the president's economic team takes questions on details. later, senate republicans weigh in on the budget. we will also hear from a couple of democrats, kent conrad and chris van hollen. >> tonight, the fourth in a series of the consumer electronics show. improving spectrum use. also, what is an ultrabook and the latest on smart phones. >> now president obama talks about his budget proposal for 2013. the request includes $4 trillion

in deficit cuts over the next decade. the president spoke at a northern virginia community college in annandale, virginia. [applause] >> thank you. good morning. welcome to northern virginia community college. after working various jobs in real estate, i found myself having -- i read about the demand for skilled personnel in the news media. cyber security is a constantly changing field. our finances are constantly under attack. as technology advances, so does the reisk. new jobs has been created such

as security analysts and digital forensics. i enrolled in nova recent complete -- and recently completed a certificate. my experience has been very enjoyable. one of the greatest assets here are the instructors to. whether taking courses online or in the classroom, instructors are dedicated professionals. watch connection to cyber provides opportunities with security competitions. i recommend others. today we're pleased to welcome the president our campus who has committed to our community colleges for tomorrow's jobs. please welcome the president of

the united states, barack obama. ["hail to the chief" plays] [cheers] >> thank you. thank you very much. thank you, virginia. thank you, nova. thank you so much. thank you, thank you very much. please have a seat. >> i love you. i love you back. great to be here. i want to thank mike for the wonderful introduction.

please give mike a new round of applause. [applause] it is great to be back here at nova. have been here so many times, i am only three credits short of graduation. [laughter] but there are a couple of reasons i keep on coming back. first of all, i think that the whole administration here is doing a great job, so i want to give them a big round of applause. the other reason is because joe keeps talking about how great you are, and just what i tell joked what to do, we

have our secretary of labor here, who is doing an outstanding job. the main reason i keep coming back is i think this institution is an example of what is best about america. love you may have caught your eye on a four-year college, some of you may be trying to learn new skills that money be leading to a new job like mike, or a job that gives you more opportunity, but all of you are hereby is because you believe in yourself, you believe in your ability, you believe in the future of your country. that is something that inspires me, and if you guys should take great pride in its. the truth is the skills and training he get here will be the best tools you have to achieve

the american promise, the promise that if you work hard, you can do well enough to raise a family, own a home, send your kids to college, and put a little away for retirement. and the defining issue of our time is how to keep this promise alive today. for everybody. because we have a choice. we can settle for a country where few people to really, really well, and everybody else struggles to get by. or we can restore an economy where everybody gets a fair shot, everybody does their fair share, everybody plays by the same set of rules, from washington to wall street to main street. that is the america out we've believed in. -- that is the america we believe in. we are still recovering from one

of the worst economic crises in three generations. we have a long way to go before everybody who wants a good job can find one. before middle-class americans regain that sense of security that has been slipping away for too long, long before the recession hits. but over the last 23 months we have added 2.7 million new jobs. american manufacturers are creating jobs for the first time since the 1990's. the economy is growing stronger. the recovery is speeding up. and the last thing we can afford to do now is go back to the very policies that got us into this mess in the first place. we cannot afford it.

the last thing we need is for washington to stand in the wake of american combeback. what does that mean concrete? for starters, congress needs to stop taxes from going up on 160 million americans by the end of this month, and if they do not act, that is exactly what will happen. congress needs to pass an extension of the payroll tax cut and unemployment insurance without drama and without delay and without linking it to some other ideological side issues. we have been through this before, remember? we have seen this movie. we do not need to see it again. or self-inflicted wounds to our economy has to be over. now is the time for action. now is the time for us to move forward. but preventing a tax hike on the

middle-class -- that is only the beginning. that is just starters. i outlined a blueprint for an economy that is built to last, an economy built on new manufacturing, and new sources of energy, and new skills in education for the american people. today we are releasing the details of that blueprint in the form of next year plus budget, and did not worry, i will not read it to you. it is a long and -- a lot of numbers. but the main idea is this -- at that time when our economy is growing and creating jobs at a faster clip, we have to do everything to keep this recovery on track. part of our job is to bring down our deficit, and if congress adopts this budget, then along with cuts we have already made,

which will be able to reduce our deficit by $4 trillion by the year 2022, $4 trillion. i am proposing some difficult cuts that i would not normally make if they were not absolutely necessary, but they are. the truth is we are going to have to make some tough choices in order to put this country back on a more sustainable fiscal path. by reducing our deficit in the long term, what that allows us to do is invest in the things that will help us grow our economy right now. we cannot cut back on those things that are important for us to grow. we cannot just cut our way into growth. we can cut back on the things we do not need, but we have to make sure everyone is paying their fair share for the things that we do need. we need to restore american

manufacturing by ending tax breaks for companies that ship jobs overseas, giving them to companies that are creating jobs right here in the united states of america. that is something that everybody should agree on. we need to reduce our dependence on foreign oil by ending the subsidies for oil companies and doubling down on clean energy that generate jobs and strengthen our security. and to make sure our businesses did not have to move overseas to find skilled workers, we have to invest in places like nova and make sure higher education is affordable for every hard- working american. [applause] that is why i -- that is what i want to focus on today, what we need to do in terms of higher education.

community colleges in particular. employers today are looking for the most skilled and educated workers. i do not want them to find them in india or china. i want businesses to find those workers right here in the united states. the skills and training that employers are looking for begins with the men and women who educate our children. all of us can point to a teacher who has made a difference in our lives, and i know i can. i want this congress to get our schools the resources to keep good teachers on the job and reward the best teachers, and in return they need to give schools the flexibility to stop teaching to the test and replace teachers who are not helping kids learn. that is something we can do. [applause]

making sure we have got the most skilled workers starts early, it starts with a jazz -- d-12, making sure every child is prepared, and when an american of every age wants to pursue any kind of higher education, whether it is a high school grad who is just trying to get that first couple of years of college education or somebody like might who is in the process of retraining, whether it is two years or four years or more, we have to make sure that education is affordable and available to everybody who wants to go. this congress needs to stop the in first -- the interest rates from student loans from dublin this july. that is important. -- from doubling it this july.

that is important. [applause] that is in our budget. we're sending to congress, now is not the time to make a school more expensive, and they can act now to make that change. they need to take the tuition tax credit that my administration put in the budget over these last few years, a tax credit that saves families thousands of dollars of intuition, and we need to make that permanent. it should not be temporary. it should be permanent. between the increases we provided in pell grants, the tax credits, keeping interest rates low, that is going to help, and millions of students have benefited throughout the country. but students and taxpayers cannot just keep on subsidizing skyrocketing tuition. we will run out of money, so

that is why i have asked states and colleges to do their part to keep costs down. we're putting colleges and universities on notice. you cannot just keep on raising tuition and expect us to keep on coming up with more and more money, because tuition inflation has gone up faster than health care. that is hard to do. to states,saying colleges, and universities, if you cannot stop tuition from going up, then funding you get from taxpayers will go down because higher education cannot be luxuries. it is an economic imperative that every family in america should be able to afford. that is part of the american promise in the 21st century. that is what we need to do, get more americans ready for jobs of

the future, but what about the jobs that are open today? i talked about this in the state of the union. there are millions of jobs open right now, and there are millions of people who are unemployed. how do we match up those workers to those jobs? what about the companies that are looking to hire right now? i hear from business leaders all the time who want to hire in the united states. but at the moment they cannot always find workers with the right skills. growing industries in science and technology have twice as many openings as we have workers who can do those jobs. think about that. at that time when millions of americans are looking for work, which should not have any job openings out there. they should all be getting filled up. here in america we have got the best workers and some of the fastest growing companies in the world. there is no worry reason --

there is no reason that we cannot connect the two, and places like this institution proves we know how to do its. -- we know how to do it. let's say you are a single parent or a returning veteran. for somebody -- or somebody who just wants a shot at a paint job. you're motivated, you know their companies looking to hire. you need to figure out how to acquire some of the specific skills about the special skills, that the companies need, and you need to figure that out as quickly as possible, hopefully without taking on tons of that. everybody in america should be able to get those skills and a community college liked nova, and companies looking to hire should be able to count on the schools to provide them with a steady stream of workers qualified to fill those specific

jobs. that is why mike was sharing his story. as he mentioned, he worked in the mortgage and real estate industry for 10 years, but when business declined he decided to start over. he began selling building materials, and in the bottom fell out of the housing market, so mike had to start over again. he figured he would try a career in cyber 30, where there is a lot of hiring. that will be a growth industry. luckily for my, nova is home to a program called cyber watch. so he signed up, and he is working while going to school. in december mike earned two ship tickets and finished with a 4.0 -- two certificates, and

finished with a 4.0. now he is working toward his associate's degree, and when he graduates he will have access to a network of over 40 companies and government agencies to help him find a job. we need more stories like mike's, and that is why my administration is helping community colleges redesign training programs hosted can learn the skills that are most in demand in industries like health st.care science, and that is what we're making a national commitment to train 2 million americans or start their own business right now. we have lined up more companies that want to help. we have already got model

partnerships between major businesses. they are already up and running. we know how they work, and that is why i have asked dr. biden to take a bus tour through several states to highlight businesses and community colleges that are working together to train workers for careers in demand right now. we have to make these examples a model for the entire nation. and we need to give more community colleges the resources they need to become community career centers, places where folks can learn the skills that local businesses are looking for right now, from data management, the high-tech manufacturing. this should be an engine of job growth all across the country, that is why we have to support them. that is why it is such a big

priority. so, an economy built to last the man's we keep doing everything we can to help students learn the skills that businesses are looking for. it means we have to keep strengthening american manufacturing. it means we have to keep investing in american energy. we have to double down on the creigh energy that is creating jobs. -- on that clean energy that is creating jobs. the budget that we are releasing today is a reflection of shared responsibility. it's as if we are serious about investing in our future and in vesting in community colleges, investing in new energy

technology, investing in basics research, we have to pay for it, and that means we have to make some choices. right now we are scheduled to spend nearly $1 trillion more on what was intended to be a temporary tax cut for the wealthiest 2% of americans. very expensive. now we are scheduled to spend another dollars trillion -- another $1 trillion. a quarter of americans pay lower tax rates than millions of middle-class americans. warren buffet plays a lower tax rate than his secretary. that is not fair and does not make sense at a time when we need to pull together to get the country moving. i do not need a tax break.

who are doing really, really, really well. it to you want to keep these tax cuts for the wealthiest americans, or do we want to keep investing in everything else -- education, clean energy, a strong military, care for our veterans? we cannot do both, we cannot afford it. some people go around and said that the president is engaging in class warfare. that is not class warfare, that is common sense. [applause] asking of billionaire to pay at least as much as a secretary when it comes to a tax rate is just common sense. warren buffett is doing fine, i am doing fine. we don't need the tax breaks. you need them. you are the ones who have seen your wages stalled.

[applause] you are the ones whose costs for everything from college to you are the ones who deserve a break. we don't begrudge success in america. i want everybody here to go out there and do great. i want you to make loads of money if you can. that is wonderful. we expect people to earn it. study hard, work hard for it. we don't envy the wealthy. but we do expect everybody to do their fair share, so that everybody has opportunity, not just some. is is just a matter of math that folks like me are going to have to do a little bit more. americans understand that if i get a tax break that i don't need and the country cannot afford, one of two things is going to happen. that means either have to add to our deficit, or you have to

pay for it. seniors have got to pay for it. in terms of suddenly their medicare benefits are costing more. it means a student suddenly seize their interest rates go up higher at a time when they can not afford it. a family that is struggling to get by as having to do more because i am doing less. that is not right. that is not who we are. each of us is here only because somebody somewhere felt a responsibility to each other and to our country's future, and that is why they made investments in places like nova. here in america, the story is never been about what we can do just by ourselves, it is about what we can do together. future and the future of our country. you believe in that future but that is why you are working hard, why you are putting in the long hours, why mike is

doing what he is doing. some of you are balancing a job at the same time you are going to school. you are scrimping and scratching to make sure you can pay tuition here. you know that doing big things isn't easy, but you haven't given up. that is the spirit we have got to have right now. we don't give up in this country. without for each other, we pull together, we work hard, we look for new opportunities, we pull each other up. that is who we are, and if we work together in common purpose, we will build an economy that lasts and remind people not by the world why america is the greatest country on earth. thank you very much, everybody. god bless you, and god bless the united states of america. [applause]

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>> president obama's economic in visor's take questions on details of the 2013 budget request. we would hear from the acting and budget director and the director of the white house national economic council. from the eisenhower executive office building, this is an hour. >> thank you for coming for our overview of the budget. and we have a four-part agenda

we are here to discuss economic assumptions. he is going to talk about the importance of the budget. >> i want to comment on four of the economic assumptions first, the economic assumptions are developed jointly by the office of management and budget and the treasury department.

when we made the projections, the unemployment rate had been at 9% or 9% -- or at 9.1% for several months. below the private sector forecast at that time. since we made our forecast, we have learned that the unemployment rate has come down 0.8% in the last six months. we have also seen an improvement

in other economic indicators, particularly for the labor market, such as initial unemployment insurance claims. as a result of this welcome news, the budget forecast for the unemployment rate should be considered stale and out of date. the private sector forecasters have shaved over 0.5% from their 2012 forecast of the unemployment rate as a result of the improved situation in the job market. and that is just over the months since we made our forecast in mid-november. if we were to do another forecast today, we would certainly lower our forecast of

the unemployment rate from what appears in the budget. to be helpful, together with the budget tables, we included the january blue chip forecast by private sector forecasters of the unemployment rate, as well as other recent forecasts. these forecasts, in fact, are all so out of date, as the new blue-chip private sector forecasters was released last friday and that is more current than the one from january that is included in the budget tables. i will quickly walk through the assumptions for three other key parameters in the budget, economic growth, inflation, and the interest rate. on a year-over-year basis, real gdp growth is assumed to be 2.7% in 2012. this is up from a pace of 1.7% in 2011. and it reflects the quickening pace of gdp growth at the end of 2011 and the presumption that

we will continue to get a boost from the extension of the 2% payroll tax cut for the remainder of this year. for 2013, real gdp growth is assumed to be 3.0%. for inflation, we have a stand that the consumer price index will rise boy -- rise by two 0.2% this year and 1.9% in 2013. the interest rate on 10 year treasury notes is a sin to be 2.8% this year -- assumed to be 2.8% this year and will rise gradually to 3.5% next year. the current 10-year treasury interest rate is around 2%. as the economy strengthens, interest rates are expected to rise. there are another -- a number of other economic parameters that influence the budget, but these are the key assumptions,

and that is why i highlighted those. i will not bore you with the dozens of other parameters. instead, i will hand it back to jeff. >> thank you. before i joined the office of management and budget three years ago, i had spent my entire time in the private sector. one thing i found that was often helpful to boil things down to a few slides. given that the budget is multiple volumes of hundreds of pages, i thought that approach might work well today. minor over four topics, first, the current policy based fines. next come a key deficit reductions. an overview of areas essential to our growth. and finally, a bottom-line of the budget and how to put this

on a sustainable path. first, the baseline. we believe we have a base line accurately reflects our current policy. in essence, this baseline is business as usual. this baseline includes the extension of the 2001-2003 tax cuts in the estate and gift taxes. it has the permanent extension of the amt and the sdr -- sgr. permanent extension makes more sense than patching these year after year. it has the enforcement of gdp capps, an accounting for future disaster costs rather to in ignoring them. this accounts for four 0.7% of gdp at the end of the budget window in 2002. last april, the president offered a blueprint for achieving more than $4 trillion

deficit reduction. he maintained that the men and in his proposal last september. this budget is very similar -- that commitment in his proposal last september. this budget is very similar to the september proposal. the budget actually includes over $5 trillion of total deficit reduction. let me walk you through the critical elements. i'm going to work from left to right. if you start on the far left, you will see 6 android $76 billion in savings from the appropriation bills enacted last year. -- $676 billion in savings from the appropriation bills enacted

last year. moving right, over $1 trillion in reductions in discretionary spending, consistent with the discretionary caps in the budget control act. third are $252 reductions from savings in medicare and medicaid that will make these programs more effective and more efficient. then you will see $262 billion in savings from programs including agricultural subsidies, direct payments, federal civilian worker retirement and the pbgc changes

and reforms that we are suggesting. these costs are net of the costs of new mandatory initiatives. the next category, the $1.5 billion bar, is revenue. revenue for deficit reduction, including the expiration of the high-income 2001 and 2003 tax cuts and the elimination of inefficient and unfair breaks for the highest earners. the 1.5 trillion dollar number is actually a net #as we further cut taxes for the middle class and small businesses. there are $13 billion in net savings from investing in a six-year surface transportation reauthorization. capping occo closes the back door on security spending. their other savings of $483 billion. these include disaster adjustments, program integrity, and averting the general fund transfer that happens every

year. as a result of all of these initiatives coming of $800 billion less in debt service. that is the bar right next to the pink are. let me go to the pink are. that cuts the other direction. these are investments in short- term job initiatives. this is the remainder of fiscal year 2013 of the three entered $54 billion of jobs initiatives that is not spent -- $354 billion of jobs initiatives that is not spent in 2012. we do not can attribute this to the total debt of the said -- we do not attribute this sequester to the total deficit reduction. the bottom line is that these efforts represent more than five trillion dollars in net deficit reduction. even as we achieve this deficit- reduction, we continue to make key investments in presidential priorities.

gene is going to provide a little more color and these priories. these include short-term measures for job growth, tax breaks for the middle-class and small businesses, and continued investment in our long-term priorities including education and job training for american workers, innovation and research and development, clean energy and infrastructure. we make these investments while abiding by the very tight spending caps, and we make hard trade-offs. and in ample this all together for you. on the left -- let me now pull this all together for you.

as you can see, in 2012, deficits from the president's policies are below 3% of gdp compared to over 4.7% for the baseline. furthermore, the debt as a percentage of gdp is stabilized from 2018 on. this is important for maintaining a strong investment environment. the president's budget replaces the sequester with a balanced approach deficit reduction, with $2.50 in spending cuts for every $1 of revenue increases. in closing, as a business person and now acting director

at omb, i believe the president's budget makes the right investments to make us even more competitive in the global marketplace. achieving declining deficit and stabilizing our debt are critical for business confidence and investment. this is good for business. it is good for the middle class, and it is good for america. let me now turn it over to jean. -- gene. >> thank you. the ultimate end of any budget is not any particular number or ratio. if this -- it is an economic strategy that is designed to make the middle class stronger, more secure, and more inclusive. to meet at end, to meet that goal, you need a plan that returns us to medium to long- term fiscal sustainability to give companies the confidence to make the united states still the place to do long-term

investment and job creation. secondly, you need to have more momentum to the recovery and job creation at this moment. we are still digging out of the largest hole and worst recession since the great depression. third, we need to have the investments that lay a foundation for the private sector to grow and become more competitive. these three goals are not contradictory. they are as complementary as good hitting, good pitching and good fielding is for a baseball team, or to seasonally adjust, a good shooting, a good rebound in in good playmaking.

if you contract too quickly, as we have seen in other parts of the world, it not only hurts your growth and job creation, it can be counterproductive to your fiscal goals. there is widespread agreement, widespread, ranging from the federal reserve chairman to the congressional budget office to top economists, that this type of balanced approach of ensuring strong demand and more momentum for recovery at the same time that you're laying out a framework for medium-long term fiscal discipline is exactly the right recipe to give confidence and growth in this recovery and expansion. there is equally that outside independence -- independent validation for the fundamental fiscal approach the jeff discussed and the president has called for since he has come here, which is that you ultimately need a grand compromise that includes a combination of entitlement

reform savings and revenues. that is what you have seen called for from goals-samson -- bowles-simpson and other commissions. whether or not you agree with every measure in this budget, there is no question it achieves this type of balance between revenue and spending cuts. the only question is whether the house republican budget that will come forward soon will, for the first time, include any semblance of that balance in their budget. now this plan, as jeff said, does include immediate efforts to strengthen the pace of recovery and job creation. there is little question that the payroll tax cut, the unemployment extension and the 100% expensing were critical for the resilience of our economy in 2011 when it faced several

hits, both external and unfortunately from the debt crisis and downgrade internally. one economist said that deal probably saves us from another recession. the extension that we just did this december for another two months gave the possibility, the opportunity for us to have the type of strong january that we saw. imagine that instead of the payroll tax cut being extended and unemployment insurance being extended, we had story after story about a hundred and 60 million americans taxes going up, a million people losing unemployment insurance. it is unlikely we would have seen the momentum and job

creation that we did this january. so, the payroll tax cut and the unemployment insurance are seen as having some of the strongest bang for the buck by independent forecasters in the congressional budget office. these outside economists have said the full extension would mean a half percentage of growth this year and well over 500,000 jobs. if we fail to extend unemployment insurance right now, two 0.5 million americans would lose their unemployment benefits in the next two months alone, and the payroll tax cut, as we have said, would go up. payroll taxes would go up for 160 million people with the typical family losing $40 per paycheck. this is obviously a critical part of our short-term,

immediate job creation strategy. but we also include more aspects that we think are critical. as alan krueger would tell you, about the only thing that was negative in the january jobs numbers was that 9600 teaching jobs were lost. 105,000 teaching jobs were lost to read the last 12 months, and to under 54,000 teaching jobs have been lost since -- 254,000 teaching jobs a been lost since the recession. this is a self-inflicted wound. this did not have to happen. had the congress passed the president's initiatives regarding teachers and first responders, we could be gaining in these areas instead of losing in them. so the president includes $30 billion for teacher layoff prevention and to help first responders in this budget as well. on school modernization, we know that the unemployment rate among construction workers is up 13%.

we know there will never be a better time to, with lower interest rates and more available workers, to rebuild our schools and our infrastructure than there is today. the president include, as he has before, $30 billion for school modernization, $50 billion for infrastructure investments, and $10 billion for an infrastructure bank. again, there is nothing fiscally responsible about infrastructure delay. you get no points for that. what better time than right now when it would strengthen our recovery and help unemployed workers who are better -- who are desperate to get back to work? beyond the immediate efforts that we need to do to get job creation going, stabilize our economy, the president laid out his keller's -- pillars both in the kansas speech and the framework in the state of the union.

as you'll see in the details as well as the state of the union, we put a strong focus on manufacturing jobs. we believe manufacturing punches above its way economically. beyond employing 11 million people, it has significant effects on multiples of additional jobs the support and are part of manufacturing. because a 70% of all private sector research and development, 90% of all patents, 60% of all exports. we put in detail some of the things we talked about in the state of the union on incentives for bringing jobs back, removing deductions for shipping

jobs overseas. you can see in here today that there is a $6 billion tax incentives over three years to prevent the downward spiral that happens too often in our communities where when there is a massive plant closings, layoffs, or perhaps layoffs that could be related to the military drawdowns, that we are -- have a strategy for those communities to attract new employers, not after they've gone to the downward spiral, the before. this budget will include a $5 billion clean energy manufacturing tax credit, often called 48 see, it is more than doubled. the demand is so high and this brings together the presidents pillars of both energy and manufacturing. the same is true with the extension of the 16 a three

provisions -- 1603 provisions that seem to have been very effective. an expanded and permanent r&d tax credit of 17% to give companies the confidence and security to make those investments. we will talk more about manufacturing innovations in weeks to come. another element that brings together the president's energy and manufacturing pillars are our advanced vehicle strategy. you will see in your new consumer tax incentive for buying advanced vehicles. these are technology neutral. there at the point of sale. they're worth $10,000. we do not pick between natural gas or electric vehicles. we let the market determine that and give consumers the incentive to buy these cars. this will come together with the

community challenge for infrastructure deployment, and the first-ever tax credit for heavy truck natural gas tax credits, the first credit of its kind. you have seen the we also, as part of our jobs manufacturing strategy, put forth an energy trade enforcement center, 50 dass 60 new people, greater coordination kick -- 50-60 new people, greater coordination in the government, and this is designed to bring additional trade cases that will level the playing field against countries around the world including china. the pillar of education and skills i am going to leave largely to cecilia, but make one point. overall, you see a very significant commitment to training at this time of very high unemployment where we are

still coming back from the worst of this recession, still gaining traction, still trying to make sure that more people are able to get the jobs. in this, you are a -- you will see a few principles in terms of community colleges -- >> we will leave this briefing on the budget we are increasing our reliance on community colleges. this is where studies point to us. given the president talked about the values of responsability and shared sacrifice in his state of the union. that is embodied in his budget as well. one of the items in the budget

and have not been out is the fact of the president is calling for dividend income to beat tax at ordinary income for those making over $250,000. good i want to be clear on something. for those in the 15% bracket, the dividend rate will remain at zero. if you are in the 15% or the 10% bracket, at any income will continue to be at the president's budget. if you are out of 20% rate, it is 15% and will continue to be so. ordinary income was what the rate was during the clinton

administration. it was consistent with a strong and robust economy. the president had sought to keep a rate at 20%, as with capital gains, but the president believes at this time, while we are asking for shared sacrifice across the board in entitlements from house to agriculture to civilian retirement, we cannot afford to devote $226 billion to lower tax rates for the highest income americans. our system for taxing income for the most well-off americans is clearly broken, and the best way to fix that is through hard choices as part of comprehensive tax reform and not by spending $206 billion on a

tax rate that is part of the reason why so many people people are paying lower rates than middle income people. i will turn it over to our partner in crime. >> thanks. just to round out the picture by my colleagues, you have heard the president talked about the urgent need to make sure our students and workers are getting the training they need, as our economy continues to expand and grow. the budget has two proposals. the first is his strong view that now a quality education

should not be a luxury. it is an economic imperative that should be available to every family. there is a vital need to make sure that we are providing opportunities for workers. to start with the education and peace, you have heard some of this before. the first part has to do with higher education. he talked about how a student loan debt is outpacing credit cards and everybody has our role to play in making sure colleges more affordable road the budget proposes to do what the federal government can to play its part by making a permanent tax credit and also by making sure a

student loan interest rates do not double as they are expected over this summer. this includes a proposal to make sure that does not happen this shoe live. there is also a series of incentives the budget reflects to make sure colleges and states are doing their parts. there is a series of incentives to keep tuition is affordable, to move aid in the direction of colleges but are keeping tuition affordable and providing good value and investing in students, needy students in particular. there is a race to the top program focused on affordability. there is a program to help states innovate, so it is a reflection of this notion that states have a role to play,

colleges have our role to play, and the budget really reflects fiscal incentives to make sure we are making higher education affordable. the second big issue is continued investments in the race to the top program. the budget provides $850 million in driving reforms at the state level. it has been expanded to include an early learning challenge, so race to the top is being applied to make sure students enter kindergarten ready to learn. this year the program also includes sister fashionable program so we are not just driving reforms at the state level. did you heard the president described in the state of the union address a series of reforms aimed at elevating the teaching profession. there is a $400 million innovation fund reflected in this budget and a program to

challenge states and districts to work with teachers to really have a transformative change on the teaching profession, to create more career ladders, to focus on training programs for education. this is something the department of education is working on pure good -- is working on. the president challenged do -- travel to the community college to announce his proposal to provide more americans with the skills they need in this 21st century the economy. this is a career fund designed 2 million workers for the jobs coming and who in demand now -- coming in demand

now. we know we are going to need to fill millions of positions in high-growth industries like health care, clean energy, information technology, and this fund is designed to create a partnership that would be implemented by the department of labor and the department of education. also to make sure they are building a partnership to provide for their communities. the idea is to help community colleges become community career center. there is a piece of the same death the colleges themselves. -- there is a piece that is aimed at the colleges themselves. state and local governments can apply for these funds. there is a piece of this dedicated to entrepreneurship to help make sure we are providing

training for folks in small businesses, and this administration has made great investment already in making sure community colleges have the resources and infrastructure available to meet the needs of this economy and students in this economy, and what this does is build on that record by making sure community colleges are linked with states to make sure they are providing the training for the jobs where even as some americans are looking for work, jobs are looking for workers, and training is really going to make the difference with linking workers to jobs that are available, and i will try to go back to can. -- i will turn it over to ken. >> thank you.

>> [inaudible] >> i could go further. and he could add on. when the president came into office we knew things cannot in good shape, but we did not know how bad they were. the fourth quarter 2008 gdp we thought was - 3% sor so. we now realize it was close to - 8%. the president inherited a much worse situation. on top of that, during the previous administration, we had

medicare, bush tax cut, so i think the situation was far worse than we had anticipated, given the economic news i started with. now the president's budget actually does cut the deficit in half by 2014, so that is one year later than the original projection, and that is explained by the situation we inherited, particularly on the economic front. just look of the defense side. it would require $500 billion. across-the-board cuts is a bad policy bureau did we believe this requester should be replaced with a balance -- is bad policy. we believe the requester should

be replaced with a balanced we should get rid of it as bad policy and achieved the 1.2 trillion dollars called for. the sequester is a very important function, so this budget is not calling for the sequestered to be taken away. they are calling for the money to be replaced by balancing the deficit reduction. >> in november when you look at first quarter and the third quarter, the average was projected to be 1.65%. it ended up being a 8.9% and

we were that' period averaging 7.8%, so have people down the deficit projections they would have been a bit darker. there is no question we face some external shocks. we do want to say this budget, when you look of the ultimate goal, is superior to the 2011 budget. now 2017 and after, the deficit has come under 3%, and let me add. it is not just that we think is. the opinion is not ours. the entire rationale was to create an enforcement mechanism designed to be mutually assured

destruction on both sides to force people to come to the table to come up with an appropriate balance of deficit reduction. that is what happened when they went to andrews air force base, so the whole design of this was as an action-forcing event to make us come forward with some sort of compromise, so i think it is totally appropriate to look at the amount rockaway over one trillion dollars, and there was an enforcement mechanism that would force us to come together and agree on amounts that were equal to or more, and we have come up with those assets are equal to that, and that is where our focus should be.

>> the difference between your deficit projections in this document and the september document, because the policy seems to be the same, but the debt in 2021 is one trillion dollars higher. ilythe differences primar economic assumptions. we also have proposed now taking the aotc permanent, so that explains the remainder. good >> what about oco? >> is capped at $450 billion. that saves $800 billion. we use out for transportation.

>> which is another policy change. >> the super committee was meeting, and we wanted to put forward a provision that were deficit savings. the president thought that would be helpful to the process to have savings people could agree to, knowing they had the blessing of the president, so we tried to put in all the deficit savings. we did not put in all our aspirations, so there is also a different purpose to that submission. >> is this a situation where if you have a compromise you would be going above and beyond 4 trillion dollars?

would you go beyond the numbers in this budget, or would they just changed? >> obviously, i probably will not negotiate a compromise with you right now. i think that is called negotiating against yourself. i think we all realize when you engage in a good face bipartisan effort, if you have a common hich is to strengthen our economy. when we put out a budget, it has $600 billion in entitlement savings, and we have already agreed to the most significant

discretionary spending cuts in decades. the discretionary number in this budget, 2.5% of gdp. that is the lowest it has been since 1964. in other words, we have put forward significant entitlement savings. the president has taken on sacred cows on our side and put forward entitlement savings you have not seen details in the president's budget before, and he puts out a budget that is equivalent to $2.50 in interest cuts for every dollar. that puts forward the type of problems that offers the opportunity for compromise. less see if we ever see a budget coming from the

republican leadership of the senate or the house or even of remark about has that type of balance, where revenues are exclusively put on the table in a significant amount that would be a step forward. we will see. le][inaudib second, your overall thing about fairness. the trucks on corporate tax reform, we are going to speak further on that before the end -- >> on corporate tax reform, we are going to speak further at the end of the month, but the president has made clear he

supports corporate tax reform that would reduce loopholes, lower rates for people investing, creating jobs in the u.s., do so further for we needuring, and that' a global minimum tax so people have the assurance nobody is escaping during their fair share as part 0 of our race to the bottom or having our tax code actually subsidize and facilitating people moving their funds to tax havens, but we will say more in more detail before the end of the month, and in terms of revenues, the president is looking for shared sacrifice. this is a democratic budget but has savings and medicaid.

it has savings for new beneficiaries in 2017. it has agricultural, civilian retirement savings. it has tough choices. how can the president go to the town hall of look at average americans who are being affected, how can they be asked to do that at the same time they say the most fortunate americans do not have to contribute at all? i think when you looked at what it takes to get the public and general support for a balanced budget agreement, you have to have that type of shared sacrifice for this to be in acceptable to the public at large. >> you talk about getting rid

of the bush tax cuts. is there a reflection in the budget? >> in the budget we have, we returned to the pre-bush tax payers. for the people above 250. the only exception to the president had previously was he had not led dividends go all the way back to the clinton era, but in this budget he decided that was something he could not afford. in terms of tax reform, he could not lay out what the rates would be, because that was something he would have to work out, but i think what the president has made clear is it needs to be

reform that leads to a tax code as progressive if not more progressive than it would be if you let the bush tax cuts expired. this is a fair point. in both the corporate and individual side, lead to reforms to the current system as we noted -- as we know it, so things like the dividend rate ds

a proposal under our current tax system. then we have other things where you hundreds the a more fair tax occurred. good and region where you could see a more tax code. this as opposed to an explicit provision. we are saying when you do tax reform we ought to get rid of the alternative minimum tax. we have to patch it every year,, and we are essentially saying we should replace it ahoy -- to replace it, but the best off are being asked to pay less than the middle class. >> then you have corporate reform common sense stuff like corporate jets and tax

expenditures, and those are offset by tax cuts for the middle class and small businesses. you get a net of 1.5 trillion dollars. at the same time, the president is favorite to -- is in favor of corporate and individual taxes. >> [inaudible] but then not talk about your revenue assumptions? >> reform takes time, and the president wants to be very specific about how we are going to raise the money to have a balanced approach. there is $2.50 of spending for every dollar of revenue, so we want to have tax reform, but the president's budget is very

specific about where the revenue comes from. >> to answer your question, we do believe in the individual tax reform we would like to see individual tax reform that would also contribute 1.5 trillion dollars to deficit reduction as part of the overall plan, so if we were just saying we wanted 1.5 trillion dollars of revenues in reform, you might say, you are just putting out a number. how would you get it? we are showing you in detail how we would get it under the current system. the same values in terms of simplicity, making sure we had a tax code that was as a progressive as if the bush tax cuts expired. that gives some sense of what

our standard would be, and that no 1.5 trillion dollars is more than the republicans would prefer. it is a bit less than called for, so i think it is a reasonable bipartisan measure to put out. >> i want to make it clear there are no tax increases for families to larger $50,000 or less. there are tax cuts, so no increases for families $250,000 or less. >> in the budget you tax the evidence for upper income taxpayers. it rolled back a little bit from the campaign promise to maintain the 20% rate on capital gains. did that give you most of the way towards the revenue and you

wanted, limiting the dividends for upper income taxpayers? i take your point that the upper income is lower than you expected. do you still have a relatively optimistic as the met? >> do this first now. when we make our projection we do it under the proposal that it will -- under the assumption that it will become law, and jean mentioned the congressional budget office has hired a bang for the buck region -- has high bang for the buck. our forecasts are based on the assumption that the economy will

strengthen. >> i do not want to confuse everybody, because there are apples and oranges in light of what we are talking about. there are a number of things you can do about so rates. there should be a rule that people are paying an effective rate of 30%. if you were, halving the dividend rate to go higher would mean less people would get higher by having of the offer an alternative minimum tax. that is how most famous people and of getting such a low tax cuts. warren buffett and arranging for

himself to get in, as dividend income and being at a 15% rate, but there is a little bit of apples and oranges. if you are putting the buffer rule on our current system and the dividend rate was back to ordinary income and the tax rates were going towards the clinton era, you would have a smaller percentage, and the idea of the buffer role was not the main force of raising revenue. it was to be a minimum tax, and we have said from the beginning we never expected the most well- off people to hit back. many people pay over 30% rate. this is designed for people who park their money somewhere or arrange for their money to be in a preferential rate so the combination allows tens of

thousands of very well off people to pay less taxes than ordinary or middle income families. >> time for one last question. >> [inaudible] 5 i do not think we take a pass. we have to go back and think about the act of save $100 billion in its first decade. and we have specific savings on medicare and medicaid and other programs in this budget and $270 billion of mandatory other savings, including federal

employee retirement, the pension benefit guaranty, so i think we are taking a serious task at deficit reduction on the entitlement side and also the balance package that has $2.50 for every dollar of revenue, and most importantly we have deficits every year. stabilize a% of gdp, which is important to make a barak -- america place to invest. >> can i point out that if you look at the ninth or 10th year of our budget and look at the amount of savings we have, on health care side, it is the same as the savings in the bowles- simpson plan, so we are very comfortable it -- comparable in the long term to where we were with bowles-simpson.

the real issue, i should point out, everything that is happening on entitlement right now, everything in terms of the dramatic expansion of people on its because of the aging of our population, all of that was known in 2000. we knew in 2000 that between 2000 and 2020, there would be a large increase of people on social security, medicare, and medicaid, and knowing all that with those predictions, we were able to project a balanced budget, even surpluses, a lot of which changed since then was the fact that besides the cost, dealing with the financial and economic crisis the president inherited is the ongoing cost from the fact that there were two major tax cuts in the prescription drug industry, all

of which was not paid for, and the legacy of that is well over $500 billion a year. that legacy ends up being the difference between us struggling with deficits and having a very low percentage of gdp. that just makes the case that we need to deal with revenue on those who are most fortunate and entitlements at the same time. we have never said it was one or the other. we always said we need a grand compromise of spending and savings and revenue savings, particularly on those who are the most well-off. that is what we have been trying to achieve. that is what this president has been trying to achieve. that is what he put in the september submission and what he is putting in this budget. >> [unintelligible]

what matters economically is what the external data as a percentage of the economy and whether it is rising or coming down. what you have now is, actually when you do what matters most, external debt, it does not include financial assets, things like student loans. you have it coming down after around 2014 or 2015. anytime you are looking at a country's economic stability, that is what you look for most of all. the president worked very hard to get a grand compromise over the summer. he is putting out entitlement changes that i have never seen in a president's budget before. agriculture subsidies, civilian retirement, even on the military side, medicaid, medicare. i think the president has very much stepped up to the plate both in the negotiations over

the summer and in this budget. all that is holding us back from progress has been, quite honestly, a resistance from too many on the republican side, particularly in the house of representatives, to do a balanced package with revenues. there are clearly some republicans who would like to engage in that kind of grand compromise, but unfortunately, not enough. >> unfortunately, we are out of time. to answer any more questions you have. please get in touch with us on e-mail and phone all day today and we will be happy to answer your questions. thanks. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> obama's budget plan for 2013

totals $3.80 trillion in spending, which is an increase from 2012. the budget request brings in about $2.90 trillion in tax revenue and creates $900 billion federal deficit for 2013. for more information, go to c- span.org. you can also find us on facebook. our latest facebook question asked, what are your priorities for next year's federal budget? visit us there to post your response. now we will get reaction from senate republicans to the president's 2013 budget request. ranking member jeff sessions of alabama led this 30-minute news briefing. >> we are here all the time,

aren't we? come on in. there we go. the budget submitted by the president of the united states is more than just a document that has lines in expenditures in it. a budget represents a revision that that president has for the future of america. in this case, it will be 10 years since mr. bernanke told us -- mr. bernanke told us a few days ago in the budget committee that we need to be looking beyond the 10-year window, particularly when dealing with systemic problems' like our economy. i believe the american people are entitled to and must have an honest budget, budget that clearly lays out the challenges we face and how the chief

executive would expect to meet those challenges. i cannot imagine governor bentley in alabama not taking the opportunity to produce a budget that allows him to lay out how he is going to meet the challenges we have, where governor christie are governor brown in california or governor cuomo in new york. this is the fourth year of this president's term in office, and his final opportunity to let out a coherent vision for how this country ought to meet the challenges that we are facing financially. remember, is chairman of joint chiefs, admiral mullen, said that debt is the greatest threat to our national security. just this morning on the msnbc, the chairman of the council on foreign relations said reece could be the united states next year.

erskine bowles, testifying last year before the budget committee, said we are facing a debt crisis and it could happen as early as two years. we are in that second year now. this is not something that is just a normal dog and pony show around congress. it reflects the challenges that we would just a couple of things about, under the pronouncement that we are hearing from the white house, this budget produced -- reduces our deficit by four dollars trillion. that is absolutely untrue. it does not reduce the deficit at all, virtually. it is just a stunning thing. i saw what tagline on cnn this morning that it would reduce spending by four trillion dollars. give me a break. it increases spending $1.50 trillion.

it increases taxes $1.90 trillion. in his own budget, the total debt he projects in the documents he has given to us would increase my $11.20 trillion over 10 years. that is how much the debt would increase. whereas the budget control act that we passed last year, and the president basically agreed to, that is $11.50 trillion in the federal deficit. it does not save one trillion dollars. it does not save a third of a trillion dollars, according to the best estimates we can come up with. it is under $300 billion that it would save over 10 years.

it is deeply troubling thing to me and i deeply believe that it is a matter that should be discussed. we have now gone for years without anything occurring that would get us off the dangerous that course we are on, except that this president during his tenure in office has added $6.30 trillion to the gross debt of the united states. i have a group of folks behind me and i will yield to them. who is going to go? >> thanks very much. i believe the president has abandoned his role as leader of this nation by not being honest with the american people about the significance of the national debt. somebody asked me if this budget was dead on arrival. i said it is not dead on

arrival, it is debt on arrival. that is what we are seeing. this is an ambush budget. the president is ambushing the american people by promising to cut the deficit by $4 trillion, when in fact he adds to the debt by $11 trillion. in the pretext of trying to help everyone, in fact, what his budget does is continue to bury the american people under mounds of debt. the promises will never occur and the spending he demands just cannot occur. this is the fourth year in a row were what we are seeing is a deficit of over a trillion dollars. remember in 2009, the president promised the american people that in fact he would cut the deficit in half by the last year of his first term in office. in fact, $1.30 trillion is the deficit that is included in this

year's budget. we have gone 1000 days without a budget passing the senate. last year his budget came to the senate. harry reid would not bring in, the majority leader. mitch mcconnell roddick and it failed 0-97. the twin tidal waves of social and security and medicare, and the numbers get so big that it is sometimes hard to realize how much deficit this year alone $1.30 trillion is. the president pretends that if you just raise taxes on a small number of people, you could solve all these problems. this is how much this deficit is. if you took all of the money earned over a million dollars by everyone in the country, took it all, and then on top of that, took all of the gold in fort knox and sold it and add it all that together, that is less than

the deficit in this year's budget alone. that is the severity of what we face. and this budget does not help solve the problem. >> i would just say one thing before we go forward. i think our colleagues would join with me. i would say if the republicans are given the opportunity next year to have a majority in congress, we would use the rule that allows the budget to be passed by 50 votes, not 60 votes required to pass the budget. we will pass a budget. we will have a bicameral budget. we will alter the debt course of america and put us on a path to growth and prosperity and not to debt and decline. that is a commitment and i am deeply disappointed we have seen such poor leadership of former

senate leadership on the question of bringing up the budget. >> i was told alphabetically, so i will assume that is right. to follow on senator sessions points, this is not a serious proposal. the president intends to exert no effort to get this budget passed. i thought last week the most telling statement that anybody made is when senator reid said he did not think there would be a senate budget. they asked the white house spokesman what he thought about that and he said they have no opinion on that. how could the white house not have an opinion on whether you even have a real budget discussion or not? you have to have a budget discussion. you have to have a budget debate. at some point you have to have a budget fight if we are going to get the priorities of the country decided what they should be decided. when jay carney can stand there

and repeatedly be asked, the white house and has no position on whether the senate has a budget or not, and he says no, we have no position on that. what kind of leadership is that? we are apparently going to have -- apparently the third year in a row where the absolute commitment of the senate majority is not to have a budget, even though the law requires that we have one every year. the simpson-bowles commission said this was the most predictable crisis in the history of mankind, and we are just continuing to go further and further down that path. >> this is a very sad day when the president of the united states fails to keep his promises to the american people once again, and rather than

treading water, he actually makes things worse. we know the president said he would cut the deficit in half by the end of his first term, and we know that is not going to happen. we know that harry reid is the majority leader of the united states senate, the only person who can put a bet to, we did put a budget on the floor of the senate for a vote, and has refused to do so for well over 1000 days and has said he would not put this budget up for a vote. budgets are where you figure out where your priorities or, where you make the hard decisions and you figure out what you have to have and cannot live without, what you would like but maybe can put off, and things you would like to have but to simply cannot afford. that kind of disciplinary process that every family, every small business undertakes in america. harry reid and the president's

on political party have simply refuse to do it. i guess the worst part about the debt is not only looking at the television and seeing what is happening over increased now and what is happening in europe, with their unsustainable debt review what is happening over in greece now. it is the impact on jobs, the fact of the matter is this $15 trillion plus debt has kept job creators on the sidelines, because they don't know what the taxes are going to be. they don't know what kind of new regulation is going to be promulgated. they don't have any predictability that allows them to plan for the future. so they do what a rational person would do, they sit on the sidelines. meantime, unemployment is unacceptably high and apparently the president is going to do nothing about that, except to raise taxes on the very people

we are depending on to make the investments and create the jobs. completely unacceptable, and i think the american people understand that. >> i will be brief. i know a lot has been said. all of us to come here are shocked by the lack of fiscal discipline that occurs here, but truly, this budget makes a mockery of the american people. our state has been blessed for decades in having governors from both sides of the aisle that have run our state well. i think -- i know that if a governor of our sacred -- of our state present a budget like this, they would literally be run out of the state. it is almost as if the administration has become flippant about this issue. there is absolutely no focus on the types of things that bowles- simpson laid out that they put in place. lowering marginal rates, driving

the economy upward, focusing on medicare, social sequoyah security, and medicaid. we all know in the case of medicaid are going to be insolvent, yet there is the role leadership on this issue. it is incumbent on the president seeking another term to lay out to the american people what his vision for our country is, as it relates to fiscal issues that are reaching a crisis level. i also think it is incumbent on whoever the republican nominee is to do exactly the same thing. i think this is a huge deficit of leadership. i am highly disappointed, and we all do not realize that not only is this fiscal issue the biggest issue that our country faces, the biggest enemy of our country is ourselves and our inability to deal with this. as senator cornyn engine, it is the one thing that people who invest are looking for as it

relates to helping drive this economy upwards. they are tied together. there is no question that dealing with these issues and having a robust economy are tied together and it is un fortunate for the american people who are out there seeking employment that the president has abdicated leadership. >> i share all these concerns of my colleagues. everyone serious agrees that we are on an unsustainable fiscal path. over 40 cents of every dollar the federal government spends is borrowed money. 100% of gdp is our debt level right now, and that is increasing significantly over time. another $11 trillion in the next 10 years on top of the existing $16 trillion. everyone knows that is unsustainable and if we do not change past, that will lead to a situation in crisis like we see in some european countries. the president with his budget is

saying that is not a problem for at least 10 years. that is completely irresponsible. we need a real discussion and real action in washington, because is not sustainable 14 years. it may not be sustainable for one or two years. -- it is not sustainable for 10 years. certification, jeff mentioned what we would do as a majority next year, and i agree with that commitment. i am going to be working with these folks and others to have that debate in the senate this year, including by proposing an amendment to multiple bills that legislation on which this amendment would be attached cannot become effective until we have a full budget debate and a series of budget votes on the u.s. senate floor as intended.

>> thanks for coming here. i want to basically confirmed what my colleagues have already stated, the president has failed to lead on the debt issue. as senator sessions said, according to admiral mullen, this is the greatest threat facing the nation. i look to the summary of this, and the fact that this president is not proposing any type of reforms to try and save social security and medicare, i have to ask, why is this president even seeking a second term? the definition of lee -- of being president is leading, and he is not leading. the deficit risk we are not even addressing. we have a huge risk in terms of interest rates increases which would dramatically increase our cost of interest. for every one%, at $1.50 trillion to our deficit. simply because of growth,

president is going to increase taxes. it will harm economic growth. for every 1% that we reduce growth by, at 3.1% of deficit grow. we sent out a letter last week asking cbo to reassess the number of people who will lose health care coverage. it will add trillions of dollars on to the cost of obamacare and onto our debt and deficits. we need to seriously take a look at this issue and this -- is president's budget does not do that. it is true failure of leadership. >> at a time of trillion dollar deficits and record debt, at time when we are spending at the federal government more than we have spent since world war ii,

the budget presented by the president is irresponsible. it does not address the acute fiscal crisis we face as country and we hope for something better. last year the president's budget was taken to the for the senate and it was indicated earlier, the vote was 97-0 against it. we hope this year there were be more responsible budget document. as a member of the house budget committee and director of the office of management -- management and budget, i see a lot of budgets, and i must say at this point, it is extraordinary in terms of lack of seriousness and responsibility. it starts by proposing a new $350 budget stimulus bill. the president then claims in the budget document $5.30 trillion in deficit reduction over the decade. in looking at that and breaking it down, 99.9% of the deficit

reduction the president claims is the following. $1.90 trillion in tax increases, iraq and afghanistan war savings that have been widely acknowledged are republicans and democrats alike as being a gimmick, the already enacted discretionary cap in the budget control act. the budget actually takes credit for what congress has already enacted. finally, net interest savings from those policies, which is about $800 billion. that is 99.9% of the deficit reduction. that leaves a minuscule $4 million in what could be called savings in this budget. it is amazing, given the situation we are in. the president hides $4 million in additional spending that is built into the baseline.

and for telecom the claimed savings of only $4 billion vanishes as well. there are no savings in this budget. this is a political year, and all of us are up you are talking about this in terms of the fiscal environment. to me, this budget goes beyond the line. it goes beyond just being a political document and goes to being an irresponsible document. given what we are facing in terms of fiscal problems, given our kids and grandkids will be facing, and given the impact on the economy, there is one thing in this budget that i think is relatively honest, and that is the president's projection of what the economy is going to do. maybe it is in part because of the budget. a budget document is both the spending cuts and revenue side and then an economic forecast. this budget, as i look at it,

concedes the unemployment rate will be higher next year than this year, and higher in 2013 and next year. he projects a 8.9% unemployment in 2012, 8.6% in 2013. ultimately, that is the worst part of the budget. there is nothing in this budget to get our economy moving again. neither is taking on the fiscal issues in making sure you have more predictability and avoiding the kind of debt crisis we are seeing in europe, and no policy to address the obvious need to give this economy a shot in the arm. in looking at this document, it looks like more of the same from last year an entirely political document during a year in which we should be making process review progress on our deficit and debt. -- we should be making progress on our deficit and debt. >> as omb director, he knows

what he is talking about. he mentioned about interest, interest this year was $230 billion. under the present numbers, interest will go to $840 billion, larger than defense, larger than social security and medicare today and it would be the fastest-growing item in the entire budget. >> if you could talk a little bit more about austerity versus spending and the white house argument that the greater priority now is not austerity, but you have to be able to keep what is already a fragile economy. is that argument hold water for you? >> europe is deciding that have to get their house in order now.

i would just say this. if you share the view that there ought to be changes in the out years, why were they not in the budget? if you say that the immediate challenge does not allow us to cut spending today, why don't you propose something that would cut spending in the future? if you recognize, as all of us do, that medicare, social security, medicaid or programs in dire danger and need to be fixed, why don't you do it today? what mr. bernanke said at the hearing was, you should definitely look for savings in the out years and you should not stop at 10, you should go beyond that. that would give encouragement to the entire financial world that the united states is on a sound path. it is rather stunning that the president does not propose that. it would help to establish

growth and our economy if we had a plan that would not lead to disaster. >> both the cbo and chairman bernanke said that allowing the bush tax cuts to expire would harm economic growth. this president's proposal, incrl harm economic growth. even though the president says he wants to grow the economy of his policies are doing the exact opposite and it will make things worse. >> when you work budget director, the president -- president bush's budget would come up and democrats would point out there is no money for the empty or four were spending more new money for emergency spending. they would sit as budgets were a bunch of gimmicks and it was dead on arrival. why should we believe this year that this is somehow worse than what we have been seeing for almost a decade? >> it is interesting.

the president's budget was taken to the floor last year and you would have expected it would become partisan. you would have had a majority of the senate supporting. the vote was 970 -- 97-0. it looks an awful lot like last year's except i would say more responsible given the fact it does not address any of the long-term challenges. it does not do anything to offset social security. the only thing on medicare is a provision for means testing which occurs after the next term. to this point about austerity. it does not make any of the tough decisions. as i said earlier you would expect in a political year budgets relatively political documents. it does not have any savings. when you go through the analysis of what is in their it does not have any impact on this long- term or short-term problem.

we're talking about the deficit over $1 trillion. a deficit of 900 + trillion dollars. these are historic levels. >> are these comparable? >> these are gimmicks that i do not think have ever perceived to be appropriate to be useful. oco. to say -- you will see the transportation funding has been paid for include -- assuming we will get savings in iraq and afghanistan. the aircraft and republicans look at this as a budget gimmick to be used in the context of the super committee for payroll tax and determined it was not appropriate. you have the president putting it out there. hundreds of billions of dollars.

the troops are coming home from iraq and afghanistan. i think these are at a new level. you also have to look at what this budget does in terms of long-term debt. instead of reducing the debt, it increases it. not just by a few trillion. sometimes between $14.12 dollars trillion. the historic numbers of dead we have seen and are not fair to future generations are increase dramatically to the point that the debt will be over $25 trillion 10 years from now. >> we did acknowledge that the war was not an emergency. it was funded with borrowed money. most -- some complain but both voted for that. it was open decision. with regard -- it was not be -- much smaller.

it is growing and searching out there. with regard to the war, the gimmick is that when you cease borrowing money to pay for the war, the president assumes the money is still there. and you could spend it. you are borrowing money to fund a new spending program. we do not have a source of money to pay for the war that when the cost drops you have money. you do not. >> republicans offered an unpaid for peril tax. i wonder if he would elaborate. how does this square with the concerns that you are telling us today? >> there have been no meetings in the last couple of days other than between the chairmen and senator baucus. they have been discussing things over the weekend.

i have not gotten a report yet today. what i do here is any proposal they seem to be having some solutions on gets taken back to harry reid. he seems to be trying to pull the rug out of any successful completion of this effort. and seems to be a cheerleader for failure. i want to extend the payroll tax holiday and unemployment soared -- insurance and make sure seniors can continue to see their doctors. harry reid is a big roadblock in preventing that from happening. >> should that be paid for? >> we're looking for ways to pay for all parts of this and there are blocks for paying for every component of the things we need to do. the democrats are not willing to pay for this. i want to make sure we're looking for things are paid for. republicans have come forward with proposals in terms of a pay

freeze on federal workers and things that have already passed the house. thank you. >> more now about the president's 2013 budget request from two democrats. kent conrad is the chairman of the senate budget committee and chris van hollen is the ranking member of the house budget committee. they spoke to reporters about the white house pose a $3.80 trillion budget. this is about 35 minutes. >> i personally believe this is moving the country in the right direction. i think we need to put in context the circumstances we

have faced. first of all the president inherited a fiscal disaster. that was not of his making. that was of the previous administration policy-making and he has had to cope with it ever since. i am encouraged by the trajectory of the deficit under the president's proposal from 8.5% of gdp down to 2.8% of gdp at the end of the budget period. it is important to remember the context within which the president is operating. in 2008 and 2009, we experienced the worst recession since the great depression. economy contracted at a rate of almost 9% in the fourth quarter of 2008. barack obama was not the president of the united states. we lost 800,000 private sector jobs in january of 2009.

that was not the result of the policies of barack obama. unemployment was surging. the housing market crisis was rippling through the economy with home building and home sales plummeting. we faced a financial market crisis that threatened to set off a global economic collapse. i will never forget crisping called to the capital on a full day and told by the secretary of the treasury zero the previous administration and the chairman of the federal reserve if action was not taken immediately there would be a global financial collapse. barack obama was not the president. we have come a long way since then. the federal response has pulled the coming back from the brink. i believe president obama deserves considerable credit for the part he played in that success.

as i noted in the fourth quarter of 2008, the economy contracted at a rate of almost 9%. positive economic growth returned in the third quarter of 2009. we have had 10 consecutive quarters of positive growth. we see a similar picture with respect to private sector job growth. in january 2009 the economy lost more than 800,000 private sector jobs. private sector job growth returned in march 2010 and we have now had 23 consecutive months of growth. this is a result of a fiscal policy that got america back on track. it is the policy of president obama. he can be proud of it. he deserves a good deal of credit for this recovery. we would like to see stronger growth and more job creation. although unemployment has come down is still too high. the slow pace of this recovery

is not unexpected. -- the economists have found that following recessions, accompanied by a severe financial crisis, recoveries tend to be shallower and take much longer. looking forward we need to remember that we have two major problems facing our country. one shorter-term and one longer- term. short-term we're still recovering from the worst recession since the great depression. the economy is improving. we still have relatively weak demand for goods and services which is holding back economic growth. longer-term, we face the death threat. job one is to improve economic growth with steps to strengthen demand. simultaneously, we need to enact a credible plan to bring down our debt. our republican colleagues have completely overlooked the first problem. of weak demand.

and would actively make that problem worse by imposing fiscal austerity right now. they have focused on the longer- term threat. their policy proposals of imposing fiscal austerity now would only further weaken demand which would lower economic growth, kill job creation, and choke off recovery. the republican economic approach suggested the economic recovery is being held back by rising interest rates. and immediate austerity would address that problem. we do not have rising economic or interest rates. interest rates are at a record low. often our republican friends say we have to listen to the markets. let's do that. let's listen to the markets. what are the market's telling us? we have record low interest

rates. we have weak demand. that tells us we need to take steps to strengthen demand. to get back on track in terms of dealing with their debt. the problem we have right now want to emphasize is weak demand. another leading economist describe the problem in recent testimony before the senate budget committee. he stated the number one problem with small businesses -- that small businesses deal with is lack of demand. they do not say access to capital. they do not say the burden of regulation. they say their order books are slim. let's pretension to what the markets are telling us. that is why companies are not hiring as fast as they could be even though they have record profit levels and $2 trillion

sitting on their balance sheets. wilson need to address the second problem of rising debt. we should not wait to respond to that challenge either. but not by imposing fiscal austerity right now but by adopting a plan that phases i and fiscal discipline as the economy strengthens. that has been the testimony of virtually every economic expert before the senate budget committee. the head of the congressional budget office. the chairman of the federal reserve. custis -- distinguished economists warning us do not impose fiscal austerity right now as the republicans would or you will kill job creation. it will hurt economic growth. at the same time they say, we do have the longer-term problem of lay-ups threat and that has to be addressed as well. we do need an economic two-step. we need short-term strengthening

of demand by investments in infrastructure. that would help -- put people to work and improve our competitive position as a country. second and simultaneously, we should adopt a credible plan that puts us back on track, the long term fiscal condition of the country. we need to do that by tax reform, by reforming our entitlement programs and by attacking wasteful spending. in his testimony before the senate budget committee, ben bernanke addressed the need for this kind of two-step approach. he said this. even as fiscal policy makers address the urgent issue of fiscal sustainability, they should take care not to unnecessarily impede the current economic recovery. fortunately, the two goals of achieving long-term fiscal sustainability and avoiding additional fiscal headwinds for

current recovery are fully compatible. indeed, they are mutually reinforcing. i believe that is precisely the balance that the president has struck in this budget proposal. to address the short-term lack of demand, the president's budget includes a number of important proposals. these include extending the payroll tax cut, unemployment insurance benefits through 2012. providing $50 billion in of front infrastructure investment. in roads, bridges, rail, and airports. extending the 100% business depreciation deduction for new investments. providing $30 billion for school modernization. providing $30 billion to help states and localities retain and hire teachers in -- and first responders. -- establishing project rebuild to restore distressed

activities. adding jobs and increasing wages. now i want to address one other kinard that i hear repeatedly from our colleagues on the other side. they have said it has been more than 1000 days since the democratic senate passed a budget. that is flatly wrong. the budget control act that was passed in august of last year contained the essential elements of the budget from 201222013. it was passed by the senate. it was passed by the house. it was signed into law by the president of the united states. it is now the law of the land. in many respects, it is stronger than any budget resolution. a budget resolution never goes to the president for his signature. let me repeat that. a budget resolution never goes to the president for his signature. it is not the law.

the budget control act not only passed the house and the senate's, it was signed by the president. it is the law. in many ways, it is more extensive than a traditional budget. not only doesn't have the force of law, it is sitting discretionary caps for 10 years, sitting over $900 billion. typically, budget caps are put in place for anonly one year. it provided enforcement mechanisms including a two-year deeming resolution which improves the enforcement of budget points of order and it created a reconciliation-like super committee process to address entitlements and tax reforms. unfortunately that super committee did not come to conclusion. it had the opportunity. at -- it back that process with a $1.20 trillion sequestered

that is now the law of the land. fact is we have a budget for this year, we have a budget for next year and pass in the budget control act was an overwhelming bipartisan vote in the u.s. senate with a strong vote in the house of representatives and signed into law by the president of the united states. we all know this is the beginning. this budget proposal of the president. we know more has to be done. it will for choir a bipartisan effort. to do more than what the president has proposed, will require both sides to come together. we hope that can occur in this budget process. i think we understand this is an election year. and so try to come together is difficult in that context. i retain hope.

i retain the belief that working together in a good-faith basis that we did in the fiscal commission as we did in the group of six, we can reach agreement across the aisle. with that, i will turn over to my colleague, congressman van hollen koy very much appreciate is coming to be with me here today. >> thank you. thank all of you for joining us today. the president's budget is a budget that is good for the country. it is good for jobs. it is good in terms of nurturing a fragile economy. it is good in tar -- terms of making long-term investments in education, science, research, innovation in things that we will need for a strong foundation for the economy for years to come. it is good because it takes a balanced approach to deficit reduction. this chart here tells an important story. let me pick up what the story

is. as you can see, in january 2009, the very month the president put his hand on the bible and was sworn in, the economy was in total freefall. - 7% gdp, losing 840,000 jobs every month. so the bottom was falling out of the economy. what you see is as a result of the actions taken by the president and the congress in passing the recovery act and actions taken by other players in the economy, we began to stop the freefall, turn the corner, and the reality is that since march 2010, we have seen over 3.5 million private sector jobs created. the most recent good news being 257,000 private-sector jobs added last month.

what is the president's -- what does the president's budget do? we have to be careful not to mess up a very fragile recovery. and that is why he calls for immediate additional investments in the economy. we have got to get the payroll tax cut passed. we have to extend unemployment insurance for millions of americans who are out of work through no fault of their own. we have to take another -- a number of immediate steps. a good part of that budget was with the president submitted to congress last of timber. when he came before a joint session in the house chamber. at that time he called for a payroll tax cut attention -- extension. he called for an extension of unemployment insurance, but he also called for another out -- some -- of a number of other

extensions. let's invest $30 million in schools. let's make sure state and local governments have enough resources to prevent layoffs of teachers and firefighters. this is a good news story. as many of you know if you were looking at the public sector, job performance over the last many months, we have seen layoffs in that sector. that is in large part because the recovery money was invested in the first two years is no longer there and it is because republicans in the house have refused to take action on the president's job bill. this budget says pass my jobs bill. pass the jobs bill that has been sitting in front of the house of representatives since last september. we're pleased that -- we're hoping we will be able to move forward on that small piece of it and unemployment insurance. as many of you who have been listening in on the conference committee, republicans want to talk about extraneous issues

when we talk about extending the payroll tax cut. they want to clamp down on clean air. regulations, mercury regulations. tdebate those on their own merits. that is one thing the president's budget does. the other important thing it does is put us on a balanced path toward long-term deficit reduction. senator conrad pointed out at the end of this 10 years, you will reduce the deficit to 2.8% of gdp under the president's plan. you will stabilize the dead as a percentage of gdp. it begins to take it on a downward project 3 -- trajectory. he does it in a balanced way. he does it through a combination of cuts. we have made substantial cuts already. we already cut the $1 trillion

of the discretionary budget through caps that have been set. that takes the discretionary budget down to the lowest percentage as a function of gp since the eisenhower administration. the president's budget also makes cuts in the mandatory spending categories. the president also says rightly that we need a balanced approach. we have got to ask the folks who have been taking in a bandage of these tax loopholes to share a greater responsibility for reducing the deficit. we should ask the folks at the top 2% to go back to the same tax rates that were paying during the clinton administration. when we saw very rapid job growth. the president takes a balanced reproacheapproach. republicans have been bashing the president budget. i am looking for to seen bears. if there's this year looks like

there's last year, here is how they deal with the deficit. they got investments in education. investments in education, science, and research and the drivers of innovation and they get our investment in infrastructure. gut all that and they shred the social safety net. the weapon out. they cut medicaid by one third, over $70 billion. these are funds that help vulnerable seniors in nursing homes and many others. they of course and the medicare guarantee. alesci to seniors, you know what? we're projecting rising health- care costs. you're on your own. you have to eat them. yourselves.

and so the question is not whether we reduce the deficit. the president's budget does that. takes the deficit down and begins to stabilize the dead as a percentage of gdp. it does that. it does not do it the way the republicans do it. the president asked for everyone to share in the responsibility for getting that job done. he insists on closing some of these special interest tax breaks. he insists on getting rid of some of the incentives to shift american jobs overseas. we want to ship products and services overseas. we do not want to ship jobs overseas. they do not want one penny to go to deficit reduction if it involves closing a corporate loophole. not one penny. a lot of them signed a pledge. we will protect those loopholes if it comes to closing them for

the purposes of deficit reduction. the president focuses on the immediate term in making sure we get the economy going and do not jeopardize this very positive but very fragile trajectory we're seeing when it comes to jobs. thank you for joining us and we're happy to answer questions. >> why we do not use reconciliation in a budget this year to try to help get some of these things through? that is the main reason why these budgets are useful. and could you comment on the house leadership's backup plans they announced [inaudible] >> with respect to the house leadership and i have not seen the full statement.

i saw some of their comments. first of all we should have with this -- what this committee work its will and focus on the priority. extending the payroll tax cut for 160 million americans. extending unemployment insurance. and making sure that seniors on medicare have doctors who will participate in the program. we should be able to get that done. and i would hope the house republican leadership instead of issuing threats would make sure the conference committee moves forward to get the job done for the american people. frankly, we saw what happened last time the house republican leadership decided to go alone. their proposal crashed and burned and it put 160 million american taxpayers at risk.

i hope they do not want to repeat the same kind of story we saw last december where the almost allowed time to totally run out on 160 million taxpayers. >> [inaudible] if that comes to the floor. >> i support a straight payroll tax cut. i believe there would be. we will have to see exactly what our republican colleagues are saying. we have been making the point that when it came to tax cuts for folks at the top, the house republicans went to great lengths to change their rules that say you do not have to pay for those. and yet they have been saying when it comes to a short-term, a 10-month payroll tax cut, all of a sudden for middle income people, all the sudden, you have to pay for it. we have been making the argument

we should move forward on this temporary payroll tax cut. our republican colleagues have proposed instead lots of offsets. for example, increasing medicare premiums, that was part of a package. i hope we can get it done. we're ready. >> is there worry that if you separated out the tax cuts from the lighter packages could jeopardize unemployment benefits? >> let me be clear. i have not seen what the republican proposal is. we should move forward on the three pieces together. if what they're saying is with respect to the payroll tax cut, there are no longer demanding it be offset with things like premium increases for seniors on medicare and that kind of thing. that may be a positive development. it is still important the three pieces travel together. i have not seen their exact proposal.

if they change their position with respect to offsetting the payroll tax cut the way they have proposed, that would be a positive development. i say that with the qualification i have not heard their proposal. >> he did not have a chance to get his question answered. you might want to use reconciliation. i have not ruled that out. >> just a point on that. we would welcome any opportunity, just to put it in context. we have seen this ever before to get a balanced approach. if you are going to use reconciliation, you would hope then the republicans are prepared finally to take a balanced approach to deficit reduction. the president was talking to speaker john boehner, the

speaker could not get his caucus to go along with the balanced approach because it required asking folks at the top to pay more in revenue. in the by the negotiations when it came time to close corporate tax loopholes, you saw the republican majority leader walk away from the table. this has been a continuing issue. reconciliation is important. it is a solution to the extent people are willing to solve these problems. that means dealing with it in a balanced way. >> you said there is a responsible way to address the second problem. you want to offer a budget that includes deeper cuts in the out years. how do those go together? in long term? >> put forward -- we will have a

chance to talk about that at a later point. i have obviously been part of two other efforts, fiscal commission and the group of six. it is interesting to look at what the president has proposed. he has borrowed heavily from what the fiscal commission proposed. fiscal commission proposed $400 billion of savings in the health care accounts over 10 years. the president's has had close to that, $364 billion. the fiscal commission proposed through ongoing tax reform, not through raising tax rates but by broadening the tax base to improve the efficiency of the economy but also to reduce the deficit. the president has a revenue, total revenue number that is close to what the fiscal commission proposed. i am looking at the president's budget, you will see he gets to revenue level of 20.1% of gdp in

the 10th year. that is a little short of the target we had in the fiscal commission. he is not raising quite as much revenue as we thought was important in the fiscal commission. nonetheless, he does move in that direction. there are many places here where the president has borrowed heavily from the work of the fiscal commission. i commend him for a period >> there's a lot of talk about shared sacrifice and all that. you are on the budget committee and education. agriculture is important. what can they look forward to on this budget? >> the president has called for net savings out of agriculture of $32 billion. that is above where we were at the end of last year. the bipartisan agreement between the republicans and democrats and the agriculture

committee, senate and house. we agreed there to $23 billion of net savings. the president is asking for somewhat more. i prefer the number that we came up with last year. it is in the ballpark. >> [inaudible] >> the savings will come from a reduction in direct payments. >> both of you guys -- the white house states that want to replace the sequester to $1.20 trillion. a lot of republicans on the house side have talked about that. this sequester was agreed upon as a backup mechanism in case the committee failed last year. to what extent does the fact that both sides are backing away from the sequester, does it give credence to the public's concern that you guys are fiscally

cowardly when it comes to the hard decisions? >> the president's budget would more than replace the savings of the sequester. the deficit savings are greater than you would get with the sequestered. number two, if you look at terms of shared sacrifice which this gentleman raised, the problem with the direction we're going is all the savings come out of discretionary spending. there is nothing on the revenue side. there is nothing on the entitlement side. under the sequestered. it is on discretionary savings that have already been cut and we're headed already as congressman dan hollen indicated, to the lowest discretionary spending as a share of our national income in 60 years. >> will agree to the process in the first place? >> the hope was the special committee would come up with a

better idea. on both the revenue side and on reform and entitlements. unfortunately, they did not. we're left with the sequestered. the president is saying we should secure the savings, we should have greater savings. we should do it in a balanced way. that is an entirely rational response, i think. >> i agree with what the senator said. i just got a note saying that what the speaker proposed was moving only on the payroll tax cut peace. that would leave millions of americans who are out of work hanging. it would leave millions of seniors who need to see their doctors as part of the medicare program potentially in the lurch. that is why these things were dealt as one package together

the first time around and they should stay together on the next round. i am glad the republicans are finally wanting to move payroll tax cut without other extraneous provisions like blocking clean- air regulation. other than that, things need to travel together. the three of them. >> you would -- you're saying you would vote against? >> it is important to keep these three things together. and as i read the statement, he is talking about something he may bring up later this week. i think the conference committee can work its will. i am hopeful we will be able to get to a solution. they're having discussions over the weekend. >> what are the state of talks right now? some of the talks breaking down over the weekend were pinned to

link the time. what can you tell us? >> i do not want to go into a lot of activity. the democrats had proposed a permanent document fix. we have proposed after part of that that you use some of the war savings. it is not clear whether our republican colleagues will go along with that. some of the senate republicans have been supportive of that idea. house republicans did not take kindly to it in the public meetings. we're looking for other alternatives. you can have anything from a one-year fixed to a permanent fix. >> a lot of people said this is not -- [inaudible] money that was not going to be spent anyway. how do you respond? look at this you year's budget and see what is

happening? the were savings budget, that has been put aside for the war has been used for other things that may not be directly related to afghanistan. if you do not cap that, what you do is you create a slush fund that exists for years and years. i think part of our hope is to make sure that the defense department, just like every other federal agency, is budgeting on a regular annual basis. you do not have a separate fund that is created. that can dramatically increase the cost to the taxpayer. the reality has been used as a part as a supplemental fund for things he may not -- that may not be related to the war. by capping it, you make sure that we are on a regular budget for the defense department.

>> what other things should be said. the republicans in the house had in their budget the use of these funds in total as offsets. in total. now they come along and complain about capping them. it is a little disingenuous. beyond that, the fact is we're out of iraq. we are winding down the effort in afghanistan. that is going to create certain savings and we ought to make certain those savings go to an intended purpose, not become as congress bent man -- van hollen has indicated, a slush fund that can be used to spend money in other places never intended by the congress. >> back to agriculture. is there anything in rural development and programs that will not be popular?

>> we have to have savings from every part of the budget. our present north dakota. -- i represent north dakota. i worked very hard on the last two farm bills. we're working hard on a new one. we can accommodate $23 billion of savings and provide a safety net. when you go beyond that, it becomes real challenging. the president has asked us to go further. he has asked for spending reductions and savings in virtually every area of the budget. we understand that has to be done. >> thank you.

>> we will have a closer look at president obama's budget tomorrow. defense secretary leon panetta and joint chiefs chairman martin dempsey will testify about the pentagon's $673 billion budget request for 2013. live coverage from the senate armed services committee starts at 9:30 a.m. eastern here on c- span. treasury secretary timothy geithner will be on capitol hill testifying on the budget. he will be at the senate finance committee. bac get started at 10:00 a.m. eastern live on c-span3. we will continue our look at the 2013 budget request next. pentagon officials talk about

the defense department's budget blueprint. and a briefing on the state department's budget proposal which includes almost $5 billion for iraq, $4 billion for afghanistan and over $2 billion for pakistan. >> now online at the c-span video library, speeches from last weekend's conservative political action conference. >> we must outsmart the liberals. we must outsmart the stupid people that are trying to ruin america. >> is about one country united under god. we are not low americans. we are red, white, and blue. president obama, we're through with you. >> they can get along and come at our throats as long as we are foolish enough to raise taxes and through money at the table and they can get along like a good scene in the movie, "after

the bank rate." one for you and they are all happy. >> more at the c-span video library. the reqeust -- request includes $525 billion in discretionary spending which is more than 1% decrease over the last budget. unless there is an agreement between congress and the white house, nearly $500 billion in cuts will be taken from the pentagon's budget over the next 10 years. this defense department budget briefing is about 50 minutes. >> the afternoon. it is my pleasure to welcome back to our briefing department the comptroller and airforce lieutenant-general spencer. he serves as the director of assessment on the joint staff.

there will have a brief opening remarks as it will take your questions and i will be fielding the questions. we put this request together in the face of considerable change that congress passed an act last year significantly reducing our resources. we are winding down troop levels in afghanistan. and yet we face a complex array of saitaluses. you put this into a budget --

next slide, please. we were guided by a commitment by the president to make sure our art forces are the best trained, best lead, best equipped fighting force in history. to do that if i could get the next slide, we followed guiding principles and i will ask general spencer if he would brief the is. >> this is the first installment in a series of budget submissions to shape the force the country needs in fiscal year 20/20. everything was on the table during this process. we continued the quest for more disciplined use of funding. reductions through the lens of strategic guidance and kept faith with our troops and supported [inaudible] you have heard this before but i will say again. regarded by the principles of our new defense strategy. >> i will use these categories to describe what we did. first a few words on the budget numbers themselves. starting with our total defense budget.

our base budget but also everything we spend on wartime spending whether it was ohco funded. this is back to 1950. we factored out the effects of inflation. go to the peak year and compared to fiscal 17, down 21%. this could be lower in 17. we are using the place holder. a few general points. most importantly this budget told -- is coming down. it will free up resources for other national priorities. if i can get the next slide. most of the focus is on our base budget. that is what is controlled by the budget control act. plescia the top line is we had anticipated by base budget last year in fiscal 13 and last year's plan with regard to request the budget authority.

it adds up to a total reduction as compared to last year's plan, $259 billion. that is the number i will keep coming back to. that is the target to accommodate title 1. the act goes out 10 years. if you told the cuts compared to last year. we ended up asking congress or will ask them or have asked them to appropriate 524. billion dollars in fiscal -- [inaudible] in the years beyond 13, the budget grows enough to keep up with inflation or a bit more. one more word before go on. this budget does not accommodate this. we're following omb fiscal guidance which did not anticipate the sequester. with those dollars in mind, how did we get there?

next slide. we -- i will go through each of them. starting with more disciplined use of our defense dollars. we made a number of proposals for more disciplined use adding up to $60 billion in savings. that is five years savings against last year's plan. these are the numbers that are adding toward a $259 billion. linnik -- made a number of proposals reducing expenses by terminating lower priority programs, by reductions in contract funding. i will not go through all of these. i will talk in a few moments about some forestructure cuts. we rephased cuts. better buying practices. we are doing a number of things in that area. setting goals for weapons systems earlier in their

development. more use of should costs as well as the will costs. better management of service contracts. a major area where we can do better. we will try to improve information and achieve audit readiness. these are general plans and commitments. same situation we were in last year when i told you last year we had $150 billion of efficiencies. over the last year, we have turned this general plans into specific plans, especially for the -- 12 and 13. will do the same thing with these fiscal 13 plants over the next year. we understand we need to make more disciplined use of our defense dollars. next slide? it will not get us all the way to the 259. it is a quarter of the savings we need. we will need to make reductions in our forestructure and

investment. this will be guided by our strategy. we have that slide on strategic goals. cromie ask general spencer if he would brief the strategic goals we will be using. >> this creates a joint force that is lean, adaptable, ready, network, and technologically advanced. it will be capable cross all domains and globally engaged. our strategy is rebalancing and builds on innovative partnerships and strong alliances. we have heeded the lessons of 10 years of war and prioritized investments in areas such as cyber, special operations and intelligence and surveillance reconnaissance assets. this will be manned and led by the high -- highest quality personnel. let me go through each of those goals and give you examples. next slide. we know we need a force that is smaller and leaner. we have taken 103,000 active

duty end strength thaout of the budget. mostly in our ground forces. down to 490,000 and the marine down and smaller reductions in the air force. -- air force and navy. mostly in the case of the reserves and the navy and air force national guard and reserves, modest reductions in the ground force reserves. ground forces especially on the active site are reduced because we're no longer sizing these forces to accommodate large, prolonged stability operations. these kind of cuts we need to reduce numbers of units. we did so, saving $50 billion. that is working toward that to 59. the army -- army will eliminate eight combat teams out of a total of 65 and do a study that may lead to reorganization and

perhaps changes in the number. the marine corps, six combat battalions at a 41. the air force will eliminate seven squadrons of 61 and reduced mobility aircraft. 27 c5's. we need to consolidate infrastructure. we will ask congress to provide authority for two rounds of base realignment and closure actions, one in 2013 and one in 2015. we want a force that is smaller and leaner but also ready and agile. readiness is a complex topic. the budget side most associated with readiness does go up. the only major preparation to go up is operation and maintenance. most associated with readiness, up 6% from fiscal 12 through 13. the overall budget is down 1% and will retain agile forces like our special ops forces, bombers, carriers, which can

self deployed. another of our goals is to balance toward asia pacific and the middle east. we will maintain capabilities critical to those areas and long term levels of ships. you can see there is a fleet of nine ships there is a current bomber fleet and makes them selected investments in a new bomber. and a float forward staging base of a new ship and the landing platform that will provide this capability to handle people and equipment in smaller contingency operations. next slide. we will not fight along if we have to. we will fight with partners. it is large in importance. the nato alliance -- unmanned vehicles we will buy and operate with nato. the cocom exercise and training

program. some organizational changes. two of those teams will come out of europe. i'm not sure yet exactly which ones and where but they will. the europeans will see more of us. many of the units are deployed to afghanistan as we wind down the troops there. we will -- there will be more of those units in europe and especially -- also with the special ops forces. we will have more of those who will be able to conduct activities. next slide. we will invest in high priority initiatives. we will not spend as much as we did last year given this budget and affordability issues. our special ops forces continue to go up and with bas andse and -- we will spend $10 billion. we will reduce the predator, reaper production from 48 to 24.

but keep our commitment to 65 combat aircraft -- patrols. we need to give time for the personnel and training session to catch up. we spent 3.4 billion on cyber including some new activities there. aimed at what we know is an important area for us. we have had to repair ties. these are changes that build toward that $259 billion trade we will reduce funding in 2013 through 17 for the joint strike fighter by -- compared to last year's plan. take out 179 aircraft. this is consistent with our strategy. we need more time for testing to be completed. in fiscal 13 we will make cuts. we are requesting $8.90 billion for the joint strike fighter. we will reduce shipbuilding by

$14.10 billion. from 57 ships in last year's plan to 41. but try to do it in a way consistent with our strategy. many of those cuts are support vessels. half of them a joint high-speed vessel. we will delay the ss bnx by four years. the three items are three of the six termination's we've proposed. we will terminate the global hawk block 30. we had envisioned it to be a replacement for the u-2 and it is not cost-effective. we will turn that -- terminate the program. next. i talked about forces and investment. let me go to full support for the all volunteer force. we're doing a number of things for full support. i will ask general center if he will brief the slide.

>> the department has no greater priority than providing the highest quality support to wounded, ill, and injured soldiers, sailors, airmen, and marines and their families. this budget funds all health- care systems as well as family support programs such as dod schools, commissaries, counseling, and child care. the transition assistance program connects transitioning service members and families to resources such as employment preparation and job search workshops. the program assists national guard and reserve members with their unique reintegration needs both during and after deployment. next slide. felt we needed to review military compensation. it is up 90% since 2001. it makes up about 1/3 of our budget. the review was guided by some principles. we need our compensation system to be concerned with the stress and military life.

we have got to be sure we have this and that allows us to attract and retain the people wekameny to ensure that no one's pay is -- and we need to ensure that no one's pay is cut. we have had to make changes to avoid overly large cuts. i'm going to recommend and i will talk -- we will recommend i will talk in a moment about specifics. the changes that save $30 billion -- that is about 10% of total savings. we will have more out of roughly 1/3 of the budget. by design, it is disproportionately small. next slide. we will find money for pay raises for the military that is consistent with the cost index. same in 2014. beyond fiscal 2014, we will recommend a small paris is what giving members and their

families time to plan. the fact that the overall economy is slow, all the races are lower -- raises are lower. we will propose changes in military health care. we are committed to high quality in the try care health care program. we will propose increases, continued increases come in try kirk enrollment fees, and we will use a tiered approach, as was proposed by the 2007 task force on the future of military medical care. it will require a somewhat higher fees for more senior retirees, lower increases in fees for junior retirees. that is for tricare prime, the hmo version. for the standard fee per service, will ask congress to enact a new in enrollment fee and higher deductibles. we will ask for a new enrollment fee for the tricare light program, retirees 65 and older, again using the tear approach. and we will increase pharmacy

go play -- pharmacy copays, creating more incentives for mail-order a generic brand prescriptions. with retirement, we're not present changes but we are asking congress to set up the military retirement modernization commission that will allow staff to look at this complicated area. if congress approves and it operates under procedures similar to that brac commission, recommending that congress approve changes, date and would only apply to new recruits coming after the changes were made. let me ask general spencer if he would comment on these from a military standpoint. >> some of last how people feel about these proposals from the stench of military competition bred date and reflect the chairman, the joint chiefs, and our senior leaders. they represent a balanced

approach to the overall budget reduction, and as mr. hale stated, are only two% of the total reductions. in accordance with the principles that got us to the budget, the honor the commitments of america's military force and their families. >> the last area is deployed war fighters. we will ask for $80.5 million for fiscal year 2013, down roughly commensurate with the troop reductions in afghanistan. almost all of the funding for afghanistan, $2.9 billion for iraq, supporting the it security corp. for iraq, and the rest of that is new equipment come out of iraq. i will mention one point so that we can get on and hear your questions. we assume that afghan force levels continued through 2015 at a level of 68,000 pit that does not mean there will not be

later changes in two levels. does not mean we want to bind the hands of the president with budget limits. we want to hear the recommendations from the commanders based on conditions on the ground and, of course, the secretary of defense, before he makes decisions on levels of troops in fiscal year 2013. i am going to spare you these slides. this one and the next one. what they do is go through five years, the $45 billion we took out in 2013, both in terms of the categories i've been discussing, the use of resources, and so forth, and then by preparation. the next slide that you will be largely spared gives you 12 enacted levels by appropriation, and also what we are requesting for appropriation in fiscal year 2013. i want to end where i started, which is to say that this is a

budget based on strategy and good management. it is the package of proposals that we've put together that we think work as a whole, and we very much hope that the congress will enact this package just as that, as a package and not start making changes, because once they do, it loses some of the synergies that make it a strong package. last slide. we are trying to cut down on printing costs, which means that we did not give you as much stuff as we usually do. but it is all on our website, and you will see the web address there. you are more than milk and, if you are not sleeping at all tonight -- more than welcome, if you're not sitting at all tonight, to get into these documents and taken up with that, i will stop and i will turn it over to doug. >> you are requesting nearly half as much money for the afghan national security forces. last year it was $11.2 billion. you are requesting $5.7 billion.

this is the u.s.' x's said he for afghanistan. why are you putting so much? >> we have invested heavily in equipment and a beginning to meet equipment needs. we still have more to do with training. we think the 5.7, based on the best judgment of our commanders over there, is adequate funding to fully support roughly 350,000 in the afghan national security forces. don't take that as any sign of the reduction in our commitment. we are fully committed to them. >> did that come from this building? >> it was their recommendation. they are very comfortable with it. >> secretary panetta said recently that there was a lot of consideration to reduce the target of 250,000 it does this never take that belief into account? belief into account?

>> there are talks of long run structure, but that would go beyond fiscal 2015. >> can i ask a question about tricare fees? the once the most well-off retirees are a quadrupling over five years. i noticed that most of the budget cuts for this next year is about 6 billion, right? it looks like most of that money is coming from the health care. >> no, it will be that much. i don't have the number in my head and no, it won't be that much. i don't have the never in my head. the fees go from 527 out of $20 a year for tricare.

the number is about right, it roughly quadrupled. it would still be quite generous compared to typical private sector plans. the aetna plan, the blue cross plan, more like $4,000 to $5,000 a year. we still think that it is generous as it should be. but we also feel we need to move in this direction to hold onto costs. those earning less than 22,000, it goes to 850. >> i wanted to follow that up. you are keeping pay raises equal to private sector raises for the next two years. the prospect of troops still being and fighting somewhere and you are tapping their paid lower than federal civilians, the private sector take it out

the square that with keeping faith, unless current pay levels are too generous? >> we are looking at control personnel costs in the context of congressional requirements that would take $259 billion out of it. had there not been that requirement, we would probably not be making this recommendation. in that context, if we choose to entirely exempt personnel, we will have to make much larger cuts in force structure and we don't want to do that. it is not consistent with the strategy. these are out-year plans. there is an old saying in the budget this is that the out years never come, which means we will keep reviewing a. if we cannot attract and retain the people we need, we will find a way to not do them in the out years. it is a reasonable proposal -- >> the big thing is that there is no pay cuts. we are just slowing the growth

in the obvious. >> you mentioned in -- the defense department mention in the defense strategic guidance that there would be a reduction in the reliance on nuclear weapons and a movement to reliance on conventional weapons. can you point to anything in the 2013 budget requests that implements that are moves in that direction? >> we fully support all three legs of the triad in this budget in making investments at all of them. the one major area where there were some reductions is the years. that is largely an affordability we would like to let the program tries will, but it is largely affordability. >> there is not going to be a briefing provided for us today, so i'm curious if you could outline what was the decision

between htx being shot? the sea-based x-band radar? >> you already know the answer. [laughter] services are coming later. >> how much of the share of cuts to the agency -- >> we are spending $9.7 billion on missile defense. i will tell you the broad strategy. we will protect our investment in home and missile defense, and we will protect european phased adaptive approach. cutting back on radars, cutting back on the missile buys, in anticipation that other areas will slow growth in this area. >> if you could articulate -- >> i cannot help you. you want to say something about

that? our acting undersecretary. >> it is a research development. we thought we could get adequate data for the testing we're doing without the radar. it is largely an affordability issue. other centers can fill in the gap. >> there was one number in there that leads out. with all the cuts, the number for army end-sprint, which has been 1.9 from 2011 to 2012, jumped to 4.9 over fiscal year 2013. at a time when we had been told to expect fewer troops in afghanistan. why is the number going up? is this just a shell game to play with money? >> it is not a shell game. first, i am impressed that you are reading these tables so carefully to my staff and iwe tried to identify the non-

tendering ground strike forces, all the strength in the army of the 40,000 in 2017 and all in the marine corps of the number we are heading for. we are doing that because this year we have made a decision to eliminate those forces. they are primarily because of the afghan war and we thought it was reasonable and omb agreed tototal of $6 billion for the ego strength for fiscal 2013. president were in this room unveiling the strategy for the budget, they described a more agile, more flexible force. when you think of agile and flexible, you think of the navy and air force. the navy and air force budgets kahane are going down while the u.s. army budget is going up.

if you look at this, i guess going up by $3 billion more -- it is going up by $3 billion more than with the table would suggest. is that what some people would call institutional inertia? >> i like all your questions except the end. no, the reason the army is going up is at the ms meant -- is a heavy investment. 2012 was artificially depressed because the congress put army in. second, we need to increase army at onm to improve readiness and in some cases because they are moving forces out of iraq and back into the states, they after move the forces back into the base budget. the army can give you more details. that is the main reason you see what is happening from 2012 to 2013.

at the 2013 to 2017 numbers, you will see a pattern that is more consistent with what you would expect. it reflects the fact that there is heavy reductions in the ground forces. i cannot remember the exact numbers in the navy and air force. >> that was a really good question. if you look at -- we get a lot around here about service shares, who should get what. to be honest, we never looked at that when we developed this budget. if you go back to 2000 entries that to 2017 -- and a trace that to 2017, the shares among the services group for the army primarily, iraq and afghanistan, and is starting to trail down. it is ironic that pre-9/11 budget chairs are about the same as they are in 2017.

>> in drawing up contingency sequestered some area, it is not why not. isn't that a clear due diligence task for you and your colleagues? >> know. we are not planning to i think i would know if we were. this is not a good policy to sequester. what we need is congress as a whole to enact a balanced package of deficit reduction that the president can sign and that will replace sequestering, and do it in a sensible way rather than this kind of meat axe approach. we are not planning. >> if you talk about it openly and publicly release some kind of contingency plans become does it make it more likely?

>> i don't think so. we listed some of what would happen, and it will be pretty. -- and it won't be pretty. we know the numbers, and what has to be done an equal percentage terms at least at the account level, army onm, navy, maybe in the world level. it would be a meat-ax approach. it won't be nice. we will a and disrupting a lot of programs, we will probably be forced into a situation with regard to our civilians. we would adversely affect readiness. the more we save, the less people will like. we are hopeful that the congress, as i say, will need to make an active package of changes to replace sequester. >> i'm sorry. >> can you address some of the criticism about efficiencies

being such a big percentage of the savings? efficiencies, budgeting $60 billion in savings? some people said that is crazy, too much efficiencies, and that they are not realistic. >> the best answer, first off, we used the word "more disciplined use our resources." i like that better, and from an economist's standpoint, these are not efficiencies. they are streamlining activities and cutting back on a lower priority programs. i think the best i can tell you is what i tried to say in my oral remarks. these are plans and commitments for this point in fiscal year 2013, 2013 through 17. we will have to flush them out, but i think we did that with regard to more than 150 that we have done last year. we have specific plans it people assigned to doing them, targets, government structure in each service.

asked the service about that as you hear from them. i colead reviews with the deputy chief management officer. we will get the majority of those deficiencies and we will do the same thing. they have to give us a little time. we cannot have it all done with this budget. >> on pay raises, if it might raise 1.7% for fiscal year 2013 and 2014, after that, given the idea of what the reduced rate will be and what metric you used to guide that? >> we are planning right now for 0.5% pay raise in fiscal 2015, 1% in 2016, 1.5% in 2017. we revisit that in terms of how well the economy's doing, how we do with work for men and retention. >> fiscal 2015 is 0.5.

>> can you go about specifically how you will be reducing the ground forces, and will need to be forced to leave the army and marine corps to reach this figure is? >> i will give you the general figure and you can ask the army for more detail. they will accept a voluntary departures were those occurred. they will take up investment standards. some are associated with other officers can stay dry i think i will let the army -- i cannot stay here as it will not be any involuntary separation. we will have to see how the economy recovers. the economy is still fairly weak. the change will be easier. if it doesn't, it will be harder. >> as you are putting these

numbers together, had he accounted for an estimate of how much will come out of retirement and how high is voluntary reduction? >> i don't have those numbers in my head. we are looking at various incentives that we could provide people to help for them. we will try to do this as we can. >> if you could talk a little bit about how you came to the idea of a nine-year plan and this pool of money rather than looking at it as a year by year, why that makes good budgeting cents. and in general, you talked earlier about predator bombs, slowing them down. are they going to be purchased in future years? is this slowing it down or just -- >> we do budget when you're at

a time in detail, and the only detailed proposal have is the $80.5 billion in fiscal 2013. the administration has proposed a cap on total oco spending through 2021. they want to limit the ability of all of us, and if the congress, to move money from the base. for afghanistan, we think that is fine. we are ok with it. i don't know if that answers your question. >> more of a white house -- your idea of -- is there a tension between that idea and your idea of putting some of these army costs and rory costs into -- and bring costs into occo? what we most need is the

ability to make a proposal each year that is consistent with the troops we expect to have there and the temple of activity that we expect. we think the form of $50 billion gives us the latitude and i'm comfortable with it secretary panetta is comfortable with it. >> on the uabs you mentioned, the air force can answer this in more detail, but they had at their plants that were off the production line. they have a target of achieving 65 combat air patrol. when they did the review, they found it was not platform that failed, it was the under- trained crews. when they did their review, they found that by lowering the amount of reapers they bought, increasing the number of trained crew, that the bank had

breached their search capability -- that they code breached their surge capability. >> how much are you expecting from the base closings, and the sums compared with the last bracs? what are you going to do if you don't get that brac from congress? >> we need him no more detail on service is working on exactly where -- we need to know more detail on service is working on exactly where the reductions would come. in terms of the blessed plan, it was expensive, about $35 billion in upfront costs we will save $5 billion a year or so. we will get a payback, and as i like to remind people, these

savings occur in perpetuity. it is still a good deal even though, frankly, the costs are significantly higher. for 90 of your third question? since we have not budgeted for them, we are ok. >> a lot of defense companies are shaking their head, looking at 40% of your savings from 2013 falling into procurement accounts. 35% to 36%. what happened to the balanced approach of procurement, about 21% of the overall budget? >> first off, as general spencer said, we make the decisions on a by-weapons-system basis. we did not say we wanted a certain proportion out of or to men or any other category. it is common to see that

procurement is just partially cut because it takes a while before we can make decisions about force structure cuts out and realize savings. if you look at our plan, even over the five years to come out procurement is more proportional, and less so in fiscal 2013. >> there is a lot of hemming and hawing about terminating the program. you have 80 of these things are ready. what operations budget is does it make to mothball -- get rid of what you already have? it seems like it calls a waste of money. can you justify this for the taxpayer? >> it was going to replace the u-2 and we thought we could do so at a cheaper price. this was no longer the case. it became too expensive. as you are probably aware, the

global clock and u-2 have two centers. the imagery centered on the u2 is far superior. based on the cost of the block 30 and the cost it would take us to maintain the u-2's, it was a business case decision and an operation to his decision. >> it does not seem to make any sense. >> i will have to refer to the specifics that will happen to block 30s. >> back on the old code, this might be an expansion of -- right, just trying to match numbers. this slide shows a big drop from 2013 to 2014. the next page, it shows dollars

going up. does that mean there is a huge drop -- >> it is a place holder in the budget. it is just that, a place holder. we will year from now make a specific proposal for 2014 and will be different from that date since it is the budget no. we were using, and it has a sharp drop from this place -- >> you have half of this for next year. is that a realistic assumption? >> i will use the word again, "place holder." it is not necessarily realistic. we will have to see troops on the ground before we make that decision. we are not constrained to $44.2 billion. we are constrained to $450 come up with the money we need to support our troops each year and

we will. >> time for just a few more questions. >> you have lifted about $2.8 billion in investments that dod says have to do with rebalancing towards the asia- pacific and the middle east. that will go to over the five- year plan? what other investments fit into that category? >> i think i cannot, because it is kind of the squishy, i will be honest. we're picking investments that we think illustrate a commitment, but in contrast to some other figures in here, there is not an easy "i did this only for the pacific," as you can imagine. almost everything we're doing what also provide benefits elsewhere. i would be hesitant to be too

precise. we are kind of shifting our resources and maybe our thinking more towards the pacific and the middle east while still maintaining a global involvement. we are not any means for our best allies in -- with our best allies in nato, we will keep them in mine. >> you used the figure $9.7 billion for missile defense. for last year? who do you expect to make up for some of those reduce purchases of missiles, radar? >> i want to say last year, that is still missile defense, maybe $10.8 billion, $11 billion? 10.4? ok. >> that was from 10.4 -- >> the level of a year ago --

that was 12. 2012 was 1-.4 -- 2012 was 10.4. there could be other middle eastern countries that stop themselves, or we will slow our actions to improve missile defenses. it could be widespread. i don't think we have made a specific choice of where we are going to do this. >> you talked about a more disciplined use of defense dollars, but you are doing a lot of procurement in ways touching programs out, which inevitably adds to unit cost. how is that a more disciplined use of dollars? >> fair point. if we had our way, we would not have done it. congress passed the budget control act. you react to be consistent with

title 1 of that act. we try to do them in a way that minimizes adverse effects. your points are well taken, and some of the stretch out will result in higher unit costs. >> to contained $400 million for the medium, extended, do you expect to see that face through or not? >> we have asked for money in fiscal 2013, the last year of the program. we have legal presentations on fiscal 2012. frank, do you want to add to this? >> it is a program that the u.s. decided not to procure a year ago. we agreed to a two-year termination phase, which we would fund in 2012 and 2013. restrictive language allows us to only spent 25% of the money. we would terminate at the end of 2012 or restructure programs

at the end of 2012. we did request the money in 2013 but the restrictions we have will make it hard for us to>> last question. >> i believe only $26 million where it requested for the okinawa to guam plan if you reach any agreement with the japanese government about how to carry out the new alignment -- >> the social economic funds in fiscal 2013 -- as you know, we announced discussions, results of discussions with the japanese. we needed to work with the japanese and consult with the congress. if we come up with a plan, we

need to look again at financial needs of fiscal 2013, and yes, we may have to adjust them. >> thank you very much. national captioning institute] cable satellite corp. 2012] >> for more information on the president's budget proposal, visit c-span's web page. you can watch budget news briefings and also read the 2013 white house budget request that includes a summary tables. the on my addition is about 256

pages. could do c-span.org -- go to c- span.org. request includes $51.6 billion for this department and the u.s. agency for international development. a 30 minute news briefing. but me start by welcoming the today to the rollout of the 2013 budget request from the state department. i know tomorrow is valentine's day, and i was going to give you flowers and chocolate, but because of constraints, what i have done is giving you a pretty book, and you can take it home and enjoy it.

with that, -- i thought that was funnier earlier. i have also been delighted with the discussion of the detailed program for all of you. this falls -- follows a year of transformational change. in iraq, which completed the largest military transition since the marshall plan, and the budget reflects the beginning of a normalizing of our plan. civilians we continue to work to keep hard-won gains.

since i presented last year's budget, there has not been a day when we were not managing multiple crises at once. now, if my high-tech skills serves me correctly, i will show in graphic detail how our budget fits into the overall federal budget. 50% of the federal budget is spent on the social security, medicare, and medicaid. second, 22% supports discretionary national security programs at the department of defense, and security, and veterans affairs. third, 13% goes to

discretionary non-security programs run by transportation, education, and justice, commerce, and hud. fourth, 6% pace interest on the federal debt. if you think there isn't a lot left over, you are right. state and usaid account for 1% of the federal budget. see that thin yellow line? that's us, 1%. today we will show how this makes the outsized contribution to america's prosperity, security, and leadership. from day one, secretary clinton has made it a priority to work smarter and more effectively. this is the reform outlined in the quadrennial review. we estimate our efforts -- but not tied up we have streamlined our efforts but not shied away from making trades in

irresponsible cuts. a recent gallup poll found that americans believe that if we spend 1/4 of our budget on foreign assistance -- let me remind you again what the chart shows -- state and aid to all of what i just described with a little less than 1% rate let me go over the numbers and my after this to go into more details if you wish. fy2013 budget for international affairs programs, known asthe function 150 account, the totals $56.4 billion. this includes state and usaid. it includes the treasury's international programs, the millennium challenge corp., the peace corps, and others. within the 150 account, you find the state department and usaid's request, totaling $51.6

billion. that is what i will focus on today we have limited our request to what is absolutely necessary to achieve our mission. even as our needs and responsibilities grow, our budget increases by less than the rate of inflation. money goes to four principal areas. 23% of the budget is spent on the frontline states -- iraq, afghanistan, and pakistan. 20% of our budget goes to preventing conflicts, support our allies and partners through direct assistance and multilateral contributions among other things. another 28% is also spent on human and economic security. the remaining 20%, 21%, support our people, and the seas, a global presence.

now the specific numbers. first, the 23%, at $1.9 billion, goes into -- $11.9 billion, goes into our national security interests in iraq, afghanistan, pakistan. operations budget funds the temporary costs associated with these missions. these are the same methodologies from last year's requests, which last for $8.2 million and $3.7 billion in air base budget for a total of $11.9 billion for the front-line states. let me break it down for you specifically. in iraq, we are requesting $4.8 billion for next year, which is about 10% less than last year. it the transition has already saved the american taxpayer a

great deal of money. with the now -- with state in the lead but the troops no longer on the ground, the government is spending $40 billion less this year than last. as discussed during last week passed a press briefing, we are continuing to be thoughtful about the right size of our presence in iraq, hiring more local staff, securing more goods locally, which would further reduce our spending. in afghanistan, we are requesting $4.6 billion. civilians are vital to our efforts and are securing our gains against the t andaliba -- the taliban, and they are laying the groundwork for what comes next -- sustainable economic growth, national reconciliation, and the long- term civilian partnership. all of which helps us ensure that afghanistan never again becomes the safe haven for terrorists.

in pakistan, the 2013 request is $2.4 billion. our relationship with is challenging. but effective corp. is critical to america's national security. the request includes funds to counter terrorism efforts and protect civilians on the ground. we're supporting key allies and partners. this year the request includes a new $770 million middle east and north africa in said the fund to support economic reforms in the region. the investment is supporting our allies and includes everything from police training in latin

america to efforts to grow stability in haiti and the south sudan to more than 70 military partnerships which are managed by the state department. it funds peacekeeping missions around the broad and our presence and international institutions. it matches last year's record high for the state of israel. this continues our efforts to support our arab partners. third, we devote another 28% of our budget to invest in human and economic security, specifically global health, food security, and climate change. party reduction, and cross- effort to empower women and girls in our humanitarian budgets. we are achieving measurable outcomes that have real impact on put improving people's lives.

even with that constraints we face, this budget supports the president's goal of freeing more than 6 million people infected with h.i.v.-aids by the end of 2013. this is a $2 million -- this is 2 million more than our goal, continuing our strong support that puts us on the path of an aids-free generation. the money we spent on human economics straight funds he managed hearing responses and the care for refugees. i will leave it to the ambassador to speak in more detail about the innovation program and mint -- implemented by usaid. fourth, 21% or $10.4 billion of this budget supports the men and women of the state department, and usaid who make the work i described possible. this budget pays for all our operations.

it funds political -- to defend democracy and human rights. it funds development options to make the world a safer place. it funds offering businesses in the u.s. and helps businesses around the world, and it helps american businesses compete to put america back to work. not a bad return on our investment. this is a moment of historic change around the world. they are also tight times for our people. the truths that have guided us from day one -- and as i would like to remind you once again, with this 1% of the federal budget, the state department and usaid will maintain our country's lucien any changes world, promote our values, jump- start our comic, and keep america safe in 2013 and beyond.

let me turn the floor over to my friend. thank you, and i want to start by reiterating the opening and closing point that the entire budget and the activities i will describe live within the 1% of the federal budget that tom highlight it. i intend to go into more detail on the priorities of the fiscal year 2013 budget proposal, and starting with the point that the president and secretary have focused on elevating development as part of our foreign policy, because the lives we save around the world, clean water, fighting hunger, are part of our national security strategy to keep us safe and part of our economic security strategy to

ensure we are expanding the number of countries and communities with whom we can trade and create jobs here at home. the budget accounts are familiar to you, like development assistance and william challenged the cats. in all these areas, we're taking a more businesslike approach difficult -- to developing results. i will begin by describing global hell this is a budget request that focuses on cost effectiveness and saving lives. it allows us to meet the president's goal of putting 6 million patient on treatment for hiv aids, building on the progress we have seen under this

administration of going from 1.7 to 3.9 million today. this will allow us to invest on hiv prevention, including the elimination of pediatric aids. this allows us to meet our global commitment in immunization. global community, we have made investments to help save more than four million lives over a five-year period by expanding access to new vaccines to poor children around the world. allows us to extend our investments in malaria and maternal child health where we have seen concrete and specific results. since 2008, a child mortality has been reduced by 16%, maternal mortality has been reduced by 13%. new studies show the

effectiveness of u.s. investments in global health in places like rwanda and tanzania. second, our feed the future program, the president's signature effort to advance food security around the world, is predicated on the point that it is cheaper and smarter to help countries learn to feed themselves then to address riots that results from food insecurity. this is an area where we have changed the way we were -- work to focus on results, focus our investments on those countries that are taking on reforms to ensure they can be successful, and rework more actively in partnership with the private sector to stretch taxpayer dollars even further. we have seen import results in places like bangladesh and

tanzania, where food production is up and the number of people and number of children who are chronically hungry has gone down. we've implemented new partnerships with pepsi in ethiopia, walmart in central america that are reaching tens of thousands of families and stretching u.s. tax dollars even further and achieving results. these accounts help us deal with food emergencies, address water when water is not available, address refugee flows around the displaced populations in everywhere around the world. in these areas as well we have taken a reform approach and prioritize deficiencies,

investing in early warning systems that highlight faster where disasters are likely to occur, pre positioning food and supplies to reduce the cost and improve the time of delivery, and expanding initiatives like the secretaries 1000 days initiative that targets food assistance to pregnant women and children so that it achieves better results in terms of nutrition, learning and outcomes. these types of strategy's allow us to reach more than four 0.6 million people who are at risk in the horn of africa in the past several months and the drought and famine that ensued. despite the fact that that has now been downgraded is in part due to effective humanitarian support. the u.s. will continue to make investments and the horn and other parts of the world where it is necessary, and will continue to use our leadership and our ability to make those investments to diversify the burden and insure that the whole world is living up to its

share responsibilities in times of need and crisis. finally, tom mentioned at $10.4 billion of the overall budget is 4 -- $10.4 million of the overall -- $10.4 billion of the overall budget is for our staff and initiatives that allow us to use new technology like mobile banking in haiti and afghanistan to fight corruption and expand access to banking services and financial services. they allow us to invest in scientific and technical partnerships like the grand challenges program, through which we launched programs like saving lives at birth and efforts to improve literacy of all grade levels. every $1 from tax their leverage is $3 or $4 from donors before -- taxpayers, leverage is

$3 and four dollars from donors before we go for it. this allows us to reduce waste, fraud and abuse, cut down on contractor costs and save taxpayers money. by recalling times opening point that this entire portfolio investment takes place within 1% of the federal budget and is a critical part of keeping a safe and secure and improving our economic prospects around the world. thank you. >> and i to ask about some of the areas where -- i would like to ask about some of the areas where you are expected to cut funding, such as aid to egypt. there is $3.1 billion in there,

but it looks as if things are not resolved, it may be cut. i would also like to ask about unesco funding. are these in anticipation of resolving these issues? are you reserving the money? if you could explain. >> sure, let's do unesco first. as you know, the congress has prohibited us from funding unesco this year. the president has articulated quite clearly that he would like a waiver allowing us to participate in it unesco. we have put the money in the budget, realizing that we cannot spend the money unless we get the waiver. we will work with our friends and colleagues on capitol hill in hopes that we can work out an agreement to fund unesco. it does a lot of enormous good

work and we would like to be sure we have a contribution to their work. in egypt, our goal is to provide the money which includes $1.3 billion for military financing and to under $50 million of direct assistance. -- $250 million of direct assistance. this budget reflects our commitment and our desire to fully fund those initiatives. >> 1 follow up on egypt and then to the broader middle east. you are saying and the egyptian side that you hope to be able to give them the money that you have outlined here. how much push back you expecting from congress on these particular numbers? secondly, on the $7 million for

the broader incentive fund, how much of that -- $70 million for the broader incentive fund, how much of that is going to be new money? >> first on egypt, i think the desire from the hill and the administration is to resolve the issues that are currently occurring in egypt. there is bipartisan support, once we can get these issues resolved, to support egypt. there seems to be no argument on that from where we sit. our hope is and desire as we proceed this year and have discussions around the budget that it will be clear to us, that the situation gets clear to us and we will be able to provide the assistance we hope to provide -- >> the state department budget briefing from just a short time

ago. i cannot tell you today where the money will be spent. we will be coming up with initiatives, with the ideal to support everything from tunisia, to support egypt, areas where things are changing. we have no idea. the world is evolving as we see it. it is all in the overall budget request, up 1.5% from last year.

>> would that include the nonmilitary? >> a different pot of money. the egypt money, $250 some million is for direct assistant. >> just want to make sure. >> thanks. me.on't stump >> the core budget, funded at 10%7 billion, and it's a increase. >> there's two ways to do this. the budget switched around from

occo. last year the request was made to move items into the occo account. we had dialogue with them. we are shifting some of those things back. even even though it looks like the base budget is up, in fact, the base and oco together -- >> my question is, since there are discretionary kept on into effect for the first turn based on the budget act, do you expect that to be funded in the regular budget argue expect congress to shifted back? >> you have watched congress for a long time, and so have i..

this is the beginning of the process. it allows for all of you report on this to look at the cost from a front-line bases. that is important because we will see those costs come down over time. the idea of putting the oco part of the state department, that is the benefit, and i think congress will look it that and my strong assumption is it will continue to fund the oco in a way that they feel reflect those costs. >> $626 million totally zero out. >> i am saying that 18% -- that

brings the 626 mou dollars to zero. >> the entire region is down but [unintelligible] so generally why are we cutting all of our assistance to those three regions by whatever it is? >> as the document will show, europe and eurasia is down about 18%. as the secretary and president have discussed many times, we have a limited amount of money, we have a huge amount of new activities occurring and need to shift resources based on the activities that are occurring. >> the last question, anyone? >> i am just wondering -- wonder, the $2.4 billion, is the core money -- >> has it come

down, or is it staying at the same level? >> staying the same. >> thanks everyone, we appreciate it. >> one quick question. we have a cut for global health programs. >> the global health budget was tedious the results we have committed to. the president made commitments to put 6 million people on aids treatment. given the call structure that, we have a budget that reflects the ability to do that. we made a commitment to eliminating the transmission of hiv aids from mothers to children and the budget supports that effort. present an effort to support the

global fund, and that -- this reflects that as well. we have essentially been seeing very good and very cost- effective results in terms of the cost of saving lives. $7.90 billion, we are maintaining a very strong commitment to global held on behalf of the president and secretary. thank you. cracks the white house rolled out its new three-point $8 trillion budget today. the president promotes his budget at a community college in northern virginia. that is next on c-span. then the president's economic team takes questions on details of the 2013 budget request. later, senate republicans weigh in on the budget. we will also hear from a couple of democrats, senate budget

committee chairman kent conrad and congressman chris van hollen, ranking member on the house budget committee. on "washington journal glo-coat tomorrow morning, -- on "washington journal" tomorrow morning. our guest is massachusetts attorney general martha coakley and we will discuss the president's proposed budget with represented kevin brady of texas, member of the ways and means committee and vice chairman of the joint economic committee. "washington journal" is live on c-span every day at 7:00 a.m. eastern. >> there has been honest contention, spirited this agreement, and i believe considerable arguments. misled't let anybody be by that. you have given here in this

hall a moving and dramatic proof of how americans who honestly differ close ranks and move forward for the nation's well- being, shoulder to shoulder. >> we look back at 14 men who ran for the office and lost. go to over website, c-span.org /thecontenders. >> what about you. are you now out of debt? do you have a comfortable backlog in the bank? are you paying less for the things you buy, or more? do you really thinks it is do you really think things cannot be better? course they can. working together, we can and will make them better. >> now president obama talks about his budget proposal for 2013. the request includes $4 trillion in deficit cuts over

the next decade. the president spoke at a northern virginia community college in annandale, virginia. [applause] >> thank you. good morning. welcome to northern virginia community college. after working various jobs in real estate, i found myself having -- i read about the demand for skilled personnel in the news media. cyber security is a constantly changing field. our finances are constantly under attack. as technology advances, so does the risk. new jobs have been created such as security analysts and digital forensics.

i enrolled in nova and recently completed a certificate. my experience has been very enjoyable. one of the greatest assets here are the instructors. whether taking courses online or in the classroom, instructors are dedicated professionals. nova's connection to cyber watch provides opportunities with cyber security competitions. i recommend others. today we're pleased to welcome the president our campus who has committed to our community colleges for tomorrow's jobs.

please welcome the president of the united states, barack obama. ["hail to the chief" plays] [cheers] >> thank you. thank you very much. thank you, virginia. thank you, nova. thank you so much. thank you, thank you very much. please have a seat. >> i love you. i love you back. great to be here. i want to thank mike for the wonderful introduction. please give mike a round of

applause. [applause] it is great to be back here at nova. i have been here so many times, i am only three credits short of graduation. [laughter] but there are a couple of reasons i keep on coming back. first of all, i think that the whole administration here is doing a great job, so i want to give them a big round of applause. the other reason is because joe biden keeps talking about how great you are, and just what i tell joe what to do -- we have

our secretary of labor here, who is doing an outstanding job. the main reason i keep coming back is i think this institution is an example of what is best about america. some of you may have your eye on a four-year college, some of you may be trying to learn new skills that pay more money, or leading to a new job like mike, or a job that gives you more opportunity, but all of you are hereby is because you believe in yourself, you believe in your ability, you believe in the future of your country. that is something that inspires me, and you guys should take great pride in it. the truth is the skills and training you get here will be the best tools you have to

achieve the american promise, the promise that if you work hard, you can do well enough to raise a family, own a home, send your kids to college, and put a little away for retirement. and the defining issue of our time is how to keep this promise alive today, for everybody, because we have a choice. we can settle for a country where few people to really, really well, and everybody else struggles to get by. or we can restore an economy where everybody gets a fair shot, everybody does their fair share, everybody plays by the same set of rules, from washington to wall street to main street. that is the america we believe in. we are still recovering from

one of the worst economic crisis in three generations. we have a long way to go before everybody who wants a good job can find one, before middle- class americans regain that sense of security that has been slipping away for too long, long before the recession hits. but over the last 23 months we have added 3.7 million new jobs. [applause] american manufacturers are creating jobs for the first time since the 1990's. the economy is growing stronger. the recovery is speeding up. and the last thing we can afford to do now is go back to the very policies that got us into this mess in the first place. we cannot afford it.

the last thing we need is for washington to stand in the wake of american comeback. what does that mean? for starters, congress needs to stop taxes from going up on 160 million americans by the end of this month, and if they do not act, that is exactly what will happen. [applause] congress needs to pass an extension of the payroll tax cut and unemployment insurance without drama and without delay and without linking it to some other ideological side issues. we have been through this before, remember? we have seen this movie. we do not need to see it again. the self-inflicted wounds to our economy have to be over. now is the time for action.

now is the time for us to move forward. but preventing a tax hike on the middle-class -- that is only the beginning. that is just starters. i outlined a blueprint for an economy that is built to last, an economy built on new manufacturing, and new sources of energy, and new skills in education for the american people. today we are releasing the details of that blueprint in the form of next year's budget, and did not worry, i will not read it to you. it is a long and -- a lot of numbers. but the main idea is this -- at that time when our economy is growing and creating jobs at a faster clip, we have to do everything to keep this recovery on track. part of our job is to bring down

our deficit, and if congress adopts this budget, then along with cuts we have already made, which will be able to reduce our deficit by $4 trillion by the year 2022, $4 trillion. i am proposing some difficult cuts that i would not normally make if they were not absolutely necessary, but they are. the truth is we are going to have to make some tough choices in order to put this country back on a more sustainable fiscal path. by reducing our deficit in the long term, what that allows us to do is invest in the things that will help us grow our economy right now. we cannot cut back on those things that are important for us to grow. we cannot just cut our way into growth. we can cut back on the things we do not need, but we have to make sure everyone is paying

their fair share for the things that we do need. we need to restore american manufacturing by ending tax breaks for companies that ship jobs overseas, giving them to companies that are creating jobs right here in the united states of america. that is something that everybody should agree on. [applause] we need to reduce our dependence on foreign oil by ending the subsidies for oil companies and doubling down on clean energy that generate jobs and strengthen our security. and to make sure our businesses did not have to move overseas to find skilled workers, we have to invest in places like nova and make sure higher education is affordable for every hard- working american. [applause]

that is what i want to focus on today, what we need to do in terms of higher education, community colleges in particular. employers today are looking for the most skilled and educated workers. i do not want them to find them in india or china. i want businesses to find those workers right here in the united states. the skills and training that employers are looking for begins with the men and women who educate our children. all of us can point to a teacher who has made a difference in our lives, and i know i can. i want this congress to get our schools the resources to keep good teachers on the job and reward the best teachers, and in return they need to give schools the flexibility to stop teaching to the test and replace teachers who are not helping kids learn. that is something we can do. [applause]

making sure we have got the most skilled workers starts early, it starts with k-12, making sure every child is prepared, and when an american of every age wants to pursue any kind of higher education, whether it is a high school grad who is just trying to get that first couple of years of college education or somebody like might who is in the process of retraining, whether it is two years or four years or more, we have to make sure that education is affordable and available to everybody who wants to go. this congress needs to stop the interest rates from student loans from doubling this july. that is important. [applause]

that is in our budget. we're sending to congress, now is not the time to make a school more expensive, and they can act now to make that change. they need to take the tuition tax credit that my administration put in the budget over these last few years, a tax credit that saves families thousands of dollars of intuition, and we need to make that permanent. it should not be temporary. it should be permanent. between the increases we provided in pell grants, the tax credits, keeping interest rates low -- that is going to help, and millions of students have benefited throughout the country. but students and taxpayers cannot just keep on subsidizing skyrocketing tuition.

we will run out of money, so that is why i have asked states and colleges to do their part to keep costs down. we're putting colleges and universities on notice. you cannot just keep on raising tuition and expect us to keep on coming up with more and more money, because tuition inflation has gone up faster than health care. that is hard to do. states,re saying to colleges, and universities, if you cannot stop tuition from going up, then funding you get from taxpayers will go down because higher education cannot be luxuries. it is an economic imperative that every family in america should be able to afford. that is part of the american promise in the 21st century. [applause] that is what we need to do, get

more americans ready for jobs of the future, but what about the jobs that are open today? i talked about this in the state of the union. there are millions of jobs open right now, and there are millions of people who are unemployed. how do we match up those workers to those jobs? what about the companies that are looking to hire right now? i hear from business leaders all the time who want to hire in the united states. but at the moment they cannot always find workers with the right skills. growing industries in science and technology have twice as many openings as we have workers who can do those jobs. think about that. at that time when millions of americans are looking for work, which should not have any job openings out there. they should all be getting filled up. here in america we have got the best workers and some of the fastest growing companies in the world.

there is no worry reason -- there is no reason that we cannot connect the two, and places like this institution proves we know how to do it. let's say you are a single parent or a returning veteran, or somebody who just wants a shot at a paint job. you're motivated, you know their companies looking to hire. you need to figure out how to acquire some of the specific skills about the special skills, that the companies need, and you need to figure that out as quickly as possible, hopefully without taking on tons of that. everybody in america should be able to get those skills and a community college liked nova, and companies looking to hire should be able to count on the schools to provide them with a steady stream of workers qualified to fill those specific jobs.

that is why mike was sharing his story. as he mentioned, he worked in the mortgage and real estate industry for 10 years, but when business declined he decided to start over. he began selling building materials, and in the bottom fell out of the housing market, so mike had to start over again. he figured he would try a career in cyber security, where there is a lot of hiring. that will be a growth industry. luckily for my, nova is home to a program called cyber watch. so he signed up, and he is working while going to school. in december mike earned two certificates, and finished with a 4.0. [applause]

now he is working toward his associate's degree, and when he graduates he will have access to a network of over 40 companies and government agencies to help him find a job. we need more stories like mike's, and that is why my administration is helping community colleges redesign training programs hosted can learn the skills that are most in demand in industries like health care science, and that is what we're making a national commitment to train 2 million americans or start their own business right now. we have lined up more companies that want to help. we have already got model

partnerships between major businesses. they are already up and running. we know how they work, and that is why i have asked dr. biden to take a bus tour through several states to highlight businesses and community colleges that are working together to train workers for careers in demand right now. we have to make these examples a model for the entire nation. and we need to give more community colleges the resources they need to become community career centers, places where folks can learn the skills that local businesses are looking for right now, from data management, the high-tech

manufacturing. this should be an engine of job growth all across the country. that is why we have to support them. that is why it is such a big priority. so, an economy built to last is why we'll keep doing everything we can to help students learn the skills that businesses are looking for. it means we have to keep strengthening american manufacturing. it means we have to keep investing in american energy. we have to double down on the clean energy that is creating jobs. the budget that we are releasing today is a reflection of shared responsibility. it's as if we are serious about investing in our future and in vesting in community colleges, investing in new energy

technology, investing in basics research, we have to pay for it, and that means we have to make some choices. right now we are scheduled to spend nearly $1 trillion more on what was intended to be a temporary tax cut for the wealthiest 2% of americans. very expensive. now we are scheduled to spend another $1 trillion. a quarter of wealthy americans pay lower tax rates than millions of middle-class americans. warren buffet plays a lower tax rate than his secretary. that is not fair and does not make sense at a time when we need to pull together to get the country moving. i do not need a tax break, or

those that who are doing really, really, really well. it to you want to keep these tax cuts for the wealthiest americans, or do we want to keep investing in everything else -- education, clean energy, a strong military, care for our veterans? we cannot do both. we cannot afford it. some people go around and said that the president is engaging in class warfare. that is not class warfare. that is common sense. [applause] asking a billionaire to pay at least as much as a secretary when it comes to a tax rate is just common sense. warren buffett is doing fine. i am doing fine. we don't need the tax breaks. you need them.

you are the ones who have seen your wages stalled. [applause] you are the ones whose costs for everything from college to groceries -- you are the ones who deserve a break. we don't begrudge success in america. i want everybody here to go out there and do great. i want you to make loads of money if you can. that is wonderful. we expect people to earn it. study hard, work hard for it. we don't envy the wealthy. but we do expect everybody to do their fair share, so that everybody has opportunity, not just some. it is just a matter of math that folks like me are going to have to do a little bit more.

americans understand that if i get a tax break that i don't need and the country cannot afford, one of two things is going to happen. that means either have to add to our deficit, or you have to pay for it. seniors have got to pay for it. in terms of suddenly their medicare benefits are costing more. it means a student suddenly sees their interest rates go up higher at a time when they can not afford it. a family that is struggling to get by as having to do more because i am doing less. that is not right. that is not who we are. each of us is here only because somebody somewhere felt a responsibility to each other and to our country's future, and that is why they made investments in places like nova. here in america, the story is never been about what we can do just by ourselves, it is about what we can do together, the future and the future of our country. you believe in that future but that is why you are working

hard, why you are putting in the long hours, why mike is doing what he is doing. some of you are balancing a job at the same time you are going to school. you are scrimping and scratching to make sure you can pay tuition here. you know that doing big things isn't easy, but you haven't given up. that is the spirit we have got to have right now. we don't give up in this country. without for each other, we pull together, we work hard, we look for new opportunities, we pull each other up. that is who we are, and if we work together in common purpose, we will build an economy that lasts and remind people not by the world why america is the greatest country on earth. thank you very much, everybody. god bless you, and god bless the united states of america. [applause] ["stars and stripes forever" plays]

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] ["stars and stripes forever" plays]

♪ ♪ ["the washington post" plays]

♪ x no questions on details of the 2013 budget requirrequest. we'll hear from the director of the white house national economic council. from the eisenhower executive office building, this is an hour. >> hello, everybody. thank you for coming for our overview of the budget. we have a four-part agenda as you can see on the screen. we will start with the chairman

of the council of economic advisers. he will discuss our economic assumptions and i will return to discuss the president's fiscal year 2013 budget. gene sperling, the director of the national economic council will play out the main investment pillars in the budget with a special emphasis on job creation, and the director of domestic policy will double click on the pillar of education and the importance of education in our budget. >> i want to comment on four of the economic assumptions that underlie the budget. first, by way of background, the economic assumptions or developed jointly by the council of economic advisers, the office of management and budget, and the treasury department.

this process takes place over several months and the assumptions or locked down in mid november. at that time, the latest report of the unemployment rate was 9.0%. that was for october 2011. that number was subsequently revised down to 8.9, but when we made the projections, the unemployment rate had been at 9% or 9.1% for several months. in the budget, we assumed that the unemployment rate would average 8.9% for 2012. then come down to 8.6% for 2013. these forecasts were very close to the consensus of private sector forecast at the time, the 2012 forecast was about 0.10 percentage point below the consensus private sector forecast at that time. since we made our forecast, we

have learned that the unemployment rate has come down 0.8 percentage point in the last six months. we have also seen an improvement and other economic indicators such as initial unemployment insurance claims. as a result of this welcome news, the budget forecast for the unemployment rate should be considered stale and out of date. private-sector forecasters have shaved over half a percentage point from their 2012 forecast of the unemployment rate as a result of the improved situation in the job market. that is just over the months since we made our forecast in mid november. if we were to do another forecast today, we would certainly lower our forecast of the unemployment rate from what appears in the budget. to be helpful, together with the budget tables, we included the

january bluechip forecast by private sector forecasters of the unemployment rate as well as some other recent forecasts. these forecasts, in fact, are also a bit out of date as new blue chip survey of private sector forecasters was released last friday, and that was lowered a bit from the one for january that was included with the budget tables. that is the unemployment rate. i will quickly walk through the assumptions for three other key parameters in the budget, economic growth, inflation, and the interest rate. on a year-over-year basis, real gdp growth is assumed to be 2.7% in 2012. this is up from 1.7% in 2011. it reflects the quickening pace of gdp growth at the end of 2011

and the presumption that we will continue to get a boost from the extension of the two percentage point payroll tax cut for the remainder of this year. for 2013, real gdp growth is assumed to be 3.0%. for inflation, we have assumed that the consumer price index will rise by 2.2% this year and by 1.9% in 2013. the interest rate of 10-year treasury notes is assumed to be 2.8% this year and to rise gradually to average 3.5% next year. the current 10-year treasury interest rate is around 2.0%. as the economy strengthens, interest rates are expected to rise. there are a number of other

economic parameters that influence the budget, but these are the key assumptions, which is why i highlighted those, and i will not bore you with all the other doesn't the parameters. i will handed back to jeffrey. >> thanks, alan. before i joined omb three years ago, i spent my entire time in the private sector, and one thing i found that is often helpful to a boil things down to a few slides, and given that the budget is multiple volumes and hundreds of pages, i thought maybe that approach would work well today. i am going to cover for topics, first the current policy baseline. next, i will cover the key elements of deficit reduction, then an overview of our investments in the areas that are central to our future competitiveness and growth. finally, the bottom line of the

president's budget and how it puts us on a sustainable path. first, the baseline. we believe we have a baseline that accurately reflects our current policy. in essence, this baseline is business as usual. the baseline includes the extension of the 2001 and 2003 tax cut in the estate and gift taxes. it has the permanent extension of the at&t and the sdr. permanent extension makes more sense than patching these year after year. it has the enforcement of gdp capps, an accounting for future

disaster costs rather to in ignoring them. this accounts for four 0.7% of gdp at the end of the budget window in 2002. last april, the president offered a blueprint for achieving more than $4 trillion deficit reduction. he maintained that the men and in his proposal last september. this budget is very similar -- that commitment in his proposal last september. this budget is very similar to the september proposal. the budget actually includes over $5 trillion of total deficit reduction. let me walk you through the critical elements. i'm going to work from left to right. if you start on the far left, you will see 6 android $76 billion in savings from the appropriation bills enacted last year. -- $676 billion in savings from the appropriation bills enacted last year.

moving right, over $1 trillion in reductions in discretionary spending, consistent with the discretionary caps in the budget control act. third are $252 reductions from savings in medicare and medicaid that will make these programs more effective and more efficient. then you will see $262 billion in savings from programs including agricultural subsidies, direct payments, federal civilian worker retirement and the pbgc changes and reforms that we are suggesting. these costs are net of the costs

of new mandatory initiatives. the next category, the $1.5 billion bar, is revenue. revenue for deficit reduction, including the expiration of the high-income 2001 and 2003 tax cuts and the elimination of inefficient and unfair breaks for the highest earners. the 1.5 trillion dollar number is actually a net #as we further cut taxes for the middle class and small businesses. there are $13 billion in net savings from investing in a six- year surface transportation reauthorization. capping occo closes the back door on security spending. their other savings of $483 billion. these include disaster

adjustments, program integrity, and averting the general fund transfer that happens every year. as a result of all of these initiatives coming of $800 billion less in debt service. that is the bar right next to the pink are. let me go to the pink are. that cuts the other direction. these are investments in short- term job initiatives. this is the remainder of fiscal year 2013 of the three entered $54 billion of jobs initiatives that is not spent -- $354 billion of jobs initiatives that is not spent in 2012. we do not can attribute this to the total debt of the said -- we do not attribute this sequester to the total deficit reduction. the bottom line is that these efforts represent more than five trillion dollars in net deficit reduction.

even as we achieve this deficit-reduction, we continue to make key investments in presidential priorities. gene is going to provide a little more color and these priories. these include short-term measures for job growth, tax breaks for the middle-class and small businesses, and continued investment in our long-term priorities including education and job training for american workers, innovation and research and development, clean energy and infrastructure. we make these investments while abiding by the very tight spending caps, and we make hard trade-offs. and in ample this all together

for you. on the left -- let me now pull this all together for you. as you can see, in 2012, deficits from the president's policies are below 3% of gdp compared to over 4.7% for the baseline. furthermore, the debt as a percentage of gdp is stabilized from 2018 on. this is important for maintaining a strong investment environment. the president's budget replaces the sequester with a balanced approach deficit reduction, with $2.50 in spending cuts for every $1 of revenue increases. in closing, as a business person and now acting director at omb, i believe the president's budget makes the right investments to make us

even more competitive in the global marketplace. achieving declining deficit and stabilizing our debt are critical for business confidence and investment. this is good for business. it is good for the middle class, and it is good for america. let me now turn it over to jean. -- gene. >> thank you. the ultimate end of any budget is not any particular number or ratio. if this -- it is an economic strategy that is designed to make the middle class stronger, more secure, and more inclusive. to meet at end, to meet that goal, you need a plan that returns us to medium to long-

term fiscal sustainability to give companies the confidence to make the united states still the place to do long-term investment and job creation. secondly, you need to have more momentum to the recovery and job creation at this moment. we are still digging out of the largest hole and worst recession since the great depression. third, we need to have the investments that lay a foundation for the private sector to grow and become more competitive. these three goals are not contradictory. they are as complementary as good hitting, good pitching and good fielding is for a baseball team, or to seasonally adjust, a good shooting, a good rebound in in good playmaking.

if you contract too quickly, as we have seen in other parts of the world, it not only hurts your growth and job creation, it can be counterproductive to your fiscal goals. there is widespread agreement, widespread, ranging from the federal reserve chairman to the congressional budget office to top economists, that this type of balanced approach of ensuring strong demand and more momentum for recovery at the same time that you're laying out a framework for medium-long term fiscal discipline is exactly the right recipe to give confidence and growth in this recovery and expansion. there is equally that outside independence -- independent validation for the fundamental fiscal approach the jeff discussed and the president has called for since he has come

here, which is that you ultimately need a grand compromise that includes a combination of entitlement reform savings and revenues. that is what you have seen called for from goals-samson -- bowles-simpson and other commissions. whether or not you agree with every measure in this budget, there is no question it achieves this type of balance between revenue and spending cuts. the only question is whether the house republican budget that will come forward soon will, for the first time, include any semblance of that balance in their budget. now this plan, as jeff said, does include immediate efforts to strengthen the pace of recovery and job creation. there is little question that the payroll tax cut, the

unemployment extension and the 100% expensing were critical for the resilience of our economy in 2011 when it faced several hits, both external and unfortunately from the debt crisis and downgrade internally. one economist said that deal probably saves us from another recession. the extension that we just did this december for another two months gave the possibility, the opportunity for us to have the type of strong january that we saw. imagine that instead of the payroll tax cut being extended and unemployment insurance being extended, we had story after story about a hundred and 60 million americans taxes going up, a million people losing unemployment insurance. it is unlikely we would have seen the momentum and job creation that we did this january.

so, the payroll tax cut and the unemployment insurance are seen as having some of the strongest bang for the buck by independent forecasters in the congressional budget office. these outside economists have said the full extension would mean a half percentage of growth this year and well over 500,000 jobs. if we fail to extend unemployment insurance right now, two 0.5 million americans would lose their unemployment benefits in the next two months alone, and the payroll tax cut, as we have said, would go up. payroll taxes would go up for 160 million people with the typical family losing $40 per paycheck. this is obviously a critical part of our short-term, immediate job creation strategy. but we also include more aspects that we think are critical. as alan krueger would tell you,

about the only thing that was negative in the january jobs numbers was that 9600 teaching jobs were lost. 105,000 teaching jobs were lost to read the last 12 months, and to under 54,000 teaching jobs have been lost since -- 254,000 teaching jobs a been lost since the recession. this is a self-inflicted wound. this did not have to happen. had the congress passed the president's initiatives regarding teachers and first responders, we could be gaining in these areas instead of losing in them. so the president includes $30 billion for teacher layoff prevention and to help first responders in this budget as well. on school modernization, we know that the unemployment rate among construction workers is up 13%. we know there will never be a better time to, with lower

interest rates and more available workers, to rebuild our schools and our infrastructure than there is today. the president include, as he has before, $30 billion for school modernization, $50 billion for infrastructure investments, and $10 billion for an infrastructure bank. again, there is nothing fiscally responsible about infrastructure delay. you get no points for that. what better time than right now when it would strengthen our recovery and help unemployed workers who are better -- who are desperate to get back to work? beyond the immediate efforts beyond the immediate efforts that we need to do to ge