in one hour, banks and overcharging. we will have the massachusetts attorney general and talk with texas republican congressman kevin >> good morning and welcome to the "washington journal" on this tuesday. here are the headlines from that proposal. the president is calling for threaded $50 billion in new stimulus. only moderate changes to social security and medicare. raising taxes by two--- by $2 trillion over the next few years on corporations.

we want to get your take on this. you can start dialing in. the number to call for our republican line is 202-737-0002. the number to call for our democrat line is 202-737-0001. the number to call for our independent line is 202-628- 0205. also, send us an e-mail, -span.org. we will get to all those comments and questions here in just one minute. first, joining us brought the hour is nancy cook. she is here to help us dig into these numbers a little bit more. nancy cook, we told the viewers the highlights, the big number. any surprises in the 2013 budget request? >> sure people -- sure. a lot of people called a

political document. some of the surprises and highlights are stimulus measures for things like infrastructure spending. you know, some people definitely got hit, like the epa for instance is taking a third year of straight cuts. it seems like climate change is less of a priority than it used to be with the administration. when you dig down into the numbers, there is definitely a lot of different stories to tell. >> right. we'll get into that. we'll talk about winners and losers. topline, i just want to show some duress charts or put up in "the wallstreet journal" yesterday. the red shows the spending in the ledger. the mandatory -- was the difference between the two? >> it is money that the government is committed to spending. discretionary spending is all the agencies and programs.

you will see in this budget that takes up a smaller portion of the spending. and then use the defense has its own spending. >> i saw figures this morning. it is about 70% mandatory spending and then 30% discretionary. will the congress approve or disapprove of this breakdown? >> congress is in charge of the discretionary pocket. that will go through even if the budget is dead on arrival as people say. that is what to be charged with coming up with. of course, the budget control act as a spending cap that is already in place. the proposal still be doling out the money for specific programs. >> let's talk about the trend here. 70% mandatory spending. has that changed over the years? >> it certainly has. just the ballooning costs of entitlement programs are a huge

issue for both parties. a few weeks ago, the congressional budget office came out with their most recent outlook. they were estimating that mandatory spending, for which, again, is the mandatory programs like social security and medicaid, off will consume more than 80% of federal gdp by the year 2022. it is going to be a huge issue moving forward. it is not anything the president is like to tackle in this budget because, again, it is a an election year. >> those top line figures, total mandatory spending -- $2.30 trillion discretionary, medicare and medicaid making up about $1.50 trillion. security, $820 billion. non-defense, $596.8 billion.

but, we said at the top here, and as you said, the president is making modest reforms to social security and medicare. what is he proposing on those two programs to bring down the cost? >> he is proposing things that the fringe the medicare program. it would really go after providers instead of beneficiaries. if it is a big difference of the republican proposals of the past, like the house republicans. it would like to privatize medicare and put it more on people to buy their own private insurance. it is really a matter of who takes the hit there -- the people who provide the care or receive the care. the president was criticized for not doing more on entitlements. just larger reform in general. his health care reform bill which will start to take effect of the next couple years will cut spending in the long term. >> this is "the i plan said

journal." -- "the atlanta journal." but let's also talk about the pentagon budget. they are facing some big cuts as well. >> they have. some of that comes from a real change in strategy. they are drawing down from two wars in afghanistan. the president has proposed those or savings, as they call it, to go to infrastructure saving. the pentagon has seen a real shift in capacity and has to think more strategically. >> top pentagon officials, including leon panetta, will be testifying later this morning at 9:30 a.m. we will and -- will end at that

point. let's get to phone calls here. duane, a republican in tallahassee. if you are the first about the president's 2013 budget. caller: in a first-time caller. what amazes me is i am not seeing a commitment on either side. the conversation is now talking about cutting budgets, where six months ago if there were no cuts, would even be offered? i do not think people understand that when they talk about discretionary spending in the budget of the white house or in congress, how much entitlements that that whole department of government receives on their own. the largest private jets in the world all sit at andrews air

force base. they just do not understand. there is room to cut in places where they think it is an everyday cost of government. we are sitting out here in the real world. we are all worried about paying our bills. it is tight everywhere. it is never tight in washington. host: you think that across the board that to be places to cut -- the pentagon, etc. caller: yes. we do without and the real world. businesses cut. i am privately employed. we cut everyday things we will not spend money on. you do not see that in washington. i mean, when you add as many jobs as they have added -- and i think it is both sides. i do not think they are in touch with reality. host: ok. caller: how are we ever going to get through this if they cannot get in touch with reality? host: let's hear from jane, a

democrat. caller: thank you for taking my call. i just think the middle class is not watching what the republicans are saying. they're not really listening to what they say on the floor when they go to make their proposals. they are not helping the middle class at all. those 50% tax rates on the wealthy and corporations and during the clinton era they had higher levels that they were requesting of the wealthy. these people are paying only on their interest. they're not even paying on the principle of what they own. they refuse to go back to that. that is what created the crisis in the first place. as soon as they took that money out of the works, we had to go back and start cutting policemen, firemen, teachers,

basic services that make the country run. and taking people's health care away from them. this is what the republicans want to do because it brings us down to the level of a third world country. they are getting away with keeping people in their factories at night and day in china and then shipping this stuff over here and flooding the markets with this stuff. host: you might be interested -- according to "the washington post" this morning, $94 billion would be for education, job training, and social services. an independent in alabama. caller: good morning. thank you for taking my call. i am in a red state and it is hard to be an independent here. you pretty much have to be a

republican in alabama to get along socially. i still try to stay independent. but right now i am very concerned about a bill that is coming to our legislature, hr- 159 today, which probably will be enacted because our legislature in the house is 2/3 republican now. it is supposed to be a jobs bill, but actually what it is is a giveaway to corporations. host: how does that tie into the president's proposal? caller: i just looked at the president's proposal and i am thinking about what is happening here. since we are dominated by republicans, that evidence would suggest that the republican party is dominated by greedy politicians. host: todd in florida. good morning.

caller: i am wondering if you are on medicaid. the older people and the younger people who are having these babies. we are paying for them. why don't they have to pay that money back? i do not understand. and why go we take all the people that are on welfare and take them off of welfare and make them earn their money? host: those are todd's thoughts. let me go back to nancy cook and talk about the other side. we're talking about spending. that is the red. i want to focus on the blue. total receipts -- how much is president obama expecting to bring in? >> if he is expecting to bring in about $1.50 trillion. -- over the next decade. he is really priming the pump to

talk of raising taxes on the wealthy. some of the ways he would do that would be through the so- called buffett rule named after warren buffett which would make sure that households making over to under $50,000 hit an effective tax rate of 30%. he also wants to tax people with dividends at a regular income rate. that really benefits the wealthy as well. it would be taxed as regular income. those are some of the ways that the budget is really a political marker. it is important to keep in mind because the tax cuts, like the bush era tax cuts from 2000 2003, those are all going to expire at the end of 2012.

in the way, the budget is a president saying those are gone and the long term. host: let me tell our viewers how much is expected -- how much the obama budget is expected to bring in. so if you let the bush era tax cuts expire for the wealthy americans, the obama administration thinks it brings in about $849 billion. the buffett rule. you get rid of that tax and instead you have the buffett rule, you're talking about $50 billion in revenue. the dividend tax would bring in a likely $206 billion. and taxes on big banks would bring in about $61 billion. proposals to limit the values of tax deductions to 20% would bring in about $584 billion. of all of these put out there,

what passes? what gets through congress? >> none of them will pass. all the republicans are saying they absolutely will not. even traffic has called this dead on arrival. it really is a sense of where the president's priorities lie. he is saying that tax cuts -- tax hikes to the wealthy are something he would like to see happen in the future. his campaign is focused on economic fairness. some of the themes of occupy wall street has come up. if reelected, we may or may not see this in his second term. host: talk about are limiting the alternative minimum tax. guest: the alternative a limited -- the alternative minimum tax is what president obama is proposing -- taking that whole trunk and replacing

that amount of revenue with the so-called buffett rule which would tax the wealthy people. this is not anything that will get through congress right now. divided congress'. it fits the president of the theme of economic fairness. host: 8 democrat in michigan. go ahead. caller: i am not sure where i went wrong when i gave them -- host: we are listening. caller: i am not sure where i was wrong with my vote, but i think hillary clinton would have been a better president. i am going to tell you why. that $50 billion that nancy cook is still talking about, the fairness doctrine for the buffett rule hits all small businesses.

i will give you an example. there are 300,000 in the united states of restaurants. those restaurants pay taxes on what the whole business makes. out of that $50 billion, do you think that maybe most of it is coming from people who only make $100,000 for their business? that fairness doctrine is a bunch of crap. host: brad, a republican in arizona. how does this measure up to the gop can't it? caller: it is a sad state of affairs that our country is in right now. america is not taking it serious enough. it is sad to see them play the political game. we are in serious trouble financially. if both sides to not approach this in the right way and cut our budget down -- i am so sick of hearing obama and his

administration sandinista be a fair share for the wealthiest people pay more. that is not going to solve the problem. if we tax them whenever% it would not take care of our issues. it needs to be cut all the way down the line. if they do not produce a budget that cuts every year, they are gone. we are not going to vote for them. people need to take them more seriously unless we want to have soup lines. that is where we are headed. host: would you be in favor of a combination of spending cuts and tax increases? caller: i would not have a problem with that. i think the cuts is what we need to concentrate on. you still have to -- and i am not in the upper tax bracket. he's got to consider the fact that the people who are in the upper tax bracket are the people who create the jobs. if we take more of their money away from them, they will be less likely to produce more jobs. that is the bottom line. i do not have a problem with

them pay more money but this is not the time when we do that. when the economy is doing well, may be asking them to pay more at that time, fine. we need to come out of this recession and start building real jobs and have a real cuts. host: economists on the other side argue this is not the time to cut spending either. this is not the time to retract. caller: if you can say it is not the time to cut spending, when has the government spending ever produced more jobs? host: let me bump this up with you. reuters did eight fact box. -- a fact box. here is what mitt romney would do.

what you think of that plan? caller: i am not a romney supporter. i think he is in line. senator paul is more in line financially. presidential candidate paul for his financial -- what you want to say? his outlook for where we should be going. he is right on. host: so you like ron paul's better? caller: definitely. i like his foreign policy. host: let me read what reuters says about ron paul's plan.

that's a pretty good sounding plan. we all know that would not be able to be done in 14 year term. -- in one four-year term. there are people who draw social security who do not needed. they're taking benefits when they have enough financial income or stability that they do not need that. there are a lot of areas that can be addressed. a bottom line, i am sick of the political games back and forth between the democrats and republicans. i think we should get rid of all the incumbents in congress. start fresh with congressmen that actually want to bring this country back to where it was. this is the greatest country on

earth. we have to start approaching it from a common sense of direction. china is not going to keep giving us money if we're going to keep going further in debt. host: your sentiments are echoed on our facebook page. let me read a couple. you can send us your comments on facebook if you go to facebook.com/c-span. we will go to nancy cook in a little bit and ask her to talk about this. talk about the budget control act that is law. who taught about president obama yesterday when he unveiled his 2013 budget. he spoke to some students outside of the sea. [video clip] >> i am proposing some difficult

cuts that, frankly, i would not make if they were not absolutely necessary. but they are. if we're going to have to make tough choices to put this country back on a more sustainable fiscal path. by reducing our deficit in the long term, with that allows us to do is invest in things that will help grow our economy right now. we cannot cut back on those things that are important for us to grow. we cannot just cut away in the growth. we can cut back on the things that we do not need, but we also have to make sure that everyone is paying their fair shoare for the things we do need. host: talking about the president obama 2013 budget request. nancy cook is helping us to dig through these numbers this morning. we're spending the first hour of "washington journal" talking about this.

let me get a response from a tweet here that i read. >> sure. in august, when president obama john boehner came up with this whole agreement -- and at john boehner came up with this whole agreement, they came up with the budget control act. it was members that were meant to find a bunch of money in deficit reductions. another thing that it did was cap spending at a certain amount so that each agency could only spend so much. and then, finally, what it impose was if the supercommittee failed to do anything, it would come across with across the board cuts that would come into effect in january 2013. those will hit everyone if there is not a way to find a deficit reduction. this president's but is say we

jaunty does so-called cuts. we will find deficit reduction through other ways. host: does the president's deal would sequestration know what happened there? guest: these are called -- these are across the board cuts. neither party thinks this is great policy. there are things there would like to protect. the president was the budget is say he has another plan for deficit reduction. some of that comes through a mix of increase revenue, like the tax hike on the wealthy. some of that will come through savings, like the drawdown of the war. the president is saying, i have this other plan for $4 trillion debt is a reduction. let's use that instead of sequestration cuts. host: we are talking about president obama's 2013 proposal. here is an e-mail from one of our viewers.

another e-mail for you from paul. send us an e-mail. we will keep talking about this year. i want to get some other news. movement on the payroll tax cut holiday and whether or not to extend it. offering to pass an extension. as well as the so-called fix. they made it privately over the weekend before going public with it this weekend.

we will talk about that as well as the budgets with kevin brady coming up. he is a republican and a code- share, a vice chair. that is coming up at 8:45 a.m. eastern time. before that, we will talk with martha coakley, the state attorney general of massachusetts. that is coming up at 8:00 a.m. eastern time. also, other things we are covering on c-span today. tim geithner will be up on capitol hill. if he will be testifying live today on c-span3 at 10:00 a.m.

also, president obama is meeting with the incoming vice president of china. go to our website, c-span.org to find out when that will air. also, the vice president of china will be making rounds throughout washington on his tour of our country for a week. he landed yesterday and had an informal dinner last week. he is an independent from new york, we're talking about the president was the budget, what you think of it? caller: i do not think it is a good one. host: why not? caller: when you add social security and medicare into the mix, we are paying for that. that is our money. when they talk about privatizing -- because the government is taking our money and using it elsewhere, they do not want to put it back in the pool. this is their plan here.

we are going to keep paying, pain, and pain. if you want to make cuts, let's start with homeland security. our borders are not secure. nothing is sit here and people are coming in at will. let's cut the environmental because they are the ones that are stopping our oil. there are a lot of cuts in washington. let's put it this way. let them take cuts. host: what you are talking about is the payroll tax holiday extension and taking that from social security. that is part of the debate here. off they do not provide offsets for that. we will ask kevin brady about

that later on this morning. we are talking about the president of the budget here. we have a budget hole on our website if you go to c- span.org/budget. you can dig through the president goes the budget and responses to it. we will continue to pose as secretaries of each agency are going up to capitol hill to testify about their budget. let me give you some other news here this morning. here is "the washington times." that is the latest on that situation there. and then in politics this morning, i want to show you some polls. it looks like the former pennsylvania senator, rick

santorum, is making some progress here. it shows in the state of michigan, where rick santorum said he will focus on coming into the primary on february 28, if he is ahead in the polls. 39%. mitt romney trails with 24%. ron paul at 24% and due gingrich at 11%. here is "the washington post" noting that separate surveys released monday suggests that romney, a former massachusetts governor and santorum are virtually tied in two national polls. the polls, and a general -- in a hypothetical general election with president obama, here is "the baltimore sun" this morning. if president obama has opened a sizable lead according to a new poll.

that is the latest in the 2012 campaign news. remember, we are covering it all as part of our "wrote to the white house" coverage. code to -- go to c-span.org to find out where our cameras will be. good morning. caller: the president's budget, he is trying to help the people a little bit. the ones that the republicans are going to propose are not going to help the middle class at all. they're going to, you know, what more tax breaks for the poor, poor or rich people. that is ridiculous. the republicans -- if the people do not wake up and go ahead and vote obama back in and get rid

of some of these republican senators and representatives so this country can run, we are going to be in a mess because they do not care about the american people. host: that was stephen, a democrat in indiana. what to show you what the republican in wyoming had to say. yesterday, a bunch of republican senators had a news conference to respond to the budget. they called it debt on arrival. [video clip] i believe the president has abandoned his role as leader of this nation without being honest about the significance of the national debt. somebody asked me if this budget was dead on arrival. i said, it is not a dead on arrival -- it is that on arrival. -- it is debt on our arrival.

the president is ambushing the american people. over the next 10 years he adds to the debt by $11 trillion. initially, he had this pretext of trying to help everyone. what his budget does is continue to bury people under mountains of debt. the savings he promises will never occur. the spending he demands are things we cannot afford. judy, at's go to republican in louisiana and get your take on the budget proposal. caller: my opinion is that i feel like the budget and spending cuts should start in the politicians market as well as the president and his aides. thank you. host: phyllis, an independent, you are next. caller: if we were to go back to the consumption tax of say 70%,

13% to the federal government, -- 17% to the federal government, 13% to the federal states. would that help? this is a question for ms. cook, please. guest: that is a very specific question. i did not catch all the numbers. a consumption tax are something economists are talking about in the long term to help pay for things like entitlements. it has not been subbing president obama has proposed in this budget. it is not a thing that mitt romney is specifically talking about right now. politically, it does not seem super feasible and the next few years. there is some talk on capitol hill about reforming the corporate tax code. that is something to look for in 2013. the president's advisors has also said the president will release some sort of framework at the end of the month.

there is movement of fronts to change the way we do our tax system. host: what might that proposal look like? have you heard from the white house or others what he might do on tax reform? guest: treasury has apparently been working on this for quite a while. there is some sense that he will lower the corporate tax rate from 35% to some sort of lower rate. that is to be read -- to be determined. he does not want to go into deeper debt to do this. i know a lot of tax lobbyist who spend excessive amount of time on capitol hill talking to different members and staffers about what corporate tax reform would look like and who would also be responsible for the bearing of the biggest burden of that. would it be multinational companies like google, apple? if we domestic firms like walmart?

manufacturers? small businesses? aboutlet's also talk winners and losers along agency lines. who came out ahead here? what department? guest: the agricultural department cannot ahead. the commerce department kim out ahead. the department of home and security, the department of veteran affairs came out ahead. some of the people that tickets, as i said earlier, the epa for the third consecutive year. the education department. who else? has the department of housing. these are all the places that taken hits. we are really in an era where regardless of what party line you are on, they are really trying to cut spending in the federal government. no one really is getting the same funding levels it would have gotten in the past.

host: another loser to add to the list, if you will, nasa. their budget down, according to "usa today" as well. let me add to the mix here on estate taxes. that is a familiar theme of from this administration. those last few points. this is something president obama has tried to negotiate on with republicans in the past. guest: most of those things defecate up in september on the present's job package. -- things came up in september

on the president's job package. those are things that presidential rival mitt romney has either talked about in his fiscal plan, he would eliminate the estate tax. or, he himself has benefited from the so-called carried interest provision which allows managers to get their income tax at 15% rather than at higher rate individual income top earners. host: president obama is drawing the line between what he would do and what mitt romney might do if he were the nominee for the republican party. guest: yeah. he is not destroy that line between what he and mitt romney would do, if he is also calling out this is a benefit to help mitt romney. it is this larger idea that the wealthiest should pay more in taxes. host: back to phone calls.

richard, an independent in texas. caller: good morning. i finally got through. i am amazed that the people who call in and do little or no research. i am 77. i am one of those 1%-ers. i have always paid the income tax. never has anyone said that -- excuse my hesitation here. i just got up. the $250,000 a year that people make, we're talking at the adjusted gross income. i wish an accountant would call in and explain this to you. adjusted gross income could be a person making $1 million could have an adjusted gross income of less than two under $50,000. -- $250,000. the military budgets of the united states for 2009 were $514

billion. adding supplemental and discretionary spending. that actually brings the sum up to $651 billion. this is not include many of the other military related items in our budget. how about the department of veterans affairs, which is needed. the energy department. the state department, spending overseas. we have 737 bases around the world. could we get by with 300 basis? no one else has that. homeland security -- that is not included in the defense. it is almost a holy grail. you cannot speak about it. if you are a politician and mention cutting anything related to military, you are against the troops.

we need to wake up about these two items. about the $250,000 and what you have to pay on that. we have over $1 trillion in a military-related. host: let me read about the pentagon's budget under the president's proposal. he brought that up. as a tilt to earlier, secretary panetta will be testifying at 9:30 before the armed services committee. we will end early to bring you to that.

also, bloomberg had a story this morning about the pentagon saying they may have to oust troops voluntarily to meet the reductions in their budget plan. as we just showed you, secretary panetta on capitol hill at 9:30 eastern time along with general

dempsey. the hill with this headline on his testimony -- a republican in bakersfield, louisiana. let's get your take on the budget. caller: it is like the last time he made his budget. he is just playing with the people. he has done it ever since he has been in. he knew that it would never pass. that is why he can say, well, they did not pass my budget. and then he can blame the republicans. it is just the same old thing all of the time. he just plays with the country, with the people in the country. they are not smart enough, i guess, to realize what in the world he is doing. host: ok.

caller: he does not care one iota about the people. he has a lawsuit in atlanta, georgia. he did not even show up for the hearing. host: all right. lots of newspapers this morning about president's budget. "the new york times" does not have a front page about the budget. there is a piece in the national section with this headline -- they say it is a responsible budget. the president's proposal is rightly focused on reviving the economy. he also gets praise for his budget from "the washington post."

a little criticism there as well. and then "the wallstreet journal" is critical, making these points. that is "the wallstreet journal" weighing in on that. also, the acting director of --

ways in today. back to your phone calls. bonnie, a democrat in middletown, new jersey. caller: revenues are at a historic low. that is because we have been on the same merry go round for a decade. it began with political operative jude orlansky. he referred to it as the santa claus theory. when republicans got into office, they would have to cut taxes on the very top and spend as fast as they possibly could. spending and investing in a nation are very different -- that is exactly what they did. the result was that when the republican president was out of office and the democratic president came into office, they would have to clean up the mess

of the deficit as a result of the $15 trillion deficit that we have somewhere between $13 and $14 trillion was done between reagan, bush, and a bush. this is not time for an austerity plan. a good example is what is happening in greece. we have to have a stimulus to get us out of this. you do not start worrying about paying down your mortgage when you cannot feed your kids. we have to stop this and realize that we have to invest in our nation. we have to grow our economy. that is the way we will get rid of the deficit eventually. anyone who is working for a paycheck, anyone who depends on a salary or social security, should realize that what the plan was all along was -- the

democrats gave us social security and labor laws. what did the republicans give us? they want to be put in a position where they have to destroy social security. if we talk about privatizing social security and medicare. it is an example of what they have in store for us. we can either go down this road of change -- ron paul? yes, i agree on military expenditures. they are astronomical. his economic theory is the same economics. it is only a little bit more insane. when he is approached about this and ask, has this austrian plan ever worked anywhere? he will admit, it is just a theory. host: ok. i will leave it there and move on to make, a republican in palmdale, california and. caller: on austrian economics, i just wanted to comment.

the administration has been thinking about coming back to a sound currency. if we do allow corrections to be able to get rid of all the non- investment in the economy and get back to real value without the massive speculation, we bring the volatility down and be able to stabilize growth at normal interest rates where we can have a nice -- and allow the correction to come. maintain a sound currency. i was just wondering what they administration and what the culture is about ron paul when he talks about a sound currency and allowing the correction to bring us to real value on things like mortgages. getting rid of hud's. that way housing values will drop. people buying houses and renting houses that will be affordable for someone like me who only

makes $40,000 a year. host: nancy, i am not sure if that is in your wheelhouse. guest: the administration is not talking not any of these currency issues that ron paul is. they are not talking about eliminating federal agencies as ron paul has on the campaign trail. i think it is interesting what the caller said about the idea of a stabilizing growth. that is something the administration is interested in, economic growth. one of its argument is that it is important pour money into things that infrastructure, education, colleges and things like that. similar with the stimulus bill and other stimulus-like measures, there is a hope that if the economy recovers and its back on its feet, then we will be better off and spending will naturally go down because people will need to lean on the government less for assistance. host: as we wrap up here, this

first hour looking at the budget, what happens next to this budget proposal? guest: sure. everyone will be talking about it. as you said, there will be testifying on the hill about these cuts. the house republicans in march or april led by paul ryan will release their own version of the budget. the appropriators will also have their own set of hearings and will ultimately decide who gets what type of money. it will pass a number of spending bills. host: it is really the appropriations process we should be watching next to see what happens for 2013 spending. guest: exactly. those people will decide where the money goes. it is a born to pay attention to the president's budgets. -- it is important to pay attention to the president's budget. we can see in the next four years or so were the conversation is going on things like entitlements, raising

taxes, cutting taxes, spending. those are the benchmarks of the talking points to come. host: when do house republicans but there but on the floor? what is the process? guest: they usually unbelted in march or april. it did not go to the senate, but it did so shake the conversation -- but it did shake the conversation. i think we can expect to see much of the same thing come up again. rep ryan and -- at cpac was talking about how he does not think republicans should shy away from reforming entitlements. we should be able to see that again. host: that is a tweet we have here on our twitter page.

guest: that is a great question. with things like an talmud reform and a tax reform, with the two parties it means two different things. i think what the republicans mean by entitlement reform is often privatizing things like medicare, social security. they want to give people a voucher system or private accounts some people will be more responsible for buying their own health insurance or managing their own retirement accounts. president obama through entitlement reform is looking to cut costs. he has shied away from saying he would reform social security by raising the age people can collect. those of the things you have to look for in the next four years. host: we have about five minutes left here to keep talking about the president's budget proposal. we will try to get a few more

phone calls as well. i wanted to let our viewers know if you more headlines here. "the baltimore sun." and then here is a little sad story for you in "the washington post." . about $1,000 was stolen. that little side story about justice breyer. if you are following the google- motorola acquisition, reporting that the department of justice gave google the go ahead to merge with motorola. good morning. caller: good morning.

i am kind of nervous. when bush came into office, he raised the taxes and then started a war. i do not mean raised. i mean cut the taxes. taxes have never been cut in time of war. they should put those taxes that in. the middle class is doing worse but the top percent is doing just fine. their taxes need to go back up to the rate of when clinton was in office. i am tired of them sang -- saying it is all about the job creators. if that was the point, we would have jobs. they keep saying that and during that time when he cut it, i

think bush's administration only created 1 million jobs. this is ridiculous to keep saying they are the job creators. you have to have jobs to get revenue. that is what we need to do. host: alabama, and vincent, democratic caller. caller: it is in regards to bringing jobs back to alabama. we are just hurting real bad. i like to see them bring jobs back from across the ocean. host: to you think president obama's budget proposal would do that? are you in favor? caller: i am not too sure about that right now because i am having a tough time watching everything going on. host: if you are curious about the budget and if you're just turning in now, let me tell you about our budget hot on c-

span.org/budget. that is what the president has put forward if you want to dig through four volumes. you can also watch testimony from all the different secretaries on that website as well. continue to go to that if you want to follow process. last phone call. james, a republican in alabama. go ahead. caller: just the historical aspect. back in 1994, our total budget was for $1.40 trillion. now we are talking that much in debt. back in 1984, our total debt was around $1.30 trillion. i think all of us have lost sight of how fast everything has

grown in the last few years. i think congress and the sides have, both lost sight. massive growth of the last few years. thank you very much. host: all right. we will leave it there. what to thank you nancy cook. thank you for getting up and giving us the details. guest: thank you for having me. it was great. host: want to turn our attention to that mortgage summit with the banks. we will talk to martha coakley. we will be right back.

♪ ♪ >> testimony continues today on president obama's budget proposal for fiscal year 2013, released yesterday. there are a number of senate hearings planned for today. this morning, leon panetta and mark dempsey will answer questions before the senate armed services committee. live coverage starts this

morning, here on c-span. the treasury secretary -- treasury secretary will be on capitol hill, testifying on the president's budget request. you can see him at 10:00 a.m. eastern on c-span 3. later this afternoon, the author of the book "the invisible arab ," join us live at 5:30 eastern. >> now online at the c-span video library, speeches from last weekend's political conservative action conference. >> we must outsmart the liberals. we must outsmart the stupid people who are trying to ruin america. >> this is about one country united under god. we are red, white, and blue.

president obama, we are through with you. >> they can come at our throat, as long as we are foolish enough to raise taxes and throw money in the center of the table. it is like a movie, "the bank robbery." >> watch and share the videos at c-span.org. >> there has been honest contention, spirited disagreement, and i believe considerable arguments. do not let anyone be misled by that. you have given here in this hall a moving and dramatic hook for americans who honestly defer. 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 our website, c-span.org /thecontenders. >> what about you? do you have a comfortable that? are you paying less or more for the things that you buy? the really not think that things can be better? of course they can. working together, we can and will make them better. >> c-span.org. >> "washington journal" continues. host: and we are back with martha coakley, the state attorney general for that -- for the state of massachusetts. joining us from boston to talk about the mortgage settlement that we heard about last thursday. who will this benefit?

guest: from my point of view, the whole economy. we are focused on right now are the two kinds of homeowners who have loans with the five banks involved in this agreement. those who have been delinquent, but not foreclosed upon yet. they are behind in payments and pre-foreclosure. the second group that will be helped our homeowners that have -- that are under water. homes that are worth less than the value of their mortgage, so they are not in a position to get out from under that. those are the two primary sets of homeowners that will be helped. keep in mind, this will avoid unnecessary foreclosures and stabilize the market. this affects all of the city's

and towns, because those homes are often of the tax rolls. host: when will the consumers and homeowners start to benefit from this? guest: the final thinking of the documents has not occurred yet. already, the five banks involved have set up phone calls. the numbers that people need to reach them, we encourage people to deal with the banks now for loan modification, or who think they might be eligible, to make those calls and get the paperwork lined up. hopefully, even though this is spread out over the next three years, the states involved, the homeowners who are looking for it, and the banks that want to get this done, will work as quickly as possible.

one thing that we have not talked about is the incredible stress that this creates for the homeowners. it is, frankly, at the root of what is needed to turn this economy around. host: i wanted to put up the numbers for our viewers so that they know the five banks and the phone number to call. we will keep those up as we talk to you this morning and let our viewers know. there they are, gmac, citibank, wells fargo, bank of america, wells fargo, those are the banks you're talking about. there is criticism, however. it could help some people a lot, "but in terms of the big picture, overall economy and

housing market, it is just a drop in the ocean of the problem." guest: i do not completely disagree with him, actually. i will tell you why. there are a lot of reasons why they are where they are today. that me tell you what this is about and what it is not about. this is focused only on the idea that the banks acknowledge that they were involved in a row was signing. the fees were related to the foreclosures themselves and why the foreclosure issues are now part of the settlement. not only is this between 40% and

60% of homeowners, there are nine other lenders that we hope will follow through and a large number of these loans that are owned by government sponsored entities, fannie mae and freddie mac. let me be clear, this is by no means the whole solution or the end of this problem. we need to make sure that this agreement is implemented. we will be able to get the relief for people that this is designed for. that is step one. secondly, it is not everybody. remember all of the attorneys general who said that we would not sign an agreement unless we could sign some sort of securitization? we card that out of this agreement. i want to be very -- we carved

that out of this agreement. i want to be very clear. we brought $600 million back to homeowners in massachusetts in securitization claims. this piece will help for those homeowners who are eligible, but there is still a lot of work to do to get this agreement implemented. we know that with my colleague in new york, we will look at the open claims. we are not done by any means. here is a piece by dean baker. he writes that there is no easy way to determine -- host: here is a piece by dean baker.

guest: we have argued this all along. reaching the agreement took far too long. it seemed like a lot, but when you start to parse out in fact what the banks would have to do anyway in terms of writing down these mortgages or writing them off, we do not know that. frankly, we could not know that until we move forward with what we think is the best option. it is not a perfect solution. trying to get for these mortgages, to keep that homeowner in the home. we do have ways to look at these numbers. frankly, being able to get the banks to the table, to agree to

do this and have a monitor in place, i will tell you one thing that we will do. my colleagues at the state level will continue to be aggressive on making sure that this is implemented. host: sounds like it was touch and go for a while as far as to would sign off on the deal and when. the last of the 49 attorney general's joined the settlement at 7:00 a.m., three hours before it was announced to the public. were you one of the last holdout? guest: we were. we were always transparent about the idea that we had a lawsuit. so, we did sign none. there is nothing like a deadline to provide a good inspiration. in the last couple of weeks and

days, many of the states were able to get the banks to come to the table on terms that were important. by a colleague in nevada, new york, delaware, be read able to say that these were things that were important to our state. for the peace a puzzle that it was designed to address, we are hearing from people all the time who were told that they had a modified loan, but meantime were foreclosed upon in the same time. it provides for people going forward a much clearer, more predictable, frankly a fairer way for dealing with people who are looking for modifications. it does not rebuild all past behavior. it does provide immediate relief

for some and hopefully for other mortgage holders of the nine companies, as well as, as we mentioned earlier, mortgages held by fannie mae and freddie mac. >> nancy is first. nancy, what do you think? >> i own a business in massachusetts and am aware of massachusetts laws. i am curious if she was the attorney general back at the time when eliot spitzer was taken down by the phone call. my point is, right before he fell from grace, he signed a letter on behalf of all 50 states attorneys general attempting to stop the predatory lending and jumbo loans. i am an insurance agent. i saw a lot of people get mortgages, buy insurance, then go under. also, trying to stop these funky

lending practices. it was john ashcroft at the time who shot them down, saying that state law could not supersede federal law. but it sounded like an 1800's law or a 1700's law. on the campaign trail they said that texas did not allow the companies to do that to the residents of texas. i was confused when i heard him say that. my understanding -- i do not have the document in front of me, but it implied that the states were stopped from protecting the consumers. host: all right, nancy. martha copley? guest: i have been attorney- general since 2007. eliot spitzer preceded me. so, the potential agreement you are talking about, there was not one when i was in office. i will say that as the attorney-

general since that time, knowing what they have done, particularly the role that new york plays because of the martin act, new york has been an important player in looking at states enforcing consumer rights and, in some instances, over the same banks. by and large much of the oversight is done by the federal government. whether it is by the fcc or the department of justice. banks lobbied to be pre-empted from state regulations. they have friends in congress that have allowed them to escape the regulation that might have slowed, slowing down the fallout we might have seen. we started to see foreclosure rescue schemes in 2006 and 2007.

we said that when you smell something that might fail, a financial product that you will make a fee on, that is unfair, that is the basis of our proceeding and in going after it in that way, we do not regulate things, but we see the problems that on regulated banks and mortgage companies can do. what you talked about with the attorney general, saying that this is a federal issue, has been part of the problem all along. i will give credit to our federal partners in this. the secretary really came to the table with us to get the agreement that we did. we have a partnership moving forward in our task force. looking at origination claims and criminal liability with the state of new york, i hope that

we will continue to address and provide accountability for what has happened in the past, and providing real relief to homeowners, getting out of this, getting real stability in the market. host: under the current deal, over 2 million homeowners could receive payment, but the average is about $2,000 per household. is that adequate? guest: let me be clear, that group of people are people that have already been foreclosed upon. because this does not deal with origination claims or the fact that the products themselves were on fair to begin with, that payment is designed to compensate people that were foreclosed upon for any failures in the foreclosure itself. it is because of uncertainty or

other costs. frankly, that amount of money for consumer is a drop in the bucket. but this suit was never designed to address wrongful foreclosures, perce, that is to say the claims that come out of origination, the kinds of be brought in fremont or option one. some people think it is not enough. that is always the case with a settlement. i think that some amount of release is appropriate. this was decided upon by the committee and the banks. it is not enough to compensate someone for a wrongful foreclosure, but it is to provide relief during an active foreclosure for the people that would have lost their homes anyway. host: peter, fort orange,

florida. caller: sorry, this is just another bailout. your propping up the real-estate market. this is a desperate move for desperate people who are afraid to see their investments go. now that they have tightened up the purse strings, everyone is cursing them. how is this fair to a responsible homeowner? that every government person out there is using all of this power and money for it -- to fight for the few people that went under water? guest: peter, i appreciate that you believe what you're saying. i believe that you are sincere in your belief that this is somehow a bailout that is unfair. it is unfortunate, i think, that people have looked at one little

piece of this. in other words, i was able to , so my mortgage payments os why should someone else could help? many of the people involved purchase homes between 2003, 2004, and 2005. if you look at the value of homes at that time before this happened, before predatory lending and securitization, the vast on fairness of banks and mortgage companies selling products to people even though they knew they would fail, with no documentation loans or appraisals -- do not worry about this, you will be able to refinance. all of those promises made when people knew that they would fail. we know that wall street knew that they would fail. they continued to pump money into this industry to securitized loans to put junk mortgages into asset backed

securities. the banks got bailed out, did they not? i understand that we needed to prevent a crash in the economy. all we're saying is that for people that got caught up in that and fairness, that own homes that are under water, is a better to say let the banks write it off? wreck the economy because those homes will now be sold at a lower price than they could have been modified for, and let's let the homes on every neighborhood and block across the country continue to be in foreclosure and in a downward spiral. if you wanted to say that the other side of the coin is that everyone we can keep in their homes is a plus because they are not on the streets, they do not have the stress of losing their

home. more importantly, they do not have a property sold for less value that takes down everyone else's homes and properties. you can come at it from the point of view of pete, but i do not subscribe to that. i think that everyone wins, when we do this fairly. part of what this does is clear the way. " we're talking about is making sure that we do not have a necessary foreclosures. that we do not foreclose on someone who is with a principal reduction and the banks won't do it. they foreclose and the home sells later for $40,000. it does not make economic and commercial sense.

i know it is a question for a lot of people. let's make sure that we know the facts about how keeping everyone in the home that can stay there helps the entire economy turnaround. host: here is another statement for you -- host: i want to go to rick, next, in montana. thank you for waiting on the line. caller: i wanted to comment on this drop in the bucket. this is all water under the bridge. the money was already spent. i say that we take the bailout money back from the banks, which was used to receive the bailouts. let them go after the realtors to recapture their losses and put it on an even scale. similar to what florida callers have seen.

it is just a drop in the bucket over the last three to five years. that is all i have to say. it is a bailout in the skies, but it is a double bubble. the water is under the bridge. the money is already spent. >> again, i do not -- host: lets get a response. guest: again, i do not particularly disagreed. this is one small piece. we have to get past some of this. the banks need to adjust their books on this. and we will move quickly with modifications and people that need to be foreclosed upon. this is precisely why many of our colleagues said the we will not give you excuses for

behavior that require accountability. we have the task force to look at behavior. for some people, it is less than that. but we needed to do this piece. we and the banks will have to be held accountable for that. that is why the implementation is important. we have to make sure that this works. i hope that some of the callers are wrong, but i think that for some folks in some places, it will. and it will help those as a group of people who are under water. but it is just a small piece of the puzzle. host: we have another twitter message from mike murphy -- host: you have talked about this

a little bit, but what is next for you prosecuting some of these banks of criminal activity? what are you looking at? guest: one of the things that my colleague in new york said for a long time -- and keep in mind, this is not to be released for criminal behavior. this task force, of which new york is the co-chair with our federal partners, eric schneiderman will have that up with several of us. look, i have been a criminal prosecutor for a long time. criminal cases can be tough to make. but putting people in jail, unless we are keeping people in their own homes, it does not

solve the economic problems here. we will proceed on both tracks to hold people accountable where we can. given what i said earlier, most of the information around potential criminal behavior will be seen by the department of justice. we will work to do what we can. if there is criminal accountability here, so be it. we cannot pursue criminal charges without also understanding the need for the simple kinds of action that are bringing financial accountability to help address the issues created by these predatory loans, securitization of them, for closures that have held the banks accountable for their behavior. host: if you are a viewer that does not understand -- what constitutes criminal activity? what is the smoking gun?

guest: in white-collar cases, literally there is no smoking gun. it is about action that is done knowingly, intentionally, to defraud. one of the issues always is that something that has been tolerated for so long with a housing bubble that started in 2006, 2007, through 2008, and we saw the crash or potential crash, with the bailout, some of this behavior is so widespread, everybody seems culpable. one of the tasks is finding individuals or corporations that we can actually hold accountable for criminal behavior, knowing intent. for individuals to be held, they have to be held be hit -- have to be hit found behaving in a specific way.

host: why are fannie and freddie still in business? that is to say, why did god frank not address this? guest: and a sense they are not in business, are they? we sent a letter to the head of pipa a few months ago saying the need to address this issue in the first instance. we need the same kind of release for those loans that can now be modified and have principal reductions. we are working with california, new york, and many other states. we will work with federal partners on that. but ultimately, we need to get the same kind of resolution that we got in massachusetts.

that issue is a good one to ask your congressman, your senators. they were federally created, a federally run, and the ways in which a resolution can be reached with them will have to be at the federal level. host: that is the headline. fannie mae and freddie mac face pressure on principal reduction. let me read this -- "we want to see wall street crooks in shackles." in, democrat, louis, missouri. -- diane, a democrat, st. louis, missouri. caller: i am concerned with the governor of wisconsin taking some of this money for his own state's budget. how will that be amended? who is going to monitor that the

state part of that is going to go where it is supposed to? guest: a good question. part of this agreement is based on the formula and size of the state and number of homes involved. states are getting some of the money in this agreement that they can use for penalties. it is appropriate in some instances that states are released, and as i mentioned earlier, the damage that states themselves the fell in cities of -- cities and towns, because of the increase in public safety costs, it goes on and on. some of that can go, and will go, i assume, to state governments. by and large, my colleagues -- i agree that most of that money should be for enforcement and

implementation, making sure that the release that the banks have agreed to give to our state goes where it is supposed to go. one of the things that states stand for is that we know our communities best. we know the ways in which, in our own states, we will be able to implement this as quickly as possible. given that, we have all worked together on this. from the colleagues i have spoken to about this, we are very committed to getting in our own state the way it can be committed by oversight. frankly, to have the federal government tell me how to do it , i am respectful of my colleagues and the fact we're going to act in the best interest of the constituents in our state.

host: this is from "the washington post." is it appropriate that part of this settlement is going to help further protect a shortfall for the federal housing administration? guest of the federal housing new administration and secretary played a huge role in bringing this about. the cost and expense at the federal level for the kind of fallout for this foreclosure crisis is appropriate. i think that they will use, and i hope they will be transparent about how they are using that money, but the cause involved for the cleanup, it is just not rowboats signing and the peace before a. the cleaning up of this should be done quickly. the federal housing authority can do this at the federal level.

we have the opportunity to put it where will best help individual consumers. host: angela, thanks for waiting. guest: -- caller: how many thousands of people in massachusetts do you have under indictment for this? i am talking about the people that signed the loans. host: knee is asking how many. guest: when i came in in 2007, you have to understand that for many states, criminals were well behind the eightball. because much of this activity

has been pre-empted by federal regulation, states like massachusetts have not have all the tools to go after criminal behavior. i have been a prosecutor for a long time. i will continue to pursue that statute. but i have to do it. i have to have the discovery available. criminal cases are always difficult to make. people misunderstand. i also know that we have to pursue the civil remedies to make sure that we get the economic release for people. if you are being foreclosed upon and thrown out of your house, it is small comfort that after three years, someone has not gone to jail. host: mark, a democrat, california. good morning. caller: i have two questions.

when are we going to stop the investment banks? i wish that there was a law that president clinton had signed where he led the investment banks and the banks merge. what happens to the people that lost their homes and the banks did not even have titles to them. some of those people have a lot of money invested in their homes and got foreclosed on improperly without the paperwork. especially veterans. i am a vietnam veteran. i know for a fact that there are

a lot of people that were oversees the got foreclosed upon. i think it is disgusting. i know that there is a wall up there that should be looked into. host: martha copley? guest: i totally agree with you. i am committed to saying that no veteran or man or woman serving overseas or out of state should ever be foreclosed upon. there are federal rules and state rules that we have tried to enforce. i know that my colleague in oregon has made that a big issue. but all of us owe that to our veterans. in massachusetts, we are on the lookout for that. there are penalties for banks, i agree. secondly, there are people that were wrongfully foreclosed upon.

we have had a court ruling that says that if you do not hold the mortgage, you cannot legally foreclosed upon it. this cutting of corners rush to get everything done has created chaos in the market. this is the legal behavior for people who have been wrongfully foreclosed upon. it is part of the continuing problem, frankly, and we will continue to pursue that. the first question that you asked about regulation, you will have to talk your congress folks about that. host: we have a specific question from twitter --

guest: that is not exactly right. as i said earlier at the top of the hour, this settlement is going to provide relief for two sets of folks. one, those who are about to default or are already delinquent. the people that need a modification of terms. there's also a second group of people who are under water. because their home is now worth less than their actual mortgage, it will include for those folks a principal reduction. it is too complicated to get into here. i suggested if you think you are one of those folks that can survive with a principal reduction, call your lender asap. start working on the loan modification that would include principal reductions, if you are eligible. i appreciate the question. it goes to the idea that many of

these homes had over inflated values at the times that they were purchased. because the market is back to where it was before the bubble was created, we agree that it makes commercial sense to write down those principles and keep that homeowner in their home. you should immediately contact one of the banks that has your loans. if you have trouble with that, contact your attorney general in the state in which to live. host: speaking of contact with the banks, we want to put up the phone numbers for the five banks that settled. if you have questions, if one of these banks is your provider, phone numbers are on the screen for those banks. those are the banks that participated in the steel.

another question for you from robin on twitter -- host: will the banks just passed this cost on to the consumers? guest: frankly, they are not supposed to. that is part -- part of why there is a monitor. that is why there is such a cynical population about the bank's passing on these. we see that all the time in consumer protection. bank of america understands that they may not -- may not do that. i do not think that this is about the settlement, but what we say as the attorneys general. this is an important moment for people like that caller to say that there are different ways to

hold banks accountable, including for the fees that they charge and prices the co-op. you do have options. we have had issues with the national banks and mortgage companies. take a look at what your community bank, savings and loan, credit union is doing in your community. these people can take their assets elsewhere. i mean this in terms of having transparency for what goes to. u.s. consumers, if you do not like the principles or policies of what your bank is doing, be vocal about it. this is a time for consumers to get educated about what they pay for when they use banking services. we try to do that every day. i do not think it should be passed along to consumers. it is a market where this happens, but consumers play a

role and i encourage you to get educated about these issues. host: the consumer protection bureau has a new rule for servicers. this is the first step in the plan to regulate mortgage servicers that have come under fire for fraudulent practices. it will revamp the billing statements sent to homeowners regarding complicated mortgages. it is also stressing the improper charging of consumer homeowners on insurance. what do you make of these new rules? >> i have been a big supporter of the bureau. my former colleague understands these issues. i think that he and the staff understand the need for this kind of consumer oriented

regulation that will help consumers become better educated so that we do not have the kind of bauble that happened like last time in this housing crisis. banks will continue to make loans, sending the money to businesses that want to borrow money. we do not want to go so far to the other end. there has been a complete lack of regulation that focused on the unfairness on the consumer side. making sure that the institutions are sound and that the banks do not fail. when you look at where the regulation focuses only on the institution itself, we have the crash. this required both, federal

regulations over banks and institutions. making sure the products that are marketed are done fairly and transparently. they will help consumers get back on their feet. where they were just pushing products out. host: martha copley, thank you so much for talking to our viewers. we appreciate your time. come back again. up next, we will talk with kevin brady about the president obama budget plan. first, a news update from c-span radio. >> and rational news at this hour, the chinese bank president

meets today with president obama at the white house. he will later attend several events with vice president joe biden and secretary of state hillary clinton. they see the potential for consolidating relations, as well as seeing it as an important test for the man expected to be the next leader of china. expected to succeed as president in 2013. in other international news, an egyptian official is accusing the united states of directly funding nonprofit groups to create chaos in the country. the remarks were made to investigating judges last fall. last week authorities referred to a total of 43 employees and nonprofit groups, including 16 americans. the americans included the son

of the trip -- transportation secretary, rail the hood -- ray lahood. earlier today, the uss abraham lincoln passed through the strait of hormuz, shadowed by iranian patrol boats. several boats flanked them throughout the gulf, while operators picked up a drone and surveillance helicopter nearby. the group is scheduled to begin providing aid to the nato mission in afghanistan, beginning on thursday. those are the latest headlines on c-span radio. >> now online at the c-span video library, speeches from last weekend's conservative political action conference. >> we must outsmart the liberals and the stupid people trying to ruin america. >> it is about one country united under god. we are not read the americans or

blue americans, we are red, white, and blue, and president obama, we are through with you. >> we can -- they can keep coming at our throats as long as we are foolish enough to keep throwing money on to the center of the table. >> you can click the videos and share them at season -- c- span.org. >> "washington journal" continues. host: we are back with congressman kevin brady. you were a conferee for this payroll tax cut extension negotiation. we have news coming out of house republicans yesterday -- ready to go ahead and extend the month off the table. >> this is a strategic decision.

we had hoped to have better negotiations, frankly, with democrats in congress. we think it is real and we should address it now. social security is borrowing $142 billion from foreign investors to pay for social security today. but what we are really concerned about is making sure that there's not a tax increase on march 1. as a backup plan, we have followed the bill to focus on getting the unemployment reforms in the solution is a we are hoping for. >> do you think that you have the votes for the rank-and-file republicans? those that came in under the notion that things had to be paid for? guest: part of the argument is clearly going to be that we want

to focus on this president headed into november, not on the payroll tax issue. we believe that extending tax relief should not be paid for. we believe in tax cuts and the alternative minimum tax. some will have already voted against it. there are some that we believe from an economic standpoint, it does not deliver much bang for the buck. i think that if it is extended for the full year, and there are unemployment benefits with medicare providers, the home will be extended as well. host: when do you think that might come to the floor? guest: my bet -- my guess is this week. i do not know when the timing is set for. i know that when the republicans come back to town, we will have a meeting to discuss this.

host: that me ask you this, one critique of the plan is that the loss of revenue could hurt social security programs that are funded by the payroll tax. another concern is the temporary nature of the measure. that an overhaul of the tax code is what is really needed. guest: they are exactly right. host: then why do it? guest: well, it is frustrating. this is the fifth consumer driven commander driver of the decade, with a permanent tax relief structure that counts. that is what we are pushing for these days, having outlined the tax reform on the business side with individual tax reform as well. but we need some partners on

this. guest: -- host: you do not believe in it, but you will support it? guest: now that it is in place, we should beef -- we should be supporting tax release the need to be replaced. tax cuts of people or greater value that does not divert from the revenue stream. host: the watch -- "the washington post," had this on their editorial page -- guest: i think that they missed

the mark in two areas. frankly, like last year, where the democrats rejected it, this year is about the economy. double taxing companies, succeeding overseas, driving manufacturing out of america -- what worries me is that if this is adopted, this budget would downgrade of the guarantee of america's future credit ratings. social security and medicare face serious challenges. we all know that. this is an election year, so the president does not want to address that, but republicans will address those special programs.

host: gene sperling responded to that yesterday. i want to show you what he had to say and get your reaction. [video clip] >> what is significant is that when we put out a budget, it has 600 million in budget savings that we have already agreed to. we have the most significant discretionary spending cuts in decades. the discretionary number for non-security savings in this budget? 2.5% gdp, which is boring, but it is also the lowest it has been since 1964. the president has taken off sacred cows on our side and put forward entitlement savings. you have not seen details like

this before. he puts out the amount of revenue, as he said yesterday, equivalent to the overall package of spending and interest cuts. guest: let me challenge the last point. we took a look at the numbers late yesterday afternoon. it is the opposite. it is $1.20 in taxes for every $1 in spending cuts. they started last year with sequestering the spending cuts that were already in place. if you were a math teacher, you would say that that is cheating. seen as a country, the tax increases in place are dangerous to the economy.

the savings that he talked about, they have done nothing to put medicare back on a solid half. host: we want to get more on talking to you directly about the president's budget. letting viewers know about the payroll tax extension debate, the president will say something this morning about trying to push congress to extend the payroll tax holiday and unemployment insurance through the end of the year. so, let's get to david, a republican in missouri. caller: thank you. this is another example of our

president and his party going out of their way -- this budget will not accomplish anything except raise taxes and fail with the cuts that are needed. it is to create a problem to come in and have more government control over things. just like the fast and furious thing that was a scam. where they just had some liberal attorney-general bragging about what they did for the gentleman in the evil banks. host: might you compromise on increasing taxes? do you think that at some point, somewhere, we need to increase taxes?

guest: the balance is in cutting revenues, not increasing spending. we know that we have $60 billion, $70 billion, $80 billion in revenues that are left on the table. there is a perfect compromise on how to create jobs and generate revenue for the treasury. yes, there are areas of compromise. host: phoenix, arizona. gregory, you are next. caller: rep, do you have a brady chair program somewhere in the back of your head? all you talk about is obama care and not spending money so the children are not saddled with debt, yet you want to take the poor kids and teach them how to be janitors, teaching the rich kids how to run the country.

it will be all kinds of crazy stuff. guest: [laughter] there is a republican plan that we did not get a chance to offer, because they shut off any alternatives to any ideas from the president's plan. pushing people on to medicaid and the imposed mandates, we focused on trying to make health care more affordable. it is one of the key reasons that small businesses cannot afford it, or people with pre- existing businesses. we focused on cost first. we still think that that is the right solution. we want to repeal the president's health-care plan and replace it with what we think is a better alternative.

host: mary, independent caller. republican line, texas. caller: several things have come up since i have been here, waiting. i spoke with john ford and. secretary of pollock, has repeatedly-- there was $100 bild out in unemployment. that does not include the last round. we have 8 million illegals or in jobs -- working in jobs. let's get them out. in addition to the last caller's comments, he fails to realize that obama admitted, " -- so, obama is not doing his job. host: ok. congressman?

guest: i agree. we're not putting enough of our resources on the border. we only have about half control of our border, which is a huge mistake. the president's budget cuts, where states have stepped up to detain those who been arrested in order for them to go through the judicial system -- he has been cutting payments to states to step for to do that. i think that is a big mistake. host: we will go to alabama. linda, republican caller. caller: president obama and the democrats do not realize that when you raise taxes on the rich, you are raising prices on everyone. the wealthy corporation owners -- they do not eat at tax. the government gets that money. the rest of us pay more for goods and services. whenever the president says he wants to raise taxes on the rich, he is raising prices on all the rest of us because we are the ones that pay for that. i do not understand why nobody makes that point.

i do not understand what the democrats do not get that -- why the democrats do not get that. guest: i think you have a good point. corporations past prices along to consumers or they stop doing what they are taxed -- corporations pass prices along to consumers or they stop doing what they are taxed to do. going actually double tax and make it harder for companies to compete. that creates, unfortunately, jobs -- they will stop creating jobs. economically, i think this budget is off track. host: would you favor of financial transaction tax to fund shortfalls in social security and health care? guest: no. a new tax does not solve the

problems. we have to make some reforms long term for the next generation, some reasonable reforms in both of those programs. unless you do that, which, again, the president simply ignores in this budget, you're not going to make it solvent for every generation once and for all. that's what you're seeking to do. host: continuing on taxes -- i heard you say the tax cut should be paid for. guest: the distinction is that the payroll tax holiday is really diverting dollars not to the general fund, but from social security, not from the social security trust fund, the nest egg, supposedly, that has been built up. this is real revenue to seniors today. we are going out that the country and borrowing money to fill in the hole and pay our social security checks today. we think that is a mistake.

we have not carried the day in that argument. we think, long term, this is damaging social security. this direction the president and democrats want to go on social security -- we are not going to stand in the way of extending that payroll tax. host: is is recognition by republicans that the loss that cost of this is recognition by republicans that you lost -- this is recognition by republican that you lost the political battle in december? guest: we need to focus on future tax cuts and to get back to the real issue, which is that we are spending and taxing ourselves into real trouble. host: you just want this off the table? guest: at some point, it has to be resolved. the house is the only body that has passed a full-year extension of the payroll tax cut and unemployment. host: "if raising taxes to pay

for the cost of government -- guest: that person is exactly right. here's the problem. this president has already signed legislation increasing taxes by over $600 billion in his first two years. how much of that went to reduce the deficit? not a dime of it. the theory is good, going forward, increasing taxes will do the same. all it will do is to sustain a higher level of spending that is not sustainable. we need a balance between new revenue is through economic growth and spending cuts over the long term, including addressing social security and medicare. i do not know how any responsible politicians as we can get our financial house in order without addressing those two programs, yet the president did that in his budget. host: i want to show our viewers the front page of "the

only paper-- of "ththe that has this story. the democratic caller, go ahead. caller: once you make a certain amount of money, you know longer have to pay into the social security fund. i want to know why we are not all given the same percentage of our paychecks -- rich, poor, no matter what you are, paying into the same fund. 10%, 5%, whatever. it's a problem for people who need it. guest: i agree that it is a problem. that's why we are pushing on the republican side to address the problem.

raising taxes on a few will not make social security solvent. it extends insolvency. i serve on the social security subcommittee. we have studied this issue at length. social security and medicare itself are 1 to require some common sense reforms -- are going to require some common- sense reforms. we are going to have to make some changes. there are good ideas out there, but we need leadership from this white house as well as congress to get it done. that's why i think the public is sorely in need of some real leadership. host: dayton, ohio, atomic independent scholar, thank you for waiting -- tom, independent waiting.hank you 4 waitinfor caller: on fair trade -- go to germany. they have laws that -- they make $45 per hour in manufacturing,

they get eight weeks of vacation, and they retire at the age of 62. i do not think mr. romney should take 15%. i do not care what he does. i am paying 25% and 30% on what i make per year. if you think that is fair, something is definitely wrong with this country. host: congressman? guest: since i serve on the ways and means committee, if you are making $30,000 per year, you are not paying 25%. you're probably in the 15% bracket, if that, pending on what your family is. at the end of the day, when you look at the tax code, and we see one of the most aggressive tax codes in the world. those with higher incomes are paying triple what those in the middle class are today. the president's claim that millionaires are not paying as much as their secretaries just does not hold up. our recent study of what people pay in america -- a recent study

of what people pay in america show that not only do higher- income people pay more than the -- the buffet role has quickly become discredited -- the buffett rule has quickly become discredited. this is from the office of budget and management on the dividends -- is there an area between those teed of rates that the two sides could compromise, bring it -- between those two rates that the two sides could compromise? guest: we would double tax them.

we also think that more and more americans are relying against -- on those dividends for their retirement years. about half of the seniors in america rely on the dividend income. we think taking more of what they have already been taxed on and what they're counting on for the nest -- their nest egg makes no sense. bling or tripling the taxes works against the economy -- doubling or tripling the taxes works against the economy. they are investing in stock. more and more people have opportunities to make long-term investments, many of them seniors, many of them under $50,000 per year in income. this is a direct tax on the middle-class that ought to be avoided at any cost. host: rhode island, al, a

republican. you are up next for representative brady. caller: president obama was a community organizer before he came into politics. in his budget, all he is looking to do is to create more of an underclass. he wants to give more money to people who contribute not much to this country. this is absolutely absurd. we have kids that are 26. they stay on their family's insurance. you cannot sustain anything like that. it cannot keep taxing people to carry people that really produce nothing -- you cannot keep taxing people who carry people that really produce nothing. you have this generational, illegitimate children -- our prisons are full of them. it has got to stop. we are destined to fail if we

keep with these policies. host: kevin brady? guest: it's important we give americans more than a fair shot at and just at food stamps or just at unemployment. we also want them to have a life they can raise their family on. the amount of money is going to take from your pocket and mine to sustain it over the long term, we simply cannot afford that. i think most people do not realize that we're spending, as a government, $1 trillion more today than we were five years ago. the revenue this year will be the highest in history -- except for three years, this will be the highest level of revenue coming into washington. this is a spending problem we have. we need to address that side of the of budget -- of the budget. host: we have this comment on our twitter page about a gallup poll.

a democrat in nashville, tennessee, you are up next. caller: thanks for putting me on after the angry man. guest: hi, pam. caller: it is a fact that more illegal immigrants have been deported in three years under obama than under eight years of bush. when it comes to the bush tax cuts, they have added over $5 trillion to the nation's debt over the last 10 years. yet republicans want to make them permanent and still not pay for them. that does not sound fiscally responsible. guest: two points -- the president is taking credit for the increase border security, the guards, the detention, the prosecutors, the judges that president bush put into place. this president likes to blame bush for a lot of the problems in america. in this case, he is taking credit for what his former --

his predecessor already put into place. secondly, we believe, at the end of the day, reducing what government takes from family paychecks, what government takes from business paychecks, especially those on main street, strengthens the economy, especially in tough times. we really believe, if you look at the facts, it is the spending from the last decade that has been the problem. host: westchester, n.y., a republican. i wondered if you could explain something to me. is it true that under the obama health care bill, we're going to be charged 1% tax on world bank transactions? guest: on the world bank transactions? caller: on all bank transactions? guest: not that i know of.

there are plenty of other new taxes on medical devices, what hospital use -- hospitals use, but i am not aware of a bank- transaction tax in the president's plan. host: we're talking about the president's 2013 budget proposal. we're here with kevin brady, vice chair of the joint economic committee. we are tracking it all on our budget hub. c-span.org/budget -- you will find everything we have been covering over the past 24 hours. the testimony and hearings will continue. guest: more and more people are interested in how their tax dollars are being spent. applications like that are hugely helpful. host: the white house yesterday released an app if you want to download the budget you're smart phone. -- budget to your smartphone.

did you do that? guest: i did not. i think republicans have a pretty good app as well -- have pretty good apps as well. caller: i do not believe there are any americans anymore. it's either black or white, republican or democrat. if you guys want to create some jobs, let's start training people how to read lie-detector tests. every politician that is out there, when you get on the news, take a lie-detector test in front of the public. because, you know, all the documents can be manipulated. republicans look at the same document and say the democrats have it wrong. democrats look at the same document and say the republicans have it wrong. host: gary, i think we got your

sentiment. guest: i disagree. i believe this country is more divided than it needs to be. i get frustrated with our president, because i think he spends a lot of time defining the country rather than putting us back together -- dividing the country rather than putting us back together. where my family and i live -- i think we have different viewpoints, but i think there is still a belief that america can be much stronger than what we are today. you have to -- all you have to do is attend a soldier's funeral back home. you will see just how much we have in common, how much we care for each other, regardless of race, income from anything like that. host: on the budget, it takes two to tango. where with republicans meet the president? what did you see that you like? guest: we have fallen behind other countries. they are very aggressively

courting our companies. they know that movie r&d into other countries will bring that -- moving r&d and other countries -- we need to be much more aggressive in ensuring are in these days in america -- ensuring r&d stays in america. host: something republicans have been talking about is spending cuts. the epa budget is down from a nasa -- is down, nasa. do you agree with those cuts? guest: i do. i think it reflects the budget control act that was passed last year. we need to set priorities. one of my frustrations -- i have introduced legislation to correct this -- i want every president, not just president

obama, to submit an honest budget that lives within spending caps, gives us a solution on what we need to do on social security and medicare, and prioritizes spending. the bill i have introduced requires every president to tell us, in five categories, where we are spending so that we can make smart cuts and reductions rather than just a ham handed, across- the-board cut. host: there are some old points of the -- some bold points of the map act. guest: it is a five-year budget for the president. this bill puts guardrails around future spending so that we, over time, shrink the size of government, put in place guardrails that future congresses cannot jump if they get uncomfortable with it. they have to stay within it. it requires honest budgeting by the president, by congress, sunsets obsolete agencies.

we and forever the threat of government shutdown -- we end forever the threat of a government shutdown. host: doesn't include a balanced budget amendment -- it include a balanced budget amendment? guest: it does not. we think we need to shrink the size of government so that it is the size that we can afford and that grows our economy at the strongest pace. host: mary in tennessee. caller: they seem to be out to destroy social security. i hate president obama -- what he did about this tax break. it is suicidal, i think. host: which one are you referring to?

the payroll tax? ok. caller: it is just terrible. he is so -- this representative is so blatant about being against social security. i am scared. i am really scared for our country. i wish every citizen in this country was listening to this program today. we would get the republicans out. host: mary, hold on the line. i think you missed the beginning of the program where you saw the republicans said, let's go forward with this payroll-tax- cut extension. if anybody is in favor of extending this payroll tax cut, then they are not in favor of social security? caller: i am talking about what brady said. he said they want to put changes in social security. that goes along with the payroll tax. host: ok. all right.

guest: republicans -- most lawmakers went along with a payroll tax cut last year because we were told by the white house it would be a one- year tax holiday. it has been extended to two. the reforms we are talking about social security do not affect you. they do not affect people who are 55 years or older today. for younger workers, if you want to keep -- if we want to keep the promise to them, we have to raise the age of social security gradually over the next 30 years to 35 years. we will have to tie benefits to cost of living, real, honest, authentic cost of living increases. if we do that, we can make social security solvent for every generation, not just for a few years, but once and for all. host: we have about 10 minutes left.

we will and "washington journal" -- we will end "washington journal" early today so that we can bring you the senate armed services committee. the secretary will face three days of growing on capitol hill. today before the senate. on wednesday, he will be back up before the house armed services committee. we are learning today -- this is likely something that will come up at the hearing today. this is a bloomberg news with this headline. the pentagon may have to oust troops in voluntarily in order to meet their reduction in the budget plan. this is the first time since the aftermath of the cold war. guest: i hope that is not the case. the pentagon is facing a $10 trillion cut over the next 10 years. the cuts are serious. you can only go so far in

reductions before it lands on the troops. i think that is a mistake. i think we ought to keep the troop levels and troop- operations support whole. we ought to focus on procurement. the sequestered that is in place today is very damaging to defense -- the sequester that is in place today is very damaging to defense. host: we're winding down the war in iraq and afghanistan. the pentagon is not planning to replace the old weapons. is that a smart decision? guest: at the end of the day, they will have to weigh what are the priorities? i do think in procurement, we have done a poor job over the years. it is a big budget item. when you take them in their whole, report after report shows we can create long-term savings.

that is where our focus. host: there is a lot of waste -- that is where our focus needs to be. host: there is a lot of waste. guest: unfortunately, there is. caller: republican brady, good morning. thank you for mentioning the fact that soldiers who passed away in combat, that we americans, true americans -- we believe in those soldiers. i served 22 years. guest: thank you for your service. caller: all these democrats who call in and said that republicans never pass anything obama does -- on the last obama budget, democrats and republicans voted and democrats were against it, too. it is not just republicans. there is only one a 51-majority

vote -- only a 51-majority vote. harry reid knows it won't pass. it is very poor documentary- writing of the president, which he has done since he has been in. he has not done a thing for the middle class or for the black people. host: pat is an independent. gio ahead. caller: i have a problem with the representative then you saying that social security is bankrupt -- the representative and you saying that social security is bankrupt. they have been taking our payroll tax and using it for other programs, including iou's and the trust fund.

it is backed by t-bills, just like the money that we borrow from china. the fund is good until at least 2037. that has not changed over the last few months. host: let me let the congressman respond. he is on the ways and means committee. guest: i wish i could assure you that was the case, that we had plenty of cash and revenue to cover social security. but we do not. we borrowed $142 billion to pay seniors their checks. we will continue to do that in the future. the latest projections are that social security will run at a deficit for ever -- forever. we will borrow to pay for that. we think that is bad news for

social security over the long term. younger workers -- we have to find a way to keep it in place for them. the problems with social security do not affect you, my mom, those who are 55 years and older, but, for the younger workers, there are some common sense reforms -- common-sense reforms we can do so that they can get social security when they depend on it. caller: the same credit rating agencies that you talk about are the ones that waited -- rated bundled, bad mortgages as triple-a investments. how can we consider the incredible judges of our economic condition -- consider them creditable judges of our economic condition?

guest: you raise a valid question. in the rating analysis of america's budget, which one agency downgraded, they made clear that, unless white house and congress to address especially entitlement programs, which are so important -- we have 10 hours and programs per day signing up for social security and medicare -- we have 10,000 elders per day signing up for social security and medicare. host: i heard there is talk that britain might get the downgrade as well from some of the credit agencies. what do you think that does to our economy? what do you think about the situation in greece with the vote for more austerity in their country? guest: that is critical.

it is critical that the european economy not have a financial run. we have very close banking ties with them. if our economy was flying at 50,000 feet, strong and steady, turbulence from europe would not be a problem. we are flying low and turbulence is a problem. i think that the fact that greece is already close to default is going to slow our growth. they need to stabilize so that they do not pull us into a double-dip. host: congressman kevin brady. thank you for making time and talking to our viewers this morning. the hearing at the senate armed services committee is getting underway. senator john mccain, the ranking republican on that committee, just came into the room. we're expecting general dempsey and defense secretary leon panetta. we turn to live coverage of the senate armed services committee

on the 2013 budget request for the pentagon. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]

[gavel] >> good morning, everybody. the committee this morning welcomes secretary of defense leon panetta and chairman of the joint chiefs of staff, general martin dempsey, for our hearing on the 2013 budget request. the associated future year's defense program and the posture of the united states armed forces. the committee also welcomes, and -- undersecretary of defense

the committee also welcome the undersecretary of defense. let me thank all of you for the commitment to the nation, our soldiers, marines, and airmen around the globe, and to their families. they are truly deserving of the nation's affection and support. your testimony marks the beginning of the committee's review of the fy 13 budget request for the department of defense. this request for -- this request includes $520 billion for the base budget and $88.4 billion for overseas contingency operations, oco. the base request is $5 billion less than the 2012 enacted request. the oco is less than last year's level -- last year's

enacted level. this conforms with the budget control act that congress passed last summer. the senate approved a budget control act on a bipartisan basis with 74 senators voting for it. but the control act locked in defense and non-defense -- the budget control act lot in defense and non-defense spending caps -- locked in defense and non-defense spending caps for 10 years. the department responded with a new program to meet our security challenges. the budget control act also included language requiring the congress to pass legislation with additional, far reaching a deficit-reduction. if congress does not come up with the deficit-reduction package by next january, one that locks in another $1.20 trillion in deficit reduction

over 10 years, then automatic spending cuts will be imposed on both defense and non-defense programs. the budget the president sent us yesterday avoid sequestration by meeting the $1.20 trillion additional defense reduction target, and approximately 1/2 in additional spending and 1/2 in additional revenues. the defense request for 2013 not only confirms -- conforms to the limits of the budget control act, but it reflects the results of the departments comprehensive and strategic review initiated by president obama in april of last year and the strategic items that resulted. we look forward to the witnesses' explanation of the process they went through to develop the new strategic guidance, their assessment of

this guidance's most important features, and potential risks relative to the current and potential future environment, and how this supports its strategic priorities and manages strategic risk in the near and long term. the administration has called for two more base realignment and closure, or brac, rounds. in my view, however, before we consider another round of brac, the department ought to take a hard look at whether further reductions in bases can be made overseas, particularly in europe. there are 4 combat brigades currently stationed in europe. even after they are withdrawn, there will still be over 70,000 u.s. military personnel deployed in europe. ending further reductions and consolidations in our overseas -- finding for the reductions

and consolidations in our overseas forces should take place before further brac rounds. the process of transition has begun and continues apace. afghan security forces are assuming responsibility for securing the afghan people in more and more areas throughout afghanistan. progress on security israel. the second round of areas to be transitioned -- progress on security is real. the second round of areas to be transitioned will be completed this year. they will live in areas where afghan security forces have the lead for providing security with coalition forces playing a supporting role. i have long pressed for afghan security forces to move increasingly into the combat lead and to assume responsibility for securing more and more afghan territory and communities as the size of the

afghan army and police are built up. the success of our mission in afghanistan depends on getting the afghan security forces in the lead with the support of the afghan people, thereby putting the lies of the taliban propaganda -- thereby proving the lies of the taliban propaganda. we have always maintained that afghan security is an afghan responsibility. last june, and an obama said that the 33,000 u.s. -- last june, president obama said that the 33,000 u.s. surge force would be removed by this december. he also said that, after the reduction of the u.s. search for

some u.s. troops would continue to drawdown -- the u.s. surge troops, u.s. troops would continue to drawdown at -- this is based on no reductions throughout all of fy 2013. one question i hope when mrs. will address this morning is whether they -- one question i hope witnesses will address this morning is whether they expect reductions below 60,000 during fy -- below 68,000 during fy 2013 and what savings would result. i hoped secretary panetta would clarify his surprising statement earlier this month -- i hope

secretary panetta will clarify his surprising statement earlier this month. he said, "hopefully by the mid to latter part of 2013, we will be able to make the transition from a combat role." there are many reports about reconciliation talks with the taliban. it taliban statements are true that they will open -- if taliban statements are true that they will open a political beice in catqatar, it could a positive development. i'm concerned that the administration is considering transferring five afghan-taliban detainees from the guantanamo detention facility to qatar. such a significant step strikes me as premature and should be considered in my view, only following positive discussions

and not preceding them. another concern i have regarding the progress of the reconciliation talks is the reported decision by the government of afghanistan to open a second channel in the dialogue with the taliban. that would be in saudi arabia. it seems to me this could create potential for confusion. the united states has said it is committed to an afghan-led to reconciliation process. that is another reason that the discussion process ought to be pursued through a single channel, with both the afghan government and us fully coordinated and participating together, whether it takes place in one or two then used -- one or two venues. respect to the u.s. marines on okinawa, we have advocated -- with respect to the u.s. marines on okinawa, we have advocated a change to avoid excess of an

unsustainable costs associated with large and elaborate new bases -- to avoid excessive and unsustainable costs associated with large and elaborate new bases. there are other challenges. there is strong bipartisan determination on this committee and in congress to do all we can to counter the threat that iran poses, including stopping iran from acquiring nuclear weapons. president obama has focused considerable diplomatic effort towards that goal because, in his words, "america is determined to prevent iran from getting a nuclear weapon. i will take no options up the table to achieve that goal." the administration is bringing the world together, as it should come as people with one voice against iran's nuclear ambitions -- as it should, as people with one voice against iran's nuclear ambitions. in recent days, general dempsey

traveled to cairo to engage the supreme council of the armed forces of egypt on the very troubling decision by the egyptians to charge 19 americans and dozens of other individuals for operating programs in support of an egyptian civil society. the committee is eager to learn the findings of general dempsey's visit. a decision by the egyptians, if unresolved, will negatively affect funding decisions that congress makes in the coming months. relative to syria, the regime of president assad is waging war on the people of syria. despite the condemnation of the arab league and almost all nations, china and russia are preventing the u.n. security council from taking any effective action. if the situation is left as it is, there is also a significant threat that surrounding countries could be severely impacted. our witnesses will hopefully discuss options that we have to help end the slaughter, as

limited as those options might be. on cyber security, defense strategic guidance notes that both state and non-state actors both the capability and intent to conduct cyber espionage and the capability to conduct cyber attacks on united states which possibly severe attacks on both our economy and on our security. the director of national intelligence, in recent testimony, placed the cyber- security threat in the top tier, alongside terrorism and nuclear proliferation, and the proliferation of other weapons of mass destruction. a recent report from the national counterintelligence executive stated that entities operating from within china and russia are responsible for the massive theft of u.s. commercial and military technology that could threaten our national security and economy. we should let china and russia know in no uncertain terms that

cyber and economic espionage will have very negative consequences for normal trade relations and other relations. finally, in the area of personnel, the department proposes numerous personnel- related reforms aimed at slowing the increase in personnel and health-care costs, which continue to rise at unsustainable rates. these reforms included significant reduction in military end strength over the next five years, other personnel-related reforms, and a commission to review military retirement benefits. i agree with general dempsey and others who urged me in a letter dated january 25, 2011, to grandfather the retirement benefits of those currently serving. we owe it to our service members and their families to address any change in their compensation and benefits in a manner that

acknowledges the commitment that we made to them when they volunteered to serve in our armed forces. secretary panetta, general dempsey, we look forward to your testimony. i will call on senator mccain. >> thank you the mr. chairman. i join in welcoming secretary panetta and chairman dempsey to discuss the president paused but it is grass -- the president's budget request for fiscal year 2013. wheel discuss the impact of these reductions on future-year defense -- we will discuss the impact of these reductions on future-year defense programs. i can say today that i do not fully endorse this budget request. indeed, i am seriously concerned about how we arrived at this point. on april 13, 2011, the president of the united states announced his intention to reduce the

department of defense budget by $400 billion through 2013 -- however, his announcement was not supported by any type of comprehensive, strategic review or risk assessment. in fact, then secretary gates testified before congress that he only learned the night before about this massive proposed cut in our defense spending. now, the president proposes $47 billion in cuts over 10 years -- $487 billion in cuts over 10 years. respectfully, this does not add up. unfortunately, this defense budget continues the administration's habit of putting short-term political considerations over our long- term national security interest. in afghanistan, merely to commanders -- military commanders asked for a surge of

40,000 troops. the president is regarded their advice and sent 30,000 troops instead, then announced a date for withdrawal. commanders recommended retaining the full surge force throughout this year. the president again disregarded their advice. the presidentraq, disregarded the advice of his commanders again, dragged out negotiations with the iraqi government with no intent to maintain the presence of u.s. troops. now, with the political and security situation is unraveling, it is difficult to argue that iraq today is, to use the president's phrase, "stable and self-reliant." it seems as though many of the president's most significant decisions about national defence

have been fundamentally disconnected from conditions on the ground -- about national defense have been fundamentally disconnected from conditions on the ground. i fear the plan to cut $487 billion from the department of defense over 10 years on the continues this dangerous and regrettable -- over 10 years only continues as dangerous and regrettable pattern. this would reduce our force by more than 125,000 military personnel. it would jeopardize our nuclear- modernization plan. it would eliminate 20% of the army's brigade combat teams, six marine corps battalions, four tactical air squadrons, and seven air force combat squadrons, and 130 mobility

aircraft. perhaps most concerning of all, in light of the administration's own identification of the asia- pacific region as the focus of u.s. defense strategy, this budget would require the navy to reduce shipbuilding by 28%, to retire 7 cruisers and two amphibious ships earlier than planned, to postpone the purchases of one virginia-class attack submarine, two combat ships, and eight high-speed transport vessels. furthermore, while this defense strategy and related budget cuts clearly increase the risk to our national security objectives, there has been no formal risk assessment provided to congress. how can we and the american people determine whether the additional risk associated with this strategy is acceptable if we do not know the specific

nature of the risk, as defined by the u.s. millitary -- mi litary? these cuts pale in comparison to what the department would face under sequestration, an outcome which would be catastrophic for our national defense. domestic politics is taking priority over national security. president is saying he would veto an effort by congress -- the president is saying he would bveto an effort by congress -- if this is catastrophic, as you state, then why don't we sit down -- why doesn't the president said down with us and work out a way to avoid what you and general bmc have described as catastrophic consequences for national security -- you and general dempsey have described as catastrophic consequences for national security rather than

saying he will veto anty bill that does not have tax increases in it? this will forever shape our nation's destiny. defense spending is not what is seeking this country deeper into -- sinking this country deeper into an unsustainable debt. we will create the hollowing-out of the u.s. military and the decline of u.s. military power. we can either take the easy route of dramatic cuts to force structure in investments, which diminished our military capabilities and increased risks, or we can balance more modest reductions with an aggressive plan to address the broader cultural problems plaguing our defense establishment. the waste and inefficiency with

which the department buys goods and services under the influence of a non-competitive, military- industrial complex. i believe we must tackle this cauldron problem head-on. we must cut congressional earmarked and pork--- this cultural problem head-on. we must cut congressional earmarks and pork-barrel spending. we must eliminate the shameless cost overruns that characterize to many of our defense programs -- too many of our defense programs. the phenomena of acquisition malpractice can be found and many more programs than just the joint strike fighter -- can be found in many more programs than just the joint strike fighter. before the department for the

risks of force structure to which the budget savings, practices like this must -- to acheive budget savings, practices like this must end. we need to start with goals, moved to strategy, and allow that rigorous process to inform the -- move to strategy, and allow that rigorous process to inform the budget we create. thank you, mr. chairman. i look forward to the testimony of our witnesses. >> thank you, senator mccain. secretary panetta. >> thank you. i ask that my statement be made part of the record. i would like to summarize some of the key points.

>> it will be made part of the record. >> mr. chairman and members of the committee, i appreciate the opportunity to appear before you to discuss the president's budget request for fiscal year 2013. that began as always by thanking -- let me begin, as always, by thanking you for the support you provide to our military members and their families. these men and women have done everything asked of them and more during more than a decade of war. and i want to thank you for the support you have given them in the past, the present, and, hopefully, in the future. the fy 2013 budget request for the department of defense was the product of an intensive strategy review that was conducted by the senior

military and civilian leaders of the department of the device -- at the advice and guidance of the president. the delauro request represents a $614 billion investment -- the total request represents a $614 billion investment, including $88.5 billion in spending to support our troops in combat. the reasons for this review are clear. first, the united states is at a strategic turning point after a decade of war and after a very substantial growth in the defense budget. second, with the nation confronting a very large debt problem and that is a problem -- and deficit problem, congress passed the budget control act of 2011, imposing a reduction in

$487 billion over the next 10 years. we decided to step up to the plate. this is an opportunity to provide a new strategy for the force we need in the future. that strategy has guided us in making the budget decisions and choices that are contained in the president's budget. he fact is we are anat an important turning public that would have required to make a strategic shift. the u.s. mission in iraq has ended. we still have a tough fight on our hands in afghanistan, but 2011 market significant progress in reducing the violence and transitioning -- 2011 marked significant progress in reducing the violence and transitioning. we're on track to completing

this mission by 2014 in accordance with our lives and commitments -- our lisbon commitments. all the nato nations are in line with the strategy we are approaching with regard to afghanistan. we're in the transition. we are transitioning security to afghan forces. our hope is that, as we make the final transition in 2014, they can take the lead on combat operations. we will be there. we will be in support. we will be combat-ready to support them through that process. i want to assure you that nato is fully in agreement with the strategy that we are moving on in afghanistan. last year, in addition to nato efforts in libya -- in addition, the nato efforts in libya also concluded. efforts hav