>> in a few moments, treasury secretary timothy geithner on the economy. in a little more than an hour, today's meeting of the senate >> today's events with president obama in ohio, and mitt romney in north carolina. >> when i was embedded in eastern afghanistan, soldiers started saying the u.s. government was wasting tens of billions of dollars on totally mismanaged logistics contracts. douglas wissing.

>> i was in one meeting where the brigade commander, and colonel mike howard, not long after president obama took office. the state department was out there saying it is counterinsurgency. we are going to do this, when the hearts and minds, nation- building. colonel howard said don't send me any more money. sen the contract officers that can oversee this stuff. i need people. i did not need more money. >> sunday night at 8 eastern on "q&a" pickwick now treasury secretary tim geithner on the u.s. economic recovery. he spoke for about an hour at the brookings institution, looking ahead to this week's imf world bank and g-20 finance ministers meeting.

>> good morning, everyone. it's a great privilege, honor, and pleasure to welcome, on behalf of brookings, secretary geithner this morning, and also david ignatius from the "washington post," and all of you. welcome at an interesting moment when the imf and world bank spring meetings are going to take place in just a few days at a moment of the world economy where there is some good news, particularly in the united states. but still, a lot of soft spots. still europe is a big worry, and in some of the emerging markets we see a market slowdown also. so, i think we're not out of the woods in terms of the world economy. and it will be, i hope, fascinating i'm sure, fascinating to listen to the exchange between david and

secretary geithner. and then you'll be invited, of course, all to come in. mr. geithner is the 75th secretary of the treasury of the united states. before serving at the treasury, mr. geithner served as the president and chief executive of the federal reserve bank of new york. in that capacity, he served as the vice-chairman and a permanent member of the federal open market committee, the group responsible for monetary policy. secretary geithner had a long career at the treasury but also worked at the imf, directing the policy development and review department, so he has very strong both international and national experience, bringing it together. secretary geithner studied international economics and east asian studies at dartmouth and sais. the event will take place in the form of a conversation with david ignatius from the washington post whom many of you, i'm sure, or maybe all of you know; he writes twice a week for an affairs column and contributes to post-partisan blog.

david has also written eight spy novels, the most famous of which is probably body of lies, which in 2008 was made into a hollywood film starring leonardo dicaprio and russell crowe. i told him before the meeting that i was really very jealous of that. ignatius joined the post in 1986. in 1990 he became foreign editor, in '93 assistant managing editor for business news. he began writing his column in '98 and continued even during his three years as executive director of the international herald tribune in paris. earlier in his career ignatius worked at the wall street journal covering a large area of topics. he studied political theory and economics at harvard and cambridge. so, welcome again, many thanks, and up to you. >> i'm always happy to be linked to leonardo dicaprio in any public setting. mr. secretary, as kemal says, we have the imf and world bank convening here. there's great curiosity about

the world economy but i want to start with the u.s. economy and ask you about the growth picture. the imf's latest forecast is for growth this year of 2.1 percent. consensus estimates all seem to be under 2.5 percent. we had signs of faster growth in last year's third quarter but then slowing, and i'd like to ask you the basic question i think everybody has which is what's going on? what's your mental snapshot of the u.s. economy right now? >> well, the u.s. economy is gradually healing, gradually getting stronger. growth has averaged about 2.5 percent since the recovery began, slower than the average of recoveries in the post-war period. why has it been so moderate? really, the following reasons: one is the basic reality that

when you're digging out of a financial crisis caused by too much borrowing, too much leverage, and the economy built too many houses, you face a lot of headwinds as you work through those imbalances and that makes growth slower than it would normally be. because people are bringing down debt, saving more, spending less, and they're naturally more cautious in that context. that's very important to understand, and the paradox in that is that the weakness that induces temporarily should be a source of strength going forward. and as you know and many people have written, we're much further along in that adjustment process than are many countries, so we've brought down risk in the financial sector quite dramatically. you know, we're four years into the adjustment in housing, and even individuals are bringing down their debt levels quite a bit. so, that's good. we also got hit by a series of pretty substantial external shocks in 2010 and '11. oil;e's crisis, japan and those are large enough to bring down the rate of growth quite significantly in the united

states. and then we had, of course, the debt limit drama of last summer which was very damaging to consumer confidence at a time when the world was very fragile. those are the main reasons why recovery has been more moderate than you might have thought, just thinking about an economy coming out of this crisis. but we're making quite a bit of progress. we're in a much stronger position than we were six months, a year, eighteen months, two years ago. and if you look at the basic indicators of economic strength in the united states, what's encouraging about it is that the strength is pretty broad based. you see it in manufacturing, in high-tech, agriculture, energy. private investment growth has been pretty strong, actually. even job creation in the private sector has been relatively strong since the re- start, and export growth is pretty good, and productivity measure is pretty encouraging. where there's weakness, still, in housing and construction, it's understandable. necessary as we work though

these imbalances, so i think we should find that pretty encouraging. again, just to finish this, still some risks and uncertainty ahead. obviously, europe's going through a very long protracted difficult set of challenges. although oil prices to date didn't look like they've had a materially significant negative effect on overall growth so far, there's still a lot of uncertainty around oil markets. and as everybody is sort of becoming aware, if you look forward to the end of the year in the united states, you face the expiry of a substantial number of tax cuts, the potential impact of a large automatic kind of spending. another debt limit debate, and it will be a big test of washington. big test of the capacity of this country to govern itself in how washington deals with those challenges. and, you know, hopefully, we use

it as an opportunity to make another significant step toward long-term fiscal reform at that time. but the engine of the american economy, the engine of the private sector, is humming along. and obviously the more we can do to reinforce that and, you know, we're just going to keep looking for opportunities with congress to try to get congress to approve additional measures that would strengthen the pace which we're growing and therefore bring the unemployment rate down more rapidly than it's coming. >> you and i were talking the other night informally about the famous cain's definition of an economy that's growing robustly. the animal spirits of investors who see a chance to make money next quarter and so invest. and then you get this viscous cycle, and we see a restraint in investor behavior. yes, investment numbers are up, but i'm wondering if you could just speak a little bit to the concern many people have that we're in a new normal.

that the animal spirits are going to be less animalistic for a while. people are going to accustom themselves to lower risks, lower rates of return. it's just a different kind of economy. do you think that's a correct picture? >> well, i think there's something to that but i think it's overdone in the context of the united states. again, remember the forces that produced the growth of the previous decade coming up to the crisis were really unsustainable, untenable. and that created a set of expectations about future performance in the financial sector and other sectors of the economy that was not plausibly sustainable over time. so, there's been a bit of gravity in expectations as people think about what it's going to take for us to grow in a more balanced and sustained way going forward. you know, we can't have an economy where we expect growth to come from sustained borrowing by individuals relative to income to finance over-investment in housing. not a plausible long-term

strategy. so, again, i think the broad adjustment you're seeing in the u.s. economy we should find encouraging. you know, it's more investment and export led. it's coming with an improvement in private savings rates, even the beginnings of improvement in public savings. public fiscal debt is coming down. that's encouraging. people are bringing down their debt burdens. the financial sector is much more stable. and, you know, we have a resilient, very dynamic american economy. you can see that, again, across the broad strength you're seeing. and i think if you look ahead, you know, the world is, i think, still at the early stage of what's going to be a very long period of pretty substantial rates of growth in the emerging world and the most populous parts of world. and we are better positioned than most developed economies to take advantage of that. and that's partly why you're seeing the strength you see today, again, in agriculture, in manufacturing, and hi-tech in the united states. >> let me ask you about the

year-end set of interlocking crises that you mentioned. in the newspapers we've been referring to that as taxmageddon with our usual restraint. but there are a lot of uncertainties that are out there. and you could argue that the president, by introducing the idea of the buffett tax, 30 percent minimum tax for millionaires, is adding to that sense of uncertainty as we head toward year-end. i want to ask you to address that question. is it just unlikely that we'll see some firming of business confidence until these issues are resolved which probably will be after our presidential election? and on the question of the buffett tax, a lot of people have wondered why the president hasn't looked instead toward more comprehensive tax reform? a lot wrong with the

u.s. tax system. you could argue that equity is part of what's wrong, but why this limited approach to a big problem? >> good questions and thanks for raising them. you know, among the challenges we face as a country -- they're not the only challenge we face -- is trying to find a way to build political consensus around a balanced mix of tax reforms and spending savings to restore sustainability to our fiscal position. as i said, it's not the only challenge we face. it's not the most urgent challenge we face, but it'll be critical going forward. and at the end of the year we have this huge incentive, huge opportunity to try to get people to come together and, again, make some progress in that direction. for that to happen, you're going to need some additional revenues through tax reform alongside some significant savings across all parts of government; health care, all the other things that

dominate the spending picture of the government. but they have to happen together because i think it's untenable to ask people to bear the burden of the significant savings that are going to have to come -- across the government which can affect all parts of the american economy and middle class families unless that's accompanied by some shift towards a modestly higher burden of taxation on the most fortunate americans. i just don't see how you justify it economically. i don't know how you do it politically unless you have that combined package. so, as part of that process, what we've been trying to do is lay the foundations for the debate that's going to have to come on tax reform. now, the president has proposed very detailed, very comprehensive tax changes. letting the bush tax cuts expire for the top 2 percent of americans, and a significant limitation in the ability of that 2 percent of americans to take advantage of deductions and exclusions in the tax code.

we think that's the necessary and essential element of tax reform alongside changes on the business side that would lower the rates and broaden the base and clean up all the corporate wealth on tax code. create strong incentives for investment. so, the two basic centerpieces of reform that are going to have to happen are ways to restore a greater degree of proclivity in tax code with a modest increase in the effect of tax rates of the most fortunate americans. that's what the buffett rule tries to do by making it clear that, as many republicans have said, that you need to limit the deductions and exclusions in the tax code which disproportionately benefit rich americans. you want to have that alongside a comprehensive business tax system which would lower rates, broaden the base, and improve incentives for investing in the united states. and what we're trying to do is, again, lay the broader foundation for those reforms, so that when we're better positioned at the end of this

year to set up a process that would move in that direction. but those should be alongside of, not a substitute for, a broader set of savings on the spending side. just one last point on this. all of the bipartisan proposals for fiscal reform share with the president's, a basic judgment that you need to have spending savings alongside some modest increase in revenues. so, everybody has looked at this, whether it's bowles/simpson, the senate six, rivlin-domenici, or the whole range of other non-partisan or bipartisan efforts out there, they've all come to the same basic judgment that there's no plausible way politically, and no really sensible way economically to try to restore fiscal sustainability without that. and tax reform should be part of that, but it requires some spending savings, too. >> so, just to clarify for our

audience, am i right in understanding you to be saying that the president would be interested at year-end in a broad discussion about tax reform as you address the series of questions that you mentioned? >> oh, absolutely. and again, i think tax reform is coming. it's inevitable. it's necessary. it's all about the shape of it. and, you know, we're going to have to make another substantial contribution on the spending side, too. and those things should proceed in parallel, and we're going to have to find some way to put in place a framework for doing those things at the end of the year. >> so, let me shift now to -- >> can i say just one more thing? >> yes. >> because it's important. i think the important thing about the uncertainty that people see ahead at the end of the year and i would just say that i don't think there's any plausible argument today in the behavior of businesses and the broad behavior of the american

economy. wherein financial markets you can see much evidence really and any evidence of that uncertainty about the ultimate resolution of our fiscal problems materially affecting economic growth or behavior. i don't -- it just doesn't exist today. no evidence -- it might come in the future, but not today. but i was going to say the big source of uncertainty around this and i think what people can do to provide a little more reassurance and balance and context is that -- or around the debt limit and the potential scope of changes on the tax side, to some extent the pace of the declining deficit. so, let me just say that the three things that would be reassuring and helpful for markets to hear from politicians in washington are the following: one is that congress will pass the debt limit without all the drama and politics and damage that republicans and congress imposed on the country last summer. two, it's important to recognize that the tax proposals we're debating would affect 2 percent of american individual tax payers, 2 percent.

they would involve a modest increase in the effective tax written on those americans. about 3 percent of small businesses affected, very small fraction of the american economy affected by those changes. and the third thing is, and this is very important too, is to recognize that when you restore fiscal sustainability like this, you've got to do it in a way which is calibrated to the strength of growth and recovery. because if you cut too quickly, if you try to bring about too precipitous a withdrawal of fiscal stimulus in that context, then the risk is you do damage to recovery and you undermine the objectives you're trying lay forward. so, those three things are important for you to recognize. and if people in washington can emphasize a commitment to those basic three tenets, then that will help reduce some of the uncertainty around what might happen at the end of the year. >> i want to turn now to europe, which is a source of great interest and some concern is the imf and the world bank

gather for their meetings. olivier blanchard, the imf economist in his latest analysis, just out in the last few days, notes the problem of investors demanding fiscal consolidation, fiscal cuts, and then getting upset at the slower growth that results from those cuts. it's kind of a trap that if you do what you're required to do then people are upset with you. and i want to ask you more broadly, looking at the situation in europe and the risk of very lowered declining growth, what do you think, what's the united states think, is an appropriate response beyond what's being done now? >> well, excellent question. i think it's the centerpiece of the policy choices you face now, going forward. you know, they have put in place a stronger set of tools for managing this crisis, stronger set of financial tools,

stronger firewall if you look at the combined force of the ecb and what the governments have put together in terms of these funds, better tools, and they have governments that are doing some very tough things on the reform side. and i think the governments of europe were helping support those reforms, have a lot more confidence in the governments for example in spain and italy now with what they're trying to do, which is good. but it's very important to get that balance right between, just to say it more simply, growth and austerity. and what you want to do is avoid a situation where since there's a risk of a prolonged period of economic disappointment and weakness on the growth side in many of those countries. you want to avoid getting in a situation where, since economic weakness produces in the short- term, larger deficits than you had hoped for, you don't want to have to offset that increase in the deficits with immediate difficult cuts and spending or taxes right away. the best way to do it is to respond to those with some

gradually phased in, medium term plans for reform. if you try to do it all upfront, then the risk is, again, you're undermining the prospects for some stability and growth, some recovery growth, and you may end up undermining and setting back the cause of reform. in addition to that, of course, as you've heard from all these debates, it's very important there be a clean and unequivocal commitment by the central bank and the broader fiscals in europe that they're going to provide the financial commitments necessary for those governments to be able to borrow at sustainable interest rates and for those banking systems to be able to fund and to function. and those two things are critically important for this very difficult and very protractile process of reform to have any chance of traction. and again, just to emphasize what the governments of italy and spain are doing are very difficult.

they're very tough, but i think they're quite promising in many ways. because you're seeing them kind of confront, not just the sustainability problems on the fiscal side, and not just the problems in the financial sectors, but they're trying to put in place a set of reforms in the labor markets and over the broader business community that'll make it easier for them to grow in the future, easier to start a business, for example, and to hire people. and those things are important and promising, but very difficult, tough long road, very fragile, very tough politically and it's important that they get a little reinforcement along the way. >> we seem to go week by week in our monitoring of the european crisis. and so, in that context, i'm interested in what you're hearing as you talk over these last days with european finance ministers and with ecb chief, mario draghi, about what's happening in these economies.

>> well, again, i would say that the really most important change that you've seen over the last six months is, i would say the governments of germany and france and the ecb, have a lot of confidence in what the new governments of italy and spain are doing. that's very important because without that it's very hard to get anything to come together and that's very important. and the other thing they've done is, as i've said, they've put in place a better set of tools. they're in the early process still of building the architecture of a set of things that will make the monetary unit work in the long run. but they're in a much better position in terms of this mix of financial tools than they were just six months ago or so. and those are very important things and the combined effects

of those actions have been to calm significantly the tensions of markets that you saw periodically in 2010 and 11. but, you know, you can see every day of course the recognition. this is going to be a long difficult protractile process, politically very difficult. and it's going to just require some reinforcement, sustained effort over time. >> and so, to sum up, am i right in taking from what you've said, a sense that europe has turned the corner in terms of the severe liquidity problems that were evident several months ago? >> well, i think what they've done is they've done a better job of reassuring the world that they're going to take the risk of catastrophic failure out of the plausible range of outcomes, out of the markets in some sense. catastrophic failure meaning, you know, cascading defaults by governments or systematic collapse of financial systems or the dismembering of the euro. they've worked very hard to take those catastrophic risks out of the market. that's absolutely essential, necessary. nothing is possible without that reassurance.

they're going to have to keep working hard to do that. and even when they achieve that, they're still left with formidable -- a very difficult set of reform challenges. but even there they've got a better set of tools in place to help reinforce those reforms. >> let me ask a final question from me and then we're going to turn to the audience for your questions. and i'd like to ask you about the final big piece of the global economy and that's china, two things of particular interest now. first, the chinese announced last weekend they were widening the band within which the rmb can move and i'm wondering whether and to what extent that addresses longstanding u.s. concerns about the value of the yuan and the way in which it's allowed to trade. and then, more generally, there's a growing discussion about whether the chinese economy is slowing; it seems to be from looking at the latest

figures. and if it's slowing, whether it's heading for what we call a soft landing, soft decline, or whether the concerns that your analysts have, that you have, that there could be somewhat more trouble ahead for the chinese economy. >> good question. i think the cumulative effect of what china's done on the exchange rate side, on the external side, is very significant and very promising. so, let's just review what they've done. they've allowed the dollar to -- the remedy to depreciate against the dollar in real terms about 14 percent since june 2010. if you look back relative to 2005, it's more like 45 percent, pretty significant adjustment in real terms. they have begun to significantly loosen the comprehensive set of controls they have in place on capital movements and they build on people to use the rmb borrow and lend in rmb. they have widened the band to allow the market forces to play

a greater role in setting the exchange rate. they have been, at least over the last six months or so, intervening significantly less. their current account surplus has come down dramatically and the expected surplus going forward has come down really quite significantly, too. so, those are important and promising and i think they signal a continued commitment by the chinese authorities. even though, they're going through this political transition to this broad change in growth strategy towards a growth strategy less dependent on external demand, more reliant on the market, more focused on domestic demand and that's encouraging. obviously, they've got a long way to go in that process, including on the exchange rate, not at the end of that process. on the growth front, it's a good question and i don't claim any particular feel for it right now. i think that it's absolutely true the growth has slowed,

particularly in the early parts of the first quarter. but i think most people look at china -- and most people in china with a feel for this are really quite confident that you're going to see this economy growing, you know, in the range of 7 to 8.5, 9 percent over the medium term. and i think that's a realistic forecast as long as europe is still making some progress and working through its crisis. >> and again, to clarify, you used some very positive language in describing chinese moves on the currency front, very, very significant, very promising you said, which leads me to ask, if the chinese continue to do this series of incremental steps that are having a significant broad effect, is that sufficient to meet the longstanding u.s. demand that the chinese allow their currency to trade more freely? >> it just means we're on the

right path. you know, none of us know -- >> right. but if they keep on that path, are they going to get to where we want them to be? >> well, depends on how long they stay on that path. i mean, i think that you don't know with certainty how far that process should go and that's an assessment. people have to make a ruling basis over time. what you can tell about the reality today is that they've moved some distance. they're planning to still move further. i think all the available evidence suggests they have to go further on the exchange rate and i think, again, the key thing -- you know, we like to remind people that nations act in their interest and their own perceived interest.

and i think china has made the basic judgment that it is essential to the long-term interest of china, economical interest of china, that they create an exchange rate that gives it the independence to run economic policy in china to suit chinese conditions, not american conditions or european conditions, chinese conditions. and that requires the gradual loosening of this link to the dollar and that's why they're embarking this path. and, as i said, you know, again, significant and promising but they're not at the end of this process, a reform. >> so, i want to go to the audience for questions. this is the treasury press corp's best chance to pound their secretary with questions before the meetings take place. so, if there's anybody from the press corp, i want to make sure to recognize them, but hands in general. i see a hand back there. yes, please? >> ian talley, dow jones. i'm not sure about the hounding, but given -- the eu used recent efforts to temporarily raise its firewall, there seems to be a dam-breaking on raising imf funds at least in a limited way. what specifically, besides pacing fiscal consolidation and

more ltros, are you going to press europe for to encourage their prospects? >> well, again, i would say looking forward -- but these are choices europeans have to make. looking for what the challenges are ahead. the challenges are obvious. they are to put in place this set of policies reinforced by financial assistance. betterrovide a foundation for growth over time. they have to put in place the institutional frame to allow monitoring to work. and that means a better developed mechanism for fiscal discipline and fiscal transfers and a means of more integrated

unified capacity to run a financial system. those are very important. they're starting to build that architecture, those reforms, but that's still ahead of them. but, you know, they're very much aware of these challenges and i think they've -- again, i think they've made a very credible commitment to do what it takes to make this process work. and they obviously have -- they absolutely have the will and the ability -- financial ability, economic ability -- to make it work. and, of course, no one can feel more strongly about that than the europeans themselves, because they have such a huge interest, strategic interest, in making this broader endeavor of economic union, monetary union, work. >> other questions? yes, please. >> hi. my name is michael feinberg. i'm a student at the george washington university. i had a question about mortgage write-downs, if the administration is considering any additional programs? and if you believe that they would have a significant effect on the broader economy? thank you. >> the housing market is, you know, still very tough in the united states, still a long way to go to work through the big overhang you're seeing in housing. and we think the most promising way is to help facilitate that processes are, one, to help americans who have income and can afford to stay in their home to stay in their home, get

a modification of the mortgage that allows them to do that; to help more americans refinance and take advantage of, you know, historically low mortgage rates even if they're deeply under water; and to move this very large stock of unoccupied homes -- the legacy of the crisis -- to move that into the rental market where there's a lot of demand, of course, and a lot of shortages. there are many other things we can do, but those seem to be the core of what's happening. and as part of the first of those, which is to give people a chance to face a more sustainable, affordable set of mortgage obligations, we think there's a case, in some circumstances, for making principal reduction a part of that. we've done that in the programs we run at the treasury. we've seen quite a lot of that in the markets, as banks and investors make the same judgment themselves that it's in their interest, over time, to do that. and we're working, as you know -- as you must know -- with fannie and freddie and their oversight bodies to make the economic and the financial case to them that this would be a useful part of what they're

trying to. and it would probably -- almost certainly improve -- overall returns to the taxpayer in those companies. the number of families who would benefit from that are significant -- not overwhelmingly large, but significant. and our basic approach on housing is that we're going to keep at it until we see a much more durable set of improvements coming. and any place we think there's a way we can help facilitate that process -- help more people stay in their homes, help facilitate transition to other forms of housing, help repair and heal the damage -- we're going to keep doing that as long as we have the authority to do it. i should say that there's a bill being considered in the house today that would end the government's authority in the housing market, which would be very damaging. i mean, to right now, at this time, with the economy where it is, with unemployment where it is, with housing where it is, with the scars and the damage

and the legacy of the crisis still so damaging and so apparent to many americans -- to stop the government from having the ability to help ease the transition in this cause would be very damaging to recovery. and there's no plausible economic or financial case for doing it. >> since you've mention the "u- word," "unemployment," i really ought to ask you, given the growth forecasts that we're looking at for the rest of this year -- and, as i mentioned earlier, the imf is projecting 2.1 percent for the year for the u.s., and consensus forecasts range between that and 2.5 -- what does that imply for the likely rate of unemployment through the year? i mean, put a different way, that doesn't imply much

improvement in the likely rate of unemployment through this year, does it? >> you know, i don't ever talk about forecasts. but if you look at what the imf and the broader community of private forecasters say about the u.s. economy now, they see an economy that's growing between 2 and 3 percent. and where it comes out in that range will determine the pace at which you see more people get back to work, and the pace at which unemployment comes down. for unemployment to come down at a significant pace, you need to be growing, you know, significantly above 2-1/2, 2- 1/2 percent. if the world conspires against that, and some mix of oil, or iran, or europe slow the momentum here again, as it did before, then you'll be at the weaker end of that range. but, still, again, just to try to emphasize what's promising -- again, we're in a much stronger position to deal with even those challenges, those uncertainties, than we were even six months or a year ago. and, you know, most things you can look at and measure in the u.s. economy today suggest more

resilience, even though, you know, we've got a lot of challenges still ahead of us. >> there was a gentleman behind you, and then you, sir. yes -- fred. >> fred bergsten from the peterson institute for international economics. tim, i think it's fair to say the major operational question at the imf meetings this weekend will be possible augmentation of imf resources to build an additional firewall to help cushion possible effects from europe. two aspects of that: you have taken, i think, a strong position that the u.s. itself will not contribute to that augmentation of imf resources. i happen to think you're exactly right. this is a liquidity issue, and the funding ought to be provided by surplus and creditor countries. the u.s. is a big debtor country, has their own deficit problems. so it's quite appropriate, i think, not to contribute -- i think you're right on that. but the second issue is the

creation of the firewall itself, the increased imf facility, and how big it ought to be. and, there, i've been puzzled, because i think it's fair to say you have not been very enthusiastic about that. in some senses, you've even discouraged creation of a very large, very rapidly available set of additional resources. and i'm puzzled about that. i would have thought you would go after the surplus, creditor countries -- china, japan, oil exporters, many others -- to put up as much money as possible to support what the europeans are doing, in order to try to avoid the spillover to our own economy and others. so, would you kind of explain why you're not out there leading the charge to put together an additional big firewall to support what the europeans are doing themselves? >> okay, good questions. so let me try to explain our basic strategy in this case.

there are two things the world is doing for europe now which are very important. one is, we are -- and we are very supportive of the imf playing a significant role in reinforcing the reform process in europe. it's a supplementary role to the european financial role. it's not the dominant financial role that's appropriate in that case, but it's a significant financial role in that context. we've been very supportive of that, and will continue to be. the second thing that's been happening, which is, i think, as significant in this case, and something only the united states can do, is the federal reserve, as it did in '08 and '09, has given the europeans unlimited access to dollar swap lines, at a critical moment where funding concerns in european banks which have very large external assets funded in dollars were under a lot of pressure. that's something only we could do. we did it early, a very, very powerful, substantial scale. and the feds indicated that they will leave that framework in place as long as it makes sense for them to do that. now, the imf is in a very good position -- i think you're can see based on the commitments you're going to see people talk about this week -- to demonstrate to the world that it can, although it has $400 billion in available resources today, a very substantial pool of money relative to, i think,

any other time in the imf's history, it has the ability to raise additional finance from other countries very, very quickly if it needs to do that. and i think that's good. because that will prove to the world that there is a substantial capacity that can reinforce what the europeans are doing, and help cushion, if necessary, the effects of any european trauma on the rest of the world. and were very -- we're actually very supportive of that process, and will be very supportive of it this week. now, what we have been -- just to be honest about it, and be direct about it, what we did not want to see is people look to the imf as a way to substitute for a more forceful european response. we didn't think that would be tenable, not fair, not really realistic or plausible were we to agree to do that. and so, where you've seen the united states -- and this is true for china, and japan, and the other major emerging economies -- a little reluctant

to move ahead of europe, it's because of that basic recognition that, you know, europe is a relatively rich continent. it absolutely has the financial resources to manage this problem. it's got to play the dominant financial role. and we wanted to see them put a more forceful commitment behind that basic reality, financial reality, before the imf came in and said, okay, they'll do what's necessary to help make sure they can reinforce and supplement that role, and cushion the effects on the rest of the world. so that's the rationale for our strategy. one last point -- the economics of a swap line that the fed provides the european central bank, and the national central banks, and the economics of a country that lends money bilaterally to the imf, are not very different. because, you know, when you lend money to the imf, you have a liquid, interest-bearing claim on the fund which you can draw on, if necessary. it has the characteristics of a

swap, in some ways. we're the only ones providing assistance directly to europe. other countries are not willing to do it directly, they're only doing it through the imf, in that context. and, of course, what the imf does is backed up by the united states in significant effect. so, it's a mistake to look at this and suggest that the united states is holding back from, and standing apart from, this broad effort. we have been, as you know, central to the broader effort by the world to help reinforce what europe is doing. and we're doing it in ways that are most effective for what europe needs right now -- available early, and in very substantial force. and those swap lines have made a very important role in dampening and cushioning the effects of europe's crisis on the rest of the world, because it diminishes the need for european banks to dramatically reduce their external assets very quickly, which would have put a lot more downward pressure on the global economy. >> ambassador fujisaki, please. >> now, this is not a question to the secretary, just to comment on fred bergsten's point.

as you know very well, we have just announced $60 billion contribution of the imf, as we have done in 2008 after wall street crash. we were the first one to come to the assistance, too, of the imf. thank you very much. >> thank you, ambassador. yes, sir -- in the third row. >>jim moody. we're all aware of how the discussion of the deficit have been a force of its own on capitol hill, and a lot of very shallow things have been announced about the deficit that show very little understanding. and i don't think the public has been given a good education on it, either. obviously, what is the right size of the deficit, or what is an acceptable size of the deficit has not been a clear public discussion at all. on the one hand, we don't want the deficit to get too big, but using the analogy of the home credit-card bill is totally wrong. we're a reserve currency country, and we're lucky to have that. and the deficit, in some sense, is a matter of foreign trade.

we're providing liquidity -- i'm sorry, we're providing parking of value, and that's valuable, per se, to park safely something for someone while they don't need it right now. and, in turn, for that we're getting liquidity that we wouldn't otherwise have. so it's an international trade issue, in some sense. both sides benefit. so the proper size of the deficit is not zero. but how big should it be? and what is the span within it which is a -- it's an extremely productive element of our economy, and yet it's being demonized constantly in the most radical terms. and the press never seems to explain the fact it's an international trade concept. the question is, what are the limits? and that public debate doesn't take place on capitol hill. it does not take place in the press. we need this, as a country, to have a rational discussion about what is, what are the limits, up and down, of the proper size of the deficit? >> you're lamenting the quality of public debate in the united states about economic policy (laughter), which you're right

to do. in terms of the fiscal deficit, the minimal acceptable anchor for fiscal policy should be the following. you need to reduce the deficit to a level where the debt stops growing as a share of the economy and can start to come down. and for a country like the united states, that means we have to have a deficit that's slightly below 3 percent of gdp, and we have to hold it over that level. you know, we're slightly above 8 percent of gdp now. we have to bring it down slightly below 3. and we have to do that in a timeframe whereby the debt stabilizes at a level that's acceptable and stops coming down. so, again, if you look at the path we've laid out for the country on cbo's metrics, metrics scoring, the president's policies would reduce the deficit to below 3 percent of gdp in, i think, 2016, hold it there over the rest of the decade. and what that means is that debt held by the public would stabilize in the 70s -- 70 percent range as a share of gdp, high 70s, and then gradually start to come down over town. now, if we were to do that, and

to achieve that, that would be a very consequential step. it would still leave us, in the outer decades, with what are still unsustainable rates of growth in health-care spending for retirees, where we've made some significant steps, in the affordable care act, to bring down the rate of growth in cost. but, obviously, we'll have to do more over time. and, again, that's why i think the right way to think about the fiscal challenges ahead is, first, put that in perspective. don't put it ahead of everything else we face. recognize you have deal with them -- to do them sensibly, you have to deal with them in a way that's balanced, which has a mix of spending savings, tax reform, and it preserves room for us to invest in the things that are important for us to grow, make sure we're not eroding what's still a very thin safety net in the united states. you know, poverty in the united states is alarmingly high. it's worth reminding americans

that even before the crisis, 20 percent of american kids were born under the poverty line, families under the poverty line. and 40 percent of american children born -- again, before the crisis -- born to families that qualify for medicaid. so, the case for balance in fiscal reform, you know, it's not just an economic case or a political reality, but there's a very important moral question, and pragmatic economic question, about how you preserve room to make investments to grow in the long run -- like infrastructure, and education innovation -- and how you make sure you're protecting critical aspects of the safety net, not just for low-income americans, but for middle-class retirees going forward. and that's why we think there needs to be a more balanced approach to fiscal reform over time. >> the gentleman in the first row, and then, madam. >>i'd like to ask you your thoughts about the tpp. the u.s. now has played a key role in tpp negotiation.

when it was formed, how do you think it will get impact to the u.s. economy? >> well, i think the two promising things that have happened on the trade front over the last couple years which are really important are, one, we were able to negotiated and get congress to pass a series of trade agreements with korea and colombia and panama that had been pending, as you know, for a long period of time. and the u.s. had essentially frozen in its capacity to negotiate export- expanding trade agreements for the american economy. and getting those agreements done is very important, because without that, why would any country be willing to take seriously an american commitment to negotiate? so that helps. and the second is that we've seen, you know, a lot of support in asia for this trans- pacific partnership. you know, it's obviously going to be for a long period of time

the most rapidly growing part of the global economy. we have huge economic interests in being part of that expansion. and we think we can use that agreement to set higher standards in the trade area for a number of economies that, itself, we hope will provide an incentive and anchor for reform, economic reforms, in the region. so, you know, it's overwhelmingly good economic policy. and it's good strategic policy, too, for the united states. and we're hopeful that, you know, by the end of this year we'll be able to put in place the basic foundation of that agreement. >> madam, in the fourth row -- yes, please. >> hi, i'm nancy donaldson, from the ilo. and, so i want to go back to david's point about unemployment, but from a global perspective. president obama, at the summit of the americas, over the weekend talked about the importance of coming together and really tackling the issue of global unemployment issues. and i know that this administration has brought those issues to the congress, as well.

we know that, in addition to the imf and world bank meetings, that the g20 finance ministers are meeting in the next couple of days. and i just wanted to ask you if you anticipate, on the agenda, having some discussion about global recovery that promotes job creation, and that that kind of growth has an emphasis? >> very good point. and, of course. so let me just say, from the u.s. perspective, the dominant, overwhelming imperative for the global economy now -- as it has been for the last three years or so -- is to lay a foundation for strong growth across the world. there are other challenges, too, but that has to be central to the agenda, of course. now, you know, for that to happen, and for that to translate into broad-based gains in income and better opportunity for americans, and better employment outcomes, you need to see growth complemented by things like better education

outcomes, better education opportunities, better training opportunities. you know, i think if you -- you know, the world economy has gone through several periods in history where you had dramatic increase in economic integration, dramatic changes in technology. and where those translated in the long periods of growth in incomes, average incomes, and, you know, broader economic opportunity, it was because those big changes in the dynamics of economic growth were accompanied by things like universal access to primary education, or things like the anderson court reporting 70 basic elements of the safety net to provide retirement security or health care security, things like that. so, again, one reason why this debate about fiscal -- about growth, the balance between growth and austerity, and the debate about the shape of fiscal for the united states is so important is to recognize that you've got to make sure you're creating better conditions for economic growth,

for better outcomes in terms of opportunity, and better prospects for broad-based income gains. and that should dominate the economic agenda in the united states and countries around the world for a long period to come. and, again, that's why this debate we're going have in the united states is so important. it's why the shape and the context of these fiscal reforms are going to be so important. >> i want to ask a last question. this gentleman here has had his hand up. and i would just ask the audience, when secretary geithner finishes his answer, if you could remain seated while he leaves the auditorium. thanks. >> thank you for your comments sir. i wanted to follow up on your opening comment that you said that debt levels in the u.s. were down. i would also like to follow up on mr. feinberg's, i believe, question

when you were talking about the treasury and mortgage debt, you talked about what you hoped would transpire going forward in the short term. but you also said there were other things that your research department was looking at. the imf research department has looked at the issue of debt restructuring. and your treasury department has looked at it. do you feel, besides mortgage debt, that credit-card debt, personal debt, student-loan debt needs to be addressed -- perhaps after the buffett rule is taken care of? after tax reform? but is there anything more precise you could say about beefing up aggregate demand, both in the u.s. with spillover effects in the global economy? thank you. >> on demand -- let's start with demand. good way to end your question. what, you know, we think the most useful thing that the congress could do right now for the american economy is pass a long-term infrastructure bill, of investment over time. that would be good for aggregate demand in the short run, good for employment

generation, good for long-term growth potential. that's one example. if they authorize the ex-im bank for a period of time, you'd have continued assurance of pretty carefully designed support for american exports, a world where lots of countries subsidize exports. those are two good examples. helping americans refinance, take advantage of lower interest rates is another thing that's sort of good. it's like -- it acts as a tax cut. you know, just under our programs, for example, on the mortgage side, the typical modification is $500 a month in lower monthly payments. a million americans have mortgage modifications that meet that test. that's a pretty substantial boost to income. if you can provide broader- based refinancing opportunities for americans, including those that are under water, you can have similarly powerful effects like that. those are things that would be good for demand. on the mortgage side, as i said, there's a pretty good financial case, pretty good economic case for adding to the tool kit of what the gscs are doing -- target

forms of principal reduction -- alongside their existing modification programs. so we're very much in favor that, and are trying to work towards that. if you'd look at the other aspects of the broader consumer debt market in the united states you referred to, i think the right emphasis of reform in the united states is on things that improve the ability of individuals to borrow responsibly. so, for example, in the private loan market, student loan market, we'd like to see -- and the cfpb is working on this, consumer financial protection bureau is working on this -- to see, we'd like to see better disclosure, and better protections, so that americans who are trying to, you know, pay for their education, borrow to do that, are not more vulnerable to making bad decisions in that context. there's a huge opportunity for sensible reforms like that, and improved

disclosure, across the broader individual credit markets. and so we'll be working towards those things. nice to see you all. thanks for coming. >> thank you very much, mr. secretary. [applause] >> two things -- one is that this is such a complicated conflict that we have never fought a war like this before. the second thing is that, what is referred to back here in washington as nation-building, really is targeted were fighting. >> david has spent decades covering military operations for the various news organizations. this week, he received a prize.

he is one of the many pulitzer prize winners named this week that you can watch online on the c-span video library. find over a quarter century of american politics and public affairs on your computer. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> members of the senate budget committee met today. that is coming in about 15 minutes. before that, we will speak with a reporter covering the issue and hear from republican committee members before the meeting. >> joining us is eric swanson with the hill senate budget committee meeting. >> he has sought to get all of

his democratic members on the plan, but was unable to do so. decided to put forward the bolles-simpson plan. there is no vote on this plan today. >> republicans have said again and again that the senate has not produced a budget in three years. does this might give them added ammunition? >> i think it does give them ammunition. you have seen representative paul ryan today, the house budget chairman, who normally does not resort to more personal attacks on conrad, actually came out saying that it is causing an embarrassing spectacle. republicans are really jumping on this as evidence of irresponsibility. whereas conrad thinks that, because of the partisan nature of the debate right now before the election, he wants to get

the conversation going that will possibly lead to a negotiation wrapping up after the election appeared >> since they made the recommendation in 2010, what did you like about it? >> it attracts bipartisan support when it was presented in december, 2010. apo votecockburn and crypt for it. that it can provide a building block. he likes the fact that it is balanced. it contains both revenue increases from tax reform and tax cuts appeared quite tavis the think the november elections will force this a budget agreement? >> there put aside temporarily.

they will be facing massive events. the bush era tax cuts will expire. it is a sequestered of spending that will begin january 22. there are events that of a plea congress does not do this. they're hopeful it will trigger legislation. it used to be so massive that there was the drafting of bills. you like to get that done. >> thank you.

>> this afternoon we have held and expected we would be marking up a budget introduced by chairman conrad. he had been on the simpson balls commission. we were interested in seeing how he would lay out a plan for the country. no to meet thecoul requirements. there is the opportunity to debate the this. it is clear in recent hours he came under great pressure from the democratic leadership who did not want their members to

have to vote for any budget. this is a continuation of a sustained plan to do that, to avoid this. last year there was not a budget produced by the leadership. when they were forced to deploy, at they were voting against president obama's budget. it is favoring a single thing that would change the course of america. i hope we would be able to go forward today with a plan that would offer us an opportunity to participate in the required process. i intended to bring up president obama's budget.

is prepared tomey advocate for his historic budget. that lobby not dented appear i think he deserves credit. they believe this is a response ability in law and morality. they explain it to the american people. if they're not willing to do this, they're not doing the things necessary to lead our country in the decades to come. that is where we are. i have a great deal of respect for senator conrad. he has been very open with me.

i know he is disappointed. i am deeply disappointed. >> this marks 1085 days without a budget. i agree with what he said. i think he wanted to do a budget. he feels conscientious about the responsibility he has. what is really unfortunate is that his leadership lower the boom. what this has become now really is a dog and pony show without the dog and pony. the other case a raid where we all have -- there is a charade where we all have

this. the american people are going to go another year about putting a plan that describes in detail we're going to deal with the big challenges facing this country. we are on a fiscal cliff. nobody wants to make hard decisions. the democrats in charge of the committee and senate have no interest whatsoever in dealing with these issues are moving forward with the budget. it is a disaster for the country. it is unfortunate for this institution that has the opportunity to be good stewards of the tax dollars. what we're saying is an absence of any ideas or thoughts about how to move this country forward. we're going to go through this jury today. it looks like we will go without

a budget for the foreseeable future. >> let me just add, i do not think anyone really can dispute the notion that the greatest challenge facing the federal government is that we are on a completely unsustainable fiscal path. it is a complete debacle if we do not change the path we are on sync. i'm not sure there's any dispute of that. we have the majority party that is asked to be in control refuses to lay out a vision for where they want to take this country. i share the view that i do not think that he acknowledges that the party in control has a response ability to lay out a vision of blueprint of where we

go from here. his leadership refuses to ask their members to commit themselves. i think this obligation goes beyond the majority party. i believe a member of the minority has the responsibility to lay out this. you probably have copies of this. i will attempt to bring this up in committee today. i may not be allowed to. this is exactly what we ought to be doing. we are amending different visions. this is the customer window for this budget. in the eighth year, it reaches a balance. it is important to put this on a federal path to balance. our friends on the other side do not think of this importance.

the advocate levels of spending that will make it impossible. isn't that important enough to have a debate from start to build on these ideas? how are we ever going to reach that consensus if we're not willing to cast those votes to move forward? i am very disappointed that we're not want to have a meaningful discussion, that we're not going to have alternatives today. i intend to take my alternative budget to the senate floor. >> i think today will be an unfortunate surveyed. his budget last year lost some in the senate. two weeks ago the current

budget lost 0-414. the american people need to understand how amazing that is. only are facing a financial crisis the president fails to lead. the democratic senate fails to lead again. i have been involved in the private sector for 33 years. this is the first time i've been involved in an entity that is not have a budget. the united states is the largest entity in the world. i want the american people to look at the fact that the democratic party leadership. it starts at the top with the president of the united states. we know when the spokesman was asked about the set to have a

budget, he had no opinion on a pair can you imagine -- opinion on its. can you imagine the president has no opinion on the budget? i ran on the senate to get our fiscal house in order. if we do not address this debt crisis, it is not just about up. debt. mr. president, where is your leadership? you have no opinion of this. your own budget failed. we have a majority leader in the senate by harry reid the coup last year said very clearly that he thought it would be bullish for the budget committee to do its job.

this is just absurd. i think the president should be fired for failing to lead on this issue. i think the democrats senate should be fired. if he cannot get the basics of putting a budget together for this country, and then you do not deserve to lead this country. this is what it is about. we are about to go into a budget hearing that is a sham. why have a committee do not do the basic budget? >> your predecessors supported some symbols. there is the concept. how would you come out if you are a lot to vote? >> what we are voting on is not

some some balls. the circumstances are -- is thought simpson bowls. the circumstances are different. i'm willing to sit down with anyone when it comes down with a minimum of $4 trillion in debt reduction. i think we need to do more. the house came up with a blueprint that does do more for this country. i'm willing to sit with anyone on the other side of the aisle. this is a joke. i do not think this is the right way to do things. >> the democrats controlled the committee. they can pass a budget. it is oftentimes misrepresented that republicans can block a vote. we cannot. they should get their act together. they should fill their responsibility. >

[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> the meeting will come to order.

i want to welcome everyone to the senate budget committee today. the committee meets to begin consideration of the resolution of the budget for fiscal year 2013. i will have a statement and then will recognize the ranking member for his statement. then the chair will recognize other members of the order alternating between the sides to the extent other members are available. members will be recognized for statements from five minutes to 7 minutes. amendments will not be in order today. the mark will not be before us as is the tradition of the committee until the end of our opening statements. i did break from tradition by providing the ranking member yesterday roughly 24 hours in advance. it was less than that. the outline of the mark that i

will be releasing later today so hopefully members will have a better idea of what they are talking about with respect to their opening statements. we did break from tradition by giving them the outline of the mark yesterday. as i now, i will lay down the bipartisan fiscal commission plan. balls simpson the bull plan -- bowles simpson plan. what i'm proposing is not partisan. i mean trying to break from business as usual. it has gone on for too long. i am hoping my colleagues will be open to finding a path that can bring us together before we

face the expiration from all the tax cuts and the imposition of this sequester. the only way this can happen is if we find some way to come together. i know it is difficult. i want to emphasize the already have a budget in place for this year and next. we are in a different position in me already are appearing -- we are in a different position than we already are.

we have spending limits in place for 2012 and 2013. the act also provided for 10 years of spending caps, providing $900 billion in savings. it created a special committee to reform medicare and social security in the tax system and it said they did not succeed there would be an additional $1.20 trillion of spending cuts imposed at the beginning of next year, the so-called sequester. because they did not reach an agreement, those additional cuts are now in the law. a total of more than $2 trillion of spending cuts was provided by the budget control act. this is what i could find in the history of our country.

all of those cuts are now in law. it is much rather than a budget resolution. a budget resolution is purely a congressional documents. it never goes to the president for his signature. a lot like the budget control act was passed on in the house and the senate, but was signed by the president. it is the law. what we do not have, and why i think it is important that we find a way to negotiate a long- term budget agreement, is we do not have a long-term budget plan. this is what we must learn to achieve. this provides a comprehensive and balanced deficit-reduction framework to build upon. it is not perfect. it does represent the middle

ground. it brings the deficit down from what it would otherwise be. it brings the debt down from what it would otherwise be. it does sell in a responsible, if there, and balanced way. it protect the vulnerable. it raises revenue by lowering rates. i recognize adjustments will have to be made. this is the original bowles simpson plan. things that happened. the budget control act. wii no adjustments will have to be made. this will take time. those adjustments will have to be negotiated.

these are critically important to take place before we get to the end of this year when we will face the expiration of all the bush tax cuts and the imposition of the sequestered. i intend to give members of the committee an extended time to evaluate my mark. as they review, i it hope to hear back from members on how they think we can maximize our chances of successfully reaching a bipartisan agreement. there's nothing i want more than to reach an agreement on a long- term plan right now. it could be that outside events such as a crisis overseas will drive us to come together. i would be open to reaching conclusions sooner. i recognize the chances of that were slim. many will not be able to reach a

conclusion until after the election. it may be that all sides to be difficult to move off their fixed position before a national election. we are going to have powerful motivating factors pushing us to warto ward resolutions. there's the potential imposition of the sequestered. this was structured to have a boat's after the 2010 election. it was structured that way for a reason. it was critically important to when there is the greatest prospect of actually getting a results. it we believed the best chance

was right after an election. this is what i am hoping to replicate now. by presenting the plan as a budget resolution, i hoped we could be read the with a bipartisan plan later this year. it will take a lot of work. all those who served in the group of eight know that this cannot be done in a matter of weeks. the ground has to be plowed it now appears we are borrowing, as 4 cents of every dollar we spent. that is the hard reality that we confront. that is not sustainable. this is expected to reach 104%

of our gross domestic product this year and continue rising to 119% and g.d.p. by 2020 to. most regard this above '90s term as the threshold. -- 90% as the danger threshold. spending is near its highest level share in more than 60 years. both sides of the ledger are part of the problem and will have to be part of the solution. we know the american people support a balanced approach to deficit reduction. a poll conducted, people were asked what is the best ways to reduce the federal budget deficit?

17% support to cut the major programs only. 8% supported taxes only. 62% so we should do it combination. the fiscal budget plan does just that. it cut spending and raises revenue through tax reform. it does exactly what the american people are asking us to do. it is the kind of plan i believe the american people will support. the guiding values of the plan as they were outline were as follows. we all have a patriotic duty to make america better off tomorrow that it is today. we should not disrupt the fragile economic recovery. to cutuld cut and invest two economic growth. we should protect the truly

disadvantaged. we should cut spending we cannot afford. we should demand productivity and effectiveness from washington. we should reform and simplify the tax code. we should not make promises we cannot keep. the problem is real and the solution will be painful. we should keep america sound over the long run. here's a brief overview of the fiscal budget plan that i am putting before the body today. it includes $5.40 trillion of deficit reduction over 10-years including savings from last year's budget control act. a large the deficit from 7.6% of gdp in 2012 to 2.5% in 2015 and 1.4% in 2022. it takes the deficit below the

three% of gdp level that is widely viewed as sustainable. it lowers the debt to 93% of gdp by 2020 to, putting that on the clearly downward trajectory. it reduces overall spending to 21.9% of gdp by 2022 and reduces discretionary spending to a historic low. it builds on health care reform but at additional savings. it fully offset the fix preventing a dramatic drop in medicare payments to physicians that treat medicare patients. it calls for social security reform that insurers this and calls for social security savings to be used only to extend the solvency.

it includes fundamental tax reform that will make the tax code somewhere, there, and more efficient law raising additional revenue. this brings the deficit down to 1.4% of gdp by the end of the decade. it stabilizes the debt by 2015 and begins to bring it down steadily after that. speding averages 21.8% a g.d.p., which is actually below the level that we experienced in the reagan administration. the plan brings discretionary spending down from 8.4% of gdp to a historic low of 4.8% by 2020 to. -- 2022.

health care spending is the guerrilla. rising health costs remain the single largest factor of the nation's long-term fiscal imbalance. in 1972, medicare and medicaid totaled only 1.1% of gdp. by 200050, that federal health spending could grow to more than 13% @ g.d.p.. we can see that medicare represent the fastest-growing portion. it is important to remember that rising health-care costs are a problem in the private sector as well. this is not just a medicare or medicaid related problem. the plan i am presenting today does not reopen the health care reform debate. it builds on health care reform

by providing additional health care savings. it provides an option to phase out exclusion for health care. they said this would be one of the most of what the insteps we can take to bend the cost curve on health care spending. it fully assets this. it includes savings proposals including cost sharing, reforming payments to health- care providers, eliminating state gaming of the medicaid tax, and extending the rebate to dual eligible to in medicare. all the budget plan calls for the same social security reforms as the original fiscal commission plan, it does not include in its numbers the savings from those social security proposals.

that is because the congressional budget act of 1974 that established the budget process prohibits the inclusion of social security and the deficit totals of a budget resolution. social security reforms will have to be considered separately. the fiscal commission budget plan does include a policy statement that supports the original fiscal commission recommendations regarding social security. it calls for social security reform the reforms social security to make it solvent, not for deficit reduction. all the savings from social security go to extending the solvency of social security, none for deficit reduction. it restores the 75 years solvency and strengthens the safety net would enhance a minimum benefit for low wage workers.

a hardship exemption for those and able to work past 62. all of these were part of the original bowles-simpson proposal. i carry them through to this proposal. a gradually increases the maximum level of wages taxed for social security raises the entire engage. with respect to the enhancement but that provision, i received a commitment that it would be better targeted to affect low income of this series. this also includes the fundamental tax reform.

the state of our tax code is simply indefensible. it is hurting the competitive position of our country. expiring provisions create uncertainty, the tax code is hemorrhaging revenue. we also need to restore fairness to the tax code. the current system is contributing to the growing income inequality in the country. when a tax reform to help address the long-term fiscal and balance. revenue is part of the problem and must be part of the solution. adopting tax reform will spur growth and allow us to compete better in the global marketplace. his here is how our cbo

director the economic benefit of tax reform before this committee. of a " i think analysts would agree that reform of the tax code that broadened the base and brought down raised would be positive for economic development, economic growth in the short term and over the longer time." we have seen the gap grow in recent years. the real after-tax household income for the top ones firm has grown about 275%. the income for the middle has grown about 35%. our tax system is contributing to this income inequality.

that have been added over the years are disproportionately benefiting those who are at the very top. in comparison, the middle quintile received about $3,200. by scaling back some tax expenditures, and they are now more than all of the appropriated accounts, we can simplify the code to vastly improved economies and effectiveness and help restore fairness. here is how martin feldstein describes the benefit of reducing tax expenditures. "cutting tax expenditures is the

best way to reduce government spending." let me repeat. "cutting tax expenditures is the best way to reduce government spending." it does not increase marginal tax rates or reduce the reward for a savings and investment are risk-taking. it also removed incentives that distort private spending decisions. cutting tax expenditures is not at all like other ways of raising revenue. we also know we need more revenue. some have argued that revenue should not exceed 18% of gdp.

on the five occasions when the budget was in surplus, revenues have ranged between 19.5% a g.d.p. and 20.6%. we will likely need a somewhat higher revenue level in the future because the country faces an unprecedented demographic situation. this includes the tax reform i believe needs to be adopted. the lowest tax rates. it improves america's global competitiveness. in makes the tax bill more progressive. the report included an illustrative tax reform plan that demonstrates how scaling back tax expenditures can simplify the code while lowering rates. instead of six brackets, it includes just three.

it also be reduced, the corporate rate. capital gains and dividends would be taxed as ordinary income. that is part of the original bowls simpson -- bowles-simpson plan. it could be maintained if it were caught up with a higher top rate. the child tax credit would be preserved to help working families. the alternative minimum tax would be repealed. the fiscal commission budget plan would increase revenue to 20.5% of gdp by 2020 to. over the 10 years, i am almost done, i appreciate your patience. i know this is a link the presentation. there's a lot here.

over the 10 years, revenue would average 19.7%, roughly the same as the clinton administration when we experience of the longest time economic growth in the nation's history. 24 million jobs were created. compared to a current law base line it represents a $1.80 trillion tax cut. compared to current policy, it represents an increase revenue of $2.40 trillion. compared to current law, it represents a tax cut of $1.80 trillion. like the original fiscal proposal, it also includes a

number of process changes to improve budget disciplines. this includes discretionary spending caps been forced by sequester. firewalls third 2015. a separate cap for war funding. let me say with respect to a more rigorous procedure, senator po has done a good job of cutting down the emergency loophole. all of them were in bowles- simpson. it feels self to pressure congress to maintain a stable debt to gdp ratio in 2015.

more accurate inflation adjustment and a process to ensure more extended unemployment benefits. that is the plan. it is comprehensive. it is balance. it is fair. it represents the best blueprint we have from which to build a bipartisan agreement. i recognized it is not perfect. the recognize adjustments will have to be made before anything like this can hope to be adopted. these adjustments will have to be negotiated. these negotiations will take time. i intend to give members time to evaluate my chairman mark. then i hope to hear back from new on how you think we can best maximize the chance of actually getting the results. how we best maximize the chance

of actually getting a result of? we are facing a fiscal train wreck. the expiration of of the bush era tax cut, at the sequester, i do not think anybody thinks this will be a good place to go. it is time to move off our fixed positions. i recognize that is probably unlikely before an election. before the ended the year we will have to find a way to come together. this represents a blueprint to begin that conversation. i will now turn to senator sessions for the purpose of his making any statement he wishes to make. there will recognize other members of the committee as we do this in seniority order, alternating between the site to the extent is possible to do.

but there are member -- if there are more members on one side on the other, we will go down to everyone has a chance to speak. will not be considering movements during today's session. opening statements are in orders. thank you very much for your courtesies the route the hearing season. please proceed with your statement. greg thank you. it has been a pleasure to work with you brought these two years. i know that you understand the challenges facing this country. you have articulated them time and time again carry the problem as we -- time and time again. we have not done it.

they just joined the senate this year. they have fought to get on the committee. they lobbied and they wanted to be a part of the great debate about the future of america. the first year we had no budget in this committee. i appreciate your being pressured to buy this. i know you intended to have a marked this year. i know there were forces aligned against that. they just did not want to be confronted with challenges inherited in changing the course

of america. i do not think that is your belief. i think that is obvious there we are. they'll at should be able to get down to numbers. we have had secret discussions and outlines and frameworks. it is laid out in real numbers by congressman ryan. people look at this. i am disappointed that we're not being able to have the kind of market that ought to be basic to the statutory duty of this

committee to but fill its responsibility to produce a budget. -- to fulfil its responsibility to produce a budget. i just want to say this. i believe it is important. there's been a systematic plan for many years to avoid a vote on budgets, to avoid being accountable to holding this. there might have the democratic committee members stand up and pass a vote for or against his budget.

the plane you have offered i do not think is consistent totally simpson-bowles plan as i understood it to be. you have no additional cuts in the budget control act.

this is a tax budget. president obama stated that he thought that we should have $3 and spending cuts for every one increase. looking at the house version, they had $1 shy in less in tax increases. they did cut spending by about 600 million. that is their version of it. it went down a dramatically. we're ready to participate. we are disappointed the majority party has decided to go forward. i will not ease up any more of time. let me say how much i add

enjoyed working with the. laiddo know simpson-bowles tha out some valuable plants that should have been a part of any future budget plan for america. it designed to move after 2010. i have to think the president deserves an expression of great disappointment. he definitely decided that he will not lay out a realistic plan for the future and is actually committed to attacking those that have laid out one.

this is bringing to bear our own philosophies and approaching to .overnment appear >> i think the ranking member for his courtesy throughout this year. >> to get this country on track to a better place. their two separate issues being talked about. they're already being confused. the two issues are fiscal year it 2013 spending levels and the need for a long-term bipartisan deficit-reduction pareplan.

i think democrats and republicans came here to cut spending and put in place the process for additional deficit reduction. the purpose was to move toward serious deficit-reduction. americans would not have been directed. this set the spending that allows us to do our job and allocate our resources. this was the agreement we came to appeared speaker john gainers spoke on it.

senator harry reid signed on. i joined with many of my colleagues. president obama signed it into law. it became the law of the land. senate democrats fully intend to honor our word and stick to that bipartisan level for the next year. i am disappointed that in less than nine months the house republicans turned around and then said to break that. that is clearly not part of what we ship on. we cannot relive a bipartisan does every time somebody makes a noise. i am glad we had decided to focus this committee on

advancing a real long-term balanced reduction package. and is not going to be easy. we'll have to make some priorities are the long term ca. that is why i think he put the simpson-bowles in front of us and have the time to really serious look at and began to give this committees and put in began to build on it. i know no individual member

agrees with every single part of it. there is some i disagree with pretty strongly. it is a very productive and smart starting point for this committee. what we need to get to is a comprehensive deal. one of the most important things about you laying down this is that puts everything on the table. it is thought wall of some pieces are declare certain parts off limits. i think this is really the critical essential part of this. every bipartisan group that has ever successfully put together a plan has done so in a balanced way. make sure our entitlement programs defense on this and are

secured to the next generation. it put on the table what is in a form part of that. this is what they are paying today in relationship to fairness to many income families. i would say that at the end of the day we have to all remember that numbers on a page are not what a budget is about. it is about the real people that are being impacted. this is really about our future. work're serious about our here, we will take what you have laid down in front of us and look at it seriously and give us our input, recognizing the end of this year has some pretty big!. we have some tremendous work in front of us. senate ter sessions, i understand your frustration.

we can put down a partisan plan here and debate it in have partisan debates are we can do the work that senator conrad has always urged us to do, to sears a look at the future. this surely is a responsibility. >> thank you. >> thank you. thank you for calling a markup of the budget for fiscal year 2013. requires congress to adopt a budget by april 15.

during this time, more than $4 trillion have been added to the nation's desk. during this time come lead the democratic majority has failed to have a budget blueprint that a lay out their priorities for deficit reduction or a path to balance. they have set proposing a budget is "foolish. it is no wonder we're driving toward a fiscal cliff. there's no one in the leadership willing to take hold of the wheel. while i am glad we're meeting to consider a budget revolution -- resolution for forward, i am also puzzled. he has said that we already have a budget in place for this year and next.

why are we here? why do need to mark up the budget control act? the answer is clear. president obama clearly agreed when he proposed his budget house republicans agreed when they voted on seven resolutions. this stands alone in their belief that this was a budget resolution. is this because they have no idea on how to balance a budget? i do not know. i am also confounded by what i have read in the press that this markup will end today with no consideration of the amendments are out a boavote.

today is nothing more than speeches with a suggestion that maybe we will meet again sometimes near the end of the year to offer amendments and vote on the resolution. the chairman was "this is a wrong time to vote on the floor. i do not think we will be pre pared to vote by the end of the election." if now is not the time to eat the solutions and take action, when is that the american people will pay a heavy price for the inability of the senate democratic leadership to lead and offer solutions. i understand the predicament that our beloved chairman is in. i am sorry for the way that this

process is being treated and he is being treated by the leadership. he deserves better. he has been a leader in calling for fiscal control for a long time. despite what he knows should be done and want to do, his leadership does not seem to want him to do it. does not seem to want him to do it. once again, the senate democratic leadership and president obama plan on being absent from the discussion. there are no solutions, no leadership. there's only failure. we have a moral obligation to offer serious solutions for today and for future generations. this exercise would be humorous if the consequences of these and actions were not so serious. >> high appreciate your leadership in this committee

over many years and no one is more dedicated in getting this country on the right course. no one has spent more time in doing that. again, we're very grateful for your commitment. you have said the number of times and i think it is important to keep repeating that, last year, we passed a very tough budget law and it really has to pieces. it put in place 10 years of spending caps and forced a cutback in spending for two years. we are not the appropriators. we set the budget caps, the limits. and that was done. it was done in a way that was much tougher than usual. it had a greater force because it was actually signed by the president of united states. so i feel very confident in that. there was, of course, put in place a deficit-reduction process.

i appreciate the efforts in doing that. i do want to say that we took that very seriously as head of the agricultural committee. i reached out to the chairman in the house, chairman lucas, and my ranking member and the ranking member of the house and we really did put in a bipartisan plan. we really did come up with spending cuts that involve streamlining, consolidating, reforming programs, everything that the public is wanting to do. so one would can be done. we represent about 2% of federal outlays. we propose a deficit-reduction cut. $23 billion. i truly believe that, if we have the will, we can do it because we did it in agriculture. we are proceeding with that

deficit reduction. it is a matter of our ability to work together and make that commitment. that is why i know we can actually do this. i don't agree with everything in the simpson-bolles proposal. but it is a thoughtful place to start. it is clear we need to support job creation with real tax reform that simplifies the tax code, closes loopholes, and counsels year marks. i also -- and cancels your earmarks. i have been involved in that. however, i don't support the efforts that balance the budget on the backs of working families and seniors. frankly, those folks have had

enough. they have faced enough. they have sacrificed enough. and that leads me to the difference between the house and the senate. the house budget committee, which i believe proposed and the house passed a budget resolution that represents the absolutely wrong values. limiting medicare and costing over $6,000 more to the average senior, making huge cuts for low-income seniors, the score on nursing homes and medicaid, eliminating women's health care and maternity care -- that is absolutely the wrong approach. to mass seniors and middle-class families to pay more so that those of the top can get another tax break is the wrong values for our country. to continued government subsidies for some folks like oil companies were making record profits when we need to be focusing on new emerging technologies is the wrong approach. so as we look at the proposal

and how we thought would get to the end of a comprehensive tax reform and comprehensive deficit-reduction plan, we will focus on jobs and opportunities for families. i want to focus on those who have taken a bigger hit on the sea, and sacrifice more than anybody else in this economy. they are the ones that we should be focused on and listening to. finally, i would simply say that you're in a very unique position with your experience on these issues and your leadership to really help us come to the long term before the end of the year. we have budget caps in place this year. but we do not have a long-term plan for fiscal sustainability and stability. i look forward to working with you to get that done. >> thank you for those kind

remarks. >> when i hear comments about the house budget, i do get a little bit upset. they had the courage to put forward a budget appeared they had the courage to mark it up. they had the courage to vote on it. we have not done that on this side. >we keep saying that the budget control act is sufficient could if that is so, why did the president put forward a budget. why did he not have the gate -- abrogate his obligation very much in the way that we are abrogating our obligation? i am disappointed when the senate defeated the conrad-greg proposal for the deficit commission. i was pleased when the president went ahead and appointed one. i was again disappointed at his state of the union speech following that.

he did not paint the same bleak picture that they had painted. america does not realize the disaster that we are headed for. had he painted that picture and then said, but i will have a budget that will put that forward and put forward in the simpson-bolles budget for us to debate, i soon pass if we had that same bleak picture printed on the people's mind. but that did not happen. he came forward with another stimulus budget, just as he did this year. in 1997, when night came to washington, our deficit was -- that number will increase that is even more sustainable. we're spending more today than ever before and we're seeing trillion-dollar year increases in the debt with no end in sight. what will happen if we do not act and cut spending? we will not be able to for the military we need. people will let get their social

security checks. roads will not be fixed. all of our money will go to paying the interest on the debt. people should not doubt that this is real. there were riots in the streets increase and their debt was less than ours. i have news for you. our debt per person is more than greece's debt per person. hough time and again, the government spends more money than it takes in. for years, we have tried to hide it, disguises, ignore it appeared we have acted like it is ok to keep spending we don't have been the world today is different than the world in 1997. unfortunately, we appear to be hiding once again today rather than making a budget resolution that will be a conference with the majority.

while i strongly support the simpson-bolles plan, one of the key aspects was this bipartisan nature. i was not consulted about the plan we are discussing today. ranking member sessions was not consulted. this is not the way legislation is supposed to work. i realize we will be able to work on that even though we're past the deadlines. we are supposed to fine the areas where we can agree and push them forward. the simpsons-bolles plan is a good outline. we need to hammer out the details. i imagine some of those details cannot be done because they're not in the budget. the government put in slightly more than two and 3 cents trillion. that is an astonishing amount of

spending. we have the opportunity to change that trend. to do that, we have to stop digging. i republican colleagues have introduced cost-saving measures and i have introduced my own bill to balance the nation's budget. while we have done this, where is the present and the colleagues in the majority? last year, president obama's budget was such an impossible proposal that it failed. not a single member was willing to support the president's budget proposal. in this senate, we have not passed a budget and more than 1000 days. in the budget we're discussing today is not likely to come to the senate floor for debate until at least after the election.

the majority leader does not want his caucus to make politically tough votes. i've understand that. none of us like to make tough votes. but consider this. by avoiding votes, he has been avoiding solutions. problems are not getting salt and the service members more than making the tough votes. at a time when the national debt breaks down more than 49 for every person in wyoming and across the country, there is no justification for business as usual. we cannot wait to be politically expedient to do what needs to be done. we cannot keep talking about the problems, talking about solutions, and shying away from substantive votes. our inability to make any changes to the way government operates has left taxpayers with less and less confidence in congress possibility to manage their tax dollars and take responsible action. we cannot continue to punt the tough decisions.

right now, the decisions we make will be tough and they will cause some pain. if we continue to avoid making any significant headway in their in -- in addressing our debt and spending, the pain that will be felt in the future will be much greater. i have heard a lot of people in wyoming about the national debt and the lack of resolution. they have shared different ideas and opinions about what solutions we should focus on. but one message is universal -- do something and do it now. this message should resonate with all of us and galvanize us to come to the table and do what we were sent here to accomplish. instead, it looks like we will end today with more talk and no action. i repeat, the house republicans at least did a budget and voted on it. senator to me has a budget that balances in eight years that he is ready to vote on. yet here we are today without a viable plan from the senate democrats. if it is too bad.

unfortunately, it does not look like we have the opportunity to do that work today. i hope we do it in the near future. thank you, mr. chairman. >> senator crapo is recognized. >> i want to say at the outset that i appreciate your bringing forward a proposal, a comprehensive proposal and seeking to put into play a process that will help us to get where we need to get in this country. i have appreciated the hundreds and hundreds of hours that you and i and other members of the group the six, now 8, put in to trying to find that bipartisan path to move this country into a stable fiscal position. we face a crisis today that i think is the biggest crisis our nation has ever faced, with the possibility of the threat of some wars. as far as an internal crisis, think this is the greatest

crisis america has ever faced. and we've really must have bold and strong action to move forward appeared i have looked forward for a long time to this day, when the budget committee would have a comprehensive plan that we can discuss. i do have to say, as i have said to you privately, that i am discouraged at the same time. although the proposal is being put forward, we will not be able to seriously act on it in the committee. i am very discouraged about the fact that we will not move forward. and take the necessary steps that will help us to build that foundation for the ultimate resolution of this issue by congress. i understand that a comprehensive fiscal plan of the nature that we need to put into place is much bigger than actually a budget resolution can achieve and i understand that there are many pieces of this

that will need extensive negotiation to be put into place. the reason i am discouraged about the notion that we will not have regular order in this committee is that i believe there are parts of its that the budget resolution can achieve and the processes that the budget resolution can put into place. there are many key elements that need to be worked into it. for example, i think some things need to be taken out of the plan. some things need to be added into the plan. and i will give a couple of specifics about that in a minute. but the point is we could make significant progress if we could simply have the opportunity in this committee to get into regular order and let all of these ideas be hashed out and played out. when we talk about what is needed in terms of a comprehensive solution, you indicated that the proposal

you're putting down today is in excess of $5 trillion of posture reduction. we need at least that if not more. as i have looked at the bu olles-some some proposal, there is five other elements that need to be included. first, the discretionary spending controls. second is a major reform of our entitlement systems. third is reform and achieving the solvency of social security system. fourth is an enforcement mechanism, which you referenced earlier, that is strong enough to make sure that the budget control act or whatever budget this congress adopts are ultimately follow through on. i have served in congress for a number of years now and i cannot recall ever getting to the second year of any budget because we always get into the first year and, by the time we get around to the next year, we

passed a new budget or we never pass a budget at all. even in the first year, we wait significant parts of the budget that we have just adopted through the emergency designation procedure and other procedures. that is why it is so critical that the fourth element of this be a powerful enforcement mechanism, which we negotiated. and the fifth is the tax reform. as you said earlier, we have a tax reform -- a tax system right now that is unfair. it is expensive to comply with. it would be hard for us to design a tax system that is more unfair or more expensive to comply with, more complex, and frankly more competitive to u.s. interests than the one we have. those five elements are the ones that we need to achieve. the reason i go through that is because, if we have a chance to do a marked up, we would be to get into the details on some of

this parent we would not -- some of this. we would not be able to do all of it. but let me just give a couple of examples. the enforcement mechanism that i just talked about -- i would like to bring an amendment and i would like to see this committee adopt the enforcement mechanism that the gang of six negotiated could i think it works. i think that amendment would pass this committee if we could have the chance to do so. by doing that, we would be putting into place or at least be putting into play some of the key solutions for a broader package. another would be in the tax arena. as was told to us in both the fiscal commission and in the gang of six deliberations and others, one of the best things we could do for generating more revenue for our economies to get a tax system that is more competitive and that meets all of the tests that we both discussed here today. that would generate phenomenal economic growth and that is the

kind of thing that would generate additional tax revenues and help us meet the revenue targets in the proposal. i would like to bring an amendment to change your scoring mechanisms here in congress so that we recognize the dynamic impacts of tax policy and spending policy and utilize that in building the bipartisan agreement to solutions to move forward. i think we could have progress there. in the agricultural arena, they got the message. and they have looked at the targets, republicans and democrats, and they made great progress in coming together in agreement, bipartisan agreement, to meet those targets, even though we have not yet enforced them. there are numerous other examples. my point is this.

i am happy to see is now finally getting an opportunity in a structural way in congress to start deliberating about these issues while we will also need to continue the negotiations outside of the hearing room and outside of the committee room. but i am discouraged that that process will only last short time and that we will not be in here putting into effect regular order in such a way that we could actually construct and adopt and put into place and a lot of the pieces of what will ultimately be needed. i will conclude with this. you mentioned what will happen at the end of the year. as i look at it, we have the expiration of the 2001 and 2003 tax cuts. we have the sequestration coming into effect. we have the expression of the payroll tax holiday. we have the expiration of the employment tax extension -- unemployment support extension. we will reach the debt ceiling. many of the other, if we do not resolve them yet, many of the

other text extenders and other tax policies that we badly need in order to help make our current code more competitive will be expiring and in need to be handled. the list goes on. and the dock fix and many others will come into play. i am for getting some others. so my point is, if we can use regular order between now and hopefully the next couple of weeks to build some of the pieces and put them into play, that this committee can do, we will give ourselves a much better opportunity when the november-december timeframe arrives to be able to put together the kind of fiscal policy plan that our country needs. so i just ask you again, mr. chairman, to reconsider the notion that we will let go into regular order, get the budget considerations in front of us, find those parts that we have to delete in order to reduce parts of it can add to it thatse

will help build and put into place the pieces of the solution that can help us later in the year and adopt a budget. i implore you, mr. chairman, to consider letting this committee do that job. >> i think you for the extraordinary efforts, both as part of the simpson-bolles commission and as part of the group of six, now the group of eight. you literally have spent hundreds of hours in a very serious way. and i have enjoyed working with the senator. senator card and is recognized. >> let me respond very quickly to the senator crapo. as i and stand it, what i would consider to be the regular order, if we can have a budget resolution that allows our committees to function, we have

an agreement, such as the bolles-simpson agreement that all of you have worked on, that would be the most constructive way to get into the details of the jurisdictions will have to get into any way. and if you're giving adequate instruction, we can get to that point without the divisiveness usually budget marked up entails. i like to make a couple of comments if i might. our current deficit is not sustainable. we all understand that. we take a look at the amount of debt that we are accumulating and the percentage of our economy is not sustainable. we know we need to do something about it. it will lead to higher interest rates and it will be very damaging to our economy. we have the responsibility to

produce a credible bipartisan plan for long-term issues. i oppose many of the policies that led to these deficits. but i have a responsibility along with every member of the senate, to come up with a credible plan that will get us out of these deficits. short-term, as the chairman pointed out, we have the budget control act. it is stronger than a budget resolution in that it has an enforcement cap and has been signed by the president. but, if after 2013, we need more, we have the bolles-simpson model to move forward. you do not have to look at the democratic sources are the republican sources. it has been validated. it has been a credible bipartisan plan to move our country forward in a long term

responsible budget plan and is bipartisan. it protects our most of vulnerable citizens. i commend them for the protections for the most vulnerable. that is very well pointed out in the commission's recommendations bid it is balance between revenues and spending cuts. quite frankly, there are only two ways you can balance the budget. you bring in more revenue or you cut spending. and the bolles-simpson has a proper balance between additional revenues and reduced spending. i applaud their efforts on it. if you look at what this committee should be doing, which is giving the macro instructions to our committee, i would hope we would reach that consensus. when the bolles-since and recommendation came out, i took exception to some of the recommendations, as each one of us has been but that is the work

that will be done by the committees of jurisdiction that is not the work to be done by the budget committee. not disagree with some of the tax recommendations. i listened to senator crapo. he had a lot of really good ideas. but that would be a to the senate finance committee that we serve on to reconcile that with the dollar amount that we need to bring in good that is how it should work the chairman's mark up allows us to do that. i strongly disagree with specific recommendations as it relates to federal workers. i felt the way that they handle federal compensation and workforce numbers would do a disservice. and to come in with the numbers without the punitive action divisive to our federal work force. i believe the chairman's mark allows us to do that.

it is our responsibility to act. i hope that we will act this year. it will only happen if we have a bipartisan agreement to enact. we have to listen to each other. if we can do that, we can avoid sequestration. we can remove the uncertainty that is currently in our economy, which is a drag on our economic recovery. it could help our economic recovery. a partisan budget, either presented by the democrats are the republicans, will not begin this process. if we were to have our democratic budget against a republican budget, it will not work. you saw what happened in the house of representatives. it will not pass the senate and it is not advancing the process of moving forward with a game plan for fiscal year 2014 and beyond. so i really wanted to applaud the chairman for his actions. it is the right way we need to move forward.

i will be the first to acknowledge that it is a long shot that we can get this done before the elections. theif we don't move in chairman's direction, we have no shot. this least gives us a chance that most people think we cannot get done. and i think the chairman has given us the best possible ability to accomplish those results and i applaud him for his work. >> i think the senator. i would now recognize senator corpsman for his comments. >> thank you, mr. chairman. we will miss your charts when you are no longer chairman of the committee. we will not miss the bad jokes. [laughter] and the friendly banter. but i would say how much i appreciate your efforts to bring a budget to the senate floor and how much i sympathize with your dilemma. even though, as one of the

acknowledged budget experts on capitol hill, there are not many of them, i am talking about you, not me -- you understand our country faces a looming fiscal crisis. yet majority leader reid, who determines what measures will or will not be brought to the floor of the senate, has shown no interest in having the senate complete one of its most fundamental duties. which puts you, as chairman of the budget committee, and in an awkward position. that is both unfortunatel and unfair. at the end of a long and distinguished career, you deserve much better and so do the american people. as members of the committee know, it has been more than 1000 days since the senate passed a budget plan. and if you don't -- if you cannot pass a budget, if you do not vote, as far as i can see, there are no plans forced to

vote on a budget this year, either here on the committee or on the senate floor. and many working families small business owner can tell you that, without a budget, it is much harder to address current or future financial problems. the situation in congress, as we see it, as i have tried to describe it, leaves my constituents scratching their heads with amazement. that usually morphs into outrage when they got their television sets when they cannot see why congress cannot get their act together and perform one of its most basic responsibilities. washington will not get its fiscal house in order without a budget plan could this has led to a trillion dollar deficits, runaway deficits now larger than our economy and with the united states government losing its aaa credit rating. for this reason, i am disappointed that this committee will not proceed with the market process that will allow members to offer amendments.

as a member of the senate arms services committee, the finance committee and judiciary to marry -- judiciary committee, i understand it is necessary to have those amendments. again, you cannot get a budget you don't vote. it appears that everyone accept the present and the majority leader think it is a worthwhile process to put forward a realistic budget. the house of representatives has had seven votes on different budget proposals. both senator toomey and senator paul have introduced their own budget proposals. we also have a president who follow the law and submitted a budget. but i would note that it did not receive a single vote in the senate last year nor did the president's budget receive a single vote from a democrat or republican in the house of

representatives this year. i think we have an idea when a member of the house supported the president's office. it increases spending every year in the budget window. we know the president's budget would add $10 trillion to the debt. this further weaken their fiscal house and now, of course, every man, woman and child owes $50,000 in national debt. we also know that the president wants to raise taxes on the american people. of course, his budget includes two dollars trillion in higher taxes. finally, we know the president's budget does not make a serious attempt to strengthen programs like medicare and social security, which we all know are unsustainable. in other words, the president proposes a big tax increase before dealing with the spiraling costs of entitlement

programs chased with higher taxes. this is not a prescription that will either put americans back to work or get our fiscal house in order. i sincerely hope that the majority leader will decide to shelf the political theater that will do nothing to create jobs or lower prices at the pump or solve america's debt crisis. we need leadership. we don't need any more gimmicks. and delays. the american people have waited long enough. otherwise, i am afraid that the public cynicism that is now generated about a 10% approval rating for congress will only continue to grow in the days and months ahead. this will not bode well for anyone, democrats, republicans, or independents. i know we can deal responsibly with the great challenges that face our country on a bipartisan basis. but it will take leadership.

i appreciate the leadership you have shown, mr. chairman, in raising these issues. but i am disappointed that we will not be able to actually vote on a budget and that this is more of an educational process than it is actually meeting our statutory duties to take up and consider a budget. but i realize that your restricted by the majority leader's refusal to bring the budget to the floor. he is the traffic cop. he decides what will go and what will not be considered. he has made it clear that he will not allow a budget resolution to come to the floor of the senate because of the imminent elections in november 2012. not wanting to put any of its members to making tough votes. but that is what we're here for, to make tough decisions on serious problems and offer serious solutions. i hope we will do that. >> thank you. >> i want to begin by

commending you on your extraordinary leadership of this committee during my service on it. i have continuously been impressed by your patience and by your expertise. it has been a privilege to serve with you, sir, on the budget committee. saddened that this will be your final one. the budget control act included a budget deeming resolution so that the budget committee can go forward with its annual spending bills. even though we already have a budget as a matter of law for next year, i agree with our chairman that this committee can be helpful in focusing attention on a longer-term, comprehensive deficit-reduction plan karen the budget control act cut nearly $1 trillion.

but much more needs to be done. i commend the chairman on a much longer-term budget proposal. by the end of the year, these decisions will be forced upon us. if we begin meaningful bipartisan conversations now, we have the chance in this committee to play a significant role in those discussions. before considering any deficit- reduction plan, i want to remember that when president clinton left office in 2001, he left a balanced budget and a country poised to pay down by 2009 our entire national debt held by the public. those surpluses were squandered, largely through deficits funding tax cuts to the highest earning americans. any serious deficit reduction plan must include new revenue and i am pleased to see that the

chairman's proposal, based on the president's bipartisan fiscal commission, would raise $2.40 trillion over four years through tax reform. the great majority of the american people and a majority of our colleagues here in the senate support a tax system that ensures that those at the very top of the income ladder pay at least the tax rate that middle- income families pay. no matter how elegant the reform we come up with, we ought to include this safeguard against future congresses inserting loopholes that benefit primarily well-connected high- income earners. while the chairman's version of the fiscal commission plan represents a fine starting point, i have deep concerns about the plan's cuts to medicare and medicaid. as members of this committee have heard me say repeatedly, we can substantially lower our health care spending and quality by improving the way in which we deliver health care. potential system-wide savings estimates have ranged from the

$700 billion per year estimate of the president's council of economic advisers to the $1 trillion per year estimate of the former bush treasury secretary paul o'neill. the office of the fiscal commission plan testified before this committee last year and agreed with me on the potential for consistent reform. mr. bolles said that what you're saying is exactly right. but it is not this horrible -- but it is not exxonmobil -- it is not exhorable. if we are smart about this problem, we can avoid the tax and benefit cuts included in the plan before us today. this need not be a partisan issue. senator apartment has spoken to it with knowledge and conviction and i look forward to working

with all my colleagues on both sides of the table to advance the substantial deficit reduction promised by wise health care system reform. i do reject the fiscal commission's social security recommendations. while other parts of the recommendations are more balanced, the social security proposal would restore long-term solvency 20%-20% combination of benefit cuts. as we know, the act prohibits -- this budget resolution does not do that. but since the mark follows the recommendations of the fiscal commission, i make this point, particularly with the change cpi. the current cpi failed to produce living adjustments in 2010 and 2011 could and i -- 2011. and i have heard from seniors out difficult it has become. the chain cpi makes it worse, not better. social security is fully solvent

through 2036. we can prolong its solvency for the next 75 years by applying the payroll tax to income above two hundred $50,000. i supported bill that does this and i hope to include it in any deficit-reduction plan. mr. chairman, i think you once again for your dedication to this committee, for your integrity, and for your hard work on this budget proposal. i look forward to working with you to improve it and to passing a much-needed deficit- reduction plan. we could go through the regular routine of deficit neutral reserve funds vote back and forth and a climactic votorama on the senate floor. the alternative is that this committee could become the fulcrum of decision for the important choice sincs our couny faces. it may be holding out to much

hope for this committee to take on that role. but you have placed your bets on that. and if you are right, it will be an historic decision. >> i think the senator. senator gramm is recognized for a statement. if you hold it down, it works better. maybe we just have a bad one. >> there we go. thank you. bipartisanship is breaking out already. first of all, we recognize that the chairman is not the problem. the chairman has tried to be the solution in different venues -- the gang of six, several members on the committee here, who tried to sit down in a bipartisan fashion to find a comprehensive solution on the revenues spending side. so clearly, your heart is in the

right place. i am sure that was a tough political exercise. but institutionally, we are broken. that is how you get at 10%. i don't expect 100 senators to agree on a budget to get the nation out of debt. i expect about 65 of us to do that. the only way we will ever do that is to have a compromise. not only a compromise, but a base document to start working on. we have a statutory obligation so i reject the notion that this new process meets our statutory obligation. we are supposed to produce a budget. and people know what that means. i would really argue to the committee as a whole that the -- that, if the debt ceiling legislation is going to be seen as the budget, then why do we exist? it was done by a handful of people. i do not even know what they talked about. it would destroy this committee by the idea that that is an

acceptable budget institutionalized in the senate. as republicans and democrats, we need to reject that notion, that what we did to raise the debt ceiling is an adequate substitute for what this committee is chartered to do under lock beard and i think it would destroy the value -- under law. and i think it would destroy the value of this committee to accept that. the 2010 election, it was about anything, it was about saving america from walking off a cliff that would down the nation, a democrat, republican, independent as a whole. most of the people in this committee the command of the 2010 election cycle felt like they had a mandate to do something different. that is why they wanted to be on this committee. the chairman has had that feeling for a very long time. we need to get ahead of this problem. i think this is a serious political miscalculation by our

democratic leadership. you will not lose your job because you are trying to solve america's problems. you will lose your job if you just do the same old thing. i will vote for the ryan budget, even though i would like to change parts of it spent i honestly believe, mr. chairman, that the public in 2010 was trying to tell us you have gone too far. you let it get too out of control. and we are demanding something new. so here is what is so disappointing for me. this great election we just had, the voice of the people did not resonate very well up here. so we will have the new election. in 2012, here's what every republican on this committee will say, i hope. if you give us control of the senate, we will produce a budget statutory under the requirements of law. we will put our vision of how to balance the budget deal with revenue on the table. but we will produce a document

because you have to do that at home. very few businesses are able to survive very long if they do not have a budget or a division for their business. no family can do what we're doing appear. i think we're missing a great opportunity. i think we're letting people down. and to my new colleagues to come on this committee, i know you will be very disappointed. thank you, mr. chairman. b -- nator big ditc >> here we are in the process of talking about a budget while appropriators are down the hall actually appropriating the money

for the budget. they are already doing the work. for us to believe that, if we sit here for the next several weeks or months and debate a budget and then assume that the appropriators will then change all the actions they're doing, i think it is misleading. the second part is that the budget, which process is so unusual -- as a former mayor, the mirror proposes a budget and they have to -- the mayor has to propose a budget and they have to vote on it. to assume that we do all this work for a budget and the president signs it is mistaken. it is the appropriations that he agrees to. i know people have different views. we have heard it here about the budget control act. it is in place. and we had a chance to comment

on it. we had a chance to debate it. and all of the senate members, we did that. some voted for it give some voted against it. the fact is that it passed. the president signed it. set some targets but the appropriators are now working through. that is where we are at. we can rehash all that. we can debate all that. i am not as new as the 10 folks, but i am the eighth person. i came here with a big group of people who wanted to see something done differently. so let's talk about what the long-term future is. that is what we can actually impact with the time that we have and the opportunity that we have in this process. when you look at this bipartisan agreement, which has been the does the commission plan, we can see peace as we like and pieces we don't like. but it is really a long-term blueprint.

it will not be fun. we have to make some tough decisions, make some tough calls on what we will do. but if we are to be frank, if we're just to debate what we should be doing in the sense of a process, people are sick and tired of debating process. but they want to know is what we are going to do. i am interested in figuring out a long-term budget plan. that is what we have a chance to do. i can argue for should have a budget debate. the chairman knows my views. i'm not afraid of any amendment. bring it on. i have been through the votorama. it is a joke. it is a waste of time. at the end of the day, we looked at each other and pat ourselves on the back and said we did a great job and we walked out. the president did not have to hear that budget. that makes no sense.

all of us who set the budget, we don't have that process. so why not have a process with a long-term plan. it is important to remember that we have already reduced the deficit through budget cuts over the last few years, significant progress, almost $2 trillion. 100% of deficit reduction and we have done some spending cuts. if you look at the economy, where we have been, i know some people think we can do a lot better. but we have come a long way in three years. we started to reduce its long- term problem. we have done some reduction. we have a stronger economy. as i mentioned, as a former mayor, you cannot solve this problem by just cutting your way out of it. there is no way. i don't care what commercials people will run in the future against me on this or what brochures people will write up

or what one-liners will people say. this is a combination of things. by a cut-only approach, you will have an impact on local and state governments. that is law enforcement, teachers, people taking care of kids through daycare assistance, the juvenile justice system, our court systems, everything you can imagine. so i commend the chairman for taking a balanced approach, a non-partisan approach. i remember when the bolles- since then came out. we now have it in front of us. we do not need a super committee. this is the budget committee. this is what the budget committee does. so we have a chance to do this long term. before, when i came to the senate three years ago, i said that the strong health of this

economy has three pieces to that. yes, have done that. as mayor, suffered multiple solutions -- i offered multiple solutions. we had a lot of good discussion, but we can do these things. it also means that we need to have certain components. you need to have revenue and smart investments for the long term, for this country and for our budget. the fiscal commission plan is very difficult in this direction. it carries a lot of credibility with me. you're looking at the architect of a plan that is very balanced. i respect the plan because it is broadbased. it includes defense and mandatory spending and health care. i share the chairman's view that view is the way we

will get our fiscal house in order. the plan reduces overall spending by $3 trillion over 10 years. it also includes $1.40 trillion on discretionary cuts and $840 billion in mandatory savings. over 10 years, we will average 8.8% of gdp, below during the reagan era appeared on the revenue side, i wholeheartedly support measured tax reform on this plan. i would say that it is a plan that is bipartisan on the table. comprehensive tax reform is the best way to reduce our deficit, lowering rates, broadening the base, and cutting tax expenditures. over 10 years, revenues will average 19.7% of gdp, which is the same under president clinton. on tax reform worked in 1986, it creates jobs.

you cannot associate the total 1986 tax reform with the millions of jobs that came after it, but it sure did help. we need to untangle this truly complicated tax code, especially with our extra two days we got for filling out our taxes. i got plenty of calls from people who were frustrated in the last minutes as they figured at the last number that they had to pay they thought they were getting a refund and did not get. this will push economic growth. it will create a simpler tax code and increases revenue while lowering rates. it will lower corporate tax rates to make american businesses more competitive which intern will help business create good jobs. increased -- i want to make it clear this plan is not perfect. there are provisions that a staunchly support and others that i simply am not on board with. i'm very concerned about the government-wide chain cpi which

reduces benefits for current social security retirees. it cuts -- the cuts accumulate over time. that means that grandmas and grandpas have a future that will be hit the hardest. this is not the right way to cut the costs because social security does not contribute to the deficit. under the current, everyone receives the same subsistence level benefit unrelated to wages. this proposal, among other things, raises retirement ages and cuts living rights. most troubling, this budget proposal endorses these changes despite the fact it is technologist's social security cannot run on a deficit and is not -- it acknowledges social

security cannot run on the deficit and is not contributing to the deficit. another problem i have with this plan is that it increases gas taxes by 15 cents. >> senator, may i just say that we have gone over time. >> i will submit this. >> that would be good. >> you are right on the nose here. let me just say that i think there are some good things and some bad things in the proposal. and i am looking forward to debate. i hope we don't just keep hammering over what we should and what we could, but what we will do. and i think this proposal lays out a broad based bipartisan support and i look forward to the great debates we will have here. thank you, mr. chairman. >> thank you. hune.or tun >> if this is a good starting

point, there has to be a good endpoint somewhere. we actually have to have votes and an opportunity to amend it and do what we would do if we were action marking up a budget. i would say that we are, on the side, sympathetic to you. we feel your pain. we liked it better when you're and talking about doing a real mark up. is what you end up with when you don't have a budget. last year, when we did not write a budget, we rushed to cobble something together to meet a debt limit and we did not address the important issues of the entitlement reform, tax reform, which the super committee was supposed to address. there again, that is something that should have been our responsibility through this process. let me just say, too, that i

think that the suggestion that this be a starting point is all fine and good. we have had votes now on the president's budget here last year, the house voted on the president's budget this year. the house voted on some version of the bolles-system plan. it only got 38 votes over there. received 38 votes in the house. i would argue that we can do big things around here. we need to do big things around here. if you look throughout history, when faced with a crisis, this institution has demonstrated the capacity to work with the white house to accomplish some pretty big things. in 1983, social security, 1996, welfare reform -- there is a

history and precedent when necessary for us to do some big and bold things. so it is really unfortunate that what we're left with right now is not doing our job. again, i don't think that anyone of us here is suggesting that you don't approach this with out the best of intentions and want to get a budget. but we understand, too, that the statements that have been made by the members of your leadership will make it very difficult for that to happen, even if we were to produce a budget to action get a vote on the floor. many of us on the side are disappointed. i think there is an expectation by the american people who have to live within budgets that the congress ought to do its job. when you're talking about massive amounts of debt and massive deficits and a tremendous need for genuine and serious reform, it can happen. it does take leadership, not

only here, but from the white house. in my view, we have not had a president who is leaning into the big challenges that we face. as evidenced by his budget, which i said got zero votes in the house of representatives. i think it is unfortunate that we are where we are. my hope would be that, at some point, we could come forward and actually produce a budget and have a debate where we have the votes and have an opportunity to talk about what i think the big issues facing this country and the crisis that is ahead of us if we do not act and act soon. so i would simply say that, i think most of us on this side are ready to go to work and ready to have a real process whereby we actually vote on amendments and try to get to a place where we can get something to the floor of the united states senate where all members have an opportunity to try and improve and strengthen and move us in a direction that will put

our country on a more sustainable fiscal track. >> senator warner is recognized for a statement. >> thank you, mr. chairman. i apologize for having to step up for a little while. thank you for breaking the glass. this is not the traditional approach and lots of probably ideas about how this came about or why it came about. but the guy has only been here threethe process here is arounde document that seems to be more about got you for future electorial campaigning process. then have you actually tried to reach a common ground on a plan

that 70's arm of us could actually agree upon that was solve the problem. i think it is a much better approach. bowles of the some symbols plas- plan will make some people very upset. i think that is great. it means that there may action be a chance for those of us a think there are 70 of us that could find common ground, and might give them a chance to go to bat. clearly for all of the merits that the rise in budget has coming out of the house, -- ryan budget has coming out of the

house, it comes out as a partisan vehicle. if you are to put a democratic proposal, the get 52 votes at the end of the year. it will not become law. our colleagues on the other side are not going to feel like they have some ownership. there have now been super committees, a gain of six. they have come up with a plan that has a mix of tax reform, entitlement reform, some additional cutbacks and discretionary. i think this is a good idea as a starting point on where we go. abel make a couple of other

comments m-- i will make a couple of comments. these are some of the creeks that we did not fully finish. these not happen overnight. that took enormous weeks and weeks and months of back and forth of negotiating in trying to understand each others' perspectives in ways that i think are valuable. the abbasid of that -- opposite of that was the budget control act. it was thrown together in a moment of crisis and was kind of my its single moment of being a united states senator. we did an enormous disservice to this country or any creepy economic activity.

earlier.up to something did did you read the bill? we have no choices. there had been preliminary work. we set of downstream and thence that were living -- events that were living to rue because you're trying to get it right. this committee could action come up with a project that could serve as a template for our colleagues in both the house and the senate. i echo some of the comments my colleagues have made. three or four last points. i know we want to speak. i think it is important to remember as we have had this debate, we still are in this time of extraordinary time.

every 100 basis points increase at $1.30 trillion to the debt. if we end up running against the time frame with the bond market no longer think we are the least ugly girl -- how do i rephrase that? the cleanest dirty shirt. much better way to rephrase that. we could be in a heap of trouble. if there was one thing i keep drilling down on, it is federal spending on our g.d.p.. revenues 50's term. it seems to me that the only

time the budget balance in the last 70 years maybe when revenue and spending have been between 19 and 21%. you have to cut spending in generate additional revenues. i hope as we go forward on this discussion the three things i would hope that we would work gone beyond moving of this frame and updating it, one would be and i give enormous credit to senator crepo on this is that if we were able to put together a long-term plan, you have to have a real enforcement mechanism. as the economy recovers, there is no way to waive those budget point of order. i would offer the very good work that we put in on about as tight

a straitjacket as you can imagine. and not even sure lindsey gramm to get 67 votes on those items. i disagree with the president on the idea that we are going to deal on the revenue side that we can solve this problem with only getting more revenues from the very top. i need to step up in a more responsible way. i think there is something wrong with 47% of americans did not pay any federal income taxes.

there needs to be an amount of folks beyond some level of poverty to be paying in so that we all have skin in the game. in terms of supporting our national defense in this crisis, we have got to have a tax reform system that will have more americans have this again in the game. i know this is an area we have spent a lot of time on. i think simpson-bowles did some great work. there's more to be done. we have to be a little more open to ideas that are a bit more controversial. the one thing that simpson- bowles had been none of the subsequent other plans include it, i guess because it was too radioactive. i am still all in.

it would include a fix on social security as well. there is no blame here other than blaming the doctors that we are living too long. a lot of this is just about math. i commend the chairman and the ranking member. i hope they will leave this in a way that to become a productive discussion. one of the great of this budget committee rolled up its sleeve and we did not have to be called a gang and we might have a framework of how we get this potential national tragedy off our backs? >> thank you. let me start by saying i respect the work that you and senator

crepo and senator warren did. you have done so with some political risk. yet you are not the budget committee. you cannot have the ability to do that. earlier.2 ou it is a new majority. we expedite it. this comes out of the committee. this is what we ought to be doing. i think senator baggage made the case as well as anybody i have heard about why it is important

to have a budget. he is not here to defend himself. i think he is saying that they provide some of the the budget discipline that is necessary on discretionary spending. he also talked about the need for a long-term blueprint for the future. over 60% of the budget this year is mandatory spending and interest on the debt. it is hard to say that it is a plan that gets at our problem. it has to be the fastest part of the mandatory side.

everything i've heard today, and i heard everyone argued. i urge the chairman to move this. i like your comprehensive presentation this afternoon. i think he laid out the problem well. i think senator sessions did the same thing. i think you agreed with the problem. we should have this debate. we should have the amendment process here and take it to the floor. i like the tax reform proposals.

it is a step in the right direction. the say this is about $2.40 trillion. like simpson-bowles, a think it does not get to the new costs that have incurred because of our health care legislation that will cost trillions more over the next 10 years. we see higher numbers of seems like every other week. senator white house talked about that. his concern that we're not really getting at the core issue. i think we ought to use this as a starting five for the committee in godhead and market

up. all we needed was 12 votes. people talked about how this could be political. it is always political. ultimately, we would have to vote. some thousand of us americans are retiring a day now and moving into social security and medicare, systems heading toward it bankruptcy if we do not make these reforms. it is time to act. we have this confluence of sequestration. there is this debt limit again.

the secretary of defense has called this catastrophic. the budget committee is providing some fiscal direction here. this is such a critical time. the house did do its job. there has been talk about that. some criticized the house budget. this is their right to do. they should acknowledge that they actually an voted on it. they had several budget proposals. the cover the political spectrum. if we would do the same, we would have the blueprint. we missed the deadline on april 1. for our committee, april 15 for the full house.

that does mean that we have already missed our statutory deadlines. that is ok. we can still move forward. it is time for us to do it. we need to be sure there's room to do this. we thing about the impact on the economy. some folks have made the point that we cannot cut much not because if we do it will slow the economic recovery. it is a weak recovery. i would argue the opposite. it is all the more reason to do it to add certainty and unpredictability. this is one of the few ways economists agree with a summit economic growth.

there are things that i wish we can and should do on things that did not have to do is spending caps. this is primarily on the entitlement reform. winning the fiscal blueprint. i think the budget could be a first step. let us have the debate here. let's see if we can find 12 votes and challenge the senate to stop abdicating its responsibility. >> thank you. i felt badly about coming so late. we just had a hearing on global trade opportunities. this is why i have been late coming. with respect to my sense of where we are, and it is pretty clear to me that what we have to find our big solutions for a big

economic challenges. the history of all of those kinds of approaches, a big solutions for big challenges means you have to come up with a bipartisan approach. when we achieve meaningful pro- growth tax reform, you had a republican president fighting for it, werworking with colleagues. only a talking about preserving the social safety net, president johnson championed it and pushed it through with a huge bipartisan majority in 1965. we have to concrete examples of major solutions for the ages that were achieved in a bipartisan fashion.

it is a huge opportunity consummated by president johnson in 1965. but have a pretty clear bipartisan approach. there is a reason why this is the way to go. they are tackling this in a strictly partisan way. the managed to drive it through the congress and get it signed into law. there is the senses that can ensure you can keep it. this is dry on a particular partisan achievements. my sense is that we have some very big opportunities. i want to outline a couple of them briefly. i am pleased that the senator talked about it.

we have talked about this. we have an understanding of what needs to be down. you have to go in there and close out a huge array of the special interest loopholes and use the same the polls to hold everything down. when we did this in 1986, we created 6.3 million new jobs within two years. i am not going to say that every one of these jobs came about through tax reform. it certainly did not hurt in terms of setting the climate for growth. since 1986, we have had a host of commissions that said the same thing. the commission was put together by george w. bush essentially proposed an updated version of what we have done in 1986. the volcker commission proposed

this. bowles-simpson, we sat in this room. we looked at all we have been talking about. we muster the political will to do its. we have a president where we have actually done at that helped create 6.3 million new jobs within two years. the attractive way to proceed. with respect to medicare, the challenge is to protect the medicare guaranteed. this is what it is all about. i've always seen this program as sacred ground.

we're not going to have the funds to ensure that this medicare guarantee is protected. i think we have an opportunity to come together. i am attracted to the preen support. it is something that has not been rejected. medicare vouchers are rejected because they're like coupons. this is clearly not acceptable. premium support which originated with democrats and now has been picked up by both democrats and repel bookends -- and republicans is something different. it is a way to ensure it choice. i might vouchers that do not keep up with medical costs, a senior specific contribution under medicare is geared to the

actual health costs they incur. this is not a coupon. it is buried in relation to the actual cost that a senior highs in a given area. if we do it that way, i think we have a chance to ensure for all tyne the vitality of traditional medicare predict all-time the vitality of traditional medicare. -- if we do it that way, i think we have a chance to insure for all time the vitality of traditional medicare. you will have a choice much as seniors have today in communities like my own were more than 50% are already tousing these various kinds of

alternatives. that is a little bit of what is in front of us. it is clear this is all about seizing the moment. maybe we're not going to get it all done tomorrow or the next

toomey. >> i'm disappointed with where we are and what i'm hearing. i correctly observe that we need a long-term budget plan. i for many people we keep that. republicans have offered this plan. with the exception of the chairman, that democrats are unwilling to go ouvote. there is no avoiding it.

the house passed a plan. you can argue all you like and disagree and that is all fine and fair. they laid out a vision. it is a plan that would put this on a sustainable fiscal path. from my point a year, an elected member of congress is not have much credibility they're not willing to offer an alternative. it is unacceptable. for either party to simply say will we are opposed that bill we will not suggest anything in the alternative. that is why give you a lot of credit for laying out a plan. i cannot believe that we are in an environment and a situation where our democratic colleagues are simply afraid to cast a vote. they are afraid to tell us whether the even support this plan. i do not think that is the case on our side. several of us have drafted our

on plants. i put an enormous amount of energy and work in producing a comprehensive budget resolution. this reflects the thinking of many of my republican colleagues and many democratic ideas. and sure it has a lot of flaws. it is a vision that it does to a balanced budget. i think we ought to be debating it, amending it. we've voted last year. almost all my republican colleagues voted for it. i understand the opposition. where was the alternative. i cannot believe that someone would suggest to the american people that they ought to not feel an obligation to lay out a plan that solves the biggest plan.

we are illustrating just how frustrating this is not to have a counter pots that should be in negotiating counterpart but is one that is able to take a stand. for instance, one of the things i think it iis important is thae can reach a balance. it is not easy to the that. we could have a reasonable argument of of water that is necessary. some people do not think that is necessary. i happen to think it is a worthwhile goal. we ought to do that.

we will never know if we do not have people willing to say here is a different idea. and the other side. >> on tax reform, i think there is a lot of common ground at least on principle. i think there is with the chairman. i have a pretty detailed parameter that my budget will lay out for the jurisdiction that would call the pro-growth reform that has been called for by a bipartisan conditions. we could have a very robust discussion for exactly how we should do that and whether that is the right thing to do. on medicare, my budget calls for the implementation after 10 years of the bipartisan plan

that senator widen just discussed. i think it is a very constructive idea that puts us on a long-term solution for medicare. not the only one. it is this solution. it works. i suggested in the budget that folks, or on medicare now and his income is less than $85,000 would have no change whatsoever. if your income is over $85,000, i suggest we implement president obama's suggestion for those affluent seniors to pay more in terms of their contribution to their medicare benefits, and if your income is above $150,000 as a retiree, you're pretty wealthy. for those votes, i suggest they contribute even more than the president has contributed. i do not know if there is an agreement on the other side and i never will of people are not willing to take a stand.

that is what is so frustrating. we have been willing to offer ideas and proposals. it is very hard, i hear people say i hope you'll come together and reach an agreement and do this bipartisan agreement. but once i will not tell us what they are for, it is hard to find out where the common ground is. i just want to say i am extremely disappointed. i think we're here today witnessing a profound opportunity. we will work out the common ground so we can have a long- term solution that we all know we need. i am very disappointed. >> senate term berkeley -- senator merkely is recognized.

>> thank you very much. this is a statement of values that lays out a guide were we as a country are going over the years to come. we need to think long and hard and things that will determine our path. will we spend money building nation abroad or home? will we be investing in education and ever structure here in america? will we be giving bonus benefits to billionaires or will we be caring for our veterans? will we be investing in the clean energy research that will help us and our addiction on foreign oil. will we invest in stem technology? will be funded agencies that

crackdown on or a speculation? will refund the agencies that keep our air and water clean or not? will refund the agencies that enforce our trade laws are not? we have to be responsible for the answers we get. it is very important to understand how we came into the current sea of red ink, wars and iraq and afghanistan share our tax cuts. there unpaid for. on top of that, financial sectors. the result is predatory loans served. a multi trillion dollar insurance industry going by the fancy name of swaps and derivatives. it sprang up from nothing.

it did so without the oversights. all these things traded the biggest meltdown since the great depression. based on decisions that were made here. members around this table participated. how do we read bill? that is the question of a budget. do we do so on the backs of working people? the very same folks who are oppressed by the predatory loans? who are oppressed by the collapse of the home prices? who are oppressed by the loss of jobs and by the destruction of their retirement account? are these the folks that deregulated the home mortgage? are these the folks who failed

to pay attention to the unregulated swaps and derivatives. are these the folks who are involved in the securities industry? i do not think so. here are some better ideas. how about the end the war in afghanistan and split the proceeds $120 billion a year. a third to investing in education. how about we and some huge special interest programs in the tax code that waste taxpayer dollars? a have run on the senate a few weeks ago. the cost billions of dollars a year. their powerful big oil companies. i was very fascinated by those the said we cannot close a one

tax loophole unless the close them all. folks realize that they were not at all prepared to take on the tass of closing those tax loopholes. how about we eliminate the $175 billion in defense that robert gates cannot contribute one bit? at the end our addiction to foreign oil ducts have always been those increase wealth and jobs in america? how about we recognize that we are systematically undermining the security on the failure to invest in and for structure and

education? europe is 75% of the gdp. we're spending too% and having a -- 2% and having a debate on the house plan that cuts 35% on the upper structure spending. -- on the infrastructure spending. this will not take this forward to a strong economy in the future. this is 5 million jobs the ordinary families and i have. often jobs with benefits. how about we rebuild the manufacturing economy so there will be a middle class in america? if we do not make things here we will not have a middle-class.

these are the types of issues that are embedded in the decisions that we make around a budget. that is a task before this committee. i thank you for calling us to this table to deliberate these incredibly important issues for the future of our nation. thank you. >> senator johnson is recognized. >> thank you. it is always fun going toward the end. you have to remain somewhat flexible. i will try to not repeat what some of my colleagues have said. i am sympathetic with your predicament. i know you do understand the problem. i know you have worked hard. i appreciate it and number of the hearings that have been educational. this is a political process here. it is our obligation to perform, persuade, and when the argument. the american people deserve a choice. they cannot make that choice of

one side refuses to put it on the table, if one side refuses to vote on what they are for. there are a number of words. this is their responsibility i take seriously. it is a responsibility of this committee to pass a budget resolution by april 1. the united states senate can pass on by april 15. did i say august 1 that i meant april 1. that is their responsibility. we should take it seriously. i should have been voting and back in march. this is what the house did.

they subject themselves to be accountable to the american people. we refuse to do this in the senate. we should be embarrassed. the american people deserve far better. we need to provide some leadership in this country. americans hunger for leadership. it is getting done. they have yet propose anything to save social security, by the year 200035 will have a deficit of six trillion dollars. we have heard last year's budget was zero to 97 in the senate. not one member of the president's own party and voted for it.

the american people need to understand what an abdication of responsibility and leadership that is. how can make a choice? they do not know what the other side is for. the other side wants to take over 1/6 of our economy. i guess they are ok with government outweighing 24% of gdp. i guess there can with $1.40 trillion deficit the last four years. during this president's term we will spend $14.40 trillion. the total deficit will be 5.3.

that is what we are borrowing. the american people deserve far better. budget lost 414. he will add dollars to our debt. that is fundamental listed the problem. i enjoy charts. i just want to talk about three very significant additional risks that could explode the deficit even further. first of all, growth. if we miss the growth target by one term, at the cbs a week at $3.10 trillion tarnation steps are the next 10 years. i hear is my one chart i will impose on me.

that is what the borrowing cost has been pared from 1970-1999, which had an average borrowing cost of 5.3%. the last three years we have been barring at an unrealistically low 1.5%. our debt gdp ratio is about 60%. we are far more creditworthy. over 100 term. that is about a 4% gap from historic. this of the '60s are much discretionary spending. that is a significant risk. if you weeks ago we debated the health care lot in the supreme court. the soap that is overturned. that represents a civilian deficit risk and no one is acknowledging.

once obamacare action kicks in starting in 2016, for the next 10 years we will spend $2.40 trillion on that program. it to be paid for by taxes, fees and penalties. we have not enacted the sgr fix. we realize that or reduce access. what makes anybody believe will reduce medical are -- medicare dollars. this represents the deficit gap or $1.60 trillion.

is that what happened next i'm not even mentioning the cost when tens of millions of employers that brought this. this made them eligible for huge subsidies and exchanges. what is that going to cost? we have various medvedev problems. i appreciate your opening presentation lange of the case. it does not scratch the surface. we have even greater risks. we have one side in washington. it refuses take a vote and tell the american people what their solution is. until that side does that and this president leaves or until we have a president who's willing to lead, we will not fix this problem. >> thank you. >> thank you.

thank you for your leadership of this committee in putting this plan in front of us. i apologize for my late arrival. when i am home in delaware, people ask me about our deficits. it is something that matters deeply to the average american. they are used to having to balance their budget. they expect our government will do the same. i could give a long speech recounting how we got year irresponsible and assigning blame and delivering the campaign speech. we're finding a way to balance the budget every year to deal with record deficits to rein in

spending and making difficult decisions. our national debt had over $15 trillion which took us a decade to put our way into. this will take us a while to work our way out of. i think we all agree are excessive debts heard our competitiveness and our country. i think we all agree it is a ticking time bomb that needs to be addressed. we have budget caps that give the appropriation committee guidance for this year. we need a plan. rather than having in other partisan wish list presented that we can fight over, i am pleased you put forward a tough, balanced, rob plan that gets us down the road toward the

real decisions we have to make. debts and deficits are not a new development. the all time you have served in the senate, it has been a real challenge. i think only for federal budget have been balanced in the past four years. the path of least resistance has been to keep revenue slow in services high. i think we are reckoning where we have to. it is my hope that this committee and its members will be serious. whatever bipartisan compromise is ultimately reach, it to be difficult. we will need an unfortunate mechanism. this of the $4 trillion over the target.

they advocated that i saw repeatedly folks to join me. regardless of which party in view, i think all of us can agree that we have to find a way forward that is thought of this rate our safety net that asks for broadly shared sacrifices that does not jeopardize the fragile sacrifice and retains long supported programs. i am pleased be put on a table and long-term plan that takes him all the different areas where we need to make changes that it use revenue growth through tax reform and reduces pentagon spending and begins to deal with our most difficult deficit and debt drivers. i was pleased that this commission presented their plan.

i was happy to join the 45 senators to publicly support a long-term deficit reduction plan that is balanced in its approach. there are things in this plan that i really dislike. i think these are bad policies. i think it would cost me less harm to programs, people, and sectors of our society that an advocate for an care charlotte about. i like to see a final plan to prioritize education and energy, many of the things the other senator spoke proudly about. we are reaching a tough plan that would allow was for the end of this calendar year to cast the votes leaning to cast to

change the path for the country. >> thank you. >> i am sympathetic to the flight of the chairman. he is very serious about these issues. i appreciate that he worked by a predecessor who i know is very serious about the fiscal state of the country. i feel like the chairman is in a position where he is like charlie brown. his leadership has pulled the football from him. we need to not just present a plan out there for us to all be here today and get very eloquent opening statements about on both sides of the aisle, but to really roll up our sleeves and take the hard votes on the plan on and on the things like and do not like.

i cannot say how excited i was to be put on the budget committee because of the important work that my predecessor did. i have been incredibly disappointed. it is very difficult for me to go home to the people of new hampshire and i think have great common sense, because they're dealing with a tough fiscal a barman. bay understand that their money coming in. sometimes it is more bills. they sit down and they figure out. every business in this country doesn't. he did any may be hard choices.

they have been a complete failure of leadership. deacon had the best laid plans and did you look at the time this committee has not been doing what we should be doing, i know it is not because of the chairman of because it is really a failure of the overall leadership. though do what you're set out to do. i been here for over 700 days. i've never done a markup. i am willing to make the tough calls. voteilling to take tough and defend them to my constituents. that is that happen around here. it makes too much sense.

with no other plan that if you are not willing to back of what you have to put forward by actions, then there is no point to have a plan out there. this is what we were sent here to do for the american people. that is what they expect of us. i would share the sentiments of my colleagues on both sides of the aisle. this is incredibly disappointing given the fiscal crisis that this country faces. i thought of my couch and decided to run for the united states senate because i have two children, a four year old and a seven year old. i know we do not get this right now it is not just about everyone else in this room. we are passing on massive amounts of debt and diminished opportunity to next-generation. i do not ever want to look at my

children. i know they're going to say "what did you do about it?" i want this committee to do what is right for this country. i hope and appreciate that the chairman wants to do this. i do not want you to be charlie brown. i do not want the football to be taken away from me. we cannot afford to continue where we are in this country. we better put it on the line and make some decisions that make the tough calls to get our fiscal house in order. if every hearing we had that was a political hearing, we are trying to prove a political point to the solving a problem, if we were able to take every single one of those hearings and we were actually working on the real problems facing this country, we would have a balanced budget right now if we spent our time doing that. that is what the american people

deserve. we need to be accountable to them. at the end of the day, we should be a shame that we're not marking up a budget i think it is a failure of leadership. -- marking up a budget. i think it is a failure of leadership. >> final thought? >> i think you can tell that members on our side like you. we appreciate you. we like all of our colleagues on the other side of the aisle on this committee. i think it is the best perception among a lot of people that we did not get a long personally the rap the whole senate. we do have some sincere disagreement about what we're going to do. we believe you would have preferred a real market today not a photo markup -- faux markup. it is three years into it

determine action to avoid responsibility for the financial future of america. it is not acceptable for the senate leadership to not face up to the challenge of our time. the debt crisis facing our america. we have a long-term system and debt crisis that is not going away anytime soon. we have got to make changes. it dwarfs all other issues facing our country. it is the greatest threat to our national security. some may think it's a smart one senator reid said it is foolish to have a budget. then to spend three years avoiding what is necessary to lay out a financial plan for the future. is there really ok to wait until after the election to vote? is that what the american

people expect of us? are they satisfied that we say we cannot take the boats close to an election, that might be tough. we do not want to do back, do we. i do not think so. i do not think that is where the american people head are. i think it is a big deal to build the responsibility that we have been given. i'd think it is particularly wrong for the president to propose nothing serious or no plan to try to block plans for coming up. then they criticize those who lay out plans that could change america and put this on the right path. i do not think it is acceptable. i think a price will be paid for this failure. i will say one more thing. the as the lord allows in this

republican party to have a majority in the senate, we are going to do our best to be worthy of their response ability given us. we're going to do everything within our power to produce a budget, one that can be reconciled with the house, at a budget that will change the debt course of america emplace this country on a path to progress and responsibility and not to decline. thank you for all of the things you have done in the hard work you have put into understanding the challenges of america. the problem is we are not willing to act on it. thank you. i think all my colleagues today. let me indicate my own view. everyone else has expressed themselves in this question . when i hear my colleague saying

there has been no budget put in place for 1000 days, i do not think that is correct. i really do not. we passed lastthe budget controa resolution. the budget control act is a lot. -- law. irresolution never goes to the president for base signature -- paul pierce a resolution never goes to the president for a signature. this not only set the budget for this year and next, and i can read the language from the budget control act. the allegations, aggregates, and levels shall apply in the senate in the same manner as for a concurrent resolution in the

budget for fiscal the year 2012. that exact same language is repeated in the next paragraph for 2013. the budget control act law shall apply in the senate in the same manner as for a concurrent resolution on the budget. to suggest we have not put in place spending limits or a spending restraint i think is misleading to people or listening. i believe is very clear in the budget control act that we passed a law that put in place spending limits not only for two years but quite extraordinarily spending caps for 10 years. i have been here 26 years. i have never seen a budget resolution put in place spending caps are more than three years.

the budget control act put in place spending caps for 10 years. in addition, the budget control act created a special committee with the obligation to come up with a plan for reforming social security, medicare, and the tax system and told them if you are able to agree, you will be able to bring that proposal to the floor of the senate and not face a filibuster, be able to pass reforms on those programs on a simple majority vote, and it further said if you cannot agree, there will be an additional $1.20 trillion of cuts put in place in the so- called sequester. because the special committee did not agree, the $900 billion of savings under the budget control act are a lot, as are

the additional $1.20 trillion in spending cuts created by the fact that the special committee could not agree on reforming medicare, social security, and our tax system. that is a total package of over $2 trillion of spending cuts. that is more than any package of spending cuts or spending restraint in the history of our country. where i do agree it is what we do not have, a long-term plan, a 10-year plan. we do have a budget for this year and next, spending restrictions in place for those two years. but what we do not have is a long-term plan. that is why i spent a lot of time trying to figure out what i would take before this

committee. at the end of the day, i decided to do what i deeply believe, and i deeply believe bowles simpson, and there are lots of things in there that i strenuously disagree with -- i told my staff i will never forget the morning of the vote on that. the only thing worse than being for this is being against it, because at least it gets our debt under control and begins to bring it down, and it does it in some kind of balanced way. i would be the first to acknowledge we have got to make adjustments to it because things that happened in the interval. i would say this also to you, and i say this with sincerity. i do not believe that this is

going to get resolved. i do not believe that all parties are going to get on their fixed positions before an election. i became chairman in 2008, and i was able to get in an election- year a budget resolution. that is one reason i insisted that the budget control act, that we did put in place spending limitations for the next two years and the enforcement mechanisms and spending caps for the next 10. i tell you. i believe as deeply as anybody in this committee that we have got an obligation and a responsibility. senator johnson, you said it well.

a responsibility, a deep responsibility to get this country back on track. i am willing to work with anyone in these coming months to figure out what adjustments would need to be made to the mark i have laid down. i will dedicate myself to try to find a way to come together so at the end of this year before we face the expiration of all of the tax cuts that are in place and before we face a sequester that i do believe would cut too much on national defense that we find an alternative. i am absolutely committed to trying. with that, we will stand in recess. we will distribute the mark. i appreciate all members for participating. [captioning performed by national captioning institute]

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plus shipping and handling. you can order your copy at c- span.org/shop. > this year's studentcam contest asked what was important and why. today's winner selected article 5. >> i am in front of the national archives here in washington, d.c., home of the constitution, bully grail of our history. article 5 of this document is a little-known provision that makes america the growing and changing society it is today. to better understand what most people's values were in regards to the constitution, i began asking people what provisions of the constitution they felt they benefited the most from. >> freedom of speech. >> freedom of speech. >> freedom of speech. >> freedom of religion.

>> freedom of speech. >> the general consensus was that the most important parts of the constitution were the amendments. >> a lot of the things that people think about when they think about the constitution are not in the constitution. they are in the amendments to the constitution. very few people when they think of the constitution didn't think of congress having the power to regulate commerce among the states and congress having the power to raise the navy and to raise an army. that is not what people think about when they think about the constitution. they think that the constitution gives you the freedom of speech. well, the first amendment gives you the freedom of speech. article 5 was pretty vital and that you take most people and ask them something, tell me three things about the constitution, chances are most of those things are amendments. >> but what is an article 5? i asked people if they knew what

article 5 was. do you know what article 5 of the constitution is? >> no. >> no. >> no. >> no. >> so what actually is article 5? >> article 5 says in both houses, they shall propose amendments to the constitution, and then should the joint resolution passed with two- thirds of the vote in both houses, then it goes to the states, where 38 states, three- quarters of the states, would have to ratify the amendment before it would become a fundamental law of the land. there is another provision in article 5 which allows the states in the face of an action in congress to ask for a constitutional convention to be established for that purpose. >> what makes article 5 so important? let's take a look at the preamble of the constitution. in the preamble, the framers road, "we, the people of the united states, in order to form

a more perfect union," what do they mean by a more perfect union? >> i think it is acknowledgment that the constitution represented sort of another try, if you will, to bring the states together, the articles of confederation, people realized it had a lot of shortcomings. i think it represented the idea that the states did want to have some sort of vital, central government, but at the same time retain their individual sovereignty over issues. >> by a more perfect union, they meant something better than what they had under the articles of confederation.

i am sure that different public figures had different ideas. >> i interpret that to mean a more perfect one than the political structure from which they came and from which they have observed and had been subject to. >> the founders thought that the constitution was a machine that would go itself. the experiment in democracy would be just that. we are in the pursuit of happiness. that is the key word. the constitution says in order to form a more perfect union. we are obligated to keep tinkering with these things and keep experimenting, and that is the great beauty of this thing. >> there were different schools of thought in terms of what the founders meant when they said "a more perfect union." that it was meant to be adjusted. in either case, its goal was to improve the nation, and america has been made better through amendments to the constitution, so what would america be like without a process to amend the

constitution? >> without article 5, if there was no process for amending the constitution, there would have been major problems. some of which have been resolved fairly well in the process. >> it certainly would not being america as we know it. it is a testament to the fact that you cannot think of everything, the matter how careful you are drafting. you cannot think of everything, so you have to fix it through amendments. >> some people think, however, that the amendment process has been a failure at times. >> there have been times when amendments have turned out to be, people change their mind. prohibition i guess is the easiest example. >> prohibition. it seemed to backfire. article 5 still allow us to repeal some laws that seemed to be unnecessary. >> it is an amazing thing. we talk about all of the

unintended consequences, but there have been positive things. one, it showed us that democracy works. >> it can be flawed public opinion, but the process itself is something that makes this country extraordinary. we are subject to a document that changes for us. we can grow. we can modify ourselves. with that article 5, i would not be able to speak my views, to write letters to the editor, to protest the law, to carry a gun, and at reasonable privacy to sit quiet at a trial and to have a quick trial, to be banned from having slaves, have my mother vote, to drink at 21, and to be able to vote in the next year. i, along with millions of other americans, would be subject to a document of antiquity. this article 5 changes the constitution to fit our changing country. >> i do not see how you could

have an organic document and one that could govern evolving doctrines and involving populace without an amendment process. i think it is of is the critical. in any document you have, there must be a process for revising it. otherwise, it could become irrelevant very quickly. >> i do not think that america could have achieved its stature without article 5 and the possibility of amending the constitution, and without the amendments that we take for granted. >> you can go to watch all of the videos and into the conversation at our facebook and twitter pages. >> in a few moments, president obama is in ohio, talking about job training. in about one half hour, mitt romney campaigns in north carolina. and the senate budget committee

meeting on the chairman's 2013 budget proposal. >> on "washington journal" tomorrow morning, the president of the national organization for women, terry o'neil, will take your calls on the violence against women act, and we will be joined by steve forbes to discuss tax policy and the economy. "washington journal" is live on c-span every day at 7:00 a.m. eastern. >> when i was embedded in eastern afghanistan, the soldiers started telling me that the u.s. government was wasting tens of billions of dollars on mismanaged logistics and development contracts. >> following the money in afghanistan and finding corruption from top to bottom, right into the hands of the taliban. >> there was an incredibly

affected by. this is not long after president obama took office, and the state department was out there saying, ok, we're going to get a whole bunch of development money, counterinsurgency, we are going to do this, win hearts and minds, and the colonel said, "do not give them any more money. send contract officers that can oversee this stuff. i need people. i do not need more money." >> bankrolling the enemy on c- span's "q&a." >> president obama spoke about changing the tax code. this is about 25 minutes. >> thank you. thank you so much. [cheers and applause] thank you. everybody, please have a seat.

well, hello, ohio. >> hello. but it is good to be back here in lorain. last time i was here, i had an outstanding burger at smitty's. i got a helmet at right now. -- at ridel. i think i may need it between now and november. it is get -- great to be backed at lorain to college. i want to thank him for that wonderful introduction. i had a chance to meet andrea and dave and dewayne, and i just want bronson's wife to know that he gives you all of the credit in the world, just in case you are watching, he loves you to death. i also want to think a

president, dr. ward churchill. [cheers and applause] -- dr. roy church. those hosting us here today. i want to recognize my outstanding secretary of labor in the house. [cheers and applause] and i want to thank all of you for coming. you know, i came here for a simple reason. an economy that is still recovering from the worst financial crisis, the worst economic crisis, of our lifetimes. the work going on here could not be more important. i need business owners all of the time who want to hire in the united states, but they cannot always find the workers with the right skills. we have but growing industries in science and technology and have twice as many openings as

we have workers who can do the job. that makes no sense. openings at a time when there are still a lot of americans, including some on this stage, who are looking for work. so we have got to do a better job training more people for the skills that businesses are looking for. when i met with manufacturers while back, they said it is starting to make economic sense to bring jobs back to ohio, bring jobs back to michigan and iowa and indiana, because even if costs are lower there, the workers are better here, and when you factor in transportation costs, a lot of times in make sort -- makes sense to in source, but that will only be true if we make sure that we of workers who have higher skills to manage fancier

machinery and thugs and other places. and all of that starts with community colleges like this one. so i just had a chance to listen to some classmates and to hear a little bit about how they got here and where they are headed. i talked to one who was laid off from a packaging company and is now learning how to operate high-tech machinery. andrea lost her job as an h.r. analyst. but she is now working in the fast-growing field of electronic medical records. david, in addition to being a truck driver for 23 years, we thought he could do the job. he is here to retrain for a higher-paying job. and we just heard about bronson who was laid off two years ago. you heard what he said. he was at a dead end in is live, and this program, along with his wife, gave him an opportunity,

so he is going to be learning hands on a shooting and the next couple of weeks after having already done some of the book work. when i meet these folks, they inspire. andrea is still dealing with the aftermath of the flood that damaged her home. all have family matters, and it is hard being out of work. it is far especially when your mid career, when you are having to change jobs, and the resilience they show and the determination they show, that is what america is about. that is part of the fighting spirit. we do not quit. and so, the question now is how will we make sure that all of america is expressing that spirit through making sure that everybody is getting a fair

shot, because that is going to be a major debate we have in this country not just for the next few months but for the next years. both -- should we settle for an economy where a few people do really well and the growing number are struggling to get by. or do we build an economy where people like wayne and others, they get a chance to get ahead. where there are matters of opportunity. where everybody gets a fair shot, and everybody does their fair share, and everybody is played by the same set of rules. and this is not just another run-of-the-mill political debate. there is always chapter in washington. folks argue about whether the sun rises in the east and whether it sets in the west, whether the sky is blue. there is always one to the

arguments in washington, but this one is different, because we're talking about the central challenge of our time. right now, we have two competing visions obama and the choice could not be clearer. the folks on the other side, i am sure they are patriots. their theory, i believe, is wrong. you see, i've never believe that government can or should solve every problem we have got. i believe the free market, the greatest force in history, and i believe that everybody as personal responsibility for their own lives. everybody has to work harder, not have things handed to us, but i also agree with our first republican president, a guy named abraham lincoln, who said that through garnett, we should

be able to do -- who said that through government, we should be able to do what we cannot do as well on our own. that is why we have a strong military, to keep us safe. that is why we of fire departments, because we never know when we might have fire at our house. that is why we of public schools to educate our children. that is how we laid railroads and highways and had research and technology, save lives, creating a tire industries. that is why we a programs like medicare and social security and unemployment insurance, because any one of us, i do not care how rich you are, you do not know, you could face a lay off for a crippling illness or run of bad luck or a tragedy. folks in ohio know about that. nothing is given.

that is why there are committed to colleges like this one. so, folks who are looking for a new job, or a better paying job, they learn the skills that the businesses need right now, and that is good for all of us. investing in a community college, just like investing in a new road or a new highway or going into rural communities, these are not part of some grand scheme to redistribute wealth. they have been made up by democrats and republicans. for generations. because they benefit all. that is what leads to a strong, durable economic growth. that is that america became an economic superpower. that is how we built the transcontinental railroad and got the best colleges and universities in the world. that is why we have cutting edge

research that happens here, and that gets translated into new jobs and businesses, because somebody did the groundwork. we created a foundation. for those of us to prosper. somebody gave me an education. i was not born with a silver spoon in my mouth. michelle was not. but somebody gave us a chance. just like these folks up here are looking for a chance. when you take classes at a community college like this one and learn the skills that you need to get a job right away, that does not just benefit you, it benefits the company, which can profit from your skills. it makes the entire region stronger economically. it makes the country's strong economically. in this country, prosperity does not trickle-down. prosperity grows from the bottom

up, and it grows from a stronger middle-class. outboard. that is how we grow this economy. [applause] and that is why i am confused when we keep having the same arguments with people about how america was built. they keep saying that we can regulate to keep our air and water clean, protect our consumers, if we just cut everybody's taxes and convert these investments in to musicologists and research and health care into tax cuts, especially for the wealthy, somehow, the economy is going to get stronger, and ohio and the rest of the country will prosper. that is the theory. ohio has tested this theory. take a look at what happened in

alliance between 2000 to 2008. it is not like we did not try it. and instead of faster job growth, we had the slowest job growth than half a century. instead of broad-based prosperity, the typical american family saw their incomes fall by about 6%. outsourcing rampant. falling financial profits all over the place, and instead of strengthening the economy, our entire financial system almost collapsed. we spent the last 3.5 years cleaning up after that mess. so there theory did not work out so well. maybe they have not been paying attention. it did not work out so well. and instead of stepping back and say to themselves, well, maybe

this did not work, so maybe we should try something different, they decided to double down. instead of moderating their views even slightly, republicans in washington, the ones running for president, proposing budgets that shower the wealthiest americans with even more. folks like me do not need it. and when you give somebody like me a tax cut, there are only a few ways to pay for it. either it adds to our deficit, meaning it is not paid for, or you end up, which is what they proposed, cutting investments in education and investment. and job-training programs. if these cuts are spread out, then 10 million college students, including you, would see your financial aid cut on average by more than $1,000 each.

thousands of medical research grants for things like alzheimer's and cancer and aids would be eliminated. our investments in clean energy that are helping to break our dependence on foreign oil and are creating jobs here in ohio will be cut by nearly one-fifth. by the time you retire, medicare will have been turned. it likely would not cover the doctors and care that you need. that would have to come out of your pocket. operating programs like this one would be forced to cut back. thousands of americans would lose out on critical employment and training services. that is the truth. when you ask the republicans, what do you say about that, it would be that obama is making this up because we did not specify which cuts. the reason they did not specify

it is because they knew that folks would not like it. but if you have got to cut a certain amount of money, and they have already said they are not going to cut defense spending, and they are going with their tax cuts, then you have to go to all of the other stuff that is left over, or it will add to the deficit. that is just math. that is not the rising on my part. they will tell you, well, we have got to do it because the deficit is so bad. the deficit is bad, and we have to deal with a serious way, and that means we all have to make sacrifices, but there is a way to deal with it deficit that is fair and asks everyone to do their fair share, in dealing with the deficit is an excuse for doing what you want to do anyway. their argument might fly if they were not also proposing to spend $4.60 trillion on lower tax breaks on top of the $1 trillion they would spend on tax

cuts for people making more than $250,000 per year or more. that is their priority. they want to give me more of a tax break. now, i just pay taxes. it is not like i love pay taxes. but i can afford it. i do not need another tax break. right now, companies cannot find enough qualified workers for the jobs they need. programs like this one are training hundreds of thousands of workers for the skills that companies are looking for, and it will help america grow. i think here in the county, 90% of the people who graduate from this program have a job three months later. 90%. that is a big deal. [applause]

why would we want to cut this program to give folks like may a tax cut that we do not need and that the country cannot afford? what is the better way to make our economy stronger proof more tax breaks given to every millionaire or billionaire in the country or with job training, making investments, and put folks back to work. this is just common sense. understand, this is not redistribution argument. this is not about getting rich people to pay for poor people. this is about getting us together making investments for our country so everybody has a shot, and that will make all of us better off. [applause] now, on monday, nearly every republican and senate voted to

block. the budget rules says if you make -- the buffet will says if you make more than $1 billion, -- $1 million, i am not talking about u.s. saved up your nest egg. i am talking unit $1 million per year -- you are making $1 million per year. that you pay as much income taxes as you do as a teacher or a bus driver. and by doing that, that helps us support the 98% of the families that make $250,000 per year or less. your taxes will not go up. this is an idea that was supported by a strong majority of the american people, including nearly half of the republicans. a majority of millionaires and support it.

the republicans did not listen. they refused to even let it come up for a vote. to ask the wealthiest among us to do their fair share. meanwhile, there is their willingness to gut programs like this one, making real differences in people's lives, for middle-class families, or those trying to get into middle- class, and my point is the middle class has sacrificed enough over the last few decades. they have had enough trouble. [applause] as i travel around the country, people are not just concerned about their immediate circumstances. they are also concerned about the future. they want to make sure america stays ahead. how to make sure that if someone is willing to work hard, they can get ahead, and people understand that if they see

taxpayer money wasted, that makes them angry. they know the government has got to be lean and mean it and do smart things, but they also understand we cannot stop investing in the things that are going to create real, lasting growth in this country, and we certainly cannot do it as an excuse to give me another tax cut. that is not who we are as a country. we are better than that. everybody here, we are here because somebody has a larger responsibility, not just for themselves but to their family first of all, and then also their community and their country. maybe they serve by day. maybe they worked at a local charity. been understood, like my grandparents understood, like my mother understood, like michelle's parents understood. we do what we do not just for

ourselves but also for this larger project because america, and now it is bartered be responsible. it is our turn to make sure that the next generation has the same opportunities that we do, and i know we can do it. the reason i know that is because of the folks i have the chance to meet, because of you. you are working hard. you have not given up. you have gone through some struggles, but you are resilient. ohio is a great example of the core strength and decency of the american people. you believe in our future. you believe in this country, and if we were together with a common purpose, i guarantee you we will make this an american century just like the 20th century was the american century. thank you, and god bless you. god bless america. ♪

ababa a bimb

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>> up next, mitt romney's speaking to supporters in charlotte, n.c., near the site of the convention. this is 15 minutes. ♪ ♪ [cheers and applause]

>> wow. thank you. you are kind to be here today. this is quite a reception. thank you. i thought we were going to be on the roof, but it looks a little wet. i am happy to be here, because i understand on the roof, i would not be able to see so many of your faces. i would be there with loudspeakers. i know the democratic convention is right behind us. the president is going to do everything he can to get north carolina in his column, and that will not be enough, because we are going to win north carolina in november. [cheers and applause] and so, it is only going to be about four months from now, we're behind us at the bank of american stadium, we are going to have the national convention, and i want to give you some thoughts about what will happen

there. a bit of a preview. i predict that you will not hear a reprised of the president obama speech from four years in denver. they will not be quoting extensively, but because they will not, i will. at the time, the president said that democrats had a different measure as to what constitutes progress, and then he went on to list specifically the democrats feel constitute progress. by the way, i think it constitutes progress as well, so it was democrats and republicans and independents, but let's look at them. he said to measure progress by, quote, how many people can find a job that pays the mortgage. now, what you will not hear at that convention is that for the last 38 months, on the planet has been above 8%. we have had 24 million americans that are out of work, stop looking for work or are

underemployed. you will not hear that since he gave that speech and became president, there have been 50,000 more jobs lost this year in north carolina, more than twice as many as it in that stadium. you will not hear that 400,000 in north carolina are out of work. you will not hear that 93% of the people who have lost their jobs during the obama years have been women. those are the things you will not hear, but as i am the nominee of the party, i hope, to make sure that people hear those loud and clear. [cheers and applause] now, the president went on in his speech. he said the democrats like him measure progress by whether the average american family sought its income go up, not down. well, let's look at what has happened, and i will tell you what you are not going to hear.

what you are not going to here is that during his term, a median income in america has dropped by $3,000. it has gone down, not up. he also said in that speech, he said, look, we are going to measure crocker's is, democrats do, whether someone can take a risk and start a new business. well, how has that been going the last few years? what you will not here is the present record in terms of encouraging entrepreneurs to start businesses, because since he has been president, of the number of new businesses started per year has dropped by $100,000 -- 100,000 per year. we have gotten too something from 600,000 to 513000. the president's policies have made it harder for entrepreneurs to start businesses and small banks to lend to them to get them going. on the measures the president himself indicated would determine whether or not we are making progress, he has failed. it is very clear that his agenda

has not accomplished what he said it would when you ran for office and when he spoke in denver, but what you are also not want to hear is that the president set a benchmark for himself upon being elected president. he said if we let him borrow $787 billion, he would hold unemployment below 8% from, and it has not been below 8% since. now, it is going to get below 8% some day. our economy always comes back, but it is not thanks to the policies of obama. obamacare did not create more jobs or higher -- or encourage businesses to wire. dodd-frank did not encourage that. stacking the labor relations board did not encourage businesses to hire more. the virtually nothing the president has done including the stimulus which protected government but did not encourage the private sector, virtually nothing he has done has made it more likely for people to get jobs, and so, for 3.5 years, we

have had unemployment above 8%. he set the measure. he has failed by the measurement he said. you will not hear that at his convention, but you will hear it at hours, i will tell you that. [cheers and applause] now, you are also not going to hear at his convention that he is on track to add almost as much public debt to this country as all of the prior presidents combined. even having been critical of president george w. bush for the debt that he had, which, of course, was far less than that which is being added by this president. you will not hear that even though he has been present for 3.5 years, he has yet to propose solutions to save medicare and social security. you will not hear that he is the

first president in modern history or an industry to cut medicare by $500 billion to pay for his obamacare. and you will not hear him repeat an accurate statement. [laughter] i actually have one in mind in particular, which was from his speech four years ago. i mean, listen to this. this is what he said four years ago, and i wish he would repeat this, and i am going to change one name at the end. he is saying, tonight, more americans are out of work, and more are working harder for less. more of you have lost your homes, and even more are watching your home's value plummet. more of you have carts you cannot afford to drive, credit cards, bills you can afford to pay, and tuition is beyond your reach. these challenges are not all of

the government's making, but the failed to respond is a direct result of a broken politics in washington and the failed policies of -- yes, barack obama. i changed the word he put in there and added barack obama. those things he said about the prior administration are absolutely accurate about his administration, and that is why even if you like barack obama, we cannot afford barack obama. it is time to get this economy going and the americans back to work with good jobs. [cheers and applause] he has been president 3.5 years, 3.5 years, and you list those issues that he described in that speech of his, he has not fixed any one of them. it would be four years before he is at the convention, four years. he cannot continue to deflect

blame elsewhere. at some point, he has got to the knowledge that this is his economy, that this is a result of this policy, not of his predecessor, not of congress. we remember that for his first two years, he had a super majority of his own party in congress. he cannot blame republicans because it was a democrat congress for two years. now, when the president was elected, he went to the white house with very high expectations on the part of the american people. we imagine that he would use all of this energy to try to fix the challenges he described in that speech, a lot of goodwill, and he had that super majority in both houses. since he was sworn in, more americans have lost jobs. he did not turn that around and put people back to work. actually, more people have lost jobs. more homes have been lost. gas prices have doubled. health-care costs are going up. tuition is more expensive. and students coming out of high

school or college cannot find work and too many cases, and servicemen and women who come home from conflict cannot find a job when they get here. now, i have told you some things that you are not going to here at the convention. one thing i am sure you will not see at the democratic convention, you will not see president obama standing alongside three columns. he is not going to want to remind anybody of greece. [cheers and applause] [applause] [laughter] he does not want to remind anyone of greece because he has put us on the road to become more like greece, with trillion dollar deficits each of the years he has been in office, with forecasts of huge deficits down the road. this is a president that is putting in peril our economic future. at some point, the people who owe money to the united states of america are going to get concerned whether it is clear to be worth something, whether the

dollar is going to be worth something in the future, and they will ask for higher interest rates. this is a president that will not want to be reminding the american people of greece when he is speaking at the convention here in charlotte. what you will hear, of course, and the president's is that things are doing great, that the american people are doing really well. they just do not know it. if he and knowledge is any problems of all, he, of course, will say it is not his fault. his list as scapegoats is very long. he always has people to blame for his failures, and now after four years of disappointment, i am sure that he is ready to leave now, four years of people not being able to see the rising incomes they had hoped for, not being able to find the jobs they expected, not being able to have a bright future for their kids coming out of college. when kids graduate from college, if they cannot find work for one or two years, that impacts not

just that your or two but there a long-term career. it has lasting effects. these 3.5 years of disappointment, very different from what he promised, will have a lasting impact on this country, and he will say this is worth it. he has navigated the storms, and now he is really leading into the future. now, we are a trusting people. we are hopeful people, but we are not dumb, and we are not going to fall for the same lines and the same person just because it is in a different place. we are going to recognize that it is time, given the fact that we learned to barack obama is and what he is capable of doing, that he is over his head and is swimming in the wrong direction, and we are convinced that it is time to get america working again, so if i am the nominee of the party, as i hope to be -- [cheers and applause]

[cheers and applause] [cheers and applause] [cheers and applause] >> mitt, mitt, mitt, mitt, mitt, mitt! >> you guys are great. so i take that as you would like me to be the nominee. [cheers and applause] if i am the nominee of the party, as that enthusiasm suggests, i am going to remind people what president obama said four years ago when he was candid obama. even though it will be a different place, you will be talking about the bright future and bringing american together, all of the things he did not do,

in the second term, and we know better. it is time we have had somebody who has spent enough time in the private sector to know how jobs are created and how they leave and how to bring them back to this country, to have some of his experience is demonstrated at cutting spending in washington. excuse me, in my case, massachusetts. that same skill i want to bring to washington. we have trevor government, regulation, and law, but the government has become too big. we have to have a president to does not just talk about these things but can actually do them, and one of the things that is most disappointing to me in our president is that over the past 3.5 years, he has engaged in constant efforts to divide america. problem of some kind, he points to some group of americans that must be responsible for it, never say that is responsible for mistakes he made, for policies that made

it harder for businesses to start and for people coming out of school to find a good job, and i am not going to divide america. if i become the president of the united states, i will use every ounce of energy. i will not attack fellow americans. i will strengthen fellow americans. [cheers and applause] because i believe very fundamentally that to remain this up -- the shining city on the hill, we must always be one nation under god, and i will keep it that way. thank you so much. great to be with you. ♪ i was born afraid i was born freight born free

free, like a river raging strong ♪ ♪ >> ♪ you cannot keep chains on main i was born free i was born free i was born free born free and i am not good at long goodbyes i was born free ♪

♪ >> ♪ oooooo ♪ >> ♪ like an unknown stranger grateful for my time grateful for my time