austerity measures that will be necessary in the future if congress does not act soon for fiscal reform. i believe fiscal on we had to reform must include both tax reform and spending cuts. one without the other is only a partial solution. in the state of the union address, the president reiterated what appears to be his goal. and that number sounds -- it only scratches the surface. i am concerned that the debate surrounding the sequester will become a diversion from the real problem facing us. the time for partial and temporary solutions is well past. what we need is a collective acknowledgment of the problem

and they comprehensive, joint effort to reach a long-term resolution. anything short of that will place the american economy on an irreversible, downward path. we will hear about the past consequences of the impending cuts. i do not doubt that they will be painful to bear. if there is a way to mitigate the pain,i'm open to discussion. i believe it is important to emphasize that the sequester of whatever temporary solution we have made is just a precursor to the main event. thank you. >> thank you, senator shelby. we will go to the panel. i am going to explain how this is going to work. we would have begin with omb and wrap up with national

security. in the interest of time and efficacy, we will have one panel and be able to ask questions where we can get cross communication going. we will start with you and then secretary donovan and secretary napolitano. we will go to questions and alternating on both sides of the aisle. right off with senator shelby and myself. you are representing omb. their obligations with the presidential responsibility. go ahead and give us the details of omb. i will not introduce everyone. we will keep it going. >> thank you. members of the committee, good morning. i'm here to discuss the

automatic spending reductions known as sequestration. it is scheduled to occur at march 1, as well as the impacts of these reductions and the actions the administration is taking to prepare to implement sequestration should it be necessary. i want to start by reiterating a point. as sequestration is bad policy. administration believes that congress should pass a balanced, bipartisan deficit reduction to avoid it. if allowed to occur, sequestration would have significant and disruptive consequences for domestic investment, national security, and poor government services. -- and core government services. the cuts required a harm middle- class families, seniors, and the most vulnerable. the president believes these indiscriminate across-the-board cuts are not ours possible way -- are not a responsible way to address our goals of balance deficit reduction. we have made significant progress in this regard.

we have an active deficit reductions over the past twothe vast majority of this progress has come in the form of spending cuts. roughly three dollars in spending cuts for every one dollar in additional revenue. the president believes we need to have a balanced approach that includes a spending cuts, but also includes commonsense tax reform that can raise additional revenue. as part of the american -- act president would have to issue this a question should date was delayed from january 2 to march 1, 2013. with $24 billion in deficit reduction split evenly, this approach set an important precedent of avoiding sequestration and having a balance deficit reduction that combines additional revenue and spending cuts.

should congress failed to act in the next two weeks, a sequestration of approximately $85 billion will be ordered for the remainder at the school year 2013. it will be split evenly between defense and nondefense programs. this will lead to a number of deeply troubling consequences and critical government programs we depend on. it would mean fewer teachers to educate the children. less funding for schools to help disadvantage kids with disabilities. less research into lifeit would cut nutrition assistance for vulnerable tabulations and reduce funding for center health programs. it would keep federal agencies from conducting expansions -- inspections necessary to keep our food and water safe and clean. it would make our home less secure. we need to keep crime out of our streets and neighborhoods. it would make us less safe or abroad -- safe or abroad.

by causing critical of degradation of our armed forces. there is no amount of planning to avoid these damaging impacts. prudence dictatesthe federal government takes reasonable steps to avoid sequestration in the most responsible way possible. there'll agencies and omb have been engaged in ongoing activities for months to figure out how to operate under sequestration. our primary sponsor that he do execute our core areas on behalf of the american people. -- our primary sponsor abilities that we execute our core areas on behalf of the american people. a sequestration order has to be issued on march force. let me reiterate -- no amount of planning or perforation on our part, no matter how thorough or careful, can mitigate the significant and harmful impact sequestration would have. it is not a responsible, long- term resolution. we need a balanced approach of

spending reductions and revenues. it needs to build upon the significant reduction we have worked to achieve, strengthens the middle class, protects investments article, -- that are critical. thank you. i look over to your questions. >> members of the committee, thank you for this opportunity. great to see you again. with your support, we would be able to help states, districts, and communities that are providing benefits to those who are the most honorable. i appreciate this opportunity to testify about this topic. i hope that committee members will keep the most vulnerable students in the forefront of their minds. they are the ones who will be hurt most if congress chooses to let sequestration happen. i want to be clear that we have

the opportunity at all levels of government to make spending for education more productive and efficient. distinct educational product to video requires smart and targeted changes to programs and not indiscriminate budget cuts. sequestration would force us to cut the crucial services and effect millions of lives of students. there is no probable plan b. here is who would get hurt -- the biggest cuts would take effect next school year that 2013-2014 school year. we need hiring decisions in the spring -- we make hiring decisions in the spring. the plan is to make do with less. meaning larger class sizes and fewer courses and less tutoring and higher unemployment. this undermines the very

stability and predicted really every schools and works hard to achieve. it hurts families, children, and school staff. the vast majority of school districts will not be able to make up with these cuts at the local level. when they had to, they will hurt the most vulnerable students the worst. federal education resources generally are targeted to those children with the greatest need. title 1 grams serve almost 23 million students at high poverty schools. special education grants help about 6.5 million special-needs students. sequestration would cut title 1 by $725 million. it could affect 1.2 million disadvantage students. it would affect 10,000 teachers and support staff. special education, we could be

forced to cut millions of dollars. it requires states and districts to cover the cost of approximately 72,000 teachers, aides, and other staffs. early childhood education, we would see cuts as well. some 70,000 students in head start could be kicked out. we're trying to do more not to the opposite. it is foolish and morally indefensible. higher education, the impact is destructive. we would have to cut back collection of student debt, it increased him into the treasury, and fell behind and servicing millions of student loans. we would also cut 70,000 students from grants and work- study programs that help them financial costs of college. clearly that is not the path we want to go down to regain our place as the nation that leads

the world in college completion. those cuts do not take cut -- affect until then next will, others will hit right away. the affect schools and programs that draw direct funding from us, the government. who would be hurt -- families of military service members, disabled individuals, and people living on native american lands. the county schools in new mexico, which 7000 students living on indian land, sequestration would cut more than one third of that district's budget. these are young people we need to invest more in and not less. we have warned our own employees that there would be possible furloughs. that is across the board cuts that we would be forced to make. we believe -- education is not just another line item budget.

education is fundamentally an investment. it is an investment in the future of our children, communities, and our country. high-quality education is the only way to build a strong and vibrant middle class and to foster upward economic and social mobility. an italian most americans do not meet the minimum qualifications to list in the military, it is also an investment in the national security. budgets are not just numbers. whether we choose to invest in children and education is a crystal clear statement about our values. children listen to what we say, but it is the action not the words that tell them whether we care. and the state of the union address, these are sudden, hard, and arbitrary cuts that would devastate priorities for education and medical research.

it would slow down our recovery. it would cost hundreds of thousands of jobs. internationally, we are striving to get better faster. the one to help our children to compete in a global economy. or do we want our country to drift in the opposite direction? i would echo the president and ask you to take your time to develop a budget that would permanently replace the sequestration. i testified last summer. the president and everyone on his team remained ready to work with all of you on a long-term plan to cut the deficit while investing in future programs that will strengthen our economy and global leadership.

>> chairwoman mikulski, vice chairman shelby, and members of the committee, i want to recognize senator murray and senator collins further great partnership together and with us in making difficult and important decisions for the country. thank you for the opportunity to testify today regarding impacts of sequestration on housing and urban development programs. should it go into effect, the cuts would be deeply that it would affect middle-class and the income in the vigils. it would cost at a time when it is helping to lead our economic recovery. more specifically sequestration would meet about 125,000 individuals, more than half of whom are disabled or elderly.

they would have the risk of homelessness. sequestration would result in over 100,000 homeless and formerly homeless people. the majority of them are families, and disabled adults, or veterans being removed from their programs and putting them at the substantial risk of returning to the streets. cuts to the housing opportunities would result in 7000 receiving housing assistance and threaten the population of homeless america. that would result in more than 3000 of the most vulnerable children not being protected from lead poisoning or other hazards in their home. cuts to -- that would mean fewer housing protection or other counseling.

this means fewer families making responsible and informed choices and greater risk throughout the housing market. sequestration would have a broader and damaging a pack -- affect. sequestration cuts $212 million from our programs, cain utes lose nearly half billion dollars of additional funding from private and other sources because they can no longer leverage those critical federal dollars. as to public housing budgets would mean more deferred maintenance and capital repairs on top of an existing capital backlog of over $25.6 billion nationwide. endangering the future of these departments and the neighborhoods. in 2012, they retained almost 22 thousand permanent jobs in more than 32.5 million people

benefited from the community grant. sequestration would jeopardize that. across all of our programs, sequestration would result in the loss of tens of thousands of jobs at a time when continued recovery depends on a stable job market, especially in our hard, hit construction company. it has been central to the housing market, but our ability to perform critical activities to support recovery would be hammered by sequestration as a result of furloughs that would be required for agency staffs. the frustration would jeopardize ability processor loans when fha or present a substantial portion of home loan originations of homebuyers across across the country, as well as 24% of all multifamily construction. that would destabilize the market and slow economic recovery. sequestration threatens

hurricane sandy recovery efforts. 5% cut amounts to $3 billion for the sandia supplemental that was passed by congress. from housing, transportation, and other areas. an example, the funding that would be cut would help make necessary repairs for more than 10,000 homes and businesses in the region. whether it is a man-made disaster of the natural disaster of hurricane sandy, hud has been central to recovery efforts. we know that broad-based economic growth requires a balance approach to deficit reduction is everyone doing their fair share. not an approach that harms the middle class or the poor and comes at the expense of our economy. sequestration is a lunch and indiscriminate instrument. -- is a blunt and indiscriminate instrument.

we cannot risk our economic recovery. opposing the serious damage that the sequester would make. thank you for allowing me to testify. yourager to work with committee in any way i can to help avoid sequestration. thank you. >> thank you. members of the committee, i appreciate the opportunity to discuss the impacts of sequestration on the department of homeland security. dhs day mission that touches almost every aspect of our economy. we secure the aviation sector and screens 2 million american travelers every day. we protect the borders and ports of entry while facilitating trade and travel. last year, our officers assessed more than three hundred

50 million people and facilitated nearly $2.3 trillion in trade. we enforce the immigration laws. we partner with the private sector to protect radical infrastructure. we work -- to protect our critical infrastructure. we support recovery. put simply, the budget cuts would be destructive to our nation's security and to our economy. it would negatively affect the mission readiness and capability of the men and women on the front lines. it would undermine the significant progress dhs is made over the past few years. perhaps most critically, it would have a serious consequence to the flow of trade and travel at our nation's port of in transit -- and ports of entry.

average wait times to clear customs will increase by 50%. at our busiest airports like newark and jfk, lax, chicago o'hare, people wait times it can reach over two hours to grow to four hours or more. that would cause thousands of mr. passenger -- missed flight connections. it would increase domestic passenger wait time by more than one hour. at the southwest florida -- border, we would have to close these ports during core hours. at the seaports, delays were it cain or examinations -- delays for container contaminations would be increased to over five days. mid-size smaller ports would have less hours of operations.

cruise terminals, processing time could increase up to six hours. it could cause passengers to miss flights are delayed trips and increase costs. trade and travel are essential to our economy. according to the u.s. travel association, one new american job is created for every 33 travelers arriving from overseas. according to the international trade administration, dhs -- could result in millions of dollars of economic loss. cpb would have to furlough all of its employees and eliminate hiring positions. decreasing the number work hours are equivalent to more than 5000 border patrol agent.

the coast guard would have to reduce its presence in the arctic i nearly one third. surface operations by more than 25%, it would affect management of the waterways and fisheries and drug interdiction and migrant interdiction and port security. under sequestration, ice -- we would not be able to maintain 34,000 detention beds mandated by congress. it would reduce our investigative activities into things like human smuggling and commercial trade fraud. sequestration reductions would require us to scale that the development of critical capabilities for the defense of federal cybersecurity networks. the core structure would remain vulnerable. it would have impacts on our nation's disaster for. ms., response, and recovery

efforts. -- the nation's disaster response and recovery efforts. we are still recovering from hurricane sandy and the tourney does in other major disasters across -- and tornadoes and other major disasters across the country. we would have layoffs of state and local emergency personnel across the country. threats of terrorism and the need to respond to and recover from natural disasters will not diminish because of budget cuts. even in this current fiscal climate, we do not have the

luxury of making significant reductions to our capabilities without wasting the nation at risk. -- without placing the nation at risk. no amount of panic -- as we approach march, i urge congress to act to prevent sequestration and ensure the safety, security, and resiliency of the nation. >> dr. carter? >> thank you. is that on? ok. thank you. i thank you both and this entire committee for having the securing. i will tell you why. we have been very concerned about what we have called the devastating effect's of sequester on our nation's defense and everything we do. we have been talking about this for 16 months now. now the wolf is at the door.

i would like to describe some of the specific consequences of sequester for national security. the big -- we have another contingency that is affecting us. it is a continuing resolution and prospect that it would enforce through the end of the year. it has near-term effects on the department. there are two things that come together. worst, sequester. it is scheduled to -- first, sequester. it is scheduled for march 1. as you all know they do it from a management standpoint, item by item. the continuing resolution has presented a problem for us. you have enough money in the continuing resolution, but the problem is that it is in the wrong account. the operations and maintenance

part is very much short. that creates problems. i will describe that. these two things come together to create what we have been calling "a crisi in readiness in the near-term. -- "a crisis in the near-term." the sequester is triggered for fy-2013. not be able to carry out the new defense strategy that we crafted under president obama's leadership only one year ago. the -- it is not that we do not understand that the department of defense needs to make a

contribution to the nation's fiscal situation resolution. that is why we have accommodated for hundred $87 billion in cuts. -- 487 billion dollars in cuts. that was on top of several hundred billions of dollars worth of cuts that secretary gates it began, eliminating unneeded and him are -- began, eliminating unneeded programs. i also understand that the taxpayer deserves every defense dollar that we do get from you. we will continue to strive to get better buying power for the defense dollar system. but both a strategic approach to defense spending and efficient use of the taxpayer dollar or undermined i

sequestration. -- by sequestration. it is not a result of an economic session or emergency. it is not because discretionary spending cuts is the answer to the fiscal challenges. do the math. it does not in reaction to a more peaceful world. it is not due to a breakthrough in military technology or strategic insight. it is not because paths in entitlement has been explored and exhausted. it is not because sequestration was a plan ever plan to be implemented. this is the collateral damage of political gridlock. for the troops, the consequences are very real and very personal. the president has indicated his intentions to spare military compensation from sequestration.

that is a very good decision. it is one that we intend to carry out. make no mistake -- the troops will fill this directly. i will give you the principal example. there are many. we will need to sharply curtail training in all the services. for example, a brigade combat team that has returned from afghanistan that is used to being tiptop ready. that is what matters to this profession. the army reports two thirds of its brigade combat teams will be at reduced readiness by year's end. to do the same with the air force and so forth. it will have a big effect for people in uniform. also civilians, and people think dod civilians are those who wake up in washington suburbs and go to an office building. they are not. they maintain ships. many of them do not even live

in the washington area during the 44% of them are veterans. 44% of them are veterans. we would have to furlough many of them. to do that for up to 22 days, i promised that when that happens, i would give them a fifth of my paycheck to the treasury for those last seven months it we have to furlough people. i cannot be furloughed because i'm an appointed, senate

confirmed employee, but i would give back a fifth of my salary. in addition, the effects would be devastating. the quality of our defense industry is second only to the quality of our people in uniform, which meets our military the greatest in the world. ecologically migrant and financially successful defense industry is in the national -- a technologically vibrant and financially successful defense industry is in the national interest. companies might be less willing to make investments in defense portfolios. subcontractors, many of them lacked the capital structure to withstand this kind of

turbulence. 50-70 cents of every dollar that we contract goes not to the prime contractor. many of these are small businesses. above all, sequester would cause a spike in inefficiencies. the consequences are direct and devastating. i would like to close with an appeal to dietrich are sequestration -- de-trigger sequestration. i would like to add that in the

long run, national security rest on a strong economy. it rest on a strong industrial and engineering base. it rest on having science, technology, engineering, and math talents here in america. indirectly, we depend upon them as well. understanding the effects of sequestration for us in managing them in the department of defense, i understand the comparable problems that are rising for my colleagues around the table. the cloud of uncertainty hanging over the defense affairs but having adverse effects. the clot is sequestration needs to be dispelled -- cloud of sequestration needs to be dispelled and not just moved into the horizon. they need to know that we will keep our commitments to them. their employees need to know we

will have the resources to per occur the world-class -- >> secretary carter -- >> our friends and enemies are watching us menem chairwoman. they need to know we have the political will to forestall sequestration. thank you. >> thank you. thank you for the compelling and riveting testimony for the consequences of this policy. as you can see, we have a great turn of members. we also had to return by 1 p.m. we will go with the five minute rule which i will impose on myself and the other members. we will ask the panelists to give crisp answers so we can get

in as much content as we can. we need to have a target on this. there is a democratic caucus. i know the other party is pondering it. we will get right on with it. you will be recognized on order of arrival. i look forward to these questions. secretary duncan. i heard secretary condoleezza rice, an iconic figure in american society, state not only on national security, but she has said repeatedly that education is a civil rights issue of this generation.

education reforms under president bush the elder, president w. bush, the impact of the sequester on our bipartisan commitments for educational reform -- we need to get our kids ready for the future. will this divalent -- derail it? >> it would have devastating impacts. we know that we can do better. it makes the untenable. condoleezza rice and others, if you're trying to level the playing field, if you want to help poor children enter the middle class, you need to give them high-quality education. this is a civil rights issue of our generation. it is an economic imperative. it is also an issue of economic security. that is a big deal. the impact would be one piece of this is title 1. it would help children with the greatest need and break the cycles of poverty and failures.

if we fail to educate these children, what will they do? what is the option? children with disabilities have tremendous need. it would have a huge impact there as well. that is unacceptable to me. >> thank you. we also understand that housing is one of the sectors that can lead us out of the recession. the economy is poised for recovery, but it is vulnerable. you are the housing guy. tell me what you think the impact the sequester will be on housing. you start -- jobs, the supply chain from the lumberyard all

the way up to big construction projects. >> you put your finger on it. housing has become one of the leading factors that is driving our recovery. because of the critical role that congress created for fha, we are central to that recovery. almost half of first-time homebuyers use an fha loan to buy the house. one of the factors of the early recovery, and that can structure and industry come has been multifamily construction. it has jumped dramatically. we drive about 20% of all that multifamily construction. even just to take a small number of employees out of our by artist and -- out of our furlough or a lack of hiring, a hiring freeze, we believe that this year alone there would be $3 billion in financing for a particular multifamily

construction that would not happen. there would be ripple effects of the jobs. that is one small example. multiply that. >> is this the ripple effect in the -- >> the brick layer or the plumber or the carpenter on the front line to the window manufacturer --all of the ripple effects to our system would be halted. >> secretary carter you outlined compellingly what the sequester would be. floating question around about minimizing the impacts on defense. there are those that would like to give you unlimited authority

to devise the defense budget without any recourse of coming to congress to soften the blow. what is your position? what is the administrative position that the animist ration's position -- what is the administration's position? do you need something more definite? >> that would take legislation. i hope there is some in the area that would dispel this problem once and for all. the other thing i will say is that at this point in the fiscal year with cuts of this magnitude, we need to go where the money is. we do not have a lot of choice.

>> you want unlimited authority? >> we would like some program authority. it would help us. >> that is not -- a senator has a proposal. we acknowledge that it will be out there in debating. i want you and us to have a real solution of the sequester. if you have a proposal, go through cr are something. right now, what you're talking that is just giving defense so you all can decide how to do it at the expense of everyone else. >> at this point in the fiscal year, it does not help us that much. if the price of that is just kicking the can down the road living under this uncertainty, that is not attract is for -- attractive for me.

>> my time is up. senator shelby. after senator shelby, we go to harkins. >> thank you. we need to return to regular order in the appropriations process. the chairwoman has talked about it. i have talked about it. you have alluded to it. to provide certainty, which we need, do all of you support a return to order on budget and appropriations measures? that is what i thought. that is right.

in the interest of reestablishing regular order and in the likely event that the sequester moves forward, what all of you consider transmitting budget amendments for fiscal year 2013 that would give you the flexibility to realize agency funding under new constraints? assuming the sequester was into effect. >> thank you, senator. i will get the responses started. the administration would oppose a solution that kept the sequester in place and try to reconstruct it in such a way that would try to dull some of the pain. we cannot cut $85 billion out of our budget over the next seven months without creating significant problems and consequences across both defense and nondefense. a critical point here is when the sequester was to put in

place, there was not only agreement that it should a compromise and a solution to balanced deficit-reduction. everyone agreed it would be harmful. one of the ways it would be harmful to this was going to carry on the back of certain populations this burden of deficit reduction, the middle- class, the vulnerable. the notion that we can live within an $85 billion cut moving money around is not change the fact that we would still be in a world where who was bearing the burden would be the middle class and the vulnerable. we will see harmful consequences without. >> that is a great summary but the idea of flexibility sounds nice but the choice is

devastating. do we save title 1, do more for ell? none of these are good tresses. we have to invest. the idea that we can kick the can down the road leads to a situation where thousands would be hurt. >> we are halfway through the year. take one example of a hudd program where we help a homeless veteran and get off the street. to say we will cut from the program means you do not have

flexibility. you have to cut off existing funding for existing units to be able to achieve these cuts in a short time. no flexibility would allow us with this kind of deep cuts to be able to do this in a way that would mitigate the great damage. >> flexibility really is inflexible. there are only so many places we can get that kind of money. it is hobsob's choice but there is no way we would get through sequestration without serious cuts at airports, seaports and land ports and the consequences that occur from that. >> my time is running away.

the president in his state of the union address laid out several new policies that would expand the role of the federal government. he also said nothing he proposed should increase our deficit by a single dime. that is troubling. would any of the new policies require an increase in discretionary spending? will congress be required to raise the capital discretionary spending? if the caps are not raised, would agencies face >> it is premature to me to talk about the president's budget. the president's budget will build on the $2.50 trillion in deficit reduction that has been achieved to date.

it will build on a framework on last year's budget. when we issue our guidance to agencies to prepare their budget so they can submit a budget to congress, there was clear direction that the discretionary caps put in place are in place. -- achieved one trillion dollars of the two trillion dollars i just described are in place. there are top choices that need to be made. the president is willing to make tough courses on domestic priorities. those are embedded into the discretionary caps and budget control act. it does not mean we cannot still make critical investments in education, energy, while also balancing budgets committee responsible spending cuts.

>> thank you, madam chair. i want to disagree with those who say we have a spending problem. when they talk about it, like there is an assumption that somehow we are a nation broke and cannot afford these things any longer. we are too broke to invest in education and housing. we are the richest nation in the history of the world. we are now the richest nation in the world. we have the highest per-capita income of any major nation. if we are so rich, what are we so broke? is it a spending problem? no. it is because we have a misallocation of capital.

and the wealth. all of this wealth that has been built up by hard working americans has been accumulating into fewer hands. then we have a tax code that is skewed toward the wealthy. a tax cut whittled with loopholes -- a tax code riddled with loopholes. that allows the wealthy had to fund manager to pay less rate of taxes that a nurse, for example. it is very interesting that all this talk we have about sequester talks about the programs that hit the hardest on the homeless and the helpless, the disabled. and yes, also the middle class. what are we talking about a sequester that when the curtain

falls, it also falls on all these tax loopholes. let those and on the same day on which we are going to cut back the spending that allows us to educate our kids with disabilities. we are not talking about that. i take exception to those that say we have a spending problem. misallocation of capital. in the 1990's when we had a balanced budget and a growing economy, our revenues were about 20% of our gdp. now it is 16% of our gdp. that equals more of a burden on families with kids with disabilities. people are homeless, trying to find a place to live.

shelter for our veterans. and the middle class people that work on the jobs that protect our country. falls on them, too. on the middle class. we have to start thinking about this in different terms. we cannot just focus all the time on cutting our obligations as government to build a more fair and just society. i still believe that the moral test of is how it treats those in the twilight of life and the dawn of life and those in the shadows of life. our homeless, our needy, disabled. that is a test of government. i do not think we are meeting that test right now. we are backing off of that.

count me as one of those, we have to do all those things but we cannot lose sight of the fact that this federal government we represent has to be involved. and making this a more fair and just society. i know that is an overview and i have taken all my time on that comment but as we move ahead and i hear voices saying no, we have to exempt defense from the discretionary cuts, if defense is this -- is exempted, the homeless should be exempted. we have to get back to a better, rational system. and back to our obligations.

i did not ask a question but i want to make it clear that i feel very strongly that it is not just appropriations causing this problem. it is a lack of the revenue we should be taking into meet our obligations as a country. >> thank you very much. yearlong standing reputation for passion -- your long standing reputation for passion is well known and appreciated. senator collins. >> take you very much, madam chairman. it is difficult to follow the eloquence of my colleague from iowa. however, i believe we do have a spending problem and the $16.40

trillion debt is ample evidence of that. i said that as one who supported increasing taxes on our highest earners. there is plenty of blame to go around for the crisis we find ourselves in. but there can be no doubt that these indiscriminate cuts represent a failure to set priorities. we cannot allow sequestration to go into effect. if we do so, we might as well pack up and go home. if we are just going to have the across-the-board cuts, what is the point of our being here? i hope we can work together to

come up with alternatives. secretary carter, i want follow up on a point you made. the ramifications of sequestration are extreme but in my judgment for the department of defense, a yearlong continuing resolution also would inflict tremendous damage and the department. congress has authorized the navy to procure 10 destroyers during the next five years as part of last year's defense authorization act. the navy already has the bids for these ships and is ready to sign but they cannot find these contracts without an appropriations bill. we risk always significant savings as well as jeopardize

and the stability of the ship building and the joe bass be held for so long and hard to preserve if we do not complete work on fy13 appropriations bill. dr. carter, do you believe it is essential we not only deal with sequester but have the defense appropriations bill for this year? >> it is. there are both very much destructive. i referred earlier to the fact that in the cr, we have inadequate maintenance and operations dollars. it hits us so fast and hard. but we also need the authority to embark on new starts.

the way ship building is organized, every new ship is a new start. we are in a position where we are five months into the fiscal year and we have the authority to build the ships we built last year and none to build the ones we plan to build this year. that is crazy. that has nothing to do with sequestered. >> we can't just do sequestration and i know i have had this same conversation with secretary napolitano as well. secretary duncan, i have met with educators from maine who tell me my state alone would face up to $11 million in cuts in education funding. that could reduce funding for critical programs such as title 1, special education, what does

the department of education intend to do to help schools that are hardest hit by sequestration if this goes into effect? could be shifted the focus of some of your competitive grant programs to help in building in education spending? >> the money we spent represented less than 1% of spending on k-12. it is a little more than half a percent. to think we can ship a small number of dollars to fill a whole does not make sense. the numbers do not work. the damage would be irreparable. there is little i can do to cushion the blow. that is why it is so important

your leadership to the right thing here. i wish i had a magic want to wait. -- i wish i had a magic wand to wave. i simply do not have that. >> thank you. a comment course secretary carter. he made an important point about the federal civilian work force. too often is thought of as white collar employees working in satellite and. senator shaheen and i know about welders, engineers going to work at a pier. these are the firefighters to put out a very dangerous fire on a nuclear submarine. we need to keep that in mind as well. >> senator murray. >> thank you very much, madam chairwoman. i appreciate the opportunity to

hear from a great panel to help us understand the impact of sequestration, should it go into effect. it is important to remember sequestration was never written into the bill to be implemented. if it had, it would have been more thoughtful. it was put to put -- put to come together and get a balanced approach on how we deal with our national budget. we are two weeks away from involvement in policy that not only should not be implemented but was never written to be implemented. i have a working with others on an approach to do that. i urge our colleagues to think about how we can do that moving forward. i have a letter for the record.

i have over 3000 organizations in this country from human rights campaign to lokke agencies urging us to do that. i submit it for the record. thank you for that. secretary donovan, in your testimony, you talked about the consequences of sequestration cut suit hud programs, over to let a thousand families being at risk of losing their housing. those cuts move past the implications you talked about. cuts in military and domestic spending will result in significant job losses across our country. middle-class families will find themselves threatened because they have lost their jobs, and a fragile time in our housing market. could you talk about how the massive job layoffs that would occur if sequestration was implemented would affect the housing market?

>> one of the things that is cause important is that for every dollar we put into housing, we see $5 and multiplied the impact. if you go in reverse, he multiplied the impact of these cuts across all the private and investment that comes in to housing. when you look at, whether it is our direct housing programs opportunity developments, for every one of the thousands of jobs he would lose through the direct spending half, the rigell effect with factory workers and real estate agents, lenders, what you see is 5-10 times the number of job cuts that happen. can you build on that a loss of confidence. housing has been driving our economic recovery. just to cut that off at the

time, you will see less consumer spending. families will not go to restaurants at the equity in their home is dropping. prices could turn back around. the ripple effects are enormous because of how central housing is to our economy. >> sequestration would have a direct impact on the housing program and the job market and the confidence factor. secretary duncan, an education as a top priority of mind. sequestration will have a huge impact. i heard from a school district in my state. they have a free and reduced price break for lunch.

they told me it would impact a $1.6 million budget cut. can you tell me how you would see the general impact of these districts having to cope with sequestration? both districts are making decisions about hiring teachers. >> behalf to look at the past couple of years. to the recovery act -- we have to look at the past couple of years. we have class sizes that are much higher than we would like unless children engaged in after-school and summer programs. we are at a tough economic time. for many educators, this is the

toughest financial situation they have been in in 30, 40 years. to move additional resources would exacerbate a really tough situation. other countries are not doing this. south korea is investing more and that is where the competition is. every good superintendent is trying to do their budget planning now for next year. they are trying to hire staff and figure out your after- school and summer school programming now. when you have a lack of stability, we do not know what is going on, you have to plan for the worst. so you do not schedule summer stuff and you raise your class size. the least we can do is give them predictability. we didn't come here to hurt that.

>> i appreciate that. i want to remind all of us, increasing class size is not just a phrase. i talked to a middle school teacher a few weeks ago after newtown who told me she now has so many kids in her classes, she has no ability to know each one of those kids anymore. we are counting on our educators to know their kids because of the impact of not knowing them. this is a real consequence to our country. >> the president talked about that extensively, the best long- term investment we can make. i talked earlier in my testimony, 70,000 children having less access to pre-k. >> thank you.

>> we now will go to ranking member on the homeland security subcommittee followed by tom udall and senator mikulski as senator feinstein. we are moving. this is a content rich hearing. >> madam chairman, it is a pleasure to be moving along with you in the chair and all of us adhering to the five minute rule. the point i want to make is you have all made the case for having to deal with shrinking resources. i did not support the sequester

either. i agree it is not the best way to deal with it. these are issues we should be dealing and working together to the process, separating the essentials on the like to do but we cannot afford it right now from the maybe we should not be doing it at all. every agency head and secretary, i have asked the same question. we have to deal with the reality that our mandatory spending is running away with our budget. the discretionary portion of defense and non-defense discretionary is shrinking. not necessarily because that is the way it should be but because the part of the pride that we have no control over in terms of growth is simply continuing to eat up more and more of our annual budget.

you can only tax so much before that is not successful. we just went through a fiscal issue here with the cliff. i also supported that. should we not all be dealing with the reality of what we are facing? when wwii ended, soldiers came home and we recovered from a depression and everybody started having babies. first we needed nurseries, then diapers, enormous amounts. that whole burge has moved through our economy and now it is retirement. 10,000 a day of those baby

boomers are retiring. we have mandatory programs in place that provide things none of us is try to undo. should we not all be here working to try to find a way to address this ever increasing mandatory spending so we have funds available for defense and essential non defense functions? the sequester is a one-year fix that we are trying to do now. shouldn't we be doing the long term fix? are you pleading with the white house, with us? are we working together to address what everybody should

have been addressing decades ago? we have all seen this coming. this modern merkel -- this modern miracle of medicine has increased life expectancy which used to be not higher than 70. now pick are living to be 80, 85, 90 and 95. once you reach 70, it was in your living on house money when you look at the history of civilization. we have known as baby boom crunch is coming for the last 35 years. we have done one thing to adjust mandatory spending -- the 1984 social security fix. which brought us about 40 years of solvency for social security by raising the retirement age. we talk about this all the time.

here we are pleading with today's -- with doomsday scenarios when regardless of what happens, are you for education, better housing, are we strengthening our national defense, according the border? all the things you're discussing here, you have to get money from a shrinking piece of the pie. so i guess my question is when are we going to step up and press our colleagues to address this problem? so it is not just a matter of we spend too much, we need to spend more. it is a budget problem we have to deal with on a long-term

basis. i have used up all my time. >> the president on multiple occasions has put forward a plan that would create $4 trillion in debt is a reduction over 10 years. that is something both members of parties and experts have pointed to as important benchmark two lay critical foundation for longer-term deficit reduction many years into the future. part of that plan involves sensible reforms to mandatory programs and entitlements. so there is in the president's proposal specific areas that are making those types of sensible reforms. they embody the spending cuts that are and then to the budget control act. then there is tax reform as well. i wanted to make sure i got on the record that in the president's plan, there are

sensible entitlement reforms. >> the has been in presidents plans. we haven't done it. and i think time is up and we need to do it. >> senator tom udall. >> thank you, madam chair. what a great pleasure is to participate in my first senate appropriations committee hearing. i wish it was under more pleasant circumstances. i would like to make two points. sequestration president's damaging cuts for new mexico's national labs, military facilities and border security. if implemented, those cuts will be very damaging to our national security. sequestration will also be very damaging to some of new

mexico's most vulnerable -- children in need of a quality education, rural communities struggling with housing and homeless veterans seeking emergency shelter. mr. werfel, new mexico's national security laboratories work to support our stockpile mission. i believe this sequester across the board cuts will hamper the important stop -- mcorp to work across the country there is zero tolerance for mistakes when dealing with nuclear weapons. are you afraid sequestered present a risk and is dad concerned about its impact as a result?

>> i think nnsa does fall within the defense category and therefore faces roughly and 8% cut which will be applied evenly across all nnsa labs and plants. it is my understanding that critical milestones will be delayed for that lab as a result of the sequestered refer los alamas, we are looking at hiring freezes and furlough days for certain employees. there is significant concern. your question, i think it is not safe from the impacts of sequestered. >> we are the customer for nnsa. we depend upon them making a safe and reliable nuclear

arsenal that we can put aboard our delivery systems. so i am concerned about it. it stretches out of the stockpile life extension programs, which is not good because it makes them more expensive and we do not have time, in many of those cases. >> thank you for those answers. i want everything i can if we go into the sequester to make sure that if you protect these national laboratories that are real jewels. new mexico's military installations are unique to our nation's national security objectives due to the large and unencumbered aerospace. the sequester will impact long-

term readiness as well as feature defense research in favor of a reckless plan to reduce the budget. i think you've talked about that. are you concerned with the impact of the sequestered on these new mexico installations? what are the near and short- term consequences of reduced training at your force bases and the reduction of research and development at white sands and the air force research lab and similar test ranges? >> in the near term, you will see a identify all months of this year a sharp curtailment of range activity and other trading activities. we do not have any other choice. we will simply run out of money. in the long run, if the reductions in budgetary authority forecast, not all o

these -- not all of these facilities can survive. we asked last year to make the judgments we are ready making -- to make the adjustments we are already making. that $487 billion, that extends over 10 years. some of these installations will have to be reduced. both in the near and far term, i will have an affect on those installations. we do not have any choice. >> mr. carter you mentioned in your testimony about small business being hurt by this. i think that could be a real impact in new mexico and across the country. thank you.

>> thank you, madam chairman. looking forward to it with great enthusiasm. secretary carter, you mentioned that the wolf is at our door on this one. i am worried the will is already inside. -- i worry that the wolf is inside. i'm worried that with or without sequestration, we aren't trying to acknowledge we do not like sequestration. it is ugly and it just does not work but it does force us to deal with budget cuts. it forces us to deal with a $15.4 trillion debt. if we are not working every day as lawmakers or you within the administration to make sure we are easing the pain of these

cuts wherever they may fall, than the and on doing right by our constituents. i want to speak to a frustration i had where i am seeing budgetary decisions that are not making sense at a time when we are forced to prioritize. we are forced to be looking at spending reductions. this is what is going on in my state of alaska with a back door run on the air force base. we are looking at our fy12 cr level that we recognize our very problematic. we have the possibility of sequestration. we have this committee's direction to the airforce. we have the same move was rejected in 2005 yet the air

force is moving forward with this plan. last week, they held four meetings in alaska despite the ban on non mission critical travel. we're supposed to be prioritizing yet you have the department moving forward with a plan that costs money rather than taking a enterprises like look at all our air force bases and determining where force structure reduction can fall. when mayor talking about priorities, it needs to make sense all the way -- when we are talking about priorities, it needs to make sense all the way. >> you're absolutely right.

it does have to make sense be on march 1. we are paying and will pay a huge long-term price for the short-term disruptions. i am already doing things. we already have to do things to curb spending. that is another reason why short-term fixes did not help us out much. they do not give the stability we need. to the point you make, that as a legitimate issue that proceeds and a somewhat independent of sequestered. it was an issue we had last year. it is a matter of priorities. i understand there was

disagreement this year about a member of the adjustments the air force made. that is why there will be a commission on the future of the air force. we are absolutely committed to working with that commission. the air force understands that and we are not going to take action that contravene the decisions that were made earlier this year. >> i would hope, we are looking long-term to our critical merit -- critical military. >> may i comment on that? >> i do need to get to mr. werfel. >> we are making decisions. sequestration does force decisions that do not make any sense.

as does the cr. >> mr. werfel, one of the most a quarter responsibilities is the trust responsibilities for american indians. one of the programs we are dealing with within the ihs is a trust is a possibility to these native people. within the va, and medicare, they are off the table in terms of their cuts. given the critical nature of the health care services to our times, what actions is ihs taking to minimize the impacts of the delivery of health care on the indian community, and given the trust is a possibility -- the trust responsibility? i realize i've gone over my time. i apologize. >> you are pointing out that the impact of the sequestered and packs a broad range of pr-- impact of the sequester impacts

a broad range of program. it is capped at 2% but not the discretionary side. the have asked each agency -- we have asked each agency to figure out how to implement the sequestered in a way that will best serve mission, ballots in all of the priorities. we have come to the conclusion, there is no way to fully protect mission. the indiscriminate and abrupt cuts as they were designed are enormously disruptive. with respect to programs serving native americans, i will take your question back and we can work with those agencies to get you a fuller answer but it is disruptive and the are asking the agencies to do everything they can to minimize

the disruption. >> that is the point of what you're getting to which is the matter what, there is no good way out of this. there are no good choices. we will go now to senator feinstein. before that, some members have to leave before they got to ask a question. we wanted to give him and affectionate welcome back. we will put their statement into the record. for the lineup, it will be feinstein, andrew, boozman. then moving along. >> ticket, madam chairman. i want to begin with something

he said -- thank you , madam chairman. i want to begin with something he said. i find it beginning to happen in california. california will lose the most jobs by far of any state. george mason university did a study. they predicted we would lose 225,544 jobs, of which 135,209 are from your department. with the knowledge that there will be 10 years of this, people are now beginning to

make decisions about their to cut staff and be ready. i believe next to a major war, economically, it is the worst thing that could happen for this country. we should end it. madam secretary of homeland security, you are the most precise of everybody as to what they can expect. i do energy and water. we have tried to find out what does this mean for the lab? our staff has spent a lot of time try to figure out where the cuts are and who will suffer them. everybody is concerned that what is going to happen to them

and we can give no one a straight answer. it is a bad phenomenon and it should and before it catches hold of america and as a great deal of damage. let me ask about one thing. for california, as happens to involve the only shipyard on the west coast. nasco in san diego. 3,500 jobs. we worked hard to achieve long lead financing for three mobile platform ships. we have the financing. what will happen to nasco and the financing? >> not good things. i'm concerned about it. there is a continuing resolution program that i mentioned earlier, the authority to proceed on the basis that we planned in shipbuilding. the sequester a reduction in budgetary caps over the long run will have a huge effect on our separate building -- on our shipbuilding industry. i am very concerned about that. there is no question there will

be a major restructuring in shipbuilding as a result. that is one part of our defense -- >> will it lose its long lead financing? >> and depends on whether the continuing resolution issue is resolved or not. if it is, there is a chance we can do that. but that is exactly what i'm talking about in terms of imprecision, on certainty. people have to make decisions with a suspect to contracts. so they make the negatively. it is my understanding and number of agencies, nsa, all fall under the defense budget. it is my understanding that

director clapper has asked the be involved in these decisions. have you worked out an agreement with him? >> yes. he and i talk all the time. i do with all of our manageres, there is a huge ahmad of the killed here and a huge number of mannesmann decisions we're try to make it into the uncertainty that he mentioned -- is huge number of management decisions we are trying to make in the uncertainty that he mentioned. we do tend to make conservative decisions. if this all goes away, we will regret. because they will introduce

inefficiency for no reason at all. >> thank you. >> senator blunt. >> thank you. thank you for the time. we keep talking about the fact that we can take some balanced approach between spending cuts and revenues. i am confused by the idea that there appear to be no spending cuts that can be taken. we have $60 billion of new revenue this year that we would not have had last year. but we cannot find $85 billion for the -- worth the cost. i will accept the idea that nobody told anybody this sequester was going to happen even though it was in the law. i had the chance to be in a

hearing with secretary carter this week and i ask what no. did they submit for the omb budget planning this year and he said they submitted a number based on the pre sequester number. so once again, we are not prioritizing. you're saying this is taking us by surprise, we do not have time to cut " we are not making a plan to take a cut next time either. what was the guidance from omb on the 14 budget? >> it was 5 below 2012 enacted. the budget control act of 2011 had with its roughly $1 trillion in discretionary spending cuts imposed through spending caps. the challenge now is $85 billion over seven months. that is the challenge you can

plan for you cannot avoid the harmful impact of. >> i accept that. it seems to fly in the face of the idea that nobody knows how to reach this goal even if half of it is revenue. it seems we are not planning that very well. secretary donovan, to clarify on the reservation funding issue, we said our funding would be cut by a third crew specific reservation. why would it be a third?

you try to find by% doubled at the end of the year, i can see. you can get back to me if you do not know why it is the third. >> i am sorry, i am not clear. >> you mentioned a specific education funding and a reservation that would be cut by one-third in the remainder of this year. >> i believe it was in secretary duncan's. >> i'm sorry. >> it is all secretary donovan's fault. [laughter] >> this is aid that goes to native american areas, areas where there are military families and bases.

we would have to cut this money right away. we disproportionately from those areas because there is a lack of property taxes. it started that district's budget -- >> the normal cuts in normal degette would take as well as the eight we would give? >> and this would happen now, not down the road. >> i am going to ask an omb question. it will be working on questions about on-site inspectors. if they did not show up at a meat processing facility, that facility cannot open. fda can come by occasionally and that does not relate impact whether that plant can be opened or not but if the usda inspector does not show up, the plant cannot open. is there any way to prioritize those kinds of individuals

showing up other workers to show up that day? >> i do not think there is, senator. the with the budget isn't structured and that 88% of their total funding is spent on salaries and benefits for front-line personnel doing the inspections you referred to. it becomes a mass issue. they will get a certain amount of budget that will be cancelled if we hit the sequestered. there is no way to find other sources of funds because 88% of the entire budget are those very people that need to be at those plants during the inspection to keep them open.

this is one of the very tangible and clear and significant impact of sequestered. this division within usda will not make its core mission, sending inspectors to these locations. therefore under a program laws and regulations, they will be -- there will be stoppages of work carried it is a very serious concern. >> the legal requirement to be at the facility, we will be asking that. >> madam chair, thank you for your leadership. i cannot think of a better person to be in that chair to help us address the challenges ahead of us. i look forward to doing my part to work with you and the ranking member. one of my colleagues last week made an observation worth repeating today. he said, offering up flexibility, which is what some

of my colleagues are offering to deal with the sequestered, as like giving the passengers of the titanic and often after they hit the iceberg as to what deccan they would like to relocate. -- to what deck they will like to relocate. i think our committee would be well advised to deal with reality. we have mentioned the word several times. why is it not that some of my colleagues on the other side will acknowledge the reality that the revenues coming into the federal government are lowest levels since president eisenhower was the president? what is it about the reality that the other side of the aisle will not embrace?

is it they did not believe the fact? do they disagree with that fact? do they have some other facts to put on the table? if they do, i will listen to that. i have not heard anyone question that. so that is a fact. it helps to frame the debate which is, we cannot rearrange the passengers on the titanic and suggest that we are doing anybody a favor. we have to bring more revenue at $600 million to my friends from missouri, that is not enough. we have a $4 trillion problem. we have or did put cuts to spending that something is to arrive -- that are too high. do the other side and expect us to do $2.8 trillion more? where revenues are going to

come -- what revenues are going to come? the same ones that argued for no new revenue also come to my committee and the men i'd double -- demand i double the number of border agent in the homeland security budget. i have done that. from 9,000 to 21,000/ we have built 651 miles of fence, a third of the southern border. this is a land border. have apprehended 1.2 million illegal people coming across the border. we have added money at the request of members to do this now now these same member to do this and now they will not help

us find additional money. secretary, what's going to happen with our southern border if the sequester goes into effect? >> i am having an outer body experience. yesterday i was before the senate judiciary committee on immigration reform and it was pressing about why we are not doing more at the border. the administration has put records amount of resources at the border. that needs to be sustained and built upon. under sequester, our calculations are we will lose an hour, 5000 border patrol agents over the next year. staffing at the ports of entry, we will look at reductions, furloughs of 12 to 14 days for every port officer.

we will look at not being able to invest in the technology that is so important to make the most out of the boots on the ground we have at the border. we are looking at longer wait times, less security and interior enforcement will not be able to meet. even if congressionaly mandated. >> my next question you have the answer in writing. this is very important for louisiana. international travel is a driver of our economy, bring in jobs to america. if we cannot put the right number of customs, that will have a terrible impact on our

ability for international trade. i will leave the question and ask you to answer it in writing. how states will be affected at that turn. >> before i do, 2 quick administrative things. questions are coming up about 2014 approprations. we do not want the government shutdown. we are working with our house counterparts on this. our president submits the

budget. we asked the ranking members to move out swiftly and smartly to begin their hearing. this committee, the administration is late submitting the budget to us. we will have a time line and be ready for markup in the late spring and over the summer. we are going to make every effort to have a regular order and follow the traditions of calendar to do that. in 2014, we will have real hearings and real debate. and i want to thank senator shelby for the way we are moving this forward. >> it is good to be here. i think i am correct in stating

the veterans administration is a good example? >> is hard to hear you, sir. i think that is better for you. >> that is how it is when you are low man on the totem pole. not very well-equipped. >> or the shortest person in the room. [laughter] >> we appreciate you will be in here. the house has acted a couple times, they sent a couple bills over. the senate hasn't acted and the president hasn't acted. the time we have going forward, it looks like we will have to work through this.

i would like to ask about a couple of things. a lot of veterans families have contacted us. can you tell us the veterans' benefits will not be affected? >> those funded through the department of veterans affairs, they are explicitly exempt under the law. but there are certain veterans' services funded out of other accounts and other agencies that would be affected. >> va hospitals -- >> that would be exempt under sequester. >> in your testimony, you mentioned they are investigating ways to reduce the problem of the $3 billion shortfall? can you give us some ways that you hope to avoid a problem being there. how you will make up for the $3 billion. >> we are looking at that and to avoid the shortfall, causing us to have to stop giving care

in the last month or so of the year. i will get back to you in writing because it is complicated. we have not found a way to do it legally yet, but we are working on it. if i may, i would like to get back to you on that. we understand the gravity of the problem. >> i think everyone on the committee, it is something we would be concerned about. in the past, when budget years were tight, the faa has proposed reductions in contract hours and flight service stations, small cities in rural areas. would you implement these reductions -- are these the type of reductions will see as a result of sequestration that would disproportionately affect rural america versus urban

america? >> there are definitely risks. they will face a cut of $600 million under sequester, a vast majority will be furloughed for one day for the rest of the year. this is going to reduce air traffic levels across the country, causing delays. it is my understanding that there will be a curtailment of service at low activity airports. there will be impacted and feel the effect of the sequester. >> he mentioned that the air force plans to cut facilities and maintenance project by about half, including cuts to 189 projects. do you have a list?

>> i can provide you with that level of detail. it is basically everywhere. >> one of the things i am concerned about, if we do go and the sequestration, i have heard that they may have to reduce flying hours by as much as 18%. and very quickly, can you tell us how how that will affect the air worthiness of our pilots? the reality is that this actually could mean 30% reduction moving forward. >> no question, flying hours will steeply declined. that means two things. first, the unit's except for afghan training, we are

prioritizing -- >> that will make the other -- >> it means they are not going to be ready for other contingencies. it is a real national security concern. if you play this out, if proficiency declines, and it takes awhile to get them back. you will see that in our air wings and throughout the year force. that is why i said short-term disruption is long-term harm, and that is why we need some solution. >> the next speaker was going to be a senator who is not here. we now go to senator sheehan,

moran, pryor, alexander, and cochrane. >> i am pleased to be able to serve on this committee with you. i am particularly pleased to hear you talk about the effort to return to regular order. for all of our panelists, thank you very much for being here. as the congress, we have been unable to deal with this debt and deficit. i was impressed and pleased to hear all of you talk about, in your remarks, that these automatic cuts that go into

effect are not just going to affect government jobs and programs, but private-sector jobs and private sector efforts to put people back to work. they will have an impact on businesses, families, jobs we are creating an impact on economic activity. i am sure that you referred to secretary carter in your remarks, the fourth quarter activity last year. we saw a decline in economic activity for the first time since 2009. that is because of the reduction in public spending, economists suggested that was a concern about the sequester. we may see a loss of 1.4 million jobs if the sequester doesn't affect. feinstein referred to the

george mason study that suggests we will lose 2 million jobs, 1 million on defense and 1 million on domestic if we don't deal with this. you referred to the comprehensive effort to address the sequestered. what i think about the comprehensive effort to address that and deficit, i think it has got to be balanced. look at the domestic side, the domestic side. i think we need to look at mandatory programs and the think we do look at revenue. we need to solve this problem for the long term. we would not run our family budgets this way. we would not run businesses this way and we should not run the government this way. it is a detriment to all of the taxpayers across the country. one of the things that i think that we have not talked about is the cost of what we're doing right now out in terms of the

sequester. i wonder if you can give us an estimate of what is costing us to plan for the sequester and if it goes into effect, what some of those costs might be. >> i don't have a specific cost estimate. i can tell you that i am taking a lot of the central coordinating roles across government in planning for a sequester. i have a sense of the impact it is having and my colleagues can certainly speak to it. it is enormously destructive to agency operations. you hear stories of people in meetings from doing the mission critical work they are supposed to be doing to be pulled into a meeting to discuss how the plan for this contingency that was never meant to occur. and at the end of the day, the planning is going to fall short, mitigating the many harmful impact.

>> let me ask you, secretary carter, because before the armed services committee, you talked about the cost of a sequester that will have a long- term impact in terms of shipbuilding, for example. >> unit costs will go up on every program affected by a sequester. we can provide you with those numbers whether it is the joint strike fighter, still at the very moment we are trying to be parsimonious with the taxpayer dollar, we are wasting it. by forcing our industry partners to the haven and economically inefficient way, that is very frustrating to me.

>> one of the things that the office of the inspector general and the federal housing administration program has recovered about $1.5 billion in able to put those to better use. can you talk about how that program might be affected by the sequester? >> it is in just the internal cost to the agency. it is a return on investment, if you will, the dollars we are spending. it doesn't take into effect where we are saving money. our inspector general, that funding would be reduced just as it would in any other program. the past year alone, we have recovered over $1 billion from lenders that were not making loans according to our standards. and having to reduce our own oversight as well as the inspector general losing critical staff, it will lead to greater losses to the taxpayer that we are gaining by making these cuts. we know that not only do we save lives by getting veterans

off of the street, but we reduce costs from emergency rooms, shelters, prisons, and our range of other institutions. we save more money by housing and homeless veteran than we do simply because of those. >> i understand you will be the new ranking member, is that right? >> i love forward to that opportunity, and i have reached out expressing my desire to have a good committee operation. i am delighted to hear her your suggestion if we're going operate under regular order. i have been asked if i like being on the appropriations committee and i look forward to

your tenacity to see that we do that. first of all, in the regard, i look forward to the hearings were we get to the point where we're talking about the appropriations process. i look forward to addressing the issues of spending a long term setting rather than the matter of a few months where sequestration will apply. i will start with you, i don't think in the years i have been a member of this committee or the homeland security committee, that we have ever had you in front of us where we have not talked about the topics of the national science facility. i was reluctant to do that today but you give me no option because our time is up. unless your release the funding in the next week, the contracts expire. the last time we were together,

you indicated it was about time to fish or cut bait. your authorized the transfer of real estate from the state of kansas, and allow the transfer of the land so that this facility could be built. you have the authority, once again, to take another step to release the $40 million this congress has appropriated to meet the state funding, to complete the utility pad. i am anxious to know if you're ready to fish or cut bait. >> we have been working with the state of kansas, and they increased their own participation i view it as a huge security need, and a huge need for agricultural industry. with respect to moving forward, i am aware of the contract

issue. i might say this perfectly illustrates the problem we are all having. i am trying to work with congress to build a facility in kansas. it is a big investment and will take some years to construct. but the country really needs it. it is virtually impossible to do a long-term capital budget when we have a 12 budget, we don't really have a 13 budget, and you know what will happen with 14. i'll have to echo secretary carter that we are making all these things more difficult, more expensive, and at the risk

of really encouraging rest to the nation, i am aware of the tough issues. i have a call with the governor of kansas this evening. you have made it almost impossible to manage this large department. >> i assume it is the universal you at not these pacific yew. >> that is right and i would not want to single you out. >> let me stress the importance of your conversation with our governor, but the money is appropriated with in your realm of releasing those dollars. >> is appropriated, but what do we do with the out years? >> is an issue that will rely on congress to fulfill its obligation to fund facility we

believe is important. i am not critical of the administration any more that i am critical of congress. it is embarrassing in the circumstances in which we don't do our work. continue to passed continuing resolutions. i asked to be a member of this committee, i think there is important work to do and i am pleased that our chair is as tenacious as she is to make sure that this is a process that the senate complies with. the you i understand is all of us, and it is past time for this congress to function. in 18 seconds i have left, let me as a focus on nih. the impact of sequestration, i

believe medical resources are significant and help save lives and reduce the cost of health care. a description for how it handles sequestration in the sense that the money goes there and is provided in grants elsewhere. will that money be used internally for research projects? if there is a reduction in spending, will reductions, an equal fashion, or how will they be divided or the 80% of the research done across the country by universities and research facilities. >> it is my understanding that nih will have to issue hundreds of you were awards that would

have spiraling impacts of delaying and halting vital work, placing prior investment at risk and ultimately setting back work on a chronic illness and disease. i am not aware of the exact split, but i think the important point is that research and innovation is important. >> i am still interested an answer to the question. i would also encourage you to provide heehaw committee for the $4 trillion plan you responded to. >> if i can respond to that, the president's budget, when it

existed, they used those. a basis for those negotiations. they submitted very specific plans on how to save $14 trillion over 10 years. it is really up to congress to work through those issues, get a bill that can pass -- pass both the house and senate and get us on a balanced attack. >> i have not been participating in those meetings that occurred, nor was i member of the select committee, and it would be great to see a proposal in writing as to what that plan is. and only go back to regular order, let's discuss those.

>> thank you for your question. i was visiting thursday morning, and offered hospitality. i will ensure that your question is asked, and one of the questions i have, the impact of sequester and your staff is more than welcome. they can hear the first name briefing that i received. and senator harkin's does that. his statements will be in the record. the deputy secretary will be with you. as you know, his new role. >> let me follow up on one of the points that he made about the department of agriculture. the law on the inspectors say the plant can't operate unless inspectors are there.

closing these plans for 15 days could result in lost volume of 2 million pounds of meat, beef and pork. 3.3 billion pounds of poultry, and 200 million pounds of egg products. it will drive the price up, so this will adversely affect every consumer in america and be very destructive to the food supply chain that we have in this country. one thing that the senator did not cover, there will be 100,000 income residents that will lose their rental assistance and to enable them to stay in safe and affordable housing. for their households, average income is $803.

these are low-income people. my first question, as these take effect, it happens in every agency. or will they be phased in over time? >> what we will see is agencies will start doing key things first. in the manner in which the furloughs are implemented are

fair and equitable. next, there will be a notice period that are different depending on the agencies. the intensification and completion of that with unions were appropriate. so the furloughs themselves will happen along a continuum, not exactly on march 1. and also spending reductions as well. >> have you done a study or analysis of the adverse effect of the u.s. economy? a study for the entire u.s.

economy? >> we do not have an official estimate, but i will point out that a range of third-party estimates, some of them have been raised during this hearing. they show a negative impact of 0.5%-0.7% in 2013 alone. what it translates to, the president is clear it will translate to hundreds of thousands if not more, job losses. we have talked that these are difficult to measure. there is pulling $85 billion out of contractors very abruptly and suddenly. you have impacts on the supply

chains. for me, i don't know if it is an important micro economic measure. what does that translate into? in particular, middle-class get jobs. >> i only have about 30 seconds here. i know that you talked about when it comes to the industrial base, these contracts have provisions and then for if the government breaks the contract, there are penalties. he said that the unit cost goes up. has the department of defense done a calculation of how much this will cost in terms of efficiency and what dollars will be wasted as part of this?

>> we do that program by program and it is related to security. a good measure of the impact, even if we for low everybody, all 800,000 civilians for the maximum we are allowed to do legally, we would get 5 billion and dollars out of the $46 billion we need. where is the other 41 billion going to come from. whether there are vacating ships or weapons systems. it is a huge impact on them. >> did you have the statement on record? said sir alexander? -- senator alexander?

>> i think the witnesses for coming this morning. you mentioned a plan to reduce the debt, that is a public document. i assume you are familiar with it. >> i am. >> can you detail exactly the plans for reducing entitlement spending over 10 years? >> i can provide you additional detail there. the 2013 budget that contains his plan has within it, with respect to deficit reduction -- >> these the specific proposal

to reduce spending on entitlement programs over 10 years. >> $362 billion in mandatory savings and it includes such provisions as reducing medicare debt coverage, alighting payments for medical education and rural providers. increasing income-related premiums. alighting drug treatments -- at $362 billion over 10 years. there is an additional $270 billion in the budget in other mandatory programs such as eliminating direct payments to usda subsidies, changes to civilian and military retirement. increases in security fees and the u.s. postal service. that covers what i have here for mandatory programs and the president's overall plan. >> that is $600 billion over 10 years, and reductions in mandatory spending. $4 trillion? >> it builds on $1 trillion previously achieved.

that is the component of mandatory spending in the president's budget. >> the problem with that is that entitlement spending is most of the problem we have, is it not? with spending and deficit? the budget control act addressed discretionary spending which is what this committee deals with. and if we follow the caps that we put on discretionary spending over the next 10 years, that part of the budget would grow at about the rate of inflation. is that not right? >> that is my understanding. >> if the whole budget grew at the rate of inflation, we would not have a problem, would we? >> going back to the fundamental components -- >> i don't want to talk about

that, i want to talk about entitlement spending. you said there is a $4 trillion goal. i said you have 38% or 39% growing at the rate of 3 or 4% a year. we have raised taxes, put caps on discretionary spending, entitlement spending is going to soak up all the money that you all are worried about and there is no plan for the president to deal with it. this isn't just the president's problem. i was sitting there trying to put more money in the higher education in the federally mandated medicaid was soaking up money that i would like to put in higher education. i would like to see a plan to do what his own bed commission said we needed to do. -- debt commission said.

restructure medicare and medicaid and a way that saves in so that people can count on them have so they don't squeeze out of the budget and everything else that we need to do according to the debt commission. federal revenues will be enough in 2025 just to pay for entitlements and the dead. there will not be any money for any of the things that any of you say are very important to the country. states have to balance their budgets. why don't we get together during these next couple of months and do what everybody knows we have to do, get control of entitlement spending so we don't have the problem you are talking about. it will not happen unless the president leads the way with specific proposals that he has not yet done. >> i am not disputing the growth of entitlement cost is the major driver in our deficit reduction challenges.

i am pointing to the fact that members of both parties have pointed to a $4 trillion benchmark in deficit reduction savings as a smart and sensible next move. >> said a turkish worker and i have put on the table a plan to reduce entitlement spending. >> of the president is ready to negotiate on sensible entitlements -- >> he is supposed to lead. >> he has put forward a plan. >> he has not put forward a plan to deal with entitlements spending because the plan which you related $600 billion out of $4 trillion and does not address restructuring the programs that are causing the government to go out of control and causing devastation that has been described.

thank you, madam chairman and i recused by time. >> a preview of things to come. >> is a pleasure to be here at my first meeting of the appropriations committee and i look forward to engaging in these type of discussions as representatives of respective states on both sides of the aisle on how to take the nation forward. that is what the discussion is all about and don't ask, if we take the budget control act and combine it with sequestration had the interests, how much of the savings? ballpark? >> the budget control act had roughly $1 trillion in deficit

reduction, the sequester would impact by 1.2 trillion. >> about $2.20 trillion. they had $600 billion on the defense, $900 billion on non- defense. is that more or less than the $600 billion in revenue that is coming out of the december 31 deal. >> it is more, by a significant amount. >> i hear folks on both sides of the aisle talking about a plan for revenue and expenditure reductions, is that anywhere close to what is being pursued with sequestration? >> no. >> how can it be replaced by revenue?

>> to achieve more balanced, yes. >> is there a difference between the $5,000 tax credit and $5,000 expenditure on a similar formula? either a program or the cost of the budget? >> i don't want to speak to the program, but the budget impact would be the same. >> if i spend $5,000 that i appropriate, isn't that basically the same $5,000? when we are talking about spending, why not across the board reductions on tax loopholes, credits, and deductions. >> of the president believes we should be talking about that. >> there are a series of things i would like to see. there is a lot more spending than that on tax loopholes, and wouldn't be closer to the balance we are talking about if

we close the tax loopholes and get back to the regular order? >> that is the fundamental guiding principle that the president wants for the solution. >> the proposal goes back a ways, but it deals with gaming in corporate status. would it make more sense to end the spending on the tax loophole or to cut special education entitle one? -- and title one. >> the best investment we can make is to get children off to a great start. we have to invest in education, smartly and wisely.

we cannot cut that investment. >> there is the stock-option loophole, and offshore profits. it is a $24 billion cost. i am not talking about the numbers being exactly even, but does it make sense to close this tax loophole or to cut a vast number of the affordable housing programs? >> our entire budget is over 50% of the folks that we serve. elderly people with disabilities. the entire budget is less than the $24 billion that you talked about. i think it is an essential investment that we need to continue to make. the costs of cutting it are devastating to families, it raises health care costs and costs for communities. when families are not housed,

it actually costs more. >> i looked at just a small number of these tax loopholes, what offshore that subsidizes our job and manufacturing. just for the total of $90 billion, roughly the same amount. basically, it can protect programs that support whores services - -core -- core services. >> absolutely. >> i am out of time, thank you very much. >> senator cochran, you were not here when i think you during

the time of his passing when you were the ranking member. i really thank you and reiterate that you're a big help during that time was very much appreciated. the way the staff worked together, and the way we worked together. they were direct guidance to me, and very much appreciated. i think it would help during a really awkward time. even a sad time of transition, i wanted to say that. >> i deeply appreciate your generous comments and your

friendship over the years. we appreciate your leadership on this committee as well. this is an example of a hearing that has gotten into the details more than any other approach. more than any other approach. which is such a big undertaking, these are real challenges that we face. too little money trying to solve too many problems. there is never enough to go around. we have to identify the priorities and work together whether we like it or not. the administration can't just send out the dicks, and establish what money each department is going to get. and so this hearing is very important. i think it is due in large part to the even-handed chairwoman.

and all the members that put their best efforts in carrying out responsibilities, we thank you. i will shut up and not prolong it any further unnecessarily. i did want to ask a question or to about sequestration. i am wondering out about it. the point is that we are operating under new restraints, if you will. in general, the sequester as it is written, cuts off all appropriated accounts at a level that is the same percentage. unless there are priorities identified by this committee or congress in consultation with the executives, we are not going to be able to carry out the will of the people who has expressed through the congress and our appropriations committee. it would be a misguided effort if we turned it over to the administration, though, to come

in every right and appropriations bill. i think we are going to learn by doing and we look forward to working with you in a cooperative way in recognizing that any changes or modifications will have to have the collective involvement of both branches of government. i don't have any other specific questions except to express appreciation and thank the chair for her leadership. >> senator reid. >> thank you, i want to add not only my best wishes for your services but they senator cochrane. let me ask secretary donna the question. we worked together on a bipartisan basis to pass the act which was directed at helping homeless veterans. it is disturbing to learn that about 100,000 homeless people may be removed from current housing or emergency shelters if sequestration goes through. >> that is the reality.

the act was bipartisan because we recognized both that we need to do more on homelessness, not only the right thing to do morally, but from a fiscal perspective. veterans programs are protected, he had the vash program would be protected, but 10% of all the people that we serve in regular home less

programs are veterans. veterans are 50% more likely to be home less than the average citizen. it is a tragedy. instead of cutting veterans from housing, that would be tragic. the cuts in funding for the public housing programs and the doctor programs more broadly mean that if the fees go down, last year we had six housing authorities turn back the vouchers for homeless veterans. unthinkable, because there was not adequate funding. even if it is protected, it would lead the housing authorities turning those vouchers back. it is perverse because the truth is, we would be housing those folks in shelters, prisons, emergency rooms, places that are much more expensive than the house and we provide.

not only would we have a terrible human cost, but raising the fiscal cost. >> you have raised a theme that i have heard secretary carter echo before the defense committee. one of the great ironies is the sequestration ends up costing more money than saving it. can you elaborate on that? >> all the programs required to be stretched out will increase their unit costs, in many cases, dramatically. we are forcing the industry to

make rapid adjustments. they will find it hard to recover. it will be expensive to recover. you will see us paying more in the long run for everything we do. we can do the most we can with the taxpayers' money and this makes it impossible. >> you will have to break contracts and pay a penalty fees because you don't have the funds to do it? >> i don't think we would like to take that particular path in most cases. what really will happen is that we won't be able to enter into contracts in the future, particularly ones that we in the industry partners have anticipated.

they are tooled up at staff up to do it and we can't enter into a new contract. these are not contract terminations, but we are failing to exercise options as the year goes on for maintenance, a base of operations, and so forth. they are a big deal for the people that do the work. >> we are searching for ways to offset the cost of the sequestration. with respect to border patrol and some of the other key national security components, what if you literally could not fill positions?

>> the results will be that we will be less able to secure the border between the reports. we will end up staffing fewer lanes. there will be disruptions in coast guard activities, disruptions in airport activities. a disruption in cargo that delays the whole supply chain. there'll be many deleterious effects. >> the ranking member. >> it came at a dysfunctional time. >> about sequestration, we used every adjective unborn the man

to say this is dumb. can we agree this is a daunting? are the iranians watching us in terms of national security? what signal would it be sending to the iranians to begin to dismantle your force as they try to wrap up their nuclear program? >> i think it directly shows a failure of resolve that we are not serious about implementing our new defense strategy. that is the kind of signal whether it is iran, north korea, they are watching us right now. they are seeing if we have the resolve to carry that out. secretary napolitano, what signal will it be sending the people trying to come here illegally if we stop securing

our borders? >> we have done so much over the past five years to really get that border more secure. it will just go backwards at a critical time when congress is looking at the system. it runs counter to everything we are trying to do. >> it undercuts the gains that we made, and it signals the radical islamists? you said you would reduce your pay by 1/5? how did you arrive at that number?

>> if we sequester someone to the maximum extent possible, they will lose one day a week, and i don't think it is right that they lose that and i don't even though i can't be sequestered. >> i think it would be high wise for us to follow your lead. that all of us follow your model and for every day it is in effect, the president should have his pay docked and we should as well to show that we

don't live on a a completely different planet like some people do. secretary duncan, how do you compete in the twenty first century without competing in education? >> lots of benchmarks, they are ahead of us over 30%. >> have you done graduation's lately? where people are receiving a ph.d. in science? >> is a diverse group. >> when it came to the masters graduates in the hard sciences, there is one guy that everybody clouds for because everybody comes from india and china, which is a great thing. i wish we had more native-born americans getting into hard sciences, but we need to welcome people throughout the world to come get an education. and we should make it easier for them to stay and be part of our country. then't see how you fix education system if we are going to attack the budget like this. if we found ourselves in budgetary creon's, we keep doing this dumb thing and it has momentum of its own, and i

am having to decide where the money goes, would you agree with me, secretary bentsen? -- duncan? if i had to pick the department of education and department of defense, i would pick the department of defense? >> i think these are false choices. >> if i make that dumb decision, do you agree it should be national security? >> we have to walk and chew gum at the same time. >> you have leadership, i think you have a chance.

>> if i had to pick, can anybody give a direct answer? >> is a false choice, it is a false dichotomy. he already said in his testimony, you have to have well-educated people. >> i will wrap it up and say it is a dumb choice but if i had to make that choice, i will pick the department of defense. >> was that entrapment? >> thank you for indulging me. >> this has been excellent

hearing. in terms of the member is anticipating -- participating, we had 90% participation. i have one final question. picture march 1. it is now midnight. here it is. can you paint the picture of how sequester is triggered? do all the lights called in federal buildings? -- to go out in federal buildings? the person managing the weather satellite does not show up every monday until congress acts?

can you pay for me literally when the phrase sequester is triggered on march 1? what will that look like? >> it will be multidimensional in is native impact. you will see intense bargaining going on with unions getting ready to issue furlough notices for hundreds of thousands of employees across the federal government. >> is that not going on now? >> that is going on now. it takes time. once we get into an area where the sequestration order is issued, it is real and serious. not that it is not serious now. it becomes law and it is an important symbolic moment. federal contractors will receive word on how their contracts will be impacted whether terminated or modified. they will get word on where agencies would not be investing in contracts. governors will be interesting

information on how it will impact their ability since -- the ability to sustain education and health and other areas. the list goes on and on. because we are in a seven month time frame, agencies are going to have to move quickly to meet this budget cut. we are doing the preparatory steps to get ready. once march 1 hits and the funds are cancel, everything we are doing in preparation becomes even more real and creates that much more uncertainty. >> i understand that. will there be an issuing of notices to people? the lights go out. people are furloughed. >> it is complicated. there are some elements of government operations that will

feel the more immediate impact. because of furloughs, we talked about the meatpacking element. the furloughs are going to occur on march 1? no. what the world looks like on march 1 is intense re-staging actions taking place. --pre-staging actions taking place. it is different from a government shutdown. a government shutdown means effective midnight, you can no longer incur any obligations and things actually shut down. >> that is scheduled to happen march 7. >> if there is not an appropriation. let me emphasize this point. i do not think it would be prudent to assume that because the lights do not shut down across the government on march 1, we can go across that precipice and pull back later.

we have had analogies of the wolf being outside the door and the wolf being in the room. it becomes extraordinarily serious once we hit march 1. then it is real and a lot of these things come to for written in a much more exponential way -- then it is for real in a much more exponential way. >> i think the witnesses. you presented excellent testimony and answered in a fourth white -- forthright, candid way. some other agencies were invited, hhs. they had to be in chicago with rahm emanuel. you make choices and see what happens. other agencies have submitted letters. they wanted to ask questions.

va and agriculture. we appreciated omb doing that. we have letters from every agency. they will be entered into the record, the public record. staff on both sides of the aisle will be able to scrutinize them. for my members, i would like to thank the active participation. everybody stayed within the five-minute rule. it is a little past 12:30 p.m. this is the temple the best tempo that i hope fourth -- this is the tempo i held for. the decorum of the committee was such that we hope to it to be

the tenor of this committee and spread to the congress. fear outside foreign creditors. foreign competitors. this is a self-inflicted wound. i think we need to deal with it expeditiously. thank you. this committee -- senators may submit additional questions. the committee stands in recess subject to the calls of the chair. thank you very much. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013]

>> we will talk more about this requester with representative harold rogers. he will be our guest on "newsmakers" today at 6:00 p.m. eastern on c-span. on the next "washington journal ," a talk about the second terms of u.s. presidents. and a discussion on the perks and benefits of former presidents of the united states including pensions, offices, and presidential libraries. "washington journal," live at 7:00 a.m. eastern on c-span. >> i do not want to be sitting in the same place i was a couple of years ago.

i would like to see a process of spectrum management that is more market driven so that things like incentive auctions continue to work, there is more flexibility given to licensees. >> you look at the growth rate in data usage from subscribers and -- subscribers some qaeda -- from cable data services. there is no slowing down. there is an insatiable hunger for speed. the cable industry has a long feature -- the future. >> more from this year's ces international consumer electronics show monday night on "the communicators" at 8:00 p.m. eastern on c-span 2.

>> we have a habit of glossing over presidents. we decide that some people are bald eagles and they have to be treated as if they are symbols of the country. you have this moving over of their rough edges. there is a feeling among modern presidency than they have a right to a certain generation and that generation will be located in their presidential library. even if they are gone, their children and their former allies, the lieutenants who live longer than presidents because they are younger, continues this. they are even more ferociously committed to the legacy because it involves them and because the old man is gone and they want to show their loyalty. what does the government do when you have a slot president?

>> part 2 of the challenges president's face. ." c-span's "q & a >> the president's nominee for treasury secretary talks about sequestration and the u.s. economy. this portion is just over an hour. >> it is a privilege to be considered by this committee. i would like to thank senator schumer for his kind and gracious introduction. i am honored that he is here this morning. i am that info to my family.

>> my parents are only here in spirit today. i am grateful to president obama to ask -- for asking me to lead the treasury department. i am hobbled by his continued faith in me. finally, i want to thank the members of this committee for meeting with me and sharing your insights. this committee plays a singular role in defining our tax, trade, health care, and social security policies. this committee is a clear example that bipartisanship can thrive and create real results for all americans. if confirmed, i will make frequent consultation with you

in that spirit of respect. forging bipartisan consensus is not an abstract idea for me. it is a fundamental threat the last thread that spends my public life. i took part in the negotiations that led to the the ground- breaking agreement to balance the federal budget. i oversaw three budget surpluses in a row. my experience in senior leadership positions outside government at new york -- new york university. it is the largest private university in the united states working collaboratively to solve problems and drive changes a universal challenge

when i returned to public service in the administration, i worked alongside secretary clinton to promote the national security and economic policies around the globe and reinvigorate american leadership abroad. at the office of management and budget, i worked with democrats and republicans to ask the budget control act. it reduced federal discretion spending to historic levels. as white house chief of staff, i adhere to the principle that we work for the american people. we saw that principle in action. because of my experience, i approach the challenges that lie ahead with a clear understanding of their impacts the and significance. it does give me a profound respect and secretary geithner and others whose acknowledgments i'd knowledge today. when the president came into office, we have the worst economic crisis since the great depression. we need to reignite growth.

our economy is in better shape today. over the past four years, the private sector has created more than 6 million jobs. rules are in place. taxpayers are not responsible for big firm fails again. the housing market is recovering and home values are stabilizing. we have isolated iran from the global financial system and establish the toughest sanction regime in history. we have sent a series of trade agreements to open markets for american goods and level the playing field for american workers and businesses. our auto companies are growing and innovating and creating jobs. we have made substantial progress reducing our deficit in a balanced way. we are in a better position today, but the work remains unfinished. our top priority is to strengthen the recovery by fostering job creation and economic growth while we make

sure that our economy remains resilient to the headwinds beyond our shores. that means making it easier to tell american made goods abroad that means working with our partners in the globe to bolster the system and promote economic stability. it means moving forward on reforms so the system is less vulnerable to crises. and it means reforming the tax system so that american businesses can thrive and compete. at the same time, we need to be on a path of fiscal responsibility. we can do even more to shrink the deficit over the next decade through a balanced mix of spending reductions and tax reform and sensible reforms to medicare that will help. even as a move forward, we need to make certain that there is

room for critical investments in education, research, and infrastructure. things that we need to grow and compete. we do not want to derail the economic recovery. that is why we cannot allow the series of harmful automatic spending cuts to go into effect. these things would impose a wounds. in closing, i would like to make one final observation. and recent years, some have said that washington is broken and that our government cannot tackle the most serious problems and that the bipartisanship is a thing of the past. i disagree. i have reached across the aisle and formed honorable compromises my entire professional life. i have been involved in almost every major bipartisan budget agreement over the last three years. i could say that the things that divide washington right now are not insurmountable as they might

look. we share the same goals. you want an economy that is expanding. we want a vibrant job market that gives anyone who works had the chance to get ahead. a financial system that helps families and innovators and entrepreneurs. a global economy that is prosperous and secure. we want a level playing field for american companies. we want a government that lives within its means. it will take a lot of hard work to achieve these goals. we have plenty of obstacles, but we will find a way through today's challenges. i'm grateful to you for considering my nomination. i look forward to any questions you might have. thank you. >> thank you. i have several questions. questions we ask all nominees. is there anything you are aware of in your ground that might be

found a conflict of interest with the duties of which you have been nominated? >> no. >> do you know of any reason that would prevent you from honoring responsibilities? >> no. >> do you agree to appear at any summons if you're confirm? >> yes. >> do commit to provide a prompt response in writing to any senator of the u.s. committee? >> i do. >> i'd like your thoughts on the tax reform. as i mentioned, the world has changed since 1986. i believe that this committee will engage in a comprehensive tax reform.

it is our duty and obligation and also our opportunity. i like your thoughts on the vision we should focus on and actions we should take. i would like you to tell us how you would work with this committee as we reformed the code. what would you focus on first and second? on tax reform? >> i was involved in the 1986 tax reform. i know how hard it is. i also know how important it is. you do not have to talk to many people to learn that the american people want tax reform. one is simpler tax code. they wanted to be easier to comply with taxes on an individual basis and know that it is fair and everyone is treated in a similar position. businesses want to go about

their business without having to worry about complicated lawyer consultations. it is hard. the ways to do tax reform is to broaden the base and lower the rates. broadening the base means taking on a lot of very entrenched interests and lowering rates benefits everyone, but not concentrated with anyone individually. i think we can do it. it is important. if there is a bipartisan consensus, there is an understanding how hard it is. i will try to get the job done. >> can you speak more about the base broadening? what areas do you think that we should focus on? you also mentioned that this robins and the lower rates. more details.

>> senator, on the individual side, it is a hard thing to do to broaden the base. it is taking a look at things that are very much part of the fabric of how people live right now. as of 1986, that is the way you can go about tax reform. it is a lot harder than 1986. we have not completed the work on the fiscal plan. we need to have more revenue. it will need to be done in an environment where as we broaden the base, we both contribute to deficit reduction and hopefully are able to lower rates. on the business side, we have a contradiction in our fiscal tax system. our statutory rate is high. our effective rate is not as high. when you look at the united states against other countries, it the statutory rate makes the u.s. look unattractive compared to others.

for individual firms, their average tax rate is much lower because of all of the complicated provisions that are part of the code now. it would be a challenge to take on those individual credit. there's no way way to bring the rate down. that is something i think we need to do to maintain competitiveness abroad. >> you still believe that going down the road we need to reduce that to get the rate down? >> i do. when one looks at a table of international tax rates, it stands up at u.s. statutory rate is high. it is a complicated story to tell that the average rate is lower. it does not affect all businesses equally. we need a simpler tax code.

>> could you briefly comment on something that was said in the press? that is your investment in the cayman islands. what was it? how did that happen? why did you choose that investment? what benefits did you receive? >> while i was in a play at citigroup, i had opportunity to make an investment in a private equity fund that was designed to invest in emerging economies around the world. it was an opportunity that look to me at the riskier than other investments i have made in the past. i have a very conservative investment philosophy. i thought it was appropriate risk given the possibility of a higher return. i invested in the fund as an employee and i divested from the fund when i was confirmed for an office in the government. my benefit was very small. i took a loss when i sold the investment.

i reported all income and pay taxes that were due. >> why the investment in the cayman islands? >> i knew that invested in emerging markets. i do not know at the time but the address of the partnership was. >> when did you divest? >> 2010 when i became omb director. the fund was disclosed in all my prior confirmations. i'm not aware of any tax benefits i got from participating. >> where did you pay taxes on that investment? >> i reported all income related to the investment on my tax forms. i paid only taxes.

i lost money on the investment. in fact, i lost money which i did not have a great deal of income. >> thank you. senator hatch. >> thank you. following the financial crisis, many lessons were learned, including citigroup have taken actions to improve their responsibilities. my question relates to the time you were there. not the current citigroup operations. responsibilities as managing director and chief ynez officer at citi units. you have said to our staff that you were not involved in portfolio management. you may not have selected assets that citi invested in or managed in the portfolio, but citigroup

organization chart seems to identify you were tied to investment research and other such activities such as liquid operations. during your time on wall street, there are units that you oversaw. those securities include class b funding. it is a product that citi is represented and sold to collect fee and then bet against. others might have been sold that you oversold.

some alleged were misrepresented to be far safer than they were. you have said that you are responsible for operational activities and management with some are little knowledge of the activities of the units that you staffed. i find that somewhat confusing. your position at citi is considered a trophy position. i hope you can provide some clarity to disprove that you -- i have four questions about your citigroup role at the time you were there. perhaps you should get your pencil ready. i will go through all of them and then you can respond. first of all, do you have any discussions or participate in e-mail exchanges, including having been cc'ed on any stock of funds? second, did you get an understanding of bank risk-taking activities from observing activities in the units you oversaw?

or did you not know of any risky activities in your units? third, did you have any oversight role with respect to financial products that work launched and sold in your units? if so, did you do anything to curtail risky activities? or did you not know about the marketing and sales products of the units that you managed? in which case, i wonder what you did. fourth, while managing to provide efficiencies at the units you oversaw, did you use any services of citigroup the services what the website calls one of the largest providers of business outsourcing services within the banking financial sector? >> let me start with my

role. everything falls within that. i was chief financial officer first of the -- that was about two years. the alternative investment business. as the chief operating officer, i was responsible for a number of broad ranging management of the business kind of activities. i had substantial responsibilities in terms of large, national, and international field organizations. i mentioned to senator baucus one of the trips i had was to montana. i went around to make sure that our business was working on the ground. in new york, i was responsible for the budget of running the business, which is very large and international operation. i was not in the business of making investment decisions. i was certainly aware of things that were going on.

i learned a great deal about the financial products. i was not designing them. i take away from that experience a deep understanding that there are risks that we need to be on guard. i would be delighted to discuss those as we go forward. with regard to specific e-mails and phone calls, it has been quite a number of years. i do not recall specific conversations. there were products were widely understood to be troubled. i was aware of funds that were in trouble. i do not have responsibility for the funds themselves, but i was aware that those difficulties were going on. >> my time is up, mr. chairman.

>> next senator on the list is senator schumer. he is not here. senator grassley, you are next. >> already? >> yep. >> mr. lew, on january 16, 2009, citigroup announced losses of $18.7 million. they also received a federal bailout through the loan guarantee on mortgage assets. one day later you received a bonus from citigroup for over $940,000 for your work as chief operating officer on the alternative investment units which was responsible for much of the loss. were you aware that citigroup was about to receive a guarantee when you received your bonus? >> i was aware of the program,

yes. why is it acceptable to take post-main dollars out of a company that was functionally insolvent and about to receive $1 billion of taxpayer support? >> in 2008, i was an employee in the private sector. i was compensated for my work. i will leave that for others to judge. >> president obama said on the campaign i used to talk about the outrage of a building in the cayman islands that had over 12,000 businesses. either this is the largest building in the world or the largest tax scam in the world. you invested more money there than the average american makes an an entire year. do you believe the president was

accurate in the building in which housed your investment as "the largest tax scam in the world"? >> i'm happy to answer questions about tax policy regarding the sheltering of income taxation. i reported all of my income that i earned. i paid all taxes due. i believe we should have tax policies that make it difficult, if not impossible to shelter income from taxation. there is a certain hypocrisy for what the president says about other tax payers. let me move on. you told finance committee that you are unaware of the association with tax scams. it makes me wonder where you have been the last years, as well as a former budget committee chairman. they have highlighted this house

to the nation several times. as i said, president obama preached about it. it is no wonder that maybe you and the president have not proposed legislative solutions to what you would consider what the president considers a tax scam. my question -- how can you be the top tax enforcer if you have not close this offshore loophole? >> senator, i think it is clear that i have reported all incomes that have earned. i pay taxes as appropriate. i believe strongly that people should pay taxes on their incomes. i have strong views on how the tax code should be constructed to encourage investment in the united states. i'm happy to answer any policy questions you have. >> do you think the house should be shut down?

>> senator, i'm not familiar with that cayman islands house. >> a case filed in the new york state supreme court, nyu, new york university is appointed state at the same time you're -- they invested in an aerial in the cayman islands open ended investment company created to be used for united states tax exempted investors. nonprofit sometimes seek to avoid paying taxes on unrelated is this income through offshore vehicles like funds in the cayman islands. while you are the executive, did nyu of investment in the cayman islands avoid taxes on unrelated business expenses? if so, how many did nyu invested in the caymans?

>> when i was at nyu, was not aware of any policy to invest in a manner that you describe. i was involved in discussions about making sure that the endowment should have as good a return as possible. we wanted to have a diverse portfolio that would help the university get income. >> i will close with this conclusion since you are unaware of it. i take your word for it. it is certainly a poor reflection if you do not know about these investments. you're paid over $800,000 more than the president of nyu to know what was going on and i'm surprised you do not know. thank you, mr. chairman. >> thank you, senator. >> thank you. mr. lew, welcome back.

i understand this is your sixth confirmation hearing. you are a glutton for punishment. we thank you for your service. i'm optimistic listening to the concerns about closing offshore loopholes. you might have something that we can do together to offset this. it would be wonderful to work together on something that would close loopholes that clearly we are seeking bipartisan support for. i would love to work on that. i would like to talk to you about one of my favorite subjects, which is growing the economy with manufacturing. i was very pleased to hear that president's comments last night. with that love to have go faster, manufacturing has been leading the recovery in growth. when we look at tax reform and what we need to do to be

competitive internationally and so on, i'm very interested to make sure that we continue to make things in america and that we innovate in america. i wonder if you can speak to how we encourage making things in america, american manufacturing? things like manufacturing deduction, how to make it more effective. what do you see in terms of continuing to innovate and make things in america again? focus on that and tax reform. >> thank you, senator. i think that one of the real reasons for taking on tax reform -- i would say the major reason for taking on tax reform is to help for the economy and improve the environment for manufacturing in the united states. we have a tax code that has a lot of provisions that benefits manufacturers of one kind or

another, they are quite complicated and quite particularistic. we have very high statutory rate for income. i think the approach to business tax reform for the point of view that our goal is to try to simplify it, that will immediately help businesses. right now they have to start spending money on accountants and lawyers just to get started. we can simplify it and lower the bar. the president outlined and his proposal last year that we ought to have a preference for manufacturing in the reformed tax code. i think that the challenge will be that we all know that a tax code that has a broader base and a lower rate will be one that

makes it more attractive to invest. they are very important to the industry. it will require a bipartisan. it will require working together for the greater good of the economy and the american people, even if that means taking away some of the particular benefits that goes to one or another part of the economy. we should take away the incentives for things like -- oil and gas exploration cannot move offshore. the resources are here. we need to look at what it is that enters into a business decision when you choose between locating in the united states or overseas and have that tax could be helpful and not hurtful. one of the things that has been encouraging in the last two years is that even with the tax code as it is, more businesses have been deciding that they

want to invest in the united states. the quality of our work force makes the united states a very attractive place to invest. it may fix the tax code, there is no limit to how much we can go. >> we have about 17 million people that work because of manufacturing and 16 million because of agricultural. that is the foundation of the economy. what would you like to see done? >> we have worked very hard pursuing multiple paths to help homeowners either refinance or modify their loans. one of the things that we would very much like to do that the president i just last night in the state of the union is enable homeowners who are paying their bills and are underwater through no fault of their own because of their financial crisis and to be able to refinance their loans. right now homeowners are locked

in to mortgages when they should be able to get 3.5% or 4% mortgages. >> thank you very much. >> thank you, senator. >> thank you, mr. chairman. mr. lew, we appreciate having you here today. i want to focus on tax reform as we did in our private discussions. i have chaired with you in my work with the simpson-bowles commission and in other areas trying to put together a comprehensive deficit reduction package and debt reduction package, i have heard you say that tax is a key part of that. not because of the need to raise revenue, but because of the need to generate growth and have a pro-growth element in the recovery effort for our country. the first part of the question i

want to ask you, the discussion of tax reform has taken in some cases a concerning turn. i have heard the term tax reform used all too frequently to be a revenue generating device. i understand it can be utilized to generate growth. please tell me why again you believe tax reform is needed in our economy. >> thank you, senator. i think we have discussed in conversations that i consider it a lost opportunity in january and december that we did not get to a final agreement on the fiscal challenges. i think that there is still more work to be done in terms of the fiscal path. we need more revenue.

i think that's separate from that, there is a need for tax reform. in clearing the tax code and broadening the base, there is room to raise the revenue that you need. a few months ago, there was discussion as to whether or not we should raise tax rates or broaden the base. we raise the tax rate and did not broaden the base. i look forward on a bipartisan basis of sound fiscal footing and perhaps more importantly having a tax code that makes sense for individuals and businesses that we have a thriving investment environment. >> i agree with that. it is more anti-competitive to our business interests. we need to correct that. i look forward to working with you in partnership.

i want to get into more detail to look at the corporate side. he had discussed the need to lower the statutory rate. i agree. do you have a target rate in mind? a lot of us have talked about 25%. at least a level 25% that we need to reach. >> the challenge is how far we are willing to go in broadening the base. we do not have the ability to lose it revenue as about the business tax reform. it is challenging to get to 25%. >> do you agree on the corporate side that we should be revenue neutral? my understanding is that in the past we have focused on the corporate rate. >> have the tax code be simplified and consistent with a more robust investment environment, particularly in a competitive environment with other countries.

i think it can be done in a revenue neutral way. i do nothing would have the ability to raise the revenue we need to deal with the fiscal problem is with the business tax reform. >> in regards to business taxation, many have made the argument that we need to pay very close attention to the individual code regard to its impact on business taxation. do you think we can do corporate reform without also doing individual tax reform? >> i think we could, but i do not think it would be the best way to do it. we should do both individual and business tax reforms. we do have a combination of different forms of business organizations. the closer we get to a place where the corporate tax system is one that is open for more business, the more competitive we will be. we need to keep both in play.

right now the challenge is many, but once we do tax reform, we should do it right and do both. >> i want to get onto some other issues, but my time is running out. on the corporate reform side are you able to negotiate on the corporate code? >> i think as we lower the rate, we have to be looking at having a minimum worldwide rate. we are trying to level the playing field. there is a debate as to whether we can go one way or another. we have a hybrid system. it is a question of where we set the dial. >> thank you. >> thank you, senator. >> congratulations, mr. lew, on your nomination. it is great to see your family. i have a lot of fiscal questions for you. you mentioned in your opening statement about medicare and

getting the delivery system right. the president mentioned that in the state of the union address and focusing on quality as opposed to frequency in tests. >> in my time at omb chief of staff, i paid attention to the implementation of the affordable health care act. it is necessary for it to be in place. >> do think that there is a provision of affordable care act that is supposed to be implemented in 2014, should it be implemented in 2014? >> we have a working hard to get this on schedule and getting these changes set up and having the affordable health care in place in 2014. many departments have been involved in that. it is not always easy.

we had to work hard to get the funding and implement on schedule. i feel like we are in a good place. >> the basic health plan is something implemented. i know the president has tried to express an opinion to help push things along. do you think the affordable care act justifies that the basic health plan should be implemented in 2014? is there a bias somewhere in the administration against lower costs managed tier delivery system that the act calls for in exchange for the exchange? is there a biased that the affordable care act means implementing only those pages related to the exchange and punting everything else even though there were would've been better cost-effective systems? >> i'm not aware of any bias. there is an enormous amount of work needed to get exchanges set up.

i would be happy to work with you on that specific issue and find out where it is in the queue and follow-up on that. >> i would greatly appreciate that. i think there is a big concern on my part that somehow people might be asking the state to forgo the more cost effective solution for that population just above the medicaid level in exchange and making it more expensive and pushing that population onto the exchange as the holy grail. i can tell you that we think it should be implemented now. i certainly will take you up on that. i want to turn to financial issues. we can talk for hours. do you believe in the reimplementation of glass-steagall?

>> senator, as we discussed when we had this conversation, glass-steagall had been over the years somewhat of an anachronism. much of the activity in the financial world had gotten beyond it. i think the problems we had in the leading up to the financial crisis were evidence that our financial regulatory system was not in peace with the growing complexity of the financial system. i think dodd frank -- it was an important part in regulatory fashion regulating oversight. i think as we go forward, we have to ask restaurants as he complete the implementation of dodd frank. are there were actions that are needed? they need to make sense in 2013. going back, i do not think it is

a resuscitating a 1930 act. >> i will take that as a no. to that point, i do not know how you can -- are you not worried that will provide more systemic risk as well? >> i think that if you look at the issues like margin requirements, it is important that we get on top of regulating things up with us at systemic risk. i think it is a little bit more complicated. the question of is there a need for any further consideration of financial regulation is one that comes in sequence after implementing dodd frank. i come to the issue open-minded knowing that we cannot let what happened leading up to 2008 happen again. we cannot let a regulatory

system become stripped by the complexity of the financial system which our economic life depends on. >> i will look for more discussion on that point. i do not understand the administration's idea of capping the municipal bonds and tax reduction at 28%. if you want to encourage more investment, federal government needs to provide cheap capital. when all of these things are putting municipalities into derivatives, you cannot convince me that they're interested in the bottom line. a policy on capping municipal bonds at 20%, i'm curious whether you will continue that policy? on the foreign investments in the real estate ask, whether you think the treasury department will complete that irs notice and take action, that would help jumpstart by the investments.

>> administration's proposal would have eliminated the value of the top tax bracket of the 28%. it is not directed at municipal bonds or specific areas of tax activity. it is meant to be a placeholder that we should have tax reform. we need to make specific policies deciding what is in and what is out and what the property tax rates are. we put in the fall back saying that a tax -- does not happen, this is something that would help us get to the target that we need. i would be happy to follow up with you on these issues. the general proposition -- the hard decisions and tax reform will in many cases where there are many things that we are sympathetic to, but we have to curtail tax benefits to broaden

the base. it is a general rule that there were a lot of -- that if there were easy decisions, tax reform would've happened a long time ago here. >> is that something you will take action on or will we have to act here? >> if confirmed, i would work with you to get them completed. >> thank you, mr. chairman. >> thank you. >> mr. lew, welcome. i want to come back to an area where i think there is room for what republicans and democrats to talk about -- tax reform. i think you are familiar with these documents.

contrast that we talked about this. i think you are familiar with these documents. contrast that with the paper the white house put out which is 25 pages. it is a corporate tax reform proposal. give ministration is going to have to do a better job of leading on the issue of tax reform if we are going to get something done on this issue. this goes along with the myriad issues we deal with a in the tax code. the president talked about tax reform last night but as i give us any details. he says he supports lowering rates for businesses. does the president when he says that agree the rates need to be lowered across the board for all taxpayers? a lot of small businesses file on individual tax forms and pay individual tax rates. should tax reform include a

lowering of rates on individual taxpayers as well as the corporate rate? >> i think to proceed on tax reform, we will have to work together, the executive and legislative branch on a bipartisan basis. if confirmed, it would be at the top of my priorities to do that. in terms of the best way to engage, i still have the white books and blue books. tax reform in 1986 did not follow treasury 1 or 2. it was worked out by two chairman in the kind of regular order process i think we will need to follow again to succeed.

when president obama sent a much shorter document to congress, and with the full distance and got act into law. the goal is how the we get something done. the means to that end, i am flexible on. i'm open to suggestions. with rates, we will have to work hard to broaden the base to lower the rates and weak revenue targets we have. but i think it is possible. if we are willing to do the hard work, we can get our fiscal house in order. >> i understand health care reform legislation and the concern about too much

specificity but this is not going to get done unless there is leadership at the white house. it will be very hard. there are a lot of groups attached to the current tax code. i believe we need to do away with everything and do what simpson bowles suggested. then figure out what we want to add back in and adjust rates accordingly. i hear the president talking about raising revenues from tax reform. i was suggesting there has to be more leadership than this relative to this when it comes to this issue. one other question.

the president he talks about entitlement reform. we have talked about the need to address what is the long term driver of debt and deficits. that of course is our entitlement programs. but there is not the specificity there. the president has talked about $400 billion. $10 trillion at is the deficit in the next 10 years, $400 billion looks like a drop in the bucket. where is it the specificity when it comes to addressing a spending problem? almost a full percentage point higher than a 40 year historical average. we have a spending problem. there is no proposal that addresses that.

the budget a few years ago the not receive a single vote. they are not serious. i hope you will engage on this issue of trying to do something about this very huge problem. >> i could not agree more that we need to deal with our fiscal challenge. i may disagree it is a combination. we have a deficit problem. that is the kind of setting where we could have a discussion and figure out the right balance. the savings proposals for a mix of different proposals. some were a burden to those who could afford to pay for it.

the president and then to negotiations in december offered to increase the force of billion dollars of this savings in medicare. we are prepared to engage in specific ways to do that. the sooner we put the fiscal from together, the better we can move on and create a growing economy and jobs. >> my time has expired. thank you. senator menendez. >> thank you, mr. chairman. in the previous confirmation hearing as the omb director, there were a series of questions raised about de-regulation and cause of the financial crisis. some of the responses you gave raised some concerns to your commitments of stronger

financial regulations. there is a difference between being the omb director and treasury secretary in that regard. he would play a very significant role in regulating our financial sector. i would like to give you an opportunity to put some concerns to rest. do you believe stronger regulation was and is necessary and if you were to be confirmed, the support of robust a limitation of the oversight rules of the dodd frank law? >> i very much believe dodd frank was necessary. needed to modernize the regulation of the financial-services industry. the oversight provisions need to be implemented. if confirmed, it would be an extraordinarily high priority of mine.

>> one of the other things you will have in your portfolio as the treasury secretary is the implementation ofsanctions. as the author of the iran sanctions act, i am interested in making sure treasury pursues the law that the congress passed unanimously that the president signed as our last tool to prevent iran from achieving nuclear weapons. if confirmed, will you ensure the robust enforcement of the sanctions provisions we have given to the president? >> yes, senator. if i might elaborate on that. i think our sanctions are bringing the world community

together. they are they largest sanctions regime in history. i have some hope we will be able to resolve the issues we have with iran peacefully and. sanction are doing what they need to do. they are crossing the iranian economy. we have not seen whether it as changed the mind of a regime so it is ready to give up the pursuit of nuclear weapons. the president has made clear it is unacceptable for iran to have nuclear weapons. i firmly believe these economic sanctions are preferable to war but we must pursue them. >> with reference to the state of the union address, the president mentioned the growth of the economy.

what do you see yourself as the role of the treasurer in being part of creating a growing economy? talks the secretary of treasury is the senior member of the president's economic team. i worked on the team from various perspectives. the treasury secretary should ask what we can do to help the economy moving and creates the possibility that every family is willing to work hard as a chance to get a decent life. there are many things we can do. i am an optimist by nature but i also believe you have to keep

working at it. the president proposed and then to the american jobs axed a number of proposals. last night,, he thanked congress for enacting a few of them and encouraged them to enact the rest. a in the longer term, we have to get our fiscal house and in the order. things like him for structure, education, skills training, we have the most vital economy in the world. to be there in the future, we need the people and infrastructure in conjunction with its fiscal policy we can afford. >> i hope you will also put in that -- the president mentioned mortgage refinancing.

i can understand why we would not let thousands of american families refinance, lower their rates and unlocked the universe of solidified homeowners. >> i could not agree more. >> mr. lew, thank you for your willingness to continue in public service. i thank you and your family. you come to this hearing with an incredible background of public service. i want to underscore one i think will be helpful. your work in the house under tip o'neill. the white house and congress were under different

parties. i think he will be well suited to bring together democrats and republicans to solve our fiscal issues. i will like to deal with problems brought to our attention about small businesses and access to capital. we have had several initiatives to help small businesses gain easier access to capital to expand job opportunities with the concerns of community banks, we see banks being merged into larger banks. there is a real challenge for a small company to get access to capital to expand our economy. do you have thoughts how you can help ease the burden that small businesses have to getting

access to capital? >> in the aftermath of the senate to crisis, one of the big challenges has been to get capital flowing again. there are businesses that have a lot of cash on their balance sheet. there are not investing. and financial institutions have been slow to get back into the lending business. we are seeing progress on opening of the spigots. it will be a balance. we have to make financial institutions are sound. larger financial institutions don't get back into a position where they create risk to the entire system or that taxpayers will be left with a burden. for community banks, many of the regulations were written to treat them differently. small restitutions do not have the same regulatory burdens and reserve requirements that large institutions do. i look forward to working with you and others on the committee

to implement a laws in a way that it the capital flowing. >> i think the laws are well intended. i want to turn to a second subject. senator portman and i worked on national savings issues and during the best of economic times, savings rates were very low. it is important for our economy to have private savings. it is also important for individuals for retirement security, taking pressure off. as we look at tax reform, there are efforts being made to diminish the tax incentives for individuals to save companies set up retirement plans.

that could be counterproductive for many reasons, including talking about the timing of tax revenues and on a long-term basis, we are accelerating tax collections begin our long-term finances not what it could be. you have suggestions as to how we can improve opportunities for individuals to save for retirement? >> i believe is very important we have policies that in courage individuals to save for their retirement. be long viewed our retirement system as being something that depends on a combination of social security pensions and savings. we are in a new world for pensions are smaller for many people which means savings will have to pick up more of the burden. we have had rules that could and simplified. there are proposals the administration has made for people to opt out as opposed to opt in to retirement savings.

that would increase the likelihood the people saving for retirement. i look for to working with you and others to think through these ideas. >> the senator talk about the health care system. how do we do it in a way we know we can get the savings we need. i look forward to working with you. your experience put you in a unique position where we can try to deliver a more efficient health care system to the american people. >> you can watch the full confirmation hearing for jack lew and other nominees like chuck hagel and senator john kerry. those all online on the c-span archive.

on the next washington journal historian and author douglas brinkly talks about the second term of u.s. presidents. washington journal live at 7:00 a.m. eastern on c-span. >> i think the women themselves in many cases, were interested in politics but had no vehicle to express that in their own lives. so they were attracted to men who were going to become politically active or already politically active. >> each of them, i find intriguing, probably half of this in particular because they are so obscure, historically. half of these women would be half of these women would be almost