earned by veterans for their retirement. you will cut benefits by disabled veterans, who are if that is not accurate, can you give a response that can respond to how those will not be cut? i wish we could go through the details, but we would run out of time. >> can i respond? can respond in writing. i have several questions to ask about the cpi. it is very disturbing that the toks will be hit the hardest moving toward a chained cpi by impacting seniors and veterans and middle-class americans.

that youhe savings get by moving toward that chained cpi, aside from the cuts to benefits the earned benefitted to seniors and veterans and disabled americans, if by raising revenues, raising taxes and most of that my understanding is a revenue hit, a tax increase for families who are middle class or below. my understanding is that, unless things have changed, the biggest impact hits families who are earning between $10,000-$20,000 because they will be pushed up into the higher brackets faster. as i look at my district, the median income is $38,000. the median income of the national american family, not just my district but everywhere

in america, if you take the median income it is $53,000. i know the president fought very hard to protect middle-class taxpayers $250,000 and below, and most of america is way below. we ended up with $450,000, which would be protected from any of the bush tax cuts expiring. certainly, anyone with $53,000 would be within that $350,000 cap. yet, the person who makes $450,000 will see a small hit from the chained c. pifment in -- cpi in what they pay in taxes where the middle america will see a greater increase in their taxes. people in my district who earn $38,000 will see a substantial

increase in you were to move to the chained c.p.i. i heard you say that the president is not fan of mothering to the chained c.p.i. without a big balanced approach. but the facts are that in any letter you write to me refute that any middle-class american, especially the ones earning $38,000 will not see a tax increase, certainly is within the $250,000, which is president said was in the threshold to protect from any tax increase. my final comment is this. in the years that social security has been in effect, americans have contribute bitted $13.9 trillion to the social security system. we've seen those contributions earn $1.6 trillion in interest earnings by being saved in the trust fund.

the total amount that has been spent in benefits for americans is $12.8 trillion. the result a there is an amount that has never been used in social security but the chained c.p.i. gets so much of its savings by hitting it beneficiaries by paying into them. i would like a response, if you could in writing as to how you would explain or refute that seniors, veterans, disabled would not be asked to pay more by getting fewer of their earned benefits. >> mr. secretary if you could respond in writing that would be wonderful. >> i would be happy to do that. >> thank you, mr. chairman. let me just mention one of the things we talked about is the challenges we got today. everybody brings a differenting background. i've been doing business for 35 years before i got here.

one of the things i got to do is go over to china in the late 1980's. in terms of the clinton era we were growing almost 5% a year and we're under 2%. to me, we're looking to blame each other and look at the last 10 or 12 years but the world has changed. i was in beijing. i saw the reality there. it has become much more of the global economy. how much of these factors are the realities that we are working with today? i'm concerned that people don't realize that the world has changed. it is a global economy. we have to help our business be more successful. i will give you one more point then i want your response. i met with the minister of trade in january. himself and the vice in two separate meetings told me the same thing, we want to grow our economy 20 million jobs a year. that's what we're averaging. i think japan has been, obviously, a big factor but

china and india coming online. i'm a blue collar kid i've watched what is happening in manufacturing. to me, that is one of the biggest issues we're not taking into account. the world has changed. we have to help our businesses be more successful. what are your thoughts on that? >> congressman, i agree totally we have to compete in a global and competitive world. i was in china a couple of weeks ago and i made the strong case that we need to be able to compete in a fair way, having our businesses have access to their markets. they need to restructure their economic approach to increase their demand in china and shifflet the focus from anti- -- shift some focus from anti-supportive old industries to contributing demand. it is good for the u.s. economy demand to grow. >> let me just say. they have a delegation there and

i had a chance to meet with many of them. we need to do more to be more competitive there. they need to open up their markets. i agree with you. >> i met with about 20 representatives in china. i asked them what we could do to be more helpful. i agree. we have to make the case. it is slow. you do not get everything you argue for, but you get progress as you engage on these issues. >> let me mention a couple of other things. committee for-- small businesses and medium- sized businesses. how do you define small business? >> there are a lot of different ways of drawing the lines. sometimes it's by the number of employees or total growth amounts of sales. rather than getting into where the line is --

>> let me move on. i want to say one thing, in terms of start up businesses, that is something we need to do everything we can to make sure we have proper tax incentives. i hear they are down about 20% or 30% for startups and entrepreneurs. that is one factor. they want more simplification in the tax code. i want to ask you another question. one of the things we're talking about and the president mentioned, i heard different numbers in terms of corporate tax rate. one of the co-chairs dealing with businesses in terms of entities, i'm concerned that we do not leave small and medium- sized businesses behind. how do we lower the rates to 25% and not leave behind a lot of folks that generate the jobs in

america to be in that tax bracket? i have talked to a lot of friends. what is happening is that evolution. how do you deal with lowering the rates without dealing with small and medium-sized businesses that compete in the same industries? >> i'm not sure i can answer in 15 seconds. we need to broaden the base and lowered the rates on the business side. we need to look at reform on the individual side. a look forward to working on a bipartisan basis on that. >> have the president understand there are a lot of things, employees that are paying at a higher bracket.

thank you. >> thank you. mr. smith is recognized. >> thank you, mr. chairman. going off of those comments from my colleague, i met with some bankers back home. my hometown. three bankers were present. two of them paid under subchapter s and the other under the sea corpse tax code. and yes, it would be reform for one and not the other. i think it is roughly half of all private sector or employment in the u.s. entities that take taxes under the individual rate. can you expand on that perhaps? >> perhaps individuals and businesses choose how to organize based on that attack system and based on the comparison of individuals pass through organize asian or -- organization or under the

corporate system. on pass-throughs, there are high statutory rates. a lot of the credit on the business side are still targeted at large firms come up but they're not redevelopment to startup firms -- but they are not really relevant to startup firms. the relationship between the two of them is really important. we work together on making business tax code make more sense. we want more tax reform on the individual side as well. the thing we have universal agreement on is that it is just too complicated. we want to encourage small businesses and small business investment. for small business looking at what we have done, it helps them doesn't helpit them that they need go to a lawyer to look at it. look at how they can do their

business and not have to have all of those costs and time for complicated compliance. if we simplify the tax code to lower the rate, i think that will help a lot. >> shifting gears a little bit international tax. it is a good thing that u.s. companies have done well in marketing their products overseas and reading some profits. there's a very punitive corporate tax code. i think corporate tax reform would help address that without for the changes, we still would not be able to see u.s. companies invest that cash that they generate overseas back in the u.s. economy. would you disagree with that? would you make some proposals offerou would suggest to an incentive to companies to bring that cash back to the economy? >> well, if you look at the minuses ofses and

investing in the u.s. versus overseas, they decide to invest in the u.s. because of our workforce. you can do business in the u.s. notwithstanding our political problems, greater stability in the u.s. i think we're making progress. that willoposals offer incentives to offer jobs in the u.s. and manufacturing that would have business incentives for off shoring jobs and differential and statutory rates between the u.s. senate countries the countries would be reduced. that would help. that is a challenging area. there were different have it designed to bring money back -- they were different paths designed to bring the money back. our goal is to grow the economy and grow the employment. >> thank you. i yield back. >> thank you. >> thank you, mr. secretary.

readyut there are getting to file their taxes for next week. i doubt there are very many who think they will be able to pay a mere nickel on the dollar. as you know and as your comments were referring to, there are many of america's largest corporations that continue lobbying you, the administration, and this congress to let them pay a nickel on the dollar in taxes on a significant portion of their earnings. i was pleased with your response just now. with president obama's comments on march 14 that the so-called repatriation, we have looked at the map and it just does not work. as your comments suggest, it never worked and terms of creighton jobs. it failed into -- in terms of creating jobs. it failed in 2004.

the share buyback program and that the thing. -- type of thing. you have included in your budget a number of measures that i just unjustified corporate tax avoidance. i believe you have incorporated earnings provisions about companies that earnings in the u.s. that have some other kind of non-tax jurisdiction. prop ofat the corporations that have developed patents and intellectual property here and all and then send abroad with payments coming from some developers here in america. you have listed numbers -- problems because of the way they allocate interest on income they do not take that now. on those three and other atoms in your budget, do you continue

in your budget, do you continue to find tax avoidance? >> we do try to close down the areas of avoidance we see. we look forward to working with congress on a bipartisan basis to do more. the shouldn't be an incentive to move u.s. jobs overseas. >> one of the problems in that regard is that over a three- 500 period, 30 fortune companies devoted more of their monies to lobbying this congress than they did in paying taxes to the treasury. negative tax rate. many of our largest corporations are paying an effective tax rates that are single digits. you are where and i believe the treasuries involved in the comments recently of the top finance ministers in germany,

france, and in the united kingdom, calling for cooperation among the g 20 countries to deal with this problem. we want to be competitive. we want every american company to be competitive and not just competitive and taxes. we seem to be the world's leaders at the moment. i have several pieces of legislation to implement some of these budget suggestions and to .o farther the concern i have, mr. secretary, is while acting some adjustment in the statutory rate is appropriate to reduce it, that you devote every cent of -- right back to the corporations. in the fiscal cliff thatiations and the law was finally approved, corporate contribute at

dime. some that major tax cuts out of those negotiations. isn't it reasonable to expect opera rate -- corporate america to pay some rates and hundred a little to close the gap? >> i budget and our policies are which we in a state in think they need to be a fair distribution. raising the top rate was a part of that. deductions for high-end individuals as part of it. of greaticiaries corporate income and wealth are the same people who are in the same high tax brackets. we have elected to try to do business tax reform in a way that will really enhance investment in the united states and operation. there arere that

different people who are paying the taxes. in the end, corporations pay out to their shareholders and they tend to be mostly people in the top bracket. .> thank you i know that we have a few more minutes. we will start up where we left off today. we'll start with those members who do not get a chance to question today tomorrow. >> thank you, mr. secretary, for being here. you know that the current rate is 35%. this is the result that we've agreed to in the fiscal cliff deal. many of us in this chamber, myself included, is dedicated to that fiscal cliff deal. it was not perfect, but for the sake of consistency and allowing small businesses and farmers to be able to put that issue to rest and focus on growing the economy and their business.

why did administration decide what we hadn agreed on months ago and only add to the uncertainty of american small businesses at a town when we need them focused on growing their businesses -- whencat and -- at a time many need them focused on growing their businesses? >> i appreciate your question. state taxes in january. it was a difficult negotiation. we make clear that the estate tax provisions were too onerous. we agreed to them. we are so fitted to this question -- we are sensitive to this question. and a big would've ever had tax .olicy made for all it has been hotly debated. we thought it was time to revisit it. it says in five years when we

revisit a number of issues, we should also revisit the estate tax. we do not propose a massive increase. disco back to rates that were in place in the 1990s. -- just go back to the rates that were in place in the 1990s. we look forward to working with you. we very much agree that we need to handle our tax discussions and a long-term way to great certainty. although the planning horizons -- the state taxes not invest decisions the same way others does. it isldn't you agree that tied to what liability might be when paying estate tax? >> i think most business decisions are based on what the value of that decision is to the business. the goal is to grow that

business and the income of that business. sometime in the future, at a point, the state tax might be different. that is different from things i current tax rates and deduction credits at the time of investment. >> thank you. about the retirement income, i'm interested in this. i thought i was doing the right aim at the age of 14. i opened my account and put in $2000. the maximumputting of $5,000. i'm lucky enough to earn the same rate of return as my counterpart who at the time were working for state and federal governments and received those returns of 78%. in 30 years, i should have an excellent amount to retire from. still the economy opposed to americans want to save their own money for the own retirement? i think you're

the only one who beat me with the ira. i was 17 or 18 when i started. we're not all discouraging people. we encourage people to start and get into the pattern of saving for their retirement. the question of the maximum amount comes out to the hard choices that we have to make in the tax code. a time when most americans look or to retiring with well over -- under $100,000 in savings, that is quite a high target. this is an attempt to make balances. you can still save for retirement without getting next to tax break. and people what seemed value our paladiare -- them at a this put disadvantage from public employees? >> i'm not sure what you mean. >> i save as a private sector

employee with my own dollars. but if on the public-sector for example, in the state of illinois, if i'm a schoolteacher or firefighter, for 30 years that access might they would have a crude annuity tax rates. comparison between savings plans and pension plans are very hard to make. obviously the pension plan does not have the same kind of divided ship wreck that a plan like an ira has tor 401k. would have to look at in more detail to make the comparison. >> thank you. for being here.

the president continues to embrace a worldwide system of taxing income which potentially subjects overseas to double taxation. despite the recommendations of his jobs counsel, his export toncil, and simpson-bowles adopt this territorial system. we are the last major industrialized country but the world like this one, having the world's highest corporate tax rate. it hurts our competitiveness. is there a shift towards a territorial system? choicesually think the are not as stark as one of the other. our system is a bit of a hybrid already. i were proposal makes it more of bozo makes it more of a

hybrid. is more of a proposahybrid. where my colleague asked if your budget ever bounced to, you said yes, what year does the budget balance? >> i believe it is in that 2050 's. away.a liwhile it forces the kind of choices that we think are not rent for the economy. it would not grow tall. --y places would lose their and these are hard choices.

we need to get it to place where everything is sustainable. we need to meet the standards of what it is an economy can have as far as debt and deficit compared to gdp. emily need to work together. the 1980s and 1990s, we do not reach a balance in one shot. it took year after year. >> is it fair to say that under the president's budget in our lifetime, we will never stop spending more money than we take in? >> i'm not convinced that in an estimate either of our lifetimes. >> you would be 100 years old. is that safe to say? i i think the question is not think when we hit balance. our budget in a place where it is affordable and we can pay our bills -- one with the budget reflect

that? >> i guess i'm disagreeing on reaching that balance is a short-term window. as notfine that spending more money than you taken in any one year. that in the president's budget is 2055. how about paying off the debt that we owe? is there a date? >> i would have to look it up. >> toledo not know. know.we do mnot rack upesses cannot debt and have no clue when they can pay it off. >> if they maintain a growing the only- i'm probably can balanceoom who

a budget. i believe in balancing the budget. >> do you have children? >> yes. well.o as had explained to them that you are not willing to pay for the things that we are enjoying today? has been 40 years of my life china get our house in order. -- trying to get our house in order. >> but not within your lifetime? >> our economy was in freefall. we. that we are growing a limited progress. wewe have stopped that and are growing. we are making progress. what about balancing in 10 years? >> i don't think american people except will accept those policies because it is not good

for the economy. >> the economy should have a better employment rate. >> is expired. mr. larson is recognized. -- time is righexpired. mr. larson is recognized. >> thank you. what an honor to have jack lew yeahere. i believe it was under your leadership that the entire federal that would have been paid off by 2009. i think that was in your lifetime. is that correct question mark >? >> i don't remember the exact year, but it was very much within my last 10. >-- lifetime. >> wars were not paid for. tax cuts that were not paid for.

unpaid for.tion financial serious crisis that led to an enormous to be in has caused us this situation. is that a fair assessment? >> it is a fair assessment. when i left omb, we projected a surplus over the next 10 years. there were a series of decisions that were made that cause that surplus to go away. we then hit a terrible recession. to the position we're in because of a combination of of policy decisions and economic conditions. we need to work together to get back on a path to sustainable deficit and keep on working. >> we all love to see us do will

the deficit. we all want to see that happen in a timely way without placing the burden on the backs of beneficiaries of our system. on one side, we hear that we have a group of people that would like to shrink government so small that you could drown in a bathtub. the people backgrounding of the recipients of social security, medicare, veterans, the disabled. especially in these very difficult times. special the people will have served this country. it seems to me that administrations application of its budget, it takes that into consideration. especially take that into consideration with the care and need to make sure that we are not going into an austere climate that would balance this on the backs of beneficiaries. that is i want to ask you this

question, and i think it's important. , it doesn't seem logical. we have been met with resistance time in town again. i appreciate the president's optimism. i'm an optimist as well. i would like to see is to be able to will this economy and, but we have not seen the willingness to invest in infrastructure or innovation. whene more than skeptical the president laid out proposals for cpi and the other side seems to say, yeah, well take that, but we don't want to take any of the balance that has to go along with that. , ifs that kind of attitude that prevails, what will the president do? >> i think the president has been very clear. he put into the budget things that are very consistent -- it

needs to have a sensible, balanced agreement. doing both sides difficult things. he's not prepared to do something like like chain cpi outside of the context of a balanced approach. tohink that we are so close what you need to reach an agreement in that center. i'll still be an optimist. i'll push forward as the president will get you get things done. i do not want to get any misunderstanding. it is not a starting point. we have been at this for over two years. it would be a mistake to treat as if you take one piece out of it and reach an agreement. >> one last name, a comment. no need to respond. social security and medicare are not impoundments. -- are noturance entitlements. these are the chances that

people pay for. check that out. it is insurance that you paid for. tell us that you need to pay more. let's get behind the science and math that will allow us to reach that. it is not an entitlement. it is insurance. >> thank you. the last question of the morning. >> thank you. mr. secretary, and remember when president gave his state of union address. that youally urge mentioned the corporate tax reform. every firm that in several more speeches. -- he reaffirmed that in several more speeches. i want to follow-up on one clarification. it made a testimony about making that there's a tax code that is simpler and fairer. you mentioned all businesses having to hire lawyers.

i hear about that all the time in minnesota. i just want to get a better sense. do you believe that component of having more comprehensive tax reform should include small businesses and family than individuals as part of that company or should they found separately? ?- file separately >> congressman, i have to be clear. both sides of tax are important. the business and the individual side. this does is choose to organize one way or another. they really need to know what each side of the tax code looks that. we'll forward to working together. it has to be in the context of the fiscal lion. -- plan. will only work if the raise i additional revenue. i think it is consistent with discussions that we had last

year. there is a fairly broad -- republicans were saying, you could do based broadening. we didn't do that. it ought to be achievable. >> i just want to make sure that small businesses are not left off the table. they should be included. there are large corporations, obviously. ell, we have worked as hard as we could to promote small businesses. tax reform should very much address the needs of small businesses. it we can do comprehensive tax reform, i hope we can. i look forward to working with you. same yearlected the the president was elected in two thousand eight. i came in with open eyes and critical amount own party for raising the dead or raising the spending and the deficit.

there is bipartisan blame and the has to be a bipartisan solution. my concern is that within the budget, it seems to be a little bit of a reaffirmation of past budgets that have been proposed by the administration to accelerate spending and only deal with some of the deficit issues of the listing issues and to later. i think we need to get to it sooner. it's.nk we may not agree on every aspect, but yet the deficit reduction plan that is what the president offered to the speaker in december. we pay for them and everyone pays for them. we cannot grant have to pay for it. -- will make the case we are in an environment where you get on the path for sustainable budget where the deficit and the debt are coming down. we will have to pay for things

after that. a differents approach. if you look at the baseline, there is no doubt that there is growing and spending in the baseline. it is no news that the baby boomers are approaching retirement. each year we are one year closer. the fact is that the baby boomers retire and there'll be a huge increase in the number of people using social security and medicare. unless we take away their entitlements to those benefits, spending will go. -- go up. >> on the other hand, debt is continue to rise. it is rising a significant percentage to gdp. what is the appropriate level? you think there is a crisis if we do not take action? >> we can bring them both the deficit and debt. downuld bring the deficit to below 2% of gdp. .e would bring the debt down

that is a huge difference between growing over 100%. it is important we work together. >> the president said in the middle of march, if you do not have an immediate crisis in terms of debt, for the next 10 years, it will be in a sustainable place. is that your view? on make sure that we get there. >> thank you. secretary.u, mr. we appreciate your time. we look forward to working with you in the months ahead. thank you, mr. chairman. >> thank you. with that, this hearing is abjured. -- adjourned. [captions copyright national cable satellite corp. 2013] [captioning performed by national captioning institute] ffrey zients, je

it has budget director on the 2014 budget. @10 a.m. eastern, maryland in 1812. war, slavery, and opportunity. at 11 p.m., the changing landscapes of suburbs and cities. the evolving roles of women in society. at 2 p.m., politics in america. the book festival live on saturday, part of the tv this weekend on c-span 2. >> acted white house budget thector discussed president's proposed budget for fiscal 2014. -- it reducesdes i the deficit over 10 years.

the housen ryan heads budget committee. >> the hearing will come to order. welcome, everybody. while this budget may be two months late, i want to thank you, mr. zients, for coming to testify and thank you for serving. it is not an easy job. it is arguably one of the most important and most difficult jobs in the executive branch. thank you for your services. i know we wish you great success. now for my speech. [laughter] now for the other side of the story. it is good to have you here. we're glad that you put out a budget 65 days late. but seriously though, we are disappointed in this budget.

we are disappointed because it is a status quo budget. it does not break any new ground. it goes over old ground. it raises taxes by $1.1 trillion. it increases spending by $1 trillion dollars. it would add $8.2 trillion to our debt. the president often says his policies would cut the deficit by 4.3 trillion dollars, sadly, that is not true. $1.4 trillion of deficit reduction over 10 years and nearly all of those savings are from well-worn gimmicks we have established as gimmicks from both parties over the years. if you remove the gimmicks, it reduces the deficit by only $119 billion. the president's budget proposes that this does not begin until the year he has left office.

having said that, the president does deserve credit for challenging his party entitlements. he has proposed increasing means testing for medicare part a and part b. unfortunately, it does not include the structural reforms we need to protect the programs. these policy changes in the budget will not save the programs. they will make them a little less expensive, but they still go bankrupt. the president's budget is a disappointment because it is a missed opportunity. we need a new approach to meet the country's most pressing needs. that is what our side is offering. our plan balances the budget in 10 years to foster a healthier economy and help create jobs. it gives opportunity to the young and retirement or seniors and a safety net for those in need. that is our objective. i understand my colleagues choose to see the objective in a different way.

i will say this -- at least everyone has a plan now. house republicans, senate democrats, and the president. that is a pretty good start. there are many differences between these plans. the president and the senate seem to believe washington knows better so there plan put more power in its hands. their budget is never balance. we see it differently. by defending the status quo, you're letting critical programs that would let medicare wither on its watch. we cannot sit here and dwell on our differences. we need to move old. -- move forward. we need to find common ground. having plans on the table helps us establish a process to go and find that common ground, even if we cannot agree on everything. we need to make a down payment on our debt and make it now. i believe we can make congress.

i'm hopeful that we will. i would like to yield to my friend and ranking member. >> thank you, mr. chairman. i want to join the chairman in saying thank you for your service as head of the ofmb. it is a tough job. i think you working for the president has done it very well. you will have a lot of opportunity to respond to some of the claims the chairman made with respect to your budget. i think the important thing is that it needs to essential goals. it focuses on job growth and strengthening the economy. we have seen more americans getting back to work, but we know we have a lot more work to do to get this economy in full gear.

your budget focuses on that. it focuses on reducing our long- term deficit in a balanced way, asking for shared responsibility. democrats in congress and republicans in congress and the president have submitted plans. i have some concerns with aspects of the president's plan, the overall thrust of it is clearly in the right direction for our country. there is a stark contrast to the house republican plan that was put forward. first, the house republican plan would put the brakes on our economy. we know the congressional budget office has said that if we keep the sequester levels of spending in place, we will see 750,000 fewer jobs at the end of this year alone. yet the house republicans budget keeps those levels in place. i received a letter from a ceo

in my district, the head of their large biotech company, who said as a result of the sequester, they froze hiring. the only place they are hiring right now is in china. the chinese look at the american model investment in bioscience and medicine and said, hey, that is a winning economic strategy. while we are cutting in places like those investments to keep our competitive edge, the republican budget would undermine those important investments. i applaud the president for putting forward a budget that focuses on investments to make sure we are competitive in the 21st century. with respect to the president's approach to deficit reduction,

he has in his budget done what he said he would do. he does it in a balanced way. he asked for shared responsibility. our republican colleagues in their budget ask everybody to take some responsibility for deficit reduction except folks at the top of the income ladder. if you are getting a tax break or tax benefit that benefits wealthy people, they get to keep it and they will double down and give you an extra tax break by lowering the top rates, which we believe mathematically can only be done by increasing the tax burden on middle income americans. throughout their budget, whether it is seniors who rely on medicare or medicaid, investments in kids education, the choice made in the republican budget is to say, let's put the burden on them at the same time we continue to

expand tax breaks for folks at the very top. we do not think that is the way to address our budget challenges or get our economy fully in gear. let me end where the chairman ended. we do have budgets that are on the table. we believe that the president has clearly indicated a willingness to meet republicans more than halfway. as you indicated, mr. chairman, some other proposals in the president's budget create -- have not been that well received by members on our side. because what he did was include certain provisions that the speaker of the house had called for as part of a negotiation with the president.

whether it is chained cpi or other provisions that the president said in this budget -- you know what, i will put those in there. the speaker asked for them. we will put them in there to show our willingness to meet republican colleagues more than halfway. it has been disappointing, the response from our colleagues not to recognize the president made that good-faith effort going forward. i hope this will be the beginning of a conversation. i do hope the house republican leadership will appoint a budget conferees so we can get going and get the input from the president. thank you for your very important contribution to that effort. >> the floor is yours.

>> thank you, everyone. i'm pleased to be here to discuss the president's 2014 budget. i'll work off of a few slides. the main message of the president's budget is to make critical investments to strengthen the middle class. to create jobs and grow the economy while continuing to reduce the deficit. on the left-hand side, in terms of balance deficit reduction, it builds off the deficit reduction achieved to date and includes the president's fiscal cliff compromise offer to speaker boehner from december. importantly, it has balance deficit reduction. at the same time, the budget opposes an important job

investment to enhance economic growth and skills and competitiveness with investments in education and r&d. each of these new investments are fully offset. they are fully paid for and they do not add to the deficit. deficit reduction over the last couple of years, democrats and republicans, have worked together to cut the deficit by more than 2.5 trillion dollars. here is the breakdown of deficit reduction to date. the budget control act tax discretionary sending saving over $1 trillion. another $370 billion dollars in 2011 appropriations. fiscal cliff agreement reduce the deficit by $660 billion. reduced interest payments, $480 billion.

$4 trillion as the benchmark that bowles-simpson and others have set to put us on a sustainable path. we are more than halfway to the $4 trillion goal. the president budget finishes the job with an additional $1.8 trillion of deficit reduction. the $1.8 trillion is from the compromise the president made with speaker boehner for the fiscal cliff negotiations in december. by including this offer in the budget, the president is showing his willingness to compromise and make tough choices and his commitment to put the country on a sustainable, fiscal path. here are the components of the deficit reduction that take us from the $2.5 trillion.

on the left side, what we have achieved. we strengthen medicare by squeezing out wastes. next, $200 billion from other mandatory programs, including reductions to foreign subsidies and selling unneeded federal real estate. next, $230 billion in savings by indexing annual inflation adjustments for the chain cpi. another $200 billion in discretionary spending beyond the caps. next, $580 billion dollars in revenues from tax reform by closing loopholes and reducing benefits for families that makes more than $250,000 in annual income.

we have $190 billion in savings from reduced interest payment on the debt. in total, this has achieved 1.8 trillion dollars in additional deficit reduction over the next 10 years, ring in the total deficit reduction to $4.3 billion. more than two dollars in spending cuts for every dollar of revenue. to be clear, this offer includes difficult cuts the president would not propose on its own, including cpi, which the president is only willing to do with protections for the vulnerable and as part of this balanced plan. however, by including the compromise for the budget, the president is showing his willingness to make tough

choices and his commitment to reducing the deficit and putting the country on a sustainable, fiscal path. the deficit from 2012 through 2023. in 2012, the deficit was seven percent. the budget phases in deficit reductions to support the ongoing recovery. by 2016, the deficit is below 3%. by 2023, it is below 2%. that is 1.7%. as a result of this deficit reduction, debt has a percent of our economy is also on a declining path. the declining deficit and debt, the president's budget achieves an important milestone of fiscal sustainability. the budget reduce that important

fiscal milestone while also investing in the drivers of economic growth. in doing so, it demonstrates that we do not have to choose between deficit reduction and economic growth. it shows that we can and indeed we must do both. the country will not prosper if we have unsustainable deficits. it also will not prosper if our infrastructure is crumbling and our workers lack the skills to compete. to have paid for initiatives like prepaid for all, job training and accelerated infrastructure investments, this budget will enhance our nations competitiveness. to balance deficit reduction, this budget will enhance confidence and lay the foundation for more durable economic growth. it is the right strategy for our economy and creating jobs and for building prosperity. with that, i will be happy to answer questions.

>> thank you. let me start with attacking some of these claims of deficit reduction. gosh, by the sound of it, it sounds like we are done. we do not have to worry anymore. problem solved. but when you measure deficit reduction in a gross non-net way by saying, look at all of the reduction, you can't neglect the deficit increase that occurred at the same time. missing from this computation is the $4.3 trillion dollar deficit from a stimulus that passed, the tax holiday, the other payroll tax holiday, the 24% increase in non-defense, spending above the caps.

if you go with net numbers, $500 billion of deficit reduction and not $4.3. look at the claims in this budget. the numbers in the budget claim $1.4 trillion. that is the proposed. if you take out the gimmick, that is 600 $70,000. excuse me, millions of dollars. if you really remove this, billions of dollars. if you net all of this out, if you strip out the gimmicks that have been well worn, one hundred $19 billion of deficit reduction. all you have to point to the fact is that this budget never balanced ever. i understand maybe it holds up well to use the word balanced every third word in every sentence when you are describing fiscal policy, but how is a budget balanced if it never balances? i think we need to be more honest about the true, fiscal nature of the situation of the problems we have. i want to ask you a couple of

technical questions. in the past, we have done this on a bipartisan basis. why is it that in this budget, you assume it is fully funded and not paid for? >> we have a balanced reduction incremental what we have achieved to date. we believe we will not cut doctors by 30%. overx this year over year year. it should be in the adjusted baseline. >> since you are saying that we paid for this that we will not pay for it anymore? president's the budget saves in healthcare costs.

200 billion dollars in other mandatory. $200 billion of discretionary. it is something that happens year over year. let's be honest in our baseline and acknowledges it happens

every year. i think you through around a lot of numbers in the statements. it is hard to track. >> i'm sure you have seen them. >> they are all over the place. >> at the end of the day, you have to look at the bottom line. the bottom line is that deficits are declining and that is on a declining path. we are below 2% of gdp by 2023. i worry we and others are spending a lot of time on baselines, but it is about the bottom line. >> that is not much accomplishment over 10 years. >> debt is on a declining path. we cannot think of deficit reduction alone. >> why do we start deficit

reduction in 2020? >> it does not start then. >> the policies proposed to begin in 2020. >> no, it is well in advanced of 2020. that is how we achieve deficit on a declining path. deficit reduction is important. it is an important component of an economic plan. we have to put people back to work. we have to increase our global competitiveness. we had to invest in r&d and education. the most important way to achieve deficit reduction beyond the policies that we are talking about today is economic growth. >> if we did not pass this

budget, the deficit would drop back? when i look at war spending, these high levels with the troop count we have in afghanistan right now, if you have a drawdown, you count that as savings? now we all agree that we had withdrawal occurring in 2014. that is policy and bipartisan agreement. but we're going to count as a spending cut the idea that the baseline assumes we would be at full troop strength well beyond 2014? in if you have withdrawal 2014, that all of a sudden counts as a spending cut of billions of dollars? in other words, not spending money that was never going to be spent in the first place is now

counted as a spending cut? >> let me review this. we cap the spending. it closes the back door for further discretionary spending. the savings you are talking about first is the official scorekeeper baseline are not counted in the 2.5 trillion dollars i mentioned and are not counted in the $1.8 trillion i mentioned. >> but it is in your $1.8 trillion. >> i think we should go back to the slide. $200 billion of other mandatory. $200 billion of discretionary. and the interest savings. that does not include that. >> you are double counting. >> the war in iraq and the drawdown in afghanistan, we will take a small portion of that money and invest in

infrastructure. that is not one point of the -- >> there in lies the issue. we are taking spending that will never be spent after using it like it is free money to spend. withis a problem budgeting. cbo did not have a choice. the law requires that they have a baseline that reflects current law. they have parameters placed upon them that allow such a gimmick. the point i would make is if all of this grand deficit reduction were real, why does the budget never balance? why are we adding to the debt in this budget? my time is running out. and putting myself on a clock. i want to ask a question about ipads. in your budget, you have ipads accruing saving and 2021 and 2023. $4.1 billion.

you lower the growth rate of gdp. we're baseline claims that growth is within the parameter. where does the 4.1 come from? how does that have the mandate in this budget get that savings it gives a medicare costs are below that? >> we believe the affordable care act is helping to drive that. you're talking about a fraction. >> i understand that. >> we believe that through continued progress in reducing unnecessary care and for mortimer costs affect of care to organizations and other innovation that medicare costs will continue to come in and serve as an important backstop function.

we do not anticipate that backstop function the necessary. >> the authority - they have to make the spending within that. you're saying that national spending never exceeds that. >> it is a small percent. we would assume health care spending will continue to come in and the will not be necessary. >> i understand the process. >> they are there to protect seniors. >> you are saying that by 2021, cap will be fixed.

they have to start reducing recommendations? >> yes. we anticipate further progress that it will most likely be unnecessary. >> thank you. >> thank you, mr. chairman. i'm your response to deficit reduction and how much we have achieved over the last couple of years and in this budget, you took us to the bottom line. what is the deficit as a percent to gdp and whether debt as a gdp is rising or declining. isn't it the case when you use that measure, you standardize all of the budgets? >> absolutely. >> the president's budget reduces the deficit to 1.7%. >> yes. >> and the house republicans

budget last year and the end of their 10 year window, they reduce deficit percent gdp to 2.1%. we are talking about half of that compared to the house republican budget.

our also point out if you look at the congressional budget baseline after 10 years, the ratio of debt is 77%. your calculation and cbo and has some different kind of substance. >> i believe it is 73%. >> and declining? >> declining each and every year. >> the chairman refuses to look at these gimmicks, but the

measures washed all those issues. the biggest whopper of a gimmick in these year's budget is a republican claim that their budget balances and 10 years and the claim that they also repeal obamacare. i would like to set up a chart if i could. this is in the 10th your other republicans budget.

claims to be $7 billion in surplus. obamao claims to repeal care in its entirety. obamacare guarantees billions of dollars in medicare savings i ending overpayments to companies and rationalizing the system. the republican budget includes this in their budget. that is shown in the red part of the chart. the republican budget also

assumes amount of revenue that will come in through the tax provisions in obamacare. approximately $1 trillion. that is the blue portion. if they really are going to get rid of obamacare, which they claim to do in their budget, their budget would not come close to balance in year number 10. that is a whopper of a budget gimmick this year. there is another big difference

in the republican budget and in the president's budget when it comes to how to deal with tax issues. you have pointed out that the very wealthy individuals continue to benefit from reductions in the tax code. you in this budget proposed to ask high-end income to take this approach will republicans say they would drop that top it would provide a huge windfall to the wealthiest people in this country, and mathematically, if you meet the criteria that you set out, which is not to increase the deficit, middle income taxpayers would have to pay more in order to fund those tax brakes for the wealthy. if you can take time to the very different approaches that the president takes with the tax reforms compared to the house republicans. >> the president in his budget raises $580 billion in tax reform. there is no raising rates. it is all. tax reform and from families

with incomes more than $250,000. the president believes we should do tax reform. individual and corporate tax reform. he put forward to specific policies that brings in that $580 billion. their deductions are at the level of the highest of the middle income families. secondly, through the buffet rule, which as anyone with over $1 million in income should pay a minimum of 30%. the president raises $580 billion from tax reform. no families are impacted that make less than $250,000 of income. this is done through the to specific policies, the 20% limit on the deductions and the buffet rule. the president believes there is an opportunity to do tax reform to make taxes were simpler and fairer and to help the middle class. >> i don't know if you had an opportunity to look at some of the analysis that has been done the house republicans budget approach with respect to the tax fees. they would drop to 25%. any do that in a neutral manner without impacting middle-class families? >> in order to go to 25% for the high income folks, $7 trillion tax rate. you would have to add to the deficit. the math does not work. another adds to the deficit or middle class families would have to pay for it. both are unacceptable. >> thank you. does to go to the bottom line on that, that means either the republican budget would not be in balance if they did what they said they would do with respect to tax rates and tax policies, in which case it would not balance in 10 years even with the super gimmick opportunity to include obamacare when they said they wouldn't. or you would be raising taxes on middle income families. that is something we opposed in our budget. let me conclude by asking you about the investment in the compromise proposal the president has put forward. it is to be infrastructure investment for our country where bipartisan issue. bipartisan unity behind it. make sure this country is number one. the sure we have infrastructure necessary to support entrepreneurship and the private sector. >> in my job, i had the

opportunity to spend time with lots of groups, entrepreneurs, small and big businesses. anyone working in the economy would agree that investing in infrastructure is key for the global competitiveness, short- term, medium-term, and long- term. the great opportunity we have is to put people back to work at the same time. it is a win for the global competitiveness, short, medium, and long-term. it also puts people back to work on worthy projects. the investment is money well spent. >> thank you.

i want to welcome you and say thank you for your service. the chairman and the co-chair have previous commitments.

i will assist in the absence. the law of the land state that -- the president and the administration did not do so. he had the extra time to balance the budget.

but that is not what the budget does. it increases taxes and spending. the same thing we have seen before. it increases dependence on the federal government. it grows government and not the economy. solveof all, it does not the challenges that need to be sought to get this economy growing again. we can bring up the first slide. this gross debt and percent of

gdp the president proposal always staying above the 90% drop entire budget window. onell recall that unless gets below that 90% level, economies do not turn around. sadly, the president's budget proposal does not address the challenges we face. all sorts of other misinformation i would love to have the time to correct. thet, i assume that

president would like to see his budget passed by congress. is that accurate? >> yes. >> that being the case, -- >> may i have the opportunity to comment on the chart? >> at some point. my time is limited. that being the case, with administration be willing to submit a budget resolution? >> i think right now we believe

you should return to regular order. regular order is a way to proceed. >> in the past, we have attempted to allow support for the budget and have been accused of not writing it in a way it would have been written. we would love to see a budget resolution from the administration. we would like to be able to have a vote on it. >> never heard from you that you would like to return to regular order. >> the president has said often times he has met the republicans more than half way. the president budget increases debt significantly. we move in the opposite direction. the president's budget increases the deficit and we move in the opposite direction to balance it within a 10 year period. the president increases taxes and we do not. that is hardly meeting republicans halfway. as the chairman said, wonderful rhetoric, but it is simply not true. is it? >> no. by putting forward the compromise offer, it includes jane cpi, something the president would not do on his own. this is directly responsive to speaker boehner's request.

the president is going to do that is part of a balance deal as long as we have those conditions. that $1.8 trillion is a compromise offer. >> chain cpi is not what we would select as a solution for the challenges we face. >> into something that speaker boehner and and leader mcconnell asked for several times. also raising the age for -- >> 30 seconds if i may about medicare. your budget proposal and gross reductions in medicaid spending, there are further cuts. how long do you think this initiation can cut payments? >> there are opportunities to make care more efficient. the more opportunities to and sent providers do not have readmissions. there is opportunity to make sure we get the same prices on drugs that we got on medicare and medicaid. there are opportunities to be made to make our system more efficient. we should take advantage of those opportunities. not turn it into a voucher system. >> our system does not do that. it provides greater choices for patients. i now recognize the gentle woman.

>> thank you. it does present a balanced approach and finds common ground. certainly reduces the federal deficit. that makes investments and moving forward with economic growth. i want to acknowledge the language. it is important for us to get done this year. we should do it. we should do that. additionale the language on moving toward a new payment system. like what i have written. it should be in possible for them and cost savings the right way. probably get some bipartisan

support on that as well. i went to highlight what aspects of the budget in the investment and innovation and technology. the president has proposed a small increase in nih funding. appreciate it. it was the result of the sequester, we seeing cut in sent to the greasers in this country. this growth of research funding comes basically from the government, nih. it is the beginning of the pipeline for new devices, biotech, industries manufacturing and production of this very important life-saving medicines and treatments. that is important to our

economy. many of our research institutions in pennsylvania are seeing dramatic cuts. millions of dollars. laying off scientists and not hiring new ones. young scientists may want to create those life-saving treatments, but economy is a big driver in many places across the country. the sequester matters. those cuts will hurt. economic growth, we may not be able to regain if we do not fix it. $3 billion which is essentially the cut the nih will see this year. repealing the tax provision of corporate jet is a good trade- off. end that special treatment of corporate jets into medical research. i'm working on that.

i hope we can get something done this year. talk about how important those dollars are to ongoing support for scientific research in medicine and sciences. >> i could not agree more. the president's budget on the domestic side r&d by 9%. that is consistent with the logic you just did. let me step back. you spotlighted a specific problem with the sequester.

it was never intended to be implemented. it is meant to be a forcing ffunction for balance deficit reduction. we find are implementing a policy that was never meant to be implemented. consequences are negative throughout the economy. american people are feeling it every day. it will reduce our gdp by half. cost us hundreds of thousands of jobs. it will impact research a life- saving breakthroughs potentially at nih. it is impacting meals for seniors.

defense contractors. across the economy, impacting hundreds of thousands. we need to replace the sequester. the president's budget does that. we need to pass it. >> i appreciate that and the fact that the president's budget creates a dialogue. we have a democratic alternative and republican budget. this is to be of conversation or else the economy will get hurt. >> i recognize the gentleman from california. >> thank you, mr. chairman. >> does the president believe that deficits matter? >> yes. it is an important component of an economic plan. >> our deficits a bad thing? >> there are not a bad thing in the abstract. the president planned as deficits going down its year. >> you have deficits containing for ever. is that correct?

i think your numbers are garbage. ali is another strong term. drop this conversation in the next for minutes, under your numbers, the deficits continue for ever, does it not? >> it is focused on a 10 year window. >> if the deficit continues to drop in the 10 year window -- >> that is right where we're at this point we are in the economy. we have to be focused on getting people back to work and investing in infrastructure. >> the deficits continue at roughly half a trillion or higher throughout the tenure limit. did i say something wrong? they do continue at half a trillion or higher. even at your numbers, throughout the tenure window. >> yeah, but the right way to think about deficits is a percent of our economy. the deficits are a percent of

our economy. it has come down quite a bit during that window. >> so we do not have to make them go away? >> it is consistent with bowles- simpson. we would be able to create jobs -- >> halfling trillion dollars are more throughout the tenure window and it will continue for ever. obvious he the president doesn't believe that we do not need to get the balance budget. julie? >> the president wants to get the economy back to its full potential. bear with me for a second. >> i'm sorry. i went to get to a couple of things. you mentioned the only change in the town of programs here are the ones you mentioned the

president put in. the president believes that social security, medicare, and medicaid are on a sustainable path where they do not need to be reformed substantially. they're not heading toward bankruptcy like the vast majority of analysts and economists from both sides say. the president does not believe that? >> i think social security is not part of our immediate fiscal issue. the president has put forward principles for social security reform. that is not part of our immediate deficit. i medicare, $400 billion in

health savings. medicareion in savings. that is the first decade. second decade, more than $1 trillion dollars in savings. that is significant. we need to honor our contract with seniors. >> when you look at the costs of medicare over that time, those numbers, which i don't agree, i do not think anyone can say that is putting us on a sustainable path. one final question really quickly -- can people who make under $250,000 buy cigarettes? >> yes. >> so you have put a tax on those who make under $250,000. >> people need to make choices. >> people make income and they pay taxes.

>> is this intended to raise revenue or to stop people from smoking? this cannot do both. you indicate that this will have people stop looking? >> we can discourage new people from smoking and encourage current smokers to quit. at the same time, those who continue to smoke cool pay a tax. -- will pay a tax. >> time is up. there's a for your testimony. i wish some of our colleagues on the other side -- thank you for your testimony. i were some of our colleagues on the other side -- i do not remember this level of excitement about balancing our

budget. would you say they're republican budget is a and austerity budget? that these are deep cuts? >> very deep cuts. cutsepublican budget domestic -- by 20%. you'reare the -- i know working on the american budget full-time. how are the austerity budgets doing in europe? how is that playing out? >> it is not doing well. but we need to invest in jobs and infrastructure. that is the right way to the economy.

>> there is a great partnership of public money to help spur innovation. how did this budget continue to promote initiatives like that and that other things the president wants to get up and running? and other initiatives like that that will lead to economic growth in industrial areas like mine? >> that is a great example pillared -- example. the budget proposes to do 16 more at $1 billion. that is directly offset. i think we all would agree those types of investments are

good for the economy. we have created 500,000 manufacturing jobs or so. we need to create more and more jobs home. each of these investments are directly offset. >> investment in natural science foundation, what do those look like in this budget? thehose are on discretionary side. prioritizedt has investments in r&d, and domestic r&d is up 9% under the president paz's budget. even with the tight discretionary caps, the president has prioritized r&d and there is a 9% increase. we are very thankful for that.

>> the real question is, what the roadmap for america in the future? part of this road that needs to include the investments that are in sectors of the economy that are going to blossom in the next decade or two. we do not always know what they are. when we say we will balance the budget in 10 years, without looking at the history of our country and the big investments we have always made, whether it is infrastructure, the space program, the national science foundation, investments in education, community colleges, pell grants, student loans, bringing those rates down, this

is a recipe that has been very successful in the united states. i do not agree with everything in the president's budget and we will have plenty of time to discuss those issues, but i want to say thank you for being, in my estimation, a voice of reason and having a vision for what america needs to be like in the next decade. we cannot cut our way to prosperity. we have seen, as i mentioned earlier, we have seen a lot of

our friend on the other side very excited and the first question was, does this matter? if dick cheney were sitting in your seat, he would of had a different answer than you. he said deficits do not matter. that was the prevailing wisdom coming out of the republican party for the last -- the first eight years of the new decade. we will press you on the issues we do not agree with. i want to say thank you for making these long-term investment that will cut the in nine states to be competitive in an increasingly competitive

global economy. >> we will also suggest you cannot tax and borrow your way to prosperity. the diamond from california for five minutes. >> thank you. thank you for testifying today. we appreciate your insight. i want to bring perspective to the debate. republicans controlled the house with the democratic president. work together to meet the challenges before us. president clinton worked with speaker gingrich. they enacted balanced budgets. president clinton raised taxes

21st came into office. the final six years, he joined the congress to address the spending side of the ledger. that is how we balance the budget and produced a surplus. however, president obama continues to be consumed by raising taxes, refuses to address spending. he has already pushed through $1 trillion taxes over the implementation of obamacare

appeared another 600 million from the recent income tax hike, the largest tax increase in real terms, in 65 years. the president's 2014 budget increase is passed by an additional 1.1 trillion dollars -- $1.10 trillion. duringrage per capita the clinton administration, excluding defense, and the stimulus, $9,089. that is a 33.4% increase. with 315 million americans, that is $630 billion more in spending each year. many talk fondly about return to the clinton-era tax policies, but with the recent tax hike, we need to talk now about going back to the clinton's spending levels. it would enable us to eliminate yearly deficits and address a long-term debt.

today's population is older today than in the 1990's. we spend more on medicare and social security. the bigger issue is that we cannot sustain the current growth projection of these programs. everyone agrees. this puts even more pressure on us to reform retirement programs for kern beneficiaries and injure their return. we can also use the lessons learned from working together in the 1990's on welfare reform and to apply them to other programs. president clinton alatas -- a lot of the benefits of balancing the budget. by reversing the earlier trend of fiscal responsibility, using conservative economic estimates, balancing the budget and producing a historic surplus, we help to restore our national spirit, and produce the resources to help opportunity and prosperity reach all corners of the nation. on the other hand, president obama recently stated his goal is not to chase a balanced budget just for the sake of balance. in the 1990's, with a golden

era, why can we not return to the clinton era spending? do you agree with president obama, the balanced budget is not a worthwhile goal? >> let's go to the early 1990's, when the head 4% gdp projected deficits. we did balance deficit reduction. wasprojection after that 2.5%. it was not that different than where we are today. we are at 1.7%, a little below. the forecast at the time, 2.5% deficit. what do we end up with? surplus. how did that happen? economic growth. it is exactly why we need a plan here. >> the economic growth happened in the private sector, not the government. >> of course. >> it seems to me the budget before us, pro-government. >> stick with the statistics. these projected deficits for the federal government was 2.5%. we are lower than that in the present's plan. what took us from -2.5% to a surplus of economic growth, absolutely the private sector growth. we need to do both here. we need to get ourselves on a fiscally sustainable path, down were deficits and debt as a% of gdp, but we also have to invest in our economy and get people

back to work, and that is similar to what the plan was in the 1990's. getting the economy growing. >> it seems to me we have increased government spending by 33%. >> the time has expired. [indiscernible] >> during these very difficult times. also, let me acknowledge the hard work and commitment of everyone at the office of management and budget. very briefly, going back to the clinton era, from what i remember, there was a surplus at the end of his term. in the bush and administration, they squandered that surplus. many of the economic policies are responsible for the recession and the hard economic place where this country is at this point. that is what i remember here in the following eight years of the clinton a administration. let me also say when we talk about a budget, we have to remember it is not only a plan for raising revenues and spending the federal funds. there is also a moral document that the statement of our nation pauses principles and goddesses. some part of the present's budgets i find very troubling, but i am very pleased to see the president clearly understands the need to make vital investments in our economy and job creation, and it is a balanced approach. president clinton did create a balanced approach and reduced it and create a surplus. the pleased to see investment in hiv and aids. the budget permanently extends the vital program, such as the child tax credit and the earned income credit. this helped millions of families across america in terms of a path, a ladder, from poverty into the middle class. let me just say the rise in budget, this is a real contrast to that.

he proposed -- the republicans' proposed another 6 seles trillion tax cuts for the wealthiest, while focusing 66% of their budget cuts on treading our nation's safety net. pretty held some productive discussions on eliminating poverty, by reducing this in half in the next 10 years, during the next 10 years. unfortunately, income and poverty rates are rising. i wanted to ask how this budget puts us on that path of a limited in poverty by reducing it in half in 10 years because, i think while i know chairman rhyme and -- brian and myself are concerned about poverty,

when i look at their budget, all of the paths that would people out of poverty were cut. traffic. -- drastically. >> it is reflected in the budget. he mentioned some areas that more expanding and extending of the itc in the child tax credit, also, the a otc, which helps families go to college, a

centerpiece we have talked a little bit about already that i want to emphasize is the president's budget, a landmark initiative for early tide -- early childhood. the tobacco tax. ladders of opportunity, including promises loans, 20 neighborhoods, where we will really work on bringing education resources, housing resources, private-sector resources, local resources together to lift up these

neighborhoods. minimum-wage, the present -- president, there is a lot of progress in this budget in what has been an important initiative from the beginning, which is helping lift people out of poverty into the middle class, crating ladders of opportunity. >> i would like to ask you if it is possible for omd to produce an appendix to the budget, a list of programs that would help low-income families, moved from poverty into the middle class, so we could understand how the work, and what they have done over years, and how to track our

decisions as it relates to the programs. i do not know if you could organize that for us or where we would go to look at that as it relates to the federal government. >> we will permit -- we will pull something together. >> that you. -- thank you. >> i find myself in rare agreement with my friend from ohio. abortion administration, two words, he is absolutely right. some of us were very exercised about it. george w. bush was one of the most fiscally irresponsible president never history. he increased spending by a

whopping 2% of gdp. the problem is the budget you are presenting today, in five years, increases it by another two% of gdp. my problem with the obama administration is not that he has reversed bush's spending patterns, but he has taken the worst of them and double down. you called the house budget an austerity program in european market. thattually seems to me

your plan is far more in the european model, the european austerity programs are headed the weighted toward tax increases. that is the problem. countries in the most trouble in europe are those with the highest marginal tax rates, including italy, and portugal. those that relied on spending cuts have done very well. take sweden between 1993 and 1997. ratioending to gdp declined to 51%. its average rate of growth doubled in that time relative to the prior decade. norway saw the same results. i appreciate the analogy with austerity programs. the ones that work reduce spending, which is what the house republican budget does. those that created additional problems are those that are weighted towards tax increases, which is the budget you are presenting. my first question involves a very simple question.

why exactly are you here? 65 days after the budget deadline. our whole system is designed to ensure that the president as the chief executive officer of our nation comes to congress with his estimate of what it will take to implement the laws over the next year. then congress has a time frame in which it has to develop a budget. you did not do that. congress, the house, and the senate, were left to act on their own without a budget. now the trend has already left the station and suddenly you fill up with this budget. i find appalling. >> unfortunately, due to congress's and ability to act, we have had manufactured crisis. >> [indiscernible] congress has acted and has adopted a budget on schedule. that process was supposed to begin with the president presented one and he did not appear that is a rhetorical question, frankly. my time is very limited. the business daily editorial today, which excoriates the budget, let me walk you through the point. this is where i would like your response. they criticize it for spending and deficits of the next to it -- two years. it increases spending by $247 billion above the base line. it increases the deficit by $157 billion above the base line. >> in terms of the timing of the budget, i was talking up the fiscal cliff prices -- crisis, followed by the sequester, which made it difficult to deliver the budget until it settled an. >> pardon me, sir. the house and the senate were able to act. it is either to confirm or deny today. does the budget over the next two years increase baseline spending by $247 billion and increase [indiscernible] >> we made progress on the economy, 36 months of job growth, 14 straight quarters of gdp growth. we have a ways to go. we need to invest in jobs. cracks are they are not? >> -- >> are they or not? let me get you to answer the second point.

$1.20 trillion, he claims it is 187 to 190, and cut the $186 billion. >> we are back to our baseline set of issues. in the base line is the sequester. >> they cancel the sequester and the claim that. >> that is right. we are very clear on how we are doing this. in the base line is the sequester, never intended to be policy. that is spending cuts across the board. we replace it with balance deficit reduction. in total, the president has $4.30 billion of deficit reduction. >> the third one was it relies entirely on tax hikes. >> i thank you for being here and your service to the country. you look at these hearings and you consider the only objective is deficit reduction. that in an of itself is an economic strategy for economic growth in this country. i think you said at the beginning of the objectives are responsible deficit reduction, but also economic growth for our country. we do not have to go back as far as my friend from ohio suggested to the time when my friend on the other side of the aisle speaks up for what we did not pay for and tax cuts for the richest americans. in recent hearing proposals, they provide another gigantic tax cut for the richest people, the top rate -- the top wage earners in the country. wherehard to understand this notion of deficit reduction is, when that is what we have

heard about here. debt. to talk about the we have to deal with it in a responsible and balanced way. i am from a state with the highest unemployment rate in the country, depending on what month you look at. what we have to look at is the job crisis in this country and how we invest in a growing economy, in getting people back to work, because i consider the single best way to do with the deficit is by getting people back to work and growing the economy. that is what our history has shown us and what we need to do. there are some things in this budget i strongly oppose. when you look at the investments the president is proposing in infrastructure, work-force training and development, education, science and research, and rebuilding our own country, and in manufacturing, those present exciting opportunities to really jump start job growth and our

economic recovery. i would like you to talk in particular about what you see as the most valuable of those. i am interested in manufacturing, which the president has articulated an exciting vision for manufacturing centers. of theeak to this notion importance of creating jobs as a way to deal with our deficit in a responsible way in the long- term and short-term with the voting real growth, and particularly job growth, in those sectors. >> you are correct. putting people back to work, getting this country to its full economic potential, is the most important thing for the president. i think you hit on the main areas. i think infrastructure is really important.

the investment, working closely with state and local governments and the private sector to put people back to work, but also position ourselves much better in terms of global competitiveness by having a 21st century infrastructure.

.

let me emphasize we're not arguing against taking our share reductions. we must sustain our vital missions and banished the inevitable risks we are incurring. therefore, i plan to submit every program in action and mitigate the most egregious cuts. in this i'm asking for your support and that of the other intelligence oversight committees for expedited consideration. i have seen this movie before. ago i served as director of dea. we were asked approve reap the reduced thend,

intelligence community by 20% in the mid to late 1990's. -- to alice and overhead cut overhead. we badly distorted the workforce. all that was reversed in the wake of 9/11. banks to support of congress over the last decade, we of rebuild the intelligence community. we now if we're not careful risk another damaging spiral. the leadership will do all we can to prevent history from repeating this cycle. observable directly sequestration impacts like shorter hours at public parks or longer security lines at reports the, the degradation to intelligence will be insidious. it will be gradual, almost invisible, until we have an intelligence failure. with that as a backdrop, let me

turn to a brief review of global direthreats. i cannot recall a time when we have had a more diverse array of challenges around the world. this makes sequestration even more incongruous. this year's assessment illustrates how dramatically the world and the increment is changing. had first seem irrelevant quickly can set off a trans-national disruptions that affect u.s. national interests. softwarencludes a variants. r variation. attacks can be deniable. i would like to turn to a few issues we have identified in our statement for the record. our statement this year leads with "cyber". and congratulations to committee

for the passage of your bill. cyber pose importance cannot be overstated. our discussion of national resources is more prominent this because it has huge national security implications. many countries important to u.s. interests are living with extreme water and food stressed that can destabilize governments, forcing migration and triggering conflicts. criminal or terrorist elements can also exploit these witnesses to conduct illicit activity recruitment and training. on the issue of terrorism, al qaeda and the potential for a massive coordinated attack on the u.s. may be diminished, but the jihadist movement is more diffused. all modes, domestic extremists are determined still to attack western interests. the turmoil in the arab world has brought despite in threats. the rise in new governments in

yemen and egypt, along with ongoing unrest in syria and mali provide openings for groups. these and other regions of the world, extremists can take advantage of diminished counter- terrorism capabilities and a high proportion -- a disproportionately high proportion of unemployed frustrated young males who deeply resent us. destruction and proliferation is another persistent threat. we continue to monitor the spread, development, and possible use of them around the world. north korea has already demonstrated capabilities. it announced in february that it conducted its third nuclear test, vowed to restart its nuclear reactor. an last year it displayed

intercontinental ballistic missile. we believe pyeongchang has already taken steps toward that system, although it remains untested. orbito put a satellite in in december, demonstrating its long-range missile technology. these developments have been accompanied with extremely belligerent aggressive public credit reports the u.s. and south korea. we continue to carefully monitor korea'sents of north next provocative steps. in uranium and ballistic missiles work. these technical advancements strengthen our assessment that iran has the scientific technical and industrial capacity to produce nuclear weapons. the central issue is it is its political will to do so. decision will reside

with the supreme leader. stockpilesmmunition retracting, particularly chemical and biological warfare agents, which are part of a large complex and geographically dispersed program. they have the potential conflict-casualty's. the increasingly beleaguered regime, having found its escalation of violence not working, it appears quite willing to use chemical weapons against its own people, in syria. looking at geographic threats, some nations in the mideast and north africa are making progress toward democratic rule, but most are experiencing violence and political backsliding. leaders in iran are exploiting the unrest and are spreading influence to undermine the u.s. and our allies.

it also faces a worsening financial outlook and the fall of the assad regime in syria would be a huge strategic move for iran. al qaeda in iraq has not gotten the strength to overwhelm iraqi security forces. iraq is producing and exporting oil added size levels in decades. islamic actors have been the chief beneficiaries of the political openings in islamist parties in egypt, tunisia, and morocco will probably solidify their influence this year. after two years of conflict in syria, the regime is accelerating. we see this in its territorial losses and sadistic shortages. the opposition is slowly gaining the upper hand. assad's days are numbered. violencea's aggressive

and the deteriorating security conditions of lead to increased civilian casualties' estimated at 70 cows and. -- 70,000 deaths. the violence is also led troops 3.6 million syrians being displaced and 1.3 million refugees who have fled syria. egyptian elections originally scheduled for this month will probably be pushed to the fall. the longer postponed, the greater the potential for more public dissatisfaction and even violence in the streets. sub-saharan africa, we're monitoring and resolve discord between sudan and south sudan, fighting in somalia, extremist attacks in somalia, and renewed conflict in the great lakes region. 's security depends on france. and on efforts by the african support mission or by future

u.n. peacekeeping operations. west african countries have deployed thousands of troops to help stabilize northern mali. contributorbiggest and it's working closely with the french to combat terrorist groups in the north. insurgencye taliban has diminished in some areas of afghanistan but is still resilience and capable of challenging u.s. and international goals. the coalition drawdown will have an impact on afghanistan's economy, which is likely to decline after 2014. in pakistan, the government has not instituted policies in tax reform and the country faces no real prospects for sustainable economic growth. this past year the armed forces continued their operations in the tribal areas which had been safe havens for al qaeda and taliban. pakistan has scheduled national and provincial assembly alleged and provincial

assembly elections. russia will continue to resist putting more international pressure on syria or iran and will continue to display a great sensitivity about missile defense. closer to home, despite positive trends toward democracy and economic development, latin america and caribbean have a slow recovery from devastating national disasters, and blood- related -- drug-related violence and trafficking. in venezuela there's a new acting president. their election is three days maduro willd it underwr probably win and continue in the tradition of hugo chavez. have trouble with

sequestration. we stand ready to address your questions. >> thank you, director. i appreciate your comments on closed versus open. i'm disappointed you took a few minutes to talk about it here after our conversation. each of the organizations before us today is the statutory alina created entity on behalf of the american people. most of the work we do in this committee is very sensitive and highly classified. if we are going to maintain public trust and not breed public mistrust, it's mistrust, that they have the opportunity to have a public interaction with the agencies of which they support not only with their hearts but with their wallets. as the executive branch is a consumer of intelligence for their policy decisions, so is the u.s. congress. i hope you will look get this as

an opportunity to showcase the agency's. it's a good opportunity to have a public dialogue about a very secretive business that protect the united states of america. always a balance. it's an important balance. i will know for the record that you were dragged kicking and screaming to the committee today. >> that is accurate. >> mr. king? >> thank you, mr. chairman. let me thank all the members of the panel for being here today. and we congratulate director brennan on his appointment to the cia. my question pertains to north korea. director clapper and director brennan. what can you tell us about what you believe the objectives are of the north korean government and what the role of kim jong un in that government is, what the power structure is, and the role of china, what role it is playing now and what role we would like it to play?

let me start. as far as the objectives of the new leader, i think his primary objective is to consolidate , a firm his power, and much of the rhetoric -- in fact, all the belligerent rhetoric lately is designed for internal and external audiences. first and foremost, it is to show that he is firmly in control in north korea. grex you believe he has an end game in mind? >> i don't think really he as much of an endgame other than to somehow illicit recognition from the world and specifically and most importantly the united korea's arrival on an international scene as a nuclear power and that that

entitles him to negotiation and to accommodation and presumably for aid. you're asked about china. hasink probably if anyone real leverage over the north koreans, it is china. china is under new leadership. the indications that we have are that china is itself rather frustrated with the behavior and belligerent rhetoric of kim jong un. you want to add anything? >> i agree with director clapper. i would add that kim jong un has not been in power long, so we don't have a track record for him like we did with his father and grandfather. that's why we are watching closely to see what -- whether woodies doing is consistent with past patterns of north korean behavior.

this is the intelligence community needs to be able to maintain a clear focus on what's going on in that region. china and north korea, china has a vested interest in stability in that area as well. it has more influence than anyone else over p'yongyang. >> a historical note, i was around in the intelligence business in 1968. command pacific headquarters in 1976 during the tree-cutting incident in the joint security area, which resulted in the murders of two american soldiers. in those two cases i recall where i thought the tension was greater than today. what we have today is a lot of rhetoric, belligerent rhetoric. some historical context might be

helpful. >> you believe south korea and ?apan are secure you believe the u.s. will stand by them? so. believe we have had expressions along .hose lines i think that our three allies are united in their concern about threat post by north korea. dialogue and.s. coordination is as good as i have ever seen. >> how day you see the position of the south korean president? ini think her position going was what she called a trust politique, which was an attempt

to engage with north korea. obviously, that calculus may be changing. i don't know, but i think it is, because of their behavior. i think she was looking for other opportunities beyond the case on the industrial center, which the north koreans cut off their nose and despite their face the in closing that down. that generates $100 million in revenue for north korea. which they desperately need. so i think she now is in a mode of being query and cautious. the public opinion polls in south korea support that stance. >> thank you. yield back. thank you, mr. chairman. good morning to the panel.

who were brought dragging and screaming to a closed hearing. after being here for a few years, i have not been able to find a difference between a closed hearing and an open hearing. by the time ago out of a closed hearing, cnn is reporting. sometimes i wonder what is the value of some of the closed hearings. i agree with your assessment before 9/11. and hasn'tsituation seen fractures in the intelligence community where there had been -- our assets had been deteriorated at the same time the agencies and departments responsible for intelligence gathering and analyzing and coming up with -- into -- standing on their own, there were not sharing information, and we had problems. in 2004, if your agency, mr.

clapper, was created to bring in the information gathering and to ensure that our intelligence community would continue to cooperate and do a better job. but its birth was very hard, because we had the defense people and the military very reluctant to give up some of their power. and other agencies were very reluctant to give up some of their assets. i did not see a great corporation. this is eight years later and i have not been able to follow, the first time i've been on this committee. i like your assessment today of how your agency has been able to overcome some of the problems we had before 9/11. now with sequestration causing some deterioration, how do you think the agency will be able to ensure that we don't go back to pre-9-eleven days of intelligence gathering?

-- 9/11 days. >> thank you for your question. it was an outgrowth of the 9/11 commission. the intelligence perform and terrorism prevention act as well. , fors been my objective what i have been trying to do in this position, is to promote integration across the community. i think we have made a lot of fights that way. when i say integration, that is a horizontally across the agencies as well as vertically. this is another new dimension for the intelligence community. vertically in terms of federal, state, local, private sector sharing and integration as what.

i have worked to try to push that. that, howdgment like successful than has been, others will have to make that call. i think we have made great strides, personally. one of the advantages to having this position is the current situation we are in with funding and budget challenges we are facing. a strength for the intelligence community to have a single person and staff who can look across the community and objectively and lead the corporate process on an objective basis for where to take cuts and where to invest. fortunately, or unfortunately, the last few years we have had a lot of practice at that.

i might ask others to comment on their views on the position. i would say general clapper has done a superb job in doing exactly what he said, and that is supporting each of the agencies and enabling us to work more closely together than we had in the past. these are completely different days from september 11. the work is aent, tribute to the person filling the seat. general clapper has done a terrific job in bringing us together horizontally and vertically, domestically. thank you. >> first of all, from dia, perspective, and to give you a sound bite, we are

approximately 17,000 men and women in our workforce. in 141 countries around the world. one of the collective efforts that we have, and it really is derived from director clapper's vision statement for our intelligence community, and it's that we will be a nation made more secure by a fully integrated intelligence community. from the lastu, 10 years, if i have seen anything, we have tactical units in the military that have been fully integrated by officers from intelligence professionals from the cia, from the fbi. we have worked closely over the last decade. those levels of relationships and maturing of how we share information not only with each other but also how we have speeded up the processes of how we share with our coalition partners out there not only in some of the battlefields but

also in some of these other areas that director clapper highlighted in terms of some threats we're facing. from my perspective, we have really moved in the right direction. i expect there's still more to do, but i'm very upbeat about the direction the of taken. >> i would just say information sharing has never been better. in the u.s. government, integration has never been better. we need to be constantly improving intelligence community. there is running for improvement as we go forward, but the latching up of the different elements, defense, cia, fbi, security, it is much better than it was before 9/11. we have been able to address some of those vulnerabilities that existed because of the stove pipe that existed. clapper'stor guidance, we will continue to enhance that effort. >> mr. chairman, i yield back. thank you for the time.

>> thank you, mr. chairman. to the panel, thank you for being here and thank you for your service to our country. to the men and women who work theyou, i am in all of patriotism, the professionalism, the efficiency, the selflessness under which they serve. -- i am in awe. i have travel to some pretty remote places. the american people have no idea the sacrifices being made. we need to thank them every day. through your leadership, there are able to do that. i want to focus on syria a little. there's been some discussion or again, id falls would like to know your assessment of what we're doing to address a possible is not likely advent of further fighting between these rebel groups and what that may mean.

>> thank you for your tribute. themen and women of intelligence community overseas particularly to appreciate when you visit antic interest in what they do. we all appreciate that. the most likely scenario that we keep even after he falls, more fractionization geographically and on a sectarian basis, that for some period of time, at least a year or year-and-a-half there would sectarianed competition and fighting, which will be very localized. there are literally hundreds of these militia groups that are

fighting on a local basis. in the north and east of the country they are gaining more control of the area. but, from an intelligent perspective, that is what to b.c. is and even after he falls . the alawite and there's the kurdish presence in the north. 65% of the population of syria, which is 22.5 million people are sunni, so we would expect those areas as well. >> there's a lot of speculation actuallyw assad is funding all this and what his reserve levels are and where he goes from here. what do you assess is the current level of military and financial support provided to the assad regime by the ezbollah, the a l

russians? >> we don't have detailed insight into exactly and how he is drawing his finances. he has his own private reserves, of course. there are business interests within syria that probably helped support him. the iranians have their own stresses because of sanctions and all that. so they are attempting to provide advisory and material support. it takes that form more than cash for the syrians. of deteriorating infrastructure, the economy of course is deteriorating, as you would expect, which directly affects 20% of the population, either those internally displaced or those that have

led. -- have fled. this is starting to show signs of strain within the regime military. we've doozy signs of either theyed or short pay to army, titan's the desertion rate. >> they seem like they are using an awful lot of arms in this fight. they are being supplied by the russians? " they had a lot of arms to start with. , whetherhuge hardware its missiles, vehicles, tanks, aircraft, helicopters, and of course all kinds of small arms. the place was awash with weapons to start with and many have fallen into the hands of the opposition. >> thank you, mr. chairman. thank you, director. thank you so much, mr.

chairman. i thank you all, gentlemen, for participating in this open hearing. such great benefit to the american people. i have some questions for appeal, director brennan, about drones. in your confirmation hearing, you suggested that the united states publicly disclose when american drone strikes kill civilians. you suggested that perhaps the should beration transferred from the intelligence to the military at some point. i wonder if you have taken any steps or if you plan to immediately take action to increase transparency about drone strikes, to make any moves of that program. you also stated at that time your belief that the idea of establishing a special court to review potential targets for

legal strikes was worthy of discussion. i wonder if any discussion had begun on this issue? councilman, when i was in my confirmation hearing, i was a sitting white house official and i was asked questions about the policies that the administration was pursuing. right now i am the director of the cia. so my remarks at that time was reflective of my position at the white house as well as my comments about the u.s. government counter-terrorism program overall. and so, i would say right now the helm of the cia and will carry out policy guidance is directed by the administration. i will continue to focus our efforts on making sure that terrorists are not able to carry out the murderous attacks against our citizens whether it be overseas or domestically. >> i wonder if you could comment, on tuesday mcclatchy

newspapers published an article number of significant individuals killed in drone strikes in pakistan were not the leaders of al qaeda or affiliated groups." the article states that oakwood hundreds of suspected low-level militants were killed in strikes." i wonder if you could address concerns that we don't always know who we are targeting and claims that the scope of these attacks is much suggested.has been >> a lot of things are printed that are inaccurate and mr. kazakhs. i am not going to talk about any specific activities or operations in any part of the world. it's my responsibility as director of cia, i will make sure we do whatever we can to work with our partners overseas to take these individuals off the battlefield that are

plotting to kill american citizens. >> let me ask you this. is there any way that you can between- distinguish targeted strikes and signature strikes by drones? >> i would refer to the comments that were made by a number of u.s. government officials publicly in speeches including when i was at the white house. discussionengage in on that here. >> ok. also, mr. you brennan. as you know, the senate intelligence committee report on former cia detention and interrogation practices is under review within the administration. comments were originally due back to the committee on february 15, though the reply has now been delayed indefinitely.

on march 7 in the new york times, a former cia senior analyst said that if any person can take this on, it would be you, director brennan. and "the institution would benefit from the eventual the classification and release of the study." what is the current status of the review of the report and can you please discuss the importance as the leader of the cia about its release? >> it is an important report that was issued by the senate subcommittee on intelligence. as recently as early this week i have spoken with a chairman and vice-chairman of the committee, telling them that i am in the documentf reviewing a and will be getting back to them shortly. this is a 6000 page document that has millions of pages behind it in terms of what was

reviewed. so it's my obligation as director of the cia to make sure my response back to them will be thorough and as accurate as possible and will convey my thes about what exactly report portrays about cia's past practices, what we have learned from that experience running the program as well as from the report, and also to identify things i might think the notittee report might accurately represent. >> thank you. i yield back. >> thank you very much. mr. westmoreland? >> thank you, mr. chairman. you were innnan, the white house and this white house seems to have a strategy that they want a negotiated peace in syria and just let

assad step down. do you think that's a good policy or plan for syria? >> congressman, i am an intelligence officer. when i was at the white house, it was a policy maker. i recognize the responsibilities is to provide policy makers with the best intelligence possible so they can formulate policy that will advance u.s. national security interests. that's what my intention is. i will not comment on whether i disagree or agree with any type of policy perspectives of this administration. >> ok. of him your opinion stepping down and the fact that he is just going to step down? >> as director clapper mentioned, there is pressure that is being applied on him. he is getting support from a number of outside entities.

that pressure will continue. we have a policy position, the u.s. government, that it's time for him to go. the bloodshed that is taking place in syria continues. the implications for the region as a whole are profound. the sooner we can bring some type of security to that country, i believe that is in our interest and in the interest of the regional states. i'm concerned about the fracturing of the country that is allowing certain groups to gain strength, because they have agendas inside syria and potential outside that are contrary to u.s. national security interests, i think. >> i guess i'm asking the question ron pau -- asking the question wrong. what is the chance you think assad will step down? >> is days are numbered.

it's a question of when the pressure is going to be sufficient on him that either he is going to voluntarily step down or he will meet his fate as the result of the pressure that's being applied on him from inside that country. is thatwn perspective he believes he's got the upper hand, and he's winning. he has also said that it was born in syria and he's going to die there. he appears to be -- to the extent we have been able to do any psychological analysis -- very committed to seeing this through. andy does not seem to be interested in leaving or voluntarily stepping down. >> thank you. like -- syria, it seems and i don't know -- there are so they different factions of what do you there,

think the chances are of moderate rebels being able to protect any interests that they would have in the new government if assad does leave or start out -- or is thrown out? extremists over there do include al qaeda elements. qaeda extension from relativelyia is small numbers compared to the total opposition. 13 ofhave a presence in the 14 provinces in syria. they are organizing themselves where they can to perform municipal services, to include

in some cases the imposition of share real lot -- of sharia law. there are increasing indications that the moderate islamists are getting wise to this and are not comfortable with it and there are indications of divisiveness among the sunni opposition groups. how that will play out is hard to say. that is something we are watching carefully. >> thank you. i yield back, mr. chairman. you, mr. chairman. welcome and congratulations to director brennan on your new post. two questions. 14 director and and and one for director clapper. this is intel and policy. what do we think the iranians are concluding from the fact that qaddafi had no nuclear

weapons and he's dead and buried a, that north korea does or that kim jong il is young, reckless, inexperienced, but nonetheless in control of his country? what do you think the iranians are concluded from this? and how do we make sure the iranians don't draw the wrong conclusion? is there anything we can do regarding north korea to make sure they don't draw the wrong conclusion? director clapper, you may have seen al-maliki made -- wrote an op-ed recently in the washington post. anyaid that iraq opposes arms transfers to either side in syria. do you buy that? maliki and theve iraqi government are knowingly

allowing arms over iraqi territory to supply the assad regime? >> i will start. iran is a much different type of country that libya or north korea. i think it around, like the rest of the international community, watch with interest as far as libya and saw how the international community came together against qaddafi government. also as far as what the international community had done as far as sanctions and other pressures on the north korean government, since it has not fulfilled its responsibilities as a sovereign state. iran has its own aspirations. it sees itself as the extension of the persian empire. its programs, including on the nuclear front, in a manner that is not consistent with its international obligations. therefore, i think there has effort to letned

the supreme leader know there are certain things we will not agree with. they're watching what's going on in libya and north korea. there's a new set of circumstances and conditions that apply to iran that they understand what the implications of of continuing down that path right now. question on al- maliki's article in the washington post, i did see it. if you bear with me, i would rather in a closed session. >> certainly. let me just ask a different question on pakistan and afghanistan. what is the motivation of the the haqqani network? how do you assess their trajectory? are they growing in power and influence? have they been weakened? what makes them fight?

>> let me start. the the haqqani network is probably the most violent group of the taliban. there's debate as to what extent they pay full allegiance or not to mullah omar. generally they do. they are quite anti-western. they have the reputation of the most violent kinds of attacks against isaf and particularly how the united states. of late, they have lost a couple of 30 leaders.-- of their key leaders. i think that has somewhat restrained in their historical and aggressiveness, but their motivation, i think, is an uncompromised. of the are a member

taliban, but they have a long history of autonomy in that area. it goes along the border between afghanistan and pakistan. they have adamantly opposed any type of foreign intervention in that region. by foreign, i'm also talking about that government as well as the afghan government, but in addition now because of the isaf coalition troops there, they're fighting along with the taliban, they are among the most lethal and the most violent groups in the area. one of the things we are looking at, as the taliban moves forward, is the the haqqani network going to stay with them or will there be separation as far as political agendas? >> thank you. mr. nunez? >> i remain concerned about the abbotabad raid files. what's been done with it and where is it and what more is being done with it? maybe some of this we can get

into in closed session as far as the specifics. but i would like for you to give an assessment from your perspective of the different agencies that fall under you. how would you grade the intelligence community's job they've done with these files in terms of combing through all of them and doing a thorough job? if you could give a basic assessment grades of what's been done so far. >> i would say, at least b + or a-. to start with, in the immediate aftermath of the raid, we joint task a 7 by 24 triage the media here that was a community effort. and to go through it as quickly as we could determine if there were any immediate threat s or

plotting. the ticket agent for the document is the cia. look at thee to material. as well at centcom. was at theraeus center of excellence, they're going through a very detailed basis all the documents almost in an academic research context any further findings from these documents that might bear on a direthreat. of theith the deputy national counter-terrorism center, i recently met with representatives from combating terrorism centerpoint at the u.s. military academy at west point. it was about what we could do to

move ahead on declassifying these captured documents, since totaling 17 documents 300 pages that were released immediately to this organization. i do think there's a good reason declassify to the extent we can and we don't justify current operations -- current u.s. intelligence operations or sources or methods, and to make this available more widely for academic research. >> i would like to make myself available. i would like to see some of this raw intelligence, if possible. that may answer some of my questions in terms of its somebody could walk me all the way through it, exactly what it is, and what you guys have been doing with it.

>> there were over 400 intelligence reports that the issues in the initial aftermath, demille after a raid. i don't know what that number is since then. >-- immediately after the raid. but there have been stories in the press that the illustration has used the documents instead of to connect the dots that al qaeda is continuing to flourish around the ", it has instead been used to disconnect the docks. i want to put that to bed, because i have great confidence in you and all the agencies. it's our jobs as members of the oversight committee to make sure that we put these rumors pressed. that, to bet heard candid. i certainly can arrange a briefing for you on how these documents have been managed from the time they were acquired. >> ok. i appreciate that. >> if i could, because the director mentioned the effort by

central command. one of the things i can assure everybody is that the secondary exploitation, the second phase of what we are doing to take this exploited information, that is being shared around certainly in military channels. throughout the military community as well, for any lessons we can take away from that, and only with central command but with africa command and european command and other military organizations around the world. i don't have the number of the top of my head, but i know there have been hundreds of additional reports that have been subsequently published that have allowed us to understand what we have been facing for some time. , as directorhat brennan said earlier, we are a learning organization and we absolutely take the kinds of

information we're getting out of this to learn and continue to adapt. >> thank you, general. mr. chairman, i will submit a question for the record related to anthrax and biological weapons that perhaps someone can get back to me on at a later date. i yield back. >> thank you. >> thank you, mr. chairman. i want to thank you gentlemen for your service tarnation as well as for your appearance here today at the hearing. what this committee considered yesterday was a cyber bill. i guess i really want to direct my first question to director clapper regarding cyber attack and whether or not -- what we could do to make sure those attacks are ported -- are th warted? >> our goal is to provide

intelligence across the board. both the fbi and the department of defense, specifically d.o.t., and all of us have a role to play in providing that information to policymakers, operators, etc. thempletely agree with underlying tentative of the bill that you passed yesterday a, which recognizes the importance of partnership between the government. we certainly collectively cannot do it all. we do need the help and assistance and cooperation of the civil sector. that's all i would say to answer your question. >> if each of you could talk a little about the greatest cyber foreignis its

governments, is the terrorists, is it criminals? where is the biggest threat? bartlett restart and others can contribute. anytime you are assessing a threat there are two dimensions. one is the capability and the other dimension is in a tent. intent. the ability to cause damage on the country, we are more concerned of the potential as a nation state. russia and china are probably the most capable from a nation state perspective having the capability to attack. this is separate from s.b. and irish, electronic or cyber espionage. as we all know, that has gone on full luminously,

particularly by the chinese. other threats from other countries that don't have that capability but might have a more malevolent intent are also of concern to us, which we do watch. then it tails off to hackers, ,riminals, organized crime which probably a a lesser capability but a more aggressive intent. let me stop and ask if others want to comment. where andking up on general clapper started. i do believe the greatest threat now comes from nation states hostile to us. he mentioned two, but i would add iran. theave seen expansion of use of tools such as denial of service attacks. but there are other tools out

there that are being developed and could be developed that instead of tying up data or delaying the transmission of data they would wipe out data. >> do you think the government has currently organized to properly to address these threats? >> i think we are reaching that point. we are about the same as we were in terms of september 11 in terms of understanding that we have to work closely together to address it. they each have a role to play. in the past when it was a counter-terrorism threat, the other substantial partner had to be state and local law enforcement. in the realm of cyber, it's the private sector. thatecessity of assuring swiftly we get information exchange between the private sector and each of our agencies and vice versa.

>> one of the most difficult things about the cyber threat we face is that it is so diverse, not just in terms of the different types of actors that engage the nation states to organized criminals to activists, but distributed denial of service attacks that we have faced at financial institutions where the websites of banks are brought down. but there are also the much more concerning types of threats as far as being able to get malware into its systems for data deletion purposes. concerns about different types expeditions looking at our introduction -- industrial control systems and try to bring down those systems, which could have a critical impact on this country. , intellectualr property rights, threats. so many things, so it needs to be a whole of the government approach predictability is our growing.

>> who takes the responsibility of these attacks? i know it's an integrated response. >> i think it depends also on what is the aspect of the lead. when you look at the cyber, there's the pope threat, the vulnerability, and mitigation. intelligence community is doing what it can so we can provide it to those departments and agencies the responsibility for addressing vulnerabilities that exist in the networks out there and also make sure we take the mitigation steps necessary. so all of us are working together. depending on what element of it. having additional authorities in the government that will allow us to engage with the private sector, i think is one we are emphasizing. answer is nation states, for sure. one of the other things, and i

think the legislation that was pushed out yesterday will go a long way, but one of the things i am very concerned about, one of the things that we do support is intelligence support to acquisition. with the defense department. the theft of our defense industrial base, is there something that keeps me up at night, i want to insure that as we provide the best intelligence that we can on the types of weapons systems that are defense department needs, we want to make sure that we outmatch our adversaries as much as we can. that's one of the areas i remain concerned about. >> thank you, mr. chairman. >> thank you very much. >> thank you for being here this morning, gentlemen. publiclyhear statements that al qaeda is on

the run, that we have broke their back, or they are about to be defeated and yet we see their affiliate's continue to flourish, there was the issue with arcata and iraq yesterday dropping a secret that they are affiliated. -- al qaeda in iraq. can we have a strategic defeat of al qaeda and what would that look like? >> thanks for the question. i would just say that this first, i would just say that this is an ideology that we face and we have been very clear about the finding that ideology. i believe that this loosely affiliated organization, franchises, the way we have described it in the past -- as we look forward and look at what we are facing now outside of just the afghanistan pakistan