this point, yesterday we had a meeting before our hearing. lee had a good discussion in there. then the way he handled himself and the hearing, if there is something he was not up on, there are bound to be some things he does not know. theas able to defer to general dempsey. i am looking at him as a person. i today got a hand written note from him. where does he find time to do this? we all know that is a nice thing to do but i never write notes. >> what was it about? for ourally thanking me

association and how i handled the hearing, how the hearing went. he said you run a tight ship. i will tell you. he does not need to do those kind of things but he does them. h. w. bush i heard would write thank you knows like that to people. i admire him for taking the time to do something like that. i am feeling pretty good. this is a guy that has been here and done it appeared he was a hero. he could have set out the war in germany. he asked to go to vietnam. he served there with his brother. be a fairlys to calm demeanor. he does not seem to get upset. i hope things continue. i felt real good about secretary

panetta. i feel really good about secretary chuck hagel. >> thank you very much for your time. back with our reporters. what did you hear from the chairman about the threat there facing?- threats we are >> every day we have the headlines about north korea, syria, iran, afghanistan, about all of these missions facing the u.s. military. very uncertain and unstable parts of the world. or it comes to how to fund this. these are completely far apart.

whether you think it should be more or less money devoted to military spending. the uncertainty is causing real problems. >> buck mckeon is reflecting the. he talks about redlines. in the next breath he was saying he does not want to get involved anywhere because we are not in a position. when you talk about afghanistan, he said you are winning. we have been fighting for 12 years. we have not yet subdued the taliban. we're talking about iran. it begs the question. if you have redlines he may have to back off if you do not feel like you have a military that can meet these challenges. this is all happening so quickly. they're having difficulty figuring out what they want to do.

>> what are they watching for? for anothertching ballistic missile. immediately will will have to see how south korea and japan responds. we need to show them that they cannot get away with it. >> with syria, what is next? >> there will be a lot of pressure. it is taking some sort of action. for airlevin is calling strikes against military targets to try to take down the aircraft that syria is using to beat back the rebels. it is this president to is disagreeing with him on that. to make toughave calls. >> thank you for being on

"newsmakers." [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013] obamat, president delivers a statement on his 2014 budget, request and the house republican leadership responds. whiteed by testimony from house budget director. and then chuck hagel on the defense department budget. wednesday president obama delivered a statement on his 2014 budget request including his plan to spend $50 billion on infrastructure. we assure the house republican leadership's response to his budget.

>> good morning, everybody. \[applause] please, please have a seat. well, as president, my top priority is to do everything i can to reignite what i consider to be the true engine of the american economy, rising, thriving middle class. that's what i think about every day. that's the driving force behind every decision that i make. over the past three years, our businesses have created nearly 6.5 million new jobs, but we know we can help them create more. corporate profits are at an time high, but we have to get wages and incomes rising as well. our deficits are falling at the fastest pace in years, but we can do more to bring them down in a balanced and responsible way. the point is our economy is poised for progress.

as long as washington doesn't get in the way. frankly, the american people deserve better than what we've been seeing, a short sided crisis-driven decisionmaking like the reckless across-the- board spending cuts that are already hurting a lot of communities out there. cuts that economists predict will cost us hundreds of thousands of jobs during the course of this year. if we want to keep rebuilding our economy on a stronger, more stable foundation, then we got to get smarter about our priorities as a nation. and that's what the budget i'm sending to congress today represents. a fiscally responsible blueprint for middle-class jobs and growth. for years the debate in this town has raged between reducing our deficits at all costs and making the investments necessary to grow our economy. thatbudget answers argument because we can do both. we can grow our economy and shrink our deficits.

in fact, as we saw in the 1990's, nothing shrinks deficits faster than a growing economy. that's been my goal since i took office, and that should be our goal going forward. at a time when too many americans are looking for work, my budget begins by making targeted investments in areas that will create jobs right now and prime our economy to keep generating good jobs down the road. as i said in my state of the union address, we should ask ourselves three questions every day -- how do we make america a magnet for new jobs, how do we give our workers the skills they need to do those jobs and how do we make sure that hard work leads to a decent living? to make america a magnet for good jobs, this budget invests in new manufacturing hubs to help turn regions left behind by globalization into global centers of high-tech jobs. we'll spark new american innovation and industry with cutting edge research like the initiative i announced to map the human brain and cure disease.

we'll continue our march towards energy independence and address the threat of climate change. and our rebuild america partnership will attract private investment to put construction workers back on the job rebuilding our roads, our bridges and our schools. in turn, attracting more new business to communities across the country. to help workers earn the skills they need to fill those jobs, we'll work with states to make high-quality preschool available to every child in america. and we're going to pay for it by raising taxes on tobacco products that harm our young people. it's the right thing to do. \[applause] we'll reform our high schools and job training programs to equip more americans with the skills they need to compete in the 21st century economy. and we'll help more middle-class families afford the rising cost of college. to make sure hard work is rewarded, we'll build new ladders of opportunity into the

middle class for anybody who's willing to work hard to climb them. so we'll partner with 20 of our communities hit hardest by the recession to help them improve housing and education and business investment and we should make the minimum wage a wage you can live on because no one who works full time should have to raise his or her family in poverty. \[applause] my budget also replaces the foolish across-the-board spending cuts that are already hurting our economy. and i have to point out that many of the same members of congress who supported deep cuts are now the ones complaining about them the loudest as they hit their own communities. of course, the people i feel for are the people who are directly feeling the pain of these cuts, the people who can least afford it. they're hurting military communities that have already sacrificed enough.

classre hurting middle- families. there are children who have had to enter a lottery to determine which of them get to stay in their head start programs with their friends. there are seniors who depend on programs like meals on wheels so they can live independently but are seeing their services cut. that's what the so-called sequester means. some people may not have been impacted but there are a lot of folks who are being increasingly impacted all across this country, and that's why my budget replaces these cuts with smarter ones, making long-term reforms, eliminating actual waste and programs we don't need any more. so building new roads and bridges, educating our children from the youngest age, helping more families afford college, making sure that hard work pays, these are things that should not be partisan, they should not be controversial, we need to them happen.

my budget makes these investments to grow our economy and create jobs and it does so without adding a dime to our deficits. now, on the topic of deficits, despite all the noise in approximate washington, here's a clear and -- in washington, here's a clear and unasailable fact. our deficits are already falling. over the past two years, i've signed legislation that will reduce our deficits by more than $2.5 trillion, more than 2/3 of it through spending cuts, and the rest through asking the wealthiest americans to be paying their fair share. that doesn't mean we don't have more work to do, but here's how we finish the job. my budget will reduce our deficits by nearly another $2 trillion so that all told we will have surpassed the goal of $4 trillion in deficit reduction that independent economists believe we need to stabilize our finances, but it does so in balanced and responsible way,

a way that most americans prefer. both parties, for example, agree that the rising costs of caring for an aging generation is the single biggest driver of our long-term deficits. and the truth is for those like me who deeply believe in our social insurance programs think it's one of the core things that our government needs to do if we want to keep medicare working as well as it has, and we want to preserve the ironclad guarantee that medicare represents, then we're going to have to make some changes. but they don't have to be drastic ones. and instead of making drastic ones later, what we should be doing is making some manageable ones now. the reforms i'm proposing will strengthen medicare for future generations without undermining that ironclad guarantee that medicare represents. we'll reduce our government's medicare bills by finding new

ways to reduce the cost of health care, not by shifting the costs to seniors or the poor or families with disabilities. there are reforms that keeps the promise we made to our seniors, basic security that's rock solid and dependable and there for you when you need it. that's what my budget represents. my budget does also contain the compromise i offered speaker boehner at the end of last year, including reforms championed by republican leaders in congress. and i don't believe that all these ideas are optimal, but i'm willing to accept them as part of a compromise. if and only if they contain protections for the most vulnerable americans. but if we're serious about deficit reduction, then these reforms have to go hand in hand with reforming our tax code, to make it more simple and more fair so that the wealthiest

individuals and biggest corporations cannot keep taking advantage of loopholes and deductions that most americans don't get. that's the bottom line. if you're serious about deficit reduction, then there's no excuse to keep these loopholes open. they don't serve an economic purpose. they don't grow our economy. they don't put people back to work. all they do is to allow folks who are already well-off and well connected game the system. if anyone thinks i'll finish the job of deficit reduction on backs of middle-class or through spending

cuts alone, that actually hurt our economy short term, they should think again. when it comes to deficit reduction, i've already met republicans more than halfway, so in the coming days and weeks, i hope that republicans will come forward and demonstrate that there -- they're serious about the deficits and debt as they claim to be. so growing our economy, creating jobs, shrinking our deficits, keeping our promise to the generation that made us great but also investing in the next generation, the next generation that will make us even greater, these are not conflicting goals. we can do them in concerts. that's what my budget does. that's why i'm so grateful for the great work that jeff zients and his team has done in shaping this budget. the numbers work. there's not a lot of smoke and mirrors in here. and if we can come together, have a serious, reasoned debate not driven by politics and come together around common sense and compromise, then i'm confident we'll move this country forward

and leave behind something better for our children. that's our task. thank you. god bless you. god bless the united states of america. [applause] >> now the acting white house --get >> while the president has backtracked, he does deserve some credit for some incremental title meant reforms. weten, why don't we do what

can agree to do? why don't we find the common ground that we do have and move on them? hikesesident got his tax in january. we don't need to be raising finally the president has offered his budget to the american people. and what we see inside the document is more of the same. and i share the sentiment that aside the divisiveness and come together to produce results that people sent us here to do.

do, that the programs like medicare, medicaid, social security are on the path to bankruptcy and that we actually can do some things to put them and we ought to do so without holding them hostage for more tax hikes. as the speaker indicated, listen, the disagreements we have in this town are well published and well-known, but let's start anew and try and say, look, set aside these differences and let's come agree on. washington. see the president's budget finally, we'll have clear differences. the president's budget does not balance. have.

stronger nothing came in showing that until yesterday. ofterday i took a group freshmen down to watch the selling of our debt. other days. you walk into the room and you being sold and you watch who's buying it. from rates happens to be low right now, but just the increase in the interest rate it's the fairness of theand as i took these freshmen members around and they looked into the glass as the minutes -- the billions of dollars went

out, you know how long we're borrowing, a simple month, because we have to come right back again and do it one more time. that to me is the real challengethis is an opportunity to come leader, margaret thatcher, this week i thought i would just share a quote in the words of margaret thatcher. you may have to fight a battle more than once to win it. as we stand here before you today, it's the same battle. it's a battle for america's

future, for the policies that are going to make america strong, that are going to create families have more take- home pay and that also that the congress putting forward a budget, ours that balances in 10 years and provides that certainty and that make decisions moving forward. and the reason that it is important is because it does impact the college grads that jobs and it impacts families that are continuing to struggle, the seniors that do not have net programs. thewhen i was home over break, i continued to hear this message everywhere i went in eastern washington, d.c., the continued concerns over our economy, the struggles to find jobs, the uncertainty over what tax rates are going to be or what health care reform is going to be going forward. and our basic responsibility is

country. >> well, we do honor margareti so admired her courage, her strength of character and her conservative leadership. and she provided such a role model. that's probably the reason both cathy and i have her top of mind this morning. and she also once said, i love argument, i love debate. gusto in honor of margaret thatcher. majorere are so many issues to debate because the american people are hurting, and we will delve into the president's budget this morning and learn more about it. but it appears at this point to be very much a status quo

budget, that just has more of the same, more tax increases, deficit, higher unemployment, less g.d.p. growth. that stands in stark contrast to the republican vision that we laid out a few short weeks ago, a budget that balances in 10 years, that puts us on a path isenergy independence which great for american manufacturing and families concerned about their pocketbook. it has fundamental comprehensive tax reform in it which ends crony capitalism, stops picking winners and losers, closes special interest loopholes, makes a fairer, flatter tax code for all americans. it addresses the issue of our autopilot spending programs, setting aside everyone who's 55 and older, making no changes to those in retirement or near retirement but saves those programs for the young people that are coming up. and most importantly, it

increases economic growth and opportunity, encourages job creation here in the united states. so we look forward to a continued debate this week. >> well, thank you. i want to thank the leadership this is my first opportunity to greet most of you. my name's luke messer, i'm a and southeastern indiana, indiana's that thegressional president mentioned entitlement reform but discouraged to see him lock that reform into his you know, everybody up here has family members, friends and neighbors who are dependent she still works at the delta

faucet factory in greensburg. i have an 85-year-old grandmother who worked her whole life as a cook and janitor. throughable to make it preserved. the president was fond of saying math. well, the simple math is if you are not reforming medicare and social security, then you see these programs fail. it's not acceptable that happen. the indicated in this budget that he would support the reform of social security and medicare. if that's the idea then let's go to work on doing that work and

increases. amendment to gun control for background checks. senate we'll review it. whatnt to wait and sew actually passes over in the senate. >> will the house veto that legislation? there's some concern among democrats that it will be a>> the senate passes a bill, the house will review it. >> on the specific issue, though, are house republicans opened to the idea of expanding background checks for gun purchases? and how much would senator toomey's endorsement, a known conservative, help with, you know, help with that? it's one thing for two members to come to some agreement. it doesn't substitute the will for the other 98 members. senate does. >> what do you think -- should something like this be put into

>> what i think is that we're for everyone. this bill only limits it -- no, that's not what i said. one of the issues that we have today is that if there is a background check required that they don't actually check all the backgrounds. we're not enforcing the laws that we have on the books today. and so we're going to have a background check that's in the law, let's make sure we do our real background check which not in every case happens. >> just limiting to internet sales and gun shows, it doesn't create any kind of national registry. is this something that you

think house republicans can -- >> again, i think it's important for the senate to do its work. and once they do their work, we'll be happy to review it. >> what's the best way for republicans to deal with debt limit this time around? >> i think we made it clear that the sequester will stay in place until we have cuts and reforms that puts us on a path balance the budget over the next 10 years. and if -- as we look at the debt limit, those are the kind budget question, is the \[inaudible] >> now the white house budget a cracker testifying about the 2014 budget request. it includes will put $8 trillion in davison reduction over a decade. this is just under three hours.

>> the hearing will come to order. welcome, everybody. while this budget may be two months late, i want to thank mr. for coming to testify and i want to thank you for serving your -- in your capacity. it is not an easy job and arguably one of the most of the old jobs in the executive branch and want to thank you for your service. i note you are in your last days of this and we wish you great success in the future. now for my speech -- [laughter] you here andhave we're glad to put out a budget 65 days late but, seriously though, we are disappointed in

this budget. because itppointed does not break any new ground. it just goes over old ground. it raises taxes by $1.10 trillion and increases spending by nearly $1 trillion at end at $8.20 trillion to our debt. in short, it takes more from families to spend more in washington. the president of and says his policies will cut the deficit by $4.30 trillion over 10 years. sadly, that is not true. the budget itself claims $1.40 trillion of death is a 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. in fact, if you remove these gimmicks, this budget cuts the deficit by $119 billion. by the way, the president's budget proposes that this poultry production does not begin until the year 2024 after

he has left office. the presidentat, does deserve credit for challenging his party on entitlements. for instance, he has proposed increased means testing for medicare part b and e. the budget does not include the structural reforms that we need to protect and strengthen critical health and retirement security programs. these policy changes in this budget will not say these programs that will make them a little less expensive but they will still go bankrupt. the president's budget as a disappointed because it is a missed opportunity. we need a new approach in washington to meet our country's most pressing needs. that is what our side is offering. that is the budget we passed through our plan balances the budget in tenures to foster a helfrich -- a healthier economy and increase jobs and increase opportunity for the on and guarantees secure retirement for the retirees and expand the safety net for those in need. my colleagues to to pursue the

objective in a different way but that is our objective and i think we accomplished that. at least everybody has a plan, now. house republicans, senate democrats, and the president -- that is a good start. we have not seen that in a few years. their many differences between these plans. these budget to raise taxes but we see it differently. by defending the status quo, we're letting critical programs like medicare wither on their watch and their policies will samantha -- will cement the record unemployment. we cannot simply sit here and well and our differences. we have to move toward and find common ground. the existence of these plans being put 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 downpayment on our debt and need to do that

now. as difficult as these challenges are, i think we can make progress and i am hopeful we will. with that, like to yield to my friend and a ranking member, mr. van hollen. >> thank you very much. i want to join the chairman in thanking you, mr. for your service, the head of the it is a tough job and i think you and the president have done very well. the important thing is it meets two essential goals -- it focuses on job growth and strengthening the economy. we have seen more and more americans getting back to work but we also know we've got a lot more work to do to kick this economy in full gear. your budget focuses on that. it also focuses, of course, on

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

in my district, the head of a large biotech company, who said that as a result of the sequestered, they have frozen hiring. in fact, the only place they are hiring right now is in china. it is not because of lower wages in china but because the chinese look at the american model of investment in bioscience and medicine and said that is a winning economic strategy. while we are cutting our investments in places like the national institutes of health, investments that are important to keep our competitive edge, the republican budget would actually undermine those improvements. i applaud the president for putting forward a budget that puts forth investments in education and science and research and infrastructure necessary to make sure we are competitive in the 21st century. with respect to the president's approach to deficit reduction,

he has, in this budget, done what he said he would do. he does it in a balanced way. he is asking for a shared responsibility. our republican colleagues in their budget ask everybody to take some responsibility for deficit-reduction accept the folks at the top of the income ladder. if you are already getting a tax break or a tax benefit, guess what? not only do you get to keep it but 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 and count on medicare or medicaid, whether it is investment in our kids' education, the choice made in the republican budget is to say ," let's put the burden on them and 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 just end or the chairman and did -- we now have these budgets that are on the table. president' hat the has clearly indicated =-= a willingness to meet republicans more than halfway. as you indicated, some of the proposals in the president's or have not been that well received by members on our side because what the president did in his budget was to include provisions -- speaker john boehner had called for these as a part of a negotiation with the president. otherr it is chain cpi provisions, the president said in this budget that i will put

those in their, the speaker ask for them and we will put them in there as a son of our willingness to meet our republican colleagues more than halfway. it has been very disappointing is the response from our republican colleagues not to recognize that the president made that good faith effort. i hope this will be the beginning of a conversation. i hope the house republican leadership will appoint budget conferees so we can get going immediately in a conference between house and senate and get the input from the president. thank you again for your very important contribution to that effort. zaentz. is yours, mr.

i think i think everybody. i'm pleased to discuss the 2014 budget and i will work of a few slides. the main message of the president's budget is that we can make critical investments to strengthen the middle-class, create jobs and gritty, while continuing to reduce the deficit in a balanced way. we can do both balance the deficit reduction and jobs investing. on the left-hand side, in terms of balanced deficit-reduction, the budget bills off the deficit reduction achieved to date and includes the president's fiscal cliff compromise offer to speaker john boehner from december. importantly, the budget turns off the sequestered by replacing the sequestered balanced deficit reduction. at the same time, the budget

proposes important jobs investments to enhance economic growth, through skills and competitiveness, with investments in education and each of these new investments are fully offset and 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 $2.50 trillion. this is the breakdown of deficit reduction to date -- the budget control act capped discretionary spending, saving over $1 trillion.

>> here are the components of the dove as a reduction the tickets from $2.50 trillion

achieved to date to over the $4 trillion target. on the left side, starting with $2.50 trillion we have already achieved, the first bar -- $400 billion in health savings that strengthens medicare by squeezing out waste and incentivizing delivery of high quality and inefficient care. next, $200 billion of savings from other mandatory programs including reductions to farm subsidies, reforms to federal retirement contributions and selling on needed federal real estate. next, $230 billion in savings by indexing annual inflation adjustments to the chain cpi. another $200 billion in discretionary savings beyond the next, $580 billion in revenues from tax reform by closing loopholes and reducing benefits for families with more than $250,000 in income.

as a result of these measures, we have $190 billion in savings from reduced interest payments on the debt. $50he same time we invest billion in immediate infrastructure, to repair our roads and bridges and create jobs. in total, this achieves $1.80 trillion in additional deficit reduction over the next 10 years, bringing total deficit reduction to $4.30 trillio with more than $2 and spending cuts for every dollar in revenue. to be clear -- this offer includes difficult cuts that the president would not propose on his on including cp i wish the president is only willing to do as a protection for the vulnerable and as part of this balanced plan. however, by including the compromise offer in the budget, the president is showing his

willingness to make tough choices in his commitment to reducing deficits and putting the country on a sustainable fiscal path. 2023al deficits from 2012- -- as a12, the deficit was 7% percent of the economy. endeavors ofases production and by 2016, the deficit is below 3%. at 1.7%.it is below 2% as a result of this step as a production, as a percentage of our economy, is also on a declining path. the declining deficits and debt, the president's budget achieves important milestones of the fiscal stability. the budget beverages that important fiscal milestone while also investing in the drivers of

economic growth. doing so, it demonstrates 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. through paid for in a stillness like free pay for all, job training and accelerated infrastructure investments, this budget will enhance our nation's competitiveness. true balanced deficit-reduction, this budget will enhance confidence and lead the foundation for more durable economic growth. it is the right strategy for our economy, for creating jobs, and for building prosperity. with that, i would be happy to answer any questions.

>> thank you. with unpacking some of these claims of deficit- reduction to date. by the sound of it, it sounds like we're done and we don't have to worry about it, problem solved. measured deficit byuction in a gross way simply saying look at the deficit reduction that occurred, you cannot neglect the deficit increases that occurred at the same time. missing from this computation, four. dollars -- $4.30 trillion deficit reduction, the stimulus during the same time, $831 billion, the payroll tax holiday, $111 billion, the other tax holiday, the 24% increase in non-defense appropriations,

$576 billion. if you go with net now embers, about $500 billion generously, not four. $3 trillion. if you look at the claims in this budget, the numbers and the budget claim $1.40 trillion in debt as a production that are being proposed. if you take out the war did make, that is 407 -- $675 billion. if you remove the extension of the stimulus, that is $161 billion. if you remove the doc fix, that is $249 billion. the unpaid pell grants, $28 billion. out and struck out the gimmicks that have been

well warrant? , it is about $119 billion of deficit reduction. all you have to point to is the fact that this budget never balanced. maybe it polls well to use the word balance sd when you described policy but house a budget balanced if it never balance says? i think we need to be more honest about the true fiscal nature of the situation of the problems we have. the doc fix - have been paying for this on a bipartisan basis. why is it that in this budget you assume teh doc fix is fully

funded and not paid for? >> we have balanced the deficit reduction of $1.80 trillion incremental to what we have achieved to date. we believe it is honest budgeting $2 we will not cut doctors by 30%. year.this year over therefore, it should be in the adjusted base line. aside from the fact that we paid for this in the past, you are saying we will not pay for it anymore? >> overall, the president's budget saves $400 billion in health-care costs, $370 billion of medicare, $200 billion in mandatory, $200 billion for discretionary. is something that happens year over year so let's be honest in our base line that it happens every year. you throw around a lot of

numbers that are hard to track. >> sure you have seen them. >> at the end of the day, we have to look at the bottom line the same way we do in the private sector. the bottom line of the president's budget is that in deficits are a declining path, debt is on a declining path, we are below 3% of gdp and 20 seats -- in 2016 and below 2% of gdp by 2023. i worry that with spending a lot of time on base lies. let's get to the bottom line. decliningis on a path. we know that is an organic debate. we know that would happen if we did nothing. >> it is an important benchmark. we need to balance -- have balanced the deficit-reduction and we cannot think of deficit reduction alone as an economic plan. >> 1 not start now?

>> deficit reduction does not start in 2020. >> they start in 2020. >> there are dead as a reductions well in advance of 2020. -- there aren't deficit reduction as well in advance of 2020. i want to make the point that deficit reduction is important. it is an important component of an economic plan but in an of itself, it is not an economic plan. we need to get people back to work and increase our global competitiveness, invest in r &d and education. the most important way to achieve deficit reduction beyond the policies we are talking about today is economic growth. not in point -- if we did pass this budget, the budget would pass faster. -- the deficit would pass faster. what i look for spending, the budget assumes we will spend at these levels with the troop

count we have in afghanistan right now in perpetuity and, if you have a drawdown, you count that as a savings. that we have a withdrawal occurring in 2014. that is stated policy, a bipartisan agreement. as ae're going to catch spending cut, the idea that the baseline assumes we would be a full troop strength beyond 2014? counts as a sudden spending cut? and other words, not spend the money that was never going to be spent in the first place is not counted as spending cuts? >> let me review this. cbo actually catch the spending

which is important because it closes the back door for further discretionary spending. furthermore, the savings you are talking about verses the cbo baseline are not counted in the $2.50 trillion i mentioned or the $1.8 billion i mentioned. --e of this $1.8 is not in the million. >> it is $400 billion of health care spending cuts. $200 billion of other mandatory, what a billion dollars of discretionary, $230 -- $230 billion of cpi and tax reform -- and tax reform and the resulting savings. >> are double counting. oco isonly place we use

because of the president's policy and the warner act for the drawdown in afghanistan. we'll take a small portion of that money and invest in infrastructure in this country. that is not part of the $1.80 billion. >> that is the issue -- we are taking spending that will never be spent and we are using it as if it is free money to spend. that is the problem with budgeting. cbo is not have a choice. the law requires the of the baseline that reflects current current law to they have parameters put in place on them that allows such a gimmick to proliferate. the point i would make is -- if all of this grant a deficit reduction were real, then why does the budget never balance? why are we adding $8.20 trillion of debt in this budget? my time is running out -- i want to ask you a question -- kaine your budget,

beginning to occur savings in 2021, 2023, for a total of $4.10 billion. rate butd the growth your baseline claims that cost growth is within that parameter. this is a sincere question -- where does the $4.10 billion come from? how does that mandate in this budget get that savings if you assume that a clerk -- medicare cost growth is below that? >> medicare cost growth has come in quite a bit. we believe the affordable care act is helping drive that. works is thatad there are components put forth

in context. you're talking about a fraction -- >> i understand that. >> we believe through continued progress in reducing unnecessary care and promote a more cost- effective care through accountable care organizations and other innovations that medicare costs will continue to come in. this serves as an important backstopped function. we don't anticipate that backstopped be necessary. discretionarythe authority. >> it is set in law, gdp.5. >> they have to make the spending go with him that cap. you say the spending never exceed that cap, yet they are showing savings. >> at the end of the window it does buy a small percentage. as we have seen across the last couple of years, we would assume that health care spending will

continue to come in and the backstopped will not be necessary. >ultimately, it is there to protect seniors and ensure we do not have excessive costs. >> i don't want to put you in a trap -- you are saying that by 2021, the cap will be hit with a small amount and the mandate triggers and have to start producing recommendations. >> again, that is the case as currently projected. we have seen significant progress in containing health care costs over the last couple of years. we anticipate further progress and therefore that will most likely be a necessary. >> mr. van hollen -- >> thank you, mr. chairman. i'm glad that in response to the chairman's question on the bessette production and how much we have achieved over the last couple of years and this

budget, it took us directly to the bottom line. aat is the deficit as percentage of gdp and whether in debt is a percentage of gdp and is rising or declining tax is not the case that when you use that measure, use standardized all the budgets? you watch out the different baselines when you use the bottom line? >> absolutely, well put. >> as you pointed out, the present budget at the end of 10 years reduces the debt to gdp to 0.7%? >> yes. >> in the house republican budget last year at the end of their 10-year window, they reduced deficit to 0.2%. -- 1.2%. if you look at the cbo baseline after 10 years, the ratio of debt as a% of gdp is 7%.

omb calculation and cbo and different but what was the debt to gdp ratio at the end of 10 years? >> i believe it was 73%. >> lower than the cbo baseline. is that still the case? >> it will decline each and every year. in 2016.ready starting >> the chairman refers to these gimmicks and different baselines but the measures we are talking about wash out all those issues. i would submit the biggest water af a gimmick -- whopper gimmick is the republican plan that their budget actually balances in 10 years and their claim that they also repeal obama care. put up this to charge.

it rationalizes the system and the republican budget includes the same things in their budget. that represents the red portion of that charge, the medicare savings that are already incorporated in the republican budget. the republican budget also assumes the amount of revenue that will come in through the tax provisions. in obama care. it would be approximately $1 trillion. that is the blue portion. to get really were going rid of obama care, their budget would not come close to balance. in the year number 10. that is the whopper the budget

gimmick this year. there is another big difference in the republican budget and in the present budget when it comes to how we deal with tax issues. you i want to ask you -- have pointed out that every wealthy individual will continue to disproportionately benefit from deductions in the tax code. in this budget proposed to ask height income people to take a little bit less as part of a balanced approach. the republican budget, as you know, says they will drop that top rate all the way from 39%- 25% which will provide a huge windfall to the very wealthiest people in this country and, mathematically, if you also meet the criteria which it does not

increase the deficit, it means middle income taxpayers will have to pay more in order to finance tax breaks for the wealthy. if you could take time to explain the very different approaches the president takes to tax reform issues in this budget compared to the house republicans. , the the budget president raises $500 million so there is no raising of rates this is only through tax reform from families with incomes of more than $250,000. the president believes we should do tax reform, individual tax reform, and corporate tax reform and then he puts forward two specific policies that raise that five under $80 billion. there would be a limit on deductions for families of more than $250,000 of 28% so there deductions are at the level of the highest of the middle income

families. secondly, through the buffett over aays with anyone $1 million income should pay 30%. no families are impact of less than $250,000 of income. through the two specific policies, the 28% limit on deductions and the buffett rule and the president believes there is an opportunity to do tax reform to make the tax code simpler and more fair and maintain progress for the middle-class. >> if you look at the house approach to the text piece, they

would drop the top rate all the way down to 25%. have you seen any scenario where you can do that in a deficit- neutral manner? >> to my understanding, in order to go to 25% for high income a $5.70 trillion tax break. you either have to add to the deficit which is what we're trying to improve here, not make it worse, or you have to increase taxes on middle-class americans. by thousands of dollars. the matter does not work any other way. you're either adding to the deficit or middle-class families have to pay more. both of those policies are obviously unacceptable to the president. the president wants no increases to middle-income families and wants to raise $580 billion.

>> thank you. just to go to the bottom line on the, that means that either republican budget would not be in balance if they did what they say they want to do with respect to tax rates and tax policies, in which case it would not balance in tenures even with this super-the gimmick of continuing to included -- obama care when they said it will not taxes onuld be raising middle-income families. as you indicated, that is something that we also oppose and did so in our budget. let me conclude by asking you to talk about the $50 billion infrastructure investment that is contained in the compromise proposal the president has put forward. it used to be that infrastructure investments for

our country or a bipartisan issue. there was bipartisan unity behind it to make sure this country is number one i making sure that we have an infrastructure necessary to theort entrepreneurs and private sector lifeline of the economy. >> in my job, had an opportunity to spend time with lots of outside groups including ceo's of small, medium, and large businesses and the entrepreneur is. anyone working in the economy would agree that lacking hour -- that investing in our infrastructure is key for global competitiveness. the great opportunity we have right now is that we can put people back to work at the same time, like construction workers and others. it is really a win for our global competitiveness and helps in terms of putting people back

to work on were the projects. that is money extremely well spent. >> thank you so much. i also want to welcome you and thank you for your service. the chairman and ranking member will be absent for a while so i am honored to be able to assist in his absence. i want to commend the president that wasing it budget 65 days late -- below the land states the president's presents a budget on the first monday in february and his administration did not do so. one would have thought that had he taken a much time, he would have presented a budget that actually balanced. he had the extra time to do so. sadly, that is not what the budget does. it increases taxes, spending, same old thing we have seen before and increases debt and

dependence on the federal government and grows government and does not grow the economy. worst of all, from our perspective, it does not solve the challenges that need to be solved to get this economy growing again and get jobs created. if we can bring up that first slide -- this is gross debt as a% of gdp in the president's proposal. always know that it stays above the 90% level throughout the entire 10-year budget window. below that 9%s level, than economies do not turn around. sadly, the president's budget proposal simply does not address of the challenges that we face. there's all sorts of other misinformation but i want to ask a couple of particular

questions. i assume that the president would like to see his budget passed by congress. is that accurate? >> yes. >> that being the case -- >> do i have an opportunity to comment on the chart? >> i am sure you will at some point. >> that being the case -- my time is limited -- with the administration be willing to submit in the form of a budget resolution, the president's budget? >> right now, we have heard from all of you and we believe you should return to regular order. it sounds like from the opening comments there is some progress in doing so. regular order should be the way to proceed here. >> in the past, we have attempted to allow the public to see the level of support of the president's budget and have then been accused of not writing it and the way it would have been written. we would love to see a budget

resolution from the administration. we want to be able to have a voteion it. >> and respect all of you by saying it should be part of your regular order. >> the president has said often times he has met republicans more than halfway. the president's budget increases debt significantly. we move in the opposite direction. the present budget increase the deficit and we move in the opposite direction. the president's budget increases taxes and we do not increase taxes. that is hardly a meeting republicans halfway. as the chairman said, it is wonderful rhetoric, but it simply is not true. is it? >> by putting forward the compromise offer which includes $1.80 trillion of deficit reduction and includes chain cpi

which is something the president would not do on his own -- this is directly responsive to speaker john boehner's request and leader mitch mcconnell's request. the president is willing to do that as part of balanced deficit-reduction as long as we have those conditions i mentioned earlier. that is absolutely critical that we understand that the $1.80 trillion is a compromise offer. >> this is important because chain cpi is not what we would select as a solution for the challenges we face. it is the president's selection of what he thinks we would like. >> it is something both speaker john boehner and leader mitch mcconnell and last for several times. you and then have asked for raising the age of medicaid. that is something the president is not willing to do. $370ur budget proposes billion in gross reductions in $307 billionding,

of that is further cuts to providers. hall locus administration cut -- how low can be a ministration cut payments to physicians and still get good care? >> there are opportunities to incentivize providers not to toe re-admissions and ways make sure we get the same prices on drugs in medicare that we get in medicaid. there are opportunities to make our system more efficient. we should be taking advantage of those opportunities. maintain medicare as we know it, not turn it into a voucher system that our proposal does not do that, in fact it provides greater choices for patients. >> i would like to recognize the gentleman before pennsylvania from -- for five minutes. >> i want to say that i appreciate that the president's budget does present a balanced

approach and takes that common ground. the federal deficit and makes core investments in strengthening this economy and moving toward economic growth. i want to acknowledge the language in the budget that repeals the sgr and that we will not cut physicians under medicare. it is important to get that done this year. there is bipartisan interest in doing that so we should do it. this is not a point of disagreement. the additional language on moving towards a new payment system, language i have written, and i appreciate much of it has been picked up in the budget. we did move to a new system of paying physicians but it also demands greater quality and better outcomes and cost savings the right way. i believe we have some bipartisan support on that as well. i would like to see that done

also. i want to highlight one aspect in recognition of the investment in innovation and research and technology. the president proposed a small increase in nih funding and i appreciate that. as a result of sequestered, we are seeing quite a crowd in scientific research in this country. -- quite a cut in scientific research in this country. this is basic research funding that comes from the government and it does important medical research but as the beginning of the pipeline for new devices and new therapeutics, biotechnology, the industry's manufacturing and production of those very important life-saving medicines and treatments. it is extremely important to our economy. in southeastern pennsylvania, it is critical because many of our

research institutions are seeing a dramatic cuts, millions of dollars, this year alone. they are laying off scientist. they are discouraging young scientists who might choose to create new life-saving medications and treatment. it is a driver of the economy certainly in pennsylvania and many places across the country. you're talking about tens of thousands of scientists and all those who work with them and how important that is. the sequestered matters. the cuts will hurt. the economic growth in future years that we may not ever be able to regain it we do not fix it. i've introduced legislation and i tried to reinstate $3 -- $3 billion which is the cup that nih will see this year. we want to reinstate that by repealing the tax provision on corporate jets. it seems like a good trade-off.

should we and that special treatment of corporate debts and use those dollars for medical research -- i am working on that. hopefully, we can get something done this year. i want you to take the time left to help us understand how important those dollars are to ongoing and consistent support for scientific research in this country. >> i could not agree more. the president's budget on the domestic side increases r &d by 90%. it is important we invest in a r &d. you have spotlighted a specific problem with this sequestered. the sequester was never intended to be implemented. it was supposed to be forcing function for balance deficit reduction. unfortunately, we find ourselves where we are implementing a

policy that was never intended to be implemented. the consequences are-throughout the government, throughout the economy and the american people are feeling this every day. towill reduce our gdp by up 1% and cost of hundreds of thousands of jobs. , life-mpacting research saving breakers potentially at nih, it is impacting meals for seniors, it is impacting defense contractors. it is across the economy. it is costing us hundreds of thousands of jobs. it is very important that we replace the sequester and the president's budget does that with balanced deficit-reduction as soon as possible. he is impacting areas like r &d >> i appreciate that and the fact that the president's budget -- a hope the dialogue we

have to have -- there is a democratic alternative we put forward and this has to be the common perception otherwise the economy will be hurt. >> recognize the gentleman from california for five minutes. >> does the president believe that deficits matter? >> yes, the deficit does matter in putting the country on a system of courts which is an important component of an economic plan. >> deficits a bad thing? >> deficits are not a bad thing in the abstract they just need to be under control. the president's plan has deficit going down each year. has theresident's plan deficits continuing forever even under your numbers. i think your numbers are garbage. of thea looking at some

stuff, throughout this conversation, i will accept that your numbers are correct. under your own numbers, the deficits continue forever, do they not? >> we're focused on a 10-year window. going beyond is difficult. >> the -- does the dove as a continued throughout the 10-year window? the right deficit at this point where we also have to be focused on getting people back to work, investing in infrastructure, investing in r &d. >> the deficits continue at $1 trillion or higher throughout the 10 years? >> the right way to think about the deficit -- >> did i say something wrong? they continue even under your numbers. >> i would like to make the point that i think the right way to think about deficits is as a percentage of our economy. they come down quite a bed

across the 10-year window. >> we don't have to make them go away? >> this is consistent with bowls simpson and other groups that have looked at this. they have looked at death is on a declining path. the present plan achieves that while also investing in our economy and creating jobs and putting people back to work. >> anything shows that they continue forever. the president does not believe that we need to get to a balanced budget, does he? in the president's opinion? >> the president believes we have to put the country on a sustainable path. >> by balancing the budget? but even more important is putting people back to work in getting our economy growing at our full potential. in the 1990's -- >> i want to get to a couple of other things. you mentioned the only thing to

any of these entitlement programs are the ones you mentioned that the president put in that it doesn't like what he put them in. therefore, the president believes that social security, medicare, and medicaid are on a sustainable path and they do not need to be reformed substantially? they are not headed toward bankruptcy like the vast majority of analysts and economists on the left and right say? does the president believe that? >> social security is not part of our immediate situation. it is solvent through 2033. forth --dent has put put forth principles for this. that is not part of our immediate deficit set of issues. it is not medicare. >> on medicare, there is $400 billion in health savings, $370 billion in medicare savings. that is the first decade. in the second decade, there's

more than $1 trillion in savings. that is significant reform to medicare toit is not make its sustainable but also to keep medicare as we know it so that we are honoring our compact with their seniors. >> when you look at the cost of medicare over that time, even at those numbers that i don't agree with, i don't think anybody will claim that gets as on a system will pass. that will not bring the taxes in line with the cost. can people make under to order $50,000 per year legally buy cigarettes? >> yes. >> then you have a cigarette tax and here's a you have a tax on people who make under $250,000 per year if they choose to smoke, do you not? >> people make a choice whether or not to smoke. >> people have a choice to make him come and get taxed. >> there are significant benefits for the middle class in terms of encouraging --

discouraging smoking. >> is this intended to raise revenue or discourage people from smoking because it cannot do both. having't anticipate anyone stop smoking? it cannot do both and i disagree with that premise. notan have many people smoking and encourage other people to not smoke and others to quit and that brings down the number of smokers and those who will smoke will pay tax. >> mr. ryan for five minutes. thank you for your testimony. i wish some of our colleagues on the other side are -- were excited when reporting two wars on credit-card ended for estrogen drugs are not paid corporate i don't remember this level of excitement about the visit reduction and about balancing our budget. you say that the

republican budget is an austerity budget? >> there are very deep cuts. we can talk a bit about the sequestered. on the domestic side, the republican budget cuts domestic programs by 20%. that is three times deeper. then the sequestered. >> most people would say is an austerity budget. >how are the austerity budgets -- i know you're working on the american budget full time -- what are the austerity budgets doing in europe right now? how are they playing out? what you're taking me beyond my area of focus. it is clear the austerity budgets are not performing well. we believe it is important to have responsible deficit in across time

and achieve the results we talked about and, at the same time, invest in jobs and infrastructure. that is the right way to grow our economy and get people back to work. >> you mentioned the research and development some of these public- in across time and achieveprivate partnerships- my district has benefited from manufacturing in youngstown, ohio and it is a great partnership of public money from the fans, energy, commerce as well as private sector money from companies like boeing and lockheed that helps spur imitation -- innovation. how does this budget continued to promote initiatives like that in the 15 other institutes the president wants to get up and running and other initiatives like that that would lead to economic growth? >> youngstown is a great example the budget proposes to do 50 more at a cost to about $1 billion. that investment is directly

offset. i think we would all agree that those types of investments are good for the economy. we have created 500,000 or so manufacturing jobs over the last few years and we need to create more and bring more jobs home in are of these investments directly offset and do not a dime to the death -- deficit. >> investments in the national science foundation and nih = what to those look like? cap.ey fit under the vca the president has prioritized investments in r &d and domestic the is up 9% under president's budget. even with thai discretionary caps, the president has prioritized r &d at a 9% increase. >> and we are thankful for that. what is the road map for america and the future? part of this road map needs to

include the investments in sectors of theeven with economye going to blossom in the next decade or two. we don't always know what those are. when you say we will balance the budget in 10 years and that will turn the economy around, without looking at the history of our country and the big investments we have always made whether it was infrastructure, the space program, national science foundation, national institutes of health, investment 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. although i don't agree with everything in the president's budget and we will discuss with those issues are, 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 their way to prosperity.

we have seen a lot of our friends on the other side get very excited and the first fromion for my friend california was if deficits of matter. if dick cheney was sitting your seat, he would have -- he would have had a different answer. he says deficits don't matter and that was the prevailing after coming out of the republican party for the last -- the first eight years of the new decade. will press you on the issues we don't agree with what i want to say thank you for making these long-term investments that would position the united states to be competitive >> 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. the average per capita during 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 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. eliminatenable us to yearly deficits and address a long-term debt.

olders population is 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. aesident clinton alatas -- 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. the projection after that was 2.5%. it was not that different than where we are today. we are at 1.7%, a little below. 2.5%orecast at the time, 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. int is what i remember here 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. aesident clinton did create balanced approach and reduced it and create a surplus. i am pleased to see the investment in hiv and aids. extendset permanently 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. we have held some pretty productive discussions on eliminating poverty, by reducing this in half in the next 10 years, during the next 10 years.

unfortunately, income inequality 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 ryan and myself are concerned about poverty, when i look at their budget, all of the paths that would lift people out of poverty were cut. drastically. >> it is reflected in the budget.

he mentioned some areas that see 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 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, you know, moved from poverty into the middle class, so we could understand how the work, and what they have done over the 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 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 plan an austerity program in the european market. it actually seems to me that 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 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. its spending to gdp ratio 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. >> 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. it is hard to understand where

this notion of deficit reduction is, when that is what we have heard about here. i want to talk about the debt. 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. speak to this notion of the 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. infrastructure is a great example of getting people back to work and set this up for medium and long-term growth. investment in education, helping people gain skills. working closely to make sure people get the right skills. we talked about research and development earlier. it is very important for our long-term competitiveness. thehen we think about longterm challenges and reducing health care are developing new and renewable energy, those require investments. the way we will been this is discovering new chilled -- cures

for disease. modernizing our record system. those require investments. one thing i am part similarly concerned about is sequestration, at the kinds of research that will provide the to keeping costs costs are sequestration. is ground breaking research that is happening. we want to develop new and clean energy sources. all these things are not only necessary so we can remain competitive but it is also address our deficit over the long time. is devastating.

president bush said sequester will set back medical science for a generation. contrast that with the budget which action increases off of the pre sequester level. >> thank you for being here today. i want to answer this briefly. he made mention when you were on the dialogue with the chairman related to the program we have in reforming our local brands. it includes a voucher program. it would you give me a definition of what you think is a voucher program? >> it is giving seniors a certain amount of money and have them be responsible for purchasing their health care. if there is overrun the seniors irresponsibility.

>> what is recommended is premium support. do you think premium support and doctors are the same at? this.are transferring you give it the recipient money to allow them to go out and find their insurance. notium support so we do keep calling something incorrectly. supreme support is a program that is run by the government. it is guaranteed to the recipient. the money is not given to them. it is a program. and reclaim my time. i want to set this straight. there's a difference between those program and premium support. let me go to something i want to go through in more detail.

willur budget you include put $4 billion in discretionary spending. financecular it would about 712 new bureaucrats. this is a massive increase compared to the increase last year of 256 new positions. by the significant increase in? where all these positions needed? >> i like to set the record straight. the president believes in reforming medicare so we can protect medicare as we know it and not move it toward a premium assistance plan or a voucher system. i want to be clear on the reference. >> we both have the same idea that we want to protected for future generations. we cannot keep calling it something that it is not.

>> might provide the been lodged it costs to seniors. is that we cannot shift costs to senior. >> you and others keep confusing that. i just want to set it straight. on the will work vocabulary. there is a difference of the president wants to sustain medicare if he wanted. >> what i am trying to make clear is that there is a definition and literature the difference between a voucher in a premium are different. i just want to make clear one more time what is being represented about what is in our plant is absolutely a premium support and not a voucher. the king answered me about why these additional positions are needed -- if you can answer me

about why these additional positions are needed. >> we are very focused on implementing the affordable care act which will provide insurance for 30 million americans who do not have it today. thel save $100 billion in first decade, $1 trillion in the second decades. there is an implementation within the hhs budget. as an talk about it implementation. trucks and implemented, are these going to be from the position at? are these permanent positions we will have to go on finding a year after year? >> the gentleman from wisconsin. >> i am one of the new folks

around here which translates into spending a lot more time and wisconsin and washington. maybe i can look at things differently. when i talk to small business owners back home, economy and getting jobs is the biggest focus. we find out from the cbo that 3/4 of our deficit next year is due to economic weakness. fact that your budget is doing that, i do not care if it is on time or addresses the holy grail of deficit reduction, you're dealing directly. this is laid out specifically. these are programs i preshave back home talking to the increase for research and development. we had a lot of talk to folks. the sequester is killing them.

the $50 billion for infrastructure. this will approve every single dollar. our road-is from building industry. we know this has the potential. hiring new workers will be very valuable. replacing the sequester. solid,s a lot of sound, good measures. to say there is one negative term. a-ter proposal.e cpi you put forth a budget that offers compromise before you set down to compromise. we are a seen some of your action.

i asked my mother exactly what she makes on social security per month. she's 84. she grew up in a lower middle- class family. would where she is in her savings. it is not a lot. socialto address security in that way seems to be breaking a promise to seniors. alternative proposal. ,f we lifted the cap on revenue do you know how much that would generate if we did lift the cap entirely? with that have? and where the white house would be on proposals like that. i think the compromise before we have a chance to sit down. >> let me first address.

the president has put it into that mitch mcconnell is not willing to do it. this included cpi. the other condition is to protect the most vulnerable including people like your mother, older social security beneficiaries. there is a provision at 76 there is an increase that goes from a 76-85 to protect older beneficiaries. the president is only willing to do cpi as part of a balanced deficit-reduction. on your specific idea, the president has set out principles for social security reform and

is not the driver. we should address social security reform. in doing so, he will list upon a balanced approach in terms of any benefits. this would have to be balanced with significant revenue increases. social security is not a driver of our current situation. >> i cannot agree with the more on that issue. haveps we should not social security part of the budget. there are lots of things we can do to exclude social security. >> we have had one crisis after another. the president is serious about it. he included the compromise offer with speaker bittner as part of his willingness to do things and

get deficit reduction so we can focus on the economy. in your budget proposal. it was the administration's proposal. >> it was part of the $1.80 trillion compromise as part of the speaker john boehner compromise offer. cpi.have but as for the age 67 is not in our budget. these are in the context of deficit reduction. >> the gentleman from texas. >> thank you for being here. i have some information.

the underpinnings of any budgets complex this. --re are what drives the there are what drives the budget. it would include unemployment estimates. reviewed your budget visa forecast. it seems like the budgets uses a much more optimistic scenario. what i would like for you to provide is two things. at theday arrive underlying requirements he used? what would happen to the presence of budgets if they were

reset at the numbers tax that is the first thing? >> i need to get there the next of the questions. all share the you same goal. it makes the economy grow more quickly. what i would like to see from the president is how do we grow the opportunity when we are raising taxes on the economy? taking a tax revenue as a percentage of gdp to levels that have not been seen before.

how do taxes generate this opportunity? on au raise the tax business, how do you encourage that business? capital to have more invest in people and research and development? to produce help them more products at a lower cost? how does this allow them to produce better services? obamacare is already crushing her.

how is she going to be better off and be able to hire more employees and invest in a new location if we are raising taxes on her? we tell apple we're going to raise taxes on you. we want to produce a lower costs. is sayingent's budget that industry. we are saying it you are a targeted bad boy. where once to recommend to do more gasoline at a lower cost. is to reduce got let's rephrase that. it was the positive spin on it.

the government ought to be more effective, more efficient. we have a report here. there are problems of fraud and overlap.d over las i would like to report on what he intends to do about this. what are the things he would like to do decks and light of ae news, why don't we have supplemental report from the administration that talks about the effectiveness and the return on taxpayer dollars? why don't we talk about the effectiveness of our party programs a? we spent $19 trillion since this

started but we have more people in poverty today. if he could provide that i would appreciate it. >> thank you. thank you for being before us. that this budget provides a renewed opportunity to reinvest in this country, put the economy on a positive path. lot of time in my home state. hit especiallyas hard. this is one of the first state to see this. these are not hiring. there also continuing to lay off.

we're talking about additional layoffs. stopping the sequester is a clear and direct productive impact on states that did not have any opportunities for fiscal growth and less that immediately is removed from the fiscal equation. i also appreciate that we're looking at health care in making sure that our safety net programs are here for the long haul. i want to clarify that i have a different sense about the ideas.can the private sector has a fixed reimbursements or expenditure tied to a premium.

shifts been appropriately. my mom who lives on $1,300 of social security and relies on on aare and paid $200 prescription drug that is lifesaving, i can ensure you these are important investments to maintain. i do want to talk about how we are looking at the cost curve. we're talking about a reduction of post-acute care. without the services, you will be readmitted to the hospital. you'll have longer stays in the hospital. that is more expensive for a bit of this year.

proposalalk about the and why it illustration might think this is an effective way to save money in medicare? >> i think we want to make sure we're taking advantage of the best practices across the country. there tends to be a correlation between lower costs and higher quality. those are the practices we are looking for. that have higher readmission rates are quality problems should receive less reimbursement than high-quality providers. what we're trying to do is drive toward that quadrants of high- quality out comes at a lower cost. there are lots of best practices that we have to do just that. is encouraging us.rring u

>> i cannot agree more that this is outcome and quality. if we pick any area of expenditure and tie that back to a benefice terry, you are trading. you're not focusing -- beneficiary, you are just trading. you're not focusing. >> there are strong providers who are providing high-quality care as a reasonable price. there are providers that are not performing as well. we want to make sure they're in the program. >> these are not blanket cuts to areas that are critical. these are measures that i would like what more information on. the danger is that you create a

credit oracle -- categorical in patients as centered care. >> we will call up and make sure we provide the rationale. >> i thank you for being here today. we spent a lot of talk on social security and the president's ideas around trained cpi. he said that was put in at the request of my leadership and senate leadership. i want to focus on that a bit. it could be left to the social security is not part of our debt problem. i will first it knowledge that there are reasons for our debt problem. medicare, medicaid, and social security. now a fourth driver is the net interest continues to grow and that we continue to allow

ourselves. morning thathis over the next several decades, the interest payment, money that we cannot spend on anything else but give away contraction for the money we are getting now could reach $900 billion. cbo was hereof the in your seat a couple of weeks ago. we talked about whether or not social security was driving any of these deficits or debt. i want to have you respond to it. said on a unified budget basis, taking account of just the tax revenues and the benefits, it is contributing to the deficit now. if one looks at just the balance of the social security trust

fund, the angle balance is positive now but will be-within about a half-dozen years -- negative within about half a dozen years. >> i do not think that is a driver of the near-term fiscal situation. the trust fund is solvent through 2033. this is acting as it was designed to do. ?> why wait for this crisis >> the president has reiterated the desire to do social security reform. this is a different path from our current deficit. deficitd be doing the reduction path. social security reform could be part of the next conversation.

>> you talk about medicaid and the budget. there can be some reforms made there. >> medicaid provides health care to tens of millions of people. >> it works well? >> is part of the expanding coverage. the cost per medicaid beneficiary and a per-capita abases is quite low. the increase to see here is the

expansion that is people who do not have health care coverage for the affordable care act. >> are you aware that if you go as the medicare recipient your thirteens are more likely to die even if you had no -- 13% more likely to die than if he had no social security at all/ do you think this is a program that works well? it is the core of our social safety net if anyone needs help care, it is people who cannot do it for themselves, who are destitute. 13% more-- they are likely to die. >> your proposal would deny coverage for 33 million americans. .> that is not right

what we do is give flexibility to the states they can determine. what obamacare does as they the middle class take medicarmedica. these programs have to be around for those who need it. frome gentleman california. >> i have to ask a question about the purpose of having that increase. what we provide to more children with our without an increase in cigarette smokers, if we include this tobacco, do you understand my question?

can we say this is implemented and it would raise the tax on cigarettes? whether or not we have an increase in cigarette smokers are not, what that increase tax, are we likely to educate more preschoolers? >> that me step back. 94 cents to a proportionate amount. what this does is that it raises revenue. it also discourages teenagers from picking up smoking. it encourages people who are smokers to quit. we will have your smokers. at the same time it will pay the tax. we will have many and millions of americans to do not receive it today. >> now to my question. increase, we are

likely to see more preschoolers get educated. >> i think we will. >> thank you for pointing that out. i did not want to put words in your mouth. >> i understand. >> millions of american kids will receive a fabulous investment. it shows the positive impact of pre k education. >> is in a great to start in her pre pre-k? >> yes. >> if you were to witness the legislative bodies, and you think that is a big thing? >> yes. >> i think it is a wonderful part of the legislative process. it is unconscionable that they would do it out that.

i do hope we will get back to appeared when it comes to the infrastructure and behrman's, is more cost-effective for us -- and investment, is more cost- effective for us now or do it later. >> it is always better to do it now. wethis particular moment, have high unemployment, particularly amongst construction workers. when the opportunity to peeput people back to work. we have large businesses competing. >> on top of what aegis said, if we need to fix a bridge or a road today, it is eroding everyday of every month of every

year. if we put it on to fix the same section of a bridge, it is more expensive to do is later. and also on the benefits factor is more expensive to put it off. business, which we all care about gets less the benefit. they tend to do with that by being culture longer. if you could think the president on my behalf. the republican budget seems to focus on deficit reduction and not on investing and creating more jobs. the budget focuses on educating our children and making sure we years strengthening our work force. is exit bravedget

enough to invest in our american workers today rather than of deficitoff reduction. i think the best way to reduce the deficit is to get back into making sure we are educating our work force, we're creating a work force that is better prepared to meet and for us to regain our position as the power base of production on this planet. thank you so much. >> thank you for being here. i appreciate your willingness to come and pick your light on the president's budget for us. i want to start out with a definition of terms. when i say balance, revenue should be equal to expenses.

you mean we need to have a tax increase. >> i say we should have spending cut and revenue. >> you mean a tax increase. >> not a tax rate increase. tax reform. >> by closing loopholes and getting rid of this. >> when listeners your use a balance you hear tax decrease. >> the right way to think about it is a balanced approach. >> two years ago obamacare it is de tax increase most of which had not hit yet. -- propose a tax increase, most of which had not hit yet.

three months ago we had a tax increase under the fiscal cliff arrangements. now we sit here with this budget which imposes another tax increase over the next 10 years. you just said a minute ago that even under this proposal we are not making entitlement program sustainable. we need to have another conversation after this tax increase gets done. i assume we're going to balance again and increase taxes to make our social programs sustainable. i assume we're talking about that this year as well. we're going to have the fiscal tax increase. we get down to the entitlement

programs, we are going to have another conversation about tax increase. broadera mighty reaching balance for this year. i have been a tax lawyer for 25 years. i have never seen anything like this. this is not leadership. we need to have a long-term plan. piecemeal,stop this no long term thought. we need to get this. nobody knows what the rules are what the rules are going to be. puttingalking about this back to where it was. a long-termto have vision. we have to come to some kind of

agreement on it. we can expect that this will to lagging get an advantage over us. one question. we have already had our debt, our credit rating decrees once because we have been on able to sufficiently deal with our debt problem. under your scenario, it continues to grow. i promise you people around the world are watching us. let's just assume the president did put this thing fourth. what do you think that we do to

our credit rating? 90% chart is thenot the right way to look at debt. >> i.t. said this is the way you wanted to look at it. >> that includes intergovernmental debt. the right way to look at that is debt held by the public. credit exactly what the agencies are looking for. will potentially put our credit rating at risk would be manufactured crisis. he will not negotiate around the debt ceiling. you for your testimony to date.

i want to spend some time talking about the presidential proposal. on this question of debt and how we are right, is it fair to say that the 2001 bush tax cuts but was not paid for at the time by this congress added to this country's debt burden? >> there were two wars that will were not paid for. >> as a result of the collapse, andook a $22 trillion hits necessitated a substantial bailouts by this institution. both of which added to our debt burden. is that correct? to the fourates

were looking plans that you it does seem to me to be forward-looking plan despite suggestions to the contrary. we are in a very peculiar situation as it relates to our recovery under the administration. it has 6 million private sector jobs that have been created. we have corporate profits at a double high. we have saw market at near all- time highs. the productivity of an american worker is at an all-time high. highloyment remains itself. we have somet

economic indicators that seem to suggest we're doing well but others suggest we have a ways to go? >> we are making progress. straight quarters of gdp growth. we need to make the commencement an infrastructure that we talked about, education, research and development. it is important that we put the country on a sustainable fiscal path. the president's plan is about angetting people back to work and make sure we're getting the investments. we need to turn off the sequester as soon as possible. that is costing us hundreds of thousands of jobs. we need to stop manufacturing these crises.

they are wary of investing because they do not know what is going to come out of washington. we need to deal with our fiscal situation, get something done. to let the economy work and let people work attentional. -- to its potential. >> i commend the president for his efforts. it takes presenting a plan that both sides have common ground. as relates to the issue of manufactured crises, if our creditors conclude that we don't have the ability in the united states of america to manage our affairs in an orderly fashion, the loss of confidence at some point may result in an increase in the interest that we are paying on our debt moving

forward? >> it is picking up where it left off over here when we talked about the downgrade. the downgrade the hat -- the downgrade happened because of the manufactured crisis. the president was clear that we would not negotiate around the debt ceiling, that the debt ceiling needs to be increased to take care of spending that is already past by this congress. therefore, we should not be manufacturing crises like the sequester. we need to turn off the sequester and make sure we don't lose hundreds of thousands of jobs. washington should return to regular order and we should let his messes and the american consumer have the confidence -- and let businesses and the american consumer have the confidence that washington will not manufacture another crisis. >> thank you for being here. some of us like regular order and we like the rule of law.

and i have four quick questions for you. a of title 49 in the u.s. code statutorily defined slow enforcement personnel as individuals authorized to carry and use firearms are vested with the police power of arrest and are identifiable by appropriate markings of authority. with sequestration in the debt crisis in mind, should federal onncies spend federal funds law-enforcement uniforms for federal employees that do not meet this definition in our law ? yes or no? >> i don't know enough about the topic. we can follow up. >> well, do you believe that the federal agency should follow the law? rex absolutely. i think federal agencies are foowg the and -- following the law now with the sequester.

>> should spending actresses be consistent with federal law? rex we have worked with agencies -- >> we have worked with agencies. as agencies implement these difficult sequester cuts, they are putting their mission first and foremost. individual decisions are up to the agency leadership. so if you have questions for a department, we can direct that to the secretary of that department hearin. >> i know you have a business and a consulting background. based on your training and your work history at omb, should they provide you with a of the drill law enforcement uniform even though you have no federal law enforcement training? >> i don't think i would do very well in a federal law enforcement uniform. so, no, i don't think i need a uniform. [laughter] >> sounds good. the airline industry, you have a

loss of about $80 billion in their workforce over the past decade. 2007, theirsa since budget has improved 18% current so that is a double digit increase despite the fact that, in 2012, u.s. airlines and passengers paid that agency $2.2 billion in taxes and fees. that was a 50% increase over what had been collected in 2002. so should tsa received increased funding when traffic has declined of -- has declined by 30 million passengers a year ? >> tsa obviously divides an invaluable surface -- invaluable service. secretaryfer to napolitano. >> let me ask you this. i received the budget yesterday on behalf of the house.

it was late. you had said in your january 11 know to chairman ryan that you would have it done as soon as possible hearing it was -- possible. it was 65 days and 45 minutes late from the deadline it should be here. 98 days later, do you consider that to be as soon as possible considering that the house has already done it budget? >> as you know, from having received our edge income it's extremely detailed -- from having received our budget, it's extremely detailed. given what happened with fiscal crisis at the end of -- the fiscal with crisis at the end of the year and then the sequester , those had major impacts on our budget process. i will assure you that the people at omb worked very hard to deliver the detailed budget that you received yesterday and we are happy to be here today to talk about it.

the soonest possible he could get here. >> absolutely. >> and they know this has to happen erasing year. >> we do the budget every single year. i hope we do not have a fiscal with negotiation and a fiscal -- and a sequester negotiation or year. >> if we did our job, we probably wouldn't have those negotiations. >> exactly. sincere is a 26% increase obama first took office. knowing that we have these difficult fiscal environments and you are talking about the fiscal cliff issues and the ethical the of sequestration, why can't we support a simple 2% reduction? why is it that you are always suggesting -- >> the overall discretionary spending with of the bca is being driven to the lowest level since the eisenhower

administration. >> your time has expired. >> i think the gentleman. -- i thank the gentleman. >> thank you for being here. you will be sorely missed. i would also like to try graduate the president for being the adult in the room. , we look at his budget don't have a purely democrat jeb it or a fairly republican bridget -- democrats budget or a fairly republican budget. it tries to bridge the gap. the president goes after deficit to -- deficit reduction by going to the sequester that would would cost us 750,000 jobs. >> absolutely not. the sequester is terrible policy. it was never meant to be of limited. it was meant to be so terrible that it would force deficit reduction. the president has enough

deficit-reduction to replace the sequester. the sequester is hurting our growth and will cost us hundreds of thousands of jobs. president's attempt to reduce our deficit cut her rounds or doubles you and. ae president has put forth permanent fix to the student loan program. >> did he try to reduce deficits by [indiscernible] >> the president does not believe in blockading medicaid and the republican budget also cuts medicaid by a third, resulting in close to 20 million people losing medicaid. >> i would commend to the president's notice, we are doing withoutme based reform

cutting benefits. >> in an earlier conversation where we ran out of time, the administration is supportive of waivers, demonstrations to improve medicaid. like any health care system, it can get better. by think we need to recognize the importance of mckay for a very vulnerable to pollution. vulnerableizing -- population. >> incentivizing states like the president is doing is a good idea. it is a voucher program,. however you want to slice it ver. >> the president's budget has sent so reforms -- has sensible reforms to the program. >> knowledgeable economists want deficits to be manageable

given the state of the country's economy and that abruptly balancing the budget in a short window like the republicans do is actually harmful to the recovery and causes problems and cuts jobs in this country. >> we talked about europe before and austerity budget. there is balance to deficit reduction that takes place across time as the economy recovers. >> in the real world, we need compromise. we will have to compromise and look at each other's opinion and validate the fact that this is a big country and everyone has a different view of the world. moms and dads across this country have to figure out what to do and come to a reasonable accommodation. as this men and women come to a deal everything with a. i think in the real world -- every single day. it's time for this adult conversation and actually deal with their rising healthcare costs, the fact that we have an aging population in this country that is putting a

burden on our revenue system that we have not seen in a long time. i think the president has laid down a very reasonable compromise marker, when the he and the speaker nearly worked out to completion last summer. i hope the conversation picks up from here. we understand one another's problems and fix this country once and for all. it's time to save our country, folks. i yield back here at >> i wish to commend the -- and i yield back. >> i wish to commend the gentleman from oregon four yielding back early. iran because i didn't think that there was a lot of people -- i ran because i didn't think that there was a lot of people defending small business people. after this conversation today, i am glad i ran. i come from texas. we thought that the sequester was president obama's program. that is where it started. a couple of questions really

quick to be easy to answer. why is your budget not balanced ? >> our budget is the right fiscal path for this time because it supports jobs and the economy while, at the same time, bringing our deficit under control. >> that doesn't mean it is balance. tax increases, as a business owner come i can tell you that tax increases have put us further in debt. why not tax reductions across the board to create more revenue and have the private sector and small businesses grow? in other words, why should america have one of the highest tax rates in the world when we are trying to be competitive? why should higher tax rates be something we are happy with? >> i was in the private sector for 22 years. most of the time was during the clinton very >> you are cutting into my time. i want to ask the questions. -- 97% ofthe

businesses are not affected. corporations favor tax reform, tax reform like the r&b tax credit which is only given -- >> lower taxes to compete -- >> the president has put forward tax reform where it is 28% for corporations and 25% for manufacturers. getting rid of loopholes and expenditures that give rewards for companies -- >> we are talking about the small business owners. they are scared to death. has any budget the president put forth had a vote of confidence? >> we are all excited about getting back to regular order. >> has he ever had a budget that anybody supported? >> people support his budget, yes. >> you started talking about your private sector experience

here if you believe summit in this budget coming this accounting, will you use this accounting when you go onto the private sector and and will you borrow more in your new business than you take in? >> i will go to the bottom line and the bottom line in this budget is that we have deficits on a declining path. at the same time, we make important -- >> but i am talking about your future career. will you go to a banker and say i am losing money but i need more money? will you do that? rex what i will do is -- >> what i will do is try to grow my business, the same way we need to grow this economy, make important investments in things like ever structure and r&d. >> that's fine. what is the threshold of tax at this president thinks the private sector can pay? >> there is no tax rate increase in the president's budget. there's is no tax rate increase. there is tax reform. goodu're not doing a very

job at telling the small business owners that durin. >> 97% of small businesses are under $250,000 in income. >> your situation is making it so that people can't make more. it is a bad situation. we talk about eliminating poverty, but you do it by putting people to work in the private sector. regulations are killing the private sector. and i will ask you a question. 7.8% unemployment, is that the new norm? -- is 15% underemployment the new norm? is 99 weeks of unemployment compensation the new norm? >> it is not the new norm. what we will come push in this budget is get people back to work and grow this economy. we have made robbers, 6.5 million jobs created by the

private sector in the last 37 months. 14 straight quarters of gdp growth. you have a lot of work ahead of us. >> i went to school in texas the muscle pardon my cyclicity during how can you say that -- my simplicity. how can you say the you have more job creation when unemployment has gone up when this administration has been in ? >> the unemployment rate is lower than now than it was when the president came in. christ i don't believe it is very -- >> i don't believe it is. >> thank you for your testimony oday. i find interesting questions and interesting responses. i checked it with three different sources that the and him limit rate, which is too high, is lower than when this president raised his hand.

am i correct? >> that is consistent with that -- with what i just said. yes. >> i think the president should be applauded for his per polls is due not only invest in do not -- his proposals only invest in science, but also reword those corporations and companies who want to bring jobs back to the united states of america. stucklad that he has with that proposal which he made in the state of the union address last year. and he has repeated it us year. but we are kidding ourselves. if we think that any sort of a decrease in social security payments is a good idea. this program was intended to be just one of the ways in which

people were insulated from poverty in their old age. pensions and savings have the road a dramatically. we all know that. the social security administration, 51% of the workforce has no pension coverage whatsoever. none. and that number will increase. we do know that. and 34% of the workforce has no savings set aside for retirement. wages todaynow that do not keep up with costs. and that is why the president and that is why our president included a race to the minimum wage. and we can debate at. but i think he is sensitive to the fact that wages are not keeping up to the increase in certain costs. cutting the benefits our seniors rely on is not how we should balance on project or try to balance the budget.

the average retired worker is receiving $1262 a month. that benefit is critical for their livelihood. they work for it, by the way. among elderly beneficiaries, 74% of unmarried people rely on the check for either half or more of their income. that is a fact. you can site many other facts. so why in gods name would we lead this budget in determining that we would put -- cut benefits in order to reduce this currentwith the economic difficulties facing seniors? what specific protections will the budget include to ensure the dose seniors, who -- that

those seniors, who relies solely on social security benefits when more and more do that every single year? how are we going to protect the seniors? you tell me. >> first of all, the chain cpi was included in the compromise package because speaker owner and senator mcconnell -- >> i heard that before. it's not blame the other side. as is our budget. >> this is not a cut in benefits. >> it is a cut in benefits. >> it is not a cut in benefits. it is a decrease in the annual increase of inflation to a benefit. >> you are recalculating. >> the benefit, when you gone social security starts at the same level. the annual increase will be paid to chain cpi, which could result in a lower increase.

>> but senior inflation is very different from inflation for you. in chaincognize that cpi? >> let me go to a second report and point. the president is only where it -- the president is only going to do this if there is a protection -- there is a bump up that is able to 5% to all seniors. so there is an older beneficiary increased to protect older beneficiaries. this is consistent with bowles- simpson and other groups. >> thank you. >> the gentleman's time is expire. mr. duffy for five minutes. >> good afternoon. you are you here in >> talking a lot about chain cpi. when does social security go insolvent? >> social security solvency is through 2033.

>> and medicare solvency goes to 20 23. >> i don't think so. >> per cbo currently, it is 2023 for medicare. does cbs a that? >> yes, but we are talking about the president i did. it extends that late into -- >> in your budget, you are proposing a change to social security that is solvent for 10 years longer than medicare. and what changes do you make in medicare? no structural changes really. you are cutting benefits to providers, doctors, hospitals, and clinics, but you are not structurally changing medicare. provide asi does not much so security as other government programs. >> but does it involve social security? does it affect the care? -- does it affect medicare?

>> on a very small basis. >> so why aren't you focused on fixing medicare? >> there are savings that includes increased demands for high-income beneficiaries. >> right. >> it will pay a trillion dollars -- >> that goes into solvency in what year? 's.late into the 2020 >> so four more years. in this proposal, these are our priorities. you haven't put out a plan, besides cutting reimbursements that go to the benefits of our seniors to actually save the program. >> to your point, we have met -- we have extended medicare solvency and we have protected medicare as we know it. >> the gentleman from wisconsin controls the time.

>> do you care about fixing medicare and saving it? >> we want to save medicare as we know it. we don't want to turn it into a voucher system. saveen why don't you medicare? >> we do. >> you don't. >> we put forward a plan that extends solvency and saves over a trillion dollars. most importantly, it saves medicare as we know it. >> you cut a trillion dollars in reimbursements for medicare. if the gentleman desires to speak instead of the witness, please reclaim your time. >> very well. >you cut a trillion dollars and it is still not solvent -- it still goes broke in 2027. so do you have a plan that saves medicare, protects our seniors, not just current retirees, but the next generation of retirees ? do you have a plan that keeps it

solvent? >> what we do is protect medicare as we know it. >> i will reclaim my time. this is yes or no. >> yes. the president's plan saves medicare as we know it. >> i will reclaim my time. in 2030, medicare is solvent in your plan? >> under the president's plan -- >> in 2030, medicare is solvent in your plan? the answer is no, isn't it? >> that is not the right way to look at the program. >> yes it is. i want to look at investment infrastructure. this is an important part of growing our economy and putting people back to work, right? and more people working brings more revenue into coffers. we all agree on that. i was reviewing the budget and nowhere in the budget did i see that the president would support

the keystone pipeline. 20,000 direct dogs, 100,000 indirect jobs, infrastructure spending -- i don't see that support. so if you care about jobs, put our private sector unions that to work -- why come in this budget, if you care about infrastructure spending and jobs, why aren't you supporting the keystone pipeline. >> the keystone pipeline decision is at the state department. i will also point you to the $60 billion immediate investment in infrastructure. >> i reclaim my last 10 seconds. 10 years from now, in your proposal, you spend $150 billion to pay the interest on the debt. that is 100 billion dollars more than you plan on spending on your military. >> the gentleman's time is expired. >> since i am the last question or on the other side of the aisle, i would make some comments and let you finish your answers or respond to things

that you may have not been able to respond to during the course of the morning. the first thing i want to say is that it is really frustrating to hear speaker boehner and leader mcconnell talk about the day, they being democrats are the obama administration, that they have the tax cuts in january and now they are asking for more. would it not be fair to say by the same logic, because of the sequester, the budget control got - that the republicans their cuts and yet they still ask for more cuts? >> if you look at the deficit reduction achieved today without the sequester -- because it was never intended to be policy -- that is three dollars in spending cuts for every dollar of revenue. >> so republicans have gotten lots of cuts and yet they ask for more in their budget.

i thought that was fair. mr. black spent a lot of time tried to distinguish between premium support and vouchers, the description or characterization of the republican plan. i would just like to note that the difference between those two characterizations is a lot of -- is a lot smaller than the difference between calling what we did in the affordable care act, allowing doctors to be paid for end-of-life decisions, calling that death panels. i think there would be a greater distinction in that vocabulary. -- that is just fine just having fun. want to say one other thing, just to clarify. when we talk about solvency with social security, we are not necessarily talking about a bankruptcy type of solvency. we are talking about how long

social security can continue to pay 100% of benefits. >> that's right. then it becomes 75% by 2033. but we would reform social security before them. >> i would like to offer you the remainder of my time if you want to talk about the 90% that levels are some of the other things that were brought up during the discussion that you are unable to respond to. >> just because it is so important to emphasize, the sequester, we heard from many of you in the -- and your constituencies what is going on and it is impacting people across the country. it will cost us anywhere from half to a full percentage of gdp when we need to be adding hundreds of thousands of jobs, not subtracting. therefore come i think it is really important that that policy was never intended to be implemented here and it was supposed be an and forcing function. and that we immediately turn off

the sequester and replace it with a balanced budget. >> you segued away from that in just a moment. there was some conversation earlier about this notion about of the expenditures and the public economy versus the private economy. i reviewed our employment situation in my district of louisville, kentucky. seven are -- seven of our largest 96 or are -- seven of our largest nine employers have adobe to our the hospital systems to humana. 80% of humana's business comes from the federal government. when we talk about government spending, we are not just talking about bureaucrat to pay the price. we are talking about a significant portion of private

employment durin. >> i want to make sure -- i did not have an opportunity to comment on the one chart that when at that showed gross debt, which is not the right way to look at our debt. it is publicly held debt. it is on a declining path starting with 2016 with the president's plan. that is a clear milestone for fiscal sustainability. on this medicare solvency issue, the president has done a lot to improve our situation on federal -- on medicare costs. he.s now growing less than cbo adjusted their baseline by over $200 billion to reflect the slowing of medicare per capita basis durin. >> just for the record, the public debt that remains in the low 70s the whole time. under the president's land. the gentleman from oklahoma is

recognized for five minutes. >> thank you. you had mentioned before the cigarette tax and the increase has a dual purpose, more revenue and a decrease in usage. >> public health benefit that -- >> so it increases the usage of the cigarettes. there is also a proposal that you had in there in the budget that removes an incentive to continue to add to an ira. do you assume from that that, it people get the $3 million, they will stop putting money in an ira and start investing in other areas? is that a yes or no? >> the tax-advantaged is a contributing provides a $200,000 -- >> yes, i know that, but do you

think that people will stop putting as much into an ira and will invest in other areas? >> but there are alternative investments -- let megarette tax -- talk about this real quick. a cigarette tax will probably decrease the use of cigarettes. if you reduce the incentives for an ira, it will probably decrease the usage of an ira. they will remove all of the normal business expensing for traditional energy production, oil, gas, coal, all of those normal business expenses will go away. do you think we will have more or less energy production if we remove all of the normal business expenses from the energy companies? >> i think we will have a big increase in production. i think we will have a continued increase in domestic production, particularly in natural gas. >> right now, we are at the

lowest drilling since 1999. >> gas production is at a record high. >> i understand that, but the drilling is not dealing with the production. when we talk about exploration in adding more massive inventory, do you think we will increase inventory if we raise taxes on energy production. >> i think we need an all of the above strategy. we are encouraging renewable energy, solar, geothermal. >> you're answering a question i am not asking. will it decrease reduction of traditional energy by increasing taxes on traditional energy producers? >> i think we have incentives properly aligned with all of the above strategy. and has a fair tax code. the president does understand -- >> let me reclaim my time. the green book from the

treasury, the details of this, uses a term that they want to have a neutral system. if you remove all the tax incentives for traditional energy production, oil, natural gas and coal, and move us to a neutral position, is it the president's position that we should be neutral on energy? >> the president leaves and encouraging alternative forms -- the president believes in encouraging alternative forms of oil andnd increasing gas production. >> in one of the books, it talks about how oil and natural gas, if we go to this one, it talks about oil and natural gas and it will be the energy for the future. because it is what we are producing. but we hope to transition at some point to that. you go to a different page and it says we will decrease the usage of oil and natural gas and try to get us to a different one. if i go to the treasury but, it says, it will be neutral on

this, and it is interesting trying to figure out the tax policy and the energy policy of where we are headed on this. if you remove all of the normal business expensing, it will decrease production. is there another industry that the president wants to remove normal expensing from? >> the president wants to get rid of tax expenditures and loopholes that encourage companies to move overseas. >> i agree that. but he is unwilling to have a territorial taxes them. >> you will have secretary lew at some point. i don't think it is territorial or global. the president has put forward goals and principles to lower the tax rate. it has a global minimum tax, which is it really a hybrid system. >> if all of the business expensing for energy production is taken away, i suppose that

will incentivize that we go to other forms of energy. the reality is that the middle class will pay more for energy in the days ahead and that will be a middle-class tax if it is shifted to a different area. >> the gentleman's time has expired. the gentleman from georgia. feel less like we are having a hearing and we are just all sitting around the dinner table together. with that in mind, i don't know if you can read -- >> i actually can't. can i get a deeper copy of it. -- a paper copy of it. i literally cannot see it. >> lasik is what salt my woes. you talked about fundamental tax reform and whether or not you have seen any proposals that could bring the rates down to 25% for high-income earners without raising the burden on middle and lower-income americans. --ill refer you to see you

to cbo who is doing an update right now. but what they show is that the effective income tax rate today for folks in the top one percent, the effective tax rate for folks in the top 1%, people earning $1.7 million a year is 19%. you go down to the top 10%, which is folks averaging $366,000 a year or more, the effective income tax rate is 16%. for two yearsre and it still surprises me how we argue about this all the time. if the effective tax rate today is 16% and if what we would like to do for fundamental tax reform is lower marginal rates and broaden the base -- >> can you give me a sense of some of the tax and spend at yours that you would get rid of ? >> i would say that that is part conversation. but to say that it is not

doable, to say it can't be done without raising taxes on middle- income americans is nonsense. it can't be done without restricting tax breaks for upper income americans, which is something the president has been very comfortable proposing. >> it is getting rid of all of the and -- all of that and more. >> to say it can't be done -- let's say we disagree with the way it can be done, but let's not say that it can't be done. that is where i would like to spend the rest of my time. i am disappointed that you are right to point out the frustration that all of america has with the brinkmanship and the vast minute dealmaking that characterize the fiscal cliff and summits of everything else that we do. yet you look down the road, just two decades away, before the time that i retire, and you say that there is no need to work on social security yet because that problem is far away. even on medicare. >> weight, to be very -- >> we are going out for years. >> i fear that you have

mischaracterized what i have said. the president has that forward basic principles for social security reform. i said that it is not a driver of our near-term fiscal situation. at the same time, the president is willing and would like to, once we get this set of situations behind us, discuss social security reform. in a balanced way. >> let me make sure that i understand and where were -- whether we are -- let me make sure that i understand. i did not see a word in the president's budget to extend the solvency social security. >> social security is solvent through 2033. it is not a driver of our near-term fiscal situation. >> did i miss a single idea for solving the social security shortfall long-term? >> the president has put forth as opposed -- >> that is what i am saying i am disappointed about that. you're saying 20 years so we do not have to worry about it.

what about the social security disability trust fund? you know when that was fund its resources? >> i believe it is 2016. when i cite 2033, it is a combination of both. x it is actually calendar -- >> it is actually calendar year 2015 during the president's term. one in 10 americans depend on that social security trust fund. either benefit cuts will occur or we will have to begin borrowing from the general social security trust fund, speeding up its demise and there is not one idea in the president's budget. maybe you are right that we can wait 20 years. >> actually, that is not the case. >> what is the one idea? x continuing disability reviews that is part of program integrity that make sure the people who are on disability shall remain disability --

remain on disability. >> and that extends until when? >> i don't have that number. the canll -- kicking down the road is bad and it is that no matter who is doing it. >> the gentleman's time has expired. the gentleman from new jersey. >> i guess we can agree that we won't agree 100% on these things. can we agree that there are some things that we agree on and those are the things that we should probably focus on? one of the things i heard when i came into the room is you said there are no new taxes and the budget. did i hear that correctly? >> we were talking about the $580 billion, which is part of the compromise with speaker boehner. a love that is achieved with tax reform, not reducing rates. speaker boehner said it was $800 billion in tax reform. >> i think that meets the

president's pledge early on and your interpretation to never raise taxes on anybody that -- s over $250,000 >> less than fair >> so the pledge was to not raise taxes on anybody -- less than. to nothe pledge was raise taxes on anybody who made under $250,000 and he has kept that pledge with regard to this budget? >> yes. >> and with regard to the fiscal cliff issue last year? >> yes. >> even when he passed of the affordable care act, we have kept that pledge? >> yes. >> so the supreme court across the street was incorrect when they called the affordable care act a tax increase because you still take the position and the white house to ask the position that that was not a tax. >

>> that is a choice that an individual makes to canada for -- >> so it is not a tax? i am not a -- lawyer. what i am telling you is that those individuals who can afford -- >> has your opinion changed since last year? yes or no? is it a tax? x it is an individual response ability feet to the supremer court for technical definitions. i am not a part of the supreme court. >> so i take that to mean that you don't know what a taxes and the white house doesn't know what a taxes. that's what a tax is. also, when i walked into the room, you said that the sequester was terrible policy.

the sequester was the white house's proposal. is there anything else in the budget that is before us that is also terrible policy? at is a yes or no touch and -- yes or no western -- that is a yes or no question. >> it is a policy that was never meant to be limited. as a positive that is being implemented, it is terrible policy. policyhere any terrible that is being rough -- being referenced to congress? >> i don't understand the question. i said the said esther was a forcing unction implement -- i ond the sequester was enforcing function. we are operating right now under the 1974 budget act. is that correct?

as far as the procedure that we go through. >> yes. >> under that law, the president is required to present a budget to us - two months ago. >> the answer is that the budget is here today. >> does not the law require that -- >> the reason for the delay -- >> reclaiming my time. does the law require him to present this budget two months ago from a yes or no? >> the budget is here today. >> you are not answering a difficult question. if you do not know with the law is, you can come back another time once you are briefed on what the law is. does the law require the president to present a budget two months ago, yes or no? >> i suggest that we recall this witness when he can answer a simple question.

do you know what the law is, sir? >> the record will demonstrate that the witness has not answered the question. >> than i recommend to the chair that we recall this witness -- question for the record, the -- >> for the record, the witness did answer the question. you may not have liked the answer -- >> the resident has -- the president has broken the law for four or five years. [indiscernible] >> i want to thank the witness for being with us for nearly three hours. i wish you godspeed in your future endeavors. his answers will be entered into the record of this hearing. at this point, this hearing is adjourned. >> thank you.

>> next, on c-span, chuck hagel and joint chiefs of staff martin dempsey followed by the middle of honor ceremony for army chaplain. later, buck mckeon on newsmakers. >> rand paul talk to students at howard university. he talks about the republican party's outreach efforts to minorities. >> thank you, senator for coming.

i am a junior health sciences student. wequestion is i believe -- must first defined which republican party. are we discussing the republican ,arty before 19th-century abraham lincoln republican party, or are we discussing the post-1968 republican party, richard mixing and ronald reagan? and which one do you do with? [applause] i think that is a great question. that hits the nail on the head exactly as to what our obstacles are. people, including those who may have clapped, perceive their -- perceive them as being different parties. the argument that i am trying

to make is that we haven't changed. .ou don't talk about it could i will either you're not good there some of us -- i will either convince you or not. we don't see an abrupt difference. we do not all of a sudden -- we see horrible jim crow and horrible racism that happened in the 1930s, 1940s, 1950s. it was all democrats. it was all republicans. but the republican party primarily were not those people. him an an argument obstacle. one of the african-american u.s. understood -- u.s. senators was a man from massachusetts. >> brooks. >> edwin brooks. [laughter] but his comment was, if

democrats had the incredible ,istory of abolition emancipation, voting rights, and being for all of the civil war amendments, you would hear about all the time because democrats are really good at talking about stuff like that. he said republicans have done a terminal job. and that is why we have to resurrect some of this -- done a terrible job. and that is why we have to resurrect some of this. people in the naacp were all republicans, do you think that people would know that? x yes. [laughter] >> i don't think that the general public -- the republican party has not talked a great lot of god the incredible history -- a great lot about the incredible history.

it is an uphill battle for me to try to convince you that we haven't changed durin. but that is part of me being here. >> we will show his entire speech today at 7 p.m. eastern time here on c-span. american express ceo ken us should know -- kenneth chenault will talk about the global economy and job creation on c-span3. and ericsson seki will testify on president obama's $152 billion budget request for the va. also on c-span3. i really learned this week have humanizing politics is. it's about people that really interact and we learned that we

can do this. we are all capable of being leaders of our country and it's about working together and finding common ground. >> before this program, i wasn't all that optimistic about the future because all of the media shows the negative aspects about the future. i think this program really made us all more optimistic about the future and more positive about where our countries going. >> we get the negative opinion from all of the media, but the fact of the matter is that every day they are working together, just a -- together. justice kagan is able to put aside your differences and go hunting with justice scalia. i think that president obama summed this up perfect yesterday. he was saying that our country has always been in turmoil throughout its history. but we, as people, have always found a way to get through it. i'm not saying i am not worried about the future and that we are not having problems we need to

fix, but i look around this room and see 103 minds who want to make a difference for this country, who want to do good. and i'm sure that there are plenty of other people around our age who want to make difference and want to do good. able toay, we will be solve the problems we face today. >> each year, high school students from around the country meet in washington as part of the senate youth program. this year, they met with leaders from all three branches of government, including president, justice elena kagan, and return per. -- richard burr. now, defense secretary chuck hagel and joint chiefs of staff martin dempsey testifying on the president's 2014 budget request. it includes a most $527 billion in discretionary spending, but does not include funding for the war in afghanistan. the pentagon says the overseas contingency operation budget would be submitted in late april

or early may. from the house armed services committee, this is three and a half hours. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2013] collects the meeting will come

to order. -- >> the meeting will come to order t. we come here today to receive testimony on the 2014 year budget request from the apartment of defense. we are happy to have you here, mr. secretary. general dempsey, thank you for being here. secretary hell, we appreciate all of the great work you do for our nation. our job on this committee is to weigh inputs from senior military leaders so that we may fulfill our constitutional obligation to provide for the common defense. two months ago, general dempsey told this committee that the military could not absorb any further cuts without jeopardizing the missions that we ask of them. today, i hope to hear how the president's budget, which asks for another $120 billion out of defense, will impact our military posture and readiness.

tocifically, i would like hear which missions we must now abandoned, reduce or cancel out right to comply with the president's budget hearing because -- president's budget. because i don't see the world getting safer. in fact, even as our forces draw down in a sand, we are negotiating an agreement to maintain an enduring presence -- in afghanistan, we are negotiating an agreement to maintain an enduring presence there. our troops are again being asked to pay the bill for out- of-control spending in washington. carl vinson, for whom this room is named, said a country does not need a navy of one strength when she is ross burress and a navy of another size and there is an economic depression. when our strength nation is prosperous and a navy

of another size when there is an economic depression. this is not simply a 2017 problem. i hope to hear how we can resolve the start of fences between the residents budget request and the president's national security strategy. margaret thatcher, who we lost this week, said during her time as prime minister that the defense budget is one of the few elements of public expenditure that can truly be described as essential. our charge is to provide that essential security to the american people and, by doing so, assure our allies. i look forward to our witnesses and sites as we move -- witnesses' insights as we move

forward. >> thank you for your great ownership on the question of our budget and our national security. i think you have done an excellent job in bringing attention to those challenges and what it is doing to our defense budget and to our boat -- to our ability to provide national security. secretary hagel, welcome to your first meeting. general dempsey, you have been here many times before. we appreciate your leadership under-secretary hale. as is obvious, we have many national security challenges. for ae been out of iraq number of years now and we are drawing down in afghanistan. but afghanistan remains a challenge. we all heard what north korea is up to, what iran is up to. al qaeda is still out there in many places