from the brookings institution this is one hour 10 minutes. >> welcome everyone here today. this is a very exciting day. as you know, brookings likes to be in the middle of the great debates of our country. this is going to be a year of really fundamental debates about the future, of what happened to growth and is it shared? and we might actually get around to arguing about what should our government spend money on, and how are we going to pay for it. we've had crisis rather than having real arguments about that the last few years, it's a real honor for me to introduce -- joining us today, she has proudly represented california's 12th district for the past 27

years. i'll continue with the introduction, but i want to say a couple things. first of all, please silence your cell phones, tweet up a storm if you want, but silence your cell phones. to tweet, it's #pelosiatbrookings. and also, we will be circulating cards for you to ask your questions, i'm going to try to ask as many of them as i can. i want to thank all the folks of brookings who have worked very hard. nancy pelosi has proudly represented california's district for 27 years. she has led the house democrats for over a decade. the first woman in american history to serve as speaker --

the american recovery and reinvestment act and quite a lot of other legislation as well. as you will hear from the remarks, proper legislative -- been an advocate of clean energy, government transparency and accountability -- it is a pleasure to welcome nancy pelosi to brookings. thank you for joining us today. [applause] >> good morning, everyone. thank you all for being here.

it's an honor, it's really an honor to be here with members and honored guests of brookings institution. thank you, e.j., for your kind words. and thank you to the senior chair of brookings. for almost 100 years, brookings has been the first name -- you can't hear? -- for over 100 years, brookings has been the first word in forward looking public policy. this institution and president and your fellows have been a strong and steady intellectual resource to private, public and nonpolicy makers across the country. together we can reach all americans in our discussion.

beginning this year, this new year, in a new congress, we have both an opportunity and a responsibility to reflect on our progress toward that america and refocus and renew our efforts for it. reflecting on our progress. six years ago in january president obama stood on the steps of the capitol as he took the oath of office and issued a call for swift bold action now. not only to create new jobs, but to lay a foundation for growth. one week and one day later house democrats passed the american reinvestment and recovery act. one of the biggest public investments in our nation's history history. the recovery act created jobs, revitalized our economy. the democratic congress followed

up by passing the president's budget, a plan for growth and opportunity based on three pillars. investments in health care, in education and innovation, and in energy. our aims were clear. reduce the deficit. believing that health care must be a right for all americans not just a privilege for a few

we massed the affordable care act. even if there were no other reason to pass the affordable care act, if every american were happy with his or her own health insurance and health care, we still would have had to pass the bill because the cost of health care in america was unsustainable. unsustainable to individuals, to families, to businesses, large and small, to governments local and -- importantly, the affordable care act is helping to drive down health care cost growth to historic lows. today the affordable care act has delivered newfound health security to 16 million americans and extended the life of the medicare trust fund by 13 years. maybe this is so i can get a drink of water in between. i don't know.

i revert to my mother of five voice to project across the room. recognizing that indication has been the indispensable ladder to achieve the american dream. the democratic caucus acted to strengthen early childhood education, deepen our commitment to vulnerable students and dramatically expand access to affordable college education. we pass a g.i. bill for the 21st century for their veterans and their families as part of the largest increase in veteran funding in our history making historic investments in education. health care and economic opportunities. in terms of american innovation, we substantially bolstered our investments.

fueling basic research, and driving forward innovative energy technologies. i'll expand on this in a moment. knowing that our reliance on foreign fossil fuels was healthy for our economy, and the air our children breathe. democrats acted to make america energy independent. by increasing domestic energy production, and we increased energy efficiency and more than doubled clean energy production. solar power is up by tenfold and wind is up by 3 fold. in terms of wind, america is number one in the world. this progress is critically important as we address the climate prices. knowing that the only way for the economy to fully recover, we must recognize that the middle class was the real -- are the

real job creators in america. in a consumer economy, when workers have the wages and confidence to spend, they generate demand and it's inturned creates jobs, it's about bigger paychecks. there is an important connection. i said i'd talk about the reconstruction. this is an important connection about america's economy. the success of the middle class is the most important engine of economic growth and of meaningful deficit reduction. this understanding is consistent with middle class economics, which the president articulated in his state of the union address last month, and the budget he released yesterday. democrats commitment to middle class economic stance in sharp contrast to the republicans relentless trickle down agenda

the agenda that drove our economy into a ditch. republicans economic agenda, included massive unpaid tax cuts for the rich. two unpaid wars and a doctrine of no regulation, no supervision of wall street. it is this radical agenda that precipitated the financial meltdown and shattered our economy. how bad was it? on the night of thursday september 18th, 2008, the secretary of the treasury came to the capital for an emergency meeting with congressional leaders to inform us of the severity of the meltdown. when i asked the chairman of the fed, at the time, ben bernanke what he thought of what the treasury secretary was telling us? he told the leaders, if we do not act immediately, we will not have an economy by monday. this was thursday evening.

that's where we were, september 18th, 2008. in order to stop the meltdown of america's financial institutions, it was necessary for us to pass the troubled assets release program, tarp supported largely by democrats and later we enacted historic consumer wall street reforms with dodd/frank regulations. far from creating growth republican priorities drove an economic catastrophe that destroyed jobs, destroyed the jobs, the savings and the security of millions upon millions of america's working families. now, republicans want to take us back to the same failed policies of trickle down, including repealing dodd/frank. in their obsession with trickle down economics, republicans fail to see the connection between the purchasing power of the middle class and the success of

america's economy. six years after the deepest recession of the great depression, the fruits on the economy are clear, 11.2 million new private sector jobs created in 58 months, the longest uninterrupted stretch of private sector growth in our history. we provided a lifeline to save the auto industry, and more than a million jobs, part of that. unemployment rate down from around 10% to 5.6%. deficit cut by two thirds, from $1.4 trillion to $483 billion this year. stock market has gone from under 7000 to over 17,000. we've seen reading scores go up high school graduation rates go up, more young people attending

college than ever. 16 million previously uninsured americans now have affordable dependable health care, and we extended the life of the medicare trust fund by 13 years, to name a few accomplishments. however, even with all of this progress, working families are still being squeezed. the reason our economy has not had a full recovery is because of stagnant wages. it bears repeating that a consumer economy, in a consumer economy, the middle class are the job creators. we must expand the purchasing power of families, ensure that working men and women enjoy the bounty of their unprecedented productivity. bigger paychecks, better infrastructure, more manufacturing in the united states. we must focus like a laser on strengthening the financial security of america's working families.

once again, there is a need for swift, bold action to reignite the middle class engine of our prosperity. in order to succeed, we must have a healthy respect for another connection. the connection between the public and private sectors. private enterprise is the heart of the economy. generating wealth and jobs. however in order for the private sector to succeed, the public sector must act to secure the conditions in which the private sector can continue to flourish. when the public sector is doing its job, investing in strong education, building infrastructure, maintaining the courts, ensuring public safety it performs tasks that the private sector cannot perform itself. public sector accomplishments,

however that leave the private sector in infinitely better shape for all americans must happen. congress must grasp again the importance of ambitious goals built into a budget for the future, which is the budget which should be a statement of our values of what is important to us, should be how we allocate our resources. this is the third connection i want to highlight. the undeniable connection between the investments we make today and the success of our country tomorrow. today i believe we must make big bold commitments in four areas. research and innovation back to back, education, infrastructure and investments in working families through the tax code. innovation is the invigorator of our economy. research creates jobs, launches entire new industries and gives us the miraculous power to cure. however, according to the american academy of arts and sciences, the report they just

put out within the past couple weeks, the united states has dropped to 10th place. 10th place in national r&d earn vestment as a percentage of gdp. as the report makes clear, unless basic research becomes a higher government priority than it has been in recent decades, the potential for fundamental scientific breakthroughs and future technological advances will be severely constrained. the report calls for our increasing our nation's total research investment to at least 3.3% of gdp. we must meet that need to reduce the deficit of innovation. the president and congress must work together to establish a sustainable growth rate in federal basic research. in terms of education, we know

that to achieve equality of opportunity we must have equality of education. we will always have an opportunity gap, so long as we have an education gap. today is it is clear that one of the most important ways to address the education gap, at education inequality from early childhood all the way to lifetime learning, is with the power of technology, especially broadband. broadband access has more benefits than just enhanced computer skills. it opens the door to a whole new host of new teaching applications and tools enriching the student and supporting a teacher. as recently as 2012, only 37% of our nation's schools had enough broadband for digital learning placing 40 million kids on the wrong side of the digital divide totally unacceptable. we must meet the needs, ensuring that every child in every zip

code has the high speed broadband they need to learn explore and thrive. we must act to close the opportunity gap in education because we cannot afford to leave anyone behind. and by the way, nothing returns more money to the treasury than investments in education. in terms of infrastructure, the american society of civil engineers rate edd america d plus. after years of disrepair and under investment, we have, according to the american society of civil engineers, $3.6 trillion deficit in america's infrastructure.

what we know is that no maintenance is the most expensive maintenance. modern infrastructure is essential for our country. it promotes commerce. improves the quality of life, by moving people to and from work and school more quickly. it is good for the quality of our air and water, it works to connect all of our communities to the promise of the internet with broadband. we must meet the nied to reduce the deficit of the infrastructure and do so in a green way. we have proven that policies that leverage private sector capital and expertise with government oversight are successful ways to create better, more sustainable communities. we should learn from these examples and expand opportunities for public private

partnerships. we should be putting people to work building roads, bridges mass transit, broadband, achieve bigger paychecks and better infrastructure, and this is a strong priority in the president's budget. in order to fund these investments, we must use the tax code and eliminate special tax expenditures that increase the deficit, they are spending, tax expenditures as we close special interest loopholes, we can reduce the corporate rate and produce more revenue we can have tax reforms that ensure all americans pay their fair sure. the economic security of america's working families must be our priority. part of these reforms must make permanent the income tax credit and the child tax credit. policies that are set to expire in 2017. initiatives with bipartisan support that strengthen the

budgets of working families. and we did this with president bush in his stimulus package. this has bipartisan support. if these policies are allowed to expire, nearly 16 million americans, including 8 million children will be pushed into or pushed deeper into poverty. we must also in that regard strengthen the child care development tax credit which is in the president's budget. to further help families, the ranking member of the budget committee has proposed several bold proposals on the table these proposals include a ceo employee paycheck fairness act. a saver's bonus to support retirement. instituting a .1% financial transactions fee, and provisions

restoring respect for hard work in the tax code. they're being reviewed by our members. with tax reform for the middle class, we can put more money into the pockets of working families. and again, ignite the engine of middle class consumers demand that drives growth and tonight for everyone. a strong middle class is the bedrock of our prosperity, the backbone of our democracy. this animates the connection between public action and private sung ses. the connection between growing paychecks and reducing the deficit. our success tomorrow. for us to achieve a bright and durable future for our country we must embrace the fact that

the financial security of our working families, is both a measure and the engine of our nation's success. it's a simple truth. when the middle class succeeds america succeeds. our recognition of that truth orchestrates the economy, and laser focus again on the purchasing power of working families that our economy needs today. we must achieve bigger paychecks, better infrastructure and manufacture more products in the united states. only by laying a firm foundation for growth, which the president talked about in his inaugural address based on ambitious goals for our future can we secure and maintain a vibrant middle class only by focused on working families can we reignite the american dream and step into a new era of american prosperity. thank you for the opportunity to be with you this morning. i look forward to your

questions. thank you so much. [applause] >> i just want to say we apologize for the state of that microphone, but it was actually a set up to allow you'll not silence your voice. welcome this morning. i am tempted to ask you about the impact on the middle class of what is clearly one of the most important news stories in the country right now. i refer to pete carroll's decision to call a pass at the end of the super bowl. it is clear that this has done wonders for the morale of the middle class in my native new england. you can pass on that issue if you'd like. where i'd like to start -- >> i can see the offense called a pass. pete took responsibility as a

good leader. >> you can be reassured that no decision ever made will be as second guessed as that one. >> i wanted to start with the president's budget. i think you can make a case that it's his most aggressive effort to influence the public debate since he took office. he's made this effort at a moment when republicans control both houses. i wonder if you could talk a bit about how -- you have congressman van hollen's proposal out there. what would democrats do if they controlled both houses again and how you will influence the

outcome of a budget, some compromise between the republicans and democrats. and this particular congress. >> when we talked about what we would do, we talked about what we have done and now we have to go forward. i believe that the president's budget does have within it, many areas of common ground. infrastructure has never been a partisan issue. we've always been able to put strong infrastructure, legislation, and then, of course, it became a little bit different. i think the urgency is there the opportunity is there, public private partnerships and it's an issue that has usually been nonpartisan, not even bipartisan. in terms of some of the issues relating to children and the rest, those are priorities we put forth with president bush in his stimulus.

he wanted to use the tax code and he was very accepting of proposals we had for affordability, the low income tax credit, child tax credit and the rest. these have been issues that republicans have supported. the issues that relate to sequestration. this is probably the fundamental point in the budget that the president put forth, he would do away with sequestration, which is -- anyway, we'll do away with it. and that is something that has appealed to republicans. i'm not here to speak for them but i'm just saying in the past they -- >> that would actually be interested. >> would do away with sequestration of where we had caps that we need to get away

with, and we have growth. we all support a strong national defense, but also remove the caps on the domestic side as well whether it's the over arching nature of it, which is to do away with sequestration, building the infrastructure of america. these kinds of issues really shouldn't have any partisan aspect to them. i think while the president has staked out a very strong budget which i believe is a statement of our national values, what we care about, there is a distinction between his budget and the republican budget in terms of social security and medicare, on the other hand, there's plenty of common ground to find some solution. as i said in the opening comments, we have to have pride we take in our issues, we have to have humility about finding common ground where we can find

it. >> in your remarks, you stressed the pride you and democrats take in the first two years. the stimulus, the auto rescue. these programs have never sort of captured broad popular support at least in the polls, democrats have argued over and over. without the recovery act, the recovery might not have happened or would have been infinitely slower. if we still have not sort of grabbed the public, the kind of majority support you would have hoped for. >> it's interesting for me to see all our republican colleagues who speak out against the recovery package, show up at every ribbon cutting and groundbreaking. 15,000 projects -- the statistics are staggering. all that came from that, and i

think there was a reluctance to -- people wanted to make sure that reducing the deficit was a high priority for us, and, therefore, the jobs would come with the bill, but not to boast of what the investments were early on. we should have messaged it differently, as we should have messaged the affordable care act differently. >> on this point about the deficit, one of the striking things about what the president did and in general what the democrats are doing now they seem much less captive to the deficit debate. it's almost as if it took hold so quickly, the things that needed to be done to get the economy moving were pushed off the agenda. can you talk about where the deficit is now relative to the desire to get the country moving and deal with the long term and the long term? >> in order to reduce the deficit, which is important to

all of us, you have to have growth. you can talk about cutting investments, and you can talk about raising revenue and all that should be on the table, but you must have growth. and you can't have false economies. anyone who thinks that by cutting education, they're going to reduce the deficit is dead wrong. nothing brings more money to reduce the deficit than education of younger people. you have to make a case to the american people about why certain investments are about the future and reduce the deficit, and from the day the president took office until now, the deficit has gone down two thirds, $1.4 trillion. what is it, $485 billion? still too high, we want to take it down.

the public is understanding that growth and bigger paychecks for the consumer, working class families to inject demand into the economy, create jobs, that brings revenue to the treasury. 70% of the deficit has been reduced since the president took office. it isn't any less a priority to reduce it further, but there is a recognition more clearly that growth, job creation is an important part of it, not just by cutting investments as we go forward. >> i want to remind everybody that there are cards in the room and i should start getting them soon. please submit your questions. i want to invite people to tweet if they wish #pelosiatbrookings. i want to ask you, what was the first thing that came to your mind when paul ryan talked about

envy economics. more generally, i'd love to know how do you react to that sort of argument? i mean, he made an interesting kind of juxtaposition where on the one hand, he talked about rising inequality, and he talked about democratic economics as envy economics? >> we don't have time to go completely into the republican budget. it's not a statement of values that most people would identify with when it comes to how we invest in the future and the rest. let me just say that is so wrong. when i saw it, i thought, stale. yesterday. that isn't what this is about. nobody begrudges people success, people recognize that people take risk and succeed, it creates well, it creates jobs, that's a good thing. what the concern is we don't want that to happen at the exploitation of the worker. god bless everyone for their success, god bless everyone for their success, but not again at

the exploitation. i don't paint everybody with the same brush but what we saw on wall street leading up to 2008 that was just not right again, not everyone on wall street can be painted with the same brush. we saw a situation where people on main street were seeing the value of their homes or their ability to keep a home, the education of their children, the stability of their jobs, their savings were all diminished because of what happened on wall street. when we passed tarp people said you did that for wall street not for main street. no, we did it for economy. it's probably the toughest vote i ever asked members to take. they paid a price for it. not something clearly explained to the american people what the connection was, between that tarp bailing out the banks and lifting up our economy.

it was interesting. this is a big deal and not something we should go back to but again we go back to the status quo. even adam smith wrote a different book, "the theory of principles" -- >> moral sentiments. >> i wish he had written one book, wealth of nations and the theory of moral principles, all in one book. he talks about the responsibility of people to each other in the other book. we all believe in the free markets, that's what our capitalist system is about. it's not about laisse fair, no cop on the beat, and look what happened a chairman on the fed an expert on the great depression, ben bernanke tells

us there will be no economy on monday. stunning. and so when he -- when paul ryan says that, i want to quote him a chairman of the standard oil of new jersey a few decades ago. chairman abrams, he talked about stakeholder capitalism capitalism, where decisions are made by management that took into consideration shareholders, workers, customers, and the community at large. at that time, we had wages at about 30 times -- the ceo was making about 30 times what the workers were making. 30 times. productivity would rise, ceo pay would rise, workers wages would

rise. when we moved to something called shareholder capitalism where none of those other considerations, the community at large, the workers were part of the decision, shareholder -- it went to 300 times ceo pay versus worker pay a right angle going in the wrong direction, and that -- so it's not about economic envy -- you know, we don't -- we just don't want a rising tide to lift all yachts, we want it to lift all boats. god bless you for what you have, but let's all share in the prosperity of the country. because the american worker contributes to that. i think that's cute, but it's not -- it's not a fact. it's just not a fact. everybody wants to succeed, and they don't be grudge other people's success unless it's

crushing them under their heel. >> i like one of the headlines leader pelosi urges congressman ryan to read all of adam smith. >> it's a beautiful book. >> i want to ask, i have some great questions here i'm about to get to -- i want to ask one more question. the first is when you look at a lot of polling there are two things that come out on public attitude, there's a lot of skepticism about the way the economy is works, a belief that laisse faire doesn't work by itself. >> on the other side, there is a lot of skepticism about government itself, and government itself can't really fix that. the reason i want to link it to the second question is that democrats, and this goes back to your days campaigning for your dad in baltimore, always counted

on the support of working class people of all colors. democrats have had a particular problem with white working class people, some of it may relate to the first half of my question. so i want to ask you, how did democrats, especially with -- they have the white house under a minority in congress, restore some faith the government can succeed in doing some of these things, how do they win back more of these white working class voters? >> i will add one other ingredient to your question. what happened in 2008 scarred people. it scarred people, and they have a -- in terms of the confidence they need to have consumer confidence to invest. i'm not particularly interested in whether it's democrats or republicans, we want a policy that works for america's working families, and i think the --

because of that scarring then, people are feeling more optimistic about what's happening in the economy now but they are not -- the scarring has had them hesitate to think it's going to last, or that something else couldn't happen. and that's not necessarily only government that's the private sector as well. when they see people trying to repeal the volcker act and dodd/frank and other things, it's part of the debate as well. the role of government has been a debate in our country since we were founded. it's always been, what is the role of government. how much do we need? how much does we need at the federal level, and it's the lively legitimate debate of our country. what i would say is different about the republicans now, it's not about the degree of government, many in the -- i'm

not talking about government i'm talking about the republican congress. are not supportive of governance. it's not a place where you are believe in governance, science and barack obama. they had a trifecta growing about being opposed to everything that is proposed and in their messaging, with the analyst's money and all the rest of that, that has affected the thinking of people, but also we haven't messaged what we -- and quite frankly, the breakdown of the -- not the breakdown, but not putting into perspective the rollout of the health care act was not a good thing.

people said, well, it doesn't work. yeah, the system works and 16 million people are into it. it's like the refrigerator keeps your food cold, the light's not going on, but the food is cold. that's an issue we have to address. you know as well as i, that many of the people you are describing had social issues that took a little path away from the democrats, whether it was guns god and gays, but a lot of that is diminishing. i maintain whatever it is about the social issues if you have a strong economic agenda that gives hope to people that they can get good paying jobs, good paying jobs, and give them that confidence. that is the winning argument and that's one that we make the differentiation. now, believe me, and i mean this from the bottom of my heart, if the republicans would come around to places where we could come together on these elections wouldn't be so important.

as long as they intend to engage in trickle down laisse fair -- i said once to the press, they make adam smith look like a piker. what's a piker? that must be a generational thing. they don't -- it's so far beyond what our responsibility is in order to protect our middle class and all that that involves. some of it was cultural issues that took people away from us, even though everything is improving, they have that scar from 2008 and they're not ready to fully embrace what is happening. they see government having played a role in what happened in 2008, either by omission or passing tarp, which they didn't

like, but we had to do it. that was a bitter pill that i -- probably worst bill i ever had to ask people to vote for in terms of the public not having a clear understanding. we supported president bush in that, the republicans abandoned him, it was overwhelmingly a democratic vote. we worked closely with president bush -- the voting rights act, whether it was issued that related as i said earlier to tax credits and the rest, whether it was an energy bill, one of the biggest energy bills in the history of the country, he wanted nuclear, i wanted renewable. we had one of the greatest bills ever. we did a number of things including tarp with him, and i only wish that the republican leadership in the congress would give the same respect to president obama and try to find common ground on issues.

>> if i mispronounce anyone's name, i apologize. rachel from inside health policy asks what do you believe is the democrats' best defense against piecemeal attacks on the affordable care act by the gop? what will the democratic strategy be in the face of the king/burwell supreme court lawsuit? >> in terms of the second part of the question, some of you may know, i know some of our friends in the press asked me this so many times who are here today, when it was -- the case before the court originally, i said we're going to win. i was wrong, i said it would be 6-3, it was 5-4. i did say we would have the chief. i have confidence about what will happen with the court, the case is -- they're saying we can't give subsidies to those

who are not in a state marketplace if they're in a federal marketplace in states where they don't have a plan in their states, then that was not covered by the bill. i don't see how that's a constitutional issue. i think for the same reason they approved, the verdict was what it was, the decision was what it was before it will be this time. to your first part of the question, how will we attack the piecemeal. this bill has won this, you can't have -- you can't say we're going to eliminate discrimination against people on the basis of pre-existing medical condition, but then not say we're going to have a mandate. it all goes together. you have to bring down the cost as i said earlier. that's one of the main reasons to have the bill, even if we had no other reason was to bring down the costs. the republicans say i'm against

discrimination on the basis of pre-existing conditions and women and i don't want lifetime caps and annual caps. you can't say that unless you have the oneness, the integrity, the integral relationship of the different parts to the bill. that's -- it's almost silly for them to say that without having the mandate which is essential to the bill and that's just the case we'll have to make. endless money came in fire and brimstone, carpet bombings death panels, abortion, you name it, things that had absolutely nothing to do with the bill, and that really poisoned the well and we didn't have an antidote out there early enough. i may have read a book about the subject and the whole messaging thing, i may, i don't have time

right now, because it's -- as president lincoln said, we have it in his book in his own handwriting, public sentiment is everything. you can't assume the public will understand this is in their interest or this and that, the public is wise, but they have to know. god bless the public -- our country is so strong because of the wisdom of the american people, the productivity ingenuity and optimism of the american people. you can't allow the other side with endless money at the time when insurance companies didn't want the bill to pass, but now have become team players in it to define what the legislation was about. it's so exciting. we talked about lincoln. let's talk about our founders. life, healthier life, liberty, pursue your happiness.

that's what this bill enables people to have a healthier life to pursue their happiness without being job locked because a child is bipolar, so they can be free to start -- self employed, start a business, be a -- engaged in the arts, change jobs, have mobility to pursue their happiness. it's a great bill and it brings down costs. lists aspirations, breaks down costs and you can't take pieces of it. any bill we pass can be subject to scrutiny to say, how can we do this better, that better. we're always open to that, but not something that totally takes the heart of it and undermines it. it's too important. this is as important as

medicare, medicaid, affordable care for access for all americans. it's a great thing. we're proud of it. >> we have five minutes left and i have one question i want to close with. i'm going to combine two people's questions here and ask you my last question which is a personal question, personal for me. this is from athena jones of cnn who very wisely is on top of the day's news. will you weigh in on the vaccination debate? should they be required? and the second is, working families from the department of homeland security could be affected by congressional inaction because the immigration fight that the republicans want to have. are you concerned this funding battle will go down to the wire? will there be another c.r.? i wanted to ask, steve lowman in the audience said, what messages

did you take from the 2014 election. vaccination, homeland security and 2014? >> on the vaccination issue, i'm sympathetic to the concerns and i've met many, many hours and tried to facilitate conversations with families who have had concerns about vaccines and how that affected children be it autism or otherwise. it is a public health issue, and the fact is children should be vaccinated. it could be a generational thing. when i was young, people had polio. a vaccine to prevent the spread of disease. i think that again -- i support the public health decisions that call for children to be vaccinated. on a separate note, we should do everything we can to find out what the causes of some of the diseases that affect our

children are and that's why in the 1990's we did -- i worked with four people, senator spector and porter and tom harkin and i to double the funding for the national institutes of health. and what that meant to invention and discovery and, of course the cdc and what that means and public health is really important to our country i would say. i'm sympathetic to concerns, but let's address it the other way. the public health requires we have the vaccination. >> the dhs. >> my friend -- in december, the republicans said we're going to pass a bill. it was a terrible bill. i didn't know if it was a doughnut and a croissant combined.

in any event, they pass this bill. i won't even go into that. let's just say what it didn't do. it didn't fund homeland security for the year. it kicked the can. the speaker said we're going to do it. it's like a thing for his -- i don't want to say right wing it's radical over the edge people. that's december. january, paris -- je suis charlie. the whole world is galvanized around the issue of homeland security except in the hermetically sealed chamber of the house, where we just aren't doing it. this is so dangerous to our security that we would be

frivolous with this, is really a dereliction of duty. and it is -- you have to understand that again, it's -- part of our messaging problem is we don't want to be fear mongers and if you tell it the way it is your hair's on fire and you go running out the room. it's so bad in terms of what it prevents homeland security from doing in terms of hiring people and the rest, and what are we? the whole world is -- you would think that the paris incident would have said, ok, we made our point, now we're going to the next place. what's the next place? the next place is we're not doing homeland security unless they can get their anti-immigrant and anti-immigration legislation in. when i leave here a little later today, i'll go to a press conference to call out some of the statements that they're making about immigrants. this isn't who we are.

we're a nation of immigrants by and large with all the respect and love for our american brothers and sisters. but it's a -- it's more of the same from there. by the way, you're concerned about the deficit? the immigration bill reduces the deficit by $158 billion in the first 10 years and then $700 billion over a 20-year period. you want to reduce the deficit pass the senate passed bipartisan bill. the senate sees this differently than the house in terms of republicans. what we have now, they're taking the president to accord over one thing or another. they're not passing a homeland security bill. no wonder the american people have doubts about the effectiveness of government since we're identified in terms

of public-private solutions, then maybe they identify it with us. this on homeland security support and defend. it's the oath of office we take support and defend constitution and all that's in the constitution and again, their negative attitude toward immigrants is driving their attitude toward the homeland security bill. it's just plain wrong. if you want to make any distinction. this isn't, i mean, we have republican former secretaries of homeland security writing and saying don't do this. again, don't paint all the republicans with this same brush. this is what's driving the agenda in the house among the house democrats, not even the senate, the house republicans. so i'm glad you asked about --

was there a third part to the question? >> there was -- >> oh, yeah. the elections -- as far as the house is concerned, where there wasn't a senate or gubernatorial race, we did just fine. my state of california, they came after us big. we had five tough races. they came after us big. they had a new leader in the republican side. they're going to show me and take away the seats we won in the last election. not only did we win them all, we added one more. and that's because we really just had the field to ourselves. it wasn't they're trying to take out a senator or a governor, you know what i mean? where they brought in that big enormous, endless money, they brought in a lot in california. i'm talking endless in those other places to win the senate and win some of the state houses. it hurt us in the house races. we didn't -- equivalent to the senate, we didn't lose as many.

they lost six. that would have been 30 for us. it's no consolation, don't get me wrong. the fact is you have to -- public sentiment is everything. you have to give people a reason to register and a reason to vote. they didn't see that reason. shame on us for not making it clearer. as i say, at the risk of not being a fear monger, you try to -- now, this is the 50th and i'll close with this, i think i have to. this is the 50th anniversary -- >> i still want to ask my one question, if i may. can i throw in my last question and then you can do the close as part of it. it is a personal question because there is sort of the image of nancy pelosi, the san francisco liberal, that parody and yet people who know you and have watched you know there were two aspects of you that don't get talked about much. one is the deep importance of

family to you, mother, grandmother and how family has been so much a part of your life. the other is god and religion. and you spoke earlier about the loss of votes because of the social issues. and i've not only heard you quote pope francis, which is very popular among liberals these days, i've heard you quote pope benedict which was not as popular among liberals. i kind of wanted you to square the person you think you are with this public image that was -- that some have because i think those aspects of your life would come as a surprise to people who have a certain view of you in their heads. and i just wanted to put that on the table before we finish. >> all right. i'm so happy that my college roommate at trinity college, washington, d.c., rita meyer is here. >> welcome. > yes, we've been friends for many, many years. here's the thing.

pope benedict -- pope benedict is known for god is love. and in the encyclical, he quotes st. augustin. saint augustine said that any government that does not exist to promote justice is just a bunch of feed. words to that effect. [laughter] this is saint augustine. 17 centuries ago. god is love. benedict is a beautiful writer and thinker. his speeches here were so fabulous and the rest. so then benedict goes on to say sometimes it is hard to define justice. but when you try to do so, you must avoid the blinding blades

of special interest and money. isn't that beautiful? when i say that on the floor, my republican colleagues are not happy about that. that is really what we have to do. we have to get money in terms of special interests weighing in on government and legislation money controlling her elections in a way that destroys any confidence the public has that their vote counts for legislation, money anything. a family of five children. when my baby was brought home, alexandra, the journalist, when i took my child home she was turning six. my colleague started talking about what they know about family planning and the rest, i think i have very strong credentials.

while we were having this debate on family planning, other domestic or international, my grandfather set up and said nancy pelosi says she think she knows more about having babies than the pope. this is like 20 years ago. [laughter] it is a strange debate that we have because the fact is family, yes, is very important, and the catholic church is very important to me. i love francis and glad he is named for st. francis. is the patron saint -- he is the patron saint of san francisco. republicans don't like what i say that either. i was raised in baltimore where we were devoutly catholic. fiercely patriotic americans.

proud of our democratic heritage and partially democratic. we saw that as our connection. people spend nearly $100 million in the campaign of 2010 to describe me to the public. since i was not a known quantity, some of that took. if you are ascendant, you are a target. except that. i accepted that modestly. and then the fact it was the 50th anniversary. the 50th anniversary of the voting rights act. the court has undone some of it. mind you, the republican congress had not chosen to except a bipartisan, modest bill to correct that. also mind you that when president bush was president, we passed the voting rights act. we were in the minority, but we

worked with him in a bipartisan way to pass the voting rights act. i think it is important because i have it here so you don't think i'm making this up. the voting rights act reauthorization, july 13 2006. 390-33 in the house, bipartisan. 192 republicans voted for. in the senate, unanimous. the voting rights act. we can't get it passed, a simple ac -- a civil version now. the 50th anniversary of the voting rights act. it was in the summer when it was done originally, august, under president lyndon johnson. is important. 1/3 of the people voted in the last election. there is something wrong with us

not getting out of that. they do see a reason to vote. they see the influence of money and politics which we must reduce. also, one more time i would close with this. i intended to have this as a close but you took us to this pass so i can't ignore this. we have selma coming up and we are going again. it is fabulous. the movie and the 50th anniversary and all of that. reverend martin luther king said he had a dream that his children would not be judged, would not be judged by the color of their skin, the content of their character. that just haunts me all the time when we talk about budget. when we talk about children, children who are economically

disadvantaged areas. their families are working two jobs because they make minimum wage, which is not a living wage. they do not have time to have dinner with their children, mentor their children, listen to them read back to their parents. the neighbors are in the same boat. the community is not there. when we talk about judging by the content of the character, we have to judge our country by the content of our character if we are not recognizing that these children are worthy of everything -- they are the heirs of america's future. you see what your children have, the love, the opportunity, this and that, and you talk about the opportunity gap and education gap. the character of our country should be judged as to how we invest in these children, and

when people ask me what is the most important issue facing the country, i always say the same thing. our children, our children, our children. the health, their education, the economic security of the family, a world of peace in which they can reach their aspirations. if you have a budget that does not enable that bigger paycheck ending education gap, all of those kinds of initiative to help a child's character grow. with example of their parents hard-working but not able to meet the needs of their children. people tried very, very hard. i think at the 50th anniversary we have to think of martin luther king and examine our own consciences about what we're

doing for the character of our country, to meet the needs of kids so they can be judged by the content of their character. it is a pretty exciting opportunity. it is the inspiration we have and the inspiration we had at our issues of conference in philadelphia and it is what unites us and i don't think there is any partisan aspect to investing in this. president kennedy said they are our greatest resource and our best hope for the future. thank you all for the opportunity to be with you today. thank you. [applause] [captions copyright national cable satellite corp. 2015] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> would people stay in their

seats as ms. pelosi leaves? it will just take a second. thank you so much. >> keep track of the republican-led congress and follow its new members to its first session. new congress, best access on c-span c-span 2, c-span radio, and www.c-span.org. the white house on monday released their 2016 budget totaling nearly $4 trillion. white house budget director shaun donovan was on capitol hill testifying about the president's plan before the senate hearing committee. this is two hours.

>> good morning, i'll call this hearing to order. today we have the testimony from omb director shaun donovan of the president's budget plan for the upcoming 2016 fiscal year. when it comes to the budget, we all know that we've lived for too many years with too many blown deadlines, failed missions, heightened crisis and last-second deals. together, both parties, both chambers, and both ends of pennsylvania avenue have allowed this way of doing business to become the new normal for how we operate. it's long past time to restore regular order to our budget process, and that begins with following the budget time line laid out in the law. yesterday after six years the president's budget was released on time. my congratulations to mr. donovan, who headed up that effort. i appreciate the work you and your team did to make that happen.

being on time is a first small step toward restoring regular order on the budget and it can help our constituents understand a little better what's happening in washington. however, our constituents also understand these truths. i know it from traveling to wyoming and visiting with people and visiting with people around the country. they think we spend too much. they think we tax too much. they think we regulate too. that we borrow too much. and their biggest worry is that we owe too much. every year since the president took office, he has proposed the same approach to the fiscal challenge facing our government, he wants to spend more, he wants to tax more, he wants to regulate more, he wants to borrow more, and he wants to owe more and more and more and more. his plans always end up with the americans holding the tab, stuck with the deficits and debt as far as the eye can see. and it's been -- i don't like that word deficit.

it gets confused with debt. deficit is our overspending. i promised at our first hearing that i'd follow the numbers look at the president's budget and here's what those numbers show. first the taxman cometh. under the president's proposal taxes head higher. a total of $2.1 trillion higher. this boost comes on top of the $1.7 trillion in taxes he's already imposed during his presidency, and i can tell you that nothing good for individuals ever comes from $3.8 trillion in additional taxes. next spending explodes. the president wants to add $259 billion of new spending in the next fiscal year. and $2.4 trillion over the next ten years. that's a 65% increase. let's see, $2.1 trillion in higher taxes. $2.4 trillion in higher spending. that's still overspending.

the president hides what he's doing when he talks about reducing the deficit. it sounds like the debt will go down. no, the deficit is the overspending that we do. did you ever hear of someone being able to buy something with the interest they saved? so the interest payments skyrocket, annual interest costs would nearly triple from $229 billion today to $785 billion in 2025. and i think that's at a pretty conservative interest rate. interest remains the fastest growing item in the budget but provides little in the way of benefit for our constituents. ever hear of anybody being able to spend the interest that they have to pay? at the end of this plan, annual interest costs would be larger than the president's proposed spending for national defense, medicaid, or the combined total of all nondefense agency spending. finally, the president's plan adds $8.5 trillion to the debt.

over the next ten years, accumulative overspending would amount to $5.7 trillion in new debt, with the federal debt climbing to $26.3 trillion in 2025. based on projected population figures, this would mean every man, woman and child in america would owe almost $76,000 in payments on president obama's debt. that's compared to $56,000 per person today. that's $20,000 per person more that everybody in america is going to owe. i mean, the child that's born today gets figured into that same -- that same cost. that same debt. altogether these were not the numbers i was looking for. i meant it when i said last week that we must confront spending. bring the debt to an end, and ultimately balance the budget. the president's proposal fails on all three elements of the mission. i'll listen to the administration make its case on why it's best to ignore balancing the budget.

but with 24 states already agreeing that the solution is to gather together to write a balanced budget requirement into our constitution, and with more states thinking about it, this is a mission we don't dare dodge. yes, 24 states have already passed a constitutional convention to balance the budget. more than 10 others are in figures released friday demonstrate firmly that in the united states, more federal spending, more federal -- the latest quarterly gdp figures released friday, and i don't think gdp means much to the next of the nation, what they're interested in is how much we take in, how much we spend, and how much more debt that results in. the latest quarterly gdp figures released friday demonstrate firmly that in the united states, more federal spending,

more federal overspending, called deficits, more interest costs, and more debt, do not yield a robust economy. our economy still bobs in the back water of too slow growth, while jobless rate edges down. and equity markets head up. the number of people who are underemployed, and have abandoned looking for work continues to be too high. as senator sanders says, we have a deficit of employment. wages are stagnant, household wealth has collapsed. too many worry the american dream is no longer theirs and won't be theirs for their children and grandchildren. failure of our economy to recover is the president's record over the last six years. he's left too many americans behind. but in looking ahead families and individuals need a federal government with a fiscal plan that helps create the climate for good jobs and good wages. americans need to have confidence that there's work to be had, jobs to be found, and paychecks to be earned. most importantly, they need to know that a strong and successful future is theirs,

again, all around the country. it's not too late for the president to join news making the future brighter by submitting a new plan that doesn't mortgage our future to pay for the present. if the president changes course, we can work together to ensure that americans have the strongest possible economy, so competition to hire employees drives up wages and benefits. so we have a solid economy. and an economy in government. i said the people don't understand the gdp. they do understand spending more than we take in. we maxed out our credit cards, we don't have a mortgage payment, maybe we should have a mortgage payment where we monthly pay down some of our debt and then use the interest we save to pay down even more. that's how people buy houses. i looked at the numbers on that. there's no possibility of that at the present time. we keep coming up with brilliant ideas for new ways to spend, to fill in gaps in gifts that we haven't been giving.

we don't really take a look at what we already have and need to weed out things that don't wrk. we pretend everything we do is perfection. and with guilty conscience we try to do more. instead we should be doing better. we have over 250 programs that have been authorized. of those, 150 of them are no longer in authorization. but we continue to spend the money on them, even though we don't look at them to see what they do and how they operate and what they should be doing, and if they even ought to exist anymore. that means we've exceeded the time that we guaranteed we'd pay for them. last year we had to vote on 1100 billion dollars in spending. i prefer to say 1100 billion, i think it's more honest than $1.1 trillion. we spent $468 billion more than the $1100 billion. if you overspend what you can control by almost 50%, aren't we buying like it was a department

store sale? colleagues, that's the sort of change that americans really believe in. senator sanders? >> mr. chairman, thank you very much. the good news is that our country has made substantial economic progress in the last six years since president bush left office. instead of losing 800,000 jobs a month, as we were during the final months of the bush administration, we are now creating some 250,000 jobs a month and are seeing steady job growth over the last 58 months. instead of having a record-breaking $1.4 trillion deficit, as we did when president bush left office in january 2009, the federal deficit has been cut by more than two-thirds. six years ago, the world's financial system was on the verge of collapse. january 2009, the federal today, that is certainly not the case. while we can be proud of what we

have accomplished in the last six years, one would be very wrong not to appreciate that there is also a lot of very bad news in our economy, especially for working families. most significantly the simple truth is, that the 40-year decline of the american middle class continues. real unemployment is not 5.6%, it is 11.2%, if one includes people who have given up looking for work, or people who are working part-time when they want to work full-time. we do not talk about this issue, but youth unemployment today is close to 17% and african-american youth unemployment is over 30%. real medium family income has declined by nearly $5,000 since 1999. incredibly, and i ask my colleagues to listen to this despite huge increases in productivity, the median male

worker, that man right in the middle of the economy, now earns $783 less than he did 42 years ago. after adjusting for inflation. the median female worker now makes $1300 less than she did in 2007. shamefully we continue to have by far the highest rate of childhood poverty of any major country on earth. in the midst of this tragic decline of america's middle class, there is another reality. and this is the main point i want to make this morning. and that is that the wealthiest people, and the largest corporations, are doing phenomenally well. the result, united states today has more income and wealth inequality than at any time since the great depression. today, incredibly, the top 1% own almost as much wealth as the bottom 90%. let me repeat that. because i think what senator

enzi was talking about has got to be put into the broad context. and that is the top one tenth of one percent today own almost as much wealth as the bottom 90%. today, one family, the walton family of walmart, owns more wealth than the bottom 40% of the american people, some 120 million americans. in terms of income, what we have seen in recent years is that virtually all new income is going to the top 1%. last year the 25 top hedge fund managers earned more income than 425,000 public school teachers. and that gap between the very, very rich, and everyone else grows wider. the fact of the matter is that over the past 40 years we have witnessed an enormous transfer of wealth from the middle class to the top 1%. in other words, we are

witnessing the robin hood principle in reverse. we are taking from working people, the poor, and giving to the very, very wealthy. from 1985 to 2013 the share of the nation's wealth going to the middle class has gone down from 36% to less than 23%. if the middle class had simply maintained the same share of our nation's wealth as it did 30 years ago, it would have 10.7 trillion dollars more. in accumulative wealth than it does today. while the middle class continues to shrink, while millions of americans are working longer hours for low wages, while young people cannot afford to go to college, while children in america go hungry, we have seen since 2009 that the top 1% has experienced an 11.5 trillion dollar increase in wealth. mr. chairman what we are talking about is not just a moral issue, it is an economic issue.

70% of our economy is based on consumer spending, and when working people do not have disposable income, when they're not out buying goods and products, we are not creating the jobs that we need. the debate that we are having this morning will have a profound impact on the lives of the american people. many of my republican friends are in favor of cutting social security, cutting medicare cutting medicaid, cutting nutrition programs for kids while providing huge tax breaks for millionaires and billionaires. that is their idea of moving the economy forward. in my view, on the other hand, if we are serious about rebuilding the disappearing middle class, reducing income and wealth inequality, and strengthening social security, medicare and medicaid we need a budget that creates millions of jobs, raise wages, makes college affordable and demands that the wealthiest people start paying

their fair share. in all of these matters, the president's budget begins to move us in the right direction. at a time when almost all of the income gains go to a top 1% and when corporate profits are at an all-time high the president's effort to end egregious loopholes while providing tax breaks for working families is exactly the right thing to do. at a time when real unemployment is over 11% the idea of increasing substantially investment in our infrastructure, and creating hundreds of thousands of jobs is the right thing to do. at a time when 20% of our kids are living in poverty, the president's budget triples the child care tax credit to $3,000 per child, and makes an additional billion dollars investment in head start exactly the right thing to do. at a time when more americans are unable to go to college the president proposes the first two years of community college to be free.

that is exactly the right thing to do. let me conclude, mr. chairman, by saying this, if we are serious about figuring out how we're going to pay for what this country needs, we might want to take a hard look at why major corporation after major corporation in some years pays absolutely zero in taxes. from 2008 to 2013 general electric made nearly $34 billion in profit in the united states not only did it pay nothing in federal income taxes, it received a tax break much nearly -- tax rebate of nearly $3 billion. and the list goes on and on and on. there's a lot to be done. our job is to protect the middle class. let's get to work doing that. >> thank you, senator sanders. our witness this morning is shaun donovan, the 40th director of the office of management and budget. prior to taking the role as head of omb director donovan served

as president obama's first secretary of housing and urban development. director donovan has a long public service career, both in federal, and local roles including commissioner of the new york city department of housing preservation and development, and as acting federal housing administration commissioner during the transition between president clinton and president bush. his private sector experience includes work at the community preservation corporation in new york city, and as a visiting scholar at new york university. director donovan holds both bachelor's and master's degrees in public administration and architecture from harvard. director donovan, as the architect of the administration's budget, we look forward to what you have to say. for the information of colleagues, director donovan will take about seven minutes for his opening testimony. director, please begin. >> chairman enzi, ranking member sanders, members of the committee, thank you for welcoming me here today to

present the president's 2016 budget. to echo your comments, mr. chairman, when i met with so many of you over the summer, one of the key themes everyone echoed was that we needed to get our budget process back into regular order. and i truly hope that this on-time budget that i'm presenting today is the first step toward that regular order. the budget comes on the heels of a breakthrough year for america and builds on our fiscal and economic progress including the , fastest job growth since the 1990s, and the fastest sustained period of deficit reduction in 60 years. the budget is a blueprint for the president's vision for middle-class economics in the 21st century. this means helping working families by making their paychecks go further, preparing americans to earn higher wages and making america the place where businesses decide to

innovate, grow, and create good, high-paying jobs. the budget shows that we don't have to choose between investing in the middle class, and being fiscally responsible. first, because we cannot afford a return to mindless austerity the budget proposes to end sequestration, fully reversing it for domestic priorities in 2016, matched by equal dollar increases for defense. by replacing sequestration with a combination of smart spending cuts, program integrity measures, and commonsense loophole closures, the budget makes room for investments in our economy, and our national security. for example on the domestic side, where sequestration would cut r&d to its lowest level since 2002, adjusted for inflation, the budget supports cutting-edge research like precision medicine, efforts to combat antibiotic resistance and the brain initiative, which is helping to revolutionize our understanding of the human brain. likewise, rather than cutting inflation adjusted national

security funding to the lowest level since 2006, the budget makes responsible investments to protect our national security, restoring readiness, and the investment in modernization needed to ensure america's continued technological edge. i want to emphasize that every investment in the budget including both the discretionary investments made possible by reversing sequestration, and mandatory and tax changes are more than paid for through spending or tax reforms. for example the budget would provide new and expanded tax credits for middle class families and would more than pay for these investments by reforming capital gains taxation, and making it more costly for the biggest financial firms to finance their activities with excessive borrowing. it also uses one-time revenues from pro-growth business tax reform to pay for an ambitious six year surface transportation proposal that would give states and localities the certainty they need to invest in infrastructure that will spur innovation and accelerate job

growth. meanwhile, the budget also achieves $1.8 trillion in deficit reduction, primarily by focusing on the key drivers of our budget challenges. health care cost growth. inadequate revenue levels in the face of the matching -- in the face of an aging population. building on the historically slow rates of health care cost growth in recent years that have already significantly improved our fiscal outlook. the budget includes roughly $400 billion in health savings, which grow significantly over time. raising about $1 trillion in the second decade. the budget also raises about $640 billion in net revenue for deficit reduction from curbing inefficient high income tax expenditures. this year's budget again reflects the president's support for commonsense, comprehensive immigration reform, along the lines of the bipartisan senate passed bill. immigration reform would reduce deficits by almost $1 trillion over two decades, while strengthening social security, and growing the economy. as a result of these measures, the budget maintains deficits well below the 40-year historical average, during every

year of the budget window. it meets the key test of fiscal sustainability, putting debt as a share of the economy on a downward path, showing investments in accelerating growth and a strong middle class are compatible with strengthening the nation's finances. and to ensure that our country remains strong and prosperous both now and in the future, it makes smart investments to give every american the chance to contribute to and share in the benefits of growth. i look forward to working with congress and this committee in the coming months. thank you and i'd be glad to take your questions. >> wow. you didn't even come close to seven minutes. [inaudible] [laughter] we do appreciate that. now we'll turn to questions last week when cbo director elmendorf testified, he did a good job of simply answering the questions asked by senators so that members on both sides had more questions that they could ask and get answers.

i hope you'll follow that model this morning, director, so that we can all have as much asked and answered as possible. i'll alternate recognition between republican and democratic senators following seniority for those who were here when the hearing was gavelled to order. after that i'll recognize members based on order of arrival. if you're not here when your name is called i'll skip you and pencil you in at the end of the question list to be recognized after everyone who was in attendance has the opportunity to ask director donovan questions. with that, director, i'll begin with my first question. you testified that stabilizing the debt as a share of the economy and putting it on a declining path is a key test of fiscal sustainability. but debt still goes up every year in the president's budget in dollar terms and chose little movement as a share of the economy. and again, that's gdp, and i don't think people understand gdp. they do understand that we spend

more than we take in. and even though we're getting record revenue, why is it a sufficient goal to merely tread water on debt as a share of gdp? >> first of all, senator, i think if any family would look at it their finances are based on what they earn. all right, thank you. apologize. i think like any family in america, the key way they think about their finances is based on what they earn. and so gdp is really the measure of what this country earns. it's the size of our economy, and most economists on both sides of the aisle really think of looking at these numbers as a share of gdp, as the correct measures. the other point i would make is that as director elmendorf no doubt testified, under current projections, under current law over the next ten years debt as a share of gdp would grow substantially.

in our baseline we show it growing to almost 81% of gdp. and so, with this $1.8 trillion of deficit reduction that our budget would achieve, we actually help to not just stabilize, but also begin to bring down the debt by the end of the window. and that is a substantial difference from our current path. >> in looking at it the president's budget never reaches balance. at its low point in 2017 the overspending is $463 billion. and that grows steadily from there, reaching $687 billion in 2025. to secure the middle class, and any hope for future generations, we need to pay down the debt and that's not possible with overspending this large. can we pay down the public debt? that is, have the dollar amount

of debt outstanding be less than the amount in a year earlier without balancing the budget? >> again, senator, the key metric for fiscal sustainability that is not only the measure that we use in the administration, but that is, i think, widely accepted, is that deficits below 3% of gdp are critical for long-term sustainability. that's a measure that we met for the first time this year, after record reductions in our deficits. over a two-thirds reduction since the president came in to office. and, that will keep us in every year of the budget window below the 40 year average for deficits that this country has faced. we think that key test of sustainability. >> ok. most people that i deal with think that if you spend more than you take in that you made a mistake. but the analytical perspective's volume of the budget documents has an interesting table on page 32 entitled trends in federal debt held by the public. that table shows interest costs as a percent of total outlays

will increase steadily under the president's budget. can this trend continue forever without compromising our ability to provide government services? >> i think what the long-term fiscal outlook chapter shows, in addition to what i've already said, is that we would stabilize the debt as a share of the economy, not just over the ten-year window, but over the 25-year window, as well. and as i think we all recognize, what we are facing in this country is a real demographic challenge with the aging of the baby boom. the key thing that we need to do, to ensure that we long run fiscal sustainability is focus on health care costs. we've seen the lowest growth in health care costs in 50 years. over the last few years, we have many, many measures, including over $400 billion in savings for medicare and medicaid proposed in the budget, that increase over time.

and, we need to recognize that we need to grow our workforce, and our economy, and immigration reform is perhaps the single most important thing we can do there. and that will add to the sustainability of social security over time. and so, we think we're attacking through this budget the key drivers of long-term deficit and debt. >> my time is almost expired. i heard your comment about health care costs going down. last year i had the head start folks come to me and complain that their budget was being cut 7.3% instead of 3.2%. i checked on it and found they were keeping most of the money in washington instead of where the kids were and it got reversed and they got all of their money. what they found was their health care costs have gone up so much they still can't add the kids back into the program. so we've got a lot of things we need to work on. my time has expired. senator sanders. >> thank you, mr. chairman.

mr. donovan, in case you haven't been made aware we have a philosophical divide on this committee of some degree. many of my republican colleagues believe that what is best for the country in the future is basically to cut, cut, cut, cut, cut, social security, medicaid nutrition, et cetera, et cetera. others of us don't think that is what is best for working families in this country. so i want to mention something to you. my staff did some research, and what we found is that it turns out that major profitable corporation after major profitable corporation, not only paid zero in a given year in federal taxes but in fact got rebates from the irs. just some examples. from 2008 to 2013, general electric made nearly $34 billion in profits in the u.s., and what was its tax break? what was its tax burden? zero. in fact it received a tax refund of nearly $3 billion. verizon from that same period of

time made up of $42 billion in u.s., it received tax refunds of $732 million. they didn't pay any taxes. they actually got rebates. now i think the president's budget begins to address some of these issues. can you talk to us, in your view, about whether or not it is appropriate that one large major profitable corporation after another pays zero in federal income taxes? >> well, senator, i think we could all agree on a bipartisan basis that our current corporate tax code is more complicated than it needs to be. that it has a broad range of loopholes that create not just unfairness across companies, but also, frankly, make our economy less efficient, and hold back economic growth. so we do support, and the budget lays this out, reform of our business tax system that would not only make it more fair, but in the long run, would increase economic growth.

and we would do that by closing a broad range of loopholes and actually lowering the basic rate from 35% down to 28%. we think a particularly important piece of this is around international tax reform, the president's spoken out very clearly that the trend of inversions of companies, you know, buying small companies overseas, and putting a domicile, relocating there, is a serious problem. this budget would not only close those loopholes, to try to stop to the maximum extent possible companies moving overseas, it also creates more broadly an international tax system which would really make it more fair and level the playing field, bringing jobs back to the u.s. >> thank you. mr. donovan there will be, i suspect, a major debate coming forward on social security. i happen to believe not only that we should not cut social

security, but we should expand benefits. i suspect my republican colleagues disagree. but first order of business done by the house republicans was to pass a rule which could result in a 20% reduction in benefits for people who receive disability benefits, laying the groundwork for either cuts in disability benefits, or, in fact, the social security for older people. your budget did not do that. you did what has been done 11 times in the past what we call readjust. social security has enough money to pay all benefits for the next 18 years. you simply took money from one account and into the other. why did you do that? >> well, as you said, senator, this small reallocation of social security taxes is the simplest, most direct way to ensure that on a combined basis, both social security trust funds

have reserves available through 2033. and this is a step that's been taken on a bipartisan basis under democrats and republicans, it's actually been done both ways, from disability to the other trust fund and back to social security, and so, we think this is the most simple and critical way. and remember, these are benefits that have been earned by folks paying in over time. we should not put them at risk of getting a 19% cut in their benefits after they paid in to this system over their working years. >> ok. mr. chairman, my time is almost up, i'll yield the floor. >> senator grassley? >> i think the president's budget is an ideological statement. based on the faith of government making decisions as opposed to individuals making decision ss i think it's based on the proposition that 535 people here in congress are a heck of a lot

smarter than 137 million taxpayers and that gets to the issue of increases taxes or not. quite frankly i think the dynamics of the american economy is going to advance the economy much faster if you have 137 million taxpayers decide whether to spend or save, and how to spend it, and how to save it, as opposed to those of us here in the congress of the united states and the president of the united states making that decision. and it's not a question of big government, small government it's a question of where -- what does the most to expand and grow our economy, because what this country needs is not more tax rates, or more taxes. we need more taxpayers. and that's going to happen by the capital investment that individuals make. not what the government makes.

is going to really grow the economy. we have a 50-year average that has said that if you have one dollar tax increase, it gives license to congress to spend $1.13. that's not going to do anything about the deficit. a license to spend more money brings us further into the hole. you can't raise taxes high enough to satisfy the appetite of congress or any president not just this president to spend money. if a tax increase would go to the bottom line, reduce the deficit, that would be one thing. i think we might look favorable upon that. but that's not going to happen and i think you see that deficits matter. the president's budget speaks to deficits mattering. they have consequences. because the president's own budget shows that the cost of interest is going to go up from a little less than $300 billion a year to $800 billion a year.

so, we have a spending problem not a taxing problem. and i don't see in this budget and i suppose i could say this even about republican budgets, that there doesn't seem to be a shame in increasing deficits, in this case, under this budget, by $8 trillion over a ten-year period of time. so this gets me to what the president has said publicly about the middle class, and my question will go to this. the president seems to believe that we need the deficit spend today and for the next ten years in order to, in his words, invest in initiatives to help the middle class. however, cbo has analyzed in great detail the long-term consequences of deficit spending. they found that in future years a growing portion of people's savings will go towards buying government debt remember than towards investing and productive capital goods. that crowding out of investment would reduce the size of the

nation's productive capital resources that produce economic benefits over time. the smaller capital stock would result in lower wages and incomes, making future generations worse off. now that's not my finding that's cbo's finding. so, two questions that you can answer at the same time. does the president think the nonpartisan congressional budget office is incorrect in stating that future generations will be worse off by taking no action to reduce deficits and debt, and to follow up to that wouldn't reducing the debt burden of future generations be more prudent than ten more years of deficit spending and growing debt? that's the only question i'll ask. >> senator, we do take the spending and deficits and debt seriously. that's why we have taken action over the full six years of this president's time in office, and achieved the fastest deficit

reduction since immediately after world war ii. and brought deficits down below our 40-year average. in addition, we make further changes in this budget, both on the spending side, and in other areas, that would reduce our deficits by $1.8 trillion over those ten years. and so, we do take that seriously. but we also take seriously that this country needs to invest in the things that are going to grow our middle class. we cut taxes for 44 million families by an average of $600. through this budget. and we do ask that where we have places in our tax code that are not only unfair but actually discourage economic growth, that we make changes to our tax code, as well. whether it's returning to the capital gains rate of 28% that was effective when president

reagan was in office. or to get rid of inefficiencies like the so-called capital gains stepped-up basis where we're actually encouraging families, the wealthiest families, to hold assets in unproductive ways, and when an average american would have to pay tax on that, because they couldn't hold it until their death, we're allowing the wealthiest families to basically hold those assets and never be taxed for capital gains. and so we do believe that we need to focus on our deficits and debt. we do in this budget. we continue to make strong progress like we have over the last few years. but we also recognize that we have to invest in our future, as well. >> thank you, mr. chairman. >> senator widen isn't here. senator stabenow. >> thank you, mr. chairman. and welcome, director donovan. >> thank you. >> i have been on this committee for a while and when i think about since 2009, you guys inherited a very big hole. and been stepping forward out of that hole for the last six years.

and i want to congratulate you. i remember when we were on this committee talking about simpson-bowles commission, the bipartisan commission that said we needed to cut $4 trillion in order to be able to get a handle on and stabilize the debt as a share of the economy, and we're step by step by step we're now at $3.3 trillion of the $4. i would suggest that's pretty good. and the fact that we are now looking at less than two-thirds of the annual deficit of what you inherited in 2009, less than two-thirds, less than two-thirds, i would suggest that's pretty good, too. 11.2 million jobs. i'd like very much to have more. nearly 3 million last year, but i couldn't agree with you more that the only way that works is to stop talking about trickle-down economics, and talk about and actually do something,

that makes sure the next steps are laser focused on middle class. so, before i ask my question though, i also want to say that we talk a lot about debt, and about how we should never spend more than we have. i would just suggest, i have a mortgage. when something's important, we spend more than we have. we have a mortgage for our house. we have a car payment. and as somebody who makes a lot of automobiles i would welcome more people doing that. we put our kids through college. unfortunately too much debt on college. many, many colleagues here, on the other side of the aisle, felt going to war twice, not paying for it was a priority. so the issue really is how do we manage our debt and move forward and not have it overwhelm us. but we certainly set priorities for when we -- for our families choose to take on debt. so it is a question of how we manage that.

i would like to move to the topic of health care and first of all congratulate you on adding dollars for medical research and the brain initiative. one of the ways that we can bring down costs that will save millions of lives is to focus on brain research. one out of five medicare dollars is spent on alzheimer's. one out of five. one out of five. and so, i'm very encouraged and believe we should even be doing more in that area. and i want to talk about health care as part of bringing down cost. latest cbo projections so that more americans are finding full-time work, getting health care coverage, we know that fewer americans are going to bankruptcy because of medical bills. good thing. tax credits that we passed are helping people afford coverage. people who already have insurance are actually getting what they're paying for now. and can't get dropped. can get coverage even if they have a pre-existing condition.

but we are seeing an ongoing debate, and very soon we'll see even more of that here in the senate. to reverse that, stripping insurance coverage from working americans that will increase the debt, the house has voted over 50 times to repeal health reform. the supreme court's considering whether or not to have the process that would put more millions of people into health care without health care. so, could you talk about how the health care law has helped to drive down medicare spending? as well as the health care costs for americans? >> senator, i appreciate you focusing on this, because it really is the single most important focus for if we want to talk about long-run deficits. but also, a critical thing for middle class families is affordable health care. and the affordable care act is working. we have now more than 10 million less fewer uninsured americans.

and more broadly, millions and millions of americans who had health care before -- health care insurance, but have actually seen, whether it's keeping their kids on their plans, not being kicked out because of pre-existing conditions, and a broad range of things, so we really have made progress. on the fiscal side what we've seen is the lowest health care cost growth in 50 years. and that has already improved our long-run fiscal picture dramatically. just take cbo's numbers, where they say just from improvements we've seen over the last few years, we're going to spend $190 billion less on medicare and medicaid in the year 2020. thanks to the lower growth in health care costs that we've already seen. i think we can work to the on a bipartisan basis to build on that. we have $400 billion in medicare and medicaid savings built in to our budget.

and for the first time, we're including a permanent sgr, or doc fix proposal in our bill fully paid for. it builds on bipartisan legislation, and it adds provisions that would go even further in terms of what we call delivery system reform. making sure that we pay doctors and hospitals based on the quality of care that they're providing, not just the quantity of care that they're providing. so i think this is an area where we've made a great deal of progress. more people are covered. they're getting better coverage. and, in fact, we can build on that through this budget and work that we can do on a bipartisan basis this year. >> thank you. >> senator sessions? >> thank you, mr. chairman. appreciate your leadership and look forward to working with you. i agree that senator sanders that the middle class is really hurting. working americans today are not doing well. since 2000, the 2007 median

income in america is down $4,000 for a family. this is catastrophic. this is absolutely one of the most dangerous trends we've seen in some time. and it's accelerated over the last decade. it's accelerated under your president's, our president's watch, mr. donovan. the problem is your policy. tax more, spend more, borrow more, regulate more, obamacare more, an immigration policy that dominates the market with workers from abroad, when we don't have enough jobs for american workers, pulling down wages of americans. that's what caused this problem. in my opinion. and that's where we disagree, senator sanders. we got a problem, but your ideas will not work, they will never work.

now, mr. donovan, reckless spending endang rs the future of the public. we remain on an unsustainable debt course. let me ask you, does your budget spend more or less than the, that we agree to with president obama in the budget control act of 2011? >> our budget overall reduces spending relative to current law. >> i just asked a simple question. you work with the taxpayers, mr. donovan. i'm asking you on their behalf a simple question. does your budget spend more money next year than the current law of the budget control act allows? >> overall, our budget reduces spending spending compared to current law. >> overall, your budget spends

$74 billion more next year than allowed by current law. isn't that true? >> i think what you're focused on, senator, is discretionary spending and i think there is broad agreement that -- >> that's what the budget control act -- >> sequestration is hurting our military readiness. the joint chiefs of staff testified to that this past week and it is hurting the ability for the -- >> you work for the american people, mr. donovan. i asked you do you propose spending more money next year than was agreed to in the budget control act. yes or no? >> i believe i've answered it. >> no, you haven't. >> proposing to reverse sequestration and our budget fully pays for those increased investments on the discretionary side with mandatory spending reductions and cutting spending, wasteful spending. >> one of the ways you fix a budget problem is when you agree to a spending limit, you stick

to it, so i'm going to ask you one more time. see if we can get this straight. american people need to know. you propose to spend more next year than the budget control act would allow? >> we proposed to lift the sequestration caps which have been harmful to our military readiness, economic growth. we more than fully pay for those with reductions in spending on the mandatory side and reducing wasteful spending. >> so, you intend to spend more than we agreed to. that is all i want you to say. will you say that? >> our budget poses -- >> why won't you say that? what is it about this that allows you to continue in that >> senator, i think there is broad bipartisan agreement that discretionary spending is not driving our deficits and in fact, our discretionary

spending, even with the increases -- >> but you won't give the american people for whom you work a simple answer. >> it remains at the lowest level -- >> time's running out. one more question. under your statement that you gave us earlier, you said that the immigration policies of this president would make social security more sustainable over time. now, isn't it true that everybody in social security does not pay in enough money to justify the withdrawals that they will take over their lifetime and by adding millions of more people unlawfully here to the social security role, will that not make social security less sustainable over time than it is today? yes or no. >> just yesterday, the actuary for the social security