at'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. 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 way? >> senator, i think there is broad bipartisan agreement that discretionary spending is not driving her deficits. in fact, our discretionary spending, even with the increases on the discretionary side -- >> you won't give the american people for whom you work a simple answer to question. >> they remained at the lowest level of the share of the economy. >> times running out. going to ask you one more question. under your statement that you give 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 put in enough money to justify the withdrawals that they will take over their lifetime? that by adding millions of more people unlawfully here through the social's ready roles will that not make social security less sustainable over time and it is today? yes or no. >> just yesterday the actuary for the social security administration confirmed that the president's executive actions that he took late last year would improve the prospects . >> over what. of time? over the life of the individual? you are not counting the times that this individual would draw their benefits, mr. donovan.

you are counting a short-term window in which they would pay in, creating a short-term additional flow of money, but you are not counting when they drop out. it is going to make the hole in social security deeper, making it harder for us to stay in social security and medicare and you know it and you are suggesting to the american people directly different from that and it's wrong. >> you don't need to take my word for it, senator. along with cbo they project that the actions the president took will reduce deficits, not increase them. >> you can find the rest of that hearing and others discussing the president's budget request at c-span.org. for more on the president's proposal and the budget process, we spoke to a capitol hill reporter. >> president obama's four dollar chilean budget request for 2016 has been released. jonathan nicholson is with us to

help us understand what is in that budget. tell us, what are some of the presidents key priorities in his budget request? what agencies would get increases? >> the two main things that sort of they highlight in the budget is they wanted to put an end to the sequester these scheduled cuts that were agreed to in the 2011 budget control act. about 74 dollar billion basically, spending over what these caps would be. they want to do those between increased domestic spending and half increased defense spending. whether republicans will go for that mixture or insist upon maybe an increase only in defense spending, which the obama administration would probably disagree with obviously remains to be seen. they also propose a lot of

different access x are essentially they call it middle class economics and tried to bring in more tax breaks for the middle class and lower income people and pay for those with some of the tax changes that would largely affected income earners. >> are we talking about major cuts in departments or agencies? >> agency by agency they want to increase irs spending, which took a big hit under the omnibus bill last year. that is likely to be problematic for republicans. the defense dod spending will certainly be a flashpoint. those are kind of some of the main aspects of the discretionary spending.

one third of the total overall federal spending is within a relatively narrow range over the last couple of years because of these budget standoffs that have been happening. >> you tweeted that the price tag for obama not having to deal with the debt amid again was one dollar trillion "insert dr. evil laugh here." tell us about that. >> "one dollar trillion." it will reset in mid-march. after that the treasury will have some more time basically using accounting maneuvers to still continue to borrow. it is an unspecified amount of time at this point. treasury is not giving a precise forecast on this handful of data . but a lot of people are thinking october, maybe november. that will be when they need a new debt ceiling increase.

if you look at the projections from the cbo and the white house office of management and budget to get from where we expect the federal debt to be in march versus where it will be in september 30 2016, which will be a few weeks before the next presidential election, it comes out to about one dollar trillion. so, that will be probably dealing with that issue near the end of the year, that will be one of the last big flashpoints between the obama white house and the congressional republicans this year. there will be a lot between here and then, though. >> what is the next step with the president's request? >> the cbo will take a look at it and say that this is probably will look at the individual pieces, that this is legitimate accounting and we would question this part over here. then in march they will get back to congress with sort of their review of the president's budget

as well as basically a new baseline, given their projections about what they expect the economy and the deficit to look like in the next 10 years. from those figures the congressional senate and then try to reconcile them before april 15. and if they can do that and that is a feat that has not been done since 2009 given that there was divided power in congress during most of those years, they will be able to use that budget document to possibly leverage later legislation and send some bills to the president for signature or for veto. and what those reconciliation bills, as they will be called, will be remains to be seen. >> jonathan nicholson, budget reporter covering house leadership. he is on twitter