[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE PRESIDENT'S
FISCAL YEAR 2014 BUDGET
=======================================================================
HEARING
before the
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, APRIL 11, 2013
__________
Serial No. 113-3
__________
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COMMITTEE ON THE BUDGET
PAUL RYAN, Wisconsin, Chairman
TOM PRICE, Georgia CHRIS VAN HOLLEN, Maryland,
SCOTT GARRETT, New Jersey Ranking Minority Member
JOHN CAMPBELL, California ALLYSON Y. SCHWARTZ, Pennsylvania
KEN CALVERT, California JOHN A. YARMUTH, Kentucky
TOM COLE, Oklahoma BILL PASCRELL, Jr., New Jersey
TOM McCLINTOCK, California TIM RYAN, Ohio
JAMES LANKFORD, Oklahoma GWEN MOORE, Wisconsin
DIANE BLACK, Tennessee KATHY CASTOR, Florida
REID J. RIBBLE, Wisconsin JIM McDERMOTT, Washington
BILL FLORES, Texas BARBARA LEE, California
TODD ROKITA, Indiana DAVID N. CICILLINE, Rhode Island
ROB WOODALL, Georgia HAKEEM S. JEFFRIES, New York
MARSHA BLACKBURN, Tennessee MARK POCAN, Wisconsin
ALAN NUNNELEE, Mississippi MICHELLE LUJAN GRISHAM, New Mexico
E. SCOTT RIGELL, Virginia JARED HUFFMAN, California
VICKY HARTZLER, Missouri TONY CARDENAS, California
JACKIE WALORSKI, Indiana EARL BLUMENAUER, Oregon
LUKE MESSER, Indiana KURT SCHRADER, Oregon
TOM RICE, South Carolina
ROGER WILLIAMS, Texas
SEAN P. DUFFY, Wisconsin
Professional Staff
Austin Smythe, Staff Director
Thomas S. Kahn, Minority Staff Director
C O N T E N T S
Page
Hearing held in Washington, DC, April 11, 2013................... 1
Hon. Paul Ryan, Chairman, Committee on the Budget............ 1
Prepared statement of.................................... 2
Hon. Chris Van Hollen, ranking minority member, Committee on
the Budget................................................. 3
Prepared statement of.................................... 4
Hon. Jeffrey Zients, Acting Director, Office of Management
and Budget................................................. 5
Prepared statement of.................................... 7
Hon. Jackie Walorski, a Representative in Congress from the
State of Indiana, prepared statement of.................... 62
Questions submitted for the record by:
Chairman Ryan............................................ 62
Hon. Marsha Blackburn, a Representative in Congress from
the State of Tennessee................................. 63
Mrs. Walorski............................................ 63
Director Zients' response to questions submitted for the
record..................................................... 64
THE PRESIDENT'S FISCAL YEAR 2014 BUDGET
----------
THURSDAY, APRIL 11, 2013
House of Representatives,
Committee on the Budget,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in room
210, Cannon House Office Building, Hon. Paul Ryan, [Chairman of
the Committee] presiding.
Present: Representatives Price, Campbell, Calvert, Cole,
McClintock, Black, Ribble, Flores, Rokita, Blackburn, Rice,
Williams, Duffy, Messer, Lankford, Woodall, Garrett, Schwartz,
Ryan, Lee, Cicilline, Jeffries, Pocan, Lujan Grisham, Huffman,
Cardenas, Schrader, Pascrell, Yarmuth.
Chairman Ryan. The hearing will come to order. Welcome,
everybody, and while this budget may be two months late, I want
to thank Mr. Zients for coming to testify. And, by the way, I
want to thank you for serving your country in the capacity you
have been serving. It is not a very easy job. It is probably,
arguably, one of the most important, but one of the most
different jobs in the Executive Branch, and I want to thank
you, Jeff, for your service because I know you are in your last
days of this, and we wish you great success in whatever it is
you choose to do in the future.
Now, for my speech. Now for the other side of the story. It
is good to have you here. We are glad you put out a budget.
Sixty-five days late, but, seriously, though, we are
disappointed in this budget. We are disappointed in this budget
because it is a status quo budget. It does not break any new
ground. It just goes over old ground. It raises taxes by $1.1
trillion. It increases spending by nearly a trillion dollars
net, and it adds $8.2 trillion to our debt. In short, it takes
more from families to spend more in Washington. The president
often says his policies would cut the deficit by $4.3 trillion
over 10 years. Sadly, that is not true. The budget itself
claims $1.4 trillion of deficit reduction over 10 years, and
nearly all of those savings are from well-worn gimmicks that we
have established as gimmicks from both parties over the years.
In fact, if you remove these gimmicks, this budget cuts the
deficit by just $119 billion. And, by the way, the president's
budget proposes that this paltry deficit reduction does not
begin until the year 2020, four years after he has left office.
Having said that, the president does deserve credit for
challenging his party on entitlements. For instance, he has
proposed increased means testing for Medicare Part D and B.
Unfortunately, the budget does not include the structural
reforms that we need to protect and strengthen critical health
and retirement security programs. These policy changes in this
budget will not save these programs. They will make them a
little less expensive, but they still go bankrupt. So the
president's budget is a disappointment because it is missed
opportunity. We need a new approach in Washington to meet our
country's most pressing needs. That is what our side is
offering. That is the budget we passed.
Our plan balances the budget in 10 years to foster a
healthier economy and to help create jobs. It is a plan to
expand opportunity for the young, to guarantee a secure
retirement for seniors, and it repairs the safety net for those
in need. That is our objective. I understand my colleagues
choose to pursue the objective in a different way, but that is
our objective and we think we accomplish that. I will say this.
At least everybody has a plan now: House Republicans, Senate
Democrats, and the president. That is a pretty good start. We
have not seen that in a few years around here. There are many
differences between these plans. The president and the Senate
seem to believe that Washington knows better so that their
plans put more power in its hands. Their budgets never balance.
They raise taxes. We see it differently. And by defending the
status quo, we are letting critical programs like Medicare
wither on their watch, and their policies will cement the
record poverty and high unemployment that we have had in place
if we stick to the status quo as these--as this budget does.
But we cannot simply sit here and dwell on our differences.
We have got to move forward. We have got to find common ground.
And the existence of these plans being put on the table helps
us establish a process to go and find that common ground. Even
if we cannot agree on everything, we need to make a down
payment on our debt and we need to make that down payment now.
As difficult as these challenges are, I believe we can make
progress and I am hopeful that we will. And with that, I would
like to yield to my friend, the Ranking Member, Mr. Van Hollen.
[The prepared statement of Paul Ryan follows:]
Prepared Statement of Hon. Paul Ryan, Chairman,
Committe on the Budget
Welcome, everybody. Well, this budget may be two months late, but I
want to thank Mr. Zients for coming to testify.
That said, I'm disappointed by the President's proposal--because
it's a status quo budget. It doesn't break any new ground; it just goes
over old ground. It raises taxes by $1.1 trillion. It increases
spending by nearly $1 trillion. And it adds $8.2 trillion to our debt.
In short, it takes more from families to spend more in Washington.
The President says his policies would cut the deficit by $4.3
trillion over ten years. But that's not true. The budget itself claims
$1.4 trillion of deficit reduction over ten years. And nearly all those
savings are from well-worn gimmicks. In fact, if you remove the
gimmicks, this budget cuts the deficit by just $119 billion.
Oh, and by the way, the President's budget proposes that this
paltry deficit reduction begin in 2020--four years after the President
has left office.
The President does deserve credit for challenging his party on
entitlements. For instance, he's proposed increased means-testing for
Medicare Part B and D. Unfortunately, the President's budget doesn't
include the structural reforms we need to protect and strengthen
critical health and retirement-security programs. The policy changes in
this budget won't save these programs.
So the President's budget is a disappointment--because it's a
missed opportunity. We need a new approach in Washington to meet our
country's most pressing challenges. That's what our side is offering.
Our plan balances the budget in ten years to foster a healthier economy
and to help create jobs. Our plan expands opportunity for the young. It
guarantees a secure retirement for seniors. And it repairs the safety
net for those in need.
But I'll say this. At least everyone has put a plan on the table--
House Republicans, Senate Democrats, and the President. There are many
differences between these plans. The President and Senate Democrats
believe Washington knows better, so their plans put more power in its
hands. They never balance the budget. They raise taxes. By defending
the status quo, they're letting critical programs like Medicare wither
on their watch. And their policies will cement record poverty and high
unemployment into place.
But we can't simply dwell on our differences. We've got to move
forward. We've got to find common ground. Even if we can't agree on
everything, we need to make a down payment on our debt--now.
As difficult as the challenges are, I believe we can make progress.
And I'm hopeful we will.
With that, I yield to the ranking member.
Mr. Van Hollen. Thank you very much, Mr. Chairman. I want
to join the Chairman in thanking you, Mr. Zients, for your
service as the head of the Congressional--head of the OMB,
Office of Management and Budget. And as the Chairman said, it
is a tough job, and I think you, working with the president,
have done it very, very well. And you are going to have a lot
of opportunity to respond to some of the claims the Chairman
made with respect to your budget. I think the important thing
is it meets two essential goals. First of all, it focuses on
job growth and strengthening the economy. We have seen more and
more Americans getting back to work, but we also know we have
got a lot more work to do to kick this economy in full gear,
and your budget focuses on that. It also focuses, of course, on
reducing our long-term deficits in a balanced way, asking for
shared responsibility.
Democrats in Congress, Republicans in Congress, and now the
president, have all now submitted plans, and while I have some
concerns with aspects of the president's plan, the overall
thrust of this is clearly in the right direction for our
country, and stands in very stark contrast to the House
Republican plan that was put forward. First of all, the House
Republican plan would actually put the brakes on our economy.
We know that the Congressional Budget Office has said that if
we keep the sequester levels of spending in place, we will see
750,000 fewer jobs at the end of this year alone. And yet, the
House Republican budget keeps those levels in place.
I received a letter from a CEO in my district, the head of
a very large bio-tech company, who said, as a result of the
sequester, they have frozen hiring. In fact, the only place
they are hiring right now is in China, not because of lower
wages in China, but because the Chinese looked at the American
model of investment in bio-science and medicine, and said,
``Hey, that is a winning economic strategy.'' And so while we
are cutting our investments in places like the National
Institute of Health and investments that are important to keep
our competitive edge, the Republican budget would actually
undermine those important investments. So I applaud the
president for putting forward a budget that focuses on
investments in education, investments in science and research,
and investments in the infrastructure necessary to make sure we
are competitive in the 21st century.
With respect to the president's approach to deficit
reduction, he has, in his budget, done what he said he was
going to do. He does it in a balanced way, asking for shared
responsibility. Our Republican colleagues, in their budget,
they ask everybody to take some responsibility for deficit
reduction, except folks at the very top of the income ladder.
There, if you are already getting a tax break or tax benefit
that disproportionately benefits very wealthy people, guess
what? Not only do you get to keep it, but they are going to
double down and give you an extra tax break by lowering the top
rates, which we believe, mathematically, can only be done by
increasing the tax burden on middle income Americans. So
throughout their budget, whether it is seniors who rely and
count on Medicare or Medicaid, whether it is investments in our
kid's education, the choice made in the Republican budget is to
say, ``Let's put the burden on them at the same time we
continue and, in fact, expand tax breaks for folks at the very
top.'' We do not think that that is the way to address our
budget challenges or get our economy fully in gear.
So let me just end where the Chairman ended, which is, we
do now have these budgets that are on the table. We believe
that the president has clearly indicated a willingness to meet
Republicans more than halfway. In fact, as you indicated, Mr.
Chairman, some of the proposals in the president's budget
create--or have not been that well-received by members on our
side because what the president did in his budget was he
included certain provisions the Speaker of the House, Speaker
Boehner, had called for as part of a negotiation with the
president. So whether chained CPI or some of the other
provisions, what the president said in this budget is, ``You
know what? I will put those in there. The Speaker asked for
them. We will put them in there as a sign of our willingness to
meet our Republican colleagues more than halfway.'' And it has
been very disappointing. What has been disappointing is the
response from some of our Republican colleagues not to
recognize that the president made that good-faith effort going
forward.
So I hope this will be the beginning of a conversation, Mr.
Chairman. I do hope that the House Republic leadership will
appoint budget conferees so that we can get going immediately
in a conference between the House and the Senate and continue
to get the input from the president. And Mr. Zients, thank you
again for your very important contributions to that effort.
[The prepared statement of Chris Van Hollen follows:]
Prepared Statement of Hon. Chris Van Hollen, Ranking Member,
Committee on the Budget
Thank you very much, Mr. Chairman. I want to join the Chairman in
thanking you, Mr. Zients, for your service as head of the OMB, Office
of Management and Budget. And as the Chairman said, it's a tough job
and I think you, working with the President, have done it very, very
well.
And you're going to have a lot of opportunity to respond to some of
the claims the Chairman made with respect to your budget. I think the
important thing is it meets two essential goals.
First of all, it focuses on job growth and strengthening the
economy. We've seen more and more Americans getting back to work. But
we also know we've got a lot more work to do to kick this economy in
full gear, and your budget focuses on that.
It also focuses, of course, on reducing our long-term deficits in a
balanced way, asking for shared responsibility.
Democrats in Congress, Republicans in Congress, and now the
President have all now submitted plans. And while I have some concerns
with aspects of the President's plan, the overall thrust of this is
clearly in the right direction for the country and stands in very stark
contrast to the House Republican plan that was put forward.
First of all, the House Republican plan would actually put the
brakes on our economy. We know that the Congressional Budget Office has
said that if we keep the sequester levels of spending in place, we will
see 750,000 fewer jobs at the end of this year alone. And yet the House
Republican budget keeps those levels in place.
I received a letter from a CEO in my district, the head of a very
large biotech company, who said, as a result of the sequester, they
have frozen hiring. In fact, the only place they're hiring right now is
in China--not because of lower wages in China, but because the Chinese
looked at the American model of investment in bioscience and medicine
and said, hey, that is a winning economic strategy.
And so while we're cutting our investments in places like the
National Institutes of Health and investments that are important to
keep our competitive edge--the Republican budget would actually
undermine those important investments. So I applaud the President for
putting forward a budget that focuses on investments in education,
investments in science and research, and investments in the
infrastructure necessary to make sure we're competitive in the 21st
century.
With respect to the President's approach to deficit reduction, he
has, in this budget, done what he said he was going to do. He does it
in a balanced way, asking for shared responsibility. Our Republican
colleagues, in their budget, they ask everybody to take some
responsibility for deficit reduction except folks at the very top of
the income ladder. There, if you're already getting a tax break or tax
benefit that disproportionately benefits very wealthy people, guess
what? Not only do you get to keep it, but they're going to double down
and give you an extra tax break by lowering the top rates--which we
believe, mathematically, can only be done by increasing the tax burden
on middle income Americans.
So throughout their budget--whether it's seniors who rely and count
on Medicare or Medicaid, whether it's investments in our kids'
education--the choice made in the Republican budget is to say let's put
the burden on the them at the same time we continue, and in fact
expand, tax breaks for folks at the very top. We do not think that that
is the way to address our budget challenges or get our economy fully in
gear.
So let me just end where the Chairman ended, which is we do now
have these budgets that are on the table. We believe that the President
has clearly indicated a willingness to meet Republicans more than
halfway.
In fact, as you indicated, Mr. Chairman, some of the proposals in
the President's budget have not been that well received by Members on
our side. Because what the President did in his budget was he included
certain provisions that the Speaker of the House, Speaker Boehner, had
called for as part of a negotiation with the President. So whether it's
chained CPI or some of the other provisions, what the President said in
this budget is, you know what, I'll put those in there. The Speaker
asked for them. We'll put them in there as a sign of our willingness to
meet our Republican colleagues more than halfway.
And it has been very disappointing--what's been disappointing is
the response from some of our Republican colleagues not to recognize
that the President made that good faith effort going forward.
So, I hope this will be the beginning of a conversation. Mr.
Chairman, I do hope that the House Republican leadership will appoint
budget conferees so that we can get going immediately in a conference
between the House and the Senate, and continue to get the input from
the President. And Mr. Zients, thank you, again for your very important
contributions to that effort.
Chairman Ryan. Mr. Zients, the floor is yours.
STATEMENT OF HON. JEFFREY ZIENTS, ACTING DIRECTOR AND DEPUTY
DIRECTOR FOR MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET
Mr. Zients. Thank you, everybody. Pleased to be here today
to discuss the president's 2014 budget. I am going to work off
of a few slides. The main message of the president's budget is
that we can make critical investments to strengthen the middle
class, create jobs, and grow the economy while continuing to
reduce the deficit in a balanced way. We can do both balanced
deficit reduction and jobs investments. On the left-hand side,
in terms of balanced reduction, the budget builds off of the
deficit reduction achieved to date and includes the president's
fiscal cliff compromise offer to Speaker Boehner from December.
Importantly, the budget turns off the sequester by replacing
the sequester with balanced deficit reduction.
At the same time, the budget proposes important jobs
investments to enhance economic growth through skills and
competitiveness, with investments in education and R&D. Each of
these new investments are fully offset. They are fully paid for
and they do not add to the deficit. In deficit reduction over
the last couple of years, Democrats and Republicans have worked
together to cut the deficit by more than $2.5 trillion. Here is
the breakdown of deficit reduction to date. The Budget Control
Act capped discretionary spending, saving over a trillion
dollars. Another $370 billion in savings through 2011
appropriations. The end of last year's fiscal cliff agreement
reduced the deficit by more than $600 billion. Together, this
deficit reduction lowered interest payments, saving an
additional $480 billion. In total, more than $2.5 trillion in
deficit reduction has been achieved.
The president is committed to achieving a total of $4
trillion in deficit reduction. Four trillion is the benchmark
that both Simpson and other independent economists have set in
order to put us on a sustainable fiscal path. The good news is
we are more than halfway to the $4 trillion goal. The
president's budget finishes the job with an additional $1.8
trillion of deficit reduction. The $1.8 trillion is from the
compromised offer the president made to Speaker Boehner during
fiscal cliff negotiations in December. By including this offer
in the budget, the president is showing his willingness to
compromise and make tough choices, and his commitment to
putting the country on a sustainable fiscal path.
Here are the components of the deficit reduction that take
us from the $2.5 trillion achieved to date, to over the $4
trillion target. On the left side, starting with the $2.5
trillion we have already achieved, the first bar, $400 billion
in health savings that strengthened Medicare by squeezing out
waste and incentivizing delivery of high-quality and efficient
care. Next, $200 billion in savings from other mandatory
programs, including reductions to farm subsidies, reforms to
federal retirement contributions, and selling unneeded federal
real estate. Next, $230 billion in savings by indexing annual
inflation adjustments to the chained CPI. Another $200 billion
in discretionary savings beyond the BCA caps. Next, $580
billion in revenues from tax reform by closing loopholes and
reducing benefits for families with more than $250,000 in
income. As a result of these measures, we have $190 billion in
savings from reduced interest payments on the debt. At the same
time, we invest $50 billion in immediate infrastructure to
repair our roads and bridges and create jobs. In total, this
achieves $1.8 trillion in additional deficit reduction over the
next 10 years, bringing total deficit reduction to $4.3
trillion, with more than $2 in spending cuts for every dollar
in revenue.
To be clear, this offer includes difficult cuts the
president would not propose on their own, including CPI, which
the president is only willing to do with protections for the
vulnerable and as part of this balanced plan. However, by
including the compromise offer in the budget, the president is
showing his willingness to make tough choices, and his
commitment to reducing deficits and putting the country on a
sustainable fiscal path.
Here are annual deficits from 2012 through 2023. As you can
see, in 2012, the deficit was 7 percent as a percent of the
economy. The budget phases in deficit reductions to support the
ongoing recovery. And by 2016, the deficit is below 3 percent.
And by 2023, it is below 2 percent, at 1.7 percent. As a result
of this deficit reduction, debt as a percent of our economy is
also on a declining path. With declining deficits and debt, the
president's budget achieves an important milestone of fiscal
sustainability.
The budget reaches that important fiscal milestone while
also investing in the drivers of economic growth. In doing so,
it demonstrates that we do not have to choose between deficit
reduction and economic growth. It shows that we can, and indeed
we must, do both. The country will not prosper if we have
unsustainable deficits. But it also will not prosper if our
infrastructure is crumbling and our workers lack the skills to
compete. Through paid-for initiatives, like pre-pay for all,
job training, and accelerated infrastructure investments, this
budget will enhance our nation's competitiveness. And through
balanced deficit reduction, this budget will enhance confidence
and lay the foundation for more durable economic growth. It is
the right strategy for our economy, for creating jobs, and for
building prosperity.
With that, I would be happy to answer any questions.
[The prepared statement of Jeffrey Zients follows:]
Prepared Statement of Hon. Jeffrey Zients, Acting Director,
Office of Management and Budget
Chairman Ryan, Ranking Member Van Hollen, members of the Committee,
thank you for welcoming me here today, and giving me the opportunity to
present the President's 2014 Budget. It is good to be with you again.
The President's 2014 Budget demonstrates that we can make critical
investments to strengthen the middle class, create jobs, and grow the
economy while reducing the deficit in a balanced way. The Budget
addresses three core questions the President raised in his State of the
Union address: How do we attract more jobs to our shores? How do we
equip our people with the skills needed to do the jobs of the 21st
Century? How do we make sure hard work leads to a decent living? The
Budget addresses these questions as part of a comprehensive plan that
reduces the deficit and puts the Nation on a sound fiscal course.
Every new initiative in this plan is fully paid for, so they do not
add a single dime to the deficit. At the same time, the Budget includes
the President's offer made as a part of the 'fiscal cliff' negotiations
to build on the more than $2.5 trillion in deficit reduction already
enacted with another $1.8 trillion, comprised of additional entitlement
reforms, spending cuts, and tax reform that promotes growth, while
reducing tax benefits for the wealthiest Americans. The Budget would
result in:
$4.3 trillion in total deficit reduction, with over $2 in
spending cuts for every $1 in increased revenue.
Debt as a share of GDP on a downward trajectory by 2016,
reducing it from 78.2 % of GDP in 2014 to 73.0% by 2023.
Deficit under 2% of GDP in the 10-year window, and below
3% of GDP by 2016.
This strategy will build on our country's economic recovery. It is
the right budget and economic plan for this period in our economy.
Since I was last with you, we have continued to make significant
progress in the recovery from the worst financial crisis since the
Great Depression. The economy is now on the mend. We have seen positive
economic growth for 14 consecutive quarters, and 37 months of private
sector job growth. Our businesses have created nearly 6.5 million jobs.
The housing market is recovering. America's auto industry is once again
resurgent. And we have successfully ended the war in Iraq and are
bringing our troops home from Afghanistan.
But as the President has indicated, our work is not done. The
economy is adding jobs, but too many Americans are still unemployed.
Businesses are hiring again, but too many are still struggling to
compete and find workers with the right skills to meet their needs.
Home prices are rising at the fastest pace in six years and
construction is expanding, but too many families with solid credit are
still finding it difficult to buy a home or refinance.
At the same time, we face significant near- and long-term fiscal
challenges. In the near-term, deficits are coming down, but they remain
too high--primarily as a legacy of the recession, and unpaid for
policies enacted over the decade before this President took office.
Over the long-term, although the Affordable Care Act reduced the
deficit and is helping to slow the growth in health care costs, along
with an aging population, rising health costs continue to be one of the
largest threats to our long term fiscal sustainability.
The right prescription to address these challenges is to combine
smart, targeted investments in areas critical for economic growth and
competitiveness, with deficit reduction that will boost confidence and
certainty by putting the nation on a sound long-term fiscal trajectory.
The Budget does just that--offering a plan for deficit reduction that
is phased in to avoid harming the economic recovery, and includes
protections for the most vulnerable. At the same time, it preserves
high priority investments that will enhance economic growth and private
sector job creation.
Let me briefly give an overview of how this Budget invests for
growth, and then how it reduces the deficit in a balanced way.
investing for growth and strengthening the middle class
Making America a Magnet for Jobs
Over the last four years, we have begun the hard work of rebuilding
our Nation's infrastructure, but to compete in the 21st Century economy
and become a magnet for jobs, we must do more. The Budget includes $50
billion for up-front infrastructure investments, including a ``Fix-It-
First'' program that makes an immediate investment to put people to
work as soon as possible on our most urgent repairs. And to make sure
taxpayers do not shoulder the whole burden, the Budget creates a
Rebuild America Partnership to attract private capital to upgrade what
our businesses need most: modern ports to move our goods, modern
pipelines to withstand a storm, and modern schools worthy of our
children.
If we want to make the best products, we must also invest in the
best ideas. That is why the Budget maintains a world-class commitment
to science and research, increasing non-defense research and
development (R&D) investment by 9 percent over 2012 levels.
Furthermore, we are targeting resources to those areas most likely to
directly contribute to the creation of transformational technologies
that can create the businesses and jobs of the future--like Advanced
Manufacturing R&D, where the Budget proposes to increase R&D
investments by over 80%.
No area holds more promise than our investments in American energy.
The Budget continues to advance the President's ``all-of-the-above''
strategy on energy, investing in clean energy research and development;
promoting energy efficiency in our cars, homes, and businesses;
encouraging responsible domestic energy production; and launching new
efforts to combat the threat of climate change.
A top priority is making America a magnet for new jobs and
manufacturing. After shedding jobs for more than 10 years, our
manufacturers have added more than 500,000 jobs over the past three
years. To accelerate this trend, the Budget builds on the success of
the manufacturing innovation institute we created in Youngstown, Ohio
last year, and calls for the creation of a network of up to 15 of these
institutes across the Nation. Each manufacturing innovation institute
will bring together companies, universities and community colleges, and
government to invest in cutting-edge manufacturing technologies and
turn regions around our country into global centers of high-tech jobs.
The Budget also supports efforts the President announced earlier
this year to modernize and improve the efficiency of the Federal
permitting process, cutting through the red tape that has been holding
back even some of the most carefully planned infrastructure projects.
These efforts will help cut timelines in half for infrastructure
projects, while creating new incentives for better outcomes for
communities and the environment.
Educating a Skilled Workforce
All of these initiatives in manufacturing, energy, and
infrastructure will help set the stage for entrepreneurs and small
business owners to expand and create new jobs. But these investments
won't matter unless we also equip our workforce with the education,
skills, and training to fill those jobs.
And that has to start at the earliest possible age. The Budget
includes a proposal that invests in America's future by ensuring that
four-year-olds across the country have access to high-quality preschool
education through a landmark new initiative in partnership with the
States. Research confirms that investments in quality pre-school are
among the highest return in improving educational outcomes and better
preparing our workforce for the demands of the global economy. This
investment in preschool is fully paid for in this Budget by increasing
the tax on tobacco products, which is also an effective measure to
improve health outcomes for our communities.
But it's not just preschool that we need to invest in. We also need
to ensure access to higher education for our country's young people.
Skyrocketing college costs are still pricing too many young people out
of a higher education, or saddling them with unsustainable debt. To
encourage colleges to do their part to keep costs down, the Budget
includes reforms that will ensure affordability and value are
considered in determining which colleges receive certain types of
Federal aid.
To further ensure our educational system is preparing students for
careers in the 21st Century economy, the Budget includes additional
measures to improve and promote science, technology, engineering and
mathematics (STEM) education. This includes a comprehensive
reorganization and consolidation of STEM education programs to make
better use of resources and improve outcomes, and a new STEM Master
Teacher Corps, to leverage the expertise of some of America's best and
brightest teachers in science and mathematics, and to elevate the
teaching of these subjects nationwide.
Making Sure Hard Work Leads to a Decent Living
The Budget also builds on the progress made over the last four
years to expand opportunity for every American and every community
willing to do the work to lift themselves up. The Budget creates new
ladders of opportunity to ensure that hard work leads to a decent
living.
The Budget proposes partnerships with communities to identify
Promise Zones that will help them thrive and rebuild from the
recession. The Promise Zones initiative will revitalize high-poverty
communities across the country by attracting private investment,
improving affordable housing, expanding educational opportunities,
reducing crime, and providing tax incentives for hiring workers and
investing in the Zones.
The Budget makes it easier for the long-term unemployed and youth
who have been hardest hit by the downturn to remain connected to the
workforce and gain new skills with a Pathways Back to Work fund. This
initiative will support summer and year round jobs for low-income
youth, subsidized employment opportunities for unemployed and low
income adults, and other promising strategies designed to lead to
employment.
The Budget supports the President's call to reward hard work by
raising the Federal minimum wage to $9.00 an hour. Raising the minimum
wage would directly boost wages for 15 million workers and would help
our growing economy. Furthermore, the Budget permanently extends
expansions of the Child Tax Credit, the American Opportunity Tax Credit
and the Earned Income Tax Credit.
Economic growth is best sustained from the middle class out.
Everyone who works hard and plays by the rules should have a fair shake
at opportunity, including going to college and getting a well-paying
job to support their family. As the President said in the State of the
Union, ``America is not a place where the chance of birth or
circumstance should decide our destiny. And that's why we need to build
new ladders of opportunity into the middle class for all who are
willing to climb them.''
Keeping America Safe
Finally, we know that economic growth can only be achieved and
sustained if America is safe and secure, both at home and abroad. At
home, the Budget supports the President's initiative to help protect
our children, reduce gun violence, and expand access to mental health
services. To confront threats outside our borders, the Budget ensures
our military remains the finest and best-equipped military force the
world has ever known, even as we wind down more than a decade of war.
Importantly, the Budget upholds our solemn obligation to take care of
our service members and veterans, and to protect our diplomats and
civilians in the field. It keeps faith with our veterans, investing in
world-class care, including mental health care for our wounded
warriors; supporting our military families; and giving our veterans the
benefits, education, and job opportunities that they have earned.
REDUCING THE DEFICIT IN A BALANCED WAY
The Budget does all of these things as part of a comprehensive plan
that reduces the deficit. All of these initiatives and ideas are fully
paid for, to ensure they do not increase the deficit by a single dime.
As a result, we do not have to choose between investing in our economy
and reducing the deficit--we have to do both.
We have already made important progress in reducing the deficit.
Over the past few years, President Obama has worked with Democrats and
Republicans in Congress to cut the deficit by more than $2.5 trillion
through a mix of spending cuts and new revenue from raising income tax
rates on the highest income Americans. This deficit reduction puts us
more than halfway toward the goal of $4 trillion in deficit reduction
that independent economists say is needed to put us on a fiscally
sustainable path.
Now we need to finish the job. That is why the President stands by
the compromise offer he made during ``fiscal cliff'' negotiations this
past December. That offer is still on the table. And this Budget
includes the proposals in that offer. These proposals would achieve
$1.8 trillion in additional balanced deficit reduction over the next 10
years, bringing total deficit reduction to $4.3 trillion, with more
than $2 in spending cuts for every $1 in revenue. The Budget brings
deficits to below 3 percent by 2016, to below 2 percent of GDP by the
end of the budget window, and puts debt on a declining path.
This represents more than enough deficit reduction to replace the
damaging cuts required by the Joint Committee sequestration. We should
reduce the deficit in a balanced, targeted and thoughtful way, not by
making harsh and arbitrary cuts that jeopardize our military readiness,
devastate priorities like education and energy, and cost jobs. As the
President has said, sequestration is not smart policy--it can and
should be replaced.
By including this compromise offer in the Budget, the President is
demonstrating his willingness to make tough choices to find common
ground to further reduce the deficit. This offer includes some
difficult cuts that the President would not propose on their own. But
both sides are going to have to be willing to compromise if we hope to
move the country forward.
Deficit reduction is not an end in and of itself. But reducing the
deficit in a way that protects our core priorities is a critical step
toward ensuring that we have a solid foundation on which to build a
strong economy and a thriving middle class for years to come.
The key elements of the President's compromise offer include:
Tax Reform: $580 billion in additional revenue from tax
reform that closes tax loopholes and reduces tax benefits for those who
need them least.
Health Savings: $400 billion in health savings that build
on the health reform law and strengthen Medicare.
Other Mandatory Savings: $200 billion in savings from
other mandatory programs, such as reductions to farm subsidies and
reforms to Federal retirement contributions.
Discretionary Savings: $200 billion in additional
discretionary savings, with equal amounts from defense and non-defense
programs--that is $200 billion below the Budget Control Act spending
caps that were lowered even further by the American Taxpayer Relief
Act.
Inflation Indexing: $230 billion in savings from switching
to the use of chained-CPI.
Reduced Interest Payments: Almost $200 billion in savings
from reduced interest payments on the debt and other adjustments.
Reforming the Tax Code
First, the Budget proposes pro-growth tax reform that closes
loopholes and addresses deductions and exclusions that allow the
wealthy to pay less in taxes than many middle-class families. The
President believes that today's tax code has become increasingly
complicated and unfair. There is no better time to pursue tax reform
that reduces the deficit, maintains progressivity, simplifies the tax
system, and supports job creation and economic growth.
As a first step towards comprehensive tax reform, the Budget
proposes two measures that would raise $580 billion by broadening the
tax base and reducing tax benefits. First, by limiting the tax rate at
which high-income taxpayers can reduce their tax liability to a maximum
of 28 percent, the President's Budget will reduce the tax benefits for
the top two percent of families to levels closer to what middle-class
families get. Second, by requiring those individuals with incomes over
$1 million to pay no less than 30 percent of their income after
charitable giving in taxes--the so-called Buffet rule--the President's
Budget will further reduce wasteful and inefficient tax expenditures.
The Budget also supports the President's plan for corporate tax
reform. Now more than ever, we cannot afford a tax code burdened with
costly special-interest tax breaks. In an increasingly competitive
global economy, we need to ensure that our tax code contributes to
making the United States an attractive location for entrepreneurship
and business growth. For this reason, the President is calling on the
Congress to immediately begin work on corporate tax reform that will
close loopholes, lower the corporate tax rate, encourage investment
here at home, and not add a dime to the deficit.
Health Savings
Along with an aging population, rising health costs continue to be
one of the largest contributors to the deficit, and any sustainable
fiscal path forward must include further reforms to our country's
health care systems.
The Affordable Care Act (ACA) was a significant step toward
controlling health care spending. The law reduced the deficit by over
$100 billion in the first 10 years and $1 trillion in the 10 years
after that, and it includes some of the best ideas on how to make our
health system more efficient and change payment systems to incentivize
higher quality and lower cost care. One of the most important steps we
can take right now for long-term deficit reduction is to implement the
ACA fully and efficiently. Still, more needs to be done.
The President is proposing to build on the achievements of the
Affordable Care Act by offering additional health savings that will
reduce the deficit by another $400 billion over the next 10 years.
These savings will be primarily achieved through smart reforms that
address long term cost growth, reduce wasteful spending, improve
efficiency, and ask beneficiaries who are able to contribute a little
more.
Specifically, the Budget includes several reforms, encouraging
delivery of high-quality and efficient services by skilled nursing
facilities, long-term care hospitals, inpatient rehabilitation
facilities and home health agencies. We are squeezing out waste by
making sure we get the same rebates for drugs, regardless of whether
people are participating in Medicare or Medicaid. Finally, the Budget
calls for the wealthiest Medicare beneficiaries to cover more of the
costs. We can reform Medicare without breaking the fundamental compact
we have with our nation's seniors. Together, these reforms illustrate
that we can achieve significant savings to improve the long-term fiscal
outlook of our healthcare programs without sacrificing quality care.
Other Mandatory Savings
Third, the Budget includes $200 billion in other mandatory savings,
coming from smart reforms and tough choices in programs outside of
mandatory health care programs. This includes reforms to agriculture
subsidies, Federal employee retirement programs, and disposing of
excess Federal property.
Combined with the economy's continued recovery, over time these
savings will reduce mandatory spending as a share of the economy
outside of the major entitlement programs by 15 percent.
Discretionary Savings
Fourth, the President's plan proposes additional cuts to
discretionary spending without jeopardizing our need to maintain the
investments in education, research and development, clean energy and
infrastructure that are necessary to continue to rebuild our economy in
the short-term and build a foundation for long-term growth. Total
discretionary spending has already been cut by over $1 trillion since
January 2011, and is currently on a path to its lowest level as a share
of the economy since the Eisenhower Administration.
In the interest of reaching bipartisan agreement on a balanced
deficit reduction package, the Budget proposes to lower the
discretionary caps even further, reducing discretionary spending by an
additional $200 billion over the next decade. The proposed cuts are
evenly distributed between defense and non-defense spending, and are
timed to take effect beginning in 2017, after the economy is projected
to have fully recovered.
It is important to note that discretionary spending only represents
about a third of the budget this year and is projected to drop to less
than a quarter of the budget by 2023. While we can work to eliminate
inefficiencies, we cannot put the country on a sustainable path forward
with cuts to discretionary spending alone.
Inflation Indexing
Fifth, in the interest of achieving a bipartisan deficit reduction
agreement, the President is also standing by his compromise offer to
use the chained Consumer Price Index (CPI) to compute cost-of-living
adjustments in major federal programs and the tax code. This is not the
President's preferred approach, but it is an idea that both House
Speaker Boehner and Senate Minority Leader McConnell have pushed for
and that the President is willing to accept. However, he is only
willing to do so in the context of a major fiscal agreement that is
balanced, includes revenue contributing to deficit reduction, and
protects vulnerable populations, as the Budget does.
The switch to chained CPI, like the additional domestic
discretionary spending cuts in the Budget, is a clear example of the
President's willingness to make tough choices in order to reach a
bipartisan agreement. The President has made it clear that he is
willing to make these compromises as part of a deal that calls for
shared sacrifice, and will put the country on a sustainable long-term
fiscal path.
Rooting Out Waste and Inefficiency
In addition to making tough trade-offs to reduce the deficit in a
balanced way, the Budget continues the President's efforts to ensure we
are getting the biggest bang for our buck when it comes to spending
taxpayer dollars. It includes a series of new proposals to root out
waste as well as reform and streamline government for the 21st Century.
In total, the Budget includes 215 cuts, consolidations, and savings
proposals, which are projected to save more than $25 billion in 2014.
These measures include closing a loophole in current law that allows
people to collect full disability benefits and unemployment benefits
that cover the same period of time; major food aid reforms that would
assist up to two million additional people, while reducing mandatory
spending by $500 million over the next decade; and ensuring that the
government pays the lowest price for drugs, regardless of the program
that makes the purchase, saving $123 billion over 10 years.
The Budget also builds on the Administration's successful efforts
to root out wasteful improper payments, which have prevented over $47
billion in payment errors over the past three years. The Budget
dedicates a dependable source of funding to root out fraud and abuse,
producing deficit savings of roughly $40 billion over 11 years.
CONCLUSION
Building on the economic recovery we have seen over the past couple
years, the Budget is the right plan for this moment in our country's
economy. This is the plan it will take to make sure America remains
strong in the years ahead and that we leave behind something better for
future generations.
I look forward to working with both houses of Congress in the
coming months as we work to make the tough decisions needed to both
grow our economy and put our country on a sustainable fiscal course.
Chairman Ryan. Thank you. Let me start with unpacking some
of these claims of deficit reduction to date. I mean, gosh, by
the sound of it, it sounds like, you know what, we are pretty
much done, we do not have to worry about it anymore. You know,
problem solved. But when you measure deficit reduction in a
gross, not net, way, by simply saying, ``Look at all the
deficit reduction that occurred; you cannot neglect the deficit
increases that occurred at the same time.'' So missing from
this computation of $4.3 trillion of achieved deficit reduction
is the stimulus that passed during this same time, $831
billion; the payroll tax holiday, $111 billion; the other
payroll tax holiday, $89 billion; the 24 percent increase in
non-defense appropriations in the first two years, the
president's first term, $576 billion; disaster spending above
the caps, $110 billion; Sandy supplemental, $50 billion; the
debt service that accompanies all that, $300 billion. If you go
with net numbers, it is about $500 billion, generously, of
deficit reduction, not $4.3 trillion. If you take a look at the
numbers in the budget claim $1.4 trillion in deficit reduction
that are being proposed. If you take out the war gimmick, which
we all know is a gimmick, that is $675 billion. If you remove
the extension of the stimulus critics, which are assumed in
this baseline, that is $161 billion. If you remove the Doc Fix
assumed in this baseline unpaid for, that is $249 billion. The
unpaid Pell grants, $28 billion. The debt service that
accompanies this, $175 billion. If you net all of this out, if
you strip out the gimmicks that have been well-worn, well-
established gimmicks, it is about $119 billion of deficit
reduction. And all you have to point to the fact is that this
budget never balances, ever.
And so I understand maybe it polls well to use the word
balance every third word in every sentence when you are
describing fiscal policy, but how is the budget balanced if it
never balances? And I just think we need to be a little more
honest about the true fiscal nature of the situation and the
problems we have. That is just a statement.
I want to ask you a couple technical questions because I
also want to be kind to all the members here on time. The Doc
Fix, for instance, in the past we have been paying for the Doc
Fix. We have done this on a bipartisan basis. Why is it that in
this budget, you assume the Doc Fix is fully funded and not
paid for?
Mr. Zients. Well, we have a balanced deficit reduction of
$1.8 trillion, incremental to what we have achieved to date. We
believe that it is honest budgeting to acknowledge that we are
not going to cut doctors by 30 percent. We fix it year over
year over year, and therefore it should be in the adjusted
baseline.
Chairman Ryan. So let me get to there. So you are saying
irrespective of the fact of the fact that we paid for this by
cutting spending elsewhere in the past, you are saying we will
not pay for it anymore.
Mr. Zients. Overall, the president's budget saves $400
billion in health care costs, $370 billion of Medicare, $200
billion in other mandatory, $200 billion in discretionary. The
Doc Fix is something that happens year over year, so let's be
honest in our baselines, and acknowledge that it happens every
year and do deficit reduction accordingly. I think, you know,
you threw around a lot of numbers in that opening statement. It
is hard to track.
Chairman Ryan. I am sure you have seen them.
Mr. Zients. Yeah, they are all over the place. So I think
at the end of the day, we have to look at the bottom line, the
same way when I was in the private sector I looked at the
bottom line. The bottom line of the president's budget is that
deficits are a declining path, debt is on a declining path, we
are below 3 percent of GDP in 2016, and we are below 2 percent
at 1.7 percent of GDP, our deficits are, by 2023. I worry that
we end up spending a lot of time with baselines, and what is in
baselines and what is not in baselines. It is best to go to the
bottom line.
Chairman Ryan. Public debt, in the beginning of the budget
window and at the end of the budget window, are north of 70
percent. That is not much of accomplishment over 10 years.
Mr. Zients. Debt is on a declining path.
Chairman Ryan. We know that that is organic to the
baseline. We know that that is happening if did nothing,
irrespective of this budget.
Mr. Zients. It is an important benchmark. We need to have
balanced deficit reduction. We also cannot think of deficit
reduction alone as an economic plan.
Chairman Ryan. Why do we start the deficit reduction in
2020? Why not start now?
Mr. Zients. Deficit reduction does not start in 2020.
Chairman Ryan. The deficit reduction policies proposed in
this budget start in 2020.
Mr. Zients. No, there is deficit reduction well in advance
of 2020.
Chairman Ryan. So let me ask you this, then.
Mr. Zients. And that is how we achieve deficits on a
declining path. But I want to make the point that deficit
reduction is important. It is an important component of an
economic plan. But it, in and of itself, is not an economic
plan. We have to put people back to work, we have to increase
our global competitiveness, we have to invest in R&D, we have
to invest in education. The most important way to achieve
deficit reduction beyond the policies that we are talking about
here today is economic growth. I think we would all agree with
that.
Chairman Ryan. So, a case in point: If we did not pass this
budget, the deficit would drop faster. So when I take a look at
war spending, the budget assumes we are going to spending at
these high inflated levels with the kind of troop count we have
in Afghanistan right now, in perpetuity, and if you have a
draw-down, then you count that as savings, $675 billion. Now,
we all agree that we have a withdrawal occurring in 2014. That
is stated policy. It is a bipartisan agreement. But we are
going to count as a spending cut the idea that the baseline
assumes we would be at full troop strength well beyond 2014.
And if you are going to have a withdrawal in 2014, that all of
a sudden counts as a spending cut of $675 billon? In other
words, not spending money that was never going to be spent in
the first place is now counted as a spending cut?
Mr. Zients. Well, let me review this. CBO has, in its
baseline, continued spending in OCO, the Overseas Contingency
Operation. We actually cap the spending, which is important
because it closes the back door for further discretionary
spending. Furthermore, the savings that you are talking about
from OCO versus CBO's baseline, the official scorekeeper's
baseline, are not counted in the $2.5 trillion that I
mentioned, and they are not counted in the $1.8 trillion that I
mentioned.
Chairman Ryan. It is in your $1.8, and I do not know how
you can explain that it is not.
Mr. Zients. If we want to go back to the slide, the $1.8 is
$400 billion of health care spending cuts, $200 billion of
other mandatory, $200 billion of discretionary, $230 billion
from CPI, $580 billion from tax reform, and the resulting
interest savings. That does not include any OCO.
Chairman Ryan. You are double counting. You are using it to
offset other spending.
Mr. Zients. The only place we use OCO is because of the
president's policies and the war in Iraq, draw-down and end in
Afghanistan, we are going to take some of that money, a small
portion of it, and invest in infrastructure in this country.
That is not part of the $1.8 trillion deficit reduction.
Chairman Ryan. Therein lies the issue here, which is we are
taking spending that will never be spent, and we are using it
as if it is free money to spend. That is the problem with
budgeting. Look, CBO does not have a choice. The law requires
that they have a baseline that reflects current law, and so
they have parameters placed upon them that allows such a
gimmick to proliferate. The point I would make is if all this
grand deficit reduction were real, then why does your budget
never balance? I mean, these are the things. Why are we adding
$8.2 trillion to the debt in this budget? We can round and
round. My time is running out, and I am putting myself on a
clock. I want to ask you a question about IPAB. We talked about
this on the phone the other day, but on table S-9, Page 197 in
your budget, you have IPAB beginning to accrue savings in 2021,
2023, for a total of about $4.1 billion. But you lower the
growth rate to GDP 0.5, but your baseline claims that cost
growth is within that parameter. So this is a sincere question:
Where does the 4.1 come from? How does the IPAB mandate a GDP
0.5 in this budget get that savings if your assumed Medicare
cost growth is below that?
Mr. Zients. Well, Medicare cost growth, to your point, has
come in quite a bit, and we believe that the Affordable Care
Act is helping to drive that. The way the IPAB works is it is
not just at a total level, there are components. Put $4 billion
in context. You are talking about a fraction of 1 percent.
Chairman Ryan. No, I understand that.
Mr. Zients. So we believe that through continued progress
in reducing unnecessary care, promoting more cost-effective
care through accountable care organizations and other
innovations, that Medicare costs will continue to come in. IPAB
serves an important backstop function, but with health care
costs coming in the way they are, we do not anticipate that
backstop being necessary.
Chairman Ryan. Okay, so that is where I am trying to get.
So that is the discretionary exercise of IPAB's authority.
Mr. Zients. No, it is set in law. It is GDP plus 0.5.
Chairman Ryan. Right. So it is set in law at GDP 0.5. They
have to make the spending come within that cap. You are saying
that the spending never exceeds that cap, yet they are showing
savings to the budget.
Mr. Zients. I am saying at the end of the window it does by
a very small percent. So we would assume, as we have seen
across the last couple years, that health care spending will
continue to come in, and that the backstop will not be
necessary. To be clear, if it ever is, any recommendations to
the IPAB comes to Congress for approval.
Chairman Ryan. No, I understand the process.
Mr. Zients. And so ultimately, IPAB is there to protect
seniors and ensure that we do not have excessive costs.
Chairman Ryan. Okay, but I just want to be clear. I am not
trying to put you in a trap. You are saying that by 2021, the
cap will be hit, breached for an ever-so-small amount in IPAB's
mandate triggers, and they have to start producing
recommendations.
Mr. Zients. Again, yes, that is the case as currently
projected. I think we have seen significant progress in
containing health care costs across the last couple of years.
We anticipate further progress, and therefore, that will most
likely be unnecessary.
Chairman Ryan. Okay. Thank you. Mr. Van Hollen.
Mr. Van Hollen. Thank you, Mr. Chairman. And Mr. Zients, I
am glad that in response to the Chairman's questions on deficit
reduction, and how much we have achieved over the last couple
of years and in this budget, you took us directly to the bottom
line, which is what is the deficit as a percent of GDP, and
whether debt as a percent of GDP is rising or declining,
because is it not the case that when you use that measure, you
standardize all the budgets, right? You wash out people's
different baselines when you use that bottom line, as you said.
Mr. Zients. Absolutely. Well put.
Mr. Van Hollen. And as you pointed out, the president's
budget at the end of the 10-year window reduces the deficit's
percent of GDP to 1.7 percent, is that right?
Mr. Zients. Yes.
Mr. Van Hollen. I would just point out that in the House
Republican budget last year, at the end of their 10-year
window, they reduced deficit percent of GDP to 1.2 percent, so
we are talking about half a percent of GDP in the 10th year,
and the president's budget this year compared to the House
Republican budget last year. I would also point out that if you
look at the Congressional Budget Office baseline, after 10
years, the ratio of debt as a percent of GDP is 77 percent. If
I recall you saying, Mr. Zients, your calculation, and,
obviously, CBO and OMB have somewhat different assumptions, but
what was the debt-to-GDP ratio at the end of the 10-year
window?
Mr. Zients. I believe it is 73 percent.
Mr. Van Hollen. Seventy-three percent, lower than the CBO
baseline and declining; is that the case, Mr. Zients?
Mr. Zients. Yes, declining each and every year.
Mr. Van Hollen. All right.
Mr. Zients. Starting in 2016, right.
Mr. Van Hollen. I mean, so, the Chairman refers to these
kind of gimmicks and different baselines, but the measures we
are talking about now wash out all those issues. I would submit
that the biggest whopper of a gimmick in this year's budget is
the Republican claim that their budget actually balances in 10
years, and their claim that they also repeal ObamaCare. I would
like to put up a chart, if I could.
So, this is in the 10th year of the Republican budget,
House Republican budget. If you look, it claims to be $7
billion in surplus. That budget also claims to repeal ObamaCare
in its entirety. The problem with that is that ObamaCare
achieved $715 billion in Medicare savings by ending
overpayments to insurance companies, by rationalizing the
system, and, in fact, the Republican budget includes all those
savings in their budget. And that represents the red portion of
that chart, the Medicare savings that are incorporated in the
Republican budget. The Republican budget also assumes the
amount of revenue that will come in through the tax provisions
in ObamaCare, approximately a trillion dollars, so that is the
blue portion. So, you will see that if they really were going
to get rid of ObamaCare, which they claim to do in their
budget, their budget would not come close to balance in year
number 10. So that is the whopper of the budget gimmick this
year.
Now, there is another big difference in the Republican
budget and in the president's budget when it comes to how we
deal with tax issues. And what I want to ask you, Mr. Zients,
is you have pointed out, the president's pointed out in this
budget, that very wealthy individuals continue to
disproportionately benefit from deductions in the tax code. And
so you, in this budget, propose to ask high income people to
take a little less as part of a balanced approach, whereas the
Republican budget, as you know, says they are going to drop
that top rate all the way from 39 percent to 25 percent, which
will provide a huge windfall to the very wealthiest people in
this country. And mathematically, if you also meet the criteria
they set out, which is it does not increase the deficit, it
means middle income taxpayers are going to have to pay more in
order to finance tax breaks for the wealthy. So if you could
just take a little bit of time to explain the very different
approaches the president takes to tax reform issues in this
budget compared to the House Republican budget.
Mr. Zients. So the president, in his budget, raises $580
billion from tax reform. So there is no raising of rates. This
is all through tax reform, all from families with income more
than $250,000. The president believes we should do tax reform,
individual tax reform and corporate tax reform. At the same
time, he puts forward two specific policies that raise that
$580 billion. A limit on deductions, again, for families with
more than $250,000 of income of 28 percent. So their deductions
are at the level of the highest of the middle income families.
And secondly, through the Buffett Rule, which says that anyone
with over a million dollars of income should pay a minimum of
30 percent. So the president raises $580 billion in tax reform.
No families are impacted with less than $250,000 of income.
This is done through the two specific policies, the 28 percent
limit on deductions and the Buffett Rule. And, at the same
time, the president believes there is an opportunity to do tax
reform to make the tax code simpler, more fair, to maintain
progressivity, and to help the middle class.
Mr. Van Hollen. And I do not know, Mr. Zients, if you had
an opportunity to look at some of the analyses that have been
done of the House Republican budget approach with respect to
the tax piece. So where they would drop the top rate all the
way down to 25 percent, have you seen any plausible scenario
where you can do that in a deficit-neutral manner without
increasing the tax burden on middle income families?
Mr. Zients. So my understanding is that in order to go to
25 percent for the high income folks, it is a $5.7 trillion tax
break. And you either have to add to the deficit, which is what
we are trying to improve here, not make worse, or you would
have to increase taxes on middle class Americans by thousands
of dollars. The math just does not work any other way.
Mr. Van Hollen. All right.
Mr. Zients. It is either adding to the deficit, or middle
class families have to pay higher taxes. Both of those policies
are obviously unacceptable for the president. The president
wants no tax increases for families less than $250,000, and
wants to raise $580 billion as part of the balanced deficit
reduction package.
Mr. Van Hollen. Well, thank you. So just to go to the
bottom line on that, what that means is that either the
Republican budget would not be in balance if they actually did
what they say they want to do with respect to tax rates and tax
policies, in which case it would not balance in 10 years, even
with the super-gimmick of continuing to include ObamaCare when
they say they are not, or you would be raising taxes on middle
income families. And, as you indicated, that is something that
we also oppose and did so in our budget.
Let me just conclude by asking you to talk about the $50
billion infrastructure investment that is contained in the
compromise proposal the president has put forward. You know, it
used to be that infrastructure investments for our country were
a bipartisan issue, that there was bipartisan unity behind the
need to make sure this country is number one by making sure
that we have the infrastructure necessary to support
entrepreneurship and the private sector lifeline is the
economy.
Mr. Zients. Well, I will tell you, in my job I have an
opportunity to spend time with lots of outside groups,
including CEOs of small, medium, large businesses,
entrepreneurs, and as anyone who is working in the economy
would agree, that investing in our infrastructure is key for
our global competitiveness, short-term, medium-term, long-term,
and the great opportunity we have right now is that we can put
people back to work at the same time, construction workers and
other people back to work. So it is really a win for our global
competitiveness; short, medium, and long-term, it also helps in
terms of putting people back to work on worthy projects, so the
$50 billion investment in infrastructure is money extremely
well spent.
Mr. Price [presiding]. Thank you so much. I, too, want to
welcome you and thank you for your service. The Chairman and
the Ranking Member have a previous commitment and they are
going to be absent for a while, so I am honored to be able to
assist in his absence. I want to commend the president for
bringing a budget that, however, was 65 days late. The law of
the land states that the president presents a budget to
Congress on the first Monday in February, and the president,
his administration, did not do so. One would have thought that
had he taken that much time, he would have presented a budget
that actually balanced, because he had the extra time to do so.
Sadly, that is not what the budget does. It increases
taxes, increases spending, same old kind of thing that we have
seen before; increases debt, increases dependence, sadly, on
the federal government, grows government and does not grow the
economy. And worst of all, from our perspective, is that it
does not really solve the challenges that need to be solved to
get this economy growing again and get jobs being created. If
we can bring up the first slide there. This is gross debt as a
percent of GDP in the president's proposal, the president's
budget. Always note, always staying above the 90 percent level
throughout the entire budget window, the 10-year budget window.
Now, you will recall, I know, from the Reinhart study that
unless one gets below that 90 percent level, and many of us
believe it ought to be lower than that, but unless one gets
below that, then economies do not turn around. And sadly,
again, the president's budget proposal simply does not address
the challenges that we face.
There is all sorts of other misinformation that I would
like to have time to correct, but I want to ask a couple
particular questions. First, I assume that the president would
like to see his budget passed by Congress, is that accurate?
Mr. Zients. Yes. Do I have an opportunity to comment on the
chart?
Mr. Price. At some point, I am sure that you will.
Mr. Zients. Okay.
Mr. Price. That being the case, my time is very limited,
that being the case, would the Administration be willing to
submit in the form of a budget resolution the president's
budget?
Mr. Zients. I think that, right now, we have heard from all
of you and we believe that you should return to regular order.
And it sounds like from the opening comments like there is some
progress in doing so, so I would defer to you, and regular
order is the way to proceed here.
Mr. Price. The reason I ask is because in the past, we have
attempted to allow the public to see the level of support for
the president's budget, and have been accused of not writing it
in the way that the president's budget would have been written.
So we would love to see a budget resolution from the
Administration. We would like to be able to have a vote on it
in the House of Representatives.
Mr. Zients. Again, we are respectful of what we have heard
from all of you, which is return to regular order.
Mr. Price. We would love to have that be part of our
regular order. The president has said oftentimes that he is
meeting Republicans more than halfway. In fact, the Ranking
Member said that just this morning. The president's budget
increases debt significantly; we move it in the opposite
direction. The president's budget increases the deficit
significantly off current law; we move it in the opposite
direction to balance within a 10-year period of time. The
president's budget increases taxes; we do not increase taxes.
That is hardly meeting Republicans halfway. So, as the Chairman
said, it is wonderful rhetoric, but it simply is not true, is
it?
Mr. Zients. Well, by putting forward the compromise offer,
which includes $1.8 trillion of deficit reduction, includes
chained CPI, which is something the president would not do on
his own; this is directly responsive to Speaker Boehner's
request and Leader McConnell's request. The president is
willing to do that as part of a balanced deficit reduction deal
as long as we have those conditions that I mentioned earlier,
protections for the vulnerable.
Mr. Price. This is an important point.
Mr. Zients. But that is absolutely critical that we
understand that that $1.8 trillion is a compromised offer.
Mr. Price. This is an important point, Mr. Zients, because
chained CPI is not what we would select as a solution for the
challenges that we face. It is the president's selection of
what he thinks we would like.
Mr. Zients. It is something that both Speaker Boehner and
Leader McConnell have asked for several times. They have also
asked, and you have asked, for Medicare age to be raised to 67
from 65. That is an example of something the president is not
willing to do.
Mr. Price. Let me talk in my last 30 seconds, if I may,
about Medicare, because your budget proposes $374 billion in
gross reductions in Medicare spending, $307 billion of that is
further cuts to providers. How low do you think that this
Administration can cut payment to physicians and still have
them see patients?
Mr. Zients. Well, there are opportunities to make our care
more efficient. There are opportunities to incent providers to
not have readmissions. There are opportunities to bundle
payments to align incentives. There are opportunities to make
sure that we get the same prices on drugs in Medicare that we
get in Medicaid. So there are opportunities to make our system
more efficient, and we should be taking advantage of those
opportunities to maintain Medicare as we know it, not turn it
into a voucher system.
Mr. Price. My time is expired. But our proposal does not do
that. In fact, it provides greater choices for patients. I now
am pleased to recognize the gentlelady from Pennsylvania for
five minutes.
Ms. Schwartz. Thank you, and I appreciate the opportunity
to follow-up on some of what was said. I do want to first say
that I appreciate that the president's budget, unlike the
Republican budget, does present a balanced approach and does
seek that common ground, some credit for that. It certainly is
moving towards reducing the federal deficit, and it does make
important investments in strengthening this economy and moving
towards economic growth.
Specifically, I want to ask a different question. I do want
to acknowledge the language in the budget that both repeals the
SGR and acknowledges that we are not going to cut physicians
under Medicare. It is extremely important for us to finally get
that done this year, and given that there is bipartisan
interest in doing that, we should do it. This is not a point of
disagreement, it is a point of agreement, so we should do that.
I do appreciate the additional language on moving towards a new
payment system, language I have written, and I appreciate that
much of it has been picked up in the budget, and some language
saying we should move to an improved system of paying
physicians in a way that is flexible for them, but also does
demand greater quality, improved outcomes, and cost savings,
the right way to do physician payments. And, again, I believe
we have some bipartisan support on that as well. I would like
to see that done also.
I did want to highlight one particular aspect of the budget
and the recognition of the investment in innovation and
technology and research. The president has proposed a small
increase in NIH funding, and I appreciate that. We now have a
request of $31.3 billion in NIH funding. Of course, as you
know, as a result of sequester, we are seeing quite a cut in
scientific research in this country. NIH in particular fuels
this growth of basic research funding that comes really,
basically, from the government, from NIH, and not only does
important medical research, but really is the beginning of the
pipeline for new devices, new therapeutics, biotech, the
industry's manufacturing and production of those very important
lifesaving medicines and treatments, and that is extremely
important to our economy.
From southeastern Pennsylvania, it is absolutely critical.
Many of our research institutions, academic medical centers are
seeing a dramatic cut, millions of dollars this year alone.
They are laying off scientists. They are not hiring new
scientists. They are discouraging those young scientists who
might choose to go on to create those, not just new lifesaving
medications and treatments, but that economy that is such a
driver, certainly in Pennsylvania; it certainly is in many
places across this country. You are talking about really tens
of thousands of scientists and all of those who work with them,
and how important that is. The sequester matters. Those cuts
really are going to hurt not just scientific research, but,
again, the economic growth in the future years that we may not
ever be able to regain if we do not fix it.
I have introduced legislation, and I tried in the Budget
Committee to reinstate $3 billion, which is essentially the 8
to 10 percent cut that NIH will see this year, and to reinstate
that by repealing the tax provision on corporate jets. It seems
like a good tradeoff by just your choices. And that special
treatment of corporate jets, and use those dollars for medical
research. So I want to tell you that I am working on that, and
I am hoping we can get something done this year. But I wanted
to just take a bit of time left to really talk about how
important those dollars are to ongoing, consistent support for
basic scientific research in this country, particular in the
medical sciences.
Mr. Zients. I could not agree more. And the president's
budget on the domestic side increases R&D by 9 percent,
consistent with the logic run you just did, so very important
that we invest in R&D. Let me step back because you spotlighted
a specific problem with the sequester.
The sequester was never intended to be implemented. It was
meant to be a forcing function for balanced deficit reduction.
Unfortunately, we find ourselves in a period where we are
implementing a policy that was never intended to be
implemented. And the consequences are negative throughout the
government, throughout the economy, and the American people are
feeling this every day. It will reduce our GDP by a half to a
full percent this year. It will cost us hundreds of thousands
of jobs. It is impacting research, as you said, and to
lifesaving breakthroughs, potentially at NIH. It is impacting
meals for seniors. It is impacting defense contractors. It is
across the economy. It is costing us hundreds of thousands of
jobs.
Ms. Schwartz. Yeah.
Mr. Zients. Hundreds of thousands. It is very important
that we replace the sequester, and the president's budget does
that with balanced deficit reduction, as soon as possible.
These impacts in areas like R&D and on the American people are
just unacceptable.
Ms. Schwartz. Well, I appreciate that, and I appreciate the
fact that the president's budget creates, I hope, the dialogue
that we have to have, the Republican budget is one alternative
passed here. The Democratic alternative that we put forward is
another way to do it. This has got to be a serious
conversation, otherwise the economy is going to get hurt, and
so are real people. Thank you.
Mr. Price. Gentlelady, time has expired. Recognize the
gentleman from California, Mr. Campbell, for five minutes.
Mr. Campbell. Thank you, Mr. Chairman. Mr. Zients, does the
president believe that deficits matter?
Mr. Zients. Yes. The deficits do matter, and putting the
country on a sustainable fiscal course is an important
component of an economic plan, it is not an economic plan in
and of itself.
Mr. Campbell. Are deficits a bad thing?
Mr. Zients. Deficits are not a bad thing in the abstract.
Deficits need to be under control. Deficits need to be coming
in. The president's plan has deficits going down each year.
Mr. Campbell. But, Mr. Zients, the president's plan has
deficits continuing forever, is that correct, even under your
numbers. And, by the way, I think your numbers are garbage. I
mean, I will use a rather strong term, and as a CPA looking at
some of this stuff. But throughout this conversation, in the
next four minutes, I am going to accept that your numbers are
correct. And under your own numbers, the deficits continue
forever, do they not?
Mr. Zients. We are focused on the 10-year window.
Mr. Campbell. Okay.
Mr. Zients. I think going beyond 10 years is difficult.
Mr. Campbell. Okay, the deficits continue throughout the
10-year window, do they not?
Mr. Zients. Deficits are on a declining path, as is debt.
That is the right deficit path for this point that we are in
the economy where we also have to be focused on getting people
back to work, investing in infrastructure, investing in R&D.
Mr. Campbell. Mr. Zients. Mr. Zients, the deficits continue
at roughly half a trillion or higher throughout the 10-year
window. Did I say something wrong? Did I say something wrong?
They do continue at half a trillion or higher, even under your
numbers, throughout the 10-year window.
Mr. Zients. Yeah, I would like to just make the point that
I think the right way to think about deficits is as a percent
of our economy, and our deficits as a percent of our economy
come down quite a bit across this 10-year window.
Mr. Campbell. So we do not have to make them go away.
Mr. Zients. This is consistent with Bowles/Simpson and
other groups that have looked at this. They have deficits on a
declining path and debt on a declining path. The president's
plan achieves that while also investing in our economy,
creating jobs, putting people back to work.
Mr. Campbell. Mr. Zients, it is my time. They are half a
trillion or more throughout the 10-year window. Anything shows
they continue forever. Obviously, the president does not
believe that we need to get to a balanced budget, does he? We
do not need to get to balance, do we? In the president's
opinion.
Mr. Zients. The president believes that we have to put the
country on a sustainable fiscal path.
Mr. Campbell. Which he thinks does not have to be balancing
a budget.
Mr. Zients. At the same time, even more important, is
putting people back to work and getting our economy growing at
its full potential. If you bear with me for one second, in the
1990s----
Mr. Campbell. Let me get. I am sorry, I want to get to a
couple other things. So, on the entitlements, now you mentioned
the only change, I believe, really to any of the entitlement
programs in here, are the ones that you mention the president
put in that he really does not particularly like but he put in.
So, therefore, the president believes that Social Security,
Medicare, and Medicaid are on a sustainable path and they do
not need to be reformed substantially, that they are not headed
towards bankruptcy like the vast majority of analysts,
economists on both the left and the right say the president
does not believe that. Is that correct?
Mr. Zients. Well, I think Social Security is not part of
our immediate fiscal issue. Social Security is solvent through
2033. The president has put forth principles for Social
Security reform. But let's be clear that that is not part of
our immediate deficit set of issues.
Mr. Campbell. Principles, but they are not in this budget.
They are not in this budget.
Mr. Zients. On Medicare, there is $400 billion of health
savings, $370 billion in Medicare savings. That is the first
decade. In the second decade, there is more than a trillion
dollars of savings. That is significant reform to Medicare to
make it sustainable, but also to keep Medicare as we know it so
that we are honoring our compact with our seniors. We are not
turning it into a voucher program, and we are not shifting
costs to seniors.
Mr. Campbell. When you look at the cost of Medicare over
that period, that even with those numbers, which I do not
agree, I do not think anybody is going to claim that that is
going to get on a sustainable path, and in no way, shape, or
form will that bring the taxes in line with the costs. One
final question for you, really quickly, can people who make
under $250,000 a year legally buy cigarettes?
Mr. Zients. Yes.
Mr. Campbell. Then you have a cigarette tax in here so you
actually have a tax on people who make under $250,000 a year if
they choose to smoke, do you not?
Mr. Zients. People make a choice as to whether or not to
smoke.
Mr. Campbell. People make a choice to make income, and they
get taxed on it. People make a choice to own a home and they
get taxed on it.
Mr. Zients. This has significant benefits for the middle
class in terms of discouraging smoking.
Mr. Campbell. Okay. Well, then, tell me this. Is this
intended to raise revenue or to stop people from smoking,
because it cannot do both.
Mr. Zients. Yes, it can.
Mr. Campbell. And you have the revenue raised in here,
which indicates that you do not expect it to have anybody stop
smoking. It cannot do both.
Mr. Zients. I disagree with that premise. We can have this
many people smoking and discourage new people from smoking.
Mr. Price. Gentleman's time has expired.
Mr. Zients. Encourage some people to quit. That brings down
the number of smokers, and, at the same time, those who
continue to smoke will pay a tax.
Mr. Price. Gentleman's time has expired. Gentleman from
Ohio, Mr. Ryan, for five minutes.
Mr. Ryan of Ohio. Thank the gentleman, and thank Mr. Zients
for your testimony here. I wish some of our colleagues on the
other side were this excited when we were putting two wars on a
credit card and having a prescription drug bill that was not
paid for. I do not remember this level of excitement about
deficit reduction and about balancing our budget. So, Mr.
Zients, would you say that the Republican budget is an
austerity budget? Deep, the deep cuts?
Mr. Zients. Very deep cuts. We have been talking a little
bit about the sequester, just to benchmark. On the domestic
side, the Republican budget cuts domestic programs by 20
percent. That is three times deeper than the sequester.
Mr. Ryan of Ohio. Okay. So we are in agreement, it is an
austerity budget. I think most people would say that. I think
probably many on the other side would say that. I know you are
working on the American budget full time. What are the
austerity budgets doing in Europe right now? How are they
playing out?
Mr. Zients. You are taking me beyond my area of focus, but
I think it is clear that the austerity budgets are not
performing well. We believe it is important to have responsible
deficit reduction phase in across time, achieve the kind of
results that we have talked about, and, at the same time,
invest in jobs, invest in infrastructure, and that is the right
way to grow our economy and put people back to work.
Mr. Ryan of Ohio. I know you mentioned the research and
development, and some of these public, private partnerships. My
district has benefitted from the Innovation Institute for
Additive Manufacturing in downtown Youngstown, Ohio. And it is
a great partnership of public money from defense, energy,
commerce, as well as private sector money from companies like
Boeing and Lockheed to help spur innovation and additive
manufacturing. How does this budget continue to try to promote
initiatives like that, and the 15 other institutes that the
president wants to get up and running, and other initiatives
like that that will lead to economic growth in older industrial
areas like mine?
Mr. Zients. Now, I think the Youngstown is a great example,
and building off of that, the budget proposes to do 15 more at
a cost of about a billion dollars. But, again, that investment
is directly offset. So I think we all would agree that those
types of investments are good for the economy. We have created
500,000 or so manufacturing jobs across the last few years. We
need to create more, bring more jobs home. And each of these
investments are directly offset so they do not add a dime to
the deficit.
Mr. Ryan of Ohio [affirmative]. And investments in National
Science Foundation and NIH, what do those look like in this
budget?
Mr. Zients. Well, those are on the discretionary side, so
they all fit under the BCA cap. But the president has
prioritized investment in R&D, and domestic R&D is up 9 percent
under the president's budget. So, even with the tight
discretionary caps, the president has prioritized R&D, and
there is a 9 percent increase.
Mr. Ryan of Ohio. And we are very thankful for that. The
real question is, what is the roadmap for America in the
future? And part of this roadmap needs to include the
investments that are in sectors of the economy that are going
to blossom in the next decade or two. We do not always know
what those are, and I think when you say we are going to
balance the budget in 10 years and somehow that is going to
just turn the economy around, without looking at the history of
our country and the big investments that we have always made,
whether it was infrastructure, the space program, National
Science Foundation, National Institutes of Health, investments
in education, community colleges, Pell grants, student loans,
bringing those rates down, putting more money in people's
pockets, this is a recipe that has been very successful in the
United States.
And although I do not agree with everything that is in the
president's budget, and we will have plenty of time to discuss
what those issues are, I want to say thank you for being, in my
estimation, a voice of reason, and having a vision for what
American needs to be like in the next decade. We cannot cut our
way to prosperity, and we have seen, as I mentioned earlier, we
have seen a lot of our friends on the other side, get very
excited, and the first question from my one friend from
California was, do deficits matter? If Dick Cheney was sitting
in your seat, he would have had a different answer than you.
Dick Cheney said deficits do not matter. And that was the
prevailing wisdom coming out of the Republican Party for the
first eight years of the new decade. So we will press you on
the issues that we do not agree with, but I want to say thank
you for making these long-term investments that will position
the United States to be competitive in an increasingly
competitive global economy.
Mr. Price. Gentleman's time has expired. Thank you, the
gentleman's time is expired. We would also suggest that you
cannot tax and borrow your way to prosperity. Gentleman from
California, Mr. Calvert, for five minutes.
Mr. Calvert. Thank you, Mr. Chairman, and thank you
Director Zients, for testifying today. We certainly appreciate
your insight. I want to bring a little perspective to this
debate. Now, we are talking about some of the past. It may not
seem like it, but Republican controlled a House and a
Democratic president, in fact, they worked together to meet the
complex challenges before us. President Clinton worked with
Speaker Gingrich and the House Republicans in the late '90s to
enact balanced budgets. We all know President Clinton raised
taxes substantially when he first came into office, but in the
final six years, he joined the Congress to address the spending
side of the ledger, and that is how we balanced the budget.
That is how we produced a surplus.
However, President Obama continues to be consumed, in my
opinion, by raising taxes. He refuses to address spending. Let
us keep in mind he has already pushed through a $1 trillion in
taxes will be phased in over the implementation of ObamaCare.
And another $600 billion from the recent income tax hike, which
was the largest tax increase, in real terms, in 65 years. The
president's 2014 budget increases taxes by an additional $1.1
trillion to fuel spending. That is enough. The president got
his higher taxes. They are now off the table. Now, we need to
focus on the spending side.
Take into consideration the average spending per capita
during the Clinton Administration was $6,809, excluding defense
spending. By contrasting, spending per capita during Obama's
tenure, when adjusted for inflation, and excluding defense, two
wars, and the stimulus, has been $9,089. That is a 33.4 percent
increase. With 315 million Americans, that is $630 billion more
in spending each year. Now many talk fondly about returning to
the Clinton-era tax policies, yet, with the recent tax hike, we
need to talk now about returning to the Clinton spending
levels. The reform of our automatic pilot spending programs,
further spending restraints, which would enable us to eliminate
yearly deficits and address our long-term debt.
Of course, today's population is older today than it was in
the '90s, so we spend more on Medicare and Social Security, but
the bigger issue is that we cannot sustain the current growth
projections of these programs. I think everybody agrees to
that. This puts us even more pressure on us to reform
retirement programs for current beneficiaries, and to ensure
that they exist for future generations. We can also use the
lessons learned from working together in the '90s on welfare
reform, and to apply them to other programs. Prior to leaving
office, president Clinton lauded the benefits of balancing the
budget. As stated in a report to Congress, ``By reversing the
earlier trend of fiscal responsibility, using conservative
economic estimates, balancing the budget, and producing an
historic surplus, we have helped restore our national spirit
and produce the resource to help opportunity and prosperity
reach all corners of the nation.'' On the other hand, President
Obama recently stated in an interview, ``My goal is not to
chase a balanced budget just for the sake of balance.''
Director, in the 1990s, it was such a golden era, why can't we
return to the Clinton-era spending levels? You agree with
President Obama that a balanced budget is not a worthwhile
goal?
Mr. Zients. So let us actually go back to the 1990s. Let us
go back to the early 1990s, when we had 4 percent GDP projected
deficits, according to CBO. We did balance deficit reduction.
The projection after that was 2.5 percent, not that different
than where we are today, where, at the end of this window, we
are at 1.7 percent, so we are a little bit below. So the
forecast at the time was 2.5 percent deficits. What did we end
up with? Surplus. How did that happen? Economic growth. That is
exactly why we need a plan here that gets us on a fiscally-
sustainable path.
Mr. Calvert. That economic growth happened in the private
sector, not in government.
Mr. Zients. Of course.
Mr. Calvert. It seems to me that the budget that is before
us is to grow government, not to grow the private sector.
Mr. Zients. Let's stick with the statistics. The projected
deficit for the federal government was 2.5 percent. We are
lower than that in the president's plan. What took us from
negative 2.5 percent to a surplus was economic growth,
absolutely the private sector growth. So we need to do both
here. We need to get ourselves on a fiscally-sustainable path,
downward deficits, downward debt as a percent of GDP, but we
also have to invest in our economy and get people back to work,
and that is very similar, or is similar, to what the plan was
in the 1990s, to get the economy growing to its full potential.
Mr. Calvert. It seems to me, by the numbers, we have
increased government spending by 33 percent.
Mr. Price. Gentleman's time has expired. Gentlelady from
California, Ms. Lee, for five minutes.
Ms. Lee. Thank you for your service, and during these very
difficult times, also let me acknowledge the hard work and
commitment of everyone at the Office of Management and Budget.
Just very briefly, going back to the Clinton era, from what I
remember, there was a surplus at the end of president Clinton's
term, and the Bush Administration squandered that surplus. And
many of those economic policies are responsible for the
recession and for the hard economic place where this country is
at this point. Now, that is what I remember during the
following eight years of the Clinton Administration.
Let me just also say that when we talk about a budget, we
have to also remember it is not only a plan for raising
revenues and spending federal funds, but it is also a moral
document that is a statement of our nation's principles and
values. So while there are some parts of the president's budget
that I find very troubling, I am very pleased to see that the
president clearly understands the need to make vital
investments in our economy and in job creation, and it is a
balanced approach, which, again, president Clinton, talking
about the Clinton era, he did create a balanced approached,
reduced the deficit, and created a surplus, which, once again,
was squandered during the subsequent administration.
I am very pleased to see the investments in mental health,
HIV and AIDS, and education, including Promise Neighborhoods
and in universal pre-K. The budget permanently extends these
vital programs, such as the Child Tax Credit and the Earned
Income Tax Credit. This helps millions of families across
America in terms of a path, a ladder, from poverty into the
middle class. And so let me just say, this is a real contrast
to the Ryan budget, where the Republicans proposed another $6
trillion tax cut for the wealthiest, while focusing 66 percent
of their draconian budget cuts on shredding our nation's safety
net. Now, in this committee, we have held some pretty, I think,
productive discussions on eliminating poverty by reducing it in
half during the next 10 years. Unfortunately, income inequality
and poverty rates are rising.
But I wanted to just ask you how this budget puts us on
that path of eliminating poverty by reducing it in half in 10
years, because I know Chairman Ryan and myself, and others on
our side are very concerned as well as on the Republican side
about poverty. When I looked at their budget, all of the paths
that would lift people out of poverty were cut drastically. And
so how does this budget begin to turn that around?
Mr. Zients. Well, you know this is an area of very strong
commitment from the president, and it is reflected in the
budget. You mentioned some of the areas; I will mention a few
more. Extending the EITC and the Child Tax Credit; also the
AOTC, which helps families go to college; a centerpiece that we
have talked a little bit about already, but that I want to
emphasize of the president's budget, is this landmark
initiative for early childhood, pre-K, paid for by the tobacco
tax; ladders of opportunity, including Promise Zones, 20
neighborhoods. We are going to really work on bringing
education resources, housing resources, private sector
resources, local resources, together to lift up these
neighborhoods. The minimum wage; the president, in his state of
the union, announced his support for the minimum wage. So there
is a lot of progress in this budget on what has been an
important initiative from of the president's from the
beginning, which is helping lift people out of poverty, into
the middle class, creating ladders of opportunity.
Ms. Lee. I have a few more minutes, and I would just like
to ask you if it is possible for OMB to produce an appendix to
the budget, or to present to this committee a list of programs
that have helped low-income families, you know, move from
poverty into middle class, so we can understand how they work
and what they have done over the years, and how to track our
decisions as it relates to these programs. I do not know if you
have that or if you could organize that for us, or where we
would go to look at that as it relates to the federal
government.
Mr. Zients. We will certainly pull something together.
Ms. Lee. Okay. Thank you very much. Thank you, Mr.
Chairman.
Mr. Price. Thank you. The gentleman from California, Mr.
McClintock, for five minutes.
Mr. McClintock. Thank you, Mr. Chairman. First, I find
myself in rare agreement with my friend from Ohio when he says
Republicans should have been far more excited about the Bush
Administration that was placing two wars on the credit card,
massive expansion of entitlements. He is absolutely right, some
of us were very excited about it. George W. Bush was one of the
most fiscally irresponsible presidents in our history. In his
eight years in office, he increased spending by a whopping 2
percent of GDP. The problem is, the budget that you are
presenting today, in five years, has increased it by another 2
percent of GDP. My problem with the Obama Administration is not
that he has reversed Bush's spending patterns, but he has taken
the worst of them and doubled down on them.
You called the House budget plan an austerity program in
the European model. Actually, it seems to me that your plan is
far more in the European model. European austerity programs are
heavily weighted toward tax increases. That is the problem.
And, in fact, the countries in the most trouble in Europe are
those with the highest marginal tax rates, including Italy,
Spain, and Portugal. The European nations that relied on
spending cuts have done very well. Take Sweden: Between 1993
and 1997, its spending-to-GDP ratio declined from 71.5 percent
to 51 percent. Its average rate of growth doubled in that
period relative to the prior decade. Finland, Denmark, and
Norway saw the same results. So I appreciate the analogy with
austerity programs. The austerity programs that work are those
that reduce spending, which is what the House Republican budget
does. Those that have created additional problems are those
that are weighted toward tax increases, which is the budget
that you are now presenting.
My first question, however, it's a very simple question:
Why are you here exactly 65 days after the budget deadline? Our
whole system is designed to assure that the president, as the
chief executive officer of our nation, comes to Congress with
his estimate of what it will take to implement the laws over
the next year. Then Congress has a timeframe in which it has to
develop a budget. You did not do that. In Congress, both the
House and the Senate, were left to act on their own without a
presidential budget. Now, when that train has already left the
station, suddenly you show up with this budget. I find that
appalling.
Mr. Zients. Well, unfortunately, due to Congress's
inability to act, we have had manufactured crisis.
Mr. McClintock. Congress has acted. Congress has adopted a
budget on schedule, but that process was supposed to begin with
the president presenting one, and he did not.
Mr. Zients. Right.
Mr. McClintock. That is more a rhetorical question,
frankly, because I do want to get to, my time is very limited,
an Investor's Business Daily editorial today, which absolutely
excoriates the budget. Let me walk you through the points. This
is where I would like to get your responses. First, they
criticize it for boosting spending and deficits over the next
two years. Over the next two years, they say it increases
spending by $247 billion above the baseline. It increases the
deficit by $157 billion above the baseline. Is that correct?
Mr. Zients. So in terms of the timing of the budget, what I
was talking about was the fiscal cliff crisis followed by the
sequester. That made it very difficult to deliver to budget
until the numbers settled in. So once the numbers settled in,
we are happy to be here today.
Mr. McClintock. Pardon me, sir, the House and the Senate
were able to act. What I would like right now is to get you to
either confirm or deny the figures in ``Investors' Business
Daily'' today. Does the budget over the next two years increase
baseline spending by $247 billion and increase the deficit by
$157 billion?
Mr. Zients. We have made progress on the economy, 36 months
of job growth, 6.5 million private sector jobs, 14 straight
quarters of GDP growth. We have a ways to go. We need to
continue to invent in jobs, and, at the same time, put
ourselves on a fiscally-sustainable path.
Mr. McClintock. Are the figures accurate? Are these figures
accurate or not accurate? All right, let me see if I can get
you to answer their second point, which is that the president
vastly exaggerates the spending cuts. $1.2 trillion are
claimed, yet the actual budget on Pages 187 through 190,
actually cuts only $186 billion.
Mr. Zients. Well, again, we are back to our baseline set of
issues.
Mr. McClintock. Their criticism is that you cancel the
sequester and then reclaim that as new savings.
Mr. Zients. That is right. We are very clear in our tables
how we are doing this. In the baseline is the sequester, which
was never intended to be policy. That is spending cuts across
the board. We replace it with balanced deficit reduction. In
total, the president's plan has $4.3 trillion of deficit
reduction and reduces the deficit to below 2 percent.
Mr. McClintock. I can't get to all six of the charges, but
the third one was, that it relies entirely on tax hikes, $6 in
new taxes for every dollar in spending.
Mr. Price. Gentleman's time has expired. Gentleman's time
has expired. The gentleman from Rhode Island, Mr. Cicilline,
for five minutes.
Mr. Cicilline. Thank you, and I thank you, Mr. Zients, for
being here and for your service to our country. You know,
sometimes if you listen to these budget committee hearings, you
would consider that our only objective is deficit reduction,
and that that, in and of itself, was an economic strategy for
economic growth for this country. And I think you said at the
beginning that the objectives are, of course, responsible
deficit reduction, but also economic growth for our country.
And we do not have to go back as far as my friend from Ohio
suggested to the times that my friends on the other side of the
aisle did not speak up for two wars that we did not pay for,
and tax cuts for the richest 2 percent of Americans that we did
not pay for, but just in recent hearings, proposals to provide
another gigantic tax cut for the richest people, the top wage
earners in this country, and a refusal to close a single tax
loophole. So it is hard to understand where this notion of
deficit reduction is something that only that other side of the
aisle cares about, because that is what we heard about here.
And so what I really want to talk about is what I think is
the real crisis facing this country. I think we have got to
deal with the debt, and I think we have to do that in a
responsible and balance way. But I am from a state that has, I
think, the highest, or second or third highest unemployment
rate on the country, depending on what month you look at, and I
think what we have to be looking at is the job crisis in this
country and how we invest in growing the economy, getting
people back to work, because I consider the single best way we
can deal with the deficit is by getting people back to work and
growing the economy. That is what our history has shown us.
That is what we need to do. And there are some things in this
budget I strongly oppose, but I think when you look at the
investments that the president is proposing in infrastructure,
in workforce training and development, in education, in science
and research, and rebuilding our own country, and in
manufacturing, those, I think, present some exciting
opportunities to really jumpstart job growth and our economic
recovery.
And I would like you to talk in particular about what you
see as the most valuable of those investments, and I am
particularly interested in manufacturing, which I think the
president has articulated an exciting vision for a set of
manufacturing centers. But speak to this notion of the
importance of creating jobs as a way to deal with our deficit
in the long term, and dealing in a responsible way in the short
term with promoting real growth, and, particularly, job growth
in those sectors.
Mr. Zients. No, I think you are absolutely correct, that
putting people back to work, getting this country performing at
its full economic potential, is the most important priority for
the president. So the fiscal sustainability is important, but
it is a component of an economic plan. It is not an economic
plan in and of itself. I think you hit on the main areas. I
think infrastructure, which we talked about earlier, is really
important, the $50 billion immediate investment, working
closely with states and local governments and the private
sector to put people back to work, but also position ourselves
much better in terms of global competitiveness by having 21st
century infrastructure. So infrastructure is a great example of
getting people back to work, which helps the economy and
individuals in the short term, but also sets us up for medium
and long-term growth. The investment in education, the focus on
community colleges, helping people develop the skills, working
closely with businesses to make sure the people are getting the
right skills. There is an $8 billion investment in community
colleges. We talked about R&D earlier; very important for our
long-term competitiveness and for creating jobs.
Mr. Cicilline. And I think the other important thing to
note is that when we think about the long-term challenges we
face in reducing health care, or in developing new and
renewable sources of energy, those require investments. The
real way we are going to bend the cost curve on health care is
discovering new cures for diseases, discovery new technologies
and new treatments, modernizing our electronic medical records
system, and those require investments. And so one of the things
I am particularly concerned about, and I think this budget
addresses, is the sequestration. The kinds of reductions in
science and research that are going to really provide the key
to reducing energy costs and making energy more available and
to reducing health care costs are at risk with sequestration.
And that we want to be a country that has pioneering research,
groundbreaking research which is happening, a well-trained and
educated workforce. We want to develop new and clean energy
sources. We want to rebuild the infrastructure of our country.
All those things are not only necessary so that we can remain
competitive and grow this economy, but they are also the key
strategies, I believe, to address our deficit over the long
term. I think this budget reflects that, and I applaud you for
that.
Mr. Zients. The sequester is devastating for these
priorities. Take NIH, the Bush NIH director, so president
Bush's NIH director, said sequester will set back medical
science for a generation. Contrast that with the president's
budget, which actually increases off of the pre-sequester level
of NIH funding by over a half billion dollars.
Mr. Cicilline. Thank you.
Mr. Price. Gentleman's time is expired. Gentlelady from
Tennessee for five minutes. Ms. Black.
Mrs. Black. Thank you, Mr. Chairman, and thank you, Mr.
Zients, for being here today. I want you to answer this really
briefly for me because I have other detailed questions that I
want to ask you. But you made mention when you were in the
dialogue with the Chairman related to the program that we have,
the Medicare program that we have, in reforming the program,
that it includes a voucher program. Would you give me a
definition of what you think is a voucher program?
Mr. Zients. A voucher program is giving seniors a certain
amount of money and having them be responsible for purchasing
their health care. And then if there are cost overruns, or
costs beyond that voucher, the seniors bear the responsibility
for that.
Mrs. Black. Now, I am sure you have read the Path to
Prosperity. And what is recommended in there is premium
support. Do you think that premium support and voucher are the
same? Are they the same? You said--excuse me, reclaiming my
time--you said in a voucher program you give the recipient
money to allow them to go out and find their insurance. Premium
support, and I will define it for you as defined in our program
so that we get this straight and we do not keep calling
something incorrectly. And premium support is a guaranteed
program that is run by the government and it is guaranteed to
the recipient. They do not get the money. The money is not
given to them. It is a program.
So, I am reclaiming my time, once again. I just want to set
this straight. I want to set the record straight. There is a
difference between a voucher program and the premium support.
Now, let me go to something that I want to go to that is a
little more detailed in your budget. I note that in your budget
you include $1.4 billion in discretionary spending increases
for personnel. And in particular, this funding would finance
about 712 new bureaucrats within CMS. And this is a massive
increase compared to the request last year of 256 new
positions. What I want to know is why the significant increase?
Where are all of these positions needed?
Mr. Zients. Well, first, I would like to set the record
straight on what the president's belief is on Medicare. The
president believes in reforming Medicare so we can protect
Medicare as we know it, and not move it toward a premium
assistance plan or a voucher system.
Mrs. Black. We will disagree on that.
Mr. Zients. So I want to be clear on the record.
Mrs. Black. If you will just answer this question, because
we both have the same idea that we want to preserve it for
those that are in it and protect it for future generations. But
I just want to set the record straight that you cannot keep
calling it something that it is not.
Mr. Zients. Okay.
Mrs. Black. So I appreciate that.
Mr. Zients. And from my perspective, we cannot shift costs
to seniors.
Mrs. Black. Look, we agree on that. We agree on the cost
shifting. But what we do not agree on is the way in which we
get there, and you and others keep confusing that. And so I
just want to set it straight, so now if you will answer my
question on this. Thank you.
Mr. Zients. We will work on the vocabulary. At the same
time, I think there is a fundamental difference, and if the
president wants to reform Medicare to maintain Medicare and
sustain Medicare as we know it.
Mrs. Black. Sir, I am not arguing with you on that point.
What I am trying to make clear is there is a definition that is
very clear, and it is in literature that it is clear. The
difference between a voucher and a premium are different, and I
just want to make clear, one more time, that what is being
represented about what we have in our plan is absolutely a
premium support and not a voucher. So if you could answer me
about why these additional positions are needed.
Mr. Zients. So on specific positions, I am not sure exactly
what you are looking at. What I will say is that the Department
of Health and Human Services is very focused on implementing
the Affordable Care Act, which will provide insurance for 30
million Americans who do not have it today, and will, according
to CBO, save $100 billion in the first decade, a trillion in
the second decade. So there is a focus on implementation of ACA
within the HHS budget. On the specific numbers, my staff will
follow-up with yours.
Mrs. Black. Okay, great. And in addition to that, what I
would really like to know, is you talk about it as the
implementation, but once it is implemented, are these going to
be permanent positions? Because if they are there for
implementation, then I want to know, are these permanent
positions that we are going to have to on funding year after
year after year? And so I appreciate your getting back to me on
that.
Mr. Zients. We will do so.
Mrs. Black. Thank you, Mr. Chairman. I yield back.
Mr. Price. Thank you for yielding back. The gentleman from
Wisconsin, Mr. Pocan, for five minutes.
Mr. Pocan. Thank you, Mr. Chairman. And thank you, Mr.
Zients, I appreciate you being here. I am one of the new folks
around here, which I think for this discussion I want to
translate to I have spent a lot more time in Wisconsin than I
have in Washington, and maybe I can look at things a little
differently. You know, when I talk to the small business owners
and folks back home, you know, the economy and getting jobs is
still the biggest focus. And when we are here doing our
training, we find out from the Congressional Budget Office that
three-quarters of our deficit next year, the country's deficit,
is due to economic weakness, needing to deal with unemployment
and underemployment. So I think the fact that your budget is
doing that, I do not care if it is on time, or if it just
addresses the Holy Grail of deficit reduction without dealing
with the economy or anything else, you are dealing directly
with the economy while you are doing the deficit reduction that
is responsibly laid out.
Specifically, a couple programs I just want to highlight
that I really appreciate from people back home I am talking to,
the increase in funding for non-defense research and
development. The University of Wisconsin just was out there
last week. We had a lot talks with folks. The sequester is
killing them on the NIH funding. The jobs lost and the
programs, we appreciate that. The $50 billion for
infrastructure: I was on our Joint Committee on Finance, and we
had to approve every single dollar of the last recovery
dollars. We had a report just from our road-building industry
that 54,000 jobs were saved or created in Wisconsin back when
that happened, so we know that that has got the potential. The
small business tax credit for hiring new workers is going to be
very valuable. Focusing on advanced manufacturing and keeping
those jobs in America, and then finally replacing the job-
killing sequester.
So, there is a lot of really sound, solid, good measures, I
think, that much like our House Democratic budget proposal
really deals with stimulating the economy and creating jobs. I
do have to say, though, there is one part that kind of takes a
little bit of a negative turn in the budget proposal, and I
think that is the chained CPI proposal. I just have a couple
questions around that.
You know, I think, as you can tell from today, that you put
forth a budget that offered a compromise before you have
actually sat down to compromise with folks. So I think you have
already seen some of the reaction on that. And, you know, I
look at this, and I called my mother and woke her up this
morning to ask her exactly what she makes on Social Security
per month. She is 84. I grew up in a lower middle class family.
They have a modest home. But she gets $1,101 a month at 84. And
then I went through some of her bills with her and where she is
at in her savings. It is just not a lot. And to try to address
Social Security in that way, to me, seems to be breaking our
promise to seniors.
But let me ask you this specifically, because this is an
alternative proposal that none of us have looked at, which is
if we lifted the cap on revenue in Social Security taxes, it is
currently at $1,137. I guess the question is, one, do you know
how much that would generate if we did lift the cap entirely.
Two, what longevity that would have, because, as I understand
it, it could about 75 years longevity. And just three, where
the White House would be on a proposal like that, because,
again, I think you have compromised before we have had a chance
to sit down and compromise.
Mr. Zients. Let me first address chained CPI. The president
has put it into the package because Speaker Boehner and Leader
McConnell asked for it. He was not willing to do age 67. The
president, as part of a balanced, comprehensive deficit
reduction package, included CPI. The other condition, however,
is to protect the most vulnerable, including people like your
mother, older, Social Security beneficiaries. So there is a
provision: At 76, there is an increase that goes from 76 to 85
to protect older beneficiaries. So the president is only
willing to do CPI as part of balanced deficit reduction, the
full package, the $1.8 trillion, and with these protections for
older beneficiaries and other vulnerables, the people that are
vulnerable in our society.
On your specific ideas, I said earlier the president has
set out principles for Social Security reform. It is not the
driver of our current deficit issues. At the same time, we
should address Social Security reform, and in doing so, he will
insist upon a balanced approach in terms of any benefit
changes, would have to be balanced with significant revenue
increases. But, again, Social Security is not a driver of our
current fiscal situation. It is solvent through 2033.
Mr. Pocan. And I could not agree with you more on that
issue, and I think I just would close with saying perhaps,
then, we should not have Social Security part of the budget. I
agree it is a separate discussion, and there are a lot of
things we could do to extend Social Security, but by including
it in this discussion and compromising before we have had a
chance to compromise, I think has somewhat muddied the waters.
Mr. Zients. I think we have had one crisis after another.
We need to get deficit reduction behind us. The president is
serious about it. He included the compromise offer with Speaker
Boehner as part of his willingness to do hard things and get
deficit reduction accomplished so we can focus on the economy
and creating jobs.
Mr. Price. Gentleman's time has expired. Just by way of
clarification, the chained CPI, that is in your budget
proposal, correct? So, it is your proposal, the
Administration's proposal.
Mr. Zients. It is part of the $1.8 trillion compromise
offer.
Mr. Price. Included in your proposal?
Mr. Zients. Absolutely, as part of the Speaker Boehner
compromise offer. And both Speaker Boehner and Leader McConnell
have asked for chained CPI on multiple occasions, as they also
asked for age 67. Age 67 is not in our budget.
Mr. Price. Not in the context of the budget.
Mr. Zients. I believe age 67 is part of the House
Republican budget.
Mr. Price. Those discussions were not in the context of the
budget, were they?
Mr. Zients. The Speaker Boehner and McConnell? They were in
the context of deficit reduction talks. We have had many rounds
of those across the last few years.
Mr. Price. Yes. Gentleman from Texas, Mr. Flores, for five
minutes.
Mr. Flores. Thank you, Mr. Chairman, and thank you, Mr.
Zients, for being here. I have some information--I am going to
have a lot of questions, and so you probably will have to
provide us the information supplementally, if you would. You
know, as a CPA, you have to look at the underpinnings of the
budget because they are what drive the outcomes in many cases.
And so the important attributes to the federal budget would
include GDP growth estimates. It would include unemployment
estimates. It would include inflation estimates, and also
interest rate estimates. And I have reviewed your budget, the
president's budget, vis-a-vis the CBO and vis-a-vis Blue Chip
forecast. And in most cases, it seems like the president's
budget uses much more optimistic scenarios.
And so, supplementally, what I would like you to provide is
two things. One is, how did the president arrive at the
underlying numbers that he used for his growth forecast in
inflation, unemployment, interest rate forecasts. And then
secondly, what would happen to the president's budget if they
were reset at the CBO numbers? So that is the first thing.
Mr. Zients. May I respond to that?
Mr. Flores. No, I need to get through the rest of the
questions, and if we have time toward the end, we will try to
do that. But, again, supplemental disclosure would be helpful.
The goal here, I think, I think you and the president, and we,
in the House of Representatives, all share the same goal, and
that is to make the economy grow more quickly. I think we have
dramatic differences and opinion as to how we get there. And so
what I would like to see from the president is, how do we grow
the economic pie in opportunity when we are raising taxes on
the economy? You know, we are taking tax revenues as a
percentage of GDP to levels that have not been seen before in
the economy over the long term. They even, as best I can tell,
exceed the rates during the Clinton Administration. So how do
higher taxes generate this economic opportunity?
The second component is, in particular, if you raise the
tax on a business, how does that help that business to have
more capital to invest in people, to invest in R&D, to invest
in their capital assets, their fixed assets? How does it help
them to produce more products at a lower cost? How does it help
them to produce better products at a lower cost? How does it
help them to produce better services at lower costs? I think
about the small business woman in Bryan, Texas, who owns a
chain of laundries, and I think, okay, if we raise the taxes on
this lady and her business, you know, after ObamaCare is
already crushing her, and she is not hiring today because of
the pending implementation of ObamaCare, how is she going to be
better off, and to be able to hire more employees and pay them
a better wage, and to invest in a new location, if we are
raising taxes on her? Let's say that, you know, we tell Apple,
we are going to raise taxes on you, but we want you to produce
more of these iPads, and we want you to produce them at a lower
cost.
Now, your budget, the president's budget, is basically
saying that to the oil and gas industry. We are basically
saying, ``You know, the oil and gas industry, you are a
targeted bad boy, and so we want to raise the taxes on you, but
yet, we are going to demand that you produce more gasoline at
cheaper cost so that Americans can have a better energy
supply.'' Now, the other goal we ought to be looking at as a
government is to reduce, well, let's rephrase that, let's put
the positive spin on it. The government ought to be more
accountable. It ought to be more effective. It ought to be
efficient.
And so, you know, we got a report here from the GAO that
came out a few days ago. It identifies scores of problems, and
waste, and fraud, and abuse, and ineffectiveness, and
duplication, and overlap in the federal government. And so
supplementally, I would like for the president to produce a
report about what he intends to do about this. What are the
things that he would like to do? The other things, let us look
at the Solyndra-type program, in light of the news about Fisker
that came out this week. Why do we not have a supplemental
report from the Administration that talks about the
effectiveness and the return on taxpayer dollars that came out
of the Solyndra and its brothers and sisters and siblings. It
is up over $2 billion now. But why do we not talk about the
effectiveness of our poverty programs. We have spent $19
trillion on poverty programs since the war on poverty started,
but yet we have got more people in poverty today, more people
on food stamps today.
So if you could provide that supplementally, I would
appreciate it. Thank you, I yield back.
Mr. Price. Thank you, the gentleman's time has expired.
Gentlelady from New Mexico, Ms. Lujan Grisham for five minutes.
Ms. Lujan Grisham. Thank you, Mr. Chairman. And thank you,
Director, for being before us today. And like many of my
colleagues, I agree that this budget provides yet a renewed
opportunity to reinvest in this country, put the economy on a
positive path. And like my colleague, Mr. Pocan, I am spending
a lot of time in my home state and district in New Mexico, and
the sequester hits us especially hard. We were identified as
being one of the worst states to see sequester effects. I have
to talk to the 2,000 people who have already been furloughed,
and the countless number of defense contractors and related
research businesses that are not hiring, that are also
continuing to lay off, and I think today in our newspaper, we
are talking about additional layoffs at one of our hospitals.
We have negative job growth. Stopping the sequester is a clear
and direct productive impact in a state that does not have any
other opportunities for fiscal growth, unless that immediately
is removed from the fiscal equation. So, I am very grateful for
this effort and this leadership by the Administration, and also
appreciate that we are looking at health care, and taking care
of the SGR, and making sure that our safety net programs are
here for the long haul.
I also want to clarify that I have a different sense about
the Republican proposal on Medicare. A voucher is, in fact,
defined as a record of disbursement or expenditure, and whether
the public sector, the government in this case, or the private
sector, has a fixed reimbursement of expenditure tied to a
premium, is, in fact, a voucher, and it does cost you
absolutely inappropriately. And my mom, who lives on $1,300 of
Social Security and relies on Medicare, who just paid nearly
$200 out of pocket for a prescription drug that is lifesaving
for her as she leaves the hospital, again, I can assure you
that these are important investments to maintain.
I do want to talk a little bit about how we are looking at
bending the health care cost curve in the president's proposal,
and I am a little confused about the reduction, the $63 million
from post-acute care, and recognize that we are concerned,
maybe, about some of those cost centers for home health and
related health care services. But without those rehab, and
therapeutic, and home health care services, you will be
readmitted to the hospital for this population, or you will
have longer stays in the hospital, and that is clearly more
expensive per beneficiary. Can you talk to me about what the
thinking was about this particular proposal, and why the
Administration might think that this is an effective way to
save money in Medicare?
Mr. Zients. I think that we, across the budget in Medicare,
wanted to make sure that we are taking advantage of the best
practices that exist across the country. There is a tremendous
variation in care. Oftentimes, higher cost does not mean higher
quality. In fact, there tends to be a correlation between lower
cost and higher quality. Those are the practices we are looking
for, those are the providers that we want to make sure are
rewarded in the system; providers that have high readmission
rates or quality problems should receive less reimbursement
than high-quality providers. So what we are trying to do here
is drive toward that quadrant of high-quality outcomes at a
lower cost, and, fortunately, there are lots of best practices
that we have in the country that do just that, and the budget
is encouraging us to move toward those best practices.
Ms. Lujan Grisham. Well, I appreciate that and I could not
agree more that this has to be an investment in outcome and
quality. When we pick any area of expenditure in the health
care system and tie that back to a beneficiary, you know, we
are just trading. You are not really focusing on quality. And
to say post-acute care needs these reductions is the same as
saying for the providers who are doing an effective job and the
whole reason to have that.
Mr. Zients. So within post-acute care, there are strong
providers who are providing high-quality care at a reasonable
price. There are providers who are not performing as well, so
want to make sure that the strong providers are reimbursed
appropriately.
Ms. Lujan Grisham. And I appreciate that. So what I am
hearing is, and I would love some additional information from
the Administration, that these are not blanket cuts to areas of
care that are critical, but these are accountability measures
that I would like lots more information on because the danger
is, is that you create a categorical reduction, not an
investment in high-quality, accountable, efficient patient-
centered care. And I would urge you to be clear and careful
about those kinds of proposals.
Mr. Zients. We will follow-up and make sure we provide the
rationale behind the policies.
Ms. Lujan Grisham. Thank you. Yield back.
Mr. Price. Gentlelady's time has expired. Thank you.
Gentleman from Indiana, Mr. Rokita.
Mr. Rokita. I thank the Chair, I thank the gentleman for
being here today. There has been a lot of talk this morning
about Social Security and the president's ideas around chained
CPI, and he recently just said that that was put in at the
request of my leadership and Senate leadership, but I want to
focus on that a bit because the impression could be left that
Social Security is not part of our debt problem.
And I will start off by first acknowledging that there are
several reasons for our debt problem. Three main drives are
Medicare, Medicaid, and Social Security. Now, a fourth driver
is the net interest that continues to grow and that we continue
to owe ourselves and other countries, countries that do not
necessarily have our best interests in mind, but theirs. And I
just read this morning that over the next several decades, Mr.
Zients, that interest payment, okay, money that we cannot spend
on anything else but give it away contractually for the money
we are getting now in credit, could reach $900 billion. Mr.
Doug Elmendorf, director of the CBO, I know you know was here
in your seat a couple weeks ago, and we talked about whether or
not Social Security was actually driving any of these deficits
or debt, and I want to quote for the record, and then have you
respond to it.
In responding, I believe to the Chair, Mr. Elmendorf said,
``Well, again, Congressmen, on a unified budget basis, taking
account of just the tax revenues, the dedicated tax revenues,
and the benefits, it is contributing to the deficit now. If one
instead looks at just the balance in the Social Security Trust
Fund, that balance is the annual balance is positive now, but
will be negative within about a half dozen years. Do you
acknowledge that? Do you agree with it?
Mr. Zients. No, I think that Social Security is not a
driver of our near-term fiscal situation.
Mr. Rokita. It is not near term fiscal situation of our
deficits and debt.
Mr. Zients. The trust fund is solvent through 2033, and the
trust fund is acting exactly as it was designed to do.
Mr. Rokita. But you talked earlier about manufactured
crises and crises that you had to deal with. Why wait for this
crisis to occur?
Mr. Zients. I think the president has reiterated in budget
after budget his desire to do Social Security reform. But let's
be clear: That is a different path, a different track from our
current deficit discussions. Right now we should be doing the
$1.8 trillion deficit reduction package that is in the
president's budget, and once we get that behind us, Social
Security reform could be part of the next conversation.
Mr. Rokita. While we are talking about the drivers of our
debt, let me ask you about Medicaid. You talked about Medicaid
in the budget, and at least you acknowledge that there can be
some reforms made there. And I think you focus most on the
waste, fraud, and abuse, which I would agree with you is
important. But that is about all you do. Do you think that
Medicaid is part of our deficit and debt problem?
Mr. Zients. Medicaid provides needed health care to tens of
millions of people. As you know, it is a partnership with the
states. It works well.
Mr. Rokita. Let me stop you there. It works well?
Mr. Zients. Meaning it provides a much-needed care.
Mr. Rokita. You want to increase it by a third, I think you
said.
Mr. Zients. Well, as part of expanding coverage of the ACA,
absolutely. Now, the cost per Medicaid beneficiary on a per
capita basis, the increase has been quite low. So, the increase
you see here is the expansion to give people who do not have
health care coverage health care coverage through the
Affordable Care Act.
Mr. Rokita. Are you aware that if you go under the knife as
a Medicaid recipient, you are 13 percent more likely to die
than if you had no insurance at all?
Mr. Zients. I do not know that statistic.
Mr. Rokita. Do you think that is a program that works well?
Medicaid, this is the program that is supposed to provide
health care for the poor. Excuse me, reclaiming my time. It is
the core of our social safety net. If anyone needs health care,
it is people who cannot do it for themselves, who are
destitute, and they are 13 percent more likely to die if they
have a surgery.
Mr. Zients. So your budget would kick 20 million or so
people off of Medicaid, would deny coverage for 30 million
Americans that will receive it through the Affordable Care Act.
Mr. Rokita. No, no, no, that is not right. Reclaiming my
time. Chairman, can I have order, please. Chairman, can I have
order? Reclaiming my time.
Mr. Price. Gentleman from Indiana reclaims his time.
Mr. Rokita. What we do is give flexibility for the states
so that they can determine who is poor. What ObamaCare does is
make the middle class take Medicaid. Middle class, by even your
definition, sir, is not poor. These programs have to be around
for those who need it, and you are doing exactly the opposite.
I yield back.
Mr. Price. Gentleman's time has expired. Gentleman from
California, Mr. Cardenas, is recognized for five minutes.
Mr. Cardenas. Thank you very much. I would like to ask you
a question about the tobacco tax, and the purpose of having
that increase in tax. Would we provide more preschool to more
children with or without an increase in cigarette smokers if we
include this tobacco tax? Do you understand my question? So say
this tobacco tax is implemented, and we raise the tax on
cigarettes; now whether or not we have an increase in cigarette
smokers or not, with that increased tax, are we likely to
educate more preschoolers?
Mr. Zients. So let me step back and explain what the
tobacco tax is about. It is adding 94 cents to a pack of
cigarettes and to other tobacco products of a proportionate
amount. What this does is it raises revenue. It also
discourages teenagers from taking up smoking, and encourages
people who are smokers to quit. So we will have fewer smokers.
At the same time, we will continue to have some people who
decide to smoke, will pay the tax, and therefore we will have
pre-K for many millions of American children who do not receive
it today.
Mr. Cardenas. Yeah, so, now to my question, so therefore
with that increase in that tobacco tax, we are likely to see
more preschoolers get educated?
Mr. Zients. I do not think likely; we will.
Mr. Cardenas. Okay. Thank you for pointing that out. I did
not want to put words in your mouth.
Mr. Zients. I absolutely understand. Millions of American
kids will receive pre-K, and pre-K is a fabulous investment.
Study after study shows the positive impact of pre-K education
on children.
Mr. Cardenas. And if we are going to educate our workforce,
is it not great to start in pre-K?
Mr. Zients. Absolutely.
Mr. Cardenas. Yes, the benefits are tremendous. As a former
employer myself, I agree with that 1,000 percent. If you were
to witness the legislative bodies go to conference on the
budget, do you think that is a good thing?
Mr. Zients. Absolutely. I think we should return to regular
order and go to conference.
Mr. Cardenas. Okay, thank you. As a former chairman of the
budget conference committee in the state of California, I think
that it is a wonderful part the legislative process. It is
unconscionable that a legislative process would do without
that, and I hope that we do get back to that here. When it
comes to infrastructure investment, is it more cost effective
for us to fix our infrastructure now or just put it off until
later?
Mr. Zients. Well, I think that it is always better to it
now.
Mr. Cardenas. But why, does it cost more later?
Mr. Zients. In this particular moment, we have high
unemployment, particularly amongst construction workers. We
have an opportunity to put people back to work. And then we
start to get the benefits from having the improved
infrastructure in terms of small, medium, and large businesses
competing, serving not only consumers in this country, but
throughout the world.
Mr. Cardenas. Yes. So to my point on the infrastructure
investment, on top of what you just said, which I agree with,
you are absolutely accurate, is if we need to fix a bridge or a
road today, it is eroding every day, every month, every year,
and if we put it off, to fix that same road or that same of a
bridge, there is no question, it is more expensive to do it
later, just on the cost outlet.
Mr. Zients. Yes. Absolutely.
Mr. Cardenas. And also on the benefit factor, it is more
expensive to put it off, because, as you pointed out, business,
which we all care about here, gets less benefit, and they tend
to have to deal with that lagging of the structure longer.
Mr. Zients. We should immediately invest in infrastructure
to improve our competitiveness and put people back to work.
Mr. Cardenas. Well, if you could please thank the president
on my behalf for the budget that he has put forward, because I
think the president's budget, unlike the Republican strategy,
the Republican budget seems to focus on deficit reduction and
not on investing in creating more jobs, and the president's
budget focuses on educating our children and making sure that
we are strengthening our workforce, which, as a result, grows
our economy today going forward. The president's budget is
actually brave enough to invest in our American children and
our American workers today, rather than putting it off for
focusing almost exclusively on deficit reduction. And I think
the best way for us to reduce the deficit is to actually get
back into making sure that we are educating our workforce, we
are creating a workforce of tomorrow that is better prepared to
compete in the world, and then for us to regain our position as
the power base of, you know, production on this planet. So
thank you so much.
Mr. Zients. Well said.
Mr. Price. Gentleman's time has expired. Gentleman from
South Carolina, Mr. Rice, five minutes.
Mr. Rice. Thank you, Mr. Chairman. Thank you, Mr. Zients,
for being here. I appreciate very much your willingness to come
and put your light on the president's budget for us. I want to
start out with a definition of terms. When I say ``balance,'' I
mean the revenue should be equal to the expenses, or expenses
should be less. And when you say ``balance,'' you mean we need
to have a tax increase.
Mr. Zients. When I say balance, I say that we should have
spending cuts and revenue. That is a balanced approach.
Mr. Rice. Where you are saying revenue, you mean a tax
increase?
Mr. Zients. Yes. Not a tax rate increase, tax reform.
Mr. Rice. Yeah, but we are talking about more tax dollars
paid in by taxpayers, that is what you mean?
Mr. Zients. By closing loopholes and getting rid of
unnecessary tax expenditures.
Mr. Rice. So when listeners hear you say ``balance,'' they
need to think tax increase, because that is what we are talking
about.
Mr. Zients. I think the right way to think about it is a
balanced approach, which is spending cuts and tax increases.
Mr. Rice. The right way to think about it, wrong way, or
whatever, it is a tax increase.
Mr. Zients. And just to review the record, we have had $2
dollars of spending cuts for every dollar of revenue.
Mr. Rice. Two years ago, the president, with ObamaCare,
achieved a balance, I mean a tax increase, most of which has
not hit yet. It is going to hit beginning of next year. And a
lot of those taxes hit what he calls middle class families and
everybody else. Now, three months ago we had a balance, I mean
a tax increase, under the fiscal cliff arrangement, and now we
sit here with this budget, which imposes another balance, not
balance, I meant tax increase over the next 10 years, and you
just said a minute ago that even under this proposal that we
are not making entitlement programs sustainable, but, in fact,
we need to have another conversation after this balance, I mean
tax increase, gets done. And I assume that we are going to
balance again and increase taxes to make our social program
sustainable. I assume we are talking about doing that this year
as well.
So, we are going to have the ObamaCare tax increases hit.
We are going to have the fiscal cliff tax increases hit. We are
talking about more tax increases right here. And when we get
down to entitlement programs, which is really where we need to
start, we are going to have another conversation about more
balance or tax increases, and I assume we are talking about all
of this this year. This is a mighty, mighty broad-reaching
balance for this year, is it not? I have been a tax lawyer for
25 years. I have never seen anything like this. This is not
leadership. I mean, we need to have a long-term plan. We have
got to stop this piece-meal, small bites, you know, no long-
term thought. We have got to give businesses certainty. Is
there any wonder why the economy is limping along when nobody
knows what the rules are or what the rules are going to be? And
in this plan, we are talking about putting the debt tax back to
where it was, what, three years ago? We have got to have a
long-term vision, we have got to come to some kind of agreement
on it, and we have got to move forward, or we can expect that
the economy will continue to limp along, that employment will
continue to lag, and that our competitors worldwide will
continue to get an advantage over us.
Now, one question. We have already had our credit rating
decrease once because we have been unable to sufficiently deal
with our debt problems. And under your scenario, the deficits
continue, and the amount of our debt as a percentage of GDP, I
think out of the chart that has been up earlier, remains at 90
percent throughout this 10-year period. I promise you that our
creditors around the world are watching us, and I promise you
that the credit agents, the credit rating agencies are watching
us. Let us just assume the president did put this thing forth
in front of a resolution, and by some miracle, it got passed;
what do you think that would do to our credit rating? Do you
think it would be downgraded again, because I am afraid it
would be the next day.
Mr. Zients. Absolutely not. First of all, the 90 percent
chart is not the right way to look at debt; the right way to
look at debt is debt held by the public.
Mr. Rice. I thought you said percentage of GDP is the way
you wanted to look at it.
Mr. Zients. That was gross debt, so that includes intra-
governmental debt. I do not think that is the right way to look
at debt. CBO, others would agree the right way to look at debt
is debt held by the public. That is not at 90 percent for point
number one. Point number two, debt on a declining path is
exactly what the credit agencies are looking for. What will
potentially put, potentially put, our credit rating at risk
would be a manufactured crisis around the debt ceiling.
Mr. Rice. Well, we will manufacture them every three
months. We do not have any long-term plan.
Mr. Zients. The president is very clear, he will not
negotiate around the debt ceiling.
Mr. Price. Gentleman's time has expired. Gentleman's time
has expired. Gentleman from New York, Mr. Jeffries, for five
minutes.
Mr. Jeffries. Thank you very much, Mr. Chairman, and thank
you for your testimony to date. I want to spend some time
talking about the president's proposal, but on this question of
debt and how we arrived at this moment in time, am I correct,
or is it fair to say that the 2001 Bush tax cut that was not
paid for at the time by this Congress added to this country's
debt burden?
Mr. Zients. Well, what you have cited, there were two wars
that were not paid for and a prescription drug plan that was
not paid for.
Mr. Jeffries. And as a result of the collapse of the
economy in 2008, we took a $22 trillion hit, by some objective
estimates, then necessitating a substantial bailout by this
Congress of financial institutions, and then a stimulus
package, both of which presumably also added to our debt
burden. Is that correct?
Mr. Zients. Yes.
Mr. Jeffries. Now, as it relates to the forward-looking
plan for the future that you have articulated that I believe
would, total, $4.3 trillion in deficit reduction over the next
10 years. That does seem to me to be a forward-looking plan
despite suggestions to the contrary. We are at a very peculiar
situation as it relates to our recovery under the president's
administration. We have gotten 6 million private sector jobs
that have been created. We have got corporate profits at a
record high. We have got the stock market at near all-time
highs. The productivity of the American worker is at an all-
time high, certainly has increased over the last several years,
yet unemployment remains stubbornly high itself. It has gone
down, but remains stubbornly high. Why is it that we have got
some economic indicators that seem to suggest we are doing
well, but others that suggest we still have a ways to go, and
how does the president's plan deal with this circumstance?
Mr. Zients. I think we are making progress. It is 6.5
million jobs, 14 straight quarters of GDP growth, but we need
to do more. Unemployment is, as you said, stubbornly high. We
need to make the investments in infrastructure that we have
talked about, in education, in R&D. At the same time, it is
important that we put the country on a sustainable fiscal path.
So the president's plan is first and foremost about getting
people back to work, ensuring that we make the appropriate
investments, that our economy performs at its full potential.
We need to turn off the sequester as soon as possible. That is
costing us hundreds of thousands of jobs, it is a self-
inflicted wound. We need to stop manufacturing these crises,
that when you meet with CEOs of small companies, medium-sized
companies, large companies, they are weary of investing because
they do not know what next is going to come out of Washington.
So we need to deal with our fiscal situation, get something
done. The return to regular order is a good development, and
let this economy work, and let people work, and let America
live up to its full potential.
Mr. Jeffries. Well, I commend the president for putting
forth this budget, as well as his effort to, in good faith, I
think, present a plan that both sides might take issue with in
different areas, but it is designed to create common ground. As
it relates to this issue of manufactured crises, is the problem
that if our creditors conclude that we do not have the ability
in the United States of America to manage our affairs in an
orderly fashion, that that loss of confidence at some point may
result in an increase in the interest that we are paying on our
debt moving forward?
Mr. Zients. Well, it is picking up where I left off over
here, when we talk about a downgrade. The downgrade happened
because of a manufactured crisis around the debt ceiling. The
president has been very clear that we are not going to
negotiate around the debt ceiling. If the debt ceiling needs to
be increased to take care of spending that has already been
passed by this Congress, and therefore, we should be not
manufacturing crises like the sequester, we should be turning
the sequester off. We should be making sure that we do not lose
hundreds of thousands of jobs. Washington should return to
regular order, and we should let businesses and the American
consumer have the confidence that Washington is not going to
manufacture a crisis and get in the way.
Mr. Jeffries. Thank you. Yield back the balance of my time.
Mr. Price. Thank you, sir. The gentlelady from Tennessee,
Ms. Blackburn, for five minutes.
Mrs. Blackburn. Thank you, Mr. Chairman. Mr. Zients, thank
you for being here. I will tell you, some of us like regular
order and we like the rule of law. And I have got four quick
questions for you. Let me ask you first, Section 49903(a) of
Title 49 in the U.S. Code statutorily defines law enforcement
personnel as individuals authorized to carry and use firearms
are vested with the police power of arrest and are identifiable
by appropriate markings of authority. So, with sequestration
and our debt crisis in mind, and you have talked about
sequestration a lot today, should federal agencies spend
federal funds on law enforcement uniforms for federal employees
that do not meet this definition in our law, yes or no?
Mr. Zients. I do not know enough about the topic. We can
follow up.
Mrs. Blackburn. You need to follow up. Well, do you believe
that the federal agencies should follow the law?
Mr. Zients. Absolutely. I think federal agencies are
following the law in how they are implementing the sequester.
Mrs. Blackburn. Okay. Should their spending practices be
consistent with federal law?
Mr. Zients. We have worked with agencies, agency
leadership. The guiding principle here is mission first. So as
agencies implement these difficult sequester cuts, they are
putting their mission first and foremost.
Mrs. Blackburn. Okay.
Mr. Zients. Individual decisions are up to the agency
leadership. So if there are specific questions you have for a
department, we can direct that to the secretary of that
department.
Mrs. Blackburn. Okay, well, I know you have a business and
a consulting background. So let me ask you this. Based on your
training and your work history there at OMB, should they
provide you with a federal law enforcement uniform even though
you have no federal law enforcement training?
Mr. Zients. I do not think I would do very well in a
federal law enforcement uniform. So, no, I do not think I need
the uniform.
Mrs. Blackburn. Sounds good. All right, airline industry,
let me ask you about this. They have lost about $50 billion and
a third of their workforce over the past decade, but looking at
TSA since '07, their budget has increased 18 percent. So that
is a double digit increase, despite the fact that in 2012 U.S.
airlines and passengers paid that agency $2.2 billion in taxes
and fees. That was a 50 percent increase over what had been
collected in '02. So should TSA receive increased funding when
passenger traffic over the past decade has declined by 30
million passengers a year?
Mr. Zients. Well, TSA obviously provides an invaluable
service. As to specifics around the TSA budget, the volume I
would defer to Secretary Napolitano.
Mrs. Blackburn. Okay. Let me ask you this, too. I received
the budget yesterday on behalf of the House, and, you know, it
was late. You had said in your January 11th letter to Chairman
Ryan that you were going to have it done as soon as possible.
Well, it was 65 days late, 65 days and 45 minutes exactly from
the deadline that it was to be here, but at 98 days later, do
you consider that to be as soon as possible considering that
the House has already done its budget, the Senate has done
theirs.
Mr. Zients. As you know from having received our budget, it
is extremely detailed. It is thousands of pages, a different
exercise than your budget exercise by design. Given what
happened with the fiscal cliff crisis at the end of the year,
and then the sequester, those had major impacts on our budget
process. I will assure you that the people at OMB worked very
hard to deliver the detailed budget that you received
yesterday, and we are happy to be here today to talk about it.
Mrs. Blackburn. And 98 days was as soon as possible as it
could get here?
Mr. Zients. Absolutely.
Mrs. Blackburn. And they know they are going to have to do
this every single year.
Mr. Zients. We do the budget every single year. I hope we
do not have a fiscal cliff negotiation and a sequester
negotiation every year.
Mrs. Blackburn. If we did a better job managing our funds,
we probably would not have those negotiations. Let me ask you
about the Department of Commerce. You requested $8.6 billion in
discretionary spending for them for fiscal year '14, and it is
a 26 percent increase since Obama first took office. So knowing
that we have got these difficult fiscal environments, and you
are talking about the fiscal cliff issues and the difficulty of
sequestration. So why can we not support a simple 2 percent
reduction?
Mr. Zients. Overall discretionary spending with the BCA cap
is being driven to the lowest level since the Eisenhower
administration.
Mr. Price. Gentlelady's time has expired.
Mrs. Blackburn. And I thank the gentleman. I yield back.
Mr. Price. Gentleman from Oregon, Mr. Schrader, for five
minutes.
Mr. Schrader. Thank you, Mr. Chairman. I appreciate it.
Well, I want to thank you for being here, Mr. Zients, you are
going to be sorely missed. Moving on here, I would also like to
congratulate the president for being the adult in the room. We
do not have, as I look at his budget, a purely Democrat budget
or a purely Republican budget. We have a budget that tries to
bridge the gaps, something this country sorely needs. More
specifically, does the president go after deficit reduction by
doubling down on the domestic sequester like the Republican
budget does, that would cost 750 jobs?
Mr. Zients. Absolutely not. The sequester is a terrible
policy. It was never intended to be implemented. It was meant
to be so terrible that it would force balanced deficit
reduction. The president's budget has more than enough balanced
deficit reduction to replace the sequester. The sequester is
hurting our growth by anywhere from a half to a full percent of
GDP, and will cost us hundreds of thousands of jobs.
Mr. Schrader. Does the president's well-meaning attempt to
reduce our deficits, national deficits, cut Pell grants or
double student interest loan rates like the Republican budget
does?
Mr. Zients. No, the president has put forth a permanent fix
to the student loan program.
Mr. Schrader. Does the president try and reduce our
national deficits by block granting Medicaid not adjusted for
medical inflation or actual case load?
Mr. Zients. No.
Mr. Schrader. Like the Republican budget does?
Mr. Zients. No, the president does not believe in block
granting Medicaid and the Republican budget also cuts Medicaid
by a third, resulting in more than, I think it is close to 20
million people losing Medicaid.
Mr. Schrader. Tell you what I would commend the president's
notice is an effort out in Oregon where we are actually doing
an outcome-based approach to Medicaid reform, where we are, you
know, frankly saying we are going to reduce Medicaid inflation
rates by 2 percent without cutting benefits.
Mr. Zients. And I do want to say, per an earlier
conversation where we ran out of time, the Administration is
supportive of waivers, demonstrations to improve Medicaid. Like
any health system, it can get better, but I do think we have to
recognize the importance of Medicaid for a very vulnerable
population that without Medicaid would not get help.
Mr. Schrader. I think incentivizing the states like the
president is doing is a really smart way to get savings and
make sure states have that flexibility, just like you
indicated. Does the president try and produce national deficits
by entertaining Medicare reforms that rely on the voucher? And
it is a voucher program. If it looks like a duck, quacks like a
duck, it is a duck. It is a voucher program, however you want
to slice it, that shifts two-thirds of the cost to seniors that
can ill-afford it being on fixed incomes.
Mr. Zients. No, the president's budget has sensible reforms
to Medicare, but maintains the program as we know it.
Mr. Schrader. And is it not true that knowledgeable
economists want deficits to be actually manageable given the
state of the country's economy, and that abruptly balancing the
budget in a short window like the Republicans do actually is
harmful to the recovery, and causes problems, and cuts jobs in
this country?
Mr. Zients. We talked about Europe before and austerity
budgets. Also, if you look at Bowles/Simpson and the other
groups, there is a balanced deficit reduction that phases in
across time as the economy recovers.
Mr. Schrader. I mean, in the real word, colleagues, in the
real world here we need to compromise. We are actually going to
have a budget deal at the end of the day here. We actually have
to compromise, and look at each other's opinion, and validate
the fact that this is a big country, everyone has a different
view of the world. You know, moms and dads across this country
have to figure out what to do and come to reasonable
accommodation. Business men and women come to a deal every
single day. I think in the real world we need to get past these
talking points. You know, it is time for this adult
conversation, actually deal with our rising health care costs,
and the fact that we have an aging population in this country
that is putting a burden on our revenue system like we have not
seen in a long, long time.
I think the president has laid down a very, very reasonable
compromised marker, one that he and the speaker had nearly
worked out to completion last summer. I hope the conversation
picks up from here. We go to conference, and the cooler heads
prevail, and we actually, like the folks in the no-labels group
do, try and understand one another's problems, and fix this
country once and for all. It is time to save our country,
folks, and I yield back.
Mr. Price. Wish to commend the gentleman from Oregon for
yielding back with 45 seconds left. The gentleman from Texas,
Mr. Williams, for five minutes, please.
Mr. Williams. Thank you, I am a small business owner, still
own a business, 41 years, and I ran because I did not think
that there was a lot of people defending small business
entrepreneurships in competition, and I have got to say after
hearing this testimony today, I am glad I ran. And I will tell
you, I come from Texas. And in Texas we always thought
President Obama, that sequester was his program. We talk about
how bad it is. I think that that is where it started. A couple
of questions real quick, they will be easy to answer. Why does
your budget not balance?
Mr. Zients. Our budget is the right fiscal path for this
period of time, because it supports jobs and the economy, while
at the same time bringing our deficits under control.
Mr. Williams. So that is your reason it does not balance,
okay. Tax increases, as a business owner, I can tell you, tax
increases have put us further in debt. That is just any way you
want to look at it. Why not tax reductions across the border to
create more revenue, and have the private sector and small
businesses grow? In other words, why should America have one of
the highest tax rates in the world, when we are trying to be
competitive? Why should the highest tax rates be something we
are happy with?
Mr. Zients. Let me say a few things. First of all, I, too,
come from the private sector. I was in the private sector for
22 years, and much of that time was during the Clinton period
of time.
Mr. Williams. You are cutting into my time. I want to ask
you the questions.
Mr. Zients. Okay, 97 percent of businesses are not impacted
by any of the president's tax reform proposals, 97 percent. For
corporations, the president does favor tax reform, tax reform
that encourages investment in this country like the RNE tax
credit, where it is only given for investment here.
Mr. Williams. Do you not think we ought to have lower taxes
to compete?
Mr. Zients. The president has put forward tax reform where
his target tax rate is 28 percent for corporations, 25 percent
for manufacturing. So the president is in favor of tax reform,
getting rid of loopholes and expenditures that encourage or
give awards.
Mr. Williams. You might want to get that word out to the
small business owners because they are not getting it. They are
scared to death. The next question I have is has any budget the
president prepared ever been ahead of vote of confidence or had
a vote to support it?
Mr. Zients. Well, as we talked a bunch, we are all excited
about getting back to regular order.
Mr. Williams. I was just asking, has he ever had a budget
that anybody supported?
Mr. Zients. People support his budget, yes.
Mr. Williams. Okay. Now, you are going to the private
sector. You started talking about your private sector
experiences. If you believe so much in this budget and this
accounting, are you going to use that accounting when you go in
the private sector, and will you borrow more in your new
business than you take in?
Mr. Zients. Well, I will go to the bottom line, and the
bottom line in this budget is that we have deficits on a
declining path, debt is on a declining path. At the same time,
we make important investments to create growth.
Mr. Williams. But I am talking about your future career.
Are you going to deficit spend? Are you going to go to your
banker and say, ``I am losing money, but I need more money''? I
mean, are you going to do that?
Mr. Zients. What I am going to do is I am going to try to
grow my business, same way we need to grow this economy, create
jobs, be competitive, make important investments in things like
infrastructure and R&D.
Mr. Williams. Well, that is fine. What is the threshold of
tax that this president thinks the private sector convey? How
high is it?
Mr. Zients. Well, I want to be clear that there is no tax
rate increase in the president's budget. There is no tax rate
increase. There is tax reform.
Mr. Williams. Well, you are not doing a very good job of
telling the small business owners that.
Mr. Zients. Ninety-seven percent of small businesses are
under $250,000 in income, and there have been no tax increase.
Mr. Williams. You know what? And they want to be more than
250,000. Your situation is making it so people cannot make
more. Now, they are trying to make 249 instead of 251. It is a
bad situation.
Now, we talked about eliminating poverty, but to eliminate
poverty by putting people to work through the private sector.
Regulations are killing the private sector. And I am going to
ask you a question: 7.8 percent unemployment, is it the norm
now? Is that the new norm? Is 15 percent poverty the new norm?
Is 18-year-olds to 64 that have not worked one day in a year,
is that the new norm? Is 15 percent underemployment the new
norm? Is 99 weeks of unemployment compensation, is that the new
norm?
Mr. Zients. No, it is not new norm. What we are trying to
do in this budget and what we will accomplish in this budget is
get people back to work and grow this economy. We have made
progress, 6.5 million jobs created by the private sector across
the last 37 months, 14 straight quarters of DGP growth. We have
got a lot of work ahead of us.
Mr. Williams. The other question is, I went to school in
Texas, so pardon my simplicity here, but how can you say that
you have had new job creation when unemployment has gone up,
when this administration has been, how can you have job
creation when unemployment continues to go up?
Mr. Zients. The unemployment rate is lower than when the
president came into office.
Mr. Williams. I do not believe it is.
Mr. Zients. It is 7.6 percent.
Mr. Williams. I do not believe it is. Mr. Chairman, thank
you. I yield back.
Mr. Price. The gentleman yields back. The gentleman from
New Jersey, Mr. Pascrell, for five minutes.
Mr. Pascrell. Thank you very, Director Zients, thank you
for your testimony today. I find interesting questions,
interesting responses, but I do know, and I am pretty positive
since I checked it with three different sources, that the
unemployment rate, which is too high, is lower than when this
president raised his hand.
Mr. Zients. Yes.
Mr. Pascrell. Am I correct, Mr. Zients?
Mr. Zients. That is consistent with what I just said, yes.
Mr. Pascrell. Okay. I think that the president should be
applauded for his proposals to not only invest in science, but
his proposal to make sure that we reward those corporations and
companies who want to bring jobs back to the United States of
America. I am glad that he has stuck with that proposal which
he made in the state of the union address last year, and he has
repeated it this year.
But we are kidding ourselves if we think that any sort of a
decrease in Social Security payments is a good idea. This
program was intended to be just one of the ways in which people
were insulated from poverty in their old age. But pensions and
savings have eroded dramatically. We all know that. According
to the Social Security Administration, 51 percent of the
workforce has no pension coverage whatsoever, none, and that
number is going to increase, we do know that. And 34 percent of
the workforce has no savings set aside for retirement. I think
we know that wages today do not keep up with costs, and that is
why our president included a raise to the minimum wage. And we
can debate that, but I think he is sensitive to the fact that
wages are not keeping up to the increase in certain costs.
Cutting the benefits our seniors rely on is not how we
should balance our budget, or try to balance the budget. The
average retired worker is receiving $1,262 a month. That
benefit is critical to a livelihood. They have worked for it,
by the way. Among elderly beneficiaries, 74 percent of
unmarried people rely on the check for either half or more of
their income. I mean, that is a fact. We can cite many other
facts. But why in God's name would we lead this budget in
determining that we are going to cut benefits in order to
reduce this deficit? With the current economic difficulties
facing seniors, what specific protections will the budget
include to ensure that those seniors who rely primarily on
Social Security benefits, and more and more do that every year,
Mr. Director. So how are we going to protect these seniors? You
tell me.
Mr. Zients. Well, first of all, the chained CPI was
included in the compromise package.
Mr. Pascrell. Yeah, I heard you say that before. Let's not
blame the other side. This is our budget.
Mr. Zients. I think it is also important, this is a cut in
benefits.
Mr. Pascrell. It is a cut in benefits.
Mr. Zients. It is not a cut in benefits. It is a decrease
in the annual increase of inflation to a benefit.
Mr. Pascrell. But you are recalculating. Let's go to point
one that you just made.
Mr. Zients. The benefit, when you go on Social Security,
starts at the same level. The annual increase will be pegged to
chain CPI, which could result in a lower increase.
Mr. Pascrell. But senior inflation is very different than
inflation for you. Do you recognize that in chained CPI?
Mr. Zients. Let me go to a second important point. The
president is only willing to do this if there is protection for
older beneficiaries. So at age 76, there is a bump up that will
equal to 5 percent of the benefit for all seniors. So there is
an older beneficiary increase to protect older beneficiaries.
This is consistent with Bowles/Simpson and other groups.
Mr. Pascrell. Thank you, Mr. Chairman. I had a lot of other
questions.
Mr. Price. The gentleman's time has expired. The gentleman
from Wisconsin, Mr. Duffy, for five minutes.
Mr. Duffy. Good afternoon, Mr. Director. I was not sure if
it was morning or afternoon. I know you were talking a lot
about chained CPI. When does Social Security go insolvent?
Mr. Zients. Social Security solvency is through 2033.
Mr. Duffy. 2033, and Medicare solvency goes to 2023.
Mr. Zients. I do not think so with the president's budget.
Mr. Duffy. Per CBO, currently, it is 2023 for solvency of
Medicare, right? Does CBO say that? Yes, right, it is 2023 for
CBO solvency for Medicare.
Mr. Zients. Right, but we are here talking about the
president's budget, which extends that late into that decade.
Mr. Duffy. That is right. So I am going to get to that. So
in your budget, you are proposing a change to Social Security
that is solvent for 10 years longer than Medicare. And what
changes you make in Medicare? No structural changes really.
Mr. Zients. Oh, absolutely.
Mr. Duffy. You are cutting benefits to providers, doctors,
hospitals, and clinics, but you are not structurally changing
Medicare that really fixes the problem, are you?
Mr. Zients. Well, first of all, chained CPI does not just
apply to Social Security, it applies to many government
programs, point number one.
Mr. Duffy. But it does involve Social Security, right? Does
it involve Social Security?
Mr. Zients. Yes.
Mr. Duffy. Yes, and does it affect Medicare? Listen, I am
asking the questions. Does it affect Medicare?
Mr. Zients. At a very small basis, yes.
Mr. Duffy. Right. And so why are you not focusing on fixing
Medicare?
Mr. Zients. Well, that is what I wanted to explain.
Mr. Duffy. Great.
Mr. Zients. We have $37 billion of savings, including
increased premiums for high income beneficiaries.
Mr. Duffy. Great. So, now, hold on.
Mr. Zients. It saves a trillion dollars in the second
decade.
Mr. Duffy. That brings you to solvency to what year?
Mr. Zients. Late into the 2020s.
Mr. Duffy. I thought it was an additional four years,
right?
Mr. Zients. That is late into the 2020s, yes.
Mr. Duffy. Okay. So if this is your proposal, to say this
is our plan, these are our priorities, you really have not
protected our seniors, have you? You have not put out a plan
besides cutting reimbursements that go to the benefit of our
seniors to actually save the programs.
Mr. Zients. To your point, we have extended Medicare
solvency, and most importantly, we have protected Medicare as
we know it.
Mr. Duffy. Mr. Chairman, could the witness answer the
question?
Mr. Price. The gentleman from Wisconsin controls the time.
Mr. Duffy. Do you care about fixing Medicare and saving it?
Mr. Zients. Absolutely. We want to save Medicare as we know
it. We do not want to turn Medicare into a voucher system. We
do not want to cut cost.
Mr. Duffy. Then why do you not put out a plan that saves
Medicare?
Mr. Zients. We do.
Mr. Duffy. No, you do not. You have solvency, but you don't
save it.
Mr. Zients. We put forward a plan that saves $370 billion
in this period of time, extends solvency, and saves over a
trillion dollars, but most importantly, it means Medicare as we
know it. It does not turn Medicare into a voucher system.
Mr. Duffy. Listen. No, no, hold on a second. No, no. You
cut a trillion dollars in reimbursements for Medicare.
Mr. Price. Gentlemen, suspend. If the gentleman desires to
speak instead of the witness, please reclaim your time.
Mr. Duffy. Very well. You cut a trillion dollars, $716
billion in Obama care, $300 billion in your budget, and it is
still not solvent. It still goes broke in 2027. So do you have
a plan that saves Medicare, protects our seniors, not just
current retirees, but the next generation retirees? Do you have
a plan that does that to keep it solvent?
Mr. Zients. We continue to make reforms to Medicare.
Mr. Duffy. That is not my question. Do you have a plan?
Mr. Zients. What we do is we protect Medicare as we know
it.
Mr. Duffy. I will reclaim my time. This is a yes or no. Do
you have a plan that saves Medicare, not just cut
reimbursements, but save it long term?
Mr. Zients. Yes, the president's plan saves Medicare as we
know it.
Mr. Duffy. I will reclaim my time. In 2030, Medicare is
solvent under your plan?
Mr. Zients. We will continue to make reforms to Medicare.
Mr. Duffy. I will reclaim my time. In 2030, is Medicare
solvent under your plan? Yes or no. The answer is no, is it
not?
Mr. Zients. It is not the right way to look at the problem.
Mr. Duffy. Yes, it is the right way.
Mr. Zients. The right way to address Medicare is to reform
it and to maintain Medicare as we know it.
Mr. Duffy. I reclaim my time. I want to look at job growth
and investment in infrastructure, okay? This is an important
part of growing our economy, putting people back to work,
right, and more people working brings more revenue into the
federal coffers. We all agree on that. I was reviewing the
budget, and nowhere in the budget did I see that the president
was going to support the Keystone Pipeline. Twenty thousand
direct jobs, 100,000 indirect jobs, infrastructure spending; I
don't see that support. So if you care about jobs, putting our
private sector unions back to work, why, in this budget, if you
care about infrastructure spending, if you care about jobs, why
are you not supporting the Keystone Pipeline?
Mr. Zients. The Keystone Pipeline decision is at the State
Department. So I defer you to the State Department. I will also
point to you the $50 billion immediate investment in
infrastructure.
Mr. Duffy. I reclaim my last 10 seconds. In 10 years from
now under your proposal, you have spent $750 billion to pay the
interest on the debt, $750 billion. That is $100 billion more
than you plan on spending on your military. This is exploding.
Mr. Price. Gentleman's time has expired.
Mr. Duffy. I yield back.
Mr. Price. The gentleman from Kentucky, Mr. Yarmuth for
five minutes.
Mr. Yarmuth. Thank you, Mr. Chairman. What I thought I
would do, since I am the last questioner on our side of the
aisle, is just make a couple of comments, and then offer you
the time to finish your answers, or respond to things that you
may have not been able to respond to during the course of the
morning.
The first thing I wanted to say is that it is very
frustrating to me to hear Speaker Boehner and Leader McConnell
talk about the fact that they, they being democrats or the
Obama administration, got their tax hikes in January, and that
is it. Now, they are asking for more. Would it not be fair to
say by the same logic because of the sequester, because of the
Budget Control Act, the roughly $2 trillion worth of cuts that
we have enacted over the last three years, that the Republicans
got their cuts, and yet they still ask for more cuts in the
Republican budget?
Mr. Zients. If you look at the deficit reduction achieved
to date without the sequester, because the sequester was never
intended to be policy, that 2.5 trillion, $3 in spending cuts
for every dollar of revenue.
Mr. Yarmuth. So Republicans have gotten lots of cuts.
Mr. Zients. Yes.
Mr. Yarmuth. And yet they have asked for more in their
budget?
Mr. Zients. Yes.
Mr. Yarmuth. Yeah, I thought that was fair. Secondly, Mrs.
Black spent a lot of time trying to distinguish between premium
support and voucher, the description or characterization of the
Republican plan, and I would just like to note that the
difference between those two characterizations is a lot smaller
than the difference between calling what we did in the
Affordable Care Act, allowing doctors to be paid for end-of-
life decisions, calling that death panels. I would say there is
a greater distinction in that vocabulary, but that is just fun.
I am just having fun. And I do want to say one other thing,
just to clarify. When we talk about solvency with Social
Security, we are not necessarily talking about a bankruptcy
type of solvency. We are talking about how long Social Security
can continue to pay 100 percent.
Mr. Zients. That is right, then it becomes 75 percent after
2033, but again, we will reform Social Security so that does
not happen.
Mr. Yarmuth. Right, I just wanted to get that on the
record. So from now on, I would just like to offer you the
remainder of my time, if you want to talk about the 90 percent
debt levels, or some of the other things that were brought up
during the discussion that you were unable to respond to.
Mr. Zients. I think that, just because it is so important
to emphasize the sequester, we heard from many of you in your
constituencies what is going on, and it is impacting people
across the country. It is going to cost us anywhere from a half
to a full percent of GDP. Hundreds of thousands of jobs at a
time when we need to be adding hundreds of thousands of jobs,
not subtracting. Therefore, I think it is really important that
a policy that was never, ever intended to be implemented, it
was meant to be a forcing function for balanced deficit
reduction, that we immediately turn off the sequester and
replace it with balanced deficit reduction.
Mr. Yarmuth. I appreciate that, and just to segue from that
just a moment, there is a lot of conversation, there was some
conversation earlier about this notion of public expenditures
and the public economy versus the private economy. And I
reviewed our employment situation in my district of Louisville,
Kentucky, and seven of our largest nine private sector
employers rely to a significant extent on government spending.
That is everything from UPS, we are the global hub of UPS, they
have $1 billion contract with the federal government; to our
hospital systems; to Humana, which, right now, realize 80
percent of Humana's business comes from the federal government.
So when we are talking about these cuts in federal spending, we
are not talking about just government bureaucrats who are
paying the price. We are talking about a significant portion of
the private economy and private employment.
Mr. Zients. Just taking advantage of your generosity in
giving me a little bit of time, I never really had an
opportunity to comment on the one chart that went up, which
showed gross debt, which is not the right way to look at our
debt. It is publically-held debt; publically-held debt is on a
declining path starting 2016 in the president's plan. That is a
clear milestone of fiscal sustainability. The second thing is
on this Medicare solvency issue. The president has done a lot
to improve our situation on Medicare cost. Our cost per capita
are now growing less than GDP. CBO adjusted their baseline by
over $200 billion to reflect the slowing of Medicare on a per
capita basis that has occurred during the president's term.
Mr. Yarmuth. Thank you.
Mr. Price. Gentleman's time has expired. Just for the
record, the public debt remains in the low 70s the whole time,
and under the president's plan.
Gentleman from Oklahoma recognized for five minutes, Mr.
Lankford.
Mr. Lankford. Thank you, Mr. Chairman. Thank you for being
here. A long day, I know, as well. You had mentioned before
about cigarette tax and the increase of cigarette tax. It has a
dual purpose. It is bringing in more revenue, and also decrease
the usage. Is that correct, based on your comment earlier?
Mr. Zients. Yes.
Mr. Lankford. Right, so if a cigarette tax goes in place,
it decreases the usage of the cigarettes. There is also a
proposal that you have in there in the budget as well that
basically removes an incentive to continue to add to an IRA if
you get past $3 million in an IRA. Do you assume from that that
if people get to a $3 million capping area they will stop
putting money into an IRA, they will invest in other areas,
they will move away from that? I am sorry, I am just trying to
set up something. Is that a yes or no? Do you think people will
continue to add to it?
Mr. Zients. If the tax advantages of contributing should
stop at the 3 million level.
Mr. Lankford. Right, I understand, but do you think people
will stop putting into an IRA as much at that point, that they
will invest in other areas because they do not have the tax
advantage?
Mr. Zients. It depends on what their alternative
investments are.
Mr. Lankford. If it actually costs more, then they probably
will. And so a cigarette tax, hold on just a second, let me
talk about this real quick. A cigarette tax will probably
decrease the use of cigarettes, and if you remove all the tax
incentives for an IRA at a certain level, it will probably
decrease the use of an IRA. The question I have is, there is
also a significant portion in here that says that they are
going to remove all the normal business expensing for
traditional energy production, so oil, gas, coal, that all of
those normal business expenses for them will go away. Do you
think we will have more or less energy production if you remove
all the normal business expensing away from energy companies?
Mr. Zients. I think that we have had a big increase in
production, and I think we will continue to have an increase in
domestic production, particularly in natural gas.
Mr. Lankford. So it will be the opposite effect. Well,
actually, right now, we are at the lowest drilling that we have
been in natural gas since 1999.
Mr. Zients. Our natural gas productions are record high.
Mr. Lankford. I understand, but the actual drilling and
expiration, that the business expenses deals with expiration.
It is not dealing with the production, right? Are you aware of
that?
Mr. Zients. Yes.
Mr. Lankford. Okay, so, when we are talking about the
expiration and adding new amounts of inventory on there, do you
think we will increase inventory if we raise taxes on energy
production?
Mr. Zients. I think that we need to have an all-of-the-
above energy strategy, where we are encouraging renewable
energy, solar, geo-thermal.
Mr. Lankford. I think you know where my questions are. You
are answering a question I am not asking. I am asking, do you
think we will increase production of traditional energy by
increasing the tax burden on traditional energy producers?
Mr. Zients. I think we will have our incentives
appropriately aligned with an all-of-the-above energy strategy,
which encourages efficiency, includes alternatives, and has a
fair tax code.
Mr. Lankford. Actually, hold on, no, let me reclaim my
time. The Greenbook, the Treasury, and the details of this
actually uses the term that they want to have a neutral system,
and that if you remove all the tax incentives for traditional
energy production, oil, natural gas, and coal, and the move is
to a neutral position, is it the president's position that we
should be neutral on energy?
Mr. Zients. The president believes that we should be
encouraging alternative forms of energy, that we should be
encouraging efficiency, and that we should also be encouraging
domestic gas and oil production.
Mr. Lankford. I would have no problem encouraging
efficiency in all different kinds of ways, but if we are going
to be neutral, it is just interesting to me. In one of the
books, it talks about how oil and natural gas, if you go to
this one, it talks about oil and natural gas will be the energy
for the future because it is what we are producing, but we hope
to transition at some point to that. You go to a different
page, and it says we are going to decrease the usage of oil and
natural gas, and try to get us to a different one. And if I go
to the Treasury book, it actually says we just need to be
neutral on this. And so it is really interesting to try to
figure out the tax policy and the energy policy of where we are
headed on this. There is no question that if you raise taxes
and you remove all the normal business expensing, that it is
going to decrease production. My question along with that is,
is there another industry that the president wants to remove
normal business expensing from?
Mr. Zients. Well, the president definitely wants to get rid
of tax expenditures and loopholes that encourage companies to
move overseas.
Mr. Lankford. Sure, I would agree with that, but he is
unwilling to do a territorial tax system, am I correct on that?
Mr. Zients. I'm sorry?
Mr. Lankford. A territorial tax system. I mean, that does
not seem to be addressed.
Mr. Zients. Again, you will have Secretary Lew at some
point. But I do not think of it as territorial and global. The
president has put forward principles for corporate tax reform,
lowering the rates, particularly for manufacturing, and having
a global minimum tax, which is really a hybrid system. It is
not a territorial or worldwide system.
Mr. Lankford. Let me reclaim my time. If all the business
expensing for energy production is taken away, I assume that is
to incentivize that we go to, then, other forms of energy. The
reality of that is the middle class will pay more for energy in
the days ahead, and that will be a middle-class tax. It just
shifted to a different area.
Mr. Price. Gentleman's time has expired. Gentleman from
Georgia, Mr. Woodall, for five minutes.
Mr. Woodall. Thank you, Mr. Chairman. Eric, if I could ask
you to put our slide up. I feel less like we are having a
hearing here, Mr. Price. More like you and I are just sitting
around the dinner table together. And with that in mind, I do
not know if you can read this.
Mr. Zients. I actually cannot, can I get a paper copy of
it?
Mr. Woodall. I am not going to go deep into the weeds.
Mr. Zients. Okay, because I literally cannot see any of it.
Mr. Woodall. I am going to take you back about two hours. I
am going to recommend a good ophthalmologist to you as well to
spot that. Lasik is what solved my woes.
Mr. Zients. I will take you up on that.
Mr. Woodall. So I will take you back to what the gentleman
from Maryland, I believe you all were talking earlier about,
fundamental tax reform, and whether or not you have received
proposals that could bring the rates down to 25 percent for
high-income earners without raising the burden on middle- and
lower-income Americans. And I will just refer you to a CBO
report. They are doing an update right now, so these are
actually old numbers that I have on the board, but what they
show is that the effective income tax rate today for folks in
the top 1 percent, the effective income tax rate for folks in
the top 1 percent, which is for people who are earning $1.7
million a year, is 19 percent. You go down to the top 10
percent, which is folks averaging $366,000 a year or more, the
effective income tax rate is 16 percent. So what I would just
say, and I have been here for two years and it still surprises
me how we argue about silliness all the time, if the effective
income tax rate today is 16 percent, and if what we would like
to do through fundamental tax reform is lower marginal rates
and broaden the base----
Mr. Zients. Could you give me a sense of some of the tax
expenditures that you would get rid of?
Mr. Woodall. I would say to the gentleman that you are
absolutely right. That is the hard conversation. But to say it
is not doable, to say it cannot be done without raising taxes
on middle-income Americans, is nonsense. It cannot be done
without restricting tax breaks for upper-income Americans,
which is something the president has been very comfortable
proposing, something that we have been very comfortable talking
about.
Mr. Zients. It is not restricting, it is getting rid of all
of them and more. And more.
Mr. Woodall. It is eliminating them altogether. Absolutely.
But again, to say it cannot be done, say we disagree about the
way it can be done, but let's not say it cannot be done. And
that is where I want to spend the rest of my time. Again, I am
disappointed. You are right to point out the frustration that
all of America has with the brinkmanship and the last-minute
deal making that characterize the fiscal cliff and so much of
everything else that we do. Yet you look down the road just two
decades away, before the time that I retire, and you still say
there is no need to work on Social Security yet because that
problem is far, far away. We will get to it then. Even
Medicare, you said we solved it because we are going out four
years, we are going to push solvency out four years.
Mr. Zients. I fear that you have mischaracterized what I
said.
Mr. Woodall. Please.
Mr. Zients. The president has put out basic principles for
Social Security reform. I have said it is not a driver of our
near-term fiscal situation. At the same time, the president is
willing and would like to, once we get this set of situations
behind us, discuss Social Security reform in balanced way. In a
balanced way.
Mr. Woodall. Again, let me make sure that I understand
whether we are kicking the can down the road or whether we are
taking these challenges on directly. I did not see a word in
the president's budget about doing anything to extend the
solvency of Social Security. Did I miss an idea that he has?
Mr. Zients. Social Security is solvent through 2033.
Mr. Woodall. We will stipulate that.
Mr. Zients. It is not a driver of our near-term fiscal
situation.
Mr. Woodall. No, it is not. We will stipulate that. Did I
miss a single idea for solving the Social Security shortfall
long term?
Mr. Zients. As I said, the president has put forward
principles for Social Security reform.
Mr. Woodall. Absolutely. And that is what I am saying, I am
disappointed about that. But you say that is out 20 years, so
we do not have to worry about it. What about the Social
Security disability trust fund? Do you know when that trust
fund exhausts its resources?
Mr. Zients. I believe it is 2016. When I am citing 2033, it
is the combination of the two trust funds.
Mr. Woodall. Absolutely. So the Social Security disability
trust fund, it is the fiscal year 2016. It is actually the
calendar year 2015, within the president's term. I know we have
one in 10 Americans who depend on that program. One in 10
insurance-paying Americans depend on the Social Security
disability trust fund. That trust fund will exhaust its
resources, and either benefit cuts will occur, or we will have
to begin borrowing from the general Social Security trust fund,
thus speeding its demise. And there is not one idea in the
president's budget. Maybe you are right that we can wait 20
years to work on Social Security.
Mr. Zients. That is actually not the case.
Mr. Woodall. What is the one idea?
Mr. Zients. Continuing disability reviews, which have a $9
to $1 return, that we would like to have funded as part of
Program Integrity, to ensure that people that are on disability
should remain on disability.
Mr. Woodall. And that extends the disability trust fund
from 2016 to when?
Mr. Zients. I do not have that calculation. It is $9 to $1
return, so we should fund that immediately. It is a great, it
is a fantastic return on investment.
Mr. Woodall. We will stipulate that. Kicking the can down
the road is bad, and it is bad no matter who is doing it. I
wish we could sit around the kitchen table and solve these
issues more often. Mr. Chairman, I yield back.
Mr. Price. Gentleman's time has expired. Gentleman from New
Jersey, Mr. Garrett, for five minutes.
Mr. Garrett. And I guess I am the last one, so I guess we
can agree that we are not going to agree 100 percent on these
things, so far with what I am hearing about this, so can we
agree there may be some things we can agree on, and that is
those things that we should probably focus on?
But one of the things I heard when I came into the room was
you said there are no new taxes in the budget. Did I hear that
correctly? I just walked in at that time.
Mr. Zients. What I was talking about is the $580 billion
which is part of the $1.8 trillion compromise with Speaker
Boehner. All of that is achieved through tax reform, not
through raising rates.
Mr. Garrett. Okay.
Mr. Zients. And I will remind folks that in December
Speaker Boehner said there was $800 billion in tax reform
potential.
Mr. Garrett. Right. I will take that. Yes, and I think that
meets the president's pledge early on, and your interpretation
that never raise taxes on anyone who makes over $200,000.
Mr. Zients. Less than.
Mr. Garrett. I'm sorry, less. So the president's pledge was
never to raise taxes on anyone who makes less than $200,000,
and the president has kept that pledge?
Mr. Zients. It is a couple who make over $250,000,
individuals at $200,000.
Mr. Garrett. And so he has kept that pledge with regard to
the budget?
Mr. Zients. Yes.
Mr. Garrett. And with regard to the cliff vote that we had
at the end of last year, the fiscal cliff issue?
Mr. Zients. Yes.
Mr. Garrett. So the president has always kept that promise?
Mr. Zients. Yes.
Mr. Garrett. And even when we passed the Affordable Health
Care Act, he has kept that promise as well?
Mr. Zients. Yes.
Mr. Garrett. And so we have never raised taxes on the
American public who make under $200,000?
Mr. Zients. Yes.
Mr. Garrett. And so the Supreme Court across the street was
incorrect when they called the Affordable Health Care Act a tax
increase because you still take the position, and the White
House still takes the position, that that was not a tax?
Mr. Zients. That is a choice that an individual.
Mr. Garrett. So it is not a tax?
Mr. Zients. It is an individual responsibility fee. I am
not a lawyer.
Mr. Garrett. Is it a tax or is it not a tax? Last year you
said it was not a tax; has your opinion changed since last
year?
Mr. Zients. It is an individual responsibility fee.
Mr. Garrett. Yes or no, is it a tax?
Mr. Zients. It is an individual responsibility fee.
Mr. Garrett. Is what I do April 15th an individual
responsibility fee?
Mr. Zients. It is an individual responsibility fee, and I
will defer to the Supreme Court on technical definitions. I am
not a lawyer, I will defer to the Supreme Court.
Mr. Garrett. So I take that as you do not know what a tax
is and the White House does not know what a tax is?
Mr. Zients. I do know that when those individuals who can
afford health care do not purchase health care, they are
transferring the cost to everybody else.
Mr. Garrett. I reclaim my time. I reclaim my time. Also,
when I walked into the room, you said the sequester was a
terrible policy. I understand that the press secretary speaking
for the president said that the sequester was the White House's
proposal. My question to you is, is there anything else in the
budget that is before us that is also terrible policy to be
proposing? That is a yes or no question.
Mr. Zients. Let me clarify. I think I should get to clarify
what I meant. The sequester was a forcing function. It was not
a policy that was meant to be implemented. So as a policy that
is being implemented, it is a terrible policy.
Mr. Garrett. Okay. Is there other times where the president
has given us terrible policies as suggestions to Congress?
Mr. Zients. I do not know what you are referring to.
Mr. Garrett. You are on quote saying that you thought it
was a terrible policy.
Mr. Zients. No. No. Please, I said that the sequester was a
forcing function. Implementing the sequester, an across-the-
board indiscriminate cut, is terrible policy. Implementation is
terrible policy.
Mr. Garrett. I'm reclaiming my time. I'm reclaiming my
time. I wrote down exactly what you said, ``Sequester was
terrible policy.'' But going beyond that, we are operating
right now under the 1974 Budget Act, is that correct, as far as
the procedure that we go through, as far as putting budgets
through the Congress?
Mr. Zients. Yes.
Mr. Garrett. Yes. Under that law, the president is
required, and was required, to present a budget to us two
months ago, correct? The answer is?
Mr. Zients. The answer is the budget is here today, in full
detail. In full detail.
Mr. Garrett. We cannot get straight answers even when you
admit to what the law is. Does not the law require that the
president submit it to us two months ago?
Mr. Zients. In full detail. The reason for the delay was
the fiscal cliff.
Mr. Garrett. No, no, no, reclaiming my time. Does the law
require him to present the budget two months ago, yes or no?
Mr. Zients. The budget is here today.
Mr. Garrett. Can you not answer a simple question? Does the
law require it? If you do not know what the law is, we can have
you come back at another time once you can get briefed on what
the law is. Does the law require that the president present a
budget over two months ago, yes or no?
Mr. Zients. The president's budget is here today. The
president's budget was delayed.
Mr. Garrett. Mr. Chairman, I would suggest that we do
recall this witness at a time that he can go back to answer
simple questions as to what the law is. Do you know what the
law is, sir? Do you know what the law is, sir?
Mr. Price. The record will demonstrate that the witness has
not answered the question.
Mr. Garrett. Then I would recommend to the Chairman that we
recall this witness when he has an opportunity to refer back to
what the law is.
Mr. Van Hollen. Actually, just for the record, the witness
did answer your question, you may not like the answer you are
getting.
Mr. Garrett. I was asking if he knows what the law is. He
would not give an answer to that. The president has violated
that law over the last four out of five years, and I would
request, Mr. Chairman, that we recall this witness when he can
be briefed not only on this law, but on many other times when
he's failed to answer questions.
Mr. Price. That request will be taken into consideration
with the Chairman. I want to thank the witness for being with
us for nearly three hours. I wish you Godspeed in your future
endeavors. All members of the committee may have until 6 p.m.,
Friday, April 12th, to submit questions for the witness, Acting
Director Zients, the answers to which shall be entered into the
record of this hearing. At this point, this hearing is
adjourned.
[The prepared statement of Jackie Walorski follows:]
Prepared Statement of Hon. Jackie Walorski, a Representative in
Congress From the State of Indiana
Mr. Zients, thank you for being here today. It is unfortunate that
this budget request is more than two months late. I appreciate the
enormous task of compiling the federal budget, but I believe the
Administration missed a key opportunity to be a part of finding a
solution to the financial mess our country is in. The House and Senate
have already completed discussion on our respective budget resolutions.
We are trying to move forward with the process, and now we are having
to put our work on hold to come back to this. But, better late than
never. I am glad we are getting the chance to discuss this budget
proposal and I look forward to asking you some questions.
[Questions submitted for the record and their responses
follow:]
Questions Submitted for the Record by Chairman Ryan
1. Table 5-2 in the Analytical Perspectives, ``Federal Government
Financing and Debt,'' includes a line item, ``Net disbursements of
credit financing accounts.'' This is comprised of ``Direct loan
accounts'' and ``Guaranteed loan accounts.'' Please disaggregate this
data by program.
2. On May 23, 2005, the OMB Director issued M-05-13 formally
establishing a requirement that administrative actions that increased
mandatory spending be offset by other administrative actions that
decreased mandatory spending.
a. Is this memorandum still in force? If yes, please describe the
procedures in place to enforce this requirement. If no, please explain
the reasons this policy was discontinued.
b. Does OMB budget in advance for administrative actions that would
increase or reduce mandatory spending? If yes, please provide a table
detailing the administrative actions that are included in the
President's FY 2014 budget request, including the budgeted cost or
savings.
3. Please provide the annual budget authority and outlays for
Overseas Contingency Operations/Global War on Terrorism in (1) OMB's
BBEDCA Baseline; (2) OMB's Adjusted Baseline; and (3) the President's
Budget Request.
4. Under the Bush Administration, OMB used an assessment model
known as the Program Assessment Rating Tool (PART) to evaluate the
effectiveness of government programs. PART allowed the public to get an
idea of how programs were performing. Why did OMB, under the Obama
Administration, choose to discontinue the use of PART? Does this
Administration not feel that it is important for the public to know the
effectiveness of programs being funded by taxpayer dollars?
5. During the hearing, Congresswoman Lee asked for information on
the effectiveness of programs targeted towards low-income programs.
Please provide information on:
a. What programs are most effective at moving individuals and
families from poverty into the middle class (please provide the basis
for your assessment); and
b. How does OMB measure the effectiveness of low-income programs?
6. Please provide a table sorted by agency displaying the final
enacted FY 2013 budget authority for each appropriation account
including the effect of the sequester the President ordered on March 1
and the administrative rescission implemented on March 27, 2013.
7. The Budget includes $1.227 million in mandatory funding and $273
million in discretionary base funding for continuing disability reviews
(CDRs) that are projected to save a net of $37.7 billion over 10-years.
You implied that this would shift back the projected insolvency date of
the Social Security Disability Insurance program. If the President's
proposal is enacted, in what year would the Disability Insurance Trust
Fund become insolvent?
Questions Submitted for the Record by Hon. Marsha Blackburn, a
Representative in Congress From the State of Tennessee
Director Zients, page 51 of the President's Fiscal Year 2014 Budget
discusses reforming the Tennessee Valley Authority. Specifically, the
budget states ``Given TVA's debt constraints and the impact to the
Federal deficit of its increasing capital expenditures, the
Administration intends to undertake a strategic review of options for
addressing TVA's financial situation, including the possible
divestiture of TVA, in part or as a whole.''
However, as you may know, Section 208 of the Urgent Supplemental
Appropriations Act of 1986 (PL 99-349) prohibits the Federal Government
from soliciting or studying any proposals to sell the Tennessee Valley
Authority or the Federal Power Marketing Administrations (PMA) without
specific congressional authorization.
Does the Administration intend to undertake a strategic review of
options for addressing TVA's financial situation, including the
possible divestiture of TVA, in part or as a whole, without specific
authorization from Congress?
What specific legal authority does the Administration have to
conduct the review without authorization from Congress?
Please also provide a list of individuals that will conduct the
review, the date the review will begin, as well as the date that the
review will be completed by.
Questions Submitted for the Record by Mrs. Walorski
1. Mr. Zients, there are many people in my district who are very
concerned that this budget never balances. They don't think it's right
that while they are working hard to live within their means, the
President is raising their taxes and encouraging the federal government
to spend even more money it does not have. I actually brought this
concern to the attention of the President, but his response to me was
just to say, ``Well, the federal government is not a family.'' Mr.
Zients, can you please explain for the record why, at a time when the
national debt is $16.8 trillion, the Administration does not think the
federal government needs to live within its means? And, before you
answer, I'd like to point out that many prominent Democrats believe we
should balance the budget, so I'd be curious to hear why the
Administration believes these Democrats are wrong.
2. Can you please provide a detailed explanation of what the
President's proposed changes to Social Security will look like for the
average American? Specifically, what do these changes mean for folks
currently collecting Social Security, and what do they mean for future
beneficiaries? Will this increase or decrease the amount of money
beneficiaries receive per check?
3. I would like to talk for a moment about the tax increases this
budget places on small business owners and on low-income Americans (via
the cigarette tax.) How will taxing our job creators and our poor help
boost our economy?
4. What additional spending cuts can be made that you believe
Republicans and Democrats can agree upon?
Director Zients' Response to Questions Submitted for the Record
REP. BLACKBURN
Director Zients, page 51 of the President's Fiscal Year 2014 Budget
discusses reforming the Tennessee Valley Authority. Specifically, the
budget states ``Given TVA's debt constraints and the impact to the
Federal deficit of its increasing capital expenditures, the
Administration intends to undertake a strategic review of options for
addressing TVA's financial situation, including the possible
divestiture of TVA, in part or as a whole.''
However, as you may know, Section 208 of the Urgent Supplemental
Appropriations Act of 1986 (PL 99-349) prohibits the Federal Government
from soliciting or studying any proposals to sell the Tennessee Valley
Authority or the Federal Power Marketing Administrations (PMA) without
specific congressional authorization.
Does the Administration intend to undertake a strategic review of
options for addressing TVA's financial situation, including the
possible divestiture of TVA, in part or as a whole, without specific
authorization from Congress?
What specific legal authority does the Administration have to
conduct the review without authorization from Congress?
Please also provide a list of individuals that will conduct the
review, the date the review will begin, as well as the date that the
review will be completed by.
The proposed strategic review of options for addressing TVA's
financial situation is consistent with applicable law. As a general
matter, the Administration has the responsibility to conduct these
types of reviews to ensure the Federal Government is operating as
efficiently as possible.
The Administration's primary consideration for the strategic review
is how to best position TVA to address its capital financing
constraints within the current fiscal environment. The possible TVA
divestiture option referenced in the President's Budget was not
intended to suggest a specific course of action but rather to provide a
basis for discussion. The Administration will evaluate various options
for addressing this issue, including potentially some options outlined
in the September 2011 TVA Office of Inspector General's (OIG) report
entitled ``History, Status, and Alternatives: TVA Financial
Flexibility.''
Administration officials will work with TVA over the next few
months to develop a plan for the review which will address its
financing issues to meet future capacity needs, fulfill its
environmental responsibilities, and modernize its aging generation
system. The review will include discussions with appropriate
stakeholders, including the Congress, customers, State and local
governments, and employees, contractors, and labor organizations to
ensure that all issues are taken into consideration--including
electricity prices, environmental obligations, employment issues, and
the safe and reliable delivery of electricity.
CHAIRMAN RYAN
Table 5-2 in the Analytical Perspectives, ``Federal Government
Financing and Debt,'' includes a line item, ``Net disbursements of
credit financing accounts.'' This is comprised of ``Direct loan
accounts'' and ``Guaranteed loan accounts.'' Please disaggregate this
data by program.
The attached table reflects estimated net financing disbursements
from the President's FY 2014 Budget, disaggregated by account and
grouped by direct and guaranteed loan types. Net financing
disbursements represent total cash outflows from the financing account
less total cash inflows to the financing account. Cash inflows include
subsidy and reestimate collections from the program account, borrower
principal and interest payments, recoveries, fees, interest received
from Treasury, and other inflows. Cash outflows include loan
disbursements, default claim payments, negative subsidy and downward
reestimate payments transferred to the receipt account, interest paid
to Treasury, and other outflows.
On May 23, 2005, the OMB Director issued M-05-13 formally
establishing a requirement that administrative actions that increased
mandatory spending be offset by other administrative actions that
decreased mandatory spending.
a. Is this memorandum still in force? If yes, please describe the
procedures in place to enforce this requirement. If no, please explain
the reasons this policy was discontinued.
b. Does OMB budget in advance for administrative actions that would
increase or reduce mandatory spending? If yes, please provide a table
detailing the administrative actions that are included in the
President's FY 2014 budget request, including the budgeted cost or
savings.
OMB memorandum M-05-13 establishes a pay-as-you-go requirement for
discretionary administrative actions that affect mandatory spending,
and it remains in force. Section 31.3 of OMB Circular A-11, which
governs preparation, submission, and execution of the President's
Budget, requires that agency budget requests include a list of all
planned or anticipated administrative actions that would increase
mandatory spending. Agency actions that are approved by OMB under the
guidelines of the OMB memorandum are included in the baseline for the
President's Budget, and are not separately tracked.
Please provide the annual budget authority and outlays for Overseas
Contingency Operations/Global War on Terrorism in (1) OMB's BBEDCA
Baseline; (2) OMB's Adjusted Baseline; and (3) the President's Budget
Request.
The attached table provides the requested information.
Under the Bush Administration, OMB used an assessment model known
as the Program Assessment Rating Tool (PART) to evaluate the
effectiveness of government programs. PART allowed the public to get an
idea of how programs were performing. Why did OMB, under the Obama
Administration, choose to discontinue the use of PART? Does this
Administration not feel that it is important for the public to know the
effectiveness of programs being funded by taxpayer dollars?
Yes, the Administration believes that it is important for the
public to know the effectiveness of programs.
The ultimate test of a performance management system is whether it
is used to drive results. PART succeeded in getting agencies to develop
more measures, and provided summary ratings for each program, but few
in Congress or among agency managers used PART information to improve
program management, make resource allocations, or inform decisions. In
fact, GAO's survey of Federal managers in 2007 showed that very few
managers found PART information useful to management decisions or
helpful in improving performance.
A first priority of this Administration was to develop a
performance management system at the Federal level that was actively
used by agency leadership and managers. In 2010, the Administration
launched the Priority Goals initiative, asking agency leaders to set a
limited number of ambitious, near-term, implementation-focused goals,
and commit to running frequent data-driven performance reviews to drive
progress on those goals.
The result is a performance management system that is actively used
by agency leadership, and is producing significant improvements in
outcomes. A GAO survey released this year found agency Deputy
Secretaries/Chief Operating Officers engaged in their data-driven
performance reviews, and ``attributed improvements in performance and
decision making to the reviews * * * which allowed different functional
management groups and program areas within their agencies to
collaborate and identify strategies which led to performance
improvements.''
Based on the lessons learned from both the PART and the Priority
Goals, and supported by the GPRA Modernization Act, the Administration
is now expanding its performance improvement efforts to cover the
agency's broader strategic goals and objectives. Starting in 2014, each
Federal agency will assess progress toward each ``strategic objective''
included in the agency strategic plan in order to inform strategic
choices, budget and policy priorities, and operational decisions.
During the hearing, Congresswoman Lee asked for information on the
effectiveness of programs targeted towards low-income programs. Please
provide information on:
a. What programs are most effective at moving individuals and
families from poverty into the middle class (please provide the basis
for your assessment); and
b. How does OMB measure the effectiveness of low-income programs?
The Budget builds on the progress made over the last four years to
expand opportunity for every American and every community willing to do
the work to lift themselves up. It creates new ladders of opportunity
to ensure that hard work leads to a decent living. It expands early
childhood learning to give children a foundation for lifelong learning.
It supports a partnership with communities to help them thrive and
rebuild from the Great Recession. It creates pathways to jobs for the
long-term unemployed and youth who have been hardest hit by the
downturn. It rewards hard work and reduces inequality and poverty by
supporting an increase in the minimum wage. And it strengthens families
by removing financial deterrents to marriage and supporting the role of
fathers.
The Budget also builds on programs that have a track record of
success in lifting families out of poverty. For example, the Budget
permanently extends expansions of the Child Tax Credit and the Earned
Income Tax Credit that were passed in the Recovery Act and continued as
part of the bipartisan Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act and The American Taxpayer Relief
Act that the President negotiated and signed into law in January 2013.
The expanded refundability of the Child Tax Credit benefits 12 million
families with 21 million children. The expansion of the Earned Income
Tax Credit for married couples and families with three or more children
provides tax cuts averaging $500 to 6 million families. These
improvements lifted 1.6 million Americans out of poverty in 2010. The
Budget also continues support of the Supplemental Nutrition Assistance
Program, the cornerstone of our Nation's food assistance safety net
that touches the lives of more than 47 million people by helping
families put food on the table.
The Budget also proposes investments that will help level the
playing field for children from lower-income families, so they enter
school prepared for success. This includes preschool for all lowand
moderate-income four year olds and Early Head Start-Child Care
Partnerships to provide access to high-quality early learning for
infants and toddlers. The Budget also includes an additional $7 billion
for the Child Care and Development Fund over the next ten years to
maintain the number of low-income families receiving subsidies and
invests $15 billion in extending and expanding evidence-based,
voluntary home-visiting for at-risk parents and children.
OMB, working in collaboration with other Federal agencies, uses a
number of approaches to determine the effectiveness of low-income
programs, including program evaluation, performance measures, and
program data.
Please provide a table sorted by agency displaying the final
enacted FY 2013 budget authority for each appropriation account
including the effect of the sequester the President ordered on March 1
and the administrative rescission implemented on March 27, 2013.
OMB is working to develop the information responsive to this
request and will provide at a later date.
The Budget includes $1.227 million in mandatory funding and $273
million in discretionary base funding for continuing disability reviews
(CDRs) that are projected to save a net of $37.7 billion over 10-years.
You implied that this would shift back the projected insolvency date of
the Social Security Disability Insurance program. If the President's
proposal is enacted, in what year would the Disability Insurance Trust
Fund become insolvent?
The Social Security trustees project that, on a combined basis, the
Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI)
Trust Funds will be solvent through 2033. However, by itself, the DI
Trust Fund will be exhausted in 2016.
To help protect the DI Trust Fund, the 2014 Budget requests
additional funding for Social Security Administration (SSA) program
integrity to help ensure that only those eligible for DI benefits
receive them. Each $1 invested in CDRs returns $9 in program savings.
Additionally, the President's Budget calls on Congress to reauthorize
and enhance SSA's demonstration authority for the DI program.
Reauthorization of this authority is overdue and would allow SSA to
test innovative strategies to help workers with impairments remain in
the workforce and help beneficiaries return to work. The President's
Budget also includes a legislative proposal to reduce an individual's
DI benefit in any month in which that person also receives a State or
Federal unemployment benefit, eliminating duplicative payments for the
same period out of the workforce, while still providing a base level of
income support.
These measures alone will not delay the projected DI Trust Fund
exhaustion date, though they will help strengthen the program and
reduce costs in the coming years. The President stands ready to work on
a bipartisan basis to safeguard Social Security and place both OASI and
DI on a stronger footing.
REP. WALORSKI
Mr. Zients, there are many people in my district who are very
concerned that this budget never balances. They don't think it's right
that while they are working hard to live within their means, the
President is raising their taxes and encouraging the federal government
to spend even more money it does not have. I actually brought this
concern to the attention of the President, but his response to me was
just to say, ``Well, the federal government is not a family.'' Mr.
Zients, can you please explain for the record why, at a time when the
national debt is $16.8 trillion, the Administration does not think the
federal government needs to live within its means? And, before you
answer, I'd like to point out that many prominent Democrats believe we
should balance the budget, so I'd be curious to hear why the
Administration believes these Democrats are wrong.
The President's Budget represents a careful balance between the
need for short-term measures to safeguard our economic recovery and the
need for further deficit reduction to bring the Federal debt under
control. The 2014 Budget maintains our commitments to the most
vulnerable and continues to make the investments that will support
future jobs and economic growth, while at the same time reducing the
deficit below historical levels and bringing down the debt as a share
of the economy.
Can you please provide a detailed explanation of what the
President's proposed changes to Social Security will look like for the
average American? Specifically, what do these changes mean for folks
currently collecting Social Security, and what do they mean for future
beneficiaries? Will this increase or decrease the amount of money
beneficiaries receive per check?
In the interest of achieving a bipartisan deficit reduction
agreement, the Budget proposes to use the chained CPI to compute cost-
of-living adjustments in major federal programs and the tax code.
However, this change must be paired with protections in these programs
for the vulnerable. It would also not apply to any means-tested
programs. The Budget proposes to adopt the chained CPI starting in
2015. The Social Security benefit enhancement would begin in 2020 and
would be targeted to elderly and long-term beneficiaries, since this is
the group that will be impacted the most by the switch to the chained
CPI, due to compounding effects. The benefit enhancement would be equal
to 5% of the average retiree benefit, phased in over 10 years.
Beneficiaries who are aged 76, or other beneficiaries (such as those
receiving Disability Insurance) in the 15th year of benefit receipt
would be eligible for the benefit enhancement. The Bowles-Simpson
Commission also recommended an adjustment along these lines to
accompany its chained CPI proposal.
What additional spending cuts can be made that you believe
Republicans and Democrats can agree upon?
The President's 2014 Budget contains numerous proposals to cut
spending and reduce the deficit. The Budget details a total of 215
cuts, consolidations, and savings proposals, which are projected to
save more than $25 billion in 2014. These proposals affect both
mandatory and discretionary spending. As the President has stated, his
Budget includes some difficult cuts that he does not particularly like,
and which may not be popular within his own party. Accomplishing
balanced deficit reduction will require tough choices and compromise
from both Republicans and Democrats.
I would like to talk for a moment about the tax increases this
budget places on small business owners and on low-income Americans (via
the cigarette tax.) How will taxing our job creators and our poor help
boost our economy?
Low-income Americans will benefit from the cigarette tax in several
ways. First, they will realize substantial health benefits; in
particular, they are more likely than high-income Americans to stop
smoking or to choose not to start smoking in response to a cigarette
tax. And if you don't smoke, you don't pay. For those who want to quit,
the Affordable Care Act ensures that health plans cover tobacco use
screening and cessation services at no additional charge. Second,
revenue from the tax will help ensure that low-income children are
prepared for success. All of the revenue raised from the tax will be
used for early childhood investments, providing access to pre-school
for four-year-olds from low- and moderate-income families and financing
the extension and expansion of voluntary home visiting programs for at-
risk families. Many business leaders across the nation--representing
both large and small companies--have called for early education
investments to build the skills of America's future workforce and
strengthen our economy.
[Whereupon, at 12:52 p.m., the Committee was adjourned]