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| <title> - THE PRESIDENT'S FISCAL YEAR 2014 BUDGET PROPOSAL WITH U.S. DEPARTMENT OF THE TREASURY SECRETARY JACOB J. LEW</title> | |
| <body><pre> | |
| [House Hearing, 113 Congress] | |
| [From the U.S. Government Publishing Office] | |
| THE PRESIDENT'S FISCAL YEAR 2014 BUDGET | |
| PROPOSAL WITH U.S. DEPARTMENT OF THE | |
| TREASURY SECRETARY JACOB J. LEW | |
| ======================================================================= | |
| HEARING | |
| before the | |
| COMMITTEE ON WAYS AND MEANS | |
| U.S. HOUSE OF REPRESENTATIVES | |
| ONE HUNDRED THIRTEENTH CONGRESS | |
| FIRST SESSION | |
| __________ | |
| APRIL 11, 2013 | |
| __________ | |
| Serial No. 113-FC04 | |
| __________ | |
| Printed for the use of the Committee on Ways and Means | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| U.S. GOVERNMENT PUBLISHING OFFICE | |
| 21-126 WASHINGTON : 2016 | |
| ____________________________________________________________________ | |
| For sale by the Superintendent of Documents, U.S. Government Publishing Office, | |
| Internet:bookstore.gpo.gov. Phone:toll free (866)512-1800;DC area (202)512-1800 | |
| Fax:(202) 512-2104 Mail:Stop IDCC,Washington,DC 20402-001 | |
| COMMITTEE ON WAYS AND MEANS | |
| DAVE CAMP, Michigan, Chairman | |
| SAM JOHNSON, Texas SANDER M. LEVIN, Michigan | |
| KEVIN BRADY, Texas CHARLES B. RANGEL, New York | |
| PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington | |
| DEVIN NUNES, California JOHN LEWIS, Georgia | |
| PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts | |
| DAVID G. REICHERT, Washington XAVIER BECERRA, California | |
| CHARLES W. BOUSTANY, JR., Louisiana LLOYD DOGGETT, Texas | |
| PETER J. ROSKAM, Illinois MIKE THOMPSON, California | |
| JIM GERLACH, Pennsylvania JOHN B. LARSON, Connecticut | |
| TOM PRICE, Georgia EARL BLUMENAUER, Oregon | |
| VERN BUCHANAN, Florida RON KIND, Wisconsin | |
| ADRIAN SMITH, Nebraska BILL PASCRELL, JR., New Jersey | |
| AARON SCHOCK, Illinois JOSEPH CROWLEY, New York | |
| LYNN JENKINS, Kansas ALLYSON SCHWARTZ, Pennsylvania | |
| ERIK PAULSEN, Minnesota DANNY DAVIS, Illinois | |
| KENNY MARCHANT, Texas LINDA SANCHEZ, California | |
| DIANE BLACK, Tennessee | |
| TOM REED, New York | |
| TODD YOUNG, Indiana | |
| MIKE KELLY, Pennsylvania | |
| TIM GRIFFIN, Arkansas | |
| JIM RENACCI, Ohio | |
| Jennifer M. Safavian, Staff Director and General Counsel | |
| Janice Mays, Minority Chief Counsel | |
| C O N T E N T S | |
| __________ | |
| Page | |
| Advisory of April 11, 2013 announcing the hearing................ 2 | |
| WITNESS | |
| The Honorable Jacob J. Lew, Secretary, U.S. Department of the | |
| Treasury, Washington, DC....................................... 6 | |
| THE PRESIDENT'S FISCAL YEAR 2014 BUDGET | |
| PROPOSAL WITH U.S. DEPARTMENT OF THE | |
| TREASURY SECRETARY JACOB J. LEW | |
| ---------- | |
| THURSDAY, APRIL 11, 2013 | |
| U.S. House of Representatives, | |
| Committee on Ways and Means, | |
| Washington, DC. | |
| The Committee met, pursuant to call, at 10:10 a.m., in Room | |
| 1100, Longworth House Office Building, Hon. Dave Camp [Chairman | |
| of the Committee] presiding. | |
| [The advisory announcing the hearing follows:] | |
| ADVISORY | |
| FROM THE COMMITTEE ON WAYS AND MEANS | |
| FOR IMMEDIATE RELEASE CONTACT: (202) 225-3625 | |
| Thursday, April 4, 2013 | |
| No. FC-04 | |
| Chairman Camp Announces Hearing on | |
| the President's Fiscal Year 2014 Budget | |
| Proposal with U.S. Department of the | |
| Treasury Secretary Jacob J. Lew | |
| House Ways and Means Committee Chairman Dave Camp (R-MI) today | |
| announced that the Committee on Ways and Means will hold a hearing on | |
| President Obama's budget proposals for fiscal year 2014. The hearing | |
| will take place on Thursday, April 11, 2013, in 1100 Longworth House | |
| Office Building, beginning at 10:00 a.m. | |
| In view of the limited time available to hear the witness, oral | |
| testimony at this hearing will be from the invited witness only. The | |
| sole witness will be the Honorable Jacob J. Lew, Secretary, U.S. | |
| Department of the Treasury. However, any individual or organization not | |
| scheduled for an oral appearance may submit a written statement for | |
| consideration by the Committee and for inclusion in the printed record | |
| of the hearing. | |
| BACKGROUND: | |
| On April 10, 2013, the President is expected to submit his fiscal | |
| year 2014 budget proposal to Congress. The proposed budget will detail | |
| his tax proposals for the coming year as well as provide an overview of | |
| the budget for the Treasury Department and other activities of the | |
| Federal Government. The Treasury plays a key role in many areas of the | |
| Committee's jurisdiction. | |
| In announcing this hearing, Chairman Camp said, ``The Ways and | |
| Means Committee is committed to comprehensive tax reform that | |
| eliminates tax loopholes, simplifies the code, and lowers rates. Tax | |
| reform that accomplishes these goals can strengthen our economy, create | |
| more jobs and allow American workers to start seeing an increase in | |
| their paychecks again. This hearing will provide both the Committee an | |
| opportunity to review the President's tax proposals and Treasury | |
| Secretary Lew the opportunity to describe how the Administration | |
| intends to work with the Committee and Congress to pass and enact | |
| comprehensive tax reform.'' | |
| FOCUS OF THE HEARING: | |
| U.S. Department of the Treasury Secretary Lew will discuss the | |
| details of the President's budget proposals that are within the | |
| Committee's jurisdiction. | |
| DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: | |
| Please Note: Any person(s) and/or organization(s) wishing to submit | |
| for the hearing record must follow the appropriate link on the hearing | |
| page of the Committee website and complete the informational forms. | |
| From the Committee homepage, http://waysandmeans.house.gov, select | |
| ``Hearings.'' Select the hearing for which you would like to submit, | |
| and click on the link entitled, ``Click here to provide a submission | |
| for the record.'' Once you have followed the online instructions, | |
| submit all requested information. ATTACH your submission as a Word | |
| document, in compliance with the formatting requirements listed below, | |
| by the close of business on Thursday, April 25, 2013. Finally, please | |
| note that due to the change in House mail policy, the U.S. Capitol | |
| Police will refuse sealed-package deliveries to all House Office | |
| Buildings. For questions, or if you encounter technical problems, | |
| please call (202) 225-1721 or (202) 225-3625. | |
| FORMATTING REQUIREMENTS: | |
| The Committee relies on electronic submissions for printing the | |
| official hearing record. As always, submissions will be included in the | |
| record according to the discretion of the Committee. The Committee will | |
| not alter the content of your submission, but we reserve the right to | |
| format it according to our guidelines. Any submission provided to the | |
| Committee by a witness, any supplementary materials submitted for the | |
| printed record, and any written comments in response to a request for | |
| written comments must conform to the guidelines listed below. Any | |
| submission or supplementary item not in compliance with these | |
| guidelines will not be printed, but will be maintained in the Committee | |
| files for review and use by the Committee. | |
| 1. All submissions and supplementary materials must be provided in | |
| Word format and MUST NOT exceed a total of 10 pages, including | |
| attachments. Witnesses and submitters are advised that the Committee | |
| relies on electronic submissions for printing the official hearing | |
| record. | |
| 2. Copies of whole documents submitted as exhibit material will not | |
| be accepted for printing. Instead, exhibit material should be | |
| referenced and quoted or paraphrased. All exhibit material not meeting | |
| these specifications will be maintained in the Committee files for | |
| review and use by the Committee. | |
| 3. All submissions must include a list of all clients, persons and/ | |
| or organizations on whose behalf the witness appears. A supplemental | |
| sheet must accompany each submission listing the name, company, | |
| address, telephone, and fax numbers of each witness. | |
| The Committee seeks to make its facilities accessible to persons | |
| with disabilities. If you are in need of special accommodations, please | |
| call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four | |
| business days notice is requested). Questions with regard to special | |
| accommodation needs in general (including availability of Committee | |
| materials in alternative formats) may be directed to the Committee as | |
| noted above. | |
| Note: All Committee advisories and news releases are available on | |
| the World Wide Web at http://www.waysandmeans.house.gov/. | |
| <F-dash> | |
| Chairman CAMP. Good morning. The Committee will come to | |
| order. | |
| Well, good morning, Mr. Secretary, and welcome to the Ways | |
| and Means Committee. The last time you testified before this | |
| Committee it was as ``Mr. Director,'' and so please allow me to | |
| publicly say what I have already said to you in private, and | |
| that is to congratulate you on your new post. And, as you are | |
| well aware, this Committee has broad jurisdiction and interacts | |
| with many departments and agencies, none more important than | |
| the Treasury Department. And, as such, it is my sincere hope | |
| that we will be seeing a lot of each other and equally | |
| important that our staffs will be working together a lot as we | |
| move forward. | |
| On Monday, the front page of the New York Times business | |
| section read, ``Lew to Press for Growth in Europe.'' And, Mr. | |
| Secretary, I appreciate and share your concerns over the fate | |
| of the European economy, but I am first and foremost troubled | |
| by the growth and lack thereof of the American economy. The | |
| simple truth is far too many families are still struggling. | |
| They face higher food prices, higher gas prices, and higher | |
| tuition prices for their children. Meanwhile, many have had | |
| their hours reduced and their wages frozen. | |
| There is no cure-all, but there are real, achievable | |
| policies that can strengthen this economy and turn things | |
| around for American families; chief among those are fixing our | |
| broken, outdated, and complex Tax Code and balancing our | |
| budget. | |
| I am sure you will hear from Mr. Ryan and others on the | |
| need to balance the budget, which the Administration's budget | |
| never does, so I will focus today on the Tax Code. America's | |
| Tax Code is broken, and I am committed to working with anyone, | |
| Republican or Democrat, to fix it. And that is why I was | |
| encouraged the President put forward a plan to tackle a few of | |
| the challenges facing our Tax Code in his budget. | |
| But the simple truth is that the President's proposal isn't | |
| the real reform we need, and it doesn't go nearly far enough to | |
| address the needs of all job creators. The problem with our Tax | |
| Code isn't how much money it makes for Washington. In fact, our | |
| government is on track to double the amount of money it takes | |
| from hardworking taxpayers over the next 10 years, proving that | |
| government has all the revenue it needs. | |
| Instead, the problem with the Tax Code is that it costs | |
| American families too much, too much in time, too much in | |
| money, to comply with it. And, Mr. Secretary, you know these | |
| facts: Americans spend over $160 billion each year trying to | |
| navigate through the complexities of the U.S. Tax Code. It | |
| takes the average American taxpayer 13 hours to comply with the | |
| Tax Code, gathering receipts, reading the rules, and filling | |
| out the forms the IRS requires. And much of this is due to the | |
| fact that over the last decade, there have been more than 4,400 | |
| changes to the U.S. Tax Code. That is more than one a day. | |
| Instead of reversing that trend and trying to make the Tax | |
| Code work for the American people, this budget adds new levels | |
| of complexities and creates new credits and deductions. And, | |
| Mr. Secretary, it is our job to make sense of this Tax Code, | |
| and I hope you and the President will work with the Congress to | |
| deliver real reform to the American people. | |
| Our Tax Code needs to be genuinely user friendly. You | |
| shouldn't have to pay a professional to figure out your taxes. | |
| The code is so riddled with layer upon layer of complexity that | |
| 9 out of 10 Americans don't feel comfortable doing their own | |
| taxes, they are forced to either pay a professional or go buy | |
| commercial software. Americans should have faith that their | |
| government is taxing them effectively and efficiently. Instead, | |
| they fear the IRS and the potential of being audited. | |
| Our Tax Code needs to be fairer at a time when American | |
| families are just trying to make ends meet. We shouldn't be | |
| taking more of their money to bail out Washington's inability | |
| to control spending. Let's put an end to the special-interest | |
| loopholes and the handouts and use that revenue to create a | |
| simpler, fairer Tax Code that lowers rates for all Americans. | |
| And, Mr. Secretary, across this country, people are sick of | |
| Washington's gridlock. And that is why I will work with you, | |
| the President, Republicans, and Democrats to simplify and fix | |
| this broken Tax Code. This budget is the first step. But the | |
| American people can do better than what the President is | |
| proposing here. It won't be easy, but this Committee, | |
| Republicans and Democrats, are willing and ready to do the | |
| tough work our constituents sent us here to do. | |
| And we don't have to settle for the same old game of giving | |
| Washington more taxpayer money and calling it reform. It has | |
| been 27 years since this town cleaned up the code. It is time | |
| for us to do our job again. Hardworking taxpayers deserve real | |
| solutions and we need to make our Tax Code simpler and fairer | |
| for every American. And let's work together to accomplish that. | |
| I want to thank you again for being here. Congratulations | |
| on your new job. And I will now turn to Ranking Member Levin | |
| for his opening statement. | |
| Mr. LEVIN. Thank you, Mr. Chairman. | |
| Welcome, Secretary Lew. We have to get used to that title | |
| since we have always known you with other titles, but mostly by | |
| your first name. I am tempted to ask you, when is the first | |
| time you appeared before this Committee? | |
| Secretary LEW. The first time I was in this room was | |
| probably in 1973 on H.R. 2, pension reform. | |
| Mr. LEVIN. I will go on. | |
| Well, we have enjoyed so much working with you in the past, | |
| only one of us I think goes back that far. And we all look | |
| forward to working with you in the days ahead. | |
| You are appearing today to discuss the Administration's | |
| 2014 budget--that is why you are here--which follows those | |
| presented earlier by House Republicans, House Democrats, and | |
| Senate Democrats. Clearly, the Administration's budget reflects | |
| an effort to open up a search for some common ground. | |
| Unfortunately, this has been rebuffed in the responses of the | |
| House Republican leadership. The Administration made clear that | |
| any search for common ground requires a balanced approach. My | |
| guess is the President has used the word ``balanced'' perhaps | |
| more than any other word, for good reason; a combination of | |
| budget cuts and additional revenues. | |
| The Republican approach is based on imbalance. The tax cuts | |
| the Republicans propose in their budget would leave a $5.7 | |
| trillion revenue gap. Yet they have never provided specifics on | |
| how they would fill it. | |
| What we know is that it would almost certainly require | |
| eliminating or dramatically cutting tax provisions that have | |
| been vital to middle- and low-income families, including the | |
| mortgage interest deduction and the exclusion for employer- | |
| provided healthcare. | |
| Their budget reaffirms their plans also to turn Medicare | |
| into a voucher program and to repeal the benefit provisions, if | |
| not the revenues which they propose keeping. | |
| In its budget, the Administration has also come forth with | |
| some further ideas on business tax reform. And in doing so, it | |
| has highlighted that while lower rates are important, they must | |
| not come at the expense of critical investments that American | |
| enterprises need to thrive and to succeed. | |
| I hope that foundation in the theme of tax equity, among | |
| others, will guide us as we face the challenge of tax reform; | |
| tax reform based on reality, not mainly on rhetoric. | |
| The imbalance in the response from House Republicans is | |
| further illustrated, even as we hear today the testimony of | |
| you, by their unwillingness to appoint conferrees to consider | |
| the budget bills passed by the House and Senate in conjunction | |
| with the Administration's budget. This continued Republican | |
| embrace of a budget deadlock is all the more worrisome, if I | |
| might say, as the sequester continues to unfold and as the debt | |
| ceiling once again approaches. | |
| Indeed, it was made all the more worrisome by the House | |
| Republican hearing yesterday that focused on the debt ceiling | |
| in terms of the possibility of prioritizing our obligations, | |
| obligations all emanating from congressional actions. We cannot | |
| continue on this dangerous path. | |
| Hopefully, this hearing will serve as a constructive | |
| opportunity to embrace a different path. | |
| I yield back. | |
| Chairman CAMP. Thank you very much, Mr. Levin. | |
| Again, it is my pleasure to welcome Secretary Jack Lew back | |
| to the Committee on Ways and Means. We look forward to your | |
| testimony. The Committee has received your written statement. | |
| It will be made part of the formal record. | |
| And, Secretary Lew, you are recognized for 5 minutes. | |
| STATEMENT OF THE HONORABLE JACOB J. LEW, SECRETARY, U.S. | |
| DEPARTMENT OF THE TREASURY, WASHINGTON, DC | |
| Secretary LEW. Thank you very much, Mr. Chairman, and thank | |
| you, Mr. Chairman, Ranking Member Levin, for your gracious | |
| welcome here today. It is an honor to appear and to present the | |
| President's budget for next year. And I sit here, as the | |
| Chairman noted, surrounded by four decades of memories of many | |
| important occasions when bipartisan cooperation has moved the | |
| country forward in the best interests of the American people. | |
| And I sit here today looking forward to continuing in that | |
| tradition this year and in my current role. | |
| Our economy is much stronger today than it was 4 years ago. | |
| But we must continue to pursue policies that help to create | |
| jobs and accelerate growth. Since 2009, the economy has | |
| expanded for 14 consecutive quarters. Private employers have | |
| added nearly 6.5 million jobs over the past 37 months. The | |
| housing market has improved. Consumer spending and business | |
| investment have been solid and exports have expanded. | |
| But very tough challenges remain. While we have removed | |
| much of the wreckage from the worst economic crisis since the | |
| Great Depression, the damage left in its wake is not fully | |
| repaired. Families across the country are still struggling. | |
| Unemployment remains high. Economic growth needs to be faster. | |
| And while we have made substantial progress, we must do more to | |
| put our fiscal house in order. | |
| At the same time, political gridlock in Washington | |
| continues to generate a separate set of headwinds, including | |
| harsh, indiscriminate spending cuts from the sequester that | |
| will be a drag on our economy in the months ahead if they are | |
| not replaced with sensible deficit reduction policies. | |
| This is my first opportunity to appear before you as | |
| Treasury Secretary and discuss from this vantage point how we | |
| need to confront these difficult challenges. But this is far | |
| from the first budget I have worked on. In my experience, a | |
| good budget offers practical solutions to problems of its time. | |
| The President's budget does that by making the investments that | |
| will drive a growing economy and by reining in our deficits | |
| responsibly so we can replace the across-the-board cuts | |
| immediately and restore fiscal stability over time. | |
| A good budget must also be grounded in reality. And this | |
| budget deals squarely with the world as it is now and as it | |
| will be in the future. It reflects the need for compromise to | |
| find a path that could command bipartisan support, and it | |
| recognizes issues of major consequence: like the fact that our | |
| demographics are shifting with the retirement of the baby | |
| boomers, the number of retirees is growing; like the fact that | |
| millions of Americans are living in poverty today; like the | |
| fact that wages and incomes for middle class Americans have not | |
| improved for more than a decade; and that, despite the | |
| significant strides through the Affordable Care Act, healthcare | |
| spending remains a key driver of long-term deficits. | |
| This budget is animated by the simple notion that we can | |
| and must do two things at once: Strengthen the recovery in the | |
| near term while reducing the deficit and debt over the medium | |
| and long term. | |
| This has been the President's long-standing approach to | |
| fiscal policy. And when you compare the trajectory of our | |
| economic recovery with those of other developed countries in | |
| recent years, it is clear why the President remains so | |
| committed to this path. | |
| As the Chairman noted, I just returned from meetings in | |
| Europe. And it is clear that in countries where austerity | |
| measures were implemented too quickly, those economies have | |
| stumbled. Ours is a different story. Notwithstanding the need | |
| to do more, our economy continues to expand with the support of | |
| growth-oriented economic policies, even as we make meaningful | |
| progress to reduce the deficit. And it is important to bear in | |
| mind how meaningful that progress has been. | |
| In the last few years, the President and Congress have come | |
| together to hammer out historic agreements that substantially | |
| cut spending and modestly raise revenue. When you combine these | |
| changes with savings from interest, we have locked in more than | |
| $2.5 trillion in deficit reduction over the next 10 years, and | |
| today, we are putting forward policies that will lower the | |
| budget deficit to below 2 percent of GDP and bring down the | |
| national debt relative to the size of the economy over 10 | |
| years. | |
| We restore the Nation's long-term fiscal health by cutting | |
| spending and closing tax loopholes, taking a fair and balanced | |
| approach. The budget achieves this balanced approach through | |
| very specific steps, such as reforming agricultural subsidies | |
| and eliminating tax preferences for companies that move | |
| operations and jobs overseas. | |
| At the same time, the budget incorporates all elements in | |
| the Administration's offer to Speaker Boehner last December, | |
| demonstrating the President's readiness to stay at the table | |
| and make very difficult choices and find common ground. | |
| Consistent with that offer, the budget includes things the | |
| President would not normally put forward, such as means testing | |
| Medicare through income-relating premiums and adopting a more | |
| accurate but less generous measure of inflation, known as chain | |
| CPI. It includes these proposals only so we can come together | |
| around a complete and comprehensive package to shrink the | |
| deficit by an additional $1.8 trillion over 10 years and to | |
| remove fiscal uncertainty that has dragged on economic growth | |
| and job creation. | |
| This framework does not represent the starting point for | |
| negotiations. It represents a fair balance between tough | |
| entitlement savings and additional revenues from those with the | |
| greatest income. The two cannot be separated and were not | |
| separated last December when we were close to a bipartisan | |
| agreement. | |
| This budget provides achievable solutions to our fiscal | |
| problems, but as crucial as these solutions are, we have to do | |
| more than just focus on deficit and debt. Now, I know the | |
| significance of balancing the budget, and I will not take a | |
| backseat to anyone when it comes to fiscal responsibility. | |
| Under President Clinton, I helped negoti- | |
| ate the groundbreaking agreement with Congress to balance the | |
| budget. As director of OMB, I oversaw three budget surpluses in | |
| a row, and worked with many on the left and the right on our | |
| plans to pay off our debt. It will come as no surprise that I | |
| was profoundly disappointed to see those surpluses squandered. | |
| But that does not mean we should make deficit reduction our | |
| one and only priority, not when our world demands that we both | |
| confront our fiscal challenges and make targeted investments to | |
| propel broadbased growth. So in addition to ensuring that we | |
| have sound fiscal footing, this budget lays out initiatives to | |
| fuel our economy now and well into the future. Every one of | |
| these initiatives is paid for in our deficit reduction package, | |
| meaning they do not add a dime to the deficit. | |
| As the President explained in the State of the Union, the | |
| surest path to long-term prosperity is to strengthen the middle | |
| class. This budget does that by zeroing in on three things: | |
| Bringing more | |
| jobs to our shores; making sure American workers have the | |
| skills needed to do those jobs; and making sure hard work | |
| amounts to a decent living. | |
| To generate more jobs in the United States, we focus on | |
| growing our economy by making it more competitive. The budget | |
| launches advanced manufacturing hubs around the country, | |
| invests in research and technology, and cuts red tape to expand | |
| domestic energy production, including clean energy and natural | |
| gas. It also puts people to work right away repairing our | |
| deteriorating roads, railways, bridges, and airports so our | |
| economy can compete in the future. | |
| We have made considerable headway over the last few years | |
| to improve education and worker training. And we can go even | |
| further by helping students acquire the skills that today's | |
| economy demands. That means joining with States to give every | |
| child a solid preschool education. It means reconfiguring high | |
| schools so students can get the high-tech, high-wage skills | |
| businesses need. And it means making college more affordable. | |
| Finally, the budget would help lift communities hit the | |
| worst by the recession, and it would adjust the minimum wage so | |
| that full-time workers are not stuck in poverty. The proposals | |
| I just outlined are part of the President's framework for | |
| growing our economy and cutting our deficits. And as this | |
| budget shows, we do not have to choose between the two, and we | |
| must not. We can adopt a powerful jobs and growth plan, even as | |
| we embrace tough reforms to stabilize our finances. This is the | |
| way a budget will make our economy stronger and help create | |
| jobs now and in the future. | |
| Before I close, I just want to say that the debate we are | |
| engaged in is very important. It is part of a complex sorting- | |
| out process that will determine our Nation's future. But | |
| everyone on this Committee knows that the path before us is | |
| going to be a struggle. It will require difficult decisions | |
| that will directly affect the daily lives of millions of | |
| Americans, entrepreneurs and immigrants, soldiers and veterans, | |
| the young and the elderly, the working poor and the very well | |
| off. And it matters that we get this right. | |
| With that in mind, I come here today optimistic about what | |
| we can accomplish. I believe we can find common ground to stop | |
| the unnecessary standoffs and manufactured crises; that we can | |
| come together to forge an agreement to right our fiscal ship | |
| and that we can make the compromises that are necessary to meet | |
| our obligations to future generations. | |
| Thank you, Mr. Chairman, and I look forward to answering | |
| your questions. | |
| [The prepared statement of Secretary Lew follows:] | |
| [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] | |
| Chairman CAMP. Well, thank you, Mr. Secretary. | |
| I am interested in making the Tax Code work for families, | |
| instead of the special interests here in Washington. And I am | |
| interested in fixing this Tax Code so families struggling to | |
| get by and maybe save a little for their college education can | |
| do so. And this budget talks about reforming the Tax Code for | |
| corporate America, but it does not talk about reforming it for | |
| families and individuals. I think we can do better. | |
| For example, there are 15 different tax breaks for higher | |
| education, including nine for current expenses, two for past | |
| expenses, four for future expenses. The IRS publication on tax | |
| benefits for education is 90 pages long. This isn't a Tax Code | |
| designed for working families; it is a Tax Code designed to | |
| make money for accountants and tax planners. Don't you think we | |
| should make some sense of all of this and help working | |
| families? | |
| Secretary LEW. Mr. Chairman, I totally agree. And the | |
| President's budget has in the past called for individual tax | |
| reform as well. The President has laid out principles to guide | |
| that. I think that the idea of tax simplification, broadening | |
| the base, is very important. The President has put it in the | |
| context of a fiscal plan where I think we have, you know, a | |
| number of objectives that have to be achieved at the same time. | |
| We have to get our fiscal house in order. As part of that, | |
| we need to raise more revenue. And we think the tax reform | |
| ought to produce that ability to both raise revenue, simplify | |
| the Tax Code, and make it so that ordinary people don't need to | |
| have complicated, hours-long processes or go to accountants for | |
| simple tax forms. You know, I participated in 1986 in tax | |
| reform. I know how hard it is to do. And I look forward to | |
| working with you on a bipartisan basis to get that done. | |
| Chairman CAMP. And I was pleased to see the Administration | |
| taking more concrete steps toward tax reform in this budget. | |
| And, again, I look forward to looking with you and the | |
| President to make the code simpler and fairer for families and | |
| individuals and to help strengthen the economy. | |
| And when I talk to middle class Americans in Michigan, back | |
| home in my district, they are frustrated by the current state | |
| of the Tax Code. And, I mean, rightly so. They don't understand | |
| the complexity. And they may not know that there have been | |
| 4,400 changes over the last decade, but certainly they know | |
| that there have been a lot of them. | |
| And it just seems unfair to me that the Tax Code forces | |
| Americans to spend over $160 billion to comply and 6 billion | |
| hours--almost 13 hours per person. That is the average | |
| taxpayer. I mean, every year, complying with the code is more | |
| expensive, more costly. And particularly when you look at the | |
| very tight margins small businesses are on, I mean, this is a | |
| huge cost to them. And, frankly, it should be their time and | |
| money, not the IRS'. And I commend the Administration for | |
| proposing revenue-neutral tax reform in the bill. But, again, | |
| don't you think individuals and families deserve a tax reform | |
| that makes the code simpler and fairer for them, too? | |
| Secretary LEW. Mr. Chairman, I believe that we need to do | |
| both individual and business tax reform. And in the context of | |
| overall tax reform, to be clear, we do not think it can be | |
| revenue neutral. We think that there needs to be additional | |
| revenue to help get our fiscal house in order. And the budget | |
| calls for $580 billion of additional revenue. | |
| On the business side, our goal has been very clear. I could | |
| not agree with you more that we need to really go at all of the | |
| special provisions, the deductions, the credits that complicate | |
| the business tax system. We need to enable ourselves to lower | |
| the rates, so that our statutory rate could be more competitive | |
| with the rest of the world. Our goal in business tax reform is | |
| really to stimulate economic growth and job creation. And I | |
| don't believe it can be separated from overall tax reform. I | |
| think if you look at the decisions that small businesses make, | |
| even how to organize, whether to be a partnership or a | |
| corporation, it makes a big difference what their relative | |
| treatment in the individual and business tax systems is. | |
| So, just intellectually, one has to look at it as a whole. | |
| I think that this is a big challenge. This is something that | |
| will require Democrats and Republicans standing shoulder to | |
| shoulder, because every one of the provisions that we would | |
| eliminate to broaden the base has people and businesses that | |
| support it. And, you know, that is a process that could only be | |
| done through bipartisan cooperation. | |
| Chairman CAMP. All right. Thank you. | |
| Mr. Levin. | |
| Mr. LEVIN. Thank you. When you look at business tax reform, | |
| the President's budget suggests that we need to maintain | |
| certain provisions that relate to manufacturing and | |
| entrepreneurship. | |
| But I want to focus, Mr. Secretary, on the gridlock in | |
| Washington today--you are the Treasury Secretary--and what the | |
| consequences are. So, just briefly, I want to start with the | |
| sequester. Are you concerned? | |
| Secretary LEW. Congressman, I think that the sequester is | |
| very bad policy. You know, it was designed to be bad policy, to | |
| motivate both sides to come up with a more sensible plan to | |
| achieve deficit reduction. And I think one thing we can be sure | |
| of is when you go out of your way to design bad policy, you can | |
| produce bad policy. | |
| The effect of the sequester is not anything that anyone | |
| should choose. They are senseless across-the-board cuts. If you | |
| look overall at the impact, at a time when we should be | |
| worrying about growing the economy, it takes roughly a half | |
| percent of GDP growth out of the economy. So it is not good | |
| policy in terms of the impact of the individual cuts. It is not | |
| good policy in terms of the overall impact on the economy. | |
| I do believe we need to have a long-term, sensible path of | |
| deficit reductions. The President's budget reflects that. It | |
| has to be balanced, there has to be shared sacrifice. And the | |
| sooner we do it, the better. I think if you look at the series | |
| of deadlocks that we have had over the last few years, each one | |
| has led to a loss of confidence in the economy, each one has | |
| caused individuals and businesses making decisions on whether | |
| to invest and grow their businesses and hire to worry about, | |
| was government going to cause there to be headwinds that made | |
| that not the right time to make an investment decision? I think | |
| government should be helping, not hurting, in the economy | |
| recovery, and replacing the sequester with a sensible, balanced | |
| plan would do that. | |
| Mr. LEVIN. And it should be done now? | |
| Secretary LEW. The sooner the better. We don't have an | |
| economic emergency in terms of deficit right now. Our budget | |
| makes clear that we need to be on a path over the next 10 | |
| years. The cuts this year are not what matters so much as the | |
| reliable path over 10 years. The sooner we get the sequester | |
| out of the way, the sooner the economy will be relieved of the | |
| burden of that half-percent cut in GDP, and the sooner programs | |
| that people depend on will get back to normal. | |
| Mr. LEVIN. So let me ask you about another piece of this | |
| gridlock, the debt ceiling. It is going to once again be bumped | |
| into. And there was a hearing yesterday about prioritization as | |
| to the debts we pay. Could you give us the Administration view | |
| on how we handle the debt ceiling? | |
| Secretary LEW. Congressman, I think the President has been | |
| clear that there is no choice but for Congress to extend the | |
| debt limit. The debt limit does not commit any new spending. | |
| All the debt limit does is it permits the government to pay the | |
| bills that Congress has authorized to be incurred. And from the | |
| beginning of our history, the United States has always paid its | |
| bills. So there is no way to pick and choose about paying your | |
| bills without being in default on one or another obligation. So | |
| the only answer is to extend the debt limit, which is what we | |
| expect Congress will do. | |
| Mr. LEVIN. Lastly, you referred to growth, and there was | |
| some reference to your trip to Europe and your concern | |
| expressed there about their continued, I think at times, rigid | |
| embrace of austerity. So why is there a major jobs component | |
| within the President's budget? | |
| Secretary LEW. I think if you look at the experience we | |
| have had in the United States and compare it to Europe, we have | |
| had a stronger recovery because we got our financial system | |
| under control; we put measures in place quickly to deal with | |
| the depth of the recession, and we have done our fiscal | |
| consolidation, our deficit reduction over time. I think that is | |
| a proven path. It is something that--we are experiencing growth | |
| that is too low and growth in jobs that is too slow. But it is | |
| much more than the general experience in Europe and in much of | |
| the world. | |
| I think that we need to grow the economy, create jobs, and | |
| get our fiscal house in order. And that is a message I brought | |
| with me in the meetings I had earlier this week. I think there | |
| is a softening in some sense in Europe. They started out a | |
| couple of years ago not worried about the impact of very high | |
| unemployment as much as we thought they should be. I think | |
| there is a growing concern in Europe that it is a serious | |
| structural problem. We start out with that understanding in the | |
| United States. We think that 7.5 percent is a high unemployment | |
| rate. Double-digit unemployment rates are unthinkable, and you | |
| have to have policies to deal with that. | |
| Mr. LEVIN. Thank you. | |
| Chairman CAMP. Mr. Johnson is recognized. | |
| Mr. JOHNSON. Thank you, Mr. Chairman. | |
| Mr. Secretary, I realize you are time constrained, so on | |
| some of these questions I would like you just to answer yes or | |
| no, if you don't mind. | |
| With respect to securing Social Security's future, in his | |
| book, ``The Predictable Surprise,'' retirement expert Syl | |
| Schieber said, ``If we fail to act, we threaten the prosperity | |
| of younger generations, a prospect your former boss, President | |
| Clinton, said would be horribly wrong and unfair.'' And I | |
| appreciated that comment. That was 15 years ago, though. | |
| And that said, I am encouraged that the President's budget | |
| took a first step toward protecting Social Security for today's | |
| workers by including the chained consumer price index to | |
| calculate the annual cost-of-living adjustment. Do you think | |
| this is a more accurate way of measuring inflation? | |
| Secretary LEW. I think, as I indicated in my opening | |
| comments, Congressman, there--it is something we are prepared | |
| to do as part of a balanced deficit reduction package. | |
| Technically, it can be justified, but it does have an impact in | |
| terms of reducing rates of increase and benefits. | |
| Mr. JOHNSON. Long term, yes. I hear a lot of talk from AARP | |
| and others that using chained CPI cuts benefits. Is that true? | |
| And I think it does. | |
| Secretary LEW. It reduces the rate of growth in the cost- | |
| of-living increases by about \3/10\ of a point. | |
| Mr. JOHNSON. Basic benefits are not cut. | |
| Secretary LEW. The underlying benefits are not cut. | |
| Mr. JOHNSON. Right. Benefits still grow each year that | |
| there is inflation. | |
| Secretary LEW. There is no doubt that we have not supported | |
| any measure that would cut the basic benefit. | |
| But I don't want to be misunderstood. A reduction of the | |
| rate of growth has an impact. And it is something that is very | |
| significant. And I appreciate your recognizing that in your | |
| opening comments. | |
| Mr. JOHNSON. We do. | |
| Secretary LEW. It is very significant. The provision | |
| imposes a---- | |
| Mr. JOHNSON [continuing]. Long term, it reduces the Social | |
| Security deficit by just 10 percent. It is not immense. Does | |
| the President plan to close the remaining 90-percent cap, or is | |
| he just going to pass the bill to our grandkids? And is he | |
| serious about fixing Social Security? | |
| Secretary LEW. The President's made clear over the last | |
| several years that he would very much want to work with | |
| Congress on a bipartisan basis on a long-term plan to make | |
| Social Security sound for the long term. He has laid out clear | |
| principles that guide that. And we would look forward to | |
| working with the Congress on that. I think it is important for | |
| all of us to remember that in dealing with Social Security the | |
| fundamental goal has to be protecting Social Security, and | |
| getting it out of the context of the budget to have a long-term | |
| discussion is probably a good idea. | |
| Mr. JOHNSON. I happen to agree with you. | |
| Next week, the Subcommittee on Social Security will hold | |
| the first hearing in the hearing series announced by Chairman | |
| Camp on the President's and other bipartisan entitlement reform | |
| proposals. And that hearing will focus on the chained consumer | |
| price index, eliminating double-dipping with respect to | |
| unemployment and disability benefits. And I am deeply troubled | |
| the President's budget includes no proposal to prevent the 21 | |
| percent across-the-board cut disability insurance beneficiaries | |
| face in 2016, just 3 years from now. | |
| The Social Security Subcommittee has held seven hearings | |
| over the last year on the disability insurance program, and I | |
| hope you will work with us to secure the future of that vital | |
| safety net. | |
| And under current law, a person can receive both disability | |
| and unemployment at the same time. And that isn't right. I | |
| don't know how someone can be able and available to work and | |
| also be unable to work due to disability. So today I am going | |
| to introduce a bill to stop people from receiving disability | |
| benefits at the same time they are receiving unemployment | |
| benefits. And in his budget, the President proposes to stop | |
| this, too, and I look forward to working with the | |
| Administration to get this bill signed into law. | |
| Thank you for your time. | |
| I yield back, Mr. Chairman. | |
| Chairman CAMP. All right. Thank you. | |
| Mr. Rangel is recognized. | |
| Mr. RANGEL. Thank you, Mr. Chairman. | |
| Thank you. | |
| Congratulations, Mr. Secretary. | |
| In New York, we live in two different worlds, especially in | |
| the borough of Manhattan; we have the world of wealth and | |
| riches, and then we have the inner cities of poverty and | |
| despair. And I just can't believe at a time of a national | |
| crisis that those that are doing so well are protected and | |
| those that--that are not doing well at all, it seems to be we | |
| are moving backward. | |
| With all due respect to the President's calculating the | |
| chained CPI, at the end of the day, benefits that would be | |
| received under the existing system would be reduced. And yet we | |
| are living, I think, at a time where the stock market--is it | |
| now presently at an all-time high? | |
| Secretary LEW. It has been. | |
| Mr. RANGEL. And would that not apply to the incomes of the | |
| chief executive officers? Is it true that they are getting paid | |
| millions of dollars for the work that they are doing? I mean, | |
| you would know this better than most people. | |
| Secretary LEW. Mr. Chairman, I don't follow day-to-day | |
| corporate salaries. | |
| Mr. RANGEL. I know. But, generally speaking, for a | |
| corporate leader and the holder of our economy to receive $2 | |
| million or $3 million, it doesn't raise any eyebrows. Having | |
| said that, everyone knows it. Everyone knows it. | |
| And it just seems to me that when we take a look at the | |
| Republicans' budget, that would indicate that at a time through | |
| all of this crisis, we still find unemployment going down, we | |
| still find minor increases in employment, that we would say, | |
| now is the time to stop spending, now is the time to cut | |
| Federal programs. | |
| Now, cutting doesn't mean you are saving money. But at a | |
| time that we are trying to come back with the economy, that | |
| world that you spent a little time in, in the private sector, | |
| where are their voices? If these people are not working, have | |
| no disposable income and cannot buy, then small business cannot | |
| sell. And where are they? They are not complaining about a tax | |
| increase, but they are certainly not involving themselves in | |
| trying to resolve this issue that we found ourselves in. | |
| So I don't know what happens when you get out there, but do | |
| you hear from the private sector in terms of how we can break | |
| this gridlock? | |
| Secretary LEW. Congressman, you know, I have to say that in | |
| the debate that we had at the end of the year last year, I had | |
| numerous CEOs tell me directly that they thought we should have | |
| the rate increases that went into effect. They were not at | |
| all--it wasn't just that they weren't opposing it; they were | |
| more comfortable having the issue resolved that we go back to | |
| the rates because they were embarrassed by the argument about | |
| whether or not they could afford the tax rate that was enacted | |
| in January. | |
| I think that--you know, going forward, it is going to be | |
| very important for the business community to stand up for the | |
| kind of balanced approach we are talking about. Because they | |
| care about the end result, which is having the deficit and debt | |
| be sustainable, and they care about economic growth. We | |
| certainly are making the case for the budget in every sector | |
| that we can, including in the business world. | |
| And I think the underlying problem that you identified is | |
| one that is kind of central to what drives our budget. The | |
| disparity of income in this country is a real problem. It is a | |
| real problem. | |
| Mr. RANGEL. Mr. Secretary, when we talk about increasing | |
| the minimum wage, the private sector's voice is heard so loud | |
| it is deafening about what would happen if the lowest people on | |
| the economic ladder get an increase in the minimum wage. I | |
| don't know what benefits my Republican friends get out of such | |
| a small number of Americans receiving so much profit, so much | |
| income, and they are willing to whisper to you that they are | |
| prepared to make some sacrifice for the good of the Nation, and | |
| yet they don't know how to communicate this. | |
| I mean, it is totally unbelievable. With all of the money | |
| that they spend on K Street, the people in the middle of my | |
| district, they don't have people that come down here to protect | |
| their interests, not even a fair, equitable way to determine | |
| how we are going to cut money from them from Social Security. | |
| But, having said that, do you respond when the people tell | |
| you that, you know, the President's right, we should be paying | |
| more, we should be involved in this deficit ending? | |
| Secretary LEW. Well, I actually heard quite a lot from the | |
| business community at the end of the year supporting the kind | |
| of balanced approach we are proposing. I think they are a | |
| little confused by the budget debate in Washington these days. | |
| I mean, when I talk to business leaders now, they don't know if | |
| there is still the chance of a bipartisan agreement, or if it | |
| is completely on the sidelines. One of the things the | |
| President's budget is saying is there is space in the sensible | |
| center for a budget agreement. And I hope that will invite | |
| those who care to come off the sidelines. | |
| Mr. RANGEL. Give us the names of those cooperative | |
| corporate leaders. I will bring them up here, and we will see | |
| what we can do. | |
| Chairman CAMP. Time has expired. | |
| Mr. RANGEL. Thank you, Mr. Chairman. | |
| Chairman CAMP. Mr. Brady is recognized. | |
| Mr. BRADY. Well, it is not exactly a profile in courage | |
| that big business leaders were willing to raise taxes on the | |
| small businesses in America and not exactly a courageous move, | |
| by any measure. | |
| You know, this budget is not fair to taxpayers. The | |
| President's budget never has to balance, so Washington never | |
| has to live within its means. It is not fair to seniors. The | |
| President refuses to save Social Security or Medicare for its | |
| own sake, for the seniors, rather than attach all these | |
| unrelated provisions that have nothing to do with those | |
| important programs. And it is certainly not fair to the | |
| unemployed, those who can't find a breadwinner in their family, | |
| because this recovery has been the weakest in modern times. We | |
| are missing 4 million jobs because of the growth gap that is | |
| getting bigger. Food stamps, since the recession bottomed out, | |
| Americans are more likely to be forced to the food stamp line | |
| than to actually walk into a company that has offered them a | |
| new job. | |
| And those who have given up hope and just dropped out of | |
| the workforce--we have gone backward to Jimmy Carter days--I | |
| don't think this budget is fair to them because it stays the | |
| course on just very weak, poor economic leadership. | |
| Looking toward those areas where there may be common | |
| ground, tax reform and saving Social Security and Medicare, I | |
| think there is a path forward. I don't think we ought to close | |
| loopholes so the government can spend more; we ought to close | |
| loopholes so we can have higher taxes for everyone, families, | |
| small business, big business, as well. | |
| And so I have three questions for you, Mr. Secretary. | |
| And, like Chairman Camp, I welcome you back to the | |
| Committee, and I appreciate the work you have done in the past. | |
| I think you can bring a valuable work ethic to this whole | |
| effort. | |
| My first question is, will you commit to sitting down with | |
| Republicans today, starting now, to fix the broken Tax Code | |
| this year? | |
| Secretary LEW. Congressman, we are already working to | |
| provide technical support for both the House and the Senate as | |
| you do your work. | |
| Mr. BRADY. So that closer--so you, Mr. Secretary, the point | |
| man for the President on tax reform, are you willing to sit at | |
| the table and stay at the table to finish fundamental tax | |
| reform this year? | |
| Secretary LEW. Congressman, in the context of our overall | |
| fiscal plan, we have a disagreement on whether or not we need | |
| to raise revenue. That is a legitimate disagreement. We are | |
| going to have to work our way through that. In the context of a | |
| fiscal plan that solves our deficit problems, we very much want | |
| to engage on tax reform. | |
| Mr. BRADY. Is that closer to a yes, that you will come to | |
| the table and stay there? | |
| Secretary LEW. I have always---- | |
| Mr. BRADY. Closer to a no? | |
| Secretary LEW. I have always been prepared to talk, and I | |
| remain prepared to talk. But I would also like to be very | |
| clear, I can't paper over what is a significant difference. | |
| Mr. BRADY. The question isn't that there are differences; | |
| we have different ideas. The question is, will you commit to | |
| coming to the table now to resolve those differences? | |
| Secretary LEW. We have always been prepared to talk with | |
| this Committee and other committees about the important | |
| business before us. Nothing is more important than getting our | |
| fiscal house in order. And as part of that, tax reform is a | |
| very important part. | |
| Mr. BRADY. Could you possibly be more vague at this point? | |
| Second question: Will you commit to fixing the broken Tax | |
| Code for families and small businesses as well as for big | |
| businesses? | |
| Secretary LEW. Again, as I responded earlier, we are very | |
| much supportive of both individual and business tax reform. We | |
| think they need to move together, and we would like to work | |
| with you to do that this year. | |
| Mr. BRADY. And so your point is we should not do--the White | |
| House's point is we should not do corporate tax reform alone, | |
| that we need fundamental reform, authentic reform for families | |
| and small businesses as well? | |
| Secretary LEW. Congressman, you are asking questions about | |
| small business. Small businesses have to make the decision | |
| whether they organize under the corporate tax laws or as | |
| partnerships under the individual tax laws. I don't know how we | |
| create a situation where they can make a sensible decision if | |
| we don't deal with it---- | |
| Mr. BRADY. But the government's role is not to tell | |
| businesses how they organize. | |
| Secretary LEW. No, not at all. | |
| Mr. BRADY. And so many of them file as individuals. So my | |
| question is really simple: Will you commit to authentic tax | |
| reform, fix this broken code for small businesses and families | |
| as well as big businesses? | |
| Secretary LEW. So, Congressman, I am trying to answer with | |
| some precision. Small businesses do make their own decisions | |
| how to organize. One of the reasons they organize as | |
| partnerships is that our statutory rate is so high on the | |
| business side. So as we go through business tax reform, that | |
| will change the decisions that many of them make. | |
| Mr. BRADY. Ten seconds: Will you commit to saving Social | |
| Security and Medicare for its own sake? | |
| Secretary LEW. I have for 40 years believed in Social | |
| Security and Medicare---- | |
| Chairman CAMP. Mr. McDermott is recognized. | |
| Mr. MCDERMOTT. Thank you, Mr. Chairman. | |
| We have been buried in this tsunami of propaganda that the | |
| problem here is there is too much spending and there is not | |
| enough tax relief for the people at the top. Hedrick Smith of | |
| the New York Times has written a book called, ``Who Stole the | |
| American Dream?'' You sat here through almost all of this, | |
| because it started in 1971. And he chronicles the process by | |
| which we have done that. And in the process, over the 30 years, | |
| the middle class has been hollowed out. Their incomes have been | |
| stagnant. Their job prospects are diminished. And their | |
| retirements are less secure. It has been a long time coming, | |
| what we have today. But the big start was under Reagan, with | |
| the disastrous Reagan cuts of 1981 that favored the wealthy, it | |
| never trickled down on the rest of the country. Reagan | |
| introduced a trend of emptying out the middle class pockets, | |
| and it has really gone on. In the 1980s, say, and 1990s, | |
| 401(k)s were popularized and pensions were ended, and for many, | |
| many people in this country. So the retirement security of | |
| Americans is deeply, deeply underfunded. Banking deregulation | |
| started in the 1990s, along with the Reagan creation of the | |
| sub-prime, sub-prime, high-interest rate housing loans that | |
| started us into the disaster of 2007. The disastrous 2001 and | |
| 2003 Bush tax cuts have given us the chunk of the deficits--a | |
| big chunk of the deficits. | |
| Now, in this country, if you play by the rules and you work | |
| hard, you are running in place, you are running in place; you | |
| are not getting ahead, and you know your kids aren't going to | |
| do as well as you did. That is what the American people think | |
| today. | |
| There is some stuff in this budget which I like. There is | |
| investment in the future; that is, in worker retraining, the | |
| infrastructure bank, money to end the sequester. | |
| I worry about our healthcare history in the long run if we | |
| don't continue to invest at the National Institutes of Health. | |
| People get Ph.D.s; we don't make the advances. We simply allow | |
| Singapore and other countries to take it away from us. And so | |
| that whole question of investment gets lost in all this talk | |
| about corporate tax reform. We lower the rates on corporate | |
| taxes, we come down to 15 percent on capital gains, where are | |
| we? The middle class is being destroyed in this country. | |
| Now, what I want you to do is imagine that we are a bunch | |
| of workers from Ohio, out of work for a year. What would you | |
| say about this budget that would be aimed at letting them | |
| understand that the President is charting a new course to save | |
| the middle class, which they feel is being crushed--they can't | |
| educate their kids, they are losing their houses, they haven't | |
| been working for a year, and they are looking for some hope? | |
| Secretary LEW. Congressman, I would say there is much in | |
| this budget that I would point to, to that working family, from | |
| our commitment to education from early childhood through higher | |
| education, to make sure that every child has a chance to have | |
| the skills to compete in the economy that they are going to | |
| grow up in. | |
| Mr. MCDERMOTT. That is a long-term thing. Give me | |
| something---- | |
| Secretary LEW. It starts right away. | |
| Mr. MCDERMOTT. Give me something I can see tomorrow. | |
| Secretary LEW. For early childhood education, it starts | |
| right away. We can't wait until people are 22 to ask if they | |
| have the skills they need. | |
| Our infrastructure proposals are to jump start | |
| infrastructure spending. I can make the case for infrastructure | |
| on so many levels. When I talk to CEOs, one of the first things | |
| they usually say to me is, we are worried about our | |
| infrastructure. Our airports, our water ports, our roads, our | |
| bridges, we are not going to be able to compete in the 21st | |
| century. Well, those are jobs today. To rebuild our | |
| infrastructure is not way off in the future; it is something we | |
| need to start immediately. | |
| Mr. MCDERMOTT. Our Republican colleagues resisted all the | |
| President's efforts or almost all the President's efforts in | |
| infrastructure creation a couple years ago. Explain to me how | |
| you are going to finance it, and how it can work. How will it | |
| work? | |
| Secretary LEW. Well, obviously, it has to be in the context | |
| of an overall fiscal plan. We have to show we are on a path in | |
| the long term, medium and long term, for bringing our debt and | |
| our deficit under control. Our budget has made it clear that | |
| when you make the tough decisions, you afford to do that. | |
| In addition to everything else we are doing in this budget, | |
| we are also ending a second war. And as we do that, we are | |
| freeing up resources. And we would say that as we end the war | |
| in Afghanistan, we need to invest here at home; as we end a war | |
| in Iraq, we need to invest here at home. And we have a budget | |
| that brings the deficit down to below 2 percent of GDP in the | |
| 10th year and invests in building our economy and creating jobs | |
| today. | |
| Chairman CAMP. All right. Thank you. | |
| Mr. Tiberi is recognized for 5 minutes. | |
| Mr. TIBERI. Growing up in a working family from Ohio, my | |
| colleague from Washington State is really trying to engage me | |
| in a little dialogue here, and I am not going to take the bait. | |
| But I will remind him that back in 2010, Mr. LaHood | |
| testified at the time opposed to a gas tax with respect to | |
| infrastructure. But I am not going to go there. I don't want to | |
| take my time today away from the Secretary. Thank you. | |
| And I am going to be in a learning mode here. The first | |
| question I have for you is, and you may not know the answer to | |
| this, but if you could have your staff get back to me and try | |
| to be constructive. It has come to my attention from some folks | |
| in Ohio that the IRS is seeking to impose a ticket tax on | |
| transportations of people in the air for management services. | |
| And they are reinterpreting, last year, reinterpreting a law | |
| that was passed during the Nixon Administration. And my | |
| understanding is, if you look at this, they are legislating | |
| rather than administering. And, clearly, in my opinion, | |
| overstepping their authority as a regulatory agency. | |
| The IRS argues that the new interpretation is correct and | |
| that the tax has been due all along. Does ``all along'' mean | |
| since 1970? I don't know. But I am concerned about it. And I | |
| would like to have your staff maybe communicate with us on what | |
| you believe the IRS is doing and if it is correct. | |
| Secretary LEW. Congressman, I would be happy to look into | |
| it. | |
| Mr. TIBERI. Thank you. And I don't want to put you on the | |
| spot. But it is an important jobs issue in not just Ohio but | |
| all over. | |
| I, along with my colleague, Mr. Kind, who I don't think is | |
| here, are cochairing a group on retirement savings. And in the | |
| President's budget, for the very first time, there appears a | |
| provision that I would like to learn more about, and see if you | |
| could maybe comment on it. It deals with retirement savings. It | |
| deals with, it appears, capping the amount of dollars that an | |
| individual can have in a retirement account, in terms of tax | |
| benefit in a retirement account, and it appears it caps the | |
| revenue stream in retirement at $205,000, cumulatively at $3 | |
| million. My question is now--and I am trying to learn, I am not | |
| being critical--thinking back to my own TSP that didn't have $3 | |
| million in it, but thinking about what happened in 2007, | |
| between 2007 and the end of 2008, and I am sure it represented, | |
| my account represented what happened to most every American, | |
| the value of that account, based upon the stock market collapse | |
| in 2008, significantly went down. So if you are 58 years old | |
| and you are not retired for 10 years and the stock market is | |
| high and you have $2.9 million, do you stop saving to avoid | |
| this for retirement? Do you worry about, well, is the market | |
| going to go way up at this point, or could it go way down? And | |
| it could go from $2.9 million to $1.9 million in a matter of | |
| months, based upon the experience we saw. How do we--and I | |
| include myself in this--how do we manage, administrate a | |
| program like this to make sure that it is done without any | |
| penalties being created or encouraging people to take an early | |
| withdrawal to avoid some sort of penalty if they go over the $3 | |
| million? I am just thinking about where this is coming from in | |
| terms of administering it. I think I know the politics of what | |
| you are trying to get to, but I am concerned about those | |
| impacts. | |
| Secretary LEW. Congressman, retirement savings is a hugely | |
| important issue. And for the average working family, | |
| unfortunately, retirement savings are more like $50,000 to | |
| $70,000 than $3 million. So for the average working family, | |
| they are so far from that $3 million level, that they probably, | |
| listening to this conversation, would wonder what we are | |
| talking about. | |
| Mr. TIBERI. Mr. Secretary, I get it. My dad has a sixth- | |
| grade education, came to America, and for my entire lifetime, | |
| starting as a kid, talked about saving for retirement. But what | |
| our task force is up here for is to try to encourage everybody | |
| to be self-sufficient. And what I don't want to do as a | |
| policymaker is send the message, we are going to go after | |
| somebody who is trying to be self-sufficient and create another | |
| trap for them or penalty for them. I am just trying to figure | |
| out, how do we administer that? | |
| Secretary LEW. So we have for a long time looked at ways we | |
| could encourage more people to participate in savings, and we | |
| have a proposal that we would hope would be part of the | |
| conversation that would have automatic enrollments, so that | |
| people opt out instead of opt in. This is a simple behavioral | |
| change that we think would very much improve the likelihood of | |
| people saving early and through their careers. | |
| The provision here, it really reflects a judgment that | |
| there should be tax incentives up to a certain point. But | |
| beyond that, we certainly encourage people to save beyond that. | |
| The tax incentives have to be looked at in the context of the | |
| tradeoffs. And to save for your retirement with tax benefits, a | |
| limit of $3 million seemed like a reasonable place to draw the | |
| line so that we are encouraging the vast majority of Americans | |
| to save as much as they possibly can. | |
| Chairman CAMP. All right. Time has expired. | |
| Secretary LEW. Thank you. | |
| Chairman CAMP. Mr. Lewis is recognized. | |
| Mr. LEWIS. Thank you, Mr. Chairman. | |
| Welcome, Mr. Secretary. I just want to take an opportunity | |
| to thank you for your many years of service, not just to the | |
| Congress, but to our country. | |
| And, Mr. Secretary, the unemployment rate in the city of | |
| Atlanta is at 8 percent. So, as you can guess, many people in | |
| my district, like people all around our country, are very much | |
| focused on jobs. Since first being elected, President Obama has | |
| made it very clear that we need to invest in jobs and job | |
| creation. Would you tell us how this budget reflects the | |
| Administration's continued efforts to create jobs and help | |
| people get back to work? | |
| Secretary LEW. Congressman Lewis, thank you for the very | |
| kind comments. | |
| This budget is all about growing the economy and creating | |
| jobs. In its kind of macro sense, it is about taking the steps | |
| we need to this year and over the next 10 years to make sure | |
| that there is the best environment for job creation that we can | |
| produce. That is getting our fiscal house in order, yet | |
| providing the support that is needed to make sure that we have | |
| educated workers, we have an infrastructure that is sound and | |
| that serves the needs of the future as well as the past, and we | |
| need to get started with that right away. We have incentives | |
| for manufacturing, and we have tax proposals that would | |
| encourage investment in the United States and not the shipping | |
| of jobs overseas. So I think, overall, if there is a single | |
| theme that ties this budget together, it is about being able to | |
| say that we are doing exactly what you are asking: We have a | |
| path for economic growth. We have a path for job creation. And | |
| we have tools in place to make that happen today and in the | |
| future. | |
| Mr. LEWIS. Mr. Secretary, in spite of all of the problems | |
| that we faced in our country during the past few years, some | |
| people have done very well and others have been left out and | |
| left behind. Can you tell us what is in the budget that is | |
| going to help those that have been left out and left behind? | |
| Secretary LEW. I think that the disparity of income in this | |
| country is a very significant problem. And we have to deal with | |
| it at both ends. We have to deal with it at the end of those | |
| who are struggling by creating the ladders of opportunity to | |
| give them the ability to get the education they need and have | |
| the skills for the jobs that they deserve. When they go to | |
| work, we need to make sure that they get a living wage. Anyone | |
| who works full time should be above poverty in this country, | |
| which is why the President has put a proposal in his budget to | |
| raise the minimum wage. | |
| I think, at the high end, we very much need to make sure | |
| that as we put in place the policies that will put our fiscal | |
| house in order, that we raise revenues from those who are most | |
| able to afford it because they have the greatest income. I | |
| think, overall, this is a budget that doesn't instantaneously | |
| fix a problem that has been decades in the making, but it moves | |
| it very much in the right direction. And, frankly, the action | |
| taken in January was the most significant step in that | |
| direction, by raising the top tax rate, really in a generation. | |
| Mr. LEWIS. Thank you very much. | |
| I yield back, Mr. Chairman. | |
| Chairman CAMP. Thank you. | |
| And, at this point, I am going to go two-to-one. So I will | |
| start with Mr. Reichert. You are recognized for 5 minutes. | |
| Mr. REICHERT. Thank you, Mr. Chairman. | |
| Mr. Chairman, my Subcommittee on Human Resources will be | |
| holding a hearing next week on unemployment insurance. And so I | |
| want to focus on--I have one question related to unemployment | |
| insurance, but also want to use it as an example of a comment | |
| that you made earlier that people, including corporations and | |
| small businesses, are confused about the budget and our process | |
| here and also sort of lack understanding as to really what is | |
| going on. | |
| Secretary LEW. That is probably something on which we can | |
| all agree. | |
| Mr. REICHERT. You are right, including myself. So I have | |
| two documents. This is, I guess, part of what really creates a | |
| little bit of confusion. First, a document from the White | |
| House, and then I have a document from the Department of | |
| Treasury. And these seem to be in conflict, to me. So the | |
| President's budget has a proposal that would more than double | |
| the wage base on which Federal employment taxes are applied, | |
| from $7,000 to $15,000. Correct? | |
| Secretary LEW. Correct. | |
| Mr. REICHERT. All told, as displayed in your budget | |
| documents, this would increase revenue by $51 billion over 10 | |
| years. I note that these tax increases would take the form of | |
| higher Federal and State payroll taxes, which in my opinion are | |
| taxes on jobs. My question is this: Why do you think a summary | |
| document prepared by the White House says that that same policy | |
| strengthening the solvency of the Unemployment Insurance Trust | |
| Fund reduces spending by 50 billion? Can you clarify this | |
| discrepancy, this sort of conflict, for myself and the rest of | |
| the folks here in the room? | |
| Secretary LEW. Congressman, I would have to take a look at | |
| those two charts. I don't want to pretend to be familiar with | |
| the comparison, and I couldn't read it from this distance. The | |
| policy on unemployment insurance is one the Administration has | |
| advocated for a number of years. It would restore the base for | |
| the unemployment tax to where it was in the Reagan years, just | |
| adjusting it for inflation. That is the essential policy. | |
| Mr. REICHERT. Excuse me, just for a moment. So the $7,000 | |
| to $15,000 increase, is that a tax hike? | |
| Secretary LEW. Well, the rate---- | |
| Mr. REICHERT. The rate reduction. Forget what this says. | |
| What is your opinion? | |
| Secretary LEW. The rate doesn't change. What it does is it | |
| puts in place--right now, we have an unemployment---- | |
| Mr. REICHERT. Does it increase taxes? Yes or no. | |
| Secretary LEW. Well, it increases the base of income---- | |
| Mr. REICHERT. I just want a yes or no answer. Does it | |
| increase taxes---- | |
| Secretary LEW. It pays for unemployment that is not now | |
| properly funded. And I think the reason for the confusion---- | |
| Mr. REICHERT. By increasing taxes? | |
| Secretary LEW. It raises the base to Reagan levels. | |
| Mr. REICHERT. Increasing taxes. But the White House is | |
| saying it is reducing spending. I am confused. | |
| Secretary LEW. The categorizations of these issues has | |
| been---- | |
| Mr. REICHERT. So I can look forward to an answer that would | |
| clarify this for me. | |
| Secretary LEW. I will be happy to get back to you. | |
| Mr. REICHERT. I want to move on to--you have used the term | |
| ``fiscal house in order'' several times here today. What does | |
| that mean to you, getting our fiscal house in order? Briefly, | |
| please. | |
| Secretary LEW. Congressman, I think that the challenge we | |
| face is to get our budget on a path to having the deficit and | |
| the debt as a percentage of our economy at a point where it is | |
| sustainable, which means the economy is growing faster and we | |
| are not---- | |
| Mr. REICHERT. What percentage would you say that would be? | |
| Secretary LEW. You know, our budget gets the deficit to | |
| less than 2 percent of GDP in the 10th year. Our goal | |
| originally was 3 percent, so we---- | |
| Mr. REICHERT. Sure, but your budget doesn't balance. | |
| Secretary LEW. You asked me a different question. You asked | |
| what---- | |
| Mr. REICHERT. Does the--but does---- | |
| Secretary LEW. It does balance in an out-year, not in the | |
| 10-year window---- | |
| Mr. REICHERT. Okay. | |
| Secretary LEW [continuing]. Quite a ways out. The challenge | |
| of balancing the budget---- | |
| Mr. REICHERT. The budget does not balance within 10 years-- | |
| -- | |
| Secretary LEW. No. It---- | |
| Mr. REICHERT [continuing]. Is that correct? | |
| Secretary LEW. We have a--the deficit is 2 percent of GDP-- | |
| -- | |
| Mr. REICHERT. Can you explain to me--I want to be in a | |
| learning mode just like my friend from Ohio. Can you explain to | |
| me and the folks around the country why it is so important for | |
| families to balance their checkbook, balance their budget--they | |
| didn't see a deficit, you know, an emergency ahead, but they | |
| lost their homes--but the Federal Government doesn't have to | |
| balance their budget, they can continue to spend, and you don't | |
| see an emergency down the road with the deficit? | |
| Secretary LEW. Congressman---- | |
| Mr. REICHERT. I don't understand. People are trying to | |
| understand this at home. | |
| Secretary LEW. Congressman, as I said in my opening | |
| remarks, I spent a big part of my career balancing the budget, | |
| creating a surplus. I understand how important a balanced | |
| budget and a surplus is. I also know that in the period before | |
| President Obama took office---- | |
| Mr. REICHERT. Well, why is it important, though, for folks | |
| at home to balance their budget---- | |
| Secretary LEW [continuing]. A deep, deep deficit was | |
| created. | |
| Mr. REICHERT. Excuse me. Why is it important for people at | |
| home to balance their budget but it is not important for the | |
| Federal Government to balance their budget? | |
| Secretary LEW. Now, I can't---- | |
| Mr. REICHERT. That is what people don't understand, sir. | |
| Secretary LEW. Families and government---- | |
| Mr. REICHERT. My time has expired. | |
| Thank you, Mr. Chairman. | |
| Chairman CAMP. All right. | |
| Secretary LEW. Mr. Chairman, could I respond just very | |
| briefly to the question? | |
| Chairman CAMP. Yes. | |
| Secretary LEW. Thank you. | |
| Families and governments are fundamentally in different | |
| positions. And governments around the world are measured by the | |
| standard of whether or not they can afford to service the debt | |
| that they have undertaken. And the measures that are used to | |
| determine whether they can afford it are reflected in our | |
| budget, and we meet them. | |
| I totally agree with you, we should be on a long-term path | |
| toward pursuing more deficit reduction and balance. What I am | |
| saying is, if you try to get there too fast, you do more damage | |
| to the economy, and you would end up making less progress, not | |
| more progress, in terms of reaching the goal. | |
| Chairman CAMP. All right. | |
| Dr. Boustany. | |
| Mr. BOUSTANY. Thank you, Mr. Chairman. | |
| Welcome, Mr. Secretary. | |
| Secretary LEW. It is good to be here. | |
| Mr. BOUSTANY. The President's 2014 budget requests an 18.4 | |
| percent increase for the Department of Treasury and its | |
| programs. And this includes a $1 billion increase, annual | |
| increase, for the IRS budget. You know, we found information | |
| just a few weeks ago about an IRS studio, production studio, | |
| ``Star Trek'' videos, things of that nature. | |
| Now, as the economy continues to sputter, families across | |
| America are having to make deep, painful cuts in their own | |
| household budgets. And, at the same time, we are borrowing a | |
| lot of money. We are borrowing a dollar for every--for every | |
| dollar of spending, 60 cents is borrowed. | |
| So, with this in mind, are there any other cuts under | |
| Treasury that you could put forth other than what is in this? I | |
| mean, the budget is proposing increased spending. | |
| Secretary LEW. Congressman, the bulk of the increases that | |
| are in the Treasury budget are really in IRS enforcement. I | |
| think that one of the goals this Committee has traditionally | |
| shared with the Treasury Department is making sure that our tax | |
| laws are effectively enforced and that we have a fair system | |
| where all taxpayers are treated alike. And there is an | |
| understanding that if you don't obey the tax laws---- | |
| Mr. BOUSTANY. Well, I fully understand that, but, at the | |
| same time, we are concerned about, on one hand, the IRS comes | |
| to us and wants more resources, and yet we see obvious waste on | |
| the other hand. | |
| Secretary LEW. Congressman, I am aware of the situation you | |
| are describing. I think we have made clear that action has been | |
| taken to make sure that doesn't happen again. | |
| You know, across government there is a need to, I agree | |
| with you, tighten our belt and not do things that don't look | |
| like they make sense. I spent a lot of time, when I was at OMB | |
| and as chief of staff, doing that across the government. I will | |
| continue to do that as Secretary of the Treasury. | |
| But I don't think that it is right to confuse that with the | |
| need to have IRS agents on the job. And that is what our--where | |
| most of our budget is---- | |
| Mr. BOUSTANY. I understand the need for enforcement, but-- | |
| -- | |
| Secretary LEW. Yes. | |
| Mr. BOUSTANY [continuing]. I guess my question is, are | |
| there other areas within Treasury that you could come forward | |
| with some proposals for cuts? I mean, obviously, there are | |
| some. I mean, what about this production studio? I think it | |
| costs $4 million a year. It has been--there may be--are there | |
| others? | |
| Secretary LEW. We are obviously taking a look at that | |
| particular item. But I would point out that, you know, one of | |
| the things that we do to try to control costs in the government | |
| is do more business remotely and not have people travel when | |
| they don't need to. One of the ways you do business remotely is | |
| through video activities. So we have to be careful that we | |
| don't cut off the ability to do the kind of work that gives us | |
| the ability to operate more efficiently. | |
| I am happy to take a look at that, along with other things. | |
| But I don't think you would want to have every meeting be in | |
| person in a city if somebody can sit in a studio and talk to | |
| 500 people---- | |
| Mr. BOUSTANY. I understand that, but we are going to | |
| continue to conduct oversight to make sure these dollars are | |
| being used appropriately. | |
| Secretary LEW. I appreciate that. | |
| Mr. BOUSTANY. Also, you have mentioned growth quite often. | |
| And Mr. Brady was asking questions about our views on tax | |
| reforms versus what we see from the Administration and the | |
| budget proposal. | |
| And one of the things I get concerned about is an approach | |
| where certain pockets of money, in the form of tax provisions, | |
| get pulled out to increase spending rather than really looking | |
| at tax reform. We really do have an historic opportunity to | |
| embark on tax reform, where we look at everything with the idea | |
| of lowering rates and promoting American competitiveness. | |
| For instance, as I look--let's just take the oil and gas | |
| expensing provisions, which have been in the President's budget | |
| continuously year after year after year. The impact of this is | |
| going to be pretty strong in the oil and gas exploration | |
| production at a time when we are seeing a shale gas revolution. | |
| If these were to be put in place without actual reductions in | |
| tax rates, I think you are going to kill the shale gas | |
| revolution--a source of job growth, a source of American | |
| competitiveness, new sources of exports. | |
| So there is a little bit of an inconsistency here. And I | |
| would just urge that you reconsider in the administration | |
| working with us on real tax reform that looks at everything | |
| with the idea of simplifying, making that code much fairer for | |
| everybody concerned, lowering rates, and really focusing on | |
| American competitiveness. | |
| Secretary LEW. Congressman, as I said earlier, I really do | |
| think that there is a common goal to broaden the base and lower | |
| corporate business tax rates. I think that we have a thriving | |
| industry now in the shale area. I think that the incentives | |
| that were put in place for a nascent oil industry are probably | |
| not what they need to be to thrive. We should work together on | |
| this as we go forward. | |
| Mr. BOUSTANY. And one last thing. In the transportation | |
| bill that was passed last year, there was statutory language | |
| about reporting on a plan for our ports and dredging. That is | |
| not in the budget---- | |
| Chairman CAMP. Time has expired. Respond in writing. | |
| Mr. BOUSTANY. I would ask that you respond to me in writing | |
| on that issue. | |
| Secretary LEW. I would be happy to. | |
| Mr. BOUSTANY. Thank you. | |
| Chairman CAMP. Mr. Neal is recognized. | |
| Mr. NEAL. Thank you, Mr. Chairman. | |
| I had resolved when I came in not to say anything in | |
| partisan response, but the last two speakers cause me to state | |
| an obvious fact, and that is that our Republican friends are | |
| always in favor of balancing the budget when there is a | |
| Democratic President. And to have heard the last two speakers | |
| go on about how we arrived where we are with these deficits is | |
| to miss the point that they didn't say anything during the | |
| preceding 8 years. And I think that bears noting, as well. | |
| Now, your DNA is in the legislative branch of government. | |
| You worked for Tip O'Neill and you worked for Joe Moakley. You | |
| know how to make a deal. You worked for the only President who | |
| has balanced the budget four times since the end of World War | |
| II. You understand precisely how this is done. And I think that | |
| ought to be acknowledged, as well, today. | |
| In February, you raised concerns, or the Department of | |
| Treasury raised concerns, about an EU proposal to implement a | |
| new financial transaction tax in 11 eurozone countries. And in | |
| its current form, that will harm U.S. investors. It is more and | |
| more likely that some eurozone countries will implement a very | |
| broad-based FTT sometime next year. This proposed tax is | |
| intentionally designed to have a broad global reach. It would | |
| result in multiple levels of taxation, and the effective rate, | |
| as you know, could be much higher than advertised. | |
| Can you update the Committee on what Treasury is doing to | |
| protect U.S. investors from this European tax? And could you | |
| also update the Committee on your recent conversations, Mr. | |
| Secretary, as you traveled to Europe? | |
| Secretary LEW. Congressman, yeah, we have made a different | |
| decision as an Administration than many others in Europe are | |
| making. We have a financial responsibility fee that has been in | |
| our budget. We think that is a better way to raise revenue from | |
| the financial services side. And, you know, we have made that | |
| point both here and in conversations overseas. | |
| I think the design element that you are describing is a | |
| very troubling one. What other countries decide to do in their | |
| borders is their business. So we can disagree about the best | |
| way to tax domestic financial services, but it is not an | |
| acceptable policy, from our perspective, for other countries to | |
| create a tax that has an extraterritorial reach and would levy | |
| a tax on a transaction in the United States. | |
| When I had my meetings earlier this week in Europe, I made | |
| that point very clearly to a number of European officials, both | |
| in the European community in Brussels and in meetings with | |
| finance ministers, making it clear that, you know, we found | |
| that to be unacceptable and we will continue to make that | |
| clear. So we are engaged with them, they understand our view, | |
| and we will continue to do so. | |
| Mr. NEAL. Thank you. | |
| And, Mr. Secretary, I am pleased that you included the | |
| auto-IRA bill in the budget that I worked on for many, many | |
| years. And a word of thanks to Treasury for recommending | |
| another item that I worked on for 14 years, to kill AMT. | |
| So it takes time around here to get these things done, but | |
| the auto-IRA proposal, I think, is superbly positioned to help | |
| with some of the issues that were raised by some of our friends | |
| on the other side, as well. | |
| Secretary LEW. I totally agree. | |
| Mr. NEAL. A reminder that it is endorsed by The Heritage | |
| Foundation. I am still waiting for a Republican to sign on to | |
| my bill. And, in addition, it has broad bipartisan consensus | |
| that it would address some of these issues. | |
| Could you speak to the auto-IRA proposal, as well? | |
| Secretary LEW. Yes. I think the auto-IRA proposal is a very | |
| good idea. It is something that doesn't require that anyone | |
| participate in an IRA. It just shifts the decision point, do | |
| you opt in or do you opt out. | |
| We think that, you know, if you make it an opt-out, which | |
| is what auto-IRA would do, there are an awful lot of people who | |
| do not start saving very early in their careers who will do so. | |
| And if you save when you are 24, 25, all the way through, you | |
| build up a much more substantial nest egg for your retirement | |
| because of compounding over the years. You never can catch up | |
| for the early years that you were out of retirement saving. | |
| So I think it is a very good idea. It is something that we | |
| have put in our budget and we continue to advocate. And perhaps | |
| in the context of tax reform, it is something that would have | |
| the ability to actually be given serious consideration. | |
| Mr. NEAL. Well, the other part of the auto-IRA that has | |
| particular appeal is that I think insurance agents, community | |
| bankers, and credit unions, even though they are small | |
| accounts, they would like the opportunity, with the potential | |
| to expand business down the road, to sell that very concept. | |
| Secretary LEW. Sure. | |
| Mr. NEAL. And another word of thanks on the savers credit. | |
| That is very important to me. I have worked on that for many, | |
| many years here, and I am pleased to see that you have paid | |
| attention to that again in the budget. | |
| Thank you, Mr. Secretary. | |
| Secretary LEW. All right. Thank you. | |
| Chairman CAMP. Thank you. | |
| Mr. Roskam is recognized. | |
| Mr. ROSKAM. Thank you, Mr. Chairman. | |
| Thank you, Mr. Secretary. | |
| Mr. Secretary, you said something in your opening statement | |
| that jarred me, and I wanted to confirm that you actually used | |
| this language because it seemed internally inconsistent with | |
| some of the other themes. | |
| So, during the opening statement, you generally laid out a | |
| theme of, look, I am Jack Lew, I have this experience and this | |
| background on a bipartisan basis, and I have been successful in | |
| other tasks in the past in bringing groups together. And that | |
| is a good attribute, and it is an attribute that we all admire | |
| and we aspire to. | |
| Now, that bipartisan language is in contrast, it seems to | |
| me, with this statement. You said, ``It is important to note | |
| that this framework,'' the White House framework, ``does not | |
| represent the starting point for negotiations.'' | |
| So here is the challenge. It is very declarative. It sounds | |
| as if there has been some revelation that you have had that we | |
| haven't participated in. And you are making a declarative | |
| statement that this is a precondition for negotiations? | |
| Secretary LEW. No, that is not what I said. | |
| Mr. ROSKAM. Well, you did say---- | |
| Secretary LEW. I said it is not a starting point. I didn't | |
| say it was a precondition. | |
| Mr. ROSKAM. Well, so what do you mean by---- | |
| Secretary LEW. Sure. I am happy to---- | |
| Mr. ROSKAM [continuing]. Saying, ``It is important to note | |
| that this framework does not represent the starting point for | |
| negotiations?'' | |
| Secretary LEW. I think the last 2\1/2\ years have | |
| represented a lot of movement from the starting point. I | |
| certainly have the wear and tear to show for it, and I think | |
| others do, as well. We are not at the beginning of the process. | |
| This budget reflects where the President was after 2 years of | |
| negotiation. And in December, we were perhaps one or two turns | |
| of the wheel away from an agreement. It didn't come together, | |
| but that doesn't mean we shouldn't keep trying. | |
| What I was saying and what I believe very strongly is that | |
| it would be very counterproductive to treat this somehow as if | |
| it is kind of the beginning of the conversation, as if the last | |
| 2\1/2\ years had not happened. And---- | |
| Mr. ROSKAM. Okay. I understand that. | |
| Secretary LEW [continuing]. To separate the parts would be | |
| a very unconstructive response. | |
| Mr. ROSKAM. I understand. | |
| Secretary LEW. We are doing very hard things, and we are | |
| asking for others to do very hard things. | |
| Mr. ROSKAM. At the end of the year, the President was | |
| making the argument about a consensus around protecting middle- | |
| class taxpayers from a tax hike. And he basically said, look, | |
| since we both agree on that, let's take them off the table. And | |
| you remember that argument. | |
| Secretary LEW. Uh-huh. | |
| Mr. ROSKAM. It was a very compelling argument, a very | |
| successful argument. | |
| What is different about that argument with the notion of, | |
| if there is consensus on both sides of the aisle around your | |
| proposed changes on Social Security, why not move forward on | |
| that in the same spirit, with the same approach, and with the | |
| same goal? | |
| Secretary LEW. Look, I think they are very different | |
| policies. | |
| Mr. ROSKAM. Why? | |
| Secretary LEW. There was a broad bipartisan agreement that | |
| middle-class taxpayers should not pay higher taxes. We are not | |
| saying we want to raise this chained CPI issue. We are saying | |
| we are prepared to do something very hard, and in a package | |
| with additional revenues to solve our deficit problems, we | |
| would do it. | |
| It is very different. We all wanted to prevent taxes from | |
| going up on middle-class workers. I am not going to sit here | |
| and say I want to do the chained CPI, and I don't think most of | |
| the Members of this Committee would. We may feel we need to as | |
| part of a balanced plan, but I sat through 2 years of meetings | |
| where I have heard one after another leader on your side say | |
| chained CPI has to be part of a budget agreement. | |
| The President put that in in December. He has kept it in | |
| because he would like to reach a bipartisan agreement. But it | |
| has to be connected to solving the whole problem, including | |
| more revenue. | |
| Mr. ROSKAM. The long-term discussion on Medicare is a | |
| discussion that continues to, I think, get everybody's | |
| attention. And yet your predecessor gave a presentation to the | |
| House Budget Committee, it was February of last year, where he | |
| basically--you know, it was one of those moments of clarity, | |
| frankly, when he said, look, we don't have a long-term | |
| proposal, but all we know is we don't like yours, meaning the | |
| House budget proposal. That was his language, not mine. | |
| You are basically doing the same thing now as it relates to | |
| Medicare; isn't that right? Because at the end of office, when | |
| the President leaves in 2017, according to the trustees, they | |
| say, look, this solvency only goes out another 7 years after | |
| your time in office. So isn't that exactly the same thing that | |
| Secretary Geithner was doing? | |
| Secretary LEW. I am not familiar with the exact comments | |
| Secretary Geithner made. I---- | |
| Mr. ROSKAM. I will get to you. I didn't overcharacterize | |
| it. | |
| Secretary LEW. I will describe our policy, if I could, in | |
| my own words, which is: You know, since the enactment of the | |
| Affordable Care Act, we have seen substantial reduction in the | |
| rate of growth of healthcare spending. With the implementation, | |
| we will see more. | |
| The President has put in this budget $400 billion of | |
| Medicare savings, including some very difficult provisions like | |
| income-related premiums, which are really means-testing | |
| measures, and---- | |
| Mr. ROSKAM. That is all well and good, but the trustees say | |
| 2024, right? | |
| Secretary LEW. And, you know, there is no doubt, as the | |
| President has said many times, we have more work to do after, | |
| but that is not a reason not to do this now. And we probably | |
| don't agree on---- | |
| Mr. ROSKAM. Do what now? | |
| Chairman CAMP. All right. Time has expired. | |
| Secretary LEW. The policy the President has proposed. | |
| Chairman CAMP. Okay. | |
| Mr. ROSKAM. I yield back. | |
| Chairman CAMP. Mr. Gerlach is recognized. | |
| Mr. GERLACH. Thank you, Mr. Chairman. | |
| Thank you, Mr. Secretary, for testifying today. | |
| I wanted to focus on your comments regarding the R&D | |
| investment issue. You state in your testimony on page 5 that | |
| the President's budget increases funding for nondefense R&D | |
| investment by roughly 9 percent over the 2012 level. | |
| How does the President's budget propose to do that? | |
| Secretary LEW. Congressman, this is the first year in a | |
| long time where I wasn't responsible for the appropriation | |
| account, so I am going to have to probably defer to my | |
| colleagues at OMB to go through all of the specific increases | |
| in R&D in the budget. | |
| But I can tell you, the pattern of increases is that we | |
| have very much put resources into energy and energy-efficiency | |
| research. We have very much put resources into biomedical | |
| research, into core basic research. We also have proposed | |
| making, you know, the tax credits for R&D permanent. So we have | |
| a balanced set of approaches. | |
| We think that R&D is the key to American competitiveness in | |
| the future and have, for the entirety of this Administration, | |
| been pushing very hard to try to increase R&D as a share of | |
| what we do. | |
| Mr. GERLACH. We have a manufacturing working group ongoing | |
| here in the Committee, and my colleague, Mr. Roskam, and, on | |
| the Democrat side, Congresswoman Sanchez, have been holding a | |
| number of meetings about a variety of issues involving | |
| manufacturing, including research and development. | |
| And one of the things we heard in our meeting on research | |
| and development was how the IRS many times contests the efforts | |
| by a company to get an R&D credit in a particular tax year, | |
| where they have to constantly battle the IRS to justify that | |
| innovative work, that research work, to establish that they, in | |
| fact, are entitled to that credit. | |
| Would it be possible for you to acquire information for us | |
| that would demonstrate how many times, how many cases the IRS | |
| really contests the efforts by companies to take the R&D tax | |
| credit and where the company then has to take an appeal of that | |
| process, of that initial determination, where that company ends | |
| up being successful and, in fact, is entitled to that R&D tax | |
| credit, so that we can get a better sense of it is not only the | |
| permanency of the rate or what the rate itself is, but how hard | |
| it is for these companies to have to go through the rigamarole | |
| to actually get the credit to begin with, from a bureaucracy | |
| standpoint? | |
| Can you help gather that data for us and see if there is | |
| some way that, not only with the rate itself, but also with the | |
| language in the statute as to when and how you get the credit, | |
| how that could be made more simple, more commonsense, and more | |
| usable by companies so that they, in fact, can feel comfortable | |
| moving forward with research and development, which is what we | |
| all want to see happen in our domestic economy? | |
| Secretary LEW. Congressman, I am happy to look into that. I | |
| don't have the numbers---- | |
| Mr. GERLACH. Yeah. I understand. | |
| Secretary LEW [continuing]. At my disposal today. | |
| I agree with you, we ought to make the administration of | |
| the Tax Code such that taxpayers and businesses trying to make | |
| decisions can have clarity and understanding. At the same time, | |
| we have to make sure that there is compliance with whatever | |
| requirements we have. | |
| I am happy to take a look at it. | |
| Mr. GERLACH. Thank you, sir. | |
| I yield back. Thank you. | |
| Chairman CAMP. Thank you. | |
| Mr. Becerra is recognized. | |
| Mr. BECERRA. Thank you, Mr. Chairman. | |
| Mr. Secretary, thank you very much, and congratulations to | |
| you. | |
| Secretary LEW. Thank you. | |
| Mr. BECERRA. I am glad you clarified, once again, that some | |
| of these provisions in your package are part of a previous | |
| negotiation with Republicans, Speaker Boehner in particular, to | |
| try to resolve our fiscal issues in a balanced way. | |
| And I know you have mentioned in the past that there are | |
| proposals by Republicans to include a chained CPI, which is a | |
| different way of calculating the cost of living for anything | |
| from Social Security benefits to veterans benefits to the Tax | |
| Code, and how much people pay on their taxes would be impacted | |
| by the so-called chained CPI. | |
| Some $230 billion is saved by moving toward the Republican- | |
| proposed chained CPI, so let me ask a couple of things. My | |
| understanding is that by going to the chained CPI, you would | |
| end up cutting benefits earned by seniors who paid into the | |
| Social Security system, you would cut benefits earned by | |
| veterans for their retirement, you would cut benefits earned by | |
| disabled veterans who are receiving veterans disability | |
| compensation. | |
| And if that is not accurate, will you please, or Treasury | |
| please, forward to me a response that would refute or explain | |
| how those payments to seniors, veterans, and disabled Americans | |
| will not be cut? I wish that we could go into detail, but I | |
| know I would run out of time if we did. | |
| Secretary LEW. Congressman, can I respond to that just | |
| briefly? | |
| Mr. BECERRA. No, I would like to--if you could respond in | |
| writing, because I know there has been a lot of discussion and | |
| I will run out of time, because I have several questions to ask | |
| about the chained CPI. It is very disturbing that the folks who | |
| are going to get hit hardest, the $230 billion that you save in | |
| the budget from moving toward a chained CPI is by impacting | |
| seniors, veterans, and middle-class Americans. | |
| The next area is on the tax side. About half of the | |
| savings, half of the savings of $230 billion in savings you get | |
| by moving toward the chained CPI, aside from the cuts to earned | |
| benefits to seniors and to veterans and disabled Americans, is | |
| by raising revenues, raising taxes. | |
| And most of that, my understanding is, is a revenue hit, a | |
| tax increase for families who are middle-class or below. In | |
| fact, my understanding is that, unless things have changed, the | |
| biggest impact by the tax increase caused by the chained CPI | |
| hits families who are earning somewhere between $10,000 and | |
| $20,000 because they would be pushed up into the higher | |
| brackets faster. | |
| And so, as I look at my district, the median income in my | |
| district is about $38,000. The median income of the national | |
| American family, so not just my district but everywhere in | |
| America, if you take the median income of American families, it | |
| is about $53,000. | |
| Now, I know the President fought very hard to protect | |
| middle-class taxpayers, $250,000 and below. And, obviously, the | |
| middle of America is way below $250,000. And we ended up, after | |
| compromise with our Republican colleagues, at $450,000 in | |
| income which would be protected from any of the Bush tax cuts | |
| expiring. So, certainly, anyone within $53,000 in income would | |
| be within that $450,000 cap. | |
| Yet the person who makes $450,000 in income will see a very | |
| small hit from the change to a chained CPI when it comes to | |
| what they pay in taxes, whereas the person earning $53,000, the | |
| middle of America, will see a much greater increase in their | |
| taxes. And, certainly, folks in my district, who earn on | |
| average, in the median, $38,000, will see a substantial | |
| increase in their taxes as time goes on if you were to move to | |
| the chained CPI. | |
| Now, I have heard you say that the President isn't a fan of | |
| moving to the chained CPI without a big, balanced approach. But | |
| the facts are--and, please, in any letter you write to me, | |
| please refute that, in fact, middle-class Americans, especially | |
| those who are earning $38,000 like folks in my district, will | |
| not see a tax increase which, my sense is, certainly is within | |
| the $250,000 in income that the President said was the | |
| threshold for protecting Americans from any tax increase. | |
| My final comment is this. And you are a Social Security | |
| trustee. In the 77 years that Social Security has been in | |
| effect, Americans, from way back then until now, have | |
| contributed $13.9 trillion in their taxes to the Social | |
| Security system. We have also seen those contributions earn | |
| $1.6 trillion in interest earnings by being saved in the trust | |
| fund. The total--and I will end, Mr. Chairman, with this. The | |
| total amount that has been spent in benefits for Americans is | |
| $12.8 trillion. The result is a $2.7 trillion amount that has | |
| never been used by Social Security. Yet the chained CPI gets so | |
| much of its savings by hitting beneficiaries under Social | |
| Security who earn those benefits by paying into them. | |
| So I very much would like a response, if you could, in | |
| writing as to how you would explain or refute that seniors, | |
| veterans, and disabled would not be asked to pay more by | |
| getting fewer of their earned benefits? | |
| Mr. BRADY [presiding]. Mr. Secretary, if you would respond | |
| in writing to Mr. Becerra, that would be wonderful. | |
| Secretary LEW. I would be happy to do that. | |
| Mr. BRADY. Mr. Buchanan. | |
| Mr. BUCHANAN. Thank you, Mr. Chairman. | |
| And I want to thank you, Mr. Secretary. And thank you for | |
| your service---- | |
| Secretary LEW. Thank you. | |
| Mr. BUCHANAN [continuing]. And congratulations. | |
| Let me just mention, one of the things that we like to talk | |
| about is the challenges that we have today. Everybody brings a | |
| different background. I had been doing business for 35 years | |
| before I got here. But one of the things--I had a chance to go | |
| over to China in the late 1980s. And I think about, in terms of | |
| the Clinton era, we were growing at 4.9, almost 5 percent a | |
| year. You remember that? We are under 2 percent. | |
| To me, we are looking to blame each other and looking at | |
| what has happened in the last 10 or 12 years, but the world has | |
| changed. I was in Beijing in 1989. I saw the reality there. I | |
| have seen what is happening with India. It has become much more | |
| of a global economy. How much of these factors are the | |
| realities that we are dealing with today? | |
| And I am concerned that people don't realize that the world | |
| has changed, it is a global economy. We have to help our | |
| businesses to be more successful. | |
| And I will give you one more point on this, and then I | |
| would like to get your response. | |
| I met with the Minister of Trade in January. He and I think | |
| the Vice Premier in two separate meetings told me the same | |
| thing: We want to grow our economy 20 million jobs a year. That | |
| is what we have been averaging; that is what we are looking for | |
| for the next 5 or 7 years. | |
| So I think Japan has been, obviously, a big factor, but | |
| China and India have been coming online the last 10 or 20 | |
| years. And I am a blue-collar kid. I have watched what has | |
| happened in the Midwest in terms of manufacturing. But, to me, | |
| that is one of the biggest issues that we are not taking into | |
| account, that the world has changed. We have to help our | |
| businesses be more successful. | |
| So what are your thoughts on that? | |
| Secretary LEW. Congressman, I agree totally that we have to | |
| compete in an increasingly global and competitive world. | |
| You know, I was in China a couple weeks ago, and I made the | |
| very strong case that we need to be able to compete in a fair | |
| way, having our businesses have access to their markets. And | |
| they also need to restructure their economic approach to | |
| increase demand in China and to shift some of the focus from, | |
| really, anticompetitive support of old industries to | |
| contributing to demand. I mean, it is good for the U.S. economy | |
| for demand to grow in China and in Europe. | |
| Mr. BUCHANAN. Yeah. Let me just say, I have met with--they | |
| have a delegation there, you know, of a chamber of 4,500 | |
| members. I had a chance to meet with many of them. So we need | |
| to do more---- | |
| Secretary LEW. Yeah. | |
| Mr. BUCHANAN [continuing]. In terms of our government to | |
| help our businesses be more competitive there. They need to | |
| open up their markets more. I agree with you there. | |
| Secretary LEW. I met with about 20 representatives of U.S. | |
| businesses in China and asked them what we could do to be | |
| helpful to them. I agree with you, we have to make the case. | |
| And we have found it slow, that you don't get everything you | |
| argue for, but you do make progress when you engage on these | |
| issues. And we need to compete on the world market. | |
| Mr. BUCHANAN. Yeah. Let me just mention a couple other | |
| things. I co-chair the Committee for Small Business, | |
| Passthrough Entities, and Medium-sized Businesses. Two things: | |
| When you look at small businesses, how do you define that? Just | |
| quickly, because I don't have a lot of time, but I want to get | |
| your definition of what a small business is. | |
| Secretary LEW. There are a lot of different ways of drawing | |
| the line. You know, sometimes it is by number of employees, | |
| sometimes it is by total gross amounts of sales. | |
| Rather than get into where exactly to draw the line, I | |
| think I would like to emphasize---- | |
| Mr. BUCHANAN. Okay. Well, let me--let me move on. I just | |
| want to say one thing. In terms of startup businesses, I don't | |
| know what that number is, but that is something we have to do | |
| everything we can to make sure we have proper tax incentives or | |
| incentives to have people start up. I hear they are down about | |
| 20 or 30 percent, in terms of any kind of startup in | |
| entrepreneurs. So that was one factor. They want more | |
| simplification of the Tax Code, more certainty of the Tax Code. | |
| And then I want to ask you another question. That was just | |
| a general comment. One of the things that we are talking about | |
| and the President has mentioned--I thought I heard two | |
| different numbers, 25 and 28 percent, in terms of corporate tax | |
| rate. Now, as someone that is one of the co-chairs heading up | |
| and dealing with businesses in terms of passthrough entities, I | |
| am concerned we don't leave small businesses and medium-size | |
| businesses behind. They are effectively at 43, 44 percent. | |
| How do we lower the rates to 25 or 28 ideally, eliminate | |
| some of the loopholes, and not leave behind a lot of our folks | |
| that generate a lot of the jobs in America that happen to be in | |
| that tax bracket? Because I can tell you, talking to a lot of | |
| friends, they would just all become C Corps. Because what has | |
| happened, the evolution, my background, is we would start out | |
| with C Corps, then we went to S Corps, and then we went to | |
| LLCs. | |
| So, how do you deal with lowering the rates on C Corps | |
| without dealing with small/medium-size businesses, most of | |
| which are passthrough entities that compete in the same | |
| industries? | |
| Secretary LEW. I am not sure I can answer it in 15 seconds. | |
| I mean, one of the reasons we need to broaden the base and | |
| lower the rates on the business side is to not have such a | |
| skewed set of decisions as businesses choose how to organize. | |
| We need to also look at reform on the individual side. And we | |
| would look forward to working on a bipartisan basis on that. | |
| Mr. BUCHANAN. What I would just have you suggest to the | |
| President is have him understand there are a lot of businesses | |
| that have 50 to 100 employees that are paying at the much | |
| higher bracket. | |
| Thank you, Mr. Chairman. | |
| Mr. BRADY. Thank you. | |
| Mr. Smith is recognized. | |
| Mr. SMITH. Thank you, Mr. Chairman. | |
| And thank you, Mr. Secretary, for your time here today. | |
| I guess perhaps building off of those comments from my | |
| colleague, I mean, I met with some bankers back home in my | |
| hometown, locally-owned banks. Three bankers were present. Two | |
| of them pay under subchapter S, and one pays under C Corp Tax | |
| Code. And yet, you know, there would be reform for one but not | |
| for the others, even though, I think, it is roughly half of all | |
| private-sector employment in the U.S. that exists in | |
| passthrough entities that pay tax under the individual rate. | |
| Could you expand on that, perhaps? | |
| Secretary LEW. Obviously, individuals and businesses choose | |
| how to organize based on the tax system and based on the | |
| comparison of individual passthrough kind of organization or | |
| under the corporate system. | |
| One of the reasons that so many firms have organized as | |
| passthroughs is that we have high statutory rates, and a lot of | |
| the deductions and credits on the business side are so targeted | |
| at large firms that they are not really relevant to the | |
| startups that you are talking about. | |
| This is obviously a complicated set of issues, and the | |
| relationship between them is very important. But, you know, we | |
| want to work together on making the business Tax Code make more | |
| sense. | |
| We want to work together on tax reform on the individual | |
| side, as well, to make it simpler. And, I mean, the thing that | |
| I think we have universal agreement on is that it is just too | |
| complicated. We have done an awful lot in this Administration | |
| to encourage small businesses and small-business investment. I | |
| can't say it is simple. I mean, for a small business looking at | |
| what they have done, it helps them, but they need to go to | |
| accountants and lawyers to take advantage of it. | |
| We should get to a place where we have a simple Tax Code | |
| where people sitting down trying to do business can look at how | |
| they can do their business and not have to have all the costs | |
| and time of the complicated compliance. If we simplified the | |
| business Tax Code and lowered the rate, I think that would help | |
| a lot. | |
| Mr. SMITH. Okay. | |
| Shifting gears a little bit to international tax, and we | |
| know that U.S. companies--and it is a good thing--that U.S. | |
| companies have done well marketing their products overseas. | |
| They have generated some profits and some cash, and they | |
| basically park that overseas because of a very punitive | |
| corporate Tax Code, which I think corporate tax reform would | |
| help address. Yet, I am still skeptical that, without some | |
| further changes, we still would not be able to see U.S. | |
| companies invest that cash that they generated overseas back in | |
| the U.S. economy. | |
| Would you disagree with that, or would you make some | |
| proposals to suggest or to offer an incentive for U.S. | |
| companies to bring that cash back into our economy? | |
| Secretary LEW. Well, we are finding more and more that as | |
| companies look at the overall pluses and minuses of investing | |
| in the United States versus investing overseas, they are | |
| deciding to invest in the United States, because of our | |
| workforce, because of the ease of doing business in the United | |
| States, and, notwithstanding our political problems, the | |
| greater stability in the United States versus most other places | |
| in the world. | |
| So I think we are making progress. In the budget, we have | |
| proposals that would have incentives to create jobs in the | |
| United States in manufacturing, that would have disincentives | |
| for offshoring jobs. As we lower the tax rate and the | |
| differential and statutory rates between the United States and | |
| other countries is reduced, that will help. | |
| I think this is a challenging area. We have seen efforts in | |
| the past that were designed to bring money back. They didn't | |
| really serve to increase investment; they just cut taxes. And I | |
| think our goal here is to grow the economy, grow employment. | |
| And we look forward to working together and getting that done. | |
| Mr. SMITH. Okay. Thank you. | |
| I yield back. | |
| Mr. BRADY. Thank you. | |
| Mr. Doggett is recognized. | |
| Mr. DOGGETT. Thank you very much, Mr. Secretary. | |
| You know, of the many Americans who are out there right now | |
| getting their taxes ready to file next week, I doubt there are | |
| very many that think they will be able to pay a mere nickel on | |
| the dollar. But, as you know and as your comments were just | |
| referring to, there are many of America's largest corporations | |
| that continue lobbying you, the Administration, and this | |
| Congress to let them pay a nickel on the dollar in taxes on a | |
| significant portion of their earnings. | |
| I was pleased with your response just now and with | |
| President Obama's comments here in the Capitol on March 14th | |
| that, as to this so-called repatriation, we have looked at the | |
| math and it just doesn't work. And it will, as your comments | |
| suggested, never work in terms of creating jobs, as it failed | |
| in 2004, though it may help to pad executive pay and corporate | |
| share buy-back programs, that type of thing. | |
| I am also pleased to see that you continue to include in | |
| your budget rejecting that idea for your budget, the | |
| repatriation notion, but you have included in your budget a | |
| number of measures that address unjustified international | |
| corporate tax avoidance. I believe you have incorporated | |
| earnings-stripping provisions about companies that have | |
| earnings here in the United States but they strip them to the | |
| Caymans or some other nontax jurisdiction. | |
| You have pointed to the problem of corporations that | |
| develop patents and intellectual property here but then it is | |
| owned and assigned abroad, with payments having to come for | |
| some of the very intellectual property that was developed here | |
| in America. | |
| You have referenced the problems of corporations reducing | |
| their income because of the way they allocate interest expense | |
| on income they don't actually take right now. | |
| On those three and other items in your budget, do you | |
| continue to find a number of areas of unjustified corporate tax | |
| avoidance on the international level? | |
| Secretary LEW. Congressman, we do try to close down the | |
| areas of tax avoidance that we see. We have put some of them in | |
| our budget. We look forward to working with the Congress on a | |
| bipartisan basis to do more. You know, there shouldn't be an | |
| incentive to move U.S. jobs overseas. | |
| Mr. DOGGETT. As you know, one of the problems in that | |
| regard is that, over a 3-year period, 30 Fortune 500 companies | |
| devoted more of their moneys to lobbying this Congress than | |
| they did in paying taxes to the Treasury. Some have a negative | |
| tax rate. Many of our largest corporations are paying effective | |
| tax rates that are single-digit. | |
| You are aware and I believe the Treasury is involved in the | |
| comments recently of the top finance ministers in Germany, in | |
| France, and in the United Kingdom calling for cooperation among | |
| the G-20 countries to deal with this problem of corporate tax | |
| avoidance. We want to be competitive. We want every American | |
| company to be competitive, but not just to be competitive in | |
| terms of corporate tax avoidance, where we seem to be the | |
| world's leader at the moment. | |
| I have several pieces of legislation that attempt to | |
| implement some of these budget provisions and to go a bit | |
| further than what I view as rather modest revisions. The | |
| concern I have, Mr. Secretary, is that while I think some | |
| adjustment in the statutory rate is appropriate to reduce it, | |
| that you devote every cent of that reform right back to the | |
| corporations. | |
| We know the history this very year is that in the fiscal- | |
| cliff negotiations and the law that was finally approved, | |
| corporate America didn't contribute a dime. In fact, some | |
| corporations got major tax cuts out of the fiscal-cliff | |
| negotiations. | |
| Isn't it reasonable to expect corporate America, having | |
| paid such low effective rates, to contribute a little to | |
| closing the budget gap and to the cost of our national | |
| security? | |
| Secretary LEW. Congressman, our budget and our policy very | |
| much states that we think there ought to be a more fair | |
| distribution of tax burden. Raising the top rates was a part of | |
| that. Having individual tax reform that raises revenue by | |
| limiting the value of deductions for high-income individuals is | |
| part of it. | |
| I think that when you look at the difference between | |
| business and corporate tax reform, the beneficiaries of great | |
| corporate income and wealth are the same people who are in the | |
| very highest tax brackets. We have elected to try to do | |
| business tax reform in a way that will really enhance | |
| investment in the United States and job creation, and we have | |
| done the revenue raising on the individual side. I am not sure | |
| that they are different people who are paying the taxes in the | |
| end, because corporations pay out, you know, to their | |
| shareholders and they tend to be going mostly to people in | |
| those top brackets. | |
| Chairman CAMP [presiding]. All right. Thank you. | |
| I know that we just have a few more minutes, and I will try | |
| to get to as many people as possible. | |
| Tomorrow, with Secretary Sebelius, we will start up where | |
| we left off today. So we will start with those Members who did | |
| not get a chance to question today tomorrow. | |
| Mr. Schock is recognized. | |
| Mr. SCHOCK. Thank you. | |
| Mr. Secretary, thank you for being here. | |
| First, I would like to bring up the issue of the estate | |
| tax. You know that the current rate is 35 percent on all | |
| estates over $5 million. This was the result of the agreed-to | |
| legislation of the fiscal-cliff deal. Many of us in this | |
| chamber, myself included, who voted for that fiscal-cliff deal | |
| did so not because it was perfect, but for the sake of | |
| consistency, for the sake of allowing small businesses and | |
| farmers to be able to put that issue to rest and focus on | |
| growing the economy and growing their business. | |
| Why did the Administration choose to revisit this issue, in | |
| my view, to go back on what we had agreed to just months ago, | |
| and only add to the uncertainty of America's small businesses | |
| at a time when, quite frankly, we need them focused on growing | |
| their businesses and not worried about losing what they have | |
| and the rules changing once again? | |
| Secretary LEW. Congressman, I appreciate the question. And | |
| we obviously did change estate taxes in January. It was a | |
| difficult negotiation. It was one in which we made clear we | |
| thought that the estate tax provisions were too generous. We | |
| agreed to them. And we are sensitive to this question of, kind | |
| of, the speed at which change is made. | |
| I don't think we have ever had tax policy that is made for | |
| all time. And in an area like the estate tax, where it has been | |
| heavily debated, we thought that after 5 years it was time to | |
| revisit. And our proposal is not for next year or the year | |
| after, but it essentially says that in 5 years, when we revisit | |
| a number of other issues, we ought to also revisit the estate | |
| tax. And we don't propose a massive increase in the estate tax. | |
| We go back to rates that were in place, you know, in the 1990s. | |
| It is an area where I know there is disagreement on both | |
| sides of the aisle, within each side of the aisle. We would | |
| look forward to working with you. We very much agree that we | |
| need to handle our tax discussions in a long-term way to create | |
| certainty. I think, of all the planning horizons, you know, the | |
| estate tax does not affect investment decisions the same way | |
| other provisions in the Tax Code do. We don't---- | |
| Mr. SCHOCK. Would you--may I ask, wouldn't you agree, | |
| though, that a business' decision on what they invest or don't | |
| invest is tied precisely to what their presumed liability might | |
| be if and when they have to pay an estate tax? | |
| Secretary LEW. I think that most business decisions are | |
| based on what the value of that decision is to the business. | |
| The goal is to grow the business and to grow the income of the | |
| business. And I don't think it is a disincentive to grow your | |
| business that sometime in the future, at the point when there | |
| is a passing, that the estate tax may be different. I think | |
| that is different from things like current tax rates, | |
| deductions, credits that are in the time of the investment. | |
| Mr. SCHOCK. Thank you. | |
| Another question is about this retirement income. I am | |
| particularly interested in this because I thought I was doing | |
| the right thing. At the age of 14, I opened my IRA and put in | |
| what was then the maximum of $2,000. This body then passed the | |
| Roth IRA, in which I had been putting the maximum of $5,000. | |
| And if I am lucky enough to earn the same rate of return as my | |
| counterparts who at the time were working for States and the | |
| Federal Government and receiving those actuarial returns of 7 | |
| to 8 percent, in 30 years I should have in excess of $3 million | |
| to retire from. | |
| Why is the Administration so opposed to Americans like me | |
| who want to save with our own money for our own retirement from | |
| doing so? | |
| Secretary LEW. Congressman, I think you may be the one | |
| person who beats me in starting earlier with IRAs. I was about | |
| 17 or 18 when I started. | |
| I applaud people starting early. We are not at all | |
| discouraging people. We are, on the contrary, encouraging | |
| people to start and stay in the pattern of saving for their | |
| retirement. | |
| The question of what the maximum amount is comes down to | |
| the hard choices we have to make in a Tax Code, in a budget | |
| where there are hard choices. In a time when most Americans | |
| look forward to retiring with well under $100,000 of retirement | |
| savings, $3 million is quite a high target. | |
| This was an attempt to make balancing decisions. We don't-- | |
| you still can save for retirement without getting the extra tax | |
| break. And I think people who have seen the value of | |
| compounding on their savings will continue to do so. | |
| Mr. SCHOCK. Doesn't this put private-sector employees at a | |
| competitive disadvantage from public-sector employees? | |
| Secretary LEW. I am not sure how you mean that. | |
| Mr. SCHOCK. Well, you are saying that I can continue to | |
| save as a private-sector employee with my own dollars, I will | |
| just have to pay taxes on, in essence, the annuity or the nest | |
| egg over $3 million. But if I am a public-sector employee, for | |
| example, in the State of Illinois, that same employee, a public | |
| school teacher or a public firefighter, whose income in 30 | |
| years may be in excess of $200,000, when they retire, in | |
| essence, their annuity will be in far excess of $3 million and | |
| will be able to have accrued that annuity at tax-deferred | |
| rates. | |
| Secretary LEW. Comparisons between savings plans and | |
| pension plans are very hard to make. Obviously, the pension | |
| plan doesn't have the kind of survivorship rights that a plan | |
| like an IRA or a 401(k) would have. I would actually have to | |
| look at that in more detail to make the comparison. I can't, | |
| off the top of my head---- | |
| Mr. SCHOCK. All right. | |
| Secretary LEW [continuing]. Do it. | |
| Chairman CAMP. Time has expired. | |
| Mr. SCHOCK. Okay. Thank you. | |
| Chairman CAMP. Ms. Jenkins is recognized. | |
| Ms. JENKINS. I thank the Chairman for yielding and for | |
| holding this hearing. | |
| And we thank the Secretary for being here. | |
| Secretary LEW. It is good to be here. | |
| Ms. JENKINS. The President continues to embrace a worldwide | |
| system of taxing income, which potentially subjects overseas | |
| income to double taxation. And this, despite the | |
| recommendations of his jobs council, his export council, and | |
| Simpson-Bowles to adopt a territorial system. | |
| We are the last major industrialized country with a | |
| worldwide system. Having the world's highest corporate tax rate | |
| and being the only major industrialized country with a | |
| worldwide tax system, it hurts our competitiveness. | |
| I know many details remain, but are you willing to consider | |
| a shift toward a territorial system? | |
| Secretary LEW. Congresswoman, I actually think the choice | |
| is not so stark as one or the other. Our system is a bit of a | |
| hybrid already, and our proposal for a global minimum makes it | |
| more of a hybrid. | |
| We would welcome the conversation of how to set the dial in | |
| the right place so that it has the right incentives without | |
| losing revenue that we can't afford to lose. I think that there | |
| is a solution in the middle here that, if we work together on a | |
| bipartisan basis, we can find. | |
| Ms. JENKINS. Okay. We will look forward to that. | |
| And then I wanted to follow up on a question from my | |
| colleague, Representative Reichert, when he asked if your | |
| budget ever balanced and you said, yes, in an out-year. What | |
| year does the budget balance? | |
| Secretary LEW. I believe in our out-years, it is in the | |
| 2050s. It is quite a while away. It is not in the 10-year | |
| window. | |
| And we think that the attempts to reach balance in this 10- | |
| year window force the kinds of choices that we think are not | |
| right for the economy, that wouldn't grow jobs. And it would be | |
| unfair to retirees and Medicare and other people who would lose | |
| their ability to count on Medicare as a guaranteed benefit. | |
| So these are hard choices. We need to get to a place where | |
| our debt is sustainable, where we meet the internationally | |
| accepted standards of what it is that an economy can have as | |
| far as a deficit and a debt as a percentage of GDP. | |
| And then we need to keep working together. You know, in the | |
| 1980s and the 1990s, we didn't reach balance in one shot. It | |
| took year after year---- | |
| Ms. JENKINS. Well, is it safe to say that under the | |
| President's budget, in our lifetime we will never stop spending | |
| more money than we take in? | |
| Secretary LEW. I am not going to sit here and estimate | |
| either of our lifetimes. | |
| Ms. JENKINS. You would be 100 years old, and I would be | |
| pushing that. So is that safe to say? I don't intend to live to | |
| be 100. | |
| Secretary LEW. I think the question is not when we hit | |
| balance. It is when do we have our budget in a place where it | |
| is affordable, where we can pay our bills, and where the | |
| economy---- | |
| Ms. JENKINS. And that is not in our lifetime. | |
| Secretary LEW. And the economy is---- | |
| Ms. JENKINS. In---- | |
| Secretary LEW. No, no, I think it is. I think the economy | |
| would---- | |
| Ms. JENKINS. Then, why wouldn't the budget reflect that? | |
| Secretary LEW. No, I guess what I am disagreeing on is, | |
| defining reaching balance in this short-term window---- | |
| Ms. JENKINS. I define it as---- | |
| Secretary LEW [continuing]. Is different. Yeah. | |
| Ms. JENKINS [continuing]. Not taking--not spending more | |
| money than you take in in any one year. | |
| Secretary LEW. Yeah. | |
| Ms. JENKINS. And that, according to the President's budget, | |
| is 2055. | |
| What date do you think it would be before we pay off the | |
| debt that we owe? | |
| Secretary LEW. You know, when I left the White House---- | |
| Ms. JENKINS. Wait. Just a second. Is there a date that you | |
| could give me? | |
| Secretary LEW. I would have to look it up, but, obviously, | |
| it would be---- | |
| Ms. JENKINS. So we don't know. | |
| Secretary LEW [continuing]. Very far in the future. We want | |
| a path for paying down the debt. | |
| Ms. JENKINS. Would you recommend that businesses, small | |
| businesses in my district do business this way, to rack up debt | |
| and have no clue when they can pay it off? | |
| Secretary LEW. Governments are different than businesses. | |
| Governments are able to pay their debt if they maintain a | |
| growing economy and if they are able to keep current with that. | |
| I am---- | |
| Ms. JENKINS. How can you say---- | |
| Secretary LEW. I am probably the only person in this room | |
| who can say he balanced the Federal budget. I believe in a | |
| balanced budget. I didn't believe in the policies in 2001, in | |
| 2003, and through 2008. They---- | |
| Ms. JENKINS. Do you have kids? | |
| Secretary LEW [continuing]. Created a deficit. | |
| Ms. JENKINS. Do you have kids? | |
| Secretary LEW. I have two children, yes. | |
| Ms. JENKINS. Okay. I do, too. How do---- | |
| Secretary LEW. I have grandchildren, as well. | |
| Ms. JENKINS. How do you explain to them that you are not | |
| willing to pay for the things that we are enjoying today, that | |
| you are just going to send them the bill? | |
| Secretary LEW. I am proud that I have spent almost 40 years | |
| of my life trying to get our fiscal house in order, and I | |
| balanced the Federal budget and ran a surplus three times. | |
| Ms. JENKINS. But you are not willing to balance the budget | |
| in your lifetime? | |
| Secretary LEW. I think we inherited a situation with a deep | |
| deficit, an economy that had no bottom, it was in free-fall. We | |
| have stopped that, we are growing, we are making progress. But | |
| we have to be honest with the American people. It is going to | |
| take a long time before we can actually reach the goal of a | |
| balanced budget again because we started so far behind. We are | |
| making good progress. | |
| Ms. JENKINS. Well, we started in the same place and were | |
| able to budget---- | |
| Secretary LEW. I would be happy to have a---- | |
| Ms. JENKINS [continuing]. For balancing in 10 years. | |
| Secretary LEW. I would be happy to have a debate on the | |
| policies it takes to get there. I don't think the American | |
| people will accept those policies because they are not good for | |
| the country. | |
| Ms. JENKINS. Well, I think they show huge growth in the | |
| economy, a better GDP growth rate, and a higher employment rate | |
| than the President's proposal. | |
| Chairman CAMP. All right. | |
| Ms. JENKINS. But we will look forward to the debate. | |
| Secretary LEW. I look forward to working with you. | |
| Chairman CAMP. The time has expired. | |
| Mr. Larson is recognized. | |
| Mr. LARSON. Thank you very much, Chairman Camp. Thank you | |
| for this hearing. Thank you for the way that you have conducted | |
| the business on this Committee, with Mr. Levin as well. | |
| And what an honor to have Jack Lew here. And I think the | |
| previous questioner just has to spark this question. I believe | |
| it was under your leadership, as well, that the entire Federal | |
| debt would have been paid off by 2009. And I think that was in | |
| your lifetime. Is that not correct? | |
| Secretary LEW. Yeah. I don't remember the exact year, but | |
| it was very much in my lifetime. | |
| Mr. LARSON. And so the policies, of course, that led to us | |
| going into a situation where we have wars, never before in our | |
| history, that weren't paid for---- | |
| Secretary LEW. Yeah. | |
| Mr. LARSON [continuing]. Tax cuts that weren't paid for, | |
| and a Medicare portion unpaid for, and then a serious financial | |
| crisis that led to an enormous recession have caused us to be | |
| in this situation. Is that a fair assessment? | |
| Secretary LEW. Congressman, it is a fair assessment. | |
| I think, as you know, when I left OMB in January 2001, we | |
| projected a surplus of $5.5 trillion over the next 10 years. | |
| There were a series of decisions that were made that caused | |
| that surplus to go away. We then hit a terrible recession, and | |
| our fiscal cannon, instead of being loaded, was emptied out. | |
| So we got to the position we are in because of a | |
| combination of policy decisions and economic conditions. And we | |
| need to work together to get back on a path to a sustainable | |
| deficit and then keep working, because, ultimately, we should | |
| do more. | |
| Mr. LARSON. And we all want to see us deal with the | |
| deficit, and we all want to see that happen in as timely a way | |
| as we can without placing the burden on the backs of | |
| beneficiaries of our system. | |
| Now, on one side, we hear this all the time, that we have a | |
| group of people that would like to shrink up government so | |
| small they could drown it in a bathtub. The people that they | |
| are drowning, of course, are the recipients of Social Security | |
| and Medicare, veterans, and the disabled, people that we would | |
| like to help, especially in these very difficult times and | |
| especially people who have served their country with honor. | |
| It would seem to me that in the Administration's | |
| application of its budget, it takes that into consideration. | |
| And it especially takes that into consideration with the care | |
| and need to make sure that we are not going into an austere | |
| climate that would balance this on the backs of beneficiaries. | |
| That is why I want to ask you this question, and I think it | |
| is important, because the President continues to reach out time | |
| and time again. For some of us, it doesn't seem logical, | |
| because he is met with resistance time and time again. I | |
| appreciate the President's optimism. I am an optimist, as well. | |
| I would like to see us be able to grow this economy, but we | |
| haven't seen the willingness to invest in our infrastructure or | |
| innovation. And so we are more than skeptical when the | |
| President lays out proposals for CPI and the other side seems | |
| to say, yeah, we will take that, but we don't want to take any | |
| of the balance that has to go along with that. | |
| If that kind of attitude prevails, what will the President | |
| do? | |
| Secretary LEW. Congressman, I think the President has been | |
| very clear. He put some very tough things in this budget, | |
| consistent with the offer he made to the Speaker in December, | |
| because he very much believes it would be the right thing to | |
| have a sensible, balanced agreement that has both sides doing | |
| difficult things. He is not prepared to do something like | |
| chained CPI outside of the context of a balanced approach. | |
| And I think that we are so close in terms of the positions | |
| the President has articulated and what we have heard over the | |
| last 2 years of what you need to reach an agreement in that | |
| sensible center, that I am still going to be an optimist, and I | |
| am going to push forward, as the President will, to try to get | |
| this done. | |
| But I don't want there to be any misunderstanding. And that | |
| is why I said in any opening statement, it is not a starting | |
| point; we have been at this for over 2 years. And it would be a | |
| mistake to treat it as if you can just take one piece out of it | |
| and reach an agreement. | |
| Mr. LARSON. One last thing I would add just as a comment, | |
| no need to respond, but Social Security and Medicare, | |
| specifically, are not entitlements. This is insurance that | |
| people pay for. You just go to your paycheck, everybody in | |
| America, and check that out. It is insurance that you pay for. | |
| Tell us you need to make an adjustment. Tell us we need to | |
| pay more. Tell us there are different actuarial assumptions | |
| that would lead to that. Let's get behind the science and math | |
| that will allow us to reach that apex. But it is not an | |
| entitlement; it is insurance. | |
| Chairman CAMP. All right. Thank you. | |
| And Mr. Paulsen for the last questions of this morning. | |
| Mr. PAULSEN. Thank you, Mr. Chairman. | |
| Mr. Secretary, I remember when the President gave his State | |
| of the Union speech back in 2011. And I was actually really | |
| encouraged that he mentioned at that time the need for | |
| corporate tax reform, in particular. And he has mentioned it | |
| and reaffirmed it in several more State of the Union speeches; | |
| in fact, moving now to having this revenue-neutral component on | |
| some business tax reform, which I think is great. And I look | |
| forward to working with you on that. | |
| I just want to follow up on one clarification, because you | |
| mentioned earlier in your testimony about making sure that, you | |
| know, we want to have a Tax Code that is simpler, fairer, and | |
| more competitive. And you mentioned earlier about small | |
| businesses having to hire accountants and attorneys and work | |
| through a very cumbersome and complex Tax Code. I hear about | |
| that all the time in Minnesota on a very regular basis. | |
| And I just want to get a better sense, do you believe that | |
| component of having more comprehensive tax reform should | |
| include more small businesses and/or families, individuals as a | |
| part of that comprehensive discussion, or should they be left | |
| separately? Because the revenue-neutral component now, as I | |
| understand it, is only on the corporate side but not including | |
| small business. | |
| Secretary LEW. Congressman, I have tried to be clear. We | |
| think both sides of tax reform are important, individual and | |
| business tax reform. Obviously, businesses choose to organize | |
| either one way or the other, and they really need to know what | |
| the world in each side of the Tax Code looks like. | |
| So we look forward to working together on a bipartisan | |
| basis. But it has to be in the context of a fiscal plan, and we | |
| believe that is only going to work if we raise some additional | |
| revenue out of tax reform. | |
| I think it is an amount of revenue consistent with | |
| discussions we were having last year. You know, last year, | |
| there was a fairly broad, bipartisan--well, at least | |
| Republicans were saying you could do a trillion dollars of | |
| revenue by base-broadening. We didn't do any of the base- | |
| broadening. So $580 billion ought to be achievable with base- | |
| broadening. | |
| Mr. PAULSEN. Well, I know there is going to be opportunity. | |
| I just want to make sure that small business is not left off | |
| the table and they will be included as a part of that | |
| discussion. Because they are just as competitive as large | |
| corporations, obviously, in promoting their sales and income | |
| and expanding their operations. | |
| Secretary LEW. Well, we have, from the beginning of this | |
| Administration, worked as hard as we can to promote incentives | |
| for small businesses. There have been 18 separate provisions. | |
| Tax reform should very much address the needs of small | |
| business. And if we can do comprehensive tax reform, as I hope | |
| we can, I look forward to working with you on that. | |
| Mr. PAULSEN. Good, good. | |
| And I want to follow up on one other point, because, again, | |
| I was elected the same year the President was elected, in 2008. | |
| And I came in with open eyes, critical of my party for raising | |
| the debt, for raising spending, and our deficits. So there is | |
| bipartisan blame, and there has to be a bipartisan solution if | |
| we are going to fix these problems. | |
| But my concern is with the new budget. And I haven't looked | |
| at all the details, but it does seem to be a little bit of a | |
| reaffirmation of past budgets that have been proposed by the | |
| Administration that do accelerate spending and don't really | |
| deal with some of the deficit issues or the balancing issues | |
| until much later in the out-years. | |
| And so I just think we need to get ahead of it sooner. Do | |
| you share that---- | |
| Secretary LEW. Well, I think this budget is actually | |
| structurally different. And we may not agree on every aspect of | |
| it, but we have the deficit-reduction plan that is what the | |
| President offered to the Speaker in December. We do have | |
| additional investments. We pay for them; everything is paid | |
| for. If we can't agree on how to pay for them, we can't do the | |
| investments. We understand that. We are going to make the case | |
| that the pay-fors are correct. And we are in an environment | |
| where, if we get on the path for a sustainable budget where the | |
| deficit and the debt are coming down as a percentage of GDP, we | |
| are going to have to pay for things that we do after that. | |
| So I actually think it is a different approach. If you look | |
| at the baseline, there is no doubt that there is growing | |
| spending in the baseline because it is no news that the baby | |
| boom is approaching retirement. Much as many of us would like | |
| it to be otherwise, each year we are a year closer. And the | |
| fact is, as the baby boom retires, there is going to be a huge | |
| increase in the number of people on Social Security and | |
| Medicare. And unless we take away their entitlement to those | |
| benefits, that insurance that they have paid into, spending | |
| will go up. | |
| Mr. PAULSEN. Now, you spoke earlier, too, about reducing | |
| deficits to a certain percentage of GDP. But, on the other | |
| hand, debt is continuing to rise, and it is rising as a | |
| significant percentage of GDP. | |
| What is the appropriate level of our debt? Do you think | |
| there is a debt crisis coming our way if we don't take action? | |
| Secretary LEW. The President's budget would actually turn | |
| the corner and bring down both the deficit and debt as a | |
| percentage of GDP. We would bring the deficit down to below 2 | |
| percent of GDP. We would bring the debt into the mid-70s and | |
| stabilize. | |
| That is a huge difference, between growing and growing over | |
| 100 percent. And I think that is why it is so important that we | |
| work together on this. | |
| Mr. PAULSEN. Let me ask this: Is it your view--the | |
| President said in the middle of March, on the 13th, he said, | |
| ``We don't have an immediate crisis in terms of debt. In fact, | |
| for the next 10 years, it is going to be in a sustainable | |
| place.'' Is that your view, we are in a sustainable place for | |
| the next 10 years? | |
| Secretary LEW. Well, I think we have proposed policies that | |
| would ensure that we get there. | |
| Mr. PAULSEN. Okay. | |
| Thank you, Mr. Chairman. | |
| Chairman CAMP. All right. Thank you very much. | |
| And thank you very much, Mr. Secretary. We very much | |
| appreciate your time. And I and all the Members of this | |
| Committee look forward to working with you in the months ahead. | |
| Secretary LEW. Thank you, Mr. Chairman. I look forward to | |
| working with you and the other Members of this Committee as we | |
| go forward. | |
| Chairman CAMP. Thank you. | |
| And, with that, this hearing is now adjourned. | |
| [Whereupon, at 12:10 p.m., the Committee was adjourned.] | |
| <all> | |
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