[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE PRESIDENT'S FISCAL YEAR 2015 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
SECOND SESSION
__________
MARCH 6, 2014
__________
Serial No. 113-FC15
__________
Printed for the use of the Committee on Ways and Means
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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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 March 6, 2014 announcing the hearing................. 2
WITNESS
The Honorable Jacob J. Lew, Secretary, U.S. Department of the
Treasury....................................................... 3
THE PRESIDENT'S FISCAL YEAR 2015 BUDGET
PROPOSAL WITH U.S. DEPARTMENT OF THE
TREASURY SECRETARY JACOB J. LEW
----------
THURSDAY, MARCH 6, 2014
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to notice, at 9:32 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
CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Thursday, February 27, 2014
No. FC-15
Chairman Camp Announces Hearing on
the President's Fiscal Year 2015 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 2015. The hearing
will take place on Thursday, March 6, 2014, in 1100 Longworth House
Office Building, beginning at 9:30 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 March 4, 2014, the President is expected to submit his fiscal
year 2015 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, ``A tax code that
is simpler and fairer will make the economy stronger so there are more
jobs and bigger paychecks. It is important that any closing of special-
interest loopholes be used to lower tax rates--not to pay for new
spending--so employers can start hiring again, families can save more
and wages can start to grow. The Tax Reform Act of 2014, released last
week, achieves these goals and includes ideas advanced by Democrats and
Republicans in Congress, as well as those offered by the Obama
Administration. This hearing will provide the Committee an opportunity
to review the President's tax proposals and Treasury Secretary Lew the
opportunity to share ideas in the President's budget designed to meet
those same goals.''
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, March 20, 2014. 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
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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
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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
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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/.
Chairman CAMP. Good morning. This hearing will come to
order. Welcome, Secretary Lew. We appreciate you being here
with us this morning, and your full written testimony will be
made part of the record.
Given that the House of Representatives is scheduled to
begin voting at approximately 10:00 a.m. this morning. I would
ask that you would provide a brief oral summary of your
testimony, so we can move more quickly to questions from
Members of the Committee. But in order to give as many Members
as possible the opportunity to question the Secretary, Ranking
Member Levin and I will forgo our opening statements. And, in
addition, we will reduce to 3 minutes the time for questioning.
So, Secretary Lew, welcome, and please begin.
STATEMENT OF THE HONORABLE JACOB J. LEW, SECRETARY, U.S.
DEPARTMENT OF THE TREASURY
Secretary LEW. Thank you very much, Mr. Chairman, Ranking
Member Levin, Members of the Committee. I appreciate the
opportunity to testify today on the President's budget.
Before I begin, let me say a few words about the situation
in Ukraine. President Obama has explained in no uncertain terms
that the steps Russia has taken to violate Ukraine's
sovereignty, Ukraine's territorial integrity, and--are a breach
of international law. As the President announced this morning,
he has signed an executive order to authorize sanctions on
individuals and entities responsible for activities that
undermine the democratic process, threaten the peace, security,
stability, sovereignty, or territorial integrity of Ukraine, or
misappropriate state assets within Ukraine.
This executive order is a flexible tool that will allow us
to sanction those who are most directly involved in
destabilizing Ukraine, including the military intervention in
Crimea, and does not preclude further steps, should the
situation deteriorate.
These sanctions build upon previous actions that the United
States has taken. But, at the same time, as the President has
said, we are prepared to work with all parties to de-escalate
the situation, and we call on Russia to take the necessary
actions to resolve this crisis. It is in Russia, the United
States, and the world's best interests to have a stable and
prosperous Ukraine. And as the Ukrainian government prepares
for elections in May, it is critical that the international
community work together to support its efforts to restore
economic stability.
I have spoken with the Ukrainian prime minister a number of
times, and he has told me that the government is ready to adopt
vital economic reforms. We have been working closely with
international partners and Congress to develop an assistance
package that will help the Ukrainian Government implement
reforms needed to restore financial stability and return to
economic growth. As part of this international effort, the
United States has developed a package of bilateral assistance
focused on meeting Ukraine's most pressing needs. This package
will include $1 billion in loan guarantees and IMF quota
legislation, which would support the IMF's capacity to lend
additional resources to Ukraine, and help preserve continued
U.S. leadership within this important institution at a critical
time.
While the United States will not increase our total
financial commitment to the IMF by approving the 2010 reforms,
it is important to note that, for every dollar the United
States contributes to the IMF, other countries provide $4 more.
At a time when the U.S. is at the forefront of international
calls in urging the fund to play a central and active first-
responder role in Ukraine, it is imperative that we secure
passage of IMF legislation now, so we can show support for the
IMF in this critical moment, and preserve our leading
influential voice in that institution.
I want to be clear that, even as we deal with the unfolding
events in Ukraine, we continue to focus on our central
objective, which is expanding opportunity for all Americans.
Over the past 5 years, we have accomplished a number of
important things to make our country stronger and better
positioned for the future. In fact, since 2009 the economy has
steadily expanded. Our businesses have added 8.5 million jobs
over the last 47 months. The housing market has improved and
rising housing prices are pulling millions of home owners from
under water. At the same time, household and business balance
sheets continue to heal, exports are growing, and manufacturing
is making solid gains.
The truth is, as the President said in his State of the
Union, we are more ready to meet the demands of the 21st
century than any other country on earth. Nevertheless, our
economy was thrown against the ropes by the worst recession of
our lifetimes. And, while we are back on our feet, we are not
where we want to be yet. Everyone here understands that. And
the question is, what are we going to do about it?
The President's budget lays out a clear path to move us in
the right direction. It not only fulfills the President's
pledge to make this a year of action, it offers a framework for
long-term prosperity and competitiveness. This budget addresses
the critical issues we face as a Nation. It recognizes that
while corporate profits have been hitting all-time highs,
middle-class wages hit a plateau, with long-term unemployment
and ongoing challenge. It recognizes that while the stock
market has been vibrant, saving for retirement and paying for
college is little more than a dream for millions of American
families. It recognizes that while our national security
threats are shifting, and we are bringing the war in
Afghanistan to a responsible end, soldiers, military families,
and veterans struggle to succeed in our economy. And it
recognizes that while work is being done to put the final
pieces of financial reform in place, reforms like the Volcker
Rule have made our financial system stronger, and an engine for
economic growth once again.
The solutions in this budget flow from a frank assessment
of these challenges. They are carefully designed to show the
choices we can make to increase opportunity and bolster the
middle class.
For instance, a cornerstone of these proposals is to expand
the earned income tax credit, so it reaches more childless
workers. We know this credit is one of the most effective tools
for fighting poverty, and it is time to adjust it so it does an
even better job rewarding hard work. This tax cut, which would
go to more than 13 million Americans, will be fully offset by
ending loopholes that let high-income professionals avoid the
income and payroll taxes that other workers pay.
Another initiative that will make a difference for hard-
working men and women is myRA. This retirement security program
will be available later this year, and it will allow Americans
to start building a nest egg that is simple, safe, and can
never go down in value.
While this budget puts forward essential pro-growth
initiatives, it also calls on Congress to reinforce our growth-
enhancing strategies by passing measures like comprehensive
immigration reform and trade promotion authority. But even as
it does these things, make no mistake; this budget is also
serious about building on the success we have made together to
restore fiscal responsibility.
The fact of the matter is, the deficit, as a share of GDP,
has fallen by more than half since the President took office,
marking the most rapid decline in the deficit since the period
of demobilization following the end of World War II. The
deficit is projected to narrow even more this year. And today
we are charting a course that will push the deficit down to
below 2 percent of GDP by 2024, and rein in the national debt
relative to the size of the economy over
10 years.
Last year, the President put forward his last offer to
Speaker Boehner in his budget as part of a balanced compromise.
This year's budget reflects the President's vision of the best
path forward. While the President stands by his last offer, he
believes that the measures in his budget are the best way to
strengthen the economy now. As this budget demonstrates, the
President is firmly committed to making tough choices to tackle
our fiscal challenges and our fair and balanced solutions
represent a comprehensive approach to strengthening our
Nation's financial footing.
This approach shrinks the deficit and debt by making
detailed responsible changes to Medicare, while eliminating
wasteful corporate tax loopholes and subsidies that do not help
our economy, and by scrapping tax breaks for those who do not
need them.
Increasing basic fairness in our tax code is not just about
improving our Nation's fiscal health, though. It is also about
generating room so we can make investments that will strengthen
the foundation of our economy for years to come. This means
helping to create more jobs by repairing our infrastructure,
increasing manufacturing, boosting research and technology, and
fostering domestic energy production. It means training
Americans so they can get those jobs by promoting
apprenticeships and upgrading worker training programs. It
means improving our education system by expanding access to
preschool and modernizing high schools. And it means making
sure hard work pays off by creating more Promise Zones,
increasing college affordability, and raising the minimum wage
to $10.10 an hour, and indexing it to inflation.
In closing, let me point out that this budget represents a
powerful jobs growth and opportunity plan. It is carefully
designed to make our economy stronger, while keeping our fiscal
house in order.
What is more, it offers Washington a real chance to work
together. As everyone on this Committee knows, for far too long
brinkmanship in Washington has been a drag on economic growth.
But we have seen a significant amount of bipartisan progress in
recent months that has helped improve economic momentum. Some
cynics say it is fleeting, some call it election year
posturing, but I don't agree. I believe this progress is real,
I believe we can keep finding common ground to make a
difference, and I believe we can continue to get serious things
done on behalf of the American people by working together.
I thank you, 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 very much, Mr. Secretary.
The Administration's budget proposal assumes that three
temporary tax provisions that were first enacted in 2009 and
expire in 2017 are permanent. This means that making them
permanent doesn't ``cost anything,'' as they don't have to be
offset. Making these provisions permanent relative to current
law is estimated to cost about $154 billion. What standard did
you use to determine what extenders would be assumed to be
permanent and not offset, and which would not?
Secretary LEW. Mr. Chairman, you are asking a question
about the baseline that we used, and baselines are a
complicated technical matter. We have tried----
Chairman CAMP. I am fully aware of that.
Secretary LEW. I know. I understand you know that. And we
have tried for the last number of years to have the baseline
reflect, as best as it can, the things that are, in practice,
more permanent, and really part of the ongoing, you know,
challenge of funding government.
We believe the refundable tax credits, the earned income
tax credit, the items you were referring to, should be made
permanent. We made that case, obviously, many times over. It
actually doesn't make a difference whether it is in the
baseline or not, in terms of what the final bottom line is. A
budget has to cover all of the spending and revenue flows in
it.
And the bottom line is that when you look at our budget, by
reducing the deficit to 3 percent of GDP, and on a path to 1.9
percent of GDP, we have put together a package that
accommodates it. It is a technical decision that I think is the
right one. Others, the Center for Responsible Budgets, the
Senate Budget Committee, others, have made a similar decision.
I understand there are technical issues in the baseline that--
--
Chairman CAMP. And--well, and if I might, there are many
tax extenders that have been part of the tax code for a lot
longer than those three provisions, such as Section 179 for
small business expensing, which was part of the 2001 and 2003
tax relief, or the R&D tax credit, for example, which was
enacted in 1981. So I think a strong case can be made that
these provisions should be permanent, as well.
And, obviously, when I released the discussion draft on
comprehensive reform, I specifically asked for feedback on that
particular issue. And I would just ask you your thoughts on a
discussion about which tax extenders should be part of the
baseline, and do you think that is an appropriate discussion to
have.
Secretary LEW. Mr. Chairman, I actually think that when we
do tax reform, coming out of tax reform, we would be better off
if we had more of a sense of permanence because certainty about
what is in the tax code and what isn't helps to contribute to--
more certainty is a better environment for investment.
The challenge we have had is--with the extenders is there
has been an ongoing debate about which ones to extend, and
whether or not they are permanent. And we believe that the tax
credits that we put in the baseline are items that have a
different character.
You know, we did propose, as a matter of policy, to make
our--the research and experimentation tax credit permanent. So
we totally agree that there are items that should be made
permanent. And what is policy and what is baseline is something
we are happy to talk about. Coming out of tax reform--and I
will note that in the plan you put forward there are some very
clear paths there which--you know, some of it overlaps
considerably with what we are talking about----
Chairman CAMP. Well, thank you. And I look forward to
having that discussion with you on those issues.
On another topic, a lot of people are angry about how
complicated the tax code is, and I certainly hear that from
people in my district who are hard-working taxpayers. You know,
as we have talked about in this Committee, the code has 15
different provisions for saving for college. The IRS has a 90-
page instruction booklet on that. The draft reform legislation
includes the bipartisan proposal by Congressmen Davis and Black
and to consolidate and modernize certain tax breaks.
Now, my question to you is, are there certain opportunities
to reform and simplify the code, particularly for parents
trying to save for college education, our hard-working
taxpayers, that we can accomplish without necessarily having to
resolve the question about whether comprehensive reform should
raise revenue or not?
Secretary LEW. Mr. Chairman, there, I think, is always room
for conversations about what we can do to make the tax code
more efficient, more effective, and easier for people to use. I
do think that, as we get to the conversation of comprehensive
tax reform, it is inherently tied to the fundamental question
of whether revenue is part of a long-term fiscal plan.
On the question of the education provisions, you know,
simplification is a desirable goal, but we also have different
objectives that are achieved by different pieces of the code
now. And I think the challenge, and a conversation we look
forward to having with you, is how to get the balance right, so
that we still are encouraging the kind of behavior that we
think makes a difference for the economic future of both
families and the country. And I know, in your plan, you know,
there are changes, some of which we have questions about in
terms of, like, the AOTC. And I think those are important
questions for us to work through.
Chairman CAMP. Yes, and I was obviously asking about not
necessarily a comprehensive approach, but on individuals.
But last, the Administration says that the business tax
reform is long-run revenue neutral. And that strikes me as
being inaccurate, given that, the way I read your budget, you
are really proposing $150 billion business tax increase in the
first decade to pay for infrastructure. And then the proposal
would be revenue-neutral in years 2011 and beyond. I think, put
another way, I think it could be described, if you looked at
year one to the long run, it is really a $150 billion tax
increase. Because I think, truly, to be revenue-neutral, you
need to calculate the $150 billion as part of that approach.
Don't the first 10 years count, as well?
Secretary LEW. Mr. Chairman, the challenge is that the--any
tax reform is going to throw off a certain amount of revenue at
the beginning, as there is a transition that won't be there in
the long run. So, if one were to take that revenue and lower
rates permanently, it almost forces you to lose revenue after
the introductory period. So, years 2011 through 2020 would
start to lose revenue.
There is a choice what to do with the one-time flows. You
could reduce the deficit with it, and that is a perfectly
legitimate decision to make, or you could do one-time
expenditures. We believe that a one-time expenditure on
building infrastructure would be good for the economic future
of this country, and that is why we proposed it. I actually
think that--when I talk to CEOs, one of the things that they
raise with me, even before tax issues, is the need for
infrastructure. So I actually think that there is support in
the business community for the idea.
Chairman CAMP. Yes. Outside of the motivation for it--but
it is a $150 billion cost in the first decade. But I think--am
I accurate in that it is revenue-neutral in years 2011 and
beyond? So if you look at the entire time frame in question, it
is actually not revenue-neutral to the tune of $150 billion----
Secretary LEW. There is a dilemma, Mr. Chairman, that if
you crank the savings, the revenues that come for one time when
there are timing shifts, or when new provisions go into effect,
into permanent rate changes, you will lose money in the out-
years. So you would have to step down rates as you got to year
2011 to be truly revenue-neutral. We think our proposal is a
better approach than that.
Chairman CAMP. All right. Mr. Levin.
Mr. LEVIN. Welcome. I welcome your statement and the
President's actions on Ukraine. And I hope all of us will rally
together to be supportive of the President's action.
And I think the Chairman has started this off on the right
step, if I might say so, so that we talk about your testimony
and issues relating to that, including tax reform. I think that
is the way we should be doing this hearing, and not wander off
into other subjects. So let me ask you about two portions of
your comprehensive testimony.
On page four you say, ``Because long-term unemployment
remains a pressing economic and social issue, the budget
provides resources for new public-private partnerships to help
get the long-term unemployed back into paying jobs.'' I think
that is right on target. Just, if you would, state briefly the
position of the Administration on extension of unemployment
compensation to the long-term unemployed, now over two million
who have lost their benefits.
Secretary LEW. Congressman Levin, we strongly support the
extension of long-term unemployment benefits. You know, as we
look at the unemployment statistics, it is clear that short-
term unemployment is coming back down to a more normal range.
But long-term unemployment is staying stubbornly high.
That means there are people who are looking for work who
can't find work, and we need to continue, as we have every time
unemployment has been at these kinds of levels, respond with
long-term unemployment benefits that phase out as the
unemployment rate comes down.
You know, I think the important thing for us to do is deal
with the short-term need by extending long-term unemployment
benefits, but also focus on what we do to get the economy
growing faster, creating more jobs, which is why we focus on
things like rebuilding our infrastructure, on skills training,
and manufacturing hubs, the things that will be job-creators,
to create opportunities for people.
Mr. LEVIN. Good. My time will be up soon. I just wanted to
refer on page two to your statement about non-defense
discretionary funding levels. And I hope, during our
discussion, you will have a chance to analyze this. Because I
think the way we are headed, non-defense discretionary funding
levels are now being lowered to levels that we haven't seen in
decades.
Secretary LEW. Congressman, that is definitely true. Part
of--we have done an enormous amount of deficient reduction,
most of it through spending reduction, most of it through
discretionary spending reduction. I think that what we are
trying to do in this budget is make a case that on both the
defense and the non-defense side, in order to meet the needs of
our Nation, we are going to have to find ways to hit our fiscal
targets, while restoring the ability to invest in our future
and defend the country.
Mr. LEVIN. Thank you very much.
Chairman CAMP. Mr. Brady is recognized.
Mr. BRADY. Thank you, Mr. Chairman. Yesterday's decision by
the White House to allow canceled insurance plans under the ACA
to continue past the election, was that primarily a political
decision?
Secretary LEW. Congressman, as you know, that decision was
a decision that was in the purview of the Department of HHS,
not Treasury. I think I could speak generally to it, but not
specifically.
In general, our approach to the implementation has been to
do everything we can to implement the Affordable Care Act in a
smooth, effective way. Obviously, there were some bumps at the
beginning. We have fixed the technical issues, and we are
moving forward.
Mr. BRADY. But this is not a technical issue. I mean, until
recently, both you and the President described these plans as
substandard. As these plans still viewed as substandard?
Secretary LEW. Congressman, again, I am going to leave the
discussion of----
Mr. BRADY. Well, it is in your budget.
Secretary LEW. Yes.
Mr. BRADY. That is what we are here to talk about.
Secretary LEW. And the goal in implementing the Affordable
Care Act has been to make sure that we--the new plans can be in
place----
Mr. BRADY. But I guess my question is----
Secretary LEW [continuing]. The exchanges can be in place,
and we are working hard----
Mr. BRADY. But what has changed? If these were substandard
plans, as described by the President--and I believe he said,
``Americans deserve better''--are they still viewed as
substandard plans?
Secretary LEW. You know, Congressman, I think we have been
clear that we think that the right level of coverage is
prescribed in the Affordable Care Act, and we have exchanges in
place, both State and Federal, to offer that coverage. And we
are going to work very hard to get people into those plans.
Mr. BRADY. But, obviously, with the White House continuing
to delay or change these, clearly, something is wrong or they
would have left it in place.
So, my question is, is this primarily a political decision?
Because the substandard plans, as described by you and the
White House a couple weeks ago haven't changed. So what has
changed?
Secretary LEW. We have been working since the enactment of
the Affordable Care Act to, step by step, implement it as
effectively as possible. I think the announcements yesterday
are the last major changes that affect individuals and
businesses. And it provides a clear path for the time forward--
--
Mr. BRADY. Well, is----
Secretary LEW [continuing]. And I think that clarity is
important.
Mr. BRADY. Obviously, for something to change, the view has
to be that forcing people into the Affordable Care Act is more
harmful to them than allowing them to stay on substandard
plans, correct?
Secretary LEW. No, I----
Mr. BRADY. I mean it has to be one or the other.
Secretary LEW. I think----
Mr. BRADY. It is great as it is, or there is a problem with
making them change plans.
Secretary LEW. I think, through the Affordable Care Act, we
are offering people choices. Those choices are good choices.
People are signing up at very rapid rates----
Mr. BRADY. If they are good--I don't mean to interrupt, but
if they are good choices, why the change, if not for politics?
Secretary LEW. I want to just repeat what I said, which is
that we are looking at the implementation of the Affordable
Care Act, to have it be as smooth as possible, and----
Mr. BRADY. Are there any other delays being considered?
Secretary LEW. I think that we have now put in place the
major pieces for individuals and for businesses, and our goal
is to----
Mr. BRADY. No other changes? Can you commit to us, and
people who are wondering, will there be any more delays of the
ACA?
Secretary LEW. Yes, we are going to continue to implement
the Affordable Care Act in as effective a way as we can. And I
am not aware of any other changes, but, obviously, I can't tell
you what we will discover, going forward.
Chairman CAMP. All right, thank you. Mr. Rangel.
Mr. RANGEL. Thank you. I want to thank the Chairman for
bringing up the important question of tax reform. And we
haven't enjoyed too much of a bipartisan atmosphere here.
Mr. Secretary, do you have any reason to believe that the
Administration would be able to have some form of tax reform
with the Republican Majority in the House, other than the
bill--the draft, rather--being presented?
Secretary LEW. Congressman Rangel, I actually believe that
there is space for us to work together. I think we have made it
clear that, on the business side, we think that there is a
convergence of thinking. If you look at the draft bill that the
Chairman put out, and the white paper that the President put
out, there are a lot of areas, not of identical provisions, but
overlap. I think we could work together on large pieces.
As I said in my response to the Chairman, I think there is
a fundamental question on individual reform that we disagree on
whether it should be revenue-neutral, or whether it should
contribute to the long-term fiscal plan.
Mr. RANGEL. Let me reframe my question----
Secretary LEW. And I think that is a bigger obstacle----
Mr. RANGEL. It is absolutely no question that there is vast
areas that we could be working together. My question to you,
have you received any indication, other than the submission of
a draft bill, that the Congress is going to work with the
Administration toward any type of tax reform?
Secretary LEW. Well, I have conversations with the Chairman
of the Ways and Means Committee on a regular basis. I----
Mr. RANGEL. And have you reached a conclusion that, with
this conversation, it is possible that we could do something?
Secretary LEW. I am a big believer in possibility. I think
if people keep talking, anything is possible.
Mr. RANGEL. Well, let me--you know, we have a lot of
problems with unemployment. And the results of this has been a
vast boom in homelessness. And I am glad to see that there is
expansion and target of giving support to the homeless, as well
as affordable housing. Is there any way for you to give to, us
the congressional districts that are suffering with
unemployment, as well as affordable housing, have you got that
broken down to statistical data? I just can't believe that only
Democrats are suffering.
Secretary LEW. Congressman, we obviously don't do the
unemployment data. The Treasury Department, the Department of
Labor does. I am happy to have somebody go back and ask if it
is available on a congressional district----
Mr. RANGEL. I would really appreciate to see how many
Americans are suffering because the Congress is not moving
forward----
Secretary LEW. Yes.
Mr. RANGEL [continuing]. With support of legislation. I
yield back the balance of my time.
Chairman CAMP. Thank you. Mr. Tiberi.
Mr. TIBERI. Mr. Lew, thank you for being here. I raised an
issue last year, when you were before us, regarding a situation
that--impacting many of my Ohio constituents. And I have yet to
receive a reply. And so I was hoping to broach it with you
again, and don't expect you to answer it today, but, if you
could, make sure your staff replies.
This week marks 2 years since the IRS issued a memorandum
taxing aircraft management services as commercial aviation,
subject to the ticket tax, instead of general aviation, subject
to the fuel tax. This is contrary to congressional intent, with
a law that was passed in 1970, and contrary to IRS practices
for 40 years. This just changed 2 years ago, and we still
haven't been able to get a reason as to why they have done
this. So, about a month ago, a little over a month ago, I sent
you a bipartisan letter on the issue, and I haven't heard back.
Again, don't expect you to answer it today, but if you
could flag it, and have----
Secretary LEW. I will flag it, Congressman.
Mr. TIBERI [continuing]. Your staff get back to us, because
there is bipartisan concern about what is happening.
Another issue I just want you to touch on briefly, if you
could, is you have been around this town a long time, and you
understand, like all of us understand, that the structural
driver of our debt is mandatory spending. So, no matter what
happens, and no matter what we do on the discretionary side, we
continue to have an increase in mandatory spending. And we see
that as far as the eye can see.
And so, for my kids, we are doing them a disservice by not
tackling what really is the true driver of our national debt.
You, in the President's budget, arguably take a step backwards.
You still do some provider cuts. But when are we, you and me--I
am not making this a partisan issue--Democrats and Republicans,
with leadership from the White House, going to start tackling
through reforms, substantive reforms, the structural driver of
our debt?
Secretary LEW. Congressman, I think we should start by
recognizing that we have actually done a lot. And I know we
don't all agree on the Affordable Care Act. But I think we can
agree that if we look at what has happened to health care costs
in this country, the rate of growth is coming down. And I
believe that the action taken in the Affordable Care Act is
part of that. If health care costs come down, that has an
enormous impact on what the direction and the slope of the
growth of entitlement costs is. So we have done quite a lot.
In our budget we have, as you noted, some more provider
savings. But we also have some things that are tough policy,
like income-related premiums, where, in bipartisan
conversations, it has been one of the reforms that we have
looked at. The President made clear when he put his proposal on
chain CPI in the budget that he was doing it because that is
something that we were--we understood was necessary to have a
bipartisan discussion on an overall package. It was never his
first choice.
Since we are not in the middle of a bipartisan discussion,
I wouldn't describe it as a step back. He has put his vision of
where we are going forward. He has also said when there is--if
there is an interest in the last offer, it is on the table.
I think that, you know, we have to look at what we have
accomplished. We have reduced the deficit by half. We are on a
path where we are at 3 percent of GDP, going down to less than
2 percent of GDP. I don't disagree that we have challenges on
the revenue and the entitlement side, tax reform and
entitlement reform, that we are going to need to deal with. I
don't think we have the kind of emergency that we had, you
know, a few years ago, when we were looking at deficits as a
percentage of GDP that were an immediate problem. We have a
challenge now where what we have to do is get a bipartisan
spirit together so everything can be on the table. And when
everything is on the table, I think we can do it.
Chairman CAMP. All right. Thank you very much. Mr.
McDermott.
Mr. MCDERMOTT. Thank you, Mr. Chairman. Jack, I am pleased
that you are here, talking about the budget. And I want to--
really have a minute or two, so I want to focus on one issue,
and that is the whole issue of the minimum wage.
It strikes me that, year after year, the basket of goods
that people can buy has dropped over the course of time with
the minimum wage. And I put this graph up there so that people
could see where the minimum wage has been. Now, in 1938, when
Charlie and I were born, or so, it was $.25 an hour, and has
gradually risen to $7.25. And the value of its ability to buy,
what--its value in buying has dropped. And you can see the red
dots. You can't buy as much as you could with the minimum wage
in the past.
And the President--in the State of Washington we are at
$9.19. We have already--we are leading the country. Oregon is
right behind us at $8.85, I think. Talk about what the increase
in the minimum wage means to the economy.
Secretary LEW. Congressman, I think that you got to start
with what the minimum wage means to a working family. Anyone
who is working full-time in this country should have a wage
that is at least at the poverty level. And that is what a
minimum wage of $10.10 would do.
I think we all know that somebody who is taking home wages
at that level is spending the money as they earn it. So it is
going straight into consumption, straight into demand, and that
goes into the economy. We also know that we have a disparity of
income in this country, and that for people at the high end,
they are not--they shouldn't be spending all of their earnings,
but it is not an environment where the money is finding its way
all back into the economy. A lot of money is sitting on the
sidelines.
I think that raising the minimum wage right now would
actually be good for the economy. You know, there are
economists who have made arguments in both directions. You can
have competing studies. I think that it is the right thing to
do, and it is good for the economy. And our experience, when we
have seen the increases in the minimum wages in states, or when
the Federal Government raised the minimum wage in the 1990s,
was that it was basically neutral, in terms of the economy. I
think right now, given where we are, it would actually be
helpful.
Mr. MCDERMOTT. Is there any study any place that shows that
raising the minimum wage depressed the economy?
Secretary LEW. Look, there are all kinds of studies out
there, so I don't want to say there are no studies showing. The
studies that I find persuasive support the argument that I
made.
Mr. MCDERMOTT. Okay, I guess we all do that. I yield back
the balance of my time.
Chairman CAMP. Thank you. Mr. Reichert.
Mr. REICHERT. Thank you, Mr. Chairman. Secretary Lew, in
2009 the Administration economists predicted that, under the
Administration's trillion-dollar stimulus plan, the
unemployment rate would never rise above 8 percent, but we all
know that is what happened. Unemployment rates soared above 8
percent for 3 years. It has fallen to 6.6 percent, only
because, I think, millions of people have stopped looking for
work, and are no longer counted as officially unemployed.
So, that is nowhere near the 5 percent unemployment rate
the Administration said we would have by now. In fact, in your
current budget, the Administration doesn't expect the
unemployment rate to return to 5 percent, ever. The best we
will ever see is 5.4. Why has this been the weakest recovery
for jobs, ever?
Secretary LEW. Congressman, when we came in in January,
2009, we knew the economy was bad. But when the statistics were
finalized as to how bad it was, the deep hole from that
recession was much worse than anyone knew at the time. So I
think you have to look at it in perspective of how bad the
situation was. It was much worse than when those projections
were made. It was much worse than anyone understood.
I think if you look at the path of the recovery, given how
bad it was when we started, bringing the unemployment rate into
the mid-sixes is a lot of progress. We have said it is not
enough----
Mr. REICHERT. Excuse me, Mr. Secretary. We are now going on
6 years. And why should we believe the Administration's
policies in this budget will work any better to promote job
creation and reduce unemployment?
Secretary LEW. Well, I actually think that, if you look at
the record of this Administration between the Recovery Act, and
the Dodd-Frank Act, and the actions we took, we contributed in
a very significant way to the recovery. And if you compare the
United States to other developed economies, we have a stronger
economy that is growing----
Mr. REICHERT. Sir----
Secretary LEW [continuing]. Better because we----
Mr. REICHERT. Sir, the budget that you are presenting
today, how can we have faith that it will speed up our economy?
Secretary LEW. Well, I think the policies stand on their
own. I am happy, when we have the time, to make the case on----
Mr. REICHERT. I think the unemployment rate speaks for
itself.
Secretary LEW. But I think the record of where we are,
compared to other developed economies, is a very compelling
case.
Mr. REICHERT. And I know my time is limited. Real quickly,
can you assure us that by next week you can have to this
Committee a request of Dave Camp, as the Chairman has repeated
over and over, the emails and documents from Lois Lerner?
Secretary LEW. You know, I know that there has--we have
been back and forth on that issue, and there are conversations
with the IRS on that. I am going to leave that to the
conversations that we have had.
Mr. REICHERT. Can you commit to providing those documents
by the end of the week, next week?
Secretary LEW. We have worked to respond to the
Committee's----
Mr. REICHERT. No commitment?
Secretary LEW [continuing]. Requests, and we will continue
to be cooperative----
Mr. REICHERT. It is not happening, sir. Can you commit to
make it happen without a deadline? Can you make it happen? Yes
or no?
Secretary LEW. Congressman, we will continue to work with
this Committee----
Mr. REICHERT. Can't do it? Okay. Thank you, I yield back.
Chairman CAMP. Mr. Lewis.
Mr. LEWIS. Thank you very much, Mr. Chairman. Thank you
very much, Mr. Secretary, for being here. Many of us, Mr.
Secretary, feel that it is our duty to ensure that the IRS has
the
tools it needs for taxpayer service and enforcement. In the
past
few years, the budget of the IRS is being reduced. I noticed in
the President's budget it is getting a small increase. I
believe the
budget has been cut by $1 billion. The President's budget
proposed $12.5 billion in funding for the IRS. It is small. It
is necessary to increase the IRS budget. How can the IRS
provide the service to the people we represent if the budget is
steadily being cut and not increased? Reduce service? Reduce
employees?
Secretary LEW. Congressman, I agree 100 percent that the
IRS needs resources to do its work for two reasons. First of
all, it is just a bad business decision to not fund the IRS so
that it can collect taxes effectively. And our system of
voluntary compliance, depends on an effective IRS.
You know, second, when individuals, citizens, call the IRS
for help, they ought to be able to get somebody on the other
end of the phone. And if you don't have people there, they
can't get their phone calls answered. So I think funding the
IRS is of critical importance. And we put in our budget,
actually, a substantial increase to demonstrate how important
we think it is, about a 7.5 percent increase.
And I know it is a difficult time, given budget
constraints. But I think the dollars put into the IRS pay off
in many ways, not the least of which is we collect revenue that
is due.
Mr. LEWIS. Yes, sir. Worth it, and good investment.
Secretary LEW. It is a good investment. And, you know,
look. I know that it is not a good thing when people call and
ask for advice or an interpretation and explanation, and nobody
answers the phone. We owe people to be there to answer the
phone.
Mr. LEWIS. Well, thank you very much, Mr. Secretary. Mr.
Chairman, I yield back.
Chairman CAMP. Thank you. Dr. Boustany.
Mr. BOUSTANY. Thank you, Mr. Chairman. Welcome, Secretary
Lew. It is widely acknowledged, and we agree that a key
economic policy is moving forward on trade, international trade
with TPP and TTIP. And yet we have trade promotion authority
legislation, specific legislation, bipartisan, bicameral, that
has been introduced.
Can you--it is widely acknowledged, too, that the
Administration cabinet have not put in the political capital
going forward to get this passed and--with the exception of
perhaps Ambassador Froman, who has been vigorously, you know,
pursuing this.
Can you commit on the part of the Administration that this
legislation, this specific legislation, H.R. 3830, the
Bipartisan Congressional Trade Priorities Act, is a priority
for this Administration, and to seek passage of this?
Secretary LEW. Congressman, the President addressed this
issue in his State of the Union very clearly.
Mr. BOUSTANY. One sentence. And it really was a bland
statement. Our trading partners are looking for a definitive
statement, because they are not going to negotiate to finality
on these agreements until we have trade promotion authority----
Secretary LEW. I spend a considerable amount of my time
talking to our trading partners. The finance ministers have a
piece of these trade negotiations in the financial area. And I
have spoken to most of my counterparts in TPP countries, trying
to advance our interest in trade negotiations, because the test
here is bringing back a TPP and a TTIP that meet our standard
of a high-quality agreement.
Mr. BOUSTANY. Absolutely.
Secretary LEW. And we have worked--I have worked with the
Chairman on issues related to the TPA. We do have a new
Chairman on the Senate Finance Committee, he has expressed an
interest in going and having some additional consultation on
this. There is no question whether we support--we are putting a
huge effort into----
Mr. BOUSTANY. So all the work done in getting a bipartisan,
bicameral agreement on this legislation is going to be for
naught if we are basically starting over on it.
Secretary LEW. Well, I am not going to speak for anyone
else, in terms of whether it is starting over or working from
where you are. That is really--you know, the Chairman is going
to have to make his own judgement----
Mr. BOUSTANY. So that Administration is not committed to
this specific piece of legislation.
Secretary LEW. I think we have made clear that we support
TPA. We support TPA that addresses the critical issues. And we
are available to work with Congress on this, and we want to get
it done as quickly as possible.
I don't think we should take our eye off of the trade
negotiations themselves, because I don't agree with your
characterization in terms of the progress made. I just this
week had some conversations with some of our principal, you
know, counterparts, where I have gotten concessions on
important issues that advance the process.
Mr. BOUSTANY. Well, I have no doubt that is the case, but--
--
Secretary LEW. So we are working very hard on it.
Mr. BOUSTANY. But to really get to the point of seeing
these countries, our negotiating partners, making tough
domestic political decisions to complete this, Congress is
going to have to pass TPA, and we have specific legislation.
Secretary LEW. Yes.
Mr. BOUSTANY. It is ready to go. I don't understand why the
Administration is not putting a full court press into this to
get this----
Secretary LEW. What I have said to our trading partners in
my conversations is we are committed to getting these
agreements finalized, we are committed to getting TPA. And we
are committed to getting across the finish line on these
things. Now let's get to work. And they get back to work.
So, I don't think we should feed the idea that you can't
make progress on TPP or TTIP.
Chairman CAMP. All right, thank you.
Mr. BOUSTANY. Thank you, Mr. Chairman.
Chairman CAMP. The Committee stands in recess until 11:00.
[Recess.]
Chairman CAMP. The Committee will be in order. First of
all, I want to publicly thank the Secretary for accommodating
the schedule today. It has been rather disruptive, and we very
much appreciate your making yourself available.
Secretary LEW. My pleasure.
Chairman CAMP. Mr. Neal is recognized.
Mr. NEAL. Thank you, Mr. Chairman. Mr. Secretary, just a
word of applause to your efforts on EITC, auto-IRA, and
continued support for new markets tax credits. And then I want
to use my time to give it to you for the purpose of talking
about a much under-reported budget outlook from where we were 5
years ago. So, perhaps you could lay out for the Committee
where we were and where we are.
Secretary LEW. Well, Congressman, you know, I don't--it is
hard to exaggerate how much improvement we have seen from 5
years ago until now. I mean we obviously saw an economy that
was in freefall, and deficits that were growing, and the need
to respond to that economic crisis, and deficits that were, you
know, at historically high levels. We have cut the deficits in
half. We have gotten the debt and the deficit as a percentage
of GDP under control.
And, clearly, we have challenges for the long term, and I
think we all know that there are challenges that we are going
to have to deal with over the next number of years. But we have
actually reached a point where, unlike the last number of
years, we don't have an urgent, immediate fiscal crisis. We
have, actually, a very sustainable path for the period of time
covered by this budget, which actually gives us an important
opportunity to shift our attention to what does it take to
build a strong, growing economy. What are the foundations of a
growing economy? Which is why, in this budget, we focus so much
on things like infrastructure and skills training and
manufacturing hubs.
And it doesn't mean that we don't have to do it in the
context of a responsible fiscal policy. Obviously, we have in
our budget the way we think you make the trade-offs to stay on
the right fiscal path. It is a world of difference from what it
was 5 years ago.
And I think if you look at what--I was a little earlier
talking about in terms of the comparison of the United States
to other developed economies. We are in a world of better
shape. We have a lot more to do before we are going to be
satisfied. But when I meet with my international colleagues and
I talk to them about struggling to get over 3 percent of GDP
growth, they think getting to 1 percent would be more than they
could imagine. And so, we are doing much better.
Mr. NEAL. Thank you, Mr. Chairman.
Chairman CAMP. All right----
Mr. NEAL. Thank you, Mr. Secretary.
Chairman CAMP. Thank you. I also will note that the
Secretary has a hard stop at 12:00, noon.
Mr. Roskam is recognized.
Mr. ROSKAM. Thank you, Mr. Chairman. Mr. Secretary, I want
to draw your attention to the interchange between your
Department and Chairman Camp on the question of (c)(4)'s,
subject of a lot of debate and discussion recently.
The Chairman sent a letter to you and then your assistant
secretary responded on February 25th. And in the response, the
assistant secretary made four very--in my view--broad
conclusions. And this is in paragraph three of the February
25th letter. And I want to walk them through you, point out
that--the claims I think are not meritorious.
So, the letter claims that the proposed rule doesn't
restrict any form of speech. And in terms of the proposed rule,
we are talking about the Administration's proposed rule on
(c)(4)'s. And yet, both the American Civil Liberties Union, and
the Heritage Foundation have come to a very different
conclusion on that. I mean--and the ACLU really comes out with
an admonition. They say that it will--your rule, your proposed
rule, ``will pose insurmountable compliance issues that go
beyond practicality and raise First Amendment concerns of the
highest order.''
So, ironically, the Administration has been able to bring
together the ACLU and the Heritage Foundation in criticism. But
why would the Department be just so completely dismissive of
that First Amendment claim, and just make an assertion,
basically, in paragraph three of the letter? Do you stand by
that assertion, or do you understand the level of concern that
people have about the chilling effect on First Amendment----
Secretary LEW. Congressman, I understand that these--this
issue raises very strong feelings on both sides. I think it
actually----
Mr. ROSKAM. It is not the feelings I am concerned about. It
is the merits of the argument. Do you think it encroaches on
First Amendment?
Secretary LEW. Look, I think that the challenge of defining
what is and is not covered by this is very--it is a big
challenge. And the reason we put out draft rules the way we did
was to invite the kind of comment that we are getting.
I think that we were very clear that this is an area where
we need the benefit of a lot of views being expressed. I am not
sure we envisioned 150,000 views being expressed, but we have
gotten more comment on this than on any other rule that we have
ever issued, and we are now looking at it. And we are going to
take everything under advisement, and we are going to look at
the issue. The IRS will continue to work on it. And we are very
open to hearing what the pros and cons of different approaches
here is.
And this is something that, if it was easy to deal with,
you know, probably would have been dealt with a long time ago.
And I think we are at the beginning, not the end of the process
of working our way through.
Mr. ROSKAM. You can sense a bit of reluctance in my voice
in that it seems the Department has made a decision already
about the nature of the proposed rule. When the assistant
secretary is making an assertion, and the assertion is it does
not restrict any form of political speech--that is paragraph
three, second or third sentence----
Secretary LEW. Well, that is certainly our view. But the
reason we took comment was to evaluate different perspectives.
Mr. ROSKAM. Good, fair enough. I am glad to hear that you
are open. Are you similarly open about the other claim?
Chairman CAMP. I am afraid time has expired.
Yes, 3 minutes goes quickly.
Mr. ROSKAM [continuing]. Pretty quick. Thank you.
Chairman CAMP. And we have other Members. Mr. Becerra.
Mr. BECERRA. Thank you, Mr. Chairman. Mr. Secretary, thank
you for your patience and in letting us return to inquire of
you.
Can I make a quick comment? First, thank you so much for a
forward-looking budget, one that tries to invest in our people,
that tries to build an economy that works for all Americans.
There is a particular aspect of your budget that you submitted
on behalf of the President that I wanted to touch on, because
it is an issue that often escapes notice as an economic engine
of growth, and that is immigration reform.
Many of us know that if we are finally able to fix our
broken immigration system, not only is it good for our national
security, not only is it good for families that will no longer
be torn apart, but it is also extremely good for our workers,
for our businesses, and our economy, in general. You include
within the budget immigration reform, and it scores as giving a
net positive to the economy and to American businesses and
workers. Can you comment on that?
Secretary LEW. Congressman, I think that the immigration
reform issue is one that there are many reasons to be for. It
is the right thing to do, it is good for our economy, and it is
who we are, as a people.
The economic argument is, I think, undeniable. You look at
the CBO estimates that were done on the immigration bills--bill
that came out of the Senate. It makes clear that it grows the
workforce, it grows payroll taxes, it helps to fund Social
Security and Medicare. It has a material positive impact on the
economy.
And you look at our businesses in this country, whether it
is the Fortune 500 or the high-tech firms, where innovation is
greatest. A disproportionate number are founded by either
immigrants or first-generation Americans. It has been the
American story that we constantly replenish the, you know,
innovative spirit of this country with people who come here in
search of better life and in building a better America. And I
think the economy reflects that, and the numbers reflect that.
Mr. BECERRA. And most of what you have just said reflects
American values. Maybe now, give me a sense in terms of the
hard numbers. In terms of the budget, the hard numbers, what is
the impact of including immigration reform in your budget?
Secretary LEW. Congressman, I may have the exact number
with me. If not, I will get back to you. The--you know, the
estimates are that the deficit would be reduced by about $850
billion, you know, over the long term, and the economy would
grow by about $1.4 trillion over the next two decades. So we
are talking about large impacts.
Mr. BECERRA. So, if you were to take out immigration reform
from your budget, we would lose that close to $1 trillion in
deficit reduction, and over $1 trillion in economic growth.
Secretary LEW. The effects of immigration reform, if you
don't do immigration reform, would be removed. Our budget is a
policy budget.
Mr. BECERRA. Thank you very much. Mr. Chairman, I yield
back.
Chairman CAMP. Thank you. Mr. Gerlach.
Mr. GERLACH. Thank you, Mr. Chairman. Secretary, thank you
for coming today. I want to focus on your initial comments
about Ukraine by way of disclosure. I co-chair the Ukraine
Caucus here in the House, so I was very interested by your
initial comments in your testimony.
First of all, let me say thank you to the President and the
Administration for this action they have taken on this
executive order to block the assets and the property of a
number of people. If you have the information now, great. If
not, if you can, provide it to me. Do you have any estimates or
approximations about how many people this particular executive
order would impact, in terms of those people that have property
or assets within the jurisdiction and the authority of the
United States that can be blocked, or frozen? Do you have any
rough estimates at this point what that is?
Secretary LEW. Congressman, I don't have that right now.
What we did this morning was we laid down a very clear
framework. It is flexible, it is something that can be directed
in a number of different directions. You know, it is aimed at
identifying individuals or entities that are undermining
democratic processes in Ukraine, not just Ukrainians,
threatened the peace, security, and stability, and sovereignty
of Ukraine that contribute to the misappropriation of funds, or
that purport to assert authority inappropriately over the
Ukraine. So it gives us a tool that is very flexible to work
with so that we can respond in a proportional way to the
situation, as it develops.
Mr. GERLACH. Okay. Do you get a sense, based on your
discussions within the Administration, do you get a sense yet
about the European Union partners of ours, whether they are
going to be willing to move forward with aggressive sanctions
the way is necessary, and I think is going to be continued to
be debated and discussed here in Congress and with the
Administration? Do you get a sense that the European Union
countries----
Secretary LEW. Well----
Mr. GERLACH [continuing]. Are going to also be as
aggressive as necessary with this situation?
Secretary LEW. The European Union just the other day,
yesterday, took action, really, following on what we did almost
immediately, when our financial center put on a watch list
individuals who might be moving Ukrainian money inappropriately
out of government and public accounts.
The--yesterday the European Union did designate a number of
Ukrainians. I know the leaders in Europe are meeting today,
even while this hearing is going on. We have obviously made the
case for solidarity in dealing with this issue in a very united
way. And I--just to reference my own comments this morning is
one of the reasons we think it is so important that the IMF
issue, the IMF reform issue, is relevant, that is one of the
things that we need to do to show that we have the leadership
role, or we can press others to do what they need to do at the
IMF, and to speak with a real voice of leadership on this
issue.
Mr. GERLACH. Thank you.
Chairman CAMP. Thank you. Mr. Doggett.
Mr. DOGGETT. Thank you, Mr. Chairman. Thank you, Mr.
Secretary. On the question of further changes in the way we tax
international transactions, you have a number of new proposals
in your budget. You refer in the budget documents to stateless
income, to tax havens, to incentives that are in our tax code,
to export jobs overseas. In terms of measuring the extent of
the change that needs to occur in the short term, if I read the
documents correctly, you say that over the next 10 years there
are about $276 billion in additional revenues that should be in
our treasury that are not, as a result of these loopholes and
special provisions.
Secretary LEW. Congressman, I have to go back and check the
numbers to see if that is exactly right. But it is a
significant impact. And it reflects, really, what we think is
both an important policy issue, and something that there should
be bipartisan agreement on, which is that our tax code should
not encourage the export of American jobs. We need to close
down the provisions that offer preferential treatment for those
kinds of practices.
Mr. DOGGETT. There is one new provision there, and I
believe you discussed it with Chairman Camp. He has a provision
in his proposal also that would use the transition monies in
changing the system overall to fund our serious problems with
highway infrastructure.
I know the issue of a temporary tax holiday has come up
several times in the past, and the Administration has opposed
that. When I asked President Obama about it when he was here at
the Capitol last year, he said we have looked at the math and
it just doesn't work to have a temporary tax holiday, as
distinguished from perhaps some future transition. Does the
Administration continue to oppose this unwise--any temporary
tax holiday or short-term tax holiday of the type we had in
2004 to fund transportation or anything else?
Secretary LEW. Congressman, we think that the proposal that
the President made in July and that is now in our budget is the
right way to do it, which is to have a transition to a new
reform tax system, which is very different from a one-time tax
holiday. We think the scoring would be different. We think the
policy is different. We think that is the right way to do it.
And I hope we can work together on an approach to business
tax reform, where we can get this done. And we are very open to
that conversation, and would love to engage in it.
Mr. DOGGETT. Thank you very much.
Chairman CAMP. Thank you. Mr. Smith.
Mr. SMITH. Thank you, Mr. Chairman, and thank you,
Secretary Lew, for taking the time to be here today. I would
like to associate myself briefly with Mr. Boustany's comments
and concerns relating to the various issues. But while
countries such as Japan are taking positive steps to open up to
more U.S. agriculture, it is vital we have trade promotion
opportunities, actually, to ensure we get the strongest
assurances our trade partners in Asia and Europe will not
continue to use unscientific barriers to discriminate against
American producers. And I hope that we can work together to
address these issues.
Relating to the budget more specifically, though, I hope
that, with tax reform, we can help more hard-working taxpayers
than just corporations filing under the C-corporation
designation. And also, looking at various other things, I know
that in your statement you indicated the President's budget
adheres to agreed-to discretionary spending caps, but also
includes an additional $56 billion discretionary spending fund
above and beyond that. Can you explain why that occurred?
Secretary LEW. Yes, Congressman. It was very important that
there was a budget agreement in December, very important that
Congress passed appropriation bills in January, and that we are
on a path--we are including the enactment of borrowing
authority. We are doing business in a more orderly way, and it
is good for the economy, it is good for the country.
The President laid out a budget within the boundaries of
the budget agreement. He also said that, as a matter of policy,
just as the December budget agreement had a way of paying for
increased discretionary resources with other changes, we need
to continue down that path because as we go forward we don't
have the right discretionary levels. We are going to need
things to invest in, both our economy and our security. And--
but we have to pay for it. And he offered his proposal of how
to do that. He was very clear that he has a budget within the
caps, and then he has things that he would propose as policy
changes, where we hope we can get that conversation going.
Obviously, if we can't agree on how to pay for it, we are left
with lower spending levels.
Mr. SMITH. Well, I would hope that with the $17 trillion
debt that we are facing, this is an agreed-upon situation or
analysis, that we can pursue policies that can help reverse
that. And thank you.
Secretary LEW. The only thing I would add, Congressman, is
that when the Budget Control Act was enacted, it was set up for
sequestration not to happen. It was set up to have an overall
budget agreement make sequestration unnecessary. And the
President's budget really is consistent with that, saying,
``Here is another way to back out some of those cuts that we
did not ever really think were right, nor, on a bipartisan
basis, did anyone say they wanted at the time.''
Mr. SMITH. Well, and I hope that, moving forward, we can
work together on some fantastic opportunities to grow our
economy, tax reform--comprehensive tax reform--being a
priority.
Secretary LEW. Look forward to working together.
Mr. SMITH. Thank you.
Chairman CAMP. Thank you. Mr. Blumenauer.
Mr. BLUMENAUER. Thank you, Mr. Chairman. Mr. Lew, we
appreciate your taking time to join us and visit us. I
appreciate the Chairman, in his work dealing with tax reform,
carved out some space for infrastructure investment. I also
appreciate the strong words that we have had from the President
supporting infrastructure. It was part of the Affordable--the
Recovery Act. It has been referenced, going forward. And that
there is a proposal that has been included.
In the off chance that neither your proposal or the
Chairman's proposal are enacted in the next six months, we are
facing a deadline. We have basically exhausted the trust fund.
We have contracts that are not going to be--that the Department
of Transportation is going to be withholding money this summer.
States and localities, as a result, are going to be pulling
back this spring. We are facing a 30 percent reduction over the
next 10 years. And we need a stable, long-term, consistent
source of funding.
Now, I am not suggesting that the Administration dive in to
another area. You will fight for your proposal, and we will see
what happens. But I would hope that we would be--that there is
a possibility of being open to a proposal that I have
introduced that is supported by the AFL-CIO, the U.S. Chamber
of Commerce, the AAA, truckers, contractors, local government,
a number of individual unions, professional groups, to raise
the gas tax to be able to replenish it.
Would the Administration, if their proposal is not
accepted, if the Chairman's proposal is not enacted, would the
Administration be open to working with Congress on the first
gas tax increase in 21 years? Would you entertain that, at
least?
Secretary LEW. Congressman, I also was pleased to see in
the Chairman's tax reform proposal that he was, as we are,
looking for a way to fund infrastructure. We have tried in our
budgets a number of different approaches to engage in a
serious, bipartisan conversation about how to fund something
that I think we all agree we need to do, which is maintain, you
know, our infrastructure for economic growth in the future.
We have put in our budget what we think is the best way to
deal with it, and we are going to continue to advocate for
that. But if you look at the budget proposals we have put in in
past years, we have said we remain available to work with
Congress on a bipartisan basis to find a mutually acceptable
funding mechanism. And that remains at the core of our belief
today.
Mr. BLUMENAUER. Thank you, Mr. Lew. Mr. Chairman, I would
hope that some time in the near future we might be able to have
a hearing on transportation finance, since that is our
jurisdiction. The clock is ticking, and I think it would be
enlightening to at least hear, so we can prepare for our
responsibilities later in the spring.
Chairman CAMP. I know we are looking and working with you
on maybe trying to do something in that vein in the near
future.
Mr. BLUMENAUER. Super. Thank you very much, Mr. Chairman.
Chairman CAMP. Ms. Jenkins is recognized.
Ms. JENKINS. Thank you, Mr. Chairman. Thank you, Mr.
Secretary, for being here.
This year, President Obama chose to unveil his budget--late
again--at a D.C. elementary school. And in his remarks he said,
``My budget is designed with their generation and future
generations in mind. And at a time when our deficits have been
cut in half, it allows us to meet our obligations for future
generations without leaving them a mountain of debt.'' That is
the end of the quote.
However, just last month, CBO said the deficit will start
to grow again in just 2 years. By 2022, we will again be
running trillion-dollar deficits, even though we will be taking
in historically large amounts of revenue. And this is just
because spending will grow twice as much as revenue. Over the
next 10 years we will add $10 trillion more to our national
debt, for a grand total of $27 trillion. A quote from CBO said
this, ``Such large and growing Federal debt could have serious
negative consequences, including restraining economic growth in
the long term.''
In the latest forecast, CBO projected that our Nation's
growth potential over the next 10 years will be much slower
than the average since 1950. Contributing to this lost
potential, CBO states, ``The economic and incentives caused by
Federal tax and spending policies that are expected to keep
hours worked and output lower than would be otherwise
expected.'' CBO now expects Federal budget deficits between
2014 and 2023 to be about 7.3 trillion, which is a trillion
larger than predicted last year, due primarily to weak growth.
If the President's budget were to become law, even by the
President's own number crunchers our Nations' debt would still
reach $25 trillion. It would add 8.3 trillion to the debt, and
hike taxes by over a trillion, and fails to ever reach balance.
Not too long ago, back in 2008, when candidate Obama criticized
his predecessor as unpatriotic and irresponsible for the debt
growing from 5 trillion to 9 trillion in his 8 years in office.
In his words--and I quote--``He is taking out a credit card
from the Bank of China in the name of our children.'' End
quote.
Can you help explain to us, and square the words of
candidate Obama with President Obama?
Secretary LEW. Congresswoman, you know, as somebody who was
director of OMB for the only 3 years in modern times when we
ran a surplus, I understand the value of fiscal policy that
puts this country in a solid place. You know, when I left OMB
in 2001, there was a $5 trillion surplus over the next 10 years
being projected. When I came back to OMB, we had a huge deficit
because the money had been spent on tax cuts we couldn't
afford, on wars we didn't pay for, and then we had the worst
financial crisis since the Great Depression.
Ms. JENKINS. But under this budget----
Secretary LEW. President Obama came into office----
Ms. JENKINS. Since our time is limited, under this budget,
what year will the Federal Government stop taking in--or stop
spending more money than they take in?
Secretary LEW. Congresswoman, as I have said----
Ms. JENKINS. Do we have a year?
Secretary LEW. This budget----
Ms. JENKINS. Or is it true that in this budget we never,
ever can point to a point in time where we will stop spending
more money than we take in?
Secretary LEW. If you look at the----
Ms. JENKINS. I am just asking. Is that true?
Secretary LEW. If you look at the period covered by this
budget----
Ms. JENKINS. Is that true or false?
Secretary LEW [continuing]. It puts the deficit into a
place where it is sustainable. When we came into office, it was
out of control. We have more work to do, going forward. But
this budget is----
Ms. JENKINS. So it never, ever balances, ever?
Secretary LEW. It gets the--it takes the deficit down to
less than 2 percent of GDP----
Chairman CAMP. All right, time has expired. Mr. Davis.
Mr. DAVIS. Thank you, Mr. Chairman. You know, I commend the
President for his focus on increasing work and opportunity
within the budget. And I want to highlight the expansion of the
earned income tax credit and exclusion of Pell income from
education credit calculations as critical changes needed. I
have advanced similar legislation solutions for years, and am
pleased to see the Administration embrace these changes.
For years, I have actively promoted expanding the earned
income tax credit for single workers within my fatherhood bill.
I heard from my constituents years ago that the EITC was not
helping single men as it could and should, and the research
supports their concerns. My fatherhood bill originally focused
on expanding the EITC for non-custodial fathers who are current
on their child care obligations. In the last few years, we have
expanded our focus to include all single workers, including
those without children, given the strong positive effects on
lowering the unemployment rates, increasing marriage rates, and
reducing incarceration rates for single men.
The EITC has been one of the most effective anti-poverty
programs in our tax code, which is why there is a long history
of bipartisan support. Indeed, the largest expansions were led
by conservative Republicans such as the former Majority leader
Dick Armey. I applaud the President for incentivizing work
through an expansion of the EITC, and promise to work with the
Administration to do so.
Further, I am extremely happy to see the improvements to
how the code handles Pell grants. I have championed this fix
for years, because it will make college more affordable for our
lowest-income students. Mr. Secretary, could you comment on how
these policies would improve opportunity and decrease policy?
Secretary LEW. Congressman, I think I agree 100 percent
that the earned income tax credit has been one of the most
important policies we have had in the last quarter-century to
deal with both incentives to work and ending poverty. I have
had the privilege of working on it since the Ford
Administration. And it has been expanded in Democratic and
Republican Administrations by Democratic and Republican
Congresses because it works. So, we have put a proposal on the
table to deal with a population that is not now getting as much
benefit from it as they might. And we think it is an important
policy, and we look forward to working with the Congress on it.
In terms of educational opportunity, we know that the
difference between opportunities in life are dramatic for
people who have and have not had a higher education. So,
whether it is Pell grants or AOTC, our budget is aimed at
giving every American a chance to succeed in this economy.
Chairman CAMP. All right, thank you. Thank you. Mr. Schock
is recognized.
Mr. SCHOCK. Thank you. Mr. Lew, I would like to draw your
attention to an Internal Revenue Service memorandum that our
Committee got permission from the taxpayer yesterday to use
before the Committee. This is the first victim of the IRS's
targeting of Tea Party groups dating back to February of 2010.
This is the memorandum that was used to transfer this case to
Washington, D.C. It was an application by the Albuquerque Tea
Party for 501(c)(4) status.
On this memorandum the folks in Cincinnati could have
checked box A when transferring this case, which says this
application involves an issue in which there is inadequate
published precedent or rules necessary. Obviously, that is what
they check when there is confusion about precedent. But
Cincinnati did not check that box, Mr. Lew. They checked box B,
and then wrote in the reason, which was ``per an email response
from Holly Paz on February 26th of 2010, this application
should be transferred to D.C., due to the potential for media
interest.''
Sir, this is the first of hundreds of Tea Party cases that
were held up not in Cincinnati, but rather, based on this
memorandum and hundreds of others that we have, were held up by
directives from Washington, D.C., specifically. This conflicts,
obviously, with the Administration's assertion, when this news
first broke, that nobody in Washington, D.C.'s IRS office or
the Administration knew anything about it, that it was solely
isolated to Cincinnati.
As you know, Holly Paz is second-in-command--or was--at the
IRS for exempt organizations. She has since resigned. The first
in command, Lois Lerner, has pled the Fifth. And this Committee
has struggled to get the information from the IRS, particularly
the emails of Lois Lerner. And I hope that you can confirm with
this Committee you are going to do everything in your power to
get us 100 percent of Lois Lerner's emails. Right now we have
gotten a couple percent of Lois Lerner's emails. Made very
difficult, quite frankly, to reach some determination.
My question, Mr. Lew, is this. The rule that you have put
out in November states this rule is necessary because there was
some confusion within the IRS about how to handle these Tea
Party--these groups' tax-exempt status. But, sir, this email,
or this memorandum and subsequent emails, suggest otherwise.
This suggests that, throughout 2009 and early 2010, hundreds of
these similar-like Tea Party applications were approved,
screened, went through the normal process, and it wasn't until
Washington, D.C. got involved through a directive via email to
Cincinnati that instructed them to uphold or to withhold
approval, and rather, to start batching these applications.
So, why the inconsistency between D.C. really being the
directive, versus Cincinnati making this decision on their own?
Secretary LEW. Mr. Chairman, do I have the time to----
Chairman CAMP. If you could, make a brief answer.
Secretary LEW. Congressman, first, to--I am reading this
piece of paper that has been put in front of me. And just to be
clear, what it says is that the application should be
transferred to the EO technical, which is what is standard
procedure when an office doesn't know what to do and it is
complicated. So it doesn't say exactly what you described.
Second----
Mr. SCHOCK. Well----
Secretary LEW [continuing]. The issue of ambiguity and
confusion in the rules, it was not my observation alone. The IG
that did a report on this reached that conclusion and said it
was necessary to clarify it. So it is not--I don't think it is
just a question of my saying that there is ambiguity. There was
a finding by the IG, which is one of the things that triggered
the review that led to the proposal.
And, as I have said earlier, we know that this is a
complicated area, we invited comment. It was not even a full
proposed rule. It was a draft of a proposed rule saying we need
comment to make sure we get this right. We got 150,000
comments, and we are working our way through them.
Mr. SCHOCK. Lerner's emails?
Chairman CAMP. Thank you. Time has expired. I would just
say, Mr. Secretary, we don't have all the documents. And I have
sought your assistance in trying to make sure that we get all
the documents in the future.
Mr. Thompson is recognized.
Mr. THOMPSON. Thank you, Mr. Chairman. Mr. Secretary, thank
you very much for being here. I have just one question, given
the time constraints, and that is on the provision in the
President's budget that repeals the LIFO tax provision, Last In
First Out. And it is my understanding that it doesn't just end
the LIFO opportunities or practices, but it does it somewhat
retroactively, where it reaches back and requires a repayment
from companies, large and small, of the benefits that they have
received from LIFO over the years. Is that correct?
Secretary LEW. Congressman, the policy is to shift so that
we make sure we don't end up with a permanent avoidance of
taxation because the accounting system permits the increase in
value of inventory to go--to not be captured.
If you sell something that you made for $1 at $10, and the
last one costs you $10 to make, and you deduct $10, there is no
taxation----
Mr. THOMPSON. I understand how the LIFO practice works. But
my interest is in the retroactivity of the provision in the
President's budget. I don't know how it can be fair where you
could go back 60 or 70 years and basically re-assess someone
and their tax liability. It would be like your tax bracket
going up and we go back 10 years and require you to pay that
under that new provision.
Secretary LEW. So the policy repeals LIFO, so that has the
effect of treating it as an accounting change, which is
reversed. And that is how it was designed. I would be happy to
follow up with you on your concerns about the impact of that.
Mr. THOMPSON. Well, I have talked to you about it in the
past, because it is not the first time that it showed up. And I
am--I would be honored to be able to sit and talk to you, and
explain how this particular provision would be harmful to many
constituents in my district, but in other districts, as well.
But it just seems grossly unfair to change the taxing
provisions and then go back 60 years and collect on that.
If that happens, this is going to have the effect of
putting people out of business, and that is not maybe they will
have a tough time, maybe they won't be able to make it, but it
is going to be--have a crippling effect on a pretty important
part of our economy.
Secretary LEW. Yes. I don't think we agree that the impact
would be as you have described it, but I am happy to follow up.
Mr. THOMPSON. Great, thank you very much. I yield back, Mr.
Chairman.
Chairman CAMP. Thank you. And, Mr. Thompson, I would just
say I appreciate the concerns you are raising, and that is why
the draft--at least the discussion draft--pairs that with a
lower rate for manufacturers on that.
Mr. Buchanan.
Mr. BUCHANAN. Yes. Mr. Secretary, thanks for being here
today. I do a lot of town halls. A lot of us do. I got here in
2007. And the budget that you were proposing today, I think the
biggest issue that comes out of those meetings is debt,
deficit, and spending. But the budget we are proposing today,
the revenues are going to be what, and the spending is going to
be what, for the record? Just quickly. I am not asking you per
dime, I mean, but----
Secretary LEW. No, I understand. But I don't want to give
you a number and have it be wrong.
Mr. BUCHANAN. Anyway, let me just say this, because we got
3 minutes. I think it is about $700,000, $800,000 difference.
Here is my point I am trying to make. You had mentioned
that we made some progress, we have cut the deficit in half,
$1.3 trillion down to $700 billion, or something like that. But
the big concern is--and you mentioned about 2 percent of the
GDP and that is all the deficit is going to go up. But I got
here in 2007, and I have been hearing it for the last 7 or 8
years. The fact of the matter is, in that year, the debt was
$8.5 trillion, roughly. We were running a $130 billion deficit.
Today it is $17 trillion, quickly going on, by the time this
Administration finishes up, going to be $20 trillion in debt.
If you look at the normal cost of money--this is what I hear
every day--normal cost of money is 4 or 5 percent. You could
have a trillion dollars in interest, which is 30 percent of the
whole budget, in terms of reduction.
And so, I say this to you because I was born in Detroit, I
grew up in the Detroit area. Detroit is bankrupt. And I am
concerned about the future of our country. What I hear from
business people in my community and other places is that they
are concerned about the uncertainty because of the debt and
deficit spending.
So, I guess I just ask you, what would you tell my
constituents? When I have to deal with this everywhere, they
say nowhere else on the planet do they do what they do in
Washington. In the State of Florida, we had less revenues, we
made the adjustments. But here, we are leaving a bankrupt
country to our children if we don't change the way we do
business. And it seems like the Administration has to lead on
this. Congress has got a responsibility. And I will say it is
not just Democrats, it is Republicans, if you look over 50
years. But if we don't change this, we are going to use--it is
going to be devastating to our children and grandchildren.
So, I would like to have you look at the debt long-term
deficit, as well, but what would be your comments to my
constituents?
Secretary LEW. Congressman, you know, as I said earlier, as
somebody who was the budget director for 3 years when we ran a
surplus, we balanced the budgets, we ran a surplus, I took a
lot of pride in having accomplished that. It was policies that
were enacted between 2001 and 2008 that dug a hole that got--we
didn't have a surplus any more, and then we had the worst
economic crisis since the Great Depression.
So, now we do have a deficit of $649 billion in 2014. But
the numbers, as a percentage of GDP, really matter. During the
same period, from----
Mr. BUCHANAN. Let me just say I know what you are saying.
You don't think the debt matters. I mean $17 trillion, going to
$20 trillion----
Secretary LEW. No, but Congressman, all----
Mr. BUCHANAN. You don't think--that is what--I am telling
you what people are telling me. They are concerned about the
future----
Secretary LEW. Yes.
Mr. BUCHANAN [continuing]. For Medicare, Social Security,
and their children when they see this debt continue to
skyrocket. And I think that is a game that has been played,
frankly, in Washington with Republicans and Democrats over the
last 50 years. It is that debt that has got everybody
concerned.
Chairman CAMP. Yes, and if you could, just answer briefly.
Secretary LEW. Yes. We have cut the deficit in half, and we
have the deficit in the last year, as a percentage of GDP,
under 2 percent. GDP will grow from $17 billion to $27 billion
over that period. So nominal numbers and percentage of GDP are
very--both important numbers. And the percentage of GDP shows
the progress we have made.
So, it is--I know it is hard to explain because GDP is a
complicated concept. But it is a much bigger economy in----
Mr. BUCHANAN. Come to Sarasota, Florida and do a town hall
with me, and we will see what we got.
Chairman CAMP. All right. Mr. Reed.
Mr. REED. Thank you, Mr. Chairman. Thank you, Mr.
Secretary, for being here today. I wanted to go into--you made
a comment that we are kind of through this emergency-type--we
now have a crisis looming over our head in some of your
testimony. And one of the things that I am very concerned about
is the overall entitlement bomb that I see going off with
Medicare insolvency, Social Security insolvency, and those are
long-term issues.
But something that really touched me last night when I was
reading the budget and looking through your written testimony
is I saw no reference to Social Security disability and the
insolvency that is going to hit in January 2016, with the
Social Security disability program. In fact, in your testimony,
the only reference to Social Security was in relationship to
its relationship with immigration reform.
So, my concern is, if the White House doesn't see this
impending $35 billion problem in 2016, where Social Security
disability recipients are going to receive a 20 percent cut in
their payments monthly as a result of this insolvency with the
disability trust fund, that is--I care about those people.
Those are millions of people that are going to wake up, and the
best we are doing right now in Washington, D.C. is to say we
are not even putting it in our budget, we are not even going to
address it as a crisis, as an impending entitlement bomb going
off.
To me, it is the canary in the coal mine, that if we don't
get our act together--and I encourage the White House to please
highlight this issue and come up with a solution, because I am
not seeing it in the budget, I don't see it in your testimony.
And I don't want to look at a Social Security disability
recipient, as I have in town halls, and said, ``I am trying to
fix it. But I will tell you, Washington, D.C. is not
listening.''
Secretary LEW. Congressman----
Mr. REED. What do you have to offer?
Secretary LEW [continuing]. I totally agree that we need to
address the situation of the Social Security disability trust
fund. And we do--have said--I have said that there is only one
solution the technical experts believe can work in the time
frame between now and 2016, and that is a reallocation of the
tax rate, as we have done in the past.
At the same time, we have proposed in our budget program
integrity provisions that will make sure that we do an even
better job making sure that only people who are qualified get
disability payments. We will clear out the backlogs of reviews.
And we need to work together on that, and we look forward to
working together on it. It is something we need to deal with--
--
Mr. REED. I wholeheartedly agree with you, we need to work
together.
Secretary LEW [continuing]. 2016 is close. And we do have a
little more time----
Mr. REED. The problem with reallocating the tax is aren't
you then hurting the actual--the solvency of Social Security
itself, by shortening that period of time?
Secretary LEW. Given the difference in size between the
trust funds, it has a very small impact on the duration of----
Mr. REED. So you are willing to sacrifice the viability of
Social Security itself----
Secretary LEW. I am just saying that none of the policies
you could put in place would have an effect in time for 2016.
Long term policies take a long time to have effect. I think
technical experts on both sides agree that if you don't want to
cut benefits, which none of us want to do on disability, there
is going to need to be a reallocation. And we look forward to
working together----
Mr. REED. But, just so I am clear, so the White House
position is--to the fix--is that--for this--is to reallocate
the tax?
Secretary LEW. Well, in the short term. But I said we also
have program integrity provisions in place, and we look forward
to working together to take a look at the longer-term issues in
disability.
Mr. REED. Appreciate that.
Chairman CAMP. Thank you.
Mr. REED. Thank you.
Chairman CAMP. Time has expired. The Secretary has been
very accommodating by coming back today, and I know he has to
leave directly at noon. So we will have one more question, a 3-
minute period, from Mr. Young, and then we will conclude.
Mr. YOUNG. Thank you. Mr. Secretary, in your opening
statement you indicated that last year the President put
forward his budget as part of a balanced compromise. And this
year's budget instead reflects the President's vision of a best
path forward. Are bipartisan compromises not part of a best
path forward?
Secretary LEW. Congressman, as somebody who has spent most
of my professional life molding bipartisan compromises--bless
you--I very much believe that bipartisan compromises are in the
best interest of this country. But you usually start with
different positions that get worked out.
What we did in last year's budget was we kind of cut to the
chase to say we almost had an agreement, let's finish it.
Frankly, there wasn't a lot of take-up on our proposal. It was
out there, and we didn't get it done. At some point you have to
go back and say we have our view, you have your view, and then
we work for a bipartisan compromise.
Mr. YOUNG. I see. So your view, your best path forward, as
indicative in this budget, presumably includes never bringing
our Nation's accounts into balance?
Secretary LEW. Well, Congressman, I think, as I have said
before, we do an enormous amount on this budget to put our
fiscal house in order and keep it in order. I think that, you
know, the challenge we had in 2009 was gargantuan. We have cut
the deficit in half. We are on a path towards a 2 percent of
GDP----
Mr. YOUNG. We are looking at a path forward here in the
budget, not 2001 to 2008. Interesting segment of time you
choose. But the path forward would indicate that it never comes
into balance. This doesn't appear to me to be a budget, as
popularly understood by, say, the business community or rank-
and-file Americans. Instead, it is, for those of us who
celebrate Christmas, a Christmas list.
If you could indicate what year it comes into balance and
how you intend to bring it into balance, it would be easier to
negotiate between our figures, balancing in 10 years in the
past, and your figures, balancing currently at infinity. Then
bipartisan compromise, as I see it, could happen. What say you,
sir?
Secretary LEW. So, Congressman, you know, we came very
close to a bipartisan agreement along the lines of last year's
budget. That didn't happen. But that didn't come to balance in
10 years. It was not--there was not a negotiation about coming
to balance in 10 years.
We believe that the urgent need right now is to make sure
the engine of growth in this country is kicked into high gear.
And we have put together a budget that has a responsible fiscal
policy and a growth strategy, and we look forward to working in
a bipartisan way to reach a consensus.
Mr. YOUNG. If this is your optimal path forward, the
country deserves better. History will remember you as the
Treasury Secretary who presided over a period when plans were
not put forward as our Nation started to drown in a sea of red
ink. And I would not want to have that sort of legacy.
It is regrettable that you won't work with us to make the
largest programs of government sustainable. Thank you so much
for coming here today and offering your perspective on why you
haven't done that.
Secretary LEW. Congressman, I would just point out that, as
the only living OMB director in history to have a surplus for 3
years, I am proud of my record.
Mr. YOUNG. Thank you, sir. Thank you for your service. I
yield back.
Chairman CAMP. Thank you. Without objection, all Members
may submit questions for the record.
Again, I want to thank the Secretary for his time this
morning, and for accommodating a very disjointed schedule. With
that, this hearing is adjourned.
[Whereupon, at 12:02 p.m., the Committee was adjourned.]
[all]