[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]





                THE PRESIDENT'S FISCAL YEAR 2011 BUDGET

=======================================================================

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

            HEARING HELD IN WASHINGTON, DC, FEBRUARY 2, 2010

                               __________

                           Serial No. 111-21

                               __________

           Printed for the use of the Committee on the Budget


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                        COMMITTEE ON THE BUDGET

             JOHN M. SPRATT, Jr., South Carolina, Chairman
ALLYSON Y. SCHWARTZ, Pennsylvania    PAUL RYAN, Wisconsin,
MARCY KAPTUR, Ohio                     Ranking Minority Member
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 SCOTT GARRETT, New Jersey
EARL BLUMENAUER, Oregon              MARIO DIAZ-BALART, Florida
MARION BERRY, Arkansas               MICHAEL K. SIMPSON, Idaho
ALLEN BOYD, Florida                  PATRICK T. McHENRY, North Carolina
JAMES P. McGOVERN, Massachusetts     CONNIE MACK, Florida
NIKI TSONGAS, Massachusetts          JOHN CAMPBELL, California
BOB ETHERIDGE, North Carolina        JIM JORDAN, Ohio
BETTY McCOLLUM, Minnesota            CYNTHIA M. LUMMIS, Wyoming
CHARLIE MELANCON, Louisiana          STEVE AUSTRIA, Ohio
JOHN A. YARMUTH, Kentucky            ROBERT B. ADERHOLT, Alabama
ROBERT E. ANDREWS, New Jersey        DEVIN NUNES, California
ROSA L. DeLAURO, Connecticut,        GREGG HARPER, Mississippi
CHET EDWARDS, Texas                  ROBERT E. LATTA, Ohio
ROBERT C. ``BOBBY'' SCOTT, Virginia
JAMES R. LANGEVIN, Rhode Island
RICK LARSEN, Washington
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin
GERALD E. CONNOLLY, Virginia
KURT SCHRADER, Oregon

                           Professional Staff

            Thomas S. Kahn, Staff Director and Chief Counsel
                 Austin Smythe, Minority Staff Director












                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, February 2, 2010.................     1

Statement of:
    Hon. John M. Spratt, Jr., Chairman, Committee on the Budget..     1
    Hon. Paul Ryan, Ranking Minority Member, Committee on the 
      Budget.....................................................     2
    Hon. Peter R. Orszag, Director, Office of Management and 
      Budget.....................................................     4
        Prepared statement of....................................     6
        Responses to questions submitted.........................    67
    Hon. Cynthia M. Lummis, a Representative in Congress from the 
      State of Wyoming, prepared statement of....................    35
    Hon. Marcy Kaptur, a Representative in Congress from the 
      State of Ohio, questions submitted for the record..........    67
    Hon. Betty McCollum, a Representative in Congress from the 
      State of Minnesota, questions submitted for the record.....    68
    Hon. Robert E. Andrews, a Representative in Congress from the 
      State of New Jersey, questions submitted for the record....    69
    Hon. Rosa L. DeLauro, a Representative in Congress from the 
      State of Connecticut, questions submitted for the record...    69
    Hon. Chet Edwards, a Representative in Congress from the 
      State of Texas, questions submitted for the record.........    70
    Hon. Robert C. ``Bobby'' Scott, a Representative in Congress 
      from the State of Virginia, question submitted for the 
      record.....................................................    71
    Hon. Michael K. Simpson, a Representative in Congress from 
      the State of Idaho, questions submitted for the record.....    71
    Hon. Steve Austria, a Representative in Congress from the 
      State of Ohio, questions submitted for the record..........    72
    Hon. Robert B. Aderholt, a Representative in Congress from 
      the State of Alabama, questions submitted for the record...    73
    Hon. Robert E. Latta, a Representative in Congress from the 
      State of Ohio, question submitted for the record...........    74

 
                THE PRESIDENT'S FISCAL YEAR 2011 BUDGET

                              ----------                              


                       TUESDAY, FEBRUARY 2, 2010

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 2:10 p.m., in room 
210, Cannon House Office Building, Hon. John Spratt [chairman 
of the committee] presiding.
    Present: Representatives Spratt, Schwartz, Kaptur, Becerra, 
Doggett, Berry, McGovern, Tsongas, Etheridge, McCollum, 
Yarmuth, Andrews, DeLauro, Edwards, Scott, Langevin, Bishop, 
Moore, Connolly, Schrader, Ryan, Hensarling, Diaz-Balart, 
Simpson, McHenry, Campbell, Jordan, Lummis, Austria, Harper, 
and Latta.
    Chairman Spratt. Once again, Dr. Orszag, Director Orszag, 
welcome to the hearing.
    Today we take up President Obama's budget for fiscal year 
2011. Our witness is author Director Orszag, welcome to this 
hearing.
    If I can borrow a line from your budget narrative, ``in 
order to understand where we are headed, it helps to remember 
where we started.''
    Our economy began backsliding into a recession in December 
of 2007, one full year before President Obama was sworn in. 
Within weeks of taking office, his administration and Congress 
launched a massive supplemental to get this economy moving 
again.
    The Recovery Act added to the short-term deficit, then 
estimated at $1.3 trillion to $1.2 trillion. The deficit was 
already swollen by the recession and by the Bush 
administration's own budgets and bailouts.
    According to the CBO, the Recovery Act has made a 
difference. By their reckoning, the Recovery Act raised real 
GDP by 1.3 to 3.5 percentage points in the second half of 2009 
and increasing employment by as many as 1.6 million jobs.
    As recently as January a year ago, the economy was not 
growing. It was shrinking, contracting by 5.4 percent in that 
month alone; 741,000 workers lost their jobs in January of 
2009. By contrast, in the last quarter of 2009, the economy 
grew by 5.7 percent. Job losses averaged 69,000.
    From the start, the Obama administration has realized, 
under your guidance, that it would be almost impossible for us 
to bring the deficit down without moving the economy up. That 
is why the President's budget for 2011 has dual objectives; one 
lies on the economy, the other lies on the deficit.
    We brought the economy back from the brink, but too many 
Americans are still feeling the recession and not the recovery. 
And no one--no one--can be satisfied when unemployment averages 
10 percent, and in many places, my district included, it is far 
worse. One of the biggest initiatives in this budget is for a 
job bill, at least it makes provision for it.
    The President's budget stays focused, however, on the 
bottom line. The deficit is cut by half, from $1.556 trillion 
in 2010, that is 10.6 percent of GDP, to $727 billion, that is 
4.2 percent of GDP, in 2013. In 4 years, it is cut in half. The 
budget keeps bringing the deficit down in 2014 when it reaches 
3.9 percent of GDP.
    Now, $727 billion in the red is nothing to crow about, but 
halving the deficit in 4 years is a worthy goal. The President 
shifts the emphasis of the budget from big business to small 
business, from Wall Street to Main Street. This budget freezes 
non-security spending overall, but it singles out priorities 
like education for increases well above a freeze.
    A 3-year freeze on non-security spending and a bipartisan 
commission, which you propose in the budget, is not enough to 
finish the job, and frankly, I would like to see a lot more 
deficit reduction, but these are concrete commitments on the 
President's part to bringing the deficit down. We are on an 
unsustainable path of deficits and mounting debt. And the 
longer we avoid the hard choices, the harder they become.
    We proved in the 1990s that it is possible to reduce 
deficits responsibly, but it cannot happen without concerted 
effort. That is why the President's appointment of a fiscal 
commission is a step in the right direction. Later this week, 
the House will take another step in that direction; we will 
vote to reinstate a statutory pay-as-you-go rule, modeled on 
the rules that helped us turn record deficits into record 
surpluses in the 1990s.
    On both the budget and the economy, there are hard choices 
ahead of us, but the budget sent up by the President today 
marks one more step toward moving the economy up while bringing 
the deficit down.
    Director Orszag, we look forward to your testimony, but 
before I turn to you for your testimony, let me turn to the 
ranking member, Mr. Ryan, for any statement he may care to 
make.
    Mr. Ryan.
    Mr. Ryan. I thank the Chairman. And welcome back, Dr. 
Orszag, good to have you.
    Throughout last year, Americans became increasingly focused 
on and troubled by the alarming growth of spending and debt 
pouring out of Washington, and they had a right to be.
    No doubt the President inherited a difficult fiscal 
situation.
    What is happening now is obviously our concern. By year's 
end, the House passed legislation to boost spending by $3 
trillion over the next decade, raise taxes by $1.3 trillion, 
and increase deficits and debt by $1.7 trillion.
    But just last week, in his State of the Union Address, and 
the discussion which we appreciated at our Republican retreat, 
the President was employing what I consider a far more open, 
inclusive tone, acknowledging the seriousness of our budget and 
entitlement problems and talking about the need for real fiscal 
discipline.
    I personally was very heartened by his remarks. The 
President sounded as though he had received the message, and he 
sounded ready to moderate his agenda.
    But yesterday, we got the actual budget, which, however you 
cut it, is remarkably similar to the plan we got just last 
year: more government spending, more taxes, more deficits, and 
more debt.
    Here is how the New York Times summed it up, quote, ``by 
President Obama's own optimistic projections, American deficits 
will not return to what are widely considered sustainable 
levels over the next 10 years. In fact, in 2019 and 2020, years 
after Mr. Obama has left the political scene even if he serves 
two terms, they start rising again sharply. His budget draws a 
picture of a nation that, like many American homeowners, simply 
cannot get above water.''
    Let's look at a few key points. This year's deficit is $1.6 
trillion. It is a record. Under this budget, the deficit never 
falls below $700 billion, and it ends the decade at $1 
trillion, 4.2 percent of GDP.
    Taxes increase by $2 trillion, using the administration's 
own estimates. Debt held by the public more than doubles over 5 
years. It exceeds 60 percent of GDP this year and consumes 77.2 
percent of our economy by the end of the budget window.
    We have heard a lot of hype surrounding a handful of 
proposals in this budget, supposedly aimed at tempering the 
government's explosive growth. So let's take a look at this 
``spending freeze'' that applies only to nondefense, non-
homeland, non-veterans, non-international affairs, non-Pell 
Grant, non-emergency discretionary spending, or in other words, 
about 13 percent of total spending.
    The freeze would follow an 84 percent increase in 
nondefense discretionary spending that the President has signed 
since taking office, and it won't even start until next year.
    PAYGO. I will note that Congress already has a PAYGO rule 
in place right now. And since the Democrats implemented it upon 
taking the majority in 2007, the deficit has soared from $161 
billion to $1.6 trillion this year, a tenfold increase. So I am 
not sure how much hope we want to place in PAYGO to solve our 
spending problem for us. We rarely follow the rule. It is often 
waived. And when we do, it is just used to chase higher 
spending with tax increases.
    And finally, I just simply want to bring attention to this 
chart and talk about the fiscal commission. You can't see this 
chart very well, but on page 146 of the budget, we have the 
administration's actual clearly unsustainable budget numbers up 
top, and then an advertisement for this commission at the 
bottom. That is in the box at the bottom. The box tells people 
basically: Don't worry, we will punt our problems to this 
nonbinding commission who will ostensibly fix the fiscal and 
economic mess this budget will just, admittedly, make worse. 
That is not what budgeting is. And I don't think anyone can 
claim that that is what governing is either. I know those are 
tough words, but we are in a very, very dire fiscal situation.
    Now, the President has contended that many of our Nation's 
problems, fiscal and otherwise, lie in petty bickering and 
partisanship in Washington. And I will be the first to agree 
that we need to avoid the politics of personal destruction. We 
need to start talking about the substance of the budget and the 
decisions ahead of us.
    Dr. Orszag, you do that.
    But we cannot get lulled into avoiding a rigorous debate on 
policies that we truly believe are bad for our Nation.
    I don't see anything in this year's budget that doesn't 
point to the exact same outcome of last year's budget, and that 
is to hasten our Nation's march down a disastrous economic and 
fiscal course and make an already unsustainable budget outlook 
even worse.
    Dr. Orszag, I appreciate your candor in the past, and I 
look forward to your testimony.
    Chairman Spratt. First, a housekeeping detail. I would ask 
unanimous consent that all members be allowed to submit an 
opening statement for the record at this point.
    Without objection, so ordered.
    Dr. Orszag, you have been here before. You know the rules 
of the road. We will make your statement part of the record, as 
is submitted. You can summarize it in any way you see fit. But 
you are today's witness, and you can take all the time you need 
to explain the budget, using charts and any other aids as you 
see fit. We are glad to have you, and we look forward to your 
testimony.

    STATEMENT OF HON. PETER R. ORSZAG, DIRECTOR, OFFICE OF 
                     MANAGEMENT AND BUDGET

    Mr. Orszag. Thank you very much, Mr. Chairman, Mr. Ryan, 
members of the committee.
    The fiscal year 2011 budget from the administration focuses 
on spurring job creation, securing the middle class, and 
putting the Nation back on a path to fiscal sustainability.
    First, let us examine where we have come from. Over the 
past year, we have averted a second Great Depression. At the 
end of 2008, the economy was declining by more than 5 percent 
on an annualized basis. At the end of 2009, it was expanding by 
more than 5 percent on an annualized basis. A very substantial 
share of that shift has to do with the policy actions that were 
undertaken to avert a second Great Depression.
    Now, while the economy is expanding, the employment market 
remains unacceptably weak. The unemployment rate is 10 percent. 
There have been 7 million jobs lost since December of 2007. 
That is why the President is stepping forward with proposals 
like the new Jobs and Wages Tax Credit, that is intended to 
help spur hiring today, especially among our small businesses.
    It is also why we must, while investing in education, 
innovation, and clean energy, bring down our deficits over 
time, because eventually, those deficits will impede ongoing 
job creation.
    Now, what about the preexisting condition with regard to 
our fiscal front? The President, in visiting with our 
Republican friends, pointed out that, on January 7, 2009, the 
Congressional Budget Office issued an Economic and Budget 
Outlook that showed very clearly an increase in spending from 
fiscal year 2008, at 20.9 percent of the economy, to fiscal 
year 2009, 24.9 percent of the economy, a 4 percentage point of 
GDP increase before the Obama administration even took office.
    So what happened in reality? In reality, spending in 2009 
was actually slightly lower than CBO initially projected, 
coming in at 24.7 percent of the economy. There is a different 
mix: mandatory spending was lower; discretionary spending 
somewhat higher because of the Recovery Act; but total spending 
was basically in line with what was initially projected in 
early 2009.
    What about our medium-term deficits? In early 2009, medium-
term deficits over the next decade of $8 trillion were already 
apparent, assuming continuation of the 2001 and 2003 tax cuts 
and the Medicare prescription drug benefit, neither of which 
were paid for and which added more than $5 trillion to our 
projected deficit, and because of the economic downturn, which 
reduces revenue and increases spending on certain programs like 
unemployment insurance and food stamps; the combined effect of 
those so-called ``automatic stabilizers'' adding more than $2 
trillion to the projected deficit.
    Now, that is all an explanation of the situation in which 
we found and find ourselves, but the key question is, I think 
both Mr. Spratt and Mr. Ryan identified, what do we do about 
it? I think the first step is to embody or embrace the basic 
principle that we shouldn't make the situation worse.
    The administration is glad that the Senate has joined with 
the House in passing statutory pay-as-you-go legislation which 
embodies that basic principle, that you should pay for new 
proposals or new tax cuts. If we had lived by this principle in 
the past, our outyear deficits would be roughly 2 percent of 
GDP, and debt as a share of the economy would be declining. We 
didn't live by it then, but we should now.
    Second, economic recovery will help to reduce the deficit. 
And under our projections, we move from a deficit of about 10 
percent of the economy this year to roughly 5 percent of the 
economy by 2015, as the economy recovers. Unfortunately, that 5 
percent of the economy is still higher than our fiscal target, 
which is roughly 3 percent of the economy. At that level, debt 
to GDP or debt as a share of the economy would stabilize.
    So how do we get from five to three? The first thing we do 
is we put forward specific proposals to reduce the 10-year 
deficit by $1.2 trillion. Let me repeat that: The budget 
embodies, even not counting the winding down of the wars in 
Iraq and Afghanistan, $1.2 trillion in deficit reduction, more 
deficit reduction than embodied in any administration budget in 
over a decade.
    How do we do that? A variety of steps: A new financial 
services fee, raising $90 billion imposed on financial service 
firms with more than $50 billion in assets, which will not only 
discourage leverage, but also meet the statutory requirement of 
repaying taxpayers in full for the cost of the TARP 
legislation.
    Second, we allow the 2001 and 2003 tax cuts for those 
families with more than $250,000 in income to expire as 
scheduled in 2011. That reduces the deficit by almost $700 
billion over the next decade.
    Third, in order to help spur the clean energy economy of 
the future, a direction in which we must move, we eliminate 
fossil fuel subsidies, reducing the deficit by $40 billion over 
the next decade.
    And finally, we have a freeze on nonsecurity discretionary, 
spending which reduces the deficit by $250 billion over the 
next decade. I note, that freeze is not across the board. We 
are investing more in education, in R&D, and in clean energy 
while reducing spending in other areas in order to achieve that 
overall freeze. I would also, perhaps during the question-and-
answer period, like to address the claim about more than an 80 
percent increase before the freeze was imposed.
    Even with those steps, the out-year deficits are higher 
than we would like, which is why we are calling for a 
bipartisan fiscal commission to get us the rest of the way. It 
is very clear that in order to address our medium-term deficits 
we will need to act together. And that is the purpose of the 
bipartisan fiscal commission, to take the additional steps 
necessary to reduce our medium-term deficits to a sustainable 
level and thereby allow ongoing economic activity and avoid the 
harm associated with deficits that are too high.
    Finally, let me just briefly point out that all of that has 
to do with our fiscal trajectory over the next decade. As you 
go out in decades beyond that, the key driver of our long-term 
deficit is the rate at which health care costs grow. And so I 
hope that we could come together to pass legislation that will 
help to not only improve quality and expand coverage, but 
reduce cost growth and reduce deficits over time in health 
care, because unless we do that, nothing else we do from a 
fiscal perspective will ultimately matter.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Peter Orszag follows:]

    Prepared Statement of Hon. Peter R. Orszag, Director, Office of 
                         Management and Budget

    Chairman Spratt, Ranking Member Ryan, and Members of the Committee, 
thank you for inviting me to testify this afternoon about the 
President's Fiscal Year 2011 Budget.
    I come before you after a trying year for the Nation. One year ago, 
the economy seemed on the verge of a severe collapse, perhaps leading 
to a second Great Depression. Together with the Congress, the President 
worked aggressively to stabilize the financial system and bring the 
economy back from the brink. The worst now appears to be behind us. 
However, the country faces two significant and ongoing challenges: high 
unemployment and a medium- and long-term fiscal situation that will 
ultimately undermine future job creation and economic growth. It took 
years to create the current jobs gap and our budget deficits, and it is 
our responsibility to start addressing them without delay.
                  rescuing and rebuilding the economy
    Let me start by reviewing where we have been.
    A little more than a year ago, in the fourth quarter of 2008, real 
GDP was declining at a rate of more than 5 percent per year. In that 
quarter alone, household net worth fell by almost $5 trillion, dropping 
at a rate of 30 percent a year. In terms of employment, the fourth 
quarter saw a loss of 1.7 million jobs--the largest quarterly decline 
since the end of World War II and a number only to be exceeded by the 
next quarter when 2.1 million jobs were lost.
    This bleak economic picture was reflected in the trillion dollar 
gap between how much the economy had the potential to produce and how 
much it was actually producing. Last year, for example, this output gap 
of roughly $1 trillion represented nearly 7 percent of the estimated 
potential output of the economy. This ``GDP gap'' motivated enactment 
of the American Recovery and Reinvestment Act (the Recovery Act) just 
28 days after we took office, to start filling this hole and jumpstart 
the economy.
    The Recovery Act contains three parts. Approximately one-third is 
dedicated to tax cuts for small businesses and 95 percent of working 
families. Another third goes toward emergency relief for those who have 
borne the brunt of the recession. For example, more than 17 million 
Americans have benefited from extended or increased unemployment 
benefits, and health insurance was made 65 percent less expensive for 
laid-off workers and their families relying on COBRA. In addition, aid 
to State, tribal, and local governments has helped them to close budget 
shortfalls, saving the jobs of hundreds of thousands of teachers, 
firefighters, and police officers. The final third of the Recovery Act 
is devoted to investments to create jobs, spur economic activity, and 
lay the foundation for future sustained growth.
    Over the past year, the evidence suggests that the Recovery Act has 
made a substantial difference. Estimates--from the Council of Economic 
Advisers, as well as respected private forecasters such as Goldman 
Sachs and Mark Zandi of Moody's Economy.com--suggest that the 
legislation added roughly three percentage points to economic activity 
in the third quarter. The result is that, as 2010 opens, the U.S. 
economy is back from the brink. Financial markets are far more stable, 
and real GDP is expanding.
    Although real GDP growth has turned positive, American businesses 
were still shedding jobs in the third and fourth quarters. The 
unemployment rate was 10.0 percent in December 2009, and there are 7 
million fewer jobs than when the recession began in December 2007. 
While there are some early indicators of labor market improvement, such 
as rising productivity and the hiring of temporary workers, there is 
much left to do.
    The increase in unemployment has had devastating effects on 
American families. Far too many workers who would rather be earning a 
paycheck are forced to accept unemployment, and are worrying about how 
to pay their mortgage, keep their health insurance, and continue to 
provide for their families while they try to find another job. As the 
President has said, the coming months will continue to be difficult 
ones for American workers, and, regardless of the GDP numbers, the 
recovery will not be real for most Americans until the job market turns 
around.
    This is why, in the short term, it is critical that we take steps 
to jumpstart job creation in the private sector. And that is why the 
Administration will work with Congress to implement a jobs creation 
package along the lines of what the President announced in December 
2009. It should include:
     Help for small businesses to expand investment, hire 
workers, and access credit. Small businesses play a crucial role in a 
dynamic economy. The Administration is calling for expansions or 
extensions of Recovery Act tax relief for small businesses that will 
encourage investment and job growth, along with a new, short-term tax 
incentive to encourage small business hiring and support employment. 
More than 1 million small businesses will receive a tax cut from this 
latter proposal, which will extend a $5,000 tax credit to small 
businesses for every new job they add in 2010 and will also reimburse 
them for the Social Security payroll taxes they pay on real increases 
in their payrolls this year.
     Investments in America's roads, bridges, and 
infrastructure. The Administration is also calling for new investments 
in a wide range of infrastructure, designed to get out the door as 
quickly as possible and continue a sustained effort at creating jobs 
and improving America's productivity. And we support financing 
infrastructure investments in new ways, allowing projects to be 
selected on merit, as was done through the Recovery Act's TIGER 
program, and leveraging money with a combination of grants and loans.
     Investments in energy efficiency and clean energy. The 
Administration is seeking a new program to provide rebates for 
consumers who make energy efficiency retrofits; such a program will 
harness the power of the private sector to help drive consumers to make 
cost-saving investments in their homes. We are also calling for 
expansion of successful, oversubscribed Recovery Act programs to 
leverage private investment in energy efficiency and create clean 
energy manufacturing jobs.
    In addition to these priority investments, the Administration 
supports immediate steps to lend additional help to those most affected 
by the recession. The Budget therefore proposes to extend emergency 
assistance to seniors and families with children, unemployment 
insurance benefits, COBRA tax credits, and relief to States, Indian 
tribes, and localities to prevent layoffs. And the Budget also extends 
tax relief to 95 percent of working families through an additional year 
of the Making Work Pay tax credit.
                      restoring fiscal discipline
    Unfortunately, we face not just this jobs deficit but also a 
substantial fiscal deficit. On the day the Administration took office, 
the budget deficit for 2009 stood at $1.3 trillion, or 9.2 percent of 
GDP--higher than in any year since World War II. And, over the 
following ten years, projected deficits totaled $8 trillion.
            Short-term deficits
    The deficit increased substantially in fiscal year 2009, which 
began on October 1, 2008. Given the depth of the economic downturn in 
late 2008, an increase in the deficit as we entered 2009 was to be 
expected--and, indeed, such an increase was temporarily desirable 
because it increased aggregate demand in the economy. (During a 
recession, the key to economic growth is the demand for the goods and 
services the economy could produce with existing capacity--and in that 
situation, temporary increases in the deficit are beneficial to help 
put the economy back on track.) The increase in the deficit during 2009 
reflected a decline in revenue and an increase in spending, both of 
which were primarily linked to the economic downturn and both of which 
were already apparent before the Administration took office.
    For example, on January 7, 2009, the Congressional Budget Office 
(CBO) issued its Economic and Budget Outlook for Fiscal Years 2009-
2019. In that document, CBO projected that government spending would 
rise from 20.9 percent of GDP in fiscal year 2008 to 24.9 percent of 
GDP in fiscal year 2009. In reality, government spending in fiscal year 
2009 turned out to be roughly what had been predicted a year earlier 
(24.7 percent), according to CBO's updated Economic and Budget Outlook 
issued in January of this year. (The mix of spending was slightly 
different from what CBO had initially projected, with somewhat lower 
mandatory spending and somewhat higher discretionary spending as a 
share of the economy.)


            Medium-term deficits
    In addition to the 2009 deficit, the Administration also inherited 
an $8 trillion ten-year deficit. Even these figures, moreover, 
understate the fiscal shortfall the Administration actually inherited 
for the next decade. As of last winter, the depth of the current 
recession was not yet fully apparent. Since we released our Budget 
overview last February, the deterioration in our economic and technical 
assumptions added another $2 trillion to the deficit through 2019, as 
it became clear that we were in the midst of the worst recession since 
the Great Depression.
    As a result, without changes in policy, deficits would total $10.6 
trillion over the next ten years--and would fall from their current 
levels to an average of about 5 percent of GDP in the second half of 
the decade.
    This unsustainable starting point largely reflects three factors: a 
failure to pay for policies in the past, the impact of the economic 
downturn, and the steps we took to mitigate that downturn.
     More than half of these deficits can be linked to the 
previous Administration's failure to pay for the 2001/2003 tax cuts and 
the prescription drug bill. Over the next ten years, these two unpaid-
for policies are slated to add $5.8 trillion to the deficit, including 
interest expense on the additional associated debt. Put differently, if 
these two policies had been paid for, projected deficits--without any 
further deficit reduction--would be about 2 percent of GDP per year by 
the middle of the decade, and we would have been on a sustainable 
medium-term fiscal course.
     The recession that began in December 2007 also adds 
considerably to the projected deficits. When the economy enters a 
recession, the Federal Government's receipts automatically fall and the 
costs for certain programs, such as unemployment insurance, 
automatically rise. Over the next ten years, these automatic 
stabilizers are projected to add about $2.4 trillion to the deficit, 
including interest expense.
     Finally, it is worth noting that the Recovery Act--which, 
as discussed, has been key to restoring economic growth--plays a 
relatively small role in the projected deficits compared to these other 
costs. Over the next ten years, the deficit impact of the Recovery Act 
is less than one-tenth the size of the costs associated with 2001/2003 
tax cuts, the prescription drug bill, and the automatic effects of the 
recession on the Federal budget.
    Summed together, this fiscal legacy--the unpaid-for 2001/2003 tax 
cuts and prescription drug bill, as well as the worst recession since 
the Great Depression and our necessary response to it--accounts for $9 
trillion of the projected deficits under current policies. They are the 
reason that our medium-term deficits are on an unsustainable course.
            Long-term deficits
    As our horizon extends beyond the next decade, the role of health 
care costs in driving our budget deficits becomes more prominent. The 
figure below shows the projected growth of Medicare, Medicaid, and 
Social Security spending over the next 75-years, assuming historical 
excess cost growth continues. This illustrates that we are on an 
unsustainable path. Within the next half century, spending on these 
three programs is projected to exceed 20 percent of GDP, more than 
double their current share of the economy. The fact remains that we 
cannot close the long-term fiscal shortfall without slowing the rate of 
health care cost growth. Reducing excess cost growth by 15 basis points 
(0.15 percentage points) generates more savings than closing the entire 
Social Security deficit over the next 75 years.


            Policies to Reduce the Deficit and Restore Responsibility
    That is how these projected deficits over the next decade arose and 
how our long-term fiscal future is dominated by health care costs. But 
whatever their cause, our future prosperity may be threatened if we do 
not address our medium- and long-term fiscal trajectory. So what are we 
doing?
    First, we have already taken action to ensure that we do not make 
the hole any deeper. The Administration proposed and Congress is on the 
verge of enacting statutory pay-as-you-go (PAYGO) legislation. PAYGO 
forces us to live by a simple but important principle: Congress can 
only spend a dollar on an entitlement increase or tax cut if it saves a 
dollar elsewhere. In the 1990s, statutory PAYGO encouraged the tough 
choices that helped move the Government from large deficits to 
surpluses, and it can do the same today. To repeat what I have already 
said, the failure of the previous administration to abide by the PAYGO 
principle accounts for over $5 trillion of our projected deficits. And, 
while both houses of Congress had already taken an important step 
toward righting our fiscal course by adopting congressional rules 
incorporating the PAYGO principle, enacting statutory PAYGO will 
strengthen enforcement and redouble our commitment.
    The President's Budget represents another important step toward 
fiscal sustainability. The Budget reduces deficits by $1.2 trillion 
over the next 10 years--not including savings associated with our 
presumed ramp-down of operations in Iraq and Afghanistan. If those 
savings are included, deficit reduction under our Budget comes to $2.1 
trillion. Furthermore, the President's Budget cuts the inherited 
deficit in half as a share of GDP by the end of the President's first 
term,
    The deficit reduction steps include:
     Imposing a three-year freeze on non-security discretionary 
funding. Over the past year, a surge in Federal spending has helped to 
bolster macroeconomic demand, while also funding long-needed 
investments that are helping to build a new foundation for economic 
growth. But, as the economy recovers, we need to rebalance our spending 
priorities, as we transition from jumpstarting the economy to restoring 
fiscal sustainability. That is why the President's Budget proposes a 
three-year freeze in non-security discretionary funding (that is, 
discretionary funding outside of defense, homeland security, veterans 
affairs, and international affairs), with funding thereafter increasing 
roughly with inflation. The proposed freeze in non-security 
discretionary funding from 2010 to 2011 is well below the 5 percent 
average growth in such funding since the early 1990s. And over the next 
10 years, this policy saves $250 billion relative to continuing the 
2010 funding levels for these programs adjusted for inflation.
    The non-security discretionary freeze allows some agency budgets to 
expand even while others are constrained, and expands some investments 
while curtailing others. Education, job training, and R&D provide vivid 
examples. Sound investments in education are crucial to building the 
skills and productivity of the Nation's current and future workers. 
Even while expanding funding overall and significantly expanding the 
successful Race to the Top competition, the President's Budget will 
eliminate 6 discretionary programs and consolidate 38 K-12 programs 
into 11 new initiatives that emphasize competition in allocating funds. 
This will give communities more choices around activities and hold 
grantees accountable for results.
    And to keep Americans building new and competitive skills 
throughout their working lives, the Budget provides $19 billion for job 
training and employment programs Government-wide, a $1.1 billion, or 6 
percent, increase from 2010. This level includes two new innovation 
funds that will test and evaluate new approaches to training 
disconnected youths, building regional partnerships, and supporting 
apprenticeships. The Budget will also support a ten-year extension of 
Trade Adjustment Act assistance for American workers who have lost 
their jobs due to imports or shifts in production overseas, and provide 
additional support for training in green jobs.
    Similarly, R&D is a cornerstone of a thriving economy, and the 
Budget features $61.6 billion for civilian research and development--an 
increase of $3.7 billion, or 6.4 percent, over 2010 levels. But while 
continuing the commitment to double funding for three key basic 
research agencies--the National Science Foundation, the Department of 
Energy's Office of Science, and the National Institute of Standards and 
Technology--the Budget also eliminates programs that are not 
effectively achieving their goals. For example, the Budget cancels 
NASA's Constellation program, which was intended to return astronauts 
to the Moon by 2020, but has run severely behind schedule and over-
budget. In place of Constellation, the Budget proposes to leverage 
international partnerships and commercial capabilities to set the stage 
for a revitalized human space flight program, while also accelerating 
work--constrained for years due to the budget demands of 
Constellation--on climate science, green aviation, science education, 
and other priorities.
     Requiring the financial services industry to fully pay 
back the costs of the Troubled Asset Relief Program (TARP). Assisting 
the financial services industry was necessary to prevent an even worse 
financial meltdown--and even greater repercussions throughout the 
entire economy. But this step rewarded firms that had taken excessive 
and unreasonable risks. While the Administration's sound management of 
the TARP program has caused its expected cost to fall by $224 billion 
since the 2010 Mid-Session Review to about $117 billion, shared 
responsibility requires that the largest financial firms pay back the 
taxpayer as a result of the extraordinary action taken. Congress 
recognized this when it wrote the legislation authorizing TARP by 
requiring the President to propose a way for the financial sector to 
pay the costs of the program. The Administration is therefore calling 
for a Financial Crisis Responsibility Fee on the largest Wall Street 
and financial firms that will last at least 10 years, but longer if 
necessary, to compensate the taxpayers fully for the extraordinary 
support--both direct and indirect--that they provided. This fee would 
be limited to financial firms with over $50 billion in assets. As it 
would be based on an institution's size and exposure to debt, it would 
also further the Administration's financial reform goals by encouraging 
firms to reduce their size and leverage--which were two major 
contributors to the financial crisis.
     Allowing the 2001-2003 tax cuts for households earning 
more than $250,000 to expire. The Budget proposes allowing most of the 
2001/2003 tax cuts to expire in 2011, as scheduled, for those families 
making more than $250,000 ($200,000 for single individuals). The 
additional revenues gained would be devoted to deficit reduction. These 
tax cuts were unaffordable at the time they were enacted, and remain so 
today. The Budget would simply return the marginal tax rates for these 
wealthiest Americans to what they were prior to 2001. Altogether, 
allowing these tax cuts to expire would save $678 billion over the next 
ten years relative to current policy.
     Limiting the rate at which itemized deductions can reduce 
tax liability to 28 percent for families with incomes over $250,000. 
Currently, if a middle-class family donates a dollar to its favorite 
charity or spends a dollar on mortgage interest, it gets a 15-cent tax 
deduction, but a millionaire who does the same enjoys a deduction that 
is more than twice as generous. By reducing this disparity and 
returning the high-income deduction to the same rates that were in 
place at the end of the Reagan Administration, the Budget raises $291 
billion over the next decade.
     Eliminating funding for inefficient fossil fuel subsidies. 
As we work to create a clean energy economy, it is counterproductive to 
spend taxpayer dollars on incentives that run counter to this national 
priority. To further this goal and reduce the deficit, the Budget 
eliminates tax preferences and funding for programs that provide 
inefficient fossil fuel subsidies and undermine efforts to deal with 
carbon pollution. The Budget proposes eliminating 12 tax breaks for 
oil, gas, and coal companies, closing loopholes to raise nearly $39 
billion over the next decade.
                        health insurance reform
    In addition to these specific policies to address the medium-term 
deficit, the Administration has also faced head-on the primary driver 
of our long-term fiscal shortfall--rising health care costs. Both the 
House and Senate health insurance reform legislation would not only 
reduce the deficit over the next decade as scored by the non-partisan 
CBO, but perhaps more importantly would create an infrastructure that 
would help to improve quality and constrain costs over the long term.
    Both bills would aggressively test different approaches to 
delivering health care and move toward paying for quality rather than 
quantity. In the Recovery Act, we took steps toward greater quality at 
lower cost by making historic investments in health information 
technology and research into which treatments work and which do not. 
Comprehensive health insurance reform would build on these investments 
by providing tools and incentives for physicians, hospitals, and other 
providers to improve quality. For example, by bundling payments and 
establishing accountable care organizations, as well as by creating 
disincentives for dangerous and unnecessary re-admissions and health-
facility acquired infections, physicians and hospitals will be induced 
to redesign their systems, coordinate care to keep people healthy, and 
avoid unnecessary complications
    It is also vital that reform include a Medicare commission--
composed of doctors and other health care experts--that can enable the 
health system to keep pace with innovation and the dynamic health care 
marketplace. The commission will help to make sure that reforming the 
health care system is not a one-time event, but rather an ongoing 
process over time, creating a continuous feedback loop where we 
generate more and better information about what is working in the 
health care delivery system and then rapidly bring those initiatives to 
scale. Lastly, reform should include an excise tax on the highest-cost 
insurance plans. The proposed tax on ``Cadillac'' health insurance 
plans will do more than help pay for reform; it will curtail the growth 
of private health insurance premiums--by providing employers with an 
incentive to seek higher-quality and lower-cost health benefits that 
will generate higher take-home pay for American workers and their 
families. In other words, the excise tax will help to slow health care 
cost growth and thereby also give Americans a pay raise.
    Congress must now deliver on this promise of fiscally responsible 
health reform--the stakes are high, both for the millions of Americans 
who lack a stable source of health insurance coverage and for the 
fiscal wellbeing of the Nation itself. I echo the President's 
commitment last week to hear any and all ideas for a better approach to 
fiscally responsible health reform, and I also echo his challenge to 
Congress that it must not walk away from comprehensive reform with the 
finish line so near.
    Taken together, the more than $1 trillion in deficit reduction 
proposed by our Budget represents an important step toward fiscal 
responsibility over the medium term, and the health legislation under 
consideration would help to reduce deficits over the longer term.
                           fiscal commission
    The President has now proposed two budgets that reduce outyear 
deficits. But the Administration is not yet satisfied. Even with this 
substantial deficit reduction, we will still face unsustainable medium- 
and long-term deficits.
    The only way to solve the remainder of our fiscal challenge is to 
solve it in a bipartisan fashion. That's why the President has called 
for the creation of a bipartisan Fiscal Commission to identify policies 
to improve the fiscal situation in the medium term and to achieve 
fiscal sustainability over the long run.
    Specifically, in addition to addressing our long-term fiscal 
imbalance, the Commission is charged with balancing the budget 
excluding interest payments on the debt by 2015. This result is 
projected to stabilize the debt-to-GDP ratio at an acceptable level 
once the economy recovers. The magnitude and timing of the policy 
measures necessary to achieve this goal are subject to considerable 
uncertainty and will depend on the evolution of the economy. In 
addition, the Commission will examine policies to meaningfully improve 
the long-run fiscal outlook, including changes to address the growth of 
entitlement spending and the gap between the projected revenues and 
expenditures of the Federal Government.
                               conclusion
    The policies we have enacted in the last year and those proposed in 
the President's Budget seek to restore economic and fiscal health after 
years of poor decisions. While we have much work left to do to 
accomplish this goal, our economic freefall has been stopped; financial 
markets have calmed; and the Recovery Act returned our economy to 
growth in the third quarter of last year. On the fiscal front, the 
President's Budget puts on the table more than $1 trillion in deficit 
reduction over the next ten years by imposing historic restraint on the 
growth of non-security discretionary funding and restoring fairness and 
balance to the tax code.
    These are key steps forward, but they are not enough. Although the 
rate of job loss has slowed dramatically, job gain has not yet begun, 
and the Administration will not be satisfied until the many Americans 
seeking work can find it. Moreover, while our Budget significantly 
reduces projected deficits, they remain undesirably high.
    The Administration is committed to addressing these challenges 
facing our Nation, and I look forward to working with you in the weeks 
and months ahead to do so.

    Chairman Spratt. Mr. Orszag, as I understand your 
presentation, the economy is assumed to grow at a rate of 4 
percent, on average, for the first 5 years. Some commentators 
have noted this and commented that it is optimistic and blue 
sky-ish. How do you respond to that? How did you derive the 4 
percentage point growth factor in developing this budget?
    Mr. Orszag. The first thing I would say is, for those who 
are interested in the specific economic assumptions, they are 
contained in table S-13 of the budget. And basically they were 
developed at the end of 2009 under the leadership of the 
Council of Economic Advisors. At the time, they were fully in 
line with the Blue Chip--that is the private sector 
forecasters--consensus on the path for the economy. So there is 
a much more sophisticated process involved, but one of the 
benchmarks that we were using was to make sure we were lining 
up with the Blue Chip consensus at the time.
    Chairman Spratt. Would you describe it as conservative or 
liberal or----
    Mr. Orszag. I think it is straight down the middle of the 
plate.
    Chairman Spratt. As you look at the projection of deficits 
over the next 10 years, the deficit is indeed cut in half from 
$1.556 trillion in 2011 to $727 billion in 2013, 2014. After 
that period of time, it hovers in the range of $720 billion to 
$780 billion, until about 2019 when it takes a decided uptick. 
So rather than seeing a continual downward trajectory in the 
far out-years, there is an uptick in the budget. What causes 
that, and is that something you are satisfied with?
    Mr. Orszag. First, one of the reasons we are calling for a 
fiscal commission is we are not satisfied with the deficit 
numbers out in 2018 and 2019, and thereafter.
    Second, the underlying driver there is basically two 
things: One is ongoing increases in Medicare, Medicaid, and 
Social Security costs because of the aging of the population 
and rising health care costs; and then also, rising debt as a 
share of the economy, imposing additional interest payments 
which then feeds into the deficit and causes that slight uptick 
towards the end of the decade.
    The reason that we believe there are additional steps 
necessary and why a fiscal commission is imperative is that we 
need to get the deficit down before that, stabilize debt as a 
share of the economy, and avoid that uptick towards the end of 
the decade and thereafter.
    Chairman Spratt. One final question. My good friend, the 
ranking member, has written something recently called ``The 
Road Map to Our Future.''
    Mr. Ryan. Something like that.
    Mr. Orszag. ``Road Map 2.O,'' I believe.
    Chairman Spratt. It is his contribution, which I respect. 
It is a solid piece of work if you happen to agree with the 
premises. If not, it is not exactly something I would endorse. 
But nevertheless, it is an earnest piece of work.
    Mr. Ryan. Can I put you down as a cosponsor?
    Chairman Spratt. No, I wouldn't put me down as a cosponsor 
yet; I haven't finished it.
    But I did see represented in the Wall Street Journal and 
other places. Have you had an opportunity to look at that, and 
do you regard this as a viable alternative to the situation we 
are in today?
    Mr. Orszag. Well, I have had an opportunity to review it. 
The Congressional Budget Office has had an opportunity to 
review it. I think it is a serious proposal. It does address 
our long-term fiscal problem. It does so in a way that I think 
many policymakers might find objectionable. It do so by--the 
key driver is what it does, in particular, to Medicare. And 
there, for those who are currently 55 or younger, it will take 
the Medicare program and instead of providing the existing 
benefit structure, instead provide a voucher, which whatever 
its other effects will shift risk onto beneficiaries. And then 
the voucher increases at a much slower rate than health care 
costs, which means that you are also shifting expected costs 
onto beneficiaries, the net result of which is that, by the end 
of the CBO analysis period, Medicare and Medicaid have been 
reduced by more than 75 percent compared to their current 
trajectory, at the cost of shifting a lot of risk and expected 
costs onto individuals and their families.
    There are other changes to. It changes the--it eliminates 
the tax benefit for employer-sponsored insurance. It introduces 
individual accounts into Social Security. It has fairly 
significant changes to the Tax Code, which will shift the tax 
burden down the income distribution and so on and so forth.
    But since the author of the plan is sitting right next to 
you, perhaps I should defer to him to describe it.
    Chairman Spratt. In that connection, I now yield to 
recognize Mr. Ryan.
    Mr. Ryan. All right. That is a lot.
    I guess I am answering the questions now instead of asking 
them.
    First of all, I thought it was important that we get off 
pointing fingers at each other and start putting plans out 
there so we can talk about how to solve this problem.
    We pretty much all agree what the problem is here. I think 
we can probably even get agreement as to the size and the 
magnitude of the problem, given that we use the CBO, GAO and 
other nonpartisan fiscal authorities.
    What we are proposing--what I am proposing, and some of my 
colleagues are proposing--is, look, let's tell current seniors, 
we are not going to mess with your benefit; you have already 
organized your lives around them. So that is why we are saying, 
people 55 and above, no changes. That is quite different than 
the health care bill moving through Congress right now. That 
takes roughly $400 billion out of today's Medicare from today's 
seniors to put into the creation of a new entitlement.
    We are saying, let's not knock 86 percent of the people off 
Medicare Advantage. We are saying, let's tell those current 
seniors in Social Security and Medicare, your benefits are 
going to stay the same, but we know that the future is totally 
unsustainable.
    And Dr. Orszag, just a quick answer if you could, you would 
agree that the spending in Medicare is on an unsustainable 
path, would you not?
    Mr. Orszag. Yes, I would agree. And we have different 
solutions.
    Mr. Ryan. And we will get into this. Absolutely, 
absolutely. The point we are making is, let's give younger 
people the chance to have the ability to plan for their future, 
and let's use our values that we have had consensus in society 
in how we approach it. A safety net for low income. Full 
support for low-income people. As people get sicker, they get 
more support. And don't subsidize wealthy people as much as we 
subsidize everybody else.
    For Social Security, the same thing; don't increase 
benefits as fast as you do for wealthier people who can afford 
it on their own, and give younger people the opportunity, if 
they so choose to have it, of having a system like that which 
we here in Congress have. This system looks a lot like the 
system we have for our own health care for our families and our 
own savings for our retirement.
    On the tax exclusion, I would simply say, most economists--
and there is lots of talk about economic consensus. I would 
disagree with the consensus on stimulus, but I think most 
people would agree that the tax exclusion is not very good 
policy. It was written in World War II at a time when people 
had the same job throughout all of their lives. It is not the 
way the world works today. People change jobs all the time. 
They get out of work. They go work for themselves.
    So why don't we end the discrimination of tax policy 
against people who don't get health care from their jobs? Let's 
give them the same benefit everybody else gets. So de-link that 
tax benefit from the job, which is changing all the time, and 
reattach it to the person, so that if they lose their jobs, 
they keep their tax benefit. If they change jobs, they keep 
their tax benefit. If they go work for themselves, they keep 
their tax benefit.
    At the end of the day, what we are trying to do here is 
attack the root cause of health inflation, bring that down. And 
really, at the end of the day, I think the philosophical 
differences we have will probably be evidenced in the different 
approaches we take.
    We simply believe the nucleus of our economy and society is 
the individual, not the government. And we believe we ought to 
have a safety net to help those people who cannot help 
themselves, to help people who are temporarily down on their 
luck, but we don't want to turn that safety net into a hammock 
that lulls able-bodied Americans into lives of complacency and 
dependency on the government. We want to give people access to 
equal opportunity so that they can make the most of their lives 
and reach their potential. That in a nutshell is the thinking 
behind the plan that I have been offering.
    With all of that, and I appreciate the indulgence of the 
chairman, is it okay if I do my questioning time, or are you 
done?
    I will give you a couple of brief questions, because I took 
a lot of time.
    You agree that Medicare is growing too fast. It grows at 5 
percent annually, which is 1.5 percent faster than the economy 
is projected to grow. That can't be sustained. You agree with 
that.
    Mr. Orszag. I agree with that.
    Mr. Ryan. So CBO is now telling us, with this new health 
care bill that is moving through Congress--and I don't know if 
it is going to pass or what is going to happen--but the most 
recent report we got from CBO says that this thing, this new 
entitlement grows at 8 percent, but the provisions being used 
to pay for it only grow at 5 percent. The Medicare savings and 
the tax changes grow at 5 percent versus 8 percent, so aren't 
we already locking in a new entitlement on top of these other 
unfunded liabilities we have that already is on a dangerous 
trajectory with respect to the resources being used to pay for 
it?
    Mr. Orszag. I am not sure what CBO analysis you are 
referring to. The ones that I have seen suggest that the health 
legislation, both in the House and Senate, would not only 
reduce the deficit over the next decade but more--just as 
importantly, reduce the deficit in the decades thereafter. And 
that is because you have the deficit-reducing parts growing 
relative to the other components of the legislation.
    And I would also note, just with regard to the underlying 
issue, that the legislation not only does that, but it puts in 
place an infrastructure where better information would be 
available, which presumably, even under your approach, you 
would want individuals to have, because in many cases now, 
individuals don't have the information that would allow them to 
make better choices. And that is just one example. There are a 
whole series of other structural changes that are crucial, 
regardless of how you want to move forward on overall health 
care.
    Mr. Ryan. Well, assuming that I am quoting CBO accurately, 
growing a spending entitlement program at 8 percent and only 
paying for it with pay-fors that grow at 5 percent creates a 
problem.
    Mr. Orszag. Yes, that would show up as a gap in the second 
decade. And we have been clear that we want deficit reduction 
in the first decade and then improving thereafter. So that 
would violate that principle.
    Mr. Ryan. I am going to have a letter I want to send you 
about the allowance for health care reform. I won't get 
technical with you now. I will send you a letter, if you could 
get the response to that.
    Last November, you stated, in the medium term, out in 2015, 
2016, 2017, we need to get something around 3 percent of the 
economy, so that debt is no longer rising as a share of the 
economy. You went on to say how the credibility of the budget 
was at stake. Am I missing something?
    The President's budget doesn't meet this standard. Why did 
the President submit a budget that does not meet the standard 
that you had laid out for a credible budget?
    Mr. Orszag. Well, it does meet the standard, including the 
recommendations of the fiscal commission. We put forward 
specific proposals to get to about 4 percent, and then we said 
a bipartisan process is necessary. Now, you have put forward 
some ideas; those can be fed into the commission. I am hopeful 
that there will be other ideas.
    Mr. Ryan. So minus the commission, it doesn't meet the 
standard.
    Mr. Orszag. Correct.
    Mr. Ryan. Okay. One last thing.
    We will disagree on the levels of discretionary spending, 
absolutely. Let's not get into that. What about statutory caps? 
I mean, why not call for creating statutory discretionary caps 
to lock in whatever level it is that you want to achieve?
    Mr. Orszag. We believe the regular congressional process 
through the 302(a) and 302(b)----
    Mr. Ryan. Hasn't worked too well.
    Mr. Orszag [continuing]. Is sufficient, but if you would 
like to explore strengthening that, that is a discussion we are 
open to.
    Mr. Ryan. And I mentioned this to the President on Friday. 
It is short notice, so I don't expect much of an issue, but 
have you given any thought to the constitutional version of a 
line item veto, kind of giving you the scalpel you need to go 
after--sort of like an enhanced rescission procedure? Have you 
given any thought to that proposal?
    Mr. Orszag. We are in favor of any constitutionally valid 
approach to eliminating unnecessary spending.
    Mr. Ryan. So I will take that as a yes.
    Mr. Orszag. I am going to repeat my answer.
    Mr. Ryan. Okay. Thank you, Peter.
    Chairman Spratt. Mrs. Schwartz.
    Ms. Schwartz. Thank you for your testimony and for the fact 
that the administration is taking very seriously what is 
actually a difficult, I would say, balance that has to be 
struck this year in responding to and continuing to respond to 
the importance of economic growth and do what we can to 
stimulate the private sector to grow jobs and revitalize this 
economy, and of course respecting what we inherited, what the 
administration inherited a year ago, was pretty dismal; 741,000 
jobs lost last January in contrast to 64,000.
    While we are not happy with that job loss, we are not happy 
with any job loss, that certainly is a much better trend, as 
the President has talked about. And I appreciate the fact that 
you have really put forward the importance of making some 
investments for the future as we also are stimulating 
particularly small business job growth. I really appreciate 
some of the proposals from the administration.
    I did want to follow up on some of the discussions about 
health care. And I want to see whether we can talk about this 
in a way that might be more comprehensible to everyone 
listening, if anyone is, because I think while we can and we 
should get into some of the budget terminology, the fact is 
that there is a very significant contrast between what has been 
proposed by the administration, by the Democratic Congress in 
tackling health care costs into the future, and the Republican 
alternatives.
    Now, I realize that all the Republicans may not be on the 
same page, but Mr. Ryan, for his presentation here, really 
gives us an opportunity to really say--to really talk about the 
contrasts that we are seeing in terms of the health care reform 
legislation that we have been working on for a number of months 
and continue to work on being important, not only to improving 
access to health coverage for all Americans and containing 
costs for businesses, helping them to be able to be more 
economically competitive, and adding new employees because 
their health costs will go down over time, but also making it 
very clear, moving us in the direction of deficit reduction for 
the Federal budget.
    Both of the proposals, the Senate and the House, have both 
received scoring reduction in the deficit going forward of over 
$100 billion and potentially more, as we look at the proposal 
for the budget and deficit reduction commission, which we 
believe the President will do through executive order.
    But what Mr. Ryan is suggesting and has proposed--and I 
assume many of his colleagues have endorsed--is actually ending 
Medicare as we know it for future seniors.
    Mr. Ryan. Will the gentlelady yield?
    Ms. Schwartz. No. I think, in fact, you have been able to 
give a really good speech here. I only have 2 more minutes, so 
let me just say that it really is offering a voucher to future 
seniors, basically saying, here is a voucher, go and use your 
individual clout with the insurance industry to be able to buy 
insurance for yourself. It doesn't matter how sick you are.
    It doesn't matter--it also does end employer-based health 
insurance, which many Americans--in fact, most Americans get 
their health insurance through their employer.
    Mr. Ryan. That is just not the case. Would you yield? That 
is just not the case.
    Ms. Schwartz. You have pointed out that the tax advantages 
for employers providing health insurance will----
    Mr. Ryan. No, that is not correct. Employers can continue 
to deduct off their taxes; it is for the individual.
    Ms. Schwartz. It is for the individual. It ends employers 
being able to do it. It moves all of this to individuals.
    Now, I think that that is a philosophical difference, an 
ideological difference to believe that individuals, whether 
they are seniors with serious medical conditions or whether 
they are actually employed workers across this country, you are 
really putting a couple hundred million Americans on their own 
to negotiate for the best price and best coverage they possibly 
can. Now, that is a very different philosophy.
    But we have heard, many of us, in town hall meetings, et 
cetera, that seniors want to keep their Medicare, and those who 
are employed who have coverage would like more consumer 
protections in their coverage but in fact don't want to see 
that coverage go away.
    So could you elaborate a little bit more on how important 
it is for us to move ahead in a way that does really address 
the major issues facing both American businesses and American 
families and our seniors and our budget to move ahead on 
comprehensive health care reform that would in fact address the 
real concerns, which is containing the rate of growth and cost 
for all of us, again, individuals, family, businesses and the 
Federal Government?
    Mr. Orszag. Sure. And maybe it would actually just clarify 
things, and I think Mr. Ryan wouldn't object if I just read 
from the CBO letter about his plan because I think it just 
crystallizes the shift, both the pros and the cons, when CBO 
wrote that both the level of expected Federal spending on 
Medicare and uncertainty surrounding that spending would 
decline, but enrollee spending for health care and uncertainty 
surrounding that spending would increase. So what would be 
involved, I think Mr. Ryan would agree, is a shift of both risk 
and expected cost to individuals, and the results would be as 
CBO said.
    Ms. Schwartz. So it would save the Federal Government 
money, but it would all shift to the individual.
    Mr. Orszag. Sure.
    Ms. Schwartz. All right. Thank you very much.
    Chairman Spratt. Mr. Ryan, did you want to comment?
    Mr. Ryan. Just one thing.
    I think that CBO letter also says that our health care 
reform gives more additional support to lower-income people 
than we currently do.
    It does not remove the tax deduction for employers to offer 
health insurance to their employees. Employers can still deduct 
off of their taxes provision of health insurance for their 
employees. It is the employee tax benefit that goes from the 
job to the employee. It is a very confusing issue. I just want 
to make should that when we debate this, we are using facts.
    Thank you.
    Chairman Spratt. Mr. Hensarling.
    Mr. Hensarling. Thank you, Mr. Chairman.
    Welcome, Dr. Orszag. This is not personal to you, since I 
have a great amount of respect for your budget acumen and your 
integrity, but this is a breathtaking document.
    It is historic levels of debt. It is historic levels of 
deficit. It is historic levels of taxation. It is simply 
breathtaking. And I fear that the actions of this 
administration, if undertaken by this Congress, will simply 
bankrupt this Nation. I fear, I fear this budget document.
    Now, Dr. Orszag, I had, I guess, my second opportunity to 
speak to the President on Friday. And if you would please relay 
to the President, I thought it spoke exceedingly well of him, 
to his leadership and his character, that he would come and 
speak to House Republicans.
    In my exchange with the President, I laid out some facts. I 
guess, to put it politely, he pushed back on them. And I asked 
him a question that he declined to answer.
    For the record, I said, the last Republican budget did not 
grow government beyond 20 percent of GDP, immediately froze 
nondefense discretionary spending, and spent $5 trillion less. 
For the record, the administration can go to the Budget 
Committee Web site, pages 49 and 39, and verify that in your 
own table, S-1, for your last budget to get the $5 trillion 
differential.
    I also asserted that what were once old annual deficits 
under Republicans have now become monthly deficits under 
Democrats. Can you pull up chart seven, please?


    Now, I don't want to spend a lot of talk looking backwards, 
but I continue to hear from my friends on the other side of the 
aisle that Republicans spent too much; Republicans created 
these deficits.
    Guess what? We share the guilt. Yes. We ran up deficits. I 
am embarrassed about them. I regret them.
    But as an order of magnitude, what we see, if you will go 
to chart eight, please, that the average deficit when 
Republicans controlled the purse strings was $104 billion. The 
average deficit when Democrats have controlled the purse 
strings, $1.1 trillion.


    So I would submit, Dr. Orszag, to the extent that you 
inherited a bad budget deficit, you inherited it from a 
Democratic Congress, and I believe you are making it far, far 
worse.
    Chairman Spratt. Let the witness answer the question----
    Mr. Orszag. And I am not sure there was a question, but I 
would be delighted to answer it anyway.
    Mr. Hensarling. I am sorry, Mr. Chairman, is the clock not 
working? Will it work now?
    Mr. Orszag. I am confused. Would you like me to respond to 
that?
    Chairman Spratt. I am going to cut you off at a minute and 
a half.
    Mr. Hensarling. Thank you, Mr. Chairman.
    Mr. Orszag. I am not sure there was a question.
    Mr. Hensarling. We are getting to the question, Mr. 
Chairman.
    Mr. Orszag. I would like to respond to it, but I will let 
you ask your question.
    Mr. Hensarling. Well, to the extent I have any time, Dr. 
Orszag, I am happy to have you put this in context.
    The question I asked the President was, will that new 
budget, like your old budget, triple the national debt and 
continue us down the path of increasing the cost of government 
to almost 25 percent of the economy? Again, table S-1 of this 
budget you have now presented shows that debt held by the 
public is said to rise from $5.8 trillion in fiscal year 2008 
to $18.5 trillion in fiscal year 2020, which is three times 
larger. So perhaps the President misunderstood what I said. If 
not, I believe he was mistaken, so I will certainly provide you 
with these citations.
    But Dr. Orszag, since the President decided to push back on 
my assertions, I have some other assertions I would like to 
share with you that you can talk about.
    Now this is from CNBC today, ``The deficit for this year 
would be 10.6 percent of the total economy, a figure unmatched 
since the country was emerging from World War II.''
    This is from the New York Times yesterday. ``The budget 
projects that the deficit will peek at nearly $1.6 trillion in 
the current fiscal year, a post-World War II record.''
    CNN, ``They are not calling it `stimulus two,' but the 
Obama administration wants to extend the life of several 
Recovery Act provisions by building them into the Federal 
budget.'' CNN yesterday.
    Reuters, ``Even if all goes according to plan, the White 
House still forecasts U.S. public debt rising above 71 percent 
of GDP by 2013, up from 53 percent in 2009, levels that could 
spook investors.''
    Today's Wall Street Journal, ``All of this spending must be 
financed, and so deficits and taxes are both scheduled to rise 
to record levels.'' Also in the Journal, ``As a share of the 
economy, outlays will reach a post World War II record of 25.4 
percent this year. This is a new modern spending landmark.''
    So if the administration pushes back on my assertions, do 
you wish to push back on the assertions of the New York Times, 
CNBC, Wall Street Journal and Reuters?
    Mr. Orszag. Well, I think actually doing so is the same 
thing. Could I put up your chart of the deficits again for a 
second because I think this is important? So let's go back to 
your----
    Ms. McCollum. Mr. Chair, point of personal privilege. Could 
I ask who prepared those charts because I can't read on the 
bottom, and I always like to know where the numbers are coming 
from?
    Mr. Hensarling. Minority staff.
    Ms. McCollum. Minority staff, so they are Republican 
documents. Thank you.
    Mr. Ryan. The chart is using CBO actual numbers. Minority 
staff prepared the chart using CBO actual numbers.
    Mr. Orszag. Here is the key point, that increase in the 
deficit that you see there is the result of the economic 
downturn and of policies that were already in place under--
while you were in control of the Congress. And in particular, 
if you take the projected deficits of $8 trillion--again, I am 
going to repeat, they reflect not paying for the 2001 and 2003 
tax legislation and not paying for the Medicare prescription 
drug benefit and the economic downturn. So saying that this is 
the responsibility of the administration or of the Democratic 
Congress is like a guy who ran up a credit card bill, left 
before the credit card bill arrived in the mailbox, and then 
the new homeowner is there, and you are saying, you ran up the 
credit card.
    Mr. Hensarling. I am happy to hear your context and 
explanation, but what I don't hear is that you deny the facts.
    Mr. Orszag. It is correct that the deficit is now higher 
than it was in 2007, yes.
    Mr. Hensarling. Thank you, Mr. Chairman.
    Thank you, Dr. Orszag.
    Chairman Spratt. Ms. Kaptur.
    Ms. Kaptur. Mr. Chairman, I am going to give my first 15 
seconds to yield to Mr. Doggett.
    Mr. Doggett. Could we get your other chart back up there, 
Mr. Hensarling, that shows the Democratic and Republican 
control? Yes, sir, that one. I don't fault you for wanting to 
give us 8 years of Bush and your claiming 4 years of Clinton, 
but that is all that that chart shows.
    Mr. Hensarling. Would the gentleman yield?
    Mr. Doggett. If I have a few seconds left.
    Mr. Hensarling. Well, I am under the impression that it is 
Congress that controls the purse strings, and seeing how we 
both sit on this committee, I would think we would both know 
that.
    Mr. Doggett. Again, I understand you want to burden us with 
8 years of Bush which the country has been burdened with and 
the most irresponsible policies imaginable, and you want to 
claim the only balanced budget we have had in 50 years, which 
came under President Clinton's policies. That chart says more 
about what we face in trying to put together a budget than it 
does anything about the history of Democratic and Republican 
control.
    Ms. Kaptur. Reclaiming my time, I thank the gentleman very 
much for clarifying that.
    Dr. Orszag, could you tell me, did President Bush ever 
submit a balanced budget to Congress in his 8 years in office?
    Mr. Orszag. I don't believe so. But what I know for a fact 
is that he never proposed a budget that reduced the deficit 
like this budget does.
    Ms. Kaptur. Yes. I don't believe he ever produced a 
balanced budget in two terms in office.
    Do you have numbers available, the total amount of 
accumulated debt at the end of his term?
    Mr. Orszag. Yes. If you look at the historical table----
    Ms. Kaptur. Would you read that into the record, please?
    Mr. Orszag. It will take me a second.
    Ms. Kaptur. And while you are looking, if you have the 
total war costs that he placed on the long-term debt, I would 
appreciate that.
    Mr. Orszag. And I can give you that. The total war costs 
are now in the range of $1 trillion and, again, involve costs 
of roughly $160 billion a year at this point.
    To answer your question on debt held by the public at the 
end of fiscal year 2009, that was $6.8 trillion.
    Ms. Kaptur. $6.8 trillion.
    Mr. Orszag. Now, there is a question about exactly--let me 
give you, the end of fiscal year 2008 was $5.3 trillion.
    Ms. Kaptur. All right. I know one thing, until people go 
back to work, nobody's budget is balanced, including the family 
budget, the local school budget, the mayor's budget, the city 
budgets, the State budgets around this country. So let me ask 
you, at the end of the Bush Presidency, how many jobs were 
being lost per month?
    Mr. Orszag. Roughly 700,000.
    Ms. Kaptur. All right. Over 700,000 jobs a month. And I 
come from one of those areas that was hit in the solar plexus.
    How many jobs are being lost today after only 1 year of the 
Obama administration?
    Mr. Orszag. Well, we will have new information on Friday, 
but well under 100,000, and hopefully, we are getting closer to 
zero. Most private-sector forecasters believe that by sometime 
this spring, we will be experiencing positive employment 
growth.
    Ms. Kaptur. Yes . That is an enormous turning around of the 
ship of state. I can tell you, in my district, what has 
happened is that people are buying lottery tickets in Ohio 
because the situation still remains bleak, but for two 
positions that were open in our corner of the State, 4,000 
people applied. People want to work. The work ethic is still 
out there. And I have a hunch that this year it is going to get 
better, but the public is still hurting a lot.
    Let me ask you, in terms of the job proposals you are 
proposing to us, which do you view as being the most effective 
in helping people move back to work? As you look at the range 
of jobs proposals, we never had any jobs proposals from the 
Bush administration. They just moved more of our jobs offshore; 
more people got thrown out of work. Which proposals are you 
making that have the greatest hope for our people?
    Mr. Orszag. Let me just identify a few that the 
Congressional Budget Office has identified as being the highest 
bang for the buck in terms of employment effects. They include 
extending unemployment insurance benefits, which the 
administration proposes, and they include things like a tax 
break for firms that increase their payroll in line with our 
new wages and jobs tax credit, which is intended to spur hiring 
among small businesses.
    Ms. Kaptur. And you have some infrastructure proposals, I 
believe, in your budget.
    Mr. Orszag. We do and we will, yes.
    Ms. Kaptur. And we know that those actually get the most 
bang for the buck in terms of what they return to the public, 
those individuals working, as well as to the taxpayer, because 
those are long-term, wealth-creation jobs. So I would just 
encourage you to do what you can there for the workforce and 
get something of lasting value for the American people. And I 
thank you so much for clarifying all those figures for the 
record.
    Chairman Spratt. Mr. Simpson.
    Mr. Simpson. Thank you, Mr. Chairman.
    Welcome, Dr. Orszag.
    I guess if anybody wants to understand what the problem in 
Washington, D.C., is, all they need to do is listen to the 
debate that has gone on here the first little while, pointing 
fingers and trying to decide who is to blame for what. The 
reality is, is that the American people don't care who is to 
blame. What they want is the problem solved.
    And I don't think it does any good to point at Bush or to 
point at this administration and say, this is that, and 
whatever.
    And I am glad for the health care debate. I wish we would 
have had this health care debate on the floor, actually. It 
would have been a good debate. Unfortunately, we were denied 
any debate on the health care bill on the floor, or any 
alternatives.
    So we need to get back to trying to solve the problems in 
this country. And while I think this budget is a problem in 
terms of long-term fiscal responsibility of this country, what 
the American people are saying is that, what you need to do up 
there is to quit spending money.
    It is really that simple, quit spending money. They are 
saying, return the unspent funds from the stimulus package to 
the Treasury and pay down the debt. They are saying, quit 
taking the money that came back in TARP and using it to fund 
new programs; do what it was originally intended to do, and 
that is pay pack the Treasury for the money that was spent on 
TARP.
    And it doesn't seem like the administration seems to have 
gotten this message.
    And I know that you are in a difficult position. This is a 
tough time for all of us.
    There are parts of this budget that I agree with; parts of 
it that I disagree with, obviously.
    We have heard a lot about statutory PAYGO. Statutory PAYGO 
only means anything if you follow it. After the great rhetoric 
that was put out about, we are going to have statutory PAYGO, 
and we have enacted statutory PAYGO; the first year we enacted 
it, you exempted $412 billion of spending from PAYGO rules.
    So if you put in statutory PAYGO, you better be willing to 
live with it and quit exempting it if it is going to have any 
impact in the long run. And so far, nobody has been willing to 
do that; all we do is go out and say the rhetoric about 
statutory PAYGO.
    Do you know, in terms of a question now, do you know how 
much money we are spending budget-wide in addressing global 
warming and greenhouse gas emissions and those types of things? 
Because one of my concerns has been, I am the ranking member on 
the Interior Subcommittee, almost every agency in there has 
money for global warming studies, and I know in a lot of the 
other agencies, they have the same thing. How much are we 
spending, and how coordinated is all of this spending? And I am 
not trying to be a global warming denier or anything like that. 
I just don't see the coordination within the administration. It 
is like, if we spend a lot of money, then we will say we are 
doing good.
    Mr. Orszag. We can get you the exact figures, but very 
roughly speaking, there is about $2.5 billion in the domestic 
agencies, places like NOAA doing climate research and so on and 
so forth, and then about $1.5 billion in the international 
affairs budget, too. So that would be about $4 billion. But we 
will get you the exact figures.
    Mr. Simpson. But there are--the National Park Service has 
$10 million to spend on global warming. EPA spends a ton of 
money on global warming. We need to look at, across all of the 
agencies, what we are doing and what the coordination is within 
the agencies if we are going to be spending all of this money 
on studying global warming.
    I compliment the administration, frankly. For the first 
time an administration has matched some of the rhetoric in 
support of global--in support of nuclear power with the funds 
in their budget. They have put together a pretty good budget in 
terms of nuclear energy and the research in nuclear energy.
    I do have some concerns with some of the policy, obviously. 
The Yucca Mountain decision, that we are going to completely 
defund that; that we are going to withdraw our application for 
Yucca Mountain. What have we put in this budget to settle the 
lawsuits that are inevitably going to come and that we are 
going to lose when we withdraw our application for Yucca 
Mountain? How much money is in there for that? And how did we 
come up with that amount? And what do we assume the final 
amount is going to be?
    Mr. Orszag. Let me first answer that, as you know, the 
President has appointed a blue ribbon commission to study 
longer-range waste management and other options for, as we 
expand this form of energy, what to do with the waste. So that 
is, I think, crucially important.
    I will get back to you with the exact figures on--as you 
know, there are a set of payments that are already involved in 
the local storage that, as you know, the waste tends to be 
stored in secure facilities, but around the reactors 
themselves, and I will get back to you with the details on 
payment flows involved in that.
    Mr. Simpson. Thank you, I appreciate that very much.
    And Mr. Chairman, let's focus on problems and see what we 
can solve going forward.
    Chairman Spratt. Mr. Doggett.
    Mr. Doggett. Thank you, Mr. Chairman.
    And, Dr. Orszag, as my earlier comments indicate, I 
understand that you have been given an incredible economic mess 
and budgetary mess, and that you cannot clean it all up 
overnight.
    I do, however, have some concerns about certain aspects of 
your budget and the approach that you take.
    I think that your proposed limitation on spending is 
important, but you apply it too narrowly. Revenue as a share of 
gross domestic product, as you know, is at the lowest level in 
this country in 60 years. It hasn't been this low since 1950. 
But the use of the Tax Code to give special treatment to 
certain types of income with preferences, exclusions and 
credits, tax expenditures, have blossomed. Many of these tax 
expenditures, just like the direct expenditures, are worthy. 
They serve a sound public policy and deserve our support. But 
some of them represent as much waste as any direct spending 
program.
    I am not going to give you any tough questions. I just want 
to raise the same one that I raised with you last March when 
you, quote, agreed wholeheartedly with me about my concern that 
we needed a greater focus on the budget with tax expenditures. 
But as I look at the section of your budget this year on 
evaluating tax expenditures, it simply copies the same 
meaningless language that the Bush administration budgets used 
without crossing a T or dotting an I. There is no 
recommendation for a limitation of tax expenditures. There is 
no plan for substantive evaluation. How are we ever going to 
get our budget in balance if wasteful tax expenditures grow 
without restraint?
    Mr. Orszag. Mr. Doggett, as I said before and as I will say 
again now, I fully concur that tax expenditures are worthy of 
scrutiny and are an important part of the fiscal problem that 
we face.
    Where I guess I would part company with you is--I am just 
doing a quick calculation in my head--we have almost a half-
trillion dollars in reduced tax expenditures contained in this 
budget. Limits on itemized deductions, elimination of fossil 
fuel subsidies delivered through the Tax Code, elimination of 
special tax preferences for corporations involving 
international activities get you to almost a half a trillion 
right there, and I think the list could continue. So I look 
forward to continuing to work with you on the more important 
issue----
    Mr. Doggett. Thank you. I appreciate that. I am referring 
specifically to Appendix A, where you outline what the 
challenge is, but you don't do anything to provide the kind of 
evaluation and substantive review of those tax expenditures 
that we need.
    As far as what you proposed on international tax avoidance, 
as I read your proposals, after the administration made a very 
compelling case for action last year, after President Obama 
even as recently as the State of the Union and his presidential 
radio address said he was in favor of closing unwarranted tax 
loopholes that reward corporations from sheltering their income 
or shipping jobs off-shore, all that this budget does is reduce 
the amount of revenue that we expect to get from international 
tax avoidance proposals by 40 percent from what you had last 
year. And last year, once the budget was announced and his 
speech was given, I didn't see any action by the administration 
to try to secure any of those proposals and turn them into law.
    Let me ask specifically in the remaining minute about your 
job tax credit. Because if we are going to borrow money to try 
to stimulate jobs, I know we want to be sure that we actually 
stimulate jobs that wouldn't have been created anyway. And I 
think this jobs tax credit talks a little better than it walks.
    You are well aware that Congress rejected this proposal 
last year in the stimulus; that while the Congressional Budget 
Office has had some good things to say about it, it noted that 
the credit would not be very effective in the industries and 
regions that are hardest hit because it does not provide an 
incentive to maintain employment at firms that have been 
contracting. You are aware that a wide range of tax experts say 
that this proposal only encourages firms to do what they would 
have done anyway, in most cases. And that is especially true of 
this one since you apply it retroactively, not to the date of 
enactment. Other economists have questioned whether it doesn't 
have the effect of distorting the market and rewarding some 
firms at the expense of their competitors.
    Can't we do better than this jobs tax proposal? And isn't, 
if we are to have one, the proposal that Senator Schumer has 
advanced that is much less costly a much better way to do it?
    Mr. Orszag. Well, we are open to other suggestions, and 
Senator Schumer and others have put forward similar ideas. We 
think the approach that we have set forward is an attractive 
one, consistent with the CBO analysis. And I guess what I would 
say is it is targeted to small businesses because small 
businesses play a crucial role in economic activity.
    You are right that some of the assistance provided will go 
to small businesses that would have hired workers or increased 
wages anyway, but I am not sure that is altogether necessarily 
a negative thing. Even in those cases--and, again, the purpose 
is to induce more hiring and induce additional wage increases. 
But even when it doesn't do that, it is injecting additional 
cash into small businesses, and that will help to alleviate the 
liquidity crunch that many small businesses face.
    Mr. Doggett. You say it is targeted, but it is all 
businesses that get this. This is not----
    Mr. Orszag. Yes, but, as you know, there is a cap. That 
means that it will go disproportionately to small businesses.
    Mr. Doggett. Right. Thank you.
    Chairman Spratt. Mr. McHenry?
    Mr. McHenry. Thank you, Mr. Chairman.
    Thank you, Dr. Orszag, for being here.
    Is this budget sustainable?
    Mr. Orszag. I would say the fiscal course--and consistent 
with the earlier thought, let's try to avoid pointing fingers. 
But both the fiscal course we were on and the fiscal course 
that we remain on over the long term are not fully sustainable. 
And that is one reason why, frankly, we need to work together, 
including through a fiscal commission, to address the problem.
    Mr. McHenry. Absolutely. So, if you are testifying in 6 
years, let's just say we are having this hearing----
    Mr. Orszag. Let's hope not.
    Mr. McHenry. Well, let's just say, all right?
    Mr. Orszag. Okay.
    Mr. McHenry. Hypothetical, because I don't want to be 
sitting here in the minority in 6 years, looking at you as the 
budget director, unfortunately. Maybe Secretary of the 
Treasury.
    But, anyway, if we are sitting here 6 years from now and we 
have acted according to this budget you have proposed, what 
would interest rates look like? Would we be in a fiscally sound 
position? Or would we have just major tremors in the economy, 
in terms of high interest rates and things of that sort?
    Mr. Orszag. Look, what I would say is, right now, the most 
immediate problem that we face is that weak job market. As we 
go out over time--and, by the way, that very weakness means 
that private borrowing has collapsed. And it is one reason why, 
despite the elevated deficit, which even Mr. Ryan will admit 
traditional, mainstream economists believe helps to mitigate 
the economic downturn, that despite that, long-term interest 
rates are very low. The 10-year bond is yielding less than 4 
percent today precisely because private borrowing has collapsed 
and, therefore, Treasury securities are relatively attractive.
    As you go out over time and private borrowing picks up, 
that situation will gradually reverse itself. And we need to 
get ahead of that problem, which, again, is why we need 
additional out-year deficit reduction to avoid the risk that 
interest rates spike sometime in the future.
    Mr. McHenry. Well, let's just be honest. I am in support of 
a commission that would actually look at entitlement reform and 
spending reform in a real way. I have a bill to that end. The 
only difference between my bill and what the administration is 
proposing is I say we have to take tax increases off the table 
and new taxation off the table and look at the spending side of 
this equation.
    Are you willing to do that?
    Mr. Orszag. Well, look, we have put forward what we believe 
is the right approach on both spending and revenue. But the 
fact of the matter is we need to let the commission do its 
work, and we think it would be premature to start taking things 
off the table at this point.
    Mr. McHenry. Are you concerned that the bond vigilantes are 
going to take hold and realize that this administration isn't 
serious, that this commission isn't very serious, that there is 
no binding nature to us having a vote on these reforms 
proposed?
    Mr. Orszag. And can I comment on that? Because there has 
been much----
    Mr. McHenry. Yes, it is a question.
    Mr. Orszag. Thank you. There is a difference between the 
statutory commission and the executive order commission. There 
is a difference, and we would prefer a statutory commission, if 
possible.
    Mr. McHenry. So would I.
    Mr. Orszag. But I think that commission has been 
exaggerated. Look, you have to realize, the structure of all 
these commissions involve a supermajority vote within the 
commission itself to report out a recommendation. That is the 
key challenge. If that actually were accomplished, the 
difference between a statutory guarantee of a vote and Senator 
Reid and Speaker Pelosi making a commitment that there will be 
a vote, which they have done, seems to me much less important.
    The real question, and returning to the earlier comment 
about working together and finding solutions, is, will you 
succeed in getting the commission on a bipartisan basis to 
actually report out a recommendation? And, if you do, I think 
that means that we have recognized the severity of the problem 
together and we are then able to move forward. And the strength 
of voting guarantee is much less important despite all the 
attention that it has received today.
    Mr. McHenry. Okay, but to address the real issue, do you 
have concerns about high interest rates in the out-years under 
a budget such as the one being proposed?
    Mr. Orszag. One of the reasons that we are calling for not 
only the $1.2 trillion in deficit reduction we have put forward 
but also a fiscal commission, which will have to take difficult 
steps, is precisely to avoid that risk.
    Mr. McHenry. So the answer is yes?
    Mr. Orszag. It is a motivation to try to act before the 
problem arises, yes.
    Mr. McHenry. Okay. Well, I certainly appreciate--you have 
always been very forthcoming with this committee, both in your 
service to the Congress and now in your service to the 
President and our country, and I appreciate that.
    My concern, to be very straightforward, is, you know, if 
cheap lending and high spending were the answer, then the last 
decade would equal unrivaled prosperity in the current decade. 
It didn't. We had a tech bubble that, with low interest rates, 
led to the subprime bubble. We are now paying for the subprime 
bubble. And, as a result, we are actually going to create a new 
bubble with Federal spending, and this will be the Obama bubble 
that generations are going to have to pay for.
    So, with that, I yield back.
    Chairman Spratt. The gentleman yields back.
    Mr. Berry?
    Mr. Berry. Thank you, Mr. Chairman.
    Thank you, Dr. Orszag. I know you have the easiest job in 
government, but we do appreciate you and appreciate the way you 
do it.
    I am most disturbed. I found myself a few minutes ago 
listening to my good friend and colleague from Idaho and 
agreeing with him, and I probably won't sleep good for weeks.
    I have a friend in Arkansas that likes to say he hasn't 
heard that much trash since he went to Western Auto and bought 
a $3 radio. Some of the comments around--we all agree we don't 
need to be pointing fingers at each other, but then we go right 
back and do it again.
    I just want to say this: If we don't come together and deal 
responsibly with these problems--and to talk about trying to 
solve these problems and leaving taxes off the table, to talk 
about solving these problems and leaving reform of the health 
care system off the table, I don't think it is possible to do 
that. And everything has to be on the table if we are going to 
do it.
    And we are going to all or at least a majority of us are 
going to have to come together and put forth the best ideas 
that are available and then do something about it, and I think 
that is what you all are trying to do. Goodness knows, we have 
needed to do it for a long time. We do know that we can do it, 
because we did it in the Clinton administration.
    So, having said that, I will yield to someone that has got 
something more intelligent and a lot more technical questions 
that you will enjoy answering a lot more.
    Thank you.
    Mr. Orszag. You seem pretty wise to me.
    Mr. Simpson. I thought your remarks were very enlightening.
    Chairman Spratt. Mr. Campbell?
    Mr. Campbell. Thank you, Mr. Chairman.
    Thank you, Dr. Orszag.
    So, because of this budget, every year it has deficits in 
excess of 3 percent of GDP, it is not sustainable, in your 
view, correct?
    Mr. Orszag. Deficits above 3 percent means that debt 
continues to rise as a share of the economy. And that is why we 
need, in addition to the steps that we have put forward, a 
fiscal commission to get the rest of the way there.
    Mr. Campbell. Okay. What does ``unsustainable'' mean?
    Mr. Orszag. Well, one way of interpreting it is that debt 
is rising as a share of GDP.
    Mr. Campbell. But what are the consequences of that? What 
bad things happen?
    Mr. Orszag. Ultimately--and, again, we are still in a 
situation where Treasury securities are the safest in the 
world. And we have time to act, but we need to get ahead of the 
problem and get ahead of the risk. The risk is that, 
ultimately, when you are on an unsustainable course, interest 
rates will spike, and that will impede economic activity and 
harm the very job creation that we are trying to spur.
    Mr. Campbell. Okay. That is what I thought. But if you look 
at the budget as it goes out, despite the fact that the 
deficits are around 4 percent of GDP as they go out, GDP growth 
is healthy. You project it at 5 percent. Inflation low; you 
have it at 2 percent. And interest rates are under control; you 
have the 10-year Treasury at 5.2 percent on average, which 
means real interest rates are roughly 3 percent, 10-year real 
interest rates of roughly 3 percent. I mean, that is all really 
good, you know, economic metrics, generally.
    So if you are going to have this high deficit, shouldn't 
those interest rates be shown as higher in those later years?
    Mr. Orszag. Well, we do--we, again, based on economic 
modeling, show an increase in interest rates that reflects not 
only a recovery of private borrowing but also some effect of 
higher debt as a share of GDP. I would note, CBO's projections 
are not altogether dissimilar in terms of economic activity, 
interest rates, and what have you.
    The issue is not what the central projection is, because 
that is, I think, in line with what our projections suggest. 
The issue is, either after 2020 or even before then, is there 
some risk that the situation can deteriorate, and do you want 
to get ahead of that? And the answer is yes.
    Mr. Campbell. Okay. But, clearly, the deficit would be 
worse than projected if GDP was less than 5 percent or interest 
rates were higher.
    Mr. Orszag. And vice versa, yes.
    Mr. Campbell. Right. Okay. All right. I guess the question 
I have, Dr. Orszag, is that, even with those I think fairly 
optimistic projections, that this budget doesn't work. I mean, 
when you say it is unsustainable, when you say it is--and it is 
not just you saying that. And, to your credit, you have been 
intellectually honest. You said that when you were CBO 
director; you are saying it today. The current CBO director 
says it, Brookings Institute says it, Heritage says it, CATO 
says it. Left, right, center, everybody agrees.
    Why would the President submit a budget that doesn't work?
    Mr. Orszag. Well, look, now I do have to just go back to 
the context again for a second, which is: This budget reduces 
the deficit by more than a trillion dollars. We have said that, 
despite that significant deficit reduction, we don't get to 
where we need to be, which is why we need a fiscal commission.
    So the comments about unsustainability is if the fiscal 
commission doesn't work. We are hoping it will, and we need 
your help to do so.
    Mr. Campbell. Okay. Got it. So this doesn't work, and you 
are saying the fiscal commission will come up with something to 
get it to work.
    Congressman Ryan, who is just one Congressman in the 
minority from Wisconsin, who is not here right now, has a 
proposal which you may disagree and many of you may disagree 
with the policies in it, but which, by your admission, fixes 
this. It works, it is credible, and fixes it. One guy, one 
minority Congressman did that.
    The President can't make a similar proposal? I mean, 
clearly with different ideas, but he needs a commission to tell 
him what to do? The President can't come up with his own idea 
or make a suggestion on how to make a sustainable budget? He 
has to punt it to a commission, when one single Congressman 
from Wisconsin has one that everyone agrees actually does work, 
even if you don't like the policies that are in it?
    Mr. Orszag. But it is not what--look, the policies are a 
dramatic shift. I mean, eliminating the Medicare program would 
solve the long-term fiscal problems, so----
    Mr. Campbell. I understand that. Granted. Dr. Orszag, I 
will give you all that. Granted. You may hate his proposal, but 
they work. So propose some that you don't hate that work. Why 
doesn't the President do that, instead of saying, ``I don't 
know what to do here. We will give it to a commission, and they 
will figure it out''?
    Mr. Orszag. Look, we have put forward $1.2 trillion in 
deficit reduction. To get the rest of the way there is going to 
require bipartisan support. I don't think Mr. Ryan's proposal 
would get anywhere near to bipartisan support. I am not even 
sure the majority of your caucus will support it.
    So, just putting out ideas is what I used to do at 
Brookings. That is the easiest thing in the world. We need to 
move toward a situation in which, together, we actually come up 
with something that can be enacted.
    Mr. Campbell. Okay. Well, you can't do something together 
unless somebody gives a place to start. Congressman Ryan has 
done that. It would be nice if the President did that, too.
    Chairman Spratt. Mr. McGovern?
    Mr. McGovern. Thank you, Mr. Chairman. I apologize. I have 
laryngitis. I want to try to be brief here.
    I want to thank you for being here, Dr. Orszag. I don't 
admire your job of having to clean up the mess that you 
inherited, but I think that this budget reflects an important 
start in the right direction.
    Let me ask you three questions. First of all, the 
Republicans have asserted that the freeze on non-security 
discretionary spending proposed in your budget follows an 84 
percent increase in spending in that category. Do you agree 
with that assessment?
    Mr. Orszag. No. Let me be very clear about this. In 2008, 
spending in this category of the budget was $408 billion. It 
increased in fiscal year 2009 because of the Recovery Act. 
Then, in 2010, it was $447 billion. So that bump-up was gone. 
And that is the level, as you can see in our tables, that is 
the level at which we freeze non-security spending. And, in 
fact, it is lower than that in 2011.
    So, to argue that we are freezing off of this grossly 
inflated base is just factually inaccurate.
    Mr. McGovern. Thank you for clearing that up.
    My next question involves war spending. Ms. Kaptur earlier 
asked you about the cost of the wars, and I guess I want to go 
one step further, and that is the cost of these wars and the 
impact on the deficit.
    The fact is that I want to give the administration credit 
for putting numbers in the budget that I think reflect the 
reality of what war spending is. I happen to disagree with the 
administration's policy on Afghanistan, and I disagree with the 
previous administration's policy on Iraq. But there is one 
indisputable fact, whether you are pro or con these wars, and 
that is they cost an awful lot of money and they are not being 
paid for.
    I would be curious to hear your assessment on the impact on 
our deficits, as well as whether or not the administration 
would consider a proposal to actually pay for these wars, which 
is something that some of us have been suggesting for quite 
some time.
    Mr. Orszag. Well, again, the spending on the war in Iraq 
and Afghanistan is contained within an overall budget that 
achieves this $1.2 trillion deficit reduction. So, from that 
perspective----
    Mr. McGovern. If we actually paid for them--I mean, some of 
us have proposed a war tax, which got shot down in a bipartisan 
way. But if there was such a revenue source, I mean, it would 
clearly reduce----
    Mr. Orszag. It would reduce the deficit further----
    Mr. McGovern. Right.
    Mr. Orszag [continuing]. If you had some additional revenue 
source, yes.
    And I think, as I may have already mentioned earlier, the 
administration's budget for fiscal year 2011 includes $160 
billion to fulfill the national security needs the President 
has identified associated with the wars in Iraq and 
Afghanistan.
    Mr. McGovern. I appreciate that. It is just that, when we 
propose a dollar increase in education funding or a dollar 
increase in health-care spending, we have to offset it. When it 
comes to the war, it seems that we don't have to worry about 
what it costs, when I think we should. World War II, we had a 
war tax; even during the beginning of Vietnam.
    But, anyway, I raise that because I do think, in addition 
to costing us dearly in terms of the lives of our soldiers, it 
also is costing us a great deal in terms of our treasure. And I 
think that one of the ways to address the growing deficit is to 
address the war costs.
    Let me go to another issue, and that is, we talk a lot 
about numbers here and people throw charts up and they have all 
these statistics, but the reality is budgets are about people. 
And in the United States of America, the richest country in the 
world, we have a hunger problem and we have tens of millions of 
our citizens who are hungry, many of whom are children.
    The President, to his credit, set a goal to end childhood 
hunger by 2010. And I think that is a tough goal to be able to 
achieve, I am sad to say. But how does this budget seek to 
accomplish that goal? And what is in the budget to improve 
access to nutritious foods for those struggling to put food on 
the tables?
    Mr. Orszag. Congressman, I couldn't agree with you more. 
Look, the fact of the matter is, almost 20 percent--I think the 
latest figure was 17 percent of our children are obese, which 
is one dimension of our food and nutrition problem. On the 
other hand, 8 million families in the United States have 
children who are, quote, ``food insecure,'' which means lack 
full access to food, were hungry basically. And the President 
is committed to reducing that number to zero by the middle of 
this decade.
    So what are we doing? We have $10 billion in 
reauthorization of child nutrition programs, the school lunch 
and school breakfast and so on and so forth programs. We have 
roughly $8 billion in the Women, Infants and Children's 
program, for example. And those are the two mainstays of our 
battle to fight child hunger and improve child nutrition.
    But I would point out--and I think even today the First 
Lady was doing an announcement or an event leading this effort 
to try to address this issue. As you know, she is very focused 
on this particular topic.
    Mr. McGovern. And I appreciate that. And I wish there was a 
better understanding in government that, by not addressing the 
issue of food insecurity and hunger, especially amongst 
children, you end up paying for it in the long run. Kids who go 
to school hungry don't learn. Kids who are obese end up having 
chronic health-care issues for the rest of their life. And I 
praise the President and First Lady for what they are doing.
    I would just make one final suggestion, and that is I think 
it would be a good idea to have a White House conference on 
food and nutrition, to get everybody together and to come up 
with one comprehensive plan to be able to deal with this 
scourge once and for all.
    Thank you.
    Chairman Spratt. Mr. Jordan?
    Mr. Jordan. Thank you, Mr. Chairman.
    Let me thank you, Director, for joining us today. I have 
one broad question, a kind of general question, and then one 
more specific.
    Let me just start with this: I am convinced the American 
people get it, and I don't know if it was Congressman Ryan or 
who said earlier, they don't really care who is to blame for 
the situation we are in. One side says it is George Bush and 
you inherited this. I understand some of that. We said some of 
the charts that Representative Hensarling put up, the amount of 
spending that has happened in the last 3 years and in the last 
year has been just unbelievable.
    But the American people get it. They know instinctively 
that we can't continue doing what we are doing. Several news 
sources talked about this budget, increased taxes, increased 
spending, increased borrowing. Americans understand you can't 
keep doing that. They understand you can't have deficits 
running at 10 percent of GDP, deficits averaging close to a 
trillion dollars over the next 9 years. They get that.
    So the general question is, I think they want to know, what 
can you say to the American people about when they see this, 
they see the broad picture, what are you saying, what is the 
administration saying to them that can reassure them we are not 
on this path, as Mr. Campbell I think very appropriately 
pointed out, that is unsustainable?
    Mr. Orszag. Well, as a start, we are freezing non-security 
spending, saving $250 billion over the next decade. And that 
includes a lot of choices that I know some people don't agree 
with. You know, there are additional investments in education, 
but you can go down the tables in this budget. There are a 
whole series of departments, from the Commerce Department to 
the Interior Department and so on and so forth, that are 
declining, even before you take into account inflation. So that 
is a start.
    Now, some people say that is not enough, and we agree, it 
is not enough. That is why we put forward more than that in 
deficit reduction. Some people say even that is not enough, and 
we agree, which is why to get the rest of the way there, we 
think we need to work with you to come up with a bipartisan 
solution to that final piece to get us to where we need to be.
    Mr. Jordan. Okay. Let me ask a more specific question then. 
How much of the increase in spending we have seen over the last 
year in the stimulus package and, I guess to some degree, even 
the bailout, the TARP program, how much of that money is 
actually now built into--I know some of that was one-time, but 
how much of it is built into the baseline in the out-years?
    Mr. Orszag. Well, see, that is another point I should have 
made. In addition to the argument made about the 80 percent 
increase not being accurate, it is also a significant 
accomplishment. Because I think one of the fears when the 
Recovery Act was enacted was that all the discretionary 
spending would be built into the base and perpetuated over 
time.
    Mr. Jordan. My question is how much?
    Mr. Orszag. I am saying the non-security freeze means that 
is not happening. In fact, by the end of the freeze, by the end 
of the freeze, spending in non-security agencies will be below 
the baseline from 2008 projected forward. So that is perhaps 
the cleanest comparison. Forget about the Recovery Act. Forget 
about everything that happened since 2008. Take spending then, 
look at the baseline. By the end of the freeze, we are below 
that.
    Mr. Jordan. Let me just be clear then. None of the $787 
billion in the stimulus package passed last February is built 
into any baseline going forward? Is that an accurate statement 
or not?
    Mr. Orszag. In aggregate--let me just be clear. I am sorry 
to get technical, but there is no budget authority provided by 
the Recovery Act in 2010 in the discretionary budget. Our 
freeze is off the 2010 discretionary levels in terms of budget 
authority, and therefore my statement holds.
    Mr. Jordan. Okay.
    Thank you, Mr. Chairman. I yield back.
    Chairman Spratt. Ms. Tsongas?
    Ms. Tsongas. Thank you, Mr. Chairman.
    And thank you, Dr. Orszag. I think that we agree that 
President Obama inherited a very challenging situation, and 
Doug Elmendorf, the head of CBO, last week testified of the 
extraordinary impact of the recovery package. And we could be 
in quite a different place without that very bold effort to 
stop the job loss.
    But we also know that unemployment or employment is a 
lagging indicator. And I happen to represent some communities 
that have been very, very hard hit. One community, in 
particular, has 18 percent unemployment. Another one hovers 
around 12 percent. It kind of goes up and down a little bit, 
but basically it remains unchanged. So I applaud the efforts 
that the President has proposed in the State of the Union 
Address and that we see in the budget here today.
    But I am wondering, do you have benchmarks in place? Are 
you going to be able to assess whether or not these initiatives 
are working? I have had a proposal out there that we need to do 
some direct job creation, that the Federal Government needs to 
get engaged around direct job creation, particularly targeted 
to communities that have been particularly hard hit, and we 
don't see a lot of that kind of discussion today.
    So I am wondering if that was ever on the table, if there 
is ever a point at which you say these tax credits are not 
having the impact we need, especially in those parts of the 
country that are just dealing with extraordinary circumstances?
    Ms. Kaptur. Will the gentlelady yield? I wish to associate 
myself with her remarks 100 percent. Thank you.
    Mr. Orszag. While we were evaluating different ways of 
trying to attack this problem of a weak labor market, we 
evaluated a whole series of proposals. So I am not going to go 
into full internal deliberations, but rest assured that there 
were a wide array of options that were scrutinized, evaluated, 
before coming to the conclusion that we should focus where we 
did.
    And I would just come back again and say, do not forget 
that the Recovery Act--because of the Recovery Act, there are 
1.5 to 2 million people today that would otherwise be 
unemployed who have jobs. It is a huge accomplishment. There is 
more that needs to be done. The unemployment rate is too high. 
The jobs deficit, reflecting the job losses that have occurred 
since December 2007, is a hole that needs to be filled in. But 
it would be substantially worse without the Recovery Act.
    Ms. Tsongas. But with these tax credits, are you going to 
look to a specific number of jobs created on a month-to-month 
basis in order to say, this is working, this isn't? We really 
need to revisit it and come up with something that is more 
targeted to communities that have been particularly hard hit.
    Mr. Orszag. I think we would welcome the additional kind of 
transparency and evaluation that has been built into the 
Recovery Act into additional jobs efforts, if the Congress also 
agrees that that would be worthwhile.
    Ms. Tsongas. Because as I talk to my colleagues on the 
floor who come from similar kinds of districts where we do see 
this extraordinary effort--and I applaud the administration for 
the Recovery Act, because I have seen in my district job after 
job that has been saved as a result of it, money spinning out 
into the private sector, primarily through the grant process, 
to begin to jump-start, for example, clean energy jobs. I think 
these tax credits for new hires are important. But there is 
still just this one element of our society that has been 
particularly hard hit and where we may need to do something 
more direct and get the government directly engaged.
    Thank you. I yield back.
    Chairman Spratt. Mrs. Lummis?
    Mrs. Lummis. Thank you, Mr. Chairman. I would like to 
submit an opening statement. It has to do with the history of 
the Federal Abandoned Mine Lands program.
    [The prepared statement of Mrs. Lummis follows:]

   Prepared Statement of Hon. Cynthia M. Lummis, a Representative in 
                   Congress From the State of Wyoming

   reauthorization of the federal abandoned mine lands (aml) program:
                            a brief synopsis
    In 1977, when the Surface Mining Control and Reclamation Act was 
passed, a tax was levied against every ton of coal produced to help 
clean up coal mines that were abandoned before reclamation laws 
existed. Half of that tax was promised back to states where the coal 
was produced, and the other half went to the federal government to run 
the Abandoned Mine Land (AML) program and direct more money to the 
states with the largest reclamation needs (primarily historic 
production states in the eastern U.S., such as Pennsylvania and West 
Virginia).
    Unfortunately, money that was promised to Wyoming and other 
certified states and tribes was not sent back to those states and 
tribes. In addition, the majority of money that was intended to be used 
for reclamation purposes was not sent to states with reclamation needs. 
Instead of on-the-ground projects, collected AML funds were kept in 
Washington, DC to be spent on unrelated federal programs or used to 
make budget numbers look better.
    Over the years, Members attempted to pass legislation to reform the 
program, but each time the needs of one group were taken care of, 
another group objected. In 2006, the Wyoming delegation worked with a 
bipartisan group of coal-state members including, Reps. Nick Rahall and 
John Peterson in the House, and Senators Jay Rockefeller, Max Baucus, 
Robert Byrd, Arlen Specter, and Rick Santorum among others to get the 
outside interests on board.
    The coal companies agreed to continue paying the tax if it was 
slightly reduced. The United Mine Workers of America (UMWA) agreed to 
support reforms to the program in exchange for continued help with 
health benefits of orphan miners whose companies had gone bankrupt. 
Uncertified states like West Virginia and Pennsylvania agreed to 
support changes if there was a guarantee that they would receive 
additional money to clean up abandoned mines, and certified states like 
Wyoming agreed to support the reauthorization if there was a guarantee 
that they would receive the money that they had been statutorily 
promised.
    The legislation began receiving serious consideration during 
consideration of the Pension Protection Act in 2006 and was passed by 
the House on a tax extenders measure that fall. However, that tax 
extenders measure failed to achieve cloture in the Senate because of 
unrelated provisions (primarily the inclusion of a death tax measure) 
and the legislation failed to move. The bipartisan group continued 
their efforts and in December 2006, passed the AML reauthorization as 
part of the Tax Relief and Health Care Act of 2006. Then-Senator Barack 
Obama voted in favor of this legislation as did current Interior 
Secretary Ken Salazar, who oversees the Office of Surface Mining, 
Enforcement and Reclamation.
    Although there have been complaints about both the Bush and Obama 
Administration's implementation of the program, there is general 
agreement among the parties involved that the program has worked well. 
Its intended goals of cleaning up more abandoned mines, returning 
statutorily promised money to states, and providing healthcare benefits 
for retired miners have been achieved.
    Contrary to the Obama Administration's portrayal of certified 
states as having cleaned up abandoned mines, states and tribes like 
Montana, Wyoming and the Navajo Nation continue to use AML funds to 
clean up high priority abandoned mines that were discovered after the 
states were certified. In addition to cleaning up as many abandoned 
mines as is feasible in a given fiscal year, states like Wyoming have 
used any remaining AML funding to move forward with President Obama's 
stated desire for clean, affordable energy through research initiatives 
and on-the-ground demonstration projects.
    In order to reach agreement on reauthorization of the AML program, 
all parties had to accept ideas that they did not strongly support. At 
the end of the day, a bipartisan group in the House and Senate came 
together, from different interests, and reauthorized the program. 
President Obama's budget request proposes to eliminate certain 
provisions of the AML reauthorization measure, thereby jeopardizing the 
larger bipartisan agreement.

    Mrs. Lummis. I just want to open by saying that an 
agreement was reached in 2006 on that program. And so, if you 
are going to open that agreement again, freeze everybody. 
Freeze the United Mine Workers' benefits, freeze the States 
from getting their money, freeze the States that are not 
certified, freeze everybody. But don't punish one person, 
because, quite frankly, Senator Obama did vote for that 
agreement, and now President Obama wants to change the 
agreement.
    So I will leave you this opening statement on that subject 
and then switch again to something that President Obama said. 
And this was last Friday. This was in a conversation with 
Republicans, and I am quoting the source here, the Washington 
Post online transcript. So this is verbatim: ``I think Paul 
Ryan has looked at the budget and has made a serious proposal. 
I have read it. I can tell you what is in it, and there are 
some ideas in there that I would agree with.'' And then he went 
on to say, ``But there are also some ideas I don't agree 
with.''
    He did say this: Quote, ``The major driver of our long-term 
liabilities everybody here knows is Medicare and Medicaid and 
our health-care spending. Nothing comes close. Medicare and 
Medicaid, a massive problem down the road. That is where it is 
going to be what our children have to worry about.''
    The reason, I would contend, that I am here in the minority 
is that Republicans ignored the American people when the 
American people said we are really concerned about 
overspending. And I would contend that if we don't get a handle 
on spending that the Democrats who are now in the majority are 
going to earn the minority, just the way the Republicans earned 
the minority.
    I don't want to be here fighting over this in 6 years, with 
you as budget director, going back and forth about the same old 
things we have been talking about today. I really want to solve 
these problems. I don't want to be old and be a former Member 
of Congress who sat and fought over things that we knew we 
could solve and we refused because we were too dug in, being 
partisans.
    So, I want to tell you, I really do want to work with the 
administration or anybody who is willing to have a serious 
conversation about entitlements. That is--and the President 
acknowledged it--the only way to really get a handle on our 
budget problems and get to budgets that are sustainable and to 
do something responsible for our children and grandchildren.
    So, with that caveat, I would say, is there anyone who has 
a proposal that is an alternative to Mr. Ryan's proposal that 
we could all sit down and work on while we are here convened as 
a Congress? Do you know of a proposal out there, Mr. Orszag?
    Mr. Orszag. I am not aware of a proposal that would 
involve--I am going to come back to the same point, which is 
that Representative Ryan's plan works because it shifts 
substantial costs and risks to individuals. I am not aware of 
any other plan that achieves either of those, either the 
reduction in cost to the Federal Government or the substantial 
shifting of risk to individuals. And it would be a very 
dramatic shift from the system that we have today in which 
individuals would face much larger risks than they do in the 
current environment.
    Mrs. Lummis. And is it fair to say Mr. Ryan's proposal 
shifts that risk only for people under 55 years of age, so they 
would have a chance to prepare?
    Mr. Orszag. Yes, but I don't think that is something you 
can actually fully prepare for.
    Mrs. Lummis. Does any Democrat in the House have a 
counterproposal to Mr. Ryan's?
    Mr. Andrews. Will the gentlelady yield?
    Mrs. Lummis. I will.
    Mr. Andrews. On November 7th, the House voted for a bill, 
which all of you voted against, that had, I believe, $480 
billion in Medicare and Medicaid reductions that were done 
through eliminating things like Medicare Advantage or phasing 
them out, making changes to payments to hospitals and other 
health-care providers.
    Now, you may quarrel with how the money was spent on 
covering people. But I would ask the gentlelady, if that were a 
freestanding bill, just those cuts, would you vote for them?
    Mrs. Lummis. Mr. Chairman, I can tell you honestly, I don't 
know. And the reason is because they weren't freestanding; we 
didn't get to discuss them.
    Mr. Andrews. But if they were?
    Mrs. Lummis. And, Mr. Chairman, I would assert again, I 
don't know. The problem that I saw with what you were proposing 
there on health care is that it would affect people that are 
currently retired. And Mr. Ryan's bill doesn't affect anyone 
who is currently retired.
    Ms. Schwartz. If the gentlewoman would yield, the 
Republicans did, at the point when we were voting on health-
care reform, also present an alternative to Mr. Ryan's 
proposal, which was spending $60 billion, insuring very few 
Americans, and actually raising the number of uninsured 
Americans to about 52 million. I think you did vote for that 
alternative. So you already did vote for an alternative to Mr. 
Ryan's proposal yourself.
    I don't know for sure, but I would just point out to the 
gentlelady that you did actually have an alternative to Mr. 
Ryan's proposal that actually did increase costs for taxpayers 
that increased the number of uninsured Americans.
    Chairman Spratt. The proposal before us is the President's 
budget. Bear in mind that the President's budget takes a 
deficit of $1.556 trillion and reduces it to $727 billion over 
a period of 4 years. It cuts it in half.
    The biggest entitlement that we must contend with is not 
Medicare, it is not Medicaid, it is interest on the national 
debt. It is truly obligatory. It cannot be manipulated. It has 
to be paid. And by bringing the debt down by that much in that 
period of time, they have contributed to a diminution, at 
least, of the debt service burden that is going to burden our 
future for years to come.
    So, is that a complete proposal? No. But the proposal is 
that it will go until we have alternate recommendations from 
the bipartisan commission. So, in the meantime, we are doing 
what we can, given the recovery, to reduce the deficit and to 
avoid any greater accumulation of debt services.
    Now we have to move on with our questions. Mr. Etheridge?
    Mr. Etheridge. Thank you, Mr. Chairman.
    Dr. Orszag, thank you for being here.
    Just for the record, I was not here when Congress took the 
first big vote in the early 1990s to start down the road to 
balance the budget. I did vote in 1997, in my first year here, 
to take the final step, because it really was a two-stage step, 
as you remember. There were a lot of Members on our side who 
did not vote, but I was one who did, because I think it is 
important to move toward a balanced budget, to get our house in 
order, that that is what we are about today.
    But let me ask you a question on something else where my 
friend from Texas and I are probably going to differ on: 
credits for hiring. Because I was in manufacturing years ago, 
and we used it in the 1970s when it came out.
    I introduced a number of weeks ago H.R. 4437, the Hiring 
Act of 2010, that really does a lot of what the President has 
talked about in his State of the Union and is now before us.
    Last quarter, we saw economic growth of about 5.7 percent, 
I think is pretty close to where the number was, and it looks 
like the economy may be turning around. But for businesses and 
the economy in my State of North Carolina, we just got numbers 
of 11.2 percent statewide unemployment numbers, and counties in 
my congressional district are roughly 15 percent. They aren't 
recovering yet.
    So my question to you is, as we look at these incentives 
for hiring that are in the budget, roughly $33 billion in job 
tax credits that are proposed to be created, that are designed 
to help job creation, how many jobs does the administration 
assume that this will create? I recognize that, in the bill I 
introduced, it capped at 50,000. I am not sure what the 
proposal is by the White House. But how many are we looking at 
in the first window of opportunity?
    Mr. Orszag. I think Christy Romer answered yesterday that 
we have not undertaken a formal analysis of the jobs associated 
with that particular proposal. As the jobs bill all together, 
all in, takes better shape, perhaps some estimates would be 
forthcoming.
    I would just again note, though, if you look at CBO's 
analysis of the biggest bang for the buck, this type of 
approach seems to rank pretty well.
    Mr. Etheridge. I know in the budget we did, my bill does it 
in two stages, so it is more generous. But I think they were 
looking at 3 million the first year and then 2-something the 
second.
    As an economist, do you believe that this is an effective 
use of a way to put Americans back to work?
    Mr. Orszag. Yes.
    Mr. Etheridge. And let me just add one more piece so you 
can answer it together. How do we balance this kind of thing 
with what we are really talking about--and I think all of us 
want to get to the same purpose, the administration, Members of 
Congress, both sides of the aisle--to get back toward getting 
our budget back in balance over the long haul?
    Mr. Orszag. Sure. Let me answer the first question first. 
Economic activity has gone from big negative to more than 5 
percent growth, and so GDP growth has turned around.
    The issue now is that what typically happens as GDP 
recovers, first you have rapid productivity growth. That is 
what we have seen over the past couple of quarters. Then firms 
start relying more on temporary help and expanded hours among 
existing workers. And then only, finally, do you get increases 
in employment itself.
    We are somewhere into the second and hopefully quickly 
moving into the third stage of that process. But what we are 
trying to do is collapse them so that we can have GDP growth 
and job growth more closely linked. And something like a jobs 
credit can help jump-start employment among firms that are 
seeing their prospects begin to turn around but might be a 
little reluctant to hire. And with the jobs credit, they go 
ahead and to it.
    Mr. Etheridge. Right. Thank you.
    Let me move to one other thing very quickly. And I will 
save one I have to ask on education for when the Secretary 
comes. This one deals with--I represent Fort Bragg and Fort 
Pope. I have a lot of military men in the service. How are we 
dealing with the out-years of the costs for VA and others, for 
a lot of these men and women who are coming back with a 
multitude of problems that are going to be long-term? We are 
going to be paying for it for years to come. Is that factored 
in the budget we are now dealing with? Because heretofore it 
was not.
    Mr. Orszag. Absolutely. There are a variety of steps taken 
under Secretary Shinseki's leadership and, frankly, even before 
you shift over to the VA, under Secretary Gates's leadership.
    As you know, the VA budget has now experienced an historic 
increase, 20 percent over the last 2 years. We succeeded in 
moving to advance appropriations, which will help secure 
funding for the VA. Secretary Shinseki is absolutely focused on 
providing high-quality care to our Nation's veterans, and the 
budget supports him in doing that.
    Mr. Etheridge. Thank you.
    And thank you, Mr. Chairman. I appreciate that.
    Chairman Spratt. Mr. Latta?
    Mr. Latta. Thank you very much for being here with us 
today.
    I would just like to follow up on what my friend and 
colleague from North Carolina was talking about. I know some of 
my colleagues here have already heard me talk about this, but I 
think I still represent the largest manufacturing district in 
Ohio--I haven't seen the new NAM numbers, though--and I also 
represent the largest agriculture district.
    As we look through the past year, with the stimulus at $787 
billion and the question now about the extra $75 billion that 
is going to be added on to that, and the people back home heard 
that they were only going to have an 8 percent unemployment 
rate, and, of course, the latest numbers U.S. were at 10 
percent--Ohio's are at 10.9 percent. I represent 16 counties, 
four of which are over 14 percent and one over 15 percent.
    So, a lot of the folks out there--and I met with my 
constituents yesterday in two different counties for over 8 
hours, meeting with a person every 5 to 7 minutes for 8 hours. 
And they are looking at what we are doing here in Washington, 
and they don't see the effects.
    And I would just, kind of, like to look at your testimony 
on page 2, and I just want to make sure I understand what you 
are talking about here. You say that more than a million small 
businesses will receive a tax cut from the latter proposal, 
which will extend a $5,000 tax credit to small business for 
every new job--every new job.
    Again, I think that you have kind of pointed it out, a lot 
of places have cut back. But in our areas, not only have we had 
massive unemployment cuts right now, or employment cuts I 
should say, but we have also had the same situation that, you 
know, we have a lot of plants working people at 32 hours. So I 
have talked to these people constantly across my district, and 
the first thing they want to try to do is get their people back 
up from 32 hours to working full-time.
    Then the plants that are still out there holding on by 
their fingernails are saying, you know, what we are going to 
do? We will hold at where we are right now and see how long we 
can go with the same employees.
    What will this $5,000 tax credit do for those businesses?
    Mr. Orszag. Sir, in particular, business that are not 
expanding their hiring but will expand their hours for 
existing----
    Mr. Latta. Right.
    Mr. Orszag [continuing]. That is one of the key reasons why 
it is not just a jobs but jobs and wages tax credit. Basically, 
what will happen is, as long as you expand your Social Security 
payroll, which you would if you increased the number of hours 
worked for an existing employee, you would also be eligible for 
a tax credit.
    So we can walk with you through the details, but the logic 
is precisely to get at the types of firms that you are 
discussing. And not only that, but, frankly, even for firms 
where the workers are already working 40 hours a week, to 
induce an increase in wages paid and provide some tax 
incentives for small businesses to do that too.
    Mr. Latta. So as long as they have an increase in their 
Social Security tax per the employee that is already employed--
--
    Mr. Orszag. Their aggregate Social Security payroll, 
correct. That would happen if workers at the same wages work 
more or at the same hours earned more.
    Mr. Latta. Okay.
    Let me ask this question. Because of the number of 
employees that have been added recently on the Federal side, 
does this budget look at reducing the Federal payroll at all? 
Because, again, when we have looked across our districts, you 
know, we have had, I am sure everyone has had their employers 
say, ``What has the Federal Government done to reduce, as we 
have made massive cuts to try to save ourselves right now?''
    Mr. Orszag. There has been an increase in the Federal 
workforce over the past several years, mostly in the Department 
of Defense, the Department of Homeland Security, the Department 
of Veterans Affairs, and so on and so forth. As you know, also 
there is an historically low wage increase for Federal workers 
built into this budget, along with a freeze for the top-level 
presidential appointees.
    And in terms of the Federal workforce, there is a chart 
that is in the analytical perspectives on page 99, and then 
there is a table somewhere there, a table on page 107, that 
just provides the total. You can see the total executive branch 
civilian employment actually does decline from 2010 to 2011 
under this budget.
    Mr. Latta. How much of an increase have we seen for total 
Federal employment going up in the last, let's say, 2 years 
going forward, the last year that you just cited?
    Mr. Orszag. There were significant increases between 2007 
and 2008. I don't have them right in front of me, but I can get 
those to you.
    Mr. Latta. I appreciate it.
    Thank you, Mr. Chairman. I yield back.
    Chairman Spratt. Ms. McCollum?
    Ms. McCollum. Thank you, Mr. Chairman.
    I believe everything should be on the table--tax cuts, 
spending, what is going to happen in the out-years with 
entitlements--because we really do need to get things under 
control. But I am alarmed when I hear the discussion being that 
the tax cuts can't be looked at, can't be reviewed, but we need 
to address what happened with spending, especially the spending 
in the Recovery Act.
    Now, I don't think it was a bad idea, when our school 
districts all across our States were cutting education dollars, 
that the Federal Government stepped in and helped our most 
vulnerable children with Title I--Title I, children who are 
eager to read but need that extra push, need that extra help. 
Because we really don't want to leave our children behind. I 
truly believe that we don't want to do that.
    Or with IDEA, special education, students who, through no 
fault of their own, through no fault of their own, struggle to 
learn, to become more self-sufficient and to be product members 
of society as they grow up.
    And I don't think it is wasteful to help our cities at a 
time of financial crisis when States are cutting back, to make 
sure there is police on the streets and first responders with 
fire trucks are able to respond to fire calls.
    Just last Friday, I was in a suburban part of my district. 
I was in White Bear Lake. And let me tell you, folks, the bear 
is looking a little skinny. I went to food shelves, where 
people who used to volunteer are now recipients. I went to 
Meals on Wheels programs, where we see more seniors now because 
of the doughnut hole that is still out there, that we need to 
fix, which we are trying to fix in the health care bill, are 
still struggling at times between food and medicine. And I 
heard from early preschool educators, as well as other school 
officials, that they are very concerned about the food 
insecurity that students face on the weekends and will face 
again this summer.
    Then, most importantly, I met with Jay--and I probably have 
permission to use his full name, but I am only going to use 
``Jay''--a man who helped build the 35 bridge after it 
collapsed, worked day and night in bitter cold and hot summers, 
who has now been laid off. He has been looking for a job. And 
without the extension in unemployment insurance, without the 
help with COBRA, his children, his two daughters, would not 
have health insurance provided by their father, they would not 
have a roof over their head. And right now he is very fearful 
of unemployment extensions running out until he finds a job and 
possibly see his house go into foreclosure.
    So, to me, this is not foolish spending. This is not 
saying, ``You are on your own, society.'' This is us coming 
together collectively to help one another in a great time of 
need.
    Now, I know that when we were facing this crisis and 
putting together responses, that maybe we have learned that we 
can do a better job in providing the responses that still need 
to be out there until the economy fully recovered.
    So I would like to ask you, Doctor, as the administration 
proposes to move forward with some of the provisions from the 
Recovery Act, what elements are you proposing to extend, which 
ones are you looking at reframing? Why should we do this? And 
what is their cost and what is the cost to our society and your 
economy if we don't reinvest dollars in the Recovery Act?
    Mr. Orszag. Let me answer that in two ways.
    One is we are proposing and embracing a jobs package as a 
supplement to the Recovery Act. The Recovery Act has succeeded 
in helping restore economic growth, and, as I have mentioned 
earlier, 1.5 to 2 million people would be unemployed today who 
aren't because of the Recovery Act. But more needs to be done, 
and that is why we are stepping forward with the jobs package.
    Now, with regard to the Recovery Act itself, there are a 
variety of cases in which each agency has identified 
specifically--and this gets very granular--but specific 
projects that are not working as well or that are behind 
schedule or that shouldn't be funded, and shifted to more 
promising alternatives. And we could get you a list of those 
projects. But there is an ongoing effort to try to make sure we 
are getting the most from each dollar that is spent.
    Ms. McCollum. Thank you, Mr. Chairman. Thank you for this 
hearing.
    Chairman Spratt. Thank you.
    Mr. Harper?
    Mr. Harper. Thank you, Mr. Chairman.
    Dr. Orszag, good to see you again.
    I think what we have noticed here since the very beginning 
is there is no end to this spending that is going on. You look 
at this and you come in, it looks like every agency, every 
committee, even the MRAs for Members of Congress go up. And it 
would seem to me, if we were serious about getting a grip on 
the budget, that one of the first places we would do is on 
spending.
    We have State governments that are having to cut back and 
scale back. We have businesses and households that are doing 
that. But, to be quite honest, we are not doing that in 
Washington, D.C. We continue at a level of spending that we 
have had. You know, and at some point we have to begin to live 
within our means.
    But the little stuff does matter. While we could argue for 
or against the merits of the stimulus bill, it is hard to 
justify to taxpayers at home, ``Oh, by the way, we spent a 
couple of million dollars on those feel-good highway signs to 
let you know that your tax dollars were spent on this 
particular project,'' things that were absolutely not 
necessary.
    If you look at our budget in Congress over the last couple 
of decades, I think you would have to go back to when John 
Kasich from Ohio was the Budget Committee chairman and you had 
the Balanced Budget Act of 1997 and you saw where the numbers 
looked better, that we can do this if we choose to do that.
    One concern I have, and if you could help me, how would you 
define the middle class?
    Mr. Orszag. We have defined the middle class as incomes 
below $250,000 for married couples.
    But if I could just come back to your earlier comment for a 
second, if you look at--and I won't comment on the 
congressional requests, because that is a separation-of-powers 
statement that I am not going to touch.
    But if you look at executive branch agencies, and this is 
contained in Table S-11, what you can see is that what we are 
proposing is a reduction for the Department of Agriculture, a 
reduction for the Department of Commerce, a reduction for the 
Department of Health and Human Services, a reduction for the 
Department of Housing and Urban Development, a reduction for 
the Department of Interior, a reduction for the Department of 
Justice, a reduction for the Department of Labor, a reduction 
for the Environmental Protection Agency, and so on and on so 
forth.
    So I am hoping you will work with us. That is what is 
required in order to freeze non-security spending, those kind 
of steps.
    Mr. Harper. But for as many as you have listed thus far, we 
haven't made those cuts. You are saying in the future budget, 
obviously what we are talking about.
    Mr. Orszag. In the budget that you will be considering this 
year, in the appropriations cycle that you will soon be turning 
to, that is what we are proposing.
    Mr. Harper. Well, if we look at--and, honestly, we are 
tired of hearing ``the mess that we have inherited'' or blaming 
it on former President Bush, which I could understand the first 
3 or 4 months, but now a year later we are still using that.
    But if you look at the deficit spending of the 8 years 
under the Bush administration, if we are looking just purely at 
the table that you have on the historical tables on page 22, if 
we are looking at those numbers, in 2 years of this 
administration, we are going to approach the deficit spending 
level of almost the 8 years prior.
    Mr. Orszag. But, again, I used the analogy before, it is 
like someone ran up a huge credit card bill, left town, the 
credit card bill shows up in the mailbox, and the new guy in 
the house is blamed for running up that credit card bill.
    If you look at why we face projected deficits, it comes 
from two main sources: the economic downturn which was apparent 
at the end of 2008, and, frankly, the steps we have taken have 
helped to mitigate it; and massive tax cuts and a Medicare 
prescription drug benefit which were deficit-financed. Those 
two factors alone add up to roughly $8 trillion in projected 
deficits over the next decade.
    Mr. Harper. Back to the middle class, tell me how you 
define the middle class.
    Mr. Orszag. Again, for example, when we talk about 
extending the middle-class tax cuts, we define that as being 
$250,000 or below.
    Mr. Harper. And the minimum amount would be what level?
    Mr. Orszag. I don't know that we have defined a lower 
amount.
    Mr. Harper. So middle class would be anybody below 
$250,000.
    Mr. Orszag. Correct.
    Mr. Harper. And the President said he would not raise taxes 
on anyone under $250,000, is that fair?
    Mr. Orszag. That is correct.
    Mr. Harper. But we are indeed doing that, though, are we 
not? By allowing, say, the Bush tax cuts to expire, are you not 
having an increase on people under that amount?
    Mr. Orszag. Absolutely not. The expiration applies only to 
those tax provisions affecting those with incomes above 
$250,000, very clearly.
    Mr. Harper. Let me ask just a couple of questions. For 
instance, the college education and expense tax credit of up 
to, what, $4,000 per family?
    Mr. Orszag. The American Opportunity Tax Credit.
    Mr. Harper. Is that going to remain or go away?
    Mr. Orszag. Yes, we continue that.
    Mr. Harper. That will continue. Okay.
    I believe my time is up, Mr. Chairman.
    Chairman Spratt. Mr. Andrews?
    Mr. Andrews. Thank you, Mr. Chairman.
    And thank you, Dr. Orszag, for being here.
    I want to honestly express my heartfelt appreciation for 
Mr. Ryan and I think Ms. Lummis and others today who I think 
have spoken very sincerely about trying to work together to 
solve these problems. I appreciate that. And I do think there 
is a basis to work together to do that.
    There is a disagreement at first, though, that I think we 
need to emphasize. I do think the number one thing, Dr. Orszag, 
that our constituents are talking to us about are jobs, or the 
lack of them, and the lack of job security. It is my 
understanding this budget proposal does include proposals that 
would cut taxes for middle-class families.
    Mr. Orszag. Yes, sir.
    Mr. Andrews. It would cut taxes for businesses, 
particularly those who create new jobs. And it would continue 
investment in building roads and bridges and clean water 
systems and things of that nature, is that right?
    Mr. Orszag. Along with key investment in education and 
innovation, yes.
    Mr. Andrews. And about how much is that of the $3.4 
trillion, $3.8 trillion budget that we are talking about here? 
How much is that?
    Mr. Orszag. I could get back an exact figure to you. But, 
as you know, actually, the bulk of that figure comes from 
Medicare, Medicaid, Social Security, and programs like that.
    Mr. Andrews. Okay. The other thing I think we have argued 
sincerely here is people say, why can't we spend less? Put 
aside the revenue stuff for a minute. Why can't the government 
here operate on less money? And I think that is a very 
legitimate question that we have to try to answer and do 
something about. And I do think it is very important we 
understand exactly what that means.
    I looked at the 2010 budget projections for the year that 
we are in right now, and, roughly speaking, 20 percent of 
everything we spend is Social Security. Now, there may be 
people here who would disagree with this, but I think most 
people in the Congress would say, don't touch that.
    Another 20 percent is the defense budget. And I think, 
although there are many who would say that should be reduced, I 
am frankly not one of them, and I think a majority of those 
would disagree with reducing that. So now we have taken 40 
cents away.
    Six cents of the budget is interest. We have to do that. 
And, by the way, that is going to grow, as interest rates rise, 
which I think they inevitably will because of economic 
conditions. That is going to grow, and that is not negotiable. 
That is the only true entitlement in the budget, as the 
chairman likes to say. You have to pay your creditors. Now we 
have taken 46 cents away.
    Another roughly 6 cents is pensions for people who have 
retired from the military, or a VA pension, or who have worked 
for the Federal Government and retired. And I don't think 
anyone would say you should take a pension away from someone 
who is receiving it. This is not future pension policy. So now 
we have taken 52 cents away.
    Of the 48 cents that are left, 70 percent of that is 
Medicare or Medicaid. So there is a little bit, you know, there 
is 15 cents left. Let's talk about what that is. That is FBI 
agents, VA hospitals, highway construction, cancer research at 
the NIH. There is some waste in there. And, look, I am all for 
whatever effort we can to work together to find it. But you are 
deluding yourself if you think there is enough waste in that 15 
cents to attack the kind of problem we have.
    Which brings us to Medicare and Medicaid. And I would ask 
you, Dr. Orszag, just to talk about the Medicare and Medicaid 
savings the administration has already supported in the House 
and Senate health care bills that have passed. Tell us a little 
bit about how much that saves and where the savings come from.
    Mr. Orszag. Well, as you have already noted, it saves 
roughly a half-trillion dollars over the next decade. And I 
would note, it comes from efficiencies gained by taking away 
excess payments to providers, a much different approach than 
reducing----
    Mr. Andrews. So, for example, if a hospital has a really 
bad track record in readmitting people to the same hospital a 
few days after they have been discharged, there is a 
disincentive to do that, right?
    Mr. Orszag. Correct. Well, there isn't currently. Under the 
proposal, there would be.
    Mr. Andrews. If there is a motorized scooter company that 
has a record of selling a lot of motorized scooters to people 
who really don't need them, that is taken away, right?
    Mr. Orszag. It is mitigated, yes.
    Mr. Andrews. The Medicare Advantage plan that pays private 
insurance companies $114 for every $100 that we pay for regular 
Medicare, that is phased out in various ways in the House and 
Senate bill, is that right?
    Mr. Orszag. So that you get down to 100 cents on the 
dollar.
    Mr. Andrews. Now, these are easy proposals to demagogue. 
And, frankly, Mr. Ryan, yours are easy to demagogue, too. And I 
don't think we should do that. But I have heard an awful lot of 
demagoguery the last couple months about those proposals, how 
they are hurting seniors and how they are obliterating Medicare 
and this. We have been guilty of that in the past. I think 
you----
    Mr. Ryan. Can I say something nice for you?
    Mr. Andrews. I would be shocked, but go ahead.
    Mr. Ryan. You know, the durable medical equipment stuff, 
spot on. The hospital readmission, spot on. Medicare Advantage, 
I think if you go to a bid-based pricing system, you could 
probably get $60 billion without ruining the program. I just 
think it goes too far.
    But the point I would make is----
    Mr. Andrews. Have you said something nice yet?
    Mr. Ryan [continuing]. Put the money into Medicare to make 
it more solvent. Don't use it to make a new entitlement. That 
is our big objection.
    Mr. Andrews. Well, I understand that, and I think there is 
room for discussion.
    I would simply make this point: that it is the official 
role of the minority party to demagogue the Medicare issue 
versus the majority party. We have done it. I think it is a 
huge disservice to the people of the country. And I think Mr. 
Ryan has made a constructive proposal with which I completely 
disagree, but it is a constructive proposal. And I think we 
should go forward and try to talk seriously about what this 
administration has already tried to do.
    Chairman Spratt. Mr. Diaz-Balart?
    Mr. Diaz-Balart. Thank you very much, Mr. Chairman.
    You know, there are some things we do agree on, I think, 
you know, the fact that the debt and deficit is unsustainable 
and we have to address it. And we keep hearing about hard 
choices. The President talked about hard choices, you have 
talked about choices, we have all talked about hard choices.
    The American people, families, small businesses, even large 
businesses, are having to make those hard choices every day, 
real hard choices, not theoretical hard choices. They are 
really making serious hard choices. They don't blame, they 
can't, nor do they, that is just not what most Americans do, 
they don't blame others for the tough decisions they are having 
to make. They don't pound their chests when they make the tough 
decisions, they make them. And they make those hard choices on 
a daily basis. They don't, frankly, make partial hard choices--
I am talking about people in leadership, whether it is the head 
of a family or a small business or a large business--they don't 
make partial hard choices that don't solve the problem and then 
say, but I am going to wait for an independent commission to 
make the hard choice that will solve the problem for me. That 
is not what families and small businesses have to do.
    By the way, I am not criticizing just this administration, 
I am talking about Congress. And I am talking about what the 
American people don't do, the American people don't do what 
Congress does, they don't. They make the tough choices. They 
don't blame others. They don't make half--I was going to say a 
different word--they don't make half hard choices and expect 
some other commission to make them for them. They show 
leadership every single day and they make the hard choices.
    Can we put up chart 9, if that is possible? We hear the 
President himself talk about the hard choices that this budget 
makes on this 3-year partial freeze. There it is. Those are the 
hard, difficult choices that are being proposed in this budget. 
See, I happen to agree with Mr. Andrews, there are some hard 
choices that have to be made. That doesn't do it.


    Dr. Orszag, you are a straight shooter. We may disagree but 
you are a straight shooter. Do you really believe that the 3-
year freeze, when you have said that that doesn't solve the 
problem, that you are waiting for this commission, you are 
going to create this commission to then come up with proposals 
to solve it, do you really believe, with a straight face, that 
I can look at the American people who are making real tough 
choices and their families with their businesses and say that 
we are doing the same thing because we are doing a temporary 
freeze, and we are doing some other things, and then we are 
going to have a commission to come back and tell us how to make 
the real choices to solve the problem? With a straight face, do 
you really think that we are making the same sacrifices in 
government that the American people are in their businesses and 
in their lives and in their families, are we making the same 
tough choices that they are?
    Mr. Orszag. Two comments; first, one of the reasons we are 
so focused on promoting job creation now is to help those 
struggling families today because unemployment remains too 
high.
    Second, with regard to these deficits, the budget includes 
more than $1 trillion in deficit reduction over the next 
decade, more than any administration has put forward in its 
budget in more than a decade. And I would say, if every family 
had to get its proposals through the Congress, the hard choices 
it would make would be much more difficult to enact also. We 
are trying to get this done in a way that is feasible. The only 
way we are going to get to where we need to be ultimately, 
given the legacy we inherited, is if we work together. And that 
is exactly what we are trying to do through this commission.
    Mr. Diaz-Balart. But Dr. Orszag, you have said before that 
this budget will not get us to where we need to go and that we 
need that commission.
    Mr. Orszag. Because we recognize that we need to work with 
you to get all the way there because, frankly, we can't do this 
by ourselves. Even if we put forward a bunch of proposals to 
get the deficit down to 2 percent or 1 percent, or zero, unless 
we have the Congress of the United States working with us, then 
it is a meaningless document.
    Mr. Diaz-Balart. Well, I understand that. You obviously 
have to get the Congress to do it. But with all due respect, 
you have blamed the past and the past administration as if that 
was a dictatorship. Now you control the House, the Senate, and 
the administration, and you are saying--am I hearing you 
correctly that the President is now saying that he cannot get 
it done, even though he controls the White House and the same 
party controls it and he needs a commission to get it done, a 
decision that every single American family makes every single 
day? They make those hard choices. Are you saying the President 
that controls the House and Senate is either unwilling or 
unable to get it done? I just want to make sure that I 
understand what you are saying.
    Mr. Orszag. Congressman, as you know, one of the things 
that has developed over the past period of time is that in the 
United States Senate, at this point, basically every single 
thing requires 60 votes. And as you know, in a matter of weeks, 
or days--I don't have the exact update--Democrats will not have 
60 votes in the United States Senate. So the comment that 
Democrats control the Senate is simply not accurate relative to 
the way voting actually works. But I appreciate the theatrics--
--
    Mr. Diaz-Balart. But then you cannot criticize the previous 
administration who had less votes for everything. It goes both 
ways, sir. It works both ways.
    Chairman Spratt. Ms. DeLauro.
    Ms. DeLauro. Thank you, Mr. Chairman. And thank you, Dr. 
Orszag. Just one question, and then I will move to a question 
about jobs and infrastructure.
    I would just say, and my colleagues have said it, Mr. 
Ryan's plan is constructive, I would concur. But as I see it, 
very simply and very quickly, it partially privatizes Social 
Security, it dismantles Medicare, it block grants Medicaid, it 
cuts taxes for the richest 1 percent of the people in this 
country, and it increases taxes for the middle class. As far as 
I can tell, we have gone down that road before. It has been 
rejected by the public; I believe it will be rejected again.
    Let me move to infrastructure, an issue you know I am 
particularly fond of, Dr. Orszag. It would appear that the 
budget eliminates the idea of a national infrastructure bank as 
it was proposed last year with the capitalization of $5 billion 
a year over 5 years. Instead, we have a National Infrastructure 
and Innovation Fund within the Department of Transportation.
    I am just going to read down several questions so that you 
can then at one time answer them. How much private capital do 
you anticipate the fund will leverage and how many jobs do you 
think can be created with the fund? Is the $4 billion request 
for 2011 a one-time request or does the administration propose 
this as an ongoing funding level? If the fund is located in the 
Department of Transportation with a board composed of senior 
DOT officials and other Federal agency representatives 
reporting to the Transportation Secretary, how do we expect or 
how can we expect it to be an objective, independent entity?
    Further, questions with regard, it looks as if we are just 
codifying the Tiger grant team. How is the fund not simply 
codifying the Tiger grant team? And it also appears as if the 
budget continues the TIFIA assistance program for surface 
transportation. My question is, why didn't the administration 
propose folding the TIFIA program into the fund? And does it 
make sense for DOT to have two Federal credit programs, the 
fund and TIFIA that make loans and provide other forms of 
credit to assist with surface transportation?
    Finally, it would appear that this new fund is singly about 
transportation. The bank, as you know, would have gone beyond 
transportation infrastructure to the environment and energy, 
telecommunications. Is it a sense that we are going to start 
out with transportation, expand it to other sectors, or do you 
believe that we should just do a transportation infrastructure? 
If you house it within DOT, it does become problematic if other 
sectors are to be added in the future.
    So let me ask you all at once. I am sorry for all of that, 
but I never get three questions.
    Mr. Orszag. That is okay. I think there were more than 
three, but that is fine.
    I know this is an issue that we have discussed at length in 
the past and it is something that you feel passionately about. 
The basic goal here is to get a concept operational, building 
on the success that we have had with the Tiger grant program 
that has been successful, get a concept operational, and then 
after proof of concept, it could be expanded both into other 
areas and perhaps spun off if necessary.
    You had asked a series of detailed questions. I think the 
most auspicious approach might be for me to get back to you in 
writing on all of them.
    Ms. DeLauro. Why don't I lay those questions out for you, 
Dr. Orszag?
    Thank you, and I yield back.
    Chairman Spratt. Mr. Austria.
    Mr. Austria. Thank you, Mr. Chairman.
    Dr. Orszag, I know it has been a long afternoon. Thank you 
for being in front of this committee again and your testimony 
today.
    I think we all agree that we are going through a weak job 
market, that our focus here should be the economy and creating 
jobs. And I think the American people expect Congress to be 
making some real policy changes here, to be moving forward with 
real policy reform.
    It has been talked about earlier, and I think all of us, 
when we go back to our districts, we face our constituents, 
there are Americans out there, the American people, that are 
struggling right now, families that are struggling to make it 
from paycheck to paycheck, small businesses struggling to make 
it from payroll to payroll. And you made a comment earlier that 
it was in your previous job or your previous career that you 
just put out ideas. And I think now is the time that we have to 
be moving forward with some real policy reforms.
    We have had this discussion, but I want to go back to this, 
and that is, it seems as though this budget, all the real work 
again is being left to this fiscal commission. And you just 
recognized earlier that, unless this Congress, and I think in a 
bipartisan manner, stands behind this commission, how 
successful can this commission be? You have an administration 
that is proposing this fiscal commission, but you recognize the 
fact that it is going to take Congress to support this 
commission in order for its recommendations to be successful. 
And I guess in my opinion, isn't it the job of the elected 
officials, all of us here and the administration, to make the 
policy decisions that need to be made?
    Mr. Orszag. Let me try to clarify also because I think 
there have been various attributions of unsustainability and 
what have you. The hole that we face is so deep that despite 
more than $1 trillion in deficit reduction contained in this 
budget we are still in the position where further steps are 
necessary, and we think the only plausible way to take those 
further steps is if we do it together. So, yes, we have a 
fiscal commission to get us the rest of the way there, but it 
is simply, I think, inaccurate to say there aren't lots of hard 
choices. You don't get $1.2 trillion, more deficit reduction 
than any previous administration has proposed in more than a 
decade, without making lots of hard choices. Now, is it enough? 
No, we have admitted that. We need to work together to get the 
rest of the way there, and I hope we can.
    Mr. Austria. I appreciate your response, but I think it was 
mentioned earlier that there has been one proposal before this 
committee, Congressman Ryan has a proposal. I would have liked 
to have seen a firm proposal today before this committee that 
we could have a true debate on, not wait for a commission to 
report back.
    Let me also talk about the debt because I have three 
teenage sons at home. And I didn't come to Congress just to 
continue to run up more debt by the public. In this budget, it 
more than doubles over the next 5 years, it triples by fiscal 
year 2019 from the current levels. The budget would push the 
debt to $9.3 trillion this year, or 63 percent of the GDP, and 
I believe that is the largest in at least recent history, maybe 
in history, and that concerns me when we are talking about the 
future down the road. At what point do we get control of the 
amount of debt--which I believe is hurting our economy right 
now--within this budget proposal?
    Mr. Orszag. Well, again, right now we find ourselves in an 
exceptional circumstance because private borrowing has 
collapsed, the interest rate on 10-year bonds remains below 4 
percent, we have taken exceptional action to rescue the 
economy--and, frankly, that was necessary. If we had not done 
that, as I have already said, 1.5 to 2 million more people 
would be unemployed today, the economy would not be growing at 
5.7 percent at the end of 2009, as it was, and we would still 
face--I mean, we sort of glide right past it. If you rewind the 
tape for a year and look at the prospects and the discussion 
then about the possibility of another depression, about 
financial market meltdown, as tough as the situation we face 
today is, it is much better than many predictions suggested.
    Mr. Austria. But we are continuing to spend. Let me just 
ask you; in this bill, how many new entitlement programs are 
created in this budget? And what is the total amount of 
spending increase is involved in those new entitlements?
    Mr. Orszag. Again, net deficit reduction of $1.2 trillion, 
discretionary savings in the non-security budget of $250 
billion. And I can get you a precise answer to your question 
afterwards.
    Mr. Austria. And then the President has talked about the 
need for fiscal restraint. How is the administration going to 
enforce the spending freeze that we have talked about for non-
defense discretionary programs, how do you enforce that with 
this type of budget proposal?
    Mr. Orszag. The way you can enforce it is through the 
regular congressional process, the 302(a) and 302)(b) process, 
but as Mr. Ryan and others already asked, if you and your 
colleagues are interested in statutory discretionary caps that 
better enforce that, that is a discussion we can have.
    Chairman Spratt. Mr. Edwards of Texas.
    Mr. Edwards. Dr. Orszag.
    Chairman Spratt. Would you yield? Dr. Orszag, we have been 
going on for 2\1/2\ hours. Do you want to take a seventh inning 
stretch?
    Mr. Orszag. Up to the committee. I am just loving this.
    Mr. Ryan. How many cans of diet Coke have you had?
    Chairman Spratt. Since we are having such a good time, we 
don't want to interrupt it. Let's go forward.
    Mr. Edwards.
    Mr. Edwards. That is the first answer, Dr. Orszag, that 
brings into question your credibility.
    Let me begin by saluting you and the administration for 
taking four major steps toward trying to get this car out of 
the ditch; a 3-year freeze on non-defense discretionary 
spending. That is significant. I am still disappointed some of 
my Republican colleagues said, well, that is really not 
significant. Maybe those who think a reduction of $250 billion 
in the deficit isn't significant, that might reflect how we got 
into this ditch in the first place.
    Secondly, I commend the administration for supporting a 
pay-as-you-go statute. I think if we had that in place and had 
Speaker Hastert and Republicans in this Budget Committee in 
this room not allowed that rule of the House to go out into 
left field in 2001 or 2002 we wouldn't be in this ditch facing 
the kind of economy and deficits that we are facing.
    Number three, I salute you for proposing a genuine effort 
to try to reduce the deficit by $1.2 trillion over a period of 
time. I would challenge anyone to suggest that is not a 
significant amount.
    Fourth, I commend the administration for supporting the 
bipartisan commission to try to deal with entitlement spending. 
I know there has been some partisan criticism of that and yet, 
as I recall, I have sat on this committee for a long time, as I 
recall, Dr. Orszag, during the 12 years that Republicans each 
and every year passed a partisan budget through this committee, 
I don't remember any long-term entitlement spending reductions 
passed during those 12 years through the House. In fact, just 
the opposite occurred. On a partisan basis, they passed the 
largest increase in Medicare spending since Medicare was 
created in 1965.
    I do want to go on record as saying I am one Democrat who 
believes our short and medium-term deficit reduction goals 
ought to be even more aggressive than the administration has 
proposed; I intend to speak out on that.
    But having said that, I also must say that it is 
disappointing that some of the captains of the economic 
Titanic, those who wrote budgets that put us into the worst 
recession since the Great Depression and gave us the largest 
deficits in American history after they inherited the largest 
surpluses in American history, now do nothing but take pot 
shots at each of these four very substantive proposals the 
administration has made.
    I welcome bipartisan support and dialogue, but those who 
were in charge when we went for the largest surpluses in 
American history and the largest deficits in American history 
ought to, if they are genuine about that, be a little bit more 
open minded rather than immediately criticizing each of these 
four very substantive proposals.
    I do want to commend Mr. Ryan. I think his proposal is 
substantive, it is dramatic, if not revolutionary, as compared 
to programs as we know them in the Federal Government. I think 
this is an opportunity for the American people to see a 
dramatic difference in the vision for the future of our 
country, one the administration has proposed, again, as we try 
to start reducing the deficits, the other one proposed by Mr. 
Ryan, not just any back-bencher Republican, the leading 
Republican, a well-respected Republican on the Budget 
Committee, genuine about reducing the deficit and the national 
debt, but one that, nevertheless, is a proposal that would 
eliminate Medicare as we know it for people under 55, partially 
privatize Social Security--and I have seen the cost of that in 
years past, it is up to $2 trillion in lost revenues to the 
Social Security Trust Fund.
    Also, as we talk about new spending, I think Republicans 
are right to ask about the level of new spending when we have 
the deficits we face. But I think it is also fair to look at 
the level of new tax cuts proposed by Mr. Ryan in the 
Republican alternative vision for our country.
    Let me just ask you this question: Do you have any kind of 
cost on what it would add to the deficit, some of the proposals 
in that Ryan road map, the Republican road map, the cost of 
eliminating the estate tax over 10 years, reducing individual--
the highest tax rate from 25 to 35 percent, eliminating the 
capital gains tax, interest income and dividend income, and 
extending the 2001 and 2003 tax cuts, do you have any ball park 
numbers on how much those individual actions would increase the 
national debt over a 10-year period?
    Mr. Orszag. We will get you exact figures, but we are 
talking about trillions of dollars shifted and offset through 
the other changes, including to, in particular, Medicare and 
Medicaid, to offset those huge shifts in the tax cut.
    Mr. Ryan. If I could just pleasantly interject.
    Mr. Edwards. Sure.
    Mr. Ryan. The status quo is unsustainable. Medicare as we 
know it will not exist in the future. It has a, at minimum, $38 
trillion unfunded liability. So we are all kidding ourselves if 
we think Medicare for under 55-year-olds is going to look 
tomorrow exactly like it looks today because no matter who is 
in charge around here, it is not going to look the same because 
it is totally unsustainable. Peter Orszag is the first guy who 
will tell you that.
    Mr. Edwards. And that is why they have proposed a 
bipartisan commission so we can sit down together.
    Mr. Ryan. It sounds like you are not going to take my ideas 
very seriously.
    Mr. Edwards. Mr. Ryan, you have never been able to get the 
vast majority of Republicans in your own caucus to support your 
very bold and honest proposals to reduce the deficit. So maybe 
we can do this on a bipartisan basis. I salute you for offering 
some tough choices and an alternative position. It is an honest 
proposal, and we ought to have a debate and debate that 
relative to the President's budget.
    Thank you.
    Chairman Spratt. Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman. I thank you, Dr. 
Orszag.
    Can we have the first chart? Dr. Orszag, I appreciate the 
fact that you have indicated that tough choices have to be 
made. This chart focuses on the tough choices that were made 
when the blue line was created. In 1993, we passed a budget 
making the tough choices. That was severely criticized; in 
fact, criticized so effectively that Democrats lost their 
majority in that next election.


    In 1995, when the new majority took over, they passed 
budgets that were viewed by President Clinton as irresponsible 
and he vetoed all of them. In fact, the government was closed 
down because he refused to sign the Republican budgets. If you 
want to know what would have happened if he had signed them, we 
do know because they passed them again in 2001 where you began 
the last red line, and you can see exactly what happened.
    In 2001, at the end of the Clinton administration we had a 
projected surplus of $5.5 trillion. That was converted, as you 
know, to additional debt of approximately $3.5 trillion or 
more. Had we not messed up the budget in 2001, we would have 
paid off the national debt 2 years ago, a debt held by the 
public. Now we find ourselves in a huge deficit.
    One of our first priorities, obviously, is in creating 
jobs. Now we are in the ditch with the deficit. My first 
question is, if we cut spending--affecting the deficit, you can 
either cut spending or increase taxes. If we cut spending, what 
effect would that have on jobs?
    Mr. Orszag. Right now?
    Mr. Scott. Right now.
    Mr. Orszag. Right now, in 2010, when we face a big gap 
between how much the economy could produce and how much it is 
producing, either raising taxes or reducing spending today 
would be harmful to jobs because the key impediment to job 
growth right now is boosting demand for how much firms could 
produce. That situation changes over time, but for 2010 that is 
the answer.
    Mr. Scott. And so if we were to do anything credible about 
the deficit this year, it would have an adverse effect on 
employment.
    Mr. Orszag. It would be counterproductive, yes. That is not 
to deny that we need to get the deficit down over time, but 
this year it would be counterproductive.
    Mr. Scott. In terms of dealing credibly with jobs, one of 
the challenges we have is, as we create jobs on the Federal 
level, States are laying people off. The Recovery Act provided 
$140 billion for States, and yet they still cut their budgets 
an additional $300 billion for a total of almost $450 billion. 
That just went to offset what the States were doing.
    Is it accurate that we have essentially offset the damages 
the States were doing to the economy?
    Mr. Orszag. We have, through direct State fiscal relief and 
through Federal actions, offset--I will get the exact 
calculations, but offset the drag that State and local 
governments typically exert on a recession because they are 
doing counterproductive steps during a recession.
    Mr. Scott. So one of the challenges we have is just to keep 
up to zero to get up to the point where we are offsetting what 
the States are laying off. When we create a job and the State 
lays off a job, we haven't made any progress. So the first 
almost $450 billion----
    Mr. Orszag. Without commenting on the exact figures because 
there is, I think, some ambiguity, one of the reasons why State 
fiscal relief was provided through the Recovery Act in a 
variety of ways was to offset the actions that States would 
have to take to lay off workers, to lay off nurses and teachers 
and cops, and so on and so forth, which would exacerbate the 
downturn.
    Mr. Scott. Can we get the next chart, please?
    
    
    When we had good fiscal responsibility during the Clinton 
administration we created an average of 237,000 jobs a month. 
During the Bush administration, although we were overspending 
the budget by $8 trillion over 10 years, we did worse.
    The long-term fiscal challenges we have in the next chart, 
this chart shows the change in percentage of GDP of Social 
Security, Medicare, Medicaid, net interest, and all other 
spending. If you look closely, the only thing that is really 
growing is Medicare. So if you wanted to solve the problems, it 
seems like getting rid of Medicare would be one way to do it, 
if that is the tough choice that you would make.


    I understand you said you would have to cut Medicare 75 
percent. Can you explain what impact that would have on a 
person who is trying to get health care with a Medicare voucher 
that is only 25 percent of the cost of health care, and what it 
would do to employees if you eliminated the tax preference for 
health care, if you eliminated that and had people essentially 
going out into the market as individuals rather than the 
market, what the tough choices would amount to in health care 
choices that the Republican alternative would envision?
    Mr. Orszag. And I think with regard to the 75 percent you 
are referring to the reduction that would occur in Medicare and 
Medicaid spending under Mr. Ryan's, the Republican alternative.
    Again, I am going to give him credit, too, for stepping 
forward with a proposal, but there is a significant question 
whether that is even a feasible approach because you would be 
providing individuals with a voucher that would not pay for the 
cost of health care over time, an increasingly small share of 
the cost of health care over time, they would not have the type 
of benefit that would be provided through Medicare, where there 
is less uncertainty about the cost that they face. So they face 
not only more definite money out of their pocket, but a lot 
more uncertainty about how much they would have to pay, And 
they would be struggling with many of the same problems that 
individuals in the current individual market struggle with, 
which are unfortunate.
    So in that situation I wonder whether future Congresses 
would actually stick to a voucher level that was inadequate for 
the Nation's elderly to purchase their own health insurance. 
And if a future Congress didn't, not only would you have 
dramatically changed the Medicare program, you wouldn't even 
get the budget savings that Mr. Ryan is aiming for, the point 
of which is, I think what we need to do with regard to Medicare 
and Medicaid is get at those underlying drivers, provide much 
better information about what works and what doesn't, change 
incentives for providers so that they have incentives to 
provide quality, not quantity, improve incentives for 
prevention and wellness, and so on and so forth. You can go 
down the list. That is a different structure and a different 
approach, but I would say, frankly, without all of those 
components present anyway, I am not sure Mr. Ryan's approach 
would even work.
    Mr. Scott. Thank you.
    Chairman Spratt. Mr. Connolly.
    Mr. Connolly. Thank you, Mr. Chairman.
    Mirabile dictu, one of the freshman on this committee gets 
to ask a question on our side of the aisle.
    I am going to try to ask three questions, Mr. Orszag. One 
is local, but very important to this region.
    In the budget OMB states that environmental and 
construction projects are not related to the Corps' main 
mission areas in deciding to divest the Corps of those kinds of 
projects. Obviously that has implications for the Chesapeake 
Bay, and many of us are concerned that transferring that 
authority to EPA, you don't have the Corps capacity--you should 
forgive the expression--at EPA to be able to do the same things 
that the Corps of Engineers does. You may comment.
    Mr. Orszag. Again, what we are trying to do with our Army 
Corps of Engineer proposal is to focus on the three traditional 
areas that the Army Corps of Engineers has focused on; 
commercial navigation, aquatic ecosystem restoration, and there 
has been an additional area added by the Congress 
traditionally. We think that is better addressed through, as 
you correctly note, other funding streams. We have more than $3 
billion for the various revolving funds involving clean water. 
We think that is a better approach to that particular problem 
than funding those projects through the Army Corps of 
Engineers.
    Mr. Connolly. Well, hopefully this is the beginning of a 
dialogue on that.
    Mr. Orszag. Absolutely.
    Mr. Connolly. At least in my district, the Recovery Act 
actually is working. It has funded a lot of transportation 
projects, it has helped with our school systems, though they 
are not out of the woods. It is funding some very important 
technology, R&D-related projects, et cetera.
    If the stimulus is working--and I think it is--why do we 
need another jobs bill or another jobs initiative contained in 
this budget? And aren't we concerned that given the sort of 
surprising strength and the economic growth of the last 
quarter, should it be sustained anywhere near that level we are 
going to see jobs created anyhow, and the lag time between this 
money being invested and actual jobs created is going to be 
long, as we just saw with the Recovery Act?
    Mr. Orszag. Look, the Recovery Act has succeeded not only 
in promoting employment, but basically primarily in restoring 
economic activity, in moving from a collapsing economy to a 
growing one, but where we still lag behind is in the employment 
market. And so the jobs package is focused specifically on 
steps we can take just to, again, more tightly link GDP growth 
to employment growth, so something like the jobs and wages tax 
credit.
    So the Recovery Act is working. It has averted a second 
Great Depression, along with other measures that were taken. 
But the employment market remains too weak, and the question is 
whether we can shorten the lags involved in when the economy 
starts recovering and when the jobs market does.
    I agree with you that private sector forecasters are 
projecting that by this spring there would be positive job 
growth, but even when that happens, it is likely to be smaller 
than would be necessary even to work the unemployment rate 
down. And don't forget we have that 7 million job gap in terms 
of jobs lost since December of 2007 that need to be worked off. 
So I don't think that the biggest risk we face is that job 
growth is going to be too rapid without further action. I think 
further action is beneficial.
    Mr. Connolly. Thank you. And I know that will be the 
beginning of a dialogue as well.
    My third and final question has to do with the ranking 
member's proposal, and I certainly join in the chorus of praise 
that he at least has put something on the table. But I part 
ways with some of my colleagues in praising that proposal 
because, quite frankly, I see it as a radical departure from 
decades of hard work in the United States to protect senior 
citizens, both with respect to their pensions through the 
Social Security program, and their health care through 
Medicare. We made a conscious decision in this country to 
provide that kind of protection under the guise of deficit 
reduction. To now threaten all of that certainly presents us 
with a stark choice. For me it is an easy one, and I believe 
for my constituents, when they understand it, it will also be 
easy. You may want to comment.
    Mr. Orszag. I am not going to dissuade you from the 
depiction that it is a very dramatic change. There is no 
question about it. And as I have already said, it not only 
means higher costs for beneficiaries, it also means more 
uncertainty around those costs for Medicare beneficiaries. And 
we haven't even gotten to the tax changes where there would be 
tax reductions at the very top and tax increases in the middle 
and towards the bottom so that the total doesn't change, but 
the burden is shifted away from higher earners and towards 
middle earners.
    Mr. Connolly. I thank the gentleman. My time is up.
    Chairman Spratt. Mr. Schrader.
    Mr. Schrader. Thank you, Mr. Chairman.
    There has been a lot of talk about Mr. Ryan's proposal and 
the President's proposal. I guess I would like to know if Mr. 
Ryan's proposal is a proposal that the Republican leadership is 
seriously entertaining. I don't know if there is a way through 
this committee and the Chair or through the media that we can 
find out if this is a proposal, that the party of no is moving 
off the party of no and actually going to go with a legitimate 
proposal. I think it is either one or the other because, as 
another Representative pointed out, there are not a whole lot 
of other proposals out there; we have got these two, and we 
need to be against everything, or we can embrace the proposal 
of the ranking member of the Budget Committee. So I would like 
to see if we can get that information, Mr. Chairman.
    Just a few quick questions if I might. It would seem to me 
that the 3-year freeze in discretionary spending has a value 
beyond the $250 billion--which is a lot of money in my neck of 
the woods--and that is showing the investors and the American 
people that we are beginning to get serious about controlling 
our debt. Wouldn't you agree with that?
    Mr. Orszag. Yes, especially as part of a broader set of 
measures to reduce deficits by more than $1 trillion, which is 
what this budget does.
    Mr. Schrader. And isn't it true that about a week, week and 
a half ago we had an opportunity--well, the Senate had an 
opportunity go with the statutory commission that had been 
praised and talked about by both sides of the aisle here today, 
but six or seven Republican cosponsors of their very own bill 
switched to ``no'' on that and ended up defeating our 
opportunity to go with statutory PAYGO, isn't that correct--
excuse me--statutory debt commission?
    Mr. Orszag. That is correct.
    Mr. Schrader. So I think it is a pretty good comment that 
the President is, despite that setback, still willing to step 
out and offer the olive branch and say, Hey, I will do it on my 
own in a bipartisan way; let's get serious about the debt and 
we will put everything on the table, not say it is going to be 
all one sort of proposal or another. I would think that that 
should indicate to the American people that this President at 
least is still serious about bipartisanship and wanting to work 
together with folks.
    Mr. Orszag. I think that is exactly right.
    Mr. Schrader. A couple of quick comments, if I may, that, 
believe it or not, a couple of things hadn't been brought up in 
3 hours. One is that I am a little concerned about just the 
focus on nondefense discretionary spending. In my area, 
education, health care, public safety, and the economy are the 
top issues. I have heard it said in quarters that our greatest 
threat to this Nation is the economy, not necessarily a land 
war in Afghanistan. And while I think we should support the 
veterans 100 percent, exclude them from any sort of reductions, 
and indeed should make sure they are well cared for, that 
inefficiencies in the defense procurement system, homeland 
security has a long way to go, I think, in terms of becoming a 
functioning body based on what we have seen here in recent 
years, and again, I do have some concerns about the buildup in 
Afghanistan. So I would hope that the administration might 
consider some initiatives in those areas.
    Mr. Orszag. Yes, absolutely. And let me again emphasize, 
the defense budget has been scrutinized, and there are 
efficiencies possible that Secretary Gates has already 
identified. So there are some important--especially in the 
procurement budget, frankly, canceling additional purchases of 
the C-17, canceling alternative engine for the F-35 fighter 
jet, canceling the CGX Navy ship, a whole variety of other 
terminations and reductions.
    Secretary Gates was remarkably effective working with the 
President and the Congress in terminating unnecessary weapon 
systems last year. We want to build on that, continue that 
success, and continue to reform especially the procurement part 
of the defense budget.
    Mr. Schrader. Last comment, if I may, Mr. Chairman.
    I applaud your efforts in trying to stimulate small 
business. I am one that happens to believe private enterprise 
is probably the best stimulator of the economy, and anything we 
can do to get small business going is probably good. I have 
some degree of skepticism over the tax credit proposal. I am 
going to be polling my Chamber and members of the business 
community and see what they think.
    But what about the administration stepping in a little bit 
stronger even than they have already with our banking and 
regulatory community? There seems to be this tension going on 
between overregulation, making the bankers concerned, but at 
the same time we don't want to end up back in the mess we are 
in.
    Are there any new initiatives, any thoughts that the 
administration is going to use to pursue areas of increasing 
the lending from the private sector, which I think is probably 
the long-term best bet here?
    Mr. Orszag. Well, with regard to the regulatory system, two 
comments; the first is that clearly the administration is very 
strongly in favor of financial regulatory reform legislation. 
The second is I believe it is correct that Secretary Geithner 
will be appearing before your committee in the near future. And 
with regard to more specifics on regulatory policy, I am going 
to defer to him given the sensitivity surrounding the 
appropriate boundaries in regulatory policy.
    Mr. Schrader. Thank you very much.
    Chairman Spratt. Mr. Langevin.
    Mr. Langevin. Dr. Orszag, thank you very much for your 
patience in being here today and for the hard work you have put 
into putting the budget together. We are going to take 
obviously quite a bit of time in scrutinizing it and working 
with the administration to try to get this right.
    We are obviously deeply concerned about where the economy 
is at this point. We have obviously come a long way from where 
we were. One year ago we were losing over 700,000 jobs, as we 
have talked about, per month and the economy shrank by about 
5.4 percent, and we have seen a slow turnaround. Of course last 
month we saw job losses at one-tenth the rate from 1 year ago 
and economic growth at 5.7 percent is my understanding. 
Obviously this is remarkable progress, but right now, quite 
frankly, my constituents can't find jobs. In Rhode Island, we 
have the third highest unemployment rate in the country at 12.9 
percent.
    So can you, once again, for my own knowledge and for my 
constituents back home, more specifically outline the proposals 
geared toward job creation? And how are these programs 
projected to decrease unemployment and over what period of 
time? And if you could, after that part of it, talk about 
specifically the funds that would be going, in the job creation 
portion of it, to the States, more specifically, to local 
cities and towns?
    One of the criticisms that we had with the stimulus money 
is that it went to States and it didn't filter down the way we 
had hoped to, particularly to local communities. So if you can 
talk specifically to money that might be going to, for example, 
the CDBG, which is something that our local mayors and town 
administrators have been clamoring for because those are the 
shovel-ready projects. If you could tackle the first part.
    Mr. Orszag. Sure. With regard to the first part, we have 
put forward a $100 billion jobs package. Some of the details 
are still to be worked out, working with the House and Senate. 
We have identified, for example, a $33 billion jobs and wages 
tax credit which would provide up to a $5,000 tax credit for 
hiring more people or expanding wages at a firm. And that will 
help to promote job growth because some small businesses are 
right on the edge of either hiring someone or providing a wage 
increase, and in return for this tax credit they would go ahead 
and do that. So that is one of the key things.
    Now, with regard to State and local fiscal relief, as you 
know, the Recovery Act included, at the State level, important 
relief delivered throughout the Medicaid program. This budget 
proposes continuing that so-called FMAP for an additional 6 
months beyond the current level.
    And then you asked about CDBG. I will get the exact figure, 
but I believe we are funding it at $4.4 billion in 2011. And we 
also have, if I remember correctly, a $100 or $150 million 
catalytic grant program to try to create more innovation within 
that part of the budget.
    Mr. Langevin. That is helpful. So the money that would go 
towards tax credits and other incentives for small businesses, 
that is included within that $100 billion?
    Mr. Orszag. Correct, within that $100 billion, yes.
    Mr. Langevin. So if I could, turning to the other part of 
our challenge, not only creating jobs--which is vitally 
important in both the short and long run--but also, as we 
talked about, as equally important, deficit reduction, can you 
talk about your projection as to how much these job creation, 
small business investments translate into overall deficit 
reduction as a percentage of GDP once the jobs are created--
obviously people are paying taxes--and is this economic growth 
enough to reduce our deficits to sustainable levels?
    Mr. Orszag. One way of answering that question is that when 
you generate an additional dollar of economic activity you 
typically reduce the deficit by somewhere between 35 and 33 
cents on the dollar. So if a dollar of additional job creation 
activity from the Federal Government creates a dollar of 
additional economic activity, something like a quarter to a 
third of it would be offset through additional revenue, in 
particular as the economy picked up.
    The key thing though is, let me just again emphasize, 
unless this economic recovery continues and unless we spur it 
on, we will never get our outyear deficits down. I mentioned we 
are at 10 percent now, we need to get to a much lower number. 
The big reduction comes as we move from 10 percent of the 
economy to 5 percent of the economy by 2015 because of the 
economic recovery, because of economic activity picking up. 
That abnormally low revenue as a share of GDP, which is 
currently the case, will increase as economic activity picks 
up. And certain cyclically sensitive spending categories like 
unemployment insurance, food stamps, and what have you, 
naturally decline as the economy picks up.
    By the way, the fact that that is happening, revenue is 
down, unemployment insurance, food stamps up, that is 
beneficial to help mitigate the economic downturn now, but as 
the recovery takes hold, those automatic stabilizers naturally 
fade and the deficit declines, and that is crucially important 
to getting this deficit down over time.
    Mr. Langevin. My time has expired. I just want to say that 
I applaud the President and look forward to working with you to 
focus on creating jobs, jobs, jobs like a laser beam. We have 
to have that focus. There are too many people that are out of 
work. We get it here in the Congress, I know the President gets 
it, and this is going to be a strong partnership to make sure 
that we get this right.
    Chairman Spratt. Mr. Yarmuth.
    Mr. Yarmuth. Thank you, Mr. Chairman. Mr. Orszag, thank you 
for your presentation and answers.
    Last week I was on Fox Business News with Stuart Barney 
responding to the State of the Union, and he asked me whether 
or not I thought that restoring the pre-Bush tax cut rate on 
the upper income earners would be an impediment to growth and 
would stop job creation. I responded that, as someone who 
started a business and have two brothers and a sister, all of 
whom run businesses, and a father who developed a rather large 
company when the income tax highest rate was 70 percent, that I 
hadn't seen that in my experience, whether it was when 
President Clinton raised the highest rate or when President 
Bush lowered it. So I didn't see any reason to believe that. He 
disagreed with me.
    I looked at his background, and I noticed--at least I 
couldn't find any evidence that he had ever run a business or 
been involved in the private sector. But I did notice that he, 
like you, went to the London School of Economics. So my 
question is whether you learned anything at the London School 
of Economics that would give you superior insight into how 
business people behave in situations like that?
    Mr. Orszag. Well, unlike him, but I guess like you, I 
started and ran a small business, which we subsequently sold. 
And I would join you in saying the key thing for a small 
business is not the marginal tax rate, especially if all you 
are doing is returning it to the levels that existed during the 
1990s, but rather it is demand for your product, access to 
capital, and good workers, all of which this budget is trying 
to focus on, get the economy back on its feet to promote 
demand, a variety of steps to promote access to capital, 
including through the Small Business Administration, and the 
new proposal that the President was speaking about today to 
spur small business lending. And then finally, in terms of 
workers in the workforce, investing in education because those 
are the workers of the future.
    Mr. Yarmuth. Thank you for clearing that up for me.
    I have to turn now to a more parochial subject; it 
definitely affects my State, Kentucky, but I think it also 
affects other States, including possibly the ranking member's, 
on this the question of LIFO. The budget proposes the 
elimination of the LIFO accounting method. In my State that 
would dramatically affect the bourbon industry, which is an 
incredibly important economic factor in my State. I know it 
affects the wine business and many other businesses in which 
aging is a factor, aging of inventory.
    The President--and I applaud these goals--has suggested 
that we want to expand our exports, we want to increase our 
manufacturing base, and we obviously want to add jobs. By 
eliminating LIFO and doing it not just prospectively but 
retroactively, and requiring that the businesses that have been 
using it legally for many years would have to make up these 
incredibly large reserves, which would essentially be an 
enormous tax cut and which would put some of these companies 
out of business, have you thought about the impact in regard to 
those three goals the administration set of something like the 
distilling industry and others where it would seem to be 
something that would run counter to the other economic goals 
that we all have?
    Mr. Orszag. Well, again, and as you know, the purpose of 
that proposal is that some firms use last-in/first-out 
accounting for tax purposes, sometimes they use different 
accounting in different settings, and there is a tax policy 
justification for moving away from that. Now, there may well be 
consequences for particular industries. Again, I am going to, 
given that it is a tax proposal and that you are going to have 
Secretary Geithner here, defer to him on answering the specific 
questions involved in particular industries. But again, the 
underlying tax policy justification for the change I think has 
been well laid out in a variety of articles. We will have to 
work with you on the impact on particular industries.
    Mr. Yarmuth. I appreciate that. One last question--and it 
may have been answered here before, but I don't recall it. Some 
of our colleague over the weekend were talking about the fact 
and making the claim that, in terms of non-security 
discretionary income, that we raised it 84 percent in 1 year. 
Would you respond to that and speculate on maybe how they got 
that number and whether there is--well, just comment on that 
claim, please.
    Mr. Orszag. Sure. It is not an accurate depiction of the 
base off of which we are freezing non-security discretionary 
spending. What happened is that category of spending went just 
north of $400 billion in 2008 to just south of $700 billion in 
2009 because of the Recovery Act and because of the measures 
that were necessary to try to mitigate the economic downturn.
    In 2010, it then declined to roughly $450 billion, a little 
bit south of that. We are freezing off of that lower level. So 
it went up, it came down, we are freezing off of the lower 
level. To claim that we are freezing off of that higher level 
is simply wrong.
    Mr. Yarmuth. I appreciate that explanation.
    Thank you, Mr. Chairman.
    Chairman Spratt. Thank you very much.
    We now turn to Mr. Becerra as the cleanup hitter. Mr. 
Orszag has to leave as soon as Mr. Becerra has completed his 
question.
    Mr. Becerra.
    Mr. Becerra. Mr. Chairman, thank you. And Dr. Orszag, thank 
you very much for your patience, for having answered every 
Member's question who attended this hearing.
    I appreciate the President's remarks in his State of the 
Union Address last week. I appreciate that he understands the 
plight of so many American families and the difficulty they are 
having. If I could have chart 4 put up on the screens. I would 
like to talk a little bit more about why this is such an 
important discussion.


    As we talk about a budget and deficits, and we talk in 
terms of trillions and billions, most Americans are thinking 
only in terms of number one, and that is the job that each of 
those individuals has. Unfortunately, for far too long we saw 
Americans losing thousands of jobs to the point where it got to 
be millions of jobs. And while finally we are starting to see a 
reversal of that job loss, it has taken some time. Each one of 
those bars that we see on that screen represents the number of 
jobs lost in the thousands, so you have to add up, if I am 
correct, Dr. Orszag, you have to add up every one of those bars 
and stack each bar on top of itself in order to figure out how 
many jobs have been lost in the last several years, most of 
them under the previous administration. And it has been some 
time in that course of those months to see some progress made.
    Now, I note that there is one lone positive bar on that 
graph, and that was back in November, a couple of months ago, 
where we actually saw job growth. It was only 4,000 jobs that 
we netted in that month, but at least it was 4,000. If I recall 
correctly, you said that we had lost, as a country, more than 
700,000 jobs the day that President Barack Obama was handed the 
keys by former President Bush in January 2009--741,000 jobs I 
believe the actual number was, which amounts to about 24,000 
jobs Americans were losing a day in January 2009 as President 
Bush exited the White House. That has changed, obviously not 
enough because we still have to add each of those bars for each 
of those months that are depicted on that screen on top of 
these other, but as you mentioned before, we are hoping to see 
some positive net job growth in the next couple of months.
    When you put that in the context of this discussion about 
deficits, I think most of us recognize that our priorities 
should be to make sure the private sector is creating the jobs 
that people need because once they are working then they can 
pay taxes. They can pay taxes, and we can take care of our 
obligations to make sure our men and women in uniform are well 
protected and well trained, that we have a well functioning 
government, et cetera, et cetera, et cetera.
    So to me the most important discussion is not so much about 
the trillions and billions we talk about in deficits, but about 
the men and women who are right now working very hard to hold 
on to their jobs and their homes.
    You talked quite a bit about the proposal the President has 
to freeze discretionary spending. I think it is a tough 
decision to make. It is probably something we have to do. I am 
very disappointed though to have heard the President say that 
it was only non-security discretionary spending as others have 
indicated as well. We used to hear about the several hundred 
dollar toilet seat. We know that during the height of the Iraq 
war Halliburton ended up charging the American taxpayer tens of 
millions of dollars for meals to our soldiers which were never 
served. We know from some recent information gleaned from the 
Department of Defense that in Afghanistan we can account for at 
least about $1 billion of contractor-related spending that we 
have no idea how it was spent, but it was about $1 billion in 
most categories that were examined. That totaled about 16 
percent of all the contractor dollars that have been expended 
by the taxpayers.
    And so many of us believe that while we have to make the 
tough decisions to freeze spending in all accounts, if you are 
going to freeze spending for our schools, if you are going to 
freeze spending for seniors programs, if you are going to 
freeze spending for housing programs, for environmental cleanup 
programs, then we should take the same brush to scrub the 
Department of Defense. I don't think any military leader, 
general or admiral, would say that he or she is opposed to 
having the Department of Defense run in as an efficient manner 
as possible so that we can expend every single dollar that we 
give to the Department of Defense for our men and women in 
uniform.
    So I would hope that the President and you all would 
reconsider this notion that there are some agencies that are 
protected while others that do very important work are not. And 
I know that you have mentioned also some reductions and cuts 
that are being made within DOD, but that doesn't mean that we 
can't continue to examine it, and I suspect Congress will 
continue to do so.
    I just wanted to get into one final subject, and that is 
the proposal put by our colleague and friend, Mr. Ryan, the 
Republican proposal, which you mentioned before.
    Again, I would agree with those who have said it is 
appreciated when someone puts forward a proposal. I would agree 
with my colleague, Mr. Connolly, that I totally disagree with 
it. And I hope you would again talk about how it would impact 
our seniors when it comes to health care and Social Security, 
since it would seem to move us towards privatizing those 
programs when we saw what happened to seniors' 401(k) accounts 
over the last 2 years when we saw a major dip in the economy.
    So, having said that, I appreciate that you were here. I 
suspect you have answered my question by having answered any 
number of members' questions in the past. But I hope you will 
take a closer look at that defense budget, because while we all 
agree we have to provide our men and women in uniform with the 
best that we can offer, we have to make sure that we do 
actually give them the best that we can offer.
    Thank you, Mr. Chairman.
    Chairman Spratt. Mr. Orszag, thank you for your excellent 
answers, and thank you for your endurance and equanimity. We 
very much appreciate it, and we look forward to working with 
you as we move forward in the budget season.
    At this point, I would ask unanimous consent that all 
members who have not had an opportunity to ask questions be 
given 7 days to submit questions for the record.
    Ms. Kaptur. Mr. Chairman, I would like to ask unanimous 
consent to place questions in the record regarding OMB's 
restricted bonding, borrowing, enhanced use leasing authorities 
in loan programs, and also on the FBI and financial fraud and 
the staffing that would be attendant to this budget in that 
regard.
    Chairman Spratt. Without objection.
    [Questions submitted by members and Dr. Orszag's responses 
follow:]

            Responses to Questions Submitted for the Record

                           rep. marcy kaptur
    Congress has acted to help the American economy recover from the 
disastrous policies of the last decade by passing the Recovery bill and 
other actions. I would like to focus for a moment on getting the Office 
of Management and Budget to act in a similar manner.
    Dr. Orszag, the Office of Management and Budget has an enormous 
opportunity to enable the job creation potential of the federal 
government through the revival of dormant or OMB restricted bonding, 
borrowing, enhanced-use-leasing authorities, and loan programs that are 
already on the federal books. Examples include the Department of 
Defense's (DOD) Title III loan program (Strategic Metals Program 
including Beryllium, Magnesium, and Titanium Powder projects) and the 
existing bonding authority of the St. Lawrence Seaway Corporation. 
DOD's Title III loan program has been prohibited from use by OMB since 
the early 1980s and the St. Lawrence Seaway Corporation has not been 
allowed to issue bonds for decades. By allowing agencies and programs 
to use the existing authorities to spur economic development we lower 
the budgetary burdens and can help reduce the necessity of 
discretionary spending, which you have frozen.

    Dr. Orszag, what is OMB going to do to get out of the way to allow 
programs that this Congress has created to allow the American economy 
to recovery?
    Will you agree to meet with Members to discuss this more fully and 
can you provide the Committee with a full list of existing programs and 
authorities that OMB has restricted the use of?

    The Administration has taken aggressive action to get the economy 
going again and to create jobs. The Administration worked closely with 
Congress to enact the Recovery Act less than one month after taking 
office, and OMB has focused on accelerating Recovery Act projects, 
while implementing the Act with an unprecedented degree of 
transparency. Further, the President has proposed significant 
additional measures to stoke job creation, including a new tax cut to 
promote small business job creation and new investments in 
infrastructure and clean energy. The Administration also supports 
temporary extension of a number of important measures in the Recovery 
Act to aid families hurt by the current recession.
    I agree with you that the Administration should also work hard to 
promote economic recovery using existing authorities, and we are open 
to discussing any suggestions you and others have to do so. In terms of 
the specific issues raised in your question above, we believe that the 
current policies are appropriate:
     The Defense Production Act (DPA) Title III program is 
designed to maintain domestic defense industrial capacity for critical 
military items. While authority is provided in the DPA for direct loans 
and loan guarantees, the Department of Defense (DOD) is satisfied that 
the current program of purchase agreements meets the defense industrial 
capacity requirement. OMB will continue to work with DOD to maintain 
critical defense industrial base programs within the United States.
     OMB has not prohibited the Saint Lawrence Seaway 
Development Corporation (SLSDC) from using its bonding authority. That 
authority is capped in statute and the Corporation has not requested or 
used any of the remaining $3.2 million in borrowing authority since the 
early 1980s when the SLSDC's obligation to repay its debt was forgiven 
through legislation.
    Dr. Orzag, America is at a crossroads and your budget recognizes a 
flaw in investigating and uncovering financial fraud. After pumping 
hundreds of billions into our financial system to stabilize the 
markets, we must commit the resources to ensuring that our system is 
protected from fraud that is destabilizing the very fabric of American 
society.
    Quoting your own budget documents, ``The FBI anticipates growing 
demands for investigations into fraud and public corruption relating to 
the government recovery efforts. Current levels of FBI agents and 
analysts are inadequate to address existing demands.''

    For the record, we would greatly appreciate a crosscut budget which 
identifies the different budget authorities of the FBI, United States 
Attorney's and Security & Exchange Commissions financial crimes, 
including mortgage crimes, and investigative units. We need to better 
understand how these three different agencies fit together and that the 
numbers you have asked for are appropriate given the immense need that 
your agency has previously identified.

    The President's Budget provides significant and appropriate 
increases for these agencies to investigate financial fraud, while also 
focusing on coordinating enforcement efforts across components of the 
Federal government.
    The FY 2011 President's Budget provides the FBI $453.7 million and 
2,606 positions (2,071 agents) to investigate white collar crime, 
including mortgage, corporate, securities, financial crisis programs 
and government fraud. The request includes an increase of $75.3 million 
and 367 new positions (143 new agents). Similarly, the Budget requests 
$322.4 million and 2,371 positions (1,564 attorneys) for the U.S. 
Attorneys to prosecute white collar crime, including mortgage and 
financial fraud. Incorporated within the total is a $17.2 million 
enhancement providing for an additional 109 positions (88 attorneys). 
In general, new positions will be allocated based on the prevalence of 
financial fraud in various districts and regions.
    The Department of Justice's resources for mortgage and financial 
criminal prosecution and litigation are not limited to the U.S. 
Attorneys. The FY 2011 President's Budget also includes 67 positions 
(45 attorneys) and $16.8 million for the Criminal Division to prosecute 
fraud; 639 positions (377 attorneys) and $117.3 million for the Tax 
Division to prosecute tax fraud; 34 positions (22 attorneys) and $4.6 
million for the Civil Rights Division to address lending and 
foreclosure discrimination; and 118 positions (87 attorneys) and $28.3 
million in the Civil Division for both affirmative and defensive civil 
litigation related to fraud and the Federal response to the financial 
crisis.
    The FY 2011 Budget provides significant resources for the 
Securities and Exchange Commission (SEC) Enforcement program. The 
request for SEC base resources ($1.234 billion) includes $23 million to 
fund new staff in the Enforcement program. These new staff will work on 
investigations, litigation, and improving market intelligence and 
analysis. The request also would allow the agency to invest in new 
enforcement technology such as a system for managing tips and 
complaints, a case management tracking system, and risk analysis tools.

    During the Savings & Loan crisis, estimates show that the FBI 
committed almost a thousand agents to this crisis. Given that the 
financial frauds being reported today, please give provide the 
committee with your confidence level that the resources for SEC, FBI, 
and US Attorney's are sufficient to uncover and prosecute the criminals 
in and around the financial crisis.

    The Administration is very confident of its ability to combat 
financial fraud and white collar crime more broadly. Over the last 
several years, our capacity to combat financial fraud has grown 
substantially. The President's FY 2011 Budget request augments these 
increases by adding $93 million for additional FBI agents and U.S. 
Attorneys, and uses innovative ``force multiplier'' strategies to 
complement increases in personnel. For example, the FBI has developed 
property flipping software and other analytical tools to help detect 
and share fraud information. The President's request would also permit 
the SEC to add a total of over 200 staff years to its enforcement and 
examinations program to uncover and prosecute financial fraud. This 
funding level would also allow SEC to proceed with developing a new 
system for managing the tips and complaints the agency receives, as 
well as new surveillance and risk analysis tools to detect emerging 
problems and frauds in the securities markets.
    The President recently signed an Executive Order establishing the 
Financial Fraud Enforcement Task Force, led by the Department of 
Justice and including the Department of Treasury, HUD, SEC and others, 
to strengthen Federal interagency coordination. The task force's 
leadership, along with representatives from a broad range of Federal 
agencies, regulatory authorities, and inspectors general, works with 
State and local partners to investigate and prosecute significant 
financial crimes, ensure effective punishment for those who perpetrate 
financial crimes, address discrimination in the lending and financial 
markets, and recover proceeds for victims.
                          rep. betty mccollum
    Doctor, as the administration proposes to move forward with some of 
the provisions from the Recovery Act, what elements are you proposing 
to extend? Which ones are you looking at reframing? Why should we do 
this? And what is their costs, and what is the cost to our society and 
our economy if we don't reinvest dollars in the Recovery Act?

    The President's FY 2011 Budget proposes to extend key measures from 
the Recovery Act to provide relief for middle-class working families' 
unemployed workers, and financially-strapped State governments. 
Specifically, the Budget proposes to extend several important Recovery 
Act tax provisions, including the new Making Work Pay tax credit, COBRA 
health insurance premium assistance, energy and housing tax credits, 
bonus depreciation for business investment, and increased expensing for 
small business. The Budget also proposes to extend the Recovery Act's 
enhanced Medicaid Federal Medical Assistance Percentage (FMAP) for an 
additional six months, extend emergency unemployment compensation and 
extended benefits, enhance the TANF emergency fund, and provide a 
second round of $250 Economic Recovery Payments to Social Security 
recipients and others who may not benefit from Making Work Pay. In 
total, these measures will provide $166 billion of support to 
individuals, families, businesses and State governments.
    In addition to these extensions of Recovery Act measures, the 
Budget includes a $100 billion allowance for other jobs initiatives. 
This allowance supports job creation measures along the lines that the 
President laid out in December, including help to promote small 
business hiring, along with new investments in infrastructure and clean 
energy. The Administration is working with the Congress on the specific 
measures to be included in a jobs bill.
                            rep. rob andrews
    It's my understanding this budget proposal does include proposals 
that would cut taxes for middle class families, would cut taxes for 
businesses, particularly those that create new jobs, and would continue 
investment in building roads and bridges and clean water systems, and 
things of that nature. Is that right? And about how much is that of the 
$3.4 trillion--$3.8 trillion budget that we're talking about here, how 
much is that?

    The President's FY 2011 Budget includes $143 billion in tax cuts 
for families and individuals and $97 billion in tax cuts for businesses 
over 2010-2020, including enhanced incentives for saving for 
retirement, education, and business investment. These tax cuts are in 
addition to the more than $100 billion in tax cuts over 2010-2020 
proposed as part of temporary recovery measures, including the 
President's proposed ``Jobs and Wages Tax Cut'' for small businesses. 
Furthermore, the baseline used for the FY 2011 Budget assumes 
extensions of the 2001 and 2003 tax cuts for those taxpayers with 
incomes of up to $250,000 (married) and $200,000 (single).
    The Budget also provides substantial support for new investment in 
infrastructure. The Budget creates a $4 billion National Infrastructure 
Innovation and Finance Fund (I-Fund); invests in a smart, energy-
efficient, and reliable electric grid; supports clean water 
infrastructure investments; modernizes the air traffic control system; 
and sustains support for high-speed rail. These proposals build on 
investments already enacted in the Recovery Act, which delivered the 
largest investment in the nation's infrastructure since President 
Eisenhower called for the creation of the national highway system.
                           rep. rosa delauro
    It would appear that the budget eliminates the idea of a national 
infrastructure (inaudible) as it was proposed last year with the 
capitalization of $5 billion a year over five years. Instead, we have a 
national infrastructure and innovation fund within the Department of 
Transportation.

    How much private capital do you anticipate the fund will leverage? 
And how many jobs do you think can be created with the fund? Is the $4 
billion request for 2011 a one-time request, or does the administration 
propose this is an ongoing annual funding level?
    If the fund is located in the Department of Transportation, with a 
board composed of senior DOT officials and other federal agency 
representatives reporting to the transportation secretary, how do we 
expect or how can we expect it to be an objective, independent entity? 
Further, questions with regard to the--it looks as if we are just 
codifying the TIGER grant team. How is the fund not simply codifying 
the TIGER grant team?
    And it also appears as if the budget continues the TIFIA assistance 
program for surface transportation. The question is, why didn't the 
administration propose folding TIFIA programs into the fund? And does 
it make sense for the DOT to have two federal credit programs, the fund 
and TIFIA that make loans and provide other forms of credit which 
(inaudible) surface transportation?
    Finally, it would appear that this new fund is singularly about 
transportation. The bank, as you know, would have gone beyond 
transportation infrastructure, to the environment and energy, 
telecommunication. Is it the sense that we're going to start out with 
transportation, expand it to other sectors, or do you believe 
(inaudible) just do a transportation infrastructure? If you house it 
within the DOT it does become problematic if other sectors are to be 
added in the future.

    The FY 2011 Budget includes a proposal that would create an 
independent operational unit within the Department of Transportation 
(DOT) called the ``National Infrastructure Innovation and Finance 
Fund'' (I-Fund). This proposal builds on the experience gained in 
discussing the FY 2010 proposal for a National Infrastructure Bank 
(NIB) with multiple stakeholders.
    The Fund will be a program of the Federal government that invests 
in at least some projects that are not self-financing and therefore 
require grant assistance; as proposed, it will operate without 
revolving funds or raising its own debt. It would be funded by 
discretionary appropriations that support projects through grants, 
credit, or a combination of both in a manner consistent with the 
Federal Credit Reform Act. The Administration continues to advocate a 
total commitment of $25 billion in Federal budget authority for the 
Fund. While we are confident that this level of funding, combined with 
anticipated levels of coinvestment, could support a multi-year 
portfolio of hundreds of high-value projects, we cannot predict with 
precision the number of jobs that will be created either directly or 
indirectly as this will depend largely on the nature of the projects 
ultimately supported by the I-Fund. However, we do believe that this 
level of funding will enable the I-Fund to deliver a significant impact 
on national economic growth and employment opportunity for Americans 
for years to come.
    Housing the National Infrastructure Innovation and Finance Fund as 
an independent operational unit within DOT is intended to strike a 
balance between independence and responsible oversight and 
coordination. A key goal of the Fund will be to seek out and invest in 
infrastructure projects without the ``politics as usual'' of past 
funding allocation and project selection practices. DOT will work to 
establish a governance structure that fosters independent project 
evaluation and investment decisions but with appropriate oversight 
mechanisms and safeguards. The Fund will build an unbiased analytical 
capability to evaluate infrastructure strategies and make investments 
that promise competitive returns on investment from a broad public 
benefits standpoint.
    The core mission of the Fund is to employ a consistent, 
independent, and rigorous analytical process to invest in projects 
nationwide that would be difficult, if not impossible, to fund under 
existing authorities. The proposal does not simply codify the TIGER 
grant team. Unlike most competitive grant programs, including DOT's 
TIGER grants, the Fund will employ a business model that takes a 
forward-leaning, entrepreneurial approach to investing and will seek 
out strong infrastructure proposals rather than enlist a typical grant 
solicitation cycle. The Fund will play a key leadership role by 
investing upfront planning and feasibility funding to identify 
regionally and nationally significant, high-value, projects, evaluate 
the merit of those projects, and then fund projects with the greatest 
promise for improving a region's or the nation's transportation 
outcomes. The Fund will target high-performance investment 
opportunities nationwide in communities large and small, rural and 
urban.
    Through the I-Fund, DOT will establish a funding source capable of 
overcoming jurisdictional boundaries, modal silos, and other obstacles 
to well-coordinated infrastructure strategies and investments. Part of 
this effort will be enabling coordination across the various sources of 
infrastructure finance and investment, both Federal and non-Federal. 
The I-Fund will coordinate its own resources with private investors as 
well as other Federal and non-Federal grant and credit programs, 
including TIFIA, to deliver complete financing packages for high value 
projects nationwide. Consolidation of these sources of Federal credit 
assistance may be considered in the future, after an I-Fund is 
established and it is clear how and to what extent these forms of 
assistance overlap.
    The Fund will target transportation and transportation-affiliated 
projects with a focus on perfecting a defensible cross-modal investment 
model. Although DOT will be limited to transportation and 
transportation-related investments, the Fund will seek coordination 
with other related infrastructure investment sectors including housing, 
commercial development, environmental protection and others. The Fund 
seeks to overcome unproductive stove-piping across transportation modes 
and achieve better coordination with investments in other 
infrastructure sectors that are related to transportation. Once this 
model is proven, the Fund may then serve as a powerful business case 
for Federal investment in other sectors.
                           rep. chet edwards
    Do you have any kind of cost on what it would add to the deficit, 
some of the proposals in that Ryan road map--the Republican road map--
the cost of eliminating the estate tax over 10 years, reducing the 
individual--the highest tax rate from 35 percent to 25 percent, 
eliminating capital gains tax, interest income, and dividend income, 
and extending the 2001 and 2003 tax cuts? Do you have any ballpark 
numbers on how much those individual actions would increase the 
national debt over a 10-year period?

    The Administration does not have an estimate of the cost of the 
Ryan budget plan. And, while CBO has done a long-term assessment of the 
budgetary impact of the Ryan plan, CBO did not estimate the fiscal 
impact of Rep. Ryan's tax proposals and, instead, simply assumed a 
revenue level at the direction of Rep. Ryan's staff.
    With that said, it is evident that the tax cuts in the Ryan plan 
would cost trillions of dollars, and that, overall, the plan would 
substantially shift the tax burden from upper- to middle- and lower-
income Americans. Relative to income, the tax cuts under the Ryan plan 
would tend to redound more to the benefit of those towards the top of 
the income spectrum, and the financing mechanism--a consumption tax--
would tend to impose a significantly higher burden on those toward the 
bottom and middle of the income spectrum.
    Furthermore, Rep. Ryan's staff directed CBO to assume a revenue 
level that, over the next two decades, would be the equivalent of 
continuing the 2001 and 2003 tax cuts as well as AMT relief. In other 
words, Rep. Ryan's staff asked CBO to assume that his plan raises no 
more revenue than if current policy were continued, while still 
imposing a substantial tax increase on low- and middle-income 
Americans.
                           rep. robert scott
    In terms of dealing credibly with jobs, one of the challenges we 
have is, as we create jobs on the federal level, states are laying 
people off. The Recovery Act provided $140 billion for states, and yet 
they still cut their budgets an additional $300 billion, for a total of 
almost $450 billion. That just went to offset what the states were 
doing. Is it accurate that--is that accurate? We've essentially offset 
the damage the states were doing to the economy?

    The Recovery Act will provide over $280 billion in funds to State 
and local governments. These funds supplement State spending in such 
areas as education, transportation, and job training. They also go 
toward relieving State budget shortfalls. This relief is being 
primarily delivered through the State Fiscal Stabilization Fund, most 
of which goes to State and local education programs, and a temporary 
change in Medicaid Federal matching funds.
    Evidence suggests that the Recovery Act's State and local fiscal 
relief has helped these governments avoid taking steps that would have 
otherwise harmed economic growth and cost jobs. According to an 
analysis by the President's Council of Economic Advisers (CEA), States 
that received more Medicaid payment relief through the beginning of 
July had experienced better labor market outcomes, controlling for 
other factors (``The Economic Impact of the American Reinvestment and 
Recovery Act of 2009,'' September 10, 2009). Furthermore, the CEA found 
a positive relationship between total Recovery Act payments to States 
through the beginning of July and change in employment in such areas as 
public safety, education, health care, and other sectors where State 
governments provide a large amount of financial support.
    In light of the continued projected shortfalls in State and local 
budgets and the need to continue bolstering job creation and the 
economy, the Budget proposes to temporarily extend several Recovery Act 
programs, including providing a six-month extension of the Recovery 
Act's Federal Medical Assistance Percentage (FMAP) relief. Such efforts 
will help State and local governments to avoid potential program cuts 
or tax increases to balance their FY 2011 budgets.
                          rep. michael simpson
    What have we put in this budget to settle the lawsuits that are 
inevitably going to come--and that we are going to lose--when we 
withdraw our application for Yucca Mountain? How much money is in there 
for that? And how did we come to that amount? And what do we assume the 
final amount's going to be?

    The Administration has demonstrated its commitment to finding a 
nuclear waste disposal solution by appointing the Blue Ribbon 
Commission on America's Nuclear Future, which will identify 
alternatives for the disposition of spent nuclear fuel that minimize 
the long-term liability to the taxpayer. The decision to terminate the 
Yucca Mountain license application does not mean that we are abandoning 
our responsibility to dispose of nuclear waste.
    No funds are provided in the FY 2011 Budget for liabilities arising 
from Yucca Mountain litigation. As is the case for most court judgments 
and Justice Department settlements, the Judgment Fund would be the 
payment source for any liabilities arising from Yucca Mountain 
litigation. The FY 2011 Budget does not project the budgetary impact of 
cases in litigation, on the assumption that the Federal government will 
prevail. The future costs of settled cases also are not shown until a 
claim for reimbursement has been reviewed and accepted.

    Do you know--in terms of a question, do you know how much money 
we're spending budget-wide in addressing global warming and greenhouse 
gas emissions and those types of things? Almost every agency in there 
has money for global warming studies. And I know in a lot of the other 
agencies they have the same thing. How much are we spending, and how 
coordinated is all of this spending?

    The FY 2011 Budget supports the Administration's comprehensive 
energy and climate change strategy. The Administration envisions the 
United States leading the world in research, development, 
demonstration, and deployment of clean-energy technology to reduce 
dependence on energy imports and to mitigate the impact of climate 
change. The Budget acknowledges the importance of scientific research 
to improve our knowledge of Earth's past and present climate 
variability and change., It also provides resources targeted to combat 
global climate change and help the most vulnerable countries prepare 
for and respond to its impacts. This approach will allow the US to 
demonstrate continued leadership in forging a global solution to the 
climate challenge.
    The US Global Change Research Program (USGCRP) and the Climate 
Change Technology Program (CCTP) are multi-agency programs that provide 
guidance on the portfolio of federally funded climate change science 
and technology related activities and include working groups and other 
efforts to promote coordination.
    The FY 2011 Budget requests $2.6 billion, an increase of over $400 
million from the FY 2010 enacted level, for research and applications 
to support the goals set forth in the USGCRP strategic plan. The USGCRP 
was mandated by Congress in the Global Change Research Act of 1990 
(P.L. 101-606) to improve understanding of uncertainties in climate 
science, expand global observing systems, develop science-based 
resources to support policy making and resource management, and 
communicate findings broadly among scientific and stakeholder 
communities. The USGCRP budget request is detailed in table 21-2 of the 
Analytical Perspectives volume that accompanies the FY 2011 Budget 
request.
    No later than 120 days after the Budget release, OMB will submit 
the Federal Climate Change Expenditures Report to Congress which will 
include an accounting of climate funding by line item. In addition to 
the climate science budget, this report will summarize funding requests 
for climate change technologies, international assistance, and tax 
provisions that may reduce greenhouse gas emissions. OMB coordinates 
the accounting of climate funding by including definitions of the major 
categories (i.e. climate change technology, climate change science, and 
international assistance) in Circular A-11, an annual document that 
provides guidance on the preparation, submission, and execution of the 
Budget. Efforts are underway to define climate change adaptation 
activities and to summarize funding in this area. The White House 
Council on Environmental Quality (CEQ), the Office of Science and 
Technology Policy (OSTP), and the National Oceanic and Atmospheric 
Administration (NOAA) have initiated a one year interagency review 
process to develop Federal recommendations for adapting to climate 
change impacts both domestically and internationally.
    Through the internal review of agency budget submissions, OMB also 
coordinates funding requests by working to prevent duplication and 
focusing on highest priority activities. We look forward to answering 
any additional questions you may have about climate change funding 
after the expenditures report is complete.
                           rep. steve austria
    Let me just ask you, in this bill how many new entitlement programs 
are created in this budget, and what is the total amount of spending 
increase that's involved in those new entitlements?

    The President's FY 2011 Budget contains a substantial extension of 
health insurance coverage and security. It does so by proposing the 
largest middle-class tax cut for health care in history; thereby 
reducing premium costs for tens of millions of families and small 
business owners who are priced out of coverage today. This reform will 
help over 31 million Americans afford health care who do not get it 
today--and will make coverage more affordable for many more.
    And health insurance reform will also improve the nation's fiscal 
health. Unlike the tax cuts and entitlement expansions of the past 
decade, the President's health insurance reform plan will be fully paid 
for--and, in fact, will reduce the deficit by more than $100 billion in 
the first decade and by more than $1 trillion in the decade after that. 
In other words, the President's reform plan will begin to address the 
key driver of the Nation's long-term fiscal imbalance--rising health 
care costs.
                          rep. robert aderholt
    In the Administration's ten year budget outlook, its best 
prediction for the deficit as a percentage of GDP is 3.6 percent. You 
have stated that the deficit needs to be at least 3 percent of GDP to 
be manageable. Why does the President not submit a budget which meets 
that criteria as a starting point for discussions within Congress?

    The President's FY 2011 Budget proposes more than $1 trillion of 
deficit reduction, even excluding savings from phasing down war costs. 
This is more deficit reduction as a share of the economy than has been 
proposed in a Budget in more than a decade. These deficit-reducing 
proposals include a three-year freeze in non-security discretionary 
spending, and a new fee on the largest financial institutions to ensure 
that every dime spent on TARP is recouped by taxpayers who bailed them 
out.
    We believe these ambitious proposals will make vital progress 
toward fiscal discipline and provide a good starting point for Congress 
to begin its deliberations on the budget this year. If all the 
President's proposals were enacted, we estimate that the deficit would 
remain above our ultimate goal for reduction. That is why the President 
is creating a new, bipartisan National Commission on Fiscal 
Responsibility and Reform--to bring both sides together to tackle our 
long-ignored fiscal challenges and build bipartisan consensus.
    As the President announced on February 18, 2010, the Commission 
will be appointed by the leaders from both political parties in both 
congressional houses as well as by the President. It will be tasked 
with making recommendations that put the budget in primary balance by 
2015, which means that we are paying for all Federal government 
operations and programs while limiting deficits to about 3 percent of 
GDP. This is projected to stabilize the debt to GDP ratio at an 
acceptable level at that time.
    The commission is also charged with making recommendations that 
meaningfully improve the long-term fiscal outlook. In the past, our 
nation's leaders used extraordinary processes--much like this fiscal 
commission--to construct solutions that, for instance, helped save 
Social Security for generations to come and turn deficits into 
surpluses. We believe that the National Commission on Fiscal 
Responsibility and Reform can be just as successful.

    When deciding to cancel NASA's Constellation Program, did you 
consider the billions of dollars spent thus far in the sense that it 
represents a lot of progress which now will have to be repeated by 
companies far less experienced than the current Constellation 
contractors?

    The President is committed to eliminating programs that do not 
work.Last year, the Augustine Committee found that the Constellation 
Program was significantly over-budget and behind schedule. The 
Administration's proposal to end the Constellation Program would 
reinvigorate NASA by harnessing the ingenuity of private companies to 
build the next human space flight vehicles and, also, enhancing 
investment in NASA's scientific research.
    Through the funding proposed in the President's FY 2011 Budget, 
NASA will initiate a timely transition from Constellation to a more 
sustainable and efficient program to provide access to low Earth orbit 
destinations while greatly enhancing opportunities for expanded human 
exploration to such destinations as Mars, the Moon, and near-Earth 
asteroids. This integrated program will capitalize on the progress and 
investments we have already made by including the extension and 
enhanced utilization of the International Space Station, likely to 2020 
or beyond; providing accelerated and more advanced Earth science and 
climate change missions; initiating a steady stream of robotic 
precursor missions; enabling a new and innovative technology 
development program to support both the realization of long-pursued 
human exploration beyond LEO and contributing to improved conditions 
for life here on our home planet, Earth; and integrate a realistic plan 
for conducting coordinated human and robotic exploration of our solar 
system.
    While the cost of the Constellation Program to date does not 
justify continuing it, its lessons will be valuable as we embark upon 
the President's new course for NASA.

    Since its inception, the Constellation Program has performed 
several successful tests and the Ares I X text went very well in the 
fall of 2009, despite having less funding than it was promised in multi 
year budgets. The new Ares rockets will be 10 times safer than the 
shuttle. Should the so called commercial companies follow the same 
safety criteria as the current Constellation contractors? If not, why?

    The tests of the Constellation Program to date have provided 
valuable information on launch vehicle and crew capsule design. NASA 
will be careful to retain these data and discoveries for future use as 
it moves forward with the President's new approach for the U.S. space 
program.
    Spaceflight is inherently risky, but both NASA and the commercial 
industry are committed to safety. Under the President's new approach, 
any future crew transport will be designed to be much safer than the 
Shuttle--starting with a crew escape system that will greatly increase 
the survivability of launch accidents . Further, NASA will provide 
rigorous oversight by setting and enforcing standards and processes to 
ensure that commercially built and operated crew vehiclesare safe.
                           rep. robert latta
    How much of an increase would we have seen for total federal 
employment going up in the last, let's say, two years, for the last 
year that you decided?

    Chapter 10 of the FY 2011 President's Budget Analytical 
Perspectives volume provides information on ``Improving the Federal 
Workforce.'' Table 10-1 shows a growth of 15 percent in full-time 
equivalent (FTE) employment for the Executive Branch civilian workforce 
(excluding Postal Service) between 2007 and 2011. Most of the increase 
(79 percent) is at five agencies--the Department of Defense, the 
Department of Veterans Affairs, the Department of Homeland Security, 
the Department of Justice, and the Department of State--that are 
centrally involved in fighting the wars in Iraq and Afghanistan, 
providing care for our returning veterans, protecting our country from 
the threat of terrorism, and advancing our Nation's interests abroad.

    Chairman Spratt. Thank you again. We look forward to 
working with you.
    [Whereupon, at 5:10 p.m., the committee was adjourned.]

                                  
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