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


 
                      THE FEDERAL BUDGET FOR 2011 
                               -------- 

                                           Tuesday, March 16, 2010.

              FISCAL YEAR 2011 BUDGET AND ECONOMIC OUTLOOK

                    Congressman David Obey, Chairman

                               WITNESSES

HON. TIMOTHY F. GEITHNER, SECRETARY, U.S. DEPARTMENT OF THE TREASURY
CHRISTINA D. ROMER, CHAIR, COUNCIL OF ECONOMIC ADVISORS
PETER R. ORSZAG, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET

                   Opening Statement of Chairman Obey

    Chairman Obey. I ask the room to come to order.
    Good morning, everybody. We are here today to discuss the 
budget and the economic situation and plans for the coming 
year.
    These plans need to be put in proper context. President 
Obama inherited four major cost drivers: the cost of two wars; 
the cost of TARP; the revenue losses due to the economic 
downturn; and the revenue loss due to two unpaid-for tax cuts, 
benefiting the wealthy to a very large measure.
    These circumstances didn't just happen overnight, and they 
can't be fixed overnight either. However, the American people 
are very clear in their expectations. Their main concerns are 
jobs, family income, and keeping the United States strong at 
home and abroad.
    President Obama, as virtually his first action last year, 
asked Congress to pass an economic recovery package aimed at 
reducing job losses and preventing another Great Depression.
    I would ask the staff to put Chart 1 up on the screen, 
please.
    As Chart No. 1 shows, the cost of the Recovery Act, 
including interest, which is demonstrated by the bar on the 
right of the chart, is less than 10 percent of the total 
deficit legacy that we face over the coming years: $1.1 billion 
versus about $11 billion.
    Now, we all know that we have to address the debt and the 
long-term budget deficits in order to provide for the long-term 
health of our Nation. But as we do so, we cannot fail to deal 
with three other serious deficits: the jobs deficit, the income 
deficit, and the opportunity deficit.
    This economy has shed 8.4 million jobs since December of 
2007. Almost one-tenth of the labor force is unemployed, and 
one-sixth is either unemployed or underemployed. To ease that 
job loss, the Congress and the administration cooperated in 
passing the Recovery Act.
    I now invite your attention to Chart No. 2.
    Some people say that the Recovery Act has not saved a 
single job. If they cannot see that that assertion is not true, 
it is simply, in my judgment, because they don't want to see. 
As Chart 2 demonstrates, between December of 2008 and March of 
2009, we lost 753,000 jobs a month. We enacted the Recovery Act 
in February of 2009, and it took several months for it to begin 
to take effect. As the chart demonstrates, in the 3 months from 
October of 2009 to January 2010, that job loss declined from a 
high of 750,000 to 35,000, a 95 percent reduction.
    While none of us will be satisfied until the economy is 
once again adding jobs, we have come a long way in the last 
year in turning the picture around. In each of the last couple 
of months, full-time employment has actually grown by hundreds 
of thousands. However, the hole is deep, and it will take time 
and constant effort to fill it.
    You know, every week somebody asks me why Americans are so 
angry. I would ask it another way: Why on Earth wouldn't they 
be angry? They have been given the shaft for most of the last 
decade. The fact is most Americans are suffering from a 
different kind of deficit: an income deficit.
    From the New Deal until a generation ago, incomes were 
growing at about the same rate for everyone, from working 
families to the richest among us. Since the 1970s, however, 
almost all income gains have gone to the top. Income for the 
middle fifth of American families rose only 15 percent from 
1979 to 2006, and most of that growth came about because women 
were working much longer hours each year than three decades 
ago. In contrast, those with incomes in the top 10 percent saw 
their income grow by 133 percent. Those in the top 10 percent 
now receive half of all income in America.
    Chart No. 3, if the staff would put it on the screen, 
please.
    Chart No. 3 shows that those even higher on the income 
ladder have had mind-boggling income gains. In 2007, the 
average income of the top one-hundredth of 1 percent reached 
$35 million, up almost tenfold over the last three decades. 
Meanwhile, the rest of society was getting table scraps.
    We have seen the largest transfer of income up the income 
ladder in recorded economic history. Why shouldn't middle-
income taxpayers be angry?
    And, since 2000, this income deficit has only been made 
worse by passage of huge tax cuts tilted toward the rich. Some 
are still pushing to eliminate the estate tax that affects only 
the richest. That is a prescription not to heal the patient but 
to poison it.
    What can we do to restore balance and budget discipline? 
Enacting health care reforms would create an important safety 
net for working families. Allowing tax cuts for the top 2 
percent of income to expire as scheduled would also, it seems 
to me, make sense.
    And there is one more deficit we ought to confront, which 
is addressed by Chart No. 4. The opportunity deficit is perhaps 
the most troubling of all that we face. Many studies have shown 
that family income is a greater determinant of college 
graduation than the aptitude of students.
    Among students who score in the top quarter on 8th-grade 
math tests, the child of a wealthy family who has graduated 
from college graduated 74 percent of the time, while the child 
who came from a poor family graduated only 29 percent of the 
time, even though they demonstrated the same ability. As a 
matter of justice, we need to provide these low- and middle-
income kids the better education opportunities they need and 
they deserve.
    So, in summary, this is the context in which our witnesses 
appear before us today to explain the administration's economic 
policies and budget policies--the context of how jobs will be 
created, how income differences can be reduced, and how 
opportunities can be created for those in the middle and lower 
rung of our economic scale.
    We have with us today Treasury Secretary Geithner, Council 
on Economic Advisors Chairman Romer, and OMB Director Orszag. 
And after I have called on Mr. Lewis for whatever comments he 
would like to make, we would be happy to hear from our three 
witnesses.
    Mr. Lewis.
    [Statement by Chairman David R. Obey.]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                 Opening Statement of Congressman Lewis

    Mr. Lewis. Thank you very much, Mr. Chairman.
    I digress before addressing specifically our panel. Our 
late leader in the committee, Jack Murtha, almost threw people 
out of the room when they put up charts. That is almost 
entirely because we all know that charts can serve their own 
purpose. And, indeed, it brings forth the phrase, ``Liars, darn 
liars, and statisticians.''
    But, in the meantime, I would like to begin this morning by 
expressing our thanks to Secretary Geithner, to Director 
Orszag, and to Dr. Romer for being with us today.
    Even as Republicans and Democrats remain divided on the 
many issues of the day, I believe we are all in agreement that 
the fiscal path we are currently on is unsustainable. With an 
annual deficit of $1.6 trillion, unemployment hovering near 10 
percent across the country--in my district, pushing in many 
places beyond 15 percent--and an economy showing only tepid 
signs of recovery, it is clear that we must change course now 
or face catastrophic consequences in the very near future.
    My colleagues, I think the simple truth is that Uncle Sam, 
among other things, needs a diet. Our greatest challenge and 
our greatest hope to achieving a lasting recovery lies in 
curbing Uncle Sam's appetite for spending. It is time to cut up 
the government credit card and live within our means or face 
disaster.
    Since 2007, the Appropriations Committee has overseen the 
unprecedented 28 percent increase in annual nondefense 
discretionary spending. Last year alone, nondefense and 
veterans discretionary spending increased by almost 13 percent. 
And that is excluding the $862 billion stimulus package.
    This stunning acceleration of spending has led to 
skyrocketing deficits, but annual discretionary funding is only 
part, as you know, of that equation. Over the long term, at 
current projections, spending on the three major mandatory 
entitlement programs will one day consume our entire budget.
    Changing course will require a level of political courage 
not often found here in Washington. Absent making tough 
choices, starting today, we will continue inflicting lasting 
damage on our economy, affecting not only our grandchildren but 
their grandchildren as well.
    Earlier this year, the President announced with great 
fanfare that he would submit a fiscal year 2011 budget that 
freezes most nondefense and non-homeland discretionary 
spending. However, that doesn't appear to be the budget that he 
has submitted. If I am wrong, I would hope you would clarify 
that.
    I say that, because the President's budget currently 
increases spending across eight of the 12 Appropriations 
subcommittees, where is the suggested freeze? Mr. President, we 
are anxious to see your freeze.
    It is disingenuous to suggest that the budget represents 
anything close to a freeze, particularly when it is being 
applied to the budget after last year's 13 percent increase in 
discretionary spending and after last year's stimulus package, 
which was approved under the faulty premise of stimulating the 
economy and creating jobs. Unemployment rates at 15 percent in 
my district would suggest that clearly has missed the target.
    In addition, the President's plan relies on several 
accounting gimmicks, like transferring Pell Grants to mandatory 
spending, to skew the true totals. Ultimately, this proposal 
will have very little, if any, positive effect on our overall 
budget picture. There is not a Member in this room today who 
believes this budget will result in significant deficit 
reduction.
    In my view, the President's budget falls woefully short in 
reining in the government's spending. It simply doesn't go far 
enough, given the scale of the fiscal challenges we face. The 
administration continues to ignore the explosive growth of 
entitlement programs and places its hopes in a fiscal 
commission to address the tough issues of this budget.
    Sadly, this commission is not accountable to Congress or 
the American public, and it won't even begin to make 
recommendations until after the midterm elections. About the 
time we start running our government by way of commission is 
about the time we truly know we are on the pathway to 
bankruptcy.
    The administration's own numbers paint an unflattering 
picture of the President's budget. Over the course of the next 
10 years, when the administration assumes the economy to have 
recovered from the recession and the war in Iraq to have ended, 
our debt, deficits, and spending will remain out of control and 
will continue to worsen.
    Assume for a moment that we finally implemented this 
President's budget. The deficit would never drop below $700 
billion and would start climbing above $1 trillion again by 
fiscal year 2020. Publicly held debt would nearly triple by the 
year 2020. The interest on this debt would quadruple over the 
same period and would become one of the largest single 
expenditures of the Federal budget.
    Ironically, the issue is not lack of revenue under the 
President's budget. This is because our President is proposing 
nearly $2 trillion in additional receipts over the next decade 
from various tax increases, fee increases, and other revenue-
raisers. So not only will Uncle Sam be spending more, but the 
President's budget will be aggressively taking money out of the 
pockets of taxpayers and out of the private economy.
    At this moment, for every available job in the United 
States, there are six people now seeking work. The President 
has said that creating new jobs and reducing unemployment is, 
and I quote, "the single most important thing we can do to 
rebuild the middle class."
    The key to job growth lies not in more spending, more 
stimulus, or more jobs bills, but in less spending, less 
taxation, and removing regulatory barriers that will hinder 
economic growth. Putting it simply, the administration is not 
only spending too much, in my view, it is scaring the hell out 
of small businesses, the economic engine of our national 
economy.
    It has done this through promoting cap-and-trade 
legislation, new rules on greenhouse gases, and new taxes and 
fees from its health care reform bill--all of which will result 
in higher prices that will be passed on to consumers. How many 
small businesses are going to invest or rehire anyone in this 
uncertain environment?
    We can agree to disagree on the cause of our economic 
troubles, but the fact remains that we cannot spend our way to 
economic health. Until this Congress and this administration 
curbs its appetite for spending, our economy will continue to 
suffer. I will close, as I began, with this comment: The simple 
truth is that Uncle Sam does need to go on a diet.
    Thank you, Mr. Chairman.
    Chairman Obey. Well done.
    If we could proceed with our testimony, I would ask each of 
our witnesses to please hold your comments to 5 minutes.
    And I will ask each Member, when we get to the questioning 
period, to remember that the 5-minute limitation applies to 
both question and answer. So if Members would like to receive 
an answer from the witnesses, it would be very helpful if we 
don't give 5-minute speeches along the way. We will have to 
keep a very tight clock this morning so that as many Members as 
possible have an opportunity to question.
    Secretary Geithner.
    Secretary Geithner. Thank you, Chairman Obey, Ranking 
Member Lewis, members of the committee. Thanks for asking us to 
come up and speak with you today.
    Your hearing takes place at a critical moment for the 
American economy. We are seeing some encouraging signs of 
progress, but we face many, many daunting challenges ahead. 
Today, though, we can say that because of the actions we took 
to put out the financial fire and because of the Recovery Act, 
the economy is expanding.
    Because we provided 95 percent of working Americans with a 
tax cut; because we provided billions to State and local 
governments to maintain basic services to keep teachers, police 
officers, firefighters, first responders on the job; because we 
provided emergency relief to those hardest hit by the recession 
by expanding and extending unemployment benefits and to make 
health insurance cheaper for families who rely on COBRA; 
because we provided support for infrastructure projects that 
are rebuilding roads and modernizing buildings across the 
country; because we acted to bring down the cost of borrowing 
from municipal governments for families and for businesses--
because of all that, the economy is expanding, exports are 
rising, manufacturing output is increasing, businesses are 
investing again, and consumption is growing.
    This is progress, but this recession caused a huge amount 
of damage, and it is going to take a lot of time to repair the 
wreckage and establish a stronger foundation for future growth 
in income and opportunity in this country.
    Now, the President believes that right now it is important 
that the Congress act to reenforce this expansion and make sure 
that it translates into job creation and broad-based income 
growth that reaches across the country. And he believes the 
best way to do that is for Congress to authorize targeted, 
additional investments in the following areas.
    First, we want to ramp up support for small businesses. We 
proposed tax cuts for small businesses; a new small-business 
lending fund that will increase access to credit for small 
businesses; and expanded authority for the Small Business 
Administration.
    Second, we need to boost investment in the Nation's 
infrastructure so we can help enlist the private sector to take 
on public works projects that are overdue and will help put 
more Americans back to work.
    Third, we need to continue supporting State and local 
governments so that they can avoid further cuts to essential 
services and personnel.
    And we also need to invest in clean energy, because by 
providing incentives for consumers to retrofit their homes now 
and promoting energy efficiency, we can help American 
households save money, help reduce emissions, and help create 
clean jobs.
    Now, Chairwoman Romer will speak shortly--will shortly 
speak in greater detail--she may speak shortly, too--about our 
economic outlook and the immediate challenges ahead. But at the 
core of the President's economic strategy is a recognition that 
we need to invest in reforms so that we can innovate and grow.
    We need to invest more in basic science and research so 
that American businesses will fund the technologies of the 
future. We need to invest in education so we can do a better 
job of teaching and creating the skilled workforce of tomorrow. 
We need to invest in export promotion, because the more 
products our businesses make and sell to other countries, the 
more jobs we will support at home. And, at the same time, we do 
enact a set of reforms that are critical to how the economy 
performs in the future: Reforms that reduce the rate of growth 
in health care costs, reforms to change how we use energy, and 
financial reforms that will protect consumers and investors and 
support future economic growth by making sure our financial 
system is channelling the savings of Americans into investments 
in companies that are innovating and growing, not just in 
feeding real estate and financial booms.
    Now, these are necessary steps, but, of course, as you have 
both recognized, they are not enough. As we act to reenforce 
this economic expansion, as we pursue investments and reforms 
that are vital to the economy and to our future, we need to 
return again to living within our means.
    When we have strong growth in place, we need to begin the 
process of reducing our deficits. Deficits matter. Ours are too 
high; they are unsustainable. And the American people, along 
with investors around the world, need to have more confidence 
in our ability to bring them down over time.
    Now, the President has outlined in his budget a set of 
policies to achieve that goal, policies that would generate, if 
enacted by the Congress, more than $1.2 trillion in deficit 
reduction over the next 10 years, reduce our deficit to below 4 
percent of GDP. And this is more deficit reduction as a share 
of the economy than any President has proposed in more than a 
decade.
    And, of course, that is why the President has created a 
bipartisan national commission on fiscal responsibility charged 
with bringing up further reducements in our medium-term 
deficits and proposing ways to deal with our long-term 
deficits, as well.
    Now, Director Orszag is going to speak in more detail about 
the steps that are necessary to restore fiscal responsibility 
to the country.
    I just want to end by saying, Mr. Chairman, the central 
challenge we face is making sure that, as we deal with the 
immediate and the urgent, as we focus on repairing the damage 
caused by this crisis, we are keeping our eye on the important. 
It is making sure that we provide immediate, targeted 
reenforcements to the expansion, but that we also implement a 
program of important investments and reforms so that we lay the 
foundation for growth that is stronger in the future, more 
sustainable, and is shared by more Americans.
    To restore confidence among families and businesses, we 
need to demonstrate that this government, this city is capable 
of coming together to solve problems. They want to see us act.
    The economy today is much stronger than it was a year ago. 
We are in a much stronger position to deal with these many 
challenges. But we have a lot of work ahead of us.
    Thank you very much.
    Chairman Obey. Thank you, Mr. Secretary.
    Chairwoman Romer.
    Ms. Romer. Chairman Obey, Ranking Member Lewis, members of 
the committee, like my colleagues, I am delighted to be with 
you this morning.
    I am going to take just a few minutes to talk in more 
detail about the policy response to the crisis, the 
administration's economic forecast, and the need for further 
job creation measures.
    In the months before President Obama took office, the 
American economy faced disruptions even larger than those that 
triggered the Great Depression. The disturbance to credit 
markets, the decline in wealth, and the rise in uncertainty 
were larger in the fall of 2008 than in late 1929 and early 
1930.
    The result was a terrible deterioration in economic 
conditions. Real GDP declined at an annual rate of over 5 
percent in the fourth quarter of 2008 and over 6 percent in the 
first quarter of 2009. And job losses totalled more than 4 
million in those 6 fateful months. The threat of a second Great 
Depression was frighteningly real.
    That the shocks did not precipitate such a depression is a 
testament to the swift and strong policy response. The 
centerpiece of that response was the American Recovery and 
Reinvestment Act of 2009. Simply put, the Recovery Act is the 
boldest countercyclical fiscal action in American history.
    Estimates from the Council of Economic Advisers, the 
nonpartisan Congressional Budget Office, and a range of private 
forecasters suggest that, because of the Recovery Act, 
employment as of the fourth quarter of 2009 was between 1.5 
million and 2 million higher than it otherwise would have been, 
and these employment effects will continue to rise in 2010.
    More generally, the broad policy response has helped to 
change the trajectory of the economy. Our financial markets are 
functioning again. Real GDP began growing in the third quarter 
of last year and grew at a robust 5.9 percent annual rate in 
the fourth quarter. Job losses have slowed to a trickle.
    However, significant challenges remain. Most obviously, the 
current unemployment rate of 9.7 percent is simply unacceptable 
by any metric. And employment is 8.4 million below what it was 
when the recession started.
    Now, prior to each budget, the troika--the Council of 
Economic Advisers, the Office of Management and Budget, and the 
Treasury--work together to produce an economic forecast. This 
year's forecast was finalized in mid-November. And all 
forecasts are subject to substantial margins of error. And, 
especially in the wake of a severe downturn, usual patterns 
surely provide less guidance than in more ordinary times. But 
we have based our budget projections on our best estimates of 
what lies ahead.
    For GDP, the forecast projects moderate growth of 3 percent 
on a fourth-quarter-to-fourth-quarter basis in 2010, followed 
by somewhat higher growth of 4.3 percent in each of 2011 and 
2012. Compared with recoveries from other severe recessions, 
the projected growth is relatively modest, particularly in 
2010.
    In terms of the labor market, the forecast projects average 
job growth of about 100,000 per month this year, about 200,000 
per month in 2011, and about 250,000 per month in 2012.
    Typically, following a recession, we see increases in 
productivity, temporary employment, and the length of the 
workweek before overall employment begins to recover. For the 
most part, developments in recent months have been following 
this pattern. Productivity growth has surged. Temporary help 
employment has risen strongly for 5 consecutive months. And the 
workweek has been generally rising. We expect to begin seeing 
job gains sometime this spring. Indeed, some private 
forecasters, such as Mark Zandi of moodyseconomy.com and those 
at Goldman Sachs, predict positive job growth this month.
    It typically takes employment growth of somewhat over 
100,000 per month to actually bring the unemployment rate down. 
Because we do not expect particularly robust job growth over 
the remainder of this year, we do not expect to see substantial 
further declines in unemployment this year. As the pace of job 
creation picks up in 2011 and 2012, we are likely to see much 
greater progress in reducing unemployment. Nevertheless, 
because of the severe toll the recession has taken on the labor 
market, unemployment is likely to remain elevated for an 
extended period.
    Because of the high levels of slack in the economy, we 
expect inflation to remain low, and we see little risk of 
substantial increases in inflation. At the same time, 
inflationary expectations appear to be very well-anchored. And 
so we do not expect to see inflation fall substantially further 
or turn into outright deflation.
    We project inflation again on a fourth-quarter-to-fourth-
quarter basis, as measured by the GDP price index, of some 1 
percent this year, 1.4 percent in 2011, and 1.7 percent in 
2012.
    These forecasts of key economic indicators are very much in 
the range both of the private forecasters surveyed by the blue 
chip economic indicators and the central tendency of the 
Federal Reserve's Federal Open Market Committee forecast.
    Now, developments since November have not led to large 
changes in the economic outlook. The most significant 
development was the good news that GDP growth in the fourth 
quarter of last year was higher than we and virtually all other 
analysts expected as of mid-November.
    Another favorable development was the fall in the 
unemployment rate by three-tenths of a percentage point in 
January and the maintenance of that lower rate in February. As 
a result, it appears possible that the average unemployment 
rate for 2010 will be slightly below our November forecast.
    The budget was released before specific policy options to 
spur job creation had been finalized, and the exact form that 
these actions take will influence the pace of job creation. The 
President has recently proposed specific high-impact measures 
to spur job creation, which would improve the outlook for 
employment and output if they were implemented.
    One cost-effective policy is continued support for those 
most directly affected by the recession. Precisely because of 
their difficult circumstances, these families are likely to 
spend a large fraction of the continued support that they 
receive. Thus, the support not only directly helps them weather 
the recession but also stimulates demand and improves the 
overall economy.
    Likewise, the weak budgetary conditions of State and local 
governments means that additional fiscal support to the States 
will prevent cuts in vital services and counterproductive tax 
increases and so, again, have strong output and employment 
effects.
    A measure that could have a particularly strong employment 
effect is a payroll tax credit for new hiring, such as the 
administration's proposed Small Business Jobs and Wages Tax Cut 
or the payroll tax credit for hiring unemployed workers 
proposed by Senators Schumer and Hatch. These proposals rely on 
the basic economic principle that if you want more of 
something--in this case, hiring--you should lower the price. 
The proposals offer a significant benefit to firms that 
undertake new hiring. Such credits have the potential for a 
large impact on job creation at a relatively modest budgetary 
cost.
    Now, these are not the only job creation measures that the 
President thinks should be done, and he is anxious to work with 
Congress on other ideas. But it is essential that we take 
further action to spur employment growth and that we do so as 
soon as possible.
    Thank you.
    Chairman Obey. Thank you.
    Director Orszag.

                  Opening Statement of Director Orszag

    Mr. Orszag. Thank you very much, Mr. Chairman. Let me offer 
some brief remarks.
    First, the deficit is temporarily elevated because of the 
economic downturn and steps necessary to address it. This 
temporary rise in the deficit is both natural and desirable 
during an economic downturn. In other words, the problem is not 
this year's deficit.
    As we look out over time, however, current policy suggests 
an utterly unsustainable course, and that is the problem. So 
how did we get here, and what should we do about it?
    First, let me clear up some misconceptions about what has 
been happening in the very near term, including statements 
about the Obama administration and a massive increase in 
spending.
    If you look at the record, in fiscal year 2008 spending was 
20.9 percent of GDP. In 2009, it was 24.7 percent of GDP--a 
very significant increase. But let's examine where that 4 
percentage point increase came from.
    On January 7th, 2009, well before President Obama stepped 
into the Oval Office, CBO issued its economic and budget 
outlook. That document very clearly showed an increase in 
spending from the 20.9 percent in 2008 to a projected 24.9 
percent in 2009. In other words, that 4 percentage point 
increase was already baked into the cake before the Obama 
administration stepped into office.
    Reality has turned out somewhat different. Total spending 
is slightly lower. The mix of spending is different. But I hope 
we can return to the question of what drove that increase.
    Second, with regard to the medium-term deficits, I think, 
Mr. Obey, we have slightly different numbers because the time 
periods are slightly different, but the basic point from this 
chart is analytically correct, which is there is a lingering 
effect from the economic downturn and then a very significant 
effect from the 2001 and 2003 tax legislation, along with the 
Medicare prescription drug benefit. And that can more than 
explain the total deficit that we face over the medium term.
    That is all fine and well, but what are we doing about the 
problem? It is fine to say we inherited a big problem, but what 
are we doing?
    The first very basic, core principle has to do with PAYGO. 
We now have statutory pay-as-you-go legislation. I would just 
point out that if we had obeyed and abided by pay-as-you-go 
legislation in the past, those outyear deficits, instead of 
being 5 percent of GDP, would be 2 percent of GDP. We would 
have a stable medium-term fiscal trajectory over the next 
decade if the 2001 and 2003 tax legislation had been financed--
not deficit-financed, but had been offset--and if the Medicare 
prescription drug benefit had not been deficit-financed.
    Second, it is important to recognize that economic recovery 
itself will help to bring down the deficit from roughly 10 
percent of GDP this year to about 5 percent of GDP in 2015. 
That is still too high. A fiscal target of roughly 3 percent 
would stabilize debt as a share of the economy, and that should 
be our objective.
    So how do we get the rest of the way there?
    First, we have already put forward specific policy 
proposals totaling $1.2 trillion in deficit reduction over the 
next decade, which I would point out is more deficit reduction 
than contained in any administration budget that has been put 
forward in more than a decade. That includes a new fee on 
financial services firms. It includes allowing the 2001 and 
2003 tax legislation to expire for the very top earners in our 
society. And it does include the 3-year freeze on nonsecurity 
spending.
    And I hope we can return to that question, also, because 
Table S-11 shows reductions in agency after agency, whether it 
is from the Agriculture Department to the Commerce Department 
to HHS, HUD, Interior, Justice, Labor, and so on down the line.
    Even with that very significant deficit reduction, however, 
the hole is so deep that we do not get to our fiscal target of 
3 percent of GDP. This is why we have called for the creation 
of a bipartisan fiscal commission not only to address our long-
term fiscal imbalance but also to put forward recommendations 
to get the rest of the way there over the medium term. And we 
could have further discussion about that.
    That all has to do with the next decade. As you look out 
further over time, the key to our long-term fiscal future has 
to do the rising cost of health care. It is absolutely 
essential that we move towards paying for quality rather than 
quantity in health care. And the legislation that is under 
consideration has very important movement in that direction, 
which we could also discuss during the question-and-answer 
period.
    Finally, I want to highlight the efforts that we are 
undertaking to seek more efficiency in government in part so 
that we can free up resources to invest in education, R&D, and 
other drivers of long-term productivity growth. We have put 
forward 126 program terminations, which would amount to $23 
billion, including the Constellation program at NASA, the 
Advanced Earned Income Tax Credit, the C-17, the alternative 
engine for the Joint Strike Fighter, and fossil fuel subsidies.
    And we look forward to working with the Congress to get all 
of those changes enacted. We had success last year, much higher 
success in our program terminations and reductions, than had 
been the case in the past. And we look forward similar success 
this year.
    Finally, if I could just close, Mr. Chairman, by saying 
what we are putting forward is a dramatically different vision, 
in which we are trying to address not only the fiscal deficit 
but the other deficits that you identified: The opportunity 
deficit, the jobs deficit.
    That is a dramatically different vision than the plan that 
has been put forward by Representative Paul Ryan, which would 
not only cause a higher deficit in 2020 at the end of the 
budget window--7 percent of GDP, which is higher than under the 
administration's budget, according to the Tax Policy Center and 
the Center on Budget and Policy Priorities--but also would 
reduce taxes for the top 1 percent of the income distribution 
by 50 percent. So it contains not only higher deficits but also 
exacerbation of the opportunity deficit that you were 
discussing.
    So we do face a basic choice, and I hope we have further 
discussion of that basic choice.
    Thank you very much, Mr. Chairman.
    [Joint Statement of Timothy F. Geithner, Peter R. Orszag, 
and Christina D. Romer before the Committee on Appropriations, 
U.S. House of Representatives.]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman Obey. Thank you.
    Again, let me remind Members we have a color-coded clock 
here in front of me, and I will enforce the 5-minute rule 
strictly this morning.
    Just one question before I turn to Mr. Lewis. It has been 
suggested by some critics of the administration that, because 
we have continued to see job loss in the economy, that somehow 
the recovery package has not had a positive impact on 
unemployment. I would like you to give us your response to 
that.
    And then, secondly, I want to ask one other question. In my 
view, because of the incredible stress laid on workers in this 
recession, there is very little faith that they have remaining 
in either political party because they feel, I think, that the 
entire system has failed them, in terms of putting the needs of 
average workers before the needs of high-rollers in this 
society.
    And I would ask you what your response would be to their 
concerns if they were looking you straight in the eye and 
saying that today.
    Ms. Romer. All right. Well, why don't I take the question 
on whether, because we are still losing jobs, that is a sign 
that the Recovery Act has not worked.
    I think nothing could be further from the truth. As I 
mentioned in my opening statement, what is true is that what 
hit this economy in 2008 was simply of enormous proportions and 
truly were shocks larger than precipitated the Great 
Depression. So we were an economy with incredible downward 
momentum. The unemployment rate, we knew, was rising rapidly.
    I think all of the evidence that we have suggests that the 
Recovery Act has been essential to changing the trajectory of 
this economy, going from GDP falling at over 6 percent in the 
first quarter of 2009 to rising almost 6 percent. You know, I 
mentioned the estimates that the Council of Economic Advisors 
has done, that it saved or created some 2 million jobs as of 
the fourth quarter.
    But those aren't just our numbers. You can look at the 
Congressional Budget Office; you can look at private-sector 
forecasts from across the ideological spectrum. All of them say 
that conditions would have been tremendously worse had it not 
been for the Recovery Act.
    So I think that is absolutely the essential point to 
understand here.
    Secretary Geithner. Mr. Chairman, let me just add one 
point.
    If you look at any measure of economic activity in the 
United States or around the world, any measure of confidence in 
the financial system, any measure of confidence among 
businesses or consumers, what you saw in March of last year 
was, after all those things were falling off the cliff, they 
turned. And they turned when people around the world saw this 
government act, and act forcefully, to fix the mess we all came 
into office with.
    And it was those actions that started to change that turn. 
And you saw growth resume in this economy just, really, one 
quarter after Congress started that process of authoring those 
basic actions. So it was a quick arrest in a panic of 
unprecedented force and a very quick resumption of the basic 
conditions, growth that have to precede job creation.
    On the broad question, I would say the following. We came 
into office not just facing the worst recession since the Great 
Depression, but we came into this mess with a series of other 
really daunting challenges. We have seen a long period of 
stagnant growth in the median wage in the country, a long 
period of very dramatic rise in income inequality, a long 
period of relative erosion in the quality of educational 
opportunities our government has provided our children. We came 
into office with a long period of very, very rapid growth in 
health care costs, a deep erosion of the fiscal vision of the 
country.
    Now, addressing those challenges is going to take a long 
time, Mr. Chairman, as you said. But we are in a much stronger 
position to address those things that matter so much to the 
basic security of Americans today because we acted so 
forcefully to address the crisis. We are in a much stronger 
position today to help begin to address those problems and try 
to rebuild confidence in the basic security of Americans.
    Mr. Orszag. Can I just very briefly add on? In addition to 
the----
    Chairman Obey. In 27 seconds.
    Mr. Orszag. I am going to do it in 27 seconds.
    In addition to addressing the short-term economic distress 
that middle-class families face, the budget moves towards 
improving our education system, towards providing additional 
assistance for things like child care, for example. And it also 
avoids the mistake of exacerbating the tensions on middle-class 
families by undertaking the kind of tax shift that is embodied 
in the Ryan plan.
    Chairman Obey. Thank you.
    Mr. Lewis.
    Good job. That was exactly 5 minutes. I hope everyone keeps 
it up.
    Mr. Lewis. Mr. Chairman, as you exercise the 5-minute rule, 
it is quite amazing to have this turnout of the committee. And 
I hope the panel understands, presuming that if all of our 
Members get to spend 5 minutes with you, it is going to be an 
extensive period here, but the Members are looking forward to 
that opportunity.
    Your budget is claiming to freeze nonsecurity spending for 
the next 3 years. However, this assumes several accounting, 
what I would call, gimmicks: Shifting billions of dollars in 
Pell Grant funding as well as additional LIHEAP funding to the 
mandatory side. But even without these maneuvers, many of our 
subcommittees for many of what you are calling nonsecurities-
funded would go up over the last year.
    Now, if the Pell Grants and additional LIHEAP costs remain 
discretionary, what would be the percentage increase of 
nonsecurity over last year's enacted level?
    Mr. Orszag. I believe that would be directed to me.
    First, let me just again point out, we proposed moving the 
Pell Grant to a mandatory program last year. We proposed it 
again this year. We believe that that is the right policy so 
that the Pell Grant is not subject to the vicissitudes of the 
annual appropriations process and so that you can go out to an 
8th- or 9th-grader and say, ``This money will be there if you 
work hard and enroll in college,'' and provide more certainty.
    That having been said, depending how the existing 
shortfall--and, by the way, the existence of the shortfall, in 
our opinion, underscores our point, which is: College 
enrollment is up; that is putting more pressure on the Pell 
Grant program. And, in our opinion, that is why one 
manifestation of why moving to the mandatory side makes sense.
    That having been said, the answer to your question depends 
on how that existing shortfall is handled, including in the 
higher education bill. If it is entirely covered, there would 
need not be any percentage increase from 2010 to 2011 that 
would be associated with keeping Pell as discretionary, as one 
example.
    Mr. Lewis. Thank you for your response.
    I must say that it occurs to me that State and other 
international programs funded in your security category would 
continue to receive increases through at least the year 2015, 
even though, by then, America will supposedly have withdrawn 
its military forces and presence in Iraq and Afghanistan.
    Why are there no savings from this downturn in the State 
and international security categories?
    Mr. Orszag. Well, one of the reasons, Congressman, is that, 
as troop levels are withdrawn, there is the need to move to a 
different model of engagement with the populations both in Iraq 
and Afghanistan.
    More broadly, as you know, one of the other inherited 
deficits that we faced involved our relations with the rest of 
the world. And that is exactly what the State Department is 
trying to rectify, albeit slowly, through the various efforts 
that they are undertaking.
    And since I think we have just a quick moment, if I could 
just address the question about the Recovery Act and the base 
for the nonsecurity funding, because I think this is very 
important to clarify: By the end of our 3-year period, 3-year 
nonsecurity freeze, nonsecurity discretionary funding will be 
at the same levels it would have been from 2008 projected 
forward with inflation.
    So, in other words, forget what happened with the Recovery 
Act, forget what happened in the meanwhile with any 
appropriations bills. If you just start in 2008, take the 
baseline from there, we will be hitting that baseline by the 
end of our 3-year freeze.
    Mr. Lewis. Mr. Chairman, I think it is very important for 
the public to understand that what we are talking about is a 
rather radically adjusted uptick of the baseline across all of 
our funding. If, indeed, we see that pattern continue, the 
public is not going to miss the point. Indeed, the public is 
frightened out there. I mean, you go to these community forums 
and you will see people saying, ``My God, how much more Federal 
Government do we need?''
    The Democratic leadership has said that this bill reduces 
the deficit over the next 10 years. I mean, does this in part 
assume increased Social Security payroll revenues? Aren't these 
dollars already claimed for Social Security use in the future?
    Mr. Orszag. I am sorry. What bill are you now referring to?
    Mr. Lewis. The leadership suggests that this bill----
    Mr. Orszag. Which one?
    Mr. Lewis [continuing]. This budget bill, the health care 
bill----
    Mr. Orszag. Oh, okay. Health care, yes.
    Mr. Lewis [continuing]. Reduces the deficit over the next 
10 years.
    Mr. Orszag. It is not just the leadership saying that. The 
Congressional Budget Office has said that.
    Mr. Lewis. It will be really interesting to see how we 
raise these baselines and reduce spending at the same time.
    In part, this assumes, as I suggested, increased Social 
Security revenues. Aren't those revenues already committed to 
Social Security recipients?
    Mr. Orszag. Congressman, as you know, the Federal budget 
already incorporates just in its base operations a system of 
trust fund accounting, where funds are credited to both the 
Social Security and Medicare trust funds and then also 
available to the unified budget.
    Chairman Obey. Mr. Dicks.
    Mr. Lewis. Thank you, Mr. Chairman.
    Mr. Dicks. Thank you, Mr. Chairman.
    I have two questions.
    One, we still have a major backlog in infrastructure. I had 
the honor of chairing the Interior and Environment 
Appropriations Subcommittee for 3 years. And during the Bush 
administration, there was a study done of the backlog on 
wastewater treatment and clean water infrastructure of about 
$688 billion. And we know we have a backlog in transportation.
    So, if that is true, why not--if you are a Keynesian, you 
would say, let's spend some more money on this infrastructure 
to further drive down unemployment and help restore the 
revenues into the Treasury.
    Number two, what are we going to do about the small 
community banks? This was mentioned in the State of the Union. 
I still think these small community banks are critical to the 
recovery.
    Can you help me on those two questions?
    Secretary Geithner. Absolutely.
    We agree that there is a very good economic case for 
putting more support, more investment into infrastructure now. 
We think it is good economic policy for the long run because it 
helps restore some basic quality to infrastructure across the 
country. We had a long degradation in quality of infrastructure 
over a long period of time. So it is good policy for the long 
run. And it is very good policy for the short run because it is 
one of the most employment-intensive forms of government 
investment that we can make.
    We have to do it, though, in a way that is fiscally 
responsible. And what the President laid out in his budget is a 
way to make those investments still in the context of this set 
of broader policies that will bring those deficits down quite, 
quite sharply over the medium term.
    Now, on the small bank, small business question, small 
businesses depend on small banks for about half of the credit 
they get. And small banks across the country, they still face a 
very, very difficult challenge. Many of them got too exposed to 
commercial real estate or they are in parts of the economy 
still suffering most from the recession. So there is a very 
good case, very good financial case, for trying to make sure 
that we are making capital available to small banks so they can 
help make sure they are keeping credit open to their business 
customers.
    We think there are two very important ways to do that. One 
is by enacting what the President proposed, which is to create 
a fund that would provide capital to small community banks, to 
those that are willing to increase lending to small businesses. 
And the second----
    Mr. Dicks. Does that require legislation?
    Mr. Orszag. It does require legislation.
    And second is to expand the ability of the SBA to provide 
guarantees in larger amounts at lower costs than would 
otherwise be possible.
    We think these two things--guarantees and capital to small 
banks--are the most effective way we can help make sure that 
businesses across the country get access to the credit they 
need to grow and expand.
    Mr. Dicks. Thank you, Mr. Chairman.
    Chairman Obey. Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman.
    The United States enjoys an unprecedented AAA credit 
rating, which allows us to borrow money more cheaply. Most 
recently, a Moody's Investor Services quarterly report 
suggested that the U.S. needed to make significant improvements 
to avoid downgrading its credit status. The report noted that, 
quote, ``preserving debt affordability will invariably require 
fiscal adjustments of a magnitude that, in some cases, will 
test social cohesion,'' end of quote. Pretty strong.
    What do you think?
    Secretary Geithner. I agree with all of you who say today, 
said in the past, will say in the future that our deficits are 
unsustainable. And it is very important that the American 
people understand that, if you care about long-term growth, if 
you care about opportunity, if you care about future growth in 
income, how strong our economy is, we need to make sure that we 
are working together to lay out a path to bring those deficits 
down.
    It is important not just for the long run; it is important 
now. Because our capacity to make sure we are reenforcing this 
expansion to make targeted additional investments in 
infrastructure and helping small businesses, those things only 
work if they are done in a framework that produces confidence 
that we can restore a gravity to our fiscal position over time.
    So all of you who emphasize this problem are right to 
emphasize it. You are absolutely right.
    But those objections are not in conflict today. If you care 
about a long-term fiscal position, which we all do, you have to 
care a lot about getting this economy back on track, repairing 
the damage caused by the recession, make sure we are growing 
again with growth led by the private sector.
    Mr. Rogers. Well, let me ask----
    Secretary Geithner. If you don't achieve that, then our 
long-term fiscal problems will be much more difficult to solve.
    Mr. Rogers. Let me interrupt you a second. The key 
determiner of credit rating is the percentage of debt to 
revenue. Agreed?
    Secretary Geithner. Well, there are--I would say it this 
way, Congressman. What people who look at our country--credit 
rating agencies, investors, Americans--what they look at is 
whether we have the political will to restore gravity to our 
fiscal position over time.
    Mr. Rogers. You are exactly right. And your budget proposes 
a record $1.6 trillion in deficit spending. I don't think 
Moody's is going to like that.
    Secretary Geithner. No, what the deficit does is--what the 
President's budget does is propose to bring down a deficit at 
exceptionally high levels that we started with dramatically 
over the next 4 to 5 years, to cut it dramatically as a share 
of the economy as a whole, to reduce it to below 4 percent of 
GDP in a relatively short period of time.
    Now, we can only propose. Congress has to enact those 
changes. But if Congress were to act on those changes, you 
would bring about a dramatic, necessary, important improvement 
in our fiscal position.
    Now, that will not solve all of our problems, because we 
still face long-term unsustainable growth in the commitments of 
the government. And that is why we need health care reform, 
other sets of changes to make sure we restore sustainability to 
our fiscal position.
    But, again, I just want to underscore what you began with, 
which is: It is very important for people on both sides of the 
aisle to say what you are saying today, which is that deficits 
matter, tax cuts aren't free, we have to pay for the things we 
do as a government. And we have to recognize that our long-term 
growth requires that we restore balance to our fiscal position.
    Mr. Rogers. Well, if we lose our credit rating or it jumps 
down to the next level, what does that mean? We have to pay 
higher interest rates to borrow money?
    Secretary Geithner. Oh, absolutely. But there is no way 
that is going to happen, Congressman. There is not a chance 
that is going to happen to this country.
    But it is very important for people to recognize that, 
again, future growth will be weaker, this expansion, this 
recovery will be weaker if we don't do a better job together 
over time of demonstrating that we are going to have the 
political will to make some tough choices.
    And that is why the fiscal commission is so important, 
because that brings Democrats and Republicans together, asks 
them to step back from politics of the moment and to propose 
changes to our policies that allow us to go back to living 
within our means.
    Mr. Rogers. Moody also says that debt service costs are 
projected to be higher in 2013 than in any other AAA-rated 
government--Germany, U.K., Spain, and France, by 2013. So 
aren't we walking a pretty tight line here about losing our 
credit rating?
    Secretary Geithner. Congressman, again, I would say it this 
way: This is completely within our capacity as a country to 
solve.
    The President laid out a path to get us almost all the way 
there, to get us below 4 percent of GDP. We have to act on that 
for that to work. We have to enact it.
    This is within our capacity to solve it. It just requires 
that we work together to find some political will to make those 
choices.
    Mr. Rogers. Well, the political will and the budget that 
has been submitted projects a $1.6 trillion deficit for 1 year. 
And, also, the freeze that has been proposed from the 
administration only applies to about 10 to 15 percent of our 
spending. You are only freezing a tiny piece of the overall 
spending.
    Secretary Geithner. One quick response?
    Chairman Obey. Ten seconds.
    Secretary Geithner. Again, Congressman, you are right to 
say we started with unsustainably high deficits. They are too 
high. We have to bring them down.
    But, again, if you look at what the President proposed, 
these are a very detailed comprehensive set of proposals that 
would reduce the deficits dramatically as a share of GDP over 
the next 4 to 5 years.
    That is necessary, it is not sufficient, because we are 
still going to have to address those long-term problems. That 
is why health care reform is so important. But we would welcome 
you joining with us in trying to make sure we can help dig out 
of this fiscal hole we inherited.
    Chairman Obey. Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.
    Welcome to this committee.
    Just for the record, out of curiosity, because I think we 
live in different worlds, I am curious what your fathers did 
for a living. Could you state that for the record, please?
    Ms. Romer. Well, I will start. My father was a chemical 
engineer and worked in a manufacturing firm.
    Ms. Kaptur. Thank you very much.
    Mr. Orszag.
    Mr. Orszag. My father is a professor of applied 
mathematics.
    Ms. Kaptur. Thank you.
    Secretary Geithner.
    Secretary Geithner. My father was a Navy pilot and then 
worked for the Ford Foundation for 28 years.
    Ms. Kaptur. Thank you very much.
    I find your testimony dismaying and out of touch. And I ask 
myself, how can we be so far apart in our views?
    My top priority is putting people back to work. Your 
testimony doesn't even mention the total number of unemployed 
and underemployed and marginally attacked in our country. That 
number, for your information, is 25 million people. Only three 
paragraphs of your testimony address unemployment, three 
paragraphs, but you devote five pages to the deficit. I might 
offer, we have a deficit because we have unemployment. People 
aren't working.
    On Page 3, astoundingly, you concede unemployment won't go 
down. You have no urgency.
    In Ohio, unemployment is going up. Twenty-one of our 88 
counties posted unemployment rates over 15 percent. We have 
more cities poor in this country than any other State now. Our 
food bank lines are growing longer. Twenty-five percent of our 
food banks and food shelters turned away people last year.
    People are becoming desperate. I am their representative. I 
cannot politely sit and listen to this and not feel compassion 
for them in expecting some from you.
    One of every ten Americans is now in foreclosure or 3 
months behind in their payment. It's worse in Ohio.
    Your workout programs are not working. I am not saying it's 
all your fault, but there should have been more traction at 
this point. People who caused this mess are doing just fine. In 
fact, JP Morgan Chase made profits of $11.76 billion last year. 
Wells Fargo made $8.49 billion. Jamie Diamond, the head of JP 
Morgan, he alone just in base compensation got $19.65 million. 
They are doing fine. The taxpayers bailed them out. My people 
are suffering. They are at the edge. Where is the urgency in 
your testimony?
    Mr. Geithner, I have been trying to come to see you to tell 
you this. I have to take time with my colleagues to listen to 
all of this because I can't get an answer to come and talk 
about foreclosures and what we can do in the situation like 
Ohio. The five biggest banks are heavily involved in derivative 
trades, about $195 trillion as of last quarter. That is the 
same bunch that caused this mess in the first place. Does the 
Secretary have any idea of the quality nature of those risks or 
are we at risk for another collateralized mortgage scam?
    Meanwhile, my people are falling off the edge. Are you 
willing to tax them on some of their profits and put that money 
into the programs to put our people back to work and solve 
these mortgage foreclosure problems?
    Secretary Geithner. Absolutely. But let me just start by 
where you started. This President acted with enormous care and 
force and speed, something you would never see in this country 
or any other country around the world facing a crisis like 
this, and worked to enact in again remarkable speed the most 
powerful set of support for an economy like you have ever seen 
before. Those things were difficult to do. They were unpopular, 
but they were essential. And there is no path to unemployment 
improvement. There is no path to stability in house prices. 
There is no path to any basic improvements in the many 
challenges Americans face. They did not start with fixing a 
crisis and restoring growth.
    Now, you are right that the housing is still a terrible 
crisis for many Americans and many people are still living with 
the fear of losing their home for things they are completely 
innocent of. People who were careful and responsible are 
suffering----
    Ms. Kaptur. Excuse me, sir. These companies are not doing 
the workout.
    Secretary Geithner. And I want to--I want to respond 
quickly. I want to highlight, though, the following thing, 
which is that the program that we put in place has reached 1 
million--more than 1 million Americans who are getting more 
than $500 a month now in lower mortgage service payments. We 
are going to do better than that. I agree with you, the banks 
are not doing good enough and we are going to put substantial 
pressure----
    Ms. Kaptur. It is pitiful, sir. It is pitiful. It is an 
embarrassment to the Nation.
    Secretary Geithner. It is a million Americans and it is 
going to get better. But I want to end where you ended, which 
is to say that we have proposed a fee that would raise from the 
Nation's major banks $90 billion over 10 years that we can use 
to address the many problems we face as a country. If Congress 
joins us in passing that fee, and you can tell your 
constituents, you can tell the American people that they will 
not be exposed to a penny of losses for the actions taken by 
many of our large institutions that helped take us to the edge 
of this crisis. So I join you in supporting this and I hope we 
will see support from the Congress.
    Chairman Obey. Mr. Wolf.
    Mr. Wolf. Thank you, Mr. Chairman.
    Jim Cooper and I have a bill H.R. 1557, the SAFE 
Commission, that puts everything on the table--Medicare, 
Medicaid, Social Security, and tax policy. And you all opposed 
it. Only on that last day did the President come out on that 
Saturday where he supported Conrad-Gregg. Had you put the 
emphasis of the administration and your lobbying effort behind 
it you could have passed our bill in the Senate and it would 
have passed in the House.
    Your Fiscal Commission is not authentically bipartisan and 
that troubles me. It's the only game in town but it troubles 
me.
    Secondly, you do not mandate a vote. Our bill used the BRAC 
Commission. We mandated a vote. And with what we are going 
through on this health care thing, deeming things like that, I 
worry that we may never get there.
    Thirdly, you do not involve the American people. The 
Cooper-Wolf bill requires there be public hearings around the 
country to listen to the American people. That is very 
important.
    Lastly, your Commission's recommendations, if they ever 
come up for a vote, will be voted on by men and women in a 
lame-duck session with probably 50, 60, 70 Members who are 
looking for jobs on K Street. Their faith will not be with the 
American people.
    So two questions: One, will the administration commit to 
holding town hall meetings across the country to listen to the 
American people? And secondly will you revise the order and 
allow additional time for the Commission to work and put the 
bill before the 112th Congress whereby we can have Members of 
Congress who have been elected to listen and have transparency? 
Two questions.
    Director Orszag. Congressman, if I could comment. First, 
with regard to public hearings, my understanding is the co-
chairs of that bipartisan commission--I want to come back to 
that point--Allen Simpson and Erskine Bowles intend to have 
involvement of the public; so it is not just the 
administration, it is the co-chairs who will be determining the 
activities of the Commission. Second, with regard to 
bipartisanship, do not forget that in order to get a 
recommendation--I think this is the key question--you need to 
get 14 out of those 18 members; so you need a significant share 
of the Republican appointees also. I think that is the key 
question. Will the Commission come together and reach a 
bipartisan recommendation? Because if that is the case, both 
Senator Reid, who has promised to bring a bill directly to the 
floor using a rule 14, and Speaker Pelosi have made commitments 
about the vote.
    I think the question is not whether it is brought to a vote 
in the Congress but the first step is to make sure we get a 
solid recommendation out of the Commission which will require 
bipartisanship in that Commission.
    Mr. Wolf. What about the lame-duck session?
    Mr. Orszag. Well, on the one hand we have been hearing 
about the urgency of the----
    Mr. Wolf. That is 1 month. Come on now. One month. That is 
different. Do you favor, though, voting with people who have 
been elected rather than a group of men and women who are 
looking for jobs downtown to be lobbyists? That is the 
question. Would you then say we could vote in the new session 
rather than in December of this year?
    Mr. Orszag. Congressman, we have put forward what we 
believe is the best path forward here. And the reason is we 
face a very significant fiscal problem that is not a problem 
right now, but we have to get ahead of it before it becomes a 
crisis, and we believe this is the right way forward.
    Mr. Wolf. Mr. Chairman, I think that it should have been 
more bipartisan. That would have had the confidence of the 
American----
    Mr. Orszag. How so, sir?
    Mr. Wolf. Because the President got six appointments. He 
got six; so it totally is not. It is skewered that way and that 
is just the reality of it.
    Secondly, there ought to be a mandate whereby the American 
people can know how it will be brought up. Will it be brought 
up in the sunshine? Thirdly, there must be an outreach all over 
the country where the American people can tell you and us what 
they really believe. And, lastly, I do not believe and I don't 
think you should either that it should be voted on by a 
Congress loaded up with people who are leaving to look for jobs 
downtown as lobbyists.
    With that, I yield back my time.
    Chairman Obey. Mrs. Lowey.
    Mrs. Lowey. Thank you and thank you, ladies and gentlemen, 
for appearing before us. I know several of you have mentioned 
loans to small business, and I have legislation as well. 
However, before I get to my question I would be most 
appreciative if you could provide some specific information 
regarding the loans to small businesses and if you would like I 
would be particularly appreciative if you could provide them 
for New York.
    This is the constant complaint over and over again. In 
fact, I have a couple of small businesses that are existing on 
six and seven credit cards. So I think this is essential. We 
are doing a lot of talk. I have legislation. But I would like 
some specifics regarding New York.
    Now, in particular as a former--I guess you still have a 
home. As a constituent, Mr. Geithner, the ultimate minimum tax 
is a big issue in my district. In fact, we are among the top in 
the number of taxpayers that are hit by the alternate minimum 
tax. We know that repealing the AMT completely would have a 
tremendous impact on tax revenue but Congressman Israel and I 
have worked on legislation which would increase the exemption 
under the AMT to $100,000 for married taxpayers filing joint 
tax returns and to $75,000 for unmarried taxpayers as well as 
deducting State and local property taxes from the AMT and 
indexing it to inflation.
    If any of you could elaborate on the President's position 
with regard to the AMT and has a determination been made on how 
much an AMT revenue is necessary for the Federal Government to 
continue collecting. I would appreciate your comments.
    Secretary Geithner. On your first question, I am happy to 
try to make sure we can provide some data to you on what is 
happening in lending in your district and your State and am 
happy to work with you on your specific bill for how we address 
those problems. Again, we think the most important thing to do 
is make sure the SBA can do its job with a little bit more 
force and to make sure small community banks that commit to 
expand lending to small businesses can get capital from the 
government at reasonable rates. Those would be very helpful 
alongside the tax measures that the President has proposed. We 
think that is a very good strong package in this area.
    Mrs. Lowey. Is there any progress now----
    Secretary Geithner. Again, the best measure to what is 
happening with lending is really the price of a loan. And 
almost every measure of a price of loan to buy a house, to buy 
a car, to send your kids to college, what a municipal 
government pays to borrow, large and small businesses, the 
price of lending has fallen very dramatically. That is 
encouraging. But again, for small banks across the country and 
for businesses who were unlucky in their choice of a bank it is 
still very, very difficult.
    On your proposal on the AMT reform, again happy to work 
with you on that proposal. The President has laid out a way to 
make sure that millions of Americans are not caught up in the 
AMT unnecessarily and doing that in a way that it's fiscally 
responsible still. As always, we have got to balance the 
concern you expressed with the basic concern we all share, 
which is we need to make sure we are doing things in a way that 
support growth, are fair, and are fiscally responsible.
    Ms. Romer. Can I just add one point here, which is through 
the Recovery Act, some 42,000 loans have been made to small 
businesses totaling about $20 billion. So I think that has 
actually been just incredibly important to helping maintain 
them through this very important time. I also just want to 
reemphasize the urgency that we all feel about our jobs----
    Chairman Obey. Will you repeat those numbers?
    Ms. Romer. It is $42,000 in loans to small businesses and 
$20 billion.
    Mrs. Lowey. If you could provide that to us in writing and 
hopefully regionally based because I don't hear that.
    Ms. Romer. We will work with the Small Business Association 
to get that because it is absolutely essential.
    But I was going to say the urgency is absolutely enormous. 
I can tell you that every single time we meet with the 
President, no matter what you tell him his question is what 
does that mean for jobs? And one of the big things we have been 
thinking about is small businesses because they are a job 
creator. That is why we have proposed zero capital gains for 
small businesses, health care reform, making it be particularly 
helpful and supportive of small businesses, when we are 
thinking about tax credits. All of those things are for small 
businesses because they are essential to job creation.
    Mrs. Lowey. Thank you, Mr. Chairman.
    Chairman Obey. Mr. Kingston.
    Mr. Kingston. Thank you, Mr. Chairman.
    Let me read a statement. This is the President of the 
United States February 5, 2009, talking about the stimulus 
program. This plan will create or save over 3 million jobs, 
February 5, 2009. February 9, 2010, the Bureau of Labor 
Statistics says that the stimulus program that there are now 24 
percent, fewer job openings in the private sector nearly 3 
million jobs have been lost. Hiring in the private sector has 
decreased by 9 percent and unemployment has gone from under 8 
percent to nearly 10 percent.
    Here's a statement by majority whip Mr. Clyburn that the 
stimulus program will create 3.5 million jobs, February 13, 
2009. A Bureau of Labor Statistics, February 5, 2010, national 
deficit is now $12.5 trillion with--I guess that would be the 
debt--with over 2.8 million jobs lost. Speaker Pelosi said that 
if we do not pass it, each month 500,000 Americans will lose 
their jobs. I think that that is what happened after we did 
pass it. Yet you are telling me the stimulus program is good.
    I would suggest to you that more people have experienced 
Elvis sightings than have seen jobs created by the stimulus 
program and if you guys think it is working, I suggest you go 
out to the Main Street of America and talk with the people. The 
economy is showing signs of recovery despite the stimulus 
program, despite irresponsible spending, despite misguided and 
excessive regulatory burdens. The private sector is recovering 
because of the business cycle. If we really want to help create 
jobs we have got to get away from big business and big 
government solutions for everything. We need targeted, 
regulatory and tax relief for small businesses, and we need to 
help community banks, not the big boys on Wall Street who are 
always going to get their bailouts.
    I want to talk to you a little bit about the deficit 
because I keep hearing how horrible everything was that this 
administration inherited. From 1995 to 2007, the Republican 
Party, which spent too much money, the Republican deficits 
accumulated at $1.2 trillion, and in 2009 the deficit alone was 
$1.4 trillion. 12 years of Republican majority rule in the 
House, add 3 years of Democrat majority rule in the House, and 
you have got a deficit bigger than 12 years accumulated. But 
that is not the end of it because you have got another deficit 
this year projected at $1.6 trillion followed by $1.3 trillion 
the next year. And some of those programs which the President 
supported when he was in the Senate--a stimulus program in May 
of 2008, $168 billion; July of 2008, a Fannie Mae bailout, $200 
billion, November of 2008, a $700 billion TARP program. And 
then as President, January 2009, $410 billion omnibus spending 
bill; February of 2009, $787 billion stimulus bill.
    And then not to mention Federal Reserve, 29 billion in 
March of '08 for Bear Stearns; September of 2008, $84 billion 
for AIG, now up to $140 billion; and now a government takeover 
of health care that is about a trillion dollars when all is 
said and done, and we are talking about a spending freeze. That 
is like taking a squirt gun to a forest fire. It is not going 
to do the trick.
    I guess my question to you would be with 37 percent of our 
revenues, of our spending--37 percent revenues plus deficit, 37 
percent is deficit spending, if you knowing what you know now 
had to do it again, would you pass the exact same stimulus 
program 1 year ago or are you that pleased with it down there 
at 1600 Pennsylvania Avenue that we think is perfect, or would 
you go back and say I would have done this a little bit 
differently, and if so what would you have done?
    Ms. Romer. Let me at least start. I think the most 
important thing to understand is the incredible downward 
trajectory that this economy was on. I just have to remind you 
at this time last year we were losing more than 700,000 jobs a 
month. This was an economy that was headed down incredibly 
fast. The Recovery Act has absolutely played a key role in 
turning that around, and inevitably where you see it first is 
it slows the rate of job loss before it finally adds to 
positive job gains.
    You ask how do you know it is working? Well, I can 
certainly give you our estimates. We certainly can talk about 
all of the other analysts, including the Congressional Budget 
Office, that say it is saving and creating jobs, but if you 
just go out into America you will find----
    Mr. Kingston. Reclaiming my time, I actually do go out to 
America and that is where I get a lot of information. No one 
believes it is working.
    Chairman Obey. The time has expired. The gentleman controls 
his own time and the gentleman's time has expired. So I don't 
think it is appropriate to have a witness continue on the 
gentleman's time.
    Mr. Serrano.
    Mr. Serrano. Thank you, Mr. Chairman.
    We are here today trying to figure out how to go forward 
and bring jobs back into our economy and bring our country to 
where it should be, but we should not forget how we got here 
and one of the things that got us here was the lack of 
oversight and the inaction of Federal agencies to protect the 
consumer to protect the investor.
    With that in mind, there are two bills, one that went 
through the House by Congressman Frank and then another one by 
Senator Dodd that speak to a consumer financial protection 
agency. The big difference as many of us see it is that Senator 
Dodd's is within the Federal Reserve and the other one is an 
independent agency. Chairman Frank himself was quoted as saying 
that putting it in the Fed is a bad joke, and other Senators 
have joined in and talked about the abysmal record the Fed has 
had. So if you had your way, should this be an independent 
agency or should it be part of the Fed and why?
    Secretary Geithner. Congressman, you are raising a very 
important question. The President, when he proposed a set of 
comprehensive financial reforms, proposed the establishment of 
an independent stand-alone agency, and the judgment we reached 
was we looked at the record of the people charged with 
enforcing consumer protection and they did not do a good enough 
job, and we thought it was important to make sure the Federal 
Reserve had the ability to focus not just on monetary policy, 
but on reducing future financial crises, and we wanted it to 
have a narrower set of responsibilities and clear authority and 
accountability for those pretty daunting challenges on their 
own.
    We wanted to have a new agency that woke up every day and 
worried about one thing, which is how to protect consumers. Now 
the critical thing, and this is really the most important 
thing, is that this agency has independent budget authority, is 
led by somebody appointed by the President, confirmed by the 
Congress. And this is the critical thing: It has the ability to 
write rules that apply across the system from banks to petty 
lenders, mortgage brokers to check cashers. And that is not 
enough. It has to have the ability to enforce those rules 
across the financial system.
    So we are going to keep working very hard as this bill 
moves through the Congress to make sure it comes out of the 
process at the end of the day in a way that has strong 
independence on these four key criteria--independently led, 
independent budget authority, capacity to write rules across 
the system and enforce those rules--because we don't want to 
see an outcome where you see parts of the system left out, left 
out of the rules of the game with no adequate enforcement on 
those entities.
    Mr. Serrano. Well, we thank you for that. And just as a 
little side note, the years that I have been on this committee, 
I have never seen happen what happened a couple years ago where 
agencies in charge of overseeing the protection of the 
consumers were actually being asked by members of the 
subcommittee how much more money they needed and they were 
being told no, it is fine we don't want any more money. And 
then we saw the Bernie Madoff scandal, and we realized that 
they actually did need to do more but they didn't want to and 
they didn't even want money to do more and it may be the first 
time in the history of this committee that the members were 
saying we can get you more money and the agency was saying no, 
we don't want any more money. And that sent a signal that 
something was wrong.
    So I hope it is an independent agency and I hope the 
administration works hard to make sure that it is an 
independent agency.
    Secretary Geithner. It is just one example. You know, it is 
not just on the consumer side. Investor protections, need 
stronger cops, better deterrence to protect Americans from 
fraud and abuse, from manipulation of markets, and we need much 
stronger tools to constrain risk taking in the financial 
system, make sure we don't have future AIGs, make sure that if 
the country ever again faces the risk of institutions managing 
themselves at the edge of the abyss, and if the government has 
to step in to protect the economy, we don't have to face--have 
the taxpayers face any risk of loss in that context. But I 
think we are getting closer to a very strong package of 
reforms. What the House passed and what Senator Dodd has 
proposed is the most sweeping set of reforms for our financial 
system since the Great Depression. They are necessary. We have 
taken a lot of careful time to get here but we want to move 
forward now to put these reforms in place.
    Mr. Serrano. Thank you. Thank you, Mr. Chairman.
    Chairman Obey. One quick response from you, Mr. Geithner. 
How much money has this administration provided by way of 
bailouts to the big banks other than TARP?
    Secretary Geithner. Thank you for raising that question, 
Mr. Chairman. We have been able to restore stability to this 
financial system at a fraction of the resources you authorized 
us, at much lower cost than anybody anticipated. I will just 
give you a few facts.
    Since we have came into office, we have written checks to 
banks for only $7 billion. None of those dollars went to major 
financial institutions, major banks. We have got $170 billion 
back from the Nation's larger banks by forcing them to go out 
and raise private capital to replace the taxpayers' money. When 
we came into office, the initial estimates of how much it would 
cost to solve this crisis were in the range of $500 billion. 
Today those estimates are down below $100 billion and if 
Congress passes its financial fee, the taxpayer will not be 
exposed to a penny of loss. We worked very hard, very 
effectively to make sure we got that--those resources back from 
the major banks so we had more resources available to meet the 
many challenges this country faces. And we have achieved much 
more improvement much more quickly, lowering borrowing costs 
for all Americans at much, much lower cost than anybody ever 
anticipated. 95 percent of the commitments we made since we 
came into office went to housing, small business mitigation.
    Chairman Obey. Thank you. Mr. Frelinghuysen.
    Mr. Frelinghuysen. Thank you, Mr. Chairman.
    Like Ms. Kaptur, I would like to put a more human face on 
this discussion and let me say, Chairman Romer, one thing you 
can be sure of, whether we are Republicans or Democrats, we 
have been out there listening to our constituents. We have our 
ear to the ground. And while New Jersey may not be Ohio with 
that high rate of unemployment, our unemployment rate in New 
Jersey is 10.1 percent. The real unemployment rate is probably 
close to 17 percent. It goes across blue collar, white collar 
New Jerseyans, and those that represent States around here take 
this whole issue very, very personally.
    So from a New Jersey perspective, tens of thousands of New 
Jerseyans are out of work. They have a feeling we don't make 
anything in this country anymore. So there is not a lot of 
consumer confidence. And by and large--I don't mean this as a 
political statement--they see the economic stimulus package as 
sort of a colossal waste of money, huge expenditure, all 
borrowing. I know that has a political flavor to it. And they 
say what are you doing down there? Well, Mr. Pastor and I are 
on the Energy and Water Subcommittee.
    As of Monday, the Department of Energy has spent $2.9 
billion of the $37 billion that was provided to it in the 
Stimulus Act more than a year ago. That is less than 8 percent. 
In other words, 92 percent of the Recovery Act funding provided 
to the Department has yet to hit the street. Three programs, 
Energy Efficiency and Renewable Energy, Office of Electricity 
and Fossil Energy amount for nearly $24 billion of unspent 
stimulus dollars, nearly equal amount appropriated to the 
entire Department of Energy in fiscal year 2010. Let me repeat 
that. Accounting for nearly $24 billion of unspent stimulus 
dollars nearly equal the amount appropriated to the entire 
Department of Energy.
    What is going on?
    Ms. Romer. Let me just very quickly--what I was trying to 
answer before, one of the best ways to see what the Recovery 
Act is doing is in the projects that are actually started. So 
we do have some 12,000 transportation projects going. I have a 
number here, almost 3,000 projects at military bases of the----
    Mr. Frelinghuysen. Let's talk about one of the major 
initiatives of the administration, which is clean energy, clean 
jobs. What is happening in the bureaucracy here? I know there 
is a problem with loan guarantees and things of that nature. 
Have we not hired enough people to handle all of this money or 
what is going on?
    Mr. Orszag. Congressman, if I could jump in here, and I am 
sure you either have had or will have the opportunity to talk 
to Secretary Chu in detail about the Department of Energy's 
activities, but I would note a few things. First, it takes time 
to get new programs up and running. Second, out of the $36 
billion, more than $25 billion has been obligated. So while the 
money has not actually been distributed, it has been--the 
recipients et cetera have been identified and the money is now 
starting to flow. So in a lot of cases, what was involved here 
was new activities or new programs. The Department of Energy 
wanted to make sure that it was done right so that we didn't 
have problems either with fraud or with improper payments. That 
took a bit of time, but the money is now--the system is now 
operating and working.
    And let me take this opportunity--there has been some 
discussion of the Recovery Act to point out, and I think we 
need to attribute the Vice President's activities and knock on 
wood, but to date, there have not been the kinds of stories 
about substantial fraud and substantial abuse that one may have 
expected given the activity this large. And I credit that to 
the aggressive efforts the Vice President has taken to speak to 
governors, to speak to mayors, to speak to recipients to say 
don't do this.
    Mr. Frelinghuysen. With all due respect you might take a 
look at the Department of Energy's IG report, some of the 
concerns, and that is an independent entity. First of all, a 
lot of money is going out to the States as you are aware of. I 
understand the difference between outlays and so forth, 
obligations, but a lot of money is going out to the States. I 
think only 9 percent of the money that has been going out to 
the States has been spent. So people back home are wondering 
what is going on here besides all the money being borrowed, 
they are wondering when are they actually going to see private 
sector jobs. And that is another issue here is what are we 
doing to concentrate on private sector jobs? I understand you 
want 600,000 public sector jobs, but people back home want to 
actually work for themselves, not for the government.
    Thank you, Mr. Chairman.
    Chairman Obey. Ten seconds to respond.
    Ms. Romer. Actually I have just one fact to add, which is 
if you look at the second quarterly report on the Recovery Act 
done by the Council of Economic Advisers, we actually looked at 
the clean energy sector and money that has been spent in that 
area, and we identified almost 52,000 clean energy jobs as of 
the 4th quarter of 2009. So it is certainly there. It is not 
nearly as big as it is going to be eventually, but it certainly 
is as Peter said starting.
    Chairman Obey. Let me simply say to members of the 
committee, I don't think it is fair for members to run out the 
clock on their questions leaving the witnesses no time to 
respond. If that happens, I will have to give the witnesses a 
minute and a half to respond even if the clock has run out. 
That will mean that some members of the committee will not have 
an opportunity to ask questions. So I hope we can try to avoid 
that.
    Ms. DeLauro.
    Ms. DeLauro. Thank you, Mr. Chairman.
    Dr. Romer, in a joint statement you mentioned, in your 
statement, significant infrastructure investments we have made, 
particularly with the Recovery Act through formula funding, 
Build America bonds, and so on. Yet according to the American 
Society of Civil Engineers, we face a $2.2 trillion 
infrastructure investment deficit that current Federal programs 
simply cannot make up. The funding we have provided will help 
our recovery but it won't be enough to move forward for long-
term economic growth. This past weekend, The New York Times did 
a piece on the huge costs involved in revamping the Nation's 
sewers. According to an EPA study, we will need approximately 
$335 billion to simply maintain the Nation's tap water systems 
in the coming decades.
    I believe a national infrastructure bank that leverages 
significant private capital to make merit-based investments in 
infrastructure--transportation, water, energy, broadband--that 
provide clear economic, environmental and social benefits can 
help create long-term job creation and economic growth.
    My colleague from New Jersey talked about our not building 
anything. I believe that this is a way for us to build and lay 
a foundation for sustainable growth in this country. Laura 
Tyson and the others on the President's Economic Recovery 
Advisory Board made a case for a bank in a Wall Street Journal 
op-ed earlier this year. What are your thoughts on the role of 
a national infrastructure bank, what role they can play in 
long-term economic growth and technological development, a 
national infrastructure policy that keeps us globally 
competitive?
    Ms. Romer. I think the first thing I want to say is I want 
to echo what my colleagues have said, what you have said, which 
is infrastructure investment is a win-win. It is good for job 
creation right now in an economy that obviously is desperately 
in need of it. It is good for long-term growth; right? 
Revamping our infrastructure. It is capital and that is 
something that helps us to be more productive going forward in 
the future. It raises standards of living. I also want to 
strongly endorse the importance of merit-based infrastructure 
positions. I think one of the real success stories in the 
Recovery Act is the infrastructure spending at the Department 
of Transportation through the TIGER Program; precisely because 
they are merit based; so I think this is absolutely a very good 
way to go forward.
    Certainly proposals for an infrastructure bank are another 
way to continue this process to leverage private sector funds, 
and certainly something that is very worthy of consideration.
    Mr. Orszag. Congressman, I would just add, as you know we 
have had many discussions about this, and we have stepped 
forward with a national infrastructure fund at the beginning 
which I know does not go----
    Ms. DeLauro. With all due respect, $4 billion in the 
Department of Transportation is not a national infrastructure 
development bank under the Treasury Department that has the 
ability to borrow in the capital markets so we can leverage 
private funds. We are not going to get serious investment for 
the long-term future of this country until we do what the 
Europeans have done in setting up a European Investment Bank.
    Mr. Orszag. I am not sure that was a question but----
    Ms. DeLauro. Well, but I want to know why we have moved off 
of the--I want to know why we have moved away from the concept 
of a national infrastructure development bank.
    Mr. Orszag. I think it is something we will continue to 
explore and discuss with you and we thought that in the 
meanwhile, having an infrastructure fund at $4 billion would be 
a first step in that direction albeit not the full approach 
that you and others have put forward.
    Ms. DeLauro. If I have any time left, I would just say to 
you that I support the transportation efforts. I think they are 
laudable. I think we move in that direction. But if we are 
going to build, if we are going to be at the cutting edge of 
technology, then we have got to look at water systems, energy, 
environment, broadband, and telecommunications.
    This is a country that was built bricks and mortar on fiber 
optics, and we are going backwards in this regard rather than 
forward, and I continue to talk about it, but there is enough 
support in this institution but outside this institution, 
whether it is the U.S. Chamber or whether it is unions or 
whether it is bondholders and folks in the financial interests 
who believe that this is a way for private investment, not 
going to Europe but private investment, being in the United 
States to build this country.
    Thank you, Mr. Chairman.
    Secretary Geithner. Congressman, could I just say I want to 
say you are right on the imperative and we agree that a bank 
that is well-designed could play a useful role in meeting those 
needs. I am happy to work with you and your colleagues to help 
to design that.
    Ms. DeLauro. I appreciate that. Thank you.
    Chairman Obey. Mr. Tiahrt.
    Mr. Tiahrt. Thank you, Mr. Chairman.
    This year we are already $655 billion in debt for the first 
5 months, if I understand it correctly, and we really are 
making projections this year--only have enough to cover the 
mandatory spending. We have to borrow for everything over that. 
So we are going to increase our debt once again this year 
further. You made a comment earlier about helping us dig out of 
this hole. When you are in a hole, stop digging might be my 
first suggestion. But I do think we have a creative opportunity 
to help reduce the costs and increase jobs.
    There is an underlying premise here that the government can 
create wealth. I don't believe that. I don't think the 
government can create wealth. Only the private sector creates 
wealth. And then a byproduct of doing that is creating jobs. So 
I am advocating for creating jobs. Capital is also a coward. It 
only goes where it is welcome. If taxes are too high, if 
regulations are too onerous, if we have too many costs 
associated driven by Federal policy whether it is energy or 
litigation policy, we can't create jobs, we can't create the 
wealth and the byproduct of the jobs.
    Last year the wisdom of this committee was to defund EPA 
from regulating and taxing livestock emissions. The proposed 
regulations and taxes were greater than the profit of margin 
for cattle production in America, and in Kansas we would feel 
that very deeply. That production would have gone south of the 
border where capital is more welcome. And, again, it was the 
wisdom of this committee to strip the funding.
    Now we are faced with challenges of cap and trade being 
driven by regulation rather than by legislation, and I think 
there is a great danger in that it will drive up costs for all 
Americans either in the way we transport products, and 
everything we buy is transported, in the cost of manufacturing 
things, and we have to make things. We can't survive as a 
service economy. We have to make things. So these regulations 
are continuing to grow. And I am just using cap and trade as an 
example but it is every regulation. I believe all regulations 
should go through a very simple formula. The benefit should 
exceed the cost of implementation.
    If the benefit received by the American people exceeds the 
cost of implementation, then we have a regulation that we ought 
to consider as being proposed and administered. But what we are 
seeing is far too many regulations driving up the cost of 
products and forcing jobs overseas. Even for ethanol now, which 
we have tried to grow as an industry, proposed regulations in 
the EPA on starch-based ethanol and the land use combination 
with it is, in effect, going to drive ethanol production out of 
our country and we will only be able to procure ethanol again 
because of regulations from Brazil basically because they make 
it from sugarcane, which is not starch-based.
    So we have this big challenge facing us because of the cost 
in business driving our jobs overseas. To help us create wealth 
in this country, I would advocate that we freeze our 
regulations on this fiscal year and next fiscal year and run an 
audit. Audit them by saying the benefit has to exceed the cost 
otherwise we are going to repeal or reform the regulation. 
Would you advocate freezing regulations until we can bring some 
sanity and common sense into them?
    Mr. Orszag. If I could comment on this briefly, first let 
me wholeheartedly agree with regard to climate change and the 
efforts to address, it would be far better to address through 
legislation than through regulation. Second--and we can provide 
this information to you--in terms of the regulations that were 
adopted during the first year of the Obama administration, the 
record shows that the benefits far exceeded the costs to a much 
larger degree than during the first year of the previous two 
administrations, and we can provide that information to you 
also.
    Third, there is an effort to review existing regulations 
through the Office of Information and Regulatory Affairs, and 
we look forward to working with you on that. I don't know that 
a freeze is necessary as opposed to continued emphasis on 
regulations, whose benefits exceed their costs and an effort to 
make sure that is true not only with regard to new regulations 
but existing ones.
    Secretary Geithner. Could I add two things? Go ahead. I am 
sorry.
    Mr. Tiahrt. I just wanted to mention if we don't make it 
more appealing to attract jobs here we are going to continue to 
offshore jobs. And this is a huge part of it. Every time we 
hire somebody--we are going to hire 153,000 people this year. 
They have got to do something. They are going to write 
regulations. We have got to slow that process down.
    Secretary Geithner. I agree. Mr. Chairman, could I just say 
you are absolutely right to remind people that what matters for 
our future is our capacity to create an environment in the 
United States if you want to invest in or support innovation. 
The test of recovery and expansion for us would be what if we 
see a durable recovery led by private sector investment and job 
creation. You are absolutely right. So we have to be careful 
about what happens to the broader investment environment in 
that context. But it is very important for people to recognize 
that the principal uncertainty businesses face today is whether 
we are going to have a growing economy creating growing demand 
for their products, and because of the damage caused by the 
recession, we still need to continue to work to reinforce this 
expansion carefully, responsibly, in a fiscally responsible way 
to make sure we have an economy that is growing so these 
businesses can start to invest and grow again.
    And it is very important as part of that that we provide 
some clarity on these key reforms that are still working its 
way through the Congress. It is obviously very important on 
health care. It is very important on financial reform. 
Businesses have a huge stake in making sure we have clarity and 
what the rules of the game are going to be going forward in 
these areas which are going to be so important to the American 
economy in the future.
    Chairman Obey. Mr. Moran.
    Mr. Moran. Thank you, Mr. Chairman. I want to thank the 
three witnesses for the extraordinary sacrifice that they have 
accepted by going into the public sector versus what they could 
be making in the private sector. It is at the local level of 
government where the rubber hits the road in terms of the 
public sector's direct impact upon people's quality of life.
    Municipalities across the country have benefited from the 
stimulus bill. They haven't always given the Federal Government 
credit, but it has resulted in their ability to retain hundreds 
of thousands of teachers, public police, firefighters, public 
works people and the like without having to raise taxes. But 
the stimulus bill is going to be exhausted pretty much by the 
end of next year. Unfortunately, real estate values which are 
the principal source of local revenue to pay for education and 
public safety and the like are not going to come back next 
year, or even for the next several years.
    So at the local level of government there will be very 
substantial retrenchment in the quantity and quality of 
services and probably a substantial increase in property taxes 
on those who are able to retain their homes. I would like for 
you to give us some insight on how you feel we can deal with 
that condition that really is just over the horizon.
    Ms. Romer. Let me address that because I couldn't agree 
with you more that the conditions in State and local budgets 
have been absolutely terrible because of the recession and are 
anticipated to remain very, very bad going forward. I think 
that we have talked about a lot about the Recovery Act, but one 
of the great success stories of the Recovery Act is the aid for 
State and local governments because it really has had a direct 
impact on State services and on keeping teachers, firefighters, 
first responders employed. It has been absolutely essential. 
And I think something that we haven't discussed much, you know, 
in thinking about what the recovery act did, part of the 
transparency is to have the recipient reporting.
    So about a third of the Recovery Act funds the recipients 
have to file a report every quarter with the government to say 
what they have done with it. And I think it is from the State 
fiscal relief that you see some of the very largest numbers. I 
think the first recipient report showed that some 300,000 jobs 
were saved or created through these funds. So it is something 
that the President is looking forward, thinking about what else 
we need to do to keep our economy growing, to try to put people 
back to work, and State and local fiscal relief is absolutely 
essential.
    Mr. Moran. If I could just followup, the Federal 
Government, for example, in the role of education can do little 
more than fill gaps or build capacity. The problem is that the 
basic foundation of our public school system is going to be 
substantially threatened by the loss of revenue coming into the 
municipalities. Do you have any thoughts about that, how we can 
deal with that?
    Secretary Geithner. Again, I would just say, and the 
President believes this very strongly, there is a very strong 
case for providing additional assistance not just to States but 
that reaches local government on a significant scale going 
forward for exactly the reasons you have said. And programs 
like Build America bonds programs, things like that that can 
help reduce the cost of borrowing for States has been a very 
successful program, but we think there is a very good economic 
case still providing more reinforcement that reaches down to 
the local level of government so they can maintain critical 
service as we still go through what is going to be still a very 
long period of repair and recovery to this financial crisis.
    Mr. Moran. Thank you very much.
    Chairman Obey. Mr. Latham.
    Mr. Latham. Thank you very much, Mr. Chairman. And welcome 
to the panel.
    A lot of people here have talked about jobs as being the 
number one issue and I certainly believe that that is true. I 
come from a small family business background, and it is of 
concern to me that there is virtually nobody in the 
administration who has ever had any real business background, 
and understands what small businesses are going through today. 
As I talk to small business people in my district and my local 
bankers, it is the fear of what we are doing to them here that 
is causing them to be frozen in place today.
    You talk to the local bank on Main Street--it has plenty of 
liquidity. The problem is that oftentimes the examiners coming 
in the back door are saying you cannot make this kind of loan, 
you have got to cut this line of credit in half, so their hands 
are tied. And if you are a small business person today in a 
subchapter S family business, you are scared to death because 
you look at next year.
    Your marginal tax rates are going to go up. The cost of 
whatever happens with health care, will cause tremendous new 
mandates, new costs per employee. You look at cap and trade 
which means the potential in our part of the country will be to 
increase utility rates by 20, 25 percent.
    So there is tremendous uncertainty out there. The capital 
gains tax rates are going to go up next year if you do invest. 
So if you are a small business person like my family and most 
people that I know, you are scared to death today and you are 
frozen in place because of what the agenda here is going to do 
to a small business, and that is about 70 percent of the jobs 
out there. If we are going to get this economy going, we are 
going to have to get small businesses moving again.
    What do I say to a small business person today who is 
scared to death of the agenda that is coming out of Washington?
    Secretary Geithner. Let me just start, but I think my 
colleagues would like to follow up. First, I want to agree with 
what you said of what is happening to on the credit side 
because you are right to emphasize that a lot of banks are--
have a lot of capital, a very strong position, and they are 
seeing what they see in any recession, which is after a period 
where supervision was maybe a little too soft in some areas 
people tend to overcorrect. And part of what the banks are 
facing is what they perceive to be unjustified additional 
supervisory pressure to tighten up on lending standards in a 
way that hurts. You are right about that, I think. But part of 
the solution is to try to mitigate that but also to make sure 
they have capital.
    Now, it is very important to recognize that we have 
proposed in this budget a series of very powerful tax cuts for 
small businesses, zero capital gains rate for investing in 
small businesses, to extend and expand tax cuts that go to 97 
percent of businesses across the country, extend and expand 
expensing bonus appreciation. These are powerful incentives for 
investment by small businesses. We think that combination of 
tax measures with additional support on the credit side would 
be very constructive. But I also agree with you that providing 
clarity of where these big make major reform efforts are going 
to end up on the financial side because that is important to 
credit as well as on health and energy would be good for 
confidence, would be good for certainty.
    People want to know what are the rules of the game I need 
to plan for, and it is better for the country for us to resolve 
for them how we are going to put those reforms in place. But 
again, I would emphasize the things we can do right now which 
are very important are very substantial additional packages of 
tax incentives for small businesses and some powerful measures 
to help make sure that those that are viable businesses or are 
growing can get access to the credit they need.
    Ms. Romer. Can I just jump in on small businesses and 
health care because the Council of Economic Advisers actually 
did a report of the legislation. I think this is one of the big 
success stories of how the legislation has been crafted to help 
small businesses. And just let me give you some facts: $40 
billion of tax credits will go to small businesses to help them 
provide health insurance for their workers. By having an 
insurance exchange, the Congressional Budget Office says that 
small businesses will be able to pay some--probably 4 percent 
less for the insurance that they provide for their workers and 
that we have explicitly not put any employer responsibility 
provisions on firms smaller than 50 employees. That is 96 
percent of all the firms in the economy. So this is certainly 
an issue that Congress has heard and has crafted the 
legislation to make sure that it helps small businesses, not 
hurt them.
    Mr. Latham. I think it is very unfortunate that--the banks 
on Main Street are not the ones that caused the problems we 
have, and yet they are the ones being penalized today; I would 
submit that people are scared to death of what the agenda is in 
Washington and they are frozen in place because of that. Thank 
you, Mr. Chairman.
    Chairman Obey. Twenty seconds to respond.
    Secretary Geithner. Well, again I would just take the other 
side of it. If you sat here and did nothing, we would not be 
helping restore confidence in businesses across the country 
because they would be more uncertain about how fast the economy 
is going to grow. They would be living with unsustainable rate 
of grow in health care costs that are killing them. They would 
deal with a financial system that hurt them terribly. And so if 
you care about business confidence and you care about 
investment, I think we all recognize the government has a 
responsibility not to just provide more reinforcement for this 
expansion, but to provide some clarity about how we as a 
country are going to address the burden posed by the health 
care system, the confusing mix of regulations and incentives 
for how we use energy, and a financial system that did a 
terrible job of meeting the credit needs of working families 
and businesses across the country.
    And the people suffering through the financial crisis are 
businesses and families that had nothing to do with the crisis. 
So I agree with you about the imperative, but I think if you 
care about confidence and certainty, you want to care about 
bringing these reforms down to Earth so we can have a stronger 
economy in the future.
    Chairman Obey. Mr. Olver.
    Mr. Olver. Thank you, Mr. Chairman.
    Mr. Secretary, in your original statement, you referenced 
that one of the key requirements for a robust economy--I am 
going to return to the comments and support the comments made 
by the gentlewoman from Connecticut here, that the key 
requirement for a robust economy was infrastructure, and you 
then listed broadband and water, sewer, and power grids and 
energy modernization and transportation. I think you could well 
have included as well education and housing.
    I chair the Transportation and HUD Subcommittee of 
Appropriations, and I strongly agree with that premise. In 
fiscal 2010, you proposed an infrastructure bank which was $5 
billion, but I don't remember if there was any legislation 
actually proposed to create that infrastructure bank. We did 
create, however, the High-Speed Innercity Rail Program and the 
TIGER Grant Program with moneys that could arguably come from 
that but only in transportation.
    In fiscal 2011, you proposed the infrastructure fund, 
somewhat like a bank, I guess. And again it is, you know, no 
legislation, and again, don't know whether it is narrowly 
transportation or something larger. Now, it seems it clear to 
me that we need an investment level that is at least in order 
of magnitude greater than the $5 billion in the 1 year or $4 
billion in the 2nd year in order to deal with the 
infrastructure needs across a broad range of areas and I am 
just curious to know whether--whether you have any intention in 
this session of proposing a broad-based kind of a fund and 
bank, much broader than this, that would include revenues that 
raised and leveraged across the whole of our economy 
essentially.
    It is somewhat in proportion to the impacts that the 
infrastructure you are talking about would have on the private, 
the public, the commerce, commercial, and business segments of 
that economy.
    Secretary Geithner. Congressman, first, we are proposing 
substantial additional investments in infrastructure across a 
whole range of what we think are very high return parts of the 
economy as a whole. We are examining how best to design a bank 
or fund that would help leverage private sector dollars, help 
leverage the taxpayers' dollars, and make sure that we are 
allocating those scarce resources to where they can have the 
biggest potential effect on projects that again having high 
economic returns.
    Again, we are taking a careful look on what--what would be 
best designed. I am happy to work with your colleagues and a 
lot people have different views on how to do this. We think 
there is a good case for, again, a substantial increase in 
investment over time in infrastructure. We need to do it in a 
fiscally responsible way, but we think there is a good case for 
a bank as part of the mix.
    Mr. Olver. Do you agree with me that the needs in these 
areas are at least in order of magnitude larger than $5 billion 
or $4 billion?
    Secretary Geithner. I do--I think the broad needs we face 
as a country in infrastructure are very substantial, obviously 
not captured by that $4 billion or $5 billion number. But 
again, if you look at the scale of resources the President has 
proposed to put into infrastructure, it is several multiples of 
that basic number. Again, we think there is a good case for 
looking at a bank or a fund as part of that broader mix as a 
complement to the existing mechanisms that this committee and 
other committees have for allocating money to infrastructure. I 
am happy to work with you on what the best design is.
    Chairman Obey. Mr. Aderholt.
    Mr. Aderholt. Thank you, Mr. Chairman. The Constellation 
program takes directly or indirectly 10,000 to 20,000 jobs if 
you include the suppliers. The Aries-1 was Time Magazine's 
invention of the year last year. The Augustine Commission's 
figures were--I think most people would say were very 
debatable. And some folks think that Aries-1 could be ready to 
go by 2014 and not 2017. Of course, as you have seen, while the 
testimony has been given on the Hill, there is hardly any 
Member of the House or the Senate that has endorsed the new 
plan. And given the condition of the economy, I just want to 
throw out the idea that you think it might be at this time at 
least consider--at least to reconsider your plan to kill 
Constellation, to keep those real jobs which are work on real 
products, and then go gradually into the commercial aspects of 
space travel.
    Mr. Orszag. Congressman, as you know, the President is 
going to be holding a summit in Florida in April on precisely 
this topic. As you also know, the motivation behind the 
proposal is to allow the United States to return to the 
tradition of leapfrogging technologies and being at the cutting 
edge of space flight rather than simply returning to things 
that we have already done.
    You also know Constellation is behind schedule and over 
budget. So all of those things are motivations for a new 
direction with a larger emphasis on cutting-edge research and 
development that will allow us to leapfrog new technologies 
that can allow more interesting and exciting space exploration 
but again, there is going to be an entire summit devoted to 
discussing this in more detail.
    We believe that we are on the right path here, one that is 
supported by a wide variety of people, including, as you know, 
Buzz Aldrin and Sally Ride and others. But, again, we are going 
to have a summit where we can have a full discussion of 
precisely this topic.
    Mr. Aderholt. Thank you, Mr. Chairman.
    Chairman Obey. Mr. Edwards.
    Mr. Edwards. Thank you, Mr. Chairman.
    Mr. Orszag, I would like to begin with you, and I will be 
asking questions that perhaps you can answer with a ``yes'' or 
``no'' or very succinctly.
    When President Clinton left office, was there a surplus or 
a deficit?
    Mr. Orszag. Surplus.
    Mr. Edwards. When President George W. Bush left office, was 
there a surplus or a deficit?
    Mr. Orszag. Deficit.
    Mr. Edwards. Was the deficit that he left to President 
Obama to inherit estimated for fiscal year 2009 above $1 
trillion?
    Mr. Orszag. Yes, sir.
    Mr. Edwards. Prior to that in American history, wasn't the 
largest deficit ever $292 billion in 1992?
    Mr. Orszag. Yes. In nominal dollars.
    Mr. Edwards. Okay. Is it correct that when President Bush 
took office, in 6 of those 8 years he was President, 
Republicans controlled the Congress, and that when he came into 
office, there was a projected surplus of $4.2 trillion for 2009 
and, through fiscally irresponsible policies, many of which 
were pushed on a partisan basis by my Republican colleagues in 
Congress who I think had lost touch with their constituents 
back home, that $4.2 trillion surplus, didn't that turn into a 
$3.3 trillion deficit?
    Mr. Orszag. There was a very substantial shift from 
projected surpluses to projected deficit.
    Mr. Edwards. So a $7.5 trillion turnaround from projected 
surplus to actual deficit.
    Mr. Orszag. A very significant shift. We can walk through 
the precise numbers, but trillions of dollars in shift.
    Mr. Edwards. Unprecedented in American history. And while I 
am one who wants to work on a bipartisan basis to grow our 
economy and reduce our deficit, and while I am one who 
believes, frankly, our long-term deficits should be lower than 
the Obama administration has proposed, I must say, in all due 
respect to some of my colleagues, that it is a little trying to 
be getting sailing lessons from the captains of the economic 
Titanic.
    You took the largest surpluses in American history and 
turned them into the largest deficits, took an administration 
where we were gaining 200,000-plus jobs a month and turned it 
into 8 years of an average of, I think, 20,000 jobs a month 
growth. And at the end of that administration, we were left 
with the largest, most serious recession in American history or 
at least since the Great Depression.
    Let me ask you, Ms. Romer, what was the GDP drop on an 
annualized basis in the last quarter of 2008?
    Ms. Romer. It was well over 5 percent at an annual rate. It 
was 6.4 percent in the first quarter of 2009.
    Mr. Edwards. The last quarter of the previous 
administration. What was the GDP growth in the last quarter of 
2009, the last quarter of the first year of this 
administration?
    Ms. Romer. 5.9 percent.
    Mr. Edwards. In the year 2008, did the S&P go up or down?
    Ms. Romer. It unquestionably went down.
    Mr. Edwards. Was it approximately a 38 percent loss?
    Ms. Romer. That sounds about right.
    Mr. Edwards. What did the S&P do in 2009?
    Ms. Romer. It certainly, after falling early in the year, 
then grew tremendously.
    Mr. Edwards. In fact, it has actually gone up by over 62 
percent since March 9th of 2009. Is that correct?
    Ms. Romer. Yes, indeed.
    Mr. Edwards. Ms. Romer, what was the job loss in the last 
quarter of 2008 on a monthly basis?
    Ms. Romer. I think it was somewhat over 500,000.
    Mr. Edwards. What was the job loss in the last quarter of 
2009?
    Ms. Romer. It was less than 100,000.
    Mr. Edwards. So what we basically have is an administration 
that inherited the deepest, most serious recession since the 
Great Depression, the largest deficits in American history that 
had been turned around from the largest surpluses in American 
history. And while there is a lot of pain out there--and Ms. 
Kaptur very, very passionately expressed that pain--at least 
the building blocks for bringing those jobs back have been put 
in place.
    Now, what we have is Mr. Ryan, one of the leading voices of 
our Republican colleagues in Congress on the budget, the 
ranking member of the Budget Committee, laying out a roadmap 
for the future. I would say it is more like a U-turn to the 
past, the past failed policies that got us into this mess in 
the first place. As Yogi Berra said, it is kind of like deja vu 
all over again.
    Mr. Orszag, you talked about the Ryan roadmap for the 
future. What would its impact be on the deficit?
    Mr. Orszag. New estimates from the Tax Policy Center 
suggest that, because the proposal would significantly reduce 
revenue, that it would result in deficits by the end of this 
decade of 7 percent of GDP, significantly higher than under, 
for example, the Obama budget.
    And that reflects quite regressive tax cuts. It is not just 
that the deficit is higher, it is also that you are 
exacerbating the opportunity gap that Chairman Obey spoke 
about.
    Mr. Edwards. And it would end Medicare as we know it by 
turning it into a voucher program so 85-year-old widows can get 
a voucher to go negotiate with an insurance company what kind 
of health care policy they would get.
    What would be the impact of the Ryan roadmap to the failed 
past on the wealthiest 1 percent of Americans?
    Mr. Orszag. They would benefit from a very substantial tax 
cut.
    Mr. Edwards. Okay. Thank you.
    Chairman Obey. The gentleman's time has expired.
    Ms. Emerson.
    Mrs. Emerson. Thank you, Mr. Chairman.
    Secretary Geithner, Director Orszag, Ms. Romer, thank you 
so much for being here today.
    My question goes to Secretary Geithner. Since I didn't get 
to finish asking you questions last week, I will take advantage 
of your graciousness in being here again today.
    You testified and you also mentioned today that the 
administration has awarded no new TARP funds to big banks and 
you have only provided $7 billion to the smaller banks. If that 
is the case, then why is it that you decided to extend the 
TARP?
    Secretary Geithner. Excellent question.
    Although we have been very successful in restoring a 
measure of stability to this financial system at a much lower 
cost than we expected, you can see in housing markets across 
the country, small businesses, challenges facing small 
community banks, commercial real estate markets, a lot of 
stress and damage still. And we thought it was very important 
to make sure we had the capacity this Congress provided us to 
make sure we are supporting targeted, well-designed additional 
programs, again, to help people who can stay in their home stay 
in their home, help small business get access to credit, help 
small banks make sure they can get through this, and generally 
repair what is still damaged in this financial system.
    We also thought it was important just to make sure that we 
had a contingent capacity and an abundance of caution. In the 
event things were to deteriorate further, we wanted to make 
sure we had the capacity to respond without having to come back 
to the Congress.
    But I think that those additional programs are likely to 
use only a small part of the remaining authority. And you can 
see in CBO's numbers and in the administration's numbers that 
the overall cost of this program will be a very, very small 
fraction of what any of us anticipated. And the programs we are 
recommending still for small banks and small businesses 
themselves also have a very, very low additional potential 
risk.
    Mrs. Emerson. Well, I will follow and ask a question in Mr. 
Edwards's vein, a ``yes'' or ``no.'' Did you ever come to the 
Congress and ask us if you could extend the TARP?
    Secretary Geithner. I notified the Congress of my decision 
to use the authority Congress gave me, which is to extend. But 
in making that notification--I just want to emphasize this--I 
was very, very clear what we would use that authority for and 
what we would not. And you can, of course, look very carefully 
at everything we are doing because we made these things 
completely transparent, so you can judge us by our actions.
    Mrs. Emerson. But the answer is no, you didn't ask, you 
just told us.
    Secretary Geithner. Well, no. I mean, I listen carefully to 
your colleagues all the time, and I had a lot of support from 
many Members, including your side of the aisle, frankly, asking 
me to make sure we would continue to do things to help make 
sure that small businesses get access to credit, we are helping 
small banks again.
    Because, as many of you have said already in this hearing 
today, if you go across the country, you can still see, even 
though in many ways the financial markets are more healthy 
today, there is a lot of damage, a lot of wreckage still in 
many parts of the financial system in the areas that the TARP 
was designed to help us fix. We have made a lot of progress, 
but we have some work to do. And, you know, it was partly 
because of the concerns many of you had expressed to me that I 
thought there was a good economic case for extending.
    Mrs. Emerson. Well, I worry and I think a lot of my 
colleagues on both sides of the aisle worry that the TARP funds 
are actually going to be used as a budget gimmick. I mean, for 
example, you know, in the December jobs bill, we used TARP 
funds to offset the cost. That is not what TARP funds were for, 
number one. Back in February, you know, you all said you wanted 
to use the TARP funds for small-business lending I think, $30 
billion for small-business lending.
    But yet, at the same time, the director of the CBO, 
Elmendorf, says that, you know, this is just one pool of 
government money and everything else is accounting treatments 
to keep track of various purposes, which to me says this is--
``treatment'' is a nice word for gimmick. So it is worrisome--
--
    Secretary Geithner. I will not support anything in that--we 
agree with your concern about this, and we will not support it. 
The law doesn't allow us to do that.
    The way the law was written, when we get resources back 
from the banks--and, as I said, we have gotten $170 billion in 
capital back and very substantial positive return on many of 
those investments--those resources go to reduce the debt.
    What we are suggesting is that we reserve some authority to 
make sure we can help reenforce, provide support to small 
community banks. And we propose that Congress authorize a 
separate program called a small business lending fund to help, 
again, deal with the credit problems facing small businesses.
    So I would not propose anything that met the test you are 
concerned about. And we don't have the authority anyway to do 
what you are concerned about. We wouldn't do it.
    Chairman Obey. Mr. Hinchey.
    Mr. Hinchey. Thank you, Mr. Chairman.
    Thank you very much. Thank you very much for the opening 
remarks you made. They were very much to the point and thank 
you for the responses given to these questions. This has been 
very interesting and very, very important.
    We are facing one of the most difficult economic conditions 
that this country has ever faced in modern history, second only 
to the Great Depression, which is talked about a great deal. As 
many people point out, the deficit is unsustainable. It is 
important; however, as my friend Mr. Edwards pointed out just 
recently--and I thank him very much for the way in which he 
posed those questions and the way in which you responded to 
them--that the people of this country understand how this 
deficit came about, what caused this deficit, and what is being 
done to try to deal with it. Those are the critical issues that 
we have to deal with.
    There are several examples that are so obvious. One of them 
was the tax cuts of 2003-2004, which have now brought about the 
greatest concentration of wealth in the hands of the wealthiest 
1 percent of the population in this country since 1929. The 
other, of course, is the military operation in Iraq, which was 
unjustified, unnecessary, had no reason to be carried out 
whatsoever, but has been very, very expensive. And the expense 
has been, to a large extent, outside of the budget in ways in 
which it caused huge amounts of debt.
    Other things include the Medicare prescription drug 
program, which came about shortly after the previous 
administration tried to privatize Social Security. That was 
rejected, happily. But, unfortunately, President Bush was able 
to get this Medicare prescription drug program put into place 
without any means of taking care of the high cost of the 
prescription drug program in the context of Medicare now. All 
of these driving up this huge deficit.
    These are the things that we need to focus attention on, 
and these are the things that are being dealt with adequately 
by this Congress and by this administration. And it really 
needs to be done very, very strongly and very, very 
effectively.
    The point that was made a little while ago about the 
government takeover of health care is absolutely absurd in the 
context of this health care bill. I mean, there are some people 
here who would like to see more government takeover of health 
care by doing something like Medicare and extending it more 
broadly across the country. And there are a lot of Americans 
out there who would like to see something like that done, too. 
But this health care program is not anything like that.
    So anyone who says that this is a government takeover of 
health care is intentionally falsifying the situation, because 
they are not ignorant. They wouldn't be here, probably, if they 
were that ignorant. So they are intentionally falsifying that 
situation for their own political objectives. And that is what 
we are seeing over and over again: Falsification of information 
for political objectives. These are the things that need to be 
dealt with.
    So what do you think we should be doing? I know this great 
stimulus bill is having a very positive effect, but there are 
substantial amounts it of that haven't been put into play. 
Frankly, my judgment at the beginning was that the stimulus 
bill was a great idea, but it should be about twice as large as 
it was.
    There have not been adequate investments in the internal 
needs of this country in an awful long time, and a lot of that 
was done intentionally for other reasons. So this is something 
that really has to be done.
    What do you think that we should be doing right now to 
upgrade the quality of this economy, get jobs for the American 
people, and get a situation that is much more equitable, much 
more fair and reasonable in the context of this economic 
circumstance?
    Ms. Romer. Well, let me address that. And I actually want 
to come back to our budget, which, as we have discussed a great 
deal this morning, puts in place a plan for dealing with the 
long-run budget deficit, makes some very hard choices now, and 
sets up a bipartisan commission.
    But if you look at our budget documents, it proposed two 
things, about $250 billion of continued relief efforts, things 
like the State fiscal relief we have talked about, and 
continuing the unemployment insurance provisions of the 
Recovery Act. All of those things are absolutely essential to 
protecting people and helping the economy continue to grow.
    It also included $100 billion of targeted jobs initiatives. 
And that is everything from, as we have discussed this morning, 
more investments in infrastructure, to a hiring tax credit, to 
zero capital gains for small businesses, to a proposal that the 
President has talked a great deal about, a clean energy or an 
energy efficiency retrofit for homes.
    All of those things are smart programs; they are targeted; 
they are fiscally responsible. But we think they could 
absolutely move the dial, help us do what absolutely has to be 
done, which is get Americans back to work. So I think there are 
good ideas out there, and the President is asking with all 
urgency that Congress move on those and get those onto his desk 
for signature.
    Chairman Obey. Ms. Granger.
    Ms. Granger. Yes, I want to follow up with just one 
question as Mr. Edwards was talking about, a particular 
timeframe, and just a ``yes'' or ``no'' on this.
    Isn't it also true we were attacked on our homeland and 
fought these two wars during that period of time?
    Thank you.
    My other question is, the President's budget for fiscal 
year 2011 proposes the deletion of all the appropriations 
language which currently places limitations on transfers of 
Guantanamo Bay detainees. And it also requires advanced 
notification and related reports. This language was passed on 
several fiscal year 2010 bills, and it was negotiated to be 
acceptable to the administration. The amendments from our side 
of the aisle would have involved even tighter restrictions and 
reporting requirements.
    So my question is, why are you proposing that the committee 
delete this language? For example, the language you are 
proposing to delete specifically prohibits the release of 
detainees into the United States and prohibits the transfer of 
detainees to the United States for continued indefinite 
detention. Does this mean the administration plans to release 
detainees into the U.S. or to transfer detainees to the U.S. 
for indefinite detention in fiscal year 2011?
    Mr. Orszag. Congresswoman, as you know, the President 
believes that Guantanamo Bay should be closed for a variety of 
reasons.
    Beyond that, what I will say is I know there are ongoing 
discussions with the attorney general and others about the 
appropriate course forward, and I am going to defer to him in 
those discussions for the specifics. But I am sure he would be 
delighted to followup with you.
    Ms. Granger. Would anyone else like to answer?
    Thank you.
    Chairman Obey. Mr. Farr.
    Mr. Farr. Thank you very much, Mr. Chairman. I really 
appreciate having this hearing.
    And thank you for your public service. We appreciate that, 
as well.
    I wanted to followup on an earlier question about the 
credit at the local level in our small banks. One of my three 
counties that I represent has 22 percent unemployment. It is a 
large agriculture area. The county next door, Salinas, Monterey 
County has the Salinas Valley with about $4 billion of 
agriculture. I mean, incredibly productive area. But we also 
have the largest base closed in the United States in 16 years; 
still trying to get that.
    There is a lot of opportunity. And what the small banks are 
telling me is that they just don't have the credit because of 
two things that they think have really impacted. One is the 
increased cost of FDIC insurance. But the second was the 
markdown of their essentially underwater mortgages. People are 
still paying because these houses are worth a lot and they will 
recover. My house is the same way. I mean, the market value of 
my house isn't what my mortgage is, but I know it is going to 
come back.
    So it is not that they are defaulting on these mortgage 
payments, but they have had to mark them down. And between the 
loss of that capital, plus paying the insurance, they are just 
saying they are squeezed. How do I respond to that?
    I mean, what you said earlier, that you want to get some--
stimulate this, but specifically what can I take away and say 
is going to happen?
    Secretary Geithner. Well again, you are absolutely right. 
There are two types of pressures facing small banks that really 
do affect small-business lending.
    One is that there are some banks in the country that really 
need more capital, and they can't go raise it in the current 
market environment. And so there is a very good case for making 
sure they have access to capital from the government on 
sensible terms, so they can use that capital to increase 
lending.
    Mr. Farr. But they have to borrow that capital, right?
    Secretary Geithner. They do. But again, we have designed a 
program where it is a very simple program. You can come and get 
capital from the government for a long period of time at a very 
low dividend rate, and that dividend rate will go down as you 
increase lending.
    Now, you are also absolutely right that a lot of banks 
report that they are under a lot of pressure from their 
supervisors to cut back lending, frankly, in part because they 
have seen the value of real estate holdings that backed the 
lending fall. So now our--I should just say, I should have said 
this before--that our supervisors are independent of the 
Treasury. But they, in recognizing this problem, came together, 
all four of the national bank supervisors together, came 
together and put out guidance in November to their examiners 
across the country to try to make sure that they had clear 
instructions not to put additional pressure on banks simply 
because they had a borrower that had borrowed from the bank 
backed by a real estate loan that had fallen in value. They 
want to make sure that the examiners are looking at the cash 
flows of the business, and they are not penalized solely for 
the reduction in real estate value.
    Mr. Farr. Penalize if there is nonperforming loans, but 
don't penalize if they are performing.
    Secretary Geithner. Exactly. Yeah, exactly right. And the 
bank supervisors followed up that guidance with additional 
guidance just last month focused on small-business lending 
guidance.
    I don't think the message is quite getting out with enough 
force yet, but Sheila Bair, who plays a critical role in this, 
and the other heads of supervision in the United States are 
working to try to make sure they get the message out. But I 
think, frankly, they could do more to make sure that the 
examiners are not overdoing it.
    Mr. Farr. And so, the money that they can borrow from you, 
is that TARP money?
    Secretary Geithner. Well, you know, TARP, as you know, is 
an enormously unpopular program, and we are trying to put it 
out of its misery. And the conditions that come with TARP and 
the uncertainty about future conditions and the stigma of using 
TARP made it basically untenable as an instrument for this 
basic need. As an example of this, we had more than 600 small 
banks withdraw their applications from the Treasury in the 
first 9 months of last year because of concern about the stigma 
and conditions.
    So what we have proposed to do is to set up a lending 
facility outside of TARP that would provide capital in support 
of lending. And we are working now with your colleagues in both 
houses to try to come out with a package that would command 
broad support.
    And, again, this, along with more support for the SBA, is, 
we think, one of the most powerful ways we can help make sure 
that businesses across the country are not starved for credit 
as they try to expand and grow.
    Mr. Farr. So these banks can't get the credit until we pass 
this legislation?
    Secretary Geithner. That is right. But the virtue in this 
is that it is not a complicated design, and when Congress 
passes it, we can move very, very quickly to approve 
applications. So I think it has probably the quickest time to 
market of any programs we could design.
    And, again, one of the best uses of a dollar of scarce 
resources is capital to a small bank, because that will turn 
into $8 to $10 in additional lending capacity.
    Mr. Farr. Thank you.
    Chairman Obey. Mr. Simpson.
    Mr. Simpson. Thank you, Mr. Chairman.
    And thank you all for being here today. I appreciate it 
very much. First, three or four comments that you can comment 
on later if you would like to, and then a question.
    First of all, for the benefit of Mr. Edwards, my good 
friend, and for Mr. Orszag, Paul Ryan isn't on this committee. 
If you would like to comment on his plan, I suggest you do it 
when he can respond to it, because I think he probably has a 
little different take than either you or Mr. Edwards have on 
his plan.
    Secondly, fiscal commission. I agree with you, I think the 
President was right to do that. Many of us have been suggesting 
this for a long time. And I think everything ought to be on the 
table. And it is going to be ugly. Decisions are going to be 
ugly. We all know that. If I think they are in the best 
interest of the country, I will vote for it. If I think they 
aren't, I will vote against it. And that is the way it ought to 
be.
    Thirdly, when we talk about unemployment and ARRA funding, 
while we talk about it creating jobs--you know, I am not one of 
those that says it hasn't created a job. Obviously, it has 
created some jobs. Three hundred in one company in my district 
doing cleanup. We are now planning for next year when they lay 
off those 300 people. That is something you are going to have 
to deal with also, because there is going to be--it is kind of 
like Cash for Clunkers. It moved the purchase of automobiles up 
and then depressed it in future times. So it is something that 
we are going to have to deal with when that unemployment hits 
in the coming year.
    Fourth, I have heard, surprisingly I guess, financial 
debt--when you came into office, financial deficits, 
opportunity deficits, job deficits, education deficits, 
investment deficits, and a new one, foreign relations deficit. 
The only one I haven't heard is the reality deficit that seems 
to have been created from all of these. If there are any other 
deficits that you faced when you came in, could you please send 
me a list of all those? I would like to hear about them.
    Now the question: The one thing I heard when I was home 
over the last couple of weeks everywhere I went, at every 
banquet we had, was, ``I wish you at the Federal level were 
making the same tough decisions every State legislator is 
making.'' And I heard that from State legislators. And I tell 
you, I have been through some of the decisions that they have 
had to make back in 1984 and 1985 when I was in the State 
legislature. They made tough, tough decisions.
    Is the President going to submit a supplemental to bail out 
States? And, if so, why should those States that have been 
fiscally responsible bail out those that have not made the 
tough decisions? And we all know that there are some that have 
not made the tough decisions that others have made. And so why 
should my taxpayers or Indiana's taxpayers bail out--and I 
won't mention the States that have been irresponsible.
    Secretary Geithner. Congressman, maybe I just could begin.
    I think you are right to say, just to go back to one of 
your initial points, which is that you need to think about the 
Recovery Act as a bridge to recovery in private spending and 
private investment. And I think if you look carefully at what 
is happening across the country today, you can see encouraging 
signs of that happening. Because, again, if you just look at 
what is happening to businesses, you are seeing private 
investment expand again, exports start to grow. And that is 
encouraging that, you know, the economy is going to be able to 
grow coming out of this, even as we do the necessary thing, 
which is wind down these emergency things we had to do in the 
face of the worst recession in a long time.
    And you are absolutely right; of course we have to make 
tough choices. And I think the American families--it is not 
just the governments--are making that choice all the time. And 
what the President's budget does is lay out what are 
dramatically consequential changes in resources and commitments 
over the next 4 years that would bring our deficits down very, 
very sharply over that period of time. And Congress is going to 
have to choose, again, what mix of those policies it is going 
to embrace. But it is very important that everybody accept the 
basic reality that we live with, which is that we have to get 
those deficits down very sharply within that period of time.
    So you are right to emphasize it. But I think in the near 
term, this year, given the damage of the recession we are still 
living with, there is a very good fiscal case, very good 
economic case for giving additional support to State and local 
governments so they don't have to cut critical services deeply 
at a time when the economy is vulnerable and so many people are 
still suffering.
    We need to do that in a careful way, in a fiscally 
responsible way. We have to make sure it is temporary so we can 
unwind those kinds of things. But I think there is a very good 
economic case, very good fiscal case now for additional 
targeted support for States and local governments as they make 
difficult choices.
    We are not going to relieve them of all those choices. They 
are going to still have to make very tough choices on 
priorities, but we want to make sure they are not having to cut 
deeply into critical services at a time when, again, in so many 
parts of the country unemployment is alarmingly high and there 
is still so much trauma and damage in the aftershock of the 
recession.
    Mr. Simpson. Do we have any time?
    Chairman Obey. Twenty seconds.
    Mr. Simpson. One thing I would like to address is what we 
are doing with fixed costs. One thing we have complimented the 
administration on in past years is that they have fully paid in 
Forest Service in the Interior. This year, Interior is going to 
have to accept $109 million in fixed costs. How are they going 
to do that?
    Mr. Orszag. Well, first, let me just say, since you have 
raised fire in particular, that aggregate resources not just in 
Interior but in the Agriculture Department and elsewhere for 
addressing wildfires is up 5 percent.
    Look, you talked about hard choices. At OMB, we face a 
flat, nominal budget despite the fact that the vast majority, 
something like 80-plus percent, of our budget is personnel and 
there is normal upward pressure because of not only wages but 
health benefits. And we have to make hard choices. The Interior 
Department is no different. And going down the list of other 
departments that I did earlier where the Secretaries have 
agreed to even nominal reductions, they have plans to do so. I 
mean, in other words, they have specified budget plans to do 
so. And we could follow up with Secretary Salazar, in 
particular, if you are interested.
    But that is exactly what is involved in getting more 
efficiency out of the Federal Government.
    Chairman Obey. Mr. Fattah.
    Mr. Fattah. Thank you, Mr. Chairman.
    Two things. One is I want to make a comment, and then I am 
going to get to my question.
    So we had the first 6 years of the Bush administration. We 
had Alan Greenspan testify in the first months of the Bush 
administration that we had a $5 trillion surplus and we could 
be an entirely debt-free country at the conclusion of 8 years 
of the Bush administration. Eight years later, much different 
reality.
    The Republican Party--and it is outrageous to hear this 
selective amnesia of some of my great friends on the other 
side--but for 6 years controlled the Congress and the White 
House, and the tax cuts which put a hole in the budget; the 
war--and we have been at war before as a country, but we have 
always paid for it with war bonds and more taxes. So we never 
went to war and sent the bill to our grandchildren, our great-
grandchildren. We paid for it. And then, finally, a major 
increase in entitlements without paying for it.
    So the country is now fiscally bankrupt as you come into 
office. The President has a national debt of over $10 trillion, 
a deficit in his first year, by the time he was sworn in, of 
over a trillion dollars. And then we have them trying to place 
the blame on this administration. It is an amazing political 
feat that they are trying to pull off here. I don't think it is 
going to work, at the end of the day.
    But I do want to get to the substance of what we have to do 
to go forward, because you have done a great job. We see a lot 
of indicators of a great job: manufacturing up, consumer 
spending up, purchasing orders up, exports up. We have seen us 
go from in the first 2 months of last year losing almost a 
million and a half jobs to losing less than 100,000 over the 
last 2 months. We see progress. But there is more work to do be 
done.
    I am interested in one of the more deep-seated problems 
hidden in the budget, which is the national debt itself and the 
interest we pay on it. Now, I propose that we have a dedicated 
revenue source and that we--exempting the financial markets, 
focus on everyday transactions, take a penny off of a dollar 
and pay off the debt, have a dedicated program to pay off the 
debt.
    Most economists who have looked at this say we need to deal 
with the long-term growth of entitlements, raise additional 
revenue, and move to broad-based tax reform. So I am interested 
in what you think about a dedicated source of revenue, a new 
source, focused only on the debt and what you think about the 
notion of a very nominal transaction fee on everyday 
transactions, not the stock market, but that happen through our 
economy.
    And you can start with the budget.
    Mr. Orszag. Okay, thank you.
    Several comments. First, while there are interesting ideas 
about dedicated revenue in a variety of settings, it is 
important to remember that money is fungible. And so, 
dedicating a dollar to this specific use is, in some sense, no 
different than the general pool, given the fungibility of 
money.
    Second, one of the key tasks that the fiscal commission 
faces is coming forward with a set of recommendations, which 
may well include both things on the spending side and possibly 
things on the revenue side too, that will get us ahead of this 
medium-term deficit problem even more than the budget already 
does.
    So, in that setting, I am sure there are going to be a 
whole variety of ideas discussed and evaluated. And we would 
like to allow that process to play out and the co-chairs to 
conduct the commission's operations----
    Mr. Fattah. So you don't believe that you could segregate a 
revenue source just to pay off the loan someday because it is 
fungible, right?
    Mr. Orszag. No, anything is possible. One could do that. 
But I guess what I am saying is, we have a commission set up to 
get ahead of the broader problem, and we would like to let it 
do its work.
    Mr. Fattah. Right. Thank you.
    Mr. Secretary.
    Secretary Geithner. Well, you and I have talked about this 
many times in the past, and I want to commend you for the 
attention you are giving to this longer-term problem we face of 
an unsustainable debt burden. You are right to focus attention 
on it. And we will, of course, take a careful look at any 
credible idea to help contribute to that reduction.
    And we look at all of these things through a simple set of 
objectives, principles, which is: Are they going to make the 
economy stronger in the future? Are they fair, do they provide 
a fair burden of adjustment on the American people? Are they 
going to make a big enough contribution to improving fiscal 
stability? We will look at things through that basic prism.
    But, as Dr. Orszag said, we want the fiscal commission to 
take a fresh look, step back from politics, and take a look at 
a range of options for how to reduce these unsustainable debt 
burdens. And, again, I want to compliment you again for 
focusing attention on not just the problem, but being 
courageous enough to put forward some creative ideas for 
solving it.
    Mr. Fattah. Thank you, Mr. Secretary.
    We have about $800 trillion in transactions in our economy, 
about $500 trillion outside the financial markets. Do you think 
that a dedicated----
    Chairman Obey. The gentleman's time has expired.
    Mr. Fattah. Thank you, Mr. Chairman.
    Chairman Obey. Mr. Bonner.
    Mr. Bonner. Thank you, Mr. Chairman.
    I, first of all, would like to thank my colleague from 
Ohio, Mrs. Kaptur, for her comments today, because she 
expressed the frustration that many of us feel, that there 
really is a disconnect. And that is not laying a partisan 
thing, because she is a member of the majority. But she is 
speaking for a lot of communities, a lot of cities, and a lot 
of people who feel that their government--Democrat, Republican, 
Congress, the administration--is not paying attention to what 
they are feeling and what they are fearing.
    Mr. Orszag, you commented initially about the fact that 
health care was something you would be willing to discuss. I 
think I am correct that all three of you are presidential 
appointees confirmed by the United States Senate. Is that 
correct?
    Mr. Orszag. Correct.
    Mr. Bonner. I would like to just share a couple quotes, 
because I am confused. I worked up here for 18 years as a 
member of a congressman's staff from my district. I have been 
in Congress representing the people of my district for--I am 
going on my 8th year.
    Last week, the Speaker of the House said to the National 
Association of County Officials, ``We have to pass the bill so 
you can find out what is in it.'' This morning in today's 
Washington Post she says that we may actually pass the bill 
without even voting on it, something that is called ``deem and 
pass.''
    Now, I am not going to ask you to comment on the Speaker's 
quotes. I am going to ask you to comment on Senator Obama and 
Senator Biden.
    Senator Obama said in October of 2007, ``You have to break 
out of what I call the sort of 50-plus-1 pattern of 
presidential politics. Maybe you can eke out a victory on 50-
plus-1, but you can't govern. You know you get Air Force One, 
there are a lot of nice perks, but you can't deliver on health 
care. We are not going to pass universal health care with a 50-
plus-1 strategy.''
    Then Senator Biden said in May of 2005, ``I say to my 
friends on the Republican side, you may own the field right 
now, but you won't own it forever. And I pray to God, when the 
Democrats take back control, we don't make the kind of power 
grab that you are doing now.''
    Were Senator Biden and Senator Obama right? Or is President 
Obama and Vice President Biden right with regard to the 
discussion of health care?
    Mr. Orszag. Congressman, first, let me just say that the 
procedures that will be followed with regard to passage of 
health care reform have been long-established. All we are 
asking for is a simple up-or-down, majority vote. But I don't 
want to get into the legislative strategy.
    The key content here, the substance is, we are on a path 
over the long term where it doesn't matter whether you support 
revenue increases, non-health spending reductions, we are on an 
utterly unsustainable course unless we change the incentives in 
our health care system.
    And on this I would agree; former Senator Frist had an 
opinion piece in The New York Times maybe 2 weeks ago saying 
the key thing we need to do is move away from paying for 
quantity and towards paying for quality. I could not agree 
more.
    The problem is--and I have now been to innumerable 
Institute of Medicine and Brookings and AEI and what-have-you 
seminars--we don't know exactly the constructs that should be 
used. We have very promising ideas: accountable care 
organizations, paying for performance, medical homes, penalties 
against high readmission rates for hospitals. But exactly 
whether the penalty should be 5 percent or 10 percent, what the 
readmission rate threshold should be, there are lots of 
promising ideas but no definitive conclusions.
    In that context, it is my firm belief that what we need to 
do is be very aggressive about testing out different strategies 
and then having a mechanism for quickly moving the scale on the 
most promising ideas. And if we don't do that--which, by the 
way, the legislation sets up an infrastructure for doing--if we 
don't do that, ultimately nothing else that we have been 
discussing on the budget is going to matter.
    Mr. Bonner. Mr. Orszag, with all due respect--Dr. Orszag--
that is just as good a shift as I have ever heard.
    I asked a very simple question. Were Senator Biden and 
Senator Obama----
    Mr. Orszag. I gave you a clear response, which is that----
    Mr. Bonner. You gave a good Washington response.
    Let me shift subjects. Dr. Romer, you indicated--and I 
would like for your numbers--I don't want to put them in your 
mouth. What were the numbers of small businesses that were 
approved for help from the government, 45,000?
    Ms. Romer. I have 42,000 loans made to small businesses 
through the Recovery Act.
    Mr. Bonner. Through the Recovery Act. Do you know how many 
small businesses actually applied for help and were turned 
down?
    Ms. Romer. I don't have that number. I can try to get it 
for you.
    Mr. Bonner. Well, that would be helpful. Because when I 
look at my district, since January of 2007 when a new majority 
took control of Congress, my district has gone from 3 percent, 
6 percent, 4 percent, 3 percent, 6 percent, 6 percent, in the 
six counties I represent, of unemployment to 11 percent, 18 
percent, 13 percent, 12 percent, 16, and 22.
    Chairman Obey. The gentleman's time has expired.
    Mr. Bonner. And I think it would be helpful to get those 
numbers so we can see who is not being helped.
    Thank you, Mr. Chairman.
    Chairman Obey. Ms. Lee.
    Ms. Lee. Thank you, Mr. Chairman.
    Let me just clarify something. The gentlelady from Texas 
has departed, but she referenced 9/11. And, yes, we 
unfortunately, you know, were attacked on 9/11. It was a 
horrific attack. But we also started a war in Iraq which had 
nothing to do with 9/11, which has cost us over 4,000 lives and 
billions of dollars. So I just wanted to clarify that.
    Good to see you, Dr. Romer, and all of you. I have one 
question for each of you.
    The Congressional Black Caucus continues to sound the alarm 
regarding the glaring unemployment rate among the chronically 
unemployed. The unemployment rate is over 15 percent for 
African Americans, over 12 percent for Latinos, compared to a 
national average of about 8.8 percent.
    The Congressional Black Caucus has specific proposals to 
address these huge disparities, which really are moral gaps. We 
presented them to our leadership and to President Obama as 
recently as last week. I will give you a copy of these 
proposals.
    But there has been much debate on the notion that broad 
economic policies without adding targeted policies and 
strategies to areas of highest unemployment will trickle down 
to these populations. It hasn't worked, really, in the past. 
And I want to know, Dr. Romer, if you think trickle-down 
economic policies will work now.
    Second, to Secretary Geithner, we also discussed with the 
President a report indicating that only 1.1 percent of African 
American businesses and 1.6 percent of Latino businesses have 
received contracts under the Recovery Act, although we have 
from the Stakeholders Outreach Initiative that 16 percent of 
our contracting dollars have gone to minority firms.
    There is a big discrepancy there, because the Kirwan 
Institute has done a study--they used government data. So did a 
reference in the Bloomberg Business Report by Jesse Washington 
in February. He also said 1.7 percent of Latino businesses and 
1.1 percent of African American businesses. So I would like to 
get that clarified, and I would like these numbers broken down.
    And, finally, to Director Orszag, good to see you. Let me 
just ask you about this partial freeze in spending as it 
relates to military spending, because we can't seem to turn off 
the spigot that rains down on these defense contractors. What 
action does the administration plan to do to reverse this trend 
and finally rein in military expenditures, which now account 
for 58 percent of the Federal discretionary spending, when we 
know that billions and billions and billions of dollars in Cold 
War-era weapon systems really need to be taken off the table? 
How do you all intend to address this within the context of the 
spending freeze?
    Ms. Romer. All right, well, why don't I start off?
    I think the first point that you raised, that, as horrible 
as this recession is on average, it is particularly hard on 
certain demographic groups, we know in certain parts of the 
country, we know on different types of people just in terms of 
how much education you have, it has been much more--the 
unemployment rate has been much higher for less educated 
workers. All of that is absolutely terrible and something that 
we need to deal with.
    I do want to say that one of the things we know is things 
like the unemployment rate for African Americans is 
particularly--it moves with the business cycle, just more 
extremely. And so, just as the unemployment rate tends to go up 
more when the unemployment rate rises nationally, it comes down 
more when the overall unemployment rate comes down.
    So I think our focus on just getting everybody back to work 
is certainly key and appropriate. But, certainly, we can do 
more. We are very anxious to work with you and have been 
listening to your ideas and very much--something that there is 
an active process in the White House, trying to figure out what 
we can do, because we obviously want to put everybody back to 
work just as fast as possible. So we look forward to working 
with you on that.
    Ms. Lee. Thank you again. We miss you in Berkeley. But you 
are doing a great job here.
    Ms. Romer. I miss Berkeley.
    Secretary Geithner. Congresswoman, could I answer your 
first question, too?
    I agree with you and I agree with Dr. Romer that it is not 
enough just to focus on things that affect the national growth 
numbers, national employment numbers. I think there is a very 
good case for making sure we are providing targeted investments 
in communities across the country hardest hit by the recession, 
by the housing crisis, by unemployment rates. And we are going 
to continue to do that.
    I will give you just two examples of things we have done at 
the Treasury in this conduct with support of the President. One 
is to substantially expand the resources we put into the CDFI 
and New Markets Tax Credit programs. And those programs, by 
design, really only go, or go principally, to many of the 
communities with the highest rates of unemployment, most 
adversely affected by the financial crisis. And we think they 
really work and have a very good record of success.
    And we announced just a few months ago a targeted program 
under TARP to give capital to CDFIs, as well. And the 
combination of those two things are a very, very large, 
substantial increase in resources to low-income communities 
across the country. That is just part of a response. I just 
wanted to highlight those two things.
    On the numbers, I would be happy to take a look at those, 
see if we can explain what the disparity is. And I will work 
with my colleagues in the administration to see if we can give 
you a response on the numbers.
    Ms. Lee. Thank you.
    Chairman Obey. Mr. Cole.
    Mr. Cole. Thank you very much, Mr. Chairman.
    And thank all three of you for your patience. It has been a 
long morning, I know, and into the early afternoon.
    Secretary Geithner, while I agree with some comments made 
by my colleague, Mrs. Emerson, about TARP and what is happening 
now, I really do--and I mean this quite seriously--appreciate 
your spirited defense of TARP and the fact that it actually 
costs less than any of us thought it would, that we are going 
to get most of our money back, and it actually accomplished 
what it was supposed to do, which was stabilize the financial 
system.
    Who was President when that was passed?
    Secretary Geithner. I think you know the answer to that. 
That was passed--President Bush proposed and passed, and my 
predecessor, Secretary Paulson, was the one who acted with the 
initial actions----
    Mr. Cole. The reason why I make that point is simply I 
think--and we all want bipartisanship. We all know we are going 
to need it to confront the problems I think all three of you 
laid out very well. We would get a lot further if you thanked 
occasionally the last President instead of blaming the last 
President for every single thing in the world.
    Secretary Geithner. I think that is a fair point. And I 
just want to say that, as you know, I worked very, very closely 
with Chairman Bernanke and with Secretary Paulson throughout--
--
    Mr. Cole. I know you did. I have read the books and know 
how highly they think of you.
    Secretary Geithner [continuing]. I fully supported the 
legislation and fully supported----
    Mr. Cole. I just would like that point made occasionally, 
because it, frankly, never is.
    Second, just looking at the stimulus act, the Recovery Act, 
whatever term we want to use, you know, I don't dispute at all 
that it has created some jobs and done some good. You can't 
deploy that much resources and not have some impact.
    But at the time that it was offered--this is probably more 
fairly directed to you, Ms. Romer--but, you know, the 
implication was or the statement was, you pass this, 
unemployment will ever get above 8 percent. Clearly, it has 
gotten above that. Clearly, we don't envision it getting back 
to 8 percent for a good long while. Why the shortfall?
    Ms. Romer. It is a very legitimate question, and I think 
the important thing to say is it really was a deterioration in 
the baseline forecast without the stimulus; that, you know, 
back in December of 2008 when we were designing the fiscal 
stimulus and certainly thinking about the effects, we knew the 
unemployment rate was headed up, and I think neither we nor 
private analysts realized just how much.
    Some of that is because the recession turned out to be 
deeper. Especially, I think, one of the things I remember very 
much from that fall was the question of, would it be isolated 
in the United States or would it spread throughout the world? 
And one of the key things that we learned early in 2009 is just 
how much it was an international phenomenon.
    I think the other thing to point out is, this recession has 
been particularly hard on the labor market. And, actually, I 
will give you a little-known fact. When we did our forecast 
last year, we actually turned out to be almost dead-on on the 
GDP forecast. But, in fact, what has happened is the 
unemployment rate has risen some 1 to 2 percentage points more 
than you would have anticipated given the behavior of GDP. It 
has been particularly hard, as has been suggested, on American 
workers.
    Mr. Cole. And, you know, I would almost take from that 
that, actually, TARP came closer to achieving its objective 
than the Recovery Act. But I think your answer is a fair one.
    Mr. Orszag, I don't have a lot of time, but this really, 
sort of, gets at where the administration wants to take us over 
a long period of time. I think you made the point that, 
historically, the Federal Government spends around 20 percent, 
21 percent of the GDP. You talked about the spike up this year, 
for I think very legitimate circumstances.
    Looking long term, if the President achieves all of the 
programs he wants to achieve, what is the long-term level of 
spending as a percentage of GDP going to be at the end of 
this--let's assume he gets reelected--at the end of a long two 
terms?
    Mr. Orszag. In the budget, it is still in the 23 to 24 
percent range----
    Mr. Cole. So, a pretty significant increase.
    Mr. Orszag. Let me try to explain why for a second. It 
reflects two basic forces.
    One is we faced an underlying problem with regard to health 
care costs and the coming retirement of the baby boomers, which 
puts upward pressure on Medicare, Medicaid, and Social 
Security. That raises, by 3 percent of GDP, those three 
programs over the decade.
    Secondly, because of the--and I guess the chart has come 
down, but because of the large debt--and I won't use the word 
``inherited'' again--but the large debt that the Nation faces, 
interest payments are higher than would otherwise be the case. 
And that raises overall spending.
    Mr. Cole. But then is it fair to say--and I want to give 
you a chance to respond--that, long term, you envision 
expansion in the size of Federal Government, I would say fairly 
substantial, and we would still have at the end of that period 
an ongoing deficit that is larger than you are comfortable 
with?
    Mr. Orszag. The deficit is larger than we are comfortable 
with, and that is exactly why, again, we are in the process of 
a full appointment of the fiscal commission, and that is what 
the fiscal commission is intended to address.
    But with regard to the expansion of government and the 
level of spending, it is crucially important to realize that 
that increase is not due to administration policies. And that 
is what I was trying to emphasize. There is an underlying 
problem. We need to address the underlying problem. And my 
opinion is we need to do it together.
    Mr. Cole. Thank you very much.
    Thank you, Mr. Chairman. I yield back.
    Chairman Obey. Mr. Berry.
    Mr. Berry. Thank you, Mr. Chairman.
    I thank you all for being here today.
    We have talked and talked and talked about infrastructure. 
And it appears that you all agree that we need more and we need 
to maintain better what we already have.
    We have a hydroelectric dam that is halfway finished with 
renovations. It would cost $20 million to shut the project 
down, and we can finish it for $50 million. And your 
administration zeroed it out. Peter, you and I have talked 
about that. I don't know if you remember or not. This was the 
first time, you recommended shutting it down. Now you come back 
and say roll it out.
    So that is a mystery to me, how that decision was arrived 
at. It is one of the reasons that I don't trust the 
administration to make too many spending decisions, because I 
don't think they do it very well.
    The other issue I would like to hear someone address is the 
way FEMA is redrawing the flood maps in this country, putting 
millions of houses in the flood plain, when they don't belong, 
and giving almost zero explanation as to how they arrived at 
this, except to say that, as they do this, they are considering 
that there is no flood protection. And in the place where I 
come from, every square inch can be flooded by somebody some 
way, somehow.
    So it is causing a huge problem. This started after 
Katrina. It has continued in the Obama administration. In fact, 
it has gotten worse. These are some of the most economically 
depressed areas in the country. And so if you could address 
those things, I would appreciate it.
    Thank you.
    Mr. Orszag. Congressman, first, with regard to FEMA, I 
guess I have been more focused on the funding for the disaster 
relief fund. And, as you know, action will be necessary there. 
We can have an administration official get back to you on the 
flood plan, because I am not personally aware of FEMA's 
activities on that.
    Mr. Berry. It is a huge problem. Even Montana has this 
problem, of all places. They don't have enough rain or water to 
hardly have a flood; they have to all get together and 
cooperate to have one.
    So we haven't been able to get FEMA's attention. We haven't 
been able to get anybody's attention so far. And it adds a 
thousand dollars to the cost of a house payment a year just 
about everywhere, and it is a very serious matter to those of 
us, especially in the Lower Mississippi Valley.
    Mr. Orszag. Okay.
    Mr. Berry. And you haven't gotten any comment about 
shutting the dam project down?
    Mr. Orszag. As you know, we have had discussions on this. 
And let me just say this. The Corps of Engineers process as a 
whole--let me sort of step back and say the Corps of Engineers 
process as a whole, I think from an administration perspective, 
we have two key objectives. One is to make sure the Corps 
remains focused on the three key areas that it has historically 
focused on. And the second is to use rigorous cost-benefit 
analysis consistent with the discussion we were having earlier 
on regulations to make sure that the best projects are funded.
    Those are the two key guiding principles that the 
administration uses with regard to Corps of Engineers funding.
    Mr. Berry. I think you blew it on this one.
    Mr. Orszag. I understand that different people have 
different perspectives. I appreciate that.
    Mr. Berry. You have a project that is half paid for, and it 
is going to cost you half of what is left to shut it down. And 
it is a hydro project; it is the cleanest energy you can get. 
And it is already there. It is not like we are building a new 
dam or anything. It is a renovation project.
    Mr. Orszag. Again, in addition to the FEMA flood plan, we 
will come back and have a further discussion with you about 
that specific project.
    Mr. Berry. Thank you.
    Chairman Obey. Mr. Calvert.
    Mr. Calvert. Thank you, Mr. Chairman.
    I apologize, I was away for a while. I was on the floor. 
And this may have been brought up, which is the problem with 
the commercial real estate sector at the present time.
    As you know, commercial real estate values throughout the 
United States are literally collapsing, going down as much as 
40 percent, 50 percent in some areas. And most experts assume 
that this continuing collapse in commercial real estate values 
will continue through 2011, 2012.
    Deutsche Bank just did, in a recent study, of about $1.4 
trillion in outstanding commercial paper, a significant part of 
that will come due by 2013. Almost half of it is underwater.
    As you know, a lot of these small and midsized banks are 
primarily exposed to these commercial loans. And the regulators 
in day-to-day activities aren't helping much, especially on the 
performing assets. We have performing assets where people are 
making their payments, making their tax payments, making their 
insurance payments, are current, and yet the bank is bringing 
them in because of appraised values and telling them to come in 
with a significant capital call, which they can't do in this 
credit market.
    And what the banks are doing is taking back the property, 
having to put it in the loan loss side of their ledger, which 
is taking credit away from these banks, because they don't have 
the money.
    So what can we do--this wouldn't, from my perspective, cost 
the government anything. If banks have discretion on performing 
assets, why aren't the banks given discretion to footnote that 
these assets--and they are assets--are current and can be 
treated as an asset rather than a liability on the balance 
sheet?
    Secretary Geithner. You are right about the problem, and 
you are right that we have a ways to go to get through the 
broader adjustment in commercial real estate that is still 
ahead of us. And we discussed it a little bit when you were 
away, but I think, again, the two most important things we can 
do in this area is to make sure that small community banks, 
which have a lot of commercial real estate exposure, have the 
ability to come take capital from the government to help make 
sure they don't have to cut lending further to their business 
clients.
    But, also, we can--and we have been continuing to work with 
the bank supervisors, so they are providing guidance to their 
examiners and that message gets out across the country that 
they don't, frankly, overreact, overreact to decline in the 
value of collateral and they look at the broader cash flows, 
earnings potential of the company as a whole, as they are 
looking at loan classification decisions.
    Mr. Calvert. I have a limited time. If the gentleman would 
let me reclaim my time.
    I will tell you, in the real world right now, I know of 
people who have shopping centers, 100 percent full shopping 
centers, paying their bills, and yet they are still getting 
capital calls on those loans, which makes zero sense.
    Secretary Geithner. No, I think you are right. I hear these 
stories across the country. I think you are right to emphasize 
them. And I just need to underscore that the bank supervisors, 
which are independent of the Treasury--I don't have the 
capacity to direct what they do, in this case--are working to 
provide a little bit more balanced guidance to lean against 
just the practices you are shining a light on. And I think they 
can probably do a better job of getting the message out to----
    Mr. Calvert. But this also goes back to the mark-to-market 
provisions. And I understand that there may be, from my 
perspective, a step back in this economy where you have an 
overcorrection in value, where we ought to take a look at 
relaxing those mark-to-market provisions on performing assets. 
Because, under the accounting rules, they are going to continue 
to deflate--this is going to continue to deflate these values. 
And that is not going to be helpful in trying to get this 
economy moving again.
    I am fearful--I don't know if you are--that this commercial 
real estate problem is so huge that it could put us back into a 
double-dip recession.
    Secretary Geithner. I do not believe it poses that risk at 
the moment. I think, again, it is going to be a challenge----
    Mr. Calvert. We thought the same thing about the housing 
market.
    Secretary Geithner. We did. But I think this is different, 
and our financial system is in a much stronger place today to 
weather those remaining challenges.
    As you know, the FTC and the FASB are looking at a whole 
range of broad reforms to accounting practices in the United 
States. And I think they would be happy to talk to you, to 
respond to any questions you have about how to think about the 
role fair value accounting can play in mitigating these kinds 
of pressures in the future.
    Mr. Calvert. Thank you, Mr. Chairman.
    Chairman Obey. Mr. Ryan.
    Mr. Ryan. Thank you, Mr. Chairman.
    You know, there has been a lot of talk about the stimulus 
package here. In my district, we have taken $20 million, and it 
leveraged a $650 million investment from a French company that 
makes tubes for oil and natural gas. We had a $350,000 
Community Development Block Grant that was leveraged into 650 
incoming tech jobs in downtown Youngstown, Ohio, a California 
company. We got a TIGER grant for $20 million that is going to 
leverage $100 million, 700 full-time jobs. We used recovery 
bonds and Community Development Block Grant money in Akron to 
keep the Bridgestone technology center located in Akron. So 
there are many success stories about the stimulus package, and 
many are happening in our district.
    One of the other things that has been positive is that 
General Motors--the Lordstown plant in Ohio is going to produce 
the Cruze. They just added a third shift because of the bridge 
loan and the whole nine yards. So there has been some positive 
things.
    Secretary Geithner, I have to talk to you about the Delphi 
salaried retirees that are located, many of them, thousands of 
them, in my district, thousands of them in Ohio and across the 
country, who just flat-out got a raw deal throughout the GM 
bankruptcy.
    We need your help. There are families here, these are 
middle-class families. There is a variety of issues with them, 
but their pensions didn't get topped off. They need your help. 
It is having a traumatic effect to our local economy and our 
ability in Ohio to fully recover because of the pensions that 
they are not getting. And we have about 15,000 to 20,000 people 
that are extremely upset not only at the government but at 
General Motors. So I think it is going to hurt GM's long-term 
success in some very traditional manufacturing States who have 
been loyal to General Motors.
    We need your help on this to figure out how, either through 
the TARP program or some other mechanism, to get these folks 
their money back.
    Secretary Geithner. Congressman, you are right to highlight 
the problem. And I am happy to spend some time in talking to 
you about whether there are ways we can mitigate it.
    And you are right to emphasize--and I think people should 
understand this--that even though the U.S. automobile sector is 
coming out of this in a much stronger position than it came in, 
and even though we were successful in preventing just enormous 
job loss across not just those companies but their suppliers in 
those communities, there is still a lot of damage caused by the 
restructuring process they went through. And I understand that.
    And you have been a very forceful advocate for highlighting 
the pain that many people still face because of this stuff. And 
I would be happy to spend some time with you, talking through 
whether there is anything we can do in that area.
    Mr. Ryan. Well, we have to do more than talk. We have to 
figure it out. Because here we are in the Mahoning Valley in 
Youngstown, Ohio; we have been in recession for 30 years. We 
are finally, as I said, starting to get some progress, and this 
is going to rip $100 million in pension money out of our 
community that is going to be detrimental not only to our 
community.
    So we have to sit down and figure this out. I mean, I think 
you have enough creative people in your organization and in my 
office and with others to be able to figure this out. So, 
please, please, please help us figure this out. We need your 
help, and we can't do it without you.
    One last thing. I have a bill that will help with some bond 
funding with local communities. As I said, the recovery bonds 
were very, very helpful. We want to get some money into our 
local port authorities. And my bill has a government guarantee 
of four times what the reserves are for a local port authority, 
for example, that could leverage a lot more money. They do a 
great job of getting money out, having economic impact, getting 
deals done, making deals happen.
    So do you see that as a viable option that you could 
possibly help us with?
    Secretary Geithner. I would have to look at the details, 
but I would be happy to do that and make sure we get back to 
you on it.
    I would underscore that the build-more-eco bond program, 
which we proposed to extend and expand and reform, has been 
very, very effective in meeting many of the similar challenges 
by local government entities across the country. But I would be 
happy to look at the details of your proposal.
    Mr. Ryan. Okay. The port authorities are great.
    Go ahead.
    Ms. Romer. I just actually wanted to add, I think the 
things that you highlighted, the degree to which stimulus, you 
know, the Recovery Act funds get leveraged by private-sector 
funds I think is an absolutely essential characteristic.
    And I think it also goes--you know, so much we hear, ``Oh, 
you have created government jobs.'' And it is so important to 
understand that, by far, the huge quantity of jobs are in the 
private sector. And that is a key part of what the Recovery Act 
is doing.
    Mr. Ryan. Correct.
    Just lastly, Mr. Secretary, I talked to the President 
yesterday--he was in Ohio--about the Delphi salaried retirees. 
So we are going to follow up and continue to work with you on 
this.
    Thank you.
    Chairman Obey. Mr. Ruppersberger.
    Mr. Ruppersberger. Well, you know, a lot in politics for us 
is not always dealing with fact, and you have heard here today 
the disputed facts. A lot of it is about perception, and 
especially in our districts, our constituents' perception of 
what is going on.
    I would like to talk about the issue of banks lending 
money. I think, of any issue that is out there now that is 
slowing down our recovery, it is about how do we get the banks 
to lend money. And whether it is money for home mortgages, 
whether it is commercial money, whatever.
    And I think the way to deal with that--and what I am 
hearing over and over--is to try to refocus and get as much 
money into the more local community banks. And that then, as a 
result of them lending money, can infuse capital, which creates 
jobs, allows to buy inventory, and also allows us to get tax 
revenue once people are working again.
    Now, let me ask you this. Where are we--or would you 
consider to recycle the existing TARP money that we are getting 
back into these community banks?
    I think this is probably one of the best ways to move 
forward. We hear what the administration--or what you say here, 
but when you are out in your community, it is just not 
happening. It is not happening in the business community, the 
small business community, whatever.
    How about that issue?
    Secretary Geithner. You are absolutely right about the 
problem. And you are also right that the best solution is to 
make sure that those banks can come and get capital. It is the 
most effective thing we can do. Again, a dollar of capital is 
$8 to $10----
    Mr. Ruppersberger. Right. Tell me how are we going to do 
it, then.
    Secretary Geithner. And we tried four different ways over 
the last 9 months to get small banks to come to the TARP, take 
capital from the government, but because of the stigma and 
because of the conditions, 600 of them withdrew their 
applications.
    So we, after trying, we decided that the only way we were 
going to do it was to go outside and around TARP. So we have 
legislation pending, and we believe it has a very good chance 
of winning broad support, to authorize a small business lending 
fund that would do exactly what you suggested.
    And, again, if enacted, it is very quick. People can come 
and we can provide capital very quickly. And it is the best, 
most effective way, with the best leverage for taxpayers' 
dollars, of getting support for the lending problems many 
businesses still face.
    Mr. Ruppersberger. Well, I would suggest that we do that 
very quickly. Because if you look at what happened in the 
savings and loan crisis, we created a resolution trust. We 
bought the bad notes from the banks that weren't worth a lot. 
But then that cleared the books, allowed the savings and loans 
to start lending. And also that paper was worth something when 
we got out of the crisis.
    Another issue and then I am finished. The other issue is 
that we have a lot of midsized banks that are really having 
some difficult problems doing whatever they can to find an 
infusion of cash so they can start lending. And a lot of these 
midsized banks in our areas might have 1,000, 2,000 jobs.
    It seems to me that their complaints are that the 
regulators are constantly telling these banks--and when they 
try to borrow money--not to lend. And yet, if there is a group 
that probably needs more help, it is that midsized banks that 
might need--not that it is not a lot of money, but in what we 
do here--$10 million to survive. That infusion could turn 
things around, create jobs, and allow the lending. And that is 
not happening.
    And I would suggest that, in each major jurisdiction, that 
you work closely with Members of Congress. Because when we get 
involved, it is like a negative. Well, you write a memo to the 
congressman, call, you are putting pressure on. Well, that is 
our job, to put pressure on when things aren't right.
    And I would suggest that you work closely. And I want to 
have my staff contact somebody on your staff, because I have a 
couple banks that are there that feel they have not been 
treated like the big banks. The smaller banks are getting 
certain help, but these midsized banks that really create a lot 
of jobs in your area.
    So how can we deal with these midsized banks that might 
need about $10 million and it might put them in a different 
area and yet the regulators say, no, don't lend, or whatever? 
How would you deal with that?
    Secretary Geithner. The FDIC, the Office of the Comptroller 
of the currency, the Federal Reserve Board Office of Thrift 
Supervision are the ones responsible for trying to make sure 
that their examiners get this balance right.
    There are some areas where they need to be tougher, 
frankly, and the responsible thing to do is to be tougher. But 
we have to be very careful they don't overdo it and end up 
making the problem we are all still working through worse.
    So the best thing you can do is to make sure that you are 
highlighting this problem for their supervisors. I can help 
reenforce that, but they are independent and I cannot direct 
what they do. I can encourage them to get that balance better.
    They are working on it. But they need to get the message 
out not just--you know, they need to get a message out of 
Washington, so the people in Washington aren't just hearing it, 
people who do bank exams across the country are hearing that 
message.
    Mr. Ruppersberger. I am glad you are able to get the facts 
out, because I really liked the line of questioning of Chet 
Edwards. We have to deal with the facts, look at history to 
learn, so we don't make those mistakes, and move forward.
    Thank you.
    Chairman Obey. Ms. Wasserman Schultz.
    Ms. Wasserman Schultz. Thank you, Mr. Chairman.
    I want to make an observation and then ask my questions all 
at once and give you most of my time to answer them.
    I just really want to point out that I wish that when I was 
in the minority in my first 2 years that we had been asked to 
come to the table and work in a bipartisan, cooperative spirit 
as many times as we have attempted to reach out and do the same 
since we took over the majority. That is just an observation.
    And then I am just rhetorically, Mr. Chairman, wondering 
how many 7.5-hour bipartisan summits on any issue did the 
previous President hold at the White House to bring people 
together and figure out how we can best come together on a very 
important issue. I think the answer is none.
    So, that having been said, I want to ask you, Mr. 
Secretary, a follow-up question to when you were in front of 
the Financial Services Appropriations Subcommittee about the 
Hardest-Hit Fund program. Because, since that subcommittee 
hearing, it has come to light that the housing agencies--my 
State is getting the second most amount of money, and we truly 
appreciate it; it is badly needed--are only being given 6 weeks 
to submit their plans. And my concern is that that is a very 
short time frame to come up with something innovative. And 
there have been comments about not reinventing the wheel, but 
coming up with something innovative and risking wasting money 
or not spending it effectively is a concern. That is my first 
question.
    Just to piggyback on what many other Members have asked but 
Mr. Ruppersberger most recently--and, again, I asked you this 
in the subcommittee hearing--the thing that I hear the most 
often in my upper-middle-class to wealthy district--because I 
do not have a lot of working-class neighborhoods in my 
district, so you would think that somehow we would be shielded. 
No one is shielded from this economic downturn. Neighborhoods 
in my district are dotted with foreclosures. And at every town 
hall meeting I have or many of the phone calls I get in my 
office, the folks stopping me on the street are saying, ``I 
have done everything I can to try to get my bank to work 
something out with me. I am upsidedown. I want to stay in my 
home. I can make mortgage payments. I am not a deadbeat. I 
don't want to walk away.''
    I hear you saying, we are trying, we are controlling, we 
are encouraging. That isn't enough. We need to make them do it. 
Why haven't we either proposed or attempted to make them do it?
    And lastly--it is a totally different subject--on the 
summit on April 15th at the Kennedy Space Center. This question 
is not for you. Probably best for Director Orszag to answer it.
    Is that summit--and I appreciate you taking us up on our 
suggestion, those of us who are concerned about the President's 
plan--is that summit going to be a session where the 
stakeholders and the administration and others are going to be 
able to come together and focus on a workable plan, a 
compromise? Or is it simply going to be a summit in which the 
President is going to come try to sell his plan to the people 
who participate? Because those are two very different types of 
summits.
    So those are my questions, and you can use my time to 
answer.
    Secretary Geithner. On your first, I hear you, and I will 
take a look at it and talk to my colleagues, and we will get 
back to you. I think you are right. We want this to get to work 
quickly. We want it to work. It is the balance we face.
    On the housing front, let me just say the following. We do 
not have the capacity to compel or force. We just don't. So 
what we are trying to do is a mix of carefully well-designed, 
very modest incentives and a huge amount of public pressure.
    One form of pressure we use is to put the numbers of 
performance of servicers in the public domain every month, bank 
by bank, so everybody can look and see which banks are doing a 
reasonable job--nobody is doing a terrific job--and which banks 
are doing a terrible job. But we are doing as much as we can. 
And, as I said in our last----
    Ms. Wasserman Schultz. I am sorry to interrupt you. But 
they jerk people around. They lead them on. They tell them they 
are going to work with them. They tell them to put in an 
application. Months go by----
    Secretary Geithner. You are exactly right. And people have 
terrible stories, incredible stories. And, you know, just to 
say it, the banks in this country have done a huge amount of 
damage to basic trust and confidence, and they have got a long 
way to go to earn back that trust and confidence. I completely 
agree with you.
    We are, as I said, we are looking at, the President has 
asked us to look at a range of improvements to this program to 
help ensure it reaches more people who are underwater, can't 
refinance, and more people who are unemployed. And we are 
hopeful that we are going to be able to come up with some 
improvements to those programs in those areas and we will be 
walking the responsible committees for those changes as soon as 
we can here.
    Mr. Orszag. Just very briefly on the summit, I think the 
goal is to have an open discussion. Now, you won't be surprised 
to hear that we hope the outcome of that is that everyone sees 
the wisdom of the path that we have chosen. But the goal is an 
open discussion.
    Ms. Wasserman Schultz. Really. Shocking.
    But, okay, I know that would be the goal. But is there an 
opportunity, is there open-mindedness in the administration so 
that it is not a my-way-or-the-highway summit?
    Mr. Orszag. I don't think we ever do my-way-or-the-highway 
summits. But, again, we are hoping that people see the benefits 
of the course that we have put forward.
    Chairman Obey. Mr. Rodriguez.
    Mr. Rodriguez. Let me thank you very much. It has been very 
educational. And I want to personally thank you for being here 
this whole morning.
    I know that during these difficult times--and it is 
unfortunate in terms of the situation that we find ourselves 
in. But one positive thing is that we have a tendency, 
personally, to refocus attention as to what we are doing at 
home and with our families and what we are doing at home in our 
country as a whole. And that, I think, is very healthy.
    And I want to thank you and congratulate you for refocusing 
attention on those basic issues. Because we can't, as an 
individual, we can't help anyone if we are hurting, and we 
can't help anyone externally as a country. We are not there 
yet.
    And one of the things that I think has come to light as a 
result of that is--and I think we have been negligent as a 
country in terms of investing in our infrastructure. Mr. Marion 
Berry talks about our dams. They are 60 to 90 years old. I have 
probably the worst dam in Texas that just got some money 
through the stimulus, through the State of Texas, through the 
Water Development Board, moneys that they got from the 
stimulus. So I want to thank you for that.
    We still have other dams. I have the Amistad, and there is 
a Falcon dam on the border that were built for four generators 
and only has two, where we could really make some things happen 
there.
    So I really believe that there could be a serious attempt 
in terms of looking at transportation, water projects, and 
those kind of things that not only create jobs but also invest 
in future generations of Americans. And through the stimulus, 
we have probably done more of that than any other 
administration. So I do thank you for that.
    I want to also thank you for your investment in our 
veterans coming back. That is the largest ever. There is still 
a lot more to be done. There is over 150-something hospitals 
that are 40 to 60 years old. And, at some point, we are going 
to have to do something about that. And that is just in the VA 
itself, not to mention all the rest of the infrastructure.
    I know that in the area of health care, the argument 
against health care is the cost, yet we know that it is going 
to cost us $4.4 trillion in the next 8 years if we don't do 
anything; and that we were handed 20 percent cuts last year on 
Medicare and this year, and we had to try to do that fix.
    Can you provide me with some feedback in terms of those 
individuals that still say that health care is going to be more 
costly than save money? Where will it save money?
    Mr. Orszag. Why don't I take a crack at that?
    First, there are significant--and, again, these are not our 
numbers. These are numbers, for example, from the Congressional 
Budget Office. There are significant efficiencies in having a 
broader pool of people through the exchange that is at the 
heart of the legislation.
    So, for example, for small businesses, one of the problems 
that small businesses face today is, if a single employee for a 
very small business, a single employee has very high cost 
during a particular year, their rates in the future can 
skyrocket. If you are in a broader pool, you don't face that 
risk, and there are efficiencies from that, along with the 
administrative benefits of having more people involved.
    More broadly, what we need to be doing--and this returns to 
the discussion earlier--is we need to be moving towards 
emphasizing quality rather than just ``more'' in health care. 
And that is the direction in which this legislation moves, I 
think in the most sensible approach, which is: Health care is a 
dynamic market, it is constantly evolving. We need a system for 
keeping pace with that and constantly evaluating what is 
working and what is not and moving towards the stuff that is 
working and away from what is not. That is not the structure we 
have in place now. That is the structure that is created by the 
legislation.
    Ms. Romer. Can I just add that, when the Council of 
Economic Advisers looked at the legislation coming through both 
houses of Congress, our estimates were that it is going to slow 
the growth of health care costs by about 1 percentage point per 
year. And that is actually just an incredibly important change. 
It has just a huge impact on standards of living over an 
extended period of time.
    The other thing I wanted to come back from, I so--you know, 
your emphasize on infrastructure. One of the things I like so 
much about what you said was defining it broadly. Right? 
Including our veterans; I think the President would say our 
educational system. Right? It is all part of the new 
foundation, making us a more productive economy, going forward. 
And I couldn't agree with you more. And it is reflected in our 
budget and the decisions that we are making.
    Mr. Rodriguez. I want to thank you. And also I would just 
add that we also dish out $100 billion annually for 
uncompensated care. And that is not necessarily the poor, 
because they get Medicaid. This is uninsured. And so I want to 
thank you.
    Thank you very much.
    Chairman Obey. Mr. Davis.
    Mr. Davis. Mr. Chairman, thank you very much.
    And I certainly have enjoyed listening to the suggestions 
and, obviously, the questions of many who serve on this 
committee. There are a couple of things I want to say before I 
ask a couple of questions.
    I am 66 years old, so I can remember a little bit of 
history, especially the most recent history. And I remember in 
1981, on January the 1st, when you go back and look at the 
Treasury and see that we owed $933 billion. Not a trillion, but 
a billion. I can remember driving down the road and heard that 
Congress raised the debt ceiling to a trillion dollars, and it 
frightened me; I almost wrecked in my pickup truck, thinking, 
how do we survive this?
    Little did I know that over the next 12 years we would go 
to $4.1 trillion in debt in just 12 years--a 400 percent 
increase. And what did we buy with it? What infrastructure did 
we build with it?
    And little did I know that, over the next several years, we 
would grow that debt to a little over $11 trillion in a period 
of just 28 years. And what did we buy with it?
    Here is what we had in 1981. We had interstate systems that 
were built. We had all the dams that you are talking about and 
I talk about that needs repair today already built. If you are 
in Las Vegas and turn a faucet on, it comes from a lake that 
was built during the Roosevelt, Hoover, Eisenhower, Nixon, 
Johnson, or Kennedy era. And that is when the infrastructure of 
America was built.
    The shuttles that we fly today--one blew up in 1986--was 
built before 1981. We had basically put in motion all the 
dollars that were needed to build the almost 100 nuclear 
reactors we had in 1975 through 1985. America's infrastructure 
was built pre-1981. And we owed less than a trillion dollars. 
We had four wars--I and II, Korea, Vietnam--before 1981. We 
built the Panama Canal and gave it back to them when Europe 
couldn't in 1979.
    So, as I hear all this talk about debt, I wonder where 
these folks were back then. Where were they then? It seems they 
have backslid a lot when they get in the majority. Because, in 
1981, we had 55 Republicans in the Senate and 45 Democrats. In 
1995, we had a majority in both the House and Senate of 
Republicans. In essence, through that 28-year period of time, 
18 of those were controlled by the party that today is saying 
debt matters. It did then, too.
    We had a 1,000 percent increase in national debt, and we 
haven't built a single infrastructure or repaired what we had 
in this country. And so we have to, in my opinion, take a 
serious look at reinvesting in America.
    When you said a moment ago that 750,000 jobs were lost in 
the first quarter of last year, that is 2.25 million people. 
When you talk about the--in the last quarter of 2008 and 
650,000 in the first quarter, that is a 1,950,000 people. For 
instance, in those 6 months that we saw dramatic losses of jobs 
in this country, if we had not lost those we would have a 6.5 
percent unemployment rate today. We have stopped the bleeding. 
We have put a tourniquet on. And we start seeing at least a 
rebounding to where we are not continually cutting the throats 
of the American people.
    And so I have always heard that figures don't lie, but 
people who figure--well, you figure out what they do. Because 
in here we have heard some comments that I just can't hardly 
get under my belt.
    And so the question I want to ask is this, after making 
those comments. I think the administration has taken a roughly 
pessimistic look in their budget report. We had about 6 percent 
growth in the fourth quarter and about 3 percent, roughly, in 
the first quarter of this year.
    And I think we are notorious sometimes as we make 
predictions if, in fact, in the first year those predictions 
are either too pessimistic or too optimistic, it really skews 
the 10-year period. Normally, we take the first 3 years, make a 
projection, and then the last 7 years we look at the past.
    If, in fact, our rebound is stronger, how do you think that 
will impact, eventually, the deficits and the budget in the 
future?
    Mr. Orszag. Let me just briefly comment on that.
    The deficit is extraordinarily sensitive to economic 
activity. So if economic activity turns out to be stronger than 
we are currently projecting, the deficit is going to come down 
even more rapidly than is shown in our budget documents.
    Mr. Davis. I think also, as you look at the current short-
term rates, we are keeping those down, the Feds are and the 
Treasury are. Of course, I think maybe the long-term bonds that 
we are seeing may factor in an inflation that is maybe a little 
bit higher. But if, in fact, we can keep inflation to about 2 
percent, let's say, how do you think that will impact, 
eventually, the future as far as economic growth?
    Ms. Romer. Well, I mean, you raise several good points. I 
think one of the most important is the idea that there is 
uncertainty about any forecast. And so, certainly for 2010, in 
our budget we have a fairly, I think, conservative estimate of 
growing at 3 percent over the year. And that is certainly less 
than after other severe recessions.
    And so, certainly, if we can get faster growth, as Dr. 
Orszag has mentioned, that would affect things. Our forecast is 
based on about a 2 percent inflation rate.
    Mr. Davis. Thank you.
    Chairman Obey. Mr. Lewis, any concluding comments?
    Mr. Lewis. Thank you very much, Mr. Chairman.
    I just certainly would like to thank the panel for your 
patience as well as the time you have spent with us. It has 
been extremely helpful.
    I am only struck by one item in this discussion that is 
before us through the week but really hasn't drawn discussion 
that is conclusive. I noted that Dr. Romer mentioned the 
exchange earlier, presuming that somewhere out there we might 
very well have an exchange that involves national health care.
    The public is reacting very clearly to this whole 
discussion. The vast percentage of the public has health care 
programming that they are happy with. They are very concerned 
about the Federal Government deciding they want to get between 
them and their physician. And the exchange idea essentially 
says we have to have a nationalized system, when the problems 
we must deal with can be handled much more simply without the 
government in the middle.
    President Obama has expressed support for a national 
exchange. Speaker Pelosi has expressed support for a national 
exchange. George Miller, her closest advisor, has done the 
same. And my friend, Henry Waxman, makes it very clear that he 
believes the Federal Government ought to be between those 
physicians and their patients.
    I would just suggest that this is very, very dangerous 
ground, and one ought to think through very carefully where the 
public is coming from as we move forward here.
    Thank you, Mr. Chairman, for your courtesy.
    Chairman Obey. Thank you.
    Let me thank all three of you for coming. And let me make a 
couple of observations of my own.
    I personally am very happy that we have a President and a 
Speaker and a Congress that is determined to do something to 
reform our health care system. It is all well and good for 
people to sit back and say, ``I have mine. To hell with you.'' 
But the fact is that this is a moral issue, and it is also an 
economic issue. Morally, we cannot afford to have 55 million 
people without insurance. And, economically, we cannot afford 
to have a situation in which the insurance companies determine 
what the hell we are spending on health care day after day 
after day.
    With respect to deficits, I have a sheet in my hand, as the 
Senator from Wisconsin used to say, which indicates that over 
the last 50 years we have had only five surpluses. In 4 of 
those years, we were under the Clinton administration after the 
Congress took a tough vote in 1993 to begin to close the 
deficit. And it also indicates that, prior to that, the only 
surplus in the last 50 years was under LBJ in 1969.
    One thing in common: In each of those 5 years, revenues as 
a percentage of GDP were at least 19.5 percent. If you take a 
look at the other 45 years when we did not have a balanced 
budget, in only one of those years did you have revenues 
approaching 19.5 percent of GDP.
    So what the chart also shows is that we were riding with a 
surplus of $69 billion in 1998 and then we ran into two wars--
one justified and one not, in my judgment; we ran into two tax 
cuts not paid for, except with borrowed money; and, as a 
result, we went from a surplus of 128 to a deficit of $1.2 
trillion. I think there is a lesson there for all of us.
    I also think there is a lesson in what Ms. Kaptur said 
today. Because the fact is, people are desperate out there. And 
I do not believe there is sufficient urgency being demonstrated 
by either the administration or the Congress, hard as we have 
worked on some items. It is very well and good for all of us 
sitting comfortably in a room like this to not have a sense of 
urgency about what is happening to people around the country. 
But we will pay a terrible price in terms of the health of this 
democracy if we don't more than we are doing today.
    If we do not act to provide additional support for States, 
we will see half the teachers whose jobs we saved last year 
lose their jobs this year. We will see school boards in 
trouble. We will see local police departments in trouble. We 
will see local State budgets in trouble. And, again, I think 
that means we have to have further action on the job front.
    Even though he is not here, I want to congratulate Mr. Cole 
for what I think was an extremely balanced and fair view of 
what has happened the past few months. The most unpopular vote 
I have cast in this Congress, except getting involved in the 
Panama Canal treaty during the Carter era, the most unpopular 
vote I ever cast--and it is the vote that Mr. Lewis also cast--
was the vote to support the creation of TARP.
    I agree that George Bush takes a bad rap on that one. The 
way I see that, you had President Bush, admittedly belatedly 
and certainly not with much pleasure, ask the Congress for the 
TARP authority. You had both presidential candidates, Mr. 
McCain and Mr. Obama, who answered his call to do the patriotic 
thing and support giving him that authority. I don't have to 
like the way Hank Paulson carried out that authority, in some 
instances. But I do think it is only fair to admit that that 
helped stave off catastrophe, not just for this country but for 
the entire world.
    I do wish that we would have the same sense of balance 
exhibited on the part of people when they review the 
performance of the stimulus package, or the recovery package. 
Was it perfect? No. I have no doubt that package should have 
been bigger. I said so at the time; I say it again today. It 
should have been bigger. But we were required to scale it back 
in order to get three crucial votes in the Senate because of 
the filibuster rule. And you know what? Even Babe Ruth strikes 
out 1,400 times. So I make no apology for having to recognize 
that the yinging and yanging of democracy sometimes, almost 
always, produces imperfect results.
    So I simply want to say that I would hate to see the shape 
of this economy today without that stimulus package. And I 
would remind people, as someone said today, deficits don't 
cause unemployment, but unemployment certainly causes deficits. 
And that is why we have to keep at least as much focus on 
unemployment as we do getting down our long-term deficit.
    With that, I thank you all for being here. I appreciate 
your staying for the whole nine yards.
    Without objection, the committee stands adjourned.

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