[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                THE PRESIDENT'S FISCAL YEAR 2011 BUDGET
                   PROPOSAL WITH OFFICE OF MANAGEMENT
                        AND BUDGET DIRECTOR LEW

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

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 16, 2011

                               __________

                           Serial No. 112-08

                               __________

         Printed for the use of the Committee on Ways and Means



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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

WALLY HERGER, California             SANDER M. LEVIN, Michigan
SAM JOHNSON, Texas                   CHARLES B. RANGEL, New York
KEVIN BRADY, Texas                   FORTNEY PETE STARK, California
PAUL RYAN, Wisconsin                 JIM McDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
GEOFF DAVIS, Kentucky                XAVIER BECERRA, California
DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
CHARLES W. BOUSTANY, JR., Louisiana  JOHN B. LARSON, Connecticut
DEAN HELLER, Nevada                  EARL BLUMENAUER, Oregon
PETER J. ROSKAM, Illinois            RON KIND, Wisconsin
JIM GERLACH, Pennsylvania            BILL PASCRELL, JR., New Jersey
TOM PRICE, Georgia                   SHELLEY BERKLEY, Nevada
VERN BUCHANAN, Florida               JOSEPH CROWLEY, New York
ADRIAN SMITH, Nebraska
AARON SCHOCK, Illinois
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
RICK BERG, North Dakota
DIANE BLACK, Tennessee

                       Jon Traub, Staff Director

                  Janice Mays, Minority Staff Director



                            C O N T E N T S

                               __________
                                                                   Page

Advisory of February 16, 2011 announcing the hearing.............     2

                                WITNESS

The Honorable Jacob J. Lew, Director, Office of Management and 
  Budget.........................................................     5


                THE PRESIDENT'S FISCAL YEAR 2011 BUDGET
                   PROPOSAL WITH OFFICE OF MANAGEMENT
                        AND BUDGET DIRECTOR LEW

                              ----------                              


                      WEDNESDAY, FEBRUARY 16, 2011

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                                    Washington, DC.
    The committee met, pursuant to call, at 2:50 p.m., in Room 
1100, Longworth House Office Building, the Honorable Dave Camp 
[chairman of the committee] presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                   Chairman Camp Announces Hearing on

                the President's Fiscal Year 2012 Budget

                   Proposal with Office of Management

                    and Budget Director Jacob J. Lew

Wednesday, February 09, 2011

    House Ways and Means Committee Chairman Dave Camp (R-MI) today 
announced that the Committee on Ways and Means will hold a hearing on 
President Obama's budget proposals for fiscal year 2012. The hearing 
will take place on Wednesday, February 16, 2011, in 1100 Longworth 
House Office Building, beginning at 2:00 p.m.
      
    In view of the limited time available to hear the witness, oral 
testimony at this hearing will be from the invited witness only. The 
sole witness will be the Honorable Jacob J. Lew, Director, Office of 
Management and Budget. However, any individual or organization not 
scheduled for an oral appearance may submit a written statement for 
consideration by the Committee and for inclusion in the printed record 
of the hearing.
      

BACKGROUND:

      
    On February 14, 2011, the President is expected to submit his 
fiscal year 2012 budget proposal to Congress. The proposed budget will 
detail the Administration's tax and spending proposals for the coming 
year, many of which fall under the jurisdiction of the Committee on 
Ways and Means.
    In announcing this hearing, Chairman Camp said, ``President Obama 
has spoken about the need to get our deficits and debt under control, 
and the budget will hopefully advance that goal. Republicans are 
committed to reducing our nation's deficits and debt which are already 
a drag on the U.S. economy and our ability to create badly needed jobs. 
I look forward to discussing the President's proposals in detail with 
Director Lew and exploring ways in which we can work in a bipartisan 
manner to reduce government spending.''
      

FOCUS OF THE HEARING:

      
    Office of Management and Budget Director Lew will discuss the 
details of the President's budget proposals that are within the 
Committee's jurisdiction.
      

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    Chairman CAMP. The Committee on Ways and Means will come to 
order to continue our hearings on the President's fiscal year 
2012 budget proposal; and I want to welcome Budget Director 
Jack Lew. Welcome to the Ways and Means Committee, Mr. 
Director.
    Mr. LEW. Thank you, Mr. Chairman. Good to be here.
    Chairman CAMP. Good to have you here before the committee.
    I am sure you were hoping that your first budget in this 
administration was going to be met with great enthusiasm. The 
chairman of the President's own fiscal commission has 
criticized it, editorial pages from the Washington Post and the 
Wall Street Journal have panned it, and even the New York Times 
wrote that this budget is most definitely not a blueprint for 
dealing with the real, long-term problems that feed the budget 
deficit. There seems to be a pattern in those comments, and I 
think with good reason.
    I think this budget is a missed opportunity. It misses the 
opportunity substantially to reduce spending so that our 
private sector can flourish; it misses the opportunity to 
address entitlement reform so that programs like Medicare and 
Social Security will be preserved not only for current 
beneficiaries but future generations as well; and it is a 
missed opportunity to begin a substantive conversation with 
Congress about how we can get this Nation back on track.
    Mr. Director, I told Secretary Geithner yesterday that I 
was interested in finding some real solutions; and I think you 
will find the members of this committee, both Republicans and 
Democrats, are interested in doing the same. So if we could, 
let us begin that discussion today. Let us just try to get past 
the talking points and let us try to find some real solutions.
    I know the members are eager to hear from you, and I look 
forward to your testimony. But, before you begin, I will now 
yield to the ranking member, Mr. Levin, for purposes of an 
opening statement.
    Mr. LEVIN. Mr. Lew, welcome. I am sure you will take 
advantage of the opportunity. Mr. Rangel is going to give our 
opening statement.
    Mr. RANGEL. Thank you so much, my brother, Mr. Levin, as 
well as the chairman and, also, Mr. Lew. And in the spirit that 
the chairman has expressed, I do hope that, sooner rather than 
later, we will be able to communicate in a way to see whether 
we can resolve some of the serious problems that our country is 
now facing.
    I welcome you and look forward to your testimony, because 
we will have an opportunity to discuss the Republican budget 
really for the first time.
    While the President's budget was reviewed by all of the 
House committees, we in the Ways and Means Committee were 
involved in that process. On the other hand, regarding the 
budget that has been presented to us by the majority last 
Friday, we haven't had any hearings. We need your help and 
guidance to see what those differences are.
    We do know that just saying that you are cutting does not 
necessarily mean that you are saving. It is our belief that the 
Republicans' budget, because of the severity of the cuts, will 
destroy jobs and cause great harm to the American people. 
Education, health care, decent homes, all are part of a growing 
economy, a healthy, competitive America. That is what we are 
looking for.
    But what happens when you cut the funds of the Corporation 
for National Community Service, which has 3 million at-risk 
children, more than 10,000 pre-school students? What happens 
when you cut programs such as the Harlem School Zone Program, 
which has been a model for the Secretary of Education and 
throughout the country to show that kids that statistically 
come from communities that don't succeed? They have shown that, 
with investment, and the proper training, almost all these kids 
can actually go to college.
    As for the community development bloc grants to cities that 
are in severe financial difficulty, this is something that has 
been relied on by mayors across the country.
    I am hoping that, in addition to supporting the 
administration, you might be able to help us to evaluate the 
budget that the majority is offering us and, at the same time, 
show us exactly whether or not these severe cuts would not have 
a negative impact on our economic growth.
    Once again, we hope that we can find some language, some 
meeting of the minds, where we can say we fulfilled our 
campaign pledges and then get on with what responsible 
legislators have to do.
    I personally want to thank you for your lifelong dedication 
to working with government. Sometimes it is a hectic 
opportunity, but, at least for us in the Congress, you are able 
to bring to us experiences from so many different 
administrations. We look forward to your testimony. And, Mr. 
Levin, I thank you as well as the Chairman for the opportunity.
    Chairman CAMP. Thank you.
    Mr. Lew, you have 5 minutes. Your full written statement 
will be made part of the record. Welcome to the Ways and Means 
Committee. We look forward to hearing your oral testimony.

 STATEMENT OF JACOB J. LEW, DIRECTOR, OFFICE OF MANAGEMENT AND 
                             BUDGET

    Mr. LEW. Thank you, Mr. Chairman, Ranking Member Levin, 
Congressman Rangel. It is good to be here. It is good to be 
back here, and I am proud to be presenting the President's 
fiscal year 2012 budget.
    After emerging from the worst recession in generations, we 
face another historic challenge. We must demonstrate to the 
American people that we can live within our means and invest in 
the future. We need to work our way out of the deficits that 
are driving up our debt and, at the same time, make tough 
choices to out-educate, out-build, and out-innovate our rivals. 
That is what it is going to take to return to robust economic 
growth and job creation and to win the future.
    This is the seventh budget that I have worked on at the 
Office of Management and Budget, and it is the most difficult. 
It includes more than $1 trillion in deficit reduction, two-
thirds of it from lower spending, and it puts the Nation on a 
path back towards fiscal responsibility.
    By the middle of the decade we will be able to pay for our 
current bills and remain in what is called primary balance for 
many years after that. This doesn't mean we are debt free. It 
means that the government will be in a place where it is paying 
for all of its current programs. In other words, spending on 
government programs won't add to our debt.
    And, as any family knows, the crucial first step to start 
living within your means is to stop using the credit card when 
you can't pay your bills. This budget in a few years will bring 
us to that point.
    But that is not enough. The debt is still there, and it is 
accumulating interest. And just like a credit card bill, if you 
don't start paying down the principal, the interest keeps 
building up. We are going to have to start paying down the debt 
as well. That is why the President has called this budget a 
down payment, because we will still have work to do to pay down 
the debt and address the long-term fiscal challenges.
    But it is important that we not gloss over how significant 
it is to go from historic deficits of more than 10 percent of 
GDP to around 3 percent of GDP, which is where we will be 
paying for our current government programs. This is the most 
significant deficit reduction since the end of World War II, 
and it is a crucial step towards a balanced budget, and we are 
going to have to work together to do that.
    But we cannot start to pay down the debt until we stop 
adding to it, and that is what this budget does. Changing the 
trajectory of our fiscal path is a significant accomplishment, 
and we are going to need to make tough choices, and I would 
like to highlight a few of them.
    The budget includes a 5-year nonsecurity discretionary 
spending freeze that will reduce the deficit by over $400 
billion over the next decade and bring spending to the lowest 
level since President Eisenhower sat in the Oval Office. To 
achieve savings of this magnitude, it is not enough to cut 
programs that are simply out of date or ineffective or 
duplicative. We are going to need to make reductions in 
programs which, but for the fiscal challenges we face, we would 
not choose to be cutting--programs like the low-income energy 
home program and the Community Development Block Program and 
national security, which we are not freezing, we are also 
making real cuts.
    Defense spending for the past 10 years has been growing 
faster than inflation, and we have it on a path to come down to 
zero real growth and then to make the reductions that it takes 
to accomplish that. This means $78 billion in savings from the 
Pentagon's budget. And in order to do that while maintaining 
our leadership in the world, we are going to have to make the 
tough decisions and that means not buying the things that we 
don't need and the things that we can't afford.
    If you combine the spending in the defense budget, the base 
budget, with spending in the area that we call the overseas 
contingencies operations--that is Afghanistan and Iraq--we are 
seeing savings because we are bringing our troops home from 
Iraq and overall spending in defense is going down 5 percent 
from last year's budget.
    Now, of course, as I think we all know, we are not going to 
solve this problem, this fiscal problem with discretionary 
spending alone; and our budget does deal with mandatory and 
revenue items. I would like to give you a few examples.
    There are two particular areas where for the past years, 
many years, we have been, on a bipartisan basis, making policy 
decisions that have added to our debt. There is a consensus 
that we shouldn't see doctor bills go up by--payments to 
doctors go down by 30 percent, and there is a consensus that we 
shouldn't see middle-class taxpayers fall into what is called 
the alternative minimum tax. The problem is that, for the past 
years, we have not paid for it and we have just put the cost of 
making those policies on the national credit card. We need to 
stop. We need to pay for it.
    This budget proposes specific savings in health programs so 
that we have $62 billion of savings to pay for a 2-year 
extension of the so-called doc fix, and we have a specific tax 
proposal to pay for a 3-year extension of the provision that 
would make sure that the middle class do not fall into the 
alternative minimum tax.
    I think that the way we do that is also important. It has 
been--the provision that we have proposed would say that 
taxpayers in the highest tax bracket should get no more benefit 
out of their itemized deductions than taxpayers in the bracket 
below. It would be a roughly 30 percent reduction in the value 
of itemized deductions, and it would bring the value of 
itemized deductions back to where it was in the Reagan 
administration. It is consistent with the fiscal commission's 
concept that we should start scaling back on spending on the 
tax side.
    Now these are both down payments to what we need to do to 
solve the long-term deficit problem, and in the State of the 
Union and in the budget the President made clear that we need 
to work together on dealing with many more areas. But we need 
to start here, and I think that we need to start here now.
    I can see that my time is out. If I can take another 
minute, there are a few other things that I would like to 
mention.
    Chairman CAMP. Yes.
    Mr. LEW. Okay, thank you, Mr. Chairman.
    In the State of the Union, the President said--and we 
repeated in the budget--and he has made clear we want to work 
together on corporate tax reform. We want to do it in a way 
that is revenue neutral. We want to reduce the number of 
special provisions, broadening the base and lowering rates. I 
hope that is an area that we can work on in a bipartisan way.
    In the area of Social Security, the President said in the 
State of the Union that, while it is not contributing to the 
deficit in the period of this budget or well beyond that, we 
would like to work together in a bipartisan basis in order to 
make sure that we can tell workers today who will be retirees 
and current retirees that the system is sound. And we look 
forward to working together on that.
    Our budget also includes a number of investments in the 
future. I won't go into all of the details because I am 
conscious of all of the time limitations. But I think it is 
important just to summarize them and say that, while we are 
making the difficult cuts, we also have to make sure that we 
are making the investments so that we are still able to have an 
educated workforce that can do the work of the future, that we 
have the scientific innovation to be at the cutting edge, as 
America has always been, and that we build the infrastructure 
so that we can have the kind of commerce we need to be 
successful. We have proposals in our budget that would do that.
    There are a number of tax proposals as well as spending 
proposals in that area, and in the course of the testimony I 
look forward to discussing that with you some more.
    Mr. Chairman, I am under no illusions at how difficult it 
is to make the tough choices to put us on a sustainable fiscal 
path. As we make those choices, I think it is important that we 
not cut areas that are critical to the economy and critical to 
future growth and critical to the future job creation in this 
country.
    And, finally, cutting spending and cutting our deficits 
requires us to put our political differences to the side and 
finding the area in the middle where we can work together.
    I look forward to working with you and enjoyed working with 
you in December. I know we can work together to see how much we 
can do to get this important work done for the American people. 
Thank you, Mr. Chairman.
    [The prepared statement of The Honorable Jacob J. Lew 
follows:]

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    Chairman CAMP. Thank you very much.
    First of all, your full written statement will be made part 
of the record.
    In your written remarks I noticed that you said the last 
time you were OMB Director the government was running a budget 
surplus. I do think it is important to acknowledge that during 
that time, outlays as a percentage of GDP averaged about 18\1/
2\ percent; and, today, while we hear a lot of talk about 
cutting spending, the budget's, outlays as a percentage of GDP 
go to about 23 percent in 2021.
    I want to take seriously the statements about the need to 
reduce spending and deficits the President has made, but when 
his budget runs up spending as a percentage of our economy to 
historic levels, it is very difficult to take that at face 
value. Do you think having government spending equal to about a 
fourth of the U.S. economy is really the right approach to 
sustainable growth and also to reducing the deficit?
    Mr. LEW. Mr. Chairman, I am very proud of the work that I 
did in this 1990s. We worked in a bipartisan basis to balance 
the budget. And I think it is important to note that, when we 
had a balanced budget, when we ran a surplus, we were also in a 
period of unprecedented economic growth. The economy was 
growing much faster than was spending on programs.
    We have just come through one of the worst economic periods 
that required extraordinary expenditures in order to get the 
economy moving. There was a loss of revenue, there were special 
provisions that had to be put in place, and we are right now at 
a time where the economy has been hit very hard. We are coming 
out of that.
    As we look ahead to the period later in this window, and 
you are looking to 2021, we are seeing a number of things 
happening at the same time. First of all, we are seeing a 
population that is aging. The Baby Boom is retiring and 
collecting benefits. In 1995, we knew that looking ahead to 
2021 there were going to be more people 65 and older collecting 
Social Security.
    Chairman CAMP. I appreciate that. But if we are really 
going to seriously reduce our debt and tackle our deficit, 
don't we need to reduce the spending part of that formula?
    Mr. LEW. Mr. Chairman, we agree totally that we need to 
reduce spending, and that is why the President has proposed 
$400 billion in discretionary spending. He has proposed $62 
billion in mandatory saving. In his budget, he has proposed a 
lot of spending reductions, and they have real impact.
    Chairman CAMP. But the debt level has increased every 
single year under this budget, reaching a hundred percent of 
our economy by 2021. So, again, that will require successive 
increases of the statutory debt limit. What additional spending 
reductions, budget reforms, or other reforms can we expect in 
order to prevent this massive increase in the debt?
    Mr. LEW. First of all, this budget would put us in a place 
in the middle of the decade where our current spending is not 
causing us to run deficits that increase the debt. The only 
thing left when we get to the middle of the decade that is 
increasing deficits and the debt is interest on the debt that 
has been accumulated already. And we agree that is a problem. I 
don't think there is going to be an argument between us that we 
have to start working on getting that down. But all that is 
left once we have hit the 3 percent of GDP target is the 
interest on the debt that is driving it up.
    Chairman CAMP. You say in your written statement that the 
biggest contributor to our Nation's long-term deficits is 
health care spending and that any new entitlement spending must 
be offset.
    But when I look at the increase in the physician payment 
formula, the $300 billion, there is no offset in the budget. 
There is no indication about how that increase is going to be 
paid for. And while we may agree on the need to get to a long-
term sustainable physician payment formula, or SGR, how can we 
move forward on that when, again, you don't offset the spending 
or you don't show how we are going to reach that goal in the 
budget.
    Mr. LEW. Mr. Chairman, I think it is very important that 
last December Congress, working with the administration, on a 
bipartisan basis paid for a 1-year extension of that provision. 
That was the first time that it had ever been paid for. It 
didn't have to be paid for under the budget rules. It was the 
right thing to do, and we commend the Congress for doing it.
    And what we have said in this budget is that we have now 
put $62 billion of specific offsets down which will cover the 
cost of the 2-year extension. With 3 years of time where we 
have paid for the sustainable growth rate provisions to be 
extended, that gives us a healthy window to work through the 
issues to come to a place where we don't need to do it every 
year, where we make the right level of policy adjustments and 
pay for them. And we have called for that. We want to work 
together on that.
    But a 3-year window to do it in is a big difference from 
where we were before, and we think it is very important.
    Chairman CAMP. Well, thank you. And I appreciate your 
comments on international tax reform, business tax reform, 
Social Security, and other areas that I hope we can work 
together on.
    So, with that, Mr. Levin may inquire.
    Mr. LEVIN. Thank you. Welcome.
    I think it is useful to look at history to the extent that 
it is instructive for the present and future. I also think we 
need to proceed in a bipartisan basis to the extent possible.
    I don't think it is true that the action we took in 1993 
was bipartisan. I mention that there wasn't a single Republican 
vote. And I mention that because I think if people remember 
that it gives this administration and those of us who were here 
then some credibility when we talk about deficit reduction. I 
think it gives us considerable credibility.
    Also, I think it is important to look at history in terms 
of spending and GDP.
    Mr. Lew, we so much welcome your insight. You are too young 
to remember, and I guess none of us remember the Depression or 
previous recessions. Has there been a tendency for spending to 
go up at times of a depression and a recession?
    Mr. LEW. Mr. Levin, it is very much the case that when the 
economy is weak spending goes up. It goes up automatically for 
things like unemployment insurance. And then it goes up when 
policy is made, as it was I think appropriately and correctly 
made 2 years ago to take actions to get the economy moving 
again.
    Mr. LEVIN. And that was considerable, wasn't it?
    Mr. LEW. Yes, it was very considerable. It was hundreds of 
billions of dollars.
    Mr. LEVIN. Let me just ask you----
    Mr. LEW. And I might add it helped to get the economic 
growth rate into the positive area. We are seeing economic 
growth that is several percentage points higher than it would 
be without having taken that action; and we are seeing 
unemployment, while still unacceptably high, at a rate that is 
lower than it would have been by many, many millions of jobs 
had we not taken action.
    Mr. LEVIN. Now, I think it is important for that to be 
stated by all of you without equivocation. I don't think you 
have any. So why is there a combination here of deficit 
reduction and investment? I am not sure the public understands. 
Why does this budget do both?
    Mr. LEW. It is a good question, and it is actually a hard 
question. Because we are at a pivot point here where we are 
going from dealing with a recession where we had to spend a lot 
of money to looking at reducing the deficit where we need to 
save a lot of money. And at the same time while we are saving 
money we have to look farther down the road to make sure we are 
building an economy that will continue to create jobs in the 
future, and this budget tries to make those tough tradeoffs.
    And while I think it is something that sounds good and 
common sense we want to pay for education, it is not just 
something that we do because we think it is a nice thing to 
educate our children. If you talk to the CEOs of technology 
companies, what they will tell you is they need more young 
applicants for jobs who are trained in math and science and 
engineering. So what we are doing is very much driving the 
future economic growth.
    The same is true in innovation, where America is the 
world's leader in innovation. We have a wonderful partnership 
in the public sector that pays for basic research and the 
private sector that adapts it and commercializes it. We need to 
continue that. Those are the kinds of areas where we are making 
investments.
    Mr. LEVIN. You mention education, and training. The CR cuts 
money for training. We are also in this battle to try to 
continue TAA, which needs to be done this week.
    Let me just mention community health centers. The CR, I 
think, cuts it 50 percent. Is that a good investment?
    Mr. LEW. Community health centers have been a good 
investment. They are part of our overall health infrastructure 
in this country, and I must say I don't know the exact funding 
level in the Continuing Resolution. I have been working on this 
budget the last few days, so there may be some numbers that I 
am not exactly current with.
    Mr. LEVIN. You may be shocked. I hope the public is.
    I yield back.
    Chairman CAMP. Mr. Herger is recognized.
    Mr. HERGER. Thank you, Mr. Chairman.
    Mr. Lew, I would like to draw your attention to two 
numbers. The first number is $6.3 trillion. That was the total 
debt held by the public when President Obama took office on 
January 20 of 2009. The second number is $8.1 trillion. That is 
the amount this budget proposed to add to the publicly held 
debt over the course of the next decade. And that is on top of 
some $2.5 trillion this President already added to the debt 
during his first 2 years in office.
    Again, that is $6.3 trillion in debt over the first 219 
years of this country's existence versus $8.1 trillion in debt 
over the next 10 years.
    This budget does virtually nothing to confront the crisis 
of our Nation's growing debt. Last year, we were told that 
there were no major deficit reduction proposals in the budget 
because the President was waiting for his Fiscal Commission to 
study the issue and make recommendations. Mr. Lew, does the 
President support the reforms proposed by the Simpson-Bowles 
Fiscal Commission?
    Mr. LEW. Mr. Herger, the President has said that he thinks 
the Commission did important work. There are things in the 
Commission report that he has embraced and put in this budget. 
There are ideas that he thinks we need to work together to 
refine them. He has really gone to great lengths to lead a very 
broad space for us to find a path towards working together on 
many of the ideas. He has not embraced the entirety of it, but 
he thinks they did very important work.
    If I could just comment on the first part of your remarks.
    When I left the Office of Management and Budget in January 
of 2001, my last day in office we projected a surplus of $5.6 
trillion over the next years. When President Obama took office 
in January of 2009, the projection of the deficit for the 
following 10 years was over $10 trillion. The world had changed 
in the years in between, and there is going to need to be tough 
decisions to reverse it.
    But the pattern had been established by a combination of 
factors. One was the recession. But another was a set of 
decisions that was made to have tax cuts and spending without 
paying for it that built a structural deficit into the 
projections. And that is really what we are dealing with when 
we look ahead to solving the problem of the future. We have to 
remove the structural deficit.
    Mr. HERGER. Well, Mr. Lew, I am sure you can see our 
concern, of course.
    Mr. LEW. I share the concern.
    Mr. HERGER. When the President came in, he indicated, his 
stimulus, was above an unemployment rate of 8 percent. And as 
you are aware, we have been over 9 percent, and we have this 
incredible debt, the numbers of which I just mentioned, on top 
of that. The economy hasn't turned around. We have more people 
unemployed. We haven't created jobs. So I am sure you 
understand the concern that we have.
    Beginning on January 1, 2012, government agencies at the 
Federal, State, and local levels would be required to withhold 
3 percent of all payments to contractors and vendors as a tax 
enforcement measure. This 3 percent withholding tax would 
allegedly raise $10 billion over the next decade. But a 2008 
Department of Defense study found that the provisions will cost 
the DOD alone more than $17 billion to implement. That is in 
addition to other Federal agencies that have their own 
contractors, not to mention the costs to the IRS to track and 
process all of these new withholding taxes.
    I have introduced legislation that would repeal this 3 
percent withholding tax. Are you familiar with this provision; 
are you aware of any efforts to estimate the cost it will 
impose government-wide; and would you agree that it doesn't 
make sense to enact taxes that cost more to collect than they 
raise in revenue?
    Mr. LEW. Congressman, I am going to have to confess that in 
the 9 weeks I have been back at OMB I have not come across that 
provision. I am not up to date on it. So I would really rather 
get back to you. I can comment in principle on it, but I think 
it would be better for me to get back to you.
    Mr. HERGER. I would appreciate that.
    [The information The Honorable Wally Herger follows:]

    [GRAPHIC] [TIFF OMITTED] T5631.016
    

                                 

    Chairman CAMP. Mr. Johnson may inquire.
    Mr. JOHNSON. Thank you, Mr. Chairman.
    Welcome aboard.
    Mr. LEW. Thank you.
    Mr. JOHNSON. Securing Social Security's necessary 
administrative funding has been a bipartisan effort for years 
at Ways and Means. Regretfully, instead of working together to 
find sustainable solutions for Social Security's future, the 
other side, your side, has chosen to scare seniors through a 
misleading analysis of Social Security's budget in the 
Continuing Resolution being considered on the floor.
    Let me remind you that Social Security is on a level budget 
due to the failure of last year's Congress to pass a budget. 
The proposed CR cuts are only 1 percent from Social Security's 
funding level established under the Democrat majority. The 
remaining $500 million the CR reclaims is the money in a 
reserve fund the agency has not spent from previous general 
budgets.
    The President's 2012 budget request assumes a 5-year budget 
freeze based on 2010 enacted levels. How can we work together 
to make sure Social Security delivers its core services during 
these times of fiscal restraint?
    Mr. LEW. Congressman, I think that is one of our most 
important jobs, to make sure that we can deliver services that 
people are entitled to in a way that is both sufficient and 
makes them accessible and in a way that is not too burdensome.
    I think that it is an area where we have made great 
progress in improving service; and part of that involves 
people, part of it involves technology. I think that as we look 
at places where we are going to be needing to make savings, 
this is not an area where we think savings or, if you look at 
our budget, we don't make savings in this area because we think 
we need to maintain with a growing population applying for 
benefits the quality of service.
    Mr. JOHNSON. You need to get the President to doctor that 
issue, because he hasn't agreed to fix Social Security, and you 
know and I know it can be fixed.
    Do you agree with the argument that the arithmetic in 
Social Security works, Social Security is fine? That is one of 
the arguments that is being made.
    Mr. LEW. Congressman, I was speaking to the question of the 
administrative costs. You are talking now about the financing 
of Social Security long term.
    I think Social Security is soundly financed until 2037. The 
trust fund--last reported, the trustees said that the trust 
fund was sound until 2037. I think we do have issues that----
    Mr. JOHNSON. There isn't any money in it. You know that. It 
is all IOUs.
    Mr. LEW. I would beg to differ.
    Since 1983, when on a bipartisan basis we worked to reform 
Social Security and to refund Social Security, we have a system 
where there is a Social Security trust fund that has a surplus, 
and it is invested in U.S. Treasury notes. It is our job to run 
a fiscal policy so that we can pay those notes back.
    Mr. JOHNSON. Well, that is right. We are borrowing from 
that trust fund.
    Mr. LEW. And part of the contract we have with Social 
Security is we have to be able to pay that back.
    Mr. JOHNSON. Do you agree with the statement in the 
President's 2010 budget that the existence of large trust fund 
balances, i.e., the IOUs, does not by itself increase the 
government's ability to pay benefits.
    Mr. LEW. That is a paragraph that--it doesn't appear in the 
budget that I sent up, because I think it is a little bit 
misleading. It is something that is true in its technical terms 
as an economic matter. But there is legal and technical issues 
regarding Social Security.
    Social Security is an entitlement program. We have payroll 
taxes that employers and employees both pay into it. There are 
fund balances that are invested in Treasuries. We have never 
defaulted on paying back Treasury bills.
    So, as a legal matter, there is a right to a benefit, and 
there is funding available. As an economic matter, we can only 
pay those benefits back if as an overall government we are in a 
fiscal position to do so. So the problem is are we running our 
fiscal policy so we can pay our bills. And I think it was 
easier when I sat here with a surplus to say with confidence 
that we can do it.
    I understand why the question is asked. But that is not a 
Social Security question. It is a question of are we running 
our fiscal policy correctly.
    Mr. JOHNSON. Well, Social Security is broke, and you know 
it. And it is nothing but pieces of paper out there. If we 
can't pay our other bills when we are in big debt, how do we 
plan on paying Social Security?
    But let me add I believe, and I think you agree, that we 
can reform Social Security so that it exists forever. I haven't 
heard the President talk about wanting to do that.
    Mr. LEW. Well, no, no. I totally agree. And the President 
just yesterday repeated he wants to work together on a 
bipartisan basis. We believe we can work together to come up 
with another 75-year plan to make the kind of commitment that 
we made in 1983 that says, looking far down the road, Social 
Security is sound. Beyond 2037, we do have work to do. And we 
look forward to working together on that.
    Chairman CAMP. Thank you.
    Mr. Rangel is recognized.
    Mr. RANGEL. Thank you so much.
    It is good to be working with you again, Mr. Lew. And the 
last time we worked closely together was when we, along with 
Gene Sperling and President Clinton, zones, attempted to bring 
in local government, State government, the private sector, and 
the Federal Government by having a plan with respect to 
empowerment zones. I understand that soon, very soon that will 
expire in the budget, the President's budget?
    Mr. LEW. Yeah. There is a proposal for a follow-on program.
    Mr. RANGEL. I would like to talk about the follow-on 
program. Because I was talking to Dr. McDermott, and he was 
sharing with me what the human body, when it is attacked 
outside, the first thing that happens is that the chemicals 
that go to try to stop the bleeding. Then there are white 
corpuscles that keep the thing from expanding and red 
corpuscles come in to start the repair.
    I would assume that with budgets, you find out the country 
is in trouble, and you are able to identify where the highest 
unemployment is, where there are dropouts, and where there is 
lack of productivity. And just like the body, the weak get 
weaker. It just seems to me that these communities that have 
all of this economic distress didn't cause this economic injury 
to themselves.
    And yet the President says that he had to help the wealthy 
to enjoy a further tax cut because that was political. But, by 
the same token, he can't help it if someone in worthwhile 
programs are going to be cut back. I think we all agree, 
whether it is the President or certainly if it is the 
Republicans, that these cuts cost jobs. These cuts cause the 
misfortune to grow worse.
    Do you have anyone on your staff or in the administration 
that takes a look at our country the way a doctor takes a look 
at our body to determine how much emergency relief has to be 
there and just to stop the hemorrhage?
    That was the concept of the empowerment zone. I do know 
that you and Dr. Sperling have something that you are thinking 
about. But once it gets bad in communities like Detroit and 
Watts and Harlem, it just gets worse. And then when you come in 
and say you are going to lose jobs on top of it, you are in 
intensive care.
    Mr. LEW. Mr. Chairman, when I moved back to New York after 
the Clinton administration, I started taking the train through 
Harlem every day to go home. I felt a huge amount of pride to 
see the work that we had talked about happening on the streets. 
And it was one of the things that reminded me that what we do 
here it is real and it affects people's lives. We did a lot of 
good work.
    Mr. RANGEL. You should take pride.
    Mr. LEW. And in this budget we have a proposal for 
something called growth zones. And, you know, what it will be 
is a competition for 20 areas that would meet the criteria. I 
am not sure I can quite follow the medical analogy, but the 
places where there is need and where we bring together the 
right assistance and we can make a big difference.
    Mr. RANGEL. Who is in charge of that program, because we 
won't have time.
    Mr. LEW. I am happy to follow up with you afterwards, Mr. 
Rangel. There is a group, a number of people; and we can work 
with your staff to make sure that we are working closely on it.
    Mr. RANGEL. We need that. We have rural areas, and so many 
other areas that cannot even compete because they have been 
trying to get out of this situation which is a massive 
recession; close to depression. We have lived through that, and 
we are still living through it.
    But you are right. The empowerment zone shows that if we 
bring all of these resources at one time, improve the school, 
get the private sector working, we can get a town back on its 
feet.
    So I look forward to working with you, Dr. Sperling, and 
Mr. Daley to see all of the things that you are thinking about, 
and to see whether or not there is a coordinated effort to 
bring in this emergency team when there are hemorrhages taking 
place throughout our country.
    Thank you for your great contribution.
    Mr. HERGER. [Presiding.] Thank you.
    Mr. Davis is recognized.
    Mr. DAVIS. Thank you, Mr. Chairman.
    Thank you for coming today.
    I discussed the administration's unemployment insurance 
proposal with Secretary Geithner yesterday, but I wanted to 
talk with you about it as well.
    The administration's budget describes the UI proposal as 
offering ``relief'' to employers. But according to page 191 of 
your budget, there is about ``$9 billion in relief,'' in 
quotation marks, through 2013 and then subsequent tax hikes 
totaling over $52 billion starting in 2014. On top of that, the 
budget proposal also extends the FUTA surtax for 10 years, 
which yields another $15 billion in revenue.
    To sum it up, that is $9 billion in short-term relief and 
$67 billion in higher, permanent tax increases over the next 10 
years. Do I have that math correct?
    Mr. LEW. I can tell you the numbers in the budget are that 
it is net $43 billion. And if that was the number you used, it 
is correct. I apologize. I didn't write down the number.
    Mr. DAVIS. I think we are dealing with a little bit larger 
number there.
    But it seems to me that employers would pay about $58 
billion less in unemployment taxes over the next decade if 
Congress simply ignored that proposal and followed current law. 
Would you agree with that? In terms of that outlay?
    Mr. LEW. If you are looking over the 10-year period, there 
is an increase in the base of salaries that are subject to the 
unemployment tax.
    Mr. DAVIS. Plus the tax increase.
    Mr. LEW. Yes. And what it would do is it would restore the 
wage base in real terms to where it was in 1983 when President 
Reagan was in office and it was set for the last time. So it is 
in real terms back to where it was in 1983. It was frozen, and 
it hasn't been changed since 1983.
    Mr. DAVIS. So it is short-term relief for a long-term 
permanent tax increase.
    Mr. LEW. So it is short-term relief, which is I think very 
important, because the State funds are running very low right 
now. They need to have some headroom to be able to do what they 
need to do to build the balances back up. So we have a 
moratorium on increases that would otherwise take effect at the 
Federal level. And afterwards, in 2014, the base would be 
adjusted so that, as I say, in real terms it would be back to 
where it was when it was last set in the Reagan administration.
    Mr. DAVIS. Has any administration in U.S. history to your 
knowledge ever proposed such a large net unemployment insurance 
tax hike?
    Mr. LEW. I actually can't tell you. I haven't gone back 
historically. I do know that in real terms it is just 
calibrating it so that it is back where it was when it was set 
the last time in 1983.
    Mr. DAVIS. Regarding the question of who pays for 
unemployment insurance, Secretary Geithner was a little bit 
fuzzy on that. He suggested the economy pays for it. Who pays 
for unemployment insurance?
    Mr. LEW. We have unemployment trust funds that are drawn 
down to pay benefits.
    Mr. DAVIS. Who actually contributes to those, though?
    Mr. LEW. The trust funds are funded by payroll taxes, and 
there are other funds as well.
    Mr. DAVIS. One of the wake-up calls to me running a 
business in the corporate world, actually signing the checks, 
was the amount of additional taxes going out the door. I guess 
the question I have for you, hypothetically, as an employer, is 
do you think you would view this as a good deal? I mean this 
getting $9,000--let us use the hypothetical number $9,000--in 
relief in exchange for $67,000 in higher taxes in the future?
    Mr. LEW. You know, I think we are comparing different 
numbers of years. On a year-by-year basis, this is a level of 
taxation that was in place in real terms for many years. It 
only eroded as the years went by since 1983.
    So I think if you look at in real terms the impact this 
would have on employers, we had a pretty good economy in the 
1990s when the real effective rate was much closer to what we 
are proposing than where it is now.
    Mr. DAVIS. One last quick question on UI. The budget 
proposal doesn't include any funding for extending Federal UI 
benefits beyond their expiration in December of this year; is 
that correct?
    Mr. LEW. That is correct.
    Mr. DAVIS. Extending the current program through 2012 would 
cost about $40 billion. Do you think the program should be 
extended? And, if so, why wasn't it included in your budget?
    Mr. LEW. You know, I think the whole idea of extended 
benefits is that we do it when we need to do it and for the 
duration of time that we need to do it. And I think we need to 
see where we are at the end of the year. It is not something 
one ought to look ahead in advance and say we know that we are 
going to be in a situation where we still need extended 
benefits.
    Mr. DAVIS. Final point, real quickly.
    Do you think it is fiscally responsible in your view not to 
include funds like these in the budgets the way you might in a 
variance account in a private sector company to at least 
project the potential need for that out there?
    Mr. LEW. There are a number of contingency areas where we 
don't include it in budget, some where we do. This is an area 
where I hope that we are in a place where we don't need it in 
there, and we will have to see where we are at the end of the 
year.
    Mr. DAVIS. Thank you very much.
    Mr. HERGER. Mr. Reichert from Washington is recognized.
    Mr. REICHERT. Thank you, Mr. Chairman.
    Welcome, Mr. Lew.
    My questions will focus on jobs for a second.
    The budget dictates new resources to the International 
Trade Administration to help achieve the goal of the national 
export initiative which I am proud to be a part of along with 
Mr. Tiberi.
    The goal, of course, is to double exports, create 2 million 
jobs by 2014. Your budget explains that these funds will be 
used to promote exports from small businesses, sell American. 
That is our goal. We also want to enforce existing free trade 
agreements and reduce trade barriers for U.S. products. And I 
congratulate the President on his recent negotiation with Korea 
and look forward to voting on that bill.
    But there is hardly a mention, other than the fact that the 
Korean agreement has been agreed to, in the budget as to the 
role of the pending free trade agreements with Colombia, 
Panama, and, for that matter, really Korea.
    The last time that we doubled exports was between the years 
of 1995 and 2007; and, as I have said many times and you 
probably know yourself, during that period of time nine trade 
agreements were passed.
    So my question is, what really is the President looking to 
do when it comes to trade agreements, recognizing the 
importance if their goal is to double exports, create 2 million 
jobs? Is it not important to get these trade agreements to 
Congress so we can have a vote on those--Colombia and Panama 
languishing, Korea we are still waiting for. What really is the 
plan? Because it is not mentioned in the budget at all. It has 
been said before, it is a no-cost stimulus.
    Mr. LEW. Congressman, the Korea agreement was completed 
right at the end of the year as the budget was being put 
together, and it is something we are very proud of. We think it 
is an important piece of work. It shows how, working together, 
we can address the serious issues that come up with trade 
agreements and still promote American exports and to make sure 
that we are competitive in important markets.
    So I don't think there is any ambiguity about the 
administration's support for the Korea agreement. I think it is 
more just a question of timing, funding for the agreement. But 
the provisions were there.
    As far as the Colombia and Panama agreements go, I think 
the President has been clear that we are continuing to work on 
them. There are issues there we have to work through, and we 
are working as hard and as fast as we can to get those 
completed.
    Mr. REICHERT. Well, I haven't seen any language in any of 
the budgets presented by the President relating to trade. So 
this isn't the first time that the language has been omitted 
from a budget proposal.
    Mr. LEW. It is not intrinsically a budget issue. As you 
said, it is something that has some implications, and the 
implications of trade agreements are addressed. We have been 
very vocal in speaking to the question of the Korea agreement 
and would be happy to follow up with you on it. There should be 
no ambiguity of the administration's position on it. It is a 
historic agreement that the President has spoken to.
    Mr. REICHERT. Okay. We will be looking forward to voting on 
those agreements this year.
    Now to health care. Last week, the director of the 
nonpartisan Congressional Budget Office testified before the 
Budget Committee that the health care law would reduce 
employment in 2020 by about 800,000 workers. Do you agree with 
that analysis?
    Mr. LEW. You know, I think that as I looked at that 
analysis last week, what it said to me was that there are a lot 
of people who are in jobs that they would either be ready to 
change or retire from if they weren't locked in to their jobs 
because of their health insurance. And that by passing the 
Affordable Care Act and ending job lock we have created more 
flexibility and mobility in the labor market. I am not 
persuaded that there is a net job loss, and I would be happy to 
pursue it with you further.
    Mr. REICHERT. You don't have a number? If you disagree with 
this 800,000 loss number, do you have a number that you are 
looking at that possibly----
    Mr. LEW. I do not have a number to give you. But we can 
follow up.
    Mr. REICHERT. Would you agree that there would be job 
losses?
    Mr. LEW. I think that the thing that I would agree with is 
that there will be people who leave jobs, people who couldn't 
retire because they were going to lose their health benefits.
    Mr. REICHERT. So let me understand. The Congressional 
Budget Office says that we are going to lose 800,000 jobs. But 
you are saying that--at least what I am hearing is--we are not 
going to lose any.
    Mr. LEW. I said I am not familiar with an analysis that 
says it is loss of jobs because of loss of economic activity. 
And I am happy to look at the analysis.
    Mr. REICHERT. Okay. Thank you, Mr. Chairman.
    Mr. HERGER. Thank you.
    Mr. Neal is recognized.
    Mr. NEAL. Thank you very much, Mr. Chairman.
    Mr. Lew, as we begin the budget scenario, this is really 
about, in some measure, preparing for the debt ceiling question 
that will be before us in the near future. But the debt ceiling 
question really isn't an argument about just the budget that is 
in front of us. It is an argument about bills incurred from the 
past. Isn't that correct?
    Mr. LEW. It is not at all about the budget in front of us, 
because the debt that we have is all the result of past 
decisions.
    Mr. NEAL. Which brings me to the next point. How much money 
have we borrowed for the war in Iraq?
    Mr. LEW. Well, I don't have a separate calculation, but we 
have been running a deficit for the entire time from the 
beginning of the war of Iraq through the withdrawal. So 
depending on what you consider to be the thing that we are 
borrowing for, one could come up with different calculations. 
We don't identify borrowing for one or another activity, but we 
have been running a deficit that whole period.
    Mr. NEAL. Well, let me take you back to projections then, 
and then we will come back to the debt issue.
    There have been 31,000 men and women who have served us 
honorably in Iraq and Afghanistan who have been wounded. And on 
a visit that I made last week with one courageous young guy, I 
did the calculation. He is about 28 years old and, with his 
life expectancy, he is probably going to be in the care of the 
VA system for the next 50 years. So not only are there costs 
that have been incurred based upon the last few years but it is 
also a discussion about the costs going forward. Is that 
correct?
    Mr. LEW. Absolutely. We have seen the costs of veterans' 
care, the need for workforce that deals with returning 
veterans, Wounded Warriors, climb dramatically as we have seen 
the number of brave men and women who are injured in battle 
come home. I think we have a pretty bipartisan consensus that 
we have an obligation to the men and women who put their lives 
on the line who come back injured to take care of them. And our 
budgets will reflect that for the rest of a generation.
    Mr. NEAL. I am certainly in agreement with the point that 
you made. I think there is bipartisan support on the committee 
and certainly in the House for the statement that you have just 
offered about the obligations that we have going forward.
    Let me go back to the debt issue.
    So it is conceivable that some of those who have voted 
repeatedly for the war in Iraq and then voted for a period of 
about 7 years out of the 8 to borrow the money for Iraq 
conceivably would say that they are not prepared to meet the 
obligations based upon the votes that they have cast?
    Mr. LEW. Mr. Neal, I would rather not speculate on the 
motives of individual Members. But I would just say that we 
have a national debt that includes hundreds of billions of 
dollars that we have spent in the last number of years on the 
war in Iraq and the war in Afghanistan. And we are paying that 
debt and the interest on the debt is one of the things that 
would be paid when the debt limit is raised. We don't identify 
which expense is connected to which dollar of debt. So there is 
no one-for-one correlation, but, conceptually, it is part of 
the whole.
    Mr. NEAL. But frequently the votes that we had on the House 
floor during those years were called supplemental budgets.
    Mr. LEW. Yes, they were.
    Mr. NEAL. And to call it a supplemental budget, Mr. Lew, 
what does that infer?
    Mr. LEW. A supplemental appropriation is an appropriation 
that is outside of the regular cycle. It is funds that weren't 
requested in the regular budget and were appropriated either 
after or parallel to but not part of the regular budget.
    Mr. NEAL. So is it fair to say, just based upon on some of 
the calculations of the numbers you have come across in your 
time, recently anyway, that the cost of the war in Iraq is 
north of $750 billion right now?
    Mr. LEW. I think that is pretty close. I mean, I haven't 
gone back and totaled it up from the beginning. But it has been 
an expensive undertaking. Yes.
    Mr. NEAL. Okay. And then, going forward, one might make the 
argument, I think with some accuracy, that because of the 
obligation we are going to have to those honorable men and 
women who have served us that the VA system is going to require 
a considerable infusion of money for years and years to come, 
maybe well north of another trillion dollars if it is over the 
life of that young man's expectancy.
    Mr. LEW. I am reluctant to put a specific number on it. I 
agree in principle it is a large number. I think the point is 
the same even if the number is a little off. I could go back 
and try and calculate a number, but I don't have a number.
    Mr. NEAL. Okay. Thank you very much, Mr. Lew.
    Thank you, Mr. Chairman.
    Mr. HERGER. Thank you.
    Mr. Brady is recognized.
    Mr. BRADY. Thank you, Chairman.
    Mr. Director, thank you for being here today. I look 
forward to working with you.
    Mr. LEW. Thank you for having me.
    Mr. BRADY. You know, I don't think this budget adds up, 
either for deficit reduction or for getting the economy moving. 
I am concerned about two things.
    One, last year's budget did talk about the need for 
increasing U.S. sales abroad through passage of trade 
agreements with Colombia, Panama, and South Korea; and we have 
been working with the administration to move those forward. The 
House has taken a very strong position to move these three 
before July 1. The budget last year talked about the 
administration's goal of finding a way forward on all three. 
The budget this year is silent on Colombia and Panama. Is there 
a reason why?
    Mr. LEW. Well, in December, as you know, we reached 
agreement on a very important agreement with South Korea. As we 
were closing this budget down, we accommodated that, as we 
should, in the budget proposal. And we are continuing to work 
on Colombia and Panama. So we need to get the Korea free trade 
agreement ratified as quickly as possible. We need to continue 
working as quickly as we can to get the others agreed to.
    Mr. BRADY. Did you put in the budget the tariff reduction 
amounts resulting from passage of all three?
    Mr. LEW. We put in the budget the one we have reached 
agreement on.
    Mr. BRADY. Korea, but not Colombia and Panama?
    Mr. LEW. Until we have an agreement, I don't believe we 
asked for funding for it.
    Mr. BRADY. But you didn't plan for it in your budget?
    Mr. LEW. Actually, I stand corrected. All three free trade 
agreements are assumed in the budget in terms of accommodated 
in the costs. They are not assumed to have been agreed to.
    Mr. BRADY. Understood.
    Mr. LEW. But there is not a financial barrier to it.
    Mr. BRADY. Good. That is reassuring.
    I want to follow up with Mr. Herger's point about the 
deficit. We oftentimes hear repeatedly about the debt and 
deficit the administration inherited. So we took a look at what 
CBO put down for the baseline from 2010 on forward. That is in 
the blue line on this graph. On the red are the 
administration's budgets and its own projections for the next 
decade. What they show is that the baseline that President 
Obama inherited is less than $2 trillion of debt over the next 
decade, but his budget and your budget shows deficits of nearly 
$8 trillion, four times larger than the baseline that the 
President inherited.
    Now, understandably, there will be some adjustments for the 
tax relief for the next few years, but this clearly shows that 
the White House is driving this deficit in a major way through 
its policies. That is one of the areas that we hope to work 
with you on, Director, to find ways to cut spending, put 
discipline back in the government, convince job creators that 
now is the time to invest, and convince consumers that they 
will not face higher taxes as a result of higher debt and 
deficits in this country. And I hope you will work with us as 
we try to rebuild some confidence in America's economy and 
fiscal condition going forward.
    Mr. LEW. Congressman, I can't quite see the chart, so I am 
going to just comment on----
    Mr. BRADY. It is a good-looking chart. You are going to 
love it. Maybe not love it, but you will like it.
    Mr. LEW. My peripheral vision isn't good enough to get it.
    I think I mentioned earlier, before you came into the room, 
that when I left OMB in January 2001 we projected a surplus 
over the next 10 years of $5.6 trillion. I was extremely proud 
to have been part of making that possible and, frankly, working 
on a bipartisan basis in 1997 to do that. When I came back just 
about 9 weeks ago, it is a $10 trillion surplus that I saw the 
President inherited when he came in in January, 2009; and it 
has gotten worse because of the recession, because of the deep 
economic difficulties we have.
    I don't think there is any question but that we need to 
work together to put a dent in it and turn it around and move 
it in the right direction. It is going to take a while. There 
is a desire, as the President said yesterday, for kind of 
instant solutions. This is a deep hole that we are in.
    And some of it was of our own making, some of it was not. 
The economy took a turn for the worse that I don't think anyone 
anticipated before the depths of the recession. There may have 
been things that we could have done differently to prevent it, 
but it certainly wasn't planned.
    The decisions made in the early part of this century, from 
2001 to 2009, did make the problem worse. I mean, we passed 
bill after bill, tax cuts and spending bills----
    Mr. BRADY. The attacks of 9/11 didn't have an effect on 
that at all?
    Mr. LEW. Well, I think certainly the fact that we have had 
a different defense posture, we have had two wars, that has all 
contributed to it, no doubt. But when you remove all of the 
things that kind of come and go, the recession will abate. We 
are growing our way out of it, not fast enough, but we are 
growing out of it. We are bringing our troops home from Iraq. 
Those expenses will go down. It is the structural deficit that 
we have to deal with.
    Mr. BRADY. But these are your budgets and your numbers, and 
they are very serious.
    Mr. LEW. I am happy to go over it or get back to you.
    Mr. HERGER. The gentleman's time has expired.
    Mr. Boustany is recognized.
    Mr. BOUSTANY. Thank you, Mr. Chairman. I appreciate this.
    Director Lew, I really appreciate you being here today, 
your testimony, and also the very difficult task you have in 
putting these budgets together. It is not an easy task.
    I want to discuss an issue that is very important to me and 
my State of Louisiana. As you may or may not know, Louisiana is 
a leader in international trade; and, in fact we rank fourth 
among the 50 States in exports to China. In the year 2009, we 
saw a 56 percent increase in our exports to China in a somewhat 
down economic year.
    As a southern State and a coastal State, one of the 
problems we have every single year--and we never have really 
good solutions to this--is a sediment buildup in our shipping 
channels. It is a significant problem. It requires constant 
maintenance. I have the honor of serving a coastal State, 
Louisiana, a coastal district, and see firsthand the importance 
of having these dredging operations done in a timely manner.
    But I want to be really clear, this is a national problem. 
Back in 1986, Congress was very wise in setting up the Harbor 
Maintenance Trust Fund. This was a fund that was a dedicated ad 
valorem tax to be used for operation and maintenance dredging 
in all the federally authorized channels to maintain their 
width and depth.
    However, over the years, Washington bureaucrats have held 
these moneys hostage to a budget process. And these critical 
waterways have been neglected. In fact, if you look at what the 
Army Corps of Engineers tells us, if you take our 59 largest 
ports, which are critical for us to meet the President's goal 
of doubling exports in 5 years, you take those 59 ports, only 
about 35 percent of them are operating at the full capacity of 
width and depth. This backlog of maintenance is growing year by 
year.
    Now, the ad valorem tax, the harbor maintenance tax brings 
in somewhere between $1.3 and $1.6 billion a year. In fact, in 
fiscal year 2010, it was $1.3 billion. But only half of those 
funds are currently being used by the Army Corps of Engineers 
for maintenance dredging. The President's fiscal year 2012 
budget proposes only $758 million to be distributed from the 
Harbor Maintenance Trust Fund for operation and maintenance 
purposes.
    Now, what is the impact of this? Vessels and companies that 
are shipping lose millions of dollars each year as they are 
forced to light load vessels for shipping. They are forced to 
operate under reduced shipping schedules when high tide is in 
to make up for the silt that has built up. And these are extra 
costs to American companies that are trying to compete 
globally.
    So if we are going to try to really meet the President's 
goal of doubling exports over the next 5 years, how do you 
justify spending only half the fees--these are dedicated fees 
that were supposed to be used for dredging--half the fees 
collected each year, leaving a $5.6 billion surplus in this 
fund when our Nation's exporting channels are becoming less 
competitive?
    Mr. LEW. Congressman, in the Army Corps program we have 
made difficult decisions, difficult trade-offs. In general, 
funding levels are not as high as they would be if we weren't 
on a path where we are trying very hard----
    Mr. BOUSTANY. But this is a dedicated tax that is supposed 
to be used. It is paid by these shippers, by this maritime 
industry; and it is dedicated in law for operation and 
maintenance dredging. So why is only half of it being used? Is 
this a budget gimmick?
    Mr. LEW. Well, I think if you look at the Army Corps 
program overall, the way the decisions have been made in the 
Corps budget are to look for the highest-value projects and to 
put funding behind the highest-value project.
    Mr. BOUSTANY. But I have talked with the Corps, and they 
consistently say they need access to that money. They could 
actually take care of all these authorized projects achieve the 
maximum efficiency so that we meet the President's goal and 
still have some left to put into the fund. This is not an 
efficient use of funds.
    Mr. LEW. I understand that there are a lot of projects that 
might well be worthy projects.
    Mr. BOUSTANY. These are all worthy projects identified by 
the Corps that they are underfunding because they can't get 
access to these funds.
    Mr. LEW. It would nonetheless be additional spending if we 
were to do the projects.
    Mr. BOUSTANY. No, No, no. Stop. It doesn't add to the 
deficit, because this is money that is already coming in 
dedicated for these projects. Otherwise, it goes into a surplus 
fund. CBO scores this as adding nothing to the deficit.
    Mr. LEW. I will go back and check. In general, when we draw 
funds down from a trust fund, changes in trust funds are 
scored.
    Mr. BOUSTANY. We are not talking about drawing down from a 
trust fund. We are just talking about using the incoming annual 
money. The fund is continuing to grow.
    Mr. LEW. Let me get back to you on that, Congressman.
    Mr. BOUSTANY. Could you get back to me in writing on that?
    Mr. LEW. I will.
    Mr. BOUSTANY. Thank you.
    [The information from the Honorable Charles W. Boustany, 
Jr. follows:]

[GRAPHIC] [TIFF OMITTED] T5631.017


                                 

    Chairman CAMP. [Presiding.] Thank you very much.
    Ms. Berkley is recognized.
    Ms. BERKLEY. Thank you, Mr. Chairman.
    Thank you for being here. I appreciate it. And let me share 
with you my tale of woe before I ask you a few questions.
    You know my district and my State probably almost as well 
as I do. You know I have got the highest unemployment rate in 
the Nation. It is officially close to 15 percent, but it is 
probably more realistically near 20. I have got the highest 
unemployment rate.
    UNLV, one of our leading institutions of higher learning, 
my alma mater, is threatening to declare bankruptcy because the 
State of Nevada is broke, and they are trying to fill a $3 
billion hole in a $6 billion budget. Very difficult to do.
    I have got 600,000 Nevadans that have no health insurance. 
It doesn't mean they don't get sick. It means they go to the 
hospital and our tax dollars are paying for their health care 
because they have no insurance. It is no accident and no 
mistake that every one of the hospitals in southern Nevada is 
operating in the red, and that is because they are absorbing 
the costs of these uninsured Nevadans.
    We are fighting two wars in this country. We have been 
doing that for a number of years. We have huge homeland 
security needs. Our veterans are coming back, and they are 
coming back with significant problems, if not physical, 
certainly emotional. Our health care system is broken; and 
until we made some reforms last year, I would say it was not 
going to exist in that current form.
    The SGR and people have complained that we are losing 
doctors. Well, my husband is a doctor. My daughter is a doctor. 
We do health care. My income is dependent on health care. So 
this is important to me.
    Maybe the reason we are losing doctors is because we don't 
have a permanent fix for the SGR. And any doctor who has to 
have a 30-day extension and a 60-day extension and a 6-month 
extension is going to throw up their hands and retire because 
they have had enough. And nobody can run a business or a home 
the way we are asking doctors to conduct their practices.
    So, having said all of that, the number one problem in my 
district is the economy. When the rest of the economy recovers, 
Las Vegas will recover, because we tend to be a one-industry 
town.
    I need to know, in your budget--and I have specific 
questions--what does the President's budget do to help get this 
economy moving and to create jobs? And let me hit a few areas 
that I think are important.
    Nevada, particularly Las Vegas, has long-standing 
transportation challenges. I believe that improving and 
diversifying the Las Vegas and Nevada economy requires 
significant investments in our transportation infrastructure. 
What investments do you propose in this area, and how will they 
affect communities like mine? What return do you expect on that 
investment?
    Mr. LEW. Congresswoman, I can't relate it exactly to 
Nevada. But, in general, the budget proposes a major expansion 
in the surface transportation program to take the historic 
levels up by I think almost $50 billion a year, a total of $558 
billion of investment.
    Ms. BERKLEY. Do you think we can continue to be a 
superpower if we have a crumbling infrastructure in our 
country?
    Mr. LEW. No, we need to work on our infrastructure. And it 
is not just our roads and bridges and tunnels. We need to work 
on the infrastructure for the economy of the future as well as 
for the more traditional infrastructure. That is one of the 
reasons that the broadband initiative is in our budget, paid 
for by fees that will be generated from selling spectrum. And 
it is, in a sense, the key to communities that are now locked 
out of the modern economy being connected to the modern 
economy.
    Ms. BERKLEY. I couldn't agree with you more. And I think 
not only does it prepare this Nation for the future, but it 
also provides good-paying jobs.
    Let me get to renewable energy, because this is a very 
important issue for the State of Nevada. It is an economic 
sector that has long-term growth potential throughout Nevada, 
and it is a job creator for my constituents. How does your 
budget advance this sector?
    Mr. LEW. Our budget invests in renewable technology in a 
number of ways.
    One, it encourages the expansion of the use of electric 
vehicles, both in terms of the development and in the 
commercialization; and we have tax proposals that would help 
with that. It invests in building standards, helping to 
increase our conservation using modern technology and 
materials. And we invest in development of renewable--solar and 
renewable technologies so that we don't have to be as reliant 
on fossil and imported fuels.
    Ms. BERKLEY. I could listen to you forever, but I have one 
more question, and my seniors would be very upset if I didn't 
ask it. The backlog of Social Security Disability claims is 
huge, particularly huge in my district. Will the funding 
increase for the Social Security Administration help with the 
backlog? And with the proposals of the cuts in the CR, how will 
that affect the backlog?
    Mr. LEW. Well, obviously, our budget in general very much 
supports the idea we need to reduce spending and find savings. 
We did not think it was necessary to reduce the Social Security 
Administration. We have provided funds to try to work down the 
backlog and are concerned about the impact that reductions 
would have.
    Chairman CAMP. All right. Thank you.
    Mr. Heller is recognized.
    Mr. HELLER. Thank you, Mr. Chairman; and, Director Lew, 
thank you for being here. I appreciate you spending some time 
with us.
    I think you just said you can't relate to Nevada. I am 
going to try again. I am from Nevada. She is from Nevada. I 
don't disagree with anything----
    Mr. LEW. No, no, I can relate to Nevada. I couldn't connect 
the policy directly to Nevada. I don't have State by State 
numbers.
    Mr. HELLER. All right. I don't disagree with anything my 
colleague from Las Vegas said. I guess the squeaky wheel gets 
the grease. I want to run through some numbers again that are 
very similar to what she said.
    Nevada's unemployment rate increased to 14.5 percent in 
December. Las Vegas' unemployment rate jumped to 14.9 percent, 
which marked a new all-time high. The unemployment rate in the 
Reno-Sparks area north of that increased to 13.8 percent, 
another new all-time high for the area. And then the Carson 
City unemployment rate, which is the capital, reached a new 
high as well, surging from 13.1 percent in November to 14 
percent in December. At 14.5 percent statewide, that is a total 
of 193,500 Nevadans who are out of work.
    I was looking at some of the Bureau of Labor Statistics' 
numbers on the amount of jobs we have created in Washington, 
D.C., at the same time; and it is debatable. One will show we 
have created, since Obama came into office, 58,000 new 
bureaucratic jobs. Another statistic says it is closer to 
141,000 new jobs we have created, and that is debatable. I 
think just yesterday Speaker Boehner said we created 200,000 
new Federal jobs since Obama has been in office. I would hate 
to think that for every job we lose in Nevada we create a new 
bureaucratic job here in Washington, D.C.
    Recently, the average duration of unemployment in Nevada 
climbed to above 35 weeks, or about 8 months. From 1997 to 
2007, in that 10-year span, the construction industry added 
40,000 jobs in Las Vegas, 9,000 in Reno and Sparks. In the 
years since, the construction industry in both areas has seen 
massive declines. In Las Vegas, construction employment is down 
55,000 from 2007 to 2010. In the Reno area, there are 12,000 
fewer construction jobs now than in 2007. Combined, the two 
areas have lost 19,000 more construction jobs in the last 3 
years than were gained in the previous 10 years.
    So in promoting the stimulus--I guess this is my question--
the President's economists presented a very clear forecast of 
what they would expect in terms of job creation if the stimulus 
passed. And I am asking you, has the stimulus been a success in 
Nevada, in your view?
    Mr. LEW. Congressman, I think the stimulus has been a 
success nationwide. Obviously, it hasn't worked well enough in 
Nevada or we wouldn't be seeing unemployment rates as high as 
they are. I think we agree that those are unacceptably high 
unemployment rates. But, nationwide, we have several million 
more jobs because of the stimulus; and, with that, we have an 
unemployment rate that is still 9 percent or higher, and we 
need to work on getting it down. So I don't think we have a 
fundamental disagreement there is more work to do. But we 
believe very strongly that the economy has grown several 
percentage points more, and several million fewer people are 
unemployed.
    I would just want to respond to one thing that you 
mentioned about the growth of the Federal workforce, and it 
kind of relates to something we were talking about a few 
minutes ago. Some of that growth in employment is related to 
the veterans' issues we were discussing. Eleven thousand of 
those new positions are in the Department of Veterans Affairs. 
We do have growing needs to take care of wounded warriors when 
they come home, and I think that we need to not put them in a 
category of just kind of Washington bureaucratic jobs. As you 
break them out, I think there are missions there that we have 
bipartisan consensus that we need to follow through on.
    Mr. HELLER. Let me continue on my questioning, Director. Do 
you believe the stimulus has reduced unemployment in Nevada?
    Mr. LEW. Congressman, I think that the stimulus bill has 
increased employment in this country nationwide. I can't speak 
with precision about Nevada. But I know there are projects in 
Nevada, there are jobs in Nevada, there was assistance in 
Nevada in terms of aid to the State that made it possible for 
the State not to lay off workers, for teachers and firemen and 
policemen to keep their jobs. So I know there was benefit in 
Nevada, and I know that unemployment in Nevada would be higher 
but for the stimulus bill. I can't sit here today and say that 
it did enough for Nevada, because you wouldn't be seeing the 
kind of unemployment rate you are seeing. But that doesn't mean 
it didn't work. The recession was very deep.
    Mr. HELLER. Where would you predict unemployment would be 
without the stimulus?
    Mr. LEW. You know, I don't have a point estimate, but I 
have seen ranges of estimates that are as high as several 
million jobs. And that is a big difference. I mean three 
million Americans is a lot of people.
    Mr. HELLER. In your proposed budget, you indicate it will 
take until 2017 for the country to reach full employment again. 
Why do you think it will take so long?
    Mr. LEW. You know, this has been a very deep recession. 
This is the deepest economic decline since the Great 
Depression. We are confident that we are in a recovery. We are 
confident that we are growing back to the point where we can 
have full employment in sight. But the history of financially 
led recessions is that the recovery period is longer and 
slower. It is not something we are happy about. That is the 
economic history.
    One of the reasons we fought so hard for the Recovery Act 
and why it was so important that we worked together on a 
bipartisan basis with the chairman and others to have the tax 
bill in December was that our economy desperately needed that 
extra boost not to have us slip back into recession. There is 
nothing more important in our country than making sure that we 
keep economic growth going and reducing unemployment.
    Chairman CAMP. Mr. Roskam is recognized.
    Mr. ROSKAM. Thank you, Mr. Chairman. Thank you, Director.
    You had a tough day yesterday in terms of the 
administration's rollout. I am sure I am not telling you 
anything you don't know. But there seemed to be near unanimity 
on the editorial pages.
    The USA Today said, ``He whiffed.''
    Investment Business Daily said that the budget was gutless, 
far worse than merely bad.
    New York Times, which is usually pretty friendly to the 
administration, said what Mr. Obama's budget is most definitely 
not is a blueprint for dealing with the real, long-term 
problems that feed the budget deficit.
    The Post said the larger problem with the budget is the 
administration's refusal to confront the hard choices that Mr. 
Obama is so fond of saying must be faced.
    You mentioned earlier in your opening remarks that there 
are difficult choices that need to be faced, Director. Let me 
ask you this. In the deficit projection that the administration 
rolled out in its first year for 2012, the projected deficit 
was $581 billion. Now for 2012 that number is $1.1 trillion. 
How did the administration get it so wrong so quickly?
    Mr. LEW. Well, there has been a lot of policy made in the 
period, some of which we made together. When we worked together 
on a bipartisan basis to have a tax bill last year, we knew it 
was going to have a substantial impact. And it is the right 
thing to have done. We needed to not have a tax increase this 
January. We needed to have tax provisions like the refundable 
tax credits extended. We needed to extend unemployment 
compensation.
    Mr. ROSKAM. But those were things that were not 
contemplated by the administration in year one?
    Mr. LEW. You know, I don't think there was anyone who 
thought at the beginning of the administration, who knew with 
certainty where the bottom of the recession was. We were in a 
free fall, and we knew that we had to take very substantial 
action to stop it. We succeeded in stopping it.
    Mr. ROSKAM. Director, if you are arguing that you were in a 
free fall at that time, you would have contemplated the worst 
possible scenario and you would have further contemplated the 
highest deficit figure. And that figure that you published then 
was 581. Now, how is it that things have gotten better in the 
country by your own testimony and you are projecting a higher 
deficit figure?
    Mr. LEW. There are a number of policy decisions, as I said. 
Because the recession was deeper than projected, there was a 
greater shrinkage in the economy, a greater loss of revenue. 
There are real consequences to having the economy decline.
    Mr. ROSKAM. Do you think the new health care law, for 
example, had anything to do with boosting the deficit?
    Mr. LEW. No, I think the CBO reported, both when it scored 
the bill and its most recent report, the health care bill 
reduces the deficit in both the first 10 years and in the 
second 10 years.
    Mr. ROSKAM. So in terms of a collapsing amount of time that 
we have together, so far you have argued that it is the 
extension--or just extending out for 2 years the 2001 and 2003 
tax cuts. That is the thing that got it off to the point where 
you were off--I mean, you weren't, but somebody was--off by 
almost 100 percent? That is not even in the strike zone.
    Mr. LEW. I think that the degrees of variance from 
projections are always greatest when you are in extreme 
economic times.
    You know, when I was at OMB the last time----
    Mr. ROSKAM. Listen, I understand that. But if the extremity 
is diminishing, why is the amount of deficit increasing?
    Mr. LEW. We are now in a recovery period after a recession 
that was deeper than it was projected to be. That means that 
the total size of the economy is smaller than it would have 
been had we not had as deep a recession as we had. That means 
that lost revenue and it means there was need to take more 
action than was contemplated originally. I think it was the 
responsible thing to do. But I think that looking at the 
projection and comparing it in that way doesn't capture what 
was going on either in the economy or the policy world.
    Mr. ROSKAM. Let me ask you this. Do you think that it is 
more likely true than not true that 2 years from now you are 
going to be making a different argument based on the past 
experience?
    Mr. LEW. Congressman, this is the seventh time I have 
presented a budget for the President. I was always estimating 
conservatively in the previous budgets. So my experience has 
been being surprised by good news. You are always surprised by 
news, because projections are just that, they are projections.
    Mr. ROSKAM. This time you got surprised by bad news, right?
    Mr. LEW. Well, I think we were at historic moment.
    Mr. ROSKAM. No, no, but you are not arguing that this 
number is better than the projection that the administration 
made in year one, right? So, in other words, 581 is a better 
number in terms of a deficit than 1.1 trillion. Isn't that 
right?
    Mr. LEW. I am not going to say I wouldn't be happier if we 
had a smaller deficit. I would be much happier if we had a 
smaller deficit. We would all be happier. But I would also be 
happier if we didn't have as bad a recession. I would be 
happier if the growth rate had been higher. I would be happier 
if unemployment was lower.
    Those things didn't happen, and we now have the results of 
it, and we have a recovery where, if we hadn't taken the 
actions that we took together as recently as December, we would 
have more people unemployed and less economic growth. That 
would have been a bad thing for the American people.
    Chairman CAMP. All right.
    Mr. Lewis is recognized.
    Mr. LEWIS. Thank you, Mr. Chairman.
    Thank you, Mr. Director, for being here. Thank you for your 
years of service to our country.
    I want to follow up to a line of questioning that my 
colleague, Ms. Berkley, asked you near the end.
    People in my district stop me in the shopping malls, on the 
streets, airports, and they are always complaining about the 
time that it is taking to get their Social Security cases 
because there is such a heavy backlog. Now, it is my 
understanding that with these legitimate complaints, Mr. 
Director, the Republican-proposed continuing budget resolution 
gives me unbelievable and great concern. It is my understanding 
that the cuts House Republicans have proposed to the Social 
Security Administration will require a month-long furlough. 
That would mean that in the Atlanta region that the delay would 
be much longer than other regions around the country. Do you 
agree?
    Mr. LEW. Congressman, I know that there are reductions in 
the Social Security Administration in the pending Continuing 
Resolution. I have asked our staff to analyze them. Clearly, if 
there are reductions in staff and there are fewer staff, it 
presents concerns. We in our budget proposed to maintain or 
increase funding in this area because we believe it is 
important to maintain the quality of service and avoiding 
backlogs. There are going to be trade-offs, as we work 
together, to reduce spending and choices that have to be made. 
This was not a choice that we thought had to be made.
    Mr. LEWIS. What does this mean to the average person that 
had been waiting in some cases for more than a year or 2 years 
and that even in some cases where people filed claims and they 
pass on, they die? They just pass on, and they never get their 
claim addressed.
    Mr. LEW. You know, I think we have a deep obligation in 
programs like Social Security, but really in all of the ways 
that we provide service to the American people, to meet their 
needs, to meet it efficiently, promptly. And if we have long 
backlogs, we have an obligation to try to reduce that.
    And it is not just backlogs. If people have to take hours 
to be on the phone waiting for someone to take their call or 
days before they can get an appointment, we need to do better 
than that.
    I feel a little bit like I am looking back in time, but 
when I was at OMB the last time we worked really hard to reduce 
the waiting periods and the backlogs. And it actually affected 
the way the American people felt about their government, 
because it is important that when people apply to the Social 
Security Administration they get good service. So this is a 
very important area. I think that we will have to work 
together. We are at the beginning of the process in this 
Continuing Resolution. I certainly hope that in the end there 
isn't a need for those kinds of reductions.
    Mr. LEWIS. Maybe if I was out someone raised a question, 
the President in his State of the Union address made it clear 
that we need to invest in jobs and job creation. Can you tell 
me what does this budget do to create like not tomorrow----
    Mr. LEW. Right, looking down the road.
    Mr. LEWIS.--down the road jobs and job creation. In my 
district, for some time in the City of Atlanta, unemployment 
has been more than 10 percent, and there are some parts of the 
city it is 15 and more.
    Mr. LEW. Congressman, as we look down the road beyond the 
recovery, we see it as being critically important that we 
invest in the things that will drive economic growth and job 
creation for the future, which is why the President put such a 
heavy emphasis on education, innovation, and building the 
infrastructure. Those are the ingredients that a strong, 
growing economy need. If you talk to employers, they are very 
concerned that they need to have access to a workforce that has 
the skills they need.
    When the President announced his budget in Baltimore the 
other day, it was pretty exciting to look out at a group of 
hundreds of young people in middle school who are excited about 
learning science, engineering, technology, math. That is what 
we need to be doing in the economy, and those are the kinds of 
investments we need to make.
    Mr. LEWIS. Thank you very much.
    Chairman CAMP. Thank you very much.
    Mr. Buchanan is recognized.
    Mr. BUCHANAN. Thank you, Chairman Camp.
    Director Lew, thanks for being here today.
    I came here in 2007 in a small class, a lot of Democrats. 
But everybody has a different motivation why they run for 
office. And I was before that, as I mentioned maybe earlier, 30 
years in business. But my passion, when I look back over 50 
years, and one of the motivations why I ran is because if you 
look back 50 years we have only balanced the budget five times 
or six times out of 50 years. And you get some credit because 
you were there during a period of that time. So I give you some 
credit on that. But it blows me away to think about when I look 
at 49 out of 50 Governors have to balance their budget.
    Do you believe in a constitutional balanced budget 
amendment? I do a lot of town halls, and I got to tell you 
people just don't understand why we don't put that in place. 
Not today, but something that gets voted in today 
constitutionally and then phases in over 5 or 6 years like 49 
out of 50 Governors have.
    Mr. LEW. Congressman, I agree that we need to work together 
to reduce the deficit. We need to ultimately have in mind a 
balanced budget again. So I think--in principle, I think that 
when the economy is growing we should be able to have a 
balanced budget. I don't believe in a constitutional amendment. 
I think we have a lot of tools at our disposal which, if we 
used them well, if we have budget control rules, things like 
PAYGO rules, control the process----
    Mr. BUCHANAN. Let me just come back, because I am limited 
on time. I go to these town hall meetings, and I do a lot of 
them, pretty much every Saturday twice a month. And everybody 
is outraged--and I think that is why a lot of Members lost 
their job this last cycle--outraged about the spending.
    I voted for a Democratic bill, PAYGO, because I thought it 
is a move in the right direction because I want to do something 
on a bipartisan basis. I applauded the President to set up this 
commission on spending. But at the end of the day, I think this 
is a lot of nonsense, because it never seems to go anywhere. 
People are tired.
    And then I take a look at the deficits projected going 
forward. We are $14 trillion going to $20 trillion. And if 
someone presented me a plan when I see that much ink over a 
period of time, I would fire them, frankly, in my businesses.
    I just don't understand, the American people don't 
understand why everybody else but Washington has to figure out 
how to balance their budget. Working families, businesses, you 
have got to be able to cut expenses, make these strategic 
investments where you need to.
    But people, I got to just tell you, back home in my town 
halls, and I feel I am representative, they are completely 
outraged about where we are at as a country and where we are 
going. They feel like we are the next Greece, the next 
Portugal. The only difference is there is nobody to bail us 
out.
    We are at $14 trillion going to $20 trillion. If you look 
at a normal cost of money at 4 or 5 percent, you are looking at 
a trillion dollars in interest a year in the next 4, 5, 6 
years. That is where we are headed before you pay out $1 to 
Medicare or $1 to Social Security. Doesn't that alarm you?
    Mr. LEW. The deficits that we are looking at do alarm me, 
and I think we have to remember how we got here. We got here--
--
    Mr. BUCHANAN. We are projecting going forward these massive 
deficits. We had a trillion and a half last year, another 
trillion and a half this year, a trillion that you guys are 
projecting next year, half trillion dollar deficits, and that 
is assuming we raise taxes going forward for the next 7 or 8 
years. I mean, I just don't know how in good conscience you 
guys can do that.
    Mr. LEW. Well, Congressman, the projections are based on 
laws that are in place in the 10 years between 2001 and--8 
years between 2001 and 2009. We passed a lot of tax cuts. We 
expanded----
    Mr. BUCHANAN. But, again, why wouldn't you--if you haven't 
in 50 years, we have only balanced the budget five times--why 
wouldn't we want to put in a constitutional balanced budget 
amendment? Nobody has any confidence in Washington. And I am 
not talking about Democrats. I am talking about Democrats and 
Republicans. Because there is plenty of blame to go around. We 
need a constitutional balanced budget amendment.
    Mr. LEW. So I think we need to make the decisions that 
would put us back on a firm financial footing. We need to pay 
for what we do, which is--I am glad that you voted on a 
bipartisan basis for pay-as-you-go. I think it is important 
that it apply to everything, to taxes and spending. The truth 
is, if you have a tax cut that you can't afford----
    Mr. BUCHANAN. That was good for about 6 weeks. The State of 
Florida has gone from $72 billion. They have lost 7 or 8 
billion. They made the tough choices.
    We don't make those tough choices in Washington. We are 
incapable. We came within one vote in 1994 of a constitutional 
balanced budget amendment. The American people want us to go 
back there. They have to pay their bills. They can't continue 
to run up credit cards. If they do, they go bankrupt. And that 
is where we are headed, towards bankruptcy, if we don't change 
the way we do business in Washington.
    Mr. LEW. In the 1990s, we worked together on a bipartisan 
basis, and we did balance the budget. I was proud to present 
three surplus budgets to the Congress on behalf of President 
Clinton. We have a proposal which would reduce the deficit so 
that we eliminate new spending contributing to the deficit. We 
will be down to just the interest on the built-up debt that 
contributes to the deficit. Then we can start building down the 
debt, paying down the debt. Like any other large debt, until 
you stop adding to it, you can't pay it down.
    Chairman CAMP. The gentleman's time has expired.
    Mr. Smith is recognized.
    Mr. SMITH. Thank you, Mr. Chairman.
    Thank you, Mr. Director.
    Obviously, your job is not easy. And we are trying to sort 
through various components of a budget, the President's 
proposed budget, the proposed budget from Congress as well. We 
have heard various numbers tossed around.
    And yesterday I know I heard some comments of concern. I 
thought that they might contain a little bit of hyperbole in 
terms of Social Security administrative efforts. And there is 
in the Continuing Resolution a proposed 1 percent cut to the 
Social Security administrative fund. Is that accurate in 
terms----
    Mr. LEW. That is my understanding. I have to confess the 
last couple of days I have been up here testifying, and I am 
not familiar with all the details, but I do understand that to 
be the case.
    Mr. SMITH. Fair enough.
    Now, in the last 10 years, the funding for the 
administrative budget for Social Security has seen, on average, 
an annual increase, annual increase of 5.4 percent in funding; 
and in fiscal year 2010, it was an 8.7 percent increase. That 
is $1 billion, roughly. Now, obviously, you have budgetary 
experience; and now a furlough would be an administrative 
prerogative. Is that accurate?
    Mr. LEW. If funding is not available to pay the people who 
are on board, it is a prerogative. But at some point it is the 
only option that you have if you don't have sufficient funding 
to pay for the personnel on board.
    The first thing you would do----
    Mr. SMITH. But it would be an administrative prerogative.
    Mr. LEW. The first thing you would do is not fill open 
positions. But if you needed to, you then have to furlough 
workers. We are all governed by a law that says we can only 
spend money that has been appropriated; and, under the Anti-
Deficiency Act, you have to take steps to make sure you stay 
within it.
    Mr. SMITH. But perhaps a wage freeze would be an option to 
a furlough. Is that conceivable?
    Mr. LEW. We have a wage freeze proposed in this budget. We 
have frozen Federal workers' pay going forward. You wouldn't 
have the option as an agency head to freeze wages on your own. 
Congress already voted to freeze Federal workers' pay for the 
next 2 years.
    Mr. SMITH. Right. Right. But is it reasonable to think that 
an administrative fund that has seen some fairly substantial 
growth over the last several years could absorb a 1 percent 
cut?
    Mr. LEW. Congressman, I have tried hard to avoid hyperbole. 
Several members have asked me questions about this subject, but 
I don't want to overstate or understate the impact. If there is 
a reduction in funding for the Social Security Administration 
of the order that is in the Continuing Resolution as it now 
stands, I am told that it could mean furloughs that would be 
required. I have got to go back and do more analysis. Do you 
run out of other options at some point?
    I think if you look at the increases in the Social Security 
Administration budget, we were working hard to eliminate 
backlogs and to process claims and to give Americans the 
service that they expect. It is a very labor-intensive process; 
and if we have fewer people, we will see more delays and 
backlogs.
    Mr. SMITH. Okay. But I just--have you ever had any 
experience where a 1 percent reduction in funding would lead to 
a furlough?
    Mr. LEW. I cannot tell you from my own personal experience. 
But I have asked my staff, who is familiar with the Social 
Security Administration budget, and they say that they think a 
reduction on the order of what is in the current bill would be 
very difficult in the remainder of the year that is left to 
meet without there being some furlough. You know, I don't want 
to overstate it. Obviously, you would do everything you could 
to avoid a furlough. But when you run out of other options, 
that is one of the tools that an administrator has.
    Mr. SMITH. What are some things that one could approach or 
consider to avoid a furlough?
    Mr. LEW. Obviously, not filling open positions would come 
first. But that is not without cost. If you need to fill a 
position to process, there is still delays in service. It is a 
little bit easier in terms of your management of your 
workforce, but it doesn't help the ultimate beneficiaries 
because you are still short of staff.
    You know, there are various things you can do that are 
relatively small in an agency like this. There is not a lot of 
travel for most Social Security Administration workers. You 
know, they go to their offices and they work there. So you have 
people who are interfacing with the public on a day-to-day 
basis, and that is what the staff there does. So the money goes 
to pay the staff, for the most part, which is why I think the 
reduction would have that effect.
    In other agencies, where there is a different mix of things 
you are doing, things you are buying, it might have a different 
impact.
    Mr. SMITH. Thank you, Mr. Chairman.
    Chairman CAMP. Mr. McDermott is recognized.
    Mr. McDERMOTT. Good afternoon, Mr. Lew. I didn't think I 
would ever see you back here.
    Mr. LEW. I didn't think you would ever see me back here 
either.
    Mr. McDERMOTT. After you presided over creating a 
magnificent surplus and went away and watched for 8 years the 
economic binge as it was squandered with tax cuts and war, I am 
surprised you are willing to come back and sweep up after the 
parade as the elephants have left. And I really, as I look at 
this budget, you have put a budget up here with the President 
which does yeoman's work in a very difficult circumstance, in a 
time when you have to make cuts, you have to make some trade-
offs, and you have to decide how tight you are going to make 
it, how much of the deficit you are going to try and make up 
immediately without stalling out the economic growth that is 
appearing to go on in this country.
    And the Republicans, watching what is going on out on the 
floor, it is kind of terrifying to realize that it is all being 
balanced on the backs of the poor and the old and the young. 
They cut 200,000 kids out of Head Start, and they are wiping 
out stuff all over the place. Veterans, throwing 10,000 
veterans out of housing programs. And when you look at that, 
you have to ask yourself if that is the priorities that the 
Republican plan is going to have.
    I can see how the President would be struggling and you 
would be struggling with what to put up here, and I would like 
to hear you talk about the trade-offs that you had to think 
about. Because you made some cuts that I don't particularly 
like, but I would like to hear the discussion that went on in 
the White House.
    Mr. LEW. Congressman, we made some cuts that none of us 
like either. I think we are well beyond the point of being able 
to just take things where it is either waste or duplicative. 
The proposals in our budget that reduce funding for programs 
like the Low Income Home Energy Assistance Program, the 
Community Development Block Grant program, even some of the 
things that don't affect people, the water and sewer grant 
programs and the airport grant programs, these are all things 
which in other times we would be supporting increases, not 
decreases in.
    But we face a very, very dangerous economic future if we 
don't get our economic house in order. We need to cut spending, 
and we are showing a way to cut spending in a balanced way as 
part of a plan which overall would reduce the deficit so that 
we are left with just the burden of paying down the debt, as 
opposed to adding to it.
    You know, I think that there are a lot of different ways to 
get there. Clearly, our plan has in it some things that will 
not be acceptable to everyone. We do rely on some net new 
revenues. You know, we have about $350 billion of net new 
revenues. We don't extend the income tax rates that give 
benefits to people in the highest tax bracket. We let them go 
back to where they would have been. And there are a number of 
things in this budget that are hard choices.
    I think that the challenge we are going to have is to 
figure out how we can work on a bipartisan basis. We put a plan 
out there. There will now be a process where other plans are 
put out there. We are going to have to find a way to work 
together. What we can't do is just kick the can down the road 
and not deal with it.
    Mr. McDERMOTT. Have you looked enough at the proposal? I 
personally think we are going to be on a Continuing Resolution 
for the rest of this year. I don't think that what is going on 
out on the floor is ever going to get through the Senate. And 
when the Senate sends back something reasonable, I can't 
imagine that the majority in the House is going to ever get 
together on it. So we are either headed for a Continuing 
Resolution from now until September or we are headed for a 
shutdown of the government.
    I would like you to talk about what the consequences of a 
shutdown are. Because a lot of people weren't around here in 
1994 when it happened--or 1995.
    Mr. LEW. I never thought that my experience managing the 
OMB during the 1995 shutdown would be relevant again. I hope it 
never is. It is not the right thing to do. I don't think that 
that is what the leadership in Congress wants, it is not what 
we want, and I hope we can work together to avoid that.
    Mr. McDERMOTT. But if they are unreasonable in the amount 
of cutting--do you have any bottom line where you will not cut 
anymore?
    Mr. LEW. Look, the President has made clear that there are 
things that--there is a right way to do it. We proposed, we 
have our budget out there. We sent up a statement today that 
made it clear that if it is a budget that undermines our 
ability to invest in the future and accomplish the things that 
we need that it is not acceptable. I think we have to work 
towards getting an acceptable bill.
    The goal here has to be to getting to agreement, and it is 
a long process. The House hasn't completed its work. The Senate 
will have to take action. I hope that we can work together to 
come up with a resolution that doesn't bring us to the edge of 
having to manage through a shutdown. It wasn't a good thing to 
do in the mid-90s. I don't think anyone wants to do it again. I 
hope nobody wants to do it again.
    Chairman CAMP. Thank you.
    Mr. Schock is recognized.
    Mr. SCHOCK. Thank you, Mr. Chairman.
    A couple questions. Last year, I served on the 
Transportation and Infrastructure Committee. I was very excited 
to see that the highway bill remains a priority of the 
President, and I was interested to see it in the President's 
budget. Can you tell me where in the budget the funds are for 
the highway bill?
    Mr. LEW. Well, the President's budget makes clear that we 
have a set of priorities in surface transportation that I think 
will take some work for us to go through with the Congress to 
agree on. We expanded some of the definitions of what we would 
want to do with the surface transportation bill to get into 
some of the technologies of the future. And I think that, as 
far as paying for it goes, what we have done is we have shown 
that we need to pay for it. We can't afford to do it without 
paying for it. But we are going to have to work together on a 
bipartisan basis to come up with the program and the funding 
mechanism to do it. So we have indicated that it will be paid 
for, but we have not specified the particular revenues. What we 
have said is that we have to have both, because we can't afford 
to do the spending without the revenues.
    Mr. SCHOCK. And I am not trying to be smug, but that is 
quite obvious. I mean, you can't do a highway bill without 
paying for it. Isn't the purpose of a budget to show how you 
are going to pay for your priorities, whether it be Medicare, 
Social Security, education, or a highway bill? I mean, to 
include something in a budget but not show how you are going to 
pay for it, one would beg to question how much of a priority it 
is then.
    Mr. LEW. Well, I think that there are lots of things in 
budgets which are proposed in ways that get a conversation 
started, that put the idea out there. Sometimes you send 
specific legislation, sometimes you don't. That is always the 
case, not just in this budget but in all budgets.
    I think particularly in the case of a highway bill, a 
surface transportation bill where there is a substantial 
conversation to be had of what the goals are, what are we 
trying to accomplish, we first have to agree on the size of it, 
the scope of it, the duration of it, and work together on the 
revenue package that is appropriate to pay for it. I think the 
principle that we can't do it unless we pay for it is something 
that is very important. Because if we can agree on the fact 
that we need to invest in infrastructure, then we will work 
together on the mechanism to pay for it.
    Mr. SCHOCK. Is the President planning to offer the first 
proposal or is he waiting for the House Transportation 
Committee to do that?
    Mr. LEW. The administration is working on a package that 
would reflect the priorities of what a surface transportation 
program would fund.
    Mr. SCHOCK. Do you know when they are planning to come out 
with that?
    Mr. LEW. I have to check on the date. I am not sure of the 
date.
    Mr. SCHOCK. I mean in the next 2 months, 6 months, the next 
year?
    Mr. LEW. I think on the sooner side rather than the longer 
side. I don't know if it is weeks or months. I can get back to 
you with a day.
    [The information was not provided:]
    Mr. SCHOCK. Okay. I am interested in your GDP calculations 
in your budget. In 2013, in particular, you have calculated a 
robust GDP in 2013. That is an interesting year, because it is 
also the year where the current tax rates that we are enjoying 
today are set to expire. And the budget, to my knowledge, 
estimates that they do expire. They are not continued at the 
current rate. 2013 is also the year in which the Obama health 
care bill's capital gains taxes and the higher payroll taxes go 
into effect. Those don't seem to be conducive to strong GDP. I 
am just curious how 2013--how you are predicting such strong 
growth.
    Mr. LEW. The projections for GDP growth flow from our view 
of how we are going to recover from what has been a very deep 
and historic recession. So it is not a normal period of time. 
It is a period of time where we have looked to the recovery 
from other financially led recessions. We, frankly, have said 
this is deeper, so it is going to take longer. So our growth 
path out of it is a bit slower.
    The first year, we are a little more pessimistic than some. 
We get a little more optimistic actually beyond 2013, where our 
view is that we will get back to where the economy would have 
been but for the recession.
    There are other forecasters who say we have had a permanent 
loss of economic capacity. We don't believe that. But our 
assumptions are related to the historical analysis of 
recoveries from financial recessions.
    In terms of tax rates, in particular at the high end, I 
would just note that the tax rates that would be in effect when 
we see the expiration of the lower rates for the top bracket 
would put us in the same place where we were when we had a 
period of unprecedented long economic growth in the 1990s. So 
they are tax rates that we know to be consistent with economic 
growth.
    Mr. SCHOCK. Thank you.
    Chairman CAMP. All right. Thank you.
    Ms. Jenkins is recognized.
    Ms. JENKINS. Thank you, Mr. Chair.
    Thank you, Mr. Director, for being here.
    Earlier today, Secretary Sebelius acknowledged that the 
CLASS program created in the health care law has several fiscal 
problems that need to be fixed. Some ideas to combat those 
problems include indexing premiums to inflation so that they 
would rise along with benefits and closing a loophole that 
allows participants to drop out and reenroll without penalty.
    While modifications like these surely would increase the 
program's revenues, they don't seem to put a dent in the 
administration's own actuaries' analysis that I quote: ``In 
general, voluntary unsubsidized and non-underwritten insurance 
programs such as CLASS face a significant risk of failure as a 
result of adverse selection by participants.'' The actuaries 
continued to explain that severe adverse selection leads to an 
insurance death spiral and there is a very serious risk that 
the CLASS program is unsustainable.
    How do you think the administration should get to the heart 
of the problem as identified by your actuaries without 
drastically changing the CLASS program? Or if it is not 
possible, then wouldn't it be fiscally responsible to abandon 
this program all together?
    Mr. LEW. Congresswoman, I have not had a chance to see 
Secretary Sebelius' testimony this morning, but I have spoken 
with her on a number of occasions about the CLASS program. And 
I know that she, both in terms of bringing the best actuaries 
to work on the program and in terms of looking at specific 
options, some of which you reviewed, is looking at what we can 
do administratively to make sure that as we implement the CLASS 
program we do it so that it can be a success and that it can be 
a program that is fiscally responsible.
    It is a challenging program. It is a new program. We are 
very early in the implementation of it. But I think that the 
bearing that the Department has taken on it, the Secretary in 
particular has taken, underscores her very deep belief that we 
have to look at it very carefully, take the steps that we can 
take to contain the kinds of risks that would potentially be a 
problem and use the administrative discretion we have to do 
that.
    Ms. JENKINS. So you support proceeding?
    Mr. LEW. I think the Department is proceeding in a 
responsible way to use its administrative flexibility to 
mitigate some of the concerns that you have raised.
    Ms. JENKINS. Okay. Over the first 10 years, the CLASS 
program would take in approximately $70 billion in premiums. 
But instead of setting aside money to pay for future benefits, 
the bill spends the premiums on new subsidies. Can you just 
explain how the CLASS program will pay out benefits to its 
qualifying participants when these premium payments have 
already been obligated to pay for the health entitlements in 
the new law? And would you consider that double-counting?
    Mr. LEW. I believe that it is funded, as all other programs 
of government are funded, when it is in operation; and that 
when it was passed it was a proposal that came out of Congress 
in the consideration of the health reform bill. It was scored 
as being paid for. And it did have savings up front. It had 
costs at the back end, which under the PAYGO rules do work to 
constitute paying for something. So I would have to go back, 
and I wasn't involved during the enactment of the health 
reform. I have worked in the last few weeks on the CLASS act, 
but I don't want to exaggerate the depth of my experience with 
it.
    Ms. JENKINS. Well, based on how I explained it, would you 
personally consider that double-counting?
    Mr. LEW. No, I don't think it is double-counting in 
general.
    Under the PAYGO rules, we look at a 10-year window; and if 
you have savings in one area and spending in another area that 
net out to zero, it is paid for. So if you ever look at any one 
point in time, it may not look like you have paid for it, but 
over the cumulative period you have. So I don't think it 
constitutes double-counting to treat something that has been 
paid for under those kinds of rules as if it has been paid for.
    Ms. JENKINS. Okay. Would you use that same kind of 
accounting advice on a business that is trying to account for 
their profits not matching the amount of revenues with the 
years of expenses?
    Mr. LEW. I think if a business has two product lines and 
they need to be profitable in every year, a business can make 
the choice that in year one product line A will make money and 
product line B will lose money, because that is how you develop 
the business, and in year five it will flip.
    And that is essentially what the PAYGO rules do. Businesses 
do all kinds of things to invest in the short term so they can 
make money in the long term.
    Now, we don't make money in the Federal Government, but 
that kind of accounting is not considered double-counting if 
you are in the business world. I mean, I know when I was in 
business there were years when you did have to take a loss on 
something, knowing that you were building a business that was 
going to make money a year later.
    Ms. JENKINS. Well, it appears this kind of accounting has 
us at a $14 trillion national debt. Thank you.
    Mr. LEW. I don't think that is what got us into the $14 
trillion debt. If we had stuck to the PAYGO rules, we wouldn't 
have as big a debt.
    Chairman CAMP. Time has expired.
    Mr. Tiberi is recognized.
    Mr. TIBERI. Thank you, Mr. Chairman.
    Thank you, Director, for being here. Thank you in your 
written testimony for acknowledging that in the '90s, both when 
you were here and when you weren't here, there was work across 
the aisle in a bipartisan way. Sometimes members up here on the 
other side of the aisle forget that in the '90s there was a 
Republican Congress that worked with the Democrat President. 
And in fact----
    Mr. LEW. And, in 1990, a Republican President worked----
    Mr. TIBERI. Absolutely right. I worked for a Republican 
Congressman by the name of John Kasich who I think you worked 
with.
    I worked for him back in the late 1980s and early 1990s 
when he introduced budgets that everybody who voted for them 
could have fit in a phone booth. They became a little more 
popular later on in the 1990s.
    But, nevertheless, thank you for acknowledging that there 
was bipartisanship then.
    You have stated a couple of times that the Bush tax cuts--I 
don't want to quote you wrong--but the Bush tax cuts have 
contributed to the deficits. And I have a chart here that I 
just want to challenge you a second.
    Mr. LEW. Actually, I was careful not to call them by 
anyone's name.
    Mr. TIBERI. Tax cuts earlier this decade.
    I have a chart here that shows--from CBO from 1970 through 
projected spending and deficits and debt through 2050, that 
between then and now, at least, revenues have been generally 
the same within a historical average. Ebbing and flowing some, 
but generally revenues have come in at a historical average. 
And that would say to me that the problem in Washington as you 
look at debt is more of a spending problem than a revenue 
problem.
    But, further, here is my question. If you look at the 
projected spending--debt spending in 2030, frightening to me. 
Because if you take Social Security, Medicare, Medicaid, and 
net interest just 20 years, it will be the size of what the 
entire Federal budget is today. So most of the problems with 
respect to where we are heading, it has been acknowledged by a 
lot of people on both the left and the right, are our 
entitlement programs and the growth of our mandatory spending.
    And for me, and I am sure for you, I have got four 
daughters who I hope are out of college by then and in the real 
world; and I just am frightened what that means for their 
quality of life and their standard of living.
    So this week two papers, USA Today--not exactly human 
events--headline is: Obama's Spending--in their editorial--Plan 
Ducks Tough Choices on the Deficit. You may have seen it.
    Washington Post editorial from Tuesday: President Obama's 
Budget Kicks the Hard Choices Further Down the Road.
    [The information The Honorable Patrick J. Tiberi follows:]

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    And in this committee--and you haven't been here to watch--
one of our colleagues--and it is not the Republican plan, but 
it is a plan that Representative Ryan has introduced, a roadmap 
to try to deal with these challenges has been maligned by 
several people on the other side of the aisle. At least he is 
trying to have a national debate.
    Because hard choices--I think you would agree with me--have 
to be made in a bipartisan way to deal with these mandatory 
entitlement programs for our next generation and generations 
beyond. And it is going to take what President Clinton quite 
frankly did and what Republicans who were here both in the 
House and Senate in the 1990s did to tame welfare and to come 
up with the first balanced budget since man first walked on the 
Moon.
    These challenges look to me to be even greater than the 
challenges in the mid-1990s that were faced in a bipartisan 
way.
    So my question after all of that is, I don't believe, as 
someone who has been around this business for a while, that it 
will happen without bipartisan support; and I don't believe 
that we can do it, Chairman Camp can do it without leadership 
from President Obama. And I hope that your experience from 
where you were before leads you to be someone who tries to push 
for leadership at the Federal level and, while this budget 
doesn't do it, give me some hope that we will do it soon.
    Mr. LEW. Well, in 20 seconds, I think that we have a budget 
that is a responsible, comprehensive budget that, were we to 
enact it, it would put us in a much better place and in a place 
where we would stop building the debt with our current 
spending. So I think that we may disagree on the content of our 
budget, the policy in it, but the direction of it does get us 
where we have----
    Mr. TIBERI. I know you have to say that, but we don't touch 
entitlements. And I know I have run out of time.
    Mr. LEW. In terms of entitlements, the President has made 
clear that he thinks we have to continue to work together on 
health care costs. The action that has been taken in health 
care costs in the last couple of years was in the Affordable 
Care Act, and it was scored by CBO to have savings of hundreds 
of billions of dollars in the first 10 years and a trillion 
dollars----
    Mr. TIBERI. We can relitigate the accounting.
    Mr. LEW. I would just note that the repeal of it has costs, 
not savings. And I hope we can work together to work from where 
we are going forward to find additional savings. We put $62 
billion of additional savings in this budget, and the President 
did extend his hand saying we need to work together. It is 
going to be hard.
    And in the 1990s it was plenty hard. If I recall correctly 
when now Governor Kasich put forward a proposal with Medicare 
savings, it was not something that reached bipartisan consensus 
right away. In the context of a bill that did other things that 
didn't reduce the deficit in a way that had bipartisan support, 
it was a long time before a conversation got going. In 1997, in 
the context of a bipartisan commitment to work on what was then 
a balanced budget agreement, we could work together towards 
mutually agreeable savings on health care.
    So I believe that it is possible to work together. My whole 
career I have tried to work together, and I think I have 
succeeded on more occasions than people even sometimes 
remember. In the 1980s and the 1990s, we did a lot of good, 
bipartisan work. I think we can do it again.
    Chairman CAMP. The gentleman's time has expired.
    I want to thank you, Director Lew, for being here today. I 
think all members have had an opportunity to have a question. 
Thank you for your responses.
    There may be an opportunity for members to send letters to 
you; and if you would respond in writing to any questions that 
didn't get asked or from members who didn't have an opportunity 
to be here this afternoon, I certainly would appreciate that.
    Mr. LEW. I would be delighted.
    Chairman CAMP. Thank you again.
    And with that, this hearing is adjourned.
    [Whereupon, at 4:55 p.m., the committee was adjourned.]

MEMBER SUBMISSION FOR THE RECORD

    The Honorable Patrick J. Tiberi

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QUESTIONS FOR THE RECORD

    The Honorable Wally Herger

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    The Honorable Charles W. Boustany, Jr.

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    The Honorable Ron Kind

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