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



 
                   HEARING ON THE PRESIDENT'S FISCAL

                  YEAR 2012 BUDGET PROPOSAL WITH U.S.

        DEPARTMENT OF THE TREASURY SECRETARY TIMOTHY F. GEITHNER

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



                                HEARING

                               before the

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

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           February 15, 2011

                               __________

                            Serial No. 112-6

                               __________

         Printed for the use of the Committee on Ways and Means




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  <-- ** ADJUST Q SPACE AS NEEDED **  deg.  <-- ** ADJUST Q SPACE AS 
              NEEDED ***  deg.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 8, 2011 announcing the hearing..............     2

                                WITNESS

The Honorable Timothy F. Geithner, Secretary, U.S. Department of 
  the Treasury...................................................     8



                   HEARING ON THE PRESIDENT'S FISCAL



                  YEAR 2012 BUDGET PROPOSAL WITH U.S.



        DEPARTMENT OF THE TREASURY SECRETARY TIMOTHY F. GEITHNER

                              ----------                              


                      WEDNESDAY, FEBRUARY 16, 2011

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                                    Washington, DC.
    The committee met, pursuant to call, at 1:02 p.m., in Room 
1100, Longworth House Office Building, Hon. Dave Camp [Chairman 
of the Committee] presiding.
    [The advisory of the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

  Chairman Camp Announces Hearing on the President's Fiscal Year 2012 
Budget Proposal with U.S. Department of the Treasury Secretary Timothy 
                              F. Geithner

    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 Tuesday, February 15, 2011, in 1100 Longworth House 
Office Building, beginning at 1:00 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 Timothy F. Geithner, Secretary, U.S. 
Department of the Treasury. However, any individual or organization not 
scheduled for an oral appearance may submit a written statement for 
consideration by the Committee and for inclusion in the printed record 
of the hearing.
      

BACKGROUND:

      
    On February 14, 2011, the President is expected to submit his 
fiscal year 2012 budget proposal to Congress. The proposed budget will 
detail his tax proposals for the coming year as well as provide an 
overview of the budget for the Treasury Department and other activities 
of the Federal Government. The Treasury plays a key role in many areas 
of the Committee's jurisdiction.
      
    In announcing this hearing, Chairman Camp said, ``With the 
unemployment rate stuck at or above 9 percent for the last 21 months 
and anemic economic growth, tax policies ought to help, rather than 
hinder, our country's economic recovery. The President has called for 
corporate tax reform to make our employers more competitive. However, 
75 percent of America's job creators are structured as pass through 
entities, and that means we need to craft policies that address the 
needs of all job creators--large and small. This hearing will provide 
the Committee an opportunity to review the President's proposals and 
explore ways in which we can work on a bipartisan basis to reduce 
complexity and develop the pro-growth tax policies our families and job 
creators need.''
      

FOCUS OF THE HEARING:

      
    U.S. Department of the Treasury Secretary Geithner will discuss the 
details of the President's budget proposals that are within the 
Committee's jurisdiction.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Tuesday, March 1, 2011 Finally, please note 
that due to the change in House mail policy, the U.S. Capitol Police 
will refuse sealed-package deliveries to all House Office Buildings. 
For questions, or if you encounter technical problems, please call 
(202) 225-1721 or (202) 225-3625.

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
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not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
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files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
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record
      
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be accepted for printing. Instead, exhibit material should be 
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or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
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noted above.

                                 

    Chairman CAMP. The committee will come to order for this 
hearing on ``The President's Fiscal Year 2012 Budget 
Proposal.''
    Before I begin this afternoon, I want to recognize an 
individual who is not with us today because his courage and 
conviction has landed him an invitation to the East Room of the 
White House. It goes without saying that it is an immense honor 
to serve with our colleague from Atlanta, Mr. John Lewis. His 
role in the civil rights movement is well-documented. And after 
today, when the President of the United States bestows upon him 
the Nation's highest civilian honor, the Presidential Medal of 
Freedom, it will be well-recognized.
    On behalf of this Committee and the people I represent in 
the Fourth District of Michigan, I want to extend heartfelt 
congratulations to John. The success of the civil rights 
movement was a victory for the African American community and 
for every American. It may be a bit out of character for this 
Committee, but I would ask that we break with tradition and all 
join in a deserved round of applause for the Honorable John 
Lewis.
    [Applause.]
    Chairman CAMP. With that, welcome, Secretary Geithner. It 
is good to see you again and have you before the Committee.
    It has been said that the power to tax is the power to 
destroy. But last year's election shows the American people are 
increasingly concerned about the power of deficits to destroy 
jobs, the sound dollar, and ultimately their children's and our 
country's future.
    Unfortunately, the President's budget features too much of 
both. It would result in record-high deficits while pushing the 
Federal tax burden over 20 percent of our economy, a level 
never sustained in our Nation's history.
    And let me be clear, Mr. Secretary, Americans are not taxed 
too little. What America has had under this administration is 
too little job creation, more borrowing, taxing, and spending, 
and certainly not the answer to what ails our economy.
    In 2009, we were promised that spending $1 trillion on a 
stimulus plan would drive unemployment under 7 percent by now. 
Instead, unemployment has remained at or above 9 percent for a 
record 21 months.
    Stimulus advocates also promised 137 million jobs by now. 
We are woefully short of that mark as well. Today, almost 14 
million Americans are looking for work but can't find it, and a 
record number have given up trying, choosing instead to sit on 
the sidelines of our economy. A full 6.2 million are long-term 
unemployed, and the average duration of unemployment is a 
record 37 weeks. That is almost double the record level before 
this recession.
    Vice President Biden recently said that the unemployed 
should just ``hang in there'' and wait for jobs to return. But, 
at the current pace, it could be 2020 or beyond before the U.S. 
returns to full employment. And that is a long time to just 
``hang in there''.
    The fact is, Americans shouldn't have to wait any longer 
for some real solutions. And, frankly, this budget is a missed 
opportunity. In the words of Erskine Bowles, the Chairman of 
the President's own deficit commission, this budget goes 
``nowhere near where [you] will have to go to resolve our 
fiscal nightmare''.
    As I look through this budget proposal, I am left wondering 
if there wasn't a printing error, because it looks almost 
identical to last year's budget. We again have massive tax 
increases, now totaling $1.9 trillion, that will hit small 
businesses, middle-class families, American employers with 
worldwide operations, and investment income--the very 
investments we need to jump-start the economy.
    Even the same things are missing from this budget. There 
are platitudes about tax reform but tax policy proposals that 
move in the opposite direction. And there is nothing on 
entitlement reform, and there is little more than lip service 
about getting the deficit under control.
    During the Simpson-Bowles commission, of which three 
members of this Committee were members, we heard testimony 
that, once a nation's debt reached 90 percent of its economy, 
that country would see economic growth decline by about 1 
percent. And in the U.S., that would cost us about a million 
jobs. And, Mr. Secretary, we are not at 90 percent; our gross 
debt is now 100 percent of our economy. And we can ill-afford 
to lose out on the needed job creation simply because 
Washington can't get its spending under control.
    Despite that and other warnings, what is being presented 
today fails to deliver real change. I had hoped for so much 
more, and I am left wondering how many more experts need to 
ring the alarm bell before this administration begins to hear 
it and act accordingly?
    I ask unanimous consent to insert into the record a 
Washington Post editorial from today's paper entitled, 
``President Obama's Budget Kicks the Hard Choices Further Down 
the Road.''
    [Washington Post article]
    [GRAPHIC] [TIFF OMITTED] 67470.010
    
    [GRAPHIC] [TIFF OMITTED] 67470.011
    

                                 
    Chairman CAMP. Now, I am sure many of my friends in the 
minority can't wait to chime in and set the record straight. So 
please allow me to admit something: We all share part of the 
blame for where we are today. However, that is not the issue. 
The issue is whether or not we will all be part of the 
solution.
    And, Mr. Secretary, you and I have had many good 
discussions about where this country needs to go. And today I 
am not interested in the boilerplate but am interested in 
finding real solutions that reduce the cost and complexity of 
our Tax Code, that deal with the unsustainable costs of our 
entitlement programs, and that brings our debt back under 
control. All of these will help unleash the private sector to 
create good-paying jobs.
    So, Mr. Secretary, I look forward to hearing from you 
today. And also, later in the week, we will hear from your 
colleagues from the Department of Health and Human Services, as 
well as the Office of Management and Budget, on these topics.
    And, with that, I yield to the ranking member, Mr. Levin, 
for the purposes of an opening statement.
    Mr. LEVIN. Thank you, Mr. Chairman.
    The President's budget is in sharp contrast to the House 
Republicans' CR. It embodies a necessary combination of 
investing in economic growth and reducing our deficit. The 
Republican 2011 blueprint, which the House will debate this 
week, reflects starkly different priorities. It disinvests. It 
would take our economy backwards through extreme cuts.
    The President's budget charts a responsible path to a 
sustainable fiscal situation. Its point of departure is an 
economy that has been through a wrenching recession and a 
recovery that is still gathering strength.
    Since the recovery began, more than 1.3 million private-
sector jobs have been created, more than in all 8 years of the 
Bush administration together.
    Our efforts were designed to ensure a sustainable economic 
recovery, and we must be sensible to that, as we take needed 
steps to reduce our deficits.
    That is why, as the President's budget lays out $1.1 
trillion in deficit reduction over the next decade, it invests 
in proven public-private partnerships that support jobs, 
innovation, and growth. It makes permanent and enhances the R&D 
credit. It extends the Build America Bond program, which 
Republicans oppose and which has financed over $180 billion in 
vital infrastructure improvements.
    It also provides an additional $5 billion for the highly 
successful 48(c) tax credit. This tax credit provides a direct 
incentive to manufacture advanced energy products like solar 
panel and wind turbines here in the U.S. In one example that I 
know you, Mr. Chairman, are very familiar with, Hemlock 
Semiconductor received $142 million in tax credits to help 
maintain its global leadership in producing the polycrystalline 
silicon used in the manufacturing of solar panels. This is one 
of the vivid examples of a successful public-private 
partnership.
    The House Republican plan disinvests in jobs and growth and 
in our community. It cuts more than $1 billion from the Clean 
Water Revolving Fund. It chokes funding for the Energy Advanced 
Research Projects Agency, which is conducting cutting-edge 
research to foster the products and jobs of tomorrow. It 
completely eliminates the COPS program that puts police 
officers on our street every day. It takes a hatchet to the 
Community Development Block Grant program that is so important 
to local economic development in municipalities that are under 
severe economic strain right now.
    At the same time, the Republicans' rules allow for 
unlimited additional tax cuts that are not paid for, at a time 
when tax revenues as a percentage of the economy are near an 
all-time low. According to the administration's estimates, 
permanently extending the tax cuts for upper-income households 
alone would increase the deficit by nearly $1 trillion over 10 
years.
    The President's budget focuses on preserving the tax relief 
for working families making less than $250,000. It would 
permanently protect the middle class from AMT. And it 
permanently extends vital assistance to working families that 
we had to fight Republicans to include in the December tax 
compromise.
    More broadly, the Chairman--you, Mr. Chairman--has 
criticized the President's budget as lacking a plan for tax 
reform. If we are going to have tax reform, we are going to 
need to work together, not against each other, to make the 
difficult choices necessary for responsible reform.
    Nowhere is it more true than on the debt limit. As the 
Secretary--as you, Mr. Secretary--has made clear, the need for 
fiscal responsibility and the need to support economic recovery 
must complement each other, not undermine one another. And 
vitally, we cannot jeopardize the economic recovery by putting 
at risk the full faith and credit of the United States. The 
majority must not irresponsibly put our economy in severe 
jeopardy by using the debt limit as leverage or as a bargaining 
chip.
    We took necessary steps to prevent a recession caused by a 
financial crisis from becoming a depression. We cannot risk a 
new financial crisis that would reverse the new momentum of 
economic growth.
    Thank you, Mr. Chairman.
    Chairman CAMP. Thank you, Mr. Levin.
    Welcome, Secretary Geithner. You have 5 minutes. Your full 
written statement will be part of the record, but you may begin 
your testimony. And welcome to the Committee on Ways and Means.

STATEMENT OF TIMOTHY F. GEITHNER, SECRETARY, U.S. DEPARTMENT OF 
                 THE TREASURY, WASHINGTON, D.C.

    Secretary GEITHNER. Thank you, Chairman Camp, Ranking 
Member Levin, and Members of the Committee. It is a pleasure to 
be here before you today to talk about the President's budget.
    The President's budget presents a comprehensive strategy to 
strengthen economic growth and expand exports, with investments 
in education, innovation, and the Nation's infrastructure.
    Alongside these investments, the budget presents a 
detailed, multiyear plan to cut spending and reduce deficits. 
Our deficits are too high. They are unsustainable. And, left 
unaddressed, these deficits will hurt economic growth and make 
us weaker as a nation. We have to restore fiscal responsibility 
and go back to living within our means.
    The President's budget cuts the deficit he inherited in 
half as a share of the economy by the end of his first term. 
These cuts are phased in over time so that we protect the 
recovery.
    In order to make it possible for us to invest in future 
growth and to restore fiscal sustainability, the President 
proposes to reduce nonsecurity discretionary spending to its 
lowest level as a share of the economy since Dwight Eisenhower 
was President.
    To achieve this, the budget proposes a 5-year freeze of 
annual nonsecurity discretionary spending at its 2010 level. 
And this will reduce the deficit by more than $400 billion over 
the next 10 years.
    The President also proposes to reduce the request for 
Defense spending, to freeze civil service salaries, to improve 
efficiency in government services through a range of program 
eliminations and reductions.
    These savings create the necessary room for us to make 
targeted investments in support of reforms that will help 
strengthen future economic growth. The most important thing we 
can do to promote our long-term growth is to improve the 
quality of education, to invest in innovation, and to rebuild 
America's infrastructure. Without these investments, America 
will be weaker and less competitive.
    As part of this strategy for growth, the President proposes 
reforms to our tax system designed to encourage investment. We 
propose to put in place a permanent and expanded tax credit for 
research and development in the United States; to eliminate--to 
eliminate--capital gains on investment and small businesses; to 
encourage advanced manufacturing and clean energy technologies; 
to keep taxes on investment income, dividends, and capital 
gains low; to reform and extend the Build America Bond program; 
and to make college more affordable for middle-class Americans.
    These tax incentives are accompanied by reforms that would 
reduce incentives to shift income and investment outside the 
United States and to close loopholes and tax preferences that 
we cannot afford.
    Now, in addition, we propose to pursue comprehensive tax 
reform that would lower the corporate tax rate. Our present tax 
system for businesses combines a very high rate with a very 
broad range of expensive tax preferences for specific 
industries and activities.
    We need a more competitive system that allows the market, 
not tax planners and lobbyists, to allocate investment, a 
system in which businesses across industries pay a roughly 
similar share of earnings, a system that provides more 
stability and certainty, that is more simple to comply with. 
And we need to do all this without adding to our future 
deficits.
    We have begun the process of building support for 
comprehensive corporate tax reform. Mr. Chairman, I want to 
welcome your personal support for comprehensive reform. I 
believe we have the opportunity to do this now.
    The President's budget also outlines some responsible 
reforms on the individual side. We propose, as we have in the 
past, to allow the 2001 and 2003 tax cuts for the wealthiest 
Americans to expire; to limit certain deductions, tax 
expenditures for those same high-income Americans; to restore 
the estate tax to the 2009 levels; and to close the carried 
interest loophole.
    These proposals--and I want to emphasize this--these 
proposals will help ensure that the savings we achieve together 
through spending restraint are devoted to deficit reduction, 
not to sustaining lower tax rates for the most fortunate 2 
percent of Americans.
    This budget would achieve the dramatic reductions in our 
deficit over the next decade that are necessary to stop the 
national debt from growing as a share of the economy and to 
stabilize our debt burden at a level that will not threaten 
future growth.
    Now, this is only a first step, a down payment on the long-
term reforms necessary to address our long-run deficits. To 
address the long-run deficits that we face over the next 
century, not just the next decade, we will have to build on the 
progress and the very substantial progress that has been 
achieved in the Affordable Care Act to reduce the rate of 
growth in health care costs.
    And in addition to that, although it is not a contributor 
to our short-term or medium-term deficits, we should work 
together across party lines to strengthen Social Security for 
future generations.
    Now, we cannot grow our way out of these deficits. They 
will not go away on their own. And they will not be solved by 
cutting deeply into programs, into investments that are 
critical for future growth and competitiveness. We have to work 
together to find consensus on a multiyear plan that cuts 
deficits where we can so that we can invest where we need and 
that reduces our deficits.
    Making a multiyear commitment will allow us to make sure 
that the changes are phased in as the economy recovers. And 
making a multiyear plan will help give businesses and 
individuals adequate time to adjust and prepare for the impact 
of those changes on the economy.
    The President's proposals represent an important starting 
point for discussion. And we recognize that there are many 
valuable ideas on both sides of the aisle. And we know, as you 
know, that we need both parties and both houses of Congress to 
come together to enact solutions that work best for the 
country.
    In December, we were able to come together to find 
bipartisan consensus on a very strong package of tax incentives 
to help sustain recovery and restore confidence. We want to 
bring that same commitment to the challenge of restoring fiscal 
responsibility.
    Thank you. I would be happy to take any of your questions.
    [The prepared statement of Secretary Geithner follows:]
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    Chairman CAMP. Well, thank you very much, Mr. Secretary.
    I think we can agree, the economy is not adding jobs at the 
rate it needs to. And I think that is particularly why I am 
disappointed. You sense disappointment on our side, that the 
President's budget brings up some of the same tax hikes on 
American small business that Congress, even when both chambers 
were controlled by Democrats, already rejected.
    About 75 percent of small businesses are structured as 
passthroughs--partnerships, or S corps, or sole 
proprietorships--and they are responsible for about two-thirds 
of all new jobs created. Yet, these are the businesses the 
President would subject to massive tax hikes by raising the top 
marginal rates.
    Given that unemployment has been stuck at or above 9 
percent for 21 consecutive months, do you really believe that 
we should be raising taxes on small businesses? And will you 
commit that any tax reform that we might move forward on would 
address the concerns of these employers?
    Secretary GEITHNER. Mr. Chairman, a very important 
question. And you are right, I think, to emphasize that our 
overwhelming priority now for the country should be to make 
sure we are reinforcing this expansion, get more people back to 
work. Because we are still living with the scars of the damage 
caused by the crisis. You can see it in high unemployment 
rates, in millions of people still at risk of losing homes, the 
pressure on small banks, small businesses across the country. 
So that objective of strengthening growth should still be our 
overwhelming focus and priority.
    Now, we propose in the budget a series of very well-
designed, targeted tax incentives for small businesses. 
Because, as you said, they are so important to job growth and 
to innovation. So, for example, as I said in my opening 
statement, we are proposing to eliminate capital gains taxes on 
investment in small businesses, to make permanent pretty 
generous expensing for investment by small businesses in 
capital equipment.
    Now, you are right that we are proposing again to allow to 
expire on the schedule agreed to by Congress last December 
these taxes that affect the top 2 percent of individuals and 
small businesses in the country. They only affect 2 to 3 
percent of businesses. And the vast bulk of those small 
businesses you referred to are structured as partnerships. And 
we are talking here about our law firms, investment firms, 
businesses who choose to structure themselves as partnerships, 
not as corporations.
    And the vast bulk of those small businesses you are 
referring to earn very, very substantial amounts of revenue 
each year. And, again, even in that case, we are proposing to 
restore those tax rates to the level that prevailed in the 
1990s, where we had the best record of investment, productivity 
growth, innovation, job growth than the country has seen in 
generations.
    We think that is a responsible recommendation. We recognize 
it is not popular on your side of the aisle. But I want to 
underscore what you said, I think, is that our challenge is it 
to figure out a way to restore sustainability and strengthen 
economic growth. We have to balance those two objectives. And 
we are not going to be growing in the future unless we make 
some tough choices to restore fiscal responsibility. And those 
are the types of tax changes, tax reforms we think are 
consistent with our obligations to strengthen growth.
    Chairman CAMP. Well, I am encouraged by some of the 
comments that the President and you have made, and also by your 
testimony today about the need for the reform of the corporate 
Tax Code.
    But, given those comments, we then see a budget that goes 
in the opposite direction. Instead of proposing reforms that 
broaden the base and lower rates, which is what I think most 
people would like to see on the business side, and trying to 
level the playing field and reduce complexity, this budget is 
proposing changes that continue to pick winners and losers.
    I guess my question to you is, how do you suggest we 
achieve tax reform, particularly on the business side, when the 
administration continues to push proposals that will raise 
taxes on some companies or some activities in order to offset 
spending that is unrelated to those activities? It is going in 
the opposite direction of, I think, the very encouraging 
comments that have been coming out of the administration and 
you, as well.
    Secretary GEITHNER. Mr. Chairman, you are right that, in 
the budget, we do not propose a detailed plan for comprehensive 
tax reform. But we do propose a set of changes to the existing 
structure that would help, as we see it, improve investment 
incentives in the United States.
    And I think the way to look at those changes is, they help 
make the case for why we need comprehensive reform. And if 
there are aspects of those proposals that make you 
uncomfortable, you should view it as an incentive for us to do 
comprehensive reform.
    And we are very serious, as you know--and we have talked 
about this a lot--in trying to build consensus now on a set of 
fundamental changes to the corporate tax system that would 
improve incentives for investment, do so in a way that is 
fiscally responsibility. And to do that, we would have to lower 
the rate very substantially and eliminate or substantially 
reduce the broad range of tax preferences, incentives, that now 
create a lot of unfairness and distortions in the Tax Code.
    But, again, what we did in the budget is say, we would like 
to work with Congress on comprehensive reform, but if we are 
forced to work within the current system, here are some changes 
that would help improve investment incentives in the short 
term. But, again, view those as an incentive, as a way to make 
the broader case for a comprehensive reform.
    Chairman CAMP. All right. Thank you.
    Mr. Levin may inquire.
    Mr. LEVIN. Thank you.
    Mr. Chairman, I am glad you asked the Secretary about the 
position of the administration not to extend the high-income 
tax cut.
    And I think, Mr. Secretary, you have helped to shatter the 
myth that this is basically an increase in taxes on small 
business. You have explained that, right? And as I remember the 
analysis, about 75 percent of the high income that would be 
affected would be income over $1 million a year. Is that 
correct?
    Secretary GEITHNER. That is roughly correct, yes.
    Mr. LEVIN. That is the estimate.
    Secretary GEITHNER. That is the estimate. That is one 
estimate, yeah.
    Mr. LEVIN. And you indicated what percentage of businesses 
would be affected?
    Secretary GEITHNER. Only 2 to 3 percent of all businesses 
in the country. And, again, the vast bulk of those businesses 
make well over a million dollars in earnings a year. And, of 
course, many, many of those who make that much money are 
fundamentally what we would call law firms or investment firms 
or other types of companies that are structured that way to 
help lower their tax burden.
    Mr. LEVIN. All right. Let me now ask you about investment, 
because there is such a sharp contrast between the President's 
budget and the CR. I think you have described it--for the 
President, it is invest and cut the deficit. For the CR, it is 
essentially non-invest or disinvest and cut the deficit, except 
increase it by how much, the high-income tax cut over 10 years?
    Secretary GEITHNER. Well, to extend the high-income tax 
cuts for 10 years would cost substantially over $700 billion, 
maybe close to a trillion dollars.
    Mr. LEVIN. All right, now, Mr. Chairman, it is interesting. 
I think we need to have this discussion. You used the term 
``winners and losers.'' And that is often talked about in terms 
of investment. And I didn't mean to pick on you. I picked on 
Hemlock because I was there.
    Chairman CAMP. The chair does not feel picked on.
    Mr. LEVIN. Good.
    I was there. It is a vivid example of public-private 
partnership. And I was told right there that, if it hadn't been 
for 48(c), the expansion would not have occurred.
    So, Mr. Secretary, just quickly sum up why this budget 
cutting the deficit combines it with investment.
    Secretary GEITHNER. Well, you know, again, we live in a 
very competitive world. We have to make sure that we are 
focused every day on how to make the country stronger and more 
competitive. And if we are going to be able to meet a 
substantial share of the growing demand for goods and services 
around the world, we want more of that to be met by investment 
in the United States.
    And what the President's budget does is propose a range of 
reforms and incentives that make it more likely that that next 
great American business builds their next factory in the United 
States and that that great foreign competitor of the United 
States builds his or her next factory in the United States. And 
we want to make sure the Tax Code is working to encourage those 
kind of investments and not to discourage those kind of 
investments.
    And it is very important, when we think about fiscal policy 
choices, we look at them through the prism of what is going to 
be a better strategy for growth and investment. It is not 
simply an exercise of reducing future deficits. Although this 
is very important to future growth, how you do it is critically 
important. And you have to set priorities, and you have to make 
sure, again, you are preserving the capacity to invest in 
things that are important to the competitiveness of every 
business in the country.
    For example, any business you talk to in the country that 
is engaged in manufacturing will tell you that they need better 
access to high-quality engineers. They want our schools to do a 
better job of producing people with the skills they need to 
compete. They need to make sure they have better designed 
incentives in the Tax Code to encourage investments here in the 
United States. The proposal we made to make permanent the R&D 
tax credit and expand the credit is a good example of those 
kind of incentives.
    But we just want to make sure that we look at these fiscal 
choices through the prism of what is going to be good for 
growth and investment in the United States.
    Mr. LEVIN. Thank you. And the CR is a disinvestment 
proposal at the time we need more, not less.
    Secretary GEITHNER. Well, again, I think the challenge is I 
think we all recognize we are going have to reduce spending. We 
all recognize we are going to have to reduce our long-term 
deficits. The question is how to do that and how to do that in 
a way that preserves incentives for investment here, allows us 
to improve education, strengthen our public infrastructure. 
That is the challenge we face.
    Mr. LEVIN. Thank you.
    Chairman CAMP. Thank you.
    Mr. Herger may inquire.
    Mr. HERGER. I thank the Chairman, and I join in greeting 
the Secretary to our hearing.
    Secretary Geithner, on page 2 of your written testimony, 
you state that, quote, ``We must restore fiscal responsibility 
over the long term by reducing the rate of growth in health 
care expenditures,'' close quote. I couldn't agree with you 
more. In fact, that is one of the main reasons why I voted 
against the Democrats' health care overhaul twice in the last 
Congress.
    The Obama administration's own Medicare actuaries have 
predicted that national health care expenditures over the next 
decade will be $311 billion higher because of the Democrats' 
health care overhaul. In other words, the health care law bends 
the cost curve up, not down.
    Yet, on page 7 of your testimony, you assert that, quote, 
``Independent analysts have estimated the Democrat health care 
law will significantly slow the growth rate of medical costs,'' 
close quote.
    Mr. Secretary, could you tell us, who are the analysts you 
are relying on for this claim? And is there a reason you are 
choosing to ignore the findings of your own administration's 
actuaries?
    Secretary GEITHNER. Excellent question, and thanks for 
giving me a chance to respond to that.
    As many of you have said, our long-term deficits that we 
face over the next century are primarily driven by rapid rates 
of growth in health care costs and, to a lesser extent, by 
Social Security obligations. The most important thing we can do 
to reduce those long-term costs is to reduce the rate of growth 
in health care costs.
    Now, in our system, in our country, we rely on the 
independent, nonpartisan Congressional Budget Office to analyze 
for the Congress and for the administration the impact of 
reforms on costs. And it is the judgments of the CBO that bind 
all of us. They bind the Congress and ultimately bind the 
administration.
    And it is in the judgment of the nonpartisan, independent 
CBO that those reforms, if enacted and held to over time, will 
substantially reduce the rate of growth in health care costs 
for the public sector. And they, in fact, make the largest 
contribution to entitlement reform that this country has 
considered in generations.
    And it is, of course, in recognition of the fact that the 
only path to long-term fiscal responsibility is through health 
care savings that these reforms made it through the Congress 
are so important. And, of course, we recognize that we are 
going to have to build on that. We haven't solved that problem 
definitively. And we would welcome the chance to join with you 
in figuring out ways we can help make a further contribution, 
even greater contribution to reducing the rate of growth in 
those costs.
    But I would rely on CBO's estimates.
    One more clarification: If I am not mistaken, I think what 
the actuary said, was if Congress does not enact those reforms, 
then costs will grow more rapidly. He was making a prediction 
about what Congress might ultimately do, not what the reforms 
would produce in terms of savings.
    Mr. HERGER. Last summer, in an interview on ``The Kudlow 
Report,'' you said that the administration wanted to prevent 
the rates on capital gains and dividends from rising beyond 20 
percent. Can you please clarify whether this 20 percent rate is 
inclusive of the new 3.8 percent tax increase included in the 
Democrat health care law?
    Secretary GEITHNER. No, it is not. But we do propose in the 
budget to make sure that the top rates on dividends and capital 
gains don't rise beyond 20, because, again, we want to have a 
budget that is encouraging investment in the United States.
    Mr. HERGER. So it is not inclusive. So it does rise beyond 
20 percent in this area.
    Secretary GEITHNER. Well, maybe this is a simplifying 
convention, but when we think about the rate on dividends and 
capital gains, we view it--we look at the statutory rate 
established in the budget. And, again, we think there is a good 
case for trying to make sure that we keep the overall tax 
burden on investment income in the United States at a modest 
level. We think that is good for future growth. We think we can 
afford do that.
    Mr. HERGER. Again, Mr. Secretary, our concern is, at a time 
when the economy is what it is, that we really hold to this. 
The American public, certainly those who are creating new jobs, 
cannot afford to have more money taken out. That money could be 
used for investment.
    I yield back.
    Chairman CAMP. All right. Mr. Johnson is recognized.
    Mr. JOHNSON. Thank you, Mr. Chairman.
    Mr. Secretary, the Congressional Budget Office shows 
permanent deficits in the Social Security program, meaning that 
Social Security payroll taxes can't fully cover benefits. In 
other words, the cost of paying benefits is now more than the 
revenues coming in to pay them. You would agree.
    We are on a very tight time schedule here, so I will ask a 
few simple questions, and I would ask you to be brief in 
responding, if you would.
    How are we paying benefits if we don't have sufficient 
payroll taxes? Is the Treasury paying Social Security interest 
it is earning from the IOUs Treasury gave the system when it 
borrowed payroll taxes from Social Security to pay for other 
government spending?
    Secretary GEITHNER. Congressman, we have the ability to 
meet our commitments to Social Security beneficiaries, and we 
will continue to meet that obligation.
    But we recognize, as do many of your colleagues, that, over 
the longer term--but we have some time to get this right--we 
need to make sure that we strengthen Social Security, secure 
Social Security for future generations. And that is going to 
require some changes. And we are, as the President has said, we 
are willing to work with all of you to figure out a best way to 
do that. But----
    Mr. JOHNSON. How much are those interest payments going to 
be in 2012, do you know?
    Secretary GEITHNER. I don't know right now, but I would be 
happy to respond to you in writing----
    Mr. JOHNSON. It is about $127 billion, according to the 
Trustees Report. According to the President's budget, in 2012 
the budget deficit is expected to hit $1.1 trillion--the fourth 
year in a row of trillion-dollar-plus deficits. Meanwhile, the 
debt held by the public will be near $12 trillion next year, 
double what it was in just 2008.
    Mr. Secretary, where will the money come from to pay the 
interest owed to Social Security?
    Secretary GEITHNER. Well, Congressman, again, I think you 
are making our point. It is very important that we find a way 
to reduce our long-term deficits. That is not something we can 
defer forever. And what the President's budget does is propose 
a detailed mix of policies, both spending restraint as well as 
tax reforms, that will bring those deficits down dramatically, 
dramatically, over the next----
    Mr. JOHNSON. I understand that, but where are you going to 
get the money to pay Social Security? You are going to have to 
borrow it, right?
    Secretary GEITHNER. We have the resources to meet those 
commitments for a substantial time to come. Now, of course, we 
don't want to put off those questions forever. It would be good 
for the country, I think, for us to come together on ways to 
strengthen Social Security. And we are willing to begin that 
conversation with the Congress soon.
    Mr. JOHNSON. Well, clearly, we are borrowing at record 
levels. That is a crisis this nation faces, the fear that the 
rest of the world soon won't want to lend to us.
    What percentage of our borrowing comes from foreign 
sources?
    Secretary GEITHNER. Well, Congressman, as a whole, we are 
borrowing much less from the rest of the world than we were 
just 3 years ago. Right now, our current account deficit, the 
amount we borrow from the rest of the world to meet our 
obligations, is now about half the level it was at the peak in 
2007. And what that means is that Americans are saving more and 
they are funding a larger share of these deficits.
    But a substantial share of our outstanding debt, like is 
true for every major economy, is held by foreigners. And, 
again, we agree and what this President's budget reflects is a 
recognition that, if we are going to grow in the future, we 
have to make sure we agree on reforms that bring down those 
long-term deficits.
    Mr. JOHNSON. The President's budget this year says 47 
percent comes from foreign sources.
    Thank you, sir.
    I yield back the balance of my time.
    Chairman CAMP. Thank you.
    Mr. Rangel may inquire.
    Mr. RANGEL. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for sharing your views with 
us.
    As we discuss the budget for 2012, soon, and very soon, we 
will have to look at the continuing resolution for this year 
and next. Having said that, at one point in time, the President 
of the United States indicated that he was only advocating an 
extension of the tax relief for those people making less than 
$250,000. But in this agreement, as they said, the President 
didn't ask for it, but he did agree that it would be for 
everybody. Having said that, I understand the cost of the 
relief given to the upper-income people is over $100 billion.
    Now, the CR that the majority has given to us has a 
substantial number of cuts in spending, but that doesn't 
necessarily mean that it is not going to be ultimately a cost 
that we are going to have to pay.
    My question to you: Have there been any comparisons between 
the cost of extending this relief to where economists say we 
should not expect economic growth as a result of it and the 
negative impact of cutting programs which could cause an 
additional spending? Has your office reviewed this to give us 
direction?
    Secretary GEITHNER. Well, Congressman, you are raising 
exactly the right point, which is that, as we think about ways 
to reduce these deficits, we have to make sure that we are 
doing things that are going to be supportive of future growth, 
that are going to have a high return, as you say, a large bang 
for the buck, if we are making investments. And you want to 
make sure you are not cutting into things that will hurt future 
growth, raise unemployment in the future, raise our long-term 
deficits in the future.
    And what the President's budget does is reflect our view of 
where those choices should be made. So, again, we want to make 
sure we are increasing investments in education, in 
infrastructure, in research and development, not cutting those. 
Because if we do a smart job of making investments in support 
of reforms in those areas, future growth will be stronger, it 
will be more competitive, our deficits will be lower in the 
future. If we cut deeply into those investments, we will be 
weaker as a country, it will be harder to solve our long-term 
fiscal problems.
    But those are exactly the kind of tradeoffs that this 
Committee and your colleagues in both houses will have to make.
    Mr. RANGEL. Mr. Secretary, really I have to go vote, but 
the point I am trying to make is that the insistence on the 
overall tax cuts for the upper income did increase the deficit, 
and that money was borrowed in order to do it. And so, to come 
back now and to talk about savings, it seems to be a dramatic 
inconsistency in supporting both of those themes.
    Secretary GEITHNER. Those temporary tax cuts were 
expensive. We can't afford to make them permanent. And I agree 
that if we are going to make cuts in spending, as we have to 
do, we want to make sure that those savings go to support 
investments and cutting future deficits, not sustaining tax 
cuts for the top 2 percent of Americans that we can't afford.
    Mr. RANGEL. Thank you, Mr. Secretary.
    I yield back, Mr. Chairman.
    Chairman CAMP. Thank you.
    Mr. Brady is recognized.
    Mr. BRADY. Thank you, Mr. Chairman.
    Mr. Secretary, this budget don't add up, either for job 
creation or tackling these dangerous deficits. And the two are 
tied together, as you say, because consumers aren't confident 
that America is going to really tackle its fiscal deficit, and 
businesses don't believe Congress is serious about this.
    I think you are repeating 2 mistakes from the last 2 years. 
One is using rosy economic forecasts, as you did last year and 
the year before--the White House, excuse me, Mr. Secretary, not 
you. These forecasts are 0.4 and 0.5 percent higher than CBO 
and OMB. Doesn't sound like much, but just that difference 
wipes out three-fourths of the purported savings in this budget 
over the next decade.
    And then, secondly, on job creation, I don't understand why 
the administration comes back with higher taxes on U.S. 
companies trying to compete and win overseas. Because all we 
are doing in this budget is encouraging companies to 
manufacture oversees--$87 billion more in energy taxes, again, 
on U.S. energy companies, encouraging them to send their 
workers overseas.
    And then, finally, this budget takes a whack at real-estate 
partnerships, traditional partnerships that build our shopping 
centers, apartments, movie theaters, office buildings, none of 
which can stand an almost tripling of their taxes.
    So, how in heaven's name does the White House believe it 
will gin up the economy, which is very sluggish, by taxing the 
manufacturers and job creators most likely to get us out of 
these tough times?
    Secretary GEITHNER. Congressman, excellent questions. And 
let me just respond quickly on each one.
    I actually think, if you look carefully at the economic 
assumptions in the budget, they are actually quite realistic 
and quite conservative. You are right, at some parts of the 10-
year horizon, some of the estimates look a little higher than 
the consensus forecast, but in other cases they are lower and 
more conservative.
    But I think if you look at these--I will just give you one 
example. The average growth rate estimated over this period of 
time is significantly lower than the average strength of past 
recoveries. So we are trying to be conservative.
    And, again, one great strength of our system is, in the 
end, CBO's assumptions govern, in this case. And you will be 
able to rely on them to make sure that we are being balanced. 
But I think they are reasonably conservative.
    Now, very important that as we think about tax policy that 
we are doing things that encourage investment. Now, you are 
right that we are proposing to reduce some tax benefits that go 
to some parts of the American business community. But we are 
proposing very substantial and very broad-based incentives for 
investment, too. And if you look at the overall net income 
impact of those in terms of tax revenues, it is a very, very 
modest change. And I think, again, what it does is shift the 
incentives in the Tax Code, if these were enacted, to encourage 
the next company to build their next plant here in the United 
States.
    Now, I know you are right that we are proposing to 
eliminate some loopholes, some preferences, things that we 
think are expensive and don't have much impact on growth. And 
we know people are going to disagree with those things, but it 
is just a reflection of the fact that we don't have unlimited 
resources, we face some tough choices, and we can't do 
everything we want to do.
    And every time we look at a tax provision, we should ask 
ourselves two questions. One is, is it improving incentives for 
investment here? And does it have a substantial return, in 
terms of growth impact? And if it is too expensive relative to 
that, then our view is we should phase it out.
    Mr. BRADY. Just a final, and I will close out. And, again, 
this isn't your budget, necessarily, but the White House. But 
please carry back to the White House this message: Because they 
kill jobs, those tax increases are dead on arrival in this 
House. We have to find a better way, we will work together with 
you, to get this economy going.
    Thank you, Mr. Secretary.
    Chairman.
    Mr. TIBERI. [Presiding.] Thank you.
    Thank you, Mr. Secretary, for being here. I guess it is 
just you and me for the time being.
    Secretary GEITHNER. Let's solve some problems.
    Mr. TIBERI. I was pleased to hear the President, in his 
State of the Union, talk about lowering corporate tax rates as 
a way to expand jobs. Within the budget, however, I am worried 
that the administration isn't paying as much attention to small 
businesses, in terms of creating jobs.
    Obviously, you know--I don't have to tell you--the way that 
small businesses are set up, most pay as passthrough entities 
their income taxes. And, therefore, I believe there are a 
number of things within the President's budget that impact 
those small-businesses owners.
    And so, if I could just kind of read you a list of things I 
am interested to hear your ``yes'' or ``no'' answer, if you 
think that any of these are a tax increase on small-business 
owners.
    The President's budget, as you know, proposes to phase out 
personal exemptions on itemized deductions. In addition, the 
President's budget proposes to limit otherwise allowable 
itemized deductions, commonly known as the Pease limitation.
    Do you consider these two tax increases on small 
businesses? Those passthrough entities that are oftentimes 
partnerships, S corps, many of those often itemize their 
deductions.
    Secretary GEITHNER. Well, to make it easier, I agree on the 
following, which is, again, that those tax changes only impact 
2 to 3 percent of small businesses. And those small businesses 
affected overwhelmingly are businesses that earn substantially 
more than a million dollars. And you are right that many of 
them are structured as passthrough entities. But, in that 
context, most of the ones that are affected by this are, you 
know, typically like a law firm or an investment partnership.
    Mr. TIBERI. The President's budget proposes to reclassify 
many groups of independent contractors as employees--you have 
testified to this before--for tax purposes. And many of those 
small businesses contract with those outside individuals.
    Do you consider the new payroll tax on those small 
businesses a tax increase on them, since you reclassified----
    Secretary GEITHNER. Well, I wouldn't describe it that way. 
Let me just tell you what the objective of this is.
    As you know, this is a very complicated provision of the 
Tax Code, and it is very hard for people to comply with it. And 
what we are proposing is a very simple thing. It is that 
Congress authorize the IRS to issue guidance for comment on how 
to make sure that we simplify the ease of complying with this, 
to make sure that businesses are on a level playing field. 
Because right now, the current system, apart from being way 
complicated to comply with, creates a lot of unfairness across 
businesses, and it gives some businesses the opportunity to, 
frankly, lower their tax burden in a way that is unfair to 
their competitors.
    So we want a level playing field and a more simple thing to 
comply with. And what we are proposing is just that Congress 
give the IRS the authority to issue guidance for comment. And, 
of course, once the IRS goes out with a draft, anybody affected 
will have a chance to comment on that and suggest how that 
could be improved.
    Mr. TIBERI. Would the small businesses be paying more, 
though, if they had those employees?
    Secretary GEITHNER. It just depends on their circumstance.
    Again, what we think is fair is, we want to have a Tax Code 
where businesses pay roughly the same amount of income tax 
relative to earnings. In our current system, as you know, it is 
deeply unfair. Some companies pay a lot more than the average, 
some pay less than the average. And we think we want to move to 
a system where, again, it is a more level playing field and it 
is a more fair, simple system to comply with.
    Mr. TIBERI. Another rate in the President's budget that has 
changed is the top rate for the estate tax. Obviously, many 
small-business owners, farmers are concerned about what happens 
in 2 years to the estate tax.
    Is the rate that goes up to 45 percent, is that an increase 
in taxes for small-business owners?
    Secretary GEITHNER. It absolutely is a change in the estate 
tax. And, again, what we are proposing is that we restore the 
rates and the exemptions to the levels that prevailed in 2009. 
And, again, with those rates and those exemptions, a tiny, 
tiny, tiny, small fraction of estates are affected by those 
changes.
    And, again, we think that is the best way to balance our 
obligations for fiscal responsibility with all the other 
objectives we share, how to make sure we are strengthening the 
economy as a whole.
    Mr. TIBERI. In my State of Ohio, there are roughly 50,000 
people that are employed by the independent oil and gas 
industry by producers. It is a pretty big industry. Most of 
these individuals are employed by small-business owners, a lot 
of family-owned businesses. And, as you know, the President's 
budget proposes to repeal the marginal well tax credit, to 
repeal the expensing for intangible drilling costs, and to 
repeal the percentage depletion.
    Do you consider this a tax increase on independent oil and 
gas producers?
    Secretary GEITHNER. I would, yes.
    What it does is, again, reduce a very, very substantial 
subsidy that now goes to the oil and gas industry. And we are 
proposing to eliminate that because it is very expensive and it 
works against a national priority, which is to encourage the 
economy, as a whole, to shift to less carbon-intensive forms of 
energy use in the future and to reduce our ultimate dependence 
on the types of energy that, again, contribute to climate 
change and could threaten future growth prospects. That is the 
rationale for that change.
    Mr. TIBERI. One of my constituents is a small-business 
owner, a family operation. He says that if this proposal 
becomes law, it will evaporate the industry in Ohio.
    Last year, Joint Tax suggested that this will not only hurt 
the domestic production of oil and natural gas, but it will, 
ironically, increase our dependency on foreign fossil fuel. Do 
you agree with that?
    Secretary GEITHNER. No, I don't.
    But here is a different way to look at this. When we allow 
parts of the American economy to pay much lower taxes than the 
average, that means taxes are higher on all other businesses in 
your State. And I think what you have to ask yourself is, is 
that fair and does that make sense? It adds to inefficiency. It 
probably hurts growth overall, because what it means is people 
who sit in this room are allocating investment, not the market 
as a whole. And, again, we want the market to decide which 
businesses grow, not the community of tax lobbyists and tax 
planners.
    Again, when we allow certain parts of the economy to pay 
much less than their fair share of taxes, then it means every 
other business in the country is paying higher taxes as a 
result.
    Mr. TIBERI. One final question: Do you consider the 
individual mandate within the health care bill, the penalty 
levied upon people who refuse to accept to take on individual 
insurance, the penalty that they have to pay to the IRS, a tax?
    Secretary GEITHNER. Congressman, I think you know my answer 
to this question, which is, we do not. But that is not a 
judgment I ultimately make. That is a judgment that is going to 
be made in different rooms, different bodies than this.
    But I can tell you that I fully support the health care 
reforms that were passed because I think they are very 
important to helping make sure that the cost businesses bear 
for health care are reduced over time and that we can restore 
fiscal responsibility, fiscal sustainability to our long-term 
deficits.
    Mr. TIBERI. Do you think, though, it is kind of ironic that 
the Treasury Secretary thinks it is not a tax but the Justice 
Department argues that it is a tax?
    Secretary GEITHNER. I cannot begin to explain when lawyers 
and financial people disagree on some things, but I can give 
you lots of other examples where that is the case.
    Mr. TIBERI. I thank you for your patience.
    We are going to take a break, about 10- to 15-minute break. 
Refill your water glass, take a restroom break. Votes should be 
done in about 10 minutes, and we will resume our hearing.
    So the hearing will be in recessed for about 15 minutes.
    Chairman CAMP. [Presiding.] Mr. Stark is recognized.
    Mr. STARK. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for taking the time to 
explain much of this to us.
    We have recently received a letter from over 270 prominent 
economists--I presume you were one of the 270--which stated 
that the Affordable Care Act contains essentially every cost-
containment provision that policy analysts have considered 
effective in reducing the rate of medical spending.
    Could you comment on how you feel the Affordable Care Act 
will relate to constraining health care costs?
    Secretary GEITHNER. Congressman, very important question, 
and thank you for asking it.
    What these reforms do over time is change the incentives 
for how Americans use health care and set in motion what we 
believe are the most powerful sets of ideas out there for 
reducing the rate of growth in health care costs over time.
    And, of course, there is a lot of uncertainty that 
surrounds these estimates, but, as I said earlier, we rely on 
the CBO to make these judgments for us. And, in their judgment, 
these reforms over time will very, very substantially reduce 
our long-term deficits by reducing the rate of growth in costs.
    Now, as the President has made clear, we want to build on 
those reforms. Ultimately, we are going to have to do more. And 
we would welcome the chance to work with people on both sides 
of the aisle to strengthen those reforms so they can deliver 
even more savings in the future.
    But I agree with your characterization that the bill 
includes, we think, many, if not most, if not all, of the best 
ideas out there for reducing the rate of growth in costs.
    Mr. STARK. Well, Mr. Secretary, you, every once in a while, 
blog. And I have been given a quote from a blog you did some 
time ago, talking about in the absence of health care reform. 
And I wonder if you could dig back on your Facebook someplace 
and send us a copy of that blog for the record.
    Secretary GEITHNER. I would be happy--to I don't really use 
that term and don't do Facebook. But I would be happy to give 
you our analysis and our reports about what the reforms would 
do for our competitiveness as a country.
    Secretary GEITHNER. Again, you know, I think it is 
important to recognize, if you ask businesses what they care 
about most among their concerns, they care a lot about the 
burden rising health care costs puts on them. And so, if we 
care about competitiveness and growth and jobs, not just access 
to affordable care, you have to make sure these reforms take 
hold or are allowed to work over time.
    Mr. STARK. Thank you. Thank you very much.
    I yield back, Mr. Chairman.
    Chairman CAMP. Thank you.
    Mr. Davis is recognized.
    Mr. DAVIS. Thank you, Mr. Chairman.
    Thank you for joining us today, Mr. Secretary.
    I would like to switch subjects to a different area that is 
very current from a standpoint of job creation and job 
sustainment, and that is to talk about unemployment insurance 
for a moment.
    Could you tell us who pays unemployment insurance taxes?
    Secretary GEITHNER. Well, as you know--and I am sure you 
know this based on your question--businesses pay the 
unemployment insurance taxes.
    Now, if you are an economist, you would give a more complex 
answer to that, because, ultimately, of course, the economy as 
a whole pays those taxes. But----
    Mr. DAVIS. But, ultimately, it comes out of someone's 
pocket.
    Secretary GEITHNER. Yeah, the direct incidence is on 
businesses. You know, some people would say that--well, I won't 
give you the more complicated answer.
    Mr. DAVIS. I guess that leads to my next question. Have you 
been an employer and paid these taxes? I mean, I have. I have 
written the checks every quarter to the----
    Secretary GEITHNER. I, unfortunately, have been in the 
public sector all my life. But I have helped manage substantial 
organizations of people.
    Mr. DAVIS. Okay. No fault in that, but it does give a 
difference in context.
    The reason that I wanted to clarify that, the 
administration's budget, pages 184 and 191, describes your 
unemployment insurance proposal as offering $9 billion in 
relief to employers through 2013, and then subsequently tax 
hikes totaling $67 billion over the next decade.
    If you were an employer, as I was or many of us on the 
Committee were, paying those checks and were looking at long-
term capital investment forecasts, trying to decide whether to 
hire or not hire, what to do, if you were an employer having to 
face that decision, would you think that getting, for example, 
$9,000 in relief now in exchange for a $67,000 tax tab in the 
future through increased unemployment insurance taxes is really 
a good deal?
    Secretary GEITHNER. Oh, I do think it is a good deal, 
because our job is to figure out what makes sense for the 
country at a time when we have limited resources. And, as many 
people on your side of the aisle have said, we have to 
recognize that we face unsustainable long-term deficits. So we 
are going to have to do things that are going to be painful. 
The choice is to--we want to make those choices in a way that 
is careful and sensitive.
    But what this proposal does--remember, this is just a 
proposal. You know, Congress has to reflect on this and 
consider it. And we are completely open to suggestions of how 
better to design it. But what it does is, it marries some 
short-term relief for States and for employers with reforms 
that make the base of these assessments more fair across 
companies as a whole.
    And, again, there may be different ways to do this. We may 
not have gotten it perfectly right. Open to suggestions, happy 
to work with you on a better way do it.
    Mr. DAVIS. I appreciate that perspective. I think 2014 may 
be the ultimate year of fulfilling that Mayan prophecy 
economically, with all of these taxes coming to bring the end 
of the business world. The concern that I have is that, in 
fact, we have so many issues that are coming if there are not 
reforms to the reform in health care and other things like 
this. I hear constantly from employers back in my district that 
there is a lot of fear, frankly, at the small to mid-sized 
business levels about hiring. Now we add on 
another issue with UI and the proposed tax increases in the 
budget.
    I guess my final question would be this: If you were an 
employer and you were trying to make decisions with cash 
longer-term, do you think that, with this looming tax hike, 
that you, personally, would be eager to take on new liabilities 
to hire people?
    Secretary GEITHNER. Well, Congressman, again, what I would 
try to look at is the following. I would say just two things. 
One is, look at what businesses across the country are doing 
today. And if you look at what has happened to the recovery 
over the last 18 months, businesses are expanding investment at 
an accelerating rate, pretty strong rate, much more rapidly 
than GDP is growing overall. And we have created more than a 
million private-sector jobs just in the last three quarters, 
much more and much more quickly than the last two recessions 
that were much milder recessions. And so, we have a long way to 
go, but we are making progress.
    Now, I would look at the overall mix of proposals in the 
President's budget on the tax side, because it is my view that 
if you look at their overall impact on businesses and 
competitiveness, they are very strong, very powerful, help 
improve incentives for investment in this country, help improve 
incentives for innovation, that we think those are good for 
growth long-term. But you have to look at the overall package 
of it, not just the specific tax cuts for businesses, but the 
broader reforms as a whole.
    Mr. DAVIS. Yeah, I appreciate your sentiment. I guess if I 
were in the personal and capital gains tax rate to 44 percent, 
combined with things like this, it might create a bit of a 
disincentive for that. But we will weigh in in a different 
place on that.
    And, with that, I yield back.
    Chairman CAMP. Thank you.
    Mr. Reichert is recognized.
    Mr. REICHERT. Thank you, Mr. Chairman.
    Mr. Secretary, welcome.
    I remember 2 years ago your first visit to this Committee, 
and I think my question was on trade. You may recall that. I 
was a little concerned there was only one sentence attached to 
the no-cost stimulus, as it has been referred to, to trade.
    And so I am happy to say that I am really encouraged with 
the President's position and latest action on his Export 
Initiative Council, which I am a member of, and then also his 
recent developments in negotiating the Korean trade agreement. 
So I am excited about the job possibilities, the doubling of 
exports, and the engine it will provide to our economy. So 
congratulations on that.
    It shows you how much can change in a couple of years. 
There is something that I am concerned about and am hoping that 
you might change a position that you have taken. I would like 
to remind you of a letter that 118 Members of Congress signed, 
along with myself and Eric Cantor, voicing our opposition to 
the tax simplification program, dubbed ``Simple Return,'' that 
you considered last Congress. This proposal would basically 
have the IRS prepare your taxes for you and mail you a bill.
    This is, in my opinion, hardly tax simplification. It is 
more like the fox guarding the henhouse. I think there would be 
a lot of people that might agree with that.
    I want to assure you that we are still aware of that 
proposal, and I wanted you to be aware of our opposition and 
hope that there might be some change in your thought as we are 
now a year or 2 later.
    I want to move on. I really want to get back to this small-
business thing. I am concerned that the administration's budget 
targets small businesses, as has been said. Some of the figures 
have been already tossed about. But, as you said and I think 
most people recognize, much of the burden, really, is going to 
fall on these passthrough businesses, the S corporations, 
partnerships, and sole proprietorships, whose income is 
reported on their owners' individual tax return.
    And, as you said, that is 3 percent of small businesses. 
However, the Joint Committee on Taxation found last year that 
roughly 50 percent of the higher Federal tax revenue would come 
from small businesses.
    I am particularly concerned about its impact on the 
millions of small businesses that are located all over the 
State of Washington and across this country. So do you believe 
that this is 50 percent of our income?
    Do you believe that higher taxes on hundreds of thousands 
of small businesses, mom and pop stores, is really a way to 
create jobs?
    Secretary GEITHNER. Well, let me just start with where you 
started. And thank you for what you said about the export side. 
And I want to say, it is very encouraging, what you are seeing 
now, which is, export growth is very strong. It is leading the 
recovery. Exports are growing really quite rapidly. And it is 
really across the board, from agriculture to high-tech. And it 
shows how fundamentally strong and resilient this country is.
    And you are right to emphasize, though, the question for us 
for the future is how to make sure that continues. And for that 
to happen, you want to make sure that you see more investment 
in the United States by U.S. companies, by foreign companies. 
And that will help contribute to the stronger export growth. We 
need to do that alongside these trade agreements.
    And I heard you on your second concern.
    Mr. REICHERT. Thank you.
    Secretary GEITHNER. Now, the way I would think about it is 
this, which is--and, again, I think this is the fairest way to 
do it. Those proposals, again, apply to a very small fraction 
of small businesses, only 2 to 3 percent. And the incidence 
falls mostly, overwhelmingly on businesses in that category 
that make substantially more than a million dollars a year. 
So----
    Mr. REICHERT. How do you address the fact, though, that 50 
percent is from small business income?
    Secretary GEITHNER. Because that income that you are 
referring to, again, is concentrated in businesses that are 
actually not small. They are actually quite large. And, 
overwhelmingly, those businesses are businesses structured like 
law firms and firms similarly structured like that. You could 
say those are like communities of individuals that earn a lot 
of money because they are very productive, and they are allowed 
under our tax system to structure themselves that way to reduce 
their taxes.
    Mr. REICHERT. But is this really the way to encourage 
economic growth?
    Secretary GEITHNER. Oh, again, I think it is.
    I think, as many people on your side have said, again, 
future economic growth depends on two really important things. 
One is better incentives for investment in this country, and 
confidence that we are going to reduce our long-term deficits. 
We have to do both. If the business community, if the American 
people, if foreign investors are not confident we are going to 
reduce those long-term deficits, then they are going to invest 
less here, and future growth will be weaker.
    So we just have to balance these different objectives. And, 
again, those are the rates that prevailed during the 1990s, 
which was the best record for small-business creation, best 
record for investment growth, best record for productivity 
growth, best record for income growth, employment growth, than 
we have seen in more than 30 years.
    So we think that that is a prudent response at a time when 
we don't have unlimited resources.
    Mr. REICHERT. We will agree to disagree on that one.
    Thank you, Mr. Chairman.
    Chairman CAMP. Thank you.
    Mr. McDermott is recognized.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for coming.
    The President's budget has cuts in it that are huge cuts to 
the deficit but still invests in the country. The alternative 
plan by the Republicans--we are going to vote on it in about 48 
or 72 hours--is cut spending and use the savings to protect tax 
cuts for the wealthiest top 4 percent.
    Now, the Republicans' spending plan, in my view, is a dark 
view of the future, one that throws the middle class under the 
bus. The Republican plan, if you read it carefully, sends one 
message to America's middle class, to the unemployed, and to 
the working poor: We don't care about you.
    Now, for example, they want to cut spending for States to 
repair highways and bridges. They want to cut Social Security 
Administration, so Social Security offices close across the 
country for a month next year. These programs won't help put 
America back to work, they don't grow the economy, and they 
keep the lights out for senior citizens.
    For example, Republicans want to cut $758 million from the 
Women, Infants, and Children program, the WIC program. Now, 
that program provides funding to keep low-income mothers and 
soon-to-be mothers, as well as their children, get food and 
health care referrals. The program was signed into law by none 
other than the great icon, President Reagan, to which all the 
Republicans in the Congress pray every day as their patron 
saint.
    Now, these are just a few examples of the drastic and 
disastrous cuts the Republicans are proposing. They don't cut 
defense, even though the Secretary of Defense is desperately 
calling us to stop buying weapons his department doesn't need. 
They don't seem to think that the wealthy have any 
responsibility to this country or for those who have less 
fortunate lives in it.
    It also seems the Republicans don't understand the idea of 
investing. Now, Paul Krugman has called these Republican 
spending cuts ``eating the future.'' That comes from a Native 
American saying, that you can tell when a tribe is on its way 
down when they eat their seed corn. Now, basically, the 
Republican focus on cutting spending from these programs, they 
cut things that don't have an immediate benefit but they really 
take a hit in the long term. And the Republicans, as they eat 
our seed corn, are doing it at the expense of the middle class 
and the poor.
    Now, the President has taken meaningful steps to balance 
the budget and bring manufacturing back to the United States. 
And I would like you to talk about the question about the Build 
America Bonds and the other investments, and contrast that with 
what is in the Republican budget. There is, we understand, $2 
trillion sitting in private hands, and they won't invest it. So 
we have no alternative but to do it from the government level, 
because the private sector is not doing it.
    I would like to hear you talk about the President's 
investments.
    Secretary GEITHNER. Well, Congressman, I can't improve on 
the contrast you described, although I agree that the choice we 
face is a pretty stark choice in different strategy for the 
country. And what we are trying to lay out is a more confident 
vision of what it is going to take for us to grow in a world 
where we face a lot of competitive challenges.
    I want to just highlight, again, some of the proposals in 
the budget which we think are going to be good for investment 
and future growth. Again, we propose to make permanent an 
expanded credit for research and development; zero capital 
gains for small businesses; an expansion of a very valuable tax 
credit to help families afford college for their children; low 
taxes on dividends and capital gains so that we are, again, not 
hurting investment incentives; investments in education so that 
we improve the quality of education; investments in improving 
the overall quality of infrastructure. I mean, if you are a 
business in the United States today and you have to deal with 
our infrastructure, it is like a tax on competitiveness.
    So those things, we think, are critical to our capacity to 
grow in the future, to compete with these countries around the 
world that are getting very good at things that we used to be 
uniquely good at. And, again, we have to make sure that, as we 
think about the budget, we think about what is a better 
strategy for growth.
    And, of course, we have to do that in a way that is going 
to be viewed as fair to the overwhelming majority of the 
American people. We are coming out of a financial crisis that 
caused devastating damage not just to low-income Americans but 
across middle-class Americans. You see that in high 
unemployment rates, in millions of Americans still on food 
stamps, millions of Americans still at risk of losing their 
homes, and after decades of very substantial increases in 
inequality.
    And so we have to find a way to make these fiscal choices 
to restore a balance, restore a gravity to our fiscal position, 
but not at the expense of our ability to grow and compete in 
the future and not at the expense of some basic principles of 
fairness for a country that is still suffering deeply because 
of the recession.
    Could I say that the Republicans are going to have the 
chance, not just in the debate about the CR, but when they put 
together their budget resolution, they are going to have the 
chance to lay out a 10-year plan, like the President does, that 
explains how the Republican leadership in the House believes we 
can bring these deficits down over time and what mix of 
spending restraint longer-term, what mix of tax reforms that 
will help achieve that.
    And that will give us a chance to have a good debate. And 
we will have a good debate. And we won't agree on everything, 
but we will agree on some things. But the important thing is 
that the strength of the economy depends on us making sensible 
choices.
    Chairman CAMP. All right. Thank you.
    Mr. Nunes is recognized.
    Mr. NUNES. Thank you, Mr. Chairman.
    Just continuing your thought there, Mr. Secretary, 
President Obama, this is his third budget. And I just find it 
peculiar that you would state just now that you are waiting for 
us to lead. Isn't that why you----
    Secretary GEITHNER. No, no, I wasn't saying that. I am 
sorry, I didn't mean to imply that. Let me just correct that.
    Obviously, the President, as President, has the 
responsibility for laying out to the country and the world 
every year a budget that lays out a 10-year path to reduce 
deficits. And that is the beginning of the process----
    Mr. NUNES. You said you are waiting for us to come up with 
our ideas?
    Secretary GEITHNER. No, no, no, not at all. We have to take 
the lead and the initiative, and you are going to disagree 
about some of those choices, and we will have to figure out 
what makes sense.
    But what I meant is that I know that you are having this 
debate about current spending for this fiscal year, but as 
important as that debate is that you are going to have the 
chance to lay out an alternative vision about how we bring 
those deficits down.
    My point is, just to come back to where we began, you are 
focused, understandably, as we are, on how to demonstrate to 
the American people we can bring some restraint to spending 
that is unsustainable. That----
    Mr. NUNES. Well, Mr. Secretary, in your budget, on page 52, 
you state or I should say, the President's budget, not your 
budget--``Even with this fundamental change, however, an aging 
population and a continued high level of health costs will pose 
serious long-term budget problems. Medicare, Medicaid, and 
Social Security will absorb a much larger share of Federal 
resources than in the past, limiting what the government can do 
in other areas. The level of high debt to GDP that is projected 
risks unsustainability without further policy changes.''
    But you kind of punt on entitlement reform and other 
subjects in your budget.
    Secretary GEITHNER. No, no. Congressman, I have listened to 
your colleagues say that, but I guess I would say the following 
in response.
    We have an unsustainable deficit over the next 10 years, 
which we have to deal with. We have to bring that down to 
something that is sustainable. And after that decade, we face 
unsustainable long-term deficits primarily driven by health 
care costs.
    Now, the Affordable Care Act brings about very, very 
substantial cost savings that will help reduce those costs, but 
we recognize we need to build on those. The President made a 
few suggestions in the budget of how to go beyond the 
Affordable Care Act to build on those things--for example, 
reforming medical malpractice----
    Mr. NUNES. Well, Mr. Secretary, I am actually glad you 
brought up Medicare in your savings. When you look at page 281 
of the Medicare Trustees Report, which you are using for your 
brilliant savings that now have solved the Medicare crisis over 
time, where now it is only $2.4 trillion, according to your 
math--but, in the back, the chief actuary says this. The chief 
actuary doesn't believe the long-term projections, because here 
is what he says: ``For these reasons, the financial projections 
shown in this report for Medicare do not represent a reasonable 
expectation for actual program operations in either the short 
range or the long range.'' I am assuming that is because we 
didn't deal with SGR and unfunded liabilities, et cetera, et 
cetera.
    Now, do you agree or disagree with the chief actuary of the 
Medicare report?
    Secretary GEITHNER. A very important clarification: In the 
way the Congress works, in the way the laws of the land work, 
CBO is the judge of what reforms cost and save. What the 
actuary was doing is making a prediction about what future 
Congresses may or may not do. That is really your job, your 
decision and CBO's.
    Now, of course, if Congress does not enact these reforms or 
repeals them or modifies them, then they will save less money 
over time. And that is what that report refers to. That is a 
prediction about what Congress will do, not a prediction about 
what the law would do if Congress were to stick with it.
    Mr. NUNES. So you think, if we just stick with the 
President's current budget, without any policy changes to 
entitlements, that we are going to be okay.
    Secretary GEITHNER. No, no. I would say this. If you enact 
the President's budget, which is unlikely, because you will 
want to change it, but if you enact that degree of deficit 
reduction over the next 4 to 5 years, then you will stabilize 
our debt as a share of the economy at an acceptable level. And 
if you leave in place the Affordable Care Act, then you will 
have made a very substantial contribution to those long-term 
deficits that start to accelerate in the decades ahead.
    Now, what the President said----
    Mr. NUNES. Mr. Secretary, I think the last 3 years I have 
heard you say almost exactly the same thing, just worded 
differently. And every year, the budget problem gets worse over 
time.
    Secretary GEITHNER. No, actually, in some ways, it is 
getting better because the economy is doing a little better 
than we expected.
    But the way our Constitution works, the President proposes, 
Congress has to legislate. And you will now share with us the 
privilege of how to make decisions about these long-term costs.
    And, again, what I think is very important for us do, and 
this is a better way for us to do it, is to lock in multiyear 
savings over time. If you try do it in 1 year, you will kill 
the economy. And you need to give the business community and 
families the chance to look ahead and the chance to adjust to 
the change that is to come over time.
    But that is something we are going to have to do together. 
We can't do that on our own.
    Mr. NUNES. My time has run out. I yield back, Mr. Chairman.
    Chairman CAMP. All right. Dr. Boustany is recognized.
    Mr. BOUSTANY. Thank you, Mr. Chairman.
    And, Secretary Geithner, it is good to see you again before 
the Committee.
    Secretary Geithner, at a time when every American is 
concerned about our ability to compete, whether here or abroad, 
it is apparent to many of us that the administration has 
launched a full-scale assault on American energy security.
    Now, there have been denials by the administration that a 
moratorium on drilling exists, but permits are not being 
granted. And, in fact, just this past weekend, the second 
largest shallow-water drilling company in the United States 
filed Chapter XI. One thousand jobs are at stake.
    This is all solely due to the administration's policies. It 
is not because of the economy; it is not because of some 
foreign event. It is solely due to policy made in the White 
House.
    Now, I have questioned you before and we have gone back and 
forth through letters on energy policy. In a letter you sent to 
me a while back, there was one line in there that really 
bothered me. I will read it back to you. It says, ``To the 
extent the credits encourage overproduction of oil, they are 
detrimental to long-term energy security.''
    This is referring to the eight--I believe it is eight-
different provisions in the budget that will be repealed. These 
are tax preferences for oil and gas that have been in existence 
for quite a long time.
    So my question is--it is a very simple starting question: 
Is there an overproduction of oil in the United States today?
    Secretary GEITHNER. Well, Congressman, I think I would come 
at that question this way: When you allow individual industries 
in the United States to pay much lower tax rates than other 
businesses pay, that means all other businesses pay higher 
taxes. And that makes the country, as a whole, less 
competitive.
    Mr. BOUSTANY. But do we really have an overproduction of 
oil in the United States today?
    Secretary GEITHNER. Well, you know, as you know, I don't--
--
    Mr. BOUSTANY. It is really kind of a ``yes'' or ``no'' 
question, isn't it?
    Secretary GEITHNER. Well, I don't run energy policy, don't 
feel equipped to address that question.
    But, again, what I would say is, it makes sense at a time 
when we have unsustainable deficits and we are worried about 
our long-term energy-security issues that we have to figure out 
ways to, frankly, clean the Tax Code out of special benefits 
that go to a limited number of industries that mean that the 
rest of Americans pay higher taxes. That is the rationale for 
this.
    Mr. BOUSTANY. But if we are looking to compete and grow, 
stimulate the economy and to grow the economy, do you believe 
that oil is a very necessary part of our energy security and 
our energy economy today?
    Secretary GEITHNER. I am sure it will be part of our energy 
security and meeting our energy needs for a long time to come. 
But, again, we think it is good policy for the country to not 
provide very generous incentives that encourage the production 
dependence on very carbon-intensive forms of energy.
    Mr. BOUSTANY. You say ``very generous incentives,'' but if 
you compare actual equivalent energy metrics with wind and 
solar, the subsidies for those are much higher on a per-unit 
basis of energy than they are for oil and gas.
    Secretary GEITHNER. True. But, again, I am not an 
economist, but I think we would argue that the overall return 
on those investments for the economy, as a whole, are higher.
    Mr. BOUSTANY. But that is not proven yet.
    Secretary GEITHNER. Well, you know, people may disagree on 
that, but, again, we think for the country, as a whole--and I 
know that this is going to be painful for parts of the energy 
industry. But I think overall----
    Mr. BOUSTANY. It is going to be painful for every American, 
sir.
    Secretary GEITHNER. No, I don't think so. I think that 
overall----
    Mr. BOUSTANY. I disagree with that. And, sir, if we tax our 
current energy production, then obviously prices are going to 
go up, whether it is electricity or fuel at the pump----
    Secretary GEITHNER. No. I think the problem with these tax 
benefits and the virtue of changing them is that they will not 
affect the price of energy for the American people. What they 
do do----
    Mr. BOUSTANY. I don't agree with that, and that is not what 
I am getting from economists that I have consulted with.
    Secretary GEITHNER. Well, unfortunately, about economists, 
you know about economists, they can disagree on almost 
anything. But we have to make these judgments.
    And, again, when you look at these industry-specific tax 
benefits, I think it is important to recognize that they only 
exist because other businesses pay higher taxes. So if you care 
about overall competitiveness of the American industry, you 
should care about trying to scale those back over time.
    Mr. BOUSTANY. There is also a provision with regard to 
dual-capacity companies. And this is going to affect U.S. 
companies that do drilling overseas, making them less 
competitive than American companies.
    Now, I have to question, why should U.S. tax law favor 
state-owned enterprises, Chinese state-owned enterprises, a 
Venezuelan state-owned enterprise, over and above U.S. 
companies?
    Secretary GEITHNER. I definitely would not support that, 
and I very much doubt that these proposals have that risk.
    But, again, Congressman, we are not going to agree on this, 
but I would be happy to talk to you about this. And I 
understand the concerns you began with, about the impact of all 
these changes on specific companies. And I would be happy to 
have my colleagues work would you on how best we can limit 
those effects.
    Chairman CAMP. All right. Thank you.
    Mr. BOUSTANY. Thank you, Mr. Chairman.
    Chairman CAMP. Mr. Neal is recognized.
    Mr. NEAL. Thank you very much, Mr. Chairman.
    Mr. Secretary, I am delighted with Dr. Boustany's comments, 
because I know now that I will be able to count on him with 
Bermuda and Switzerland as they compete in the reinsurance 
market in his part of the country with domestic companies.
    I am going to give you a chance to speak, Mr. Secretary, on 
this. Could you give us an idea of where we were with TARP, 
where we are with TARP, and where we are going with TARP?
    I am delighted with your modified proposal on reinsurance. 
You can already sense that the Bermuda and Swiss companies who 
are receiving a subsidy to compete with American companies are 
taking note of what you proposed.
    And the last issue is that the Department of Labor is 
proposing some new rules on fiduciaries, with their public 
hearing next month. And, at the same time, SEC is proposing new 
rules under Dodd-Frank to create a uniform fiduciary standard.
    I am hoping that Treasury will be involved in this 
rulemaking so that you will have some enforcement 
responsibility, as IRAs are solely in your purview. And you 
know I have your auto IRA that I have carried for the last two 
sessions.
    But I am asking, I guess, in the three instances here what 
the Treasury role will be in each instance.
    Secretary GEITHNER. Well, let me start with where you 
ended. We will follow that debate very closely. And, of course, 
we share your interest of trying to make sure these come out 
with a reasonable balance. But we will watch that stuff 
carefully.
    You understand what we are proposing on the reinsurance 
side. I don't need to go into that. But, again, we are trying 
to make sure there is just a level playing field for American 
companies.
    On TARP, where you began, let me just say a few things 
about where we are on TARP.
    When I came into office, the CBO estimated this program 
would cost us about $350 billion. We now believe that, outside 
of housing, these programs will show a positive return to the 
American taxpayer, very substantial amounts. And that is 
because we ran a strategy that had private capital, not the 
taxpayers' money, come in and bear the largest burden of trying 
to solve our crisis, recapitalizing the banking system, et 
cetera. And we have been very, very successful in managing 
those investments to generate, if you just look at the bank 
investments, for example, billions and billions in dollars in 
positive return that we can use to meet our long-term 
challenges.
    These programs were incredibly successful in restructuring 
the automobile industry, restoring it to profitability. And we 
have a much stronger private financial system today than we had 
going into the crisis because of the success of the President's 
strategy. We have not just saved, you know, hundreds and 
hundreds of billions of dollars of taxpayers' resources, but we 
are going to show a positive return, outside of housing, that 
is very substantial.
    I think it will prove to be the most successful financial 
rescue in modern history, even recognizing that we still face a 
lot of challenges ahead in digging out of this crisis, 
repairing the damage caused by it.
    Mr. NEAL. Well, as one who supported that initiative, I 
would point out and I think it is important to acknowledge 
again, that that legislation took place in October of 2008. So 
we are grateful for your efforts to make sure that the 
initiative worked, understanding that, even though it was 
proposed by the previous administration, that it is one of 
those instances in the House of Representatives where moderate 
Democrats and moderate Republicans cast the correct vote.
    Secretary GEITHNER. And the current Speaker of the House 
played a decisive role in helping make that happen. And there 
were a lot of courageous votes in this body in support of that 
legislation. It was very unpopular legislation, but it was a 
courageous and necessary act.
    Now, when we came in, we had to finish the job and get the 
money back. But it was absolutely essential to helping break 
the back of the financial crisis.
    Mr. NEAL. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman.
    Chairman CAMP. Thank you.
    Mr. Heller is recognized.
    Mr. HELLER. Thank you, Mr. Chairman.
    And, Mr. Secretary, thank you for being here.
    You keep exempting housing every time you talk about the 
economy turning around, and I would like to home in on that for 
just a minute.
    As you are probably aware, I am from Nevada. We have some 
real housing problems in Nevada. In fact, for the last 4 years 
straight, actually 49 straight months, Nevada has continued to 
have the highest foreclosure rate in the United States. One in 
every 79 housing units in Nevada has received a foreclosure 
notice. We have one county, where I believe 1 in 49 homes has 
received a foreclosure notice.
    We have over 400,000 households that owe more on their 
mortgage than they are worth. To put that in better 
perspective, three-quarters of the people in their homes are 
owing more now than their homes are worth. A couple of 
examples: We have a housing unit in northwest Las Vegas that 
were originally priced at $735,000, built in 2006. One of them 
went for $62,500 at auction last year. There is also a condo 
unit in Las Vegas that was selling in 2006 for $625,000, now 
selling for $106,000. I am just trying to put this thing in 
perspective, help you understand.
    When I talk to my constituents, of course they blame the 
banking industry, saying they are not willing to negotiate. 
When you talk to the banking industry, they blame the FDIC. 
When you talk to the FDIC, they blame you. Now, I am not asking 
you who you blame; I am just trying to set this picture in a 
manner to which you can respond.
    I want to give you two quotes, two of your quotes. I don't 
disagree with these quotes, but I think you can help shed some 
light on them. You said, ``I personally believe that there is 
going to be a good case for the government preserving some type 
of guarantee to make sure that people have the ability to 
borrow to finance a house even in a very damaging recession. I 
think there is going to be a good case for that.''
    You also said, ``I think we are not going to preserve 
Fannie and Freddie in anything like their current form. We are 
going to have to bring fundamental change to that market.''
    Some people would say that those two conflict with one 
another. The more I read it, I think it makes more sense.
    For my sake and perhaps my constituency's sake, could you 
shed some light, perhaps, on where we are going in the housing 
industry? And so that we are not exempting housing every time 
we talk about the economy improving, that perhaps there is a 
direction that we are moving or this administration is moving 
that we can fully understand.
    Secretary GEITHNER. Excellent question. And I am glad that 
you emphasized this basic reality still, which is, again, the 
scars of this crisis are still very deep and broad, and they 
are present still across the country.
    But the housing crisis was very much concentrated in your 
State and three other States and in a series of cities across 
the country. And it is still very, very hard. And, to be 
realistic, I think it is going to take several more years to 
heal the damage caused by that crisis.
    Now, we are trying do two things. One is we are trying to 
make sure that we can reach as many Americans as we can to give 
them a chance to stay in their home if they can afford it. The 
programs we have helped put in place have helped roughly 2.5 
million Americans have a chance to take advantage of a modified 
mortgage that lowers their monthly payment and stay in their 
home.
    We can't help everybody, because a lot of people got 
themselves way overextended, and we don't think we can justify 
using the taxpayers' money to help them stay in homes they 
can't afford. But we are going to try to make sure we reach as 
many people as we can. Those programs that are still in place 
now are making a huge difference for millions of Americans. And 
we want to make sure that, again, they do as much as they can.
    Now, longer term, obviously we have a housing system that 
is a mess and did not work, overwhelmingly dependent on the 
government now still. And what we laid out last week was a plan 
to gradually wind down Fannie and Freddie, gradually restore 
this market to a market where private capital provides most of 
the mortgages in this country, but still has the government 
play a limited role, a targeted role in helping provide 
affordable housing alternatives, rental as well as ownership, 
to low-income Americans.
    And we proposed a variety of other models for trying to 
make sure that the government is providing some kind of 
protection against the risk of a very severe recession in the 
future. We are not going to do that with Fannie and Freddie, 
though. We don't think they can be part of that solution.
    And we want to begin a debate in Congress with the relevant 
Committees about how best to craft legislation that would 
achieve those objectives: wind down Fannie and Freddie; restore 
the private market to the dominant place in housing finance, 
but with better protections for consumers; more capital against 
risk; homeowners holding more equity in their homes; and some 
protection in a future crisis against the risk that you have a 
mild recession turn into a depression. That is a very difficult 
challenge to do.
    And, of course, for the reasons you began with, we want to 
make sure these reforms are phased in gradually. Because we are 
not going to take any risk that we slow the process of 
repairing the housing market or we damage the recovery.
    Chairman CAMP. All right. Thank you.
    Mr. Gerlach is recognized.
    Mr. GERLACH. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for testifying today.
    One of the statements the President made in his State of 
the Union, which I felt was very positive, was his desire to 
address the corporate tax situation. And while he did not 
express, necessarily, where he felt the rate should be lowered 
to, it was a very positive statement that that is an issue he 
wants to work on.
    Do you have a sense of where the President wants to go, 
from the 35 percent corporate rate to what level?
    Secretary GEITHNER. Well, my own view is, for it to be 
worth it, you have to move it substantially lower. The 
average----
    Mr. GERLACH. So, in the 30s? Or below 30, into the 20s?
    Secretary GEITHNER. The average rate of our major trading 
partners now is in the high 20s. And for it to make a 
meaningful difference, you want to get it down substantially 
towards that level.
    Mr. GERLACH. Okay. And are you of the belief that, by doing 
that, you are incentivizing more domestic activity, economic 
activity, trying to encourage more investment here domestically 
rather than abroad?
    Secretary GEITHNER. Absolutely. I think that there are two 
very important rationales for doing this.
    One is, again, you want the market allocating investment, 
you want the market choosing which companies grow, which 
companies succeed. You don't want the tax system making those 
judgments, getting in the way of those judgments. And so, if 
you can clean up the tax system, lower the rate, broaden the 
base, you probably improve overall growth and efficiency.
    But as important as that, you want the Tax Code working 
with, not against, the objective of encouraging investment here 
in this country.
    Mr. GERLACH. Would those same goals apply to an individual 
taxpayer?
    Secretary GEITHNER. I think, generally, we are going to 
have to do comprehensive individual tax reform, too. And, as 
many people have proposed in the past, probably the best way to 
do that, to simplify the system, make it more fair, is to also 
lower the rates and broaden the base.
    Mr. GERLACH. Okay. As I understand it, under the 
President's 2012 proposal, he actually wants to raise the two 
top marginal rates from 33 to 36 and from 35 to 39.6, both of 
which would be over the corporate rate that we are talking 
about reducing. If those same goals apply to corporations as to 
individual taxpayers, why would the administration want to see 
an increase in those rates?
    Secretary GEITHNER. Well, again, what I would do is 
compare--if you think about those rates in context, they are 
the rates that prevailed in the 1990s, and we were doing fine 
as a country then. Actually, it is a record that was the envy 
of the world then and we would be thrilled to recreate today.
    So I think those rates are something that is completely 
consistent with the strategy of making sure we are more 
competitive, we are growing. And it recognizes that, again, as 
many of your colleagues have recognized, we have unsustainable 
fiscal deficits. And if we are going to save money together in 
reducing spending, we want to make sure those savings go to 
deficit reduction and improving incentives for investment in 
the country.
    Mr. GERLACH. Okay. Well, we don't have the same economy in 
2011 as we did in the 1990s. And I would hope that we would all 
work together to reconstruct a Tax Code that works for the 
current economy, both domestically and in the world, rather 
than going back to the 1990s and try to reconfigure the same 
kind of tax structure that may not be applicable to what we 
need do today.
    And I can't understand if we, on the one hand, agree that 
we need to lower the corporate tax rate to stimulate 
investment, why you also want to increase taxes on individuals 
if we want those same taxpayers to take their hard-earned 
money, invest it in the economy, create economic activity, and 
do the things that we all want to see happen to raise 
everybody's boat.
    So it seems to be a little incongruous that we would want 
to decrease or lower the corporate tax rate, and yet, at the 
same time, still in an economy with 9 percent unemployment, you 
want to increase taxes on people who we want to see invest in 
this economy.
    Secretary GEITHNER. Congressman, again, you are raising 
very important questions that just reflect the difficulty of 
the choices we face.
    But I will tell you, you know, my sense is, if you gave 
businesses the choice, they would choose that mix. They would 
say, we are comfortable living in an economy where we see a 
modest increase in marginal tax rates for only 2 percent of 
Americans and we see a more competitive tax system. I think 
they would prefer to play in that economy than the one we have 
today.
    Mr. GERLACH. Thank you, Mr. Secretary.
    Chairman CAMP. Thank you.
    Mr. Becerra is recognized.
    Mr. BECERRA. Thank you, Mr. Chairman.
    Mr. Secretary, good to see you. Thank you for being here.
    I am going to detour from asking you about the President's 
budget for next year for a moment, because the plan House 
Republicans released on Friday pertaining to this current 
year's budget could create an immediate crisis for millions of 
Americans who depend on Social Security.
    The Republican proposal cuts the Social Security 
Administration's operating budget for the rest of this current 
year by $1.7 billion below what the Social Security 
Administration needs for this current year, 2011. That is over 
$500 million below what the administration spent to serve the 
public last year with a smaller population of beneficiaries.
    As a trustee of Social Security, I am wondering if you 
could give me comments as to whether or not you think that is 
the way we should be stewarding the most important program that 
the Federal Government has for Americans, especially those of 
retirement age.
    Secretary GEITHNER. Well, again, Congressman, as you would 
suspect, I would not support those changes, for just the 
reasons you said.
    Mr. BECERRA. Okay. Now, my understanding is that, from what 
we are being told, that if the cut is made as the Republicans 
propose in their current-year budget proposal, it would mean a 
loss of 3,500 jobs, it would shut down the Social Security 
Administration's offices for 1 month, which means each and 
every one of us who services seniors in our office, disabled 
Americans, in our offices through constituent services would 
have to explain to members in our community that, for a period 
of about a month, there would be no one answering the phones, 
no one responding to queries, no checks going out to 
beneficiaries, no Social Security numbers issued to newborn 
babies.
    Over half a million retirees, widows, and severely disabled 
workers would face these delays, starting with the creation of 
a budget like this. Is that something you think, as a trustee 
for Social Security, that we can at this stage handle?
    Secretary GEITHNER. No. Again, I would not support cuts 
that would have that impact, for just the reason you have said.
    Now, again, I just want to be careful. I haven't seen those 
cuts. We don't know what the House is going to actually pass. 
And we would take a very careful look at anything the House 
passes and try to make sure that people understand the full 
implications.
    But the most important thing, again, is, as we find a way 
to restore gravity to our fiscal position, we are not cutting 
into basic services and critical investments that will hurt the 
economy longer-term--not just short-term, but long-term as 
well.
    Mr. BECERRA. And now, on a related note, our Republican 
colleagues are threatening to shut down the government unless 
certain cuts are made in certain programs. And that would come 
through a vote on the debt ceiling limit. And they would vote--
some have said that they would vote against it.
    Some Members on the Republican side have said that they 
would vote against increasing the debt limit and keeping the 
government operating unless there were cuts to Social Security. 
I know that there are some who have made a proposal that 
would--I would call it the proposal to pay China first; that 
before you pay any money for any program, whether it is a 
Social Security beneficiary or Medicare beneficiary, you have 
to first pay other creditors, including China and others who 
have lent us money. That is why some of us call it the ``pay 
China first'' proposal.
    Do you believe that we should be holding the government and 
all those who depend on the services that the government 
provides hostage in order to make certain cuts that could 
ultimately have a devastating impact on Americans?
    Secretary GEITHNER. I don't, Congressman. As you know, I 
believe that America has to meet its obligations, that we are a 
country that pays its bills, we meet our commitments. And we 
cannot afford to do anything that would create a risk of 
jeopardizing this recovery, slowing the pace of expansion, 
slowing the pace of employment growth. And to create any 
uncertainty in the minds of the American people and the broader 
investment community that America will not meet its obligations 
would be very damaging to the recovery.
    And, again, just to take the more confident side of this, 
of course I am completely confident Congress will act, as it 
always does, to raise the debt limit. And I very much welcome 
the comments made by the Republican leadership, both in the 
House and the Senate, that recognizes that America has 
obligations and is going to have to meet them.
    Now, we are going to have to have a very important debate 
about how to restore fiscal responsibility. And we are looking 
forward to that debate, again, because that is a necessary 
debate for us to have. But we are going to have to work that 
out and still make sure the world understands that we are a 
country that meets its commitments.
    Mr. BECERRA. We are going to have a further discussion 
later on, not just through the discussion of the budget but in 
coming up with tax reform policies, on what we do with all 
these tax loopholes. The President's fiscal commission, which I 
was privileged to serve as a member of, called these tax 
loopholes ``tax earmarks,'' because essentially we are 
earmarking money to certain segments of the American economy, 
whether it is businesses or individuals. And they get the gain 
while the rest of the population doesn't.
    And you do touch on them some. In fact, you had a 
conversation with my colleague Mr. Boustany about the tax 
loopholes that go for the oil industry. Are those the types of 
things that you are going to continue to try to seek out some 
consensus and try to make reform to our Tax Code?
    Chairman CAMP. If you could just answer briefly. Time has 
expired.
    Secretary GEITHNER. Yes.
    Chairman CAMP. All right.
    Mr. BECERRA. Thank you, Mr. Secretary.
    Chairman CAMP. Dr. Price is recognized.
    Mr. PRICE. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for joining us today on what 
really, I think, is one of the most important issues for our 
constituents. They understand that our fiscal house is not in 
order, and they are demanding that it be put in order.
    Just by way of clarification, I think it is also important 
to appreciate that the President is the one who holds the keys 
as to whether or not the government gets shut down. He has said 
that he won't sign something--fill in the blank. Whether or not 
this government gets shut down is squarely in the President's 
lap.
    You said just a moment ago that you thought it was 
appropriate for the market to decide which companies grow and 
succeed. Many of us on our side of the aisle and many Americans 
believe that this administration has grossly distorted the 
market and made it much more difficult for companies to be able 
to succeed in the way that the normal business processes work, 
where the government isn't coming in to bail out their 
competitor or to change the playing field.
    So I think it is incredibly important that we recognize 
that the kind of things that are being said here don't 
necessarily square with what the reality is, or at least the 
perception of folks out there.
    But I want to talk about what you have said and what the 
President said. This is a 10-year path. You said today, we need 
to take the lead and the initiative. And so, for so many of us, 
we are just dumbfounded, astounded by the fact that the 
administration hasn't taken this opportunity to address the 
issue of entitlements.
    Clearly, the automatic spending that is in the budget, in 
the Federal Government, just continues and continues and 
continues. And if there is no change, obviously that is what 
will make us Greece, with no pejorative opinion on Greece, but 
certainly the financial situation.
    Why didn't you all address the entitlement situation?
    Secretary GEITHNER. Well, Congressman, at the risk of 
repeating myself, what the President's budget does is reduce 
our deficits to roughly 3 percent of GDP over a 5-year time 
frame----
    Mr. PRICE. I got that.
    Secretary GEITHNER. --which is the level necessary to 
stabilize our debt burden at a level that is acceptable for us.
    Mr. PRICE. In 5 years, are we any more capable of 
addressing the challenges of Medicare and Medicaid than we are 
right now?
    Secretary GEITHNER. Well, you are right to point out, as we 
do, that that is just a first step, and solving the 10-year 
deficit, which is essential and important, does not, by itself, 
solve the long-term deficits.
    Mr. PRICE. So would you say----
    Secretary GEITHNER. But, again, this President and this 
body has already passed and put in place the most sweeping 
entitlement reform to reduce costs that we have considered as a 
country. And just contrast it with, for example, what this body 
passed in the previous decade, which was a large expansion of 
Medicare to cover pharmaceuticals without paying for it, adding 
to our deficit----
    Mr. PRICE. Actually, Mr. Secretary, I wasn't here when that 
passed, but----
    Secretary GEITHNER. You weren't. I don't blame you for 
that.
    Mr. PRICE. I would suggest that what was passed in the area 
of health care in fact will increase costs to the Federal 
Government, increase our deficit and our debt, as opposed to 
decrease it.
    So it really is remarkable, again, when you say, we need to 
take the lead and initiative. There is no evidence of this 
administration taking the lead and initiative on entitlement 
reform. You have taken the lead and initiative on expanding 
entitlements and expanding automatic spending.
    I want to address a particular issue in the area of health 
care as a physician, the issue of the sustainable growth rate 
and how physicians are compensated for the remarkably high-
quality care that they deliver.
    My reading of the budget, and it is just recent, is that 
over the 10-year window, I think it is about $341 billion, 
somewhere in that range, to allow for the SGR to continue. 
Where are you getting that $341 billion? I haven't been able to 
determine that.
    Secretary GEITHNER. We identify ways to cover the costs of 
that for, I believe, the first 2 years----
    Mr. PRICE. Yes.
    Secretary GEITHNER. --but not for the remaining 8.
    Mr. PRICE. Correct.
    Secretary GEITHNER. And we are assuming--and it is an 
assumption, or it is a prediction, it is a hope that Congress 
will, as they have done the last 2 years, figure out a way to 
make sure they can sustain those rates at levels Congress seems 
to want to, and do it in a way that they pay for it. But we 
only identify how to do it in the first 2 years.
    Mr. PRICE. So the assumptions are that Congress will take 
care of that and that money will be there.
    Secretary GEITHNER. Not all on your own. We will probably 
have to join you in figuring out ways to pay that. But we don't 
solve it, we don't identify how to do it over the full 10 
years.
    Mr. PRICE. Okay. Well, let me just register, finally, my 
real concern about what I believe is a remarkable lack of 
leadership on the part of this Administration in not addressing 
the issue of Medicare and Medicaid reform.
    Chairman CAMP. All right. Thank you.
    Mr. Doggett is recognized.
    Mr. DOGGETT. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary.
    The budget that the President has presented seeks to add 
some improvements in our fiscal operations both through revenue 
and spending changes. And, as important as those spending cuts 
are, some of them even painful cuts in spending, the revenue is 
also very important. In fact, it is the principal job of this 
Committee.
    You don't believe that we can achieve a balanced budget 
without some additional revenues, do you?
    Secretary GEITHNER. No, I don't. I don't think you can 
achieve the necessary reduction in deficits that are critical 
to long-term growth without looking at sensible, carefully 
designed tax reforms, as well.
    Mr. DOGGETT. Right. And with reference to those tax 
reforms, one that you have been involved in of late is 
corporate tax reform. We recently, as you know, had a hearing 
in this Committee on this.
    According to a Bush administration Treasury report, taxes 
on U.S. corporations represent a smaller percent of their 
profits, in fact, than in other developed countries across the 
OECD. I believe that last year there was a report out that 
corporate tax receipts represent a little over 7 percent of 
Federal tax revenues. Fifty years ago, it was about three times 
that amount that we got.
    President Reagan, which I think provides us some guidance 
here, when he approved the 1986 Tax Reform Act, he actually 
raised corporate tax revenues for the Federal Treasury by about 
$122 billion.
    You have said that the guiding principle here, and the 
President has said in his State of the Union, is that, at a 
minimum, we should not borrow money or shift more of the tax 
burden to individuals in order to have corporate tax reform. 
And I want to assure that that is a firm and unyielding 
position of the administration, that we will not be borrowing 
from the Chinese to finance such a reform, and we will not be 
shifting more of the burden to individuals.
    Secretary GEITHNER. That is right. When we say revenue-
neutral, we mean we would not support tax reform that reduced 
revenues from the corporate sector, but it also means that we 
don't think it is realistic or achievable or desirable to try 
to raise revenues from higher taxes on businesses, because we 
live in a much more competitive world. And though what you said 
is right, the average effective tax rate on U.S. businesses 
today is about the average of our competitors, but our 
statutory rates are much higher, their statutory rates are much 
lower, and that creates a playing field that works to our 
disadvantage.
    And we don't think realistically we can shift more of the 
burden to the business community than they already bear because 
of that new competitive world. So when we say revenue-neutral, 
we mean revenue-neutral.
    Mr. DOGGETT. You are not going to have them contribute less 
than 7 percent.
    Secretary GEITHNER. Not going to reduce and not going to 
try to go materially higher.
    Mr. DOGGETT. You have included in this budget proposal, 
again, international tax loophole closures that you have had in 
the past. And one of those that I have been particularly 
interested in is the one that deals with corporations that 
develop intellectual property, patents, various other forms of 
intellectual property, formulas and the like here in the United 
States, perhaps even using our research credits, and then just 
before they are to be marketed they shift the ownership or they 
joint-venture it offshore.
    We had testimony on this last year at our hearing from 
Assistant Secretary Shay, who said that the administration 
would support moving forward to deal with this narrow but very 
costly problem that I believe your budget that you just 
submitted says costs us about $20 billion over 10.
    And my question to you is, does the administration continue 
to support dealing with this serious problem of shifting 
intellectual property overseas as a separate, independent 
matter from broader reform we hope to eventually achieve?
    Secretary GEITHNER. We do. We can do it in two different 
ways. We can do it by reforming the current system, as we 
proposed, to reduce the opportunity our Tax Code provides to 
shift income outside of the United States, income from 
intangibles like you suggested. Or we can do it through 
comprehensive reform.
    But, again, the overriding objective should be to make sure 
that we are reducing both the incentives and the opportunities 
in the tax system to shift income and investment outside of the 
United States.
    Mr. DOGGETT. And I believe that there are proposals not 
unlike the one Mr. Becerra talked about for Social Security in 
this continuing resolution to make significant cuts to Internal 
Revenue Service tax enforcement. I know some people who would 
like to see that amount cut to zero, but we have had testimony 
in the past that, for every dollar that we cut in tax 
enforcement, we are reducing revenues by $3 to $14.
    Does that remain true, that significant cuts to the 
enforcement will actually worsen our budget deficit problems?
    Secretary GEITHNER. Absolutely. The independent analysts 
that look at this say, for every dollar you put in to IRS 
resources, customer service enforcement, you raise at least $4.
    Chairman CAMP. All right. Thank----
    Secretary GEITHNER. Every dollar you cut has the same cost.
    Chairman CAMP. Thank you.
    Mr. Smith is recognized.
    Mr. SMITH. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for your time and your service.
    We heard earlier commentary on Social Security and what 
could be accomplished or what could not, perhaps, speculatively 
be accomplished. Now, a furlough, as apparently was suggested, 
would that not be an administrative prerogative?
    Secretary GEITHNER. You know, I don't have the privilege or 
the responsibility of managing the Social Security 
Administration, so I can't--and I haven't had a chance to look 
at these cuts. So I was very careful in responding to that 
question by saying that, if the cuts had that impact, then I 
think it would be imprudent and unwise and unnecessary. But I 
haven't had a chance to look at them. And I don't know how we 
would meet whatever Congress would propose.
    Mr. SMITH. Okay. Well, I appreciate that. And I guess I 
would like to certainly do my part for not participating in 
hyperbole and, you know, ramping up rhetorical statements for 
various reasons. But, certainly, I think you can agree, we are 
facing some significant challenges.
    We have touched a bit on taxes here today. You know, the 
estate tax, I hear a lot of input on that from back home, rural 
Nebraska. They say it is double taxation. Do you agree with 
that?
    Secretary GEITHNER. Well, you know, I--I don't know what I 
would describe--how I would describe it. But what I would say 
is that the rates and exemptions we proposed would make sure 
that that tax only affected, we think, less than one-half of 1 
percent of estates in any given year.
    And, again, we are not proposing it because we like doing 
it. We are only proposing it because, as you are saying over 
and over again, we have unsustainable obligations, 
unsustainable deficits, and they will hurt future growth and 
make us weaker as a country if you don't fix them. And we are 
going to have to do a bunch of things to spread the burden of 
that.
    But, again, our proposals would only affect less than one-
half of 1 percent of all estates in any given year.
    Mr. SMITH. Well, I can appreciate that. I mean, it 
certainly reduces the political pushback. I would hope that you 
would share the concern of many of my constituents, not just 
about the estate or death tax, but the narrowing of the tax 
base, that fewer and fewer people are paying taxes. Whether it 
is the Federal income tax that fewer and fewer people are 
paying or other taxes how do you think we could address that?
    Secretary GEITHNER. Well, if you look at our tax system 
today, there is lots of unfairness across the system. And you 
refer to one piece of it, which some people think is unfair, 
which is lower-income Americans pay payroll taxes but many 
don't have to pay the income tax as a whole. But the vast 
majority do pay the payroll tax.
    But I will take the other side of it. It is also true that, 
as many of our, you know, most successful executives have said, 
you can be a very successful businessman today and pay a much 
lower effective tax rate than people who work for you. And that 
doesn't seem fair either.
    And, again, we are trying to propose some initial reforms 
to help leave us with a more simple, more fair system.
    Mr. SMITH. All right. And I can appreciate that, as well.
    Now, on the capital gains tax rate, is there any concern 
that letting that go back up or even pushing it back up could 
actually result in fewer dollars of capital gains tax being 
recovered?
    Secretary GEITHNER. Not at 20 percent, no. Again, we are 
proposing to make sure that--but, you know, Congress has to 
make this choice--that we would only see, if those goes up for 
the highest-income Americans, they only go up to 20 percent. 
And we think that is a very modest rate on capital income.
    Mr. SMITH. But still by increasing the penalty per se of a 
transaction, there would be no risk or very little risk of 
actually having fewer transactions?
    Secretary GEITHNER. I don't think--I think it is a very 
small effect.
    You know, we are also, as I said, proposing to eliminate 
capital gains on investments in small businesses. We have some 
offsetting things that are good. But I think that would be a 
very modest change, and no material impact on the economy or 
investment decisions.
    Mr. SMITH. Okay. Thank you, Mr. Secretary.
    I yield back.
    Chairman CAMP. All right. Ms. Jenkins is recognized.
    Ms. JENKINS. Thank you, Mr. Chair.
    And thank you, Mr. Secretary, for joining us today.
    Chairman CAMP. If the gentlewoman would suspend, because of 
short time, as the Ranking Member and I have discussed, we are 
going to go to 3 minutes per member to try to accommodate every 
single Member.
    Secretary GEITHNER. And, again, I am happy to respond in 
writing to any questions. And I am sorry that I have to leave 
at 3:30.
    Ms. JENKINS. Thank you, Mr. Chair.
    Once again, thank you, Mr. Secretary, for joining us.
    As a result of an agreement last December, the estate tax 
for the next 2 years will be imposed at a top rate of 35 
percent with a $5 million exemption. And effective for 2013, 
President Obama has proposed to make permanent the estate tax 
parameters that were in effect in 2009, a top rate of 45 
percent, $3.5 million exemption, which would not be indexed for 
inflation.
    I am a sixth-generation Kansan, raised on the family's 
dairy farm in Holton. My kids are the seventh generation to 
grow up in eastern Kansas. Mr. Secretary, as you probably know, 
Kansas is an ag State. I hope you have an appreciation for the 
importance of the family farm to this nation.
    Do you even happen to know what the price of a new combine 
is?
    Secretary GEITHNER. I have never been a farmer, do not 
know.
    But I will say one thing, which is, the agricultural 
community in the United States today is one of the strongest 
parts of the economy today. And you are seeing in exports of 
agriculture, in basic growth in agriculture, a lot of 
encouraging signs of how strong this country is in agriculture. 
And we want to do everything we can to make sure we are 
reinforcing that.
    Ms. JENKINS. We feel like we are under attack here. A new 
combine costs over $300,000; a new tractor, over $225,000. That 
is with nothing attached to it. If you want to attach a high-
priced implement, it is $170,000 on top of that. So, as you can 
see, the cost of the necessary equipment to manage a farm can 
be quite high. In fact, it can easily top $1.5 million just in 
equipment.
    Several years back, the USDA did a study. There were nearly 
11,000 Kansas family farmers that had land and buildings valued 
at over $2 million. So the cost of implements and land values, 
when added together, it is really not hard to get to the $3.5 
million cap on the estate tax that the President's budget is 
proposing.
    And, in addition, I want to note, the average net income on 
a family farm is approximately $45,000 a year.
    Now, I have heard the President state that everyone needs 
to pay their fair share of taxes, but under the President's 
proposal, it is not unreasonable to expect that a significant 
percent of Kansas family farms could be placed at risk when 
trying to comply with Federal tax laws and most likely could 
not meet the capital requirements to maintain ownership between 
generations.
    So I just would like to see if you realize how this 
proposal negatively treats family farms. I would ask you, how 
do you advise family farms address this challenging issue?
    And perhaps as a follow-up, it has been promised that taxes 
wouldn't be raised on those earning below $250,000. With the 
net income of the family farm being $45,000 a year in Kansas, 
again, how do you explain hitting them with a tax increase that 
could cost many of them their livelihood?
    Chairman CAMP. Just very briefly, Mr. Secretary.
    Secretary GEITHNER. Could I just say one thing?
    Chairman CAMP. Yes.
    Secretary GEITHNER. Again, the estate tax changes would 
affect only less than one-half of 1 percent of estates in any 
given year, including the families that you are concerned 
about. And we share those concerns.
    One very important point: In the tax package passed by the 
Congress at the end of the year, the President proposed, and it 
was included in that, a provision for 1 year, any business in 
the country can fully expense capital investment, fully write 
off against their taxes the cost of a new combine, a new 
tractor. And that is one reason you are seeing capital 
investment expenditures start to accelerate now in the 
beginning of the year.
    So, again, if you look at the overall mix of things we are 
proposing, we have put in place, they will substantially 
improve the capacity and the competitiveness of American 
businesses and American companies.
    Chairman CAMP. All right. Thank you.
    Mr. Thompson is recognized.
    Mr. THOMPSON. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here.
    And if the gentlewoman from Kansas is truly interested in 
saving family farms, I have a bill for you. See me after the 
hearing.
    I think it is important that we discuss this budget today, 
on the same day we are beginning the debate on the CR. And a 
couple of my colleagues have juxtaposed some of the 
differences. I think one of the major ones speaks directly to 
the issue that I think it was Mr. Herger raised, that he was 
interested in a budget that gets people back to work. And that 
is kind of the antithesis of what the CR does, given the early 
analysis that that would cost us about 800,000 jobs.
    And so, if you juxtapose what is happening today in the CR 
and the President's budget, specifically things such as the 
Build America Bonds, which were so successful--I know 
Sacramento airport used those. They generated 1,250 jobs. And 
probably every district across the country can say something 
similar. And I would like to hear how you deal with that, 
because that is certainly a job creator, visavis the job killer 
in the CR.
    And also, on energy issues, I notice the President's budget 
extends the 1603 Treasury grant program, which is so important 
for renewable energy, and the section 48(c) provision, the 
manufacturing tax credit, which is important to keeping those 
jobs here in America.
    And I would like to hear about that and what you see as an 
opportunity for us, through encouraging and investing in 
renewable energy, how we can use that to create more jobs.
    And I should also mention, because it was brought up today 
by someone on the other side about the potential loss in 
traditional energy jobs, that the CR makes some cuts that will 
make it impossible to get permits renewed and issued for those 
traditional energy jobs, which, again, puts us at an energy 
disadvantage.
    Secretary GEITHNER. Well, Congressman, you highlighted a 
range of things we think are some of the most important things 
we can do to help the economy recover, not just in the short 
term but long term.
    And I would share the caution that, as you look at how to 
make these tough choices across the deficit as a whole, be 
careful not to cut investments that will hurt jobs and be 
careful not to cut investments that will hurt our 
competitiveness in the future. And when you think about our 
broader fiscal challenges, make sure you bring a long-term 
perspective and that you are putting in place restraint that we 
can live with over time, that balances that need to make sure 
we are strengthening the recovery of the economy as a whole, 
and also brings some gravity to our fiscal position.
    Chairman CAMP. All right. Thank you.
    Mr. Buchanan is recognized.
    Mr. BUCHANAN. Thank you, Mr. Geithner, for being here.
    Thank you, Mr. Chairman, for this meeting.
    The biggest concern I have is about taxation, in terms of 
the President's budget, but I want to touch on a couple of 
things.
    One, we are all interested in jobs, because we know if we 
grow jobs, it cuts the deficit. So we have to do that. I think 
you agree with that.
    But let me tell you the reality. I am a guy who has been in 
business 30 years, had a thousand employees 4 years ago, so I 
understand the middle markets pretty well. I was Chairman of 
the Florida Chamber. I dealt in these middle-market and small 
companies.
    Let me give you my observations from Florida. One, there is 
a severe lack of credit for small- and medium-sized businesses. 
You know that; I have seen you acknowledge it numerous times. 
Compared to what was 4 years ago, it is very difficult to get 
credit. Today, they can talk about credit, but unless you are 
going to put up a half-million-dollar CD, you are not going to 
get that line of credit, whatever you need.
    The second thing is health care. To me, it is a big 
entitlement program for 32 million or 50 million people, but it 
doesn't do anything to bend the curve for small- and medium-
sized business. I had one of our largest employers the other 
day in from Sarasota. They are getting ready, ideally, to hire 
300 people. They could hire more. Their health care bill went 
up a million and a half dollars. But that goes across the 
board, even with small companies. Everybody says, ``Vern, I 
just got my health care bill. It went up 20 percent.'' It is 
killing jobs. Lack of credit is killing jobs.
    Now, the third thing that comes to the budget with the 
President is increasing taxes. I want to go back to a point 
that you made. You said that it only raises taxes on 2 to 3 
percent of small businesses. That was in your opening comment. 
That might be true of the percentage of businesses, but how 
many jobs do they create? There are a lot of people, and most 
of them that might make a million dollars today, but they have 
700 employees. They need more capital. But this budget suggests 
we raise their taxes in a climate with a lack of credit and 
health care costs going up. A lot of these businesses, as you 
know, are passthrough entities.
    So how 
do you respond to the tax aspect of the President's budget?
    Secretary GEITHNER. Okay, again, very briefly, you are 
right about the credit problem. And I agree with you, it is 
very important. And, you know, after a period where credit was 
too easy, it is too tight now in pockets of the country, 
particularly for businesses that were unlucky in their choice 
of bank. Because their bank got overextended, they were the 
victims of the bank having to reduce leverage and strengthen 
capital.
    But we are hoping that is going to start to improve. The 
numbers suggest it is starting to improve. The price of credit 
is much, much lower than it was at any time in the last 2 years 
or so.
    And this small-business program that is now working its way 
through the system is going to help a little bit, help small 
banks get capital from the government, help States provide a 
little more financial power into their credit programs.
    And we have to make sure that the examiners, the 
supervisors, and the bank supervisors aren't----
    Mr. BUCHANAN. But getting to that tax piece, I really 
want--you said 2 or 3 percent. I want you to make a comment on 
that.
    Secretary GEITHNER. Now, again, it is very important to 
understand, so I am glad you asked it again. And I am just 
telling you the numbers that the independent tax people tell 
the Congress, or inform the Congress of.
    It is 2 to 3 percent of small----
    Mr. BUCHANAN. Of companies.
    Secretary GEITHNER. Of companies. And----
    Mr. BUCHANAN. That employ how many?
    Secretary GEITHNER. And you are right, they employ 
substantial numbers of people. But the vast bulk of those 
companies affected by that are companies that make substantial 
amounts of earnings.
    Now, you are right that their taxes----
    Mr. BUCHANAN. They are not all law firms and investment 
firms. I can tell you that----
    Secretary GEITHNER. No, they are not all law firms. But 
those that are not law firms and investment firms are 
overwhelmingly still earning substantial amounts of money.
    And, again, these are the rates that prevailed at a time 
when the small-business community in this country----
    Mr. BUCHANAN. But we don't have the circumstances we have 
today. That is my concern.
    Chairman CAMP. All right. The time has expired.
    And, Mr. Secretary, I know we agreed on a hard stop at 
3:30. We do have three Members on each side that have not had 
an opportunity to question. I don't know if I could prevail on 
you----
    Secretary GEITHNER. Could I listen to the questions and 
then, if I don't have time, I will respond to them in writing?
    Chairman CAMP. All right. 
Why don't we have them at least pre-
sent their questions to you. I appreciate your generosity in 
staying.
    So Mr. Blumenauer is recognized. And then, once you 
complete your question, we will go on to the next person.
    And then if you want to try to summarize at the end, I 
would appreciate that, Mr. Secretary.
    Mr. BLUMENAUER. Mr. Secretary, first of all, I would just 
identify with my friend, Mr. Thompson, about the energy.
    But my specific question that I would pose to you deals 
with what my friend from Louisiana talked about, about 
potential downside impacts of the President's proposal to 
eliminate outdated fossil fuel subsidies for the oil companies 
and invest in energy for the future. By the way, some of us--I 
have introduced legislation that would do exactly that, and I 
have a number of cosponsors.
    I would hope that you could analyze for us, in a world oil 
market where a barrel of oil is fungible and a price is 
determined internationally that is in the range of $2 trillion 
to $3 trillion, or more if it keeps going up, what impact $8 
billion would have on the $2 trillion to $3 trillion--the 
extent to which it has any benefit, would that inure to 
Europeans or Chinese, if it made any difference at all.
    It seems to me that would be useful for us, to have this 
proper context.
    Chairman CAMP. All right. Thank you.
    Mr. BLUMENAUER. Thank you, Mr. Chairman.
    Chairman CAMP. Mr. Berg.
    Mr. BERG. My question comes from North Dakota. Back in the 
1980s, we had a real financial problem, and we increased taxes, 
and the problem just continued. A decade ago, we had the same 
problem, a lot of other States did, after the dot-com bubble 
burst. And, really, we took the opposite approach. We tightened 
our belt. We didn't raise taxes. We encouraged the private-
sector growth. And today we are below 4 percent unemployment. 
We encouraged the oil and energy industries to grow, encouraged 
those kinds of jobs, and they have had positive growth.
    So my question to you really relates to the importance of 
small business. My own experience is, when you tax small 
business, that is negative for them. It creates uncertainty. 
And so, in this budget, I see the taxes going up on small 
business. A lot of small businesses, are passthrough entities, 
and so they are paying taxes at ordinary income rates. In fact, 
I think 50 percent of small business is paying their tax as 
ordinary income.
    So, again, my question to you is how can we increase the 
taxes on these small businesses, and how can that be good for 
our economy?
    Secretary GEITHNER. Again----
    Chairman CAMP. All right.
    Secretary GEITHNER. Well, I am sorry. I said I wouldn't 
respond, but I will come back at the end.
    Chairman CAMP. All right. Mr. Kind.
    Mr. KIND. Thank you, Mr. Chairman.
    And, Mr. Secretary, thank you for being here.
    I, too, have a follow-up question about the fiduciary 
definition that is being worked on by Labor and SEC, but I will 
submit that in writing and hopefully get a response from you.
    But I don't know if you are or are not aware, but the 
Economic Policy Institute, a nonpartisan, independent group, 
finally had a chance to analyze the Republican continuing 
resolution that is before us this week. And they determined 
that, if enacted as proposed, it would result in over 800,000 
jobs being lost in both the private and public sector, given 
the policy implications behind their continuing resolution.
    I find that 800,000 number very fascinating, because, the 
day President Obama was sworn in, you may recall that we were 
losing 800,000 jobs a day. Since then, we have had----
    Secretary GEITHNER. A month.
    Mr. KIND. A month, A month. Since then, we have had 11 
consecutive months of private-sector job growth. The day he was 
sworn in, $17 trillion of wealth had already been destroyed in 
the stock market. Since then, over $13.5 trillion has been 
restored.
    And the day he was sworn in, he inherited from the previous 
administration a $1.5 trillion budget deficit. Now, the first 
year in which you guys had control of the budget, it was 
revised downwards by $150 billion. It is going up again next 
year, but that is primarily due to the continuation of the Bush 
tax cuts that all of them supported on the other side.
    And I think we just have a very stark contrast between two 
different visions for our country right now: one that is 
offering a very cold, dark assessment about the future of our 
nation and the possibility of economic growth, and one that is 
more hopeful and optimistic.
    I see that in the budget that this administration has 
proposed, especially in the area of innovation and 
competitiveness. I agree, and I think most people would agree, 
with the President in the State of the Union when he says, we 
have to out-innovate, out-build, out-create, out-compete the 
rest of the nations in the world. And there are smart 
investments in doing it and bad spending that we have to get 
control of in order to bring balance to all of this.
    And I would be interested, again, if you want to submit a 
written response or whatever, to highlight some of the more 
important investments you feel we have to move forward on in 
order to create the sustainable long-term economic growth that 
we face in this nation.
    Thank you.
    Chairman CAMP. All right. Mrs. Black is recognized.
    Mrs. BLACK. Thank you, Mr. Chairman.
    Mr. Geithner, I want to read from your written testimony 
here. You say, ``Our deficits are too high, and they are 
unsustainable. Left unaddressed, these deficits will hurt 
economic growth and make us a weaker nation. And we must go 
back to living within our means.'' I couldn't agree with you 
more.
    But this budget predicts, over the next 10 years, that we 
are going to lower our deficit to 3 percent of GDP. And I am 
just thinking about my 14-year-old grandson. And 10 years from 
now, what I can say to him is, ``You know, Dylan, I am really 
sorry that we could only lower this to 3 percent. And, by the 
way, you are going to have at least a $15 trillion deficit that 
you and your family are going to have to pay back. And I am 
really sorry that I just couldn't get it quite done for you.''
    Why is that our goal, to still be at a deficit, not a 
balanced budget, and not growing our economy to the point where 
we can start paying down our debt? That just seems like not a 
very good goal to me.
    Secretary GEITHNER. Excellent question. I agree with you; 
it is a place to start, but it is not enough.
    Chairman CAMP. Mr. Pascrell is recognized.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    Mr. Geithner, let's put to bed once and for all, if you 
would--and I think you need to address this directly--that we 
did not--maybe the President did not address it for the other 
reasons, the entitlements. But it is not true that Federal 
health care reform adopted many--they did adopt many of the 
recommendations from Congress' own independent advisory 
commission. I hope you read it. The Medicare Payment Advisory 
Commission, very specific recommendations. And that by having a 
Medicare center for innovation, Medicare can now test and use 
new payment models to improve patient care and to bring the 
cost down. I have never heard anything about that from Fox. 
Ever, ever, ever will I hope to hear that.
    And my second area I think you should address is, we are 
cavalierly talking about public employees like they are 
chattel. That is what we do with cops and firemen and teachers. 
And they are not. They have given their lives to this country. 
If they have some bad ones in the mix, get them out of there. 
But you can't paint with a wide brush.
    We are now having a weird situation of increasing private 
jobs and the public jobs going down. And if you don't think 
that is going to cost us money, you are wrong.
    Thank you, Mr. Chairman.
    Chairman CAMP. All right. Mr. Schock is recognized.
    Mr. SCHOCK. Thank you, Mr. Chairman.
    Thank you, Mr. Geithner, for being here.
    There are two questions I want to highlight, one dealing 
with what some are calling the TARP tax, the tax being levied 
on institutions with assets over $50 billion. I am specifically 
interested in a couple of things: one, why in one step we are, 
with a broad brush, taxing all institutions with assets above 
$50 billion, whether they took TARP or not; and then, at the 
same time, we exempt out some entities that actually took TARP.
    And then, I think the question that is begged is, when the 
administration says we are making money on TARP, why would we 
need a tax to begin with?
    The other question deals with the budget, which really 
seeks to penalize those companies that utilize deferral. And 
for those of us that have companies in our State that are large 
multinationals, I guess my question would be, how does that 
help create jobs? And, more importantly, how does it help us 
become competitive in a world climate? For a company that may 
only have 10 or 12 percent of their operations overseas, we may 
be able to get the skin, but if 70 or 80 percent of what they 
sell is manufactured and sold in other countries, I would 
suggest that perhaps they are just going to leave if we 
continue to make it more and more uncompetitive for them to 
remain in America.
    Chairman CAMP. Mr. Crowley is recognized.
    Mr. CROWLEY. Thank you, Mr. Chairman.
    And I will be brief. I was hoping to have more of a 
discussion with you, Mr. Secretary. I appreciate your being 
here today.
    With respect to the health care reform law that we put in 
place and that you so ably helped to lead the charge on and to 
talk about the impact on the U.S. economy, I would have liked 
to have had a conversation and heard from you and your thoughts 
about what we are hearing more about, the taxation on America's 
middle class that that bill will bring about, how it is going 
to kill jobs in America. I would have liked to have talked to 
you about that. Or how it is going to kill small businesses, 
that small businesses will never use the tax credits that they 
have been afforded under the new law.
    I would have liked to have had a conversation about a lot 
of the falsehoods that have been spewed about this, and 
continue to be, even though small businesses are using tax 
credits, even though we are not killing small businesses in 
this country, nor are we killing job creation and growth, as 
you have just said, that we have consistently over the last 11 
months continued to see growth in the private job market. And 
that there is not going to be an increase, because of that 
bill, on taxes in the middle class.
    I would have liked to have had an opportunity to talk to 
you about that. I wasn't able to, so I think I answered the 
questions for you. But thank you very much for being here 
today.
    Chairman CAMP. All right.
    Mr. Secretary, I want to thank you for your time. You were 
very generous. I will certainly give you the opportunity to 
respond now, if you like, to touch on any of those things or to 
respond in writing at your discretion. If you would like to 
comment now, you may.
    Secretary GEITHNER. Well, can I just say a few final 
things?
    Chairman CAMP. Yes.
    Secretary GEITHNER. Let me just make a few final points.
    If you care about entitlement reform and our long-term 
fiscal deficits, the most important thing Congress could do is 
to make sure the reforms that were put in place to reduce the 
rate of health care cost growth remain in place, are enacted, 
that Congress sticks to them. And if we can find ways to go 
beyond, we welcome a chance to do that.
    A second observation to make: We had a lot of discussion 
about the state of the economy and what is going to be good for 
future growth. I just want to emphasize that, by any measure 
you can look at the fact that the stock market is up about 100 
percent since when we came into office, or you can look at 
overall levels of profitability for the American business 
community as a whole the American private sector you look at 
productivity growth, you look at the dynamics of innovation, 
what is happening in expert growth, the American business 
sector is in a dramatically stronger position today because of 
the actions taken by Congress and the President and the Fed 
over this period of time. Our job is to help make sure we 
reinforce that, because we have a lot of challenges ahead 
still.
    On the TARP tax, just a quick response: The law that 
authorized the TARP requires the administration to propose a 
fee to cover any losses so that we hold the taxpayer harmless. 
And those costs have come down dramatically.
    And, as I said, outside of housing, we are likely to earn a 
positive return. But because the independent estimates still 
estimate we still have some risk of loss, we felt obligated to 
put in the budget how would we propose to recoup that so the 
taxpayers aren't exposed to that. And we have proposed a very 
modest fee, only on those firms that were eligible, the largest 
firms that were eligible for the emergency assistance.
    Just one final thing on deferral: As you think about 
deferral, think about it this way. The current tax system at 
the margin makes it more likely that a company in your State is 
going to build a plant outside of the United States rather than 
inside of the United States. And what it means is that, if you 
have two companies in your State competing together, the 
current tax system will favor, with a lower tax burden, the 
company that builds that next plant outside of the United 
States.
    This is a complicated thing to fix, and we are committed to 
fixing it. That is one reason why we are proposing 
comprehensive tax reform. But as you look at these changes, I 
think you want to join with us in making sure that the tax 
system is working with our broad objectives at trying to 
strengthen incentives for investment here in the United States.
    And, again, any time you give any particular industry a tax 
benefit, tax credit, it means all other businesses, on average, 
pay higher taxes. That is not fair, and it makes us less 
competitive. That is something worth changing.
    Nice to be here today. Thank you. Excellent questions, good 
discussions. I look forward to continuing them with you. And 
let's see if we can do corporate tax reform.
    Chairman CAMP. All right, thank you. And thank you for 
being so generous with your time.
    And if Members have questions, they will submit them to you 
in writing. And I hope that we could receive a response.
    Chairman CAMP. Thank you again, Mr. Secretary.
    This hearing is now adjourned.
     [Whereupon, at 3:46 p.m., the Committee was adjourned.]
    [Questions submitted by the Members to the witnesses 
follow:]
    The Honorable Pat Tiberi

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    The Honorable Dave Reichert
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    The Honorable Rick Berg
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    The Honorable Diane Black
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     The Honorable Mike Thompson
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    The Honorable Ron Kind
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