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





                  PRESIDENT'S FISCAL YEAR 2013 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

                             SECOND SESSION

                               __________

                           FEBRUARY 15, 2012

                               __________

                           Serial No. 112-20

                               __________

         Printed for the use of the Committee on Ways and Means





[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]








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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

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  MIKE THOMPSON, California
PETER J. ROSKAM, Illinois            JOHN B. LARSON, Connecticut
JIM GERLACH, Pennsylvania            EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   RON KIND, Wisconsin
VERN BUCHANAN, Florida               BILL PASCRELL, JR., New Jersey
ADRIAN SMITH, Nebraska               SHELLEY BERKLEY, Nevada
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas
ERIK PAULSEN, Minnesota
KENNY MARCHANT, Texas
RICK BERG, North Dakota
DIANE BLACK, Tennessee
TOM REED, New York

                   Jennifer Safavian, Staff Director

                   Janice Mays, Minority Chief Cousel














                            C O N T E N T S

                               __________

                                                                   Page

Advisory of February 15, 2012, announcing the hearing............     2

                               WITNESSES

The Honorable Timothy F. Geithner, Secretary, U.S. Department of 
  the Treasury, testimony........................................     6
The Honorable Sam Johnson........................................    26
The Honorable Pat Tiberi.........................................    35
The Honorable Pat Tiberi A.......................................    38
The Honorable Joseph Crowley.....................................    58
The Honorable Geoff Davis........................................    67

                       SUBMISSIONS FOR THE RECORD

Center for Fiscal Equity.........................................    72
National Community Tax Coalition.................................    79
U.S. Chamber of Commerce.........................................    81

                        QUESTION FOR THE RECORD

The Honorable Timothy Geithner, responses........................    88

 
 PRESIDENT'S FISCAL YEAR 2013 BUDGET PROPOSAL WITH U.S. DEPARTMENT OF 
               THE TREASURY SECRETARY TIMOTHY F. GEITHNER

                              ----------                              


                      WEDNESDAY, FEBRUARY 15, 2012

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                            Washington, DC.

    The committee met, pursuant to call, at 10:05 a.m., in Room 
1100, Longworth House Office Building, the Honorable Dave Camp 
[chairman of the committee] presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS


                 Chairman Camp Announces Hearing on the

           President's Fiscal Year 2013 Budget Proposal with

     U.S. Department of the Treasury Secretary Timothy F. Geithner

                      Wednesday, February 15, 2012

    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 2013. The hearing 
will take place on Wednesday, February 15, 2012, in 1100 Longworth 
House Office Building, beginning at 10:00 A.M.
      
    In view of the limited time available to hear the witness, oral 
testimony at this hearing will be from the invited witness only. The 
sole witness will be the Honorable 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 13, 2012, the President is expected to submit his 
fiscal year 2013 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 above 8 percent for the last three years, it is clear 
that our economy is still far too weak and the Administration must 
change course if we are going to truly get America working again. This 
hearing will provide the Committee an opportunity to review the 
President's proposals, especially his policies that would make the Tax 
Code more complex and our companies trying to compete around the globe 
less competitive.
      

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 
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From the Committee homepage, http://waysandmeans.house.gov, select 
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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 Wednesday, February 29, 2012. 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 
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    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
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relies on electronic submissions for printing the official hearing 
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or organizations on whose behalf the witness appears. A supplemental 
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    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 TTD/TTY in advance of the event (four 
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noted above.
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman CAMP. Good morning. I want to thank everyone for 
being here this morning, especially our honored guest, Treasury 
Secretary Timothy Geithner.
    Before we get started with our discussion of the fiscal 
year 2013 budget, I do want to take a moment and recognize 
Reginald B. Greene, as he has been known to all of us who come 
to this room as Reggie. Today marks Reggie's 30th year with 
this committee. In those 30 years Reggie has guided many 
members, myself included, in the ways of this committee. His 
subtle but strong manner and direction has kept this committee 
running like a finely tuned machine. Reggie's professionalism 
and demeanor have been a hallmark of his service, and he is 
appreciated by all who serve on this committee. So Reggie, 
thank you for your continued service, your dedication to this 
committee, and to the House, and our Nation.
    Again, welcome Secretary Geithner. It is good to see you 
and to have you before this committee, and I look forward to 
your testimony today. Since our first hearing of the 112th 
Congress, the Ways and Means Committee has spent countless 
hours focused on comprehensive tax reform that will strengthen 
our economy and get Americans working again. I am proud of the 
progress that we have made so far. I realize there is much more 
work to do.
    In our hearings focused on tax reform, there has been one 
common theme from our witnesses: enthusiastic support for 
making the Tax Code simpler and fairer so that we can transform 
the code from one that hinders to one that helps economic 
growth and spurs a climate for job creation.
    Unfortunately, much of what we heard from the President in 
his State of the Union address and what we see here in the 
budget points to the opposite. Instead of focusing on tax 
reform that can create jobs, the budget is replete with 
proposals that will take more money away from employers, 
investors, and savers. And all told, there are nearly $2 
trillion in tax increases, many of which have appeared year in 
and year out despite the bipartisan and bicameral rejection of 
those policies. Those tax increases include pushing the top 
rates close to 45 percent.
    I understand the President's claim that everyone must pay 
their fair share, but what I don't understand is how raising 
taxes on investors and small businesses accomplishes that 
objective, and I certainly don't understand how that is 
supposed to help get Americans back to work.
    Mr. Secretary, you know the facts. The bottom half of 
earners in this country pay no Federal income taxes. Meanwhile, 
the top 10 percent of earners pay 70 percent of all income 
taxes, which includes many small businesses that are critical 
to job creation. And now you want people to pay more, taking as 
much as 45 percent of everything they earn. And it seems to me 
that in America, no matter how much money you make, the Federal 
Government should not be able to take nearly half of your 
income, especially not on top of all the other local, State, 
and gas taxes that you pay.
    I would also note that this budget more than triples the 
tax on dividends. This massive increase in the top tax rate on 
dividends marks a significant departure from prior budgets, 
when the President had proposed to raise the dividend rate, 
quote, only to 20 percent. It is also worth noting that because 
dividends are paid out of income that has already been taxed at 
the corporate level, and then are taxed again in the 
shareholders' hands, this proposal would push the total Federal 
tax rate on dividends to 64 percent.
    Equally telling are the policies absent from this budget. 
For the last several years, Mr. Secretary, you have appeared 
before this committee, and we have discussed in private the 
possibility of some sort of comprehensive tax reform coming out 
of the Treasury Department. But as someone joked to me the 
other day, it looks like we will see a unicorn before we see 
this administration put out a comprehensive tax reform plan.
    I understand it is an election year and playing 
Washington's age-old game of promising favors to special 
industries and special interest groups is a tried and true 
plan. But, Mr. Secretary, in less than 2 months, the United 
States will have the highest corporate tax rate in the 
industrialized world at 39.1 percent. This dubious distinction 
makes it that much more challenging to attract businesses to 
hire and invest here at home where we need the jobs. Simply 
put, this budget, coupled with the inaction of this 
administration on tax reform, has left U.S. companies and their 
workers at a competitive disadvantage in the global 
marketplace. It is an advertising campaign that says to job 
creators, ``Don't invest in the United States, invest somewhere 
else.''
    Clearly, there is much work to be done on the tax reform 
front, but we must also focus sometime during today's 
discussion on our debt and deficit. The fiscal year 2013 budget 
is the highest budget deficit ever proposed and fails to 
deliver on the President's promise to cut the deficit in half 
by the end of his first term. We have had countless 
commissions, committees, and panels tasked with finding 
solutions. I have served on some of those. Independent 
economists have found that debt loads greater than 90 percent 
of GDP could result in the loss of up to a million jobs. We 
aren't at 90 percent. Our debt is now at 102 percent of GDP, 
and this budget proposed to keep the national debt at a level 
that exceeds the size of the entire U.S. economy every single 
year into the future. A budget that drives debt and deficits 
even higher will only weaken our economy and further put at 
risk the 13 million Americans who are currently out of work.
    And with that, I will now yield to Ranking Member Mr. Levin 
for the purposes of an opening statement.
    Mr. LEVIN. Thank you, Mr. Chairman. Welcome, Mr. Secretary. 
I guess it won't surprise anybody to say that I had a very 
different reaction to your testimony, and I know that you will 
have a chance to respond to our chairman.
    Indeed, Mr. Secretary, as I read your testimony rather late 
last night, my basic reaction was this: that as you sit here 
before us, you and the administration stand tall. The economic 
policies of the administration are working. Much more 
improvement in our economy is necessary, but what the critics 
cannot escape is that there has been improvement, and the 
administration policies importantly contributed to this 
improvement.
    You inherited an economy losing 700,000 jobs a month. The 
administration was not afraid to adopt a policy that stated 
clearly that in the short term, the principle must be growth. 
Assisted by a variety of government programs, private employers 
have added more than 3.7 million jobs in the last 2 years, and 
the rate of unemployment has dropped measurably. As your 
testimony indicates, there remain substantial challenges and 
potential dangers, but the administration is sticking to its 
guns.
    The deficit must be and is being addressed, taking into 
account that in the immediate term there must be a continued 
emphasis on growth, which is also essential for attacking the 
longer-term deficit; thus, an emphasis on improving education 
and training and investing in infrastructure and research and 
development, all of which require an active public role and an 
active public-private partnership.
    Likewise, assisting the further strengthening of 
manufacturing is in your testimony. It is often heard that the 
government should not pick winners and losers. When that 
rhetoric is applied blindly, it blindsides American businesses 
and workers. It led some to oppose government assistance to 
help the American automobile industry get back on its feet, not 
to run that industry, but to allow it to keep running. This 
administration should be proud that it had the courage to 
persevere despite all the naysayers.
    Your testimony makes clear that we still have a 
considerable way to go to put our economy back on its feet 
fully, to increase the flow of jobs, to assist the American 
middle class to again move up the ladder, to make sure there is 
shared responsibility, fairness and support for 
entrepreneurship in our Tax Code, and to ensure continued 
increased growth and a major attack on our serious budget 
deficits.
    We should act on these challenges, acknowledging, and I 
emphasize this, that against difficult odds, the administration 
has moved us forward towards achieving these goals. Thank you, 
Mr. Chairman.
    Chairman CAMP. Well, thank you, Mr. Levin.
    Again, I would like to welcome back Secretary Geithner. 
Thank you for your time today. Thank you also for getting us 
your written statement in time for us to review it before the 
hearing, and it will be made part of the formal hearing record. 
You are recognized now for 5 minutes, and you may begin when 
you are ready. Thank you.

STATEMENT OF THE HONORABLE TIMOTHY GEITHNER, SECRETARY, UNITED 
        STATES DEPARTMENT OF TREASURY, WASHINGTON, D.C.

    Secretary GEITHNER. Thank you, Mr. Chairman, Ranking Member 
Levin and Members of the Committee, thanks for the chance to 
come before you today and talk about the President's budget.
    Our economy today is gradually getting stronger, but we 
have a lot of work ahead of us still. Over the last 2\1/2\ 
years, despite the financial headwinds from the crisis, despite 
the severe cutbacks by State and local governments, despite the 
crisis in Europe, despite the increase in oil prices we saw 
last spring, despite the tragedy in Japan, despite all those 
shocks and headwinds, the economy has grown at an average 
annual rate of 2\1/2\ percent. Private employers have added 3.7 
million jobs over the last 23 months, private investment in 
equipment and software is up by more than 30 percent, 
productivity has improved, exports across the American economy, 
from agriculture to manufacturing, are expanding rapidly, 
Americans are saving more and bringing down debt levels. The 
financial sector is in much stronger shape, helping to meet the 
growing demand for credit and capital.
    Now, these improvements are signs of the underlying 
resilience of the American economy, of the resourcefulness of 
American workers and businesses, and the importance of the 
swift and forceful actions we took alongside the Federal 
Reserve to stabilize the financial system and to pull the 
economy out of the worst economic crisis since the Great 
Depression.
    But, as I said, we still face very significant economic 
challenges, particularly for households and families. Americans 
are still living with the acute damage caused by the financial 
crisis. The unemployment rate is still very high, millions of 
Americans are living in poverty, still looking for work, 
suffering from the fall in the value of their homes, and 
struggling to save for retirement or for college education.
    For these reasons, the President's budget calls for 
substantial additional support for economic growth and job 
creation alongside longer-term reforms to improve economic 
opportunity and to restore fiscal responsibility.
    I applaud congressional leaders for yesterday's progress 
towards extension of the payroll tax cut and emergency 
unemployment insurance. These measures will be crucial to 
supporting millions of Americans and the broader economy as a 
whole, but there is more we can do.
    We will continue to encourage Republicans in Congress to 
join with us in supporting additional actions to cut taxes for 
workers and businesses, to preserve the jobs of teachers and 
first responders, to put construction workers back to work, to 
help more Americans refinance their mortgages to take advantage 
of lower interest rates. But beyond these immediate steps, the 
President's budget calls for a long-term strategy to strengthen 
economic growth and opportunity while reducing our fiscal 
deficits to more sustainable levels.
    Now, the conventional wisdom in Washington is that the 
debate we begin this week on the President's budget does not 
matter because Congress is too divided to legislate this year, 
but this is a very important debate to have, and it is 
important to have that debate now. It matters because this is a 
fundamental debate about economic priorities, how to increase 
growth and opportunity, how to strengthen health care and 
retirement security, how to reform our tax system, and how to 
live within our means. We must govern with limited resources. 
We have to make choices about how to use those resources more 
wisely, particularly given the millions and millions of 
Americans that become eligible for Medicare and Social Security 
over the next few decades.
    Any strategy to address these challenges has to answer a 
few fundamental questions. How much do we have to cut in terms 
of future deficits? Which programs should be cut, preserved, or 
expanded? How should we share the burden of deficit reduction?
    Let me explain how we propose to answer those questions. 
The President's budget would reduce projected deficits by 
roughly $4 trillion or $3 trillion on top of the caps and cuts 
in the Budget Control Act. Overall, the President's budget 
would lower the deficit from just under 9 percent of GDP in 
2011 to around 3 percent of GDP in 2018. Reducing the deficit 
to that level would stabilize the overall debt-to-GDP ratio in 
the second half of the decade, putting us on a path to fiscal 
sustainability, and putting us in a much better position to 
address--to confront the remaining challenges we will still 
face in future decades as more Americans retire.
    Under this budget, discretionary spending is projected to 
fall to its lowest level as a share of the economy since Dwight 
Eisenhower was President. The President's plan would also slow 
the growth of spending in Medicare and Medicaid, both through 
the Affordable Care Act and the additional proposals we have in 
the budget on Medicare and Medicaid. But as we reduce spending, 
we have to also protect investments that are critical to 
expanding economic growth and opportunity, and that is why the 
budget makes targeted but important investments in education, 
innovation in manufacturing, and infrastructure.
    Now, in order to achieve this balance, significant savings 
but some room for investment to improve growth and opportunity, 
we are proposing to raise a modest amount of additional revenue 
through tax reform. The President's plan includes $2.50 of 
spending cuts for every dollar of proposed revenue increases.
    [The insert of Secretary Geithner follows:]


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    Secretary GEITHNER. Our proposal for tax reform would raise 
taxes by roughly 1 percent of GDP. The revenue increases are 
focused on the top 2 percent of American taxpayers, not the 
remaining 98 percent. Focusing these revenue proposals on the 
top 2 percent, those who have fared the best in the last decade 
of financial excess, is far better for the economy and more 
fair to the American people than cuts of an equivalent 
magnitude to Medicare benefits, to infrastructure, or to other 
programs that support our most vulnerable.
    We propose tax reforms that raise revenues because we do 
not believe it is possible to meet our national security needs, 
to compete effectively in the global economy, or to preserve a 
basic level of health care and retirement security without some 
increase in revenues as part of a balanced deficit reduction 
plan. Although we illustrate in the budget a range of specific 
tax changes that could be added to the present tax system to 
generate the necessary revenue, we think the best approach, 
though, is to get there through comprehensive tax reform. We 
have laid out a broad set of principles for tax reform to make 
the system more simple and more fair and better at encouraging 
investment here in the United States. You can hear a little bit 
more from us on this topic on the corporate side in the coming 
weeks. I look forward to discussing those proposals with you 
then.
    Now, I know there are Members of Congress who are critical 
of these proposals and would prefer a different strategy, and 
you should judge our plan, as I know you will, against those 
alternatives. Some of you have suggested that we should cut 
deeper and faster, with more severe austerity now, but that 
approach in our judgment would damage economic growth, would 
reverse the gains we have achieved in getting more Americans 
back to work, and would push more Americans into poverty. You 
cannot cut your way to economic growth. For the United States 
today, given the challenges we face, severe austerity now is 
not a growth strategy.
    Some have suggested also we try to restore fiscal balance 
without raising any additional revenue from anyone, or even by 
cutting taxes further. To do so, it is very important to 
recognize this--to do so, would entail deep cuts in benefits 
for retirees and low-income Americans, cuts to investments in 
education and innovation that would hurt growth and 
opportunity, and cuts in defense spending that would damage our 
national security interests. So we will not support those 
alternative strategies.
    I want to emphasize again, Mr. Chairman, if you do not 
support raising this modest amount of revenue through tax 
reform, then you have to ask yourself: Who are you going to ask 
to bear the burden that would fall on basic benefits of 
retirees or on our national security capacity if you don't or 
are not able to find additional revenues?
    Now, the President's budget includes very tough reforms but 
with a balanced mix of spending cuts and tax reforms. It 
preserves room for us to make investments that will improve 
opportunity for all Americans, and help make economic growth 
stronger in the future. It protects our basic commitments to 
retirement security and health care for the elderly and the 
poor, it provides substantial immediate help for the average 
Americans alongside reforms to restore fiscal responsibility 
over the long run. This plan will not solve all the Nation's 
challenges, but it will put us in a much stronger position to 
deal with those challenges.
    I would be happy to try to answer your questions.
    Chairman CAMP. Well, thank you. Thank you very much.
    [The prepared statement of Secretary Geithner follows:]


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    Chairman CAMP. I appreciate both in your written and oral 
comments that we are going to look for something, particularly 
on corporate tax and some time. The President has been 
mentioning this in a couple of remarks, particularly since his 
2011 State of the Union speech a year ago. But we keep hearing 
details that the President wants to lower rates and broaden the 
base, and that those details are just around the corner. And I 
realize we are waiting a little longer for that in your 
testimony, but why isn't comprehensive tax reform part of the 
President's budget, or even corporate tax reform part of the 
President's budget?
    Secretary GEITHNER. Well, as I said, and I think you have 
to acknowledge, I think we are going to have to get to 
comprehensive tax reform, individual and corporate. I don't 
really see a way to meet the Nation's challenges effectively 
without doing that. You are going to hear a lot about concerns 
people have with how you would raise additional revenue under 
the current tax system. That is a good case for tax reform. So 
it is coming. It is inevitable, it is necessary, and we can't 
keep putting it off.
    What we are trying to do is lay the foundation for that 
debate, and it is going to be a tough debate for us to have, by 
laying out specific elements we think we are going to have to 
see on the individual side to make it more fair. And you are 
going to see us in the next couple weeks lay out the core 
elements on the corporate side. The corporate side is 
important, too, because we want to improve incentives for 
investing in the United States.
    So we will have a chance to begin that debate with you, and 
we are going to give you a fair amount of texture, although not 
a fully articulated set of proposals because we want to 
preserve some room to come together on this. I think you are 
going to find, although we are going to start in a different 
place from you, we are going to start tougher from you on a set 
of key provisions. There is, I hope, more room for common 
ground on this, and we need to use this opportunity now to 
start to lay the foundation for the fundamental changes ahead.
    Chairman CAMP. On July 7th of 2010 you were on CNBC's 
Kudlow Report, and you said, and I am quoting, ``We are going 
to make sure that we keep at 20 percent the existing rates on 
dividends and capital gains, we think that is good policy,'' 
end quote.
    And this budget takes top marginal rates on dividends, as I 
said in my opening statement, to roughly 45 percent, and when 
you include the PEP and Pease limitations and the new 3.8 
percent investment tax scheduled to go into effect next year, 
it is pretty high numbers. So, do you still believe that 20 
percent on dividends is good policy?
    Secretary GEITHNER. Well, you are right that in the 
President's proposals to the supercommittee in September we, as 
part of that comprehensive strategy, we did propose to restore 
the tax treatment of dividends for the top 2 percent to the 
rates that prevailed in the last years of the Clinton 
administration, which is to ordinary income, that is correct. 
And we did that because we found, as we were putting together a 
comprehensive deficit reduction plan, we were going to--we were 
putting $360 billion of Medicare, Medicaid cuts on the table 
over 10 years, very substantial cuts, hundreds of billions of 
dollars to other mandatory programs, and deep cuts in defense 
spending, that as part of a balanced package we had to find 
ways to do more revenues. That is why we proposed that.
    But I want to say one thing, Mr. Chairman, just to go to 
your opening comments. You are right that we are proposing to 
raise the effective tax rates on the top 2 percent of 
Americans. You are absolutely right. We are proposing to do 
that. We are not doing it because we like doing it. We are 
doing it because to not do that requires us to find $1.5 
trillion in additional savings from, again, either Medicare 
benefits, low-income programs, infrastructure investments, or 
national security. So one way to think about this, is it fair 
to ask 98 percent of the rest of the country to bear the burden 
of that $1.5 trillion, 1 percent of GDP in revenues, that we 
are proposing to achieve by raising the tax rate on the top 2 
percent of Americans?
    Chairman CAMP. I don't think those are the only choices 
available to us. I think obviously tax reform that creates 
economic growth and prosperity is another way and should be 
part of this mix. You mentioned, quote, the ``fair share'' and 
the President talks about it as well, high-income earners 
paying their fair share. The top 3 percent pay as much as the 
other 97 percent in income taxes, and the top 10 percent, as I 
said in my opening statement, currently pay 70 percent of all 
income taxes, and the bottom 50 percent pay no income taxes at 
all. Now I know they pay payroll taxes. But they don't pay 
income taxes. So what should these numbers be? Should the top 
10 percent pay 80 percent of all taxes? Should they pay 90 
percent of all taxes? What is the--from your mind, what is the 
appropriate amount that the top 10 percent should pay?
    Secretary GEITHNER. Chairman Camp, I know we have been 
having this debate for a long time, we are going to have it for 
a long time in the future, I suspect, and we are going to come 
to different judgments on this. Again----
    Chairman CAMP. I am just trying to get your judgment on it.
    Secretary GEITHNER. The fundamental fiscal reality we face 
today is we have unsustainable deficits, we have to recognize 
those constraints. If we are going to bring them down, you have 
to choose, and if you choose to try to do it without any 
revenues, you will find it necessary to embrace cuts in 
Medicare benefits or in investments or national security that 
you will not be prepared to support. Then you can ask yourself, 
okay, if you recognize you have to figure out ways to get 
through tax reform, more revenues out of the current tax 
system, then you should ask who should bear the burden. And the 
question, should be, who is in the best position to bear the 
burden of that additional responsibility?
    Chairman CAMP. I understand the path you want to go down, I 
am just trying to understand from the administration's point of 
view what is an appropriate level of fair share. Is it that the 
top 10 percent pay 80 percent of all taxes?
    Secretary GEITHNER. The way--you know, we live in a----
    Chairman CAMP. Because obviously 70 isn't enough; is that 
correct?
    Secretary GEITHNER. We live in a----
    Chairman CAMP. The fact that the top 10 percent pay 70 
percent of all taxes, you don't feel that is enough.
    Secretary GEITHNER. Well, Mr. Chairman, maybe I could try 
it this way. We live comfortably in a bipartisan tradition that 
has helped govern this country for decades and decades of a 
system of progressive taxation where we ask the most fortunate 
people to pay a larger share of their income in taxes.
    Now, if you look at the effective tax rate today paid by 
the top 2 percent, 1 percent, 0.5 percent, 0.10 percent of 
Americans today, their effective tax rate is remarkably low. It 
is in the mid-20s today. It is not in the 40s, it is not in the 
30s, it is not in the 50s, it is in the mid-20s. Now, our 
judgment is, again, that that effective tax rate should go up 
modestly for those people because, again, if we don't do that, 
then you have to find some way to get the savings you need to 
meet the other needs of the country.
    Chairman CAMP. But from what I understand in your 
testimony, what we are going to see maybe in a few weeks is 
something on corporate, which I certainly welcome, and I look 
forward to seeing that, I hope the President gets engaged on 
that issue. But I don't think we are going to see anything on 
individual reform. I know you want to raise taxes at a certain 
point, but what I am trying to get is, why isn't there a 
comprehensive reform plan? If this is such a key part of 
economic recovery, why isn't there a comprehensive reform plan 
coming from this administration? Why isn't there an outline of 
a path forward in the President's budget to help us move 
forward in this great bipartisan tradition that you mentioned?
    Secretary GEITHNER. We have been very specific about the 
types of tax changes we think you would have to do if you are 
going to work off the current tax system. You are right, 
though, we have not put out and we don't plan to put out in the 
next few months a comprehensive individual tax reform.
    But let me explain why. We spent, as you know, a huge 
amount of time working closely with the Republican leadership 
over the summer to see if we could find consensus on a 
comprehensive balanced plan, tax reform combined with 
entitlement reforms. As you know, we found it impossible in 
that discussion, despite a lot of effort, to close the gaps 
between us. In fact, I think your side walked away from the 
table three separate times because----
    Chairman CAMP. I don't think we want to really go there, 
Mr. Secretary.
    Secretary GEITHNER. But that is the explanation. We tried 
with your side, and we found--it is just realistic. We found 
ourselves too far apart to find a basis today for a consensus 
on a comprehensive individual reform plan. We are going to have 
to get to that. But we took a run at it, and we found, just to 
be fair, that you were not ready yet.
    Chairman CAMP. Well, to compare some private meetings with 
a few Members of Congress with a public proposal by the 
President is not a fair comparison. What we are asking for is 
some sort of public leadership stand on this issue.
    Secretary GEITHNER. We met with the Republican leadership, 
not just a few Members of Congress, and we had extensive 
detailed discussions about a broad range of strategies on 
individual tax reform. But, again, to be fair, you guys were 
not ready.
    Chairman CAMP. I think if you--I think that is not a fair 
characterization of what occurred there. I wasn't in those 
meetings, but I will tell you that I think if the President 
were to lead on this issue, I think there would be a receptive 
audience with the American people, and we could begin to 
fashion a public debate on this. I think what people don't like 
is these debates occurring behind closed doors where they are 
not part of it. Those were all closed-door meetings, those were 
not part of the public record. So what I would like to see is 
some proposal come from the administration on this issue.
    I think the budget would have been an opportunity to do 
that. I am disappointed that it is not in there. But I do look 
forward to at least seeing this, these ideas that you are going 
to put together on corporate reform. And with that, I will 
yield to Mr. Levin for his opportunity.
    Mr. LEVIN. Well, Mr. Chairman, we welcome this debate. You 
suggested that the Secretary not go there. He went there 
because you went there. I mean, you raised the issue, and I 
must say when it comes to proposals----
    Chairman CAMP. What I objected to was the Secretary 
characterizing one side or another not coming to an agreement. 
I don't think that is--I don't think that is appropriate, and 
that is what I am pointing to. If he wants to talk about the 
discussion, that is fine.
    Mr. LEVIN. Okay. It is my time. I think what he said was 
that there were discussions and your team walked away, and that 
is accurate.
    Let me just say in terms of proposing a comprehensive 
individual tax reform, the Republicans have put out a target of 
25 percent without specifying how to get there. So there is no 
comprehensive individual tax reform proposal by the 
Republicans, and still you criticize the administration. Mr. 
Chairman, sometimes you talk about who pays income tax, but 
then you ask is it appropriate for certain people to pay 80 or 
90 percent of all taxes? That is simply inaccurate.
    When you look at the charts for 2011, the individual income 
tax over $1.091 trillion, the social insurance and retirement, 
essentially FICA, is $818 billion. So there is no way that any 
group pays 80 to 90 percent of all taxes, and the Secretary 
appropriately pointed to the effective tax rate of 17 percent. 
It is on the top 400 returns, not 40 or 45 percent.
    In terms of income inequality, we ought to remember that 
those figures are in terms of income growth. Between 1976 and 
2007, the top 1 percent got 58 percent of the income growth. So 
when this administration talks about fair share, that is a fair 
position to take.
    Mr. Secretary, I would like to just ask you in my remaining 
time, you talk in your testimony about the importance of 
growth, and about how we cannot cut our way to economic growth. 
On page 9 you say, ``A common mistake in the wake of financial 
crises is for governments to withdraw support for the economy 
too soon.'' You have worked on this issue in this country and 
internationally. So tell us the philosophy, the approach, of 
our government.
    Secretary GEITHNER. You know, unfortunately the world has a 
lot of experience in financial crises, mostly in mismanaging 
them. And again the typical mistake governments make is they 
wait too long to confront the crisis, act aggressively, and 
then at the first signs of traction they pull back and reverse 
course, leaving the economy weaker, the cost of the crisis 
greater, recession risks much higher, more unemployment, more 
carnage and damage from the crisis longer, and we are not 
prepared to make that mistake.
    It is worth recognizing that today, even with all the 
concerns around the world about the capacity of our American 
political system to find common ground on these issues, Mr. 
Chairman, even with that concern--and we share that concern, 
frankly--we pay less than 2 percent to borrow for 10-year 
maturity. Even with the huge increase in deficits we inherited, 
interest cost today on our total debt is very low.
    Now, we have the ability and the room now to be more 
careful about how we dig our way out of this mess, and not do 
so that adds to the burden on average American middle-class 
families and risk making the crisis worse and longer and more 
protracted. So our basic judgment is, and I think the record of 
history supports this, is that you have to be very careful to 
make sure you are working to support growth until you fully 
recover from the crisis. And that is why we are proposing this 
combination of pro-growth investments combined with long-term 
fiscal reforms. That is the rationale for the strategy.
    Mr. LEVIN. Thank you. My time has expired.
    Chairman CAMP. Thank you. Mr. Herger is recognized.
    Mr. HERGER. Thank you, Chairman Camp, and I must state that 
I completely share your disappointment with this budget. It is 
frustrating to hear the President repeatedly talk about the 
need for bipartisan effort to fix our country's economic and 
fiscal challenges, yet these words are not backed up by 
actions. Once again, this budget does nothing to bring down our 
corporate tax rate that will soon be the highest in the 
industrialized world; it does nothing to simplify a Tax Code 
that costs taxpayers hundreds of billions of dollars each year 
just to figure out what they owe; and it does nothing to save 
and strengthen important programs like Social Security and 
Medicare that are headed towards bankruptcy.
    House Republicans have made it clear that we are committed 
to working to find solutions on these issues so we can create 
jobs here in America and secure a better future for our 
children and grandchildren. But to make real progress we need 
leadership from the President, and that is why it is 
disappointing that we have been presented with yet another do-
nothing budget that appears to be driven by election year 
politics instead of true leadership.
    Mr. Secretary, last year this committee held a joint 
hearing with the Senate Finance Committee to look into one 
aspect of tax reform, the tax treatment of debt versus equity. 
Excessive debt was one of the main drivers of the recent 
financial crisis, and there is broad agreement that our Tax 
Code creates a clear bias in favor of debt financing and 
against equity financing; yet the President's budget proposes 
to triple the top marginal tax rate on dividends from 15 
percent to roughly 45 percent. Won't higher taxes on dividends 
further encourage the use of debt financing and cause 
businesses to take on more leverage, increasing the risk of 
companies becoming insolvent?
    Secretary GEITHNER. I do not believe so, but let me respond 
to the broader set of things you began with. The President's 
proposal lays out $360 billion in cuts to Medicare and Medicaid 
over the next 10 years. Now, you can say you like a different 
mix of cuts or more cuts, but you can't say there is not 
hundreds of billions of dollars in proposed reforms in Medicare 
and Medicaid in the President's budget. We also proposed 
hundreds of billions of dollars in other cuts of what are 
called other mandatory programs, very tough, very hard, not 
very popular sets of programs. We have proposed very 
substantial cuts in defense on top of the trillion dollars of 
cuts that we worked together on last August.
    Now, again, you can decide, you would propose to go deeper 
and faster. Understand that perspective. Our position, though, 
is that would be damaging to the economy, make us worse off in 
the long run, and in the short run. That is the difference we 
share in this.
    Now, on your basic question about how you think about debt 
and equity, let me just say a few things. Now, you are right 
that we have the highest statutory tax rate on corporations in 
the world, and that is why you are going to hear us in the next 
couple weeks lay out for you a broader framework of how to make 
our tax system for business income better at encouraging 
investment in the United States, and we are going to have a 
good debate about how best to do that. But the average 
effective tax rate on American corporations today is roughly 
the same, the effective tax rate, as our major competitors, in 
the high 20s. And if you look at the effective tax rate on 
investment financed by debt in the United States today, as you 
said, it is low.
    Now, we think in corporate tax reform we can alter the 
incentives slightly in favor of the same objective you laid 
out, and we think we can do that. But I do not believe the 
proposal on dividends we suggest carries the risk you are 
concerned about, but I will be happy to talk to you more about 
that. We will have a chance, when we talk about the corporate 
side, to think about that basic question.
    Mr. HERGER. Well, I would--and not only am I concerned with 
that, but others are concerned with that. In your testimony you 
state that there are too many tax provisions that favor some 
industries and investments and benefits only those that receive 
them. This forces some businesses to carry a larger share of 
the tax burden than they would under a more equitable system, 
and it also hurts overall economic growth by distorting 
incentives for investment of tax credit. Well, I will yield 
back.
    Chairman CAMP. All right, thank you. Mr. Stark is 
recognized.
    Mr. STARK. Thank you, Mr. Chairman, and thank you Mr. 
Secretary, for your testimony today. The President's budget 
talks about almost $500 billion in investment in surface 
transportation system, about $50 billion to create 
infrastructure jobs right now. You noted that there are over 2 
million fewer construction workers on the job, and with 
historically low interest rates, this would make it inexpensive 
for communities to begin infrastructure spending right away.
    In contrast, we have got a transportation bill before the 
House, but our House Republican leadership is proudly 
proclaiming that it doesn't create any jobs, and rather than 
invest in mass transit, they are actually defunding in their 
proposal the transportation funds all together.
    Now, I disagree with that Republican approach, and I agree 
with you that infrastructure investments are the best way to 
create jobs right now. Can you provide some insights into that 
discussion in the President's proposal to create jobs through 
infrastructure spending?
    Secretary GEITHNER. Absolutely. I think that any American, 
and if you talk to any business, recognize that we are living 
with a terribly degraded, very inefficient infrastructure 
across the country. Transportation infrastructure, roads, 
bridges, rail, airports. And that degraded infrastructure 
imposes a tax on American businesses. It makes it more 
expensive to run a business in the United States than it should 
be.
    And it is very important we put together a long-term, 
multiyear plan to improve the quality of that basic 
infrastructure. It is good for jobs now, it is good for growth 
in the future, it makes businesses more efficient, more 
competitive. You have to do it in a responsible way. We are 
proposing to do it by adding to the traditional funding 
mechanisms, using a modest amount of the savings we get from 
winding down the wars in Iraq and Iran--Iraq and Afghanistan.
    Now, there are some people that are going to say we can't 
afford to do that, and I don't agree with that. It is a good 
investment, it has very high returns, will help raise long-term 
growth, and again it is very good for getting more people back 
to work sooner, particularly people in the construction 
industry that are hurt the most by the crisis.
    Mr. STARK. Thank you very much. Thank you, Mr. Chairman.
    Chairman CAMP. Thank you. Mr. Nunes is recognized. I am 
sorry, Mr. Johnson is recognized. Apologize.
    Mr. JOHNSON. Thank you.
    Chairman CAMP. The gentleman from Texas.
    Mr. JOHNSON. My questions cover the slides you see before 
you.
    [The insert of The Honorable Sam Johnson follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                                 

    Mr. JOHNSON. CBO recently released its budget and economic 
outlook, and the news for Social Security is alarming. On the 
first slide you see that in January of 2009 when the President 
took office, Social Security had a 10-year cash flow surplus of 
$73 billion. Today there is a massive 10-year cash flow deficit 
of just over $1 trillion.
    On the second slide you see that according to the board of 
trustees, Social Security's 75-year shortfall has increased 23 
percent from $5.3 trillion in the 2009 report to $6\1/2\ 
trillion in the 2011 report.
    On the third slide you see that time is running out for us 
to find a solution to ensure full disability benefits will be 
paid. At the time of the trustees' 2009 report, we had 11 
years. At the time of last year's report we had 7 years, and 
according to CBO we have now just 4 years before the disability 
trust fund is exhausted.
    As you know, President Obama in his 2011 State of the Union 
address said we should also find a bipartisan solution to 
strengthen Social Security for future generations. Last year 
when you were before the committee, you said 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. Those are your quotes.
    So here we are, Mr. Secretary, 1 year later. As the 
managing trustee of the Social Security and Medicare Trust 
Fund, you well know we are facing one of the most predictable 
crises that worsens with each passing day, and yet there was no 
mention of Social Security in your testimony. The President 
ignored the recommendations of his own fiscal commission. He 
said nothing in his State of the Union, and he has proposed 
nothing in his budget to secure Social Security's future, not 
even for the disability insurance program. Why?
    Secretary GEITHNER. Congressman, we share your view that we 
are going to have to find a way to come together on a 
bipartisan basis to strengthen Social Security. You are right 
to point out the importance of doing that, and we are still 
going to work with you on that.
    Now, of course as you know, at the risk of provoking the 
chairman again, I don't mean to do this, I will do this 
carefully, we did spend quite a bit of time with the Republican 
leadership in the summer exploring ways to do that, and we 
found, frankly, we were too far apart; and what we are not 
prepared to do is to embrace reforms to Social Security that 
would cut deeply into future benefits for moderate-income 
retirees. That is not something we can do. We are just too far 
apart on that. But of course we are willing to work with you on 
that. And you are right, this is important for us to do, but 
there is no risk in the foreseeable future to benefits for 
Social Security retirees. We have a little bit of time to get 
this right, and we are not going to try to do it on terms that 
would dramatically----
    Mr. JOHNSON. Well, we can keep borrowing money. I think the 
American people are tired of empty rhetoric and are looking for 
constructive solutions, so let's see if we can get somewhere.
    Does the President support increasing the Social Security 
full retirement age, which his own commission recommended, an 
idea also supported by Democrats such as the vice president and 
minority whip Steny Hoyer? Yes or no?
    Secretary GEITHNER. Congressman, again, I will be happy to 
talk about the broad imperative, happy to spend time on your 
side talking about alternative proposals.
    Mr. JOHNSON. Well, that is not the question. Can you give 
me a yes or no answer?
    Secretary GEITHNER. I am not going to talk about the 
specifics except to say that we will not support an approach 
that cuts deeply into benefits for middle-income retirees. We 
are not going to.
    Mr. JOHNSON. I want to ask you, do you know what the tax 
rate and the taxable maximum amount that rate applied to was 
when the program first started?
    Secretary GEITHNER. I don't know when the program first 
started, but I know----
    Mr. JOHNSON. Let me help you out. The answer is 2 percent; 
1 percent paid by the employee, 1 percent paid by the employer, 
up to a maximum amount of $3,000.
    As our fourth slide shows, excluding the payroll tax 
holiday, we have got a 12.4 percent tax rate on earnings up to 
$110,100 this year. The maximum is on autopilot to 
automatically increase every year.
    So with that, let me ask, does the President still stand by 
his campaign position of higher Social Security taxes, even 
though history shows us we cannot tax our way to sustainable 
solvency? Yes or no.
    Secretary GEITHNER. Well, I am not sure I understand that 
question, but I guess I would ask you the question, which is, 
is your proposal to solve this problem by cutting more deeply 
into benefits for middle-income retirees? Because if it is, 
then we won't join you in supporting that.
    Mr. JOHNSON. The answer is no.
    And lastly with respect to the disability program, is the 
administration's plan to fund disability with general funds, 
with 45 percent of those funds borrowed from abroad, how does 
this work to make the program more secure?
    Secretary GEITHNER. Congressman, again, we would be happy 
to work with you on this. As I said, we tried over the course 
of the summer, didn't find enough common ground. We will come 
back and do it again with you anytime you want to do it. You 
are right----
    Mr. JOHNSON. Well, I am telling you there is a lot of 
common ground. Steny Hoyer and I have worked together. He is a 
Democrat, as you know.
    Secretary GEITHNER. I do know.
    Mr. JOHNSON. And I think that we are willing to discuss 
Social Security and fix it for good.
    Secretary GEITHNER. Okay, I am happy to work with you on 
that, and again I appreciate you pointing out how important it 
is. It is not something we can put off indefinitely, we have to 
come together on it, but we are very far apart on the core 
substance, and we have got to figure a way to narrow our 
differences.
    Chairman CAMP. Mr. McDermott is recognized.
    Mr. MCDERMOTT. Welcome to the firing zone, Mr. Secretary. 
It is good to see you, and I agree with you that the budget is 
a statement of our priorities, and I think the President has 
the right ones. History has taught us that if we don't keep 
investing in the economy, we are not going to keep it moving. 
And one has to wonder in those people who want to stop 
investing whether they really want the economy to stagger and 
slow down as we come into the election. It looks very 
suspicious to me that they don't want to invest in 
infrastructure and they don't want to invest in education and 
R&D and the other things.
    Now, investing, in my view, is absolutely critical for the 
economy, and it is not going to be solved by tax cuts, and I 
listened to them beat up on you about what went on last year, 
but my--just answer a generic question for me. Can you have a 
good-faith negotiation when one side of the table gets up and 
leaves? Is it possible?
    Secretary GEITHNER. Well, it makes it a challenge, but I 
think the----
    Mr. MCDERMOTT. Who do you negotiate with when they are 
gone?
    Secretary GEITHNER. Well, it is hard, but the real 
challenge we face, again just to be direct about it, because we 
have to be honest about the debate, the real challenge we face 
is we are just so far apart on these core priorities.
    Mr. MCDERMOTT. I would like to--let me go a little bit 
further. There isn't anybody who sits on the top row of this 
committee who believes that there is going to be tax reform in 
the next year. I mean, anybody who thinks that simply has 
forgotten everything. The tax reform of 1986 took 6 years of 
the Reagan administration, with Danny Rostenkowski and Tip 
O'Neill and the President playing golf, smoking cigars, and 
drinking whiskey, and negotiating for 6 years. So it isn't 
going to happen. So the President needn't waste his time 
listening to this stuff: Where is your proposal, where is their 
proposal? They don't have one because they won't stay at the 
table.
    And further, when you put a committee of 12 together, and 
the House sends 6 Republicans who, before they walk into the 
room, say there will be no new taxes, you know there is nothing 
going to happen. Everybody knew it. I mean, we all put a brave 
face on, but nobody believed it.
    Now, I would like to hear from you, do you think the 
problems of this country can be solved without raising revenue?
    Secretary GEITHNER. I wish it were otherwise, but I don't 
think so for the reasons I said. You know, our deficits are 
just too high, they are unsustainably high, and we face a huge 
set of other challenges. And as you just can see from the 
terrible crude math, it is, I think, impossible to do, meaning 
bring the deficits down to a sustainable level.
    Mr. MCDERMOTT. Is that because you think that the cuts that 
would have to be made----
    Secretary GEITHNER. Exactly.
    Mr. MCDERMOTT. --in social programs are so severe?
    Secretary GEITHNER. Just think of it this way. We are 
proposing $1.5 trillion in tax increases on the top 2 percent 
of Americans over a 10-year period of time. That is 1 percent 
of GDP. Just 1 percent of GDP. But it is $1.5 trillion. So if 
you are not going to do that, you have to cut benefits by $1.5 
trillion or you have to cut national security by hundreds of 
billions or you have to cut investments in education or 
infrastructure. Those are the kinds of choices we face.
    So we don't come to this position with enthusiasm. We come 
to it by sober, responsible recognition that the fiscal 
alternatives we face, challenges we face, cannot be met 
responsibly without a modest increase in revenues through tax 
reform. That is the realistic responsible recognition that we 
have come to.
    Mr. MCDERMOTT. My understanding of this President's budget 
is that it has an increase in investment in transportation over 
what the House bill that we are fiddling around with right now 
out on the floor. Explain your thinking about that as opposed 
to offering tax breaks to business if they will hire people, or 
all those phony things we have tried in the past. Why does 
infrastructure work better in creating jobs?
    Secretary GEITHNER. Well, to be a little fair to the other 
side, we have actually proposed a combination of approaches. We 
have proposed a substantially higher level of investment in 
infrastructure for a longer period of time because for the 
reasons your colleagues know well, because we think there is a 
very high return for that economically. Growth will be higher, 
more people back to work, businesses more competitive. Good 
use----
    Mr. MCDERMOTT. More jobs?
    Secretary GEITHNER. More jobs, more growth, businesses more 
competitive. But we also propose to combine that with some very 
targeted short-term tax incentives like 100 percent expensing 
for businesses, for a temporary period of time, hopefully as a 
bridge to broader tax reform that will improve incentives for 
investing in the United States. So we are actually trying an 
approach that combines tax incentives for growth with 
infrastructure investments for growth.
    Mr. MCDERMOTT. Thank you.
    Chairman CAMP. Thank you. And I know that some people want 
to talk about everything but this budget, but let me just say 
that I made public statements as a member of the supercommittee 
that everything was on the table. The Toomey plan did put 
revenue on the table through pro-growth tax reform. It was 
about $250 billion. It was not the trillion dollars that the 
other side wanted. So to say that there was no proposal there 
is just simply inaccurate.
    And I would also say on tax reform, I have a bill, a draft 
discussion on corporate reform. There is a plan out there. So I 
would just say that while there may have been meetings with the 
leaders, the administration has never come to this committee, 
which has jurisdiction over this issue, to work with 
Republicans and Democrats on this committee, which we have been 
trying to do with a series of hearings. We had 15 hearings on 
this issue, we have had hearings with the Senate. I think going 
through a regular process might be a better approach. So, 
again, I know from your statement you are going to be giving us 
some concepts or ideas on corporate reform that I look forward 
to. So with that, I would recognize----
    Secretary GEITHNER. Mr. Chairman, could I just say----
    Chairman CAMP. Yes.
    Secretary GEITHNER. I would just like to emphasize the 
common ground. I agree with you, we are going to need 
comprehensive tax reform. I think it is inevitable, I think it 
is necessary, I think it is the best way to get a better system 
that is more responsible fiscally, so I am with you on that, I 
think the case is compelling. And the reason why I think this 
debate is worth having now, even if we are a little short of, 
on either side, comprehensive detailed legislative language, is 
because we have got to find a way to narrow the gap a bit if we 
are going to make progress, and that requires confronting this 
basic question of how do you make the broader plan balanced, 
how do you make sure there is the right mix of pro-growth 
things with things that are still fair in terms of opportunity; 
that is the debate we have to have.
    Chairman CAMP. But legislation has been introduced on this 
issue on the corporate side.
    Secretary GEITHNER. Yeah.
    Chairman CAMP. I don't pretend to say it is complete.
    Secretary GEITHNER. You are ahead of us on the corporate 
side, that is right, but we will be happy to have a little more 
detailed discussion in the coming weeks.
    Chairman CAMP. Mr. Nunes is recognized.
    Mr. NUNES. Thank you, Mr. Chairman. Mr. Secretary, I am 
going to try to quote you here, but I think you just said that 
this budget was a sober, direct recognition; is that what you 
said?
    Secretary GEITHNER. Of the fiscal reality we face, which is 
unsustainable deficits we need to cut by about $4 trillion over 
10 years.
    Mr. NUNES. Well, I was a little stunned by the word 
``sober,'' because I was wondering if you weren't sober 4 years 
ago. You know, this is the same thing every year you have come 
before this committee. I have heard you, at least innuendo, 
about blaming Bush, the past administration, the problems that 
you inherited. Every year you come to this committee with a 
budget, you say the same thing, but you have borrowed $5 
trillion. This country has borrowed $5 trillion in President 
Obama's first term, which is basically the same amount that 
Bush borrowed in his 8 years. And so I am just wondering, you 
know, we are hearing a lot about infrastructure and job 
creation and you guys are going to have some type of tax 
reform, but what happened 4 years ago? You were saying 
virtually the same exact speech 4 years ago as what I hear 
today. And so I just don't know how much more money, if $5 
trillion wasn't enough.
    Secretary GEITHNER. Congressman, again, if you want to talk 
about the relative fiscal virtue of the Republican leadership 
in the last decade relative to what we face, I would be happy 
to do that.
    Mr. NUNES. No, I am just glad--I am not trying to place 
blame here on you or the Republicans or on anyone. I am just 
saying that I just find it rather ironic that now you guys have 
become sober suddenly and recognize that we have a budget 
problem in this country.
    Secretary GEITHNER. That is not fair. Each of these years 
and budgets, we have proposed a way to get ourselves back to a 
sustainable position, and we have done it every year with the 
budget from the beginning. Now, what we are debating, though, I 
think, is not whether we should do that, not whether we have to 
do it. We are debating how we should do it. And the reason why 
we are having such a good debate is you do not support the 
strategy we have embraced to cut the deficits because your 
strategy, as I understand it, is a strategy that would ask us 
to preserve and lock in unaffordable tax cuts for the top 2 
percent, and to make that tenable you want to cut----
    Mr. NUNES. I can see that. The one proposal I did not 
support was the stimulus bill. That was supposed to go into 
creating infrastructure, shovel-ready project, blah, blah, 
blah. And so, you know, I am just trying to figure out why it 
is that that policy didn't work, and somehow, you know, it 
seems like you want to recreate another stimulus package. That 
doesn't seem to be possible, because at the same time you are 
trying to say you are going to balance the budget. I just want 
to know how much more should we have spent. How much more 
should we have spent.
    Secretary GEITHNER. If you want to go back and talk about 
the record of what those policies are, that is fine. I can----
    Mr. NUNES. I just want to know. If you didn't spend enough, 
how much more should we spend?
    Secretary GEITHNER. If you want to look at the record of 
analysis about the impact on the economy, I can draw to your 
attention Republican economists who said growth would have been 
dramatically weaker, unemployment much higher, millions of jobs 
lost, if we had not done that. Congress did the right thing in 
doing that and it was necessary and decisive and effective.
    Now, today, looking forward, if you don't want to invest in 
infrastructure, and you don't want to invest in education, and 
you don't want to invest in innovation, you don't want to do 
things for jobs now, then how are you going to get the economy 
growing more rapidly? That is the debate we are trying to have. 
Now, I completely understand and share deeply the imperative of 
reducing our fiscal level to a sustainable level, and we 
propose a way to do that. Where we differ, I think, with your 
side, though, is how to do it, not whether to do it.
    Mr. NUNES. I think that my time is almost up and I have 
another quick question for you, but I think the difference is 
that for some reason in the administration, you guys believe 
government creates jobs.
    Secretary GEITHNER. That is not true.
    Mr. NUNES. Spending creates jobs, and we don't agree with 
that. But let me switch to a topic that I think we have some 
agreement on.
    Secretary GEITHNER. I just want to say that what you just 
said there is not true. We recognize, as does anybody who 
believes in fiscal responsibility in this country, that the job 
of government is to create the conditions that allow businesses 
across the country to invest and create jobs.
    Mr. NUNES. Like Solyndra would be a good example of that.
    Secretary GEITHNER. Investments in clean energy are 
absolutely a good use of the taxpayer's money. Absolutely good, 
and we are going to do more of it----
    Mr. NUNES. Solyndra was a good investment?
    Secretary GEITHNER. It is a very good strategy, economic 
strategy. And there is lots of support on your side of the 
aisle for doing this to make sure we are creating tax 
incentives and financial incentives for investment in clean 
energy. And we will continue to find ways to do that. There is 
risk in doing that.
    Mr. NUNES. I am glad to have you on the record defending 
Solyndra. That is very interesting.
    Mr. LEVIN. Mr. Chairman, he wasn't doing that, by the way.
    Chairman CAMP. The gentleman's time is expired.
    Mr. NUNES. Mr. Chairman, if I may, I do have a question for 
you on the SEC regulations and I think we actually are in 
agreement on this, and I will get you a question in writing, 
Mr. Secretary.
    Secretary GEITHNER. Okay. Thank you.
    Chairman CAMP. If you accommodate, responding in writing 
would be helpful.
    Secretary GEITHNER. Absolutely.
    Chairman CAMP. Mr. Brady is recognized for a moment.
    Mr. BRADY. Mr. Chairman, today I want to take a moment to 
honor one of our heroes amongst us. Thirty-nine years ago Sam 
Johnson returned home safely from Vietnam after being in prison 
for 7 years in the Hanoi Hilton, nearly half of it in solitary 
confinement. He is a hero among us, and each and every year we 
are grateful for your safe return, Sam.
    Chairman CAMP. Mr. Tiberi is recognized.
    Mr. TIBERI. Thank you, Mr. Chairman. That is a tough act to 
follow.
    Mr. Secretary, you mentioned economic growth, pro-growth, 
growing our economy. Let me tell you a little bit about what is 
happening in Ohio. In Eastern Ohio you may have heard, you may 
have read, there has been over the last year a huge find of 
natural gas shale; not even really much on line yet, quite 
frankly. That could be a huge game-changer in Ohio. In fact, 
many are coming into Ohio investing. But Ohio's oil and gas 
industry is primarily made up of a whole lot of mom and pop--
some second-, third- fourth-generation families running oil and 
gas businesses.
    Mr. Chairman, I would like to ask unanimous consent to 
submit an article from the Washington Times for the record. The 
article discusses an Iraqi war veteran from Ohio, who upon 
returning couldn't find a job, and was recently hired by an oil 
exploration company making between $60- and $70,000 per year, 
allowing him to stay in his hometown.
    Chairman CAMP. Without objection.
    [The insert of The Honorable Pat Tiberi follows:]


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    Mr. TIBERI. The point of that article, Mr. Secretary, as 
you know, is that the find of a game-changer, not just for the 
oil and gas industry, not just for energy, but for jobs and 
economic growth throughout that region of our State, and there 
is a multiplier effect. I talked to an auto dealer in Columbus, 
who said a friend of his in that part of the State, an auto 
dealer, sold more Cadillacs last year than he has sold in 
years. Now, you might have a particular interest in that. That 
Cadillac dealer is on the verge of selling a whole lot more 
Cadillacs over the next several years if this oil and gas is 
allowed to continue to be explored and extracted.
    Now, like the Cadillac dealer, most of those oil and gas 
companies are pass-through entities. As you know, they pay 
their taxes individually, the owners of those companies do. And 
the oil and gas industry, it is a big deal in Ohio. My 
understanding is the President's budget proposes to increase 
the top two marginal individual tax rates, therefore impacting 
those pass-through entities. Would that be a tax increase on 
the top two tax rates of pass-through entities? It is a yes-or-
no answer.
    Secretary GEITHNER. Yes.
    Mr. TIBERI. The President's budget, in my understanding----
    Secretary GEITHNER. It is worth noting, though, that again, 
in proposing to allow those Bush tax cuts for the top 2 percent 
to expire, they would return them to the level that prevailed 
in the late 1990s, which I think, as you know, was a remarkably 
good period for private investment and productivity growth and 
job creation and----
    Mr. TIBERI. It is a yes-or-no answer. The President's 
budget also proposes to limit the personal exemption on 
itemized deductions for those individuals as well.
    Secretary GEITHNER. Absolutely.
    Mr. TIBERI. And finally, applying it to the oil and gas 
industry, my understanding is the President's budget proposes 
to repeal the marginal wealth credit, the intangible drilling 
cost and percentage depletion. And I think you have agreed in 
the past with me when we have talked about this, that that 
would be a tax increase to them.
    Secretary GEITHNER. Well, it is a--I think a better way to 
say it, using the language on your side, it is the removal of a 
subsidy in the Tax Code.
    Mr. TIBERI. Okay, Mr. Chairman, I would like to ask 
unanimous consent to submit this Joint Committee on Taxation 
report which determined that repealing those provisions would 
have a devastating impact on domestic oil and gas production, 
and would result in increased, unfortunately, dependency on 
foreign fossil fuels to be entered into the record.
    Chairman CAMP. Without objection.
    [The insert of The Honorable Pat Tiberi follows:]


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    Mr. TIBERI. Mr. Secretary, in addition--again, talking 
about that Cadillac dealer, my understanding is that the 
President's budget changes in accounting methods eliminates 
LIFO, last-in-first-out, accounting within the budget that 
would impact not only that small business, but a number of 
small businesses, not only in my State, distributors, 
manufacturers, car dealers, devastating effects. In fact, the 
one car dealer, he said he would be lucky if he even stays in 
business if that position is repealed. Is that in the budget?
    Secretary GEITHNER. Yes, it is in the budget. We have a 
different view of the impact, though.
    Mr. TIBERI. I would love to have you talk to this car 
dealer. Maybe GM can have him talk to you.
    Mr. Chairman, last point, question to Mr. Secretary. You 
mentioned that the effective rate of most our U.S. 
multinationals is in the 30s.
    Secretary GEITHNER. High 20s.
    Mr. TIBERI. High 20s.
    Secretary GEITHNER. You know, mid- to high 20s is the 
effective tax rate. It is much, much lower----
    Mr. TIBERI. We have had a dozen hearings, Mr. Secretary, 
and we have had CFOs, we have had tax accountants, these folks 
competing with German companies, Australian companies, 
companies from all over the world. And their effective tax 
rate--in fact, one told us was 36 percent. Most of what we 
heard from them regarding their effective tax rate was from 30 
to 36.
    How can we create more jobs, Mr. Secretary? How can we ask 
the private sector, which you just acknowledged to Mr. Nunes is 
where the jobs are going to be created, if we tell the pass-
through entities that their taxes are going to go up? And if we 
tell the oil and gas companies that they are not going to be 
able to drill, and if we tell our corporate folks that we are 
only to get to 28, apparently, in the President's proposal. The 
corporate tax rate is not even the average of what the world is 
at 25 so how can we compete?
    Chairman CAMP. Give the Secretary time to answer.
    Secretary GEITHNER. Here is the thing to think about in 
this context. The effective tax rate on the energy industry in 
the United States today is much, much lower than the average. 
It is lower because the Tax Code provides a substantial amount 
of subsidies to those private companies.
    We propose, for lots of reasons, mostly because we think it 
is fair and more efficient, to dial some of those back. Now, if 
you oppose that, you have to ask yourself who should pay for 
those subsidies, and why is it fair to ask other businesses or 
other individuals to bear the burden of paying for those 
subsidies in the Tax Code? That is another way to think about 
your question.
    But since you are concerned, as far as I can tell, about 
the risk that the effective tax rate on the oil industry is 
going to be too high, ask your staff to show you what the 
average effective tax rate is today, because you will find it 
is way below the average of what other American businesses pay.
    They pay more in order to subsidize that. We don't think 
that is efficient. We don't think it is good economic policy. 
We don't think it is responsible fiscal policy. And that is why 
we think there is need for reform there.
    Chairman CAMP. Okay. Mr. Neal is recognized.
    Mr. NEAL. Thank you, Mr. Chairman. Mr. Secretary, as you 
know, I have been involved in the battle of Alternative Minimum 
Tax for a long, long period of time. I am intrigued by the 
proposal that the President is offering, and that you and your 
staff, I know, have helped to assemble. But it does bear 
noting. And many of the former Bush economic advisors in the 
last couple of weeks have indicated that many of the things 
that they did with the Bush tax cuts that I opposed, made the 
Alternative Minimum Tax not only more complicated, but it 
simply hit more people because of those tax cuts.
    Now, I think there is an opportunity here to, as you have 
indicated, to force a discussion about tax reform based upon 
AMT in the proposal that you have. And I hope you might in the 
next couple of minutes maybe flesh that out for all of us. But 
not to miss the point, as Bruce Bartlett has indicated in a 
powerful little book that I would recommend to our Republican 
colleagues as well, an advisor to Ronald Reagan, he has kind of 
laid out not a left or a right scenario as much as a kind of 
reflection on what went awry during those years.
    And the second part of my question is, what do you intend 
to do with the Bush tax cuts?
    And the third part of the question is, I know the money 
market funds discussion has arisen, and as we proceed with that 
I think it is important to acknowledge that local government, 
and State government relies on those money market funds for a 
lot of private-sector investment and initiative. So that is a 
three-part question, and have a go at it.
    Secretary GEITHNER. Okay. We think the Buffett Rule, which 
is a proposal that says what people that make more than $1 
million in this country should pay in terms of their effective 
tax rate. No less than 30 percent is a better AMT.
    Mr. NEAL. Can you eliminate AMT?
    Secretary GEITHNER. We think it is a better version of an 
AMT. And AMT is a mess, and obviously you have to fix it. 
Again, we are making a simple judgment that the only way to 
restore fiscal responsibility and still preserve the 
commitments we need to make to our retirees and national 
security, is by a modest increase in the effective tax rate for 
the Americans who are in the best position to absorb that 
burden. That is the simple principle behind the Buffett Rule.
    Now, your second question is, What do we propose to do with 
the Bush tax cuts? What we propose to do is to allow the Bush 
tax cuts that went to the top 2 percent to expire at the end of 
this year, as is scheduled to happen. We propose to extend the 
Bush tax cuts that go to middle-class families, the rest of the 
98 percent of Americans that pay taxes.
    We think that is good economic policy, and fair. But it is 
not enough. We have to go beyond that. And so in addition to 
that, as your colleague reminded us, we also propose to limit 
the value of deductions and exclusions for the top 2 percent of 
Americans, so the benefit they get from those deductions is the 
same as an average middle-class family. We think, again, that 
is a simple principle of fairness and fiscal prudence.
    You raised the SEC money market reform questions. We are 
very, very supportive of the SEC's objectives of trying to make 
sure that we have put in place additional reforms to make a 
more stable money market fund industry so that it doesn't pose 
the risk to the broader economy in the financial system that 
you saw in the fall of 2008. And we are working closely, 
alongside the Fed, on how to get that balance right. And people 
are going to want to look very closely at the proposals they 
come out with. They will have a chance to comment on those 
proposals. And we will, of course, listen very carefully to any 
concerns raised about those proposals.
    Mr. NEAL. Lastly, Mr. Secretary, as we proceed at some 
point, I hope, to finish the extenders here at some point, I 
emphasize, two initiatives that I have worked really hard on 
for a long period of time, the Build America Bonds, and, I 
would note, by way of a document that I have here that my 
Republican friends--boy, did their congressional districts 
benefit from the Build America Bonds program. And I know that 
there are some that have had an interest in it, and others have 
insisted on taking it with one hand and dissing it with the 
other, but it has been very effective.
    And the other issue, the new markets tax credits. It worked 
wonders across New England as well as across the rest of the 
country. I think they are very sound economic principles that 
we can all adhere to regardless of party position or 
persuasion. So I am hopeful that as you proceed, that you will 
look favorably upon those opportunities as well.
    Secretary GEITHNER. We will. And I share your enthusiasm 
and support for those two types of tax proposals.
    Chairman CAMP. Thank you. Mr. Reichert is recognized.
    Mr. REICHERT. Thank you, Mr. Chairman. Welcome, Mr. 
Secretary. Thank you for appearing today. We are still awaiting 
the arrival of Secretary Sebelius. We appreciate your presence.
    Secretary GEITHNER. I wish she could be here today with me.
    Mr. REICHERT. So do we.
    Secretary GEITHNER. To join in the debate.
    Mr. REICHERT. Yeah. Well, I also want to compliment you. 
You have improved in your testimony since 2009 when you first 
appeared.
    You stick to your speaking points rather well. What I hear, 
though, today, is your sort of theory on economics here is that 
government needs to invest more money, to spend more money to 
decrease our debt. And also I hear that we need increased taxes 
on job creators. So that is what I am hearing.
    I want to touch on the corporate tax reform just for a 
moment because I have also heard, and I have written down some 
quotes here, that you see an urgency here in corporate tax 
reform. You see an urgency. We can't wait. We have got to get 
this done. But we are going to hear from you and the President, 
a little bit later, on some of of the details.
    You are going to lay out some core elements. However, there 
is not a full articulated proposal. You are right. We are not 
going to give specifics. That is one quote that you gave the 
chairman. This won't be in the next few months, but could be 
possibly in the next few weeks. So are we--I am confused. Are 
we going to see corporate tax reform? Are we really going to 
see something from the administration on corporate tax reform 
in the next few weeks, in the next few months, or are we going 
to wait until after the election?
    Secretary GEITHNER. Maybe I should--since you are so 
interested in this timing question, maybe I should go back a 
little bit.
    Mr. REICHERT. I only have a limited amount of time, Mr. 
Geithner. Mr. Secretary, are we going to see a plan on 
corporate tax reform in the next few weeks----
    Secretary GEITHNER. You are going to see in the next few 
weeks us lay out a framework of proposals for corporate tax 
reform to begin the debate----
    Mr. REICHERT. Does that mean specific details?
    Secretary GEITHNER. No, it is more than principles, but 
less than fully articulated legislative language.
    Mr. REICHERT. No specific details?
    Secretary GEITHNER. No, that is not true. It will be----
    Mr. REICHERT. Will we get the details later, Mr. Secretary? 
Mr. Secretary, specific details later to come?
    Secretary GEITHNER. I think that we will----
    Mr. REICHERT. By the end of the year?
    Mr. LEVIN. Mr. Chairman, he should be allowed to respond to 
the question.
    Mr. REICHERT. It is a yes-or-no question. I am looking for 
a yes-or-no answer, Mr. Geithner.
    Secretary GEITHNER. I think we will give you a framework in 
the next couple of weeks.
    Mr. REICHERT. Let's just say this.
    Mr. LEVIN. Mr. Chairman.
    Mr. REICHERT. It is my time, thank you.
    Chairman CAMP. Mr. Reichert has the time.
    Mr. REICHERT. Mr. Secretary, let's say that we get a plan, 
we see some details and some specifics.
    Secretary GEITHNER. I am----
    Mr. REICHERT. How do you plan, sir, to, for example, in 
the--in Washington State, 56 percent of our jobs are small 
businesses. They pay their corporate income taxes through the 
individual Tax Code, as you know. The very--these very same 
taxes that you propose, you are raising in this budget to over 
40 percent in some cases; for example, 2.1 percent tax on 
medical devices, 3.8 percent tax on employers through the 
health care bill, another 40 percent tax on health care plans. 
You are going to raise the death tax. You are also going to 
raise the capital gains tax.
    How do you plan to protect our small businesses, the people 
that are creating jobs, in your corporate tax reform? How do 
you plan to protect our small businesses, our job creators? 
That is what I want to hear from you today, and I think that is 
what the American people want to know.
    Secretary GEITHNER. Good question. And as you know, we have 
worked very hard with Congress to put in place a series of very 
powerful tax incentives for small business over the last 3 
years; very substantial, powerful programs to help get them 
more access to credit. We are going to build on those proposals 
in the things that you are going to hear from us in the next 
couple weeks.
    It is worth noting, though, and I just want to make sure 
this is clear, that the proposals we have introduced in the 
budget to allow the Bush tax cuts for the top 2 percent to 
expire, as scheduled----
    Mr. REICHERT. Mr. Secretary, answer the question, please.
    Secretary GEITHNER. We----
    Mr. REICHERT. We are looking at a 40 percent tax on small 
businesses. How do you plan to protect small businesses?
    Mr. LEVIN. Mr. Chairman, could you let him answer the 
question?
    Chairman CAMP. Mr. Reichert has the time.
    Mr. LEVIN. Don't abuse the----
    Mr. REICHERT. Mr. Secretary, please answer the question. 
How do you plan to protect small businesses in your corporate 
tax reform plan? That is what I want to know. I don't want to 
know what you have done in the past. I want to know what you 
are going to do.
    Secretary GEITHNER. Again, you are going to have the 
chance--I am sure you will call me up here again, and I am 
going to look forward to talk to you about it when we lay out 
our----
    Mr. REICHERT. Answer the question, please. Mr. Secretary, 
please answer the question. How do you plan to protect small 
businesses?
    Secretary GEITHNER. You will----
    Mr. REICHERT. The question has not been answered. Answer 
the question, please.
    Chairman CAMP. The gentleman's time is expired. Mr. Roskam 
is recognized.
    Secretary GEITHNER. Mr. Chairman, can I just respond to 
this question?
    Chairman CAMP. Yes.
    Secretary GEITHNER. Congressman, as I said, you will hear 
us in the next couple of weeks lay out a broad framework for 
reform in the corporate tax system. You will hear in that 
context some answers to your question. I am not going to answer 
that today, because we are going to do this a couple of weeks 
from now. But we will have the chance to talk about that, and I 
look forward to that.
    Mr. REICHERT. Okay. Thank you for not answering the 
question.
    Chairman CAMP. Mr. Roskam is recognized for 5 minutes.
    Mr. ROSKAM. Mr. Secretary, lets switch gears. When asked 
about how harmful the Senate's lack of a budget was last week, 
Chairman Bernanke said this two-sentence--three-sentence quote. 
He said, ``Is the uncertainty about the future of the Tax Code 
government programs and so forth a negative for growth? I think 
it is. Because firms like to have certainty, like to be able to 
plan.''
    Now, when the White House was asked its opinion about no 
action on the part of the Senate, the White House said they had 
no opinion. What is your view? Do you agree with the White 
House, or do you agree with Chairman Bernanke?
    Secretary GEITHNER. I believe that it is very important to 
the future of the country, to have confidence in the United 
States, that Congress come together and agree on a balanced 
program of fiscal reforms to give Americans confidence and the 
investors more confidence, that we will find a way to go back 
to living within our means. And that is very important for us 
to do, and better for us to do it sooner, rather than later. 
And that is why we are here today, to debate how best to do 
that.
    Mr. ROSKAM. So unlike the White House, am I incorrect in 
interpreting you to say that it would be helpful if the United 
States Senate passed a budget?
    Secretary GEITHNER. No, I was answering a different 
question, which was that----
    Mr. ROSKAM. Let's go back to the question that I answered--
or that I posed. The Chairman of the Fed says it is not helpful 
for the Senate not to act.
    Secretary GEITHNER. That is not what the Chairman said.
    Mr. ROSKAM. When asked about how harmful the Senate lack of 
a budget is, the Chairman said this: Is uncertainty about the 
future of the Tax Code government programs''--that is, budget--
and so on a negative for growth?'' Chairman Bernanke, said, ``I 
think it is.''
    Firms like to have certainty, like to be able to plan. So 
you are not recharacterizing Chairman Bernanke's testimony, are 
you?
    Secretary GEITHNER. Well, to actually be fair, I didn't 
hear exactly what he said.
    Mr. ROSKAM. Okay, that is exactly what he said.
    Secretary GEITHNER. But I think you are asking a question 
really about budget process.
    Mr. ROSKAM. No, I am asking a question, Mr. Secretary, 
about budget priorities. That is an acknowledgment by the 
United States Senate, which is what I think would be incredibly 
helpful to produce a budget. When the White House was asked, 
Mr. Secretary, about that issue, the White House said it had no 
opinion.
    What I am asking you is, what is your opinion about the 
Senate's failure to produce a budget?
    Secretary GEITHNER. Let me try it a different way.
    Mr. ROSKAM. No, let's try it that way. So the question is: 
Do you have an opinion about the Senate's failure to produce a 
budget?
    Secretary GEITHNER. Congressman, I will say I will try to 
state it a better way. Maybe this will be helpful to you. 
Congress, in August, enacted in the Budget Control Act, a 
series of caps and controls on discretionary spending which we 
are living within. We have some disagreements on how best to do 
that. Now, what that act did not do is reach agreement on a set 
of entitlement reforms--to health care, other mandatory, or 
broader tax reforms--to help deal with the rest of the 
remaining fiscal challenges we face.
    Now, it is our judgment, which is why we put forward a 
budget and why we are having this debate with you, that we need 
to start to lay the foundation for bipartisan consensus on both 
of those entitlement reforms and tax reforms. Now, it would be 
good for us to do that. That is why we are having this debate.
    At the end of the year, we are going to have to start that 
process because with the expiration of all of the Bush tax cuts 
and the sequester hitting at the end of this year, we are going 
to have to find some way to reach broader consensus on fiscal 
reform. That is why we are having the debate right now. So I 
don't know that you and I disagree in the sense that this is 
important for the country. That is why we are debating it. And 
what we have got to try to do is try to figure out how to find 
more common ground because, as you can tell, at the moment we 
are a little apart on taxes and we are a little apart on 
entitlements.
    Mr. ROSKAM. So let's move in to try and find common ground. 
Is there anything fundamentally different about this budget 
that you are here presenting today that is different than the 
budget from last year that failed to get a single vote of any 
United States Senator?
    Secretary GEITHNER. It is different in two very important 
respects. It lays out a much more substantial set of savings on 
Medicare and Medicaid and what is called other mandatory--farm 
subsidies, civil servants' retirement and some such things--
that were not in the President's budget last year. Together 
those savings amount to hundreds and hundreds of billions of 
additional dollars over 10 years; it outlines some additional 
savings on the defense side, and so in that sense it is 
different.
    It is also different in the sense that it is a much more 
substantial set of near-term support for job creation and 
growth than we proposed last February, because we would like 
growth to be stronger than it has proven to be. Those are the 
main differences from the last year's budget.
    Mr. ROSKAM. My time has expired and I will yield back. Let 
me ask just one rhetorical question, and that is one I doubt 
you will answer. But that is: Does the President have a 
commitment from Senator Reid to put the President's budget on 
the Senate floor for a vote? I yield back.
    Chairman CAMP. Thank you. Mr. Becerra is recognized for 5 
minutes.
    Mr. BECERRA. Mr. Secretary, thank you for being here. Let 
me first apologize to you for this committee's lack of decorum, 
and more specifically, lack of courtesy to you as a witness 
here today. There used to be a time when we could disagree 
without being disagreeable. And there was a time where we could 
have a real discussion and debate with the witnesses. But 
perhaps this is why so many Americans today are fed up and 
frustrated with Congress and give it such a low rating, in that 
they don't believe that we are here to listen to Americans or 
to its representatives, but just to say what we think.
    Let me ask you a question about jobs. We have seen 
progress. Last month's report where over 250,000 private-sector 
jobs were created was a good sign, compared to just 3 years 
ago, when the President inherited the keys to the White House, 
where we lost in that month of January 2009 close to 780,000 
jobs in 1 month. That is a major--a million jobs turnaround in 
January 2009, to what we see in terms of January 2012.
    But we still have a long ways to go, because during that 
deep recession that began in 2007 and 2008 under President 
Bush, we lost close to 8 million jobs. Now, we know that we are 
losing jobs. At the same time, we know that a lot of those jobs 
aren't being lost altogether and disappearing. They are going 
overseas, a lot of outsourcing of American jobs. And I know 
that the President has said that he is very interested in 
trying to move forward a bipartisan policy that would allow us 
to insource jobs, to keep jobs in America, and I know you have 
got some specific proposals there.
    Now, one step before I ask a question of you. A review of 
the employment data shows that in the 10-year period of 1989 to 
1999, U.S.-based multinational corporations added 4.4 million 
workers to the payrolls in the U.S. They at the same time, by 
the way, added 2.7 million jobs overseas. So they were 
outsourcing back in that 10-year period between 1989 to 1999, 
but they were also insourcing, insourcing more than they were 
outsourcing.
    The 10-year period that followed, 1999 to 2009, those same 
U.S. multinational corporations based in the U.S. eliminated 
864,000 jobs in this country at the same time that they were 
adding 2.9 million jobs overseas.
    So, whereas in the previous decade, they were insourcing 
while they were outsourcing, it has now become the case that 
too many of those American multinational corporations are 
outsourcing while they are cutting American jobs here at home.
    Do you have any proposals, does the President have any 
proposals in his budget to try to encourage American companies 
to insource jobs here in America?
    Secretary GEITHNER. I think probably the single most 
important rationale for corporate tax reform and the most 
important test of whether we can do corporate tax reform on 
sensible grounds is whether we can improve the incentives for 
companies to create and build things in the United States, 
because we want U.S. companies not just to be a large share of 
the huge growth we are going to see outside of the United 
States in the coming decades, but we want to see more of that 
demand met by things that are not just produced and created in 
the United States, but support American jobs.
    That is, I think, one of the most important reasons is to 
try to find a way to help do corporate tax reform, that brings 
down the rate, broadens the base, and shifts those incentives, 
in favor of creating and building things in the United States.
    So you are going to see when we begin this discussion in 
the next couple of weeks about corporate tax reform, some 
specifics about how to do that. And I would say we would look 
at any proposal through that simple test, which is relative to 
what you face today, are we making it more likely that that 
next factory by a U.S. company or a foreign company is built 
here?
    Mr. BECERRA. Now, in the last 23 or so months, we have seen 
some 3.7 million jobs created. So we are no longer losing the 
jobs, we are creating them, and we want to accelerate that. 
Some 400,000 of those jobs are in manufacturing in America, so 
we are increasing manufacturing jobs--again, not as fast as we 
should; but, again, do you have any proposals in the budget, 
tax credits, and so forth, that would incent manufacturing to 
occur in the U.S.?
    Secretary GEITHNER. Yeah, as you heard the President say in 
the State of the Union, and you will see in the budget, and you 
will see more in the next couple of weeks, we believe that as 
we consider broad corporate tax reform, we need to be 
strengthening the incentives for manufacturing, advanced 
manufacturing. We think there is a very compelling economic 
case for doing so; again, very high returns in terms of 
economic growth, and you are going to see from us some more 
specific ideas about how best to meet that test.
    Remember, the things that can move, industries will move if 
it is economically compelling for them to move. Manufacturing 
is one example of that, and that is one reason why you want to 
focus where you think there is a good case for special tax 
preferences on that important industry.
    Mr. BECERRA. Thank you. Mr. Chairman, thank you very much. 
I yield back my time.
    Chairman CAMP. Mr. Gerlach.
    Mr. GERLACH. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary, for being here. I just jotted a note from your last 
comment that the purpose of the corporate tax reform effort 
that you are going to be undertaking is to basically 
incentivize growing jobs and building jobs here in the United 
States.
    My district is outside of Philadelphia. We have a very 
significant medical device industry, and we are very concerned 
that the 2.3 percent tax imposed on the Obama Care legislation 
will actually have the opposite effect. In fact, there is a 
study by Avromed that there would be about 48,000 jobs lost in 
the industry if this $20 billion tax over 10 years is enacted--
or excuse me, is implemented.
    So based upon your testimony today that you intend as part 
of the administration to put forward a comprehensive corporate 
tax reform plan of action, although it won't be in legislative 
form, will the repeal of the medical device tax be part of 
that? And if so--or, excuse me--if not, why not?
    Secretary GEITHNER. No, it will not be part of that, and I 
understand your concerns about this, and I would be happy to 
talk to you in more detail about it. But let me give you our 
general sense. The Affordable Care Act will dramatically expand 
insurance coverage, as you know, for tens of millions of 
Americans, and therefore we are pretty confident that the net 
impact on businesses that are in the business of providing 
health care devices or otherwise, will be very positive, very 
substantially positive, even with the measures we propose to 
make sure we are doing that in a fiscally responsible way. But 
I would be happy to talk to you in more detail about that. I 
understand your concerns.
    Mr. GERLACH. Well, given the nature of the tax, if you are 
familiar with it, it is a 2.3 percent tax on gross receipts 
right off the top; whereas, many of the companies in our area, 
and Representative Paulson also has been working very hard on 
this issue, many of the companies only have a net profit at the 
end of the day of only about 1 or 2 percent. So if you are 
taking 2.3 percent off their gross revenues, you are putting 
many of those companies at risk, and in fact allowing them to 
consider moving to other parts of the world to undertake their 
R&D and their manufacturing.
    So again, what is it about the medical device tax that you 
think somehow is going to create jobs rather than what you 
agree is the purpose of corporate tax reform, which is to 
incentivize the growing of jobs here in the United States----
    Secretary GEITHNER. Again, I would be happy to spend more 
time trying to understand your concerns on this stuff, but we 
think that on balance, that mix of reforms, again, will expand 
health care dramatically for tens of millions of Americans, 
will be very positive on balance for American businesses that 
are in that business.
    Mr. GERLACH. So you are open to the industry having more 
communication with you, the administration, to demonstrate why 
that tax is not going to incentivize job growth?
    Secretary GEITHNER. I am always happy to get advice and 
concerns on these kinds of things and would, of course, listen 
on those.
    Mr. GERLACH. Okay, one other question. Last year when you 
were here, I asked you specifically what the corporate rate 
ought to be rather than 35 percent, and we got you to answer a 
little bit on that to say you thought it should be down in the 
area of around 28 percent.
    Secretary GEITHNER. I don't think I said--did I say--I 
don't think--I have been very, very careful not to give you a 
number.
    Mr. GERLACH. Well, I would be glad to send you the 
transcript. But you were down--I got you down to around 28 
percent. My question is: Is that where you are going to be when 
the corporate proposal--tax proposal comes out in terms of the 
new rate you think it ought to be?
    Secretary GEITHNER. I think what I tried to say in the past 
is we want to bring down the rate, and we think we can, to a 
level that is closer to the average of that of our major 
competitors.
    Mr. GERLACH. Okay, thank you, Mr. Secretary. Thank you, Mr. 
Chairman.
    Chairman CAMP. Thank you. Before I go to Mr. Thompson for 5 
minutes, after him we will be alternating one and one, and we 
will go to 4 minutes, because I know the Secretary has to leave 
at 12:30. We appreciate the time that we have had with him.
    So Mr. Thompson is recognized for 5 minutes, but after 
that, it will be 4.
    Mr. THOMPSON. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary, for being here today. And I want to focus in on jobs 
and one particular aspect of jobs, and that is why I was so 
pleased to see that the President continues to make what I 
think are very important investments in renewable energy, 
including the extending the 1603 Treasury grant program, 
advanced energy manufacturing credit, and the production tax 
credit for wind, as well as calling for investments in energy-
efficient buildings.
    In particular, the 1603 program has leveraged nearly $23 
billion in private sector investments, and it supported over 
22,000 projects, nearly half of those in my home State of 
California. And I think every district, every congressional 
district represented on this dais today, has taken advantage of 
the 1603, and benefited greatly from that.
    And I know that in California, there has been over $1.2 
billion in grants issued; in Texas, over $1.6 billion in grants 
issued; and in my district, that means small businesses have 
been able to completely go to solar power or get increased 
amounts from wind energy. And this means that when they do 
that, not only does that create jobs, people installing those, 
people building those. But that means more money in their 
pockets, more money from energy savings, where they can invest 
more money in their businesses, they can hire more workers. And 
maybe some of those panels were built in the Dow plant in 
Midland, Michigan.
    And I think it is important to point out that they received 
$17 million in advanced energy manufacturing credits. And that 
is important because that is not only jobs in Midland, 
Michigan, but that means that those solar panels that they are 
installing in my district, and most of the other districts on 
this dais, are made right here in the United States of America.
    And also it is important that we continue to extend the 
production of the tax credit for wind. If that is allowed to go 
away, that will result in the loss of nearly 40,000 clean 
energy jobs. So as we continue to promote job creation, and add 
to the 3 million jobs that have been created over the past 2 
years, what role do you see clean energy investments in our Tax 
Code playing in the creation of those jobs?
    Secretary GEITHNER. They should continue to play an 
important role for all of the reasons you said. I think that 
they are, as part of a comprehensive strategy to make sure 
Americans are using energy more efficiently to reduce our 
dependence on foreign oil, to increase the value of renewable 
sources of energy. We think tax incentives like the ones you 
described are an important part of energy policy and a good 
economic policy for the country.
    Mr. THOMPSON. Well, I can just tell you from my personal 
experience in my district and different places I have visited 
across this country, this is extremely important. And there are 
areas that are hanging high hopes on the continuation of these 
programs. They are working with community colleges; they are 
working with private business in the private sector to train 
individuals and to work on manufacturing in these areas. And I 
think this has more potential than we have already seen to 
date, and I see this going no place but up.
    It has been brought up during some of the previous 
questioners, about the--what has been known as the Bush tax 
credits. What happens to our deficit if those expire, as they 
are set to expire?
    Secretary GEITHNER. If you would extend the Bush tax cuts 
for the top 2 percent----
    Mr. THOMPSON. What if it just goes away?
    Secretary GEITHNER. Oh, I thought you asked the opposite. 
If you--well, let me try to do it this way, maybe it will 
answer your question. Which is, if you would extend them, it 
costs somewhere between $700 billion and a trillion dollars 
over 10 years. We don't think that we can afford to do that, 
which is why we propose to let them expire.
    Mr. THOMPSON. And then lastly, I just want to point out a 
lot has been questioned of you as to where your proposal is. I 
am a big proponent of us doing the work here in this committee 
and we should be making the proposals. And if you look at the 
House Ways & Means Committee's discussion draft bill, and if 
you turn to the provision on tax reform for individuals, it 
reads: ``Individual tax reforms to be provided.''
    In other words, there is nothing here. If you look at the 
corporate income tax rate reduction, it reads: ``Other business 
reforms to be provided.'' There is nothing here.
    So I suggest that we do our work, and get some proposals 
out on the table. I yield back.
    Mr. HERGER. [Presiding.] The gentleman yields back. The 
gentleman from Florida, Mr. Buchanan, is recognized for 4 
minutes.
    Mr. BUCHANAN. Thank you. I appreciate you being here today, 
Mr. Secretary. My concern is, as a guy who has has been in 
business for 35 years--I got up here in 2007--I am a big 
proponent of a constitutional balanced budget amendment. We 
couldn't do that today to be a realist because of where we are 
at. But that would have been something that would have been 
phased in over 7 or 8 years, and this isn't a Republican or 
Democratic idea, both. If you look back over 50 years, we 
balanced the budget five times.
    I look at the State of Florida, and we have had a tough 
time, high unemployment down there, but we were forced to 
balance the budget. They have had less revenues. They make the 
tough choices. I am very concerned that this philosophy where 
we don't put this in place, we are betting the farm.
    In fact, one of the past secretaries, because everybody 
likes to refer back to the Great Depression, had said that they 
stimulated--they put more money into the recession. Looking 
back, it didn't do anything much to jobs, but what they did do 
is leave a pile of additional debt at that point in time.
    So when we go out here and we look at what has happened 
over the last 4 years, and we have had plenty of debt before 
that but we have added $5 trillion in additional debt, aren't 
we potentially betting the farm? When you look down the road, 
we are going to be at $20 trillion in debt. The normal cost of 
money--you brought up interest rates--are usually 4 or 5 
percent, and you are going to have a trillion dollars in 
interest a year before you pay out one benefit.
    Why doesn't a constitutional balanced budget amendment make 
sense that would be phased in over a period of time, because I 
personally think we are incapable as an institution to deal 
with this.
    Secretary GEITHNER. I will give you one piece of history, 
and this is just to comment on what you said, that the Great 
Depression is a way to think about this question. Which is, if 
you look at what happened to Federal spending and debt in World 
War II, you can see one of the challenges with trying to live 
with a balanced budget. And you saw in that context, necessary, 
essential, and huge, massive increases in government spending 
for a temporary period of time that we were able to unwind, 
restore, grow out of, and leave ourselves in a stronger 
position.
    And it is, I think, very hard to run a country with an 
amendment that would lock in restraints to make it harder for 
us to deal with national security, were all of the other 
unforeseen challenges----
    Mr. BUCHANAN. Well, let me just----
    Secretary GEITHNER. But I was going to agree with you a 
little more, because I am with you on the basic imperative. You 
are absolutely right, though, that to get from a point where 
you have unsustainable deficits to more sustained deficits, we 
have to lock ourselves into a fixed set of constraints on how 
much we can borrow that forces us to come down over time. What 
we should be fighting about together, is not whether we do 
that, because we have to do that. What we should be fighting 
about is--what is the mix of policies we should embrace to get 
ourselves there, which is what you all have to do.
    Mr. BUCHANAN. My point on that is that we have been 
incapable of that during the last 50 years. During the Clinton 
Administration, give him some credit; with the Republicans, 
they seemed to work together and got a balanced budget 
amendment. But what this does, I can tell you as a guy who 
worked in the middle markets for a lot of years, it creates an 
enormous amount of uncertainty when we start running a 
trillion-and-a-half and continue to run these trillion-dollar 
deficits, ideally going forward up to $20 trillion. People are 
sitting on the side lines with their cash, and that is a 
problem.
    Let me take you to the next question. I just want to say, 
because someone mentioned something about a Cadillac dealer, 
and I will just take that one industry because I was out at 
their show out in Vegas. But the point is that there are 17- or 
18,000 dealers. Most of them are pass-through entities. That is 
just one little segment in terms of businesses. Those are the 
folks--and one of the problems they have got in those 
industries, as you know, even though the banks claim they are 
lending, there are a lot of areas where they can't get loans, 
and raise taxes on a lot of small business people with pass-
through entities. A lot of those people that I know are the job 
providers.
    So I would like you to just--when you look at this thing 
about where are we going to get the money from, we also have to 
keep in mind if they have to pay another $20,000 or $30,000 a 
year, that is another job that they can't create.
    Secretary GEITHNER. I understand those concerns and again I 
just want to flesh out two things. The proposals we made to let 
the tax cuts expire for the top 2 percent only affect 2 to 3 
percent of small businesses that employ people. Now----
    Mr. BUCHANAN. That might be the businesses, but how many 
jobs do they create or how many jobs do they have? It is a lot 
more than 2 or 3 percent.
    Secretary GEITHNER. That is a fair point. And again, the 
other thing I would say is, I totally understand the concern--
there is nothing easy in this--is that if you don't do what we 
are proposing, you still have to ask yourself who are you going 
to ask to pay higher taxes to avoid that, or who are you going 
to ask to absorb the broader cost benefits?
    Mr. BUCHANAN. But if they create more jobs, ideally, then 
there is going to be more money, ideally, in the Treasury. 
Instead of paying something out, we will get something back in 
terms of revenues.
    Secretary GEITHNER. Another comparison, again, if you look 
at how they did in the second half of the 1990s when they faced 
similar rates to what we are proposing now, they did really 
very well. And if you look at the health of the business 
community at that time--it is actually pretty strong today--but 
at that time, we had a very impressive record of investment, 
productivity growth, job creation across the business sector, 
even with the rates that prevailed then.
    Chairman HERGER. The gentleman's time has expired. Mr. Kind 
from Wisconsin is recognized for 4 minutes.
    Mr. KIND. Thank you, Mr. Chairman and thank you, Mr. 
Secretary, for your indulgence and patience with us today. To 
my good friend from Florida, I did support the balanced budget 
when it came up for consideration. I wish there was a little 
more flexibility in it for severe economic downturns and 
security contingencies and that, but I supported it, because 
looking back in retrospect, if we had a balanced budget 
amendment in place, it might have made it a little bit 
difficult to pass the 2001, 2003 tax cuts without paying for 
them or entering into two major wars in Iraq and Afghanistan 
without paying a nickel for them, or passing a new prescription 
drug plan, Part B, the largest expansion of entitlement 
spending since Medicare was first created in 1965, without 
paying a nickel for it.
    And, Mr. Secretary, you and the President, this 
administration inherited a mess. I mean, we were losing 750,000 
jobs a month the day President Obama was sworn in; $17 trillion 
of wealth was already destroyed in the stock market; and you 
inherited a $1.5 trillion annual budget deficit. And I think, 
clearly, progress is being made, and I appreciate the work that 
you and this administration have put into focusing on the 
economy and job creation.
    I am going to ask you your thoughts on the insourcing 
initiative that this administration is focused on, and I am 
glad to see that today the President is in my home State, 
Milwaukee, visiting Master Lock. And it is a wonderful 
insourcing story of a major manufacturer in the Upper Midwest 
that has brought back over 100 jobs right now.
    And I know this administration has been focused on what 
more we can do to encourage that insourcing and expanding the 
manufacturing base of this country.
    Later this month, I believe, you are going to be holding a 
Select USA Investment Summit, bringing people together about 
the value of investing and growing jobs here in America. And we 
will have an opportunity, I feel, for the Tax Code, of trying 
to really incent businesses to stay in America or locate in 
America to produce jobs. And I believe that a global economic 
power like us has to have the ability to make and invent and 
produce things again.
    There are a lot of reasons why businesses decide to locate 
where they are--from wages to sourcing supply to customer base 
to quality control and that--but also one of the reasons is we 
can't ignore the Tax Code. And I would like to see us work in a 
bipartisan fashion, through the Tax Code, of reducing that rate 
to any company, and hold out the promise that if you are a 
business that wants to make something or invent something, 
create, produce, or grow something here in America, you are 
going to get a significant tax advantage for doing that. And I 
would like to hear your thoughts on that.
    Secretary GEITHNER. We are in the same place as you, and 
you made the case well. And again, I think that is the test 
that you should apply to any broad-based tax reform. We want to 
look at it in its totality and say is it going to make it more 
likely, more economically compelling, that more companies--
American and foreign--are making that investment here. So we 
are not just designing and creating things here, but we are 
building things here in the United States. And I think you made 
the case well.
    You are going to hear again, you will see some proposals in 
the budget to do that, and you will hear some more from us in 
the next couple of weeks. I think it is important to recognize 
that, and I know you do, that a substantial amount of 
production by American companies is going to happen outside the 
United States. And that is going to continue. That is 
necessary, it is probably desirable. But what we don't want to 
do is to have the Tax Code at the margin make that happen where 
it doesn't need to happen. And again, we think through better 
designed reforms, we can shift the incentives in favor of 
building and creating more of those things in the United 
States.
    Mr. KIND. While I share the goal that trying to lower the 
marginal rates for all companies is a desirable goal and that, 
but I think we can be doing more to try to incent manufacturing 
activity in this country as well. And I am looking forward to 
hearing the administration's proposals on this. There hasn't 
been a lot of definition with the work that we have been doing 
in this committee, and to be fair, I think we have to put 
something on paper so that we have a real discussion point 
rather than the philosophical hearings that we have been 
having. And trying to get to 25 in the deficit-neutral fashion 
is going to be difficult. But it also ignores the fact that 
most of the other countries we are competing with has a VAT in 
place----
    Secretary GEITHNER. That is right.
    Mr. KIND. --to supplement the lost revenue from having 
lower corporate rates, and no one is discussing that around 
here. How do we do this in a deficit-neutral fashion while 
still making our companies as competitive as they need to be?
    Secretary GEITHNER. I am glad you pointed that out. Can I 
just say one thing Mr. Chairman, quickly?
    Chairman CAMP. [Presiding.] Quickly, yes.
    Secretary GEITHNER. You are right that, you know, those 
countries that have moved to lower their statutory rates did so 
by raising what were already pretty substantial VATs, and the 
test that you should apply to any tax reform plan is, is it 
going to help reduce the deficit? Is it going to be fiscally 
responsible, and is it going to make the system more fair, more 
efficient? Is it going to improve the incentives for investing 
here?
    Chairman CAMP. Dr. Price has 4 minutes.
    Mr. PRICE. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary for joining us again. The level of deficit in the 
next fiscal year projected in your budget, is----
    Secretary GEITHNER. Let me see if I got this right. We are 
about 8.6, a little below 9 percent in 2011. We have----
    Mr. PRICE. How about in absolute values?
    Secretary GEITHNER. I am trying to get to this.
    Mr. PRICE. I have only got 4 minutes.
    Secretary GEITHNER. We came down a bit in 2012. We came 
down really quite substantially in 2013, so somewhere between 5 
and 6 percent of GDP in 2013.
    Mr. PRICE. And the absolute number is about $1.3 trillion.
    Secretary GEITHNER. I am not sure that is right, but what 
matters is the share of GDP.
    Mr. PRICE. The absolute number is about $1.3 trillion. 
Discretionary spending is about a trillion dollars; is that 
correct, ballpark?
    Secretary GEITHNER. Well, the discretionary numbers are set 
by the cap.
    Mr. PRICE. I understand. I am just talking about absolute 
numbers. You have $1.3 trillion in deficit. You have got $1 
trillion in discretionary spending, which means if you did away 
with all of discretionary spending, the entire Federal 
Government, outside of the mandatory spending, you wouldn't 
balance the budget, is that correct, in the next year?
    Secretary GEITHNER. I like where you are going. Go ahead.
    Mr. PRICE. So where is the solution? Where are the reforms 
on the mandatory side that allows us to get to balance in your 
budget?
    Secretary GEITHNER. Okay, good question. So we have $360 
billion in reforms to Medicare and Medicaid over 10 years.
    Mr. PRICE. And those come from?
    Secretary GEITHNER. They come in Medicare in the form of 
lower payments to providers, and some modest changes to the 
share of health care costs borne by upper-income Americans. 
Medicaid, a set of other reforms that the budget outlines in 
some detail. We go beyond that, though, in non-health, other 
mandatory----
    Mr. PRICE. Let me get this straight, if I may. The 
fundamental reform, the solution to saving Medicare in this 
country, is to raise rates on folks who have a significant 
income, and to whack away again at providers in terms of their 
payment for services; is that right?
    Secretary GEITHNER. No, I wouldn't say that. We are not 
claiming to offer the definitive long-term solution to 
Medicare.
    Mr. PRICE. Let me ask you why--why you are not offering the 
fundamental reform for Medicare, when we understand that we 
could do away with the entire spending in the Federal 
Government, except for mandatory spending, and not even 
approach balance.
    Secretary GEITHNER. Well, we are, again, we are proposing 
this comprehensive set of reforms, including to Medicare and 
Medicaid, which together bring the deficit down to a 
sustainable level over the next 10 years. But as I said in my 
opening statement, that just puts us in a better position to go 
confront the long-term challenges we face.
    Now, as you know, the Affordable Care Act takes $100 
billion, roughly, out of the deficit in the next 10 years, and 
a trillion in the second decade. We go beyond that with this 
additional $360 billion of reforms in Medicare and Medicaid in 
the next 10 years.
    Mr. PRICE. Let me share with you the concerns of physicians 
across this land caring for patients. And that is that your 
reforms in both the Affordable Care Act and in this current 
budget decrease the ability of physicians to care for patients, 
because you empower in this budget, the Independent Payment 
Advisory Board, which is a 15-member board of unelected 
bureaucrats with no appeal process, no appeal process, no 
requirement that any of them are actively practicing 
physicians. And what your budget does and what the Affordable 
Care Act does is say to physicians, we will not pay you for 
those services, because you can't cut benefits to the seniors, 
as you well know, by law. So the only thing that you can do, by 
your own admission here today, in this $360 billion, is to 
decrease payments to providers.
    What that means, Mr. Secretary, as you well know, and as I 
think the President well knows, and certainly the American 
people know, is what this will result in is a decreased access 
to care in this country, a decreased quality of care in this 
country, and decreased ability of the physicians in this 
country to care for patients. And that is what gives them 
nightmares.
    Chairman CAMP. All right, time has expired. We will go to--
--
    Secretary GEITHNER. May I respond to that? I understand 
your concerns about this. I just want to point out that if you 
don't do it the way we propose it, then you are going to have 
to do it with deeper cuts in benefits to middle-income 
Americans. So we are not claiming we solve all the problems. We 
understand your concerns about this, but life is about 
alternatives; we have to make choices and we think this mixed 
proposal is better than asking a middle-income retiree to pay 
dramatically higher costs for their health care in their 
retirement.
    Chairman CAMP. We are going to go back to a 2:1 ratio. And 
after--the next two speakers will be at 4 minutes. We are going 
to have to go to 3 minutes to be able to conclude by 12:30. So, 
Ms. Jenkins is recognized for 4 minutes.
    Ms. JENKINS. Thank you, Mr. Chairman. Thank you, Mr. 
Secretary, for being here. And Mr. Secretary, you have 
described this budget as a carefully designed set of 
investments and reforms to boost growth, create jobs, and 
improve opportunity for middle-class Americans. And last year 
the President gave a speech in my district, at home in Kansas, 
where the President boasted about making productive investments 
to secure a solid future for the middle class. However, the 
President's speech also instructed the crowd that, of course, 
those productive investments cost money, and they are not free.
    I think we all understand that this White House's spending 
is not free. And I think where we differ is where we should 
trust middle-class families. Should we trust families in Kansas 
to make their own productive investments rather than funneling 
our money through Washington? And the real threat to middle-
class families, I believe, is Washington's never-ending 
appetite to spend money.
    This budget would increase spending by $200 billion, to 
$3.8 trillion, or more than 24 percent of GDP, which, according 
to even your own rosy projections, would result in a projected 
deficit of $1.3 trillion, adding $7 trillion in debt through 
2022. And the numbers only get worse.
    At the same time, your budget calls for $1.9 trillion in 
new taxes from across the economy. I believe you have proposed 
tax increases on the rich and growing small businesses, an 
undefined Buffett tax increase, double taxation on dividends. 
You capped charitable contributions, taxed the oil and gas 
industry, and even managed to shake some spare change from the 
aviation industry, not to mention the $1 trillion in fabricated 
war savings. And even after your budget has taxed the rich, the 
oil and gas, business, jet manufacturers, you still continue to 
run record annual deficits for years to come; never, ever 
approaching balance. You never, ever balance the budget, or lay 
out a plan to eliminate this national debt.
    Rather than protecting the middle class, I would suggest 
this budget will saddle the middle class, and those aspiring to 
be in the middle class, with trillions in national debt. It 
seems that this guarantees--your budget guarantees tax 
increases that will fall squarely on the middle class. There is 
no one left to tax.
    So my question is, doesn't the White House's inability to 
control spending mean that eventually middle-class taxpayers 
will just end up footing this bill?
    Secretary GEITHNER. You are mistaken in that judgment, and 
the President is committed and you have heard us say over and 
over again, that we will extend the Bush tax cut for middle-
class families.
    Ms. JENKINS. Who is going to pay off the debt? Who is going 
to balance the budget after you tax all of these other people 
and no one is left but the middle class?
    Secretary GEITHNER. You listed accurately not the 
implications of those scenarios, but you listed very accurately 
exactly how we propose to restore our deficit to a little more 
secure level.
    Ms. JENKINS. You don't get to balance.
    Secretary GEITHNER. No, we----
    Ms. JENKINS. And you never, ever even address the national 
debt.
    Secretary GEITHNER. We get to the critical test of fiscal 
responsibility and sustainability, which is, do we reduce the 
deficits to the level where our debt burden as a share of the 
economy stops growing and starts to decline.
    Ms. JENKINS. That is your definition.
    Secretary GEITHNER. No, that's----
    Ms. JENKINS. In Kansas, hardworking families don't spend 
more money than they take in. Can you do that?
    Secretary GEITHNER. Well, let me pose it slightly--maybe 
this way it would be helpful. Who would you like to bear the 
burden of reducing our deficits? If you would like----
    Ms. JENKINS. I would like us to control spending, and that 
is what I am trying to point out.
    Secretary GEITHNER. Where would you like to cut spending 
deeper than what we proposed?
    Ms. JENKINS. I think you will see a House budget that was 
proposed last year that eventually gets to a balanced budget 
and eliminates the debt, and I would be surprised if--excuse 
me, I would be surprised if you don't see the House Republicans 
pass a similar budget this year. And I yield back. Thank you.
    Chairman CAMP. And if the Secretary could respond briefly, 
I will then go to Mr. Crowley.
    Secretary GEITHNER. Okay. If you propose a way to get to 
balance the way you did last year, then what you show again is, 
if you do it without modest tax increases on the top 2 percent, 
then you have to cut deeply into Medicare benefits to do it and 
into low-income country program. And we will not support that.
    Chairman CAMP. Mr. Crowley is recognized for 5 minutes.
    Mr. CROWLEY. Mr. Chairman, just very briefly. Thank you for 
the time. I do note that, Mr. Secretary, that I suspect they 
will have a similar budget that they did last year that would 
include the Ryan provision which would voucherize, voucherize 
and privatize the Medicare system. Is that not what you 
suspect, Mr. Geithner?
    Secretary GEITHNER. Well, I can't speak for them.
    Mr. CROWLEY. The gentlelady just mentioned that they 
suspect that they, she suspects they will pass the same type of 
budget this year, Republican majority will pass the same type 
of budget. Is it not--for the record, did it not include a 
voucherizing of the Medicare system in their last budget?
    Secretary GEITHNER. Well, again, if they propose what they 
did last year, that would be a fair description.
    Mr. CROWLEY. Thank you. So there is an answer to their 
side; they want to privatize the Medicare system, they want to 
basically take government out of the Medicare system and put it 
into the hands of private insurance companies. Do you not 
suspect that as well, Mr. Geithner?
    Secretary GEITHNER. Well, again, I don't want to speak for 
them, but I would say the basic point is if you want to reduce 
our deficits and you want to do it without raising revenues on 
anybody, then you have no alternative but to cut deeply on the 
principal drivers of--which are benefits to retirees.
    Mr. CROWLEY. I want to focus particularly on this section 
of the President's budget. The President's budget assumes that 
average civilian unemployment will fall from 9.0 percent in 
2011 to 8.9 percent in 2012. The reality is the unemployment 
data used by the administration is far higher than the current 
actual levels of unemployment, which is, I think, a good thing. 
For example, the U.S. economy has added private job sectors--
sector jobs for 23 straight months, for a total of 3.7 million 
private sector jobs over that period. In the last 12 months 2.2 
million private sector jobs were added on net.
    The U.S. automobile industry is thriving and adding workers 
again, this despite my Republican colleagues' objections to the 
Federal Government aiding the U.S. manufacturers like General 
Motors and Chrysler. The Recovery Act has helped create 
millions of new jobs, particularly in construction and 
infrastructure, through programs administered by Treasury 
Department, like the Build America Bonds program.
    Chairman Camp, I ask permission to submit for the record a 
list of every Build America Bonds infrastructure project funded 
under the Recovery Act in every district of Members of the 
Committee on Ways and Means.
    Chairman CAMP. Without objection.
    **Information Not Provided**
    Mr. CROWLEY. Now, all of this, Secretary Geithner, has 
happened with little or no help from my Republican colleagues 
who control the House today. In fact, no help, quite frankly, 
from my Republican colleagues. These are all positive steps and 
an improvement over when President Bush left office and the 
Nation was losing 1 million jobs per month. Though I know, I 
know with an unemployment rate at 8.3 percent, it is not time 
for a victory lap, and I am not going to ask you to go and 
explain exactly how we got to this point in a very positive 
way. Can you just very briefly tell us what the President's 
budget lays out for the future in terms of job growth?
    Secretary GEITHNER. The President lays out a series of 
specific proposals to improve investments and things that will 
help improve job creation, bring down the unemployment rate 
faster, like in infrastructure, but to combine those with--this 
is of course beyond the payroll tax cut extension which we hope 
Congress will enact soon--combined with a series of very 
affordable, quite modest investments in education, in training, 
community college, and in basic science, research and 
innovation, so that we are doing things not just to help near-
term growth but also improve the long-term growth prospects of 
the economy.
    Mr. CROWLEY. Mr. Geithner, I made it very clear my 
disappointment, in particular, with the $260 billion 
transportation bill that Speaker Boehner has put forward, which 
he and I both agree--which he has said will not create jobs. I 
just want to submit for the record once again the Speaker's 
statement here where he almost proudly asserts that the 
Republican $260 billion transportation bill will not create any 
jobs for Americans. And with that, I will yield back the 
balance of my time.
    [The insert of The Honorable Joseph Crowley follows:]


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    Chairman CAMP. Thank you. Mr. Secretary, I do want to say 
that the House-passed budget contained premium support, and 
that is a very different concept than the one that I think you 
might have agreed to. But we will take this up with Secretary 
Sebelius when she is here later in the month. Mr. Paulsen is 
recognized for 3 minutes.
    Mr. PAULSEN. Thank you, Mr. Chairman, and Secretary, thank 
you for being here. I really want to follow up on the question 
of the medical device tax which is going to start in just a 
little under a year as a part of the President's new health 
care law. You mentioned earlier that you think this is going to 
be a net positive or have a net positive balance as a part of 
the implementation of this tax.
    Secretary GEITHNER. I would just say----
    Mr. PAULSEN. Can you just talk a little bit about that? 
What data do you have that might support that contention?
    Secretary GEITHNER. Well, as I said, you know, I would be 
happy to spend more time with you trying to make sure I 
understand your concerns on this side, but let me try to make 
the basic point. What the Affordable Care Act does, as you 
know, is expand access to health care coverage for tens and 
tens of millions of Americans. By that simple device it 
substantially improves opportunities for people who are in the 
business of providing health care. So our judgment is, on 
balance, it is a good package for people in the health care 
business.
    Now, we had to do that in a way that is fiscally 
responsible, and so we have done some things that--you are 
right, we want to make sure we are paying for these things, 
unlike what Congress did in the expansion of the--in the 
Medicare Part D back in the last decade. We are trying to do 
this in a responsible way. We think on balance it substantially 
improves opportunities for people in the health care business.
    Mr. PAULSEN. Mr. Secretary, I want to follow up on this 
because I know in Massachusetts, which has some similar 
provisions that are in the President's new health care law, 
there has been no increased utilization of medical device 
sales, and Secretary Sebelius has been here to talk about this 
as well. My understanding is that 75 percent of the folks that 
are uninsured are 45 years of age or less, and, you know, a lot 
of these medical devices that are life-improving, life-saving, 
go to folks that are above age 45, and so I don't think there 
is data--if there is data out there, I would like to see the 
data of what is supporting it. I am going to tell you, the 
companies I represent in Minnesota are very concerned about 
that. These are research and development jobs. It is 
innovation; the President has talked about it, you mentioned it 
today. I just really think this is an American success story as 
much as it is a Minnesota success story, and I want to keep 
this here, and this is a tax that is about $20 billion over a 
10-year period. It is more than the amount of money that is 
invested in this industry actually each and every year.
    And so I really want to follow up with you if there is 
actual data that is going to support this down the road. 
Companies have already announced, in fact Stryker, which is 
based in Michigan where the chairman and the ranking member are 
from, they are laying off 5 percent of their workforce this 
year because of the tax, in anticipation. It is a time bomb out 
there. And this is a real issue.
    Thank you, Mr. Chairman, I yield back.
    Chairman CAMP. Mr. Marchant is recognized for 3 minutes.
    Mr. MARCHANT. Thank you, Mr. Chairman. Mr. Secretary, when 
we go home every weekend, we travel around our districts, and 
we speak to the businesses, and the number one focus that our 
business people are telling us is that they think the Tax Code 
is too complicated, their compliance costs are extremely high, 
and they would like to have a flatter system and a lower tax 
rate, but they don't expect to pay less taxes. They just want 
to spend more of their time in their business.
    If Congress sends to the President a comprehensive tax 
reform plan that is revenue neutral, simplifies the Tax Code, 
lowers both the corporate rate and the personal tax rate, is it 
your opinion in your discussions with the President that he 
would sign that legislation?
    Secretary GEITHNER. Well, maybe I could separate it and 
tell you this way: On the corporate side, we would support a 
plan that lowers rates, broadens the base, doesn't add to 
future deficits, helps clean up all the distortions and 
subsidies in the Tax Code, and improves incentives for 
investing in the United States.
    Mr. MARCHANT. And revenue neutral?
    Secretary GEITHNER. Well, as I said, doesn't add to the 
future deficits. Now, in the--on the individual side, as you 
know, you heard us debate this, we think we have to find a way 
through tax reform to get some additional revenues out of the 
current tax system just because the magnitude of the fiscal 
challenge we face long term is too great for us to meet without 
a modest amount of additional revenues.
    Mr. MARCHANT. So if we put it together, he would not sign 
it?
    Secretary GEITHNER. Again, we think the combined reform has 
to be consistent with our long-term fiscal challenges, which 
means that we have to find a way--I wish this were not so--we 
have to find a way to get a modest amount of additional 
revenues out of the individual tax system.
    Mr. MARCHANT. So he would not sign it at that point?
    Secretary GEITHNER. Not if it is not fiscally responsible, 
he would not sign it.
    Mr. MARCHANT. Thank you, Mr. Chairman.
    Chairman CAMP. Ms. Berkley is recognized for 3 minutes.
    Ms. BERKLEY. Thank you, Mr. Chairman, and thank you, Mr. 
Secretary, for being here with us again. I have to say I was 
somewhat amused by so many members on the other side of the 
aisle talking about the uptick of Cadillac sales in this 
country. If I am not mistaken, Cadillac is a GM brand, and what 
I find so interesting is that so many on the other side of the 
aisle opposed the administration's successful attempt to save 
our country's auto industry, which would mean all of these 
dealerships that are now selling Cadillacs wouldn't be in 
business, and 2 million of our fellow citizens would have lost 
their job as well.
    A lot of members have spoken about what is happening in 
their particular districts and States. I am sure I don't have 
to remind you about what is happening in the State of Nevada. 
We still have the highest unemployment rate in the country and 
the highest mortgage foreclosure rate. What is a very 
potentially strong boon to our economy is the development of 
our abundance of sun and wind and geothermal. Not only will it 
create thousands of good paying construction jobs, when it has 
been estimated that close to 80 percent of my building trades 
are unemployed, it will put them back to work. And then we will 
have a product to export, and that is energy, which this Nation 
so desperately needs.
    Now, I think Mr. Nunes was very intent on getting you on 
the record about Solyndra. I think you believe, as I do, that 
if there was wrongdoing that they need to be punished, but that 
you shouldn't be throwing the baby out with the bath water. For 
a State like Nevada, putting our revenue into developing sun, 
wind, and geothermal would be a tremendous boon, and can you 
comment very quickly on that?
    Secretary GEITHNER. Well, as I have said before, I think 
there is a very good economic case for a carefully designed set 
of incentives to the Tax Code and some other cases for 
encouraging development of clean energy renewable technologies. 
I think it is a necessary part of any effective energy 
strategy, and we are going to continue to support that.
    Ms. BERKLEY. I am glad to hear that for the sake of my 
State.
    The Build America Bonds, I was very pleased that the 
President is increasing and making them permanent. For a State 
like Nevada they have been essential, and I can tell you that 
representatives from the city of Reno and city of Las Vegas 
depend on these bonds, and I just wanted to compliment the 
administration on that.
    And the last thing is, if you wouldn't mind, I would like 
to be a conduit in writing. My Nevada's treasury secretary has 
a number of questions that she would like to ask you, and I 
would like to submit them to you, if I may.
    Secretary GEITHNER. Absolutely.
    Ms. BERKLEY. With that, thank you again for being here.
    Secretary GEITHNER. Thank you.
    Chairman CAMP. Thank you. At this time----
    Ms. BERKLEY. I yield back.
    Chairman CAMP. Thank you. Mr. Berg is recognized.
    Mr. BERG. Thank you, Mr. Chairman. One of the questions 
that I have is this, of course, accumulating debt that we have 
got. In your opinion, at what point do you raise the red flag?
    Secretary GEITHNER. The way we look at the debt burden, you 
have to measure it as a share of the economy as a whole, and 
you should look at the debt, net debt held by the public, net 
of financial assets, and if Congress were to embrace and adopt 
the President's proposals, then by that measure our debt burden 
would stabilize as a share of GDP in the roughly 70 to 80 
percent range, and then gradually start to come down over time 
until we see Medicare and Social Security costs start to rise 
again as millions of Americans retire.
    Now, a debt burden at that level is a manageable debt 
burden for the country. It is possible that as the economy 
recovers and we get out of the crisis, that we would be able to 
find prudent, sensible ways to get it lower over time, but we 
met that basic test of getting the deficit down low enough so 
you stabilize the debt burden appropriately measured at a level 
that is manageable. Again, manageable until in the outer 
decades you see millions and millions more Americans retire and 
eligible for Medicaid.
    Mr. BERG. And then the other countries that look at that 
debt level, are they using the net debt as well? I mean, is 
that something pre-skid?
    Secretary GEITHNER. I know that is sort of hard. Some 
people use the gross and don't take out financial assets.
    Mr. BERG. Right.
    Secretary GEITHNER. Some people use the net, but I am 
really----
    Mr. BERG. It is not a standard really?
    Secretary GEITHNER. But I am quite confident that the test 
that we use is a reasonable test.
    Mr. BERG. Okay.
    Secretary GEITHNER. Of course, now, to get there, though, 
even to get to that level, as you know, we have to make some 
very tough choices and bring the deficits down really quite a 
long way and hold them there.
    Mr. BERG. Well, let me shift gears. One of the things that 
I see in the proposal is to eliminate the intangible drilling 
costs, and I know there has been a lot of talk about that, but 
from my experience in small business, I mean, that is an 
expense that, you know, we are actually out-of-pocket expense. 
My question is why--why is that being repealed? I mean, where 
is it consistent in other parts of the code where a small 
business, you know, is depreciating that or deducting that? 
What is the rationale?
    Secretary GEITHNER. Well, as you know, we have done in the 
last 3 years very, very generous and really very, very powerful 
incentives for investment through hundreds in expensing and 
bonus depreciation, a range of other provisions over the last 3 
years. We thought that was necessary and very important. And 
when we come to discuss comprehensive corporate tax reform, we 
will have a very important debate about which of those types of 
incentives we should preserve, which ones we can't afford any 
longer.
    In that context, you will have to make some very tough 
choices about whether the level of specific subsidies for 
particular industries are things we can afford now, and that is 
the tough choice we are going to face. But, again, you will 
have a chance to work through those things while we start to 
confront----
    Mr. BERG. What we are saying, where else in the code do we 
see a small business can't deduct its hard costs? Is there 
another business or industry that----
    Chairman CAMP. Time has expired, and we are running very 
short. Mr. Schock is recognized.
    Mr. SCHOCK. Thank you, Mr. Chairman. Mr. Secretary, thank 
you for being here. I want to ask a few specifics on taxes that 
are proposed, specifically the one dealing with banks. It seems 
that this is a recurring theme each year in your proposal.
    I might note that when Democrats controlled both the House 
and the Senate, they did not embrace this proposal, and last 
year, of course, Republicans in the House did not embrace this 
proposal. So I question the sincerity in putting it again in 
the budget, other than the fact that perhaps the President is 
being consistent.
    You know, there has been a lot of talk about getting the 
banks to pay back for the costs of TARP. But based on testimony 
by the Treasury Department and numbers from your agency, the 
$245 billion that was injected into banks, according to the 
Treasury Department, turned a $13 billion profit. However, some 
of that TARP money was invested in other organizations, like 
AIG, General Motors, Chrysler. The Treasury Department has let 
us know that on the Chrysler investment we have lost $1.3 
billion, on the General Motors investment we have already 
written off $4.4 billion in loss, $23 billion of public stock 
was sold, another $23 billion is yet owed.
    We have 500 million shares of stock. According to the share 
price today, we could get about $12 billion from the shares of 
stock if we would sell them. So we are looking at about another 
$10 billion on top of the already $4 billion in loss on GM, in 
addition to losses on AIG.
    So my question, of course, is if we have lost all this 
money on the car companies, which the President seems to be 
very proud of the bailouts of the car companies, but it seems 
to be that is where the taxpayers lost their shorts, and we 
actually made money on the money we gave to the banks, why is 
it that we are taxing the banks?
    Secretary GEITHNER. Good question. Thanks for raising it. 
When Congress passed the legislation to authorize TARP, they 
put in a provision as part of that legislation that placed on 
us the obligation to propose to Congress a way to recover any 
losses from the financial industry, so the way the law was 
written, in our judgment, we have an obligation to propose to 
Congress how we would recover any losses across the program 
from the financial industry.
    Mr. SCHOCK. And that is very helpful. So in your opinion, 
would it be more fair for Congress to give you the ability to 
recoup the losses from the industries you bailed out that you 
lost money on, as opposed to the only industry you can recoup 
from, according to the current law, which is the financial 
sector in which you made money?
    Secretary GEITHNER. There is no--I am glad you are 
reminding people we made money on the investments in the 
financial sector. It is good to remind people that that was a 
very well designed, very sensible set of investments, and I am 
grateful that you have done that.
    Now, there is no way of doing this, recovering any losses, 
whatever losses we face, in a way that is going to be judged 
fair by people. But if you don't ask the financial industry to 
bear that cost, then you are going to ask other industries that 
benefited less from these programs, other industries that were 
innocent victims of the crisis, to bear the cost. And I don't 
think that makes a lot of sense. Of course, Congress----
    Chairman CAMP. All right, time has expired. Mr. Reed is 
recognized.
    Mr. REED. Thank you, Mr. Chairman, I didn't expect that. 
Mr. Secretary, I appreciate you being here, I truly do. One 
thing I would just say, when you want to respond to the 
question that the Senate doesn't have a budget and that had no 
impact on your position, whether or not that impacts where we 
are going forward as a Nation, from a credibility point of 
view, the fact that the House will have a budget, the President 
will have a budget, I think it just makes common sense that if 
the Senate had a budget, it would be good to have that in black 
and white so we could have an open and honest debate with 
America. So I just offer that for your thought process going 
forward.
    The area I want to spend a little time on, I don't know if 
we spent enough time on today, is the area of trade and China 
and currency manipulation. And I am very concerned about the 
various proposals on how we are going to deal with that issue, 
and I would be interested in your thoughts on the currency 
manipulation bills that are pending and what your thoughts from 
the Treasury Secretary's point of view as to how we move 
forward on the issues of potential unfair trade practices by 
China, one of our largest trading partners?
    Secretary GEITHNER. If I am not mistaken, I am going to 
have a chance to come up and talk to the committee in more 
detail about those exact kind of questions with some of my 
colleagues from the Cabinet in the next few weeks, so I look 
forward to doing that in more detail.
    So let me just say a couple things right now. China is 
allowing its currency to gradually appreciate against the 
dollar. It is up about 8\1/2\ percent in nominal terms over the 
last 19 months or so, 20 months; but if you adjust for 
inflation, it is up more like 12 percent against the dollar. If 
you look at the cumulative appreciation over the last 5 years 
or so, it is up close to 40 percent in real terms against the 
dollar. We think they have got some ways to go. We would like 
them to move more quickly along the grounds for reasons that--
--
    Mr. REED. And how do we--because I only have a very short 
amount of time. What is the plan from the Treasury's point of 
view as to how to advance that agenda?
    Secretary GEITHNER. The only--what we are doing is to work 
with countries around the world.
    Mr. REED. On a multilateral----
    Secretary GEITHNER. With the IMF, and of course working 
very hard on the Chinese to try to get them to move more 
quickly, and we are going to use every means available to be 
persuasive in encouraging them to move more quickly.
    Mr. REED. Any of the legislation pending or proposed in the 
House and Senate, do you see as a barrier to that agenda, from 
your perspective?
    Secretary GEITHNER. Again, we will have a chance to talk 
about this in more detail in the next couple weeks or so. I 
think just to be fair about it, we have got to be careful. For 
those tools to be effective, they have to be consistent with 
our international obligations. Otherwise they don't really give 
us any leverage.
    Mr. REED. I so appreciate you saying that because I 
wholeheartedly agree with that. We need to be consistent with 
those international obligations. With that, Mr. Chairman, I 
will yield back.
    Chairman CAMP. All right. Thank you. Mr. Pascrell is 
recognized.
    Mr. PASCRELL. Thank you, Mr. Chairman. It certainly is a 
convoluted policy, Mr. Secretary, when you close jobs in the 
USA and bring them overseas, that the taxpayers provide the 
money to help you move. That is pretty convenient. But if you 
are an American company reversing the trend, and that is in-
sourcing jobs, and this is the first President that has talked 
about that of the last six, Democrat or Republican, and now we 
are finally understanding how manufacturing is critical and a 
balanced economy is critical.
    And the decline of manufacturing jobs, I think it is about 
to be reversed, if not already. In-sourcing is a critical 
policy decision. This is a big deal, I think, with people, and 
with the perception that people have who is really getting 
helped and who is getting hurt.
    Mr. Secretary, how will the President's in-sourcing 
policies help manufacturers in my district or any districts 
bring employees back home, and can you specifically address the 
20 percent credit in-sourcing and the 18 percent advanced 
manufacturing deduction?
    Secretary GEITHNER. What we propose to do is to improve the 
tax incentives for investing in the United States, to make them 
more powerful if you are in the manufacturing business and 
advanced manufacturing, and to reduce the incentives in the 
current Tax Code to shift investment and income overseas. That 
is a hard thing to do, but, as we have been discussing, we have 
a chance in the next few weeks to begin the discussion about 
how best to do that, but it is very important that we find a 
way to do that.
    Mr. PASCRELL. Wouldn't you agree that the Republican 
decision to reduce the Section 199 deduction for manufacturers 
is contrary to what you are attempting to do with this budget?
    Secretary GEITHNER. Well, again, I think what you want to 
do is look at--when we talk about comprehensive reform, you 
want to look at the combined impact of the whole mix of changes 
to lower the rate, broaden the base. And, again, I think we are 
agreeing that what you want to look at is the net impact of 
those changes on the economic incentives to invest here.
    Mr. PASCRELL. I hope we work very closely, Mr. Secretary, 
and I agree with Mr. Reed's opening remarks about what 
direction we should be going in. So we could find some 
compromise, believe it or not. Thank you.
    Chairman CAMP. Thank you. Mr. Davis is recognized.
    Mr. DAVIS. Thank you, Mr. Chairman. Mr. Secretary, 
appreciate you being here today, and I would like to revisit a 
subject you and I have talked about before in these hearings 
over the last several years.
    I would like to make a statement, though, before that on 
the last-in-first-out accounting, or LIFO, that was included in 
the budget. I am disappointed that for the fourth straight year 
the administration included a repeal of LIFO in its budget. 
LIFO is not a loophole or exotic tax shelter, it is a 
conventional and well-established accounting practice dating 
back to 1936 when it was brought into being. It minimizes 
inflation gains and accurately reflects replacement costs for 
inventory. It is also important to many industries in the 
United States, with an estimated 36 percent of companies using 
LIFO for some portion of their inventories.
    The repeal of LIFO would have a devastating practical 
impact, and according to your estimate it would raise overall 
taxes by $73 billion in the midst of what is a challenging 
economic climate, with the increase falling heavily on 
manufacturing companies, thereby significantly reducing the 
capital they have available for investment in needed machinery, 
equipment, and ultimately job creation, and frankly would 
become a huge obstacle to the whole in-sourcing discussion that 
has been taking place. Repealing LIFO will further reduce U.S. 
competitiveness in the global economy at a time when we are 
trying to encourage more U.S. manufacturing, and indeed it is 
going to accomplish just the opposite.
    Last month my good friend Mr. Thompson and I, along with 20 
other colleagues, including many on this committee, wrote a 
letter to the President asking that he refrain from including 
the repeal of LIFO in this year's budget. Mr. Chairman, I would 
like to submit our letter for the hearing record.
    Chairman CAMP. Without objection.
    [The insert of The Honorable Geoff Davis follows:]


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    Mr. DAVIS. Thank you. It demonstrates strong bipartisan 
support for LIFO and the need for this accounting method to 
remain in any future budget.
    Mr. Secretary, the President's budget states, quote, ``By 
almost any measure, the economy this past year was stronger 
than it was in 2009 at the start of the administration,'' end 
quote. This claim does not square with reality. Since the 
President took office, there are 1.2 million fewer jobs, 
unemployment has gone from 7.8 to 8.3 percent, the price of gas 
has increased from $1.85 to $3.48, the median value of single-
family homes are down $33,000, the national debt has increased 
from $10.6 to $15.4 trillion. Considering these statistics, by 
what measures do you believe Americans are better off since the 
start of the administration?
    Secretary GEITHNER. Well, thanks for asking that question. 
It is the defining issue in this debate. If you look at when 
growth resumed--which it did really remarkably quickly in the 
summer of 2009--since growth resumed we have grown an average 
rate of about 2\1/2\ percent, despite all the shocks I referred 
to in my opening statement--oil, Japan, Europe, all the 
financial headwinds that follow a crisis like we had, people 
bringing down debt, working through the overhang in the housing 
markets, we have 3.7 million private sector jobs created over 
that period of time, private investment is up by 30 percent. 
Any measure of the basic health of the business for the United 
States is much stronger today. Profits are, for example, as a 
share of GDP, higher than they were before the crisis. Balance 
sheets of corporate America are much stronger, productivity 
growth is stronger, Americans are saving more as a share of 
their income, they are bringing debt down. Those are good 
fundamental improvements.
    Now, parts of the American economy are still, obviously, 
terribly suffering from the crisis. Housing, construction, 
environment for many small businesses is still very tough. 
Those are the aftershocks and the legacy of a crisis like we 
have lived through produced by a long period of too much 
borrowing, unsustainable investments in housing and 
construction, but we are working through those things. And this 
economy and the health of the business community in the United 
States would be dramatically worse today if we had not taken 
the steps we did to put out those financial fires and get 
growth started again.
    Chairman CAMP. All right, thank you. We just have one 
person left. Last but not least, Ms. Black is recognized for 3 
minutes.
    Mrs. BLACK. Thank you, Mr. Chairman, and I will be brief in 
my comments. I want to go back to what you acknowledge to be 
the greatest driver of our debt, and that is Medicare. You 
actually did say to the Congressman from Kansas that it was a 
principal driver. You also said that the President's plan does 
work on bringing the debt down, but until then we see debt 
burden begins to rise with the retirement of millions of 
Americans. So you acknowledge that this is an issue. The 
President acknowledged it was an issue when he asked the 
Bowles-Simpson Commission to give him recommendations, and they 
did, and they were bold recommendations. And yet when you 
answered the questions from my colleague from Georgia, you 
talked about the changes that are going to be made or the 
things that are going to be directly affecting this in the 
President's budget is lower payment to our providers and also 
affecting the upper-income Americans in what their benefits 
are. These are not bold, these are not recommendations that 
have been put out there by Bowles-Simpson. We continue to just 
kick the can down the road by nipping around the edges, and I 
am really disappointed in that.
    I would like to know where in this budget I can see, I have 
looked on some of the pages on 112 and 113, on some of these 
recommendations. But unless there is something more to it than 
what I see there, these are not bold changes.
    And if I may say one more thing before I turn this over to 
you to give me some advice on where I might find those, it is 
that I am really disappointed that we continue to have folks 
who were not enthralled about the budget that we put out last 
year in the Path to Prosperity to continue to misrepresent the 
program and calling it a voucher program. Either the folks that 
are using this term are just not bright enough to understand 
what premium support is, or there is some other sinister reason 
why they continue to use language that is not true.
    So we have all got to be honest with one another, and since 
we acknowledge this is the greatest driver of our debt and we 
cannot take care of it until we do take care of this with 
fundamental changes, I am disappointed that those are not what 
I see, unless you can point me to someplace else in this budget 
document.
    Secretary GEITHNER. You are right that over the next 50 
years, 30 to 50 years, Medicare, Medicaid, Social Security 
produce an unsustainable rise in our debt burden.
    Mrs. BLACK. We are going to see it before then.
    Secretary GEITHNER. But for the next 10 years those costs 
are not the principal driver of our deficits.
    Now, we have a fundamental disagreement about how to 
restore fiscal balance and also what type of mix of reforms to 
Medicare are going to allow us to maintain our commitment to 
guarantee our seniors retirement and health care security. The 
big--I think the most simple way to contrast our two strategies 
for reform of Medicare are whatever you want to call the Ryan 
Republican strategy, what it would do is dramatically reduce 
the benefits available to middle-income seniors.
    Mrs. BLACK. With all due respect, Mr. Geithner, I think 
that is a misrepresentation of what was put out there, and 
again I really am disappointed that we continue to have 
misrepresentations of what the plan actually does, and I wish 
that we could just talk without--take the political out of it 
and talk about the reality. And we can't deny the fact that all 
of those who are economists tell us this is the biggest driver 
of debt, it is going to cause us a big problem not in 30, 40, 
50 years, but sooner than that, when we see that that fund is 
going to totally be unsustainable. So I know my time is up, and 
I yield back.
    Secretary GEITHNER. Two quick things in response to that. 
One is the characterization I used is CBO's, it is not a 
political or Democratic criticism, it is the CBO evaluation of 
the impact on beneficiaries.
    Again, the other thing I would emphasize is, you are right 
to remind everybody that our commitments in Medicare and 
Medicaid over time are unsustainable, and we are going to have 
to embrace reforms to get them on a sustainable path, but if 
you try and restore overall sustainability to our fiscal 
position without a dollar of revenues, then you will make that 
challenge much harder, and you will be forced to embrace much 
deeper cuts in benefits than I think we should find acceptable 
as a country.
    Chairman CAMP. Thank you very much, Mr. Secretary, and I 
appreciate you staying over so that every member of the 
committee who wanted to ask you a question and remained could 
do that. And thank you again for making yourself available, and 
with that this hearing is adjourned.
    [Whereupon, at 12:39 p.m., the committee was adjourned.]
    [Submissions for the Record follow:]
                       SUBMISSIONS FOR THE RECORD
                        Center for Fiscal Equity


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                    National Community Tax Coalition


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                        U.S. Chamber of Commerce


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    [Question for the Record follow:]
               The Honorable Timothy Geithner, Responses


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