[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]






 
                THE PRESIDENT'S FISCAL YEAR 2014 BUDGET


                  PROPOSAL WITH U.S. DEPARTMENT OF THE


                    TREASURY SECRETARY JACOB J. LEW

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

                                HEARING

                               before the

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

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 11, 2013

                               __________

                          Serial No. 113-FC04

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
         
         
         
         
         
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                      COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington        XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               RON KIND, Wisconsin
ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas                 ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota              DANNY DAVIS, Illinois
KENNY MARCHANT, Texas                LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio

        Jennifer M. Safavian, Staff Director and General Counsel

                  Janice Mays, Minority Chief Counsel
                  


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of April 11, 2013 announcing the hearing................     2

                                WITNESS

The Honorable Jacob J. Lew, Secretary, U.S. Department of the 
  Treasury, Washington, DC.......................................     6


                THE PRESIDENT'S FISCAL YEAR 2014 BUDGET



                  PROPOSAL WITH U.S. DEPARTMENT OF THE



                    TREASURY SECRETARY JACOB J. LEW

                              ----------                              


                        THURSDAY, APRIL 11, 2013

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

    The Committee met, pursuant to call, at 10:10 a.m., in Room 
1100, Longworth House Office Building, Hon. Dave Camp [Chairman 
of the Committee] presiding.

    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

                                                
FOR IMMEDIATE RELEASE                   CONTACT: (202) 225-3625
Thursday, April 4, 2013
No. FC-04

                   Chairman Camp Announces Hearing on

                the President's Fiscal Year 2014 Budget

                  Proposal with U.S. Department of the

                    Treasury Secretary Jacob J. Lew

    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 2014. The hearing 
will take place on Thursday, April 11, 2013, 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 Jacob J. Lew, 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 April 10, 2013, the President is expected to submit his fiscal 
year 2014 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, ``The Ways and 
Means Committee is committed to comprehensive tax reform that 
eliminates tax loopholes, simplifies the code, and lowers rates. Tax 
reform that accomplishes these goals can strengthen our economy, create 
more jobs and allow American workers to start seeing an increase in 
their paychecks again. This hearing will provide both the Committee an 
opportunity to review the President's tax proposals and Treasury 
Secretary Lew the opportunity to describe how the Administration 
intends to work with the Committee and Congress to pass and enact 
comprehensive tax reform.''
      

FOCUS OF THE HEARING:

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

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Thursday, April 25, 2013. Finally, please 
note that due to the change in House mail policy, the U.S. Capitol 
Police will refuse sealed-package deliveries to all House Office 
Buildings. For questions, or if you encounter technical problems, 
please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
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. The Committee will come to 
order.
    Well, good morning, Mr. Secretary, and welcome to the Ways 
and Means Committee. The last time you testified before this 
Committee it was as ``Mr. Director,'' and so please allow me to 
publicly say what I have already said to you in private, and 
that is to congratulate you on your new post. And, as you are 
well aware, this Committee has broad jurisdiction and interacts 
with many departments and agencies, none more important than 
the Treasury Department. And, as such, it is my sincere hope 
that we will be seeing a lot of each other and equally 
important that our staffs will be working together a lot as we 
move forward.
    On Monday, the front page of the New York Times business 
section read, ``Lew to Press for Growth in Europe.'' And, Mr. 
Secretary, I appreciate and share your concerns over the fate 
of the European economy, but I am first and foremost troubled 
by the growth and lack thereof of the American economy. The 
simple truth is far too many families are still struggling. 
They face higher food prices, higher gas prices, and higher 
tuition prices for their children. Meanwhile, many have had 
their hours reduced and their wages frozen.
    There is no cure-all, but there are real, achievable 
policies that can strengthen this economy and turn things 
around for American families; chief among those are fixing our 
broken, outdated, and complex Tax Code and balancing our 
budget.
    I am sure you will hear from Mr. Ryan and others on the 
need to balance the budget, which the Administration's budget 
never does, so I will focus today on the Tax Code. America's 
Tax Code is broken, and I am committed to working with anyone, 
Republican or Democrat, to fix it. And that is why I was 
encouraged the President put forward a plan to tackle a few of 
the challenges facing our Tax Code in his budget.
    But the simple truth is that the President's proposal isn't 
the real reform we need, and it doesn't go nearly far enough to 
address the needs of all job creators. The problem with our Tax 
Code isn't how much money it makes for Washington. In fact, our 
government is on track to double the amount of money it takes 
from hardworking taxpayers over the next 10 years, proving that 
government has all the revenue it needs.
    Instead, the problem with the Tax Code is that it costs 
American families too much, too much in time, too much in 
money, to comply with it. And, Mr. Secretary, you know these 
facts: Americans spend over $160 billion each year trying to 
navigate through the complexities of the U.S. Tax Code. It 
takes the average American taxpayer 13 hours to comply with the 
Tax Code, gathering receipts, reading the rules, and filling 
out the forms the IRS requires. And much of this is due to the 
fact that over the last decade, there have been more than 4,400 
changes to the U.S. Tax Code. That is more than one a day.
    Instead of reversing that trend and trying to make the Tax 
Code work for the American people, this budget adds new levels 
of complexities and creates new credits and deductions. And, 
Mr. Secretary, it is our job to make sense of this Tax Code, 
and I hope you and the President will work with the Congress to 
deliver real reform to the American people.
    Our Tax Code needs to be genuinely user friendly. You 
shouldn't have to pay a professional to figure out your taxes. 
The code is so riddled with layer upon layer of complexity that 
9 out of 10 Americans don't feel comfortable doing their own 
taxes, they are forced to either pay a professional or go buy 
commercial software. Americans should have faith that their 
government is taxing them effectively and efficiently. Instead, 
they fear the IRS and the potential of being audited.
    Our Tax Code needs to be fairer at a time when American 
families are just trying to make ends meet. We shouldn't be 
taking more of their money to bail out Washington's inability 
to control spending. Let's put an end to the special-interest 
loopholes and the handouts and use that revenue to create a 
simpler, fairer Tax Code that lowers rates for all Americans.
    And, Mr. Secretary, across this country, people are sick of 
Washington's gridlock. And that is why I will work with you, 
the President, Republicans, and Democrats to simplify and fix 
this broken Tax Code. This budget is the first step. But the 
American people can do better than what the President is 
proposing here. It won't be easy, but this Committee, 
Republicans and Democrats, are willing and ready to do the 
tough work our constituents sent us here to do.
    And we don't have to settle for the same old game of giving 
Washington more taxpayer money and calling it reform. It has 
been 27 years since this town cleaned up the code. It is time 
for us to do our job again. Hardworking taxpayers deserve real 
solutions and we need to make our Tax Code simpler and fairer 
for every American. And let's work together to accomplish that.
    I want to thank you again for being here. Congratulations 
on your new job. And I will now turn to Ranking Member Levin 
for his opening statement.
    Mr. LEVIN. Thank you, Mr. Chairman.
    Welcome, Secretary Lew. We have to get used to that title 
since we have always known you with other titles, but mostly by 
your first name. I am tempted to ask you, when is the first 
time you appeared before this Committee?
    Secretary LEW. The first time I was in this room was 
probably in 1973 on H.R. 2, pension reform.
    Mr. LEVIN. I will go on.
    Well, we have enjoyed so much working with you in the past, 
only one of us I think goes back that far. And we all look 
forward to working with you in the days ahead.
    You are appearing today to discuss the Administration's 
2014 budget--that is why you are here--which follows those 
presented earlier by House Republicans, House Democrats, and 
Senate Democrats. Clearly, the Administration's budget reflects 
an effort to open up a search for some common ground. 
Unfortunately, this has been rebuffed in the responses of the 
House Republican leadership. The Administration made clear that 
any search for common ground requires a balanced approach. My 
guess is the President has used the word ``balanced'' perhaps 
more than any other word, for good reason; a combination of 
budget cuts and additional revenues.
    The Republican approach is based on imbalance. The tax cuts 
the Republicans propose in their budget would leave a $5.7 
trillion revenue gap. Yet they have never provided specifics on 
how they would fill it.
    What we know is that it would almost certainly require 
eliminating or dramatically cutting tax provisions that have 
been vital to middle- and low-income families, including the 
mortgage interest deduction and the exclusion for employer-
provided healthcare.
    Their budget reaffirms their plans also to turn Medicare 
into a voucher program and to repeal the benefit provisions, if 
not the revenues which they propose keeping.
    In its budget, the Administration has also come forth with 
some further ideas on business tax reform. And in doing so, it 
has highlighted that while lower rates are important, they must 
not come at the expense of critical investments that American 
enterprises need to thrive and to succeed.
    I hope that foundation in the theme of tax equity, among 
others, will guide us as we face the challenge of tax reform; 
tax reform based on reality, not mainly on rhetoric.
    The imbalance in the response from House Republicans is 
further illustrated, even as we hear today the testimony of 
you, by their unwillingness to appoint conferrees to consider 
the budget bills passed by the House and Senate in conjunction 
with the Administration's budget. This continued Republican 
embrace of a budget deadlock is all the more worrisome, if I 
might say, as the sequester continues to unfold and as the debt 
ceiling once again approaches.
    Indeed, it was made all the more worrisome by the House 
Republican hearing yesterday that focused on the debt ceiling 
in terms of the possibility of prioritizing our obligations, 
obligations all emanating from congressional actions. We cannot 
continue on this dangerous path.
    Hopefully, this hearing will serve as a constructive 
opportunity to embrace a different path.
    I yield back.
    Chairman CAMP. Thank you very much, Mr. Levin.
    Again, it is my pleasure to welcome Secretary Jack Lew back 
to the Committee on Ways and Means. We look forward to your 
testimony. The Committee has received your written statement. 
It will be made part of the formal record.
    And, Secretary Lew, you are recognized for 5 minutes.

   STATEMENT OF THE HONORABLE JACOB J. LEW, SECRETARY, U.S. 
           DEPARTMENT OF THE TREASURY, WASHINGTON, DC

    Secretary LEW. Thank you very much, Mr. Chairman, and thank 
you, Mr. Chairman, Ranking Member Levin, for your gracious 
welcome here today. It is an honor to appear and to present the 
President's budget for next year. And I sit here, as the 
Chairman noted, surrounded by four decades of memories of many 
important occasions when bipartisan cooperation has moved the 
country forward in the best interests of the American people. 
And I sit here today looking forward to continuing in that 
tradition this year and in my current role.
    Our economy is much stronger today than it was 4 years ago. 
But we must continue to pursue policies that help to create 
jobs and accelerate growth. Since 2009, the economy has 
expanded for 14 consecutive quarters. Private employers have 
added nearly 6.5 million jobs over the past 37 months. The 
housing market has improved. Consumer spending and business 
investment have been solid and exports have expanded.
    But very tough challenges remain. While we have removed 
much of the wreckage from the worst economic crisis since the 
Great Depression, the damage left in its wake is not fully 
repaired. Families across the country are still struggling. 
Unemployment remains high. Economic growth needs to be faster. 
And while we have made substantial progress, we must do more to 
put our fiscal house in order.
    At the same time, political gridlock in Washington 
continues to generate a separate set of headwinds, including 
harsh, indiscriminate spending cuts from the sequester that 
will be a drag on our economy in the months ahead if they are 
not replaced with sensible deficit reduction policies.
    This is my first opportunity to appear before you as 
Treasury Secretary and discuss from this vantage point how we 
need to confront these difficult challenges. But this is far 
from the first budget I have worked on. In my experience, a 
good budget offers practical solutions to problems of its time. 
The President's budget does that by making the investments that 
will drive a growing economy and by reining in our deficits 
responsibly so we can replace the across-the-board cuts 
immediately and restore fiscal stability over time.
    A good budget must also be grounded in reality. And this 
budget deals squarely with the world as it is now and as it 
will be in the future. It reflects the need for compromise to 
find a path that could command bipartisan support, and it 
recognizes issues of major consequence: like the fact that our 
demographics are shifting with the retirement of the baby 
boomers, the number of retirees is growing; like the fact that 
millions of Americans are living in poverty today; like the 
fact that wages and incomes for middle class Americans have not 
improved for more than a decade; and that, despite the 
significant strides through the Affordable Care Act, healthcare 
spending remains a key driver of long-term deficits.
    This budget is animated by the simple notion that we can 
and must do two things at once: Strengthen the recovery in the 
near term while reducing the deficit and debt over the medium 
and long term.
    This has been the President's long-standing approach to 
fiscal policy. And when you compare the trajectory of our 
economic recovery with those of other developed countries in 
recent years, it is clear why the President remains so 
committed to this path.
    As the Chairman noted, I just returned from meetings in 
Europe. And it is clear that in countries where austerity 
measures were implemented too quickly, those economies have 
stumbled. Ours is a different story. Notwithstanding the need 
to do more, our economy continues to expand with the support of 
growth-oriented economic policies, even as we make meaningful 
progress to reduce the deficit. And it is important to bear in 
mind how meaningful that progress has been.
    In the last few years, the President and Congress have come 
together to hammer out historic agreements that substantially 
cut spending and modestly raise revenue. When you combine these 
changes with savings from interest, we have locked in more than 
$2.5 trillion in deficit reduction over the next 10 years, and 
today, we are putting forward policies that will lower the 
budget deficit to below 2 percent of GDP and bring down the 
national debt relative to the size of the economy over 10 
years.
    We restore the Nation's long-term fiscal health by cutting 
spending and closing tax loopholes, taking a fair and balanced 
approach. The budget achieves this balanced approach through 
very specific steps, such as reforming agricultural subsidies 
and eliminating tax preferences for companies that move 
operations and jobs overseas.
    At the same time, the budget incorporates all elements in 
the Administration's offer to Speaker Boehner last December, 
demonstrating the President's readiness to stay at the table 
and make very difficult choices and find common ground. 
Consistent with that offer, the budget includes things the 
President would not normally put forward, such as means testing 
Medicare through income-relating premiums and adopting a more 
accurate but less generous measure of inflation, known as chain 
CPI. It includes these proposals only so we can come together 
around a complete and comprehensive package to shrink the 
deficit by an additional $1.8 trillion over 10 years and to 
remove fiscal uncertainty that has dragged on economic growth 
and job creation.
    This framework does not represent the starting point for 
negotiations. It represents a fair balance between tough 
entitlement savings and additional revenues from those with the 
greatest income. The two cannot be separated and were not 
separated last December when we were close to a bipartisan 
agreement.
    This budget provides achievable solutions to our fiscal 
problems, but as crucial as these solutions are, we have to do 
more than just focus on deficit and debt. Now, I know the 
significance of balancing the budget, and I will not take a 
backseat to anyone when it comes to fiscal responsibility. 
Under President Clinton, I helped negoti- 
ate the groundbreaking agreement with Congress to balance the 
budget. As director of OMB, I oversaw three budget surpluses in 
a row, and worked with many on the left and the right on our 
plans to pay off our debt. It will come as no surprise that I 
was profoundly disappointed to see those surpluses squandered.
    But that does not mean we should make deficit reduction our 
one and only priority, not when our world demands that we both 
confront our fiscal challenges and make targeted investments to 
propel broadbased growth. So in addition to ensuring that we 
have sound fiscal footing, this budget lays out initiatives to 
fuel our economy now and well into the future. Every one of 
these initiatives is paid for in our deficit reduction package, 
meaning they do not add a dime to the deficit.
    As the President explained in the State of the Union, the 
surest path to long-term prosperity is to strengthen the middle 
class. This budget does that by zeroing in on three things: 
Bringing more 
jobs to our shores; making sure American workers have the 
skills needed to do those jobs; and making sure hard work 
amounts to a decent living.
    To generate more jobs in the United States, we focus on 
growing our economy by making it more competitive. The budget 
launches advanced manufacturing hubs around the country, 
invests in research and technology, and cuts red tape to expand 
domestic energy production, including clean energy and natural 
gas. It also puts people to work right away repairing our 
deteriorating roads, railways, bridges, and airports so our 
economy can compete in the future.
    We have made considerable headway over the last few years 
to improve education and worker training. And we can go even 
further by helping students acquire the skills that today's 
economy demands. That means joining with States to give every 
child a solid preschool education. It means reconfiguring high 
schools so students can get the high-tech, high-wage skills 
businesses need. And it means making college more affordable.
    Finally, the budget would help lift communities hit the 
worst by the recession, and it would adjust the minimum wage so 
that full-time workers are not stuck in poverty. The proposals 
I just outlined are part of the President's framework for 
growing our economy and cutting our deficits. And as this 
budget shows, we do not have to choose between the two, and we 
must not. We can adopt a powerful jobs and growth plan, even as 
we embrace tough reforms to stabilize our finances. This is the 
way a budget will make our economy stronger and help create 
jobs now and in the future.
    Before I close, I just want to say that the debate we are 
engaged in is very important. It is part of a complex sorting-
out process that will determine our Nation's future. But 
everyone on this Committee knows that the path before us is 
going to be a struggle. It will require difficult decisions 
that will directly affect the daily lives of millions of 
Americans, entrepreneurs and immigrants, soldiers and veterans, 
the young and the elderly, the working poor and the very well 
off. And it matters that we get this right.
    With that in mind, I come here today optimistic about what 
we can accomplish. I believe we can find common ground to stop 
the unnecessary standoffs and manufactured crises; that we can 
come together to forge an agreement to right our fiscal ship 
and that we can make the compromises that are necessary to meet 
our obligations to future generations.
    Thank you, Mr. Chairman, and I look forward to answering 
your questions.
    [The prepared statement of Secretary Lew follows:]
    
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    Chairman CAMP. Well, thank you, Mr. Secretary.
    I am interested in making the Tax Code work for families, 
instead of the special interests here in Washington. And I am 
interested in fixing this Tax Code so families struggling to 
get by and maybe save a little for their college education can 
do so. And this budget talks about reforming the Tax Code for 
corporate America, but it does not talk about reforming it for 
families and individuals. I think we can do better.
    For example, there are 15 different tax breaks for higher 
education, including nine for current expenses, two for past 
expenses, four for future expenses. The IRS publication on tax 
benefits for education is 90 pages long. This isn't a Tax Code 
designed for working families; it is a Tax Code designed to 
make money for accountants and tax planners. Don't you think we 
should make some sense of all of this and help working 
families?
    Secretary LEW. Mr. Chairman, I totally agree. And the 
President's budget has in the past called for individual tax 
reform as well. The President has laid out principles to guide 
that. I think that the idea of tax simplification, broadening 
the base, is very important. The President has put it in the 
context of a fiscal plan where I think we have, you know, a 
number of objectives that have to be achieved at the same time.
    We have to get our fiscal house in order. As part of that, 
we need to raise more revenue. And we think the tax reform 
ought to produce that ability to both raise revenue, simplify 
the Tax Code, and make it so that ordinary people don't need to 
have complicated, hours-long processes or go to accountants for 
simple tax forms. You know, I participated in 1986 in tax 
reform. I know how hard it is to do. And I look forward to 
working with you on a bipartisan basis to get that done.
    Chairman CAMP. And I was pleased to see the Administration 
taking more concrete steps toward tax reform in this budget. 
And, again, I look forward to looking with you and the 
President to make the code simpler and fairer for families and 
individuals and to help strengthen the economy.
    And when I talk to middle class Americans in Michigan, back 
home in my district, they are frustrated by the current state 
of the Tax Code. And, I mean, rightly so. They don't understand 
the complexity. And they may not know that there have been 
4,400 changes over the last decade, but certainly they know 
that there have been a lot of them.
    And it just seems unfair to me that the Tax Code forces 
Americans to spend over $160 billion to comply and 6 billion 
hours--almost 13 hours per person. That is the average 
taxpayer. I mean, every year, complying with the code is more 
expensive, more costly. And particularly when you look at the 
very tight margins small businesses are on, I mean, this is a 
huge cost to them. And, frankly, it should be their time and 
money, not the IRS'. And I commend the Administration for 
proposing revenue-neutral tax reform in the bill. But, again, 
don't you think individuals and families deserve a tax reform 
that makes the code simpler and fairer for them, too?
    Secretary LEW. Mr. Chairman, I believe that we need to do 
both individual and business tax reform. And in the context of 
overall tax reform, to be clear, we do not think it can be 
revenue neutral. We think that there needs to be additional 
revenue to help get our fiscal house in order. And the budget 
calls for $580 billion of additional revenue.
    On the business side, our goal has been very clear. I could 
not agree with you more that we need to really go at all of the 
special provisions, the deductions, the credits that complicate 
the business tax system. We need to enable ourselves to lower 
the rates, so that our statutory rate could be more competitive 
with the rest of the world. Our goal in business tax reform is 
really to stimulate economic growth and job creation. And I 
don't believe it can be separated from overall tax reform. I 
think if you look at the decisions that small businesses make, 
even how to organize, whether to be a partnership or a 
corporation, it makes a big difference what their relative 
treatment in the individual and business tax systems is.
    So, just intellectually, one has to look at it as a whole. 
I think that this is a big challenge. This is something that 
will require Democrats and Republicans standing shoulder to 
shoulder, because every one of the provisions that we would 
eliminate to broaden the base has people and businesses that 
support it. And, you know, that is a process that could only be 
done through bipartisan cooperation.
    Chairman CAMP. All right. Thank you.
    Mr. Levin.
    Mr. LEVIN. Thank you. When you look at business tax reform, 
the President's budget suggests that we need to maintain 
certain provisions that relate to manufacturing and 
entrepreneurship.
    But I want to focus, Mr. Secretary, on the gridlock in 
Washington today--you are the Treasury Secretary--and what the 
consequences are. So, just briefly, I want to start with the 
sequester. Are you concerned?
    Secretary LEW. Congressman, I think that the sequester is 
very bad policy. You know, it was designed to be bad policy, to 
motivate both sides to come up with a more sensible plan to 
achieve deficit reduction. And I think one thing we can be sure 
of is when you go out of your way to design bad policy, you can 
produce bad policy.
    The effect of the sequester is not anything that anyone 
should choose. They are senseless across-the-board cuts. If you 
look overall at the impact, at a time when we should be 
worrying about growing the economy, it takes roughly a half 
percent of GDP growth out of the economy. So it is not good 
policy in terms of the impact of the individual cuts. It is not 
good policy in terms of the overall impact on the economy.
    I do believe we need to have a long-term, sensible path of 
deficit reductions. The President's budget reflects that. It 
has to be balanced, there has to be shared sacrifice. And the 
sooner we do it, the better. I think if you look at the series 
of deadlocks that we have had over the last few years, each one 
has led to a loss of confidence in the economy, each one has 
caused individuals and businesses making decisions on whether 
to invest and grow their businesses and hire to worry about, 
was government going to cause there to be headwinds that made 
that not the right time to make an investment decision? I think 
government should be helping, not hurting, in the economy 
recovery, and replacing the sequester with a sensible, balanced 
plan would do that.
    Mr. LEVIN. And it should be done now?
    Secretary LEW. The sooner the better. We don't have an 
economic emergency in terms of deficit right now. Our budget 
makes clear that we need to be on a path over the next 10 
years. The cuts this year are not what matters so much as the 
reliable path over 10 years. The sooner we get the sequester 
out of the way, the sooner the economy will be relieved of the 
burden of that half-percent cut in GDP, and the sooner programs 
that people depend on will get back to normal.
    Mr. LEVIN. So let me ask you about another piece of this 
gridlock, the debt ceiling. It is going to once again be bumped 
into. And there was a hearing yesterday about prioritization as 
to the debts we pay. Could you give us the Administration view 
on how we handle the debt ceiling?
    Secretary LEW. Congressman, I think the President has been 
clear that there is no choice but for Congress to extend the 
debt limit. The debt limit does not commit any new spending. 
All the debt limit does is it permits the government to pay the 
bills that Congress has authorized to be incurred. And from the 
beginning of our history, the United States has always paid its 
bills. So there is no way to pick and choose about paying your 
bills without being in default on one or another obligation. So 
the only answer is to extend the debt limit, which is what we 
expect Congress will do.
    Mr. LEVIN. Lastly, you referred to growth, and there was 
some reference to your trip to Europe and your concern 
expressed there about their continued, I think at times, rigid 
embrace of austerity. So why is there a major jobs component 
within the President's budget?
    Secretary LEW. I think if you look at the experience we 
have had in the United States and compare it to Europe, we have 
had a stronger recovery because we got our financial system 
under control; we put measures in place quickly to deal with 
the depth of the recession, and we have done our fiscal 
consolidation, our deficit reduction over time. I think that is 
a proven path. It is something that--we are experiencing growth 
that is too low and growth in jobs that is too slow. But it is 
much more than the general experience in Europe and in much of 
the world.
    I think that we need to grow the economy, create jobs, and 
get our fiscal house in order. And that is a message I brought 
with me in the meetings I had earlier this week. I think there 
is a softening in some sense in Europe. They started out a 
couple of years ago not worried about the impact of very high 
unemployment as much as we thought they should be. I think 
there is a growing concern in Europe that it is a serious 
structural problem. We start out with that understanding in the 
United States. We think that 7.5 percent is a high unemployment 
rate. Double-digit unemployment rates are unthinkable, and you 
have to have policies to deal with that.
    Mr. LEVIN. Thank you.
    Chairman CAMP. Mr. Johnson is recognized.
    Mr. JOHNSON. Thank you, Mr. Chairman.
    Mr. Secretary, I realize you are time constrained, so on 
some of these questions I would like you just to answer yes or 
no, if you don't mind.
    With respect to securing Social Security's future, in his 
book, ``The Predictable Surprise,'' retirement expert Syl 
Schieber said, ``If we fail to act, we threaten the prosperity 
of younger generations, a prospect your former boss, President 
Clinton, said would be horribly wrong and unfair.'' And I 
appreciated that comment. That was 15 years ago, though.
    And that said, I am encouraged that the President's budget 
took a first step toward protecting Social Security for today's 
workers by including the chained consumer price index to 
calculate the annual cost-of-living adjustment. Do you think 
this is a more accurate way of measuring inflation?
    Secretary LEW. I think, as I indicated in my opening 
comments, Congressman, there--it is something we are prepared 
to do as part of a balanced deficit reduction package. 
Technically, it can be justified, but it does have an impact in 
terms of reducing rates of increase and benefits.
    Mr. JOHNSON. Long term, yes. I hear a lot of talk from AARP 
and others that using chained CPI cuts benefits. Is that true? 
And I think it does.
    Secretary LEW. It reduces the rate of growth in the cost-
of-living increases by about \3/10\ of a point.
    Mr. JOHNSON. Basic benefits are not cut.
    Secretary LEW. The underlying benefits are not cut.
    Mr. JOHNSON. Right. Benefits still grow each year that 
there is inflation.
    Secretary LEW. There is no doubt that we have not supported 
any measure that would cut the basic benefit.
    But I don't want to be misunderstood. A reduction of the 
rate of growth has an impact. And it is something that is very 
significant. And I appreciate your recognizing that in your 
opening comments.
    Mr. JOHNSON. We do.
    Secretary LEW. It is very significant. The provision 
imposes a----
    Mr. JOHNSON [continuing]. Long term, it reduces the Social 
Security deficit by just 10 percent. It is not immense. Does 
the President plan to close the remaining 90-percent cap, or is 
he just going to pass the bill to our grandkids? And is he 
serious about fixing Social Security?
    Secretary LEW. The President's made clear over the last 
several years that he would very much want to work with 
Congress on a bipartisan basis on a long-term plan to make 
Social Security sound for the long term. He has laid out clear 
principles that guide that. And we would look forward to 
working with the Congress on that. I think it is important for 
all of us to remember that in dealing with Social Security the 
fundamental goal has to be protecting Social Security, and 
getting it out of the context of the budget to have a long-term 
discussion is probably a good idea.
    Mr. JOHNSON. I happen to agree with you.
    Next week, the Subcommittee on Social Security will hold 
the first hearing in the hearing series announced by Chairman 
Camp on the President's and other bipartisan entitlement reform 
proposals. And that hearing will focus on the chained consumer 
price index, eliminating double-dipping with respect to 
unemployment and disability benefits. And I am deeply troubled 
the President's budget includes no proposal to prevent the 21 
percent across-the-board cut disability insurance beneficiaries 
face in 2016, just 3 years from now.
    The Social Security Subcommittee has held seven hearings 
over the last year on the disability insurance program, and I 
hope you will work with us to secure the future of that vital 
safety net.
    And under current law, a person can receive both disability 
and unemployment at the same time. And that isn't right. I 
don't know how someone can be able and available to work and 
also be unable to work due to disability. So today I am going 
to introduce a bill to stop people from receiving disability 
benefits at the same time they are receiving unemployment 
benefits. And in his budget, the President proposes to stop 
this, too, and I look forward to working with the 
Administration to get this bill signed into law.
    Thank you for your time.
    I yield back, Mr. Chairman.
    Chairman CAMP. All right. Thank you.
    Mr. Rangel is recognized.
    Mr. RANGEL. Thank you, Mr. Chairman.
    Thank you.
    Congratulations, Mr. Secretary.
    In New York, we live in two different worlds, especially in 
the borough of Manhattan; we have the world of wealth and 
riches, and then we have the inner cities of poverty and 
despair. And I just can't believe at a time of a national 
crisis that those that are doing so well are protected and 
those that--that are not doing well at all, it seems to be we 
are moving backward.
    With all due respect to the President's calculating the 
chained CPI, at the end of the day, benefits that would be 
received under the existing system would be reduced. And yet we 
are living, I think, at a time where the stock market--is it 
now presently at an all-time high?
    Secretary LEW. It has been.
    Mr. RANGEL. And would that not apply to the incomes of the 
chief executive officers? Is it true that they are getting paid 
millions of dollars for the work that they are doing? I mean, 
you would know this better than most people.
    Secretary LEW. Mr. Chairman, I don't follow day-to-day 
corporate salaries.
    Mr. RANGEL. I know. But, generally speaking, for a 
corporate leader and the holder of our economy to receive $2 
million or $3 million, it doesn't raise any eyebrows. Having 
said that, everyone knows it. Everyone knows it.
    And it just seems to me that when we take a look at the 
Republicans' budget, that would indicate that at a time through 
all of this crisis, we still find unemployment going down, we 
still find minor increases in employment, that we would say, 
now is the time to stop spending, now is the time to cut 
Federal programs.
    Now, cutting doesn't mean you are saving money. But at a 
time that we are trying to come back with the economy, that 
world that you spent a little time in, in the private sector, 
where are their voices? If these people are not working, have 
no disposable income and cannot buy, then small business cannot 
sell. And where are they? They are not complaining about a tax 
increase, but they are certainly not involving themselves in 
trying to resolve this issue that we found ourselves in.
    So I don't know what happens when you get out there, but do 
you hear from the private sector in terms of how we can break 
this gridlock?
    Secretary LEW. Congressman, you know, I have to say that in 
the debate that we had at the end of the year last year, I had 
numerous CEOs tell me directly that they thought we should have 
the rate increases that went into effect. They were not at 
all--it wasn't just that they weren't opposing it; they were 
more comfortable having the issue resolved that we go back to 
the rates because they were embarrassed by the argument about 
whether or not they could afford the tax rate that was enacted 
in January.
    I think that--you know, going forward, it is going to be 
very important for the business community to stand up for the 
kind of balanced approach we are talking about. Because they 
care about the end result, which is having the deficit and debt 
be sustainable, and they care about economic growth. We 
certainly are making the case for the budget in every sector 
that we can, including in the business world.
    And I think the underlying problem that you identified is 
one that is kind of central to what drives our budget. The 
disparity of income in this country is a real problem. It is a 
real problem.
    Mr. RANGEL. Mr. Secretary, when we talk about increasing 
the minimum wage, the private sector's voice is heard so loud 
it is deafening about what would happen if the lowest people on 
the economic ladder get an increase in the minimum wage. I 
don't know what benefits my Republican friends get out of such 
a small number of Americans receiving so much profit, so much 
income, and they are willing to whisper to you that they are 
prepared to make some sacrifice for the good of the Nation, and 
yet they don't know how to communicate this.
    I mean, it is totally unbelievable. With all of the money 
that they spend on K Street, the people in the middle of my 
district, they don't have people that come down here to protect 
their interests, not even a fair, equitable way to determine 
how we are going to cut money from them from Social Security.
    But, having said that, do you respond when the people tell 
you that, you know, the President's right, we should be paying 
more, we should be involved in this deficit ending?
    Secretary LEW. Well, I actually heard quite a lot from the 
business community at the end of the year supporting the kind 
of balanced approach we are proposing. I think they are a 
little confused by the budget debate in Washington these days. 
I mean, when I talk to business leaders now, they don't know if 
there is still the chance of a bipartisan agreement, or if it 
is completely on the sidelines. One of the things the 
President's budget is saying is there is space in the sensible 
center for a budget agreement. And I hope that will invite 
those who care to come off the sidelines.
    Mr. RANGEL. Give us the names of those cooperative 
corporate leaders. I will bring them up here, and we will see 
what we can do.
    Chairman CAMP. Time has expired.
    Mr. RANGEL. Thank you, Mr. Chairman.
    Chairman CAMP. Mr. Brady is recognized.
    Mr. BRADY. Well, it is not exactly a profile in courage 
that big business leaders were willing to raise taxes on the 
small businesses in America and not exactly a courageous move, 
by any measure.
    You know, this budget is not fair to taxpayers. The 
President's budget never has to balance, so Washington never 
has to live within its means. It is not fair to seniors. The 
President refuses to save Social Security or Medicare for its 
own sake, for the seniors, rather than attach all these 
unrelated provisions that have nothing to do with those 
important programs. And it is certainly not fair to the 
unemployed, those who can't find a breadwinner in their family, 
because this recovery has been the weakest in modern times. We 
are missing 4 million jobs because of the growth gap that is 
getting bigger. Food stamps, since the recession bottomed out, 
Americans are more likely to be forced to the food stamp line 
than to actually walk into a company that has offered them a 
new job.
    And those who have given up hope and just dropped out of 
the workforce--we have gone backward to Jimmy Carter days--I 
don't think this budget is fair to them because it stays the 
course on just very weak, poor economic leadership.
    Looking toward those areas where there may be common 
ground, tax reform and saving Social Security and Medicare, I 
think there is a path forward. I don't think we ought to close 
loopholes so the government can spend more; we ought to close 
loopholes so we can have higher taxes for everyone, families, 
small business, big business, as well.
    And so I have three questions for you, Mr. Secretary.
    And, like Chairman Camp, I welcome you back to the 
Committee, and I appreciate the work you have done in the past. 
I think you can bring a valuable work ethic to this whole 
effort.
    My first question is, will you commit to sitting down with 
Republicans today, starting now, to fix the broken Tax Code 
this year?
    Secretary LEW. Congressman, we are already working to 
provide technical support for both the House and the Senate as 
you do your work.
    Mr. BRADY. So that closer--so you, Mr. Secretary, the point 
man for the President on tax reform, are you willing to sit at 
the table and stay at the table to finish fundamental tax 
reform this year?
    Secretary LEW. Congressman, in the context of our overall 
fiscal plan, we have a disagreement on whether or not we need 
to raise revenue. That is a legitimate disagreement. We are 
going to have to work our way through that. In the context of a 
fiscal plan that solves our deficit problems, we very much want 
to engage on tax reform.
    Mr. BRADY. Is that closer to a yes, that you will come to 
the table and stay there?
    Secretary LEW. I have always----
    Mr. BRADY. Closer to a no?
    Secretary LEW. I have always been prepared to talk, and I 
remain prepared to talk. But I would also like to be very 
clear, I can't paper over what is a significant difference.
    Mr. BRADY. The question isn't that there are differences; 
we have different ideas. The question is, will you commit to 
coming to the table now to resolve those differences?
    Secretary LEW. We have always been prepared to talk with 
this Committee and other committees about the important 
business before us. Nothing is more important than getting our 
fiscal house in order. And as part of that, tax reform is a 
very important part.
    Mr. BRADY. Could you possibly be more vague at this point?
    Second question: Will you commit to fixing the broken Tax 
Code for families and small businesses as well as for big 
businesses?
    Secretary LEW. Again, as I responded earlier, we are very 
much supportive of both individual and business tax reform. We 
think they need to move together, and we would like to work 
with you to do that this year.
    Mr. BRADY. And so your point is we should not do--the White 
House's point is we should not do corporate tax reform alone, 
that we need fundamental reform, authentic reform for families 
and small businesses as well?
    Secretary LEW. Congressman, you are asking questions about 
small business. Small businesses have to make the decision 
whether they organize under the corporate tax laws or as 
partnerships under the individual tax laws. I don't know how we 
create a situation where they can make a sensible decision if 
we don't deal with it----
    Mr. BRADY. But the government's role is not to tell 
businesses how they organize.
    Secretary LEW. No, not at all.
    Mr. BRADY. And so many of them file as individuals. So my 
question is really simple: Will you commit to authentic tax 
reform, fix this broken code for small businesses and families 
as well as big businesses?
    Secretary LEW. So, Congressman, I am trying to answer with 
some precision. Small businesses do make their own decisions 
how to organize. One of the reasons they organize as 
partnerships is that our statutory rate is so high on the 
business side. So as we go through business tax reform, that 
will change the decisions that many of them make.
    Mr. BRADY. Ten seconds: Will you commit to saving Social 
Security and Medicare for its own sake?
    Secretary LEW. I have for 40 years believed in Social 
Security and Medicare----
    Chairman CAMP. Mr. McDermott is recognized.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    We have been buried in this tsunami of propaganda that the 
problem here is there is too much spending and there is not 
enough tax relief for the people at the top. Hedrick Smith of 
the New York Times has written a book called, ``Who Stole the 
American Dream?'' You sat here through almost all of this, 
because it started in 1971. And he chronicles the process by 
which we have done that. And in the process, over the 30 years, 
the middle class has been hollowed out. Their incomes have been 
stagnant. Their job prospects are diminished. And their 
retirements are less secure. It has been a long time coming, 
what we have today. But the big start was under Reagan, with 
the disastrous Reagan cuts of 1981 that favored the wealthy, it 
never trickled down on the rest of the country. Reagan 
introduced a trend of emptying out the middle class pockets, 
and it has really gone on. In the 1980s, say, and 1990s, 
401(k)s were popularized and pensions were ended, and for many, 
many people in this country. So the retirement security of 
Americans is deeply, deeply underfunded. Banking deregulation 
started in the 1990s, along with the Reagan creation of the 
sub-prime, sub-prime, high-interest rate housing loans that 
started us into the disaster of 2007. The disastrous 2001 and 
2003 Bush tax cuts have given us the chunk of the deficits--a 
big chunk of the deficits.
    Now, in this country, if you play by the rules and you work 
hard, you are running in place, you are running in place; you 
are not getting ahead, and you know your kids aren't going to 
do as well as you did. That is what the American people think 
today.
    There is some stuff in this budget which I like. There is 
investment in the future; that is, in worker retraining, the 
infrastructure bank, money to end the sequester.
    I worry about our healthcare history in the long run if we 
don't continue to invest at the National Institutes of Health. 
People get Ph.D.s; we don't make the advances. We simply allow 
Singapore and other countries to take it away from us. And so 
that whole question of investment gets lost in all this talk 
about corporate tax reform. We lower the rates on corporate 
taxes, we come down to 15 percent on capital gains, where are 
we? The middle class is being destroyed in this country.
    Now, what I want you to do is imagine that we are a bunch 
of workers from Ohio, out of work for a year. What would you 
say about this budget that would be aimed at letting them 
understand that the President is charting a new course to save 
the middle class, which they feel is being crushed--they can't 
educate their kids, they are losing their houses, they haven't 
been working for a year, and they are looking for some hope?
    Secretary LEW. Congressman, I would say there is much in 
this budget that I would point to, to that working family, from 
our commitment to education from early childhood through higher 
education, to make sure that every child has a chance to have 
the skills to compete in the economy that they are going to 
grow up in.
    Mr. MCDERMOTT. That is a long-term thing. Give me 
something----
    Secretary LEW. It starts right away.
    Mr. MCDERMOTT. Give me something I can see tomorrow.
    Secretary LEW. For early childhood education, it starts 
right away. We can't wait until people are 22 to ask if they 
have the skills they need.
    Our infrastructure proposals are to jump start 
infrastructure spending. I can make the case for infrastructure 
on so many levels. When I talk to CEOs, one of the first things 
they usually say to me is, we are worried about our 
infrastructure. Our airports, our water ports, our roads, our 
bridges, we are not going to be able to compete in the 21st 
century. Well, those are jobs today. To rebuild our 
infrastructure is not way off in the future; it is something we 
need to start immediately.
    Mr. MCDERMOTT. Our Republican colleagues resisted all the 
President's efforts or almost all the President's efforts in 
infrastructure creation a couple years ago. Explain to me how 
you are going to finance it, and how it can work. How will it 
work?
    Secretary LEW. Well, obviously, it has to be in the context 
of an overall fiscal plan. We have to show we are on a path in 
the long term, medium and long term, for bringing our debt and 
our deficit under control. Our budget has made it clear that 
when you make the tough decisions, you afford to do that.
    In addition to everything else we are doing in this budget, 
we are also ending a second war. And as we do that, we are 
freeing up resources. And we would say that as we end the war 
in Afghanistan, we need to invest here at home; as we end a war 
in Iraq, we need to invest here at home. And we have a budget 
that brings the deficit down to below 2 percent of GDP in the 
10th year and invests in building our economy and creating jobs 
today.
    Chairman CAMP. All right. Thank you.
    Mr. Tiberi is recognized for 5 minutes.
    Mr. TIBERI. Growing up in a working family from Ohio, my 
colleague from Washington State is really trying to engage me 
in a little dialogue here, and I am not going to take the bait.
    But I will remind him that back in 2010, Mr. LaHood 
testified at the time opposed to a gas tax with respect to 
infrastructure. But I am not going to go there. I don't want to 
take my time today away from the Secretary. Thank you.
    And I am going to be in a learning mode here. The first 
question I have for you is, and you may not know the answer to 
this, but if you could have your staff get back to me and try 
to be constructive. It has come to my attention from some folks 
in Ohio that the IRS is seeking to impose a ticket tax on 
transportations of people in the air for management services. 
And they are reinterpreting, last year, reinterpreting a law 
that was passed during the Nixon Administration. And my 
understanding is, if you look at this, they are legislating 
rather than administering. And, clearly, in my opinion, 
overstepping their authority as a regulatory agency.
    The IRS argues that the new interpretation is correct and 
that the tax has been due all along. Does ``all along'' mean 
since 1970? I don't know. But I am concerned about it. And I 
would like to have your staff maybe communicate with us on what 
you believe the IRS is doing and if it is correct.
    Secretary LEW. Congressman, I would be happy to look into 
it.
    Mr. TIBERI. Thank you. And I don't want to put you on the 
spot. But it is an important jobs issue in not just Ohio but 
all over.
    I, along with my colleague, Mr. Kind, who I don't think is 
here, are cochairing a group on retirement savings. And in the 
President's budget, for the very first time, there appears a 
provision that I would like to learn more about, and see if you 
could maybe comment on it. It deals with retirement savings. It 
deals with, it appears, capping the amount of dollars that an 
individual can have in a retirement account, in terms of tax 
benefit in a retirement account, and it appears it caps the 
revenue stream in retirement at $205,000, cumulatively at $3 
million. My question is now--and I am trying to learn, I am not 
being critical--thinking back to my own TSP that didn't have $3 
million in it, but thinking about what happened in 2007, 
between 2007 and the end of 2008, and I am sure it represented, 
my account represented what happened to most every American, 
the value of that account, based upon the stock market collapse 
in 2008, significantly went down. So if you are 58 years old 
and you are not retired for 10 years and the stock market is 
high and you have $2.9 million, do you stop saving to avoid 
this for retirement? Do you worry about, well, is the market 
going to go way up at this point, or could it go way down? And 
it could go from $2.9 million to $1.9 million in a matter of 
months, based upon the experience we saw. How do we--and I 
include myself in this--how do we manage, administrate a 
program like this to make sure that it is done without any 
penalties being created or encouraging people to take an early 
withdrawal to avoid some sort of penalty if they go over the $3 
million? I am just thinking about where this is coming from in 
terms of administering it. I think I know the politics of what 
you are trying to get to, but I am concerned about those 
impacts.
    Secretary LEW. Congressman, retirement savings is a hugely 
important issue. And for the average working family, 
unfortunately, retirement savings are more like $50,000 to 
$70,000 than $3 million. So for the average working family, 
they are so far from that $3 million level, that they probably, 
listening to this conversation, would wonder what we are 
talking about.
    Mr. TIBERI. Mr. Secretary, I get it. My dad has a sixth-
grade education, came to America, and for my entire lifetime, 
starting as a kid, talked about saving for retirement. But what 
our task force is up here for is to try to encourage everybody 
to be self-sufficient. And what I don't want to do as a 
policymaker is send the message, we are going to go after 
somebody who is trying to be self-sufficient and create another 
trap for them or penalty for them. I am just trying to figure 
out, how do we administer that?
    Secretary LEW. So we have for a long time looked at ways we 
could encourage more people to participate in savings, and we 
have a proposal that we would hope would be part of the 
conversation that would have automatic enrollments, so that 
people opt out instead of opt in. This is a simple behavioral 
change that we think would very much improve the likelihood of 
people saving early and through their careers.
    The provision here, it really reflects a judgment that 
there should be tax incentives up to a certain point. But 
beyond that, we certainly encourage people to save beyond that. 
The tax incentives have to be looked at in the context of the 
tradeoffs. And to save for your retirement with tax benefits, a 
limit of $3 million seemed like a reasonable place to draw the 
line so that we are encouraging the vast majority of Americans 
to save as much as they possibly can.
    Chairman CAMP. All right. Time has expired.
    Secretary LEW. Thank you.
    Chairman CAMP. Mr. Lewis is recognized.
    Mr. LEWIS. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary. I just want to take an opportunity 
to thank you for your many years of service, not just to the 
Congress, but to our country.
    And, Mr. Secretary, the unemployment rate in the city of 
Atlanta is at 8 percent. So, as you can guess, many people in 
my district, like people all around our country, are very much 
focused on jobs. Since first being elected, President Obama has 
made it very clear that we need to invest in jobs and job 
creation. Would you tell us how this budget reflects the 
Administration's continued efforts to create jobs and help 
people get back to work?
    Secretary LEW. Congressman Lewis, thank you for the very 
kind comments.
    This budget is all about growing the economy and creating 
jobs. In its kind of macro sense, it is about taking the steps 
we need to this year and over the next 10 years to make sure 
that there is the best environment for job creation that we can 
produce. That is getting our fiscal house in order, yet 
providing the support that is needed to make sure that we have 
educated workers, we have an infrastructure that is sound and 
that serves the needs of the future as well as the past, and we 
need to get started with that right away. We have incentives 
for manufacturing, and we have tax proposals that would 
encourage investment in the United States and not the shipping 
of jobs overseas. So I think, overall, if there is a single 
theme that ties this budget together, it is about being able to 
say that we are doing exactly what you are asking: We have a 
path for economic growth. We have a path for job creation. And 
we have tools in place to make that happen today and in the 
future.
    Mr. LEWIS. Mr. Secretary, in spite of all of the problems 
that we faced in our country during the past few years, some 
people have done very well and others have been left out and 
left behind. Can you tell us what is in the budget that is 
going to help those that have been left out and left behind?
    Secretary LEW. I think that the disparity of income in this 
country is a very significant problem. And we have to deal with 
it at both ends. We have to deal with it at the end of those 
who are struggling by creating the ladders of opportunity to 
give them the ability to get the education they need and have 
the skills for the jobs that they deserve. When they go to 
work, we need to make sure that they get a living wage. Anyone 
who works full time should be above poverty in this country, 
which is why the President has put a proposal in his budget to 
raise the minimum wage.
    I think, at the high end, we very much need to make sure 
that as we put in place the policies that will put our fiscal 
house in order, that we raise revenues from those who are most 
able to afford it because they have the greatest income. I 
think, overall, this is a budget that doesn't instantaneously 
fix a problem that has been decades in the making, but it moves 
it very much in the right direction. And, frankly, the action 
taken in January was the most significant step in that 
direction, by raising the top tax rate, really in a generation.
    Mr. LEWIS. Thank you very much.
    I yield back, Mr. Chairman.
    Chairman CAMP. Thank you.
    And, at this point, I am going to go two-to-one. So I will 
start with Mr. Reichert. You are recognized for 5 minutes.
    Mr. REICHERT. Thank you, Mr. Chairman.
    Mr. Chairman, my Subcommittee on Human Resources will be 
holding a hearing next week on unemployment insurance. And so I 
want to focus on--I have one question related to unemployment 
insurance, but also want to use it as an example of a comment 
that you made earlier that people, including corporations and 
small businesses, are confused about the budget and our process 
here and also sort of lack understanding as to really what is 
going on.
    Secretary LEW. That is probably something on which we can 
all agree.
    Mr. REICHERT. You are right, including myself. So I have 
two documents. This is, I guess, part of what really creates a 
little bit of confusion. First, a document from the White 
House, and then I have a document from the Department of 
Treasury. And these seem to be in conflict, to me. So the 
President's budget has a proposal that would more than double 
the wage base on which Federal employment taxes are applied, 
from $7,000 to $15,000. Correct?
    Secretary LEW. Correct.
    Mr. REICHERT. All told, as displayed in your budget 
documents, this would increase revenue by $51 billion over 10 
years. I note that these tax increases would take the form of 
higher Federal and State payroll taxes, which in my opinion are 
taxes on jobs. My question is this: Why do you think a summary 
document prepared by the White House says that that same policy 
strengthening the solvency of the Unemployment Insurance Trust 
Fund reduces spending by 50 billion? Can you clarify this 
discrepancy, this sort of conflict, for myself and the rest of 
the folks here in the room?
    Secretary LEW. Congressman, I would have to take a look at 
those two charts. I don't want to pretend to be familiar with 
the comparison, and I couldn't read it from this distance. The 
policy on unemployment insurance is one the Administration has 
advocated for a number of years. It would restore the base for 
the unemployment tax to where it was in the Reagan years, just 
adjusting it for inflation. That is the essential policy.
    Mr. REICHERT. Excuse me, just for a moment. So the $7,000 
to $15,000 increase, is that a tax hike?
    Secretary LEW. Well, the rate----
    Mr. REICHERT. The rate reduction. Forget what this says. 
What is your opinion?
    Secretary LEW. The rate doesn't change. What it does is it 
puts in place--right now, we have an unemployment----
    Mr. REICHERT. Does it increase taxes? Yes or no.
    Secretary LEW. Well, it increases the base of income----
    Mr. REICHERT. I just want a yes or no answer. Does it 
increase taxes----
    Secretary LEW. It pays for unemployment that is not now 
properly funded. And I think the reason for the confusion----
    Mr. REICHERT. By increasing taxes?
    Secretary LEW. It raises the base to Reagan levels.
    Mr. REICHERT. Increasing taxes. But the White House is 
saying it is reducing spending. I am confused.
    Secretary LEW. The categorizations of these issues has 
been----
    Mr. REICHERT. So I can look forward to an answer that would 
clarify this for me.
    Secretary LEW. I will be happy to get back to you.
    Mr. REICHERT. I want to move on to--you have used the term 
``fiscal house in order'' several times here today. What does 
that mean to you, getting our fiscal house in order? Briefly, 
please.
    Secretary LEW. Congressman, I think that the challenge we 
face is to get our budget on a path to having the deficit and 
the debt as a percentage of our economy at a point where it is 
sustainable, which means the economy is growing faster and we 
are not----
    Mr. REICHERT. What percentage would you say that would be?
    Secretary LEW. You know, our budget gets the deficit to 
less than 2 percent of GDP in the 10th year. Our goal 
originally was 3 percent, so we----
    Mr. REICHERT. Sure, but your budget doesn't balance.
    Secretary LEW. You asked me a different question. You asked 
what----
    Mr. REICHERT. Does the--but does----
    Secretary LEW. It does balance in an out-year, not in the 
10-year window----
    Mr. REICHERT. Okay.
    Secretary LEW [continuing]. Quite a ways out. The challenge 
of balancing the budget----
    Mr. REICHERT. The budget does not balance within 10 years--
--
    Secretary LEW. No. It----
    Mr. REICHERT [continuing]. Is that correct?
    Secretary LEW. We have a--the deficit is 2 percent of GDP--
--
    Mr. REICHERT. Can you explain to me--I want to be in a 
learning mode just like my friend from Ohio. Can you explain to 
me and the folks around the country why it is so important for 
families to balance their checkbook, balance their budget--they 
didn't see a deficit, you know, an emergency ahead, but they 
lost their homes--but the Federal Government doesn't have to 
balance their budget, they can continue to spend, and you don't 
see an emergency down the road with the deficit?
    Secretary LEW. Congressman----
    Mr. REICHERT. I don't understand. People are trying to 
understand this at home.
    Secretary LEW. Congressman, as I said in my opening 
remarks, I spent a big part of my career balancing the budget, 
creating a surplus. I understand how important a balanced 
budget and a surplus is. I also know that in the period before 
President Obama took office----
    Mr. REICHERT. Well, why is it important, though, for folks 
at home to balance their budget----
    Secretary LEW [continuing]. A deep, deep deficit was 
created.
    Mr. REICHERT. Excuse me. Why is it important for people at 
home to balance their budget but it is not important for the 
Federal Government to balance their budget?
    Secretary LEW. Now, I can't----
    Mr. REICHERT. That is what people don't understand, sir.
    Secretary LEW. Families and government----
    Mr. REICHERT. My time has expired.
    Thank you, Mr. Chairman.
    Chairman CAMP. All right.
    Secretary LEW. Mr. Chairman, could I respond just very 
briefly to the question?
    Chairman CAMP. Yes.
    Secretary LEW. Thank you.
    Families and governments are fundamentally in different 
positions. And governments around the world are measured by the 
standard of whether or not they can afford to service the debt 
that they have undertaken. And the measures that are used to 
determine whether they can afford it are reflected in our 
budget, and we meet them.
    I totally agree with you, we should be on a long-term path 
toward pursuing more deficit reduction and balance. What I am 
saying is, if you try to get there too fast, you do more damage 
to the economy, and you would end up making less progress, not 
more progress, in terms of reaching the goal.
    Chairman CAMP. All right.
    Dr. Boustany.
    Mr. BOUSTANY. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary.
    Secretary LEW. It is good to be here.
    Mr. BOUSTANY. The President's 2014 budget requests an 18.4 
percent increase for the Department of Treasury and its 
programs. And this includes a $1 billion increase, annual 
increase, for the IRS budget. You know, we found information 
just a few weeks ago about an IRS studio, production studio, 
``Star Trek'' videos, things of that nature.
    Now, as the economy continues to sputter, families across 
America are having to make deep, painful cuts in their own 
household budgets. And, at the same time, we are borrowing a 
lot of money. We are borrowing a dollar for every--for every 
dollar of spending, 60 cents is borrowed.
    So, with this in mind, are there any other cuts under 
Treasury that you could put forth other than what is in this? I 
mean, the budget is proposing increased spending.
    Secretary LEW. Congressman, the bulk of the increases that 
are in the Treasury budget are really in IRS enforcement. I 
think that one of the goals this Committee has traditionally 
shared with the Treasury Department is making sure that our tax 
laws are effectively enforced and that we have a fair system 
where all taxpayers are treated alike. And there is an 
understanding that if you don't obey the tax laws----
    Mr. BOUSTANY. Well, I fully understand that, but, at the 
same time, we are concerned about, on one hand, the IRS comes 
to us and wants more resources, and yet we see obvious waste on 
the other hand.
    Secretary LEW. Congressman, I am aware of the situation you 
are describing. I think we have made clear that action has been 
taken to make sure that doesn't happen again.
    You know, across government there is a need to, I agree 
with you, tighten our belt and not do things that don't look 
like they make sense. I spent a lot of time, when I was at OMB 
and as chief of staff, doing that across the government. I will 
continue to do that as Secretary of the Treasury.
    But I don't think that it is right to confuse that with the 
need to have IRS agents on the job. And that is what our--where 
most of our budget is----
    Mr. BOUSTANY. I understand the need for enforcement, but--
--
    Secretary LEW. Yes.
    Mr. BOUSTANY [continuing]. I guess my question is, are 
there other areas within Treasury that you could come forward 
with some proposals for cuts? I mean, obviously, there are 
some. I mean, what about this production studio? I think it 
costs $4 million a year. It has been--there may be--are there 
others?
    Secretary LEW. We are obviously taking a look at that 
particular item. But I would point out that, you know, one of 
the things that we do to try to control costs in the government 
is do more business remotely and not have people travel when 
they don't need to. One of the ways you do business remotely is 
through video activities. So we have to be careful that we 
don't cut off the ability to do the kind of work that gives us 
the ability to operate more efficiently.
    I am happy to take a look at that, along with other things. 
But I don't think you would want to have every meeting be in 
person in a city if somebody can sit in a studio and talk to 
500 people----
    Mr. BOUSTANY. I understand that, but we are going to 
continue to conduct oversight to make sure these dollars are 
being used appropriately.
    Secretary LEW. I appreciate that.
    Mr. BOUSTANY. Also, you have mentioned growth quite often. 
And Mr. Brady was asking questions about our views on tax 
reforms versus what we see from the Administration and the 
budget proposal.
    And one of the things I get concerned about is an approach 
where certain pockets of money, in the form of tax provisions, 
get pulled out to increase spending rather than really looking 
at tax reform. We really do have an historic opportunity to 
embark on tax reform, where we look at everything with the idea 
of lowering rates and promoting American competitiveness.
    For instance, as I look--let's just take the oil and gas 
expensing provisions, which have been in the President's budget 
continuously year after year after year. The impact of this is 
going to be pretty strong in the oil and gas exploration 
production at a time when we are seeing a shale gas revolution. 
If these were to be put in place without actual reductions in 
tax rates, I think you are going to kill the shale gas 
revolution--a source of job growth, a source of American 
competitiveness, new sources of exports.
    So there is a little bit of an inconsistency here. And I 
would just urge that you reconsider in the administration 
working with us on real tax reform that looks at everything 
with the idea of simplifying, making that code much fairer for 
everybody concerned, lowering rates, and really focusing on 
American competitiveness.
    Secretary LEW. Congressman, as I said earlier, I really do 
think that there is a common goal to broaden the base and lower 
corporate business tax rates. I think that we have a thriving 
industry now in the shale area. I think that the incentives 
that were put in place for a nascent oil industry are probably 
not what they need to be to thrive. We should work together on 
this as we go forward.
    Mr. BOUSTANY. And one last thing. In the transportation 
bill that was passed last year, there was statutory language 
about reporting on a plan for our ports and dredging. That is 
not in the budget----
    Chairman CAMP. Time has expired. Respond in writing.
    Mr. BOUSTANY. I would ask that you respond to me in writing 
on that issue.
    Secretary LEW. I would be happy to.
    Mr. BOUSTANY. Thank you.
    Chairman CAMP. Mr. Neal is recognized.
    Mr. NEAL. Thank you, Mr. Chairman.
    I had resolved when I came in not to say anything in 
partisan response, but the last two speakers cause me to state 
an obvious fact, and that is that our Republican friends are 
always in favor of balancing the budget when there is a 
Democratic President. And to have heard the last two speakers 
go on about how we arrived where we are with these deficits is 
to miss the point that they didn't say anything during the 
preceding 8 years. And I think that bears noting, as well.
    Now, your DNA is in the legislative branch of government. 
You worked for Tip O'Neill and you worked for Joe Moakley. You 
know how to make a deal. You worked for the only President who 
has balanced the budget four times since the end of World War 
II. You understand precisely how this is done. And I think that 
ought to be acknowledged, as well, today.
    In February, you raised concerns, or the Department of 
Treasury raised concerns, about an EU proposal to implement a 
new financial transaction tax in 11 eurozone countries. And in 
its current form, that will harm U.S. investors. It is more and 
more likely that some eurozone countries will implement a very 
broad-based FTT sometime next year. This proposed tax is 
intentionally designed to have a broad global reach. It would 
result in multiple levels of taxation, and the effective rate, 
as you know, could be much higher than advertised.
    Can you update the Committee on what Treasury is doing to 
protect U.S. investors from this European tax? And could you 
also update the Committee on your recent conversations, Mr. 
Secretary, as you traveled to Europe?
    Secretary LEW. Congressman, yeah, we have made a different 
decision as an Administration than many others in Europe are 
making. We have a financial responsibility fee that has been in 
our budget. We think that is a better way to raise revenue from 
the financial services side. And, you know, we have made that 
point both here and in conversations overseas.
    I think the design element that you are describing is a 
very troubling one. What other countries decide to do in their 
borders is their business. So we can disagree about the best 
way to tax domestic financial services, but it is not an 
acceptable policy, from our perspective, for other countries to 
create a tax that has an extraterritorial reach and would levy 
a tax on a transaction in the United States.
    When I had my meetings earlier this week in Europe, I made 
that point very clearly to a number of European officials, both 
in the European community in Brussels and in meetings with 
finance ministers, making it clear that, you know, we found 
that to be unacceptable and we will continue to make that 
clear. So we are engaged with them, they understand our view, 
and we will continue to do so.
    Mr. NEAL. Thank you.
    And, Mr. Secretary, I am pleased that you included the 
auto-IRA bill in the budget that I worked on for many, many 
years. And a word of thanks to Treasury for recommending 
another item that I worked on for 14 years, to kill AMT.
    So it takes time around here to get these things done, but 
the auto-IRA proposal, I think, is superbly positioned to help 
with some of the issues that were raised by some of our friends 
on the other side, as well.
    Secretary LEW. I totally agree.
    Mr. NEAL. A reminder that it is endorsed by The Heritage 
Foundation. I am still waiting for a Republican to sign on to 
my bill. And, in addition, it has broad bipartisan consensus 
that it would address some of these issues.
    Could you speak to the auto-IRA proposal, as well?
    Secretary LEW. Yes. I think the auto-IRA proposal is a very 
good idea. It is something that doesn't require that anyone 
participate in an IRA. It just shifts the decision point, do 
you opt in or do you opt out.
    We think that, you know, if you make it an opt-out, which 
is what auto-IRA would do, there are an awful lot of people who 
do not start saving very early in their careers who will do so. 
And if you save when you are 24, 25, all the way through, you 
build up a much more substantial nest egg for your retirement 
because of compounding over the years. You never can catch up 
for the early years that you were out of retirement saving.
    So I think it is a very good idea. It is something that we 
have put in our budget and we continue to advocate. And perhaps 
in the context of tax reform, it is something that would have 
the ability to actually be given serious consideration.
    Mr. NEAL. Well, the other part of the auto-IRA that has 
particular appeal is that I think insurance agents, community 
bankers, and credit unions, even though they are small 
accounts, they would like the opportunity, with the potential 
to expand business down the road, to sell that very concept.
    Secretary LEW. Sure.
    Mr. NEAL. And another word of thanks on the savers credit. 
That is very important to me. I have worked on that for many, 
many years here, and I am pleased to see that you have paid 
attention to that again in the budget.
    Thank you, Mr. Secretary.
    Secretary LEW. All right. Thank you.
    Chairman CAMP. Thank you.
    Mr. Roskam is recognized.
    Mr. ROSKAM. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary.
    Mr. Secretary, you said something in your opening statement 
that jarred me, and I wanted to confirm that you actually used 
this language because it seemed internally inconsistent with 
some of the other themes.
    So, during the opening statement, you generally laid out a 
theme of, look, I am Jack Lew, I have this experience and this 
background on a bipartisan basis, and I have been successful in 
other tasks in the past in bringing groups together. And that 
is a good attribute, and it is an attribute that we all admire 
and we aspire to.
    Now, that bipartisan language is in contrast, it seems to 
me, with this statement. You said, ``It is important to note 
that this framework,'' the White House framework, ``does not 
represent the starting point for negotiations.''
    So here is the challenge. It is very declarative. It sounds 
as if there has been some revelation that you have had that we 
haven't participated in. And you are making a declarative 
statement that this is a precondition for negotiations?
    Secretary LEW. No, that is not what I said.
    Mr. ROSKAM. Well, you did say----
    Secretary LEW. I said it is not a starting point. I didn't 
say it was a precondition.
    Mr. ROSKAM. Well, so what do you mean by----
    Secretary LEW. Sure. I am happy to----
    Mr. ROSKAM [continuing]. Saying, ``It is important to note 
that this framework does not represent the starting point for 
negotiations?''
    Secretary LEW. I think the last 2\1/2\ years have 
represented a lot of movement from the starting point. I 
certainly have the wear and tear to show for it, and I think 
others do, as well. We are not at the beginning of the process. 
This budget reflects where the President was after 2 years of 
negotiation. And in December, we were perhaps one or two turns 
of the wheel away from an agreement. It didn't come together, 
but that doesn't mean we shouldn't keep trying.
    What I was saying and what I believe very strongly is that 
it would be very counterproductive to treat this somehow as if 
it is kind of the beginning of the conversation, as if the last 
2\1/2\ years had not happened. And----
    Mr. ROSKAM. Okay. I understand that.
    Secretary LEW [continuing]. To separate the parts would be 
a very unconstructive response.
    Mr. ROSKAM. I understand.
    Secretary LEW. We are doing very hard things, and we are 
asking for others to do very hard things.
    Mr. ROSKAM. At the end of the year, the President was 
making the argument about a consensus around protecting middle-
class taxpayers from a tax hike. And he basically said, look, 
since we both agree on that, let's take them off the table. And 
you remember that argument.
    Secretary LEW. Uh-huh.
    Mr. ROSKAM. It was a very compelling argument, a very 
successful argument.
    What is different about that argument with the notion of, 
if there is consensus on both sides of the aisle around your 
proposed changes on Social Security, why not move forward on 
that in the same spirit, with the same approach, and with the 
same goal?
    Secretary LEW. Look, I think they are very different 
policies.
    Mr. ROSKAM. Why?
    Secretary LEW. There was a broad bipartisan agreement that 
middle-class taxpayers should not pay higher taxes. We are not 
saying we want to raise this chained CPI issue. We are saying 
we are prepared to do something very hard, and in a package 
with additional revenues to solve our deficit problems, we 
would do it.
    It is very different. We all wanted to prevent taxes from 
going up on middle-class workers. I am not going to sit here 
and say I want to do the chained CPI, and I don't think most of 
the Members of this Committee would. We may feel we need to as 
part of a balanced plan, but I sat through 2 years of meetings 
where I have heard one after another leader on your side say 
chained CPI has to be part of a budget agreement.
    The President put that in in December. He has kept it in 
because he would like to reach a bipartisan agreement. But it 
has to be connected to solving the whole problem, including 
more revenue.
    Mr. ROSKAM. The long-term discussion on Medicare is a 
discussion that continues to, I think, get everybody's 
attention. And yet your predecessor gave a presentation to the 
House Budget Committee, it was February of last year, where he 
basically--you know, it was one of those moments of clarity, 
frankly, when he said, look, we don't have a long-term 
proposal, but all we know is we don't like yours, meaning the 
House budget proposal. That was his language, not mine.
    You are basically doing the same thing now as it relates to 
Medicare; isn't that right? Because at the end of office, when 
the President leaves in 2017, according to the trustees, they 
say, look, this solvency only goes out another 7 years after 
your time in office. So isn't that exactly the same thing that 
Secretary Geithner was doing?
    Secretary LEW. I am not familiar with the exact comments 
Secretary Geithner made. I----
    Mr. ROSKAM. I will get to you. I didn't overcharacterize 
it.
    Secretary LEW. I will describe our policy, if I could, in 
my own words, which is: You know, since the enactment of the 
Affordable Care Act, we have seen substantial reduction in the 
rate of growth of healthcare spending. With the implementation, 
we will see more.
    The President has put in this budget $400 billion of 
Medicare savings, including some very difficult provisions like 
income-related premiums, which are really means-testing 
measures, and----
    Mr. ROSKAM. That is all well and good, but the trustees say 
2024, right?
    Secretary LEW. And, you know, there is no doubt, as the 
President has said many times, we have more work to do after, 
but that is not a reason not to do this now. And we probably 
don't agree on----
    Mr. ROSKAM. Do what now?
    Chairman CAMP. All right. Time has expired.
    Secretary LEW. The policy the President has proposed.
    Chairman CAMP. Okay.
    Mr. ROSKAM. I yield back.
    Chairman CAMP. Mr. Gerlach is recognized.
    Mr. GERLACH. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for testifying today.
    I wanted to focus on your comments regarding the R&D 
investment issue. You state in your testimony on page 5 that 
the President's budget increases funding for nondefense R&D 
investment by roughly 9 percent over the 2012 level.
    How does the President's budget propose to do that?
    Secretary LEW. Congressman, this is the first year in a 
long time where I wasn't responsible for the appropriation 
account, so I am going to have to probably defer to my 
colleagues at OMB to go through all of the specific increases 
in R&D in the budget.
    But I can tell you, the pattern of increases is that we 
have very much put resources into energy and energy-efficiency 
research. We have very much put resources into biomedical 
research, into core basic research. We also have proposed 
making, you know, the tax credits for R&D permanent. So we have 
a balanced set of approaches.
    We think that R&D is the key to American competitiveness in 
the future and have, for the entirety of this Administration, 
been pushing very hard to try to increase R&D as a share of 
what we do.
    Mr. GERLACH. We have a manufacturing working group ongoing 
here in the Committee, and my colleague, Mr. Roskam, and, on 
the Democrat side, Congresswoman Sanchez, have been holding a 
number of meetings about a variety of issues involving 
manufacturing, including research and development.
    And one of the things we heard in our meeting on research 
and development was how the IRS many times contests the efforts 
by a company to get an R&D credit in a particular tax year, 
where they have to constantly battle the IRS to justify that 
innovative work, that research work, to establish that they, in 
fact, are entitled to that credit.
    Would it be possible for you to acquire information for us 
that would demonstrate how many times, how many cases the IRS 
really contests the efforts by companies to take the R&D tax 
credit and where the company then has to take an appeal of that 
process, of that initial determination, where that company ends 
up being successful and, in fact, is entitled to that R&D tax 
credit, so that we can get a better sense of it is not only the 
permanency of the rate or what the rate itself is, but how hard 
it is for these companies to have to go through the rigamarole 
to actually get the credit to begin with, from a bureaucracy 
standpoint?
    Can you help gather that data for us and see if there is 
some way that, not only with the rate itself, but also with the 
language in the statute as to when and how you get the credit, 
how that could be made more simple, more commonsense, and more 
usable by companies so that they, in fact, can feel comfortable 
moving forward with research and development, which is what we 
all want to see happen in our domestic economy?
    Secretary LEW. Congressman, I am happy to look into that. I 
don't have the numbers----
    Mr. GERLACH. Yeah. I understand.
    Secretary LEW [continuing]. At my disposal today.
    I agree with you, we ought to make the administration of 
the Tax Code such that taxpayers and businesses trying to make 
decisions can have clarity and understanding. At the same time, 
we have to make sure that there is compliance with whatever 
requirements we have.
    I am happy to take a look at it.
    Mr. GERLACH. Thank you, sir.
    I yield back. Thank you.
    Chairman CAMP. Thank you.
    Mr. Becerra is recognized.
    Mr. BECERRA. Thank you, Mr. Chairman.
    Mr. Secretary, thank you very much, and congratulations to 
you.
    Secretary LEW. Thank you.
    Mr. BECERRA. I am glad you clarified, once again, that some 
of these provisions in your package are part of a previous 
negotiation with Republicans, Speaker Boehner in particular, to 
try to resolve our fiscal issues in a balanced way.
    And I know you have mentioned in the past that there are 
proposals by Republicans to include a chained CPI, which is a 
different way of calculating the cost of living for anything 
from Social Security benefits to veterans benefits to the Tax 
Code, and how much people pay on their taxes would be impacted 
by the so-called chained CPI.
    Some $230 billion is saved by moving toward the Republican-
proposed chained CPI, so let me ask a couple of things. My 
understanding is that by going to the chained CPI, you would 
end up cutting benefits earned by seniors who paid into the 
Social Security system, you would cut benefits earned by 
veterans for their retirement, you would cut benefits earned by 
disabled veterans who are receiving veterans disability 
compensation.
    And if that is not accurate, will you please, or Treasury 
please, forward to me a response that would refute or explain 
how those payments to seniors, veterans, and disabled Americans 
will not be cut? I wish that we could go into detail, but I 
know I would run out of time if we did.
    Secretary LEW. Congressman, can I respond to that just 
briefly?
    Mr. BECERRA. No, I would like to--if you could respond in 
writing, because I know there has been a lot of discussion and 
I will run out of time, because I have several questions to ask 
about the chained CPI. It is very disturbing that the folks who 
are going to get hit hardest, the $230 billion that you save in 
the budget from moving toward a chained CPI is by impacting 
seniors, veterans, and middle-class Americans.
    The next area is on the tax side. About half of the 
savings, half of the savings of $230 billion in savings you get 
by moving toward the chained CPI, aside from the cuts to earned 
benefits to seniors and to veterans and disabled Americans, is 
by raising revenues, raising taxes.
    And most of that, my understanding is, is a revenue hit, a 
tax increase for families who are middle-class or below. In 
fact, my understanding is that, unless things have changed, the 
biggest impact by the tax increase caused by the chained CPI 
hits families who are earning somewhere between $10,000 and 
$20,000 because they would be pushed up into the higher 
brackets faster.
    And so, as I look at my district, the median income in my 
district is about $38,000. The median income of the national 
American family, so not just my district but everywhere in 
America, if you take the median income of American families, it 
is about $53,000.
    Now, I know the President fought very hard to protect 
middle-class taxpayers, $250,000 and below. And, obviously, the 
middle of America is way below $250,000. And we ended up, after 
compromise with our Republican colleagues, at $450,000 in 
income which would be protected from any of the Bush tax cuts 
expiring. So, certainly, anyone within $53,000 in income would 
be within that $450,000 cap.
    Yet the person who makes $450,000 in income will see a very 
small hit from the change to a chained CPI when it comes to 
what they pay in taxes, whereas the person earning $53,000, the 
middle of America, will see a much greater increase in their 
taxes. And, certainly, folks in my district, who earn on 
average, in the median, $38,000, will see a substantial 
increase in their taxes as time goes on if you were to move to 
the chained CPI.
    Now, I have heard you say that the President isn't a fan of 
moving to the chained CPI without a big, balanced approach. But 
the facts are--and, please, in any letter you write to me, 
please refute that, in fact, middle-class Americans, especially 
those who are earning $38,000 like folks in my district, will 
not see a tax increase which, my sense is, certainly is within 
the $250,000 in income that the President said was the 
threshold for protecting Americans from any tax increase.
    My final comment is this. And you are a Social Security 
trustee. In the 77 years that Social Security has been in 
effect, Americans, from way back then until now, have 
contributed $13.9 trillion in their taxes to the Social 
Security system. We have also seen those contributions earn 
$1.6 trillion in interest earnings by being saved in the trust 
fund. The total--and I will end, Mr. Chairman, with this. The 
total amount that has been spent in benefits for Americans is 
$12.8 trillion. The result is a $2.7 trillion amount that has 
never been used by Social Security. Yet the chained CPI gets so 
much of its savings by hitting beneficiaries under Social 
Security who earn those benefits by paying into them.
    So I very much would like a response, if you could, in 
writing as to how you would explain or refute that seniors, 
veterans, and disabled would not be asked to pay more by 
getting fewer of their earned benefits?
    Mr. BRADY [presiding]. Mr. Secretary, if you would respond 
in writing to Mr. Becerra, that would be wonderful.
    Secretary LEW. I would be happy to do that.
    Mr. BRADY. Mr. Buchanan.
    Mr. BUCHANAN. Thank you, Mr. Chairman.
    And I want to thank you, Mr. Secretary. And thank you for 
your service----
    Secretary LEW. Thank you.
    Mr. BUCHANAN [continuing]. And congratulations.
    Let me just mention, one of the things that we like to talk 
about is the challenges that we have today. Everybody brings a 
different background. I had been doing business for 35 years 
before I got here. But one of the things--I had a chance to go 
over to China in the late 1980s. And I think about, in terms of 
the Clinton era, we were growing at 4.9, almost 5 percent a 
year. You remember that? We are under 2 percent.
    To me, we are looking to blame each other and looking at 
what has happened in the last 10 or 12 years, but the world has 
changed. I was in Beijing in 1989. I saw the reality there. I 
have seen what is happening with India. It has become much more 
of a global economy. How much of these factors are the 
realities that we are dealing with today?
    And I am concerned that people don't realize that the world 
has changed, it is a global economy. We have to help our 
businesses to be more successful.
    And I will give you one more point on this, and then I 
would like to get your response.
    I met with the Minister of Trade in January. He and I think 
the Vice Premier in two separate meetings told me the same 
thing: We want to grow our economy 20 million jobs a year. That 
is what we have been averaging; that is what we are looking for 
for the next 5 or 7 years.
    So I think Japan has been, obviously, a big factor, but 
China and India have been coming online the last 10 or 20 
years. And I am a blue-collar kid. I have watched what has 
happened in the Midwest in terms of manufacturing. But, to me, 
that is one of the biggest issues that we are not taking into 
account, that the world has changed. We have to help our 
businesses be more successful.
    So what are your thoughts on that?
    Secretary LEW. Congressman, I agree totally that we have to 
compete in an increasingly global and competitive world.
    You know, I was in China a couple weeks ago, and I made the 
very strong case that we need to be able to compete in a fair 
way, having our businesses have access to their markets. And 
they also need to restructure their economic approach to 
increase demand in China and to shift some of the focus from, 
really, anticompetitive support of old industries to 
contributing to demand. I mean, it is good for the U.S. economy 
for demand to grow in China and in Europe.
    Mr. BUCHANAN. Yeah. Let me just say, I have met with--they 
have a delegation there, you know, of a chamber of 4,500 
members. I had a chance to meet with many of them. So we need 
to do more----
    Secretary LEW. Yeah.
    Mr. BUCHANAN [continuing]. In terms of our government to 
help our businesses be more competitive there. They need to 
open up their markets more. I agree with you there.
    Secretary LEW. I met with about 20 representatives of U.S. 
businesses in China and asked them what we could do to be 
helpful to them. I agree with you, we have to make the case. 
And we have found it slow, that you don't get everything you 
argue for, but you do make progress when you engage on these 
issues. And we need to compete on the world market.
    Mr. BUCHANAN. Yeah. Let me just mention a couple other 
things. I co-chair the Committee for Small Business, 
Passthrough Entities, and Medium-sized Businesses. Two things: 
When you look at small businesses, how do you define that? Just 
quickly, because I don't have a lot of time, but I want to get 
your definition of what a small business is.
    Secretary LEW. There are a lot of different ways of drawing 
the line. You know, sometimes it is by number of employees, 
sometimes it is by total gross amounts of sales.
    Rather than get into where exactly to draw the line, I 
think I would like to emphasize----
    Mr. BUCHANAN. Okay. Well, let me--let me move on. I just 
want to say one thing. In terms of startup businesses, I don't 
know what that number is, but that is something we have to do 
everything we can to make sure we have proper tax incentives or 
incentives to have people start up. I hear they are down about 
20 or 30 percent, in terms of any kind of startup in 
entrepreneurs. So that was one factor. They want more 
simplification of the Tax Code, more certainty of the Tax Code.
    And then I want to ask you another question. That was just 
a general comment. One of the things that we are talking about 
and the President has mentioned--I thought I heard two 
different numbers, 25 and 28 percent, in terms of corporate tax 
rate. Now, as someone that is one of the co-chairs heading up 
and dealing with businesses in terms of passthrough entities, I 
am concerned we don't leave small businesses and medium-size 
businesses behind. They are effectively at 43, 44 percent.
    How do we lower the rates to 25 or 28 ideally, eliminate 
some of the loopholes, and not leave behind a lot of our folks 
that generate a lot of the jobs in America that happen to be in 
that tax bracket? Because I can tell you, talking to a lot of 
friends, they would just all become C Corps. Because what has 
happened, the evolution, my background, is we would start out 
with C Corps, then we went to S Corps, and then we went to 
LLCs.
    So, how do you deal with lowering the rates on C Corps 
without dealing with small/medium-size businesses, most of 
which are passthrough entities that compete in the same 
industries?
    Secretary LEW. I am not sure I can answer it in 15 seconds.
    I mean, one of the reasons we need to broaden the base and 
lower the rates on the business side is to not have such a 
skewed set of decisions as businesses choose how to organize. 
We need to also look at reform on the individual side. And we 
would look forward to working on a bipartisan basis on that.
    Mr. BUCHANAN. What I would just have you suggest to the 
President is have him understand there are a lot of businesses 
that have 50 to 100 employees that are paying at the much 
higher bracket.
    Thank you, Mr. Chairman.
    Mr. BRADY. Thank you.
    Mr. Smith is recognized.
    Mr. SMITH. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for your time here today.
    I guess perhaps building off of those comments from my 
colleague, I mean, I met with some bankers back home in my 
hometown, locally-owned banks. Three bankers were present. Two 
of them pay under subchapter S, and one pays under C Corp Tax 
Code. And yet, you know, there would be reform for one but not 
for the others, even though, I think, it is roughly half of all 
private-sector employment in the U.S. that exists in 
passthrough entities that pay tax under the individual rate.
    Could you expand on that, perhaps?
    Secretary LEW. Obviously, individuals and businesses choose 
how to organize based on the tax system and based on the 
comparison of individual passthrough kind of organization or 
under the corporate system.
    One of the reasons that so many firms have organized as 
passthroughs is that we have high statutory rates, and a lot of 
the deductions and credits on the business side are so targeted 
at large firms that they are not really relevant to the 
startups that you are talking about.
    This is obviously a complicated set of issues, and the 
relationship between them is very important. But, you know, we 
want to work together on making the business Tax Code make more 
sense.
    We want to work together on tax reform on the individual 
side, as well, to make it simpler. And, I mean, the thing that 
I think we have universal agreement on is that it is just too 
complicated. We have done an awful lot in this Administration 
to encourage small businesses and small-business investment. I 
can't say it is simple. I mean, for a small business looking at 
what they have done, it helps them, but they need to go to 
accountants and lawyers to take advantage of it.
    We should get to a place where we have a simple Tax Code 
where people sitting down trying to do business can look at how 
they can do their business and not have to have all the costs 
and time of the complicated compliance. If we simplified the 
business Tax Code and lowered the rate, I think that would help 
a lot.
    Mr. SMITH. Okay.
    Shifting gears a little bit to international tax, and we 
know that U.S. companies--and it is a good thing--that U.S. 
companies have done well marketing their products overseas. 
They have generated some profits and some cash, and they 
basically park that overseas because of a very punitive 
corporate Tax Code, which I think corporate tax reform would 
help address. Yet, I am still skeptical that, without some 
further changes, we still would not be able to see U.S. 
companies invest that cash that they generated overseas back in 
the U.S. economy.
    Would you disagree with that, or would you make some 
proposals to suggest or to offer an incentive for U.S. 
companies to bring that cash back into our economy?
    Secretary LEW. Well, we are finding more and more that as 
companies look at the overall pluses and minuses of investing 
in the United States versus investing overseas, they are 
deciding to invest in the United States, because of our 
workforce, because of the ease of doing business in the United 
States, and, notwithstanding our political problems, the 
greater stability in the United States versus most other places 
in the world.
    So I think we are making progress. In the budget, we have 
proposals that would have incentives to create jobs in the 
United States in manufacturing, that would have disincentives 
for offshoring jobs. As we lower the tax rate and the 
differential and statutory rates between the United States and 
other countries is reduced, that will help.
    I think this is a challenging area. We have seen efforts in 
the past that were designed to bring money back. They didn't 
really serve to increase investment; they just cut taxes. And I 
think our goal here is to grow the economy, grow employment. 
And we look forward to working together and getting that done.
    Mr. SMITH. Okay. Thank you.
    I yield back.
    Mr. BRADY. Thank you.
    Mr. Doggett is recognized.
    Mr. DOGGETT. Thank you very much, Mr. Secretary.
    You know, of the many Americans who are out there right now 
getting their taxes ready to file next week, I doubt there are 
very many that think they will be able to pay a mere nickel on 
the dollar. But, as you know and as your comments were just 
referring to, there are many of America's largest corporations 
that continue lobbying you, the Administration, and this 
Congress to let them pay a nickel on the dollar in taxes on a 
significant portion of their earnings.
    I was pleased with your response just now and with 
President Obama's comments here in the Capitol on March 14th 
that, as to this so-called repatriation, we have looked at the 
math and it just doesn't work. And it will, as your comments 
suggested, never work in terms of creating jobs, as it failed 
in 2004, though it may help to pad executive pay and corporate 
share buy-back programs, that type of thing.
    I am also pleased to see that you continue to include in 
your budget rejecting that idea for your budget, the 
repatriation notion, but you have included in your budget a 
number of measures that address unjustified international 
corporate tax avoidance. I believe you have incorporated 
earnings-stripping provisions about companies that have 
earnings here in the United States but they strip them to the 
Caymans or some other nontax jurisdiction.
    You have pointed to the problem of corporations that 
develop patents and intellectual property here but then it is 
owned and assigned abroad, with payments having to come for 
some of the very intellectual property that was developed here 
in America.
    You have referenced the problems of corporations reducing 
their income because of the way they allocate interest expense 
on income they don't actually take right now.
    On those three and other items in your budget, do you 
continue to find a number of areas of unjustified corporate tax 
avoidance on the international level?
    Secretary LEW. Congressman, we do try to close down the 
areas of tax avoidance that we see. We have put some of them in 
our budget. We look forward to working with the Congress on a 
bipartisan basis to do more. You know, there shouldn't be an 
incentive to move U.S. jobs overseas.
    Mr. DOGGETT. As you know, one of the problems in that 
regard is that, over a 3-year period, 30 Fortune 500 companies 
devoted more of their moneys to lobbying this Congress than 
they did in paying taxes to the Treasury. Some have a negative 
tax rate. Many of our largest corporations are paying effective 
tax rates that are single-digit.
    You are aware and I believe the Treasury is involved in the 
comments recently of the top finance ministers in Germany, in 
France, and in the United Kingdom calling for cooperation among 
the G-20 countries to deal with this problem of corporate tax 
avoidance. We want to be competitive. We want every American 
company to be competitive, but not just to be competitive in 
terms of corporate tax avoidance, where we seem to be the 
world's leader at the moment.
    I have several pieces of legislation that attempt to 
implement some of these budget provisions and to go a bit 
further than what I view as rather modest revisions. The 
concern I have, Mr. Secretary, is that while I think some 
adjustment in the statutory rate is appropriate to reduce it, 
that you devote every cent of that reform right back to the 
corporations.
    We know the history this very year is that in the fiscal-
cliff negotiations and the law that was finally approved, 
corporate America didn't contribute a dime. In fact, some 
corporations got major tax cuts out of the fiscal-cliff 
negotiations.
    Isn't it reasonable to expect corporate America, having 
paid such low effective rates, to contribute a little to 
closing the budget gap and to the cost of our national 
security?
    Secretary LEW. Congressman, our budget and our policy very 
much states that we think there ought to be a more fair 
distribution of tax burden. Raising the top rates was a part of 
that. Having individual tax reform that raises revenue by 
limiting the value of deductions for high-income individuals is 
part of it.
    I think that when you look at the difference between 
business and corporate tax reform, the beneficiaries of great 
corporate income and wealth are the same people who are in the 
very highest tax brackets. We have elected to try to do 
business tax reform in a way that will really enhance 
investment in the United States and job creation, and we have 
done the revenue raising on the individual side. I am not sure 
that they are different people who are paying the taxes in the 
end, because corporations pay out, you know, to their 
shareholders and they tend to be going mostly to people in 
those top brackets.
    Chairman CAMP [presiding]. All right. Thank you.
    I know that we just have a few more minutes, and I will try 
to get to as many people as possible.
    Tomorrow, with Secretary Sebelius, we will start up where 
we left off today. So we will start with those Members who did 
not get a chance to question today tomorrow.
    Mr. Schock is recognized.
    Mr. SCHOCK. Thank you.
    Mr. Secretary, thank you for being here.
    First, I would like to bring up the issue of the estate 
tax. You know that the current rate is 35 percent on all 
estates over $5 million. This was the result of the agreed-to 
legislation of the fiscal-cliff deal. Many of us in this 
chamber, myself included, who voted for that fiscal-cliff deal 
did so not because it was perfect, but for the sake of 
consistency, for the sake of allowing small businesses and 
farmers to be able to put that issue to rest and focus on 
growing the economy and growing their business.
    Why did the Administration choose to revisit this issue, in 
my view, to go back on what we had agreed to just months ago, 
and only add to the uncertainty of America's small businesses 
at a time when, quite frankly, we need them focused on growing 
their businesses and not worried about losing what they have 
and the rules changing once again?
    Secretary LEW. Congressman, I appreciate the question. And 
we obviously did change estate taxes in January. It was a 
difficult negotiation. It was one in which we made clear we 
thought that the estate tax provisions were too generous. We 
agreed to them. And we are sensitive to this question of, kind 
of, the speed at which change is made.
    I don't think we have ever had tax policy that is made for 
all time. And in an area like the estate tax, where it has been 
heavily debated, we thought that after 5 years it was time to 
revisit. And our proposal is not for next year or the year 
after, but it essentially says that in 5 years, when we revisit 
a number of other issues, we ought to also revisit the estate 
tax. And we don't propose a massive increase in the estate tax. 
We go back to rates that were in place, you know, in the 1990s.
    It is an area where I know there is disagreement on both 
sides of the aisle, within each side of the aisle. We would 
look forward to working with you. We very much agree that we 
need to handle our tax discussions in a long-term way to create 
certainty. I think, of all the planning horizons, you know, the 
estate tax does not affect investment decisions the same way 
other provisions in the Tax Code do. We don't----
    Mr. SCHOCK. Would you--may I ask, wouldn't you agree, 
though, that a business' decision on what they invest or don't 
invest is tied precisely to what their presumed liability might 
be if and when they have to pay an estate tax?
    Secretary LEW. I think that most business decisions are 
based on what the value of that decision is to the business. 
The goal is to grow the business and to grow the income of the 
business. And I don't think it is a disincentive to grow your 
business that sometime in the future, at the point when there 
is a passing, that the estate tax may be different. I think 
that is different from things like current tax rates, 
deductions, credits that are in the time of the investment.
    Mr. SCHOCK. Thank you.
    Another question is about this retirement income. I am 
particularly interested in this because I thought I was doing 
the right thing. At the age of 14, I opened my IRA and put in 
what was then the maximum of $2,000. This body then passed the 
Roth IRA, in which I had been putting the maximum of $5,000. 
And if I am lucky enough to earn the same rate of return as my 
counterparts who at the time were working for States and the 
Federal Government and receiving those actuarial returns of 7 
to 8 percent, in 30 years I should have in excess of $3 million 
to retire from.
    Why is the Administration so opposed to Americans like me 
who want to save with our own money for our own retirement from 
doing so?
    Secretary LEW. Congressman, I think you may be the one 
person who beats me in starting earlier with IRAs. I was about 
17 or 18 when I started.
    I applaud people starting early. We are not at all 
discouraging people. We are, on the contrary, encouraging 
people to start and stay in the pattern of saving for their 
retirement.
    The question of what the maximum amount is comes down to 
the hard choices we have to make in a Tax Code, in a budget 
where there are hard choices. In a time when most Americans 
look forward to retiring with well under $100,000 of retirement 
savings, $3 million is quite a high target.
    This was an attempt to make balancing decisions. We don't--
you still can save for retirement without getting the extra tax 
break. And I think people who have seen the value of 
compounding on their savings will continue to do so.
    Mr. SCHOCK. Doesn't this put private-sector employees at a 
competitive disadvantage from public-sector employees?
    Secretary LEW. I am not sure how you mean that.
    Mr. SCHOCK. Well, you are saying that I can continue to 
save as a private-sector employee with my own dollars, I will 
just have to pay taxes on, in essence, the annuity or the nest 
egg over $3 million. But if I am a public-sector employee, for 
example, in the State of Illinois, that same employee, a public 
school teacher or a public firefighter, whose income in 30 
years may be in excess of $200,000, when they retire, in 
essence, their annuity will be in far excess of $3 million and 
will be able to have accrued that annuity at tax-deferred 
rates.
    Secretary LEW. Comparisons between savings plans and 
pension plans are very hard to make. Obviously, the pension 
plan doesn't have the kind of survivorship rights that a plan 
like an IRA or a 401(k) would have. I would actually have to 
look at that in more detail to make the comparison. I can't, 
off the top of my head----
    Mr. SCHOCK. All right.
    Secretary LEW [continuing]. Do it.
    Chairman CAMP. Time has expired.
    Mr. SCHOCK. Okay. Thank you.
    Chairman CAMP. Ms. Jenkins is recognized.
    Ms. JENKINS. I thank the Chairman for yielding and for 
holding this hearing.
    And we thank the Secretary for being here.
    Secretary LEW. It is good to be here.
    Ms. JENKINS. The President continues to embrace a worldwide 
system of taxing income, which potentially subjects overseas 
income to double taxation. And this, despite the 
recommendations of his jobs council, his export council, and 
Simpson-Bowles to adopt a territorial system.
    We are the last major industrialized country with a 
worldwide system. Having the world's highest corporate tax rate 
and being the only major industrialized country with a 
worldwide tax system, it hurts our competitiveness.
    I know many details remain, but are you willing to consider 
a shift toward a territorial system?
    Secretary LEW. Congresswoman, I actually think the choice 
is not so stark as one or the other. Our system is a bit of a 
hybrid already, and our proposal for a global minimum makes it 
more of a hybrid.
    We would welcome the conversation of how to set the dial in 
the right place so that it has the right incentives without 
losing revenue that we can't afford to lose. I think that there 
is a solution in the middle here that, if we work together on a 
bipartisan basis, we can find.
    Ms. JENKINS. Okay. We will look forward to that.
    And then I wanted to follow up on a question from my 
colleague, Representative Reichert, when he asked if your 
budget ever balanced and you said, yes, in an out-year. What 
year does the budget balance?
    Secretary LEW. I believe in our out-years, it is in the 
2050s. It is quite a while away. It is not in the 10-year 
window.
    And we think that the attempts to reach balance in this 10-
year window force the kinds of choices that we think are not 
right for the economy, that wouldn't grow jobs. And it would be 
unfair to retirees and Medicare and other people who would lose 
their ability to count on Medicare as a guaranteed benefit.
    So these are hard choices. We need to get to a place where 
our debt is sustainable, where we meet the internationally 
accepted standards of what it is that an economy can have as 
far as a deficit and a debt as a percentage of GDP.
    And then we need to keep working together. You know, in the 
1980s and the 1990s, we didn't reach balance in one shot. It 
took year after year----
    Ms. JENKINS. Well, is it safe to say that under the 
President's budget, in our lifetime we will never stop spending 
more money than we take in?
    Secretary LEW. I am not going to sit here and estimate 
either of our lifetimes.
    Ms. JENKINS. You would be 100 years old, and I would be 
pushing that. So is that safe to say? I don't intend to live to 
be 100.
    Secretary LEW. I think the question is not when we hit 
balance. It is when do we have our budget in a place where it 
is affordable, where we can pay our bills, and where the 
economy----
    Ms. JENKINS. And that is not in our lifetime.
    Secretary LEW. And the economy is----
    Ms. JENKINS. In----
    Secretary LEW. No, no, I think it is. I think the economy 
would----
    Ms. JENKINS. Then, why wouldn't the budget reflect that?
    Secretary LEW. No, I guess what I am disagreeing on is, 
defining reaching balance in this short-term window----
    Ms. JENKINS. I define it as----
    Secretary LEW [continuing]. Is different. Yeah.
    Ms. JENKINS [continuing]. Not taking--not spending more 
money than you take in in any one year.
    Secretary LEW. Yeah.
    Ms. JENKINS. And that, according to the President's budget, 
is 2055.
    What date do you think it would be before we pay off the 
debt that we owe?
    Secretary LEW. You know, when I left the White House----
    Ms. JENKINS. Wait. Just a second. Is there a date that you 
could give me?
    Secretary LEW. I would have to look it up, but, obviously, 
it would be----
    Ms. JENKINS. So we don't know.
    Secretary LEW [continuing]. Very far in the future. We want 
a path for paying down the debt.
    Ms. JENKINS. Would you recommend that businesses, small 
businesses in my district do business this way, to rack up debt 
and have no clue when they can pay it off?
    Secretary LEW. Governments are different than businesses. 
Governments are able to pay their debt if they maintain a 
growing economy and if they are able to keep current with that. 
I am----
    Ms. JENKINS. How can you say----
    Secretary LEW. I am probably the only person in this room 
who can say he balanced the Federal budget. I believe in a 
balanced budget. I didn't believe in the policies in 2001, in 
2003, and through 2008. They----
    Ms. JENKINS. Do you have kids?
    Secretary LEW [continuing]. Created a deficit.
    Ms. JENKINS. Do you have kids?
    Secretary LEW. I have two children, yes.
    Ms. JENKINS. Okay. I do, too. How do----
    Secretary LEW. I have grandchildren, as well.
    Ms. JENKINS. How do you explain to them that you are not 
willing to pay for the things that we are enjoying today, that 
you are just going to send them the bill?
    Secretary LEW. I am proud that I have spent almost 40 years 
of my life trying to get our fiscal house in order, and I 
balanced the Federal budget and ran a surplus three times.
    Ms. JENKINS. But you are not willing to balance the budget 
in your lifetime?
    Secretary LEW. I think we inherited a situation with a deep 
deficit, an economy that had no bottom, it was in free-fall. We 
have stopped that, we are growing, we are making progress. But 
we have to be honest with the American people. It is going to 
take a long time before we can actually reach the goal of a 
balanced budget again because we started so far behind. We are 
making good progress.
    Ms. JENKINS. Well, we started in the same place and were 
able to budget----
    Secretary LEW. I would be happy to have a----
    Ms. JENKINS [continuing]. For balancing in 10 years.
    Secretary LEW. I would be happy to have a debate on the 
policies it takes to get there. I don't think the American 
people will accept those policies because they are not good for 
the country.
    Ms. JENKINS. Well, I think they show huge growth in the 
economy, a better GDP growth rate, and a higher employment rate 
than the President's proposal.
    Chairman CAMP. All right.
    Ms. JENKINS. But we will look forward to the debate.
    Secretary LEW. I look forward to working with you.
    Chairman CAMP. The time has expired.
    Mr. Larson is recognized.
    Mr. LARSON. Thank you very much, Chairman Camp. Thank you 
for this hearing. Thank you for the way that you have conducted 
the business on this Committee, with Mr. Levin as well.
    And what an honor to have Jack Lew here. And I think the 
previous questioner just has to spark this question. I believe 
it was under your leadership, as well, that the entire Federal 
debt would have been paid off by 2009. And I think that was in 
your lifetime. Is that not correct?
    Secretary LEW. Yeah. I don't remember the exact year, but 
it was very much in my lifetime.
    Mr. LARSON. And so the policies, of course, that led to us 
going into a situation where we have wars, never before in our 
history, that weren't paid for----
    Secretary LEW. Yeah.
    Mr. LARSON [continuing]. Tax cuts that weren't paid for, 
and a Medicare portion unpaid for, and then a serious financial 
crisis that led to an enormous recession have caused us to be 
in this situation. Is that a fair assessment?
    Secretary LEW. Congressman, it is a fair assessment.
    I think, as you know, when I left OMB in January 2001, we 
projected a surplus of $5.5 trillion over the next 10 years. 
There were a series of decisions that were made that caused 
that surplus to go away. We then hit a terrible recession, and 
our fiscal cannon, instead of being loaded, was emptied out.
    So we got to the position we are in because of a 
combination of policy decisions and economic conditions. And we 
need to work together to get back on a path to a sustainable 
deficit and then keep working, because, ultimately, we should 
do more.
    Mr. LARSON. And we all want to see us deal with the 
deficit, and we all want to see that happen in as timely a way 
as we can without placing the burden on the backs of 
beneficiaries of our system.
    Now, on one side, we hear this all the time, that we have a 
group of people that would like to shrink up government so 
small they could drown it in a bathtub. The people that they 
are drowning, of course, are the recipients of Social Security 
and Medicare, veterans, and the disabled, people that we would 
like to help, especially in these very difficult times and 
especially people who have served their country with honor.
    It would seem to me that in the Administration's 
application of its budget, it takes that into consideration. 
And it especially takes that into consideration with the care 
and need to make sure that we are not going into an austere 
climate that would balance this on the backs of beneficiaries.
    That is why I want to ask you this question, and I think it 
is important, because the President continues to reach out time 
and time again. For some of us, it doesn't seem logical, 
because he is met with resistance time and time again. I 
appreciate the President's optimism. I am an optimist, as well.
    I would like to see us be able to grow this economy, but we 
haven't seen the willingness to invest in our infrastructure or 
innovation. And so we are more than skeptical when the 
President lays out proposals for CPI and the other side seems 
to say, yeah, we will take that, but we don't want to take any 
of the balance that has to go along with that.
    If that kind of attitude prevails, what will the President 
do?
    Secretary LEW. Congressman, I think the President has been 
very clear. He put some very tough things in this budget, 
consistent with the offer he made to the Speaker in December, 
because he very much believes it would be the right thing to 
have a sensible, balanced agreement that has both sides doing 
difficult things. He is not prepared to do something like 
chained CPI outside of the context of a balanced approach.
    And I think that we are so close in terms of the positions 
the President has articulated and what we have heard over the 
last 2 years of what you need to reach an agreement in that 
sensible center, that I am still going to be an optimist, and I 
am going to push forward, as the President will, to try to get 
this done.
    But I don't want there to be any misunderstanding. And that 
is why I said in any opening statement, it is not a starting 
point; we have been at this for over 2 years. And it would be a 
mistake to treat it as if you can just take one piece out of it 
and reach an agreement.
    Mr. LARSON. One last thing I would add just as a comment, 
no need to respond, but Social Security and Medicare, 
specifically, are not entitlements. This is insurance that 
people pay for. You just go to your paycheck, everybody in 
America, and check that out. It is insurance that you pay for.
    Tell us you need to make an adjustment. Tell us we need to 
pay more. Tell us there are different actuarial assumptions 
that would lead to that. Let's get behind the science and math 
that will allow us to reach that apex. But it is not an 
entitlement; it is insurance.
    Chairman CAMP. All right. Thank you.
    And Mr. Paulsen for the last questions of this morning.
    Mr. PAULSEN. Thank you, Mr. Chairman.
    Mr. Secretary, I remember when the President gave his State 
of the Union speech back in 2011. And I was actually really 
encouraged that he mentioned at that time the need for 
corporate tax reform, in particular. And he has mentioned it 
and reaffirmed it in several more State of the Union speeches; 
in fact, moving now to having this revenue-neutral component on 
some business tax reform, which I think is great. And I look 
forward to working with you on that.
    I just want to follow up on one clarification, because you 
mentioned earlier in your testimony about making sure that, you 
know, we want to have a Tax Code that is simpler, fairer, and 
more competitive. And you mentioned earlier about small 
businesses having to hire accountants and attorneys and work 
through a very cumbersome and complex Tax Code. I hear about 
that all the time in Minnesota on a very regular basis.
    And I just want to get a better sense, do you believe that 
component of having more comprehensive tax reform should 
include more small businesses and/or families, individuals as a 
part of that comprehensive discussion, or should they be left 
separately? Because the revenue-neutral component now, as I 
understand it, is only on the corporate side but not including 
small business.
    Secretary LEW. Congressman, I have tried to be clear. We 
think both sides of tax reform are important, individual and 
business tax reform. Obviously, businesses choose to organize 
either one way or the other, and they really need to know what 
the world in each side of the Tax Code looks like.
    So we look forward to working together on a bipartisan 
basis. But it has to be in the context of a fiscal plan, and we 
believe that is only going to work if we raise some additional 
revenue out of tax reform.
    I think it is an amount of revenue consistent with 
discussions we were having last year. You know, last year, 
there was a fairly broad, bipartisan--well, at least 
Republicans were saying you could do a trillion dollars of 
revenue by base-broadening. We didn't do any of the base-
broadening. So $580 billion ought to be achievable with base-
broadening.
    Mr. PAULSEN. Well, I know there is going to be opportunity. 
I just want to make sure that small business is not left off 
the table and they will be included as a part of that 
discussion. Because they are just as competitive as large 
corporations, obviously, in promoting their sales and income 
and expanding their operations.
    Secretary LEW. Well, we have, from the beginning of this 
Administration, worked as hard as we can to promote incentives 
for small businesses. There have been 18 separate provisions. 
Tax reform should very much address the needs of small 
business. And if we can do comprehensive tax reform, as I hope 
we can, I look forward to working with you on that.
    Mr. PAULSEN. Good, good.
    And I want to follow up on one other point, because, again, 
I was elected the same year the President was elected, in 2008. 
And I came in with open eyes, critical of my party for raising 
the debt, for raising spending, and our deficits. So there is 
bipartisan blame, and there has to be a bipartisan solution if 
we are going to fix these problems.
    But my concern is with the new budget. And I haven't looked 
at all the details, but it does seem to be a little bit of a 
reaffirmation of past budgets that have been proposed by the 
Administration that do accelerate spending and don't really 
deal with some of the deficit issues or the balancing issues 
until much later in the out-years.
    And so I just think we need to get ahead of it sooner. Do 
you share that----
    Secretary LEW. Well, I think this budget is actually 
structurally different. And we may not agree on every aspect of 
it, but we have the deficit-reduction plan that is what the 
President offered to the Speaker in December. We do have 
additional investments. We pay for them; everything is paid 
for. If we can't agree on how to pay for them, we can't do the 
investments. We understand that. We are going to make the case 
that the pay-fors are correct. And we are in an environment 
where, if we get on the path for a sustainable budget where the 
deficit and the debt are coming down as a percentage of GDP, we 
are going to have to pay for things that we do after that.
    So I actually think it is a different approach. If you look 
at the baseline, there is no doubt that there is growing 
spending in the baseline because it is no news that the baby 
boom is approaching retirement. Much as many of us would like 
it to be otherwise, each year we are a year closer. And the 
fact is, as the baby boom retires, there is going to be a huge 
increase in the number of people on Social Security and 
Medicare. And unless we take away their entitlement to those 
benefits, that insurance that they have paid into, spending 
will go up.
    Mr. PAULSEN. Now, you spoke earlier, too, about reducing 
deficits to a certain percentage of GDP. But, on the other 
hand, debt is continuing to rise, and it is rising as a 
significant percentage of GDP.
    What is the appropriate level of our debt? Do you think 
there is a debt crisis coming our way if we don't take action?
    Secretary LEW. The President's budget would actually turn 
the corner and bring down both the deficit and debt as a 
percentage of GDP. We would bring the deficit down to below 2 
percent of GDP. We would bring the debt into the mid-70s and 
stabilize.
    That is a huge difference, between growing and growing over 
100 percent. And I think that is why it is so important that we 
work together on this.
    Mr. PAULSEN. Let me ask this: Is it your view--the 
President said in the middle of March, on the 13th, he said, 
``We don't have an immediate crisis in terms of debt. In fact, 
for the next 10 years, it is going to be in a sustainable 
place.'' Is that your view, we are in a sustainable place for 
the next 10 years?
    Secretary LEW. Well, I think we have proposed policies that 
would ensure that we get there.
    Mr. PAULSEN. Okay.
    Thank you, Mr. Chairman.
    Chairman CAMP. All right. Thank you very much.
    And thank you very much, Mr. Secretary. We very much 
appreciate your time. And I and all the Members of this 
Committee look forward to working with you in the months ahead.
    Secretary LEW. Thank you, Mr. Chairman. I look forward to 
working with you and the other Members of this Committee as we 
go forward.
    Chairman CAMP. Thank you.
    And, with that, this hearing is now adjourned.
    [Whereupon, at 12:10 p.m., the Committee was adjourned.]