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



 
                            THE PRESIDENT'S
                        FISCAL YEAR 2014 BUDGET

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

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, APRIL 11, 2013

                               __________

                            Serial No. 113-3

                               __________

           Printed for the use of the Committee on the Budget


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                        COMMITTEE ON THE BUDGET

                     PAUL RYAN, Wisconsin, Chairman
TOM PRICE, Georgia                   CHRIS VAN HOLLEN, Maryland,
SCOTT GARRETT, New Jersey              Ranking Minority Member
JOHN CAMPBELL, California            ALLYSON Y. SCHWARTZ, Pennsylvania
KEN CALVERT, California              JOHN A. YARMUTH, Kentucky
TOM COLE, Oklahoma                   BILL PASCRELL, Jr., New Jersey
TOM McCLINTOCK, California           TIM RYAN, Ohio
JAMES LANKFORD, Oklahoma             GWEN MOORE, Wisconsin
DIANE BLACK, Tennessee               KATHY CASTOR, Florida
REID J. RIBBLE, Wisconsin            JIM McDERMOTT, Washington
BILL FLORES, Texas                   BARBARA LEE, California
TODD ROKITA, Indiana                 DAVID N. CICILLINE, Rhode Island
ROB WOODALL, Georgia                 HAKEEM S. JEFFRIES, New York
MARSHA BLACKBURN, Tennessee          MARK POCAN, Wisconsin
ALAN NUNNELEE, Mississippi           MICHELLE LUJAN GRISHAM, New Mexico
E. SCOTT RIGELL, Virginia            JARED HUFFMAN, California
VICKY HARTZLER, Missouri             TONY CARDENAS, California
JACKIE WALORSKI, Indiana             EARL BLUMENAUER, Oregon
LUKE MESSER, Indiana                 KURT SCHRADER, Oregon
TOM RICE, South Carolina
ROGER WILLIAMS, Texas
SEAN P. DUFFY, Wisconsin

                           Professional Staff

                     Austin Smythe, Staff Director
                Thomas S. Kahn, Minority Staff Director



                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, April 11, 2013...................     1

    Hon. Paul Ryan, Chairman, Committee on the Budget............     1
        Prepared statement of....................................     2
    Hon. Chris Van Hollen, ranking minority member, Committee on 
      the Budget.................................................     3
        Prepared statement of....................................     4
    Hon. Jeffrey Zients, Acting Director, Office of Management 
      and Budget.................................................     5
        Prepared statement of....................................     7
    Hon. Jackie Walorski, a Representative in Congress from the 
      State of Indiana, prepared statement of....................    62
    Questions submitted for the record by:
        Chairman Ryan............................................    62
        Hon. Marsha Blackburn, a Representative in Congress from 
          the State of Tennessee.................................    63
        Mrs. Walorski............................................    63
    Director Zients' response to questions submitted for the 
      record.....................................................    64


                THE PRESIDENT'S FISCAL YEAR 2014 BUDGET

                              ----------                              


                        THURSDAY, APRIL 11, 2013

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:00 a.m., in room 
210, Cannon House Office Building, Hon. Paul Ryan, [Chairman of 
the Committee] presiding.
    Present: Representatives Price, Campbell, Calvert, Cole, 
McClintock, Black, Ribble, Flores, Rokita, Blackburn, Rice, 
Williams, Duffy, Messer, Lankford, Woodall, Garrett, Schwartz, 
Ryan, Lee, Cicilline, Jeffries, Pocan, Lujan Grisham, Huffman, 
Cardenas, Schrader, Pascrell, Yarmuth.
    Chairman Ryan. The hearing will come to order. Welcome, 
everybody, and while this budget may be two months late, I want 
to thank Mr. Zients for coming to testify. And, by the way, I 
want to thank you for serving your country in the capacity you 
have been serving. It is not a very easy job. It is probably, 
arguably, one of the most important, but one of the most 
different jobs in the Executive Branch, and I want to thank 
you, Jeff, for your service because I know you are in your last 
days of this, and we wish you great success in whatever it is 
you choose to do in the future.
    Now, for my speech. Now for the other side of the story. It 
is good to have you here. We are glad you put out a budget. 
Sixty-five days late, but, seriously, though, we are 
disappointed in this budget. We are disappointed in this budget 
because it is a status quo budget. It does not break any new 
ground. It just goes over old ground. It raises taxes by $1.1 
trillion. It increases spending by nearly a trillion dollars 
net, and it adds $8.2 trillion to our debt. In short, it takes 
more from families to spend more in Washington. The president 
often says his policies would cut the deficit by $4.3 trillion 
over 10 years. Sadly, that is not true. The budget itself 
claims $1.4 trillion of deficit reduction over 10 years, and 
nearly all of those savings are from well-worn gimmicks that we 
have established as gimmicks from both parties over the years. 
In fact, if you remove these gimmicks, this budget cuts the 
deficit by just $119 billion. And, by the way, the president's 
budget proposes that this paltry deficit reduction does not 
begin until the year 2020, four years after he has left office.
    Having said that, the president does deserve credit for 
challenging his party on entitlements. For instance, he has 
proposed increased means testing for Medicare Part D and B. 
Unfortunately, the budget does not include the structural 
reforms that we need to protect and strengthen critical health 
and retirement security programs. These policy changes in this 
budget will not save these programs. They will make them a 
little less expensive, but they still go bankrupt. So the 
president's budget is a disappointment because it is missed 
opportunity. We need a new approach in Washington to meet our 
country's most pressing needs. That is what our side is 
offering. That is the budget we passed.
    Our plan balances the budget in 10 years to foster a 
healthier economy and to help create jobs. It is a plan to 
expand opportunity for the young, to guarantee a secure 
retirement for seniors, and it repairs the safety net for those 
in need. That is our objective. I understand my colleagues 
choose to pursue the objective in a different way, but that is 
our objective and we think we accomplish that. I will say this. 
At least everybody has a plan now: House Republicans, Senate 
Democrats, and the president. That is a pretty good start. We 
have not seen that in a few years around here. There are many 
differences between these plans. The president and the Senate 
seem to believe that Washington knows better so that their 
plans put more power in its hands. Their budgets never balance. 
They raise taxes. We see it differently. And by defending the 
status quo, we are letting critical programs like Medicare 
wither on their watch, and their policies will cement the 
record poverty and high unemployment that we have had in place 
if we stick to the status quo as these--as this budget does.
    But we cannot simply sit here and dwell on our differences. 
We have got to move forward. We have got to find common ground. 
And the existence of these plans being put on the table helps 
us establish a process to go and find that common ground. Even 
if we cannot agree on everything, we need to make a down 
payment on our debt and we need to make that down payment now. 
As difficult as these challenges are, I believe we can make 
progress and I am hopeful that we will. And with that, I would 
like to yield to my friend, the Ranking Member, Mr. Van Hollen.
    [The prepared statement of Paul Ryan follows:]

            Prepared Statement of Hon. Paul Ryan, Chairman,
                         Committe on the Budget

    Welcome, everybody. Well, this budget may be two months late, but I 
want to thank Mr. Zients for coming to testify.
    That said, I'm disappointed by the President's proposal--because 
it's a status quo budget. It doesn't break any new ground; it just goes 
over old ground. It raises taxes by $1.1 trillion. It increases 
spending by nearly $1 trillion. And it adds $8.2 trillion to our debt. 
In short, it takes more from families to spend more in Washington.
    The President says his policies would cut the deficit by $4.3 
trillion over ten years. But that's not true. The budget itself claims 
$1.4 trillion of deficit reduction over ten years. And nearly all those 
savings are from well-worn gimmicks. In fact, if you remove the 
gimmicks, this budget cuts the deficit by just $119 billion.
    Oh, and by the way, the President's budget proposes that this 
paltry deficit reduction begin in 2020--four years after the President 
has left office.
    The President does deserve credit for challenging his party on 
entitlements. For instance, he's proposed increased means-testing for 
Medicare Part B and D. Unfortunately, the President's budget doesn't 
include the structural reforms we need to protect and strengthen 
critical health and retirement-security programs. The policy changes in 
this budget won't save these programs.
    So the President's budget is a disappointment--because it's a 
missed opportunity. We need a new approach in Washington to meet our 
country's most pressing challenges. That's what our side is offering. 
Our plan balances the budget in ten years to foster a healthier economy 
and to help create jobs. Our plan expands opportunity for the young. It 
guarantees a secure retirement for seniors. And it repairs the safety 
net for those in need.
    But I'll say this. At least everyone has put a plan on the table--
House Republicans, Senate Democrats, and the President. There are many 
differences between these plans. The President and Senate Democrats 
believe Washington knows better, so their plans put more power in its 
hands. They never balance the budget. They raise taxes. By defending 
the status quo, they're letting critical programs like Medicare wither 
on their watch. And their policies will cement record poverty and high 
unemployment into place.
    But we can't simply dwell on our differences. We've got to move 
forward. We've got to find common ground. Even if we can't agree on 
everything, we need to make a down payment on our debt--now.
    As difficult as the challenges are, I believe we can make progress. 
And I'm hopeful we will.
    With that, I yield to the ranking member.

    Mr. Van Hollen. Thank you very much, Mr. Chairman. I want 
to join the Chairman in thanking you, Mr. Zients, for your 
service as the head of the Congressional--head of the OMB, 
Office of Management and Budget. And as the Chairman said, it 
is a tough job, and I think you, working with the president, 
have done it very, very well. And you are going to have a lot 
of opportunity to respond to some of the claims the Chairman 
made with respect to your budget. I think the important thing 
is it meets two essential goals. First of all, it focuses on 
job growth and strengthening the economy. We have seen more and 
more Americans getting back to work, but we also know we have 
got a lot more work to do to kick this economy in full gear, 
and your budget focuses on that. It also focuses, of course, on 
reducing our long-term deficits in a balanced way, asking for 
shared responsibility.
    Democrats in Congress, Republicans in Congress, and now the 
president, have all now submitted plans, and while I have some 
concerns with aspects of the president's plan, the overall 
thrust of this is clearly in the right direction for our 
country, and stands in very stark contrast to the House 
Republican plan that was put forward. First of all, the House 
Republican plan would actually put the brakes on our economy. 
We know that the Congressional Budget Office has said that if 
we keep the sequester levels of spending in place, we will see 
750,000 fewer jobs at the end of this year alone. And yet, the 
House Republican budget keeps those levels in place.
    I received a letter from a CEO in my district, the head of 
a very large bio-tech company, who said, as a result of the 
sequester, they have frozen hiring. In fact, the only place 
they are hiring right now is in China, not because of lower 
wages in China, but because the Chinese looked at the American 
model of investment in bio-science and medicine, and said, 
``Hey, that is a winning economic strategy.'' And so while we 
are cutting our investments in places like the National 
Institute of Health and investments that are important to keep 
our competitive edge, the Republican budget would actually 
undermine those important investments. So I applaud the 
president for putting forward a budget that focuses on 
investments in education, investments in science and research, 
and investments in the infrastructure necessary to make sure we 
are competitive in the 21st century.
    With respect to the president's approach to deficit 
reduction, he has, in his budget, done what he said he was 
going to do. He does it in a balanced way, asking for shared 
responsibility. Our Republican colleagues, in their budget, 
they ask everybody to take some responsibility for deficit 
reduction, except folks at the very top of the income ladder. 
There, if you are already getting a tax break or tax benefit 
that disproportionately benefits very wealthy people, guess 
what? Not only do you get to keep it, but they are going to 
double down and give you an extra tax break by lowering the top 
rates, which we believe, mathematically, can only be done by 
increasing the tax burden on middle income Americans. So 
throughout their budget, whether it is seniors who rely and 
count on Medicare or Medicaid, whether it is investments in our 
kid's education, the choice made in the Republican budget is to 
say, ``Let's put the burden on them at the same time we 
continue and, in fact, expand tax breaks for folks at the very 
top.'' We do not think that that is the way to address our 
budget challenges or get our economy fully in gear.
    So let me just end where the Chairman ended, which is, we 
do now have these budgets that are on the table. We believe 
that the president has clearly indicated a willingness to meet 
Republicans more than halfway. In fact, as you indicated, Mr. 
Chairman, some of the proposals in the president's budget 
create--or have not been that well-received by members on our 
side because what the president did in his budget was he 
included certain provisions the Speaker of the House, Speaker 
Boehner, had called for as part of a negotiation with the 
president. So whether chained CPI or some of the other 
provisions, what the president said in this budget is, ``You 
know what? I will put those in there. The Speaker asked for 
them. We will put them in there as a sign of our willingness to 
meet our Republican colleagues more than halfway.'' And it has 
been very disappointing. What has been disappointing is the 
response from some of our Republican colleagues not to 
recognize that the president made that good-faith effort going 
forward.
    So I hope this will be the beginning of a conversation, Mr. 
Chairman. I do hope that the House Republic leadership will 
appoint budget conferees so that we can get going immediately 
in a conference between the House and the Senate and continue 
to get the input from the president. And Mr. Zients, thank you 
again for your very important contributions to that effort.
    [The prepared statement of Chris Van Hollen follows:]

      Prepared Statement of Hon. Chris Van Hollen, Ranking Member,
                        Committee on the Budget

    Thank you very much, Mr. Chairman. I want to join the Chairman in 
thanking you, Mr. Zients, for your service as head of the OMB, Office 
of Management and Budget. And as the Chairman said, it's a tough job 
and I think you, working with the President, have done it very, very 
well.
    And you're going to have a lot of opportunity to respond to some of 
the claims the Chairman made with respect to your budget. I think the 
important thing is it meets two essential goals.
    First of all, it focuses on job growth and strengthening the 
economy. We've seen more and more Americans getting back to work. But 
we also know we've got a lot more work to do to kick this economy in 
full gear, and your budget focuses on that.
    It also focuses, of course, on reducing our long-term deficits in a 
balanced way, asking for shared responsibility.
    Democrats in Congress, Republicans in Congress, and now the 
President have all now submitted plans. And while I have some concerns 
with aspects of the President's plan, the overall thrust of this is 
clearly in the right direction for the country and stands in very stark 
contrast to the House Republican plan that was put forward.
    First of all, the House Republican plan would actually put the 
brakes on our economy. We know that the Congressional Budget Office has 
said that if we keep the sequester levels of spending in place, we will 
see 750,000 fewer jobs at the end of this year alone. And yet the House 
Republican budget keeps those levels in place.
    I received a letter from a CEO in my district, the head of a very 
large biotech company, who said, as a result of the sequester, they 
have frozen hiring. In fact, the only place they're hiring right now is 
in China--not because of lower wages in China, but because the Chinese 
looked at the American model of investment in bioscience and medicine 
and said, hey, that is a winning economic strategy.
    And so while we're cutting our investments in places like the 
National Institutes of Health and investments that are important to 
keep our competitive edge--the Republican budget would actually 
undermine those important investments. So I applaud the President for 
putting forward a budget that focuses on investments in education, 
investments in science and research, and investments in the 
infrastructure necessary to make sure we're competitive in the 21st 
century.
    With respect to the President's approach to deficit reduction, he 
has, in this budget, done what he said he was going to do. He does it 
in a balanced way, asking for shared responsibility. Our Republican 
colleagues, in their budget, they ask everybody to take some 
responsibility for deficit reduction except folks at the very top of 
the income ladder. There, if you're already getting a tax break or tax 
benefit that disproportionately benefits very wealthy people, guess 
what? Not only do you get to keep it, but they're going to double down 
and give you an extra tax break by lowering the top rates--which we 
believe, mathematically, can only be done by increasing the tax burden 
on middle income Americans.
    So throughout their budget--whether it's seniors who rely and count 
on Medicare or Medicaid, whether it's investments in our kids' 
education--the choice made in the Republican budget is to say let's put 
the burden on the them at the same time we continue, and in fact 
expand, tax breaks for folks at the very top. We do not think that that 
is the way to address our budget challenges or get our economy fully in 
gear.
    So let me just end where the Chairman ended, which is we do now 
have these budgets that are on the table. We believe that the President 
has clearly indicated a willingness to meet Republicans more than 
halfway.
    In fact, as you indicated, Mr. Chairman, some of the proposals in 
the President's budget have not been that well received by Members on 
our side. Because what the President did in his budget was he included 
certain provisions that the Speaker of the House, Speaker Boehner, had 
called for as part of a negotiation with the President. So whether it's 
chained CPI or some of the other provisions, what the President said in 
this budget is, you know what, I'll put those in there. The Speaker 
asked for them. We'll put them in there as a sign of our willingness to 
meet our Republican colleagues more than halfway.
    And it has been very disappointing--what's been disappointing is 
the response from some of our Republican colleagues not to recognize 
that the President made that good faith effort going forward.
    So, I hope this will be the beginning of a conversation. Mr. 
Chairman, I do hope that the House Republican leadership will appoint 
budget conferees so that we can get going immediately in a conference 
between the House and the Senate, and continue to get the input from 
the President. And Mr. Zients, thank you, again for your very important 
contributions to that effort.

    Chairman Ryan. Mr. Zients, the floor is yours.

 STATEMENT OF HON. JEFFREY ZIENTS, ACTING DIRECTOR AND DEPUTY 
    DIRECTOR FOR MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET

    Mr. Zients. Thank you, everybody. Pleased to be here today 
to discuss the president's 2014 budget. I am going to work off 
of a few slides. The main message of the president's budget is 
that we can make critical investments to strengthen the middle 
class, create jobs, and grow the economy while continuing to 
reduce the deficit in a balanced way. We can do both balanced 
deficit reduction and jobs investments. On the left-hand side, 
in terms of balanced reduction, the budget builds off of the 
deficit reduction achieved to date and includes the president's 
fiscal cliff compromise offer to Speaker Boehner from December. 
Importantly, the budget turns off the sequester by replacing 
the sequester with balanced deficit reduction.
    At the same time, the budget proposes important jobs 
investments to enhance economic growth through skills and 
competitiveness, with investments in education and R&D. Each of 
these new investments are fully offset. They are fully paid for 
and they do not add to the deficit. In deficit reduction over 
the last couple of years, Democrats and Republicans have worked 
together to cut the deficit by more than $2.5 trillion. Here is 
the breakdown of deficit reduction to date. The Budget Control 
Act capped discretionary spending, saving over a trillion 
dollars. Another $370 billion in savings through 2011 
appropriations. The end of last year's fiscal cliff agreement 
reduced the deficit by more than $600 billion. Together, this 
deficit reduction lowered interest payments, saving an 
additional $480 billion. In total, more than $2.5 trillion in 
deficit reduction has been achieved.
    The president is committed to achieving a total of $4 
trillion in deficit reduction. Four trillion is the benchmark 
that both Simpson and other independent economists have set in 
order to put us on a sustainable fiscal path. The good news is 
we are more than halfway to the $4 trillion goal. The 
president's budget finishes the job with an additional $1.8 
trillion of deficit reduction. The $1.8 trillion is from the 
compromised offer the president made to Speaker Boehner during 
fiscal cliff negotiations in December. By including this offer 
in the budget, the president is showing his willingness to 
compromise and make tough choices, and his commitment to 
putting the country on a sustainable fiscal path.
    Here are the components of the deficit reduction that take 
us from the $2.5 trillion achieved to date, to over the $4 
trillion target. On the left side, starting with the $2.5 
trillion we have already achieved, the first bar, $400 billion 
in health savings that strengthened Medicare by squeezing out 
waste and incentivizing delivery of high-quality and efficient 
care. Next, $200 billion in savings from other mandatory 
programs, including reductions to farm subsidies, reforms to 
federal retirement contributions, and selling unneeded federal 
real estate. Next, $230 billion in savings by indexing annual 
inflation adjustments to the chained CPI. Another $200 billion 
in discretionary savings beyond the BCA caps. Next, $580 
billion in revenues from tax reform by closing loopholes and 
reducing benefits for families with more than $250,000 in 
income. As a result of these measures, we have $190 billion in 
savings from reduced interest payments on the debt. At the same 
time, we invest $50 billion in immediate infrastructure to 
repair our roads and bridges and create jobs. In total, this 
achieves $1.8 trillion in additional deficit reduction over the 
next 10 years, bringing total deficit reduction to $4.3 
trillion, with more than $2 in spending cuts for every dollar 
in revenue.
    To be clear, this offer includes difficult cuts the 
president would not propose on their own, including CPI, which 
the president is only willing to do with protections for the 
vulnerable and as part of this balanced plan. However, by 
including the compromise offer in the budget, the president is 
showing his willingness to make tough choices, and his 
commitment to reducing deficits and putting the country on a 
sustainable fiscal path.
    Here are annual deficits from 2012 through 2023. As you can 
see, in 2012, the deficit was 7 percent as a percent of the 
economy. The budget phases in deficit reductions to support the 
ongoing recovery. And by 2016, the deficit is below 3 percent. 
And by 2023, it is below 2 percent, at 1.7 percent. As a result 
of this deficit reduction, debt as a percent of our economy is 
also on a declining path. With declining deficits and debt, the 
president's budget achieves an important milestone of fiscal 
sustainability.
    The budget reaches that important fiscal milestone while 
also investing in the drivers of economic growth. In doing so, 
it demonstrates that we do not have to choose between deficit 
reduction and economic growth. It shows that we can, and indeed 
we must, do both. The country will not prosper if we have 
unsustainable deficits. But it also will not prosper if our 
infrastructure is crumbling and our workers lack the skills to 
compete. Through paid-for initiatives, like pre-pay for all, 
job training, and accelerated infrastructure investments, this 
budget will enhance our nation's competitiveness. And through 
balanced deficit reduction, this budget will enhance confidence 
and lay the foundation for more durable economic growth. It is 
the right strategy for our economy, for creating jobs, and for 
building prosperity.
    With that, I would be happy to answer any questions.
    [The prepared statement of Jeffrey Zients follows:]

      Prepared Statement of Hon. Jeffrey Zients, Acting Director,
                    Office of Management and Budget

    Chairman Ryan, Ranking Member Van Hollen, members of the Committee, 
thank you for welcoming me here today, and giving me the opportunity to 
present the President's 2014 Budget. It is good to be with you again.
    The President's 2014 Budget demonstrates that we can make critical 
investments to strengthen the middle class, create jobs, and grow the 
economy while reducing the deficit in a balanced way. The Budget 
addresses three core questions the President raised in his State of the 
Union address: How do we attract more jobs to our shores? How do we 
equip our people with the skills needed to do the jobs of the 21st 
Century? How do we make sure hard work leads to a decent living? The 
Budget addresses these questions as part of a comprehensive plan that 
reduces the deficit and puts the Nation on a sound fiscal course.
    Every new initiative in this plan is fully paid for, so they do not 
add a single dime to the deficit. At the same time, the Budget includes 
the President's offer made as a part of the 'fiscal cliff' negotiations 
to build on the more than $2.5 trillion in deficit reduction already 
enacted with another $1.8 trillion, comprised of additional entitlement 
reforms, spending cuts, and tax reform that promotes growth, while 
reducing tax benefits for the wealthiest Americans. The Budget would 
result in:
     $4.3 trillion in total deficit reduction, with over $2 in 
spending cuts for every $1 in increased revenue.
     Debt as a share of GDP on a downward trajectory by 2016, 
reducing it from 78.2 % of GDP in 2014 to 73.0% by 2023.
     Deficit under 2% of GDP in the 10-year window, and below 
3% of GDP by 2016.
    This strategy will build on our country's economic recovery. It is 
the right budget and economic plan for this period in our economy.
    Since I was last with you, we have continued to make significant 
progress in the recovery from the worst financial crisis since the 
Great Depression. The economy is now on the mend. We have seen positive 
economic growth for 14 consecutive quarters, and 37 months of private 
sector job growth. Our businesses have created nearly 6.5 million jobs. 
The housing market is recovering. America's auto industry is once again 
resurgent. And we have successfully ended the war in Iraq and are 
bringing our troops home from Afghanistan.
    But as the President has indicated, our work is not done. The 
economy is adding jobs, but too many Americans are still unemployed. 
Businesses are hiring again, but too many are still struggling to 
compete and find workers with the right skills to meet their needs. 
Home prices are rising at the fastest pace in six years and 
construction is expanding, but too many families with solid credit are 
still finding it difficult to buy a home or refinance.
    At the same time, we face significant near- and long-term fiscal 
challenges. In the near-term, deficits are coming down, but they remain 
too high--primarily as a legacy of the recession, and unpaid for 
policies enacted over the decade before this President took office. 
Over the long-term, although the Affordable Care Act reduced the 
deficit and is helping to slow the growth in health care costs, along 
with an aging population, rising health costs continue to be one of the 
largest threats to our long term fiscal sustainability.
    The right prescription to address these challenges is to combine 
smart, targeted investments in areas critical for economic growth and 
competitiveness, with deficit reduction that will boost confidence and 
certainty by putting the nation on a sound long-term fiscal trajectory. 
The Budget does just that--offering a plan for deficit reduction that 
is phased in to avoid harming the economic recovery, and includes 
protections for the most vulnerable. At the same time, it preserves 
high priority investments that will enhance economic growth and private 
sector job creation.
    Let me briefly give an overview of how this Budget invests for 
growth, and then how it reduces the deficit in a balanced way.
        investing for growth and strengthening the middle class

Making America a Magnet for Jobs
    Over the last four years, we have begun the hard work of rebuilding 
our Nation's infrastructure, but to compete in the 21st Century economy 
and become a magnet for jobs, we must do more. The Budget includes $50 
billion for up-front infrastructure investments, including a ``Fix-It-
First'' program that makes an immediate investment to put people to 
work as soon as possible on our most urgent repairs. And to make sure 
taxpayers do not shoulder the whole burden, the Budget creates a 
Rebuild America Partnership to attract private capital to upgrade what 
our businesses need most: modern ports to move our goods, modern 
pipelines to withstand a storm, and modern schools worthy of our 
children.
    If we want to make the best products, we must also invest in the 
best ideas. That is why the Budget maintains a world-class commitment 
to science and research, increasing non-defense research and 
development (R&D) investment by 9 percent over 2012 levels. 
Furthermore, we are targeting resources to those areas most likely to 
directly contribute to the creation of transformational technologies 
that can create the businesses and jobs of the future--like Advanced 
Manufacturing R&D, where the Budget proposes to increase R&D 
investments by over 80%.
    No area holds more promise than our investments in American energy. 
The Budget continues to advance the President's ``all-of-the-above'' 
strategy on energy, investing in clean energy research and development; 
promoting energy efficiency in our cars, homes, and businesses; 
encouraging responsible domestic energy production; and launching new 
efforts to combat the threat of climate change.
    A top priority is making America a magnet for new jobs and 
manufacturing. After shedding jobs for more than 10 years, our 
manufacturers have added more than 500,000 jobs over the past three 
years. To accelerate this trend, the Budget builds on the success of 
the manufacturing innovation institute we created in Youngstown, Ohio 
last year, and calls for the creation of a network of up to 15 of these 
institutes across the Nation. Each manufacturing innovation institute 
will bring together companies, universities and community colleges, and 
government to invest in cutting-edge manufacturing technologies and 
turn regions around our country into global centers of high-tech jobs.
    The Budget also supports efforts the President announced earlier 
this year to modernize and improve the efficiency of the Federal 
permitting process, cutting through the red tape that has been holding 
back even some of the most carefully planned infrastructure projects. 
These efforts will help cut timelines in half for infrastructure 
projects, while creating new incentives for better outcomes for 
communities and the environment.

Educating a Skilled Workforce
    All of these initiatives in manufacturing, energy, and 
infrastructure will help set the stage for entrepreneurs and small 
business owners to expand and create new jobs. But these investments 
won't matter unless we also equip our workforce with the education, 
skills, and training to fill those jobs.
    And that has to start at the earliest possible age. The Budget 
includes a proposal that invests in America's future by ensuring that 
four-year-olds across the country have access to high-quality preschool 
education through a landmark new initiative in partnership with the 
States. Research confirms that investments in quality pre-school are 
among the highest return in improving educational outcomes and better 
preparing our workforce for the demands of the global economy. This 
investment in preschool is fully paid for in this Budget by increasing 
the tax on tobacco products, which is also an effective measure to 
improve health outcomes for our communities.
    But it's not just preschool that we need to invest in. We also need 
to ensure access to higher education for our country's young people. 
Skyrocketing college costs are still pricing too many young people out 
of a higher education, or saddling them with unsustainable debt. To 
encourage colleges to do their part to keep costs down, the Budget 
includes reforms that will ensure affordability and value are 
considered in determining which colleges receive certain types of 
Federal aid.
    To further ensure our educational system is preparing students for 
careers in the 21st Century economy, the Budget includes additional 
measures to improve and promote science, technology, engineering and 
mathematics (STEM) education. This includes a comprehensive 
reorganization and consolidation of STEM education programs to make 
better use of resources and improve outcomes, and a new STEM Master 
Teacher Corps, to leverage the expertise of some of America's best and 
brightest teachers in science and mathematics, and to elevate the 
teaching of these subjects nationwide.

Making Sure Hard Work Leads to a Decent Living
    The Budget also builds on the progress made over the last four 
years to expand opportunity for every American and every community 
willing to do the work to lift themselves up. The Budget creates new 
ladders of opportunity to ensure that hard work leads to a decent 
living.
    The Budget proposes partnerships with communities to identify 
Promise Zones that will help them thrive and rebuild from the 
recession. The Promise Zones initiative will revitalize high-poverty 
communities across the country by attracting private investment, 
improving affordable housing, expanding educational opportunities, 
reducing crime, and providing tax incentives for hiring workers and 
investing in the Zones.
    The Budget makes it easier for the long-term unemployed and youth 
who have been hardest hit by the downturn to remain connected to the 
workforce and gain new skills with a Pathways Back to Work fund. This 
initiative will support summer and year round jobs for low-income 
youth, subsidized employment opportunities for unemployed and low 
income adults, and other promising strategies designed to lead to 
employment.
    The Budget supports the President's call to reward hard work by 
raising the Federal minimum wage to $9.00 an hour. Raising the minimum 
wage would directly boost wages for 15 million workers and would help 
our growing economy. Furthermore, the Budget permanently extends 
expansions of the Child Tax Credit, the American Opportunity Tax Credit 
and the Earned Income Tax Credit.
    Economic growth is best sustained from the middle class out. 
Everyone who works hard and plays by the rules should have a fair shake 
at opportunity, including going to college and getting a well-paying 
job to support their family. As the President said in the State of the 
Union, ``America is not a place where the chance of birth or 
circumstance should decide our destiny. And that's why we need to build 
new ladders of opportunity into the middle class for all who are 
willing to climb them.''

Keeping America Safe
    Finally, we know that economic growth can only be achieved and 
sustained if America is safe and secure, both at home and abroad. At 
home, the Budget supports the President's initiative to help protect 
our children, reduce gun violence, and expand access to mental health 
services. To confront threats outside our borders, the Budget ensures 
our military remains the finest and best-equipped military force the 
world has ever known, even as we wind down more than a decade of war. 
Importantly, the Budget upholds our solemn obligation to take care of 
our service members and veterans, and to protect our diplomats and 
civilians in the field. It keeps faith with our veterans, investing in 
world-class care, including mental health care for our wounded 
warriors; supporting our military families; and giving our veterans the 
benefits, education, and job opportunities that they have earned.

                 REDUCING THE DEFICIT IN A BALANCED WAY

    The Budget does all of these things as part of a comprehensive plan 
that reduces the deficit. All of these initiatives and ideas are fully 
paid for, to ensure they do not increase the deficit by a single dime. 
As a result, we do not have to choose between investing in our economy 
and reducing the deficit--we have to do both.
    We have already made important progress in reducing the deficit. 
Over the past few years, President Obama has worked with Democrats and 
Republicans in Congress to cut the deficit by more than $2.5 trillion 
through a mix of spending cuts and new revenue from raising income tax 
rates on the highest income Americans. This deficit reduction puts us 
more than halfway toward the goal of $4 trillion in deficit reduction 
that independent economists say is needed to put us on a fiscally 
sustainable path.
    Now we need to finish the job. That is why the President stands by 
the compromise offer he made during ``fiscal cliff'' negotiations this 
past December. That offer is still on the table. And this Budget 
includes the proposals in that offer. These proposals would achieve 
$1.8 trillion in additional balanced deficit reduction over the next 10 
years, bringing total deficit reduction to $4.3 trillion, with more 
than $2 in spending cuts for every $1 in revenue. The Budget brings 
deficits to below 3 percent by 2016, to below 2 percent of GDP by the 
end of the budget window, and puts debt on a declining path.
    This represents more than enough deficit reduction to replace the 
damaging cuts required by the Joint Committee sequestration. We should 
reduce the deficit in a balanced, targeted and thoughtful way, not by 
making harsh and arbitrary cuts that jeopardize our military readiness, 
devastate priorities like education and energy, and cost jobs. As the 
President has said, sequestration is not smart policy--it can and 
should be replaced.
    By including this compromise offer in the Budget, the President is 
demonstrating his willingness to make tough choices to find common 
ground to further reduce the deficit. This offer includes some 
difficult cuts that the President would not propose on their own. But 
both sides are going to have to be willing to compromise if we hope to 
move the country forward.
    Deficit reduction is not an end in and of itself. But reducing the 
deficit in a way that protects our core priorities is a critical step 
toward ensuring that we have a solid foundation on which to build a 
strong economy and a thriving middle class for years to come.
    The key elements of the President's compromise offer include:
     Tax Reform: $580 billion in additional revenue from tax 
reform that closes tax loopholes and reduces tax benefits for those who 
need them least.
     Health Savings: $400 billion in health savings that build 
on the health reform law and strengthen Medicare.
     Other Mandatory Savings: $200 billion in savings from 
other mandatory programs, such as reductions to farm subsidies and 
reforms to Federal retirement contributions.
     Discretionary Savings: $200 billion in additional 
discretionary savings, with equal amounts from defense and non-defense 
programs--that is $200 billion below the Budget Control Act spending 
caps that were lowered even further by the American Taxpayer Relief 
Act.
     Inflation Indexing: $230 billion in savings from switching 
to the use of chained-CPI.
     Reduced Interest Payments: Almost $200 billion in savings 
from reduced interest payments on the debt and other adjustments.

Reforming the Tax Code
    First, the Budget proposes pro-growth tax reform that closes 
loopholes and addresses deductions and exclusions that allow the 
wealthy to pay less in taxes than many middle-class families. The 
President believes that today's tax code has become increasingly 
complicated and unfair. There is no better time to pursue tax reform 
that reduces the deficit, maintains progressivity, simplifies the tax 
system, and supports job creation and economic growth.
    As a first step towards comprehensive tax reform, the Budget 
proposes two measures that would raise $580 billion by broadening the 
tax base and reducing tax benefits. First, by limiting the tax rate at 
which high-income taxpayers can reduce their tax liability to a maximum 
of 28 percent, the President's Budget will reduce the tax benefits for 
the top two percent of families to levels closer to what middle-class 
families get. Second, by requiring those individuals with incomes over 
$1 million to pay no less than 30 percent of their income after 
charitable giving in taxes--the so-called Buffet rule--the President's 
Budget will further reduce wasteful and inefficient tax expenditures.
    The Budget also supports the President's plan for corporate tax 
reform. Now more than ever, we cannot afford a tax code burdened with 
costly special-interest tax breaks. In an increasingly competitive 
global economy, we need to ensure that our tax code contributes to 
making the United States an attractive location for entrepreneurship 
and business growth. For this reason, the President is calling on the 
Congress to immediately begin work on corporate tax reform that will 
close loopholes, lower the corporate tax rate, encourage investment 
here at home, and not add a dime to the deficit.

Health Savings
    Along with an aging population, rising health costs continue to be 
one of the largest contributors to the deficit, and any sustainable 
fiscal path forward must include further reforms to our country's 
health care systems.
    The Affordable Care Act (ACA) was a significant step toward 
controlling health care spending. The law reduced the deficit by over 
$100 billion in the first 10 years and $1 trillion in the 10 years 
after that, and it includes some of the best ideas on how to make our 
health system more efficient and change payment systems to incentivize 
higher quality and lower cost care. One of the most important steps we 
can take right now for long-term deficit reduction is to implement the 
ACA fully and efficiently. Still, more needs to be done.
    The President is proposing to build on the achievements of the 
Affordable Care Act by offering additional health savings that will 
reduce the deficit by another $400 billion over the next 10 years. 
These savings will be primarily achieved through smart reforms that 
address long term cost growth, reduce wasteful spending, improve 
efficiency, and ask beneficiaries who are able to contribute a little 
more.
    Specifically, the Budget includes several reforms, encouraging 
delivery of high-quality and efficient services by skilled nursing 
facilities, long-term care hospitals, inpatient rehabilitation 
facilities and home health agencies. We are squeezing out waste by 
making sure we get the same rebates for drugs, regardless of whether 
people are participating in Medicare or Medicaid. Finally, the Budget 
calls for the wealthiest Medicare beneficiaries to cover more of the 
costs. We can reform Medicare without breaking the fundamental compact 
we have with our nation's seniors. Together, these reforms illustrate 
that we can achieve significant savings to improve the long-term fiscal 
outlook of our healthcare programs without sacrificing quality care.

Other Mandatory Savings
    Third, the Budget includes $200 billion in other mandatory savings, 
coming from smart reforms and tough choices in programs outside of 
mandatory health care programs. This includes reforms to agriculture 
subsidies, Federal employee retirement programs, and disposing of 
excess Federal property.
    Combined with the economy's continued recovery, over time these 
savings will reduce mandatory spending as a share of the economy 
outside of the major entitlement programs by 15 percent.

Discretionary Savings
    Fourth, the President's plan proposes additional cuts to 
discretionary spending without jeopardizing our need to maintain the 
investments in education, research and development, clean energy and 
infrastructure that are necessary to continue to rebuild our economy in 
the short-term and build a foundation for long-term growth. Total 
discretionary spending has already been cut by over $1 trillion since 
January 2011, and is currently on a path to its lowest level as a share 
of the economy since the Eisenhower Administration.
    In the interest of reaching bipartisan agreement on a balanced 
deficit reduction package, the Budget proposes to lower the 
discretionary caps even further, reducing discretionary spending by an 
additional $200 billion over the next decade. The proposed cuts are 
evenly distributed between defense and non-defense spending, and are 
timed to take effect beginning in 2017, after the economy is projected 
to have fully recovered.
    It is important to note that discretionary spending only represents 
about a third of the budget this year and is projected to drop to less 
than a quarter of the budget by 2023. While we can work to eliminate 
inefficiencies, we cannot put the country on a sustainable path forward 
with cuts to discretionary spending alone.

Inflation Indexing
    Fifth, in the interest of achieving a bipartisan deficit reduction 
agreement, the President is also standing by his compromise offer to 
use the chained Consumer Price Index (CPI) to compute cost-of-living 
adjustments in major federal programs and the tax code. This is not the 
President's preferred approach, but it is an idea that both House 
Speaker Boehner and Senate Minority Leader McConnell have pushed for 
and that the President is willing to accept. However, he is only 
willing to do so in the context of a major fiscal agreement that is 
balanced, includes revenue contributing to deficit reduction, and 
protects vulnerable populations, as the Budget does.
    The switch to chained CPI, like the additional domestic 
discretionary spending cuts in the Budget, is a clear example of the 
President's willingness to make tough choices in order to reach a 
bipartisan agreement. The President has made it clear that he is 
willing to make these compromises as part of a deal that calls for 
shared sacrifice, and will put the country on a sustainable long-term 
fiscal path.

Rooting Out Waste and Inefficiency
    In addition to making tough trade-offs to reduce the deficit in a 
balanced way, the Budget continues the President's efforts to ensure we 
are getting the biggest bang for our buck when it comes to spending 
taxpayer dollars. It includes a series of new proposals to root out 
waste as well as reform and streamline government for the 21st Century.
    In total, the Budget includes 215 cuts, consolidations, and savings 
proposals, which are projected to save more than $25 billion in 2014. 
These measures include closing a loophole in current law that allows 
people to collect full disability benefits and unemployment benefits 
that cover the same period of time; major food aid reforms that would 
assist up to two million additional people, while reducing mandatory 
spending by $500 million over the next decade; and ensuring that the 
government pays the lowest price for drugs, regardless of the program 
that makes the purchase, saving $123 billion over 10 years.
    The Budget also builds on the Administration's successful efforts 
to root out wasteful improper payments, which have prevented over $47 
billion in payment errors over the past three years. The Budget 
dedicates a dependable source of funding to root out fraud and abuse, 
producing deficit savings of roughly $40 billion over 11 years.

                               CONCLUSION

    Building on the economic recovery we have seen over the past couple 
years, the Budget is the right plan for this moment in our country's 
economy. This is the plan it will take to make sure America remains 
strong in the years ahead and that we leave behind something better for 
future generations.
    I look forward to working with both houses of Congress in the 
coming months as we work to make the tough decisions needed to both 
grow our economy and put our country on a sustainable fiscal course.










    Chairman Ryan. Thank you. Let me start with unpacking some 
of these claims of deficit reduction to date. I mean, gosh, by 
the sound of it, it sounds like, you know what, we are pretty 
much done, we do not have to worry about it anymore. You know, 
problem solved. But when you measure deficit reduction in a 
gross, not net, way, by simply saying, ``Look at all the 
deficit reduction that occurred; you cannot neglect the deficit 
increases that occurred at the same time.'' So missing from 
this computation of $4.3 trillion of achieved deficit reduction 
is the stimulus that passed during this same time, $831 
billion; the payroll tax holiday, $111 billion; the other 
payroll tax holiday, $89 billion; the 24 percent increase in 
non-defense appropriations in the first two years, the 
president's first term, $576 billion; disaster spending above 
the caps, $110 billion; Sandy supplemental, $50 billion; the 
debt service that accompanies all that, $300 billion. If you go 
with net numbers, it is about $500 billion, generously, of 
deficit reduction, not $4.3 trillion. If you take a look at the 
numbers in the budget claim $1.4 trillion in deficit reduction 
that are being proposed. If you take out the war gimmick, which 
we all know is a gimmick, that is $675 billion. If you remove 
the extension of the stimulus critics, which are assumed in 
this baseline, that is $161 billion. If you remove the Doc Fix 
assumed in this baseline unpaid for, that is $249 billion. The 
unpaid Pell grants, $28 billion. The debt service that 
accompanies this, $175 billion. If you net all of this out, if 
you strip out the gimmicks that have been well-worn, well-
established gimmicks, it is about $119 billion of deficit 
reduction. And all you have to point to the fact is that this 
budget never balances, ever.
    And so I understand maybe it polls well to use the word 
balance every third word in every sentence when you are 
describing fiscal policy, but how is the budget balanced if it 
never balances? And I just think we need to be a little more 
honest about the true fiscal nature of the situation and the 
problems we have. That is just a statement.
    I want to ask you a couple technical questions because I 
also want to be kind to all the members here on time. The Doc 
Fix, for instance, in the past we have been paying for the Doc 
Fix. We have done this on a bipartisan basis. Why is it that in 
this budget, you assume the Doc Fix is fully funded and not 
paid for?
    Mr. Zients. Well, we have a balanced deficit reduction of 
$1.8 trillion, incremental to what we have achieved to date. We 
believe that it is honest budgeting to acknowledge that we are 
not going to cut doctors by 30 percent. We fix it year over 
year over year, and therefore it should be in the adjusted 
baseline.
    Chairman Ryan. So let me get to there. So you are saying 
irrespective of the fact of the fact that we paid for this by 
cutting spending elsewhere in the past, you are saying we will 
not pay for it anymore.
    Mr. Zients. Overall, the president's budget saves $400 
billion in health care costs, $370 billion of Medicare, $200 
billion in other mandatory, $200 billion in discretionary. The 
Doc Fix is something that happens year over year, so let's be 
honest in our baselines, and acknowledge that it happens every 
year and do deficit reduction accordingly. I think, you know, 
you threw around a lot of numbers in that opening statement. It 
is hard to track.
    Chairman Ryan. I am sure you have seen them.
    Mr. Zients. Yeah, they are all over the place. So I think 
at the end of the day, we have to look at the bottom line, the 
same way when I was in the private sector I looked at the 
bottom line. The bottom line of the president's budget is that 
deficits are a declining path, debt is on a declining path, we 
are below 3 percent of GDP in 2016, and we are below 2 percent 
at 1.7 percent of GDP, our deficits are, by 2023. I worry that 
we end up spending a lot of time with baselines, and what is in 
baselines and what is not in baselines. It is best to go to the 
bottom line.
    Chairman Ryan. Public debt, in the beginning of the budget 
window and at the end of the budget window, are north of 70 
percent. That is not much of accomplishment over 10 years.
    Mr. Zients. Debt is on a declining path.
    Chairman Ryan. We know that that is organic to the 
baseline. We know that that is happening if did nothing, 
irrespective of this budget.
    Mr. Zients. It is an important benchmark. We need to have 
balanced deficit reduction. We also cannot think of deficit 
reduction alone as an economic plan.
    Chairman Ryan. Why do we start the deficit reduction in 
2020? Why not start now?
    Mr. Zients. Deficit reduction does not start in 2020.
    Chairman Ryan. The deficit reduction policies proposed in 
this budget start in 2020.
    Mr. Zients. No, there is deficit reduction well in advance 
of 2020.
    Chairman Ryan. So let me ask you this, then.
    Mr. Zients. And that is how we achieve deficits on a 
declining path. But I want to make the point that deficit 
reduction is important. It is an important component of an 
economic plan. But it, in and of itself, is not an economic 
plan. We have to put people back to work, we have to increase 
our global competitiveness, we have to invest in R&D, we have 
to invest in education. The most important way to achieve 
deficit reduction beyond the policies that we are talking about 
here today is economic growth. I think we would all agree with 
that.
    Chairman Ryan. So, a case in point: If we did not pass this 
budget, the deficit would drop faster. So when I take a look at 
war spending, the budget assumes we are going to spending at 
these high inflated levels with the kind of troop count we have 
in Afghanistan right now, in perpetuity, and if you have a 
draw-down, then you count that as savings, $675 billion. Now, 
we all agree that we have a withdrawal occurring in 2014. That 
is stated policy. It is a bipartisan agreement. But we are 
going to count as a spending cut the idea that the baseline 
assumes we would be at full troop strength well beyond 2014. 
And if you are going to have a withdrawal in 2014, that all of 
a sudden counts as a spending cut of $675 billon? In other 
words, not spending money that was never going to be spent in 
the first place is now counted as a spending cut?
    Mr. Zients. Well, let me review this. CBO has, in its 
baseline, continued spending in OCO, the Overseas Contingency 
Operation. We actually cap the spending, which is important 
because it closes the back door for further discretionary 
spending. Furthermore, the savings that you are talking about 
from OCO versus CBO's baseline, the official scorekeeper's 
baseline, are not counted in the $2.5 trillion that I 
mentioned, and they are not counted in the $1.8 trillion that I 
mentioned.
    Chairman Ryan. It is in your $1.8, and I do not know how 
you can explain that it is not.
    Mr. Zients. If we want to go back to the slide, the $1.8 is 
$400 billion of health care spending cuts, $200 billion of 
other mandatory, $200 billion of discretionary, $230 billion 
from CPI, $580 billion from tax reform, and the resulting 
interest savings. That does not include any OCO.
    Chairman Ryan. You are double counting. You are using it to 
offset other spending.
    Mr. Zients. The only place we use OCO is because of the 
president's policies and the war in Iraq, draw-down and end in 
Afghanistan, we are going to take some of that money, a small 
portion of it, and invest in infrastructure in this country. 
That is not part of the $1.8 trillion deficit reduction.
    Chairman Ryan. Therein lies the issue here, which is we are 
taking spending that will never be spent, and we are using it 
as if it is free money to spend. That is the problem with 
budgeting. Look, CBO does not have a choice. The law requires 
that they have a baseline that reflects current law, and so 
they have parameters placed upon them that allows such a 
gimmick to proliferate. The point I would make is if all this 
grand deficit reduction were real, then why does your budget 
never balance? I mean, these are the things. Why are we adding 
$8.2 trillion to the debt in this budget? We can round and 
round. My time is running out, and I am putting myself on a 
clock. I want to ask you a question about IPAB. We talked about 
this on the phone the other day, but on table S-9, Page 197 in 
your budget, you have IPAB beginning to accrue savings in 2021, 
2023, for a total of about $4.1 billion. But you lower the 
growth rate to GDP 0.5, but your baseline claims that cost 
growth is within that parameter. So this is a sincere question: 
Where does the 4.1 come from? How does the IPAB mandate a GDP 
0.5 in this budget get that savings if your assumed Medicare 
cost growth is below that?
    Mr. Zients. Well, Medicare cost growth, to your point, has 
come in quite a bit, and we believe that the Affordable Care 
Act is helping to drive that. The way the IPAB works is it is 
not just at a total level, there are components. Put $4 billion 
in context. You are talking about a fraction of 1 percent.
    Chairman Ryan. No, I understand that.
    Mr. Zients. So we believe that through continued progress 
in reducing unnecessary care, promoting more cost-effective 
care through accountable care organizations and other 
innovations, that Medicare costs will continue to come in. IPAB 
serves an important backstop function, but with health care 
costs coming in the way they are, we do not anticipate that 
backstop being necessary.
    Chairman Ryan. Okay, so that is where I am trying to get. 
So that is the discretionary exercise of IPAB's authority.
    Mr. Zients. No, it is set in law. It is GDP plus 0.5.
    Chairman Ryan. Right. So it is set in law at GDP 0.5. They 
have to make the spending come within that cap. You are saying 
that the spending never exceeds that cap, yet they are showing 
savings to the budget.
    Mr. Zients. I am saying at the end of the window it does by 
a very small percent. So we would assume, as we have seen 
across the last couple years, that health care spending will 
continue to come in, and that the backstop will not be 
necessary. To be clear, if it ever is, any recommendations to 
the IPAB comes to Congress for approval.
    Chairman Ryan. No, I understand the process.
    Mr. Zients. And so ultimately, IPAB is there to protect 
seniors and ensure that we do not have excessive costs.
    Chairman Ryan. Okay, but I just want to be clear. I am not 
trying to put you in a trap. You are saying that by 2021, the 
cap will be hit, breached for an ever-so-small amount in IPAB's 
mandate triggers, and they have to start producing 
recommendations.
    Mr. Zients. Again, yes, that is the case as currently 
projected. I think we have seen significant progress in 
containing health care costs across the last couple of years. 
We anticipate further progress, and therefore, that will most 
likely be unnecessary.
    Chairman Ryan. Okay. Thank you. Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Mr. Chairman. And Mr. Zients, I 
am glad that in response to the Chairman's questions on deficit 
reduction, and how much we have achieved over the last couple 
of years and in this budget, you took us directly to the bottom 
line, which is what is the deficit as a percent of GDP, and 
whether debt as a percent of GDP is rising or declining, 
because is it not the case that when you use that measure, you 
standardize all the budgets, right? You wash out people's 
different baselines when you use that bottom line, as you said.
    Mr. Zients. Absolutely. Well put.
    Mr. Van Hollen. And as you pointed out, the president's 
budget at the end of the 10-year window reduces the deficit's 
percent of GDP to 1.7 percent, is that right?
    Mr. Zients. Yes.
    Mr. Van Hollen. I would just point out that in the House 
Republican budget last year, at the end of their 10-year 
window, they reduced deficit percent of GDP to 1.2 percent, so 
we are talking about half a percent of GDP in the 10th year, 
and the president's budget this year compared to the House 
Republican budget last year. I would also point out that if you 
look at the Congressional Budget Office baseline, after 10 
years, the ratio of debt as a percent of GDP is 77 percent. If 
I recall you saying, Mr. Zients, your calculation, and, 
obviously, CBO and OMB have somewhat different assumptions, but 
what was the debt-to-GDP ratio at the end of the 10-year 
window?
    Mr. Zients. I believe it is 73 percent.
    Mr. Van Hollen. Seventy-three percent, lower than the CBO 
baseline and declining; is that the case, Mr. Zients?
    Mr. Zients. Yes, declining each and every year.
    Mr. Van Hollen. All right.
    Mr. Zients. Starting in 2016, right.
    Mr. Van Hollen. I mean, so, the Chairman refers to these 
kind of gimmicks and different baselines, but the measures we 
are talking about now wash out all those issues. I would submit 
that the biggest whopper of a gimmick in this year's budget is 
the Republican claim that their budget actually balances in 10 
years, and their claim that they also repeal ObamaCare. I would 
like to put up a chart, if I could.
    So, this is in the 10th year of the Republican budget, 
House Republican budget. If you look, it claims to be $7 
billion in surplus. That budget also claims to repeal ObamaCare 
in its entirety. The problem with that is that ObamaCare 
achieved $715 billion in Medicare savings by ending 
overpayments to insurance companies, by rationalizing the 
system, and, in fact, the Republican budget includes all those 
savings in their budget. And that represents the red portion of 
that chart, the Medicare savings that are incorporated in the 
Republican budget. The Republican budget also assumes the 
amount of revenue that will come in through the tax provisions 
in ObamaCare, approximately a trillion dollars, so that is the 
blue portion. So, you will see that if they really were going 
to get rid of ObamaCare, which they claim to do in their 
budget, their budget would not come close to balance in year 
number 10. So that is the whopper of the budget gimmick this 
year.
    Now, there is another big difference in the Republican 
budget and in the president's budget when it comes to how we 
deal with tax issues. And what I want to ask you, Mr. Zients, 
is you have pointed out, the president's pointed out in this 
budget, that very wealthy individuals continue to 
disproportionately benefit from deductions in the tax code. And 
so you, in this budget, propose to ask high income people to 
take a little less as part of a balanced approach, whereas the 
Republican budget, as you know, says they are going to drop 
that top rate all the way from 39 percent to 25 percent, which 
will provide a huge windfall to the very wealthiest people in 
this country. And mathematically, if you also meet the criteria 
they set out, which is it does not increase the deficit, it 
means middle income taxpayers are going to have to pay more in 
order to finance tax breaks for the wealthy. So if you could 
just take a little bit of time to explain the very different 
approaches the president takes to tax reform issues in this 
budget compared to the House Republican budget.
    Mr. Zients. So the president, in his budget, raises $580 
billion from tax reform. So there is no raising of rates. This 
is all through tax reform, all from families with income more 
than $250,000. The president believes we should do tax reform, 
individual tax reform and corporate tax reform. At the same 
time, he puts forward two specific policies that raise that 
$580 billion. A limit on deductions, again, for families with 
more than $250,000 of income of 28 percent. So their deductions 
are at the level of the highest of the middle income families. 
And secondly, through the Buffett Rule, which says that anyone 
with over a million dollars of income should pay a minimum of 
30 percent. So the president raises $580 billion in tax reform. 
No families are impacted with less than $250,000 of income. 
This is done through the two specific policies, the 28 percent 
limit on deductions and the Buffett Rule. And, at the same 
time, the president believes there is an opportunity to do tax 
reform to make the tax code simpler, more fair, to maintain 
progressivity, and to help the middle class.
    Mr. Van Hollen. And I do not know, Mr. Zients, if you had 
an opportunity to look at some of the analyses that have been 
done of the House Republican budget approach with respect to 
the tax piece. So where they would drop the top rate all the 
way down to 25 percent, have you seen any plausible scenario 
where you can do that in a deficit-neutral manner without 
increasing the tax burden on middle income families?
    Mr. Zients. So my understanding is that in order to go to 
25 percent for the high income folks, it is a $5.7 trillion tax 
break. And you either have to add to the deficit, which is what 
we are trying to improve here, not make worse, or you would 
have to increase taxes on middle class Americans by thousands 
of dollars. The math just does not work any other way.
    Mr. Van Hollen. All right.
    Mr. Zients. It is either adding to the deficit, or middle 
class families have to pay higher taxes. Both of those policies 
are obviously unacceptable for the president. The president 
wants no tax increases for families less than $250,000, and 
wants to raise $580 billion as part of the balanced deficit 
reduction package.
    Mr. Van Hollen. Well, thank you. So just to go to the 
bottom line on that, what that means is that either the 
Republican budget would not be in balance if they actually did 
what they say they want to do with respect to tax rates and tax 
policies, in which case it would not balance in 10 years, even 
with the super-gimmick of continuing to include ObamaCare when 
they say they are not, or you would be raising taxes on middle 
income families. And, as you indicated, that is something that 
we also oppose and did so in our budget.
    Let me just conclude by asking you to talk about the $50 
billion infrastructure investment that is contained in the 
compromise proposal the president has put forward. You know, it 
used to be that infrastructure investments for our country were 
a bipartisan issue, that there was bipartisan unity behind the 
need to make sure this country is number one by making sure 
that we have the infrastructure necessary to support 
entrepreneurship and the private sector lifeline is the 
economy.
    Mr. Zients. Well, I will tell you, in my job I have an 
opportunity to spend time with lots of outside groups, 
including CEOs of small, medium, large businesses, 
entrepreneurs, and as anyone who is working in the economy 
would agree, that investing in our infrastructure is key for 
our global competitiveness, short-term, medium-term, long-term, 
and the great opportunity we have right now is that we can put 
people back to work at the same time, construction workers and 
other people back to work. So it is really a win for our global 
competitiveness; short, medium, and long-term, it also helps in 
terms of putting people back to work on worthy projects, so the 
$50 billion investment in infrastructure is money extremely 
well spent.
    Mr. Price [presiding]. Thank you so much. I, too, want to 
welcome you and thank you for your service. The Chairman and 
the Ranking Member have a previous commitment and they are 
going to be absent for a while, so I am honored to be able to 
assist in his absence. I want to commend the president for 
bringing a budget that, however, was 65 days late. The law of 
the land states that the president presents a budget to 
Congress on the first Monday in February, and the president, 
his administration, did not do so. One would have thought that 
had he taken that much time, he would have presented a budget 
that actually balanced, because he had the extra time to do so.
    Sadly, that is not what the budget does. It increases 
taxes, increases spending, same old kind of thing that we have 
seen before; increases debt, increases dependence, sadly, on 
the federal government, grows government and does not grow the 
economy. And worst of all, from our perspective, is that it 
does not really solve the challenges that need to be solved to 
get this economy growing again and get jobs being created. If 
we can bring up the first slide there. This is gross debt as a 
percent of GDP in the president's proposal, the president's 
budget. Always note, always staying above the 90 percent level 
throughout the entire budget window, the 10-year budget window. 
Now, you will recall, I know, from the Reinhart study that 
unless one gets below that 90 percent level, and many of us 
believe it ought to be lower than that, but unless one gets 
below that, then economies do not turn around. And sadly, 
again, the president's budget proposal simply does not address 
the challenges that we face.
    There is all sorts of other misinformation that I would 
like to have time to correct, but I want to ask a couple 
particular questions. First, I assume that the president would 
like to see his budget passed by Congress, is that accurate?
    Mr. Zients. Yes. Do I have an opportunity to comment on the 
chart?
    Mr. Price. At some point, I am sure that you will.
    Mr. Zients. Okay.
    Mr. Price. That being the case, my time is very limited, 
that being the case, would the Administration be willing to 
submit in the form of a budget resolution the president's 
budget?
    Mr. Zients. I think that, right now, we have heard from all 
of you and we believe that you should return to regular order. 
And it sounds like from the opening comments like there is some 
progress in doing so, so I would defer to you, and regular 
order is the way to proceed here.
    Mr. Price. The reason I ask is because in the past, we have 
attempted to allow the public to see the level of support for 
the president's budget, and have been accused of not writing it 
in the way that the president's budget would have been written. 
So we would love to see a budget resolution from the 
Administration. We would like to be able to have a vote on it 
in the House of Representatives.
    Mr. Zients. Again, we are respectful of what we have heard 
from all of you, which is return to regular order.
    Mr. Price. We would love to have that be part of our 
regular order. The president has said oftentimes that he is 
meeting Republicans more than halfway. In fact, the Ranking 
Member said that just this morning. The president's budget 
increases debt significantly; we move it in the opposite 
direction. The president's budget increases the deficit 
significantly off current law; we move it in the opposite 
direction to balance within a 10-year period of time. The 
president's budget increases taxes; we do not increase taxes. 
That is hardly meeting Republicans halfway. So, as the Chairman 
said, it is wonderful rhetoric, but it simply is not true, is 
it?
    Mr. Zients. Well, by putting forward the compromise offer, 
which includes $1.8 trillion of deficit reduction, includes 
chained CPI, which is something the president would not do on 
his own; this is directly responsive to Speaker Boehner's 
request and Leader McConnell's request. The president is 
willing to do that as part of a balanced deficit reduction deal 
as long as we have those conditions that I mentioned earlier, 
protections for the vulnerable.
    Mr. Price. This is an important point.
    Mr. Zients. But that is absolutely critical that we 
understand that that $1.8 trillion is a compromised offer.
    Mr. Price. This is an important point, Mr. Zients, because 
chained CPI is not what we would select as a solution for the 
challenges that we face. It is the president's selection of 
what he thinks we would like.
    Mr. Zients. It is something that both Speaker Boehner and 
Leader McConnell have asked for several times. They have also 
asked, and you have asked, for Medicare age to be raised to 67 
from 65. That is an example of something the president is not 
willing to do.
    Mr. Price. Let me talk in my last 30 seconds, if I may, 
about Medicare, because your budget proposes $374 billion in 
gross reductions in Medicare spending, $307 billion of that is 
further cuts to providers. How low do you think that this 
Administration can cut payment to physicians and still have 
them see patients?
    Mr. Zients. Well, there are opportunities to make our care 
more efficient. There are opportunities to incent providers to 
not have readmissions. There are opportunities to bundle 
payments to align incentives. There are opportunities to make 
sure that we get the same prices on drugs in Medicare that we 
get in Medicaid. So there are opportunities to make our system 
more efficient, and we should be taking advantage of those 
opportunities to maintain Medicare as we know it, not turn it 
into a voucher system.
    Mr. Price. My time is expired. But our proposal does not do 
that. In fact, it provides greater choices for patients. I now 
am pleased to recognize the gentlelady from Pennsylvania for 
five minutes.
    Ms. Schwartz. Thank you, and I appreciate the opportunity 
to follow-up on some of what was said. I do want to first say 
that I appreciate that the president's budget, unlike the 
Republican budget, does present a balanced approach and does 
seek that common ground, some credit for that. It certainly is 
moving towards reducing the federal deficit, and it does make 
important investments in strengthening this economy and moving 
towards economic growth.
    Specifically, I want to ask a different question. I do want 
to acknowledge the language in the budget that both repeals the 
SGR and acknowledges that we are not going to cut physicians 
under Medicare. It is extremely important for us to finally get 
that done this year, and given that there is bipartisan 
interest in doing that, we should do it. This is not a point of 
disagreement, it is a point of agreement, so we should do that. 
I do appreciate the additional language on moving towards a new 
payment system, language I have written, and I appreciate that 
much of it has been picked up in the budget, and some language 
saying we should move to an improved system of paying 
physicians in a way that is flexible for them, but also does 
demand greater quality, improved outcomes, and cost savings, 
the right way to do physician payments. And, again, I believe 
we have some bipartisan support on that as well. I would like 
to see that done also.
    I did want to highlight one particular aspect of the budget 
and the recognition of the investment in innovation and 
technology and research. The president has proposed a small 
increase in NIH funding, and I appreciate that. We now have a 
request of $31.3 billion in NIH funding. Of course, as you 
know, as a result of sequester, we are seeing quite a cut in 
scientific research in this country. NIH in particular fuels 
this growth of basic research funding that comes really, 
basically, from the government, from NIH, and not only does 
important medical research, but really is the beginning of the 
pipeline for new devices, new therapeutics, biotech, the 
industry's manufacturing and production of those very important 
lifesaving medicines and treatments, and that is extremely 
important to our economy.
    From southeastern Pennsylvania, it is absolutely critical. 
Many of our research institutions, academic medical centers are 
seeing a dramatic cut, millions of dollars this year alone. 
They are laying off scientists. They are not hiring new 
scientists. They are discouraging those young scientists who 
might choose to go on to create those, not just new lifesaving 
medications and treatments, but that economy that is such a 
driver, certainly in Pennsylvania; it certainly is in many 
places across this country. You are talking about really tens 
of thousands of scientists and all of those who work with them, 
and how important that is. The sequester matters. Those cuts 
really are going to hurt not just scientific research, but, 
again, the economic growth in the future years that we may not 
ever be able to regain if we do not fix it.
    I have introduced legislation, and I tried in the Budget 
Committee to reinstate $3 billion, which is essentially the 8 
to 10 percent cut that NIH will see this year, and to reinstate 
that by repealing the tax provision on corporate jets. It seems 
like a good tradeoff by just your choices. And that special 
treatment of corporate jets, and use those dollars for medical 
research. So I want to tell you that I am working on that, and 
I am hoping we can get something done this year. But I wanted 
to just take a bit of time left to really talk about how 
important those dollars are to ongoing, consistent support for 
basic scientific research in this country, particular in the 
medical sciences.
    Mr. Zients. I could not agree more. And the president's 
budget on the domestic side increases R&D by 9 percent, 
consistent with the logic run you just did, so very important 
that we invest in R&D. Let me step back because you spotlighted 
a specific problem with the sequester.
    The sequester was never intended to be implemented. It was 
meant to be a forcing function for balanced deficit reduction. 
Unfortunately, we find ourselves in a period where we are 
implementing a policy that was never intended to be 
implemented. And the consequences are negative throughout the 
government, throughout the economy, and the American people are 
feeling this every day. It will reduce our GDP by a half to a 
full percent this year. It will cost us hundreds of thousands 
of jobs. It is impacting research, as you said, and to 
lifesaving breakthroughs, potentially at NIH. It is impacting 
meals for seniors. It is impacting defense contractors. It is 
across the economy. It is costing us hundreds of thousands of 
jobs.
    Ms. Schwartz. Yeah.
    Mr. Zients. Hundreds of thousands. It is very important 
that we replace the sequester, and the president's budget does 
that with balanced deficit reduction, as soon as possible. 
These impacts in areas like R&D and on the American people are 
just unacceptable.
    Ms. Schwartz. Well, I appreciate that, and I appreciate the 
fact that the president's budget creates, I hope, the dialogue 
that we have to have, the Republican budget is one alternative 
passed here. The Democratic alternative that we put forward is 
another way to do it. This has got to be a serious 
conversation, otherwise the economy is going to get hurt, and 
so are real people. Thank you.
    Mr. Price. Gentlelady, time has expired. Recognize the 
gentleman from California, Mr. Campbell, for five minutes.
    Mr. Campbell. Thank you, Mr. Chairman. Mr. Zients, does the 
president believe that deficits matter?
    Mr. Zients. Yes. The deficits do matter, and putting the 
country on a sustainable fiscal course is an important 
component of an economic plan, it is not an economic plan in 
and of itself.
    Mr. Campbell. Are deficits a bad thing?
    Mr. Zients. Deficits are not a bad thing in the abstract. 
Deficits need to be under control. Deficits need to be coming 
in. The president's plan has deficits going down each year.
    Mr. Campbell. But, Mr. Zients, the president's plan has 
deficits continuing forever, is that correct, even under your 
numbers. And, by the way, I think your numbers are garbage. I 
mean, I will use a rather strong term, and as a CPA looking at 
some of this stuff. But throughout this conversation, in the 
next four minutes, I am going to accept that your numbers are 
correct. And under your own numbers, the deficits continue 
forever, do they not?
    Mr. Zients. We are focused on the 10-year window.
    Mr. Campbell. Okay.
    Mr. Zients. I think going beyond 10 years is difficult.
    Mr. Campbell. Okay, the deficits continue throughout the 
10-year window, do they not?
    Mr. Zients. Deficits are on a declining path, as is debt. 
That is the right deficit path for this point that we are in 
the economy where we also have to be focused on getting people 
back to work, investing in infrastructure, investing in R&D.
    Mr. Campbell. Mr. Zients. Mr. Zients, the deficits continue 
at roughly half a trillion or higher throughout the 10-year 
window. Did I say something wrong? Did I say something wrong? 
They do continue at half a trillion or higher, even under your 
numbers, throughout the 10-year window.
    Mr. Zients. Yeah, I would like to just make the point that 
I think the right way to think about deficits is as a percent 
of our economy, and our deficits as a percent of our economy 
come down quite a bit across this 10-year window.
    Mr. Campbell. So we do not have to make them go away.
    Mr. Zients. This is consistent with Bowles/Simpson and 
other groups that have looked at this. They have deficits on a 
declining path and debt on a declining path. The president's 
plan achieves that while also investing in our economy, 
creating jobs, putting people back to work.
    Mr. Campbell. Mr. Zients, it is my time. They are half a 
trillion or more throughout the 10-year window. Anything shows 
they continue forever. Obviously, the president does not 
believe that we need to get to a balanced budget, does he? We 
do not need to get to balance, do we? In the president's 
opinion.
    Mr. Zients. The president believes that we have to put the 
country on a sustainable fiscal path.
    Mr. Campbell. Which he thinks does not have to be balancing 
a budget.
    Mr. Zients. At the same time, even more important, is 
putting people back to work and getting our economy growing at 
its full potential. If you bear with me for one second, in the 
1990s----
    Mr. Campbell. Let me get. I am sorry, I want to get to a 
couple other things. So, on the entitlements, now you mentioned 
the only change, I believe, really to any of the entitlement 
programs in here, are the ones that you mention the president 
put in that he really does not particularly like but he put in. 
So, therefore, the president believes that Social Security, 
Medicare, and Medicaid are on a sustainable path and they do 
not need to be reformed substantially, that they are not headed 
towards bankruptcy like the vast majority of analysts, 
economists on both the left and the right say the president 
does not believe that. Is that correct?
    Mr. Zients. Well, I think Social Security is not part of 
our immediate fiscal issue. Social Security is solvent through 
2033. The president has put forth principles for Social 
Security reform. But let's be clear that that is not part of 
our immediate deficit set of issues.
    Mr. Campbell. Principles, but they are not in this budget. 
They are not in this budget.
    Mr. Zients. On Medicare, there is $400 billion of health 
savings, $370 billion in Medicare savings. That is the first 
decade. In the second decade, there is more than a trillion 
dollars of savings. That is significant reform to Medicare to 
make it sustainable, but also to keep Medicare as we know it so 
that we are honoring our compact with our seniors. We are not 
turning it into a voucher program, and we are not shifting 
costs to seniors.
    Mr. Campbell. When you look at the cost of Medicare over 
that period, that even with those numbers, which I do not 
agree, I do not think anybody is going to claim that that is 
going to get on a sustainable path, and in no way, shape, or 
form will that bring the taxes in line with the costs. One 
final question for you, really quickly, can people who make 
under $250,000 a year legally buy cigarettes?
    Mr. Zients. Yes.
    Mr. Campbell. Then you have a cigarette tax in here so you 
actually have a tax on people who make under $250,000 a year if 
they choose to smoke, do you not?
    Mr. Zients. People make a choice as to whether or not to 
smoke.
    Mr. Campbell. People make a choice to make income, and they 
get taxed on it. People make a choice to own a home and they 
get taxed on it.
    Mr. Zients. This has significant benefits for the middle 
class in terms of discouraging smoking.
    Mr. Campbell. Okay. Well, then, tell me this. Is this 
intended to raise revenue or to stop people from smoking, 
because it cannot do both.
    Mr. Zients. Yes, it can.
    Mr. Campbell. And you have the revenue raised in here, 
which indicates that you do not expect it to have anybody stop 
smoking. It cannot do both.
    Mr. Zients. I disagree with that premise. We can have this 
many people smoking and discourage new people from smoking.
    Mr. Price. Gentleman's time has expired.
    Mr. Zients. Encourage some people to quit. That brings down 
the number of smokers, and, at the same time, those who 
continue to smoke will pay a tax.
    Mr. Price. Gentleman's time has expired. Gentleman from 
Ohio, Mr. Ryan, for five minutes.
    Mr. Ryan of Ohio. Thank the gentleman, and thank Mr. Zients 
for your testimony here. I wish some of our colleagues on the 
other side were this excited when we were putting two wars on a 
credit card and having a prescription drug bill that was not 
paid for. I do not remember this level of excitement about 
deficit reduction and about balancing our budget. So, Mr. 
Zients, would you say that the Republican budget is an 
austerity budget? Deep, the deep cuts?
    Mr. Zients. Very deep cuts. We have been talking a little 
bit about the sequester, just to benchmark. On the domestic 
side, the Republican budget cuts domestic programs by 20 
percent. That is three times deeper than the sequester.
    Mr. Ryan of Ohio. Okay. So we are in agreement, it is an 
austerity budget. I think most people would say that. I think 
probably many on the other side would say that. I know you are 
working on the American budget full time. What are the 
austerity budgets doing in Europe right now? How are they 
playing out?
    Mr. Zients. You are taking me beyond my area of focus, but 
I think it is clear that the austerity budgets are not 
performing well. We believe it is important to have responsible 
deficit reduction phase in across time, achieve the kind of 
results that we have talked about, and, at the same time, 
invest in jobs, invest in infrastructure, and that is the right 
way to grow our economy and put people back to work.
    Mr. Ryan of Ohio. I know you mentioned the research and 
development, and some of these public, private partnerships. My 
district has benefitted from the Innovation Institute for 
Additive Manufacturing in downtown Youngstown, Ohio. And it is 
a great partnership of public money from defense, energy, 
commerce, as well as private sector money from companies like 
Boeing and Lockheed to help spur innovation and additive 
manufacturing. How does this budget continue to try to promote 
initiatives like that, and the 15 other institutes that the 
president wants to get up and running, and other initiatives 
like that that will lead to economic growth in older industrial 
areas like mine?
    Mr. Zients. Now, I think the Youngstown is a great example, 
and building off of that, the budget proposes to do 15 more at 
a cost of about a billion dollars. But, again, that investment 
is directly offset. So I think we all would agree that those 
types of investments are good for the economy. We have created 
500,000 or so manufacturing jobs across the last few years. We 
need to create more, bring more jobs home. And each of these 
investments are directly offset so they do not add a dime to 
the deficit.
    Mr. Ryan of Ohio [affirmative]. And investments in National 
Science Foundation and NIH, what do those look like in this 
budget?
    Mr. Zients. Well, those are on the discretionary side, so 
they all fit under the BCA cap. But the president has 
prioritized investment in R&D, and domestic R&D is up 9 percent 
under the president's budget. So, even with the tight 
discretionary caps, the president has prioritized R&D, and 
there is a 9 percent increase.
    Mr. Ryan of Ohio. And we are very thankful for that. The 
real question is, what is the roadmap for America in the 
future? And part of this roadmap needs to include the 
investments that are in sectors of the economy that are going 
to blossom in the next decade or two. We do not always know 
what those are, and I think when you say we are going to 
balance the budget in 10 years and somehow that is going to 
just turn the economy around, without looking at the history of 
our country and the big investments that we have always made, 
whether it was infrastructure, the space program, National 
Science Foundation, National Institutes of Health, investments 
in education, community colleges, Pell grants, student loans, 
bringing those rates down, putting more money in people's 
pockets, this is a recipe that has been very successful in the 
United States.
    And although I do not agree with everything that is in the 
president's budget, and we will have plenty of time to discuss 
what those issues are, I want to say thank you for being, in my 
estimation, a voice of reason, and having a vision for what 
American needs to be like in the next decade. We cannot cut our 
way to prosperity, and we have seen, as I mentioned earlier, we 
have seen a lot of our friends on the other side, get very 
excited, and the first question from my one friend from 
California was, do deficits matter? If Dick Cheney was sitting 
in your seat, he would have had a different answer than you. 
Dick Cheney said deficits do not matter. And that was the 
prevailing wisdom coming out of the Republican Party for the 
first eight years of the new decade. So we will press you on 
the issues that we do not agree with, but I want to say thank 
you for making these long-term investments that will position 
the United States to be competitive in an increasingly 
competitive global economy.
    Mr. Price. Gentleman's time has expired. Thank you, the 
gentleman's time is expired. We would also suggest that you 
cannot tax and borrow your way to prosperity. Gentleman from 
California, Mr. Calvert, for five minutes.
    Mr. Calvert. Thank you, Mr. Chairman, and thank you 
Director Zients, for testifying today. We certainly appreciate 
your insight. I want to bring a little perspective to this 
debate. Now, we are talking about some of the past. It may not 
seem like it, but Republican controlled a House and a 
Democratic president, in fact, they worked together to meet the 
complex challenges before us. President Clinton worked with 
Speaker Gingrich and the House Republicans in the late '90s to 
enact balanced budgets. We all know President Clinton raised 
taxes substantially when he first came into office, but in the 
final six years, he joined the Congress to address the spending 
side of the ledger, and that is how we balanced the budget. 
That is how we produced a surplus.
    However, President Obama continues to be consumed, in my 
opinion, by raising taxes. He refuses to address spending. Let 
us keep in mind he has already pushed through a $1 trillion in 
taxes will be phased in over the implementation of ObamaCare. 
And another $600 billion from the recent income tax hike, which 
was the largest tax increase, in real terms, in 65 years. The 
president's 2014 budget increases taxes by an additional $1.1 
trillion to fuel spending. That is enough. The president got 
his higher taxes. They are now off the table. Now, we need to 
focus on the spending side.
    Take into consideration the average spending per capita 
during the Clinton Administration was $6,809, excluding defense 
spending. By contrasting, spending per capita during Obama's 
tenure, when adjusted for inflation, and excluding defense, two 
wars, and the stimulus, has been $9,089. That is a 33.4 percent 
increase. With 315 million Americans, that is $630 billion more 
in spending each year. Now many talk fondly about returning to 
the Clinton-era tax policies, yet, with the recent tax hike, we 
need to talk now about returning to the Clinton spending 
levels. The reform of our automatic pilot spending programs, 
further spending restraints, which would enable us to eliminate 
yearly deficits and address our long-term debt.
    Of course, today's population is older today than it was in 
the '90s, so we spend more on Medicare and Social Security, but 
the bigger issue is that we cannot sustain the current growth 
projections of these programs. I think everybody agrees to 
that. This puts us even more pressure on us to reform 
retirement programs for current beneficiaries, and to ensure 
that they exist for future generations. We can also use the 
lessons learned from working together in the '90s on welfare 
reform, and to apply them to other programs. Prior to leaving 
office, president Clinton lauded the benefits of balancing the 
budget. As stated in a report to Congress, ``By reversing the 
earlier trend of fiscal responsibility, using conservative 
economic estimates, balancing the budget, and producing an 
historic surplus, we have helped restore our national spirit 
and produce the resource to help opportunity and prosperity 
reach all corners of the nation.'' On the other hand, President 
Obama recently stated in an interview, ``My goal is not to 
chase a balanced budget just for the sake of balance.'' 
Director, in the 1990s, it was such a golden era, why can't we 
return to the Clinton-era spending levels? You agree with 
President Obama that a balanced budget is not a worthwhile 
goal?
    Mr. Zients. So let us actually go back to the 1990s. Let us 
go back to the early 1990s, when we had 4 percent GDP projected 
deficits, according to CBO. We did balance deficit reduction. 
The projection after that was 2.5 percent, not that different 
than where we are today, where, at the end of this window, we 
are at 1.7 percent, so we are a little bit below. So the 
forecast at the time was 2.5 percent deficits. What did we end 
up with? Surplus. How did that happen? Economic growth. That is 
exactly why we need a plan here that gets us on a fiscally-
sustainable path.
    Mr. Calvert. That economic growth happened in the private 
sector, not in government.
    Mr. Zients. Of course.
    Mr. Calvert. It seems to me that the budget that is before 
us is to grow government, not to grow the private sector.
    Mr. Zients. Let's stick with the statistics. The projected 
deficit for the federal government was 2.5 percent. We are 
lower than that in the president's plan. What took us from 
negative 2.5 percent to a surplus was economic growth, 
absolutely the private sector growth. So we need to do both 
here. We need to get ourselves on a fiscally-sustainable path, 
downward deficits, downward debt as a percent of GDP, but we 
also have to invest in our economy and get people back to work, 
and that is very similar, or is similar, to what the plan was 
in the 1990s, to get the economy growing to its full potential.
    Mr. Calvert. It seems to me, by the numbers, we have 
increased government spending by 33 percent.
    Mr. Price. Gentleman's time has expired. Gentlelady from 
California, Ms. Lee, for five minutes.
    Ms. Lee. Thank you for your service, and during these very 
difficult times, also let me acknowledge the hard work and 
commitment of everyone at the Office of Management and Budget. 
Just very briefly, going back to the Clinton era, from what I 
remember, there was a surplus at the end of president Clinton's 
term, and the Bush Administration squandered that surplus. And 
many of those economic policies are responsible for the 
recession and for the hard economic place where this country is 
at this point. Now, that is what I remember during the 
following eight years of the Clinton Administration.
    Let me just also say that when we talk about a budget, we 
have to also remember it is not only a plan for raising 
revenues and spending federal funds, but it is also a moral 
document that is a statement of our nation's principles and 
values. So while there are some parts of the president's budget 
that I find very troubling, I am very pleased to see that the 
president clearly understands the need to make vital 
investments in our economy and in job creation, and it is a 
balanced approach, which, again, president Clinton, talking 
about the Clinton era, he did create a balanced approached, 
reduced the deficit, and created a surplus, which, once again, 
was squandered during the subsequent administration.
    I am very pleased to see the investments in mental health, 
HIV and AIDS, and education, including Promise Neighborhoods 
and in universal pre-K. The budget permanently extends these 
vital programs, such as the Child Tax Credit and the Earned 
Income Tax Credit. This helps millions of families across 
America in terms of a path, a ladder, from poverty into the 
middle class. And so let me just say, this is a real contrast 
to the Ryan budget, where the Republicans proposed another $6 
trillion tax cut for the wealthiest, while focusing 66 percent 
of their draconian budget cuts on shredding our nation's safety 
net. Now, in this committee, we have held some pretty, I think, 
productive discussions on eliminating poverty by reducing it in 
half during the next 10 years. Unfortunately, income inequality 
and poverty rates are rising.
    But I wanted to just ask you how this budget puts us on 
that path of eliminating poverty by reducing it in half in 10 
years, because I know Chairman Ryan and myself, and others on 
our side are very concerned as well as on the Republican side 
about poverty. When I looked at their budget, all of the paths 
that would lift people out of poverty were cut drastically. And 
so how does this budget begin to turn that around?
    Mr. Zients. Well, you know this is an area of very strong 
commitment from the president, and it is reflected in the 
budget. You mentioned some of the areas; I will mention a few 
more. Extending the EITC and the Child Tax Credit; also the 
AOTC, which helps families go to college; a centerpiece that we 
have talked a little bit about already, but that I want to 
emphasize of the president's budget, is this landmark 
initiative for early childhood, pre-K, paid for by the tobacco 
tax; ladders of opportunity, including Promise Zones, 20 
neighborhoods. We are going to really work on bringing 
education resources, housing resources, private sector 
resources, local resources, together to lift up these 
neighborhoods. The minimum wage; the president, in his state of 
the union, announced his support for the minimum wage. So there 
is a lot of progress in this budget on what has been an 
important initiative from of the president's from the 
beginning, which is helping lift people out of poverty, into 
the middle class, creating ladders of opportunity.
    Ms. Lee. I have a few more minutes, and I would just like 
to ask you if it is possible for OMB to produce an appendix to 
the budget, or to present to this committee a list of programs 
that have helped low-income families, you know, move from 
poverty into middle class, so we can understand how they work 
and what they have done over the years, and how to track our 
decisions as it relates to these programs. I do not know if you 
have that or if you could organize that for us, or where we 
would go to look at that as it relates to the federal 
government.
    Mr. Zients. We will certainly pull something together.
    Ms. Lee. Okay. Thank you very much. Thank you, Mr. 
Chairman.
    Mr. Price. Thank you. The gentleman from California, Mr. 
McClintock, for five minutes.
    Mr. McClintock. Thank you, Mr. Chairman. First, I find 
myself in rare agreement with my friend from Ohio when he says 
Republicans should have been far more excited about the Bush 
Administration that was placing two wars on the credit card, 
massive expansion of entitlements. He is absolutely right, some 
of us were very excited about it. George W. Bush was one of the 
most fiscally irresponsible presidents in our history. In his 
eight years in office, he increased spending by a whopping 2 
percent of GDP. The problem is, the budget that you are 
presenting today, in five years, has increased it by another 2 
percent of GDP. My problem with the Obama Administration is not 
that he has reversed Bush's spending patterns, but he has taken 
the worst of them and doubled down on them.
    You called the House budget plan an austerity program in 
the European model. Actually, it seems to me that your plan is 
far more in the European model. European austerity programs are 
heavily weighted toward tax increases. That is the problem. 
And, in fact, the countries in the most trouble in Europe are 
those with the highest marginal tax rates, including Italy, 
Spain, and Portugal. The European nations that relied on 
spending cuts have done very well. Take Sweden: Between 1993 
and 1997, its spending-to-GDP ratio declined from 71.5 percent 
to 51 percent. Its average rate of growth doubled in that 
period relative to the prior decade. Finland, Denmark, and 
Norway saw the same results. So I appreciate the analogy with 
austerity programs. The austerity programs that work are those 
that reduce spending, which is what the House Republican budget 
does. Those that have created additional problems are those 
that are weighted toward tax increases, which is the budget 
that you are now presenting.
    My first question, however, it's a very simple question: 
Why are you here exactly 65 days after the budget deadline? Our 
whole system is designed to assure that the president, as the 
chief executive officer of our nation, comes to Congress with 
his estimate of what it will take to implement the laws over 
the next year. Then Congress has a timeframe in which it has to 
develop a budget. You did not do that. In Congress, both the 
House and the Senate, were left to act on their own without a 
presidential budget. Now, when that train has already left the 
station, suddenly you show up with this budget. I find that 
appalling.
    Mr. Zients. Well, unfortunately, due to Congress's 
inability to act, we have had manufactured crisis.
    Mr. McClintock. Congress has acted. Congress has adopted a 
budget on schedule, but that process was supposed to begin with 
the president presenting one, and he did not.
    Mr. Zients. Right.
    Mr. McClintock. That is more a rhetorical question, 
frankly, because I do want to get to, my time is very limited, 
an Investor's Business Daily editorial today, which absolutely 
excoriates the budget. Let me walk you through the points. This 
is where I would like to get your responses. First, they 
criticize it for boosting spending and deficits over the next 
two years. Over the next two years, they say it increases 
spending by $247 billion above the baseline. It increases the 
deficit by $157 billion above the baseline. Is that correct?
    Mr. Zients. So in terms of the timing of the budget, what I 
was talking about was the fiscal cliff crisis followed by the 
sequester. That made it very difficult to deliver to budget 
until the numbers settled in. So once the numbers settled in, 
we are happy to be here today.
    Mr. McClintock. Pardon me, sir, the House and the Senate 
were able to act. What I would like right now is to get you to 
either confirm or deny the figures in ``Investors' Business 
Daily'' today. Does the budget over the next two years increase 
baseline spending by $247 billion and increase the deficit by 
$157 billion?
    Mr. Zients. We have made progress on the economy, 36 months 
of job growth, 6.5 million private sector jobs, 14 straight 
quarters of GDP growth. We have a ways to go. We need to 
continue to invent in jobs, and, at the same time, put 
ourselves on a fiscally-sustainable path.
    Mr. McClintock. Are the figures accurate? Are these figures 
accurate or not accurate? All right, let me see if I can get 
you to answer their second point, which is that the president 
vastly exaggerates the spending cuts. $1.2 trillion are 
claimed, yet the actual budget on Pages 187 through 190, 
actually cuts only $186 billion.
    Mr. Zients. Well, again, we are back to our baseline set of 
issues.
    Mr. McClintock. Their criticism is that you cancel the 
sequester and then reclaim that as new savings.
    Mr. Zients. That is right. We are very clear in our tables 
how we are doing this. In the baseline is the sequester, which 
was never intended to be policy. That is spending cuts across 
the board. We replace it with balanced deficit reduction. In 
total, the president's plan has $4.3 trillion of deficit 
reduction and reduces the deficit to below 2 percent.
    Mr. McClintock. I can't get to all six of the charges, but 
the third one was, that it relies entirely on tax hikes, $6 in 
new taxes for every dollar in spending.
    Mr. Price. Gentleman's time has expired. Gentleman's time 
has expired. The gentleman from Rhode Island, Mr. Cicilline, 
for five minutes.
    Mr. Cicilline. Thank you, and I thank you, Mr. Zients, for 
being here and for your service to our country. You know, 
sometimes if you listen to these budget committee hearings, you 
would consider that our only objective is deficit reduction, 
and that that, in and of itself, was an economic strategy for 
economic growth for this country. And I think you said at the 
beginning that the objectives are, of course, responsible 
deficit reduction, but also economic growth for our country. 
And we do not have to go back as far as my friend from Ohio 
suggested to the times that my friends on the other side of the 
aisle did not speak up for two wars that we did not pay for, 
and tax cuts for the richest 2 percent of Americans that we did 
not pay for, but just in recent hearings, proposals to provide 
another gigantic tax cut for the richest people, the top wage 
earners in this country, and a refusal to close a single tax 
loophole. So it is hard to understand where this notion of 
deficit reduction is something that only that other side of the 
aisle cares about, because that is what we heard about here.
    And so what I really want to talk about is what I think is 
the real crisis facing this country. I think we have got to 
deal with the debt, and I think we have to do that in a 
responsible and balance way. But I am from a state that has, I 
think, the highest, or second or third highest unemployment 
rate on the country, depending on what month you look at, and I 
think what we have to be looking at is the job crisis in this 
country and how we invest in growing the economy, getting 
people back to work, because I consider the single best way we 
can deal with the deficit is by getting people back to work and 
growing the economy. That is what our history has shown us. 
That is what we need to do. And there are some things in this 
budget I strongly oppose, but I think when you look at the 
investments that the president is proposing in infrastructure, 
in workforce training and development, in education, in science 
and research, and rebuilding our own country, and in 
manufacturing, those, I think, present some exciting 
opportunities to really jumpstart job growth and our economic 
recovery.
    And I would like you to talk in particular about what you 
see as the most valuable of those investments, and I am 
particularly interested in manufacturing, which I think the 
president has articulated an exciting vision for a set of 
manufacturing centers. But speak to this notion of the 
importance of creating jobs as a way to deal with our deficit 
in the long term, and dealing in a responsible way in the short 
term with promoting real growth, and, particularly, job growth 
in those sectors.
    Mr. Zients. No, I think you are absolutely correct, that 
putting people back to work, getting this country performing at 
its full economic potential, is the most important priority for 
the president. So the fiscal sustainability is important, but 
it is a component of an economic plan. It is not an economic 
plan in and of itself. I think you hit on the main areas. I 
think infrastructure, which we talked about earlier, is really 
important, the $50 billion immediate investment, working 
closely with states and local governments and the private 
sector to put people back to work, but also position ourselves 
much better in terms of global competitiveness by having 21st 
century infrastructure. So infrastructure is a great example of 
getting people back to work, which helps the economy and 
individuals in the short term, but also sets us up for medium 
and long-term growth. The investment in education, the focus on 
community colleges, helping people develop the skills, working 
closely with businesses to make sure the people are getting the 
right skills. There is an $8 billion investment in community 
colleges. We talked about R&D earlier; very important for our 
long-term competitiveness and for creating jobs.
    Mr. Cicilline. And I think the other important thing to 
note is that when we think about the long-term challenges we 
face in reducing health care, or in developing new and 
renewable sources of energy, those require investments. The 
real way we are going to bend the cost curve on health care is 
discovering new cures for diseases, discovery new technologies 
and new treatments, modernizing our electronic medical records 
system, and those require investments. And so one of the things 
I am particularly concerned about, and I think this budget 
addresses, is the sequestration. The kinds of reductions in 
science and research that are going to really provide the key 
to reducing energy costs and making energy more available and 
to reducing health care costs are at risk with sequestration. 
And that we want to be a country that has pioneering research, 
groundbreaking research which is happening, a well-trained and 
educated workforce. We want to develop new and clean energy 
sources. We want to rebuild the infrastructure of our country. 
All those things are not only necessary so that we can remain 
competitive and grow this economy, but they are also the key 
strategies, I believe, to address our deficit over the long 
term. I think this budget reflects that, and I applaud you for 
that.
    Mr. Zients. The sequester is devastating for these 
priorities. Take NIH, the Bush NIH director, so president 
Bush's NIH director, said sequester will set back medical 
science for a generation. Contrast that with the president's 
budget, which actually increases off of the pre-sequester level 
of NIH funding by over a half billion dollars.
    Mr. Cicilline. Thank you.
    Mr. Price. Gentleman's time is expired. Gentlelady from 
Tennessee for five minutes. Ms. Black.
    Mrs. Black. Thank you, Mr. Chairman, and thank you, Mr. 
Zients, for being here today. I want you to answer this really 
briefly for me because I have other detailed questions that I 
want to ask you. But you made mention when you were in the 
dialogue with the Chairman related to the program that we have, 
the Medicare program that we have, in reforming the program, 
that it includes a voucher program. Would you give me a 
definition of what you think is a voucher program?
    Mr. Zients. A voucher program is giving seniors a certain 
amount of money and having them be responsible for purchasing 
their health care. And then if there are cost overruns, or 
costs beyond that voucher, the seniors bear the responsibility 
for that.
    Mrs. Black. Now, I am sure you have read the Path to 
Prosperity. And what is recommended in there is premium 
support. Do you think that premium support and voucher are the 
same? Are they the same? You said--excuse me, reclaiming my 
time--you said in a voucher program you give the recipient 
money to allow them to go out and find their insurance. Premium 
support, and I will define it for you as defined in our program 
so that we get this straight and we do not keep calling 
something incorrectly. And premium support is a guaranteed 
program that is run by the government and it is guaranteed to 
the recipient. They do not get the money. The money is not 
given to them. It is a program.
    So, I am reclaiming my time, once again. I just want to set 
this straight. I want to set the record straight. There is a 
difference between a voucher program and the premium support. 
Now, let me go to something that I want to go to that is a 
little more detailed in your budget. I note that in your budget 
you include $1.4 billion in discretionary spending increases 
for personnel. And in particular, this funding would finance 
about 712 new bureaucrats within CMS. And this is a massive 
increase compared to the request last year of 256 new 
positions. What I want to know is why the significant increase? 
Where are all of these positions needed?
    Mr. Zients. Well, first, I would like to set the record 
straight on what the president's belief is on Medicare. The 
president believes in reforming Medicare so we can protect 
Medicare as we know it, and not move it toward a premium 
assistance plan or a voucher system.
    Mrs. Black. We will disagree on that.
    Mr. Zients. So I want to be clear on the record.
    Mrs. Black. If you will just answer this question, because 
we both have the same idea that we want to preserve it for 
those that are in it and protect it for future generations. But 
I just want to set the record straight that you cannot keep 
calling it something that it is not.
    Mr. Zients. Okay.
    Mrs. Black. So I appreciate that.
    Mr. Zients. And from my perspective, we cannot shift costs 
to seniors.
    Mrs. Black. Look, we agree on that. We agree on the cost 
shifting. But what we do not agree on is the way in which we 
get there, and you and others keep confusing that. And so I 
just want to set it straight, so now if you will answer my 
question on this. Thank you.
    Mr. Zients. We will work on the vocabulary. At the same 
time, I think there is a fundamental difference, and if the 
president wants to reform Medicare to maintain Medicare and 
sustain Medicare as we know it.
    Mrs. Black. Sir, I am not arguing with you on that point. 
What I am trying to make clear is there is a definition that is 
very clear, and it is in literature that it is clear. The 
difference between a voucher and a premium are different, and I 
just want to make clear, one more time, that what is being 
represented about what we have in our plan is absolutely a 
premium support and not a voucher. So if you could answer me 
about why these additional positions are needed.
    Mr. Zients. So on specific positions, I am not sure exactly 
what you are looking at. What I will say is that the Department 
of Health and Human Services is very focused on implementing 
the Affordable Care Act, which will provide insurance for 30 
million Americans who do not have it today, and will, according 
to CBO, save $100 billion in the first decade, a trillion in 
the second decade. So there is a focus on implementation of ACA 
within the HHS budget. On the specific numbers, my staff will 
follow-up with yours.
    Mrs. Black. Okay, great. And in addition to that, what I 
would really like to know, is you talk about it as the 
implementation, but once it is implemented, are these going to 
be permanent positions? Because if they are there for 
implementation, then I want to know, are these permanent 
positions that we are going to have to on funding year after 
year after year? And so I appreciate your getting back to me on 
that.
    Mr. Zients. We will do so.
    Mrs. Black. Thank you, Mr. Chairman. I yield back.
    Mr. Price. Thank you for yielding back. The gentleman from 
Wisconsin, Mr. Pocan, for five minutes.
    Mr. Pocan. Thank you, Mr. Chairman. And thank you, Mr. 
Zients, I appreciate you being here. I am one of the new folks 
around here, which I think for this discussion I want to 
translate to I have spent a lot more time in Wisconsin than I 
have in Washington, and maybe I can look at things a little 
differently. You know, when I talk to the small business owners 
and folks back home, you know, the economy and getting jobs is 
still the biggest focus. And when we are here doing our 
training, we find out from the Congressional Budget Office that 
three-quarters of our deficit next year, the country's deficit, 
is due to economic weakness, needing to deal with unemployment 
and underemployment. So I think the fact that your budget is 
doing that, I do not care if it is on time, or if it just 
addresses the Holy Grail of deficit reduction without dealing 
with the economy or anything else, you are dealing directly 
with the economy while you are doing the deficit reduction that 
is responsibly laid out.
    Specifically, a couple programs I just want to highlight 
that I really appreciate from people back home I am talking to, 
the increase in funding for non-defense research and 
development. The University of Wisconsin just was out there 
last week. We had a lot talks with folks. The sequester is 
killing them on the NIH funding. The jobs lost and the 
programs, we appreciate that. The $50 billion for 
infrastructure: I was on our Joint Committee on Finance, and we 
had to approve every single dollar of the last recovery 
dollars. We had a report just from our road-building industry 
that 54,000 jobs were saved or created in Wisconsin back when 
that happened, so we know that that has got the potential. The 
small business tax credit for hiring new workers is going to be 
very valuable. Focusing on advanced manufacturing and keeping 
those jobs in America, and then finally replacing the job-
killing sequester.
    So, there is a lot of really sound, solid, good measures, I 
think, that much like our House Democratic budget proposal 
really deals with stimulating the economy and creating jobs. I 
do have to say, though, there is one part that kind of takes a 
little bit of a negative turn in the budget proposal, and I 
think that is the chained CPI proposal. I just have a couple 
questions around that.
    You know, I think, as you can tell from today, that you put 
forth a budget that offered a compromise before you have 
actually sat down to compromise with folks. So I think you have 
already seen some of the reaction on that. And, you know, I 
look at this, and I called my mother and woke her up this 
morning to ask her exactly what she makes on Social Security 
per month. She is 84. I grew up in a lower middle class family. 
They have a modest home. But she gets $1,101 a month at 84. And 
then I went through some of her bills with her and where she is 
at in her savings. It is just not a lot. And to try to address 
Social Security in that way, to me, seems to be breaking our 
promise to seniors.
    But let me ask you this specifically, because this is an 
alternative proposal that none of us have looked at, which is 
if we lifted the cap on revenue in Social Security taxes, it is 
currently at $1,137. I guess the question is, one, do you know 
how much that would generate if we did lift the cap entirely. 
Two, what longevity that would have, because, as I understand 
it, it could about 75 years longevity. And just three, where 
the White House would be on a proposal like that, because, 
again, I think you have compromised before we have had a chance 
to sit down and compromise.
    Mr. Zients. Let me first address chained CPI. The president 
has put it into the package because Speaker Boehner and Leader 
McConnell asked for it. He was not willing to do age 67. The 
president, as part of a balanced, comprehensive deficit 
reduction package, included CPI. The other condition, however, 
is to protect the most vulnerable, including people like your 
mother, older, Social Security beneficiaries. So there is a 
provision: At 76, there is an increase that goes from 76 to 85 
to protect older beneficiaries. So the president is only 
willing to do CPI as part of balanced deficit reduction, the 
full package, the $1.8 trillion, and with these protections for 
older beneficiaries and other vulnerables, the people that are 
vulnerable in our society.
    On your specific ideas, I said earlier the president has 
set out principles for Social Security reform. It is not the 
driver of our current deficit issues. At the same time, we 
should address Social Security reform, and in doing so, he will 
insist upon a balanced approach in terms of any benefit 
changes, would have to be balanced with significant revenue 
increases. But, again, Social Security is not a driver of our 
current fiscal situation. It is solvent through 2033.
    Mr. Pocan. And I could not agree with you more on that 
issue, and I think I just would close with saying perhaps, 
then, we should not have Social Security part of the budget. I 
agree it is a separate discussion, and there are a lot of 
things we could do to extend Social Security, but by including 
it in this discussion and compromising before we have had a 
chance to compromise, I think has somewhat muddied the waters.
    Mr. Zients. I think we have had one crisis after another. 
We need to get deficit reduction behind us. The president is 
serious about it. He included the compromise offer with Speaker 
Boehner as part of his willingness to do hard things and get 
deficit reduction accomplished so we can focus on the economy 
and creating jobs.
    Mr. Price. Gentleman's time has expired. Just by way of 
clarification, the chained CPI, that is in your budget 
proposal, correct? So, it is your proposal, the 
Administration's proposal.
    Mr. Zients. It is part of the $1.8 trillion compromise 
offer.
    Mr. Price. Included in your proposal?
    Mr. Zients. Absolutely, as part of the Speaker Boehner 
compromise offer. And both Speaker Boehner and Leader McConnell 
have asked for chained CPI on multiple occasions, as they also 
asked for age 67. Age 67 is not in our budget.
    Mr. Price. Not in the context of the budget.
    Mr. Zients. I believe age 67 is part of the House 
Republican budget.
    Mr. Price. Those discussions were not in the context of the 
budget, were they?
    Mr. Zients. The Speaker Boehner and McConnell? They were in 
the context of deficit reduction talks. We have had many rounds 
of those across the last few years.
    Mr. Price. Yes. Gentleman from Texas, Mr. Flores, for five 
minutes.
    Mr. Flores. Thank you, Mr. Chairman, and thank you, Mr. 
Zients, for being here. I have some information--I am going to 
have a lot of questions, and so you probably will have to 
provide us the information supplementally, if you would. You 
know, as a CPA, you have to look at the underpinnings of the 
budget because they are what drive the outcomes in many cases. 
And so the important attributes to the federal budget would 
include GDP growth estimates. It would include unemployment 
estimates. It would include inflation estimates, and also 
interest rate estimates. And I have reviewed your budget, the 
president's budget, vis-a-vis the CBO and vis-a-vis Blue Chip 
forecast. And in most cases, it seems like the president's 
budget uses much more optimistic scenarios.
    And so, supplementally, what I would like you to provide is 
two things. One is, how did the president arrive at the 
underlying numbers that he used for his growth forecast in 
inflation, unemployment, interest rate forecasts. And then 
secondly, what would happen to the president's budget if they 
were reset at the CBO numbers? So that is the first thing.
    Mr. Zients. May I respond to that?
    Mr. Flores. No, I need to get through the rest of the 
questions, and if we have time toward the end, we will try to 
do that. But, again, supplemental disclosure would be helpful. 
The goal here, I think, I think you and the president, and we, 
in the House of Representatives, all share the same goal, and 
that is to make the economy grow more quickly. I think we have 
dramatic differences and opinion as to how we get there. And so 
what I would like to see from the president is, how do we grow 
the economic pie in opportunity when we are raising taxes on 
the economy? You know, we are taking tax revenues as a 
percentage of GDP to levels that have not been seen before in 
the economy over the long term. They even, as best I can tell, 
exceed the rates during the Clinton Administration. So how do 
higher taxes generate this economic opportunity?
    The second component is, in particular, if you raise the 
tax on a business, how does that help that business to have 
more capital to invest in people, to invest in R&D, to invest 
in their capital assets, their fixed assets? How does it help 
them to produce more products at a lower cost? How does it help 
them to produce better products at a lower cost? How does it 
help them to produce better services at lower costs? I think 
about the small business woman in Bryan, Texas, who owns a 
chain of laundries, and I think, okay, if we raise the taxes on 
this lady and her business, you know, after ObamaCare is 
already crushing her, and she is not hiring today because of 
the pending implementation of ObamaCare, how is she going to be 
better off, and to be able to hire more employees and pay them 
a better wage, and to invest in a new location, if we are 
raising taxes on her? Let's say that, you know, we tell Apple, 
we are going to raise taxes on you, but we want you to produce 
more of these iPads, and we want you to produce them at a lower 
cost.
    Now, your budget, the president's budget, is basically 
saying that to the oil and gas industry. We are basically 
saying, ``You know, the oil and gas industry, you are a 
targeted bad boy, and so we want to raise the taxes on you, but 
yet, we are going to demand that you produce more gasoline at 
cheaper cost so that Americans can have a better energy 
supply.'' Now, the other goal we ought to be looking at as a 
government is to reduce, well, let's rephrase that, let's put 
the positive spin on it. The government ought to be more 
accountable. It ought to be more effective. It ought to be 
efficient.
    And so, you know, we got a report here from the GAO that 
came out a few days ago. It identifies scores of problems, and 
waste, and fraud, and abuse, and ineffectiveness, and 
duplication, and overlap in the federal government. And so 
supplementally, I would like for the president to produce a 
report about what he intends to do about this. What are the 
things that he would like to do? The other things, let us look 
at the Solyndra-type program, in light of the news about Fisker 
that came out this week. Why do we not have a supplemental 
report from the Administration that talks about the 
effectiveness and the return on taxpayer dollars that came out 
of the Solyndra and its brothers and sisters and siblings. It 
is up over $2 billion now. But why do we not talk about the 
effectiveness of our poverty programs. We have spent $19 
trillion on poverty programs since the war on poverty started, 
but yet we have got more people in poverty today, more people 
on food stamps today.
    So if you could provide that supplementally, I would 
appreciate it. Thank you, I yield back.
    Mr. Price. Thank you, the gentleman's time has expired. 
Gentlelady from New Mexico, Ms. Lujan Grisham for five minutes.
    Ms. Lujan Grisham. Thank you, Mr. Chairman. And thank you, 
Director, for being before us today. And like many of my 
colleagues, I agree that this budget provides yet a renewed 
opportunity to reinvest in this country, put the economy on a 
positive path. And like my colleague, Mr. Pocan, I am spending 
a lot of time in my home state and district in New Mexico, and 
the sequester hits us especially hard. We were identified as 
being one of the worst states to see sequester effects. I have 
to talk to the 2,000 people who have already been furloughed, 
and the countless number of defense contractors and related 
research businesses that are not hiring, that are also 
continuing to lay off, and I think today in our newspaper, we 
are talking about additional layoffs at one of our hospitals. 
We have negative job growth. Stopping the sequester is a clear 
and direct productive impact in a state that does not have any 
other opportunities for fiscal growth, unless that immediately 
is removed from the fiscal equation. So, I am very grateful for 
this effort and this leadership by the Administration, and also 
appreciate that we are looking at health care, and taking care 
of the SGR, and making sure that our safety net programs are 
here for the long haul.
    I also want to clarify that I have a different sense about 
the Republican proposal on Medicare. A voucher is, in fact, 
defined as a record of disbursement or expenditure, and whether 
the public sector, the government in this case, or the private 
sector, has a fixed reimbursement of expenditure tied to a 
premium, is, in fact, a voucher, and it does cost you 
absolutely inappropriately. And my mom, who lives on $1,300 of 
Social Security and relies on Medicare, who just paid nearly 
$200 out of pocket for a prescription drug that is lifesaving 
for her as she leaves the hospital, again, I can assure you 
that these are important investments to maintain.
    I do want to talk a little bit about how we are looking at 
bending the health care cost curve in the president's proposal, 
and I am a little confused about the reduction, the $63 million 
from post-acute care, and recognize that we are concerned, 
maybe, about some of those cost centers for home health and 
related health care services. But without those rehab, and 
therapeutic, and home health care services, you will be 
readmitted to the hospital for this population, or you will 
have longer stays in the hospital, and that is clearly more 
expensive per beneficiary. Can you talk to me about what the 
thinking was about this particular proposal, and why the 
Administration might think that this is an effective way to 
save money in Medicare?
    Mr. Zients. I think that we, across the budget in Medicare, 
wanted to make sure that we are taking advantage of the best 
practices that exist across the country. There is a tremendous 
variation in care. Oftentimes, higher cost does not mean higher 
quality. In fact, there tends to be a correlation between lower 
cost and higher quality. Those are the practices we are looking 
for, those are the providers that we want to make sure are 
rewarded in the system; providers that have high readmission 
rates or quality problems should receive less reimbursement 
than high-quality providers. So what we are trying to do here 
is drive toward that quadrant of high-quality outcomes at a 
lower cost, and, fortunately, there are lots of best practices 
that we have in the country that do just that, and the budget 
is encouraging us to move toward those best practices.
    Ms. Lujan Grisham. Well, I appreciate that and I could not 
agree more that this has to be an investment in outcome and 
quality. When we pick any area of expenditure in the health 
care system and tie that back to a beneficiary, you know, we 
are just trading. You are not really focusing on quality. And 
to say post-acute care needs these reductions is the same as 
saying for the providers who are doing an effective job and the 
whole reason to have that.
    Mr. Zients. So within post-acute care, there are strong 
providers who are providing high-quality care at a reasonable 
price. There are providers who are not performing as well, so 
want to make sure that the strong providers are reimbursed 
appropriately.
    Ms. Lujan Grisham. And I appreciate that. So what I am 
hearing is, and I would love some additional information from 
the Administration, that these are not blanket cuts to areas of 
care that are critical, but these are accountability measures 
that I would like lots more information on because the danger 
is, is that you create a categorical reduction, not an 
investment in high-quality, accountable, efficient patient-
centered care. And I would urge you to be clear and careful 
about those kinds of proposals.
    Mr. Zients. We will follow-up and make sure we provide the 
rationale behind the policies.
    Ms. Lujan Grisham. Thank you. Yield back.
    Mr. Price. Gentlelady's time has expired. Thank you. 
Gentleman from Indiana, Mr. Rokita.
    Mr. Rokita. I thank the Chair, I thank the gentleman for 
being here today. There has been a lot of talk this morning 
about Social Security and the president's ideas around chained 
CPI, and he recently just said that that was put in at the 
request of my leadership and Senate leadership, but I want to 
focus on that a bit because the impression could be left that 
Social Security is not part of our debt problem.
    And I will start off by first acknowledging that there are 
several reasons for our debt problem. Three main drives are 
Medicare, Medicaid, and Social Security. Now, a fourth driver 
is the net interest that continues to grow and that we continue 
to owe ourselves and other countries, countries that do not 
necessarily have our best interests in mind, but theirs. And I 
just read this morning that over the next several decades, Mr. 
Zients, that interest payment, okay, money that we cannot spend 
on anything else but give it away contractually for the money 
we are getting now in credit, could reach $900 billion. Mr. 
Doug Elmendorf, director of the CBO, I know you know was here 
in your seat a couple weeks ago, and we talked about whether or 
not Social Security was actually driving any of these deficits 
or debt, and I want to quote for the record, and then have you 
respond to it.
    In responding, I believe to the Chair, Mr. Elmendorf said, 
``Well, again, Congressmen, on a unified budget basis, taking 
account of just the tax revenues, the dedicated tax revenues, 
and the benefits, it is contributing to the deficit now. If one 
instead looks at just the balance in the Social Security Trust 
Fund, that balance is the annual balance is positive now, but 
will be negative within about a half dozen years. Do you 
acknowledge that? Do you agree with it?
    Mr. Zients. No, I think that Social Security is not a 
driver of our near-term fiscal situation.
    Mr. Rokita. It is not near term fiscal situation of our 
deficits and debt.
    Mr. Zients. The trust fund is solvent through 2033, and the 
trust fund is acting exactly as it was designed to do.
    Mr. Rokita. But you talked earlier about manufactured 
crises and crises that you had to deal with. Why wait for this 
crisis to occur?
    Mr. Zients. I think the president has reiterated in budget 
after budget his desire to do Social Security reform. But let's 
be clear: That is a different path, a different track from our 
current deficit discussions. Right now we should be doing the 
$1.8 trillion deficit reduction package that is in the 
president's budget, and once we get that behind us, Social 
Security reform could be part of the next conversation.
    Mr. Rokita. While we are talking about the drivers of our 
debt, let me ask you about Medicaid. You talked about Medicaid 
in the budget, and at least you acknowledge that there can be 
some reforms made there. And I think you focus most on the 
waste, fraud, and abuse, which I would agree with you is 
important. But that is about all you do. Do you think that 
Medicaid is part of our deficit and debt problem?
    Mr. Zients. Medicaid provides needed health care to tens of 
millions of people. As you know, it is a partnership with the 
states. It works well.
    Mr. Rokita. Let me stop you there. It works well?
    Mr. Zients. Meaning it provides a much-needed care.
    Mr. Rokita. You want to increase it by a third, I think you 
said.
    Mr. Zients. Well, as part of expanding coverage of the ACA, 
absolutely. Now, the cost per Medicaid beneficiary on a per 
capita basis, the increase has been quite low. So, the increase 
you see here is the expansion to give people who do not have 
health care coverage health care coverage through the 
Affordable Care Act.
    Mr. Rokita. Are you aware that if you go under the knife as 
a Medicaid recipient, you are 13 percent more likely to die 
than if you had no insurance at all?
    Mr. Zients. I do not know that statistic.
    Mr. Rokita. Do you think that is a program that works well? 
Medicaid, this is the program that is supposed to provide 
health care for the poor. Excuse me, reclaiming my time. It is 
the core of our social safety net. If anyone needs health care, 
it is people who cannot do it for themselves, who are 
destitute, and they are 13 percent more likely to die if they 
have a surgery.
    Mr. Zients. So your budget would kick 20 million or so 
people off of Medicaid, would deny coverage for 30 million 
Americans that will receive it through the Affordable Care Act.
    Mr. Rokita. No, no, no, that is not right. Reclaiming my 
time. Chairman, can I have order, please. Chairman, can I have 
order? Reclaiming my time.
    Mr. Price. Gentleman from Indiana reclaims his time.
    Mr. Rokita. What we do is give flexibility for the states 
so that they can determine who is poor. What ObamaCare does is 
make the middle class take Medicaid. Middle class, by even your 
definition, sir, is not poor. These programs have to be around 
for those who need it, and you are doing exactly the opposite. 
I yield back.
    Mr. Price. Gentleman's time has expired. Gentleman from 
California, Mr. Cardenas, is recognized for five minutes.
    Mr. Cardenas. Thank you very much. I would like to ask you 
a question about the tobacco tax, and the purpose of having 
that increase in tax. Would we provide more preschool to more 
children with or without an increase in cigarette smokers if we 
include this tobacco tax? Do you understand my question? So say 
this tobacco tax is implemented, and we raise the tax on 
cigarettes; now whether or not we have an increase in cigarette 
smokers or not, with that increased tax, are we likely to 
educate more preschoolers?
    Mr. Zients. So let me step back and explain what the 
tobacco tax is about. It is adding 94 cents to a pack of 
cigarettes and to other tobacco products of a proportionate 
amount. What this does is it raises revenue. It also 
discourages teenagers from taking up smoking, and encourages 
people who are smokers to quit. So we will have fewer smokers. 
At the same time, we will continue to have some people who 
decide to smoke, will pay the tax, and therefore we will have 
pre-K for many millions of American children who do not receive 
it today.
    Mr. Cardenas. Yeah, so, now to my question, so therefore 
with that increase in that tobacco tax, we are likely to see 
more preschoolers get educated?
    Mr. Zients. I do not think likely; we will.
    Mr. Cardenas. Okay. Thank you for pointing that out. I did 
not want to put words in your mouth.
    Mr. Zients. I absolutely understand. Millions of American 
kids will receive pre-K, and pre-K is a fabulous investment. 
Study after study shows the positive impact of pre-K education 
on children.
    Mr. Cardenas. And if we are going to educate our workforce, 
is it not great to start in pre-K?
    Mr. Zients. Absolutely.
    Mr. Cardenas. Yes, the benefits are tremendous. As a former 
employer myself, I agree with that 1,000 percent. If you were 
to witness the legislative bodies go to conference on the 
budget, do you think that is a good thing?
    Mr. Zients. Absolutely. I think we should return to regular 
order and go to conference.
    Mr. Cardenas. Okay, thank you. As a former chairman of the 
budget conference committee in the state of California, I think 
that it is a wonderful part the legislative process. It is 
unconscionable that a legislative process would do without 
that, and I hope that we do get back to that here. When it 
comes to infrastructure investment, is it more cost effective 
for us to fix our infrastructure now or just put it off until 
later?
    Mr. Zients. Well, I think that it is always better to it 
now.
    Mr. Cardenas. But why, does it cost more later?
    Mr. Zients. In this particular moment, we have high 
unemployment, particularly amongst construction workers. We 
have an opportunity to put people back to work. And then we 
start to get the benefits from having the improved 
infrastructure in terms of small, medium, and large businesses 
competing, serving not only consumers in this country, but 
throughout the world.
    Mr. Cardenas. Yes. So to my point on the infrastructure 
investment, on top of what you just said, which I agree with, 
you are absolutely accurate, is if we need to fix a bridge or a 
road today, it is eroding every day, every month, every year, 
and if we put it off, to fix that same road or that same of a 
bridge, there is no question, it is more expensive to do it 
later, just on the cost outlet.
    Mr. Zients. Yes. Absolutely.
    Mr. Cardenas. And also on the benefit factor, it is more 
expensive to put it off, because, as you pointed out, business, 
which we all care about here, gets less benefit, and they tend 
to have to deal with that lagging of the structure longer.
    Mr. Zients. We should immediately invest in infrastructure 
to improve our competitiveness and put people back to work.
    Mr. Cardenas. Well, if you could please thank the president 
on my behalf for the budget that he has put forward, because I 
think the president's budget, unlike the Republican strategy, 
the Republican budget seems to focus on deficit reduction and 
not on investing in creating more jobs, and the president's 
budget focuses on educating our children and making sure that 
we are strengthening our workforce, which, as a result, grows 
our economy today going forward. The president's budget is 
actually brave enough to invest in our American children and 
our American workers today, rather than putting it off for 
focusing almost exclusively on deficit reduction. And I think 
the best way for us to reduce the deficit is to actually get 
back into making sure that we are educating our workforce, we 
are creating a workforce of tomorrow that is better prepared to 
compete in the world, and then for us to regain our position as 
the power base of, you know, production on this planet. So 
thank you so much.
    Mr. Zients. Well said.
    Mr. Price. Gentleman's time has expired. Gentleman from 
South Carolina, Mr. Rice, five minutes.
    Mr. Rice. Thank you, Mr. Chairman. Thank you, Mr. Zients, 
for being here. I appreciate very much your willingness to come 
and put your light on the president's budget for us. I want to 
start out with a definition of terms. When I say ``balance,'' I 
mean the revenue should be equal to the expenses, or expenses 
should be less. And when you say ``balance,'' you mean we need 
to have a tax increase.
    Mr. Zients. When I say balance, I say that we should have 
spending cuts and revenue. That is a balanced approach.
    Mr. Rice. Where you are saying revenue, you mean a tax 
increase?
    Mr. Zients. Yes. Not a tax rate increase, tax reform.
    Mr. Rice. Yeah, but we are talking about more tax dollars 
paid in by taxpayers, that is what you mean?
    Mr. Zients. By closing loopholes and getting rid of 
unnecessary tax expenditures.
    Mr. Rice. So when listeners hear you say ``balance,'' they 
need to think tax increase, because that is what we are talking 
about.
    Mr. Zients. I think the right way to think about it is a 
balanced approach, which is spending cuts and tax increases.
    Mr. Rice. The right way to think about it, wrong way, or 
whatever, it is a tax increase.
    Mr. Zients. And just to review the record, we have had $2 
dollars of spending cuts for every dollar of revenue.
    Mr. Rice. Two years ago, the president, with ObamaCare, 
achieved a balance, I mean a tax increase, most of which has 
not hit yet. It is going to hit beginning of next year. And a 
lot of those taxes hit what he calls middle class families and 
everybody else. Now, three months ago we had a balance, I mean 
a tax increase, under the fiscal cliff arrangement, and now we 
sit here with this budget, which imposes another balance, not 
balance, I meant tax increase over the next 10 years, and you 
just said a minute ago that even under this proposal that we 
are not making entitlement programs sustainable, but, in fact, 
we need to have another conversation after this balance, I mean 
tax increase, gets done. And I assume that we are going to 
balance again and increase taxes to make our social program 
sustainable. I assume we are talking about doing that this year 
as well.
    So, we are going to have the ObamaCare tax increases hit. 
We are going to have the fiscal cliff tax increases hit. We are 
talking about more tax increases right here. And when we get 
down to entitlement programs, which is really where we need to 
start, we are going to have another conversation about more 
balance or tax increases, and I assume we are talking about all 
of this this year. This is a mighty, mighty broad-reaching 
balance for this year, is it not? I have been a tax lawyer for 
25 years. I have never seen anything like this. This is not 
leadership. I mean, we need to have a long-term plan. We have 
got to stop this piece-meal, small bites, you know, no long-
term thought. We have got to give businesses certainty. Is 
there any wonder why the economy is limping along when nobody 
knows what the rules are or what the rules are going to be? And 
in this plan, we are talking about putting the debt tax back to 
where it was, what, three years ago? We have got to have a 
long-term vision, we have got to come to some kind of agreement 
on it, and we have got to move forward, or we can expect that 
the economy will continue to limp along, that employment will 
continue to lag, and that our competitors worldwide will 
continue to get an advantage over us.
    Now, one question. We have already had our credit rating 
decrease once because we have been unable to sufficiently deal 
with our debt problems. And under your scenario, the deficits 
continue, and the amount of our debt as a percentage of GDP, I 
think out of the chart that has been up earlier, remains at 90 
percent throughout this 10-year period. I promise you that our 
creditors around the world are watching us, and I promise you 
that the credit agents, the credit rating agencies are watching 
us. Let us just assume the president did put this thing forth 
in front of a resolution, and by some miracle, it got passed; 
what do you think that would do to our credit rating? Do you 
think it would be downgraded again, because I am afraid it 
would be the next day.
    Mr. Zients. Absolutely not. First of all, the 90 percent 
chart is not the right way to look at debt; the right way to 
look at debt is debt held by the public.
    Mr. Rice. I thought you said percentage of GDP is the way 
you wanted to look at it.
    Mr. Zients. That was gross debt, so that includes intra-
governmental debt. I do not think that is the right way to look 
at debt. CBO, others would agree the right way to look at debt 
is debt held by the public. That is not at 90 percent for point 
number one. Point number two, debt on a declining path is 
exactly what the credit agencies are looking for. What will 
potentially put, potentially put, our credit rating at risk 
would be a manufactured crisis around the debt ceiling.
    Mr. Rice. Well, we will manufacture them every three 
months. We do not have any long-term plan.
    Mr. Zients. The president is very clear, he will not 
negotiate around the debt ceiling.
    Mr. Price. Gentleman's time has expired. Gentleman's time 
has expired. Gentleman from New York, Mr. Jeffries, for five 
minutes.
    Mr. Jeffries. Thank you very much, Mr. Chairman, and thank 
you for your testimony to date. I want to spend some time 
talking about the president's proposal, but on this question of 
debt and how we arrived at this moment in time, am I correct, 
or is it fair to say that the 2001 Bush tax cut that was not 
paid for at the time by this Congress added to this country's 
debt burden?
    Mr. Zients. Well, what you have cited, there were two wars 
that were not paid for and a prescription drug plan that was 
not paid for.
    Mr. Jeffries. And as a result of the collapse of the 
economy in 2008, we took a $22 trillion hit, by some objective 
estimates, then necessitating a substantial bailout by this 
Congress of financial institutions, and then a stimulus 
package, both of which presumably also added to our debt 
burden. Is that correct?
    Mr. Zients. Yes.
    Mr. Jeffries. Now, as it relates to the forward-looking 
plan for the future that you have articulated that I believe 
would, total, $4.3 trillion in deficit reduction over the next 
10 years. That does seem to me to be a forward-looking plan 
despite suggestions to the contrary. We are at a very peculiar 
situation as it relates to our recovery under the president's 
administration. We have gotten 6 million private sector jobs 
that have been created. We have got corporate profits at a 
record high. We have got the stock market at near all-time 
highs. The productivity of the American worker is at an all-
time high, certainly has increased over the last several years, 
yet unemployment remains stubbornly high itself. It has gone 
down, but remains stubbornly high. Why is it that we have got 
some economic indicators that seem to suggest we are doing 
well, but others that suggest we still have a ways to go, and 
how does the president's plan deal with this circumstance?
    Mr. Zients. I think we are making progress. It is 6.5 
million jobs, 14 straight quarters of GDP growth, but we need 
to do more. Unemployment is, as you said, stubbornly high. We 
need to make the investments in infrastructure that we have 
talked about, in education, in R&D. At the same time, it is 
important that we put the country on a sustainable fiscal path. 
So the president's plan is first and foremost about getting 
people back to work, ensuring that we make the appropriate 
investments, that our economy performs at its full potential. 
We need to turn off the sequester as soon as possible. That is 
costing us hundreds of thousands of jobs, it is a self-
inflicted wound. We need to stop manufacturing these crises, 
that when you meet with CEOs of small companies, medium-sized 
companies, large companies, they are weary of investing because 
they do not know what next is going to come out of Washington. 
So we need to deal with our fiscal situation, get something 
done. The return to regular order is a good development, and 
let this economy work, and let people work, and let America 
live up to its full potential.
    Mr. Jeffries. Well, I commend the president for putting 
forth this budget, as well as his effort to, in good faith, I 
think, present a plan that both sides might take issue with in 
different areas, but it is designed to create common ground. As 
it relates to this issue of manufactured crises, is the problem 
that if our creditors conclude that we do not have the ability 
in the United States of America to manage our affairs in an 
orderly fashion, that that loss of confidence at some point may 
result in an increase in the interest that we are paying on our 
debt moving forward?
    Mr. Zients. Well, it is picking up where I left off over 
here, when we talk about a downgrade. The downgrade happened 
because of a manufactured crisis around the debt ceiling. The 
president has been very clear that we are not going to 
negotiate around the debt ceiling. If the debt ceiling needs to 
be increased to take care of spending that has already been 
passed by this Congress, and therefore, we should be not 
manufacturing crises like the sequester, we should be turning 
the sequester off. We should be making sure that we do not lose 
hundreds of thousands of jobs. Washington should return to 
regular order, and we should let businesses and the American 
consumer have the confidence that Washington is not going to 
manufacture a crisis and get in the way.
    Mr. Jeffries. Thank you. Yield back the balance of my time.
    Mr. Price. Thank you, sir. The gentlelady from Tennessee, 
Ms. Blackburn, for five minutes.
    Mrs. Blackburn. Thank you, Mr. Chairman. Mr. Zients, thank 
you for being here. I will tell you, some of us like regular 
order and we like the rule of law. And I have got four quick 
questions for you. Let me ask you first, Section 49903(a) of 
Title 49 in the U.S. Code statutorily defines law enforcement 
personnel as individuals authorized to carry and use firearms 
are vested with the police power of arrest and are identifiable 
by appropriate markings of authority. So, with sequestration 
and our debt crisis in mind, and you have talked about 
sequestration a lot today, should federal agencies spend 
federal funds on law enforcement uniforms for federal employees 
that do not meet this definition in our law, yes or no?
    Mr. Zients. I do not know enough about the topic. We can 
follow up.
    Mrs. Blackburn. You need to follow up. Well, do you believe 
that the federal agencies should follow the law?
    Mr. Zients. Absolutely. I think federal agencies are 
following the law in how they are implementing the sequester.
    Mrs. Blackburn. Okay. Should their spending practices be 
consistent with federal law?
    Mr. Zients. We have worked with agencies, agency 
leadership. The guiding principle here is mission first. So as 
agencies implement these difficult sequester cuts, they are 
putting their mission first and foremost.
    Mrs. Blackburn. Okay.
    Mr. Zients. Individual decisions are up to the agency 
leadership. So if there are specific questions you have for a 
department, we can direct that to the secretary of that 
department.
    Mrs. Blackburn. Okay, well, I know you have a business and 
a consulting background. So let me ask you this. Based on your 
training and your work history there at OMB, should they 
provide you with a federal law enforcement uniform even though 
you have no federal law enforcement training?
    Mr. Zients. I do not think I would do very well in a 
federal law enforcement uniform. So, no, I do not think I need 
the uniform.
    Mrs. Blackburn. Sounds good. All right, airline industry, 
let me ask you about this. They have lost about $50 billion and 
a third of their workforce over the past decade, but looking at 
TSA since '07, their budget has increased 18 percent. So that 
is a double digit increase, despite the fact that in 2012 U.S. 
airlines and passengers paid that agency $2.2 billion in taxes 
and fees. That was a 50 percent increase over what had been 
collected in '02. So should TSA receive increased funding when 
passenger traffic over the past decade has declined by 30 
million passengers a year?
    Mr. Zients. Well, TSA obviously provides an invaluable 
service. As to specifics around the TSA budget, the volume I 
would defer to Secretary Napolitano.
    Mrs. Blackburn. Okay. Let me ask you this, too. I received 
the budget yesterday on behalf of the House, and, you know, it 
was late. You had said in your January 11th letter to Chairman 
Ryan that you were going to have it done as soon as possible. 
Well, it was 65 days late, 65 days and 45 minutes exactly from 
the deadline that it was to be here, but at 98 days later, do 
you consider that to be as soon as possible considering that 
the House has already done its budget, the Senate has done 
theirs.
    Mr. Zients. As you know from having received our budget, it 
is extremely detailed. It is thousands of pages, a different 
exercise than your budget exercise by design. Given what 
happened with the fiscal cliff crisis at the end of the year, 
and then the sequester, those had major impacts on our budget 
process. I will assure you that the people at OMB worked very 
hard to deliver the detailed budget that you received 
yesterday, and we are happy to be here today to talk about it.
    Mrs. Blackburn. And 98 days was as soon as possible as it 
could get here?
    Mr. Zients. Absolutely.
    Mrs. Blackburn. And they know they are going to have to do 
this every single year.
    Mr. Zients. We do the budget every single year. I hope we 
do not have a fiscal cliff negotiation and a sequester 
negotiation every year.
    Mrs. Blackburn. If we did a better job managing our funds, 
we probably would not have those negotiations. Let me ask you 
about the Department of Commerce. You requested $8.6 billion in 
discretionary spending for them for fiscal year '14, and it is 
a 26 percent increase since Obama first took office. So knowing 
that we have got these difficult fiscal environments, and you 
are talking about the fiscal cliff issues and the difficulty of 
sequestration. So why can we not support a simple 2 percent 
reduction?
    Mr. Zients. Overall discretionary spending with the BCA cap 
is being driven to the lowest level since the Eisenhower 
administration.
    Mr. Price. Gentlelady's time has expired.
    Mrs. Blackburn. And I thank the gentleman. I yield back.
    Mr. Price. Gentleman from Oregon, Mr. Schrader, for five 
minutes.
    Mr. Schrader. Thank you, Mr. Chairman. I appreciate it. 
Well, I want to thank you for being here, Mr. Zients, you are 
going to be sorely missed. Moving on here, I would also like to 
congratulate the president for being the adult in the room. We 
do not have, as I look at his budget, a purely Democrat budget 
or a purely Republican budget. We have a budget that tries to 
bridge the gaps, something this country sorely needs. More 
specifically, does the president go after deficit reduction by 
doubling down on the domestic sequester like the Republican 
budget does, that would cost 750 jobs?
    Mr. Zients. Absolutely not. The sequester is a terrible 
policy. It was never intended to be implemented. It was meant 
to be so terrible that it would force balanced deficit 
reduction. The president's budget has more than enough balanced 
deficit reduction to replace the sequester. The sequester is 
hurting our growth by anywhere from a half to a full percent of 
GDP, and will cost us hundreds of thousands of jobs.
    Mr. Schrader. Does the president's well-meaning attempt to 
reduce our deficits, national deficits, cut Pell grants or 
double student interest loan rates like the Republican budget 
does?
    Mr. Zients. No, the president has put forth a permanent fix 
to the student loan program.
    Mr. Schrader. Does the president try and reduce our 
national deficits by block granting Medicaid not adjusted for 
medical inflation or actual case load?
    Mr. Zients. No.
    Mr. Schrader. Like the Republican budget does?
    Mr. Zients. No, the president does not believe in block 
granting Medicaid and the Republican budget also cuts Medicaid 
by a third, resulting in more than, I think it is close to 20 
million people losing Medicaid.
    Mr. Schrader. Tell you what I would commend the president's 
notice is an effort out in Oregon where we are actually doing 
an outcome-based approach to Medicaid reform, where we are, you 
know, frankly saying we are going to reduce Medicaid inflation 
rates by 2 percent without cutting benefits.
    Mr. Zients. And I do want to say, per an earlier 
conversation where we ran out of time, the Administration is 
supportive of waivers, demonstrations to improve Medicaid. Like 
any health system, it can get better, but I do think we have to 
recognize the importance of Medicaid for a very vulnerable 
population that without Medicaid would not get help.
    Mr. Schrader. I think incentivizing the states like the 
president is doing is a really smart way to get savings and 
make sure states have that flexibility, just like you 
indicated. Does the president try and produce national deficits 
by entertaining Medicare reforms that rely on the voucher? And 
it is a voucher program. If it looks like a duck, quacks like a 
duck, it is a duck. It is a voucher program, however you want 
to slice it, that shifts two-thirds of the cost to seniors that 
can ill-afford it being on fixed incomes.
    Mr. Zients. No, the president's budget has sensible reforms 
to Medicare, but maintains the program as we know it.
    Mr. Schrader. And is it not true that knowledgeable 
economists want deficits to be actually manageable given the 
state of the country's economy, and that abruptly balancing the 
budget in a short window like the Republicans do actually is 
harmful to the recovery, and causes problems, and cuts jobs in 
this country?
    Mr. Zients. We talked about Europe before and austerity 
budgets. Also, if you look at Bowles/Simpson and the other 
groups, there is a balanced deficit reduction that phases in 
across time as the economy recovers.
    Mr. Schrader. I mean, in the real word, colleagues, in the 
real world here we need to compromise. We are actually going to 
have a budget deal at the end of the day here. We actually have 
to compromise, and look at each other's opinion, and validate 
the fact that this is a big country, everyone has a different 
view of the world. You know, moms and dads across this country 
have to figure out what to do and come to reasonable 
accommodation. Business men and women come to a deal every 
single day. I think in the real world we need to get past these 
talking points. You know, it is time for this adult 
conversation, actually deal with our rising health care costs, 
and the fact that we have an aging population in this country 
that is putting a burden on our revenue system like we have not 
seen in a long, long time.
    I think the president has laid down a very, very reasonable 
compromised marker, one that he and the speaker had nearly 
worked out to completion last summer. I hope the conversation 
picks up from here. We go to conference, and the cooler heads 
prevail, and we actually, like the folks in the no-labels group 
do, try and understand one another's problems, and fix this 
country once and for all. It is time to save our country, 
folks, and I yield back.
    Mr. Price. Wish to commend the gentleman from Oregon for 
yielding back with 45 seconds left. The gentleman from Texas, 
Mr. Williams, for five minutes, please.
    Mr. Williams. Thank you, I am a small business owner, still 
own a business, 41 years, and I ran because I did not think 
that there was a lot of people defending small business 
entrepreneurships in competition, and I have got to say after 
hearing this testimony today, I am glad I ran. And I will tell 
you, I come from Texas. And in Texas we always thought 
President Obama, that sequester was his program. We talk about 
how bad it is. I think that that is where it started. A couple 
of questions real quick, they will be easy to answer. Why does 
your budget not balance?
    Mr. Zients. Our budget is the right fiscal path for this 
period of time, because it supports jobs and the economy, while 
at the same time bringing our deficits under control.
    Mr. Williams. So that is your reason it does not balance, 
okay. Tax increases, as a business owner, I can tell you, tax 
increases have put us further in debt. That is just any way you 
want to look at it. Why not tax reductions across the border to 
create more revenue, and have the private sector and small 
businesses grow? In other words, why should America have one of 
the highest tax rates in the world, when we are trying to be 
competitive? Why should the highest tax rates be something we 
are happy with?
    Mr. Zients. Let me say a few things. First of all, I, too, 
come from the private sector. I was in the private sector for 
22 years, and much of that time was during the Clinton period 
of time.
    Mr. Williams. You are cutting into my time. I want to ask 
you the questions.
    Mr. Zients. Okay, 97 percent of businesses are not impacted 
by any of the president's tax reform proposals, 97 percent. For 
corporations, the president does favor tax reform, tax reform 
that encourages investment in this country like the RNE tax 
credit, where it is only given for investment here.
    Mr. Williams. Do you not think we ought to have lower taxes 
to compete?
    Mr. Zients. The president has put forward tax reform where 
his target tax rate is 28 percent for corporations, 25 percent 
for manufacturing. So the president is in favor of tax reform, 
getting rid of loopholes and expenditures that encourage or 
give awards.
    Mr. Williams. You might want to get that word out to the 
small business owners because they are not getting it. They are 
scared to death. The next question I have is has any budget the 
president prepared ever been ahead of vote of confidence or had 
a vote to support it?
    Mr. Zients. Well, as we talked a bunch, we are all excited 
about getting back to regular order.
    Mr. Williams. I was just asking, has he ever had a budget 
that anybody supported?
    Mr. Zients. People support his budget, yes.
    Mr. Williams. Okay. Now, you are going to the private 
sector. You started talking about your private sector 
experiences. If you believe so much in this budget and this 
accounting, are you going to use that accounting when you go in 
the private sector, and will you borrow more in your new 
business than you take in?
    Mr. Zients. Well, I will go to the bottom line, and the 
bottom line in this budget is that we have deficits on a 
declining path, debt is on a declining path. At the same time, 
we make important investments to create growth.
    Mr. Williams. But I am talking about your future career. 
Are you going to deficit spend? Are you going to go to your 
banker and say, ``I am losing money, but I need more money''? I 
mean, are you going to do that?
    Mr. Zients. What I am going to do is I am going to try to 
grow my business, same way we need to grow this economy, create 
jobs, be competitive, make important investments in things like 
infrastructure and R&D.
    Mr. Williams. Well, that is fine. What is the threshold of 
tax that this president thinks the private sector convey? How 
high is it?
    Mr. Zients. Well, I want to be clear that there is no tax 
rate increase in the president's budget. There is no tax rate 
increase. There is tax reform.
    Mr. Williams. Well, you are not doing a very good job of 
telling the small business owners that.
    Mr. Zients. Ninety-seven percent of small businesses are 
under $250,000 in income, and there have been no tax increase.
    Mr. Williams. You know what? And they want to be more than 
250,000. Your situation is making it so people cannot make 
more. Now, they are trying to make 249 instead of 251. It is a 
bad situation.
    Now, we talked about eliminating poverty, but to eliminate 
poverty by putting people to work through the private sector. 
Regulations are killing the private sector. And I am going to 
ask you a question: 7.8 percent unemployment, is it the norm 
now? Is that the new norm? Is 15 percent poverty the new norm? 
Is 18-year-olds to 64 that have not worked one day in a year, 
is that the new norm? Is 15 percent underemployment the new 
norm? Is 99 weeks of unemployment compensation, is that the new 
norm?
    Mr. Zients. No, it is not new norm. What we are trying to 
do in this budget and what we will accomplish in this budget is 
get people back to work and grow this economy. We have made 
progress, 6.5 million jobs created by the private sector across 
the last 37 months, 14 straight quarters of DGP growth. We have 
got a lot of work ahead of us.
    Mr. Williams. The other question is, I went to school in 
Texas, so pardon my simplicity here, but how can you say that 
you have had new job creation when unemployment has gone up, 
when this administration has been, how can you have job 
creation when unemployment continues to go up?
    Mr. Zients. The unemployment rate is lower than when the 
president came into office.
    Mr. Williams. I do not believe it is.
    Mr. Zients. It is 7.6 percent.
    Mr. Williams. I do not believe it is. Mr. Chairman, thank 
you. I yield back.
    Mr. Price. The gentleman yields back. The gentleman from 
New Jersey, Mr. Pascrell, for five minutes.
    Mr. Pascrell. Thank you very, Director Zients, thank you 
for your testimony today. I find interesting questions, 
interesting responses, but I do know, and I am pretty positive 
since I checked it with three different sources, that the 
unemployment rate, which is too high, is lower than when this 
president raised his hand.
    Mr. Zients. Yes.
    Mr. Pascrell. Am I correct, Mr. Zients?
    Mr. Zients. That is consistent with what I just said, yes.
    Mr. Pascrell. Okay. I think that the president should be 
applauded for his proposals to not only invest in science, but 
his proposal to make sure that we reward those corporations and 
companies who want to bring jobs back to the United States of 
America. I am glad that he has stuck with that proposal which 
he made in the state of the union address last year, and he has 
repeated it this year.
    But we are kidding ourselves if we think that any sort of a 
decrease in Social Security payments is a good idea. This 
program was intended to be just one of the ways in which people 
were insulated from poverty in their old age. But pensions and 
savings have eroded dramatically. We all know that. According 
to the Social Security Administration, 51 percent of the 
workforce has no pension coverage whatsoever, none, and that 
number is going to increase, we do know that. And 34 percent of 
the workforce has no savings set aside for retirement. I think 
we know that wages today do not keep up with costs, and that is 
why our president included a raise to the minimum wage. And we 
can debate that, but I think he is sensitive to the fact that 
wages are not keeping up to the increase in certain costs.
    Cutting the benefits our seniors rely on is not how we 
should balance our budget, or try to balance the budget. The 
average retired worker is receiving $1,262 a month. That 
benefit is critical to a livelihood. They have worked for it, 
by the way. Among elderly beneficiaries, 74 percent of 
unmarried people rely on the check for either half or more of 
their income. I mean, that is a fact. We can cite many other 
facts. But why in God's name would we lead this budget in 
determining that we are going to cut benefits in order to 
reduce this deficit? With the current economic difficulties 
facing seniors, what specific protections will the budget 
include to ensure that those seniors who rely primarily on 
Social Security benefits, and more and more do that every year, 
Mr. Director. So how are we going to protect these seniors? You 
tell me.
    Mr. Zients. Well, first of all, the chained CPI was 
included in the compromise package.
    Mr. Pascrell. Yeah, I heard you say that before. Let's not 
blame the other side. This is our budget.
    Mr. Zients. I think it is also important, this is a cut in 
benefits.
    Mr. Pascrell. It is a cut in benefits.
    Mr. Zients. It is not a cut in benefits. It is a decrease 
in the annual increase of inflation to a benefit.
    Mr. Pascrell. But you are recalculating. Let's go to point 
one that you just made.
    Mr. Zients. The benefit, when you go on Social Security, 
starts at the same level. The annual increase will be pegged to 
chain CPI, which could result in a lower increase.
    Mr. Pascrell. But senior inflation is very different than 
inflation for you. Do you recognize that in chained CPI?
    Mr. Zients. Let me go to a second important point. The 
president is only willing to do this if there is protection for 
older beneficiaries. So at age 76, there is a bump up that will 
equal to 5 percent of the benefit for all seniors. So there is 
an older beneficiary increase to protect older beneficiaries. 
This is consistent with Bowles/Simpson and other groups.
    Mr. Pascrell. Thank you, Mr. Chairman. I had a lot of other 
questions.
    Mr. Price. The gentleman's time has expired. The gentleman 
from Wisconsin, Mr. Duffy, for five minutes.
    Mr. Duffy. Good afternoon, Mr. Director. I was not sure if 
it was morning or afternoon. I know you were talking a lot 
about chained CPI. When does Social Security go insolvent?
    Mr. Zients. Social Security solvency is through 2033.
    Mr. Duffy. 2033, and Medicare solvency goes to 2023.
    Mr. Zients. I do not think so with the president's budget.
    Mr. Duffy. Per CBO, currently, it is 2023 for solvency of 
Medicare, right? Does CBO say that? Yes, right, it is 2023 for 
CBO solvency for Medicare.
    Mr. Zients. Right, but we are here talking about the 
president's budget, which extends that late into that decade.
    Mr. Duffy. That is right. So I am going to get to that. So 
in your budget, you are proposing a change to Social Security 
that is solvent for 10 years longer than Medicare. And what 
changes you make in Medicare? No structural changes really.
    Mr. Zients. Oh, absolutely.
    Mr. Duffy. You are cutting benefits to providers, doctors, 
hospitals, and clinics, but you are not structurally changing 
Medicare that really fixes the problem, are you?
    Mr. Zients. Well, first of all, chained CPI does not just 
apply to Social Security, it applies to many government 
programs, point number one.
    Mr. Duffy. But it does involve Social Security, right? Does 
it involve Social Security?
    Mr. Zients. Yes.
    Mr. Duffy. Yes, and does it affect Medicare? Listen, I am 
asking the questions. Does it affect Medicare?
    Mr. Zients. At a very small basis, yes.
    Mr. Duffy. Right. And so why are you not focusing on fixing 
Medicare?
    Mr. Zients. Well, that is what I wanted to explain.
    Mr. Duffy. Great.
    Mr. Zients. We have $37 billion of savings, including 
increased premiums for high income beneficiaries.
    Mr. Duffy. Great. So, now, hold on.
    Mr. Zients. It saves a trillion dollars in the second 
decade.
    Mr. Duffy. That brings you to solvency to what year?
    Mr. Zients. Late into the 2020s.
    Mr. Duffy. I thought it was an additional four years, 
right?
    Mr. Zients. That is late into the 2020s, yes.
    Mr. Duffy. Okay. So if this is your proposal, to say this 
is our plan, these are our priorities, you really have not 
protected our seniors, have you? You have not put out a plan 
besides cutting reimbursements that go to the benefit of our 
seniors to actually save the programs.
    Mr. Zients. To your point, we have extended Medicare 
solvency, and most importantly, we have protected Medicare as 
we know it.
    Mr. Duffy. Mr. Chairman, could the witness answer the 
question?
    Mr. Price. The gentleman from Wisconsin controls the time.
    Mr. Duffy. Do you care about fixing Medicare and saving it?
    Mr. Zients. Absolutely. We want to save Medicare as we know 
it. We do not want to turn Medicare into a voucher system. We 
do not want to cut cost.
    Mr. Duffy. Then why do you not put out a plan that saves 
Medicare?
    Mr. Zients. We do.
    Mr. Duffy. No, you do not. You have solvency, but you don't 
save it.
    Mr. Zients. We put forward a plan that saves $370 billion 
in this period of time, extends solvency, and saves over a 
trillion dollars, but most importantly, it means Medicare as we 
know it. It does not turn Medicare into a voucher system.
    Mr. Duffy. Listen. No, no, hold on a second. No, no. You 
cut a trillion dollars in reimbursements for Medicare.
    Mr. Price. Gentlemen, suspend. If the gentleman desires to 
speak instead of the witness, please reclaim your time.
    Mr. Duffy. Very well. You cut a trillion dollars, $716 
billion in Obama care, $300 billion in your budget, and it is 
still not solvent. It still goes broke in 2027. So do you have 
a plan that saves Medicare, protects our seniors, not just 
current retirees, but the next generation retirees? Do you have 
a plan that does that to keep it solvent?
    Mr. Zients. We continue to make reforms to Medicare.
    Mr. Duffy. That is not my question. Do you have a plan?
    Mr. Zients. What we do is we protect Medicare as we know 
it.
    Mr. Duffy. I will reclaim my time. This is a yes or no. Do 
you have a plan that saves Medicare, not just cut 
reimbursements, but save it long term?
    Mr. Zients. Yes, the president's plan saves Medicare as we 
know it.
    Mr. Duffy. I will reclaim my time. In 2030, Medicare is 
solvent under your plan?
    Mr. Zients. We will continue to make reforms to Medicare.
    Mr. Duffy. I will reclaim my time. In 2030, is Medicare 
solvent under your plan? Yes or no. The answer is no, is it 
not?
    Mr. Zients. It is not the right way to look at the problem.
    Mr. Duffy. Yes, it is the right way.
    Mr. Zients. The right way to address Medicare is to reform 
it and to maintain Medicare as we know it.
    Mr. Duffy. I reclaim my time. I want to look at job growth 
and investment in infrastructure, okay? This is an important 
part of growing our economy, putting people back to work, 
right, and more people working brings more revenue into the 
federal coffers. We all agree on that. I was reviewing the 
budget, and nowhere in the budget did I see that the president 
was going to support the Keystone Pipeline. Twenty thousand 
direct jobs, 100,000 indirect jobs, infrastructure spending; I 
don't see that support. So if you care about jobs, putting our 
private sector unions back to work, why, in this budget, if you 
care about infrastructure spending, if you care about jobs, why 
are you not supporting the Keystone Pipeline?
    Mr. Zients. The Keystone Pipeline decision is at the State 
Department. So I defer you to the State Department. I will also 
point to you the $50 billion immediate investment in 
infrastructure.
    Mr. Duffy. I reclaim my last 10 seconds. In 10 years from 
now under your proposal, you have spent $750 billion to pay the 
interest on the debt, $750 billion. That is $100 billion more 
than you plan on spending on your military. This is exploding.
    Mr. Price. Gentleman's time has expired.
    Mr. Duffy. I yield back.
    Mr. Price. The gentleman from Kentucky, Mr. Yarmuth for 
five minutes.
    Mr. Yarmuth. Thank you, Mr. Chairman. What I thought I 
would do, since I am the last questioner on our side of the 
aisle, is just make a couple of comments, and then offer you 
the time to finish your answers, or respond to things that you 
may have not been able to respond to during the course of the 
morning.
    The first thing I wanted to say is that it is very 
frustrating to me to hear Speaker Boehner and Leader McConnell 
talk about the fact that they, they being democrats or the 
Obama administration, got their tax hikes in January, and that 
is it. Now, they are asking for more. Would it not be fair to 
say by the same logic because of the sequester, because of the 
Budget Control Act, the roughly $2 trillion worth of cuts that 
we have enacted over the last three years, that the Republicans 
got their cuts, and yet they still ask for more cuts in the 
Republican budget?
    Mr. Zients. If you look at the deficit reduction achieved 
to date without the sequester, because the sequester was never 
intended to be policy, that 2.5 trillion, $3 in spending cuts 
for every dollar of revenue.
    Mr. Yarmuth. So Republicans have gotten lots of cuts.
    Mr. Zients. Yes.
    Mr. Yarmuth. And yet they have asked for more in their 
budget?
    Mr. Zients. Yes.
    Mr. Yarmuth. Yeah, I thought that was fair. Secondly, Mrs. 
Black spent a lot of time trying to distinguish between premium 
support and voucher, the description or characterization of the 
Republican plan, and I would just like to note that the 
difference between those two characterizations is a lot smaller 
than the difference between calling what we did in the 
Affordable Care Act, allowing doctors to be paid for end-of-
life decisions, calling that death panels. I would say there is 
a greater distinction in that vocabulary, but that is just fun. 
I am just having fun. And I do want to say one other thing, 
just to clarify. When we talk about solvency with Social 
Security, we are not necessarily talking about a bankruptcy 
type of solvency. We are talking about how long Social Security 
can continue to pay 100 percent.
    Mr. Zients. That is right, then it becomes 75 percent after 
2033, but again, we will reform Social Security so that does 
not happen.
    Mr. Yarmuth. Right, I just wanted to get that on the 
record. So from now on, I would just like to offer you the 
remainder of my time, if you want to talk about the 90 percent 
debt levels, or some of the other things that were brought up 
during the discussion that you were unable to respond to.
    Mr. Zients. I think that, just because it is so important 
to emphasize the sequester, we heard from many of you in your 
constituencies what is going on, and it is impacting people 
across the country. It is going to cost us anywhere from a half 
to a full percent of GDP. Hundreds of thousands of jobs at a 
time when we need to be adding hundreds of thousands of jobs, 
not subtracting. Therefore, I think it is really important that 
a policy that was never, ever intended to be implemented, it 
was meant to be a forcing function for balanced deficit 
reduction, that we immediately turn off the sequester and 
replace it with balanced deficit reduction.
    Mr. Yarmuth. I appreciate that, and just to segue from that 
just a moment, there is a lot of conversation, there was some 
conversation earlier about this notion of public expenditures 
and the public economy versus the private economy. And I 
reviewed our employment situation in my district of Louisville, 
Kentucky, and seven of our largest nine private sector 
employers rely to a significant extent on government spending. 
That is everything from UPS, we are the global hub of UPS, they 
have $1 billion contract with the federal government; to our 
hospital systems; to Humana, which, right now, realize 80 
percent of Humana's business comes from the federal government. 
So when we are talking about these cuts in federal spending, we 
are not talking about just government bureaucrats who are 
paying the price. We are talking about a significant portion of 
the private economy and private employment.
    Mr. Zients. Just taking advantage of your generosity in 
giving me a little bit of time, I never really had an 
opportunity to comment on the one chart that went up, which 
showed gross debt, which is not the right way to look at our 
debt. It is publically-held debt; publically-held debt is on a 
declining path starting 2016 in the president's plan. That is a 
clear milestone of fiscal sustainability. The second thing is 
on this Medicare solvency issue. The president has done a lot 
to improve our situation on Medicare cost. Our cost per capita 
are now growing less than GDP. CBO adjusted their baseline by 
over $200 billion to reflect the slowing of Medicare on a per 
capita basis that has occurred during the president's term.
    Mr. Yarmuth. Thank you.
    Mr. Price. Gentleman's time has expired. Just for the 
record, the public debt remains in the low 70s the whole time, 
and under the president's plan.
    Gentleman from Oklahoma recognized for five minutes, Mr. 
Lankford.
    Mr. Lankford. Thank you, Mr. Chairman. Thank you for being 
here. A long day, I know, as well. You had mentioned before 
about cigarette tax and the increase of cigarette tax. It has a 
dual purpose. It is bringing in more revenue, and also decrease 
the usage. Is that correct, based on your comment earlier?
    Mr. Zients. Yes.
    Mr. Lankford. Right, so if a cigarette tax goes in place, 
it decreases the usage of the cigarettes. There is also a 
proposal that you have in there in the budget as well that 
basically removes an incentive to continue to add to an IRA if 
you get past $3 million in an IRA. Do you assume from that that 
if people get to a $3 million capping area they will stop 
putting money into an IRA, they will invest in other areas, 
they will move away from that? I am sorry, I am just trying to 
set up something. Is that a yes or no? Do you think people will 
continue to add to it?
    Mr. Zients. If the tax advantages of contributing should 
stop at the 3 million level.
    Mr. Lankford. Right, I understand, but do you think people 
will stop putting into an IRA as much at that point, that they 
will invest in other areas because they do not have the tax 
advantage?
    Mr. Zients. It depends on what their alternative 
investments are.
    Mr. Lankford. If it actually costs more, then they probably 
will. And so a cigarette tax, hold on just a second, let me 
talk about this real quick. A cigarette tax will probably 
decrease the use of cigarettes, and if you remove all the tax 
incentives for an IRA at a certain level, it will probably 
decrease the use of an IRA. The question I have is, there is 
also a significant portion in here that says that they are 
going to remove all the normal business expensing for 
traditional energy production, so oil, gas, coal, that all of 
those normal business expenses for them will go away. Do you 
think we will have more or less energy production if you remove 
all the normal business expensing away from energy companies?
    Mr. Zients. I think that we have had a big increase in 
production, and I think we will continue to have an increase in 
domestic production, particularly in natural gas.
    Mr. Lankford. So it will be the opposite effect. Well, 
actually, right now, we are at the lowest drilling that we have 
been in natural gas since 1999.
    Mr. Zients. Our natural gas productions are record high.
    Mr. Lankford. I understand, but the actual drilling and 
expiration, that the business expenses deals with expiration. 
It is not dealing with the production, right? Are you aware of 
that?
    Mr. Zients. Yes.
    Mr. Lankford. Okay, so, when we are talking about the 
expiration and adding new amounts of inventory on there, do you 
think we will increase inventory if we raise taxes on energy 
production?
    Mr. Zients. I think that we need to have an all-of-the-
above energy strategy, where we are encouraging renewable 
energy, solar, geo-thermal.
    Mr. Lankford. I think you know where my questions are. You 
are answering a question I am not asking. I am asking, do you 
think we will increase production of traditional energy by 
increasing the tax burden on traditional energy producers?
    Mr. Zients. I think we will have our incentives 
appropriately aligned with an all-of-the-above energy strategy, 
which encourages efficiency, includes alternatives, and has a 
fair tax code.
    Mr. Lankford. Actually, hold on, no, let me reclaim my 
time. The Greenbook, the Treasury, and the details of this 
actually uses the term that they want to have a neutral system, 
and that if you remove all the tax incentives for traditional 
energy production, oil, natural gas, and coal, and the move is 
to a neutral position, is it the president's position that we 
should be neutral on energy?
    Mr. Zients. The president believes that we should be 
encouraging alternative forms of energy, that we should be 
encouraging efficiency, and that we should also be encouraging 
domestic gas and oil production.
    Mr. Lankford. I would have no problem encouraging 
efficiency in all different kinds of ways, but if we are going 
to be neutral, it is just interesting to me. In one of the 
books, it talks about how oil and natural gas, if you go to 
this one, it talks about oil and natural gas will be the energy 
for the future because it is what we are producing, but we hope 
to transition at some point to that. You go to a different 
page, and it says we are going to decrease the usage of oil and 
natural gas, and try to get us to a different one. And if I go 
to the Treasury book, it actually says we just need to be 
neutral on this. And so it is really interesting to try to 
figure out the tax policy and the energy policy of where we are 
headed on this. There is no question that if you raise taxes 
and you remove all the normal business expensing, that it is 
going to decrease production. My question along with that is, 
is there another industry that the president wants to remove 
normal business expensing from?
    Mr. Zients. Well, the president definitely wants to get rid 
of tax expenditures and loopholes that encourage companies to 
move overseas.
    Mr. Lankford. Sure, I would agree with that, but he is 
unwilling to do a territorial tax system, am I correct on that?
    Mr. Zients. I'm sorry?
    Mr. Lankford. A territorial tax system. I mean, that does 
not seem to be addressed.
    Mr. Zients. Again, you will have Secretary Lew at some 
point. But I do not think of it as territorial and global. The 
president has put forward principles for corporate tax reform, 
lowering the rates, particularly for manufacturing, and having 
a global minimum tax, which is really a hybrid system. It is 
not a territorial or worldwide system.
    Mr. Lankford. Let me reclaim my time. If all the business 
expensing for energy production is taken away, I assume that is 
to incentivize that we go to, then, other forms of energy. The 
reality of that is the middle class will pay more for energy in 
the days ahead, and that will be a middle-class tax. It just 
shifted to a different area.
    Mr. Price. Gentleman's time has expired. Gentleman from 
Georgia, Mr. Woodall, for five minutes.
    Mr. Woodall. Thank you, Mr. Chairman. Eric, if I could ask 
you to put our slide up. I feel less like we are having a 
hearing here, Mr. Price. More like you and I are just sitting 
around the dinner table together. And with that in mind, I do 
not know if you can read this.
    Mr. Zients. I actually cannot, can I get a paper copy of 
it?
    Mr. Woodall. I am not going to go deep into the weeds.
    Mr. Zients. Okay, because I literally cannot see any of it.
    Mr. Woodall. I am going to take you back about two hours. I 
am going to recommend a good ophthalmologist to you as well to 
spot that. Lasik is what solved my woes.
    Mr. Zients. I will take you up on that.
    Mr. Woodall. So I will take you back to what the gentleman 
from Maryland, I believe you all were talking earlier about, 
fundamental tax reform, and whether or not you have received 
proposals that could bring the rates down to 25 percent for 
high-income earners without raising the burden on middle- and 
lower-income Americans. And I will just refer you to a CBO 
report. They are doing an update right now, so these are 
actually old numbers that I have on the board, but what they 
show is that the effective income tax rate today for folks in 
the top 1 percent, the effective income tax rate for folks in 
the top 1 percent, which is for people who are earning $1.7 
million a year, is 19 percent. You go down to the top 10 
percent, which is folks averaging $366,000 a year or more, the 
effective income tax rate is 16 percent. So what I would just 
say, and I have been here for two years and it still surprises 
me how we argue about silliness all the time, if the effective 
income tax rate today is 16 percent, and if what we would like 
to do through fundamental tax reform is lower marginal rates 
and broaden the base----
    Mr. Zients. Could you give me a sense of some of the tax 
expenditures that you would get rid of?
    Mr. Woodall. I would say to the gentleman that you are 
absolutely right. That is the hard conversation. But to say it 
is not doable, to say it cannot be done without raising taxes 
on middle-income Americans, is nonsense. It cannot be done 
without restricting tax breaks for upper-income Americans, 
which is something the president has been very comfortable 
proposing, something that we have been very comfortable talking 
about.
    Mr. Zients. It is not restricting, it is getting rid of all 
of them and more. And more.
    Mr. Woodall. It is eliminating them altogether. Absolutely. 
But again, to say it cannot be done, say we disagree about the 
way it can be done, but let's not say it cannot be done. And 
that is where I want to spend the rest of my time. Again, I am 
disappointed. You are right to point out the frustration that 
all of America has with the brinkmanship and the last-minute 
deal making that characterize the fiscal cliff and so much of 
everything else that we do. Yet you look down the road just two 
decades away, before the time that I retire, and you still say 
there is no need to work on Social Security yet because that 
problem is far, far away. We will get to it then. Even 
Medicare, you said we solved it because we are going out four 
years, we are going to push solvency out four years.
    Mr. Zients. I fear that you have mischaracterized what I 
said.
    Mr. Woodall. Please.
    Mr. Zients. The president has put out basic principles for 
Social Security reform. I have said it is not a driver of our 
near-term fiscal situation. At the same time, the president is 
willing and would like to, once we get this set of situations 
behind us, discuss Social Security reform in balanced way. In a 
balanced way.
    Mr. Woodall. Again, let me make sure that I understand 
whether we are kicking the can down the road or whether we are 
taking these challenges on directly. I did not see a word in 
the president's budget about doing anything to extend the 
solvency of Social Security. Did I miss an idea that he has?
    Mr. Zients. Social Security is solvent through 2033.
    Mr. Woodall. We will stipulate that.
    Mr. Zients. It is not a driver of our near-term fiscal 
situation.
    Mr. Woodall. No, it is not. We will stipulate that. Did I 
miss a single idea for solving the Social Security shortfall 
long term?
    Mr. Zients. As I said, the president has put forward 
principles for Social Security reform.
    Mr. Woodall. Absolutely. And that is what I am saying, I am 
disappointed about that. But you say that is out 20 years, so 
we do not have to worry about it. What about the Social 
Security disability trust fund? Do you know when that trust 
fund exhausts its resources?
    Mr. Zients. I believe it is 2016. When I am citing 2033, it 
is the combination of the two trust funds.
    Mr. Woodall. Absolutely. So the Social Security disability 
trust fund, it is the fiscal year 2016. It is actually the 
calendar year 2015, within the president's term. I know we have 
one in 10 Americans who depend on that program. One in 10 
insurance-paying Americans depend on the Social Security 
disability trust fund. That trust fund will exhaust its 
resources, and either benefit cuts will occur, or we will have 
to begin borrowing from the general Social Security trust fund, 
thus speeding its demise. And there is not one idea in the 
president's budget. Maybe you are right that we can wait 20 
years to work on Social Security.
    Mr. Zients. That is actually not the case.
    Mr. Woodall. What is the one idea?
    Mr. Zients. Continuing disability reviews, which have a $9 
to $1 return, that we would like to have funded as part of 
Program Integrity, to ensure that people that are on disability 
should remain on disability.
    Mr. Woodall. And that extends the disability trust fund 
from 2016 to when?
    Mr. Zients. I do not have that calculation. It is $9 to $1 
return, so we should fund that immediately. It is a great, it 
is a fantastic return on investment.
    Mr. Woodall. We will stipulate that. Kicking the can down 
the road is bad, and it is bad no matter who is doing it. I 
wish we could sit around the kitchen table and solve these 
issues more often. Mr. Chairman, I yield back.
    Mr. Price. Gentleman's time has expired. Gentleman from New 
Jersey, Mr. Garrett, for five minutes.
    Mr. Garrett. And I guess I am the last one, so I guess we 
can agree that we are not going to agree 100 percent on these 
things, so far with what I am hearing about this, so can we 
agree there may be some things we can agree on, and that is 
those things that we should probably focus on?
    But one of the things I heard when I came into the room was 
you said there are no new taxes in the budget. Did I hear that 
correctly? I just walked in at that time.
    Mr. Zients. What I was talking about is the $580 billion 
which is part of the $1.8 trillion compromise with Speaker 
Boehner. All of that is achieved through tax reform, not 
through raising rates.
    Mr. Garrett. Okay.
    Mr. Zients. And I will remind folks that in December 
Speaker Boehner said there was $800 billion in tax reform 
potential.
    Mr. Garrett. Right. I will take that. Yes, and I think that 
meets the president's pledge early on, and your interpretation 
that never raise taxes on anyone who makes over $200,000.
    Mr. Zients. Less than.
    Mr. Garrett. I'm sorry, less. So the president's pledge was 
never to raise taxes on anyone who makes less than $200,000, 
and the president has kept that pledge?
    Mr. Zients. It is a couple who make over $250,000, 
individuals at $200,000.
    Mr. Garrett. And so he has kept that pledge with regard to 
the budget?
    Mr. Zients. Yes.
    Mr. Garrett. And with regard to the cliff vote that we had 
at the end of last year, the fiscal cliff issue?
    Mr. Zients. Yes.
    Mr. Garrett. So the president has always kept that promise?
    Mr. Zients. Yes.
    Mr. Garrett. And even when we passed the Affordable Health 
Care Act, he has kept that promise as well?
    Mr. Zients. Yes.
    Mr. Garrett. And so we have never raised taxes on the 
American public who make under $200,000?
    Mr. Zients. Yes.
    Mr. Garrett. And so the Supreme Court across the street was 
incorrect when they called the Affordable Health Care Act a tax 
increase because you still take the position, and the White 
House still takes the position, that that was not a tax?
    Mr. Zients. That is a choice that an individual.
    Mr. Garrett. So it is not a tax?
    Mr. Zients. It is an individual responsibility fee. I am 
not a lawyer.
    Mr. Garrett. Is it a tax or is it not a tax? Last year you 
said it was not a tax; has your opinion changed since last 
year?
    Mr. Zients. It is an individual responsibility fee.
    Mr. Garrett. Yes or no, is it a tax?
    Mr. Zients. It is an individual responsibility fee.
    Mr. Garrett. Is what I do April 15th an individual 
responsibility fee?
    Mr. Zients. It is an individual responsibility fee, and I 
will defer to the Supreme Court on technical definitions. I am 
not a lawyer, I will defer to the Supreme Court.
    Mr. Garrett. So I take that as you do not know what a tax 
is and the White House does not know what a tax is?
    Mr. Zients. I do know that when those individuals who can 
afford health care do not purchase health care, they are 
transferring the cost to everybody else.
    Mr. Garrett. I reclaim my time. I reclaim my time. Also, 
when I walked into the room, you said the sequester was a 
terrible policy. I understand that the press secretary speaking 
for the president said that the sequester was the White House's 
proposal. My question to you is, is there anything else in the 
budget that is before us that is also terrible policy to be 
proposing? That is a yes or no question.
    Mr. Zients. Let me clarify. I think I should get to clarify 
what I meant. The sequester was a forcing function. It was not 
a policy that was meant to be implemented. So as a policy that 
is being implemented, it is a terrible policy.
    Mr. Garrett. Okay. Is there other times where the president 
has given us terrible policies as suggestions to Congress?
    Mr. Zients. I do not know what you are referring to.
    Mr. Garrett. You are on quote saying that you thought it 
was a terrible policy.
    Mr. Zients. No. No. Please, I said that the sequester was a 
forcing function. Implementing the sequester, an across-the-
board indiscriminate cut, is terrible policy. Implementation is 
terrible policy.
    Mr. Garrett. I'm reclaiming my time. I'm reclaiming my 
time. I wrote down exactly what you said, ``Sequester was 
terrible policy.'' But going beyond that, we are operating 
right now under the 1974 Budget Act, is that correct, as far as 
the procedure that we go through, as far as putting budgets 
through the Congress?
    Mr. Zients. Yes.
    Mr. Garrett. Yes. Under that law, the president is 
required, and was required, to present a budget to us two 
months ago, correct? The answer is?
    Mr. Zients. The answer is the budget is here today, in full 
detail. In full detail.
    Mr. Garrett. We cannot get straight answers even when you 
admit to what the law is. Does not the law require that the 
president submit it to us two months ago?
    Mr. Zients. In full detail. The reason for the delay was 
the fiscal cliff.
    Mr. Garrett. No, no, no, reclaiming my time. Does the law 
require him to present the budget two months ago, yes or no?
    Mr. Zients. The budget is here today.
    Mr. Garrett. Can you not answer a simple question? Does the 
law require it? If you do not know what the law is, we can have 
you come back at another time once you can get briefed on what 
the law is. Does the law require that the president present a 
budget over two months ago, yes or no?
    Mr. Zients. The president's budget is here today. The 
president's budget was delayed.
    Mr. Garrett. Mr. Chairman, I would suggest that we do 
recall this witness at a time that he can go back to answer 
simple questions as to what the law is. Do you know what the 
law is, sir? Do you know what the law is, sir?
    Mr. Price. The record will demonstrate that the witness has 
not answered the question.
    Mr. Garrett. Then I would recommend to the Chairman that we 
recall this witness when he has an opportunity to refer back to 
what the law is.
    Mr. Van Hollen. Actually, just for the record, the witness 
did answer your question, you may not like the answer you are 
getting.
    Mr. Garrett. I was asking if he knows what the law is. He 
would not give an answer to that. The president has violated 
that law over the last four out of five years, and I would 
request, Mr. Chairman, that we recall this witness when he can 
be briefed not only on this law, but on many other times when 
he's failed to answer questions.
    Mr. Price. That request will be taken into consideration 
with the Chairman. I want to thank the witness for being with 
us for nearly three hours. I wish you Godspeed in your future 
endeavors. All members of the committee may have until 6 p.m., 
Friday, April 12th, to submit questions for the witness, Acting 
Director Zients, the answers to which shall be entered into the 
record of this hearing. At this point, this hearing is 
adjourned.
    [The prepared statement of Jackie Walorski follows:]

    Prepared Statement of Hon. Jackie Walorski, a Representative in 
                   Congress From the State of Indiana

    Mr. Zients, thank you for being here today. It is unfortunate that 
this budget request is more than two months late. I appreciate the 
enormous task of compiling the federal budget, but I believe the 
Administration missed a key opportunity to be a part of finding a 
solution to the financial mess our country is in. The House and Senate 
have already completed discussion on our respective budget resolutions. 
We are trying to move forward with the process, and now we are having 
to put our work on hold to come back to this. But, better late than 
never. I am glad we are getting the chance to discuss this budget 
proposal and I look forward to asking you some questions.

    [Questions submitted for the record and their responses 
follow:]

          Questions Submitted for the Record by Chairman Ryan

    1. Table 5-2 in the Analytical Perspectives, ``Federal Government 
Financing and Debt,'' includes a line item, ``Net disbursements of 
credit financing accounts.'' This is comprised of ``Direct loan 
accounts'' and ``Guaranteed loan accounts.'' Please disaggregate this 
data by program.
    2. On May 23, 2005, the OMB Director issued M-05-13 formally 
establishing a requirement that administrative actions that increased 
mandatory spending be offset by other administrative actions that 
decreased mandatory spending.
    a. Is this memorandum still in force? If yes, please describe the 
procedures in place to enforce this requirement. If no, please explain 
the reasons this policy was discontinued.
    b. Does OMB budget in advance for administrative actions that would 
increase or reduce mandatory spending? If yes, please provide a table 
detailing the administrative actions that are included in the 
President's FY 2014 budget request, including the budgeted cost or 
savings.
    3. Please provide the annual budget authority and outlays for 
Overseas Contingency Operations/Global War on Terrorism in (1) OMB's 
BBEDCA Baseline; (2) OMB's Adjusted Baseline; and (3) the President's 
Budget Request.
    4. Under the Bush Administration, OMB used an assessment model 
known as the Program Assessment Rating Tool (PART) to evaluate the 
effectiveness of government programs. PART allowed the public to get an 
idea of how programs were performing. Why did OMB, under the Obama 
Administration, choose to discontinue the use of PART? Does this 
Administration not feel that it is important for the public to know the 
effectiveness of programs being funded by taxpayer dollars?
    5. During the hearing, Congresswoman Lee asked for information on 
the effectiveness of programs targeted towards low-income programs. 
Please provide information on:
    a. What programs are most effective at moving individuals and 
families from poverty into the middle class (please provide the basis 
for your assessment); and
    b. How does OMB measure the effectiveness of low-income programs?
    6. Please provide a table sorted by agency displaying the final 
enacted FY 2013 budget authority for each appropriation account 
including the effect of the sequester the President ordered on March 1 
and the administrative rescission implemented on March 27, 2013.
    7. The Budget includes $1.227 million in mandatory funding and $273 
million in discretionary base funding for continuing disability reviews 
(CDRs) that are projected to save a net of $37.7 billion over 10-years. 
You implied that this would shift back the projected insolvency date of 
the Social Security Disability Insurance program. If the President's 
proposal is enacted, in what year would the Disability Insurance Trust 
Fund become insolvent?

    Questions Submitted for the Record by Hon. Marsha Blackburn, a 
         Representative in Congress From the State of Tennessee

    Director Zients, page 51 of the President's Fiscal Year 2014 Budget 
discusses reforming the Tennessee Valley Authority. Specifically, the 
budget states ``Given TVA's debt constraints and the impact to the 
Federal deficit of its increasing capital expenditures, the 
Administration intends to undertake a strategic review of options for 
addressing TVA's financial situation, including the possible 
divestiture of TVA, in part or as a whole.''
    However, as you may know, Section 208 of the Urgent Supplemental 
Appropriations Act of 1986 (PL 99-349) prohibits the Federal Government 
from soliciting or studying any proposals to sell the Tennessee Valley 
Authority or the Federal Power Marketing Administrations (PMA) without 
specific congressional authorization.
    Does the Administration intend to undertake a strategic review of 
options for addressing TVA's financial situation, including the 
possible divestiture of TVA, in part or as a whole, without specific 
authorization from Congress?
    What specific legal authority does the Administration have to 
conduct the review without authorization from Congress?
    Please also provide a list of individuals that will conduct the 
review, the date the review will begin, as well as the date that the 
review will be completed by.

          Questions Submitted for the Record by Mrs. Walorski

    1. Mr. Zients, there are many people in my district who are very 
concerned that this budget never balances. They don't think it's right 
that while they are working hard to live within their means, the 
President is raising their taxes and encouraging the federal government 
to spend even more money it does not have. I actually brought this 
concern to the attention of the President, but his response to me was 
just to say, ``Well, the federal government is not a family.'' Mr. 
Zients, can you please explain for the record why, at a time when the 
national debt is $16.8 trillion, the Administration does not think the 
federal government needs to live within its means? And, before you 
answer, I'd like to point out that many prominent Democrats believe we 
should balance the budget, so I'd be curious to hear why the 
Administration believes these Democrats are wrong.
    2. Can you please provide a detailed explanation of what the 
President's proposed changes to Social Security will look like for the 
average American? Specifically, what do these changes mean for folks 
currently collecting Social Security, and what do they mean for future 
beneficiaries? Will this increase or decrease the amount of money 
beneficiaries receive per check?
    3. I would like to talk for a moment about the tax increases this 
budget places on small business owners and on low-income Americans (via 
the cigarette tax.) How will taxing our job creators and our poor help 
boost our economy?
    4. What additional spending cuts can be made that you believe 
Republicans and Democrats can agree upon?

    Director Zients' Response to Questions Submitted for the Record

                             REP. BLACKBURN

    Director Zients, page 51 of the President's Fiscal Year 2014 Budget 
discusses reforming the Tennessee Valley Authority. Specifically, the 
budget states ``Given TVA's debt constraints and the impact to the 
Federal deficit of its increasing capital expenditures, the 
Administration intends to undertake a strategic review of options for 
addressing TVA's financial situation, including the possible 
divestiture of TVA, in part or as a whole.''
    However, as you may know, Section 208 of the Urgent Supplemental 
Appropriations Act of 1986 (PL 99-349) prohibits the Federal Government 
from soliciting or studying any proposals to sell the Tennessee Valley 
Authority or the Federal Power Marketing Administrations (PMA) without 
specific congressional authorization.
    Does the Administration intend to undertake a strategic review of 
options for addressing TVA's financial situation, including the 
possible divestiture of TVA, in part or as a whole, without specific 
authorization from Congress?
    What specific legal authority does the Administration have to 
conduct the review without authorization from Congress?
    Please also provide a list of individuals that will conduct the 
review, the date the review will begin, as well as the date that the 
review will be completed by.

    The proposed strategic review of options for addressing TVA's 
financial situation is consistent with applicable law. As a general 
matter, the Administration has the responsibility to conduct these 
types of reviews to ensure the Federal Government is operating as 
efficiently as possible.
    The Administration's primary consideration for the strategic review 
is how to best position TVA to address its capital financing 
constraints within the current fiscal environment. The possible TVA 
divestiture option referenced in the President's Budget was not 
intended to suggest a specific course of action but rather to provide a 
basis for discussion. The Administration will evaluate various options 
for addressing this issue, including potentially some options outlined 
in the September 2011 TVA Office of Inspector General's (OIG) report 
entitled ``History, Status, and Alternatives: TVA Financial 
Flexibility.''
    Administration officials will work with TVA over the next few 
months to develop a plan for the review which will address its 
financing issues to meet future capacity needs, fulfill its 
environmental responsibilities, and modernize its aging generation 
system. The review will include discussions with appropriate 
stakeholders, including the Congress, customers, State and local 
governments, and employees, contractors, and labor organizations to 
ensure that all issues are taken into consideration--including 
electricity prices, environmental obligations, employment issues, and 
the safe and reliable delivery of electricity.

                             CHAIRMAN RYAN

    Table 5-2 in the Analytical Perspectives, ``Federal Government 
Financing and Debt,'' includes a line item, ``Net disbursements of 
credit financing accounts.'' This is comprised of ``Direct loan 
accounts'' and ``Guaranteed loan accounts.'' Please disaggregate this 
data by program.

    The attached table reflects estimated net financing disbursements 
from the President's FY 2014 Budget, disaggregated by account and 
grouped by direct and guaranteed loan types. Net financing 
disbursements represent total cash outflows from the financing account 
less total cash inflows to the financing account. Cash inflows include 
subsidy and reestimate collections from the program account, borrower 
principal and interest payments, recoveries, fees, interest received 
from Treasury, and other inflows. Cash outflows include loan 
disbursements, default claim payments, negative subsidy and downward 
reestimate payments transferred to the receipt account, interest paid 
to Treasury, and other outflows.





    On May 23, 2005, the OMB Director issued M-05-13 formally 
establishing a requirement that administrative actions that increased 
mandatory spending be offset by other administrative actions that 
decreased mandatory spending.
    a. Is this memorandum still in force? If yes, please describe the 
procedures in place to enforce this requirement. If no, please explain 
the reasons this policy was discontinued.
    b. Does OMB budget in advance for administrative actions that would 
increase or reduce mandatory spending? If yes, please provide a table 
detailing the administrative actions that are included in the 
President's FY 2014 budget request, including the budgeted cost or 
savings.

    OMB memorandum M-05-13 establishes a pay-as-you-go requirement for 
discretionary administrative actions that affect mandatory spending, 
and it remains in force. Section 31.3 of OMB Circular A-11, which 
governs preparation, submission, and execution of the President's 
Budget, requires that agency budget requests include a list of all 
planned or anticipated administrative actions that would increase 
mandatory spending. Agency actions that are approved by OMB under the 
guidelines of the OMB memorandum are included in the baseline for the 
President's Budget, and are not separately tracked.

    Please provide the annual budget authority and outlays for Overseas 
Contingency Operations/Global War on Terrorism in (1) OMB's BBEDCA 
Baseline; (2) OMB's Adjusted Baseline; and (3) the President's Budget 
Request.

    The attached table provides the requested information.

    
    
    Under the Bush Administration, OMB used an assessment model known 
as the Program Assessment Rating Tool (PART) to evaluate the 
effectiveness of government programs. PART allowed the public to get an 
idea of how programs were performing. Why did OMB, under the Obama 
Administration, choose to discontinue the use of PART? Does this 
Administration not feel that it is important for the public to know the 
effectiveness of programs being funded by taxpayer dollars?

    Yes, the Administration believes that it is important for the 
public to know the effectiveness of programs.
    The ultimate test of a performance management system is whether it 
is used to drive results. PART succeeded in getting agencies to develop 
more measures, and provided summary ratings for each program, but few 
in Congress or among agency managers used PART information to improve 
program management, make resource allocations, or inform decisions. In 
fact, GAO's survey of Federal managers in 2007 showed that very few 
managers found PART information useful to management decisions or 
helpful in improving performance.
    A first priority of this Administration was to develop a 
performance management system at the Federal level that was actively 
used by agency leadership and managers. In 2010, the Administration 
launched the Priority Goals initiative, asking agency leaders to set a 
limited number of ambitious, near-term, implementation-focused goals, 
and commit to running frequent data-driven performance reviews to drive 
progress on those goals.
    The result is a performance management system that is actively used 
by agency leadership, and is producing significant improvements in 
outcomes. A GAO survey released this year found agency Deputy 
Secretaries/Chief Operating Officers engaged in their data-driven 
performance reviews, and ``attributed improvements in performance and 
decision making to the reviews * * * which allowed different functional 
management groups and program areas within their agencies to 
collaborate and identify strategies which led to performance 
improvements.''
    Based on the lessons learned from both the PART and the Priority 
Goals, and supported by the GPRA Modernization Act, the Administration 
is now expanding its performance improvement efforts to cover the 
agency's broader strategic goals and objectives. Starting in 2014, each 
Federal agency will assess progress toward each ``strategic objective'' 
included in the agency strategic plan in order to inform strategic 
choices, budget and policy priorities, and operational decisions.

    During the hearing, Congresswoman Lee asked for information on the 
effectiveness of programs targeted towards low-income programs. Please 
provide information on:
    a. What programs are most effective at moving individuals and 
families from poverty into the middle class (please provide the basis 
for your assessment); and
    b. How does OMB measure the effectiveness of low-income programs?

    The Budget builds on the progress made over the last four years to 
expand opportunity for every American and every community willing to do 
the work to lift themselves up. It creates new ladders of opportunity 
to ensure that hard work leads to a decent living. It expands early 
childhood learning to give children a foundation for lifelong learning. 
It supports a partnership with communities to help them thrive and 
rebuild from the Great Recession. It creates pathways to jobs for the 
long-term unemployed and youth who have been hardest hit by the 
downturn. It rewards hard work and reduces inequality and poverty by 
supporting an increase in the minimum wage. And it strengthens families 
by removing financial deterrents to marriage and supporting the role of 
fathers.
    The Budget also builds on programs that have a track record of 
success in lifting families out of poverty. For example, the Budget 
permanently extends expansions of the Child Tax Credit and the Earned 
Income Tax Credit that were passed in the Recovery Act and continued as 
part of the bipartisan Tax Relief, Unemployment Insurance 
Reauthorization, and Job Creation Act and The American Taxpayer Relief 
Act that the President negotiated and signed into law in January 2013. 
The expanded refundability of the Child Tax Credit benefits 12 million 
families with 21 million children. The expansion of the Earned Income 
Tax Credit for married couples and families with three or more children 
provides tax cuts averaging $500 to 6 million families. These 
improvements lifted 1.6 million Americans out of poverty in 2010. The 
Budget also continues support of the Supplemental Nutrition Assistance 
Program, the cornerstone of our Nation's food assistance safety net 
that touches the lives of more than 47 million people by helping 
families put food on the table.
    The Budget also proposes investments that will help level the 
playing field for children from lower-income families, so they enter 
school prepared for success. This includes preschool for all lowand 
moderate-income four year olds and Early Head Start-Child Care 
Partnerships to provide access to high-quality early learning for 
infants and toddlers. The Budget also includes an additional $7 billion 
for the Child Care and Development Fund over the next ten years to 
maintain the number of low-income families receiving subsidies and 
invests $15 billion in extending and expanding evidence-based, 
voluntary home-visiting for at-risk parents and children.
    OMB, working in collaboration with other Federal agencies, uses a 
number of approaches to determine the effectiveness of low-income 
programs, including program evaluation, performance measures, and 
program data.

    Please provide a table sorted by agency displaying the final 
enacted FY 2013 budget authority for each appropriation account 
including the effect of the sequester the President ordered on March 1 
and the administrative rescission implemented on March 27, 2013.

    OMB is working to develop the information responsive to this 
request and will provide at a later date.

    The Budget includes $1.227 million in mandatory funding and $273 
million in discretionary base funding for continuing disability reviews 
(CDRs) that are projected to save a net of $37.7 billion over 10-years. 
You implied that this would shift back the projected insolvency date of 
the Social Security Disability Insurance program. If the President's 
proposal is enacted, in what year would the Disability Insurance Trust 
Fund become insolvent?

    The Social Security trustees project that, on a combined basis, the 
Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) 
Trust Funds will be solvent through 2033. However, by itself, the DI 
Trust Fund will be exhausted in 2016.
    To help protect the DI Trust Fund, the 2014 Budget requests 
additional funding for Social Security Administration (SSA) program 
integrity to help ensure that only those eligible for DI benefits 
receive them. Each $1 invested in CDRs returns $9 in program savings. 
Additionally, the President's Budget calls on Congress to reauthorize 
and enhance SSA's demonstration authority for the DI program. 
Reauthorization of this authority is overdue and would allow SSA to 
test innovative strategies to help workers with impairments remain in 
the workforce and help beneficiaries return to work. The President's 
Budget also includes a legislative proposal to reduce an individual's 
DI benefit in any month in which that person also receives a State or 
Federal unemployment benefit, eliminating duplicative payments for the 
same period out of the workforce, while still providing a base level of 
income support.
    These measures alone will not delay the projected DI Trust Fund 
exhaustion date, though they will help strengthen the program and 
reduce costs in the coming years. The President stands ready to work on 
a bipartisan basis to safeguard Social Security and place both OASI and 
DI on a stronger footing.

                             REP. WALORSKI

    Mr. Zients, there are many people in my district who are very 
concerned that this budget never balances. They don't think it's right 
that while they are working hard to live within their means, the 
President is raising their taxes and encouraging the federal government 
to spend even more money it does not have. I actually brought this 
concern to the attention of the President, but his response to me was 
just to say, ``Well, the federal government is not a family.'' Mr. 
Zients, can you please explain for the record why, at a time when the 
national debt is $16.8 trillion, the Administration does not think the 
federal government needs to live within its means? And, before you 
answer, I'd like to point out that many prominent Democrats believe we 
should balance the budget, so I'd be curious to hear why the 
Administration believes these Democrats are wrong.

    The President's Budget represents a careful balance between the 
need for short-term measures to safeguard our economic recovery and the 
need for further deficit reduction to bring the Federal debt under 
control. The 2014 Budget maintains our commitments to the most 
vulnerable and continues to make the investments that will support 
future jobs and economic growth, while at the same time reducing the 
deficit below historical levels and bringing down the debt as a share 
of the economy.

    Can you please provide a detailed explanation of what the 
President's proposed changes to Social Security will look like for the 
average American? Specifically, what do these changes mean for folks 
currently collecting Social Security, and what do they mean for future 
beneficiaries? Will this increase or decrease the amount of money 
beneficiaries receive per check?

    In the interest of achieving a bipartisan deficit reduction 
agreement, the Budget proposes to use the chained CPI to compute cost-
of-living adjustments in major federal programs and the tax code. 
However, this change must be paired with protections in these programs 
for the vulnerable. It would also not apply to any means-tested 
programs. The Budget proposes to adopt the chained CPI starting in 
2015. The Social Security benefit enhancement would begin in 2020 and 
would be targeted to elderly and long-term beneficiaries, since this is 
the group that will be impacted the most by the switch to the chained 
CPI, due to compounding effects. The benefit enhancement would be equal 
to 5% of the average retiree benefit, phased in over 10 years. 
Beneficiaries who are aged 76, or other beneficiaries (such as those 
receiving Disability Insurance) in the 15th year of benefit receipt 
would be eligible for the benefit enhancement. The Bowles-Simpson 
Commission also recommended an adjustment along these lines to 
accompany its chained CPI proposal.

    What additional spending cuts can be made that you believe 
Republicans and Democrats can agree upon?

    The President's 2014 Budget contains numerous proposals to cut 
spending and reduce the deficit. The Budget details a total of 215 
cuts, consolidations, and savings proposals, which are projected to 
save more than $25 billion in 2014. These proposals affect both 
mandatory and discretionary spending. As the President has stated, his 
Budget includes some difficult cuts that he does not particularly like, 
and which may not be popular within his own party. Accomplishing 
balanced deficit reduction will require tough choices and compromise 
from both Republicans and Democrats.

    I would like to talk for a moment about the tax increases this 
budget places on small business owners and on low-income Americans (via 
the cigarette tax.) How will taxing our job creators and our poor help 
boost our economy?

    Low-income Americans will benefit from the cigarette tax in several 
ways. First, they will realize substantial health benefits; in 
particular, they are more likely than high-income Americans to stop 
smoking or to choose not to start smoking in response to a cigarette 
tax. And if you don't smoke, you don't pay. For those who want to quit, 
the Affordable Care Act ensures that health plans cover tobacco use 
screening and cessation services at no additional charge. Second, 
revenue from the tax will help ensure that low-income children are 
prepared for success. All of the revenue raised from the tax will be 
used for early childhood investments, providing access to pre-school 
for four-year-olds from low- and moderate-income families and financing 
the extension and expansion of voluntary home visiting programs for at-
risk families. Many business leaders across the nation--representing 
both large and small companies--have called for early education 
investments to build the skills of America's future workforce and 
strengthen our economy.

    [Whereupon, at 12:52 p.m., the Committee was adjourned]

                                  
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