see the light of day so we're going to move ahead with our own budget plan which will actually pass the house. >> as to the dod -- >> the question on the department of defense is what i -- >> so on dod, i think it's really important to understand that this is strategy first, budget second. so this is a strategy which is consistent with what secretary panetta, his leadership team and the president all believe is the right strategy. the budget follows. the budget, as you know, does have a 1% decrease in dod. so the secretary is making tough choices. i think you should talk to him about specific programs. i think he can't generalize -- i do know a little bit about contracting and procurement. i think you can't generalize on that. i think you need to look program by program and any specific questions you have i would direct to the secretary. >> i will be talking to him tomorrow. but as you probably well know, being from the private sector and i'm from the private sector myself.

when you push off these large acquisition programs, your costs increase in a number of studies that show that the cost increase on this is as high as 40% increase and the actual acquisition cost. but that won't show up in the budget numbers because you're shifting those numbers beyond the budget window. so it's something that we're very concerned about. one in additional costs that puts on these programs, which makes it more difficult to explain to the american public why we're expending as much money for these particular programs as we are when it's unfortunately because of the way we're acquiring these weapon systems. >> i think secretary panetta has a very well thought through plan and i suggest that you put that question to him. >> thank you. thank you, mr. chairman. >> thank you. mr. yarmuth. there he is. >> thank you, mr. chairman. thank you for being here and for your testimony.

quick question in relation to something that mr. garrett raised the issue of the -- however you characterize it, fine tax under the affordable care act. you said there were no new taxes in this budget. if i'm not mistaken, that final budget or tax was in existing law prior to this budget being submitted. therefore by the chairman's own standards those things that are in existing law you don't get credit for or blamed for. the implication that in some way this budget raised revenue through that vehicle doesn't meet the standard the chairman said. would you agree with that? >> i think it's important in this budget there are no increases on families earning less than $250,000 and, in fact, important tax breaks, including the america opportunity tax credit which is up to $10,000

for tuition credit, tax against tuition, which is important as part of our global competitiveness and ensuring that people can afford to go to college. so the middle class is -- we need to rebuild and make sure that we're doing the what's right by the middle class and this budget does that. >> thank you. i'm going to get a little parochial for a second. >> please. >> over the last three years the administration proposed to appeal the accounting method and i understand that by your calculations that would result in about $78 billion worth of revenue. obviously that accounting method has been used for a long time and has been considered a valid accounting method for certain businesses, including one that's near and dear to the heart of all kentuckians, the bourbon distilling industry. and the justification being that

bourbon by law has to be aged for quite a long period of time. i have a fortune 1,000 company based in my district, brown foreman distilleries which would be adversely impacted to the tune of several hundred million dollars by this change. meanwhile, it does about $3.4 billion worth of business, about half of that is exported. so it is contributing to our helping our trade balance. my question to you is while calculating the impact the change in life for accounting methods in terms of the revenue sides has omb calculated. the other implications, economically, of that change including the possible death of some businesses in the country. >> right. on the lifo, that disproportionately benefits oil and gas producers who have record profits.

there was a lot of game that can go on through that lifo system. as you know, the treasury secretary is the point person on specifics around individual tax policies. so i'll have to defer to secretary geithner on the calculation and how cost to benefits are weighed. >> i appreciate that. i have raised that with secretary geithner as well. quick question. when i'm home this weekend and in costco, i know mr. simpson says people don't air r care about it. if i'm walking through costco and kroger or someplace and a citizen says, why should i care whether this is a -- the deficit, debt, percentages of gdp as opposed to nominal numbers, whether it's the $11 trillion here in this calculation or in the republican budget that was passed last year, the $6 trillion, why does that matter to the average citizen? >> i think it matters because we need to make sure the sandwich citizen understands that we're doing what we need to do right

now to bring down the unemployment rate and make sure that people are employed and there are plenty of jobs that we're making the investments to make this a more competitive country. we're doing it at the same time as we're bringing our deficits down and creating a sustainable level of debt to gdp so this one maintains our standing in the world as the place to invest. you see it as we mentioned earlier in our current interest rates and we need to maintain an environment that has both american companies and global companies investing here. >> and that would be the difference between united states and greece? >> absolutely. >> thank you. >> mr. akin. >> thank you, mr. chairman. just a couple of questions. you just said a minute ago this is the budget that puts people back to work. boy, it would be nice if that were, in fact, true, but i'm not so sure that i'm sold on that idea.

first of all, on a larger context, when you tax small business owners in increased taxing them, that is going to make their business less competitive and harder to create jobs. specifically i wanted to call your attention to your tax increases that you've got. my understanding is that under american energy producers you have a repeal of percentage depletion for hard mineral fossil fuel, i.e. coal. so you're going to repeal a percentage of depletion for coal. how is that going to affect the income taxes of a coal company. >> it would increase them. >> increase them. about what amount? >> i don't know. i can follow up with you on that. >> you don't really need to. i know. okay. they're paying about a 22% tax, this would double it. what this does is it basically puts coal companies out of business. there are a bunch of mines already closing down but this thing here is going to shut down the coal industry. now, i don't understand how shutting the coal industry along with some other administrative policies such as delays

permitting and expansion of the streams roll to make it so you can't dig under half of the coal in an area that makes long wall mining just goes out the window. what you're doing is you're shutting an entire industry down and this is a key part of -- this budget is a key part of driving the last spike in the coffin of coal. so how you can say that this thing is a budget that puts people back to work, i just don't feel like that's a reasonable assertion at all. >> may i respond? >> yes, you may. >> i think you might be overstating the impact on coal companies but we can continue that dialogue. overall on -- >> double it on coal taxes is pretty significant? >> overall -- overall on small businesses, we, the president, has done 17 different tax breaks for small businesses. this budget has further tax breaks for small businesses. it allows small business toes write off 100% of their investments. also gives them a tax credit as they increase their payroll.

so the president believes that small business is vital to this economy and the growth of this economy and support small business in a very vigorous way. >> let's see how we're doing that in a vigorous way. increase in death taxes. that makes it hard. that's an increase on the tax of small business. and second of all -- >> are you talking about the estate tax? >> estate tax. >> just to respond to that. the '09 level, $7 million exemption. i believe that it impacts less than 0.3 of 1% of estates. >> well, the point of the matter is you go death taxes and capital gains, that's the money, that's the seed corn financially of people making investments which gets the businesses going. if we have a policy of first of all taxing them more, so this is a budget that's going to tax them more and then we follow that up with, of course, all the other regulations that you're burying them in. i don't understand how this is going to help. but particularly, i take extreme

exception, not only to that -- not to even mention what you're doing to defense and the 10%, another 10% cut coming. but this isn't a budget that does anything but puts people back to work, i think this is a budget that's going to specifically destroy a lot of industry and a lot of jobs. i yield back. >> thank you. we're making up some time. mr. pascrell? >> thank you, mr. chairman. when does the budget balance? i think that's a great question. mr. zients. and you were put to the test by the ranking member, my friend from new jersey, when he asked you that question in different ways in different times. and he claimed that you never answered the question. you know, dante's inferno is a terrace and we're looking at it right now.

the budget that was presented to us, not that long ago, mr. chairman, your budget, your budget, was balanced on the positive in terms of the percentage of gdp in 2063. let me finish, please. >> if you want to be accurate -- >> i'm going to get back to you. i always allow you to speak. 2063 -- 50 years. balanced budget. >> that was when the debt was paid off. >> you took, if your budget, i thought you were courageous to present one, so hear me out. i said that to you once before. you took revenue off the table, oil revenue. no increases. the cbo said we had annual deficits of 3.5 and 4.5% of gdp.

so it was estimated that in the budget that you presented, and please correct me if i'm wrong, to add 62 trillion to the debt before going into balance out. it's difficult to have a five-year budget, let alone a ten-year budget. you don't know what's going to happen. you don't know the emergency. of course when you're not paying for anything it doesn't matter. but we aren't paying for things now. we're trying to do it. i think both parties are trying -- >> would you politely yield? draw a figure eight if you can. here's the point. this is really tough stuff. >> it is. >> it's really hard given the tough fiscal situation our country is in to balance it. so the question is, what path are you putting the country on? what your trajectory? >> i agree with that. >> ours is you can see balances the budget, it takes a long time. but the key is you're getting the doubt downward and paid off, which is that date you're talking about.

the baseline, what this budget does, sends our debt in the stratosphere. that's the point. >> we have different stratospheres, i understand that. if we would work together we perhaps move towards some tangible evidence. so you can't over simplify these things. you can't ask director zients out of context. it's a simplification. it doesn't work. it doesn't work. now, as a former member of the transportation and infrastructure committee, i believe that funding for roads, bridges, buses, trains, is an investment in the economy. i have never seen an economist say otherwise. they are right once in a while. according to the american society of civil engineers, our infrastructure is graded as

d-minus. that's no surprise to anybody around the table if president's budget includes $50 billion in up front investments and a $460 billion six-year reauthorization which is 80% increase. this is in contrast with the budget of the transportation committee that's coming up, not today or tomorrow, in the future. headline news. on that topic, we learned yesterday that the congressional budget office found that this legislation leads the highway trust fund $78 billion more in the hole. but i got to take exception to one thing in this budget. i have an exception on many. i am supportive of the budget transportation budget in the president's proposal. i got a major problem with the retroactive cap on the municipal bond tax preference. how long are we going to take to

minimize and target municipalities in this country which give very little help from anybody anywhere until their town, small or large, goes under? the phase-out could result in higher borrowing costs. where are they going to get this money? i want you to tell me where they're going to get the money for state and local governments to pay the higher rates on what you are suggesting and i think that this would be a disaster for municipalities who have had to lay off police, fire, teacher, et cetera, et cetera. large and small towns. republican and democratic towns. this is an absurdity. i would like to know your answer, if i could, mr. chairman. go ahead. >> well, i think on a specific tax policy i will, again, defer to secretary geithner in terms of the transportation comments. i couldn't agree more. it's actually a $476 billion reauthorization, six years.

the other thing i would note is that the president has $30 billion in the budget to make sure that teachers and first responders and other key people at the state and local level keep their jobs and are put back in their jobs. so the transportation is a win-win. it puts people back to work and makes us more globally competitive. >> mr. chairman, i would ask you to take a look very carefully at this point. we do not know the consequences of this or understand it. neither party did in the past ten years. i'm asking you to look at it because we are burying our municipalities. >> duly noted. mr. cole? >> i want to agree with my friend. i think you were courageous to offer the budget you did. i think this committee was courageous to pass it. i think the house was courageous to pass it. i'm sorry my friends when they were in the majority didn't do a budget last year. that our friends in the senate haven't done one in 1,000 days and we find precious little support for the president's budget on his side of the aisle.

it is tough to grapple with these things. i'm almost reluctant to say i'm happy to see you here. every time somebody does that they spend the next 4 1/2 minutes to beat you up. i am happy to see you here. you will do a good job for the president. you've served him well in previous capacities. let me put a hypothetical in front of you but i think it's a reasonable hypothetical. first, let's say you get your revenue increases in your budget and they occur as predicted in the budget. let's say for a minute discretionary spending does better. we've actually spent less on discretionary side in the appropriations process than the president asked for the last two budget years. we made budget control act going forward which kind of put a ceiling on that. i think we actually on the discretionary side of things can do even better than the president projects. so if those two things happen if there's any realistic chance of

this budget ever balancing absent some sort of serious it into -- entitlement reform? >> i think the affordable care act resulted in $100 billion in savings in the first decade, a trillion in the second. in this budget, $360 billion of further health care savings through the efficiency gains, effectiveness gains they talked about earlier. $270 billion of non-health care mandatory programs. it's an important set of initiatives, policy to get done. >> can it ever balance? >> we need to keep working on it. we need to keep working to see how we maintain the compact that we have with our seniors at the same time. >> i agree. is it fair to say that means no, that we're going to have to have some sort of entitlement reform to get further to where we all want -- >> go back, i'll go back to my private sector experience. sometimes when you face a really big challenge, you keep going at

it and you keep making incremental progress. and you do it in a way that maintains the compact that we have with our seniors. the republican budget breaks that compact. it's asking folks in 2022 to pay 65, $6400 more according to cbo. that breaks the basic compact. you can seep -- we can keep that compact and keep going after it. >> what is the president -- reclaiming my time. what is the president's plan then to deal with this? >> the plan is to make this progress in this budget, enact into law, continue to work together to make oh continued improvement toss these programs to make sure that we're maintaining the compact at the same time -- >> do you think the president will tell us what the plan is before the next election? >> i think the president on multiple occasion has shown leadership, come to the table in serious discussions and each and every time has rebuffed. no one is willing to take a balanced approach to deficit reduction. >> i disagree on that. there's no leadership when you

present a plan. >> when you present a plan, we have a plan on entitlement reform. let me ask you another question. limited time. you referenced in your initial remarks that looks like we're making progress on the payroll tax, and we may well be. we'll probably all have to hold our nose on both sides of the table but that potentially could happen this week. do you continue in your budget the payroll tax holiday next year or do you assume that we're going to return to -- as i think we should, quite frankly, hopefully the economy is stronger and we can return to the normal social security taxes and revenues that we used to project on current taxes. >> it's the latter. we're confident that we'll be in the type of shape economically that we can end the payroll tax holiday. >> you're pretty sure we're going to -- >> yes. thank you very much. last question, we've had a lot of discussion about oco. again, i disagree with you on projecting $850 billion worth of

savings. how do you do that unless you can figure out what we're going to spend if we go to war someplace else. you're taking savings saying we're ending wars. the next ten years is very unpredictable. you have no place in there where you would assume that we would spend money to go to war. it's a pretty good chance -- >> i don't want to speculate on national scene and that definitely is for secretary panetta. i will point out that there are $450 billion in oco still in the budget in this situation where we're saving over $800 billion. it's not as if oco is going to zero. there's $450 billion. >> thank you very much. appreciate it. i yield back, mr. chairman. >> mr. honda. >> thank you, mr. chairman. i appreciate it. and thank you for your presence here. the budget is, i think, for the public and i agree with mr. simpson that when we talk in terms of percentage of gdp,

people's eye just glaze over because it's just not something that we talk on a daily basis, it's not a common language outside of the beltway. having said that we've been talking about extending the payroll tax cut and the unemployment insurance benefits and the information i have is if we extend the 2% payroll tax cut and the unemployment insurance benefits, that could add about 0.5 percentage points to the economic growth in 2012 and supply between 120,000 and 600,000 jobs. moody's analytics said this, that doing this would add 0.9% percentage points to economic growth, which is almost double. the nexus between the extending of the payroll tax cuts and the job creation, how does that

happen? i mean, you know, how do you create the jobs from the tax cuts? what is the economic dynamics that happens in people's motivations and, you know, what is the thinking -- >> i'm not a macro economic guru by any stretch, but the statistics that you said i think are widely accepted statistics. by ensuring that families have an extra $40 in their payroll at each paycheck through the end of the year has great spill-over effect. they go out and they spend that money and that creates additional jobs. >> it's just that simple. >> i think that's the basis of it. yes, it's a very complex set of interrelated issues, but, you know, when people have more money in their pocket to spend, they're able to spend it. and they're able to help stimulate the economy and create jobs. now, i want to be clear that the

president's plan is not just a payroll tax cut. it's extending the unemployment, as we've talked about, but it's also an immediate $50 billion investment in infrastructure. it's ensuring that there's money for us to retain first responders. it's to hire veterans and to continue to make changes that will help our housing market rebound. so there's -- this is a multi-facetted approach. we need that given that we're still at 8.3% unemployment. we need to attack on all fronts and get people back to work. >> so since we've done this for a while now, are there any hard data that we can look at and say, since we've done this, it's created "x" amount of -- >> i think the most important thing we can look at is thankfully over the last several months the unemployment rate has come in quite a bit. it's not where we want to be at 8.3% but it's moving in the right direction. gdp growth is moving in the right direction.

now is not the time to stop. now is the time to continue to make the investments that put people back to work and make our country more competitive. at the same time, we will be putting ourselves on a path to deficit reduction and stabilize our debt which is important for our medium and long term. >> and there will be a point where we'll withdraw the tax cuts -- >> i was just asked that question, and the plan is that the payroll tax cut be extended through the end of the year. it's very important. there are no plans for additional payroll tax holidays. >> does the chamber of commerce or any other organization reflect that same kind of sentiment and data? >> sure. i think there's wide spread belief that the payroll tax holiday helps to create jobs and helps our recovery. and if you would like, i can have our staff follow up with some of the specifics on that. >> for the future, maybe we could find some other

terminologies when we talk about percentage of gdp, can say which means or something like that. >> we'll work on that. >> this is a way where we can educate ourselves and educate the general public when they hear terminology -- >> i think the main thing is the general public needs to understand that there's an immediate emphasis on job creation, getting people back to work, which is essential for our economy and for individuals and for families and for the middle class. and at the same time, we do need to bring down our deficits to a point where they're stable. they decline. we have stable debt. and, therefore, as a percent of gdp, that makes sure that we as a country remain favored place to invest, both for american companies and for global companies. >> thank you, mr. chairman. >> thank you. >> thank you, dr. price. >> thank you. i want to welcome you, but i think what the american people are -- they just have a huge frustration about what's

happening here in washington. and they don't get a sense that anybody's dealing with the issues honestly and forthrightly. if you look at -- and this budget, i think, compounds that. if you look at what some folks are saying across the country, the "wall street journal" says promises of future spending cuts are a mirage. mr. obama needs to point to the mirage because fiscal record is the worst in modern american history. "washington post" says, mr. obama proposed budget for fiscal year 2013 falls short. final budget of his first term does not reflect the leadership on issues of debt and deficit that mr. obama once vowed. bloomberg says it's a wasted opportunity. on and on and on. as a physician i can tell you that the doctors across this land and the patients across this land are very, very concerned that the pack that they have with each other, the agent to provide the highest quality of health care in this country, they see it eroding away. i want to go to the big picture

if i may. what revenue do you project for the united states in the next fiscal year? >> the -- >> ballpark. >> are we doing fiscal year 2013? >> correct. >> the total receipts for the u.s. government is $2.9 trillion. >> what level of spending do you project? >> $3.8 trillion. >> 3.8. and the discretionary amount? >> is a little over a trillion dollars. >> a trillion. so if you removed all discretionary money, then we would barely get to balance under your current budget. is that right? >> yes. discretionary spending, so you know, is going down. >> i understand that. >> but if you removed it all that is all the spending at the federal level completely? >> given that we have a deficit of about $900 billion -- >> my point is that the concern on the health care side, is that unless we address the

fundamental reforms that are necessary to save medicare and medicaid, that we're ignoring the problems. so what solutions are incorporated in this budget for medicare, for example? >> so it starts with the affordable care act which saves $100 billion first decade, a trillion in the second. and there's $360 billion in this budget. which has things like, when people move from medicaid to medicare, they get the same drug rebate that they -- that we get as a government, the same drug rebate that they got in medicaid, we get that in medicare. it saves a lot of money. >> you're not presenting to tell me that's the major fundamental reform that's going save medicare? >> no. >> the major fundamental reform that's going to save medicare in this budget is -- >> the major fundamental reform is to keep going at it the way the president has. re