the committee will come to order me today to receive the president's budget and the balance the budget is an old colleague who has served here in the house with us sat on his committee with us and is not only respected but well liked by everyone in this committee room and the on both sides of the aisle in the house of representatives we don't always agree with the budget decisions made by the bush administration but the decision to rob portman as the director of the office of management and budget was a splendid decision we look forward to working with you we honestly welcome you and look forward to working with you not just today but over the rest of this year and into the future hopefully in a search for common ground so that we can put the budget back in the black back in balance where it should be particularly given the situation we found ourselves in american history where the baby boom was about to return and we should not be incurring we all agree substantial deficits that we are today i have to remind you that president bush inherited a budget was in surplus surplus by his own camp by five point six trillion dollars from two thousand and two to two thousand and eleven by the end of two thousand and two that just surplus was in two thousand and twelve according to these projections we have our doubts about then the president's budget does reach balance on the far horizon two thousand and twelve we think that's unrealistic for several reasons that we hope you'll address your testimony today first of all there's no fix and your budget for the alternative minimum tax after two thousand and seven now that's a convenient assumption because it generates about a trillion dollars in extra revenues but it's also unlikely assumption because it means that there will be about thirty nine million taxpayers paying the extra trillion dollars thirty i mean as opposed to about five or six million today  e assumes that revenues will continue to grow it's seven percent per year i don't see the always optimistic they assume the revenue growth will be five point eight percent per year difference a slight one point two percent or two thousand and twelve were found in your budget some big hits on health care and title means two hundred fifty two billion dollars in medicare cuts twenty nine billion dollars in medicaid cuts and we think too little funding for chip the children's health insurance program to be renewed and over the next ten years provide the minimal recovered coverage it provides for some four million children we doubt seriously that there's another provision made for all of the existing children to be covered and we think really chips should be reaching out to include more children there's a big increase however and defense spending to six hundred and forty three billion dollars that includes a supplemental of honored forty one eight and it's accompanied by supplemental of honored sixty three billion for zero seven but in two thousand and nine as having a supplemental of one hundred forty one year and one hundred and seventy the previous year  forty one hundred seventy billion dollars to fifty billion dollars to zero in ten eleven and twelve you're proud of the fact that there are no tax increases in this budget and i think we should all try to minimize taxes on the veterans hospital or four point come to four point nine billion dollars no small item over a period of ten years they need inspections been around the track repeatedly like most of these the requests and yet to make it to the finish line so we think it's probably probably fooling yourselves if you think that these fees are going to be suddenly accepted this year when they've been rejected in previous years there are significant constraints on discretionary spending and the strikes us is a bit odd which is what you're providing i think you providing a one percent increase leave little funding for initiatives and programs we think are important like education for the first for the third time in three years this administration is requesting a cut in education from fifty seven point five billion dollars to fifty six billion dollars and one point five billion dollars cut you may say that's not much you may say we've got to cut spending somewhere and we've got to tackle enticements we say that one way to make the more formal is make our people more productive and national that is education job training employment services to clean a world of free trade that we found ourselves in today and yet that function function five hundred which  education and job training and related activities that function think up by four billion dollars we found that hard to believe in the face of the challenges that we have as a country today is chilly i got up early with mr ron and we went to war on c span and it was cold only get so much blood out of it we find the result that you claim unconvincing and there's one indication of that and of what's happening to the budget as a whole when you look at dead accumulation the bottom line on the back of the envelope over the next several years if you could put up a chart mr portman when president bush came to office the national debt the gross national debt was five point seven trillion dollars that is grown by three trillion dollars over the last six years eight point seven trillion dollars today added so far therefore is three trillion dollars on the watch of this administration the debt that is projected the end of this period of time is nine point five trillion dollars based upon the on budget deficit this budget shows which are about four hundred fifty billion dollars a year add that up and it comes almost four trillion dollars over the last over the tenure of this administration that service so if we're skeptical  because we're looking at the past performance of the administration on your watch but on the president's watch which is accumulated this mountain of debt the consequences are that net interest has grown from one hundred seventy one billion dollars in the first year the bush administration to two hundred sixty one billion dollars this year nearly eight hundred billion dollars this could have been used for other purposes that's not there and when we talk about entitlements tackling entitlements we think this one has to be done with first because this is a truly obligatory you can cut social security you can cut medicare you can adjust them to shame them to fit in the budget but debt service has to be paid our credit will collapse so we think that this is a first order of business before we move on to the been tied in with this has to be dealt with all these questions in the spirit of vigorous to but we look forward to working with you we hope we can find common ground but we also found that the differences between the sorts of central and that's what we would like to discuss today proposals in the president's budget the members are going to agree and disagree with we need to have those discussions and these are the critically important decisions and it's our job to make them but this budget lays down some key markers that i wholeheartedly support and once the president balances the budget without raising taxes this budget maintains a successful program policy that if you will the solid sustained economic manchin has created more than seven million new jobs to federal revenues driven down the deficit and put it on a path to balance we've seen double digit growth in revenues in the past few years and we're now collecting more in taxes as a share of the economy than the average of the past forty years even c d o which tends to be conservative about revenue estimates has raised its projection receipts for the next two years simply put our budget challenge is not working americans are sending us too little of their hard earned money it said the federal government is spending too much of it too fast to be sustained and that is particularly true of our entitlement programs in the past few weeks this committee has had very good hearings of the chairman set forth where he heard from the comptroller general in the studio director who clearly told us that these programs must be reformed in order to survive but they are simply unsustainable as currently structured and this is particularly true of so surety medicare and medicaid if we fail to act in this committee these programs will impose a crushing burden on both the budget the economy and  people that they are intended to help i appreciate the president has begun to address this in his budget congress must also address it in ours the president also included several recommendations for reforming the way the budget works by making the process more transparent more accountable this is something we can do here in the in this committee hopefully in a bipartisan way here is included the house passed version of the line item veto that members here have worked on mr cooper mr quero who was here before worked on he's also incorporates some worthwhile earmark reforms as well which which the majority has done a good job on bringing forward finally all know that this budget for the first time includes the full estimated cost of the war effort and i think that's a testament of the fact that rob portman is now the budget director clearly this is a central issue that congress will debate this year and we need to know what we're dealing with immensely helpful to these costs are included up front rather than later on a supplemental request and we want to compliment you on this new but in transparency in short critics have tried to dismiss the president's budget in fact this saves ninety six billion dollars is the proposal but what that means is medicare medicaid so sure he will spend more money next year than they spent the year before more money the year after that and more money there are after so we need to make sure that we really address these issues in a truthful way that when it actually does reduce spending that's a cut but if it increases spending at a slightly lower rate that's not a cut so i think it's important that we keep our language clear enough and realistic so that we can come together to solve these problems and it's my hope that this committee will use this budget as a starting point then take the lead and work in a bipartisan way to craft the best possible plan to meet our nation's needs both in the short run and the long term i think the chairman freeling and i'm just happy to see director portman here and welcome rob i will have to summarize some of the statements you have before you first it's good to be back here in the hearing room i must say that i'm not sure i like being on the side of the witness table but it's good to see a lot of good  friends and former colleagues i appreciate your opening statement mr chairman and i hope to have the opportunity to address each of those issues that you raised during the course of the of the hearing some of which i'll address now i'm here before the committee today to discuss as you say the residents  like two thousand and eight five year budget proposal and we have good news for the american people this budget achieves balance reducing the deficit every year while meeting our nation's priorities chairman mr ryan i've had a number of conversations with each of you about what you're looking for in the president's budget this year and how we need to work together to achieve balance i hope you appreciate some of the  changes you see reflected in this budget i hope you'll appreciate that instead of painting a rosy scenario on revenues to get to balance we actually take quite a cautious approach and i'll address that in a moment i hope you'll take note that we have responded to congressional concerns by showing more war costs for the first time we've included these work supplementals as part of the budget in a transparent way and incidentally all those war costs are included in the calculation of reduce deficits and a balance budget by two thousand and twelve i hope you'll see we've changed our projections from past years from a freeze or a cut to include a slight increase in non security discretionary spending throughout the budget window and certainly consistent with congress the president have done in the past three years including this year you also see that we've eliminated some of the policies that show budget savings but are unlikely to materialize because of congressional opposition one example there mr chairman the one which is the biggest budget challenge we face as a country this includes important programs which is medicare medicaid social security i will address is further in a moment but the progress we are making on getting our fiscal house in order short term must not distract us from this longer term challenge both mr and mr spratt address that in their opening comments in this budget we propose sensible reforms primarily in medicare that are less than a one percent reduction in the annual rate of growth but they do represent an important first step in beginning to reduce the unsustainable growth in these important programs or restraining spending overall the president's budget also provides new resources for key priorities mr spratt has talked about an increase in funding for national security to compact terrorism and protect our homeland it includes new policies to address issues of concern to america's families including educating our children access to affordable health care and reducing energy costs on the whole we've attempted to give you a credible and more realistic plan to maximize our chances of working together as mr press talked about to achieve balance over the past two years we've worked together to reduce the deficit by one hundred and sixty five billion dollars that's a fact we've been able to make progress for two primary reasons first because we've been blessed with a strong economy that is generated record revenues and second because we've done a better job restrain spending especially keeping non security spending under inflation for the past three years it's exactly these elements solid economy seven as you see we projected deficit will decline to two hundred forty four billion dollars incidentally that's a reduction of ninety five billion dollars since our last estimate in july two thousand and six the deficit in two thousand  eight two hundred thirty nine billion and you'll see from this chart the projected deficit is one point six percent as a share of our economy which is really the key measurement of the deficit because it shows the impact of government borrowing on economic activity this projected f y r e deficit is lower than eighteen of the past twenty four of the past twenty five years as a percent of our economy the deficit then continues to decline each year both in nominal terms and  percent of the economy until we reach a budget surplus which will see sixty one billion in two thousand and twelve you'll recall that three years ago president bush set out a goal of cutting the federal budget deficit in half in five years from its projected peak in two thousand and four at that time many expressed skepticism this goal could be met what was actually achieved last september three years ahead of schedule we want to all build on that success and work with you to balance the budget president's tax relief which otherwise expire in two thousand and ten as you can see from this next chart since the tax relief to full effect in two thousand and three we've seen strong and steady job growth with the creation of more than seven point four million new jobs we've also seen a dramatic increase in business investment productivity strong paychecks are now growing after two thousand and three new economy not only strengthened but federal revenues surged hitting record levels over the past two years the president's two thousand and eight budget uses five year economic projections that are in line with the forecasts by outside experts as you'll see from this chart we assume g d p growth were average about three percent over the budget window closely tracking the forecasts of the blue chip outside forecasters this year incidentally are two point seven percent forecast is now below most outside forecasts and certainly below market expectations you'll see from the next chart with solid economic growth our total receipts are now slightly above the struggle average of eighteen point three percent as a share of the economy and we project these receipts would remain incidentally at  the historical average for the an entire five year period we have what i would term a cautious revenue forecast for this fiscal year and going forward we protest revenue growth will be five point five percent in fiscal year two thousand and seven and averaged five point four percent through two thousand and twelve mr spratt put us some other numbers a moment ago i think that might be some baseline numbers but when you look at our budget spratt including our policies it's actually not a seven percent growth it's five point four over the five year period you said that comparison five point six c d o if that's the case and we are slightly below where c d o would be  is five point four percent estimate over the five year period is below the forty year average which is seven point six percent incidentally and it's well below the dramatic eleven played percent riyadh last year and well below the fourteen and a half percent we had the year before in fact as numbers this committee know it's below the actual first quarter results for the fiscal year already in which are eight point two percent over the same period of last year so as in the past our revenue projections are produced by the career professionals at the office of tax analysis at the department treasury we choose to use them we aren't statutorily required to do so but we've chosen to and i will tell you mr chairman and i would tell the committee this morning as was the case in the past two years we may well find that our revenue projections are low they were about half what they ended up being last year and our projection of six percent in actual eleven point eight percent so i just want to warn you now because i may be back here in the summer with a midsection review and again we may see a decline in the deficit as we've seen the last couple years i don't want you to think that we are doing nothing other than depending on these career professionals but the fact is the first quarter were eight point two percent and our projection is five point five percent so you should know that incidentally in the next month which is january we just got in we're four billion above we thought we would be so i think these projections are actually quite cautious even with a cautious forecast on revenues this budget demonstrates that we can achieve balance by two thousand and twelve and do so without raising taxes in addition we have plans to more effectively and efficiently collect the taxes owed our budget help grow the tax gap in two ways firstly changes that promote compliance while maintaining that important balance between tax payers and tax payers right and our government these changes mr chairman are estimated to raise twenty nine billion dollars over the next ten years so it begins to try t this tax gap we agree with those members on both sides of the aisle want to approach is to actually we have the most aggressive proposal we've ever included to try to do that the two thousand a budget proposal the rate of growth for non security discretionary spending to one percent mr spratt said that's below the rate of inflation again we believe this is both this really prudent and realistic as noted earlier congress no president has done a better job restraining spending in this area over the past few years in fact the average growth in this area of non security spending has been about one percent over the past three years including spending growth in the long term continuing resolution that the house just passed so under democrat leadership we just passed a long term c r that holds non security discretionary spending at about one percent we believe we can address our nation's top priorities within this level of funding and we should do it in our budget within discretionary spending the administration closely examined each program to determine whether it's a priority or not and whether it's effective whether it's producing the intended result based on these through reviews the budget proposes a terminator reduce one hundred forty one discretionary programs for savings to about twelve billion dollars these reforms will help us reduce the deficit and channel resources to higher priorities and were effective programs were able to make these judgments of how to spend taxpayer dollars more wisely in part with the tools developed through the president's management agenda last year to ensure greater government accountability we launched a new website called expect more dot gov which is shown in this next chart this site includes information for taxpayers in the programs that have been assessed for effectiveness using what's called the program assessment rating tool commonly known as part with this website congress and the president now have an unprecedented view into which programs work which do not and what they are doing to try to improve another way we're trying to provide greater transparency holding ourselves accountable and demanding results with the new and improved version of this website we launched yesterday we now have programs level information about the performance of nearly one thousand federal programs  by the way this represents the chairman ninety six percent of government about two point five trillion dollars in federal spending i encourage members and staff anybody watching today to check out expect more do the press two thousand and eight budget also outlines a comprehensive series of budget reforms that will improve fiscal restraint transparency and accountability in government spending ryan talked about this a moment ago but it includes the legislative line item veto this committee led the effort on this last year by the mr ryan did a lot of work on this on a bipartisan basis now both the house and the senate have demonstrated by a majority vote that each chamber supports this legislation by allowing congress to take a second look at legislation at the end of the process we could work together to help eliminate on warning earmarks and other wasteful and unnecessary spending the budget also proposes discretionary spending caps expanding the paygo concepts or applies to both discretionary spending and to new mandatory spending the budget contains the president's key reforms to the earmarking process as you know including full disclosure of remarks putting earmarks in actual legislative language present committee reports and cutting the number and amount of earmarks by at least half our budget shows so we can work with you to achieve balance by two thousand and twelve but that accomplishment will be short lived without addressing our long term budgetary challenge again the unsustainable growth in medicare medicaid and social security as you can see from this next chart mandatory spending is overwhelming the rest of the budget in the space of four decades mandatory spending has grown from about twenty six percent of our budget to over half of our budget in two thousand six as the next chart shows the current trends are not sustainable under current law we estimate that by two thousand and forty spending on these and other important programs plus interest on the death attributable to them will crowd out all other spending this would mean no spending for homeland security or defense or education unless we make the necessary reforms it seems to me  agreement that the unfair both of these programs represent real long term threats to beneficiaries to our federal budget and to the economy we now face a thirty two trillion dollar unfunded obligation in medicare over the next seventy five years our choices without reform will be massive benefit cuts enormous deficits were huge tax increases the balanced budget is important in part because it positions our country to address these looming fiscal challenges mr spratt made this point in his opening comments but our five year budget proposal also makes an important downpayment sensible reform of mandatory spending reducing spending growth by ninety six billion dollars over five  years primarily in the medicare program but also on medicaid and other programs the proposals are very similar in character to those this administration is offered in the past and the administration before us and many in congress have offered to put these reforms in context as you can see in the next chart the size of our budget proposal this area is considerably smaller than we've done in the past in one thousand nine hundred seven when we join together as republicans and democrats again with divided government under the clinton administration to achieve balance you can see what the percentage was of mandatory spending savings as compared to what we're proposing today although an important first step the savings in this proposal would only reduce the  mandatory spending by less than one percent specifically over ten years the annual growth in medicare is scheduled to be seven point four percent all our proposals together would reduce that to ensure rates of growth of six point seven percent however while these proposals to live a relatively small savings in the short term effects that build over time are substantial the changes we have proposed to medicare would reduce the unfunded obligations of the program by twenty five percent over the seventy five year horizon i talked about earlier a trillion dollars or thirty two trillion dollars unfunded obligation frankly under our policies we've laid out for you today we can achieve balance within a five year window without any of these mandatory savings but we don't need to be digging a deeper hole by ignoring it for another year balance is not coming at the expense of our commitment to seniors and low income americans quite the opposite we must begin the reform of these programs now in order to protect those very commitments addressing entitlement spending is the right thing to do because small changes now can have a big impact later committee to take a careful look at these reforms as we restrain spending we're also investing in our nation's highest priorities combating terrorism protecting the homeland and addressing pocketbook issues that affect the standard of living for american famil the two thousand and eight budget supports our troops fighting terrorism abroad strengthens our military for the future supports our efforts on the diplomatic front and protect our homeland from attack it invests abstention resources to maintain high levels of military readiness and we continue t transformation of our military to meet the new threats of this century i want to make the next point very clearly because i think it's often this understood the cost of the war and all the increases in defense spending are reflected in our deficit projections in fact again there's been one hundred sixty five billion dollar reduction or a deficit over the last two years even with substantial work costs earlier the administration supports greater transparency and accountability and this budget improves the timeliness and specificity of the information provided to you and the american public about the cost of iraq afghanistan in the global war on terror within the two thousand and eight budget the administration goes further than we have in the past we saw the full cost of war the rest of the president's term we are providing our requests for the full cost of the world both in two thousand and seven and in two thousand and eight and for the first time including account level detail and justification y two thousand and nine the administration welcomes oversight of this war spending and we hope these details will help you more fully understand our work related requests this is a good faith effort on our part to be as transparent as possible in what we anticipate the needs will be as far out as we can reasonably project chairman the budget before you shows that we can achieve balance reducing the deficit every year by keeping the economy strong and imposing sensible and realistic spending restraint we are committed to working with you and all members of this committee on both sides of the aisle to ensure that our fiscal house in order is in order for the time all of us will be in office but also for the future i'm optimistic that we can do it across party lines as the american people expect and deserve a chairman thank you for your time and i look forward to your questions testimony is that you're achieving balance without raising taxes we have a problem with that because the alternative minimum tax is i think you'll agree clearly a tax in and as we read your budget after two thousand and seven the a m t is in for for some effect not patches not mitigated and according to c b s so over a ten year period of time unless is in some way mitigated or modified their alternative minimum tax will go from six million tax filers to thirty nine million tax filers and the additional revenues raised with it employees will be closer trillion dollars i think it's a trillion forty one dollars forty one billion dollars per c b s asked me don't you agree this is a tax increase and that it contributes significantly to your ability at this point to the it's about a thirty six billion dollars change in our revenues mostly in two thousand and eight reduction in revenues because of that with a four to working with you on that patch for two thousand and seven that would give congress actually about twenty months until the end of two thousand and eight to have to take action again to avoid the very consequences that you're talking about so just to be clear the budget does address a m t in the sense of providing this patch the one we chose to provide  generous patch that congress has provided in the past which is the patch called no new filers so it avoids the a m t falling to middle income tax payers as as you address with regard to the long term absolutely it's a it's a huge issue we need to address together what we've said in this budget which is we have said in our past budget is that we believe that he and he does need to be reformed we believe it's misguided tax policy and we want to work with you to do that i will take a little issue with your point that we  saying that thirty nine million tech spiritual pay a m t under our budget we do not assume that our budget in fact our budget assumes that we will have a revenue neutral  idea of how you would fund enough loophole closings zintan repealing tax measures to do something that's significant i'm not being sarcastic on this is going job i don't have a rabbit ready to pull out ahead either but  like to know your wisdom about how it can be done when we are looking forward to the rabbit you will pull out of the hat when you do your own budget mr chairman i'm sure it'll be interesting but what we have said in the past i think continues to be true only because a m t is now interacting with so much of the tax code which is what ought to be done not as part of some limited loophole closing but it ought to be done as part of tax reform but you've got one accident early involve larger tax issues factored into your revenue base and so if you back that out i think you back yourself out of being in a balanced condition by two thousand and twelve well you know it's it's it's it's an intellectually honest position we're taking which is that those revenues continue but that we ought to reform and i think twenty months is enough time for us to get together and do that i think members on this committee on both sides of the aisle believe that the a m t because it is not indexed is something that in this regard i did see your budget from last year in this regard and i notice that you did something very similar to what we're doing although you did not pass for two thousand and seven because you weren't at that point yet but we're patching forward congress has not yet provided such a patch but we are assuming that that's good policy to give us time to come up with a longer term solution i also believe mr chairman as i said earlier that our revenue estimate is cautious and we will see come this summer i suspect i'll be back before you just as it were last two summers and saying that the revenues would come in a little higher than we expected last year it was again one hundred percent higher and we're going to be in a position to show even lower deficit these kinds of revenues can be used for priorities i would put a t at the top of that list in terms of priorities we hope it happens we're perspectively percentage growth the seven percentage point growth is based upon the assumption that the five point six percent growth with tax cuts and there's four point three percent there's still a substantial difference between you and as i said earlier the difference between your own that assumption alone is about one hundred fifty five billion dollars and twenty and twenty over the next ten years are extended which is what you propose and if they empty is indexed for inflation which is basically what we're talking about the budget outlook for twenty seven thing would change from a surplus ten years from now from a lower again our rates of growth are consistent with the blue chip forecasters which is a cumulation of private sector forecasters the biggest difference though between us and c b i was on inflation about two thirds of the difference which is about ninety six billion dollars in two thousand and twelve is because c d o has a rate of inflation that is lower than ours in fact it's lower than any private core cast that i have seen and because of that difference we are going to have different assumptions on economic growth that leads to some differences in two thousand and twelve and of course even bigger differences you say over the ten year period i think are some things are more realistic i think they're in line with the again private sector forecasters who look at the economy i think they're more accurate with two the assumptions are making about our budget i definitely get the budget in other words the assumption a m t is not what we're saying in the budget so you can come up with all kinds of numbers but i think what we have to go back to is you know what is the most realistic projection of growth we think economic growth that we've got i showed you have there about three percent on average it's realistic we think our revenue projection of five point four percent over the five year period and five point five percent this year is cautious we're sticking with it it's it's our budget numbers are shown and i mean my hope is you know mr chairman if we can get together at least agree on some of these assumptions so that moving forward you know we are working working from the same the same basic facts about our economy today and looking forward in a conservative way i don't think we ought to have a rosy scenario but i think if we can get beyond that it might be easier for us to come together and show balance together it seems to us in looking at each of the koran tyrian job growth hormone inflation g d p growth all of these things that you were about ten through three tenths of revenge porn two thousand and six and the other is that you continue your cost per c b s model through the forecast period twenty seven thing those two factors have a dramatic impact the difference between having a budget that you can stand and salute and one that's still in big trouble and as i said one is a mt the other is war calls this assumes that we'll begin building down our two hundred twenty five thousand troops deployed in iraq and afghanistan in a couple of years will be a steady decline to the point where in two thousand and thirteen a seventy five thousand troops in theater not necessarily in country but in theater that may be a bit high maybe a bit low but that's one of the  models that c d o gives is when we factor those trees assumption in there the budget goes south and hurry and ends up about four or five hundred billion dollars in the red at the end of the forecast period that's a concern about your budget and  percent lower than us and yet which seems like a small amount and yet it makes a ninety six billion dollars difference in two thousand and twelve and we think we're in the mainstream here and cvo is not conceived as a great job by the way but in are and certainly i think we are cautious compared to the last three years where we have reduced the deficit by hundred sixty five billion dollars over the last two on the work cos i think that's an interesting assumption that there be seventy five thousand troops in theater and twenty thirteen you would agree that incremental supplemental carlson ten eleven twelve is more likely to be zero is going to be something greater than zero well again cvo is saying seventy five thousand troops in twenty thirteen that's not our  sumption we do not hope that there will be seventy five thousand troops nor do we assume there will be seventy five thousand troops so you know it depends on what your assumptions are on a m t again the assumption they're using there is not the assumption in our budget deficit has gone down much more because of higher revenue growth how much of the recent deficit reduction resulted from significant growth in tax revenue up till now but more importantly going forward how much deficit reduction the president's budget do you depend on for future revenue growth versus savings in the budget it's a great question when you look at what's happened the last year as an example about seventy five percent of the reduction in the deficit compared to what we adapters ninety five billion dollars lower today for two thousand and seven that we're projecting than the one we projected back in july seventy five percent of that is due to increased revenues from a healthy economy about twenty five percent of it though is due to as i said earlier a little better restrain on the spending side and as i say publicly a lot and it really gets picked up congress has to be commended because in the appropriations process you all took some tough votes over the last few years to begin to restrain the growth of so called non security spending and you know it's a fact over the three year period it's somewhere one point one one point two percent growth in non security spending this year it's about one percent so i think it's a combination mr right of both of those but most of it isn't driven by revenue at this point going forward however our projections on revenue as you've noted are cautious and so the improvement in our deficit is more driven by the spending side than it is by the revenue to start from some sort of a baseline but five point five percent growth this year in the revenues is something that we think is cautious on the spending side we continue to see again improvement on the long term c r in terms of the non security spending and that's of course factored into our calculation that's really the key we i think will all agree that we can't just keep banking all this high revenue growth that it's to stay like this forever so going forward whatever budget we pass we're going to have to balance it on the spending side instead of just assuming higher organic revenue growth but the discussion we're going to have this year is going to largely talk about taxes that the entitlement changes you're proposing are necessary to so called quote unquote finance the cost of the president's tax cuts this is you know pretty darn misleading from my perspective given the fact that we had two highly astute witnesses that came here the comptroller general the new director the c b l nonpartisan objective paul who said even if you let all of the taxes go away all the tax cuts go away and raise all the taxes that still won't even come close to solving our entitlement problem the question i basically had is take a look at this chart which shows medicare growth before and after your reform your proposal to go to the second chart please which shows medicaid growth before and after reform we're showing that in  proposal which these two read here about sixty eight billion dollars in savings that both of these trend lines are clearly up i mean you can even see the daylight between the medicaid savings and go back to the last chart please the medicare and there is a slight savings difference in that in the two trend lines the point is even if we slightly restrain the growth of these entitlements they're still growing and they're growing at unsustainable rates i think you said that with these two policies in place carried out to the seventy five year window which is how we actually judge these things then we're just as twenty five percent of the way there of balancing and making solvent medicaid in medicare so even if i guess the question is this let's suppose we do away with all the tax cuts let's suppose we do it c d o assumes and we get rid of all the two thousand one two thousand three tax cuts we forget about the a m t and just let it kick in we'll have that solve this problem long term will that  make the entitlement solvent though it is not adequate to address the shortfall that you show on your chart it also would put the economy at risk to argue that when you look at what happened in two thousand and three there was an incredible correlation between tax relief being put in place and the increase in production productivity and job seven point four million new jobs since that time period and wages now going up so it would be a mistake in our view to jeopardize that economic growth which ultimately creates the revenues which is unable to be in this better position today so no doesn't it close the gap it also could put at risk some of the very benefits or economies that are letting us have the discussion today about how to get a balance not whether to get t balance so even if we raise taxes on capital gains raise taxes on dividends raise taxes on all income taxpayers cut in half the per child tax credit bring back the marriage penalty and let the a m t had about fifteen million taxpayers at the end of  decade even if we do all that but still won't fix our entitlement problem and still won't balance the long term budget know we need to make changes in these programs and we can make sensible smart changes in the short term that have significant impacts longer term i talk about the fact that these proposals that we've made you're not very impressed with twenty five percent i take it but i'm pretty impressed and i look forward to the vocals from both sides of the aisle to see how we can further as they say bend the curve in or save these programs long term and avoid the catastrophic fiscal crash we're going to have if we don't make changes relatively small changes now to change that program seven point four percent is the growth projection for medicare over the next ten years all of our proposals would reduce that to six point seven percent less than one percentage point reduction so that's what we're proposing in our budget is only a first step knowledge that but it's an important first step and we would hope that congress at a minimum could come together with us and figure out ways to begin to address this problem mr ryan is so well explained so it seems that i think you're going to hear from both sides the aisle everybody's going to say we need to balance the budget and i think you'll get a near unanimous vote on that goal i guess the question that is before all of us is do we balance the budget at a higher level of spending and taxing or do you balance the budget at a lower level of tax rates and spending and what is the difference for our country what is the difference for our economy you've picked a side in that debate from your budget appears that you're choosing to balance the budget at a lower level of spending rather than to balance the budget at a higher level of spending why is that why did you choose that path and why is that materially different both for the economy and for the long run fiscal sustainability of our of our budget it's it's an incredibly important debate because it goes to reconcile mckillop the average tax burden on our economy which is measured by the percent of our g d p or our economy is eighteen point three percent that's the forty year average as i indicated earlier the budget proposal we are sending forward is actually slightly above that average will be about eighteen point five percent this year and no time during our five year budget period doesn't fall below the historical average so it's not that we're under facts and by the way that includes the president's tax relief being continued in two thousand  that we're spending too much and that's why our budget does in the non security area again what congress has done in the last few years which is restrain that rate of growth where all of us have a bigger role to play because it's the only appropriate amount we do spend more on the security side and i think that's necessary given the situation we're in with the global war on terror and then finally we begin the process of addressing the unsustainable growth in more than fifty percent of our budget now which is the so called entitlement programs or mandatory spending going the other way which is adding more of a tax burden to the economy we believe puts at risk some of the same economic growth and job growth again that has gotten us this point of higher revenues to be able to even talk about a balanced budget well let me just close by sharing a concern with you and it's extern quite frankly i bring from wisconsin you know from a manufacturing state from a state that saw a lot of lost manufacturing jobs it's doing better now but still we have a ways to go and my concern is  that america is the sole superpower we are the world's largest economy but we can't take that for and anymore and my concern is that in this new era of globalization with new economic challenges and threats from new countries like emerging countries like china and india and others that we can't just take for granted we can balance the budget at a higher level of spending and therefore higher taxes that we have to think about when we put this budget together what this  competitiveness of our economy what this means to the competitiveness of our workers should we balance the budget by taxing labor and capital and businesses more or less and those decisions will determine how competitive our workers in our businesses are in the international marketplace in in this is and it's new era of globalization and so i simply wanted to put out a word of caution that as we you know we can't do it like we used to do it before we should take for granted our leadership role in the economy used to take for granted that our children are going to be better off than we are that our our standard of living is are going to automatically increase we don't have that luxury anymore and so all i simply want to say is a word of caution that as we go through this process of balancing the budget that we focus on the spending side instead of the tax side because more important than just whether or not people pay more taxes or not it directly speaks to the competitiveness of our country of our workers of our companies and as to whether or not we can enjoy ever higher live living standards so i just hope you put that in mind as we negotiate and come to an agreement about how we balance a budget or not and with that i know other people when i ask questions  youngsters are most vulnerable that this would be a shared priority and it doesn't make any difference what your political persuasion is that we're all looking for the opportunity to increase the preset opportunity for health insurance for our kids we've got nine million low income children are uninsured today the president budget fails to provide sufficient farms to the s chip program to continue to insure the same number of children as the program currently ensures and in addition to that it provides no funding to support state efforts to be able to cover more children as i understand this budget it would limit health care funding for children and families earning more than two hundred percent of poverty even though we have sixteen states that in fact cover children in families above this level there are about four and a half million children and families earning between two hundred three hundred percent of poverty  either uninsured or depend on public coverage excluding these families from participating in the s chip program would leave them with out health care would undoubtedly increase that number of uninsured children now the way this is brings in another piece here with the way that the president's budget would fund as chip is by making thirteen billion dollars in new cuts so the medicaid program that's thirteen billion dollars over five years if you deal with the regulatory changes as i understand it we're going to be looking at about twenty five billion dollars over five years that comes on the heels of six point nine billion dollars in cuts to medicaid over five years it was part of the republican reconciliation  a package now so you have the president's budget not providing enough funding to cover health insurance for for children currently under yep it does increase the number who get insured you're cut medicaid which covers the poorest kids in this nation so you're pitting poor children against children and families that are just above the poverty line it's hard to figure out where the decision making was in these in these two efforts and how the president who talks about wanting to insure more of the nation's children and how we can get that coverage by questions here are so a whole lot of these costs shifted do you believe that they will shift to be shifted to the states to try to help them cover the uninsured to the providers who serve the uninsured or will medicaid beneficiaries have to pay more out of their pocket do you know what the state by state effect of all of these a spending cuts will be and i appreciate your question your interest in this i would urge you not to look at the medicaid reforms many of which again have been offered before not just by this administration but others particularly the reforms to payments which we think are a ppropriate policy along with the s chip proposal these are independent proposals you may disagree with our reforms but i hope you will look at those reforms on their own we think they are the right thing to do regardless of what we do with regard  chip with regard to s chip you know you're under an obligation to reauthorize this year and so we decided to put into the budget a proposal for reauthorization in essence or least provide the budgetary window for that and as a result we do not do a straight line baseline on s chip we increase s chip over the i've year period we had approximately five billion dollars in additional funds to the s chip program over again what we are currently spending so reauthorization is something that will work with you on we look forward to it we're providing more funding you may believe that's not adequate it sounds like you don't but not when you're going to have well i would hope that the money from any reforms would come back into the program and not be placed somewhere else where we should look at independently we provide more funding we do target the resources as you say directly to those children under two hundred percent of under s chip well and that's that's a question that the congress when you all originally came up with the s chip idea you focus it on low income kids and that's what we're trying to get back to is that extent we have limited resources even though we do provide more resources we believe it ought to be more focused on those children under two hundred percent of poverty doesn't work in reality and we are hearing about the realities of what are faced with and the realities of the number of  and anything that you that you can tell this committee until this congress on how to reform this process is broken and we've seen that we need to know how to fix it been racking my brains haven't come up with anything yet number two  we talk about cutting sixty six billion dollars over the medicare budget and i'm not going to touch social security medicaid and i know that's a great start we're actually slowing the growth and in trying to be more responsible is it enough i mean when we're facing over seventy five years a thirty five trillion dollar unfunded liability don't you think we need to be a little more bold to kind of get a grasp on these things in a shorter term rather than a longer term and last when we're talking about the different branches and holding each other accountable talk to me a little bit about a line item veto certainly in favor of think the version of the house passed last year was an excellent version kind of give me some feedback on your thoughts on that and how you think it would certainly help the process just quickly on your marks the president has made his proposal the first part of actually i think very consistent with what congress has now done  and i bought the congress for taking it least on the house side changing the rules in the senate passing legislation to deal with more transparency in or marks for people to know who the recipient is how much money is where it's going all these things we think are good changes we would go beyond that and say that these earmarks out of the in the actual statutory language that you vote on among other things that gives you the opportunity to look at that and decide whether you might want to offer an amendment to strike that as opposed to being in committee reports we're about ninety percent of your marks now reside in the committee report by the way is also not signed by the president so he doesn't have the opportunity to vote up or down in self through a potential veto on that so the idea would be there to be in the statutory language not in the in the report language i know that's controversial among many prickly appropriations committee it seems like that's part of the transparency effort the third one is the one you also mention which is let's cut the number and amount in half in the present is that both the number of remarks and the amount of money represented by earmarks in half i think that's also something that's good policy in doable if you look at what happened this year under the long term r there are virtually no earmarks there may be a few in there and we're still analyzing that as you are but i think it's possible to reduce by fifty percent with all the transparency improvements of policy your marks have triple over the last ten years and i think it's something that we should be able to do working together blind item veto actually i think compliments this very well i said something i don't think the legislative line item veto will be used much why i think it will have a chilling effect i mean i think it will result in more transparency and therefore less likelihood that unnecessary and wasteful spending will end up in earmarks because members just as was the case with unfunded mandate reform back in the ninety's where we centrally said we'd hold up unfunded mandates to the public in the press if we do the same thing with earmarks to a legislative line item veto in that many of you support and i appreciate the budget committees majority vote on that bipartisan i think that will have a chilling effect on the kind of bad legislation that we all believe we need to be more and more cognizant of as we get to balance so i think the president's proposal makes sense not just on its own but as a complement to the  we're talking about finally with regard to medicare your question is is it enough i have said earlier and i i believe this to be true that this has to be bipartisan and we have to figure out a way to come together across party lines to come up with sensible reforms to all these programs social security medicare and medicaid the proposals in the budget focus on medicare and to a certain extent medicaid as miss laura said some of it is focused on payments and fraud and abuse in the current system on the medicare side it's focused on provider payments it's also focused on some more means testing in medicare the beneficiaries actually in the medicare proposals we have would see a reduction in their premiums overall five point six percent of beneficiaries who make over eighty thousand dollars a year or a hundred fifty thousand dollars a year as a couple would see a slight reduction in the federal subsidy for their premiums still get a subsidy but it would be reduced slightly but for every other beneficiary and other words over ninety percent of beneficiaries they'd actually see a reduction in their premiums under our proposals why because as you know they pay twenty five percent of the part b premium federal government pays the other seventy five percent and it's a reduction in that amount so saves about six billion dollars for medicare beneficiaries over the five year period so there are i think ways in which we can go about this in our budget that makes sense that actually are positive for beneficiaries but you're absolutely right we have a bigger challenge in front of us as mr ryan's chart showed and as mr spratt said and that's something that we do need to deal with we have taken a first step in that direction and again i would encourage congress at a minimum to work with us on that first you thank you most of us thank you mr chairman embassador portman standard and poor's is probably on the top credit rating agency in america the world they projected last summer that the s treasury bond the most important financial instrument on the planet will lose its aaa credit rating in twenty twelve that's the year that your budget projections have  reaching a surplus so the question for this committee is whom do we believe standard and poor's or this administration standard and poor's didn't just say that we're lose our  is damaging or destroying america's credit so why should we believe your happiness over standard imports rejection well standard and poor's doesn't have much faith in and you all were apparently in us to to achieve the fiscal discipline we've talked about in this budget they may not think we can get to balance in five years i think we can you know talk a lot about this and and i have said this before to you privately never publicly i commend you for the fact that you raise these issues because what i hear you saying is we should at least achieve balance under a unified budget by two thousand and twelve standard bores me i think we can do that i think we can but you know their real focus is this long term challenge and that's what we just talked about medicare medicaid and social security that's the key issue and i'm worried that when you spread happy talk about budget balance in five years using every trick in the o m b book to try to make that look real and then realizing we have these terrible entitlement problems by not connecting those two usat congressional will to deal with the problem we're going to a number of headlines today a number of folks bragging in their speeches balance in five years we're going have a sixty one billion dollars surplus when you and i know that's not true because according your own numbers if you look at your appendix during the budget five years out you will achieve a superficial surplus of sixty one billion by borrowing two hundred and forty eight billion dollars from so security trust fund over the next five year period according to your budget you will be a borrowing one point two trillion dollars from a false security surplus to make it look like we're reaching toward surplus that doesn't cut it that's not realistic that is taking so security trust fund money and spending on it for other purposes whether it's the war whether it's for earmarks so one point two trillion dollar robbery of the whole security trust fund and that's one of the fundamental principles of your budget and that's what standard and poor's thankfully sees through when they understand that we are damaging possibly destroying america's credit rating with budgets like these well you're absolutely right that all of us budget that way and you know this committee is going to budget that when your budget the congressional budget office budgets that way every republican and democrat administration has done that since one nine hundred sixty seven and so we're you know we're all in this together and i just think you know you make the point very very well and you make the point we're trying to make at a minimum let's get to balance using the silk unified budget which is all money in all money out you make a very good point that that doesn't include the surplus that now exists in the social security fund as you also know intention or years that surplus begins to dissipate because you don't have the money payroll taxes coming in to pay the benefits going out so i again i'll i can say is though i apologize if you think i disconnected the two i tried in my testimony and in my answers to questions to very much connected to in fact explicitly said we can get to balance without even dealing with any of these medicare or medicaid issues we can't and we show you how in our budget we shouldn't do that even though we can it's not the right thing to do because we need to deal with these long term issues you're also absolutely right that if you look you know our analytical perspective or in the indexes you see you can you can find where this is we show the budget in different ways we show the net operating costs that you've been on a great job talking about which shows the government's liabilities under cruel basis we also go step further as you know in this financial report of the united states which seem to present a good job filling out the country about and i encourage everybody to reduce it's on the web it's on our website each member was sent a copy by me personally and also you got a copy before  morning that was jim cooper's idea by the way it also shows a statement of social insurance which is basically our unfunded obligations on social security medicare and medicaid and you know you can look at the budget through a lot of different presentations there are literally you know a dozen out there that i've seen we use a unified budget so do you all that means at a minimum we ought to be able to get a balance in the next five years  greetings and thank you ambassador and i appreciate your coming to the committee doing and i'd like to commend you obviously are also your staff were her job of putting together the budget in your presentation today i frankly think it's what i've seen so was a positive step forward in the right correction what i think we're trying to seek on both sides of the aisle here and that is to get to a balanced budget within the next five years and i look forward to working with your staff and yourself personally and with my colleagues across the aisle to achieve that and to do so in a way that will ensure that the people in the northeast new jersey and specifically in the great fifth congressional district of new jersey where i represent people who are already pay some of the highest taxes in the country will not see an additional tax burden placed on them on the federal level you know every family in america whether in new jersey in suffolk county or anyplace else in america they all have to set up their own family budget and they have to set up their priorities and they have to make difficult decisions when they make up that family budget and we're really no different here as you recall when you served on this committee we have to make those difficult decisions too and i hope my friends on the other side of the aisle will remember those working families that every time we talk or some other people talk about raising taxes that means that you are taking a dollar out of some family in  jersey or some or maybe in one of their districts out of their budget and sending it down to our budget down here director also i would also like to commend you and also the president for regarding a topic that this committee has talked about now in the last two hearings that we've held and that is budgeting the cost of global war on terror within the budget process as i said we've had a couple hearings on this already and i know that those costs are hard and difficult to estimate but appreciate the fact that you have as best you could in this project just reading the news the wall street journal yesterday front page story it said and all those quote very briefly since president bush took office on the front pages of this he has boosted annual spend spending by fifty percent including five hundred billion dollars over five years for the war spending on homeland security at the same time he has cut taxes expanded medicare to cover prescription drugs approved one hundred billion dollars of clean up the gulf coast and signed bills a spend a little more each year on domestic spending and critics said it couldn't be last and couldn't be done and they refer back to the seventy's when president johnson when it triggered inflation but concluded says but this time it's been nearly painless inflation in check the federal budget deficit is down from  two thousand and four peak and it rests at nearly historical average of two thousand two percent of g d p and long term interest rates are relatively low so my question i'll leave you answer these couple questions when you last two minutes is can you assure my constituents of new jersey that we will in fact get to a balanced budget or can in fact get to a balanced budget by two thousand and twelve not do it by raising taxes and would you be willing since the other side well mr cooper is gone right now to look to additional entitlement reform because as mr cooper has just laid out that is the problem area despite the rosy projection we're getting to a balanced budget with the administration be willing to consider even greater reforms in those area to rush to address the issue as mr cooper's raise going forward that that is the area that this committee in this congress must address long term yes thank you again for your good comments got and i have laid out already today why the president believes it's so important to make permanent the tax relief from two thousand and one and two thousand and three that's in our budget because we believe it's the right policy for america's working families as you say and for our economy and the innovation and risk taking and entrepreneurial activity that it has generated has helped us to create the very increased revenues that let us talk about a balanced budget so to raise taxes as some have suggested seems to us to be exactly the wrong direction instead we ought to focus on the spending side and that's what this budget does will also say that with regard to your question on the deficit today and where we are relative to the past today's deficit in two thousand and seven is approximately one point eight percent of our g d p incidentally when i first ran for congress in ninety two it was four point six percent of our g d p so it is relatively low big the average over the years is two point two percent or two point three percent your average is two point four percent actually so instead of two point four percent today we are at about one point eight percent so we have made progress and we've made progress together the tax relief is helped to get the economy back on its feet that economy  generated greater revenues and we've also done a little better job restraining spending so you know it's a good news story in terms of the progress we're making one hundred sixty five billion dollars in real reductions in the deficit over the last two years but it's not enough because we have to continue that to get to balance and also address the long term liabilities which are not addressed through a five year balance or a ten year balance since those problems don't begin to emerge for another ten fifteen twenty twenty five years i showed the thirty year problem which is that we crowd out all other spending when they do so they create such a fiscal imbalance that we would have a huge problem on our hands with having to either raise taxes dramatically cut benefits dramatically or go deeply into debt we don't want to take any of those three bad choices rather let's make small changes now that's what we haven't in our budget it's a first step knowledge to you it's you know it's not the solution to all these concerns that have been and thank you mr portman for being here i'm going to restrain myself and all the conversation about the role of taxes or tax cuts on the economy and revenues because i do want to talk to you about the president's plan health care proposals any time you we work through the tax code to affect what kind of coverage people get there are always the intended and unintended consequences and and many experts looking at the president's plan suggest that it will it winds up with preferences for health savings accounts and also high deductible health plans now you know and therefore it is likely to lead to a decline in employer sponsored coverage now i think there are lots of problems with employer based health coverage in this country but the president's plan is pushing people away from that kind of group coverage into the individual market and  it may well be and i guess this is this is one question do you mean to support declines in employer sponsored coverage since it would be less incentive for workers to demand it and less incentive for employers to provide it and is it possible that if you have declines in employer based coverage that that would offset any gains in the individual market i just say the individual market in my state is very very small and the fundamental problem is if you're sick and if you're old you have a much harder time getting it then you if you try to get coverage through a group policy it's a fair question and you know this health care debate is i think now engaged in a new way because of the polls that we've made in the budget regarding the tax treatment of health care there should be no different senate for an employer to continue offering just what that employers offer now for the simple reason as you know that the employer deduction stays the same and that's been misunderstood by some people this is a it's a complicated area but the only change that is contemplated in the proposal in the budget is that the exclusion from both payroll taxes and income taxes which is like a super deduction you know because it's payroll taxes also would now be available to those people who do not yet employer based coverage so if you're an employer in maine and you're currently offering coverage you should know you get the same tax advantage you get now having said that i think there may be some employers who will choose or maybe as you say their employees will choose to go to the private market rather than stay with the employer market why because now that exclusion will be available to you whether you work in a place that offers health care insurance or not you know it's very hard to predict the treasury department has a model out there as you know which shows that some people will lose their employer based coverage they also the nany answer your final question that the net effect will be more people getting insurance coverage because think about if you're an individual you know have the ability to say if you're making about sixty thousand dollars a year to get about forty five hundred dollars a year to go out and buy health care so that the net effect should be more people being insured and it's really a fairly big number let me let me follow that one out because i understand the administration has estimated the net three to five million of the nearly forty seven million uninsured would get coverage under this white deduction plan well three to five million out of forty seven million especially when the the number of uninsured is growing at about a million a year under the bush administration that isn't very much but i would like to know how solid that estimate is what you know where what the evidence behind it is if you could elaborate on that and what i would do will provide you all the information department treasury model provides this there there is no in in my view from having looked at this there is not the kind of solid information we would like to have as to what employers are likely to do because we haven't tried this before but one thing i would say is to cover an additional three to five million americans is a good thing so if that's the net effect i would think that we as a congress and president should should look in that direction just by fairness you know if you if you get your coverage for an employer fine you should be able to get your exclusion but you don't feel good to get it if you don't have an employer that provides it so that they aren't the only the only addition here is that is that  the thing about the group market is is more in tune with the fundamental idea of insurance that we all share the risk of illness or injury once you get to the individual market then you're leaving people on their own who are not who are older or sick or have a preexisting condition or whatever and that's that's a fundamental problem what happens to those folks who have left you know that it's a fair question to thoughts on that one again as you know this is voluntary so nobody is being forced to go into the individual market if the employer offers a cover which again employers should continue to offer for the most part because their benefits haven't changed at all second is if you go to a state like maine where at least as you indicate the individual market is not as well developed that may be more of a problem our health care is regional as you know and in some states actually the individual market is starting to develop and to create opportunities for people who may have a preexisting condition or as you say not eligible for medicare but the  older workers might have a hard time finding coverage so part of this plan is how can we develop that individual market to make it more mature so you have the kind of transparency and competition you get to an individual market to try to reduce health care costs overall for everybody finally part of the president's proposal that's in his budget as you know is to work with the states states like maine to be sure that we are focused on what some people might term uninsurable americans in other words people that are just have a very hard time getting health insurance and that's through the state risk pools which would be part of what secretary leavitt i believe is going to talk before this committee about this very issue is going to be working with states on to try to encourage the formation of these kinds of pools of maine has such a risk pool to try to cover some of those folks you're talking about who are not likely to find coverage at work or not likely to find coverage an individual market but thank you thank you  to have quite a quest as i understand it i look forward now to seeing the democrat budget that doesn't borrow from the services here any surplus principle a m t relief fully funds the war in pluses up a number of discretionary accounts and then balances that is a document mr chairman i look forward to seeing i do however fear the tax burden that's going to end up placing on small businesses and families in the fifth congressional district of texas director portman one i want to be want to congratulate you in the administration for putting forth this this budget it's interesting to me how many people in this city have been focused on balancing our unified budget and indeed you now present one that achieves that i'm happy to celebrate that i wish it was more from spending restraint as opposed to economic growth but i salute it nonetheless having said that i'm one who's always viewed the deficit to be a symptom and spinning the disease so i'm happy that we will at least in the short term eliminate this particular deficit and you know many still on the other side of the aisle are interested in rolling back the pro growth tax relief that makes this balance possible and getting rid of the zero one and zero three tax relief if i did my math correctly and look at your budget over the five year window the administration is proposing expenditures of about fifteen point three trill in the extension of the tax relief using  static scoring is about three hundred seventy three billion so if i did my math right the tax relief to the spending is about two and a half percent zelikow pretty solid back of the envelope calculation that sounds that sounds pretty close so if you're really trying to achieve balance if you're really concerned about these problems it would seem to me you'd want to focus not just on the two and a half percent that accounts for tax relief but on the ninety seven and a half percent that accounts for spending as you well know recently we've had the head of c b s and the head of g a o in to testify before a committee and i don't have the transcripts in front of me but i think hopefully everybody would agree that a fair assessment of what they said is that the number one physical challenge of the nation is to reform entitlement spending your budget makes some modest proposals in that regard but indeed  can we ever are you serious about the fiscal challenges of this nation in are you being fiscally responsible if you put forth a budget that doesn't have an total net savings i think that's the key challenge we face as a country as i said earlier and i think that has been confirmed by much more knowledgeable and wiser people like that chairman ben bernanke he or some the other witnesses you mentioned  been before the committee this budget does address the issue it's not going to be easy politically for congress to deal with this never has been on the other hand if you look what we did in one thousand nine hundred seven the last time we joined hand for a balanced budget we were much more ambitious frankly and john spratt was part of that some of us you called me an old colleague earlier so i'm old enough to say i was here  the number there was closer to a hundred fifty billion we're talking about a number at about sixty six billion as a percent of the medicare program or a percent of entitlements of course it was significantly more because these programs have grown so much in the interim so it is difficult politically i understand that but it's the right thing to do and it is less than we have challenged ourselves to do in the past in fact it's less than we did in one thousand nine hundred with over or the second over in  as to medicare both in nominal terms and as a percent of those programs directly prove my time is about to run out the doctor or zag now has a far cvo i believe testified in our last hearing even assuming that you let the pro growth tax relief expire even assuming no a m t relief that we would have to increase taxes by fifty percent on the next generation just a valance the budget if we don't reform entitlement spending has your office looked at and looked at that analysis and have you reached the conclusion we have looked at the testimony by theodore zagg the new head of herschel budget office and we may  have some differences as i said earlier on on the assumptions but we agree with the premise which is that as i said earlier if we do not make sensible changes now that have bigger out your changes to these programs to reform them and in some cases improve these programs in terms of the fraud and the abuse that's in some of the payments or right side some of the payments then we will have stark choices and one will be dramatic increases i don't know  fifty percent increases exactly where we are we might be a little higher than that actually based on our analysis but it would be extremely detrimental to our economy and to the next generations that are depending on us to do what's responsible which is to begin the process of changing these programs so they are sustainable over the long term i will also say that you will see in our budget not just the proposals with very specific proposals on the programs that are the fastest growing programs and it creates the biggest fiscal challenge medicare in particular with the thirty two trillion dollar unfunded obligation but we also have in place a medicare trigger in our budget proposal similar to what congress has already enac with more enforcement so instead of having the current trigger which says that if the forty five percent of general revenue is exceeded for two years in a row and it's a six year projection and congress has to take up something which it without any teeth in it in other words there's no requirement in congress do any particular reforms these programs we actually put in place would be a sequestered at that point i don't think congress would do that but i think congress instead would do the right thing which is to make these relatively small reforms in these programs so we not only deal with this issue as you noted with some very specific ideas on our part that begin taking the right steps but we also have this broader budget reform proposal that we think could be extremely helpful to congress to encourage all of us to do the right thing for future generations a factor that's not addressed i don't believe in your budget and also we wonder if it is justifiable in light of the two hundred sixty two billion dollars over ten years you coming in medicare you can continue paying managed care providers on the medicare  amount in excess of what the fee for service providers are paid just to leave those two thoughts with you which are going to limit some of the some of the money to say we think should be used for medicare and health care you're watching a program about wall street the picture is very rosy people are very happy but when you turn on the television and listen to the comments of people on main street they seem to be directly opposite of what you're hearing on wall street so many people today think that the country's on the wrong track so many people don't believe that their financial situation has improved and people don't see how they're going to afford to send their kids to college try to buy a house these days in many parts of the country the economic growth is shown that even though we've created some jobs the president is averaging about a less than one hundred thousand jobs a month in job creation when the previous president president clinton average somewhere about two hundred fifty thousand jobs per month and so when you take a look at what's going on you can begin to understand why people are somewhat disbelieving of what they hear and i want to focus on something that i think will only add to that disbelief the lack of trust that the public will have in the way the federal government operates especially with regard to the budget the president's budget as you have testified shows that we are going to continue to diminish the size of the budget deficits over the next five years to the point where by two thousand and twelve we will have a sixty one billion dollars surplus that assumes that we will have to use every single cent of what is contributed on a daily basis by working americans to the social security system through the trust fund in zero seven so security will collect one hundred ninety billion dollars in worker contributions beyond what it needs that surplus americans believe goes into a trust fund that surplus under the president's budget is used to offset the size of the budget deficit the actual budget deficit or ocean haven't isn't just to off two hundred forty four billion dollars as as you've said it's four hundred thirty four billion dollars but because we're using every single cent of the social security trust fund surplus we can mask the actual size of the operating budget surplus we do that again in phone eight the deficit the bush budget says is two hundred  thirty nine billion well without that without using so security monies the actual size of the deficit would be four hundred thirty two billion dollars you know nine the administration's budget says we go down two hundred eighty seven billion dollars deficit still large but if you take out the monies that are being used from so security to diminish the size of the deficit the deficit would be four hundred five billion dollars to the point that in two thousand and twelve when the breath of the president's budget projects a sixty one billion dollar surplus if you did it if you were to take back the money that's being used from the so scree trust fund to help mask that the actual size of the budgets budget or deficit or surplus is a deficit of one hundred and ninety four billion dollars even in of two thousand and twelve and so when you take up a trillion two hundred billion or so dollars out of so security money that today every of today the american worker who went to his job her job today and knows that by the end of the month the fica deduction will be taken out of his or her check that said going to go for so security for medicare everyone believes that that's what they're contributing towards but the reality is that our federal budget is operating using every single dime every single cent of the so money that's being contributed that is needed today for social security and so when when we see these polls shows that americans are very concerned that they don't believe that we're going through really good times you can wreck understand it when you see how difficult it is for them to send their kids to college or to be able to buy a new home or believe that the government's going to do right by them on social security so much from i guess my question is how do we in this whole cruisin budgeting process as we try to explain to the american public explain to them why the president doesn't include a long term fix for the alternative minimum tax which we know isn't it creep up and grab millions of americans in the next few years in new tax bite that they're not expecting how do we explain to the american people that we don't forecast in the president's budget the long term cost of the iraq war which i don't believe any american says that we're going to be done in a year or even two and how do we then account to the american public for using every single cent of the social security trust fund for things that don't relate to social security it's interesting to hear the comments from my former colleague on the ways and means committee about social security i agree with you and again we've laid that out through the financial report of the united states i talk to you about i think we should be as transparent as possible on the fact that we are using social security trust fund surpluses we have for forty years as you know you all will and your budget the congressional budget office does democrat administrations alike have done this for forty years and it's a you know it's a credible approach in the sense that it's all the money in all the money out you know what would you do with that surplus otherwise you can't put it under the mattress that's not what we do under under law but we should know that that's what's happening and that's all the more reason to get to balance i mean that's what i guess it would lead me to the conclusion that we need to do all we can to restrain spending keep the economy growing to get to balance because that at a minimum is where we should be to prepare for the retirement of baby boom generation and increasing health care costs that you talked about so i don't i don't disagree with you on that i do disagree with you on the economy we are blessed with an economy that right now is the envy of the world you know we've got lower unemployment rates than we had during the one nine hundred ninety s during the recovery in the one nine hundred ninety s we just did go up but guess what wages are going up faster in this recovery and they did in the late one nine hundred ninety s with that recovery the consumer confidence numbers came out this week i'm sure you saw a five year high in consumer confidence so maybe the polling data in your district are a little different you have very high housing costs i know in your district in california and there are certainly challenges out there no question housing is one of them but we are right now in a situation where we have a strong and growing economy we need to keep that economy growing it's an economy that's generated these record revenues we talked about i mean they are record revenues the last two years that reduce the deficit along with some better spending restraint one hundred fifty five billion dollars that's a fact and so i would say is i don't disagree with you at all on the fact that we should be telling the american people about the social security surplus i'm glad you explained it and you find it well today i hope i've been transparent about it today it's there on the other hand it's all the more reason for us to redouble our efforts to keep constraints on the spending side he's economy moving ahead which is you know the magic formula that's gotten us to a better situation today at one point eight percent deficits rather than the average of two point four percent or as i said when i first ran for office four point six percent we're making progress let's keep making progress and then let's get to a surplus because when you get to a surplus you deal with the debt in a more direct way you deal with the social security surplus and all the issues that you raise very talked about the a m t issue our budget as you know provides for this patch in the first year that takes us out until the end of two thousand and four congress will have to act again we agree with you it's a major problem we think is misguided tax policy the way it is not indexed with regard to the cost of war as you know we are showing more than we have before more importantly we're showing out as far as we can possibly estimate you can imagine the military planners are anxious about what we are showing because we're showing costs won't be incurred as you know for eighteen months two years sometimes three years because we're showing costs out the levy on this administration things will change on the ground we don't know what's going to happen we are very hopeful that the new strategy that the president general petraeus and others are engaged in will begin to quell the sectarian violence and we'll have better news that's our plan but we do not project that in particular with this budget but we you know have a very difficult time giving you anything that's not misleading beyond the time period that we  really want to commend you for addressing starting to address this issue mandatory spending the president of the a while ago recommended and asked for a bipartisan commission a committee of members of congress to try to with putting everything on the table preconditions with no to try to see if we can get a better handle on that issue that's question number one if you'll just hold the answers question number two i just want to make sure that i'm not confuse i'm not the smartest guy in the world but when i heard your presentation and then i later heard our chairman  who's clearly a bright and on a person talk about medicare cuts in your budget i understood that there are not medicare cuts that there's a decrease in the increase i just want to make sure that i didn't get that wrong is for example the child tax credit is that extended that tax cut per child is the marriage penalty relief is that still extended and if it's not obviously then every married couple would pay more just because because the fact they're married is the college tuition deduction still supported by the president is a school teacher expense that action still supported by the president just like out of clarify simplify for somebody who's a simple minded person like me what are some of the specific tax cuts that the president is still supporting is that and that is that is reflected in your budget without all raga to answer the questions thank you thank mister thank you good questions and appreciate your asking about the bipartisan commission idea as you know the president presented that in a state of the union a year ago he believes that we should be working on a bipartisan basis to try to address these entitlement challenges we face he is absolutely in favor of that and you know i think in an election year it was probably hard for republicans and democrats alike to come together it was a whole lot of interest expressed by democrat leadership at that time now we're beyond that election there's always another election coming but at least one year this year so it seems to us like this is a good year for us to come together there has been some discussion and chairman fred has been part of some new scotians about a working group  we are not concerned as much about what we call the commission or a working group or even what the precise membership is not whether it's outside experts that typically a commission would include or whether it's done with group to deal with the entitle me to and we believe everything should be on the table and frankly that's a change i think on both sides that we will be able to say no preconditions so i'm more hopeful than most maybe i'm the medicare program over the next years growth at seven point six percent instead with all the proposals that we've included in our budget it would grow still and it would grow at six or seven point four percent over ten years  under current projections instead it would grow at six point seven percent so some point four percent versus six point seven percent would be the difference that still is a healthy rate of growth and annual rate of growth it's of course way higher than inflation it's of course higher than the growth of our economy it's of course higher than the rest of domestic spending which the last three years congresses have to around one percent and we project going forward so it's a substantial growth and it's a substantial commitment to our seniors on medicaid  growth rate is projected to be about seven point three percent over that period of time all the proposals in our budget would mean there would be a growth of about seven point one percent so still again a substantial growth well beyond inflation the growth of our economy and other domestic spending with regard to the tax relief you're absolutely right it would include the marriage penalty relief but also child tax credit also expansion of the ten percent bracket also in tax relief that is critically important we think to innovation and entrepreneurial activity to create additional investment in jobs to put us in this position today of having more revenues and therefore a chance to balance this budget so we would hope that that tax relief could be continued rather than raising taxes  america's families and on those who are creating opportunities for others that would incur if we did not continue that tax relief so those are all measures that would be expiring in two thousand and ten unless congress act mr chairman a misfortune for your testimony mr portman i want to be sure that i understand the requests from the administration concerning the president's widening of the war in iraq as i understand it included  additional monies in the two thousand and seven war supplemental for the additional twenty one thousand five hundred combat troops but you have not included it in the always budget request and therefore the funding for those troops comes to an abrupt halt on september thirtieth of this year is that correct if you are you are correct it is in the two thousand and seven supplemental but it is not a new you know in the two thousand a diff we want to continue that escalation of watching of the war after september thirtieth of this year the administration will be back asking for more money if they find that necessary i you know i think so let me tell you what we are proposing two thousand and eight request we've never done this before so it's a lot of detail and you have a chance to have oversight and look at it is basically a straight line projection in other words yes sir i want to talk to you about those assumptions but you've answered my question that come september thirtieth no money is requested by this administration for this escalation that it says go solve all our problems or it depends are so many would rather look at that at that time that's what my my point is yes it will go not about what's happening at that time next but you also didn't include in the supplemental request even from now until september thirtieth the dollars for the support of those twenty one thousand additional troops which the congressional budget office answer a request from our chairman mr spratt last friday that the true cost of the escalation the president's proposal is not five point six billion dollars as you requested but twenty seven it could be as much as twenty seven billion dollars or forty eight thousand more troops and so if you get the true cost again if the money and not enough money has been included here we can expect yet another supplemental increase i realize you brought along a few boxes and you sent boxes of papers over to the committees but i think all we've gotten is really just a glossy version of what we've had in the past and not the kind of detailed accounting that is done with the regular defense budget i think what we're finding is that just as the cost in blood and money for the president's invasion of iraq and skyrocketed from what the american people were told at the outset the cost of the president's decision to reject sound military advice and the iraq study group findings by escalating and widening the war are escalating even before the escalation gets underway initially administration officials claim that the expansion would only cost five point six billion dollars for twenty one thousand troops we now know that that is not accurate even though there are some debate about how big that increases you're going to tell me about the flatlining  afterwards we also have the new national intelligence estimate and it concludes that even after eighteen months not in sept on september thirtieth that even after eighteen months the iraqis will not likely have significantly increased their security enough to reach the level that the president said they would be at last year this directly conflicts with your budgeting and with secretary gates claim that the escalation will only last for a few months unless it is the administration's intention to simply escalate and then leave before the security level that can be provided by the iraqi troops is where the national intelligence estimate says it will be the defense depart i testified from that same chair to the committee a couple weeks ago that the administration is running through money in iraq at about ten billion dollars a month and that it doesn't have even an operational plan a the job year and a half from now to put in fifty billion dollars as the cost of the war for the the budget that you would be submitting when you're sitting in this chair this time next year to begin in september  of of eight is is just in conflict with a president who's who stated publicly that he plans to just hand this problem off to his successor and it seems to me that it's is misleading as the claims that were made at the outset of the war that the total cost of the war including sweeping away the rose petals from the streets would not exceed fifty billion dollars i know that you said much of this is an incalculable certainly the suffering the administration calcul certainly the loss of our standing in the world isn't calcul but isn't it grossly misleading the calculate that the annual cost of this war for the fiscal year that will begin eighteen months from now and it will be only fifty billion dollars and doesn't this just represent a continuation of the deceit of congress and the american people concerning what it cost in money not to mention blood for this wide g conflict thank you started i don't know for make you happy or not but i think i can clarify some of your thinking on what we have presented it's a good faith effort as i said earlier to try to present more and better from ation it's not accurate to say who did that it doesn't provide account level information it does for the first time and so although it's a chapter of the budget not part of the deal do you base which i would argue is the appropriate way to yes ok thank you i'm going to make you feel better second the you say that we are wrong in our estimate of five point six billion we're not we are again see below makes very different assumptions and we do one of our some sins and it's then that the escalation of the onus on september the thirtieth that's correct you said earlier it's just a few months that's more than a few months but it is within this fiscal year of through the end of september second you know c b o makes an assumption i wish they'd talk to  first before they came out with their suctions and seeing as we've done a lot of work on this both the odeon and i won't be scrubbing the deal do you request a lot of this comes you know from extensions of existing deployments and there's something of the all new troops going over to the region which is more expensive but we have laid out you know again deliberately a plan here that doesn't solve extending some of the deployments that are currently in the theater and then finally you know in terms of the support troops we believe that the support troops currently on the ground can provide more support and we have a way that we can demonstrate that if the only come to us early i think it would have been helpful and also again some of those troops are not coming over with the reinforcements but would be extensions of existing deployments so that's the difference in our five point six billion dollar figure and there figure but it is an assumption that this increase in brigades this reinforcement will over this fiscal year has the intended effect and that's what our military planners think i guess the final thing i would just say is you know we are providing to you and to the american people a lot of detail here some of which and that's one reason i want to talk about the straight line is very difficult to predict a few months from now things will have changed two years from now which is where most of  funding would actually be spent things will change a lot we are hopeful that our plan will be successful we believe that it will be to quell some of the sectarian violence going abel's not to have to incur the same costs but what we're giving you in a way to so you understand does not reflect that it reflects a straight line in terms of the military operations the difference because it's our good faith effort to try to give you in a transparent way that option but it is that option  it is one forty five versus one seventy you might ask why the reason there is that i just see in the one seventy we you in congress and we have decided to front load more of these costs on what's called reconstitution reset instead of putting fifty billion in the bridge remember in october we put seventy billion in because we had twenty two or twenty three in terms of reset or reconstitution of equipment so if you to wear and tear in the theater that's a decision we've made to invest more heavily in that in zero seven and we had previous projected some of that money won't be spent as you know and for two or three or four years but in terms of the military operations and there is reset no it is well you know we're providing all this justification you can pick it apart you may disagree with it  but i don't want to overstate frankly what we're presenting you in terms of its accuracy because it is impossible to predict for military planners and thank you for your tolerance but this is so very important i just want to be clear on the very first point you made you're saying that the best judgment of yourself your military planners secretary gates vice president cheney and a whole lot is that this escalation which hasn't quite gotten underway yet will be over before september thirtieth of this year what i'm saying is it's not my estimation i'm on the budget and my job is to be sure appropriate resources are there for an appropriate request and what the military planners have said is that this is a deliberate policy decision on our part this additional brigades reinforcements would be within this the school year so as a deliberate decision you won't need them after september thirtieth or that you just want to deceive the american people that you won't need them after that or that's a new money and that's our plan thank you rule have on on the budgeting process and more importantly to your testimony long term what in your judgment does this new rule have what effect or what have  on the next generation you have a vested interest isn't as a father of three young children one of whom your daughter may be here in congress one day trying to struggle with those issues can you be more like i'm more than the other two that's right i know a lot i know all three of them that's why i mentioned her you know you know our budget proposal we take a little different approach on the pay go side as we said earlier when you look at the big picture here we're not under texas i t are you she was spending we have now levels of taxation that are above the storable level we project that to to continue over the five and ten year period in terms of the spending side we think it's important to have more discipline in the process the paygo that your past does apply to spending but only to new entitlement spending in other words it does nothing about the continual problem we talked about at length here today of the unsustainable growth in the programs it does if you want to add more on top of that you would have to find the resources to pay for it is also not address the day to day government spending that is annually appropriated and i think that would be a surprise to a lot of americans to hear that but what most people think about government spending the agencies and departments and programs are any appropriated are not subject to pay go under the rules that you all pass so i said in my testimony we in effect extend pay go to the domestic side by having  on domestic spending enforceable caps which would act like paygo so we go further on the spending side plus we have this trigger mechanism for the largest fiscal challenge we face which is on the medicare side that if congress determines that the medicare program is growing at these fast unsustainable rates then congress has to do something about it so we take a little different approach we think that if you apply it on the tax side and say that you cannot extend existing tax relief like the tax relief that mr diaz balart talked about that that could have a very detrimental impact on our economy and on many american families and we think instead we ought to focus on the spending side so that's i guess the difference in our approach is we do believe in paygo we plant more broadly on the spending side both on existing mandatory spending and on the domestic discretionary spending that you all appropriate every year switching gears a little bit and director as committee i noticed a little bit of give and take between you and the chairman and a few other members about the budgeting process you've been a member of this committee you've been a member of the house in the minority and in the majority you were a member of the house with a democrat president a republican president with respect to the budgeting process whether it be war costs whether it be and t really whether it be other matters that have been talked about today you gently talked about the fact that republicans and democrats do the process the same so are you saying that when that when mr clinton did his budgeting same as this president during his budgeting when the minority when the current majority was the majority when you were in congress at the beginning of your career are you saying it was done the same yes i am and we have talked about different approaches to budgeting how you can look at the obligations of the government differently what we've chosen to do is budget on the basis of a unified budget meaning all of the money and including payroll taxes and all of the money out and the point that i was making earlier is at a minimum we ought to be able to achieve a balance in terms of that approach to budgeting in other words be sure that all the funds coming in all the funds going out reaches balance just as happens in every american family every small business in america you've got to figure out a way to balance  there are ways to look at this that are more like businesses which is an accrual method where you say gee what are your actual liabilities for instance retirement of our federal employees should that be included and that would be sort of the next step is a net operating cost budget discussion with you today about showing the surplus and social security that's another way you could approach it and the final one of many options would be to look at what our obligations are not liabilities because we have the ability to change the direction of these programs and we must in my view but what would it mean if we didn't and that's the thirty two trillion dollar unfunded obligation in medicare or the fifteen trillion dollars unfunded obligations over seventy five years in social security so i guess you're absolutely right this is the way it's been done in the past this is the way i believe you know we ought to achieve balance together that would be a first good step but at the same time we should be more transparent in showing these other approaches another cost and that's why i shared this with you today which has the operating cost approach i just talked about and also has the ability for us to look at what they call the i think the social insurance long term forecast which is along the lines of the unfunded obligations i talked about so we provided this on our website on the dot dot gov it's on the treasury web site i encourage people to look at it and understand as best we can provide what the fiscal situation is of the united states thank you thank you mr chairman mr berry thank you mr chairman issue as far as economic growth is concerned and we talk about entitlement reform and i know that you like those recommendations in your budget why do you not ever look at how much money we american people receive the world market price for pharmaceuticals why do you not ever consider in your budgets reducing i know you take reducing expenditures are probably wish to later this week or next week and i think you've got to get into some of the militia's with him directly i will say that in the budget from the budget perspective if we had taken the two thousand and two farm bill which is the most generous farm bill that we have passed in this country and extended it out for five years or for ten years under our budget five years the baseline spending because of high prices as you know would have had a lower cost to the budget than we put in other words we've added five billion dollars over ten years to what would have been the two thousand two baseline we did that because as you know in the farm bill proposal that sector johannes laid out there are some changes both on the commodit but also on some of the so called green box research in conservation and so on have additional spending so actually our baseline and mr spratt knows i'm talking about had to be increased not decreased for the farm bill because we added another five billion i do understand your concerns on the commodity programs because there are some reforms projected by separate johanson those programs and again you have a chance to talk to them about that about the rights program and so on how that would work but the marking loan program katter's difficult program changes notwithstanding there's actually more money in the budget for farmers and we would have had under the two thousand and two bill we'll work with the on that i mean we're going to have to work together as i said with this shift to reauthorize this year and you know the  budget numbers that we've put in here we think give us some room to be able to work together on the other issues that you raised i will get back to you on some your specific questions but i will say on the you said reducing payments to the private insurance businesses and part d or the i assume you're referring to medicare advantage program under reg or medicare it's interesting because if you look at what's happened since we passed the prescription drug plan which is part d the costs are less than we reason for that is that the competition between the providers of the prescription drug plans we have now competing against each other's private insurers has resulted in lower costs than we expected as you know premiums are lower than any of us expected at the time that we were talking about thirty six dollars premiums and now we're in the mid twenty's so the plan is worked pretty pretty well from a fiscal situation from i've you know budget perspective in the sense that it's less costly to the american taxpayer it's also worked well for beneficiaries in the sense that there are costs are lower than we expected that they would be and i think it's largely because of the competition so i would be hesitant personally critically party to change the way we reimburse people on on that basis because i think that competition is healthy for our seniors as long as restraints parents the information and we can always do a better job of providing more of that but seniors have been pretty smart you know they have been to pass to the lowest cost plans to provide for what they need and so i think that maybe a model we should be looking at for the rest of medicare rather than talking about you know going as you suggest maybe to reducing payments for private insurance business this is going to compete let him compete with each other for the business and maybe that is based on experience and part the approach that can both help the beneficiary and save the federal government some of these otherwise difficult challenges we're going to have on  chairman and i think we're starting to talk a little bit about what i'm going to ask about but it's the farm bill and and first of all i do applaud your efforts to balance a budget certainly without raising taxes and i believe that the key to balancing our budget is growing our economy and promoting fiscal responsibility also serving on that house ag committee i look forward to the farm bill discussions that we're about to have and we know that farm bills are written to cover current economic issues are economic times and as you know today's conditions are much different from those of the two thousand and two farm bill debate and clearly in two thousand and two congress did not anticipate the commodity prices we are experiencing today and i say that proudly but that said within your projections to balance the budget by two thousand and twelve do you have room to accommodate fluctuations in policies which may be unexpected or unintended that could be within the farm bill that may question and mr berry raised some of the same concerns you know how do we know what this program's to look like going forward we rely as we always have at least i'm told we always have on the u s d a projections as to prices are going to be right now as you know there's a high demand low stocks for a lot of commodities including corn of course primarily because of corn being used more more for energy and our ethanol plants need more corn there's substitution going on as you know so that a so i been farmers now planning corn for that reason and that raises the price of beans so overall impact of this is that commodity prices are up and therefore our programs like the marketing loan program or the countercyclical program are paying out less and as a result over the next five years and ten years based on the assumptions of g m that the department of agriculture is making about market conditions during that time period they think that our federal payments will continue to be relatively low  so our proposal actually provides more funding rather than that baseline projection and that's the five billion dollars figure i talked about earlier we'll see how this all pans out  but when you look at again the demand right now side of the equation and you look at the potential for expanding exports i worked with mr barry for instance on turkey they were blocking our rights export work together open up that market more you know there are so many opportunities out there from my previous job as trigger presented if we should be doing much more export ing of our farm products we already plant one every three hundred three acres reps where we can do more there we have the most productive farmers in the world and you see the energy demand will not be decreasing i think it will increase based on all projections i think this is adequate mr smith to provide what you're talking about which is a fluctuation over the next next five and ten years but policy might be more stable more predictable and budgetary i think it will be it will be more market based to other words by taking out some of the price and production factors in how the federal government provides a subsidy you get to more of a market based system and i think that's good for the consumer frankly to mr barry's question earlier i also think that if you look at were some this additional funding is going which is to provide conservation research other programs some of which will provide farmers more of a sense that there is a safety net in essence i think it could end up having the impact of being more predictable for farmers and you know i know this is a tough issue and there will be farmers in your state nowhere who will say that the two thousand and two bill was a good deal and they'd like to continue it i would just say to that if you look at what the baseline that's going to happen with the two thousand and two bill we're actually providing based on rest of that as to what will happen we are actually providing more not less funding in this budget to be able to leave room for you all to negotiate a good farm bill thank you challenges and the issues and problems we face as a nation over the short term and long term future and i firmly believe that intelligent people working in good faith operating in good faith can can solve these broken that the united states of america the greatest economic machine on the face of the earth has about an eighteen percent federal tax rate as percentage of g d p the total tax burden on our citizens is in the high twenty's all the other g eight nations our in the forty's and so one of the things we made us the great nation is that we invest in some infrastructure domestic infrastructure  spending as an average i want to follow up on a question a comment that mr t berry asked earlier he talked a little bit about pay go now i must portman as you know there are many of two but i think i heard you say in an answer to mr teamers question that you would only support paygo or the o m b use decision to support pay go always relates to discuss mandatory spending and not to the tax side is that the case what i talked about was and i appreciate your comment on the discretionary caps what we said is that we would expand the pay go concept to deal with not just new entitlement spending which is you know what the people rules apply to but also some of the existing challenges we talked about entitlements even if there were new spending added to the existing challenge and to the domestic side through the application of caps which force you to deal with pay go on the domestic side as is well so we would do more on the spending side but we would not apply it to your tax relief or to the extension of existing to actually which is which is one of our concerns with current paygo as passed by the house in particular the two thousand and ten extension of the actually from two thousand and one to two thousand three well i think that's what our heard you say and i'm sorry to hear you say that because it's our belief that if you use those kind of tools to bring something into balance you have to bring you have to apply to all of the the ledger not just one side of the ledger and i don't know how you can use that as a tool to bring the budget into balance just board and it's my hope that you would recommend to the president if we can if we can bring such a piece of legislation to get it done and i think this out of the capital the leadership has agreed we maybe have a little different view on applying it particularly as i said to the extensions like the tax relief that's already in place that otherwise would result in an immediate tax increase on whatever individuals or small businesses would be affected by whatever parts of the code were not extended so we think that is not again the challenge we face as a country we now have tax rates above the historical average we have spending unfortunately sniffly above the historical average and that's where you have a lot more energy and i want to again you know i talked with this privately but i want to commend you you may not want this commendation but you have focused a lot on that issue on the spending side and your time here in congress and particularly on the need for us to get control of these unsustainable growth rates and entitlements though if that's that's where the problem lies at this point and i just as an aside i will say one of the concerns that i personally have peco is that the way it would apply is not just limited on spending because it's only to new entitlement spending not to discretionary spending not to existing challenges we face but also it seems to me it puts a bias against tax relief in favor of spending talk about the farm bill a minute ago you know the parts of the farm bill that have to be extended this year because it has to be reauthorized are soon to go forward in other words if the tax relief ends in two thousand and ten we have to pay for it if the farm bill is extended beyond two thousand and seven we don't have to pay for under the pay go rules it just seems to me that's exactly the wrong emphasis the emphasis ought  on where objectively speaking we have a bigger problem right now least historically which is on the spending side so i think there's some ways we can maybe work together on perfecting you know some of these some of these rules to make them apply on a more even handed basis when i hear you talk about the your differences of view on paygo it seems to me there's a basic philosophical difference in that at least from point of view and i guess you share this there is a difference in terms of government paying something out to somebody in government taking something from somebody and that's the essential difference between a tax and a payment and i guess we have reached a position here where there are some who argue that they ought to be considered the same whether you receive you to give it's the same thing and i was not here when you pass the round of tax cuts for the president that will expire but isn't it the case that you had to have them expire because of budget rules particularly in the senate that's true under the senate rules there is a reconciliation process so called that allows you to pass tax relief or other reconciliation  spending or revenue proposals by a majority vote rather than the normal sixty vote because of the filibuster rules in the senate and when you do that you are subject to the the budget period of ten years so when the two actually flew was passed it was passed in my view because it was the right thing to do for the economy at the time that's proven to be true to look at the chart we had of earlier on what happened in two thousand and three there's a direct correlation between the implementation of the tax relief and the increase in production and productivity and jobs and so on but under the senate rules it had to be within this time frame we saw the only point i'm trying to make is that your we are having this argument and we're talking about somehow on our side of the aisle we are robbing from the american people are not getting to a situation of a surplus because we want to extend tax cuts that were put in place as a result of the fact that there was a majority view in the congress that they were good public policy and because of senate rules you had to have a limit on them and now we've come up to the limit time and talking about whether we should extend that same public policy base tax relief and we're viewed as if it's a grab for the rich or somehow we're destroying the possibility for a surplus and i don't think that that is very well articulated it has to be with the way they operate in the senate where majority rule doesn't rule where the idea of the filibuster which the filibusters hoary history is that it was the means by which we stopped the senate from ever passing anti lynching legislation which passed the ho a number of times and yet now it's enshrined in the program over there on the other side of the of the capitol and we are bound by it and suddenly we're in an argument that gee we really only thought we ought to extend those tax cuts for several years because economically that made sense and that's just not the case secondly i'd like to ask you this and that is you have as your assumptions that we're going to have an unemployment rate over the last over the next number of years  below five percent when i serve here the first time around the first couple of years before the reagan proposals of serious tax cuts which we've continued forward we have unemployment rates are much higher than four point eight percent if i'm not mistaken if we were sustaining an unemployment rate of seven point five percent for instance for the forseeable future what would be the impact you have any idea what the impact on the budget outlays would be well first i'll get to the answer to that question very specifically because we can plug that into the model the economic model we talked earlier about the fact that it includes g d p growth and inflation and so on but i think again you know given what's happened over the last five or six years that this unemployment number is he has a reasonable number and also happens to be in line with the blue chip which is a com place a lot of private foreca estimate we're at four point six percent today so you know frank that we're assuming unemployment will go unemployment rate will go up you know they were today and there's you know there's more sense by economists and i should let them speak and not me that given the flexibility in our labor market that that is their estimate of a realistic estimate that we stay in that five percent or five percent range we have been at four point four point six four point seven or eight now it's it is low relatively low compared to the last few decades it's relatively lower but we think it's a solid projection going forward to the slightly higher but not as high question open because thank you mr chairman director portman thank you for your testimony and your testimony here today we've heard a lot of discussion about the entitlement programs being the biggest fiscal challenge that we're facing and while i appreciate that that's a challenge you know to be fair were written the costs that we're facing due to some of the decisions the foreign policy decisions of this administration to launch and as collate are bob in any rock isn't that also and the enormous fiscal challenge that we're facing not only now but into the future with respect to veterans health care costs and other needs that we are going to to to deservedly take care of first welcome to the community of ohio and and it's a good question the the costs for iraq afghanistan global war in terror over the last two years have been substantial and yet we have achieved one hundred sixty five billion dollar reduction in our deficits during that time so i'm not saying that they  aren't substantial costs in going forward we're showing in a more transparent way those costs but given the fact that we've had solid economy and given the fact that we've been able to do a little better job of restraining spending in some other areas  we have been able to not just absorb those costs but actually see a reduction in our in our deficit year to year so you're right it is a substantial cost on the veterans side we show as you know in our budget substantial increase in veterans health care we show a substantial increase in defense department health care we show a substantial increase in some of the concerns that have been raised by members this committee before that we'd be sure and provide adequate resources for those health care needs so it's in the budget and again i think with realistic assumptions on the economic situation and the non security spending we can show still show declining deficits and we can we can get to a balance using the unified budget we talked about earlier track department there's so much more that i would like to talk about in terms of veterans health care and perhaps somebody else on this panel will do that but i would i would like to shift just for most if i could to the issue of poverty and the fact that thirty seven million americans live in poverty five million more than in two thousand  the department of agriculture class size twelve point six million families that is quote food insecure meaning that on any given day those families may not be able to buy enough food for the whole family despite that the president but the president's budget includes a number of cuts to programs for low income families including food assistance programs housing programs provides essentially no increase over the two thousand and seven level for housing choice vouchers which of course is the largest low income housing program despite the rising need for affordable housing also cuts community development grant block grant programs which by the way of course in ohio are a staple of you know economic  development for our communities among other things to meet the basic needs this budget also cut funding for low income home energy assistance by four hundred twenty million dollars for the amount needed to keep pace with inflation so the question is so many of these programs are small they're small in budget terms in the federal budget terms but cutting them has such an important impact in the lives of the most needy people who we represent how do you explain the administration's priorities here in the decision to reduce funding for these programs that address families most basic needs for food and shelter while still finding the two trillion dollars for the tax cuts if you look at the budget there are certain there are a lot of proposals that also increase some funding and some of those very few talk about one you know perhaps in the area of housing we provide for the ability of the community housing authorities to provide more funding for the section eight vouchers you talked about we believe that will lead to one hundred eighty thousand low income families by the way getting vouchers who cannot get them today that's been held up by some and the housing community as a positive thing in terms of the other issues that you address we continue a strong commitment with regard to some of the core issues that relate to and to americans like medicaid talked earlier about s chip we actually provide more funding and are current law it  might not be as much as you think we should be providing and then in general on the economy and on poverty i am encouraged by what has happened in the last year which is we're seeing now not just higher growth rates in our economy not just higher productivity but we're actually seeing higher wages and this is hourly wages which relates to some of the very folks you're talking about who are working poor who are punching a time clock every day and what they're interested in is that real wages have increased above inflation and that's now happening it normally lags in a recovery and it lag in this recovery but it's interesting when you compare those to previous recoveries whether it's if this recovery is like others it will continue to see that and that will have a positive impact not just again the good numbers on the economy we talked about which are not only good numbers better than we're  projected three point five percent growth this first quarter in this fiscal year and you know our estimate for the years two point seven percent but also that it's being shared more broadly including by lower income workers who are seeing their hourly wages going up now so that should continue if this recovery is like others thank you thank you mr chairman mr ambassador it's good to have you back up here i think i'm the last on our side to throw a couple questions to you so i'll try to be gentle given some of the wax you've gotten during the earlier testimony i asked this question of the new director of the congressional budget office last week and so if with our vote we choose to not extend those tax cuts that did create seven point two million new jobs in a very low unemployment rate in other economic indicators that children or small businesses that are taking advantage of a lower tax rate for their growth and expansion and so you know to change the c tax structure which we believe has contributed to the economic expansion would be viewed as a tax increase by those who are backed by as important to me from a budget perspective is it really put at risk some of the economic growth that has led to these higher wages i talked about as lead to more job opportunities you talked about is now seven point four million new jobs by the way since two thousand and three and could put at risk some of these revenues that we've seen coming in that is to get to the point of talking seriously about balancing the budget let's shift gears for a minute you've had three impressive positions that i know of on your resume since i've known you you've been a member of this bo really is if you see an inflation in a program in fact a growth in a program is there any place else you're from the buckeye state is there any person ohio that understands an increase in spending  yet that's a cut and that's certainly the way it's pro trade here in the city how many of these so called credits that you have to defend an answer today are really cuts in the actual programs that you've been talking about but it's a it's a good point and mr boehner i know you were two years a senior staff member and now is as a member and you've seen over the last few decades this discussion take place and still it's difficult to successfully communicate what we're talking about we're not talking about in the area of medicaid or medicare he cut it all in fact the rate of growth is far higher than the rate of growth and the economy or inflation or even the rest of the domestic spending and with regard to medicare as i said earlier it will grow and will grow at a healthy clip about seven point four percent over the next ten years if we do nothing and if we took all these proposals we're talking about implementing them in the still six point seven percent growth in medicaid i think the number is it would grow at seven point two percent  percent as compared to seven point one percent if all of our proposals were implemented so i think when most americans hear that they do understand it we're talking about a slowing the rate of growth that is otherwise unsustainable without again huge tax increases big benefit cuts or going deeply into debt in the future and the out years are pretty scary and when you look at the unfunded obligation over a seventy five year period  over the infinite horizon it's time for us as responsible public officials to figure out a way to come together and make some sensible relatively small changes now to avoid that  testimony use you identify the percentage of the deficit to g d p as quote the key measure with a deficit because it shows the impact of government borrowing money canonic activity close quote i tend to agree your observations david walker was here ten days ago and released an analysis that says that by twenty fifteen the debt it will be about five percent of g d p if there were not significant policy changes you are proposing design or stand it one significant policy change which is that discretionary spending would grow slower than the rate of inflation but you keep the tax cuts in place and i don't see any major in title meant suggestions it was sixty eight billion over five years which is pretty minor in the grand scale of things if we adopted the president's budget as submitted what percentage of g d p with the deficit be surplus under unified basis may not know if sometimes mr walker wisely focuses us more on the so called on obligated or how your obligations or actually go further into surplus under under our calculation if i may come back to this it was five vs nine unified distinction though i think you just said this is accurate that if you look at the actual operating federal budget net of social security we're not in surplus in two thousand and twelve and under your proposal how broke what's the projected social security surplus over the next five years in your plan  in and so we include that as part of the unified all of it yeah all of which is to say though again no none of that we are offering as the rhetorical fiction here of a social security trust fund and it is a rhetorical fiction but if there of no dollars in the projected so security surplus would be set aside to meet future so security obligations under your plan is that correct nothing well it depends how you look at it i mean if you assume that we're going to have those obligations in the future which is that fifteen trillion are figure i talked about that we are well then that is being credited toward the trust fund and and that's you know how again he's relatively large numbers in the future are arrived at  the question is what you do with the surplus when it comes in or under statute as you know we are able to invest that in treasuries only interesting thought if we were to treat that surplus the way defined benefit plan does in the corporate world and actually save it against future obligations i think one of the greatest risk in this process is that we get fixated on the next five years which we should but do so to the tepper detriment of embracing the hardest questions about what happens in the next ten or fifteen or twenty years and the truth is there's probably a fairly marginal difference between what the two parties would do in the next five years but there's an enormous consequence for not doing something about the next fifteen or twenty years in the next five years i don't want to mention one year we had this back and forth about what a cut is and in is an inflation adjusted if i read correctly your proposal in the elementary secondary and vocational education accounts there are in fact cuts in absolute dollars aren't there if i read discretely in fiscal zero eight that category would get thirty eight point five billion which then drops to thirty seven point five billion in zero nine in my ring that correct i don't think i have the chart that you have in front of you but let me tell you what our what our numbers are it includes an additional one point one billion for title one as you know no child left behind is increased in the president's budget by about a billion dollars part of that is title one there are other education programs that again this year as we've done in past years we believe should be reduced or even terminated some of those hundred grammes you talk you submit for the record the absolute dollars that you are proposing for elementary secondary vocational education f y o eight and the absolute dollars you're proposing for that category in two thousand and twelve if i read it programs like id and no child left behind if i read that correctly you know we do as you note we have allocated that funding base and we think of the priorities and no child left behind gets more than a billion dollars in new funding under a budget because of that as a title one focusing on those kids who need the help the most but you're right some of these other programs including book at where we don't think you get the same value again i encourage you to look at expect more dot gov you can see our analysis his programs we do not have  passed an increase the pell grant maximum to forty three ten for next year and so i think all of us are pleased to see that the president is also requesting an increase in the program actually to forty six hundred but if i read  your tables correctly that estimate the cost of increasing the pell grant maximum to fifty four hundred a part me to forty six hundred in zero eight will be five hundred thirty two million dollars  and that unfortunately is offset by zero ing out s c o g which is now at seven hundred seventy one million and you would zero that out which i guess you would it would agree is a c and the perkins revolving fund the president requests that it be recalled and if i'm reading the charts correctly that's that's a four hundred nineteen billion dollars million dollar cut pardon me for fiscal zero eight  also bringing that to zero so if i'm reading these numbers correctly to increase the pell grant maximum to forty six hundred would require five hundred thirty two million dollars of additional appropriations but it would be done at the expense of cutting one point two billion out of other student financial aid programs and so my question to you again if i am reading these numbers accurately is how can anyone suggest that that this would increase affordability if we are adding five hundred thirty two million and deducting some one point two billion from the student loan probably from the total student aid available from the federal government this is a net loss of seven hundred some million dollars so how can we suggest that this is a good thing thank you mistress i don't have a lot of the sort that you're referring to but i will tell you that my understanding is that by taking the maximum pell grant forty six hundred dollars per student which as you indicate is a substantial increase in fact over what the house just did in the long term c r which frankly i hadn't expected to see and i was also pleased to see that because it's good policy that we make a new and substantial commitment actually we take it up to fifty four hundred dollars per student by two thousand and twelve and that is a substantial new commitment for exactly what we think is the most important issue which is low income students being able to get access to colleges universities you cannot define my program you talked about you're absolutely right that's a that's a cut and although it is relatively small amount compared to the increase in the health grants and i would encourage you to look at those separately i mean i think those are two different policy issues we think that the program is based on an antiquated formula and frankly doesn't show results and again we talked earlier about performance of looking at results but it's based on a formula as i understand from back in the sixty's or maybe i think the one nine hundred sixty s goes primarily to more established schools including some wharton ivy league schools that we think would be better served by increasing the federal commitment through pell grants and it does not go by the way to a lot of junior would just suggest and i administered these programs for a number of years before i came here and i would just suggest that that i have an entirely different perspective of the utility if you will of the s c o g program and of the perkins loan program and i know the administration a year ago when it the recall of the perkins loan revolving fund made the argument that it was duplicative of the guaranteed student loan program that we currently have and i guess what i want to say to you is in the real world that's just not true  most students who borrow a guaranteed student loan also borrow a perkins loan most students who get a pell grant also get an f c o g so if we're what we're looking to do is influence individual students ability will not enhanced affordability it will not enhanced access and i would i mean i very much hope that that my colleagues here in the congress will recognize that one of the thing we did look in the higher ed committee we looked at the formula by which the campus based programs are allocated we recognize that it is a formula that gives preference to well established schools and we were trying to we were struggling with ways to to change that formula what came out of the higher ed reauthorization that that the house passed changed it in some ways perhaps not perfectly but changed it in some ways and i think when we reauthorize again this year we're going to look at that but i guess all i just think it is and i don't want to sound impolite but it is disingenuous you glad to see me i'm glad the last let me let me thank you for being here so i would like to spend a few minutes after we finish i have a question as relates to farming roughly forty five percent of the firemen who lose their i won't do that here because i can talk about that and few minutes let me just say before i ask my question so that you will know and for the record prior to coming to united states congress i've spent nineteen years in business fo years as a county commissioner where i chaired a commission for two ten years in the north carolina johnson where i balance for budget and eight years as the elected state superintendent to schools in north carolina so some of my question is coming in agricultur some in education but you said at the outset i believe and i want to ask a question on this when he said our highest priority is to protect the homeland i believe that was your actual words and i look at the first responder cuts and i'm shocked because it cuts there for homeland security at the state level and you can argue whether state all the fun that pop out or assistance grants cut the fifty four point seven percent burn grants cut the thirty two point seven percent community oriented policing cut banani four point one percent now this approach has been cut every year in congress but i'm backing him but it bothers me greatly that we are making these kind of cuts now one can argue well they're already somewhere else let me just state for the record haven't shown a reason i mention where i head for is that i serve as a can of commissioner in the late seventies when they cut out programs we can is pick them up associate myself with the comments made by mr bishop because under these education cuts and i want to take them up with the secretary there are some in here that that makes absolutely to me i'm aghast m t seasonal farm workers cut very little money but for the children who move heaven going to stupid then i can tell you they move from canada county they will be lost and get no help and yet these are investments these are in expenditures and i hope we can remember this we talk of making cuts we come at investing in our future down the road if we're going to need people to grow and make a difference we've got to invest in our infrastructure education is a huge piece and i don't see how you invest if you cut out the programs that make a difference in the future i hope you will comment on those corralling those are critical pieces and look forward to working with the only because i think those are the sort of like a farmer eating a seed corn there won't be a future if you don't invest in the next generation because the children who are going through our college thanks quickly if i could try to answer a couple of these questions put it in a little perspective i think on the state local grants we do have some changes as you indicate it's a little different than what we did last year one of the things that i was surprised to learn when i got to this there and we as you know we are trying to do a better job to deal with the red tape or the federal paperwork involved in that and spend out that money so you know our view from a management perspective because that's part of the title of job here is to be sure that that five six million dollars is spent and spent wisely and rather than adding more to the existing funding there the thought was how do you loosen up some of that funding and  it out we do increase as you know funding in some areas and reduce it in others totally totaling it all up where four point three billion dollars for the state local first responders part of that is a billion dollars in the air operability communication grants and you know those are to be awarded in zero seven and they're funded through the spectrum auction receipts so i would encourage you to look at that is that billion dollars sometimes is not looted in there but that would be some of that also have been here before you know congress not go pick up some of those all  understanding is that has been funding the part for zero seven and so you know we we do think that given the amount of resources that are out there already and given the fact that we have changed some of our approach and that we have this billion common communications grants in our budget that we can indeed continue to provide for what the state and local first responders need as you know overall we have a big increase in funding in our in the homeland security area and the question is whether these individual programs work better or whether it's better to do it in a more comprehensive way with more flexibility in thing and education i mean some of these programs i will check now on the migrant farm worker program but as you know we have increased education spending working together dramatically over the last several years we've got thirteen point nine billion for part of one this year which is a one point one one point two billion dollar increase and basically we believe the money  go more for the title one focus where there isn't flexibility and as a elected superintendent of education you know that issue much better than i do but what we're hearing is that the different flexibility is better than having the federal government send money for a specific purpose and i don't know if migrant farm workers one of those but i suspect it is so we take a little different approach overall when you look at the funding that we have provided it's more than the administration has provided on education over the last several years it's an active it would be a five billion dollar increase for title one for instance which is the largest increase under any ministration this is since we since we started again about one point one billion this year alone and more focused on no child left behind but focus on providing the funds to the schools and then to have them have more flexibility as to how those funds are spent thank you federal government only about seven percent was chairman of the funding in some districts the poor school districts are substantially more and they get when they wind up being the ones who really are disadvantaged because they have more title one children and that money has a few comments and ask a couple of questions and then i think will be concluded with no other members but let me begin by thanking you for your many years of distinguished public service in the congress trade representative is now director of o is a very serious challenge our country faces that your children in mind need us to address and the sooner the better frankly i were some of our republican colleagues said listen to this a few years ago when the largest increas entitlement spending least in the in the medicare program on the history of the medicare program was passed through this congress with the support of the administration and i think that's certainly one of the challenges we face today is paying for an increase in and programs that tune of hundreds of billions of dollars that came from public ministration in a republican house and republican senate i want to work as a father two young sons with you on a bipartisan basis to make tough choices to to balance a budget but also for that very reason my my concern about the future for your children and mine and where we're going to leave them and a massive federal debt i would i could not be totally quiet today and not make a few comments about the this budget proposal showing no disrespect to your presentation of it which has been but actually not pinion this budget proposal is is more of the same presented very articulately by you mr portman but it's more of the same it's what we heard in two thousand and one that we can have a defense bill but we can balance a budget and have into reality after having had the largest or process in american history we heard the same free lunch philosophy in two thousand and three two thousand and four two thousand and five two thousand and six and now we're hearing it again and i think the message of the american people on november seventh is i want to change and yet what i hear in this budget is basically more of the same promise that we can for the first time in american history from the major war by passing and extending massive   ministration mr stockman had the integrity to say whoops we cut taxes too deeply we better go back and make some corrections so we don't for burden our grandchildren yet twenty years later we come along you know i go back and read the congressional record those who supported the tax cuts said we can do this we're still going to have a balanced budget what didn't happen and if i were judging you by the quality your presentation today would be an a plus but i think mr portman if you and i were on a university board siding whether to continue the employment of a basketball coach who's been the coach for the last six years and that coach came to us and you predicted in the seventh year he was going to predict that he'd have a twenty nine wins and one loss record i'm not sure that you and i would hire him again based solely on his promises for the future i think we would judge the hiring of that basketball coach on the basis of what his track record has been and i think a subject far more important the heart of a basketball coach that of the budget of the united states and the deficit that we face so the largest deficits the largest deficits in american history and an actual nominal dollars i think we should judge the projection the ministration for the zero eight budget based on how accurate you've been over the last six years and during that time much of that time you were here in congress  sitting here at this desk but the reality is that an administration that came in with the largest surpluses in american history projecting to pay down the national debt missed its projections by over eight trillion trillion dollars to the national debt and that's not all the administration's fault it is reality to me person responsibility means stepping consequences for the impact of decisions we have we have made  good faith want to continue to listen to your presentations on the budget in the months ahead and do want to work together and find common ground we can do that but i hope you'd forgive us if some of us are i think fairly so skeptical of the projections that we're going to have a balanced budget by the year two thousand and twelve i don't think you would bet your family nest egg on their projection i know i would not bet my family nest egg on that one point specifically  issue of cuts we've heard a lot of discussion today and over the last five years about what to cut to me it cuts if if the number of veterans receiving health care is reduced a card is if the number of children receiving children's health insurance program health care services is cut that is a real cut even if you've increased nominal dollars we can say we've increased funding but if it hasn't that funding increase hasn't kept up with inflation hasn't kept up with the increased number of children for seniors  veterans in our country it's a cut it's a cut to real people it's a cut that hurts real people including veterans and military retirees and children who need health care whether one wants to call it a cut or not really didn't matter the people who services are being being reduced one thing i would say is not a cut is when you suggest that the administration has cut this deficit and then your definition of portman was that well we've reduced the deficit fifty percent below what we projected it to be and keep in mind that ministration started out with a huge surplus not a deficit in projections of surpluses but i'd have to use an analogy that's  checking that in the year two thousand and seven i'm going to gain one hundred pounds but on december thirty first i only gained sixty pounds i guess i could i could gloat and say you know i i lost forty pounds but i didn't really lose forty pounds fact is i just didn't gain as much as i had projected i would at the first of the year and that's why i'm kind of philosophy can only  obesity in the real world if i follow the diet program like that i think we're going to continue to see obese in seen in seriously threatening deficits if we don't see something change from the status quo of this promise that despite all good intentions and i do think given good intentions ministration despite all good intentions we have not been able to fund the war in iraq fight the war on terrorism cut taxes and balance the budget and your children and mine are going to pay the interest on this extra three trillion dollars national debt we've built up over the last six years to the day they they die having said all that i want to i want to work with you to find common ground while respecting each other we do have honest differences of opinion as is we do a couple of specific questions and then i'll finish and since i carried on and you were enough to listen i'll be happy to give you time to respond to those comments but let me ask you specifically the president's budget does not propose significant increases if any at all in health care premiums for members of congress and members of the president's cabinet yet they propose massive increases health care premiums for men and women who serve our country in the military twenty and twenty five and thirty years ministration thing that's for the answer that question in your earlier question on veterans you know we have another healthy increase in veterans health care about six point one billion dollars this year as compared to two thousand it is compared to this year eighty percent by the way during his administration eighty percent increase which is an unprecedented increase in our commitment with we're now going to be for the record over half of that increase came from increases that were initiated by congress on a bipartisan basis not not increases proposed by the administration once again this year we are proposing again substantial increases and yet we are able to keep the overall domestic spending it at the one percent level this means we set priorities and veterans clearly is a high priority with the increases of  percent in medical care for two thousand and eight again with two point five billion dollars dedicated just to that purpose on the fees as you know again in our budget this year we have a proposal that's a little different this year unlike last year the receipts from these proposals are classified as mandatory which you should like better so the medical care funding requests includes the full resources need with no reduction for the new fees second is that this only applies to higher income veterans and only veterans who do not have a service connected health problem so it is asking those veterans who are higher income who do not have a service connected health problem to pay a little bit more for their veterans health care which if you know it's improved dramatically over the last several years could i ask you about that by her income in categories seven they could veterans making as little as twenty nine or thirty thousand dollars a year so we're talking about increases in fees on veterans whose income might be as low as thirty thousand dollars here is that the definition of high income veterans it is seven eight seven  ask you specifically about military retirees the question that i asked told in that last one that it would be no one below fifty thousand dollar income would be affected by the fees in the budget this year or if you're raising the fees on category seven eight  that goes down as low as thirty thousand unless there are other details in the budget that specifically override that and say you only pay additional fees if you're making over fifty thousand we can follow up on that let me with limited time let me just ask you about the military retirees last year the administration proposed in the republican congress rejected a seven hundred thirty five million dollar increase in health care premiums for military teri's men and women increase was going to require a thousand dollars per year increase in premiums for retired military officers over a two year starting a two year period phased in over two years it would become a thousand dollars a year increase in health care premiums for someone short of a country twenty to thirty years in the military this year's proposal doesn't bring in seven hundred thirty five million it brings in one point nine billion dollars i just projected last year's administration proposal out using those numbers nearly three thousand dollars a year increase in health care premiums for military retirees could you give me any specifics and if you need to follow up on specifics we can follow  our country for twenty years or longer and it's not asking the same sacrifice from the president's cabinet members or members of congress you know this is the proposal for retirees under sixty five  we think is an appropriate policy approach to you know for magic increasing health care costs and dramatic increase the commitment by taxpayers to retirees because particularly with regard to our veterans program  our defense retirees program we've seen increases above inflation in our funding requests and we'll see that again this year and increase in well beyond what we have in the other domestic programs we've talked about today  we think that this is a consistent program with providing for those who need the most help with regard to their health care because it targets this to lower income retirees and i would just say as a general matter all the concerns you raised earlier about the fiscal condition and the fact that health care is a driver of a lot of that care medicaid veterans health care military health care we do need to work together and figure out how to make sure that we are providing the need for those veterans need the help and i think our budget proposal does that both with regard to veterans and military retiree substantial resources from the american taxpayer but we also have to figure out how to be sure these health care costs in general and i'm referring to all of our health care programs are continuing you know of that in some cases as is the case of some of these programs more than double the cost of inflation or appreciate the honest answer i think military health care costs truly is a serious issue we've got to deal with it i would think you know find massive opposition within the veterans community the military terry community within congress to actually call it a fee but in effect it's a one point nine billion dollar tax increase  on military retirees men and women who have served our country for twenty to thirty years and this is an example of why i think we have the three trillion dollar increase in the national debt over the last six years administration proposals about both tax cuts and spending cuts congress courageously adopts the tax cuts but after hearing hundreds of deficit hawks speeches folks turning to deficit does when it comes to making some of the tough choices the administration has asked  for so we get that's what we're get so we get the patients tax cuts the not the spending cuts and that's why your children and mine are going to have to pay interest on this three trillion dollars national debt but take a moment to respond to that and you're your thoughtful comments about where we are this is a good example i guess is the defense health programs none of this would apply to any active duty service members or their families these these we're talking about would be considerably lower than any of the averages for private health care plans this year we're requesting a six point two percent increase in funding in this area since the administration started to say seventy four percent increase in funding for retiree health care for department events you know i just think it's some point it's important for us to focus on how to in a more bipartisan way look at some of these programs that are growing again at  more than twice inflation and figure out you know how do we come up with a more centrist way to deal with them in terms of your comments on you know the fact that congress is only picked up on the tax cuts and not on the spending restraint i gave you credit earlier for doing more in spending restraint the last few years the numbers that i was using a hundred sixty five billion dollars reduction the deficit is not from projections are actual numbers the deficit has reduced on down one hundred sixty five billion  what level well what level or what level how do you get the hundred sixty five billion because we're now at about two hundred forty four billion dollars on our projection for this year and again i think that's the end up being high and the largest deficit in american history part of this higher at some other times in our recent history now we're down to one point eight percent well below the growth in the economy and that's significant not because we've done enough because as i've testified today repeatedly we need to do more to prepare for what i believe to be our greater fiscal challenge but as a percentage of our economy which is the key measurement we have made progress and we've made it together and if we can continue that progress then we put ourselves in a tough position because of the long term problem this is a debt you talked about the debt a moment ago and you talked about the fact that when president bush was elected there was a projected the crease in the deficit and you did use were projected and i appreciate that because it never materialized and it didn't not materialize because of the tax cuts by far the primary reason it didn't materialize you know was because of the recession and so you can have projections you know of two point four trillion dollars in surplus and so on they don't mean anything if you have the economy take a nosedive as it did in two thousand and one and was on the doorstep when he was elected the tax cuts were put in place and some people disagreed with them including members this committee but they were because they were put in place not because the tax cuts were viewed as the immediate problem to the deficit but because we needed to get the economy back on track in order to have the opportunity to do well are today with higher represents exactly what's happened if you look at what's happened is that record revenues the last two years we reduce the deficit because of that we're going to a little better job on spending and we continue that will be in better shape if you look here this is the debt again you may disagree with me but every kind of assign a democrat republican or nonpartisan says the key is what economics i studied all my life when you're having economic growth you should be in a surplus situation not in a deficit situation one day we're going to have with a deficit and i have the last well i just say we're just going to have to disagree i think putting that one point nine billion dollars tax taking that much additional money out of the pockets of men and women to serve the military for twenty to thirty years and the ministrations don't ask a member of the congress or the present cabinet to make the same kind of sacrifice on their health care premiums is not keeping faith is not it's not fair but we'll have to disagree on that when you presented your your budget very well i respect your service and and despite some very serious  disagreements honest disagreements i look forward to working with you your great public servants and i thank you for being here today i'd like to ask unanimous consent that members who did not have the opportunity to ask questions of witnesses be given seven days to submit questions for the record