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63–033 2011

THE PRESIDENT’S FISCAL YEAR 2011 BUDGET 

HEARING 

BEFORE THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

FEBRUARY 3, 2010 

Serial No. 111–41 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

CHARLES B. RANGEL, New York, Chairman 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK B. MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

DANNY K. DAVIS, Illinois 

BOB ETHERIDGE, North Carolina 

LINDA T. SA ́ NCHEZ, California 

BRIAN HIGGINS, New York 

JOHN A. YARMUTH, Kentucky 

DAVE CAMP, Michigan 

WALLY HERGER, California 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GINNY BROWN-WAITE, Florida 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

DEAN HELLER, Nevada 

PETER J. ROSKAM, Illinois 

Janice Mays, Chief Counsel and Staff Director 

Jon Traub, Minority Staff Director 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

Page 

Advisory of January 27, 2010, announcing the hearing ....................................... 2 

WITNESS 

The Honorable Timothy F. Geithner, Secretary, U.S. Department of the 

Treasury ................................................................................................................ 4 


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THE PRESIDENT’S FISCAL YEAR 2011 BUDGET 

WEDNESDAY, FEBRUARY 3, 2010 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:00 a.m., in room 

1100, Longworth House Office Building, Hon. Charles B. Rangel 

(Chairman of the Committee), presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–3625 

January 27, 2010 

Chairman Rangel Announces a Hearing on the 

President’s Fiscal Year 2011 Budget with 

U.S. Department of the Treasury 

Secretary Timothy F. Geithner 

House Ways and Means Committee Chairman Charles B. Rangel today announced the Committee will hold a hearing on President Obama’s budget proposals 

for fiscal year 2011. The hearing will take place on Wednesday, February 3, 

2010, in the main Committee hearing room, 1100 Longworth House Office 

Building, beginning at 10:00 a.m. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be limited to the invited witness, the Honorable Timothy F. Geithner, 

Secretary of the Treasury. However, any individual or organization not scheduled 

for an oral appearance may submit a written statement for consideration by the 

Committee and for inclusion in the printed record of the hearing. 

FOCUS OF THE HEARING: 

On February 1, 2010, President Barack Obama will submit his fiscal year 2011 

budget to Congress. The budget overview will detail his tax proposals for the coming 

year, as well as provide an overview of the budget for the Treasury Department and 

other activities of the Federal Government. The Treasury plays a key role in many 

areas of the Committee’s jurisdiction, including taxes and customs. 

BACKGROUND: 

In announcing the hearing, Chairman Rangel said, ‘‘Developing a budget is a 

difficult challenge at a time when we need to continue our efforts to create 

jobs and strengthen our economy even as we face increasing concerns 

about our long-term fiscal outlook. I have enjoyed working with Secretary 

Geithner over the past year and look forward to hearing him discuss how 

the President proposes to meet those challenges.’’ 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://democrats.waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for 

which you would like to submit, and click on the link entitled, ‘‘Click here to provide 

a submission for the record.’’ Once you have followed the online instructions, submit 

all requested information. ATTACH your submission as a Word or WordPerfect document, in compliance with the formatting requirements listed below, by close of 

business Wednesday, February 17, 2010. Finally, please note that due to the 

change in House mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House Office Buildings. For questions, or if you encounter technical 

problems, please call (202) 225–1721 or (202) 225-3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 


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The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://democrats.waysandmeans.house.gov. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TDD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

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Chairman RANGEL. The Ranking Member and I have been trying to find some way that we can move this forward. The Secretary 

of Treasury has a limited amount of time. We hope that the Members would agree to a 3-minute limit in terms of questioning, and 

we will stick to it. We want everyone to have an opportunity to ask 

a question. 

We expect a battery of votes on the floor in a couple of hours. 

And so I yield my opening statement to the Ranking Member, Mr. 

Camp. 

Mr. CAMP. Well, Mr. Chairman, in that spirit I will submit my 

opening statement for the record so that we can leave more time 

for questions by Members on the Committee, and I appreciate the 

opportunity to move forward. Thank you, Mr. Chairman. 

[The prepared statement of Mr. Camp follows:] 

Prepared Statement of Dave Camp, 

Ranking Member, Committee on Ways and Means 

Thank you, Mr. Chairman, and welcome back to the Committee, Mr. Secretary. 

Today we begin our annual cycle of hearings on the President’s budget proposals 

and their effects stretching out for the coming decade. As usual, we will have many 

specific questions about what the Administration plans in terms of spending and 

taxes, and why. 

But before we get to the specific questions about the individual proposals in here, 

a larger question looms in the minds of tens of millions of Americans. 

Where are the jobs? 

Last year at this time, President Obama and Democrats in charge of Congress 

were putting the final touches on their so-called stimulus plan. And in selling that 

plan, they made all sorts of promises about the jobs it would create and the beneficial impact it would have on the unemployment rate. 

Everyone is, of course, entitled to their opinions. But facts are stubborn things. 

And the facts, quite clearly, show the promises made by this Administration about 

stimulus were more than a little off the mark. 


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Instead of creating 3.5 million jobs as Democrats promised, we have since witnessed the elimination of nearly 3 million more jobs. 

As we can see from the chart on the screen, we were told unemployment would 

stay below 8 percent if stimulus passed. Yet unemployment is now 10 percent, and 

the President’s budget admits it will stay there throughout 2010. 

Instead of more paychecks, the lasting legacy of stimulus may be measured more 

by the spike in the number of people collecting unemployment checks. A record 12 

million Americans recently claimed unemployment benefits, almost 50 percent more 

than the 8 million when Congress passed stimulus. 

Today, 10 months after stimulus, 49 of 50 States have lost jobs, representing another promise made, but not kept, in selling this debt-bloating behemoth to the Nation. 

Other promises, such as those claiming most job creation would be in the private 

sector or that construction and manufacturing would benefit especially, have been 

shown to be equally off the mark. 

These are not empty assertions. These are all painstakingly documented and can 

be found on the website of Ways and Means Committee Republicans. 

Further proof of the failures of stimulus can be found in last week’s report by the 

Congressional Budget Office, which found stimulus actually cost taxpayers $75 billion more than originally forecast, in large part because the failure to create jobs 

drove up spending on unemployment and other Federal benefits. 

This is the sobering context in which we will consider today’s budget. Simply put, 

it proposes the highest spending, largest tax hikes, and biggest deficits in American 

history. Meanwhile, the Administration claims these steps are necessary to spur job 

growth in the coming decade. 

And that really leads us to a more basic question. If the nearly $1 trillion added 

to our debt by stimulus didn’t spur job creation this year, why should we expect that 

adding another $9 trillion in debt over the next decade—as this budget proposes— 

will improve things? 

I look forward to a discussion of how the specifics in the President’s budget will 

actually create real jobs. Not ‘‘jobs funded’’ or ‘‘jobs temporarily saved until stimulus 

money runs out’’ or whatever else someone would like to count. But real, lasting jobs 

in profitmaking companies that are selling goods and services to our fellow Americans and customers around the world. 

Because for people across the country, especially those I represent in Michigan 

where the unemployment rate is over 14 percent today, ‘‘How does it create jobs?’’ 

is the first, middle, and last question on their minds. 

Today, I will be looking for answers to these questions from the Administration. 

I thank the Chairman and yield back the balance of my time. 

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Chairman RANGEL. Mr. Geithner, we will waive opening remarks and go right into your testimony. 

STATEMENT OF TIMOTHY F. GEITHNER, SECRETARY, 

U.S. DEPARTMENT OF THE TREASURY 

Secretary GEITHNER. Chairman Rangel, Ranking Member 

Camp and Members of the Committee, it is a pleasure to be back 

here today. 

A year ago, as you know, when the President took office, our Nation was facing a deep recession. The economy was contracting at 

an annual rate of about 6 percent. The financial system was on the 

verge of collapse. Credit was frozen. The housing market was in 

free-fall. Millions of Americans had lost their jobs, and the economy 

was losing jobs at the rate of three-quarters of a million additional 

jobs a month. And this is very important: When the President came 

into office, he faced a deficit of $1.3 trillion and projected deficits 

before a single bill was enacted that, according to CBO, would more 

than double the Nation’s debt over the next decade. 


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I want to just say this again: In January 2001, CBO, which is 

your designated nonpartisan, neutral scorekeeper, projected 10- 

year surpluses of $5.6 trillion. In January 2009, before the President stepped into office, those projected surpluses turned into $8 

trillion in projected deficits. So let me just repeat that. Over the 

course of 8 years, we went from the summits of $5.6 trillion in projected surpluses to $8 trillion in projected deficits. That is a swing 

of $13 trillion. 

Now, this recession caused tremendous damage, and today millions of Americans are still living with the consequences of that recession. And we all know that the road to jobs, to greater economic 

security and to fiscal responsibility starts with economic growth. 

And today, in large part due to the actions Congress took and that 

we took to put out this financial fire, our economy is now growing 

again, and in the fourth quarter it grew at the fastest rate in 6 

years. 

This is progress, but it is not enough, and that is why we need 

to work together to intensify our focus together on job creation, on 

investment and on innovation. 

Now, when you talk to small businesses across the country, as 

I know you do, they tell a similar story. They are worried about 

whether they are going to see demand for their products, and their 

ability to expand and to hire depends on access to credit. And that 

is why the President in New Hampshire yesterday proposed new 

legislation to create a small business lending fund. That new fund 

will offer capital to community banks that have historically been at 

the center of lending to small businesses, and we need them if we 

are going to be able to grow and create jobs. That is why the President is also proposing to substantially expand what the Small 

Business Administration can do in terms of higher loan limits, 

lower guaranteed fees. We want to extend the Recovery Act provisions and build on those. 

Now, in addition to helping small businesses get access to credit, 

we are proposing extensions of Recovery Act tax relief for small 

businesses. Expensing, bonus depreciation, we are proposing zero 

capital gains on investments to small businesses, and we want to 

work with you to design a credit to help small businesses expand 

hiring. The President’s proposal—and we are open to ideas on how 

best to do this—is to give small businesses that add jobs $5,000 for 

each net job they create, and combine that with some payroll tax 

relief. 

Now, in the President’s budget we laid out a comprehensive 

agenda to invest in innovation and strengthen our economic foundation. This budget is designed to create the conditions for the private sector to grow so that businesses small and large can create 

jobs. To do this we need serious financial reform not just to provide 

better protection for consumers and investors, but to make sure 

that our financial system is taking the savings of Americans and 

financing future growth and innovation, not financing financial and 

real estate booms. 

We want to encourage American innovation. Last year we made 

the largest investment in basic research funding in the history of 

our country, and we want to build on that and give businesses incentives to invest in R&D and in clean-energy technologies. 


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We need to increase exports, and that is why we are committed 

to working with this Committee and with the Congress to pursue 

strong trade agreements, because the more American businesses 

are able to export, the more jobs they are going to be able to create 

in America. 

We want to invest in education. Businesses in this country need 

an education system that does a better job of teaching and creating 

a skilled and productive workforce. 

And finally, we need health care reform so that we can provide 

greater economic security for tens of millions of middle-class families and help reduce the extraordinary cost burden our existing 

health care system puts on businesses large and small. 

Now, these are reforms the government has to make. If the government fails to meet these basic challenges, Americans will suffer, 

and businesses will suffer. The market cannot solve these challenges on its own. The government needs to address these challenges in order to provide a strong foundation for a dynamic, growing private sector. 

Now, part of this foundation requires returning as a country to 

living within our means. When we have strong growth in place, we 

need to begin the process of bringing down our deficits. These deficits are too high. They are unsustainable. And the American people 

and investors around the world need to have the confidence that 

we are going to work together to bring them down when the economy is stronger. 

Now, the President’s budget proposes some important steps toward that objective. Starting in fiscal year 2011, we propose to cap 

nonsecurity discretionary government funding for 3 years. Second, 

we are proposing some important changes to our tax system to 

make it fairer and help bring down those long-term deficits. So we 

are proposing to allow the tax cuts put in place for the richest 

Americans to expire to close what is called the carried interest 

loophole so that we are taxing the income of hedge fund and private equity managers in the same way we tax the earnings of 

teachers and firemen, and we want to eliminate unnecessary, unfair and ineffective tax subsidies. 

As we take these modest steps, though, we want to expand, extend the Making Work Pay tax credit, which goes to 95 percent of 

working families across the country. We are working to close down 

the TARP at zero cost to the taxpayer. If you join with the President in passing our proposed financial responsibility fee, the taxpayer will not be exposed to a penny of loss on the actions the government was forced to take to fix the financial system. 

Third, we have to restore basic disciplines of budgeting that all 

American families live with by reinstating pay-as-you-go. Any new 

initiative should be paid for without adding to the deficit. In the 

1990s, those disciplines helped move us from a deficit that was 4.5 

percent of GDP in 1991 to a substantial surplus in 2000. Now, this 

budget outlines a path to bring our deficits down as a share of our 

economy to below 4 percent over the next several years. And while 

government support for the economy is critical now, we can’t let 

our future deficits and debt continue to grow faster than our economy without hurting future prosperity. 


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This is going to be a difficult task, it is going to require tough 

choices, politically difficult choices, but it is important we work together on that. And that is why the President has proposed the creation of a bipartisan fiscal commission which will be charged with 

identifying responsible policies that can win support across the 

aisle to bring down these deficits. 

I want to just close by saying the following: The United States 

economy is in a much stronger position today than it was a year 

ago, but our challenge is not just to repair the damage caused by 

this recession. We also have to make the investments that are necessary to our future prosperity. We have not been investing in 

making the kind of reforms that are essential to broad-based economic growth in this country, and that is why the investments laid 

out in the President’s budget are so important. 

Now, I know we have different ideas on how best to get the economy growing again and make sure we are creating jobs, but I want 

to underscore where I think you can find some common ground 

today. People across the aisle today say deficits matter, and ours 

are too high. Tax cuts are not free. We have to pay for the programs we propose to undertake. But our priority today, our priority 

today, is to make sure we are getting Americans back to work and 

we have the conditions in place for a sustainable recovery. Now, I 

want to say I look forward to working with this Committee on how 

best to design and implement policies that achieve that objective. 

And I want to conclude, Mr. Chairman, just by saying one thing 

about what you read in the news today about AIG. What happened in AIG was an outrageous failure of policy. As a country we 

should have never let a company take on a scale of risk that could 

threaten the stability of the financial system, and we should never 

allow the taxpayers ever again to be in a position where they have 

to pay a penny for rescuing a financial system from the mistakes 

caused by not just government, but the decisions of people running 

these major firms. 

Part of what contributed to this was a set of compensation practices that defied gravity; they were deeply responsible. In a simple 

way what happened is people were paid if things went well, but 

they were not exposed to loss if things went bad. And what happened in AIG is the people running that firm, as they were taking 

on a level of risk we had not seen ever before, they had it—they 

were paying their people on a presumption that they would share 

in the gains if things turned out fine, but if things went south, they 

would be protected from those losses. These contracts were put in 

place in December 2007, and in March 2008, before that company 

faced collapse, they came to the government and said, we need you 

to help us save us from ourselves. 

Those contracts were outrageous. They should never have been 

permitted. And Ken Feinberg has done an exceptional job under 

very tough conditions. I asked him to come and help us work 

through this. He is a brave, smart, tough man, who knew he was 

not going to make anybody happy, and he did a very good job of 

negotiating down those payments and trying to make sure that you 

did not have any of that kind of stuff in place in that firm or across 

our major firms in the future. 


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Now, if you join with us in passing this proposed fee on our largest financial institutions, then you will be able to say, as we do, 

that the American taxpayer will not pay a penny for what happened in AIG. And if you work with us on financial reform, then 

we can put in place the kind of bankruptcy procedure we have for 

real companies and we have for small banks that allow us to deal 

with future AIGs without having to face the kind of outrageous 

things you have seen us have to confront in this process. 

So our job today is to see if we can find a way to fix what was 

broken in this economy and in this financial system. We are making some progress, but we have a ways to go. And we are looking 

for the best ideas that offer the best bang for the buck to get people 

back to work that are responsible, recognize we have limited resources, but understand the deep obligation we have to try to repair what was broken, repair all the damage that was done, and 

put us back on a path where we can be more—we have earned 

back the confidence of the American people that they are going to 

have a more secure economic future. 

Thank you, Mr. Chairman. 

Chairman RANGEL. Thank you, Mr. Secretary. 

[The prepared statement of Secretary Geithner follows:] 


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Chairman RANGEL. Well, you have said it all. I am going to 

yield to Mr. Camp. But I think it is abundantly clear that in addition to having incentives, we have to find some way to provide confidence to the people out there, especially our small businesses. Let 

us see where we do have a common ground. 

I am going to ask Mr. Camp to consider his staff working with 

the House, analyzing, as we will, the President’s proposal to see 

what parts of it are acceptable, because the misery, the pain that 

is going on out there is not Republican, it is not Democrats, and 

I think they are looking for some degree of unified support. 

So we are going to give it our best try, Mr. Camp and I, and we 

do hope your office would share with us experts to help us to get 

through the political problems that unfortunately we face. I thank 

you for your testimony, and I yield to Mr. Camp. 

Mr. CAMP. Well, thank you, Mr. Chairman. And obviously we 

will do everything we can to be working on all of these issues facing certainly our country at this difficult time. But I want to thank 

you for being here, Mr. Secretary, and for the opportunity to really 

have a hearing on the President’s 2011 budget. And it appears 

from my reading of the budget that the President is calling for 

about $2 trillion in tax increases, is that correct, as a total number? 

Secretary GEITHNER. Well, here is how I would say that—— 

Mr. CAMP. Well, I think it is. 

Secretary GEITHNER. What we are proposing to do is allow it 

to expire. 

Mr. CAMP. I really would like to get your comment. 

Secretary GEITHNER. We are proposing to allow to expire the 

tax cuts that affect 2 to 3 percent of the richest Americans in the 

country. We think that is fair, we think that is just. But we are 

extending very important tax cuts for the vast bulk of Americans, 

vast bulk of American businesses. And these are powerful, very 

powerful, responsive tax cuts. They are good policy. We should 

work together to make sure those happen. 

Mr. CAMP. And I notice that the budget does not factor in the 

House-passed national energy tax. And if you did factor that into 

the budget, the total number would be closer to really about $3 trillion in tax increases in the budget. So last year I look at the increase in spending by about 84 percent in last year alone, and since 

the Democrats came into the Majority, the debt limit has increased 

by 60 percent, and now you want to pay for all that spending and 

all of that debt with about $3 trillion in new taxes if you add in 

the 2—plus the $1 trillion cap-and-trade. 

Secretary GEITHNER. No, Mr. Camp, I don’t think that is—— 

Mr. CAMP. And those new taxes on small businesses, on working 

Americans’ health benefits, and also, as I said, taxes on energy. 

Now, I understand the President has called for about $30 billion 

to help small businesses, and on the surface I think that sounds 

pretty good. But as I look at the President’s budget, his tax increases would hit small businesses particularly hard, because you 

are increasing taxes on nearly half of all small business income, 44 

percent according to the Joint Tax Committee. So under the President’s plan, small businesses would pay an additional $10 billion 

in taxes in 2011 alone, and a total tax increase over the 10-year 


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period of $259 billion. So it seems to me that $30 billion in help 

pales in comparison to the $250 billion in tax increases. 

Secretary GEITHNER. We would welcome—if you are prepared 

to work with us to make sure we can help small businesses to get 

credit and take the resources we have saved by fixing this broken 

financial system devoted to that, that would be terrific. But the tax 

benefits of small businesses in the President’s budget are very, 

very substantial and dramatic. And again, one very important 

point—and this is not our numbers—letting the tax cuts on highincome Americans expire affects only 2 to 3 percent of American 

small businesses, 2 to 3 percent. 

Mr. CAMP. I see my time has expired. 

Secretary GEITHNER. But the tax benefits we are proposing to 

give them are very, very substantial, and we hope you will join 

with us in making those permanent and extending those incentives. 

Mr. CAMP. Well, I will just say in light of the private-sector job 

losses announced this morning, further job losses in January, I 

don’t see how raising taxes will have the effect of leading to job creation. And when you look at the total tax relief versus the total tax 

increases, it is a significant tax increase particularly on small businesses. 

Thank you, Mr. Chairman. 

Chairman RANGEL. Mr. Levin. 

Secretary GEITHNER. Can I just respond to that last point? 

Chairman RANGEL. Okay. 

Secretary GEITHNER. I just want to do it one more time just to 

say historically. I have been in public service all my life. My first 

job in public service was the Treasury Department, first under Secretary Jim Baker. Lloyd Bentsen gave me my first job, my first 

senior job, in Treasury. When I left the Treasury, at that point 

CBO and OMB projected $5 trillion, more than $5 trillion in surpluses. When the President came into office, that had shifted to an 

$8 trillion deficit. 

Now, there is nothing fair, responsible or good for business in 

that swing. Now, we are in a deep hole that we did not create; we 

are trying to dig out of it. Love your help in trying to dig out of 

it, but it requires that we would be growing again and get people 

back to work. And we are willing to work with you on how best to 

do that, but our priority is again to fix what was broken, make 

sure we have an economy that is growing, people are back to work. 

If we do that well, then we are going to be in a better position to 

help dig ourselves out of this fiscal hole. 

Mr. CAMP. Well, where I come from, when you are in a hole, you 

stop digging. And I look at the tax increases, the debt, the spending, and particularly the way it is going to fall on small business, 

I don’t see the help there. But I would like to—I mean, the purpose 

of this hearing is to really highlight these provisions and see where 

we can maybe find ways to move ahead and help certainly get jobs 

started again in this country. Thank you. 

Chairman RANGEL. Will the clerk please start the clock over for 

Mr. Levin. 

Ms. SCHWARTZ. Will you just yield for one moment for a point 

of clarification? I just want to be clear about the numbers. This 


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came up yesterday in the Budget Committee, that there is a new 

category now called ‘‘Democratic control budgets.’’ And so what the 

Republican side is doing is putting the last 2 years of the Bush Administration deficits onto us. 

Chairman RANGEL. Mr. Levin will proceed. 

Mr. LEVIN. I am glad—look, I think we need to try to find common ground, but it won’t work if people try to escape from the past. 

And I think everybody needs to remember the sentence you read, 

simply put, over $8 trillion of the projected deficits we faced as we 

put together the budget were due to the fiscal policies of the last 

8 years and the effects of the deep recession this President inherited. 

I want to ask you then, Mr. Camp talked about the impact on 

small business, and when they do that, they talk about the 250 category, $250,000, and maintaining—not maintaining the tax cut for 

those people, and they include everybody, lawyers, et cetera. Repeat for us the impact, if you would, Mr. Secretary, of not continuing the tax cut for wealthy Americans. Who is hit by that? 

Secretary GEITHNER. Roughly 2 to 3 percent of individuals and 

roughly 2 to 3 percent of small businesses. 

Mr. LEVIN. Okay. That is a fact. 

Now, also there has been opposition for the fee on financial institutions. Say a word about why the Administration is proposing 

that. 

Secretary GEITHNER. The law Congress passed to give the executive branch the authority to fix this financial mess required the 

Secretary of the Treasury to propose a way to recoup any losses so 

that the American taxpayer was not having to shoulder the burden. 

So what we did is a simple commonsense thing, is propose a fee 

on our largest banks that benefited the most from the actions we 

had to take to fix the financial crisis, designed in a way that operates like a fee on risk or a fee on leverage. It is a simple—it is fiscally responsible, it is fair, it helps make the system stable if it is 

designed well. 

Mr. LEVIN. Okay. And I hope as we search for common ground, 

those on the Minority side will indicate their position on that. 

And the same on the $30 billion for community banks. Just sum 

up quickly why you suggest we do that and why you suggest how 

we pay for it? 

Secretary GEITHNER. Community banks are responsible for 

about half of small business lending. Community banks were not 

part of the problem, but they are a necessary part of the solution. 

For them to be able to help small businesses expand and grow in 

that payroll, they need to make sure they have access to capital. 

Not all of them can raise capital in private markets now. So what 

we are proposing is a simple thing, is to give them capital and design it so that the more they lend, the more economically attractive 

will be that capital. Now, we are also proposing to expand what the 

SBA can do. And those two things alongside these tax incentives 

for small businesses is a powerful package of measures. 

Mr. LEVIN. And I hope as we search for common ground, Mr. 

Chairman, that those on the Minority side will express their position on that proposal. Thank you. 

Chairman RANGEL. Thank you. 


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Dr. McDermott. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. 

A budget is setting the priorities of how a group spends their 

money, whether we are talking about a family, or we are talking 

about the Federal Government. And as you look at the situation 

today where everybody wants a job, and all we are talking about 

is jobs, jobs, jobs, the example of the priorities of Franklin Delano 

Roosevelt were to create jobs through the Work Projects Administration, through the CCC. You have seen the same thing over time 

in the seeded jobs that have been created. And I would like to hear 

you convince me that putting a tax credit out for small business 

is more effective than recreating some of the creation of jobs that 

have gone on in the past. 

Seattle needs a seawall. If we have a Earthquake like they just 

had in Haiti, the city will slide down into the ocean. We have a viaduct that is clearly a problem, as the one in San Francisco went 

down. So that the infrastructure jobs are everywhere around us. 

There are human service jobs in schools, in nursing homes and all 

kinds of places for seeded positions. 

Convince me that your balance of putting money on the side of 

small business helps for job creation—because if people don’t have 

money, they don’t go to small businesses to buy stuff. 

Secretary GEITHNER. I agree with you, and that is exactly well 

said. And that is why we have been so supportive of very substantial investments in infrastructure across the country. Now, those go 

directly to putting people back to work. And it is good for the economy as a whole as well, because as you know, there are parts of 

our Nation’s infrastructure that have been allowed to decay and 

erode over time. So infrastructure spending, if it is well designed, 

and if it can move quickly, is very powerful and effective. And we 

will be very supportive as we work with the Senate to follow your 

lead in passing a jobs bill and making sure there is well-designed 

infrastructure spending as part of that. 

In addition, one of the most effective things we can do is to make 

sure that at the State and local level there are resources so that 

teachers can stay in the classroom teaching, firefighters are able to 

stay on the job. And those things, aid to first responders, helping 

State governments avoid having to make deeper cuts in the basic 

services, that is good policy, very powerful, and can operate very 

quickly. 

So you are right to say that tax cuts alone are not going to solve 

this problem. And you are right to say we need to do other things 

alongside that to make sure that you are doing direct things that 

can help job creation in areas where the country needs greater investments. But together we think that package could be quite powerful. 

Mr. MCDERMOTT. The tax expenditures right now are balanced 

how, infrastructure versus tax cuts? 

Secretary GEITHNER. Well, that really depends on the mix that 

Congress ultimately adopts. But in our view is—what we propose 

is that Congress set aside about $100 billion for additional spending right now to reinforce job creation. And we are suggesting only 

a third of that go for this new jobs-tax credit-hiring incentive. The 

balance of the rest should go to things that we think would also 


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complement that, help repair infrastructure, help first responders, 

make sure we have teachers in the classroom, and so that is one 

way to cut the package. 

Mr. MCDERMOTT. Thank you. 

Chairman RANGEL. Mr. Herger. 

Mr. HERGER. Thank you, Mr. Chairman. 

Secretary Geithner, it has been a year now since the President 

signed a so-called stimulus bill, and Americans are still wondering 

where are the jobs. In my own northern California rural district, 

the unemployment rate is over 15 percent. The last thing we 

should be doing is passing legislation that would make this problem worse. 

The President’s budget assumes that Congress will pass a health 

care bill. The House Democrats’ health care bill raises taxes by 

more than $732 billion over the next decade. Using the methodology developed by Christina Romer, President Obama’s top economic 

advisor, these tax hikes could cost the country 5 million jobs, something the Republicans find unacceptable. Does losing 5 million jobs 

on top of the current double-digit unemployment rate concern you? 

Secretary GEITHNER. Congressman, those are not our numbers. 

They are no numbers I don’t think any reasonable economist would 

support. And, of course, we would not ask you to support programs 

that carried that risk, because we believe, as you did—— 

Mr. HERGER. It is the methodology by the President’s own advisor that calculated this. 

Secretary GEITHNER. There is not a chance that a reasonable 

independent economist would look at that package of measures and 

suggest that would be the impact over time. One thing is important 

for people to understand: Businesses today, small businesses, pay 

more for health care than large businesses. The burden on them in 

the current system is not good for business. They normally put it 

at the top of their basic concerns about what Washington is doing 

to make their lives harder. 

Our job is, and our priority is, as you said rightly, unemployment 

is just outrageously high in this country, and even the national 

number doesn’t capture much higher numbers in districts like 

yours, many parts of the country. And that is why it is so important that we are on this and keep working to reinforce this. The 

worst thing we could do today would be to stand back and say, all 

right, we are going to hope that our challenge now can be best addressed by going and cutting these deficits dramatically today. 

That would be irresponsible; that would be fiscally irresponsible. It 

would make the economy weaker. It would not be good for the 

country. 

Mr. HERGER. I would like to ask you some specific tax increases 

that are in the House and Senate health care bill since the President’s budget does not provide any details of what he is asking 

Congress to pass. Does the Administration support a new 8 percent 

payroll tax on employers who don’t offer health insurance that 

meets government standards, a tax that could result in the loss of 

millions of jobs? And does the Administration support a tax on any 

American who chooses not to buy government-mandated insurance, 

a tax that would fall on millions of Americans making less than 

$250,000 per year? 


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Secretary GEITHNER. Congressman, you have all spent a lot of 

time on health care this year. And, frankly, we hope you spend 

some more time because we would like to get it done. And if you 

ask businesses what they are worried about a lot, what they would 

like is to know what the rules of the game are going to be, they 

would like there to be a little uncertainty lifted, they would like 

this debate to end so that they know how they can basically plan 

it, and they would like us to lift the burden of cost the current system puts on them. 

So I know you spent a lot of time on this. There is a lot of views 

on both sides of the aisle, but we are committed, and we think it 

is important for the country to try to see if we can work together 

to put in place some sensible reforms that will reduce the rate of 

growth in costs, expand coverage, improve the quality of care, and 

end the huge hidden cost and unfairness in our current system. 

Chairman RANGEL. Mr. John Lewis from Georgia. 

Mr. LEWIS. Thank you very much, Mr. Chairman. 

Thank you, Mr. Secretary, for your presence. Thank you for your 

willingness to serve the government for so many years. 

Mr. Secretary, I am pleased to see that President Obama’s 

budget continued the theme of trying to restore fairness and balance to our Tax Code. I also am glad to see that the President has 

taken on efforts to reduce the tax gap. Can you please take a moment to share with us some of the ways in which the President 

seeks to close the tax gap? And can you please tell us why the 

President believes that this is so important? 

Secretary GEITHNER. Congressman, on this issue we are following the lead of this Chairman and many Members of the Committee. I will give you one example. Our tax system today creates 

a range of incentives that encourage companies to shift investment 

and income offshore. Let me put it more starkly. You could have 

two companies operating together in a district or a State. If one of 

them shifts investment income overseas, it pays less in taxes. You 

could have a competitor keeping that investment here, adding jobs 

in the United States, pay a higher tax burden. We don’t think that 

is good economic policy. We don’t think that is fair. We want to 

make that a more even playing field. So that is one example of a 

set of reforms, commonsense reforms, that can make the system 

fairer that are good for investment in jobs in this country. 

There are different ways to do it. In many ways, again, we are 

following the lead of your Chairman and many Members of this 

Committee, and we want to build on that to make sure that we are 

making it harder for people to evade their responsibilities, to take 

advantage of loopholes in current law that are unfair and effective. 

We are proposing to end a range of ineffective subsidies in our Tax 

Code that go to oil and gas industries, for example. Another example I gave is on how we tax the incomes of hedge fund managers 

and private equity firms. We are suggesting that they should get 

taxed on income like teachers are today. Those are simple, fair 

things. 

We are proposing to extend Make Work Pay; goes to 95 percent 

of working Americans. We want to make permanent the middleclass tax cuts that, again, go to 95, 97 percent of Americans. Again, 

those things we think are fair. We can do those in a way that is 


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fiscally responsible. I am sure there are other things we can do, but 

we are starting with that. And we are carrying the responsibility 

of proposing ways to help dig ourselves out of this hole we are in, 

and to do it in a way that is going to support growth in jobs, is 

fiscally responsible and is fair, fair to the American people. 

Mr. LEWIS. Thank you very much, Mr. Secretary. 

Chairman RANGEL. Richard Neal. Sounds like tax reform to me, 

doesn’t it? 

Mr. NEAL. Sounds good to me, Mr. Chairman. 

Thanks, Mr. Secretary. First, though, a word of thanks for including my auto IRA bill in the budget recommendation. I don’t understand why there would be any opposition to that. It has been 

well met by community bankers. It has been well met by insurance 

agents and credit unions as well. 

I also want to say, as Mr. Lewis mentioned a moment ago, I appreciate the inclusion of reinsurance in your budget. I have lobbied 

that issue for many, many years. I do appreciate the simplicity of 

your proposal, but it might still allow significant shifting of profits 

offshore outside of the reach of the U.S. tax system. 

And incidentally, for our friends that are here today, a reminder: 

Domestic companies are upset about this. This isn’t an issue that 

was brought to my attention by the AFL/CIO. This was offered by 

domestic insurance companies that want something done about it. 

They don’t understand why they have to compete with companies 

who move offshore. 

In addition, Mr. Rangel has been very sincere in our effort to 

talk about tax reform, and I appreciate the time and effort you 

have put into these international tax provisions. And recently 

Chairman Rangel asked me to look into transfer pricing, and I 

have begun a study of that complex issue with the assistance of the 

Committee staff and our experts at Joint Tax. And I hope that we 

can work together on these international reforms, because Mr. 

Rangel’s proposal does encourage companies to stay here and to 

prosper. 

Now, would you explain briefly the changes to international tax 

proposals as you did a moment ago, or at least to the followup on 

them and how they have changed since the last budget? 

Secretary GEITHNER. Again, we are trying to balance a simple 

imperative. We want to make sure there is a level playing field for 

American companies so we are not creating incentives to shift investment, jobs and income overseas. We want to do that in a way 

that takes account of the fact that American companies compete 

globally. We want to make sure we are reinforcing, not hurting 

that competitive position. And we have to balance those objectives. 

So we put out some proposals last year, again that followed in 

many ways the leadership of the Chairman and many Members of 

this Committee. We heard a lot of reaction to those. We took that 

into consideration. We narrowed the scope, in part because of concerns about impact and competitiveness. We made some additional 

suggestions, too. 

But I want to make the basic point, which is there are different 

ways to do this. Of course, we will work closely with you on this. 

We are open to suggestions. And we understand that a lot of people 

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form or corporate tax reform, and that may be true, but we think 

these are sensible, commonsense things, and we would like to try 

to move on them. 

Mr. NEAL. Certainly you raise the issue of tax reform, and I 

hope that remains a priority with the Administration. 

And last, Mr. Secretary, could we get Treasury to submit to us 

what the cost of the war in Iraq will be? And not just the immediate costs that are now north of $1 trillion, but, just as importantly, the obligation we have to the men and women who have 

served us honorably, for our veterans hospitals for years and years 

and years to come. 

The idea that we could invade Iraq and cut taxes and use supplemental budgets here to masquerade the true cost of that obligation 

is part of where we find ourselves. So it is okay to suggest that if 

we are digging a hole, and we find that we can’t get down anymore, 

that we should stop digging. But I will tell you that obligation is 

a very honorable obligation to pay for those veterans hospitals for 

years and years to come. So I hope that you could give us a realistic assessment of what that invasion cost and why we find ourselves in some measure with these deficits we have today. 

Secretary GEITHNER. A basic responsibility we have is to be 

honest and account for the costs of governing, whether it is meeting 

our national security needs or new programs that benefit millions 

of Americans, like on Medicare Part D. We need to make sure that 

we are being fair and honest about what those costs are. I completely support that principle. Thank you. 

Chairman RANGEL. Our veteran buddy, Mr. Sam Johnson from 

Texas. 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Mr. Geithner, I would like to first express my appreciation for 

the President including in his budget legislation H.R. 690, which 

I introduced along with my colleague Earl Pomeroy, to remove cell 

phones from a listed property. It is high time we made this change. 

That is a dumb tax to begin with, and I think you would agree. 

Secretary GEITHNER. Thank you for saying that. And I agree 

it is something that most people are very supportive of. 

Mr. JOHNSON. Yes, sir. 

Well, I would like to begin my questions on tax credit proposal. 

I am not sure if you had a chance to read the article in the CNN 

Money entitled ‘‘Obama, Here is $5,000, Go Hire Someone.’’ In that 

article Jimmy Hughes, a small businessowner in my district, is 

quoted as saying, ‘‘I need the money before I hire the people, not 

after I hire them.’’ So according to him, future hirings depend on 

his cashflow situation, not on a tax credit. So how is this temporary 

1-year credit going to be of any help to businesses? 

Secretary GEITHNER. Well, I think it can be very helpful. But 

again, let me just underscore what I said at the beginning, which 

is that the key thing is to make sure there is growth and demand 

for products people want to buy. But I think if you look at what 

is happening across the country now, it is not just the economy has 

stopped shrinking and it grew at the most rapid rate in 6 years 

last quarter, but you are starting to see now just the beginning of 

people seeing orders increase. So as that happens, what this will 

do is make it more likely that people add jobs in anticipation of 


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that increase in orders. And if we can make them get more credit 

available, they will be able to borrow to finance that expansion. 

So this doesn’t solve all problems, but we think it will make a 

real difference. 

Mr. JOHNSON. You need to fix the bank problem first. 

Let me ask a question about the President’s fiscal commission. 

Are tax increases on the table for Social Security reform, yes or no? 

Secretary GEITHNER. Congressman, thank you for raising this. 

What we are doing is proposing to take a model that President 

Reagan pioneered in the 1983 so-called Greenspan Commission, 

and a model that Senator Gregg and Senator Conrad have designed, to get a group of statesmen together, step back from politics, see if they can find common ground on things that will help 

dig ourselves out of this hole. And you want them to be able to 

come fresh, no preconditions, and try to work on things that again 

will make sense. 

Mr. JOHNSON. The question is are you going to tax Social Security? 

Secretary GEITHNER. Again, I think everybody—part of this is 

saying the same thing, which is that what you want to do is have 

people come, step away from politics, take a cold, hard look at it, 

and figure out what is going to make sense and work and what can 

command bipartisan consensus. In this commission, our view is 

that you need to have Democrats and Republicans together recommend things that are going to work. It won’t work if you just 

have Republican ideas on one side or just Democratic ideas on the 

other. These are big problems, got to work on them together. It is 

going to take a while; this is one way to do it. 

Mr. JOHNSON. Social Security can be fixed, but it doesn’t need 

to be taxed. 

Thank you, Mr. Chairman. 

Chairman RANGEL. I would like to recognize the gentleman 

from Tennessee John Tanner. 

Mr. TANNER. Thank you very much, Mr. Chairman. 

And, Mr. Secretary, thank you for being here. 

I will be very brief. I have to run over to the floor to do a bill. 

I hope you all will talk more about the dangers that we face as a 

country if we do nothing about the structural deficit. 

In 2000, if you look at the website of the Treasury Department, 

revenue and expenditures were both around 19 percent of GDP. We 

were basically breaking even. The second worst thing that happened in 2001 happened in February when the CBO estimated it 

would be a $5 trillion surplus over the next 10 years. I remember 

saying at the time, I don’t know what the price of cotton is going 

to be in 10 days, and they are telling me what is going to happen 

in 10 years. And we all know what happened after June of that 

year, 2001, when the economic game plan for the country was enacted, and in September we had 9/11, and every assumption that 

went in the conclusion of a $5 trillion surplus was no longer valid. 

And what happened during this entire decade is that the Administrations and Congress have not gone back and revisited the fact 

that since that time, revenue has never been as much as 19 percent of GDP, and expenditures have never been less than 20 percent. Like the war in Afghanistan and Iraq, we borrowed money. 


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Never before been done. It is a structural deficit. And this palaver 

about, well, we will just cut spending here and there, and that will 

take care of it, all of us know is not possible financially, unless 2 

and 2 somehow don’t equal 4 anymore. 

What I would ask that you do—and I applaud you for the commission. I told somebody the other day the way this Congress operates, and has since basically I have been here 21 years, is no matter who is in charge, we would still have pony express stations 

open in Wyoming if it was up to Congress, and we didn’t have a 

BRAC Commission for defense spending. And the temptation here 

is to put off the tough decisions, but we are rapidly, as you know, 

reaching a point where we cannot any longer do that. 

So I just want to thank you for what you are doing. But I think 

the more emphasis we tell and put on the American people about 

this structural deficit and be honest with them—I think this idea 

that if you raise taxes a penny on somebody that makes adjusted 

gross income of $10 million is somehow a crime has to be addressed, because we cannot get along without at least some acknowledgement that revenue and expenditure have to somehow 

equal about the same as a percentage of gross domestic product. 

I made a little speech here. I know that you know that. I hope 

you will just say it over and over so people understand it. 

Secretary GEITHNER. I would be happy to say it. Our fiscal position is unsustainable. We will be poor as a country if we don’t fix 

that problem. Our priority now has to be growth in jobs. That is 

the fiscally necessary, responsible thing to do. Without that you 

can’t fix our long-term deficits. But even when we are growing 

again, the economy is back on its feet and back to work, we are 

still going to be left with an unsustainable fiscal position, and that 

is why—and if we don’t commit to bring that down, then we face 

the risk of a weaker growth in the future, and that would be unfair 

not just to businesses, but to the families, too. 

So I completely agree with you. And again, I think if you listen 

carefully now, even though it is a deeply political moment, if you 

listen carefully now, it is very encouraging. People don’t say anymore, deficits don’t matter; they don’t say anymore, tax cuts are 

free; they don’t say anymore, we can afford to make huge, expensive commitments in perpetuity without paying for them. And that 

is a healthy recognition, very costly recognition. But you hear more 

people saying that, and I think that is fundamentally encouraging. 

We get this economy growing again, we get the unemployment 

rate down, get job creation up again, then we can start to shift to 

bring them down. And what the President’s budget does is to say 

that next year we start that process. And, you know, that next year 

is not too late, it is not too soon to start, but we start to make it 

clear that we recognize this, and we understand that we got to 

bring those long-term deficits down. 

Chairman RANGEL. Mr. Doggett from Texas. 

Mr. DOGGETT. Thank you, Mr. Chairman. 

Mr. Secretary, I have two questions that I will state and ask separately regarding your testimony this morning that your goal is to 

get the best bang for the buck to get people back to work; certainly 

something all of us share. The first one concerns the comments you 

make this morning that really repeat what the President said in 


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his recent radio address, that we need to close unwarranted tax 

loopholes that reward corporations for sheltering their income or 

shipping American jobs ashore—offshore. 

As I read your budget proposals, they are exactly the same as the 

ones you advanced last year minus 40 percent of the revenue for 

multinationals who export jobs overseas and shelter their income. 

Since you announced that proposal last year, other than a speech 

by the President in May and occasional reference to it, I haven’t 

seen anything done to achieve these objectives other than the Wall 

Street Journal report that you and former Secretary Summers assured multinationals that they shouldn’t be so worried about. 

My question is what reason is there to believe that the Administration will do any more this year on the 60 percent of the proposal 

that is left to close unwarranted tax loopholes that result in jobs 

being shipped overseas than it did last year? 

My second question, Mr. Secretary, concerns the jobs tax credit. 

Everybody is for a tax provision that will actually produce in a 

cost-effective way more jobs. There is a great question about the 

particular proposal for $33 billion that the Administration has advanced. Marty Sullivan, a former Treasury Department economist, 

I think put it most succinctly in saying, the general consensus 

among tax experts is that the credit is a stinker, because it simply 

encourages people to do what they would have done anyway. 

Since your proposal is retroactive, surely there can be no claim 

that a new job added in January or February or before this bill was 

signed was caused by this provision. It also distorts the market. 

For my small business in central Texas that has been hanging onto 

its employee even though it has been very painful to do so, they 

get nothing out of this jobs tax credit. But for those dismissed employees or a new company coming into town, they certainly benefit. 

Your own staff, one of your secretaries, has said, ‘‘Well, we don’t 

know how effective it will be, but it may be even if we get 10 percent out of this, that will be great, because it will assure liquidity 

for small businesses.’’ 

Surely the Treasury can come up with a better way to promote 

job growth than a proposal that may be 90 percent ineffective, that 

for $33 billion gives us $3 billion of new jobs. The Congressional 

Budget Office has also noted that this provision will be the least 

help where there is greatest need. Could you respond on each? 

Secretary GEITHNER. Absolutely. I have never met a—— 

Chairman RANGEL. We have a time constraint which we all 

have. I would suggest that you respond in writing to the eloquent 

questions of Mr. Doggett. 

[The information follows:] 

Chairman RANGEL. And I would like to recognize Mr. Brady of 

Texas. 

Mr. BRADY. Thank you, Mr. Chairman. 

I am confused. You repeatedly regret the $1 trillion annual deficit that you were handed as an Administration. And since Congress controls the pocketbooks, White House can’t spend a dime it 

isn’t given by Congress, remind us who was in charge of Congress 

for 2 years when you were handed that huge annual deficit? 

Secretary GEITHNER. I think you know the answer to that, 

Congressman. 


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Mr. BRADY. It is Democrats. 

Secretary GEITHNER. But the damage to our fiscal future, the transformation from $5.6 trillion—— 

Mr. BRADY. Got it. We heard that earlier in the comments. I appreciate it, Mr. Secretary. I just want to make sure our listeners 

weren’t confused by who handed you that horrible deficit. 

And I wasn’t going to bring up AIG, but since you did, there is 

common ground and anger and outrage at the way AIG’s bailout 

has been handled by you and Treasury; Congress, Democrats, Republicans; the public as well, both the first two bailouts, the SECA 

deal that gave 100 percent on the dollar to the counterparties of 

AIG, the Fed then trying to prevent the public and Federal regulators from knowing the details of that. Last year the President 

was outraged at the $45 million in bonuses. It is a year later. It 

is $100 million in bonuses now—oops. 

The Administration’s handling of AIG resembles the Keystone 

Kops. It would be funny if it wasn’t leaving taxpayers crying about 

it. 

I do think in this economy the White House has taken its eye off 

the ball, pursuing, I think, an extreme agenda and failed economic 

policies. Today consumers have no confidence, little confidence in 

the economy. Businesses aren’t willing to hire back new workers 

who make those expansion plans because they are frightened by 

the cost of higher health care costs, higher energy costs, higher 

taxes. 

But where there is common ground is in the President’s commitment the other night at the State of the Union to double exports 

over the next 5 years. Other economies are growing faster than the 

United States. That is where the customers are at. Selling U.S. 

products and goods around the world creates jobs in the United 

States. 

Up here, Mr. Secretary, I put up a graph of what our exports are 

doing. It took 11 years to double the exports during some pretty 

strong economic times in global growth. And my question is, because I welcome what the President said, and there is common 

ground for that, I believe, on this panel and in this Congress, so 

what is the President’s plan to double exports over the next 5 

years? 

Chairman RANGEL. I am going to ask the Secretary to respond; 

however, I hope that Members give time for the Secretary to respond within the 3 minutes, because it is so unfair to the newer 

Members who won’t get a chance to ask questions also. Please be 

brief, Mr. Secretary, so we can make certain that we can get answers. 

Secretary GEITHNER. Congressman, glad to hear what you said 

about exports. I think it is a very realistic objective, partly because 

the world is growing fast, faster, and because American companies 

are very good at competing in a range of things that the world 

needs. So I think it is a very realistic objective. 

I think it requires that we work together to pass strong trade 

agreements. It will expand opportunities in those foreign markets. 

We can’t let other countries go and compete away those markets 

from us. It requires some support through Ex-Im Bank and Commerce to make sure that businesses are getting a little assistance 


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where they can. And it requires we be investing in things that help 

us stay at the frontier of innovation. And so by putting the largest 

investments in basic research and development, permanent extension of the R&D tax credit, targeted tax incentives to new technologies, those are things that make a big difference and help 

make sure that we are in the game gaining market share around 

the world. 

But I think you are right to emphasize it. In fact, U.S. exports 

have been doing really quite well recently, but we want to make 

sure that we are reinforcing that. 

Mr. BRADY. Are the three pending trade agreements part of 

that plan this year? 

Secretary GEITHNER. Absolutely. As the President said, it is 

not just that. We need to be in the game in Asia as they move to 

try to negotiate new agreements there, and we want to make sure 

that the broader Doha Round of trade agreements, the multilateral 

agreements themselves, we put those in place in a way that is 

going to be good for American companies. 

Mr. BRADY. Thank you, Mr. Chairman. 

Chairman RANGEL. Mr. Pomeroy of North Dakota. 

Mr. POMEROY. Thank you, Mr. Chairman. 

Mr. Secretary, I would just note, comments from my friends on 

the other side of the aisle about AIG and the other regulatory failures of the last Administration seem to me incredibly out of place. 

We watched under the preceding Administration regulatory resolve 

ultimately fade away, yielding to blind faith in market activity. 

I used to be an insurance commissioner. I believe in the insurance marketplace. But that doesn’t mean you don’t watch the swindlers, the crooks, and the shortcutters that are going to try to rip 

off, ultimately, the public. That is what happened. We are still 

picking up the pieces, at great expense to the public, for that misguided, unbridled faith in the marketplace that occurred in the last 

Administration. 

But the question I want to ask you about relates to job growth 

in this tight budget timeframe. I believe one area where we can 

have job growth, still consistent with very sound budget principles, 

is in the area of pension funding relief. 

This Committee regrettably played a part in putting into law an 

extraordinarily stringent funding regimen for pensions. I believe it 

made no sense because it didn’t match assets with liability timelines. That was before the collapse. Once the collapse occurred, we 

have crushed portfolio values because of market correction. We 

have low interest rates, which further produce a very onerous funding picture. 

They need, I believe, interim funding relief, not to the jeopardy 

of the solvency of the plan, but basically bringing funding requirements more in line with solvency principles. If we do that, Mr. Secretary, we can also have for companies maintaining defined benefit 

pension plans more cash in the operation to grow the operation, to 

hire employees, to grow the economy. I would like your comments 

on that. 

Secretary GEITHNER. Congressman, I think you are right. We 

think there is a good case for targeted pension relief for just the 

reasons you said, and we would like to work with you on doing 


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that. I am not sure we have exactly the exact, precise way to do 

it, but the basic principle is right, and we are prepared to work 

with you on that. 

Mr. POMEROY. Thank you, Mr. Secretary. 

I yield back. 

Chairman RANGEL. Mr. Thompson of California. 

Mr. THOMPSON. Thank you, Mr. Chairman. 

Mr. Secretary, thank you for being here. And I want to thank 

you personally for the responsiveness of you and your office in 

working on issues through my office. 

Two Members before me have talked about this new jobs credit, 

and I want to associate myself with their concerns. Mr. McDermott 

talked specifically about projects that actually generate jobs and, at 

the same time, generate security to communities. 

And I just think it is incongruent that we want to spend money 

to hopefully create jobs in small businesses. I don’t know anybody 

in business who hires an employee because they are going to get 

a tax break. People hire employees because they have work to do. 

And, at the same time, this budget cuts the Corps of Engineers. 

There are projects all across this country that are critical to the 

public safety of the people that we represent, projects that are beyond shovel-ready, they are already going, and they are terribly underfunded. It seems to me that we could get a lot more bang for 

taxpayer dollars if we looked at that rather than trying to put some 

seven-bank shot together on how we hire employees. 

Secretary GEITHNER. Congressman, I just want to say I completely agree. The most important thing we can do is to make sure 

there is growing demand for the products American businesses are 

creating. That is a necessary thing. Nothing is possible without 

that. 

But I just ask you, please take a careful look at the way this was 

proposed. There is a lot of concerns about previous versions of this. 

We have listened very carefully to those concerns. I am not sure 

we have addressed all those concerns, but this is designed with a 

view to exactly those concerns. And we think it is better than the 

previous, but we do not have a monopoly of ideas on this. 

Again, our test, as you said, is we want to do things that have 

the highest prospect for a dollar of taxpayer resources providing a 

spark to investment, a spark to job creation. And we think these 

can play a role alongside what you said, which is support for infrastructure, State and local governments, those kinds of measures. 

Mr. THOMPSON. Thank you. 

Another proposal in the budget is the idea that we would do 

away with the LIFO, the last-in, first-out accounting practice. This 

is an accounting practice that works well for some U.S. businesses. 

If we do this, if we end it, what is going to happen is U.S. small 

businesses are going to take a big tax hit, and their competitors 

overseas are going to have a terrific advantage over us in the marketplace. 

There are some industries that have to hold their inventory for 

a long time. This is a fair and reasonable way to recognize that, 

and I would strongly urge you to go back and revisit that, along 

with the user fee that this budget imposes for TTB. 


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I can’t think of anything that would be more difficult for these 

small businesses to deal with than this. It even charges people who 

don’t use TTB. And, again, it gives a terrific advantage to our overseas competitors in the markets. So I would urge you strongly to 

revisit these two issues. 

I yield back. 

Chairman RANGEL. I might suggest, Mr. Secretary, the Majority and Minority get together in a workshop atmosphere with your 

office to thrash these ideas out, where we have more than 5 minutes back and forth. 

Mr. Ryan, it seems like you have been with me all weekend on 

TV. But you are recognized. 

Mr. RYAN. Not in person. We should get together more often. 

Chairman RANGEL. I would like to yield to you. 

Mr. RYAN. All right. Thank you, Chairman. I appreciate it. 

First, just an order of business, I sent you a letter last year, 

Mr. Geithner, about Delphi pensioners, salary pensioners. I want 

to insert this for the record. If you could get back to me, I really 

want to get a response from you. 

Chairman RANGEL. Without objection. 

[The information follows:] 

Mr. RYAN. I brought up page 146 in your budget, which is your 

S–1 budget totals. And, when you take a look at this, I just find 

this amazing. You have your budget totals here, which, by your 

own admission, from your own budget director, you are a smart 

guy, you have smart economists over there, all of them say that, 

for the medium and long run, the budget deficit has to get below 

3 percent of GDP. Yet, this budget plan you are bringing to us 

doesn’t even get close to it. 

Secretary GEITHNER. You are exactly right. And we said 

clearly—— 

Mr. RYAN. Since I have 3 minutes—— 

Secretary GEITHNER. Okay, sorry. 

Mr. RYAN. So you have this warning on here. It is like the warning on a cigarette pack. You have this little magic box underneath 

your budget totals that says we are going to have a commission do 

it. We are going to have this partisan commission, two-to-one ratio 

of Democrats over Republicans, that will give us a report after the 

election—— 

Secretary GEITHNER. Well, no, it is not a two-to-one ratio. That 

is not fair. It is not a two-to-one ratio. 

And let me say it slightly different. What we are saying is we 

are going to solve our part of the mess we inherited. So we inherited a structural deficit, and to bring that down, we are going to 

have to work together. 

Mr. RYAN. Then why don’t you do it in your budget? If you are 

going to solve this problem—you guys run the government. If you 

are going to solve our fiscal situation, why don’t you do that? Why 

don’t you give us a budget that actually gets the deficits to a sustainable level? 

Secretary GEITHNER. All right, then let me—just one more 

thing. 

Mr. RYAN. No, no. Let me read a quote. I want to read a quote. 

I have 3 minutes. Let me read a quote from Mr. Orszag in the Wall 


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Street Journal, which I completely agree with. ‘‘The unusual situation that the government finds itself in, with other countries willing to finance the U.S. debt at low rates, won’t last.’’ And he added, 

‘‘When it flips, the question is, how do you get ahead of that to 

avoid the downward spiral of rising interest rates, a plunging dollar, and a sinking economy?’’ 

I couldn’t have said it better myself. 

Secretary GEITHNER. I think it is a good quote, too. I agree 

with that. 

Mr. RYAN. The vigilantes in the bond markets are going to get 

us, and the American people are going to get hurt. 

So why aren’t you giving us a budget, not punting to a commission, but why aren’t you giving us a budget that, using your own 

definitions and standards, actually is sustainable? 

Secretary GEITHNER. Congressman, we are proposing a budget, 

again, that takes the huge mess we inherited—— 

Mr. RYAN. You can blame Bush only so long. 

Secretary GEITHNER. Congressman, it is just a factual thing. 

Again, I would say, when I left the Treasury in 2000, it was surpluses on OMB and CBO’s round as far as the eye can see. When 

we came in, it was a deep trench. 

Mr. RYAN. Fine. You obviously inherited a tough situation. You 

are making it worse, by your own admission. 

Secretary GEITHNER. Again, we are willing to join with you in 

digging our way out of this mess. We are proposing to bring that 

deficit down from its ridiculous levels today where we inherited 

them, more than half of the share of the economy, we get it below 

4 percent. But we would like a little assistance in taking it the next 

way forward. 

But you are absolutely right about the basic imperative, which 

is, unless we get these down, we are going to be weaker as a country in the future. And it is very good for the country to hear you 

and your colleagues stand here today and say, ‘‘We are ready to be 

fiscally responsible.’’ That is a good thing for the country. We welcome it. We want to work with you on how we are going to do that. 

Mr. RYAN. You shouldn’t worry about the criticism of us as 

much as you should about the bond markets. 

Chairman RANGEL. Mr. Larson of Connecticut. 

So much for the bipartisanship. 

Mr. LARSON. Thank you, Mr. Chairman. 

And thank you, Mr. Secretary, for your service to the country. 

Mr. Secretary, I wanted to ask you specifically, and I know you 

may have said something in your opening remarks as well, but 

with regard to the privatization of Social Security or with the idea 

of a path forward being one that includes the privatization of Social 

Security or vouchers for Medicare, what is the Administration’s position on that? 

Secretary GEITHNER. Congressman, let me say clearly, the 

President, I am confident, would oppose it. I would oppose it. I 

don’t think it is fair to say to Americans that we are going to privatize Social Security, leave elderly Americans with a voucher that 

wouldn’t cover the costs of basic health care as they go into retirement. I do not think that would be fair, and we would work against 

that, just as they have stated directly. 


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Mr. LARSON. Is this anything different than what we heard 

from the previous Bush Administration about how they would privatize Social Security? 

Secretary GEITHNER. Well, Congressman, I don’t actually understand and have not seen the details of that proposal, but I actually don’t think that that proposal would have a lot of support on 

the other side of the aisle too. But that is for them to speak to. 

Mr. LARSON. Well, I want to thank the Secretary and certainly 

would support the Administration in that respect. 

With regard to small businesses, if you could further enlighten 

us with regard to why the Administration is focused in this area 

and what you predict the outcomes will be for small businesses, 

which are hurting? 

Secretary GEITHNER. Businesses create jobs. We need businesses, small and large, to start to invest and add back the jobs 

they cut as they were scared the economy was falling off the cliff. 

That requires growth. And the economy is now growing, but we 

want to make sure we are reinforcing that. 

Growth is not enough. With growth, we want to see more jobs 

created. For that to happen, we think there is a good case for some 

targeted incentives to help reinforce that process, and they need 

some credit if they are going to be able to expand. And lots of small 

businesses across the country, through no fault of their own, if they 

were unlucky in their bank, or there are parts of the country that 

are experiencing the worst of this stuff, they are hurt because the 

credit pipes in the economy are still clogged. So we need to open 

those up if they are going to be able to start to meet what is growing demand, a slight uptick in demand for their products. That is 

the basic case. 

So alongside what we have to do on infrastructure, help for State 

and local governments, those kinds of proposals, we think there is 

a good case for targeted tax incentives and measures to help get 

that credit where it can be best used, by small businesses. 

Mr. LARSON. Well, I hope that you and the President, as the 

President continues to go out on the road, et cetera, we are able 

to talk about small business, but especially about the preservation 

of Social Security and Medicare and how important that is to such 

an important base of society and so many baby boomers who are 

now in the position to seek these benefits. It is true that we have 

to make sure it is sound and secure into the future, but that 

doesn’t mean throwing the baby out with the bath water, so to 

speak. 

Secretary GEITHNER. I couldn’t agree more. Again, it is important to understand that this—— 

Chairman RANGEL. The time has expired. 

Mr. Becerra. 

Mr. BECERRA. Thank you, Mr. Chairman. 

Mr. Secretary, it is good to see you here. Thank you for being 

with us. 

Before I begin, I just want to mention a conversation that I had 

with Assistant Secretary Allison recently, about a month or so ago, 

about the programs that you have underway under TARP to try to 

help get dollars out into our local communities, to our local banks 

and so forth, and the efforts that are being made to make sure that 


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businesses owned by veterans, women and minorities have an opportunity to participate. These are very small businesses, and we 

want to make sure that they are able to help us manage those accounts. 

I am hoping that you will allow me to follow up with you, because you indicated an interest before. And I learned some, not disturbing information, but some confusing information about how you 

track that progress. So I would like to follow up with you, if I may, 

on that. 

Secretary GEITHNER. I am happy to do that. It is very important to me. Our overall number on contracts is quite strong. But 

if you look at value of contracts, it is too low, and we would like 

to do better. 

Mr. BECERRA. I would like to follow up with you on that. 

I would like to turn to some charts that were prepared by the 

Budget Committee that I would like to begin with. 

There is a chart that should go right before that. There we go. 

Mr. Secretary, if you take a look at this chart, what you will see 

is this is a chart that tracks our annual deficits since 1981. It goes 

back a ways because too often the conversation here is very limited 

in scope. We talk only about this year’s deficits or this year’s problem or this year’s accumulated debt without taking into account the 

history of where we have been. So I decided I had better go back 

a number of years, some 30 years, to talk about what has gone on 

in this country in terms of deficits and surpluses. 

If you take a look, what you see is something very interesting. 

That chart ends in 2009 when President Obama was handed the 

keys by President Bush, and you can see the steep decline that we 

were in. That is what we were facing as a country in terms of our 

annual deficits. And you can also see, the only time we were really 

in surplus was under President Clinton. 

Now, if we go to the second chart, what that first chart really 

amounts to is a chart that shows how many years of deficits we 

had. And, quite honestly, when you total it up, it turns out to be 

a lot of debt. Annual deficits lead to lots of debt, and we ended up 

having a doubling, a near doubling of the size of the national debt 

under the previous Administration. 

Well, if we will go to the next chart, it is tough to turn that deep 

a hole into a pile of good news. And while it hasn’t been the best 

of news for Americans totally this year, this past year, things have 

gotten much better. As you know, we have actually seen economic 

growth for the first time consistently for some time. It has been 

about 2 years since we saw consistent economic growth, and now 

we are beginning to experience that. 

And, if we go to the next chart, we will see how that now uptick 

toward economic growth—and I believe some of that is due to the 

policies of the Administration—we now begin to see jobs not necessarily being lost in the numbers they were—a year ago, they 

were lost to the tune of 741,000; that is 24,000 jobs lost a day when 

President Obama got the keys from President Bush—to the point 

where now we actually saw a little bit of job growth—you can’t 

really see it much in November—and certainly a vast reduction in 

the jobs that are being lost. And some believe we are going to see 

job growth in the next quarter. 


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Finally, the last chart I wanted to point out is that it does matter 

if we have deficits and run massive debts because the American 

public may not think in terms of the national debt but they certainly know what they have in their bank account. And we saw the 

401(k)s and bank accounts of Americans drop dramatically. Now 

we are seeing them come back. 

So, while the news isn’t all good, it is improving, and you have 

to put it in an historical context of where we were. 

So, I will end with this question, Mr. Chairman: Mr. Secretary, 

I don’t know if you know this, but let me ask you a question. You 

have a train with about 120 cars on it traveling at 50 miles an 

hour. And it is traveling recklessly, fiscally recklessly. How long 

does it take to stop that train when the conductor says, ‘‘I have to 

pull the emergency brakes and change course?’’ How long does it 

take? 

Chairman RANGEL. Mr. Linder of Georgia. 

Mr. BECERRA. Mr. Chairman, if I could ask the Secretary if he 

knows the answer? 

Secretary GEITHNER. It is going to take a while. You can’t turn 

on a dime, but you have to start. 

Mr. BECERRA. I will give you the answer. It takes about a mile 

and a half to stop that train. It is going to take a while to turn 

this country around. 

Mr. LINDER. Mr. Secretary, welcome. I am glad you are here. 

In your opening comments, you stated that it was the obligation 

of your Department to come up with these proposals, such as the 

new tax on banks to fill the holes. When did this proposal originate? Who originated it? How long has it been under discussion? 

Secretary GEITHNER. Congressman, we at the Treasury started 

to take a look at how to meet that obligation in the law in the fall 

of this year. 

Mr. LINDER. Would you share Larry Summers’ and Christine 

Romer’s comments on this proposal? 

Secretary GEITHNER. Well, again, this is the President’s proposal, and we recommended it to him, and it had really broad support. 

Mr. LINDER. Would you share with us some of the inner-office 

memos on this going back to last fall? 

Secretary GEITHNER. Congressman, again, I would be happy to 

explain why this versus the alternative. 

Mr. LINDER. Would you share with us some of your inner-office 

memos on the origination of this idea? 

Secretary GEITHNER. I would be happy, as always, to make 

sure we are helping this Committee make good choices about how 

best to do this. But, again, the basic point, and it is a simple point, 

is I think the law required us to make sure we proposed how to 

recoup losses. We looked at a bunch of different ways to do that. 

We wanted to do it in a way that was going to be fair, it was put 

on the people who benefited the most, and didn’t leave the taxpayers exposed to a dime. And, if we could, we wanted to do it in 

a way that was like a fee on leverage and on risk. That is why we 

chose this model. We know there are other ways to do it, but we 

think this is a pretty commonsense proposal. 


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Mr. LINDER. Will you share with us some of the background 

memos on this, back and forth? 

Secretary GEITHNER. Again, I would be happy to talk with you 

about all the discussions we had about alternatives so that you can 

understand a little bit about why we came to this choice. 

Mr. LINDER. Would you give us some of the memos between you 

and other people in the Department when this decision was arrived 

at? 

Secretary GEITHNER. Well, Congressman, do you want to have 

a debate about the merits of the proposal? 

Mr. LINDER. No, I just want to know when it started. 

Secretary GEITHNER. I told you when it started. Again—— 

Mr. LINDER. Then I would like to see the memos. 

Secretary GEITHNER. I would be happy to be responsive to any 

request you make about any of the merits of this versus the alternatives, how we came to this judgment. I will be happy to do it. 

Mr. LINDER. Thank you. 

On the TARP wind-down, you mentioned something about that 

in your opening comments. Are you going to abide by the statute 

that says that money should go to pay down the deficit, or are you 

going to reuse the money? 

Secretary GEITHNER. Of course we are going to abide by the 

statute. The way the statute is written is that when repayments 

come in, they go to reduce the debt. And it is important to recognize we have been successful in getting, I think, about $170 billion 

back from the banking system, and that goes directly to reduce our 

long-term fiscal challenges. But what it didn’t do is reduce the authority Congress gave us. And the way the law was designed is we 

are still left with that authority. 

Now, we are not going to have to use that authority, but we 

think it is a good idea to preserve some of that authority, that existing authority—and we are not going to use anything like that 

$730 billion—to make sure we are helping small community banks 

do what they need to do to help their business customers grow and 

expand. So that is the basic principle, that is the basic design of 

the bill. 

Again, I hope this is something that we can do together, because 

community banks across the country—it is in every district, in 

every State—they will say what is true, which is it is hard for them 

to raise capital, even though they were very good, well-run banks. 

And some of them have opportunities to expand. And there is a 

very good economic case for trying to make sure you can take a dollar of investment in them and encourage lending. It has some of 

the highest return on a dollar of tax revenue that we have seen. 

Mr. LINDER. So your answer is, you are going to reuse the 

money? 

Secretary GEITHNER. No, no. No. I say, the way the law is written, the $175 billion we took back from the banking system, that 

was in the banks when I came into office, goes to reduce the debt. 

But we are going to take some of the authority that Congress authorized, a very small amount of that authority, but it is a good 

amount of authority, and make sure that we are helping the small 

banks, too. 


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Chairman RANGEL. Mr. Linder, if you could identify these documents that you are seeking, I will try to help you to get them. 

Mr. Blumenauer of Oregon. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. 

And thank you, Mr. Geithner, for joining us. You will be surprised to know that all of us Members of Congress think it is a 

good idea to be fiscally responsible. The issue comes in when we 

do it, how we do it. 

To this extent, I commend my friend Paul Ryan, who is leading 

the charge for the Republicans on the budget, for coming up with 

some specifics. I will debate Paul on a few of those. But I think he 

is offering a valuable service, when other people dance around it, 

to say, ‘‘Here is what we need to do.’’ And I think this is something 

that we need to continue doing. 

You have some elements of the budget which I like. You have 

taken on some of what I think are unjustified subsidies to agribusiness that actually don’t help small farmers and ranchers. It 

might help the Treasury. 

In the past, you have offered up in the budget reinstitution of the 

Superfund tax, which would actually help us clean up the toxic legacy for decades, create jobs, and protect the environment. 

What you said a moment ago about the fiscal situation not being 

sustainable and that our priority should be on jobs and recovery of 

the economy, I couldn’t agree more. 

But I would hope that, as you develop this and you work with 

Congress, you can think about one area that is not sustainable, and 

that is our infrastructure spending. You are hearing a common 

theme, at least on this side of the aisle. We have a Highway Trust 

Fund in deficit for the first time in history. We are shoring it up 

with the general fund, which is adding to the deficit in the long 

run. We are at an impasse with reauthorization. So we are not 

dealing with the big-ticket, long-term investments in transportation that would create jobs and revitalize the community. 

I am hopeful that we can have a thoughtful discussion about the 

wisdom of spending about as much money on more tax breaks, extending some provisions more for business, which would be about 

this fiscal headroom that would be necessary to actually fully fund 

a transportation bill that would put people to work, that all the 

economists we have talked to say would have a higher economic 

multiplier, and would let us be on with the big task ahead of us. 

Do you have any comment about actually financing the infrastructure deficit? 

Secretary GEITHNER. Again, our basic test should be what is 

going to do the best job of getting growth back, growth stronger, 

more jobs, spark for investment, do that in a way that is fiscally 

responsible over the longer term and do it in a way that is fair— 

fair on small businesses, fair on working families. That is the basic 

balance we have to strike. 

And I agree with you that, if you do infrastructure spending 

right, you get a very high return, and you do things that are good 

for how fast we can grow in the future, how fast businesses can 

grow, because people depend on a basic level of infrastructure that 

we don’t really have as a country. But we have to find a balance 


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between those things. I want to work with you and we will be 

happy to work with you on what the best balance is. 

Mr. BLUMENAUER. Thank you. 

Chairman RANGEL. Mr. Kind of Wisconsin. 

Mr. KIND. Thank you, Mr. Chairman. 

Mr. Secretary, thank you for your testimony here today. 

In speaking about fairness, you know, to be fair, I mean, there 

is a whole lot of hand-wringing going on around this place right 

now in regards to the cause of the budget deficits from a lot of people who actually should know better. I mean, recent history shows 

that, while the Republicans were in control with a Republican 

President, they passed two large tax breaks that primarily benefited the most wealthy, not a nickel of it offset or paid for in the 

budget. 

This came on the heels of two wars overseas, not a nickel of it 

paid for, and then the largest expansion of entitlement spending 

since Medicare first passed in 1965 when they passed their prescription drug plan, which analysts say is going to cost our country 

about $1.2 trillion over the next 10 years, not a nickel of it paid 

for. 

So this Administration walked into a budget mess and an economic situation perhaps worse than any previous Administration 

since FDR when he walked into the Great Depression. So it took 

a while to get into it, a lot of bad policy decisions, from my point 

of view, and it is going to take a while to get out. 

And I am glad you and the President and the Administration are 

so focused on a robust small business agenda, because we understand the crucial role they are going to play as a locomotive to pull 

us out of this economic recession with job creation. 

In my district in western Wisconsin, the small businesses, the 

family farmers are the backbone of the economy. And everything 

we can do to help them right now keep their doors open and expand jobs is going to be needed. That is why the Administration’s 

proposal of extending the accelerated depreciation, the immediate 

expensing, no cap gains tax for small businesses, this new $30 billion loan program that you want to set up—and I want to work 

with your office to make sure that family farmers are also eligible 

for those loans, because they are going to need that credit this 

spring in order to get the spring plant in, too. That is going to be 

an important component. 

But I want to focus briefly on the new jobs tax credit. I guess 

this fits into the category of ‘‘we don’t do anything new around here 

except the history we repeat.’’ And this is not a new idea. It was 

something tried back in 1976. Maybe I am missing something, but 

from the analysis and data that came from that tax credit attempt 

back then, it fell kind of flat and we didn’t get a good bang for the 

buck from that 1976 new jobs proposal. 

What do you see in your proposal which is different from 1976 

that might give us hope that this might spur some job creation, especially with the small businesses in the country that will add jobs 

and help get this economy back on track? 

Secretary GEITHNER. There are two parts to this proposal. 

One is if you add a net job relative to the amount of people you 

had on the payroll in 2009, you get a $5,000 tax credit. In addition, 


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if you add to payroll, if you increase the hours of the people you 

have currently employed, if you raise wages and salaries for them, 

then we give you payroll tax relief alongside that. 

It is very different in design from the one you referred to from 

the late 1970s. Although, the record on that is somewhat better 

than I think you said. It is very different from what the Congress 

considered last December in designing the Recovery Act. And there 

may be different ways to do this, but we think it is designed in a 

way that is much more effective in providing a bit more spark to 

hiring as growth demand picks up. 

But you are right, this is a controversial proposal, and we are 

trying to be creative about it and pragmatic about it. And, of 

course, we recognize what many of you have referred to, which is 

what businesses say most is they want to make sure they are facing growing orders, have the financing available to meet those orders. But I think this will provide a little bit more of a boost, a little more spark to make sure, as we grow, we are creating more jobs 

than we otherwise would. 

Mr. KIND. Thank you. 

Thank you, Mr. Chairman. 

Chairman RANGEL. Mr. Tiberi. 

Mr. TIBERI. Thank you, Mr. Chairman. 

Mr. Secretary, thank you for being here today. 

Yesterday the President said in New Hampshire, ‘‘We must 

budget our money the way the American people do.’’ I am sure you 

agree with that. 

My dad came to America literally on a boat and got a job in a 

manufacturing plant. Some years he made less than others. When 

he made less, we spent less. When he lost his job, when he lost his 

pension, when we lost our health care, we spent even less than the 

year before. 

You recognize this document? 

Secretary GEITHNER. I do. 

Mr. TIBERI. I thought you would. Back in 2007, the American 

people gave us $2.5 trillion to spend, their money. We spent $2.7 

trillion—too much. The deficit that year was $160 billion. By the 

way, after several years of two wars and a Medicare prescription 

drug benefit, our deficit was too much, but it was $160 billion. 

Two years later, the economy went off a cliff. The 2009 budget, 

according to your numbers, the American taxpayers sent us $2.1 

trillion, of course, less than 2 years earlier. We spent $3.5 trillion. 

To go further, on your budget, if you look on out in the out-years, 

the 2015 estimate, because of tax increases we are going to take 

from the American people $3.6 trillion. My dad would say, ‘‘Wow, 

okay, we spent $3.5. Now we are going to take in $3.6?’’ 

Long term, to Mr. Becerra’s point, we fixed it, right? No. My dad 

would be highly disappointed, because we are going to spend $4.3 

trillion. And to make matters worse, to go 5 years more, we are 

going to spend $5.7 trillion. That is not how the American people 

budget, Mr. Secretary. 

My question: Small business, everybody talks about small business—— 

Secretary GEITHNER. Congressman, could I just respond quickly on that point? 


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Mr. TIBERI. You can after I ask my question, because the Chairman will cut me off. So you can answer two questions, that question and then you can answer this question. 

We talk about small businesses. Both sides talk about small 

businesses. In this proposed budget, we give you and the IRS the 

authority to now reclassify independent contractors, independent 

contractors who work across the country for small mom-and-pop 

businesses—I am thinking of a homebuilder friend of mine who 

uses carpenters, he uses people to lay carpet, he uses people to put 

on the roof as independent contractors. And now you could reclassify them for the issue of payroll taxes, health care benefits, pension costs. This will put small businesses across America out of 

business. 

Secretary GEITHNER. And we are not going to do that, and we 

are not proposing to do that. But I am glad you raised that point. 

Mr. TIBERI. Will you take that out? 

Secretary GEITHNER. I would like to say this exactly this way. 

We are proposing that we work together to legislate authority for 

the IRS to clarify a system today that is very, very hard for small 

businesses to comply with. 

Let me just give you an example. A small business today looks 

at the current system. They have to try to figure out what happens 

in the tax courts over time, case by case. They have to take into 

consideration more than 20 different factors to try to figure out and 

make that judgment like that. It is not easy for them. It is not fair 

for them versus large businesses. 

So what we are suggesting is a very simple, pragmatic proposition, but we have to work with you to do it. We can’t do it on our 

own; is that we make it a little easier. We are not going to change 

that basic line though. And I completely recognize and agree with 

the concerns you said, and I will not support things that would 

carry that risk. 

But I want to come back to where you began. Your rendition of 

history is right in the sense that it is a mess created to behold, but 

it is much worse than you said. It is not just that we came into 

office with a $1.3 trillion deficit, but the projected deficits at that 

point were going to add an additional $8 trillion over the next 10 

years. 

Now, you are right about governments and households, and you 

are right to say that governments have to make choices. We have 

to live within our means, too. But in a financial crisis, in a recession, you can’t save your way out of it, you can’t cut spending and 

expect that to lift your way out of it. 

When you are facing this kind of deep wreckage and damage, the 

basic obligation of government—we learned this, it was expensive 

in the Great Depression, but we learned our mistake. We have 

watched lots of other countries make that mistake. But you cannot 

cut deficits in the midst of a deep financial crisis and expect to do 

anything but see thousands of jobs lost, millions lost, thousands of 

businesses close, millions more Americans lose their homes. There 

is no—— 

Mr. TIBERI. My time has expired, Mr. Secretary. I was just 

quoting the President. 

Chairman RANGEL. Mr. Pascrell. 


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Mr. PASCRELL. Thank you, Mr. Chairman. 

Thank you, Mr. Secretary. 

Despite the promises made in TARP, it seems as hard as it was 

a year ago for small businesses in my area of North Jersey to get 

loans. You know that better than I do. So now you are talking 

about $30 billion from TARP to create a new separate program designed to provide capital to small and community banks, as I understand it. I agree that we should invest TARP, and I think we 

should not look lightly at the suggestion we reduce the deficit by 

TARP. 

What is the justification and evidence that this is going to open 

up lending? We had justification last year. It didn’t work. What 

makes this justification any more cogent? 

Secretary GEITHNER. Let me try and say it this way. We have 

a recession caused in part by the fact that people across the country borrowed too much. We are facing—again, we had an economy 

shrinking at an annual rate of 6 percent after they had borrowed 

too much. So there was no way through this that wasn’t going to 

see borrowing come down as businesses and families went back to 

living within their means. And you have seen a precipitous drop in 

demand for loans and credit by very strong, healthy businesses. 

But what is a problem for us as a country is when a good business, a viable business that has good customers, that can expand, 

wants to grow, and it can’t meet that demand with access to credit. 

Mr. PASCRELL. And that is a lot of businesses. 

Secretary GEITHNER. And that is a lot of businesses. I agree 

with you completely. 

Now, that is not easy to fix, because the pipes are still a little 

clogged for small business credit. What this does is help open up 

those pipes by trying to make sure that a small bank doesn’t have 

to cut further—— 

Mr. PASCRELL. So you think that is the difference in providing 

TARP money for the smaller banks as compared to what we did 

last year? Is that what you are saying? 

Secretary GEITHNER. No. The capital that went to small banks 

last year was very, very helpful. And I think if you talk to small 

banks across the country, those who came and took that money 

said they were able to do things they could not do. In a simple way, 

a dollar of capital from the government creates $8 to $10 in lending 

capacity. And that was very effective. 

But what you saw happen last year—and this is important to 

recognize—we had more than 650 banks, about 650 small banks, 

withdraw their applications for assistance from the government, for 

lots of reasons, but among those reasons were two: One is there 

was a public perception created that that made them look weak. 

Many competitors ran ads against them, the ones that took assistance, saying they were weaker for it. And they were very scared 

that that assistance would come about with burdens and conditions, making it harder for them to run their bank. 

Mr. PASCRELL. My time is running out. I just need to say this, 

Mr. Secretary: We need to do something about the financing of 

foreclosures. 

Finally, the AMT, when I read this budget, you talk about a permanent solution to AMT, but it looks like you are paying for it with 


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deficit financing. We don’t want to go back. You go back to the past 

Administrations, but it seems to me you are replicating this by not 

calling for paying for the reduction permanently of the alternative 

minimum tax. You are doing the same thing as those other guys 

did. 

Secretary GEITHNER. No, absolutely not. 

Mr. PASCRELL. Well, how are you paying for it? 

Secretary GEITHNER. We are proposing to reinstate the basic 

disciplines on spending and revenues that were in place in the 

1990s to help constrain exactly the concern you raised. 

Chairman RANGEL. Mr. Crowley. 

Mr. CROWLEY. Thank you, Mr. Chairman. 

Welcome, Mr. Secretary. Good to see you again. 

Before I go into my line of questioning with you, I feel compelled 

to highlight something that was brought up earlier today by my 

good friend Kevin Brady from Texas when he inquired about AIG. 

As someone very intimately involved in this issue with you, as well 

as with Mr. Kanjorski from Pennsylvania, I think it is important 

that we not rewrite history here today. 

I think you did a good job in your opening statement. But I want 

to just clarify again that the former President and his party begged 

this Congress to create the TARP. The former President and his 

party gave the money to AIG almost unfettered. And the former 

President and his party did not provide for oversight of that money 

or of the AIG bonuses. And now they want to blame this Administration and your office for their mistakes and their methods, just 

like they will do on the deficit here today as well. 

Mr. Secretary—— 

Secretary GEITHNER. Congressman, you need to start a little 

further back even than that, okay? Because what happened in this 

country is we allowed people to get around basic protections we put 

in place on banks and to build up huge risk and leverage outside 

those banks, doing things like banks do—this is true in AIG and 

a range of other institutions—without any effective oversight or 

constraints and without the kind of basic tools like bankruptcy that 

we used to handle these kinds of problems for basic banks. 

Those two failures, that failure of regulation and policy and the 

failure of tools to give us bankruptcy, those were tragic mistakes. 

And that is why it is so important that we fix this mess and put 

in place reforms so we are not faced with those choices again. 

Mr. CROWLEY. Thank you, Mr. Secretary. 

Mr. Secretary, if we took all of the spending, if we zeroed out all 

spending, no more Coast Guard, no more food safety inspectors or 

air traffic controllers or cancer research at NIH, and didn’t pay any 

Federal employees, we would still have a trillion-dollar deficit, is 

that correct? 

Secretary GEITHNER. I think it is exactly right that the principal factors driving our deficits are not the things you referred to. 

Mr. CROWLEY. The principal factors are the issues of Social Security and especially the out-of-control costs in the Medicare system, is that correct? 

Secretary GEITHNER. Absolutely. But it is not just that. It is 

the tax cuts that are in place for the most fortunate Americans. 

Mr. CROWLEY. I was going to get to that point. 


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Secretary GEITHNER. I am sorry. 

Mr. CROWLEY. That is all right. You did it for me. 

Mr. Secretary, I want to applaud Mr. Ryan, as well, for his honesty and presentation of an internal budget. But, again, I believe, 

as my colleagues do as well, they are just bringing out again some 

of the failed policies of the former Administration rejected by the 

American people, and that is the privatization of Social Security 

and the providing of vouchers under the Medicare system. They 

were rejected before. I hope this Administration rejects them again, 

as you stated before, and the President strongly rejects that proposal. 

Secretary GEITHNER. Yes, we will. 

Chairman RANGEL. The Chair recognizes Ms. Brown-Waite of 

Florida. 

Ms. BROWN-WAITE. I thank the Chairman. 

Thank you, Mr. Geithner, for being here. 

Mr. Chairman, I have a series of five questions. I obviously won’t 

have time because our time was truncated. So I may submit them 

and ask Mr. Geithner to respond to four of them, and one I will 

ask. 

Chairman RANGEL. Without objection. 

[The information follows:] 

Ms. BROWN-WAITE. Thank you. 

Americans are very concerned about jobs and certainly the escalating national debt. The most recent estimates indicate that the 

United States will be spending about $700 billion a year in interest 

payments by the end of this decade. To put that in context, that 

is kind of like a new TARP every single year, for which the taxpayers get zero in return. And, by the way, I didn’t vote for the 

TARP. 

Right now, you are financing current interest payments by borrowing more. The President’s budget freeze is a drop in the bucket. 

What happens when confidence fails and interest on Treasury 

bonds skyrockets? 

The second part of that question is, speaking of TARP, community banks are still doing some lending, and yet your proposal is 

to escalate that. But the larger banks, the larger banks that we 

helped out, sir, are doing nothing. They are calling in lines of credit. They are putting businesses out of business. They are calling in 

notes. And that is one of the reasons why we have such a problem 

today in this economy. 

Why not deal with the large banks who sucked the money from 

the American public, sir? Could you answer that? 

Secretary GEITHNER. Congresswoman, you are absolutely right 

about the corrosive cost to our economy of having large deficits, 

this huge increase in the debt we inherited, create much higher interest burdens. And we have to work together to bring down those 

long-term deficits. I completely agree with you, and you said it 

well, and it is important for people to highlight that. 

Now, let me talk about the financial system just very quickly. 

What we did when we came into office is we took back $170 billion 

from the largest banks in the country by forcing them to go out and 

raise private capital so the American people could take those resources and put them to meet our long-term needs, including the 


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one you pointed out, which is these deep, long-term fiscal deficits 

and their burden. 

Now, it is very important that we keep working together—— 

Ms. BROWN-WAITE. Sir, I don’t think you can use this money 

twice. I don’t think—— 

Secretary GEITHNER. Oh, we are not using it twice. As I said, 

the way the law is written—— 

Ms. BROWN-WAITE. I don’t think you can use it to give them 

back to the community banks and comply with the law that says 

that has to reduce the deficit. 

Secretary GEITHNER. Congresswoman, and you did not vote for 

it and I did not design the law, but the way the law was written, 

it was very carefully written. It says that when we get repayment—and let me say this again, $170 billion in repayments from 

our financial system replaced by private capital—— 

Ms. BROWN-WAITE. Sir, my time is almost up. 

Secretary GEITHNER. I want to make sure we get this right. 

Ms. BROWN-WAITE. One other question. When we talk about 

the fact we had a surplus, nobody is saying, guess who was in 

charge of Congress? Sir, I think you know and I know and the 

American people know, it was the Republicans who insisted on 

that. And so it was the Republicans who controlled Congress at the 

time. 

With that, Mr. Chairman, I yield back the balance of my time. 

Chairman RANGEL. Okay. Let’s see now. Mr. Van Hollen. 

Mr. VAN HOLLEN. Thank you, Mr. Chairman. 

Thank you, Mr. Secretary. 

It is indisputable that the Obama Administration inherited an 

economy in free-fall and that, before the President even put his 

hand on the Bible, we had a $1.3 trillion deficit last year. The 

question, of course, is how we go forward. And I think this discussion is very healthy, because the more we hear some ideas from the 

other side, the more we hear that they want to turn back the clock 

to some of the proposals from the Bush Administration that got us 

into this mess to begin with. 

Let’s just talk about tax policy. We talked about that this morning. The recovery bill provided tax relief for 95 percent of working 

Americans—95 percent of working Americans. The head of the Republican House conference the other day described those as ‘‘boutique tax cuts,’’ and then turned around and asked the President 

if he would do a tax cut that helped the wealthiest. We have heard 

again this morning the idea that we should continue in place the 

tax cuts that benefited the wealthiest Americans, and at the same 

time we say, ‘‘You guys got to get those deficits under control.’’ 

You can’t have it both ways. The Bush tax cuts that the President has proposed to allow to expire on their own terms, that portion of it benefit, on average, Americans who have income of 

$809,000. This is on incomes over $250,000, with average incomes 

over $800,000. And by doing that, we will reduce the deficit by 

$826 billion over 10 years, almost a trillion dollars. 

So, it is interesting to hear the notion that we should turn back 

the clock once again, give disproportionate tax breaks to the 

wealthiest Americans, and then turn around and say, ‘‘Well, let’s 


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work together to reduce the deficit.’’ So let us focus on ideas. That 

was one of them. 

We also adopted statutory PAYGO, which I think most Americans understand the notion that you got to make do. You have to 

make sure if you are going to add somewhere to government programs, you have to find offsets one way or another to pay for them. 

Again, we look forward to the House passing that. 

We have had a discussion about TARP. President Bush came to 

this Congress and said, ‘‘We are facing a meltdown in the financial 

industry. We have to rescue it.’’ A distasteful choice; the President 

said it was like having a tooth pulled. But it was necessary to turn 

things around. 

But the key issue is what you said, Mr. Secretary: Now what are 

we going to do to get the money back? You have a proposal on the 

table to make sure that AIG and the financial industry that got 

that money from the taxpayer has to pay back every cent. 

So I hope our colleagues on the other side of the aisle will work 

with us. Because when we passed the Wall Street accountability 

bill here in the House, we had a provision to do that, and we didn’t 

get a vote from a single Member on the other side. So this discussion is very healthy. 

Mr. Secretary, as I leave, I just ask you to get back to me on a 

proposal to establish a financing authority for green energy. It is 

an area we have to invest in. I think there were some promising 

ideas in the President’s budget to create a $4 billion infrastructure 

innovation fund. I hope we can focus that on clean energy initiatives. There was a provision in the House energy bill to do that. 

I look forward to a conversation with you on that. 

Chairman RANGEL. Mr. Davis of Kentucky. 

Mr. DAVIS OF KENTUCKY. Thank you, Mr. Chairman. 

Mr. Secretary, I appreciate your being here today. 

I would like to continue our discussion where we left it off last 

February regarding LIFO, last-in, first-out accounting. I think 

there is a misunderstanding in much of the economic world on the 

role of this. It is not a loophole or tax shelter. It was actually started during the Great Depression. 

And speaking of turning the clock back, I hear a lot of references 

from the other side about the Roosevelt Administration, much of 

which—his legislation was ruled unconstitutional. In fact, the domestic agenda got shut down by the Senate as a result of overreach. 

My concern here, in particular, if we want to create jobs in manufacturing, repeal of LIFO creates many challenges. It is a well-established practice. I think my colleague, Congressman Thompson, 

rightly pointed out that we are on a different standard. Our foreign 

competitors do not have this. This is one small advantage because 

of the great disadvantage American business does have in international competition. How do we compete with the Chinese with 

our average rate being around 40 percent and theirs about 12? 

Here is the question: In industries like distillery and aerospace, 

where you have to set that inventory in many cases for years and 

then accrue it at a cost dramatically higher, you know, you would 

raise taxes by $60 billion effectively, but at our end, for example, 

in my State, it would—actually, those are your numbers, $59.1 bilVerDate Nov 24 2008 12:52 Apr 13, 2011 Jkt 063033 PO 00000 Frm 00051 Fmt 6633 Sfmt 6602 I:\WAYS\WAYSPS\63033\63033.XXX APPS06 PsN: 63033

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lion I believe is the exact number. In this downturn, I can see it 

very clearly killing jobs, reducing investment and risk, where that 

is already a challenge now. 

Congress rejected the proposal to repeal it last year. You brought 

it back to us. You told me there was a difference of opinion on that, 

but we have very broad bipartisan support to keep it. I was wondering if you would comment on where you see the compelling reason to repeal this? 

Secretary GEITHNER. Congressman, you made the case against 

it very well, and I understand the concerns against, but we think 

it is reasonable policy. Again, we are following the lead of many 

Members on this Committee who have proposed this in the past. 

I would be happy to talk to you or respond in writing and try to 

walk through what its impact might be and what its rationale is. 

But we thought it was good policy back then. We still think it 

is good policy. I understand the concerns you raised. I know not everybody agrees. And that is how this process works. We get to sit 

down and look at these proposals and figure out what is going to 

make the most sense. 

Mr. DAVIS OF KENTUCKY. Well, just looking at it as a turnaround, and there was this discussion that I have heard, of this 

drumbeat—I am waiting for President Eisenhower to be blamed, 

since we are attacking Republican Presidents on infrastructure. 

But—— 

Secretary GEITHNER. Well, I don’t think LIFO caused the crisis. I don’t think it—— 

Mr. DAVIS OF KENTUCKY. No, but I think we are calling for 

bipartisanship and then making endless attacks on things that, 

frankly, are pointless from a political standpoint. 

I put this in light of a corporate turnaround. When you go into 

a failing plant, and I have done that before, the one thing that you 

never do is hurt the things that are actually maintaining financial 

stability and put further burden to increase costs when you are trying to take cost out of the process. 

All I could say is, when you come in with a $160 billion deficit 

and condemn that, and then we have over a $1 trillion deficit, if 

I took that before a board of directors, I would hear the words from 

that show ‘‘The Apprentice,’’ ‘‘You’re fired.’’ And that is what the 

American people are going to do if we keep this out-of-control 

spending. 

Secretary GEITHNER. I don’t think metaphors capture what we 

are facing. 

Chairman RANGEL. Ms.—— 

Secretary GEITHNER. Could I say one thing, Mr. Chairman? 

But I think you said an important thing. A failing company, we 

got a turnaround problem. Now, I don’t think we have a failing 

economy. We have huge strength across this country, a lot of innovative, dynamic, strong businesses. But we have a turnaround 

problem. And we are beginning to make some progress turning it 

around. 

And, again, we would like to see if we can find ways that work 

together that will make it more likely we get this economy back on 

track, we repair the damage, repair the wreckage, and, as we grow, 

we do so with more jobs. 


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Chairman RANGEL. Ms. Schwartz from Pennsylvania. 

Ms. SCHWARTZ. Thank you, Mr. Chairman. 

And thank you, Secretary. 

I appreciate your comments. I think my colleagues on this side 

of the aisle made it very clear, and I think some concession on the 

other side of the aisle, that in fact this Administration did inherit 

a financial mess, both in the economy and, of course, for our Federal budget. So, thank you for your comments and clarifying both 

the reality of what we inherited, but also how we are going to go 

forward to really remedy all we can do to actually stimulate the 

economy and job growth. 

I particularly appreciate the focus in the budget on small business and small business lending—we have all heard that from our 

businesses—and also the focus on the deficit, the pay-as-you-go, the 

commission, and the fact we are trying to balance this, what do we 

do to restore stability, which we have already done, in the economy, the action that the Administration and this Congress has already taken, and what we are going to do going forward. 

I wanted to ask something that hasn’t been asked yet, and that 

is potentially some agreement in a bipartisan way, and that is on 

the issue of helping encourage Americans to save, particularly to 

save for retirement. 

I think there were some comments from both sides saying we 

have to act more like families do. But the fact is a lot of American 

families got into serious trouble by borrowing more than they could 

repay, and it is true the Federal Government did that in the previous Administration, as well. But we don’t always make it very 

easy to save. 

One of the things that happened during this terrible recession we 

are in is that, in August, Americans started to save again. But it 

isn’t easy. It is challenging for families that are facing very difficult 

financial times. And it is, we know, made easier when you can save 

at work, save through your employer. Seventy-eight million working Americans do not have any kind of retirement plan or savings 

plan at their workplace. 

What I really want to ask you is the proposals that the Administration has put forward, both to encourage small businesses to— 

really, they can’t afford real retirement savings—set up 401(k)s 

and make that easier and less costly for small businesses, and even 

for those small businesses that don’t choose to do a 401(k), to do 

some kind of automatic savings for their employees. 

I guess all of us know that money we haven’t seen that we put 

away adds up over time. I encourage all of my young staffers to do 

that, and many of them do. 

But this is really important, and I think it is something we can 

all agree with in a really bipartisan way. 

Secretary GEITHNER. The most important thing we can do—— 

Chairman RANGEL. Let me tell you the problem that we have 

here. We have 10 Members that have not had an opportunity to inquire, and we got about 10 minutes to get to the floor. For those 

Members that want to stay, we can divide that time up to 1 minute 

apiece or, at the 2 o’clock hearing, give priority to those people who 

have not made inquiry. So who would want to wait until 2 o’clock 

so I can bypass them? 


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Okay. 

Ms. SCHWARTZ. I will close by thanking you and look forward 

to working with you on those proposals. 

Secretary GEITHNER. I would be happy to respond in writing on 

those proposals. 

Chairman RANGEL. Mr. Reichert. 

Mr. REICHERT. Do I have 1 minute, or do we have time for 3 

minutes? 

Chairman RANGEL. One minute, unless you prefer to come 

back. 

Mr. REICHERT. Mr. Secretary, you and I had an exchange last 

year regarding trade. I just want to go back to that very quickly. 

From 1995 to 2007, we did have a double in our U.S. exports, but 

there were nine trade agreements passed at that time. The President has said that he wants to double our exports. We need to have 

these trade agreements passed. 

Do you support the free-trade agreements, the concept of free 

trade? 

Secretary GEITHNER. Oh, absolutely. Yes. 

Mr. REICHERT. Do you support the Korean agreement, the Colombian agreement, the Panamanian agreement? Yes or no? Do 

you support those agreements, having trade agreements with those 

countries? 

Secretary GEITHNER. We support having strong trade agreements. Open markets for U.S. exporters are fair for American business. 

Mr. REICHERT. Mr. Secretary, do you believe that trade creates 

jobs? 

Secretary GEITHNER. I do. 

Mr. REICHERT. Do you believe we are losing jobs by not passing 

the trade agreements? Yes or no? 

Secretary GEITHNER. I think we can create more jobs if we expand exports. 

Mr. REICHERT. Mr. Chairman, my time is not up. 

Chairman RANGEL. Your minute has expired. 

Mr. ETHERIDGE. Thank you, Mr. Chairman. 

Mr. Geithner, thank you for being here. And put me in the category of those who support the HIRING Act tax credits. I have introduced a bill similar to what the President has. It is a little bit 

different, broader. But for a State that has 11.2 percent unemployment, higher than the national average, we are on board. 

Let me ask you—and I have talked to my chambers. I was at two 

of them the other night, Vinson and Erwin. They are tickled to 

death, and they want to see something happen. These were the 

Chambers of Commerce. 

Congressman Rangel and I introduced a tax credit bill for school 

construction in the Recovery Act, but the market for those bonds 

has been slow to develop because of the financing side of that issue, 

and I know you are working on that. Can you give us some idea 

of where the guidance is? 

And second, the President’s budget includes the America—Buy 

America Bonds Act, and I hope you will look at that for qualified 

school construction bonding as well, because I think these are ways 

to put a lot of people to work very quickly. 


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Chairman RANGEL. Ms. Berkley. 

Ms. BERKLEY. Thank you, Mr. Chairman. 

It is lovely to see you again, Mr. Secretary. I am going to do this 

in 30 seconds and then get a response. 

My district is in a world of hurt. I have over 13 percent unemployment. My building trades are 50 percent unemployed. I have 

the highest mortgage foreclosure rate in the country. I have a service-oriented economy. I have been pushing for 100 percent deductibility of meals tax and a spousal travel allowance to get people 

back to work. What are you going to do to help me? 

Secretary GEITHNER. You have been a passionate, eloquent advocate for those two proposals. 

Ms. BERKLEY. And I have more. 

Secretary GEITHNER. And I understand you feel strongly about 

them, and I will be happy to talk to you and work with you on how 

best we can meet that objective. 

And you are right to remind everybody that there is a huge 

amount of pain still across this country, and it is not captured in 

the national numbers. And there are parts of the country where 

unemployment is much, much higher, where job loss—where foreclosure is much, much higher, and that is why we have done everything we have as quickly as we have to put a floor under this recovery and help reinforce recovery. You are right about it, and I am 

glad you are reminding people about it. 

Ms. BERKLEY. Well, thank you. 

One other thing. We keep talking about small businesses. Don’t 

forget my big developers; they can’t get a loan either. 

Chairman RANGEL. Mr. Yarmuth. 

Mr. YARMUTH. Thank you, Mr. Chairman. 

Mr. Secretary, thank you very much for your presentation. I 

want to spend my minute reinforcing my colleague Mr. Davis’ comments about LIFO. In the Commonwealth of Kentucky, we have an 

industry which is $3 billion worth of our gross State product. I 

know you want to talk about expanding exports. We export bourbon to 126 countries. It is a growing part of the economy. It is one 

of the manufacturing sector’s growing segments. Overall manufacturing is down 20 percent in Kentucky. The distilling industry is 

up 6 percent. This proposal would represent an existential threat 

to many of our distilleries, and it is a significant concern. 

I yield back, Mr. Chairman. 

Chairman RANGEL. Thank you. 

Mr. Secretary, I hope we can get together with a bipartisan discussion of the recommendations made by the President and you. In 

any event, we look forward to working with you outside of just this 

formal hearing to see whether we can iron our differences. And we 

will need your help with the Senate. It doesn’t really make sense 

for us to go through all of this only to find out that they have problems with our product. 

So let me thank you for being with us. I look forward to being 

with you again soon. 

This hearing stands adjourned until 2 p.m. this afternoon. 

[Whereupon, at 12:04 p.m., the Committee was adjourned.] 

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