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THE PRESIDENT’S FISCAL 

YEAR 2013 BUDGET 

HEARING 

BEFORE THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

HEARING HELD IN WASHINGTON, DC, FEBRUARY 15, 2012 

Serial No. 112–19 

Printed for the use of the Committee on the Budget 

( 

Available on the Internet: 

www.gpo.gov/fdsys/browse/committee.action?chamber=house&committee=budget 
(II) 

COMMITTEE ON THE BUDGET 

PAUL RYAN, Wisconsin, Chairman 

SCOTT GARRETT, New Jersey 

MICHAEL K. SIMPSON, Idaho 

JOHN CAMPBELL, California 

KEN CALVERT, California 

W. TODD AKIN, Missouri 

TOM COLE, Oklahoma 

TOM PRICE, Georgia 

TOM MCCLINTOCK, California 

JASON CHAFFETZ, Utah 

MARLIN A. STUTZMAN, Indiana 

JAMES LANKFORD, Oklahoma 

DIANE BLACK, Tennessee 

REID J. RIBBLE, Wisconsin 

BILL FLORES, Texas 

MICK MULVANEY, South Carolina 

TIM HUELSKAMP, Kansas 

TODD C. YOUNG, Indiana 

JUSTIN AMASH, Michigan 

TODD ROKITA, Indiana 

FRANK C. GUINTA, New Hampshire 

ROB WOODALL, Georgia 

CHRIS VAN HOLLEN, Maryland, 

Ranking Minority Member 

ALLYSON Y. SCHWARTZ, Pennsylvania 

MARCY KAPTUR, Ohio 

LLOYD DOGGETT, Texas 

EARL BLUMENAUER, Oregon 

BETTY MCCOLLUM, Minnesota 

JOHN A. YARMUTH, Kentucky 

BILL PASCRELL, JR., New Jersey 

MICHAEL M. HONDA, California 

TIM RYAN, Ohio 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin 

KATHY CASTOR, Florida 

HEATH SHULER, North Carolina 

PAUL TONKO, New York 

KAREN BASS, California 

PROFESSIONAL STAFF

AUSTIN SMYTHE, Staff Director 

THOMAS S. KAHN, Minority Staff Director 
(III) 

C O N T E N T S 

Page 

Hearing held in Washington, DC, February 15, 2012 .......................................... 1 

Hon. Paul Ryan, Chairman, Committee on the Budget ................................ 1 

Prepared statement of ............................................................................... 3 

Hon. Chris Van Hollen, ranking minority member, Committee on the 

Budget ............................................................................................................ 4 

Prepared statement of ............................................................................... 6 

Jeffrey Zients, Acting Director and Deputy Director of Management, Office of Management and Budget .................................................................. 7 

Prepared statement of ............................................................................... 9 

(1) 

THE PRESIDENT’S FISCAL YEAR 2013 BUDGET 

WEDNESDAY, FEBRUARY 15, 2012 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON THE BUDGET, 

Washington, DC. 

The Committee met, pursuant to call, at 10:00 a.m., in room 210, 

Cannon House Office Building, Hon. Paul Ryan, [Chairman of the 

Committee] presiding. 

Present: Representatives Ryan, Garrett, Simpson, Calvert, Akin, 

Cole, Price, McClintock, Chaffetz, Stutzman, Lankford, Black, 

Ribble, Flores, Mulvaney, Huelskamp, Young, Amash, Rokita, 

Woodall, Van Hollen, Schwartz, Blumenauer, McCollum, Yarmuth, 

Pascrell, Honda, Ryan of Ohio, Wasserman Schultz, Castor, Tonko, 

Bass. 

Chairman RYAN. Committee will come to order. Welcome all to 

this important hearing, and Mr. Zients, I do not envy your task 

today. I want to welcome you. You are new to the job; you got 

thrown into the breach; you came late with respect to running 

OMB to preparing this budget, and you have got a very tough job 

ahead of you. With the departure of Jack Lew, you have got thrown 

in at the late moment. 

I want to tell you first, before I get into this, thank you for serving our country. You came from a successful private sector career 

back to government and we applaud that; so I just think that these 

things go without saying, but they bear repeating. 

The problem is you are in the position of defending a budget 

that, essentially, dodges the most difficult challenges our country 

faces. The New York Times reported that this budget is quote 

‘‘More a platform for the president’s reelection campaign than a 

legislative proposal,’’ end quote. After a careful review of this budget, it is very hard to disagree with that. 

The Associated Press accurately, in my view, quotes this budget 

as quote ‘‘Takes a pass on reigning in government growth. Instead, 

it leaves the drivers of the debt, namely the unsustainable growth 

in entitlement programs largely unchecked. It takes a pass on real 

reform even though the looming bankruptcy of these programs 

threatens to end the guarantee of security that they provide for our 

nation’s seniors, and it breaks the president’s promise to cut the 

deficit in half by the end of his first term.’’ As ABC News reported, 

this budget does not come close. 

We have heard a lot of excuses from this administration for why 

the president broke his promise, but what we have not heard is 

any semblance of accountability. To the best of my knowledge, no 

one in the White House has taken responsibility for this failure. In-
2 

stead, we get a blame game that does not stand up to scrutiny. 

Jack Lew, your former boss, claimed that the reason the Senate 

Democrats have not passed a budget in over 1,000 days is because 

Republicans had threatened a filibuster. Look, this is simply false. 

We all know, as I am sure Mr. Lew knows, that budget resolutions 

cannot be filibustered. They can be passed with a simple majority 

vote; it is that the Senate Democrats chose not to do so. 

The real source of dysfunction in the Senate comes from members of the president’s own party who have been unwilling for almost three years now to go on record in support of his budgets, or 

to pass budgets of their own. 

More to the point, it was not so long ago that the president’s 

party held total control of the White House and both branches of 

government, during which time the agenda was enacted in near totality. He was able to pass into law massive spending and taxes, 

the creation of new, open-ended entitlements, a regulatory onslaught that is now hurting our economy and trillions of dollars in 

new debt. Even after all of this, the new House majority provided 

him with an opportunity to make good on his promise, and ‘‘to put 

aside the chronic avoidance of tough decisions,’’ to use the president’s words, that he once used to lament. 

We were, and we remain eager to work with the president to stop 

spending money we do not have, to reform government programs 

that are not delivering on their promises, and to enact pro-growth 

policies that raise revenue by getting our economy growing again. 

Instead of working with us though, the president has demonized 

our ideas to stave and strengthen health and retirement security 

programs. He fought to keep his reckless spending spree growing, 

and he continues to insist on taking more money from hard-working Americans, not to reduce the deficit, but to fuel his ever higher 

spending increases. The president’s ongoing refusal to advance serious solutions to our nation’s fiscal challenges represents a stunning 

dereliction of duty. 

We are not going to give up hope. I remain committed to working 

with my colleagues on both sides of the aisle wherever common 

ground can be reached. Some of us have been doing that. There is 

growing bipartisan support for reforms that are needed, but this 

consensus cannot succeed as long as the president of the United 

States remains on the outside looking in, as he does today. It is my 

hope that this hearing can shed some light on why this is occurring. 

I have just got to say, we see a debt crisis coming. We know our 

government is making promises to people it simply cannot keep. It 

is time for us to be honest with Americans about these things. Both 

parties got us into this mess, but this is the fourth budget from 

this president with a trillion dollar deficit each year, obviously a 

breaking of that promise, but worse yet, no credible solution to deal 

with our debt, to deal with this great threat to today’s economy, 

and tomorrow’s future for our kids. Instead, we get the politics of 

envy and division. Instead, we get smoke and mirrors, accounting 

tricks, budget gimmicks. 

If we are going to save this country from a debt crisis, and give 

our kids a better future, we have to have leadership. I have to say, 

I am just very disappointed that we are not getting this from the 
3 

president. With that, I look forward to questions, and I yield to the 

ranking member Mr. Van Hollen. 

[The prepared statement of Chairman Paul Ryan follows:] 

PREPARED STATEMENT OF HON. PAUL RYAN, CHAIRMAN, 

COMMITTEE ON THE BUDGET

Welcome all, to this important hearing. 

I’d like to thank our witness today, Mr. Zients, for coming to us under difficult 

circumstances. 

With the departure of Mr. Lew from OMB just last month, we understand that 

you are testifying on short notice, and we recognize the difficulty of that. 

And unfortunately, your job is even more difficult than usual—you are in the position of having to defend a budget that essentially dodges the most difficult challenges our country faces. 

The New York Times has reported that this budget is, quote, ‘‘more a platform 

for the president’s re-election campaign than a legislative proposal.’’ After a careful 

review, it’s hard to disagree. 

The Associated Press has reported—accurately in my view—that this budget, 

quote, ‘‘[takes] a pass on reining in government growth.’’ 

Instead, it leaves the drivers of our debt—namely, the unsustainable growth of 

entitlement spending—quote, ‘‘largely unchecked.’’ 

It takes a pass on real reform, even though the looming bankruptcy of these programs threatens to end the guarantee of security they provide for our nation’s seniors. 

And it breaks the President’s promise to cut the deficit in half by the end of his 

term. As ABC News reported, this budget ‘‘does not come close.’’ 

We’ve heard a lot of excuses from this administration for why the President broke 

his promise. But what we haven’t heard is any semblance of accountability. 

To the best of my knowledge, no one in the White House has taken responsibility 

for this failure. 

Instead, we’ve gotten a blame game that doesn’t stand up to scrutiny. 

Jack Lew, your former boss, claimed that the reason Senate Democrats haven’t 

passed a budget in over 1,000 days is that the Republicans have threatened to filibuster. 

This is simply false. As Mr. Lew surely knows, budget resolutions cannot be filibustered. They can be passed with a simple majority. 

The real source of dysfunction in the Senate comes from members of the President’s own party, who have been unwilling—for almost three years now—to go on 

record in support of his budgets, or to pass budgets of their own. 

More to the point, it wasn’t so long ago that the President’s party held total control of the White House and both branches of Congress—during which time his 

agenda was enacted in near totality: 

• massive new spending and taxes 

• the creation of new, open-ended entitlements 

• a regulatory onslaught that hurt the economy 

• and trillions of dollars in new debt. 

Even after all this, the new House Majority provided him with an opportunity to 

make good on his promise—to put aside the ‘‘chronic avoidance of tough decisions’’ 

that he once lamented. 

We were—and we remain—eager to work with the President to stop spending 

money we don’t have * * * to reform government programs that aren’t delivering 

on their promises * * * and to enact pro-growth policies that raise revenue by getting our economy moving again. 

Yet, instead of working with us, the President has demonized our ideas to save 

and strengthen health and retirement security programs. 

He fought to keep his reckless spending spree going. 

And he continues to insist on taking more money from hardworking Americans— 

not to reduce the debt, but to fuel his ever-higher spending. 

The President’s ongoing refusal to advance serious solutions to our nation’s fiscal 

challenges represents a stunning dereliction of duty. 

But I haven’t given up hope. I remain committed to working with my colleagues 

of both parties wherever common ground can be reached. 

There is a growing bipartisan consensus for the reforms that are needed. But this 

consensus cannot succeed as long as the President of the United States remains on 

the outside looking in. 
4 

Unfortunately, that’s where he stands today. And my hope is that this hearing 

can shed some light on why. 

Mr. Zients, we look forward to your testimony, but we do not envy your predicament. This unserious budget raises some very serious questions, and the American 

people deserve answers. 

With that, I yield to the Ranking Member, Mr. Van Hollen. 

Mr. VAN HOLLEN. Well, thank you Mr. Chairman. Mr. Zients I 

want to add my word of welcome to that of the chairman. I think 

after your testimony in the Senate yesterday that you are already 

battle-tested. Welcome to the job and thank you for jumping into 

the breach, as the chairman said, and I believe you have gotten off 

to a very good start. Sometimes we are all guilty of selective 

quoting, I will just point out that the New York Times editorial 

was headlined ‘‘A Responsible Budget;’’ and this is a responsible 

budget that begins to turn the corner in terms of the deficits and 

is very important in terms of job creation. 

I think it is important to remind everybody that when the president took office he inherited the worst economy since the Great Depression. That is not an excuse; that is a fact. That is just a historical fact, and if we could put the chart up here you will see that 

the red was in the last administration where we were losing jobs 

rapidly. When the president was sworn in, the economy was contracting at a rate that we now know is 8.9 percent of GDP; 800,000 

jobs were lost in January 2009 at the time the president put his 

hand on the Bible and was sworn in. 

Where are we today? Well, with the passage of the Recovery Act, 

with the successful effort to save the auto industry and other measures that have been taken, we have added 3.7 million private sector jobs over the last two years and 257,000 just last month. 

We all recognize we still have a long way to go, and that too 

many Americans are still out of work, too many Americans are 

hurting economically, but we have turned the corner and we must 
5 

build on this gradual economy, and we certainly should not go back 

to the same policies that got us into that mess in the first place. 

Now, the fastest and most effective way to reduce the deficit is 

to put Americans back to work, and in fact the Congressional 

Budget Office recently estimated that we could cut the deficit by 

one-third if our economy were at full employment. So how do we 

help nurture that recovery? We begin by passing the payroll tax 

cut extension, and it looks like we may have some good news on 

that front. We begin by making sure that the millions of Americans 

who are out of work and unemployed through no fault of their own 

continue to get some support, which not only helps their families, 

but helps the whole neighborhood and the economy around them. 

The president’s jobs plan that he submitted back in September also 

includes a lot of other elements that are just sitting in this House 

of Representatives and have not moved. His plan includes $50 billion for immediate infrastructure investment to help put people 

back to work rebuilding our roads, our bridges, helping expand 

broadband, and it also contains a long-term plan for infrastructure 

development. 

It stands in great contrast, I will say, to the infrastructure bill 

that we are taking up on the floor of the House this week which 

does not begin to do the job in which former Republican Congressman Ray LaHood, now Secretary of Transportation, called the 

worst transportation bill he has seen in 35 years of public service. 

That just does not get the job done. 

Now, as we nurture the recovery, we have to act now to reduce 

the deficit over the next decade in a steady and predictable way, 

and this budget does that. The budget exceeds the deficit reduction 

targets established by the Budget Control Act, it consistently lowers the deficit as a share of the economy until it gets to under 3 

percent of GDP, and it stabilizes the debt as a percent of the economy. The president does this, not by arbitrarily slashing defense 

and domestic investments, as would happen under the sequester, 

but by taking a balanced approach; that leads me to the fundamental issue which is that the question is not whether to reduce 

the deficits, the question has been how do we reduce the deficit, 

and the president’s approach is the balanced approach. It takes the 

kind of framework we saw from the bipartisan commission, the 

Simpson-Bowles, Rivlin-Domenici. It adopts the cuts that we made 

to discretionary spending in earlier months. It cuts another $600 

billion in mandatory spending, but it also does something else. It 

does eliminate a lot of the special interest tax breaks. It does ask 

the very wealthiest Americans to go back to paying the same top 

rate that they were paying during the Clinton Administration, a 

time when the economy was booming, and that balance is what our 

Republican colleagues have objected to. 

This is a question of choices. If last year’s Republican budget is 

any sign of where we will head this year, they take a lopsided approach further slashing investments in education, in science and 

research and infrastructure, which are critical drivers of the economy, and they do slash the social safety net in that they cut $700 

billion from Medicaid that goes to help people like the vulnerable 

seniors in nursing homes, and they do ask seniors on Medicare to 

carry the entire risk of rising health care costs, and that is their 
6 

choice, but that is not a balanced approach. I think what we see 

here in the president’s budget is a responsible approach that takes 

that balanced approach to dealing with a very serious problem. 

With that, Mr. Chairman, I thank you for the opportunity. 

[The prepared statement of Chris Van Hollen follows:] 

PREPARED STATEMENT OF HON. CHRIS VAN HOLLEN, RANKING MEMBER, COMMITTEE ON THE BUDGET

Welcome, Director Zients. Thank you for being here today to talk with us about 

the President’s budget request for 2013 and the tough choices the Administration 

made to protect and build upon the economic recovery, while putting in place a plan 

to steadily reduce the deficit over the next decade. 

When the President took office, he inherited the worst economic crisis since the 

Great Depression. The economy was in total freefall, contracting at a rate of 8.9 percent. We were losing over 800,000 jobs per month. Where are we today? With the 

passage of the Recovery Act, and the successful effort to save the auto industry, 

we’ve added 3.7 million private sector jobs over the last two years and over 257,000 

just last month. We recognize that we still have a way to go and that too many 

Americans are still out of work and hurting—but we are turning the corner. We 

must build on this fragile recovery. We cannot go back to the policies that put us 

in this mess. 

The fastest and most effective way to reduce our deficit is to put Americans back 

to work—in fact, the Congressional Budget Office recently estimated that we would 

cut the deficit by one-third if our economy were at full employment. How do we do 

it? We can begin by giving a boost to the economic recovery by passing a payroll 

tax cut extension and continuing to provide unemployment insurance to the millions 

who are out of work through no fault of their own. 

The President’s budget also includes other key elements of the President’s American Jobs Act, which has been sitting before Congress since September. These elements include tax cuts for small businesses and critical new investments. The budget provides $50 billion for immediate infrastructure funding and $10 billion for an 

infrastructure bank—this will allow us to put people back to work rebuilding and 

modernizing our schools, roads, and bridges—and it also contains a long-term plan 

for infrastructure development. This is a different approach from the Republican 

transportation bill in the House, which former Republican Congressman and Secretary of Transportation Ray LaHood has said ‘‘is the worst transportation bill I’ve 

seen during 35 years of public service.’’ It stands in stark comparison to the bipartisan bill in the Senate. 

We must also act now to reduce the deficit over the next decade in a steady, predictable way. The President’s budget does that. The budget exceeds the deficit reduction targets established in the Budget Control Act of 2011, consistently lowering 

the deficit as a share of the economy and stabilizing the debt as a percentage of 

the economy. The President reaches the targets not through an automatic sequester 

that arbitrarily slashes defense and domestic investments, but instead with policy 

choices that balance the need to make wise investments to spur job growth and provide security for the middle-class with the need to put the budget on a fiscally sustainable path. The issue is not whether to reduce the deficits over the coming decade, but how. The President’s plan takes a balanced approach to reducing the deficit. It adopts the cuts to domestic spending included in the Budget Control Act. It 

cuts mandatory spending by over $600 billion. But it also eliminates special interest 

tax breaks for corporations and the wealthiest Americans. It asks our highest earners to return to the same tax rate in place during the Clinton Administration, when 

the economy was booming. 

It is this balance that our Republican colleagues object to. Ninety-eight percent 

of our Republican colleagues have signed a pledge saying they won’t close one special interest tax loophole for the purpose of deficit reduction. And because they don’t 

want millionaires to pay more, they seek to reduce the deficit on the backs of middle-income taxpayers and seniors. If last year’s budget is any indication, they would 

slash our investments in education, science and research, infrastructure—key drivers of innovation and economic growth. And their proposal last year would force seniors to absorb the rapidly rising costs of health care, end the Medicare guarantee, 

and whack Medicaid by over $700 billion. So, again, the question is not whether we 

reduce the deficit, but how. 

What the President’s budget does instead is to take a balanced approach to deficit 

reduction, following the framework developed by bipartisan groups such as SimpsonBowles and Rivlin-Domenici. These groups called for a combination of spending cuts 
7 

and revenue increases, while guarding against cutting spending too deeply too soon. 

Adopting abrupt austerity measures will only hurt the fragile economy. This isn’t 

just my opinion and that of these bipartisan groups—economists like Federal Reserve Chairman Ben Bernanke have also argued against immediate spending cuts 

that will jeopardize our economic recovery. We need to get serious about debts and 

deficits in this country, but we must do it in a responsible way. The President takes 

a balanced approach to deficit reduction. 

Thank you Mr. Chairman and thank you Director Zients for coming today; I look 

forward to your testimony. 

Chairman RYAN. My pleasure. Mr. Zients, the table is yours. 

STATEMENT OF JEFFREY ZIENTS, ACTING DIRECTOR AND 

DEPUTY DIRECTOR FOR MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET 

Mr. ZIENTS. Thank you. Thank you Mr. Chairman, Ranking 

Member Van Hollen, and members of the Committee. Thank you 

for having me here today to present the 2013 budget. As the chairman said, before I joined OMB three years ago, and I have now 

been at OMB three years and been involved in the budget, so I feel 

like I am in a good position today to talk about the president’s 

budget. Before that I had spent more than 20 years in the private 

sector; I had not been in government at all before. One thing I 

found that was helpful in the private sector is to boil things down 

to a few graphics. So if it is okay with everybody I thought I would 

use my few minutes to walk you through the highlights of the 

budget using, I hope, these two screens. 

I will cover four topics: first, the current policy baseline, next, the 

key elements of deficit reduction, then an overview of our investments in the areas that are central to our future competitiveness, 

jobs, and growth, and finally the bottom line of the president’s 

budget and how it puts us on a sustainable path. Let me start with 

the baseline. 

We believe we have a baseline that accurately reflects current 

policy. In essence, this is business as usual. The baseline includes 

the extension of the 2001 and 2003 tax cuts, estate and gift taxes; 

second, the permanent extension of AMT and SGR; we believe this 

presentation is more honest than patching these year after year; 

enforcement of the BCA caps and joint committee sequester; and 

accounting for future disaster costs, rather than ignoring them. 

The baseline results in an annual deficit of 4.7 percent of GDP at 

the end of the budget window in 2022. This is where we start before our policies take effect. 

Let me now turn to our deficit reduction policies. Last April, the 

president put forward a framework to achieve more than $4 trillion 

in deficit reduction. He maintained the $4 trillion in his proposal 

to the joint committee last September. This year’s budget is very 

similar to the September proposal with the addition of a year to the 

budget window. So as you can see on the far right in that green 

bar, this budget actually includes $5 trillion of total deficit reduction. 

Let me walk you through the key elements, I hope you can see 

them. I am going to walk from left to right across those blue bars. 

You start on the far left. You will see $676 billion in savings from 

the appropriation bills enacted last year, including both the 2011 

appropriations in April, and the OCO savings from the 2012 appropriations. 
8 

Next, there is over $1 trillion in reductions in discretionary 

spending, consistent with the caps in the BCA. Next, there are 

$362 billion in reductions from Medicare, Medicaid, and other 

health programs that will make these programs more effective and 

more efficient; then $272 billion in savings from reforming nonhealth mandatory programs in areas such as agriculture, federal civilian worker retirement, and the PBGC. These costs are net of the 

cost of new mandatory initiatives. 

The next category is $1.5 trillion of revenue for deficit reduction, 

including the expiration of the 2001 and 2003 tax cuts for the highest earners, and the elimination of inefficient and unfair tax 

breaks. The $1.5 trillion is a net number as we further cut taxes 

for the middle class and small businesses. 

Next, $617 billion in net savings from capping OCO and investing in a six year surface transportation re-authorization. Capping 

OCO importantly closes the back door on security spending. 

Then there are other net savings of $141 billion. These include, 

for example, disaster adjustments, program integrity, and general 

fund transfers for transportation that are no longer necessary. As 

a result of these proposals, debt service costs decreased by $800 billion. 

Finally, in that pink bar right next to the green bar, there are 

$176 billion of investments in short-term job initiatives that actually cut the other way; so these are investments. This is the remainder of this $354 billion of job initiatives not spent in 2012. 

I want to be clear that we do not count the sequester in our total 

deficit reduction. We believe that the sequester is bad policy and 

we propose that it be replaced by this larger, more balanced package of deficit reduction, but be clear: the sequester is still in place, 

the president believes firmly that it is a very important enforcing 

function to make sure we do balanced deficit reduction. 

The bottom line is these efforts represent a total of more than 

$5 trillion in net deficit reduction. Even as we achieve the deficit 

reduction, we continue to make key investments in priority areas. 

These include short-term measures for job growth totaling $354 billion, tax breaks for the middle class and small businesses amounting to $352 billion, and continued investment in our long-term priorities, including education and job training for American workers, 

innovation and R&D, clean energy, and infrastructure. We make 

these investments in a budget that abides by the very tight spending caps and makes hard trade-offs. 

Let me now pull it all together for you. On the left, I have compared the adjusted baseline that I talked about in that first slide 

with the results of the president’s policies. As you can see in 2022, 

deficits from the president’s policies are below 3 percent of GDP 

compared to 4.7 percent in the baseline. Furthermore, debt as a 

percent of GDP is stabilized from 2018 on. This is important for 

maintaining a strong investment environment. The president’s 

budget replaces the sequester with a balanced approach to deficit 

reduction with $2.50 in spending cuts for every $1 of revenue increases. We have made tough choices, and we all need to work together to maintain this balanced approach. 

In closing, as a businessperson and now OMB acting director, I 

believe the president’s budget makes the right investments to make 
9 

us even more competitive in the global marketplace, and achieving 

declining deficits and stabilizing our debt are critical for business 

confidence and investment. This is good for business; this is good 

for the middle class, and good for America. Now, I would be happy 

to take your questions. 

[The prepared statement of Jeffrey Zients follows:] 

PREPARED STATEMENT OF JEFFREY ZIENTS, ACTING DIRECTOR AND DEPUTY DIRECTOR

OF MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET

Mr. Chairman, Mr. Ranking Member, members of the Committee, thank you for 

welcoming me here today, and giving me the opportunity to present the President’s 

2013 Budget. 

Let me start by saying that at the beginning of the year, I did not expect to be 

sitting in this seat before you today. But, as you know, the President asked Jack 

Lew to serve him as White House Chief of Staff, and then asked me to serve as 

Acting Director. 

I do not come to the job with the same experience as my two predecessors: I am 

not a former OMB Director or former CBO Director. What I do bring to this role 

is a perspective forged from nearly three years at OMB overseeing the agency’s 

management efforts and from two decades before that in the private sector, leading 

public companies. I know many of you also bring private sector experience to your 

public service, and I look forward to the discussion we can have today. 

The President’s Budget is built on the idea that our country has always done best 

when everyone gets a fair shot, everyone does their fair share, and everyone plays 

by the same rules. We are all in this together: when the middle class is shrinking 

and families no longer can afford the goods and services that businesses are selling, 

it drags down the entire economy. Similarly, countries with less inequality tend to 

have stronger and steadier economic growth over the long term. 

By following these quintessentially American values of equal opportunity for all 

and responsibility from all, we can build an economy that will grow robustly and 

create good jobs for years to come—and we can pursue deficit reduction that is balanced and will put the country on a sustainable fiscal path. This Budget lays out 

the President’s vision to do both. In it, we make tough choices—cutting waste where 

we can as well as some valuable programs that we would not cut if not for the fiscal 

situation. We put forward a plan to support and strengthen economic growth now 

so we can get more Americans back to work. And to meet the tight spending constraints that the President signed into law and insisted be a part of his Budget, we 

re-allocate resources to allow targeted investments so that we have an economy in 

years to come that is based not on speculation and bubbles, but one that is built 

on the solid foundation of an educated and skilled workforce, cutting-edge innovation, and world-class infrastructure. 

To understand our approach to the Budget, let me review the progress we have 

made since the President was elected and the challenges that we face today. 

WHERE WE HAVE BEEN

When the President took office, the economy was losing over 700,000 private sector jobs a month, and experiencing the worst two quarters of growth since the end 

of World War II. Many thought that we were on the brink of a second Great Depression. 

But long before this recession hit, there was a widespread feeling that hard work 

had stopped paying off; that fewer and fewer of those who contributed to the success 

of our economy actually benefited from that success. Those at the very top grew 

wealthier while everyone else struggled with paychecks that did not keep up with 

the rising cost of everything from college tuition to groceries. And as a result, too 

many families found themselves taking on more and more debt just to keep up— 

often papered over by mounting credit card bills and home equity loans. 

Then, in the middle of 2008, the house of cards collapsed. Too many mortgages 

had been sold to people who could not afford—or even understand—them. Banks 

had packaged too many risky loans into securities and then sold them to investors 

who were misled or misinformed about the risks involved. Huge bets had been made 

and huge bonuses had been paid out with other people’s money. And the regulators 

who were supposed to prevent this crisis either looked the other way or did not have 

the authority to act. 

In the end, this growing debt and irresponsibility helped trigger the worst economic crisis in generations. Combined with new tax cuts and new mandatory pro-
10 

grams that had never been paid for, it threw our country into a deep fiscal hole. 

And millions of hardworking Americans lost their jobs, their homes, and their basic 

economic security. 

Due to swift action taken by the President shortly after taking office, the nation 

avoided what could have been a second Great Depression. We have now experienced 

23 consecutive months of private sector job growth, with 3.2 million jobs created. 

In just the first few months of 2009, the President’s strong leadership produced a 

Recovery Act to bolster American families against the worst of the crisis, as well 

as a rescue of the auto industry and the stabilization of our financial system which, 

together, prevented our economy from spiraling into a deep depression. 

When my predecessor last appeared in front of this Committee to present the 

President’s budget, our economy was gaining traction after enduring a historic recession and coming back from the brink of a depression. During the previous six 

quarters, real gross domestic product (GDP) had grown at an average annual rate 

of 3 percent and, over the previous 12 months, the private sector had created 1.3 

million new jobs. The financial system was no longer in crisis. The credit and capital 

markets were functioning, and the cost of stabilizing the financial and automobile 

sectors was amounting to a fraction of initial estimates. Yet we also subsequently 

have learned that the recession was deeper than many experts first thought: revised 

estimates showed that the economy contracted at an 8.9 percent annualized rate in 

the last quarter of 2008, from an original projection of 3.8 percent, the largest quarterly downward revision in history. 

Then, a trio of world events created strong headwinds that challenged the economic expansion: uprisings in the Middle East that sent oil prices higher; an earthquake in Japan that prevented American auto and manufacturing companies from 

getting the supplies they needed to keep our factories producing; and widespread 

sovereign debt concerns in Europe that roiled markets across the globe. In addition, 

the willingness of some Republicans in Congress to risk the first default in our Nation’s history over the statutory debt ceiling and the subsequent downgrade by 

Standard & Poor’s of the long-term sovereign rating of U.S. Treasuries and other 

debt tied to the U.S. credit rating kept financial markets on edge and appeared to 

rattle consumer confidence. 

In the face of these headwinds, the policies enacted by the President played a key 

role in keeping the economy moving forward. Because of the policies that the President fought for, the typical working family received a $1,000 payroll tax cut in 2011, 

and millions of Americans pounding the pavement looking for jobs could continue 

to receive unemployment insurance. This provided crucial insurance against 

headwinds buffeting our economy. 

While there are lingering concerns over the financial developments in Europe and 

the risk they pose to the U.S. economy, the pace of real GDP growth picked up in 

the second half of last year. Despite these encouraging signs, economic growth is 

not strong enough to create enough good jobs for all the Americans who want to 

work or robust enough to restore for the middle class the security and opportunity 

they deserve. 

At the same time, our country still faces the consequences of years of fiscal irresponsibility. When the President took office, he inherited an annual deficit of $1.3 

trillion and projected deficits of trillions more in the years thereafter. Driving these 

deficits were decisions made over the previous eight years not to pay for two tax 

cuts and a Medicare prescription drug benefit. The deficits were then exacerbated 

by the recession: the sharp decline in receipts, steep increase in automatic outlays 

to help those in need, and efforts needed to jumpstart economic growth. 

Recognizing the challenges still facing the economic recovery over the past year, 

the Administration pursued both short-term efforts to boost economic growth and 

job creation plus comprehensive, balanced initiatives to put the United States on the 

path toward fiscal stability were both needed. These are complementary policies: A 

growing economy is necessary for long-term deficit reduction, and likewise, longterm deficit reduction and fiscal sustainability is necessary to sustain and strengthen economic growth for years to come. 

That is why the President pursued significant, balanced deficit reduction throughout calendar year 2011: first, in his 2012 Budget; then, in the Framework for 

Shared Prosperity and Shared Fiscal Responsibility released in April that built on 

the Budget to identify $4 trillion in deficit reduction; next, in a similarly sized plan 

presented to congressional Republicans during negotiations over extending the debt 

ceiling during the summer; and finally in the President’s Plan for Economic Growth 

and Deficit Reduction that was presented to the Joint Committee on Deficit Reduction in September. It also is why the President proposed the American Jobs Act 

(AJA) in September of 2011, a plan to put more people back to work, put more 

money in the pockets of working Americans, and do so without adding a dime to 
11 

the deficit. This combination of tax cuts, infrastructure investments, and aid to 

those seeking work would give the economy a needed boost through this difficult 

time. 

Unfortunately, at each step, partisan divides and an unwillingness by many in 

Congress to ask the wealthiest among us to pay their fair share through any revenue increases prevented a comprehensive deficit reduction agreement or measures 

in the AJA to boost demand from being enacted. Indeed, this lack of real progress 

on both the AJA and deficit reduction actually became a drag in and of itself on 

an economy already struggling to recover from a severe recession and battling significant headwinds from events around the globe. 

As we look toward the next fiscal year, the challenges of this past year persist: 

we need to boost economic growth and job creation now and take the steps necessary to put the country on a fiscally sustainable path. 

PUTTING THE NATION ON A FISCALLY SUSTAINABLE PATH

In this year’s Budget, the President continues to pursue policies that will shore 

up our economy and our fiscal situation. Together with the deficit reduction he 

signed into law this past year; this Budget will cut the deficit by well over $4 trillion over the next decade. This will put the country on a course to a level of deficits 

below 3 percent of GDP by 2018, and will also allow us to stabilize the Federal debt 

relative to the size of the economy. To achieve these results, this Budget contains 

a number of steps to put us on a fiscally sustainable path. 

First, this Budget implements the tight discretionary spending caps that the 

President signed into law in the Budget Control Act of 2011. These caps will generate more than $1 trillion in deficit reduction over the next decade, and reduce discretionary spending from 8.7 percent of GDP in 2011 to 5.0 percent in 2022, the lowest this type of spending has been since President Eisenhower sat in the Oval Office. 

Meeting the spending targets in this Budget meant some very difficult choices: reforming, consolidating, or freezing programs where we could; cutting programs that 

were not effective or essential and even some that were, but are now unaffordable; 

and precisely targeting our investments. Every department will feel the impact of 

these reductions as they cut programs or tighten their belts to free up more resources for areas critical to economic growth. In fact, for every $1 in new revenue 

from those making more than $250,000 per year, the Budget proposes $2.50 in 

spending cuts. 

And throughout the entire Government, we will continue our efforts to make programs and services work better and cost less: using competition and high standards 

to get the most from the grants we award; getting rid of excess Federal real estate; 

and saving billions of dollars by cutting overhead and administrative costs. 

Second, to build on the work we have done to reduce health care costs through 

the Affordable Care Act, the President is proposing more than $360 billion in reforms to Medicare, Medicaid, and other health programs over 10 years. The goal of 

these reforms is to make these critical programs more effective and efficient, and 

help make sure our health care system rewards high-quality medicine. What it does 

not do—and what the President will not support—are efforts to turn Medicare into 

a voucher or Medicaid into a block grant. Doing so would weaken both programs 

and break the promise that we have made to American seniors, people with disabilities, and low-income families. 

Third, to address other looming, long-term challenges to our fiscal health, the Administration has put forward a wide range of mandatory savings. These include reductions in agriculture programs, changes in Federal employee retirement and 

health benefits, reforms to the unemployment insurance system, and new efforts to 

provide a better return to taxpayers from mineral development. Reflecting the plan 

the President presented to the Joint Select Committee on Deficit Reduction, these 

mandatory proposals would save $270 billion over the next decade. 

Fourth, this Budget begins the process of implementing the President’s new defense strategy that reconfigures our force to meet the challenges of the coming decade. Over the past three years, we have made historic investments in our troops 

and their capabilities, military families, and veterans. After a decade of war, we are 

at an inflection point: American troops have left Iraq; we are undergoing a transition in Afghanistan so Afghans can assume more responsibility; and we have debilitated al Qaeda’s leadership, putting that terrorist network on the path to defeat. 

At the same time, we have to renew our economic strength here at home, which 

is the foundation of our strength in the world, and that includes putting our fiscal 

house in order. To ensure that our defense budget is driven by a clear strategy that 
12 

reflects our national interests, the President directed the Secretary of Defense and 

military leadership to undertake a comprehensive strategic review. 

The President presented the results of the review, reflecting the full support of 

our Nation’s military leadership, at the Pentagon on January 5. There are several 

key elements to this new strategy. To sustain a global reach, we will strengthen our 

presence in the Asia Pacific region and continue vigilance in the Middle East. We 

will invest in critical partnerships and alliances, including NATO, which has demonstrated time and again—most recently in Libya—that it is a force multiplier. 

Looking past Iraq and Afghanistan to future threats, the military no longer will be 

sized for large-scale, prolonged stability operations. The Department of Defense will 

focus modernization on emerging threats and sustaining efforts to get rid of outdated Cold War-era systems so that we can invest in the capabilities we need for 

the future, including intelligence, surveillance, and reconnaissance capabilities. The 

Administration will continue to enhance capabilities related to counterterrorism and 

countering weapons of mass destruction, and we will also maintain the ability to 

operate in environments where adversaries try to deny us access. And, we will keep 

faith with those who serve by giving priority to our wounded warriors, 

servicemembers’ mental health, and the well-being of military families. 

Adapting our forces to this new strategy will entail investing in high-priority programs, such as unmanned surveillance aircraft and upgraded tactical vehicles. It 

will mean terminating unnecessary and lower-priority programs such as the C-27 

airlift aircraft and a new weather satellite, and maintaining programs such as the 

Joint Strike Fighter at a reduced level. All told, reductions in the growth of defense 

spending will save $487 billion over the next 10 years. In addition, the end of our 

military activities in Iraq and the wind-down of operations in Afghanistan will mean 

that the country will spend 24 percent less on overseas contingency operations 

(OCO) this year than it did last year, saving $30 billion. The Budget also includes 

a multi-year cap on OCO spending so that we fully realize the dividends of this 

change in policy. 

Finally, the President believes deeply that in our country, everyone must shoulder 

their fair share—especially those who have benefited the most from our economy. 

In the United States of 

America, a teacher, a nurse, or a construction worker who earns $50,000 a year 

should not pay taxes at a higher rate than somebody making $50 million. This is 

not about class warfare; this is about the Nation’s well-being. This is about making 

fair choices that benefit not just the people who have done fantastically well over 

the last few decades—such as myself or the President, but that also benefit the middle class, those fighting to get into the middle class, and the economy as a whole. 

In the Budget, the Administration calls for individual tax reform that: cuts the 

deficit by $1.5 trillion, including the expiration of the high-income 2001 and 2003 

tax cuts; eliminates inefficient and unfair tax breaks for millionaires while making 

all tax breaks at least as good for the middle class as for the wealthy; and observes 

the Buffett Rule that no household making more than $1 million a year pays less 

than 30 percent of their income in taxes. In addition, the Administration proposes 

a $61 billion Financial Crisis Responsibility Fee on largest financial institutions to 

fully compensate taxpayers for their extraordinary support during the depths of the 

financial crisis. This will offset the cost of TARP and pay for the President’s mortgage refinancing program which will help thousands of homeowners keep their 

homes. 

Reining in our deficits is not an end in and of itself. It is a necessary step to rebuilding a strong foundation so our economy can grow and create good jobs. That 

is our ultimate goal. And as we tighten our belts by cutting, consolidating, and reforming programs, we also must invest in the areas that will be critical to giving 

every American a fair shot at success and creating an economy that is built to last. 

That starts with taking action now to strengthen our economy and boost job creation. We need to finish the work we started last year by extending the payroll tax 

cut and unemployment benefits for the rest of this year. We also need to take additional measures to put more people back to work. That is why the President introduced the AJA last year, and why the Budget contains nearly $375 billion in shortterm measures for job growth starting in 2012, including many planks of the AJA 

that were not enacted plus some new job creation initiatives to put people back to 

work by rebuilding our infrastructure, providing businesses tax incentives to invest 

and hire, and giving States aid to rehire teachers and first responders. 

We also know that education and lifelong learning will be critical for anyone trying to compete for the jobs of the future. That is why the President will continue 

to make education a national mission. What one learns will have a big impact on 

what he or she earns: the unemployment rate for Americans with a college degree 
13 

or more is only about half the national average, and the incomes of college graduates are twice as high as those without a high school diploma. 

When the President took office, he set the goal for America to have the highest 

proportion of college graduates in the world by 2020. To reach that goal, we increased the maximum annual Pell Grant by more than $900 to help nearly 10 million needy students afford a college education. The 2013 Budget continues that commitment, provides the necessary resources to sustain the maximum award of $5,635, 

and takes tough steps to improve the financial footing of the Pell program in 2014 

as well. In this Budget, the President proposes a series of new proposals to help 

families with the costs of college including making permanent the American Opportunity Tax Credit, a partially refundable tax credit worth up to $10,000 per student 

over four years of college, and rewarding colleges and universities that act responsibly in setting tuition, providing the best value, and serving needy students well. 

To help our students graduate with the skills they will need for the jobs of the 

future, we are continuing our effort to prepare 100,000 science and math teachers 

over the next decade. To improve our elementary and secondary schools, we are continuing our commitment to the Race to the Top initiative that rewards the most innovative and effective ways to raise standards, recruit and retain good teachers, and 

raise student achievement. The Budget invests $850 million in this effort, which already has been expanded to cover early learning and individual school districts. 

And to prepare our workers for the jobs of tomorrow, we need to turn our unemployment system into a re-employment system. That includes giving more community colleges the resources they need to become community career centers—places 

that teach skills that businesses are looking for right now, from data management 

to high-tech manufacturing’ creating a Pathways Back to Work Fund, which will 

support summer and year-round jobs for low-income youth, and will help connect 

the long-term unemployed and low-income adults to subsidized employment and 

work-based training opportunities; and reforming Career and Technical Education. 

Once our students and workers gain the skills they need for the jobs of the future, 

we also need to make sure those jobs end up in America. In today’s high-tech, global 

economy, that means the United States must be the best place in the world to take 

an idea from the drawing board to the factory floor to the store shelves. In this 

Budget, we are investing $140.8 billion for R&D overall; increasing the level of investment in non-defense R&D by 5 percent from the 2012 level, even as overall 

budgets decline; and maintaining the President’s commitment to double the budgets 

of three key basic research agencies (National Science Foundation, Department of 

Energy’s Office of Science, and National Institute of Standards and Technology Laboratories). To make sure that more goods are stamped with ‘‘Made in America,’’ the 

Budget dedicates $2.2 billion for advanced manufacturing R&D, a 19 percent increase over 2012. And while a tight budget environment means that we are proposing level funding for biomedical research at National Institutes of Health ($30.7 

billion), we are getting out of the money through new grant management policies 

that will increase the number of new research grants by 7 percent. 

Moreover, this Budget continues the Administration’s commitment to developing 

America’s diverse, clean sources of energy. The Budget eliminates unwarranted tax 

breaks for oil companies, while extending key tax incentives to spur investment in 

clean energy manufacturing and renewable energy production. The Budget also invests in R&D to catalyze the next generation of clean energy technologies. These 

investments will help us achieve our goal of doubling the share of electricity from 

clean energy sources by 2035. By promoting American leadership in advanced vehicle manufacturing, including funding to encourage greater use of natural gas in the 

transportation sector, the Budget will help us reach our goal of reducing oil imports 

by one-third by 2025 and position the United States to become the first country to 

have one million electric vehicles on the road by 2015. We also are working to decrease the amount of energy used by commercial and industrial buildings by 20 percent to complement our ongoing efforts to improving the efficiency of the residential 

sector. And we will work with the private sector, utilities, and States to increase 

the energy productivity of American industries while investing in the innovative 

processes and materials that can dramatically reduce energy use. 

It is also time for government to do its part to help make it easier for entrepreneurs, inventors, and workers to grow their businesses and thrive in the global 

economy. The President is calling on Congress to immediately begin work on corporate tax reform that will close loopholes, lower the overall rate, encourage investment here at home, simplify taxes for America’s small businesses, and not add a 

dime to the deficit. Moreover, to further assist these companies, we need a comprehensive reorganization of the parts of the Federal Government that help businesses grow and sell their products abroad. If given consolidation authority—which 

Presidents had for most of the 20th century—the President will propose to consoli-
14 

date six agencies into one Department, saving money, and making it easier for all 

companies—especially small businesses—get the help they need to thrive in the 

world economy. 

Finally, this Budget advances the national security interests of the United States, 

including the security of the American people, the prosperity and trade that creates 

American jobs, and support for universal values around the world. It increases funding for the diplomatic efforts that strengthen the alliances and partnerships that 

improve international cooperation in meeting shared challenges, open new markets 

to American exports, and promote development. It invests in the intelligence and 

homeland security capabilities to detect, prevent, and defend against terrorist attacks against our country. 

As we implement our new defense strategy, my Administration will invest in the 

systems and capabilities we need so that our Armed Forces are configured to meet 

the challenges of the coming decade. We will continue to invest in improving global 

health and food security so that we address the root causes of conflict and security 

threats. And we will keep faith with our men and women in uniform, their families, 

and veterans who have served their Nation. 

These proposals will take us a long way towards strengthening the middle class 

and giving families the sense of security they have been missing for too long. But 

in the end, building an economy that works for everyone will require all of us to 

take responsibility. Parents will need to take greater responsibility for their children’s education. Homeowners will have to take more responsibility when it comes 

to buying a house or taking out a loan. Businesses will have to take responsibility 

for doing right by their workers and our country. And those of us in public service 

will need to keep finding ways to make government more efficient and more effective. 

Understanding and honoring the obligations we have to ourselves and each other 

is what has made this country great. We look out for each other, pull together, and 

do our part. But Americans also deserve to know that their hard work will be rewarded. 

This Budget is a step in the right direction. And we hope that it will help serve 

as a roadmap for how we can grow the economy, create jobs, and give Americans 

everywhere the security they deserve. 

I look forward to working with both houses of Congress in the coming months as 

we work to put our fiscal path back on a sustainable course. 

Chairman RYAN. Thank you, Mr. Zients. We will do great if our 

answers are not so long and we do not filibuster here in the House. 

So I want to run through a handful of things, and I think they are 

going to bring me a PowerPoint in a second here. 

So let’s put aside the fact that we are using different 10 year 

windows to get from the $4 trillion claim to the $5 trillion claim. 

This stuff is confusing enough. Let’s just go to the $4 trillion claim, 

which is what the budget documents make, and because there is 

a difference in 10 year windows and I think we would all probably 

agree on that. So you are saying that the policy changes in this 

budget reduce the deficit by $4 trillion, correct? 

Mr. ZIENTS. Right. 

Chairman RYAN. So bring up Figure 2. Let’s walk through that. 

Using your numbers, these are not CBO numbers, these are OMB 

numbers. So to make this $4 trillion claim stick, that this budget 

does this, the top bar, the blue bar, claims credit for the Budget 

Control Act, $2.3 trillion. This is a law that was already passed. 
15 

Mr. ZIENTS. Right. 

Chairman RYAN. I do not know how one can claim that this 

budget achieves these things when this is something Congress already passed. I would add to that, Congress passed this over the 

president’s initial objections. He wanted a clean debt limit increase, 

then he wanted a tax increase of the debt limit, and only because 

of this House majority did we get the BCA; so let’s take away that 

claim because that is not in your budget. You cannot claim you are 

achieving this when it is a law that we already passed. 

So now we are down to the war gimmick. People call this OCO. 

The war gimmick is let’s claim savings on spending that is never 

going to be requested and never going to be spent and all of a sudden claim that that is going to save us $850 billion. I do not know 

what part of the private sector you come from, but if we are saying 

we are saving money that we were never going to request, never 

going to spend, I do not know how you can say you are saving 

money. 

Now you are down to the doc fix. Nobody wants these doctors to 

get cut, nobody wants to see this 27 percent cut occur, but we cannot just assume it away. It is here, it is happening, it is in law, 

and it happens at the end of the month. So we are just assuming 

that they are not going to get cut and that is $430 billion in your 

numbers. Then let’s take off the interest savings that you are attributing to all these claims and here is what we are left with. We 

are left with a budget that has only $400 billion in deficit reduction 

over a 10 year window. If you strip out these accounting tricks and 

these budget gimmicks, it is a 10 year budget that spends $47 trillion with a net deficit reduction of $400 billion. So I just do not understand how you can claim anything other than this. Let’s go to 

Figure Number 1. Let me ask you this. How much does the debt 

increase under your budget? 
16 

Mr. ZIENTS. Can I respond to the run you just did because you 

keep building on top of it, and it is going to be difficult for me to 

organize my thoughts. 

Chairman RYAN. Okay, let’s go back to Figure 2. 

Mr. ZIENTS. Please, that would be much more helpful. 

Chairman RYAN. You bet, my pleasure. 

Mr. ZIENTS. First of all, I think we all agree that the $2.3 trillion 

came from the BCA, and we have been talking consistently about 

a minimum of $4 trillion of deficit reduction. This reminds me of 

a marathon and when you start the race. We started the race 

months ago, so taking credit in this budget for the $2 trillion that 

we have worked together to achieve, I think makes a lot of sense. 

Second, on OCO: OCO very importantly closes the back door. 

Chairman RYAN. Then why do you not count the stimulus spending and the 24 percent increase in domestic spending? 

Mr. ZIENTS. I am sorry? 

Chairman RYAN. I mean, if you are going to count things that 

happened in the past, why do you only count the things that count 

to your benefit and why do you not count things that do not work 

to your benefit? 

Mr. ZIENTS. The stimulus is accounted for as part of the budgets. 

Chairman RYAN. Not in the numbers. 

Mr. ZIENTS. The BCA, this summer, that counts towards the $4 

trillion deficit reduction we have been talking about all along. Secondly, on OCO, very importantly, we are closing the backdoor to 

spending by capping OCO. CBO scores it as savings, and it is this 

president’s policies that have led to getting our troops out of Iraq 

and draw down in Afghanistan. I do not know exactly how you are 

cutting the chart here, but somehow you have left off $1.5 trillion 

of revenue that needs to be raised, revenue that is part of balanced 

deficit reduction. I do not know where that is, but the president’s 

budget proposes $1.5 trillion. 
17 

Chairman RYAN. I will give you that, but this is just the spending side of the ledger. 

Mr. ZIENTS. Okay, sorry. Then on the spending side, and again, 

I am not sure how you are cutting it, but there are $360 billion of 

mandatory savings from health care, and there is another $270 billion of net savings from other mandatory programs, I mentioned 

some of them: PBGC, the federal retirement, the agricultural programs. So there is further savings there and then on top of all of 

that, obviously you have debt service from bringing down the 

spending. 

Chairman RYAN. Right, so we net things out. That is what balance sheets do. And when you net all of this out, not claiming credit for something somebody else did, or Congress and president did 

before, you cannot say this budget has policy changes which 

achieves a result which was already achieved before. It is not 

achieved in this budget. 

With respect to war, we pass supplementals to fund wars. Congress has to affirmatively pass these supplementals to fund wars, 

so if there is a back door, it is already closed. If we are pulling out 

by some date certain which everybody now agrees to this timeline, 

it is not as if it is a surprise, it is a flaw in the baseline that they 

assume we are going to be at a full-fledged war for 10 more years. 

It does not work to cut us off, okay. 

Mr. ZIENTS. I think of CBO as the referee. 

Chairman RYAN. Like I am saying, please do not interrupt. We 

pass supplementals. It is not a back door if we are not in war; we 

do not pass supplementals. What I am saying, at the end of the day 

here, is when you net this out this budget, using your own numbers, has a net increase of spending of $1.5 trillion and a net increase of taxes of $1.9 trillion, and that is how you result with a 

$400 billion of deficit reduction. These are your numbers we are 

using; we are not using somebody else’s numbers. 

Let me ask it a different way. How much does this budget add 

to the debt? What is the nominal amount of money that this budget 

adds to the debt? 

Mr. ZIENTS. Well, I think the right way to think about it is as 

debt as a percentage of GDP. 

Chairman RYAN. No, but what is the nominal amount? How 

much actual money is added to the debt? 

Mr. ZIENTS. Well, the nominal amount we can pull from one of 

the tables. Let me have my team gather that while I answer the 

question I think the right way, which is to think about the debt 

as a percentage of GDP, and this budget stabilizes debt as a percentage of GDP, which is very important for maintaining the investment environment that we all want, which is making America 

the right place to invest. Let me just circle back, if I may, to OCO. 

I think we would all agree that the CBO is the referee here and 

I just want to make it clear that CBO does score OCO as savings. 

Chairman RYAN. So if we assume we are going to be at war for 

10 years in the baseline, because that is what the law requires 

CBO does, by the way; it is not CBO’s fault. Then all of a sudden 

we are going to have a pullout from Iraq and Afghanistan before 

10 years is over, this money is all of a sudden a spending cut, it 

is savings? 
18 

Mr. ZIENTS. Savings relative to the baseline according to CBO, 

yes. And it importantly closes the backdoor on discretionary spending. 

Chairman RYAN. If this is the way we measure reality heaven 

help us. I will just use your budget, your chart. If you can bring 

up Figure 1, please. I have your number for you, so I can just get 

into it if you want to. You are adding $11.4 trillion to the debt. Excuse me, the baseline adds $11.4 trillion to the debt. That means 

if just do not do anything, and we just sit still, we add $11.4 trillion to the debt. Your numbers in your budget adds $11.2 trillion 

to the debt. So how on earth can you make a claim that this budget 

achieves $4 trillion in deficit reduction when your own numbers 

show, instead of increases the debt by 78 percent it increases it by 

76 percent. Instead of increasing it by $11.2 trillion it increases by 

11.4 to 11.2. 

Mr. ZIENTS. Two points that I would make. One is I think it is 

really important that we are starting with an honest baseline. The 

idea that each year we patch SGR year over year, or AMT year 

over year, it is just not reality. You have to start with the right 

baseline of where we are, and we do that. So I think that it is 

much better we face into the wind and know where we are. 

Secondly, a lot of this in inherited. It is inherited from an administration that passed a 2001 and 2003 tax cut that was unpaid for, 

a Part D Medicare unpaid for, two wars unpaid for, and then we 

walked, as Congressman Van Hollen said, to an economic situation 

which was the great recession. 

Chairman RYAN. So if these wars are unpaid for, then how can 

you claim savings from them? 

Mr. ZIENTS. Well they were unpaid for at the time, yeah; and 

therefore, we are capping the savings, capping OCO and getting 

the savings, and CBO scores it as savings. 

Chairman RYAN. I think you see my point. If this is correct, and 

we all agree the baselines are messed up around here, that is not 

a source of contention, but if the baselines are as messed up as you 

say and we agree, then you cannot have your cake and eat it too. 

You cannot say that this budget is cutting the deficit by $4 trillion. 

If you actually add this all up, net it all out, it is a $1.5 trillion 

in net spending increases with a $1.9 trillion net tax increase and 

that results, over the 10 year window, of a measly $400 billion of 

deficit reduction over a 10 year period. Look, I know we love to 

back and bash the last administration. Lots of us have criticisms 

with past fiscal policy from both political parties. This is your 

fourth budget. I mean, it is not as if the president came in office 

a month ago. This is his fourth budget, four years of trillion dollar 

deficits, and a repudiation of the promise to cut the deficit in half 

by his last year of his first term. I just do not know how you can 

run away from your own numbers. 

Mr. ZIENTS. I always want to go to the bottom line, and the bottom line here is more than $4 trillion of deficit reduction. 

Chairman RYAN. Yeah, okay. 

Mr. ZIENTS. The bottom line here is that we get the deficit as a 

percent of GDP below 3 percent. The bottom line here is we stabilize debt as a percent of GDP. These are important milestones. 
19 

Do we have more work ahead? Absolutely. This budget reaches an 

important milestone. 

Chairman RYAN. I want to give Chris his time. I just want to ask 

one last question. You claim to want to give IPAB more tools to 

consider quote ‘‘value based benefit design changes,’’ but you also 

prohibit IPAB from changing cost during arrangement for beneficiaries. I do not understand this. If we are saying you cannot have 

cost sharing arrangement changes with beneficiaries, but IPAB 

now will have the power to design quote-unquote ‘‘value based benefit design changes’’ what does that mean? 

Mr. ZIENTS. At the end of the day we have put forward in this 

budget more than $360 billion of health care savings. What they 

are based on is what I have seen in the private sector, I know all 

of you have seen, and I know there is a doc in the room, which is 

tremendous variation in how medicine is delivered around this 

country, and there is not a great correlation between how much it 

costs and how effective it is, and we need to drive to that intersection of lower cost and more effective health care by decreasing variation in care, driving towards best practices, having the same type 

of productivity increases that other sectors have enjoyed in health 

care. 

What does productivity mean? Productivity means you drive 

down costs and increase quality at the same time. So we have 

made progress with the Affordable Care Act, we have made 

progress in this budget in driving toward more productive health 

care, more efficient, more effective care for our seniors, and we 

need to continue to do that. 

Chairman RYAN. So we are going to give IPAB more power to determine how value is achieved on beneficiary designs? 

Mr. ZIENTS. IPAB is a backstop on the system, and we are making sure that we are driving toward more effective, more efficient 

care, and that we are not in any way violating the basic compact 

that we have with our seniors to provide them with high quality 

care. 

Chairman RYAN. Mr. Van Hollen. 

Mr. VAN HOLLEN. Thank you Mr. Chairman, and again, thank 

you Director Zients for being here. Let me just pick up on a couple 

points that the chairman raised. The Simpson-Bowles commission, 

the bipartisan commission, set $4 trillion in deficit reduction as 

their 10 year window. Rivlin-Dominici, another bipartisan commission, also set something in that range of $4 trillion over the 10 year 

window. Included in their recommendations were reducing discretionary spending by actually over $1 trillion. Now, as part of the 

Budget Control Act that we all passed, we did cut discretionary 

spending over the next 10 years by approximately $1 trillion. It 

seems perfectly reasonable, and I think an ordinary American 

watching this proceeding would agree that you should be able to 

count the effort we made already toward the $4 trillion. I mean, 

after all, Simpson-Bowles recommended we do something along 

those lines, we did it. That is $1 trillion. We also, as you have 

pointed out, put in place this mechanism to achieve another $1.2 

trillion through a sequester. 

Now, I dare say that Republicans and Democrats alike agree that 

the sequester is not the best way to achieve that deficit reduction. 
20 

It has across the board cuts to defense and important non-defense 

investments, and what you have proposed is another better, more 

balanced way of achieving that $1.2 trillion deficit reduction, but 

just because it is already somehow built into the CBO assumptions 

that this massive across the board $1.2 trillion cut that nobody in 

this room, I think, thinks is the best approach to doing that, just 

because you have come up with a better way of doing that, does 

not mean that your budget should not be credited with that $1.2 

trillion in deficit reduction. I think that is kind of common sense. 

Let me say something about the war savings. The reality is if 

you look at the appropriations budgets today, they are already 

using so-called OCO war savings as a bit of slush fund when it 

comes right down to it. So the reality is closing the door on that 

slush fund, I believe, will achieve real savings as we move into the 

out years and, as you have pointed out, the decisions that the 

president has made with respect to Afghanistan and Iraq will help 

accelerate that effort. 

I would point out to the chairman that when he presented the 

Republican proposal here before the budget committee last year 

and said that their budget achieved a $5.8 trillion cut out of the 

CBO baseline, that included the OCO spending, because CBO includes that in their baseline as you pointed out. 

Now, let me turn to what I think, really, is the essential question 

that we face in this committee, in this Congress, and in the country, which is how we are going to achieve the deficit reduction we 

all recognize we need to get to over the 10 year period. How do we 

get the balanced budgets over the longer term and stabilize the 

debt as a percentage of GDP and really that means there are 

choices to be made. Ninety-eight percent of our Republican colleagues in the House have signed this pledge that says that they 

will not close one tax loophole for the purpose of deficit reduction. 

Not one penny can go to deficit reduction from closing a tax loophole. You get rid of a subsidy for the oil and gas industry, you cannot use that savings for the purpose of deficit reduction. I think 

what the president has proposed is that we want to achieve a net 

of $1.5 trillion in additional revenue, and doing it in a way that 

protects middle income taxpayers, but does ask the folks at the 

very top to pay more. 

Sometimes we hear from our colleagues that the wealthiest are 

already paying a growing share of income; it is not because their 

tax rates have gone up; it is because they have done disproportionately better than all other working Americans. The productivity 

gains from the 1990s and the 2000s did not accrue to the benefit 

of working Americans, or middle income Americans. They accrued 

to the folks at the top. Now, that is great, but when you are trying 

to deal with the deficit? I should not say that is great, it would be 

better to have shared prosperity, but the reality is when you are 

dealing with the deficit we have to make choices. 

If we could put up the slide. 
21 

I hope everybody will really take a look at this CBO report that 

came out last fall on growing income inequality in the United 

States. What this chart shows, and that red line there at the top 

are the top 1 percent income gains, again, proportional, and you 

can see what people in different quintiles did. This is why the folks 

at the top are paying more, in terms of taxes, because they are 

making a whole lot more than everybody else. That is simple math. 

This is not about the politics of envy or class warfare, this about 

how do we solve a deficit problem in a way that asks for shared 

responsibility. What this chart shows is we should maybe ask the 

folks at the very top to pay a little more because if we do not, we 

are going to have to do what the Republican budget last year did, 

which is slash important investments in education, lack Medicaid 

and the Medicare guarantee. 

If we could go to the next. We also hear that the president’s 

budget is going to lead to these huge tax increases that are going 

to weigh down the economy. What this chart shows is that if you 

go back to the Clinton years, you had revenue at 21 percent of 

GDP. The Simpson-Bowles proposal takes revenue to 20.6 and then 

the president’s budget actually has less revenue as a percent of 

GDP at the end of this window. 
22 

The point here is that this is a balanced approach which does not 

even raise as much revenue as a percent of GDP as either we did 

during the Clinton years, when the economy was booming, or the 

in the bipartisan Simpson-Bowles proposal. 

Now, here is what I am going to ask you to do. If you could just 

lay out very clearly why it is important to take a balanced approach, why it is important to deal with the revenue side of the 

equation as well as the cutting side of the equation, and what the 

consequences are for middle-income Americans and all Americans 

if you do not take a balanced approach, if you try to deal with this 

deficit issue the way our Republican colleagues have suggested, 

which is without taking one penny for deficit reduction from closing 

tax breaks. 

Mr. ZIENTS. Right. Well, I think, first of all, you mentioned discretionary spending. This budget takes discretionary spending from 

about 9 percent of GDP down to 5 percent. So we are making very 

hard choices in achieving that. The balanced approach, which is at 

the center of the president’s plan, has also been at the center of 

other plans. You mention Simpson-Bowles. Simpson-Bowles has a 

balanced approach, in fact, raises more revenue than we are talking about raising here. So I think when any serious group looks at 

this, there is a recognition that we need to increase our revenues. 

We cannot increase our revenues from the middle class. The president has no tax increases for families less than $250,000. In fact, 

they are further tax cuts. We need to increase revenue from the 

wealthiest 2 percent, who as you pointed out Congressman, have 

benefited extraordinarily across the last several decades and asking 

them to do their fair share so we, as a country, can succeed and 

have a healthy, growing middle class makes a lot of sense. 

As someone who was part of the private sector during the 1990s 

when the tax rates were the tax rates that enabled us to have that 

share that you have on the screen, there was plenty of incentive 
23 

to grow businesses, plenty of incentive to invest. We need to have 

everybody do their fair share in order for the country to get into 

a better position than we are in today, to have us have deficits of 

less than 3 percent of GDP by 2018, and to stabilize debt as a percent of GDP which is very important for our long term investment 

environment and our long term growth. 

Mr. VAN HOLLEN. Thank you Mr. Chairman, let me just conclude 

by reading from the statement from the co-chairs of SimpsonBowles commission, with respect to the president’s budget, as Mr. 

Zients indicated, and I think we all agree, we should all find ways 

to achieve greater deficit reduction as we move into the out years, 

especially, but here is what they said: 

‘‘In the framework the president announced in April and what he 

submitted to the select committee, the president embraced many of 

the goals and principles outlined by the fiscal commission and incorporated some of the policies we proposed. We are pleased that 

the president’s latest budget continues to focus on deficit reduction 

and are also encouraged to see real, specific policies for limiting tax 

expenditures, slowing health care cost growth, and reducing spending throughout the government.’’ 

That is the quote from the bipartisan co-chairs of the president’s 

fiscal commission and, again, I think what the president has laid 

out here is that balanced approach that the American people are 

looking for, rather than a lopsided approach which will ask middleincome families to take the brunt of our national effort to put the 

country on a long-term fiscally sustainable footing, and with that, 

Mr. Chairman, I thank you. 

Chairman RYAN. All right. Thank you. Mr. Garrett. 

Mr. GARRETT. Thank you and I appreciate your testimony today. 

I appreciate you also being here from the private sector. You probably feel a little lonely sometime over at the White House in that 

respect, but I am glad that you are here coming with that experience. One point though, you did just say that there are no tax increases for those folks who are making under $250,000. 

Mr. ZIENTS. Families under $250,000, individuals under 

$200,000. 

Mr. GARRETT. So if I am part of a family that does not buy 

health insurance in violation of the president’s health care program, and I have to pay because of that, that is not a tax on me? 

Mr. ZIENTS. The Affordable Care Act saves money. 

Mr. GARRETT. I understand that, but is that a tax on me, if I do 

not pay that or is that not a tax? 

Mr. ZIENTS. I am not sure I am following the question. 

Mr. GARRETT. You said there is no tax increases on people making under $250,000. If I make under $250,000 and I do not buy 

health insurance as I am required to under the Affordable Health 

Care Act, is that tax on me or is that not a tax on me? A moment 

ago you said there is not tax increase. 

Mr. ZIENTS. There are not. 

Mr. GARRETT. So that is not a tax? 

Mr. ZIENTS. No. 

Mr. GARRETT. That is not a tax? Okay. I want to be clear on that 

because that is not the argument that the administration is making. Let’s move on before the Supreme Court. I appreciate again, 
24 

the fact that you are from the private sector. Two decades in the 

private sector leading public companies. In that area of responsibility, you always had to present a budget, I guess, for those companies, right? 

Mr. ZIENTS. Absolutely. 

Mr. GARRETT. Right, and that is why I do sincerely commend the 

administration for coming forward with this budget. Do you anticipate that this budget will be taken up in the Senate? 

Mr. ZIENTS. I look forward to the policies in this budget being 

put into law, and putting us on a sustainable path. I am not an 

expert in the process of Congress, but I will tell you that I look forward to the policies that are embedded in this budget. 

Mr. GARRETT. When you were leading public companies, would it 

be responsible to have a budget in public companies? 

Mr. ZIENTS. Absolutely. 

Mr. GARRETT. When you were leading public companies, would it 

be fair to say it would be irresponsible not to have a budget? 

Mr. ZIENTS. Yes, and I would say that, as the CEO of a public 

company, and if you think of the president as the CEO of this country. 

Mr. GARRETT. Right. 

Mr. ZIENTS. That CEO has come forward on multiple occasions 

with serious proposals. 

Mr. GARRETT. I appreciate that and that is why I thank the administration, I thank you for being here, just as Paul did as well 

because it is a hard seat to sit in and I appreciate the administration for putting pen to paper and actually outlining that; that is 

good so we have something to dialogue with going forward. 

Mr. ZIENTS. But I want to emphasize this is not the first time 

the president put forward a proposal. 

Mr. GARRETT. I appreciate that, I am just hearing from you that 

it is responsible to have a budget. Last year the president proposed 

a budget to the Senate and he got zero votes if I understand. Recently the Senate president said that he has no intention of putting 

a budget up, so as far as I understand right now, I commend you 

and I commend the president for coming forward with a budget, 

but as of right now, if what you said before it is the responsible 

thing to have a budget, it is irresponsible not to have a budget; it 

would seems as though it would be irresponsible for Senate President Reid to not take this budget up and have a vote on this. 

Would you agree with that? 

Mr. ZIENTS. As the chairman said, the president and obviously 

the legislative bodies put into effect the BCA last summer, that 

serves as a budget, and that is a real accomplishment, it keeps us 

going. 

Mr. GARRETT. So we do not need this budget? 

Mr. ZIENTS. What we need is this budget, we need the policies 

embedded in this 2013 budget the president has put forward. 

Mr. GARRETT. So that only will be done if it will be passed into 

law if Senator Reid takes this up in the Senate. So we are both on 

the same page encouraging the Senate. 

Mr. ZIENTS. I hope the Senate and the House work together to 

make sure that the president’s policies are enacted into law as soon 

as possible, to achieve the deficit reduction. 
25 

Mr. GARRETT. Let me ask you another quick question, just give 

me a one year answer, if we pass this budget tomorrow, when does 

the budget balance in this country under your proposal? 

Mr. ZIENTS. That is not a year question. 

Mr. GARRETT. Sure it is. I can put a chart up on the RFC budget, 

or I can put up Paul’s budget. He is not answering the question. 

It is a simple question; I am looking for a year. Paul’s budget can 

tell us when it is balanced, the RFC budget can tell us when it is 

balanced. A simple year. What year does your budget balance? 

Mr. ZIENTS. This budget makes significant progress across this 

decade. 

Mr. GARRETT. Is your answer that this budget never balances? Is 

it your answer this budget never balances? 

Chairman RYAN. Time for the gentleman has expired. The witness is obviously not going to answer the question. Ms. Schwartz. 

Ms. SCHWARTZ. Thank you, Mr. Chairman. I just wanted to make 

a comment or two about the conversation that has been going on 

with the questioning. Two points I wanted to make, just quickly on 

the last questioning. You may want to, and were gracious not to, 

but to point out that the Ryan budget last year that was voted by 

the Republican House did not reach balance in the 10 year window. 

So if that is the standard I think the president is doing pretty well. 

Just a comment also about the chairman not wanting to acknowledge, what I understand to be the budget process, which is to take 

current law, which might mean law that was passed in the past, 

and apply it to our current budget and to the 10 year window. He 

wanted to take away the fact that President Obama actually put 

war expenditures in the budget, rather than considering them 

emergency spending every year, and did anticipate those expenditures in the future to be honest about budgeting; and the fact that 

we are not going to spend all of that is a good thing for this country, but it means it gets acknowledged in the budget, right? 

Mr. ZIENTS. Absolutely. 

Ms. SCHWARTZ. Secondly, same thing on SGR, the anticipated 

cuts that only happened once in the last decade. Again, this budget 

deals with that in a way. If the chairman is suggesting that we do 

not have to actually make up for that difference in SGR, then that 

make it a lot easier for us if we do not actually have to acknowledge that that is the law of the land and we have to quote ‘‘pay 

for it’’ which I also consider an accounting problem. 

The chairman, in his analysis, if you take all that off it means 

we do not have to consider current law in our budget. That is kind 

of astounding. I do not know how we would. You may want to 

change the budget process but we are in the middle of a budget 

process. If we were at home, or our home budgets, and someone 

said your mortgage is going to go down even though you have anticipated what your mortgage payments are going to be for the next 

10 years. If someone says they are going to go down, you change 

what you are going to spend next year and the year after and the 

year after that. That is all this is doing; it is acknowledging the 

reality of current law and how that affects future budgets. 

The chairman of the budget committee just said he does not consider that process legitimate, nobody considers it legitimate but 

that is the process of the way the budget is determined and how 
26 

we deal with it. You have done that, the president has done that, 

and to his credit he is dealing with the reality of both more savings, the savings that that accomplishes, and the cuts that are not 

going to happen. I do not know how we begin to have a discussion 

about baseline when the chairman of the budget committee just denied the way we do it. 

Anyway, I want to take the next two and a half minutes just to 

quickly ask you what I think is on the minds of most Americans, 

which is how President Obama moves forward in the budget in 

making sure that we grow this economy, and we do not do anything to hurt this fragile economic growth. Maybe even more importantly, it makes critical investments in the future, particularly 

in growth industries. So I wanted to just take a couple of minutes, 

if you would, to talk about the critical investments that are made 

in everything from basic research, on energy and life sciences, to 

investments in innovative industries, and advanced manufacturing. 

These are growth industries in our nation, we are excited about the 

increase in manufacturing that is happening in this country, but 

this is so important that the president is making clear investments 

in the innovative sector. He is going to create jobs for Americans 

right now and into the future, and if not done, could seriously hurt 

our economic growth in the future. 

Mr. ZIENTS. Agreed. I mean, we are seeing the signs of recovery, 

but we have a lot of work ahead. 8.3 percent unemployment is completely unacceptable. The president is making investments to continue the job growth. It starts with the payroll tax holiday, which 

I know you are making progress on, extending unemployment, fixing, as you said, SGR. The president looks forward to signing something soon. 

Ms. SCHWARTZ. We would like to fix it permanently, but that is 

another conversation. 

Mr. ZIENTS. That is a different conversation, but let’s get it done, 

let’s get payroll tax holiday done so that there is not a tax increase 

on 160 million Americans. So it starts there. There is a call for an 

immediate $50 billion investment in infrastructure, which I think 

is important both for jobs and for our global competitiveness. On 

manufacturing, we are seeing manufacturing job growth, which is 

great. Manufacturing jobs are great jobs, they are well paid jobs, 

and they have great spillover effect to other service jobs. There are 

investments in this budget to continue R&D around manufacturing, particularly at MIST and at other agencies. We are continuing to do research around clean energy, and at the same time 

we are encouraging manufacturing companies to locate here and to 

manufacture here. There are tax incentives for manufacturers to do 

their manufacturing here in the United States. You mentioned 

health care, even in this difficult environment we are maintaining 

NIH’s funding and increasing the number of grants. 

Ms. SCHWARTZ. Thank you, all extremely important to our economy, thank you. 

Chairman RYAN. Thank you. Mr. Simpson. 

Mr. SIMPSON. Thank you, Mr. Chairman. I am tempted to ask 

you if you were drafted for this job or you volunteered, but I will 

not go there because it is a tough job that you have and I know 

that, and I appreciate you being here today to present the presi-
27 

dent’s budget. I am also fascinated by this discussion we have. We 

get into baselines and all that kind of stuff; the American people 

really do not care about baselines. I do find it interesting that you 

are trying to use OCO savings when there is not an account in 

Treasury with all this money in it that we are going to save and 

not spend. That is the reality. As I remember, it was the Bush Administration that signed a status of forces agreement, and we have 

known that we were going to be coming out of Iraq for a number 

of years. So to count a continued effort, as we have had in the last 

several years, for the next 10 years and then say we are saving it 

is just phony, which a lot of this budget is, quite frankly. 

I am just a simple guy from Idaho. What the American people 

want to know is how much deficit are we going to add to our current deficit if we were to pass this blueprint this year, which I understand is $1.3 trillion. How much would it be at the end of the 

10 year cycle, which I understand is going to be still around $750 

billion? What would the total deficit be at the end of a 10 year cycle 

if we adopted the president’s spending plan, point one? 

Point two, is the point that Mr. Garrett made. Every budget I 

have seen except the ones proposed by this president previously 

and this year, never put a target out there of when we expect the 

budget to be balanced, and you ought to at least present a budget 

which says, ‘‘I do not care, 50 years from now.’’ Make it some time, 

but tell us when, if we adopt this spending plan, when we will 

achieve a balanced budget, and quit adding to the debt. 

The question I have is does this administration really care about 

deficits and debt? They talk a lot about it, but their budgets do not 

reflect that, and I also hear a lot of talk about Simpson-Bowles, 

which I support, but you know what? This administration walked 

away from it. 

Mr. ZIENTS. Well, that was a lot at once. Let me try to respond 

and I will do it quickly, Mr. Chairman. First of all, I am honored 

to be in the job and I am honored to serve this president and honored to present this budget. On OCO, I have made the points, and 

I will repeat them. It closes the back door. I think we all agree that 

CBO is our referee, and CBO scores it as savings. 

Mr. SIMPSON. What back door are you talking about? 

Mr. ZIENTS. The back door to more discretionary spending. Second, on deficits, I do not think you want to look at this in nominal 

dollars. No one thinks a dollar today is worth a dollar tomorrow, 

so I would rather have the dollar today than tomorrow, so let’s 

pivot to GDP and percent of GDP. 

Mr. SIMPSON. Nobody cares about that, they care about what the 

dollar amount is that you are going to create in deficit spending. 

Constituents that talk to me do not say as a percentage of GDP, 

what is our debt going to be in 10 years? You know what they say, 

is how much are we spending and how much are we going in debt 

and are we becoming Greece? This plan is Greece’s plan. 

Chairman RYAN. Let him answer. 

Mr. ZIENTS. I think what you are seeing is declining deficits in 

real dollars, which is the right way to look at it. You are seeing 

debt stabilized as a percent of GDP. We are hardly Greece, look at 

our interest rates. This is a place where people want to invest, and 

if we get on the president’s plan people will want to continue to in-
28 

vest. This budget achieves significant savings in the 10 year window. It is a step, it is an important step, there is more work to be 

done, and the president has shown his leadership and his willingness to work with Congress to achieve deficit reduction and let’s 

start by getting the policies in this budget enacted into law. We 

will achieve a good milestone by doing that. 

Mr. SIMPSON. You do a great job of trying to defend it, but I tell 

you that this budget leads us to Greece. At some point in time, we 

have to balance this budget, and I do not see this administration 

taking any steps to do that. Yes, they make little savings here and 

little savings there, and make phony comparisons against a baseline that they have created, and say that we are saving money 

when we are not. I will tell you that the American people are fed 

up with this. 

Mr. ZIENTS. We are not Greece. 

Mr. SIMPSON. And I am fed up with this. 

Mr. ZIENTS. We are not Greece. 

Mr. SIMPSON. We are not Greece yet. 

Mr. ZIENTS. And we are not going to be Greece. This budget 

achieves a sustainable of level of debt as a percent of GDP and will 

make sure that this country continues to be a great place to invest 

in. I believe in this country, I believe in our workers, I believe in 

our competitiveness and the president’s budget supports it. 

Mr. SIMPSON. You know what, so do I. So does everyone in here, 

so I wish your budget matched the rhetoric that you put forward, 

but I do appreciate you being here because you have a tough job. 

Chairman RYAN. Thank you. Mr. Blumenauer. 

Mr. BLUMENAUER. Thank you Mr. Chairman. Mr. Zients, I appreciate your being here. 

Mr. ZIENTS. Thank you. 

Mr. BLUMENAUER. It is interesting for me, as I have two points 

of reference as I listen to my colleagues go back and forth. One is 

to look at what is proposed on this by the presidential candidates 

running for the Republican nomination in terms of more defense 

spending, no revenue adjustments, and even people like George 

Will pointing out that it is just an absolute fantasy land and it will 

be fun to watch in the unfortunate circumstance if you have a 

Romney budget here, and some of you are sentenced to the budget 

committee again, reconciling what he was talking about with this 

impassioned rhetoric. 

When the Republicans were in charge with the Bush Administration, what we were presented every year looked better because it 

was not anywhere near an honest budget. I really commend you 

and the president for not being in a fantasy land that somehow 

these overseas adventures are unforeseen, supplemental funding, 

and it is just free money, Congress. That somehow we are not dealing with the alternative minimum tax, and that we are not dealing 

with the sustainable growth rate for Medicare reimbursement for 

physicians. If we did the fantasy budgeting that my Republican 

friends accepted, and in fact, participated in with the Bush administration, this $700 billion number would be under $200 billion if 

you engage in fantasy budgeting, which did not bother people when 

Republicans were in charge. I appreciate your laying it out. I appreciate the notion of looking at some longer term investments be-
29 

cause you could not be more right. We are not Greece and the 

world would not be lending us billions of dollars at very low interest rates if they thought we were, even remotely. So our challenge 

is how do we move forward over the next 10 years to start bending 

the cost curve. 

I think you have a number of things here that presumably even 

Republicans and Democrats can agree on. I would like to zero in 

on one, where there has been some support around this table. The 

chairman and I have worked on some agricultural reforms in the 

past and it was even one of the good parts of his budget. The administration proposes reduction in agricultural subsidies. I wonder 

if you could elaborate on that a little bit. 

Mr. ZIENTS. Absolutely. I mean, it is a time of strong profitability 

in the farm sector, and there are direct payments going to some 

farmers, even though they are not producing. Crop insurance, the 

returns, the IRR on crop insurance is too high, so there are opportunities to save about $30 billion by getting rid of these unnecessary subsidies and at the same time continuing to have a very competitive agricultural sector. That is part of those savings that I 

mentioned that were part of the other mandatory savings. 

Mr. BLUMENAUER. Well, I think this is an example of where 

maybe we can stop sort of the posturing, but we will do some political posturing and we did it before, we will do it again, but this is 

an area where I think the administration has outlined something 

that we on this committee can get behind. We have a farm bill that 

is expiring September 30th. We can move forward with actually 

more substantial savings. 

Mr. ZIENTS. The exact number in the president’s budget, I was 

not off by much, is $32.2 billion. Real money that I think makes 

sense to put into law as soon as possible. 

Chairman RYAN. I think that is the one thing we agree with him 

on. 

Mr. BLUMENAUER. I would hope, Mr. Chairman, that this is 

something that the committee might roll up our sleeves and do 

some work this year providing some budget committee leadership, 

I know you believe in this, the administration believes in it. I just 

want to say, we are fighting sort of a juggernaut on the floor, but 

I would think that this is something we ought to be able to set our 

sights on, deliver some real savings, show that we can work together, and do something that will help the American public and 

actually will help more farmers. 

Mr. ZIENTS. If I may just make one point. I do think it is important that as we work together and achieve real deficit reduction, 

that we do it in a balanced way. So it is important to find savings 

in agriculture, it is important to find savings in health care. It is 

also important to get revenue. So this budget has $2.50 of spending 

for every $1 of revenue. We need to maintain a balanced approach 

and not cherry pick here or there. 

Chairman RYAN. We have got some time constraints. I appreciate 

it, obviously we disagree with that number, but Mr. Calvert. 

Mr. CALVERT. Thank you Mr. Chairman. I know Mike left, but 

I want to certainly associate myself to his remarks. Looking 

through this budget, I think it is a lack of leadership that has put 

us on an unsustainable path that, if enacted, would lead to this 
30 

country’s economic demise. That is why there is little support in 

the House for this, there no support for it in the United States Senate, and I suspect very little support throughout this country. 

Thankfully there are a lot of people in this room and throughout 

the country to make sure that this budget does not hold. I think 

the budget we have done here is a responsible budget. At least it 

puts us on a pathway to economic solvency and I want to congratulate the chairman and the committee for the good work we are trying to do to keep this country fiscally sound. 

I also serve on another committee so I want to get into some 

other issues: on the issue of defense acquisitions. I serve on the Defense House Appropriations Subcommittee with my good friend Mr. 

Cole, and obviously we are taking a look at how we are doing acquisitions, and as the budget requests delays and restructures several major acquisition programs, including the joint strike fighter, 

the Army’s ground combat vehicle, and the replacement for the 

Navy’s ballistic missile submarine. You are claiming that these 

delays will save taxpayer money. Historically, stretching out these 

defense acquisition programs, do those reduce costs or are you just 

shifting those costs outside that budget window? 

Mr. ZIENTS. I would like to actually start with your comment 

about our economic demise. Maybe I am just more optimistic about 

this country, but I think a budget that puts people back to work 

and at the same time puts on a sustainable path to deficit reduction. 

Mr. CALVERT. You are claiming my time. I am optimistic too because I know that your budget is not going to get to see the light 

of day, so we are going to move ahead with our own budget plan 

which will actually pass the House, but the question is on the Department of Defense. 

Mr. ZIENTS. So on DOD, I think it is really to understand that 

this is strategy first, budget second, so this is a strategy which is 

consistent with what Secretary Panetta, his leadership team, and 

the president all believe is the right strategy. The budget, as you 

know, does have a 1 percent decrease in DOD, so the secretary is 

making tough choices. I think you should talk to him about specific 

programs. I think you cannot generalize. I do know a little bit 

about contracting and procurement. I think you cannot generalize 

on that, and I think you need to look program by program and any 

specific questions you have I would direct to the secretary. 

Mr. CALVERT. I will be talking to him tomorrow, but as you probably well know, being from the private sector, and I am from the 

private sector myself, when you push off these large acquisition 

programs, your costs increase and there are a number of studies 

that show that the cost increase on this is as high as a 40 percent 

increase in the actual acquisition cost, but that will not show up 

in the budget numbers because you are shifting those numbers beyond the budget window. So there is something that we are very 

concerned about. One, in additional costs that it puts on these programs, which makes it more difficult to explain to the American 

public why we are expending as much money for these particular 

programs as we are, when it is unfortunately because of the way 

we are acquiring these weapon systems. 
31 

Mr. ZIENTS. I think Secretary Panetta has a very well thought 

through plan and I would suggest you direct that question to him. 

Mr. CALVERT. Thank you. Thank you, Mr. Chairman. 

Chairman RYAN. Thank you, Mr. Calvert. Mr. Yarmuth. 

Mr. YARMUTH. Thank you Mr. Chairman. Mr. Zients, thank you 

for being here and for your testimony. Quick question in relation 

to something that Mr. Garrett raised, however you characterize it, 

fine, tax under the Affordable Care Act. You said there were no 

new taxes in this budget. If I am not mistaken, that fine, budget, 

or tax was in existing law prior to this budget being submitted; and 

therefore by the chairman’s own standards, those things that are 

in existing law you do not get credit for or blamed for. Well, the 

implication that in some way this budget raised revenue through 

that vehicle does not meet the standard which the chairman set, 

would you not agree with that? 

Mr. ZIENTS. Yeah, I think it is important that in this budget 

there are no increases on families earning less than $250,000, and 

in fact, there are important tax breaks including the American opportunity tax credit which gives up to $10,000 for tuition credit, tax 

against tuition, which is important as part of our global competitiveness, and ensuring that people can afford to go to college. We 

need to rebuild and make sure that we are doing what is right by 

the middle class and this budget does that. 

Mr. YARMUTH. Thank you. I am going to get a little parochial for 

a second. 

Mr. ZIENTS. Please. 

Mr. YARMUTH. Over the last three years, the administration has 

proposed to repeal the LIFO accounting method, and I understand 

that by your calculations that would result in about $78 billion 

worth of revenue. Obviously, that accounting method has been used 

for a long time and has been considered a valid accounting method 

for certain business, including one that is near and dear to the 

heart of all Kentuckians, the bourbon distilling industry, and the 

justification being that bourbon by law has to be aged for quite a 

long period of time. I have a Fortune 1,000 company based in my 

district, Brown-Forman Distillers, which would be adversely impacted to the tune of several hundred million dollars by this 

change. 

Meanwhile, Brown-Forman does about $3.4 billion worth of business, about half of that is exported. So it is contributing to helping 

our trade balance. My question to you is while calculating the impact of the change in LIFO accounting methods, just in terms of 

the revenue side, has OMB calculated the other implications economically of that change, including the possible death of some businesses in the country? 

Mr. ZIENTS. On the LIFO, that disproportionately benefits oil and 

gas producers who have record profits and there is a lot of gaming 

that can go on through that LIFO system. As you know, the Treasury secretary really is the point person on specifics around individual tax policy, so I will defer to Secretary Geithner on the calculation and how cost and benefits are weighed. 

Mr. YARMUTH. I appreciate that, I have raised that with Secretary Geithner as well. Quick question, when I am home this 

weekend and I am in Costco, I know Mr. Simpson says people do 
32 

not care about it, but in case somebody is watching this and I am 

walking through Costco, or Kroger, or someplace and a citizen says 

why should I care whether the deficit and debt are percentages of 

GDP as opposed to nominal numbers, whether it is $11 trillion 

here in this calculation or in the Republican budget that was 

passed last year the $6 trillion. Why does that matter to the average citizen? 

Mr. ZIENTS. I think it matters because we need to make sure the 

average citizen understands that we are doing what we need to do 

right now to bring down the unemployment rate, to make sure that 

people are employed and there are plenty of jobs, and that we are 

making the investments to make us a more competitive country. 

We are doing it at the same time as we are bringing our deficits 

down, and creating a sustainable level of debt to GDP, so that this 

maintains our standing in the world as the place to invest. I mean, 

you see it, as we mentioned earlier, in our current interest rates 

and we need to maintain an environment that has both American 

companies and global companies investing here. 

Mr. YARMUTH. And that would be the difference between United 

States and Greece? 

Mr. ZIENTS. Absolutely. 

Mr. YARMUTH. Thank you. 

Chairman RYAN. Mr. Akin. 

Mr. AKIN. Thank you, Mr. Chairman. Just a couple questions, 

you just said a minute ago this is a budget that puts people back 

to work. Boy, it would be nice if that were, in fact, true, but I am 

not so sure that I am sold on that idea. First of all, in a larger context, when you tax small business owners and increase taxing 

them, what the effect of that is going to be is to make their business less competitive and harder to create jobs, but specifically I 

want to call your attention to your tax increases that you have got. 

My understanding is that under American energy producers, you 

have a repeal of the percentage depletion for hard mineral fossil 

fuels, i.e. coal. So, you are going to repeal a percentage depletion 

for coal. How is that going to affect the income taxes of a coal company? 

Mr. ZIENTS. It would increase them. 

Mr. AKIN. It would increase them. About what amount? 

Mr. ZIENTS. I do not know the exact percent, but I can follow up 

with you on that. 

Mr. AKIN. Well, you do not really need to. I know, okay? They 

are paying about a 22 percent tax. This would double it. What this 

does is it basically puts coal companies out of business. Now, there 

are a bunch of mines that are already closing down, but this thing 

here is going to shut down the coal industry. 

Now, I do not understand how shutting the coal industry, along 

with some other administrative policies, such as delaying permitting and expansion of the streams rule so you cannot dig under 

half of the coal that is in an area which makes long-wall mining 

just go out the window. What you are doing is you are shutting an 

entire industry down, this budget is a key part of driving the last 

spike in the coffin of coal. So, how you can say that this thing is 

a budget that puts people back to work, I just do not feel like that 

that is a reasonable assertion at all. 
33 

Mr. ZIENTS. May I respond? 

Mr. AKIN. Yes, you may. 

Mr. ZIENTS. I think you might be overstating the impact on coal 

companies, but we can continue that dialogue. 

Mr. AKIN. Do you not think doubling their federal taxes is pretty 

significant? 

Mr. ZIENTS. Overall on small businesses the president has done 

17 different tax breaks for small businesses. This budget has further tax breaks for small businesses that allows small businesses 

to write off 100 percent of their investments. It also gives them a 

tax credit as they increase their payroll. So, the president believes 

that small business is vital to this economy and the growth of this 

economy and has supported small businesses in a very vigorous 

way. 

Mr. AKIN. Yeah, well let’s see how we are doing that in a vigorous way. First of all, we are increasing death taxes, so that 

makes it hard. That is an increase on the tax of small business. 

Mr. ZIENTS. I am sorry, are you talking about the estate tax? 

Mr. AKIN. Yeah, estate tax, death tax, same thing. 

Mr. ZIENTS. So, just to respond to that, it is at the 2009 level, 

which has a $7 million exemption. I believe it impacts less than 0.3 

of one percent of estates. 

Mr. AKIN. Well, the point of the matter is you go death taxes and 

capital gains, that is the money, and that is the seed corn financially of people making investments, which gets businesses going. 

And if we have a policy of first of all taxing them more, so this is 

a budget that is going to tax them more, and then we follow that 

up with, of course, all the other regulations that you are burying 

them in, I do not understand how this is going to help. But, particularly, I take extreme exception not only to that, not to even 

mention what you are doing to defense and the 10 percent and 

with the other 10 percent cut coming, but this is not a budget that 

does anything that puts people back to work. I think this is a budget that is going to specifically destroy a lot of industry and a lot 

of jobs. I yield back. 

Chairman RYAN. Thank you. We are making up some time. Mr. 

Pascrell. 

Mr. PASCRELL. Thank you, Mr. Chairman. When does the budget 

balance? I think that is a great question, Mr. Zients, and you were 

put to the test by the ranking member, my friend from New Jersey, 

when he asked you that question in different ways and different 

times, and he claimed that you never answered the question. 

You know, Dante’s Inferno is the terrace, and we are looking at 

it right now. The budget that was presented to us not that long 

ago, Mr. Chairman, your budget, was balanced on the positive in 

terms of the percentage of GDP in 2063. Let me finish, please. 

Chairman RYAN. Okay, but if you want to be accurate. 

Mr. PASCRELL. I am going to get back to you. I always allow you 

to speak. 2063. 

Chairman RYAN. The debt was paid off by then. 

Mr. PASCRELL. Fifty years, balanced budget, that is what we are 

talking about. 

Chairman RYAN. That was when the debt was paid off. 
34 

Mr. PASCRELL. You took in your budget, and I thought you were 

courageous to present one. So, hear me out. I said that to you once 

before. It took revenue off the table, all revenue, no increases, and 

the CBO said we had annual deficits of 3.5 and 4.5 percent of GDP. 

So, it was estimated in the budget that you presented, and please 

correct me if I am wrong, to add $62 trillion into the debt before 

going into balance out. It is difficult to have a five year budget let 

alone a ten year budget. You do not know what is going to happen. 

You do not know the emergence. Of course, when you are not paying for anything, it does not matter, but we are paying for things 

now. We are trying to do it. I think both parties are trying. 

Chairman RYAN. Would you politely yield? 

Mr. PASCRELL. Go ahead. 

Chairman RYAN. Draw a figure eight if you can. Here is the 

point. This is really tough stuff. 

Mr. PASCRELL. It is. 

Chairman RYAN. It is really hard given the tough fiscal situation 

our country is in to balance. So, the question is what path are you 

putting the country on, what trajectory are you putting the country 

on? 

Mr. PASCRELL. I agree with that. 

Chairman RYAN. Ours, as you can see, balances the budget. It 

takes a long time, but the key is you are getting the debt downward and paid off, which is that date you are talking about. The 

baseline, the status quo we have, which is what this budget essentially does, sends our debt into the stratosphere, and that is the 

point. 

Mr. PASCRELL. Well, we have different stratospheres. I understand that. And if we work together, we perhaps could move towards some tangible evidence. So, you cannot oversimplify these 

things. You cannot ask Director Zients out of context. It is a simplification. It does not work. It does not work. 

Now, as a former member of the Transportation and Infrastructure Committee, I believe that funding for roads, bridges, buses, 

trains, is an investment in the economy. I have never seen an economist say otherwise. They are right once in a while. According to 

the American Society of Civil Engineers, our infrastructure is graded as D minus. That is no surprise to anybody around the table. 

The president’s budget includes $50 billion in upfront investments, 

and a $460 billion six year reauthorization, which is 80 percent increase. This is in contrast with the budget of the transportation 

committee that is coming up, not today or tomorrow, in the future. 

Headline news. 

On that top, we learned yesterday that the Congressional Budget 

Office has found that this legislation leaves the highway trust fund 

$78 billion more in the hole, but I got to take exception to one 

thing in this budget. I have an exception on many. 

I am supportive of the transportation budget in the president’s 

proposal. I got a major problem with the retroactive cap on the municipal bond tax preference. How long are we going to take to minimize and target municipalities in this country which get very little 

help from anybody anywhere until their town, small or large, goes 

under? The phase-out could result in higher borrowing costs. 

Where are they going to get this money? I want you to tell me 
35 

where they are going to get the money for state and local governments to pay the higher rates on what you are suggesting, and I 

think that this would be a disaster for municipalities who have had 

to lay off police, fire, teachers, et cetera, large and small towns, Republican and Democratic towns. This is an absurdity, and I would 

like to know your answer if I could, Mr. Chairman. Go ahead. 

Mr. ZIENTS. Well, I think on the specific tax policy, I, again, will 

defer to Secretary Geithner in terms of your transportation comments, I could not agree more. It is actually a $476 billion reauthorization, six years. The other thing I would note is that the 

president has $30 billion in the budget to make sure that teachers 

and first responders and other key people at the state and local 

level keep their jobs and are put back in their jobs. So, the transportation is a win-win. It puts people back to work and helps make 

us more globally competitive. 

Mr. PASCRELL. Mr. Chairman, I would ask you to take a look 

very carefully at this point. We do not know the consequences of 

this or understand it. Neither party did in the past 10 years. I am 

asking you to look at it because we are burying our municipalities. 

Chairman RYAN. Duly noted. Mr. Cole? 

Mr. COLE. I want to agree with my friend, Mr. Pascrell. I think 

you were courageous to offer the budget you did. I think this committee was courageous to pass it. I think the House was courageous 

to pass it. I am sorry that my friends, when they were in the majority, did not do a budget the last year, and our friends in the Senate have not done one in 1,000 days, and we find precious little 

support for the president’s budget on his side of the aisle. So it is 

tough to grapple with these things. 

Mr. Zients, I am almost reluctant to say that I am happy to see 

you here, because every time somebody does that, they spend the 

next four and a half minutes beating you up, but I really am happy 

to see you here. 

Mr. ZIENTS. Thank you. 

Mr. COLE. I know you will do a good job for the president; you 

have served him well in your previous capacity. Let me put a hypothetical in front of you, but I think it is a reasonable hypothetical. 

First, let’s just posit that you get the revenue increases in your 

budget, and those actually occur as predicted in the budget. And 

let’s posit for a minute that discretionary spending actually does a 

little bit better, and we have actually spent less on the discretionary side and the appropriations process than the president 

asked for the last two budget years. We have the Budget Control 

Act going forward, which kind of put a ceiling on that, and I think 

we actually, on the discretionary side of things, can do even better 

than the president projects. 

So if those two things happen, is there any realistic chance of 

this budget ever balancing absent some sort of serious entitlement 

reform? 

Mr. ZIENTS. Well, I think that, you know, the ACA, the Affordable Care Act, resulted in about $100 billion of savings in the first 

decade, a trillion in the second. In this budget, there is $360 billion 

of further health care savings through the efficiency gains, effectiveness gains that I talked about earlier. There is $270 billion of 
36 

non health care mandatory programs. It is an important policy to 

get done. 

Mr. COLE. But can it ever balance? 

Mr. ZIENTS. We need to keep working on it. 

Mr. ZIENTS. We need to keep working to see how we maintain 

the compact that we have with our seniors at the same time. 

Mr. COLE. I agree. Is it fair to say that means no, that we are 

going to have some sort of entitlement reform to get further to 

where we all want to be. 

Mr. ZIENTS. Yeah. I will go back to my private sector experience. 

Sometimes when you face a really big challenge, you keep going at 

it, and you keep making incremental progress, and you do it in a 

way that maintains the compact that we have with our seniors. 

The Republican budget breaks that compact. It is asking folks in 

2022 to pay $6,500, $6,400 more according to CBO. That breaks a 

basic compact. 

Mr. COLE. I would disagree with that. 

Mr. ZIENTS. We can keep that compact and keep going after it. 

Mr. COLE. Reclaiming my time, what is the president’s plan then 

to deal with this? 

Mr. ZIENTS. The plan is to make this progress and this budget, 

have these policies enacted into law, and continue to work together 

to make continued improvements to these programs to ensure that 

we are maintaining the compact and at the same time bringing 

down cost. 

Mr. COLE. Do you think the president will tell us what his plan 

is before the next election so we know what is going on? 

Mr. ZIENTS. I think the president, on multiple occasions, has 

shown leadership, come to the table with serious discussions, and 

each and every time has been rebuffed, meaning no one is willing 

to take a balanced approach to deficit reduction. 

Mr. COLE. Reclaim my time, but I will disagree with you on that. 

You show leadership when you present a plan. We have not got a 

plan on entitlement reform. 

I have limited time, but let me ask you another question. You 

referenced in your initial remarks that it looks like we are making 

progress on the payroll tax, and we may well be. We will probably 

all have to all hold our nose on both sides of the table and accept 

some things we do not like, but that potentially could happen this 

week. Do you continue, in your budget, the payroll tax holiday next 

year, or do you assume that we are going to return to, as I think 

we should, quite frankly, hopefully the economy is stronger and we 

can return to the normal Social Security taxes and revenues that 

we project on current taxes. 

Mr. ZIENTS. It is the latter. We are confident that we will be in 

the type of shape economically that we can end the payroll tax holiday. 

Mr. COLE. Okay. So, you are pretty sure? 

Mr. ZIENTS. Yes. 

Mr. COLE. Very good. Thank you very much. Last question, and 

we have had a lot of discussion about OCO, and, again, I disagree 

with you on projecting $850 billion worth of savings, but how do 

you do that unless you can figure out what we are going to spend 

if we go to war someplace else? You are taking savings, saying we 
37 

are ending wars, but the next 10 years is very unpredictable. And 

you have no place in there where you would assume we would 

spend money to go to war, but there is a pretty good chance. 

Mr. ZIENTS. Well, I do not want to speculate on the international 

scene; that is definitely s for Secretary Panetta. I will point out 

that there are $450 billion in OCO still in the budget in this situation where we are saving over $800 billion. 

Mr. COLE. Okay. 

Mr. ZIENTS. It is not as if OCO is going to zero. There is $450 

billion. 

Mr. COLE. Thank you very much. I appreciate and yield back, 

Mr. Chairman. 

Chairman RYAN. Mr. Honda. 

Mr. HONDA. Thank you, Mr. Chairman. I appreciate it. And 

thank you for your presence here. The budget is, I think, for the 

public, and I agree with Mr. Simpson that when we talk in terms 

of percentage of GDP, people’s eyes just glaze over because it is 

just not something that we talk about on a daily basis; it is not a 

common language outside of the beltway. Having said that, we 

have been talking about extending the payroll tax cut and the unemployment insurance benefits, and the information I have says 

that if we extend the 2 percent payroll tax cut and the unemployment insurance benefits, that could add about 0.5 percentage 

points to the economic growth in 2012, and supply between 120,000 

and 600,000 jobs. Mark Zandi of Moody’s Analytics has estimated 

that doing this would add 0.9 percentage points to economic 

growth, which is almost double. 

The nexus between the continuing and extending of the payroll 

tax cuts and the job creation, how does that happen? I mean, how 

do you create the jobs from the tax cuts? What is the economic dynamics that happens and people’s motivations? What is the thinking? 

Mr. ZIENTS. Well, I am not a macroeconomic guru by any stretch, 

but the statistics that you cite, I think, are widely accepted statistics, and by ensuring that families have an extra $40 in their payroll at each paycheck through the end of the year has great spillover effect. They go out and they spend that money, and that creates additional jobs. 

Mr. HONDA. It is just that simple? 

Mr. ZIENTS. I think that is the basis of it. It is, again, a very 

complex set of interrelated issues, but when people have more 

money in their pocket to spend, they are able to spend it, and they 

are able to help stimulate the economy and create jobs. 

Now, I want to be clear that the president’s plan is not just the 

payroll tax cut. It is extending the unemployment, as we have 

talked about. 

Mr. HONDA. Right. 

Mr. ZIENTS. But it is also an immediate $50 billion investment 

in infrastructure. It is ensuring that there is money for us to retain 

first responders. It is to hire veterans and to continue to make 

changes that will help our housing market rebound. 

So this is a multifaceted approach. We need that, given that we 

are still at 8.3 percent unemployment. We need to attack on all 

fronts and get people back to work. 
38 

Mr. HONDA. So, since we have done this for a while now, are 

there any hard data that we can look at and say since we have 

done this, it has created X amount of jobs? 

Mr. ZIENTS. I think the most important thing we can look at is 

that, thankfully, across the last several months the unemployment 

rate has come in quite a bit. It is not where we want it to be at 

8.3 percent, but it is moving in the right direction. GDP growth is 

moving in the right direction. Now is not the time to stop. Now is 

the time to continue to make the investments, to put people back 

to work, and make our country more competitive. 

At the same time, we will be putting ourselves on a path to deficit reduction and stabilize our debt, which is important for our medium and long term. 

Mr. HONDA. And there will be a point when we will withdraw the 

tax cuts? 

Mr. ZIENTS. Well, I think I was just asked that question, and the 

plan is that the payroll tax cut be extended through the end of the 

year. That is very important, but that there are no plans for additional payroll tax holidays. 

Mr. HONDA. And does the Chamber of Commerce or any other organization reflect that same kind of sentiment and data? 

Mr. ZIENTS. Sure. I mean, I think there is widespread belief that 

the payroll tax holiday helps to create jobs and helps our recovery. 

And, if you would like I can have our staff follow up with some of 

the specifics on that. 

Mr. HONDA. Yeah, and for the future maybe we can find some 

other terminologies when we talk about percentage of GDP. 

Mr. ZIENTS. We will work on that. 

Mr. HONDA. This is a way where we can educate ourselves and 

educate the general public when they hear terminologies. 

Mr. ZIENTS. I think the main thing is the general public needs 

to understand that there is an immediate emphasis on job creation, 

getting people back to work, which is essential for our economy and 

for individuals and for families and for the middle class, and at the 

same time, we do need to bring down our deficits to a point where 

they decline. We have stable debt, and therefore, as a percent of 

GDP, I hate to use that terminology, but they are stabilizing debt. 

And that makes sure that we, as a country, remain the favorite 

place to invest, both for American companies and for global companies. 

Mr. HONDA. Thank you, Mr. Chairman. Thank you. 

Chairman RYAN. Thank you. Dr. Price. 

Mr. PRICE. Thank you, Mr. Chairman. I think that I want to welcome you, Mr. Zients, but I think the American just have a huge 

frustration about what is happening here in Washington, and they 

do not get a sense that anybody is dealing with the issues honestly 

and forthrightly; and this budget, I think compounds that. 

If you look at what some folks are saying across the country, the 

Wall Street Journal says, ‘‘promises of future spending cuts are a 

mirage. Mr. Obama needs to point to the mirage, because his fiscal 

record is the worst in modern American history.’’ The Washington 

Post says, ‘‘Mr. Obama’s proposed budget for fiscal year 2013 falls 

short. The final budget of his first term does not reflect the leader-
39 

ship on issues of debt and deficit that Mr. Obama once vowed.’’ 

Bloomberg says, ‘‘it is a wasted opportunity,’’ on and on and on. 

As a physician, I can tell you that the doctors across this land 

and the patients across this land are very concerned, and that the 

pact that they have with each other, the ability to be able to provide the highest quality of healthcare in the country, they see eroding away. I want to go to the big picture, if I may. What revenue 

do you project for the United States in the next fiscal year. Ball 

park? 

Mr. ZIENTS. Are we doing fiscal year 2013? 

Mr. PRICE. Correct. 

Mr. ZIENTS. The total receipts for the U.S. Government is $2.9 

trillion. 

Mr. PRICE. And what level of spending do you project? 

Mr. ZIENTS. $3.8 trillion. 

Mr. PRICE. $3.8. And the discretionary amount? 

Mr. ZIENTS. Is about a little over a trillion dollars. 

Mr. PRICE. A trillion. So, if you removed all discretionary money, 

then we would barely get to balance under your current budget. Is 

that right? 

Mr. ZIENTS. Yes. I mean, discretionary spending, so you know, is 

going down. 

Mr. PRICE. I understand that, but, if you removed it all, that is 

all the spending at the federal level completely? 

Mr. ZIENTS. Well, given that we have a deficit of about $900 billion dollars. 

Mr. PRICE. My point is, Mr. Zients, is that the concern on the 

health care side is that unless we address the fundamental reforms 

that are necessary to save Medicare and Medicaid, that we are ignoring the problem. So, what solutions are incorporated in this 

budget for Medicare, for example? 

Mr. ZIENTS. So, it starts with the Affordable Care Act, which 

saves $100 billion in its first decade, a trillion in its second. 

Mr. PRICE. In this budget? 

Mr. ZIENTS. Then there is $360 billion in this budget which has 

things like when people move from Medicaid to Medicare they get 

the same drug rebate that we get as a government, the same drug 

rebate that they got in Medicaid, that we get that in Medicare. 

That saves a lot of money. 

Mr. PRICE. You are not presuming to tell me that that is the 

major fundamental reform that is going to save Medicare? 

Mr. ZIENTS. No, no. 

Mr. PRICE. So, the major fundamental reform that is going to 

save Medicare in this budget is? 

Mr. ZIENTS. The major fundamental reform is to keep going at 

it the way the president has. Here is $360 billion of savings. I 

think the framework that we start with or the principle we start 

with is that we have a compact with the American people. 

Mr. PRICE. If I may, I have only got a short period of time. In 

your own budget, Medicare spending in 2022 is a trillion dollars, 

and this next year, $487 billion. 

I want to revisit, if I may, the Independent Payment Advisory 

Board, because it is of great concern to patients across this land, 
40 

because they believe it to be, as I believe it to be, a denial of care 

board. 

I think in your earlier comments to the chairman, you mentioned 

that this budget would give new tools to the Independent Payment 

Advisory Board through value-based benefit design changes that 

you intimated could cut benefits to beneficiaries. 

Mr. ZIENTS. I want to be clear that we attribute no savings to 

that board. That board is there as a backstop if we do not get the 

savings that we have committed to. 

Mr. PRICE. And a backstop requires that there is a catcher to 

catch the ball first, and I would suggest that there is no catcher 

in place. 

Mr. ZIENTS. Right. 

Mr. PRICE. And therefore, Mr. Zients, if I may, the backstop will 

be the only thing there. 

Mr. ZIENTS. If you look at the data, health care costs on a perperson basis is coming in. It came in quite a bit. So, we are making 

progress in making health care more effective for more people. 

Mr. PRICE. I have got 30 more seconds, and I just want to share 

with you the concern that the physicians of this land have, and 

that is that they are no longer able to have that physician-patient 

relationship that allows them to provide the quality of care that 

they believe is most important for their patients. They also believe 

that the whacking away at providers in this country is destructive 

to the ability of them to care for their patients, and consequently, 

the patient’s access to care is being terribly eroded, and this budget 

continues that. 

Mr. ZIENTS. I think the Affordable Care Act is very sensitive to 

that patient-physician relationship in making sure that we work together in a way across the whole health system so that we maintain that relationship and improve the system, both in terms of its 

outcomes and lowering its costs. 

Mr. PRICE. Thank you for pointing me to that. 

Chairman RYAN. Thank you. Ms. Castor. 

Ms. CASTOR. Thank you, Mr. Chairman. Welcome, Director 

Zients. 

Mr. ZIENTS. Thank you. 

Ms. CASTOR. I thank you for all of your hard work and your 

whole team. The economy is getting better. We have had 23 

months of private sector job growth. The unemployment rate is at 

its lowest level in three years. I think the first chart we had up 

tells the story. Small business confidence is growing, but it is clear 

that our country must do more to accelerate job creation so that 

our neighbors have good jobs, and the non-partisan CBO gave us 

some good, healthy advice just a few months ago, and Director Elmendorf reiterated that when he was here just a week or two ago 

that if America can create more jobs, we can reduce the deficit. So, 

it is very important to see the administration’s job creation strategy that also doubles as a debt reduction strategy. 

I would like you to focus in a little bit on the administration’s 

job creation strategy. I know it has not been easy because the 

president’s American Jobs Act has been blocked by the Republican 

Congress, but I am happy to see that in this budget the president 

does not give up on a number of investment strategies and job cre-
41 

ation strategies. If it is infrastructure, research and innovation, I 

appreciate that you believe that we need to continue to invest 

there, and I would like you to focus on education, because it is vitally important that America continue to invest in students and our 

future workforce. They have got to be trained and talented to focus 

on the challenges of the coming decades. 

So, would you go through the education section? I represent a 

community where we have a large public research university. We 

have a private universities and colleges and a substantial community college presence. They are going to be very interested in what 

you are proposing for the Pell grant, what you are proposing for 

community colleges, and other investment and job creation strategies. 

Mr. ZIENTS. As you know, it is one of the most important areas 

of focus for the president, which is to ensure our long-term competitiveness and to invest in education. I will hit on a few highlights, but the budget is very robust as to education from early 

childhood through college. 

In terms of a few of the highlights I mentioned earlier, the American Opportunity Tax Credit, which gives up to $10,000 of tax 

breaks for tuition, the community college area is very important. 

The president, just this week, announced a new $8 billion initiative 

to work with our community colleges around the country, working 

closely with businesses in those community college areas to ensure 

that we are putting together the right courses and the right teaching, so that when folks graduate, when they do their courses, they 

have jobs, and we expect that will impact two million students 

around the country. 

The other area I would touch on because you touched on it is Pell 

grant. The president’s budget has the Pell grant at the higher level 

of $5,600 or $5,650, funded for two years, and I think more than 

nine million students are part of the Pell grant program. 

So, that is three of many initiatives. The president also really believes that we need to make sure that college is affordable. If tuition increases, continue to compound that rates above inflation, 

students either cannot afford to go to college or they leave with 

debt that is too high. The president has a real emphasis on making 

college more affordable by having incentives for colleges to begin to 

reign in their tuition increases. 

So, from early childhood, to K through 12 through college, this 

president and this budget focuses on education and making sure 

that we are able to compete and win in this global economy by having the best educated workers. 

Ms. CASTOR. And the president’s also continued to put emphasis 

on the portion of the American Jobs Act creating jobs through public school modernization and renovation because all across the 

areas that I represent the state has, and this is not unique to Florida, but many states have rescinded in what they are able to do 

in schools, and we could put thousands and thousands of people to 

work renovating schools. 

Mr. ZIENTS. Well, it is a great situation, and it is $30 billion to 

both modernize our schools, which is great for education, and, at 

the same time as you point out, puts people to work. This proportionally puts construction workers to work who need jobs, so it is 
42 

a great opportunity to get a two-for: improve our schools, which is 

great for our students, which will make them better educated and 

more competitive in this global marketplace, and it immediately 

puts people to work. So, $30 billion is in the president’s budget to 

do just that. 

Ms. CASTOR. Thank you. 

Chairman RYAN. Thank you. Mr. McClintock. 

Mr. MCCLINTOCK. Thank you, Mr. Chairman. The ranking member, I think, put his finger on the great question confronting this 

committee, and, for that matter, confronting this nation. He made 

two statements, one of which I disagree with, the other which I 

heartily agree with. 

He said that this administration had inherited the worst economy since the Great Depression, and I agree it inherited a terrible 

mess. But, I seem to remember a time more recently when we had 

double-digit unemployment, double-digit inflation, mile-long lines 

around gas stations, and interest rates at 21.5 percent. That was 

the end of the Carter administration. We elected Ronald Reagan 

who adopted policies quite the opposite of this administration. 

Perhaps the reason the ranking member does not remember 

those days as vividly is because they did not last very long, and 

those policies produced one of the great economic expansions in our 

nation’s history. In fact, Phil Graham recently published an article 

in the Wall Street Journal which he estimated that if the economic 

recovery under this administration had tracked the same as the 

Reagan years, we would have nearly 17 million more Americans 

working today with per capita income about $5,500 greater than it 

is today; which brings me to the point that he made, that I heartily 

agree with, when he says that we cannot return to the same policies that got us into this mess. Amen to that. We have to ask ourselves what were those policies? The Bush administration increased spending by over 2 percent, over 2.5 percent of GDP. They 

expanded entitlement spending massively. They turned in massive 

budget deficits, and they presided over an unprecedented government intervention in the housing market, encouraging bad loans by 

dragooning taxpayers into covering the losses for those bad loans. 

My beef with this administration, and my concern over this 

budget, is that it has not only not corrected those mistakes, those 

policies, but instead has repeated them and doubled-down on them, 

which brings me to the concerns that I would like to raise with this 

budget and get your feedback. 

A year ago, we had one economist after another coming before 

this committee warning us that the federal government needs to 

get its finances in order in the next three to five years to avoid a 

fiscal meltdown that would dwarf the 2008 crisis. One of those 

economists was Secretary Geithner, and I would like to read you 

a quote from his testimony. He said, ‘‘Over the next five to 10 

years, we have an unsustainable fiscal position. We have to get 

that down to a level where the debt is not growing as a share of 

the economy. Without that, nothing else is possible and will do a 

lot of damage to future growth and confidence.’’ 

That is very important. Now, I want you to listen very carefully 

to this next line, Mr. Zients, because I am going to need your guidance on it. ‘‘That is why you need to bring the deficits down over 
43 

the next three to five years to something that achieves primary balance. That is a minimum necessary.’’ Does this budget bring us 

down to primary balance in that timeframe? 

Mr. ZIENTS. I will answer your question in one second. 

Mr. MCCLINTOCK. Well, I only have one minute and 30 seconds. 

My comparison was not a question, it was a statement. I would like 

you to answer a question. Does this budget bring us to primary balance? 

Mr. ZIENTS. Yes, it does. 

Mr. MCCLINTOCK. In what period of time? 

Mr. ZIENTS. Five years. 

Mr. MCCLINTOCK. From now? 

Mr. ZIENTS. Yes. 

Mr. MCCLINTOCK. Okay. So, it is not the minimum that Secretary Geithner set last year of three to five years from last year? 

Mr. ZIENTS. The budget achieves primary balance in 2018, given 

unexpected economic situation, which a lot of which was controllable around the debt ceiling. If we had avoided that, we might 

have had a better economic recovery. 

Mr. MCCLINTOCK. Mr. Zients, I am going to have reclaim my 

time because I need to get back to the credibility of that statement. 

In 2009, the president projected a $581 billion deficit for fiscal year 

2012. By 2010, his 2012 estimate had grown to $828 billion, an increase of 41 percent in his projection in just a single year. In February of 2011, the president’s projected 2012 budget deficit grew to 

$1.1 trillion, and this year the president projects that deficit to be 

$1.3 trillion, which is 128 percent increase over his projection at 

the beginning of his term. So, why should we trust your budget 

projections three or four or five years into the future when we have 

a track record of grossly distorted projections under this administration? 

Mr. ZIENTS. Well, I think the first thing to start with is your 

comparison to the Reagan recession. It is apples and oranges. That 

was fueled by inflation, and Fed policy was the answer. You get out 

of a recession like that much more quickly than a financially-led 

recession, which is unfortunately what we inherited based in large 

part on those policies that you articulated so elegantly at the beginning. 

So we started in a hole. We thought it was a hole that was about 

negative 3 percent of GDP. It ended up being negative 8 percent 

for Q4 of 2008 and Q1 of 2009, so a much deeper hole. We are 

digging our self out of that hole, and the president’s budget puts 

us on a sustainable path. 

Chairman RYAN. If you want to keep to your schedule, or you 

want to be out by 12:30. I am trying to get through everybody. 

Mr. ZIENTS. Please. 

Chairman RYAN. Mr. Tonko. 

Mr. TONKO. Thank you, Mr. Chair. Mr. Zients, thank you for 

joining us here today. I want to use my brief time here today to 

focus on the issues of fairness that are emphasized in this budget 

proposal. I want to read briefly from a letter that Chris, a constituent of mine from Schenectady, New York, wrote almost exactly 

one year ago. He writes of his thanks for living in a society that 

has allowed him, his wife, and their two children to succeed, and 
44 

the role that things like public infrastructure and public education 

played in their success. He concluded his eloquent letter with this, 

‘‘We are not rich, but as Americans, we are willing to give back to 

the country that has given so much to us. We feel a responsibility 

to ensure that others have that same opportunity that we benefit 

from. As my elected representative, I want you to know that when 

our government requires additional revenues to close the budget 

gap, we are willing to do our share. If it becomes necessary to raise 

taxes to preserve essential social services, I will consider it an 

honor to support them through my contributions.’’ 

This committee, on both sides of the aisle, is rightfully concerned 

about the future of our deficit. In 2011, federal spending was 24.1 

percent of GDP. Tax revenue was 15.4 percent of GDP. There is a 

pretty big gap between those two numbers. That tax rate, 15.4 percent of GDP, is the lowest, I would point out, since President Eisenhower was in office, before Social Security and Medicare were 

law, before we even had all 50 states in fact. 

Mr. Zients, do you have, on hand, what federal revenues averaged under the Reagan administration as a share of GDP? 

Mr. ZIENTS. I do not have it readily handy, but my team might 

have it. I know under Clinton, as we saw earlier, it was about 20 

percent. 

Mr. TONKO. Okay. I believe my information is 18.2 percent. And 

do you have on hand what federal revenues averaged under the 

Clinton administration as a share? 

Mr. ZIENTS. Well, that was shown earlier. I think it is right 

around 20 percent. 

Mr. TONKO. Yeah, 19 percent. So, we have 19 percent under 

President Clinton, 18.2 percent under President Reagan, and now 

15.4 percent under President Obama. That is not the picture some 

of my colleagues are painting here. I have heard my Republican 

colleagues commenting this week that with this budget, the president will increase spending over the course of 11 years by 62 percent. Do we know how much President Reagan’s increase in spending over his eight years in office? 

Mr. ZIENTS. That was higher. I actually do have that data with 

me, if my team can just hand it over. I am sorry. Let me follow 

up and get you those specifics on Reagan. 

Mr. TONKO. Okay. My information is 69 percent. 

Mr. ZIENTS. That sounds correct. 

Mr. TONKO. And how much did President George Bush increase 

spending for his eight years in office? 

Mr. ZIENTS. I believe even higher, but it sounds like you have the 

data in front of you. 

Mr. TONKO. My information is 89 percent. 

Mr. ZIENTS. Yes. 

Mr. TONKO. So, thank you. My point is this: for what has been 

deemed a tax-and-spend presidency, it seems to me that President 

Obama is cutting taxes more and increasing spending less as a 

share of GDP than many of our great Republican leaders, and we 

need to restrain our rhetoric, I believe. 

Mr. ZIENTS. And, in fact, on the revenue side, we are bringing 

it in 2021 right to that 20 percent level at 20.1 percent. 
45 

Mr. TONKO. Right. Well, tax-and-spend is a catchy line, and it 

gets thrown around a lot in an election year, but another constituent of mine wrote to me a couple of months ago with similar, 

catchy lines. Rod is a retired teacher from Voorheesville, New York. 

‘‘You might think,’’ he writes, ‘‘that after the ruinous binge of deficit spending that was the Bush administration, we would not 

again hear the old tax-and-spend song. Bush administration,’’ in 

Rod’s words, ‘‘was an era of spend-and-pretend.’’ And that is what 

we have seen time and time from my colleagues across the aisle 

when they control our government. Rod went on to write the following: ‘‘President Obama is asking Congress to invest in value-creating enterprises. He believes, and I think, that if we can spend 

our taxes to train young men and women to fight and kill, we can 

spend taxes to teach the same young people to teach and heal. He 

believes that if we build schools in Iraq, we can build them in 

Iowa.’’ 

I am incredibly honored to represent constituents like these and 

believe that the important facts here that need to be exchanged in 

a very logical, contrasting way, is an important exercise. 

Mr. ZIENTS. I think what is at the core of both your constituency’s comments, or letters, is a balanced approach. This is a balanced approach. $2.50 of spending cuts for every $1 of revenue. We 

need a balanced approach in order to get on a sustainable path. 

Mr. TONKO. And I agree with you, and I appreciate that. I am 

running out of time. I was going to ask you about the investments 

in research and development. 

Mr. ZIENTS. We can follow up. 

Mr. TONKO. Okay. 

Chairman RYAN. Thank you. 

Mr. TONKO. Thank you. 

Chairman RYAN. Mr. Chaffetz. 

Mr. CHAFFETZ. Thank you, Mr. Chairman, and thank you, Mr. 

Zients, for being here. 

Mr. ZIENTS. Thank you. 

Mr. CHAFFETZ. The president promised when he was running for 

election that he would not increase taxes on anybody earning 

$250,000 or less. Do you believe that to be the case, and is that the 

case moving forward? 

Mr. ZIENTS. Yes. The president is committed to no tax increases 

for those families earning $250,000 or less, or individuals at 

$200,000 or less. 

Mr. CHAFFETZ. But he has already violated that pledge, has he 

not? I mean, is that not the medical device tax at 2.3 percent, that 

is about to kick in, is that not a tax on people earning $250,000 

or less? 

Mr. ZIENTS. You need to tell me more about the medical device 

tax and how that impacts individuals. 

Mr. CHAFFETZ. Well if you are earning less than $250,000 and 

you need to go purchase a medical device, you are going to have 

a new tax at 2.3 percent. 

Mr. ZIENTS. That is a corporate tax, or it is an individual tax? 

Mr. CHAFFETZ. No, it is an individual tax. I would appreciate if 

you would look into that. 

Mr. ZIENTS. I will look into that. 
46 

Mr. CHAFFETZ. The indoor tanning tax, the tax on tobacco, the 

individual mandate, there is a long list of things that have already 

been implemented that I think violate that pledge, and I would appreciate your perspective on it because to say that is true and will 

continue to be true in the future, I just think is factually inaccurate. 

Mr. ZIENTS. Let me have my staff follow up with your staff on 

those individual taxes and how they actually relate to individuals. 

Mr. CHAFFETZ. Thank you. You refer to a sustainable rate of debt 

as a percentage of the GDP. What is that actual number? What do 

you think is an acceptable level of debt for this country? 

Mr. ZIENTS. Well, this budget has it come down to about 76 percent of GDP. 

Mr. CHAFFETZ. But if you look at the total debt that is offered 

by the Treasury, the total percentage, what percentage do you 

think is an acceptable level? 

Mr. ZIENTS. Well, I think that importantly, at this stage, the 

most important milestone is to stabilize it as we have talked about. 

Our work is not done. 

Mr. CHAFFETZ. But, it is like 100 percent now, right? 

Mr. ZIENTS. I think that is not the right way to look at it. I think 

the right way to look at it is the debt that is held by the public. 

Mr. CHAFFETZ. So, what is the case to say why would we not look 

at the total debt? Why would we not look at all the obligations. 

Mr. ZIENTS. I think it makes sense to look at debt that is within 

the federal government, that is sort of inside the family, if you will. 

This is looking outside. Debt held by the public, I think, is the 

right metric. It is what most people would agree is the right metric, 

but I just want to get back to you on the percent. Currently, in 

2012, that is about 74 percent, and stabilized at 76 percent. 

Mr. CHAFFETZ. Would I be inaccurate to say if you look at the 

total debt, which is on this Page 203 of the budget, debt issued by 

the Treasury, that when President Obama took office, it was in the 

range of $9 trillion, and that under this plan that has put forward 

by the president, it would go to $26 trillion. Can you see why people are concerned about this? 

Mr. ZIENTS. Absolutely, and I would say a major root cause of 

that problem is the fact that in the prior administration. 

Mr. CHAFFETZ. You are going to actually blame President Bush? 

Mr. ZIENTS. Well, if you want me to answer your question as to 

where the bulk of that debt come from, it comes from unpaid for 

tax cuts, it comes from unpaid for Medicare Part D, it comes from 

unpaid for wars, and then inheriting the great recession, which we 

absolutely needed to dig ourselves out of. The hole was very, very 

deep. 

Mr. CHAFFETZ. Let me move on. I totally and fundamentally disagree with you from top to bottom. The bottom line is the president 

was elected at $9 trillion in debt and we are going to grow it to 

over $26 trillion under his plan, under his numbers, and I think 

that is fundamentally wrong. 

Mr. ZIENTS. Can I make one comment? 

Mr. CHAFFETZ. Let me move on. No, I cannot. I have got a 

minute and 15 seconds. You said your part; I want to say mine. I 

want to talk about the federal payroll, because if federal payroll 
47 

continues to increase, the reality is there are 145,000 additional 

federal workers, not counting the uniform, military, postal, or census workers, 145,000 additional federal work. The president has 

stood before the American people and said he was putting a pay 

freeze in place. I think that was a farce, because through step increases, through rewards and bonuses, the payroll went up, and it 

continues to go up. Can you please explain to me at point do we 

think we can actually justify increasing the payroll even more and 

more? 

Mr. ZIENTS. Well, this year’s budget actually calls for, essentially, 

a flat number of employees in those agencies that you are citing. 

Of your 145,000 89 percent of that is security related. I think we 

all would agree that our veterans should get care in the hospitals, 

that we should protect our borders at DHS. 

Mr. CHAFFETZ. You have made your point. Let me ask this last 

thing, Mr. Chairman. I know you do not have this whole thing 

memorized, but on Page 114 of the Analytical Perspectives it says, 

‘‘This pay increase proposal permits savings of approximately $28 

billion over 10 years,’’ and it continues. If your staff could help explain how a pay increase has a savings over the course of times? 

Mr. ZIENTS. Well, I want to be very clear. The president froze civilian pay for two years. This proposal is for 50 basis points, onehalf percent of an increase, and the savings is the difference between that and what happens in the private sector with 1.7 percent. 

Chairman RYAN. And with that, Ms. McCollum. 

Ms. MCCOLLUM. Thank you. Thank you, Mr. Zients. I would like 

to shift gears here a little bit and talk about a part of the budget 

that we usually do not ever discuss here in a budget committee, 

and I am hoping I can capture the chairman’s interest and we can 

talk about this some more in the coming months, and that what 

this budget request means for our nation’s private sector. The Red 

Cross, Meals on Wheels, Habitat for Humanity, these and thousands of other non-profits are working to solve problems, improve 

the quality of life in communities all across the United States. The 

country’s estimated 1.5 million non-profits are a distinct sector of 

America’s economy and they employ 10 percent of our country’s 

workforce. 

Now, there is no doubt that non-profits that are part of being job 

creators. Non-profits tackle issues that are often beyond the reach 

of government and below the bottom line of the business sector. 

That is why the work that non-profits do is not an extra; it is essential. Every American community depends upon the non-profit 

sector. The federal government depends upon non-profits to implement many federal programs, from worker retraining to crime prevention. 

All of us in Washington and in OMB, and Congress need to start 

paying attention to the help of the non-profit sector, much like we 

do with the small business sector. This budget requests $948 million for the Small Business Administration to protect, strengthen, 

and represent the interest of our nation’s small business, but the 

non-profit capacity building program authorized at $5 million is 

now recommended for zero, zeroed out. 
48 

So, I would like to ask you a couple of questions. Do we know 

how much of this budget would be implemented by the non-profit 

organizations in this community and across the country? Do we 

know how much federal funding is being leveraged with local government and private funds by non-profits? Do we know how many 

jobs non-profits will create within the federal funds in this budget, 

and this is not a ‘‘got you,’’ because nobody normally asks these 

questions. 

Mr. ZIENTS. No. They are good questions. They are very good 

questions. 

Ms. MCCOLLUM. I would very much like to work with you, as you 

get these answers, because none of us on this committee, to my 

knowledge, since I have been on the Budget Committee, has asked 

about the non-profit sector, and so I do hope that the chair takes 

some interest in this and looks at how this is interrelated. 

I would like to follow up with you about how we increase the 

focus on non-profit’s sector, to strengthen it, and to strengthen local 

economies because, as I said earlier, they implement a lot of things 

that the federal government needs to have happen in this country, 

and they do a lot of the work that the poor profit sector just will 

not get involved in because there is not profit in it. Yet, the poor 

profit sector relies on many of the programs that they provide. I 

know I asked you some questions you did not have direct answers 

for, but if there is anything that you would like to maybe say about 

the non-profits. 

Mr. ZIENTS. No, I agree with you that they are essential, both to 

making sure that our programs are effectively implemented in the 

federal government, and to our society at large. As to your specific 

questions, I look forward to my staff following up with you, and 

your staff to address some of the specific data that you are looking 

for, but I do not have that handy. 

Ms. MCCOLLUM. Thank you. I think we need to talk about this, 

because you and I both know in our communities how integral they 

are to the fabric of our communities. 

Chairman RYAN. So, these mediating institutions are critical to 

a civil society flourishing, and I would just simply say we want to 

get back to a virtuous cycle, because the non-profit sector thrives 

on donations from the profit making center, meaning the private 

sector, and so we clearly need to have a vibrant, profitable, private 

sector, so that we can have a flourishing non-profit sector. It is a 

virtuous cycle that we want to get on and we have different approaches on how to achieve these things. 

Ms. MCCOLLUM. Mr. Chair, let’s leave the politics aside. 

Chairman RYAN. No, that is my point. 

Ms. MCCOLLUM. I think we need to understand how the nonprofit sector is working and as members of Congress, sometimes we 

say well, we will have the private sector do that. We just assume 

that the private sector can pick up the slack, and to your point, the 

business sector sometimes says the bank is closed on that. 

Chairman RYAN. I indulged because we had time and now we do 

not, and want to be mindful of this gentleman’s time. So, Mr. 

Huelskamp. 

Mr. HUELSKAMP. Thank you, Mr. Chairman. I appreciate the opportunity, Mr. Zients. I appreciate the opportunity to question you 
49 

today. I appreciate the budget presentation. Going through the 

budget, I have not dug into it as much as I will shortly. If you had 

to pick one thing as the absolute highlight of this budget, what 

would it be? What are you most proud about in this particular 

budget? 

Mr. ZIENTS. I think it is the combination of investing in the short 

term, to make sure that we put people back to work, and at the 

same time, putting us on a sustainable path, by getting our debt 

deficits under control. So, it is the combination. It is doing both at 

once. It is not an either, or. 

Mr. HUELSKAMP. And I appreciate that, and we have had the 

earlier question, and I stepped out for a little bit. There was another committee visiting with folks about their budget in a particular area, but again, you did not answer the question earlier 

about exactly when do we actually balance. When I visit with constituents, they are worried about a deficit, but more importantly, 

they are worried about the debt. They understand the math, and 

until you do not have a deficit, you cannot propose to pay down the 

debt. So, maybe I will ask the question a little differently. When 

does the president’s proposal actually reduce the debt on America? 

Mr. ZIENTS. Well, he stabilizes the debt in this budget, and this 

budget makes major progress. The president looks forward to working with both Houses to continue to bring down our deficits, and 

bring down our debt. 

Mr. HUELSKAMP. What year does he actually stabilize the debt? 

That would suggest that there is a year in which this budget will 

balance. 

Mr. ZIENTS. 2018. 

Mr. HUELSKAMP. That is when the budget will balance? 

Mr. ZIENTS. I think the question you asked was when does the 

debt stabilized. The debt stabilizes in 2018, as a percent of GDP. 

Mr. HUELSKAMP. As a percent of GDP. 

Mr. ZIENTS. Which we keep coming back to it. You have to think 

about it that way, because nominal dollars do not make any sense. 

If I would told you that you could have a dollar today, or a dollar 

10 years from now, I think we would all take the dollar today. 

Mr. HUELSKAMP. Does the debt stabilize, or the additional debt 

that the president’s budget proposes, that stabilizes, correct? The 

debt load continues to increase as a percentage of GDP? 

Mr. ZIENTS. No. Debt stabilizes a percent of GDP, starting in 

2018. 

Mr. HUELSKAMP. But the president does not propose to ever actually balance the budget, is that correct? 

Mr. ZIENTS. We are not at the point in this budget window where 

we are balancing the budget. This takes us a significant step toward that, and then we need to work together to continue to drive 

toward a balanced budget. 

Mr. HUELSKAMP. The window you discuss is in the next 10 years. 

So, there is no balanced budget in the next 10 years, correct? But 

looking long term, it is a question I get from constituents, you have 

understand, they ask when will Washington, instead of talking 

about a balanced approach, actually give us a balanced budget? 

Can you foresee how many years, decades that might occur? 
50 

Mr. ZIENTS. I do not think any of us can project out that far. 

What I can tell you is this budget makes significant progress. We 

bring down our deficits to below three percent of GDP. We stabilize 

our debt as a percent of GDP. That is a major milestone. There is 

more work to be done. 

Mr. HUELSKAMP. In the next 10 years, another question, how 

much more debt is added to the bottom line in this president’s 

budget? 

Mr. ZIENTS. Well again, I do not think you should think about 

it in nominal terms. 

Mr. HUELSKAMP. No, but what is the nominal term? Humor me, 

if you would, please. 

Mr. ZIENTS. I think your colleague before was saying some numbers. I can try to track them down. The debt held by the public is 

currently in 2012, about $11.6 trillion dollars, and in 2022, $19.5 

trillion. 

Mr. HUELSKAMP. So, to you, stabilizing the situation is just adding debt, but not as quickly? I mean this president is comfortable 

with never having a balanced budget, maybe in the next 20 to 30, 

to 40 years? 

Mr. ZIENTS. I think what we are talking about is making serious 

progress in a period of time when you can actually talk about 

progress. Who knows what happens across 30, 40, 50 years of time? 

We are making that progress. We are making that progress while 

we maintain the basic compact we have with our citizens. 

Mr. HUELSKAMP. Well, I would hope that maybe your staff would 

actually kind of project what the administration would like to see. 

Give us a date when we would actually have a balanced budget, 

not a percent of GDP, but actually spend less in one year than we 

are taking in, and that has not happened in decades, and I would 

like to see that happen. 

Another thing, quick question, what part of the budget, and particularly the president’s tax increases, actually create jobs. I know 

it is a short, short time. I only have 22 seconds left, but I wish your 

staff would get back to me and identify. I know the president has 

proposed a bunch of new tax increases, and I am concerned about 

jobs. Exactly which one of these tax increases and how will they 

actually create jobs, because that is what the American people 

want. 

Mr. ZIENTS. Well, I think in terms of the medium-term, having 

a balanced approach of deficit reduction, which creates an investment environment. 

Chairman RYAN. And we will, as he said, let you get back to him 

in writing, if you want, just in the interest of time. Mr. Ryan. 

Mr. RYAN OF OHIO. Thank you, Mr. Chairman. I feel like I am 

living in an alternative reality here, because I just left the Armed 

Services Committee, in which Secretary Panetta, head of the Joint 

Chiefs, were presenting $500 billion worth of cuts to the military, 

making very significant cuts that many people were uncomfortable 

with, and it was my friends on the other side of the aisle were saying well, wait a minute. Maybe we should not make those cuts. 

Maybe we got to be careful about how deep we go. And then I come 

to the Budget Committee, and we are not cutting enough. So, I 
51 

think that is always proved that we are, I think, striking the right 

balance, and I think you guys are doing that. 

I think it is also important for us to know that the Republican 

budget adds almost $9 trillion to the debt over the course of the 

next 10 years. The Republican Study Committee budget adds almost $6 trillion to the debt over the next few years as well. I think 

it is also important to point out that the policies that this president, and in many instances, the Democrats passed, that stabilized 

the economy, made investments, the stimulus package, stabilized 

the economy, got us to where we are going now, in the right direction, they were opposed by the Republicans. 

The auto industry bailout in Ohio, thousands of people, one in 

every eight jobs in Ohio is related to the auto industry, because of 

what President Obama did, and that is helping us stabilize things. 

I think you hit the nail on the head with the issue of Medicare. I 

will ask you is Medicare a Medicare problem? Is it an entitlement 

problem or is it a health care cost increase problem that is leading 

to the increases in the Medicare loss? 

Mr. ZIENTS. Well, I think we need to make sure that we keep the 

compact that we have with the American people, and if we can do 

that through smart changes to the Medicare system; the Affordable 

Care Act saved over $100 billion. 

Mr. RYAN OF OHIO. Medicare costs are going up because health 

care costs are going up. 

Mr. ZIENTS. For two reasons, health care costs are going up and 

the baby boomers are retiring. So, it is a demographic issue and 

it is a health care cost issue. Fortunately, some of those health care 

costs are starting to come down. We still do have our demographic 

issue. 

Mr. RYAN OF OHIO. Right, and we see in hospitals like Summa 

Hospital, in Akron, Ohio, that is focused on the patient centered 

medical home, where they are beginning to use that way of reorganizing the system and the delivery of health care, to drive down 

costs. 

Mr. ZIENTS. What makes me optimistic are examples like the one 

you cite. We have those examples all around the country. Let’s take 

working and transfer it around the country, so we have best practices throughout; and best practice is defined as cost efficient care 

that has the best possible outcomes. 

Mr. RYAN OF OHIO. Right, and I agree with you. I think that the 

Affordable Care Act is essential to all of this, and the medical 

homes, and those kinds of things. I think it is important to point 

out, somebody brought up President Reagan. You know, President 

Reagan did cut taxes, and then a few years later he raised taxes, 

several times. Do you know how many times President Reagan 

raised taxes? 

Mr. ZIENTS. I do not know the number of times. 

Mr. RYAN OF OHIO. Six, seven, eight, something like that. So, I 

would like to remind my friends who worship at the altar of Ronald 

Reagan, that he would be beneath Ron Paul and the presidential 

primary election right now, and as far as support from the Tea 

Party. 

Quickly, the research and development, because I love what you 

guys are doing with the community colleges. Youngstown, Ohio, 
52 

Akron, Ohio, these are decisions in a value based document, which 

is our budget, that are going to help my constituents, $10,000 tax 

credit for tuitions, Pell Grants, community colleges. 

Mr. ZIENTS. They add to the list, ensuring that the interest rate 

does not go up on student loans, which it is scheduled to go up to 

6.8 percent from 3.4 percent. The budget keeps it at 3.4 percent. 

Mr. RYAN OF OHIO. So the average person is not only going to 

get a payroll tax cut, but if we start implementing some of the 

budget priorities from this administration, they are going to see 

more help with their student loans, as you just stated, more money 

for Pell Grants, and getting them in the community college. 

Mr. ZIENTS. Encouragement to make sure that colleges are more 

affordable. I mean this is a major emphasis of this budget. 

Mr. RYAN OF OHIO. I appreciate what you guys have done. This 

has been very difficult and I think what we are seeing now in Ohio 

and around the country is people start to appreciate what has been 

done as we have weathered the storm over the past few years, and 

as the question now, is now what. Now what do we do? Now where 

do we go? And I think what you are talking about with STEM college and investments in the community colleges, they are going to 

ramp America up to be competitive, and that high end manufacturing that we are going to need. So, I appreciate what you are 

doing and thank you very much. We are here to support you. 

Chairman RYAN. Thank you. Mr. Mulvaney. 

Mr. MULVANEY. Thank you, Mr. Chairman. If the staff could 

bring up the first slide. 

Mr. ZIENTS. My eyesight is not good enough. Can I get a paper 

copy? 

Mr. MULVANEY. You can, actually, and it is simply a pledge that 

he made when he ran for office and said today, I am pledging to 

cut the deficit we inherited by half during this first term. I am not 

going to ask you about that because in response to a Washington 
53 

Post criticism of this promise yesterday, I understand the administration’s official position is now that they had to break that promise because things turned out to be much worse than they thought 

they were. 

Then, I was going to ask you about this next promise about not 

raising taxes on any families making less than $250,000 a year, 

but I think you have been asked about a couple of those already. 

Mr. Garrett asked you about the Individual Mandate Excised Tax 

for failing to purchase government qualifying health care, and I 

think you said that was not a tax. Then I believe Mr. Chaffetz 

asked you about things such as the medical devices tax. 

Mr. ZIENTS. Can I make one 10 second comment on that front? 

The president actually has cut middle class taxes by $300 billion. 

Mr. MULVANEY. Except for everything that is on this list. 

Mr. ZIENTS. $300 billion. 

Mr. MULVANEY. Again, when you make a pledge I guess you do 

not really get to say listen, I am going to raise it someplace and 

reduce it someplace else. That is not my question. My question actually focuses on something you said earlier, which is on the next 

slide. 

Mr. ZIENTS. There is absolutely no way I will be able to read that 

one. 

Mr. MULVANEY. And I will read it to you because it is right out 

of your budget. Table S-4, you mentioned several times that this 

is a responsive budget as to deficit, and then you were loathe, at 

times, to talk about nominal dollars; and I agree that when you are 

talking in 2012 about $1 in 2022, it is not the same thing. I would 

suggest to you that you can talk apples to apples, nominal dollars, 

when you are talking about, for example, net interest payments in 

2015 versus, say, Medicaid payments in the same year, 2015. I 

would suggest to you, sir, that the budget that you offered to us 

today has net interest payments in 2015 exceeding what we will 

spend on Medicaid. The budget that you have offered us today has 

net interest payments exceeding the money that we spend on nondefense. Medicaid, you have got a budget for $372 billion of spending in 2015, net interest 384. 

Mr. ZIENTS. Yes. 

Mr. MULVANEY. You go to non-defense by 2017, 553 versus net 

interest of 570. And then by 2020, net interest payments will exceed defense. So, what you have offered us, sir, is a budget with 

the fastest growing line item being net interest, and a future for 

this country where net interest by 2020 will exceed what we spend 

on defense. That interest will exceed what we spend on non-defense 

discretionary, and what we will pay also for Medicaid. I ask you, 

sir, if you really do believe that that is a responsible budget as to 

deficit? 

Mr. ZIENTS. I really want to be responsive, and maybe this just 

needs to be done, chairman, in follow up, because Table S-4 is the 

adjusted baseline. That is not actually the president’s budget. So, 

it would be very difficult for me to comment off of an adjusted baseline. 

Mr. MULVANEY. But I believe the data is off of your budget. 

Mr. ZIENTS. No, this is the baseline that in the beginning of my 

presentation that I described as an accurate reflection of business 
54 

as usual. So I think that if we want to start to comparing numbers, 

we should probably do it off of the actual budget, rather than adjust the baseline. In cognizant of the time that we have, I think it 

is probably best just done in follow-up. 

Chairman RYAN. Just to interject, just go to S-5, which is the 

next page in your budget, and the same point can be made. 

Mr. MULVANEY. And let’s go to the next one then because this 

is back to the president’s own words then. In that same promise 

when he said he was going to cut the deficit by half, there is actually a line that they caught my attention, which is the one that 

says, ‘‘but I refuse to leave our children with a debt that they cannot repay.’’ So, I will ask the same question that has been asked 

several times here today, which is, when my children ask me when 

we can expect to start repaying the debt, what is the answer? 

Mr. ZIENTS. I think what the answer is that we have to do two 

things here in this budget, and we are not alone in saying this. 

CBO has said this. The Fed has said this. Major economists have 

said this. We need to put get people back to work. We need to create jobs. We need to put ourselves in a position where we are more 

competitive as a country. That is step one. Step two, if we do not 

do step one then we are in real trouble. With step one done, we 

are able to get ourselves on a sustainable path. 

Mr. MULVANEY. I thought this budget was designed to put people 

back to work and create jobs. 

Mr. ZIENTS. It absolutely is. So step two, gets us to a point where 

our debt stabilizes a percent of GDP, and that will allow us to continue to be a place to invest in. You can see it in our current credit 

markets that we are the chosen place. We can maintain that status. American companies will grow here. Global companies will 

grow here and we will be in a much better spot than we are in 

today. There is more work to be done. 

Mr. MULVANEY. Then, I guess my last question; I know my time 

is up, but your party had control of both Houses of Congress and 

the White House for all of 2009 and 2010. Why did you not do 

those things when you were in control? 

Chairman RYAN. We will let you get back to him in writing. 

Mr. ZIENTS. Please. 

Chairman RYAN. Let’s go to Mr. Young next. 

Mr. YOUNG. Thank you, Mr. Chairman. Mr. Zients, thank you so 

much. We have almost hit the end here, only a couple more questioners. I really appreciate being here today to explain this budget. 

I do have to say when I visit my constituents in southern Indiana 

and I do town hall meetings, I frequently go through a budget presentation, a PowerPoint presentation. Where I start is where the 

money goes and I think many Americans do not really appreciate 

how much money is spent on so called mandatory expenditures: 

Medicare, Medicaid, and Social Security being the largest of those 

expenditures. They account for approximately 70 percent of all expenditures. Now, under the president’s budget, net Medicare 

spending increases, by my reading, about $135 billion over the next 

10 years, correct? 

Mr. ZIENTS. If you have done the math, you have done the math. 

Mr. YOUNG. Okay. President’s budget: Medicaid spending more 

than doubles over the next 10 years. President’s budget: Social Se-
55 

curity runs a permanent cash deficit over the next 10 years, accounting for about $1.1 trillion. Again, these are the largest programs of our federal government, the largest mandatory programs. 

Under the president’s budget for 2013, 6.5 percent of federal outlays will go to debt service. That increases more than doubling to 

about 15 percent in 2022. Under the president’s budget, mandatory 

spending over the next 10 years will increase to almost 80 percent 

of total federal expenditures. I have a pretty obvious question here, 

and I just want to dig fairly deeply on this, why did the administration not address this entirely predictable situation where mandatory spending continues to tick upward at a rapid rate, driving 

our debt crisis. 

Mr. ZIENTS. Well, let’s break it apart a little bit here. On Medicare, the Affordable Care Act actually saves over $100 billion in its 

first decade, and $1 trillion in its second. In this budget, there is 

$360 billion of health care savings, and as we have talked about 

repeatedly today, we will continue to work together to figure out 

how we make care more effective and more efficient, but we have 

a basic compact with our citizens. 

Mr. YOUNG. Agreed. So, let me pivot off of that compact. 

Mr. ZIENTS. We need to make sure that we don’t break that compact by creating a system of vouchers where we transfer risks to 

our citizens. That is not the right way to go about that. 

Mr. YOUNG. I am going to reclaim my time here and agree that 

we need to maintain the trust, and not break the faith with the 

American people. These are important programs that my constituents are demanding. We lay out a coherent plan to make them 

solve it, to make them sustainable. Why have you not done that? 

Mr. ZIENTS. We have made significant progress. 

Mr. YOUNG. What does that mean, significant progress? 

Mr. ZIENTS. Look at the budget. The budget brings the deficit 

down below 3 percent of GDP. It stabilizes debt as a percent of 

GDP. It maintains that compact that we have, which we both believe in. 

Mr. YOUNG. Mr. Zients, I am going reclaim my time. A budget 

is a roadmap as to how you would solve these fiscal problems I the 

future. All right? It does not lay down some weak marker so that 

in the future we can cooperate. It is supposed to lay out an optimal 

plan. It is supposed to lay out, frankly, what the priorities of the 

administration are, what your ideas are, and then we can find compromise after that. 

Let me continue, please. Without any specifics, you know what 

we are left with? We are left with talking points. We are left with 

political arguments. If we would lay out a scorable plan for each 

of these different programs, then we could find common ground, 

which is exactly what the American people want. I will give you 

an opportunity to respond to that point. 

Mr. ZIENTS. Well, I think that I have told you about the president’s budget and why I think it is the right way to go. I would 

contrast it with the Republican budget, which creates vouchers and 

transfers risk to our citizens on health care. 

Chairman RYAN. Mr. Zients, I would be happy to show you in 

writing how it does not do that, and I would be happy to share that 

with you later. 
56 

Mr. ZIENTS. Okay. And at the same time, it creates block grants 

for Medicaid at very low levels, and continues tax cuts for the 

wealthiest Americans; that does not strike me as a good plan. 

Mr. YOUNG. Mr. Chairman. 

Mr. VAN HOLLEN. He is trying to answer the member’s question. 

Mr. YOUNG. It is not about your plan. It is the same plan the 

members of Congress have. 

Mr. VAN HOLLEN. Since the Chairman interjected on the last 

point. I will show you why it is not at all the same plan members 

of Congress. 

Mr. YOUNG. It is based on the same model of competition where 

plans have to compete for your business, provide more value, and 

you still enjoy the benefits of competition, while saving the American people money. 

Mr. VAN HOLLEN. I will tell the gentlemen the plan the members 

of Congress have is a much better deal in terms of shared contribution than the plan proposed by the Republicans. 

Chairman RYAN. Since all time has expired. 

Mr. YOUNG. I look forward to seeing your plan, Mr. Van Hollen. 

Chairman RYAN. I could go on and on. I am going to risk the 

temptation. It is Mr. Lankford’s turn. 

Mr. LANKFORD. Thank you, Mr. Chairman. Mr. Zients, thanks for 

being here. 

Mr. ZIENTS. Thank you. 

Mr. LANKFORD. It has been a long day, and getting a chance to 

do this yesterday, and doing it again today. I do thank you honestly 

for your experience in the private sector, both with Bain and with 

Portfolio Logic. Those are successful companies and then I assume 

you would much rather be here talking about Washington National’s baseball today then you would about the budget today, and the 

history that you have with that. So, thank you for what you have 

done on that, and sometime we will visit offline about baseball? 

Mr. ZIENTS. I look forward to that. 

Mr. LANKFORD. Let me tell you somewhat the frustration, I 

guess, as we come into this, and just looking at the budget and 

starting to go through it, because there is this sense when we are 

home in our districts, and people talk to us and they just want to 

know when are we going to get control of our debt, and how is that 

going to happen, and when is that going to come down. Their perspective is, from their business and from their home, that there is 

this plan that I am going to pay off this big mortgage. In business 

you do not have a CEO of a company that says for the rest of this 

company we are going to run in the red. We are never going to run 

in the black. So, that just does not translate, and when you use 

terms like stabilize our debt to try to get us down to 3 percent of 

GDP, that does not translate anywhere else. 

Last year, the term in the same committee from Jack Lew, and 

from Timothy Geithner was sustainable deficits. That was the term 

last year. We want to get us to sustainable deficits. We had the 

same frustration trying to figure out what in the world is that. Is 

there ever a point, and again, the same conversation’s are not new 

to this year. It was the same with last year. I go back, for me, 

somewhat past is prologue and all this, and I go back to 2009, 

when the president said, ‘‘Today, I am pledging to cut the deficit 
57 

we inherited in half by the end of my first term in office.’’ And I 

pull up the 2010 budget from the president, and go to this year, 

2012. So, in the 2010, and look to what was the expected deficit 

in this year. The expected deficit this year was 581 billion. It is actually going to be 1.3 trillion. So, you understand our frustration 

in coming into this. It is easy to look at some future documents like 

this did, and to say I have this great plan, and we are going to 

spend this, we are going to do this, but it ends up in this case being 

almost three times higher this year than what was anticipated by 

the president in 2010. That is the frustration. So, I do not say that 

in a form of a question. 

I do have a question for you. I say that just to say hear our empathy with this as well. It is easy in Washington to say we are 

going to stabilize our debt. No one outside of these 10 square miles 

processes that. We said three years ago it was going to be $581 billion; it is actually $1.3 trillion, and then we look at the projections 

now and think these are guesses, but we have got to figure out how 

to budget. 

I do want to ask though about some of the tax pieces. There is 

a segment in there about energy taxes. I think it is about $40 billion or so, if I remember the number correctly, for companies that 

are producing energy. Do you know some of the specifics of that? 

Mr. ZIENTS. What sector of the energy market are you talking 

about? 

Mr. LANKFORD. For this particularly, I think it was on fossil 

fuels. So, there was a whole series of taxes saying it is about $40 

billion. Do you know what some of those taxes may be? 

Mr. ZIENTS. What I do know is that oil and gas profits are a 

record high, that we no longer need these types of incentives, that 

production is at record high, and our imports are down. 

Mr. LANKFORD. Actually our imports are down because we are 

producing more. 

Mr. ZIENTS. That is right. That is where I started. I think production is at the highest point it has been in eight years. 

Mr. LANKFORD. Yeah, it has been great. 

Mr. ZIENTS. Part of that is making sure that we continue to open 

up properties, both onshore and offshore for production. 

Mr. LANKFORD. I completely agree, but you are not sure which 

taxes that would be or which areas? 

Mr. ZIENTS. We can get you the details. 

Mr. LANKFORD. For instance, intangible drilling costs is one that 

gets hit on a lot. They really do not seem to be any different for 

a company that is doing drilling than it is for any other business 

writing off their business expense. We are trying to figure out what 

the dynamic is to say you do manufacturing, if you do something 

else, I mean you write off your business expense, but if you happen 

to produce oil, or you happen to produce natural gas, you cannot 

write off that business expense. That is no longer manufacturing. 

Is that kind of the plan at this point or do you know if there is 

a breakdown of large companies, small companies? Will a company 

that is a drilling company, or a lot of these small independents, the 

majority of the drilling and operation that comes out of the ground 

is this very small company. So, they may have five to 12 employ-
58 

ees. Will they have the same tax burden that a company that has 

5,000 that also produces oil? Is it the same across that? 

Mr. ZIENTS. Well work with Treasure to get your answers to 

those questions. 

Mr. LANKFORD. Yeah, because that would be helpful to know, because if you are talking about the energy companies, everyone goes 

to Exxon. Exxon is a pretty rare breed in this field. The majority 

of them are mom and pop shops that are family owned businesses. 

Their business model is based around when they have business expenses. They can write them off, just like every other small business in America. 

Mr. ZIENTS. We will work with Treasury to follow-up. 

Mr. LANKFORD. I yield back. Thank you. 

Chairman RYAN. Because he has been generous with his time, 

and we are going to limit to the remaining members here, meaning 

if another member shows that we are closing the roll with who is 

here. So if a members coming they are not going to be able to get 

time. So with that, Ms. Wasserman Schultz. 

Ms. WASSERMAN SCHULTZ. Just under the wire, Mr. Chairman. 

Thank you very much. Welcome. 

Mr. ZIENTS. Thank you. 

Ms. WASSERMAN SCHULTZ. Congratulations. Getting back to 

something that Mr. McClintock talked about in extolling the virtues and the record of former President Reagan in helping to bring 

us out of a significant recession at the time, I want to just read a 

quote. ‘‘We are going to close the unproductive tax loopholes that 

have allowed some of the truly wealthy to avoid paying their fair 

share. In theory, some of those loopholes were understandable, but 

in practice, they sometimes made it possible for millionaires to pay 

nothing, while a bus driver was paying 10 percent of his salary, 

and that is crazy. It is time we stopped it.’’ Now, if I was going to 

quiz the numbers here on who we might have attributed that quote 

to, I bet it would not be at the top of anyone’s mind, but that was 

from a speech by Ronald Reagan at Northside High School in Atlanta, Georgia, on June 6, 1985. 

Mr. ZIENTS. No one would have guessed that Warren Buffet 

would say the same thing. 

Ms. WASSERMAN SCHULTZ. Right, exactly. He said, ‘‘I would raise 

rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains, and for those who made 

$10 million or more. I would suggest an additional increase in 

rates,’’ and that was on August 14, 2011. 

So, that prefaces my question, Mr. Zients. How does the president’s budget strike a balance when it comes to addressing our 

short term and long term deficit reduction needs, because I think 

there is very little that we are agreeing on in Congress these days, 

but I think we actually all agree that we need to make a commitment to reducing our deficit, in the short term and in the long 

term. 

Mr. ZIENTS. I agree. 

Ms. WASSERMAN SCHULTZ. But the economists that I have heard 

from across the spectrum, major economists, have really indicated 

that we need to be careful about not short circuiting what is an obvious recovery that we have begun. 
59 

Mr. ZIENTS. I think that is right. So, it is a two step process. It 

is a focus on job creation, making sure that we continue to have 

the economic recovery, starting with the payroll tax, unemployment, extending that, the $50 billion of infrastructure, modernizing 

our schools, just to hit a few of the highlights, and at the same 

time we move to deficit reduction across the medium term. 

The key is that it is a balanced approach and this is at the core 

of most approaches outside this chamber in terms of looking to 

Bowles-Simpson as an example; but it is a balanced approach. Our 

approach has $2.50 of spending cuts for every dollar of revenue. 

Ms. WASSERMAN SCHULTZ. That is an important point. The budget proposed by the president has $2.50 in spending cuts for every 

dollar in proposed revenue? 

Mr. ZIENTS. Yes. 

Ms. WASSERMAN SCHULTZ. When it comes to subsidies for the oil 

industry, for example, I mean I think it is important to note that 

we had an increase in production, the most production of oil domestically that we have ever had, but how does the president’s budget 

treat subsidies, taxpayer subsidies, to the oil industry who are 

making record profits? 

Mr. ZIENTS. It gets rid of them. It gets rid of, I think we heard 

earlier, it is about $40 billion. I believe that figure is correct. They 

do not need those subsidies. 

Ms. WASSERMAN SCHULTZ. So, the feeling is that those oil companies do not need those subsidies in order to be able to remain very 

profitable, and still be able to increase domestic production, because we are allowing more lease sales, opening up more areas to 

drilling, which, by the way, I oppose, at least in terms of lease 

sales that are not available currently. 

Mr. ZIENTS. Production is way up. Our imports are way down 

and just to correct the figure, it is $30 billion, not $40 billion. 

Ms. WASSERMAN SCHULTZ. And this is all being done within the 

lease sales that are currently available and that we opened up in 

the GOMESA Agreement from 2006. Is that right? 

Mr. ZIENTS. I believe so. If that is not the case, I will have my 

staff follow-up. 

Ms. WASSERMAN SCHULTZ. Okay, thank you very much. I yield 

back. 

Chairman RYAN. Mr. Stutzman. 

Mr. STUTZMAN. Thank you, Mr. Chairman, and thank you, Mr. 

Zients for being here today. I got a couple of questions and I want 

to kind of follow up on some of the comments that you have made 

throughout the day. You talk about the compact with Americans, 

and I guess how do you define that? I assume you are talking 

about Social Security, Medicare. Can you define what you are saying when you say compact with Americans? 

Mr. ZIENTS. I think you are right. You know, we have people who 

have contributed across the years to Medicare, to Social Security, 

and they have correctly have relied on a set of promises that we 

have made, and we need to live up to those promises, while at the 

same time we do responsible things. 

Mr. STUTZMAN. Two the largest expenditure items in our federal 

budget is Social Security and Medicare. Do you think that we can 

keep the compact with Americans, and I am assuming you are say-
60 

ing all Americans, that includes you and I, at the current levels of 

benefits, demographics, payroll tax cuts, all of the games that are 

played around Social Security and Medicare, can we keep that compact at sustainable levels? 

Mr. ZIENTS. I feel like we have talked about Medicare on several 

occasions today. Let me just quickly summarize that the Affordable 

Care Act is essential. It expands coverage. It saves $100 billion in 

its first decade, a trillion dollars in the second decade, the package 

the president’s budget has on health care saves another $360 billion, and we need to keep going at it. So, this is important. We 

have made important steps, both with the Affordable Care Act and 

today, in the president’s budget, you see $360 billion of savings in 

health care, Medicare, Medicaid, and other programs. That is an 

important step, but the same way we do in other sectors. We have 

to keep going at it. 

Mr. STUTZMAN. What about Social Security? 

Mr. ZIENTS. Social Security is solvent until 2036. 

Mr. STUTZMAN. What happens then? 

Mr. ZIENTS. At the same time, the president has expressed his 

desire to begin to lean into that issue, to do it in a balanced way, 

and he looks forward to working with members of both the House 

and the Senate, but I want to be clear. 

Mr. STUTZMAN. So the compact will change. 

Mr. ZIENTS. But I want to be clear on Social Security. That is not 

our immediate problem. We should get on to it, but that is not our 

immediate problem. 

Mr. STUTZMAN. But the compact will change. It has to change. 

I mean you are a smart guy. You are a successful guy. It is not 

going to be the same for you when you are ready to retire as it is 

for those who are 55 and above. 

Mr. ZIENTS. We need to keep the basic compact that we have and 

we need to go about any reform that we do in a balanced and fair 

way. 

Mr. STUTZMAN. Okay, so it will change? So, I want to touch a little bit on something, and I am a farmer from Indiana, and I support eliminating direct payments. I have been an advocate of that. 

I am glad that the president is following Congress’ lead on that and 

including that in his budget, but if we are going to eliminate direct 

payments, will the federal government employees to administer direct payments being needed? 

Mr. ZIENTS. Well, I do not know about the exact employees and 

what they have in terms of their portfolio. I can tell you that Secretary Vilsack has been very aggressive in managing administrative costs. He is out there with a very strong position in terms of 

consolidating administrative costs, proposing to close offices, and 

being incredibly efficient. 

Mr. STUTZMAN. The reason I asked is because you have proposed 

in 2011, enacted, where salaries are at 1208, 2012 estimate is ate 

1199, 2013 is 1208. 

Mr. ZIENTS. What page are you working off of? 

Mr. STUTZMAN. I am working off of the USDA Budget Summary. 

Mr. ZIENTS. Right, and you are working off of what line? 

Mr. STUTZMAN. It is Page 16. It would be discretionary under 

Farm Service Agency, FSA Salaries and Expenses. So, I guess my 
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comment and my question is why would you eliminate the entire 

program, but not adjust federal government salaries to show that 

this is a program that is not going to be in existence, so we are 

going to continue to be paying government employees for a program that does not exist. 

Mr. ZIENTS. We need to get to the bottom of it. 

Mr. STUTZMAN. Okay. 

Mr. ZIENTS. As I said, Secretary Vilsack has shown tremendous 

leadership in cutting expenses and ensuring that taxpayer dollar is 

well used. So, I would like to come back to you on the specific line 

item. 

Mr. STUTZMAN. That is fine. And the last point, real quick, GDP 

is estimated at 14.9 in 2011, or assumed, and in 2022, 25.4. Do you 

think that is even possible? 

Mr. ZIENTS. I am sorry, GDP? 

Mr. STUTZMAN. 14.9 today, 25.4 in 2022. Is that even possible? 

Mr. ZIENTS. Oh, absolutely. This is historical GDP growth, yes. 

Chairman RYAN. Mr. Ribble. 

Mr. RIBBLE. Thank you, Mr. Chairman. I know it has been a long 

day. Mr. Zients, thank you for being here. 

Mr. ZIENTS. Thank you. 

Mr. RIBBLE. Welcome to the party. Like you, I have spent almost 

my entire life in the private sector, but I do have a couple of questions because I have concerns about the president’s budget and it 

actually concerns how you got there, given your background, but 

we will talk about that in just a second. Who was president of the 

United States December 2010? 

Mr. ZIENTS. Barack Obama. 

Mr. RIBBLE. And who was the Speaker of the House in December 

2010? 

Mr. ZIENTS. Nancy Pelosi. 

Mr. RIBBLE. And who was the Senate Majority Leader in December, 2010? 

Mr. ZIENTS. Harry Reid. 

Mr. RIBBLE. All right. Good. We have got it. The Democratic 

Party controlled all three levels of government and at that time 

they extended the 2001, 2003 tax cuts to everybody. Was that a 

balanced approach then or was it terribly unbalanced in December 

2010? 

Mr. ZIENTS. I think in December, 2010 we were in the midst of 

a very difficult economic situation and a decision was made, in the 

context of a much larger package, as you know, to do that extension; the president has never believed in the extension for the 

wealthiest 2 percent and this budget has no tax increases for families making less than $250,000, but I think very rationally and 

very fairly has the wealthiest 2 percent pay more by returning to 

the same Clinton era tax rates when we ran surpluses, and as 

someone who was in the private sector then, it sounds like you 

were there also, there was plenty of incentive to grow businesses, 

plenty of incentive to invest, plenty of incentive to hire people. 

Mr. RIBBLE. And right now, you are saying that the economy is 

precarious. We still need to invest in deficit spending to this degree 

because of it, because if we cut spending too much, we might harm 

the economic growth of the country. Is that correct? 
62 

Mr. ZIENTS. That is true. 

Mr. RIBBLE. Okay. So, we cannot have it both ways, that we have 

to have it here, but the tax cuts do not belong there. 

Mr. ZIENTS. No, but I disagree. You are assuming that targeted 

investments in areas like infrastructure, research and development, and manufacturing, which we need in order to compete in 

this global economy and get people employed, equate to the same 

thing, is asking the richest 2 percent to pay a little bit more. Those 

are not the same thing. Those are apples and oranges and we can 

do both, and what that achieves is it gets people back to work and 

it gets us in a position where we have a balanced approach deficit 

reduction, which is essential to bringing down our deficits. 

Mr. RIBBLE. Let’s talk about that balanced approach, because you 

have used the word probably a hundred times today. 

Mr. ZIENTS. I have been here a long time. 

Mr. RIBBLE. Yeah, I am sure you have. Right if you look at the 

slide up there, top 5 percent of American taxpayers are contributing 58.70 percent of the income tax revenue coming into Treasury. 

Under your balanced approach idea, should that number be 70 

percent, 90 percent, 95 percent, especially in light of the comments 

in your testimony where I quote on Page Number 1, ‘‘By following 

these quintessentially American values of equal opportunity for all, 

and responsibility from all, we can build an economy that will grow 

robustly and create good jobs for years to come.’’ So, I am curious, 

going back to your balanced approach, and I will even give you 

some wiggle room here. Let’s use the top 10 percent of wage earners in the country. What is the balanced approach? How much 

more of the total burden should they bear? 

Mr. ZIENTS. Well, I guess again, my eyesight is failing me. What 

are we looking at here? Is this income? 

Mr. RIBBLE. That is the tax burden by income level. 
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Mr. ZIENTS. These are income taxes? 

Mr. RIBBLE. Right, so the bottom 50 percent are paying 2.3 percent of revenue coming to Treasury. 

Mr. ZIENTS. But does that include payroll taxes, Medicaid? 

Mr. RIBBLE. No, this is just income tax. This is just income tax. 

Mr. ZIENTS. This is just income tax. So, I think that it is important. 

Mr. RIBBLE. Well, but rich people will pay other taxes, too. 

Mr. ZIENTS. I think if you look back across the last couple of decades or more, when we were both in the private sector, there has 

been such disproportionate wealth creation focused on that very top 

tier. 

Mr. RIBBLE. There have been a lot of middle class people that 

were brought into that wealthy place as well. 

Mr. ZIENTS. Middle class has not done nearly as well, and what 

we need to do is we need to ask that top 2 percent to do their fair 

share. The budget has specific proposals. 

Mr. RIBBLE. 36.7 percent is not fair for them? It should be 50 

percent? I am trying to get a number from you so I know what balance is. 

Mr. ZIENTS. The president’s proposal has two main pillars. One 

is to return to the Clinton era tax rate of 39.6 percent, which 

worked quite well back then. We actually had surpluses, and then 

to ask that the wealthiest limit their deductions to 28 percent, so 

their deductions are the same as, or do not so far exceed, middle 

class. That strikes me as fair. 

At the same time, I want to emphasize that the president is in 

favor of fundamental tax reform and the Buffett Rule would be 

part of that fundamental tax reform, a simpler code, lower rates 

would all be part of tax reform. 

Chairman RYAN. Mr. Flores, last, but not least. 

Mr. FLORES. Certainly not least. Thank you, Mr. Zients. 

Mr. ZIENTS. Thank you for waiting. 

Mr. FLORES. Thank you for your testimony today. This iPad cost 

about $600. That is the same as about six barrels of oil that Exxon 

produces. Who makes more profit? 

Mr. ZIENTS. I do not know the answer to that question. 

Mr. FLORES. Apple makes substantially more profit on this iPad. 

So, the question is this. Let’s say that Apple is making too much 

money on this, so let’s go to Apple and raise their taxes. Now, are 

we to assume if we do that that Apple is going to make more of 

these at a cheaper cost for the American people or for the international community? 

Mr. ZIENTS. I do not know what specific tax expenditures or tax 

breaks Apple has. 

Mr. FLORES. You know the answer like I do. Let me get to the 

rest of my question. 

Mr. ZIENTS. I do know that there are outdated tax breaks and 

expenditures for oil and gas companies. 

Mr. FLORES. We expect Apple to be able to reclaim its intellectual property investment and its investment in plant, property, 

equipment, and people, the same thing that we allow energy companies to do, and to somehow come up with the fact that there 

should be a differential between these two is not fair to use the ad-
64 

ministration’s language. It is not balanced. It will create winners 

and losers. 

Just overall I am disappointed in the budget. It fails to address 

the president’s competitiveness council that deals with jobs, it fails 

to address the deficit commission that talks about our looming financial crisis, it does not deal with the looming insolvency of Medicare, Social Security, Medicaid, those programs. 

I have a few questions, on stimulus spending we have tens of billions of dollars of so-called targeted spending in here. What metrics 

do we have to prove that this is going to better spent than the $800 

billion we spent the last stimulus package. I guess the overall question is, why does government do it better? Chairman Bernanke, 

last week, of the Federal Reserve, said that the private sector generally invests better and more efficiently for the greater good the 

American people than does the government, so why are we re-upping on this failed program? If you take the wildest job estimate 

of 2.7 million jobs, it costs $300,000 per job created. I guarantee 

the private sector can do it for less than that. 

Mr. ZIENTS. Let me answer it actually in the context of the President’s Council on Jobs and Competitiveness because I actually 

worked very closely with Jeff Immelt, Ken Chenault and others, 

and it is not to say that everything in this budget is consistent 

with everything they recommended, but the focus on education, 

first and foremost for that group; the focus on infrastructure, top 

of the list; an infrastructure bank, which we propose in this budget 

for $10 billion is something the jobs council recommends. The 

president has worked very closely with his jobs council and has 

adopted many of its recommendations, both administrative actions 

that we have taken, including speeding up payments to all contractors. 

Mr. FLORES. Thank you. Reclaiming my time. Thank you, I appreciate you addressing that. We are going to have to agree to disagree. I think it is just version 2.0 of a failed stimulus program. 

I did not see anything in the budget having to do with program integrity. In other words, and I will ask this question in every hearing that I go to with respect to this budget, what is it that prevents 

future Solyndras? What is it that prevents the administration from 

picking winners and losers? What is it that will make the American hard-working taxpayer feel confident that their dollars are 

being properly spent? In other words, what makes them feel confident that we are not going to be bailing out some of the president’s contributors in the future? Do we have any provisions like 

that in this budget? 

Mr. ZIENTS. Well, in terms of program integrity, there is significant investment in program integrity because program integrity 

has a heck of a good return. For every $1 you spend on IRS program integrity, you return $5. 

Mr. FLORES. I am talking about the way we are spending dollars, 

not IRS collection dollars. 

Mr. ZIENTS. Same in Social Security in terms of program integrity, same in health care in terms of program integrity. The president put a statement out. 

Mr. FLORES. Okay, you are telling me this provisions are included in this budget, is that correct? 
65 

Mr. ZIENTS. Absolutely. 

Mr. FLORES. Okay. Thank you. 

Mr. ZIENTS. They are. 

Mr. FLORES. The next thing I have to do has to do with GDP 

growth assumptions. I noticed that in looking at the 2012 budget 

versus the 2013 budget, during the years 2015 through 2019, now 

the GDP growth assumptions have been amped up a fair amount, 

this does not compare well with the recent CBO update that we got 

that paints a much bleaker future for economic growth. So how 

does OMB come up with numbers that are pretty optimistic in my 

view? 

Mr. ZIENTS. Well the CBO assumptions, I think that you are 

talking about, assumes that none of the president’s policies are 

adopted. In fact, the 2001 and 2003 tax cuts disappear, both for the 

middle class and the upper, the wealthiest. So I think the CBO is 

based on current law and, therefore, is a projection that is not reflective of the kinds of policies that we would agree on, even if we 

do not agree on all of them. 

Mr. FLORES. Probably not many of them. 

Mr. ZIENTS. Well, I do not think any of us are looking to increase 

taxes on the middle class, for example, so a CBO assumption would 

have that. So I really think you are comparing apples and oranges. 

Mr. FLORES. Thank you, I yield back. 

Chairman RYAN. Guess what, time has expired. Hearing is adjourned. Mr. Zients, welcome to your first trip to the Budget Committee. 

Mr. ZIENTS. Thank you. Thank you for having me. 

Chairman RYAN. Hearing is adjourned. 

[Whereupon, at 1:02 p.m., the Committee was adjourned.] 

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