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tv   Treasury Secretary Jack Lew Testimony on the Fiscal Year 2017 Budget  CSPAN  February 14, 2016 1:26am-3:38am EST

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the tragedy is that if this flounders, the call to jihad will increase. that is why the diplomatic initiative we launched in vienna is so important. the 20+ member issg includes every major country with a direct stake in syria. parties as diverse as i ran -- iran and saudi arabia met at the table, constructively moving forward. they agreed on a list of unanimous principles reflected in the un. these principles reflect the way toward a stable, sovereign, inclusive, united, nonsectarian syria that we all seek. but which the vast majority of people believe can never be achieved with president assad at its helm. you cannot stop the war that
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way. yesterday we made progress advancing two of the major components of the u.n. resolution. the trucks are lined up. the permissions are being granted. they should flow today or tomorrow. in the wee hours of friday morning, we agreed that the sustained delivery of humanitarian aid will begin this weekend. first to the areas where it is most urgently needed, then all those in need throughout the country, particularly in the besieged areas. the u.n. has said that the trucks are loaded and ready to go. we established a task force which has met already for the first time in a geneva, and will report regularly on the progress to guarantee the delivery of this aid. the issg also agreed to implement a nationwide cessation of hostilities to begin in one week's time.
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why a week? for the simple reason that the modalities have to be worked out. and people have to be communicated to in order to not have it start with failure. this will apply with any and all parties within syria, with the exception of terrorist organizations, daesh, an d al nusra. there is a lot of work to do before this effective cessation can commence. to that end, we have established another task force, which the chair of russia and i will work on. we will work on the modalities of how we deal with this. the vast majority, in our opinion, of russia's attacks have been against legitimate opposition groups. to adhere to the agreement that has been made, we think it's critical that russia's targeting
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change. the entire issg, including russia, has agreed to work to make that happen. be clear about this. the foreign minister has says we need to work together as a group to determine who should be attacked, who is qualified as a terrorist and who is not. i will say bluntly that there is no way to properly put a communitarian -- a humanitarian access as ambitious as the one we put in place, and no adequate way to deal with cessation of hostilities unless we work together on every aspect of this from the political to the humanitarian to the military. we are doing that now. we are not approaching this with some sense of pie in the sky hope. we will work through where this targeting should take place, where it shouldn't, how we work
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together in order to be effective so we don't drive away from the table. obviously, if people that are ready to be part of the political process are being bombed, we are not going to have much of a conversation. that is what we are working on. the security council resolution has demanded that all parties immediately cease any attacks against civilian. that too has not happened to date. the violence of the emerging -- violence of the regime went up. we know civilians are being killed. we hope this week can be a week of change. some have argued that the reason humanitarian access has denied is because assad and his allies
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including russia might believe , that by defying the will of the international community, they can win the war. that is a proposition being discussed. if that is what russia and assad think, then i believe they would be missing the lessons of the last five years. the syrian, have rejected assad, have endured 4 years of shelling, barrel bombs, gas, scud missiles, chemical attacks, torture, and they may be pushed back here or there. but they are not going to surrender.
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i don't believe there is anybody that believes that they will. the countries that have supported assad and the countries that have opposed him say they are committed to continuing that. that is not a recipe for resolution. we have to take it vantage of this woman's --f -- take advantage of this moment. the more successful that people decisions made in the coming days and weeks could end the war in syria or it could define a
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very difficult set of choices for the future. everyone here knows what we have to do to get this right. putting an end to the violence and bloodshed is essential, but also providing syrians with the humanitarian aid they need is critical. it is pretty clear that the uncertainty, even the fear of what's happening to europe, of these refugees, of terrorism -- it is different. and everybody feels that.
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as a result, in some quarters, there is a pessimism in the air. i believe we have good reason to be optimistic about the future.
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the reason is the size, the durability, the capacity, the talent, the extraordinary resilience of this alliance. in one form or another that has been expressed, not just in the formality of this alliance since it's came into being, but throughout the last century. yeah, there is violence in the world. you better believe it. but you know what, it's changed. the 20th century was defined by state on state violence, millions upon millions of people -- people dying. there are actually fewer people dying in conflict today than ever before. him and despite the challenges we face between 1990 and 2015, remarkable things have happened. it changed life for millions of people. the range of -- the rate of child mortality fell by one half. life expectancy has increased dramatically around the world. particularly in developing countries. in 2001, there were less than one million kids going to school in afghanistan, and all of them were boys. today, there are almost 8 million kids going to school. 40% of them are girls. more than 2.5 billion people have access to clean water. the number of people living in extreme poverty has declined in more than one half. for the first time in history, it is below 10%. i could run a longer list of things that you know we're doing. productivity, the changes of technology. a century ago, the numbers of
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people brought into the near and middle-class in china and india and many other countries. a century ago this month, the in battle of verdun was just beginning. the most excruciating chapter over hebrew -- of a horrific war that would cause 37 million casualties and kill one german and one frenchman out of every five. 70 years ago -- 75 years ago, to be precise, millions of refugees were streaming not into europe, but out of europe. seeking refuge from a confrontation with fascism that would climax in unprecedented savagery and the holocaust. 50 years ago, half of europe hidden behind the iron curtain. a quarter of a century ago, europe was witness to a brutal campaign of ethnic cleansing that would rage for years.
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my friends, we cannot come to munich, to a security conference, and ignore the underlying message of this history. this moment is not as overwhelming as people think it is. we know what needs to be done. most importantly, we have the power to do it. the transatlantic community is not strong because we somehow have been exempt from tragedy or strife. we are strong because we are resilient. because in a decade after decade, we have stood together to defend our security, prosperity, our values. because we have resisted attempts after attempt to divide and make us turn on one another, and above all, we are strong
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because of the core beliefs that holds together. -- hold us together. we need to heed the advice of president kennedy on his trip to berlin, the year of this munich conference beginning. "lift your eyes beyond the dangers of today," he said, "to the hopes of tomorrow." if we do that, if we remember the values at the heart of a partnership, if we take the lessons of history of what we've been able to accomplish in this incredible alliance, i have no doubt whatsoever we are going to get this right. we're going to get through this moment, and we are going to build the prosperity and security and stability that every single one of us wants. we are going to do just fine. thank you. [applause]
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>> this president's day on c-span three will feature special programs on the vietnam hearings. we will first hear from kennan.or george then, retired general james gavin. career -- and create we have learned that naval and air power alone cannot win alone. it was incredible to me that we had forgot this lesson so soon. we are on the verge of making .hat same tragic error
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from will also hear .ecretary of state dean roth >> president obama has asked for .4.1 trillion
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>> today's hearing is on present 2016. budget for
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there are some hints about some of the details come at congress officially received the proposal yesterday. -- as often has been the case, what we received was not a practical vision for the future. we are going to have to have .rder here was to -- for example, in his budget, president obama looks again to raise taxes on hard-working americans that are being packaged as these. -- these -- fees.
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vision for a expanding government. it deficits as far as the eye can see. that debt by the way stands at an astronomical $19 trillion as of last week i believe it was, close to 80% larger than when the president first took office. i will also note that the budget provisions relating to puerto rico. forpresident's budget calls $6.6 billion intended to provide a tax credit for residents of .he island
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apparently the authors wrote a -- we are being told that some of the same officers -- offers that this is unfair and must be undone. perhaps any members of congress could explain why that was done in the first place. i have been working hard for another -- a number of my colleagues to help puerto rico who should be a real focus in this. i have a bill that offers $7istance of more than
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million. since last summer, ivan asking my colleagues just how much additional health funding they would like to see for puerto rico. in every case, specific details have been withheld and congress has been admonished to fix this problem and a fiscally responsible way. saw aday, we finally system number from the a ministration. why it took until now for these details to emerge is beyond me. at least they're here. in addition, while we are on the subject of puerto rico, i do not believe the ministration has been to report about the nature of the restructuring authority for the territory. are on generously -- that is actually not what is being sought.
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even though the territories constitution gives preference to some of those. we need to be clear about what is actually being debated and proposed here. i hope tolou hear more about your thoughts. this morning, i wrote to the .overnor of puerto rico it's that amounts to $121 billion. growing crisis of underfunding pensions.
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another issue that i look forward to is a provision of the recently enacted last act regarding the debt collection program. reportference accompanied the law made clear -- the law also requires that it be signed within three months. i look for to a status update in an effort to get the contracts signed in the cases released to ensure taxpayers are aware of the program and how it is going -- and it ismended
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going to be implemented. -- how it is going to be implemented. lew shouldy jack know, i have -- i have asked for these details in writing and public hearings and in private conversations. inquiry, they my have all opted to cloak any contingency plans in secrecy, sharing only in private discussions with market participants heard all of you dealt to provide specific answers to questions, choosing
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instead to ignore the issue. we know these contingency plans exist, yet officials of the highest level of the executive branch have refused to share with congress or the american people. unacceptable and because we have received virtually no cooperation on this requiresgislation that it is now probably necessary. a lot ton see, we have discuss today and i look to a robust amount of discussion. with that, i will turn to senator wyden for his statement. >> thank you there much. and secretary jack lew, we appreciate you being here for what i believe will be one final time on this particular item of business.
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you and i have talked about in what iput taxes think is the right context. right now, in america, there are two different taxes -- tax systems. people that most working deal with is mandatory. their taxes come directly out of their paycheck. then there is another system for the well-connected. under that system, it seems that you can often pay what you want, when you want to. the fact is, most working americans earned one or two paychecks a month. they may have a mortgage, kids, those taxpayers interact with a very small portion of the american tax code. but there are far too many
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cobweb filled corners that typical americans never have to enter into. they are loaded with byzantine counts and firms can use to pry open loopholes. as a result, you have increasingly slippery andnitions of capital gains an array of tax dodging strategies. it is a mindnumbing system. it is no wonder that somebody works the line in a factory and has a gig in a mom and pop business would believe that the tax code is stacked against them. i don't think anybody would make a huge bet on a complete rewrite of the american tax code this year so as to address the entirety of the unfairness in
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terms of how our tax system plays out to the working families. opportunity for democrats and republicans in the congress working with the treasury and the irs to work .ogether right now that major opportunity is to avoidance on the tax schemes that have resulted in the corporate tax gap. i'm going to have more to stay -- say about that this afternoon. the short story is that two thirds of a trillion dollars everyn taxes goes unpaid decade. in my view, every policymaker should be doing more to figure out why and how you are going to fix this. i also see this as an to free up resources
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so as to be able to take on a number of the big economic challenges of this time. by the way, there are a noble -- number of proposals and the budget that are clearly going to be of significant benefit. as you know mr. secretary, a number of us on this committee have proposed to expand the favors credit. we are all interested -- the community college proposes are going to be quite helpful to students pushing to find that first high wage, high skill jobs. and he have a number of investments in children's health that i think are very constructive. there are a number of smart proposals that could be a huge help to working-class families, small businesses across the country. and i look forward to working on
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a bipartisan basis with our colleagues here to pursue those issues. mr. chairman i also want to wrap up i thanking you. i think it is worth noting here that in the finance committee, chairman hatch has scheduled three hearings for us to come together on a bipartisan basis budgetine the presidents proposal. in my view, that is a major responsibility that we have and too a practical need communicate with the administration and that is true no matter which party controls the white house. in fact, these debates that we are starting control much of the debate over the course of the year. apparently some other committees are not exercising this same responsibility this year. i just want to say that i hope that does not become a president -- precedents. >> before we go any further, i
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would like to give an introduction to secretary jack lew. he took his position on fed were, 2013. hire to his confirmation, he staff andthe chief of before that the director of the .ffice of budget met after leaving the clinton administration before joining so as -- at new york university and taught as a clinical professor at nyu's school of public service until june 2006, when he was named ceo at citigroup's alternative investment unit.
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a degree from harvard and from -- been asay that it has long and productive. i want to thank you for all you have done for our country and in your current job, continue to do. we will take your statement of this time. lew: thank you mr. chairman. as senator wightman noted, this will be the last time i present the presidents budget. we enter this final year with a great deal of energy because they're so much that we still need to get done for the american people. as the president said in his state of the union, this is a time for extraordinary change.
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foster economic opportunities for all. we need to leverage new technology and solve urgent problems. think such as climate change, we policy thatue a protects our national security and we need to work together to prove our political discourse. discuss the major aspects of the presidents budget and how it lays out a vision for what we need to do as a country. fivenow and over the next or 10 years and beyond. to create growth and to make sure opportunity is broadly shared. in the seven years since president obama took office at the time of the worst financial crisis since the great depression, we have seen a sustained economy. notwithstanding, some of the
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recent volatility that we have seen and are saying, economic growth continues at a solid pace. since my testimony a year ago, itseconomy has continued record-breaking streak of private sector job growth. over the last two years, we have experienced the strongest job creation since the 1990's. at 4.9% the unemployment rate is half of what it was in 2008. physicalue on a sound -- fiscal path. the deficit is a share of gdp three quarters to 2.5%. despite this, we have much to to address the challenges of our new economy. the president's 2017 budget puts ,orward the building blocks
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crating the conditions for sustained economic growth while upholding the basic american belief that everyone who works hard should get a shot at success. it shows that investments and growth and opportunity contributor nations path. as the budget -- will making other critical investments and other challenges over the next 10 years. today i would like to focus on three areas of the presidents budget. reformng our proposal to the tax code. american business tax system is essential and priding -- providing growth.
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while inversions may be legal, it is wrong for companies to take advantage of our infrastructure, education, our research, and avoid paying their view of taxes. secondly, we need to invest more includes private and public infrastructure --
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we must support working families. this budget seeks to respond to the relationship between workers and employees. it provides expanded insurance to help families stay on their feet when underemployed as part of a job transition. it proposes to expand access to retirement savings opportunities, complementing our success. to help those without retirement or savings opportunities that work begin to say. the president's budget will create a stronger more glue set of a economy and maintain fiscal responsibility. to respondk together to immediate events. as the chairman noted, and puerto rico there is work we need to do. i think the chairman for working with us to try to think through an approach to dealing with this
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critical problem. puerto rico faces unemployment at 12% and is experiencing an unsustainable debt crisis. the administration proposed a comprehensive plan to encourage congress to act with the speed this crisis requires. this must begin with legislation to permit financial restructuring along with oversight, neither which will cost any taxpayer dollars. this budget does not address every challenge. as the president stead in the state of union address, progress is not inevitable but rather it is the product of choices we make. we face a number of big choices. we must take action to strengthen social security to to previousmitment and future generations of workers. the decade of fiscal responsibility laid out by this budget gives us the time we need to address long-term challenges. recent agreement not only
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demonstrates we have the capacity, but lays a foundation to address immediate challenges i look forward to working with this committee to make more progress over the coming year and i look forward to your questions. >> thank you secretary lou. secretary lew. repaymento's specific according to the constitution of puerto rico, your proposal would blow right through that constitutional protection even while you argue puerto rico's autonomy might -- must be respected. your proposal gives preferential treatment among unsecured claimants to obligation of puerto rico's public pensions and would give those claimants preferential treatment relative .o the general obligation
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the issues are complicated. among general obligation on holders are retirees in my home state of utah who under your formulation would be subject to less preferential treatment than puerto rico public pension claimants. can you explain your proposal a to provide preference for public pension obligations were some of those others are retirees in places like all of our states, places like my state of utah who also have claims and thought they were protected. lew: the financial picture is complicated. they of 18 different odd issues and are complicated. different levels of priority. the math is clear. $72 billion of outstanding bonds, they do not have the
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capacity to support the debt service said there is need for restructuring. a restructuring needs to includes all the bonds or virtually all the bonds to be a effective because if you do it on too small of a basis that will not work. we have never said all bondholders get treated equally. certainly there is the space to reflect the differences between categories of bondholders, even the voluntary offer the commonwealth put forward that principle. with regard to pensions, if you look at what is happening in the last few months, pensions are being shifted. pension contributions are being to pay bondholders. so you have workers paying into coming fund, the body is out to pay bondholders. that is not going to be there for their pensions. that is not a tenable solution. thousands of people a month
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leaving puerto rico. the economy cannot sustain the migration of the people who are capable of building the economic future. i know that we've talked about this many times. agreeds a crisis we needs to be addressed, the question is how do we do it in a way that works and is fair. we are put together a comprehensive proposal. with me clear the first steps have to be restructuring authority combined with oversight. that will not completely solve all the problems but that is where the emergency is. we look forward to working with you on an approach that meets the standard of fairness we can sustain. whyn hatch: i often hear -- the same't chapter nine bankruptcy that many municipalities across the country can access.
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retroactive chapter nine authority is what senator blumenthal's bill and proposal of the house involves. your proposal with super nine is very different. a representative has indicated lack of support for your super nine proposal. found in congress has legislation with the super nine structure. state and territorial officials have expressed concerns, including concerns about moral hazard and increased borrowing cost in states and municipalities across the country which could result from your proposal. it seems your broad restructuring authority has not received public support once the details are known. there is anyou feel appropriate proposal in congress and of so, if you have any one has on why no
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introduced your proposal is a bill in congress. sec. lew: i have talked to all of the office holders of puerto rico. leaders, legislative representative of the house. i think there is a broad understanding and shared view they need to have restructuring authority that will work and a -- and encompass the problems. i know there is concern. we can work to those details. as we have gone through this with your team and with others we have erred issues where there is room to find ways to work through this. what does not work is to say puerto rico should somehow solve the fiscal dilemma it faces without some very broad restructuring authority because puerto rico's debt is principally the thing that is staye down its ability to solvent. it is a case of insolvency where
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the debt is just beyond what they can support. unless it is restructured in an orderly way, it will go through a decade of projective litigation were different stakeholders with different bondholder interest will be suing the commonwealth in court. decadel have a lost where, i do not know of the commonwealth can recover from a 5-10 year. of litigation. look forward to working with you and others in congress. conversations with you and 50 members of the house and senate. maybe more. be done. needs to when we asked, we have to act in a way that works for the problem will be coming back at us. i do not think that will serve anyone. that it has concern to be something that is perceived to and be fair. we show the concern there will be oversight to make sure the
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future as a path which is sustainable. i look forward to working with you and others to find a solution. , mr.ank you very much chairman. secretary lou, as i indicated in haveate and you and i talked about, when it comes to finding issues that democrats and republicans ought to be able to work together on, this corporate tax gap comes front and center. two thirds of $1 trillion owed over aid taxes unpaid in decade. i recently sent a letter to the irs commissioner concerning the agency's apparent lack of tracking of these corporate tax issues and i think there is questions. i know we cannot get in all of the details in five minutes but i think it would be helpful to get on the record because i think there is some questions about whether the agency really knows these sources, the major
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sources of this corporate tax. based on your current knowledge, what are the major sources of corporate tax avoidance attributing to this vast sum of money that goes unpaid? >> senator, i think the challenge is not just one or two causes. there are many aspects of our economy that are not on the books. many aspects where businesses are organized to avoid taxes. if they do it legally that is different than if they do it illegally. one of the basic challenges of the irs over the last few years is by being deprived of resources, we lacked visibility -- we shoulde have have more visibility into. it the end of the year, we saw some restoration of recognition
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that in order to have an effective tax service you need to find it so you can do and enforcement, oversight and get data you need to answer questions you're asking. i totally agree. we should be able to put more resources into working on identifying resources of the tax are enforcement mechanisms to get added, to use our enforcement tools to do that. enforcement is people. you do not and force by turning on a computer. you enforce by having revenue agents, teams that can do investigative work. i'm grateful for the increase we got, but it was not for those purposes. was foreases we got very important thanks, cyber security, answering phones. we have gaps in the irs budget which do not give us the resources we need to and force as effectively as we need. ers, and working with
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the treasury, have a modern the majoro track sources of the corporate tax cap? because based on the letter of the communication we have had with the irs, i do not think that is clear. -- looked at that very care very substantial sum of money and say, that is not right and hadfair to taxpayers have their taxes pulled out of their paycheck directly. it also would be an opportunity to show that we can make tough choices. we can race money -- raise money by collecting taxes out and make your about priorities. to tracka database these sources of corporate tax avoidance? >> they are old systems.
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the team at the irs does a very good job making it look more modern than they are by making them more accessible to taxpayers and others who are looking for information, but behind it is a very old computer system. one of the things we will be a focus for with cyber security and identity theft is upgrading the computer system with some of the additional fonts we have. this is an ongoing issue at the irs. system. old computer i do not want to say a system that cannot give us the ability to do the analysis, but i would defer to the commissioner on the details of what needs there would be in terms of the data processing capacity. a system that needs investment. >> one last question. there is a big difference between the tax on wages and to the tax on investment income.
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the gap has increased particularly in the context of the last major tax reform, when ronald reagan decided in conjunction with a lot of democrats, bob paquin, a whole host of people that he was going to have equal treatment for somebody who makes a wage and somebody who has investments. in your view, what does the president's budget due to begin in effort to close this gap taxation between taxes on a wage income.s on investment >> it does a number of things. some are repeat proposals from the past like changing the capital gains tax rate and dealing with stepped up basis. some are new. stepped up some are new. like our provisions that try to get at all forms of income no matter how it's structured so
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that you can't avoid self-employment taxes or taxes that were put in place to pay for healthcare by categorizing your income a certain way. i think it's a real problem in terms of the concentration of income we see today at the very top and the fact that the income comes in a form that is very -- is taxed very differently. the system doesn't look fair to working people who just pay a tax on every dollar that comes in. that doesn't mean we should have a punitive standard towards unearned income. but you can convert earned income into unearned income to get a lower tax rate, it creates a problem. >> my time super. i just think it's worth noting that in the last tax reform effort, democrats and republicans said there was an opportunity for everybody in america to get ahead. and one of the ways was to treat
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wage income and investment income the same. thank you. >> thank you. senator roberts? >> mr. chairman, thank you very much for holding this hearing. mr. secretary, welcome back. i just want to register right off the bat my strong opposition to the proposal to place a new tax on oil. i know that's popular, certainly popular given the situation with the presidential race. i don't think it's extraordinary opportunity. i think it's another blow to the oil and gas industry, which is hurting. i have read and heard the economists placing a tax on carbon in order to, quote, address market failures and to properly account for the alleged costs of carbon-based energy sources. same economists content this would have little impact on the economy and that these costs, which they acknowledge will be passed through to consumers. can be implemented in a manner
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to minimize the impact on lower income taxpayers. i have heard it said that with the price of oil so low, now is the best time to implement an oil tax. fewer people -- this is a quote. fewer people will notice this tax. you know, i know, they may see it but they will feel it. just because the tax would be less visible under the current market conditions does not mean its impact would be less severe. i want to take a quick look at how this proposal will impact kansas where we endeavor to produce oil and gas despite the war against oil and gas by the administration. the oil and gas industry is a major component of the kansas economy. our producers invest over $700 million annually in the state. 10% of the work force is employed in oil and gas production, either directly or downstream industries. that's 118,000 workers that would be affected. that amounts to 12% of kansas
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payroll and over 15% of the state's tax revenue. all told, this is about $3 billion in family income in my state. it's no secret that global oil prices and supply and demand issues have hit the kansas oil and gas industry hard as well as many other states. some of the states' oil and gas service companies have laid off 50% of their work force. some producers have seen layoffs of 20% to 25% of their work force. kansas production has dropped about 5.5% and state tax revenue from the industry has dropped by over 50%. these are real impacts. very severe impacts happening right now. this is just directly within the industry, think about the related manufacturing and service industries. it's a massive new tax and make no mistake, it would burden the economy, spilling over into gas prices, almost everything else
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produced or transported within our economy. the kansas oil and gas industry is hurting. i think this proposal would only make things worse. i find that unaccessible and hope we certainly do not approve this. my question as described in your treasury general explanation, 15% of the revenue from the tax would be dedicated for relief for households with particularly heavy industry costs. sort of like a new national program. i do not view this as an extraordinary opportunity. in kansas most of the oil exploration and production companies are considered by any standard small businesses. my question is, does your department propose to set aside any of the revenue from this tax to assist oil and gas industry workers or workers who lose their jobs or otherwise are harmed by the new oil tax?
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>> senator, i think if you look at the price of oil over the last year, over the last even days, you have seen movements that are far more dramatic than the impact of the $10 fee over five years. $10 would be phased in over five years. i think we all know that we watch oil prize prices moving b bigger than that every day. i don't think we should exaggerate what the size of the fee is. we do think it's important at a time when -- particularly when oil prices are low to put in place a mechanism that will both help to capture the benefit of making the price signal one that contributes to better usage. but also to put in place a mechanism for us to invest in the technology and the infrastructure we need going forward in this country. it would but our highway trust
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fund in a more balanced, safe, sound place. and it would give us the renewable technologies and the new technologies of the future. it would apply to imported oil as well as to u.s. developed oil. it doesn't have a differential impact. >> are you going to set aside part of this to help the oil and gas industry with regards to small businesses that would be hurt by this tax? >> we obviously have set aside resources to deal with those who are low income who have no i'll t ter naive but to face higher prices. i'm happy to look at a proposal that would you have on those lines. >> i would think -- >> i would be happy to get into a discussion about it. >> if it's low income folks you will try to help, i think you ought to take a look at the harm that this tax will have on the oil and gas industry and maybe actually help those folks as well. >> first, we don't know what the
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exact amount that will be passed on in prices. >> my time has expired. i appreciate your response. thank you. >> senator schumer. >> thank you, mr. chairman. my first question is on tax reform. international tax reform. you and i have talked about that at great length over the last year. to summarize, i think we need it for two reasons. first, american multinational companies should pay the taxes they owe. right now our companies making profits overseas can keep that stashed offshore, avoid taxation all together. that's unacceptable. second, we have to protect american jobs in the future of our nation's economy. as you are aware and probably more than anybody else, more and more of the nation's multinational companies are leaving our shores all together. partnering with foreign companies to pay lower taxes in foreign jurisdictions, moving headquarters and property overseas. you secretary lew and the administration, the president
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have put forward a very serious international proposal, tax reform proposal that would transition to a new form of international taxation. house republicans have proposed similar solution solutions. i have been pleased to work with a bipartisan committee, including on this committee. we're trying to bridge over, of course, the divide between existing proposaproposals. there's common ground. i remain at the table ready to work. i assume that's the case for you as well. >> absolutely, senator. we continue to -- >> that's called a softball question. you are allowed to answer it. >> we continue to believe that working together to get business tax reform done is absolutely a high priority. we got closer last year than people outside thought. there were very good
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conversations going on where there was a pretty broad sense of where there might be an agreement on international business tax reform. in a way where we use a one-time revenue to pay for infrastructure that we want to be able to support, not build kind of future liabilities into the tax system that are unsustainable in terms of cost. it was disappointing that at the end of the year there seemed to be pulling away from that. our budget puts in place the proposal -- >> it's the same proposal as last year. the number of treasuries modelling from 205 billion to 350. >> that's for the international tax provision. >> that's because more companies are moving overseas and keeping their money overseas. is that right? >> it's a technical estimate of how much we think money is being kept overseas. and how much it's being subject to tax overseas and what would come here when the tax is put in
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place. we need to deal with the problem. >> that increase in revenue means lost jobs here. it should be a warning signal shot across the bow to us. one final point. this is for our republican colleagues. i have worked with senator portmans and others on this proposa proposal. that is, i know the administration feels strongly as do many of us on this side that international reform must be coupled where investments in this country because that's the way to take not all of the money but at least some of the money that we gain from getting these revenues and without it it's going to be hard to pass something. so has your view stayed the same that we won't get a deal on international tax reform this year or ever without pairing it with some degree of investment? >> senator for several years, we have been advocating linking those issues for two reasons.
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one is, if you don't use that revenue for a one-time expenditure like an investment in infrastructure, you can't cut rates with that that amount or losing revenue in the long run. so we think that that solves the structural problem of how do you deal with one-tile revenue. secondly, we have an enormous infrastructure need. if we ever get a business tax reform bill that has real bipartisan support, it has to include the infrastructure. we're very much of that view. >> i agree and -- and now speaker but then ways and means chair ryan understood that completely. i just hope people on the other side won't pull away from that because that will make it much harder to pass it. my final -- go ahead. >> i was going to say, while we're going to put every effort we can into getting full business tax reform done, i want to under score the inversions. we're seeing more and more stories of companies going
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overseas, large companies. we can't wait a year to deal with this. >> agreed. >> we need to deal with it and deal with it now and you could deal with inversions on its own. i don't think that's ideal. we should deal with business tax reform. i don't want to be leaving in a year watching more companies having moved overseas and i don't think anyone in this committee wants to look at that, either. the answer is you need legislation. >> i agree. can you answer this yes or no because my time is running out. essential to getting puerto rico back on track, it is necessary, may not be everything is a chapter nine bankruptcy provision. that is the -- or a broad bankruptcy provision, not a chapter nine and that is the view of many of us here on this side of the isle, is it administration. >> absolutely. there are multiple ways of drafting it. it doesn't have to be drafted. it could be drafted in terms of legislation that applies to the territori
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territories. the affect would have to be broad restructuring. >> thank you. >> senator? >> welcome. wonder to feel have you before the committee and let me thank you for working with me and leaders in my state to help us in a number of different areas. we very much appreciate it and as i start, when you were talking about the unemployment rate when president obama took office in michigan, it was 15.7% and we were at the verge of losing the major foundation of manufacturing in the country and with administration's help, the president's help we turned that around. unemployment is now 5.1. from 15.7 to 5.1 is a huge change. the challenge, as you know all too well is that not everyone is feeling theƱi recovery and so wn people lost the equity of their
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home, the primary way that middle class families save or lost or job or even in the auto industry took major cuts to save the industry and those who have been threatened on all sides, it's very difficult even though the broad numbers are incredibly positive. i want to speak about one of the areas and ask your comments regarding one area of incredible insecurity for people around pensions. and i know that colleagues of mine, as well, have spoken with you and i share the concern about the united mine workers. i am particularly from the standpoint of michigan concerned about the multi employer pension plans and the reform legislation that passed at the end of last year, which as you know gave administratiors of plans the
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ability to apply cuts to earned pension benefits for the first time since 1974 and it was unfortunately part of a must pass appropriations bill to avoid a government shut down at the time that didn't give us, didn't give congress time to debate the impact on retirees and from my perspective, a pension is a promise and key corner stone how we have had a middle class and the dignity and respect of work in this country, and i am deeply concerned about what we now face. on monday treasury held a public meet income detroit to hear from retirees that would be directly affected, more than 500 people showed up for that meeting. they went into great detail how they would be hurt by huge cuts in some cases 50 to 70% of their proposed pension. these are folks that gave up increases, annual increases in pay to have a secure pension for
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the future. so this is incredibly concerning. it's an outrage and i'd like to know what administration would propose to address this incredibly serious issue and really, broken promises for folks who have worked hard all of their lives and are trying to figure out how to go on in retirement. >> senator, as you and i have discussed, this is a terrible problem and there is no easy or good answer and as a result of the legislation you described written in co-sponsored and asked by congressman kline and miller, that responsibility falls to the treasury department to review the plans for working through multi employer plans that are not able to make their
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payments. you know, the challenge is they all go to an underfunded pension benefits guarantee corporation fund and if there is not enough money in the fund to pay the benefits, the question is do you drain that fund and have nothing for anyone? we are in the process through the hearings you described. we appointed ken feinberg to administer this for us. he is going around listening and he's listening to heartbreaking stories and in the end, we'll have to review the propels that come forward from the plans and as actions are taken and, you know, the first one will come up for review, i believe, in may. we'll continue looking at what options there are to -- in terms of how to review them, but at the core is this tension between not enough money to pay the
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benefits and very, very difficult changes in benefit structure to make the plans last longer. since we don't have additional money to inject into the system, it doesn't give us the option of just saying, you know, continue as we are because that would end up hitting more people. these are terribly difficult and i appreciate ken feinberg taking the task to report to me on that and i'll continue to stay close working with all of you. >> thank you. mr. secretary and chairman, one of the things i hope we will look at is the accounting changes, laws changed in the last several decades that allowed over funded plans to be available and changes that nothing to do with workers that have created a large part of
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this so that now we're talking about funding but there is a lot more to it in terms of how pensions got to this particular point and i think we've got a lot of hard questions to look at and decisions that were made. thank you, mr. chairman. >> thank you, ms. chairman. just a couple general observations about the budget. $3.4 trillion in new taxes, revenues to gdp at 20%, which is only happened once in the last 50 years. the 50 year average is 17.4% revenue to gdp. spending goes up to 22.6% of gdp. that's only happened five times in the last half century. the 50 year average there is 22.6%. and so spending is up. taxes are up. and at the end of the decade, the debt goes from $19 trillion
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today to $27.4 trillion. so the budget really is more spending, more taxes, and more debt. and it just seems to me that you guys are on your way out. this was a chance to go big and bold and i see it as another missed opportunity to do something that really matters about what we know the fiscal crisis facing the country is, that's mandatory accounts and mandatory spending. in fact, the budget shifts more spending over into the mandatory accounts. it's just some general observations, expressing frustration and disappointment. i do have a question, this comes back to slightly changing gears here for just a moment. with how the u.s. financial services companies are treated under the trade agreements, my understanding is that the treasury department opposed the idea of providing u.s. financial services companies the same
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protections with data flows most u.s. other companies will benefit from. i wonder if you can clarify on the issue. do you believe that u.s. financial services firm should be protected from foreign laws and impose restrictions on where they can transfer or process customer data? >> senator, this is a provision that we've been working on talking with the financial services community on, but also, with our own regulators and the requirements and in terms of how they view what they need prudential reviews of financial institutio institutions. we can't give away something that our financial regulators would need here in the united states. we're working with industry and with regulators as we go through
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this. we're sensitive to the concerns. it is certainly not something that is designed to put a burden on -- was meant to put a burden on u.s. financial institutions. we bargained very hard in tpp to get terms very favorable generally to institutions on a global basis. this is actually a case where what we in the united states, we meaning the -- not treasury but our independent regulators require in terms of data availability is one of the issues we have to work around. >> on cross border data flow, that's things we prioritize and seems it was a different standard what you're telling me is that that's actually something that you're working with the industry and the regulators -- >> yeah, we've -- in other aspects of tpp, been very
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aggressive to make sure that a local data requirements aren't put in place, for example, to restrict the ability of a global system like a credit card system to work effectively because we have big industries in that area. this is a kind of sub issue because of the regulatory requirements in the united states but we're working through it and sensitive to the concerns. >> okay. >> if i might, senator, just go back to your observation and i don't mean to take your time. >> but you will. [ laughter ] >> it is true the budget would trend back up to a 20% revenue, percentage of gdp. i remember well when 20% of revenue i was budget director at the time and we were on a path towards paying down the national debt and great economic growth. when you look at the growth of
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spending, you have to recognize medicare and medicaid will grow and we have to look at are we doing what we need to do? we don't spend any money we don't offset. physically it's balanced. these are important conversations this year and beyond. >> i would say the tough choices with regard to those parts of the budget that we all know are growing dramatically and in a matter of a few years is going to be entitlements and interest on the debt that eats up all of our revenue that comes in and everything that we spend for defense and discretion is going to be borrowed money, which is why we end up with a huge debt at the end. if part of it, of course, is we've got to figure out how to meaningfully reign in, reform the programs so they fit the demographics of the future and
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get growth up to a higher level, which obviously comes back to issues which i'm out of time and won't have a chance to get into but i think tax reform goes squarely at. when you're growing at 1 to 2% and slightly you were saying 2.3, 2.6 over the course of the next decade, doesn't get us there fast enough. so thank you, mr. chairman. time is expired. >> thank you. senator? >> thank you, mr. chairman. i guess a little bit of what i'm going to do is vent, also. senator laid the president for being able to do that. when you said this is your last presentation here before the committee -- >> of a budget. you're welcome to have -- [ laughter ] >> particularly related to the budget, i would think not to
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have to come back and both parties got one vote, i'm not sure who that was previous years got zero votes. you must think to some point, what a waste of time and effort goes in to coming up here and presenting a budget and not having support from either party. that's just an observation of mine. you state on your first page here that this is a vision for the future and i look at this as something that is totally disconnected with the reality of where we are. senator talked about the big gorilla in the room we haven't been able to deal with, that is mandatory spending and as you know, over the last five or six years, the congress together, the president tried to come to some solution to put some long-term reforms in that would keep us from becoming involve
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vanlt and our children and grandchildren won't have the opportunities and it's a failure and will put us in a very difficult situation. why do we go through this charade? simply say, you guys are spending stuff we no longer accept and whether it's the democrat party or republican party, there are messages being sent out there saying, you know, we caught onto the shell game that goes on in washington. they sit there and talk about how to fix the future and the
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future looks more dim so why can't we sit down here and talk about the problems we face and simply saying and you said because everything we are going to spend in the future is offset. it's offset by $3 trillion of more taxes. and i don't know of an economist that says the way to prosperity and receiving invasion and supporting middle class families and lower class is not to raise taxes $3 trillion over the next ten years. i gus, using most of my time to vent but i would like responses because i just think based on what we watched last night, the public is saying this is a bunch of gibberish going on here in washington and we want something
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different and radically different from both sides. both candidates got shillacd and say they are frustrated with d.c., i'm not talking d or r, these people failed and why can't we get on to something more related to reality? >> senator, i recognize that we have different views of how we should address the future but i think this budget is a very clear picture of how we believe we should address the future. i think we've also shown over the last couple years that when we sit down and engage on difficult issues, we find pathways to work together and make real progress. we made real progress last year on a number of important issues. i actually think it's quite relevant. it is part of system there are different approaches to what the answer of the future is and if we could get back to the place
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where you take those differences and figure out where to work together, we ought to be able to do business tax reform. there is a lot of over lap between the two sides of the isle here and administration and republicans and congress on how to think about it. we should just sit down and do it. people would feel better if we had a tax system where we didn't have inversions anymore. a lot in the budget -- >> we might be better able to do it if you bring forward a budget that gets at least majority of support on a bipartisan basis when you bring forth budget year after year after year and gets zero votes from democrats or republicans, does it ever give you pause maybe your vision for the future is not selling with the american people? >> i've been working on budgets for most of the last 40 years and i haven't known a year when there hasn't been that difference between parties beginning of the year and then you go to work on the things where you can get work meaningfully done. >> regarding the major issue we all face both sides, mandatory
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spending, over the last 40 years, we have not addressed that. >> we actually have over the last 40 years done a lot of things on mandatory spending that made a difference. i was part of the security form in 1983 that made a real difference. >> that's legitimate and 1983. >> i think the you look at the affordable care act while we may not agree on the policy, it's clear it helped reduce spending on health care and medicare and extended the life of the trust fund and the most important turning of a corner on spending in health care in decades. that doesn't mean we don't have more work to do but i actually think when we have an environment where we can work together and the thing where is there is room to make progress, we can give the american people something they should be proud of. when it's shut downs and fighting and crisis, it's not hard to understand how people get fed up with that. >> chairman has been very generous with my time. i yield back. but thank you. secretar secretary. >> senator menendez.
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>> thank you for your good work. i want to talk about puerto rico. 3.5 million american citizens and i under line that, american citizens that fought in our armed forces in just about every conflict this country has had for the last century. if you walk to the vietnam wall, you will see name ounce that wa wall. the citizens are in dire straights and threatens to explode into a full force human tar yin calamity. i hear it from puerto ricans living in the state of new jersey that have loved ones there that tell me about their challenges of their families on
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the island. now some say puerto rico shouldn't be able to restructure the debt even though they had the right in the law one time and stripped out and no one knows why, but they had that right and instead that they should simply raise taxes and cut spending to a degree to get their books in order. the problem is the debt payments in puerto rico are 36% of puerto rico's annual revenue. six times the u.s. average. so it seems any solution that doesn't include restructuring will be willfully inadequate and, you know, i know some people say this is being poll lit sized with the hedge funds, bottom feeders that bought cheap and want to maximize profits. that has nothing to do with those american citizens in
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puerto rico and we're seeing puerto ricans coming to the mainland where they will enjoy the rights and responsibilities of any other u.s. citizen, which by the way, will be far more costly. i want to get from administration on the record to make this clear and in fact, if puerto rico didn't have to make the debt payment, it would run a billion-dollar surplus so do you agree that providing puerto rico with the tools to restructure the debt is a necessary component of any successful recovery package? >> senator, i totally agree. there are things that need to be part of the comprehensive plan in the long run but there is an immediate crisis in puerto rico. i met with business leaders. i met with working people. i met with all the public officials. it's not a future crisis. it's a current crisis. they talk about hospital wards being shut down, schools being
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closed and pensions being drained of many people paying into pension funds that are being emptied out to pay for bond payments. this is not sustainable. people are leaving the island and the economy can't recover if the economy shrinks because people leave. when you're insolvent, your bond payments cannot be supported any longer and you have to restructure. that's what happens in the private sector. it happens when cities become insolve insolvent. puerto rico is complicated. there is 18 different series of debt. they could be in court from five to ten years with litigation. i don't think the economy could recover. there won't be an economy to talk about. >> if it was good enough -- >> crisis -- >> if it was good enough for trump, it's good enough for the people of puerto rico. >> i'll leave the comparisons
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for others. 3.5 million americans in chaos. >> let me ask you very briefly, chapter nine authority opened to municipalities, that doesn't -- >> it doesn't really work. it addresses about a third of the debt. >> with large debt payments due in may and july, isn't there going to be a point where we will face the consequences if we continue to delay an act? >> you know, they have only managed to be in default on small bond issues by doing things almost unthinkable in terms of financial management. when you talk about prematurely emptying out pension funds to pay bondholders, that is not something you do if you're not already bankrupt. when you talk about taking money dedicated to one bondholder and shift it to pay another bondholder, that can't go on for very long. i can't tell you at what point they run out of those extraordinary and very unhealthy
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kinds of tools but it can't go on forever and restructuring authority has to be in place enough in advance to restructure to meet may and july as they come. so i think the first quarter is a meaningful period if the deadline, the speak et set for the house to act is very important. we are willing to work with everyone and anyone that approaches us with the intention of solving the problem. we know that there is going to have to be oversight with restructuring. i do believe doing something on the medicate reimbursement is important but i totally agree with you without restructuring, there is not a solution. >> mr. chairman, there is a fierce urgency of now on this issue and i just don't get the sense that many of my colleagues understand that and i hope we can awaken them to that fierce urgency of now and the rights that 3.5 million american citizens have and would have if they were living here in the
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united states. it's just fundamentally wrong and so you ask people to shed their blood, risk their lives and can't treat them with the same dignity and respect they would have here on the mainland. something is fundamentally wrong about that. i hope we can -- i hope we can prick the conscience of the senate to move on this issue, mr. chairman because this is really consequential to millions of people. >> you raise aid lot of good points and to be honest, we're in the process of doing that. i'm going to come up with a different bill than the one we filed which would do the job to a large degree or get us started on it in time to do it even more thoroughly. i hope i can enlist your support when we finally get this -- there is no politics as far as i'm concerned. i want to get it done, and -- >> mr. chairman, you'll have my support if at the end of the day, what we are going to do is give the people of puerto rico the same opportunity than any
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united states citizen has here. i'm happy to work with the chairman towards that goal. i just have a real fierce of urgency and i can't elaborate on that enough to drive that point home. >> before the end of march. we'll see what we can do. senator brown, you're next. >> i want to throw in the words about the 3.5 million citizens emphasizing these are american citizens and that this should be done quickly and fierce urgency of now senator menendez talked about. thank you for the work you're doing that i have in my state. senator port man's state and city of lorraine and cleveland. lorraine at one point had a higher percentage of puerto ricans where 500 workers right after world war ii, 500 men came to lorraine to work in the u.s. steel and their girlfriends and families followed to the point there is a vibrant community
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there and so many of them were still very connected to the island of puerto rico as american citizens. i want to talk for a moment, mr. secretary, about something this committee did, mr. chairman so very, very important. part of the bipartisan package we made permanent the temporary extensions of the earned income tax credit and child tax credit, whether measured in terms of the additional money they have earned in low income families' pocke pockets. this is the largest anti poverty advance since the 1993 budget act saved the affordable care act. other than the affordable care act, what this committee did last year on the itc and ctc was the most important anti poverty advance that this country had. i want to focus on the earned income tax credit in 2013 the most recent year for which comple
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complete, 6.2 million people were lifted out of poverty. half were children. worker whose don't claim children are the only workers who can be taxed more deeply into poverty, which is ironic considering we brag about rewarding work and when we make our speeches around here. it's wrong, nobody who works full-time should live in poverty that is a fundamental -- should be a fundamental american value and i think is. 44 of -- 43 of my colleagues and i including many of us introduced a proposal to correct the problem. speaker ryan offered similar propels as has administration. give us thoughts, if you would, on the proposal, the need it would address and particularly, the impact on the economy. >> i agree with your assessment of the significance of making
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the refundable credits permanent. there is nothing more important we could have done to deal with poverty in the country and create an incentive to work, which is why there is historically bipartisan support. i think that there ought to be a way to work in a bipartisan way to get something done. i talked to speaker ryan and since about this many times. the president as has been reported. i think that this is an area where if we could put some other issues aside and concentrate, we could create a model for how you deal with problems of shared that help deal with inequity and help people get back into the work force. if you tax people back into poverty, you can't complain people aren't becoming part of
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the work force. it's not -- one of the reasons the itc was created was to make work pay and make it so people wouldn't have this ization of going to work at low wages. i don't know there is more elaborate economic response. i think you put a pretty accurate point on it if you have a tax that's taxes people into poverty, it's not a good tax. and if you have a solution, it is one that there ought to be bipartisan support for because everybody supports work and the earned income tax credit was created in a administration and budget agreements for many decades that i've been involved with. i hope this can be the next chapter and do it this year.
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>> senator bennett. >> thank you so much for your leadership and service over so many years. i want to start with an unrelated issue, whether you can describe for the committee we got a vote on the customs bill and whether you could describe the enforcement provisions in that bill and their importance. >> yes, senator, thank you. i think that the enforcement provisions are very important because while it is critically important to have creative agreements that open borders for free trade, it's equally important that we have meaningful tools to enforce fair trade and that we use those tools. i mean, anti dumping, duties are important tools and, you know, the customs conference report comes, you know, after we've taken some action at the end of last year where we added to the resources we have in our
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departments to implement the anti dumping and counter vailing duty laws. now when the conference report on customs is passed, will there be another round of enforcement tools? it would give -- it would create accountability for future administrations, this administration and future administrations for the prosecution of cases of duty evasion. the bill creates deadlines by which the customs and border patrol have to notify you of actions taken to investigate allegations. it gives the border patrol extra tools to protect property. it stream lines operations that facilitate the flow of leg legitimate trade and it gives us tools on an issue that you had helped to craft to bring
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currency issues into sharp focus so we can be even more effective pushing back on any unfair practices in that area. >> appreciate your help on that provision. i wanted to go back to senator was talking about. because we are at the moment cutting across the board, cutting defense spending. and americans and that certainly simultaneously we've now had $19 trillion of debt on the balance sheet which from the point of view of the next generation of americans as a combination is toxic. i wonder, i'd like to give the opportunity to tell us what
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issue you give your successor for how they could lead this congress in a bipartisan way to actually begin balance. that we are prosing to place on the next generation of americans. the time has come to get this work done. what's your advice. >> whoever takes my place will be coming into a very different situation than my predecessor and you were the budget direc r director. >> the deficit 10% climbing the debt would cross. we had a full blown crisis.
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steady economy, we have to start moving toward deficit reduction both economy recovery and we're delivering we got the deficit below 3% of gdp and rejections of the deficit and around 75% of gdp. a hockey stick going off. whoever takes my situation where, you know, hoeflfully it's long term and you can say ten years down the road where do we want to be? it's a blueprint. we got to invest in the debate
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about what do you do about long-term investments. so many people feel left out tod today. what do we do when there is real needs, real needs of education and training and research that we're not meeting. we got to fill that space. the budget agreement give us a period of time. the budget lays out ideas, let's get progress done on the ones we can agree on and whoever comes in will hopefully be able to take the debate forward. it's not a debate that begins and ends. it goes on. as i said to senator thoon, we have to be realistic about the mix of revenue and end andiing . when we balanced butt get. we had 20% of gdp revenue as pointed out.
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that was consistent with running what was projected to be a $5.5 trillion surplus. if you're looking at a period now where we have the baby boom retiring. it shouldn't be as a surprise to anyone that the demographics are rougher. when my generation was born, everybody knew that 60 years later, people would be 65. what we could have done in the 2010 period is carry forward the fiscal position we were in in 2001. we didn't do that. then we had a financial crisis and a recession but we're now in a more stable place so i actually think it is -- if we can make progress on the short and medium term. we have to work towards politics and permits the kind of civil debate to deal with issues in a bipartisan basis. >> thank you senator casing. >> thank you, mr. chairman. i'll be -- i'll just brief
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because i have to run. i want to commend you for your public service. now this is your third or fourth chapter significant public service and we're grateful it's a hard job in any environment but especially the current climate in washington so we command you. i was talking to you earlier today about an issue i think, i know you work on every day in the administration does as well and enough attention. the strategy to focus on terrorism financing or our efforts to cut off financing to terrorists and especially now the challenge that isis presents. i guess i'd ask about the current efforts. and if there is anything you hope we would do in addition to t
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the, you can't be tough on terrorism and issue in your department so in addition to putting an important commercial or focus we should confirm and enough isis financing. >> i appreciate your calling attention to the urgent need to confirm the secretary for this critical responsibility our world dealing with financing and we have to provide information to countries, we should have it under secretary is confirmed to do the job asfectively and your support. let he give you a little background of current state of
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where we are in the counter aisle of in terms, isil involved over the last couple years. they started by concurring bank vaults. they developed oil resources and ex portion taxes and to goat renew renewable work with the close 90 branchs of banks and isil territory. we worked with our military and in their control. we worked to close the resources so that it's much harder if not impossible to sell that, the trade with syria in particularly
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and when you look at what we're doing now in terms of title wave two, we're not just striking the refineries, we're striking at the oil tanker trucks which they use to move the oil to the border and been working with the government to shut down into the system and retirees who aren't getting because they live in isil control territory. these things are very hard on the non-isil people and towards funding. i can't say that we're done. they are always evolving but what they have done is grown so that they need they can't continue to grow. we have to keep cutting back on their sources of renewable funding make it harder and
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harder and obviously, military and what we can do on the finance side. and the first time in history the finance ministers from around the world met in the security counsel and together with russia we sponsored -- i sponsored a resolution that had the whole world and sanctions. we have an aggressive effort. and keep their financial flows up to their needs. we've turned to hard to stay where they are. and powerful tools to do it. it's a different entity. there is a lot of work we need to do by latterly. we shut down cement trade and
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not like trucks come and middleman and was to make middlemen liable so that it's not just the isil forces themselves that can be sanctioned and we are working very hard and adam is leading the effort for us. >> thank you, mr. chairman, secretary, thank you for your extraordinary public service and the manner in which you handled treasury very proud of your work. we're here on the budget, some of the tax propels in the budget under the jurisdiction of this committee and certainly, support what you're trying to achieve in higher education and make you more affordable to make pensions easier for individuals to
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accumulate funds for senator portman and i are working on ideas. some energy propels making permanent 179 dealing with energy efficient and retro fit. that is good. new market tax credit and the state i represent low income spend. i just want to use my time to talk about fundamentals and you have on the competitiveness of the tax code globally, you are making certain recommendations made in the last budget certainly deal with parts of the problem. and but it doesn't deal with the fundamental issues. the two fundamental problems we have is one, we have two tax codes. one for the wealthy and one for the rest of us and wealthy figure outweighs to get around the changes we make and two steps ahead of us. but if we past that, they will figure out something else.
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and the second is we have high marginal rates compared to the countries. the 35% corporate rate you deal with and try to get it lower. 39.6% individual rate. and what's amazing about that is that this nation among the nations we compete with relies less on the government sector so why should we have the largest rate? so i want to know why we're not considering something fundamentally different where we could have the lowest marginal tax rates in the world by 500% on both income and consumption. we could get a corporate rate down to 17%, individual rate down to 28%. we can do this in a revenue neutral way. you're not going to lose revenues. it's paid for in the tax code. not trying to take it from one sector to the other. all within the tax code itself. it rewards savings and very efficient. you can -- you don't use the tax code as much as you used today for policy but use it to collect
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revenue. that may seem strange to use the tax code to collect revenue. it's progressive, more progressive than the current tax code. i'd say that's not necessarily a high bar but more progressive than our tax code, which i would think most people would want. one of the complaints we hear about it is that's visionary, long-term, what can we do in the short-term? we've been talking about this for 30 years. this is your last opportunity to give us good advice and i would hope you would be visionary. one last point before i give you your time to respond, there are now democrats and republicans both proposing this type of tax reform, so this is not something that can't happen. it can happen. the more and more people look at it, they say gee, why aren't we doing this? why isn't america the only industrial nation that doesn't use consumption taxes? i understand the political hurdles. i tell you this, your propels have political hurdles.
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some are so common sense. everything has political hurdles. why not try to correct the problem? >> senator, obviously the question of income tax versus consumption tax is very serious analytical one. we have never endorsed a consumption tax. many other countries do and their overall tax burden may not be lower than ours. it's just the way it's paid is through different mechanisms. their income tax is lower but total tax may be higher. you know, we do, as you know, well have sales taxes at the state and local level in many parts of the country so this is an area where, you know, where there has been a federal income tax and state and local authorities have tended to use sales taxes. it's not by the basic nature that a consumption tax is more progressive by it's basic
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nature, it could potentially be less progressive. one would have to design. >> the two -- >> to make it progressive. >> we introduced a bill to do this. this is not hypothetical. the two design factors, revenue neutral. won't grow. it will be revenue neutral and the second it will be more progressive than the current tax code because you tax out the benefits to make the tax code progressive. >> i understand those are the objectives behind the proposal you designed. i'm saying inherently in the design of consumption taxes, people at low income levels consume 100% of their income. people at high new mexiincome l don't. you have to overcome that by design. not something we've supported or we are working on a proposal for. obviously, it's an area of intel lex well but not an area we're
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currently looking at putting propels forward. >> i didn't expect you to embrace it. that was not the purpose for the question. the purpose is this, we will have hurdles getting any of this done and we've been arguing about this for a long time and it's no longer thou etheory. we should have an advantage in the tax code. when you add up the tax burdens of the countries we compete with, they have a higher tax burden than we do. why are we losing companies to great britain for example? >> i think, senator, the business tax system is the reason we're losing companies, not -- >> not over 90% of the business pay in at personal rate. >> those aren't the companies -- >> some are. >> senator, your time is up. senator portman. >> thank you, chairman and secretary lou, good to have you back with us. you're probably having nightmares about the budget
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hearings you've had in the past and this is relatively easy. to many fewer notebooks. >> yes. >> i always hated those hearings. senator carten talked about the competitiveness and tax code and schumer talked about it. i agree, we have got to have a broader reform of the tax code but in the meantime, we know as you have said today that we've got a real problem with regard to our business tax as it relates to sea corporations and they are competitive. my one concern is you focus about invernsions. that's not the biggest problem. the biggest problem is they are not competitive and when you can't invert because we put regulations out there, we continue to have the problem and i, you know, would reference shyer, which as you recall was going to do an inversion with shyer. these are two huge pharmaceutical companies and
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didn't move forward because they didn't want to go through the hoops that you require. so what's happened. they bought four u.s. companies, said five. we'll just start buying them and globaling up u.s. companies. the last one, $32 billion acquisition. and as you know, they take investments and jobs with them when they do this. so we have got to get at the underlying problem. we talked about it and we have worked together on this. you worked well with us on trying to come up with frame work. i'm happy about some parts of the budget and not others and i think we need to keep an open mind. i may be the last who believes we have to get something done this year. we have to. it's not so much it's the right thing to do but we have to because if we don't, we'll continue to lose more people overseas. it's workers, wages, benefits, that's what gets affected based on the studies i've seen.
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>> i didn't mean you should -- >> we should talk about that. >> i didn't mean to suggestion inversions are the only problem, they are a big problem and indicative of the competiti competitiveness concerns and i am totally with you that we ought to get something done this year. i mean, we had conversations last year where reasonable people could see a pathway forward. i don't think that any of us should feel comfortable just watching more american businesses leave the united states, be purchased by foreign companies -- >> thank you -- >> because we failed to make the effort. >> i appreciate your comments and i think let's be honest. a lot of people said well, the leadership in congress and the white house put this off and what you just told me is you aren't putting it off. you're prepared to roll up your sleeves and get re-engaged and do something this year. if we wait a couple years which is what a lot of people say, we'll lose so many more businesses, every week or so we'll lose one particularly when people figure out we're not
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going to deal with it because in the boardrooms, the shareholders and pushing and investment banking firms offering big propels that makes the owners of the company and the board members well off but hurts the workers, i think it will be more pressure. let me ask you something else, hardest fit funds. ensuring at the end of the year that we had a better allocation for funds who put more funding in, you got 2 billion. senator brown and we have worked on this issue. this is something that affects ohio a lot and michigan a lot. 91% of the allocation is drawn down. we have so many properties out there. these are abandoned homes not just a magnet for crime but they are also reducing the value of everybody else's homes in the neighborhood. could you tell us today what you are doing with regard to distributing the funds? we would like them to be
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directed to the states and made available for elimination purposes but could you tell us about the allocation form la? >> thanks senator and thank you for the work that you and senator brown did to make this funding available and we are working as quickly as we can to make sure that we get it allocated. we're looking at a combination of approaches to get some money out quickly, as quickly as possible through an automatic formula approach but also to keep a mechanism to target based on where the need is the greatest on specific applications. we're very close to completing the process of putting that together. it's obviously only a few weeks since the provision was enacted. i've made it clear to my team that i view this as an urgent issue because i'd like to be able to commit the money and get it out there and use this year. that was the intention of the legislation and i'm very proud
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of the work that has been done on blight removal using hardest hit funds. it was something that was at the time an innovative interpretation of the hardest hit fund, but i totally agree with you. if you have a house on a block with blighted housing on it, if you don't remove the blighted housing, your chance of staying above water are really tough because blighted housing brings down the values. so the economics of it are very strong -- >> thank you. >> we're doing our best to get it out quickly. >> we appreciate your commitment. we have 100,000 homes in ohio that are vacant in the institute that need help now and ready to be demolished and appreciate your commitment and hope this funding will go toward blythed communities. >> we're very much keeping in mind how to be consistent with the purposes congress had in the legislation and as i say very close to being ready to -- time
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is of the essence. we don't want this to become march, april, may. >> thank you. >> thank you, senator. >> thank you, mr. chairman and secretary, thank you for being here. i had a chance to talk to you earlier but i want to reiterate my concern with the budget on the $190 million 19.2% cut to the hand ford cleanup. it's very important we don't miss cleanup deadlines and we make sure technically difficult aspects of the project are met and that the river corridor remediation is actually, the challenges of that continue to have great focus. i know that everybody always looks at the budget and thinks there is ways to get money, big numbers and cleanup but this is the largest cleanup project in the world and it has taken a long time and needs to happen and we need to have the continued support.
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so i appreciate, you know, hearing your comments on that and i know you'll tell me you're going to get back to me because of your position but i want to put the administration on notic this is something we have great concern about and want to work with you on it. i also would like if you would comment on where we are with trade promotion, i'm sorry, the tpp bill i supported trade promotion authority because i believe in a global economy, the number of buy laterals being done without us was not where we needed to be and that we should allow a lot of different ideas to come before the congress with different propels. so i want to hear where you think we are for the rest of the year with that because i hope that we're not going to have a delay by our colleagues on the republican side of the isle on moving forward on that legislation. i know some people would like to put it off until the next election, but to me, we should use, if we truly believe this is
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about an effort of the united states making sure that china doesn't become the dominant player in a developing what aro to make sure that there is market access to u.s. products and goods that are important in the asian market. and last, not to throw all of this complexity at you in a variety of subjects, this issue of puerto rico, because my other responsibility is ranking member on the oversight of territories. to me, it seems like congress needs to really act on the restructuring. your budget proposal reflects comments that the administration made before the energy natural resources committee that again has oversight over territories. so we appreciate that that budget reflects a restructuring plan. but if you can comment on why it is so important that the structuring plan takes over
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immediately, we really need to act now. and if you could address it i would so appreciate it. >> so senator, let me try to cover quickly all three questions. on hanford, i'll take back the comments and share with you when i was omb, and noted something that was not directly mine. but i'll take back your comment. on ttp, the signing of the agreement was it an important step? the customs bill being taken up tomorrow is another important step. and we're going to continue to press forward to have a vote on ttp. obviously, we're working very hard to make sure when the vote comes up we have the support to pass it. if i could take one step back and look at where we were in early december, or middle of last year and where we are now we've done a lot of important things to promote the u.s. economic leadership in the world and u.s. economic strength. we're not looking at an
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export/import bank that is unfunded. hugely important. we're not looking at forms that are creating friction with the united states and the rest of the world. we've done our part and kept our commitment. and with ttp now signed and cued up for a vote this year, u.s. leadership in the world economically is part of what makes our country strong and part of what makes our economy strong. and open the trade agreements that provide opportunities for the u.s. to participate in the future of global growth. our critical part of that ttp is that. puerto rico, to begin by thanking you for the efforts that you have been making for months now to try and make sure this issue gets the kind of attention it deserves. i believe it is a crisis. i believe there is a need for action, immediately on restructuring authority on oversight. i think there are other aspects which we address in our plan
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which if we can get them done, they're urgently needed. but we can't put off restructuring and oversight. and we look forward to working with you in your other committee, whatever committee congress chooses to address this. but i think the people of puerto rico need us to act. that is 3.5 million american citizens who will be plunged into chaos if congress does not act. >> aren't we at the point now where this could cost the economy millions and millions of dollars if more and more people migrate to the united states? >> they're american citizens, they don't need any permission. they have rights to come anywhere and should have those rights because they're american citizens. what is terrible is that it is further hurting the economy of puerto rico, and people who are part of the economic future leave the island and it does
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shift the cost burden to where those people go, if it is costs on the public health system or public authorities. the only path to a stable future for puerto rico has to involve them restructuring their debt. there is a variety of ways that they could be legislated. we look forward to meeting with you and others to work on bipartisan support. we have to remember the court if they don't get to restructure the debt, they're insolvent. without restructuring authority they will just default on one after another series of debts. they will be locked up in five or ten years of ugly litigation. and that is something that will set the economy back even more. so the deadline, set for the committee to act in the first quarter of the year was very
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important. we'll work with them and you to engage with the chairman to get something done. we can't just call it a solution. it has to work. >> thank you. >> mr. chairman, thank you, i'll take my 30 minutes now. first of all, thank you very much for holding this hearing and thank you for your commitment to tax reform. i want to thank the secretary for being here and thank you for your patience to get to where we are now. the comments made by senator schumer are very reflective. you and i had discussions earlier when we talked about the highway bill and the way we deal with infrastructure in this country. with the passage of the highway bill supported by the administration is there a different use now for those revenues? you keep talking about this, but is there another use for it?
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>> so senator, you and i discussed the five-year reauthorization is important because going year to year is terrible. but they did not have sufficient funding to provide for the types of expanding of infrastructure we need in parts of the west. so for us to be able to have opportunities to build the infrastructure we need for the 21st century we're going to need more funding. we think that using the funds associated with business tax reform are a win/win. first of all, the biggest advocates are the u.s., we need that. the bipartisan basis for agreement we're still very much of the view that bringing them together is essential. >> i am pleased that you have continued to get something done this year. i don't know what the possibilities are, that is probably up to the chairman more than it is up to me. i certainly hope we keep open minds on this process. i want to turn to another
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subject. that is the irs. gao report provided a quote, the lowest level of telephone service during the fiscal year of 2015. you have oversight. only 38% of the ages are terrible. what is the new threshold? what is the new one you want to meet? >> my goal is for everybody to get their call in. if you visited an irs call center you would have empty seats. it takes people during tax season to answer the phones. at the end of the year we have an increase in appropriations that gave us the ability. we are hiring people and worked as quickly as we could. this tax season we'll have more people in place to answer calls. it won't be perfect, we didn't get enough money to solve all the problems -- >> what is your expectation.
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>> the commissioner will be here, he will probably be able to give you a better estimate. we want to substantially reduce the wait time and drop wait. because frankly i believe it's unacceptable for taxpayers to call their government and not get an answer. it wasn't because we didn't want to answer the phones, we were not given the money -- he and i talk about this issue, i advocated for the funding that we got in december. so i very much am engaged in making sure that we do better here. but what neither he nor i can say is that we can get the phones answered if we don't have enough people. i mean, i'll tell you the truth -- >> so what is the expectation i guess is what i'm trying to get at? >> i don't have a number off the top of my head. >> we all have the same goals, but what is the expectation? >> the expectation is it will be -- 70% -- whether it will hit
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70%, the commissioner can maybe give you a little bit more -- i mean, i'll tell you the truth, they were recruiting people before the appropriation passed in the hope that the appropriation was passed. but they could not hire anyone until they had the money. we're talking about the end of the year until now. standing up new personnel to be in place trained to answer questions. >> let's change topics real quick, i don't have a lot of time here, he is not giving me the 30 minutes. on the omnibus, as you know there is a two-year delay on the cadillac tax. can you explain the geographic adjuster? >> yeah, the idea behind the cadillac tax was just to hit the most expensive plans and say this was a way to bend the cost curve. it had had geographical
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disparities in different areas, there was broad concern it was getting beyond the price plans. where the proposal we have addresses the concerns about the geographical disparity, it also makes sure it applies to the most expensive plans. it is very clear if we are to get our hands on the entitlement plan we talked about part of that is the tax care, and the entitlement plan helps you do that. >> is there any other plan that has a geographical adjuster to it? >> i'm not sure if that -- i'm looking at my tax counsel. it is -- i would have to go back and check if there are others. >> here is my concern, it may california or new york, but i have a feeling it's not going to affect nevada. our unions, public employees, will all be affected. our senior citizens will all be affected by this cadillac tax in a couple of years. and if

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