Transcripts For CSPAN3 Key Capitol Hill Hearings 20150206

The Export Import Bank is a critical component of our export strategy. In a world where nobody had export subsidies, one could have a conversation about whether or not we should have one. But in a world where our competitors have export programs, and we might not, thats putting a burden on our exporters thats just not fair. If youre selling, you know, from washington state, i know aircraft are a big issue, if youre selling aircraft against companies that have export financing, because of programs like the Export Import Bank, and we dont, thats something that you cant make up for just by running a tighter operation. Now, we have discussions going on on an international basis to see whether we can on a global basis lower the export subsidy programs. In that kind of an environment, it would be a different question. But we cant unilaterally put our companies in a position where exporters from other countries have export support, and they dont. So i think the reauthorization of the Export Import Bank is critical. And what do you think that the what would the Administration Like to see as congress were moving towards a period that i think is may 31st or something. We have for a long time advocated a reauthorization that would provide longer term certainty around the program. And i think the sooner its enacted the better, because uncertainty is not a good thing. Thank you. Thank you, mr. Chairman. Thank you, senator. Senator menendez arrived just in the nick of time. Thank you. To secure the next spot. Thank you, mr. Chairman. Mr. Secretary, i want to raise an issue with you that haes huge bipartisan support in the senate. And also, the support of the administration. Which is reforming the Foreign Investment and Real Estate Property act so that foreign Pension Funds can put muchneeded capital into the u. S. Commercial real estate market. And weve talked about this before. And how this equity to the u. S. Can create jobs right here at home. The current tax on Real Estate Investment trusts was due to an administrative action, not a legislative one. And indeed up until treasury issued a notice in 2007, foreign Pension Funds, investing in reits were equally with their counterparts. It seems treasury made this change in the first place. It could also undo this policy, and eliminate a barrier to private infrastructure investment. Im pleased to see that once again, the president agrees with me on the need for reform as illustrated in his budget. So since we all agree this is a bad policy, and treasury clearly has the authority to reverse this ruling, i hope that you would look at taking some sort of action on this. So my question is one, does it make any sense to create obstacles for Foreign Investment in the u. S. , particularly considering our dire need for Infrastructure Investments and will you commit to working with me, and theres a Bipartisan Group of members of this committee and beyond who support this effort. Senator, weve discussed this before, and as you acknowledge, we agree this should be fixed. We believe it needs to be fixed through legislation. I actually hope that in the discussions were having about business tax reform, it provides an opportunity for us to do this in a bipartisan way. And weve obviously put forward a legislative proposal again and i look forward to working with you on it. So youre not going to deal with it administratively obviously, so the question is but you do support the administration yes. Okay. Let me ask you in the same light, one of the main themes in the president s budget is the need for extensive investments in roads bridges, and other critical infrastructure. One of the most effective ways to help local municipalities, and i say this as a former mayor, make these critical investments is the private activity bond program. Unfortunately, the caps on water and Wastewater Infrastructure projects make it extremely difficult for local communities to take advantage of the program for these critical needs. And thats because, for example water projects are often multiyear ventures making it impossible to fit under the annual caps. I have legislation i plan to reintroduce that actually passed through this committee that would move the caps for water and Wastewater Infrastructure projects, and im pleased to see the president s budget included positive reforms in this regard. Would removing the caps help local communities upgrade their antiquated infrastructure . Senator, we did put the new proposal in our budget to try to accomplish the same goal. Im obviously raising the caps would provide more room for the local authorities. We think what weve proposed is similar theory behind it and we would look forward to working together to get something enacted into law to enable local projects to go forward more easily. And finally we have record job growth, and the administration has done i think, economically a great job lowest unemployment, some long period of time private sector job growth for a long period of time deficit as percentage of the gdp probably the lowest in 50 years and a whole host of other positive economic factors, but we still have a stagnant, which you refer to in your opening statement. Longterm Unemployment Rate is still, however, far too high. Leaving millions of americans out of the recovery. Theyre stuck on the sideline and while they do that their skills and networks become out of date which hurts them in trying to get back into the economy. Ive introduced legislation called the better education and skills training for americas work force that would provide a robust tax credit for businesses who pay for training for longterm unemployed workers and would create a competitive pool of tax credits for business clusters who come together to set up Training Programs at Community Colleges. I see the president s initiative on Community Colleges. Do you believe that designing a Job Training Program focused on providing the longterm unemployed with skills in demand would help reduce the disproportionately longterm Unemployed People in our country . Senator, we have, through the policies weve put in the budget, i think embraced very strongly the idea that we need to make sure training is available to help people get into or get back into the work force. Thats where our Community College proposal comes in its where other training proposals come in. There are multiple ways one could accomplish it. We put in our budget the ways that we think would be most effective. But we look forward to working together. Wed like to work with you. I understand and support the president s broader initiative. But how we deal and focus on longterm unemployed is a critical element. Totally agree. If you look at the, you know, kind of potential tpp in the medium term, getting people back in the labor force is not just something thats right for the individual, but its a way to make sure our economy is growing more. Im thrilled to find at least three places we can largely agree. Senator carper . Thank you, sir. Thanks, mr. Chairman. Welcome. Good to see you. I want to start off by thanking you and the administration for working so hard with us last year to find Common Ground on the health insurance. If we can work that out we can work out some of these issues as well. Mr. Secretary, you started off talking about the strength of the economic recovery. Ill acknowledge its not everything we would like but for us, its encouraging. Even by today. Today we received from the department of labor the latest unemployment filings. Averaging right around 280,000. It was 628,000 at the time president obama and Vice President biden were inaugurated. Hopefully it will have a positive effect on wages for a lot of people who havent had much of an increase in wages for a while. One of the things that i sought to do is coming out of the election is to figure out areas we can agree on. You touched on that in your testimony, and in the president s state of the union. My hope is we can move forward on trade, including tpa. My hope is we can move forward on cybersecurity to protect our better protect our sea ports. And comprehensive tax reform. I would like very much to do that. You mentioned the need to do that. Its a tough nut to crack. But so important. Immigration reform we need to take up Immigration Reform that reduces the deficit. It raises the i think the gdp very substantially over the next five, ten years. We ought to just do that. Work force, i like the president s proposals with respect to the Community Colleges, trying to encourage folks to continue their education coming out of high school. The last one i want to mention is transportation. Several of my colleagues mentioned it. And we have jurisdiction over that. Public works is the authorizing committee and were the committee that has to figure out how to pay for these improvements. We very much need to make them. Im intrigued by what the president has proposed, what the administration has proposed. Im not an advocate of repatriating money if we repatriate every ten Years Companies will continue to leave money parked overseas, until we lower it again. Give them a free pass. I dont think thats a very good idea. I think the administrations idea is intriguing. I think it will be difficult to achieve. But im interested in exploring it with you, and my colleagues. Ive been over the last six months i think ive talked with just about everybody on this committee. A lot of republicans in the house, and democrats in the senate and the house. What do you think we ought to do for transportation funding . Ive gotten a bunch of ideas. One is a user fee, 3 cents or 4 cents a year for four years. And that basically is a barebones approach and gives us about 100 billion a year, which is the minimum of what we 100 billion over six years, bare bones of what we need. Second idea thats sort of in talking to my republican colleagues, why dont we open some additional areas for oil or gas exploration. And some of the revenues that could flow from that that could go into the Transportation Trust fund. The president proposed that the areas off of virginia, north carolina, South Carolina and georgia be opened up for exploration. And that could actually marry an administration idea with ideas ive heard from my republican colleagues. I heard from a number of the republican colleagues, and democrats, too, why cant we figure out how to do transportation projects less expensive. Get a better result for less money. D. O. T. Has new ideas to share with us this year. So that might be something the administration and democrats and republicans could agree on. Those are just some of the ideas that ive heard. And i think id like to talk about energy policy. We like to talk about Energy Policies in an all of the above approach. I think there might be an all above more comprehensive approach on transportation funding than i thought a year ago. Your reaction, please. Senator carper, we obviously strongly share the sense of urgency to get a Longterm Service transportation bill enacted. Theres no way to effectively plan infrastructure going six months at a time, or even a year at a time. You need to have the time to plan complicated projects. We put in our budget a proposal that i think has the basis for bipartisan support. We genuinely want to pursue it and we think its the best approach. If that were turn out not to be the approach that could muster bipartisan support, we would Work Together to look at other creative options. But i actually think that there is a, you know, reason to be optimistic that we can get the president s proposal, or a form of it enacted into law. It draws on principles that are shared on both sides. Its in their best interests of the country, good for the economy, it will create good middle class jobs. So im not were going to kind of roll up our sleeves and try and get it done. Okay. Thanks so much. States are beginning to shut down Construction Projects in the spring, and in the summer. Because of the lack of predictability. I think the president s idea has merit. I think its going to be hard to do. The question for us is if were not able to do that for a while, what are we going to do in the meantime. The answer cant be nothing. All right. Thanks so much. Thanks, mr. Chairman. Okay. Lets go to senator carden. Thank you mr. Chairman. And secretary lew thank you for your service. Very much appreciate your longstanding commitment to public service. And the effective job youre doing as secretary of the treasury. I first want to talk about an area i talked to you once before about, and thats our Community Banks. We are still seeing Community Banks in maryland being challenged to be able to survive, not because of their viability individually, but because of the new regulations et cetera. They were not the speculators that brought about the financial collapse. And theyre trying to figure out a way to remain relevant in todays banking world. One area where we could help is during the t. A. R. P. Period, the preferred stock of Community Banks were now held by treasury, and they want to buy back that preferred stocks but there are certain obstacles in the way. I would ask that that get on your radar screen to see if we cant facilitate the viability of Community Banks through considerations through treasury to make it easier to recoup their preferred stock. Senator carden, we share the view that Community Banks play a Critical Role in local economies, and in creating an engine for Small Business growth and local economic activity. We have, in the t. A. R. P. Program, worked with Community Banks, will continue to. We obviously have certain constraints in the t. A. R. P. Program in terms of how we can dispose of assets. But im happy to look into it again. Appreciate it very much. I was very interested in your exchange with senator wyden in regards to the u. S. Harmonizing with the International Community on tax rates and the fact that we have high Corporate Tax rates. I also was interested in the exchange on simplification where youre trying to wyden wants to get the code more simplified, and i agree. I would at least put in a plug that you take a look at the progressive consumption tax that i filed taxpayers, joint taxpayers under 100,000 wouldnt have to file any income tax, and we would have the lowest marginal tax rates in the industrial world. If were going to harmonize lets take a look at where the rest of the oecb countries are receiving their revenues if we want to be competitive. I urge you to take a look at it because i think it would answer some of your questions. I want to get your comment in regards to the administrations position on doing business tax reform. Along with senator thune ill cochair a working group that will be looking at the business tax issues. And we have concern as to how Small Businesses treat it. If you deal just with Corporate Tax rates, then those who have passthrough entities, or use s corporations, would be at a competitive disadvantage if thats all we do. Because of the high individual rates. So i would ask, how can you really just do Corporate Tax reform and be fair to Small Businesses in our country . Senator carden we have always talked about business tax reform, not Corporate Tax reform, because we think its important that when we do business tax reform, we look at Small Businesses as well as the corporate side. We have in our proposal for example, the sexction 179 provision in taking of depreciation. You can take a full deduction in the year you make an investment you dont have to do it over time. Weve done an enormous number of simplifications to make it easier for Small Businesses. I think that we are weve designed provisions that are going to help Small Businesses. Were open to ideas, if there are ideas that come out of the conversations you and senator thune have. We would look forward to working with you. I would just point out that, if you end up in a position where one of the reasons businesses choose to file as individual businesses as opposed to corporations is that its better for them to do. If it becomes advantageous they can also but it changes the current competitive situation and Small Businesses are already challenged today. I understand they can make that choice back and forth. I want to get one last point in, if i might and that is on retirement and savings. Once again progressive consumption tax would help reward savings and retirement. But one of the things that we have learned working with senator portland in the house is that the tax incentives alone arent enough for middle income working families. Thats why employer sponsored plans, when they put money on the table is important. Im just urging you, as you look at your proposals for retirement securities, that we dont have the unintended consequence of adversely affecting employersponsored plans where they have money on the table where we would only be using the tax deferral as an incentive. Because i dont think thats enough for a lot of we agree. We actually have a proposal in our budget to make it more advantageous for firms to contribute for Small Businesses especially, to make a contribution into an employees retirement plan. We look forward to working with you on that. Thank you. Thank you, mr. Chairman. Thank you senator. Senator brown. Thank you, mr. Chairman. Secretary, welcome. Good to see you again. First off, a short statement. I know senator schumer and senator stabenow asked you about currency. I want to echo their remarks. I also want to remind you and ambassador froman that there is strong, strong support in the senate for real currency provisions, both tpa and tpp. Better and stronger negotiating objectives, but enforceable currency standards. Ive heard your comments before, but im hopeful as we move forward on that, we can bring you in our direction a little bit more. I want to walk through the country by country among the tax that you and the president have proposed. Just a series of questions, because i think that its often difficult to sort of process this. The tax the global minimum tax youre proposing is 19 , is that correct . Thats correct, senator. If theres 85 of the effective tax rate theyve paid for the last five years in every country where they do business, correct . Thats correct as well. If a corporation shifts its profits to bermuda where the Corporate Tax rate is zero that they would now owe 19 to our government on those profits crest . Correct. But if the same corporation were in south korea where the tax rate is slightly over 20 , or india where its higher, or in germany where its in the high 20s the corporation would not owe a single dollar more in u. S. Taxes is that correct . Thats also correct. This is a proposal that fundamentally shuts down tax havens and your opinion of that . Thats a very accurate description. And when were in international meetings, theres huge discussion of whats called base erosion and profit shifting. And theres two halves to that problem. One problem is the tax havens that have the rates at the bottom. The other problem is the broken tax codes like ours that have the ridiculously high statutory rates. We put in a proposal to do what we think they need to do and well be vigorous to push against the tax haven rates to the bottom rates. I think we have enormously better argument if weve done our part. So to what do you ascribe the opposition to your proposal in congress, among some in the Business Community not nearly all, but to what do you ascribe that . I think there will always be an argument for a lower rate, if theres a possibility of getting a lower rate. Its not surprising were hearing an argument it should be lower than 19 or lower than 14 . We havent heard arguments that undermine the basic integrity of the approach. And i actually dont think that weve heard arguments that suggest that theres not the basis for a bipartisan discussion to work through this. You know, we dont think that the numbers that weve picked have kind of absolute truth to them. We could have gone a little higher, we could have gone a little bit lower. It would fix the broken tax system and keep the american jobs here. Let me speak to something we can work out, thank you for that, and weve worked out bipartisanly for decades. And that is the Social Security disability insurance. The president s budget supports a routine accounting measure called reallocation. We had hearings last year when senator wyden was the chair, and had discussions with pretty much everybody in this committee on the reallocation. It doesnt cost taxpayers money. Its been done 11 times before bipartisanly. Walk us through what you suggest what the administration suggests on reallocation, and tell us what will happen if we refuse to do it and why we should do it. Senator we have a twopart proposal. One is we do have proposals that would do things like continuing disability reviews and incentives to get back to work pilot programs to help people get back to work from disability. But i dont think there are any experts who believe that any approaches that you could design would fix the disability shortfall in the short term. We saw a huge increase in the disability rate during the economic crisis for a variety of reasons. The only shortterm solution is a reallocation of the rates. Ive been doing this long enough that i remember when we had to reallocate from the disability from the Old Age Survivors Trust Fund to get to the 1983 reforms. So its not the its many times theres been reallocations, and theyve gone in both directions. I think we do need to Work Together on kind of a longer term solution. But i dont see any alternative but to have there be a reallocation to deal with the upcoming challenge. My recollection is we knew weve known for some time actuaryily in fairly accurate prediction when this would happen . Weve known this for some time . The exact month shifted the updated projections, but we knew it was in the zone of the next year for some time. Okay. Thank you, mr. Chairman. Thank you. Thank you senator. Senator bennett. Thank you mr. Chairman. Thank you mr. Secretary, for being here. Just when things couldnt possibly get worse the congress distinguished itself at the end of the last congress by passing a tax incentive bill among other things included an extension of the wind production tax credit for two and a half weeks. And you have just and in that context, and understanding that context, in your answer to senator brown, you the secretary of the treasury of the United States of america described our tax code as broken and ridiculous. And there isnt any thinking person on this committee that doesnt agree with that characterization of the tax code. Youve been around here for a long time and know i think acquired a lot of wisdom over that period of time. And i think the people of colorado, what they would like to know is, what are the conditions that are required to actually fix this tax code, to reform the tax code . What do we have to do to put this committee in the position to actually do the peoples business, to not do this insanely minor and ridiculous legislating, but actually get to a place where we can fix this code . Senator to allow the private sector to compete in this global economy. Senator, i couldnt agree more that shortterm extenders are a terrible way to do business. For a company that at the beginning of 2014 wanted to know what their tax status would be, waiting until the last week of the year doesnt help you plan your business. So its all retroactive for decisions that were made when people didnt know what the tax code would be. So it couldnt possibly have the incentive effect that it would have if it was a permanent tax law. We proposed dealing with the extenders in the context of tax reform, so that we pick the ones that should be made permanent, make them permanent, pay for them in the form of tax reform, and have a tax code that had a stability and certainty to it. I think the answer of what we have to do, we learned in 1986 what the answer on tax reform is. We have to Work Together, and we know there are going to be interests opposed losing what other special business they have, but on a bipartisan basis say its worth broadening the base closing loopholes, closing the rate and if we do it together, we can get it done. You know i am more optimistic than many, because it just makes such profound sense to do it. And i also think that if we dont do it its going to lead to an economy where we see more companies doing things we dont like. And thats not a good outcome. I want to thank the chairman for putting us in these working groups, because i think that at least presents a bipartisan start for our efforts. I remember a principal of the Charter School in my district, i once asked him, you could hear a pin drop in this place. I said how do you create these conditions where you can get this done . He said, i visualize the conflict in advance, and then when it comes, i know its going to be there and we can get through it. I think thats what we need to do on this issue. Not going to be easy to do, but we can do it. And senator, ive offered to both the chairman and to senator wyden that we look forward to working with the bipartisan working groups to help technically and with our ideas. And look forward to working with you. I think there are number of us on both sides of the aisle that feel the same way. I wanted to ask you an education question. The gao found in 2009, 1. 5 Million Students failed to take the credit or deduction for which they were eligible. Another study found one in four taxpayers failed to take the maximum education tax benefit when theyre eligible for multiple credits. I was pleased to see the budget simplifies our system of tax expenditures and makes the education credit more refundable. Are can you describe how simplification and better targeting might increase Overall College affordability. Senator, we share the concern that the current array of patchwork of benefits, tax benefits and grants makes it very difficult for a family to take full advantage of everything thats available to them. One of the reasons that we put together this approach was to simplify it, to make it so that families would understand what it is that they have available, and to take it into account. Weve consolidated the education tax credits into an expanded aotc. Weve simplified taxes for pell grant recipients. And tuition and related expenses for scholarships, part of the reporting is straightforward. It will be easier. Weve repealed the student Loan Interest deduction for new students, but allowed Debt Forgiveness to be excluded from income. And education savings accounts, you know well, weve actually said were not going to do that. Okay. Im out of time, mr. Chairman. But i just want to call your attention, mr. Secretary, to a bill that senator alexander and i have that would reduce the questions on the Financial Aid form from 108 questions to 2 questions. I think that would align with the work that youre trying to do. I hope youre paying some attention to that. Thank you, senator. Thank you, mr. Chairman. Senator scott . Thank you. The vote just started. Senator wyden is headed over so wed like to finish it so you dont have to sit around, mr. Secretary. Thank you, mr. Chairman. I appreciate it. P i will say this. You have done something that i am very surprised at and almost bewilders me you actually answered questions, which is a remarkable experience for a new senator. I havent liked your answers consistently, but at least you provided true and clear direction for this committee. I appreciate that. I want to go back to a question you heard from senator thune and senator heller as it relates to the inheritance tax. I started a Small Business a number of years ago, and grew that business from zero accounts, no cash to being worth some real money from my perspective. Lets say that business ends up being worth 2 million. I know there is 1 million threshold that if youre a Small Business owner you dont pay taxes, or inheritance on that. So i passed that business on to my nonexistent child. 2 million value. Whats the tax thats owed . Well, senator, we do have the 1 million the first million is gone. Im sorry, are you asking about the estate tax or steppedup basis. For steppedup basis, we have 1 million exemption. Yes. Then we also have over 15 years. And the payment period. Yes. And it would be taxed at the rate of the individuals income. So if they were not earning a lot, they would pay a very low rate. If they were earning more, they would pay a higher rate. A couple hundred thousand dollars likely . Over 15 years. Right. The real challenge is anytime that you have a nonliquid asset that youre required to sell or leverage in order to get the resources to pay the government, you reduce the actual value of that asset, which then means for Small Business owners and specifically minority Business Owners, the way you create wealth in this nation is a way to create profit. It only happens a couple ways through the market through Business Ownership and real estate. So in the area of Business Ownership, when you are in the position to create that profit, you have to be able to pass it on generation to generation the fords and chevys and all these big businesses. The proposals from the president actually impedes the ability for small and minority Business Owners to transfer wealth so you actually create wealth. I would love to see you guys go back to the drawing board and perhaps have some be at least a little malleable in this area, because a 1 million threshold on a nonliquid asset is really worth about 600,000, has been my experience. Senator, we obviously, through the exemptionses we put in, tried to be sensitive to the issue, through would be impacted severely and negatively by this conversation. But let me ask you a separate question in a different direction. I think in section 165, the dodd frank that really gives the fed unlimited discretion to make sure that banks and Financial Institutions are not taking on too much risk. Yet the president in his budget includes a new tax, or a fee on banking liability, supposedly designed to curb excessive risk taking. Any new tax on banks ultimately finds its way to the consumer. Mr. Secretary, does the request for this new bank tax or fee, suggest that the president believes that the dodd frank the law that was passed entirely it seems on party lines, does not pry ample tools for reining in excessive risks . Senator we think the dodd frank act is working very well. And has very much reduced the risk in the system. We think the tax proposal we put forward is entirely consistent with the dodd frank act. Its designed to make it a bit more expensive for firms to be highly leveraged, and that is one of the factors that contributes to risk. I think that if you look at our overall tax proposals, by reducing the Corporate Tax rate thats going to also have a benefit for Financial Institutions and other companies. I think if you look on balance, we treat Financial Institutions quite fairly. I will tell you that the seven basis points that you increased it by may mitigate risk, but at the same time it really passes on a greater burden to the consumer, which makes it even more difficult for Small Business owners to borrow money. My time is running out. But looking at the proposal on the Corporate Tax restructuring, i would note a 28 rate would be a positive rate, and would put us in a position to be globally competitive. However, for us to get there, the 14 repatriation deemed rate is you must know a nonstarter in a conversation about actually bringing home i guess you dont have to bring it home, youll get taxed whether you bring it home or not. You have to know thats a nonstarter on our side of the aisle. It would be helpful to go back to the drawing board and have a conversation that has a realistic expectation or opportunity to make progress. Senator, i would say the structure of it is similar to the proposal put forward by the republican chairman of the house ways and Means Committee. We see it very much in the realm of the issue that we could have a constructive bipartisan conversation on. Conversation, yes. Progress, probably not. Thank you. Senator portman . Thank you, mr. Chairman. I appreciate the fact that tax reform gets so much notice here today. Because i do think its an opportunity in this budget for us to try to make progress. I think senator scotts right. I think its one where we have differences in terms of what the deemed repatriation rate is. I do think that the structure is consistent with what many of us have talked about on this side of the aisle. Look, we need to do it. In ohio, Companies Choose to invert, buying a Smaller Company overseas and move the domicile from ohio to one of our, you know, Global Trading partners in developed countries. And this is happening all over the country. More importantly, i think a lot of companies who are u. S. Companies cant compete. U. S. Workers cant compete. So Foreign Companies are buying them. Theres a study coming out soon that says that over 9,000 u. S. Companies acquired by Foreign Companies in the last ten years alone. And finally, its tougher to compete. Even if youre not taken over been a foreign company, you tend to have a difficult time expanding. Ive heard this from ohio companies. One said they completed a deal and all the negotiations in korea to buy a subsidiary there, a Germany Company walked in and said we can pay 19 more. They lost the ability to expand. So this is happening and its American Workers who are taking the brunt of it. I want to commend you for putting into the budget, i have big concerns about the budget as you know both of us used to be in the budget job. And i dont think it takes on the challenge of our time, which is the mandatory side of the spending. But with this particular provision, i think it gives us a chance to try to do something that will help American Workers and therefore, not just increase economic growth, but also create the middle class jobs that were always talking about. Because these jobs are the very ones that are at stake right now. Thats who loses if we dont lower the rate. There was a great study done by the National Budget office that shows that. Its not about the board room, its about the workers. I guess the one question i would have for you today, just to be sure we understand where we are, and this notion of helping the Highway Trust Fund because this came up with a lot of the different members, theres been discussion of saying why dont we just do a tax holiday. In other words, as we did ten years ago, and 20 years ago tell folks you can bring money back to this country at a lower rate, and then, therefore, well be able to fund the Highway Trust Fund. Have you looked at that issue, if we didnt do tax reform, rather just did a tax holiday . What would be the impact on revenues . Senator, we have looked at it in both the joint tax committee, and our estimators, and have determined that it costs money. It doesnt save money. So it wouldnt create additional revenue for the Highway Trust Fund . No. And i think as a structure, as we were discussing a little bit earlier, onetime tax holiday, voluntary tax holiday doesnt solve the structural problem. What it does is tells company keep all your earnings overseas until the next tax holiday. It doesnt regularize the tax treatment in any meaningful way. By putting in place a new structure with a minimum tax and toll charge, i think we accomplish the goal of having our tax system work properly so that Business Decisions we made on economic terms, not on tax terms, and i think that it will create Better Climate for creating jobs in the United States. So while i dont think the onetime voluntary tax holiday works well, and accomplishes the goal, i do think that the proposal we put in structurally does. As you and i have discussed the question of where you set the rates is something that people can disagree about. If you start with the structure making sense i think there is a basis for a bipartisan conversation. I hope you will reiterate today for the record what you have said publicly and in some of our meetings that this is a starting point for you all in terms of the rates. I do think senator scott mentioned well have differences in terms of the rate. We want to make sure this works to make our workers more competitive. If we end up with a rate of 19 , for instance, some would argue we have not accomplished that. Because you look at the comparable rates around the world now, the effective rate has to be, in my view in the mid20s in order for us to be competitive. If you look at the tax rate here, plus the 19 minimum the average rate actually is above the average of the oecd countries. We hope youll work with us on the rate. And also to ensure that we do have the ability to help on the Highway Trust Fund i think we have to come to some understanding how well deal with the extenders. Maybe this could be part of this which would make all the sense in the world. And lets be sure were working together to find a base line that works. If you did do the deemed we patriation, which is part of the overall tax reform, you do think there could be some revenue for Highway Trust Fund . I do think there could be revenue for the Highway Trust Fund. Just to be clear as we deal with the expiring provisions we need to deal with the original provisions that expire as well. Mr. Chairman without objection so ordered. Id like to put in two letters from the uaw and ford motor company. The issue of currency. I think currency manipulation does affect trade. I hope that you, mr. Lew in your work on this issue, will help us to put in enforceable standards on currency. I think it makes a lot of sense. It does affect the way American Workers compete globally. Thank you, mr. Chairman. Senator grassley . Are you ready . Or would you like me to go . Why dont you im happy to have you go. If were limited to five minutes, you go ahead. Okay, great. Yes go ahead. Secretary lew let me kind of walk through what looked like the transportation choices ahead. Because i think thats an important part of this debate. To me, theres sort of three entrants in the discussion. There is the gas tax issue, and we got a sense last year that it would be hard to build significant bipartisan support for a major hike in the gas tax. Then there is the repatriation issue. And im certainly open to looking at this, a question of taxes, and transportation. There is clearly an infrastructure a nexus there. Because we have of course, trust funds, and we have excise taxes, so there is a clear nexus there. I think we also have learned from the 2004 experience that there is no repatriation rainbow out there. And in fact my sense is, that if you make it voluntary with respect to the whole process the joint committee on taxation our score keeper wont score it. Thats certainly a path worth debating. The path that we know works because weve done it, is the bond question, a question of getting some of this vast sum of money off the sidelines and into infrastructure. Its a good investment and bonding works. It was in this room close to six years ago, after decades worth of bipartisan efforts chairman baucus talked about build america bonds, and people talked about what might happen and i said we might sell 3 billion to 5 billion worth of them. In a year and a half 183 billion worth of build america bonds were sold. All up and down the eastern seaboard, and senator caseys state, governor rendell and others, major supporters of build america bonds. You can debate what kind of bond they ought to be as well. In other words there are different types, and i think we understand it. But, you know, to me, a, because it has actually worked and helped us get more revenue, b, because theres a bipartisan history there, i think it would be very helpful you all have been interested in qualified infrastructure bonds. Ive had a great interest in a variety of new approaches here that will draw more private investment into the countrys infrastructure. Give us your thoughts on how the approach that you all are talking about that would lend itself to a bipartisan alliance to get more private funding in the infrastructure. Senator as you and i have discussed, this scenario that we violently agree on i think that the violent agreement, oh my goodness. Violent agreement. Your leadership in the design of bond provisions here has been extremely important. We have worked with you on these. I hope we can work on a bipartisan basis to get either the qualified Public Infrastructure bonds or you can name it any number of things, whether you call them build america bonds, or america fast forward bonds, or qualified structured bonds. The idea is to create opportunities for private capital to be invested in infrastructure. One thing we know for sure is that even if we are successful in extending our Service Transportation bill for six years at a higher level, that will only meet a fraction of the infrastructure needs that we have in this country. This isnt a case where we should do an either or. We need to do both. We also need to pursue Public Public private partnerships as another avenue. The deficit is the real serious economic challenges for us to deal with in order to make sure that the future of our economy is as bright as its been in the past. We cant have ports that arent adequate to take the deep draft ships that are going to be coming through. We cant have airports that are subpar and behind their international competitors. We cant have roads that maybe takes hours longer to get from one place to another than it should. That costs time, and money and its a drag on economic growth. So we believe that obviously theres shortterm benefits of job creation in infrastructure. Longterm, you know, for the entire history of our country, its one of the key starting economics for build for the future. Senator casey is next. Senator grassley, both in order. And i know my colleagues have been very patient and i appreciate it. Thank the ranking member. I want to apologize that i was not here earlier, mr. Secretary. I didnt have a chance to hear your testimony. It was one of those conflicted mornings. But were grateful that 54a difficult time. As you know we had ambassador here just a number of days ago. One of the parts of his both testimony and then the back and forth with the questions clearly indicated that initially you and i have talked about the manipulation. Thats not been addressed in the tpp negotiations. He directed questions to you and thats the reason i raised it first and foremost. You have discussed my main concern as been about china. The other concern is down the road. Thats great concern on currency manipulation. Just in terms of data i want to ask you maybe two questions about this. Just as it manipulates to japan, the Economic Policy institute found that currency manipulation is main driver in the deficit for japan and this displaced 896,000 jobs nationwide in 2013 including 40,100 jobs in pennsylvania. Its a broader measure of trade deficit. Its very frustrating. I think currency manipulation is both unfair and very damaging. It would be, its a double insult if it isnt raised. I want to get your response to that. We do push back. The Current International force. Even more importantly bilaterally. I think the study on japan is not entirely accurate. There is no evidence that in the last several years japan has intervened in a way that would meet the standard that youre describing. I think the activity that the report is pointing to is not government activity but investment of funds in the private pension fund. Private Pension Funds in the United States as well as other countries have mixed portfolios. I think if you did the analysis the United States invests in other countries as much as other countries invest in the United States. I dont believe theres any evidence of manipulative investment. We hold them accountable for their work. Their language suggests they are deviating domestic tools. If we do that we see change in language and restraint in policy. I do think the question of looking at Macro Economic tools is important. If you look at our qe policies to other countries it was disruptive disruptive. Without qe we would not be able to dig ourselves out of the recession. We cant compare situations that are Macro Economic to unfair manipulative practices. The broader question is even goes beyond japan. I understand its asserted. Problem is we never seem to get something tangible, a result that will have our workers on level playing field. The frustration i get sense the administration doesnt place the priority that i place on this issue. I actually think that were second to none in terms of pushing back on what our unfair practices. I know i have raised it not in just occasional offhanded way. I think its central to our relationship with another country. I have seen it have affect. I think we have been aggressive. As ive said earlier were open to discussion of how to build a bridge between trade discussions and trade legislation and the processes for dealing with currency through the current authorities. I would look forward to that conversation. Thank you. I dont want you to take time to answer it. Following on our meeting a week or two ago, then he said like senator casey did it was up to the secretary of the treasury that was negotiating this or dealing with this subject. My question would have been specifically is the administration doing anything of consequence to address the currency manipulation of our trading partners around the world. There isnt going to be any change of behavior. Its frustrating to me that we dont take on china. Theyre not involved in tpp but involved in this whole business of currency manipulation. Ive taken the senior vice premier and the president and the finance minister on the issue. They have actually responded to our pressure. We have taken it seriously and made progress. I wouldnt want to say you arent, i know those steps have been taken. They didnt use to admit they intervene intervene intervene. They say they will refrain. They have never been willing to abide by the transparency requirements of the imf. In response to repeated pressure they have said they will abide by the transparency to see what theyre doing. Its a very serious issue. Were very actively engaged and pushing very hard on china. Let me say thank you if youre doing more than what theyre doing. You spoke about a 1 million issue as far as the way the president s plan will work. You mentioned that threshold. Its not a Small Business. If a business more specifically if the business is over 1 million or is it a 1 million exemption in. Its a dividing point. Its definition. Okay. The 1 million is defined guest the size of the business, not the size of the game. For larger business the provisions would apply. For smaller business they wouldnt. Okay. You have to be on 1 million. If youre over 1 million then the first million is taxed. Thats my question. Theres a 200,000 exemption for individual. 100 exemption and you still get the 15 years to pay any taxes that are due. Youre only taxed at the gate not on the base value. I think rather than take anymore time ill put a statement on this issue in the record. I think its very detrimental to family farming. Thats the summation of it. I think tax, if you want to keep a family farm in the business its going destructive destructive. Any questions for the record should be submitted by no later than february 12th. The hearing is adjourned. Thank you. Is with us to help us understand whats in that budget. Tell us what are some of the president s key priorities in his budget request and what agencies would get increases . The two main things that sort of, they highlight in the budget is they wanted to end the sequester or scheduled cuts that were agreed to in the 2011 budget control act. Whether they try to bring more tax breaks in for the middle class and lower income people and pay for those with some tax changes that largely affect us. Are we talking about any major cuts . The agency they want to inkries irs funding that took a big hit under the cr bill. That is likely to be problematic for republicans. The defense dod a flash point. Those are some main aspects. You tweet the price tag for obama not having to deal with debt limit begin about 1 trillion. Insert dr. Evil laugh here. Tell under the circumstances about that. 1 trillion. The debt ceiling is suspended so it doesnt apply. It will reset in mid march. After that treasury will have some more time using some accounting maneuvers to still continue to borrow. Its an unspecified amount of time at this point. Treasury is giving a precise forecast so they have more data. A lot of people are thinking october, maybe november that will be when they need a new debt ceiling increase. If you look at the figures the projections by the cbo and by houses office of management to get expected to be march versus where it will be september 30th of 2016. 1 professional republicans this year. It will be here and there. What is the next step of the budget process . Basically get sent over to the cbo. They will look at it and say this is probably look at the individual pieces. This is a legitimate accounting. This part of over here we would question. In march get back to congress with their review of the president s budget as well as the new baseline given their projections about what they expect the economy and the deficit to look like the next ten years. From those figures Congressional Republicans will write their own budget. One each in the house and the senate and then try to reconcile them before april 15th. If they can do that thats a feat thats not been done since 2009 during most of those years. They will be able to use that budget document to possibly leverage later legislation that would be immune to fill butsibuster in the senate and send some bills to the president for signature or veto. What those reconciliation bills will be remains to be seen. Hes a budget reporter covers house leadership. Hes on twitter bna house. Thanks very much for joining us today. Thank you. Congressman paul ryan said japan and canada need to cut their farm tariffs to u. S. Agriculture. Congressman ryan who chairs the house ways and Means Committee talked about the importance of trade at the Washington International trade association. Cause were short on time im not going to go with a lengthy intro introduct introduction. All trade matters originate, pass through will be one of principal architects to that. Without further ado, chairman ryan. Thanks the a lot. I appreciate it. Theyre going to be calling votes fairly soon. Well get on with it. Steve and i have known each other for many years. I want to thank him for a very quick introduction. Last time we had this many people talking about trade policy was when brett favre went to the new york jets. Its nice to have a lot of protrade people in one room. Trade is absolutely vital because our jobs absolutely depend upon it. 20 years ago, trade supporter of one out every ten jobs. Today, trade supports one out of every five jobs. This is our future. Theres no turning back. We cannot create more jobs if we dont get more customers. 96 of the worlds populations, 96 of the worlds consumers dont live in this country. They live in other countries. Were going global for the same reason pioneers went west because thats where the opportunity is. We should welcome this change because more trade means higher pay. Jobs that rely on trade pay on average 18 more than others. Take an example. Say youre a blue collar guy ar gal working for a computer manufacturer. If that company also exports youll make another 11,000 more a year. The one reason in the big leagues Companies Just have to be at the top of the their game. They have to invest in their workers. They have to give you better equipment or better training and they have to give you better pay. Otherwise they will strike out. Competition is the thing. Its that very pressure, that little extra nudge that pushes companies to do more and pay more. We are heading into this future with our eyes wide open as we should be. Just as we compete for other peoples business they compete for ours. Just as new jobs will arise other jobs will change. Theres no doubt about it. Global competition is tough. Its real tough. Its persistant. Ultimately its a good thing. The aver raj American Family of four saves 10,000 a year. The thing about trade is it can feel like a competition where theres always a winner and always a loser. Really its more like a collaboration because both sides succeed. Otherwise they wouldnt do it. More trade means more people from every country, buying, selling, investing creating all working together to build a better world. Trade is good for america. People have legitimate grubs with the economy. Lets make sure we have grabbed the right culprit on this one. The problem isnt whether other countries play by the rules, its when they break the rules or rather its when they rig the rules in their favor. I would argue that the best solution to that is more trade agreements. Now, what a trade agreement does is levels the playing field. Our economy is one of the most open in world. It takes down barriers to our exports, tariffs quotas red tape. It says youve got what i want and ive got what you want. Lets work something out. Let seets up rules so its easier to trade. That way we will be better off. The numbers bear there out. Take three of our most recent trade agreements. Where do our exports stand now. Vej tanls to career ya upkorea up 60 . Household appliances to panama up 200 . If you add all all the countries that we do not have trade agreements with, our manufacture manufactures run a huge trade deficit with them. If you add up the countries that we do have trade agreements with we run a surplus. The numbers confirm what we already know. The American Worker can compete with anybody if given a fair chance. Say someone steals your software. If youre a big corporation, youve got money lawyers, you can get to the bottom of it. You can do something about it. If youre small or medium size business and 98 of ourics porters are small and medium side businesses, you cant afford to fight that. Youre out of luck unless theres a trade agreement. Unless theres an enforceable trade agreement. You can work with federal agencies that take up with that country. Wen theres no agreement its the law of the jungle. When there is, its the rule of law. Hire is the issue. Oush klg r it should be tho surprise that our share of what east asia imported fell by 42 . Every one of our Top Competitors did better. You cant put points on the board if youre not on the field. Our rivals, our rivals are playing for keeps. The chinese are pursuing a lot of agreements. They are talking to anyone who will listen to them from south korea and asia and norway. T not Free Enterprise. Its what we call state capitalism. They say sure well take down some barriers but were still going to force companies to store their data in china. Were still going to hand out sweetheart deals to our government firms. Were going to demand people to fork over their intellectual property. The chinese are walking tall. Now other countries are following their lead brazil, argentina, indonesia to name a few. When we complete a trade agreement, we strengthen our ties with other countries. Our economy is stronger. Our National Security is stronger. Its a lot easier to live in the neighborhood thats friendly prosperous and free. Were also negotiating a deal with europe. Our biggest beef is they impose food and safety standards. The way they write it its pretty opaque. They want us to label this a bratwurst like sausage. Its kind of like saying the Green Bay Packers engage in soccer like activity. Canada agreed to accept some of these labeling standards. The point is if we do nothing, red tape and barriers to our exports will only multiply. Nobody negotiates with an empty seat. We have got tot be in this game. If we dont write the rules of the global economy, somebody else will. Somebody who may not have our best interest at heart. We had to get out there and change it because its not just the goods and services that we care about. Its people too. Nothing has done more to lift people out of poverty around the entire world than the Free Enterprise system. Nothing has given people a better chance to reach their full potential. This is an idea that needs defending because not every country shares our way of life or even understands it. A few years back a foreign politician was talking to an american journalist. The first question he asked was here in the United States you dont have this phenomenon of passing money under the table. The journalist explained in our country the way to get ahead isnt to grease the palms or cut the corners but to make an honest living. Competition is the only real cure for corruption he said. What were offering the world is not just an economic vigsion. Were offering a moral vision. Its our job to make this a reality. We have an opportunity to do just that. Right now were negotiating several big trade agreements. These are great opportunities. Tpp and tpip could give us access to over 1 billion customers and twothirds of global gdp. Think about that. I want to explain what were looking for in congress. If i had to sum up my approach it would be this, aim high, go for the gold. Take down as many barriers as possible. In fact, i would rather have fewer countries signed on if we took down more barriers. If any of the 12 countries in these talks think standards are too high, i would complete the agreement without them and invite them to join later when they can. Labels are labels. Theyre meant to inform. Theyre not meant to frighten. Regulartions are meant to keep people safe and not keep politicians in office. Everybody benefits. Any agreement must include strong protections for cross border data flows. We need to think big. We fleedneed to go beyond signing up deals for trade and services that were signed in the days of bicycle messengers. We can do better. We need to push countries to do more. Weve got to keep trucking at the wto. First, weve got to implement the trade agreement. This could add a trillion dollars. This is a great opportunity to tear down barriers that could add another trillion dollars. We can keep our crucial edge. Weve got to keep using the dispute settlement process to enforce our rights. Otherwise whats the point of having a trade agreement. Before we can conclude any of these deals theres one thing that we have to do. Weve got to pass trade promotion authority. Here is the issue. When the United States sit douns at the negotiating table, every country at that table has to be able to trust us. They have to know that the dleel the administration wants is also the deal that congress wants. If our trading partners dont trust the administration, if they think it will make commitments that congress will undo later on they wont make concessions. Why run the risk for no reason. On the other hand once our training part ners inging partners know we are trustworthy, theyll be more willing to make concessions. Thats why we have to pass tpa before negotiations are complete. We have to be in the best position possible. We have to maintain a united front. Im not saying to enhance our leverage we have to enhance the administrations power. Its far from it. Im saying what tpa does is enhances congresss power. Tpa empowers congress. Heres how. Nothing stops the administration from negotiating deal. They can go out and do this right now. If we waited until after negotiations to get involved and simply reacted to whatever they put in front of us we must just kill the deal. That means we have to get involved before the deal is done, not after its finished. We have to be proactive, not reactive. We call this process trade promotion authority. I think of it more as a contract. We say if you want this top up or down vote you have to meet three requirements. Number one youve got to follow our guidelines. Here is what we want to see in the trade agreement. Number two you have to talk with us. You have to consult with us. Number three, you have to remember Congress Gets the final say. We cant get the best deals would you tell us tpa. Thats why we have to pass it as soon as we can and why the president has to show leadership. Completing these trade deals is my number one priority. There are a few other things on our to do list. This will be a very busy year for trade. First, reauthorize gsp. Many Small Businesses need this program to stay competitive. Second, pass a seamless and timely renewal of the african growth and opportunity act as soon as possible. This program has helped reformers promote Good Government in africa. Its helped Free Enterprise come to these companies opinion its said to our reformers in africa Free Enterprise is the way to go. Third, fienld a way forward for the tariff bill. Its been slipping through us. Weve got to get this done. Weve got to get a common sense solution to this. Finally, wefr got to pass the customs trade facilitation and enforcement act. Dong kevin bray congressman kevin brady has done solid work on this bill. This is all important legislation. Weve got to get it done. This is a long wish list but our plan to execute on all these funds. Lets not lose sight of the bigger picture. We wont abandon the field. We will stick up for Free Enterprise and free people. This world still looks to our example. The conditioning of your birth does not determine the outcome of your life. Thank you for indulging me today. I appreciate it. Do i have time for questions or do i have to go . There are votes. I was going to stay and do questions for the while. Thats the wap it works. I got about five votes that started already. I apologize. Thank you very much. I really appreciate your time. Thanks. Congressman john fleming of louisiana is here to talk about his membership in the newly formed freedom caucus. A group designed to challenge the republican study committee. Washington journal is live every morning at 7 00 a. M. Eastern on cspan. Join the conversation with your calls and on facebook and twitter with your comments. The Political Landscape has changed with the 114th congress. Not only are there 43 new republicans and 15 new democrats in the house and 12 new republicans and 1 new democrat in the senate theres 108 william in congress including the first africanamerican republican in the house and the first veteran woman in the senate. The page has lots of useful information including Voting Results and statistics about each session of congress. New congress best access on cspan, cspan radio and cspan. Org. Up next senate panel lookings at possible changes to military benefits. The Senate Armed Services Committee Heard from members of the military compensation and retirement modernization commission. The commission is tasked with coming up changes to military pension, health care and retirement compensation. Senator john mccain chairs the committee. Good morning. The Committee Meets this morning to receive testimony from the commissioners of the military compensation and retirement modernization commission. I want to thank each commissioner for your diligence and hard work over many months to develop the recommendations youll present to us today. Our Witnesses Today are the Commission Chairman honorable alfonso muldan jr. The honorable Larry Pressler stephen boyar and the honorable doug mr. Michael higgins and i understand that senator bob kerry is snowed in in new york and christopher carney. I encourage members of this committee to keep an open mind. Were also eager to hear from any military or other organizations that has constructive ideas to improve the Current System. No one has a monopoly on good ideas. We come as patriots who love our nation and armed forces and want to improve the quality of life and all who serve and their families. We pledge to keep their well being in our thoughts as we deliberate the recommendations. We must not shrink from the opportunity before us to create a modern system of compensation and Retirement Benefits that would provide greater value and choice for those it serves. Congress established the commission in the National Defense authorization act for the fiscal year 2013 to conduct a review of the military compensation and Retirement Systems and to make recommend recommendations from modernization. We ask commission that want want to ensure the viability of force during all levels of condition. Two, ensure successful recruitment, retention and careers for those members and three, modernize and achieve fiscal sustainability for Retirement Systems in the 21st century. In the current form may be less than suitable for members. Tricare, the militarys Health Program was implemented in the mid 1990s. Before they were appropriate for their fulltime, both the retirement system and tricare were appropriate for their time but clearly times have changed. Were here today to learn how it could make compensation and benefits better for the military families for our Current Forces and forces in the future. As this economy evaluates the recommends recommendations to modernize we must carefully consider how any changes in compensation will motivate young people to serve this the 21st century. In a constrained fiscal environment we must consider how best to achieve the prop balance of providing attractive compensation and paying for military modernization and readiness, effective equipment. We can meet both of these objectives and we must. Thats why ive asked senator graham, chairman of our Personnel Sub Committee to hold a series of hearings in the near future to explore all the commissions recommendations in greater depth especially in those areas of retirement and health care. I thank senator graham for their leadership on these critically important issues. Finally, we look forward to the testimony from the commission today. The recommendations come to us unanimously after nearly two years of hard Work Research and debate. I encourage the commissioners to speak freely without reservations. Some of them i know im sure will do that. Thank you again commissioners for your extraordinary efforts. Senator reed. This hearing comes as the depts submitted its budge et cetera for fiscal year 2016. While we await the full details theres a few noticeable aspects that request. It shows how deep the funding shortfalls run. Second the department is requested measure to slow the growth of personnel course. The Department Submit these proposals last year. Congress supported some and elected the others until after this commission reported its recommendations. Many members have been reluctant to support it by the past several years while this commission deliberated and suggest we should wait until this report submitted. This is the context in which today we hear from this panel. These issues are paramount. We charge with fighting and winning the nations wars. Usually when we talk about caring for our men and women in uniform the sdugs is focussed on their pay but these other elements are equally important if we want our Service Members to accomplish the mission and come home alive. Its important to state that the goal is not to save money. Its to strengthen the all voluntary force. Its to modernize a retirement system thats 70 years old. Importantly, it is to ensure that Service Members and their families enjoy a quality of life and a quality of service that will enable the services to recruit and retain the very best men and women for military service needed to meet National Defense objectives. Under the current budget situation i fear we are quickly pricing ourtse inging ourselves out of having a military efficiently sized and trained to meet the threats we face all over the world. As we heard last week the budget caps do not allow the services to meet their National Defense objectives. If these recommendations that youre making are inacted and provide savings, such savings should be used to address four structure shortfalls and reinvest in readiness and modernization. Id like to highlight one inequity of the Current System that the commission has pointed out. Only 17 of all Service Members will leave with any retirement. Were told as many as 775 will leave with some Retirement Benefits even if they do not serve the entire 20 years, as most do not. Thank you for this important work. Id like to thank all the members of the panel. All of whom have other responsibilities and work that need to be done and took their valuable time and effort to bring, an excellent comprehensive report which i know will serve as guidance for us as we move forward with much needed reforms. I thank you you all again. Were ready to listen to your statement and thank you for your chairmanship. Thank you. My fellow commissioners and i am honored to be here today. We thank you for the opportunity to testify. We also thank you for your support of the commission during the last 18 months and for your leadership in protecting our Service Members compensation and benefits. Id like to request that our final report be entered into the record. Without objection. The old voluntary force is without fear. Its never been clear than during the last 13 years of war. As commissioners we recognize our obligation to craft a valued compensation system thats both relevant to contemporary Service Members and able to operate in a modern and efficient manner. We are unanimous in our relief that the recommendations we offer in our report strengthen the foundation of the force ensure our National Security and truly honor those who served and the families who support them now and into the future. Our report is informed by our own lifelong experiences with military service, Public Policy and as public servants. More than 150,000 current and retired Service Members provided thoughtful responses to the commissions survey. We developed working relationships with more than 30 military and veteran service organizations. The commission received input for more than 20 federal agencies, several department of defense working groups. Numerous research institutions, private firms and not for profit ofrgs organizations. The result include 18 months of independent research, review and analysis. Our work represent the most comprehensive review since the inception of the all voluntary force. We reviewed each program to determine if and how modernization might ensure the long term viability of the volunteer force enable the quality of life for Service Members and their family and achieve a greater fiscal sustain sustainability sustainability. Our recommendations do this and more improving access, choice and value within the compensation system. It proposes a blended plan that extends Retirement Benefits from 75 of the force. It leverages the retention power to maintain current profiles. Our Health Benefits recommendations improve access, choice and value of health care for active family duty and retirees while reducing out lays by 3. 2 billion. Our recommendations maintain patrons grocery discount while also reduces the cost of delivering that benefit by more than 500 Million Dollars annually. While these savings are significant, the commission did not engage in cost cutting drill. In fact, our recommendations to improve joint readiness, Service Members, financial literacy, support for exceptional families and transition assistance require additional funding. They sustain the voluntary force by maintaining or increasing the overall value of computation and benefits for Service Members and their families and provide additional options for personnel managers to design and manage a balanced force. It saves taxpayers more than 12 billion annually. While sustaining the overall value of compensation and benefit for those who serve and have served and the families who support them. My fellow commissioners and i thank you again for the opportunity to testify today and we are honored to present our unanimous recommendations. We stand ready to answer your questions. Thank you very much. If its okay ill just have a couple of brief questions because i was briefed by you already. If any of the members of the committee wish to respond to any questions by me or other members just signify and youll be recognized. Two brief questions. How do you know that your recommends dags recommendations will provide the same fore services on the issue of the proposed compensation system . Right now theres an incentive to remain for 20 years. In this president plan there will be retirement compensation lit literally throughout. Do we have incentive for people to remain in for a career or disincentive . We do indeed mr. Chairman. We did a blended plan here. We already have a defined benefit. We added a defined contribution to this and to make sure that we can do the retention or provide for the retention that the services told us that they wanted us to. Im going to have commissioner higgins to talk to the specifics of that recommendation. Commissioner higgins. Thank you very much, mr. Chairman and chairman mccane. System includes the incentives and the choice that people want to enforce. We feel its going to be a very powerful retention tool. When we look forward at how the system will operate over time our belief is and supported by our analysis and in this case it was a ran model that was the dynamic retention model used. We believe that this will, our proposal will exactly model the current force profiles. It will have the tools within it including a continuation pay through a savings plan which is currently with matching which is currently not offered today. It will include the tools that will draw people through the 20year career much like the defined benefit does today and to some large extent because defined benefit is retained under our proposal. About 80 of the that defined benefit. These new tools meet the demand of choice flexibility along with the defined benefit that is retained. We believe will operate very effectively and modelling that weve done will support that. Thank you. On the issue of health care how does this insentivize beneficiaries to seek the most Cost Effective means of Getting Health Care . Thank you for the question. That was very important to us as we took a look at the programs that are providing the benefits to our Service Members. As we travel across the country and we talk to families, Service Members, retirees and listening very very carefully to the conversations and discussions that we had in terms of what people said they wanted they preferred as value choice access and value of health care were the things that kept coming times and times again. Im going to ask commissioner boyar to speak specifically to that question. Thank you. Cost effective means, i can look at it for two ways. One is for the government and the other is for the family. How can we achieve both . Presently under tricare we dont because there isnt sufficient fools tools. With regard to the families we said, can we do better not om for the government with regard to the cost but also with regard to the families and approve the quality of care give them the choice that they want and get better access. We found that if we move to a system where we have what we call tricare choice where they can select from available plans in a particularly geographic region. It does call for more empowerment of the individual. Were asking that individual is able to select a plan that best fits their family and when we do that the plans themselves that are then administered managed by opm those plans will have effective management utilization tools and it becomes more Cost Effective not only to the families but the government. Thank you. Senator reed. Part also strengthening the military treatment facilities, the traditional facilities that have to be ready to deploy if we deploy. And part of it, as i understand the proposal, is that they would be part of these Health Care Systems. Can you comment from as former vice chief on this whole issue of strengthening the military medical infrastructure along with giving individuals more choices in the health care . Or if someone else wants to. No, im more than happy to. Yes. I think were in a death spiral right now from the standpoint of they just dont have the number of reps that they need to keep their doctors up to standard. And this is a way that we can bring into our military treatment facilities, the kinds of cases that contribute to battlefield medicine. Thats what makes this system so different than any other system. We need welltrained doctors, not only to treat patients in hospitals but to be ready to deploy wherever we send them and provide that same kind of treatment on day one of the conflict. This will allow us to attract military treatment facilities, the kind of cases that will keep those skills up. And are so absolutely crucial to our wounds rate in the last 14 years of war. And it will do that on day one of the next conflict. And i really believe that this is something that is going to ensure that we have that combat medical readiness capability we need moving into the future. And if we dont do it, were going to have a very, very difficult time being able to provide that. So, this is not just about the benefits to the individual military personnel, this is about the overall viability of the Health Care System in the military . Absolutely. And thats one of the reasons why we look so strongly at a readiness command. Because we really believe theres going to have to be somebody who is keeping an eye on this system to ensure that the services are doing the kinds of things that are necessary to keep those mtfs viable training grounds for our physicians. Let me direct this to the chairman. You can decide who is appropriate. But im sure im not alone. But when we mobilize National Guardsmen and women in reservists, those are the ones that sometimes have the most difficulty getting into the health care plan, making sure that their family who is not close to a military facility, in fact who may be far removed. It seems to me that this approach that youre suggesting, choosing among a set of private insurance plans would be much more easily accessed by reserve components. Is that accurate, mr. Chairman . That is correct. That is correct, senator reid. One of the things that happens with our proposal for the reserve components is anytime theyre mobilizing or being activated, the family members normally will go without coverage. Theres a period of time that they just dont have coverage when that happens. This will solve that problem for them because they wont have to worry about losing going long periods of time without coverage of health care when the reserve component member activate and deactivate. Senator reed, i mean, thats an excellent question. That Strategic Reserve that we built over time really wasnt prepared operationally. We know that. You funded it. You did a lot of things to bring it up, round it out and make the total force that better in the 13 years of war. But with regard to the undesirable choices that the families had to make to be part of the operations, youre absolutely right, senator. So when we looked at this and said, with regard to that total force, even though we really pressured the chiefs, do we want an Operational Reserve versus Strategic Reserve . They really do. They dont want to call it that because they dont want to fund it. What is realistic when we talk about the war after next or how to fund the war after next and caring for the people, when it comes to the health care, that benefit needs to be for the total force. Now so for the reserve components, the continuity of care that your question goes to, it is so disrupted for the family. If we say from day one when you join the reserve component that health care is part of that benefit, you can select the type of plan that best fits your family. Your premium is 25 . We capped it at 25 for the premium. Then theres no disruption in the continuity. They like their local providers. And then if theyre on for a longer period of time, theyve come, gone on active duty, theyre part of the contingency operation, then they go on to the active duty plan, receive their basic allowance for health care that takes care of the premium for that of their family. Thank you very much. Senator reed, if you dont mind, i would like to have another member of our commission spoke speak to that as a reservist, please. Commissioner carney. Thank you. Mr. Reed, those of us who lived in sort of rural areas and were on reserve duty. It wasnt tricare exactly. It was more like try to find care. And this takes care of that. What were offering now is a system that provides a network that is robust enough to care not only for the member when they are on their civilian side, but also for the families when the member is deployed. Thats exactly what were trying to do here and do it in a way that is fiscally sustainable. Medical readiness are critical as sects of the overall readiness mission. If we can do this with a tricare choice system, then i think this is a good step forward. Thank you very much. Thank you. Thank you, mr. Chairman. To my good friend steve bouer who i used to sit next to, i agree with you except im more concerned about todays war than i am the war after next. Right now is when were having the problems that were having. And we had a hearing last week. We had schlesinger, we had george schultz, madeleine albright. And they reminisced about what our capabilities were at that time, and what is expected, and even read the charge that president reagan had made at one time and determined what a Defense Budget should be. The reason im saying this is i look and i agree with senator reed who talked about the inadequacy in meeting the threats. I read that director clapper, when he says looking back over my now more than half a century in intelligence, ive not experienced a time when weve been beset by more crisis and threats around the globe than we are right now. In light of the fact that we have the force structure problems that im very proud of all of our chiefs. The general has been before us, and all of the rest of them, talking about how significant this is and its something thats unprecedented. The reason i bring this up, weve got a Quality Group here, mr. Chairman. And i just think after this is over you should reconvene and get into this thing as to the current threat thats out there and the inadequacy that were facing. Its one thing for the chiefs to come forward and talk about whats going to happen with sequestration. But when you folks, with your backgrounds come forth, to me that gives a different sense of meaning. And i would hope that we might consider that. I was a product of the draft and look at things a little differently than than others. I was one that was not at all optimistic that the all volunteer force would be the quality force that it is now. I was wrong. Although there are some advantages to the draft at that time. I think that when you are examining the charges that were given to you, you would say that i would ask you the question. What have you decided motivates the young people to serve in the allvolunteer force, and then, why are so many of them leaving . What is if you could zero in on two or three reasons as to why they dont stay on. You know, quite often we go back and talk about how much cheaper it is for us to retain than to retrain. The extreme example is to get a pilot to the point where they can go an f22 quality and its the reenlistment bonus is 250,000 but the cost to retrain is 17 million. Now scale that down to whatever forces that we have here. What is the reason that, major reason that they come in and then they leave . Thank you for the question, senator. We spent a lot of time looking at that, that specific issue that you address. Its a very important one. As we think about how to modernize the compensation programs, compensation programs for tomorrow, we are thinking about exactly what is required for the military to be able to recruit and retain people. And we have to think about the new generation, that they value and prefer. Those are the kind of things that we listened to and heard as we talked to people. As it was already indicated to today, 83 of the enlisted force actually wind up leaving without any kind of Retirement Benefits, which is why we made the recommendation that we did, to be able to extend some of the Retirement Benefits for those Service Members who will serve and then move on to do other things from 17 to 75 . And id also like to p