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Hearing of the House Budget Committee - President's Budget Based on Phantom Revenues and Magical Math

Hearing

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Date:
Location: Washington, DC

Today, Rep. John Campbell (R-CA), senior Member of the House Budget Committee, questioned OMB Acting Director Jeffrey Zients on President Obama's FY2014 budget proposal at a House Budget Committee hearing.

Noting that the proposal makes no attempt to balance the budget, Campbell asked the OMB Acting Director whether or not President Obama actually believes deficits matter. He also questioned Zients on why the president's budget does not address entitlement reform in a serious manner and if this is an indication that the White House believes the bankrupt entitlements are on a sustainable path. Finally, Campbell asked why President Obama broke his promise to not tax Americans that make under $250,000.

Transcript of Complete Line of Questioning Between Rep. John Campbell and Acting Director Jeffrey Zients

JC: "Mr. Zients, does the president believe the deficits matter?"

JZ: "Yes, the deficits do matter and putting the country on a sustainable fiscal course is an important component of an economic plan. It's not an economic plan in and of itself."

JC: "Are deficits a bad thing?"

JZ: "Deficits are not a bad thing in the abstract. Deficits need to be under control. Deficits need to be coming in. The president's plan has deficits going down each year."

JC: "But, Mr. Zients, the president's plan has deficits continuing forever, isn't that correct? Even under your numbers? And, by the way, I think your numbers are garbage. I'll use a rather strong term as a CPA looking at some of this stuff. But, in this conversation, in the next four minutes, I'm going to accept that your numbers are correct and, under your own numbers, the deficits continue forever, do they not?"

JZ: "We're focused on the ten-year window. I think going beyond ten years is difficult."

JC: "OK, the deficits continue throughout the ten-year window, do they not?"

JZ: "Deficits are on a declining path, as is debt. That is the right deficit path for this point that we are at in the economy. We also have to be focused on getting people back to work, investing in infrastructure, investing in R&D…"

JC: "Mr. Zients, the deficits continue at roughly half a trillion or higher throughout the ten year window."

JZ: "I think the right way to think about deficits-"

JC: "Did I say something wrong? They do continue at half a trillion or higher even under your numbers throughout the ten-year window?"

JZ: "I would like to make the point that I think the right way to think about deficits is as a percent of our economy. And, our deficits as a percent of our economy come down quite a bit across this ten-year window."

JC: "But, we don't have to make them go away?"

JZ: "This is consistent with Bowles-Simpson and other groups that have looked at this. They have deficits on a declining path and debt on a declining path. The president's plan achieves that while also investing in our economy, creating jobs-"

JC: "This is my time. They are half a trillion or more throughout the ten-year window. Anything shows they continue forever. Obviously, the president doesn't believe we need to get to a balanced budget, does he? We don't need to get to balance, do we? In the president's opinion?"

JZ: "The president believes that we have to put the country on a sustainable fiscal path-"

JC: "Which does not mean we have to balance the budget?"

JZ: "Even more important is putting people back to work and getting our economy growing at its full potential. If you bear with me for one second, in the 1990s-"

JC: "I'm sorry; I want to get to a couple of other things. On the entitlements, the only change to the entitlement programs here are the ones you mentioned the president put in that he really doesn't particularly like, but put in. So, therefore, the president believes that Social Security, Medicare and Medicaid are on a sustainable path and they don't need to be reformed substantially. That they're not headed toward bankruptcy like the vast majority of analysts, economists on both the left and the right say. The president doesn't believe that?"

JZ: "Well, I think Social Security is not part of our immediate fiscal issue. Social Security is solvent through 2033. The president has put forth principles for Social Security reform. But, let's be clear that it is not part of our immediate deficit set of issues."

JC: "But, they're not in this budget?"

JZ: "On Medicare, there's $400 billion of health savings, $370 billion in Medicare savings. That's the first decade. In the second decade, there's more than $1 trillion of savings. That is significant reform to Medicare to make it sustainable, but also to keep Medicare as we know it so that we are honoring our compact with our seniors and not turning it into a voucher program. Not shifting costs to seniors."

JC: "When you look at the cost of Medicare - even with those numbers with which I don't agree - I don't think anybody is going to claim that is going to get us on a sustainable path. In no way, shape, or form will that bring the taxes in line with cost. One final question for you, really quickly. Can people who make under $250,000 a year legally buy cigarettes?"

JZ: "Yes."

JC: "Then, you have a cigarette tax in here. So, you have a tax on people who make under $250,000 a year if they choose to smoke, do you not?"

JZ: "People have to make a choice as to whether or not to smoke."

JC: "People make a choice to make income and they get taxed on it. People make a choice to own a home and get taxed on it."

JZ: "This has significant benefits for the middle class in terms of discouraging smoking."

JC: "Ok, tell me this, is this intended to raise revenue or to stop people from smoking? Because it cannot do both. And, you have the revenue raised in here, which indicates that you don't expect it to make anybody stop smoking. It cannot do both."

JZ: "I disagree with that premise. We can have this many people smoking and discourage new people from smoking. Encourage some people to quit. That brings down the number of smokers and, at the same time, those who continue to smoke will pay a tax."


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