As prepared for delivery
WASHINGTON - Chairman Camp, Ranking Member Levin, and
members of the committee, thank you for the opportunity to appear before you
today to discuss the President’s Fiscal Year 2014 Budget.
President’s Budget is based on a belief that an agreement to achieve balanced
deficit reduction is consistent with making – and fully paying for – targeted
investments critical to continued economic growth and job creation. The Budget includes
the President’s compromise offer to Speaker Boehner to reduce the deficit by an
additional $1.8 trillion, in addition to the more than $2.5 trillion already
enacted, and fully pays for all new initiatives to ensure that they do not add
to our deficit burden.
United States economy has made substantial progress toward recovering from the
worst financial crisis since the Great Depression. Despite significant headwinds – both as a
result of the crisis and from other temporary shocks – the economy has grown at
an average annual rate of just over 2 percent over the last three and a half
years. We have seen steady improvement
in the labor market, where private sector employers have added nearly 6.5
million jobs since the trough of the labor market in February 2010. The housing market, which had been a significant
drag on economic growth throughout the recession and into the early stages of
the recovery, is now gaining upward momentum.
our economy is stronger today, more work must be done to help create jobs and
accelerate growth. Even though the
unemployment rate, at 7.6 percent, is at its lowest level in four years, it is
still too high. Too many Americans are
still struggling to find work. Despite
recent improvements in the housing market, many families remain underwater on
their mortgages and credit-worthy borrowers continue to have trouble getting
the financing they need to buy a home or refinance existing mortgages. Although corporate profits are at an all-time
high, America’s middle class continues to struggle.
President’s Budget addresses these challenges in a way that builds on the
momentum of the economic recovery. It takes
a credible approach to bringing our deficits down to a sustainable level; at
the same time, it makes important investments to help build a foundation for sustainable
economic growth. These proposals are
based on the conviction that an agreement is within our reach, and that it is
also possible to achieve both our fiscal goals and our long-term priorities.
deficit reduction is necessary to put our nation on a sound fiscal course, we
have to bear in mind that the recovery remains fragile. Cutting spending too deeply or too soon would
harm the recovery in the near term, undermining our shared fiscal goals and our
ability to make necessary investments for growth over the long term.
proposals in the Budget are targeted at growth and opportunity – cutting where
we can and investing where we will see the strongest return, both now and into
the future. Specifically, the Budget
calls for increased investment in innovation and infrastructure to make the United
States a more attractive place for job creation. It introduces initiatives to bolster education
and worker training so Americans have the necessary skills to compete in a
global economy. And it puts forward
policies that are designed to give all Americans the opportunity to share in
the benefits of economic growth. These measures
will help grow and strengthen the middle class, which has been the key engine of
prosperity in the United States. Additionally,
they are fully paid for, so they will not add to the deficit.
the central challenges addressed in the President’s Budget – strengthening
growth now, investing in our future, and putting our nation on a sound fiscal
footing – complement and depend on each other.
Investing in our economy today will help us grow in the future and that,
in turn, makes our fiscal challenges considerably more manageable. Committing to a credible path for deficit
reduction today allows for investments that enhance our long-term growth.
Balanced Deficit Reduction
the President came into office four years ago, he inherited a large fiscal
deficit – projected to be more than 9 percent measured as a share of the
economy before any of his policies were enacted. As the economy has been healing, both the
expiration of cyclical spending and a pickup in economic growth have
contributed to a more sustainable path for the country’s finances.
the past two and a half years, we have made considerable progress in reducing
the size of the deficit, which fell to about 7 percent of GDP in FY 2012 – the
fastest pace of deficit reduction over a similar time frame since just after WWII. Moreover, following current policy, the
deficit will continue to decline over the next 10 years, owing to a mix of
spending cuts and tax reforms including $1.4 trillion in spending cuts to discretionary
programs (as a result of both the Budget Control Act of 2011 and other
appropriations bills enacted since 2011), as well as over $600 billion in
revenue from the American Taxpayer Relief Act of 2012. Taking into account interest savings, this
amounts to more than $2.5 trillion in deficit reduction over the 10-year window,
not including savings from winding down the wars in Iraq and Afghanistan. But we need to do more to ensure that our long-term
fiscal outlook continues to improve.
must continue to achieve deficit reduction in a balanced way. It must include entitlement reform and
spending reductions. We must also pursue
tax reform that closes loopholes and addresses deductions and exclusions that
allow the wealthy to pay less in taxes as a percentage of income than many
middle-class families. Individual tax
reform must be coupled with reform of the U.S. business tax system to enhance
American competitiveness, lower rates, broaden the tax base, and level the
playing field for companies without losing any revenue. All told, these initiatives constitute a
balanced approach to deficit reduction. Such
a balanced approach does not force unnecessary cuts to education, energy, and
medical research and does not endanger Medicare and Social Security.
President’s Budget takes this balanced approach with additional spending cuts
and increased revenues through tax reform.
These policies will reduce the deficit to roughly 1.7 percent of GDP by
the end of the budget window and put the nation’s debt on a declining path,
reaching 73.0 percent of GDP by 2023.
additional $1.8 trillion in deficit reduction proposed in this Budget comes
from closing tax loopholes and reducing tax benefits for those who need them
least; continued health care reform; savings from mandatory programs;
additional cuts to discretionary spending; and savings from using a more
accurate measure of inflation, plus the reduced interest payments resulting
from lower borrowing.
most important pieces of the compromise offer made by the President include:
- Tax Reform: $580 billion in
additional revenue from tax reform that closes tax loopholes and reduces tax
benefits for those who need them least and that will support the creation and
retention of high-quality jobs.
- Health Savings: $400 billion in
health savings that build on the health reform law and strengthen Medicare.
- Other Mandatory Savings: $200 billion
in savings from other mandatory programs, such as reductions to farm subsidies
and reforms to federal retirement contributions.
- Discretionary Savings: $200 billion
in additional discretionary savings, with equal amounts from defense and
non-defense programs– that is $200 billion below the Budget Control Act
spending caps that were lowered even further by the American Taxpayer Relief
Act of 2012.
- Consumer Price Index: $230 billion
in savings from switching to the use of chained-CPI.
- Interest Payments: Almost $200 billion
in savings from reduced interest payments on the debt and other adjustments.
address each of the key elements of the President’s compromise offer, all of
which are in the Budget.
Components of Balanced Deficit
a first step toward balanced deficit reduction and tax reform, the President
proposes enacting two individual tax reform measures that would raise $580
billion by broadening the tax base for high-income taxpayers, and ensuring that
the very wealthy pay federal tax rates at least equal to those paid by middle-class
Americans. The first measure sets a 28
percent maximum rate at which upper-income taxpayers could benefit from
itemized deductions and certain other tax preferences to reduce their tax
liability. The second puts in place the
Buffet rule, which requires those individuals with incomes over $1 million to
pay no less than 30 percent of income after charitable contributions in
taxes. At the same time, the Budget
includes business tax reform that will provide greater certainty and improve
global competitiveness while preserving the revenue collected today.
Health Care Reform Savings
President’s Budget builds on the health care cost savings driven by the Affordable
Care Act by reducing excess payments for health care services and supporting
reforms that boost the quality of care. The
Budget also includes structural changes that will help encourage Medicare
beneficiaries to seek high-value health care services, while preserving the
basic structure and promise of the program.
These actions would save an additional $400 billion.
Other Spending Cuts and Savings
Budget calls for a total of $400 billion in additional discretionary and
non-health mandatory spending cuts over the next 10 years. Savings in mandatory programs outside of
health care include reforms to agricultural subsidies and federal retirement
benefits as well as from a variety of smaller savings initiatives across the
budget includes an additional $200 billion in spending cuts, split evenly
between defense and nondefense spending.
On its current trajectory, discretionary spending is projected to
decline to its lowest level as a share of the economy since the end of the
1950s; the discretionary cuts included in the President’s offer to Speaker
Boehner would push discretionary spending even lower. The President’s cuts are coupled with targeted
investments that are imperative to growth and opportunity, such as early
addition, the Budget includes additional savings of $230 billion by changing
the standard measure of inflation used to adjust spending programs and the tax
code from the standard CPI to a chained CPI, coupled with protections for the
most vulnerable. The chained CPI is a
more accurate measure of inflation in that it does a better job of reflecting
the substitution of goods in response to relative price changes.
Strengthening the Middle Class by
Investing in the U.S. Economy
addition to the proposals to stabilize our finances, the President’s Budget
offers a number of policies aimed at making targeted investments to promote
long term growth. These policies make
domestic job creation more attractive by increasing investment in innovation,
infrastructure, and manufacturing. The
Budget also offers policies to increase access to and the affordability of education
and job training programs. At the same
time, it includes proposals so that the gains from these policies can be shared
by all Americans.
Promote Greater Competitiveness in
number of proposed initiatives are designed to enhance our ability to sell
American-made goods and services to the rest of the world. The Budget increases funding for agencies
involved in trade promotion and trade financing so that these agencies can help
the United States achieve the goal set in 2010 by the National Export
Initiative (NEI) to double U.S. exports over a five-year period. In addition to the NEI, the Budget prioritizes
completing ongoing trade negotiations – such as the Trans-Pacific Partnership –
and opening new negotiations – like the Transatlantic Trade and Investment
Partnership with the European Union – to help strengthen trade ties with the
Asia-Pacific region and the European Union, respectively. In addition, more resources for trade
enforcement will help make sure that our workers and businesses exporting their
products and services overseas are operating on a level playing field.
the U.S. corporate tax system provides incentives for companies to relocate
operations abroad by allowing them to reduce their tax liability. The President’s Budget changes that by reforming
the corporate tax system to encourage domestic job creation without losing any
revenue. Part of that effort will
include removing deductions for moving production overseas and providing a new tax
credit for firms that bring foreign operations back to U.S. soil.
Investing in Innovation, Infrastructure,
global markets become more open and as economic activity abroad continues to
strengthen, it is crucial that U.S. firms and workers remain on the technological
frontier. That is why we need to invest in
Research and Development (R&D), infrastructure, and our manufacturing base. These investments will help foster job
creation, raise living standards, and keep our nation competitive in a global
President’s Budget increases funding for non-defense R&D investment to $70
billion, a roughly 9 percent increase over its 2012 level of $64 billion. These investments are targeted to areas most
likely to unleash transformational technologies that will create the businesses
and jobs of the future. History has
shown that federal support for R&D has helped spur new technologies, including
the internet, global positioning systems, and clean energy.
federal investments in public infrastructure projects, such as the national
highway system, have led to significant gains in our nation’s productive capacity. In recent years, however, work to maintain
and improve public infrastructure has failed to keep pace with the rate of
deterioration and obsolescence. As CEOs
tell me every time we meet, our aging infrastructure has become a detriment to
our future growth prospects, and modernizing infrastructure must be a national priority.
President meets this obligation by directing $50 billion toward infrastructure
upgrades and repairs. And to get started
on the most urgent projects as quickly as possible, the Budget would create a
“Fix it First” program that puts people on the job right away to clear out the
backlog of deferred work on highways, roads, bridges, transit systems, and
airports. But taxpayers need not shoulder
the entire cost of these projects: the President’s Budget calls for a
Partnership to Rebuild America. This
program helps leverage private investment in infrastructure by starting a
National Infrastructure Bank as well as by enacting America Fast Forward bonds,
which help facilitate and reduce the cost of financing new projects. These initiatives will help lay the
foundation for long-term economic growth and also help generate new high-quality
middle-class jobs today.
our manufacturing sector also generates new, high-quality middle-class jobs. The Budget makes a one-time down payment of $1
billion to establish manufacturing innovation hubs in various regions around
the country. The Budget also includes
funding to launch
Technology Acceleration Centers oriented toward improving supply-chain
efficiency. Finally, the Budget prioritizes
investments and initiatives to make the United States a world leader in clean
Investing in the American Workforce
we want to make America more competitive in the global economy, we must equip America’s
workers with the high-tech skills that the 21st century requires.
Budget takes a number of steps to help Americans acquire these skills. It proposes to work together with states to
make high-quality preschool available to every four-year old in America. It rewards school districts that develop new
partnerships with colleges and employers, and focus on science, technology,
engineering, and mathematics (STEM) so that high school students are better
prepared for the jobs of tomorrow. And
it expands access to higher education by making college more affordable. The
Budget makes the American Opportunity Tax Credit – which helps students pay for
college expenses – permanent. At the
same time, it reaffirms the Administration’s strong commitment to the Pell
Grant program, which provides grant assistance to low- and moderate-income
students and provides a mechanism to keep interest rates for student loans from
rising – at a time when market rates are low.
addition to investing in education, the Budget strongly supports training and
employment programs to help workers gain skills and find new jobs or careers. One specific focus is on modernizing, streamlining,
and strengthening government delivery of job training services. The Budget proposes a Universal Displaced
Worker program that would reach over 1 million workers per year with a set of
core services, combining the best elements of two more narrowly targeted
programs. In addition, starting in
fiscal year 2015, the Budget provides $8 billion for the Community College to
Career Fund; this Fund supports state and community college partnerships with
businesses, thereby enhancing the skills of American workers.
Strengthening the Middle Class
in U.S. firms and workers is critical to maintaining competitiveness, but it is
also important to make sure that all Americans have an opportunity to benefit
from the resulting economic gains.
this end, the President’s Budget includes tax proposals that are geared toward rebalancing
the tax code in a way that eases the burden on the middle class, including
closing specific loopholes that benefit only a small group of the wealthiest
Americans. The Budget also contains a
number of proposals designed to build ladders of opportunity so that hard work
is rewarded and inequality and poverty are reduced.
Budget creates a Pathways Back to Work fund to make it easier for workers,
particularly the long-term unemployed, to remain connected to the workforce and
gain new skills for sustained employment.
The Budget would also increase the minimum wage to $9.00 an hour by the
end of 2015 and index it to inflation thereafter.
as whole, the policies put forth in the President’s Budget enhance America’s competitiveness
and, in doing so, create a healthy environment for fostering a strong, growing
middle class – a key engine for sustainable economic growth in which hard work
is rewarded and every American has an opportunity to advance and succeed. At the same time, we maintain our commitment
to our most vulnerable citizens and to our seniors.
these new policy initiatives are fully funded, so that the Budget is able to
make essential investments in the nation’s future while also reducing the
summary, the U.S. economy has made significant progress toward recovering from
the worst financial crisis since the Great Depression. However, it is important to recognize that we
should be doing more to secure the recovery, create jobs, and improve the
future prospects of the nation.
have made significant gains in the labor market, but unemployment remains
unacceptably high at 7.6 percent and too many Americans are still looking for
work. Congress has already passed some parts
of the American Jobs Act. We can further
support the recovery in the private sector by passing the rest. Similarly, activity in the housing market
appears to be gaining momentum, but we need to do more to support credit-constrained
families who want to buy a house or refinance their existing mortgage.
President’s FY 2014 Budget, by including the components of the President’s
December compromise offer to Speaker Boehner, reiterates a commitment to coming
together around a balanced plan to reach more than $4 trillion in total deficit
reduction over the 10-year budget window.
At the same time, it prioritizes growth-oriented policies that are
designed to enhance U.S. competitiveness and strengthen the middle class,
ensuring that the resulting economic gains can be shared broadly among all
conclusion, it is important to note that this framework does not represent the
starting point for negotiations. It represents a fair balance between
tough entitlement savings and additional revenues from those with the greatest
incomes. The two cannot be separated, and were not separated last
December when we were close to a bipartisan agreement.
is my first opportunity to appear before you as Treasury Secretary, but this is
far from the first budget that I have worked on. There is no doubt that this is a serious proposal
at a serious time. There is a path to a
bipartisan agreement that moves the country forward. This budget deals with the world as it is now
and as it will be in the future. It
makes difficult choices. It includes a
powerful jobs and growth plan. And it is
the right course of action for our nation and our economy, and a path for
bipartisan agreement to move the country forward.