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tv   Key Capitol Hill Hearings  CSPAN  July 29, 2014 11:00pm-1:01am EDT

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>> i just don't see in this global market, in this globized world that we live in that withdrawing into yourself in a insolear nation is going to help you. number one economically you're not going to succeed. we all know that you need capital. you need foreign customers. russia needs the developed manufacturerers and things they can sell in the world not just the exacted minerals which are the fundamental of their national economy today. i just think that it's really a big danger. i was very intrigued as i mentioned to you yesterday, the comments that were made by former deputy prime minister cudrin who was very clear in our interview not just the ukraine policy was wrong but that
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those -- he spoke out very strongly against the ultranationalist. he saw them taking russia in the wrong direction. clearly this is going to be one of the key things that i and my staff are going to have to watch in russia as the battle between the ultranationalists if you will, and the modernizers, those who want to have russia part of the global economy and global political system, push ahead. it's going to be a key part of any analysis of russia. >> well, thank you for your insights. clearly having a russia that's part of the international order both in terms of security as well as economic issues is the preferable course of events. how we get there still a road map to be determined. >> yes, sir. >> test.
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ladies and gentlemen, i'd like to call to order the second panel of the united states senate committee on foreign relations considering 3 ambassadorial nominees i'm pleased to consider this hearing for the nominees. all three of our nominees have impressive records of accomplishment. i look forward to hearing their priorities for advancing u.s. interests. our first nominee is long known as one of the most stable and democratic countries in the continent. dedicated a large portion of its capable americaning to address wild live trafficking. reports of marginalization of the sun. the nominee is a career foreign services officer and is deeply familiar with region issues as a
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result of his posting in southern africa. his knowledge of the region, his previous service and leadership skills will allow him to bring strong contributions to the mission. next we consider an island nation off the west coast of africa. a stable democratic lower middle income country. a strong partner with the u.s. counting narc oe trafficking. he brings expensive region leadership experience. he currently served as the director of affairs visa office and previously served as principal officer in mexico and was director of the state department's west african affairs. last but not least we consider
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brunie. prison sentences for pregnancy out of wed lock or failing to pray on friday. these new restrictions will apply to all of them including the 22% who are not muslim. i'm hopeful our next u.s. ambassador will encourage to protect human rights and dignity. it is an increasing partner for achieving u.s. objectives. it also opposes territorial aggression by china in the south china sea and therefore it's imperative our ambassador skillfully manage lobilateral relations to achieve this goal. >> a career member of the foreign relations service counselor. he served as deputy assistant secretary for china at the department of commerce. he also served as senior commercial officer at the u.s. consolute officer and deputy senior commercial officer in
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tokyo. i'd now like to invite my colleague senator flake to make any opening statement he would like before i invite our nominees to make their opening statement. >> thank you mr. chairman. thanks for being here and i met with two of you in the last little bit in my office to look forward to your testimony. thank you for your service. >> thank you senator flake. i'd like to welcome our nominees and encourage you to take the time to introduce your families and friends who we all know are a central part of your service in government. we're grateful of their sack riff riff icsacrifices as well their ongoing support. >> thank you. it's my honor to appear here today as the president's nominee to be the next u.s. ambassador to the republic. i am grateful to president obama and secretary kerry for this tremendous vote of confident and for this country to come before you. i wish to acknowledge my daughter sara. she's currently a junior in
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tennessee. her first postings a foreign service kid started when she was 8 weeks old. i regret my parents didn't live long enough to be here today. they devoted their entire lifetimes to public service highlighted by my father's four years of service as a pilot in world war two. they enjoy a multipart any political system and unbroken history of civilian rules since independence in 1975. it is the story of progress, prosperity, political stability and democracy. we have enjoyed warm relations since we opened our consolute there nearly 200 years ago. many of these families immigr e immigrated to new england and participated fully in the great life of our country and many of
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them wish to invest in a great future. we are partners on a number of important matters among them maritime security and transnational crime are key. the government strongly supports county narcotics maneuvers. it is a model in the region for strategic partnership. if confirmed, it is my goal to maintain and enhance this multilateral and inner agency cooperation. u.s. engagement in support of their economic and commercial development is bearing fruit. their first millennium challenge was successfully completed in 2010 with significant gains. first improvements in transportation networks facilitating integration of internal markets and improvements in water and conservation which promoted increases in profits and foreign incomes and support to micro institutions. it is my open to help in
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consolidating these gains. they are the first country in the world to qualify for a second millennium compact with wide reaching reforms in water and sanitation sectors. they support their overall development goal to sustainable private sector led growth. >> mr. chairman prior assignments in africa and african affairs have equipped me with cultural and region knowledge and language skills to relate to the people. similarly if confirmed i will draw upon my 27 year career in the foreign service including my experience as principle officer in mexico to effectively lead the u.s. mission there. i look forward to mentoring entry level officers who staffed many of the embassies positions. if confirmed my number one priority will be to promote the safety and well fair of athe
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american citizens. >> thank you very much. mr. miller. >> mr. chairman and members of the committee. it is a great honor to appear before you today as to serve as the next ambassador. i appreciate the confidence secretary kerry was put in me tore considering me. i am also greatly grateful for the support. our first overseas assignment was there in the country we love dearly. during my 27 years in the foreign service i'd had the privilege of serving in senior leadership positions in a variety of different posts. over the past three years in south africa i managed the rapid growth of one of our busiest region support and training centers. our multiagency expansion is reflecting our growing economic partnership with southern
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africa. mr. chairman this is one of africa's greatest success stories. it is one of the continents longest standing democracies. our current engagement is across a range of issues underscores the country's potential in region and global partner for the united states. our joint efforts to combat hiv, aides as made a world wide contribution in treatment and convention. if confirmed i would draw from my law enforcement experience to be a strong advocate of the law enforcement community. they also host the international broadcasting bureau voice of american relay station serving most of the african continent. they have worked with us to promote democracy, good governance and human rights. they have taken a stand at the united nations, the
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african-american. they have a strong military relationship with the united states. the defense forces current leadership is u.s. trained an one of the continents strongest supporters. >> they have many key assets u.s. investors look for. stability, transparency and respect for law. if confirmed i will serve as the u.s. representative, recognizing region integration is essential to the long term stability and prosperity of southern africa. it is a region leader and strong partner on conservation and environmental issues such as managing region water supplies and combating human trafficking. their hiv problems of 25% among young adults is the second highest in the world. the decline in diamond reserves constitutes their greatest
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strategic challenge since independence. as diamond resources begined dw they may suffer. they suffer from income inequality, high unemployment ageing infrastructure and a need for more skilled market. women are disproportionately affected by hiv and gender violence is a serious problem. they are april example of what is happen in africa and why it matters. i would work to help with their potential and support them in addressing their environmental and health challenges to the benefit of both of our nations. thank you again for the opportunity to appear before you today. i will be happy to answer any questions you have. >> mr. chairman, ranking member flake. members of the committee. thank you very much.
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it's a great honor to appear before you today. before beginning my testimony, it's my privilege to introduce to you my wife, rachel, our two children crystal and caroline and my very proud 90-year-old mom, betty allen. my brother scott allen and my 3 nieces, lisa, jessica and sara. as a veterans foreign service officer with six previous assignments, i want to thank my family for their extraordinary flexibility, patience and many sacrifices. i would like to thank my wife for forsaking her own career for our family giving me the opportunity to serve the american people overseas. mr. chairman if confirmed, it would be an honor to serve my country as the u.s. ambassador there. we have enjoyed strong and prosperous relations since 1850 when our two countries signed the treaty of peace, friendship,
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commerce and navigation. still in effect today the treaty has underpinned our close cooperation for 160 years. we have a long history of working together to promote, peace, stability and development. if confirmed, i hope to continue that tradition and strengthen our relationship for the 21st century. today the united states's relationship with them rest on two central pillars. the first is growing economic partnership and the second is expanding reasonable cooperation. our economic partnership is manifested through rapidly expanding trade. in 2013 american companies exported $559 million of goods and services to them and we enjoy large bilateral surpluses. our bilateral economic cooperation is further
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demonstrated by rapidly increasing investment flows including $116 million worth of american investment in brunei in 2012. finally as you noted mr. chair, brunei was a founding member in the launch of tpp negotiations. indeed they are a key part of our effort to finalize a high standard agreement for the 21st century. the second pillar of our relationship with brunei concerns region issues. brunei successfully chaired them last year. they've long been an important member of the region and recently the united states and brunei have cooperated on a number of matters of great importance to southeast asia. we've launched the english language program for a $25 million five year initiative funded by the brunei government. also brunei and indonesia joined us no founding the u.s./asia
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energy. we are clb raollaborating on a billion xm program to further finance that to the region. brunei has hosted a large humanitarian assistance exercise which brought together service members from the united states and the region. certainly there are challenges. mr. chairman as you noted, brunei's sharia last has caused serious concerns. the first phase of this law went into effect on may 1. we're concerned the code criminalizes several aspects of the freedom of religion. we're concerned over some of the
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punishments that have been announced for future implementation. we're also concerned as you noted mr. chair that it criminalizes consequent yule same sex conduct between adults. freedom of expression and religion are fundamental human rights. as we understand no physical punishments have been implemented under the current phase of the law it should make sure it prohibits torture or unhuman punishment. while officials have offered that it would be impossible to receive a conviction for stoning or amputation, the threat of such extreme punishment still raises concern. to these ends, we regularly communicate with brunei regarding fundamental human
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rights and encourage them to uphold their international commitments. mr. chairman, ranking member flake, members of the committee, thank you for inviting me to testify before you today and giving my nomination kind consideration. please let me answer any questions you may have. >> if i could first, just two questions on the maritime security. i'm particularly interested in how we engage them and the united states in economic investment and in diplomatic and political relations back to their country of origin. as you reference there's a sizable community in new england. what could we do to more successfully engage them and the united states which is a critical competitive advantage lacked by china, russia, brazil, others. what more can we do. >> as you know they often lead
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the way in our relationships, including our commission relationships with the african countries. the community in new england has already shown interest in investing in the open economy there. right now the sky is the limit. for instance, looking at trade figures recently between us and them. they are fairly low. typical exports from there to the u.s. in a given year about a 1, $2 billion. from the u.s. back there 8, 9, $10 million. those could go up dramatically. if confirmed i intend to work on fostering trade ties. there's also a very interesting proposal on the table from one of the new england colleges to open up a campus to begin to prepare students to come up and study at the university level in the u.s. that's something my successor -- my predecessor may well push over the top during our time there and if not, confirmed, i intend to. >> i'd be interested in follow-up from you once
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confirmed presuming confirmation about exactly how we can do a better job at engamiging the communities. second on maritime security, you referenced narc oe trafficking is a major concern for me and many off the coast of west africa. could you explain the extent of the cooperation between the u.s. and them in combating both narc oe trafficking and illegal fishing in the western coast of africa. >> happy too. we'd have a lot of engagement between different agencies. they're naval assets regularly conduct exercises and ship visits down there. over the years we've given them three shicps including a 51 footer that they put to good use. their problem is obviously in the sea lanes between them and west africa. traf ific coming over from sout america and reading towards europe. we also helped them start a
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command center called cosmar which they have formed an inner agency group to start to get control of their own water. as you know sometimes the problem is narc oe traffickers or illegal fishing or other economic losses from their waters. with a small and very abled coast guard type navy command center we worked with them on. our state department bureau of narcotics and law enforcement also have programs with them. they've been a very good partner. >> mr. miller you referenced that they are one of the most stable, capable militaries. we have a close police training relationship there. they are also a strong supporter of africom. what do you think they could do to play more of a role in supporting region security efforts and what more could we do to combat wild life trafficking.
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nati some of the neighbors are preventing the progress of wild wife trafficking. >> i've seen first hand in south africa over the last three years the devastation caused by the increasingly sophisticated and lethal wild life trafficking syndicates. the defense force is the first line of defense there to combat wild life trafficking. it's a highly regarded, well respected defense force. we have a number of programs in place to assist the bdf and the government and the government to assist anti-poaching operations including classes on anti-trafficking investigations, money laundering investigative courses to strike at the root to the syndicates that are behind many of the trafficking outfits in the region. we're strong supporters of their establishing a wild life
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enforcement network for southern africa there. the only way we will solve the problem is through a regional and ultimately a global approach. >> thank you. senator flynn. >> well, thank you. and thank you to your families as well. the sacrifices that they have made and continue to make. i know it's quite a commitment. i spent one year over seas when we have a child just a year and a half old. i look at that and think, you know, the difficulty that is to have one child away from cousins and parents or grand parents and everything else. you've done it many, many times. your service is appreciated all the families in particular. but with regard to them and the millennium challenge -- we're in the second iteration. what did we learn in the first? what lessons are we taking
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forward? how can we make sure that we expand on the benefits? >> millennium challenge corporation has not quite finished its after action report on the first compact. the second compact it was decided to get the first two years to get the legal and regulatory framework in place. it's coming along nicely. once that's done and only once that done we will move onto construction and other spending. >> okay. mr. allen, trade surplus that's a pretty good surplus how much of it is trad iitionally is military equipment or planes. is that typical year to year or is that just a bump lately. >> thank you ranking member. the trait surplus and trade works are quite volatile. last year we delivered several
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aircraft and that screwed the numbers. we have a number of other aircraft -- large aircraft deals in the pipe line. thus, i would consider a rising trend in u.s. exports to brunei in the foreseeable future. aircraft, oil equipment, consumer goods, food, and a good number of other commodities as well. >> the oil economy is certainly shrinking from what it was. how much longer are they looking to revive it for as long as they can. they are certainly looking to diversify. that will be a lot of your role and certainly why they have so much interest in the tpp and we appreciate their leadership and help there. i hope it's something that congress can give the president the tools to actually give affect to. in the area of dif feversificad what are they doing? >> sir, i share your sentiments
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entirely with large to tpp. the imf just this week or last week released a report suggesting that brunei's tpp would be trending upwards toward 6% this year and next. so their economy is doing quite well. in terms of diversification, they are trying to move down stream in the petroleum business. develop tourism and other service exports and develop other segments of their economy that employ more brunei citizens and integrate themselves better in the region. >> thank you. >> thank you. >> mr. miller, i haven't spent much time in that area enough but i spent a year in south africa, and six months in z zymbobway. when i got back to college i
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wrote my master thesis trying to explain their electorate hold in the 80s. now we've determined what that hold is. it's brute force and tri trickannery. now all of us are trying to explain the hold he has on all of west africa. it's been disappointing to see the other countries count i innance what has gone on there. i will note they were the one country to be somewhat critical initially but then kind of fell in line with the other southern african countries. what can you do in your role to make sure there's the appropriate pressure and appropriate stand taken by these countries at least standing up to what should not be countinnanced there. long question, sorry. >> president comah has taken
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some lonely and courageous and principled stands as a proponent of human rights and democracy across west africa. he supported the political agreement and sent a delegation there for recent elections and was critical for the elections afailing to abide by their own standards. the two country enjoy full diplomatic relations but they are not shy about criticizing what it see as violations of human rights there. i would take every opportunity to engage in the highest levels of the government on issues human rights. i would look forward to working with bruce warton on regional human rights and good governance issues. >> thank you. in most cases, i mean they have
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great governing principal as does the eu. i think we need to make sure that these countries stand up for their own standards. certainly they have been more willing to do so than other countries in the region. please pass on our thanks for that. hopefully we can foster that kind of attitude to stand up -- not western standards or u.s. standards but the election standards and otherwise. human right standards has its of the propounded and other countries in the region. again, thank you all for your service and i have no doubt that you'll serve the country well in this capacity. >> thank you senator. >> thank you senator. i have just a few more questions for mr. allen who i didn't get to in my first round. if you would just speak further about how you're going to address the issue of sharia law
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and some kmchallenges that coul create problems with further progress with ttp and our relationship with brunei, thank you chairman. >> i share your sentiments on brunei's sharia penal code. i think the first thing we need to do is monitor implementation. watch very closely and thus far they are in the very early stages this. therefore we need to monitor closely. we need to increase our dialogue on the importance of human rights and our expectations of human rights in brunei. we need to remind the government of brunei if it becomes necessary, when it becomes necessary, of their international human rights obligations. we need to speak out in favor of
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our principles. i will not be shy in upholding our principles with the government and with the people of brunei. with regard to t abopp, it is ul to note that brunei was a founding member part of the p 4. it's also important to note that trade and investment, economic exchange is an important way to broaden support for the universal values that we hold dear. we have not used trade agreements in the past to address religious concerns. visa vie, the specific strategy for tpp, i would have to refer you to, str which i, ustr which leading those important negotiations.
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i look forward to being a partner with them to ensure the passage of tpp and also ensuring that our views on human rights are known and hopefully respected in brunei. thank you. >> given your long career in service and commerce i would also be interested in how you view intertlellectual property rights when you view them as progress and essentially you think advocating for a regime in change that respects american intellectual property rights and how central you think that is. >> i think it's absolutely essential. they are core to our economy and more importantly our future economic growth. with regard to brunei, there are still some intellectual property right problems but they were lifted off of ustr special watch list recently thus indicating
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some progress made. that said i understand there still are problems. i look forward to the government of brunei to further clean up and further the protection of intellectual property rights. the negotiations with t aboupp clearly very important to our future economy and growth. >> thank you. with that, i'd like to thank all three of our nominees today. i'd like to also thank if i might his daughter, mr. miller, and of course christopher and caroline. thank you all for your support. i know there's many others as well. we're grateful that you stuck it with us and your willingness to serve. we will keep the record open of this panel until noon tomorrow wednesday july 30th. i will recess for a third panel.
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>> president obama's choice to be u.s. ambassador to russia was approved by the senate foreign relations committee earlier. his nomination will go to the full senate. the president joined the eu and announced new sanctions against russia on tuesday. here is a portion of the president's remarks. >> we've also made it clear as i have many times that if russia continues on its current path, the cost on russia will continue to grow. today is a reminder that the u.s. means what it says. we will rally the international community in standing up for the rights and freedom of people around the world. today and building on the measures we announced two weeks ago, the united states is imposing new sanctions in key sectors of the russian economy, energy, arms, and finance. we're blocking the exports of specific goods and technologies
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to the russian energy sector. we're expanding our sanctions to more russian banks and defense companies. we're formally suspending credit that encourages exports to russia and financing for economic development pr mment pn russia. at the same time the european union is joining us in imposing major sanctions on russia its most significant and wide ranging sanctions to date in the finance sector, the eu is cutting off certain financing to state owned banks in russia. in the energy sector the eu will stop ex-porting certain goods and technologies to russia which will make it more difficult for russia to develop its oil resources over the long term. in the defense sector the eu is prohibiting new arms exports and is halting the exchange of technology.
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the sanctions were announcing today will have an even bigger bite. >> with live coverage of the u.s. house on cspan and the senate on cspan 2. here on cspan 3 we compliment that coverage by showing you the most relevant congressional hearings and public affairs events. on weekends cspan 3 is the home of american history tv with programs that tell our nation's story. the civil war's 150th anniversary. visiting battlefields and key events. american artifacts, touring museums and historic sites to discover what artifacts reveal about america's pass. history book shelf with the best known american history writers. the presidency, lectures in history with top college professors delving into america's past. our new series, real america featuring archival government and educational films from the 1930s through the 70s. cspan 3 created by the table tv industry and funded by your local cable or satellite
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provider. watch us in hd. like us on facebook and follow us on twitter. >> now the head of the congressional budget office talks about the long term budget outlook and the health of the u.s. economy. he testified earlier this month before the house budget committee. the chairman is congressman paul ryan of wisconsin. the committee will come to order. to make sure that every witness knows that it is against the law to provide false testimony to a committee of congress. we've begun this new committee practice in every committee swearing in our witnesses. plea we've taken this step because of a recent legal guidance from the debt of justice. raise your right hand. do you solemnly swear or affirm the testimony you are about to give will be the truth, the whole truth and nothing but the truth. >> yes, i do.
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>> let the record reflect the witness answered in the affirmative. >> all right. glad we got that over with. welcome to the hearing today. we're going to discuss cbos long term bumming budget outlook. i want to thank the director for all of their hard work. this is very important work that cbo does and we're pleased to receive it again. quote, between 2009 and 2012 the federal government recorded the largest budget deficits relative to the economy since 1946 causing its debt to sore. closed quote. with deficit as big as the ones that cbo projects, federal debt will be growing faster than gpd a path that will be ultimately unsustainable. closed quote. that pretty much says it right there. it's unsustainable. our national debt is already bigger than our economy. yet, it's going to get even
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larger. our economy is already too weak to create the jobs we need and yet it's going to get weaker. people already can't find work and yet there will be even less opportunity. the average numbers of hours worked is shrinking. we know what the problem is. sending keeps growing. our economy can't work up and over the next 20 years real spending about grow by 27%. we will be taking in plenty taxes. frankly a lot more in taxes. still, that's not going to be enough. we will still be spending more than we take in. a lot more. the reason that spending is growing so fast is that our safety net is broken. medicare and social security are going broke. cbo says social security's unfunded liability now stands at 25% higher than before. if we do nothing, we could have a debt crisis. if we did, the most vulnerable are the ones who will be hurt
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the first an the worst. now, i understand some of my colleagues might not be all concerned about the government spending more money and the soaring debt. we hear lots of rationalization. here is what should concern everybody. if we spend all of our money on entitlements, we will have no money left for anything else. if we do nothing, spending on social security, our major health care programs and just net interest payments will take up almost all of the budget. total spending and everything else will fall to 7% of the economy by 2039. it would be the fallest share of our economy since the 1930s. here is another serious concern. cbo warns that our growing national debt would compromise our national security. admiral mullens said the same thing a few years ago. if we don't take action now we will have less to spend on national defense and will be less prepared for future
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challenges. the answer is very simple. repair our safety net. cut wasteful spending. prepare for the future. don't raise taxes. the way i see it, we shouldn't force families to pay more for washington's problems. we shouldn't make hard working taxpayers pay more for washington's mistakes and procast innation. hard working taxpayers deserve more than that. we need to expand opportunity for everyone in this country. we can start by getting the budget under control. i'm pleased he is here. i was going to filibusterer for a while longer. i would like to yield to the ranking member for his opening remarks gentleman thank you mr. chairman. i want to thank the doctor for appearing before this committee again and all of the work your colleagues do at the congressional budget office. before we discuss the long term budget outlook, i do think it's important to note that the
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progress we made so far on the deficit because in recent years congress has acted to reduce projected deficit business over $3 trillion which with more than three quarters of those deficit reductions coming from spending cuts. in addition, actual deficits not just projected deficits but actual deficits have fallen traumatically from $1.4 trillion in the fiscal year of 2009 to less than $600 billion today and are expected to continue shrinking as a share of the economy in the near future but as the congressional budget office's long term report makes clear, the deficit will begin growing again in the long term. the question mr. chairman has never been whether we need to reduce the long material deficits, the question has always been how we do it. as i will being look at the chos report, it's clear the only rational way to tackle the long term deficit is through the balanced approach that president obama and congressional
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democrats have been proposing for years. a combination of cuts but also cuts to special interest tax breaks, and other tax expenditures. unfortunately we do not have a partner when it comes to closing tax breaks and loopholes when it comes to reducing the deficit. our republican tax breaks refuse to close loopholes in order to reduce the deficit. in fact, this year the house has already passed more than $500 billion in unpaid for tax cuts with $300 billion more awaiting for action. i don't think we've seen such an increase in the deficit in the space of 30 days in many decades. they've not paid for a single penny of those permanent tax cuts meaning that other americans are going to have to shoulder the load in the future and by the way, mr. chairman, it
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violates the republican's own budget resolution. so given our republican colleague's unwillingness to take a balanced approach to reduce the deficit. we've got to do what we can do. we should be all focused on trying to grow jobs now and have jobs that pay living wages. we've made some progress on this issue. 288,000 jobs were added to the economy in june. we've seen 52 consecutive months of private sector job growth totaling 9.7 million new jobs. we've got to do more. that's why we've got to invest more in our national infrastructure. we need to do a permanent fix so it as we've discussed rather than the short term band-aid approaches that do not allow for long term investments and decisions. we've got to boost the minimum wage. it's a scandal that you can work 40 hours a week all year long
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and still have to raise a family in poverty in this country and we should pass comprehensive immigration reform which the congressional budget office has indicated will reduce our long term deficits and boost economic growth. so we need to deal with the short term crisis but part of the reason we're seeing the short term crisis is the failure and inability of this congress to pass immigration reform. i would note that we've seen some important good news. cbo has projected federal health care spending in the year 2039 has actually fallen by 1/4th to 8% of gdp in the estimates today. this is not time for reverse on the important gains we've made in health care policy including per capita health care costs.
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just in conclusion we should be working together to reduce the deficit. enough governing by crisis. enough threats that we will default on our national debt obligations. enough government shut downs but now let's focus on some really long term solutions to not only long term solutions but solutions that allow people to have a lifestyle that allows them to meet the pieces of the american dream that are so important to everybody. so i look forward to the testimony of mhim thank you. >> thank you to ul athe members of my committee. my colleagues are happy to be back with you to talk about cbo's new outlook for the budget to the long term. the federal deficit is shrinking this year to its smallest size
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since 2007 roughly $500 billion to our estimate. it is quite close to its average over the past 40 years. federal revenues will equal about 17 1/2% of gdp which is quite close to their historical average. the federal deficit will be close to its 40 year average of 3% of gdp however in current laws governing tachixing stay t home deficits will become noticeably larger. because such debt is now larger relative to gdp than in any point in u.s. history, accept for a brief period around world war ii, further increases in the long term could be especially harmful. 25 years from now in 2039, federal debt hold by the public would exceed 100% of gdp we
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project. where the upper path of debt relative to the economy could not be sustained indefinitely. for this report we've put our projections for 25 years with greater uncertainty through greater decades. we see it rising to 26% in 2039. the increase would occur because under current law federal spending for social security and the government's major health care programs, medicare, medicaid, the children's health insurance program would rise sharply. we project that such spending would represent 14% of gdp by 2039 twice the average seen over the past 40 years because of the combination of the ageing of the population. growth in per capita spending and the expansion of the federal
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health care programs. the government's net interest payments would also be larger relative to gdp than their past average primarily because the debt would be larger. in sharp contrast under current law spending more all other federal benefits and services would be on track to make up a smaller percentage of gdp by 2024 than in any kind in more than 70 years. thus the increase in federal spending relative to the size of the economy would occur not because of general growth in the size of the federal government but because of growth in a few of the largest programs. federal revenues would also increase relative to gdp because of current law but more slowly than spending. revenues would equal 19 1/2 percent compared to 17 1/2% today. that increase would reflect the gradual shift of income to higher tax bracket as gains out
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pace inflation as well as expiring tax provisions and other factors. deficit woulds grow as would gr accumulation would push up federal debt. federal debt held by the public in 2039 would reach 106% of gdp without factoring the harmful economic effects of that debt and the 111% of gdp including those effects beyond the next 25 years, the pressures caused by rising deficits in debt would become even greater. to put the federal budget on a sustainable path for the long term, lawmakers and the public will have to accept significant changes. either reducing spending for large benefit programs below the projected levels or letting revenues rise more than they would under current law or some combination of the approaches. the size would depend on the amount of debt considered appropriate and the timing of
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the changes that would be made. for example, you might set a goal of bringing debt back down in 25 years to the average%age of gdp seen during the past 40 years which is 39%. one way to meet that particular goal would be to phase in deficit reduction such that deficits excludeing interest payments were $4 trillion lower over the next decade and the amount of deficit reduction in 2024 as a percentage of gdp was continued thereafter. naturally if you aim for lower debt or delay taking action, the ultimate policy changes would need to be larger. if you aim for higher debt or made changes more quickly than in our scenario than our required changes would be smile. our report gives estimates for a large number of scenarios that you might consider. to be sure, long term projections are quite uncertain. we examined how the projections would differ if we used
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different estimates of future productivity, interest rates or growth of health care costs. we found that the projections would differ quite a bit. nonetheless, the main implication of our projections applies for a wild range. federal debt which is already high by historical standards would be as least as high or probably much higher 25 years from now. thank you. >> thank you. want to get into a few areas. let me start with health care. this year's report suggests that in order to address the short fall in medicare's trust fund you would have to either increase pay roll taxes from 2.9% to 3.7% or cut medicare spending by about a fifth immediately and permanently in order to bring it back into balance for the next 25 years.
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do you consider a program that requires those kind of corrections sustainable. >> those would be very large changes as you know the growth of medicare and other programs is the key driver of pressure on the federal tedebt. we don't try to isolate any particular programs but big changes are needed in some of these large programs or taxes will have to go up is the biggest deal. >> so we've basically had this 50/50 split between public and private health care spending. 53% of total spending came from private sources while 47% came from public sources. your report shows that health care spending is supposed to go from 16% of gdp today to 22% in the long term window. do you expect the current rough 50/50 split to stay what it is.
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>> in our projection the federal share would grow but we've not quantified that. it would grow because of the ageing of the uppopulation becae it moves more people over 65 and the additional benefits in medicaid. >> but you don't project where the split comes down. >> we have not done that projection. question do it for you. >> i think that would be helpful. let's go over to social security. of all of the things i'm concerned about it's the new projections in social security. >> the last before you said it was 1.9% of pay roll, the year before that it was 1.8%, this means it's grown by over 150% over just the last three years. for someone whose 55 today can they expect to see their benefit cut in 2030 when the trust fund goes bankrupt and how much if
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so? >> so you're right mr. chairman. our estimate of the unfunded liability in social security has increased considerably over the past few years. we've taken on board new information about mortality rates, what we think will happen to disability rates and altered our projection of interest rates and many other factors. if nothing else were done then when the trust fund ran out of money, payments out under current law we think would equal revenues coming in. that would be a cut of about 1 quarter in benefits the moment that occurred we've not done that estimate yet. across the board. as you know we produce a more detailed long term projection for social security and we will do that in a few months. >> a lot of the proposals that we had were to exempt current beneficiaries. if you were to exempt current beneficiaries from that across the board cut what would that mean to future beneficiaries if
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you had to distribute the cut only to those who are not yet retired. what would that be? >> we haven't been able owe do that calculation yet either. it wouldn't change that much that in the sense that the first year, the new beneficiaries would be maybe 5% of all beneficiaries. if you gave nothing to beneficiaries you would still need to cut the benefits of existing beneficiaries. >> if you're exempting the entire population with longevity growing as it is, the pool that you're distributing the cuts to is a lot smaller. >> yes. exactly. that's what i'm saying. you can't satisfy -- you get passed that date you get to 2031 or 2032 if you get to new beneficiaries you would still need to cut the benefits of existing beneficiaries. >> it's not even do-able. that's amazing. >> right. >> interest rates. your interest rates -- your projections go down about 50 basis points.
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i'm curious as to the rational on that. you say the 10 year note will be 2 1/2%. i think last year you said 3%. i'm curious what's behind that projection? what if real interest rates rose? we've asked you to do interest rate simulations many times. what if they go back to the historic outlook of 3.1. what would be the budget outlook if we go back to the historic average. and why would the down ward revision of 50 basis points? >> so we did a comprehensive re-examination of our interest rate projections. there's been a lot of discussion among researchers and among people in the financial community about what interest rates will go back up to when they go back up. we assessed a number of factors some that would push the interest rates down for example slower growth of the labor force
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which reduces the number of people who are going to work and thus pushes down interest rates. we looked at the lower productive growth that pushes down interest rates. the greater share of income going to high income people. there's a number of factors that we thought would lower interest rates. on the other side we think there are factors that would raise interest rates. one is more federal debt. we also think there will be slightly less per capital inflow from abroad. that will push interest rates up a bit. we did our best using the evidence that exists to assess their relative sizes and we thought on balance interest rates were likely to be somewhat lower over the next 25 years than they've been over the last 20 or so years. so we took down our projection of the rate we projected with
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about half of a percentage point. if interest rates were half a percentage higher -- >> so 3. >> to three and over the entire 25 years what we did here is change the projection only beyond the first ten years. they were half a point higher for the entire 25 years then the debt to gdp ratio over 25 years would be 105% instead of 111%. >> i thought it was 106. >> 106 without the feed back from the bad economy. >> 111 to 135. >> okay. >> is the biggest driver labor force participation? >> that's the biggest -- biggest source of down ward pressure relative to the past. >> i will say when i smoke to people in the bond trading in the spring. we had interest rates looking too high in the second half of the decade relative to a number of what them thought. there aren't a lot of market
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participants who are focused very much on developments in 25 years out. so we can't draw on that directly but i think the move we made is quite consistent with what we see in financial markets for the second half of this decade and what we think is likely to be the case given these fundamental factors beyond that. >> labor market participation is an issue we will have to get into. there are a lot of contributing and moving factors but that's an issue we will have to deal with here in date detail.
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