Manchester. Americans are bond to our british friends by common language, culture and many other things such as common law. As a boy i remember the strength that to us americans to witness the courage of the british people as they stood strong in the battle of britain. We know the result of the british people will once again vanquish a common foe. Today i think we can speak to all members of the committee when i say god save the queen and god save great britain. We care great deal for friends overseas and we wish them the best. Todays hearing will have a dual focus. We will discuss the president s budget for fiscal year 2018 and ongoing efforts to reform our nations tax code. We are pleased to be joined here today by treasury secretary, Stephen Mnuchin will provide the ministrations perspective on these important issues. We welcome you back to the committee and as if this was your first Budget Hearing before this committee let me warning these hearings tend to be grueling, that is a necessary part on the budget process in the committees oversight function. Not to worry and i think youre up to the challenge, let me begin by saying a few words out about the president s budget. Obviously we are all still very near the details of this proposed budget. At this point i can say that i apply the president for advancing progrowth economies for getting the economy moving. I should the ministrations concern which ballooned by nearly doubling under the previous a ministration. The budget increased Economic Growth and reaches 3 . As i understand it that vision relies on implementation of the number policies including tax reform cutting unnecessary regulation, Building Infrastructure and some other approaches as well. I think reforming healthcare is part of that, reducing deficits that significantly him prove the surprise side of the economy. This is not unheard of that the administration places belief in its policy proposals. For example in the fiscal year 2010 budget growth was assumed to get to a size 4. 6 . It was assumed to average 3. 8 over an eight year time. Was premised on the administrations belief and policy and prescriptions. While critics will want to criticize the nature of the budgets growth projections it is more realistic than a number Budget Proposals ive seen in the past, particularly some of came from the Previous Administration. As i shared the overall goal to reduce deficits keeping them mind the nations debt nearly doubled in the administration. We have a number of difficult choices as we work to address reforms. The difficulties reflected in the budget. I look forward to continuing to examine the various proposals and to hearing secretary mnuchins insights about the items in the budget that we will discuss today. I like to talk about discussing the other elements and that is tax reform. I have been beating the drama tax reform. I start to make the case for reform in the committee, the senate floor public forms and events in private conversations. I have not been alone. Theres been a bipartisan recognition, one that is growing more by the day that our current tax system doesnt work. Throughout the endeavor i have stated numerous times that it is going to be successful if were going to be successful and see engagement from the president. He for anyone right set off as a political statement let me make it clear that i was not advocating for the election of the republican president , i repeatedly implored president obama to engage with congress on tax reform, but to no avail. The Current Administration but i tax reform framework earlier this month. One that i think could serve as an outline as a separate move sword, keeping in mind as with any major and undertaking we need to be realistic and commit to practicing the art of the doable. I expect to get a number of questions about the tax plan today. In addition i expect to hear a lot about the process to achieve tax reform will move through congress. That point, we have already heard a few demands of my friends on the other side via as if they were preconditions for any serious engagement on tax reform. I hope that these are preconditioned but still i want to address one of them briefly here today. One of them is that republicans have abandoned the use of budget reconciliation for tax reform. This is a hard demand. Historically speaking most major tax bands that have moved through reconciliation have had bipartisan support. The past when republicans have controlled the house and senate along with the white house all of our tax reconciliation bills have enjoyed some Senate Democrats support. If we can reach agreements on policy theres no reason why democrats cannot agree to support a tax reform package to move through the reconciliation process. In the intention is to continue working so long as theyre willing to engage. With this desire and commitment to. And thanks to the secretary for being here today so i will turn to my colleague and friend for his opening remarks. Thank you very much and to share your view with respect to those despicable acts in manchester. So we understand your points are very well taken. With the American People demanded buses bipartisan cooperation health care to affect the daily lives for what it has offered is a onepage tax cut proposal that is shorter than the typical drug store receipt. For those working families those that have led to easy those to even having close to make Bernie Madoff blush. I will focus my remarks into areas. First of the Economic Team with the middleclass tax cut. If this was billed for a middleclass tax cut this is like middleclass housing. And just openended promises. How which treats the very fortunate to to eliminate the estate tax with a mile wide loophole than it is a prescription for more inequality and right in this room that mr. Mitchell and and i agreed though long of a note tax cuts for the rich but after what we have seen in the tax plan in the budget we have to throw that in the waste bin along with the trump plan not to cut medicare the health plan to make it harder for us to keep the trust fund solvent solvent, 1 trillion of medicaid cuts 70 billion of cuts to Social Security disability. So the promise not to cut medicare or medicaid it also has not rung true. So with the proven idea of tax cuts there is anybody that agrees with that. And then to zero the amount in into the stratosphere but instead the revenues have cratered. And then to go further to the early 2000 and those did not pay for themselves either. And the low and behold to have to raise revenue bottom line to pay for itself argument is as well as the flat Earth Society is those trying to defend it. To want to respond briefly to the point with respect to the process going forward. Because citing those that our more than the economic sugar high pass to be bipartisan. Because you have that oped article it takes a lot of careful consideration and i know something about it because i wrote two of them. But the focus has to be on riding the economic proposal to create good paying jobs without the burden on the middle class. That is the kind of reform from poolsides but the point with respect to reconciliation this is not a debate about the desire of my friends the chair and wanting to work in a bipartisan way because he and i have done that on a lot of occasions but the chair as intent noted reconciliation is inherently a partisan process. That is what it is all about and in effect puts a gun to decide. So thats why there is such a strong feeling on our site about not using reconciliation and iil want to make that comment to not diminish and have the desire for a partisan bill because having written two of them, i would very much like in accordance with these principles i outlined, and i know my colleagues have said that also. The dysfunctional, we have to understand that. But we have to ensure that weo have a bipartisan process. And for that, i want to comment briefly on my friend from arkansas. I would like to extend a warm welcome to the secretary of state. We are grateful to have you he here. In 2017 prior to his confirmation, he was the finance chairman for donald trump for president and in addition to traveling with the president or out of the country in that role, he also served as the senior economic adviser in the economic positions and sanctions. Before those activities, he served as the founder, chairman and chief executive officer of Capital Management and also served as the chairman and chief executive officer until the sale to the group. Earlier in his group he marked as the chief Information Officer and has extensive experience in Global Financial markets and oversight of training at u. S. Government securities, mortgages and municipal bonds. Hes committed to philanthropic activities and served as the members of the board and the museum of contemporary art los angeles, the museum of art and Sculpture Garden on the mall, ucla Health Systems board and New York Presbyterian Hospital board and Los Angeles Police foundation. He was born and raised in new york city and has a masters degree from yale university. We are grateful to have you here and appreciate your willingness to serve your country. Please proceed with your opening statement. It is a pleasure to be here. Members of the committee, it is an honor to be here today. I am looking forward to working with members of congress and this committee on passing important legislation for the American People. My number one priority is treasury secretary creating sustainable Economic Growth for all americans. The best way to achieve this ise a combination of tax reform, regulatory relief and protecting taxpayers. This also includes making some difficult decisions with respect to the budget. We are currently bearing the cost of previous years and this has forced us into making hard choices but the remarkable thing about Economic Growth is it builds on itself. If we develop the right policies today, our children and grandchildren will reap the benefits of an ever growing economy. India in the next ten years of the return to the modern historical average of about 3 annual gdp growth our economy will grow by trillions of dollars. This will be meaningful to every man, woman and child in thisch country and future generations. Tax reform will play a major role in the campaign for growth. Its been more than 30 years since weve had comprehensive tax reform in this country. This administration is committed to changing that. We have over 100 people working at the enormous issue. We are working diligently tod bring tax relief to middle and lower income americans as well as making america does this competitive again. All of this comes as we simplify the tax code and make it easier for hardworking americans to file their returns. Finally, i would like to speak about the importance of free and Fair International trade. Its a component of Economic Growth of the trade deals that disadvantage american workerss and business can hardly be considered either free or fair. In meetings with my international counterparts, i expressed this dual importance. Just two weeks ago i had productive meetings with the finance ministers of the g7 and met with members of the world bank. They understood our concerns and we have an approach to the International Dialogue with the spirit of mutual understanding. And the president joint session to congress, he spoke about the marvels of the country is capable when the citizens were set free to pursue theirir passions. Fundamental is improving the uncompetitive taxes from blocking the way. This has been a significant few months and treachery. We have been studying, developing and implementing policies that will put this country on the path to sustainey Economic Growth. In the coming months, we will work with this committee and the congress in what we will look back on as an important time for the nations economy and our history. Thank you and i look forward to answering your questions today. We are glad to have you here and appreciate the way that you are doing your work. In the oped was written by senator obama blank advisor is doctor goldstein in the 2,008 edition of the journal and i will put that in the record at this point. Th in that oped, he stated that then senator obamas tax proposal would reduce the west end and 18. 2 of gdp. That would be a revenue to gdp target that they thought was desirable. And in that target it certainly exceeded the nations longrun average for the revenue to gdp which the nonpartisan cbo tells us they are about 17 over the last 50 years. Interestingly, the Current Administrations budget has revenues averaging 18. 2 of gdp over a ten year budget window exactly what then senator obama was advocating. They are already heading higher and above the historical average and considering the president s budget projects an average of 18. 2 in revenues as a share of the economy, how do you respond to critics of the president s budget doesnt raise enough revenues . Thank you for pointing that out and i look forward to that oped that you are putting in the record. I believe as you pointed out we have rid of the week for revenue and gdp with Economic Growth we think that the critical issue is we haveon tax reform thatre simplifies the taxes and makes the business competitive again. E some have argued congress shouldnt pass the reconciliation process and should get categorically off the floor before any bipartisan talks on tax reform. The Democratic Senate had adopted a budget that included a reconciled tax increase of almost 1 trillion. That purpose is tax reform. Despite the objections at the time i agreed to work with but then chairman and on an intense bipartisan tax reform process. There were no preconditions need and they abandoned the reconciled tax instruction. There are other relevant examples that played out the hist same way. In fact it is fairly safe to say requiring that type of precondition of the categorical abandonment of the reconciliation prior to negotiating is without any substantive precedent. What are your thoughts on that mr. Secretary, any process related demand that you would like to make before you would be willing to work with both sides on capitol hill on theoth side bipartisan tax . I have no process demands from my standpoint i am hopeful we can work with both republicans and democrats. I know weve had the opportunity to work with your staff and i know my staff is going to be sitting down with senators staff indoors later in the week. We are hopeful we can find Common Ground particularly on the issue of making the business tax is competitive. We have a system that is highly uncompetitive. We need to put the workers back to work. Mr. Secretary, the president s budget is increasind Economic Growth and reaches 3 . As i understand, that relies on the implementation of a number of policies including progrowth tax reform cutting out unnecessary regulation buildingg infrastructure, reforming health care, boosting Energy Production and reducing the deficit significantly improve the supply side of the economy. It is not unheard of that and administration places belieanadn the efficacy of his policymini proposals. In the fiscal year 2010 budget of the growth was assumed to get to as high as 4. 6 and assumed to average 3. 8 over the extended eight year period. That was on the belief in the policy prescriptions particularly the stimulus. Mr. Secretary can you spend a little bit of time explaining why the administration believes its policy proposals including but not limited to tax reform can generate sustained Economic Growth . We believe that a combination of tax reform, regulatory relief and trade policies will return t us to the levels of 3 Economic Growth with gdp. And i believe that our longterm projection is actually 2. 9 in the budget. It takes several years to get to 3 and ive heard lots of economists tell us why that is not going to be the case. But we are committed to have policies to get back to what our appropriate growth rates in this country where. Thank you very much. Welcome, mr. Secretary. Nothing shows tax unfairnesss more clearly than your proposal to let the fortunate few convert the ordinary income into business income without Strings Attached paying the lowest 15 p tax rate and also avoid Social Security and medical payroll taxes into prescription for more inequality in america. So you are creating a massive new tax loophole. My reason for asking the question is especially because you cant enforce the tax laws on the books now. How do you expect the American People to believe you can prevent the fortunate few from exploiting this new loophole when you cant even stop the current . That is a very good question. Let me assure you ive said this repeatedly to the banking side but we are absolutely committed to make sure pass through his small and mediumsized businesses have the benefit of the business right. But this is not just something for large corporations, small and mediumsized businesses are the engine of growth in this economy but we will make sure people cannot use this as a loophole where they should be paying 35 on the wages and they pay 15 instead. I assure you that will be in the code and we will have ways to enforce that. Respectfully, i dont think that cut it. I do not doubt that you believe you can absolutely make it happen. You are absolutely sure its going to go for the Small Business but the reality is they thrived in the absence of tough enforcement principles and ii didnt hear that now. This proposal has been out there and we have not gotten any specifics ab