Managed to be in default on small bond issues by doing things almost unthinkable in terms of financial management. When you talk about prematurely emptying out Pension Funds to pay bondholders, that is not something you do if youre not already bankrupt. When you talk about taking money dedicated to one bondholder and shift it to pay another bondholder, that cant go on for very long. I cant tell you at what point they run out of those extraordinary and very unhealthy kinds of tools but it cant go on forever and restructuring authority has to be in place enough in advance to restructure to meet may and july as they come. So i think the First Quarter is a meaningful period if the deadline, the speak et set for the house to act is very important. We are willing to work with everyone and anyone that approaches us with the intention of solving the problem. We know that there is going to have to be oversight with restructuring. I do believe doing something on the medicate reimbursement is important but i totally agree with you without restructuring, there is not a solution. Mr. Chairman, there is a fierce urgency of now on this issue and i just dont get the sense that many of my colleagues understand that and i hope we can awaken them to that fierce urgency of now and the rights that 3. 5 million american citizens have and would have if they were living here in the United States. Its just fundamentally wrong and so you ask people to shed their blood, risk their lives and cant treat them with the same dignity and respect they would have here on the mainland. Something is fundamentally wrong about that. I hope we can i hope we can prick the conscience of the senate to move on this issue, mr. Chairman because this is really consequential to millions of people. You raise aid lot of good points and to be honest, were in the process of doing that. Im going to come up with a different bill than the one we filed which would do the job to a large degree or get us started on it in time to do it even more thoroughly. I hope i can enlist your support when we finally get this there is no politics as far as im concerned. I want to get it done, and thank you very much, mr. Chairman. I wanted to throw in with the words of the 3. 5 million citizens of puerto rico, again, emphasizing these are american citizens and should be done quickly and the fierce urgency of now. Thank you for that work youre doing. I have in my state, lorraine had a higher percentage of puerto rican s than any city in the world. 500 came to lorraine to work in u. S. Steel and their girlfriends and families followed. Some are still very connected to the island of puerto rico as american citizens. I want to talk for a moment, mr. Secretary, about something this committee did, mr. Chairman so very, very important. Part of the bipartisan package we made permanent the temporary extensions of the earned income tax credit and child tax credit, whether measured in terms of the additional money they have earned in low income families pockets. This is the largest anti poverty advance since the 1993 budget act saved the Affordable Care act. Other than the Affordable Care act, what this committee did last year on the itc and ctc was the most important anti poverty advance that this country had. I want to focus on the earned income tax credit in 2013 the most recent year for which complete, 6. 2 Million People were lifted out of poverty. Half were children. Worker whose dont claim children are the only workers who can be taxed more deeply into poverty, which is ironic considering we brag about rewarding work and when we make our speeches around here. Its wrong, nobody who works fulltime should live in poverty that is a fundamental should be a fundamental American Value and i think is. 44 of 43 of my colleagues and i including many of us introduced a proposal to correct the problem. Speaker ryan offered similar propels as has administration. Give us thoughts, if you would, on the proposal, the need it would address and particularly, the impact on the economy. I agree with your assessment of the significance of making the refundable credits permanent. There is nothing more important we could have done to deal with poverty in the country and create an incentive to work, which is why there is historically bipartisan support. I think that there ought to be a way to work in a bipartisan way to get something done. I talked to speaker ryan and since about this many times. The president as has been reported. I think that this is an area where if we could put some other issues aside and concentrate, we could create a model for how you deal with problems of shared that help deal with inequity and help people get back into the work force. If you tax people back into poverty, you cant complain people arent becoming part of the work force. Its not one of the reasons the itc was created was to make work pay and make it so people wouldnt have this proverse tax ization of going to work at low wages. I dont know there is more elaborate economic response. I think you put a pretty accurate point on it if you have a tax thats taxes people into poverty, its not a good tax. And if you have a solution, it is one that there ought to be bipartisan support for because everybody supports work and the earned income tax credit was created in a administration and budget agreements for many decades that ive been involved with. I hope this can be the next chapter and do it this year. Senator bennett. Thank you so much for your leadership and service over so many years. I want to start with an unrelated issue, whether you can describe for the committee we got a vote on the customs bill and whether you could describe the enforcement provisions in that bill and their importance. Yes, senator, thank you. I think that the enforcement provisions are very important because while it is critically important to have creative agreements that open borders for free trade, its equally important that we have meaningful tools to enforce fair trade and that we use those tools. I mean, anti dumping, duties are important tools and, you know, the customs conference report comes, you know, after weve taken some action at the end of last year where we added to the resources we have in our departments to implement the anti dumping and counter vailing duty laws. Now when the conference report on customs is passed, will there be another round of enforcement tools . It would give it would create accountability for future administrations, this administration and future administrations for the prosecution of cases of duty evasion. The bill creates deadlines by which the customs and Border Patrol have to notify you of actions taken to investigate allegations. It gives the Border Patrol extra tools to protect property. It stream lines operations that facilitate the flow of legitimate trade and it gives us tools on an issue that you had helped to craft to bring currency issues into sharp focus so we can be even more effective pushing back on any unfair practices in that area. Appreciate your help on that provision. I wanted to go back to senator was talking about. Because we are at the moment cutting across the board, cutting defense spending. And americans and that certainly simultaneously weve now had 19 trillion of debt on the Balance Sheet which from the point of view of the next generation of americans as a combination is toxic. I wonder, id like to give the opportunity to tell us what issue you give your successor for how they could lead this congress in a bipartisan way to actually begin balance. That we are prosing to place on the next generation of americans. The time has come to get this work done. Whats your advice. Whoever takes my place will be coming into a very different situation than my predecessor and you were the budget director. The deficit 10 climbing the debt would cross. We had a full blown crisis. Steady economy, we have to start moving toward deficit reduction both economy recovery and were delivering we got the deficit below 3 of gdp and rejections of the deficit and around 75 of gdp. A hockey stick going off. Whoever takes my situation where, you know, hoeflfully its long term and you can say ten years down the road where do we want to be . Its a blueprint. For how how to think about it ch weve got to invets in the short and medium term to get the economy to where it has a chance to get people a future. I think to have a debate about what to do about longterm entitlements would be a different debate if we could turn the corner. So many people feel left out of the today. What do we do when there is real needs, real needs of education and training and research that were not meeting. We got to fill that space. The budget agreement give us a period of time. The budget lays out ideas, lets get progress done on the ones we can agree on and whoever comes in will hopefully be able to take the debate forward. Its not a debate that begins and ends. It goes on. As i said to senator thoon, we have to be realistic about the mix of revenue and ending is. When we balance the budget in the 1990s and ran a surplus, we had 20 of gdp revenues. That was consistent with running what was projected to be a 5. 5 trillion surplus the day i left office. If youre looking at a period now where we have the baby boom retiring. It shouldnt be as a surprise to anyone that the demographics are rougher. When my generation was born, everybody knew 65 years later, people were going to be 65. Thats not a surprise. What we could have done in the 2010 period is Carry Forward the fiscal position we were in in 2001. We didnt do that. Then we had a financial crisis and a recession but were now in a more stable place so i actually think it is if we can make progress on the short and medium term. We have to work towards politics and permits the kind of civil debate to deal with issues in a bipartisan basis. Thank you senator casing. Thank you, mr. Chairman. Ill be ill just brief because i have to run. I want to commend you for your Public Service. Now this is your third or fourth chapter significant Public Service and were grateful its a hard job in any environment but especially the current climate in washington so we command you. I was talking to you earlier today about an issue i think, i know you work on every day in the administration does as well and enough attention. The strategy to focus on Terrorism Financing or our efforts to cut off financing to terrorists and especially now the challenge that isis presents. I guess id ask about the current efforts. And if there is anything you hope we would do in addition to the, you cant be tough on terrorism and not talk adam sooben, so unless than putting an important commercial or focus on adam, whom we should confirm, just give us kind of an update on whats going well, cut lg office is financing and what more we can do. I appreciate your calling attention to the urgent need to confirm the secretary for this critical responsibility our world dealing with financing and we have to provide information to countries, we should have it under secretary is confirmed to do the job asfectively and your support. Let he give you a little background of current state of where we are in the counter aisle of in terms, isil involved over the last couple years. They started by concurring bank vaults. They developed Oil Resources and ex portion taxes and to goat renewable work with the close 90 branchs of banks and isil territory. We worked with our military and in their control. We worked to close the resources so that its much harder if not impossible to sell that, the trade with syria in particularly and when you look at what were doing now in terms of title wave two, were not just striking the refineries, were striking at the oil tanker trucks which they use to move the oil to the border and been working with the government to shut down into the system and retirees who arent getting because they live in isil control territory. These things are very hard on the nonisil people and towards funding. I cant say that were done. They are always evolving but what they have done is grown so that they need they cant continue to grow. Were striking at the oil tanker trucks which they used to move the oil to the border. Weve work wd the government of iraq to shut down payments into the system, so there are employees and retirees who arent get iting paid because ty live in isil controlled territory. Its what you have to do is deprive them of an evergreen source of funding. Now, i cant say that were done. They are, there are always evolving, but what they have also done is grown so that they need more money than they can raise and that means they cant continue to grow and we have to keep cutting back on their sources of renewable funding. Make it harder and harder for them to grow and force them to shrink. There are other military efforts, but im talk about what we can do on the finance side. And the first time in history the finance ministers from around the world met in the security counsel and together with russia we sponsored i sponsored a resolution that had the whole world and sanctions. We have an aggressive effort. And keep their financial flows up to their needs. Weve turned to hard to stay where they are. And powerful tools to do it. Its a different entity. There is a lot of work we need to do by latterly. We shut down cement trade and not like trucks come and middleman and was to make middlemen liable so that its not just the isil forces themselves that can be sanctioned and we are working very hard and adam is leading the effort for us. Thank you, mr. Chairman, secretary, thank you for your extraordinary Public Service and the manner in which you handled treasury very proud of your work. Were here on the budget, some of the tax propels in the budget under the jurisdiction of this committee and certainly, support what youre trying to achieve in Higher Education and make you more affordable to make pensions easier for individuals to accumulate funds for senator portman and i are working on ideas. Some Energy Propels making permanent 179 dealing with Energy Efficient and retro fit. That is good. New market tax credit and the state i represent low income spend. I just want to use my time to talk about fundamentals and you have on the competitiveness of the tax code globally, you are making certain recommendations made in the last budget certainly deal with parts of the problem. And but it doesnt deal with the fundamental issues. The two fundamental problems we have is one, we have two tax codes. One for the wealthy and one for the rest of us and wealthy figure outweighs to get around the changes we make and two steps ahead of us. But if we past that, they will figure out something else. And the second is we have high marginal rates compared to the countries. The 35 corporate rate you deal with and try to get it lower. 39. 6 individual rate. And whats amazing about that is that this nation among the nations we compete with relies less on the government sector so why should we have the largest rate . So i want to know why were not considering something fundamentally different where we could have the lowest marginal tax rates in the world by 500 on both income and consumption. We could get a corporate rate down to 17 , individual rate down to 28 . We can do this in a revenue neutral way. Youre not going to lose revenues. Its paid for in the tax code. Not trying to take it from one sector to the other. All within the tax code itself. It rewards savings and very efficient. You can you dont use the tax code as much as you used today for policy but use it to collect revenue. That may seem strange to use the tax code to collect revenue. Its progressive, more progressive than the current tax code. Id say thats not necessarily a high bar but more progressive than our tax code, which i would think most people would want. One of the complaints we hear about it is thats visionary, longterm, what can we do in the shortterm . Weve been talking about this for 30 years. This is your last opportunity to give us good advice and i would hope you would be visionary. One last point before i give you your time to respond, there are now democrats and republicans both proposing this type of tax reform, so this is not something that cant happen. It can happen. The more and more people look at it, they say gee, why arent we doing this . Why isnt america the only industrial nation that doesnt use consumption taxes . I understand the political hurdles. I tell you this, your propels have political hurdles. Some are so common sense. Everything has political hurdles. Why not try to correct the problem . Senator, obviously the question of income tax versus consumption tax is very serious analytical one. We have never endorsed a consumption tax. Many other countries do and their overall tax burden may not be lower than ours. Its just the way its paid is through different mechanisms. Their income tax is lower but total tax may be higher. You know, we do, as you know, well have sales taxes at the state and local level in many parts of the country so this is an area where, you know, where there has been a federal income tax and state and local authorities have tended to use sales taxes. Its not by the basic nature that a consumption tax is more progressive by its basic nature, it could potentially be less progressive. One would have to design. The two to make it progressive. We introduced a bill to do this. This is not hypothetical. The two design factors, revenue neutral. Wont grow. It will be revenue neutral and the second it will be more progressive than the current tax code because you tax out the benefits to make the tax code progressive. I understand those are the objectives behind the proposal you designed. Im saying inherently in the design of consumption taxes, people at low income levels consume 100 of their income. People at high income levels dont. You have to overcome that by design. Not something weve supported or we are working on a proposal for. Its an area of inquiry that someone pays attention to and thinks about. Id be happy to have conversations about. Its not an area were looking at putting proposals. I didnt expect you to embrace it. That was not the purpose for the question. The purpose is this, we will have hurdles getting any of this done and weve been arguing about this for a long time and its no long theory. We should have an advantage in the tax code. When you add up the tax burdens of the countries we compete with, they have a higher tax burden than we do. Why are we losing companies to Great Britain for example . I think, senator, the business tax system is the reason were losing companies, not not over 90 of the business pay in at per