Secretary mnuchen first. Welcome to everybody. Good morning. Senator cons and senator langford he looked good earlier. Today we have the opportunity to review the budget requests of the department of treasury and the Internal Revenue service. As we begin this important hearing we welcome our Witnesses Today, treasury secretary Steven Mnuchen and irs john koskinen, and the treasury ig for Tax Administration russell george. Thank you for being here. The department of treasury has an important mission. Its work is to promote Economic Growth and stability and safeguard our Financial System which is critical to maintain a Strong Economy and create economic opportunity. Equally important is its work to combat terrorism. The proliferation of weapons of mass destruction, money laundering, Drug Trafficking and other National Security threats. The Internal Revenue service has the significant role of administering our nations tax laws. To carry this out effectively, taxpayers must have the faith that irs will do its job without regard to an individuals exercise of their constitutional rights. The irs must also protect taxpayers personal information and privacy as the irs continues to evolve and make changes in its Service Delivery systems there must be improvements in its ability to manage that change without adversely affecting taxpayers or compromising their personal information. We look forward to hearing from all of our Witnesses Today about the details of your budget requests as well as your plans to address cybersecurity threats and vulnerabilities within treasury and in our nations financial sector. In addition, we also want to learn more about treasurys plan to make a comprehensive approach to regulatory relief. Hopefully, those efforts will help spur Economic Growth and job creation. Thank you and i will now turn to my marching member, senator cons, for his opportunity statement. Thank you for convening this hearing. I appreciate the opportunity we have on the subcommittee to examine a wide, diverse range of interest across many agencies and in particular the department of treasury. I look forward to finding Common Ground and strengthening our partnership. I would like to welcome our witnesses, secretary mnuchen, commissioner koskinen and mr. George. Thank you for joining us. We are considering the budget request by the Treasury Department, a Department Central to our governments stability and operations, that helps sustain our countrys Fiscal Health and protect our National Security, from collecting taxes and processing over three trillion dollars in federal payments to pursuing financial crimes here in the United States and identifying individuals here and abroad that would promote terror. I am concerned the budget request were considering would undermine the departments ability to fulfill these bills. In the nonirs parts of treasury the request is 1. 3 billion, 26 less than current levels. To achieve that reduction, the bulk et would rely on staff cuts achieved through Department Wide hiring freeze. My concern is this might not result in a strategic realignment of resources but instead drain the departments best and brightest to meet an arbitrary budget goal. The budget also cuts common sense investment like cybersecurity improvements and upgrades to Financial System i think the entire federal government relies on for treasury services. I am concerned about proposed cuts to the office of terrorism and Financial Intelligence which helps enforce economic sanctions and reductions in the Financial Crimes Enforcement Network which combats domestic and International Money laundering. I think these are all areas of your department worthy of full investment. I have continually called upon in administration and its predecessor to crack down on iran and north korea and other regimes that support terror. Although there have been some mixed signals, i believe the administration shares and strongly supports these goals. I would be interested in hearing whether the requested funding levels are sufficient for these vital bureaus. The budget promise to eliminate grants to Community DevelopmentFinancial Institutions which support development and create jobs in under served neighborhoods around our countries and cuts funds for entities created in the wake of the financial crisis, an 8 cut for fsoc, and 25 to the office of financial research, both of which i think have real value. Lets look at the majority of the budget before us, which is the irs. No Government Agency is more visible, more impactful to the American People than the Internal Revenue service which collects the revenue that fund more than 95 of the federal governments operations and public service. Each year more than 80,000 Public Servants at the irs make hundreds of millions of contacts with american taxpayers. There have been seven consecutive years of either budget freezes or budget cuts to irs. The proposal were reviewing today would continue that trend by cutting i think 260 million from an underresourced agency. My concerns are not based on the partisan politics of this. To put the scale of this proposed cut in context, President Trumps level for the irs falls 400 million short of what president bush asked for in 09. I think the predictable impact of in reduction would be the loss of more than 4,000 staff in Taxpayer Services, which would significantly diminish the services for taxpayers seeing prefiling and post filing guidance to timely and accurate meet their Tax Obligations. The level of service in the upcoming year if this cut is enacted would drop to nearly 40 45 during peak filing. That would mean more than six out of ten callers more than six of ten caller will not be helped on toll free lines as they seelk guidance. My office hears from constituents when their calls go unanswered or it takes a long time to connect with irs officials. I think the solution is to give the agency the resources to meet these constituent needs. I look forward to hearing more about why the department and the irs think it is a good idea to reduce Service Delivery rates and what we might do together to address that. We have a lot more to discuss today. Let me move to the end and say in the absence of a Funding Agreement on our committee, we will continue to work here. I am grateful for your service and look forward to your testimony, and i know that our respective constituents expect no less than a highly efficient and wellfunctioning irs and department of the treasury. I look forward to working with you, chair woman, capito, as we move forward in our 2018 process. Thank you. Thank you, senator coons. Secretary mnuchen, i invite you to present your remarks on behalf of the department of treasury. Thank you. Good morning. Chairwoman capito and ranking members of the subcommittee, thank you for inviting me today. I look forward to working with the subcommittee on funding key priorities for the benefit of the American People. One of the president as promise also to the american taxpayer was he would make sure that their money was spent wisely. A budget should not be an end in itself but a means of improving the lives of americans. More money does not necessarily translate into better policy. The president has challenged every agency and department to identify greater efficiencies and savings that can be realized both immediately and in coming years. The administration is proud to submit a budget that achieves this goal. This budget makes some difficult choices because of necessary constraints. We carefully evaluated the allocation of resources to each of the departments important functions and made reductions where needed. These choices in no way diminish our ability to operate the government effectively. The president made it clear, National Security is a top priority, and in accordance the treasurys request prioritizes National Security and cybersecurity programs. Another top goal of treasury is creating sustained Economic Growth. This muchneeded growth will be achieved through a combination of tax reform, Regulatory Reform and trade. We will work with congress to pass legislation that allows american taxpayers to keep more of their hardearned paychecks. If we develop the right policies today, we will secure a prosperous future for our children and grandchildren. The difference between recent sluggish growth and a return to 3 or higher gdp is trillions of dollars into if economy, making a meaningful difference in the lives of allamericans. This budget prioritizes funding for treasurys wide array of economic and financial tools, including sanctions. As our enemies have changed, so too have our weapons to combat them. We are honing the economic and financial tools in our arsenal to disrupt the Financial Resources and procurement capabilities of those who wish to do us harm. This includes actions against destabilizing regimes, terrorist kne networks and drug traffickers. Stopping the flow of funding to dangerous nonstate actors, working with foreign partners to keep their Financial Systems secure, protecting our own Financial System, these key programs are critical to the continued safety and stability of the nation. Protecting treasury and the Financial System from cyberattacks is critical to our financial stability. Cyberattacks against our agency or the Financial System have the potential to impact markets, the economy and our National Security. The cybersecurity enhancement account makes investments into enterprisewide cybersecurity capabilities that allow treasury to better defend against cyberattacks and more efficiently respond to recover when they do occur. This account also makes investments in Critical Infrastructure protection, allowing treasury to work collaboratively with Financial Services sector to increase their operational resilience. In recent months our office of terrorist and Financial Intelligence agreed with the gulf counterparts on the intent to establish a terrorist financi financing targeting center, a Bold Initiative to fight terrorist financing. It is a key outcome of the president and saudi arabia and will enhance cooperation with gulf countries. It will support the administrations priority to fight terrorism, counter irans influence and deprive terrorists globally of the access to gulf countries. As i mentioned earlier, tax and Regulatory Reform are marquise items for Economic Growth and job creation. It has been over 30 years since we have had comprehensive tax reform in this country. We are committed to changing that. Such reform means a simplified code that will provide simpler taxes and relief to middle income americans while making our business competitive again. We have taken a comprehensive approach to regulatory relief, meeting with hundreds of businesspeople across the financial industry including community, regional and large Financial Institutions, consumer advocacy groups, academics, think tanks, trailed groups and insurers. We have heard about what works and what does not. Our reforms will spur Economic Growth by increasing access to credit and providing relief for Community Banks and making regulations more efficient, effective and appropriately applied. We will do this while ensuring our Financial System is secure and stable and does not put taxpayers at risk. We have the opportunity to do great things for the American People, and i look forward to working with members of this subcommittee and on these important issues. Thank you very much, and im happy to answer any questions today. Thank you, mr. Secretary. At this time we will proceed to our questioning where each senator will have five minutes. So im going to begin the questioning, and i would like to welcome you and thank you also for the visit, recent visit to my office. I appreciate the opportunity to get to know you and see your vision of where the department of treasury is going to go. Lets talk about Regulatory Reform. You mentioned it in your remarks. I know that you have talked to stakeholders all around the country, independent regional and large banks, regulators, consumer advocates, academics, analysts and investors, the whole range, to get a clear picture of what the Regulatory Framework is now. What would you say is your most significant challenge that you have encountered to this point to getting real meaningful regulatory relief . Thank you very much. First of all, let me just say under the president s executive order weve examined regulatory changes for the Financial System. While this looks at many aspects of dodd frank, it goes much further than dodd frank. We are pleased we delivered the first report on banks and Credit Unions, and we look forward to delivering three more reports as it impacts other areas. I think for us the biggest challenge is making sure we deal with the issue of regulatory overlap and making sure that the regulators are working together, and thats something that as my chair of fsoc im very focused on. I am pleased to report we have had very good reception from both sides of the aisle on our suggestions in the report, and we look forward to working with congress on some meaningful changes, particularly for Community Banking. I think, as you know, the top institutions account for about 50 of the assets in the Banking System in the United States. We need to create a system where Community Banks and regional banks can thrive, and we also look forward to working with the regulators on many of the proposals. Thank you. I appreciate your emphasis on Community Banks as somebody from a smaller state where Community Banks really are the life blood of a small community, access to credit, familiarity with regions and areas, customers. We want to preserve that model for those of us who dont have large bank entities, you know, close by. I know as a former member of the financial Financial Services committee on the house side, this was a topic of great of great concern to all of us to make sure that we can provide flexibility and reasonable regulation and not a onesizefitsall. I appreciate that. I would like to first of all, we talked the other day, that im proud of the work being done in parkersburg, West Virginia at the bureau of Fiscal Service. We have 2,000 folks there doing a lot of great things. One of the things theyre doing is to promote government efficiency through a shared Services Model. I with like to first of all invite you to come visit parkersburg and the bureau of Fiscal Service there, but also like to see just a commitment from you that youre willing to kind of push this concept of shared services. I think it has been rather successful in the beginning, and we want we would like to see it grow for obvious reasons. Do you have any comments on that . Well, first of all thank you for the invitation. I will take you up on that. Great. I look forward to visiting the facility. It is a very important facility of ours, and i very much appreciate the model we have of Fiscal Services where it provides shared services across the government. I think that it is our obligation to look at other areas that we can use a similar approach. One of them, i believe, is technology. We have too many Different Technology departments in the different agencies. We dont have consistent technology, and i fully support a shared Services Model of for technology across the executive branch, amongst other ideas. Sounds great. Sounds great. Thank you very much. I know were going to have other questions on cybersecurity, so i would like to kick it off because i think were