[Senate Hearing 108-207]
[From the U.S. Government Publishing Office]
S. Hrg. 108-207
NOMINATION OF JOSHUA B. BOLTEN
=======================================================================
HEARING
before the
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
ON THE
NOMINATION OF JOSHUA B. BOLTEN, TO BE DIRECTOR, OFFICE OF MANAGEMENT
AND BUDGET
__________
JUNE 25, 2003
__________
Printed for the use of the Committee on Governmental Affairs
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COMMITTEE ON GOVERNMENTAL AFFAIRS
SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah THOMAS R. CARPER, Deleware
PETER G. FITZGERALD, Illinois MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama MARK PRYOR, Arkansas
Michael D. Bopp, Staff Director and Counsel
Johanna L. Hardy, Senior Counsel
Joyce A. Rechtschaffen, Minority Staff Director and Counsel
Susan E. Propper, Minority Counsel
Jennifer E. Hamilton, Minority Research Assistant
Amy B. Newhouse, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Collins.............................................. 1
Senator Akaka................................................ 2
Senator Voinovich............................................ 3
Senator Lautenberg........................................... 4
Senator Sununu............................................... 5
Senator Durbin............................................... 6
Senator Coleman.............................................. 7
Senator Stevens.............................................. 20
Senator Fitzgerald........................................... 27
Senator Carper............................................... 29
Senator Pryor................................................ 35
Senator Levin................................................ 38
WITNESSES
Wednesday, June 25, 2003
Hon. Jon S. Corzine, a U.S. Senator from the State of New Jersey. 8
Joshua B. Bolten, to be Director, Office of Management and Budget 9
Alphabetical List of Witnesses
Bolten, Joshua B.:
Testimony.................................................... 9
Biographical and professional information requested of
nominees................................................... 45
Pre-hearing questionnaire and responses for the Record....... 53
Corzine, Hon. Jon S.:
Testimony.................................................... 8
Appendix
Letter from Thomas J. Donohue, President and Chief Executive
Officer, Chamber of Commerce of the United States of America,
dated June 25, 2003, supporting the nomination of Mr. Bolten... 146
Post-Hearing Questions for Joshua Bolten from:
Senator Collins.............................................. 147
Senator Lieberman............................................ 149
Senator Akaka................................................ 155
Senator Levin................................................ 156
Additional question for Mr. Bolten submitted for the record by
Senator Levin.................................................. 157
NOMINATION OF JOSHUA B. BOLTEN
----------
WEDNESDAY, JUNE 25, 2003
U.S. Senate,
Committee on Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 9:32 a.m., in
room SD-342, Dirksen Senate Office Building, Hon. Susan M.
Collins, Chairman of the Committee, presiding.
Present: Senators Collins, Stevens, Voinovich, Coleman,
Specter, Bennett, Fitzgerald, Sununu, Levin, Akaka, Durbin,
Carper, Lautenberg, and Pryor.
OPENING STATEMENT OF CHAIRMAN COLLINS
Chairman Collins. The Committee will come to order. Good
morning.
Today, the Committee on Governmental Affairs is holding a
hearing to consider the nomination of Joshua Bolten to be the
Director of the Office of Management and Budget, one of the
most important positions in the Federal Government. Most people
know OMB as the agency that oversees the preparation of the
President's budget and its administration by Executive Branch
agencies. OMB, however, also has a variety of other
responsibilities. Most notably, it oversees financial
management, Federal procurement, information and regulatory
policies in all executive agencies. As such it plays a broader
role than virtually any other agency in the Federal Government.
While OMB's budget functions are important, so too are its
management responsibilities. Over the years this Committee has
received countless reports from Inspectors General and the
General Accounting Office that highlight programs at high risk
for mismanagement, waste, fraud, and abuse. Ensuring that
agencies are properly managed is crucial to seeing that
taxpayer money is wisely spent and that the missions of each
agency are carried out efficiently and effectively.
I applaud President Bush for placing far more emphasis on
management issues than have previous administrations. For
example, the President has developed an aggressive Management
Agenda to ensure that management issues are of high priority.
As part of this Management Agenda OMB is responsible for
assessing agencies' performance in five key areas: Financial
management, human resources, e-Government, competitive
sourcing, and linking budget to performance.
The administration is also beginning to link management and
budget issues through its Program Assessment Rating Tool, also
known as PART. PART is intended to hold agencies more
accountable and ensure that they are operating efficiently by
identifying the strengths and weaknesses in their programs.
In overseeing these management responsibilities as well as
the preparation and implementation of the President's budget,
Mr. Bolten will face many challenges if confirmed for this
critical post. I am very pleased personally that he has agreed
to serve in this important position for which he is very well
qualified. His extensive experience in both the public and
private sectors provides him with the background he will need
as the Director of OMB. Mr. Bolten also possesses the extensive
knowledge, extraordinary intelligence, and perhaps most
important, the patience and persistence needed to be a
successful OMB Director.
I would now like to turn to Senator Akaka for any opening
remarks that he might have.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka. Thank you very much, Madam Chairman. I join
you in welcoming our nominee, Mr. Bolten, and his mother as
well.
It is every President's prerogative to implement management
proposals like, as you mentioned, Madam Chairman, PART, the
Program Assessment Rating Tool or the Management Scorecard. I
believe that management proposals should not make worse the
challenges that we seek to correct.
A good example of my concern is the recent demand on
employees at the National Institutes of Health to sign and
return within a day an addendum to their performance plan
contract. The addendum included the objective of completing
``the fiscal year 2003 competitive sourcing program.''
Circulation of this form, reportedly without explanation,
created widespread confusion and even fear among some
employees.
The incident raises a question as to why there are such
missteps at a time when NIH is seeking to hire young
researchers and scientists. Unfortunately this example is
indicative of what I see as a disregard for the government's
most valuable asset--its workforce. The insistence on numerical
targets for contracting out work regardless of an agency's
needs does not evoke an employee friendly work environment.
I urge you to re-examine what type of work the
administration views as inherently governmental, and work with
employees to allay their fears.
Federal contracting policies should be fair to Federal
workers, be transparent, and be in the best interest of the
public. Agency efforts to address challenges in recruitment and
retention should not be undercut by numerical targets that
simply eliminate jobs.
In closing, let me touch on the budget aspect of your new
appointment, Mr. Bolten. I urge you to focus like a laser on
the debt burden we are bequeathing to our children, and with
that I wish you well in your work.
As you may know, the Congressional Budget Office estimates
the on-budget deficit to exceed $400 billion in fiscal year
2003. This amount includes Social Security with the budget. If
Social Security is off-budget as it should be, the actual
deficit would approach $600 billion, or 5.5 percent of the
gross domestic product. In 2001, there was a budget surplus.
With the President's current budget there would still be a
budget deficit in 2013.
Mr. Bolten, I look forward to your testimony and I want you
to know that I may not be here long in this meeting because I
have a markup that I have to attend, but I will stay as long as
I can.
Thank you very much, Madam Chairman.
Chairman Collins. Thank you, Senator. Senator Voinovich.
OPENING STATEMENT OF SENATOR VOINOVICH
Senator Voinovich. Thank you, Madam Chairman. I would like
to extend my warm welcome to Josh Bolten, and I am glad that
your mother is here and another young lady. Is that your
sister? It is a special day, I am sure, in your family's
history.
I recently had the pleasure of meeting Mr. Bolten to
discuss his vision for the roles and responsibilities of the
Director of Office of Management and Budget, and I find him to
be eminently qualified for that job. If confirmed, Mr. Bolten,
you will enter OMB at a very crucial time. The departures of
Mitch Daniels' deputy director, Nancy Dorn, deputy director for
management, Mark Everson, have left OMB without a cohesive
management team to oversee the Federal Government's policies,
procedures and programs. However, with your nomination and Clay
Johnson's recent confirmation I am hopeful the new leadership
team will provide the necessary amount of continuity, energy,
and pragmatism to OMB's management and budget roles.
Mr. Bolten, three of my goals when I came to Washington
were to balance the budget, pay down debt, and change the
culture of the Federal workforce. If you are confirmed as OMB
Director you will have a key role in each of these issues. I
have always believed that if you have your finances in order
and you have good people, you have a successful business. As
OMB Director you will be involved in the biggest business that
we have in our country.
In the past decade, fiscal conservatives have worked very
hard to return the Federal Government to a balanced budget. For
a short time after hand-to-hand combat--and I was here during
that hand-to-hand combat--we met our goal for 2 years. In 1999,
we had a real on-budget surplus of about $1 billion and then in
2000 we had one of about $87 billion. It is the first time that
we did not use Social Security to operate the Federal
Government.
Unfortunately, our success in balancing the budget was
short-lived. In the blink of an eye we returned to spending the
Social Security surplus and running large budget deficits.
Today, instead of reducing our $6.2 trillion national debt, we
are expanding it. In 2001, we had an on-budget deficit of $33
billion. In 2002, we suffered an on-budget deficit of $314
billion, and CBO now projects that we are going to have a
unified budget deficit in 2004 and 2005 of over $400 billion.
And as Senator Akaka just pointed out, if you add in Social
Security we are close to about $600 billion borrowing to run
the Federal Government.
In addition to the budget process, the Federal Government
has been experiencing a different type of deficit for too long,
one of human capital. For the first 4\1/2\ years of my term I
have offered solutions to the government's human capital
crisis. Last year, with the administration's support we
successfully amended the homeland security legislation to
include several provisions that are helping the Federal
Government recruit and retain the best and brightest candidates
possible.
However, Congress alone cannot solve the human capital
crisis. Therefore, I was grateful that the President took a
proactive interest in the issue of making strategic human
capital management the first of his five governmentwide
management initiatives. It is terrific and I commend the
President and the administration for their foresight and
leadership on this issue.
Overall, I believe the administration is making progress in
implementing the President's management agenda. I hope Mr.
Bolten will continue the legacy left by Mitch Daniels by
serving as the President's advocate and leader on
governmentwide management reform.
I am, however, troubled that the administration's
competitive sourcing initiative is causing unease within the
Federal workforce. In fact on July 24th I will hold a
Subcommittee hearing to examine the past, present, and future
of the administration's competitive sourcing initiative. I am
interested to learn how you would manage the program if you
were confirmed.
Madam Chairman, I believe Mr. Bolten possesses the
qualities and skills necessary to be an effective director of
OMB and hope we can move him through the process as soon as
possible.
Chairman Collins. Thank you, Senator. Senator Lautenberg.
OPENING STATEMENT OF SENATOR LAUTENBERG
Senator Lautenberg. Thank you, Madam Chairman. Welcome to
Josh Bolten, and my friend and colleague, Senator Jon Corzine.
The two of you seem to have an affinity of sorts; background. I
think Jon Corzine worked for Josh Bolten; is that right, Josh?
[Laughter.]
Reverse order.
I had the opportunity to meet Josh Bolten some days ago,
and while there are issues that we do not agree on, and I think
that his focus on trade-related activities is very important--
but I really believe that having gone to school in New Jersey
he will be a quick learn. We do welcome him here.
I am sure he will handle himself very well, if all goes as
planned and he is confirmed as the director of OMB. He knows
his way around Washington having been here for some time, and
we congratulate you for being nominated for this post. Your
family, I understand, is with you and we also congratulate them
for having such a talented member of the family here.
I want to make just a couple of quick points. First, on a
parochial matter, I look forward to getting Mr. Bolten's on-
the-record commitment to try to give us a hand, work with New
Jersey, with Governor McGrevey and other New Jersey officials
on our State's PAAD waiver. The PAAD program in New Jersey
works quite well. It is a prescription drug program designed to
help those who are at the 160 percent of the poverty level or
less. It has been paid for out of New Jersey funds for many
years. What we are looking for now is a waiver--not uncommon,
by the way--to be able to use other Federal funds at no
increase in cost to the Federal Government for the program
because of the emergency nature of the cash flow right now. But
with New Jersey picking up, continuing to pick up its share of
the obligation that we have set out to provide. So I would
hope, Mr. Bolten, that you will be able to look at that. It has
been quickly moved in a couple of other States, so we would ask
your attention to that.
Second, I want to modestly remind the nominee that I had a
very good vote last week on the privatization, the potential
privatization of the air traffic control function. We won 56 to
41 to prevent the President from privatizing air traffic
control functions. It is not modest at all to say so, but we
had a lot of thoughtful Republicans join a lot of thoughtful
Democrats and put this into place. So we are not happy about
the suggestion that there could be an attempt to privatize FAA.
I consider that like a fifth branch of the military and they
have such a wonderful safety record there that we do not want
to disturb it.
Last, I want to find out whether or not a report that was
commissioned by the former Treasury Secretary, Secretary
O'Neill, indicating that the future Federal budget deficits
could total $44 trillion, I want to know whether or not that
report is prevented from being made public. It should be made
public, and we would like to have some understanding about
where it is and what it is.
I said before that was final. This is final. I would hope
that if confirmed, Mr. Bolten, that we are going to have a good
working relationship with the Congress. It was not quite what
we would like to see it in the last administrator, but we
believe that we can achieve that with you. As long as we are
open and straight with one another, having done the work that
you have done in the past--I looked at it carefully. I know you
have got broad shoulders. You just may have to exercise them
occasionally, but other than that we will try, as you see, with
Senator Voinovich and the Chairman, Senator Collins, this is
going to be among your easier places to be.
But we look forward to working with you and believe that
you are going to have a distinguished record with OMB. If we
disagree on an issue, we want to work to resolve, as much as
practical, the issue, and get on with the business of
government.
Thank you very much.
Chairman Collins. Thank you, Senator.
We are following the early bird rule today, so I will call
on Senator Sununu next.
OPENING STATEMENT OF SENATOR SUNUNU
Senator Sununu. Thank you, Madam Chairman. Having only been
here for 6 months I do not know a great deal about the Senate,
but I know as a potential nominee you should probably be a
little bit nervous when a Senator says, ``This will be easy. Do
not worry.'' [Laughter.]
As I came into the hearing, you might have noticed a flash
of excitement. For a minute I thought you had talked Senator
Corzine into taking the position in your stead. [Laughter.]
I say that only half jokingly. I think that the position of
Budget Director is the toughest job in Washington. You have one
boss and 535 critics, but as tough as that role may be, I think
the President has made a great choice. Josh Bolten has
tremendous qualifications, and experience in finance and
budget. He has a great depth of understanding of the policy
issues that we deal with, and more than just understanding the
nuances of policy, an ability to understand the budget
implications of policy, which is absolutely critical.
Moreover, you have experience in the White House in the
administration, and the White House is a difficult place to
work. It is a large organization in and of itself, and
understanding how to work through issues and problems and
decisions that need to be made as a budget director is valuable
experience to have.
I think we are very fortunate to have such a qualified
nominee. I do not think you need a lecture about the state of
the budget. You have been dealing with these issues, at least
in a peripheral way, now for several years. We have a challenge
I think everyone understands, to try to control Federal
spending, get the economy moving, and strengthen revenue
collections. Those are going to be recurring themes not just
this year, but I think for the next 2 to 5 years as we try to
bring our budget back to a balance.
Thank you, Madam Chairman .
Chairman Collins. Thank you. Senator Durbin.
OPENING STATEMENT OF SENATOR DURBIN
Senator Durbin. Thanks a lot, Madam Chairman.
Mr. Bolten, welcome, and you could not come with higher
recommendation than the presence of your former business
colleague and friend, Senator Jon Corzine, who has talked to me
personally about his respect for you, and that ranks very high
with me, and I am happy that you are here today.
I assume that before you came here today they had you
review a lot of things in preparation for the penetrating
questions which Senators are known to ask, and you perhaps had
a chance to take a look at the statements made by your
predecessor, Mitch Daniels, when he sought this job. We asked
Mr. Daniels, ``What challenges currently face the OMB?'' A very
broad question. It is interesting what he told us, January 16,
2001, ``I view the greatest challenge for OMB is the
development and management of the Federal budget during a
period of record budget surpluses.'' He went on to say, ``I
think it is imperative to ensure taxpayers' dollars are spent
efficiently, and programs are increased due to some high
priority and that is simply due to the availability of funds.''
My, what a difference 2\1/2\ years make. You are now in a
position where you come to this job facing the largest deficits
perhaps in our Nation's history, and we of course are concerned
about what happened in 2\1/2\ years, what economic policy did
we follow that failed to revive the economy and drove us so
deeply into debt. I am interested because you have been close
to the opinion makers and decisionmakers in the White House
during that period of time, whether there was any voice in the
room sitting with the President at any point in time that said,
``You know, this is not working, these tax cuts are not
working.'' Clearly that voice did not prevail in the
conversation because the President followed one massive tax cut
with another one, and still we have record unemployment, the
highest deficits in our history, and frankly, a state of the
economy which is of very great concern, and one that will
absolutely, I think, influence your job at OMB more than
anything else. I think your hands have been tied. I think you
are being given a very difficult job with your hands tied, with
the tax cut taking money out of the Treasury, with the needs
for national defense and national security, the demands there
that will be met and will be spent by Congress. What is left is
very limited. The President cannot fund his own education
program. No Child Left Behind has become an unfunded mandate in
my State as it has in many other States. And time and again we
are finding, whether it is prescription drugs or health care,
or homeland security, or veterans' medical, the money is not
there, the money is gone. It went by way of tax cuts, primarily
to the wealthiest people in this country.
I am interested, as you tell us about your experience that
leads to this, in finding out whether there was any voice in
the room speaking to the President at any point over the last
2\1/2\ years, saying this is not working, because clearly the
facts tell us it has not worked. What Mitch Daniels faced were
grand surpluses and the need to impose discipline, and what you
face are massive deficits and the absolute imperative to put
discipline into that process. It is a tough job. I believe you
are up to it. I am anxious to hear what you have seen and heard
in the White House in the last 2\1/2\ years that can give us
some comfort that reason has at least been suggested, if not
prevailed.
Thank you, Madam Chairman.
Chairman Collins. Thank you. Senator Coleman.
OPENING STATEMENT OF SENATOR COLEMAN
Senator Coleman. Thank you, Madam Chairman. I look forward
to voting for this nomination, to moving it forward very
quickly. Clearly, Josh Bolten contains the skill, the talent,
the intellectual capacity, the experience that is necessary to
do a very tough job.
I echo the changing reality by my colleague from Illinois.
Less than 9 months after Mitch Daniels' statement we were hit
with September 11, and subsequent to that we were hit with
WorldCom, Tyco, Enron, and a great unstabilizing impact on
confidence in the economy, and I think we have made progress.
But you do have perhaps one of the toughest jobs in Washington.
Somebody has to hold the line. I would not like to lecture
here, but to reiterate that this President is a compassionate
conservative, and I think we have to keep that in mind, and so
as OMB does the things that it does, clearly and hopefully not
in a mechanistic, formalistic way, but taking into
consideration the human impact on some of the decisions that
are made.
Then finally, I looked at your comments and noted in answer
to one of the questions you talked about the important task
going forward as to return the economy to strong growth and
healthy job creation, which will begin to move the government's
finances back into balance. Clearly, tax cuts, trade policy and
the like are important.
So I think you bring the skills and the talents to the
table at a very difficult time. The world has changed since
Mitch Daniels came before us a couple years ago, but I think we
are up to the task and I think you are the right guy to do it.
Thank you, Madam Chairman.
Chairman Collins. Thank you, Senator.
It is now a great pleasure to welcome our colleague from
New Jersey, Senator Corzine, for his introduction of the
nominee.
TESTIMONY OF HON. JON S. CORZINE, A U.S. SENATOR FROM THE STATE
OF NEW JERSEY
Senator Corzine. Thank you, Madam Chairman, and colleagues
of the Committee. It is good to be here with you today. I am
particularly pleased in the role that I am playing because I
enthusiastically support the nomination of Josh Bolten to be
the Director of OMB.
As you may know, Madam Chairman, Josh was a trusted
colleague in the private sector for a number of years. He
almost became my Chief of Staff before he so abruptly chose an
alternative career path with a then-aspiring governor, high-
aspiration governor from Texas. Accepting graciously that
slight, I maintain a sincere respect for Josh Bolten's judgment
and consider him a close friend.
That said, my support of his nomination is not based on
friendship. It is knowing Josh as a man of uncommon common
sense, intelligence, integrity, and I think he is an
outstanding leader, and I think he will do an outstanding job
as the Director of OMB. I think most people who know him would
share that view. While at Goldman, Sachs he was rightly
respected for his intellect, work ethic, modesty and skills as
a manager. Speaking for myself, I relied on him heavily in
almost every way, except when I was asking someone to write my
political speeches. In that case we sometimes had to part ways.
From all indications, he has done a similarly outstanding job
for the President including writing political speeches. I am
confident that he will do a great job at the OMB.
To be a good OMB Director, you have to get your hands
dirty, you have to get into the details of a lot of issues and
understanding of the program. Josh is an individual that is
both willing to do that, has exhibited that, understands the
intricacies of policy, and I know he will do an outstanding
job.
To be a good OMB Director, you also need to maintain an
effective working relationship with the Congress and with
colleagues in the administration and the White House. Josh will
excel at this, in my view, because he believes in treating
everyone with respect, and because he knows not just how to
pursue an agenda, but to listen and learn from others. In that
regard I hope you were listening to Senator Lautenberg on the
PAAD waiver for New Jersey.
To be a good OMB Director, you need to be a good manager,
and I know from personal experience that Josh is. He is well
organized and he knows how to get the best out of other people.
And finally, to be a good OMB Director, you need to be able
to communicate about complex policy issues with a broad range
of players, including all of us sometimes difficult folks on
the Hill, but most certainly with the public.
Lest I be accused of killing Josh with kindness, let me
assure my Republican friends that Josh and I have very
different views on some matters of policy. That was true in our
Goldman, Sachs days, and will be true in the future, I am sure.
But while we will surely see things from different
perspectives, Josh is the kind of person who can be someone who
can disagree with you without being disagreeable, and I think
that will serve the administration and the public very well in
one of the toughest jobs in Washington.
In sum, Madam Chairman, I cannot imagine a better choice
President Bush could have made for OMB Director. I am proud to
call Josh Bolten a friend. I am confident he will do an
outstanding job not only for the President, but for our Nation,
and I hope the Committee will give his nomination fast,
favorable consideration to go forward. Thank you.
Chairman Collins. Thank you very much, Senator, for your
comments. It is very helpful to know of your personal
experience in working with the nominee, and we very much
appreciate your taking the time to introduce him today. We
would be happy to excuse you at this point if you would like,
or you are welcome to stay by his side and whisper in his ear.
Senator Corzine. I think he is going to do OK.
Chairman Collins. Mr. Bolten has filed responses to a
biographical and financial questionnaire, answered prehearing
questions submitted by the Committee, and has had his financial
statements reviewed by the Office of Government Ethics. Without
objection, this information will be made a part of the hearing
record, with the exception of the financial data, which are on
file and available for public inspection in the Committee
offices.
Our Committee rules require that all witnesses at
nomination hearings give their testimony under oath, so, Mr.
Bolten, I would ask that you stand and raise your right hand.
Do you swear that the testimony you are about to give to
the Committee will be the truth, the whole truth and nothing
but the truth, so help you, God?
Mr. Bolten. I do.
Chairman Collins. Mr. Bolten, I would like to give you the
opportunity to introduce any family members or other special
people to you who are here today.
TESTIMONY OF JOSHUA B. BOLTEN, TO BE DIRECTOR, OFFICE OF
MANAGEMENT AND BUDGET
Mr. Bolten. Madam Chairman, I have with me my mom, whose
80th birthday we will be celebrating in just a few weeks, and
my sister Susannah, and my friend Lindsey Kozberg. I am very
proud to have them all here, and I thank you for welcoming
them.
Chairman Collins. We welcome them. We are glad to have them
here as well. Mr. Bolten, I would now like to ask you to
proceed with any statement that you would like to make to the
Committee.
Mr. Bolten. Thank you, Madam Chairman and Members of the
Committee. I appreciate the opportunity to be here this
morning, and I am deeply honored to come before you as the
President's nominee to be the Director of the Office of
Management and Budget. I will, for the record, put my thanks in
to Senator Corzine, who was generous as an employer, and even
more generous with his kind words, and I was proud to call him
boss, and I am now proud to call him friend.
Madam Chairman, I've spent most of my career in public
service, and I've been fortunate to have a wide array of
extraordinary experiences in that service. For someone who
takes great pride in public service, there may be no better or
rewarding job than OMB Director. Helping to prepare the budget
of the United States is an unparalleled opportunity to see that
the Nation's priorities are carried out completely and
faithfully. The Federal Budget and the spending bills that
follow represent a shared conclusion on how much of the
people's money the government will spend and for what purposes.
These are critical judgments, as Madam Chairman, you and other
Members have noted, and the American people depend on all of us
to get them right.
Equally important is the other part of OMB's mandate,
Federal management. OMB has the responsibility to make sure
that our government delivers on its promises, gets the most out
of its resources and puts the great talents of Federal
employees to good use.
Madam Chairman, you and other Members of this Committee
have shown strong leadership on the management agenda, and I
look forward to working with you to make this agenda successful
in every way.
Since being nominated I've heard from many knowledgeable
people, and I think virtually every Member of this Committee,
that being the Director of OMB is not the easiest job in
government. This is true in the best of times, and it is
certainly true in our challenging times. Yet I believe that the
President's program, as reflected in his budget, is very well
designed to meet the Nation's greatest challenges. Those
challenges are strengthening our economy, securing our
homeland, and winning the war on terror. If confirmed, I will
give full effort to serving these great goals and will do so,
as the President has directed me, with a watchful eye on the
people's money.
In preparing to take on the role of OMB Director and its
challenges, I've been greatly encouraged by two discoveries.
First is the people of OMB. They perform some of the toughest
jobs in government with the highest, the very highest level of
professionalism and dedication. Second is the goodwill of so
many Members of Congress, beginning, Madam Chairman, with
Members of this Committee, and extending to your able staff. My
own service on the Senate Finance Committee staff roughly 15
years ago, that experience gave me an early appreciation and
respect for the role of Congress both in enacting laws and in
overseeing their implementation.
We may, as some Members have noted, Senator Corzine noted,
we may have differences. They may be large. But they need not
be partisan or bitter, and I hope they never will be. You have
my commitment, Madam Chairman, that if confirmed I will work
closely with this Committee and with the entire Congress as we
fulfill our shared responsibilities for the American people.
Thank you again for this opportunity to appear. I look
forward to your questions.
Chairman Collins. Thank you, Mr. Bolten.
I am going to begin the questioning with standard questions
that we ask of all nominees for the record. First, is there
anything that you are aware of in your background which might
present a conflict of interest with the duties of the office to
which you have been nominated?
Mr. Bolten. No.
Chairman Collins. Second, do you know of anything personal
or otherwise that would in any way prevent you from fully and
honorably discharging the responsibilities of the office to
which you have been nominated?
Mr. Bolten. No.
Chairman Collins. And third, do you agree without
reservation to respond to any reasonable summons to appear and
testify before any duly constituted Committee of Congress if
you are confirmed?
Mr. Bolten. I do.
Chairman Collins. You passed that first round with flying
colors. [Laughter.]
We are now going to start a round of questions of 8 minutes
each.
Mr. Bolten, OMB is responsible for overseeing the financial
management of Federal agencies and Federal programs. Many of us
were very concerned and disturbed to learn recently that
accounting problems have plagued the Corporation for National
and Community Service, and the result has been that the
projections for the AmeriCorps program show that there will be
severe reductions in the number of volunteers for fiscal year
2003, and this is going to occur, unless we remedy the problem,
despite the fact that the President has identified this program
as a priority, and that it has strong support among Members of
Congress. Congress attempted to correct these financial
management problems by passing the Strengthen the AmeriCorps
Programs Act last week, but nevertheless, past errors will
cause my home State of Maine to cut its number of volunteers
from 160 last year to only 20 in the next fiscal year, and I
think that is true of everybody sitting on this panel. Our
States are all experiencing these significant cutbacks.
How will OMB work with the Congress and the Corporation to
minimize the impact of these financial management problems?
They should not have occurred in the first place, but they
certainly should not be allowed to decimate a program that has
been working very well and is a presidential as well as a
congressional priority.
Mr. Bolten. Madam Chairman, that is indeed a high
presidential priority and the President has put great emphasis
on his support for AmeriCorps and for the other programs that
are under the aegis of the Corporation for National Community
Service, and that is an issue on which I want to work with you
and the other Members very closely to see what we can do.
There was a serious financial management problem, an
accounting problem that has persisted for many years within the
AmeriCorps program that has undermined its ability to meet its
financial obligations. When that was discovered by the folks
over at AmeriCorps, by the financial manager there last year,
she took very rapid steps to solve the problem. The Congress
stepped in helpfully in supplemental appropriations earlier
this year to fill some of the gap that was created by that
problem. But we were not able to take it all the way. The
President's request for AmeriCorps and other CNCS entities was
not fully met in the appropriations bills that were passed
earlier this year. We are very hopeful that we will be able to
get full funding as we go forward, including all of the
President's requests in the 2004 budget. I want to work very
closely with you on getting that full funding going forward,
and then doing everything we can possibly in the interim to
ensure that we get as many people serving in AmeriCorps and the
other important volunteer agencies as possible.
Chairman Collins. There has been a great deal of discussion
recently about high energy prices and the impact on our
economy. Alan Greenspan, for example, recently testified about
his concern over the high price of natural gas as one of the
key challenges facing our economy. There is another side of
energy prices, however, beyond this macro view, and that is the
challenges that many of our low income families face during
cold winter months in simply keeping warm, particularly in
areas of the country like the Northeast, which are heavily
reliant on home heating oil. Every year we have a tussle with
OMB to get the emergency LIHEAP, the Low Income Heating
Assistance Program, monies released in time.
Would you commit to working with those of us who are
concerned about prompt funding of the LIHEAP program to, (A)
ensure that the President's budget adequately funds this
program, and (B) that we do not keep experiencing these delays
in releasing the emergency funds?
Mr. Bolten. I will make that commitment, Madam Chairman.
The President's budget this year requests a total of about $2
billion for the LIHEAP program, $300 million of that in
contingency money that we can use to meet those urgent needs
that you spoke about, and you do have my commitment that as we
see urgent needs come up, we will work with you to ensure that
we get that money out promptly to the people who need it.
Chairman Collins. I have a second question I want to ask
you about the LIHEAP program. That is, the community action
agencies in Maine that administer the program tell me that
there is a far more efficient way to administer the LIHEAP
program, and that would be if we advance funded it so that you
would have to have double funding for 1 year in order for this
to happen. But that way the funding would be received in the
summer months and it could be distributed so that people could
fill their oil tanks when prices are lower. There is a
significant difference usually in the cost of home heating oil
in the summer months versus the winter months. By taking the
same amount of money but disbursing it in the summer months,
the community action agencies would be able to help a far
greater number of people, or give a larger benefit level.
I realize that you cannot commit today to changing the way
the program is structured, but would you be willing to work
with us to take a look at the efficiencies that would be
brought about by having an advance appropriation to change the
funding cycle for this program so that the money would go
further and be able to either help more people or provide a
greater monthly benefit?
Mr. Bolten. It is an interesting idea, Madam Chairman. I
would be glad to work with you on it. I have not heard about it
before, but it sounds like it may hold both some promise and
peril, and we'll see if we can capture the promise and avoid
the peril.
Chairman Collins. We see only promise. We will help you on
that.
Finally, on my round of questions, I want to ask you a
procurement question. As you may know, the Senate recently
adopted an amendment that Senator Talent and I offered, and
Senator Levin supported as well, that dealt with the issue of
contract bundling by the Department of Defense. What we are
finding is that small businesses are finding it increasingly
difficult to bid on Federal contracts because contracting
officers are bundling the requirements for contracts together
into one large contract that is beyond the scope or means of a
smaller company to bid on. If the requirements in that contract
were broken out in a logical manner, it would expand the number
of businesses in the United States that could bid on the
contract, and thus help the Federal Government to get a better
price, perhaps better quality.
Now, procurement officials tend to resist breaking up these
contracts because it is obviously easier for them to administer
one giant contract and leave it to the prime contractor to
subcontract certain parts of it, but if you look at it from the
perspective of the taxpayer getting the best value and the
desirability of having as broad a contractor base as possible,
the advantages of breaking out contracts requirements become
obvious.
Will you work with us to try to implement through the
Office of Federal Procurement Policy within the OMB, policies
that will discourage unnecessary bundling of contracts?
Mr. Bolten. I will, Madam Chairman, and the issue you've
raised is a priority for the President. He has recognized for
many years that perhaps the best way to promote small business,
minority-owned, women-owned businesses is to ensure that the
contract that they are bidding for are not so large that they
are simply out of the game. So the President very much supports
the initiative that you have pursued and I know the OMB's
Office of Federal Procurement is putting in place some programs
to ensure that when agencies do bundling, they have met a
variety of criteria that justify the bundling in that
particular case because I think we are in full agreement with
you that the bundling should not be permitted unless it is
necessary in that particular case. So we will look forward to
working with you on the implementation of that.
Chairman Collins. Thank you. Senator Lautenberg.
Senator Lautenberg. Thank you very much, Madam Chairman.
Mr. Bolten, you had a hint of what might be coming from me
in my other remarks, and I want to continue the discussion
about our Pharmacy Plus Program. We in New Jersey have been in
negotiation with CMS and OMB since March 2002, and Section 1,
it is 1115, waiver of the pharmacy plus. One of the questions I
was anxious to ask today on behalf of the people in my State
who need and depend on the assistance provided by the PAAD
program, if you as OMB Director will make the effort to work
with us to reach a speedy conclusion on the matter of this
waiver, and I would like to know that you will keep me informed
about the progress of this situation as it goes.
As an example, Wisconsin applied about the same time as New
Jersey did for this waiver, and their approval was developed in
July 2002, so I would like to know that we can count on you to
take a good look at it, and again, keep us in touch.
Mr. Bolten. Senator, not being at OMB at this point, I have
had no involvement in the waiver, but I'll be glad to work with
you if confirmed.
Senator Lautenberg. I am sure you are aware of the report
commissioned by then Treasury Secretary Paul O'Neill, showed
the United States facing Federal deficits of more than $44
trillion, and there was extensive reporting by the Financial
Times of London, and they talk about the administration
choosing not to disclose the findings of the report during a
time when Congress and the administration were negotiating the
10-year, $350 billion tax cut. How do you feel about disclosing
this kind of information? Is the public, the Congress entitled
to know what is expected from inside the financial structure of
the White House?
Mr. Bolten. Sure, Senator, the public is entitled to know
what the government's views are about what is coming down the
road at us in our budget situation. I have not seen the report
you've referred to. I know of it. But what I can tell you is
that this administration, for the first time, has taken on very
explicitly precisely the issue that is addressed in that
report, which is the massive unfunded liability that we face in
our entitlement programs. One of the chapters of the budget
that the President put out at the beginning of this year, the
2004 budget, explicitly addresses some estimates that the
administration has made and some economists have made about the
size of that unfunded liability. I understand that this report
uses different methodology, taking out estimates infinitely,
and it attaches a higher number to it. We can discuss what the
right methodology for putting the number on the size of the
unfunded liability in their entitlements is, but I don't think
we really need to do that to have the discussion. The number is
huge, whether it's $17 trillion or $47 trillion, and it's a
problem that we need to work together to address.
Senator Lautenberg. Enormous consequences in my mind,
whether it is $17 or $47, but is one of those unfunded
liabilities a tax cut promise that the President made? Because
that one got funded in a hurry, and we are seeing it now as, I
hope, will not be an annual or biannual process. Is that one of
the liabilities that you would pair off against the other,
unfunded against other unfunded liabilities?
Mr. Bolten. No, sir, the President's and the tax cuts
enacted by this Congress are not part of the unfunded liability
problem we face. The problem we face is the obligations that we
as a society have undertaken mostly through Medicare, Medicaid
and Social Security, for which we are not setting aside
sufficient money to cover. The tax cuts are a more short-term
measure, designed to get this economy going again. The deficits
we face in the short run, hopefully not the long run, the
deficits we face in the short run are by historical standards
relatively within the range of past practice. They are large.
They are larger than we want them to be, but they are not the
problem we face with the huge unfunded liability coming down
the road. They are, by my judgment, part of the solution to
getting this economy back on to the kind of growth that this
economy needs, which is ultimately the solution for the
government to bring its budget back into balance now.
Senator Lautenberg. I do not want to be unfair with you
because we are talking about some things that occurred in the
past, but I would like to feel that we have some understanding
about what the public is entitled to hear and when they are
entitled to hear it. I believe in lots of sunshine even though
we rarely see it around here, but the fact is that I am hoping
that we are going to be able to count on you in that regard. I
ask you here, are you committed at this point, or have you been
encouraged to think about the next tax cut during your early
tenure on the job?
Mr. Bolten. I have not, Senator. I have been involved,
obviously, in the discussions on the tax cuts that the
President has proposed over the last few years. The President,
at this point, has no plans for a future tax cut beyond those
that are already contained in his budget, some of which are
still pending before the Congress. And my expectation is that
the judgment about whether any further tax cuts are needed will
be made based on a cold-eyed view of the economic situation.
And whether a further tax cut is needed I think will be known
when we know better how the economy is doing.
Senator Lautenberg. You might guess, I see the glass as
half full, and I am concerned about the quick evidence that we
have seen. Having been the senior Democrat on Budget before I
left in early 2001, where we were beginning to ride a very
comfortable surplus train, and suddenly this has turned around
and we are developing massive budget deficits, very
disappointing, and I am not including the war. I am one of
those who believe that that action was necessary, and I commend
the President and our military for having it done in very
competent fashion.
One last question if I may, Madam Chairman. I want to ask
Mr. Bolten if you are familiar with the A-76 outsourcing
program?
Mr. Bolten. I have become familiar with the President's
competitive sourcing initiative, yes, sir.
Senator Lautenberg. And that is combined with the
President's agenda to privatize Federal jobs and job functions
that might create too much pressure on agencies at this time to
identify functions as commercial or attempt to contract out.
One example of those, and I think it is perhaps the most
egregious for all kinds of reasons, not including the generic
reason, but is the air traffic control privatization. Again, I
want to be fair with you. Have you seen enough of that to
comment on whether or not that is a program that you think is
advisable at this time?
Mr. Bolten. I do not have enough information, Senator, but
I can tell you that it would be my commitment to ensure that
the President's competitive sourcing initiative is implemented
in a way to ensure that the only jobs that we attempt to
competitively source would be those that are inherently
commercial in nature.
Senator Lautenberg. Thanks, Madam Chairman. Thanks, Mr.
Bolten. Good luck.
Mr. Bolten. Thank you, sir.
Chairman Collins. Thank you.
Senator Sununu. I'm sorry. Senator Voinovich first. Thank
you.
Senator Voinovich. Thank you. I would like to comment on
the Chairman's remarks to you. The AmeriCorps situation is a
problem in Ohio. It is a very good program. The private sector
is supporting it much more than I ever thought they would, and
I think we need $200 million if it is somewhere to be found to
take care of this problem. You are aware of it, and I know the
President supports it. Anything you can do to help switch
AmeriCorps would be greatly appreciated.
Mr. Bolten. I agree, Senator, we're in a difficult spot
because we do not have the money in the budget for 2003 that we
would like to have for the program. It's an extraordinarily
successful and important program from the President's
initiative. If confirmed, I will do what I can to assist for
this year. More importantly, I think, or just as importantly, I
want to look forward to make sure that we make sure that
program gets the resources it needs going forward.
Senator Voinovich. Great. Again, too often I do not think
the Office of Management and Budget ties up other policies in
the Federal Government that cause problems like the LIHEAP
program. In other words, we must provide LIHEAP funding to
those in need because the cost of oil, and the cost of gas is
so high. It seems to me that when some of these things come up,
that you ought to emphasize that we need to get, for example,
Clear Skies passed so that we have a more diversified source of
energy to keep us from relying on natural gas, which could
drive up the heating costs of people all over this country.
Furthermore, finding natural gas has become a priority with
Alan Greenspan, and that we need an energy policy in this
country, that opens up more sources of natural gas. Too often
we do not tie the two together so people only hear about it
from the environmental groups, but we never connect up some of
these policies with the down side of, for example, cuts to the
LIHEAP program. Have you given any consideration to looking at
how some of these things work and working with some of your
colleagues so people can make the connect?
Mr. Bolten. I have, Senator, and I would be pleased to work
with you on that if I am confirmed as Director. I think those
are very important connections to make, and the energy
legislation that is now pending before the Senate I think is a
good place to start, as well as, as you mentioned, Senator, the
President's Clear Skies initiative.
Senator Voinovich. And I think the fact that you worked in
the White House policy shop, makes you more qualified to start
connecting up the dots for the American people.
Mr. Bolten. I hope so, Senator.
Senator Voinovich. One thing I have noticed about the
current budget and budgets of the past is they really seem to
ignore the infrastructure needs of this country. For example,
if you look at water and sewers, we are talking $50 billion
during the next 5 years, and the amount of money in the 2004
budget was less than what was in the budget before that.
Unfortunately, we have resorted to borrowing money from the
Highway Trust Fund to pay for new road construction and
existing road maintenance. It seems that people are reluctant
to look at the fact that we may need more gas tax dollars in
order to do the job that we need to have a decent highway
system. My State, for example, is the ``Just in Time State,''
and the highways affect our economy. The role of the Army Corps
of Engineers, has expanded into environmental restoration, and
their budget has been cut. They have operation and management
costs that have expanded astronomically every year. It seems
like no one is paying attention to the infrastructure needs of
this country. They seem to be taking back seats, and it is
particularly disconcerting because of the fact that we have all
these Federal mandates on local governments. At one time the
Federal Government pitched in, for example, for sewers. Now it
is a loan program.
Would you like to comment on that? Why is it that there
seem to be no appreciation of these infrastructure needs that
we have got for the country?
Mr. Bolten. Senator, I'll be glad to work with you on the
infrastructure issues. They are important. Obviously, the
infrastructure is central to how our economy operates. We need
to make sure it's sound. There are, at the same time, many
competing priorities in the budget, as Senator Stevens knows
better than anyone, and my first sense is that the President's
budget as presented in 2004 does meet many of the
infrastructure needs that we have. The highway proposal that
the President put out earlier this year is, I recall, roughly a
20 percent increase over previous highway funding. There are
demands for a great deal more highway funding, but the
administration's view is that given the many priorities that we
have in the budget, that's what we have available to deal with
the infrastructure, the highway infrastructure priority, and I
do not expect the administration to be supportive of a gas tax
increase to try to expand the base there.
Senator Voinovich. Well, the truth of the matter in the
highway area is that the new program will get us back another
few years, and it will take us until 2007 to recover. This
demands your full attention and I hope you look into it.
Mr. Bolten. I will look at it with you, Senator.
Senator Voinovich. And I know GAO is working on a big study
on infrastructure needs of this country.
As you know, the House included significant personnel
reforms in their version of the National Defense Authorization
Act, and although the full Senate Committee--we did not get a
chance to participate because the Parliamentarian decided it
was not a germane issue. So I worked with Chairman Collins and
Senator Levin, on a bipartisan level, to come up with an
alternative to Secretary Rumsfeld's proposal. We are very
concerned that our bill is given consideration by the
Conference Committee. We would also like to see the
administration be involved in this as well. One of the concerns
that we have is that the original bill from the Department of
Defense cut out the Office of Personnel Management. We believe
the Office of Personnel Management should be involved in the
establishment of a new DoD personnel system as they are with
the Homeland Security Department. We think that they should be
involved with this new proposal in terms of personnel
flexibility, which changes Title 5. Are you familiar with this
issue?
Mr. Bolten. Roughly familiar, and I will become more
familiar if confirmed. I will take a close look at that. I do
know that Secretary Rumsfeld and OPM Director James had an
opportunity to address this, and came to the conclusion that
the right thing to do for the Defense Department was to let
them establish the flexibilities through their own system, and
that, it seems to me, offers them an opportunity to actually
structure the personnel system within our defense community in
a way that is going to make it possible for Secretary Rumsfeld
to pursue the major transformation of our modern military that
he would like to see accomplished.
Senator Voinovich. We feel that OPM should to be involved,
and we have seen their non-involvement in the Transportation
Security Administration. A debacle we had over there is
evidence that they ought to be involved in these issues.
Thank you.
Mr. Bolten. Thank you, Senator.
Chairman Collins. Senator Akaka.
Senator Akaka. Thank you very much, Madam Chairman.
Mr. Bolten, as you know, OMB's Statistical Policy Directive
15 was revised in 1997. It governs the racial and ethnic data
collection by Federal agencies. Native Hawaiians were
disaggregated from Asian-Pacific Island category at that time,
and a new category, Native Hawaiians and Other Pacific
Islanders, was created. Agencies were given until January 1,
2003 to make all existing record keeping and reporting
requirements consistent with its standard. If confirmed, I am
asking you what will you do to ensure a full implementation of
Directive 15?
Mr. Bolten. Senator, I'm aware of Directive 15 and your
leadership in putting it into place. It is a sound directive
and knowing of your interest particularly and your kindness to
my mom, I will be keeping an especially close eye on the
enforcement of that directive, which I am told is being
observed by the various agencies, and you have my commitment
that if confirmed as Director, I will ensure that it is
strictly observed by various agencies to whom it applies.
Senator Akaka. Thank you. GAO is studying this issue for
me. Let me ask another question.
Sound government contracting relies on transparency and
accountability. In your response to prehearing questions you
stated that, ``agencies should take into account that some
commercial practices will lack the degree of transparency that
the public rightfully expects of Federal agencies.'' Could you
please clarify what that means? Do you believe the practices of
contractors should be less transparent than Federal workers in
public/private competitions?
Mr. Bolten. No, Senator, I don't. I do think that as we
move toward competitive sourcing in some areas agencies need to
take in account that private contractors may not yet be as
familiar as they should be with the transparency requirements
of government, but then I think what that means is that it is
contingent upon those of us involved in promoting a competitive
sourcing agenda to ensure that the private contractors are
brought up to speed on whatever transparency requirements we
may have within the government, just as we need to make sure
that where the public employees are competing for an inherently
commercial function, that they are brought up to standard on
knowing how to bid for a contract because that, on the other
side of the coin, is an unfamiliar area to many public sector
employees.
I think the important part here, Senator, is that we ensure
that there is a level playing field of competition, where we've
decided that a function is inherently commercial and
appropriate for review as to be competitively sourced. We make
sure that there is a fair competition between the public sector
and the private sector.
Senator Akaka. Thank you. OMB had a hard and fast deadline
for agencies to complete outsourcing goals by September 30 of
this year. At the same time, the Office of Federal Procurement
Policy has repeatedly advised agencies to spend more time on
front-end planning before initiating a public/private
competition. This is an important point since, with the
exception of the Department of Defense, most agencies have
little or no experience with these competitions. Now OMB has
extended its deadline to July 2004. My question is: Why has
this deadline been extended nearly a year?
Mr. Bolten. Well, partly for the reasons that I was just
talking about, which is that I think we need to make sure that
as we ask for competition to be brought to some of these
inherently commercial functions, we make sure that all sides
are ready to do that, and as I said, so that there is a level
playing field of competition. If the agencies need more time to
have their personnel trained in the proper functioning of a
competitive bidding process, if the employees need an
opportunity to come up to speed on how to do a proper
commercial bid, then we should be flexible in giving the time
to do that, because the one thing we don't want to do is give
the bum's rush here and have a competition done on an unfair
basis. What we want to do is get the most efficiency possible
out of the taxpayers dollar and we want to do that on a fair
basis to both public employees and private sector employees.
Senator Akaka. I am sure Senator Voinovich would be
interested in this question, so let me ask you, will there be
funds for training?
Mr. Bolten. Funds for training within the agencies?
Senator Akaka. Yes.
Mr. Bolten. I don't know precisely what the budget is, but
I expect that the administration would undertake to ensure that
agencies have the proper training necessary to conduct a good
competitive bidding process.
Senator Akaka. There are serious concerns over OMB's
revision to Circular A-76. The revision removes cost as the
driving factor in deciding whether Federal work should be
outsourced. As a result, Federal jobs may be eliminated if the
work can be performed more efficiently in house. The revision
allows agencies to outsource Federal work without giving
Federal employees a chance to compete for their jobs. My final
question is how will you ensure that OMB's revised regulations
are fair to Federal workers and enhance government efficiency?
Mr. Bolten. Senator, I'll be glad to work with you as we
implement the regulations. We do want to make sure they're
fair. We do want to make sure that we are getting the most
efficient use of the taxpayers' dollar, and that we are doing
that in a way that does not unjustifiably disadvantage any
party in the competition. So I'll look forward to working with
you on it. I know how sensitive an issue it is to many of your
constituents and other Members of this Committee. We will pay
attention.
Senator Akaka. Thank you very much, Mr. Bolten, for your
response, and I wish you well.
Mr. Bolten. Thank you, Senator.
Senator Akaka. Thank you, Madam Chairman.
Chairman Collins. Thank you, Senator.
Senator Stevens, Senator Sununu has agreed to defer to you.
Always a wise move, to defer to the Chairman of the
Appropriations Committee.
OPENING STATEMENT OF SENATOR STEVENS
Senator Stevens. Thank you very much, and I apologize to my
colleagues.
I welcome you in your new position, and I think you have
eminent qualifications. As I told you in our personal
conversation, I hope you do not throw away Mitch's flak jacket.
You will need it before we are through.
Mr. Bolten. I'm wearing it now, Senator.
Senator Stevens. I do want to ask you a few questions
though that relate to not only my role here in this Committee,
but in appropriations. First here in this. I am working with
the Chairman on the revision of the DoD suggested changes in
the civilian personnel procedures. I would urge you to go back
and look at the Gaither report in 1958, and see what President
Eisenhower sought for then-Secretary McElroy, and changes in
defense procedures, both in hiring and in concentration of
power in the Secretary of Defense. To the great credit of the
CNO at that time, Artie Burke, he convinced Congress not to
follow the President's recommendations totally. It was enacted
in 1958, but the concentration of power in the Secretary was
not approved by Congress, and I hope that this Committee will
see to it that it is not approved this time. I do think that
there is an absolute necessity for having a senior executive
service that reaches throughout the government. My feeling
about the Department's recommendations that have been sent up
here for change in civilian procedures is that it would destroy
many of the things that many of us have worked for years on,
and that is for a fact a senior executive service that knows
that it has the protection of law, and knows that any member of
that senior executive service is qualified to serve in any
department of the government. I would urge you to check that
out, and hope that it does not turn into a battle between your
office and us here on this Committee.
With regard to the Appropriations Committee, I do not know
how to even ask questions about this, but I hope that you
realize that the gimmicks in the budget this year have placed
severe restrictions on the Senate. Take bioshield, for
instance. Bioshield has just been approved as an addition to
the budget by the House, and as it does that the provision in
the budget resolution says that their top line for budget
authority and outlays is automatically increased. When it comes
over here, the budget resolution gimmick says the authorizing
committee has the increase in budget authority, but we do not
get the increase in outlays. Automatically an enormous battle
between your position and mine, and I do believe that we have
to put you on notice that we are not going to approve bioshield
under those circumstances. You are going to have to give us
either a budget waiver or something, because unless you do, I
have to take the money out of other subcommittees to fund
bioshield. This budget is replete with those little gimmicks.
Another one is that there is a cap put on the Senate for
2003. We cannot change the 2003 amounts. That does not apply to
the House. It just applies to the Senate, and puts a cap on the
budget for 2003. But guess what? There was never a budget
resolution for 2003. Under the circumstances if we want to
rearrange some 2003 money in order to meet some of the
requirements for 2004, such as bioshield, I am faced with a 60-
vote point of order there too.
I really think that we need to also take a look at
veterans' care. Veterans' care now, even if I fund the budget
resolution, which is woefully short, we are a billion and a
half short in outlays. Why? Because they limited us in outlays.
I am going to serve notice on you and on the Senate that
next year we are not going to get that kind of a gimmicky
resolution. I am going to oppose the budget resolution if they
attempt to do that again. I would urge you to study it, because
it automatically creates friction between your office and the
Senate Appropriations Committee, and we cannot cut below what
we have got now, MILCON, you name what it is, the subcommittee
is woefully short to meet the conditions that exist in this
country following Afghanistan and Iraq on the heels of Bosnia
and Kosovo, particularly in defense and in other areas of the
government.
I want you to know I welcome you here, and I am without
question going to vote for your confirmation, but I want to
urge you to use some of your distinguished background as a law
professor to help us get some of your people on the management
side to follow the law. We have had so many disputes with the
Congress because the agencies think they can go around the law
and not comply with the law with regard to the appropriations
process in particular, and we have to put restrictions in the
appropriations bills in order to assure compliance with
existing law. I do not think we should have to do that. I hope
that you will help us in that regard.
My main question to you is, have you had a chance yet to
take a look at this 2004 budget and how it is being handled?
Mr. Bolten. Yes, sir, I am beginning to become educated in
it.
Senator Stevens. I do not want to pin you down here at a
confirmation hearing, but as I indicated, there are some real
wrinkles in this one, and I do not think we ought to be put in
a position where we are automatically in conflict, although I
will wear my Hulk tie to tell you when I am ready for battle,
OK? I really think we should try to avoid those battles and I
welcome your background in order to try and achieve that goal.
Madam Chairman, I thank you for the time. I am too fed up
right now with problems that I know you do not have the answers
to, and neither do I, but I would hope that you are aware of
those problems and will work with us to try and solve them.
Thank you very much.
Chairman Collins. Thank you, Senator.
Mr. Bolten. Madam Chairman, if I may make a comment to
Chairman Stevens, I am with you all the way. I am familiar with
some of the problems you have raised, not all of them. I have
become familiar with the sorts of tensions and conflicts that
are created when we do put gimmicks into the budget. I would
like to work with you to keep those to a minimum, particularly
on something like the bioshield initiative which is so
important. If confirmed I would like to work with you
immediately to ensure that we properly fund bioshield without
having to unnecessarily take that money away from other
committees. I do not think that was the intent from the
beginning, and I know that when we use a variety of budget
gimmicks in the resolutions, that we put ourselves in positions
where we end up in unnecessary conflict. I am very much looking
forward to working with you to avoid that.
Senator Stevens. I do hope you will do that, and I do hope
that we can find some way to look at the problems ahead of
time, for instance, FEMA. We are short on money for FEMA right
now.
Mr. Bolten. Yes, sir.
Senator Stevens. And we need a budget, something on
request. But I know why you are not sending it to us. We have
got several others along the line too. Somehow or other we have
to set up some kind of reserve for those supplementals that are
coming if we do not get an amendment from you on the budget.
And under the budget resolution, as it stands right now, even
if you send a supplemental, my top line is still what it is
now. That is the difficulty.
Mr. Bolten. Understood, sir.
Senator Stevens. Thank you very much.
Mr. Bolten. Thank you, Senator.
Chairman Collins. Thank you, Senator. Senator Durbin.
Senator Durbin. Thank you, Madam Chairman.
Mr. Bolten, I am sure as you look into the responsibilities
and authority of the Office of Management and Budget, you will
find some surprises. I certainly did. After September 11, I
focused on one issue, and I said everybody has a specialty. My
specialty is going to be in a field that I know almost nothing
about, and that is information technology. At my age and with
my experience, I rely on the youngest people in my office to
give me advice on information technology.
But I did know this: Our oversight of the Federal Bureau of
Investigation disclosed that as of September 11, the
information technology in that agency was archaic,
embarrassingly archaic. And there was little or no
communication between the information technology of the FBI,
the Immigration and Naturalization Service, all of the obvious
agencies.
So, had anyone really come up with the names of the 19
terrorists on September 11 and tried to transfer them from INS
to the FBI or to the Federal Aviation Administration, it was
possible to do by telephone or fax or hand carrying. So I said,
well, I am going to go after this. I really took this right up
the chain. I started with Bob Mueller at the FBI, whom I
respect greatly, Attorney General Ashcroft, Vice President
Cheney, even to the President. And every one of them said,
``Why, certainly. We need to modernize this architecture of
computers and we need to have interoperability.'' I love those
terms.
Then I was stopped in my tracks by OMB. Mitch Daniels and
the OMB said, ``Stop, Senator. Stop, Mr. President. This is our
job. We have the management responsibility when it comes to
this kind of architecture for information technology.'' When
the Homeland Security bill came before this Committee, I tried
to push for a Manhattan Project, to try to really accelerate
the development of the very best information technology to
fight the war on terrorism. Tom Ridge said, ``It is a great
idea. It is a force multiplier.'' But time and again I was
stopped by OMB, that said, ``Our people have that
responsibility. Stay away.'' And they prevailed.
That is some indication of the power of your agency, and
your power once you become the head of this agency as I am sure
you will. But also the responsibility. I do not expect you at
this moment, unless you can surprise me, to give me a long
discourse about what has been done at OMB and what will be
done. But I would like to ask you this. Within 30 days after
your confirmation, would you be kind enough to report to me so
I can share with the Members of this Committee exactly what has
happened? I know great strides have been made at the FBI and a
few other agencies, but the idea of getting all of our agencies
to communicate with one another, to share this information, to
protect America, turns out to be part of your say in this new
role.
I do not know if you want to comment on that, but I just
wanted to vent if you do not mind.
Mr. Bolten. Thank you for venting, Senator. I do know that
Director Mueller has made extraordinary progress at the FBI----
Senator Durbin. Yes, he has.
Mr. Bolten [continuing]. In increasing interoperability and
all the other buzz words that basically mean that they have
radically improved their ability to collect and disseminate the
information that we have within the government from the people
who have it to the people who need it, and only the people who
need it.
I think you have probably seen some presentation from him.
Senator Durbin. I have.
Mr. Bolten. Which is very impressive about the progress
we've made.
Senator Durbin. It is impressive.
Mr. Bolten. So I am anxious that if placed in this position
of responsibility to be able to encourage that kind of
innovation across the government. I will be happy to bring
several very knowledgeable e-Government experts that we have at
OMB with me to come visit you sometime in the next 30 days
after I am confirmed. I am not sure that I will understand
everything they say, but my expectation is that you will.
Senator Durbin. That is fair enough.
Mr. Bolten. And I am hopeful that you will be impressed by
it.
Senator Durbin. That is fair enough. The thing that struck
me though was that the territorial imperative at OMB was so
strong that it stopped all of this effort that we were focusing
on, and it is that same territorial imperative at each of these
agencies that excludes communication and dialogue that is
essential for our security. So I hope that when you look at the
management of this you can help me in developing that.
Mr. Bolten. Here's an important point about the role of
OMB, and that is that one of the reasons why we find ourselves
often without interoperability is that agencies go off and do
their own things. OMB's unique strength is that it can look out
across the whole government and give direction so that the
agencies are able to be consistent to cooperate with each
other, not just on IT but on all sorts of policies. So my
territorial imperative as Director would be to ensure that we
get that kind of consistency, but that we empower the agencies
to do the right thing and upgrade their IT systems in a way
that I think you should be happy with.
Senator Durbin. Let me ask you this question. In my
introduction I talked about Mitch Daniels' statement to this
Committee when he sought this post 2\1/2\ years ago. His
biggest worry is what to do with these surpluses, what are we
going to do with them? And here we are 2\1/2\ years later in a
totally different world. It has been turned upside down from
your point of view. It now is not a record surplus, it is a
record deficit. It now is not an expanding economy, it is an
economy that has lost over 2 million jobs in the last 2\1/2\
years.
I would like to go to my opening statement. Was there a
point in time where you sat in a meeting with the President
where anyone questioned the idea of tax cuts as part of the
Bush economic policy, as to whether this was working?
Mr. Bolten. Let me go back even a little bit farther in
your statement, Senator. At the time that $5.6 trillion
surpluses were projected, I think we now know in hindsight that
the projections were wrong. It is not that our situation has
changed so radically in the last few years, it is that our
understanding of what the reality is has changed so radically.
When this President came into office at the beginning of 2001,
the economy was already entering into a recession. The stock
market had peaked a full year before that. Government revenues
were declining. When the President-elect met with business
leaders in Austin in January 2001, before his inauguration, the
word from all of those business leaders unanimously was, we
have hit a wall. The economy is dropping off of a cliff and
it's accelerating. The business people varied in their
assessments only by when they hit the wall. Some had said
earlier in 2000, some said later in 2000. All of them had the
same message for the President. This is why the President came
into office with a conviction that it would be very important
for any number of reasons to get the economy going again.
The advice, the unanimous advice of economists, whose
opinions I respect, has been that the policy best fashioned to
get the economy going again was precisely the kind of policy
that was pursued in the tax cuts of 2001, 2002 and 2003. Give
the people, give the businesses back some of their own money so
that they can invest in job creation and ensure that the
economy is robust.
Senator Durbin. So I take it from your statement that you
have no misgivings about the Bush economic policy, about the
latest statements about record unemployment rates over the last
years, the fact that we are now knocking on the door of the
biggest deficit as a percent of GDP that we have seen in some
50 years? None of this is giving you any pause as to whether or
not you ought to step back and say: Maybe we were not on the
right track here. Maybe there is something we have missed in
terms of getting this economy moving again. You are still a
true believer, no misgivings?
Mr. Bolten. Senator, I share the President's concerns about
our deficit situation, and especially about the unemployment
situation that we now face. Too many people are looking for
jobs, unable to find them. The economy, although we have pulled
ourselves out of the recession we had when the President
entered into office in 2001, is not growing nearly as fast as
it should be, particularly to generate the jobs we need. But I
have no misgivings about the policies that the President
pursued to try to correct that situation. On the contrary, I
would say those policies were precisely designed to address the
problem we have on both the deficit side and on the jobs and
economic side. And the problem was, has been, economic growth
that is too slow, too anemic. The solution for that is in fact
to give people and businesses back some of their money so that
they can invest and make the economy grow.
Senator Durbin. If I might ask one last question. So are
more tax cuts your recipe now for economic recovery?
Mr. Bolten. No, sir. While you were out of the room I was
asked whether I had been instructed or had in mind any
particular tax plan. The answer is no. I think the judgment
about what further the economy might need, needs to be made
based on an assessment of where the economy stands. Our
economists right now, particularly given the tax cuts in 2001
and 2003, are projecting a return to at least moderate growth
by the second half of this year above the 3 percent margin,
which is where I think most of, if not all of, the blue chip
economists are. So we believe that we have taken the right kind
of steps to get the economy back on track, but we will need to
reassess toward the end of the year, and I hope I will be able
to persuade you that if we need more measures, that we can get
the support of the Congress to pursue them.
Chairman Collins. I am going to turn to Senator Sununu
because we just started a vote and I want to give him an
opportunity to question before we break.
Senator Sununu. Thank you, Madam Chairman.
As I indicated in my opening statement, Mr. Bolten, it is
nice to have someone with such strong qualifications, such
great experience in policy, budget matters and in the
administration, and I think someone with the temperament for
the job. It was hard to tell, and I do not know him that well,
but I think Senator Stevens likes you. [Laughter.]
But so often the problem is we have nominees----
Mr. Bolten. Senator, if I could get that in writing, back
home that will be a huge help. [Laughter.]
Senator Sununu. We have nominees come forward, and they
have the qualifications and they have the experience and they
have the temperament for the job. As policy makers, we are
excited to see that. But we are not sure if they are going to
be in a position, or if they are close enough to members of the
administration to have the kind of access and the kind of
influence, frankly, to have the ear of the President on policy
matters that are important. That can be a very real concern.
You can imagine my relief today when I saw in the paper that
Democrats see Bolten as the key to Bush's inner sanctum. I
think it is terrific that we have someone with such strong
bipartisan support that is obviously going to be in a position
to make a difference, and to be an advocate for budget policies
and economic policies. I am not especially surprised that the
President has chosen someone that supports his approach to
economic growth and opportunity to run the budget office. That
is not a stunner to me. And I am sure you are going to be an
advocate for policies that you think are right, but also an
honest broker when it comes to making budget decisions.
Let me also note that I am not stunned, but pleased, that
you were willing to complete the 100 pages of questions and
answers that we have been provided. I think there were
something like 75 pages from the Committee, and another 20
pages or so from Senator Lieberman, that cover all matters of
budget policy. So I will not go into the detail that those
questions go into because that would only be redundant.
I would like you to talk broadly about the recent growth in
Federal spending that we have seen, specifically the growth in
discretionary spending that has been proposed by the President
for the 2004 budget. Perhaps you can provide some relative
comparison to previous years growth in discretionary spending,
and talk a little bit about what kind of a growth level you see
as being sustainable. I happen to believe that controlling the
growth of spending is very important to moving back toward a
balanced budget, and that will not happen. Even if we are
successful in 1 year, it has to be sustained over a period of
time. So talk about that level. What level needs to be
sustained to help us balance the budget?
Mr. Bolten. Senator, thank you. The President's 2004 budget
contained a growth in discretionary spending of roughly 4
percent, which is about the expected growth in the income of an
average family, and the President chose that rough amount
because he thinks that, at least in the current times it is a
pretty good measure of how rapidly the Federal budget ought to
be growing. It is a moderate amount, but it should be plenty of
room to accommodate all of the priorities we have, given the
competing priorities that we have because we absolutely must
provide what is necessary to protect the homeland and ensure
that we can effectively prosecute the war on terror. Those are
must do's. They are part of the discretionary budget, but those
are not discretionary obligations of the Federal Government.
That then leaves us with the discretionary part of the
budget that is unrelated to Homeland Security and defense,
about half of $800 billion that is in the discretionary budget.
And I agree with you completely that if we are going to bring
this government back on a path toward a balanced budget, we
need to be sure that we are showing as much restraint as
possible in the growth of that number. I believe we can do it.
The most important prerequisite to doing that, I believe,
is to ensure that this economy is actually on a path back to
growth.
The collapse in government revenues from income tax
receipts is actually the principal reason why we find ourselves
in the deficit situation we do this year. The radical decline
in receipts from capital gains tax, from income tax that
accompanied the collapse in the stock market, and in general
economic activity, is why, for example, in 2002 we found
ourselves in a deficit situation that had previously been
projected to be a surplus. So I think the most important things
we can do are first, on the side of the discretionary budget,
ensure that we are very carefully allocating our resources and
ensuring substantial restraint, and on the other hand putting
in place policies like the President's tax cuts, that are well
designed to ensure robust economic growth.
Senator Sununu. Could I ask you to comment on the one or
two most important management reforms or management initiatives
that the OMB will be working on in the next 12 months?
Mr. Bolten. I feel I'm a little bit at peril by
highlighting one or two of leaving some child behind, and
likely to, if confirmed, enter into the job having disappointed
many of the people at OMB. The President's management agenda,
as Chairman Collins outlined at the outset, includes five very
broad categories, all of which are important. Human capital
development, competitive sourcing, integration of budget and
management processes, sound financial management, and--Chairman
Collins, help me out. I think I have missed----
Chairman Collins. E-Government.
Mr. Bolten. E-Government, that I was discussing with
Senator Durbin, is the fifth one.
All of those are important priorities. If I may come back
to you after I have had some experience in the job and let you
know which I think holds the greatest promise for the greatest
progress over the next year, I would like to do that. Right now
I will identify all of them as key priorities of the
administration and of OMB, and I would gratefully receive your
counsel on where you think we ought to be putting our effort in
the year ahead.
Senator Sununu. Thank you. Thank you, Madam Chairman.
Chairman Collins. Thank you.
We are in the midst, unfortunately, of three roll call
votes. Senator Fitzgerald, would you like to begin your
questions now or after the recess?
OPENING STATEMENT OF SENATOR FITZGERALD
Senator Fitzgerald. I will begin it with a few remarks,
then vote, and I would start my questioning when I come back.
I want to congratulate the Chairman for having this
hearing. I think Mr. Bolten clearly has superior credentials.
He has been a success in almost everything he has done in life,
and he has a distinguished academic background. He has been a
success in law and in business and in government, and I think
he will make a very good Director of the OMB.
I do have some questions when we get back. I am hopeful
that we could move the nomination rapidly through the Senate
because with the appropriations process getting well under way,
I think it would be unfortunate if the administration did not
have an OMB Director in place as we go forward this summer
before the recess.
So I will resume questioning when we get back.
Thank you, Madam Chairman. And if I could ask leave to have
my opening statement included in the record, I will not read it
now.
Chairman Collins. Without objection.
[The prepared statement of Senator Fitzgerald follows:]
OPENING PREPARED STATEMENT OF SENATOR FITZGERALD
Thank you, Chairman Collins, I would like to welcome our witness
today, Mr. Joshua B. Bolten, whom President Bush has nominated to be
the Director of the Office of Management and Budget (OMB).
Mr. Bolten, the President has selected you for one of the most
important positions in our government, and I congratulate you on your
nomination.
As the Chairman of the Governmental Affairs subcommittee on
Financial Management, the Budget, and International Security, I have a
special interest in ensuring that Federal agencies receive independent
audits and in making our government more accountable to the taxpayers.
Fiscal mismanagement by Federal agencies costs taxpayers billions
of dollars each year. In the area of erroneous payments by Federal
agencies, the General Accounting Office has reported that the problem
is so pervasive, that the actual extent of improper payments
government-wide is unknown. GAO also reported that the total amount of
improper payments could be more than $35 billion.
Another area of extensive government waste is the misuse of
government credit cards by agency employees. Last Wednesday,
Comptroller General David Walker testified before the House Budget
Committee that the GAO and a number of Inspectors General have
identified improper and fraudulent use of government credit cards in
the Departments of Agriculture, Education, Defense, Housing and Urban
Development, Interior, and the Federal Aviation Administration. On
April 16, 2003, the GAO reported that it had documented in HUD alone
millions of dollars in improper or questionable purchase card
transactions by agency employees.
In fact, I was pleased to read in this morning's Washington Post
that Secretary Abraham has ordered an extensive overhaul of the Energy
Department's nuclear laboratories, in large part due to government
waste involving the misuse of credit cards and missing equipment.
Therefore, it is imperative that the new OMB Director exercise
strong leadership, implement rigorous standards, and hold agencies
accountable to ensure each agency is practicing sound financial
management.
To help strengthen this process, I sponsored the Accountability of
Tax Dollars Act of 2002, which President Bush signed into law last
November. This new law expanded the audit requirement of the Chief
Financial Officers Act to cover all Executive Branch agencies, while
providing authority to OMB to exempt certain agencies with budgets
under $25 million. This provision requires agencies to prepare
financial statements and to subject those statements for review by
independent auditors. The agencies must then submit their audited
financial statements to Congress and the administration for close
scrutiny.
During today's proceedings, I look forward to hearing from Mr.
Bolten about his views regarding OMB's role in implementing the
Accountability of Tax Dollars Act. I also look forward to hearing about
his vision and the leadership role he will play in OMB to improve
financial management in government agencies.
As I mentioned in the beginning of my statement, Mr. Bolten has
been nominated to one of the most important positions in the Federal
Government. As Congress begins to consider the appropriations bills for
Fiscal Year 2004, I believe it is vitally important for the Office of
Management and Budget to have a Senate-confirmed director as
expeditiously as possible. Therefore, it is my hope that this Committee
will act promptly on this nomination.
Thank you, Chairman Collins.
Chairman Collins. We are going to recess for,
unfortunately, 25 minutes because we have three stacked votes.
I know that Senator Levin and Senator Pryor, in addition to
Senator Fitzgerald, have additional questions. So while you may
have been encouraged by the lessening of people here, you still
have others that are eager to question you. So we will be in
recess for 25 minutes.
I do want to say in response to Senator Fitzgerald's
comment, that it is my intent to mark up this nomination
tomorrow in the hopes of clearing it by the full Senate before
we depart for the July 4th recess.
Mr. Bolten. I appreciate that very much, Madam Chairman.
Thank you.
Chairman Collins. We are in recess for 25 minutes.
[Recess.]
Chairman Collins. The hearing will come back to order.
I am pleased at this time to call upon the distinguished
Senator from Delaware for any questions he may have.
OPENING STATEMENT OF SENATOR CARPER
Senator Carper. Thanks, Madam Chairman.
Mr. Bolten, welcome. Delighted to see you today.
Madam Chairman, Mr. Bolten was good enough to come by and
visit with me as I suspect he did most of the Members of the
Committee a week or two ago, and we had the opportunity to walk
all over the Hart Building, up and down, and to get to know
each other a little bit better. It is easy to see why the
President has confidence in him and would submit his name for
this nomination.
About 2\1/2\ years ago, we sat, I think, in this same room,
and Mitch Daniels sat at that same table, and we had the
opportunity to talk with him as a nominee for head of OMB, to
talk with him about his view of the world, and the budget, and
our finances as a country. I was pleased, especially pleased,
when he assured us that the concerns that I expressed about the
level of our national debt, together with some of our other
unfunded liabilities were concerns that he shared. My staff was
actually good enough to dredge up some of the quotes that he
made. He promised to give, and this is a quote, ``a very high
priority to debt reduction.'' And he spoke of the great window
of opportunity that we had. You may recall that window at the
time, and due to the great surpluses that the new
administration was inheriting from the old administration, and
gave us a chance to deal with some long-term challenges
including the time when my generation, the baby boomers, will
start later in this decade, early in the next decade.
He noted that if we let the opportunity pass us by, it
would make addressing those challenges--and I will quote again.
He said, ``A much more painful and severe process.'' Needless
to say, I have been disappointed, sorely disappointed with the
direction of our budget policy since that day. Not only have we
let this window of opportunity pass us by, but we have
succeeded in--notice I say ``we''--have succeeded in
transforming what might have been the most enviable fiscal
position of any Nation on earth into a situation in which we
will now, this year I am told, have the largest budget deficit
in the history of the world, the largest budget deficit in the
history of the world. That is hard to believe, but I am told
that is true.
I am one of those Democrats who actually likes to cut
taxes, and when the President came to Delaware in early spring
of 2001, we talked about tax policy, and he was putting
together his proposal to submit to the Congress at the time.
And I said, ``I like to cut taxes too. When I was Governor of
Delaware, we cut taxes 7 out of 8 years, but we also balanced
the budget in 8 years, and we managed to get ourselves the best
credit rating, Triple A credit rating for the first time in the
history of our State.'' I will not go into all the ways we cut
taxes, but we basically cut in half State incomes taxes for a
typical middle class family, cut them in half, State personal
income taxes. Delaware used to have the top marginal personal
income tax rate in the country, 19.8 percent, when Pete Dupont
became Governor in 1977. When I left as Governor, it was 5.95
percent, and we still balanced the budget and ended up with
reducing our debt and getting a better credit rating.
This administration has significantly reduced Federal
revenues and done so with the acquiescence of the Congress. I
think four-fifths of the budget today, however, is comprised of
about 4 or 5 areas. One is defense. Another is entitlement
spending, and a third is interest on the national debt. I do
not know if this is true, but I believe it is. I think we spend
today about 19, 20 percent of GDP to run the government. I
think we spend about 7 percent of GDP for Medicare, Medicaid
and Social Security. By the time that my generation is in full
retirement, about 25 years from now, I believe that we will be
spending about 15 percent of GDP just for Medicare, Social
Security and Medicaid.
What we are leaving for our kids is not something that I
feel good about. I do not think any of us could feel good about
this kind of legacy. It is sort of like, we will take the tax
cuts now. We will take the health care and prescription drug
program now. And by the way, to our sons and daughters, we will
let you pay for it. I thought the best line of the President's
State of the Union message was when he talked about how we
should not pass on to the next generations the challenges that
we could address today. I thought that was a great line. But
really, we are passing on a big part of what we ought to be
doing today, to those who follow us, as our children and our
grandchildren.
I want to really come back to--with that as pretext, I want
to come back just to share with you some of the concerns I
shared with Mitch Daniels, 2, 2\1/2\ years ago. He said all the
right words, and we are where we are today and we do not have a
budget deficit just because of any one administration, any one
person, or any one policy. I realize it is more complicated
than that. But sure would love it if we had a Budget Director
who did not just talk a good game and say the right words about
being concerned about the budget deficit, but who actually
would help us address the policies and take on the policies
that we need to. We can squeeze domestic discretionary spending
all we want. That is not going to solve this problem. It has to
be broader than that.
The last thing I will say, and then I will turn it over
just for comments, if you will, to Mr. Bolten. Somebody told me
the other day, Madam Chairman--are you on the Armed Services
Committee?
Chairman Collins. I am.
Senator Carper. Somebody told me the other day we spend
more money on defense now than the next 18 nations combined. Is
that true?
Chairman Collins. You have to ask the nominee.
Senator Carper. The next 18 nations combined.
Mr. Bolten. Thanks. [Laughter.]
Senator Carper. And we are all interested in strong
security, strong national defense, and I say as an old Naval
flight officer, war veteran, if that is true, that is stunning.
Any kind of initial response to those observations, those
reflections?
Mr. Bolten. Senator, thank you, and thank you for the
opportunity to visit with you. I did enjoy our tour around the
Hart Building, which was nostalgic for me, Madam Chairman. We
even, through the Senator's good offices, had an opportunity to
barge in on the office that I used to occupy on the second
floor of the Hart Building, which but for the presence of the
Senator, would have been, had the Capitol Police called.
I want to thank you for that opportunity, Senator, and I
enjoyed our conversation.
Senator Carper. They still had, like written on one of the
doors, like you could barely see it, like it was in pencil or
pen, it said, ``For a good time call Josh Bolten.'' [Laughter.]
Senator Carper. That was probably about 20 years old.
Mr. Bolten. Yes.
Senator Carper. You could still just barely make it out. By
the way, anybody here from your family here with you?
Mr. Bolten. Yes, sir.
Senator Carper. Who is here?
Mr. Bolten. My mom and my sister are both here.
Senator Carper. Which one is which?
Mr. Bolten. My mom is the one who will be celebrating her
80th birthday in a few weeks.
Senator Carper. I was just with my mom in Kentucky this
past weekend. She is 80-years-old as well. So happy birthday.
And your sister? Welcome aboard. You did a good job with this
one I think, both of you.
Mr. Bolten. Senator, first I want to commend your tax
cutting fervor. I hope we will be able to work together should
further tax cuts be necessary at some point, or appropriate at
some point. I also want to share and commend your concern about
the long-term budget situation that we face, that is driven
principally by entitlements. I think you were exactly right
when you said that we can squeeze discretionary spending all we
want, but that's not going to address the real, fundamental,
long-term problem, which is the tidal wave of unfunded
entitlement liabilities that is coming at us far out in the
future. And I share your conviction that it's the
responsibility of this generation to try to address those
problems for future generations, and I look forward to working,
Madam Chairman, with you, the rest of the Committee and other
Members of Congress on how to address those problems.
Now, as to the remarks that you referred to by my
predecessor, Mitch Daniels, who in my judgment was a terrific
Budget Director and an extraordinary person. His words I think
remain true today, that we do need to address these problems.
Even when it appeared that we were on the cusp of massive
surpluses, budget surpluses, these problems were coming. Now
though it is clear that those surpluses never existed, that the
5.6 trillion or whatever was estimated at the time of Mitch
Daniels' appearance before this Committee 2\1/2\ years ago.
Now, that it is clear that surplus never existed, it is all the
more important that we act with great caution to control our
discretionary spending as best we can.
And we had discussed earlier, Madam Chairman, some of the
measures we might take to do that and to ensure that on the
discretionary side of the budget we do all we can to control
it. On the defense portion of the budget, it is large. I don't
know if it's larger than the next 18 countries combined. I
would be surprised if it were that large, but----
Senator Carper. The next time you have a chance to be
before us, I will try to remember to ask that question.
Mr. Bolten. I will prepare myself as soon as this hearing
is over, with the correct data on that. It is certainly true
that America is far out ahead of the rest of the world in
defense spending and in defense capability, and it is critical
that we remain there for our own national security and to
ensure that the United States fulfills its role as the world's
super power in helping to promote peace and end the threat of
terror around the world. So that portion of the budget, I think
we will agree, is one that is discretionary in name, but not
discretionary in function. We must meet our national security
obligations and we must meet our obligations to protect the
homeland.
So that leaves a relatively small part of the discretionary
budget over which we have some control on a year-by-year basis,
and I am anxious to work with the Members of Congress to ensure
that we are observing strict discipline in that category.
The other thing we can do in the short run is ensure that
we have a robust economy, because at the time that you spoke to
Mitch Daniels, it was before September 11, it was before the
corporate scandals that persisted through much of the 1990's,
came to light, and caused some collapse of confidence both on
Wall Street and in the markets. It was before the President
launched the war on terror in Afghanistan and in Iraq. And
perhaps most important, it was before that there was a full
realization of how weak the economy that we were entering was
actually going to be. There were clear signs that the economy
was going to be much weaker than was reflected in those
optimistic $5.6 trillion surplus projections. That was not a
good idea of how weak the economy has been, and in fact,
subsequent projections, almost semiannually, have been, even
when conservative, have underestimated the weakness in the
economy and the corresponding falloff in government revenues
that was going to come with that.
When you spoke with Mitch Daniels we were anticipating
large budget surpluses, largely based on a tremendous increase
in government income tax revenues coming in. The reason why in
the next year, in 2002, we had the budget deficit we did was
principally the result of a radical falloff in government
revenues, in income to the government from capital gains taxes
and from income taxes.
The most important thing I think we can do in the short run
is to try to restore us to a sustainable budget position, to
get the economy moving again. Beyond that, even if restoring
the deficits were not important, it's very important that we
provide jobs for the people who want jobs, and I believe that
the President's tax cuts that have been enacted by this
Congress in 2001, 2002 and 2003, have been precisely well
designed to try to put us back on that track.
Senator Carper. My time is expired. If there is another
round, I would welcome the chance to ask another question or
two. Thank you. I think for the record--you mentioned, if I
could, you said that those surpluses never existed. But
actually they did exist, we actually had a surplus or two,
maybe three----
Mr. Bolten. Yes, there were modest budget surpluses
immediately in those years. What I was referring to was the
projection of a $5.6 trillion surplus over----
Senator Carper. We went from 1968 to roughly 1998 without
ever balancing the budget, and then we did it, I think, two or
three times in a row. Thank you.
Chairman Collins. Senator Fitzgerald.
Senator Fitzgerald. Thank you, Madam Chairman.
Mr. Bolten, in January of this year, the National
Commission on the Public Service, known as the Volcker
Commission, released its report called ``Urgent Business for
America: Revitalizing the Federal Government for the 21st
Century.'' One of the report's major findings was the extent to
which there is an enormous amount of duplication and overlap in
government agencies. The report cited some specific examples,
including 50 homeless assistance programs administered by 8
agencies; 90 early childhood programs in 11 agencies and 20
different offices; 40 job training programs administered by 7
agencies; and 342 economic development related programs
administered by 13 different cabinet departments.
What do you think about the Volcker Commission's findings
on overlap in government agencies and programs?
Mr. Bolten. I have not read the Volcker Commission study. I
will look forward to doing so and to addressing it with you in
greater detail. I can say that I do view it as a central
function of the Office of Management and Budget, to be looking
precisely for those kinds of opportunities that are highlighted
in the report, to consolidate government efforts and to focus
our efforts on those programs that are actually well designed
to achieve the objective.
We have in place now something that Chairman Collins
described very well at the outset of the hearing, called the
PART process, the performance assessment--performance--I don't
know. Chairman, can you help me out again?
Chairman Collins. PART, just call it PART, rating tool.
Mr. Bolten. Anyway, it is the tool by which the Office of
Management and Budget looks at individual programs and
determines where there are clear goals set out for that
program, whether it is meeting its goals, and whether it is
being appropriately managed. So far the administration has done
about 20 percent of the reviewable programs that are out there.
That was done in the past budget cycle. In this budget cycle, a
cumulative additional 20 percent----
Senator Fitzgerald. Has the OMB recommended any programs
for elimination based on a finding of ineffectiveness?
Mr. Bolten. I don't know whether the connection has been,
but it seems to me it should create opportunities precisely for
that, and that as we look at those programs, and as we evaluate
their effectiveness, there is also an opportunity to look
across programs that are--once we have been able to do a
complete canvas of the programs in government--and say that
these 20 programs are all headed toward the same objective.
Let's see which ones are actually doing well at meeting the
objective, and let's move the resources away from the ones that
are ineffective and move them toward the ones that are
effective. I think that's central to the role of the Office of
Management and Budget, and I look forward to working with this
Committee on those issues.
Senator Fitzgerald. I, for one, stand ready to help you
with any initiatives you undertake at the executive level. I
think your leadership could be very important in this regard,
enhancing the programs that are effective, and dismantling or
recommending the dismantling of programs that are ineffective.
But also please take a look at that overlap that the Volcker
Commission cited, because it seems to me that we are probably
wasting an enormous amount of taxpayer resources by duplicating
our efforts in so many different ways.
I would like to ask you a few questions about the Chief
Financial Officers Act, and I want to compliment your
predecessor, Mitch Daniels, on the improvements that were made
in terms of the 24 government agencies that are required by the
Chief Financial Officers Act of 1990 to get annual financial
audits. Prior to 1990 there were no audit requirements, which
is really incredible if you think about it. Prior to Mitch
Daniels' term most of those agencies were not getting clean
audits from their auditors, but under Mitch Daniels, in
February of this year, OMB announced that a record 21 of the 24
CFO Act agencies submitted unqualified financial audits. In
other words, the accountants were not qualifying their audit
reports. But OMB reported that one agency, the U.S. Agency for
International Development, USAID, received a qualified audit,
and two agencies, the Small Business Administration and the
Defense Department--the Defense Department takes up a lot of
our government spending--they received not qualified audits,
but they received disclaimers of opinions all together. That
means that the auditors are not really able to make heads or
tails out of their books, and so they could not comment at all
on the meaningfulness of their financial reports.
I would be interested to know what steps you might plan on
taking to try and get the Department of Defense and the Small
Business Administration to urge them to get their books and
records in order? We could be wasting billions of dollars.
Money could be misappropriated. We would not know about it. It
could be stolen. We would not know about it because their books
and records are not in good enough shape to express any opinion
on them.
Do you have any thoughts on what you might be able to do to
move those departments forward in this area?
Mr. Bolten. These are huge and longstanding problems, and
it is one of the issues that the President identified early on
in his administration as a top management priority, which is to
get the financial management in the individual agencies right.
There has been an enormous amount of progress made. You cited
some of it. I know that for the first time in its history the
Department of Agriculture has a clean audit as well, and it
will be a high priority of mine, and especially a high priority
of the recently-confirmed Deputy Director for Management, Clay
Johnson, to see that we extend the good news throughout the
government. We have a lot of challenges in doing that. These
are not problems that have popped up overnight.
Senator Fitzgerald. Have you thought about creating any
internal rewards or carrots and sticks within your budgeting? I
have noticed that agencies that receive a clean audit do not
really get a reward, and the ones that go on year after year
getting negative audits or qualified opinions or disclaimers of
opinion receive no penalty. Their budgets are not cut. Have you
ever thought about calling some of these directors in and
saying, hey, we cannot be entrusting you with all this money if
you cannot get clean audits?
Mr. Bolten. We will be glad to think about additional
sticks and carrots. What I can tell you is that the spotlight
that the President's management agenda and the scorecard have
put on agency practices is in itself, has been in itself, a
pretty powerful carrot and stick. I've had the privilege of
being present when the President meets with a lot of his
cabinet officers just to review their agenda, which he does
periodically. And rare is the cabinet officer who does not
either brag about having gotten a good mark on one of these new
scorecard measures or a PART review, or does not complain about
having gotten an unfairly bad mark. And the principal takes
note. The President asks about the scorecard, and I know the
cabinet officers take it very seriously. So I think the
spotlight itself has provided a very powerful carrot and stick,
and I am looking forward to working with you to maybe increase
the wattage of the spotlight, because that may be the most
powerful tool we have.
Senator Fitzgerald. Just one final question. I know my time
has expired. We passed another law last year, the
Accountability of Tax Dollars Act, that extended the CFO Act to
all Federal agencies with budgets over $25 million, and I
believe that is going to add this audit requirement to 78
agencies.
I understand in December of last year Mitch Daniels sent a
memorandum to those 78 agencies outlining their obligations
under the new act. But in his memorandum he indicated that he
was invoking the waiver provisions in the act, and was waiving
the act's new requirements during the initial transition period
of 2002, when that law was passed.
Are you able to inform the Committee today of whether any
of the 78 agencies may have requested a waiver for 2003, and
are you able to tell the Committee today how many of the 78
agencies you expect to meet the new requirements of that act
this fiscal year?
Mr. Bolten. I'm not, Senator, but if confirmed, I will
provide you an answer to that as promptly as possible.
Senator Fitzgerald. I would urge you to be tough on them
and try and get them all to comply.
And I want to welcome your sister and your mother here to
this Committee too. They should be very proud of you, and I
wish them well also. Thank you very much.
Mr. Bolten. Thank you, Senator.
Chairman Collins. Thank you, Senator. Senator Pryor.
OPENING STATEMENT OF SENATOR PRYOR
Senator Pryor. Thank you, Madam Chairman.
Mr. Bolten, let us talk some dollars and cents here real
quick, and I will try to leave plenty of time for Senator Levin
to ask questions.
In response to written questions you said, ``Our current
deficit, as measured as a percentage of gross domestic product,
is not large by historical standards and is manageable within
the overall context of our economy.'' I believe it was last
week the CBO came out with a projection that we would be at
$400 billion in deficit for this fiscal year. Do you agree with
that projection, by the way?
Mr. Bolten. What I can tell you is that the latest
projection in the President's budget, which goes all the way
back to January or February, has a $300 billion projection. But
since then there have been further degradation in the
expectation about the economic growth. There has been an
omnibus bill, there has been a supplemental and so on, some
additional tax cuts. My expectation is that $300 billion number
is low.
Senator Pryor. Do you think it will be about $400 billion?
Mr. Bolten. I don't know what it will be. OMB will release
a mid-session review this summer, so fairly shortly, that will
update our own projections.
Senator Pryor. But as part of your statement there, you
said that you look at the gross domestic product, and that is
an interesting point, because obviously one way to look at a
deficit is based on a percentage of GDP, but it seems to me
that is only one aspect of the deficit, because the most
important aspect of a debt is how are you going to pay it back.
And at this point, what I see our government doing is going
further and further and further into debt, and larger deficits
every year. In other words, I do not know what it was last
year, $200 and some odd billion. This year it is going to be
$400 billion, maybe more. Next year, I am scared to know what
the projection will be for next year.
But do you agree with me that GDP is one thing to look at,
but also how we pay the debt back is equally important, maybe
more important than GDP percentage?
Mr. Bolten. Well, absolutely, how we're going to repay the
debt is important. The burden of the debt, I think, is properly
measured as a percentage of GDP, just as if you were taking out
a mortgage, you would take out a mortgage roughly appropriate
to your income and----
Senator Pryor. Wait a minute though. GDP is not our income.
GDP is the gross domestic product. Our income is the revenues
that we take in.
Mr. Bolten. Understood, Senator, but the measure of how
much of a burden on this society that the deficit we may run
will impose, I think is dictated by how well the economy
overall is doing. The deficits we have now are I think too
large. We need to bring them down. By historical measure, even
a 4 percent of GDP deficit figure is not way out of line with
historical precedent.
What we do need to worry about is the addition that is
adding to the public debt, as you are concerned, because in the
long run a great buildup in public debt or an expectation that
there will be a great buildup in public debt, can ultimately
lead to rising interest rates, which is where the problem comes
back and bites us today in the economy. So far we haven't seen
that. In this period of rising deficits, we have seen declining
interest rates, in fact, to almost historic lows in both short
term and long term rates.
So right now we don't see the bite from the deficits we are
running, and that's why I used the word manageable in the
written response to the questions, but I think you're
absolutely right, it is something we need to be concerned
about, and we need to be particularly concerned about getting
control of our long term budget situation with respect to the
massive unfunded liabilities that are coming at us in our
entitlement programs.
Senator Pryor. I am glad you mentioned unfunded liability
because in your opening statement you refer to that, and a
couple times in questioning you refer to that. It seems to me--
and I would like to hear your thoughts on this--our debt load,
not as a percentage of GDP, but as a percentage of our Federal
budget, is increasing fairly dramatically every year. It eats
into our ability to meet our responsibilities, whether it is
Social Security, Medicare, Medicaid, whatever it may be.
Now, do you agree with that, that it is eating into our
ability to meet our responsibilities?
Mr. Bolten. I think they're actually severable problems
here. Our immediate deficit is a problem of how we're doing on
our current accounts, and it seems to me that these are the
kinds of deficits we are running now, while too high, are
manageable within our current means. What is much more
difficult to address, it seems to me, is the longer term
picture of looking out several decades and ensuring that we are
properly structuring our programs and setting aside enough
money to meet all the liabilities currently unfunded that we
see coming at us with entitlements. In the short run I think
the best answer for us is to have a strong and growing economy
that will restore the revenue base that has been so badly
eroded recently, and that will be, I think, a big help in
bringing us toward balance in the short run. But even taking
care of that short run problem doesn't take care of the long
run entitlement problem that I know you share a great concern
about.
Senator Pryor. Yes. I am very concerned about that. I just
sense that it is going to be harder and harder for us to meet
our responsibilities over time. You can look in the future, the
not-too-distant future, and see a train wreck about to happen.
Back on the percentage of GDP, etc., how large do you
believe the deficit can get as a percentage of GDP before it
becomes unacceptable? Is there a magic percentage--not magic--
but is there a percentage that in your mind, where it has just
gotten too large?
Mr. Bolten. I have posed precisely that question to a
number of economists whose opinions I respect, I did not get an
answer, and so I won't have an answer for you either. What I
can say is that the size of deficits we are currently running,
while a matter of concern, don't reach the level of alarm that
it's likely to have a long term detrimental effect on our
economic situation either today or in the future. If that were
true, I think we would be seeing it in the interest rates, and
we're seeing precisely the opposite in lower interest rates.
Senator Pryor. I understand that there is also Fed policy
there that is driving interest rates lower at the same time, so
we will see how that works out.
But let me ask two last questions really, and that is, when
you look at a budget, any kind of budget, it does not matter if
it is a household budget or the Federal Government's budget,
you really look at two things. That is, how much money you are
taking in and how much money you are spending. I would like to
hear your thoughts and your recommendations to the Congress, if
you are ready to talk about those, about what spending we
should cut.
Also I would like to hear your thoughts about if you think
a tax increase would ever be necessary in the future.
Mr. Bolten. Taking the second part of the question first,
Senator, I do not foresee either the need or the propriety of a
tax increase as we look forward. I think the tax cuts that have
been put in place have been precisely the right kind of remedy
for the situation we were in, and my expectation is that any
sort of tax increase will actually cause a contraction in the
economic growth that really is our best prospect for getting
back to a sound budgetary basis.
As to the spending cuts, I am not ready today to discuss
those with you. I will be ready at some point if confirmed and
have had a chance to dig in with the very able staff of OMB. My
expectation is that in the 2005 budget the President presents,
we will be presenting some cuts in budgets that will
undoubtedly have controversy in some portion of the Congress,
and I look forward to soliciting your support for achieving
some of the cuts that may be necessary for us to do the kind of
fiscal restraint in the short run that I think you and I will
both agree is necessary.
Senator Pryor. Madam Chairman, I would like to thank you
and thank the witness. Just in parting, I would encourage you,
Mr. Bolten, to take to heart the comments of Senator Stevens
and Senator Voinovich. Both of them are very respected not just
within this institution but all over the government and I think
they make very valid points about our budget and some of our
spending priorities. So I would encourage to always keep their
comments in mind.
Mr. Bolten. I will. Thank you, Senator.
Chairman Collins. Thank you, Senator. Senator Levin.
OPENING STATEMENT OF SENATOR LEVIN
Senator Levin. Thank you, Madam Chairman.
Welcome to you, Mr. Bolten, and congratulations. You are
well qualified for the position to which you have been
nominated. We commend you on it. I obviously have a lot of
questions, a number of differences in terms of the economic
approach that you take, but nonetheless, you are clearly well
qualified for the position, and we look forward to an early
confirmation.
I would like to talk to you about dynamic scoring first, as
to how reliable it is. I gather you, in general, support
dynamic scoring?
Mr. Bolten. As a principle, yes.
Senator Levin. It is supposed to provide a more complete
picture of the budget effects of tax and spending proposals,
but a good number of experts, perhaps most, believe that
dynamic scoring, as practiced today at least, is inaccurate and
unreliable. The Congressional Budget office last year asserted
that dynamic scoring would pose intractable problems. Those are
their words. And to my knowledge, there is no consensus that
exists among economists to start to implement dynamic scoring.
It relies on a number of highly subjective elements, including
predictions of future interest rates, monetary policies, fiscal
policies, business cycles, and labor supplies, among other
matters. There also of course is a risk of dynamic scoring
being manipulated to arrive at a desired result.
Do you plan on employing more dynamic scoring as head of
OMB?
Mr. Bolten. Senator, I didn't hear anything that I disagree
with in what you have just said. Our economists internally say
the same thing, that the science of dynamic scoring is at this
point insufficiently advanced. There's been a lot of terrific
work done, I'm told, to advance the science, if it can be
called that, of trying to estimate what sort of macroeconomic
effects are going to result from a specific change in either
revenue or spending policy, and I think it's very important
that we try to do that, because as the administration
evaluates, and as you, the Members of the Congress evaluate a
change in policy, I think you ought to have before you the best
information possible about what sort of economic effects that
change in policy is going to have. Today's relatively static
analysis does not capture that. So as a matter of principle, I
do support trying to advance toward the point at which we will
have science that at least some critical mass of economists can
agree is sufficient for us to change the way we score things.
Senator Levin. And until we get to that point?
Mr. Bolten. For the time being, I know of no plans to shift
over our system. I do intend, Senator, to be working on this
issue with other colleagues in the administration, and hope to
be coming to you shortly with mechanisms for dynamic scoring
that we can all agree actually accurately capture what is
likely to be happening in the economy.
Senator Levin. That would go both to tax and spending
proposals if you do that?
Mr. Bolten. Yes, sir.
Senator Levin. The CBO recently undertook a dynamic scoring
analysis of the President's latest tax cut proposals, and found
small supply side impacts, sometimes positive, sometimes
negative, with an overall negligible effect on the economy. The
Joint Committee on Taxation undertook a dynamic scoring
analysis of $550 billion worth of tax cuts in a House of
Representatives' proposal. It found some short term stimulus to
the economy, but also, ``The positive business investment
incentives arising from the tax policy are eventually likely to
be outweighed by the reduction in national savings due to
increasing Federal Government deficits.'' And four of the five
Joint Tax dynamic scoring models predicted a drop in GDP
between 2009 and 2013, while the other model remained constant.
So these dynamic scores predict pretty anemic results for
those years, and yet I think you said that is just precisely
the right kind of remedy, that tax cuts are the right kind of
remedy. It does not sound to me like it is much of a remedy at
all, even according to some dynamic scoring models. Are you
familiar with those models and their application to the tax
cuts? And do you disagree with their assessments?
Mr. Bolten. I do disagree with their assessments, and I
think a lot of other economic analysts do, and I know that many
of the best analysts on Wall Street also disagree with those
analyses. They do see very positive effects coming from the tax
cuts in the overall economy, and I think they, many of them
have been able to model greatly enhanced--well, greatly may be
in the eye of the beholder--but substantially enhanced economic
performance out of this economy as a result of those tax cuts.
So I feel very strongly that we have taken precisely the
right kind of measures so far, and hopefully they will put us
back on a path toward robust economic growth that we need to
get people jobs in this economy and bring government revenues
up.
Senator Levin. I guess my specific question is, are you
familiar with those five Joint Tax Committee scoring models?
Mr. Bolten. I know of them.
Senator Levin. Have you seen that particular analysis?
Mr. Bolten. I know of them, Senator. I have not read them.
Senator Levin. We are back in a deep deficit ditch, and I
heard some of your testimony here this morning including your
answers to Senator Pryor's questions, and I have been concerned
for a long time about the direction that we are heading in
terms of deficits, and I do not find any really strong feeling
about the problem of deficits in the administration. I wish I
did. I think it is very untraditional in terms of conservative
economic policy, to be this casual about deficits, as I sense
this administration is--$400 billion becomes manageable all of
a sudden. Is $500 billion manageable?
Mr. Bolten. Senator, I don't want to put a number on what's
manageable. I think the manageability of our current deficits
is in fact reflected in what we are seeing in short- and
especially long-term interest rates, and those have been
declining while the deficits are going up. I think that is
strong evidence that we are not causing harm to the economy
with the size of deficits we are running.
Senator Levin. It also could be evidence of a very anemic
economy where nobody is investing.
Mr. Bolten. It undoubtedly is evidence of that as well. I
would not describe the administration's attitude toward the
deficits, however, as casual. There are at this moment some
higher priorities. Bringing the deficits down is a very high
priority of the President. Returning our budget to balance is a
very high priority of the President. But over the last couple
of years we have had higher priorities, and those include
protecting the homeland, winning the war on terror, and
restoring this economy in the short run to the kind of growth
that will actually make it possible to bring us back to
balance.
Senator Levin. Since Senator Stevens said that you are
going to need Mitch Daniels' flak jacket, let me ask you
whether you agree with what Mitch Daniels said less than 2
years ago, that we were awash in money, we were just awash in
money. Do you think this Nation is awash in money any more?
Mr. Bolten. I think Mitch was referring to the projected
surplus of, at the time I think it was $5.6 trillion.
Senator Levin. It was.
Mr. Bolten. We clearly are not in that kind of situation
today and I believe we were not in that situation then. It is a
testament more to the inaccuracy of projection models than
anything else. But even at the time that Mitch was testifying
here, 2\1/2\ years ago, the economy was already entering into
recession, and government revenues were declining. I do not
believe that we were at the time awash in surplus money. We
clearly are not now, and that is a situation we need to
address.
Senator Levin. It is just not that the Nation is awash in
money. He said, ``But it's going to be.'' Doesn't sound like
anything close to deficit hawks or a conservative approach to
me. That kind of a projection is the basis for reducing
revenues, surely has contributed to the deficit. Now, you have
mentioned other things which have contributed to the deficit
too, which they have. But surely, tax cuts have contributed to
the deficit, at least according to the Congressional Budget
office. Would you not agree with that?
Mr. Bolten. I do agree that certainly in the short run, the
tax cuts have contributed to the deficit. That is actually part
of their purposes, is to get some money out to the people who
need it to spend and invest. But I go back to the priorities,
which include getting this economy going again, which I think
the tax cuts have been very well designed to accomplish, to
bring us out of the recession that was at the doorstep when the
President entered office, and to restore the economy toward the
robust growth that will make it possible to bring the budget
deficits down in the future.
Senator Levin. Like Mitch Daniels' projection of the
future, whether or not these tax cuts in fact have that effect,
we will know soon enough. But I am afraid that your optimism
about the effect of tax cuts runs directly counter at least to
our Joint Tax Committee's assessment, which is that they are
negligible in terms of producing any kind of economic growth.
That is a bipartisan Joint Tax Committee. That is not a
partisan comment at all.
Mr. Bolten. Understood, Senator, and I trust that I will
have the opportunity to come back before you and show that the
expectations that I have reflected and those of many other
government officials and economists are the accurate ones, and
that we will be headed back toward growth toward the end of
this year.
Senator Levin. Well, we sure hope that that is the case. We
look forward to your coming back in either case, whether your
predictions are accurate or not.
My time is up. I have a few additional questions, but my
time is up this round.
Chairman Collins. Thank you, Senator Levin.
I would like to thank Mr. Bolten for appearing before the
Committee today----
Senator Levin. I can submit them----
Chairman Collins. Would you like another couple minutes?
Senator Levin. Yes, if that would be all right.
Chairman Collins. OK.
Senator Levin. I should not have assumed there would be
another round. I apologize, Madam Chairman.
Just one other question about the personnel system. I guess
two questions. One is the financial management problems that
Senator Fitzgerald mentioned. The ability to address them,
particularly in the Department of Defense, is going to depend
on whether or not you can put financial management systems in
place with appropriate controls. That is what the key is in the
DoD. This has been a longstanding problem, long before this
administration. But it needs to be addressed.
I wonder, Madam Chairman, if we could perhaps lay down a
challenge to our new OMB Director, to give us perhaps by the
end of the year, since you are talking about spotlights, give
us by the end of the year your projection as to how we are
going to make some progress in the financial management in the
DoD so that we can get it auditable. Would that be reasonable
to ask? This goes on year after year after year at the
Department of Defense. Is that doable, is that practical, by
the end of the year to give us a roadmap towards auditability
for the Department of Defense?
Mr. Bolten. Senator, in a sense I think we're already doing
that and will do it when we release our scorecard.
Senator Levin. Then you could perhaps give it to us now
then. That would be fine. If you think that roadmap exists now,
if you could just give us that for the record, that would be
terrific.
Mr. Bolten. Senator, I'm not in a position to do that,
certainly not currently being the Director. I'm not in the
position to do that. But I do know that it will be the focus of
intensive review as we prepare our 2005 budget submission that
will come to you in February of this coming year, and that we
will have a very sharp focus on the management practices
throughout the government, including the Department of Defense,
and will be able to show you a scorecard of how we think they
are doing, and address the measures that we think are going to
be needed to make the score better.
Senator Levin. That budget submission will be adequate in
terms of timing, if you can include it in that.
Mr. Bolten. Thank you, Senator.
Senator Levin. And the last question would be, Dr. Chu, who
is in the Department of Defense, has stated that if the
Department of Defense moves 300,000 members of the uniform
military into war fighting tasks, that there is no constraint
to preclude the Department from hiring 300,000 new civilians to
replace them. Will you ensure that in fact there is no
constraint. He was talking about OMB. He said there is no
constraint from OMB. Will you ensure that there is no
constraint on the ability of the Department of Defense to hire
new civilians to fulfill the functions that were previously
performed by members of the uniform military?
Mr. Bolten. Senator, I am not entirely sure of the
implications, but my instinct is to say yes, but if I may come
back to you with a direct response on that.
Senator Levin. That would be great.
Mr. Bolten. For the record. The one thing I would say is
that if the question is, does OMB impose FTE, full time
equivalent ceilings, my understanding is that OMB does not now
do that, and that the constraint on the Department of Defense
would be their overall budget, and that it is within those
budgetary limits that the Defense Department would have to
operate in terms of its new hiring.
Senator Levin. You can give us a more complete answer then
for the record as to whether there are any constraints on FTEs,
full time equivalents, taking the place of uniform military
people inside the Department of Defense.
Mr. Bolten. I will do that.
Senator Levin. That will be great, and thank you very much,
and congratulations.
Mr. Bolten. Thank you, Senator.
Chairman Collins. Thank you, Senator Levin.
Mr. Bolten, I think it is a sign of how important the
position is for which you have been nominated that we have had
13 Senators here today to ask you questions.
We do look forward to working with you. I am confident that
we will be able to move your nomination fairly expeditiously,
and I appreciate your being here today.
I also want to thank you for your willingness to serve in
this very difficult position. It is probably the most difficult
position in the entire Federal Government in many ways. But
surely, it is also one of the most significant. Your commitment
to public service means a great deal, and impresses me greatly,
and I think we are very fortunate that you are willing to
accept this further responsibility.
So we look forward to working with you. Without objection,
the record will remain open until 5 p.m. today for the
submission of any additional materials for the record. It is my
hope that the Committee will be able to report out your
nomination tomorrow, and have it cleared by the full Senate
before we adjourn. In that regard I want to acknowledge the
efforts of Senators and staff on both sides of the aisle, as
well as your efforts to reply quickly to the voluminous number
of questions that were submitted to you.
Chairman Collins. This hearing is now adjourned.
[Whereupon, at 1 p.m., the Committee was adjourned.]
A P P E N D I X
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