[House Hearing, 107 Congress]
[From the U.S. Government Printing Office]



 
         ENSURING DOMESTIC SECURITY: ISSUES AND POTENTIAL COSTS

=======================================================================

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

            HEARING HELD IN WASHINGTON, DC, NOVEMBER 7, 2001

                               __________

                           Serial No. 107-18

                               __________

           Printed for the use of the Committee on the Budget







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                        COMMITTEE ON THE BUDGET

                       JIM NUSSLE, Iowa, Chairman
JOHN E. SUNUNU, New Hampshire        JOHN M. SPRATT, Jr., South 
  Vice Chairman                          Carolina,
PETER HOEKSTRA, Michigan               Ranking Minority Member
  Vice Chairman                      JIM McDERMOTT, Washington
CHARLES F. BASS, New Hampshire       BENNIE G. THOMPSON, Mississippi
GIL GUTKNECHT, Minnesota             KEN BENTSEN, Texas
VAN HILLEARY, Tennessee              JIM DAVIS, Florida
MAC THORNBERRY, Texas                EVA M. CLAYTON, North Carolina
JIM RYUN, Kansas                     DAVID E. PRICE, North Carolina
MAC COLLINS, Georgia                 GERALD D. KLECZKA, Wisconsin
ERNIE FLETCHER, Kentucky             BOB CLEMENT, Tennessee
GARY G. MILLER, California           JAMES P. MORAN, Virginia
PAT TOOMEY, Pennsylvania             DARLENE HOOLEY, Oregon
WES WATKINS, Oklahoma                TAMMY BALDWIN, Wisconsin
DOC HASTINGS, Washington             CAROLYN McCARTHY, New York
JOHN T. DOOLITTLE, California        DENNIS MOORE, Kansas
ROB PORTMAN, Ohio                    MICHAEL E. CAPUANO, Massachusetts
RAY LaHOOD, Illinois                 MICHAEL M. HONDA, California
KAY GRANGER, Texas                   JOSEPH M. HOEFFEL III, 
EDWARD SCHROCK, Virginia                 Pennsylvania
JOHN CULBERSON, Texas                RUSH D. HOLT, New Jersey
HENRY E. BROWN, Jr., South Carolina  JIM MATHESON, Utah
ANDER CRENSHAW, Florida
ADAM PUTNAM, Florida
MARK KIRK, Illinois

                           Professional Staff

                       Rich Meade, Chief of Staff
       Thomas S. Kahn, Minority Staff Director and Chief Counsel









                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, November 7, 2001.................     1
Statement of:
    David M. Walker, Comptroller General, U.S. General Accounting 
      Office.....................................................     5
    Hon. Newt Gingrich, former Speaker of the House of 
      Representatives, member, U.S. Commission on National 
      Security/21st Century......................................    27
    Hon. Lee H. Hamilton, former Member of Congress, member, U.S. 
      Commission on National Security/21st Century...............    29
Prepared statements and additional submission:
    Hon. John M. Spratt, Jr., a Representative in Congress from 
      the State of South Carolina................................     4
    Comptroller Walker...........................................     8
    New York Times article concerning bioterrorism, submitted by 
      Mr. Bentsen................................................    23








         ENSURING DOMESTIC SECURITY: ISSUES AND POTENTIAL COSTS

                              ----------                              


                      WEDNESDAY, NOVEMBER 7, 2001

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 1:20 p.m. in room 
210, Cannon House Office Building, Hon. Jim Nussle (chairman of 
the committee) presiding.
    Members present: Representatives Nussle, Gutknecht, 
Thornberry, Watkins, Hastings, Schrock, Culberson, Putnam, 
Kirk, Spratt, Bentsen, Clayton, Price, Clement, Hooley, 
Baldwin, McCarthy, Moore, and Matheson.
    Chairman Nussle. Call the Budget Committee hearing to 
order.
    Today we begin the process of hearings for the fiscal year 
2003 budget, and for that matter, possible fiscal year 2002 
supplemental budget requests and priorities. Today's hearing is 
entitled, Ensuring Domestic Security: Issues and Potential 
Costs. We have two very distinguished panels today who will 
come forward and will enlighten us on a number of different 
topics.
    This hearing is intended to examine the broad issues and 
challenges in ensuring the Nation's domestic security in the 
midst of the current war against terrorism. It is not 
specifically focused on President Bush's Office of Homeland 
Security, although I have no doubt there will be many 
references to that office and to priorities that office may in 
the future bring forth.
    The hearing today will in part examine the extensive work 
on the part of the General Accounting Office in reviewing the 
U.S. Government's antiterrorism programs, outlining the 
agency's findings and presenting some specific recommendations 
for organizational efficiencies and management improvement. In 
addition, representatives of the United States Commission on 
National Security/21st Century will be present and will present 
Commission findings and recommendations on defending the United 
States against terrorism.
    Prior to the attacks of September 11, the administration's 
fiscal year 2002 request for antiterrorism programs totaled 
$12.8 million, spread across 43 different Federal agencies. 
Additional resources will, no doubt, be forthcoming and have 
been forthcoming, but funds may not be spent in the most 
efficient manner absent a strong, effective organizational plan 
that prioritizes these programs and avoids duplication. So one 
of the questions today will be what is the most effective way 
to consolidate and manage the government's antiterrorist 
efforts. GAO has found that the government does not yet have a 
sound terrorist vulnerability assessment in place, and without 
such an assessment, it is probably not possible to target funds 
to correct the most critical vulnerabilities in national 
infrastructure.
    The second question will be how soon can a comprehensive 
threat and risk assessment be completed for this Nation. 
Finally, fully recognizing that the President needs maximum 
flexibility to get the Office of Homeland Security established 
quickly, many details remain to be resolved including, but not 
limited to, how much budgetary control will the Director 
request; and will the Director truly have a single focal point 
for homeland security as was promised by the President; how can 
the Director leverage State and local enforcement and public 
health resources for maximum effectiveness. In short, how can 
the new Office of Homeland Security operate with the most 
effective, efficient plan for the future?
    The budget for 2003 that we will be discussing and 
formulating in short order, needs to take into account an 
emerging new and revitalized priority for homeland security. In 
short, today's hearing only begins the process of examining 
homeland security and combating terrorism. This is not meant to 
try and take a drink out of the fire hydrant all in one fell 
swoop. There are a number of other hearings, and there is, in 
fact, a security briefing with Secretary Rumsfeld at 3 o'clock 
that I know Members are interested in attending. But it is to 
begin the process.
    What I would suggest today, that our main focus be: where 
has our priority been with regard to homeland security in 
combating terrorism, and where is it today now as far as the 
priority for the Federal Government. It will serve as a preface 
for determining the priority in next year's budget. I would 
recommend to Members that we do this in that light and that we 
focus the hearing in that manner so that we can hold a number 
of hearings in order to get to the bottom of this as we move 
forward.
    Before we begin with the panels, I would like to recognize 
John Spratt for any comments he would like to make.
    Mr. Spratt. Thank you, Mr. Chairman.
    Mr. Chairman, Mr. Walker, Lee Hamilton and I guess the 
Speaker is to arrive later. First of all, we look forward to 
your testimony. It is my understanding that GAO has done almost 
70 studies over the years on what you might today call homeland 
security, and we look forward to your sharing the fruits of 
that inquiry with us.
    It is my understanding, that a former colleague, Mr. 
Hamilton, and our former colleague, the Speaker, Newt Gingrich, 
will be talking about organizing the government in order to 
better protect ourselves against terrorist attacks, detecting 
the attacks, deterring the attacks, responding to them once 
they occur. This dialogue is long overdue, and I am glad we are 
having it here in this committee.
    I don't want to detract from that important topic, but the 
Chairman said this is about priorities; what priorities have we 
addressed and what priorities haven't we adequately addressed. 
I want to take just a minute to talk about ``the fire next 
time,'' the risk of nuclear terrorism and the need for nuclear 
nonproliferation programs.
    The devastation that was dealt us on September 11 was 
horrendous, but it could have been far worse if they used 
nuclear weapons. It could have wiped out all of Manhattan. 
There is one element that stands between the terrorists and 
nuclear weapons, and that is fissile material, plutonium, 
highly enriched uranium, and we ought to take every possible 
effort to see that they do not obtain them.
    Just days before September 11, smugglers were apprehended 
in Turkey--not the first time--but they were apprehended there 
with what was at the time believed to be bomb-grade uranium; 
trying to smuggle it out of Russia. Yesterday, President Bush 
warned that bin Laden and al Qaeda have been actively seeking 
nuclear materials for some time.
    We are not doing nearly enough, nearly as much as we should 
to keep nuclear materials and nuclear know-how out of the hands 
of the terrorists. Mr. Thornberry and I have worked on it in 
the Armed Services Committee. The main program that deals with 
this whole problem is called Nunn-Lugar, but it needs more 
attention even though it has some bipartisan support.
    The fact of the matter is, nonproliferation has been a much 
harder sell than it really ought to be. DOE shares the mission 
with DOD--the Department of Energy. The amount of money that we 
put up in the Department of Energy, all totaled, everything 
that would fall under this rubric was $874 million last year. 
One of the line items in those accounts that is a line item is 
for nonproliferation and verification R&D, the sort of thing in 
the budget that doesn't get a lot of attention. It doesn't have 
any program connectivity back home with constituents unless you 
come from one of the States with one of the national labs. But 
in any event, by last budget year, a number of programs had 
been clustered under this particular umbrella, and the total 
funding for it was about $227 million. When this year's budget 
request came over, that program, that line had been cut by 
$57.5 million for reasons that I still do not understand.
    Let me give you one out of many things that will suffer as 
a consequence of that reduction. That is the development of 
sensors that can detect bioterrorism activities that are taking 
place either in the production of the weapon or in the 
aftermath of an attack so that we can get a realtime readout, a 
quick analysis, chemical analysis, biological analysis of what 
the agent is, and then public health authorities knowing this 
can act quickly to stop it.
    There is a system called BASIS. It is an acronym for 
Biological Aerosol Sentry and Information System. The labs have 
been developing this and a lot of other systems. They field-
tested this system. It falls under the rubric of those accounts 
that were cut by 27 percent, by $57 million, in this year's 
budget. Now we raised the issue again in the Armed Services 
Committee. It has been raised in the Appropriations Committee, 
and we succeeded in restoring about $30 million, but there is 
still a substantial cut there, and it is the sort of thing we 
really need to call attention to. It doesn't have a lot of sex 
appeal, a lot of drama, and it doesn't buy you a lot of 
constituent support, but I think it is critically important. If 
nobody else will champion the cause and the need, I think this 
committee, among others, ought to take it up.
    That is why I took advantage of your indulgence, just to 
strike that particular theme. It may be totally off the script 
that you are going to talk about, General Walker, but I wanted 
to lay it on the record and bring it to the attention of my 
colleagues.
    Thank you for coming, and I look forward to your testimony.
    [The prepared statement of Mr. Spratt follows:]

  Prepared Statement of Hon. John M. Spratt, Jr., a Representative in 
               Congress From the State of South Carolina

    Thank you, Mr. Chairman, and thank you, Mr. Walker, for joining us 
today. GAO has done almost seventy studies over the last 4 years on 
antiterrorism and homeland security, and I look forward to your 
testimony.
    During the hearing today, Mr. Walker and our second panel--
consisting of our former Speaker, Newt Gingrich, and our former 
Chairman of the House Foreign Affairs Committee, Lee Hamilton--will 
focus on organizational changes needed to protect against terrorist 
attacks. Studies show that we are not organized to detect terrorist 
threats, or to deter them from occurring, or to respond to them once 
they do occur. These are vital issues and this dialog is long overdue.
    I do not want to detract from the topic, but I do want to take just 
a few minutes to talk about the ``fire next time,'' the risk of nuclear 
terrorism and the need for non-proliferation. The devastation dealt by 
terrorists on September 11, 2001 was horrendous. But had they used 
nuclear weapons, it would have been far worse. There is one element 
that stands between terrorists and the possession of nuclear weapons, 
and that's fissile materials, and we should take every effort to see 
that they do not obtain them. Only days before September 11, smugglers 
were apprehended in Turkey trying to move weapons-grade uranium out of 
Russia. Yesterday, President Bush warned that bin Laden and Al Qaeda 
have been actively seeking nuclear materials.
    We are not doing nearly as much as we should to keep nuclear 
materials and nuclear know-how out of the hand of terrorists. This is 
not a partisan issue; Mr. Thornberry and I have worked on the Armed 
Services Committee to improve non-proliferation programs. The original 
program was established by Senator Nunn and Senator Lugar. I worked 
with Jon Kyl when he wa sin the House to set up the main DOE program. 
Senators Nunn, Lugar, and Domenici established the legislation to 
bolster homeland security in 1996. Bill McCollum and I introduced the 
bill in the House. These programs have enjoyed bipartisan support, but 
this the sad truth: nonproliferation has been much a tougher sell than 
it should be.
    The Department of Energy shares the non-proliferation mission with 
the Department of Defense and focuses on its particular realm: nuclear 
materials. DOE's non-proliferation budget is about double DOD's non-
proliferation budget. All told, the DOE non-proliferation budget in FY 
2001 was $874 million. The administration's budget cut these programs 
in its '02 budget request by $101 million, a cut of almost 12 percent. 
The energy and water bill just adopted by Congress restored part of the 
cut, but only part, about $30 million, leaving these programs $70 
million below the 2001 level.
    Let me tell you the impact these cuts will have on just one 
program, non-proliferation and verification R&D.
    Los Alamos National Laboratory and Lawrence Livermore National 
Laboratory have been involved for years in developing sensors placed on 
U.S. satellites to monitor the production, testing, or use of nuclear, 
biological, and chemical weapons. Before 1991, the program was 
unfocused. It was changed in the aftermath of the Persian Gulf when 
inspectors discovered that Iraq's weapons of mass destruction were more 
advanced than the U.S. intelligence community had estimated. Shortly 
after the Gulf War, Congress set up a specific line in the DOE budget 
for non-proliferation and verification to develop technologies to 
detect the production, testing, transfer, or use of such weapons.
    The President's budget request for this critical research in FY 
2002 was $170 million; that's $57.5 million (25 percent) below the 2001 
level of $227.5 million. The energy and water bill conference report 
added back some of that cut, but still left the program almost $20 
million below last year's level. Here are some of the projects that 
will be cut:
    New seismic monitoring devices to help ensure that Russia, China, 
or others are not improving their nuclear weapons by conducting 
underground tests with a yield below 1 kiloton.
    The Biological Aerosol Sentry and Information System (BASIS), 
designed to detect a bio-terrorism attack within hours so that public 
health agencies can react quickly to stop the spread of the agent. This 
capability is not in hand, but it is maturing. BASIS was field-tested 
at Salt Lake City in March 2001. This cut will slow down the 
development of a promising technology, and one sorely needed.
    Development of new sensors to detect atmospheric nuclear 
explosions. Our satellites that carry these sensors are all being 
retired. We do not have any of the old sensors on hand they were all 
custom built. This cut may delay the construction of new sensors in 
time to be placed on replacement satellites. If not built on time, the 
U.S. will not be assured of the ability to detect an atmospheric 
nuclear explosion.
    New sensors specifically geared to go on platforms to detect the 
production, testing, transfer, or use of WMDs. These sensors pick up 
various ``signatures'' telltale clues that may be chemical, 
electromagnetic, infrared, optical, or radio-nuclide, all absolutely 
critical to improving the ability of the U.S. intelligence community to 
keep watch on what countries like North Korea, Iran, Iraq, and Libya 
are doing.
    If these cuts stand, and if they continue, we will be depriving our 
intelligence community of the resources they need to improve the 
technical means of gathering data and tracking threats. These cuts are 
the exact opposite of what we should be doing. These programs have 
limped along receiving more in lip service than real money. This must 
change; and if the administration will not lead, Congress should.
    Non-proliferation is just one part in our war on terrorism, and 
weapons of mass destruction are just one aspect of our hearing today, 
and not the primary subject; but I wanted to take this opportunity to 
raise the issue, because I think it has not received the attention or 
funding that it clearly calls for.

    Chairman Nussle. David Walker, who is the Comptroller 
General and works for us at the General Accounting Office, I 
welcome you to the committee. I also want to parenthetically--
as I told you in private and in front of a number of Members 
who were involved in the last 3 or 4 weeks as a result of the 
anthrax scare on Capitol Hill--show our appreciation to you and 
the General Accounting Office for the use of your facilities. 
It is something that--as I told you--one of the things that I 
have learned in Washington is that real estate on Capitol Hill 
is probably one of the most prized possessions, and for you to 
unselfishly allow us to come over and let us use your hall is 
something that we are deeply grateful and indebted to you for, 
and we appreciate all your staffs' indulgence and assistance as 
we made that transition.
    We welcome you today. Long before aviation security was a 
topic on the public's agenda, GAO was conducting a number of 
investigations in issuing reports. Long before bioterrorism and 
weapons of mass destruction, back when it was just a possible 
theoretical possibility, you were warning us. We appreciate 
that you would now come before us and give us an update on the 
questions that we have asked, and we welcome your testimony and 
invite you to present it at this time. Welcome.

  STATEMENT OF DAVID M. WALKER, COMPTROLLER GENERAL, GENERAL 
                       ACCOUNTING OFFICE

    Mr. Walker. Thank you, Mr. Chairman. Mr. Spratt and other 
members of the committee, it is a pleasure to be back before 
you.
    Let me say it was our pleasure to accommodate the Members 
of the House of Representatives. Obviously it was something 
that we felt was appropriate to do. It was a hardship on us, 
but it enabled us to get close to our client in new and 
unexpected ways. I am sure that you are happy to be back in 
your offices, and we look forward to continuing to work with 
you.
    With regard to today's hearing, I have got an extensive 
statement for the record and am going to summarize the most 
important points and allow time for the Q&A. Obviously, we have 
two distinguished individuals who are going to be on the next 
panel.
    The terrorist attacks of September 11 have profoundly 
changed the agendas of Congress, the White House, Federal 
agencies, State and local governments and a number of private 
sector entities, while simultaneously altering the way of life 
for many Americans. As a lesson from history inscribed in the 
front of the National Archives states, ``eternal vigilance is 
the price of liberty.'' Our fight against terrorism is not a 
short-term effort, and homeland security will forever be a 
priority for our Nation. As a result, we must find the best 
ways to sustain our efforts over the significant time period 
and leverage our finite resources, both human and financial, in 
ways that will have the greatest impact.
    An effective framework to address these challenges will 
require not only leadership with a clear vision to develop and 
implement a homeland security strategy in coordination with all 
relevant partners, but also the ability to marshal and direct 
the necessary resources, both financial and human, to get the 
job done. The recent establishment of the Office of Homeland 
Security is a good first step, but a series of questions must 
be addressed regarding how this office will be structured, what 
authority its Director will have, and how this effort can be 
institutionalized and sustained over time.
    The Director will need to define scope and objectives of 
the homeland security strategy. This strategy should be 
comprehensive and encompass the steps necessary to reduce our 
vulnerabilities, deter attacks, manage the effects of any 
attacks and provide for appropriate response. The strategy must 
involve all levels of government, the private sector, 
individual citizens, both here and abroad, and other nations. 
This strategy should also use a risk management approach to 
focus finite national resources on areas of greatest need.
    We will never have zero risk. We don't have enough money 
for zero risk. Even if we put every amount of money we could at 
it, we will never get zero risk, it is virtually impossible.
    As the first board notes, one of the challenges that former 
Governor Ridge, will face is that even before September 11, 
there were a lot of players on the field in the Federal 
Government. Mr. Chairman, you noted 43 players in this year's 
budget alone receiving money for homeland security, and 
actually this is just to combat terrorism. I would argue that 
combating terrorism is a subset of homeland security, and 
arguably there are other issues that would come under homeland 
security banner, although counter terrorism initiatives 
constitute the biggest part of it. This doesn't count State and 
local government programs, nor does it include the many other 
entities it must be coordinated with.
    While homeland security is an urgent and vital national 
priority, we should recognize that the challenges that it 
presents illustrate a range of challenges facing our government 
in other areas that are not as visible or urgent, but 
nevertheless important. These include a lack of mission 
clarity, too much fragmentation and overlap, the need to 
improve the Federal Government's human capital strategy, 
difficulties in coordination and operation among levels of 
government across sectors of the economy, and the need to 
better measure performance and make sure that for the money 
that Congress appropriates, you get demonstrable results. Just 
because you get the money doesn't mean that you are going to 
get results.
    As we respond to these urgent priorities of today and the 
long-term requirements of homeland security, our Nation still 
must address a number of other short-term and long-term fiscal 
challenges that were present before September 11, and remain 
today. Our history suggests that we have incurred sizable 
deficits when the security of our Nation or the state of our 
economy was at risk. We are fortunate to face these risks today 
at a time when we have some near-term budget flexibility. It is 
important to remember that the long-term pressures on the 
budget have not lessened; in fact, they are much worse as a 
result of not only the events of September 11, but the 
declining economy and continued increases in health care costs. 
As a result, the ultimate task of addressing today's urgent 
needs without unduly exacerbating our long-range challenges has 
become much more difficult.
    As the next two boards will note, the long term budget 
outlook is daunting. Based on CBO's latest projection in 
August, we have projected the long term budget outcomes 
assuming that the entire unified budget surplus is eliminated 
in the near term. Our long term budget model suggest that by 
the year 2030, there will be no money for discretionary 
spending. By the year 2050, the only thing the Federal 
Government will be doing is paying bondholders.
    The next chart demonstrates how it looked before September 
11, and this is not just because of September 11 it is also 
because of the decline in the economy and a number of other 
things. Even before September 11 and before the additional 
decline in the economy, the long term budget outlook was 
already bad, even with the assumption that we were going to 
save every penny in the Social Security surplus. Even with this 
assumption, discretionary spending was going to have to be cut 
by 50 percent by 2030; clearly these are bleak and 
unacceptable.
    My point is simple. There are a lot of legitimate demands 
that must be addressed today because of the events of September 
11, and there are a number of actions that Congress will 
undoubtedly want to take in order to try to stimulate our 
economy, but it is important that those be focused on 
legitimate need rather than want. It is important to try to 
avoid hitchhikers, those who want to stack wants on top of 
needs; to be able to realize that what we have here is a very 
profound long-range challenge, nothing less than a need to 
review, reassess and reprioritize everything the Federal 
Government does and how it does it, because the numbers do not 
add up.
    All too frequently, we assume that the base is acceptable, 
and therefore, the debate is about the increment, the plus or 
minus from the base. The base doesn't work. We cannot sustain 
the base long term. We have to start figuring out what the 
government is doing, what are you getting for it, what kind of 
return on investment, and how does that compare with the new 
and competing demands, whether they are security-related or 
prescription drugs, whatever they might be. What is the most 
important priority? Realistically you can't meet them all.
    In summary, the terrorist attack of September 11 was a 
defining moment for our Nation, our government and in some 
respects the world. The appointment of former Governor Ridge to 
head the Office of Homeland Security within the Executive 
Office of the President is a promising first step in marshaling 
the resources necessary to address our homeland security 
requirements. It can be argued, however, that statutory 
underpinnings and effective congressional oversight are 
critical to sustaining broad-scale initiatives over the long 
term. Therefore, as you move beyond the immediate response, I 
think it is important that you consider the implications of 
different structures for this Office of Homeland Security, not 
only on its ability to effectively get the job done, but on 
your ability--the Congress's ability--to conduct effective 
oversight, and our ability at GAO to help you to be able to do 
that.
    I have serious concerns that the way that this office is 
structured right now may not make it effective and could 
seriously compromise our ability to help the Congress engage in 
effective oversight. I also believe that we need to work 
together to figure out how we and others can help the Congress 
make sure the funds that you appropriate as a result of the 
acts of September 11 are used for the intended purpose with 
demonstrable results. The model that was used to track spending 
for Hurricane Mitch and other kinds of disaster assistance 
efforts may be something we want to explore with you going 
forward.
    We have already started talking with OMB. They are getting 
their systems together to track funds. I think it is important 
because we are talking about significant sums of money, and our 
long-range challenges are now much tougher.
    Obviously, we stand ready to help in any way that we can, 
and we look forward to doing so. Thank you very much.
    Chairman Nussle. Thank you, General Walker.
    [The prepared statement of Mr. Walker follows:]

   Prepared Statement of David M. Walker, Comptroller General of the 
                             United States

    Mr. Chairman and members of the committee, the terrorist attacks of 
September 11, 2001, have profoundly changed the agendas of the 
Congress, the White House, Federal agencies, State and local 
governments, and a number of private sector entities, while 
simultaneously altering the way of life for many Americans. The grave 
events of September 11th not only ended the debate about whether 
threats to our homeland are real, but also shattered the false sense of 
invulnerability within our Nation's borders. At the same time, the 
aftermath of the attacks also clearly demonstrates the spirit of 
America and the enormous capacity of this Nation to unite; to 
coordinate efforts among federal, state and local agencies, as well as 
among private businesses, community groups, and individual citizens in 
response to a crisis; and to make the sacrifices necessary to respond 
both to these new threats and the consequences they entail.
    Our challenge is to build upon this renewed purpose in ways that 
create both short- and long-term benefits and allow us to sustain our 
efforts. As the lesson from history inscribed on the front of the 
National Archives states, ``Eternal vigilance is the price of 
liberty.'' Our fight against terrorism is not a short-term effort, and 
homeland security will forevermore be a priority for our Nation. As a 
result, we must find the best ways to sustain our efforts over a 
significant time period and leverage our finite resources, both human 
and financial, in ways that will have the greatest effects.
    I appreciate the opportunity to discuss with you today a framework 
for addressing Federal efforts to improve our homeland security and the 
fiscal implications that these actions may have for our Nation. 
Specifically, I will discuss the nature of the threats posed to our 
Nation, key elements of a framework to address homeland security, and 
the potential short- and long-term fiscal implications these efforts 
may have for the Nation.
                                summary
    According to a variety of U.S. intelligence assessments, the United 
States now confronts a range of increasingly diffuse threats that put 
increased destructive power into the hands of small states, groups, and 
individuals and threaten our values and way of life. These threats 
range from incidents of terrorism and attacks on critical 
infrastructure to cyber attacks, the potential use of various weapons 
of mass destruction, and the spread of infectious diseases. Each of 
these threats has varying degrees of potential to cause significant 
casualties and disruption. GAO has reported on many of these issues 
over the past several years, and the changing nature of security 
threats in the post-cold war world remains a key theme in our strategic 
plan. Appendix I contains a summary of our work and products in this 
area.
    An effective framework to address these challenges will require not 
only leadership with a clear vision to develop and implement a homeland 
security strategy in coordination with all relevant partners but also 
the ability to marshal and direct the necessary resources to get the 
job done. The recent establishment of the Office of Homeland Security 
is a good first step, but a series of questions must be addressed 
regarding how this office will be structured, what authority its 
Director will have, and how this effort can be institutionalized and 
sustained over time. The Director will need to define the scope and 
objectives of a homeland security strategy. This strategy should be 
comprehensive and encompass steps designed to reduce our 
vulnerabilities, deter attacks, manage the effects of any successful 
attacks, and provide for appropriate response. The strategy will 
involve all levels of government, the private sector, individual 
citizens both here and abroad, and other nations. Our strategy should 
also use a risk management approach to focus finite national resources 
on areas of greatest need.
    While homeland security is an urgent and vital national priority, 
we should recognize that the challenges it presents illustrate the 
range of challenges facing our government in other areas not as visible 
or urgent--but nevertheless important. These include a lack of mission 
clarity; too much fragmentation and overlap; the need to improve the 
Federal Government's human capital strategy; difficulties in 
coordination and operation across levels of government and across 
sectors of the economy; and the need to better measure performance.
    As we respond to these urgent priorities of today and the enduring 
long-term requirements related to homeland security, our Nation still 
must address a number of other short-term and long-term fiscal 
challenges that were present before September 11, 2001, and remain 
today. Our history suggests that we have incurred sizable deficits when 
the security or the economy of the Nation was at risk. We are fortunate 
to face these risks at a time when we have some near-term budgetary 
flexibility. It is important to remember, however, that the long-term 
pressures on the budget have not lessened. In fact, they have increased 
due to the slowing economy and the increased spending levels expected 
for fiscal year 2002. As a result, the ultimate task of addressing 
today's urgent needs without unduly exacerbating our long-range fiscal 
challenges has become much more difficult.
           the nature of the threat facing the united states
    The United States and other nations face increasingly diffuse 
threats in the post-cold war era. In the future, potential adversaries 
are more likely to strike vulnerable civilian or military targets in 
nontraditional ways to avoid direct confrontation with our military 
forces on the battlefield. The December 2000 national security strategy 
states that porous borders, rapid technological change, greater 
information flow, and the destructive power of weapons now within the 
reach of small states, groups, and individuals make such threats more 
viable and endanger our values, way of life, and the personal security 
of our citizens.
                 figure 1: threats to national security


    Hostile nations, terrorist groups, transnational criminals, and 
individuals may target American people, institutions, and 
infrastructure with cyber attacks, weapons of mass destruction, or 
bioterrorism. International criminal activities such as money 
laundering, arms smuggling, and drug trafficking can undermine the 
stability of social and financial institutions and the health of our 
citizens. Other national emergencies may arise from naturally occurring 
or unintentional sources such as outbreaks of infectious disease. As we 
witnessed in the tragic events of September 11, 2001, some of the 
emerging threats can produce mass casualties. They can lead to mass 
disruption of critical infrastructure, involve the use of biological or 
chemical weapons, and can have serious implications for both our 
domestic and the global economy. The integrity of our mail has already 
been compromised. Terrorists could also attempt to compromise the 
integrity or delivery of water or electricity to our citizens, 
compromise the safety of the traveling public, and undermine the 
soundness of government and commercial data systems supporting many 
activities.
               key elements to improve homeland security
    A fundamental role of the Federal Government under our Constitution 
is to protect America and its citizens from both foreign and domestic 
threats. The government must be able to prevent and deter threats to 
our homeland as well as detect impending danger before attacks or 
incidents occur. We also must be ready to manage the crises and 
consequences of an event, to treat casualties, reconstitute damaged 
infrastructure, and move the Nation forward. Finally, the government 
must be prepared to retaliate against the responsible parties in the 
event of an attack. To accomplish this role and address our new 
priority on homeland security, several critical elements must be put in 
place. First, effective leadership is needed to guide our efforts as 
well as secure and direct related resources across the many boundaries 
within and outside of the Federal Government. Second, a comprehensive 
homeland security strategy is needed to prevent, deter, and mitigate 
terrorism and terrorist acts, including the means to measure 
effectiveness. Third, managing the risks of terrorism and prioritizing 
the application of resources will require a careful assessment of the 
threats we face, our vulnerabilities, and the most critical 
infrastructure within our borders.
Leadership Provided by the Office of Homeland Security
    On September 20, 2001, we issued a report that discussed a range of 
challenges confronting policymakers in the war on terrorism and offered 
a series of recommendations.\1\ We recommended that the government 
needs clearly defined and effective leadership to develop a 
comprehensive strategy for combating terrorism, to oversee development 
of a new national-threat and risk assessment, and to coordinate 
implementation among Federal agencies. In addition, we recommended that 
the government address the broader issue of homeland security. We also 
noted that overall leadership and management efforts to combat 
terrorism are fragmented because no single focal point manages and 
oversees the many functions conducted by more than 40 different Federal 
departments and agencies.\2\
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    \1\ Combating Terrorism: Selected Challenges and Related 
Recommendations (GAO-01-822, Sept. 20, 2001).
    \2\ Combating Terrorism: Comments on Counterterrorism Leadership 
and National Strategy (GAO-01-556T, March 27, 2001).
---------------------------------------------------------------------------
    For example, we have reported that many leadership and coordination 
functions for combating terrorism were not given to the National 
Coordinator for Security, Infrastructure Protection and 
Counterterrorism within the Executive Office of the President. Rather, 
these leadership and coordination functions are spread among several 
agencies, including the Department of Justice, the Federal Bureau of 
Investigation (FBI), the Federal Emergency Management Agency, and the 
Office of Management and Budget. In addition, we reported that Federal 
training programs on preparedness against weapons of mass destruction 
were not well coordinated among agencies resulting in inefficiencies 
and concerns among rescue crews in the first responder community. The 
Department of Defense, Department of Justice, and the Federal Emergency 
Management Agency have taken steps to reduce duplication and improve 
coordination. Despite these efforts, state and local officials and 
organizations representing first responders indicate that there is 
still confusion about these programs. We made recommendations to 
consolidate certain activities, but have not received full agreement 
from the respective agencies on these matters.
    In his September 20, 2001, address to the Congress, President Bush 
announced that he was appointing Pennsylvania Governor Thomas Ridge to 
provide a focus to homeland security. As outlined in the President's 
speech and confirmed in a recent executive order,\3\ the new Homeland 
Security Adviser will be responsible for coordinating Federal, State, 
and local efforts and for leading, overseeing, and coordinating a 
comprehensive national strategy to safeguard the Nation against 
terrorism and respond to any attacks that may occur.
---------------------------------------------------------------------------
    \3\ Establishing the Office of Homeland Security and the Homeland 
Security Council, E.O. 13228, Oct. 8, 2001.
---------------------------------------------------------------------------
    Both the focus of the executive order and the appointment of a 
coordinator within the Executive Office of the President fit the need 
to act rapidly in response to the threats that surfaced in the events 
of September 11 and the anthrax issues we continue to face. Although 
this was a good first step, a number of important questions related to 
institutionalizing and sustaining the effort over the long term remain, 
including:
     What will be included in the definition of homeland 
security? What are the specific homeland security goals and objectives?
     How can the coordinator identify and prioritize programs 
that are spread across numerous agencies at all levels of government? 
What criteria will be established to determine whether an activity does 
or does not qualify as related to homeland security?
     How can the coordinator have a real impact in the budget 
and resource allocation process?
     Should the coordinator's roles and responsibilities be 
based on specific statutory authority? And if so, what functions should 
be under the coordinator's control?
     Depending on the basis, scope, structure, and 
organizational location of this new position and entity, what are the 
implications for the Congress and its ability to conduct effective 
oversight?
    A similar approach was pursued to address the potential for 
computer failures at the start of the new millennium, an issue that 
came to be known as Y2K. A massive mobilization, led by an assistant to 
the President, was undertaken. This effort coordinated all federal, 
state, and local activities, and established public-private 
partnerships. In addition, the Congress provided emergency funding to 
be allocated by the Office of Management and Budget after congressional 
consideration of the proposed allocations. Many of the lessons learned 
and practices used in this effort can be applied to the new homeland 
security effort. At the same time, the Y2K effort was finite in nature 
and not nearly as extensive in scope or as important and visible to the 
general public as homeland security. The long-term, expansive nature of 
the homeland security issue suggests the need for a more sustained and 
institutionalized approach.
Developing a Comprehensive Homeland Security Strategy
    I would like to discuss some elements that need to be included in 
the development of the national strategy for homeland security and a 
means to assign roles to federal, state, and local governments and the 
private sector. Our national preparedness related to homeland security 
starts with defense of our homeland but does not stop there. Besides 
involving military, law enforcement, and intelligence agencies, it also 
entails all levels of government--Federal, State, and local--and 
private individuals and businesses to coordinate efforts to protect the 
personal safety and financial interests of United States citizens, 
businesses, and allies, both at home and throughout the world. To be 
comprehensive in nature, our strategy should include steps designed to:
     reduce our vulnerability to threats;
     use intelligence assets and other broad-based information 
sources to identify threats and share such information as appropriate;
     stop incidents before they occur;
     manage the consequences of an incident; and
     in the case of terrorist attacks, respond by all means 
available, including economic, diplomatic, and military actions that, 
when appropriate, are coordinated with other nations.
    An effective homeland security strategy must involve all levels of 
government and the private sector. While the Federal Government can 
assign roles to Federal agencies under the strategy, it will need to 
reach consensus with the other levels of government and with the 
private sector on their respective roles. In pursuing all elements of 
the strategy, the Federal Government will also need to closely 
coordinate with the governments and financial institutions of other 
nations. As the President has said, we will need their help. This need 
is especially true with regard to the multidimensional approach to 
preventing, deterring, and responding to incidents, which crosses 
economic, diplomatic, and military lines and is global in nature.
Managing Risks to Homeland Security
    The United States does not currently have a comprehensive risk 
management approach to help guide Federal programs for homeland 
security and apply our resources efficiently and to best effect. ``Risk 
management'' is a systematic, analytical process to determine the 
likelihood that a threat will harm physical assets or individuals and 
then to identify actions to reduce risk and mitigate the consequences 
of an attack. The principles of risk management acknowledge that while 
risk generally cannot be eliminated, enhancing protection from known or 
potential threats can serve to significantly reduce risk.
    We have identified a risk management approach used by the 
Department of Defense to defend against terrorism that might have 
relevance for the entire Federal Government to enhance levels of 
preparedness to respond to national emergencies whether man-made or 
unintentional in nature. The approach is based on assessing threats, 
vulnerabilities, and the importance of assets (criticality). The 
results of the assessments are used to balance threats and 
vulnerabilities and to define and prioritize related resource and 
operational requirements.
    Threat assessments identify and evaluate potential threats on the 
basis of such factors as capabilities, intentions, and past activities. 
These assessments represent a systematic approach to identifying 
potential threats before they materialize. However, even if updated 
often, threat assessments might not adequately capture some emerging 
threats. The risk management approach therefore uses the vulnerability 
and criticality assessments discussed below as additional input to the 
decisionmaking process.
    Vulnerability assessments identify weaknesses that may be exploited 
by identified threats and suggest options that address those 
weaknesses. For example, a vulnerability assessment might reveal 
weaknesses in an organization's security systems, financial management 
processes, computer networks, or unprotected key infrastructure such as 
water supplies, bridges, and tunnels. In general, teams of experts 
skilled in such areas as structural engineering, physical security, and 
other disciplines conduct these assessments.
    Criticality assessments evaluate and prioritize important assets 
and functions in terms of such factors as mission and significance as a 
target. For example, certain power plants, bridges, computer networks, 
or population centers might be identified as important to national 
security, economic security, or public health and safety. Criticality 
assessments provide a basis for identifying which assets and structures 
are relatively more important to protect from attack. In so doing, the 
assessments help determine operational requirements and provide 
information on where to prioritize and target resources while reducing 
the potential to target resources on lower priority assets.
    We recognize that a national-level risk management approach that 
includes balanced assessments of threats, vulnerabilities, and 
criticality will not be a panacea for all the problems in providing 
homeland security. However, if applied conscientiously and 
consistently, a balanced approach--consistent with the elements I have 
described--could provide a framework for action. It would also 
facilitate multidisciplinary and multiorganizational participation in 
planning, developing, and implementing programs and strategies to 
enhance the security of our homeland while applying the resources of 
the Federal Government in the most efficient and effective manner 
possible. Given the tragic events of Tuesday, September 11, 2001, a 
comprehensive risk management approach that addresses all threats has 
become an imperative.
    As this Nation implements a strategy for homeland security, we will 
encounter many of the longstanding performance and accountability 
challenges being faced throughout the Federal Government. For example, 
we will be challenged to look across the Federal Government itself to 
bring more coherence to the operations of many agencies and programs. 
We must also address human capital issues to determine if we have the 
right people with the right skills and knowledge in the right places. 
Coordination across all levels of government will be required as will 
adequately defining performance goals and measuring success. In 
addressing these issues, we will also need to keep in mind that our 
homeland security priorities will have to be accomplished against the 
backdrop of the long-term fiscal challenges that loom just over the 10-
year budget window.
                short- and long-term fiscal implications
    The challenges of combating terrorism and otherwise addressing 
homeland security have come to the fore as urgent claims on the Federal 
budget. As figure 2 shows, our past history suggests that when our 
national security or the state of the Nation's economy was at issue, we 
have incurred sizable deficits. Many would argue that today we are 
facing both these challenges. We are fortunate to be facing them at a 
time when we have some near-term budgetary flexibility. The budgetary 
surpluses of recent years that were achieved by fiscal discipline and 
strong economic growth put us in a stronger position to respond both to 
the events of September 11 and to the economic slowdown than would 
otherwise have been the case. I ask you to recall the last recession in 
the early 1990's where our triple-digit deficits [in billions of 
dollars] limited us from considering a major fiscal stimulus to jump 
start the economy due to well-founded fears about the impact of such 
measures on interest rates that were already quite high. In contrast, 
the fiscal restraint of recent years has given us the flexibility we 
need to both respond to the security crisis and consider short-term 
stimulus efforts.
 figure 2: surpluses or deficits as a share of gross domestic product 
                           (gdp) (1800-2000)


    Note: Data through 1929 are shown as a percent of gross national 
product (GNP); data from 1930 to present are shown as a percent of GDP.

    Sources: Office of Management and Budget and Department of 
Commerce.

    As we respond to the urgent priorities of today, we need to do so 
with an eye to the significant long-term fiscal challenges we face just 
over the 10-year budget horizon. I know that you and your counterparts 
in the Senate have given a great deal of thought to how the Congress 
and the President might balance today's immediate needs against our 
long-term fiscal challenges. This is an important note to sound--while 
some short-term actions are understandable and necessary, long-term 
fiscal discipline is still an essential need.
    As we seek to meet today's urgent needs, it is important to be 
mindful of the collective impact of our decisions on the overall short- 
and long-term fiscal position of the government. For the short term, we 
should be wary of building in large permanent structural deficits that 
may drive up interest rates, thereby offsetting the potential economic 
stimulus Congress provides. For the longer term, known demographic 
trends (e.g., the aging of our population) and rising health care costs 
will place increasing claims on future Federal budgets--reclaiming the 
fiscal flexibility necessary to address these and other emerging 
challenges is a major task facing this generation.
    None of the changes since September 11 have lessened these long-
term pressures on the budget. In fact, the events of September 11 have 
served to increase our long-range challenges. The baby boom generation 
is aging and is projected to enjoy greater life expectancy. As the 
share of the population over 65 climbs, Federal spending on the elderly 
will absorb larger and ultimately unsustainable shares of the Federal 
budget. Federal health and retirement spending are expected to surge as 
people live longer and spend more time in retirement. In addition, 
advances in medical technology are likely to keep pushing up the cost 
of providing health care. Absent substantive change in related 
entitlement programs, we face the potential return of large deficits 
requiring unprecedented spending cuts in other areas or unprecedented 
tax increases.
    As you know, the Director of the Congressional Budget Office (CBO) 
has recently suggested the possibility of a Federal budget deficit in 
fiscal year 2002, and other budget analysts appear to be in agreement. 
While we do not know today what the 10-year budget projections will be 
in the next updates by CBO and the Office of Management and Budget 
(OMB), we do know the direction: they will be considerably less 
optimistic than before September 11, and the long-term outlook will 
look correspondingly worse. For example, if we assume that the 10-year 
surpluses CBO projected in August are eliminated, by 2030 absent 
changes in the structure of Social Security and Medicare, there would 
be virtually no room for any other Federal spending priorities, 
including national defense, education, and law enforcement. (See fig. 
3). The resource demands that come from the events of September 11--and 
the need to address the gaps these events surfaced--will demand tough 
choices. Part of that response must be to deal with the threats to our 
long-term fiscal health. Ultimately, restoring our long-term fiscal 
flexibility will involve both promoting higher long-term economic 
growth and reforming the Federal entitlement programs. When Congress 
returns for its next session, these issues should be placed back on the 
national agenda.
figure 3: august 2001 projection--composition of federal spending under 
             the ``eliminate unified surpluses'' simulation


    Note: Revenue as a share of GDP declines from its 2000 level of 
20.6 percent due to unspecified permanent policy actions. In this 
display, policy changes are allocated equally between revenue 
reductions and spending increases.

    Source: GAO's August 2001 analysis.

    With this long-term outlook as backdrop, an ideal fiscal response 
to a short-term economic downturn would be temporary and targeted, and 
avoid worsening the longer-term structural pressures on the budget. 
However, you have been called upon not merely to respond to a short-
term economic downturn but also to the homeland security needs so 
tragically highlighted on September 11. This response will 
appropriately consist of both temporary and longer-term commitments. 
While we might all hope that the struggle against terrorism might be 
brought to a swift conclusion, prudence dictates that we plan for a 
longer-term horizon in this complex conflict.
    Given the long-term fiscal challenge driven by the coming change in 
our demographics, you might think about the options you face in 
responding to short-term economic weakness in terms of a range or 
portfolio of fiscal actions balancing today's urgent needs with 
tomorrow's fiscal challenges. In my testimony last February before the 
Senate Budget Committee,\4\ I suggested that fiscal actions could be 
described as a continuum by the degree of long-term fiscal risk they 
present. At one end, debt reduction and entitlement reform actually 
increase future fiscal flexibility by freeing up resources. One-time 
actions--either on the tax or spending side of the budget--may have 
limited impact on future flexibility. At the other end of the fiscal 
risk spectrum, permanent or open-ended fiscal actions on the spending 
side or tax side of the budget can reduce future fiscal flexibility--
although they may have salutary effects on longer-term economic growth 
depending on their design and implementation. I have suggested before 
that increasing entitlement spending arguably presents the highest risk 
to our long-range fiscal outlook. Whatever choices the Congress decides 
to make, approaches should be explored to mitigate risk to the long 
term. For example, provisions with plausible expiration dates--on the 
spending and/or the tax side--may prompt reexamination taking into 
account any changes in fiscal circumstances. In addition, a mix of 
temporary and permanent actions can also serve to reduce risk.
---------------------------------------------------------------------------
    \4\ Long-Term Budget Issues: Moving From Balancing the Budget to 
Balancing Fiscal Risk (GAO-01-385T, Feb. 6, 2001).
---------------------------------------------------------------------------
    As we move beyond the immediate threats, it will be important for 
the Congress and the President to take a hard look at competing claims 
on the Federal fisc. I don't need to remind this Committee that a big 
contributor to deficit reduction in the 1990's was the decline in 
defense spending. Given recent events, it is pretty clear that the 
defense budget is not a likely source for future budget reductions. 
(See fig. 4).
               figure 4: composition of federal spending


    Source: Budget of the United States Government FY 2002, Office of 
Management and Budget.

    Once the economy rebounds, returning to surpluses will take place 
against the backdrop of greater competition of claims within the 
budget. The new commitments that we need to undertake to protect this 
Nation against the threats stemming from terrorism will compete with 
other priorities. Subjecting both new proposals and existing programs 
to scrutiny would increase the ability to accommodate any new needs.
    A fundamental review of existing programs and operations can create 
much needed fiscal flexibility to address emerging needs by weeding out 
programs that have proven to be outdated, poorly targeted or 
inefficient in their design and management.\5\ Many programs were 
designed years ago to respond to earlier challenges. Obviously many 
things have changed. It should be the norm to reconsider the relevance 
or ``fit'' of any Federal program or activity in today's world and for 
the future. In fact, we have a stewardship responsibility to both 
today's taxpayers and tomorrow's to reexamine and update our 
priorities, programs, and agency operations. Given the significant 
events since the last CBO 10-year budget projections, it is clear that 
the time has come to conduct a comprehensive review of existing 
agencies and programs--which are often considered to be ``in the 
base''--while exercising continued prudence and fiscal discipline in 
connection with new initiatives.
---------------------------------------------------------------------------
    \5\ See Congressional Oversight: Opportunities to Address Risks, 
Reduce Costs, and Improve Performance (GAO/T-AIMD-00-96, Feb.17, 2000) 
and Budget Issues: Effective Oversight and Budget Discipline Are 
Essential-Even in a Time of Surplus (GAO/T-AIMD-00-73, Feb. 1, 2000)
---------------------------------------------------------------------------
    In particular, agencies will need to reassess their strategic goals 
and priorities to enable them to better target available resources to 
address urgent national preparedness needs. The terrorist attacks, in 
fact, may provide a window of opportunity for certain agencies to 
rethink approaches to longstanding problems and concerns. For instance, 
the threat to air travel has already prompted attention to chronic 
problems with airport security that we and others have been pointing to 
for years. Moreover, the crisis might prompt a healthy reassessment of 
our broader transportation policy framework with an eye to improving 
the integration of air, rail, and highway systems to better move people 
and goods. Other longstanding problems also take on increased relevance 
in today's world. Take, for example, food safety. Problems such as 
overlapping and duplicative inspections, poor coordination and the 
inefficient allocation of resources are not new. However, they take on 
a new meaning--and could receive increased attention--given increased 
awareness of bioterrorism issues.
    GAO has identified a number of areas warranting reconsideration 
based on program performance, targeting, and costs. Every year, we 
issue a report identifying specific options, many scored by CBO, for 
congressional consideration stemming from our audit and evaluation 
work.\6\ This report provides opportunities for (1) reassessing 
objectives of specific Federal programs, (2) improved targeting of 
benefits and (3) improving the efficiency and management of Federal 
initiatives.
---------------------------------------------------------------------------
    \6\ Supporting Congressional Oversight: Framework for Considering 
Budgetary Implications of Selected GAO Work (GAO-01-447, March 9, 
2001).1 GAO-01-822, Sept. 20, 2001.
---------------------------------------------------------------------------
    This same stewardship responsibility applies to our oversight of 
the funds recently provided to respond to the events of September 11. 
Rapid action in response to an emergency does not eliminate the need 
for review of how the funds are used. As you move ahead in the coming 
years, there will be proposals for new or expanded Federal activities, 
but we must seek to distinguish the infinite variety of ``wants'' from 
those investments that have greater promise to effectively address more 
critical ``needs.''
    In sorting through these proposals, we might apply certain 
investment criteria in making our choices. Well-chosen enhancements to 
the Nation's infrastructure are an important part of our national 
preparedness strategy. Investments in human capital for certain areas 
such as intelligence, public health and airport security will also be 
necessary as well to foster and maintain the skill sets needed to 
respond to the threats facing us. As we have seen with the airline 
industry, we may even be called upon to provide targeted and temporary 
assistance to certain vital sectors of our economy affected by this 
crisis. A variety of governmental tools will be proposed to address 
these challenges--grants, loans, tax expenditures, direct Federal 
administration. The involvement of a wide range of third parties--state 
and local governments, nonprofits, private corporations, and even other 
nations--will be a vital part of the national response as well.
    In the short term, we have to do what is necessary to get this 
Nation back on its feet and compassionately deal with the human 
tragedies left in its wake. However, as we think about our longer-term 
preparedness and develop a comprehensive homeland security strategy, we 
can and should select those programs and tools that promise to provide 
the most cost-effective approaches to achieve our goals. Some of the 
key questions that should be asked include the following:
     Does the proposed activity address a vital national 
preparedness mission and do the benefits of the proposal exceed its 
costs?
     To what extent can the participation of other sectors of 
the economy, including state and local governments, be considered; and 
how can we select and design tools to best leverage and coordinate the 
efforts of numerous governmental and private entities? Is the proposal 
designed to prevent other sectors or governments from reducing their 
investments as a result of Federal involvement?
     How can we ensure that the various Federal tools and 
programs addressing the objective are coherently designed and 
integrated so that they work in a synergistic rather than a fragmented 
fashion?
     Do proposals to assist critical sectors in the recovery 
from terrorist attacks appropriately distinguish between temporary 
losses directly attributable to the crisis and longer-term costs 
stemming from broader and more enduring shifts in markets and other 
forces?
     Are the proposal's time frames, cost projections, and 
promises realistic in light of past experience and the capacity of 
administrators at all levels to implement?
    We will face the challenge of sorting out these many claims on the 
Federal budget without the fiscal benchmarks and rules that have guided 
us through the years of deficit reduction into surplus. Your job 
therefore has become much more difficult.
    Ultimately, as this Committee recommended on October 4, we should 
attempt to return to a position of surplus as the economy returns to a 
higher growth path. Although budget balance may have been the desired 
fiscal position in past decades, nothing short of surpluses are needed 
to promote the level of savings and investment necessary to help future 
generations better afford the commitments of an aging society. As you 
seek to develop new fiscal benchmarks to guide policy, you may want to 
look at approaches taken by other countries. Certain nations in the 
Organization for Economic Cooperation and Development, such as Sweden 
and Norway, have gone beyond a fiscal policy of balance to one of 
surplus over the business cycle. Norway has adopted a policy of aiming 
for budget surpluses to help better prepare for the fiscal challenges 
stemming from an aging society. Others have established a specific 
ratio of debt to gross domestic product as a fiscal target.
                               conclusion
    The terrorist attack on September 11, 2001, was a defining moment 
for our Nation, our government, and, in some respects, the world. The 
initial response by the President and the Congress has shown the 
capacity of our government to act quickly. However, it will be 
important to follow up on these initial steps to institutionalize and 
sustain our ability to deal with a threat that is widely recognized as 
a complex and longer-term challenge. As the President and the 
Congress--and the American people--recognize, the need to improve 
homeland security is not a short-term emergency. It will continue even 
if we are fortunate enough to have the threats moved off the front page 
of our daily papers.
    As I noted earlier, implementing a successful homeland security 
strategy will encounter many of the same performance and accountability 
challenges that we have identified throughout the Federal Government. 
These include bringing more coherence to the operations of many 
agencies and programs, dealing with human capital issues, and 
adequately defining performance goals and measuring success.
    The appointment of former Governor Ridge to head an Office of 
Homeland Security within the Executive Office of the President is a 
promising first step in marshalling the resources necessary to address 
our homeland security requirements. It can be argued, however, that 
statutory underpinnings and effective congressional oversight are 
critical to sustaining broad scale initiatives over the long term. 
Therefore, as we move beyond the immediate response to the design of a 
longer-lasting approach to homeland security, I urge you to consider 
the implications of different structures and statutory frameworks for 
accountability and your ability to conduct effective oversight. 
Needless to say, I am also interested in the impact of various 
approaches on GAO's ability to assist you in this task.
    You are faced with a difficult challenge: to respond to legitimate 
short-term needs while remaining mindful of our significant and 
continuing long-term fiscal challenges. While the Congress 
understandably needs to focus on the current urgent priorities of 
combating international terrorism, securing our homeland, and 
stimulating our economy, it ultimately needs to return to a variety of 
other challenges, including our long-range fiscal challenge. 
Unfortunately, our long-range challenge has become more difficult, and 
our window of opportunity to address our entitlement challenges is 
narrowing. As a result it will be important to return to these issues 
when the Congress reconvenes next year. We in GAO stand ready to help 
you address these important issues both now and in the future.
    I would be happy to answer any questions that you may have.
        appendix i: prior gao work related to homeland security
    GAO has completed several congressionally requested efforts on 
numerous topics related to homeland security. Some of the work that we 
have done relates to the areas of combating terrorism, aviation 
security, transnational crime, protection of critical infrastructure, 
and public health. The summaries describe recommendations made before 
the President established the Office of Homeland Security.
Combating Terrorism
    Given concerns about the preparedness of the Federal Government and 
state and local emergency responders to cope with a large-scale 
terrorist attack involving the use of weapons of mass destruction, we 
reviewed the plans, policies, and programs for combating domestic 
terrorism involving weapons of mass destruction that were in place 
prior to the tragic events of September 11. Our report, Combating 
Terrorism: Selected Challenges and Related Recommendations,\1\ which 
was issued September 20, 2001, updates our extensive evaluations in 
recent years of Federal programs to combat domestic terrorism and 
protect critical infrastructure.
    Progress has been made since we first began looking at these issues 
in 1995. Interagency coordination has improved, and interagency and 
intergovernmental command and control now is regularly included in 
exercises. Agencies also have completed operational guidance and 
related plans. Federal assistance to state and local governments to 
prepare for terrorist incidents has resulted in training for thousands 
of first responders, many of whom went into action at the World Trade 
Center and at the Pentagon on September 11, 2001.
    We also recommended that the President designate a single focal 
point with responsibility and authority for all critical functions 
necessary to provide overall leadership and coordination of Federal 
programs to combat terrorism. The focal point should oversee a 
comprehensive national-level threat assessment on likely weapons, 
including weapons of mass destruction, that might be used by terrorists 
and should lead the development of a national strategy to combat 
terrorism and oversee its implementation. With the President's 
appointment of the Homeland Security Adviser, that step has been taken. 
Furthermore, we recommended that the Assistant to the President for 
Science and Technology complete a strategy to coordinate research and 
development to improve Federal capabilities and avoid duplication.
Aviation Security
    Since 1996, we have presented numerous reports and testimonies and 
identified numerous weaknesses that we found in the commercial aviation 
security system. For example, we reported that airport passenger 
screeners do not perform well in detecting dangerous objects, and 
Federal Aviation Administration tests showed that as testing gets more 
realistic--that is, as tests more closely approximate how a terrorist 
might attempt to penetrate a checkpoint--screener performance declines 
significantly. In addition, we were able to penetrate airport security 
ourselves by having our investigators create fake credentials from the 
Internet and declare themselves law enforcement officers. They were 
then permitted to bypass security screening and go directly to waiting 
passenger aircraft. In 1996, we outlined a number of steps that 
required immediate action, including identifying vulnerabilities in the 
system; developing a short-term approach to correct significant 
security weaknesses; and developing a long-term, comprehensive national 
strategy that combines new technology, procedures, and better training 
for security personnel.
Cyber Attacks on Critical Infrastructure
    Federal critical infrastructure-protection initiatives have focused 
on preventing mass disruption that can occur when information systems 
are compromised because of computer-based attacks. Such attacks are of 
growing concern due to the Nation's increasing reliance on 
interconnected computer systems that can be accessed remotely and 
anonymously from virtually anywhere in the world. In accordance with 
Presidential Decision Directive 63, issued in 1998, and other 
information-security requirements outlined in laws and Federal 
guidance, an array of efforts has been undertaken to address these 
risks. However, progress has been slow. For example, Federal agencies 
have taken initial steps to develop critical infrastructure plans, but 
independent audits continue to identify persistent, significant 
information security weaknesses that place many major Federal agencies' 
operations at high risk of tampering and disruption. In addition, while 
Federal outreach efforts have raised awareness and prompted information 
sharing among government and private sector entities, substantive 
analysis of infrastructure components to identify interdependencies and 
related vulnerabilities has been limited. An underlying deficiency 
impeding progress is the lack of a national plan that fully defines the 
roles and responsibilities of key participants and establishes interim 
objectives. Accordingly, we have recommended that the Assistant to the 
President for National Security Affairs ensure that the government's 
critical infrastructure strategy clearly define specific roles and 
responsibilities, develop interim objectives and milestones for 
achieving adequate protection, and define performance measures for 
accountability. The administration has been reviewing and considering 
adjustments to the government's critical infrastructure-protection 
strategy and last week, announced appointment of a Special Advisor to 
the President for Cyberspace Security.
International Crime Control
    On September 20, 2001, we publicly released a report on 
international crime control and reported that individual Federal 
entities have developed strategies to address a variety of 
international crime issues, and for some crimes, integrated mechanisms 
exist to coordinate efforts across agencies. However, we found that 
without an up-to-date and integrated strategy and sustained top-level 
leadership to implement and monitor the strategy, the risk is so high 
that scarce resources will be wasted, overall effectiveness will be 
limited or not known, and accountability will not be ensured. We 
recommended that the Assistant to the President for National Security 
Affairs take appropriate action to ensure sustained executive-level 
coordination and assessment of multiagency Federal efforts in 
connection with international crime, including efforts to combat money 
laundering. Some of the individual actions we recommended were to 
update the existing government-wide international crime threat 
assessment, to update or develop a new International Crime Control 
Strategy to include prioritized goals as well as implementing 
objectives, and to designate responsibility for executing the strategy 
and resolving any jurisdictional issues.
Public Health
    The spread of infectious diseases is a growing concern. Whether a 
disease outbreak is intentional or naturally occurring, the public 
health response to determine its causes and contain its spread is 
largely the same. Because a bioterrorist event could look like a 
natural outbreak, bioterrorism preparedness rests in large part on 
public health preparedness. We reported in September 2001 that concerns 
remain regarding preparedness at state and local levels and that 
coordination of Federal terrorism research, preparedness, and response 
programs is fragmented.
    In our review last year of the West Nile virus outbreak in New 
York, we also found problems related to communication and coordination 
among and between federal, state, and local authorities. Although this 
outbreak was relatively small in terms of the number of human cases, it 
taxed the resources of one of the Nation's largest local health 
departments. In 1999, we reported that surveillance for important 
emerging infectious diseases is not comprehensive in all states, 
leaving gaps in the Nation's surveillance network. Laboratory capacity 
could be inadequate in any large outbreak, with insufficient trained 
personnel to perform laboratory tests and insufficient computer systems 
to rapidly share information. Earlier this year, we reported that 
Federal agencies have made progress in improving their management of 
the stockpiles of pharmaceutical and medical supplies that would be 
needed in a bioterrorist event, but that some problems still remained. 
There are also widespread concerns that hospital emergency departments 
generally are not prepared in an organized fashion to treat victims of 
biological terrorism and that hospital emergency capacity is already 
strained, with emergency rooms in major metropolitan areas routinely 
filled and unable to accept patients in need of urgent care. To improve 
the Nation's public health surveillance of infectious diseases and help 
ensure adequate public protection, we recommended that the Director of 
the Centers for Disease Control and Prevention lead an effort to help 
federal, state, and local public health officials achieve consensus on 
the core capacities needed at each level of government. We advised that 
consensus be reached on such matters as the number and qualifications 
of laboratory and epidemiological staff as well as laboratory and 
information technology resources.

    Chairman Nussle. Prior to September, the Government's 
proposed fiscal year 2002 budget for all programs under the 
definition of combating terrorism was approximately $12.8 
billion. As I understand it, 8.6 billion was categorized as, 
quote, combating terrorism; 1.8 billion was, quote, to combat 
weapons of mass destruction; and 2.6 billion was categorized, 
quote, critical infrastructure protection, for a total of $12.8 
billion. This is, as I understand it, a 78 percent increase 
since fiscal year 1998, which was the first year that some of 
these definitions appeared in the budget and appeared in 
appropriations. There was slightly more than half spent by the 
Department of Defense.
    How do we measure the effectiveness of this money that has 
been spent and the priority that has been put toward combating 
terrorism, combating weapons of mass destruction and critical 
infrastructure protection? Are we only able to do that through 
the prism of what occurred on September 11, or is there a way 
to examine the effectiveness of these resources that have been 
spent and coordinated thus far, and what model would you 
suggest?
    I think you gave us some very good advice with regard to 
oversight, particularly the caveat to Congress's often cheerful 
method of providing hitchhikers for--under the rubric of 
combating terrorism, just about everything has that definition 
attached to it, it seems, for stimulating the economy. How 
would we model the oversight for these programs?
    Mr. Walker. First, let me say that those numbers that have 
been reported to you, is how much money was appropriated and 
how much money was spent for those activities. I think that one 
of the things that has to be done on a targeted basis, and we 
are happy to try to work with this committee and others as 
appropriate, is what are they actually doing with that money. 
In some cases it may be investment-oriented, or it may be R&D, 
and you may need to do R&D, and R&D may not be getting a payoff 
in year 1, but it is something you need to do to stay ahead of 
the curve and ultimately will be able to demonstrate that you 
are getting some return on that over some period of time.
    One of the concerns I have is that there is not enough 
focus on what is being done with the money and what we are 
getting for the money. There has also been a challenge in 
government in that most of the activities that have occurred 
have been everybody looking at their silo, each of these 
individual 43 departmental agencies being responsible and 
accountable for what they do rather than looking across 
government. In the area of counterterrorism, homeland security, 
by definition, you have to take a horizontal approach across 
the Federal Government as well as across boundaries, 
domestically and internationally. I think we need to work 
together building off GPRA, but targeting in on areas of 
opportunity--security being one of the most fundamental--to try 
to work with the Congress and others to do a more thorough 
analysis of what actually is being done and what is being 
achieved of what is being done.
    Chairman Nussle. When could that analysis be completed, 
because what I am concerned about is that we will very 
cheerfully enter into a bidding war when it comes to--from a 
partisan standpoint, or even in a nonpartisan standpoint--an 
effort to demonstrate our desire to protect America. We have 
said, the President has said, every American has said they 
would be willing to pay just about any price to ensure that 
September 11 never happens again. That is easy to say in a 
speech. When the Budget Committee meets coming in January, 
February and March to actually put that on paper and realize 
the juxtaposition that it has with health care, welfare, the 
environment, transportation and everything else in the Federal 
budget, that will be a little bit harder pill to swallow and 
more difficult to sustain long-term fiscal sanity and get us 
back on an even keel in short order.
    So how quickly can we come up with that kind of analysis so 
that we are better prepared to enter into this next budget 
cycle?
    Mr. Walker. We have created a GAO task team to focus 
horizontally on the issue of homeland security, and Randall Yim 
is the director of that group. What I would suggest is we get 
him and his people together with your staff and figure out what 
we can do. It depends upon how much you want us to do. We can 
make it a priority. I think it needs to be a priority, and I 
think it is illustrative of what needs to be done in a whole 
range of government areas. This happens to be the most acute 
need right now, and we will work with you.
    Chairman Nussle. As part of the horizontal approach, we 
need to include State and local.
    Mr. Walker. I agree. I met this morning, with a number of 
State treasurers who are trying to work with us and will end up 
working with the administration because they want to play a 
part here and want to leverage the economic power of the States 
and the State pension funds to combat terrorism. There are 
things that can be done in that regard, and we are working with 
them to facilitate networking with the executive branch to get 
that done.
    Chairman Nussle. Mr. Spratt.
    Mr. Spratt. Let me follow up on that idea. Would it be 
possible then for the General Accounting Office, first of all, 
to take something like the wiring diagram you have there and 
expand upon it and give us an inventory of all the programs in 
the Federal Government, associated agencies, that are 
counterterrorism, homeland security today, or is that--is that 
a doable task?
    Mr. Walker. I think it is a doable task. Mr. Spratt, we can 
make a good faith effort to get that done.
    Mr. Spratt. Usable. Give us a big compendium, and nobody 
will ever look at it.
    Mr. Walker. I understand what you are saying. Yes.
    Mr. Spratt. Obviously we would want the organizations, and 
we would want the programs associated with those organizations. 
In many cases it will be dual and triple applications. It would 
not just be homeland security. There would be other purposes. 
We would like to know, I think, the cost associated with the 
programs. Then once we get that, I guess we need to talk to you 
about how do you measure effectiveness. We use the word ``cost-
effective'' all the time. We don't have a good device for 
measuring cost-effectiveness.
    Mr. Walker. We can come up with the agencies. We can make a 
good faith effort of coming up with what they report as the 
related cost.
    Obviously one of the problems with cost is how do you 
define it; are they allocating overhead to it, or is it just 
direct cost. So I think what we can do is do the best we can to 
get some meaningful information that gives you a baseline. But 
ultimately this is something we are going to have to do, in 
more depth, over time.
    Mr. Spratt. Well, we welcome the opportunity to sit down 
with your staff and work out that project.
    Chairman Nussle. Mr. Gutknecht.
    Mr. Gutknecht. Thank you, Mr. Chairman.
    Mr. Walker, it has been said that one of the first 
casualties of war is the truth, and there have been some rumors 
floating around and I just want to find out what you know about 
this. I was told last week, for example, over the last 3 years 
the Federal Government has spent several hundred million 
dollars on consultants to deal with bioterrorism. In view of 
the rather ham-fisted way we seem to have dealt with anthrax, I 
am curious.
    Two things: First of all, can you confirm that; do you know 
that; and is there a way to find out whether or not that is 
true? Secondly, I think we owe it to our constituents to find 
out what in the world we have gotten for all the money we have 
spent.
    What the number is, we don't know right now, but we know it 
is a pretty sizable number over the last 3 years, and I would 
just like to work with you, and I would hope that you would 
work with the Budget Committee. I do think there will be a 
tendency in the next year or so, and perhaps beyond, to be 
willing to spend a lot more money, but I agree that at some 
point we have to demonstrate to our constituents and to the 
taxpayers that in fact they are getting fair value for the 
money we spent. Do you know anything about the amount----
    Mr. Walker. I do not know the amount of money that has been 
spent on bioterrorism consultants, but hopefully at least we 
will get a feel for what is being proposed to be spent on 
bioterrorism as part of this other review. I don't know if we 
have a way to figure that out or not. The information that we 
get does not break it out by whether or not it is, for 
consultants. I will see what, if anything, we can do on that, 
but I cannot confirm the fact that we have spent several 
hundred million dollars.
    Mr. Gutknecht. Mr. Chairman, let me just brag for a minute, 
if I can, on some of my constituents. For all the money we have 
spent over the last number of years on bioterrorism, the one 
thing that we learned, to our despair, that we really did not 
have an effective test for anthrax. A team of researchers 
working in my district, with no Federal funds, in the last 30 
days, has developed a test for anthrax at Mayo Clinic which 
will give you results within 30 minutes.
    I think that there is an example and I think maybe a lesson 
for us, and that is, all the money that we are throwing into 
some of the Federal agencies, we don't seem to get the kind of 
results; and here we have some scientists working in a lab in 
Rochester, Minnesota with no Federal funds, and they come up 
with a test within 30 days that will give us answers within 30 
minutes. I hope we won't lose that lesson as we go forward. I 
will yield back.
    Mr. Walker. I think we also have to keep in mind that we 
have had one producer for a vaccine for anthrax, or at least 
one type of anthrax, that has not received FDA approval. So we 
have spent a tremendous amount of money on that and yet FDA 
hasn't approved the vaccine. This is an example of something 
that has gone wrong.
    Chairman Nussle. I am going to call on Mr. Bentsen next, 
but let me propound a unanimous consent request. I would ask 
unanimous consent that we invite to the table, after Mr. 
Bentsen has an opportunity to ask questions, our second panel 
and allow them to make their presentation. We have a briefing 
at 3:00, and I think it would be good to get their thoughts on 
this as well before we go around. So, Mr. Bentsen, and we will 
call that second panel----
    Mr. Bentsen. Thank you, Mr. Chairman. And excuse my voice.
    Mr. Walker, you raised some interesting questions. And I 
apologize to our second panel, but I am going to have to leave 
to go back to a markup on the reinsurance bill that we are 
working on in response to September 11 which may well have 
future budget implications. But you raised some interesting 
questions on whether or not the cost--and there will be a cost 
associated with this--whether or not it is a supplemental cost 
or becomes a substitution cost for other programs that we might 
do. And I don't know that any of us have that answer.
    We know that most of the first responders are State and 
local, but we also don't know the answer of whether this is a 
Federal cost that the Federal Government will ultimately have 
to underwrite. So it is a very complicated issue.
    I would like to turn your attention to a story that ran 
Monday in the New York Times about the public health care 
system in responding to bioterrorism, and I would ask unanimous 
consent to insert it into the record, if I might.
    [The information referred to follows:]

    Struggling to Reach a Consensus on Preparations for Bioterrorism
                         by sheryl gay stolberg

                   [New York Times, November 5, 2001]

    In his 5 years as president of Johns Hopkins Hospital in Baltimore, 
Ronald R. Peterson has spent much of his time trying to make ends meet. 
But now that the anthrax scare has made bioterrorism a reality, Mr. 
Peterson is planning to spend money, not save it.
    This year, Johns Hopkins will buy extra medicines, masks, 
ventilators and radios for its security force. It will retrofit a 
building with new air filters, to keep infectious germs from spreading. 
The price: $7 million. The question is, who will pay for it?
    ``The Federal Government is going to have to give us some 
assistance,'' Mr. Peterson said. Last week, the American Hospital 
Association estimated that the Nation would have to spend $11.3 billion 
to get hospitals ready to handle a serious bioweapon attack. But the 
leading bioterrorism legislation in Congress proposes $3 billion for 
all aspects of preparedness, with $400 million earmarked for hospitals.
    The gulf between these two estimates shows how far the Nation is 
from a consensus on what must be done to prepare for bioterrorism. The 
current anthrax attacks, which have killed 4 people and sickened 14 
others, have done more than years of reports and warnings to convince 
Americans that the Nation must get ready for a large-scale germ attack.
    But the anthrax-tainted letters, while terrifying, have not been 
much of a test of the country's hospital network.
    The system they have tested--the public health system--has been 
strained to its breaking point.
    ``We have spent, in the last 3 years, one dollar per year per 
American on bioterrorism preparedness,'' said Dr. Tara O'Toole, 
director of the Center for Civilian Biodefense Studies at Johns Hopkins 
University. ``We are basically getting what we paid for.''
    Senator Bill Frist, Republican of Tennessee, and Senator Edward M. 
Kennedy, Democrat of Massachusetts, are proposing legislation that 
would increase that amount tenfold, to $3.1 billion a year, Mr. Frist 
said.
    Dr. O'Toole says that amount is merely a ``down payment on what is 
going to have to be a long-term investment.'' There is little agreement 
among lawmakers and policy experts about how much is needed.
    Mr. Kennedy, for instance, initially wanted to spend $10 billion on 
bioterrorism, including $5 billion to improve the public health system. 
The current Frist-Kennedy package, which could be taken up by the 
Senate this week, includes about $1 billion for public health.
    In the House of Representatives, Democrats have proposed $7 billion 
for bioterrorism, including $3.5 billion for public health 
improvements; House Republicans are drafting an alternative.
    The Bush administration has asked Congress for $1.5 billion to 
fight germ attacks, most of it to stockpile antibiotics and vaccines.
    ``We can achieve much better preparedness very quickly,'' Mr. 
Kennedy said, ``but it will require a major national effort and a major 
commitment of new resources.''
    ``The question is not whether we have the ability to protect the 
American people,'' he said, ``but whether we have the will.''
    Having the will does not just mean having the money. It means 
training doctors and nurses and public health professionals. It will 
also mean a sea change in the way hospitals do business.
    For more than a decade, managed care companies and the Medicare 
system have pressed hospitals to squeeze the extras out of their 
budgets. Hospitals have cut beds from emergency rooms. They have 
eliminated laboratory technician positions and pharmacy jobs. They no 
longer stockpile medicines, and instead buy drugs each day as needed. 
These steps have eliminated what is known as surge capacity, the 
ability of hospitals to handle a sharp increase in patients.
    To prepare for bioterrorism, hospitals must build surge capacity 
back in. Yet because they are reimbursed by health insurers only for 
patient care, hospital executives say they have no way to pay for 
bioterrorism preparedness. And because hospitals compete for patients, 
most have not engaged in regional planning for a bioterrorist attack--
designating one city hospital as the burn unit, for instance, and 
another the infectious disease ward.
    ``Back in civil defense days, there were regional hospital planning 
committees that had some type of a game plan,'' said Amy Smithson, a 
bioterrorism expert at the Henry L. Stimson Center, a research 
organization in Washington. ``Privatization of the hospital industry 
has meant that if physicians, nurses and hospital administrators could 
not charge their time to a health insurer or Uncle Sam, then it was 
difficult for them to do this type of thing.''
    The American Hospital Association estimates that, in a large-scale 
bioterrorist attack, each urban hospital will need to be able to care 
for 1,000 patients; the preparations will cost about $3 million per 
hospital, and more than $8 billion all told. Each rural hospital, the 
association has said, will need to be able to care for 200 patients, at 
a cost of $1.4 million per hospital, a total of more than $3 billion.
    Some bioterrorism experts, among them Dr. Frank E. Young, the 
former director of the Office of Emergency Preparedness at the 
Department of Health and Human Services, have suggested that military 
field hospitals could be used to help cope with an attack. Others say 
that is not practical.
    ``I think it's naive to say we don't need to upgrade our hospital 
capabilities,'' said Joseph Waeckerle, an expert on bioterrorism who 
edits the Annals of Emergency Medicine. ``People are going to go to 
emergency departments of hospitals, and they are going to go in 
waves.'' Of the current anthrax attacks, he said: ``This is one small 
incident. What happens if we have a big one?''
    Senator Frist said he was reluctant to commit the government to 
spending a lot of money on hospital preparedness until the hospitals 
developed bioterrorism plans. ``Only one out of five hospitals even has 
a bioterrorism plan,'' Mr. Frist said. ``If you gave them a billion 
dollars, they don't have a plan to spend it on.''
    There is general agreement, however, that the Federal Government 
needs to stockpile vaccines and antibiotics. The Bush administration 
has proposed spending $509 million to acquire 300 million doses of 
smallpox vaccine, one for every American, and $630 million to expand 
the National Pharmaceutical Stockpile, a cache of medicine and 
equipment that could be used in the event of a national emergency. 
Antibiotics from the stockpile are being distributed to people exposed 
to anthrax.
    Kevin Keane, a spokesman for Tommy G. Thompson, the secretary of 
Health and Human Services, called the administration's $1.5 billion 
plan ``a strong investment and a good start.'' Mr. Keane said the 
health secretary is ``continuing to work very closely with Senators 
Kennedy and Frist as well as other Members of Congress on a final 
package.''
    But Representative Robert Menendez, a New Jersey Democrat who is 
chairman of the House Democratic caucus's task force on homeland 
security, said Mr. Bush's plan did not go far enough. The Democrats' $7 
billion package, for instance, includes $1.1 billion to improve 
intelligence capabilities to detect bioterrorism, $870 million for law 
enforcement and $720 million for the military.
    ``The administration is way behind the curve,'' Mr. Menendez said. 
``They may be very aggressive in their war on Afghanistan. But in my 
view, and in the view of many people, they are not as aggressive on the 
homeland part of this issue.''
    As the debate continues, the Nation's public health laboratories 
are struggling to analyze tests generated by the anthrax scare. Dr. 
O'Toole, of Johns Hopkins, said laboratory workers at the Centers for 
Disease Control and Prevention were ``literally sleeping in the lab,'' 
while public health departments in affected states were working around 
the clock to analyze suspicious powders.
    ``We've been doing this for a few weeks now and people are tired,'' 
Dr. O'Toole said. ``It is not sustainable over the long term. Public 
health has been so frayed and reduced in recent years that it is very 
hard to rise to the occasion.''
    There is a shortage of epidemiologists who are trained to recognize 
and investigate outbreaks of infectious disease, said Dr. Michael T. 
Osterholm, a professor of public health at the University of Minnesota 
who advises Mr. Thompson, the health secretary, on bioterrorism. ``Many 
health departments couldn't hire one,'' Dr. Osterholm said, ``even if 
they had the money.''
    So no matter how much money Congress appropriates, Dr. Osterholm 
said, the United States cannot prepare for bioterrorism overnight.
    ``It's going to be a multiyear building project,'' Dr. Osterholm 
said. ``That's what people have to understand. It's like a skyscraper. 
Even if you want to build it tomorrow, it's going to take time.''

    Mr. Bentsen. It was in response to a letter, or at least in 
part in response to a letter put out by the American Hospital 
Association, where they estimated that the cost of bringing the 
Nation's hospitals up to speed to deal with bioterrorism 
response would be about $11 billion-plus. I didn't read this 
article first thing Monday morning, because I was sitting at 
Baylor College of Medicine in Houston, and the head of the 
institution that I was sitting with had read it and mentioned 
it to me. All over this country, major hospitals and medical 
centers, including the Mayo Clinic, are in the process of 
figuring out what they would do and how they would respond to a 
bioterrorism attack.
    Where are we, and where has the Federal Government been in 
trying to deal with these issues? It is my understanding in the 
past we have had a research budget of about $200 million at the 
NIH and other funding at CDC, but have we taken any of the 
appropriate steps to ensure that the public health system is 
ready to address any sort of widespread bioterrorism attack, 
and what do you all estimate the costs will be?
    Mr. Walker. Well, Jan Heinrich, who is a director of in our 
health care practice, will come up and would like to briefly 
respond to what the government has done in the area of 
bioterrorism, and then I would like to come back and talk to 
you about infrastructure.
    Ms. Heinrich. On the public health side, it has only been 
recently that we have begun to reinvest in infrastructure that 
we need if, in fact, we are going to be able to respond 
adequately; that is our surveillance systems, our training so 
that we can recognize these biological agents. On the hospital 
systems side in the emergency rooms, I know there is a great 
deal of concern within the American hospital systems because 
all of our Federal programs have really been focused on 
efficiency and really cutting out the excess capacity. I think 
what we are hearing now is that we don't have that excess 
capacity, and so we have heard varying reports about what in 
fact it will cost us to expand emergency room capability and to 
expand hospital beds.
    Mr. Bentsen. Do you think that the $11 billion figure that 
AHA puts out is a ballpark figure?
    Ms. Heinrich. I would really want to look very carefully at 
that figure.
    Mr. Walker. I think there is a serious issue that goes 
beyond this that I would like to touch on. Based on all the 
work that GAO has done, even with the events of September 11 
there is significant excess physical infrastructure in a range 
of areas that we need to take a look at, and I would argue that 
because of the events of September 11, we now need to look at 
it quicker, because what we are going to have to do is to 
ensure the safety and security and the proper equipping of a 
number of facilities whether they be DOD, VA, postal service 
facilities. We are going to need to do that.
    We have significant excess physical plant right now and 
ultimately we are going to have to rationalize that physical 
plant. I would hope that we can think about accelerating the 
rationalization of that, because we are going to have to invest 
to safeguard that physical plant and properly equip and staff 
whatever physical plant we have in light of the events of 
September 11. I know there are a lot of people who are coming 
out now saying, we would end up having to use all the physical 
facilities and rooms that we have to address a potentially 
catastrophic event.
    We have to go back to the risk assessment. What is the 
likelihood that that is going to happen? Can we afford to pay 
for and staff for something that might have a 1 percent or less 
than 1 percent probability? These are some of the issues we 
have to address.
    Mr. Bentsen. Thank you, Mr. Chairman.
    Chairman Nussle. Thank you. I would invite Chairman 
Hamilton and Speaker Gingrich to the witness table. Like the 
GAO, the U.S. Commission on National Security/21st Century did 
not regard domestic use of weapons of mass destruction by 
terrorists as science fiction or as a threat that might be 20 
years in the future. So for your farsightedness and your 
willingness to do some heavy lifting on the Commission to begin 
the thought process at that time, hopefully far into the 
future--but as we know now not quite so--we are very grateful 
for your work product. We are grateful for your attendance here 
today.
    We will begin with Speaker Gingrich. Welcome back to the 
Budget Committee and to the Congress, and we look forward to 
your testimony.

STATEMENT OF HON. NEWT GINGRICH, FORMER SPEAKER OF THE HOUSE OF 
 REPRESENTATIVES, MEMBER, U.S. COMMISSION ON NATIONAL SECURITY/
                          21ST CENTURY

    Mr. Gingrich. Mr. Chairman, and Mr. Spratt and members, I 
am grateful to be here. Chairman Hamilton and I are very 
grateful you took the time to let us chat with you. Let me 
start for just 30 seconds and pick up on what General Walker 
started with, which is that this committee should, I think, 
take seriously; the notion that we have to rethink health care, 
rethink Social Security, have a profound increase in the value 
per dollar of government spending. DOD procurement would be the 
example that Mr. Gutknecht cited, where within 30 days we had 
generated a product in the private sector from a world-class 
institution that probably would have taken 10 years under 
normal processes.
    Fourth, I think we have to look at economic growth, because 
the difference over the 30 years you are citing between a 3 
percent average and a 2 percent average is a stunning multiple. 
I would say this committee ought to take those four zones as 
very profound areas of reform without which you cannot solve 
the problems that General Walker outlined.
    We on the Hart-Rudman Commission--which I commend President 
Clinton for having agreed to establish, and Secretary Cohen for 
having agreed to sponsor--reached three key conclusions I want 
to cite to you. The first is, as we reported in March, that we 
have to plan on the assumption that a weapon of mass 
destruction will be used in an American city and that we have 
to assume that in the next 25 years that is the number one 
threat to the United States.
    At the time we said it, I think a lot of news media thought 
it was either science fiction or irrelevant, but around 
September 12 they became more interested. I just want to 
emphasize what we cited was neither September the 11th nor the 
anthrax event. The anthrax event has involved 4 deaths and 17 
infections. September the 11th actually understressed the 
system in terms of casualties, because so many people 
tragically died in the buildings, they didn't need medical 
care. I would suggest to you, if you look at all the reports in 
the last 15 years, if you get a major biological problem, 
either a large anthrax, a reengineered smallpox, or a 
reengineered flu--the largest epidemic of the 20th century was 
flu in 1918. It killed more people than died in the 4 years of 
the First World War. So the flu can be, if properly engineered, 
an extraordinarily illness. You have to remember we may not 
have the correct vaccine, which is why buying 300 million units 
is probably the right thing to do. But we had better be 
building a brute force capacity to identify, analyze, and 
respond. We may have to maintain shadow factories that are 
capable of being converted rapidly, or factories that are paid 
to have a double capacity, because we may literally have to 
produce a brand new vaccine to a brand new engineered disease.
    These are very serious things. I agree they may only be 1 
percent occasions, but if you have a nuclear weapon go off in 
an American city, or if you have a major biological event, 
people in the next hearing are not going to say gee, you were 
really prudent in not worrying about that. I think it requires 
global systems, it requires using a large part of the National 
Guard, and it requires a significant investment.
    Let me also point out the second thing we said was a 
danger, after a weapon of mass destruction in an American city, 
was the failure of American math and science education and the 
failure to invest enough in science, and I would argue the 
tripling of the budget of the National Science Foundation. I 
don't care where you take the money from. Tripling the budget 
of the National Science Foundation is as big a national 
security investment as anything else you do, and insisting on 
measured productive math and science education is central to 
our survival. We said to a group, unanimously, this is a larger 
threat than any conceivable conventional war. I think that 
should sober anybody who cares about national security in terms 
of our education.
    Third, we concluded that there has to be a Homeland 
Security Agency, and our reason was simple. Based on the drug 
czar's experience, having a coordinated exhortation role is in 
the end futile. There has to be real power. Now, there are a 
lot of different ways to design that real power, but if you 
have 44 or 52 or 60 agencies after Governor Ridge leaves, after 
the President ceases to focus on this crisis, the next Homeland 
Security Director is going to be essentially impotent. 
Furthermore, because homeland security is central to the 
Congress, the Congress had better have a position which is 
accountable to the Congress. This should be a position which is 
approved by the Senate; it should be a position by which you 
could compel testimony; I think it is a very important issue.
    Let me say two last quick things. My personal bias is, as 
you do all your planning, looking at the charts that General 
Walker laid out, you can't get intelligence and national 
defense on a world basis for less than 4 percent of GDP; that 
every effort to try to do it is going to end up coming short, 
and then later you will wonder why that particular shortfall. I 
agree with what Mr. Spratt said: There are too many things like 
that we need to be doing that we are not right now.
    Lastly, I think the Congress right now should set a 
benchmark of September the 15th next year. You could do this in 
2 weeks. Set a benchmark of September 15 next year, assume two 
major crises, one nuclear and the other biological, and lay out 
what the United States should be capable of doing on that date. 
Because if we don't set right now a tough goal for September a 
year from now, then when it happens a year from now we will 
wonder why we are not capable. I hope it won't happen, but I 
think it is realistic to assume you could have a major problem 
in at least one city, and we could be 10 percent prepared if we 
don't cut through the red tape and the inertia and insist on a 
wartime kind of urgency.
    Chairman Nussle. Mr. Hamilton.

 STATEMENT OF HON. LEE H. HAMILTON, FORMER MEMBER OF CONGRESS, 
   MEMBER, U.S. COMMISSION ON NATIONAL SECURITY/21ST CENTURY

    Mr. Hamilton. Mr. Chairman and Mr. Spratt, thank you for 
the opportunity to testify.
    The Speaker was a little modest when he referred to the 
Commission. The idea of the Hart-Rudman Commission really 
originated with the Speaker--President Clinton, and Secretary 
Cohen made the appointments. We had a remarkable Commission, 
very broadly based--Republicans, Democrats, liberals, 
conservatives, across the board of the political spectrum. The 
unique thing about it was the unanimity of the recommendations. 
The principal point was in terms of conclusions that Americans 
will likely die on American soil, possibly in large numbers. 
That was written about a year ago, and it unfortunately turned 
out to be very prophetic.
    We also concluded that the Federal Government was very 
poorly organized to deal with the question of homeland security 
and mentioned, as the Chairman did a moment ago, the number of 
agencies that are involved. As a matter of fact, I think 43 
probably understates it. I think it is a good many more than 
that if you look at it carefully, and we said that the Federal 
Government had a very fragmented, ad hoc approach to the 
question of homeland security.
    Let me summarize very quickly some of the other 
recommendations and I will not go into any detail, just try to 
cover them as quickly as I can. The President had to develop a 
comprehensive strategy and I think that is underway now. The 
three elements to it are:
    Prevention. Preventing possible terrorist attacks from 
taking place. That is the best defense, of course.
    Protection. Protecting all kinds of critical infrastructure 
across this country.
    And, of course, the response mechanism for responding to a 
disaster after it strikes.
    We proposed, as the Speaker suggested, the National 
Homeland Security Agency. I will want to say a little more 
about that. The director would be a member of the Cabinet. He 
would be confirmed by the Senate. He would have his own budget 
and staff. The core of it would be what is today FEMA, but you 
would add the Customs Service, the Border Patrol, and the Coast 
Guard.
    We also made a recommendation with regard to the Congress, 
and we think the Congress is not very well organized either to 
deal with homeland security. The problem here is not just with 
the executive branch, but trying to explain to the Congress or 
testify before the Congress on homeland security is an 
enormously complicated task, because you split all over the 
place jurisdictions with regard to homeland security, and you 
have to get your act together in the United States Congress, 
just as clearly as the executive branch has to get its act 
together.
    Now, on the point of organization, the threshold question 
is how serious is the threat of terrorism to the national 
security? If you believe that is the number one threat to the 
United States, as the Commission unanimously believed, then it 
has enormous implications as to the way you organize the 
government and the way you allocate your resources. There are 
plenty of other threats to the national security, some of them 
very serious indeed. We would like to deal with all of them, 
put all the resources against each of them, but you can't do 
that. You have to establish priorities.
    If this is the number one threat, then you had better begin 
to allocate your budget and your resources and organize your 
government in such a way that you deal with the number one 
threat. At the moment, there are two schools of thought. One 
envisions White House Office, National Security Council, or the 
National Economic Council that has been put into place now by 
the President. Mr. Walker, I think, was exactly right when he 
said that is an excellent first step. I also agree with him 
that is not sufficient.
    The second approach, a Cabinet official, direct control 
over department, direct control over budget, direct control 
over staff. The Commission is pretty solid on this; we were 
very solid. We thought you needed a department of government 
with Cabinet status. Does the person in charge have the clout, 
does he have the money, does he have the staff to get things 
done? That is the key.
    Now, I think Governor Ridge, an excellent choice, will have 
total support of the President, good access to the President. 
But over the long term you have got to look at this problem 
beyond the Bush administration. You have got to look at it in 
terms of years, not in terms of a few months or even 4 years' 
time. I think it is terribly important, if you want to move 
this Federal bureaucracy, you have got to have someone in that 
position that has clout. You can't do it the balance of this 
year, you have got a heavy schedule for the remaining few 
weeks, but you certainly ought to be thinking about setting up 
a Cabinet agency when you come back.
    When Don Rumsfeld was the Secretary of Defense the first 
time, not this time, he made this statement on one occasion 
when he got into a conflict with the Intelligence Community. He 
said, ``if it is in my budget, I control it.'' That is a 
statement that every one of us can fully appreciate. If we are 
running the Defense Department, any other department, agency, 
if it's in our budget we would want to control it.
    That is precisely the problem that Governor Ridge is going 
to confront. He is going to be sitting around that table with a 
lot of very powerful actors in this town, as powerful as you 
can get around a single table, and the only way he is going to 
be able to move that bureaucracy over a period of time, 
Governor Ridge and his successors, will be to have his budget 
and to be able to control that budget.
    I know there is a lot of arguments here for coordination 
and we have to deal with a lot of problems through interagency 
coordination and cooperation. It is an important thing to do in 
ordinary times, but these are not ordinary times. This is a 
national emergency and we are at war, and the business of 
national homeland security is an urgent national priority.
    So I think--my time is concluded. You have got to look at 
this in terms of clout, in terms of budget, in terms of 
strategy, or in terms of staff. And the point that has been 
made by both the Speaker and Mr. Walker is this: If you want to 
leave the Congress out of the action, do it by Executive order. 
The National Security Adviser is tough to get up before this 
Congress. You cannot compel the National Security Adviser to 
come up here. They often cooperate, they are often very 
generous in that. If you are a department head, the Congress 
can compel him to be here and you can ask him the tough 
questions which it is your duty to do in your oversight 
responsibilities. If you want to leave the Congress out of all 
of this, just let it drift along for a period of years and 
months under an Executive order. If you want to put the 
Congress into the action, give it a statutory base.
    Chairman Nussle. I thank our witnesses. Mr. Sununu.
    Mr. Sununu. Thank you, Mr. Chairman. Thank you for joining 
us.
    I would like the panel members to address or at least begin 
by addressing in a little more detail one of the Commission 
recommendations dealing with establishing an independent Agency 
for Homeland Security. There is also a recommendation to 
establish an Assistant Secretary of Defense for Homeland 
Security. How would those two interact? And the proposal is to 
move Customs, Border Patrol and the Coast Guard into Homeland 
Security. Would they report within the Department of Defense to 
the Undersecretary, would they report to the Homeland Security 
Director, or are they one and the same?
    Mr. Hamilton. I think with respect to the Coast Guard, 
Border Patrol, and Customs, they would report to the director 
of the Homeland Security Agency. When you are dealing with the 
Federal Government with all of these cross-cutting 
responsibilities, it is literally impossible to bring 
everything under one person. We did not recommend that the 
intelligence functions be put under the director of Homeland 
Security. We did not recommend the defense functions--we kept 
that different. We did say that the DOD, as you have suggested, 
Mr. Sununu, should have an Assistant Secretary reporting 
directly to the Secretary of Defense on homeland security, 
which I think the Department of Defense does not have today. So 
we try to elevate it within the Department of----
    Mr. Sununu. What elements within DOD would that individual 
be responsible?
    Mr. Hamilton. I don't think I can respond to that other 
than to say those elements that have responsibility for 
homeland security defense. We did believe that the primary DOD 
agency or bureau that would have responsibility here would be 
the National Guard. The National Guard is in place. The 
infrastructure is in every State. They already perform 
functions that are very similar to what we are asking here. So 
that becomes the primary DOD body that you would deal with.
    Mr. Sununu. Speaker Gingrich, you talked a little bit about 
bioterrorism and, I guess, the scope of the threat; the 
technology that is out there that we would even have a 
difficult time imagining at this point, modified bugs, whether 
it is flu or smallpox or other. There are a number of key 
elements to dealing with a bioterrorism threat where I think 
there were probably--we could argue there are some weaknesses: 
the R&D side, developing vaccines and treatment; the 
distribution and logistics associated with providing vaccines 
and treatment where it might be needed; the first responders, 
their need for equipment and training and technology.
    My question is, is there a particular area here, or one 
that I haven't mentioned, where you see the greatest technical 
weakness or the greatest need for resources that we as a 
Congress ought to focus our attention first?
    Mr. Gingrich. That is a very good question and I am going 
to give you a very discouraging answer. If you go back and 
watch the movie Titanic, there is a fateful moment where the 
designer of the ship tells the heroine that he actually 
designed the ship to have the full number of lifeboats, but 
they didn't want to crowd the promenade so they only put half 
of them on, a decision which ultimately cost well over 1,000 
lives.
    Before the First World War, outside the professional 
military, nobody understood the change in scale, and you can 
read all sorts of books before the First World War that said no 
war could last more than 60 days because the economies would 
collapse, et cetera. Before the Second World War, to have 
suggested either the Holocaust and the deliberate massacre of 6 
million people or to have suggested nuclear weapons, or, for 
that matter, fire-bombing which actually killed more people 
than nuclear weapons, would have been unthinkable. People would 
have said that is not at all likely.
    You are in the same boat now. The challenge is to say to--
to just go back and have your staff put together the seven to 
ten best reports of the last 10 years on biological events and 
put it on a chart and stare at it. It probably won't occur. It 
is probably not really a threat. But the study that said a lay-
down by airplane of an aerosol anthrax over Washington would 
kill 1,100,000 people--look what 4 deaths and 17 total people 
involved did to this economy, to the Congress, to staffing, to 
buildings, and then imagine a serious event. We have not seen 
by the standard of our Commission a serious event yet.
    So I would just say to you, you have to look at all of it 
and be ruthless about the notion that you can't necessarily 
know what will hit you because we don't today understand 
biological knowledge. So you have got to have a very fast 
response time, which is why the breakthrough that Mr. Gutknecht 
mentioned was so important. I would say you have got to look at 
the whole system, because it is the piece that you don't fix 
that is going to kill a lot of people.
    Mr. Hamilton. If I may respond.
    Mr. Sununu. Please.
    Mr. Hamilton. The one that worries me most in the 
biological area is smallpox. Smallpox is, of course, 
exceedingly contagious. The American population, if you are 
under--I don't know the age--30, 40 years of age, you have not 
been vaccinated. If you have a breakout in smallpox you will 
have devastating numbers of dead from smallpox in the younger 
population. Those of us who are my age had a smallpox 
vaccination, and the percentages are that we would experience a 
very small number of deaths even though the vaccination was 
many, many years ago. Smallpox is the killer biological weapon.
    I agree with Mr. Spratt's comments earlier about nuclear 
weapons. That I would rank even higher probably in the total 
list.
    Mr. Sununu. Thank you.
    Mr. Walker. I think it is important to bring these 
together. First you have to look at a risk assessment. You have 
to do a comprehensive risk assessment; what is the spectrum of 
risk? I would like to piggyback on what Speaker Gingrich said. 
You may assess that the risk of a certain thing happening is 
not very high, but nonetheless we have got to be able to deal 
with it. But how you deal with it is important.
    For example, Speaker Gingrich talked about the fact that in 
order to address the adverse implications of a particular 
weapon of mass destruction in city X, maybe we should have a 
national capability that has the ability that can be moved to 
city X, because we don't know where city X will be. So, we need 
a national response team to respond very quickly. In the 
absence of looking at it that way, let me tell you how people 
are going to treat it. Every city and every department and 
agency will want to end up building their own infrastructure, 
which is totally irrational and unaffordable. So we have to do 
the risk assessment, set the priorities, and then figure out 
how best to respond to that risk. Certain things may be local, 
certain things may be regional, certain may be national, 
certain may be Federal.
    Mr. Hamilton. But we should begin now to vaccinate 
everybody in the country for smallpox.
    Mr. Sununu. Thank you.
    Chairman Nussle. Mr. Clement.
    Mr. Clement. Thank you, Mr. Chairman. This is a wonderful 
panel. All of you are great leaders and you have given us a lot 
of food for thought.
    General Walker, I will start with you first. You mentioned 
the role of government almost as if you were saying that you 
feel like your hands are tied right now when it comes to moving 
forward with effective oversight. Were you saying that?
    Mr. Walker. What I am saying is, that what is clear to me 
when you look at these numbers and you project them out is that 
in addition to entitlement reform--which Speaker Gingrich 
talked about--there are current and future priorities that 
Congress is going to want to fund and that the American people 
are going to want to fund and it would be prudent for it to 
fund. But, because of what is in the baseline right now, the 
numbers just don't work. Growing the economy obviously will 
help but it is not going to close the gap that we are talking 
about here. So if you want to close the gap that I showed 
between what current tax burdens will allow and what the 
projected spending is going to be. You are going to have to 
look at the base departments, agencies, programs, and 
activities; you are going to have to review, reassess and 
reprioritize. Some programs may be doing things that are 
worthwhile, but they are not generating decent results and you 
may have higher priorities that you want to be able to fund or 
need to be able to fund.
    In addition, with regard to homeland security, I am very 
seriously concerned about how you are going to conduct 
effective oversight and how we are going to help you do that 
unless this agency is a statutory agency.
    Mr. Clement. We could get into the position of being almost 
a drunken sailor, spending money as if there is no tomorrow, 
with no accountability, because we are spending it for national 
security or counterterrorism.
    Mr. Walker. It is amazing how many things can be cloaked 
under the rubric of national security or counterterrorism. I 
will just leave it at that.
    Mr. Clement. Speaker Gingrich, I know you can say more 
things in fewer words than any fellow I have ever worked with, 
even being a Georgian. That is pretty good, being a Tennesseean 
myself. I know you mentioned rethinking Social Security and 
health care. I could argue that is a national security, too, 
because if people don't have enough money to live on or if they 
don't have the proper health care, they can't survive either. 
That is national security. Am I wrong or right?
    Mr. Gingrich. Well, no. I think, first of all, President 
Eisenhower, who had a fair background in the military, always 
emphasized that financial security and financial strength were 
a key particular part of how we would ultimately defeat the 
Soviet Union. He was very frugal with defense spending and 
tough-minded about having a strong economy and a strong 
society. I think certainly you have to look at a range of 
issues where I would argue this committee, if you take General 
Walker's charts, which said even without the problems since 
September 11 there were certain inevitable long-term challenges 
you are faced with. I have spent most of the last 3 years 
looking at health care and I will say flatly, if we don't 
transform the health care system, you can't possibly make the 
current structure work when the baby boomers retire. It is 
going to fall apart. You go down a list of things. I think that 
is another hearing for another day.
    Your point is exactly right. For the long-term future of 
the country, there are Social Security issues, there are 
financial issues, there are health issues that are as profound 
for the country as national security, and unless they are all 
working, the country does not work. I think that is a more than 
fair point, which is why I would argue you want to think 
carefully and cleverly about as much of your civil defense 
being either volunteer or part time.
    Let me give you three quick examples. We ought to have a 
public health corps of volunteers so if you got to a biological 
event--in a city like New York, you can absorb 100,000 people 
dealing with smallpox. So you want those to be part-time 
volunteers who get trained twice a year and are doing it 
because there is a crisis like the World War II bomb shelter 
wardens were in Britain.
    Second, you probably want a civil defense system much like 
in the fifties, where FEMA would organize people so if you had 
a big nuclear event or a big bomb event, you could have people 
who could go to it.
    Third, I believe notionally--and I wouldn't defend the 
number precisely--but you would probably want 40 percent of the 
National Guard redirected to medical and construction 
challenges, which frankly the Guard hierarchy will probably 
fight, but for the country's future that is where you imbed it 
at lowest cost to have the local response capability.
    Mr. Clement. Mr. Hamilton, no one have I learned more from 
when it comes to international relations than you. You have 
become my mentor over the years. I want to ask you to diffuse 
the situation we have right now. Is there something that could 
break where we could have peace in the Middle East or between 
the Israelis and the Palestinians? I know we have Afghanistan 
to deal with right now, but knowing we are not going to get to 
zero risk, ever, as General Walker said, is that the key that 
unlocks the door if we truly are going to grasp terrorism 
today?
    Mr. Hamilton. No, I don't think it is a key that unlocks 
the door. Like it or not, the Arab countries today do in fact 
link the war on terrorism with progress in the Israeli-
Palestinian dispute. So it is a factor, but I think you could 
remove that very troublesome factor, the Palestinian-Israeli 
dispute, and you still will have the phenomenon of terrorism 
because it is much more deep-seated than just the Israeli-
Palestinian dispute.
    Mr. Clement. Thank you.
    Chairman Nussle. Mr. Thornberry.
    Mr. Thornberry. Thank you, Mr. Chairman, and I appreciate 
this hearing and those which are to follow. I agree with Mr. 
Spratt on the issue of nonproliferation, but I also believe 
that is but one example in our government where one can 
question whether our priorities are right, whether they have 
changed since September 11, and whether they are right going 
into the rest of the century. I think this committee has a role 
in helping focus on those priorities.
    I guess I would like to ask each of you to comment on two 
questions. One question is, it seems to me that the Hart-Rudman 
recommendations are not necessarily inconsistent with Governor 
Ridge's office. In other words, I see Governor Ridge, as 
described by the White House, as a national security adviser. 
The National Security Adviser has departments to implement this 
coordinated policy which he or she formulates, and it does seem 
to me that a Department of Homeland Security to implement at 
least those policies dealing with the border and cyberterrorism 
and emergency response makes some sense, so it is not 
inconsistent with Governor Ridge's position. Indeed, it could 
help him do his job better. If Governor Ridge is going around 
making sure the Border Patrol radios talk to the Customs 
Service radios, then he is functioning at the wrong level, but 
somebody has got to do it.
    General Walker, it seems to me that arrangement is not 
inconsistent with the principles you laid out, and I would like 
to know if anybody disagrees with that.
    My second question is more difficult. How do we impart this 
sense of urgency that is necessary to make the changes here and 
in the executive branch? I am circulating an editorial from USA 
Today from last week that basically says there is no way 
Congress is ever going to do the Hart-Rudman recommendations, 
because Congress will not step on toes here or the executive 
branch to rearrange. It is just too politically difficult. I 
agree with the Speaker, we have not yet gotten to the big 
event.
    How do we impart that sense of urgency in order to better 
prepare for that big event? I would like for each of you to 
give us some advice on how we can do that.
    Mr. Walker. First, with regard to the Office of Homeland 
Security, we issued this report which ironically came out very 
shortly after September 11, because we had done a lot of work 
before September 11 on combatting terrorism. In fact, we issued 
it on the day that the President came up here and spoke to the 
joint session of Congress, and the first recommendation was 
that they create an office similar to what he did the night 
that we issued the report. We obviously had talked to the 
administration several weeks in advance. It was a partial 
adoption. We were clear that we thought it needed to have a 
statutory basis, and that it would be preferable if it was a 
PAS appointment.
    Why? Two reasons. Number one, history has told me that 
whether you are in the public or private sector, if you don't 
have significant control over financial and human resources, if 
all you have is an outbox and not an inbox, you are not going 
to be effective over time.
    Number two, there is no question that Governor Ridge and 
President Bush know each other well, like each other, work 
effectively, and in this environment maybe there is a good 
chance that this model could work. However, that is looking at 
it on an individual basis, not an institutional basis, and I 
think that Congress needs to look at it on an institutional 
bases.
    Number three, I am very concerned if this office does not 
have a statutory basis, less about whether or not it is PAS or 
Cabinet level, if this office does not have a statutory basis. 
I care about the Congress and because we are an instrument in 
helping you to do your job. Some of the problems we have 
experienced already in conjunction with the energy task force 
and the Vice President, you are going to have problems and we 
are going to have problems getting access to information to 
help you do your job, and in an area like homeland security I 
would argue that is unacceptable to the American people.
    Mr. Gingrich. I agree with everything General Walker just 
said. I would simply add, on the issue of being a national 
security adviser, it is a profound misunderstanding of why the 
National Security Adviser matters. The National Security 
Adviser matters because the President of the United States 
talks with his or her counterparts all over the world virtually 
every day, and in order to do that, the National Security 
Adviser is the first person to brief them every day, and is 
with them at different times every day. That will never be true 
of a Homeland Security Office. They will never be comparable in 
centrality to the President.
    Second, we have got to decide whether we are going to be a 
comfortable country until the crisis, or a serious country. 
This is at the core of your urgency question. I think hearings 
matter. I think the Congress ought to hold a series of threat-
based hearings and then say OK, do we want to be the people who 
take the right steps before there is a catastrophe or would we 
rather just wait and hold the hearings after the catastrophe?
    There is a very real--not gigantic--but real possibility of 
something really bad happening and I think I agree with you, 
the reason people don't feel urgency is they are told over and 
over again by the government things are under control. This is 
not like Desert Storm. We are not sending professionals half a 
world away while we get to watch it on TV. This is a very 
complicated long-term struggle that has direct life-and-death 
implications at home. We are not today functioning that way. I 
think the President gets it. I think the Vice President gets 
it, I think the Secretary of Defense gets it. I am not sure, 
frankly, much beyond there that people have a sense of driving 
urgency that there could be a crisis tomorrow morning and we 
are not prepared for that crisis.
    Mr. Hamilton. I should say, first of all, that Mr. 
Thornberry recognized this problem far before his other 
colleagues did, and we on the National Security Commission are 
grateful to you for your recognition of that and your 
leadership. He was talking about this months and months ago, 
and I think has been an effective voice of leadership.
    I agree with your observation. There is nothing 
inconsistent here. The President deserves a lot of credit for 
moving this forward. He did what he had to do. He has created 
an Executive order and started the process. Now the Congress 
has to do what it is supposed to do. It is an evolving matter.
    I don't think there is a right or wrong way to deal with 
this organizational question necessarily. There may be a more 
effective way to do it than the other way, but whatever we do 
it is going to be an improvement over what we had before. I am 
sure of that.
    Secondly, on imparting a sense of urgency, let me make this 
observation. I think the people of this country today are in 
the grip of fear and they want information and they want 
leadership today, and the domestic situation proved more 
serious than our public officials initially indicated, I 
believe. This is a function of leadership. You have to disclose 
fully what you know and what you don't know. We don't know 
everything about anthrax. We have all learned, even the 
scientists have learned a lot about anthrax in the last few 
days. You have to avoid speculation. You have to make sure your 
facts are straight and you have to recommend specific steps 
that people can take. They are out there today, they hear all 
of you talking about it, they hear the President talking about 
how urgent the situation is and how great the risk is. My gosh, 
they had it demonstrated graphically on September 11. What they 
are really saying to themselves is, what do I need to do for 
myself and my family? You have got to give them some direction. 
You are the leaders. I think the President is making a 
genuinely good effort to do this, and I know Governor Ridge is.
    The President and Governor Ridge are not going to get it 
right every time. There are too many things we are not sure of 
here. So how do you impart the sense of urgency? That is your 
job. You are the leaders and the rest of us have to do the best 
we can to try to give you support.
    Chairman Nussle. Ms. McCarthy.
    Mrs. McCarthy. Thank you, and I find the testimony of 
everyone really extremely interesting. I agree with the sense 
of urgency. I don't know whether it is my nursing training--and 
I will be very honest with you--even when we were here without 
an office, and I thank you for sharing space, and I'm looking 
at my colleagues--everyone is saying like oh, this is nothing. 
It is something.
    On the health care needs, smallpox, I mean that is what we 
should be worrying about. You know, obviously we didn't get the 
message across on anthrax. An awful lot of people did know some 
things about it but not to the extent of what was happening. 
Buildings didn't have to be closed, in my opinion, because the 
spray at the beginning is usually depleted at that time. The 
other stuff would be negative or positive on the swabs. We 
spent so much money and time and fear among people, and we have 
to get that right and we have to have one spokesperson, as far 
as I am concerned, giving that education out there.
    I agree with you, Mr. Gingrich, that we have to start 
educating the people. They are scared. Yet when I give a speech 
and say we have a long haul ahead of us and we are going to 
have to be careful, and yet we are sending a message out there, 
``oh, go to the movies and everything,'' and that is fine 
because we have to keep the economy going, but I also happen to 
agree that it is almost like we are taking care of children. We 
don't want them to know too much, and yet they know a lot more, 
and then their fears are built on their imagination and that is 
what we are seeing with our adults, our families.
    As far as home security, we have to get this right and that 
is going to be the toughest job, in my opinion, here in 
Congress, because it is going to become political, and you know 
it and everyone else knows it. Once politics get involved in 
what we are trying to do as far as the right thing, 
unfortunately I think that we might lose in the end. I happen 
to think there is a sense of urgency. I happen to think that 
something is going to happen whether it is next week, whether 
it is next month, and we are not prepared for it. We are not, 
and that is a sad thing, but we will learn from it. I hope they 
listen to you when we look to see how to set up the correct 
formula for home security. I hope everyone works together on 
it.
    This is the biggest challenge this Nation has faced in a 
long, long time. Other nations are going to be looking toward 
us to see if we do it right. So we have a lot at stake in this. 
The biggest problem, as far as I am concerned with the budget 
that we are talking about is taxes. Whether you agree that we 
need tax stimulus or not, our moneys right now should be going 
for national security and everything else has to be put on 
hold, and just at the basic line as far as I am concerned.
    Mr. Walker. Real quickly on that, Ms. McCarthy. First, 
after these events happened, I thought back to my undergraduate 
days where I was taught about Maslov's theory. Some of us might 
remember that. At the base of his hiearachy of needs was self-
preservation; at the pinnacle was self-actualization. I would 
argue that prior to September 11, a lot of people in this 
country were focused on the word ``me'' and self-actualization; 
how can I maximize what I get out of life? Today there are a 
lot of people focused on self-preservation, which is a concern, 
but they are also focused on the word ``we,'' both family and 
country, which is a positive.
    The other side is--I agree with Mr. Hamilton, because of 
the fact that if you look at risk with regard to smallpox from 
the standpoint of mortality and its infectious nature. It is a 
very serious issue. Even those of us who had the vaccine, 
evidence notes that if it was years ago, it is not likely to be 
as effective.
    Mrs. McCarthy. Actually after 10 years it doesn't have any 
effect. I was lucky. After nursing school, we had to get 
another shot. So I had it twice in my life. 1964 was the last 
time. 1974 was when they gave the last shots, if I am not 
mistaken.
    Mr. Gingrich. Can I just comment, because I think you put 
your finger on something very important. We are very likely to 
have overreacted to the relatively small anthrax event and be 
underreacting to the scale of the threat simultaneously. So we 
are spending an enormous amount of energy running in circles 
and not nearly enough energy on tough, deep decisions that 
would enable this country to survive a serious problem.
    Mrs. McCarthy. Thank you.
    Chairman Nussle. Mr. Hastings.
    Mr. Hastings. Thank you, Mr. Chairman. I found the 
testimony of all three of you to be fascinating. It probably 
wouldn't have been as fascinating if it were held on September 
the 10th, but nevertheless that is where we are.
    I guess one observation--I would like to ask all three of 
you. General Walker, you were talking about the idea that it 
will never get to zero risk, you can never attain that 100 
percent. Yet at the same time, you are all talking about an 
inventory of some sort of risk assessment on a variety of 
areas, and I haven't fully looked into your reports, so I can't 
respond to everything that you have suggested. The question 
then becomes: If you can't get zero risk, at what percentage is 
it acceptable to be on guard? Then in that process, what do we 
do or how do we respond to maybe the threats that different 
political philosophies will have as it relates to us in a free 
and open society?
    So I invite you, if hopefully understand what I am saying, 
to respond to that, to give us some sort of guidance on that.
    Mr. Gingrich. Let me draw a distinction. I don't think you 
would want to live in a society that was so tightened down that 
you had no risk of anything bad happening, just as people don't 
want to buy a car which is so heavy and structured that nothing 
could ever hurt you. It would be a tank. It would be effective, 
but it wouldn't sell very much.
    I think the biggest challenge from a homeland security 
standpoint is to think through the responses and, as General 
Walker said, to design them to be mobile and fluid and, as we 
have argued, to make them as much as possible Reserve, Guard, 
and civil defense oriented, so that you recognize most of the 
time you don't need them, but to actually build them to be 
pretty robust. Because if you have a big problem--and a large 
anthrax exposure would be a big problem, smallpox or another 
engineered contagion would be a big problem, one or more 
nuclear weapons would be a big problem--what you want to have 
is enough response capability that you could smother a problem 
of that size. You want to build it in such a way that most of 
the time you are not paying for it to be on stand-by. Most of 
the time it is a reserve capability built into the society, 
rather than a full-time agency standing by, waiting for what 
could be a once-in-30-year event. The same thing as carrying 
lifeboats, what you don't want to do is find out you are at the 
once-in-30-year event and you have no capacity to respond.
    Mr. Hamilton. I think your question, Mr. Hastings, is 
really on the mark because it raises the most difficult task I 
think the President and Governor Ridge confront, and that is 
the question of priorities. You have got the nuclear attack, 
you have got the biological, you have got the chemical, you 
have got conventional. I think what they have to do is 
determine what kind of attacks are most likely and what can be 
done to prevent those attacks.
    Now, that is a very, very tough call because what you would 
like to do is say, OK, we are going to defend against all of 
it, and we have got enough money to do it. But we don't have. 
Where do you put your resources? And that is tough. Most people 
now put chemical down the list, for example, but it was a 
chemical attack that blew up the building in Oklahoma City. The 
materials used in that attack were the materials that are used 
every day on the farm, so you can't just ignore that.
    I would put the nuclear first. I would put biological and, 
as I have indicated, smallpox at the head of the list. There 
are about eight or nine, what do you call them, pathogens or 
whatever; and I would rank them, and then I would begin to 
identify what kind of things should be done to prevent each 
one. You may get the list wrong because you can't predict it. I 
have sat in on 100 meetings on terrorism. Nobody at any time 
ever suggested to me that somebody would fly a jet airliner 
into the Trade Towers or the Pentagon. So you can't hit it 
every time, but the tough job is priorities and allocating 
resources.
    Mr. Walker. A couple things that I think are important. 
First, there is no single right answer. There is no minimum 
acceptable percentage. You have to do a risk assessment. You 
have to assess your threats, vulnerabilities, their 
criticality, and you have to compare that against the resources 
that you have. Governor Ridge is the one who has to be 
responsible for doing that for the executive branch. I would 
argue that since the Congress appropriates the money and since 
the Congress is also going to be accountable for what happens 
or what doesn't happen, all the more reason why it is important 
that you have the ability to conduct effective oversight, not 
micromanagement, with regard to these activities. So that comes 
back to the bulk of my testimony. Thank you.
    Mr. Hastings. That leads to a follow-up here. I found your 
testimony on figure 2 of page 10 of the spikes that you had of 
the deficits throughout our history, they all showed up in 
times of war. Maybe there is a study on this elsewhere but you 
don't mention it--at least what I read here--is what I call the 
``unintended consequences'' of other legislation. For example, 
we are still trying to repeal the telephone tax of 1898 that is 
still on the books--but also because of the wage and price 
controls of the Second World War, which led to health care 
being delivered by employers, an ``unintended consequence.''
    Is there a study that you have within GAO where you have 
looked at statutes that were passed during this period of time 
that may still be on the books that have had consequences that 
are contrary or causing this problem right now? I mean, you put 
up the Medicare chart. You probably could have put Medicaid up 
there. And I would suggest that part of that is at least linked 
to the policies of the Second World War.
    Mr. Walker. We haven't done that. If you look on page 10, 
figure 2, that talks about deficits and surpluses as a 
percentage of GDP and properly points out that in times of war 
or serious economic recession or depression, we have had 
deficits, but we have come out of it.
    There are two things that we face now that we never faced 
before. Number one, demographics are working against us, not 
for us; and number two, health care costs are out of control. 
The system is fundamentally broken. So, therefore, we didn't 
face those issues, and we better do something about them.
    Mr. Hastings. Thank you, Mr. Chairman.
    Chairman Nussle. Thank you.
    Mrs. Clayton.
    Mrs. Clayton. Thank you, Mr. Chairman, for having the 
hearing. I would like to thank the panelists for their 
thoughtful presentations. Also, it is appreciative in both 
instances that your studying and deliberation was prior to the 
events of September 11, and you have been giving a considerable 
amount of thought to it.
    I was struck by the Commission's report on the national 
security's preface. It says that the U.S. Commission on 
National Security 21st Century was born more than 2 years ago 
out of the conviction that the entire range of the U.S. 
national security policies and processes required reexamination 
in light of the new circumstances. The question is that when 
you looked at the stretch, your more extensive one gave all 
kinds of reasons for the threat. Yet, when we look at 
responding to the threats, we correctly looked at how do we 
need to make an assessment, but also, how do we detect and stop 
it. We do not look at the causes of which we can prevent these 
threatening events from occuring.
    You describe the new circumstances as the advancement of 
information, the globalization, the quick access to 
information, the lack of stability in certain countries. You 
describe also in some instances about our failure to invest in 
science and education because we are not possibly keeping up. 
When I look at the recommendations initially from Mr. Walker, 
as well as the initial part from the Commission, Mr. Walker 
doesn't mention them at all. You put those kind of 
recommendations in the back of your report, investment in 
science and education--not the back, but it is not the first.
    My question is, is it important to talk about the root 
causes of these, or is it important to talk about the 
organization and the leadership? Back to the question of how 
urgent is urgent; who describes the urgency of the situation? 
Is it the talking heads on the media who describes it? That is 
why we have the anthrax anxiety rather than having all of the 
anthrax facts. And when we also begin to try to examine the 
structure at the lower level of our health department and try 
to get them engaged in it, they are fearful because the science 
is changing so fast.
    We do need homeland security. It is very, very important. 
It is the same threats in part that have threatened us abroad 
that is really threatening us here. The difference is that we 
as Americans have never suffered from that. So now we are now 
trying to find out how the current infrastructure can respond 
to these new circumstances. So it seems to me that we also have 
to not only create, but coordinate one who can bring all these 
little boxes together to respond to it, but to think of how we 
should respond to that. In fact, one of you talked about a new 
paradigm of thinking. I have not heard enough today to make me 
feel that I understand the basis of the recommendations of the 
U.S. Commission's report. I did read some part of it earlier 
when it first came out with the commissioners talking about it, 
because I was interested in the science and education component 
of it, and there was a lot of emphasis on that. Can you speak 
to those?
    Mr. Gingrich. When we first sat down with the President to 
create the Commission, our point was that the world was 
changing so dramatically that we wanted an unconstrained look 
at the future. So it doesn't start with defense. It doesn't 
start with intelligence. It doesn't start with any narrow 
position. It says, what is going to affect American security in 
the next 25 years. In that sense it was the broadest commission 
since 1947. As Mr. Hamilton pointed out, it was one that was 
very bipartisan and very serious and took us the 3 years to 
think these things through.
    As I pointed out earlier, I thought it was remarkable the 
Commission on National Security would list science and math and 
science education as the number two problem, and every 
commission member signed off on it. This is a bigger threat 
that any conceivable conventional war. In that sense there is a 
root challenge that we tried to highlight. I know you were very 
helpful. One is, I believe, the long-term overseas threats we 
are dealing with are vastly beyond al Qaeda and bin Laden and 
require a very profound look at how we encourage modernity and 
how we encourage the rise of states that are compatible with 
the world we live in. It is a much harder problem than we have 
dealt with, and it is a topic I would be glad to talk to you 
about sometime.
    Second, when you start talking about the civil defense of 
the future, I believe the Internet, the capacity to reach every 
single doctor, including every retired doctor, every single 
nurse, including retired nurses, if you have planning in 
advance, you could have a web page that was highly 
authoritative that the National Institutes of Health and the 
Centers for Disease Control jointly produced that was exactly 
accurate, that gave you the most accurate information as of 3 
minutes ago. People could build a high sense of certainty. That 
requires a willingness to cut through the baloney of the 
current bureaucracies and the current pork barrel and the 
current unwillingness to reach outside normal institutions, 
which in part goes back to the earlier question that was raised 
about the sense of urgency.
    We are still behaving as though politics as usual and 
bureaucratic infighting as usual is tolerable, and is a very 
real risk that we are going to kill a lot of Americans, because 
we can't get people to understand we are in a modern world with 
modern technologies, and those technologies cut across all of 
the bureaucracies and create totally new capabilities if you 
organize around them instead of cutting them off by your 
bureaucratic channels.
    Mr. Hamilton. I might say a word, Mrs. Clayton, about why 
the Commission reached the conclusion it did with respect to 
Americans dying on American soil. You raised the question of 
root causes. We went to 28 different countries. One of the 
things we found there was resentment and hostility against the 
United States, not just in countries that are adversaries of 
ours, but almost every country. Now, sometimes that was 
expressed more strongly than others. Sometimes there was a deep 
hostility, but always a resentment, and we came to recognize 
that though it is hard for us to believe in this country, an 
awful lot of people in this world have grudges against us, some 
of them to the extent that they want to kill us and kill 
innocent people.
    Secondly, we determined that the terrorists have--and this 
is obvious, I guess--greatly expanded their capabilities and 
their sophistication in using those capabilities. Third, we 
found that the American communities are very vulnerable. You 
put all of this together, and we said terrorism is the number 
one threat.
    Now, your question about root causes or organization or 
leadership, here I move into an area that is admittedly 
controversial, but I do believe myself that to deal with 
terrorism, you have to look at the question of root causes. I 
don't want to suggest for a moment that that is easy to do. I 
know how difficult it is to deal with those problems, but I 
think we have to look at the reasons why people turn to 
terrorism, and we have to understand that there is a lot of 
misery, and there is a lot of despair. There is a lot of 
hopelessness. There are a lot of governments out there that 
just are not responsive to the needs of their people and who 
serve only a very few people in the country, and that is part 
of why people turn to terrorism.
    Now, I don't suggest for a moment we can deal with that 
easily. I know how complicated that is. On the other hand, you 
have to be sensitive, I think, to it and have to try to 
understand this phenomenon of terrorism better than we do.
    Why do these people do these things? A partial answer is 
that foreign policy has consequences. It has been the unanimous 
view of every Member of Congress I have known, every President 
that I have known that the United States should put forces in 
Saudi Arabia. I have never, ever heard a speech against it. 
That is what triggered Osama bin Laden. What really made him 
mad was American forces' presence in Saudi Arabia. From our 
standpoint, that is a given. We have to have forces there to 
protect the supply of oil. From his standpoint, he sees it as 
defiling everything that he holds sacred.
    Mrs. Clayton. One final question, please.
    Mr. Gutknecht [presiding]. There are three other members 
who would like to ask questions.
    Next we have the gentleman from Florida Mr. Putnam.
    Mr. Putnam. Thank you, Mr. Chairman.
    I read the report, and I think General Boyd did an 
outstanding job as your Executive Director for that Commission. 
And quite honestly, I am a little bit envious of the 
opportunities that you all had to participate in this and deal 
with the best epidemiologists and the best demographers and the 
best sociologists and the best educators and the best foreign 
policy folks in every possible region of the world to come up 
with a broad-based, comprehensive plan in dealing with 
technology and everything all over the map.
    One of the things that you highlighted in the report that 
you have just mentioned, Mr. Hamilton, is that one of the 
greatest threats the United States faces in the next decade is 
resentment. You said that the Nation was not prepared for a 
terrorist attack on its own soil. Then you took it a step 
further and then said not only is the Nation not prepared, but 
it is less prepared than it thinks it is.
    How has the reaction of the United States to the attacks in 
New York and Washington fit within your expectations for the 
American's public's response?
    Mr. Hamilton. I must say I have been favorably impressed. 
As I look at the response in New York City, which was the 
principal focus of the attack, it was better than I would have 
anticipated--the manner in which they dealt with that horrible 
tragedy. As I see, what I think is happening across the country 
now is every community says, well, my hospital prepared to deal 
with an attack in my hometown. I am encouraged by this, and I 
think the President deserves credit in alerting the country to 
it.
    I don't want to be Pollyanna-ish about this. We have a 
long, long way to go to be prepared, but September 11 has had a 
profound impact on the American people, and I think that we are 
seeing the American people respond as we would expect them to, 
very constructively and favorably. Overall I have been well 
impressed with the way they have responded.
    Mr. Gingrich. I guess I want to agree, but with a very deep 
condition. I draw a distinction between how people responded to 
the World Trade Center and how they responded to anthrax, 
because there have been very different responses so far. If we 
had had a really big attack, I think the odds-on even money, we 
would be in a total mess. The weapons of mass destruction is a 
totally different event than even the World Trade Center, which 
was a confinable and definable event in one small part of New 
York City. It was not an event that had a 2, 3, or 4-mile 
radius with all sorts of secondary and tertiary damage.
    Second, if we had been hit by a wave of attacks every other 
day for a week, we would have been in a totally different 
situation.
    And third, if we get hit by a biological on a big scale, 
whether it is infectious or it is simply widely disbursed 
aerosols, we will be in a different situation.
    I would say the American people have responded in a very 
positive way to a threat that is very real, but we should not 
in any way underestimate how rapidly this system would break 
down in its current structures if we were hit by a really 
serious attack.
    Mr. Walker. First I think the U.S. has always done a great 
job in responding to crises. Both at the Pentagon and in New 
York City, people came together to do what had to be done, 
whether they worked for the Federal, State, local government, 
whether they were public sector, private sector or not-for-
profit sector. It is amazing. From that standpoint I think it 
is a positive.
    Personally, I have been disappointed with regard to the 
public's reaction with regard to the anthrax situation. I think 
there has been more fear and more concern and more of a 
potentially emotional adverse reaction than potentially should 
be justified. We haven't done enough to really focus on some of 
the other areas, whether it be smallpox or whatever else that 
could, frankly, have more profound with regard to the 
implications.
    In summery, I have a positive view on crisis management 
response and was disappointed with regard to the reaction to 
the real nature and extent of the threat for anthrax. Let us 
hope we can end up moving forward from here.
    Mr. Putnam. Recognizing that the psychology--the motivation 
of these terrorists and your focus, quite understandably, on 
low-risk, high-consequence events, how much attention or focus 
did the Commission have on low-risk, low-casualty types of low-
tech terrorist events that would have a fundamental impact on 
public confidence, food safety, food supply, quality of public 
health, things of that nature, which would have much less of an 
impact than a nuclear weapon, but tremendous economic and 
psychological ramifications?
    Mr. Hamilton. Mr. Putnam, I think we just didn't go into 
that kind of detail. We did not try to speculate on which types 
of terrorist attacks would be employed by the terrorists. I 
don't recall extensive discussions as to, for example, 
poisoning the American food supply.
    Mr. Putnam. Thank you.
    Mr. Gutknecht. Mr. Kirk.
    Mr. Kirk. Thank you. Just ask a rhetorical question. Can we 
have Social Security without national security? If a bomb hit 
the Social Security Administration, would we be able to secure 
the future retirement of Americans? Or maybe what happened to 
the social security system of Poland as the German Army swept 
over with their plains. We are not used to domestic damage in 
the United States. When you look at the bloody destruction of 
France or Britain in the last wars, this is something that 
passed us by, something the United States has not seen since 
1865 on a large scale.
    I am worried about your chart, General Walker, about how 
debt can threaten democracy, that we have seen various French 
Republics vote themselves into debt, depression and 
dictatorship by transferring such a huge burden onto a future 
generation.
    So I wonder if the panel can comment on that, that we 
haven't suffered domestic damage before. It lifts the costs by 
quantum levels above the damage that we delivered against 
Germany or Japan because we were not being hit back. How can we 
conduct a vast social program if a foreign army is able to 
destroy large amounts of real estate in our country? What about 
a vast amount of debt? I am wondering if you could give us for 
the record a comparison with huge levels of debt that other 
countries have run up in the past and what happened to their 
political dynamic.
    Mr. Walker. Let me try to reinforce a couple of points from 
my testimony. It is clear that, with regard to today, that 
Congress is going to have to respond to the effects of 
September 11, but it is also clear that before September 11 we 
had a big problem. Now it is a much bigger problem that we have 
got to figure out how to deal with, and it is a structural 
problem. It is a structural problem that should cause us to 
reexamine what government does and how government does business 
in the context of how the world has changed in the last 20 
years and how it is going to change even more in the future. I 
don't think we have done that.
    Mr. Kirk. Did you perceive the key point of where we reach 
such a level of debt that people won't buy it?
    Mr. Walker. Theoretically that is possible. We are not 
close to that at this point in time. One of the issues you have 
to ask yourself, it is not just the level of debt, it is the 
level of tax burden and the level of flexibility that the 
Congress will have to make choices on discretionary programs 
and for future generations to make choices about what they want 
government to do.
    That is part of the problem. Mandatory spending has gone 
from one-third of the Federal budget when Kennedy was President 
to two-thirds now, and it is getting worse. So it is a 
combination of all these things that I think represent a risk.
    Mr. Gingrich. If I could, let me put it in a little 
different context. I think we have some real problems. I think 
we have some real problems in national security. I think we 
have some real problems structurally, particularly as it 
relates to health, Social Security and the core and competency 
of the government as a bureaucratic delivery system that is now 
increasingly out of date with the way we organize to do things 
in the rest of society.
    I am strategically a 100 percent optimist. Gil Gutknecht 
years ago gave me a study of the 1st Minnesota, which took 82 
percent casualties at Gettysburg, stopping the last great 
charge that might have broken the Union. Chairman Nussle and I 
used to participate in a period of seeming hopelessness when we 
had this fantasy that you could not only have a change of 40 
years power structure in the Congress, but you could balance 
the budget, reform welfare and do a whole range of fantasies 
that people often laughed at us about.
    This is a country which emerged on the edge of a continent; 
defeated the most powerful nation in the world in order to 
become a country; had a very restrictive President who 
personified limited government--Jefferson--who sent the Marines 
to Tripoli, where part of their song comes from, bought all of 
the Louisiana territory, dramatically expanded the Nation. We 
survived the Civil War. We survived Imperial Germany. We 
defeated Fascist Italy, Nazi Germany and Imperial Japan 
simultaneously, and we outlasted the Soviet Union in a 45-year 
conflict that was strategically one of the most profound and 
brilliant campaigns ever fought.
    If you were asking my bet, my bet is we will reform Social 
Security. We will reform health care. We will defeat terrorism. 
We will complete the job of modernizing the underdeveloped 
world. Your grandchildren will live in a country and on a 
planet that is remarkably prosperous, healthy and safe. But it 
takes your generation now having the same courage as the 1st 
Minnesota or the same courage as that band of people in past 
generations, and Chairman Hamilton will agree. We have seen 
bleak moments, and there were periods when the Congress was 
confused. We cheerfully participated in the confusion. But over 
time the system does do a remarkable job of forcing very big 
reforms.
    Mr. Kirk. Thank you, Mr. Chairman.
    Chairman Nussle. In that context, first of all, thank you 
for all of the substantive discussion we have had today.
    I would like to turn to process for a moment because the 
Budget Committee, Mr. Speaker, is where much of those reforms 
begin in setting the predicate and determining so much of the 
process that put us on the track to at least the most recent 
reforms. Let me ask your opinion as well as Chairman Hamilton, 
who also has a very distinguished career as a chairman of a 
committee, your advice to me and to Mr. Spratt and the 
committee members here as we begin to formulate the budget for 
2003 and try to take into consideration all of these very 
important matters, juxtaposed with the other challenges, health 
care, Social Security, how do we do it? What is your 
recommendation to us making these big changes? We are going to 
start that process. If it isn't successfully started here, it 
may not begin at all. So what would be your recommendation on 
how we organize ourselves and this committee to change the 
budget paradigm for 2003?
    Mr. Gingrich. Well, if I might, first of all, thank you for 
inviting us. And let me say I think you are doing exactly what 
this committee ought to do, which is to intellectually look at 
the totality, because that is the one great virtue this 
committee has the over the entire rest of the House and the 
rest of the institution.
    I will go back to what I said earlier. I think this 
committee ought to look at the total reform of health care, not 
just the pieces, not just Medicare, but the total structure of 
how we deal with health in America, because if you get another 
doubling of GDP for health, we won't be able to afford anything 
not just in government, it will have a profoundly distorting 
effect, and it is mostly unnecessary. We can find ways to do 
that.
    Second, I do think you ought to look at retirement 
security, because you have to cope with the scale of the baby 
boomer generation and the burden that if it is not done 
correctly, it will be on their children.
    Third, I think there is a need for a profound rethinking of 
how government operates. If you look at the Ford Motor Company 
now laying off 20 percent of its white collar employees, look 
at all the different efforts to rationalize, modernize, 
downsize, make more productive, and then you look at the 
bureaucracies at the State, Federal and local level, they are 
just unconscionable. And all the bureaucracies will explain to 
you why they can't change.
    I want to cite one example that ought to be a case study. 
The Indian Trust Fund is a multibillion-dollar fiasco that it 
would be a comedy if it weren't so tragic. Just take that one 
example where the taxpayers end up on the hook for billions of 
dollars for a process run by thousands of bureaucrats, run 
badly, that would be outsourced to an agency like Schwab or 
Merrill Lynch. There are hundreds of agencies that handle this 
kind of information without scandal. In the Federal Government, 
the answer to a scandal is to double the number of people 
engaged in the scandal.
    I think you have to really look at a profound rethinking of 
the structure of government because you cannot micromanage your 
way through these systems. I would say that before September 
11, Secretary Rumsfeld is moving in the right direction with 
enormous opposition, but he needs a profound overhaul of the 
procurement system, the management system and the R&D system of 
defense as a predicate to being able to effectively transform 
the defense system. That is the scale of change I think you 
have got to be looking at. This committee ought to try to 
contextualize all the budget decisions in terms of these very 
large changes.
    Mr. Hamilton. Mr. Chairman, I don't think I can give you 
much advice. The Commission led by Senators Rudman and Hart had 
the easy job in a sense. We are looking at the fairly narrow 
question of national security. We didn't have to worry about 
money. You have to worry about the money, and you have to worry 
about lots of things other than national security narrowly 
defined. We all know that the toughest job in government is 
setting priorities, but if there is anyplace in the world where 
that ought to be done it is in the Budget Committee. That is 
why you were established, to look at the big picture, as the 
Speaker said a moment ago, and to establish the priorities for 
the American people in light of the resources that are 
available.
    Let me just conclude with this. When I first came to the 
Congress, I was in a room about two or three doors down and 
listened to then New York Times bureau chief Scottie Reston. He 
said, ``Always take time in the Congress to put your feet up on 
the table and to look out the window and ask yourself what is 
good for the country.'' There are so many things that press 
upon you as a Member of Congress every single day, so many 
people after you, so many groups that want to get your ear, and 
that is good because it gives you a lot of good information. 
Somewhere along the line every Member of Congress has to put 
their feet up on the table, so to speak, look out the window, 
take time to reflect and to think and to be honest with 
yourself, what are the most important things that this country 
needs to be doing at the moment. If you do that, you will not 
hit it right every time, and you will not always persuade your 
colleagues that you are right, but you are at least approaching 
it in the right way.
    Mr. Walker. Two words and some examples: leadership and 
stewardship. We need leadership to focus on what should the 
priorities be, what should government be doing, how should 
government be doing business today and tomorrow; and secondly, 
there needs to be stewardship to think about the long-term 
implications of decisions that are made today, both actions and 
inaction.
    One of the problems you have right now is you are flying 
without instruments. Where are your metrics? Should you 
establish some type of metrics as to, for example, debt as a 
percentage of GDP; mandatory spending as a percentage of the 
overall budget? What are not only the short-range implications 
of actions that are taken today, what are the implications 
beyond 10 years, because guess what? The first baby boomer 
doesn't reach 65 until 11 years from now, and the crest of the 
wave doesn't come until about 2016. We don't live on a flat 
Earth, so we can't cut our budget view off 10 years from now.
     Setting priorities is tough work. Changing how government 
does business is tough work. But this committee is uniquely 
positioned. Along with the Government Reform Committee to try 
to track the issues about how government does business.
    Secretary Rumsfeld ironically on September 10 had an 
historic speech in which he announced an agenda to reform DOD's 
bureaucracy, and we have been working very closely with the 
Secretary and others to try correct long standing problems. 
Needless to say, that is no longer as high a priority today, 
but that was an example of the type of courage and conviction 
it is going to take. It is going to take years, but this 
committee and other committees are going to help make it 
happen.
    Chairman Nussle. Well, none of that advice was very 
helpful--no, I appreciate that. There is obviously a lot of 
work that we are going to have to do. It is a different world, 
and the Budget Committee will be the first step in that 
process. I appreciate the comments, as sobering as they are. I 
think they are realistic, and they are given straightforward 
with a lot of heart of true patriots. I have no doubt that you 
will continue to be in touch with us as we continue to navigate 
these uncharted waters.
    With that, if there aren't any other questions for this 
panel, I appreciate your time today, and this committee will 
stand in recess.
    [Whereupon, at 3:30 p.m., the committee was adjourned.]