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



                 TREASURY, POSTAL SERVICE, AND GENERAL

                     GOVERNMENT APPROPRIATIONS FOR

                            FISCAL YEAR 2003

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS
                             SECOND SESSION
                                ________
  SUBCOMMITTEE ON THE TREASURY, POSTAL SERVICE, AND GENERAL GOVERNMENT 
                             APPROPRIATIONS
                ERNEST J. ISTOOK, Jr., Oklahoma, Chairman
 FRANK R. WOLF, Virginia             STENY H. HOYER, Maryland
 ANNE M. NORTHUP, Kentucky           CARRIE P. MEEK, Florida
 JOHN E. SUNUNU, New Hampshire       DAVID E. PRICE, North Carolina
 JOHN E. PETERSON, Pennsylvania      STEVEN R. ROTHMAN, New Jersey
 TODD TIAHRT, Kansas                 PETER J. VISCLOSKY, Indiana   
 JOHN E. SWEENEY, New York
 DON SHERWOOD, Pennsylvania         
                          
 NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
   Michelle Mrdeza, Jeff Ashford, Kurt Dodd, Walter Hearne, and Tammy 
                                Hughes,
                            Staff Assistants
                                ________
                                 PART 3

                  EXECUTIVE OFFICE OF THE PRESIDENT AND
                   FUNDS APPROPRIATED TO THE PRESIDENT
                                   AND
                          INDEPENDENT AGENCIES

                              

                                ________
         Printed for the use of the Committee on Appropriations
                                ________
                     U.S. GOVERNMENT PRINTING OFFICE
 80-059                     WASHINGTON : 2002




                      COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                  DAVID R. OBEY, Wisconsin
 JERRY LEWIS, California             JOHN P. MURTHA, Pennsylvania
 HAROLD ROGERS, Kentucky             NORMAN D. DICKS, Washington
 JOE SKEEN, New Mexico               MARTIN OLAV SABO, Minnesota
 FRANK R. WOLF, Virginia             STENY H. HOYER, Maryland
 TOM DeLAY, Texas                    ALAN B. MOLLOHAN, West Virginia
 JIM KOLBE, Arizona                  MARCY KAPTUR, Ohio
 SONNY CALLAHAN, Alabama             NANCY PELOSI, California
 JAMES T. WALSH, New York            PETER J. VISCLOSKY, Indiana
 CHARLES H. TAYLOR, North Carolina   NITA M. LOWEY, New York
 DAVID L. HOBSON, Ohio               JOSE E. SERRANO, New York
 ERNEST J. ISTOOK, Jr., Oklahoma     ROSA L. DeLAURO, Connecticut
 HENRY BONILLA, Texas                JAMES P. MORAN, Virginia
 JOE KNOLLENBERG, Michigan           JOHN W. OLVER, Massachusetts
 DAN MILLER, Florida                 ED PASTOR, Arizona
 JACK KINGSTON, Georgia              CARRIE P. MEEK, Florida
 RODNEY P. FRELINGHUYSEN, New Jersey DAVID E. PRICE, North Carolina
 ROGER F. WICKER, Mississippi        CHET EDWARDS, Texas
 GEORGE R. NETHERCUTT, Jr.,          ROBERT E. ``BUD'' CRAMER, Jr., 
Washington                           Alabama
 RANDY ``DUKE'' CUNNINGHAM,          PATRICK J. KENNEDY, Rhode Island
California                           JAMES E. CLYBURN, South Carolina
 TODD TIAHRT, Kansas                 MAURICE D. HINCHEY, New York
 ZACH WAMP, Tennessee                LUCILLE ROYBAL-ALLARD, California
 TOM LATHAM, Iowa                    SAM FARR, California
 ANNE M. NORTHUP, Kentucky           JESSE L. JACKSON, Jr., Illinois
 ROBERT B. ADERHOLT, Alabama         CAROLYN C. KILPATRICK, Michigan
 JO ANN EMERSON, Missouri            ALLEN BOYD, Florida
 JOHN E. SUNUNU, New Hampshire       CHAKA FATTAH, Pennsylvania
 KAY GRANGER, Texas                  STEVEN R. ROTHMAN, New Jersey    
 JOHN E. PETERSON, Pennsylvania
 JOHN T. DOOLITTLE, California
 RAY LaHOOD, Illinois
 JOHN E. SWEENEY, New York
 DAVID VITTER, Louisiana
 DON SHERWOOD, Pennsylvania
   
 VIRGIL H. GOODE, Jr., Virginia     
   
                 James W. Dyer, Clerk and Staff Director

                                  (ii)

 
  TREASURY, POSTAL SERVICE, AND GENERAL GOVERNMENT APPROPRIATIONS FOR 
                                  2003

                              ----------                              

                                          Thursday, March 14, 2002.

                   EXECUTIVE OFFICE OF THE PRESIDENT

                               WITNESSES

PHILLIP D. LARSEN, SPECIAL ASSISTANT TO THE PRESIDENT AND DIRECTOR, 
    OFFICE OF ADMINISTRATION
JAMES F. DANIEL, CHIEF FINANCIAL OFFICER, OFFICE OF ADMINISTRATION
    Mr. Istook. Good afternoon. I'm happy to welcome the this 
afternoon the Special Assistant to the President for 
Management, Phil Larsen, his second appearance before this 
subcommittee. He was with us last year and is no stranger to 
us. And Jim Daniel--I am sorry I do not have in writing, Mr. 
Daniel, the correct title to attribute to you.
    Mr. Daniel. Chief Financial Officer.
    Mr. Istook. Excuse me. I apologize. Mr. Larsen, of course, 
as our chief witness who has a long and distinguished career 
serving several presidents as well as the House of 
Representatives. We certainly commend you for your service. 
Since your last appearance we have gone through a great number 
of changes in this country by the effects of 9/11 and what has 
followed since then. We are pleased that you are here today in 
support of the President's fiscal year 2003 appropriations 
request for the Executive Office of the President.
    You are aware, Mr. Larsen, as I mentioned to you before, we 
have a number of concerns among Members of the Subcommittee as 
well as Members of the Congress relating to the Office of 
Homeland Security. Not a question about how well it is 
performing its job. I know of no one that has any significant 
displeasure with the job that Governor Ridge is performing. The 
issue truly is one of accountability to make sure that we 
handle things in a proper way of accountability between the 
branches of government as it relates to our constitutional 
duties and protecting this Nation. We covered that in some 
depth this morning with Mitch Daniels from the Office of 
Management and Budget and I for one do not intend to repeat it.
    Most of the questions that we have regarding the Office of 
Homeland Security, although their budget is a portion of the 
budget for the Executive Office of the President, the type of 
questions that I believe Members would have could only fully be 
answered by Governor Ridge. And I recognize that we may try to 
put you on the spot to speak in his place, but frankly, my own 
questions of that significance, I would reserve rather than 
posing to you. I don't think there is any sense in going 
through an exercise in futility on that account.
    We do have questions, of course, that are part of the 
President's request for EOP relating to the consolidation of 
accounts. I frankly believe the ability to accomplish some of 
those things is weakened by the circumstance with the Office of 
Homeland Security and the issue of accountability there. 
Nevertheless, I will be pleased certainly to hear what your 
testimony may be in that regard and especially in regard to the 
security needs, to the extent that it is proper to discuss in a 
public session, in of the White House, the White House complex 
and the other extensions of the Executive Office of the 
President in the post-9/11 environment. We know that everyone 
in America, as broken-hearted as we are about the attacks that 
were made, were nevertheless pleased that the attacks did not 
go further and that the White House itself was not hit by any 
attack, nor was the U.S. Capitol building. We want to make sure 
all the personnel that are involved in these and other 
facilities are properly safeguarded against terrorist threats. 
Everything we can do to minimize the threat is important and we 
want to work with you to accomplish those objectives.
    We look forward to hearing your testimony. Before that, I 
would like to recognize our ranking member, Mr. Hoyer. 
    Mr. Hoyer. Thank you very much and, welcome, Mr. Larsen and 
Mr. Daniel. When you appeared before the committee last year, 
as you recall, I mentioned that I thought the previous White 
House had been treated in a fashion that was different than 
both the Bush White House--Bush One and Reagan White House 
prior to that. I disagreed with that treatment because I 
believe the President and the budget of the White House, 
particularly as it relates to its direct operations of the 
President and his individual staff, need to be given great 
deference by co-equal but equal branch of government.
    However, at the same time, this subcommittee must not, in 
my opinion, relinquish its oversight responsibility, which is 
to ensure that the resources appropriated to the Executive 
Office of the President are allocated and spent consistent with 
the law and consistent with our policies.
    I have 41 questions for the record so I can be confident 
from my own perspective that that objective has been met. As 
you read those questions, and as they may give you some pause, 
they are all questions that were asked of the Clinton White 
House. I would hope that we could get answers to those, 
complete answers in a timely fashion so I can have them within 
hopefully the next 45 days.
    Mr. Hoyer.  Now I would like to turn to an issue the 
Chairman mentioned in his opening statement, which is the need 
to hear from the Director of Homeland Security. I am going to 
ask you some questions on that later, but the committee makes 
it a normal occurrence to hear annual testimony from White 
House officials such as the Office of Management and Budget and 
the director of the Office of National Drug Control Policy. In 
years past, we have heard from Gary Bauer, who was not 
appointed with the advice and consent of the Senate, who was 
the domestic policy counsel.
    We have heard from the executive director of the National 
Security Council who testified before this committee on the 
National Security Council's budget. So the Chairman's 
suggestion that Mr. Ridge testify before this committee is not 
without precedent and is, in my opinion, consistent with our 
constitutional responsibilities. I understand the Governor's 
appointment to assist the President somewhat limits our ability 
to require his appearance before a congressional committee, 
although I frankly don't think we should get into a legal 
confrontation on that issue. It would be, I think, the 
minority's standpoint that if we had to, we have to. This is a 
critically important question.
    The Chairman made an extraordinarily good statement, I 
thought, on this issue as it relates to the institutional 
issues involved and the constitutional issues involved as we 
prepared to hear the testimony of Mitch Daniels. I respect the 
President's right to invoke executive privilege in terms of 
advice provided to him by his immediate advisors, but that is 
not what we are talking about. I have asked every agency that 
has appeared before this committee that dealt with law 
enforcement whether or not they had their budget reviewed by 
the Office of Homeland Security.
    Interestingly enough, the immediate director, 
administrator, supervisor did not know. Apparently it was done 
in this case by the Treasury Department, who submitted their 
budget. I asked what the recommendations were and no one knew. 
That is unacceptable. In a democracy, we don't have a KGB. We 
don't have a secret element to our security and law 
enforcement. Does that mean that some things shouldn't be 
secret? Of course it does not. They should be secret. Does it 
mean that the Congress should require in open session for 
Governor Ridge to disclose things that may compromise security 
or compromise the safety of our people? Absolutely not. It does 
mean that the Congress needs to know what Mr. Ridge is doing, 
what he is recommending. He, after all, has been given by the 
President of the United States the responsibility of making 
recommendations on over $30 billion in expenditures. That is a 
lot of money in anybody's lingo. We should hear from him and 
get his advice and counsel as to where we should be spending 
money. The mission of the office as stated in the Executive 
Order 13228--and to this degree I am repeating what our 
Chairman said earlier this morning, develop and coordinate the 
implementation of a comprehensive national strategy to secure 
the United States from terrorist threats or attacks. That's not 
advice to the President. It may well be advice to the President 
as to how to accomplish that objective. That is a specific, 
critically important objective for which he has been given 
responsibility.
    In this capacity, the assistant to the President has been 
granted budgetary review authority. Like ONDCP, he does not 
have the authority to veto, but he does have the authority to 
make recommendations, both, I presume, to OMB and to the 
departments.
    Mr. Larsen, I have many other questions to ask you about 
today, which I will do, such as the administration's proposal 
to consolidate the budget for all White House offices into one 
account. Last year I was willing to work with the 
administration on this issue. I worked very closely with Sean 
O'Keefe in trying to figure out what might be done, and we 
didn't do that. As you know, neither side of the aisle is 
particularly enamored with this proposal, again for exactly the 
same reason that we are concerned about homeland security. Very 
frankly, it seems that your posture--I don't mean you 
personally--the posture of the White House with respect to 
homeland security should give us great reservations with 
respect to any suggestion to consolidate the budgets. I presume 
if we consolidated, Director Daniels--this was a very important 
hearing we had with him--may well say I don't need to testify 
because I am in the Executive Office of the President and Mr. 
Larsen will testify on my budget. That is not acceptable. So we 
will talk about that.
    Unfortunately, the administration took an all-or-nothing 
approach that was unacceptable to this committee. However, as 
you recall--not you, but when we discussed that. I hope your 
office will be more flexible in your position this year and the 
proposals frankly will meet the same fate, I think.
    I look forward to your testimony and further discussion on 
your budget request for fiscal year 2003. I always have 
sympathy for the individuals who are supposed to talk about a 
pretty straightforward administrative budget. Unfortunately, 
you are the only person who comes up here for an exceedingly 
nonsimple budget in that the ramifications of how those monies 
are spent have political, strategic, tactical consequences for 
our country. So you get in the hot seat whether the seat should 
be hot or not. Good to have you here.
    Mr. Istook. If you would, Mr. Larsen, it is our practice to 
swear the witnesses.
    [Witnesses sworn.]
    Mr. Istook. We will be pleased to hear your testimony. Of 
course, the entirety of your witness statement will be placed 
in the record. So I invite you and all your witnesses to 
deviate from it, extemporize as you see fit or give an 
executive summary of things as you see necessary.

                           Summary Statement

    Mr. Larsen. Thank you, Mr. Chairman and Mr. Hoyer, for the 
opportunity to come back and appear on behalf of the Executive 
Office of the President Budget. I want to introduce again Jim 
Daniel, the Chief Financial Officer who is accompanying me 
today. I also want to express my appreciation to Michelle 
Mrdeza and Rob Nabors of your staff who have helped us a lot in 
what's been a very complicated and unique year, especially 
since 9/11.
    Last year when I testified, I explained several of the 
issues that we were confronted with after we came into office 
in January 2001. I would like to just take a minute and tell 
you about a few things we have done to improve the operation of 
the presidency.

                office of administration reorganization

    In the first instance, we have reorganized the Office of 
Administration, which is the central provider of administrative 
support. What we found when we arrived was a very fragmented, 
compartmentalized organization. I think I had close to 13 
direct reports, some heading up offices of only one and two 
people. What we have done is try to build a unified management 
team. That now consists of myself as the Director, Jim as the 
Chief Financial Officer. We have hired from the House of 
Representatives, the Chief Information Officer, and have a 
Chief Operating Officer and a Chief Projects Officer. This 
forms a unified management structure that allows the four or 
five of us to set the overall goals and objectives for the 
agency and allows for better leadership, we believe, for the 
staff who work in OA.

                     implementation of the cfo act

    Another thing we have done is work very diligently to 
implement the Chief Financial Officer's Act, which we were 
required by statute to implement effective January 20, 2001. 
First thing we did was appoint Jim to that position. Under the 
act, the President is required to designate a senior Executive 
Office of the President official to serve as the ``Head of the 
Agency'' and he is also required to designate a CFO. I have 
been designated as the Head of the Agency for the purposes of 
implementing the CFO Act and Jim has been designated by the 
President as the CFO.
    After designating Jim, we began to take a look at all the 
financial operations of the various components of the Executive 
Office of the President, and one of the first requirements of 
the statute was to complete an auditability assessment. This is 
a study to determine whether or not we would be able to put out 
financial statements that were true and accurate. We have 
completed that auditability assessment. We have developed a 
checklist of over 250 items for the implementation by the CFO 
and identified over 100 internal controls that we need to put 
into place. Some are already in place, most are not. I would 
say on a score card--and Jim doesn't know I'm going to say 
this, but on a score card we are probably at about a C or a C 
minus. So we have a lot of work to do. But this auditability 
assessment will serve now as our blueprint for the 
implementation stage.

                         information technology

    Also last year I indicated that we were disappointed in 
what we found in the area of information technology. We worked 
very, very diligently to try to enhance that. We worked very 
closely with your committee staff on these programs. Our first 
step was to bring in a Chief Information Officer that has 
extraordinary experience in running a large operation. In fact, 
the individual was in charge of the House Information System 
and we stole him from you. He has brought in three or four 
people from various parts, both government and private sector, 
to serve as his senior team. It has not even been a year yet 
and we are well on our way to accomplishing some of the 
objectives we promised to this committee.
    Today we were able to provide to the staff the copy of the 
IT enterprise architecture, which we have agreed with the staff 
will now go to GAO for their review. Tomorrow, you should be 
getting an inventory of the human resources capabilities of the 
EOP IT program. So we're moving down the line and I think we're 
moving very well.
    We have implemented many processes to make sure we're 
looking at all new projects on an enterprise basis, that we are 
identifying what the business requirement is and taking extra 
steps to make sure we don't get caught up in the roar for new 
gadgets just because they happen to show up in the marketplace.

                    travel business manager program

    Another program that we implemented, and Jim deserves a lot 
of credit for making this happen, was a travel manager program 
to assist us in assuring the accuracy and the timeliness of our 
accounting system for presidential travel. Presidential travel 
has always been difficult to manage. It just always was hard to 
get accurate and timely information in order to pay the bills 
on time. We now send a person from Jim's office on every 
domestic presidential trip. That person is responsible for all 
the obligations made by the Federal Government. Most vendors at 
the local site are paid by the time we leave by use of 
government credit card. Right now, we are paying every voucher 
and every other payment on a trip within 30 days on average. I 
believe the average before was in excess of 120 days.

                         emergency supplemental

    We appreciate the committee's assistance in the days 
immediately following 9/11, when we were required to pull 
together very quickly an emergency supplemental. And as I 
explained to your staff in working with them over the next 
several days, this was pulled together very, very quickly. 
Numbers were pulled together before final decisions were even 
made in order to make sure that we had sufficient resources in 
the pipeline. We have now come back to the Committee with a 
request to reprogram, pursuant to the Committee's instruction, 
some of the money we received through that emergency 
supplemental.

                             computer virus

    In addition to the events of 9/11, in the last year we also 
spent considerable amount of resources about a three-month 
period of time last summer, battling a continuing series of 
computer viruses that were aimed at the White House internet 
site. We were successful in keeping those out. It was not 
without a lot of effort by our IT people. But we were never 
shut down, and other government agencies were, and that gives 
you a sample of how good some of the people are that work for 
us.

                     eop consolidated appropriation

    Lastly, I want to mention the consolidated appropriation. 
We once again are making a request to consolidate all of the 
EOP appropriations into a single account. We are certainly very 
grateful for the efforts of both you, Mr. Chairman, and you, 
Mr. Hoyer, last year to help us with this. We are going to make 
a much stronger effort to make sure everybody gets an 
understanding of our perspective of why we think this is 
advisable. And we want to work with you and your Committee to 
come up with a mechanism where we can accomplish both goals.
    Our goals are to provide more flexibility for the President 
and more opportunities to achieve efficiency in operations. 
Your goal to make sure that you have the level of oversight 
that you are comfortable with. I don't see these two as being 
mutually exclusive, and we would be happy to work with your 
staff to try to come to some accommodation on that.
    I believe I will conclude with that. I have the complete 
opening statement which I understand you will put in the 
record. And with that, I'd be happy to answer any questions you 
may have.
    [The statement of Mr. Larsen follows:]

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
 ADMINISTRATIVE DUTIES ASSOCIATED WITH THE OFFICE OF HOMELAND SECURITY

    Mr. Istook. Thank you Mr. Larsen. Let me ask--and this is 
on the administrative side of the Office of Homeland Security. 
We had part of the testimony from Mr. Daniels this morning 
indicating that the organizational needs of the new Office of 
Homeland Security required the full-time work of two to three 
members of the staff at OMB. As you mentioned it's been 
something that's been undergoing constant change. It's 
something that's still under design, as it were. But would you 
tell us what it takes as far as the administrative side, people 
within the EOP that are required to handle the administrative 
duties on behalf of the Office of Homeland Security and give us 
the parameters as they are today--because they may be very 
different than what they were when the budget was prepared--the 
number of people, whether they are on EOP staff, detailees, 
loaned employees, something through some sort of memorandum of 
understanding, but the people who, in the normal course of 
their workday, are reporting directly to the Office of Homeland 
Security?
    Mr. Larsen. Certainly. Let me begin by saying that the 
Homeland Security Office is a part of the White House Office 
and therefore the Office of Administration is the central 
administrative provider. Right now, based on where we see it 
ending up, we are looking at one additional person or two, I 
guess it is, in the CFO's office to handle the financial 
aspects. We have one person who will be on site with Homeland 
Security to handle IT matters. We probably spread over about 
three people, a combination of one FTE to handle facility kinds 
of things, and probably the equivalent of another FTE spread 
over a number of people to handle mail and messenger kinds of 
things. So my guess--I never really looked at it this 
carefully, but we're probably right around four, five full-time 
people to handle this operation.

                 OFFICE OF HOMELAND SECURITY PERSONNEL

    Mr. Istook. And then those that are working within the 
office, Office of Homeland Security, whether they be detailees 
from--and I know there's a whole alphabet soup of agencies, 
detailees involved with the Office of Homeland Security. Would 
you describe that for us, please, as well as how much space and 
what locations, and how much equipment is necessary to be in 
their work areas for them.
    Mr. Larsen. Let me start first with the numbers of 
personnel. The Homeland Security Office was given an allocation 
of 40 people. The 40 are being funded out of the emergency 
supplemental in 2002 and we have requested full year funding 
for them in fiscal year 2003. Of the 40, 16 are allocated to 
the so-called cyber board. The remainder are working on the 
other side of Homeland Security.
    In addition, the Homeland Security Office's current 
estimate now is 95 individuals from other agencies.
    Mr. Istook. Let me interrupt just briefly. I recognize 
that's a goal and it's a moving target number, but give me an 
approximation of how many of those are on board today.
    Mr. Larsen. Forty-two. And let me assure the committee that 
we have--the Homeland Security Office was pulled together 
rather hastily, and when you do that, there's opportunities for 
error, we have gone back through and double-checked every 
person that we have brought in from another agency to make sure 
they were in full compliance with the law in terms of 
categorization as to whether they are detailees, assignees or 
whatever. And we will continue to do that as long as necessary 
to make sure that everything is aboveboard with these people. 
Right now all but 18 of the 42 people are classified as 
detailees, which means the parent agency under current law will 
be reimbursed after 180 days in the fiscal year. The cyber 
board, as I said, has 16 FTEs. They have not yet--come up with 
a staffing plan beyond that. They will probably want to use 
some additional detailees but it has not been made known to me 
at this time.
    Mr. Istook. Space and equipment requirements.
    Mr. Larsen. The space and equipment requirements, part of 
the Homeland Security, cyber board is located in an alternative 
location outside the EOP complex on G Street Northwest. The 
rest of Homeland Security, the bulk of it is located at another 
location in Northwest Washington. And then the senior staff is 
located in the Old Executive Office Building. These were 
complete new build-outs, so obviously, getting into equipment 
area, and given the nature of the work that they will be doing, 
especially to coordinate with national, Federal, local, State 
law enforcement activity, we had a substantial investment in 
technology--and communications to make sure that they had all 
the tools that they needed in case we ever ended up with 
another 9/11 event. They have to be able to operate at the 
location where they work. And all together for the Homeland 
Security, we put in close to a little over $12 million thus 
far, and that includes building out the space as well as all 
the equipment.
    Mr. Istook. I realize that not all of them are either 
employed by, detailed to or assigned to the Executive Office of 
the President. Knowing the charge that's been given to Governor 
Ridge includes an extensive charge with coordinating all 
Federal agencies dealing with homeland security, as well as 
coordination with the local and State agencies, do you have any 
way to put a number on those, although they may not be within 
the Office of Homeland Security, where their main role back in 
their agency is directly involved in coordinating with the 
Office of Homeland Security? I know there's different liaisons 
and so forth that different agencies are assigned, for example.
    Mr. Larsen. I have not looked at that, Mr. Chairman.
    Mr. Istook. But I am correct there are some people that are 
not detailed, that are assigned to the Office of Homeland 
Security, but it may be, for example, a liaison with FBI?
    Mr. Larsen. They are working on site--back at their 
agencies. I do not know that number.
    Mr. Istook. I have some other questions, but let me defer 
to Mr. Visclosky right now. Thank you. Mr. Visclosky.

      REDUCTION IN HIGH INTENSITY DRUG TRAFFICKING AGENCY FUNDING

    Mr. Visclosky. Chairman, thank you very much. Mr. Larsen, 
my understanding is that the request for funds for the high 
intensity drug trafficking areas this year, HIDTAs, will be 
206.4 million and that we appropriated for fiscal year 2002, 
226.4. My assumption, but also really I guess my question to 
you, is the $20 million reduction because the 20 million that 
was in the supplemental for HIDTA was not built into your base 
line?
    Mr. Daniel. The numbers are correct. We are requesting 206 
million, but I don't know the exact--right now, I don't know 
the exact reason why we took the $20 million decrease. 
Programmatically at EOP we treat that as an--a separate program 
and not part of the salaries and expenses budget. And this is 
handled by the ONDCP director.
    Mr. Visclosky. So my questions would be better directed 
towards----
    Mr. Daniel. We can take it for the record and we can get 
you an answer.
    [The information follows:]

                 High Intensity Drug Trafficking Areas

    The High Intensity Drug Trafficking Areas (HIDTA) program was set 
up so that law enforcement agencies could zero in on areas designated 
by ONDCP as centers of major drug production, manufacturing, 
importation, or distribution. The program has grown from the five 
original HIDTAs of a decade ago to 28 HIDTAs currently. However, no 
systematic evaluation of the HIDTA program has been conducted and no 
credible performance measures have been developed. In addition, there 
are questions about whether some of these areas deserve to be 
designated as HIDTAs. The President's Fiscal Year 2003 budget proposes 
FY 2001 level funding for the HIDTA Program and $500,000 to develop 
better performance measures for the HIDTA Program. ONDCP will use 
performance data to make decisions concerning HIDTA funding in the 
future.

       EFFECTIVENESS OF HIGH INTENSITY DRUG TRAFFICKING AGENCIES

    Mr. Visclosky. I would--because for the record I would make 
a point, because in other documentations I have looked at, the 
suggestion has been made that it's not been evident that the 
HIDTA programs have been effective and, for the record, because 
there is one in my congressional district that encompasses 
Gary, Indiana which has unfortunately for seven years in a row 
led the United States of America per capita homicide rate has 
been effective because of the designation by the subcommittee 
and the funding. The level of homicides within the entire 
geographic area over that period of time have declined by a 
factor of 15 percent. And the fact is that we've been able to 
build some very worthwhile and constructive programs with 
HIDTA. We have, in conjunction with the Indiana National Guard, 
torn down 179 crack houses and given these people fewer places 
to hide, and in some neighborhoods and on some blocks it is 
that one structure that is their drug problem. We have been 
able to construct a program at no expense to any taxpayer to 
have gang tattoos removed for those who are trying to turn 
their life around. And again the process, as far as ensuring 
that these people are in fact trying to get on the straight and 
narrow, is being done by the officers at HIDTA. And most 
recently, last week, there was a press conference about a new 
initiative within the HIDTA area so that we would have a 
clearinghouse to try to get some of these illegal guns off the 
street.
    The example was used of one individual who was arrested 
seven different times with a gun with no permit which is a 
misdemeanor for first offense in Indiana. Seven times. And he 
is charged with a misdemeanor because no one in each adjoining 
community and sometimes within the same community knew that 
this gentleman had been arrested before. And using the HIDTA as 
a clearinghouse, each department has now vowed to run each of 
one of these through so that before one of these people is 
gone, the second arrest then becomes a felony. And the U.S. 
Attorney's Office is also involved to ensure that depending on 
what the other history of these individuals might be, they'll 
examine whether we should be doing Federal charges or State and 
local charges.
    And for the record, I appreciate the Chairman's courtesy 
here, I would make the statement that it has been very, very 
beneficial and has saved a lot of lives in northwest Indiana. 
Thank you, Mr. Chairman.
    Mr. Larsen. We will make sure your question and your 
comments get back to the appropriate people.
    Mr. Istook.  And, by the way, we do expect Mr. Hoyer back. 
He had testimony, I think, to give to the Transportation 
Subcommittee.

                     WHITE HOUSE COMPLEX FACILITIES

    In the White House campus, certainly part of the funding 
last year was to aid--to stabilize some of the problems and fix 
some of the problems with the facility of the executive mansion 
itself. And I am aware that the situation regarding the 
usability of the entire White House campus has changed because 
of the events of 9/11. There are several million dollars 
proposed, for example, in the GSA budget, which we have 
jurisdiction, just trying to do the necessary study, for 
example, of security and reconstruction and repair, renovation 
issues regarding the Eisenhower, the Old Executive Office 
Building. Would you elaborate for us on to what extent since 9/
11 areas of the campus have not been available for full use, 
how that creates any budget problems with alternative 
arrangements, and what we might anticipate with what is 
necessary to make sure--and I understand distinctions between 
what might be said in public and what might need to be said in 
private, but what should we anticipate needs to be done to make 
sure the campus is modern in the facilities it has and the 
capabilities that it has as well as being secure?

                        RELOCATION OF PERSONNEL

    Mr. Larsen. Surely. It's no secret that shortly after 9-11, 
the entire 17th Street side of the Old Executive Building was 
vacated of all staff personnel. That is primarily because its 
close proximity to the street put it at a very high risk.
    Mr. Istook. How many offices does that comprise, 
approximately?
    Mr. Larsen. Approximately 100.
    Mr. Istook. Please go ahead.
    Mr. Larsen. Those people who were located in those offices 
were relocated to other places. Some were relocated to other 
places within the Executive Office Building, in other words, to 
the other side, which resulted in those people being uprooted 
and put someplace else. It was quite a domino effect overall. 
We ended up moving 700 or so people over a three-day weekend. 
We did obtain additional space on G Street. We have put 
approximately 300 people that were formerly in the EEOB complex 
over there. That is an additional rent cost of approximately $6 
million on an annual basis. We moved some other people out of 
the Old Executive Office Building and squished them together 
over in the New Executive Office Building.

         RENOVATION OF THE EISENHOWER EXECUTIVE OFFICE BUILDING

    And, in addition, the people who were left in the Old 
Executive Office Building, we had to double them up and that 
kind of thing. That's probably the main thing right now on 
campus. As you know, the GSA has for many, many years talked to 
us about the renovation of the Old Executive Office Building. 
Now that the 17th Street corridor is sitting vacant that is 
once again being looked at. No final decision has been made 
yet. I know we have talked to your staff about it and it's an 
extremely expensive project. The building is in very, very sad 
condition.
    For example, most of the plumbing for sewage is the 
original. It's over 100 years old. We had a flood about three 
or four weeks ago where a pipe burst at about 2 o'clock on 
Sunday morning and could have caused some real serious damage 
if it had been in another location.
    As I say, senior staff is looking at the whole project. The 
issue of funding is going to be paramount and I am sure we will 
come back to the committee to discuss that further with you. We 
have had your staff down and they have looked at the facility.

                            MAIL OPERATIONS

    Another issue resulting from 9/11 that has complicated our 
life is the receipt of mail. We are probably no different than 
you folks up here. We're still working through a process that I 
have briefed your staff on, and I'd be happy to talk to you 
about it. We are working on a procedure at another location to 
come up with a program to make sure that all mail delivered to 
the White House is safe for the recipients. It's a difficult 
chore. We're working closely with Secret Service, CDC, 
President's Science Advisor, a whole number of folks. Number 
one, the science is still evolving, as you know. So what we 
think we are doing right today may not be right tomorrow. The 
second thing is it's expensive. But no matter how you look at 
it, the more you get into it, you come to the bottom line that 
whatever system you set up, it only takes one letter. And 
that's kind of a scary proposition. But I think we're well on 
our way of having a good solution so we can start receiving 
mail in a more timely manner.
    Mr. Istook. What sort of delays are experienced right now 
and what alternatives have been set up? Because when you go 
through the more elaborate security measures just like 
congressional mail right now, of course, goes through this 
irradiation process, you add significant delays. What kind of 
delays are you dealing with if someone is sending mail, for 
that matter, if they are seeking overnight service and you're 
having to bypass normal methods of receiving and distributing 
the mail? What sort of delays are you experiencing for the 
White House complex and presidential mail, and what 
alternatives have you been able to set up? How satisfactory are 
they?
    Mr. Larsen. Let me speak first on the alternatives. We are 
working with some of the groups I mentioned earlier to develop 
a system. That system right now is just in the early prototype 
stages. Once it's operational, I believe our estimate is from 
the day we receive a letter from the post office that we can 
have it turned around and inside the complex within 48 hours.
    Mr. Istook. But that's a future improvement. That's not the 
current circumstance.
    Mr. Larsen. No. The current circumstance right now is that 
in the period from mid-October up until about the end of 
December, we weren't able to take a whole lot of mail and the 
postal service got better a lot in delivering the mail and 
running it through their irradiation process, so we did develop 
a backlog. We are concentrating now on new mail, and as time 
goes on we will go into that backlog and try to get it cleaned 
up. It depends, anywhere from a two-day turn-around from the 
time we get it from the post office to a couple of weeks, 
depending on whether they deliver us one bin of mail or 12. 
That is our current situation. I think the current mail that 
we're getting is mid-January early February is the most current 
mail we're getting now.
    Mr. Istook. And you're not receiving any mail that's within 
a two or three-day turn-around? You're running, what is that 
going to be, approximately three weeks behind?
    Mr. Larsen. At least.
    Mr. Istook. And for intergovernmental mail, for priorities 
that people say, you know, we've got to get this to the 
President or some advisor, what are people doing? Are they 
having people send the mail to their house, to a postal drop 
someplace trying to bypass, or what is happening?
    Mr. Larsen. We have contacted and worked with all of the 
folks who have regular correspondence, the House, the Senate, 
the various departments and agencies. We have messenger service 
that runs around and picks up so we know it's not going through 
the mail process. Most of our correspondence today coming from 
Capitol Hill comes that way. Your administrative people call us 
and say we have x number of packages or letters to go to the 
President. We come up and pick them up. There's a good deal of 
messengers from other agencies coming to us. They are all 
properly checked. They have IDs. We are fairly confident that's 
okay. We did a few other things that kind of helped.
    One of the first things we did is we recognized that with 
the backlog of mail we would very soon end up with a very huge 
stack of unpaid invoices sitting in mail bins and our vendors 
would be starting to get mad very quickly. We contacted all of 
the vendors, which must be over a thousand that we deal with, 
anything from buying erasers to computers, and gave them 
special fax numbers and they fax their invoices to us now and 
they certify on the fax, and then we pay from that fax and that 
is working very, very well. And, as a matter of fact, we are 
actually paying our bills much faster now. Overall, all of our 
invoices were running about 97 percent being paid within 30 
days.
    Mr. Istook. The revised and improved mechanism for intake 
of mail that you mentioned, is that something you can describe 
to us that you are trying to put in place that you say will 
improve the turn-around to approximately 48 hours?
    Mr. Larsen. I believe that's something I can provide. I 
have already described it to your staff. I'm not real 
comfortable with putting it on public record at this time, 
number one, because it is a prototype, and number two, there 
are some pieces and portions I believe, I can't say for sure, 
but I believe to be classified. So if we could work out another 
arrangement, I'd be happy to----
    Mr. Istook. Certainly. And it is important for this 
subcommittee to have an understanding because also having 
responsibilities regarding the Postal Service, there's a great 
deal of interaction between the safety measures that we're 
looking at. And certainly, as we found with the Postal Service 
and the irradiation of mail, there's an extensive issue of 
unintended consequences that can erupt as well.

                           USA FREEDOMS CORPS

    Let me ask--did you have anything else? I certainly want to 
give Mr. Hoyer the opportunity when he returns. One of the 
initiatives in the Executive Office of the President is the 
office relating to what the White House is calling the Freedom 
Corps.
    Mr. Larsen. Correct.
    Mr. Istook. Can you give us some understanding of the 
resources that you see as necessary and what work would be 
accomplished by that office, and especially how it might be 
unique or not from work that is currently being done elsewhere?
    Mr. Larsen. Certainly. I will let Jim give you what the 
numbers are. It's currently--I believe there are four 
individuals. First let me say this. That the Freedom Office is 
a part of the White House office. There are four individuals 
who are assigned to that function. They are White House staff. 
And it's my understanding their mission is to increase the 
emphasis on volunteerism in the country and to coordinate and 
try to bring together in some consistent way a variety of 
programs currently existing in the government in such places as 
the Citizens Corps or the Peace Corps and the various volunteer 
agencies.
    Jim, am I wrong, was it $2 million?
    Mr. Daniel. The total costs that we itemize are really the 
six authorizations for the individuals. All the other costs is 
primarily administrative, so we really didn't itemize how much 
floor space and rent and desk and tables. We have accounted 
them as another six FTE for the White House. So that is the 
only specific part we itemize.
    Mr. Istook. You mentioned their task is working with 
volunteer groups, and you mentioned, for example, Peace Corps 
and there is AmeriCorps. Doesn't this go beyond volunteer 
groups? This also goes to people that are being compensated in 
some form for their service, whether it be direct payment or 
whether it be some sort of government grant or education 
opportunity. I mean it's not purely for volunteers, is it, that 
is being encouraged through this office?
    Mr. Larsen. I'm really not sure. I can answer that question 
for you for the record without any difficulty.
    [The information follows:]

                           USA Freedom Corps

    Building on our Nation's rich tradition of citizen service, this 
Administration's policy is to foster a culture of responsibility, 
service, and citizenship by promoting, expanding, and enhancing public 
service opportunities for all Americans and by making these 
opportunities readily available to citizens from all geographic areas, 
professions, and walks of life. More specifically, this Administration 
encourages all Americans to serve their country for the equivalent of 
at least 2 years (4,000 hours) over their lifetimes. Toward those ends, 
the executive departments, agencies, and offices constituting the USA 
Freedom Corps shall coordinate and strengthen Federal and other service 
opportunities, including opportunities for participation in homeland 
security preparedness and response, other areas of public and social 
service, and international service. The executive branch departments, 
agencies, and offices also will work with State and local governments 
and private entities to foster and encourage participation in public 
and social service programs, as appropriate.

    Mr. Istook. Mr. Hoyer.

                      OFFICE OF HOMELAND SECURITY

    Mr. Hoyer. I apologize, Mr. Larsen, because I had to 
testify across the hall on a project I'm very excited about and 
I hope the White House would be very excited about. We are 
talking about the South Capitol Street. I don't know how long 
you have lived in this area, but you come across that bridge 
and it's got to be the ugliest entrance to Washington, DC, and 
we want to create in effect a Pennsylvania Avenue Development 
Corporation rebirth of that Southeast Capitol Street Boulevard 
Gateway Project, I call it. So I wanted to say something about 
that.
    But I'm glad I got the opportunity to put you on it as well 
because I want everybody in our city to be enthusiastic about 
it.
    Let me ask you some questions now about the Office of 
Homeland Security. Have you been part of any discussions 
concerning the consolidation of agencies into a super border 
agency?
    Mr. Larsen. No.
    Mr. Hoyer. Do you know who's leading these discussions and 
responsible for this type of analysis in the administration?
    Mr. Larsen. I do not. First I've heard of it.
    Mr. Hoyer. First you heard of it?
    Mr. Larsen.  That's correct.
    Mr. Hoyer. Can we expect the administration to submit such 
a proposal in the near future?
    Mr. Larsen. I have no idea
    Mr. Hoyer. In your opinion, what are the advantages and 
disadvantages for creating such a super agency?
    Mr. Larsen. I can't answer
    Mr. Hoyer. Can you explain the Office of Homeland 
Security's new alert advisory system to us?
    Mr. Larsen. Basically I can, based on what I've read in the 
paper.
    Mr. Hoyer. Beyond that, you haven't been involved in it?
    Mr. Larsen. No. I'm not in those policy issues.
    Mr. Hoyer. Mr. Larsen, I didn't expect you to be able to 
answer those questions, but I hope that you will go back to the 
White House and tell them these are critical questions that 
this committee needs to know. We are talking about millions of 
dollars, maybe billions, ramifications on the answers to these 
questions, and no one could expect you to give them. Everybody 
would expect Governor Ridge to be able to answer these 
questions, as they are legitimate for this committee.
    The point I was making, I think I had made, is that there's 
no reason why you should know those.
    Mr. Larsen. That's correct. And I'll be happy to take them 
back.
    Mr. Hoyer. I appreciate that. I had 30, about, of those 
questions, but I think I made the point in about five. Is the 
proposal you are making on consolidation substantively 
different this year?
    Mr. Larsen. I don't believe it is.

                       CONSOLIDATED APPROPRIATION

    Mr. Hoyer. Now I would ask you to give the subcommittee an 
example of an occurrence where the President did not have 
adequate resources to accomplish one of his goals for the White 
House because of the lack of unification of the account.
    Mr. Larsen. I think I can do that. One that comes to mind 
is immediately after 9/11 it was a very confusing time. 
Decisions were being made, quite frankly, on the fly, not just 
at the White House but all over this town. Most people took 
about 24, 48 hours to even figure out what was going on, and 
the shock. If you would have looked across the EOP agencies, 
you could have 30 to 40 funded vacancies scattered throughout 
the agencies and several million dollars of uncommitted money 
that the President could have pulled together immediately to 
meet this crisis, should he have chosen to do so.
    Mr. Larsen. Under current law, he can't do that. If he 
wants to move a thousand dollars from, say, the Council of 
Economic Advisors to the White House Office, he has to come 
back to the Congress in the form of a supplemental, 
essentially.
    Mr. Hoyer. Mr. Larsen, let me stop you at that point.
    Do you recall how long it took for us to give the President 
$10 billion in unearmarked discretionary funds?
    Mr. Larsen. I don't recall. It was a couple of weeks, I 
believe.
    Mr. Hoyer. No more than 14 days. The Congress acted with 
great alacrity, simply because we saw the need. The reason I 
make that point is, I understand 9/11 was an extraordinary 
occurrence. It was a very exceptional occurrence. I guess that 
may be redundant. Can you name another example, other than 9/
11, which I think is not frankly the--it is not the reason you 
made the proposal.
    Mr. Larsen. No.
    Mr. Hoyer. Everybody is using, Mr. Larsen--everybody, 
including me, by the way, so I don't exempt myself from it--we 
have got to do this, that or the other because of 9/11. You 
have heard that all the time. I need another person because, 
after September 11th, gee whiz, we just got this great burden. 
You have to say no to some of that, because they asked for that 
same person in January and February of last year.
    Mr. Larsen. Correct.
    Mr. Hoyer. They had another reason for it, correct?
    Mr. Larsen. Correct.
    Mr. Hoyer. What was the reason before 9/11? Give me a 
specific example. The reason, as you can tell from the tenor of 
my questions, I don't believe there is such an example.
    Mr. Daniel. You know, a couple of issues that I would kind 
of like to point out before 9/11 are just kind of practical 
day-to-day things, in a sense.
    Since we are divided up into so many small organizations in 
terms of appropriations, some organizations really have as few 
as 10 or 11 people. What happens is, on issues like lump sum 
leave, we could have someone sitting for about 30 years, or 
they could come in with the administration having already 
served in the Federal Government. If they are entitled to 
retire, if they retire, there is--literally, we would have to 
pay all of the leave for that one employee. And the money just 
simply wouldn't be there, because the accounts are so small.
    So what we find is that we find that most of the 
organizations, since we have to manage the separate pots, we 
really have--I mean, we end up lapsing a lot of money to guard 
against any kind of ``what if,'' because anti-deficiency is not 
an option.
    Just one other quick example is, one of the--one piece of 
legislation that passed this year or one law is frequent flyer 
miles. You know, previously to November, the government owned 
frequent flyer miles. Well, after November, it belonged to the 
individuals. We have had some very, very aggressive programs to 
manage those frequent flyer miles over the years, and that 
simple change really is going to cause some of our 
organizations, like Trade, the trade representative travels a 
lot, about 30 or 40,000 dollars.
    If we had a single appropriation, those are the kinds of 
things where we have a mid-year review, we can go through and 
look at the hard-core programs and--just the policy programs 
and the programs that are changing due to pricing.
    Mr. Hoyer. Mr. Daniel, can I ask you this question? You may 
not have been here long enough to know the answer to this 
question. Maybe Mr. Larsen will know.
    In the instances which you mentioned, I can't imagine that 
there would be a committee chair or a ranking member who would 
deny a reprogramming under those circumstances. Have you ever 
experienced a denial of a reprogramming or something of that 
type?
    Mr. Daniel. See, in those two instances you can't 
reprogram.
    First, I should state that, yes, sir, you all have been 
very generous on reprogramming. We have not been denied.
    But reprogramming, as you know, really applies within the 
appropriation. Some of our accounts, some of our appropriations 
are much smaller than line items in other appropriations. So, 
in this particular case, it would really--if the money was not 
available, the only option would be to come back to the entire 
Congress to get the money.
    Mr. Hoyer. What you are saying? If you have a problem in 
the NSC, you can only reprogram money within the NSC budget?
    Mr. Daniel. Correct.
    Mr. Hoyer. If our response then was to simply authorize, 
rather than consolidating the budgets, but to authorize in our 
bill the ability to reprogram from one of your agencies to 
another, with the approval, obviously, of the committee as a 
normal reprogramming occurs, would that solve your problem?
    Mr. Larsen. It would have to depend on what sorts of limits 
were put on it. And that--I don't believe it would give the 
President the full flexibility that we would like to see and 
also give us the full flexibility with regard to the 
implementation of the CFO Act. It makes it very difficult to 
implement the CFO Act across 13 different, separate 
appropriations. All it takes is one or two people to say, I 
don't want to play in this particular game.
    And, Mr. Hoyer, there is another example. I have been 
through probably four or five Presidential transitions, and not 
just with this President but with others. And one of the 
difficulties every incoming President is faced with is 
sufficient flexibility in that first year to fine-tune that 
Executive Office of the President to meet his priorities.
    Now, let me make it clear. I think that needs to be done 
with full consultation and information to the Congress. But the 
President is somewhat hamstrung when he comes in, and he has 15 
separate boxes, and then whatever he wants to do has to be done 
in one of those few boxes, and he can't do anything else.
    Mr. Hoyer. He can submit a supplemental.
    Mr. Larsen. He can submit a supplemental for additional 
money, but----
    Mr. Hoyer. You can even submit a supplemental and say, we 
would like you to cut A and add it to B. We have to do it by 
law, I agree with you on that, as opposed to the reprogramming 
within an agency.
    My point, Mr. Larsen, I really do want to try to 
accommodate you. I will tell you, as you know, I am absolutely, 
irrevocably opposed to including OMB in any consolidation. It 
is a large agency. It is a critical agency. It is not a little 
agency of four or five people. Its impact on the Federal 
Government is very significant, and I am going to be 
unalterably opposed to consolidating that with the White House 
budget.
    The same goes for the Office of National Drug Control 
Policy, a very large, significant agency.
    Frankly, that leads me to another question. Well, let me 
finish my observation.
    I am sympathetic to your wanting to manage the White House 
better. I have for 20 years had a history of trying to give 
flexibility--most of which have been with Republican 
Presidents, I sadly say. Nevertheless, I have had a good 
relationship with all of the Presidents and think it is 
appropriate for us to give you flexibility to run the White 
House the way the President--he has been elected by the people, 
just like I have. However, he has been elected by all of the 
people, and he should have the flexibility to manage his 
office.
    However, I have a responsibility. It is this whole thing 
about Tom Ridge and the Office of Homeland Security that have a 
responsibility to see the appropriation of those funds. That is 
what those 41 questions address.
    This committee was very concerned about how Mr. Clinton was 
spending money on lighting the Lincoln bedroom every night. 
Fine. Okay. What is good for the goose is good for the gander.
    I want to give you flexibility without undermining 
oversight. The reason I suggested perhaps that would be one 
alternative of giving you greater flexibility in terms of 
transferring funding or reprogramming funds, but it doesn't 
give you enough flexibility. You are going to have to come to 
grips--or you won't get this--I mean, it will be a nice 
intellectual exercise, but I will guarantee you, having talked 
to Mr. Dorgan, Mr. Campbell, Mr. Istook and myself--I think Mr. 
Istook was the--I don't want to put words in his mouth, but the 
most sympathetic to you. He was trying to work on it, and I 
tried to work with him. Ultimately, we didn't reach an 
agreement.
    You really should look at what you can do to perhaps do 
what you want to do within the framework of what the Congress 
thinks its responsibilities are. If you just stick with the--
which is what ultimately happened--just stick with your 
proposal--as you point out, it is about the same as it was last 
year, I think you will have about the same result.
    Mr. Larsen. As I said earlier, we recognize probably more 
fully this year than even last year that Congress has a need, 
and it is legitimate for oversight.
    On the other hand, for flexibility for the President and 
efficiency of operations, particularly for OA to run a better 
operation----
    Mr. Hoyer. I understand.
    Mr. Larsen. And I guess where I am having a hard time is--I 
don't see these two things as mutually exclusive. It seems to 
me that there ought to be a way, working together, that we can 
come up with a solution.
    Mr. Hoyer. I would hope that is the case. I have tried to 
be open. Of course, I am--I was not objective last time, 
because Sean O'Keefe, as you probably know, happens to be a 
very good friend of mine. I really like him, and I have great 
respect for him, so I wouldn't hesitate to work with him.
    And I have great respect for the Chairman, and the Chairman 
wanted to try to work it out. But it didn't work out.
    If we can do it, I want to do it. You need to be--I think 
have a little more flexibility to accomplish what we think we 
need to do and what you want to do. And I just suggested one 
option. I mean, I am sure there are other options that may be 
good.
    Now, let me, if I can, Mr. Chairman, ask a few other 
questions.
    Mr. Istook. Go ahead.

                   WHITE HOUSE OFFICE BUDGET INCREASE

    Mr. Hoyer. The White House Office has increased by $29 
million or a 54.8 percent increase. How much of that is for 
homeland security?
    Mr. Larsen. I believe almost all of it, with the exception 
of the amount that is in there for the pay raise coming next 
January.
    Mr. Hoyer. Okay. So do you know how much that is?
    Mr. Daniel. Actually, I have it.

                OFFICE OF ADMINISTRATION BUDGET INCREASE

    Mr. Hoyer. While he is looking for that, let me ask you. 
The Office of Administration has a $23 million increase, or a 
49.4 percent increase.
    Mr. Larsen. That is correct.
    Mr. Hoyer. What is that for?
    Mr. Larsen. The bulk of the OA increase will come for 20 
additional personnel, and I am almost afraid to say that, but 
we determined we needed that as a result of 9/11 primarily in 
the information systems technology area. Also, we need 
additional support people in mail and messenger, simply because 
we are in so many different locations now.
    Mr. Hoyer. I think 9/11--by the way, I didn't mean to imply 
that is not a legitimate reason for doing things. But----
    Mr. Larsen. I understand.
    Mr. Hoyer. It is hard to be very credible when you asked 
for the same thing 12 months ago and then say the reason we 
need it is 9/11. That is all I meant.
    Mr. Larsen. I understand.
    Mr. Hoyer. National Security Council, $2 million 
additional. That is 27 percent.
    Do you want to go back?
    Mr. Daniel. Back to the White House. $25 million is for 
homeland; $2.6 million is U.S. Freedom Corps.
    Mr. Hoyer. How much?
    Mr. Daniel. $2.6 million.
    Those are the two major programmatic changes again.
    Mr. Hoyer. Okay. Now, to--the $23 million you indicate is--
now it is obviously for much more than 20 additional people, or 
I would like to come to work in that office.
    Mr. Daniel. That was for the White House.
    Mr. Hoyer. I have gone on. I raced on to the next item of 
Office of Administration. $23 million, of which there were 20 
additional people. My observation was if that is $23 million, I 
want to go to work for you if I can.
    Mr. Larsen. There are a few more things.
    Mr. Hoyer. I got you. What are they?
    Mr. Daniel. Okay. The $10 million focused on the emergency 
specifically, and then there is another----
    Mr. Hoyer. When you say ``focused on the emergency,'' is it 
something more specific than that?
    Mr. Daniel. Yes, sir. I actually have a list.
    Mr. Hoyer. Again, I am going to make the point at the end, 
so you can be thinking of it. I want to know who administers, 
for instance, the $25 million. Do you administer that?
    Mr. Larsen. Which $25 million?
    Mr. Hoyer. In the White House office.
    Mr. Larsen. Yes.
    Mr. Hoyer. So that who--who hires the people in that 
office?
    Mr. Larsen. Well, the White House staff will determine who 
they hire.
    Mr. Hoyer. Mr. Ridge doesn't have authority to hire and 
fire his people?
    Mr. Larsen. Yes. He will make a selection. The process for 
hiring is the operating officials will make the selection of 
who they want. Then that person is cleared through a security 
check, background investigation. That person is also run 
through a drug test. The appropriate paperwork is filled out 
and is signed off on by counsel's office.
    Mr. Hoyer. I really--Mr. Larsen, my point is not so much 
the process, which I presume every White House person goes 
through. It is Mr. Ridge's authority, dealing with his budget.
    Again, let me make the point. Some people say, well, he 
really doesn't have line item authority over those billions of 
dollars. He just advises. That is true. My presumption, though, 
he does run the Office of Homeland Security. He is the boss in 
that office.
    Mr. Larsen. That is correct.
    Mr. Hoyer. If he is the boss that--we have bosses of 
agencies come in here. So you understand, Gary Bauer, who was 
President Reagan's Director of the Office of Domestic Policy--
--
    Mr. Larsen. Yes.
    Mr. Hoyer [continuing]. He testified on his budget before 
this committee. He didn't say there was precedent that he 
hadn't been advice and consent of the Senate, or that he was an 
advisor to the President. He came and he testified right where 
you are sitting, not in this particular hearing room, on his 
budget.
    The Administrator of the National Security Council has 
testified before this committee on numerous occasions.
    Now it so happens we have reduced the number of hearings 
and we don't take the smaller agencies, but it was not a 
judgment that was made, as far as I know, that the NSC was no 
longer under our purview. It was simply that we had reduced the 
number of hearings that we have.
    Hopefully, you get my point. While I think you are 
obviously overall responsible for these budgets, I really do 
believe that the person--am I correct--who decides how much 
money he needs, how many people he needs, what level of pay 
they need, in other words, what kind of talents they need at 
what levels for that $25 million is Tom Ridge?
    Mr. Larsen. That is correct.
    Mr. Daniel. Mr. Hoyer, I can answer your question.
    Mr. Hoyer. Yes, sir.
    Mr. Daniel. Okay. OA's $5.6 million is for rent, and it is 
$2 million for the FTE.
    Mr. Hoyer. That is additional rent?
    Mr. Daniel. The additional rental space.
    Mr. Hoyer. For the extra 20 people?
    Mr. Daniel. No, the rental space here is really for the new 
facilities we have started to pay for as a result of 9/11.
    Mr. Hoyer. You have moved some of the people out of----
    Mr. Daniel. Exactly. And also another $5 million for the 
data center. When we originally sent our estimate in, we 
identified $15 million.
    Mr. Hoyer. It is actually $20 million?
    Mr. Daniel. Yes.
    Mr. Hoyer. The Clinton White House, as I recall, had that 
problem as well, increasing its request from time to time--he 
says with emphasis.
    Mr. Daniel. And another $1.5 million is for--this is the 
year we need to renew our base IT contract. We have a large 
contractor there. So we are projecting that.
    Mr. Hoyer. All right. So we are up to 12.
    Mr. Daniel. Another $2 million for telecommunications costs 
for the new office space.
    Mr. Hoyer. I am sorry? New telecommunications for the new 
office space?
    Mr. Daniel. In essence, again as a result of having the new 
facilities, we are still extending our networking, and we have 
to bring it up. So it is new IT costs associated with that.
    Mr. Hoyer. It was 1.5, right?
    Mr. Daniel. The 1.5 was for the base. When we looked at the 
fact that we are going into a new contract, the regular 
inflation factors are just not--was just not enough. We 
inflated our whole program about 1.8 percent. That was not 
enough. We really looked specifically at that industry, because 
that is a significant part of our costs.
    Mr. Hoyer. $2 million to telecom then. That gets us up to 
about 14. We have got another 10 to go, or 9 to go.
    Mr. Daniel. We have given some of that. I have the whole 
list.
    Mr. Hoyer. Why don't you provide that for the record?
    Mr. Daniel. No problem.
    Mr. Hoyer. That is kind of my intent.
    [The information follows:]

Fiscal Year 2003 Budget Increases White House Office of Administration, 
                       National Security Council

    The White House's $29,928,000 increase includes $24,844,000 for the 
Office of Homeland Security (OHS), $2,600,000 for USA Freedom Corps, 
and $2,484,000 for other White House requirements. The primary OHS 
costs are $11,139,000 for salaries and benefits, and $10,999,000 for 
OHS contractual services. Other components of the increase include 
$1,337,000 for OHS travel and advisory board activities, as well as 
lesser amounts for communications, transportation, printing, supplies, 
and equipment. The USA Freedom Corps costs include salaries/benefits 
($800,000), travel ($600,000), and services ($1,200,000). The White 
House increase includes the general 2.6% pay raise and inflationary 
adjustments for travel, transportation, space rental, printing, 
communications, services, and supplies. Other White House increases 
include equipment and White House Communications Agency costs (military 
salaries and life-cycle equipment replacements).
    The Office of Administration's $23,173,000 increases includes 
$20,957,000 associated with requirements as a result of September 11, 
and $2,216,000 for other requirements. Major components of the 
``emergency'' requirements include additional personnel to support the 
new office locations and projects ($2,271,000), space rental for the 
new office locations and the Offices of Homeland Security and Combating 
Terrorism ($5,591,000) and information technology efforts resulting 
from the emergency ($12,290,000). The major components of the increase 
for the other OA requirements include $658,000 for inflation and 
$1,480,000 for start-up cost associated with a new information 
technology facility contract.
    The National Security Council's $2,031,000 increase includes 
$1,590,000 for the Office of Combating Terrorism (OCT) and $441,000 for 
other requirements. Salaries and benefits constitute the bulk of the 
increase for OCT ($1,304,000), along with lesser needs for travel, 
transportation, communications, printing, services, supplies, and 
equipment. The other NSC increase covers State Department detailees who 
become reimbursable in FY 2003 ($299,000) and inflation ($142,000).

               National Security Council Budget Increases

    Mr. Hoyer. There is the National Security Council, 27 
percent increase, $2 million.
    Then--Mr. Chairman, I will end with that. That is the 
large--the trade representative is the other large increase.
    Mr. Larsen. Mr. Hoyer, we have broken out all of the 
increases in our original submission. What we will do is pull 
those pages. It explains in great detail each--by object class 
what all of the increases for each of the agencies are. We will 
be happy to give you those.
    Mr. Hoyer. Okay. Thank you, Mr. Chairman.
    Mr. Istook. Thank you, Mr. Hoyer.
    Mr. Larsen, Mr. Daniel, we appreciate your taking the time 
this afternoon; and, obviously, we will have a number of 
questions for the record to submit to you.
    Mr. Larsen. Thank you. Appreciate it.
    Mr. Istook. We stand adjourned.
    Mr. Hoyer. I may have--I don't want to botch your time, but 
I want to go back to you for questions. I have some other 
questions.
    Mr. Istook. I was prepared to close unless you had further, 
but I don't want to cut you off.
    Mr. Hoyer. Thank you. If I can.
    Mr. Istook. Never mind.
    Mr. Hoyer. Having said that--let me submit, Mr. Chairman, 
the rest for the record. Then if I have follow-ups on that I 
will follow up with you.
    Mr. Larsen. Yes, sir.
    Mr. Hoyer. If you could get those within the next 45 days, 
that would be very helpful.
    Mr. Istook. Never mind the never mind. We stand adjourned.

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
                                          Thursday, March 14, 2002.

                    OFFICE OF MANAGEMENT AND BUDGET

                                WITNESS

MITCHELL E. DANIELS, JR., DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET
    Mr. Istook. Good morning. I'm pleased to welcome the 
director of the Office of Management and Budget, Mitch Daniels. 
We regret, Mr. Daniels, that there was a hold-up at security, 
you getting in, but we are glad that you are here.
    As you know, Mr. Daniels, a great deal has changed since we 
last saw each other in a heartwringing setting. Not only did we 
have the most horrible date in our Nation's history on 
September 11th, but you have had a year to get settled in the 
new administration.
    Last year you had been on the job for about five months, 
and we both know that right now, tension between the branches 
of government that we are each involved in is normal and 
expected. Both branches have responsibilities, the executive 
and the legislative, regarding government spending.
    But the tension that is normal we all know is too high 
right now. I think it is fair to say that there is no honeymoon 
currently because of that. I would like to make some general 
observations, if I may.
    Part of the conflict concerns earmarks by Congress where 
money will be spent. Now the executive branch may not label its 
decisions as earmarks, but executive branch decisions are no 
purer than decisions made by the Congress. I know of some 
earmarks by Congress that I believe are bad. I also know of 
some that I believe are good. But if Congress doesn't specify 
where and how to spend or not spend, who does?
    The answer is the executive branch. I know of some 
executive branch decisions that I believe are bad, and I know 
of some that I believe are good. It is the same as I feel about 
decisions made by the Congress. I want to encourage all of us 
to focus on the quality of spending decisions, not the source, 
because neither branch of government is perfect.
    As you know, Director, the Committee on Appropriations 
derives its authority from Clause 7 of Section 9 of Article 1 
of the U.S. Constitution that states, no money shall be drawn 
from the Treasury but in consequence of appropriations made by 
law. This is unique and powerful authority. It comes with 
considerable responsibility that I and everyone else take 
seriously.
    First, it requires us to have a full, complete 
understanding of Federal programs and operations. It is our 
business to understand where the money is going and what it is 
being used for. It is our job to understand the detailed 
operations of agencies and programs and to ensure that 
appropriated dollars are not only used for their intended and 
authorized purposes, but also are being used wisely.
    I have to be direct, Mr. Director, that I am dissatisfied 
with the quantity and the quality of information coming out of 
the administration as it relates to homeland security. This is 
a major issue. It involves billions of taxpayer dollars. More 
importantly, it involves millions of lives.
    This afternoon we will be hearing from Phil Larsen, Special 
Assistant to the President for Management and Administration. 
He will be testifying on behalf of the Executive Office of the 
President, including the Office of Homeland Security. So my 
specific questions relating to that office I will reserve for 
him to the extent that we can get the answers.
    However, I do believe it is critical that you understand my 
dissatisfaction because as Director of Office of Management and 
Budget, you have significant control over the information that 
comes from the administration and the substance and tone of 
official communications between our branches.
    This committee needs more open, honest and direct 
communication with the administration. There is concern about 
testimony delivered by the Assistant Secretary for Civil Works 
recently. I am even more concerned by the insistence by the 
administration that Governor Ridge is not going to testify. I 
am interested in hearing OMB's involvement in these and other 
decisions that can have a chilling impact on the appropriations 
process and the relationship between our branches of the 
government.
    The President is requesting $38 billion for homeland 
security in the new fiscal year. Yet the Director of Homeland 
Security has not agreed to appear before the Congress. Other 
witnesses who do appear are held to standards that require them 
unfortunately to withhold important information about the 
budget process, the formulation of it. It seems to me that the 
President and the country are not the best served by that.
    Let me tell you what I relate this to. This is very similar 
to the concern that I had with the last administration 
regarding national defense. As a member at the time of the 
defense subcommittee, I witnessed general after general coming 
before our subcommittee and feeling forced to stick to the 
script from the White House rather than giving the 
straightforward, unvarnished testimony about national defense 
matters that this Congress should have and must have. And I 
believe our national security suffered due to the lack of the 
candor. The current administration is having to make up for 
some of the problems that were caused by the lack of that 
candor.
    I can't be more direct than this, to say the exchange of 
information between the executive and legislative branches on 
all appropriations matters needs to be free-flowing, honest and 
comprehensive.
    Mr. Daniels, I realize there is some tension because of 
comments from you about Congressional spending: Don't just 
stand there, spend something, that remark. I share your concern 
that Congress does not always discipline itsspending. But I 
have to say neither does the White House and neither do 
administrations. I believe you will find we are relevant when it comes 
to drawing taxpayers' money from the Treasury, and it needs to be for 
programs that are fully understood and fully explained. If they are 
not, we should not expect Congress to fund those programs.
    As you know, the administration again is asking for 
considerable latitude regarding the funds made available for 
the White House operations. Once again, the President is 
requesting the consolidation of all White House funds into one 
lump sum appropriation.
    The President also is requesting broad new authority 
governmentwide for a request of the discretionary transfer 
authority among appropriations accounts. We have been given 
assurances from the administration, especially with regard to 
the Executive Office of the President, that despite 
consolidations and transfer authority, information would 
continue to be provided to Congress for oversight purposes, the 
same as we normally receive now, that it would not be 
diminished.
    As you know, perhaps more than anyone else, I tried to help 
you last year with the consolidation of these accounts within 
the White House. But now the situation regarding the Office of 
Homeland Security gives me new skepticism about whether our 
oversight would be diminished if we granted that consolidation 
or that transfer authority. We need more trust between the 
Office of Management and Budget and the Appropriations 
committee than we have right now.
    Let me quote from the Constitution on some matters that 
relate to homeland security. Article 1, Section 8, Clause 1.
    It is the Congress that is charged expressly to provide for 
the common defense and general welfare of the United States. 
Now, that is homeland security. It is there in the very first 
enumeration of powers of the legislative branch. Other parts of 
Article 1, Section 8 specify that it is the Congress which 
must, and I quote here, define and punish offenses against the 
law of nations, to declare war, to make rules for the 
government and regulation of the land and naval forces, to 
provide for calling forth militia, to provide for organizing, 
arming and disciplining the militia, and for governing such 
part of them as may be employed in the service of the United 
States.
    All of those are parts of homeland security. Too often 
these provisions of the Constitution are overlooked. But they 
make clear the use of the military and the protection of our 
homeland is not as simple as designating the President as 
Commander in Chief. It involves both branches. Ours is a system 
of shared and balanced power. It is incumbent on all of us to 
resolve any gray areas by discussion and agreement, not by 
having one branch dictate to the other.
    What if more government responsibility were to be delegated 
to someone who is given the title of presidential assistant in 
theory? Because I understand that is the theory that the 
administration utilizes in theory, that delegation of someone 
given that title could be used to deny information to the 
Congress about government policies, spending and activity.
    An executive order could be used to try to override the 
laws, even the Constitution, and that would be wrong. I know 
this President respects the Constitution of the United States 
just as much as I do. But we have to look to the powers and 
actions of an office, not its title, to resolve this issue of 
accountability to the Congress. The decisive point--and I have 
read carefully the executive order creating the Office of 
Homeland Security. The decisive point is that the Office of 
Homeland Security and its director have been entrusted by the 
President with direct authority that goes far beyond simply 
being an advisor to the President.
    There is consensus that one of the overriding challenges of 
homeland security is coordinating and exchanging information 
between Federal agencies and between Federal agencies, not only 
among themselves, but between them and State and local branches 
and units of government.
    That coordination is not only a responsibility of the 
executive branch, but also the legislative. If it fails to 
happen, all of us can and should be held responsible and 
accountable.
    If you look at the October 8th, 2001 executive order, 
Number 13288, that establishes the Office of Homeland Security 
and its director, given the title as assistant to the President 
for Homeland Security, we find the authority granted to that 
director goes well beyond simply being an advisor to the 
President.
    In a six-page, single-spaced, detailed order, only once, 
once, is his mission declared to be that of simply giving 
advice. That is when he is charged with reviewing and giving 
advice regarding budget matters. The remainder of the executive 
order is devoted to grants of actual authority.
    For example, I quote from the executive order: To 
prioritize the requirements for foreign intelligence relating 
to terrorism, to ensure that intelligence and law enforcement 
information relating to homeland security is disseminated to 
and exchanged among appropriate executive departments and among 
State and local governments and private entities. To coordinate 
domestic exercises and simulations and coordinate programs and 
activities for training Federal, State and local employees. To 
ensure that national preparedness programs and activities for 
terrorist threats or attacks are developed, and are regularly 
evaluated. To ensure the readiness and coordinated deployment 
of Federal response teams. To coordinate efforts to improve the 
security of the United States borders, territorial waters and 
air space. To develop criteria for reviewing whether 
appropriate security measures are in place at major public and 
privately-owned facilities, to coordinate efforts to protect 
transportation systems, to coordinate efforts to protect United 
States livestock, agriculture and systems, and to coordinate 
the strategy of the executive branch for communicating with the 
public in the event of a terrorist threat or attack.
    Whether it is the director of the FBI, the attorney 
general, the head of any other portion of Federal law 
enforcement or the military, we cannot as a Congress hold them 
accountable for this coordination if their decisions do not 
come from them, but come from the Office of Homeland Security 
to whom the President has granted this express authority.
    To deny the testimony of the Office of Homeland Security is 
to deny this Congress its Constitutional role of coordinating 
intelligence and responses to terrorist threats.
    The duties that are granted to the director of Homeland 
Security are also shared duties with the Congress. They require 
accountability with the Congress. Any effort to cut off the 
normal interaction with the agency heads and policymakers, 
including public hearings where appropriate, and closed, secure 
hearings where necessary, any effort tocut that off is not only 
wrong, but it violates the U.S. Constitution's express grant of 
enumerated powers to the Congress.
    It is my full intention that the product of this 
subcommittee's work must and will reflect this enforcement of 
the U.S. Constitution, as every Member of this House has taken 
the sworn oath to preserve, to protect and to defend.
    I look forward to hearing your testimony, Mr. Daniels. I 
realize that is a long comment, but I felt it was very 
important that it be made, as are other comments that Members 
have.
    So we look forward to hearing your testimony and very 
pleased to have our Chairman of the full committee, Chairman 
Young, with us. And I would recognize him next for the remarks 
that he may have.
    I will be happy to recognize which ever one of you wants to 
go first.
    Mr. Hoyer. Mr. Chairman, I believe, that first of all, I 
want to adopt almost everything that Mr. Istook said. There was 
some disagreement we had in there about the former 
administration, but I adopted everything that he had to say, 
and because I think on the issue, the Chairman of our committee 
and the Ranking Member of our committee speak for all 
irrespective of party, but based on the Constitution.
    I would want to urge--I would want to yield to Mr. Chairman 
for his opening statement, to our chairman, Mr. Young.
    Mr. Young. Mr. Hoyer, thank you. Mr. Chairman, thank you 
very much. And, Mr. Daniels, welcome to what will probably be a 
lively and interesting subcommittee hearing. I will keep my 
remarks brief because we actually invited you to hear to hear 
what have you to say. So we want to give you plenty of 
opportunity for that.
    But I wanted to--I had a lot of things I wanted to say. Mr. 
Istook said some of these things for me. But I read an 
interesting article in The Washington Post this morning. And 
I--and, much of it I agree with, as a matter of fact, written 
by Mr. Robert D. Novak.
    But the last sentence of his column really disturbs me, 
because it says, President Bush is losing the war against the 
appropriators and can lose it badly.
    Mr. Daniels, there is no war between the President of the 
United States and the Appropriations Committee of the United 
States House of Representatives. To the contrary, I believe our 
record is such that when the President said a budget number, 
the Appropriations Committee worked within that budget number.
    The President has spoken to me personally on several 
occasions, complimenting us for having done that. And I would 
tell you that that was not always easy, because there were many 
interests that we considered and had to reject because we were 
staying within the President's budget number. But we are--we 
are supportive of the President, at least the majority party 
is, and actually the minority party on the Appropriations 
Committee has been very supportive of the President.
    But when we talk about war, the President has a--a 
difficult role in the world today. September 11th changed 
everything and President Bush was presented with a challenge 
more serious than any president has faced since December the 
7th, 1941.
    And I would say to you that, and I said to the President 
and to the public as often as I can, he has just responded in 
an outstanding fashion. He has been a dynamic leader and the 
Congress has lined up behind him to be totally supportive. In 
fact, on September the 14th, Mr. Obey and I introduced an 
emergency supplemental spending bill we passed the same day, 
and that bill actually gave the President a tremendous amount 
of flexibility in how he used the 40 billion. He had tremendous 
flexibility on the first 20 billion, something we don't 
normally allow chief executives.
    But in the--in this case, because we had such a challenge, 
we did that. So we are not at war with the President. We have--
we have had some differences with the Office of Management and 
Budget, and that is not unusual. If--if this were a different 
administration and another Office of Management and Budget 
Director was sitting here, we would still have differences, 
because your job is numbers. Our job is what do those numbers 
reflect? What do we do with those numbers? That is one of the 
things that we have to deal with. And I compliment you. You do 
a good job with the numbers. Occasionally on some we don't 
understand what those numbers do.
    But, anyway, we are not at war. We are here to be on the 
same team. While we may have differences on occasion, we will 
try to keep those differences respectful and deal with them 
directly. And I just want to assure you, and I hope that you 
will assure the President, that this committee is not at war 
with him. To the contrary, we are very, very supportive. And 
speaking for this Chairman, I think he has done just a 
tremendous job faced with the real honest to God challenge that 
this country that he leads was faced with on September 11th.
    I may have a little different feeling from my subcommittee 
chairman, Mr. Istook, on the Homeland Security director. 
Governor Ridge has been very forthcoming with our--the 
membership of our committee. We have met with him on numerous 
occasions in a bipartisan fashion, with the chairmen of our 
subcommittees, ranking members of our subcommittees. He has 
been as forthcoming as he possibly could b, considering the 
fact that we are still in a state of organization and still in 
a state of determining what do we do today, what do we do 
tomorrow to protect our homeland.
    I will tell you that this committee is totally committed to 
protecting our homeland. We are not going to leave anything 
undone that relates to protecting our citizens and our country, 
whether they are here at home or whether they are overseas, 
whether they are abroad.
    So as we proceed with the hearing, understand that this is 
not a war, but we have a legitimate role to play based on the 
Constitution. I think that you would be one of the first ones 
to condemn any appropriator who voted for something not knowing 
what it was about. You may disagree with what it was about, but 
I don't think that you or anyone would want us to vote money 
for something that we have no knowledge of. And in most cases, 
the only knowledge we have is from our hearings with 
administration officials or our field visits where we actually 
have a chance to look at the projects.
    But that is an obligation that most of us take very 
seriously under the Constitution, which was created by our 
Founding Fathers in the form of an equal but separate authority 
with the legislative branch, the executive branch, and the 
judicial branch.
    So having said that, Mr. Chairman, I yield back to you, and 
look forward to an interesting hearing.
    Mr. Istook. Thank you, Mr. Chairman.
    Mr. Hoyer, had you completed your remarks or were you 
deferring to Chairman Young?
    Mr. Hoyer. No, I hadn't quite completed my remarks.
    Mr. Istook. If you would like to complete your remarks.
    Mr. Hoyer. I would. Thank you very much. I talked to the 
Ranking Member, and would have been pleased to yield to him, 
but he suggested that I go first so I will do that.
    Mr. Daniels, I want to welcome you to your hearing. This is 
a very serious hearing. It is about much more than the budget 
of the Office of Management and Budget. You have the 
responsibility, of course, of overseeing what the President--
the entire budget for the President, and I want to talk about 
that.
    You and I had a good visit in my office, I think it was a 
candid visit, last year. The last time you appeared before this 
committee, I referred to one of your predecessors, and I also 
expressed my concern that the President's tax cut was going to 
limit our ability to pay down the debt and invest in our 
people, and that we could possibly face huge deficits similar 
to the 1980s and 1990s. I thought that was wrong.
    Last year, as well, I quoted from David Stockman's book, 
one of your predecessors. I quoted from that book because I 
think it was a lesson not just for David Stockman, but for us 
all. I will quote again from his book at page 13 of the 
prologue. He said this: I knew we were on the precipice of 
triple-digit deficits. They, of course occurred, as you know. 
And national debt in the trillions. In fact, we added almost $4 
trillion to the debt in 12 years. Destructed profound 
dislocations throughout the entire warp and woof of the 
American economy. That happened.
    He goes on to say, and this is I think hopefully for 
contemplation, not only by you but by us all, but I kept quiet 
and tried to work inside, Mr. Stockman said. It goes on to say 
after November 1981 the administration locked the door on its 
own disastrous fiscal policy jail cell, and threw away the key. 
The President would not let go of his tax cut. Cap Weinberger 
hung on to dear life to the $1.46 trillion defense budget. Jim 
Baker carried around a bazooka, firing first and asking 
questions later to anyone who mentioned the words social 
security. Deaver, Meese and others ceaselessly endeavored to 
keep all of the bad news out of the Oval Office and off the 
tube. The Nation's huge fiscal imbalance was never addressed or 
corrected; it just festered and grew.
    That was David Stockman writing about his performance and 
his concerns and his failures really as director of OMB. As 
director of OMB, it is, in part, at least, your job to shape 
the fiscal policy of this administration.
    Last November, the President mentioned that his 
administration, and I quote, brought sorely needed fiscal 
discipline to Washington. I don't believe that is what has 
happened. We are in the middle of the worst fiscal reversal in 
the Nation's history. The budget you presented to us last year 
projected a surplus of $5.6 trillion. The budget you submitted 
this year contemplates a 10-year surplus of $1.6 trillion. If 
you subtract from that the interest we will pay because of the 
debt we do not pay down, it goes down to $.6 trillion. That is 
a loss of $4 or $5 trillion in the space of some 10 months.
    In your statement, you state that the past, and I quote, 
must give way to an era of accountable government. I agree with 
that. The loss of $4.6 or 5 trillion dollars in one year does 
not seem to me to be accountable government.
    We are in the middle of the worst fiscal reversal, as I 
said, in the Nation's history. The President's budget confirms 
the tax cut accounts, not my observation, not CBO's, your own 
Office of Management and Budget, 43 percent of that reversal.
    This is not rhetoric coming from our party, it is on Table 
2-4 on page 28 of your submission. CBO estimates that we will 
spend the entire Social Security and Medicare surplus and then 
some this year, next year, and the year after that. That is not 
a lock box, that is a Social Security hemorrhage.
    CBO estimates that we will remain in an on-budget deficit 
at least until 2012, which means we will continue to spend 
Social Security surpluses for years to come.
    Now, I carry around page 126. I fold it up, put it in my 
pocket and use it all of the time because there are some who 
say that spending is the problem. Congressional pork, their 
spending, that is the problem. There is one person in America 
who can stop spending in its tracks and only one, and that is 
the President of the United States. In my career, 20-plus 
years, and particularly during the 12 years that President 
Reagan and President Bush led this country, no vetoed 
appropriation bill requiring more spending was ever passed by 
the Congress of the United States. Ever. It didn't happen.
    There was only one appropriation bill in which a veto was 
overridden. That was a bill that President Reagan vetoed in 
1983 and his veto message said we did not spend enough money on 
defense in that particular instance. It was the only veto that 
was overridden ever in my history.
    Let me state another figure that comes from your page 126 
which gives, in my opinion, life to the assertion that spending 
is the problem. If you will look at page 126, in the 12 years 
under President Reagan and President Bush, we spent more as a 
percentage of GDP than we spent in any year before that, or in 
any year thereafter. For the eight years of the Clinton 
presidency, we spent less of GDP, not more, and we kept coming 
down.
    We have now under President Bush frankly reversed that 
trend.
    Now, let me say a couple of things about specifics. Federal 
employee pay. You have recommended 2.6 percent versus the 4.1 
percent for uniform personnel. On February 2nd an 
administration official was quoted in The Washington Post as 
saying the military pay policy is responsible and sensible 
because they are protecting our citizens and the homeland 
against foreign countries--foreign enemies, which is one of the 
foremost priorities of the United States Government. I agree 
with that.
    I agree with the fact that the uniform personnel ought to 
get that 4.1 percent. I disagree with the notion that Federal 
civilian employees should receive less. Mr. Director, I brought 
with me today several pictures of others in Federal service, 
who, in my opinion, are also on the front line. All of these 
people, whether they are law enforcement officials, we have 
people who went into buildings with anthrax, biological, 
chemical concerns; they are on the front line. They are subject 
to risks as well. Whether they are FBI agents, CIA personnel, 
NSA personnel, CBIRF down--my own personnel, some of which are 
uniform, some of which are not, they are on the front lines. I 
would hope that we candeal with that. And I will have some 
questions on the disparity.
    No Director of Office of Management and Budget, however 
hard they have protested against the formula, has come up with 
an alternative formula. Not one. That is not fair. That is not 
accountable. That is not honest dialogue.
    Lastly, and this, I hope, is not going to be contentious, I 
want to mention election reform. The Help America Vote Act 
passed this House and authorizes $2.65 billion to overcome the 
deficiencies that we saw that were not partisan in nature, but 
we are in a democracy. Our chairman has talked about the 
Constitution. That Constitution guarantees to every American 
the right to vote, and guarantees to every American, I believe, 
that their vote will be counted, and counted accurately. I 
would hope that we could fund that at the levels authorized. 
Mr. Director, I would hope that consistent with the agreement 
of our Chairman, of Speaker Hastert, that we would fund a sum 
of $650 million in the supplemental, the fiscal year 2002 
supplemental that you will be sending down shortly to fund that 
effort, to make sure that the most basic right that an American 
has, the right to vote, is protected.
    Mr. Director, I look forward to your testimony. Again, I 
quote Stockman not because I think it embarrasses Stockman or 
because he was Republican. It is because he was involved, as I 
have indicated to you, at the central point. Mr. Darman was 
badly criticized for his advice to the President on signing the 
1990 agreement. My opinion is our deficit would have been much 
greater had Bush the First not looked the fiscal realities in 
the eye and said we have got to take this step.
    I thank you for your attention. I thank the chairman for 
his leniency on the time.
    Mr. Istook. Thank you, Mr. Hoyer. Mr. Daniels, before your 
testimony, I want to recognize the full committee's Ranking 
Member. I realize you are being subjected to listening to more 
than you would normally expect, but it is, frankly, however you 
may characterize it, it is a tribute to your position and the 
appreciation for your capability that has attracted the full 
Chairman as well as the full committee's Ranking Member today.
    Mr. Daniels. It is a learning experience.
    Mr. Istook. It is a learning experience. But it is a 
testimony to the--personally the respect that I do have for you 
and the efforts that you are making, and the significance of 
your position, of your work. So, Mr. Obey, I recognize you.
    Mr. Obey. Mr. Chairman, I--because I have an extensive set 
of questions that--I would prefer to--to hold until the 
question period, because I don't want to impose on the 
committee's time twice.
    At this point I would forego any opening statement except 
to say that I agree with the opening statement that you made. I 
think it is an important institutional responsibility that you 
are trying to carry out, and I fully support the contents of 
your statement.
    Mr. Istook. Thank you, Mr. Obey. We will defer you and 
grant you leeway when your turn comes to the order of 
questioning.
    Mr. Daniels, we would be happy to receive your testimony. 
Of course, it is our practice to swear witnesses. If you would 
rise, please.
    [Witness sworn.]
    Mr. Istook. Thank you.
    Normally, Mr. Daniels, I ask people to give us an executive 
summary since your entire written testimony will be in the 
record. But I realize you may want to expound at more length 
than normal this morning. So we would be happy to receive your 
testimony.

                   Opening Remarks--Director Daniels

    Mr. Daniels. I am sure the committee will be glad to know I 
intend to expound at less length than necessary and spare you 
the written testimony which I was pleased to submit.
    Let me just make a few, I hope, brief comments and go 
straight to the important part of the proceeding.
    I am very pleased to represent the 500-plus people of the 
Office of Management and Budget at this hearing, which at least 
nominally has to do with our budget and our stewardship of our 
responsibilities. And I would simply say, as always, that I 
honestly believe that these are the most talented, certainly 
the hardest working and most conscientious career servants, 
public servants that I think that the Federal Government has 
anywhere. Their fine qualities are not always universally 
acclaimed, but I am able to tell you from close hand 
observations that this is so.
    I would like to agree very strongly with the comments that 
your Chairman in particular made about this whole business of 
how we are working together. It always makes better copy and 
probably more interesting chit-chat when there are the 
disagreements, which are inevitable. But let's just look at the 
record. I think in our common endeavors we had an enormously 
successful 2001. For the first time in almost a decade, all 13 
appropriations bills were passed individually.
    But for the intervention of September 11th, I am convinced 
that the bills would have been enacted on time. We were well on 
track to do that. And, you managed to do that in the face of 
the war and turmoil that overtook us all. You also passed three 
supplemental bills under difficult conditions.
    And so, of course, there was disagreement and, of course, 
there were arguments about how that ought to occur. But from 
the President's standpoint, and I hope from all of yours, when 
you step back from it all, I think we ought to recognize the 
public interest was well served and that people conducted 
themselves appropriately and with results in mind.
    So I also completely disagree with the newspaper 
characterization which I had not seen but which you read into 
the record. I think in part this result was achieved because we 
had a lot of close consultation. And if there are more things 
we ought to do--I am speaking now in the context of the 
appropriations process, I know your interest is broader than 
that--we will do that. We began direct interaction with your 
staffs at the very beginning last year, at least I was told as 
a newcomer, earlier and more intensively and more regularly 
than has been the practice. And we are already engaged on doing 
that again this year. So if there is more we can do to share 
more information sooner with you, we are happy and determined 
to do it. I think we are off to a good start this year, too.
    Yesterday your colleagues on the Budget Committee took the 
first step forward. I think it was a very good step. It is 
consistent with the President's priorities, not exactly 
identical to what was submitted, but very, very close, and 
certainly, in the aggregate, responsible. And so I hope that we 
are embarked on a second successful year. The year will be 
different. And I guess if I were to make one plea to the 
committee, it would be the plea that the budget submission that 
the President has made, that we not approach this year's 
decisions on a business-as-usual basis. And I think we are 
going to have to remind ourselves of that from time to time as 
we focus on individual items that people feel passionately 
about. I hope someone on each occasion will remind the group 
that these are different times, and we have transcendent 
priorities, the protection of Americans and the defeat of a foe 
that is out to harm us, and that individual and territorial and 
lesser priorities, however important they may be in isolation, 
may have to give way this year, will have to give way, if we 
are to meet our most urgent needs and have some sense of 
responsibility collectively.
    In our very small way at OMB, we have tried to reflect this 
different attitude. We submit to you a budget for OMB that is 
flat, frozen from last year. And we think we can do our work, 
we can do it more productively than we did last year and serve 
you and serve the President and serve the public as well as or 
better. That is the budget we submit.
    In the event there are questions, I will be happy to defend 
it. I thank the committee for its time and I thank you all for 
elevating the discussion to topics that are important to us 
all. The subject of homeland security and how its Director 
should interact with this committee and with the Congress is a 
legitimate one. It is not my particular area. I will answer 
questions as best I can. Our counsel and others have first 
responsibility here.
    I will just simply say that I know from listening to 
discussions about it, that the President and--and his support 
team absolutely affirm the constitutional importance of the 
Congress and its primacy in spending the public's money. And 
there may be differences of interpretation when it gets to a 
single job, and I think that is what is afoot here, not a 
philosophical difference, and no constitutional disrespect at 
all.
    So I thank you for this opportunity and look forward to 
questions on matters large or small.
    [The information follows:]

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    Mr. Istook. Thank you, Mr. Daniels.
    I appreciate your approach. As you understand, you are 
probably, as far as within the Executive Office of the 
President, the highest ranking official that appears before us, 
which is why elements such as the Office of Homeland Security 
are brought to your attention for that very reason. Even though 
we recognize that is not your personal, principal 
responsibility, although you interact with everyone involved 
with it.
    I would like to say first, one, I visited yesterday with 
individuals from OIRA and I appreciate the progress that is 
being made regarding something we talked about at length last 
year on the limited English proficiency regulations, as they 
are called. But I won't go into detail on those today. But I 
did want to express appreciation that there is some progress 
being made in that area. Whether it is fast enough, we might 
debate, but the fact is there is progress being made.
    Let me ask you first, regarding a key part of OMB, the 
management side, there are a lot of initiatives, and frankly in 
the discussion of homeland security they are not attracting all 
of the attention that they might. But I know the administration 
has a number of initiatives underway trying to make the 
government more effective, more efficient, trying to take 
functions that should be performed in the private sector and 
have them performed by the private sector, outsourced, the FAIR 
Act and so forth.
    What I wanted to ask, in looking at some elements of the 
progress, would you explain to us how many of the people that 
are involved in this effort are within OMB, and how many that 
are actively engaged in that effort are out in the other 
agencies? I am concerned with reports about some things not 
having the level of coordination that you want in these efforts 
and, therefore, I am concerned with what is the mix between 
people within OMB and people that are in other departments that 
are tasked with this?

                     PRESIDENT'S MANAGEMENT AGENDA

    Mr. Daniels. Mr. Chairman, as it has to be, the vast 
majority of people will be those in the departments. We are not 
an operating entity. We can only be a catalyzing, possibly, and 
a coordinating agent in most of the areas that the President 
has identified. We boiled down literally scores of possible 
targets to five, as you know.
    We work rigorously, tediously, to follow up to try to make 
certain that progress is being made. This is very difficult in 
an environment in which many of the incentives, carrots or 
sticks that would be available in a business or other context, 
are not available.
    But I think things are working well. The vast majority of 
the people working on it are people in the agencies and 
subagencies. The President's Management Council, which 
comprises the Number Twos, so to speak, at all of the agencies 
and key departments has been the board of directors, in essence 
for this agenda, and has its attention fixed on this. It will 
only work, we will only make progress, progress against the 
odds, if this becomes understood as a part of every appointee 
and every key SES leader's job. There have been many, many 
programs now involving hundreds of the key appointed and career 
leadership of the government to understand the agenda, 
understand how much importance the President attaches to it. So 
your caution is a good one. Your concern is the one that we 
started with. But we are working on it.
    Mr. Istook. I am not sure when we may have David taking on 
Goliath, and whether you have enough smooth stones in your 
slingshot.
    Also you have, although the Office of Homeland Security has 
its specific assignments, as far as making resources available 
to that office, there have been a great many people, of course, 
that have been detailed, transferred. And OMB is involved with 
the mix of that. Now as you gathered from my comments, my 
concern is that homeland security funds should go to those who 
can be held accountable for homeland security. This is all 
about accountability. Within the OMB, what has it taken in 
terms of the resources that have been devoted to gathering 
together the people from other aspects of Federal Government, 
bringing them into the orbit of the Office of Homeland 
Security, in whatever way? What has that demanded upon the--
what has that required of resource within OMB in order to make 
a, what they call a de facto, if not de jure, something that 
happens in fact, even though it may not be the formal legal 
structure, pulling things together and doing some very quick 
efforts to change the structure of homeland security by 
bringing those together?
    What has that required of OMB, of its resources, to be able 
to accomplish that task? And what parts of it are yet to be 
done?

               OMB RESOURCES FOCUSED ON HOMELAND SECURITY

    Mr. Daniels. As you would expect any budget office to do, 
we promptly shifted resources from lesser priorities to higher 
ones. In fact, on the day Governor Ridge was appointed, we 
canvassed our organization and assembled a dedicated unit of 
people whose new job would be homeland security.
    Mr. Istook. This is within OMB?
    Mr. Daniels. Within OMB. And those people have been and 
will continue to work at the behest of and hand in hand with 
Governor Ridge and his office. I didn't want them to try to 
have to try to build a parallel structure along with all of the 
other problems they were facing.
    Mr. Istook. How many OMB people needed to be delegated to 
that particular task?
    Mr. Daniels. I think we have about three or four people 
working full-time which is in addition to everyone else working 
at their normal duty station. And I think Governor Ridge has 
affirmed on every occasion that one problem that was forecast 
but never happened was difficulty directing resources when he 
believed that given the investment or expenditure or new budget 
request was necessary. We saw it as our job to go get that 
done.
    Mr. Istook. You have been able to do that without--for 
example, this interfaces with your request for greater 
authority for the President to be able to transfer funds across 
accounts. But what has been necessary with the Office of 
Homeland Security as far as bringing those funds together, 
bringing the accounts together, transferring things and 
gathering them, you have been able to do it with one, of 
course, the special appropriation that was made previously, but 
also within the existing law without great transfer authority, 
you have been able to put together those resources then.
    Mr. Daniels. It is what we are there to do. It has mainly, 
of course, been an additive process at this point and resources 
have not been the problem. Congress, of course, moved so 
aggressively and so supportively in a bipartisan way to act on 
these problems that we have had from the beginning more than 
enough money, and we still do, incidentally. As we had forecast 
in December, the amount of money that you enacted last year 
would last quite a long time. Four months into the fiscal year, 
only 26 percent of the money has been obligated. Three-fourths 
of it still remains unobligated. And, by the way, since Defense 
is running ahead of that number, in most departments well under 
20 percent of the money has actually been obligated so far.
    Mr. Istook. Defense is a greater percentage, you are 
saying?
    Mr. Daniels. That's correct. Over time, absolutely greater 
flexibility, the ability to move at least on a limited basis 
resources from some intended purpose to an emergent or 
emergency purpose would be extremely helpful. Now that would be 
true if we weren't in a war. I think we still would have asked 
for greater flexibility than has existed historically. I think 
that is very, very important. And this administration and every 
future administration needs a great deal more freedom to 
manage. If you want, as Congress does, a better managed 
government, we have got to work together to allow managers to 
do a good job. But I think that need for flexibility is 
accented at a time like this.
    Mr. Istook. Very good. We can have further discussions on 
that, but I need to provide time to Mr. Hoyer. Thank you.
    Mr. Hoyer. I yield to Mr. Obey.
    Mr. Obey. Thank you, Mr. Hoyer. Mr. Daniels, when the 
President came to town, he said he wanted to see a new way of 
doing things in this town, that he wanted to see cooperation 
between the branches of government and respectful consideration 
of each others' views. You and several others of the 
administration, in my view, have a severe attitude problem 
that, in my view, is getting in the way of the respectful 
relationship that ought to exist between the White House and 
the Congress as an institution. There has been lots that's been 
written about your relationship with the Congress. I don't 
really know you that well personally, but I do respect your 
personhood. I do respect the office that you hold. I do respect 
the institution of the White House. And I respect--well, that's 
not true--I respect almost everyone in public service. But I 
really believe that you and several others in the 
administration have demonstrated a condescending attitude 
toward the Congress as an institution that prevents our 
relationship from being as constructive as I want that 
relationship to be and that it needs to be. And I would like to 
illustrate what I mean and ask you a few questions along the 
way.
    How many people have you been elected to represent?
    Mr. Daniels. Zero, sir. I always told my daughters, for 
instance, that Brad Pitt and I have a lot in common because we 
got the exact same number of votes for President.
    Mr. Obey. I appreciate you being frank about that. That is 
true, that you have not been elected by anyone that I know of. 
You have been selected by the President and that's certainly 
important. But collectively, the 435 of us in this institution 
have been elected by over 280 million Americans in order to 
pursue their interests. This is a little book and it is not 
very impressive when you look at it, but it happens to run the 
show. It is the Constitution of the United States. Can you tell 
me where in the Constitution does it state that the Congress is 
a branch of government which is inferior to the executive?
    Mr. Daniels. Nowhere, sir.
    Mr. Obey. That is right. Where does it state that the 
legislative judgment should reside in the executive branch of 
government?
    Mr. Daniels. Same answer.
    Mr. Obey. That's right, it doesn't. In paragraph 1, section 
1, the very first sentence of the Constitution, after the 
preamble, it states, all legislative powers herein granted 
shall be vested in a Congress of the United States.
    I would like to take a look at some of your statements and 
actions in order to follow this line of thought. Where in the 
Constitution does it say that the executive branch should 
determine spending decisions?
    Mr. Daniels. Nowhere.
    Mr. Obey. That's right. Again on page 8, in article 1, it 
says no money shall be drawn from the Treasury but in 
consequence of appropriations made by law.
    Now this is the Appropriations Committee, and we are 
charged by the entire House of Representatives with the 
responsibility of producing appropriations, and I guess what 
bothers me is when I look at the number of statements that you 
have made publicly, it demonstrates to me an attitude which is 
at variance with the description of governance laid down by the 
Constitution.
    Example. Last July you spoke before the National Press Club 
and stated, quote, can we achieve greater freedom to manage for 
this President and future presidents from a Congress which I 
think inadvertently in many cases has tied many of our 
departments up in a morass of Lilliputian dos and don'ts? I 
assume everybody understands that the word Lilliputian comes 
from the book by Jonathan Swift outlining Gulliver's visits in 
the South Pacific. Lilliputians were people less than six 
inches high.
    You seem to like this analogy so much that you even used 
tax money to include a full color picture of Gulliver and the 
Lilliputians in the President's budget. And, frankly, I get the 
sense that you and other Cabinet members, or at least some of 
them, feel that you could get about the people's business if it 
weren't for the small-minded and inconsequential rabble on 
Capitol Hill that you have to contend with. And, frankly, I 
don't think you are the only person in the administration that 
appears to have that attitude.
    Secretary O'Neill, objecting last March to a Senate rule 
requiring reconciliation measures to be revenue neutral over 
the term of a budget resolution said this, quote, there is a 
very interesting thing that the rules that are created by just 
ordinary people are in some ways more and more like the 
Lilliputians tying us to the ground. I don't know why we have 
to live these rules. After all, they were only made by other 
people. And so far as I can tell, God didn't send them.
    And you yourself objected in front of the Senate Budget 
Committee in July to, quote, being hog-tied by a million 
Lilliputian orders to do this, that, or the other. And, 
frankly, I think that attitude was also conveyed when Secretary 
Rumsfeld told our defense subcommittee last year that he was 
shocked and dismayed that 14 percent of the supplemental went 
to defense priorities. Can you imagine, priorities established 
by the Congress rather than those contained in the 
administration request.
    Now I have often differed with congressional judgments on 
defense spending because, in my view, for the last--certainly 
the last 10 years, I think they have provided too much money 
for yesterday's weapons, for yesterday's Cold War, and not 
nearly enough to deal with new challenges such as cyber 
terrorism and a wide variety of 21st Century threats. But 
whether you or Secretary Rumsfeld or anybody else likes it and 
even--I would say this would extend to the Old Miss cheerleader 
in residence in the Senate who attacked Senator Daschle the 
other day. I would remind everyone that on page 6 of the 
Constitution--no, that is the wrong page--yes, it is page 6, it 
is Congress that is given the power to declare war, but it is 
given the power to do even more than that with respect to our 
military operations because the Constitution further says that 
it is the Congress that has the power, quote, to raise and 
support armies, but no appropriation money for that use shall 
be for a longer term than two years. And it also says the 
Congress has the power to maintain a navy, to make rules for 
the government and regulation of the land and naval forces of 
the United States.
    And I would say that I hope the Secretary of Defense and 
other high administration officials recognize that the 
Congress, while it may make faulty judgments, just as the 
executive branch may, Congress has the right to determine where 
specific funding ought to go in the defense as well as every 
other budget, and if the President doesn't like it, he can veto 
it. But the President, so far as I know, hasn't vetoed any 
appropriation bill out of this committee. Thirteen of the 14 
appropriation bills last year, including supplemental, were 
reported by this committee on a bipartisan basis, as the 
Chairman indicated earlier.
    But I am also concerned about your attitude with respect to 
homeland security issues. It came certainly through loud and 
clear when you demanded an unprecedented $10 billion be spent 
any way you wanted last year in that $40 billion that we 
provided for you. And in that first $10 billion that we made 
available without strings, you told us that there would be, 
quote, full consultation between the administration and the 
Congress. And yet you notified us of your decisions by e-mail 
as you shoveled billions of dollars out the door. That is not 
what I call full consultation. And I don't think it is what 
many Members of Congress, regardless of party, would call full 
consultation.
    And I think your respect for the legislative branch and the 
separation of powers was further conveyed last November when 
you told The Wall Street Journal, and you were talking about 
us, quote, their motto is don't just stand there, spend 
something. This is the only way you feel relevant. That is what 
you said when we were talking about the need to provide 
additional money for homeland security above the amount 
requested by the administration. And I think that attitude 
problem is unhealthy and is going to cause a lot of unnecessary 
problems.
    I would also say that I think that attitude again surfaced 
last week in the manner in which Mike Parker at the Corps of 
Engineers was dealt with because he did not toe the line and 
read only from the speaking notes that you had provided to him. 
Now I happen--Mike Parker happens to have very little regard 
for me, and the feeling is mutual. We have minimum high regard 
for one another, I think it is safe to say. And I happen to 
agree with you on the substance of the Corps of Engineers' 
budget, much more than I agree with Mr. Parker. But I do 
believe that the Congress cannot exercise its constitutional 
responsibility to allocate resources if it cannot get honest 
judgments from those who are paid with appropriated money to 
run these programs about what their needs really are.
    And that, in my view, that problem isn't only an issue with 
Mr. Parker, it's an issue with respect to the fact that this 
committee has been denied a full briefing from the Pentagon and 
from other agencies of government on the subject of homeland 
security and continuity of government. And this committee was 
told that that briefing was denied on theinstructions of the 
White House.
    Now this Congress has an obligation, no information, no 
money. And I think that we have got to build a much more 
respectful relationship between the executive and legislative 
branches or we are going to have a whole lot of fights that are 
going to be totally unnecessary. There shouldn't have been any 
disagreement whatsoever on homeland security between you and 
us, but there was last year. And I think it is rooted in the 
arrogant attitude that I have seen by some people in the 
administration that the way it is supposed to work is the way 
it worked at Enron, where the board, mere puppets; 
stockholders, minor inconvenience.
    I think the Congress is viewed by some people in the 
administration as being a group of undistinguished underlings 
and that the management, so to speak, is in the process of 
bringing them to heel. And that, in my view, is an unhealthy 
attitude. And nothing more disturbing than the performance of 
your agency when the White House and the Congress were working 
together on homeland security items.
    After September 11, to recite the record, you asked for a 
blank check, an unlimited amount of money for an unlimited 
amount of years. Mr. Young and I, acting on a bipartisan basis, 
responded by saying no. No blank checks for anybody. But within 
one week we provided you with $40 billion. That is not a bad 
piece of change. And then he and I and our staff proceeded to 
have discussions with each and every one of the major national 
security agencies, the National Security Agency, the FBI, the 
CIA, and a number of others, including HHS and the Centers for 
Disease Control, to try to determine what the agencies 
themselves felt we ought to be doing in addition on an 
emergency basis. And I had no expectation, and I am sure Mr. 
Young didn't, that the White House would simply swallow every 
recommendation that we were putting together.
    But based on my experience of chairing the Foreign 
Operations Subcommittee for 10 years and pushing, in eight of 
those years, pushing foreign aid budgets through the Congress 
to assist Republican administrations, I had the impression that 
we would at least talk about it. Instead we went up to the 
White House, and what were we told? The President told me 
personally, nose to nose, that he had been informed by his good 
friend Mitch Daniels that they had asked for every dime that 
was necessary, and then we were told without even a review and 
without one moment's discussion between the executive branch 
and the legislative branch, we were told if we appropriated one 
dollar more than the White House requested for homeland 
security that the President would veto the bill. We ignored 
that and added, I think, around $3 billion. And as a result, 
for instance, the FBI's new computer system will be up and 
running this summer rather than a year from now as would have 
been the case if we had stuck to the White House's original 
budget request.
    We didn't do that because we were so smart. We did it 
because we talked to people in the field. One FBI agent said to 
me when he was trying to piece together what happened with the 
airliners and trying to figure out where to try to find 
additional terrorist cells around the country, he said to us 
and to the staff, bipartisan staff, he said, you know, it 
drives me crazy, because I've been working on this and I am 
trying to put these pieces together, and he said it haunts me 
that I know that if I could have just put the pieces together 
one day earlier, I might have been able to save an awful lot of 
lives.
    So, as I say, we did not expect you to swallow our package, 
but it would have been nice if we would have been able to have 
a civilized conversation about it before we were handed the 
back of your White House hand by being told that before 
reviewing our suggested work product, you were going to throw 
it in the ash can by vetoing it. That is not the way we 
encourage institutional cooperation.
    Mr. Istook. Mr. Obey, can I inquire of you, are you at the 
end of your remarks?
    Mr. Obey. Three more minutes.
    Mr. Istook. I will try to hold you to that, if you don't 
mind.
    Mr. Obey. Mr. Chairman, I could have taken a lot of time in 
the opening statement, and I took none.
    Mr. Istook. I understand, and I've granted leeway 
accordingly.
    Mr. Obey. I just want to put in context why I make these 
comments. There is a book out on John Adams by David 
McCullough, and here is what he says about Adams' concern for 
the structure of government, and it goes to the comments made 
by the chairman of the subcommittee this morning. The structure 
of government was a subject of passionate interest that raised 
fundamental questions about the realities of human nature, 
political power and the good society. Reliance on a single 
legislature was a certain road to disaster for the same reason 
reliance on a single executive, king, potentate or president 
was bound to bring ruin and despotism. Balance, counterpoise 
and equilibrium were the ideals that he turned to repeatedly. 
And that could be seen in the Constitution of the Commonwealth 
of Massachusetts, which Adams personally drafted where he 
wrote, the legislative, executive and judicial power shall be 
placed in separate departments to the end that it might be a 
government of laws and not men.
    And I think it is important to note that what is striking 
about Article 1, Section 9 of the Constitution was the 
unanimity with which it was supported across the political 
spectrum. James Madison said the House of Representatives 
cannot only refuse, but they can propose the supplies requisite 
for the support of government. They, in a word, hold the purse, 
that powerful instrument by which we behold in the history of 
the British Constitution an infant and humble representation of 
the people gradually enlarging the sphere of its activity and 
importance and finally reducing the overgrown prerogatives of 
the other branches of government.
    And Madison was joined in that by Hamilton who had quite 
different views. And George Mason put it very differently when 
he said the person and the sword ought never to get in the same 
hands, whether executive or legislative. And Louis Fischer, a 
very well known constitutional scholar, has observed, quote, 
the rise of democratic government is directly related to the 
legislative control over all expenditures.
    So, Mr. Daniels, I simply want to say that I think every 
member of this committee wants to work with you. I enjoy 
working with people of all political persuasions. There is 
nothing I would rather do than solve a problem. I don't enjoy 
fights, but I've never walked away from one in my life. But I 
would prefer not to have fights. I would prefer that we work 
things out and deal with each other with an open mind. But it's 
not helped when we have the kind of repeatedcomments that we 
have gotten from you and several other people in the administration 
about the Lilliputian nature of the Congress that you have to deal 
with, that you have to suffer with. And it is not, in my view, that 
kind of a relationship is not strengthened when the Congress is told on 
something as fundamental and basic as homeland security issues that 
whatever we think is going to be vetoed before we've even had a chance 
to talk to you about it. And I would hope and expect that the attitude 
this year will be different.
    And I thank you for your indulgence.
    Mr. Istook. Thank you, Mr. Obey. Let me say before giving 
Mr. Daniels the opportunity to respond, of course, to Members 
of the subcommittee, we have obviously granted extraordinary 
leeway to the Chairman and Ranking Members in this discussion 
for reasons that we hope will ultimately let some feelings be 
surfaced and vented and hopefully provide the basis for being 
able to reconstruct and move things forward together 
positively. But after Mr. Daniels responds, and calling on the 
other Members, out of necessity I will and must strictly 
enforce the five-minute rule.
    Mr. Daniels, I certainly want to give you the opportunity 
to respond to the question that Mr. Obey posed. I think there 
was a question in there.
    Mr. Daniels. I think there were several excellent ones, Mr. 
Chairman. I thank you for your granting the extra time, and I 
thank Mr. Obey for a very important statement. Let me start by 
saying that I frequently in my life need an attitude 
adjustment, as we call it where I am from, and usually my wife 
supplies those. It doesn't happen that infrequently, and I have 
never found it a hard thing to do.
    I will say in this instance that if--not if, since you 
reached that impression, I would say a misimpression of any 
condescension, any disrespect, any lack of reverence for the 
Congress' role or anything like that, that was inadvertent, 
unintentional, and I don't read my comments as conveying that, 
but that doesn't matter. You did, and that means I wasn't very 
precise or selective in some of the things I may have said or 
done.
    I would point out that I think you will find that not a 
word has been directed at an individual person, or really at 
any particular group in the Congress. These are broader 
statements, most of them not original or unique to me, but 
never personal. I can't help but point out this is not at all 
the case in terms of things said about me and my OMB colleagues 
or, as we are now known, ``thugs'', ``idiots'', ``bureaucratic 
imbeciles'', ``the axis of evil'' and so forth. We don't use 
terms like that.
    Mr. Obey. And neither do I.

                           FREEDOM TO MANAGE

    Mr. Daniels. I recognize you don't. Let me, before moving 
to the most substantive of the many things you said, let me say 
that clearly we could have been and I should have been more 
precise or thoughtful about one piece of imagery. This business 
of Lilliputian bonds was meant to convey, the adjective was 
meant to refer to the bonds, not the Congress, or not the 
authors of any of these bonds, and I can understand why that 
could have been misunderstood.
    The point--the intended point was that--and this is 
something I know that I believe fervently to be a real problem, 
that collectively there are thousands of requirements or little 
prohibitions that do prevent any administration from getting 
the most value for taxpayers, to delivering to the taxpayer 
representatives the well managed government that we all seek, 
and that these tend to be very small individually. But when you 
put them all together, they have the effect of making action, 
effective action difficult and that is what we meant to say. We 
will find a better way to say it and we won't use that 
particular image, which I do think confused and misled you.
    This is and I will say in passing, I do believe this is a 
real problem, and I do hope we can make real progress about it. 
When one of our departments cannot close a regional office or 
reassign even a handful of people without some sort of 
firestorm or legislative authority, when the Department of 
Health and Human Services is forced to keep dozens of PR 
operations, dozens of HR operations, all running in parallel, 
this is really unfortunate. And so I do hope it is something we 
can work on together. We don't seek unlimited license. We know 
that there's not a perfect analogy to the business world or the 
nonprofit world, but we will not make serious progress in the 
direction of better stewardship of resources and more effective 
action under the current circumstances as they apply to 
procurement, as they apply to personnel, as they apply 
sometimes just to the structure of the organizations which we 
are asked to lead.

                           CORPS OF ENGINEERS

    I will just say a very quick word about the matter of the 
Corps of Engineers, because I think it raises larger issues 
which you pointed to, and here I do have a sincerely different 
outlook. This was a very unfortunate, regrettable situation and 
in part because it was so totally avoidable. But the course of 
honor in an appointed position in an administration, if one 
cannot agree with the President's policy, is to resign one's 
post. There's a long and proud tradition of that. It's been a 
little in disuse lately, but I think that is the appropriate 
response to a situation if one finds it truly unconscionable to 
support the policy, you know.
    More colloquially, if the President calls ``off tackle'', I 
can't go run a fly pattern. And, so it was an unfortunate 
situation, but I think those who believe that any of us who, as 
you pointed out, are not elected, we serve at the pleasure of 
someone who was--cannot support the policies that the President 
has selected, it is not only our duty not to go take public 
exception, it's really a dereliction of that duty.
    The very smart people sitting behind the committee members 
here assist you very ably. But if one of them ran out and said 
``my Member is all wet on this bill he just offered'', I don't 
think you would hesitate too long knowing what to do. And I 
don't think your colleagues would salute that person as a 
paragon of courage. So I do think the situation is different 
and it is unfortunate, and I wish it had not happened.
    Mr. Obey. I was not questioning the President's right to 
fire anyone. My point is that if this Congress--let me put it 
this way. For 120 years we got along without an OMB and the 
agencies came directly to this committee and asked for their 
funding. If we get into a position where we cannot get--expect 
to get honest and unvarnished views from people in agencies, 
including the Pentagon, where we have been denied a briefing on 
homeland security, if we can't get unvarnished views, then in 
my view, we need to remember that when we created the OMB in 
1921, that didn't transfer our Article 9 responsibilities. And, 
in my view, if we can't getbetter cooperation from OMB, then 
the agency ought to be defunded.
    Mr. Istook. Gentlemen, I believe we've had the exchange 
that was necessary, and I would like to move on with the 
opportunity for the other Members. For the benefit of Members 
trying to balance the sides in the order of arrival, if there 
is a problem for anyone, let me know.
    I intend to call on Ms. Northup, Mr. Rothman, Mr. 
Visclosky, Mr. Sherwood, Mr. Tiahrt, Mr. Sweeney and Mrs. Meek, 
and when Mr. Price returns from having to depart momentarily, I 
will push him into that order because he was here earlier. Ms. 
Northup.
    Mrs. Northup. Yes. Thank you. I appreciate you coming 
before the committee today. Clearly there are very different 
views on what the administration is trying to accomplish it and 
how they are going about it. I am not surprised that when 
congressmen have been elected on a spend-more platform that 
they would run into conflict with an administration that ran on 
a spend-less platform. So I think it is going to be very 
difficult to find middle ground as we debate this and create 
public policy to go forward.
    I think that it is important to have the discussions about 
how to best get there. I think sometimes those discussions can 
be excellent. And if you don't mind my analogy, I will give you 
a river. In Louisville we have been discussing the Ohio River 
bridge that is going to be built there. It has been debated now 
for 35 years and we are about to get a record of decision. 
There are a few people that have opposed that bridge, that 
have, no matter how many conversations, how many EPA studies, 
how many things we do, they are never going to decide that this 
bridge and this place is a good idea.
    However, the discussions brought a consensus that 80 
percent of the people in our community support. I would like to 
think that what could go on between the Congress and the 
administration is that we recognize that there are different 
philosophies here. They are legitimate. We have had these 
debates before, but we do have people that were elected on 
different platforms that are in conflict. And in this--and 
sometimes no matter how many times you converse with people, 
you are not going to get their agreement because they basically 
don't ever want to get to the bridge, but I think some of us 
do.
    Along that line I would like to ask you about earmarks. I 
have to tell you I agree with you. I look at the agencies up 
here and it is a take-your-breath-away experience every day. 
The amount of money they spend that is unproductive that isn't 
measurable in any input that goes on and on is breathtaking to 
me. And I guess what I believe, earmarks do sort of jump over 
that bureaucracy and they generally tend to actually build 
something, to actually provide an administrator for a program 
that makes a difference in children's lives. And, you know, I 
see a lot of the conflict up here as some people believe in 
agencies up here. They believe in bureaucracies. I believe 
getting the money to the front line in Louisville, Kentucky. 
And at some point it seems to me we can agree that to allow 
some earmarks for programs that are good, at the same time 
close programs in these same agencies or eliminate them as we 
go through it, make that the trade-off, have the earmarks come 
out of the total amount of spending.
    But I guess my point to you would be, I don't think we are 
going to do away with earmarks. I don't think they are all bad. 
I think there are some that are laughable. But I think a lot of 
them do a whole lot more than triple the amount of money in an 
agency that finds itself going round and round discussing a 
bridge project for 35 years.

                           EARMARK DISCUSSION

    Mr. Daniels. Well, thank you, Ms. Northup. And--here, I 
think we are a lot closer together than some people seem to 
imagine. Every single time I have been asked about the earmark 
question, I have said the same thing. It is a matter of degree. 
There is nothing illegitimate about it. It has been a part of 
every Congress' activities, I suppose, since number one.
    It is, however, I think also legitimate to point out that 
the practice has exploded, perhaps gone beyond reasonable 
boundaries, 700 percent increase in six years. So it is simply 
not a matter of continuing a long time practice. Something very 
different has been going on. We have programs that are 100 
percent earmarked. We ought to send the poor people who are 
supposed to run them home. There's nothing to do.
    Mrs. Northup. You know, I would probably support that.
    Mr. Daniels. Well, but I tell you it is probably time to 
let this subject go. I don't think there is a big difference 
and the point's been made. And Congress will finally decide. 
But I do remain of the view that some moderation in this 
practice is in order. And I will tell you the one area that I 
think is most problematic--I think it has begun as it has grown 
so much bigger--it has begun to diverge into areas where it 
really is not just a matter of opinion--research and 
development. It is not a good idea. It is not really within the 
competence, I respectfully submit, of the Congress to decide 
which scientific project has greater merit. There is a process 
for that. It is competitive. It has peer review. And we do need 
our research dollars going into the highest quality science, to 
the highest priority science. And so at least as to scope, if 
not to total numbers of earmarks and dollars, I do hope that 
there will be some mindfulness of this as this year's and 
future budgets are put together. Just some moderation, I think, 
is really our only plea.
    Mr. Istook. Thank you, Ms. Northup. Mr. Rothman.
    Mr. Rothman. Thank you, Mr. Chairman. Director Daniels, 
good to see you again. I am going to try to get most of my 
comments in my five minutes. A number of things. I understand 
your comment about Lilliputians, but if OMB feels that through 
the course of decades Congress has placed burden after burden 
on efficient decision-making by OMB or any other agency in the 
executive branch, come to Congress with your changes that would 
eliminate these stupid rules and you will get Democrat and 
Republican support for eliminating them. At the very least, 
it's your burden to bring them forth rather than simply rant in 
general terms about being unable to do your work. Come with the 
solutions and we will pass them.
    Also with regards to the choices made by the 
administration, for the most part in terms of the war and 
homeland defense and foreign policy, I agree 100 percent. I am 
Democrat, but nonetheless I agree 100 percent with the 
President's handling of these things so far.
    With regards to domestic priorities, I think the 
administration is wrong. For example, you can't have 
everything. The administration has decided to cut by 71 percent 
the COPS program; cut 71 percent the COPS program. Since 9/11--
I'm from northern New Jersey, we have a keen appreciation of 
the work of our police, our fire and rescueworkers and other 
first responders. It was tough enough to do the job to bring the crime 
rate down, and the COPS program helped bring the crime rate down along 
with other factors, but it was a significant factor, so say the cops 
and the chiefs, Republicans and Democrats, in the field. You want to 
cut that program 71 percent. Yet the burden on our police forces are 
even greater because now they have to watch out for terrorists and 
would-be terrorists and threats of mass--weapons of mass destruction. 
And yet you want to cut the COPS program 71 percent.
    At the same time you want to cut the COPS program 71 
percent, you say we need to give a tax cut, which includes a 
tax cut for the richest one percent of Americans who make over 
$940,000 a year on average, the richest one percent, over 
$940,000 a year. That's their household income. The 
administration feels it necessary to give them a tax break 
which will cost billions and billions of dollars over the next 
10 years, but it doesn't have the money for COPS. It's going to 
cut the COPS program 71 percent.
    I think those priorities are absolutely wrong. Plus the 
administration says it doesn't have money for prescription 
drugs for seniors under Medicare. You want to provide 180 
billion, but most people say the real program costs between 500 
and 700 billion to do prescription drugs for seniors right. But 
you say you don't have the money, but you're giving money away 
to the richest of the rich. I'm not against tax cuts. It is a 
matter of choosing what we do with the finite amount of money 
we have in our budget. And also you project this tax cut causes 
43 percent of the deficit that is projected by you over the 
next number of years. Your own tax cut causes 43 percent of 
these shortfalls and moneys and you are going to take the money 
from the Social Security trust fund. Take it instead from those 
people who are making extraordinarily large amounts of money. I 
think $900,000 is a lot of money. I don't think they need the 
tax cuts. Instead invest that in prescription drugs for 
seniors. Don't take the money out of the Social Security trust 
fund surplus. Put money into school construction so we save 
local property taxpayers the need to rebuild their crumbling 
schools. Over 65 percent of the schools in the country need to 
have major repairs, roofs, boilers and the like, and they are 
starting to become overcrowded with the growing number of 
children.
    I will add one more thing. I got passed, when I was on the 
Judiciary Committee to secure our schools act, passed by 
Republicans and Democrats unanimously to provide funds for 
those school districts that wanted to match, provide half the 
money for metal detectors and security devices in their 
schools. I got the Judiciary Committee, the most partisan 
committee in Congress, unanimously to support it. I got the 
Congress to authorize $30 million.
    Last year what happened, President Bush, zero in the 
budget, zero in the budget to secure our schools. Fortunately 
we were able to get through the Congress a $5 million dollar--
for the whole country, $5 million for security devices at 
schools after a lot of work.
    This year again, there is zero money for it. You say, well, 
there is money for it in other programs. This is the only 
program that addresses this directly. And I want to tell you 
just in the State of New Jersey, we could spend that $5 million 
from all the school districts, Republicans and Democrats that 
said, Steve I want to get into that program. My school district 
will put up half the money and be matched by the Feds, and yet 
it is zeroed out in your budget.
    I can understand how you have difficulty balancing a budget 
when you give money away. I believe in tax cuts and incentives 
and capitalism and entrepreneurship, but don't give money away 
to people who don't need the incentive, who for the last 10 
years made millions of dollars for doing very well, fine, thank 
you, with this kind of income. I think it is a matter of 
domestic priorities, and I think the administration, frankly, 
with respect, has got them wrong.
    Mr. Istook. Thank you, Mr. Rothman. Mr. Visclosky?
    Mr. Rothman. May I get a response, Mr. Chairman?
    Mr. Istook. You didn't really leave time for a response. 
You are infringing upon other Members' time. If Mr. Daniels 
feels strongly, we will allow him to respond. But members, if 
they want a response from Mr. Daniels, should understand it 
comes out of their five minutes, unless Mr. Daniels, if you 
wish to----

                           FREEDOM TO MANAGE

    Mr. Daniels. I would like to, Mr. Chairman, and I'll try to 
be quick. First, I think your opening challenge is a very fair 
one. We ought to point out and ask for the new discretion we 
need. We have this year. We have two bills in the area of 
``freedom to manage'' and a variety of requests in the 
departmental budgets for some greater freedom to move money and 
to move people. I hope the Congress will take these proposals 
seriously, and thank you for that comment.

                              COPS PROGRAM

    Let me say a word about the COPS program because I think it 
illustrates many other things. Aid to local law enforcement is 
going to go up dramatically if the President's budget is 
adopted. Police departments and fire departments, would get 
billions more than last year, and that would be in a different 
form because we are in a different world. And we have suggested 
it be shifted in large part to first responder activities, for 
instance. But the total amount of money committed to police and 
fire departments is recommended by the President to go up 
dramatically.
    Let's talk about the COPS program. It was supposed to have 
an end point, but like many programs that we create, we forget 
about that eventually. It was supposed to fund 100,000 new 
policemen. It funded 125,000. So it ran 25 percent beyond its 
intended life. This is the hiring part. The rest of it we do 
propose to maintain.
    Now I am going to skip over the fact that we have no data 
that says the program reduced crime. Cities that got no COPS 
grants had crime reductions just as big as those that did. But 
let's say it was a worthy effort. It is also appropriate for us 
to address shifting our emphasis as conditions change, and that 
is what surrounds that particular recommendation.

                           SECURE OUR SCHOOLS

    I understand very much your hard efforts and your pride in 
the Secure our Schools Act that you enacted. We support the 
goals of the act. I think our difference here is really about 
local control. And the Safe and Drug-Free School Act, for 
instance, provides funding, about 20 times the initial size--by 
more now--of your bill. It is simply a matter of trying to 
allow local school districts to decide whether it is metal 
detectors or something else that will make their schools safer 
and more secure for students. We certainly understand and 
support the goals that you've championed.
    Mr. Istook. Thank you, Mr. Daniels. I will advise Members 
when they are three-and-half minutes into their time so we can 
make sure, as I am sure everyone wants to give Mr.Daniels an 
opportunity to respond, to make sure that we do give an opportunity to 
present both sides.
    Mr. Visclosky.
    Mr. Visclosky. Thank you, Mr. Chairman. Mr. Daniels, as a 
native of Indiana, I do appreciate the position you find 
yourself in and do appreciate your competence and the 
intelligence you bring to it.

                           CORPS OF ENGINEERS

    I want to touch on three issues. On February 28, relative 
to testimony by General Flowers of the Army Corps of Engineers 
before the Senate Appropriations Subcommittee, you stated, 
General Flowers' statements about stopping projects and lost 
jobs are totally bogus. And my understanding is that the 
synonym for bogus is false. You go on to say that I can supply 
detail if necessary. At the direction of the Energy and Water 
Subcommittee of the House, the Corps was asked to supply us 
with their analysis of General Flowers' statement.
    We also earlier this week asked members of your staff if 
they could provide us with details to show that the Corps' 
analysis was false. What they told us is that they are still 
analyzing the material that the Corps has provided. Your 
statement was made obviously several weeks ago. And you 
mentioned before, people should take the course of honor if 
they disagree with a position, and I don't disagree with that 
assertion. But here, obviously, you have called into question 
General Flowers' veracity, from my perspective, and if you 
would care to comment, I would appreciate it.
    Mr. Daniels. First of all, it was not intended to be a 
public criticism of him. It inadvertently became public, but I 
still do adhere to that view. I can find no justification--we 
are still looking. And if the Corps has supplied an analysis 
that would point you to these job losses in particular, we'll 
be glad to look at it. But our impression, the only way we can 
work our way backwards to such a number is if one assumes 
things not in evidence, like dramatic further ramp-ups in Corps 
activity.
    Mr. Visclosky. I only have a couple of more minutes. I 
don't mean to cut you off. You used the word assumption. You 
mentioned specifically on the 28th that you can supply detail 
if necessary. If you could, we would appreciate if your staff 
could.
    Mr. Daniels. We would be glad to let you know the reasons.

                     GRAND FORKS, ND, CORPS PROJECT

    Mr. Visclosky. Secondly, in reference to the questioning by 
Mrs. Northup, I did appreciate the fact that you indicated that 
there is nothing wrong with earmarks and that Congress will 
decide. I must tell you that I do appreciate that. I would note 
that as far as the submission for the Corps of Engineers in the 
budget, there was an amount for the Grand Forks, North Dakota 
and East Grand Forks-Minnesota project that was increased from 
14,759,000 to $30 million in an errata sheet that was also 
supplied with the budget submission. Could you tell me who made 
the directive, who provided the directive to have that increase 
made?
    Mr. Daniels. No, but I will get you that answer.
    Mr. Visclosky. Was it from the Office of Management and 
Budget.
    Mr. Daniels. It could have been. It is certainly true that 
in that particular budget and, unlike most, it is typical for 
administrations to enumerate specific projects. That's because 
here, unlike most activities, we can have a very specific 
return on investment calculation made. The Corps makes one and 
we look at them, too, and that's the reason that typically you 
sort of deal off the top of the deck in terms of the ones that 
will give the taxpayer the best return.
    Mr. Visclosky. If you could submit for the record who 
directed the increase, because I also have a copy of the web 
page by Senator Kent Conrad, who on February 4 said that at 
Conrad's request that the administration increased funding for 
construction in the Grand Forks levy from the original $15 
million to $30 million. We could put even more money toward 
building the flood control system, but I'm glad we were able to 
double the amount to what the White House originally planned. 
Because there was an increase of $15 million dollars, if you 
could also supply to us where the moneys came from, because it 
is my understanding that there was eventually a cross war 
slippage as far as where the extra $15 million dollars came 
from.
    The final point I would make is I also appreciate it very 
much, your comments about research and development and 
earmarks. For the record, I would acknowledge that I reached 
out as an elected Member of Congress and earmarked for research 
and development. I did so for a number of reasons, one, because 
I thought the particular projects had merit. But secondly, 
during a hearing last year before Energy and Water, it came to 
my attention that for--am I done?
    Mr. Istook. Your time has expired, Mr. Visclosky. I wasn't 
cutting the sentence off. Were you at a comma or a period?
    Mr. Visclosky. I'm real close.
    Mr. Istook. Just don't be James Joyce, please.
    Mr. Visclosky. The labs were establishing four centers for 
excellence for nanoscience research and they entered into a 
relationship with a particular university on a noncompetitive 
basis. To their credit, I think that they have heard the 
message from the Appropriations Committee in the House that in 
the future, these do have to be competed. And I was happy to 
say--to hear you say that it would bring that to your attention 
if I believe, and I think if other members believe, there was 
really peer review and really real competition, I think we 
would feel much more comfortable, and I was happy to hear you 
say that.
    Mr. Istook. Thank you, Mr. Visclosky. Mr. Sherwood.
    Mr. Sherwood. Thank you, Mr. Chairman, Mr. Daniels. Ithink 
I have a pretty firm understanding of the fact that I was sent here by 
the people of Pennsylvania to make sure that government is part of the 
solution and not the source of the problem. And in that regard, these 
fights that take on a life of their own between Republicans and 
Democrats or the administration and the Congress are not necessarily 
productive. I think we have a classic situation of what we all learned 
in economics 101 this time of guns and butter. You know, we have 
declining revenues and increased security needs, and so these 
discussions are going to be very strong, but they don't need to be 
particularly rancorous. And one of the things that I think that is so 
important to make government relevant and for government to get out of 
the way of people getting done what they have to do is paperwork 
reduction. And the Paperwork Reduction Act requires OMB to manage 
government-wide paperwork reduction. And in each of the last six years, 
I understand that has increased, not decreased. And in the April 2001 
Government Reform Subcommittee held a hearing on this and there it was 
determined that the IRS accounts for 82 percent of the government-wide 
paperwork burden, and also the Commissioner of the IRS testified there 
that the greater potential for paperwork and burden reduction within 
the IRS is enormous.
    I currently understand that OMB only has one person working 
part-time on IRS paperwork reduction where in comparison you 
have about four full-time equivalents in HHS and about four 
full-time equivalents at EPA. Do you intend to increase your 
staffing and attention devoted to this big problem so that we 
can make some progress?
    Mr. Daniels. Well, Mr. Sherwood, I will go take a look at 
it and maybe we will. But I will tell you what you already 
know. The answer to this problem has very little to do with how 
much effort OMB puts into it. It has everything to do with 
whether we can simplify the tax laws of this country. And 
Secretary O'Neill is hard at work on that right now to see what 
can be done administratively and also hard at work on our 
latest look, I guess, our latest national look of whether we 
have the Tax Code we really want. And that could lead to 
proposals from the administration and have another run at 
simplification of the Code.
    But you cited, I think, the single piece of data that is 
most important for people to remember when we worry, as we 
should, about the aggregate paperwork burden government imposes 
on the economy and on our citizens, and that is that we will 
never crack this problem unless and until we decide that we can 
live with a less complex Tax Code with fewer preferences and so 
forth.
    Mr. Sherwood. I agree with what you said, but I think that 
is a little simplistic. I think that you have a burden to 
direct the IRS in their procedures, and my understanding is 
that their procedures are pretty archaic and create a whole lot 
more paperwork than would be necessary even with the problems 
that we have in the Tax Code. And I agree 100 percent with 
that. But I think absent the fact that we have the Tax Code 
straightened out, I still don't think that you are giving the 
agency the oversight or something is happening to make it work 
a little better.
    Mr. Daniels. Fair point, Congressman. We will go back and 
examine our efforts and see where we can do more. But one area 
that will make some contribution is if we can migrate more 
people to paperless filing of tax returns and at least starting 
from the simple stand, the short form. A major effort is 
underway. It is one of our principal e-government, so-called, 
projects now. So there are certainly things that OMB can 
contribute to and appreciate your reminder we should redouble 
our efforts.
    Mr. Sherwood. Thank you. Mr. Chairman, I have a couple of 
other questions along that line that I would like to submit.
    Mr. Istook. We will have those submitted for the record. 
Thank you, Mr. Sherwood.
    Mr. Istook. Mr. Tiahrt.
    Mr. Tiahrt. Thank you, Mr. Chairman. Mr. Director, I think 
there is a really good liaison team between the White House and 
Congress. But it seems like whenever we communicate with the 
White House liaison, it sort of goes one way and doesn't seem 
to be a back flow from the White House to Congress, and 
sometimes it could be the reverse, but my experience has been 
that we get a good ear, but we don't often get a good response. 
And I will use a couple of examples. One is Homeland Security 
director, Governor Ridge. I think he has a very important part 
in what goes on with the budgeting process, and he reviews a 
lot of budgets, but yet we fail to have an opportunity to talk 
with him about his views and what his priorities are.
    The second one is the shortfall in the Pell Grants. A 
couple of months ago, or within the last couple of months, in 
order to overcome the $2 billion shortfall, the easy target was 
to hit these earmarks. Now that affected a lot of us. Some of 
them were a lot of important programs. If you don't allow or 
use the angle that these earmarks are not necessary, I think 
you overlook some of the inadequacies within the current 
system.
    The Department of Education cannot account for over a 
billion dollars. It is not the only agency that's like that. We 
have some specific programs that are very important for 
communities that have Hispanic students whose parents are 
Hispanic, who can't get any homework help unless they find 
somebody who is either bilingual or can help with their English 
directly in the school system.
    One of these programs that we are targeting in the 
legislation that was cut out, or an attempt to be cut out, to 
find money for the Pell Grant was such a program in Wellington, 
Kansas. Now if the administration had just two-way 
communications with us, picked up the phone and said we had a 
shortfall and talked to Chairman Regula, what do we do to 
overcome the shortfall, there are moneys that could be 
transferred. There are unobligated funds. We could have met the 
problem. But one simple phone call did not occur.
    We are having the same problems, as I said earlier, with 
Homeland Security Director Ridge. Even though we have a good 
liaison with the White House, we are not getting good 
communications. Could you tell me why you think that Secretary 
Ridge will not come before the committee, or has he changed his 
mind? And also how can we improve our communications between 
Congress and the White House?

                      OFFICE OF HOMELAND SECURITY

    Mr. Daniels. Well, Governor Ridge, I know, wants to 
communicate as openly and effectively as he can with Congress. 
On the specific question of his testimony, there is simply a 
legal difference of opinion about whether someone in his 
position can or should be summoned. I can't go much further, 
because again this is not the area of my responsibility. But he 
is viewed just as the national security advisor is viewed, as a 
presidential aide, advisor, and certainly available to members 
of Congress, but not in the formal sworn testimony mode.
    I think I have reflected the view of our lawyers accurately 
on that. But there must be alternative ways. And I know that he 
is looking for them to make sure that you have the information, 
all of the information and direct access to him that you need 
as Members.
    As far as I can tell, our legislative contact people do a 
great job. They work awfully hard at it. There are a lot of you 
to keep in contact with. And each of you is the source of many 
useful and interesting ideas. So they are working hard all of 
the time.
    Mr. Hoyer. You cleaned that up.

                           PELL GRANT PROGRAM

    Mr. Daniels. There probably was a better way to handle the 
Pell Grant thing. The real problem, to be honest with you, is 
it snuck up on us and we had to get a proposed answer quickly 
so kids can get the help that they need in this season.
    We did put together what funds the President had not 
requested, which by definition were of less priority to us, but 
we tried to spread a menu of $2 for every dollar we needed, to 
leave it to the Congress which ones or which sources to use. So 
that could have probably been handled better, but it was our 
best effort under the circumstances.
    Mr. Tiahrt. Just in closing, 20 percent of the 
administration has passed and we got a ways to go. And I think 
these closer communications will help us get through these 
problems.
    Mr. Daniels. We will try.
    Mr. Sweeney [presiding]. Thanks, Mr. Tiahrt. Mr. Price.
    Mr. Price. Thank you, Mr. Chairman. Mr. Daniels, let me add 
my welcome to the committee and say that I am going to have a 
couple of questions for the record, including a request for an 
update from you, a status report from you on a sealed corridor 
study involving a North Carolina railroad project, and it is a 
year overdue. I think it has been sitting in OMB for some 
months. We do need to know what it will take to shake that 
loose, because it is anticipated the report has some very 
important conclusions for our work in making our rail grade 
crossings safer and promoting rail safety.
    Mr. Price. I am also a Member of the Budget Committee. I 
wanted to follow up with you orally on our markup yesterday and 
some of the discussions that we are having there about the 
credibility of the budget process, the sources we use for our 
budget estimates, and the time frame we employ in projecting 
budgets.
    As you know, our Budget Committee, the majority of our 
Budget Committee here in the House, have shifted this year from 
a 10-year to a five-year budget time frame. And they shifted 
from using OMB--I mean CBO numbers, Congressional Budget Office 
numbers, to using OMB numbers.
    As our Chairman said yesterday, it is quoted in the Post 
this morning, if you don't like the weather report, you might 
as well change the channel. And that is what we are doing.
    Maybe you can help illuminate why the CBO versus OMB 
assumptions seem to be different. I understand a lot of it has 
to do with OMB's more optimistic assumptions about Medicare 
outlays and other optimistic assumptions about Medicare 
receipts. I am not asking for great detail on that. But suffice 
it to say there are some differences here. And the use of OMB 
numbers serves the majority's purpose in terms of making the 
books look better, and making the proposal look better. But one 
has to wonder about this kind of decision to turn to a 
different source of numbers from that independent office set up 
here on Capitol Hill for just this purpose, and particularly 
this five-year time frame.
    2008, the baby boomers start retiring. 2015 or so, the cash 
flow in Social Security reverses. The disappearing surplus that 
we have witnessed in the last 10 months, the impact of that in 
those years six through 10 is severe in terms of the amount of 
the national debt, the amount of the debt service that we are 
required to make, and how quickly we can prepare for the 
retirement of the baby boomers. So what is to be said, or is 
there anything to be said for shifting from a 10-year to a 
five-year time frame? I wonder if you could comment on this 
rather remarkable shift and how it looks from your perspective.

                        HOUSE BUDGET RESOLUTION

    Mr. Daniels. Yes, sir. These are important questions. I 
don't know why one database versus another was selected. The 
starting point really is to note how close these numbers really 
are. In a $2.1 trillion budget, we are only separated by less 
than 1 percent. That, I think, however, is magnified by the 
fact that we are teetering right on balance, and therefore it 
generates, I think, some symbolic importance that is a little 
bit disproportionate.
    Mr. Price. Teetering on balance, that is, if one leaves out 
the--the bill just passed.
    Mr. Daniels. Yes. The stimulus bill.
    Mr. Price. The stimulus bill. Yes.
    Mr. Daniels. Yes, sir. The baselines are reallyquite close 
together. CBO, for one thing, assumes the renewal of the emergency 
spending that Congressman Obey and others talked about, the $40 billion 
from last year. We did not. We don't think that Congress will in the 
end. That alone accounts for a big piece, about one third of the gap. 
The rest of the gap, the very small gap between CBO and us, has to do 
with revenue assumptions. It is a little paradoxical, we have the more 
conservative economic assumptions, the most conservative growth 
assumptions that are extant right now.
    But they assume, for instance, lower corporate profits, 
therefore, lower corporate tax payments that is the biggest 
difference. On the Medicare front they assume a few more 
disabled people than we do and so forth. But I would point 
something out to you that I think is important and interesting. 
If you look not only at Medicare, but at the entitlements put 
together--Medicare, Medicaid, civil service retirement, and so 
forth, we are almost identical over each time horizon, we, CBO 
and OMB. So there is really no difference, it is just that they 
have Column A a little higher, and we have Column B a little 
higher. On a net basis, it is very close.
    Five years, 10 years. Five years was the practice. In fact, 
three years was the practice until 1971. We didn't pretend we 
could look out any further. Then it was five years until the 
last few years, we tried 10 years. Ten years is very 
misleading.
    I will give you one example, back again to Congressman 
Obey. The $3.1 trillion 10-year surplus which we project in our 
budget is--most people have fastened on the fact that it is so 
much smaller than last year's projection of $5.6 trillion. But 
if you look past last year for a moment, it is the biggest in 
history. It is the biggest in history until last year, which 
says what? That when you are trying to do this on a 10-year 
timeframe, you have got to be very careful and very aware that 
these things can swing all over the place.
    We can be back here next year, if the economy roars, 
somehow looking at long term surpluses that are much larger 
than the one we can see right now. I think it just argues for 
humility and for going back where we used to be. Five years, 
believe me, we can't really be that accurate even that far out.
    Mr. Price. But you understand the kind of questions it 
raises, though, when the 10-year projection was used with such 
confidence a year ago when the administration was making the 
case for its tax cut and for the--for its other budget 
proposals.
    Mr. Daniels. You are right, sir, although on every single 
occasion that I have appeared in, I tried to put the grain of 
salt on the meal and point out that there are huge ranges of 
errors. In fact, that is why we left 18 percent of last year's 
budget projection, that projected surplus in a contingency 
reserve, because we recognized that this thing can vacillate 
wildly.
    Mr. Price. Thank you.
    Mr. Sweeney. Thank you, Mr. Price. Welcome, Mr. Daniels. 
Mitch, I have been looking forward to this meeting for some 
time, as you can imagine. As I sat and listened to the earlier 
opening statements, I became a little perplexed as to how I 
wanted to proceed. And because I do appreciate your call and 
the call of Members of this committee for a more constructive 
relationship, and I am happy to see in this face-to-face 
meeting what I see as a more contemplative and respectful tone 
and tenor on both sides, I would say, but certainly from your 
side, because--as I am sure you understand, I had--there was a 
time when I was coming to you, and that was not a satisfactory 
experience for me. And I would hope that in the future those 
relationships would be better and we would be able to do better 
things.
    I am going to ask that some of this information be put on 
the record for really that purpose, and in order to flesh out 
details.
    Mr. Sweeney. But, as we all know, shortly after the attacks 
on September the 11th, the President made a remarkable 
commitment to the affected areas. We went through a rather 
drawn-out, difficult period for six months. Part of the 
problem, I understand, was the magnitude and the newness of the 
challenge we face, and I think part of the problem really was 
at the core of the earlier conversations here about our ability 
to communicate with each other and how well we went about that.
    My fundamental question is where we go from here. I know we 
have got commitments. But I, for two basic principal purposes, 
would ask that you--I will submit a formal question to you and 
ask that you respond to it on the record, because I want to 
establish that response on the record. And I also want to, as 
best I can as an appropriator, one who takes this role very 
seriously, want to flesh out as many of the details as we can, 
and continue that process because New Yorkers need that kind of 
reassurance at this point, that actually our words are going to 
be backed up. And I absolutely believe that they are at this 
point in time.
    I have a couple of other questions, though, that I would 
like to get to. One relates to the contractor indemnity issue. 
I spoke to you at the White House about that. I am interested. 
Do you have any formal agreements, and if so, state what they 
are, and if not, tell us what you perceive we need to do to 
have the contractor indemnity issue--complete the contractor 
indemnity issue.

                           NEW YORK CONCERNS

    Mr. Daniels. Congressman, I am not aware of any updates 
since we were together a few days ago. But, as you know, it is 
one of the things that the city identified in its priority 
list. Therefore, we are trying to accomplish it. The main 
objective right now is to accomplish it through the purchase of 
insurance. And as far as I know, that attempt is still ongoing. 
If that doesn't work, for some reason, we will fall back on 
another way.
    Mr. Sweeney. Would you suggest then that we look towards 
the emergency supplemental that is coming down the pike as 
maybe a vehicle to attach this issue to, or have you gone 
through the process of deciding whether legislative action 
needs to be taken? If so, at what time?
    Mr. Daniels. We believe that this issue will be added in 
the supplemental request that the President makes here shortly, 
the one that has been reviewed with you and your fellow members 
in the delegation. And it is our intention that that be one of 
the goals accomplished by that last installment.
    Mr. Sweeney. I would appreciate it if we had continued 
contact with your folks so we would have an understanding.
    I didn't want to today perpetuate the notion that the 
consternation between OMB and between the administration and 
the appropriators was based in philosophy or partnership, 
certainly substantially so. I share your philosophies and your 
partisanship and probably have a great deal of personal 
relations and contact with the administration. But I do think 
the past year has been a very difficult one for all of us, in 
many, many ways made worse by our failures to communicate and 
be more direct with one another.
    And while I may disagree with the administration's 
proposals on decreasing highway funding, I would like to submit 
some questions in that vein, overwhelmingly so.
    Mr. Sweeney. I am not just appreciative or supportive, but 
I am applauding the efforts and the job that has been done, 
although sometimes it hasn't been particularly pretty. And I 
would hope that we can go forward from here, using today to set 
the he tone to do very good work together and continue to do 
that.
    Mr. Daniels. That is well said, Congressman. I appreciate 
it. Congressman Obey is not still with us. But one thing I 
didn't get said in the time allowed with him was that, you 
know, I think democracy is often not pretty. But our debates 
tend to be healthy, especially when we can get them on the 
right level. The President insists on that. If we have ever 
fallen off that path, we have tried to make amends and get back 
on it. That is certainly our instruction from him.
    You know, he read us a number of things that appear in the 
Constitution and he was right on every score. There is 
something that is not said in the Constitution, which is that 
Congress' power shall be unchallenged and unquestioned. And 
that, from time to time, is our responsibility. And we will try 
to discharge it in an appropriate and respectful manner.
    The debates we had over the supplemental at the end of last 
year were really as to timing and amount, not as to goals. And 
again, I would refer us all to the results of last year, 
although it was often difficult, produced the result that I 
think was a commendable improvement over the results of the 
previous eight or nine years.
    Mr. Istook [presiding]. I appreciated your response to Mr. 
Sweeney's question, Mr. Daniels, and we should have a couple of 
the other Members returning from the votes momentarily.
    Mr. Daniels. Oh, good.
    Mr. Istook. I am sure you are looking forward to that.
    As you have made it very clear, and I think you understand, 
we had to get some things out in the open. I think everybody, 
for example, very much appreciates, respects, and is pleased 
with the performance, for example, of Tom Ridge in the function 
as director of Homeland Security.
    But we know that no one in significant positions, by virtue 
of getting an additional title of assistant to the President, 
that doesn't mean that changes the nature of their other duties 
that they may have, just as I know you function in the one form 
as an advisor to the President, in addition to being the 
director of the Office of Management and Budget. People wear 
many hats, and sometimes it is a question of what is the 
biggest hat that they may happen to be wearing.

                         GOVERNMENT INITIATIVES

    I wanted to ask you about a comment you made relating to 
the E-Government initiatives, which is one of the funding 
issues before us in our subcommittee's jurisdiction.
    You mentioned especially in regard to the efforts that 
relate to efforts to simplify income taxes, and to simplify not 
only the tax code itself, but the process, the time that it 
requires of each of us as individual taxpayers.
    I know that personally. Although I have a CPA that 
previously prepared my income tax returns, since I have been a 
Member of Congress, I have made it a point to prepare those 
personally, so I receive the full impact. My CPA is a friend, 
he understands I am not trying to deprive him of business, I'm 
trying to make sure that I go through the same experience as 
most Americans experience.
    But in the E-Government initiatives and the issue on-line 
tax filings, the extent to which the IRS or the Treasury 
Department will get into a business that is part of the private 
sector right now on tax preparation software, can you tell us 
where you see the lines of this particular E-Government 
initiative between what the IRS and the Federal Government 
might be doing on line and where the private sector currently 
is on its software that is sold commercially?
    Mr. Daniels. Yes, Mr. Chairman. First, I commend you for 
putting yourself through the wringer of trying to deal with 
your own taxes.
    Mr. Istook. It is not done yet.
    Mr. Daniels. I would just point out that you are only in 
company any more with about half of your fellow citizens. Fully 
half of all Americans have given up trying to do it themselves 
and have had to go find professional help. It is a sorry 
commentary, in my judgment.
    You raise the question that is to me one of the trickiest 
ones we are dealing with. How, on the one hand, can we make it 
simple for an American to discharge his required duty to pay 
taxes, without abridging something this administration believes 
strongly, which is the government should not set itself up in 
business in competition with things provided in the private 
sector. In fact, as was mentioned earlier on, we are moving 
very hard to allow the private sector to do those things for 
the American public that it can do that government need not do.
    I guess the line has to be drawn where tax preparation 
begins. We all just have to keep talking and make sure that 
line is not crossed. You know, I think it is fair to say that 
many of those businesses are there only because of the 
complexity or principally because of the complexity we built 
into the Tax Code. There is not a God-given or constitutional 
right to make money off of the misery of your fellow citizens 
because they can't do their own taxes.
    So, and yet this is a very important service to be provided 
for people whose financial affairs are more complicated. So the 
E-Government project that is underway now aims really at the 
very simplest end, at the so-called short form filers. I think 
there are about 30 million, a little less than 30 percent.
    Mr. Istook. Are you speaking of 1040-EZ and 1040A, but not 
the full 1040?
    Mr. Daniels. Yes, sir. I think I am correct on that. That 
would alleviate the burden for many, many Americans who file 
very simple forms, who do not or certainly should not have to 
pay extra simply for the privilege of paying their taxes. And, 
we do seek to make life easier for those citizens. And, I think 
that can be done without in any way going and putting the IRS 
into the tax preparation business.
    You know, the IRS is in the advice business already. We 
have another problem we are trying to clean up, which is ``800 
numbers,'' where you have a very high chance of never getting 
an answer--about 30 percent. And, if you get an answer, you 
have an unfortunately high percentage chance of getting the 
wrong answer. So that is a management issue we are working on. 
But I have to ask myself the question, nobody that I know of 
believes that is not a useful thing to try to do. In fact, your 
colleagues want us to do a better job of it. So we all have to 
work together to make sure we are providing information in 
simplicity without competing with tax preparation.
    Mr. Istook. On the E-Government initiative, there is 
concern about the cost versus the benefit. Let me give you a 
key example, although it involves a quasi-governmental agency, 
the U.S. Postal Service. We had testimony before our 
subcommittee yesterday afternoon from the Postmaster General, 
Jack Potter. One of the areas we got into was the postal 
service's E-Government--E customer initiatives, started on-line 
security document delivery, bill payment services.
    They projected that their revenue stream from those this 
last fiscal year would be $104 million. They were only off by a 
factor of 100 to one. In other words, they had about one 
percent of the revenue now that they anticipated, yet they 
expended $100 million in putting those enterprises together.
    Now, when we talk about E-Government initiatives, and 
realizing that although I am a fervent believer in the 
capabilities of what we can do through the Internet and 
publicly available information, sometimes there is a cost 
versus requirement.
    How does OMB intend to address the question of making sure 
that the benefits will outweigh the cost, and in what areas are 
those most likely to have the best cost-benefit ratios?
    Mr. Daniels. Yes. Thank you. In selecting the 24, first E-
Government initiatives, there were literally hundreds of 
possibilities. The 24 selected were chosen because of their 
prospect to make the most difference for the most citizens. But 
also, none will go forward without a business case that will 
tell us to our satisfaction what the return is expected to be 
because the dollars we can spend on this are scarce, and we 
need to put them where they will make the most difference. So 
E-tax filing made the list, asset sales made the list, 
rulemaking commentary made the list, but many, many others did 
not because they didn't make the test of high return.
    And, likewise, as we look at the $50 billion that the 
government through all of the different agencies will spend on 
IT this year, we are going to use the authority Congress gave 
OMB, which has not been used really in the past, to intervene 
and stop projects which do not have a solid business case 
behind them.
    There is an awful lot of money being spent on projects for 
which that case has not been, that burden has not been carried. 
It needs to be.
    Mr. Istook. Would you tell us here about how is that 
particular aspect being managed, to intervene before you have a 
project go forward that is not going to be cost-effective?
    Mr. Daniels. Well, we are simply insisting on that.
    Mr. Istook. We being who within OMB?
    Mr. Daniels. Well, OMB through our chief technology 
officer, our chief information officer. Mark Forman heads that 
office and has the assignment to work through all of our 
branches to make sure that investments in IT are subject to 
this scrutiny. And we do have somewhat unique authority there 
by virtue of the Clinger-Cohen Act to step in where tax dollars 
are being spent, not as a part of a formal capital plan that 
imposes a kind of standards that you recommended to us. And we 
have a lot of work to do there. But at least Congress has 
provided a tool to do it, and we are using it.
    Mr. Istook. Let me ask you finally--and the other Members 
may not return. So, if not, I will make this the final area 
unless Mr. Visclosky had something further.
    We had a situation in recent months, and this is talking 
about the ability of E-Government to be a resource for people 
to get information, that government has in a usable form where 
it can actually influence their decisions, not through 
propaganda, but just through information, through knowledge, we 
had an experience--an organization called the Environmental 
Work Group compiled an on-line database from public records, an 
on-line database of recipients of assistance through the 
Federal Farm Programs here. You could look at it, you could 
look up an individual's name, a state, you can look up a ZIP 
code, a community, and find out how many people were receiving 
how much through Federal farm assistance programs.
    I believe it had a significant impact on the debate that 
was occurring in the U.S. Senate at the time on the farm bill. 
Now regardless of what side anybody may take on those debates, 
I thought it was a significant use of information available on 
line to be readily available to a large number of people.
    My question is, do the E-Government initiatives of OMB, 
focus on the ability to put information regarding Federal 
expenditures in a form that enables people to track it from 
program through some intermediate agency and to ultimate 
recipients? How does that fit into the E-Government initiatives 
that are underway? Is that the type of thing that you are 
looking to make possible?
    Mr. Daniels. We are certainly sympathetic with the goals 
and aims. I will give you maybe a small example. But in our 
rulemaking responsibility, regulatory review at OMB, we have 
put up all information on the web so that people can see, and 
it is completely in the open as they ought to be able to, who 
is commenting, who is coming in to present their case, and have 
meetings and so on and so forth, and what the content of those 
were.
    The President believes in a maximum of openness around 
these processes and the Internet, E-Government and so forth are 
great ways as you illustrated to enable that.
    I would have to say honestly in thinking through the first 
24 E-Gov projects, most of them are aimed at helping the 
citizens find service, to book a trip at a national park, for 
instance, to investigate, to find out what your options are, 
but to act on that, or to bring greater efficiency to 
government.
    We have 14 payroll departments in the Federal Government 
scattered across multiple departments and agencies, and there 
are possibly some important savings if we can bring that 
together in a web-enabled fashion. So I guess that is where the 
emphasis is initially.
    But I quite agree with you that to use this--to make 
information more accessible ought to be a major goal. I guess I 
left out one thing, the so-called First-Gov, the portal, which 
we upgraded recently and the Vice President switched on a 
couple of weeks ago.
    Mr. Istook. I won't ask you where he was when he turned the 
switch at the time.
    Mr. Daniels. Right. But with three clicks, the citizen now 
can reach almost any information, at least that is available in 
government now. The trick would be to make more and more 
available through that device.
    Mr. Istook. Well, I appreciate that, because personally I 
believe that as a lot of this discussion today began on debates 
about what government spending is proper and what is not, and 
who makes those decisions, I think letting the result be clear 
to citizens, and that information be clearly available, is the 
best check on unwarranted spending perhaps that we can have.
    Mr. Visclosky, did you have further questions you wanted to 
ask before we need to adjourn?
    Mr. Visclosky. Mr. Chairman, just for a moment to check on 
Mr. Hoyer's status, because my impression the last conversation 
was that he was coming back.
    Mr. Istook. That was my impression. But that is why I was 
continuing. But he did not return. I do not know, with this 
other vote. Please proceed.
    Mr. Visclosky. If I might just have your discretion. I 
think they are checking to see if he is coming right back.
    Mr. Istook. That is fine.
    Mr. Visclosky. I don't want to belabor any points. I don't 
have any questions except to preserve Mr. Hoyer's rights if he 
is coming en route back. But, as long as my mike is on.
    Mr. Istook. I knew you couldn't resist.
    Mr. Visclosky. Since the last portion of our conversation 
was disjointed, Mitch, I would simply reemphasize that I am 
concerned about making sure that there is competition within 
the Department of Energy and the labs, because I do think that 
they do terrific work. My sense is there ought to be some 
diffusion of those possibilities for universities and colleges 
throughout America, not just a select few.
    So I do agree with your earlier comments and appreciate and 
would hope through OMB that you would follow up.

                          U.S. CUSTOMS SERVICE

    Mr. Istook. Okay. Thank you, Mr. Visclosky.
    Let me--and we will wait and make sure that we give Mr. 
Hoyer the opportunity for that. The--the one significant item, 
Mr. Daniels, in the President's budget that is of great 
importance to the subcommittee regards United States Customs 
Service.
    In the President's budget proposal that came from your 
office, there is an item of approximately $250 million 
regarding the Customs Service, which has a key role in homeland 
security and border security, which even before September 11th, 
this subcommittee was very aggressively involved in increasing 
the manpower and the assets that are available to them to 
interdict illegal cargos, illicit drugs and, of course, persons 
who should not be coming into the United States.
    But the ability to continue making the resources available 
to the Customs Service in the President's proposed budget is 
dependent upon enacting some $250 million in additional customs 
fees. That is the way the President's proposal is structured. 
Whether this Congress does it that way obviously is 
problematical. But could you give us the justification for 
linking greater homeland security, border security personnel 
and resources for the Customs Service to enacting some $250 
million in new fees? Should that additional funding to protect 
us be dependent upon whether we raise fees?
    Mr. Daniels. Mr. Chairman, I would refer to this as a 
proposal to bring current or modernize fees. Both the airline 
and cruise ship fees have been in law for a long time. Airline 
fees, have remained at the same $5 level since 1986, which is 
worth only $2 adjusted for inflation today. So this increase 
would bring it current. Raising the airline fee to $11 and 
raising the cruise ship from $1.75, up by a quarter to $2 
produces the numbers that you talked about.
    And if--it has been the judgment of Congress all of these 
years that there is a benefit, to the traveler from the 
services Customs is called on to provide, therefore, that it is 
a legitimate case for user fees.
    I would agree with you we have got to be very careful not 
to create new user fees which are really taxes by another name. 
But in this case, we are simply updating one that hadn't been 
changed in 17 years, and at a time when arguably the demands on 
Customs and the benefits to the traveling public have been 
ramped up by events.
    Mr. Istook. Does the administration support the proposed 
increases in the personnel and assets for the Customs Service 
whether those user fees are adopted as the mechanism for 
financing it or not?
    Mr. Daniels. We think that increases in the capability of 
the Customs Service are essential. Governor Ridge has included 
this among his prescriptions for homeland security. So we think 
that has to be secured. As always, we would be willing to work 
with Congress to secure it. If there is an alternative means 
that does not grow the Federal budget or the deficit we project 
for this year, we obviously will work with you on it.
    Mr. Istook. I appreciate that. That is important to know 
that the funding is seen as a very important priority whether 
that is the source of that funding or not. Thank you.
    Mr. Hoyer.
    Mr. Hoyer. Thank you very much, Mr. Chairman.
    Again, I want to call your attention--I have got some 
questions to ask you. I think for the honesty of the debate, 
Mrs. Northrup mentions frequently in our discussions, and she 
is not here, but she mentions frequently that--and Mr. 
Sherwood, that we weren't sent here to spend money. You come 
before the Appropriations Committee, the carping on the 
executive department, frankly, in a bipartisan fashion, it is 
not limited to Republican administrations. Democratic 
administrations do the same. The carping is about, oh, 
theappropriators are spending too much money.

                      SPENDING AS A PERCENT OF GDP

    The point of page 126 in your budget is that we are 
spending less of GDP than we spent 40 years ago. This committee 
is spending half as much of GDP as we spent in 1962, half as 
much in terms of discretionary spending. Mandatory spending 
obviously has doubled.
    We have--take 18 percent, as--we have essentially gone from 
12 on discretionary to six on mandatory, and we have reversed 
that. It is now six on discretionary and 12 on mandatory. 
Obviously Social Security and Medicare have bumped that up. The 
suspicion is that somehow the Federal Government is spending 
wildly, and that is our problem. Very frankly, your party gives 
a lot of credence to that thought, because we got to stop 
spending in Washington.
    What that does is makes the debate less genuine, less real, 
because it does not deal with the facts. Clearly I think all of 
us agree that we should make spending efficient and effective. 
We are going to have--we are always going to disagree on who 
should be making pork decisions. I am for pork. There is bad 
pork, I am against it. If there is good pork, I am for it. My 
staff hates it when I say that. Frankly, my public agrees with 
that, whether it is the Ohio bridge that Mrs. Northrup, 
Kentucky to Ohio, thinks they need. You know, I think that is 
fine. They probably do need it. I am for trying to help them. 
But we are always going to have that debate.
    We should have an honest debate that we are not--this 
committee in particular--is spending half as much investing in 
education, which in 1962, of course, we didn't do much of. It 
was 1965, of course, when we started spending money on 
education.
    Now, let me ask you some specific questions.
    Mr. Daniels. Can I just agree with you strongly for a 
minute?
    Mr. Hoyer. I will always yield to people who agree with me, 
particularly strongly.
    Mr. Daniels. I really do agree, maybe with a footnote for 
that part about the parties and all of that. But on the rest of 
this, this is true and this is important. I think we have to 
be, and, I always tell our folks, you have to be careful when 
we look at spending and GDP, because it is actually the 
denominator that drives that. In our budget, spending as a 
percent of GDP is headed up by our current projections, not 
necessarily because spending is going up, but if the GDP is not 
projected to grow as fast, it really bends those numbers in a 
hurry.
    So that is something to be careful of. But your facts are 
correct. And the important thing you brought up----
    Mr. Hoyer. They are actually your facts.

                  MANDATORY VS. DISCRETIONARY SPENDING

    Mr. Daniels. Well, our facts are always correct. You can be 
sure they are correct if they are our facts. But the part I 
really am glad you raised is this business of the steady 
slippage of the Federal budget from the discretionary to the 
mandatory side, from the part that this committee and the 
Congress directly controls to the part that is most of the time 
on auto pilot, in between authorizations and so forth. I think 
that is a real good government issue that ought to cut across 
party lines. And I brought to the leadership of the 
Appropriations Committees a modest menu, but a menu of some 
possible things we might try to bring back across the line.
    If you look on the mandatory side, it is not all 
entitlement programs and things like that, that probably belong 
there. There are a few items where we are paying administrative 
costs of programs. You folks should be looking at those and 
deciding is that the right amount, too little, too much, and I 
think is something that we ought to try to work on together, 
because I think it goes to the heart of your power that we 
talked about earlier to control the Federal purse.
    Mr. Hoyer. It is not so much a question of power. It is a 
question of whether or not this committee, as has historically 
been done, with the American public, dedicated a portion of 
their wealth to public investments, which has made an 
extraordinarily positive difference in America. Whether it is 
infrastructure or education or health care, discretionary, a 
lot of it is on mandatory. We have a difference of opinion, 
frankly, on mandatory discretionary shift, a $9 billion shift. 
I don't have time to go into that. I want to have that 
discussion with you, because I, on policy grounds, disagree 
with your premise. Your premise is that the shifting of that 
will make the costs of employees more visible. I think it 
personally will make it less visible. Why? Because it will 
change it into discretionary dollars, which are not perceived 
to be dollars that the agency has to spend, but has, as the 
name implies, a decision to make as to whether to spend that 
money. It doesn't have that decision.
    Secondly, because you will put it in multiple accounts, it 
will be much harder for the public to say, this is what it 
costs us to hire Federal employees and have them retire. It 
costs us $9 billion. How do I know? Because right in Treasury--
you said it is sort of hidden, it is not hidden at all. You can 
go to that figure and that tells you exactly how much retirees 
cost us. So we have, I think, a difference of opinion as to 
where--frankly, I agree with you that the public should know. I 
think it is more visible in that one figure than it is in 
discretionary accounts, obfuscated to some degree by the 
impression that somehow the agency is making a decision, which 
in fact it is not.
    I do not disagree with you, for instance, in the A-76 
process or other processes that it does make sense to, in 
effect, back that out of the $9 billion and say how much does 
this cost you.
    I did vote. Do you want to go vote? I won't do anything 
untoward. I won't take over the committee.
    Mr. Istook. Go ahead with your questions.
    Mr. Hoyer. I think the answer was no.
    But you get my point, I think. Backing it out for purposes 
of saying, well, this is how much it costs to run the 
Department of Defense with the number of employees and a number 
of retirees you have, so if you are going to compete with the 
private sector on something, this is the real cost. I 
understand that.
    Now let me go to your real cost on the second thing.
    I apologize. Our chairman has to leave and I need to leave 
as well, and you probably do as well.
    FEPCA. You and I have discussed this. You haven't come up 
on--just like any of your predecessors with an alternative to 
FEPCA. Until you do, I am going to continue to press for 
following the law. I frankly think your economic numbers in 
your budget, your facts don't justify not following FEPCA under 
the law. Because I think we are going to have positive economic 
growth, you projected positive economic growth.
    I have one minute left?
    Mr. Istook. I have one minute left for the vote that is on. 
 If you have finished? I am sorry that I don't--I am not able 
to allow you more time.
    Mr. Hoyer. On FEPCA, I would really like a substantive 
answer to that question, because it is a vexing problem to come 
to grips with what is the right number.
    I will ask you also about the mandatory expenditure shift. 
I am going to oppose that for the reasons I have articulated, 
which are differences of opinion, which I think are legitimate. 
I will ask some other questions. The Chairman needs to leave 
and I don't want him to miss the vote.
    Mr. Istook. We will have those questions for the record.
    Thank you again, Mr. Daniels. As I pointed out to people, 
there were certain questions and although they are not normally 
directly within the purview of the Office of Management and 
Budget which you direct, nevertheless you are the highest 
ranking official within the Executive Office of the President 
that customarily appears before this subcommittee, and 
therefore you are the recipient of certain matters that extend 
a little bit beyond OMB's normal jurisdiction.
    Mr. Daniels. No accounting for my good fortune, Mr. 
Chairman.
    Mr. Istook. You are very fortunate, you are very capable, 
and I very much appreciate your work. Thank you for your time. 
We stand adjourned.



                           W I T N E S S E S

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Daniel, J.F......................................................     1
Daniels, M.E., Jr................................................   289
Larsen, P.D......................................................     1


                               I N D E X

                              ----------                              
                                                                   Page
Executive Office of the President:
    Administrative Duties Associated with the Office of Homeland 
      Security...................................................    22
    Appropriations Restructuring.................................    38
    Automated Records Management System..........................    82
    Capital Investment Plan (CIP)................................    84
    Chief Financial Officer......................................   135
    Computer Virus...............................................     6
    Condition of the Eisenhower Executive Office Building (EEOB).    78
    Daniel, Biography of Chief Financial Officer.................    21
    Effectiveness of High Intensity Drug Trafficking Agencies....    24
    Emergency Supplemental.......................................     6
    EOP Consolidated Appropriation............................... 6, 30
    Executive Office of the President............................   110
    Executive Residence and White House Repairs and Restoration..   124
    Fiscal Year 2003 Budget Increases............................    36
    FY 2002 Supplemental.........................................   118
    High Intensity Drug Trafficking Areas........................    24
    Hoyer, Questions Submitted by Congressman....................   248
    Implementation of the CFO Act................................     5
    Information Technology.......................................     5
    Larsen, Biography of Office of Administration Director.......    20
    Larsen, Opening Statement for Office of Administration 
      Director...................................................     8
    Larsen, Summary Statement of Office of Administration 
      Director...................................................     4
    Mail Operations..............................................    26
    Meek, Questions Submitted by Congresswoman...................   283
    National Security Council Budget Increases...................    36
    Office of Administration Budget Increase.....................    33
    Office of Administration Reorganization......................     4
    Office of Administration.....................................   134
    Office of Homeland Security Personnel........................    22
    Office of Homeland Security..................................    29
    Office of Homeland Security, Cyber Security..................    76
    Office of Homeland Security, Off-site Facility...............    73
    Office of Homeland Security, Salaries and Expenses...........    43
    President's Travel...........................................    89
    Questions Submitted by the Committee.........................    38
    Reduction in High Intensity Drug Trafficking Agency Funding..    23
    Relocation of Personnel......................................    25
    Renovation of the Eisenhower Executive Office Building.......    26
    Resubmission and Clarification of Responses to the 
      Committee's Questions......................................   141
    Travel Business Manager Program..............................     6
    USA Freedom Corps............................................28, 29
    White House Communications Agency............................   133
    White House Complex Facilities...............................    25
    White House Office Budget Increase...........................    33
    White House Office...........................................   136
    White House Repair and Restoration...........................    80
Office of Management and Budget:
    COPS Program.................................................   318
    Corps of Engineers.........................................313, 319
    Daniels, Opening Remarks of Director.........................   298
    Earmark Discussion...........................................   315
    Freedom to Manage..........................................313, 318
    Grand Forks, ND Corps Project................................   319
    Government Initiatives.......................................   327
    House Budget Resolution......................................   324
    Hoyer, Questions Submitted by Congressman....................   387
    Mandatory vs. Discretionary Spending.........................   333
    Meek, Questions Submitted by Congresswoman...................   401
    New York Concerns............................................   326
    Northup, Questions Submitted by Congresswoman................   373
    Office of Homeland Security..................................   322
    OMB Resources Focused on Homeland Security...................   306
    Peterson, Questions Submitted by Congressman.................   375
    Pell Grant Program...........................................   323
    President's Management Agenda................................   305
    Price, Questions Submitted by Congressman....................   404
    Questions Submitted by the Committee.........................   336
    Secure Our Schools...........................................   318
    Sherwood, Questions Submitted by Congressman.................   379
    Spending as a Percent of GDP.................................   332
    Sweeney, Questions Submitted by Congressman..................   376
    U.S. Customs Service.........................................   331
    Visclosky, Questions Submitted by Congressman................   406

                                
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