[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
FROM REORGANIZATION TO RECRUITMENT: BRINGING THE FEDERAL GOVERNMENT
INTO THE 21ST CENTURY
=======================================================================
HEARING
before the
COMMITTEE ON
GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
MARCH 6, 2003
__________
Serial No. 108-2
__________
Printed for the use of the Committee on Government Reform
Available via the World Wide Web: http://www.gpo.gov/congress/house
http://www.house.gov/reform
______
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COMMITTEE ON GOVERNMENT REFORM
TOM DAVIS, Virginia, Chairman
DAN BURTON, Indiana HENRY A. WAXMAN, California
CHRISTOPHER SHAYS, Connecticut TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York
JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania
MARK E. SOUDER, Indiana CAROLYN B. MALONEY, New York
STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland
DOUG OSE, California DENNIS J. KUCINICH, Ohio
RON LEWIS, Kentucky DANNY K. DAVIS, Illinois
JO ANN DAVIS, Virginia JOHN F. TIERNEY, Massachusetts
TODD RUSSELL PLATTS, Pennsylvania WM. LACY CLAY, Missouri
CHRIS CANNON, Utah DIANE E. WATSON, California
ADAM H. PUTNAM, Florida STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia CHRIS VAN HOLLEN, Maryland
JOHN J. DUNCAN, Jr., Tennessee LINDA T. SANCHEZ, California
JOHN SULLIVAN, Oklahoma C.A. ``DUTCH'' RUPPERSBERGER,
NATHAN DEAL, Georgia Maryland
CANDICE S. MILLER, Michigan ELEANOR HOLMES NORTON, District of
TIM MURPHY, Pennsylvania Columbia
MICHAEL R. TURNER, Ohio JIM COOPER, Tennessee
JOHN R. CARTER, Texas CHRIS BELL, Texas
WILLIAM J. JANKLOW, South Dakota ------
MARSHA BLACKBURN, Tennessee BERNARD SANDERS, Vermont
(Independent)
Peter Sirh, Staff Director
Melissa Wojciak, Deputy Staff Director
Randy Kaplan, Senior Counsel/Parliamentarian
Teresa Austin, Chief Clerk
Philip M. Schiliro, Minority Staff Director
C O N T E N T S
----------
Page
Hearing held on March 6, 2003.................................... 1
Statement of:
Volcker, Paul A., chairman, National Commission on the Public
Service; Frank C. Carlucci, member, National Commission on
the Public Service; and Donna Shalala, member, National
Commission on the Public Service........................... 27
Letters, statements, etc., submitted for the record by:
Burton, Hon. Dan, a Representative in Congress from the State
of Indiana, prepared statement of.......................... 73
Carlucci, Frank C., member, National Commission on the Public
Service, prepared statement of............................. 38
Clay, Hon. Wm. Lacy, a Representative in Congress from the
State of Missouri, prepared statement of................... 82
Cummings, Hon. Elijah E., a Representative in Congress from
the State of Maryland, prepared statement of............... 77
Davis, Chairman Tom, a Representative in Congress from the
State of Virginia, prepared statement of................... 4
Davis, Hon. Danny K., a Representative in Congress from the
State of Illinois, prepared statement of................... 20
Davis, Hon. Jo Ann, a Representative in Congress from the
State of Virginia, prepared statement of................... 17
Maloney, Hon. Carolyn B., a Representative in Congress from
the State of New York, prepared statement of............... 76
Shalala, Donna, member, National Commission on the Public
Service, prepared statement of............................. 35
Shays, Hon. Christopher, a Representative in Congress from
the State of Connecticut, prepared statement of............ 69
Volcker, Paul A., chairman, National Commission on the Public
Service, prepared statement of............................. 30
Watson, Hon. Diane E., a Representative in Congress from the
State of California, prepared statement of................. 80
Waxman, Hon. Henry A., a Representative in Congress from the
State of California:
New York Times article................................... 9
Prepared statement of.................................... 12
FROM REORGANIZATION TO RECRUITMENT: BRINGING THE FEDERAL GOVERNMENT
INTO THE 21ST CENTURY
----------
THURSDAY, MARCH 6, 2003
House of Representatives,
Committee on Government Reform,
Washington, DC.
The committee met, pursuant to notice, at 10:05 a.m., in
room 2154, Rayburn House Office Building, Hon. Tom Davis
(chairman of the committee) presiding.
Present: Representatives Tom Davis of Virginia, Shays,
McHugh, Jo Ann Davis of Virginia, Platts, Putnam, Schrock,
Miller, Janklow, Blackburn, Waxman, Maloney, Cummings,
Kucinich, Davis of Illinois, Tierney, Clay, Watson, Lynch,
Ruppersberger, Norton, and Cooper.
Staff present: Peter Sirh, staff director; Melissa Wojciak,
deputy staff director; Keith Ausbrook, chief counsel; Ellen
Brown, senior legislative counsel; John Callender, counsel;
David Marin, director of communications; Scott Kopple, Mason
Alinger, and Edward Kidd, professional staff members; Teresa
Austin, chief clerk; Joshua E. Gillespie, deputy chief clerk;
Jason Chung, office manager; Brien Beattie and Michael Layman,
staff assistants; Phil Barnett, minority chief counsel; Kate
Anderson and Althea Gregory, minority counsels; Denise Wilson,
minority professional staff member; Earley Green, minority
chief clerk; Jean Gosa, minority assistant clerk; and Cecelia
Morton, minority office manager.
Chairman Tom Davis. Good morning. I would like to welcome
everybody to the inaugural oversight hearing of the Government
Reform Committee of the 108th Congress.
Today's hearing will set the stage for many of the issues
that we hope to address in this committee over the next few
years. What I would like, if we can have Members' forbearance,
if we have an opening statement, to get it in the record, try
to limit the opening statements today to Mr. Waxman and myself
and the ranking members of the Subcommittee on Civil Service.
Everyone else's statement will go into the record. Then, as we
go through questions, you can weave your statement, if you want
to do that. But any statement will go in the record that you
would like to put in.
We are here today to discuss a report that was issued
earlier this year by the National Commission on the Public
Service, also known as the Volcker Commission, named after the
chairman of the Commission, Paul Volcker. Chairman Volcker
brings 30 years of Federal service to discussion, serving in
five Presidential administrations, including his most
noteworthy appointment as chairman of the Federal Reserve
System under both Presidents Carter and Reagan.
Chairman Volcker has agreed to come before this committee
today to present the Commission's findings, and he has brought
with him a distinguished group of dedicated public servants who
serve with him on the Commission. Accompanying Chairman Volcker
are Frank Carlucci, who served as Secretary of Defense under
President Reagan, in addition to a number of other high-level
appointments, and Donna Shalala, the former Secretary of Health
and Human Services under President Clinton and a former
president of a university of thousands of students.
In February 2002, Chairman Volcker announced that he would
be chairing the National Commission on the Public Service, a
group of long-time public servants who share a concern that the
current structure of government would not be able to meet its
obligations in the 21st century. The purpose of the Commission
was to take a year to analyze research and data and marry it
with the experience and expertise of the members of the
Commission, to set out an agenda for renewal and reform of the
public service.
Chairman Volcker chaired a similar commission 13 years
prior, and believed that the acute need for renewal and reform
of the public service was even more essential today. A year
later, after hearing testimony from dozens of highly respected
organizations, the Commission issued its final report calling
for sweeping changes in organizational structure and personnel
incentives and practices. The report made a compelling case for
change by documenting the organizational chaos that pervades
our Federal Government and detailed the degradation of the
notion of public service in recent decades.
In response to the dire critique of the state of affairs in
government, the Volcker Commission presented a set of 14
recommendations that will, hopefully, help us address some of
these issues that are all too familiar to public servants. I
will let the members of the Commission discuss their
recommendations in further detail in their own words.
A number of these recommendations are similar to
recommendations made in 1989 by the National Commission on the
Public Service. Unfortunately, that suggests we may face
significant challenges in implementing these seemingly logical
recommendations. I would like to hear from Chairman Volcker and
other members as to what challenges we should expect in trying
to implement the recommendations.
I also look forward to hearing from our witnesses in the
context in which they arrived at the conclusions they made. The
Commission is composed of 11 of the most-distinguished public
servants you could ask for from both sides of the aisle. We
will be interested to hear about the debates that took place
regarding the various recommendations and findings in the
report, and I look forward to discussing a strategy for
possible next steps with our witnesses.
I am very much interested in pursuing all of these
recommendations in order to improve the economy and efficiency
of the Federal Government, making Federal employment a more
attractive career option for our Nation's youth.
[The prepared statement of Chairman Tom Davis follows:]
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Chairman Tom Davis. I would now like to recognize Mr.
Waxman, the ranking member of the Committee on Government
Reform.
Mr. Waxman. Thank you very much, Mr. Chairman. I would like
to thank you for holding this hearing. This is an important
issue that merits careful consideration by this committee.
I also want to thank you and your staff for your
willingness to work collaboratively with the minority staff on
the hearing. I am hopeful that the spirit of bipartisanship
continues and that we can really accomplish something in this
Congress.
I would like to welcome the witnesses today and thank you
for taking the time to appear before us. All of you have had
distinguished careers in public service and are uniquely
qualified to speak to the challenges facing the Federal
Government.
Reforming the Federal Government is an issue of great
importance. There are some parts of government that are not
effective, not efficient, and need to be changed. However,
there are many parts of government that are good and should be
valued and preserved. The task before our committee is, thus, a
daunting one: how to reform government, yet still retain those
features that work.
In my mind, the best part of the Federal Government is the
millions of dedicated men and women who work for us every day.
Last July, Tom Friedman, a columnist with the New York Times,
wrote eloquently about the virtues of our civil servants. He
said, ``Our Federal bureaucrats are to capitalism what the New
York police and fire departments were to 9-11, the unsung
guardians of America's civic religion, the religion that says,
if you work hard and play by the rules, you'll get rewarded and
you won't get ripped off. . . . So much of America's moral
authority to lead the world derives from the decency of our
government and its bureaucrats, and the example we set for
others. . . . They are things to be cherished, strengthened,
and praised every single day.''
I would like to put Mr. Friedman's column in the record in
its entirety and encourage all members of the committee to read
it when they have an opportunity.
Chairman Tom Davis. Without objection, so ordered.
[The information referred to follows:]
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Mr. Waxman. The basic framework of the Federal Government
dates back to the 1950's, after the Hoover Commission proposed
a sweeping reorganization. At that time there was no Medicare
or Medicaid, no EPA or NIH, no terrorism threat within our
borders. Today our society is more complex, and the Federal
Government needs to ensure that it has the tools to serve the
needs of the American people.
For the Federal Government to perform the complex functions
now entrusted to it, the government needs to recruit, train,
and retain highly skilled workers. The report we are
considering today contains ideas for how we can achieve these
goals. These ideas and others need careful consideration by
Congress.
One thing is certain, though: the government won't be able
to attract and retain top people if it abrogates the
fundamental protections of the civil service. Indeed, the
report discusses the importance of safeguarding the essential
rights of public servants, including merit hiring,
nondiscrimination, protection from arbitrary personnel actions,
and freedom from political interference. The report also states
that, ``Engaged and mutually respectful labor relations should
be a high Federal priority.''
Having been a public servant for the last 35 years, I
believe there is no more fulfilling profession than working for
the government and helping to improve the lives of all
Americans, particularly those less fortunate. It is troubling,
then, to read in the report, ``The notion of public service,
once a noble calling proudly pursued by the most talented
Americans of every generation, draws an indifferent response
from today's young people and repels many of the country's
leading private citizens.''
We must all work to change this attitude. I look forward to
working with Chairman Davis and the members of the Volcker
Commission on this important issue. Thank you.
[The prepared statement of Hon. Henry A. Waxman follows:]
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Chairman Tom Davis. Thank you very much. Mrs. Davis.
Mrs. Davis of Virginia. Thank you, Mr. Chairman. I would
like to start by thanking Chairman Paul Volcker and the other
witnesses from the National Commission on Public Service for
joining us today, and especially for their work in assembling
their provocative report, ``Urgent Business for America.''
I also want to acknowledge the hard work of organizations,
including the Brookings Institute, the Council for Excellence
in Government, the National Academy of Public Administrators,
the GAO, the Office of Personnel Management, and several others
who assisted the Commission on this work.
Your timing couldn't be better. As we begin our work in the
108th Congress against the background of the new Homeland
Security Department opening its doors for the first time, the
issues that you raised in your report which go to the
fundamental questions of how the government is organized, how
it is managed, and how its employees are hired, promoted, and
paid, have taken on an urgency not seen in many years.
I see the Volcker Commission report as a guidepost for
Congress as we begin our journey of reforming the Federal
Government. On both sides of the Capitol we have teams of
lawmakers in place who take civil service and government
reorganization efforts very seriously and who are determined
that this important report does not merely collect dust on the
shelves of Congress.
As the new chairwoman of the Subcommittee on Civil Service
and Agency Organization, I intend to pursue with an open mind
several issues raised by your work, particularly those
recommendations dealing with pay, hiring, recruitment, and
reorganization, through subcommittee hearings, and I am hopeful
that you, Chairman Volcker, and other members of the Commission
will be available to testify at those hearings and to share
your knowledge with us as we consider legislation.
This will be a bipartisan, bicameral effort. Good
government is not a Republican, nor is it a Democrat issue.
Good government is popular government. It is effective
government. That is what all of us want: a government that is
agile enough to protect its citizens and to provide its needed
services.
Once again, Chairman Volcker, and the rest of the panel, I
thank you for your time. I am very interested to get to the
question-and-answer period, so that we can discuss the many
interesting proposals contained in your report.
With that, Mr. Chairman, I thank you.
[The prepared statement of Hon. Jo Ann Davis follows:]
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Chairman Tom Davis. Now I would like to recognize the
ranking member on the Civil Service Subcommittee, Mr. Davis
from Illinois.
Mr. Davis of Illinois. Thank you, Mr. Chairman. Mr.
Chairman, the fact that the first full committee hearing
convened under your leadership focuses on civil service reform
signals the importance of this issue for you and for this
committee. As ranking member of the Civil Service and Agency
Organization Subcommittee, I look forward to working with you,
Representative Waxman, and Representative Jo Ann Davis,
chairwoman of the subcommittee.
In the last 2 years the call to reform the civil service
has grown. The Senate has held numerous hearings on civil
service reform. Since 2001, the General Accounting Office has
put government operations and human capital needs on its
governmentwide high-risk list. A Connecticut businessman gave
$25 million to launch the Partnership for Public Service, a
nonprofit organization whose goal is to revitalize the public
service, and well-regarded research institutions, like the
Brookings Institute, the Council for Excellence in Government,
the National Academy of Public Administration, and the Kennedy
School of Government, have issued briefing papers and held
forums on how to reform the Federal Government.
This is not the first time, however, that attempts have
been made to reform the Federal Government and its work force.
The National Performance Review and the Contract with America
Initiatives come to mind. But timing is everything and it
appears that now is the time to make constructive changes to
the Federal civil service and how it operates.
Yes, there are overlapping jurisdictions, a conundrum of
rules and regulations, pay inequities, and government
operations that are outdated and outmoded. To effectively
reform Federal operations in the work force, we must first
understand the logic and reasoning behind the outdated and
outmoded rules and regulations. If not, we are destined to
reform everything and improve nothing.
The Civil Service Act of 1883, the Pendleton Act, was
enacted to remove partisan political influences from the
selection and retention of civil servants. In 1923, the
Classification Act was passed to provide a systematic means of
placing the right person in the right job and paying comparable
salaries for comparable work. The Equal Employment Opportunity
Act of 1972 resulted in full and equal opportunity in hiring,
training, and promotions.
The Civil Service Reform Act of 1978 changed and
streamlined civil service laws to do what many are calling for
now, to give managers the tools and freedom to manage, and it
gave Federal employees incentives to be more productive. The
Whistleblower Protection Act was enacted to investigate and
prosecute prohibited personnel practices, waste and
mismanagement, and political activity.
There was a reason, a need, for the aforementioned
legislation, and unless the problems that led to the creation
of that legislation have disappeared, there is still a need for
those laws. If there are new problems and concerns that demand
our attention, we should address them. However, we need to be
cognizant of what we are reforming and why, and what the
implications for the Federal Government will be.
The members of the Volcker Commission are well-regarded and
well-respected in their areas of expertise. I look forward to
their testimony and how it can help the Federal Government to
do a better job for the taxpayers and its employees.
I also look forward to working with my colleagues, Federal
employee unions, research organizations, and others, as we
journey together to improve the efficiency and effectiveness of
the Federal Government and place a higher premium on civil
servants.
I thank you, Mr. Chairman, and yield back the balance of my
time.
[The prepared statement of Hon. Danny K. Davis follows:]
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Chairman Tom Davis. Thank you, Mr. Davis.
If there is no objection, with unanimous consent, everyone
else's statement will go in the record, and we will get right
at it.
Ms. Norton.
Ms. Norton. Mr. Chairman, if I could make a statement?
Chairman Tom Davis. We tried to move it so that we can
get--otherwise, everybody makes a statement and they sit here
all morning.
Ms. Norton. Mr. Chairman, if you are saying that you would
like us not to make a statement, then I would defer to you.
There is another issue that has not been raised, and I would
like to be able to put it on the table.
Chairman Tom Davis. Sure.
Ms. Norton. Because I do welcome the fresh eyes of the
Volcker report and I want to thank you for the recommendations.
I do want to lay on the record that I believe that as important
as structure and operations are, is the human crisis capital
that the Federal Government is facing. And I am on the Select
Committee on Homeland Security. Today I think most Americans
would feel fairly secure with respect to our defense operations
abroad, but would not feel nearly as secure with respect to
security at home. That is partly because they know that at home
they are not, in fact, dependent mostly on the military; they
are dependent mostly on civil servants, on people that guard
the borders, on people who sit in government agencies.
Almost half this work force can retire within 3 years.
There is a very jittery work force here. I went to the Ronald
Reagan Building last Friday, when the President came before
those civil servants to reassure those coming into the Homeland
Security Department that their future was not at risk.
The reason that I bring this up and want to lay it on the
table, especially since I am not going to be here for this
entire hearing, is because, if in fact half the work force can
retire within 3 years, that means the most senior people, the
people in whom the Federal Government has invested the most,
the most valuable people when it comes to security at home.
I am at least as interested in that as I am in the
operations and the structure of the Federal Government. I have
a great interest in the structure of the Federal Government.
When I came to run an agency of the Federal Government, it was
among the most troubled agencies in the government. I am very,
very sympathetic to the notion of the need to improve
management when you are dealing with the largest employer in
the country, but there are huge problems.
We had to fight, a big fight, for pay parity between
military and civilian workers last year. Even though it is
civilian workers that people are looking to to protect them at
home, we may have another huge fight this year. We keep having
these fights.
We had an important downsizing of the work force in 1990.
We have a growth in political appointments. We have a growth in
contracting out. If employees keep seeing this, we are going to
chase out of the government the people we most need to protect
the people of the United States of America.
Thank you, Mr. Chairman.
Chairman Tom Davis. Thank you.
If there are no other statements, I would like to now go to
our witnesses. It is the policy of the committee that all
witnesses be sworn in before they testify.
[Witnesses sworn.]
Chairman Tom Davis. Thank you.
To afford sufficient time for questions, Mr. Volcker, if
you could limit your time to just a few minutes, I think we
have read the statement and we have questions ready to go, but
we would like you to sum up, and then we will give Mr. Carlucci
and Ms. Shalala an opportunity to speak, and then we will go
right to questions. Thank you.
STATEMENTS OF PAUL A. VOLCKER, CHAIRMAN, NATIONAL COMMISSION ON
THE PUBLIC SERVICE; FRANK C. CARLUCCI, MEMBER, NATIONAL
COMMISSION ON THE PUBLIC SERVICE; AND DONNA SHALALA, MEMBER,
NATIONAL COMMISSION ON THE PUBLIC SERVICE
Mr. Volcker. Thank you, Mr. Chairman and members of the
committee. I am delighted that you have called this hearing,
and I am, obviously, delighted to hear the indications of
support for a change and that the time may be right.
This is a difficult subject. It doesn't always attract a
lot of attention, but we, obviously, think it is terribly
important. That is reflected in the colleagues that are here
today, representative of the Commission generally.
I do want to just mention that sitting behind me are Paul
Light, who was, in a sense, the father of this in his work at
Brookings in public administration, and Hannah Sistare, who is
our indispensable staff leader who will be with us a while
longer. I think they are part of this, a very big part.
You have our report, and I won't read my statement. I
assume the report will be made part of the record and my
statement will be made part of the record.
Chairman Tom Davis. Absolutely.
Mr. Volcker. As you know, it is rather brief as these
reports go. It doesn't purport to be a detailed blueprint of
legislation or change, but it does purport to give a strong
sense of direction as to where we should be going, and it does
suggest some very immediate steps that could be taken by this
committee and elsewhere to get the process going.
We came at this from, obviously, a feeling which is widely
shared that there is too little sense of instinctive trust in
the Federal Government, that there has been an erosion of trust
I think in all institutions, but it is particularly dangerous
when it includes the Federal Government, and there is a lot of
evidence that is true.
It is not only true by people outside the government, but
there is a lot of evidence that it has been true of people
inside the government, which I think really suggests that time
has come for reform. The frustration and dissatisfaction within
the government, as well as outside the government, is quite
clear.
I would simply summarize the report by saying, what started
out as a feeling of a need for change in personnel systems
primarily, and more flexibility in personnel systems, quickly
evolved into our thinking that, while that was necessary, it
had to be part of a major reorganization of the executive
branch.
Quite coincidentally, as we were thinking along this line,
the proposal, was made for a Department of Homeland Security,
which in philosophical terms, anyway, reflected some of the
same concerns and objectives that are in our report: the need
for greater consolidation of related and overlapping agencies,
brought together in an environment of more administrative
flexibility and personnel flexibility, but with strong
political leadership.
So that is the core, without repeating everything in my
statement, of the report. The core of our concerns is a
reorganization of the government. It has been called for
before. We think the urgency and the direction now is clearer,
combined with more disciplined management, strong political
direction, but a more flexible personnel system. All of that
puts a large burden on oversight by the Office of Personnel
Management, by the Office of Management and Budget, and by the
Congress itself.
So this is a process for years literally, but what is
important is to get it started. I think this committee has a
particularly key role in that respect.
What we would like to see, what we have proposed, is some
enabling legislation, in effect, putting particular
organizational proposals of the President on a fast track in
the Congress. There are precedents for that in this area; there
are precedents for that in other areas. We think it is very
difficult to get progress without that kind of legislative
arrangement, and that, obviously, is an area for this committee
to take leadership.
We do have other suggestions that are complementary to
that. The question of effectiveness in appointment of political
officials has been a recurrent theme of all the examinations of
government, I think: the length of time that it takes, the
inefficiencies in that process. We repeat recommendations that
have been made by many other inquiries earlier and by the
Congress itself. I must say that we suggest that it might be
even more efficient and more effective if there were less
political appointees in total than, in fact, there are.
The question of pay arises at the top level. That is an
area that has been getting some attention. We were particularly
impressed by the urgent need for action with the judiciary,
where the case was put to us very forcibly by those responsible
for the operation of the judiciary in this country. Pay has
lagged for judges to a degree that it does risk, the quality of
judicial appointments and the judiciary system, and that
certainly is something that should receive your attention.
I would only add that, in making rather sweeping proposals,
we have been assisted not only by our own experience and our
own small staff, but we have been joined by a number of
organizations that do research in this area and have a deep
interest in public administration over a period of time. That
is all reflected in the report that you have before you.
So we come before you not just, I think, as an opinion of
12 people, which I take seriously because I think a lot of
experience is represented here, but it is kind of a culmination
of a lot of thinking and research in the whole community of
public administration.
So I will just leave it with those comments and be
delighted if my two colleagues could speak as well.
[Note.--The report of the National Commission on the Public
Service entitled, ``Urgent Business for America, Revitalizing
the Federal Government for the 21st Century,'' may be found in
committee files.]
[The prepared statement of Mr. Volcker follows:]
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Chairman Tom Davis. Well, thank you. Ms. Shalala, would you
like to make any additional comments? Thanks a lot for being
here.
Ms. Shalala. The recommendations that we are making here,
which are structural and governmental reform recommendations,
have everything to do with who we can attract to serving
government. I have spent half of my career at very high-level
positions, except as a Peace Corps volunteer, in government and
the other half leading major institutions of higher learning in
this country. In my judgment, our ability to recruit and retain
a new generation of what I believe are extraordinary young
Americans to government, who are going to be more diverse and
more talented than any generation that we have had in the past,
has everything to do with these kinds of reforms. They want to
come into a government in which they have an opportunity to be
successful and participate in decisionmaking at the highest
level.
I have served in government on the Democratic side, but I
have also observed leaders of government on the Republican
side. In both cases I have been in government where civil
servants were never allowed in the room under Democratic and
Republican administrations when major decisions were being
made. During my tenure I never made a major decision in which
only political appointees were in the room because I knew well
that, unless senior civil servants who had most of the
information were in the room, and they brought the junior
people that did much of the work into the room, we would not be
able to either recruit or retain them.
Let me give you another example. When I came into
government, the National Institutes of Health, the Director of
the NIH had less authority to hire people and to reorganize NIH
than the dean of any major medical school in this country. The
bureaucratic systems for recruiting scientists, even though the
kinds of people that he was recruiting were exactly the same
kinds of people that were being recruited at our major
universities for research positions as well as research
administration positions, there was much less authority for
that individual. Now we made some changes, with bipartisan
support, about that authority.
But these recommendations have everything to do with
recruiting and retaining people for our most important
scientific agencies: the National Science Foundation, the FDA,
the CDC, and the NIH. Therefore, the connection between
structure and personnel is clearly there.
Thank you very much.
[The prepared statement of Ms. Shalala follows:]
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[GRAPHIC] [TIFF OMITTED] T6438.023
Chairman Tom Davis. Thank you very much. Mr. Carlucci,
thank you for being with us.
Mr. Carlucci. Thank you, Mr. Chairman. I have a short
statement which I would submit for the record.
Chairman Tom Davis. OK.
Mr. Carlucci. Let me endorse what Donna just said about
bringing civil servants into the process. I was a civil servant
for 26 years and believe that the effective functioning of
government depends on the strong interaction between political
appointees and civil servants.
My testimony introduces a historical note by pointing out
that well over 30 years ago I testified before the Government
Operations Committee on an effort to move the domestic agencies
of government from a constituency-orientation to a mission-
orientation. We would have created four departments: the
Department of Community Development, the Department of Human
Resources, the Department of Economic Affairs, and a Department
of Natural Resources. The Government Operations Committee,
under the leadership of Chairman Holifield and Congressman
Horton, studied this extensively and voted out the Department
of Community Development.
I cite this to show that this is a longstanding issue, one
that needs to be addressed. I think it is more urgent today
than it was then. It needs the full support and devotion of the
administration and the members of this committee, and I would
look forward to working with you in any way that I can as you
move forward to deliberate on this important subject.
[The prepared statement of Mr. Carlucci follows:]
[GRAPHIC] [TIFF OMITTED] T6438.024
[GRAPHIC] [TIFF OMITTED] T6438.025
Chairman Tom Davis. Thank you very much.
We will start the questioning with Mrs. Davis on our side,
and then we will go to Mr. Davis, keep it in the family.
Mrs. Davis of Virginia. Thank you. Thank you, Mr. Chairman,
and thank you all for being here to testify on what I consider
to be a very important issue before Congress.
I think we have heard it alluded to by several of you that
retention, retaining, and hiring is just something that we seem
to be having a problem with. You know, NASA, in my district I
hear that the engineers, the top folks, are at retirement age
and we don't have people to fill the gap.
With that said, in January 2003, the GAO projected that we
are going to have a wave of retirements within the Senior
Executive Service. We have a lot of minority and females in the
lower levels, but we don't have them in the senior executive
positions. Do you think that the Federal Government is in a
position to promote within? We are going to have to--and, Ms.
Shalala, you may know this since you worked with the higher
learning institutions--do we go out to the private sector? I
mean, how do we get these folks to come in?
Ms. Shalala. We do both. Great institutions grow their own
through training programs and giving people opportunities, and
they also in certain circumstances bring people in. We,
obviously, bring in political appointees, but we also bring in
specialists in certain areas. I think government has to do
both.
But if people entering the government don't think they have
an opportunity to reach the top position and don't have an
opportunity to grow, then you cannot have a first-rate civil
service. There are a variety of different proposals that have
been made: the Presidential Management Intern Program. When I
first came to government, knowing that no one else in the
administration knew anything about it, I took 70 percent of the
PMIs the first year, until the other Cabinet Secretaries caught
on, because they were the most talented young people that we
would bring into government and had an opportunity to put
within the agency.
Mrs. Davis of Virginia. We have heard about the political
appointees and maybe we shouldn't have so many political
appointees. Do you think that it would be difficult for an
administration, be it Republican, be it Democrat, or whatever,
to be able to promote their agenda, what they want to get done,
if we don't have the political appointees?
Ms. Shalala. No.
Mr. Volcker. I think there are probably a lot of views on
this, but in my experience, and I have had political
appointments but I am not a highly political person in the
partisan sense, but in my observation of administrations, the
tendency when a new administration comes is always to say: How
do I get my program enacted? I need a lot of political
appointments. There are a lot of people they want to reward. So
you get a steady progression of more and more political
appointees.
You have the problem, then, of demotivating the civil
servants. I think at the end of the day you get less done than
if you had a coherent set of political appointees of senior
status working with effective civil servants who mainly want to
be in on the action, so to speak. They want to see things
happen, and they want strong direction. You will get more
coherence, I am convinced, with fewer but better political
appointments than if you have too many.
Mr. Carlucci. Absolutely. I agree with that. We could do
with about half the number of political appointees that we
have, and the issue should be the quality of the political
appointees. The current processes for bringing in political
appointees discourages quality, and that is one of the issues
that the report addresses.
Mr. Volcker. On the appointment process itself, of course,
we have repeated other suggestions that are made. You have had
a steady erosion--or a steady increase may be the way to put
it--in the amount of time it takes to get political appointees
in place. The government just goes on for 6 months without many
political appointees in place.
Ms. Shalala. I ran the Department of Health and Human
Services the first 3 months without a full array of political
appointees, which allowed me to meet the senior people in the
Department and reach down deeper in the Department. If someone
had said to me you had to do that for 2 years, I could have
done it. We needed a thin level of political appointees, and
we, in fact, mixed appointments--the IG was a civil servant;
the Exec. Sec. person came from the civil service--because we
wanted to send some messages to the senior people that there
were opportunities in the Department. So we mixed the two.
We could certainly do with many less--I don't know whether
it is half or a third--many less political appointees.
Mr. Volcker. You are going to have trouble keeping us
quiet, but let me----
Mrs. Davis of Virginia. It appears you are passionate on
this issue.
Mr. Volcker. I have one other point. The typical political
appointee is in office 2 years. It takes them 6 months to get
in, and then he is there for 2 years. In just the management
side of government, the administrative side of government, it
is very hard to have the perspective that is necessary and the
tenure that is necessary to operate an efficient ship, when you
know you are only going to be there 2 years. You may not know
it, but that is the average experience. You don't have the kind
of perspective that is necessary for the operational side of
government.
Mrs. Davis of Virginia. I have a million questions, but my
time is up. Thank you, Mr. Chairman.
Chairman Tom Davis. You stirred up a hornets' nest with
that, but it is a good dialog. [Laughter.]
Mr. Davis.
Mr. Davis of Illinois. Thank you very much, Mr. Chairman.
I, too, want to thank the witnesses.
Mr. Volcker, in your written statement you suggest that:
``The evidence is clear of inadequate recruiting, inability to
attract those with specialized skills, scrimping on job and
professional training, and inability to appropriately reward
high performance.''
Could you give an example of inadequate recruitment, what
you mean by inadequate recruitment?
Mr. Volcker. You know, if you will permit me, I would like
to defer to my colleague here, who speaks so eloquently on this
subject out of her experience in very large departments
requiring in some cases very highly skilled, specialized
personnel.
Ms. Shalala. Congressman, we heard testimony from the
judiciary comparing the salaries of full professors in our law
schools, not even the deans but full professors in our law
schools. As someone who has run two major universities and the
Federal Government at the Department of Health and Human
Services, the Federal Government in the judiciary is not
competitive, not even close in terms of salaries or packages
that we can put together to recruit people.
Now, this is particularly true when you have to find people
at the right point in their careers to take these positions,
sometimes serious, very important leadership positions. I
consider myself a pretty good recruiter, but in many cases some
of the people that we wanted we weren't even close. We are
talking about public universities. We are not talking about
Harvard and Princeton and Yale. We are talking about trying to
recruit from public higher-educational institutions in this
country, to recruit top-notch people that would head groups in
our government.
I particularly want to make an argument for the judiciary.
Since I was sued 11,000 times a year when I was in government,
I probably shouldn't be making that kind of argument, but to
recruit first-class judges, the comparison to what we are
paying in the law schools for people at that level--I am not
comparing the partners in law firms, but what the law
professors are being paid--isn't even close. We want people of
that quality.
It also affects our ability to get diversity in government,
I am convinced, because top-notch people who are African-
Americans or are Hispanics or Asian-Americans have lots of
offers. We have to get close so they can send their kids to
college.
Mr. Davis of Illinois. Do either one of you have any
suggestions in terms of how we overcome this inequity as we try
to correct the situation that you describe?
Ms. Shalala. Well, I think you might want to hear what
Frank has to say, but there is no question in my mind that the
recommendations in this report, separating out senior people to
a more technical corps--we have some flexibilities in
government for scientists, but not enough.
We also need to make decisions quicker. When you are
competing against a university, those universities can make
decisions quicker because their processes are more streamlined.
You have got to look at the markets that you are competing
against.
Again, I want to emphasize I am not talking about
recruiting against the private sector. I am talking about
recruiting against the public sector.
Mr. Carlucci. I might just mention that it is very hard in
DOD to get technically qualified people to leave high-paying
jobs and come into government, where they have got post-
employment restrictions. They also have a difficult process to
go through, divesture, with full visibility into their finances
and personal life.
I know of instances where up to 20-24 people have turned
down a high-level job in a technical area before finally
someone was found. Usually, that person is on the verge of
retirement.
Mr. Volcker. If I may just take an area that is very much
in the news these days, given all the scandals in the corporate
world and in auditing, the SEC is one of our premiere agencies
historically in the United States, known for, I think, both
competence and integrity. I don't think there is any doubt that
agency has not been able to keep up, for a variety of reasons,
with the complexities and growth of the world of finance and
the difficulties in the world of finance.
When you consider the competition that they are under in
terms of getting really good, aggressive, competent, young
people against the opportunities perceived and otherwise on
Wall Street, you recognize that they need a little flexibility
in staffing.
Mr. Davis of Illinois. Madam Secretary, and I guess I like
the idea of calling you ``Madam Secretary,'' you mentioned the
difficulty of having high-level civil service personnel in the
system participate in major decisionmaking. Was that codified
in any way or was this just a practice of directors or agency
heads?
Ms. Shalala. I think it was a practice. When we have
expanded the number of political appointees, which means that
we have layered down, it allows people off the hook in terms of
who they put in the room, in my judgment.
Some of the recommendations here are about legal kinds of
issues, but by reducing the number of political appointees, it
seems to me you integrate the government better and you allow
us to recruit people who feel like they are going to be in the
decisionmaking process. To come into government, to work all
your career, to be successful, to move up to the highest levels
of government, and then not to be in the room because there are
layers of political appointees, I think reduces the number of
people that want to come into government, if they don't think
they can participate.
All of you have to think about that connected to the number
of political appointees. And you are hearing this from a
Democrat, as well as from Republicans, about the need for that
level.
Mr. Davis of Illinois. Thank you.
Chairman Tom Davis. Thank you very much, Mr. Davis. Mr.
Putnam.
Mr. Putnam. Thank you, Mr. Chairman. I appreciate the
Commission's work and certainly agree that we need to develop a
way to continue to attract the brightest and the best young,
talented, gifted people in this country to answer the call to
public service.
I couldn't help but notice, though, that----
Chairman Tom Davis. Adam, when you said that, I was
thinking about you, when you spoke about the ``youngest and the
brightest.'' He is the youngest subcommittee chairman I think
in congressional history at 28. [Laughter.]
Mr. Putnam. I couldn't help but notice, though, that you
punted when it came to legislative salaries. You do have a
provision in here, but I suspect that the reason for that is
that you can't make an argument that it has hurt the number of
people who are called to run for office. I mean everyone in
this room certainly has to deal with elections. So, clearly,
the salary has not impacted those who seek legislative office.
I am troubled by the call to essentially, if you were to go
with the dean's pay for judges, you would take the judicial
salaries to somewhere in the neighborhood of $300,000, which
would create an interesting issue in terms of the branches of
government where you have determined, by saying whatever
political difficulties Members of Congress face in setting
their own salaries, they must make the quality of public
service their paramount concern, as well as involving the other
branches of government.
So you would be creating a situation where we have
determined that the judicial branch is more important or,
therefore, should be compensated in a drastically different
manner than the legislative branch. I would ask, how do you
factor in the fact that it is a lifetime appointment?
Mr. Volcker. Well, there is some misunderstanding here. We
are not suggesting $300,000 for----
Mr. Putnam. Well, that was the average salary that would
put it back in line with what their deans and comrades-in-arms
are being paid.
Mr. Volcker. I don't think--we cited some evidence as to
what deans were getting at leading law schools and what
professors were getting. I don't think we meant to say we are
recommending a $300,000 salary.
The practical area that we are talking about is failure of
judicial salaries to increase at all. The district judge, if I
recall correctly, now makes $150,000 a year. We deliberately
did not cite precisely what we thought would be appropriate,
but we cited these comparisons to suggest, I would think, that
you might begin at least by catching them up with the failure
to keep up with the cost of living over the past decade.
I personally think a little bit on top of that would be
appropriate, too. In my mind, $300,000 was not in the ball park
of what I would have thought appropriate.
Mr. Putnam. Well, I was just looking at your pay
comparison.
Mr. Volcker. That is a reflection, I think, in part of
there are attractions to being a Federal judge. Lots of people
want to be a Federal judge, and to have a lifetime appointment,
and so forth and so on. So they don't have to compete with
partners in a law firm.
Those people in universities generally can make some income
outside their salaries, too. So if they are getting a $300,000
salary, undoubtedly, they are making more than that. But we did
not mean to suggest that $300,000 was the right number.
Mr. Putnam. What is the rationalization of decoupling the
congressional salary as basically the cap for the other senior-
level service positions? There are instances where we have done
that. The SEC I believe is one of them. But it is a fairly
dangerous Pandora's box to open because, frankly, it would
immediately exceed where we are, because all of us have to
answer for the 3.9 percent, or whatever it is that we get every
2 years or every year.
So there is some concern that within a very short period of
time most every senior-level executive in the entire Federal
Government would be making more than the board of directors for
that Federal Government. I would be interested in hearing your
thoughts on where that would take us 5, 10, 20 years down the
road.
Mr. Volcker. This has been, clearly, a chronic problem: the
debate between getting an adequate salary at the top level for
a relative number of people in the administration while dealing
with the natural congressional reluctance to face their
constituents with salaries that create a political problem for
them.
Our suggestion is we can well understand and agree with an
increase in congressional salaries that is more or less
commensurate with what we are proposing. But what we do say, if
you feel that is inappropriate, given your particularly
sensitive position, if I may put it that way, in terms of the
electorate, you shouldn't refuse to increase the salary for
judges and senior executives because of that particular
sensitivity, because I think you are doing damage to the basic
operation of the government.
Mr. Carlucci. May I add something? I think the case we are
making is that this linkage has resulted in an erosion of
quality in the executive branch and may well be eroding the
quality in the judicial branch. I assume that you are not
arguing that you have to preserve linkage for linkage's sake;
that the purpose of the salary is to encourage quality and, if
necessary, delink them. You delinked them already when you
doubled the salary of the President.
Mr. Putnam. The argument I make is simply that it creates
an awkward situation. At the University of Miami there are very
few people, other than the number of top researchers and the
football coach, who make more than the president of that
university.
If you had a Federal Government where the vast majority of
the senior-level executives are making substantially more than
the board of directors or the Congress, then you have created
somewhat of an awkward situation. I am not arguing for greater
congressional salaries. I am arguing that, in the spirit of
public service, which is what all of this is, and when you
factor in the additional benefit, the revolving door in and out
of the private sector, the potential for long-term earnings as
a result of having been the Deputy Under Assistant Secretary to
the Under Secretary of such and thus, there are other reasons
why people enter government other than the specific salary.
That is my argument.
Mr. Volcker. There is no question about that. There are
other considerations here, and it is just a question of
relative proportion and how far can you let this get out of
line safely with the marketplace.
Chairman Tom Davis. Would the gentleman yield? Your time is
up.
Mr. Putnam. Yes, I don't have any more time to yield.
Chairman Tom Davis. Let me just say that a lot of the
revolving door are political appointees. They are not your
career people that come up. I think we are talking less about
the political appointees than attracting a cadre who will come
and stay in government.
One of the things I am hearing is they want to be involved
in the decisionmaking, that regardless of their personal
politics, they tend to respond to whoever their boss is. They
want to be part of the action.
But these are people who spend their life, 30 years, in
government many times. A lot of them will leave at mid-term if
they don't see that career path, when their neighbors and
everybody else are making money.
I appreciate your question. Obviously, it raised a lot of
comments down here as we work our way through it. Thank you.
Ms. Norton.
Ms. Norton. Thank you, Mr. Chairman.
I found your recommendations very helpful and very
thoughtful. The Commission recognizes that the Federal
Government is competing for the same personnel that everybody
else is, and you recommend that pay be based on market
comparisons.
You are aware, then, perhaps of the locality pay system. I
wonder what you think of locality pay, which applies to
everybody from managers, but especially to people in the higher
levels because those are the people that are most likely to
have marketable skills that they can use elsewhere, and to take
those skills and to use them elsewhere. What do you think of
the locality pay system? Do you have criticisms of it? If so,
how would you change it? What kind of system, if not that
system, would you put in place?
Ms. Shalala. The question is about locality pay. Actually,
the locality pay has been used to basically try to handle the
market situation in those places. It was a way around dealing
directly with competitive salaries, I think, Congresswoman
Norton.
Ms. Norton. Well, it was a way of saying they are making
this.
Ms. Shalala. That is right.
Ms. Norton. If you live in New York or Washington and you
are a manager of X,Y,Z, people make this; you make----
Ms. Shalala. Right.
Ms. Norton. There are some disparities here, and it was an
attempt to bring that pay here more in line with the pay that,
presumably, this employee could go out on the open market and
earn.
Ms. Shalala. Right. I think our point would be, on locality
pay, that it does partially allow people in a certain area to
get more competitive, but it doesn't solve the problem, as we
have well seen. It doesn't completely overcome what has
happened in the market or the larger group that you are trying
to deal with. It just doesn't make up the difference.
Ms. Norton. So what does? If not looking at what people
earn in San Francisco and trying to make the comparable----
Ms. Shalala. You have to look at their specific jobs. You
have to look at specific jobs.
Ms. Norton. Well, but that is what locality pay does. It
says, a manager doing exactly what you are doing in San
Francisco or New York makes this; if you are a Federal
employee, you make awesomely less than this. And this was a
system that has become very controversial, but that tries
gradually over time to bring you closer to what your
counterpart in the private sector in your locality makes, so
that you will not pick up your hat and go work there.
So I want to know, if not that system, which has been
controversial only because it has been difficult to get the
Federal Government to, in fact, employ it--it is a matter of
Federal law. If not that system, looking region by region, city
by city, using your notion of a market-based comparison, if you
mean it, and if not locality pay as the way to make the market-
based comparisons, then what is the way? Because this is an
issue on which we need a whole lot of help now because of the
difficulty in implementing locality pay.
Mr. Volcker. My impression is quite a deal of progress has
been made in locality pay in the last decade or so, since the
last commission that I was involved in, when we made a big
point of the need for locality pay. I am told some considerable
progress has been made there.
The Federal Government is a very big organization, and we
have got a lot of different problems. We did not find, our
investigators have not found, an across-the-board problem with
Federal pay up and down the line. The problem tends to be
concentrated in particular areas. It is concentrated with the
top level, where there has been enormous compression.
Nearly everybody in the Senior Executive Service gets
pretty much the same pay, and it is a problem with technical
experts, professional experts. There are problems in some
particular scientific areas, particularly in more senior
professional or management positions. But it is not an across-
the-board problem with Federal pay every place at all ranks,
and particularly I think locality pay has helped take care of
some very obvious problems that did exist in that area.
Ms. Norton. You are certainly right. The locality pay has
been very helpful. It has been very difficult to get each
President to, in fact, do what the Congress says to do, which
is to do it. While I agree with you that the disparities put us
out of the market, unable even to recruit at the higher levels,
I disagree with you that it does not apply to any but the
higher levels. The figures on that are available for anybody
who wants to look at them.
I would like to ask you a question about competitive
outsourcing. This is a hugely controversial issue. We have got
to take a hold of these controversial issues if we are going to
keep a work force.
Outsourcing is a part of the way every government does
business now. I think people, even people who disagree with it,
have come to accept the notion that there is going to be
outsourcing.
The controversy comes because--I note that you believe, let
me begin there, that it should not undermine the core
competencies of the government. I very much appreciate that you
say that.
One of the problems with destabilizing the civil service
work force is that there is no way of knowing how the
government does outsourcing, when it does outsourcing, or who
is going to be outsourced.
The comparisons between costs are often not done. There is
a presumption that is greatly resented in the civil service
work force that, if you put in the contract work force, it is
going to be cheaper and it is going to be better.
Now imagine there are civil servants, huge numbers, working
side by side, virtually, with contract employees who are doing
exactly the same job. This is a big problem, whether you are
working at very high levels or whether you are working further
down the system.
I wonder if you have any ideas for the government on how to
make a more rational system of competitive outsourcing. And may
I add that the notion of having the civil servants compete with
contractors has been given the back of its hand by the Federal
Government. If you want competitive outsourcing, then one way
to do it would be to have some experiments at least to allow
civil servants who have been doing the job to compete with
contractors to see who does the job best, at least on a pilot
basis.
That would help, it seems to me, to get down some of the
controversy, and again, if I may say so, eliminate some of the
outpouring of people out of the Federal Government and our
inability to simply quickly attract new people of the same
quality and experience to fill their positions.
Chairman Tom Davis. Thank you. The gentlelady's time has
expired. If you would like to answer, if you have any response
to that, you are welcome to do so.
Mr. Carlucci. I will just comment that DOD has run a number
of those competitions, some successful, some not quite so
successful, but there is at least one agency that is doing it.
Chairman Tom Davis. Yes. In fact, DOD has had the A-76
Circular they have used for years----
Mr. Carlucci. For some time.
Chairman Tom Davis [continuing]. And that is being revamped
as we speak, and a lot of dialog going on. We had the
Competitive Source Panel last year coming back and reporting,
but it is an area this committee intends to look at a lot, and
we look forward to your input in that, Ms. Norton.
Ms. Norton. Thank you, Mr. Chairman.
Chairman Tom Davis. Thank you very much.
Mr. Volcker. It does seem to me an area where the Congress
ought to set down some guidelines, and I think it is in this
committee's jurisdiction as to how to deal with this promising,
but also difficult, area.
Chairman Tom Davis. It is a difficult area, and we could
spend a whole hearing just on that issue and polarize the
committee, but it is something that we intend to pay a lot of
attention to and having a dialog. Thank you.
Mr. Schrock.
Mr. Schrock. Thank you, Mr. Chairman. I am going to be
very, very brief.
Mr. Volcker, thank you for what you and your Commission are
doing. Now I only got this when I walked in here this morning,
but when I looked through it, I realized I need to read every
page of it.
I think the thing that you have said that struck me the
most is it is taking too long to get the political appointees
confirmed. Either you said it or Ms. Shalala. I don't know of
any department that has collapsed because no people have been
there, and I think there are too many political appointees.
I know the DOD has even thought about doing away with the
Secretariat level because all those jobs are--and don't get me
wrong; I am a retired military officer, so I support the DOD--
those are just paybacks for getting somebody in the White House
elected. I am not sure we benefit by that sort of thing very
much.
When you get done with this, when we get this implemented--
and I hope we just don't have a hearing; I hope we get this
implemented--there are other things you need to take on as
well, and they have nothing to do with what you did, but I am
going to mention three of them, figures I learned last night.
I learned that the Social Security Administration, 10
percent of the checks that go to people, the recipients are
dead. Ten percent are dead, and most of them go offshore.
Welfare fraud is an epidemic right now, billions of dollars
on welfare fraud. In the Department you used to head, Mr.
Carlucci, $18 billion of missing military hardware.
We have to get these departments under control. I think if
you hired the best and the brightest to get in there and give
them flexibility to do what they want when they leave, we are
going to put a stop to some of this stuff. So I admire you for
what you are doing.
I just hope this doesn't fall on deaf ears in Congress. It
is great that the chairman is holding this hearing, but
sometimes I find, when I was in the State level as well, you
walk out of a hearing and nothing is done; they stick it on a
shelf and don't implement it. I hope you will bug us to death
until we do something about that because it is good stuff, and
I thank you very much for what you have done.
Mr. Volcker. Well, I think we have learned that this is an
easy area for everybody to put it on the shelf and not take
action. The whole purpose of our report is to try to stimulate
action in a reasonable direction, because we think it is sorely
needed. There is just so much evidence that is needed. I do
hope the committee will follow through.
Mr. Schrock. I agree. Thank you.
Chairman Tom Davis. Mr. Ruppersberger.
Mr. Ruppersberger. First, thank you for what you are doing.
I think it is very important that we do continue to evaluate
and look at our government on a regular basis. With the quality
of the Commission, I think, hopefully, we will be able to do
something.
To begin with, I think we have a very complex government;
most governments are. But when you look at management,
management has basic fundamentals. It is usually hiring the
best people that you can, giving those people a clear sense of
direction and clarity of mission. You have a Secretary. You
hold that Secretary accountable for the performance of that
department.
Now management of a department or management of an agency,
or whatever, has different components. We talked about salary.
That is one issue. But I think an issue that is important, too,
is the ability of the leader to motivate.
I think you were talking about bringing the civil servants
into the room, making them feel a part of a process. I think
that is a very, very important issue.
I want to ask a question, though, as far as what you have
looked at. Are you familiar with the Gains Sharing Program?
Mr. Volcker. The what?
Mr. Ruppersberger. Gains Sharing. Let me try to explain it.
I was a former county executive, and I managed in Baltimore
County about 7,000 people. I realized, when I came into office
8 years ago, that we were in a recession; morale is down. You
hear morale is down on a regular basis.
I hired a consulting team outside of our area to implement
this program called ``Gains Sharing.'' Gains sharing,
basically, is group incentive and then based on performance.
What you really do is that you have facilitators and you go
into different departments and you create like a pilot program.
To give you an example, one of our pilot programs was the
food service in our detention center. As a result of pulling
the front line together and asking the front line, what can you
do to make your job better, to improve performance, as a result
of facilitators working with the front line, they said, ``Well,
we can fix our food better. We can purchase better.'' As a
result of working in that program, this group, performance went
up; costs went down.
Part of this Gains Sharing Program, when cost goes down and
it can be established, there is an incentive with money that
goes to the group. As a result of that, we had, as an example,
employees maybe making $28,000 or $35,000 who took home a
$5,000 bonus. But the bonus is just a small part.
What gains sharing really did, it improved management
versus the front line, and it improved the relationships.
Therefore, the front line felt as if they were now shareholders
in the entire government operation, and they just weren't
coming in and punching a clock and taking their 20 years.
That motivation makes a very big difference. But not only
did it improve labor/management relationships, you found that
in the group, because the group had an incentive to improve
performance, that the group would then manage their own
employees. The lazy employees, they would get on them and say,
``You're hurting the group.''
Now what happened, you can't just say gains sharing is
going to be a program or a philosophy that, for instance, with
police officers, how many arrests you make. Let me give you an
example in the police department. You usually have three
shifts, and one car is used by the different shifts. If you are
taught how to apply brakes to a car versus somebody who
doesn't, and you don't have to get new tires--one group has to
get new tires in 6 months, the other in a year. There is a
performance issue. There is a cost-saving issue.
So I think it is extremely important that you look at the
motivation point of working, bringing the front line in, and
that will allow the civil servants again to be shareholders in
the operation.
The second point, I think the flexibility issue is
important. We know the political ramifications. We are always
going to be changing, different administrations and different
people that come in, and they want their own people that are
there.
But when it comes to specialty areas, and in your testimony
today, if you are competing with the private sector for people
in the technology arena, for people in a specialty area, you
need to have that flexibility to hire the best you can, because
we are one of the largest employers. We need that expertise.
So there must be some flexibility to compete with the
private sector in specialty areas. I think that will not
interfere with the civil servants. The civil servants are
concerned that, if you get the camel's nose in the tent, there
is a problem. We have to distinguish to look at the issue of
performance.
Now my point--it was a statement really--have you
considered or looked at the Gains Sharing Program? I know in my
previous job, the State Department, because we won a national
award for our gains sharing and it was effective, the State
Department made inquiry. I think they are looking into that, to
possible implementation of that within their Department.
Could you consider looking at it or have you looked at it?
Ms. Shalala. Yes, actually, the Federal Government has a
variety of different approaches that are similar to the
philosophy of gains sharing, including investments in total
quality management, where you get the front line people as part
of the group, and figuring out reward systems.
The problem with a lot of these kinds of experiments, they
have been put on top of the existing system. What you are
suggesting is that the fundamental culture changes, so that the
government is organized in different ways. That is consistent
with the report itself, which argues for nimbleness and
flexibility and reward systems.
We didn't focus on pay. We did focus on, and we have a list
of, various experiments in government that we think ought to be
mainstreamed. The concept of gains sharing, the use of total
quality management, and other kinds of management approaches
are very much what the government has both started to do and
what needs to be mainstreamed. That is what the report
recommends.
Mr. Volcker. When I listened to you, Congressman, it
sounded to me like a sermon. Forgetting about the details, we
didn't consider gains sharing as a specific, but your emphasis
on the need for management and flexible management is right in
the spirit of our report.
I think we are trying to do two things. The government is
complicated. We want strong, coherent political direction, but
when it gets to administering a program, the administerial job,
the kind of thing that Mr. Schrock was talking about, and
Social Security, Medicare, Medicaid, many other programs, then
the balance goes toward getting some managerial flexibility and
effectiveness. That takes a kind of different talent than the
political one. It takes people who are going to be there for a
while and have responsibility. You can have measurable results.
That is what we want to encourage.
Mr. Ruppersberger. One of the things that I think is
lacking in a lot of management generally is a lack of
accountability, holding people accountable for performance.
Once you establish something and you tell people what to do,
and you hold them accountable, if they know they are going to
be held accountable, and you give the resources to do it, you
can do the job.
One other point: I haven't heard training. I think training
is extremely important. A lot of times you have civil servants,
as an example, who start out; they are very good workers. They
move into management; they don't know how to manage because
they haven't been trained to manage, and they really interfere
with the front line. I think that is a very important issue
that we need to look at also.
Mr. Volcker. You will find that word rather emphasized I
think in the report. That has been a big lacuna in Federal
employment, much less spent on training and education than in
the private sector.
Mr. Carlucci. There is another aspect of this, and that is
that the current appropriations and authorization process
discourages savings. If you save money in the Federal
Government, you lose it.
I can remember when I was in Donna's old Department staying
up half the night the last day of the fiscal year to shovel out
all the grants, because if we didn't get them all out, the
money would be taken away from us, and we would get less the
next year.
When I went to DOD, I tried to design a program where base
commanders could keep some of the savings that they achieved.
OMB stepped right in and said, ``No, we'll take the money.'' I
think DOD is going back at it again, but you have to take a
look at the appropriations process, if you really want to
encourage people to generate savings and get rewarded for
generating those savings.
Mr. Ruppersberger. No question, but that needs to be a
change in culture.
I will tell you another trick that is used, too. You talked
about not being able to fill positions for 6 months. That is
your Budget Office that saves money that way.
Chairman Tom Davis. Thank you. The gentleman's time has
expired.
Let me say thanks. I will give you one example when I
headed a government out in Fairfax. Our first year we had a
fiscal crisis. I went to all my managers, you know, ``We need
the savings,'' and they squeezed maybe 1 or 2 percent. We came
back with a theory, with a program, that if they saved the
money, they could keep a third of it and spend it the way they
wanted to. They came up with a lot more money. Who wants to
save money in their budget and scrimp their budget to go to
some department that overspends?
So this is something that I look forward to working with
you on, and I think it is in the spirit of where this report is
headed. I appreciate it.
Mrs. Miller. Thank you.
Mrs. Miller. Yes, thank you, Mr. Chairman. I will be brief,
but in regards to what you were just talking about, use it or
lose it, that really is true. I think that is part of Secretary
Rumsfeld's idea of transformation in the DOD which is very
appropriate.
I wanted to make a comment on your report as well. I also
just received this when I came in today, but I am going to read
it all. I can see it is a very interesting report. Obviously,
you spent a lot of time and resources and attention to it.
I am from Michigan, and we did a very similar type of
report. We called it the Secchia Commission, where we tried to
look at how we could structurally reform State government, how
we could incentivize people, whether you were using flex time
and comp time, and all these kinds of things.
We talked about, which I am sure is in here, you know, for
instance, the concept of customer service from civil servants
to taxpayers. That should not be a novel one. It could be an
operative phrase.
As you have been talking about how you attract for some of
the higher tier, also coming from Michigan, a labor State, we
had also some recommendations in the Secchia Commission report
about how some of the very contentious labor/management issues,
as you try to restructure these things, and how difficult it
was to mesh those challenges.
I am wondering if you have any specific recommendations in
here or if you could comment on the kinds of challenges you
would expect the Federal Government to face when you start
talking about structural reform to the civil service.
Mr. Volcker. Well, I guess our whole report is directed
toward those kinds of problems, that we need some structural
reform. I don't think I have any----
Ms. Shalala. The big challenges could be congressional
because you would have to re-sort the congressional committees.
Many of these agencies already have so many committees of
jurisdiction that it would be a mistake to just re-sort out the
Federal Government and not make the accompanying changes in
terms of congressional committees. So they would have to fit
together, and that is one of the recommendations that is made.
Mr. Volcker. We were so bold as to feel that we could make
a recommendation to the Congress itself here and there, like
changing the committee structure. But I do feel that, if you
are going to follow the philosophy in the report, all
administrative agencies and all bureaucracies need some
oversight, and they need political oversight, and the committee
structure of the Congress ought to be reasonably aligned, so
that some committee feels responsible for kind of continuing
oversight of executive agencies. That is true in some cases
now, but in other cases it is not. I think that alignment is
important.
Mr. Carlucci. Another point made in our report that is
extremely important is that this has to be a collaborative
effort between the administration and organized labor. You have
to bring the participation of the employees along, and there is
going to have to be some consultation with the labor unions.
Mrs. Miller. Thank you.
Chairman Tom Davis. Thank you very much.
Let me just say we are having a series of three votes. Ms.
Watson, we will go to you, try to go to Governor Janklow, and
then probably recess and, if your time permits, come back. That
will give you about a 20-minute break. Then we will come back.
I haven't asked my questions yet. I just want to have a few
minutes of dialog, if your schedule permits.
Ms. Watson.
Ms. Watson. Thank you so much, Mr. Chairman. I want to say
that I have the full confidence in the panel in front of me
that the outcome will be a positive one.
There are just several comments I would like to make. You
can respond later.
I think your recommendations are going in the right
direction. Recommendation nine that deals with salary
compensation, I, too, in my former life know that in California
we lost a lot of good people to the private sector. So I want
to just confirm and underline your making salaries commensurate
with the private sector to keep good people.
An additional concern is I see the dumbing-down of America.
In watching television, the quality of the programs are for
children in maybe elementary and junior high school. So I think
under your recommendation 12 we need to look at competent
people, the best and the brightest, and we are going to have to
some way relate to universities and to the private sector, be
sure that we can attract people from there to come into
government with incentives, so that they will know they can
move up to the salary levels they could in the private sector.
I am really disturbed about what is happening to America with
the kind of media that we are exposed to.
Diversity becomes an issue in my mind. I want to be sure
that, when we talk about competency, we also talk about
competent people who reflect America as it is today.
I come from a State where diversity is a goal; diversity is
a value. We are the first State in the Union that has a
majority of minorities.
Your recommendations 13 and 14 are excellent. I think that
continuing education needs to be a part of whatever your final
recommendations are.
So I want to wish you well. You are on the right path. You
are going in the right direction. As I look at the panel, I
know that your final report will be something that will really
bring our government to the 21st century.
Thank you so much, Mr. Chairman.
Chairman Tom Davis. Ms. Watson, thank you very much.
Mr. Janklow, thanks for waiting. This will be our last
question before we break. Thank you.
Mr. Janklow. Mr. Chairman, members of the Commission, I
appreciate your indulgence. I will be very brief.
One, you look at page 19 of the report. It talks about the
delay in the appointment of people. That is scandalous,
absolutely scandalous.
One, the system is used to intimidate people. Two, the
system is used in order to try and embarrass people. Three, the
system is used for political payback, and, four, it is used for
anything by both political parties except to try to give the
President of any party the team that they need to really get
the job done.
Two, you look at page 38 of the report, and you see what
you have with respect to the Environmental Protection Agency.
That is scandalous.
I have seen charts from the National Governors Association.
There are 128 Federal agencies that deal with education in this
country. That is scandalous.
The food safety issues, you have got 20 different agencies
that deal with food safety that they have been able to
identify. You know, contrast that with what the military has
been able to do over the last couple of decades. When they were
in Grenada, they approached a situation where they tried to
call in an airstrike, I think as some of you will remember,
onto a particular building. They didn't have the communication
for the Army to talk to the Air Force. So somebody actually
received a medal, a captain received a medal, from the 82nd
Airborne, by having gone to a pay telephone, using his AT&T
credit card, called Fort Bragg, NC. They radioed the Pentagon.
They got hold of an AWACS that called in an airstrike.
Somewhat after that point in time, when they got to Desert
Storm, they didn't have those kinds of problems. The military
figured it out.
I can't tell, until they run for political office, whether
generals are Republicans or Democrats, or captains or sergeants
or corporals. The military is a beautiful example of how you
can have a bipartisan organization that functions.
But you are missing one thing in all of this. Why don't you
draft the proposed statutes for us? We can't do it. We can't
even figure out how to get Homeland Security without going home
for our Christmas recess.
Chairman Tom Davis. An honest man here. [Laughter.]
Mr. Janklow. So why don't you draft proposed statutes and
then let us fight about how to modify what it is that you are
doing? But if you ask us to do it in the first instance--and I
will say this: Wherever you can find Donna Shalala and Frank
Carlucci, I want to be in the midst of them. That is a great
group. Volcker, you are in a perfect spot for this type of
thing. [Laughter.]
But if you folks would draft a statute for us, or the
proposed statutes, then we could go to work on them, and we
will get something done. Otherwise, this is going on the shelf.
It is not even going to be a footnote in history; it is too
thin, and nobody is ever going to pay attention to it after the
hearings are over.
Thank you.
Chairman Tom Davis. Mr. Janklow, it is great to have you on
the committee. [Laughter.]
Mr. Volcker. I was about to suggest to Ms. Watson that we
were trying to put the ball in your court. Now it has been
kicked back.
Mr. Carlucci. Well, actually, if I may comment, some of the
statutes have been already drafted. Years ago, I spent a lot of
time testifying on something called the Allied Services Act,
when I was in HEW. This is an act that would have allowed
localities, community action organizations at the local level,
to co-mingle funds where there were like programs.
Mr. Janklow. But everything has been drafted once. Put it
together in a package.
Chairman Tom Davis. OK, let's address this when we get
back. We have about 7 minutes left on the first vote.
Mr. Janklow. Thank you.
Chairman Tom Davis. We have two 5-minute votes. So if you
can wait about 25 minutes, we will take a break. Thank you very
much. You have generated up a lot of enthusiasm and comment
here. Thanks.
[Recess.]
Chairman Tom Davis. The full committee will reconvene.
I will start with questions. There is nobody else here. I
have got a bunch of them that I want to ask.
First of all, one of the recommendations that you give that
I think is very, very important, and I wanted to get input from
all of you, is to reauthorize the executive reorganize
authority that existed from Roosevelt to Reagan. We saw what
happened with the Department of Homeland Security, the
wrangling back and forth, and everything else. Obviously, I
think it makes a lot of sense to have a fast-track procedure.
The key for us, the difficulty, the devil is in the
details: How do you write this? There is a huge suspicion right
now between some of the public employee groups and this
administration after Homeland Security. So you, obviously, have
to write some language in there that would give a modicum of
protection on that.
To me, the key to writing an executive reorganization
authority is to get away from all these turf fights that you
run into up here. Now that is what is critical. I think we
could handle the public employee component of that in a
satisfactory way. If the administration or any later
administration doesn't want to go along with that, then they
are on their own and they don't come under this reauthorization
authority.
So I think we can take care of that, and that is one of the
larger political obstacles. But the key is to make sure that
these different committees that have jurisdiction don't try to
pick it apart.
We ask the executive branch to do a lot of things in
delivering service, and we ought to give whoever the Chief
Executive is, whether it is Bill Clinton or George W. Bush, or
whoever, give them the tools they need to make it go. I think
this makes a lot of sense.
If we can take care of the public employee piece, it seems
to me this is a much more doable piece without that. I think
you would have a battle royal that is just going to go right
down the middle.
I would be interested in your comments on it. I will start
with you, but I would be interested particularly in Ms.
Shalala, what she may have to say about this, and Mr. Carlucci.
Mr. Volcker. Well, let me give you my reaction. What you
are saying, it seems to me, is exactly in accordance with our
thinking. If we are going to have some progress here, we are
not going to reorganize the government overnight, but you can
set up a framework that will expedite the process, not in one
great sweep for the whole government, but permit progress in
one area or another, depending upon the President and what his
priorities are, and all the rest.
And you could set up a framework, I would think, that, as
you suggest, avoids the turf fight. The turf fight will come
with a specific proposal, fitting in the general framework that
you have in mind. But I do think you have to deal with some
things in the framework.
I just speak for myself. You mentioned the labor one. I
think that is an important one. This outsourcing thing may be
something that fits into a general framework, too. We have got
some guidelines about what that should be, and I am sure there
are other areas where you need some broad guideline for the
Congress, so that when the President proposes something, he
conforms to those guidelines and you don't fight that battle
every time a particular piece of reorganization comes before
you.
Chairman Tom Davis. Right.
Mr. Volcker. The turf fight will come then, as I see it.
Chairman Tom Davis. Well, and you could put in some
consultation ahead of this as part of the guidelines that the
Congress is completely----
Mr. Volcker. Exactly.
Chairman Tom Davis. Ms. Shalala.
Ms. Shalala. One way of thinking about what we did is in
many ways we eliminate the turfs by putting them all together,
so that no one is fighting with each other over who goes where,
because you have consolidated into superagencies the functions
of government. So, in some ways, you reduce the amount of turf
fighting that is going on.
I also would say that you would have to put in more than a
modicum of protection for the civil service. For them to
believe us, they have to believe that we are serious about
partnerships with labor and that we are willing to work through
these issues with them. It is not just the labor
representatives; it is the civil servants in general in the
departments that have to have a sense of trust that this is not
going to be an arbitrary and capricious process.
So I think it is possible. I think it is important to do
it, but I think that we have to think about who at the end of
the day is going to produce the work, and that is going to be
the people that work there. They have to get more than just
messages. They have to see us demonstrate that this is going to
be a partnership to produce very good outcomes for the
government.
Chairman Tom Davis. Do you think it is fair to say, then,
on your Commission, had we asked for specific language on this,
it may not have been a unanimous vote because the devil really
is in the details here in terms of how you write some of these
protections in and everything else?
Ms. Shalala. Our Commission could achieve a unanimous vote
on protections, in my judgment.
Chairman Tom Davis. OK.
Ms. Shalala. I mean, we would have to work very hard at it,
but I think that Frank and I, as people who have run these big
agencies, and certainly the chairman, could have probably
worked something out in terms of protections based on our
experience, working with the unions. But I am not sure, Mr.
Chairman, that is particularly our role. It is a political
function to work through this.
Chairman Tom Davis. It is, but I think this: You look at
it. Each of you have a perspective and a different
philosophical perspective as you look at this. But having a
group as diverse as yours coming to some agreement or
commenting on language, so that we may come up, emboldens us a
little bit as we go out.
You always worry about somebody saying, ``I don't want any
change, period.'' Even if you get something reasonable, nothing
happens. I am not asking you to do it, but I am just saying we
may want to ask you to testify up here, if we put some language
up and get comments on it.
You don't have to worry about political repercussions; our
Members do, and that is one difference. But you can embolden
Members sometimes by putting a stamp of approval on some
language you think is, given your experience and perspective,
having been in the Federal Government for a long time, that is
very important to us.
Mr. Carlucci.
Mr. Carlucci. There is a slightly modified model that one
could think about, and that is the Base Closure Commission that
was created when I was Secretary of Defense, where you had
outside experts take a look at the base structure. In this
case, it would be government organization structure. Make
recommendations which the administration would accept or
reject, and then move it to the Congress, which would have no
ability to amend it, would have to accept it or reject it in
its totality. That is similar to the fast-track legislation,
but it introduces the commission idea into it as well.
Chairman Tom Davis. OK. I think my time is up. Mr. Shays,
any questions? I have more questions, but I will wait until the
next round.
Mr. Shays. I am just happy to have you pursue a few. Tom,
do you want to just take yours?
Chairman Tom Davis. That is fine. Well, no, we have Mrs.
Blackburn down there, who has not had an opportunity for
questions, who has been sitting there patiently. Let me
recognize you and give you 5 minutes. Thank you, Marsha.
Mrs. Blackburn. Thank you, Mr. Chairman, and, yes, I have
thoroughly enjoyed this. Being someone who came from the State
Senate in Tennessee, who was an advocate of government reform,
I have enjoyed reading through your statements, listening to
you, and also I look forward to looking through your book.
There is one thing that I did want to ask you about. As I
looked through your report that was delivered this morning and
read through the conclusion--I am one of those that goes to the
back of the book and reads that first.
Mr. Volcker. Find out who murdered whom before you read the
book. [Laughter.]
Mrs. Blackburn. Right. One of the things I noticed in here
was a statement that you say, ``This would not be a bigger
government but it would be a better government.''
Ms. Shalala, in your comments you had noted three things
that you saw as being important: clear program objectives,
performance specifications, and basic employee guarantees.
What has intrigued me, just in this short of period of
time, is that there is no comment toward cost. When you talk
about this being a better government than a bigger government,
in what way? Because I look at it and think, is a better
government going to end up costing us less? Is a bigger
government just in terms of cost? Is it in terms of more or
less government regulation? Is it going to be something that
the taxpayers are going to feel like they are getting a better
buy for? Is it going to be fewer Federal employees who are more
fairly compensated?
As you all have worked through this process to build a
framework, as Mr. Chairman just said, the devil is in the
details. I think that for those of us who have people who
entrust us with their vote to represent them and their views,
what it is going to end up costing is very important to the
taxpayers that support this system.
Ms. Shalala. Well, let me simply say, from the point of
view of a manager of any kind of large, complex, any kind of
organization, retention saves money. The turnover of personnel,
the constant need to recruit, not being able to keep your
senior people, in the long run costs you money. Overlapping
functions costs the government money, where you have large
numbers of government agencies who are doing similar things.
I always thought about the Medicare program, and I don't
really want to get into Medicare, but the problem with it was
that the legislation was so complex that it just cost a lot of
money to manage a government program where the legislation
itself was so complex, because everybody kept adding
requirements to it. If I was going to reform the Medicare
program, I would clarify the legislation first before I started
to add new functions all on top of it, but Medicare is just an
example, a highly complex piece of legislation.
Social Security, on the other hand, is much more
straightforward in terms of what the rules are, how you get on
it. The parts of it that are complex have to do with
disability.
But my sense is that, by taking major pieces of legislation
and constantly changing the rules by changing legislation, you
have made it so complex to administer; anything that you could
do to bring clarity to both the legislation, the functions of
government, who is responsible for what--I never guarantee that
you could save money. What I do guarantee is that you could
improve the quality of government and of government service,
and certainly not add to the overall cost.
Mr. Carlucci. Certainly, by eliminating some of the
duplication, you can save money. But some of the things that we
do are unquantifiable. How much is it worth, for example, to
save an airline because you have high-quality air controllers?
Or we have the example today of the all-volunteer Army, which
has dramatically improved the quality of our military.
Difficult to quantify the savings, but we know that we are
better off because we have these kinds of dedicated and well-
trained and well-educated people.
Mrs. Blackburn. Thank you.
Chairman Tom Davis. OK, thank you very much. Mr. Shays.
Mr. Shays. Thank you. Thank you, Mr. Chairman. Thank you
for conducting this hearing, and thanks to our three panelists.
I get a little embarrassed when three people who have such
busy schedules have to wait 45 minutes while we are voting. I
apologize for that.
Chairman Tom Davis. But it was on the Journal and a motion
to adjourn. So you can be assured that it was important
business. [Laughter.]
Mr. Shays. So we really felt important while we were there.
[Laughter.]
Mr. Volcker. That was a constructive vote, I would say.
[Laughter.]
Mr. Shays. I was extraordinarily impressed with the people
who are on this committee, 11 direct and 2 ex officios, really
politically astute folks, very knowledgeable. So I consider
what you were able to accomplish as being done by people who
know a lot about government.
I was also impressed by the breadth of the recommendations,
but they aren't really spelled out in much detail. That is
probably wise as well.
What I want to ask you is, I would like each of you to tell
me the one thing you think is the most important and the one
you think is the least important. I would like you to tell me
the recommendation you think will be the most difficult to have
and the least difficult.
Mr. Volcker. Well, most important in----
Mr. Shays. Of these 14 recommendations.
Mr. Volcker. Pardon me?
Mr. Shays. Of these 14 recommendations, which of the 14 is
the most important? And if you want to give me two or so----
Mr. Volcker. Well, certainly, in a tactical sense, the most
important is what we were just talking about: getting some
legislation to facilitate reorganization on a kind of fast-
track, to use that term, basis.
Mr. Shays. Reorganization of the government or the
personnel process?
Mr. Volcker. Pardon me?
Mr. Shays. Reorganizing the government into different
departments and agencies or reorganizing the personnel process?
Mr. Volcker. No, reorganizing the government I was thinking
of.
Mr. Shays. OK.
Mr. Volcker. I think that is important for two reasons.
First of all, I don't think you are going to get the
reorganization without that kind of authority. Second, it would
be an enormous signal, I think, from this committee that this
whole thing is taken seriously, and that things should move
forward.
I don't think there is anything else you could do, just to
give you my opinion, to get the process launched than lay the
basis for some of the other recommendations.
Mr. Shays. It would sure wake people up. Let me just take--
--
Mr. Volcker. I would say, on specific things, I think we
have always had this problem of salaries and compression at the
top, but I do think the judiciary makes a very persuasive case
and that something ought to be done there. I think there is
some gestation of thinking in the administration and elsewhere.
So that could be done, and a little more flexibility in
salaries breaking the Senior Executive Service between the
management and the professional staff, and providing some
flexibility there, to give you three specifics, I think would
be a great help, right off the top of my head.
Mr. Shays. Thank you. I am not going to ask you the one you
think is least important, actually. That would be fun to know,
but I am not going to ask you.
Mr. Carlucci, which do you think is the most important?
Mr. Carlucci. Well, I agree with my chairman. I think
getting a fast track is probably----
Mr. Shays. Is that a requirement for the answer?
[Laughter.]
Mr. Carlucci. That is how we reached a consensus, Mr.
Shays. [Laughter.]
Mr. Volcker. I wish other agencies worked that way.
[Laughter.]
Mr. Carlucci. Well, I agree that getting fast track is
important, although it is a toss-up, in my mind, between that
and the compensation issue and personnel flexibility.
Mr. Shays. OK. I really should have had it done like the
Supreme Court and had the chairman answer last.
Ms. Shalala.
Ms. Shalala. Congressman, I would basically say the same
thing. I would say the same thing. Giving the Secretaries
authority to modify their compensation systems would be
important because the agencies are so complex. With proper
oversight, they need some of that authority at the same time.
I would also, in answer to your other question about what
is the worst, we left out the least important things. In fact,
part of the debate on our Commission was to reduce this to just
the most important recommendations.
Mr. Shays. Well, that is interesting. That is interesting.
Now tell me what you think is going to be the most
difficult in this to pass.
Ms. Shalala. The fast-track authority.
Mr. Carlucci. Fast track.
Mr. Shays. OK.
Ms. Shalala. It is going to be very difficult. We didn't
spend as much time focusing on Congress. The Congress itself,
if this is given, has to reorganize. Because it does no good to
have a streamlined agency that meshes all of these functions if
you have to go to 15 congressional committees, and they all
have jurisdiction over you, because in many ways you are back
where you started. So Congress itself has to have an
accompanying reorganization if the government agencies are
going to be reorganized, it seems to me.
Mr. Shays. Do you mind if we go on----
Mr. Volcker. You know, your feeling, obviously, is the fast
track is very difficult, and I can understand that feeling. It
is the most basic, I guess, of our recommendations. But, I will
tell you, I wonder whether it is more difficult than some of
these things that seem fairly obvious that never are done, like
recommendation No. 8: ``The Congress should undertake a
critical examination of ethics regulations.'' I don't know how
many commissions there have been that I have been involved in,
or have not been involved in, that have been in this area over
the last 10 years and nothing happens.
Mr. Shays. Yes, and this is in some cases a silly
requirement, I think, not that we are too loose in our ethics,
but that we have standards that make it very difficult. I think
that is what you are saying.
For instance, I had a constituent who would have been
wonderful in government. He was given a 40-page document,
single-spaced practically, and he said, when he looked at this
document, he said he didn't want to even apply.
Mr. Volcker. Exactly.
Ms. Shalala. Mr. Shays, one of the President's appointees
who eventually got confirmed had to go back and track down the
babysitter she had when she was a graduate student to find out
whether--because she couldn't remember whether she had paid
their Social Security. Of course, she hadn't paid their Social
Security. So she tracked them down to pay their Social
Security. I mean it was 20 years before.
Mr. Shays. Yes. Mr. Chairman, do we get involved in the
ethics issue? Would this come out of this committee?
Chairman Tom Davis. We certainly could, particularly as it
pertains to civil service and the like, the revolving door,
those issues.
Ms. Shalala. Congressman Shays, the reason this is so
difficult is because there aren't a lot of people in this town
interested in management.
Mr. Shays. Right.
Ms. Shalala. Out of the hundreds of times that I testified,
maybe 10 percent were actually about management of the
Department as opposed to specific issues. You chaired one of
the few hearings where I testified myself. You will remember
the blood issue.
Mr. Shays. Yes, I do.
Ms. Shalala. And specifically about the management of that
internally in the Department and how we were organized to deal
with a very important safety issue, the blood safety issue. But
very rarely was I called up on management questions as opposed
to major policy or legislative debates.
Mr. Shays. Besides the importance of that hearing, the one
thing I remember was, because it was important, you didn't get
into the protocol issue of, being a subcommittee and you were
Secretary of the Department, not coming in. I will always be
grateful to you because I think that was one area where we
collectively made some really excellent improvements, which is
a credit to you, I might say.
Mr. Chairman, thank you. I think what this Commission has
done is given Mrs. Davis and others on this committee a
wonderful opportunity to do some very important work, if we
choose to undertake it. I thank them, all three, and your
entire Commission.
Chairman Tom Davis. Thank you. I think the issue--there are
some people that don't like government, but if you believe in
government and you believe it can accomplish things, we need to
make it as efficient as we can.
I worked for one of these big A,B,C companies out there you
see around the Beltway, one of these high-tech companies. I was
general counsel and a senior vice president with a company
called PRC. It was a billion-dollar-a-year company. I know Mr.
Carlucci's----
Mr. Carlucci. We tried to buy it. [Laughter.]
Chairman Tom Davis. But everybody else did. I don't know
why you didn't get it, but you got BDM and some others.
But the point is our most valuable asset wasn't our
computers; it wasn't even our contract backlog. It was our
people. They walked out the door every night. Replacing a good
person is, as Ms. Shalala said, a very difficult thing;
turnover costs in ways you can even measure. If you can get the
right people, train them--training came up earlier. One of the
first things that gets cut in any agency budget is training,
when you have to snap your budget. You have good, solid people,
knowledgeable people, but they miss training 2 or 3 years; it
is costing us billions in procurement not to have the right
people trained, up-to-date, and giving them the right tools.
We have a lot of potential, and I think this is a very good
guideline for us to proceed with in terms of fleshing this out.
But we might want to hear from you and react to some of the
proposals we put down the road, and maybe sometimes a consensus
dissipates when you have to come up with the particulars.
I have got a couple more questions, but I want to ask Mrs.
Davis if she wants to ask any more questions first.
Mrs. Davis of Virginia. Thank you, Mr. Chairman. I do have
one that is probably going to be a big issue, and that is pay
for performance. I was just wondering how you all would suggest
approaching that, how we would keep from a senior management
person having something like cronyism causing them to give the
raises, as opposed to the actual pay for performance. So that
is one of the big concerns that I have. How do we know that it
would be done fairly?
Mr. Carlucci. Through oversight is one. Let me make the
analogy with the private sector. I, and I am sure Donna and
Paul as well, have chaired compensation committees in the
private sector where we have done pay for performance in a big
way, set up compensations anywhere from 40 to 60 percent of a
person's total compensation. It could even be higher.
But it is the board of directors that has responsibility
for overseeing it and seeing that there are no abuses. In each
of the agencies you have got Inspectors General; you have got
hotlines, and you have got congressional committees. That ought
to be sufficient oversight to ensure that the process is run
with integrity.
Mr. Volcker. I think something we haven't emphasized here
this morning is directly relevant and something that would be
in the enabling legislation, so to speak. That is the role of
the oversight agencies within the Federal Government,
particularly the Office of Personnel Management.
I would think, if you are going to have this kind of
flexibility, there is a real trick to have the flexibility, and
somebody need to be looking out for the abuses which
bureaucrats are subject to, like other people. How that is done
finally by the Congress, but before you get to the Congress, I
think you have got to be sure that within the executive branch
there is some kind of oversight, and it has got to be
reasonable oversight that doesn't destroy the purpose of
flexibility. It is a real problem for any organization,
particularly if you don't have the bottom line of the income
statement to discipline it.
Ms. Shalala. If the senior people who ultimately are
responsible for signing off on those pay increases aren't
credible people, if they are people dragged in from political
campaigns who don't have substantive knowledge or the skills--
and part of this balance that we have achieved here in
recommending that you reduce the number of political appointees
is also to make sure that the senior managers in the department
are credible people that have gotten there through a merit
system.
I mean, I am the last one to object to a layer of political
appointees, but I think the Presidents have to be careful about
who they put in those positions and about their willingness to
work with the senior managers of the department, and to make
sure that it is a credible merit system, if you are going to
put in a pay for performance.
The second point I would make is it is not so easy in some
governmental functions to figure out what the performance is,
particularly if the legislation is complex. I think I left
government after 8 years deciding that as much of the problem
was flawed legislation as it was the management tools that we
had. So sorting that out, and that is why one needs a
combination of bonus systems, rewarding group efforts, and
other kinds of tools, but managers need lots of different kinds
of tools, not simply the pay-for-performance kinds of things.
Mr. Volcker. I probably am not characteristic of most
people who have been in government. I have my own
idiosyncracies. But we have got a lot of oversight in the
Federal Reserve in the sense that people like to haul us up and
testify about monetary policy and where interest rates are
going and where the economy is going. The Federal Reserve is
not subject to many of the ordinary civil service requirements,
but I would have been delighted to have more strict--just
straightforward, say once a year, oversight of the
administration of the Federal Reserve because I always looked
at it as kind of an ally of mine in trying to maintain some
discipline in the organization, which I think is pretty good.
But, you know, it is a great protection against some of the
excesses. You can't pay a salary that is going to look odd on
the proverbial front page of the New York Times if you think
you are going to get some oversight which may reveal that. So I
think this is kind of inherent in our recommendation to have
congressional committees that corresponded with kind of super-
departments that we are proposing, so that it is clear where
the administrative oversight lies.
Mrs. Davis of Virginia. Mr. Chairman, I thank you, and I
look forward to our subcommittee having many more hearings on
some of these issues. Hopefully, you all will be there to help
us out. Thank you, Mr. Chairman.
Chairman Tom Davis. Thank you.
One of the issues that was brought up today that is kind of
counterintuitive is the fact that political appointees many
times don't really help the process. Bringing the career civil
servants in is more productive. It is something I think we want
to look at a little bit more. Every administration needs a
place to put their people when you come in and you get all
these resumes coming, but if the average service is 2 years, if
in fact many of these people don't have expertise in the areas
they are, and if they underutilizing civil servants, frankly,
the taxpayers are the losers on something like that.
So that was an insight that we are seeing--yes?
Mr. Volcker. It is counterintuitive, I think, to new
administrations certainly, but I have seen enough of these.
They come in, Democrats and Republicans, they are both alike;
they are very suspicious of what has been there before. They
want to change it. They want to think they are going to change
it. They want to put in a lot of political appointments. That
is the way they think they are going to do it.
I have seen these same administrations leave, at least in
the departments that I have been involved with, and they have
more respect for the civil service than when they came in; they
wish that they had more time to improve the civil service and
work with them. It is quite a different attitude.
But we have had this ratcheting-up with virtually every
administration of more and more political people, who often
have more of an agenda of their own, and they think they have a
political constituency, than the civil servant does.
Mr. Carlucci. If I can comment, this is a never-ending
battle between the agency head and the White House. I have
served, as I mentioned in my testimony, in seven agencies. The
first thing I have done in each of those agencies is grab
somebody who is politically connected, make them my person in
the agency to fight off the White House and make sure I didn't
have to take all their political axe.
Chairman Tom Davis. Right, and the fact is you go through a
campaign, then you get all these people who have given up a
year or two of their lives, and they expect a job out of it. I
mean that is human nature. Democrats, Republicans, all of us in
the business know how it works. I guess you suffer through some
of that in politics. That is what it is about.
Mr. Carlucci. It is inevitable.
Chairman Tom Davis. But the fact is, if you are keeping the
civil servants who have done this for their career, out of
college and their training, and they are out of the room, what
an underutilization. You just wonder what happens.
But I think that was important. I think that is an
important recommendation in terms of giving us a perspective
because there is always, particularly on our side of the table,
there is always this perspective that you have this bureaucracy
of people who have their own agendas, and as the political
people come in, we are the ones trying to drive it. It is
interesting to hear from people who have served in
administrations of both parties that it really is not the way
it works.
So I can't thank you enough for putting this together. The
last thing I want to do, and I think the members who are here
today want to do, is let this die in the dust. I don't know if
we will be able to get it all done, but there are some pieces
that we are going to give it a shot.
I have talked with Susan Collins over on the Senate side
about this, too, and they are excited. George Voinovich is
excited about doing some of this.
So let's see where it goes, and we may call you back as we
try to put pen to paper. As I said, the devil is in the
details. We have got to make sure that there are friends in
both parties who have an interest in this, and some of them who
are excited can try to draft something that we could actually
move through.
Mr. Shays. Oh, I'm sorry, Mr. Davis, would you like another
round of questions?
Mr. Davis of Illinois. Thank you. Thank you very much, Mr.
Chairman.
You know, listening to Mr. Carlucci, I was just thinking
that ``hip hop'' isn't new. Fight off the writeoffs--I kind of
like that. I thought that was a great comment. [Laughter.]
Mr. Volcker, let me ask you, in your testimony you suggest
that any reorganization proposals sent to Congress from the
President should really be given a straight up-or-down vote
within a specified period of time.
Mr. Volcker. Right.
Mr. Davis of Illinois. Why do you make that assertion?
Mr. Volcker. Pardon me? Why?
Mr. Davis of Illinois. Why do you suggest that it should be
a specified period of time? Are you suggesting that committees
may bottle it up or the process may hamper it?
Mr. Volcker. Well, you know, that recommendation reflects,
I guess, experience. You are dealing with inevitably very
sensitive political constituency problems that have been turf
problems between agencies. It is not unlike in many ways the
problems that you ran into with the base closings or with the
trade negotiations. Experience says that, if you want to get
something done in some of these areas, it will be nitpicked or
debated to death unless there is something that forces a vote
on the whole package. This is a way of achieving it, and it has
got precedence in the reorganization area.
I guess all of us strongly felt that action would not be
forthcoming with any kind of assurance unless you had that kind
of a mechanism to trigger the action. Now I think that only is
possible, I suspect, as the chairman was suggesting, if the
enabling legislation itself deals with guidelines for some of
the issues that are bound to be controversial. So you deal with
those issues without any time limit for the enabling
legislation.
But then once the labor, once the contracting out, once the
oversight provisions are at least suggested in general terms,
and there is a consensus on that, then the other legislation,
where you are still going to have the turf issues and some
other issues, can proceed expeditiously.
Now I also think we put a lot of emphasis on calling forth
the administration to work with the Congress, work with you or
the relevant committee in particular areas, and work with
outside groups when they make their proposal. So that,
presumably, when it comes to you, it is pretty well vetted. At
least that is the hope.
Mr. Davis of Illinois. Thank you. We have talked a great
deal about the inability of top-level people to exercise
judgment and expertise that they have developed over the years.
One of the concerns that I have is the whole business of
diversity at that level. So how do we make sure that we have a
diverse pool of individuals who are going to make it to the SES
levels? Could someone comment on that?
Ms. Shalala. Well, Congressman, I have worked on that issue
over the years. The way you do it is to hold managers
accountable. If diversity is an element that we believe is the
only way in which you can have a government of great
excellence, and you need it at the upper levels, then the
processes for getting promoted have to be fair, but leaders and
managers have to feel responsible for developing a diverse work
force at all levels of government. Congress has to hold people
responsible and look at the processes, and people have to come
up here and explain what they are doing or what they are not
doing and why they are not doing it. But congressional
oversight is key on that particular issue.
Mr. Davis of Illinois. There has to be great oversight at
all levels, from entry all the way up the ladder, to make sure
that there is fairness and an equitable way of treating people
and situations, so that they do have the opportunity to get
there.
Ms. Shalala. Absolutely.
Mr. Davis of Illinois. Thank you.
Chairman Tom Davis. Will the gentleman yield?
Mr. Davis of Illinois. Yes.
Chairman Tom Davis. Let me just make a comment. One of the
recommendations here is that in your SES you split it up into a
technical side and a managerial side.
Ms. Shalala. Right.
Chairman Tom Davis. You find so often that your best
technical people aren't your best managers. I don't have any
evidence for this, but my instinct is that that also opens up a
path for people who may not have had the educational background
but are great managers, that may not have the technical
expertise, or whatever, on this side.
But I will be happy, let me say to my friend, as we work
through some kind of fast-track legislation on this, to work
with him to try to assure we can get some language that would
be acceptable to you, and it will benefit the Federal work
force, because there is just a lot of talent out there of
people from all races and ethnic groups that just don't go into
government.
That is the bottom line. There are a lot of qualified
people out there. We just don't get them in government. A lot
of them are minorities. We just need to go out and find them
and incentivize them, and have a government that they can be
proud of. I think some of these recommendations are trying to
change what it means to serve in government.
Mr. Volcker. I am involved in a private organization that
is concerned about diversity. Their whole raison d'etre is
diversity in the business world, but they start from the simple
presumption that I think is even truer in government: that
given the diversity in the United States and our population,
you are not going to have effective government without
recognizing that if you don't have diversity in government, you
are not going to have a very responsive citizenship.
Chairman Tom Davis. Absolutely.
Mr. Volcker. And how you convert that into language and
proper oversight, or whatever, I don't know, but I think that
is a reality.
Chairman Tom Davis. I remember when I was the head of the
government in Fairfax and we started hiring Spanish-speaking
police officers and they topped our quotas. Well, you know, 15
percent of our population was hispanic. When you go into a
neighborhood, you want somebody who can speak the language. The
same with firefighters and the like.
There are appropriate roles on this, and we could disagree
over the degree and how you do it, but there is a recognition
that we can improve on what we are doing. The bottom line is we
don't have enough people wanting to go into government and stay
in the government, and there is a huge talent pool out there.
If we can get them in, we can run it more effectively. The
taxpayers are the winner.
You have given us a little road map here, and I appreciate
it very much. I appreciate all your comments and being so
patient, staying with us through these very important votes we
had to go over. Well, at least one of them was an important
vote.
Mr. Volcker. I am sure I can speak for all the members of
the Commission, that we really appreciate your initiative in
having this hearing and the interest you have shown.
I am not sure the Commission still exists. We are rather an
informal body. We issued a report. I think most members thought
they had discharged their responsibility.
Chairman Tom Davis. It is a powerful list of names.
Mr. Volcker. Maybe we can corral some of them together and
do a little more work.
Chairman Tom Davis. Well, thanks. I hope that we have laid
some groundwork today for reform and identifying some of the
issues we can improve on in this Congress.
Again, thank you, Mr. Volcker, Mr. Carlucci, Ms. Shalala,
for your time, being here today.
I want to thank our staff for organizing this hearing. I
think it has been productive.
The working papers of this will be put into the record,
and, again, any other statements Members wanted to make. If
there are any supplements that you think of that you would like
to send in, we will make them part of the record.
The meeting is adjourned. Thank you.
[Whereupon, at 12:37 p.m., the committee was adjourned, to
reconvene at the call of the Chair.]
[The prepared statements of Hon. Christopher Shays, Hon.
Dan Burton, Hon. Carolyn B. Maloney, Hon. Diane E. Watson, and
Hon. Wm. Lacy Clay follow:]
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