[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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                            WASHINGTON : 2003
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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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    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:]

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    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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