[Senate Hearing 109-7]
[From the U.S. Government Publishing Office]



                                                          S. Hrg. 109-7

                    TRANSFORMING GOVERNMENT FOR THE
                              21ST CENTURY

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION




                               __________

                           FEBRUARY 16, 2005

                               __________

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs



                    U.S. GOVERNMENT PRINTING OFFICE
20-173                      WASHINGTON : 2005
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001

        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
                      Tom Eldridge, Senior Counsel
               Don Bumgardner, Professional Staff Member
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
            David Berick, Minority Professional Staff Member
                      Amy B. Newhouse, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statement:
                                                                   Page
    Senator Collins..............................................     1
    Senator Lieberman............................................     3
    Senator Coburn...............................................     5
    Senator Lautenberg...........................................     6
    Senator Pryor................................................    21

                                WITNESS
                      Wednesday, February 16, 2005

Hon. David M. Walker, Comptroller General of the United States, 
  U.S. Government Accountability Office..........................     8
    Prepared statement...........................................    29

                                Appendix

Charts submitted by Mr. Walker...................................    62
Responses to questions for the Record for Mr. Walker from:
    Senator Collins..............................................    67
    Senator Lieberman............................................    75

 
                    TRANSFORMING GOVERNMENT FOR THE
                              21ST CENTURY

                              ----------                              


                      WEDNESDAY, FEBRUARY 16, 2005

                                       U.S. Senate,
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:04 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Susan M. 
Collins, Chairman of the Committee, presiding.
    Present: Senators Collins, Lieberman, Coburn, Lautenberg, 
and Pryor.

             OPENING STATEMENT OF CHAIRMAN COLLINS

    Chairman Collins. The Committee will come to order. Good 
morning.
    This Committee often holds hearings exposing wasteful or 
even fraudulent government spending as part of its oversight 
responsibility.
    Today, however, we are taking a broader look at what 
government should do and how government should deliver services 
in the 21st Century.
    As the title of this hearing--Transforming Government for 
the 21st Century--indicates, we are not here to look at where 
we are or where we have been. This is about where we need to go 
and how to get there. It is about questioning the very premises 
of programs that have often changed very little from when they 
were first launched decades ago. It is about accountability and 
effectiveness.
    All of us here can easily remember a time not very long ago 
when mention of the 21st Century evoked images of a future that 
was either dazzling or depressing. Now that we are in the 21st 
Century, we find that it is neither the Jetsons nor the Matrix.
    The great changes we must deal with, the new threats that 
have emerged with the end of the cold war, the globalized 
economy, demographic trends, and the advancement of technology 
were underway long before Y2K.
    The key to this hearing then is not the phrase 21st Century 
but the word ``transforming,'' one of the most dynamic words in 
our language. The great changes of recent decades and the 
myriad other changes they draw in their wake have been 
accumulating and accelerating over many years. In response, 
government has all too often moved at what can charitably be 
described as the speed of government.
    The GAO report we will discuss today is an excellent place 
to begin this transformation and I want to commend the 
Comptroller General and his staff for embarking upon this 
study. Like this Committee, the GAO is going beyond its 
customary role by opening this important discussion.
    The title of the GAO report that we are releasing today is 
``21st Century Questions: Reexamining the Base of Government.'' 
\1\ This report is not an exercise in imagining the future. It 
is the direct result of the GAO's fiscal oversight duties and 
the sobering realization that our government's current fiscal 
policies on both the spending and the revenue sides of the 
ledger cannot be sustained in the future we have entered.
---------------------------------------------------------------------------
    \1\ A copy of the report, ``21st Century Challenges: Reexamining 
the Base of the Federal Government,'' GAO-05-325SP, February 2005, is 
retained in the files of the Committee, or may be obtained through the 
U.S. Government Accountability Office.
---------------------------------------------------------------------------
    Baby boomers' retirement, health care, homeland security, 
national defense, environmental protection and the increasing 
demands in such areas as energy, transportation, and education 
are but a sampling of the forces that are relentlessly leading 
our Nation to mounting deficits.
    As this report observes, the concern is not with deficits 
that result from extraordinary events such as terrorist attacks 
or short-term economic downturns. The concern is with long-term 
escalating and persistent deficits that will diminish the 
standard of living and the security of Americans for 
generations to come.
    This report is presented in the form of questions. They 
cover virtually every function of the Federal Government. They 
range from broad policy objectives to specific inquiries. For 
example, how best to allocate resources across our increasingly 
integrated yet still discrete Armed Forces? Can transportation 
grant programs be restructured and consolidated to encourage 
the creation of efficient intermodal systems? Given the great 
advances in communications, are regional offices still the best 
way for Federal agencies to serve the public? Is having 44 job 
training programs spread across 9 agencies the best way to help 
our workers adapt to the changing economy? These are just some 
of the questions that GAO raises.
    This question format is appropriate because it is Congress 
and the administration that must provide the answers. There are 
more than 200 questions and they cover a lot of territory. But 
the overall issues can be summed up by these three questions: 
First, what kind of government would we create if we were 
starting from scratch today? Second, since we cannot ignore 
existing obligations, needs, programs and systems, how can we 
transform government without disrupting its ongoing functions? 
And third, and perhaps the most perplexing question of all, how 
can we change government in spite of the entrenched interests 
that are committed to resisting any change?
    All of this sounds daunting. We should be encouraged, 
however, because we have done it before. The structure of our 
military today could not have been imagined during World War II 
and yet it has been transformed dramatically. Program 
reexamination and restructuring are nothing new, Social 
Security in 1983, tax reform in 1986, and welfare reform in 
1996 are just a few examples. In the aftermath of September 11, 
we consolidated 22 Federal agencies into the Department of 
Homeland Security. And more recently, enacted sweeping 
intelligence reforms.
    It is time we applied our proven ability to innovate and 
our knowledge of transferring the government to the entire 
spectrum of government itself.
    If you type the words ``challenges of the 21st Century'' 
into an Internet search engine, you will get tens of thousands 
of results. From hospitals to the hospitality industry, from 
the news media to art museums, from the governments of great 
economic powers to rural school boards. It seems that every 
organization is reexamining what it does and how it does it in 
the light of this new millennium.
    Look a little closer and it is clear that there is nothing 
intrinsic about the dawn of the 21st Century that makes 
reexamination necessary. The striking new look our calendars 
took on 5 years ago was merely a reminder to many that a 
reexamination is long past due.
    One of the great thinkers on the subject of organization 
and management is Peter Drucker, a Presidential Medal of 
Freedom recipient in 2002. His pre-millennium book, 
``Management Challenges of the 21st Century,'' includes a 
chapter entitled ``Creating Change: The Leader's Task.'' Here 
is a quote from that: ``Innovation,'' he said, ``is not a flash 
of genius. It is hard work.''
    So today we are embarking on the hard work of the 
innovation and transformation. This hearing and this report 
will get us started. And again, I want to commend the 
Comptroller General for undertaking this vitally important 
task.
    Senator Lieberman.

             OPENING STATEMENT OF SENATOR LIEBERMAN

    Senator Lieberman. Thanks very much, Madam Chairman, for an 
excellent, thoughtful opening statement. A great one line 
there, not your most substantive point, but that the 21st 
Century turned out to be neither the Jetsons nor the Matrix. I 
thought that was good.
    Mr. Walker, welcome. This is a very important hearing and I 
thank the Chairman for convening it. The truth is the room 
ought to be packed and the Nation ought to be watching. Maybe 
some are watching through that camera.
    But you are playing a role as a kind of a Paul Revere. And 
this time it is not the British that are coming. It is genuine 
fiscal failure of the American Government, which will make the 
future of our children and grandchildren, and those of us who 
are lucky enough to be alive, in the not too distant future, 
much less than we want it to be.
    Today Mr. Walker, who has done such an extraordinary job at 
the helm of the now quite appropriately renamed Government 
Accountability Office, is going to take us beyond the day to 
day, which is to say the kinds of reviews of ongoing Federal 
programs that GAO does such a great job at, to look over the 
horizon at the enormous fiscal, social and national security 
obligations that the Federal Government will face and, on the 
current path, will not be able to handle.
    This stuff is riveting. Madam Chairman, I had the 
opportunity--it is hard to describe it as an opportunity--to 
hear Mr. Walker do something like this to another group a while 
back. I was just grateful when it was over that all of us were 
still able to rise from our chairs and leave the room because 
honestly, it goes at the heart of America's normal optimism and 
particularly hopefulness about the future.
    Maybe part of what it says to us is that we have been 
really optimistic and hopeful about the future, but we have not 
figured out how to pay for it. As a result, some of the 
consequences are startling. These charts that Mr. Walker will 
show us soon, says to us that by 2040, which is not that far 
from now, 35 years, just on the current path that we are on, 
and not extending the current tax provisions, including tax 
cuts, the revenue that at the Federal Government is likely to 
generate will cover net interest on the debt, Social Security 
and most of, but not all, of Medicare and Medicaid. Nothing for 
what is the rest of the Federal Government, and a lot of stuff 
that a lot of people really care about: Education, 
environmental protection, and, I should have started at the 
beginning, national security, homeland security--the first 
responsibility of government--to provide for the common 
defense.
    And as startling as that is, and I feel like we should be 
screaming this out, if you extended the otherwise expiring tax 
provisions, when we get to 2040, 35 years from now, with the 
revenue that will produced, all we are going to be able to pay 
for is the projected interest on the debt. I laugh with a 
certain sense of alarm. No money for Social Security, Medicare, 
Medicaid, or any of the rest of the Federal Government.
    The only way we are going to begin to deal with these is by 
beginning to deal with them, and as soon as possible. We are 
going through, with the President's leadership if you will, he 
is challenging us to do something about Social Security because 
it is not sustainable in the long run.
    What Mr. Walker's statement to us today says, is that the 
Federal Government, as we know it, is not sustainable in the 
long run. As much as we all care about Social Security, 
Medicare and Medicaid, which we surely do, and we have to deal 
with the enormous looming gaps in funding for those programs 
that are so critical to the quality of life of tens of millions 
of Americans, we also care about the rest of the Federal 
Government--national security, homeland security, and 
education. I repeat housing aid, environmental protection, and 
national parks. You could go on and on.
    We have to face this and we have to tighten our belts. 
Obviously, one of the consequences of not doing so is that we 
continue to increase the amount of money we borrow. At some 
point this puts us in real jeopardy in terms of our fiscal 
credibility, perhaps leading to a precipitous slide of the 
dollar with all of the adverse consequences that we will have 
for our economy ultimately and probably leading to the loss of 
an enormous number of jobs in our country.
    But also, of course, we become beholden to foreign 
purchasers of our debt. And in some sense, thereby lose some of 
the independence and authority that we gain as a result of our 
extraordinary American military.
    The final point that I wanted to make is that all of this 
reminds us, I hope it does, that our budget process has broken 
down here in Congress. A series of checks that were set up to 
try to limit spending, or to put it another way, to make sure 
that spending and revenues balance, have just collapsed. There 
is not a lot of rational focused review of spending as we all 
know. The last 3 or 4 years we have had big omnibus 
appropriations acts come through that frankly do not receive 
much of attention from individual members. We need to get back 
to a better system.
    I say this with a certain grain of salt, but I have felt 
that we ought to go to a system of present value accounting so 
we can get a real long-term sense of what our obligations are 
as businesses do. I say that with a grain of salt this morning 
because just going to 2040 is alarming enough and ought to 
generate action.
    I go back to what I said at the beginning, David Walker is 
extremely credible for all that he has done for our government. 
He is now saying to us, this country is in danger. We have met 
the enemy and it is us. Therefore, it is up to us to do 
something about it.
    President Bush, in his State of the Union address recently 
said, ``we will not deny, we will not ignore, we will not pass 
along our problems to other Congress', other presidents, and 
other generations.''
    And now, we all need to honor that promise and work 
together to make sure that the events that Mr. Walker projects 
this morning do not happen. Because if we continue on our 
current path, they will happen and America, this beloved 
country of ours, will be much less than we want it to be for 
our children, our grandchildren, and for the world. Thank you.
    Chairman Collins. Thank you, Senator. Senator Coburn.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Madam Chairman, and Mr. Ranking Member, I 
apologize for being late.
    I just came from the Indian Affairs Subcommittee meeting 
where they are talking about budget items. There are 10 times 
as many people there protecting the turf as there are here 
looking at the long run. I must associate my remarks with 
yours. Most of what you just said is what I ran on just 4 
months ago. I think it is really important and I am so pleased 
to have the opportunity to chair a Subcommittee. And I hope 
both our Chairman and Vice Chairman, as ex-officio Members of 
that Committee, will be involved. We have to do something.
    My heartache is that things will continue as they have 
been. It does not matter whether it is Democratic leadership or 
Republican leadership. The powers that be, to protect 
themselves and their interests, deter effective oversight. And 
we have not done it. We have not lived up to our responsibility 
as a Congress to do the right oversight in each and every area.
    I am reminded back: The Grace Commission stipulated that 
over 20 percent of everything that the government spent was 
either defrauded, wasted or abused. And yet, of all of the 
recommendations that were brought forth by that independent 
commission, two out of every three that were recommended were 
never even looked at by Congress, never even considered by 
Congress.
    Also, looking at the chart, and having read a book which I 
think both of you are familiar with, ``Running on Empty,'' by 
Peter Peterson, and a lot of his numbers come from your office, 
sir. The time to do something is now, not later. The time to be 
aggressive is now, not later.
    As I look at the numbers that are spent on Medicare and 
Medicaid--as we see that number from today triple--one out of 
every three dollars that is going to be spent on Medicare and 
Medicaid in 2040 is going to be related to diabetes. And yet, 
the administration is not leading on that. Nobody is leading on 
prevention. We know that one of two people who will ultimately 
get diabetes could be precluded from that by just a change in 
the exposure to the foods they eat as a child. High fructose 
corn syrup now has been held in two different separate studies 
to double your lifetime risk for diabetes, unrelated to 
obesity. And yet we have no leadership in our country on 
prevention. Prevention is the thing that is going to bring 
those numbers down.
    We are starting to see some leadership in terms of best 
practices in terms of Medicare and Medicaid, but it is very 
minimal and not aggressive enough.
    I look forward to your testimony. I believe it is incumbent 
upon us, if we really care about the future, and if we want to 
honor the heritage that was given to us, that we fulfill our 
responsibility of being aggressive in terms of oversight. I 
hope to be a part of that. Thank you.
    Chairman Collins. Thank you very much.
    I think we should address you as Dr. Coburn in addition to 
Senator Coburn. I was just saying to Senator Lieberman that I 
founded the Diabetes Caucus in the Senate several years ago. 
And at that point, one out of four Medicare dollars were being 
spent treating diabetes. I remember bringing up that issue at 
Tommy Thompson's confirmation hearing because an initiative in 
that area would clearly translate not only in improved human 
health and lives but a substantial reduction in health care 
dollars. So I appreciate knowing of your interest in that area.
    Senator Lautenberg.

            OPENING STATEMENT OF SENATOR LAUTENBERG

    Senator Lautenberg. Thank you, Madam Chairman and I 
apologize for my lateness. I should have played follow the 
leader. I saw Senator Lieberman going to another committee that 
we both sit on, and he had advance notice that that was not 
going to be held for 2 more weeks. It took me awhile to 
discover that I was the only one in the room.
    Senator Lieberman. Senator Lautenberg, when I told him 
that, said he would still go there to sit down so he could be 
the first to speak when the hearing started. [Laughter.]
    Senator Lautenberg. In any event, Madam Chairman, we have 
done a fair number of things together after we got through the 
getting used to your kind of start. But in any event, important 
matters come before this Committee and I am pleased to see your 
leadership on yet another important matter.
    Holding this hearing on government accountability, it 
causes us to look at things, I think, in kind of a different 
way. The telltale, if you will, is the budget. I have listened 
carefully to Senator Coburn's comments, having the background 
that he has as a physician, has special resonance.
    But when we look at the cost increases in programs like 
Medicare and Medicaid and what might happen with Social 
Security if we do not deal with the problems there. And I think 
of the number of people who are so dependent on these programs. 
And those numbers obviously have grown, much to my personal 
delight as one can attest to.
    My father died when he was 43, having contracted cancer in 
an occupational position that was dangerous to his health. But 
my father, who was 43 when he died, took 13 months to die. My 
mother was 36 years old when he finally passed away. In 
addition to the grief that came from losing a loved one, the 
enormity of the bills that were owed, doctors, hospitals, you 
name it. There were not the sophisticated chemicals or drugs 
that we have today to help him get through. But the costs 
mounted.
    I had enlisted in the Army with not very good prospects in 
sight, and my ability to go to Columbia University at a cost 
that was reasonable for even this little family of ours meant 
an awful lot. I am not sure all of my Republican colleagues 
would agree that this was a benefit to the country but here I 
am, having created a business and an industry, the outsourcing 
industry. I am credited with being a pioneer in that industry.
    I look at the benefits of those programs and the 
embarrassment that my dad had when he had to take a job with 
WPA. His dignity was hurt but not so much that he could resist 
the few dollars a week that he could make and help my mother 
and my little sister and me.
    We want to do these things and get them into line. But I 
think the starting point has to be examining the programs fully 
and realistically and kind of understand where the government 
fits. As I look at some of the commentary that has been 
available to us, the statement from Grover Norquist who is 
President of Americans for Tax Reform. And he said their goal 
is to shrink government to the size where it can be dragged 
into the bathroom and drowned in the bathtub.
    When I think of the people who are dependent on Medicaid or 
disability payments from Social Security, what a terrible thing 
it would be to eliminate those programs when we consider, Madam 
Chairman, the fact that my good fortune in business got me to a 
point where I can afford to take good care of my family and 
certainly did not need a tax break.
    If that tax break comes at the cost of eliminating someone 
from Medicaid or a disability program, someone who desperately 
needs medical attention and health care, and we start looking 
at the budget first and saying OK, I think we have to look at 
the thing in its entirety.
    I commend you for bringing the question up, and Mr. Walker 
for his exceptional and balanced service to the country. We are 
glad to have you here and to be able to discuss this.
    Sorry I was late and sorry I ran over time here.
    Chairman Collins. Thank you.
    I would now like to welcome our distinguished witness to 
the hearing. David M. Walker became the seventh Comptroller 
General of the United States and began his 15 year term on 
November 9, 1998.
    As all of my colleagues have indicated, we have worked very 
closely on this Committee with the Comptroller General. He has 
done an outstanding job in leading the Government 
Accountability Office and in producing fact-based, nonpartisan 
reviews of government programs and operations. So we very much 
look forward to hearing your testimony today.
    Thank you, Mr. Walker.

 TESTIMONY OF HON. DAVID M. WALKER,\1\ COMPTROLLER GENERAL OF 
    THE UNITED STATES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Walker. Thank you, Chairman Collins, Ranking Member 
Lieberman, and other Senators for being here today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Walker appears in the Appendix on 
page 29.
---------------------------------------------------------------------------
    I appreciate the opportunity to unveil GAO's latest report: 
21st Century Challenges: Reexamining the Base of the Federal 
Government.\2\ I understand that each of you have a copy of the 
report. It is being unveiled at this hearing.
---------------------------------------------------------------------------
    \2\ A copy of the report, ``21st Century Challenges: Reexamining 
the Base of the Federal Government,'' GAO-05-325SP, February 2005, is 
retained in the files of the Committee, or may be obtained through the 
U.S. Government Accountability Office.
---------------------------------------------------------------------------
    I want to thank this Committee, and the Chairman and 
Ranking Member in particular, but all of the Members of the 
Committee for your support of this effort and for your 
recognition of the strategic importance of the issue which we 
are going to discuss today.
    It is somewhat ironic, as one of you mentioned, there are a 
number of competing hearings going on right now. And they all 
involve important players and topics of varying importance. But 
they are all focused on the here and the now. There is not 
enough focus about the future.
    I would respectfully suggest that the contents of this 
report and the subject of this hearing is of more strategic 
importance and long ranging significance to this country than 
probably any other hearing that will go on today in either body 
of the Congress.
    So I want to thank all four of you for being here and maybe 
others will come and join us from time to time.
    The good news is that this is just the beginning. This is 
the first step of what is likely to be a long road involving 
this Committee, other committees, and various other parties 
over many years in order to address our current situation.
    As you know, Senators, the GAO is in three lines of 
business: Oversight, insight, and foresight. Today's topic is a 
foresight topic, with significant oversight and insight 
implications.
    I would like to note that it is important to know at the 
outset why we produced this report and why we produced it at 
this time. First, as you know, while most of our work is 
oversight and insight, we have been doing more foresight 
related work in order to help the Congress be in a position to 
address current and emerging trends and challenges before they 
reach crisis proportions.
    In doing that, we have drawn upon the extensive amount of 
work that we have done for the Congress over the years, over 90 
percent of which is either mandated by the Congress or 
requested by the Congress. We also looked at our strategic plan 
for serving the Congress, which is prepared in conjunction with 
the Congress.
    And candidly, the reason that we are doing it now is that 
if you look at the results of the financial statement audit for 
the U.S. Government for September 30, 2004, fiscal 2004 was a 
very bad year. We increased our liabilities and unfunded 
commitments by over $13 trillion in 1 year. They went up from 
$30 trillion to over $43 trillion in 1 year, largely due to the 
Medicare prescription drug benefit. And we had a large unified 
deficit, of which less than 25 percent had anything to do with 
Iraq, Afghanistan, and incremental homeland security costs. And 
yet, we had the strongest economic growth of any major 
industrialized Nation last year, and have not been in a 
recession for several years.
    But as Chairman Collins mentioned, the important point is 
not as much what happened last year or what is going to happen 
this year. The important point is where are we headed? I think 
that this report makes it very clear that, based upon our work, 
we are headed for very troubled waters if we continue our 
current course. As a result, we must change course or risk 
doing irreparable harm to our ship of state as well as to the 
future security, standard of living and choices that will be 
made available to our children and grandchildren.
    If I can, what I would like to do is show you some of the 
highlights in the report. I would respectfully request, 
Chairman Collins, that my entire written statement be included 
in the record, if it is OK with you.
    Chairman Collins. Without objection.
    Mr. Walker. Thank you.
    Understand at the outset, before I go through this, the 
report notes that we are on an unsustainable fiscal path. We 
must fundamentally review and reexamine what the Federal 
Government does, how the Federal Government does business, and 
in some cases who does the government's business. It must be 
comprehensive, involving discretionary spending, mandatory 
spending and entitlement programs, as well as tax policies. 
That is the premise.
    It is also important to note that a significant majority, 
if not a vast majority, of the Federal Government, is based 
upon conditions that existed in the 1950's and the 1960's. Most 
current Federal Government policies, programs, functions, and 
activities have never been subject to fundamental review and 
reexamination since they were initiated. We have been layering 
and layering and layering with the presumption that the base is 
OK. Not only is it not OK, it is unsustainable. It is important 
to recognize that reality.
    If I can, this is the first chart.\1\ I understand that all 
of these have been provided to you. They are also contained in 
the report.
---------------------------------------------------------------------------
    \1\ The charts submitted by Mr. Walker appear in the Appendix on 
pages 62 to 66.
---------------------------------------------------------------------------
    The first one is based upon CBO's baseline protection. We 
do not compete with our sister agency. They do a very good job 
with what they are asked to do. It is also based upon the best 
estimates of the Social Security and Medicare Trustees--of 
which I used to be one from 1990 to 1995--regarding what the 
cost of these programs will be.
    But there are three key assumptions that underlie CBO's 
projection and are used as an input into this first GAO 
simulation, that I would respectfully suggest are totally 
unrealistic. First, no new laws will be passed. Second, 
discretionary spending will grow by the rate of inflation. And 
third, that all tax cuts will sunset. And actually, let me add 
a fourth one, that AMT, the alternative minimum tax, will not 
be fixed. Those are four key assumptions which, by the way, CBO 
is required by law to make. And I would respectfully suggest 
those are unrealistic assumptions and so this is an optimistic 
scenario.
    But even under this optimistic scenario, you can see that 
we face large and growing structural deficits due primarily to 
known demographic trends and rising health care costs.
    If we can, let us take the next chart.
    Senator Lieberman. Excuse me, for a quick question. What 
kind of economic growth do the CBO numbers assume for the 
country over that period of time?
    Mr. Walker. On the out years they assume economic growth, I 
think, of about 1.8 to 2 percent real GDP growth. However, I 
will provide the exact number for the record. The reason, 
primarily, is because of slow work force growth, because we 
have a significant reduction in work force growth that is 
expected to continue. The bottom line is, let us hope we can 
get better economic growth than that. But I think you will see 
from the next chart, there is no way we are going to grow our 
way out of this problem, reinforcing the importance of today's 
report.
    The next chart. There are only two differences between this 
simulation and the last one, as Senator Lieberman touched on. 
Discretionary spending grows by the rate of the economy rather 
than inflation. And, that all tax cuts are made permanent.
    I am not saying that is good, bad, or indifferent. I am 
just giving you the numbers. The fiscal future on this scenario 
is that the Federal Government will be able to do little more 
than pay interest on our large and mounting Federal debt. In 
fact, the simulation model blows up in the 2040's under this 
scenario.
    These are obviously both unacceptable paths. A likely 
scenario is probably somewhat in between these two bookends. 
Both of which are unacceptable and unsustainable. We need to do 
something about it. Next chart please.
    This report attempts to take the strategic themes that are 
in our strategic plan for serving the Congress, which have been 
developed in conjunction with the Congress. These are themes 
that have no geopolitical boundaries. They are global trends. 
They are trends affecting the Federal, State, local 
governments, the public sector, private sector, and not-for-
profit sector. Long-range fiscal challenges, I have shared with 
you some of those. Changing security threats in a post-cold war 
environment and increasing global interdependence. The changing 
nature of the economy, moving to a knowledge age rather than an 
industrial age. Demographic shifts, rapid changes in science 
and technology and a variety of quality of life issues, such as 
education, work, family, the environment, and urban sprawl. 
Also changing governance structures where more and more issues 
have to be handled on a global basis like fighting infectious 
diseases, and protecting the homeland. These have to be fought 
on a global basis, not just here at home. As well as more and 
more issues have to be dealt with Federal, State and local as 
well as public, private, and not-for-profit sector involvement.
    Next chart please.
    We build off of our strategic themes because they are 
grounded in our work for the Congress and in our strategic plan 
that has been accepted by the Congress. We have a number of 
generic questions in the report.
    Such things as when did we create this program or policy? 
Why did we create this program or policy? What were the 
conditions that existed at the time? What were we trying to 
accomplish? How do we measure success on an outcome basis? Are 
we successful based upon such measures? How has the world 
changed since then? Should the program be reviewed, 
reconsidered, revised, reengineered or eliminated even based 
upon those changes? What priority is it for today and tomorrow? 
Are we using best practices?
    These are very basic questions but I would respectfully 
suggest they have not been asked and answered for a vast 
majority of the Federal Government.
    And it is not just the spending side. It is also tax 
preferences. In many years, the total cost of tax preferences 
exceeds total discretionary spending. And yet, they are off the 
radar screen. Total tax preferences in many years exceed total 
discretionary spending, the biggest and the fastest-growing tax 
preference being health care. Next chart please.
    We then look at these themes, which are on the horizontal 
axis, and we looked at a vertical axis--such as defense, 
education, transportation--these are self-explanatory, to see 
how these trends converge with the different departments and 
agencies and functional areas within the Federal Government. 
Typically, committees are structured on the vertical axis 
rather than from a horizontal dimension. This Committee, 
fortunately, has a lot of horizontal responsibility and 
authority.
    Then, next chart, what we then attempted to do is to pull 
the vertical and horizontal dimensions together to show how 
they interrelate. For example, when you are talking about 
demographics, you have to talk about things like Social 
Security, the labor force, private pensions, disability 
programs, and health care. Next chart please.
    When you are talking about increasing global 
interdependence, you have to talk about such issues as 
financial regulation, domestic subsidies, and the structure of 
our tax system. Next chart please.
    When you are talking about a knowledge-based economy on 
which our competitive posture and economic growth is based upon 
having the best people, we cannot compete on wages. We have to 
compete based upon productivity, quality, and innovation.
    On this dimension, you have to look at immigration policy 
and workforce policy and retraining, research and development 
and whether or not we are generating enough personal savings to 
be able to finance our own needs. As you know, and I think 
Senator Lieberman was the one that mentioned it, we are relying 
to an increasing extent on foreign investors to finance our 
consumption and our deficits. To a certain extent, we cede part 
of our own destiny by doing that. That is not risk-free, by 
doing that. Next chart please.
    Changing security threats and defense resource allocations. 
What type of force do we need? What type of footprint do we 
need? What type of information sharing must we have in order to 
maximize deterrent and respond to adverse events? Next chart 
please.
    And then from a governance standpoint, issues like the need 
for national performance indicators. Believe it or not, this 
country does not have a strategic plan. It does not have a 
performance plan. And it does not even have a set of key 
national indicators to measure where we stand, how we are doing 
over time, and how we compare with others. Economic, security, 
safety, social, and environmental indicates. We do not have 
them.
    We are working with the National Academy of Sciences and 
the OECD to try to help further the development of such 
standards. They could help to inform a strategic plan, enhance 
performance and accountability reporting, and provide a basis 
for this much-needed fundamental baseline review and 
reassessment of the Federal Government.
    In summary, there is little low hanging fruit here. But 
there is tough work that needs to be done. No one single 
approach will address all of our challenges. Many players will 
have to be involved over a number of years in order to address 
them.
    I would respectfully suggest this could take as long as a 
generation to effectively address all of the questions. But we 
must start now because time is working against us. And unlike 
investments, where the miracle of compounding works for you, 
the miracle of compounding is working against us right now 
because debt on debt is not good.
    And last, I would respectfully suggest that our country, 
children and grandchildren are counting on us to not just focus 
on today but to also be good stewards for tomorrow. And that 
ultimately, it is not about numbers. It is about values. What 
type of country do we want to have in the future? What type of 
country do we want to hand over to our children and 
grandchildren? What choices do we want them to be able to make 
as to what they feel the proper role of government should be in 
the future? How much flexibility are we going to provide them?
    I would conclude by saying, Chairman Collins, that you 
mentioned a very important word. And I think there are three 
that are going to be really important here as we move forward, 
both for the Legislative Branch and the Executive Branch. 
First, courage. the courage to take on these issues. There are 
a lot of people who are vested in the status quo. Change is 
really tough, especially for a monopoly like government that 
does not change very much.
    Second, integrity. People with integrity who speak the 
truth, state the facts, and tell it like it is. People who want 
to find out what is working and what is not working in order to 
make informed choices.
    And third, innovation. We are going to have to think 
outside the box. What are we trying to accomplish? How best to 
accomplish it? What is the proper role for the Federal 
Government? Where should the Federal Government be involved 
because the private sector cannot or will not do it, the other 
levels of governments are not doing it and therefore we are in 
a unique position or there is a need for us to be able to do 
it? And how can we partner more? And how can we focus more on 
achieving positive results and concrete outcomes? Because in 
many cases, we do not know what results and outcomes we are 
getting, from the tax preferences, for the discretionary 
spending, or the mandatory spending.
    As you know, more and more of the budget is on autopilot. 
Over 60 percent of the budget is on autopilot and it is going 
up every year.
    Thank you, Madam Chairman. I appreciate you allowing me a 
little bit of extra time because this is an important topic.
    Chairman Collins. Thank you so much for an excellent 
statement and overview.
    I think most Members of Congress are keenly aware of the 
fiscal challenges that you describe, although when you see the 
charts, it is even more startling in the out years. And in many 
ways, we are like a person who knows that he needs to go on a 
diet and yet just cannot seem to start.
    That makes me wonder whether we need changes in the budget 
process to help us exercise the kinds of fiscal discipline and 
make the hard choices that need to be made.
    Could you comment on whether or not there are some specific 
changes to the budget process that GAO believes would help 
impose the kind of fiscal discipline that is lacking now?
    Mr. Walker. Yes, I can. And I think that is an excellent 
point. Many of the controls and safeguards that existed in the 
budget process have now expired. Some of the things that we 
believe that the Congress needs to consider include reasonable 
spending caps, PAYGO rules that apply on both sides of the 
ledger, meaning on the spending side and the tax side. 
Realistically, if you are trying to address the bottom line, 
you should not exempt one side of the ledger.
    Having also some type of triggers for mandatory spending 
programs. Being able to get a better handle on the total 
commitments that we have already. For example, I mentioned to 
you the $43 trillion number. That is the estimated total 
liabilities and commitments as of September 30, 2004. Let me 
compare that number to another number that might shock you. The 
total estimated net worth of every American, Bill Gates down, 
including home equity is $47 trillion. And we currently have 
total liabilities and commitments of $43 trillion in current 
dollar terms.
    We are obviously not going to be able to deliver on all of 
our current promises. We are going to have to restructure.
    We need to think about the discounted present value cost of 
major spending and tax proposals before they are enacted into 
law. And as a supplement to or a substitute for the cash flow 
items that we get right now for 1 year, 5 years, and 10 years.
    We also need to try to get a sense as to what the 
intergenerational impact of some of these burdens might be. As 
you know, right now there are a lot of things in the budget, a 
lot of things in the law right now whose costs escalate right 
beyond the 5 or 10 year horizon on both the spending side and 
the tax side. And because of known demographic trends, we need 
to think about the longer-term affordability and sustainability 
of existing policies and programs.
    There are other things that I think should be considered, 
as well. Some people have advocated biennial budgeting. That is 
not a panacea by any means. Some people believe that if you had 
biennial budgeting, that you would spend more time on 
oversight. I would like to think that is the case, but I would 
not want to bet a whole lot of money on it.
    Frankly, we have been doing supplementals every year, and 
are likely to do supplementals for the foreseeable future. So 
that provides a safety valve to be able to deal with issues if 
you go to biannual budgeting.
    So these are some of the areas, but I absolutely agree, 
Madam Chairman, that we absolutely have to do something with 
regard to the budget process. It is fundamentally broken.
    Chairman Collins. I want to switch to one of the specific 
issues that you have highlighted in your report and that is the 
fractured approach that the Federal Government applies to job 
training programs. I believe GAO indicated that there are some 
44 job training programs spread across nine different agencies. 
This matters to a State like mine, which has lost a lot of 
manufacturing jobs in the past decade. I know there has been 
some frustration about the delivery of job training programs in 
my State.
    On the other hand, we passed the Workforce Investment Act 
to try to coordinate those programs. Did that not work? What is 
your assessment?
    Mr. Walker. I think that was a positive step in the right 
direction but I think there is more work that needs to be done. 
Candidly, job training is just a subset of a much bigger 
challenge. For example, you properly point out that we have 
noted that there are 44 different programs among a number of 
different agencies. I recently found out, for example, there 
are over 20 Federal agencies involved in financial literacy. We 
recently had a related forum over at GAO. We invited a number 
of people. Many of them did not even know they were in the 
business.
    One of the things that we have to do is we have to get 
better visibility horizontally. In other words, take particular 
areas, job training, food safety, financial literacy, you name 
it. How many different players do we have on the field? What 
are they doing? Why do we need this many? Are they doing things 
consistently and in a nonduplicative and integrated fashion?
    I think one of the things that we look forward to working 
with this Committee and others on is how can we start looking 
at things not just vertically, which government has done for 
years and always will, but also horizontally?
    Chairman Collins. Let me just quickly ask you one final 
question for this round.
    As I read your report and the 200 questions, it is almost 
overwhelming to know where to begin to tackle the programs and 
policies that you outlined. Your report is a great help in 
giving us the overview. But as a follow up, I wondered if GAO 
would be willing to apply the reexamination criteria that is 
set out in Table 1 of your report to the programs within the 
Federal Government and respond back to us with a list of 
programs that you believe should be reexamined first? If you 
could help us narrow the universe of programs that might be 
most fruitful for us to examine in-depth. Would that be a 
project that GAO would be willing to undertake?
    Mr. Walker. I would be happy, along with the other GAO 
professionals, to work out something with your staff that can 
be done within a reasonable amount of time. As you might 
imagine, trying to apply those criteria to all Federal programs 
is something that would take years to do.
    So I think what we might be able to do is to take 
particular areas that you and other Members might have 
particular interest, like homeland security information 
sharing. To what extent do we have multiple programs across 
government dealing with the same type of issue? What about 
regions? Do we need as many regions as we have? And other 
topics, and to try to come back with something for your 
consideration.
    Chairman Collins. Thank you. Senator Lieberman.
    Senator Lieberman. Thanks, Madam Chairman.
    I want to go back, Mr. Walker, to something you said at the 
end of your opening remarks, which is that more than 60 percent 
of the spending of the Federal Government is currently on 
autopilot. That is a reality that is clearly not understood or 
known by most of the American people. I would dare say that a 
lot of Members of Congress have not focused on that reality.
    It struck me last year, when once again we were unable to 
complete, because of the breakdown of the Congressional budget 
process, each of the separate 13 appropriations bills. So it 
was all lumped together in an omnibus bill at the end. It came 
to somewhat over $800 billion. That is a lot of money, 
obviously. But it turns out to be about a third of the full 
spending of the Federal Government because the rest is interest 
on the debt, Social Security, Medicare, and Medicaid, 
particularly.
    It speaks to our problem, and why the focus in this session 
on the sustainability of Social Security over the long run is 
just the beginning, and why it is so important that we figure a 
way together to deal with that, to give both the public, the 
financial markets and ourselves the confidence that we can go 
on and deal with some of the longer-term problems of broader 
Federal Government sustainability that you talk about.
    Deficits in the Federal Government are nothing new. So my 
first question to put this in the context, because you, in 
previous years, and other comptrollers general, have come 
before Congress and warned about impending long-term 
unsustainability.
    To the best of your knowledge, is the circumstance we are 
in today, that you have portrayed, just a little worse than it 
has been for a long time? Or is something much more grave 
occurring?
    In other words, is this the worst ever as a Comptroller 
General looks forward to the fiscal future health of the United 
States?
    Mr. Walker. I do not know that I would be in a position to 
say is this the worst ever. What I would be able to tell you is 
that fiscal 2004 was a very bad year. With a $13 trillion 
increase in liabilities and unfunded commitments in 1 year, 
going from $30 trillion to over $43 trillion in 1 year. And the 
large current deficit, which obviously is not the primary 
problem. Where we are headed is the primary problem. But with 
the current deficit, less than 25 percent of it had to do with 
Iraq, Afghanistan, and incremental homeland security costs. And 
yet, we had strong economic growth and we have not been in a 
recession since November 2001. So those are warning signals.
    I am a member of the Sons of the American Revolution. Both 
my wife and I have family members who fought and died in the 
Revolution. I remember Washington's words of wisdom, ``the most 
important personal attribute is courage. And the most important 
institutional attribute is fiscal responsibility.'' We need to 
heed Washington's words of wisdom.
    Senator Lieberman. Let me ask you about some of the 
responses institutionally. As you know, I have been interested 
in present value accounting for the Federal Government 
activities. I suppose, in one sense, people would ask why, 
because the news is bad enough with cash value accounting. But 
we ask businesses under ERISA to use present value accounting. 
Social Security trustees are now using it.
    I believe I know you are supportive of this, but I wonder 
if you could just talk about why it would help to go to present 
value accounting as a supplement to cash value accounting?
    Mr. Walker. First, we have present value accounting for 
financial reporting. Unfortunately, not enough people look at 
the financial statements of the U.S. Government.
    I would respectfully suggest that while they were issued in 
record time this year, they were issued on December 15, only 76 
days after the end of the fiscal year, which is record time, 
which is a real accomplishment, not many people have probably 
read those financial statements, including the disclaimer of 
opinion by GAO because of the poor state of financial records 
at DOD and elsewhere. But also because the emphasis paragraph 
that I put in, noting that we are on an unsustainable fiscal 
path.
    But we have present value accounting for financial 
statements. And the numbers that I gave, the $43 trillion, you 
can get those out of the annual report. The problem is you have 
to look in several different places and pull them together.
    And so I am working with the Secretary of the Treasury, the 
Director of OMB, and the Federal Accounting Standards Advisory 
Board to enhance financial reporting.
    But in addition, on the budgeting side, which I believe you 
are touching on, I think as a supplement to--not a substitute 
for--the cash flows, we need present value numbers for big 
ticket spending and tax items to be considered by the Congress 
before it acts. You did not have that when you passed the 
Medicare prescription drug bill. The debate was about whether 
it was going to cost $395 billion, which is what CBO said, or 
$534 billion, which is what the Medicare's Chief Actuary said?
    Roughly 3\1/2\ months after Congress passed that bill, the 
Medicare trustees came out and said $8.1 trillion in current 
dollars. That number should have been on the table. It should 
have been discussed and debated because I think a lot of people 
are shocked by it today.
    Senator Lieberman. My time is up but I look forward to a 
second round.
    One thing that number would have probably inhibited is the 
number of people who described the Medicare proposal as cheap. 
In other words, too cheap, that it did not cover enough. It 
just suggests what the cost is of the commitments that we make.
    And we do this all with good intentions. This is another 
part of the American character. We are good people. We want to 
take care of each other.
    But one of the great traditional American values also was 
to pay your bills. The Federal Government is not paying its 
bills.
    Thank you, Madam Chairman.
    Chairman Collins. Senator Coburn.
    Senator Coburn. Madam Chairman, I think one of the great 
traditions of Congress is fixing the wrong problems. And I 
think that is what they did with the Medicare drug bill. That 
happens to be my personal opinion and I was not here at the 
time.
    Following on what Senator Lieberman said, the real problems 
we face, because of the lack of discipline in Congress--and see 
if you agree with me--we have a demographic shift, aging 
population. We have an unsustainable population birth rate. In 
other words, it is below reproduction of our population. We 
have exported a vast majority of our basic manufacturing tasks. 
Fourth, is we have not restrained spending.
    Whether you want to talk about tax cuts greater or less 
than 19 percent of consumption or 22 percent consumption of 
GDP, the fact is that with those basic demographic changes, if 
they are not changed, we will not fix the problem.
    We are not going to change the aging. It is doubtful we 
will have much influence on the birth rate. So we have really 
two options. One is to do what you suggest and really have a 
systematic review. The other is to look at the export of our 
manufacturing that we seem to be wanting to give to the rest of 
the world through our open trade but nobody else's open trade 
policies.
    How much of our financial problem has to do with the 
undermining of our basic manufacturing industry in this 
country, in terms of jobs? Much as the Chairman has lost, 
Oklahoma, I think, lost 60,000 manufacturing jobs in the last 6 
years.
    If we want to try to tackle this problem, and I think right 
now you can see the number of people here, there are not many 
people interested in this problem. So, is it realistic to think 
the Congress is going to address it? And, if we decide to 
address it, how do we leverage that? How do we expand? You're 
talking about a generation. We can't wait a generation to fix 
these problems.
    Mr. Walker. Several comments. First, a number of the items 
that you mention are real issues. They are real problems. There 
are others, but those are real problems.
    Second, someone said demographics are destiny. And 
demographics are a major factor contributing to our long-range 
problem. Those are known. They are not going to change very 
much. We need to recognize that reality. And the baby boomers 
are eligible for early retirement beginning in 2008. That is 
going to start to crunch the budget because the Social Security 
surpluses are going to start to go down in 2008. That will 
start putting pressure on the rest of the Federal budget, and 
ultimately it is only going to get worse over time. As you 
know, Medicare is a much bigger problem than Social Security 
but it is going to take much longer to solve.
    Manufacturing, that is an issue. But I think one of the 
things we have to keep in mind is while obviously one has to 
look at trade policy, I think the other thing one has to keep 
in mind is we are truly in a global economy. More and more 
corporations are multinational corporations. And multinational 
corporations do not have duties of loyalty to countries. They 
have duties of loyalty to their shareholders. To the extent 
that there are other countries that can end up producing things 
that are not high value and a lot cheaper than us, we are never 
going to be able to compete on wages.
    All the more important that we have to recognize we have to 
have education systems, retraining systems, and technologies 
that enable us to compete based on productivity, innovation, 
quality, those types of factors in order to maintain our 
standard of living and improve it.
    As far as Congress, I would respectfully suggest that there 
are at least a couple of committees that are of strategic 
importance. This one, because of the scope of this Committee. 
You have the authority to deal with all of government 
operations and look at the effectiveness of government 
programs. And second, the Budget Committee. Others are very 
important, do not get me wrong.
    But I think those two committees can help lead the way. And 
I also think this is something that needs visibility in both 
caucuses because I do not think that many members really 
understand the true nature, extent, magnitude, and potential 
implications of this, in part because of how we keep score, as 
Senator Lieberman mentioned. The way we keep score does not 
provide a full and fair view of where we are and where we are 
headed. It does not allow you and your colleagues to make a 
fully informed decision on really important things. That has 
got to change.
    But I am confident that we can rise to this challenge. I am 
just concerned about when we are going to get started and I 
hope today is the beginning of that effort.
    Senator Coburn. Let me go back and ask you, based on the 
history of oversight of the Congresses of the last 10 years, 
why are you confident that Congress is going to do that?
    Mr. Walker. Because some people are starting to pay 
attention. When I came into my office this morning, and Madam 
Chairman, I don't know if you all saw this. I just saw it this 
morning, and had no idea this was coming out.
    Merrill Lynch took out a full-page ad today in the Hill 
that says GAO to Congress, long-term fiscal policy on 
unsustainable course. They took that money out of their pocket 
and their shareholders pocket. I knew nothing about this.
    This tells me that Wall Street is watching and that 
investors and lenders are now starting to get concerned about 
it. And they should be. And by the way, the dollar has taken a 
big hit in the last couple of years and that is a shot across 
the bow. We need to take that seriously.
    Senator Coburn. So let me go back. Do you have any ideas, 
if Congress would decide they want to tackle this, how do we 
leverage that out so it does not take a generation to do? How 
do we leverage the ability of this Committee to look both 
horizontally and vertically and to do assessments and reviews 
based on some of the outlying characteristics? How do we 
leverage that to get it done in less than a generation?
    Mr. Walker. First, I think we have to leverage it within 
the Congress and also elsewhere. For example, the Executive 
Branch. I would respectfully suggest that since the Executive 
Branch is the management part of government, and since they 
have the responsibility for managing the various programs that 
exist, that they need to look at these generic questions that 
we have, that apply to every major program, policy, function, 
and activity. They need to look at the other illustrative 
questions that we have raised. And they need to start focusing 
on those, answering those questions. OMB needs to develop a 
strategic plan and a government-wide performance plan.
    In addition to that, I believe that Congress and all of the 
committees of Congress, should take a look at the contents of 
this report and consider it as they deem appropriate in setting 
their agenda for oversight, in considering budget requests that 
come before the Congress, in considering legislative proposals.
    So I think that this is a framework that can and should and 
must be considered by both the Executive Branch, both career 
and non-career, as well as the Congress in basically thinking 
about how it goes about doing its ongoing business on a day-to-
day basis. It has to integrate it into the ongoing business 
operations.
    Chairman Collins. Thank you. Senator Lautenberg.
    Senator Lautenberg. Thank you again, Madam Chairman.
    Your presentation is excellent and we would expect nothing 
less, Mr. Walker, knowing you over these years. But I do think 
that the cart is running ahead of the horse here in terms of 
how do you solve these problems?
    The first thing I would do would extend the terms of U.S. 
Senators and say maybe you can only serve one 12-year term. And 
then we would start thinking about the long-range implication 
of decisions that we make. These are unfortunately tied into 
political decisions, as you know.
    There are some natural factors. When you talk about the 
implication that some of government record-keeping is a little 
bit shoddy, is this an Enron we are looking at? Or is it a 
Fannie Mae or something like that? If you do not have the 
confidence that you ought to have in what we are producing, 
then that is a mechanical thing.
    I think that we are way beyond that in terms of what the 
problems are. There is a book around and I commend for my 
colleagues and general reading. It is called the ``End of Work: 
The Decline of the Global Labor Force and the Dawn of the Post-
Market Era.'' It is written by Jeremy Rifkin. And since I grew 
up in the technology business in my business career, one of the 
biggest things that we are looking at is the technological 
opportunities to replace manual labor. As a consequence, there 
is an actual shrinkage of the workforce that is taking place in 
front of us.
    One of the things, among several that we have to look at, 
you cannot have low wages with higher standards of living. And 
that is axiomatic, in my view. So if we want to go to 
Bangladesh, or whatever countries, where people live in huts 
and they will knit and push machines for 15 cents an hour and 
want our American workers to compete with that, then we are 
saying what is going to have to happen is our standard of 
living is going to have to go down substantially. Because you 
cannot say to them OK, you live in the huts and you run with 
the diseases that your kids have, high infant mortality in many 
cases, and then have us with high wage employees and reasonable 
standards of living and say that well, we have to match up. 
Once the marketplace became global, there was enormous change.
    I don't mean to give a lecture here but last night Chairman 
Collins and I saw a film on disaster portrayed in the event of 
an attack in London using chemicals and radiation. It was a 
horror. I was forced as I viewed things--and I served in World 
War II--on a comparative basis the world had a lot fewer 
casualties for the numbers engaged directly in combat than we 
see later on.
    An observation that I made was that the theater of war, 
Senator Lieberman, was extended substantially. America itself 
is now included in the theater of war. That is what happens. 
Because with technology and madness, any part of our country is 
susceptible. And therefore, if we have to spend the money 
necessary to defend ourselves in a theater of war, then the 
costs are considerable.
    It is a lot easier to think of war over there someplace, 
away from our borders. But we learned on September 11 that we 
are included. When I was a kid in the Army, in World War II, I 
saw the first of unmanned missiles. One was a jet bomb, one was 
a rocket bomb sent by the Germans, unmanned. It was the 
beginning of a terrible gain in technology. And now that they 
have been able to compact these weapons, nuclear bombs are 
small, have them carried by one or two persons willing to 
conspire, give up their lives to take others. So what is the 
cost of that?
    I submit, without getting too esoteric here, that there is 
enormous sociological change that we have to examine. The 
increased longevity, for which I am grateful because otherwise 
I would not be here, but the fact of the matter is all of these 
factors come into play. And how we relate the numbers, frankly, 
is a secondary thing because we want to promote good health and 
we want to promote not only long life but energy and vitality, 
as well. And all of these things have enormous costs.
    But then what happens to our budgeting?
    As you know, Mr. Walker, a financial statement is comprised 
of two principal parts. One is the revenue side and the other 
is the expense side. You cannot have a balanced report unless 
the revenues somehow or other, either through direct production 
or loans or borrowing, at least equal your expenses. Not 
indefinitely.
    So we are in a peculiar position. I think you did a real 
service this morning and I thank Senator Collins and Senator 
Lieberman for promoting this discussion. The question of how 
you really get to the bare bones is something that we are 
unwilling to attack with the political events as we see them. 
Everyone knows that we get closer and closer to encouraging our 
reelection when the previous one is complete. As a consequence, 
it is hard to put the longer range things on the table because 
there is no impact felt right away.
    And with that I don't offer you any solutions but I offer 
more things to be concerned about, I think, and looked at. 
Thank you.
    Chairman Collins. Senator Pryor.

               OPENING STATEMENT OF SENATOR PRYOR

    Senator Pryor. Thank you, Madam Chairman.
    Mr. Walker, again, thank you for your time and attention to 
this. This is all very important, and of special long-term 
importance. The work GAO has done on this subject matter has 
been a very valuable tool for Congress.
    Also, you have a great reputation and you have always 
impressed me as a straight shooter. We need more of that around 
here, folks that will get through all of the rhetoric and just 
get down to the facts.
    The first question I have is about GAO itself. You have 
been in operation since the 1920's?
    Mr. Walker. Nineteen hundred and twenty one.
    Senator Pryor. I am curious about GAO's track record in 
making predictions. Have you ever looked at yourself and tried 
to go back and see how accurate you have been over the years in 
making projections?
    Mr. Walker. I have not had that done. We can go back and 
see whether or not it has been done before and also maybe take 
a look at what has happened in recent years.
    I will tell you this, that having been a trustee of Social 
Security and Medicare for 5 years, and having been part of the 
process of projecting out for 75 years for those programs, and 
knowing that the trustees come up with three estimates, high 
cost, low cost and best estimate, which we are using for this 
simulation, in general over the time actual results have been 
between the best estimate and the high cost estimates.
    I know that since I have been Comptroller General, which is 
a little over 6 years now, that the long-range budget 
simulations have generally gotten worse over time. The reason 
that they have generally gotten worse is because we are not 
necessarily thinking about the long-term cost, affordability 
and sustainability of current decisions on both the spending 
side and the tax side of the ledger.
    Senator Pryor. I agree with what you are saying sitting 
there.
    I know that as a Member of the Senate, and just as a Member 
of Congress generally, I think that we all should continually 
look at the programs we have for the Federal Government and 
evaluate them and reevaluate them. I like the areas where you 
touched on going back to the basics. How long has this program 
been around? What was the goal of it, etc.? I think that is a 
very healthy exercise that we should all do.
    But I would like to hear your thoughts on a practice that 
Congress does, and that is we sunset legislation. When we often 
sunset legislation or we have to reauthorize it at a certain 
time, is that helping or hurting us in our examination and 
reform effort to try to make government run more efficiently?
    Mr. Walker. It is a concept that has conceptual merit but 
quite frankly, many times Congress does not reauthorize 
programs and yet they are funded. And so that system is not 
working as anticipated, as well.
    I do think that one of the things that has to be done is 
that there needs to be mechanisms to periodically review and 
reconsider what is in the base and whether or not Federal 
programs and policies are achieving their intended objectives 
and whether or not they are as high a priority today and for 
tomorrow as it has been in the past.
    Senator Pryor. Do you have a recommendation on that? Are 
you saying that Congress should be the one that does the 
reevaluation? Or should Congress somehow get blue ribbon panels 
or whatever to go and review programs? How should we do that? 
Do you have a recommendation on that?
    Mr. Walker. One of the things that we have in chapter 3 of 
this report, or what I would refer to as the way forward, is we 
have a number of different mechanisms that could potentially be 
used in order to address these and other questions, some of 
which need to be embedded in the normal process that Congress 
deals with, the budget process, the appropriations process, the 
oversight process, and the reauthorization process.
    I do believe, Senator, that it is a shared responsibility. 
I believe that the Executive Branch should be focusing on these 
issues, these generic questions as well as the other 
illustrative questions. I also believe the Congress, as part of 
its regular legislative, oversight, and appropriations 
responsibilities, needs to be focused on these issues. So we 
need both. I do not think we can rely on one or the other. I 
think both have to play a major role.
    Senator Pryor. So as we are talking about reforming Social 
Security and at some point reforming Medicare and Medicaid, do 
you think we need to reform Congress as well?
    Mr. Walker. As you know, the Congress is my client. I will 
tell you this, I do not believe that either the Executive 
Branch or the Legislative Branch is well-positioned to deal 
effectively with all of these challenges that we are facing. 
Realistically, the Executive Branch is probably going to change 
before the Congress. But ultimately, I think the Congress is 
going to have to change in some ways as well to maximize its 
effectiveness.
    Senator Pryor. One thing that you touched on that Senator 
Lieberman picked up on is that 60 percent of government 
spending is on autopilot. Basically, you are talking about the 
entitlement programs or the mandatory spending categories, 
whatever we want to call them. Do you have any recommendations 
on how we address those and how we can make those less 
expensive and a smaller part of the budget overall?
    Mr. Walker. First in 1964, Congress got to decide how two-
thirds of the budget would be spent every year. Now it is down 
to less than 40 percent and it is getting less each year based 
upon known demographic trends and a variety of other factors.
    We have a number of suggestions in the report but some of 
the ones that I would touch on would be that we need to start 
getting some things on the radar screen that are off the radar 
screen. To a great extent, a lot of this mandatory spending is 
off the radar screen. We are just letting it go. We are not 
even focusing on it. That is not just on the spending side, it 
is on the tax side, too.
    As I mentioned, in many years the total cost of tax 
expenditures exceeds total discretionary spending. And yet, tax 
expenditures are off the radar screen. We are really not 
focusing on them.
    I think looking at the commitments that have been made, 
being able to consider triggers, engaging in a fundamental 
review and reassessment of existing mandatory programs.
    I saw this morning, for example, that there is a proposal 
to extend TriCare to all Reservists and Guard members, even if 
they are not on active duty. That would cost a tremendous 
amount of money. Given the fact that employers are looking to 
get out of the health care business, let me assure you that 
that would just be an excuse for every member of the Guard and 
Reserve and their family to go on to the Government TriCare 
program, which in 1-year cost, or the 10-year cost may not look 
that bad. But the discounted present value cost would be 
shocking.
    Senator Pryor. Thank you.
    Chairman Collins. Thank you.
    Mr. Walker, the OMB has put forth a number of proposals to 
encourage Congress to evaluate Federal programs, and if they 
are ineffective to terminate them. For example, there already 
is the OMB Program Assessment Rating Tool, the PART program. 
Last year, Congress funded all but one of the 13 programs that 
OMB concluded were either ineffective or had results not 
demonstrated.
    I think the PART program may not be the best tool for 
evaluating the worthiness of programs, but I think OMB has a 
point about how difficult it is to terminate programs once they 
have been enacted.
    This year, the administration has proposed a Results 
Commission and a Sunset Commission to try to put into place 
some sort of action forcing mechanism to force Congress to make 
affirmative decisions to extend programs that the commission 
may have found are ineffective.
    What is your general view on the PART program and on the 
administration's proposals for these two commissions?
    Mr. Walker. I think the PART program, the Program 
Assessment Rating Tool, has conceptual merit. It is basically 
the administration's recognition that you need to review the 
base of government and to try to ascertain whether and to what 
extent programs are achieving real outcome-based results. And 
if not, why not? And the ones that are more successful, 
hopefully, would receive better treatment, at least as it 
relates to the President's proposal. And the ones that are not 
demonstrating results, then presumably they would not receive 
as favorable treatment through the President's proposed budget.
    I believe that PART is a step in the right direction. By no 
means is it perfect. I think you also have to recognize, as you 
do I'm sure, that any administration is associated with a 
particular president and a particular party and therefore is 
not necessarily viewed with the same degree of merit on both 
sides of the aisle. And that there could be some skepticism, no 
matter which administration it is, as to what their proposals 
might be.
    And so I think it is important to have GAO and others, as 
appropriate, doing evaluations that are professional, 
objective, fact-based, nonpartisan, nonideological, and 
hopefully fair and balanced as a supplement to what the 
administration might do.
    I also believe that there needs to be more consultation. I 
believe the administration has done some good things, but their 
consultation with key stakeholders has not always been very 
effective. And working in partnership over a period of time 
would significantly increase the likelihood of success. 
Reasonable people can and will differ in these areas. No doubt 
about it, especially with all the vested interests. But I think 
there needs to be significant process improvement.
    As far as the Results Commission and the Sunset Commission, 
I have not seen the details. As you know, Senator, titles of 
things can be misleading. Therefore, I will reserve judgment on 
what they are proposing until I see the details.
    Chairman Collins. Let me do just a follow-up, knowing that 
you would want to get back to us on that issue.
    As I understand the administration's proposal for the 
Sunset Commission, it would review some 1,200 government 
programs over a 10-year period. So that the concept is that a 
program's managers would have to justify its continued 
existence once every 10 years, or at least once every 10 years.
    From what you are saying, however, if we take that kind of 
approach we should look at the other side of the ledger. We 
should be looking at tax preferences and whether they should be 
continued. Is that a fair judgment?
    Mr. Walker. Absolutely. I think we have to look at 
mandatory spending, including entitlement programs, 
discretionary spending and tax policy, including tax 
preferences. The gap is too great to grow our way out of the 
problem. You are not going to solve the problem just by looking 
at one dimension. We need to look at all three.
    Chairman Collins. Let me ask you one final question today, 
and that is in the area of health care. If you look at your 
charts, the fastest-growing part of the Federal budget is the 
Medicaid and Medicare programs. It is going to be a tremendous 
challenge for government to tame the cost.
    What should Congress and the administration begin to tackle 
in what is the fastest-growing part of our budget?
    Mr. Walker. First, one of the things I was pleased to see, 
although not without controversy, is the President's Budget 
incorporates a number of GAO recommendations. One example is 
that there is some gaming going on with regard to Medicaid 
reimbursements. There has also been some practices that have 
been engaged in by various other parties where the government, 
we believe, is paying more than it should and more than was 
intended. So that is a positive step.
    Second, with regard to Medicare, I think some of the things 
we are going to have to look at is such things as, in the 
short-term, is there an opportunity to be able to develop some 
standards of practice that would improve quality, reduce costs, 
enhance consistency, improve equity, also potentially reduce 
litigation risk?
    Third, is there an opportunity to engage in large case 
management practices? A significant percentage of Medicare's 
cost, and Medicaid's too, are incurred by a relatively small 
percentage of the covered population. In the private sector and 
even some State and local governments, there are large case 
management practices that are being engaged in to try to get a 
better handle as to what people are doing and what the costs 
are. Sometimes you find yourself, you have people taking 16 
prescription drugs, which is dangerous, or they are working 
counter to each other. That is another example.
    A fourth one might be how can you leverage the government's 
considerable purchasing power?
    But in the final analysis, Senator, Medicare by itself is 
eight times greater than Social Security. Medicaid is on top of 
that. It is going to take fundamental reform on an installment 
basis over many years, not just of these programs but also the 
entire health care system.
    And that is why I think it is important that the Congress 
consider moving now rather than later on Social Security 
reform. The reason being is that while Social Security is only 
$3.7 trillion of that $43 trillion problem, you have an 
opportunity to reform Social Security in a way that will exceed 
the expectations of every generation of Americans--and I will 
be happy to comment on that if you want. You can get a win and 
improve credibility in the markets, improve confidence within 
the public and within the Congress to be able to deal with 
issues before they reach crisis proportions because quite 
frankly the heavy lifting is going to take a lot more time and 
you are not going to exceed the expectations of any generation 
of Americans, I would respectfully suggest.
    Chairman Collins. Thank you. Senator Lieberman.
    Senator Lieberman. Thanks, Madam Chairman.
    Mr. Walker, earlier on in your testimony you mentioned a 
series of steps that Congress could take to try to get us back 
in balance. And look, we are proving, unfortunately, that we 
are incapable of just doing it in the normal process, that we 
have got to create some parameters here, some fences around the 
holes we are falling into. I am going to list the ones: 
Spending caps, PAYGO rules, triggers, and biannual budgeting. 
One of our colleagues has a Constitutional Amendment on a line 
item veto, which we passed some years ago and then was struck 
down by the Supreme Court. So this is his attempt to try to 
bring it back.
    Of those, and this Committee--and I appreciate the 
Chairman's leadership in calling this hearing and beginning the 
process--this Committee is in a position to try to take the 
lead in offering some legislative parameters to self-
discipline. What would be your favorite among those, or a 
couple of favorites, and just talk about the details of why you 
chose them?
    Mr. Walker. We would be happy to work with your staff and 
other Committee staff further, but on a preliminary basis what 
I would say is some spending caps and PAYGO on both sides of 
the ledger. In addition, to consider, as a supplement to and 
not a substitute for, the current information Congress gets, 
the discounted present value dollar cost of major tax and 
spending proposals before they are enacted into law.
    There are others but those would be a few off the top of my 
head.
    Senator Lieberman. That is helpful.
    Can I take you back and ask you just to talk a little bit, 
and I would welcome your input or your staff's, on spending 
caps? Just describe in general terms how we might best do that?
    Mr. Walker. Realistically, I think there are probably a 
couple of different approaches. One is you may want to take a 
look at what type of target or cap you might have, not just 
with regard to discretionary spending. But I also think that 
you have to think about whether or not you have certain 
triggers or mechanisms that deal with mandatory spending, where 
you are on autopilot, that forces some type of review and 
reconsideration, rather than just automatically assuming we are 
going to continue the status quo.
    I think you also have to think, and I am talking off the 
top of my head here, Senator, a little bit, brainstorming with 
you. I think we have to think about what are we going to do on 
the tax preference side. That cannot be off the radar screen, 
either.
    For example, one of the things that I noted in the 
President's budget is there is a proposal for additional tax 
preferences for health care. It is already the largest tax 
preference in the Internal Revenue code. And yet we are 
proposing additional ones. What about reconsidering the 
existing one?
    So I think that somehow we have to consider the tax side 
too, because in the final analysis we are talking about the 
bottom line. And the bottom line is a function of revenues and 
expenditures. And therefore you need to consider both.
    Senator Lieberman. How about PAYGO. PAYGO is the basic 
idea, as the name suggests, that if you adopt a spending 
program or a tax cut you have to pay for it.
    Mr. Walker. I think it needs to apply on both sides of the 
ledger because we are talking about the bottom line.
    Senator Lieberman. What are your thoughts about a line item 
veto, leaving aside whether it is significant enough to amend 
the Constitution?
    Mr. Walker. That would involve a significant change in 
authority between the Legislative Branch and the Congress, who 
I and GAO work for, and the Executive Branch. So I hesitate to 
say more on that at this time, Senator.
    Senator Lieberman. That was well done. But let us continue 
to work on that.
    Let me ask you a very different kind of question, although 
related to the general subject, and bring you to where Congress 
is focused today, which is on trying to make Social Security 
sustainable. One of the things that bothers me about the 
current proposal, insofar as we understand it, for privatizing 
accounts, and I am really trying hard, as a lot of members are, 
to keep our minds open. As I said at the outset, the President 
has forced us to confront the long-term unsustainability of 
Social Security. So one or another may argue about what his 
response is, but he put it on the agenda.
    One of the questions that I have asked myself is on the 
privatizing, which requires transition costs and borrowing to 
achieve them--and that goes into the trillions, as Vice 
President Cheney said a few weeks ago, over the decades to 
come. How do we measure whether that indebtedness really begins 
to affect our international financial credibility to the point 
where the dollar loses value, interest rates have to be raised, 
business is stifled, people lose jobs?
    What standards can we apply to that? I guess I will stop 
there and I may have a quick follow-up.
    Mr. Walker. Senator, I would guess, one of the things we 
have to be careful about in the debate about Social Security is 
the words that we use. I would respectfully suggest that just 
as a crisis may not be an appropriate word, privatizing may not 
be either. Because in effect, what is being talked about with 
individual accounts is whether or not there should be 
individual accounts. If so, as part of a broader proposal. 
Because by themselves they will not deal with the solvency and 
sustainability problem. In fact they could exacerbate it.
    Senator Lieberman. That is a real important point. There 
may be a value to those private accounts for a lot of other 
personal and macroeconomic reasons, but they themselves do not 
deal with the system.
    Mr. Walker. That is exactly right, Senator. The question is 
are they a carve-out? In other words, are they part of the 
existing payroll tax? Are they an add-on? Are they voluntary? 
Are they mandatory?
    I will say this, we need to consider, I believe, in any 
reform proposals not just the cash flow implication but also 
the discounted present value dollar implication of whatever 
reform package is being considered. We are consistent at GAO. 
We say we think you need to consider both, on the tax side, on 
the spending side, as well as part of major reform proposals.
    I think the other thing that we have to consider is that 
not all promised benefits under Social Security are funded. If 
you want to deliver on all promised benefits under Social 
Security, it is going to cost several trillion dollars to be 
able to do that at some point in time. The question is when?
    So one last thing I would mention on this is if you look at 
the financial statements of the U.S. Government, you will not 
find a liability to the trust funds of Social Security and 
Medicare, shockingly. The reason that you will not find a 
liability is because the left hand owes the right hand. That is 
something I think that needs to be reconsidered. Why? Because 
after the government took the people's payroll taxes, it spent 
the people's payroll taxes, and it put an IOU in the so-called 
``trust funds.''
    Senator Lieberman. Which we are going to have to start 
paying.
    Mr. Walker. Correct. You are going to have to start paying. 
The IOU's are guaranteed as to principal and interest. The 
bonds are backed by the full faith and credit of the U.S. 
Government. That has legal, political, and moral significance, 
but no economic significance whatsoever. Social Security is 
going to start to constrain the budget in 2008, as the surplus 
starts to go down. It is going to get worse over time.
    At the same time, when you go from implicit debt, which is 
the unfunded gap, to explicit debt------
    Senator Lieberman. Which we will have to deal with, either 
by cutting current government spending or raising more revenue.
    Mr. Walker. Correct. Or you can go out to the market to 
borrow it. You either have to raise revenues, cut expenses or 
increase debt held by the public.
    If you do that, then you are competing with other capital 
needs. The question is what interest rates are you going to 
have to pay? Part of the issue is how much credibility does the 
reform package have in the market because, on the one hand, it 
is good news if Congress is able to handle a known problem 
before it absolutely has to, which is what it did in 1983. In 
1983, the checks were not going to go out on time! So the 
market would presumably give you some credit for handling a 
known problem before an absolute crisis was on your doorstep.
    On the other hand, you are going to be competing for 
capital and it is to be determined what impact that might have 
on interest rates.
    Senator Lieberman. Thank you. Thanks very much. It has been 
a very important morning.
    Chairman Collins. Thank you very much, Senator Lieberman, 
for your participation in this important hearing.
    Mr. Walker, thank you so much for the great work that GAO 
is doing in this area.
    Mr. Walker, I think this is extraordinarily important work, 
as your first comments implied to us. We look forward to 
continuing this process with you, in helping us identify more 
precisely where we should begin focusing and tackling some of 
these issues.
    And also, on the possible budget reforms, which I really 
think could be key in getting control and imposing fiscal 
discipline.
    The hearing record will be held open for 15 days for the 
submission of questions and additional materials.
    I again want to thank you and your staff, and I want to 
thank our Committee staff for their hard work.
    This Committee is now adjourned.
    [Whereupon, at 11:42 a.m., the Committee was adjourned.]


                            A P P E N D I X

                              ----------                              

[GRAPHIC] [TIFF OMITTED] T0173.001

[GRAPHIC] [TIFF OMITTED] T0173.002

[GRAPHIC] [TIFF OMITTED] T0173.003

[GRAPHIC] [TIFF OMITTED] T0173.004

[GRAPHIC] [TIFF OMITTED] T0173.005

[GRAPHIC] [TIFF OMITTED] T0173.006

[GRAPHIC] [TIFF OMITTED] T0173.007

[GRAPHIC] [TIFF OMITTED] T0173.008

[GRAPHIC] [TIFF OMITTED] T0173.009

[GRAPHIC] [TIFF OMITTED] T0173.010

[GRAPHIC] [TIFF OMITTED] T0173.011

[GRAPHIC] [TIFF OMITTED] T0173.012

[GRAPHIC] [TIFF OMITTED] T0173.013

[GRAPHIC] [TIFF OMITTED] T0173.014

[GRAPHIC] [TIFF OMITTED] T0173.015

[GRAPHIC] [TIFF OMITTED] T0173.016

[GRAPHIC] [TIFF OMITTED] T0173.017

[GRAPHIC] [TIFF OMITTED] T0173.018

[GRAPHIC] [TIFF OMITTED] T0173.019

[GRAPHIC] [TIFF OMITTED] T0173.020

[GRAPHIC] [TIFF OMITTED] T0173.021

[GRAPHIC] [TIFF OMITTED] T0173.022

[GRAPHIC] [TIFF OMITTED] T0173.023

[GRAPHIC] [TIFF OMITTED] T0173.024

[GRAPHIC] [TIFF OMITTED] T0173.025

[GRAPHIC] [TIFF OMITTED] T0173.026

[GRAPHIC] [TIFF OMITTED] T0173.027

[GRAPHIC] [TIFF OMITTED] T0173.028

[GRAPHIC] [TIFF OMITTED] T0173.029

[GRAPHIC] [TIFF OMITTED] T0173.030

[GRAPHIC] [TIFF OMITTED] T0173.031

[GRAPHIC] [TIFF OMITTED] T0173.032

[GRAPHIC] [TIFF OMITTED] T0173.033

[GRAPHIC] [TIFF OMITTED] T0173.034

[GRAPHIC] [TIFF OMITTED] T0173.035

[GRAPHIC] [TIFF OMITTED] T0173.036

[GRAPHIC] [TIFF OMITTED] T0173.037

[GRAPHIC] [TIFF OMITTED] T0173.038

[GRAPHIC] [TIFF OMITTED] T0173.039

[GRAPHIC] [TIFF OMITTED] T0173.040

[GRAPHIC] [TIFF OMITTED] T0173.041

[GRAPHIC] [TIFF OMITTED] T0173.042

[GRAPHIC] [TIFF OMITTED] T0173.043

[GRAPHIC] [TIFF OMITTED] T0173.044

[GRAPHIC] [TIFF OMITTED] T0173.045

[GRAPHIC] [TIFF OMITTED] T0173.046

[GRAPHIC] [TIFF OMITTED] T0173.047

                                 
