[Senate Hearing 109-684]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 109-684
 
 EARMARK REFORM: UNDERSTANDING THE OBLIGATION OF FUNDS 
                       TRANSPARENCY ACT 

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

                                HEARING

                               before the

                FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
                     INFORMATION, AND INTERNATIONAL
                         SECURITY SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 16, 2006

                               __________


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                        and Governmental Affairs




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        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
   Joyce A. Rechtschaffen, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk


FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, AND INTERNATIONAL 
                         SECURITY SUBCOMMITTEE

                     TOM COBURN, Oklahoma, Chairman
TED STEVENS, Alaska                  THOMAS CARPER, Delaware
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
LINCOLN D. CHAFEE, Rhode Island      DANIEL K. AKAKA, Hawaii
ROBERT F. BENNETT, Utah              MARK DAYTON, Minnesota
PETE V. DOMENICI, New Mexico         FRANK LAUTENBERG, New Jersey
JOHN W. WARNER, Virginia

                      Katy French, Staff Director
                 Sheila Murphy, Minority Staff Director
            John Kilvington, Minority Deputy Staff Director
                       Liz Scranton, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Coburn...............................................     1
    Senator Carper...............................................     4

                               WITNESSES
                        Thursday, March 16, 2006

Hon. Jeff Flake, a Representative in Congress from the State of 
  Arizona........................................................     6
Hon. John McCain, a U.S. Senator from the State of Arizona.......    10
Thomas A. Schatz, President, Citizens Against Government Waste...    14
Steve Ellis, Vice President of Programs, Taxpayers for Common 
  Sense Action...................................................    16
Scott Lilly, Senior Fellow, Center for American Progress.........    18

                     Alphabetical List of Witnesses

Ellis, Steve:
    Testimony....................................................    16
    Prepared statement...........................................    51
Flake, Hon. Jeff:
    Testimony....................................................     6
    Prepared statement...........................................    39
Lilly, Scott:
    Testimony....................................................    18
    Prepared statement...........................................    57
McCain, Hon. John:
    Testimony....................................................    10
    Prepared statement...........................................    41
Schatz, Thomas A.:
    Testimony....................................................    14
    Prepared statement...........................................    43

                                APPENDIX

Charts submitted for the Record from Senator Coburn..............    27


 EARMARK REFORM: UNDERSTANDING THE OBLIGATION OF FUNDS TRANSPARENCY ACT

                              ----------                              


                        THURSDAY, MARCH 16, 2006

                                     U.S. Senate,  
            Subcommittee on Federal Financial Management,  
        Government Information, and International Security,
                            of the Committee on Homeland Security  
                                          and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:32 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Tom Coburn, 
Chairman of the Subcommittee, presiding.
    Present: Senators Coburn and Carper.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. The Subcommittee will come to order.
    Good morning. We have convened this hearing to look at the 
need for earmark reform and legislation that would be an 
important step toward achieving such reform.
    Pork politics is not an ancient practice that can't be 
reformed. Pork, as we know it today, didn't exist 20 years ago. 
In 1987, President Ronald Reagan vetoed a spending bill because 
it contained 121 earmarks. Disturbingly, the number of earmarks 
has skyrocketed over the past decade--from 4,126 in 1994 to 
15,887 in 2005--according to the Congressional Research 
Service.
    Last year, the number of earmarks dropped to 12,852, but 
the total cost of the earmarks rose by $16 billion last year to 
a total of $64 billion, not including the highway bill, the 
earmarks that are contained in the highway bill. And those are 
truly authorized earmarks in the highway bill.
    America's greatness was built on sacrifice and service, not 
the politically-expedient politics of pork. There is no lost 
Article of the Constitution or missing Federalist Paper that 
gives Members of Congress a blank check to fund any project 
they desire.
    Indeed, Thomas Jefferson wrote James Madison in 1796 that 
allowing Congress to spend Federal money for local road 
projects would ``be a source of eternal scramble among the 
members [for] who can get the most money wasted in their State, 
and they will always get most who are meanest.''
    Jefferson's prophetic warning has been borne out by the 
reality that there exists an indisputable linear relationship 
between the runaway spending of the last 10 years and a 
markedly increased earmarks, as you can see from the other 
chart.
    The truth is earmarks are a gateway drug on the road to 
spending addiction. One day, an otherwise frugal member votes 
for pork, the next day, he or she votes for a bloated spending 
bill or an entitlement expansion. After all a ``no'' vote might 
cut off access to earmarks.
    Congressional leaders and appropriators use earmarks as a 
leverage to get members to vote their way--often for monstrous 
spending bills that a member otherwise might oppose. In other 
words, earmarks help grease the skids for bigger government--
not necessarily more efficient government, not necessarily 
better government.
    The task of selecting a share of the 15,000 annual pork 
projects has become an all-consuming endeavor for most 
congressional offices. Gathering earmark requests, meeting with 
lobbyists, working to secure a coveted seat on the 
Appropriations Committee leaves little time for the traditional 
duties of overseeing government and reforming outdated 
programs.
    And we see the consequences of this neglect: In recent 
years, layers of government waste have gone virtually ignored, 
and bloated agencies have failed to deliver basic services, but 
their budgets are just increased each year as if on auto-pilot. 
Congress has failed miserably in its oversight responsibility.
    For example, last year the Department of Education told the 
Washington Times that it was facing ``a significant challenge 
to process and monitor all of these earmarks.'' This was in 
reference to 1,175 congressionally mandated projects in small 
print taking up 40 pages of the 663-page omnibus spending bill.
    The next chart shows a comparison between earmarks and 
entitlement savings.
    Some congressional critics of earmark reform make the 
excuse that getting rid of earmarks isn't the solution to 
reigning in runaway spending, controlling entitlements is. But 
as we saw with the recent budget reconciliation bill, Congress 
was barely able to trim even a relatively tiny amount of 
entitlement spending.
    While earmarks cost $64 billion last year, entitlement 
savings from budget reconciliation was only $4.8 billion. And 
its estimated savings over 5 years was just $38.8 billion.
    If Congress is unable to eliminate the most unjustifiable 
spending--which earmarks usually are--then how could it 
possibly make tougher choices on politically charged 
entitlement programs like Medicare and Social Security? Given 
current and future national debt realities, we cannot afford to 
spend money on these individual pet projects.
    Even if the individual projects had merit--and many do, and 
I am sure that most of them have good-hearted and honest 
constituencies in their support--those merits for a small 
parochial interest have to be weighed against the broader risks 
of the out-of-control growth of earmarking and the long-term 
financial health of the United States.
    Earmarking can lead to outright corruption, as seen in the 
recent guilty plea of former Representative Duke Cunningham for 
bribery over an earmark of money for his district. Reducing or 
eliminating earmarks would help reduce the power of lobbyists, 
who often raise campaign money for Members of Congress if they 
slip an earmark into a bill that benefits a lobbyist's client.
    Next you will see posters of two lobbyists' Web sites with 
some pretty revealing quotes.
    The Web sites of these top lobbying outfits make no bones 
about their ability to serve up pork for their clients. All of 
the sites stress the firms' cozy relationship with members and 
their staff and highlight their employees' previous government 
experience as a signal to potential clients that they are 
networked into the pork game.
    Many sites outright brag about the amount of earmarks they 
have secured for clients. The two examples that you might see--
and this is just two of many. First is a blown-up poster of a 
lobbying firm's Web site with quotes of interest pulled out for 
viewers to read.
    The quote states, ``Each year, our attorneys secure 
hundreds of millions of dollars in Federal funds for a wide 
range of clients. We have successfully designed and implemented 
strategies to win Federal funds for hundreds of new programs, 
to keep controversial programs funded, to increase funding for 
client priority programs, and, when called for, to initiate for 
programs not requested in the budget.
    ``Many of our attorneys are veterans of congressional 
committee staffs or Federal offices and, thus, know the budget 
process from both sides, giving them a depth of perspective on 
the process that greatly benefits our clients.''
    The second lobbying firm's Web site, ``Collectively, our 
Federal practice group possess an intricate knowledge of the 13 
annual Federal funding bills and the methods for obtaining 
identified appropriations from a variety of accounts. We have a 
strong relationship with numerous key members and staff in both 
House and Senate and a knowledge of precisely how, where, and 
when to intervene to achieve desired results.
    ``Although success is never guaranteed, the fees that our 
clients pay in pursuit of legislative appropriations are almost 
always greatly exceeded by the amount of funding they receive. 
For fiscal year 2004, this group obtained $334 million for our 
appropriation clients.''
    While there is nothing inherently wrong with lobbying per 
se, earmarking in particular develops an unhealthy relationship 
between members, their staff, and the lobbyists seeking favors. 
According to the Wall Street Journal, the number of companies 
hired to pursue earmarks has doubled since 2000. According to 
the Center for Public Integrity, the commonly lobbied issue is 
budget and appropriation--6,800 companies as of 2005.
    The willingness of those in power to abuse the 
appropriation process through earmarking has led to an 
explosive growth in the lobbying industry and encouraged the 
excesses illustrated by the Cunningham and Jack Abramoff 
scandals.
    Abramoff has described the appropriation committees and, by 
extension, the appropriation process, as an ``earmark favor 
factory'' in which influence and votes are bought and sold. I 
believe Senator McCain's legislation--which I proudly co-
sponsored--and its companion in the House, sponsored by 
Congressman Jeff Flake, is an important first step in a process 
that should ultimately lead to the shutdown of this process.
    This legislation would require that earmarks be placed in 
the text of legislation rather than the committee reports that 
accompany bills. Under current practice, committee report 
language directs Federal agencies to spend money on particular 
earmarks--and the agencies have learned that congressional 
appropriators will retaliate if their language is ignored, even 
if it's in the national interest to ignore it.
    Next is a recent Congressional Research Service report that 
shows that 96 percent of the 12,852 appropriation earmarks in 
FY2006 were hidden within the report language. That means the 
language was slipped in behind closed doors, at the last 
minute, or in the middle of the night. Everyone knows that the 
conference reports become public almost immediately before they 
have to be voted on, which makes it almost impossible for 
members to know what they're voting on or for.
    Earmarks need transparency and time for debate to make sure 
each item is considered on its own merits and in light of the 
competing priorities that this country faces. Tucking earmarks 
into a conference report prevents taxpayers from the benefit of 
debate and disclosure about how their money is being spent. 
Requiring earmark projects to be a part of actual legislation 
would also make it easier for legislators to challenge them by 
offering amendments to change or strike them.
    Transparency and debate will also reduce the value of 
earmarks as an instrument for party discipline by leadership in 
appropriators. And, shining light on these pet projects will 
help ethics compliance by curbing the incentive for members to 
take campaign donations from special interests.
    Ideally, forcing lawmakers to defend projects will expose 
them to ridicule and, eventually, the practice of earmarking--
and the out-of-control spending it leads to--will slow.
    The truth is Congress will never take meaningful steps to 
tackle our enormous fiscal challenges as long as it indulges 
with impunity in a practice that creates a culture of 
complacency.
    They say every cloud has a silver lining. I believe that 
the various lobbying and earmark-related scandals, both real 
and imagined, have opened a unique window of opportunity to 
enact reforms now that may not ever come again. If Congress 
fails to pass meaningful reforms that attack this climate of 
corruption at its source, the public will, and should, take 
reform into its own hands in November.
    I want to thank our witnesses for being here today, and I 
look forward to our dialogue.
    Senator Carper.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thanks, Mr. Chairman.
    It is good to be with you, and I want to welcome 
Congressman Flake. I don't think I have ever met you before. 
And so, just very nice to have a chance to meet you.
    I am going to listen to your testimony, and then I am going 
to have to slip out.
    Today, we hold this hearing as the Senate debates the 
budget for the debt ceiling. We are going to be asked to vote, 
probably later today, to raise the debt ceiling by about three 
quarters of a trillion dollars.
    And that will mark, I think, the fourth time we have been 
asked to raise the debt ceiling in the last 5 years. And we 
have gone from a time when we had balanced budgets--literally, 
surpluses as far as the eye could see--to a time when we have 
deficits for as far as the eye can see.
    And as baby boomers, my generation, are moving toward 
retirement, the situation doesn't look brighter. In fact, it 
looks bleaker. As a result, I think we have to look in every 
corner of where we spend money or how we bring money into this 
Federal Government of ours to make sure that we are doing all 
we can do to reverse our slide into fiscal insanity and to get 
back on the right track.
    There are a lot of things that we can be doing. We have 
talked, in fact, we have had hearings about some of those. One 
of them is just to collect the monies that are owed to the U.S. 
Treasury. IRS reported to us just weeks ago that about $290 
billion in tax revenues that were owed to the Federal 
Government last year were not collected--$290 billion.
    We have had a series of hearings on improper payments. And 
it turns out that the Federal Government makes a lot of 
payments, mostly overpayments, for things that we ought not to 
be doing, and it is about $50 billion. It is real money.
    We know that some of the folks who benefit from entitlement 
programs, frankly, make enough money that they probably should 
be means tested and that we can go to, not to balance the 
budget on the backs of folks who depend on entitlement 
programs, but there is money that can be saved, particularly 
from those that are more affluent and who are eligible for 
entitlement programs.
    We get to the issue of earmarks, and it reminds me a little 
bit of what we used to have in our State. Maybe you have it in 
Oklahoma or Arizona as well, but we had something called a 
grant in aid package that would come through the legislature 
every year.
    We would pass an operating budget. We would pass a capital 
budget. And the legislature itself would put together a grant 
in aid package. And the grant in aid package would allow each 
of the legislators to pick their favorite good cause--and they 
were good causes. I mean, Boy Scouts, Girl Scouts, boys and 
girls clubs. Any number of nonprofits doing the Lord's work in 
a whole lot of ways--and it was beginning to take more and more 
of the budget.
    And one of the things that we did in our State, and I think 
they probably have done in other States, is to say it is not 
inherently bad to have a grant in aid package, but to limit it 
to some percentage of the overall spending so that it just 
doesn't continue to grow.
    When I look at the charts that we see this morning, the 
thing that concerns me is not so much that we do have earmarks, 
but that the trend is going in the wrong direction. It 
especially is going in the wrong direction now as the budget 
deficit gets larger and larger.
    The last thing I would say. The thing that troubles me most 
about earmarks is the idea that if you pass a House bill, it 
doesn't have a provision in it. The Senate passes an 
appropriations bill, it doesn't have a provision in it. And 
when a bill comes out of conference and there is a provision in 
it that wasn't in either bill going in, that is not good.
    And that, in terms of reforms and things to change, I 
think, will get at least my support for cleaning that up and I 
suspect the support of a lot of us.
    Congressman Flake, welcome. Glad to see you, and look 
forward to your testimony.
    Senator Coburn. Congressman Flake, thank you for being 
here. Congressman Jeff Flake presently is serving his third 
term in Congress, represents the 6th Congressional District of 
Arizona. He serves on the House Committees on the Judiciary, 
the Committee on International Relations, and the Committee on 
Resources.
    Congressman Flake, your entire testimony will be made a 
part of the record, and you are recognized.

 TESTIMONY OF HON. JEFF FLAKE,\1\ A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF ARIZONA

    Mr. Flake. Thank you. I appreciate the opportunity to be 
here, and I want to commend you, Senator Coburn, for your lead 
on earmark reform and for all you have done in this area and 
for co-sponsoring the legislation that we have in the House.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Flake appears in the Appendix on 
page 39.
---------------------------------------------------------------------------
    And Senator Carper, thank you for what you are doing, and 
your recognition as far as conference reports and what is going 
on there with earmarks being airdropped in at the last minute 
truly is a growing problem. And it is something that is 
addressed by this legislation.
    I think it is appropriate that you are having this hearing 
today. I am not sure what deadlines the Senate has, but the 
biggest deadline in Congress on the House side is today. It is 
the deadline for submission of earmark requests before the 
Appropriations Committee.
    You have a lot of staffers from district offices in 
Washington this week that wouldn't be otherwise. You have 
lobbyists on the Hill in droves that wouldn't be otherwise. 
After today, this is kind of like April 15 for accountants. 
When today is gone, many lobbyists' work is done for the year. 
There will be a run on the airport tonight for the Bahamas, I 
think. This is what this process has become.
    My office, we don't do any earmarks, but still we get 
lobbyists hoping that we will change our mind, apparently, 
because we got this year several request forms already filled 
out for us. Typically, the practice is these request forms from 
the Appropriations Committee come to the member offices. The 
members will simply turn them over to lobbyists, who will fill 
them out, give them back to the members, sign them, and turn 
them in.
    And we received several filled out. Just all that was 
needed was my signature to make earmark requests. I would 
submit that when that is what the process has become, we have a 
problem, a huge problem.
    Senator Coburn outlined the trend that we are on in terms 
of earmarks. It is not a pretty picture. It is exploding. 
Depending on how you define an earmark--it is anywhere from 
$4,000 to $15,000 or $2,000 to $14,000--in any event, any way 
you look at it, it has exploded and under our watch as 
Republicans. And I think it is nothing to be proud of.
    You mentioned the CRS study that was just released, 
indicating that 96 percent of earmarks are in conference 
reports or committee reports. They aren't contained in the 
actual legislation. What that means is that individual members 
simply have no access to challenge those earmarks.
    We talk a lot about giving the President line-item veto 
authority. I think that he ought to have it. I would be more 
pleased if we had it. And we have given it up. When we 
legislate by report rather than actual legislation, we have 
given up our ability to challenge individual spending items.
    I have pointed out before that had any of us suspected that 
Duke Cunningham had been bribed to get any of the $90 million 
in earmark that he allegedly got for his clients, we couldn't 
have stopped very many of them, if any, because they were 
contained in conference and committee reports that we simply 
don't have access to. That is a problem, and that is something 
that we have got to stop.
    H.R. 1642 and the companion bill in the Senate, as you 
mentioned, Senator Coburn, simply say that if you want an 
earmark, you have got to put it in a bill. And members ought to 
have access to that bill on the House floor.
    But when it comes to conference reports, conference reports 
by definition are unamendable when they get back to the floor. 
So there has to be a process, a point of order protection, 
something that prevents earmarks from being the term that is 
used is ``airdopped in'' at the last minute.
    And I am afraid that if we shut down the process at the 
committee level and make sure that earmarks have to be in the 
bills there, then the trend will be--and we don't shut down the 
conference report process, then all earmarks will simply shift 
to a later stage, and there will be even more incentive to move 
them where they cannot be accessed at all.
    There is some discussion about even if we don't allow the 
earmarks into bills, that we have access through limitation 
amendments on the reports. But if we do that, then we will have 
to tighten up the rules in the House because, as it stands, the 
House can waive rules, and does, requiring that committee 
reports even be there on the floor when the legislation is 
voted on. And unless we tighten that process, all we will have 
is reports being approved after the bill has already passed.
    You mentioned earmarks as the gateway drug to spending 
addiction. That is the best description that I can think of. 
People will point out, well, it is only a small percentage of 
the budget. But what we have seen over the past couple of years 
with the spending increases that we have seen, it has coincided 
with the number of earmarks.
    Typically, if you have an earmark in a bill, you can't vote 
against that bill, or you might lose your earmarks in the 
conference committee. That is the game that is played in the 
House. And so, you have members supporting bloated 
appropriation bills that they wouldn't support otherwise. And 
so, it simply balloons spending everywhere. The earmarks are 
more important than the sum of their parts in terms of dollar 
value because they simply leverage higher spending everywhere 
else.
    We had a discussion the other day in the House as to 
whether or not there is a constitutional right to earmark, and 
it was a fascinating discussion. Members will point out Article 
1, Section 9, Clause 7, saying that it is the Congress's power 
to appropriate. Certainly it is.
    But we ought to point out that James Madison in 1817 vetoed 
the first appropriation bill with earmarks. Didn't feel it was 
proper to do so. It has been debated since then. The Supreme 
Court has ruled a couple of times and has simply said that 
Congress makes the determination.
    So Congress can say that earmarking is proper, but if you 
accept the notion that it is OK for Congress to have an earmark 
for an indoor rainforest in Iowa, then it begs a question, what 
kind of funding would be unconstitutional? Where does it stop? 
Where does parochialism end in this sense?
    So this legislation is important in that it brings not only 
transparency, but just as important, it brings accountability. 
You not only have to have names associated with earmarks and 
shine more light, there has to be an ability for members to be 
able to stand up and challenge.
    It is interesting that some of those who will claim a 
constitutional right to an earmark will go further and claim 
that they should have a right to have an earmark without that 
funding even being scrutinized by other Members of Congress 
because they know their district better than anyone, and they 
should have a right to actually decide what funding goes there.
    I think that is dangerous territory for anybody to be in, 
and for those who pretend to believe in limited government, it 
is simply inconsistent with that philosophy. But with that, I 
have the statement in the record, and I will be glad to answer 
any questions you might have.
    And thank you again for the invitation to come here.
    Senator Coburn. Let me ask you a couple of questions. 
Hopefully, Senator McCain will arrive.
    What you often hear from Members of Congress is that if we 
don't earmark, then there is an uncontrolled bureaucracy that 
will spend the money any way they want. First of all, what is 
your response to that? And second, is there any truth to it? 
And is there a constitutional solution to that if, in fact, it 
is true?
    Mr. Flake. Well, we have a process in Congress, a carefully 
designed process of authorization, appropriation, and 
oversight. And the problem with earmarks is they circumvent 
that process.
    For those who say that we need to be able to tell the 
Federal agencies that they are not spending in a way that we 
outlined or that is proper, we kind of lose all credibility.
    For example, in this past year's defense bill, when we 
criticize the Department of Defense for not spending sufficient 
funds on body armor. Yet we earmark more than $1 million for a 
museum in New York in the defense bill. What kind of 
credibility do we have, as Members of Congress, when we 
stipulate that kind of spending?
    So it has really taken away our ability to have proper 
oversight because we simply can't pass the laugh test when we 
criticize Federal agencies for profligate spending or for not 
following the dictates of the Congress because here we are 
saying you have to spend money. Here is our spending 
instructions on the Punxsutawney weather museum in Pennsylvania 
or the Cowgirl Hall of Fame. It is simply we have a process of 
oversight, and earmarks simply circumvent that.
    Senator Coburn. So the fact is the Congress has not done 
its oversight?
    Mr. Flake. You bet. No doubt. We simply aren't doing 
oversight, and I think it is largely because it is 
embarrassing, once we get into it, to actually confront the 
same Federal agencies that we have stipulated should spend 
money on 800 projects of questionable value and then to try to 
tell them that they are not spending money properly.
    And for those who say we are simply spending money that is 
authorized or appropriated anyway, and we are simply deciding 
where it is spent, we are earmarking accounts that we never 
dreamed of earmarking in years past. There are certain 
agencies--the FAA, for example, that has designated accounts 
for maintaining runways or towers. When we earmark accounts 
like that, then the next year, those agencies have to come back 
and maintain those runways, those facilities. Yet the accounts 
they have to do that are gone. And so, they will have to come 
back and ask us to backfill those accounts. And so, it simply 
leads to higher spending everywhere else.
    With regard to transportation, the transportation bill is 
an authorization bill, but it acts like an appropriation bill. 
And the trend has been to actually spend less money on highways 
and roads and methods that actually promote mobility or 
pollution abatement because typical Members of Congress will 
say I want a long list of earmarks that I can claim credit for. 
And so, they will have a transportation museum or a 
beautification of this street or a bike path here. So they can 
have a long list, and it typically drains money away from the 
infrastructure that the gas tax was intended to fund.
    Senator Coburn. In your oath of office, when you take an 
oath of office as a congressman for the United States of 
America, is there anything in there that says your obligation 
is to bring the most back for your State? Is there anything in 
that oath that would imply that?
    Mr. Flake. Nothing that I have discovered. And I can tell 
you a lot of my colleagues are tired of this process. They 
simply are tired of being an errand boy for the local mayor, 
tired of having so much staff time spent on securing these 
earmarks. And so, it is a problem.
    One reporter approached me the other day and mentioned that 
he had just read Mo Udall's old book, ``How To Be A 
Congressman.'' Mo Udall came here in a special election, famous 
Arizonan, and he didn't get any introduction or instruction on 
what to do. So he wrote a book on what a Member of Congress is 
supposed to do.
    That reporter pointed out that nowhere in the book were 
earmarks mentioned at all. This is a recent phenomena. You 
pointed that out. There have been earmarks in years past, but 
it is typically just in the Appropriations Committee, just an 
appropriator here or there, and they tended to be a little more 
judicious with it.
    In fact, in our discussion the other day, when we were 
discussing earmarks in the policy committee of the House, one 
member mentioned, ``Well, let us get a little institutional 
perspective. How did earmarks work in the 1980s?''
    And they asked one of the members that was there in the 
1980s. This member said, ``Well, I can't tell you. We didn't 
get any then. It was different. I only discovered a few years 
ago that I could do this, but it is wonderful.''
    And so, it is a recent phenomenon, and it has simply become 
out of control in the last couple of years.
    Senator Coburn. One last question for you, Congressman 
Flake. Can Arizona, as a State, be viable and healthy if the 
United States is on a financial tailspin?
    Mr. Flake. No. And the notion that you are a Member of 
Congress, it is your job to bring home the bacon because that 
is in the best interest of your district simply doesn't square 
with reality.
    If we continue with this process and continue out-of-
control spending that is really fostered with these earmarks, 
every district, every State is worse off. And that is why we 
have to change the process.
    Senator Coburn. Thank you. Senator McCain, welcome.

TESTIMONY OF HON. JOHN McCAIN,\1\ A U.S. SENATOR FROM THE STATE 
                           OF ARIZONA

    Senator McCain. Thank you very much, Mr. Chairman.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator McCain appears in the 
Appendix on page 41.
---------------------------------------------------------------------------
    And could I just add on to Congressman Flake's comment and 
his personal example?
    I believe that Congressman Flake has shown enormous 
courage, and a friend of his and mine decided to challenge him 
in a primary because he didn't bring home the bacon, because he 
didn't have enough ``earmarks.'' And I am happy to tell you 
that Congressman Flake won overwhelmingly, and that was 
probably the key issue associated with that primary, wouldn't 
you say?
    Mr. Flake. Let me just say I had a good example to follow 
here.
    Senator McCain. But Mr. Chairman, if there is such a thing 
as preaching to the choir, it is testifying before you today--
or maybe preaching to the preacher.
    I want to thank you for everything you have done. I think 
that every American home should see these two charts.\2\ And I 
know that we are doing our best to get them around.
---------------------------------------------------------------------------
    \2\ The charts referred to appear on pages 29 and 34 respectively 
in the Appendix.
---------------------------------------------------------------------------
    One of the issues that I did want to discuss is this 
placement in the conference report of earmarks. This is an 
insidious and ever-growing practice that is really 
unconscionable because, according to law, conference reports 
don't have the force of law. But as soon as the bill is passed, 
the various agencies get a phone call and say, hey, it is in 
the conference report, and you better treat it as law. In fact, 
I think a couple of times it has been written into the bill 
that the provisions of the conference report will have the 
force of law.
    Mr. Chairman, you and I don't have the ability to remove 
those from the conference report when we are in debate on the 
floor and when we discuss the provisions of a bill. We can go 
after the earmarks in the bill itself, but we can't the 
conference report. So we have to ban it. And I really believe 
that the time is right now for it.
    I was down in Memphis last weekend with a group of the 
party faithful from all over the country, but mainly from the 
South, and it was obvious to me from my remarks to them--but 
more importantly, from their remarks to me--that they know this 
has got to stop. That we are mortgaging our children's futures.
    And I think that we have our base energized. They support 
us. I think the majority of the American people support us, no 
matter what their party affiliation is. And this is a time to 
act, and we will be able to do it, I believe, when we take up 
the lobbying reform.
    And Mr. Chairman, I was thinking last night in anticipation 
of appearing before you today, if, for some reason, this reform 
bill does not proceed, then, Mr. Chairman, I think you and I 
and our other colleagues have just got to start slapping it on 
as amendments on bills.
    We can't let another appropriations cycle go by. The 
appropriators are already beginning to shape their bills. We 
cannot let another cycle go by with the kind of activity such 
as is described on that chart.
    So, Mr. Chairman, I would appreciate it if you would allow 
my complete statement to be made part of the record, and I know 
you have to proceed. But committee reports and manager 
statements do not have statutory force. They cannot. And 
departments and agencies are not legally bound by their 
declarations, as we stated in a letter to the President of the 
United States just last week.
    I thank you, Mr. Chairman, for all you do, and I appreciate 
you for the courage you continue to display and the leadership 
you continue to give those of us who are interested in fiscal 
responsibility.
    And I am very pleased and proud of my colleague from the 
State of Arizona. It is a little tougher environment over there 
in the House, as you know, and he shows a great deal of 
courage.
    Senator Coburn. Thank you, Senator McCain. Your entire 
statement will be made a part of the record.
    Senator McCain. Sometimes my entire record is made part of 
my statement. [Laughter.]
    Senator Coburn. Yes, well, it comes with you. That is for 
sure.
    I want to thank you for coming here and thank you for what 
you have done. There is no question you have been a leader on 
this issue in the Senate for years.
    I want to ask a couple of questions. When a House bill 
comes to the Senate floor today, an appropriation bill, and we 
are considering it, do we have any knowledge of the earmarks 
from the House?
    Senator McCain. I don't think so, unless we have had an 
opportunity to see the bill.
    Senator Coburn. But the record is not a part of what we are 
voting on. Is that correct?
    Senator McCain. That is correct, sir.
    Senator Coburn. So the senators in the Senate chamber are 
voting on, they can have access on a delayed basis and 
oftentimes untimely basis to the report language in the Senate. 
But that does not include the report language from the House, 
does it?
    Senator McCain. No, sir.
    Senator Coburn. So, in essence, the Senate, every time they 
vote on an appropriation bill, has no knowledge of the earmarks 
from the House on the bill that they are voting on. Is that 
correct?
    Senator McCain. Yes, sir.
    Senator Coburn. And so we don't know what we are voting on 
on appropriation bills, based on what the earmarks are that are 
coming from the House?
    Senator McCain. That is exactly correct. And even if we 
did, sometimes, as you know--not sometimes, but all too 
frequently--the bill is completed in the middle of the night 
the night before we are supposed to go into recess. By 
unanimous consent, it is brought. It appears on our desk, and 
then we vote.
    And everybody wants to leave to go into recess. So, 
therefore, any bad guys that want to examine the bill or make 
changes or amendments are under enormous pressure not to do so. 
And we have not only seen this with individual appropriations 
bills, but unfortunately, quite frequently, with omnibus 
bills--omnibus stacking them all together.
    And then we are shocked, shocked and surprised weeks and 
months later when we find out that provisions were put in which 
we find incredibly bad.
    Senator Coburn. What do you think----
    Senator McCain. Do you want to say something, Jeff? Go 
ahead.
    Mr. Flake. I just want to point out, the House--and I am 
not sure what the Senate rules are--but the House actually has 
some pretty good rules to prohibit this kind of airdropping of 
earmarks into a conference report, but we waive them routinely. 
We waive all points of order lying against a bill.
    Otherwise, anyone could stand up and say there is non-
germane--in this case meaning spending that wasn't authorized 
by either the Senate or the House--in the bill. But we waive 
those rules. And that is what this legislation is all about, an 
effort to say we simply will enforce our own rules that we 
have. And I don't think that is too much to ask.
    Senator Coburn. What is the likelihood of this legislation 
to pass in the House?
    Mr. Flake. Well, today, we will find out what is part of 
the earmark reform proposal that will be in the lobbying 
reform. And the last check, as of last night and this morning, 
is that we aren't dealing sufficiently with the conference 
report angle.
    There is some movement on if not putting all language, 
earmark language in the bills during the committee process or 
the appropriation process, at least allowing members access 
through limitation amendments to the committee reports.
    But the problem with that is as along as there is an out 
with the conference report, that is where the earmarks will go. 
If members fear that their earmarks may be seen or singled out 
in that process, they will simply airdrop them into the 
conference report at the end of the process, and we aren't 
moving yet to close that down.
    Senator Coburn. Senator McCain, do you have any experience 
or knowledge with the fact of what would happen if an agency 
didn't follow conference report language in terms of the 
expenditure of money?
    Senator McCain. Then there are implicit threats of cuts in 
travel, administrative costs, etc., and other threats to cut 
programs that are of high priority to the people in those 
bureaucracies. I know it happens. It is not done in writing.
    Senator Coburn. So, basically, you have----
    Senator McCain. You have the powerful committee chair 
people, members of the committee that are responsible for the 
funding of an agency saying treat these provisions as law. And 
if you don't, then there will be repercussions.
    And I know that happens, and I doubt if we could find a 
single member of those agencies who would come over and testify 
before you that it is true. But they certainly have told me 
that many times.
    Senator Coburn. So, basically, you pass a report language 
that does not have the force of the law, that most of the time 
is not available to the members of either body when they have 
to vote on it, and then you have leverage applied, coercion 
applied. Is the answer does the President have to spend this 
money?
    Senator McCain. No, sir. Jeff, did you want to answer?
    Mr. Flake. Just on the agencies, it is even more pernicious 
than that. I have actually been contacted by somebody from a 
Federal agency who said that they will sometimes get calls from 
the Appropriations Committee, from staff after a bill has 
passed and saying, ``We forgot to include this earmark. Can you 
fund it as if it were included?''
    And I joked at the time that this is what our oversight has 
come to. ``We made an oversight. We forgot to put this in. Can 
you fund it anyway?''
    But as Senator McCain said, they simply can't afford not to 
fund those requests, or they are punished in the next year.
    Senator Coburn. Yes. And a great example of that is we had 
a USAID program that went to California, which cost a whole lot 
more money had it been done somewhere else. And the head of 
USAID was actually threatened with his job because of his 
complaint about that earmark. So there is not only behind-the-
scenes coercion, there is also threats that are made in public.
    Senator McCain. And I would like to bring up another 
unpleasant episode, Mr. Chairman. Somehow one Member of 
Congress, an appropriator, with a crooked lobbyist, all by 
themselves, were able to channel hundreds of millions of 
dollars to one ``defense contractor'' for the most nebulous and 
wasteful and criminal projects. And obviously, I am referring 
to former Congressman Cunningham.
    Is the system so broken, is there so little oversight, Mr. 
Chairman, that one member and one lobbyist can divert hundreds 
of millions of dollars of taxpayers' dollars that are supposed 
to be for the men and women in the military to a corrupt 
enterprise?
    I think everybody was so alarmed at what Congressman 
Cunningham did. I think we should be alarmed that he was able 
to.
    Senator Coburn. Yes. So we discussed before you arrived the 
lack of oversight and the oversight responsibility of Congress 
and that part and parcel of the earmark process is lack of that 
oversight.
    Well, I want to thank both of you. We appreciate you 
coming. And Senator McCain and Congressman Flake, thank you so 
much for your service to the country.
    Senator McCain. Thank you, Mr. Chairman.
    Senator Coburn. Our next panel has Steve Ellis, vice 
president for programs for Taxpayers for Common Sense; Tom 
Schatz, president of the Council for Citizens Against 
Government Waste; and Scott Lilly, senior fellow at the Center 
for American Progress and somebody who has extensive experience 
inside the appropriation process.
    I want to welcome each of you. Your entire testimony will 
be made a part of the record, and you are each recognized for 5 
minutes.
    Mr. Schatz.

 TESTIMONY OF THOMAS A. SCHATZ,\1\ PRESIDENT, CITIZENS AGAINST 
                        GOVERNMENT WASTE

    Mr. Schatz. Thank you very much, Mr. Chairman.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Schatz appears in the Appendix on 
page 43.
---------------------------------------------------------------------------
    And as I mentioned to you very briefly earlier, we have 
been waiting 16 years for someone to come up with a proposal 
and a serious one to reform the earmark process.
    Senator Coburn. Let me interrupt you for a minute.
    Mr. Schatz. Yes.
    Senator Coburn. You can see how important this hearing is 
to the rest of the Members of the Senate.
    Mr. Schatz. I was going to mention that.
    Senator Coburn. There is no one else here. There is no one 
else in attendance because this is not deemed to be a problem.
    Mr. Schatz. I think they are also probably off trying to 
figure out what earmarks they want to add into these bills, 
given certainly what Congressman Flake mentioned, that this is 
a deadline in the House, and the appropriations process is 
moving forward in the Senate.
    And that is one of the points that we have made in our 
testimony, that this is not a large amount of dollars, although 
$64 billion is. And our definition of pork barrel spending, 
which we have been using since 1991, which was developed in 
conjunction with the Congressional Porkbusters Coalition, is a 
little bit more narrow than the overall earmark number. But 
whatever you want to call it, it is a problem. There is no 
question about it.
    And the witnesses prior to this have described it well, as 
have you. And being aware of that, I think the question is what 
do we do about it?
    I think there will be some very public repercussions if 
nothing is done because this process has been and is really 
symbolic of the larger problems here in the U.S. Congress. 
These are low-priority projects that take up a lot of time, 
leaving little time and effort and oversight to see what we 
have done with our money and also to look at these larger 
problems, like Social Security and Medicare.
    So the very least that we should be doing is what is 
contained in S. 1495, the Obligation of Funds Transparency Act, 
which tells the agencies you can spend money only if it is the 
committee report.
    And to address one of your questions, when did this start? 
In 1988, the Office of Management and Budget issued a report 
identifying unauthorized projects in the appropriations bills. 
That was the first and last time they ever did that because the 
following year, the Appropriations Committee started talking 
about, as the Senator and the Congressman mentioned, cutting 
off certain funds to OMB.
    We, in turn, took that idea and turned it into the first 
Congressional Pig Book in 1991, and we have been issuing them 
ever since. And we have identified more than 66,000 projects, 
costing $212 billion over that period of time.
    And as the government has grown, so has the number of 
earmarks and the pork and the waste, which points to, 
obviously, the need to reduce the size and scope of government, 
and it would certainly help to start with these low-priority 
projects.
    Taxpayers have probably heard about the $50 million indoor 
rainforest. They may not have heard about $3 million provided 
to the First Tee Program in Florida or $273,000 to combat Goth 
culture in Blue Springs, Missouri, which turned out to be such 
a ridiculous project that they returned $132,000, saying maybe 
this isn't such a big deal.
    But originally, they claimed that these kids were running 
around town, and they were going to blow up the school like 
they had done at Columbine, and we needed to do something about 
it. And Congressman Graves apparently believed this and added 
this money in. And then it was given back.
    But since the vast majority of projects are added in 
committee reports and in conference reports, that is really 
where the focus of any legislation should be. We have seen some 
proposals to allow points of order to be presented against 
items added in conference reports. That is certainly helpful.
    But I think there needs to be a very comprehensive look 
because, as both of your first witnesses said--Congressman 
Flake and Senator McCain--this is our chance. These scandals 
have brought forth the interest, at least with the public, if 
not your colleagues here today, on this issue to an extent that 
it has never been done before.
    We have been issuing the Congressional Pig Book--and 
Senator McCain and Congressman Flake have come along, and we 
hope you will join us as well this year--and we get a few days 
of publicity and some conversation and some possible reforms. 
But the result of what has happened, where the digitization of 
DOD manuals can turn into a bribe has really indicated things 
have gone too far.
    So we have been talking about this for a long time, and 
people say, well, is it really that big a deal? It is because 
of what it symbolizes and what it has become over the period of 
time and also, of course, the explosion in this type of 
spending.
    In fact, we really refer to the whole process as a form of 
legalized bribery, where we have taken this money from the 
taxpayers, kind of washes through the Appropriations Committee. 
As Congressman Flake pointed out, when you have the lobbyists 
filling out these forms and handing them back to the members 
just as if it is going to happen, nobody is thinking about the 
fact that this is the taxpayers' money.
    I don't think anyone who was asked to individually 
contribute their share for that $50 million indoor rainforest 
in Iowa would be very happy about it. But when they hear 
members go back home and talk about these projects, it sounds 
like it is the most wonderful thing in the world.
    And in terms of the priorities of the agencies, the 
National Park Service has a $9 billion maintenance backlog. And 
one of the things we will put into our Congressional Pig Book 
this year is the information that the National Park Service has 
a program called ``Save America's Treasures.'' They asked for 
$15 million, a competitive program. They got the $15 million.
    The appropriators added $16.2 million above that and 
earmarked every single dollar. So they thought the program was 
important enough to more than double the amount of money, but 
they started making those decisions.
    So that is just one small example of what is wrong with 
what has been going on. And we really appreciate your 
leadership on this issue, and we will be ready to help you get 
this legislation moving forward.
    Senator Coburn. Mr. Ellis.

   TESTIMONY OF STEVE ELLIS,\1\ VICE PRESIDENT OF PROGRAMS, 
               TAXPAYERS FOR COMMON SENSE ACTION

    Mr. Ellis. Thank you very much, Mr. Chairman.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Ellis appears in the Appendix on 
page 51.
---------------------------------------------------------------------------
    Good morning, and I am Steve Ellis, Vice President of 
Programs at Taxpayers for Common Sense Action, a national 
nonpartisan budget watchdog.
    And you know, I noticed when you mentioned that the Senate 
hasn't recognized they have a problem. As anybody who has done 
any 12-step program recognizes, that is the first step towards 
curing your addiction to spending is to recognize that you have 
a problem.
    I think some of the efforts that we have seen today or at 
least some of the comments from leadership has been that there 
is a political problem rather than actually a substantive 
problem. Taxpayers for Common Sense Action definitely believes 
there is a problem and strongly believes in making earmarks and 
the legislative process, particularly the appropriations 
process, fully transparent and more accountable.
    By denying funding for pork provisions that are not in the 
actual law, S. 1495, the Obligations of Funds Transparency Act, 
helps force the earmarks out of the shadows and into the light 
of public debate.
    As everyone on this panel is painfully aware, and you, Mr. 
Chairman, and the previous panel, earmarking has exploded in 
recent years. But as noted, at least a bit by Mr. Schatz, is 
that earmarks, to me anyway, I guess, are a little like 
pornography.
    Maybe in more ways than one, but more going off of the late 
Supreme Court jurist's Potter Stewart's observation that he 
couldn't define pornography, but that he knew it when he saw 
it. Well, earmarks are hard to define, but we all know it when 
we see it.
    As your chart showed, in constant 2005 dollars, the CRS 
found 4,126 earmarks in fiscal year 1994 worth $29.6 billion. 
That increased by fiscal year 2005 to 15,877 earmarks worth 
$47.4 billion. That represents a 285 percent increase in the 
number of earmarks since fiscal year 1994 and a 60 percent 
increase in the cost of those earmarks.
    TCS's own analysis of the earmarks in fiscal year 2005 
found 15,584 earmarks worth $32.7 billion. In the fiscal year 
2006 defense appropriations bill, TCS found 2,837 earmarks 
worth $11.2 billion. That is up from 62 earmarks worth $8.9 
billion in 1980 and a dozen earmarks worth $5.6 billion in the 
1970 defense appropriations bill.
    The average 1970 earmark was worth $466 million compared to 
the average 2006 earmark at $3.9 million. You could argue that 
those dozen half billion dollar 1970 earmarks may have 
represented the legitimate policy differences between the 
Legislative and Executive Branches. But it is clear that at 
$3.9 million, the 2006 earmarks were an effort to steer defense 
dollars back home for pork barrel spending and political 
favors.
    Last year's highway bill had a record $24 billion in 
earmarks, including the infamous ``bridges to nowhere,'' which 
were part of a billion dollars obtained for Alaska by 
Transportation Infrastructure Committee Chairman Don Young.
    When Congress finally passed the Foreign Sales Corporation/
Extraterritorial Income (FSC/ETI) bill, what was supposed to be 
a fix for a $5 billion trade distorting subsidy became a $140 
billion Frankenstein's monster larded up with tax provisions to 
benefit bow and arrow manufacturers, professional sports teams 
owners, fish and tackle box manufacturers, and shopping mall 
developers.
    The U.S. Army Corps of Engineers, their budget is built 
project by project. So it is virtually all earmarks. The 
President zeroed out 532 of the fiscal year 2006 earmarked 
projects in his latest budget. The Army inspector general 
remarked that for the Corps, ``The budget process was deemed a 
first half irrelevancy. The measure of effectiveness was the 
amount of funds actually appropriated by Congress.''
    The American Association for the Advancement of Science had 
noted recently that, ``Although earmarked funding has been 
increased steadily over the past several decades, by all 
accounts, the dramatic explosions in R&D earmarks in 2005 and 
2006 coincide with the flattening and even declining R&D 
budgets,'' meaning that earmarks cut into competitive programs 
instead of adding to them. In fiscal year 2005, there were $1.5 
billion in R&D earmarks. By fiscal year 2006, $2.4 billion.
    Simply limiting the number of earmarks is not going to 
work. The first step is to make the budgeting process 
transparent. Every earmark request should be made public in 
real time. Additionally, each successful earmark should be 
accompanied by amplifying information and the name of the 
requesting Members of Congress.
    Next, earmarks can be defined as legislative provisions 
that specify certain discrete projects or entities to receive 
Federal funding. These provisions could appear in 
appropriations, authorizations, and revenue bills. 
Additionally--and this differs from S. 1495--all entities 
should be included--private, non-Federal, and Federal. To leave 
out Federal entities entirely would leave many earmarks, such 
as those for defense or for the Corps of Engineers, untouched.
    Finally, there has to be some teeth. S. 1495 has teeth. If 
it is not in the bill, it doesn't get funded. But just because 
an earmark is in the law, it isn't necessarily worthwhile, 
which is some of what Representative Flake was mentioning.
    We also need to have effective tools to highlight and 
remove egregious earmarks. The consequences of earmarking are 
clear. Duke Cunningham's schemes to profit off the backs of 
taxpayers counted on earmarks. Jack Abramoff called 
appropriations bills ``favor factories,'' as you mentioned.
    Earmarks are the direct result of a corrupt process that 
encourages lawmakers to scrutinize and fight over the minutiae, 
to spend their time not legislating and conducting oversight, 
but pulling money into million dollar chunks back to their home 
districts.
    Taxpayers for Common Sense Action stands ready to work with 
you and others to enact real reform. S. 1495 could be a hammer 
in our toolbox working to build a responsible Federal budget.
    Thank you very much for inviting me to testify today.
    Senator Coburn. Thank you, Mr. Ellis.
    Mr. Lilly, I want to thank you especially for being here. 
Your knowledge, institutional knowledge and background is very 
important to this debate.
    Thank you.

TESTIMONY OF SCOTT LILLY,\1\ SENIOR FELLOW, CENTER FOR AMERICAN 
                            PROGRESS

    Mr. Lilly. Thank you. The idea that a legislature should 
control purse strings really goes back to 1215, when the 
British nobility told King John that if he was going to spend 
money, they were going to be in on the decisionmaking.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Lilly appears in the Appendix on 
page 57.
---------------------------------------------------------------------------
    When the Founding Fathers met in Philadelphia to put the 
Constitution together, they spent months over the structure of 
the government. But one provision, probably the most profound 
provision in the document with respect to the model of 
government we had, was adopted without any debate at all.
    That is Article 1, Section 9, Clause 7, which 
Representative Flake mentioned earlier. ``No money shall be 
drawn from the Treasury, but in consequence of appropriation 
made by law.''
    There was virtually universal support among the Founding 
Fathers for a Congress that had really dominant power over 
spending. But what this hearing is about, and I think this a 
very important hearing, is what do we do when Congress uses 
that power foolishly?
    Earmarking is essentially the practice of taking discretion 
that is normally exercised by program administrators and 
directing it through the legislative process. That is done in 
many instances for good and sufficient policy reasons, and that 
is what makes this argument so difficult.
    But in more recent years, the amount of earmarking, as 
these charts show, has virtually exploded, and the motivation 
behind the earmarks, the nature of the earmarks has become more 
parochial and more political, rather than based on legitimate 
policy differences between the two branches of government.
    I think that the perception that this practice has a major 
impact on public expenditures or the debt is probably wrong. I 
think there is some impact, but I don't think that is why we 
should be opposed to it.
    I think the idea that most earmarks--and I think you 
mentioned this in your opening statement--are ridiculous and 
wasteful is also wrong. Most members work very hard, most 
Senators work very hard at picking the things that they think 
will benefit their communities the most.
    But I do think the practice is out of control, and I think 
it is diminishing the integrity and the effectiveness of the 
Congress and the entire Federal Government.
    Earmarks are distributed in a highly unfair manner, and I 
mentioned in my written testimony that Bakersfield, California, 
got over $700 million in transportation earmarks, far more than 
nearby Los Angeles, which clearly has far greater 
transportation difficulties.
    While most earmarks are reasonably good, in my opinion, the 
ones that are bad are really bad, and some of my favorite 
candidates for the ``earmark hall of shame'' have been 
mentioned by the other witnesses this morning.
    More troubling to me is something else that has been 
mentioned, and that is that earmarks are corrupting the 
legislative process. People are being divided from their 
constituents by offers or threats regarding earmarks and often 
on unrelated policy questions. Not just more or less spending--
and I would say there are also instances where earmarks are 
used to persuade members to vote for less spending than they 
would otherwise--but also on tax policy and trade policy, on a 
wide range of other things.
    And I think while conservatives and liberals may disagree 
on what the policy ought to be, there is room for both sides to 
agree that they ought to be made based on the conscience of the 
member and his relationship with his constituents, not on what 
the leadership offers in terms of earmarks.
    But the worst thing about earmarks, in my opinion, is that 
they have eaten the legislative process. People are so consumed 
by the practice, and the more earmarks you have, the more 
communities, the more foundations you have coming to Washington 
asking for earmarks. And the more time that staff and senators 
and Members of Congress have to spend talking to people about 
these, the more time they spend with the committee staff, and 
the more time the staff that should be doing oversight is 
wrapped up and dealing with this burden of earmarks.
    As I mentioned in my written testimony, one subcommittee 
got nearly 15,000 requests for earmarks, which would, if you 
put each request on a single page, be a 10-foot high stack of 
paper. So just the work that it takes to handle that is 
enormous.
    I think that we have an opportunity to do something now 
that we haven't had in a long time, and I think this hearing is 
a step in the right direction. I would say I am much less 
sanguine about the legislation that is being promoted. I know 
it is well intended. One provision in the legislation, which 
requires separate votes on conference reports on ungermane 
amendments, I think is good, but it doesn't get at the problem 
of earmarks.
    I would ask why, when one of the major issues that we are 
raising here about earmarks, we don't do anything about the 
earmark in the highway bill, which this legislation does not 
do. It does not do anything about the earmarks that are showing 
up in mandatory spending bills or in tax bills, all of which 
should be included in any sensible approach to this.
    Furthermore, I think the Appropriations Committee can walk 
right away from this language because it is not difficult to 
put these things in bill language. It is not difficult to put 
them in bill language in a conference report. So they can be 
put into the bill, brought back to the floor, and you have no 
more choice than you do now.
    I would also point out that any appropriation bill that is 
reported out, which has earmarks in the report, that report is 
available to members on both sides of the Capitol at the time 
that the bill is reported. The earmarks that are in there are 
there, and any member can reduce the account which is earmarked 
by the amount that he wishes based on the quality of the 
earmarks that are in there.
    If he finds five offending earmarks, he can offer an 
amendment to strike the amount that those earmarks would take 
out of that account on the floor, and it would be, I think----
    Senator Coburn. But not on a conference report?
    Mr. Lilly. On a conference report, you have got a big 
problem. I don't know how you get around that problem, but you 
don't solve it with this bill because you can put the bill 
earmarks into the bill language of the conference report.
    Senator Coburn. Well, let me stop you there for a minute 
and ask some questions. First of all, here is the theoretical 
problem, which becomes a very practical problem, when they come 
out of conference. The report language is printed. At the same 
time the bill is put on the floor, it goes online, but the 
report language is 280 pages long, and you are going to move 
the bill today.
    So no staff, outside of appropriations staff, ever gets a 
chance to judiciously study what is in the report language. And 
as you said, they are very crafty writers. We had report 
language this last year in the defense appropriation bill on 
FMAP for Alaska that never mentioned Alaska once.
    But to the benefit of Alaska, but to the detriment of 13 
other States, Alaska got $120 million more for their FMAP 
program, when other States were suffering just as well. And 
Alaska was never mentioned. It wasn't even discovered in terms 
of the crafty writing. So the point is, time is of the essence 
on report language.
    I want to ask you a couple of other things.
    Mr. Lilly. Could I respond to that?
    Senator Coburn. Yes, sir.
    Mr. Lilly. I worked with several members on the House side 
who have introduced legislation that has over, I think, 120 co-
sponsors now. And one of the provisions in that legislation is 
that conference reports, as well as bills, have to lay over, 
and printed copies have to be available for 2 days before a 
vote can be taken on it, and that can be waived only by 
unanimous consent, every single member. Even a two-thirds vote 
would not accelerate that.
    Senator Coburn. That is in some of the legislation that is 
coming through the Senate as well.
    Mr. Lilly. And I think that is the only protection that you 
have.
    Now the provision that is in this bill which blocks non-
germane legislation from going in, and I think it would do a 
great deal of good, for instance, with the drug liability 
language that was airdropped into the defense appropriation 
bill. What that would do would be to go back to what we did for 
over 100 years in the House and Senate, and that is there is a 
prohibition against House conferees adopting legislative 
language in a conference report.
    And so, the way they get the conference back is to bring it 
back in technical disagreement, and then the rules require a 
separate vote on each such provision. And we used to do that 
all the time. That basically stopped in 1998, and I think that 
is a terrible blow to the process, and not good for the 
Appropriations Committee or the authorizing committees to let 
that happen. And the Flake bill would correct that.
    Whether there is some mechanism by which you could have 
separate votes on earmarks that show up in a conference, I am 
not sure. That is uncharted territory. But the best thing would 
be to reduce the number and volume of them.
    Senator Coburn. Right. One other question. I took you 
right, but my staff didn't take you right. I recognize that 
most earmarks have value, but they are just not in the priority 
for what our Nation is when we are spending $630 billion more 
than we take in every year.
    Mr. Lilly. Well, I think we earmark--I don't agree with the 
CRS numbers or some of the others. But I would say truly 
district-oriented earmarking is probably 2 percent of 
discretionary spending. The problem is that we are so focused 
on that 2 percent that we almost have a deal with the White 
House that they control the other 98 percent. That is what the 
real problem with this is, and----
    Senator Coburn. Well, the other problem is, is if you ask 
for an earmark, and then the bill comes out that is horrendous 
in terms of its spending and you don't vote for it, not only 
does that earmark come out, you don't get one the next cycle.
    So, in fact, it is a corrupt process, whereby members are 
forced to vote for things they would never vote for because of 
one small parochial interest that is in the political best 
interest in the short term of that Member of Congress, but is 
in the politically disinterest of this country and its future.
    And that is what is so undeniably wrong with this process 
is the process is used to grow the government in a way that is 
not in the best interest of the country over the long term. 
That is the problem with it.
    Mr. Lilly. I agree.
    Senator Coburn. If we were in surplus, I wouldn't have any 
problem with that. I would love to compete with a lot of the 
bureaucrats rather than have oversight. But we are not in 
surplus. What we are is stealing every day the future from our 
kids.
    One other statement you made, and then I will let our other 
panel members comment. You said there were earmarks that 
sometimes are used for less spending. Could you give me an 
example of an earmark that is placed in a bill that would 
incentivize less spending?
    I have never seen one. I served in the House for 6 years, 
and I have been here a year and a half, and I have never seen 
one.
    Mr. Lilly. We had a funny situation on the Labor HS bill in 
the House last November. That bill came back. Senator Specter 
said that there is so little in for top priority programs we 
can't afford to do earmarks.
    Came back to the House a bill that was probably a good deal 
better than the one that left the House comfortably. Came back 
and was defeated on the House floor. And I think there was 
widespread speculation that people would not have voted for it 
without earmarks, but they would if they had earmarks.
    And the intention this year is to put earmarks in it 
because they know it is going to be a really bad bill and the 
only way they can get the votes to cut Head Start, to cut a lot 
of these programs is to give members something on the side.
    Senator Coburn. The 302(b) numbers on Labor/HHS has 
declined in the House this year?
    Mr. Lilly. Yes. It will be lower.
    Senator Coburn. They have a lower number than last year 
after the 1.5 percent?
    Mr. Lilly. Well, the budget resolution hasn't been passed, 
but----
    Senator Coburn. Well, it doesn't matter what that is 
because the appropriators determine the separate 302(b) numbers 
anyhow.
    Mr. Lilly. Well, they can't do the 302 until they get the 
budget number, but I think the expectation is that there are 
going to be cuts across the board. If they stay within the 
President's budget, which I think they will, then----
    Senator Coburn. I think it is interesting for the public, 
the public doesn't realize that when a budget is passed and you 
have a total discretionary spending number, that the process 
under which that goes is really a rather fluid process, is it 
not, in terms of appropriations?
    In other words, you can kind of play the game with the 
numbers to move, depending on which bill you move first and 
which one you want to get out there and how you leverage that 
in terms of getting the votes to pass bills?
    Mr. Lilly. Well, the big game that was played last year was 
in the defense side, and this two-step process we have now 
where we fund the government in one set of bills and then the 
Iraq war in another creates a lot of opportunity for mischief. 
And both sides took money out of defense, knowing that they 
would replace that money in the supplemental.
    One reason we have a $92 billion supplemental was that 
money was taken out of defense in the 2006 bills. So, yes, 
there is a lot of movement that goes on.
    Senator Coburn. Mr. Schatz, Mr. Ellis, any comments?
    Mr. Schatz. Well, I think Mr. Lilly has made some very good 
points about how it all works, and I think it is instructive 
for people to understand that there are a lot of games played 
here that would get people in trouble.
    The Enron trial is going on right now, and I wonder how 
many Members of Congress would be in that same type of 
situation for the kinds of accounting gimmicks that we use here 
in Washington. We seem to add days to fiscal years to move 
money from one place to another. I recall one of your 
colleagues once tried to make Lake Champlain the sixth Great 
Lake in order to get certain funds.
    So it takes a lot of work to watch how these funds are 
being spent. The more exposure, the more opportunity to 
eliminate these projects, the better off we are. And certainly, 
the member-directed local projects are the ones that really 
have the least merit or have less merit than others.
    Some members talk about wanting to have this discretion. 
They would like to be able to direct funds back home. Why have 
grant programs? If you don't like the way money is being 
distributed, change the formula. Don't go around and say, well, 
we would like to add $16 million to the Save America's 
Treasures Program at the National Park Service, go to your 
local theater or museum or whatever it might be and ask them to 
apply and compete with the rest of the world.
    Senator Coburn. You raise a great point. The other problem 
with earmarks, which nobody ever talks about, is when something 
is earmarked, the normal process of oversight and evaluation of 
that money doesn't take place, most generally.
    So if money goes through a grant process, there is an IG 
that looks at it. There is an evaluation of the grant process, 
in other words, internally. When it is earmarked, there is no 
oversight.
    And I will give you a great example. A million dollars, or 
$500,000 went to a small school system in Oklahoma for 
computers. They ended up paying $1,000 a month for this small 
school system just for maintenance on the computers. They have 
nothing, essentially nothing left in terms of computers or 
maintenance, and the money is gone. And there is no 
accountability except through the grant process.
    Now the grant process is going to come back and look at how 
that money was spent. And of course, the appropriate things 
were done. Had I earmarked that money and the same thing 
happened, there would have been no oversight on it. So that is 
the other thing that the American public doesn't understand is 
that when something is earmarked, very rarely does it ever get 
looked at again in terms of how the money is spent.
    Mr. Schatz. If I could add one example, and it is in my 
statement, and I will try to summarize. The First Tee Program, 
St. Augustine, Florida, which is a nonprofit organization 
created to teach young people how to play golf, a few years ago 
got $1 million for a character education program. And certainly 
any sport can teach you character if it is done the right way.
    And there is, in fact, a character education program at the 
Department of Education, and you and I might agree it is 
probably not something we should do anyway, but it is there. 
All the money goes to State and local education agencies. The 
largest amount is about $500,000. They apply. They are 
evaluated. They may or may not get the money the following 
year, but there is a group of people that are watching how the 
money is being spent.
    Since the First Tee Program would never qualify--and by the 
way, this is an organization that is supported by the PGA, the 
LPGA, major manufacturers of golf equipment--they even run ads 
on the major golf tournaments. So they have got plenty of money 
if they wanted to save a million dollars for character 
education, they could get it somewhere else.
    There is no way to evaluate how that program is working at 
that entity because it doesn't qualify. So that is just one 
example of, I am sure, many that we have identified over our 
66,000 projects since 1991 that simply subvert the whole 
process of spending money.
    Senator Coburn. Thank you. Mr. Ellis.
    Mr. Ellis. Yes, sir. I think that one of the things that 
you have hit on and I think is incredibly important that is 
going on here is that how much time actually that the 
earmarking process absorbs. I mean, it takes away from the 
oversight function, but it also just absorbs a tremendous 
amount of staff time and members' time.
    And I have here this is just one member's earmark requests 
from last fiscal year that they had submitted to the House. And 
you figure this times--this is only a sophomore member. So I 
imagine as you get a little more senior you would have even 
more. But this times 535 requests, you have a huge stack of 
earmark requests that end up going to the Appropriations 
Committee. The Appropriations Committee goes through all of 
that. Not every single one gets funded. They make decisions on 
that. There are replies back. The staff obviously had to 
develop all of this.
    I mean, there is a huge amount of energy that is directed 
toward what is admittedly a small part of the Federal budget, 
but it means that we are not spending nearly as much energy on 
the rest of the Federal budget and dealing with all of those 
other issues. And to some extent, I firmly believe that the 
growth in earmarks is almost because it is a ``keep up with the 
Joneses'' type of thing. It is that they do it because they 
can.
    A couple of years ago when we had an omnibus, we did a 
listing of a wide variety of earmarks across the country. One 
of the earmarks that we listed was A-Plus for Abstinence, a 
group in Pennsylvania--laudable group, you know? And we just 
put together the whole listing. As you said, some of these 
earmarks are for otherwise laudable programs.
    And the executive director called me to complain that they 
were on this list. But her complaint was not so much that we 
had listed them, but she had never even asked for an earmark. 
She had never even asked for this money. A Member of Congress 
had visited her program and had thought that this was a good 
program and just added it there.
    She wasn't sure if she wanted to take the money because she 
didn't know if she wanted the Federal Government involved in 
her program. And so, it is just a case of where the member is 
just trying to shovel the cash out because they can.
    Senator Coburn. Well, we have a vote on, and I have got 
about 8 minutes left on it.
    I want to say, first, thank you for coming. Thank you for 
the work. Mr. Lilly, I am tremendously appreciative of you 
participating in this panel.
    I have asked my staff to try to make an appointment with 
you, Mr. Lilly. I have met with these guys before, but I have 
never sat down--and your experience is something that I would 
like to just kind of spend some more time asking you questions 
and learning some of what you know to try to address this 
issue.
    Mr. Lilly. I would be glad to.
    Senator Coburn. I thank each of you for attending.
    The hearing is adjourned.
    [Whereupon, at 10:47 a.m., the Subcommittee was adjourned.]
                            A P P E N D I X

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