[Senate Hearing 109-657]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-657
 
                  NOMINATION OF HON. ROBERT J. PORTMAN

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                 ON THE

  NOMINATION OF THE HON. ROBERT J. PORTMAN TO BE DIRECTOR, OFFICE OF 
                         MANAGEMENT AND BUDGET


                               __________

                              MAY 17, 2006

                               __________

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        Committee on Homeland Security 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
            Jennifer A. Hemingway, Professional Staff Member
             Michael L. Alexander, Minority Staff Director
         Adam R. Sedgewick, Minority Professional Staff Member
                  Trina Driessnack Tyrer, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Collins..............................................     1
    Senator Lieberman............................................     2
    Senator Voinovich............................................     5
    Senator Akaka................................................     6
    Senator Coleman..............................................     8
    Senator Dayton...............................................     8
    Senator Coburn...............................................     9
    Senator Lautenberg...........................................    10
    Senator Warner...............................................    11
    Senator Bennett..............................................    12
    Senator Levin................................................    22
    Senator Carper...............................................    29

                                WITNESS
                        Wednesday, May 17, 2006

Hon. Robert J. Portman, to be Director, Office of Management and 
  Budget:
    Testimony....................................................    13
    Prepared statement...........................................    45
    Biographical and professional information....................    47
    Letter from U.S. Office of Government Ethics.................    53
    Responses to pre-hearing questions...........................    54
    Responses to post-hearing questions..........................    99

                                APPENDIX

Article titled ``The Return of Voodoo Economics,'' submitted by 
  Senator Voinovich..............................................    43


                NOMINATION OF THE HON. ROBERT J. PORTMAN

                              ----------                              


                        WEDNESDAY, MAY 17, 2006

                                       U.S. Senate,
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:18 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Susan M. 
Collins, Chairman of the Committee, presiding.
    Present: Senators Collins, Voinovich, Coleman, Coburn, 
Bennett, Warner, Lieberman, Levin, Akaka, Carper, Dayton, 
Lautenberg, and Pryor.

             OPENING STATEMENT OF CHAIRMAN COLLINS

    Chairman Collins. The Committee will come to order.
    First let me explain the delay in starting the Committee's 
nomination hearing today. We just had a roll call vote. I know 
that our nominee is very familiar with roll call votes and the 
fact that chairmen cannot control what happens on the floor. So 
I appreciate everyone's indulgence in the delay in beginning 
this important hearing.
    Today the Committee will consider the nomination of former 
Congressman and Ambassador Robert Portman to be the Director of 
the Office of Management and Budget.
    The mission of OMB is to assist the President in preparing 
the Federal budget and to oversee its execution by Executive 
Branch agencies. In carrying out this mission, the OMB 
evaluates the effectiveness of agency programs, assesses 
competing funding demands, and sets priorities. The Agency is 
also on the front lines of the Federal Government's efforts 
against waste, fraud, and abuse as it evaluates the 
effectiveness of Federal programs and pursues management 
reforms.
    Another responsibility of the OMB is to ensure that Agency 
rules, testimony, and proposed legislation are consistent with 
the President's budget and with the Administration's 
priorities.
    These responsibilities place the OMB at a critical juncture 
within the Federal Government as the link between the Executive 
Branch and Congress. The OMB can exert a powerful influence on 
public policy through its budgetary, legislative, managerial, 
and regulatory mandates.
    The current pressures on the Federal budget are 
extraordinary. The American people are very concerned about the 
size of the Federal deficit and the spiraling increases in the 
Federal debt. Some of this increase is attributable to the war 
on terrorism and to unprecedented natural disasters like 
Hurricane Katrina. But even without these factors, our Nation 
faces an ongoing structural deficit that will become an 
increasing challenge in coming years.
    While the President's budget estimates that the Federal 
deficit will decline to $205 billion by 2011, total debt is 
expected to increase to more than $11 trillion that same year.
    As alarming as these figures are, this level of debt will 
be reached even before the retirement of the baby boomers' 
generation, which will present our Nation with its most serious 
challenge yet with respect to funding Social Security, 
Medicare, and other entitlement programs.
    Our economy, fortunately, is strong. And as the new Federal 
Reserve Chairman has put it, it has always shown a remarkable 
ability to ``absorb shocks of all kinds, to recover, and to 
continue to grow.'' The economic growth since the terrorist 
attacks of September 11 is a striking demonstration of this 
resiliency.
    And yet even a small change in our economy's growth rate 
can dramatically affect the deficit and the revenues we need to 
support critical social programs. According to the 
Congressional Budget Office, a change of just 0.1 percent in 
the growth rate over a 10-year period would change Federal 
revenues by $224 billion and spending by $48 billion for a 
total net impact of $272 billion on the deficit.
    While growth above projections would be very welcome news, 
we must be prepared for the possibility that the slightest 
slowdown in our economic growth rate can present us with even 
greater budgetary challenges than we predict today. Clearly the 
decisions that we make now about tax relief and spending 
increases will have profound repercussions far into the future.
    To impose fiscal discipline, I believe that Congress should 
once again adopt the PAYGO rules. By requiring offsets for 
entitlement spending increases and for tax cuts, a requirement 
that cannot be waived without a super majority of 60 senators, 
PAYGO would provide a powerful tool for budget restraint. I 
believe it is critical to apply the principles of PAYGO to the 
tough choices Congress must make this year and in the years to 
come.
    Given all of these extraordinary challenges, never before 
has it been more important to have an individual as experienced 
and as qualified and capable as Ambassador Portman at the helm 
of OMB. We are very fortunate to have such an extraordinary 
nominee for this critical position.
    Prior to his confirmation last year as the U.S. Trade 
Representative, Ambassador Portman served six terms in the 
House of Representatives, including service on the Ways and 
Means Committee and as Vice Chairman of the House Budget 
Committee. He understands the budget, and he understands 
Congress.
    I welcome him to the Committee, and I look forward to his 
testimony this morning.
    Senator Lieberman.

             OPENING STATEMENT OF SENATOR LIEBERMAN

    Senator Lieberman. Thank you very much, Madam Chairman. 
Welcome to you, Ambassador Portman, and members of your family. 
Congratulations on your nomination.
    Your experience in the House as Vice Chairman of the Budget 
Committee, your membership on the Ways and Means Committee, and 
most recently your service as the White House trade negotiator, 
I think, give you excellent credentials and a unique 
perspective as you prepare to become Director of the Office of 
Management and Budget.
    I also appreciated your pledge, when the President 
announced your nomination, to ``work closely with Congress on a 
bipartisan basis'' as we try to get our exploding Federal 
deficit under control. That is very important.
    Madam Chairman, on what might be called a point of personal 
privilege, I do want to note at the outset that I have a very 
special personal bond with Ambassador Portman. You may or may 
not know that during the 2000 presidential campaign, as now 
Vice President Cheney prepared for our vice presidential 
debate, Rob Portman played the then Democratic vice 
presidential candidate--me. So Rob, I may, during the question 
and answer period, ask you to ask yourself the questions that 
you think I might ask you. [Laughter.]
    In any case, let me help in preparing you for that dual 
responsibility by outlining some areas that I have concern 
about with regard to OMB.
    Obviously, you are this Administration's third Director. 
You will not be writing on a blank slate. But your performance 
will be judged by how well you come to grips with some of the 
problems that face us now.
    I begin by quoting President Bush, who has said, ``A budget 
is more than a collection of numbers. A budget is a reflection 
of a Nation's priorities, its needs, and its promise.''
    I agree, but I would add that a budget must also be about 
balancing our revenues and expenditures and delivering on those 
priorities, needs, and promises, or else it really is a 
collection of numbers without meaning or mission or ultimately 
without responsibility. And I mean the responsibility that 
comes with good fiscal management.
    Your job, as you know, is to help the President first 
prepare the budget and then execute it across 14 cabinet 
agencies and more than 100 executive agencies, boards and 
commissions. As OMB Director, you will recommend how and where 
every dollar of our budget is spent, how each agency's programs 
are managed, and you will oversee the review of vital rules for 
public health and safety.
    I have concerns about how these responsibilities have been 
carried out. Let me start with the budget. We obviously need to 
get our national budget in order. We are heading, by one 
estimate, toward $10 trillion of long-term debt. This is a 
great country and a strong country, and I do not favor 
apocalyptic views. But the obvious reality is we are spending a 
lot more than we are taking in. And we are thereby placing on 
our children, grandchildren, and beyond an enormous burden of 
interest payments on the debt that is a result of our failure 
to impose balance.
    If we are going to get our fiscal house in order, I agree 
with the Chairman, we have to do some of the things that have 
been talked about. We have to go back to pay-as-you-go 
budgeting. I am in favor of the idea of a line item veto.
    But ultimately this is done by tough decisionmaking to 
simply, but strongly, balance revenue and expenditures. And in 
doing that, everything has to be on the table and up for 
discussion, spending and taxing, in my opinion.
    We recently passed a $70 billion tax package that gives tax 
breaks to the Nation's wealthiest who do not need help and to 
the oil industry, which is recording record profits and thereby 
increasing the already enormous national debt. It also leads to 
a lack of resources to adequately fund some vital programs that 
are essential to our Nation's priorities, needs, and promises, 
as the President said in that statement.
    For instance, I continue to believe that we are drastically 
underfunding education, particularly the No Child Left Behind 
Act, which has, in a lot of places around the country, become a 
bad word. But it is a law with a very worthy purpose that was 
adopted with bipartisan support. We just have not given the 
local educators enough support to carry it out.
    As a matter of fact, under the budget that the President 
has proposed this year, Title I budgets--which is education 
assistance for low income school districts across the country--
will be frozen or cut. In Connecticut, by my tally, 122 out of 
166 school districts will actually see Title I cuts this year.
    Second, this Committee is the Homeland Security and 
Governmental Affairs Committee. I believe that we have not 
adequately funded homeland security yet. Has our support of 
homeland security grown? Yes, it has, obviously in the 
aftermath of the tragedy of September 11, 2001. But I continue 
to believe that we are still not spending enough to meet the 
government's fundamental obligation to protect our citizens. I 
am thinking here particularly of port security, interoperable 
communications, and bioterrorism preparedness. The same is true 
as we learned in this Committee's investigation of Hurricane 
Katrina and the recommendations we have made.
    Finally, in a somewhat different vein, I want to bring to 
your attention a matter of budget process that I am concerned 
about: The way we are using supplemental budgets to fund the 
wars in Iraq and Afghanistan. I believe that harms us in two 
ways. First, it may conceal the true costs of our total 
national defense by putting a large part of the cost off the 
budget. And that reduces the scrutiny and discipline our 
Defense Department needs and adds to the bill again that our 
children are going to pay.
    Second, it has had the effect of encouraging the military 
to put core programs into the supplemental budget. My fear is 
that when, and I would say when, not if, the supplementals come 
to an end, some of these critically necessary national defense 
programs will face the possibility that they will be defunded. 
And that will be to our national detriment.
    I do not agree that the costs of Iraq and Afghanistan are 
currently unknowable and that we cannot budget for them. I do 
agree that the budget is a statement of our priorities, needs, 
and promises. But without the kind of balance in the beginning 
that Chairman Collins and I have talked about and good 
execution afterward with proper priorities recognized, a budget 
can become just numbers with no meaning or mission. And that 
means it fails the American people and it fails our best values 
of fiscal responsibility.
    Those are some of the serious challenges you will face 
when, as I trust, you will be confirmed as Director of OMB. And 
I look forward to working together with you on them in the 
bipartisan spirit that you have committed yourself to.
    Thank you very much.
    Chairman Collins. Thank you. Senator Voinovich.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. Thank you, Madam Chairman. I was 
scheduled to introduce Mr. Portman, and in order to expedite 
the hearing, I will do that as part of my opening statement.
    Chairman Collins. Thank you.
    Senator Voinovich. It is an honor for me to be here to 
introduce my good friend, Rob Portman.
    Madam Chairman, as you know, this is the second Committee 
that Rob Portman has to appear before for this nomination. That 
underscores the great importance of the position for which he 
has been nominated.
    The Director of the Office of the Management and Budget is 
the President's aide of all macro level budget and management 
issues in the Executive Branch. It is an extraordinarily 
important position.
    Ambassador Portman, former Congressman Portman, is an 
excellent pick for the job of Director of the Office of 
Management and Budget. I have no doubt that Rob is more than 
well-qualified for this weighty position, and if confirmed, he 
will do an excellent job.
    I urge the Committee to speedily confirm his nomination so 
that he may take up his duties at this critical time.
    Rob served in the House, as the Chairman has mentioned, for 
12 years. He served on the Ways and Means Committee, and he was 
Vice Chairman of the Budget Committee. He also served as 
Chairman of the House Republican Leadership.
    Prior to his election to Congress he was an associate in 
the Washington law firm of Patton Boggs, specializing in 
international law. He then returned to his home town of 
Cincinnati to work as a partner in the firm of Braydon, Head 
and Ritchey. From 1989 to 1991 he served in George H. W. Bush's 
White House as Associate Counsel to the President and then 
Director of the White House Office of Legislative Affairs.
    In short, he understands Capitol Hill and the White House, 
and I have no doubt that he will work hard to foster cordial 
and productive relationships between OMB and Congress, which is 
important to the success of the OMB Director.
    Most recently, he has served our Nation as U.S. Trade 
Representative. I have mixed emotions about his departure from 
USTR because he was doing such a good job in that office. He 
worked to expand global free trade and markets for American 
businesses. I am especially grateful to him because, as an 
Ohioan, he understands as well as anyone the impact trade has 
on manufacturing. While free trade is vital to Ohio and this 
country, so is ensuring that our international trade partners 
abide by the rules we have all agreed upon.
    Rob has been a good friend and colleague for many years. We 
have collaborated on legislative matters going back to my days 
as Governor of Ohio, including unfunded mandates relief 
legislation. He led the House on this issue and did a fabulous 
job. We also worked together on advocating for Cleveland's NASA 
Glenn, legislation to defend the rights of States to offer tax 
incentives to promote economic development, and the Senate 
version of the Portman-Cardin bill.
    I have complete faith that he will serve our Nation as 
Director of OMB with intelligence, enthusiasm, and strength 
that have marked his time in Congress and the Executive Branch. 
I am also confident that he has the courage and the moral 
fortitude to advise the President as clearly as he possibly 
can. And of course, once giving the President his advice, doing 
what the President directs.
    It is important that somebody understand the programs that 
these dollars fund and look beyond just the numbers in terms of 
their significance.
    Rob also has excellent interpersonal skills and treats 
people with dignity and respect. He is a good man with a 
wonderful, understanding wife, Jane, and they have three 
children. I appreciate, Jane, your sacrifice. But I hope you 
will see more of him now than you did when he was with USTR.
    I know that Rob appreciates the government management 
issues that are of high interest to this Committee and the 
Subcommittee on Oversight of Government Management, which I 
chair. I am confident that, if confirmed as OMB Director, Rob 
will continue the fine and unappreciated efforts--unappreciated 
efforts--of the Bush Administration to improve the operations 
and effectiveness of Federal departments and agencies.
    When I came to the Senate I said there was no ``M'' in the 
OMB. Clay Johnson has really done a good job of bringing the M 
back into OMB. As you know, Mr. Portman, I am interested in 
human capital management, and I look forward to engaging you on 
that issue.
    You are going to have your hands full with the budget side 
of OMB, and I think that your service as Vice Chairman of the 
House Budget Committee will certainly prove valuable to you.
    As we recently discussed in my office, our Nation has a 
number of great challenges before it, and this Administration 
and this Congress will have to wrestle with how to prioritize 
and balance these competing interests with limited resources.
    Madam Chairman, I agree with you. If our friend from 
Oklahoma had voted with us, we would have had PAYGO. I think it 
is absolutely essential that we go back to PAYGO for spending 
and taxes.
    I am confident that Rob will bring strong leadership to 
this new role, just as he has done in Congress, at USTR, and 
his previous positions at the White House.
    I ask this Committee to advance his nomination swiftly so 
he can get to work. Thank you.
    Chairman Collins. Thank you for your introduction of the 
nominee. Senator Akaka.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Madam Chairman. I want 
to thank you and the Ranking Member for conducting this 
hearing.
    Ambassador Portman, welcome to the Committee. I welcome you 
and your family, and I want to also say thank you to your 
family for sharing you with the Nation. I met your lovely wife, 
Jane, this morning. And also I notice your dad is here, as 
well, and other members of the family. I want to welcome all of 
you here.
    During this time of severe budgetary constraint, I know 
that the job to which you have been nominated will not be an 
easy one. But I feel strongly that your background on the Hill 
will serve you and us well, and I look forward to working with 
you in a bipartisan manner.
    As you stated in response to pre-hearing questions posed by 
our Committee, as Director of the Office of Management and 
Budget, you will seek to ensure that the Nation's resources are 
properly aligned with its challenges and priorities.
    I hope this is so, Mr. Ambassador, because many of us are 
deeply disturbed over the direction our country has taken and 
continues to follow under current fiscal policies.
    Our country has only been out of debt for 2 years in its 
long history, in 1834 and 1835. Before and after those notable 
years more than 170 years ago, the main cause of debt 
accumulation was war expenditures, which is similar to what we 
are facing today with U.S. operations in Iraq and Afghanistan.
    I firmly believe we must continue to support our brave men 
and women in the Armed Forces and help them to complete their 
missions. However, the Federal dollar is also being stretched 
to meet the needs of those whose lives were disrupted by 
Hurricanes Katrina and Rita and to continue the active stance 
on the global war on terror.
    The government has tried to absorb all of these costs, but 
we are facing a declining pot of resources. Since January 2001, 
according to the Center on Budget and Policy Priorities' 
calculations of Congressional Budget Office data, in terms of 
projected costs from 2002 to 2011, a third of the cost of 
legislation adding to deficits relates to defense, homeland 
security, and international matters.
    But 50 percent are tax cuts, which is why I voted against 
last week's Tax Reconciliation Conference Report that included 
an astonishing $70 billion cut in taxes. It is wrong to lay the 
heavy costs on current and future taxpayers. As you know, our 
country has been running deficits near $300 billion. In March, 
the Federal debt limit was raised to a record of about $9 
trillion.
    As noted by Senator Kent Conrad, Budget Committee ranking 
member, the national debt in just the first 5 years of the Bush 
Administration has increased by $3 trillion. Quite simply, this 
country is outspending what is being brought in as revenue. And 
our children, grandchildren, and generations beyond will be 
left to pay the bill.
    Although I agree with you that we must align our country's 
resources and balance them to meet its challenges and 
priorities, I just do not see that happening under our current 
fiscal policies.
    Ambassador Portman, I look forward to hearing your views 
and, of course, as I said, look forward to working with you in 
a bipartisan manner to meet the budgetary crisis we are in now. 
And I want to wish you well. Thank you very much.
    Chairman Collins. Thank you. Senator Coleman.

              OPENING STATEMENT OF SENATOR COLEMAN

    Senator Coleman. Thank you, Madam Chairman.
    Madam Chairman, I am very pleased the President has chosen 
to nominate Ambassador Portman as Director of the Office of 
Management and Budget.
    I have to apologize. I will be going to another hearing on 
rural broadband technology right after this, but I wanted to 
make a brief opening statement.
    I have had the opportunity to work with the Ambassador on 
trade issues. I was in Hong Kong during a brief rate of time 
during the discussions on WTO. We worked on CAFTA together. He 
is a man of extraordinary intellect. He brings balance, he 
brings judgment. He has the personal skills, the abilities to 
work with people, which is important. This is a relationship 
business, a relationship town. It is not all about green 
eyeshades. You have to understand how programs work and their 
importance to the people who are impacted by them.
    We can have a healthy debate on this Committee about 
deficits. Clearly we are all deeply concerned about mounting 
deficits and the impact on the next generation. We can debate 
whether tax cuts are good or bad things. I believe they 
stimulate growth and in the end cut into the deficit.
    But I do want to at least urge the nominee, with that good 
heart that he has and that good mind, to bring a sense of 
balance to this, as the ranking member talked about. I am a 
former mayor. And every year we get recommendations on CDBG 
from OMB, and in an overwhelming manner this Congress says we 
need to go in another direction. We need to support those 
programs. We have the same thing with the COPS program that we 
get a recommendation from the Administration and then this 
Congress says we really need this.
    So, this is the challenge--and I know you are up to it. I 
wholeheartedly endorse and support this nomination, and I urge 
my colleagues to.
    But I would just urge the Ambassador to have that sense of 
balance. And if there is a way up front to avoid perhaps some 
of these battles that we have between the Administration and 
friends in Congress on issues like CDBG and the COPS programs. 
We are going to be working on a Farm Bill next year, a Farm 
Bill that has served this country well in the time, the 
existing bill. Now we have to look to the future.
    So with that, the President has made an outstanding choice. 
I look forward to working with the Ambassador. And I think the 
skills that he has are the ones that are needed at this time.
    As I said before, I wholeheartedly endorse and support this 
nomination.
    Chairman Collins. Thank you. Senator Dayton.

              OPENING STATEMENT OF SENATOR DAYTON

    Senator Dayton. Thank you, Madam Chairman. I will also be 
following my colleague to the Agriculture hearing, and I also 
would second what he said about the excellent choice the 
President has made in your selection, sir.
    Anyone who is willing to trade in international trade 
negotiations for Congressional committees has a proven 
commitment to public service, which I think is laudatory. You 
have proven that throughout your career. I think you will be an 
excellent leader, and I will support your nomination.
    Thank you, Madam Chairman.
    Chairman Collins. Senator Coburn.

              OPENING STATEMENT OF SENATOR COBURN

    Senator Coburn. Thank you, Madam Chairman. Welcome, Mr. 
Portman.
    I had the great pleasure of serving with Ambassador Portman 
in the House, and I, too, know his skills and his ability, and 
he is ultimately respected by all of those that he has dealt 
with. I have not met anybody that has not. I feel very 
confident he will be confirmed.
    The problems that face our country are not just with the 
budget. The problems that face our country are with the Senate 
and the House and failure to do oversight.
    I just want to put in perspective--I am a believer in PAYGO 
as long as we do not bias spending against tax cuts, but we do.
    One billion seconds ago was 1959. That is what a billion 
seconds ago was. A billion minutes ago a guy by the name of 
Jesus walked on the face of this earth, a billion minutes ago. 
$1 billion ago was 3 hours ago, the rate at which the Federal 
Government spends money.
    I know the Ambassador has some important thoughts on EITC, 
which we overpay from somewhere between $9.6 billion and $11.4 
billion a year. We know the Defense Department paid $6 billion 
out last year in performance bonuses to companies that did not 
meet the performance bonus requirements. We know there is 
another $34 billion worth of waste, fraud, and abuse in the 
Pentagon. There is $40 billion in overpayments by Medicare. 
There is at least that much in Medicaid, of which $15 billion 
in New York State alone. We have another $8 billion that we are 
spending on maintaining buildings that we do not want. And we 
have another $100 billion on pure waste, fraud, and abuse 
throughout the rest of the government.
    You add all that up, and then you consider the tax gap, 
which is estimated by the IRS now at $350 billion, and that 
comes to $585 billion. We would not have a deficit if we were 
doing our jobs.
    My goal is to make sure that we put sunshine on everything 
we do. Sometimes we do not have the courage to do what we need 
to. But when we are held accountable through methods of 
sunshine, where the American people realize what we are doing 
or what we are not doing, we are held to better account.
    And so my great concerns and my belief in Ambassador 
Portman in this job is that accountability will be the number 
one thing that comes forward. And that can only happen if we 
have great transparency.
    I would tell you this week I asked for the budget for the 
Architect of the Capitol, and I was told I could not have it, 
that they would not give it to me. And that is the kind of 
problems that we deal with. As a sitting U.S. Senator, I cannot 
see the budget for the Architect of the Capitol?
    There are real problems in our government. Sunshine cures 
almost every one of them. Sunshine in the agencies, sunshine in 
Congress, and knowing that the American people, if they have 
the information, will help us solve the problems that we are 
dealing with and will put policy ahead of politics foremost in 
our mind so that we address the real issues.
    I appreciate our Chairman, Senator Voinovich, and Senator 
Lieberman because they have the same desire as I do, as not to 
lay a load on the next two generations that is really going to 
change for the first time and create opportunities that are 
less for our grandchildren than what we have experienced.
    My hope is that we will come across the line and do the 
hard work, the very hard work of oversight, and then 
translating that oversight into legislative changes that make a 
difference.
    So I will be with you on PAYGO as long as we start 
responding to the things that we are finding that are not fixed 
that are wrong. But I can never be for a PAYGO that advantages 
spending to the detriment of our tax dollars today and our 
grandchildren's tax dollars tomorrow.
    My hope is that the leadership that I know Ambassador 
Portman has will shine over the next 2\1/2\ to 3 years so that 
we address the very real problems that are in front of us. My 
hope is that he will be a leader in making that sunshine be 
available to the American public. Thank you, Madam Chairman.
    Chairman Collins. Thank you. Senator Lautenberg.

            OPENING STATEMENT OF SENATOR LAUTENBERG

    Senator Lautenberg. Thank you, Madam Chairman, for holding 
this important hearing to meet and talk with Ambassador Rob 
Portman as he is proposed for the directorship of the Office of 
Management and Budget.
    The management side often gets less attention than the 
budget side, and frankly, I think it is even a more important 
part of the assignment.
    If we look at the numbers as they are now, under this 
Administration, the deficit has soared and we are passing more 
and more debt and problems along to future generations. And it 
does not have to be that way. I know we can do better. We all 
believe that we can because we have done better in the past.
    I was the ranking member on the Budget Committee when we 
balanced the budget and actually began to pay down the Federal 
debt. It took tough choices to balance the budget, but making 
hard choices is what leadership is supposed to be about.
    The tax cuts that the Senate passed last week will give 
those with incomes exceeding $1 million an average tax cut of 
$41,977. But they will give the middle-class Americans just 
$46, on average. There is something so outrageous about that 
relationship.
    And we just heard that maybe programs like EITC are 
spending too much money, $7 billion to $9 billion. Well my 
gosh, those who earn $1 million a year will be the recipient of 
$14.5 billion worth of tax breaks and cost to this government.
    Whenever we talk about this, and I stand on my record and 
my past as chairman of one of America's most successful 
companies. You, Rob Portman, know the company very well, having 
known the last CEO.
    So I am not embarrassed to talk about these things without 
risking the accusation of class warfare. That is such an unfair 
designation. Because if there is class warfare, it is against 
those who are struggling to make a living.
    For what we spent last week to give wealthy Americans more 
tax cuts, we could have enabled another 2.8 million youngsters 
to attend a public college. We could have provided health 
insurance for every uninsured child in America. We could have 
hired 225,000 public school teachers and still had enough left 
over to scan every cargo container coming through our ports.
    In the business world, where I come from, a company that 
followed the fiscal policies as this Administration is doing 
would have soon been out of business.
    Now President Bush has presided over the largest fiscal 
reversal in our Nation's history, from a $236 billion surplus 
in 2000 to a projected $423 billion deficit in 2006. During his 
5 years in office, the total national debt has increased by 50 
percent and is now approaching $9 trillion.
    Saddling our children and grandchildren with this burden is 
wrongheaded. We all know we can do better. But at the very 
least, we can hope that Mr. Portman, with his knowledge and 
experience, will help change the direction we are taking now 
and bring us to a point of fiscal fairness, to the people who 
look to government for assistance at critical moments in their 
lives.
    And I welcome Mr. Portman to this job. He is someone who 
has skill and experience that is hardly matched, but we would 
like him to look at the things that I just mentioned. Thank you 
very much.
    Chairman Collins. Thank you. Senator Warner.

              OPENING STATEMENT OF SENATOR WARNER

    Senator Warner. Thank you, Madam Chairman, and 
distinguished Ranking Member.
    Mr. Portman, I join others in saying the country is 
fortunate that you and your family will continue to accept 
those commitments for further public service. I was very 
pleased when I heard that you were appointed, and I must say my 
wife, who is proud of her roots in Ohio, sends her best this 
morning, particularly to your lovely wife, knowing of the 
commitments of the family.
    I was quite intrigued with your responses to the questions. 
Madam Chairman, they were a very good series of questions that 
the Committee propounded to our nominee about the line item 
veto. And looking back over your distinguished record in the 
House of Representatives, obviously you are going to be a loyal 
supporter of the President. He desires it. But what stances did 
you take in the House?
    Ambassador Portman. Senator, I was in support of the line 
item veto. At that time we did not have the same legislative 
line item veto that has been proposed. And I look forward to 
talking to you more about that, perhaps in the questioning.
    Senator Warner. It will be interesting how you go about 
this.
    But I want to pick up on the comments made by my 
distinguished colleague, who serves with me on the Armed 
Services Committee. That is about the supplementals regarding 
our military. They are absolutely essential. But it has gotten 
to the point where not only do we experience the true cost not 
being reflected in the budget, but we are losing valuable 
oversight.
    How well you understand, being a Member of the Congress, 
the bifurcating of the responsibilities of the several 
committees, and the Armed Services Committee that I am 
privileged to serve on with several Members of this Committee, 
we have a subcommittee structure that goes over an issue first, 
then the full committee goes over the issue, and it is 
carefully reviewed in the context of the overall military 
budget and the balances are made within that.
    That is lost. It has gone by the wayside. And that concerns 
me a great deal.
    I would hope that in the future we can, while necessary to 
have this emergency spending, we will begin to recognize the 
downside of the enormity of these supplementals and the fact 
that they carry many items that would normally be under the 
oversight structure.
    Last, the estate tax. On that question I will wait to the 
round of questions to get into it in more detail, but that is 
going to be a tough one for this Senator. As much as I feel 
that there is an inequity about taxing so many times the hard-
earned earnings of individuals and their families, the impact 
on the budget is quite significant in terms of loss of income.
    And you have got to keep an eye on that loss of income to 
the United States. The estimate is as high as $500 billion over 
10 years if it were to come about this fiscal year or the next.
    So Madam Chairman, that is a full platter for this nominee. 
We wish him well. You are going to have my support. Thank you.
    Chairman Collins. Thank you. Senator Bennett.

              OPENING STATEMENT OF SENATOR BENNETT

    Senator Bennett. Thank you very much, Madam Chairman.
    Mr. Ambassador, we welcome you and salute you for your 
willingness to serve. I join with my colleagues in extending my 
best to you and your family for that.
    I simply, as I listened to the opening statements that have 
little or nothing to do with your job, decided I will fit right 
in and give an opening statement that has little or nothing to 
do with your job.
    As our friend Senator Moynihan used to say--I am not sure 
whether he created it, but he is associated with it--everyone 
is entitled to his own opinion but not to his own facts.
    I would simply like to state, for the record, in case 
anybody is paying any attention, that the deficit is coming 
down, not going up. It is coming down in absolute dollars. And 
more importantly, it is coming down as a percentage of GDP.
    We have heard the figure that it is projected to be $423 
billion in 2006. That is an old projection. The current 
projection out of CBO is $300 billion. And as percentage of GDP 
in 2004 the deficit was 2.8 percent. As a percentage of GDP in 
2005 it was 2.6 percent. And if CBO is correct with its current 
projection, in 2006 it will be 2.3 percent. And that projection 
includes passage of the supplemental at the President's number 
and the passage of the tax extenders that the Senate acted on.
    So I recognize all of the problems that we face long term. 
But I think the record, at least in this debate, ought to be 
fairly clear that the deficit is coming down, both in nominal 
dollars and as a percentage of GDP. And we ought to keep 
repeating that, rather than the canard that somehow the economy 
is out of control.
    The current growth of GDP is higher than the averages of 
growth in the 1990s, the 1980s, the 1970s, and the 1960s. This 
is an economic performance with which I am happy to be 
associated.
    With that, Mr. Ambassador, we will now return to the issues 
facing your tenure as manager of OMB.
    Chairman Collins. Thank you, Senator.
    Ambassador Portman has filed responses to a biographical 
and financial information. He has answered pre-hearing 
questions submitted by this Committee and had his financial 
statements reviewed by the Office of Government Ethics.\1\
---------------------------------------------------------------------------
    \1\ The biographical and financial information and pre-hearing 
questions appear in the Appendix on page 47.
---------------------------------------------------------------------------
    Without objection, this information will be made part of 
the hearing record with the exception of the financial data, 
which are on file and available for public inspection in the 
Committee's offices.
    Ambassador, our Committee's rules require that all 
witnesses at nomination hearings give their testimony under 
oath, so I would ask that you please stand and raise your right 
hand.
    Do you swear that the testimony you are about to give the 
Committee will be the truth, the whole truth, and nothing but 
the truth, so help you, God?
    Ambassador Portman. I do, Madam Chairman.
    Chairman Collins. Thank you.
    Ambassador, we have referred to some of your family members 
who are present here today, but I would invite you to present 
them to the Committee at this time.

    TESTIMONY OF HON. ROBERT J. PORTMAN,\2\ A NOMINEE TO BE 
           DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET

    Ambassador Portman. Thank you very much, Madam Chairman.
---------------------------------------------------------------------------
    \2\ The prepared statement of Mr. Portman appears in the Appendix 
on page 45.
---------------------------------------------------------------------------
    It has already been mentioned that I am fortunate enough to 
have some of my family here who came from our home in 
Cincinnati. Luckily the hearing was postponed a few minutes 
because they were postponed as well by traffic around the 
Beltway. But I am very proud to formally introduce them.
    First my wife, Jane, who is behind me. It has already been 
mentioned about the sacrifices those of us in public service 
make, and I appreciate more than you know those comments. But 
Jane, along with our three children, has been wonderfully 
patient with me and supportive of me in my public service 
career. And I could not do this job without that support and 
love and patience. I thank her for being here.
    My father is also with us. Bill Portman is here. He 
celebrates his 84th birthday in July. And his integrity and his 
decency and his judgment inspire me every day. I will need that 
inspiration in this new job. So Dad, thank you for being here, 
too.
    Madam Chairman and Senator Lieberman and other Members of 
the Committee, I very much appreciated your opening statements. 
I listened very carefully to them, and I look forward to having 
a dialogue as we get into the question and answer period on 
some of the specific issues you raised.
    I also want to thank you and other Members of the Committee 
who are not here for meeting with me or speaking with me before 
this hearing. It was a great opportunity for me to get your 
input and have an opportunity to better understand your 
priorities and your concerns.
    To my friend, former Ohio Governor, now Senator George 
Voinovich, thank you for those kind words and the advice that 
you are never hesitant to give me. To me, Senator Voinovich 
represents the very best of public service. I have admired him 
and sought his counsel throughout my career, including when my 
career included working for him as a volunteer. Now I get to 
work with him to ensure, as he said, that the M in OMB gets the 
attention that it properly deserves.
    Madam Chairman, I do not believe there is any other 
position in the Federal Government that is responsible for such 
a broad portfolio of issues, as was evident by the opening 
comments, as Director of the Office of Management and Budget. 
It is a tough job. It is a serious responsibility. If 
confirmed, I will take that responsibility very seriously and 
work hard on behalf of the taxpayer to ensure that tax dollars 
are spent wisely.
    As the Committee knows, I have served as U.S. Trade 
Representative for just over a year. It has been a great 
privilege to work with some of you on the Committee on those 
trade issues and to work with a very skilled and talented team 
at USTR. And I have been very proud to represent our country in 
trade negotiations around the world.
    Prior to that, as was noted, I did represent the Second 
District of Ohio for about 12 years, serving on the Budget and 
Ways and Means Committees.
    Also not mentioned, I was on the House Leadership Committee 
to draft the Homeland Security Department legislation, which is 
something I hesitate to mention because it may lead us into 
some tough homeland security questions. But it was a very 
interesting experience, and I focused, with Senator Voinovich 
and others, on some of the human capital issues.
    This morning, thus, I find myself returning to some 
familiar territory, budget, taxes, entitlements, and how to 
make our government work better through better program 
oversight.
    I do understand, as Senator Lieberman indicated, the 
importance of open lines of communication with Congress. If 
confirmed, I will prioritize consultation, just as I have at 
USTR. And I do because I believe it is essential to addressing 
the very real opportunities we have to work together but also 
the very serious challenges that we face. There is no other way 
to do it.
    OMB has this unique and important role in our system of 
government. As the Chairman said, all spending decisions go 
through OMB, as well as major regulatory changes and, of 
special interest to this Committee as was noted, the overseeing 
of the management of the Executive Branch.
    I do believe that President Bush has helped reprioritize 
the M for management in OMB. Should I be confirmed, I look 
forward to working with this Committee on both sides of the 
aisle to build on the good work you have done.
    Senator Voinovich mentioned the Deputy Director for 
Management, Clay Johnson. I think the team at OMB has 
reprioritized that management aspect of the job. And I 
strongly, as you know Senator Voinovich, support that and want 
to continue to build on that.
    I see opportunities for us to work together, to try to get 
even better results for the taxpayers' money. This includes 
efforts in the Executive Branch to further streamline programs 
and make them work better, improve them so that government 
services are as effective and efficient as possible. I think it 
also means budget process reforms. I believe in a workable 
legislative line item veto. Senator Warner has asked me. I 
believe and accept that it can help reduce some wasteful 
spending. And I think it can improve accountability through 
transparency.
    I do believe it can be workable, working with this 
Committee and others, and I would be happy to talk more about 
that if there are additional questions.
    I also believe earmark reform is important. I think it is 
an additional way to bring transparency to government spending 
so that people know how their hard-earned dollars are being 
spent.
    On the budget side of OMB, I see challenges but also 
opportunities. Working together I think we can create a better 
legacy for our children and our grandchildren. In the past 5 
years our country and the Federal budget, as Senator Collins 
has noted, have faced very serious challenges. From the stock 
market bubble to the recession in 2001, the corporate scandals 
to the September 11 attack, the ensuing war on terror, and of 
course the unprecedented natural disasters of Hurricanes 
Katrina and Rita.
    In facing these challenges the American people and our 
economy have proven up to the task. Senator Collins talked 
about resiliency. I think with bold steps the President took 
early on, this resilient economy has bounced back. Senator 
Bennett talked a little bit about some of those indicators. 
Senator Collins talked about the importance of this economic 
growth to deficits and debt, and she is absolutely right. We 
are now experiencing strong and positive growth in our economy 
in general and in jobs and revenue in particular.
    We have added jobs for 31 months in a row now, over 5 
million new jobs. The unemployment rate has fallen to 4.7 
percent, lower than the average of the past three decades. The 
job market for college graduates is at its best in years.
    The economy is growing. GDP is a healthy 4.8 percent growth 
in the first quarter. This follows economic growth of 3.5 
percent in 2005. As U.S. Trade Representative, I note that this 
is the fastest growth, considerably faster than our other trade 
partners in the industrialized world.
    In the first quarter productivity is up at 3.2 percent. We 
had a 5.7 percent increase in the hourly compensation rate, 
also, in the first quarter, which was very welcome.
    So as a result of this economic growth, what has happened? 
Revenue is up. Tax receipts for 2005 grew by 14.5 percent. That 
is the fastest growth, I am told, in 24 years. In February OMB 
estimated that receipts would grow again in 2006, even after 
the 14.5 percent growth last year. The estimate was 6.1 
percent.
    Last week the U.S. Treasury Department reported that 
revenues in the first 7 months of this fiscal year are at an 
all-time high and substantially exceeding that 6.1 percent 
estimate. We will see how it goes in the final 5 months, but it 
looks like we are going to have another year of very high 
growth in revenues.
    The high revenue growth, thanks in part to tax relief, will 
have a positive effect, of course, on deficits, as Senator 
Collins has said.
    All of this means, from a budget perspective, I do believe 
we are on track to meet the President's target of cutting the 
deficit in half by 2009. I think we have done this by working 
closely with Congress to focus on national priorities while 
reducing spending elsewhere.
    I also think we have a lot more work to do. If confirmed, I 
look forward to working with the Committee to restrain spending 
while continuing to protect Americans at home and, as noted, 
fight terrorism abroad.
    Restraining discretionary spending, as we have done in 
recent years, is an essential part of deficit reduction. But it 
is the unsustainable growth in the entitlement programs, as has 
been noted here this morning, including Medicare, Medicaid, and 
Social Security, that poses the greatest long-term fiscal 
danger.
    It is absolutely critical that we work together now to 
develop sound policies that put these programs on a sustainable 
footing for future generations. There, too, I welcome your 
input.
    With the good news on the economy, growing tax revenues, 
and continued spending restraint, our short-term deficit 
picture does look better, but there is clearly a lot of hard 
work ahead to ensure our fiscal house is in order for the 
future.
    I am an optimist. I believe working together we can address 
these very real budgetary challenges and improve the management 
of our Federal Government in ways that serve the people we 
represent.
    Again, I appreciate the Committee's consideration of my 
nomination, and I very much look forward to your input and 
questions.
    Chairman Collins. Thank you very much.
    I am going to begin my questioning with the standard 
questions that we ask of all nominees.
    First, is there anything you are aware of in your 
background which might present a conflict of interest with the 
duties of the office for which you have been nominated?
    Ambassador Portman. There is none.
    Chairman Collins. Second, do you know of anything personal 
or otherwise that would in any way prevent you from fully and 
honorably discharging the responsibilities of the office?
    Ambassador Portman. No.
    Chairman Collins. And third, do you agree without 
reservation to respond to any reasonable summons to appear and 
testify before any duly constituted committee of Congress if 
you are confirmed?
    Ambassador Portman. Yes.
    Chairman Collins. You passed the test. Those were the right 
answers for the first three questions.
    I would inform my colleagues that we are going to do two 
rounds of questions so we will start with a 6-minute round, and 
I am going to ask everyone to adhere to the time limit because 
there will be a second round.
    Mr. Ambassador, I want to turn first to the issue of pay-
as-you-go budgeting, in other words, the PAYGO rules, that many 
of us mentioned in our opening statements.
    I believe that PAYGO rules provide much needed constraints 
for Congress as we wrestle with fiscal decisions. The 
Administration has indicated an openness to imposing PAYGO on 
the spending side of the budget but not the tax side.
    I question how you can apply PAYGO rules to only one side 
of the ledger? Does it not make more sense to look at both 
spending and revenues since both affect the size of the 
deficit?
    Ambassador Portman. Madam Chairman, it is a fair question, 
and I noted it came up during the opening statements, and there 
was a good debate here on the Committee. I would say a couple 
of things.
    One is the way we would currently operate PAYGO, unless we 
change the scoring rules, it is true that there is a bias, in 
my view, for spending and a bias against tax relief. Why? 
Because we assume that programs go out indefinitely on the 
spending side.
    For instance the Farm Bill, which was mentioned, which 
would expire in 2007, would be assumed to continue as would 
other mandatory spending programs.
    Whereas on the tax side we assume that tax relief would not 
continue. In other words the expiration, for instance, on the 
relief on the investment side, capital gains side, would be 
assumed to end, even after the President signs the legislation 
you all recently passed. That would assume to end in 2010. The 
same with the other tax relief.
    So if you apply PAYGO to that sort of a system, I do think 
it is a little unfair because I do think you are biasing the 
spending side in a positive way and disadvantaging the tax 
relief side.
    Second, I guess it is just a philosophical question. Are we 
overtaxed? And is it something that we want to establish as a 
potential incentive for us to raise taxes, particularly to pay 
for mandatory spending? And I have concerns there, and I know 
the Administration has expressed that.
    As a percentage of our economy, taxes have been relatively 
low from 2001 until recently. Because of the recession, because 
of the economy being less vigorous and not growing as fast, and 
also because of the tax relief.
    But frankly, we are back up to the historical level if the 
revenue projections that Treasury made last week continue. In 
fact, a little above the 40-year average, which is 18.2 percent 
of our economy.
    So I think we need to look at those figures carefully and 
be sure that we are not burdening our economy just as we are 
beginning to get out of the trough we were in with the 2001 
recession and all of the challenges that you noted, but also as 
we are beginning to see that impact on our deficits and 
eventually our debt, which is to say higher revenues from the 
tax relief.
    Chairman Collins. This Committee recently concluded a 7-
month investigation into the response to Hurricane Katrina, and 
we found widespread waste of taxpayers' dollars, whether it was 
on wasted commodities like ice that was intended for the 
victims and instead ended up in my home State of Maine, fraud 
in the individual assistance program because of a lack of 
internal controls, an unnecessary reliance on sole source 
contracting that boosted the price that was paid for a whole 
host of services and items, or the hasty purchase of $750 
million worth of manufactured housing that cannot be installed 
in flood plains and is sitting unused in Hope, Arkansas.
    Our Committee has documented waste, fraud, and abuse that 
exceeds $1 billion. The real number is probably much more.
    This Committee tried to be proactive on this front. We very 
early on passed legislation to create a chief financial officer 
to oversee the spending in the Gulf region. And we passed 
legislation to create a special inspector general to look for 
waste, fraud, and abuse. Unfortunately and, in my view, 
inexplicably, the OMB opposed both pieces of legislation. And 
thus, they were never considered by the full Senate.
    Now obviously you were not involved in any way in that 
decision, or I am sure if you were a far wiser decision would 
have been reached. What can we do in the future to ensure that 
when there is a disaster or an unanticipated need for a massive 
infusion of Federal funds we have better controls in place to 
protect the taxpayer's investment?
    Ambassador Portman. Well, Madam Chairman, thank you. You 
have raised some very troubling issues and you raised them well 
in your report, ``Hurricane Katrina: A Nation Still 
Unprepared.'' I read the summary as recently as last night.
    You lay out a lot of the troubling facts that you have 
cited today but also some recommendations for better financial 
management, ways in which we can reduce waste, fraud, and abuse 
next time around because we will have future natural disasters 
that require very immediate attention.
    On the sole source contracting, I am particularly 
interested in that issue and look forward to working with you 
on that. My understanding is that it is done only in very 
limited cases and should be limited to extraordinary 
circumstances and then should be recompeted. That certainly 
would be my point of view.
    On the CFO and IG issues that you raise, I am happy to look 
at those issues carefully with the Committee. My sense there is 
we also want to be sure that the agencies most responsible, in 
this case the Department of Homeland Security or the Army Corps 
or other agencies or departments that had to respond quickly, 
the military, that they need to have accountability within 
their own IG systems and their own CFO systems as well.
    We want to be careful not to remove that accountability 
from the agency structure and, in a sense, take them off the 
hook. So that would be one of my concerns as I begin this 
review with you and other Members of the Committee, should I be 
confirmed. I do not know if you have any thoughts on that this 
morning, but I do want to be sure that accountability is really 
felt at the agency level.
    Chairman Collins. Thank you. Senator Lieberman.
    Senator Lieberman. Thanks, Madam Chairman. Thanks again, 
Ambassador.
    I want to talk to you first about the long-term fiscal 
crisis that many of us mentioned in our opening statements.
    In December of last year, the Congressional Budget Office 
warned that without change, ``At some point the economy will be 
unable to provide enough resources for the government to pay 
interest on the debt.''
    At that time, outgoing CBO Director Holtz-Eakin stated, 
``It is impossible for the economy to grow its way out of this 
problem. It is too big.''
    Obviously the economic growth numbers are heartening to all 
of us. But I want to ask you, in so far as the economy is 
growing, it helps us deal with the long-term fiscal imbalances 
we have talked about. But do you agree with the former CBO 
Director that we cannot just grow our way out of the problem, 
that it is too big, that we have to impose some restraint on 
both directions to get back to balance in our Federal books?
    Ambassador Portman. I do. I think I was on the Budget 
Committee when he made some of those statements. I guess the 
one caveat that I would add to that is that it is not so much 
the domestic discretionary side, where I think this Congress 
has done a good job in the last couple of years of keeping 
restraints in place. We can talk about the supplementals, which 
is a concern I share with you, Senator, and others. But in 
general, we have been able to keep the domestic discretionary 
spending within inflation.
    It is on the mandatory side and the entitlement side where 
I think Director Holtz-Eakin focused more. Those are the long-
term problems you talk about. And there it is not sustainable. 
Not only cannot we grow our way out of it, we cannot tax our 
way out of it in my view.
    If you look at some of these numbers, as I did again this 
morning, by 2030 the mandatory or entitlement side of the 
budget will grow by about 50 percent compared to where it is 
now. As you know now, roughly 20 percent defense, roughly 19 
percent domestic discretionary, and the rest, about 61 percent, 
is entitlements and debt service.
    By 2040 it would, as I read it, exceed all revenues. In 
other words, entitlements would be all of our budget, assuming 
we stay roughly within the same percentage of our economy on 
the revenue side.
    So we have a long-term problem here that, as I mentioned in 
my opening statement, we can address best now so we do not come 
to that precipice and have to make very hard decisions that 
have severe impacts on the people we represent.
    So I look forward to working with you on that, and I do 
agree with you, there needs to be changes legislatively in 
order to address it.
    Senator Lieberman. I agree. I guess I would say, just to 
wind up my response to that answer, which I appreciate, is that 
the challenge for us, as I think Senator Coburn said, is not 
just to deal with the numbers but to deal with the increasing 
political paralysis here in Washington. Because we must 
confront the problem you have just described, which we all know 
is coming. We have entitlement programs that are humane 
programs that people count on. And yet, they are on an 
unsustainable course.
    To deal with that unpleasant and ultimately painful reality 
is going to require real leadership in both the Executive 
Branch and the Congress, Republicans and Democrats. And I say 
leadership in the sense that you do not solve a problem like 
this without doing some things that are difficult and may be 
unpopular or are probably inherently unpopular.
    But you do it because our future requires it. So I welcome 
you, I challenge you to work with us and the Administration on 
that.
    I have just got a couple of minutes left. I want to ask you 
to speak a bit about what Senator Warner and I both talked 
about, which is what I think is the overuse of supplemental 
budgets by the Pentagon. And I want to ask you what your 
opinion generally is on that. I have indicated the reasons why 
I think it is problematic. And whether you have any plans to 
work with the Pentagon and with Congress to take some of the 
elements of the supplemental budgets, which allegedly are for 
Iraq and Afghanistan, and move it into the regular budget 
process and therefore, as Senator Warner pointed out, into the 
regular oversight process, perhaps hopefully bringing more 
efficiency and cost-effectiveness to those programs.
    Ambassador Portman. Senator, if I am confirmed, I would 
look forward to working with Senator Warner, you, and others 
who have a concern about this. I share your concern. Honestly 
when I was in the House, I was advocating for more in the 
budget and less in the supplemental.
    I was very pleased thus this year to see that the 
Administration included in the 2007 budget the $50 billion as 
an allowance for Iraq and Afghanistan. That was the first time, 
as you know, since those operations began that the 
Administration included a base amount.
    It is not going to be enough. The question is how much is 
enough? I do think there is a level of uncertainty here. None 
of us knows precisely, we cannot. The budget is put together, 
as you know, 18 months or even 2 years ahead of time.
    On the other hand, we know that there will be ongoing 
expenditures there. And I think it is important to reflect 
that.
    In terms of your question about whether some of the 
supplemental funding is better put into the base budgeting of 
the Pentagon, I am really looking forward to, if confirmed, 
rolling up my sleeves and getting into that issue. Because I do 
think that is a very serious problem on both sides. You would 
not want to put into the base something that was relatively 
temporary. In other words, if some of these costs in Iraq can 
be reduced through some of the successes we are seeing with the 
Iraqi forces taking some of the front-line positions, you would 
not necessarily want to see that in the base because then it is 
difficult to remove.
    On the other hand, as you say, if it is, in fact, long-term 
or more permanent programming and therefore not subject to the 
oversight that Senator Warner and you have talked about, then 
there is a dividing line that should move it more toward the 
budget side.
    So these are tough decisions, I know, that Congress will 
have to make. But I think the Administration can perhaps do a 
better job in giving you some guidance there.
    Senator Lieberman. Thanks, Ambassador. I appreciate that. I 
take that answer to be encouraging and appropriately balanced, 
resisting my invitation to directly take on Secretary Rumsfeld 
in your confirmation hearing. Thank you very much.
    Ambassador Portman. Thanks for letting me off the hook on 
that one.
    Chairman Collins. Senator Voinovich.
    Senator Voinovich. Thank you, Madam Chairman.
    As I mentioned in my introductory statement, I have been 
impressed by the Bush Administration's focus on management 
issues. Clay Johnson has done a pretty good job of bringing the 
focus back to management in OMB.
    One of the responsibilities that we have on this Committee 
is oversight of the High Risk list. GAO puts it out at the 
start of every Congress. There are 26 items on that list. One 
of the things that I suggested to Mr. Bolton and his 
predecessor was that OMB ought to be working on that list.
    On that list, 14 items are in the Defense Department; some 
of them have been on the list since 1990. Secretary Rumsfeld 
says that we can probably save billions of dollars if we could 
shape up DOD operations. It is not something that is going to 
happen overnight. There are two High Risk areas that I am 
paying particular attention to which I call to your attention. 
One is the supply chain management, which we are working on 
with Ken Krieg at the Department of Defense.
    The other one is the security clearance process. I wish I 
could say that progress is being made. But we are going to have 
a hearing, by the way, this afternoon, and we will examine why 
the Defense Security Service suspended processing new 
applications for private sector security clearances several 
weeks ago.
    Even before this, government contractors have been 
increasingly frustrated that requests for security clearances 
often take more than a year to process. To lure employees who 
already have a security clearance, firms have offered large 
bonuses and given away luxury vehicles.
    That is the kind of thing that should have been noticed by 
OMB. I think if you go through and look at a lot of the 
agencies you will discover that we are not giving them the 
resources they need to do the job that we are asking them to 
do. We are just squeezing them to the point where they are not 
able to get the job done.
    If you give an agency a mission and then do not give it the 
resources to get the job done, basically you are telling the 
agency that you do not think very much of the job you are 
asking it to do. I think that OMB has failed to look at that 
issue.
    I have similar concerns regarding the people and resources 
that are needed to implement the new personnel systems in the 
Department of Homeland Security and the Department of Defense. 
Those Departments need enough money to get the job done and 
implement those new systems as the Administration wants them 
to. I would like to have you look at that.
    The last issue, and I do not know if you are even aware of 
this, but OMB is evaluated under the President's Management 
Agenda. Of the five categories for evaluation, OMB has earned a 
yellow for strategic human capital management and in E-
government, but continues to have red scores for competitive 
sourcing, financial performance, and budget performance and 
integration.
    What are you going to do to make sure that your own agency 
has green in all of those categories? You should be the leader 
and the role model in terms of management for the Executive 
Branch.
    Ambassador Portman. I could not agree with you more. 
Leading by example is certainly going to be my intent if I am 
confirmed. I have heard about the scorecard. It is the OMB 
scorecard applied to other agencies. It should also be applied 
to us. And we should be in position to lead by example. So I 
will definitely be focused on that.
    On the High Risk list, I appreciate your bringing that to 
my attention this morning. The issues that you raise are all 
issues that I know enough about to know that they deserve 
additional focus from OMB. As you know, OMB is a relatively 
small entity. It has to depend on the agencies to do a lot of 
the oversight and necessary work.
    You mentioned the personnel systems at the Department of 
Homeland Security and the Department of Defense that you have 
worked so hard on. They are working with OPM. OMB has a role. 
But it has really got to be within the agencies that the input 
is received from the people who will be affected, which I know 
is one of your top priorities. So we need to be sure the 
resources are there to meet our highest priorities. That 
certainly would be a high priority in terms of the changes we 
are asking them to undergo.
    So I will look into all of these, Senator, with you and 
others on the Committee. I will also be sure that this High 
Risk list, in general, is something that we can begin to work 
down. You say eight have been there since 1990, so clearly it 
is an area that needs attention.
    Senator Voinovich. Senator Coburn is examining a whole 
bunch more. But I really believe that if we attacked the High 
Risk list and improved the operations in the Defense 
Department, then some of these other issues that you are 
concerned about, Senator Coburn, would be addressed.
    Ambassador Portman. Thank you, Senator.
    Chairman Collins. Senator Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Madam Chairman, thank you very much. Welcome 
to you and congratulations to you on your appointment.
    We are, I think, going to have a highly qualified person 
with great experience to take over this position, and I very 
much look forward to your being in it.
    First, let me ask you, Mr. Portman, about OIRA. We did not 
have a chance to talk about that during your visit to my 
office, but I want to spend just a couple of minutes with you 
on this issue.
    This is, as you know, the Office of Information and 
Regulatory Affairs (OIRA), which is in the OMB. OIRA's role is 
to review regulations proposed by Federal agencies. Under the 
Executive Order that governs, OIRA's review process of proposed 
regulations is supposed to be a transparent one.
    This was an issue which was very much debated and discussed 
in both houses, I believe. It is important that the public know 
which proposals come from regulatory agencies and which ones 
originate with OIRA. And in particular, this Executive Order, 
which is number 12866, requires the public disclosure of 
``changes in the regulatory action that were made at the 
suggestion or recommendation of OIRA.''
    And again, this was a subject which was very intensively 
reviewed by Congress before this Executive Order was adopted 
because Congress wanted very much to know whether or not it was 
the regulatory agency which was making changes or proposed 
changes or whether this came through the political folks at the 
top, acting through the OMB.
    So what happened here is that OIRA has established a 
process of informally reviewing agency proposals prior to final 
decision-making at the regulatory agency. And according to the 
GAO, the number of informal reviews by OIRA has increased 
dramatically in recent years, and these reviews ``can have a 
substantial effect on the agency's regulatory analysis and 
substance of those reviews.''
    The changes, however, that are made pursuant to that 
informal review process are not made public pursuant to the 
Executive Order. So this practice, this informal review 
practice, seems to me to frustrate the intent of the Executive 
Order. And again, the purpose of that order is to ensure public 
disclosure, that the changes are made and where these changes 
are coming from.
    And so my question is are you familiar with this issue? If 
so, would you give us your reaction to these informal reviews? 
Because it seems to be inconsistent with the plain language of 
the Executive Order for agencies to make significant changes at 
the suggestion or recommendation of OIRA without disclosing 
that fact to the public.
    It is fine to make changes. That is not the issue. The 
issue is the transparency issue. Where do these changes come 
from? At whose suggestion were they?
    Ambassador Portman. Thank you, Senator.
    I am aware generally of the issue of how do you balance the 
internal deliberative process, which I think Members of 
Congress appreciate is an Executive Branch prerogative, with 
the need for more transparency. I was not aware of the specific 
issue of the informal reviews and your concern that they are 
not currently subject to the same transparency concerns.
    My overall approach to this will be to try to open it up 
more. I think sometimes the secrecy and mystery surrounding 
OIRA does not benefit the Congress or the public's interest or 
necessarily the Office of Management and Budget. My sense, as I 
have looked at this over the last couple of weeks, knowing that 
I might be asked to take on this task, is that OIRA works very 
well with the agencies and that for the most part, although 
there are refinements to a lot of these proposed regulations, 
that relationship has improved over time and it is more 
professional, more transparent. I would want to encourage that 
to continue.
    So E.O. 12866, as you know, provides for certain guidance. 
I will certainly be taking a look at that and specifically 
looking at the issue of the informal reviews.
    Senator Levin. To make sure that not just the purpose or 
the spirit of the Executive Order but literally the letter, in 
this case, of the Executive Order be complied with fully, we 
would appreciate your doing that.
    I guess one more question before my time is up. We have had 
a debate in this Congress over the Advanced Technology Program, 
and I think there are differences between Members of this 
Committee on the value of the program. I am looking at my 
friend, Senator Coburn, when I talk about the differences on 
this program. But he is very out front about it, and I have 
always admired him for being out front about the issues such as 
this where there are differences.
    But nonetheless, the majority of the Congress has 
appropriated money for this program. The law requires that when 
Congress appropriates funds, that unless they are 
unappropriated or somehow or other Congress changes the law, 
that the Executive Branch is supposed to execute the laws and 
not make up the laws.
    So this program has a 2006 appropriation, which is not 
being spent. I know the Administration wants to zero this 
program, and that may have the support of some Members of 
Congress. But we do not know what the 2007 budget is going to 
be yet, and there will be a battle over that issue as there is 
every year.
    But until that issue is resolved in 2007, I think the law 
needs to be abided by the Executive Branch. It cannot take the 
law unto itself. And so I would urge you to take a look at the 
2006 appropriation for that program and to make sure that, in 
fact, the program is implemented in 2006, as written by 
Congress, and that we do not have the funds not spent because 
in 2007 the Executive Branch hopes we will not appropriate 
more.
    That would be a request to you. It is, I think, what the 
law does require and maybe you can get back to us on what your 
intentions will be relative to those funds in 2006, which are 
still there, and to give us the assurance that, in fact, they 
will be spent.
    Ambassador Portman. Thank you, Senator. I appreciated 
talking to you briefly about that the other day.
    There are two issues here, as you say. One is the 
effectiveness of the program, the appropriateness of it, the 
necessity of it going forward, where we may have some honest 
differences.
    But the second issue is, as you say, a process issue, and I 
will look into that as to the 2006 appropriation and get back 
to you.
    Senator Levin. Thank you. Thank you, Madam Chairman.
    Chairman Collins. Thank you. Senator Coburn.
    Senator Coburn. Ambassador Portman, this last year, when 
the President submitted his budget and the budget 
justifications were sent to the Appropriations Committee, they 
were made unavailable to other Members of Congress. And I 
questioned your predecessor, Josh Bolton.
    And he made a commitment to me that next year they will be 
made available, not only to Members of Congress, but also 
available online. Will you confirm that commitment from OMB 
that they will, in fact, the budget justifications, be 
available to Members of Congress outside of the Appropriations 
Committee, as well as be available online to Americans?
    Ambassador Portman. Senator, if Josh Bolton committed to 
you, I would not want to go back on anything your friend and my 
friend, Josh Bolton, said. So as I said earlier, I think more 
information is better. I think it helps.
    Senator Coburn. The whole culture of limited knowledge 
about where we are spending the money and why cannot help us. 
Everybody in America needs to know why the President wants to 
spend money a certain way. And to say that we can only give 
this to a certain group of Senators or Congressmen belies the 
fact that we are an open society and an open government. The 
truth will set us free.
    If it is something the Administration wants, they ought to 
be willing to defend it, and it ought to be publicly open. So 
those budget justifications ought to be available to every 
Member of Congress and every citizen of this country.
    I would just hope that you would make sure that is 
implemented in this next year--and it is not to be critical. It 
is to have an understanding of where the budget justifications 
are coming from.
    One of the other things that I think is tremendously 
important for us to hold us accountable as elected officials is 
to have a Federal procurement database on the Internet that is 
transparent and allows the public to see who gets Federal money 
and for what. I would like your comments on that and whether or 
not you think that is a good idea? And if so, if you would be 
supportive of making that happen at OMB?
    Ambassador Portman. I will look into that. I know that is 
an issue that has come up, thanks to your interest. I think it 
makes sense, just as you say with regard to what the 
justifications are for our budget numbers, to have procurements 
which I assume would be major contract procurements be 
available for public inspection.
    On the database issue, my understanding is that there may 
be some logistical issues as to putting it on one database, and 
that is something that I will be looking into if confirmed.
    I believe that the agencies currently do provide the 
information, but it is not in the same format.
    Senator Coburn. The agencies, some do, some do not. USAID, 
for example, does not. They are in one program now because we 
have insisted on it.
    There is a database online today, but it is not accessible, 
it is not easily accessible, and it is not comprehensive. It is 
just part of sunshine.
    And I am not talking about security issues. I do not think 
they ought to be out there. I am not talking about things that 
do not need to.
    But for example, in Katrina one of the things that we have 
noticed is there is no transparency on the money that was spent 
by FEMA to the Corps past those contractors. You can get to one 
contractor but there is none. So consequently, in many of the 
things that we did in Katrina, we paid three times what we 
should have paid for it because we had all of this layering 
which was hidden. It was not transparent.
    What I am asking is that the information go to the American 
people because basically their collective wisdom is better than 
ours. And when they get to see it, they get to be critical of 
it. And they cause us to attune to their concerns, which 
sometimes we are not concerned with. And they can help us be 
better stewards of their money. So that is the motivation 
behind that.
    The other thing that I would like to see is some teeth to 
the terminations list. OMB has done a lot of great work in 
looking at--the PART analysis--programs that do not have 
effective goals, they do not measure their goals. They are not 
accomplishing their purposes. And OMB sends over here routinely 
a terminations list. Granted, it is sometimes disputed among 
Members of Congress.
    But one of the things that OMB can do is advise the 
President to veto spending bills, appropriation bills, that 
have those terminations list funded. That is the ultimate power 
that the President has.
    And I wonder what your thoughts are about utilizing a veto 
to carry out some of the terminations list that we know are 
wasteful. You will have a group that supports any one of those 
individual projects because they are localized, they are 
regionalized to prospective States or Congressional districts. 
But the only way you are ever going to get that solved is if 
you use the power of the Executive Branch to limit those.
    Ambassador Portman. It is an excellent question. I am just 
looking at the budget this year. As you know, there are 141 
programs this year that would be proposed in our fiscal year 
2007 budget for either termination or substantial reductions. I 
think it is a savings of almost $15 billion.
    This, of course, leads to the question of how do you veto 
individual items in a bill because some of these are relatively 
small programs in much larger bills. That goes to the question 
of the legislative line item veto we talked about earlier, and 
I indicated my support for that, in part to get at some of 
these issues and to have more accountability in the system 
where those issues are brought up, as you say, to the best 
disinfectant, which is the sunshine, which is disclosure.
    So I look forward to working with the Committee on this. I 
think some of it can be done short of a line-item veto, as you 
say, but it would also be helpful in some of these very large 
appropriations bills or the omnibus appropriations bills if we 
had the ability to pull out these individual programs that are 
in the Administration's budget and, from our point of view, 
appropriate for termination.
    Senator Coburn. Thank you, Madam Chairman. My time has 
expired. Will we have another opportunity?
    Chairman Collins. Yes. Senator Lautenberg.
    Senator Lautenberg. Thanks, Madam Chairman. I apologize for 
having been out of the room for so long at another committee, 
but I watched with interest what was taking place, the magic of 
the television facility is certainly worthwhile, but you have 
to kind of divide your thoughts.
    Ambassador Portman, you were asked questions, some of which 
I had in mind, about the budgeting process and where the 
variation comes between what the OMB has come up with and CBO. 
You have noted that there were some significant differences.
    I wonder whether you could comment on, are the tools that 
are used different from one organization to the other? You know 
CBO very well, having been the recipient of information from 
them when you served in the House. Is it a mechanical thing 
that produced the difference? How are these things weighted or 
induced? Are they induced to come out one way or another, do 
you think?
    Ambassador Portman. That is a good question. As you know, 
the Chairman talked a little bit about how relatively small 
changes in these assumptions can make huge differences down the 
road in terms of the CBO or OMB projections on deficits. Right 
now, as you know, we are facing a big gap between where OMB is 
and where CBO is on the deficit calculation for this fiscal 
year. And so that is based on different assumptions and 
therefore different models.
    There are very slight differences. Senator Collins talked 
about how 0.1 percent can mean a $272 billion change in the 
deficit over time. I think that accounts for it, Senator.
    I do not know that there is a bias in particular. As I said 
to you in our conversation yesterday, if you look for a bias 
you might see it going back and forth because right now, for 
example, CBO believes that revenues will be higher than OMB has 
estimated. Or even than some of the Treasury estimates, as I 
understand it.
    Other years it has been the other way around, where CBO has 
been more conservative in its estimates. I do not believe there 
is a bias there.
    Senator Lautenberg. We discussed it, and it would be 
shocking to me, in my business life, to have seen us try to get 
two different auditors in there for the same financial 
statement, to see them come up with differences.
    Ambassador Portman. Good point.
    Senator Lautenberg. I do not know whether conferences 
between the two are prohibited. I think they should be. But to 
iron out and be able to come up with an explanation of why 
these differences exist. And I understand and Chairman Collins 
knows very well what adjustments can mean. She understands the 
process extremely well, lots of things that come before this 
Committee.
    One of the things that is noted that, as is said in 
colloquial English, is beauty is in the eyes of the beholder. I 
heard one of our colleagues discuss the pride in our financial 
condition and listed several things that he thought indicated 
that we were sailing in the right direction.
    I look at the deficit, and we heard comments before by 
another colleague who said that we could not work our way out 
of the debt situation that we were in under present conditions.
    Now does it bother us that we have a $9 trillion debt limit 
that was pushed through and there was lots of opposition in the 
vote in the Senate to that? What are the prospects that we 
could be looking for another hike in the debt limit in the not 
too distant future? At what point is this a really dangerous 
condition for our country?
    We are now handing off debt to our kids in substantial 
proportion. Can we believe that those debts will disappear 
before 15 or 20 years, when our grandchildren are more mature?
    Ambassador Portman. It is a serious question. And, as I 
said earlier, I do believe our short-term budget projections 
are a little better. I do believe that we will meet the 
President's target, should there not be another major natural 
disaster or other event, because revenues are increasing, the 
economy is doing well, and you all are doing a good job in 
restraining the domestic discretionary spending, at least in 
the last couple of years, working with the Administration.
    So, we are on track, and our numbers should go down. That 
is what CBO is estimating for this year, as you know.
    But you are right, in terms of the long-term, and I would 
even say midterm, issues. Why is that? It is because of the 
mandatory spending continuing to increase far greater than the 
rate of inflation.
    If you look at the numbers in terms of the debt you talked 
about, the big concern I have is in terms of the so-called 
internal debt. In other words, the government to government 
debt, which is the Social Security Trust Fund primarily, but 
also other trust fund debts. Those are increasing dramatically 
because we have not taken some of these hard choices that 
Senator Lieberman and others talked about on the entitlement 
side.
    If we do not do that, we will see that total debt, not the 
debt owed to the public, but the total debt, including the 
intergovernmental debt, increase.
    On the public debt side, which is what most economists 
really think affects the economy, and you and I talked a little 
about this, we are doing a little better job. If you look at 
the historical average of that debt to GDP, we are within the 
range now. The projections going forward are that we will begin 
to see some reduction in that percentage to the economy, 
assuming the economy continues to grow as projected.
    But the bigger problem is not the public debt. The bigger 
problem is that internal debt, which is really another way of 
saying we have got an entitlement problem we need to address. 
And if we do not address that, I agree with you, it is not 
sustainable.
    Senator Lautenberg. Madam Chairman, if I might impose for 
just a short minute here, and that is to say that when we look 
at the internal debt and we try to estimate what the 
consequences of that will be as we try to make the sources from 
which we borrowed more reliable for the beneficiaries of the 
program, Social Security in particular, Medicare, etc.
    But then are we not forced to look at the programs? There 
is kind of a rush to the top in our society right now. Wealthy 
people are doing very well. I had a successful business, and I 
like it better this way than when I was a poor kid growing up 
in Paterson, I can tell you.
    But I worry about the country at large. The people who 
desperately need help from us, I mentioned before, like Head 
Start and some of the educational funding, I think is going to 
create a penalty that this country is going to suffer from for 
many generations unless we do something about it.
    Thank you very much. And thank you, Ambassador Portman.
    Ambassador Portman. Thank you, Senator.
    Senator Lautenberg. Lots of good luck to you.
    Ambassador Portman. Thank you, sir.
    Chairman Collins. Senator Carper.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thanks, Madam Chairman.
    I would like to say we were saving the best for last but I 
understand there will be another round of questions so this 
will not be the last.
    It is good to see you. Welcome. I understand your father is 
here?
    Ambassador Portman. He is.
    Senator Carper. And that he is 84 years young?
    Ambassador Portman. He is only 83 now. He is much younger 
than that. But he will turn 84 this summer.
    Senator Carper. I just want to say to your dad, you and 
Rob's mom did good work in raising this kid and instilling the 
kinds of values that we would like to see in all of our 
children. I just want to start by commending you.
    I understand your wife is sitting immediately behind you, 
the former Jane Dudley. And I just want to say you took up 
where his parents left off, and I think he has turned out 
pretty well.
    Ambassador Portman. She continues to mold me.
    Senator Carper. Thank you for sharing him with all of us. 
As my friend, Joe Biden, likes to say for people who put up 
with a lot: for you, no purgatory, straight to heaven, Mrs. 
Portman. You will get your reward. Thanks for sharing him with 
all of us.
    I say to your dad, your son is well known and well admired 
on both sides of the aisle here in the Congress, in the House 
where he served, and in the Senate as well. My guess is that he 
is going to be confirmed without any difficulty. He has already 
been confirmed once to be our Trade Ambassador, and I think, by 
almost every fair account, he has done a very fine job.
    His two immediate predecessors were also people that we had 
a high regard for around here. One was Mitch Daniels who worked 
for a number of years, as I recall, with Dick Lugar? I think he 
worked with Senator Dick Lugar and is now the governor of 
Indiana. He was held in very high regard.
    And subsequent to him Josh Bolton was our OMB Director and 
somebody that I like a lot, and I have a high regard for him, 
and I know others do, too.
    During that time that Mitch served as OMB Director, I think 
our budget deficit went up about $900 billion. And under Josh 
Bolton, during Mr. Bolton's tenure as OMB Director, I believe 
our Nation's debt might have gone up by about $1.5 trillion.
    And now we come to our third nominee here, and I just hate 
to think how much the deficit is going to go up under his 
watch.
    We had a good visit yesterday and talked about some of this 
stuff, and I just want to mention a couple of points if I may, 
and then I would like to ask for your comments.
    When I was in the House of Representatives, I mentioned to 
you yesterday that I was a co-author of the Balanced Budget 
Amendment to the Constitution, which got a whole lot of votes, 
I think about 280, which is very close to what you need to 
pass.
    It was not a balanced budget amendment that mandated a 
balanced budget every year. But it was one that said the 
President had to propose a balanced budget at a certain date 
and that Congress could unbalance the budget, but you needed a 
super majority, a three-fifths vote to unbalance the budget and 
a three-fifths vote to raise the debt ceiling, as well.
    In my State, we always had to propose balanced budgets. My 
own experience has been if you did not have a governor who was 
showing leadership on fiscal issues, or a mayor or county 
executive or president, it is not the nature of a legislative 
body to somehow offer the leadership on fiscal issues that the 
chief executive does not provide.
    In reflecting on a balanced budget amendment, sometimes I 
think we only need a balanced budget amendment that says at a 
certain date the President has to propose a balanced budget. I 
think in providing that kind of leadership and being able to 
defend himself or herself with the shield of the Constitution 
is still not a bad idea.
    I also mentioned to you yesterday, I authored when I was in 
the House of Representatives the first statutory line item veto 
bill that passed the House, I think by a three to one margin. 
It died over here in the Senate.
    This is an issue I think whose time is probably going to 
come again. I think Senator Kerry was over at the White House 
last month with some others sort of endorsing the idea. Our 
take on it was just a little different. I am going to lay it 
out and then ask you to comment on it.
    We called for, in our statute, a 2-year test drive for line 
item veto powers. In our proposal, the President was limited in 
how much he could rescind in spending. If a program was fully 
authorized, he could rescind no more than 25 percent of that 
authorization in his proposal. If the program was not 
authorized at all, the President could propose a rescission of 
100 percent. So there is a difference between programs that are 
authorized and unauthorized.
    When the President submits his rescission, the problem is 
the President can offer rescission messages every day. The 
Congress just usually ignores them and has for decades.
    In our proposal, the Congress could vote against a 
rescission by the President, a proposed reduction in spending, 
but they would have to vote. And we had an expedited process 
for compelling a vote. We did not require a two-thirds vote to 
override a rescission, a simple majority, 51 in the Senate and 
218 in the House. And we provide the President with this power 
for 2 years. Not forever. It certainly was not part of the 
Constitution, but I called it a 2-year test drive.
    There were those that were concerned that if we gave the 
President this kind of power and there was something that the 
President wanted Senator Collins to agree with him on, the 
President could say well, I am going to take out your favorite 
project in Maine, or for Senator Carper in Delaware, and to use 
that as a lever or a wedge to get his way.
    So we made it a 2-year test drive and said if the President 
abuses it, he will lose it. If he does not abuse it, then maybe 
we will restore it beyond that point in time.
    Let me just stop and ask you to comment, if you will, on 
the idea of line item veto powers, whether it should be in 
statute, whether it should be in the Constitution? And what 
virtues, if any, do you find in the proposal I just laid out?
    Ambassador Portman. First may I say, Senator Carper, I 
agree with you on the importance of leadership, particularly 
Executive Branch leadership as you saw when you were governor. 
It also requires teamwork, and I appreciate the leadership you 
have shown on some of these budget process reforms and on 
specific initiatives like line item veto or balanced budget 
where you have not necessarily been in the majority of your own 
party. So it requires leadership on both sides, and I take that 
responsibility seriously. So we will see what we can do 
together.
    On the line item veto, in a sense the line item veto that 
you supported was a more powerful tool for the executive than 
what we are proposing because, as you know, based on the court 
case we have changed the line item veto language to provide 
more of a legislative line item veto where the Congress does 
have the ability to play a very important role--an up or down 
vote which is important but in fact nothing can happen unless 
the Congress votes for it. It just brings it to the sunlight we 
talked about earlier. But there is not a 2-year test drive in 
the President's proposal. It is permanent, as I understand it.
    So I think it has some elements to it which I think 
Congress, and certainly the courts, would find more consistent 
with the separation of powers and the balance between us, 
including some time frames, including the way the rescissions 
would work. And OMB has already testified I understand recently 
that we could perhaps live with even some additional changes 
that Congress might think were appropriate. But it is 
permanent.
    My own thinking would be if we work through something that 
makes sense, that provides Congress with the ability to work 
its will, but on individual spending decisions, that we should 
probably make it permanent subject, of course, to change 
Congress to Congress or at any time Congress feels it is not 
being used properly. But I am not sure we need to have the test 
drive.
    Why? I think what you said is true. I think there is more 
of an acceptance now of the need for some more discipline on 
all of us and another tool for the executive to have the 
ability to take some of these leadership stands that you say 
are necessary. I think that thinking has evolved since your 
days in the House.
    Senator Carper. Thanks. My time is expired. I understand 
there is going to be a second round, and I will be right back. 
Thank you.
    Chairman Collins. You are leaving during my second round?
    Senator Carper. I am not going anywhere.
    Chairman Collins. Ambassador, I want to go back to your 
answer to the question about a special inspector general and a 
chief financial officer to oversee all of the Katrina spending. 
You raised a very valid point about accountability and making 
sure that the individual agency IGs and CFOs are not ``being 
taken off the hook,'' I think was your term.
    The problem, however, is when you have a massive 
expenditure of billions of dollars that crosses department 
lines and you have no one person who is responsible for 
establishing the controls for all of the departments and 
agencies involved, whether it is the Army Corps or DHS or HUD 
or HHS, you have a situation lacking a uniform approach. I 
think this leads to a lack of accountability.
    In addition, with DHS, which obviously had the lion's share 
of the money, there was another significant problem, and that 
is that there is not a permanent CFO in place right now. We 
recently held the confirmation hearing for the first permanent 
CFO.
    I wanted to bring those issues up before going on to some 
other issues because I really believe in the future we need a 
different approach. I continue to believe that had the 
proposals advanced by this Committee been put into place, we 
would not have seen so much waste, fraud, and abuse that have 
really plagued the recovery. So it is just food for thought for 
the future.
    I do want to go on to some other issues.
    As you know, within the OMB is the Office of Federal 
Procurement Policy, a small office but a critical one for 
establishing the Federal policy for contracting. We have seen 
some real problems with an over reliance on sole source 
contracts recently. The Special Inspector General for Iraq 
Reconstruction and Recovery has identified numerous cases of an 
excessive reliance on sole source contracting, as well as 
outright contractor fraud, both of which have resulted in 
significant waste of taxpayer dollars.
    We have also seen an inability to be able to trace where 
money is going and what it has been used for.
    Similarly, in the aftermath of Hurricanes Katrina and Rita, 
FEMA awarded four large sole source contracts to provide 
temporary housing. Originally these big four contracts were 
valued at $100 million each. But recently FEMA raised the 
ceilings for each of these four contracts to $500 million 
without recompeting them.
    That is very troubling to me because had we competed these 
contracts in the first place and had them on the shelf 
available to be implemented in the event of a natural disaster, 
I am convinced that we could have saved significant money.
    What will you do, as head of OMB, to strengthen the 
protections against sole source contracts? You mentioned that 
it is supposed to be done only when there is either not another 
supplier available or in times of national emergency. But we 
are not anticipating natural disasters that we know are going 
to occur. And it is possible to negotiate these kinds of 
contracts in advance.
    Ambassador Portman. You raise very valid concerns. As I 
said earlier, my general approaches, of course, will be to 
encourage competition and recompeting when it is necessary to 
go to a sole source because, as you say, it is the only 
contractor that can handle an extraordinary circumstance. And I 
think it may be the case in some of these issues with Iraq as 
well as with Katrina. And then second, when there is a national 
emergency or the urgency is required.
    I will be working with, as you say, the Administrator for 
Federal Procurement Policy to review not only what happened in 
Katrina which, as you say in your report, has resulted in these 
caps being raised dramatically, and then the inability to not 
only save some taxpayer dollars but also some temporary housing 
that ended up not being used for Katrina, so some waste.
    But I also think it needs to be looked at more generally, 
and I look forward to working with the Committee on that. As 
you know, in the procurement area we have made some strides in 
terms of transparency, and I think that needs to continue as 
well. There are Federal rules and regulations and statutes, as 
you say, that do authorize sole source contracts but only in 
these limited circumstances. We need to be sure that we are 
abiding by those.
    Senator Collins. I want to now turn to a question that I 
have asked at every OMB Director's hearing since I have been in 
the Senate, and it is still an issue. It involves the Low 
Income Home Energy Assistance Program (LIHEAP), which is so 
important to low income families in my State and in other cold 
weather States. It has become even more important given the 
cost of energy and the escalation of prices that we have seen 
in the last year.
    We do not administer this program in the most cost-
effective way. If there were an advance appropriation for this 
program, which would mean that for one year you would have to 
double fund the LIHEAP program, you would allow States, 
community action agencies, and others that are involved to 
serve their clients during the summer months when home heating 
oil prices are far lower or significantly lower than in the 
winter months. And you would be able to stretch that LIHEAP 
appropriation further or increase the size of the benefit or 
serve more people.
    I ask that you work with me to take a look at the way the 
LIHEAP program is structured. If, in fact, the bulk of the 
purchasing could be done in the summer months rather than 
waiting to the height of the winter months when costs are the 
highest, we could serve more people or at least stretch the 
dollars further. I would ask that you take a look at this.
    I raised this issue at Josh Bolton's hearing. I raised it 
at Mitch Daniels' hearing. And each time I get a promise to 
take a look at this. But I hope that you will not only make 
that promise but truly work with us to see if there is a better 
way.
    Ambassador Portman. I appreciate that. I enjoyed our 
conversation about that. And because of that conversation, I 
have begun to look at that and, if confirmed, I will do even 
more.
    One of the issues that I see is the difference between the 
emergency funding and the base funding with regard to the 
emergency needs. Of course, it would be difficult to know what 
we need in advance. But with regard to the base amount, which 
is a substantial amount as you say, there I will be interested 
in looking at some flexibility options both with regard to the 
Federal share but also the State cost share.
    So I look forward to working with you on it. I have learned 
more about LIHEAP in the last week than I had known previously, 
even in my time in Congress. I will be learning even more, 
Madam Chairman, at your request.
    Chairman Collins. Thank you. Senator Voinovich.
    Senator Voinovich. Thank you.
    I am sorry that I had to leave for a few minutes. It is 
obvious that you will have a full plate, Mr. Portman, and if I 
were in your shoes, I would make sure that OMB's management 
agenda is thoroughly addressed. Because I think if some of 
these management challenges are taken care of, you are going to 
be able to do a much better job responding to some of the 
issues that we are asking you to address.
    You and I have talked about the growing national debt, and 
I think the House included in their budget proposal a provision 
raising the debt ceiling to almost $10 trillion, which, if it 
becomes law this year, would be a 78 percent increase in the 
national debt since I came to the Senate in 1999.
    You heard Senator Bennett's comments about how these tax 
reductions are helping the economy. I am going to send you a 
copy of this article, and I would ask that it be inserted into 
the record.\1\
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    \1\ The article appears in the Appendix on page 43.
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    Chairman Collins. Without objection.
    Senator Voinovich. It is a Washington Post opinion article 
by Sebastian Mallaby. The title of it is ``Return to Voodoo 
Economics.'' The article asserts that tax cuts never produce 
enough economic activity to make up for the loss of revenue.
    If we continue to extend the taxes that were passed in 
2001, we are talking about a $2.4 trillion loss in revenue. I 
think we have reached a stage where we have to decide how much 
of our GDP do we need to run the country? A couple years ago, 
Federal taxes were 16.5 percent of GDP. I think Federal taxes 
are up to about 18.5 percent of GDP today. But what should the 
percentage be? It has historically been around 20 percent. The 
question is: What should the percentage be? How do you get 
there? I would be interested in your thoughts on that.
    Regarding tax reform, the President has talked eloquently 
about it in the past, but it looks like it has been placed in 
somebody's drawer and forgotten.
    The President, in the State of the Union address, talked 
about a commission to examine reforms to Social Security, 
Medicare, and Medicaid. To my knowledge, that commission has 
not been appointed yet--we ought to get on with that.
    I believe what we are ignoring is the growing national 
debt. We are ignoring the great impact of the coming baby 
boomers' retirement. And we are ignoring the costs of homeland 
security and the war abroad.
    Senator Lieberman believes that we are not spending enough 
money on homeland security. But Madam Chairman, I do not know 
if you know this or not, but we have doubled the DHS budget 
since September 11. If you include other homeland security 
money that is coming from other agencies, we have tripled that 
budget. So we are spending an enormous sum of money on homeland 
security. We are now putting pressure on the nondefense 
discretionary budget.
    So Mr. Portman, I would be interested in knowing: Where are 
you on tax reform? And where are we on this commission that is 
going to examine mandatory spending, which we have to address 
as soon as possible?
    Ambassador Portman. You have touched on all of the big 
issues. You and I have had many of these conversations about 
the economy and the impact of taxes and particularly on the 
deficits. I, as you know, feel strongly that restraining the 
spending must go hand-in-hand with a growing economy, and we 
need to do everything we can to encourage that. We have seen 
it, as you know, in the last couple of years. I mentioned the 
fact that our revenues were up last year 14.5 percent. I do not 
think it is a coincidence. I think the tax relief that you 
ended up supporting and perhaps refining, that became fully 
implemented in 2003 correlates incredibly well with the job 
growth and the economic growth.
    Senator Voinovich. There are some very valid economists 
that say that is part of it. But we have also had lower 
interest rates, and the confidence has been restored in the 
financial markets.
    Some Republicans say the economic recovery has all happened 
because of the tax cuts. I do not think that is the case. So 
there are some differences of opinion here.
    But what do we do about the national debt, the growing 
mandatory spending, and the fact that we have a tax code that 
is absolutely a nightmare? Something should be done about these 
things.
    Ambassador Portman. You are absolutely right. How do we 
take what is a growing economy and a growing share of revenue 
as to GDP--by the way, the average over the last 40 years as 
18.2 percent? If the Treasury estimates from last week are 
accurate, and we have another 5 months in this fiscal year so 
we do not know for sure, but if they are accurate, we will be 
up to 18.3 percent.
    So we are not under taxed historically right now. We are 
overspending, slightly overspending which leads to the annual 
deficits. And in terms of the long-term costs----
    Senator Voinovich. But the problem is that we are spending 
so much on the war----
    Ambassador Portman. War and Katrina.
    Senator Voinovich [continuing]. And on the response to 
Katrina and homeland security.
    Ambassador Portman. You are absolutely right, substantial 
increases.
    Senator Voinovich. That is why I have said that to be 
responsible, and I know this is controversial, we should go to 
the American people and ask them for a temporary tax increase 
to cover these temporary costs so we can get the budget back 
into balance and adequately fund the nondefense discretionary 
budget.
    Ambassador Portman. We are getting very close on that. I 
honestly believe we will make our 2009 cutting it in half, 
which will be down, by the way, Senator, to 1.4 percent of GDP, 
which is well below, as you know, the historical average. The 
40-year average is 2.3 percent of GDP.
    So we are doing OK in the short term. But the issue is the 
long-term. I could not agree with you more on tax reform. One 
thing we can do in terms of taxes is deal with the AMT and deal 
with the tax gap through tax reform.
    I think frankly it is a challenge but also an opportunity 
right now for us to combine the entitlement reform that you 
have supported with tax reform that enables us to raise revenue 
in a more efficient way to be able to deal with some of these 
long-term problems that you talk about.
    And I am eager to roll up my sleeves, if confirmed, and 
work with you on all three of these issues. One, being sure 
that we have the adequate revenue and that it is being raised 
in the proper way, and that is the tax reform side. Two, is 
dealing with the budget issues, both short-term and long-term 
and domestic discretionary spending. There we have to be sure 
we have the right balance. You talked about the concerns we 
have right now with homeland security and the war. We need to 
figure out which goes into supplementals and which goes into 
annual budgets so there is more oversight.
    But third, is this longer-term issue of entitlement 
spending. It is not sustainable. Medicare, as you know, is just 
over 6 percent growth. Medicaid, 7 percent to 8 percent. As I 
said, if you look down the road 30 and 40 years, pretty soon 
entitlement spending takes up the entire budget, assuming we 
keep our revenues to GDP roughly where it is, which is 
important to keep the economy growing.
    So these are big issues. I am an optimist. As I said in my 
opening statement, I took this job, Senator, as you know 
because I have talked to you about it, because I believe that 
we have a historic opportunity right now to address some of 
these issues. I do not know if we are going to be able to do it 
in the next few months because we have an important election 
coming up, but I do believe that it is time for us to grapple 
with these big issues that have tremendous long-term impacts.
    If we do it now, then there will be less dislocation both 
to our economy but also to our seniors and others who depend on 
these entitlement programs.
    Senator Voinovich. And our kids.
    Ambassador Portman. And our kids.
    Chairman Collins. Mr. Ambassador, I know Senator Carper is 
coming back for some additional questions, and I have a few 
additional ones, as well.
    Senator Carper, would you like to do your questions first 
or do you want me to proceed?
    Senator Carper. I have a group I am trying to meet with, 
and they are just going to wait. If I could proceed, that would 
be a real help.
    Chairman Collins. Then why don't you proceed?
    Senator Carper. Thank you very much.
    I recall the words in the 2004 campaign, you may recall the 
words in the 2004 campaign. One of the candidates for president 
was accused of flip-flopping. I forget what the issue was. I do 
not know if it was a vote on a supplemental appropriation. But 
he said first I was for it and then I was against it or words 
to that effect.
    We have done some skullduggery and gone back to see how 
former Congressman Portman voted. And we all are captives of 
our voting records. I am sure you can find things to crucify me 
with mine.
    But we found out that in 1995 and 1997 you voted for a 
budget reconciliation measure, a budget resolution that 
apparently included what we call PAYGO, two-sided PAYGO. For 
our guests, it means that if Senator Carper or Senator Collins 
or Senator Voinovich want to cut taxes we have to come up with 
an offset so that the deficit will not get larger. We can 
either cut spending someplace to offset it or raise taxes 
someplace else.
    But some of us fought very hard for a PAYGO approach that 
says if anybody is going to do something to make the deficit 
bigger, we have got to come up with an offset, whether it 
happens to be spending increases or whether it happens to be 
revenue cuts.
    Let me just ask your views now on this issue, if you do not 
mind. How do you feel today about two-sided PAYGO?
    Ambassador Portman. It is a very fair question.
    As you know, I was Vice Chair of the Budget Committee, and 
I took a different point of view. And part of it, honestly, was 
informed by the experience that I had. I ran for Congress in 
1992 for the first time. At that time, our deficit was 4.6 
percent of our economy, which is the way most economists like 
to measure it because that is really what they are concerned 
about is how much is it affecting the economy, interest rates, 
inflation, and so on.
    Today, this year, we are probably at about 2.5 percent of 
our economy. Is it too large? Do we need to get it down? Yes. 
But we were in even worse shape in 1992.
    What happened is over that time period of my first 7 or 8 
years in Congress, we finally got around to this balanced 
budget amendment. We got Democrats and Republicans working 
together--you were one of them--to say we need to keep our 
spending under control and we need to do some things on the tax 
side early, tax increases. But later in 1997, when the economy 
really took off, capital gains cuts and other tax relief.
    My experience was, when I stood down on the House floor and 
said proudly, along with Chairman John Kasich, a friend of 
Senator Voinovich's and others, that we were balancing the 
budget and we were going to do it by 2002. And doggone it, it 
was because we were making all these tough decisions on 
spending.
    What happened is No. 1, we did not make tough decisions on 
spending. Spending continued to increase. But No. 2, we 
balanced the budget much sooner than anybody expected. Why? 
Because of the economy. We did not do it in 2002-2003. I think 
we did it by 1999-2000, we had balanced budgets.
    I just sort of became a believer more in the importance--
and Senator Collins talked about this at the outset--of 
economic growth being really what is going to drive us to 
fiscal sanity here, and that we need to be very careful, 
whatever we do, that we do not risk putting in place policies 
that could affect economic growth.
    I am concerned, frankly, when you look at the way PAYGO 
works, right now if you have a spending program it goes on 
indefinitely even if it is meant to expire. I mentioned the 
Agriculture bill earlier, but other mandatory spending. Whereas 
on the tax side you assume it is all going to expire, therefore 
there will be tax increases.
    So if there was a more level playing field in terms of how 
you would apply PAYGO, I frankly would feel differently about 
it. But the position I took in the House Budget Committee is 
the position that, I think, the Administration takes and I 
still take, which is I am for the PAYGO rules as it applies to 
mandatory spending. I think it is important. But as to taxes, I 
am concerned that if we did that we would risk the economic 
growth side.
    I do think we need to get to balanced budgets. I do think 
we need to increase our revenues. But as I saw in the 1990s, 
the way to do that is to be sure we have a strong and growing 
economy.
    Senator Carper. I think it was Denis Healey who used to be 
Chancellor for the Exchequer who used to talk about the theory 
of holes. It goes something like this: When you find yourself 
in one, stop digging. We need all the tools that we can muster 
to stop digging.
    I do not know that we will ever have a balanced budget 
amendment to the Constitution. We might, but I do not know.
    We may or may not have some kind of statutory line item 
veto powers for the President. It may happen. It may not.
    We have had experience with PAYGO on both the spending side 
and the tax side. I think it was to good effect. And I, for 
one, would welcome its return. And somewhere along the line 
maybe we can convince our friends in the Administration that 
the position that some of them supported as recently as 1995 
and 1997 is actually not a bad position to support now.
    Yesterday when we were meeting, I telegraphed a pitch to 
the extent that I said I wanted to talk today a little bit 
about the tax gap, and I suspect others have a bit already.
    But in a day when we have these huge budget deficits, $300 
billion and $400 billion, and we find out that the tax gap last 
year apparently was about $290 billion. That is $290 billion 
that IRS tells us was owed, and we actually have some idea who 
owed it and the kind of taxes that were owed, and we did not 
collect the money.
    I would just ask your thoughts on what the Administration 
would do and what role you will play in trying to make sure we 
reduce that $300 billion. Even if we can reduce it about $100 
billion, that is real money.
    Ambassador Portman. It is a great question, and I know your 
Subcommittee has done a lot of good work on this.
    As you know, I co-chaired the IRS reform effort with 
Senator Bob Kerrey in the 1990s. The tax gap, to me, is a huge 
opportunity for us. I mentioned in response to Senator 
Voinovich's question about tax reform that should be one of our 
drivers. That should be one of the reasons that we look to tax 
reform because there are certain things you can do to simplify 
the code and to make it easier to enforce the code. We have 
done the opposite, as you know, under our watch that will help 
to close the tax gap.
    So I think it is a great opportunity for us. I think it 
should be one of the reasons we look to tax reform. I think 
that tax reform ought to, among other things, focus on how to 
close that tax gap.
    Senator Carper. Thanks very much, and it is good to see 
you. Good luck. You are going to need it. And it is just a real 
pleasure to meet your family today.
    Ambassador Portman. Thank you, Senator.
    Senator Carper. Thanks, Madam Chairman.
    Chairman Collins. Ambassador, I want to discuss briefly the 
need to examine innovative ways of financing essential 
programs. Let me give you some examples.
    In shipbuilding, the new Chief of Naval Operations (CNO) 
has said that we need to be spending on average $13.4 billion 
for shipbuilding for many years in order to achieve the 313 
ship fleet that the CNO believes is necessary.
    One obvious way to achieve that goal is to put in the $13.4 
billion that is needed over the next several years. But another 
way to achieve the same goal is through incremental funding 
where you would recognize that a destroyer, for example, or a 
submarine is not constructed all in one year. Thus, you spread 
the cost over the construction period and budget an amount that 
fully covers the cost in a particular year but does not fully 
fund the entire ship or submarine in the initial year.
    OMB traditionally has been very reluctant to engage in 
incremental funding. Do you have any initial impressions of 
whether we should look for more innovative funding techniques 
to meet very real needs, needs that have been identified by the 
Chief of Naval Operations, in shipbuilding?
    Ambassador Portman. I am interested in looking at that. I 
know Treasury, OMB, and CBO have all done some analyses of the 
particular issue you are talking about and on capital budgeting 
generally. There is some concern that has been expressed by at 
least some of those entities, maybe all three of them, about 
what the impact would be on the taxpayer. Would you end up 
spending more or less if it was not subject to what they would 
call Treasury financing?
    But it is something I am very interested in looking at with 
regard to some of those known long-term expenses, and I look 
forward to working with you particularly on the Navy ship 
issue.
    Chairman Collins. Thank you.
    Senator Voinovich, I know you need to go shortly. Do you 
want to ask any additional questions?
    Senator Voinovich. No, I am fine. Thanks for being willing 
to take on this job.
    Ambassador Portman. Thank you, Senator. It is an honor to 
do it.
    Senator Voinovich. It is comforting to know that you are 
going to be there, and I am sure that you know I will work with 
you and this Committee will work with you.
    Ambassador Portman. I look forward to it. Thank you.
    Chairman Collins. Thank you. You are very fortunate to have 
Senator Voinovich as your very strong advocate. He is a 
terrific Member of this Committee, and his endorsement and 
introduction of you carry great weight with the entire 
Committee. So thank you for being here today.
    As you may be aware, we are in the midst of a 
recapitalization program for the Coast Guard that is known as 
the Deepwater Program. Study after study has said that the 
Coast Guard vitally needs to rebuild its cutters, its aircraft, 
and its communication system. Deepwater is the plan to do so.
    That plan, however, stretches over some 20 years, and I 
think the Administration actually recently extended 
implementation of Deepwater to 22 years.
    If we were to recapitalize the Coast Guard over a 10-year 
period, we would end up saving more than $1 billion. By 
stretching out implementation of Deepwater we are making the 
program far more expensive in the long run, as well as delaying 
the Coast Guard the use of vitally needed assets.
    The Coast Guard, as you are well aware, in the post-
September 11 environment has taken on a much greater mission 
for homeland security, for port security, and as a result is 
really stretched very thin.
    Will you commit to taking a look at whether or not, rather 
than stretching out the recapitalization program, we could 
achieve significant savings by recapitalizing the Coast Guard 
over a shorter period of time?
    Ambassador Portman. I certainly will take a look at that. 
This is always a difficult balance, looking at the year-to-year 
budget numbers and then looking at what some of the long-term 
implications are. I think I told you about some of the 
experiences I had as a Member of Congress in this regard, with 
regard to environmental cleanups where we could shorten the 
time and save taxpayers literally billions of dollars, which we 
were able to do on one site in the former Congressional 
District I represented. But we had to deal with the higher 
impact on the budgeting in those earlier years.
    Given the situation we are in of trying to reduce our 
deficits and eventually our debt, we need to balance that 
against some of these long-term needs.
    But I certainly will look at that particular issue with you 
and, in general, would like to work with you on that to be sure 
that we are making wise decisions for the long-term for the 
taxpayers.
    Chairman Collins. Finally, I have many other questions that 
I am going to submit for the record but only one more that I 
want to raise here today.
    Senator Carper and I have been working together over the 
last 3 years on comprehensive legislation to reform the Postal 
Service. It implements many of the recommendations of the 
President's Commission on the Postal Service and would place 
the Postal Service on sound financial footing going forward.
    The Postal Service really matters to our economy. It is the 
linchpin of a $900 billion mailing industry that employs some 9 
million Americans in fields as diverse as financial services, 
paper manufacturing, printing, publishing, and catalog 
production. It has an enormous impact on our economy. The need 
for predictable, affordable postal rates is evident as is the 
need to get away from the litigious, lengthy process that we 
have now for determining postal rates.
    Both the House and the Senate have passed comprehensive 
postal reform bills, and we are about to begin our conference. 
But the biggest hurdle that we face right now is the 
Administration's insistence that the bill that we produce be 
budget neutral.
    Here is the situation that we face: Over the next 10 years, 
the CBO's latest estimate is that this legislation would have 
an impact of $1.5 billion on the budget. That is substantially 
lower than the original score for this bill, which was $3.9 
billion.
    But if you look over the long-term you find that this 
legislation actually has a beneficial impact on the Federal 
budget because we require the Postal Service to pre-fund its 
enormous unfunded liabilities for health insurance. And because 
that money is paid into Treasury coffers before it is paid out 
to retirees, it has a beneficial impact on the Federal budget.
    We only do postal reform legislation once every 30 years. 
Having dealt with this bill during the last 3 years, I 
understand why we only do it every three decades. I would urge 
you to work with us on postal reform. We need to get this bill 
through. It is an excellent bill, reflecting 3 years of work, 
and has passed both the House and the Senate. We need to work 
together and to recognize that the long-term impact will not 
only put the Postal Service on a sound financial footing and 
require it to pay down enormous unfunded liabilities, but also 
that the long-term impact will be very positive for the overall 
Federal budget.
    So I hope you will work with us. We really need to get this 
done, and we need to get it done this year.
    Ambassador Portman. Thank you, Madam Chairman.
    I am impressed with all the projects that this Committee 
and you personally have ongoing. And this is a huge one. As you 
know, I have in the House had an opportunity to look into this 
and to vote on this. The pre-funding of the future retiree 
health benefits I know is a huge issue and an overhang that 
needs to be dealt with.
    I understand the President's budget this year does have a 
way to take funding out of escrow and to start to pay down some 
of those future liabilities. But I will look forward to working 
with you on this with the hopes that we can come up with a 
solution. As you say, once every few decades we need to do 
this.
    I agree with you that the predictability that could come 
with that and putting the service on a sound financial footing, 
at least for the next couple of decades, is critical. So I look 
forward to working with you on it.
    Chairman Collins. Thank you very much.
    Again, I want to thank you not only for your participation 
in this hearing today and fully answering all of our questions, 
but for your ongoing commitment to public service. You have 
succeeded at every job you have ever taken on, and I feel that 
we are very lucky in this country to have an individual with 
your talent and skills being willing to take on what I think 
may well be the most difficult and thankless job in the Federal 
Government. It is a credit to you and speaks well of your 
strong commitment to public service.
    I thank your family for their commitment, as well, because 
I know it means working incredibly long hours. I am confident 
in predicting that you are going to have very strong support by 
this Committee, and we will work to move your nomination 
forward very quickly so that you can begin working instantly on 
all of the issues that we have raised today.
    Without objection, the hearing record will be kept open 
until noon tomorrow for the submission of any additional 
written questions and statements for the record. The sooner you 
get that information back to us, the sooner we can proceed to a 
Committee vote.
    I thank you very much for your appearance today and for 
your commitment to public service.
    Ambassador Portman. Thank you. Madam Chairman, I just want 
to thank the staff. The staff interview was very helpful to me.
    And I want to thank you particularly for a speedy hearing 
and your willingness to expedite the nomination. Thank you.
    Senator Collins. Thank you. This hearing is now adjourned.
    [Whereupon, at 12:39 p.m., the Committee was adjourned.]

                            A P P E N D I X

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