[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
                THE PRESIDENT'S FISCAL YEAR 2009 BUDGET

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

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

            HEARING HELD IN WASHINGTON, DC, FEBRUARY 7, 2008

                               __________

                           Serial No. 110-30

                               __________

           Printed for the use of the Committee on the Budget


                       Available on the Internet:
       http://www.gpoaccess.gov/congress/house/budget/index.html




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                        COMMITTEE ON THE BUDGET

             JOHN M. SPRATT, Jr., South Carolina, Chairman
ROSA L. DeLAURO, Connecticut,        PAUL RYAN, Wisconsin,
CHET EDWARDS, Texas                    Ranking Minority Member
JIM COOPER, Tennessee                J. GRESHAM BARRETT, South Carolina
THOMAS H. ALLEN, Maine               JO BONNER, Alabama
ALLYSON Y. SCHWARTZ, Pennsylvania    SCOTT GARRETT, New Jersey
MARCY KAPTUR, Ohio                   MARIO DIAZ-BALART, Florida
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 DANIEL E. LUNGREN, California
EARL BLUMENAUER, Oregon              MICHAEL K. SIMPSON, Idaho
MARION BERRY, Arkansas               PATRICK T. McHENRY, North Carolina
ALLEN BOYD, Florida                  CONNIE MACK, Florida
JAMES P. McGOVERN, Massachusetts     K. MICHAEL CONAWAY, Texas
NIKI TSONGAS, Massachusetts          JOHN CAMPBELL, California
ROBERT E. ANDREWS, New Jersey        PATRICK J. TIBERI, Ohio
ROBERT C. ``BOBBY'' SCOTT, Virginia  JON C. PORTER, Nevada
BOB ETHERIDGE, North Carolina        RODNEY ALEXANDER, Louisiana
DARLENE HOOLEY, Oregon               ADRIAN SMITH, Nebraska
BRIAN BAIRD, Washington              [Vacancy]
DENNIS MOORE, Kansas
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin

                           Professional Staff

            Thomas S. Kahn, Staff Director and Chief Counsel
                 Austin Smythe, Minority Staff Director


                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, February 7, 2008.................     1

Statement of:
    Hon. John M. Spratt, Jr., Chairman, House Committee on the 
      Budget.....................................................     1
    Hon. J. Gresham Barrett, a Representative in Congress from 
      the State of South Carolina................................     3
    Hon. Jim Nussle, Director, Office of Management and Budget...     4
        Prepared statement of....................................     8

                THE PRESIDENT'S FISCAL YEAR 2009 BUDGET

                              ----------                              


                       THURSDAY, FEBRUARY 7, 2008

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 11:00 a.m., in Room 
210, Cannon House Office Building, Hon. John M. Spratt 
presiding.
    Present: Representatives Spratt, DeLauro, Edwards, Cooper, 
Allen, Schwartz, Kaptur, Becerra, Doggett, Blumenauer, Berry, 
Boyd, McGovern, Tsongas, Etheridge, Moore, Bishop, Ryan, 
Barrett, Bonner, Garrett, Diaz-Balart, Hensarling, Simpson, 
Mack, Campbell, Tiberi and Alexander.
    Chairman Spratt. I call the hearing to order and welcome 
back to the House Budget Committee our former Chairman, Jim 
Nussle, and I thought I saw Jim Bates out there, too. All the 
old alumni, and we are delighted to have you participate.
    Jim chaired this Committee for six years honorably, 
graciously, and fairly, I might add, and his presence still 
looms over this room in the portrait that hangs just behind me. 
Jim, we are glad to meet you today in a new and elevated 
capacity as the Director of the Office of Management and Budget 
and member of the Cabinet.
    Mr. Nussle. I was just trying to think, when you said, 
``elevated.'' I am not sure that that is, I do not want to 
debate you already, Mr. Chairman, but elevated it may not be.
    Chairman Spratt. Well, you may have seen this cartoon, but 
Herblock used to run a cartoon in the Washington Post after the 
inauguration of every new President. It showed an empty 
barber's chair, and this caption beneath it: ``Every new 
President deserves a free shave.'' In that vein we will try to 
tread lightly today. But after you take some of our questions 
you may wish you were sitting on the dais here again instead of 
there at the witness table.
    The Bush Administration begins its last lap with this 
Budget for 2009. But after seven years it seems to us that it 
bears all the earmarks of previous Budgets: more tax cuts and 
more deficits and more debt offset by draconian cuts in 
Medicare and Medicaid, and smaller but significant cuts in such 
things as the Social Services Block Grant and the Community 
Services Block Grant. President Bush took office with an 
advantage that no President in recent times has enjoyed: a 
Budget in surplus, big time surplus, $236 billion in the year 
2000. His economists looked out ten years and estimated that 
over the next ten years cumulative surpluses would come to $5.6 
trillion. His first Budget suggested that we could have it all: 
guns, butter, tax cuts too, and never mind the deficits. But by 
the year 2004 the surplus was gone, vanished, replaced by a 
deficit of $413 billion. In nominal terms, the largest deficit 
in American history.
    For fiscal 2009 the Bush Administrative projects a deficit 
of $407 billion, very near the record level of 2004. But in 
calculating this deficit the Administration has inserted a $70 
billion plug for the cost of our deployment in Iraq and 
Afghanistan in 2009 and nothing thereafter. The Administration 
also assumed that the Alternative Minimum Tax, the AMT, will be 
fully in effect after 2008, reclaiming with one hand the tax 
cuts extended with the other. In short, the Bush 
Administration's Budget understates spending, in our 
estimation, and overstates revenues. If realistic adjustments 
are made for our deployments in Iraq and Afghanistan, and if 
the AMT is adjusted so that it does not apply to middle income 
taxpayers, by our calculation the deficit is $440 billion, a 
new record, and the Budget is nowhere near balanced by 2012. 
When the President took office the national debt stood at $5.7 
trillion. Today it is $9.2 trillion and rising, projected to 
increase to 9.7 by the time the President leaves office, up $4 
trillion in eight years. This is the legacy left to our 
children and grandchildren.
    To move the Budget to balance and still renew the tax cuts 
passed in '01 and '03, and also extend other popular tax 
concessions such as the R&E Tax Credit, plus pass some new tax 
cut initiatives, this Budget proposes, first of all, cuts in 
Medicare of $556 billion over ten years, cuts in Medicaid of 
$47 billion, $5 billion in fees on veterans, $86 billion in new 
user fees, and this Budget wipes out completely, totally 
eliminates, the Social Services Block Grant and the Community 
Services Block Grant, two longstanding pillars that have held 
up the, the social safety net. And it wipes out forty-seven 
small educational programs. It eliminates in addition the 
Weatherization Program and cuts LIHEAP by $570 million at a 
time when fuel prices are soaring and the existing program 
serves only a fraction, 16 percent, of those who qualify. It 
cuts CPA by $330 million, and Centers for Disease Control by 
$433 million in each, in one year, 2009.
    At the same time, and this disserves us, this 
Administration declines to submit a realistic supplemental for 
what our deployments in Iraq and Afghanistan are likely to cost 
over the next five years, although we have a five year cost 
basis from which to extrapolate that number. Since the request 
for fiscal 2008 for these costs is $199 billion this is a 
significant omission to say the least, easily $500 billion. The 
Administration also declines to submit a construct for fixing 
the Alternative Minimum Tax so that it does not come down on 
middle income families for whom it was never intended. Instead, 
it lets the AMT remain on the books, fully effective after 2009 
when everyone knows that this is not fair or politically 
viable. So it seems to us that far from proposing a plan to fix 
the Budget, and Administration is proposing policies that will 
worsen it and leaving the consequences for the next 
Administration and the next generation.
    Mr. Director, we have many questions for you and we are 
looking forward to hearing your testimony. But before you begin 
I want to allow our Ranking Member for the day, Mr. Barrett, to 
make his opening statement. We are told that Mr. Ryan is snowed 
in in Wisconsin.
    Mr. Barrett. And a lot better looking, too, Mr. Chairman. 
He is on his way and I apologize for Paul not being here. 
Director Nussle, thank you. It is great to see you, Jim, and we 
welcome you back to the Hill. We both are South Carolinians and 
we both have on green ties, but I will probably be a little 
kinder to you than Chairman Spratt will. But no doubt you can 
hold your own with anybody.
    Director, the President's Budget lays out the critical 
fiscal issues that this Congress is going to have to deal with 
in the near future. Key among them, balancing the Budget, 
promoting sustained economic growth, slowing the growth of the 
federal spending, and addressing the coming entitlement crisis.
    First on deficits. Last year at this time, after several 
years of dramatic declines in the federal deficit we found 
ourselves on what many described a glide path to balance in the 
near term. Now that path has been interrupted, mainly due to 
the slowdown in the economy and the stimulus package. But we 
should still balance the Budget. Even while addressing current 
challenges in the economy, the President's Budget achieves 
balance by 2012 without raising taxes. Let me say that again. 
The President's Budget achieves balance by 2012 without raising 
taxes by demanding the federal government get in control of, 
guess what? Spending.
    This Budget also achieves balance through sustainable 
fiscal policies that support economic growth and job creation. 
It maintains the tax policies that have supported the solid 
growth which, until only recently, succeeded in producing 
appreciably higher revenue, appreciably higher revenue, and 
dramatic reductions in the deficit.
    Finally, the President's Budget recognizes that our 
nation's challenges go well into the next few years. It takes a 
significant, critical step toward addressing the greatest 
threat to our nation's future strength and prosperity, the 
unsustainable growth of our largest entitlement programs. While 
the President's Budget doesn't pretend to fix the entitlement 
problem in one fell swoop, it does propose specific reforms, 
one of which would reduce Medicare's $34 trillion unfunded 
liability to nearly a third. That would be a tremendous step. 
$10 trillion, Mr. Director, and I congratulate you on that. And 
if the people wanted to criticize the President's specific 
proposals for addressing the problem, fine, then let us make 
sure they come forward with some solutions on how we can fix 
this stuff.
    We must reform these programs so they can meet their 
mission of providing health and retirement security and a 
reliable safety net today and in the future. The Administration 
has a proposed plan, but it is Congress who has the power of 
the purse strings. It is Congress who will decide the federal 
Budget. And it is Congress who is ultimately responsible, and 
accountable, for ensuring a sustainable path to our nation's 
future.
    I look forward to the discussion today, Mr. Director, and 
again, welcome back.
    Chairman Spratt. Mr. Director, I want to also welcome your 
lovely wife Karen, sitting right there behind you, so if you 
have any questions you are stumped on you know where to turn.
    Mr. Nussle. Trust me.
    Chairman Spratt. Welcome back again, and the floor is 
yours.

  STATEMENT OF JIM NUSSLE, DIRECTOR, OFFICE OF MANAGEMENT AND 
                             BUDGET

    Mr. Nussle. Mr. Chairman, thank you. I see many friends in 
this room and many allies. And many fond memories well back to 
me from my time here. And I want to thank Paul Ryan, even 
though he is not here, for his leadership, and the leadership 
on the Republican side. And Austin Smythe, he was with OMB 
until very recently, and has now come down for able leadership 
of a great staff on the Republican side. And so I greet you. 
And to my friends on the Democratic side, the majority side, 
particularly Tom Kahn and the great staff that you have. And my 
very good friend John Spratt. There is no more honorable person 
that I know in the United States Congress. And you are just a 
statesman and someone I enjoyed sitting next to for many years. 
And we are going to have a lot to discuss and a lot of tough 
questions, and probably a few tough answers, too. Trust me, 
they are all going to be tough answers, difficult answers. But 
there are nothing but fond memories from my time spending work 
on the Budget here in this Committee. And I just want to 
sincerely say thank you for the warm welcome back.
    I am very pleased to be here to present the President's 
Budget. This is the first time the President has submitted his 
Budget electronically, which has been an interesting, to say 
the least, project that has received praise in some respects 
and still a little bit of concern and criticism on the other. 
The interesting thing about it is that on day one the website 
had 75,000 individual, different hits, and I believe 660,000 
separate PDFs were downloaded that very day. So I think it went 
further and wider than the audience that the Budget typically 
goes to. And I think that is good news. Anytime you can make 
the Budget more transparent, more user friendly, more 
searchable, certainly saving the tons of paper and not killing 
so many trees is always good. But making it more transparent 
for the American people and the taxpayer I think is always 
something to be thankful for.
    And to those who are still concerned about it, I would just 
recommend, if you would, we would like to make improvements to 
this process. I think this is an important process going 
forward regardless of the paper side of the equation. The 
electronic side is a new age. This is the first electronic 
document that was sent from the executive branch to the 
legislative branch, and it is something that will most likely 
continue in many respects. So as we go through this I would say 
to you as friends that let us work together to try and improve 
the document, improve the capability to search it, to use it, 
so that we can all be better off.
    When the President talked to me about preparing this Budget 
he asked me to do five things, five things that he wanted as 
goals within this Budget. First, he wanted to make sure that we 
addressed the immediate economic challenges. And in a 
bipartisan way I say congratulations to all of you for the 
speed in which you have tackled some of the economic 
challenges. We can get to those, I am sure, today as well. 
Second, he wanted to ensure sustained prosperity, not just in 
the short run but in the long run. Third, he wanted to make 
sure that we kept America safe. That has been job one for him 
during his Administration. That is the first thing he worries 
about, thinks about, talks about, is briefed about when he 
wakes up, and it is the last thing before he goes to bed. 
Balance the Budget by 2012, a goal. And also continue to 
address our long term spending challenges.
    As I say, continued economic growth to me is the most 
critical and most important element of reducing the deficit, of 
getting back to balance, of dealing with or addressing our long 
term spending challenges that we have before us. I mean, there 
is no question that the bipartisan growth package that you 
considered, that we have in the Budget at 1 percent of GDP, or 
$145 billion, combined with a slowing economy and loss of some 
of the corporate receipts last year, has contributed to some 
near term deficits. We believe that while the deficit in 2008 
will be 2.9 percent of GDP and 2.7 percent of GDP in--excuse 
me, 2008 it is 2.9, 2009 2.7 as we projected. We believe that 
this uptick can be very temporary and can be very manageable, 
and we can continue on a path to balance the Budget by 2012 
provided that we keep taxes low, keep the economy growing, and 
keep spending in check.
    I don't believe Americans are undertaxed, and the President 
does not believe that Americans are undertaxed. We are not 
experiencing short term deficits because the American people 
are undertaxed. As this slide shows, the tax burden, especially 
when you measure it as a percentage of GDP, is 18.5 percent, 
which is higher than the historical average.


    Mr. Nussle. Now this may surprise some observers who watch 
this process, who realize or believe that, ``Well, if the 
President cut taxes in 2001 and in 2003 there must be less 
revenue.'' Well, that is not the case. In fact, taxes are not 
too low. Revenue growth has actually been quite strong and 
running well ahead of GDP. It was over 14 percent in 2005 of 
revenue growth. There was a revenue growth of 11 percent in 
'06, and 6 percent in '07. So revenue is growing and grows when 
you reduce taxes. So it is not the revenue. Revenue is not the 
problem.
    Spending is really the problem, or the challenge, that we 
all have to face. We must do more to keep spending in check in 
order to balance the Budget in 2012, but more importantly to 
address the long term challenges of our unfunded liabilities 
and obligations. The Budget proposes to keep non-security 
discretionary spending below 1 percent for 2009, and then hold 
it level for the next four years. It also terminates or 
significantly reduces about 151 different programs which total 
$18 billion in the first year alone. These are programs that, 
frankly, are either just not achieving results or are, have not 
had a good track record, could be done better locally, or by 
the private sector, or by private charities. There is a number 
of ways that we can improve these programs that can be 
streamlined and in order to do a better job. Good intentions 
alone are not enough to justify the continuation of a program 
that isn't working, or is no longer a priority, particularly 
when there are tight Budgets and you have to make choices. So 
we focus on outcomes, not just inputs. We also believe that 
earmark reform is important and necessary if we are going to 
change the culture in Washington that has led to some waste and 
low priority spending. So we believe that these are areas that 
we can address on the spending side.
    In addition, we have automatic spending, mandatory 
spending, which is overwhelming the rest of the Budget. Now 62 
percent is on autopilot, is not under the control of Congress 
or the President unless specific legislative action is taken. 
And really, the current trends are not sustainable. In just the 
next thirty-five years as the Fiscal Wake-Up Tour reports, from 
David Walker and others who have testified before this 
Committee many times, in just thirty-five years the automatic 
spending portion of the Budget will completely swallow the 
entire revenue that is available and leave nothing for the 
basic federal responsibilities that are in our Constitution to 
protect our homeland and for national defense.
    I don't believe that, therefore, it would be, it would be 
responsible not to put forth a package of mandatory savings. 
And that is the reason why in this Budget the President is 
proposing $208 billion worth of savings over the next five 
years. It may seem challenging. There is no question that we 
hear that constantly, how challenging it is to tackle the 
entitlement problem. But this package is, frankly, smaller that 
the bipartisan approach that was taken in 1997 under the 
Balanced Budget Act. And I believe it is realistic. It is a 
fair proposal. And I challenge Congress to take, take this 
challenge and to at least make a down payment on what is a 
looming fiscal crisis that we all have to be serious about.
    Within that package the President has proposed reasonable 
steps to get Medicare growth under control. There is $178 
billion of savings over the next five years in this proposal. 
This means Medicare would continue to grow, and this chart 
demonstrates that.


    Mr. Nussle. Medicare would continue to grow under the 
President's proposal. It just won't grow at 7.2 percent. It 
will grow at 5 percent. This is reasonable growth. It is way 
above inflation, and I think it is a reasonable growth pattern 
for a very important program. This proposal would also help 
address nearly one-third of the long term funding problem, 
which now approaches $34 trillion in Medicare alone. It is 
simply, I believe, irresponsible not to begin to address these 
longer term obligations with at least smaller, bite size down 
payments. Because the longer we wait, the more difficult and 
more challenging that problem will be.
    So in conclusion, the President asked me to address 
immediate economic challenges. I believe we do so in this 
Budget. And you should be commended for what you have done here 
in Congress, and continue to do. We need to get that passed. We 
need to ensure sustained prosperity. It is the reason why the 
President makes his tax relief permanent, and believes that in 
order for us to have that kind of long term sustained 
prosperity we have to trust people with their own resources to 
create the entrepreneurial class of the future to create the 
jobs of the future. We have to keep America safe. We do that in 
a bipartisan way, so many ways and so many times. And I believe 
we can do that again this year. We get to balance by 2012 if we 
control spending and we continue to address the long term 
spending challenges. I look forward to the opportunity to have 
a good conversation here today and to address your questions, 
and I look forward in the future to continue to serve you in 
any way that you see appropriate. Thank you, Mr. Chairman.
    [The prepared statement of Jim Nussle follows:]

 Prepared Statement of Hon. Jim Nussle, Director, Office of Management 
                               and Budget

    Chairman Spratt, Ranking Member Ryan, and distinguished members of 
the Budget Committee, it is good to be back in the hearing room with 
you. Thank you for having me before the Committee today to discuss the 
President's FY 2009 five-year budget proposal.
    It has been a while since I have attended a hearing in this room. I 
have fond memories here, of the Budget staff, and all of you. I am 
honored to be back.
    As was true when I was in Congress, I would not be here without the 
hard work and dedication of staff. Before I began my tenure as Director 
of OMB, I had respect and admiration for the OMB staff. This 
perspective has only grown stronger as I lead this team of talented, 
intelligent and dedicated professionals. It is truly a pleasure to come 
to work each day and roll up my sleeves next to them. I thank each and 
every one of them for their devotion to public service.
    As you all know, for the first time the President submitted his 
Budget to Congress electronically. It is posted at www.budget.gov. We 
at OMB are excited to lead this effort for a few reasons: 1) it allows 
us to utilize technology to provide information in a user-friendly, 
fast and public way; 2) if others follow our lead, this step will 
result in conserving 20 tons of paper--saving over 480 trees; and 3) we 
finally have clean desk.
    We are doing our part to provide transparency across the budget 
process, so thank you for indulging a few product promotions. To help 
Americans see where their money is being spent, we have launched a 
website called www.usaspending.gov. This is a result of the Federal 
Transparency Act that many of you championed. And to help Americans see 
the kind of results they are getting for their money, we launched 
www.expectmore.gov. I invite all Americans to log on and find out for 
themselves how their hard-earned tax dollars are being spent.
    Let me turn to the budget itself. The President's FY09 Budget 
focuses our resources on our nation's highest priorities: the security 
of the American people and the prosperity of our economy.
    The Budget invests substantial resources to protect the United 
States from those who would do us harm. Continuing our Nation's efforts 
to combat terrorism around the globe, the Budget provides our men and 
women in uniform the tools they need to succeed in Afghanistan and 
Iraq, and it furnishes the resources needed for our civilians to help 
those nations achieve economic and political stabilization. The Budget 
proposal also strengthens our overseas diplomatic capabilities and 
development efforts, advances our political and economic interests 
abroad, and improves the lives of people around the world.
    Over the past seven years, we see the economy has successfully 
responded to substantial challenges, including a recession that began 
in 2000, terrorist attacks, corporate scandals, wars, and devastating 
natural disasters. It is a measure of our economy's resilience and the 
effectiveness of pro-growth policies that our economy has absorbed 
these shocks, grown for six straight years, and had the longest period 
of uninterrupted job growth on record. Yet mixed indicators confirm 
that economic growth cannot be taken for granted.
    To insure against the risk of an economic downturn, the 
Administration urges Congress to quickly pass the bipartisan growth 
plan that will provide immediate, meaningful, and temporary help to our 
economy. The negotiated package provides approximately $100 billion in 
temporary relief that would allow Americans to keep more of their 
paychecks to spend as they see fit. It also provides direct relief to 
businesses--approximately $50 billion in near-term tax relief for 
business purchasing equipment to grow or sustain their capabilities. 
While this bipartisan package will add to the deficit in the short 
term, continued economic growth and continued spending restraint will 
help bring the Budget into balance in 2012.
    Americans have real concerns about their ability to afford 
healthcare coverage, pay rising energy bills, and meet monthly mortgage 
payments. They expect their elected leaders in Washington to address 
these pressures on our economy. So this Budget puts forth proposals to 
make health care more affordable and accessible, reduce our dependence 
on foreign oil, and help Americans struggling to keep their homes.
    Above all, the Budget proposal continues the pro-growth policies 
that have helped promote innovation and entrepreneurship. I join the 
President in his belief that higher taxes would only lead to more 
wasteful spending in Washington--putting at risk both economic growth 
and a balanced budget.
    As we work to keep taxes low, we must do more to restrain spending 
to achieve balance by 2012. The Budget proposes to keep non-security 
discretionary spending growth below 1 percent for 2009 and then hold it 
at that level for the next 4 years. It also cuts spending on 151 
projects totaling more than $18 billion that are not achieving 
results--because good intentions alone do not justify a program that is 
not working.
    There is also the matter of earmarks. Earmarks have tripled in 
number over the last decade and have increased spending by billions of 
dollars. Most earmarks are not even included in legislative text and 
are not subject to an up or down vote of Congress. Last year, the 
President has called on Congress to voluntarily reform the earmarking 
process. Unfortunately, limited progress was made. That's why the 
President announced during his State of the Union Address that he will 
veto any annual spending bill that does not meet his goal of cutting 
earmarks in half from FY08 levels on a bill by bill basis.
    The President also issued an Executive Order instructing federal 
agencies to ignore earmarks unless included in bill text that has been 
reviewed and voted on by Members of Congress. This means earmarks will 
be subject to votes, which will better expose them to the light of day 
and help constrain excessive and unjustified spending. If Congress 
continues the process of earmarking in report language, those projects 
will have to compete for federal dollars before funding is provided 
based on merit. We believe these changes are necessary to reform the 
culture of earmarking that has led to wasteful and unjustified pork-
barrel spending.
    As we take these steps to address discretionary spending, we also 
need to confront the biggest challenge to the Federal budget: the 
unsustainable growth in entitlement spending. Many Americans depend on 
programs like Social Security, Medicare, and Medicaid, and we have an 
obligation to make sure they are sound for our children and 
grandchildren. I am the third Budget Director to come before you with 
this request. If we do not address this challenge, we will leave our 
children three bad options: huge tax increases, huge deficits, or huge 
cuts in benefits. And the longer we put off the problem, the more 
difficult, unfair, and expensive a solution becomes.
    The Budget proposal works to slow the rate of growth of these 
programs in the short term, which will save $208 billion over 5 years. 
This step alone would reduce Medicare's 75*year unfunded obligation by 
nearly one-third. This is one of the most serious challenges that faces 
our country. I want to work with the members of this committee to 
address reforms that can avert the oncoming fiscal train wreck. In 
doing so, we need to make sure that all tools at our disposal are used 
to put these vital programs on a sustainable path. Reconciliation is 
such a tool, but if it is only used to increase spending and the size 
of the Federal government, it will be a missed opportunity to achieve 
retirement and health security for the American people.
    Before closing, I would like to take a minute to discuss funding 
for our troops. Last February, the President's Budget included a full-
year estimate for FY08 GWOT funding. While some changes were made to 
the request in the fall, Congress has had more than three fourths of 
our request pending since February. This past December, Congress chose 
to only provide partial funding for our troops and they will soon need 
the remainder of the request to ensure that operations continue without 
interruption. I ask Members of Congress to quickly consider the 
remaining funding our military commanders have told us the troops need 
to do their jobs. The Budget includes an allocation of $70 billion for 
the Global War on Terror. A detailed request will be submitted to the 
Congress once we have secured the resources for FY08 and have better 
information on the changing conditions in the field from General 
Petraeus and Ambassador Crocker.
    In the Budget, the President has set clear priorities that will 
help us meet our Nation's most pressing needs while addressing the 
long-term challenges ahead. With pro-growth policies and spending 
discipline, we will balance the budget in 2012, keep the tax burden 
low, and provide for our national security. And that will help make our 
country safer and more prosperous. Mr. Chairman, thank you for the 
time, and I look forward to your questions.

    Chairman Spratt. Thank you, Mr. Chairman, Mr. Director. Let 
me supply an omission on my part. Anyone who would like to 
submit a statement for the record, at this point, an opening 
statement, I ask unanimous consent that that authority be 
extended. Without objection, so ordered.
    Mr. Director, as I said in my opening statement, if the 
core of your Budget is an assumption that I think undercuts the 
credibility of the entire Budget. And that is that the AMT will 
still be applicable after next year, fully in force and effect, 
and it becomes and is a robust revenue raiser. You are assuming 
that it will apply. We won't fix the threshold at which it 
applies. So lots of middle income taxpayers for whom it was 
never intended are going to be affected by that assumption 
unless you make a correction. Given the fact that we have 
patched it year by year by year, and it will need to be patched 
next year as well as the subsequent years if we are to treat it 
fairly, it mystifies us why you are calling for the renewal of 
the tax cuts that expire on December 31, 2010, but not first 
dealing with the AMT problem. And also using the revenues that 
are derived from that assumption, the assumption there will be 
no fix in the AMT, that it will be applying to lots of middle 
income, millions of middle income taxpayers. In addition, your 
Budget defers to the Department of Defense. OMB or somebody 
made the decision that you couldn't extrapolate or develop a 
construct for what it is likely to cost to continue to have 
troops at significant levels deployed to Afghanistan and Iraq.
    The cost of those two, the magnitude of those two 
assumptions alone is easily a trillion dollars over the period 
of your Budget. How do you account for the fact that these two 
elements are not included? And that as a consequence that the 
numbers are quite different when you do include them? You don't 
really expect to go forward for the next five years and not fix 
the AMT so that it doesn't apply to middle income taxpayers, do 
you?
    Mr. Nussle. Well, let me try and take both of those 
quickly. First of all, on the AMT, it has been the President's 
position, and he continues to hold it today, that we should not 
just patch the AMT but fix it. And it should be part of a 
comprehensive tax reform proposal that he and the Congress 
should work out together, including any changes to the AMT. And 
that is the reason, that is still embodied within the Budget. 
It was, it has been the proposal every year that the President 
has been in office.
    Chairman Spratt. Well, well, we have had three witnesses, 
four including yourself, come and testify that that is the way 
the Administration would like to proceed. And they have told us 
that you will do that within the Tax Code in a revenue neutral 
manner so it will have no impact on the bottom line of total 
revenues. But we have yet to see it. Mr. Rangel, your former 
Chairman of Ways and Means, has developed a fix for the AMT 
problem. If you have that fix available would you submit it for 
the record so we could compare it to what Ways and Means itself 
is considering as a permanent fix?
    Mr. Nussle. Yes. I mean, the President has, again, he had a 
Tax Reform Commission that made proposals and they were deemed 
at that time, and continue to be deemed, fairly dead on arrival 
when it comes to reform proposals. I am not sure that has 
changed. I doubt that has changed today. But what we are hoping 
for is that the AMT will be the incentive for all of us to sit 
down and to reform the Tax Code, top to bottom, in a 
comprehensive way. And so we don't put a particular fix, so to 
speak, in this, or a patch in this. We believe it should be 
fixed as part of overall tax reform.
    Chairman Spratt. Do you have an estimate yourself of how 
much revenue will be derived from leaving the AMT fully in 
effect over the five year span of your Budget?
    Mr. Nussle. Four hundred over five. 400 billion----
    Chairman Spratt. Four hundred over, 400 billion of----
    Mr. Nussle. That is back of the, quick back of the envelope 
from John Kitchen.
    Chairman Spratt. Right. And I know the President has sent 
up from time to time new revenue initiatives, tax cut 
initiatives. But has he sent to us a comprehensive fix for the 
AMT? A multiyear, permanent fix for the AMT?
    Mr. Nussle. Not in specific legislative language that I am 
aware of, no.
    Chairman Spratt. Don't you think it would help the process 
if he submitted his, and we started a bidding process? At least 
a serious consideration of it? Its being the first in order of 
priorities, I think we need to fix it before we address tax 
cuts expiring two years from now.
    Mr. Nussle. That certainly can be considered. But I think 
the seriousness, I mean if you take for instance the mandatory 
package, the hue and cry that we heard about the mandatory 
package in the Budget is that, ``It is an election year. We 
can't do challenging things.'' Well, I would think tax reform 
may fall into that category of challenging things. So I think 
the President needs to know that Congress is going to be 
serious about it before he would send up anything. That is just 
without having the chance to talk to him about whether he would 
consider sending up a specific proposal.
    Chairman Spratt. Well, we are serious enough that Mr. 
Rangel took it upon himself to use the staff of the Ways and 
Means Committee and the Joint Tax Committee to develop an 
alternative. And I think it would be useful for the debate, and 
timely, if the Administration would submit its alternative, or 
its option, for addressing this problem just as Mr. Rangel has.
    Let me ask you about the other aspect. And that is, the 
omission of anything for the War after the plug of $70 billion 
for next year, anything further thereafter. Now you know and I 
know that there are going to be troops in Afghanistan and Iraq 
for some years to come. How long, nobody can say. It will 
depend to some extent I guess on the outcome of the next 
election. But there is a substantial sum right now being spent. 
I believe the request for this year, '08, is $189 billion of 
which we have appropriated about $88 billion. There is a 
hundred still pending. Given the magnitude of that number, and 
the knowledge that there is going to be a continued presence, a 
continued deployment of troops certainly in Afghanistan for 
some time to come, shouldn't there be some kind of number in 
there? Some extrapolation of existing costs? Some look back at 
five years of cost experience, and extrapolation forward of 
what it is likely to cost over the next five years?
    Mr. Nussle. The challenge here, Mr. Chairman, is that a 
detailed request for GWOT spending is still pending before 
Congress for $108 billion that has not yet been acted upon. And 
this was a specific request that was sent a year ago, now, that 
Congress requested. I remember being very cheerfully part of 
the team that requested that the Administration do a much 
better job of specifically asking for GWOT spending but that 
was so we could act on it quickly, as Congresses did. This 
time, Congress has decided not to act on it. We know the number 
is not realistic to say $89 billion for 2008. But yet, Congress 
has not acted on any more spending than eighty-nine. So I think 
the challenge here is that with things as fluid on the ground 
as they are, and that is good news, generally, because we have 
had some success in Iraq and Afghanistan of late, waiting for 
the Petraeus testimony to be, we think, in March or early 
April, which may again adjust the strategy. All of these are 
factors that make it difficult, if not impossible, to make a 
detailed request beyond recognizing not only we need to pay for 
what we know right now this year and enough money to get us 
into next year and a new administration and a new Commander in 
Chief who may decide to make a different judgment or a 
different spending allocation for the War in Iraq and 
Afghanistan.
    Chairman Spratt. Well, that number could easily be $500 
billion on top of the $400 billion to $500 billion for the AMT 
fix. So you have got a trillion dollar variable here that is 
unresolved in this equation that we are trying to solve, and 
that is a balanced Budget by the year 2012. I don't think you 
can declare balance when you have those two variables 
undefined, at least, not even estimated.
    Mr. Nussle. Well, we are projecting. We are not declaring. 
We are only projecting, and we are making requests of the 
Congress for funding. And we are making requests that we 
control spending. Control spending not only on the 
discretionary side but also on the mandatory side. If Congress 
doesn't act on the $208 billion request that number can be 
added to your equation as well. And that makes, and my guess is 
that there will be a lot of requests for more funding, as I 
heard in your opening, for more funding for a lot of programs 
that didn't receive funding. And so that also can be added to 
the deficit, and the debt, and the requests, and everything. 
So, I mean, this number will continue to grow if we don't begin 
to control spending. And that is the reason we make the request 
we do.
    Chairman Spratt. In any event, you would agree that there 
is going to be a substantial sum required for the deployment of 
these troops to those two theaters over the next five years, 
and that number has to be supplied in order to make your bottom 
line realistic?
    Mr. Nussle. I know it is more than seventy. I don't know 
the amount beyond that.
    Chairman Spratt. It is certainly not zero.
    Mr. Nussle. No. But it is not zero for this year, either, I 
would say respectfully. And that is so far what we can count 
on, at least for the rest of this year.
    Chairman Spratt. Let me ask you quickly about Medicare and 
then let others put questions to you. Big cut in Medicare, 
granted it is over a long period of time, ten years, $560 
billion. And it begs the question, at least for me, as to why 
you didn't pick off some of the low hanging fruit to make up at 
least for some of those savings. For example, the Medicare 
Prescription Drug Bill set up a program called Medicare 
Advantage. And today according to what CBO tells us we are 
paying 13 percent more for beneficiaries under that program, a 
managed care type delivery system, than we pay under 
traditional fee for service Medicare. CBO further tells us that 
if this gap continues that they estimate over a ten year period 
of time we will pay $150 billion more for this class of 
beneficiaries than for the beneficiaries under traditional 
Medicare. That would seem to me something that needs to be 
rectified, and done soon, because it can save big bucks. But 
if, as I read, at least the summary of your Budget, that is not 
touched or addressed at all.
    Mr. Nussle. It is not directly addressed. But there is a 
huge effect on the, on Medicare Advantage, Part C Medicare, as 
a result of the policies that we are asking for. In fact, it is 
about a $43 billion reduction to Medicare Advantage Part C as a 
result of the fact that we are reducing fee for service, and as 
a result that has an impact on Medicare Part C Advantage. Now, 
we want to make sure that Medicare Advantage, and the reason 
why it has been protected is to give it a chance to blossom and 
to grow and to have some effect as a choice for seniors across 
the country in a lot of underserved areas. And that is 
occurring. It is still occurring. It is still blossoming. And 
we want that to be able to occur. But it does have an impact, 
even though it is direct. And it is about a $43 billion impact.
    Chairman Spratt. In addition, the same Medicare 
Prescription Drug Bill has that notorious language which 
prohibits the federal government from bargaining or negotiating 
drug prices with pharmaceutical firms. That would be another 
means of saving some substantial sum of money. Nobody knows how 
much so CBO has told us they can't score it because it is an 
unknown. But off the seat of our pants we suspect it is a 
substantial number. Is the Administration negotiable at all 
about that particular provision of the law?
    Mr. Nussle. What we have, what we have done here is 
recognized that the scoring, as we remembered from Medicare 
Part D when it first occurred, was it was supposed to cost $552 
billion and it has come in much cheaper than that. The 
pharmaceutical managers have, it has worked. There has been 
negotiation. There has been better management and better 
practices. And the price has come down about $162 billion from 
its original score. So there have been savings already from 
Medicare Part D and that is the reason that, other than a means 
testing for Part D Medicare, we don't, we don't make any 
additional proposal there.
    Chairman Spratt. Thank you very much, Mr. Director. And now 
I will turn to Mr. Barrett.
    Mr. Barrett. Thank you, Mr. Chairman. Mr. Director, let us 
talk a little bit about the economy. We have talked about----
    Chairman Spratt. We have got seven minutes left to vote. I 
don't have to explain this to you.
    Mr. Nussle. I can, I can be done if----
    Chairman Spratt. What do you want to do? You want to go 
vote now and come back? How many votes do we have? Oh boy.
    Mr. Nussle. I can, I am happy to wait.
    Mr. Barrett. You want me to go ahead and ask my questions, 
Mr. Chairman?
    Chairman Spratt. Go ahead.
    Mr. Barrett. Okay. I will be brief, Mr. Director. The 
stimulus package, we have talked about short term, long term, 
as you know the Senate is sitting on it. They are talking about 
an additional $40 billion increase to the short term stimulus 
package, Mr. Director. Talk to me about the effect of that. 
Also, talk to me about the long term effect. You know, the 
Chairman, and the ranking party, or the majority party, has 
talked about taxes. We have had Charlie Rangel talk about the 
mother of all tax cuts. They have talked about AMT, but then 
they delayed it to the very end. We have talked about the Bush 
Tax Cuts and what they are going to do, when we are talking 
about long term stimulus wouldn't some certainty with the tax 
market, with the Tax Code, bring some stability in a long term 
stimulus look into this economy, Mr. Director?
    Mr. Nussle. Well, as the President has said, and I believe 
others have said, other economists have said, that the most 
important thing we can do for the economy is make the tax cuts 
permanent. That is the long term horizon. Short term, you all 
have chosen a package which provides rebates and some 
incentives for business, which can have a short term 
stimulative effect. We have heard economists say as much as 
six-tenths of a percent of GDP increase in the first year 
alone. That would be important in the kind of softened economy 
we see right now. So that may be the stimulative effect in the 
short term, if there isn't excessive spending. But long term, 
again, I believe, the President believes, others believe, that 
the best thing we can do is provide some stability within that 
Tax Code and make the tax relief permanent.
    Mr. Barrett. Yeah, and I concur. Let us talk a little bit 
about Medicare, Medicaid, entitlement spending. From GAO, to 
CBO, to the Federal Reserve, to Chairman Nussle, to Chairman 
Spratt, to right now Ranking Member Barrett, we have all said 
entitlement spending is going to cripple this economy and it is 
going to bring this government down. I applaud your efforts 
going from 7.5 to 5 percent. And even the Chairman today said 
they were draconian cuts. If we don't, Mr. Director, if we 
don't have some type of responsible spending with these 
entitlement programs, I mean what is the outcome? We both know, 
but I want to hear it out of your mouth. What is the outcome of 
this economy and of these programs?
    Mr. Nussle. Well, the challenge just becomes deeper and 
deeper. As I showed you on that one chart, the thing that 
amazes me, and I am not even sure that chart isn't too 
optimistic, that eventually the revenue, the revenues would go 
only for automatic entitlement spending. I think the challenge 
here for Congress is that, you know, it really, you have an 
opportunity to do smaller steps and not wait till the one big 
step that has to occur maybe eight, ten years down the line. 
You have an opportunity now, we have an opportunity to work 
together the way it was done in 1997 when the package was 
actually bigger and we didn't have the looming crisis just ten 
years out. The package in 1997 of savings under Medicare was 
bigger. And so I believe that we can do a little bit every 
year, or every other year, in order to make this challenge seem 
a little bit less challenging and less onerous to the economy, 
and to the overall Budget that our government is going to have 
to deal with.
    Mr. Barrett. Last short question. If I could get somebody 
to put up Chart 45 for me?


    Mr. Barrett. This chart, I think, will clearly show, Mr. 
Director, that once the Bush Tax Cuts of 2001 and 2003 were 
fully implemented, fully implemented, that the top 50 percent 
are actually paying more taxes. And according to your 
testimony, not only were they paying more taxes, revenues were 
up. It looks at the bottom here, the bottom 50 percent, they 
are actually paying less. So tell me, in your best estimate, 
Mr. Director, if we do have the mother of all tax cuts--tax 
increases, excuse me. If we do have the mother of all tax 
increases, is this additional revenue really going to help? 
According to everybody we have heard so far they say, ``There 
is no way we can tax our way out of this.'' I mean, 
historically, is this not a correct chart here?
    Mr. Nussle. Generally speaking, and again from my 
experience, having sat where you are, Congress does not 
necessarily do a better job of controlling spending when more 
revenue comes in. I don't think there is any correlation 
between the two. I think it is better spent by individuals and 
families and small businesses, and those that are creating 
opportunities and jobs and dealing with their own challenges 
far better than we could from the hallowed halls here in 
Washington, D.C.
    It is also interesting to me, every time I see these 
figures it boggles the mind, but 1 percent, the top 1 percent 
of the country pays 40 percent of all of the taxes. And the top 
5 percent almost pays 60 percent of all of the taxes in this 
country, which is an amazing thing. So you can always, you 
know, go after the wealthy, the rich, that sounds good. But 
they are already paying quite a bit and the challenge is not 
getting any less challenging. So I believe for the long term 
strength of our economy we need to, we need to make those tax 
reliefs permanent.
    Mr. Barrett. Thank you, Mr. Director. Thank you, Chairman.
    Chairman Spratt. The Committee will stand in recess subject 
to the call of the Chairman. Mr. Director, you know your way 
around. Make yourself at home. We will be back as quickly as 
possible.
    Mr. Nussle. Thank you.
    [Recess.]
    Chairman Spratt. Paul, let us go on. I will recognize you 
first. Mr. Director, we are ready to get started if you are, 
sir. Before doing that let me welcome back Mr. Ryan who has 
trooped through the snow to get here to ask his question. So I 
recognize him first, and then go to Mrs. DeLauro. Mr. Ryan?
    Mr. Ryan. Thank you, Chairman. We are used to a lot of snow 
in Wisconsin, but when we get about twenty inches it slows us 
down a little bit. So, just about a half a day, though. So 
thank you for your indulgence. Hey, welcome Director. Nice to 
see you.
    Mr. Nussle. Thank you.
    Mr. Ryan. Feels a little different on that side, I suppose?
    Mr. Nussle. I liked it on that side better. Already just in 
the first half hour I can tell you that.
    Mr. Ryan. I wanted to ask you some questions about 
discretionary, I don't know, I just flew in because of the 
snowstorm. So I don't know if this was already covered. But a 
couple things as I was reading through the Budget on the plane, 
your DOD, your request for, your supplemental for the War, last 
year you had the full '08 supplemental in the Budget. This 
year, you have $70 billion which you call a placeholder, which 
it says is not the full amount. Why do it that way this year? 
Because last year the Administration made good progress on 
this.
    Mr. Nussle. A couple of reasons. First of all, I agree with 
you that the administration made good progress. And I remember 
sitting where you are and asking that the Administration do 
just that. A couple of things have occurred. Number one is that 
immediately after the request was made last year it was stale. 
It was a request for about $141 billion, I believe, and there 
were two major policy and strategy changes during the year. And 
as a result it needed to be adjusted up. So immediately, 
almost, upon submission it was inaccurate. Second, the fact 
that the Congress has not acted on the War Sup to this period 
of time, and still remains, more than half of it is left 
remaining for this year is very troubling to the Administration 
given the fact that we a year ago made the request. We can't 
have a request hang out a year and expect it to be, expect it 
to be right. It will be stale in that period.
    Mr. Ryan. What----
    Mr. Nussle. A couple of other things, quickly. One is that 
we didn't want to tie the hands of our commanders coming back 
with their recommendations in March, which will occur. And then 
lastly, the $70 billion gets you into this year and into the 
next Commander in Chief, who may in fact make a different 
determination about the strategy. And we didn't want to tie 
their hands. So that is the entire rationale.
    Mr. Ryan. Last year's request fell short of the actual 
request, of the actual emergency supplemental by how much? Do 
you know off the top of your head?
    Mr. Nussle. The full request was $193 billion, and I 
believe we have $89 billion to date. Is that what you were 
asking?
    Mr. Ryan. Yeah. Yes. I am trying to figure out----
    Mr. Nussle. So $108 billion left.
    Mr. Ryan. A hundred and eight left, which is what you are 
hoping and expecting is going to pass this Congress sooner 
rather than later. So how should we try to extrapolate what we 
ought to think that this is going to end up being for the full 
amount so we can get a better accurate look at the deficit 
path? What do you think would be a good rule of thumb for us to 
take out the full cost for the year?
    Mr. Nussle. This is a difficult, this is a difficult thing 
to do because it would be a prediction only. It would not be a 
request and that is what the Budget is, it is a request. We 
make very specific requests throughout the Budget whenever we 
send that up. Secretary Gates yesterday testified in front of 
the Armed Services Committee, I believe in the Senate that they 
asked him about, you know, how much would it be. And he said, 
``Well, basic math could speculate to a higher number but it 
would be speculation.'' And he quickly said, ``Look, we have 
got to, we have got to do the work in order to make sure that 
that specific proposal is accurate.''
    Mr. Ryan. Okay, another discretionary question. You propose 
eliminating 151 programs, and that saves $18 billion in '09, is 
that correct?
    Mr. Nussle. Yes.
    Mr. Ryan. How many of those were proposed, were most of 
those proposed in last year's Budget as well?
    Mr. Nussle. There are many of them that had been proposed 
over the years. But Congress has actually taken amazing action 
on these programs. We have saved over the course of the term 
since we have been sending these up, ninety-one programs have 
been eliminated, seventy-one have been reduced, and we have 
already saved $10 billion in this exercise. So even though some 
of these have been sent up again this is a good exercise for us 
to constantly go through and weed the garden with these 
programs.
    Mr. Ryan. That is what I wanted to get at, which is 
hundred-fifty-one, eighteen billion, that gets you to your 
baseline on discretionary. You include that assumption----
    Mr. Nussle. Yes.
    Mr. Ryan [continuing]. In your baseline, correct?
    Mr. Nussle. Yes.
    Mr. Ryan. But, but the point is you are saying there is a 
track record of some achievement, albeit not full achievement, 
of these kinds of savings. You are saying this recommendation 
has been heeded in the past, and we have seen some, some 
harvesting of that garden, so to speak?
    Mr. Nussle. Yes.
    Mr. Ryan. All right. Yeah, that is the other question, is 
the omnibus. How much of this--well, I will get to that later. 
Let me ask you about your mandatory savings. Does this Budget 
cut mandatory spending?
    Mr. Nussle. Actually it slows the rate of growth----
    Mr. Ryan. Right.
    Mr. Nussle [continuing]. In mandatory spending, is all it 
really does.
    Mr. Ryan. So how much does this Budget propose to increase 
mandatory spending versus the baseline?
    Mr. Nussle. Overall in mandatory spending? Let me see if I 
can pull that up for you. Do you want to ask another one while 
I am looking?
    Mr. Ryan. I think it is 5-9-5-6.
    Mr. Nussle. Well, that is in Medicare, is 5 percent. We 
could do the math for you.
    Mr. Ryan. Okay.
    Mr. Nussle. We will do it for you.
    Mr. Ryan. But if I recall it is maybe two to three tenths 
of a percentage point difference between the baseline and the 
proposal. Does that sound about right? Maybe 5.9 percent 
mandatory growth versus the proposed Budget----
    Mr. Nussle. Yeah, that does sound right.
    Mr. Ryan [continuing]. Is 5.6, I think.
    Mr. Nussle. That does sound right.
    Mr. Ryan. The point is, you hear all this rhetoric that you 
are slashing and cutting spending in mandatory programs when in 
fact they are actually growing at rates that exceed the rate of 
inflation, is that not the case?
    Mr. Nussle. That is the case.
    Mr. Ryan. One last question, because I appreciate the 
Chairman's indulgence on the no clock for me, but I don't know 
if Mr. Barrett had that. On tax policy, you assume the '01 and 
'03 tax cuts are permanent, correct?
    Mr. Nussle. Yes.
    Mr. Ryan. And you assume one-year patch, correct? On the 
AMT?
    Mr. Nussle. In '08.
    Mr. Ryan. And your assumptions keep the revenue as a share 
of GDP at what average rate over the five and ten year window, 
do you know that off the top of your head?
    Mr. Nussle. Not right off the top of my head.
    Mr. Ryan. It is above 18.3, if I am not mistaken.
    Mr. Nussle. It is around, depending, it depends to some 
extent on the impact of the growth package. But 18.5 is where I 
believe it is.
    Mr. Ryan. And your increase in the deficit in the first two 
years of this Budget comes from primarily the growth package 
and the supplemental and what else?
    Mr. Nussle. Loss of revenue, actually, or a slowing of 
growth in revenue, mostly from corporate receipts. That is 
primarily where it comes from.
    Mr. Ryan. I have taken enough liberty.
    Mr. Nussle. Some emergency spending in addition to that, 
but mostly in those areas you just outlined.
    Mr. Ryan. All right. Thank you, Chairman.
    Chairman Spratt. Thank you, Mr. Ryan. Mr. Edwards?
    Mr. Edwards. Mr. Nussle, as someone who had the privilege 
of serving with you and coming to Congress with you in January 
of 1991, it is a pleasure to have you back before this 
Committee. And while you and I have had some honest 
philosophical differences over Budget policy, every step of the 
way I have respected your integrity and your decency and your 
commitment to this country. So it is good to have you back.
    Mr. Nussle. That is shared, Chet, thank you.
    Mr. Edwards. If I could make a, just a comment overall 
about the policies that have led us to where we are today. Some 
estimates are that by the end of this year, during this 
Administration's eight year period in office, we will have 
added $4 trillion, or close to $4 trillion, to the national 
debt. And based on my estimates of an average interest rate of 
4.7 percent on that debt, what that means is our government 
will be spending $188 billion a year on interest each year just 
to pay the debt accumulated during the last eight years. And if 
my math is correct that equates to about $627 in taxes per year 
for every man, woman, child, and infant in our country. And for 
a family of four, if you averaged it out, it would be $2,508 in 
taxes every year just to pay the interest on the debt created 
during this Administration.
    What I would want to say for the record is that after eight 
years of hearing that we can have balanced Budgets during a 
time of War in Iraq and Afghanistan, and the War on Terrorism, 
we can have balanced Budgets with the continuation and even an 
extension of tax cuts, the reality has proven that just hasn't 
been possible. There are multiple reasons for that. September 
11th, the recession in 2001, the Wars in Iraq and Afghanistan, 
but we have known about those situations for years. And so one 
way or another, Congress and the Administration have failed to 
meet our responsibility to future generations to pay for what 
we think is important enough to purchase as a government.
    And my concern is that this Budget just seems to be a 
continuation of the same policies over the next five years that 
have led to these unprecedented deficits, and $4 trillion 
increase in the national debt, over the last eight years. And 
what I would say, Mr. Nussle, is that if every member of the 
House had been as consistent as you perhaps there would have 
been the spending cuts to pay for the tax cuts. But what I have 
observed every year that I have been on this Budget Committee 
is, including when you were Chairman, is tax cuts were proposed 
and passed in Congress, and members promised we would have 
spending cuts to pay for those tax cuts. But, frankly, we 
couldn't even get a majority of Republican members in the 
House, much less a majority of Democratic members, to vote for 
those spending cuts to pay for the tax cuts. So we have ended 
up with tax cuts not paid for by spending cuts, and therefore 
our children and grandchildren have to face this enormous 
interest payment each year for the rest of their lives.
    An example of the kind of unrealistic spending cut 
proposal, I think, is in the President's Budget for the next 
five years for veterans spending. According to the 
Congressional Budget Office, after an initial bump up in 
current services at .4 of one percent for 2009, the President's 
Budget would cut $20 billion in current services for veterans 
over the next five years, with 85 percent of that money going 
to VA medical care. That means about a $17 and a half billion 
cut in real services to veterans healthcare over the next five 
years. And so I would say to my colleagues in the House that if 
you say we can balance the Budget and continue to try to make 
permanent the Bush Temporary Tax Cuts, I would have to ask do 
you also endorse a $20 billion cut in veterans programs over 
the next five years?
    I guess, Mr. Nussle, my question to you would be one, why 
would the Administration propose these kind of cuts, after 
inflation, considering current service levels today? And based 
on your years of distinguished service in the House, what do 
you think the probabilities are that Congress in 2010, 11, 12, 
and 13 will cut VA programs by $20 billion in current services?
    Mr. Nussle. It is a fair question. I am not sure what 
Congress will do this year, so I, don't hold me to what 
Congress will do in years to come. I----
    Mr. Edwards. Would you bet your family, I bet you and I 
wouldn't bet our family nest egg and retirement on the belief 
that Congress will cut veterans spending by $20 billion over 
five years.
    Mr. Nussle. No, but you and I also know that there is a 
time coming here where, because all of the revenue is going to 
go to these mandatory programs, we will leave nothing for the 
discretionary programs that are important to all of us. I mean 
Congress and the President, and you are right, there are going 
to be some changes that need to be made, no question about it. 
We have a good track record with regard to our veterans. In a 
bipartisan President and Congress way and partnership we have 
increased veterans spending over 100 percent since the 
President came to office. Some of it was proposed by Congress, 
some of it by the President, but jointly we have done, I think, 
a good job. That will need to continue. But what we demonstrate 
in this Budget is our request for this year, which is a healthy 
and appropriate request, and it demonstrates that we have got 
to get serious about entitlement spending otherwise some of 
these other very important accounts are going to be at peril.
    Mr. Edwards. Okay. I agree with entitlement spending 
challenge. I agree with the increase in veterans funding. But I 
would point out for the record, Mr. Chairman, that half of the 
increase in veterans spending during the Bush Administration 
has come from Congress above the President's request. But I did 
not hear an answer, and I know my time is up Mr. Chairman, but 
in terms of, does the Administration seriously defend cutting 
$20 billion of present services out of VA, current services to 
veterans over the next five years?
    Mr. Nussle. Actually, we hold all discretionary spending at 
a freeze level for the next four years under the Budget.
    Mr. Edwards. But under current, given inflation and the 
increasing number of veterans, as I understand it it is a $20 
billion cut in current services.
    Mr. Nussle. Well, and that is the, that is the challenge 
that we are under, not only to get back to balance but to 
address these longer term challenges. We have to be very 
serious about them. Otherwise, those are some of the choices we 
are going to end up having to make.
    Mr. Edwards. I thank you for your distinguished service. It 
is good to have you back here today.
    Mr. Nussle. Thank you, my friend.
    Chairman Spratt. Mr. Simpson?
    Mr. Simpson. Thank you, Mr. Chairman. It is good to have 
you back Director. Must be different sitting on the other side 
of the table rather than up here on this side of the table.
    Mr. Nussle. Yes, it is.
    Mr. Simpson. Let me ask you just a couple questions about 
the, about the President's Budget. I have often noted that in 
the past, whether it was at the state level or whether it was 
at the federal level, sometimes the administration makes, 
administrations make proposals that aren't realistic that in 
fact aren't going to be passed, they know they aren't going to 
be passed, in order to put together a Budget that they can 
submit that has the lowest deficit, or a balanced Budget, or 
whatever they want to do.
    You propose in your Budget $10 billion, or $10 trillion 
over seventy-five years in Medicare, which I applaud you for in 
that if we don't get after mandatory spending we are going to 
be in big trouble. We sit and complain about earmarks, we sit 
and complain about discretionary spending, and try to keep non-
defense homeland security discretionary spending at a growth 
rate of 1 percent, which we know is unrealistic. That is not 
going to happen. But we try to do that in a Budget. While we 
sit back and watch the dollars go out the door in mandatory 
spending unwilling to take on the tough job of making the 
decisions to reform the mandatory spending side of this. You 
propose Medicare proposals to save $178 billion over five years 
and reduce Medicare's current $34 trillion unfunded liability 
by about a third. What specific proposals do you propose to 
save that money? That $178 billion to reduce that growth from 
7.2 percent to 5 percent? Are they realistic proposals? Things 
that Congress has a chance of acting on in a bipartisan 
fashion? I look at it and it looks at savings in provider 
payments. What does that do to accessibility? And how did we 
come up with reducing provider payments, which we know that 
Congress every year goes back in and adjusts those provider 
payments?
    Mr. Nussle. Well, first of all I can, as a, as a amateur 
political consultant I can certainly give you my opinion about 
that. But I think here as serious policy makers we have a 
responsibility to recognize that even though it is going to be 
difficult, and even though for instance some of the changes, 
for instance, current law for doctors, which would mean that 
they would receive no update. That we would freeze other 
providers for three years, establish competitive bidding for 
labs. Some of these are really tough, but things that have been 
done in the past, for instance, is the reason why I bring up 
1997 and suggest that the last time the Congress in a 
bipartisan way together with the Administration said, ``Let us 
try and tackle this. Let us dip the growth curve and allow it 
to grow but just not as fast.'' Many of these proposals were 
considered and were on the table, and were adopted. And so, yes 
it is going to be hard. Yes, it is going to be politically 
unpopular. But I can tell you, and you and I both know this, it 
is going to be very difficult to explain how we bankrupted 
these programs in six, seven, eight, ten years.
    Mr. Simpson. Well, I agree with you that it is going to be 
hard to explain that. And if we don't do something about it 
they are going to be bankrupt. The problem is, is everything I 
see that comes out of the Administration or the previous 
Administration is a band-aid. Nothing goes in and fundamentally 
reforms the program. And I get frustrated when all I see is 
band-aid approaches trying to solve things----
    Mr. Nussle. Right.
    Mr. Simpson [continuing]. To save a few billion dollars 
here and a few billion dollars there without looking at the 
total program and what the hell it does to the whole program.
    Mr. Nussle. All right, well then let us----
    Mr. Simpson. And the same thing is true of social security.
    Mr. Nussle. Yes.
    Mr. Simpson. Nobody is willing to take on the tough 
decisions of sitting down and let's saying, ``Let us have some 
true reform. Let us look at what we can afford in terms of a 
Medicare program for senior citizens in this country.'' And 
what decisions are we willing to make? Because there is an 
election every two years.
    Mr. Nussle. Well, the President did that with Social 
Security. But back onto Medicare, what we demonstrate in this 
Budget is the order of magnitude you would need to have, the 
kind of consideration you would have to have, if you wanted to 
just take care of one-third of the problem, knowing that we are 
ten years away. So the order of magnitude is 178. Throw out the 
specific proposals for just a moment and say, ``Take 178 as a 
goal. What can we do in order to, no band-aid, let us put a 
tourniquet on it or let us throw it all out and start over.'' 
However you want to do it. We are willing to have that kind of 
debate and conversation. But by and large, Congress has been 
unwilling to address any of it. And so we are at least trying 
to show you ways that you have addressed it in the past, like 
1997, with ways that we could suggest today to at least get 
one-third of the problem under control.
    Mr. Simpson. Well, let me suggest that much of the 
proposals in the Budget are proposals that probably won't pass 
Congress. So we probably, and I think you probably realize that 
and I think the Administration probably realizes that. And so 
consequently we won't address the problem. And what I am saying 
is that this Administration is in a perfect position, last year 
in office, to sit down and say, ``Let us have some 
bipartisanship. Let us sit down and look at this total 
program.'' And instead of, like the Administration did with 
social security and saying, ``I am not going to tell you what 
to do, but it has to have x, y, and z in it.,'' saying 
everything is on the table. Let us sit down and talk. And let 
us see what we can do to resolve this problem. Because if we 
don't, then I wouldn't want to be our children talking to us.
    Mr. Nussle. And the Economic Growth and Stimulus Package 
may be a trail that has been well blazed for that kind of 
conversation. I will say, however, though, there are those, 
such as the Senate Majority Leader, who I think have the 
opinion, or the belief, or the feeling, that it may be better 
to try and negotiate with a new President. And so for instance, 
just this week, made the statement that we probably wouldn't do 
any appropriation bills. We could probably get a better deal 
from the next President. So it may just be a C.R. So there, on 
the one hand we have had some success with bipartisanship with 
an economic growth package. On the other side there are those 
that say, ``Let us just punt and wait till next year and see if 
we can get a better deal.'' We are ready to work if Congress is 
ready to talk about some of these issues and we think the order 
of magnitude is about right even if the specific policies 
aren't perfect.
    Mr. Simpson. Well, I appreciate that. And I am not trying 
to put all the blame on the Administration because Congress has 
been at fault also in not insisting that some of these things 
get done. But I would like to see, you know, there are a 
majority, I think, of members of Congress in both parties who 
would be willing to sit down whether leadership is or not.
    Chairman Spratt. Mr. Allen?
    Mr. Allen. Thank you, Mr. Chairman. And I have to say that 
the remarks of the gentleman from Idaho are much welcomed in 
this room. I agree with much of what you had to say.
    Mr. Nussle, welcome back. I believe we need a Federal 
Budget that will strengthen our nation's defenses, make our 
homeland more secure, and our community safer, and support the 
people, families, and small businesses that drive America's 
economy and keep us competitive in the global marketplace. I 
have serious concerns that the President's Budget would make it 
even harder for families in Maine and across America to afford 
quality healthcare, fuel to get to work and heat their homes, 
and college education for their kids, and everyday expenses 
that rise faster than their paychecks. It seems to me that this 
Budget is pretty much what we have had before from this 
Administration. And the $4 trillion increase in the national 
debt is, I think, a reflection of very much a failed policy.
    Director Nussle, I want to turn to a question about port 
security. Security experts have repeatedly stated that port 
security remains one of our biggest vulnerabilities. In the 
Safe Port Act passed in 2006 Congress authorized $400 million a 
year for port security measures, and we appropriated that 
amount for 2008. The President, however, cuts that number in 
this Budget in half, and has requested only $210 million for 
the Port Security Grant Program for 2009. Now many people may 
not know this, but the port of Portland in my district is the 
second largest oil port on the east coast. The goods that reach 
our shores in Portland travel all over the northeast and reach 
the rest of the United States. My constituents want to know and 
I want to know, why is the President undermining our homeland 
security efforts by underfunding vital programs that enhance 
and improve security at our nation's ports?
    Mr. Nussle. And I am, could you repeat the number? Because 
I have a different number for port security than the one you 
were talking about. We don't----
    Mr. Allen. Well, the number I have for the Port Security 
Grant Program is from $400 million last year to $210 million in 
the proposal.
    Mr. Nussle. Oh, I see. Okay. Yes, I mean our total for port 
security is actually increased by 14 percent. The grant program 
may have, may have, may have been reduced. Actually, it is the 
exact same request the President made in 2008. But we have a 14 
percent increase for total port security under the Department 
of Homeland Security which is a fairly robust number to meet 
some of the challenges that you have just outlined. I think 
that is an appropriate amount.
    Mr. Allen. Well, we will go back and take a look at that. I 
am very concerned about the decline, though, in the grant 
program. Because for many municipalities and states that is an 
important, that is a very important source of funding.
    Let me turn to another issue. According to the Center for 
Budget and Policy Priorities the President's Budget proposal 
would cut grants to state and local governments for all 
programs other than Medicaid by an estimated $18.9 billion, 7.4 
percent, from 2008 to 2009, adjusted for inflation. That 
includes a 22 percent reduction in funding for LIHEAP despite 
the fact that prices for heating oil in the northeast have gone 
through the roof. Given the difficult economic challenges many 
states and communities are facing, have you really looked at 
what, you know, these dramatic reductions in funds to states 
will be? They are all struggling trying to balance their 
Budgets. And if you reduce the Social Security Block Grant and 
you reduce the Community Development Block Grant, and reduce 
funds for law enforcement, you go on and on, have you really 
studied the economic impact of that? Is anything that comes out 
of OMB that looks at the consequences of what you are 
proposing?
    Mr. Nussle. Well, in, and on to your last couple of 
questions. I am not sure. I would have to go back and check if 
there has been specific analysis to those questions. But in 
general, I mean, there is a, and I think you said it, these are 
states and local governments. They have responsibilities as 
well to this. They can't just assume that the federal 
government is going to, is going to pay for all of these kinds 
of activities. And the federal government has been increasing, 
steadily increasing their support. And in fact our request in 
many of these different areas has certainly gone up over the 
years. We may not be able to outbid Congress, and LIHEAP is an 
example. Our request year over year has grown. We have a $1.7 
billion request, which was over our $1.5 billion request from 
last year. But we are not going to be able to outbid a Congress 
that wants to continue to add resources here.
    Mr. Allen. Well, I would take exception to the fact that 
these funds have been increasing. For many grants to states the 
funds have been decreasing, certainly the Community 
Development----
    Mr. Nussle. Well, our requests have been increasing.
    Mr. Allen. Well, right. That is another issue. I yield 
back.
    Chairman Spratt. Mr. Bonner?
    Mr. Bonner. Thank you, Mr. Chairman, and Director welcome 
back.
    Mr. Nussle. Thank you.
    Mr. Bonner. We look at you every time we walk into this 
Committee Room with fond memories. I want to first of all echo 
the thanks I think you received from some of our other 
colleagues. During the Budgeting process I asked you and your 
staff for your assistance on a couple, three projects that were 
important to Alabama. And you didn't help us at all but I want 
you to know that I appreciate the fact that you shot straight 
with us every step of the way.
    Mr. Nussle. Sounds like today I didn't help anybody.
    Mr. Bonner. Well, the fact that you would return our phone 
calls that you would invest the time that I know is precious in 
your new position meant a lot to us, and we do appreciate that.
    That said, I think that the President came last week, a few 
weeks ago, and gave the State of the Union message. In it there 
were not many bold or ambitious new programs that were costly 
but he did outline some. And I think this Budget reflects that 
there were some new programs. And we, as you know, are having 
an internal debate on the Republican side at least about the 
subject of earmarks. And what constitutes an earmark, and what 
is the difference between a congressional earmark and an 
administrative earmark that might be reflected in the Budget. 
You have sat on both sides of the aisle here. Could you give us 
some perspective in terms of does this Budget have any new 
earmarks in it? And what is the difference between someone in 
the bureaucracy of the administrative branch of government 
putting the priority as opposed to someone in the legislative 
branch?
    Mr. Nussle. I will tell you, this has been one of the, one 
of the challenges that I have had as Director in putting this 
Budget together, is to try and make sure that I with integrity 
could come up to you and say, ``We are not earmarking.'' There 
is no question that the Budget is a request. That is what it 
is. And we are requesting you to put money in certain places. 
And as such, there will be those who define that as an earmark. 
But first and foremost, it is public. It is transparent. It has 
total justifications behind it that you can decide and weigh 
one way or the other. It is public often for over a year before 
it is acted upon. It is often distributed, mostly distributed, 
in a competitive grant kind of format, even in those instances 
where it is, where winners and losers are chosen. And that 
process is also quite transparent. So there have been some 
instances in the past where the President's Budget has 
specifically directed resources to one or two sole projects. 
Those have been removed from this Budget. And what remains are 
only projects or proposals or requests that are done in a 
competitive way, and are fully open to your scrutiny and 
judgment as to whether or not they are appropriate.
    Mr. Bonner. During your distinguished career in Congress, 
and the relationship you enjoyed with our now Chairman, who 
also has enjoyed a distinguished career in Congress, we, much 
conversation has taken place in this room about the future 
growth of entitlement spending and what we can do as the 
elected officials of this country to get some handle on it. You 
have young children. Many of us have young children or 
grandchildren. And I guess to paraphrase a question that was 
asked at the National Prayer Breakfast this morning where the 
speaker said rhetorically, ``What do you pray for?'' What do 
you wish for in your current position, and in your previous 
years of service, for our children and grandchildren with 
regard to the debt that they are looking at because Congress, 
the Administrations before, this current Administration, and 
any future Administration, might leave to them? I mean, I was 
listening to one of the presidential candidates declare victory 
the other night, and the promise that we are going to have 
universal healthcare for all Americans, and improved teacher 
salaries for all teachers, and all these wonderful things. And 
it sounds great. And we can have it. But it will come at a 
cost. And what would you wish for your children, and my 
children, and other children in this country in terms of 
bearing that cost?
    Mr. Nussle. Well, it is a profound question. But it is also 
a, in final analysis a policy and political question. The two 
things that I wish for that will have impact on that, I think, 
in greatest respect are that our country is safe. Because if 
our country is not safe all of the rest of this conversation 
matters little. If we aren't able to protect ourselves in the 
future, and that is why the Budget, if you will, puts so much 
emphasis, and why you all put so much emphasis in homeland and 
national security issues. We have got to keep safe. And second, 
we have got to keep safe so that we can continue to be 
prosperous. And that is the second, that is the X factor that 
is involved in solving many of these problems. I have said from 
the Chair and I will say here today, you cannot grow out of any 
of these problems entirely. But growth does matter. And so 
keeping our country safe and continued economic growth are the 
two most important issues, even before you decide whether it is 
personal accounts for social security, or whether you means 
test this program, or whether you have a reconciliation package 
for savings in Medicare. Those are decisions we will all make. 
Keeping us safe so that we can be prosperous are the two most 
important issues for my kids.
    Mr. Bonner. Again, thank you for your service.
    Mr. Nussle. Thank you.
    Chairman Spratt. Mrs. Schwartz?
    Mrs. Schwartz. Thank you, Mr. Chairman. And as everyone has 
said, welcome back Director Nussle. I think that, you know, my 
first term I served on Budget and you were Chair at that time 
and we had some tussles and difference of opinion, so 
interesting to have you back and to be able to maybe continue 
the dialogue if we may, and maybe hope to reach some 
compromise, some reasonable way to move forward.
    Certainly my feeling, as you look at Budgets, and we look 
at this Budget, the President's Budget, is that a Budget is a 
statement of priorities, it is a statement of values. You have 
made it very clear this morning that the high priority is on 
defense, on security, and on sustaining the President's tax 
cuts for, I would say for the wealthiest Americans. There are 
many tax, those tax cuts, as you know, on our side of the 
aisle, we agree with and would like to see move forward on. But 
I wanted to focus on one of the areas that you mention at least 
in your written testimony. I am not sure you mentioned it this 
morning. And that is that Americans have real concerns about 
the economy and the economic downturn, and in particular that 
does affect their concerns about affordable healthcare and 
access to healthcare. What I hear from my constituents is the 
concern about the high cost of insurance coverage, access to 
insurance coverage, and access to healthcare. And certainly as 
a government we have made a commitment, and I am going to ask 
Mr. Etheridge to move one way or the other, if I may. Otherwise 
I can't see Mr. Nussle and he can't see me. Thank you. And 
indeed, no really, as a government we have a huge 
responsibility particularly for seniors and children in our 
Budget. And you have talked about that a good bit this morning. 
I don't think you have talked very much about how we can be 
more effective, more efficient, or improve outcomes for 
Americans. I think that needs to be the goal. And then the 
question is----
    Mr. Nussle. In healthcare, you mean?
    Mrs. Schwartz. In healthcare----
    Mr. Nussle. Yes.
    Mrs. Schwartz [continuing]. Under Medicare in particular. 
And there has been, you have been silent, and the 
Administration's really been, there were a few moments where we 
actually had some commonality on medical records and electronic 
medical records, but basically been silent on anything but the 
cost of Medicare and the cost of children's healthcare, 
particularly around CHIP. Not about what it might do to bring 
down costs if we actually do it more efficiently, more 
effectively, and improve outcomes.
    In fact, the, you have done two things on healthcare, this 
is simplified if I may. That is to cut the growth of Medicare, 
to cut funding for hospitals and providers pretty dramatically. 
And to really say the only way we are going to get healthcare 
to more Americans is to take money away from those who have 
insurance through employers, which is about 60 percent of 
Americans, and direct it to the individual marketplace, which 
is very, very difficult, as I assume you know, for any 
individual, particularly anyone who is of modest income to be 
able to afford the private marketplace. So even with tax 
benefits at the end of the year, it is hard for most Americans 
to find the, be able to find affordable health insurance. And 
secondly, if you have any kind of health issue at all it is 
very difficult to buy it and have it be meaningful. Preexisting 
conditions exclusions are huge for most Americans. And yet, 
the, the proposal from the Administration is to spend $105 
billion over the next five years in taxpayer dollars to be able 
to offer, to try and shift more Americans from the employer to 
the individual marketplace.
    And I am struck by this in part because you are talking 
about, in the estimations I have, is the President's proposal 
would cost over $2600 per person, per year. And yet you want to 
spend these kind of dollars, but when it came to what was a 
very bipartisan, originally bipartisan, agreement to spend much 
less than that, $35 billion, to get healthcare to kids of lower 
middle income families, the President refused to do it. And I, 
you know, I just want to you to comment on the real disconnect 
there. A much more efficient use of taxpayer dollars to get 
healthcare for kids that could have a much more significant 
effect on healthcare outcomes. It was ready to go. It was a 
bipartisan effort here in Congress. And the President refused 
to invest that $35 billion to get healthcare to another four 
million children. And yet want to use much more money, in a 
much less efficient marketplace, to, to move people from 
employment to individual health insurance. It doesn't seem to 
make a lot of sense if what you are trying to do is to make 
healthcare more affordable, more effective, and improve 
outcomes. Could you speak to that?
    Mr. Nussle. Well, a couple of things. I mean, first of all 
we have improved the SCHIP proposal, we believe, in the Budget 
that we have presented. And the President's goal is to, is the 
goal that was established in the original SCHIP, and that is to 
provide health insurance for children who are currently poor 
and uninsured. And them first, not adults, not children----
    Mrs. Schwartz. And yet, if I may interrupt, you are going 
to spend, you are proposing to spend $105 billion on adults who 
may already have insurance, not even be part of the uninsured 
pool. So if that is the goal of the Administration is to get 
care to the poorest children, you are now taking those dollars 
away and using it for an initiative that actually may go to 
potentially wealthy individuals who already have insurance 
through tax deduction.
    Mr. Nussle. My guess is that most of the wealthy 
individuals already have insurance and are well covered. I 
think this is for the uninsured population who have to rely on 
employers in order to even have access to healthcare. And it is 
usually very expensive. They don't have the market effects of 
being able to pool their risks with other individuals, may it, 
let us say association health plans, as an example. There is a 
number of directions that we could go with this. The President 
put, and still does in this Budget proposal, $23 billion on the 
table for that kind of reform to give people better access. But 
I will tell you that individuals, I believe, are much better at 
controlling the marketplace. I would trust you in your ability 
to control the marketplace much better than your employer. And 
I think that is true in general for most people. We need to get 
better personal control or our healthcare if we are going to be 
able----
    Mrs. Schwartz. I think my time is up but I want to thank 
you, Director Nussle, because you have made something very, 
very clear. Is that this is an attempt to move from what might 
be very comprehensive, full coverage to moving people to an 
individual marketplace that may be very hard to purchase it, 
healthcare coverage. But what your goal here is to actually 
make people more personally responsible whether they can afford 
it or not, whether they have had access to better coverage or 
not, and in fact doesn't recognize the real difficulties and 
expense of the individual marketplace.
    Mr. Nussle. I don't think that is what I said. What I said 
was this is for people who are uninsured. So nobody is moving 
from being----
    Mrs. Schwartz. It is not targeted that way. I don't think 
there is any, if it is targeted, that would be interesting----
    Mr. Nussle. Well then why don't we, let us write it that 
way.
    Mrs. Schwartz. If you are open to ways to make sure that it 
is targeted to----
    Mr. Nussle. We are open to writing it that way.
    Mrs. Schwartz. It is not written that way now, but I would 
be interesting in having a conversation to make sure it is 
targeted to more modest income, middle income folks who are 
struggling with this, that it is targeted to the uninsured, and 
that it actually has a marketplace that actually allows them to 
afford it.
    Mr. Nussle. Well, in order for a marketplace to be 
established you cannot seal off an entire population and say, 
``You can't participate. You can only have a small group who 
can participate.'' That will not help drive the marketplace.
    Mrs. Schwartz. Let me say that I do agree that we need to 
tackle this. And I do agree with that. I do think that from a 
tax fairness point of view we have to look at some tax reform 
to make sure that individuals who are purchasing in the private 
marketplace can get some fairness out of the tax policy. I 
completely agree on that. But I think there is work to be done 
to make this meaningful in any way for middle income families 
who are struggling to find health insurance.
    Chairman Spratt. Mr. Etheridge?
    Mr. Etheridge. Thank you, Mr. Chairman. And Mr. Nussle, 
thank you for being here. Let me ask you a couple of questions 
and I will try to keep them pretty tight so we can get through. 
I look at this Budget, and I had the privilege of serving on 
this Committee last year and again this year. And I view it as 
a Budget that is continuing a lot of misplaced opportunities 
and a lot of real challenges and problems are going to be left 
for the next president, whomever that president may be. And a 
lot of the problems were made in this term of this President. 
So let me ask this. You said earlier that you would increased 
the funding for a couple of areas, homeland security being one, 
some other things. But I look at the numbers, and sometimes it 
kind of helps to break it down where the rubber meets the road. 
And I believe if you are going to have homeland security you 
have to have hometown security. That is all across this 
country.
    Just this past week I went to a community and delivered a 
Fire Grant for a fire truck because they had a truck they 
couldn't crank, wouldn't run, wasn't working, thirty-five years 
old. And it makes a difference in that community. I see here 
that the Homeland Security State Grants are proposed to be cut 
in the 2008 Budget by 42.3 percent. Byrne Justice money, cut. 
Assistance to Fire Fighters Grants, cut substantially. Clean 
Water State Revolving Funds, 21 percent cut. Is this consistent 
with helping communities help themselves?
    Mr. Nussle. Well, let us start with whose responsibility it 
is to protect that community.
    Mr. Etheridge. Well, after 9-11 we asked the fire 
departments and the police departments----
    Mr. Nussle. And we took care of New York.
    Mr. Etheridge [continuing]. Across this country to take on 
a much larger role, and then we started to help funding them. 
But now we are going to get them out there and get them engaged 
and pull the money back.
    Mr. Nussle. I don't think we asked them to take on a bigger 
role. They wanted to take on a bigger role. The taxpayers 
wanted them to take on a bigger role. Property taxes have gone 
up in order to cover that in many instances. I was a local 
volunteer firefighter. I, I mean I know what that is all about. 
But just look at the local grants just as an example because 
you brought this up. I think this is, to me it is fascinating. 
We have, you, have appropriated----
    Mr. Etheridge. Give it to me quickly because I have got a 
couple more I want to ask before my time runs out.
    Mr. Nussle. Okay. $23 billion have been appropriated since 
2001. Four additional billion was appropriated last year. There 
currently remains an additional $7 billion, plus that four, 
that has not yet been spent but has been awarded and is in the 
pipeline. $11 billion of that twenty-three----
    Mr. Etheridge. All right, let me move to another question. 
Because I----
    Mr. Nussle. But isn't that, why is that?
    Mr. Etheridge [continuing]. I served as a County 
Commissioner, I served as a State Legislator, and I served as 
State Superintendent. There are things called ``money in the 
pipeline'' that are obligated and not yet spent.
    Mr. Nussle. Okay. So why do we put more money into the 
pipeline if the money in the pipeline is not being spent?
    Mr. Etheridge. Because they may be obligated--let me move, 
let me move to one other one. Because it is obvious you are 
going to take up my time trying to get through that one. Let me 
move to education, because I happen to believe that one, having 
served eight years, is a critical piece. This Administration 
has talked about it and yet every time the Budget comes over 
here there are certain areas that get cut. I have worked with 
previous administrations. I know how important education is. In 
terms of character education there is very little money. It 
really helps children see the world through a moral lens. It 
really is the kind of thing we want to encourage in schools. 
And yet, that is eliminated. Vocational education at a time 
when we have challenges in our schools but more important in 
the workplace training men and women to meet the challenges of 
the twenty-first century, eliminated totally.
    Finally, I will move from that and they have cut Teacher 
Education Improvement Grants, 21st Century Learning Centers, 
Child Block Grant monies, and at a time when the economy is 
slowing down Social Service Block Grants are cut by 29.4 
percent, and 100 percent cut in 2010. Totally eliminated at a 
time when we have some serious--I recognize we have got to get 
our house in order. But why should the most challenged among 
us, the children who are going to have to inherit the future 
are the ones we are going to paste the greatest burden on?
    Mr. Nussle. And has that money increased student 
achievement, or test scores, or their ability to do math and 
science and reading?
    Mr. Etheridge. I am just reading you the numbers from my 
statement----
    Mr. Nussle. I know, but it is not, but see that is----
    Mr. Etheridge [continuing]. And the answer is yes.
    Mr. Nussle. No, the answer is actually no.
    Mr. Etheridge. It is yes in North Carolina.
    Mr. Nussle. It is not yes. How does character education 
funded by the federal level determined by all of us wise people 
here back in my hometown to my kids that are in high school 
today going to improve their education? Can you explain that to 
me?
    Mr. Etheridge. Absolutely. Because there is never enough 
money to meet the needs. If you give them the block grants and 
the opportunities for teachers to training and education, the 
answer is yes.
    Mr. Nussle. We are ready to block grant all of this 
education money. In fact, that is where it went. It went into 
Title I so that it could go back to the states and be flexibly 
used by the teachers and the principals in the schools there 
for appropriate education, and to get student achievement 
rather than stovepiped grants that are determined by wise 
people in Washington, D.C. who don't necessarily care more 
about the kids back in Iowa or North Carolina any more than we 
do.
    Mr. Etheridge. Let me help you with one of the block 
grants. Because one of the great programs with block grants 
are, and the administration with a block grant, this is a great 
history and having been Superintendent I know it. And the next 
year they come back and they cut it across the board and said, 
``Take this out of administration and we are going to cut it.'' 
And pretty soon it goes away because you have no constituency 
for it. Thank you, and I yield back.
    Chairman Spratt. Mr. McGovern?
    Mr. McGovern. You were here longer than me, so you know. 
Welcome back. Let me, I just want to begin by saying the 
stimulus package was mentioned earlier. I got to tell you, I 
supported the stimulus package that went through the House and 
I am a little bit disappointed with kind of the final product. 
I mean it is, it is a step in the right direction, but you know 
in this Committee we had a number of people testify about the 
fact that, that providing stimulus to the most vulnerable 
households could, you know, would really make the greatest 
impact. And many of the experts, Republican and Democrats, that 
we talked to from various administrations all kind of agreed 
that the stimulus package should have included a temporary 
increase in the food stamp, food stamp benefits. And 
unfortunately, I mean we didn't do that here in the House. And 
I am not sure whether they will be able to do it in the Senate. 
And it looks as if whatever stimulus package goes to the White 
House will not include an increase in food stamp benefits. I 
think that is a shame because not only are food stamps a good 
stimulus for our economy but they serve an important purpose, 
and that is they feed hungry people. And that is, 
unfortunately, a real issue. It is a growing issue in my State 
and all across this country. According to the Bush 
Administration's own data hunger is getting worse in this 
country. Not better, it is getting worse. The USDA Report on 
Food and Security release at the end of last year states that 
more than 35.5 million people went hungry, didn't have enough 
to feed their families, in our country in the year 2006. That 
is an increase of more than 300,000 from 2005.
    Now we have a federal safety net in place to address these 
issues, the safety net food stamp program, meals on wheels, 
school meals, and the emergency food system. It is proven and 
it does its job when it is properly funded and maintained. Yet 
this Budget, and again I am relying on the experts that kind of 
deal with these issues, your Budget goes directly after a lot 
of the safety net. You know, under the Bush Administration and 
when Congress was under Republican control these programs, in 
my opinion, were unwarranted targets. Having said that I also 
want to stress that there are many members of Congress on both 
sides of the aisle, Republicans and Democrats, who did their 
best to protect these programs from being unfairly targeted. 
Republican reconciliation bills tried to eliminate food stamps 
for many of the people who relied on them. And thankfully those 
proposals were defeated, and we are now in the process of 
expanding food stamps and other anti-hunger programs to reach 
the tens of millions of Americans who need them.
    But this Budget does the same kind of things those old 
reconciliation bills tried to do. This Budget, you know, 
underfunds food stamps and WIC. You say that increasing, you 
say you are increasing WIC but you are taking away from other 
programs that are part of WIC to fund, you know, to claim that 
you are increasing the program. You low ball other programs 
that help low income families, like LIHEAP and Child Care. And 
again, this Budget eliminates funding for key nutrition 
programs, such as the Commodity Supplemental Food Program. In 
fact, this the third time the Bush Administration Budget has 
proposed these cuts and Congress has twice before rejected 
these proposals, once by a Republican controlled Congress and 
once by a Democratic controlled Congress.
    So here is my questions. Why do you persist in continuing 
to make these proposals when the Congress on a bipartisan basis 
has clearly rejected them, making it very clear that we want 
these programs continued because of the their value to so many 
hungry Americans? Why would an Administration that is concerned 
about stimulating the economy choose to cut back spending on 
food assistance programs that stimulate the economy in the food 
and agriculture sector and help hundreds of thousands of low 
income Americans who are dependent upon them? And why would a 
Congress that has twice rejected these proposals, and is 
currently working closely with the Administration on an 
economic stimulus package, support proposals that would reduce 
food assistance to nearly 800,000 needy Americans?
    And let me just finally say, there is not a member of 
Congress up here who when they go back to their district are 
not made aware of the fact that our food banks are at capacity. 
The food pantries are, you know, are providing assistance to 
people like never before. That working families are 
increasingly relying on these services. I mean, this is a 
significant issue that seems to be ignored and would be made 
worse if this Budget became enacted by Congress.
    So I guess, you know, I would appreciate a response to any 
of that, or----
    Mr. Nussle. Well, let me just try and tackle one. The food 
stamp program, part of the reason why a number of years ago the 
food stamp program was put into reconciliation was because I 
think it was running an error rate of about 18 percent.
    Mr. McGovern. No longer.
    Mr. Nussle. As a result of reconciliation and the Bush 
Administration fixing the program, some reforms done here in 
Congress including the debit card, a number of reforms, I mean 
we took a program that has an appropriate role, a very 
important focus. We want people who cannot afford it, who need 
those kinds of services, to be able to get them. But we also 
knew that there was an underground market, a so-called black-
market, for food stamps the way it was being done. There was an 
18 percent error rate. We reduced that rate. We improved the 
program. More assistance is now getting to the people that is 
appropriate. And I think we should, we should cheer about that. 
But, you know, so I, that is the reason why you used 
reconciliation, is to improve, is to find savings, is to make 
necessary reforms. That is the reason why you do it. It was 
done, and I think it was done appropriately. And as a result we 
don't see that kind of error rate now.
    Mr. McGovern. But in this Budget, in this Budget, I mean, 
you know, 300,000 people in low income families would lose 
benefits that they currently get. This is according to the Food 
Research and Action Center.
    Mr. Nussle. I haven't seen that report----
    Mr. McGovern. The minimum food stamp benefit is like still 
$3 a day.
    Mr. Nussle. I would like to see that report. I don't, I am 
not sure I could agree with that.
    Mr. McGovern. That is the average food stamp benefit. The 
minimum is $10 a month. I mean we have got people, your own 
Administration is saying that there are more people in the 
United States today, I mean, the most recent data is that 
hunger is becoming a worse problem.
    Mr. Nussle. And we believe that this Budget covers that, 
but the----
    Mr. McGovern. How does it cover it when your----
    Mr. Nussle. The statistics you cited, I would be happy to 
take a look at them.
    Mr. McGovern. I am happy to get you the----
    Mr. Nussle. Right. Because I have not seen them and I, and 
so I, I just, I can't believe that. So until I have a chance to 
see it----
    Mr. McGovern. Well, I will tell you that it is true. I will 
get you the statistics, and, you know, and I would also----
    Mr. Nussle. Well I am not suggesting if the statistics were 
true, I am just saying is it correct analysis. I would like to 
see that. So.
    Mr. McGovern. Well my sense is it is correct analysis. 
Again, I mean based on what I see in my own district. When I go 
to food banks and I find out that, you know, that they are at 
capacity. That more and more people that are showing up to food 
banks are working families.
    Mr. Nussle. But it is an entitlement program. So if there 
is somebody who is available, or who qualifies, why aren't they 
getting that?
    Mr. McGovern. Well, I will provide you the statistics.
    Mr. Nussle. Okay.
    Mr. McGovern. But I am just, what I am simply saying is 
that the benefit as it is right now doesn't meet the need.
    Mr. Nussle. Well but for, if there are 200,000 people who 
are qualified for food stamps and for some reason are not 
getting the benefit we need to know why.
    Mr. McGovern. I will get you the statistic.
    Mr. Nussle. But it has nothing to do with, you know, some 
Budget, mysterious Budget that is cutting food stamps. It has 
to do with something else.
    Mr. McGovern. But where it is relevant is when the average 
food stamp benefit is $3 a day. The minimum food stamp benefit 
is $10 a month, hasn't been changed since the mid-1970's when 
in fact even those who are getting the benefit aren't getting 
enough to deal with the fact that food costs are rising, you 
know? The cost of living is rising. Fuel costs are rising. I 
mean, people are not able to survive. The safety net is being 
decimated. And what I am saying is that your Budget, as I see 
it, you know, makes it even worse. And if I can get you the 
statistics and the analysis, and we can have a discussion on 
this I would appreciate it because I think this is a serious 
issue.
    Mr. Nussle. Thank you.
    Chairman Spratt. Before turning to Mr. Moore the Ranking 
Member, Mr. Ryan, has a couple of questions he wanted to ask. 
Mr. Ryan?
    Mr. Ryan. Thank you, Chairman. Director Nussle, I just 
wanted to get your reaction, your take on the Medicare 45 
percent trigger. As you know, it is my understanding that the 
Administration's proposals within this Budget would actually 
take care of the funding alert given that this new rule 
provides sort of a fast track procedure kind of approach. Would 
you care to speculate what we should be expecting given the 
fact that we are going to exceed this 45 percent trigger 
funding alarm for Medicare?
    Mr. Nussle. Yeah, the last few years now the President has 
sent up proposals in this regard, more than enough to, in a 
cafeteria approach, to deal with this. I am not aware that a 
decision has yet been made on how to address the so-called 
Medicare trigger. And so I am not able to speculate on that 
today. But we believe just to start with here today that there 
is more than enough to address that 45 percent revenue issue 
with the proposals that are before us.
    Mr. Ryan. Yeah, I think it is just important to highlight 
the fact that we have a huge funding alarm going off this year 
with respect to Medicare. And to the extent that we can, each 
side of the, each side of government talk about that that is to 
the best because we do have a problem here.
    Mr. Nussle. The concern I would have with the, with the so-
called trigger mechanism is that it is possible for Congress to 
act to just get you under----
    Mr. Ryan. Yes.
    Mr. Nussle [continuing]. The trigger, but ignore the fact 
that the trigger is going to continue to go off every year. And 
that the long term is still looming. So my concern about any 
proposals that are going to be considered, which is the reason 
why the President put up the Budget he did, is that the trigger 
is nice to discuss. But that should only be the alarm. You have 
still got to run out of the building that is on fire and figure 
out how you are going to put it out. And that is the issue that 
I think Congress needs to address.
    Mr. Ryan. And if we implemented the full range of 
recommendations in the Budget it would reduce the unfunded 
liability of Medicare by about a third, is that correct?
    Mr. Nussle. By a third, yes.
    Mr. Ryan. Thank you.
    Chairman Spratt. Mr. Moore?
    Mr. Moore. May we have the slide please?
    
    
    Mr. Moore. Director Nussle, welcome back and I appreciate 
your service. And I wanted to bring to your attention this, 
which I think we all wish were true. President Bush said in his 
first Budget address, or Budget message in February of '01, 
``Our Budget will retire nearly $1 trillion in debt over the 
next four years. This will be the largest debt reduction ever 
achieved by any nation at any time.'' And as I said, I think we 
all wish that were true. Unfortunately in September of '01 we 
had a horrible incident in our country and we had to spend some 
money there. And I understand all that and certainly I think 
virtually every member of Congress supported those 
expenditures.
    But I want to talk to you about this and what this means to 
the future. I have eight grandchildren. I am very concerned 
about their future and what we have done to their future. As 
you are aware, our country's gross national debt has increased 
$3.5 trillion in the past seven years from $5.7 trillion in 
January of '01 to more than $9.2 trillion today. Again, I think 
we have mortgaged the future of our children and grandchildren 
and we have to consider what that is going to do to them in the 
future. And given the fiscal challenges we face today many of 
us are concerned about the potential long term costs of 
extending all of the '01 and '03 tax cuts, which CBO has 
estimated would cost over $2.7 trillion over the next decade, 
including increased debt service. These longer term costs and 
their potential impact on the nation's debt and the economy, 
and the argument that the permanent extension of the tax cuts 
would produce so much economic growth that they would pay for 
themselves, is just not factual in my reading. In fact, the 
July '06 report from the Treasury Department found that if the 
tax cuts were made permanent, even under the most favorable 
economic scenario they would produce increased revenues 
sufficient to cover less than 10 percent of their cost.
    Wouldn't the significant levels of new debt produced by the 
permanent extension of these tax cuts without offsets have a 
serious detrimental impact on our economy? Shouldn't we be 
talking about PAYGO, not, and as you know we finally got a rule 
that expired back, I believe, in '02 reinstituted this year. 
And I belong to the Blue Dog Coalition. We talked with our 
leadership, and that rule is now instituted again in the House 
of Representatives. Shouldn't we be talking, though, about 
applying Pay As You Go principles not only to new spending but 
also new tax cuts as well?
    Mr. Nussle. Well, Congress can make that, obviously, can 
make that determination. And as I, as I understood it this year 
you tried to do just that. The economic growth and stimulus 
package evidently fell outside of PAYGO as I understood it. So 
there appear to be some exceptions, at least, to the rule.
    Mr. Moore. Yes, sir.
    Mr. Nussle. I mean, your focus, your focus on debt and 
deficit is well placed. I am concerned about it, too. I am more 
concerned about the debt held by the public than I am, because 
that is the debt we are paying the interest on. And if you look 
at that, again, we believe because of the ability that we have 
here to manage the short term deficit that we can get back to 
that time that you and I remember when we were actually, the, I 
think it was actually the day of September 11th we were ready 
to hold a hearing in this very room about how can we not dip 
into the social security trust fund and pay down even more 
debt. So I remember those days very well. So I think it is well 
placed.
    But I can tell you that, you know Dennis, my view is that, 
and again, this is not to suggest that the only thing that you 
worry about is the economy. But I am very concerned about the 
signal that it sends, you know, to the marketplace, to the 
economy, to the, you know, if basically we don't make these tax 
cuts permanent, particularly the dividends and capital gains, 
to a marketplace right now that is skittish. The marriage 
penalty, the child credit, I can't believe, my view, my thought 
is that most people would support continuing those. It gets 
into some of these other areas where it gets a little dicey. 
But those are the very ones, I will say to you, that, that I 
think the market would react very poorly to. It could stunt 
growth and if we don't continue to grow that X factor, even 
though that is not the only thing that will help, that X factor 
is very important to getting us back on our two feet.
    Mr. Moore. I appreciate your comments and I don't totally 
disagree with what you are saying here. I think we do need to 
look carefully at those. On the other hand I think we have got 
to start living like, as a nation, like most American families 
do, within a Budget. Not all, but most do. And for years we 
have not been doing that. And now we have a $9.2 trillion debt 
we are passing onto future generations, which I think is just 
horrible. We should not be doing that to our future 
generations. I do understand, I voted for the President's first 
tax cut based upon projected surplus over the next ten years. I 
think $5 trillion of it didn't pan out that way, but that is 
what I was led to believe at the time I voted for that. That is 
why I voted against the second. But I think we do need to start 
living within a Budget. I thank you very much.
    Mr. Nussle. Thank you.
    Chairman Spratt. Ms. Kaptur?
    Ms. Kaptur. Thank you very much, Mr. Chairman. Welcome 
Director Nussle, nice to see you back in the House and your 
familiar chambers here. You got a tough sell up here. I am 
trying to decide whether the Bush Administration, you have only 
been over there, what two years? A year and a half?
    Mr. Nussle. No, time flies when you are having fun but it 
is only about four months, five months.
    Ms. Kaptur. Four, oh boy. Then you have got a doubly tough 
job. I am trying to make a judgment as to whether the Bush 
Administration in total has been profligate. And that is an 
interesting word. I just took the dictionary out. And it comes 
from the Latin roots of fligare, which means to ruin, and the 
word pro, which means forward. So ruining forward, profligate, 
intemperate, reckless, whether we are squandering our future 
and dissipating our children's inheritance.
    According to the numbers I have, and my specific question I 
have is do you have your Budget submission up there with you? 
Because I want to know on what page is the bottom line. If you 
could just give me the bottom line, which page that is on. From 
past Bush Budgets, nearly $4 trillion, a total of $4 trillion, 
has been added during this Administration in debt. $5.7 
trillion in January 2001 to $9.7 trillion by the end of this 
year. That is more debt than during all presidential 
administrations from George Washington through Ronald Reagan. 
It is an, staggering, in my opinion, profligate, legacy.
    My question to you is, in the time you have in office, for 
the 2009 submission, if you could kindly give me the page on 
which the bottom line is, and what the deficit is projected for 
2009, which is the only Budget we can do anything about here. 
We don't know which of us will be back next year. Everyday is a 
gift.
    Mr. Nussle. Probably the best, and I don't have the page 
number. I will find out. But it is table S11 is answering some 
of the questions you just are talking about with regard to debt 
and deficit. And the answer is 410 for this year and 407 for 
'09, is the unified Budget deficit.
    Ms. Kaptur. $410 billion in the red for this year, did you 
say?
    Mr. Nussle. Yeah, and that is page 165 of the Budget.
    Ms. Kaptur. One, thank you, I thank you for that. And 
then----
    Mr. Nussle. Table S11.
    Ms. Kaptur. S11, and then for next year? What was it, four?
    Mr. Nussle. 4-0-7.
    Ms. Kaptur. 4-0-7, is best as, so that is, just in two 
years three-quarters of another trillion dollars. Another 
trillion dollars. According to the numbers I have the interest 
we have to pay on the combined deficit was $260 billion in, for 
2009 rising to over $300 billion by 2013. And the question I 
have is do you know how much of that $302 billion will be paid 
to foreign interests? We know during the Bush Administration, 
of the debt securities being sold now 80 percent since 2001 are 
sold to foreign interests. So we are becoming more and more 
indebted to outside interests. How much are we now paying them 
in interest?
    Mr. Nussle. Let me check just so I can get you the right 
answer. My ballpark, as I remember it, is 40 percent but I will 
find out.
    Ms. Kaptur. Okay, so that would be, let us say----
    Mr. Nussle. I take your point seriously regardless of the 
amount so----
    Ms. Kaptur. Right. Because you know I look at the 
committees I sit on. Okay, so let us say we are paying $140 
billion----
    Mr. Nussle. Forty-five percent, we got the number.
    Ms. Kaptur. Forty-five, nearly half, so we are draining off 
our tax dollars to pay interest to bond holders someplace else. 
I look at the committees that I sit on. NASA, if our Budget is 
$15 billion in a year we are doing well. And we have got all 
kinds of problems with the space shuttles and everything else, 
and solar panels ripping up in space, and trying to keep good 
engineers on. I happen to represent a region that was just 
heavily hit by flooding this week, and one of my concerns in 
your Budget is that it is a billion dollars less for the Army 
Corps of Engineers. And I would just ask you to take a look at 
that Budget, also. Because it is a 15 percent cut, over a 15 
percent cut from the 2008 enacted level to the Army Corps. In 
Ohio, which is on the Great, the part of Ohio I represent is on 
the Great Lakes, we have enormous backlogs of Army Corps 
projects that are unfinished. They are not even in the ground. 
Another town just got flooded again last night. Sixteen and a 
half feet of water, Finley, Ohio, that is in Jim Jordan's 
district. And but it comes up to our district, you know? Do you 
see any possibility of the Corps Budget being, or accounts 
being shifted to move some money to needy infrastructure 
projects such as the Corps where we have got these huge 
backlogs?
    Mr. Nussle. I will tell you what, the criteria we used this 
year, and it is not necessarily going to comfort you, but I, 
let me just tell you what our criteria because I think it is 
important for you to hear that if you, especially since you 
serve on the Committee. Our, it was based on performance based 
construction. So whether or not they could accomplish it. 
Second is that we decided we wanted no new starts this year. 
And third was we focused on what can be completed of that huge 
backlog, not just in Ohio, but across the country. What could 
be completed this year? Let us get it completed this year. So 
as opposed to starting all sorts of other ones, continuing some 
progress, let us see what we can actually get completed this 
year and focus our resources on that. Because you are right. 
Congress continues to send more and more from the 
authorizations side and the appropriations side does not, 
cannot keep up, with the enormous backlog that comes from that 
authorization side.
    Ms. Kaptur. Mr. Chairman, I know my time is up but I just 
have to say that for this one town, Finley, Ohio, Mike Oxley 
used to represent it when I believe you served, Mr. Director. 
And they have been so hard hit. It is not even my district. 
But, I mean, we have members here who lost lives. Bart Gordon 
was just down on the floor from Tennessee. In this particular 
community that project will never start this year, because it 
wasn't in the ground and that is the problem.
    Mr. Nussle. What, what, was it a flood wall? Or a levee? 
What was it that----
    Ms. Kaptur. They have to create a flood wall. And they----
    Mr. Nussle. So this would be something new?
    Ms. Kaptur. Well, there were some drawings done many years 
ago.
    Mr. Nussle. Okay.
    Ms. Kaptur. But they would have to get some engineering 
work done. But now, they have been flooded twice in the past 
eight months. And these are severe, I am talking about the 
headquarters of Marathon Oil. I am talking about the major 
downtown area of this town. And the flooding problems are 
significant. And I just think this Corps Budget is truly, truly 
inadequate. And I am just, I am being selfish because this is 
my area, but, I mean, look at Louisiana. Look at the 
requirements that we have all over this country. And to send us 
back home to say, you know, ``Well gosh, it is a 15 percent 
cut,'' when we have got people living in shelters. Something 
has to shift.
    So I thank you very much, and I thank you Mr. Chairman for 
giving me an extra thirty seconds.
    Chairman Spratt. Thank you, Ms. Kaptur. And Mr. Director, 
thank you for your presence here today, for your testimony, and 
for your forthcoming and forthright answers. We appreciate it 
and we look forward to working with you.
    Mr. Nussle. Thank you, Mr. Chairman.
    [Whereupon, at 1:40 p.m., the Committee was adjourned.]

                                  
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