[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]





                         THE AMERICAN RECOVERY
                          AND REINVESTMENT ACT
                           OF 2009, AN UPDATE

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

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, JULY 14, 2010

                               __________

                           Serial No. 111-29

                               __________

           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
ALLYSON Y. SCHWARTZ, Pennsylvania    PAUL RYAN, Wisconsin,
MARCY KAPTUR, Ohio                     Ranking Minority Member
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 SCOTT GARRETT, New Jersey
EARL BLUMENAUER, Oregon              MARIO DIAZ-BALART, Florida
MARION BERRY, Arkansas               MICHAEL K. SIMPSON, Idaho
ALLEN BOYD, Florida                  PATRICK T. McHENRY, North Carolina
JAMES P. McGOVERN, Massachusetts     CONNIE MACK, Florida
NIKI TSONGAS, Massachusetts          JOHN CAMPBELL, California
BOB ETHERIDGE, North Carolina        JIM JORDAN, Ohio
BETTY McCOLLUM, Minnesota            DEVIN NUNES, California
JOHN A. YARMUTH, Kentucky            ROBERT B. ADERHOLT, Alabama
ROBERT E. ANDREWS, New Jersey        CYNTHIA M. LUMMIS, Wyoming
ROSA L. DeLAURO, Connecticut,        STEVE AUSTRIA, Ohio
CHET EDWARDS, Texas                  GREGG HARPER, Mississippi
ROBERT C. ``BOBBY'' SCOTT, Virginia  CHARLES K. DJOU, Hawaii
JAMES R. LANGEVIN, Rhode Island
RICK LARSEN, Washington
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin
GERALD E. CONNOLLY, Virginia
KURT SCHRADER, Oregon
DENNIS MOORE, Kansas

                           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, July 14, 2010....................     1

    Hon. John M. Spratt, Jr., Chairman, Committee on the Budget..     1
    Hon. Paul Ryan, Ranking Minority Member, Committee on the 
      Budget.....................................................     2
        Submission for the record: letter, dated April 22, 2010, 
          to President Obama.....................................    13
    Hon. Thomas J. Vilsack, Secretary, U.S. Department of 
      Agriculture................................................     4
        Prepared statement of....................................     6
        Responses to questions submitted.........................    97
    Matt Rogers, Senior Advisor to the Secretary, U.S. Department 
      of Energy..................................................    40
        Prepared statement of....................................    42
        Responses to questions submitted.........................    97
    Veronique de Rugy, Ph.D., senior research fellow, Mercatus 
      Center, George Mason University............................    64
        Prepared statement of....................................    65
    Josh Bivens, Ph.D., macroeconomist, Economic Policy Institute    73
        Prepared statement of....................................    75
    Hon. Michael K. Simpson, a Representative in Congress from 
      the State of Idaho, questions submitted for the record.....    96
    Hon. Marcy Kaptur, a Representative in Congress from the 
      State of Ohio, questions submitted for the record..........    96

 
     THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009, AN UPDATE

                              ----------                              


                        WEDNESDAY, JULY 14, 2010

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 1:00 p.m. in room 
210, Cannon House Office Building, Hon. John Spratt [chairman 
of the committee] presiding.
    Present: Representatives Spratt, Kaptur, Becerra, Doggett, 
McGovern, Etheridge, DeLauro, Edwards, Scott, Langevin, 
Connolly, Schrader, Ryan, Hensarling, Garrett, Diaz-Balart, 
Campbell, Jordan, and Djou.
    Chairman Spratt. I am going to call the hearing to order. 
Secretary Vilsack, welcome. We look forward to your testimony.
    We have a vote on the floor and what we propose to do is do 
opening statements, go vote, come back and proceed with the 
hearing if that is agreeable with you.
    We are here today for an update on the Recovery Act and our 
economy.
    The baseline in which we begin is January, 2009, the month 
prior to passage of the Recovery Act. The economy was shrinking 
an annualized rate of 5.4 percent; 779,000 jobs were lost in 
that month alone, 2 million in the previous quarter.
    The deficit at that starting point was projected to be $1.3 
trillion for fiscal 2009. Now, after adoption of the Recovery 
Act and after 18 months of other fiscal and monetary relief, 
the economy is in its third straight quarter of growth and a 
net of nearly 900,000 jobs have been created since January 
2010.
    Because of the economy and the aggressive measures we took 
to deal with the worst recession since the Depression, the 
deficit rose to $1.4 trillion for 2009. That is far more than 
we can sustain, but it is not substantially more than CBO 
foresaw in January of 2009.
    Most economists agree that it is counterproductive to try 
and balance the Federal budget in the midst of a recession. But 
we have been taking steps to make sure that the budget recovers 
as the economy recovers. We have made pay-as-you-go statutory; 
created a fiscal commission; and approved in the House a 
discretionary spending cap for 2001 at a level that is $7 
billion below the President's request.
    This is the third hearing that this committee has held to 
examine the State of the economy and the recovery. In June, 
Federal Reserve Chairman Ben Bernanke testified that the Fed 
anticipates that real gross domestic product will grow in the 
neighborhood of 1--3.5 percent over the course of the coming 
year as a whole and maybe at a somewhat faster pace next year.
    When I asked Chairman Bernanke whether TARP and the 
Recovery Act had been necessary to rescue the financial system 
and our economy, Bernanke replied, ``Certainly, we have averted 
what I think would have been, absent these interventions, an 
extraordinarily severe downturn, perhaps a great depression''--
that from a man who is characteristically understated.
    Two weeks ago, we heard from a panel of economists, 
including Mark Zandi. Zandi said that, by his estimate, the 
economy will grow nearly twice as fast over the course of 2010 
as it would have fared without the Recovery Act. The 
Congressional Budget Office has estimated the Recovery Act is 
contributing significantly to economic turnaround, raising GDP 
by 1.7 to 4.2 percentage points in the first quarter of 2010 
and increasing employment by between 1.2 million and 2.8 
million jobs in that quarter alone.
    Yet, the economic recovery is not proceeding as fast and as 
steadily as we would like. And for too many Americans, jobs are 
still scarce and hard to find, and credit is still tight and 
hard to get.
    So, we hold today's hearing to examine the impact the 
Recovery Act has had on the economy and consider impacts that 
it may have yet. We are pleased to have to testify 
representatives from two Cabinet departments that have 
responsibility for a considerable portion of the Recovery Act 
funding. First, we will hear from Secretary Tom Vilsack from 
the Department of Agriculture.
    We had originally been scheduled to hear from the Energy 
Secretary Steven Chu as well, but a last-minute scheduling 
issue kept him from being here, and he will be represented by 
Matt Rogers, who is his senior adviser. We will hear testimony 
from Mr. Rogers after we hear Secretary Vilsack's testimony and 
members have had a chance to ask questions. We will hear from 
both witnesses in detail about the impact of the funding and 
tax provisions contained in the Recovery Act.
    After hearing from our Administration witnesses, we will 
then turn to economists from the Economic Policy Institute and 
the Mercatus Center at George Mason University. But before we 
go to Secretary Vilsack, let me recognize the Ranking Member, 
Mr. Ryan, for his opening statement.
    Mr. Ryan.
    Mr. Ryan. Thank you, Chairman.
    Thank you for calling this hearing to assess the stimulus 
and its impact on the economy and the Federal budget. I also 
want to extend a warm welcome to our witness again.
    Secretary Vilsack, good to have you again. Thanks for 
taking time out of your busy schedule.
    I also want to take a moment to recognize Veronique de 
Rugy--I just took a little time to practice that name, I think 
I got it right--who will join the next panel.
    Veronique is a distinguished economist and senior research 
fellow at the Mercatus Center at George Mason University, and 
she has done a tremendous amount of work on tracking stimulus 
spending.
    Over a year ago, Congress enacted a stimulus bill that 
spread huge spending increases across the government. By every 
objective measure, from jobs and economic growth to the rising 
price tag, the stimulus has failed.
    It has failed to create the jobs promised. Rather than save 
or create 3 to 4 million jobs, the economy has shed 2.7 million 
jobs since the stimulus passed. It has failed to keep the 
unemployment rate below 8 percent as promised. Unemployment 
still hovers near 10 percent. It has failed to revive the 
economy, as growth remains sluggish and there are growing fears 
of a double-dip recession.
    A year ago, we were told that the stimulus would cost us 
$787 billion. That cost has risen in the latest estimate to 
$862 billion. The total price eclipses $1 trillion when you 
include the borrowing costs.
    Rather than acknowledge the limitations of this borrow-and-
spend approach, the Administration and this Congress have opted 
to move goal posts and to double down. We will be likely told 
today, as Americans have been lectured throughout the so-called 
``Recovery Summer'' campaign blitz, that those promises were 
based on miscalculations of the severity of the situation. The 
proponents will tell us that we should all be grateful that the 
pain isn't more acute and that it is not fair to hold 
policymakers accountable for the failures of their policies.
    The economic models that were overpromising on the stimulus 
were clearly wrong, yet the Administration relies on these same 
economic models to make the case to double down on this failed 
borrow-and-spend economic experiment. The failed stimulus is 
unfortunately typical of Washington's destructive economic 
agenda. The government cannot spend, tax, and regulate its way 
into economic prosperity, but that is exactly the policy course 
this majority has chosen.
    Washington's economic overreach is paralyzing investment 
and growth. It is fostering an environment of anxiety and 
uncertainty and further eroding the American people's trust in 
their elected leaders.
    From health care and the financial sector to the auto 
industry and the costly cap-and-trade national energy tax, this 
Administration and this Congress seem to believe that the 
answer to every problem is to explode the size of government 
and to centralize power in Washington. And while the 
Administration will be quick to highlight what it sees as its 
accomplishments from deficit spending on its stimulus program, 
we still have no budget.
    We just learned that the Administration's budget and 
economic update, which was due tomorrow, will be delayed this 
year. We still haven't received the Trustees' report on 
Medicare and Social Security's financial health, which we 
usually receive in April. The American people are fed up with 
the relentless push to spend money we don't have, add to our 
crushing burden of debt, and evade accountability for the 
dismal results.
    We need to chart a new course. Let's cancel the remaining 
stimulus funds. Let's get a grip on runaway Federal spending, 
and let's advance pro-growth economic policies. We need to spur 
sustained job creation, rebuild confidence in our future, and 
restart the American engine of prosperity.
    Thanks again to all of our witnesses. Obviously, we have 
differences of opinion, and I look forward to your testimony.
    Chairman Spratt. I think we have framed the issues 
adequately for the forthcoming hearing. We will be back as 
quickly as possible. Thank you, again, Secretary Vilsack, for 
your indulgence.
    [Recess.]
    Chairman Spratt. I call the committee back to order, and 
before proceeding to hear from our witnesses, I would simply 
ask unanimous consent that all Members be allowed to submit an 
opening statement for the record at this point.
    Without objection, so ordered.
    I also welcome again our witnesses and would tell each of 
them that their statements have been filed and will be made 
part of the record in their entirety, so they can summarize as 
they see fit.
    Secretary Vilsack, thanks for coming. We look forward to 
your testimony, the floor is yours.

        STATEMENT OF HON. THOMAS J. VILSACK, SECRETARY,
                 U.S. DEPARTMENT OF AGRICULTURE

    Secretary Vilsack. Mr. Chairman, thank you very much.
    And to Representative Ryan and other members of the 
committee, thank you for the opportunity to be here today to 
speak to you briefly about the American Recovery and 
Reinvestment Act.
    The chair has done a good job of discussing the role that 
the Recovery and Reinvestment Act has played in helping to 
rescue our economy from a potentially serious depression, as 
reflected in increased growth in our gross domestic product and 
in private-sector job numbers.
    I would like to direct the committee's attention for just a 
few minutes to the state of rural America and the impact that 
the Recovery Act has had and will continue to have on a 
resurgence and revitalization in rural America.
    This is an area, Mr. Chairman, where we have seen high 
unemployment, significant poverty, income disparities, aging 
populations and declining populations, not for the last couple 
of years but for a number of decades.
    The Recovery and Reinvestment Act, in my view, provides a 
real shot in the arm for rural America, and it is the linchpin 
to a revitalization of the economy. Consider what we have been 
able to do at USDA with the Recovery and Reinvestment dollars. 
Today over 800 communities have seen improvement in community 
facilities as a result of projects funded through the Recovery 
and Reinvestment Act. Our Community Facility Grant Program has 
allowed us to expand hospitals, libraries, police stations and 
fire stations, creating jobs and providing strengthened 
communities that will impact and affect over 10 million 
Americans.
    The same is also true for the reinvestments that have been 
done in wastewater and sewer projects. Again, over 800 projects 
have been impacted already by the recovery dollars. This has 
allowed us to improve water quality for over 2 million 
Americans, reducing the threat of water-borne illness, and more 
importantly and perhaps as importantly, creating an opportunity 
for these communities across the country to be able to attract 
real economic development because they have the capacity to 
fulfill water needs of growing and expanding businesses.
    Speaking of growing and expanding businesses, the Recovery 
and Reinvestment Act has provided an opportunity for us to 
assist over 1,000 rural businesses, helping to create and 
retain jobs that are so vital to our recovery. Nine hundred 
business and industry loans have already been made by USDA and 
more to come. A hundred and eighty-eight projects under the 
Rural Enterprise Grant Program have been funded, spurring 
entrepreneurial opportunity.
    At the same time this is taking place, we are also working 
aggressively to expand broadband access in rural and remote 
areas across the country. To date, 137 projects have been 
funded and obligated. This will provide broadband coverage to 
over 500,000 households, over 100,000 businesses, well on the 
way to reaching our goal of 1.2 million households positively 
impacted by having access to broadband and over 230,000 
businesses being able to access the opportunity this presents. 
Small businesses will be able to expand markets. Farmers and 
ranchers will be able to have real-time information. Homeowners 
will be able to access online education without having to leave 
their homes. In addition, anchor institutions, 7,800 anchor 
institutions, will be assisted in expanding opportunities in 
schools with class opportunities for small rural schools that 
are unable to hire teachers but can have access to online 
courses.
    At the same time, we are working hard through the Forest 
Service to impact and affect the 193 million acres of our 
forest and grassland properties. With the Recovery and 
Reinvestment Act, we have already been able to improve 8,400 
miles of roads, an additional 1,900 miles of trails, and 25,000 
acres have been improved in terms of soil and water 
conservation. This, in addition to the fact that we have 
expanded the opportunity for the American dream of 
homeownership to 89,000 individuals across the country through 
our Direct and Guaranteed Loan Programs.
    All of this will help create opportunity today and, as 
importantly, will continue progress in creating a more vibrant 
and revitalized rural economy tomorrow. This goes along with 
the recovery aspect of the Recovery and Reinvestment Act, where 
we have already provided over 2,600 farm families with direct 
loan assistance to allow them to maintain their farms; $350 
million in disaster assistance has been provided under the 
Recovery Act; and over 40 million Americans are currently 
receiving SNAP payments. Thousands of school children will also 
receive assistance, as will those who are food bank recipients, 
as a result of the recovery and reinvestment.
    At the same time, Mr. Chairman, that we are trying to 
revitalize the economy, we want to make sure that what we do is 
transparent and that we are held accountable, and so we have 
actively involved our staff in working together to try to 
create interactive maps, such as the one I am holding up in my 
hand here on housing.
    We have similar sheets on our Web site that will tell 
people exactly what is taking place within their State. We are 
also keeping track of contract performance. This book is a 
series of contract performance measures to make sure that we 
are continually on track, to make sure that projects move 
forward, creating the jobs and opportunities that were promised 
through the Recovery and Reinvestment Act.
    We received $28 billion in the form of appropriations: 
$17.2 billion has been obligated; $14.1 billion has been 
outlaid; and we are awaiting projects in the Forest Service and 
broadband to expand on those numbers.
    With that, Mr. Chairman, I would be happy to answer 
questions that the committee has.
    [The prepared statement of Secretary Vilsack follows:]

        Prepared Statement of Hon. Thomas J. Vilsack, Secretary,
                     U.S. Department of Agriculture

    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to appear here today before the House Committee on the 
Budget to provide an update and highlight the many successes of the 
American Recovery and Reinvestment Act of 2009 (Recovery Act) for the 
United States Department of Agriculture (USDA). I am pleased to be 
here, along with Secretary Chu, to report that the Recovery Act is 
working. The investments we are making are not only creating jobs and 
economic stability, but also funding the technology and infrastructure 
that will lay the groundwork for future economic growth.
    I am pleased to be here this morning to report that the Recovery 
Act is accomplishing even more. It is restoring America in terms of 
economic growth and vitality and building a new sense of community 
across our nation. And at the most fundamental level, the Recovery Act 
is enabling Americans to own homes and is preserving housing for the 
people all across our country. This is the very core of the American 
Dream--and supports and renews the very values that our nation was 
founded upon.
                   the recovery act in rural america
    Mr. Chairman, it is especially important to highlight what the 
Recovery Act means specifically to Rural America. While the economic 
downturn in the past two years was more severe than any other in 
generations, the difficulties experienced by Rural America have been 
more acute and long lasting. From all perspectives, Rural America has 
been in a state of recession for more than two decades. As such, rural 
communities have struggled to maintain the population and businesses 
needed for economic growth, and income growth rates have suffered 
accordingly. The Recovery Act addressed these issues facing Rural 
America, by funding critical infrastructure and providing new economic 
opportunities.
    The Obama Administration moved quickly to provide immediate relief 
for hard-hit families and businesses. The short-term rescue funding 
provided through the Recovery Act was necessary to get Americans back 
on their feet and get our economy growing again.
    At the same time we began making targeted investments in critical 
infrastructure projects like expanded broadband access and a smart 
energy grid that help to lay the foundation for economic growth in the 
21st century.
    Today, both public and private economists say the Recovery Act is a 
driving force behind recent GDP growth and is responsible for millions 
of jobs. The Recovery Act has pulled us back from an economic crisis 
and put us on a path toward economic growth.
                 status of recovery act implementation
    In just over one year, USDA has announced all of the $28 billion of 
ARRA funds provided to the Department. As of June 30, we have obligated 
$17.2 billion and outlayed $14.1 billion of the funds provided to the 
Department.
    Last year we were in the ``rescue'' phase. We were funding many of 
our relief programs to help families get back on their feet. For 
example, over 40 million Americans now receive a 13.6 percent increase 
in benefits under the Supplemental Nutrition Assistance Program (SNAP, 
formerly named Food Stamps). For most families of four, this is an 
extra eighty dollars per month at the grocery store, totaling $800 
million a month in direct stimulus to the economy. Our estimates show 
that money spent on SNAP may have even larger effects on economic 
activity than other types of government spending. And further, our data 
indicates that 97 percent of funding received through this program is 
spent within 30 days of receipt. Not only does this assistance allow 
families to provide more nutritious and abundant meals for families, it 
is also a direct form of stimulus to our economy and goes to people who 
are already certified as being in need.
    With the rescue phase of Recovery Act implementation fully 
underway, we have now been able to focus more on the ``recovery and 
reinvestment'' phase this year. With most of our funding fully 
obligated and projects now underway or beginning, more jobs and 
additional economic growth are being realized. For example, this summer 
approximately 800 Water and Waste Treatment projects will be underway, 
as compared to 370 last summer. With more than twice as many projects 
underway, the full possibilities of the Recovery Act are beginning to 
take shape. Similarly, about 500 rural businesses will receive loans 
this summer compared to 100 last summer--or a five-fold increase. Even 
more important than the shear scope and magnitude of the Recovery Act 
projects, it is also important to consider the qualitative impact on 
communities. Loans for businesses and industry mean the development of 
better paying jobs, and jobs with benefits and future occupational 
opportunities. For Rural America, this is absolutely vital in 
maintaining the fabric of a community and providing young people the 
prospect of a better future. Recovery Act dollars are being put to 
work, making long-overdue infrastructure improvements, creating new 
opportunities for local economic growth and supporting well-paid jobs.
 united states department of agriculture achievements in recovery act 
                             implementation
    As a result of the Recovery Act, we are building stronger, 
healthier communities and laying the groundwork for a new 21st century 
economy in Rural America.
    The Recovery Act also provided critical emergency funding to help 
our farmers and ranchers keep their operations going strong, and to 
better enable USDA to support production agriculture in field offices 
across the country. Within 24 hours after the signing of the Recovery 
Act, USDA had disbursed $173 million in additional Direct Farm 
Operating Loans authorized under the Act; this helped more than 2,600 
farmers and ranchers across the United States buy the fuel, feed and 
other supplies they needed to continue day-to-day operations. The 
Recovery Act provided $50 million to help aquaculture producers offset 
the dramatically-rising feed costs that threatened to force them out of 
business, and extended much-needed disaster assistance totaling $744 
million to help farmers weather devastating losses due to natural 
disaster. Finally, by providing $50 million for critical modernization 
of Farm Service Agency information technology systems, the Recovery Act 
will help USDA's dedicated field staff to deliver services faster and 
easier to farmers and ranchers in our Service Centers around the 
country.
    Through the Recovery Act, significant resources have been dedicated 
to help increase access to critical health, safety, and educational 
resources. For example, with ARRA funding from USDA, over 800 essential 
community facilities including libraries, hospitals, and fire stations 
will be built or repaired in Rural America and over 9,000 rural 
businesses will receive loans or grants to help start a new business or 
prevent one from failing. Additionally, over 85,000 rural Americans 
will receive the assistance they need to purchase or repair a home. As 
a result of this investment, fire fighters will have the resources they 
need to keep communities safe, rural Americans will be closer to 
critical health care needs, and businesses will have the resources they 
need to stay competitive. Access to these vital community facilities 
and assistance to buy a home will help Rural America become a place 
where younger generations will want to stay and raise a family.
    Moreover, USDA has committed to using $100 million in loans and 
grants of ARRA funding to build or repair libraries in Rural America, 
which will provide increased educational access to 2.5 million rural 
residents. Such access will provide increased educational opportunities 
and therefore increased economic competitiveness for Rural Americans. 
Libraries not only play a vital role in educating their patrons, they 
also enhance the economic vitality of a rural community. Rural 
businesses are able to access an array of informational resources, 
including new state of the art communications tools and technologies 
that often aren't otherwise available in their community. Libraries are 
also a source for connecting people to the internet. Many rural 
Americans don't have computers at home and wouldn't be able to afford 
monthly internet fees even if they did. Public libraries offer free 
internet access and computer training--keys to bridging the digital 
divide and improving the quality of life in Rural America. Recognizing 
this significance, USDA is using the Broadband Improvement Program, 
funded through ARRA, to help advance this commitment. Specific funding 
has been set aside and is available to allow applicants to request 
grant funds to reimburse the associated costs for connecting any rural 
library in their proposed funded service area with funding from an 
award from USDA's Community Facilities program. Because of this 
commitment, rural communities will have increased educational and 
economic opportunities.
    Building a critical infrastructure is imperative to the future of 
Rural America. Without access to clean, safe water supply, or access to 
new competitive technologies, Rural America will continue to experience 
population loss. As a result of Recovery Act funding, communities in 
Rural America are getting the infrastructure needed to become 
competitive in a 21st century economy. For example, approximately 2 
million rural residents will benefit from new or improved water and 
waste treatment systems provided by USDA's Water and Environmental 
Program. As a result of this ARRA investment, over 800 rural 
communities will have clean drinking water, safe waste disposal, and 
reduced environmental impact from their sewer systems. The health-
related improvements from these projects to Rural Americans are worth 
the investment-alone. On average these projects will reduce each rural 
population's potential for water-borne illness by 6 percent. But even 
further, the water-related projects are essential to rural economies. 
Water and waste water initiatives are absolutely essential in 
attracting new business opportunities to these areas, as businesses 
place access to clean and abundant water as a prerequisite in site 
selection for growth and expansion.
    In addition, nearly 400 Natural Resources Conservation Service 
projects, totaling $340 million in Recovery Act funding, will provide 
significant public and environmental benefits to Rural America through 
the restoration of floodplains and investments in watershed 
improvements, including critical infrastructure. Nearly $230 million 
has been obligated towards these projects to date and approximately 170 
projects have commenced construction or are in the process of 
restoration. These projects will protect communities from potential 
loss of life and property from natural disasters, as well as help 
develop better green infrastructure by restoring natural vegetation and 
riparian corridors. These investments will create quality, green jobs 
connected to environmental restoration and protection of areas safe for 
new business development.
    The Forest Service has already funded 705 Recovery Act projects 
across the nation. Forest Service Recovery Act projects will provide 
multiple resource benefits including healthy ecosystems; reduced fire 
risk; clean abundant water; safe accessible recreation opportunities; 
energy-efficient facilities; and technology to convert wood to clean 
energy on federal, as well as state, private, and tribal owned lands.
    This summer, as field season kicks into high gear, the investments 
made last year will transform dollars to action with thousands of 
projects beginning and others dramatically ramping up hiring and 
activity. Already, we are seeing a tremendous increase in 
accomplishments on the ground when compared to last field season. For 
example, last summer we maintained 128 miles of trail; this field 
season already, we have treated over 1,770 miles of trail. Last summer, 
we maintained 427 miles of roads; this field season, we have already 
treated over 7,170.miles of roads. Last summer, we treated 33,874 acres 
of forest to reduce wildfire risk; this field season we have already 
treated over 266,000 acres to reduce wildfire threat. Much more will be 
accomplished by the end of this field season
    Also, with funding from the Recovery Act, we are making the 
investment to bring broadband to rural communities for the first time 
ever. The Recovery Act will bring broadband to an estimated 1.2 million 
households, 230,000 businesses, and 7,800 anchor institutions. As a 
result of this investment, many individuals, schools, libraries, and 
healthcare facilities will obtain broadband capabilities for the first 
time. Farmers will have access to real time market information, 
businesses will have the tools to compete in a global marketplace, and 
rural residents will have increased educational and medical 
opportunities.
    The Recovery Act provided clear direction and a historic 
opportunity to bring broadband into rural areas that otherwise would 
not have the resources to install broadband. Rural areas are most often 
the areas that are not considered good investments by companies 
installing broadband. We have an opportunity to give communities that 
might otherwise be overlooked a chance to be positioned for the next 
generation of technology and the next phase of U.S. economic growth. 
Broadband technology is essential to job growth in Rural America since 
broadband connections provide a platform for rural Americans to be 
connected to their counterparts in urban areas of the U.S. and beyond. 
This connection would help business owners tighten their distribution 
channels, increase efficiency in their processes and reach a larger 
market. Furthermore, American farmers will be able to use broadband 
connections to watch product prices, obtain weather forecasts, buy and 
sell commodity futures, track the progress of supplies ordered or 
products shipped, and find markets.
    As Broadband reaches Rural Americans, who would not have been 
served otherwise, it is easy to see the kind of transformational impact 
that the Recovery Act is having on our Nation. The result is a new 
sense of community in rural areas, who can now communicate more 
effectively with their neighbors, with the nation, and with the rest of 
the world. Young people will be able to grow up and become more 
competitive with youth from around the globe, in terms of educational 
capacity, but also as part of a global community.
    Access to broadband in rural communities will also likely enhance 
the attractiveness of these locations to firms able to operate 
remotely. Rural communities linked to broadband will be able to host 
call centers, information technology hotlines and other industries that 
require remote connection to businesses. Extending broadband access to 
Rural America means better and quicker access to information and the 
infrastructure to operate and compete in a 21st century economy. And 
the capacity of rural communities to provide highly skilled and highly 
technical information technology-related jobs in the future will be 
vitally important to attracting young people to Rural America as a 
place to live and work.
                      a new way of doing business
    In the past, government policies have not been strategic or focused 
on long-term economic growth and sustainability. Rural communities have 
suffered as a result. However, the enactment and implementation of the 
Recovery Act created an opportunity to reexamine how government 
operates and begin making necessary changes to ensure every dollar 
being spent is achieving its maximum potential. A priority for 
President Obama is to restore the trust of the American people in their 
government.
    Transparency and accountability with government spending is of 
vital importance so taxpayers can ensure their money is being spent in 
the best way possible. These principles are also important to guarantee 
government takes a close look at where and how money is being spent. 
Starting with the Recovery Act, this Administration set a new standard 
for transparency and accountability with government spending. Recovery 
Act projects go through several layers of approval before getting 
funded. Wasteful or unwise projects are rooted out and rejected up 
front. Moreover, all Recovery Act spending is tracked and recorded so 
the public can see where each dollar is being spent.
                   rural america: present and future
    Mr. Chairman, the American Recovery and Reinvestment Act has 
provided Rural America with the funding necessary to withstand the 
economic devastation caused by our nation's financial crisis. Through 
Recovery Act rescue funding, struggling rural Americans, who lost their 
jobs, could not afford food, housing or proper health care have been 
transitioned from tough times to better times.
    But the Recovery Act is accomplishing so much more than just 
rescuing our economy. The Recovery Act allowed us to look forward--
making unprecedented investments in rural communities. The Recovery Act 
invested in infrastructure, industries, and new ventures well-
positioned to make the most of the strategic assets found in Rural 
America, ensuring the long-term vitality of these communities and 
America's economy more broadly.
    While there is certainly much work to be done to bring jobs and new 
businesses to communities that have been shedding both for decades, the 
Recovery Act has taken a giant first step forward. I am certainly proud 
of the efforts of USDA and all of the Executive Branch team who serve 
day in and day out to ensure the promise of the Recovery Act is 
realized. But I also want to point out that absolutely none of the 
accomplishments could be possible without the partnership and tenacious 
commitment of state and local governments and all of the hard work of 
individuals and groups at the local level across Rural America. It is 
their dedication and commitment that embody the spirit and heart of our 
nation.
    Mr. Chairman, I believe that our Nation's experience in Recovery 
Act implementation embody the very principles and ideals of the United 
States. Time and time again, our country has proven that when difficult 
times and hardship affect our nation, we come back stronger and even 
more resilient for the future. Americans have always been up to the 
challenges that have been presented to them, and have overcome every 
obstacle that has emerged over our history. We are at our best as a 
nation when we work together to rise up to meet and overcome new 
challenges. Mr. Chairman, I view our nation's response to the global 
financial crisis and our concerted efforts to rescue, renew, and 
revitalize America through the Recovery Act as prime examples of what 
our country is capable of. It is our dedication to the American Dream 
and the single-minded focus that we can adapt, transform, and emerge 
better prepared as a nation and become stronger than ever.
    Mr. Chairman, I am proud to be part of this effort and I look 
forward to responding to any questions that members of the Committee 
might have.

    Chairman Spratt. Governor Vilsack, you have been--well, I 
just said that, Governor Vilsack; that is how we originally 
knew you. You have been Governor. You have been Secretary of 
Agriculture, and you have seen, I know, many of these projects 
throughout the country.
    Are you satisfied, first of all, that they are worthwhile 
investments and, secondly, that they are doing something beyond 
the communities where they are spent to boost the economy?
    Secretary Vilsack. Mr. Chairman, in addition to being a 
Governor for eight years and a State senator for six, I was 
also mayor of a small town for five years. I can assure you, 
just take the wastewater projects, for example, I can assure 
you that the 800 communities that have received assistance to 
improve water quality are in a much better position to attract 
people, young couples, housing developments, and business 
developments as a result of these investments.
    They will not only impact and affect the community in which 
these investments are made, but they will also have a positive 
impact on economic opportunity within the region of that 
community. Many of these communities are county seat towns that 
are basically the economic hub for their county and their 
region.
    To the extent that we have helped over a thousand 
businesses retain jobs or create jobs and expanded opportunity, 
that, too, will have a positive impact for some time.
    Perhaps the one thing that has the greatest potential is 
the work that is being done in broadband. I mean, I am excited, 
having come from a State that had a statewide fiber optic 
system that was developed a number of years ago, I saw, 
firsthand, the impact that that has had on small-town schools; 
on hospitals being able to link up to tertiary care centers; 
our National Guard; our library systems being able to expand 
dramatically their services and operations; businesses that 
will absolutely be able to expand markets from their local 
market to regional and global markets. The ability of farmers 
and ranchers to have real-time information makes a real 
difference in terms of their bottom line. And I will tell you, 
to the extent that you have got homeowners who are taking care 
of children who want to expand their educational opportunity, 
access to online courses makes a difference.
    There is no question that this Recovery Act has made a 
significant impact in the lives of 89,000 families who would 
otherwise, but for this act, would not have had the 
homeownership opportunities that we have created through USDA. 
And I suspect that there are similar stories and indications 
throughout the various Departments of the Federal Government 
that were impacted by the Recovery and Reinvestment Act.
    Chairman Spratt. How much in the way of funding do you 
still have left to commit or distribute?
    Secretary Vilsack. As I indicated, we had $28 billion of 
announced, the $28 billion in our appropriation, that has all 
been announced. We have outlaid it, roughly half of that. We 
have obligated about $17 million, so there is another $11 
million or so to obligate. A lot of that is in SNAP, which is, 
as you know, spaced out over a period of some time.
    And I might add that even SNAP has an economic benefit. The 
reality is, for every $5 we invest in SNAP, there is $9.20 of 
economic activity. When more people can buy more food, somebody 
has got to stock that food, someone has got to shelve it, 
someone has got to truck it, someone's got to process it, 
someone's got to pack it, someone has to produce it. All of 
that equates to potential job opportunities, both saved and 
increased.
    We also have additional resources with broadband that will 
be obligated before the September 30th deadline.
    Chairman Spratt. Where do you think the money is likely to 
be spent, the money yet to be obligated and spent? Which of 
these programs is it likely to be invested in?
    Secretary Vilsack. There are still resources available in 
broadband, which we had over a thousand applications in our 
second round of funding. We have reviewed those applications, 
and we are in the process of finalizing decisions. We have 
already made announcements with one group. We have two more 
sets of announcements to make very shortly, and then there will 
be ongoing announcements over the summer.
    In addition, there are still some resources left in the 
Community Facilities Grant Program and some resources in the 
business and industry programs, but those will all be committed 
before September 30. We are on track to make sure that these 
resources are obligated, and then we will make sure that they 
create the kinds of opportunities by tracking them.
    Sometimes, it doesn't look as if the money has been paid 
out because we are waiting, based on our programs, for projects 
to be completed. We get the sign from a city that is involved 
in the wastewater facility project, for example, that they have 
finished the project. That is--at that point in time, we cut 
the check and reimburse the city for their costs. So, a number 
of these projects are currently working, and as soon as they 
are completed, we will pay out the resource.
    There is still additional money to be spent on the Forest 
Service, which has also a profound economic impact. We now know 
from a recent study that there are 173.5 million people that 
visit our forests, over 300 million people who drive through 
it, and that they have collectively about a $27 billion impact 
on economies within 50 miles of forests. So, as we improve 
trails, roads, and so forth, we increase opportunity for 
outdoor recreation.
    All of this is going to take place as a result of what we 
have invested through the Recovery and Reinvestment Act through 
the USDA.
    Chairman Spratt. Mr. Secretary, thank you for your 
excellent testimony and your time in being here.
    I turn now to Mr. Ryan.
    Mr. Ryan. Hi, Mr. Secretary. We are starting to see some of 
the Democratic leaders here in the House come around to kind of 
our way of thinking on unspent stimulus funds. The Majority 
Leader Hoyer the other day said that spending fatigue is 
occurring across the country, and Congress ought to look at 
redirecting some of that money. The House's war supplemental 
took some money from unspent stimulus funds to offset some of 
the war supplemental spending.
    Does the Administration share this change of heart? Are you 
looking at possible ways of rescinding unspent stimulus money 
to go toward deficit reduction?
    Secretary Vilsack. Representative, thank you for that 
question. It is an important question, and I know a serious 
debate will take place. Let me say that, at USDA, we do take 
deficit reduction seriously. It is one of the reasons why we 
recently completed negotiations with the reinsurance, standard 
reinsurance agreement for crop insurance. As a result of that 
re-negotiation, we essentially saved $6 billion, $4 billion of 
it which we dedicated to deficit reduction.
    So, we are already taking steps at USDA. I would say that 
it would be shortsighted as it relates to USDA programs, 
particularly the reinvestment part of the USDA programs, to 
take resources away, given the opportunities that these 
programs create for benefits today and in the long term.
    We will, obviously, work with Congress to do whatever has 
to be done within the parameters that you all set, but I would 
say that USDA is stepping up on deficit reduction in a very 
meaningful way with the $4 billion from the Recovery and 
Reinvestment Act.
    Mr. Ryan. Let me take a stab at bipartisanship then. Do you 
think, with the $1.5 trillion deficit, we ought to be offering 
subsidies to wealthy farmers? I think we agree on this. You are 
an Iowa guy, and I am a Wisconsin guy. I think we agree on some 
of these things.
    Secretary Vilsack. I think there are opportunities for us 
to continue to look at ways in which we can utilize our 
resources within USDA and the safety net to do what the safety 
net is designed to do.
    If I might say, though, I see rural development and job 
growth and creation in rural America as part of the safety net. 
That is why I am insisting on trying to save as much of this 
resource as possible.
    Here is why: 45 to 50 percent of our farm families require 
off-farm income in order to keep the farm. So, it is really 
important for us to maintain that part of the safety net.
    Can there be adjustments? As you well know, we have 
proposed, in a number of budgets, reductions to some of the 
farmers in the top tier. We obviously support that. The 
President supports that. We would appreciate your help in 
getting that done.
    Mr. Ryan. Yes, I mean, I would say the term ``safety net'' 
implies targeting and focusing on those who need a safety net. 
And so, I think there is an area where we ought to be able to 
agree. I hope you are forceful with OMB in its submission of 
the next budget, and we can work on that.
    There is a specific thing I want to ask you. I sent a 
letter, along with Congressman Flake, Ron Kind, and Barney 
Frank, a bipartisan letter, to the President on April 22nd 
dealing with the Brazil-WTO cotton dispute.
    Secretary Vilsack. Yes.
    Mr. Ryan. We are, I think, shelling out, under this 
agreement, $147 million a year to Brazilian agribusiness so we 
can continue paying about $3 billion a year to large U.S. agri-
businesses. This is an unsustainable position.
    We were facing large tariff retaliation against a whole 
slew of American businesses. Obviously, when we enter into 
agreements, we should fulfill those agreements. It is tough to 
expect the same from other countries when we don't do it 
ourselves.
    We haven't gotten a response from this letter yet. Would 
you--I would like to ask unanimous consent to submit it for the 
record.
    Chairman Spratt. Without objection.
    [The information follows:]
    
    
    
    Mr. Ryan. But would you comment on this?
    Secretary Vilsack. Sure.
    Mr. Ryan. Where is your thinking on this? What are you 
going to propose to do? Are we going to wait until the next 
farm bill to revisit this issue, or can we get on with 
reforming the cotton program, save taxpayer dollars, stop 
paying $147 million a year, and make some sense out of this and 
get some deficit reduction?
    Secretary Vilsack. I think it is important to characterize 
this as a situation that we inherited.
    Mr. Ryan. No two ways about it, absolutely.
    Secretary Vilsack. Okay, and we were confronted with the 
fact that Brazil, because of a WTO ruling, had the capacity to 
penalize American farm interests and business interests to the 
tune of $850 million annually. It would have increased over 
time well north of a billion dollars on an annual basis.
    What was of deep concern was their capacity to actually 
look at technical information and trade secrets and that type 
of opportunity to open up to the world things that we were 
trying to protect under our patent laws. So, we felt it was 
necessary to do something in the short term to ensure that that 
did not happen. That is the reason we negotiated the agreement 
we did.
    It required us to do three things, two of which we have, I 
believe, done and one of which we are currently working on. One 
was that we had to look at certain regulatory decisions that we 
had to make within APHIS as it related to Brazilian goods, 
which we are in the process of doing, so that markets could be 
more open.
    Secondly, we needed to look at the GSM Export Assistance 
Program, and we have made changes to that. The WTO did not take 
that into consideration. We think that they ought to take that 
into consideration, because we believe, by the changes that we 
have made to that program, that we have addressed the concern 
expressed in the case.
    Mr. Ryan. So the price triggers are set at market-based 
levels?
    Secretary Vilsack. We believe that we have done what needs 
to be done in that particular program. I will tell you I am not 
confident enough with the details of the specifics, but I have 
just been advised that we are fairly confident the GSM issue is 
in the process of a resolution.
    The issue, as you have mentioned, is the cotton program. I 
do think there has been a reluctance on the part of both 
Democrats and Republicans to reopen the farm bill on a variety 
of occasions and circumstances. We would stand ready to provide 
assistance to whatever committee or group, if that is something 
that folks want to reopen. I suspect, given the fact that we 
have begun 2012 farm bill discussions, that it will most likely 
be adjudicated and resolved in that discussion.
    Mr. Ryan. So, I understand why you did it, the 147, you got 
dealt this card. But if we are trying to project this out, it 
is 147 a year until a new farm bill, perhaps, changes it, until 
2012. Is that kind of what we should be expecting here?
    Secretary Vilsack. Well, if Congress wants to reopen the 
2008 farm bill, we will be happy to assist in that effort. I 
have not seen any indication from anyone on either side of the 
aisle that there is an appetite for that.
    Mr. Ryan. That is a fair assessment. Thank you.
    Chairman Spratt. Mr. Becerra.
    I don't believe Mr. Becerra is here.
    Mr. Etheridge.
    Mr. Etheridge. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for being here today.
    Much of my district is small towns and rural areas. It is 
probably more representative of America--maybe only one other 
district in the country, because one of the test sites for the 
Census was in my district several years ago, and they have been 
hit pretty hard by the recession.
    We have seen some pretty bad policies over recent years 
that sort of got us in this ditch, and we are still struggling 
to get out of it. As a matter of fact, folks in my district 
have paid a pretty heavy price.
    But we have worked hard here in Congress to put in place 
what I think are some common-sense policies to help turn this 
around and put people back to work. And the Recovery Act we are 
talking about today is a big part of that, and it has played a 
central role.
    Every county, save one, in my district has been above the 
national average, and unemployment numbers are still terribly 
high. That is significant, but they are coming down. As a 
matter of fact, today, every county is lower, the unemployment 
rates are lower than they were a year ago, so I happen to 
believe that the Act had something to do with it.
    Mr. Secretary, would you comment a little bit more on the 
farm-operating direct loans, which have had a real impact on 
districts like mine, that were included in the Recovery Act as 
well? You touched on it, but could you get into more detail 
about how many have been made, do we still have funds to make 
some more for some of these folks who are now hurting, need 
them to operate with, and what impacts they have had on the 
farm economy across this country?
    And finally, how is USDA using recovery funds to improve 
public services? You touched on the community issues, but here 
I am talking about fire departments, rescue squads. In these 
rural areas, you know, we have the nicest hospital in the 
world, but if you don't arrive alive, you can't survive, and 
that is a critical piece of that process.
    Secretary Vilsack. Representative, we essentially expended 
all of the direct loan resources under the Recovery and 
Reinvestment Act to assist 2,636 farm families with the direct 
loan portion. We then transitioned to our regular programming 
resource to provide assistance and help, and we have seen, 
frankly, a rather significant increase in the interest in both 
our Direct and Guaranteed Loan Programs.
    We will, and, very shortly, reach the maximum capabilities 
with reference to the Guaranteed Loan Program and very shortly 
will also do the same in our Direct Loan Program, which is why 
we have asked for some assistance in taking a look at those 
programs and seeing if there is a way in which greater 
authority can be given to us. If it requires structuring the 
fees so that there is no impact on the budget, we understand 
and appreciate that. But we are now becoming more and more the 
lender of first resort as opposed to the lender of last resort.
    Mr. Etheridge. Mr. Secretary, do you have any idea how many 
of these people were first-timer folks coming to USDA, given 
the economic situation?
    Secretary Vilsack. Oh, I would say a significant 
percentage. And the reason why I say that is, historically, we 
were looking at Direct and Guaranteed Loan numbers about a half 
of what we have today. We saw a dramatic increase in 2009. We 
increased it under the 2010 budget, what we thought would be 
enough. We went through that in the first 5 or 6 months of the 
fiscal year.
    So, there is a tightening of the credit at the commercial 
lending level. We have tried to speak to commercial banks about 
the necessity of working with us. We have also worked within 
our own systems to restructure loans, to extend payments, to 
look for ways in which we could provide some assistance, short 
of voluntary or forced liquidation, which we don't want to do. 
We want to keep people on the farm. We want to repopulate the 
rural communities. We don't want to continue to see a decline.
    You mentioned the public services aspect of our mission 
area. I think the Community Facilities Grant Program has done a 
good job of responding to the need of the communities for 
ambulances, for fire trucks, for fire stations, for police 
stations, for police cruisers. Those projects have been funded, 
not just through the Recovery and Reinvestment Act, but also 
through our regular program.
    We have tried not to focus on just simply the Recovery Act. 
We have tried to do as best we can to utilize our regular 
programming resources as well. So, we are seeing community 
facility projects in addition to the 800 that I mentioned in 
the Recovery Act.
    We have also seen an opportunity that was not taken in the 
previous administration to expand dramatically assistance to 
libraries. Libraries are the campfire of the 21st century. It 
is the place where folks who don't have access to computer 
technology can access it. It is the place where grandparents 
can connect with their grandchildren, who potentially are far 
away. It is an opportunity for us to really provide a learning 
center, and we have seen a rather significant commitment in 
this Administration to libraries.
    Mr. Etheridge. Thank you.
    Thank you, Mr. Secretary.
    Thank you, Mr. Chairman, I yield back.
    Chairman Spratt. Mr. Hensarling.
    Mr. Hensarling. Thank you, Mr. Chairman.
    I am certainly glad that you have called this hearing, 
although I do lament that, unfortunately, it is obviously not 
to have a budget markup. We continue to be a Budget Committee 
without a budget, 3 months and counting.
    I think you, Mr. Chairman, probably said it best, and that 
is, if you can't budget, you can't govern.
    I hope sometime before the next recess comes, we will 
actually have an opportunity to come here and mark up a budget, 
instead of debating spending discipline and budget priorities, 
as I wish we could.
    I fear that we may be having a debate today about, in many 
respects, how to take the largest deficits in history, the 
largest debt in history, and make them even larger with yet 
another stimulus plan. I hope that is not our purpose here.
    I respectfully disagree with those of my colleagues and the 
Secretary who believe that the stimulus act has been effective. 
I personally see the only thing that it has stimulated is a 
larger deficit and a larger debt.
    We know, over the break, we just learned that we had the 
third largest 1-day increase of the national debt in our 
Nation's history. I know there are a number of reasons for 
that, timing reasons, but at $168 billion, it should still 
weigh very heavily upon our minds. That, of course, is worse 
than the entire deficit for fiscal year 2007.
    We just learned that we just passed the $1 trillion deficit 
mark for this year, which will be our second year in a row and 
the second time ever to have a trillion dollar deficit, on the 
way to $1.5 trillion.
    Mr. Chairman, you know, along with the Ranking Member and 
myself, and I don't know if Mr. Becerra is here, that those of 
us who serve on the President's Fiscal Responsibility 
Commission have heard testimony that when a nation's gross debt 
to GDP approaches 90 percent, bad things happen. Historically, 
you can lose a percentage of GDP, which, in our case, means we 
could go from 3 to 2 percent of GDP, lose an entire third of 
our economic growth. And we know, Mr. Chairman, that today, the 
U.S. stands at 89 percent gross debt to GDP.
    And so, I have no doubt that any time you spend money, you 
can do good things with it, but there are also bad things that 
happen with it.
    We just had a vote on the House floor as part of the 
``YouCut'' program, dealing with all of this signage around the 
Nation about the stimulus act.
    Unfortunately, it went down in defeat. I sometimes think 
that better verbiage on the signs might be, we are borrowing 43 
cents on the dollar, mainly from the Chinese and sending the 
bill to our children and our grandchildren.
    I continue to believe that the biggest problem impeding job 
creation today is not so much a lack of capital, but more so a 
lack of confidence. I certainly hear it from the small business 
people in my district.
    And most recently, I must admit, I have heard it on 
national television when I woke up the other morning to the 
Ranking Member, who clearly got up earlier than I did. But the 
chief economist for the NFIB, the largest small business 
organization in the Nation, apparently was being interviewed 
and I will quote from that interview: ``It is not just 
expectations on the tax rates, per se, but just the cost of 
carrying labor under the health care bill, the promise and 
heavy discussion on a VAT. The deficit scares us to death. We 
don't understand how we can keep doing this, so everyone you 
look at, everything that Congress seems to be thinking about is 
not helpful for small business, and they don't see it as 
helpful to the economies. There is no stimulus here; it is just 
drawing resources out and deploying them in the government 
sector, not helping the private sector.''
    In fact, may I have chart 5, please? It shows that since 
the stimulus act was passed, we have lost about 2.6 million 
private-sector jobs. Certainly we have had a gain in government 
jobs.


    So, I don't see all the benefit, Mr. Secretary, that I know 
you do.
    In the remaining seconds that I have, I don't want to talk 
so much about what the government may be doing to create 
uncertainty, but maybe what the government is not doing, and 
privately, before we started, I had a chance to mention this to 
you.
    I represent a lot of agricultural interests, particularly 
beef interests, in east Texas. One thing we could to do to 
create jobs is to pass some free trade agreements around here 
with Colombia, Panama, and South Korea. And I am just curious 
when the Administration and the President is going to demand 
that Congress take a vote on these free trade agreements.
    Secretary Vilsack. Representative, I appreciate that 
question.
    Let me preface it by saying that we are enjoying a fairly 
robust ag export year at USDA. We anticipate it will be the 
second best export year we have had since we began keeping 
records; well, an increase of $8 billion increase in additional 
exports over last year.
    That is a broad range of commodities that are being 
exported, and we have, consistent with the President's export 
initiative, redoubled our efforts to make sure that we have 
aggressive opportunities in all parts of the world.
    Heartened by the President's directive to Ambassador Kirk 
to complete discussions with Korea on issues relating to both a 
wider opportunity for beef, as you and I privately discussed 
before the hearing, the importance of that to your constituents 
and to all of agriculture, as well as making sure that whatever 
deal is struck is appropriate and fair to the auto 
manufacturers of this country and the consumers of this 
country.
    As it relates to Colombia and Panama, we continue to fine 
tune the negotiations on that. I know that there are still some 
environmental issues that need to be resolved, but there is a 
commitment to getting those resolved and getting those to 
Congress.
    As the President indicated, he is hopeful of having the 
Korean agreement before he has the opportunity to travel to 
Korea. And I would anticipate and expect that shortly after 
that, Congress will have the opportunity to take a look at it. 
We are certainly supportive of it.
    In the meantime, we are aggressively promoting expanded 
opportunities in China, Japan, as you and I talked about, 
trying to make sure that the Taiwanese live up to their 
responsibilities, reopening the pork and poultry markets, which 
were very important in both China and Russia. The President's 
involvement, specifically and personally, in reopening the 
poultry market in Russia is an $800 million to $900 million 
opportunity for us to expand trade.
    So, while we still have work to do, we are hopeful, given 
the numbers, and we know that every billion dollars of ag trade 
represents somewhere between 800,000 and 900,000 jobs, so we 
are very, very focused on this at USDA.
    Chairman Spratt. Mr. McGovern.
    Mr. McGovern. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for being here.
    Like all of my colleagues, I am concerned about the state 
of the economy and the direction of the recovery. My friends on 
the other side of the aisle sometimes let hyperbole get in the 
way of the facts, so let me state the obvious.
    President Obama inherited the worst economy since the Great 
Depression. President Bush increased the size of the government 
and the size of the deficit in astronomical amounts. 
Republicans passed tax cut after tax cut, mostly for the rich, 
without paying for them. They decided to use America's credit 
card to finance two wars. These same Republicans abdicated any 
oversight responsibility of the financial industry, all of 
which led to the recession that we have yet to recover from. 
And all of this is what led to the need for the passage of the 
American Recovery and Reinvestment Act.
    According to CBO, there are 1.8 million to 2.8 million more 
jobs in America as a result of the Recovery Act. That is a 
start, but clearly, it is not enough. Yet, my Republican 
colleagues continue to attack the Recovery Act as wasteful 
spending.
    Ironically, many of them have no problem promoting the 
Recovery Act in their own districts, as 114 Republicans who 
voted against the Recovery Act have taken credit for its 
successes back in their home districts. So, I should point out 
to my colleague from Texas that in his district alone, there 
was over $110 million worth of projects funded, from energy 
efficiency to senior centers to public transportation to buses 
to police officers--I could go on and on and on and on and on. 
I don't know whether he wants to send all that money back and 
negate all those projects, but nonetheless----
    Mr. Hensarling. Will the gentleman yield?
    Mr. McGovern. I yield to the gentleman.
    Mr. Hensarling. The answer is, if we will use it to pay off 
the national debt, absolutely.
    Mr. McGovern. In other words, the gentleman would like all 
of these projects in his district unfunded.
    Mr. Hensarling. If we will pay off the national debt, the 
answer is, yes.
    Mr. McGovern. The answer is fewer police officers. I can go 
on, less money for schools.
    But anyway, my Republican friends have no problem for 
calling for an extension for the Bush tax cuts, even as they 
have the audacity to say the tax cuts don't have to be paid 
for.
    It is ironic, however, and it is callous and cruel that 
they have found fiscal religion when it comes to programs like 
unemployment, that directly help our recovery and the people 
who are suffering most during this recession.
    Our Republican friends seem to have forgotten that 
extending the Bush tax cuts will increase the deficit by $3.7 
trillion.
    One of the more important parts of the Recovery Act are the 
safety net provisions, programs that help people keep their 
health care, have a steady income while they look for work and 
put food on their table.
    I am particularly pleased with the SNAP provisions that 
provided a boost of 13.6 percent in the maximum food stamp 
benefit. This means that most households received about $40 to 
$50 more per month in 2009 as a result of the increase provided 
in the Recovery Act. This means families who are struggling 
with losing their job or less income had a little more money 
for groceries because Congress passed the Recovery Act.
    In addition, these provisions provided the biggest bang for 
their buck. As the Secretary stated, economist Mark Zandi, an 
adviser to John McCain, said that an increase of $1 in SNAP 
results in $1.86 in economic activity. But now, Republicans are 
refusing to pass extensions for unemployment without providing 
an offset. These are the same Republicans, mind you, who 
refused to offset trillions of dollars of tax cuts.
    One of the offsets proposed in the Senate was to sunset 
these SNAP provisions included in the Recovery Act. While some 
may say that this is just unspent money, improperly referring 
to this as a slush fund, this is really a $9 billion cut in 
SNAP benefits, and it will result in deep cuts for families and 
seniors currently on SNAP. In other words, supporters of this 
offset would make it harder for families to put food on their 
table at a time when jobs are still scarce and incomes are 
still stagnant.
    Now personally, I think this is wrong in every sense of the 
word to take food away from hungry families, which is what this 
cut would do. It is also important to note that the number of 
people enrolled in SNAP will go down as the economy improves.
    So, Secretary Vilsack, I have just a few questions, and I 
will ask them all at once. First, how has the Recovery Act 
affected people who have struggled to put food on their table? 
And do you consider this funding successful?
    Second, addressing this potential cut in SNAP benefits, has 
Congress, under any party leadership, ever enacted SNAP cuts 
this big? Has Congress ever enacted cuts that will reduce 
benefits to every single household on the program?
    Third, can you explain to me how taking away $45 a month in 
SNAP benefits from low-income working families might affect the 
Administration's commitment to eliminate childhood hunger by 
the year 2015? And what do you think the impact will be on food 
and security here in America if 20 million children see their 
food stamps cut over the next few years?
    Secretary Vilsack. Representative, I would certainly 
indicate to you that the families who have been benefited from 
the SNAP increase are appreciative of that, and I think it is, 
I think it is important for us to discuss this, not in terms of 
solely expenditure but also investment. I mean, the reality, as 
you indicated, is that SNAP benefits have a tendency to turn 
around in the economy more quickly; 97 percent of the SNAP 
benefits are invested and spent by those families within 30 
days. So, if you talk about something to stimulate the economy 
and get things rolling and to get things going, there is no 
quicker stimulus than what you see in a SNAP program.
    And as I said earlier, when you increase the opportunities 
for families to buy more, they, in fact, buy more, which means 
that grocery stores have to shelve more, they have to truck 
more, they have to process more, they have to package more. All 
of that is related in some way, shape or form to job creation 
and saving jobs. Depending upon the multiplier you use, we are 
talking about tens of thousands of jobs that are impacted by 
this. So, I think it is important to take a look at SNAP in 
that context.
    Obviously, the hope that I have is that we will continue to 
see private job growth, as we have the last several months. We 
will continue to see an expanded GDP, as we have the last 
several quarters. And as we do, more and more people will have 
the confidence; more and more investment will take place by the 
private sector; and we will begin to see unemployment numbers 
come down and the need for SNAP hopefully reduced.
    I would say that there are ways in which we can do a better 
job of utilizing the SNAP education dollars. If you are looking 
for an opportunity to take a look at how we might be able to 
better utilize, we have proposed a new partnership with States 
that could potentially increase SNAP-Ed but at the same time 
potentially reduce the overall cost of the program, without 
impacting and affecting the beneficiaries of the program. There 
are some States, obviously, that need to do an even better job 
of expanding awareness about SNAP. There are, unfortunately, 
States today where a little bit over 50 percent of the people 
who qualify for SNAP are actually taking the benefits of SNAP. 
We would like to see that, obviously, increased.
    As it relates to the issue of childhood hunger, I think 
every American shares the goal that the President articulated 
during the campaign and has reminded people of recently, which 
is that we do need to make a concerted effort to eliminate 
childhood hunger. We also have to, as the First Lady has 
indicated, deal with childhood obesity. We at the USDA are 
committed to doing both of those. You will see over the course 
of the next couple of weeks that we are engaging the private 
sector as well in a real effort to try to eliminate childhood 
hunger.
    Mr. McGovern. But as it relates to the offsets that are 
being talked about in the Senate, that is what I am concerned 
about; is that the offsets that have been proposed by some in 
the Senate to pay for the tax extenders and the unemployment 
compensation, their point of taking money out of the Recovery 
Act that is directed toward SNAP, but I am concerned that that 
might have an adverse impact on the issues that we are talking 
about.
    Secretary Vilsack. Well, I would just simply say that if 
there is a conversation about offsets, that it ought to be in 
the context of improving nutritional opportunities, and I think 
that there is a tremendous opportunity with the reauthorization 
act of the Child Nutrition Act. That is a discussion I would 
like to have with you in terms of where we can best utilize 
resources and address this issue of childhood hunger.
    Chairman Spratt. Mr. Garrett.
    Mr. Garrett. And, I thank the chairman.
    And before I begin, in reference to the gentleman from 
Massachusetts' opening remarks, lamenting the fact that our 
President inherited a worsening economic climate and increasing 
deficit picture; a week or so ago, we had another gentleman 
sitting in your chair, a great economist, Chairman of the 
Federal Reserve. I had the chart up here at the time. But I 
asked him a question. I put up a chart at that time, and I 
said, can you tell us which direction the deficit was going 
around, up until around 2006 or so? And he sort of smiled, and 
he said, well, it is going down. And I said, can you tell us 
where the direction of the deficit is going from 2007 forward? 
He said, well, that is going up.
    And so, to the gentleman from Massachusetts, you are right, 
our President did inherit a worsening economy and a worsening 
deficit. Unfortunately, he inherited it from you and your 
party, because it was your party who controlled this House and 
this committee with the budget process, and the chairman sat 
here, was the author of the budget, which saw those----
    Mr. McGovern. I didn't vote for those tax cuts that added 
trillions of dollars.
    Mr. Garrett. Well, reclaiming my time, which I didn't 
yield, so just remember where all appropriation bills begin, by 
the Constitution, and it is here in this House. And it was this 
committee, under this chairman, and under these, your side of 
the aisle, that saw the worsening of the economy.
    But to the point, Mr. Secretary, on the bill, or on your 
Department, one area I just want to talk about, you spoke a 
little bit about, and that is the broadband stimulus funding. 
Broadband stimulus funding, as I have been looking at it 
recently and talking to some folks, is very capital-intensive 
in order to execute properly.
    Now, what I hear is that many private providers have 
already sunk, whether it is millions or billions of dollars, 
into projects to bring broadband technology to consumers and to 
consumers in rural areas as well. So, I am troubled when I 
heard that a number of the stimulus projects, rather than 
providing the broadband to unserved areas, were actually 
building on top of existing networks, where broadband service 
had already begun to be implemented.
    So, when you think about it, the last thing that we need to 
be doing with limited Federal dollars--although it seems from 
this Administration those dollars are unlimited--but to the 
extent they are limited, is allocating taxpayers' resources to 
compete against private businesses where, as I said, broadband 
is already in the process of being established.
    When you do that, you basically deprive the underserved 
communities where the money should be going of limited Federal 
resources; and you are doing something that we saw on Financial 
Services as well--some of us serve on that committee--where you 
are picking winners and losers. In essence, you are using 
taxpayer dollars to pick who is going to win and who is going 
to lose in theirs.
    And another problem with doing that is you create 
disincentives. If we are going to start building out in areas 
that building has already begun, you create a disincentive for 
any other private enterprise to go into those areas and provide 
additional services going forward. Actually, you create 
disincentives for future broadband investment.
    So, first of all, for a moment, could you just comment on 
the overlying development that you are seeing in certain areas?
    Secretary Vilsack. Well, we made a concerted effort, 
Representative, to focus on rural and remote areas that were 
underserved or not served at all by broadband with the 
application process in both the first and second round. Most of 
our projects that we are funding are our last-mile projects, 
which is to say that there may be an existing enterprise but 
they have not connected to the home, they have not connected to 
the anchor institution, they have not connected to the 
business. That last mile is extremely important, particularly 
in rural areas; and so our focus has been on making sure that 
those connections are made.
    The Commerce Department is focusing on middle mile, linking 
up existing systems so that there is greater, expanded 
coverage.
    I would be happy to work with you, but I think you will 
find, at least within USDA, that there is not the significant 
overlap that you have suggested, that in fact we have really 
made a concerted effort to avoid that. This is not about 
driving the cost down. This is really about expanding the 
service.
    Mr. Garrett. And I only have limited time, so there are 
just two other questions on this. One is, we hear you say that 
you want to go into underserved areas and more rural areas; and 
yet I understand that some of the service areas that we have 
seen in the past, such as Mount Washington Ski Resort in 
Bretton Woods, New Hampshire, were to compete against the Eagle 
Communications in Hays, Kansas, so there at least I saw a 
couple of examples where maybe we are not looking at the most 
rural areas and areas where we should be questioning whether 
USDA should be doing it on.
    And the second question is----
    Secretary Vilsack. Can I just mention--respond to that?
    Mr. Garrett. Yes.
    Secretary Vilsack. The one area that you mentioned had one 
of the highest unemployment rates in that State, the ski area, 
and it did meet the definition of ``rural'' based on the 
broadband application process.
    Mr. Garrett. And very quickly, in my last two seconds, the 
USDA has only obligated $480 million out of the $2.5 billion 
appropriated. I guess you are authorized to the end of 
September.
    Secretary Vilsack. I don't think that is accurate, sir. I 
think we actually have announced projects totaling $1.7 
billion.
    Mr. Garrett. You have obligated that?
    Secretary Vilsack. We have identified projects and have 
made announcements of those projects. There are 137 projects 
that we have announced we are going to fund; and with the 
announcements that we are going to make in the next week or so, 
it totals about $1.7 billion.
    Mr. Garrett. Because we were told by the leadership on the 
other side of the aisle that we have to spend this money and 
vote on this bill immediately; and that, of course, was last 
year. And so, if we are just announcing yet not fully 
obligating spending until somewhere down the road, maybe we 
didn't need to rush to judgment on it?
    Secretary Vilsack. I don't think that is accurate, 
especially as it relates to broadband, because there were 
literally thousands of applications. In USDA, we had close to 
3,000 applications. These are very technical applications that 
have to be reviewed, both on a technical and a financial 
respect. I think we will obligate the resources before 
September 30th, all the resources that you have provided; and 
the potential impact of this, as we said earlier, 1.2 million 
households, 230,000 businesses are going to be impacted and 
affected and 7,800 anchor institutions. I think that is a 
significant commitment and an important commitment, 
particularly in rural areas.
    Mr. Garrett. My time is up. Thank you.
    Chairman Spratt. Mr. Edwards.
    Mr. Edwards. Mr. Chairman, thank you.
    I just want to comment. I came here to hear the Secretary 
but must comment in response to Mr. Garrett and my friend and 
colleague and neighbor from Texas, Mr. Hensarling's, comments. 
I share their concern about the deficit. I think it is genuine. 
And I want to give the three gentlemen credit. I think they 
believe it is important to reduce the deficit, as we all do in 
this room. But I just cannot share the fiction that today's 
deficits are primarily the fault of Democrats.
    Mr. Garrett's chart--I have seen it. I wish we had it 
here--kind of reminds me of the person who drives the car off 
the cliff and the other passenger in the car says, ``How are we 
doing?'' And he says, ``So far so well,'' but hands him the 
keys and says, ``Now, if we have a wreck, it is your fault.''
    The facts are that when President Clinton left office we 
had the largest surpluses in American history. The fact is that 
when President Bush came into office, OMB and CBO were 
projecting a $4 to $5 trillion surplus during that 8-year 
period. The fact is at the end of that 8-year period--during 
which the Republicans controlled the Congress in 6 of those 8 
years--Republicans passed the 2001 and 2003 tax cut bills, not 
paid for, on a partisan basis and a prescription drug bill at 
least half as expensive as the entire health care reform bill. 
They did that on a partisan basis, and in doing so they helped 
drive our economy and the deficits off the cliff.
    They, through predominantly partisan budgets, turned the 
largest surpluses in American history into the largest deficits 
in American history. And the reality is, the fact is that when 
President Bush left office, after those 8 years of 
predominantly Republican-driven budgets, we were losing 700,000 
jobs a month.
    Now, I hear some people say, Mr. Secretary, Mr. Chairman, 
that Democrats' efforts at recovery haven't done a thing, 
haven't created a job. Well, I don't know what the numbers were 
last month, but I know in, I believe, in April or May we were 
creating over 300,000 jobs a month, many of those private-
sector jobs. That is a turnaround of over 1 million jobs a 
month. I don't think that is nothing. I think for 1 million 
Americans that makes a huge difference in their day-to-day 
lives.
    The fact is that after 8 years of the Bush administration, 
supported by the Republicans on this committee and their budget 
proposals, tax cuts for the wealthiest, from August 29 to 
October 10, 2008, the stock market went down 27 percent. 
Households, seniors, families saving for their children's 
college education fund lost 27 percent of their savings because 
of the predominantly Republican-driven partisan budgets of that 
decade.
    The fact is--it is an inconvenient fact, perhaps--but the 
fact is when President Obama was sworn into office the deficit 
projected for 2009 was $1.3 trillion. Before President Obama 
did a single thing, the deficit left by the previous Republican 
administration was going to be $1.3 trillion. At the end of 
that year of efforts, stimulus recovery efforts, I believe the 
total deficit was about $1.4 trillion. So, where does the 
majority of the blame lie there?
    I wish we could get away from the blame game. I think Mr. 
Hensarling, Mr. Ryan, and Mr. Garrett are genuine about wanting 
to reduce the deficit. I disagree. I think their conference, 
when they had control of this House for 12 years--by the way, 
during 4 of those 12 years they failed to pass a budget through 
the House and Senate and final passage of a budget, and I 
didn't hear the partisan attacks on themselves during those 4 
years when they were in control and did not pass a budget.
    I wish we could get past some of that partisanship. I wish 
we could work together, but I don't want to be a part of 
putting back in place the captain of the economic Titanic if he 
is just simply going to put back in place the same sailing 
lessons that wrecked that Titanic. Perhaps working together we 
can find some bipartisan common ground--I hope so--but we won't 
find it if those who were the architects of the greatest 
recession since the Great Depression and the architects of 
partisan budgets that turned the largest surpluses into the 
largest deficits just simply try to cover their tracks and 
point fingers at Democrats.
    I will be critical of Democrats and I have voted against 
some Democratic funding because I thought that funding was not 
affordable, given our present deficits, but I would like to see 
some bipartisanship on both sides of the aisle here to reduce 
this deficit and to get our economy back on solid ground.
    Mr. Secretary, thank you for your service to our country 
and your work during these difficult times.
    Chairman Spratt. Thank you, Mr. Edwards.
    Mr. Diaz-Balart.
    Mr. Diaz-Balart. Thank you, Mr. Chairman.
    I want to thank Mr. Edwards for saying that we really need 
to stop this blame game, and the way to do that is to move 
forward. We do know where we are at, by the way. The co-
chairman of the President's, what is it, Fiscal Responsibility 
Commission, Mr. Bowles, said that we are basically going 
towards bankruptcy, the country is bankrupt. That is a new 
phenomenon. It is a recent phenomenon. We can blame or not 
blame. But the way to deal with it, by the way, is to just mark 
up a budget.
    Now, this is the first time, however, that we are not even 
attempting to mark up a budget, and you have got to ask the 
question, why? Because the numbers are, frankly, so out of 
whack that I guess we are trying to hide it from the American 
people? I don't know. But that is a new phenomenon as well. And 
the way to get over the blame game and to get bipartisan is to 
mark up a budget. And this is the first Congress clearly since 
I have been here where there is not even an attempt to mark up 
the budget. That is not showing good bipartisan effort.
    But we have the honor to have the Secretary here, and I 
want to mention, I want to thank you for mentioning exports. 
You talk about China and Japan. The President himself said in 
the State of the Union--in fact, I have it here, so I may quote 
it. He said, ``We will double our exports over the next 5 
years, an increase that will support 2 million jobs in 
America.'' And I support that, and that makes sense.
    Now, over the last 5 years, one of our Nation's closest 
allies, a democracy that just had elections, transparent 
elections, they are fighting these narcoterrorists, 
narcotraffickers, Colombia, has been the largest market for 
U.S. agricultural exports in South America, exports totaling 
$4.3 billion. Those have been declining steadily because we 
haven't passed a free trade deal with Colombia. And it is ready 
to go. In the meantime, while we haven't done it, Colombia has 
signed free trade deals with six other nations, including our 
neighbor, Canada.
    So, Mr. Secretary, here is an issue. You talked about 
exports. The President talked about exports. Getting this free 
trade deal pushed--the President brought it over to Congress 
and then helped us try to get the votes to push it, and I think 
the votes were here in a bipartisan fashion--would immediately 
create jobs. You mentioned exports. You mentioned--actually, I 
don't remember the number that you put out there, how many jobs 
are created per billion dollars of ag exports, to our best 
ally, it is ready to go.
    And with all due respect, sir, it doesn't cost one penny of 
the taxpayers' money. Colombia already has preferential 
treatment for their exports coming to the United States. It 
would even the playing field. And with all due respect, sir, 
other than, you know, nice words, where is the effort? Where is 
the lobbying effort? Where are the members of the Cabinet 
lobbying the Speaker, going to every office of Congress pushing 
for this effort, which wouldn't cost one penny, which would 
help our ally, which would help our economy, which would 
immediately create jobs, and would do exactly what you are 
saying? Where are your efforts on the Colombia free trade deal?
    Secretary Vilsack. Well, Representative, let me say that we 
are working with Ambassador Kirk to finalize that agreement. As 
the President indicated, he wants the Ambassador to focus on 
the Korea Free Trade Agreement because there is a real 
opportunity for us to get that done. That would obviously be 
significant for American agriculture.
    Let me say that as important as free trade agreements are--
and they are and we support them--that is just one aspect of an 
overall effort in terms of trade. We have aggressively tried to 
reopen markets that have been shut down because of 
nonscientific barriers that have been created. We have 
aggressively looked for opportunities for engagement in 
multilateral discussions, which is why the President is focused 
on the Trans-Pacific partnership, which we are also engaged in.
    I have traveled on a number of occasions to China and 
Japan, designed in part to reopen markets, to expand markets. 
China right now is now the third leading market for us in the 
first half of the year, fiscal year. It was the number one 
market for the first time ever in terms of trade.
    And we are seeing an increase in ag trade. I think you will 
continue to see a commitment on the part of this Administration 
to focus on trade. We understand in agriculture there is a 
trade surplus----
    Mr. Diaz-Balart. Colombia, specifically Colombia.
    Secretary Vilsack. Specifically Colombia, as I said, 
Ambassador Kirk still has work to do. There are still aspects 
of that agreement that have not been finalized. It is part of 
the negotiations. It is in the process of being negotiated. And 
as soon as that is completed, I can assure you that we will be 
very much interested in encouraging participation by the 
Congress and passage by the Congress.
    Mr. Diaz-Balart. Any idea of when we are looking at? When, 
roughly? We are obviously not looking at this Congress, so are 
we looking at the beginning of next Congress? Any idea?
    Secretary Vilsack. Well, obviously, sooner rather than 
later. And as the President indicated, he clearly wants the 
Korean agreement to be completed before he travels to Korea.
    So, there is work being done on Korea. There is work being 
done on Colombia. There is work being done on Panama. There is 
work being done on removing barriers. There is work being done 
on reopening markets that have been shut down. There is work 
being done in international forums to make sure that the rules 
are fair to the United States. There is work being done to 
expand opportunities for biotechnology crops. There is work 
being done in increasing our commitment to collaborators in 
country. There is work being done on research.
    There is a holistic and comprehensive approach that is 
being taken. It is not just one single aspect of this that is a 
silver bullet. We have to do all of this, and we are engaged.
    Mr. Diaz-Balart. I appreciate that. I would just 
respectfully ask that you please start focusing a little bit 
more on Colombia. It is ready to go. You know, it's--every day 
losing market share, including to our neighbor to the north, 
Canada. Colombia is our best ally, they are ready to go, and it 
just seems to me that there are always excuses why that just 
doesn't come up. And this is not a couple of months. It has 
been years now. It frankly doesn't cost a penny.
    I would just respectfully request that you all look at that 
and kind of emphasize that, because we have an ally that is 
ready to go. We are losing market share. It doesn't cost a 
penny. It would create jobs. And, frankly, it just seems like 
there are all these reasons and excuses why it just doesn't 
happen, and we have heard them before, and I just would 
respectfully ask that you please look at that.
    Chairman Spratt. Ms. DeLauro.
    Ms. DeLauro. Thank you, Mr. Chairman.
    Welcome, Mr. Secretary. It is a delight to have you here 
today; And thank you for your outstanding work on all fronts, 
whether it is nutrition, whether it is rural development, and 
indeed trying to help to open markets.
    I would suggest to my friend, Mr. Diaz-Balart, that one way 
in which we could immediately increase imports and exports, 
quite frankly, is lift the embargo on Cuba; and our 
agricultural interests would certainly--who are clamoring for 
new markets--it would open up an area which is very close by 
us. And as far as the last time that I looked, Cuba had not 
been engaged and participated in killing maybe 50 or more union 
leaders.
    So, let's get real. Let's open up markets. Let's look to 
Cuba so our agricultural interests can really get off the 
ground. And if you take a look at the recent newspapers, you 
will see that American farmers are asking for this to get done.
    I would also add, with regard to the budget, as far as I 
know, Democrats voted for a budget $7 billion below the 
President's call for discretionary spending, in addition to 
which we have not seen a Republican budget come forward in any 
way.
    Let me move to rural development, which is, I know, an area 
of your passion, Secretary Vilsack. We are appreciative of your 
work in this area.
    Under ARRA, USDA was appropriated $4.3 billion toward rural 
development programs, expanding opportunities for broadband 
loans and grants to rural communities, providing 80,000 home 
loans in rural areas, constructing and repairing rural water 
waste treatment facilities, protecting and conserving our 
farmland, improving the economic and environmental climate in 
rural communities.
    I am going to ask you to highlight the progress the 
Department has made in improving rural economies through ARRA. 
But before I do that--I am sure you have read it. My colleagues 
ought to look at it and read it--is that in the Saturday, July 
10th's, business section of the New York Times: ``High speed 
for the sparsely wired. Stimulus projects widen access to 
broadband.''
    I want to talk about Cynthia Wegner and her husband, owners 
of a farm and horse breeding business in western Kansas, will 
be able to upload a photograph of a horse to show a potential 
buyer in seconds, not the 20 or 30 minutes they now need with 
dial-up service. ``I just cannot begin to tell you how 
frustrating it is to do anything with it,'' she said.
    I will just go to the jump page and read what the Chairman 
of the FCC said: ``The extension of Internet service was a 
significant moment in communications. Extending broadband in 
rural America is as important to jobs and growth in the 21st 
century as extending electricity was in the 20th century,'' he 
said.
    By all accounts, if you take a look at this and what has 
happened with broadband and extending it to rural America, we 
have been--you have been successful, Mr. Secretary; and I would 
ask you to comment on some of the areas in rural development 
and the progress that we are making there.
    Secretary Vilsack. Thank you. I am not sure whether I am 
supposed to refer to you as Madam Chairman or Representative.
    Ms. DeLauro. In this body, it is Representative. The chair 
is there.
    Secretary Vilsack. I appreciate the opportunity to sort of 
expound on my opening remarks.
    Let me give you some percentages in terms of the resources 
that have been obligated and that are currently working in the 
rural development area.
    With reference to rural water and waste disposal programs, 
80 percent of the resources made available to the Department 
have been obligated. In terms of the community facility 
program, 70 percent have been obligated. The single-family 
housing guarantee, 99 percent have been obligated. The direct 
housing guarantee, 69 percent have been closed. The rural 
enterprise grants, 99 percent. And the Business and Industry 
Loan Program, 93 percent.
    So, in terms of broadband, as I explained earlier, we have 
committed to 137 projects, about $1.7 billion of the resource 
made available to us. We will meet the September 30th deadline 
in terms of commitments on that resource.
    The impact of these funds are as follows: Eight hundred 
community facility projects have been funded, and there are 
more to come. Eight hundred wastewater and sewer projects have 
been funded, more to come. Nine hundred businesses have 
received help from the Business and Industry Loan Program, and 
188 projects have been funded through the Rural Enterprise Loan 
Program. Eighty-nine thousand home loans have been closed, 
expanding the American dream of homeownership to those folks. 
And we are currently working on broadband, 137 projects, as I 
indicated, helping over 500,000 households, 100,000 businesses, 
and several thousand anchor institutions. And I think when it 
is all said and done, we will positively impact 1.2 million 
households, 230,000 businesses, and 7,800 anchor institutions.
    Representative, I think this is, in my view, a very, very 
significant framework that you all have put in place. When you 
combine it with the energy title of the farm bill that we are 
in the process of implementing together with work we are doing 
at USDA, I think what you have is the framework for a 
revitalized and a new rural economy, and it is long, long 
overdue.
    With due respect to the concerns expressed here today about 
the recession--and they are real--rural America has expressed 
and experienced this for decades, high unemployment, high 
poverty. Ninety percent of persistent poverty counties in this 
country are located in rural America, 90 percent. Aging 
populations, declining populations, income disparities, this is 
the shot in the arm that rural America needed. It is an 
indication that someone is paying attention to those good 
folks.
    And this is why it is important, if I could just have 30 
seconds. It is important because the value system of this 
country is rooted in rural communities. One-sixth of the 
population of the country lives in rural America, but 45 
percent of the people who serve us in uniform come from rural 
America. And it is because those young men and women are taught 
something at a very early age, and that is that you can't keep 
taking. You obviously have to replenish the soil in order for 
the soil to continue to give you bounty. The same thing is true 
of a country. And the ability to create opportunities for those 
young people to come back, live, work, and raise their families 
in the same small communities that raised them I think is very, 
very important.
    So, we are working night and day with our regular 
programming and with this recovery and reinvestment resources 
to try to build a revitalized rural economy. And as long as I 
am Secretary, that is going to be an important focus of what we 
do at the USDA.
    Ms. DeLauro. I want to say thank you, Mr. Secretary, again 
and say that I would like to work with you so that when this 
information gets out, as it should get out, that really rural 
America knows who is on their side. Thank you for being on the 
side of rural America.
    Chairman Spratt. Mr. Djou.
    Mr. Djou. Thank you very much, Mr. Chairman; and thank you 
very much, Mr. Secretary.
    Mr. Secretary, I have two sets of questions. I am, of 
course, concerned--as I am sure the Administration is--about 
our ballooning budget deficits and our languishing economy. And 
here thus far this afternoon we have heard more than enough 
blame to go around here. I am far more concerned about fixing 
things and looking forward in the future than continuing to lay 
partisan blame.
    So, I have two sets of questions for you. The first set of 
questions that I have is, I hear your testimony and I fully 
understand and appreciate that the Administration's testimony 
is that we are not hearing enough of the so-called ``good 
news'' from the stimulus, that there are more things happening 
out there that is just not being reported properly. From my 
perspective, I guess, as a freshman, it sounds a lot like to me 
what the Bush Administration was saying about the war in Iraq 
in 2004 and 2005. But I think what turned things around when 
General Petraeus took over was he set out some very clear 
metrics and standards, dates and targets and goals.
    So, my first question actually to you is, when can the 
American people see unemployment reduced below 8 percent? Or 
maybe I will ask a little bit more open-ended. What specific 
targets do you think are realistic to achieve and by what date? 
When can unemployment and real economic recovery----
    Secretary Vilsack. Representative, to the 2 to 3 million 
people whose jobs have been saved or whose jobs have been 
created as a result of the Recovery and Reinvestment Act, the 
recovery has come to them. There are obviously still tens of 
millions of Americans who are impacted and many Americans who 
are concerned about the future. We deal with this in rural 
development all the time. And I think it is important to note 
that what you have done with the Recovery and Reinvestment Act 
is to create a sense of momentum, which I think you will see 
build over the course of the next year or two.
    Mr. Djou. So by this time next year, will unemployment be 
below 8 percent?
    Secretary Vilsack. Well, that obviously depends in large 
part upon the confidence that the private sector has. It 
depends on circumstances. I don't think it is appropriate for 
me to talk about hypothetical circumstances. I can only tell 
you about what is happening today. And what is happening today 
is that there is at least a sense of opportunity that did not 
exist in rural communities prior to----
    Mr. Djou. Mr. Secretary, what I am trying to pin you down 
on is what tangible metric do you think can be achieved and by 
when? Because that is what I really think turned things around 
in Iraq.
    Secretary Vilsack. I think the tangible marker was 3 to 4 
million jobs being created as a result of the Recovery and 
Reinvestment Act, and we are on our way to meeting that goal. 
And we will meet it by the end of the process, in terms of the 
monies being distributed and put into effect. So, I think in 
the next 12 months you are going to see a continued drop, a 
number of job growth related to the Recovery and Reinvestment 
Act. Depending upon which number you look at today, it is 
somewhere between 2 and 3 million. I think you will see it 
somewhere between 3 and 4 million.
    Mr. Djou. My second set of questions relates to the amount 
of stimulus money that has already been spent. I hear from your 
testimony--correct me if I am wrong--about 50 percent has been 
outlaid so far that was allocated to the Department of 
Agriculture; is that correct?
    Secretary Vilsack. That is correct.
    Mr. Djou. With 50 percent still to go, does this mean that 
there is no need for further fiscal stimulus?
    Secretary Vilsack. I think it is really important to 
understand how this works in the rural development sphere. When 
you have a community facility grant, you can essentially 
obligate that grant, but that grant is the last dollar that is 
paid. So, it requires a city, for example, to design a 
wastewater treatment project, to get a contractor, to have the 
contractor build the facility, to have interim financing by the 
city put in place; and then, ultimately, the contractor is 
paid, the project is approved, and the signoff occurs. At that 
point in time, our resources are outlaid. These resources are 
committed, but it will take some time before they are actually 
paid out.
    Mr. Djou. So, I guess my question is, is there any need for 
another stimulus package beyond what was already allocated in 
2009? Are you confident that--I mean, with 50 percent still to 
go, is there any reason that we need more stimulus?
    Secretary Vilsack. Let me suggest to you that I think it is 
imperative that there be some attention paid to the unemployed 
and that benefits are provided to the unemployed and continued 
benefits are provided because these families that are currently 
cut off from unemployment, they are really struggling. What are 
they to do?
    Mr. Djou. Okay. That actually goes back to my first point. 
When are we going to see the unemployment rate drop below 8 
percent or 7 percent?
    Secretary Vilsack. Well, the Recovery Act's responsibility 
was to generate somewhere between 3 and 4 million jobs. That 
will be done. I think it is imperative that we approach the 
future with greater confidence, frankly. I think the fact that 
we are having conversations about deficits are an important and 
positive step in sending a message to the market. I think the 
stock market's improvement is a message. I think the private-
sector job growth over the last several months is an 
indication. That has to continue.
    I am confident in the capacity of this Recovery Act to 
continue to create job opportunities. I am confident in the 
capacity to meet the goal which we set, somewhere between 3 and 
4 million jobs retained and saved. We are well on our way to 
doing that. I think that is very important. And I am very 
confident in the capacity of the investments that you are 
making in rural America to have long-standing benefits to rural 
America.
    When you look at return on investment, I think it is 
important to look at the long term; and I think you are going 
to see a significant return on the investment in broadband, in 
business expansion, and new opportunities for education. I 
think you are going to see a return on investment for community 
facilities in wastewater.
    Take a town in Missouri recently who needed this wastewater 
treatment facility in order to restart a hospital project that 
was shut down because they didn't have access to clean water. 
Our recovery and reinvestment resources investing is going to 
allow that wastewater treatment facility to be built and also 
that hospital to be completed. How many lives will be saved as 
a result?
    I think that is the kind of thing that I think we have to 
look longer term. I think there is going to be tremendous 
benefit in rural America as a result of what you all have done 
here.
    Mr. Djou. Great. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman.
    Chairman Spratt. Mr. Langevin.
    Mr. Langevin. Thank you, Mr. Chairman.
    Mr. Secretary, thank you for being here; and let me just 
say how much I appreciate the hard work that you and the other 
members of the Administration are doing to try to get this 
economy turned around. And, as Mr. Djou has pointed out, we 
hope that we are going to be able to create the jobs in the 
very near future. They are going to get us to where we know our 
economy should be performing and can be performing.
    I also think it is important to understand and reflect on 
how we got here so that we can look forward and we don't repeat 
the mistakes that got us into the mess that we are in in the 
first place. We look back at the years of the Clinton 
administration and we see all the positive things that were put 
in place that allowed for job growth and record budget 
surpluses, and then the administration after that that allowed 
for a great deal in terms of tax cuts and such but heaped on 
the national debt and didn't have an accounting of how we paid 
for these kinds of things.
    Thankfully, under the leadership of this committee, the 
Chairman, and this Congress, we have put PAYGO legislation back 
in place, which was a major factor in the Clinton years of why 
we had a balanced budget, and it led to surpluses and job 
growth. That PAYGO legislation expired in 2002, and it was just 
made permanent again this year, so that for every dollar of 
increased spending or every kind of a tax cut that there is an 
offset in either spending cuts somewhere else or tax increases 
in order to account for that.
    So, we have laid the foundation for solid growth in the 
future in responsible budgeting. It is my hope in the very near 
future that, once we have this economy turned around, we have 
things back on track, then I know we are going to also turn our 
attention aggressively to getting our fiscal house in order and 
getting our budget deficits under control.
    In the meantime, let me talk about some of the important 
work that is being done under the American Recovery and 
Reinvestment Act, particularly in essential benefits getting 
people through this time, the SNAP program.
    My home State of Rhode Island was hit really hard by this 
economic recession. Right now, we currently have the fourth 
highest unemployment rate in the country. And from the 
beginning of the recession in June, 2008, until June, 2010, the 
number of Rhode Islanders enrolled in SNAP increased 66 
percent, from 87,285 people to 145,361 individuals. Just 
shocking numbers in so many ways, and it speaks to the need 
right now and the types of essential support that things like 
the Recovery Act are helping to provide right now to get people 
through this difficult time.
    The Recovery Act provided critical assistance to Rhode 
Islanders by increasing the amount of SNAP benefits which 
directly stimulated our State's economy. So, it was about 
helping people, but it was also about stimulating the economy. 
And according to the Rhode Island Community Food Bank, this is 
the greatest demand that officials have seen in the 
organization's 28-year history.
    So, my questions are, given these circumstances: do you 
believe that the $20 billion of the Recovery Act allocated for 
nutrition assistance is enough to meet the sustained demand 
until we have gotten ourselves out of this situation right now 
in the current downturn? What effect would a decrease in SNAP 
benefits have at this point in the recovery?
    And then the second half of that question is, has the total 
amount for nutrition assistance in the Recovery Act been 
exhausted?
    And then, finally, if so, what additional steps are being 
taken or are needed to continue assisting families that are 
really hit hard by the recession?
    Secretary Vilsack. Let me answer the last question.
    The total amount of resources available to SNAP--actually, 
the way it was structured is to be stretched out over another 
year or so. So the total amount has not been expended, but we 
are on track, obviously, to do that.
    We work very closely with States to try to encourage 
greater participation in SNAP. As I said--I believe I said 
earlier that there are some States that do a very good job of 
getting the people who qualify for SNAP aware of SNAP program 
and participating in the SNAP program. There are others who 
still have work to do; and we have been aggressively trying to 
work with States to improve their outreach, to improve the 
education component under SNAP-Ed to make sure people 
understand. That is one of the reasons why we suggested a move 
to category eligibility to make it a little bit easier to 
qualify for SNAP so that there aren't bureaucratic barriers to 
participation.
    We will do the job as best we can with the resources that 
you all provide. As I indicated, I think there are ways in 
which we could probably use the SNAP-Ed dollars more 
effectively to leverage greater opportunities for education and 
at the same time potentially save resources.
    Representative, we take deficit reduction at USDA very 
seriously, as reflected in the work that we did on the standard 
reinsurance agreement for crop insurance, where we negotiated a 
significant savings and used $4 billion of that savings to 
reduce the deficit. So, we are cognizant, we are working, we 
are constantly looking for ways within USDA to more effectively 
and efficiently use resources; and we are going to continue to 
work with States to make sure that we get to as many people who 
qualify for SNAP as possible.
    Mr. Langevin. I appreciate it.
    Can you just answer that last part of the question of what 
effect a decrease in the SNAP benefits would have at this point 
in the recovery?
    Secretary Vilsack. Well, if you were to decrease benefits 
right now, obviously, it would mean that people who are 
currently receiving benefits would receive less. That would 
have a rippling effect. They would obviously be able to 
purchase less at the grocery store. And that, as I said 
earlier, does have a ripple effect. If you are selling less, 
then perhaps you don't have to shelve as much, you don't have 
to process as much, you don't have to package as much, you 
don't have to truck as much, you don't have to produce as much. 
All of that impacts, in terms of the supply chain, potential 
employment opportunities for people. And so, longer term, our 
hope is that an improved economy requires less of a dependence 
and need for SNAP.
    I would say, as I said earlier, I think it is imperative 
that we not only focus on SNAP but that we also look for 
opportunities to extend unemployment compensation to those who 
have been out of work for an extended period of time. Because, 
without that, they really have very, very little hope of being 
able to keep their home or take care of their families.
    Mr. Langevin. Mr. Secretary, thank you for the job you are 
doing.
    Thank you, Mr. Chairman. I yield back.
    Chairman Spratt. Mr. Jordan.
    Mr. Jordan. Thank you, Mr. Chairman; and thank you, Mr. 
Secretary.
    Just a couple comments.
    First, to the gentlelady who is no longer here from New 
York, some of her comments and her questioning. I have 
introduced a balanced budget on behalf of the Republican Study 
Committee. I would appreciate it that the Secretary gets a 
chance to take a look at that.
    We think it does the right things. It protects Social 
Security. It keeps the tax cuts in place that are set to expire 
this January. It does the right thing with national defense but 
also cuts some spending which, frankly, we have to do around 
this place.
    Also, I would just mention I think there is a big 
difference between trading with Colombia and trading with Cuba. 
Cuba is a state sponsor of terror. Their former leader just 
this week made the ridiculous statement that somehow he 
believes the United States is responsible for the South Korean 
military vessel that was sunk. So, I think we have got to keep 
all that in mind.
    I do appreciate the Secretary's comments when he talks 
about the values of rural America. I have the privilege of 
representing west central and north central Ohio, many strong 
ag counties in the 11 counties I get to represent there.
    But I was just curious, because you made another statement, 
Mr. Secretary. Let me ask it this way. Do you think that 
government policies can actually undermine the values that I 
believe that rural America encourages? And specifically, you 
talked about the unemployment compensation. Do you ever think 
that we can go with something too long where we are maybe 
encouraging the wrong kind of behavior and not rewarding the 
proper behavior?
    Secretary Vilsack. Representative, in my capacity in public 
life--again, as a Mayor, a State Senator, a Governor, and now 
as Secretary of Agriculture--I have talked to a lot of folks 
who have lost their jobs and lost their farms----
    Mr. Jordan. I understand that. My question goes to the 99 
weeks, almost 2 years of assistance. Do you ever think we can 
go maybe too far with that and we undermine the same values 
that you and I both believe are important to America, in 
particular rural America?
    Secretary Vilsack. If this were a normal situation and not 
as severe and deep a recession as we have suffered, your point 
might be well taken. But I think this is an unusual 
circumstance.
    Mr. Jordan. Is there ever a time when it should end?
    Secretary Vilsack. Yeah, when----
    Mr. Jordan. No, no, no, no, no. Should we continue to 
extend it further than 99 weeks? Is there a time you would cut 
it off?
    Secretary Vilsack. I think you extend it for the time 
necessary to get people back on their feet.
    Mr. Jordan. That is not what I asked. Do you think it 
should go further than 99 weeks or do you think 99 weeks is 
when it should stop?
    Secretary Vilsack. I think there should be a current 
extension for those who have been unemployed in terms of 
chronic----
    Mr. Jordan. Have you had any employers, as I have, come up 
to you and say, you know what? We have actually had people 
hired. They found out that the extension kicks in; and they 
said, you know what? We are not going to take the job because 
we can get by by not working and get money from the taxpayer in 
compensation.
    Secretary Vilsack. If that is true, then under----
    Mr. Jordan. Have you had anyone say that to you? I have had 
people say that to me.
    Secretary Vilsack. No. But as I understand it, if that were 
to take place, then they would potentially be disqualified from 
receiving unemployment.
    Mr. Jordan. Okay. Let me ask a line of questioning. I did 
this when we had Secretary Duncan in here with the Department 
of Education.
    How many people work at the Department of Agriculture?
    Secretary Vilsack. Roughly 103,000 to 104,000, somewhere in 
that neighborhood.
    Mr. Jordan. And is that number higher this year than last 
year? What is the trend?
    Secretary Vilsack. Well, we are in the process, actually, 
of taking a look at how we might be able to restructure----
    Mr. Jordan. Is it up or down?
    Secretary Vilsack. I think it is about the same.
    Mr. Jordan. And what is the average salary of folks who 
work at the Department of Agriculture?
    Secretary Vilsack. You know, I don't know a specific 
number. I would be happy to get that to you.
    Mr. Jordan. Can you hazard a guess?
    Secretary Vilsack. I would be reluctant to do that.
    Mr. Jordan. What is the average salary of a farmer across 
the country?
    Secretary Vilsack. It depends on the size of the farm.
    Mr. Jordan. Our staff has said approximately $63,000.
    Would the average salary for the Department of Agriculture 
be higher than the average salary of a farmer of $63,000.
    Secretary Vilsack. I think it would be comparable, perhaps 
less.
    Mr. Jordan. Do you know how many people at the Department 
make over $100,000?
    Secretary Vilsack. I don't know that number.
    Mr. Jordan. Will you be able to get that to us?
    Secretary Vilsack. Sure.
    And let me just say what we are trying to do. We are taking 
a look at the supervisor to front line worker ratio as a way to 
figure out how we will be able to deal with the President's 
directive to us to reduce our discretionary spending, as we 
did--we kept our discretionary spending at about $1 billion 
less with the budget that was proposed for 2011 as the 
President instructed us to do. And as I indicated further, we 
have discovered $4 billion in savings through the Standard 
Reinsurance Agreement.
    So, we are constantly looking for ways. We are taking a 
look at our buildings, trying to figure out how we might be 
able to consolidate our building holdings to save resources. 
So, we are constantly involved in trying to figure out ways to 
do a better job----
    Mr. Jordan. I have 5 seconds. I want to get one other 
question if I could, Mr. Chairman.
    The GAO did a study looking at dollars that the 
organization Planned Parenthood gets. In that study--I was 
actually part of a press conference. Representative Olson from 
Texas had called for this study. In there--I forget what page, 
and I wish I would have brought the document with me--the 
Department of Agriculture actually gave some money to Planned 
Parenthood. Do you know if that in fact is the case--according 
to GAO, it was--and if so, what was the money for?
    Secretary Vilsack. You would have to be more specific in 
terms of time, in terms of date. It could very well be that a 
facility, a health care facility, could have received a 
community facility grant that leased property to Planned 
Parenthood. I don't know.
    Mr. Jordan. Does it strike you as sort of strange that your 
Department would be using taxpayer dollars and awarding those 
dollars to an organization like Planned Parenthood? I mean, the 
Department of Agriculture giving money to Planned Parenthood, 
does that strike you as strange just on the surface?
    Secretary Vilsack. Not necessarily. Because if you 
understand the rural development component of our mission area 
and the impact that we have with community facility grants on 
expanding health care coverage and expansion----
    Mr. Jordan. Do you think most farmers in America would be 
comfortable with you giving dollars to Planned Parenthood?
    Secretary Vilsack. I think it is important for people to 
understand the significance of health care in rural America and 
how difficult it was and is to get care in rural America.
    Mr. Jordan. Would you answer that question? Do you think 
most farmers would be comfortable with dollars going from the 
Department of Agriculture to Planned Parenthood?
    Secretary Vilsack. I think if they understood the 
connection with health care and they understood the connection 
of their own family planning efforts, they might very well 
understand that.
    Mr. Jordan. Really? Okay. Thank you, Mr. Secretary.
    Chairman Spratt. Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.
    Mr. Secretary, thank you so very much for being here. Thank 
you for being the most important lifeline to America's families 
right now who are enduring unemployment and this very difficult 
economy. Truly, you are their vital link.
    And I want to thank you on behalf of the people of Ohio 
where we have--counting the over 670,000 still unemployed, many 
working in part-time jobs, and those that have fallen out of 
the workforce--I would say, out of 11 million people, we have 1 
million people on the bubble; and without the Department of 
Agriculture, I honestly don't know where we would be. So I want 
to thank you. You have a tremendous burden.
    I really don't understand my colleague, who represents some 
districts south of me, how he can even say some of what he said 
here today during this session. We ought to be supporting the 
value of work in this country, and those people that have 
worked and are unemployed through no fault of their own, as he 
and his colleagues voted to outsource jobs to China and Mexico 
and everyplace else, we are at risk of losing the value of 
work. People are starting not to believe that you can earn a 
living in this country anymore. That unemployment check is a 
lifeline.
    And the food that you provide from the Department on behalf 
of the American people, we simply couldn't get along without it 
in our area. In fact, our food pantries and feeding sites are 
stressed right now, Mr. Secretary. And the TFAT program, the 
Commodity Supplemental Food Program, we need more right now. We 
have nearly 350 feeding sites around our region. People are 
having to swallow their pride and go in for bags of food, and 
it is not a very pretty picture out there. So, the situation 
faced by our food banks is dire. And with donations down and 
demands up, I just am very concerned about the next several 
months.
    And I am interested, from your perspective nationally, what 
you are hearing from our food banks and from our helpers around 
the country that are holding life and limb together for our 
families?
    Secretary Vilsack. Representative, I have actually been to 
a number of food banks in a number of cities and communities 
across the country, and I think your observations are correct. 
They have a tremendous need. They feel a great deal of stress. 
They were very appreciative of the resources made available 
through the Recovery and Reinvestment Act. It was a lifeline. 
It allowed them to assist us in helping to offset some of the 
problems that we experienced in some of our markets when other 
countries shut down access to pork, to poultry. It gave us some 
opportunity for us to purchase surplus product. And the need, 
obviously, continues. We are working as best we can to provide 
the resources and the assistance that we can. But I will tell 
you that they were very, very, very appreciative of what was 
done in the Recovery and Reinvestment Act. It was clearly an 
important thing to do.
    Ms. Kaptur. Mr. Secretary, I don't know if you have any 
ability to put in a good word on this, but for the last several 
years, as our employment rate has ticked up, we have been 
gleaning fields, harvesting fields in the fall. The Ohio Farm 
Bureau even helped us on this by helping us harvest cabbage and 
corn and so forth.
    In Ohio, if farmers in places like Ohio where the 
unemployment rate is so high, this fall, as food remains in the 
field, encouraging through the USDA, not-for-profit groups, 
church groups, religious groups, other groups, student groups, 
to go out and help us glean the fields, move that product 
through our food banks--Ohio Farm Bureau was able to help us 
pick up lots of cabbage, acres of cabbage that were left.
    I went to every major food bank in Ohio. And where we can 
grow some of our own food, we are plowing under lots of it just 
because we don't have these gleaners networks in place. But 
just in one food bank in our area we collected 769,000 pounds 
last year, up from about 350,000. This year, we want to go over 
1 million pounds.
    I don't know who at USDA might take an interest in that at 
your Farm Service Agencies or whatever, but I am telling you in 
the Midwest where unemployment is so high, gleaning those 
fields is another piece of the answer for us.
    Secretary Vilsack. I would say two things.
    First of all, we would be happy to participate in that.
    Secondly, we have our own effort to try to collect over 1 
million pounds of food to donate through USDA employees to food 
banks across the country since we have offices in virtually 
every county. So, there is a collection process under way. And 
we have over 450 people's gardens, some of which are producing 
produce which is being made available to food banks. I know the 
one we have at USDA's Washington, D.C., office, our main 
office, is helping to fund the Central Kitchen here in 
Washington, D.C.
    Ms. Kaptur. I think that is so important. In our community 
of Toledo, we have over 100 community gardens now. We are 
ratcheting up production. I know USDA is taking an interest in 
these food short areas and these food desert areas. I would 
encourage you on in those efforts, and thank you so very much 
for your leadership during a critical time for our country.
    Chairman Spratt. Secretary Vilsack, thank you very much for 
your forthright answers, your excellent information, and not 
the least your equanimity. We appreciate your forbearance as we 
made our way through this. It has been a very helpful hearing, 
and we appreciate your participation.
    For our other witnesses, we will be back as quickly as we 
can. We have three votes, one momentarily and two following 
that. And we will be back just as soon as we can. We are sorry 
to hold you up.
    [Recess.]
    Chairman Spratt. Mr. Rogers, we appreciate your forbearance 
and patience. You are here today to testify as the pinch 
hitter, so to speak, for the Secretary, who could not be here 
due to the fact that he has been detained in Texas.
    We welcome you here. We will make your full statement part 
of the record so that you can summarize it, but the floor is 
yours to proceed.

STATEMENT OF MATT ROGERS, SENIOR ADVISOR TO THE SECRETARY, U.S. 
                      DEPARTMENT OF ENERGY

    Mr. Rogers. Thank you, Mr. Chairman; and I will try to make 
a very brief statement.
    Chairman Spratt, Ranking Member Ryan, members of the 
committee, thank you for the opportunity to testify today on 
the importance and good work of the American Recovery and 
Reinvestment Act.
    As you know, Secretary Chu had to stay in Houston longer 
than expected to help with work on the BP oil spill, and he 
sends his regrets. Hopefully, I will prove an acceptable 
substitute.
    I also want to thank Secretary Vilsack for his good work. 
The collaboration between DOE and USDA on biofuels, on ``Feds 
Feed Families,'' and on a variety of rural development issues 
has been quite exceptional.
    When President Obama took office, we were facing the 
greatest economic crisis since the Great Depression, and today 
a Council of Economic Adviser's report estimates that between 
2.4 and 3.6 million jobs have been created already with the 
Recovery and Reinvestment Act. This is a start, obviously not 
enough, but a very important start on rebuilding the economy.
    What the Recovery Act did was it put a floor under an 
economy in free fall. It restarted job reaction, and it laid 
the foundation for long-term economic growth and prosperity.
    The CEA report today also highlights the critical role that 
the Recovery Act is playing in bringing private capital off the 
sidelines and back into high-return, job-creating projects.
    The Recovery Act made a $90 billion down payment on our 
clean energy future with historic investments in energy 
efficiency, renewable energy, transportation electrification, 
carbon capture and storage, environmental cleanup, breakthrough 
innovation, and smarter electric grids. We have been working to 
invest the Department of Energy's share of this funding quite 
quickly and wisely; and I am pleased to report that these 
projects are creating good jobs today, reducing pollution, and 
laying the foundation for the United States to establish global 
leadership in multiple high-technology, clean energy sectors.
    Mr. Chairman, let me give you three specific examples.
    First, an advanced vehicle industry is beginning to take 
root in America. One year ago, American businesses had just 2 
percent of the global market for advanced batteries that will 
power the vehicles of the future. Over the next 5 years, thanks 
to the Recovery Act, American factories are projected to have 
up to 40 percent of the world's capacity to produce these 
batteries. In fact, President Obama will be on the ground at a 
ground-breaking for Compact Power in Holland, Michigan, 
tomorrow to highlight this momentum and the new jobs that come 
with it.
    Second, because of the Recovery Act programs that we 
administer with Treasury, we are on track to double America's 
renewable energy generation and, perhaps more importantly, our 
clean energy manufacturing capacity by 2012. The Recovery Act 
is contributing to making the United States once again a great 
place to invest in manufacturing.
    Third, we are jump-starting a new home weatherization 
industry in America. After a slow start due to the difficulty 
of taking a program up by 10 times, the Weatherization 
Assistance Program is delivering on its promise, improving the 
energy efficiency of between 25,000 and 30,000 homes across 
America every month.
    Mr. Chairman, the Department of Energy has been 
accelerating performance while minimizing risk to taxpayers. We 
have already made selections for 98 percent of the Department's 
$32.7 billion in contract and grant authority. We have 
obligated 90 percent of these funds, accelerating job creation 
across the country.
    As our partners ramp up their projects, we reimburse them 
for the projects made and the projects complete. We reimbursed 
$472 million in March, $569 million in April, $695 million in 
May, $747 million in June, and in July we expect to hit our 
target run rate of between $800 million and $1 billion every 
month of outlays to our recipients.
    We think about this as the zone between 55 miles an hour 
and 65 miles an hour. At $800 million a month, we are running 
at highway speed, creating jobs as rapidly as these projects 
can. At above $1 billion a month, we begin to be worried that 
perhaps we are going too fast and creating too much risk.
    We are also approaching our top rate of job creation. In 
the first quarter of this year, the Department's investments 
created or saved nearly 30,000 jobs. We expect the final 
numbers will show that we created or saved more than 40,000 
jobs in the April to June quarter just finished. We expect to 
create or save 50,000 to 60,000 jobs for the July to September 
quarter and to remain at this rate of job creation through the 
spring of 2012.
    Not included in these quarterly numbers reported in to 
Federalreporting.gov are the more than 45,000 additional jobs 
created through the tax programs and even more jobs created up 
and down the supply chain of the clean energy economy that we 
are building.
    Mr. Chairman, the Recovery Act projects demonstrate how 
core American values--innovation and entrepreneurship, 
discipline and team work, self-determination and competition--
are bringing America back, allowing this country once again to 
assert global leadership in industries where we, in fact, can 
produce the best products in the world. If we can pass 
comprehensive energy and climate legislation this year, we can 
unlock funds that are trapped on the sidelines in the private 
sector, bringing those funds off the sidelines to create even 
more jobs and building on the momentum that has been created by 
the Recovery Act.
    Thank you very much for this opportunity to testify today, 
and I am very pleased to take any questions that you may have.
    [The prepared statement of Matt Rogers follows:]
    
    
    
    Chairman Spratt. In your position of reviewing grants, 
grant applications, do you get out in the field and actually 
see and witness these projects taking shape?
    Mr. Rogers. One of the great privileges of this role has 
been to be able to go out across the country and to look at 
these projects as they take shape.
    I was out in Colorado a couple weeks ago with the Vice 
President at UQM, which is an electric drive manufacturer for 
electric vehicles. And what was powerful about that was to see 
the workers going back to work in a facility, a set of folks 
who had gotten laid off who get to go back to work now to make 
the most competitive products in the world. And the pride with 
which those workers were able to come back because of this kind 
of Recovery Act funding is the kind of thing that motivates 
what I do every day.
    Chairman Spratt. I was in Charlotte, North Carolina, when 
the President came there for that very purpose of unique 
components in lithium batteries. Would you expound a little bit 
on the technology that's being developed there? What is the 
industrial policy that underlies your approach to using 
government funding to build private-sector capacity?
    Mr. Rogers. Let's take the batteries and transportation 
electrification awards where North Carolina, and Celgard, has 
been a very important player in that.
    Chairman Spratt. Let me interrupt you. As I recall, that 
was a dollar-for-dollar match, too. The company put up a dollar 
for every dollar you awarded.
    Mr. Rogers. That is correct. So, for every dollar that the 
Department of Energy has under the Recovery Act, we have been 
matched more than dollar for dollar by private-sector funds 
coming into these projects.
    These are a set of projects where the United States across 
the last decade or more missed a product cycle. All of a 
sudden, we allowed Asia to take over the manufacturing base for 
advanced technology batteries.
    The great opportunity that we have is to reestablish the 
linkage between innovation, manufacturing, and deployment in a 
strong and vibrant domestic marketplace. Where we do that, we 
create attractive, high-paying, long-term jobs, and we create 
the kind of growth that we expect in our economy.
    We take batteries as a simple one. We expect these markets 
to be growing in the order of 7 percent every year, as opposed 
to in a world that perhaps is growing 2 to 3 percent a year. 
So, we have a very high-growth marketplace where the United 
States only had 2 percent of the world capacity because we had 
allowed it to go overseas.
    The great news is, with U.S. innovation, we can bring that 
base back; and because of the investments we have made under 
the Recovery Act, the United States has the potential to have 
40 percent of the world's market share in batteries by 2012. 
This kind of investment reestablishes the United States as a 
major competitor in a very high-growth market where our 
innovations are the best in the world.
    Chairman Spratt. Are there other technologies to which you 
have made this dramatic a commitment?
    Mr. Rogers. There are a broad range of technologies. The 
great opportunity that I have had a chance to witness in this 
is the power of innovation in the United States to establish 
global leadership positions. So, we will take a company in 
North Carolina, Cree, that makes a set of light bulbs that take 
about 5 percent of the energy as the light bulbs in this room. 
This is a technology that the United States invented where a 
set of the manufacturing went across to Asia, where we are now 
bringing that kind of manufacturing capacity back here to the 
United States. And the great opportunity we have is we have 
about a dozen different companies who are beneficiaries under 
the Recovery Act who are inventing the most efficient and most 
competitive products in the world in that particular area.
    We take a look at the smart grid, another area where the 
United States has a great chance to lead the globe. Itron, 
which is a company that is based in Washington State and in 
South Carolina, has substantially increased its employment 
because of our build-out of the smart grid activities. We now 
have 138 different projects in 48 different States across the 
country.
    And one of the things that we are doing as part of this, 
this is just a down payment on an investment in U.S. 
infrastructure that, frankly, hasn't happened in the grid since 
I was 5 years old; and the opportunity that we have by 
investing in these projects is to have U.S. manufacturers like 
Itron develop the capabilities to serve a very rapidly growing 
U.S. domestic market and, frankly, take positions on a global 
basis. The United States has the best technology; and if we can 
combine that with manufacturing in a vibrant domestic market, 
we are really on our way. And that is what the Recovery Act has 
allowed us to do.
    Chairman Spratt. Five billion dollars has gone to help low-
income families make their homes more efficient, heating 
efficient and cooling efficient. In South Carolina, my home 
State, I understand the allocation is $59 million to scale up 
existing efforts. Will that money be regranted to State-wide 
beneficiaries?
    Mr. Rogers. That is correct. So, the State receives the 
funds, and then we actually deploy it through a network of 916 
community action agencies across the country. So, in South 
Carolina there is a portfolio of community action agencies in 
the local community who understand where the local centers of 
poverty are, where the elderly are most in need. The 
opportunity that the weatherization program gives us is the 
ability to create jobs, to make homes more livable, to put 
money back in the pockets of hardworking homeowners, and then 
to make sure that we actually reduce pollution in our 
communities.
    This weatherization program is one of the great success 
stories of the Recovery Act, now delivering again between 
25,000 and 30,000 homes every month of weatherization 
assistance across the country.
    Chairman Spratt. Thank you very much for your testimony; 
and thank you, too, again for your patience.
    Mr. Hensarling.
    Mr. Hensarling. Thank you, Mr. Chairman.
    Mr. Rogers, I didn't quite catch it in your testimony, but 
is it roughly $30 billion that your Department has under the 
stimulus bill?
    Mr. Rogers. That is correct. We have a total of 
appropriations of $36.7 billion, of which $32.7 is contract and 
grant authority.
    Mr. Hensarling. And then I think you said that the 
Department has outlaid 16 percent of that; is that correct?
    Mr. Rogers. The Department has outlaid cumulatively 16 
percent of that. We are outlaying it now, as of June, at a rate 
of $800 million a month.
    Mr. Hensarling. Well, I am certainly not an adherent to 
Keynesian economics, but for those who are, doesn't it have 
something to do with the timing and the essentially shovel-
ready nature of the projects? And so, I am just curious, when 
you talk about all the benefits, it doesn't seem to comport 
with Keynesian theory that so little of this money has actually 
gone out the door.
    Mr. Rogers. Well, again, I think that Secretary Vilsack 
talked about this at some level. Our primary task is to make 
sure that the funds move out the door to projects that create 
jobs and have a long-term economic, positive economic impact. 
If you look at the infrastructure investments, the primary 
event is the event of obligating those funds, and we have 
obligated 90 percent of those funds. We have actually selected 
98 percent of the projects.
    When the funds are obligated, people--you start ordering 
capital equipment, and people get hired. We then reimburse the 
recipients after they hit major milestones or after they 
complete the project. And so what you see then is the outlay 
rate as a lagging indicator.
    Mr. Hensarling. Let me ask about these milestones. As I 
understand it, the bulk of this money appears to be going to 
the Office of Energy Efficiency and Renewable Energy, $16 
billion, I think that is kind of the centerpiece of your green 
energy initiative, is that correct?
    Mr. Rogers. The Office of Energy Efficiency and Renewable 
Energy did administer about $16 billion of the funds, which 
then go out to a portfolio of private companies.
    Mr. Hensarling. Well, let me ask you this question and you 
can tell me whether or not they are behind the power curve, but 
if you go to the Web site of recovery.gov, under this 
particular program, percent of funds obligated, it says no data 
available; number of homes weatherized, no data available; 
estimated energy savings from projects, no data available; 
schedules and milestones to be determined. I think this 
information was accurate as of the last 24 or 48 hours, unless 
you can disabuse me of the notion.
    Mr. Rogers. I will have to go look at recovery.gov. If you 
go to our Web site, you can see exactly the answers to each of 
those questions that are posted on our Web site every day.
    Mr. Hensarling. Okay, well, perhaps, one part of the 
Administration might do a little better of communicating with 
the other part of the Administration.
    In your mind, and I am curious about how your department 
thinks about this, but when you are talking about all these 
great things that you are doing with this stimulus money, where 
do you think the stimulus money is coming from?
    Mr. Rogers. The stimulus money comes from America's 
taxpayers, and we take our stewardship of the taxpayers' 
dollars very, very seriously. What we are working to do is to 
lay a foundation for America's economic future by investing in 
a portfolio of projects and technologies that hold the 
potential for long-term economic growth and job creation.
    I think that is what we have been able to do under the 
Recovery Act, and I think the American taxpayer gets a great 
return on this investment.
    Mr. Hensarling. The American taxpayer is drowning in debt. 
We are looking at the single largest deficits we have ever seen 
in our Nation's history. We just hit a trillion dollar deficit 
milestone. We have got trillion dollar deficits as far as the 
eye can see. Our gross debt to GDP is now approaching the 
danger zone of 90 percent.
    Greece is at 110 percent. They are having to sell sovereign 
territory to pay for their debt.
    So, listen, I understand you take pride in your work. I 
have no doubt that good things can be done with what seemingly 
looks like free money, but sooner or later, you have got to 
live within a budget. Unfortunately, we have passed no budget. 
We appear not to be on track to pass any budget, first time in 
the history of the House, as I understand it, that we would not 
have passed a budget.
    But I have got to tell you, at least in the folks I talk to 
in my neck of the woods in East Alice and rural east Texas, 
there is a huge concern about this wave of debt, and it is one 
of the reasons--again, it is not a lack of capital we are 
seeing as much as it is a lack of confidence.
    You, yourself, talked about funds on the sideline. By most 
estimates, there is $2 trillion of capital sitting on the 
sidelines that would come into the economy if there was any 
confidence in the policies of the Administration. I just hope 
at some time that people will recalibrate--I know we continue 
to have debates on who to blame here, whether it be Bush, Ford, 
Nixon, Coolidge, Harding, Grant, Lincoln, I don't know who--but 
I just have a hard time seeing, by any discernible measure, 
that this thing is working.
    I don't even know how you come up with your jobs-saved 
figure. What I know is that since this bill has passed, we are 
still essentially mired in almost double-digit unemployment, 
the highest level in a generation, and all I see and most of my 
constituents see is a wave of debt. Now, you know, you can 
borrow 43 cents on the dollar from mainly the Chinese and send 
the bill to our children and grandchildren; I am sure you can 
do a few good things with it now.
    But I certainly don't think it is worth the cost, and I 
think that entrepreneurs, small businesses, investors are 
living in fear of this debt, as they well should, and I know 
you are not the decisionmaker here, but somebody in this 
administration had better put forth a plan to deal with this 
long-term structural debt and do it quickly, or all this 
capital will continue to sit on the sidelines, and whatever 
efforts you are doing at the Department of Energy will be all 
for naught.
    And one of the things that was leading to uncertainty is 
the increased rhetoric on your cap-and-trade, which I believe, 
if I recall right, it has been a while, but at least the House-
passed version, I think had about an $800 billion price tag to 
the economy. I think that is the CBO number. Maybe it is $600 
billion. Maybe it is $800 billion.
    But how that is going to create jobs at a time when we have 
historic unemployment is beyond me.
    Anyway, I know we have another panel. I will yield back, 
Mr. Chairman.
    Chairman Spratt. Mr. Connolly.
    Mr. Connolly. Thank you, Mr. Chairman.
    Mr. Rogers, not to belabor an issue, but--and I know you 
don't purport necessarily to be an expert on how the budget 
works, but is it your understanding, as it is mine, that the 
unpaid Bush tax cuts cost about $700 billion roughly? Is that 
your understanding?
    Mr. Rogers. Again, I am not a good budget economist. I am 
trying to drive a whole set of energy projects through the 
system, so I will regrettably have to pass.
    Mr. Connolly. Well, let's stipulate for the record, that is 
about right. And is it your impression, just as a layman, 
watching the economic record of previous Congresses controlled 
by the other party and the Bush administration, that that $700 
billion investment, which was promised to lift all boats in a 
rising tide and create unprecedented prosperity and numerous 
jobs, did it work?
    Mr. Rogers. Across the last decade, in the markets that I 
know the best, we have had two fundamental challenges. We 
confused arbitrage for innovation, and we lost track of the 
core innovative spirit of the United States of America. And we 
ended up allowing a whole series of industries to move 
overseas. We allowed a whole set of renewable industries to 
move to Europe, allowed batteries and transportation to move to 
Asia, because we forgot the core basis around manufacturing.
    So, innovation and manufacturing, if we can keep our focus 
there, as opposed to where it has been for the last decade, we 
will be much better off.
    Mr. Connolly. And to the point you are making, would it 
surprise you then to learn that if you measured job growth with 
those promised prosperity from those tax cuts that, in fact, 
the net job growth from March of 2001 to March of 2009 was a 
negative 430,000? Would that surprise you?
    Mr. Rogers. That would not surprise me.
    Mr. Connolly. And what has been the net negative job 
situation growth or negative growth since we passed the 
recovery bill?
    Mr. Rogers. Well, since the--if you take a look at this 
year, we have seen positive job growth in 6 out of the last 7 
months. And I think the important part to some of the earlier 
dialogue is, certainly in the energy projects that I deal with, 
substantially all the job growth that we are seeing is private-
sector jobs.
    What we are doing is, every time the Federal Government is 
putting out a dollar, we are being matched more than 1 for 1 by 
private dollars, and these projects are ending up creating a 
foundation for long-term competitiveness that I think we can 
all be proud of.
    Mr. Connolly. Mr. Chairman, can we put up the graph on 
economic expansion in the third quarter that shows current and 
projected GDP growth? I don't know what chart number that is--
yes.


    Now, Mr. Rogers, if I am looking at GDP and, again, the 
promise of those who want to criticize the Recovery Act, who 
were great champions of the Bush tax cuts that weren't paid for 
and that created huge holes in the deficit that they now say 
they decry, produced that kind of economic record in terms of 
GDP growth. Is that your understanding?
    Mr. Rogers. Yes, if you look at, again, at the Recovery 
Act, what makes me excited is to see the Recovery Act again 
delivering 3 million jobs already, clearly on the way to the 3 
to 4 million that CEA originally projected and contributing to 
a turnaround in GDP growth. If the United States can grow at 
that kind of rate with the kind of innovation that we see, all 
of a sudden, our ability to create wealth for all Americans 
grows dramatically.
    Mr. Connolly. And some seem to have trouble with the idea 
of, you know, that there is spending and then there are 
investments, investments involved with up-front expenditure, 
but they have a return on them.
    I was intrigued to hear you talk about the Advanced 
Battery. You said, if I heard you correctly, that we were 
reduced to like 2 percent of the world market.
    Mr. Rogers. Two percent.
    Mr. Connolly. Two percent, and you said that, by 2012, 
because of the investments we are making through the recovery, 
we are on track to get 40 percent by 2012; is that correct?
    Mr. Rogers. We will have the capacity to deliver 40 
percent.
    Mr. Connolly. And could you just give us real quickly, what 
was the investment? And what is the--any kind of projected 
economic value to that 40 percent by 2012?
    Mr. Rogers. So we invested $2.4 billion of taxpayer funds 
in these projects. We were matched more than dollar-for-dollar 
by the private sector to create a total of more than $4.8 
billion of projects. These projects then are growing at, again, 
the expected rate for these markets is to grow at 7 percent a 
year, so we get a set of jobs today, and we get more jobs 
tomorrow, and we get more jobs the year after that.
    It is those kinds of investments that I think, a decade 
from now, as we look back at the Recovery Act, that we will 
say, we saw an inflection point in the way the United States 
uses energy, and we saw an inflection point in the way the U.S. 
thought about infrastructure and innovation.
    Mr. Connolly. Mr. Chairman, my time is up, but I do think 
that this concept of a return on investment is well worth 
exploring because sometimes, in our debate here, to make 
political points, we descend into sort of a mindless view about 
all expenditures being the same. Investments are not the same, 
and many of them have incredible returns on them that make them 
very worthwhile and create jobs and expand the U.S. economy.
    Thank you, I yield back.
    Mr. Rogers. Mr. Djou.
    Mr. Djou. Thank you, Mr. Chairman.
    Mr. Rogers, my questioning also is similar to the Secretary 
of Agriculture's, earlier today and that is, I want to see some 
clear metrics. You are spending a lot of money. You are saying 
it is helping. I think this is all good. We all, I think, have 
the same objective, Republicans and Democrats. We want to see 
the American economy turned around. We want to see Americans 
put back to work.
    The amount of money being spent by the stimulus, by the 
Department of Energy, can you give me some clear, tangible 
metrics in terms of when and how much you are going to see--
what rate, are we going to see the unemployment rate go down? 
When are we going to see it?
    And I will leave it open-ended to the Administration to 
give me a clear benchmark to gauge success.
    Mr. Rogers. So, I spent 25 years in the private sector 
before I took on this role a year and a half ago. When I came 
in----
    Mr. Djou. I know, McKinsey is very well-known for that, and 
I will leave McKinsey to do the benchmarking here.
    Mr. Rogers. When I came in, the mantra that we established 
for the Department was accountability every day. This is about 
accountability and making sure that we move these funds out in 
a timely way with great stewardship of the taxpayers' 
resources. We took the funding that we received from the 
Federal Government and turned that into 144 different projects, 
each of which have a very clear set of milestones and the tasks 
that we have. We now have 5,000 individual recipients.
    For each recipient we have a very clear set of milestones. 
We think about them as earned-value milestones, that you get 
paid when you hit your earned-value milestones, and we have to 
make sure that we are hitting those marks on time, on budget.
    The very good news is that we continue to hit all of our 
marks on time, on budget, and what we are seeing is a rate of 
innovation that is faster, I think, than we would have 
expected.
    If we take a look at your State of Hawaii, where 
substantially all of the power is generated by fossil fuel, by 
the import of crude oil, so you have among the highest energy 
costs in the whole country.
    We started yesterday, the first wind Kahuku wind project, 
which is funded by a loan from the Department of Energy. It is 
a great project to reduce the amount of oil required in Hawaii. 
We are doing the same thing in biofuels in Hawaii, where there 
are some great opportunities both for algae biofuels as well as 
for cane biofuels. And the ability to take a State like Hawaii 
and significantly reduce its exposure to the imports of crude 
oil, enormously important for the health of the economy, not to 
mention the immediate and direct jobs that you are receiving 
under the Recovery Act.
    Mr. Djou. Well, Mr. Rogers, my follow-up question, then, is 
do you have enough? Do you need more? Is what we have already 
allocated and appropriated to the Department of Energy 
sufficient? Are we going to hit all of these milestones?
    Mr. Rogers. So, we continue to hit all the milestones on 
time, on budget. What we have faced is the fact that, for every 
dollar we had, we were oversubscribed 5-1. So, every time we 
made an award, I got to turn down 80 percent of the people 
while the Secretary came out and made awards to the 20 percent 
who were successful.
    You take a look at programs like the 48C tax credits for 
clean energy manufacturing, $2.3 billion; 181 different 
projects across the country, terrific stories, and yet we were 
oversubscribed in that case by 3 to 5 to 1.
    The President has asked for another $5 billion to 
reestablish U.S. leadership in industry after industry. And 
those kinds of funds are among the highest return funds that 
Congress can provide.
    Mr. Djou. Now, okay, my final question, do any of these 
projects, all of these billions of dollars that were spent, do 
you believe that it has any impact on the unemployment rate? 
And, if it does, is it a positive effect on the unemployment 
rate? And if it does have a positive effect on the unemployment 
rate, when will we start seeing the unemployment rate go down?
    Mr. Rogers. If you look across the portfolio of projects 
that we have funded under the Department of Energy and with our 
colleagues at Treasury in the energy arena, these are having a 
clear and demonstrable impact on employment in these sectors. 
You are seeing employment in clean energy technologies grow 
quite rapidly, and we are very proud of the kinds of jobs we 
have created, both in deployment but also in the manufacturing 
of the technologies further up the supply chain. And those 
kinds of pieces are all pieces of the puzzle that are 
contributing to the 3 to 4 million jobs that CEA is expecting, 
the 3 million jobs that we believe have already been created, 
according to the Council of Economic Advisers, under the 
Recovery Act.
    So we are seeing the kind of job creation--clearly, in a 
world where we lost 89 million jobs in the course of the great 
recession, 3 million doesn't solve the problem. But what we are 
doing is we are turning the corner. And what you are seeing is 
the private markets now beginning to go take up the pace. The 
engine is turning over, and we are moving in the right 
direction.
    Mr. Djou. So, will we see the unemployment rate go down, 
and if so, when, because of the stimulus package?
    Mr. Rogers. What I can see in the energy arena is the 
employment going up consistently. And I think you can ask 
Christy Romer as to exactly how that translates into the 
national accounts. But from a Recovery Act standpoint, it is 
unquestionable that the Recovery Act is working and is creating 
jobs, even, and beginning to turn the GDP growth around in a 
way that is exactly what we were looking for.
    Mr. Djou. Thank you.
    Thank you, Mr. Chairman.
    Chairman Spratt. Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.
    And welcome, Mr. Rogers. Thank you so much for coming 
today. I can tell you there couldn't be any department more 
important than yours to the region that I represent in northern 
Ohio, the southern rim of Lake Erie from Toledo to Cleveland, 
where energy rates are sky high. It is the biggest job killer 
we have.
    We have worked hard over the last quarter century to spawn 
a solar industry. We now feel we have--with companies like 
First Solar. We feel we probably have 6,000 jobs related to 
solar manufacturing that pivots off of our very well-known 
glass industry in our region, and we would like five times that 
many jobs overnight in our area.
    The Obama Administration inherited a country in shambles 
and a Department of Energy stuck in the 20th century, and I 
want to thank you for spending part of your life in helping 
America move into this new century and new opportunity.
    The other day, there was a story--it was reported in our 
local paper--that over in Switzerland, a pilot had actually 
flown a solar plane for 24 hours, and I am glad a Swiss pilot 
did that. I wish it had been an American pilot here on our 
soil, but to remain aloft for 24 hours with the batteries 
charged by the sun was, it kind of reminded me of the modern 
day Wright brothers, an analogy for that.
    So, my question of you really is, to expand on your 
Department's perspective on job creation in this new emerging 
energy sector, what more can you tell us about that, the chief 
engines of growth? How do I make sure that a region like mine, 
which is suffering from such high unemployment, accesses all 
the important programs that we can propel innovation that 
produces jobs, as we are beginning to do in the solar sector?
    Are there ways for the Department to move funding out more 
quickly? I don't know how much of the recovery dollars are 
actually committed at this point from the Department, but I 
think it is probably fair to say that my region doesn't apply 
as aggressively as places that have MIT and Stanford and, you 
know, sort of the typical places. How can we better connect to 
you?
    Mr. Rogers. I think Ohio provides a wonderful microcosm of 
how the energy story is beginning to play out. One of the 
things that we have seen over the last 18 months is how the 
United States can really lead in a global clean energy economy. 
You take a company like First Solar, which drives a set of 
fundamental innovations in thin-film solar panels and has among 
the most competitive products in the world. Their challenge is, 
how do you make sure that it is competitive to manufacture in 
the United States? And what they did was they applied for a 48C 
Clean Energy Manufacturing Tax Credit from the U.S. Treasury; 
were awarded that because of their level of innovation, and 
then their customers are benefiting from the 1603 program, the 
tax grants for renewable energy deployment.
    Over the last decade, we forgot that we actually have to 
have a vibrant domestic demand market. We have to actually 
invest in manufacturing. We thought that maybe we could just 
innovate and then arbitrage, and that was, kind of, you know, 
that was all that it really took to grow an economy.
    And I think what First Solar demonstrates, what Cardinal 
Fastener in Ohio demonstrates, is that if we drive the 
innovation through manufacturing and through a vibrant domestic 
demand market, all of a sudden, we can grow entire industries 
that not only can compete in the United States but can compete 
all the way around the world. I mean, First Solar is very 
competitive in the Middle East, in Europe. It is a terrific 
story. And there are multiple companies like that in Ohio and 
around the country.
    If you look at our Recovery Act funding, again, 98 percent 
of our grants are done. We moved that money out the door very, 
very quickly. We still have a few--some money available still 
for loans and have a very attractive loan pipeline as we move 
forward.
    But as we look forward, I think the key is to establish the 
rules of the road so that we have long-term incentives for 
manufacturing, that we have long-term incentives for renewable 
energy deployment in this country and that we continue marrying 
innovation with it. If you look at some of the great 
institutions in Ohio, if you look, Ohio State was one of the 
recipients of one of our science awards. And the ability to 
start all the way back at the basic science and then move all 
the way through to new products, manufacturing and out into the 
marketplace, that is the story of growth that we are committed 
to in the Department of Energy. And that is the story of growth 
that you can see in each of the projects that we have been able 
to fund.
    Ms. Kaptur. I would cordially invite you to the only 
renewable energy campus in America at the University of Toledo, 
up in our area, and if you ever have the time, if you are 
flying over that part of the country, Ohio, we would love to 
welcome you, introduce you to some of our companies. And 
perhaps you could talk about the Department's perspective, what 
you are trying to encourage, to make sure that we are tooling 
up in every possible way, because we do view ourselves as 
leaders in this new energy world. So, I would cordially extend 
that invitation to you and your colleagues.
    Mr. Rogers. Thank you.
    Chairman Spratt. One last question from me.
    Once this technology has been developed and brought to 
maturity and demonstrated, how do we assure ourselves that it 
won't then be outsourced overseas in some manufacturing country 
like China?
    Mr. Rogers. I think there are two answers to that question. 
This notion of making sure that the innovations that we have 
stay here and really build industries here in the United States 
is enormously important to the Department, to the Secretary, to 
the President.
    If you look at the most exciting projects that we are 
funding under the Advanced Research Projects Agency for Energy, 
ARPA-E, which is, if you will, for energy, the equivalent of 
what DARPA for the Defense Department, one of the things that 
we are requiring is that when those projects, when that 
technology reaches maturity, that they build their 
manufacturing here in the United States. Because what we don't 
want to be doing is funding, all of a sudden, a set of bench 
research, and then when it goes to manufacturing, all of a 
sudden we are moving abroad.
    What we are observing though, and the thing that gives me 
the greatest degree of confidence, is the rate of innovation is 
so high, that the United States can be very, very competitive. 
So, we funded, on Monday, a set of projects around power 
conversion devices, right; these are things that are 
transformers, if you think about it. The United States owned 
the global market for transformers all the way from the end of 
World War II into the middle of the 1970s, and then we gave it 
up. We lost it to Europe, and then we lost it to Asia. The 
innovations that U.S. companies are now driving in that area 
are between 10 and 100 times more efficient than the current 
products on the market today.
    If I drive a performance improvement of tenfold versus what 
the Chinese competitor has, frankly, I can manufacture here in 
the United States because there is no labor cost difference 
that can make up for a tenfold innovation performance, 
improvement difference. So, that is the opportunity that we 
have, is to take that innovation, and then we have to be 
thoughtful about our manufacturing incentives here in the 
United States.
    If you go around the world, this is a global competition 
for manufacturing centers. And what we have observed under the 
Recovery Act is we have seen investors from all over the world 
bring their manufacturing base here to the United States. In 
renewable energy alone, we have seen $10 billion of foreign 
direct investment into the United States, where companies that 
have the choice to build anywhere in the world choose to build 
their manufacturing in the United States.
    Nissan is going to, for example, begin building their Leaf 
technology, their new electric car, in Smyrna, Tennessee. Why 
are they building in it in Smyrna, Tennessee? Because we had 
the Advanced Technology Vehicles Manufacturing Program here 
that made it attractive to manufacture in the United States, 
one of the most competitive cars in the world.
    The great opportunity that we have is to make the United 
States a source of innovation and manufacturing excellence 
because we do, in fact, have a vibrant local demand market. But 
I do think it is very, very important to think about that 
linkage and to work the entire supply chain. That is what we 
have had the opportunity to do under the Recovery Act.
    I think we can learn some lessons from how the Recovery Act 
has worked as we think about policy on a long-term basis.
    Chairman Spratt. Mr. Hensarling.
    Ms. Kaptur.
    Ms. Kaptur. Mr. Chairman, I had a follow-up question, if 
the gentleman would yield, on what you had asked. I had a 
follow-up question. Would that be all right?
    Chairman Spratt. Yes, if you confine it to that, I would 
recognize you for that purpose, but we do have another panel 
waiting to testify.
    Ms. Kaptur. All right. I wanted to follow on your question 
with a concern and ask Mr. Rogers what his thoughts are on 
this. I talked about the company First Solar, and their 
successes are very well-known, but they recently have worked 
with the government of China and will be building a facility 
there. And one of my questions is, how does one, when one 
manufactures in another country, especially a country like 
China, how does one assure that no interest there would 
actually assume your intellectual property?
    How does a U.S. company function in an environment like 
China and then not have the chief counterfeiter of the world, 
industries in China, steal our technology and duplicate that? 
How does the company protect itself?
    Mr. Rogers. This is a very important question. It is one 
that Secretary Locke is spending a good deal of time on in 
Commerce, making sure that we think about protecting U.S. 
intellectual property on a global basis. My observation, again 
from my time in the private sector, was that many companies, a 
company like General Electric, will do some manufacturing in 
China but won't actually take another block of manufacturing 
into China where their most important intellectual property 
resides.
    The reason for that is, it is very, very hard to protect 
trade secrets, because innovation occurs at two different 
levels. It occurs in the product, but it also occurs in the 
manufacturing process.
    If you move that to another country, it is very, very easy. 
I mean, you go back, Thomas Jefferson was actually very, very 
good at taking technology from England and bringing it to the 
United States. So, it is very easy to take that kind of process 
technology and product technology when you manufacture in 
another place.
    And I think, again, many companies are very, very good at 
managing that. It is something that Commerce takes very, very 
seriously. But it is one of the advantages of making the United 
States an attractive place to invest in innovation and in 
manufacturing.
    If we create the kinds of platforms from which we can 
export to a global marketplace, it is much easier to protect 
your intellectual property here than it is anywhere else in the 
world.
    Ms. Kaptur. I want to thank also Congressman Hensarling for 
allowing me that question. I truly appreciate it.
    Chairman Spratt. Mr. Rogers, thank you very much for your 
responsive answers, your excellent presentation. We very much 
appreciate it, and we appreciate, once again, your patience 
today.
    Mr. Rogers. Thank you.
    Chairman Spratt. Thank you very much indeed.
    Now we have a final panel, Josh Bivens with the Economic 
Policy Institute; and Veronique de Rugy of the Mercatus Center 
of George Mason University.

STATEMENTS OF VERONIQUE DE RUGY, PH.D., SENIOR RESEARCH FELLOW, 
  MERCATUS CENTER, GEORGE MASON UNIVERSITY; AND JOSH BIVENS, 
        PH.D., MACROECONOMIST, ECONOMIC POLICY INSTITUTE

    Chairman Spratt. Ms. de Rugy, we will allow you to go first 
if that is your preference.

             STATEMENT OF VERONIQUE DE RUGY, PH.D.

    Ms. de Rugy. Good afternoon, Chairman Spratt, Ranking 
Member Ryan and member of the committee.
    My name is Veronique de Rugy. I am a senior research fellow 
at the Mercatus Center at George Mason University where I study 
tax and fiscal policy, the Federal budget process, and the 
implication of government spending for economic growth.
    It is an honor to be here today to discuss what stimulus 
means for the long-term economic health of our country. I would 
like to focus my testimony on two main areas. First, I would 
like to discuss why government spending to stimulate the 
economy does not work. Second, I will summarize some 
preliminary findings from my quarterly report on stimulus 
spending data that will further illustrate why stimulus 
spending doesn't work.
    When President Obama signed into law the American Recovery 
and Reinvestment Act at a cost of $787 billion, he promised 
that it would create or save 3.5 million jobs over the next 2 
years, 90 percent of these jobs in the private sector. The 
Administration also claimed that, without the Recovery Act, the 
unemployment rate would reach 8.8 percent, while with the Act, 
it would begin to decline.
    Since then, the U.S. economy has shed another 2.5 million 
jobs and the unemployment rate has climbed to 9.5 percent. That 
is higher than the White House predicted it would have reached 
even without the stimulus.
    The Administration and its team can repeat as much as they 
want that the stimulus is working and has created 3 million 
jobs. It won't make it true.
    The actual data, the actual data, tells a very different 
story. The American people want to know why the economy is 
still weak, why they don't have jobs. After all, the 
Administration promised that, if only the government spent 
money, it would create much more than originally invested in 
economic growth. Why spend the money otherwise, right?
    This increasing gross domestic product is what economists 
call the multiplier effect, but academics disagree. Harvard 
professor Dr. Robert Barro and Charles Redlick explain the 
historical value of the multiplier in the United States. Their 
work shows that in the best-case scenario, a dollar of 
government spending produces much less than a dollar in 
economic growth, between 40 cents and 70 cents. Imagine if that 
were the return on our private sector's investment; America 
would not be the economic engine of the world.
    Moreover, Barro also calculates the impact on the economy 
if the government funds this spending with taxes. He found, 
based, again, on actual data, that if the government spends a 
dollar and raises taxes to pay for it, the economy will shrink 
by $1.10. In other words, greater spending financed by taxes 
hurts the economy.
    The stimulus isn't working, because it is based on faulty 
economic theory.
    Now, let me tell you what I found looking at actual 
recovery data. Using the tens of thousands of stimulus 
recipients reports published on recovery.gov each quarter and 
economic and political data from the Bureau of Labor 
Statistics, the Census Bureau, GovTrack.us and others, my 
preliminary findings are the following:
    First, the total number of jobs claimed from the stimulus 
is 682,000, not 3 million. Four out of five jobs were created 
in the public sector, not the private sector, as promised. The 
average cost of each job created or saved is $282,000. That is 
a lot of money.
    Now, you would expect that the government would invest 
relatively more money in districts that have the highest 
unemployment rate and less money in districts with lower 
unemployment rates, but it does not appear to be the case. The 
data shows no correlation between how the money is spent and 
unemployment rates.
    The understandable temptation to take action in times of 
recession should not lead lawmakers to take counterproductive 
measures. The data shows the stimulus has not worked. The 
American people know the stimulus has not worked.
    But if stimulus funds are about investment, is there 
anything policymakers can do to help the economy? Yes, there 
is. The first step in real job creation is for government to 
acknowledge its limitations. Private businesses are the true 
drivers of job creation. They flourish when they have a 
reasonable expectation that the government will be noninvasive, 
nonburdensome and fiscally responsible. By creating a stable 
economic environment, which isn't the case right now, the 
Federal Government would do more to aid job creation than any 
stimulus package could.
    I am happy to answer any questions you may have. Thank you.
    [The prepared statement of Ms. de Rugy follows:]

    Prepared Statement of Veronique de Rugy, Senior Research Fellow,
                Mercatus Center, George Mason University

    Good afternoon Chairman Spratt, Ranking Member Ryan, and members of 
the committee. My name is Veronique de Rugy, I am a senior research 
fellow at the Mercatus Center at George Mason University where I study 
tax and fiscal policy, the federal budget process, and the implications 
of government spending for economic growth.
    Since the Great Recession began in December 2007, employment has 
shrunk by 7.5 million jobs,\1\ long-term unemployment is higher now 
than in any previous recession,\2\ and real GDP has plummeted to 2006 
levels.\3\ The understandable temptation to take action in time of 
recession however should not lead lawmakers to take counterproductive 
actions. On February 13th 2009, President Obama signed into law the 
American Recovery and Reinvestment Act (ARRA) at a cost of $787 billion 
with the promise that it would ``create or save'' 3.5 million jobs over 
the next two years, mostly in the private sector.\4\ What's more, based 
on a study by Christina Romer, the Chairman of the Council of Economic 
Advisors, and Jared Bernstein, the administration claimed that without 
the Recovery Act unemployment rate would reach 8.8 percent while with 
the act it would immediately start declining (see figure 1).\5\
     figure 1: unemployment rate with and without the recovery plan


    Since the president signed the stimulus package into law, the U.S. 
economy has shed another 2.5 million jobs and the unemployment rate has 
climbed to 9.7 percent from 7 percent, higher than the White House 
predicted it would have reached even without the stimulus.
    While the stimulus may have appeared to have been a wise investment 
when it was made, it was really no wiser than a junk-rated mortgage-
backed security: though the stimulus claimed a good rate of return, in 
reality it appears to have lost money by destroying growth. At best, it 
shifted jobs from privately funded to publicly funded ones.
    The first step in real job creation is government to acknowledge 
its limitations. Private businesses are the true drivers of job 
creation; they flourish when they have a reasonable expectation that 
the government will be noninvasive, non-burdensome, and fiscally 
responsible. By creating such an environment, the federal government 
would do more to aid job creation than any stimulus package could.
                           promises, promises
    The stimulus bill draws on the views of economist John Maynard 
Keynes. In Keynesian thought, a fall in economic demand causes a fall 
in spending. Since one person's spending is someone else's income, a 
fall in demand makes a nation poorer. When that poorer nation prudently 
cuts back on spending, it sets off yet another wave of falling income. 
So a big shock to consumer spending or business confidence sets off 
waves of job losses and layoffs.
    Can anything stop this cycle? Keynesians say yes: government 
spending can take the place of private spending during a crisis. If the 
government increases its own spending, it will create new employment. 
These new workers should consume more, and businesses should then buy 
more machines and equipment to meet the government's and the 
revitalized public's demands.
    This increase in gross domestic product is what economists call the 
multiplier effect. It means that one dollar of government spending will 
end up creating more than a dollar of new national income.
                       the theory of multipliers
    It is difficult to get solid evidence on the economy's response to 
changes in government spending. Direct reporting measures--such as 
those employed by Recovery.gov, the U.S. government's website for 
tracking stimulus spending--capture the direct and observable effects 
of government spending on economic activity. These measures can be 
helpful, but they fail to account for the indirect, less-easily 
observable effects of government spending. To capture the big-picture 
effect of government spending, economists turn to the spending 
multiplier.
    As explained above, the multiplier effect or spending multiplier 
refers to the idea that an initial amount of government spending leads 
to a change in the activity of the larger economy. In other words, an 
initial change in the total demand for goods and services (what 
economists term aggregate demand) causes a change in total output for 
the economy that is a multiple of the initial change. For example, if 
the government spends one dollar and, as a result of this spending, the 
economy (as expressed by the Gross Domestic Product, or GDP) grows by 
$2, the spending multiplier is 2. If the economy grows by $1.50, the 
spending multiplier is 1.5. However, if the economy only grows by 50 
cents (a loss from the original $1 spent), the spending multiplier is 
0.5.
                    the spending multiplier debates
    The theory sounds pat, but economists have been debating aspects of 
government spending multipliers for years. One crucial debate centers 
on how to measure a multiplier's value. Some economists find spending 
multipliers that are smaller than 1.\6\ Other economists, however, 
assert that spending multipliers are much larger.\7\ Still others argue 
that multipliers can't even be credibly measured.\8\
    Another debate surrounds the implications of spending multipliers. 
For Keynesians, consumption is the ultimate goal of government 
spending, and even with a multiplier smaller than 1, spending can still 
increase GDP. Thus Keynesians argue that, during a recession, when 
people tend to save their money rather than investing it in the private 
market,\9\ a small increase in GDP is better than nothing.
    Simple Keynesian macroeconomics assumes that in times of high 
unemployment, the government is better than the private market at 
guiding idle resources to create economic output. Government spending 
puts unemployed labor and capital to work at zero social cost.\10\ When 
the government puts this previously unemployed labor and capital to 
work, the mobilized labor and capital produce added goods and services 
that private sector was unable to create.
    A New Classical understanding of the multiplier starts with the 
idea that government spending has some social cost (i.e. a rise in 
government spending requires a fall in other parts of GDP, such as 
consumption and investment). As such, the value of the public projects 
(bridge construction or roads) needs to justify that social cost. This 
view doesn't assume that an increase in consumption at any cost is a 
good thing: if the multiplier's value is less than 1, then government 
spending has crowded out the private investment and spending that would 
have otherwise happened.
    Even government spending where the multiplier is higher than 1 
could still be a poor use of taxpayer dollars. For instance, though $1 
in government spending could lead to a GDP boost of $1.50 in the short 
run, it could also make it harder to solve the longer-term debt 
problem.
                          the data of defense
    So what is the historical value of the multiplier in the United 
States? A new study by Harvard professor Dr. Robert Barro and Charles 
Redlick answer this question in details by using defense spending as a 
proxy for overall government spending.\11\
            figure 2: real government spending and real gdp


    First, the economists explain that in order to understand the 
effects of government spending on the economy, one must know how much 
of the economic change is due to government spending and how much is 
due to other factors. Unfortunately, it is impossible to figure this 
out with general government spending, since the level of government 
spending often expands and contracts along with the economy.\12\ When 
the economy grows, income and tax receipts increase. This, in turn, 
leads to increased government spending (see figure 2).
    However, they argue that there is a useful, much more isolated 
proxy for overall government spending: defense spending. Using defense 
spending as a proxy has several advantages.\13\ First, government does 
not set defense spending levels based on the state of the economy. Non-
economic factors drive defense spending. Second, changes in defense 
spending are very large and include sharply positive and negative 
values (see figure 3). Finally, the historical data on defense spending 
covers periods of high unemployment. Thus this data set should reveal 
whether government spending creates increased economic growth in a 
slack economy.
  figure 3: changes in defense and non-defense government purchases, 
       1914-2006 (expressed as ratios to the previous year's gdp)


    Moreover, studying the effects of defense spending on the economy 
gives the best-case scenario of the spending-multiplier effect of 
government spending on the economy because defense spending leads to 
economic growth in ways that general government spending does not. For 
example, in times of war, the government mandates the increased 
production of particular goods, and the scarcity of domestic labor due 
to military enlistment and resources also forces economic resources to 
go to innovative and productive uses that did not exist before the 
war.\14\
    Barro and Redlick's research estimates that the multiplier for 
changes in defense spending that people think will be temporary--
spending for the Iraq war, for example--is between 0.4 and 0.5 at the 
time of the spending and between 0.6 and 0.7 over two years. If the 
change in defense spending becomes permanent, then these multipliers 
increase by 0.1 to 0.2.\15\ Over time, this is a maximum multiplier of 
0.9. Thus even in the government's best-case spending scenario, all of 
the estimated multipliers are significantly less than one. This means 
greater government spending crowds out other components of GDP, 
particularly investment.
    In addition, they calculate the impact on the economy if the 
government funds the spending with taxes. They find that the tax 
multiplier--the effect on GDP of an increase in taxes--is--1.1. This 
means that if the government raises taxes by $1, the economy will 
shrink by $1.1. When this tax multiplier is combined with the effects 
of the spending multiplier, the overall effect is negative. Barro and 
Redlick write that, ``Since the tax multiplier is larger in magnitude 
than the spending multipliers, our estimates imply that GDP declines in 
response to higher defense spending and correspondingly higher tax 
revenue.'' \16\ Thus, they conclude that greater government spending 
financed by tax increases hurts the economy.
                               more data
    Other economist have also calculated defense spending multipliers 
of less than or equal to 1.\17\ Economists Bob Hall and Susan Woodward 
recently examined spending increases from World War II and the Korean 
War and found that the government spending multiplier is about 1.\18\ 
Economist Valerie Ramey's work on how U.S. military spending influences 
GDP gives a multiplier estimate of 1.2 in the short term, but in the 
long term, she finds that consumer and business spending fall after a 
rise in government purchases, offsetting the initial effect of the 
government spending.\19\
    In a recent blog post over at Neighborhood Effects, my colleague 
Matt Mitchell reports on a number of peer-reviewed studies have also 
examined the relationship between government size, somehow measured, 
and economic growth.
    ``Here is a sample: Barro (1991 and 1989); Folster and Henrekson 
(2001); Romero-Avila and Strauch (2008); Afonso and Furceri (2008); 
Chobanov and Mladenova (2009); Roy (2009); and Bergh and Karlsson 
(2010). Each of these studies finds a strong, statistically 
significant, negative relationship between the size of government and 
economic growth.
    What about the short run? Here again the evidence seems weak at 
best. Consider new research by Harvard's Robert Barro and Charles 
Redlick. They find that for every dollar the government spends on the 
military (read: takes out of the private economy), the economy gains 
just 40 to 70 cents. Spending a dollar to obtain 40 to 70 cents does 
not a good deal make. Or consider another study by Harvard's Laruen 
Cohen, Joshua Coval and Christopher Malloy. They rely on the fact that 
the federal government tends to spend more money in districts whose 
congressional members are chairs of powerful committees than in 
districts whose members are just rank-and-file. They find that firms 
actually cut capital expenditures by 15 percent following the 
ascendency of a congressman to the chairmanship. Moreover, firms seem 
to scale back employment and experience declines in sales.'' \20\
                   job creating or just job shifting?
    It's obvious that the government can hire people. But how many of 
these jobs will be taken by people already working in the private 
sector? This is a statistic that desperately needs to be calculated. 
After all, if most stimulus jobs are taken by people just switching 
over from privately funded jobs to publicly funded ones, that hurts any 
short-run Keynesian stimulus effect. In fact, in the last year, some 
people have switched from private to public sector jobs. According to 
the Boston Globe, these people were willing to take a cut in pay 
because they valued the security and fringe benefits of a government 
job.\21\ Every worker who switches to a government job for the good 
benefits hurts the Keynesian story.
    In a 2007 paper, economists Quadrini and Trigari posed another 
important question: if a government routinely hires more workers during 
a recession, will the unemployed intentionally stay unemployed longer, 
in hopes of getting a good government job? \22\ Since government jobs 
and stimulus-funded Davis-Bacon prevailing wage jobs tend to have high 
wages and good benefits, there might be a strong incentive for 
unemployed workers to search a bit longer before settling for a 
private-sector job. In a simulation, Quadrini and Trigari found that 
when government spending stimulates the economy during a recession, it 
makes the typical recession worse. Many of the unemployed stay 
unemployed a few weeks longer, in the hopes of finding a high-paying, 
secure, stimulus-funded job. Common sense for an unemployed worker--
searching for the best job possible--means a longer recession for all 
of us. So the Quadrini/Trigari multiplier isn't just zero: It's 
negative, even in the short run.
    If stimulus jobs paid market wages rather than high Davis-Bacon 
wages, this would be less of a problem, but a problem it is.\23\ And 
it's a problem that only points in one direction: a smaller multiplier. 
Perhaps it won't push the short-run multiplier down to zero (or less 
than zero) but a multiplier between zero and one starts to sound much 
more plausible. And if that's the case, then fiscal ``stimulus'' grows 
the government at the cost of shrinking the private sector.
                          why does it matter?
    Getting the multiplier wrong has big consequences when 
understanding the effects of fiscal stimulus on the economy. The 
government uses multipliers to estimate the widely cited projections of 
unemployment, job creation, and economic output. In the time leading up 
to the passage of the ARRA, Council of Economic Advisors (CEA) 
economists Christina Romer and Jared Bernstein used spending 
multipliers greater than 1 to promote the economic effects of the 
fiscal stimulus package.\24\ In the months following the implementation 
of this package, the Congressional Budget Office (CBO) used estimates 
of a spending multiplier between 1.0 and 2.5,\25\ relying on 
macroeconomic models that ignore the possibility that the growth of the 
economy may be affecting the level of government spending and not the 
reverse.\26\ By extrapolating from these multipliers, CBO and CEA have 
made important projections about the effects of fiscal stimulus on the 
economy. These projections, however, have been largely wrong.
    For example, in their January 2009 report,\27\ Romer and Bernstein 
used multipliers of between 1.0 and 1.55 to determine the effect of the 
proposed stimulus spending (then $775 billion) would have on GDP and 
job creation. They assumed that each 1 percent increase in real GDP 
would create an additional 1 million jobs. Based on that assumption and 
their estimated spending multiplier, they estimated that the fiscal 
stimulus would create 3.5 million jobs by the end of 2010. While we 
cannot be certain how many jobs would have been lost or created without 
a stimulus package, we do know that since February 2009, 2.55 million 
jobs have been lost.\28\
                      the worst-possible stimulus
    Leaving the multiplier debate aside, there are other important 
reasons why the stimulus bill will have deleterious consequences for 
the economy. The Recovery Act took the form of increased government 
spending through federal and state bureaucracies, going to areas such 
as education, infrastructure, and energy spending.
    For months now then, the stimulus bill has routed the bulk of the 
stimulus money through various government bureaucracies. As economist 
Keith Hennessey explains, this spending will be ``inefficient--It will 
be inefficient in two senses. The spending represents the policy 
preferences of legislators (and all their ugly legislative deals and 
compromises), rather than the choices of hundreds of millions of 
Americans who presumably know better how they would like money spent on 
them. The spending will also be wasteful, and we are starting to see 
signs of this in the press.'' \29\
    The spending is also occurring very slowly. According to the 
recovery.org data, 16 months after the adoption of the Recovery Act, 
agencies, firms, and citizens spent some $190 billion in grants and 
contracts--that is a mere 60 percent of discretionary spending in the 
bill (highways, mass transit, energy efficiency, broadband, education, 
state aid).\30\ And only $20 billion in additional spending was 
reported during the last quarter of the 2010 for which the data is 
available. Congress has expended most of the $267 billion for set aside 
for entitlement spending (food stamps, unemployment, and Medicare 
refundable tax credits), but the bulk of that sum went to Medicaid 
spending, which flows to the states, not into the private economy. 
Spending in states defers, not mitigates, the economic impact of the 
recession. By extending unsustainable spending programs, this spending 
has simply prolonged the lag time until needed spending adjustments 
occur, not created jobs.
    Thus even if you believe that Keynesian aggregate demand theory is 
correct in saying increased government spending stimulates the 
economy--in this case of this ``stimulus,'' the spending is happening 
so slowly and inefficiently that it does not even meet the conditions 
for a Keynesian economic stimulus, regardless of whether you believe 
one would have worked in the first place.
    This spending may increase elements reported as part of GDP: 
increasing cash in people's pockets might produce some increase in 
consumer spending. Throwing more money at roads might lead to more 
investment. Bailing out the states will yield more state spending. But, 
unless you believe that federal spending magically conjures up 
purchasing power, the total GDP will remain unchanged, because the 
federal government has to borrow the stimulus money from either 
domestic or foreign sources. This borrowing in turn reduces other areas 
of demand and/or increases the net trade deficit. In the end, the 
stimulus spending does not increase total demand it just reshuffles it, 
leaving the economy just as weak--if not weaker because the national 
debt is higher--as before.
                             stimulus facts
    Using the tens of thousands of stimulus recipient reports published 
on recovery.gov each quarter and economic and political data from the 
Bureau of Labor Statistics, the Census Bureau, GovTrack.us, and others, 
I am writing a series of quarterly reports that put this aggregate 
information into a larger context.
    I am about to release the third of that series. Today I would like 
to highlight some preliminary findings based on this data. (The data 
and results presented here encompass the first quarter of the calendar 
year 2010 reports of Recovery Act contracts and grants only. The 
complete dataset used for this report will be available for download at 
Mercatus.org when the full report is released at the end of July 2010.)
    First, in the third quarter for which Recovery.gov reports are 
available, federal agencies awarded over 69,717 contracts and grants. 
Total spending reached over $192.2 billion. That is roughly $22 billion 
more reported received than in the previous quarter. At that rate, the 
government should be done awarding stimulus dollars by 2020. In other 
words, the money is being spent very slowly.
    Second, the total number of jobs the stimulus has created or saved 
is claimed to be 679,814. However, it is hard to know what these jobs 
represent since the administration recently changed how it counts jobs. 
According to the new rules, the administration no longer keeps a 
cumulative tally of jobs created and saved by the stimulus. Instead, it 
posts only a count of jobs for each quarter. Also, instead of counting 
only created and saved jobs, it counts any person who works on a 
project funded with stimulus money--even if that person never lost his 
or her original job.\31\
    These changes highlight the near impossibility of accounting for 
how many jobs were saved by the (expenditure or allocation of) stimulus 
funds, but what we do know from these numbers is that of the 679,814 
jobs reported created or saved, four times as many of these jobs were 
in the public rather than the private sector.
    Total jobs ``created or saved'' in public entities: 550,749
    Total jobs ``created or saved'' in private entities: 127,306
    Third, the average cost of each job created or saved is $282,000. 
However, the average cost per private sector job created or saved is 
over $647,000.
    Fourth, controlling for the percentage of the district employed in 
the construction industry, which is often used as a proxy for the 
vulnerability to recession of a district, the preliminary results find 
no statistical correlation between all relevant unemployment indicators 
and the allocation of funds. This preliminary result, which is similar 
to the ones in the two previous reports, suggests that unemployment, at 
least thus far, has not been the factor leading the awards. Also, I 
found no correlation between other economic indicators, such income, 
and stimulus funding. As the main argument for enacting the $787 
billion stimulus bill was that if government spends money where it is 
the most needed, that expenditure would create jobs and trigger 
economic growth, one would have expected the government would invest 
relatively more money in districts that have the highest unemployment 
rates and less money in districts with lower unemployment rates. Such 
does not appear to be the case.
                               conclusion
    The understandable temptation to take action in time of recession 
should not lead lawmakers to take counterproductive actions. Economists 
have shown that stimulus by government spending is not productive, and 
Barro and Redlick's data show that the CBO's multiplier overestimates 
the return on government spending almost by a factor of two.
    What's more, the stimulus's effect on job creation is unclear. Did 
it create productive jobs? Is the stimulus money simply funding public 
jobs for some who had jobs in the private sector but switched over for 
reasons of security? Is the stimulus simply funding pay raises that 
would have happened stimulus money or not? Is the stimulus money simply 
funding jobs that existed and were not at risk?
    Unfortunately, we cannot know. In fact, a recent report by the 
Government Accountability Office highlights that Recovery.gov is not 
transparent and the data displayed on it doesn't promote the 
transparency agenda of the Obama administration.\32\
    If stimulus funds are a bad investment, is there anything Congress 
can do to help the economy? A few years ago, Christina and David Romer 
looked at the impact of tax cuts on the economy and concluded that the 
tax multiplier is about three: a dollar of tax cuts raises GDP by about 
three dollars.\33\ Their finding suggests that the economy might get 
more bang for the buck with tax cuts rather than spending hikes.
                                endnotes
    \1\ Statistics from the Bureau of Labor Statistics National Current 
Employment Statistics survey at http://bls.gov. Job loss calculated by 
author using non-farm payroll employment change from December 2007 to 
June 2010.
    \2\ Randy Ilg, ``Long-Term Unemployment Experience of the 
Jobless,'' Issues in Labor Statistics, Summary 10-05 (2010).
    \3\ Author's calculation based on data from NIPA Table 1.1.6. Real 
Gross Domestic Product, Chained Dollars from the Bureau of Economic 
Analysis.
    \4\ Barack Obama, ``Address to Joint Session of Congress'' (speech, 
The United States Capitol, Washington, D.C., February 24, 2009), http:/
/www.whitehouse.gov/the--press--office/remarks-of-president-barack-
obama-address-to-joint-session-of-congress/.
    \5\ Christina Romer and Jared Bernstein, `` The Job Impact of the 
American Recovery and Reinvestment Plan'', news release, January 9, 
2009.
    \6\ Robert Barro, ``Government Spending Is No Free Lunch,'' Wall 
Street Journal, January 22, 2009, http://online.wsj.com/article/
SB123258618204604599.html.
    \7\ For estimates of multipliers greater than 1, see Marianne 
Baxter and Robert G. King, ``Fiscal Policy in General Equilibrium,'' 
American Economic Review 83, no. 3 (1993): 315--334; Christina Romer, 
Jared Bernstein, ``The Job Impact of the American Recovery and 
Reinvestment Plan,'' news release, January 10, 2009, and Andrew 
Mountford and Harald Uhlig, ``What are the Effects of Fiscal Policy 
Shocks'' (working paper no. 14551, National Bureau of Economic 
Research, December 2008).
    \8\ Murray Rothbard, ``Money and Its Purchasing Power,'' in Man, 
Economy and State, With Power and Market, http://mises.org/rothbard/
mes/chap11a.asp.
    \9\ Michael Woodford, ``Simple Analytics of the Government 
Expenditure Multiplier'' (working paper, Columbia University, January 
27, 2010), 43, http://www.columbia.edu/?mw2230/G--ASSA.pdf.
    \10\ Another way to think of this is that there is something wrong 
with the price system. To learn more about why this is not the case in 
a world with rational actors, see Robert Barro, ``Long-term 
contracting, sticky prices, and monetary policy,'' Journal of Monetary 
Economics 3, no. 3 (July 1977): 305--316.
    \11\ Robert Barro and Charles Redlick, ``Macroeconomic Effects from 
Government Purchases and Taxes'' (working paper, Mercatus Center at 
George Mason University, Arlington, VA, 2010).
    \12\ Zvi Hercowitz and Michel Strawczynski, ``Cyclical Ratcheting 
in Government Spending: Evidence from the OECD,'' The Review of 
Economics and Statistics 86, no. 1 (February 2004): 353--361 and 
Graciela L. Kaminsky, Carmen M. Reinhart, and Carlos A. Vegh, ``When It 
Rains, It Pours: Procyclical Capital Flows and Macroeconomic 
Policies,'' NBER Macroeconomics Annual 19, (2004): 11--53.
    \13\ The use of defense spending as an exogenous shock to study the 
effect of government spending has been explored in-depth in Roberto 
Perrotti, ``In Search of the Transmission Mechanism of Fiscal Policy,'' 
(working paper 13143, National Bureau of Economic Research). In 
addition, it has been used as an econometric tool to study the effects 
of fiscal stimulus on the economy in a number of studies. including 
Olivier Blanchard and Roberto Perotti, ``An Empirical Characterization 
of the Dynamic Effects of Changes in Government Spending,'' Quarterly 
Journal of Economics 107, no. 4 (November 2002): 1329--1368 and Miguel 
Almunia and others, ``From Great Depression to Great Credit Crisis: 
similarities, differences and lessons'' Economic Policy 25, no. 62 
(2010): 219--265, among others.
    \14\ Robert Barro and Charles Redlick, ``Macroeconomic Effects from 
Government Purchases and Taxes,'' 32.
    \15\ Ibid, 44.
    \16\ Ibid, 29.
    \17\ See Olivier Blanchard and Roberto Perotti, ``An Empirical 
Characterization of the Dynamic Effects of Changes in Government 
Spending and Taxes on Output,'' and Robert E. Hall, ``By How Much Does 
GDP Rise If the Government Buys More Output?'' Brookings Papers on 
Economic Activity, forthcoming.
    \18\ Bob Hall and Susan Woodward, ``Measuring the Effect of 
Infrastructure Spending on GDP,'' in Financial Crisis and Recession, 
http://woodwardhall.wordpress.com/2008/12/11/measuring-the-effect-of-
infrastructure-spending-on-gdp/.
    \19\ Valerie Ramey, ``Identifying Government Spending Shocks: It's 
All in the Timing,'' unpublished, University of California San Diego, 
October 2009.
    \20\ Matt Mitchell, ``Why This Isn't The Time to Worry that 
Government Is Spending Too Little,'' Neighborhood Effects, June 30 
2010. http://neighborhoodeffects.mercatus.org/2010/06/30/why-this-isnt-
a-time-to-worry-that-government-is-spending-too-little/
    \21\ Megan Woolhouse, ``Now hiring, your Uncle Sam,'' Boston Globe, 
May 30, 2009, http://www.boston.com/jobs/news/articles/2009/05/30/
unlike--rest--of--us--federal--government--is--hiring--a--lot/.
    \22\ Quadrini and Trigari, (2007) ``Public Employment and the 
Business Cycle,'' http://www-rcf.usc.edu/?quadrini/papers/
PublicEmployPap.pdf, later published in Economic Inquiry.
    \23\ Indeed, if government jobs paid market wages, then recessions 
would be a great time to build roads and hospitals at a much lower cost 
than usual: Taxpayers could save money, hiring employees who were 
waiting for the private-sector to improve.
    \24\ Christina Romer and Jared Bernstein, ``The Job Impact of the 
American Recovery and Reinvestment Plan,'' 12.
    \25\ Congressional Budget Office, Estimated Impact of the American 
Recovery and Reinvestment Act, January 2010 through March 2010 
(Washington, DC: Congressional Budget Office, May 2010), http://
www.cbo.gov/ftpdocs/115xx/doc11525/05-25-ARRA.pdf.
    \26\ Ibid, Appendix. For an example of models operating under 
similar assumptions, see R. C. Fair, ``Estimated Macroeconomic Effects 
of the U.S. Stimulus Bill,'' unpublished, Yale University, March 2010.
    \27\ Christina Romer and Jared Bernstein, The Job Impact of the 
American Recovery and Reinvestment Act (January 9, 2009), http://
otrans.3cdn.net/45593e8ecbd339d074--l3m6bt1te.pdf.
    \28\ Authors' calculations using data from the Bureau of Labor 
Statistics, Employment, Hours, and Earnings from the Current Employment 
Statistics Survey, total change in nonfarm payroll employment, January 
2009 to June 2010.
    \29\ Keith Hennessey, ``Will the Stimulus Come Too Late,'' June 3, 
2009. http://keithhennessey.com/2009/06/03/will-the-stimulus-come-too-
late/print/
    \30\ Congressional Budget Office, Implementation Lags of Fiscal 
Policy: http://www.cbo.gov/ftpdocs/102xx/doc10255/06-02-IMF.pdf
    \31\ For example: When Chrysler reported a $53 million contract to 
build 3,000 government vehicles last fall, it listed zero jobs because 
it used existing employees to fill the orders. But under the new rules, 
those workers would have counted. Also, now recipients can count pay 
raises as stimulus jobs as long as they are counted as fractions of a 
job
    \32\ Government Accountability office, ``Increasing the Public's 
Understanding of What Funds are being Spent on and What Outcomes are 
Expected,'' May 2010. http://www.gao.gov/highlights/d10581high.pdf full 
report: http://www.gao.gov/new.items/d10581.pdf
    \33\ Christina D. Romer and David H. Romer, ``The Macroeconomic 
Effects of Tax Changes: Estimates Based on a New Measure of Fiscal 
Shocks,'' (working paper, University of California--Berkeley, March 
2007), http://www.econ.berkeley.edu/?cromer/RomerDraft307.pdf.

    Chairman Spratt. Let's turn next to Dr. Bivens, and then we 
will put questions to the panel.
    Dr. Bivens.

                STATEMENT OF JOSH BIVENS, PH.D.

    Mr. Bivens. Thank you, I would like to thank the committee 
for the opportunity to testify today. I am Josh Bivens, an 
economist at the Economic Policy Institute here in Washington 
D.C.
    In assessing the American Recovery and Reinvestment Act, I 
want to make four arguments today, and I will try to make them 
very quickly, in my opening statement.
    First, it was badly needed. I think we can get through 
that. Most people agree the economy in late 2008 or early 2009 
was in a tough spot; something needed to be done.
    Second, contrary to a lot of criticism, it worked 
essentially as advertised. What was not advertised was the 
depth of the downturn, which was much more worse than people 
thought, and I would be happy to talk a little bit more about 
this in Q&A.
    Third, it was cheap. The sticker price of the Recovery Act 
was estimated at $787 billion when it was passed. It is often 
characterized as enormous. It was less than half as large as 
the tax cuts enacted during 2000; smaller than the cost of wars 
in Iraq and Afghanistan; and, most importantly, small relative 
to the economic shock it was meant to absorb.
    Further, because it spurred economic activity and tax 
collections reduced the need for safety net spending, its net 
budgetary income impact was probably less than half the 
headline figure.
    Lastly, despite the millions of jobs created or saved by 
the act, unemployment does sit at 9.5 percent today and will 
surely rise to over 10 percent again in the coming year. We 
should provide further fiscal support.
    Quickly, argument one, it was needed. People talked about 
this a lot. I just want to make one statement here. I mean, the 
negative shock to private-sector spending due to the bursting 
housing bubble was, by most macroeconomists' estimation, larger 
than the economic shock that led to the Great Depression. This 
was a once-in-a-generation economic shock facing the U.S. 
economy.
    By February 2009, the month that the Recovery Act was 
passed, the U.S. economy was losing 750,000 jobs per month, and 
this is crucial, even though the Federal Reserve had kept 
interest rates below 1 percent for the previous 21 months. This 
is crucial. This is why you needed something like the Recovery 
Act. The primary tool most people use or most people think 
should be used when the economy faces recession is to lower 
short-term interest rates. We had done that. Nothing had 
happened. The Fed was out of conventional ammunition. Something 
else had to be done.
    That is why economists like me, we don't argue for a 
stimulus package every 5 years or so or every time there is a 
hiccup in the economy; we argue for it when there is a once-in-
a-generation economic shock.
    Argument two is that it worked. I mean, the estimates of 
the Recovery Act were that it would create about 3 to 4 million 
jobs. If you look at private sector, macroeconomic forecasts, 
people whose salary relies on being closer to their competitors 
in forecasting economic trends, they are essentially unanimous 
that the Recovery Act will add 2 to 3 million jobs before it is 
over. The Congressional Budget Office concurs.
    This is firmly in line with what mainstream economic theory 
teaches is the effect of fiscal stimulus when interest rates 
are near zero. And the timing of the Recovery Act coincides 
perfectly with the halt in the downward spiral, both in 
economic output and unemployment.
    I will just give you one example, in the 6 months before 
the Act took effect, GDP contracted by almost 6 percent at an 
annualized rate. In the 6 months after, the economy grew at a 
slightly less than 1 percent annualized rate, and the growth 
has just gotten better since then.
    Argument three, it was cheap. It is clear the country faces 
real, long-run budget challenges. It is also equally clear that 
the Recovery Act adds almost nothing to those long-run budget 
challenges, and further fiscal support today would add very 
little to it. I mean, one example, if you are a true budget 
pessimist and you believe that the alternative fiscal scenario 
identified by CBO in their latest long-term budget outlook is 
the most likely future trajectory of deficits--I am not such a 
pessimist, but it is a pessimistic outlook--if you believe 
that, this would imply that the Recovery Act was responsible 
for about 1 percent of the long-run fiscal gap facing the 
country. The big drivers of the long-run fiscal gap are health 
care costs and revenue as a share of GDP, not the support we 
provided in response to the once-in-a-generation economic 
shock.
    Another issue besides its purely budgetary cost, which also 
was cheaper because the economic activity it spurred actually 
created more tax collections and reduced the need for public 
sector public safety net spending, its overall economic 
opportunity cost was low. And we know it was low because 
interest rates have not risen in any appreciable fashion since 
it was passed.
    For the people who say increased public-sector spending 
necessarily crowds out private spending, the mechanism through 
which that works has to be rising interest rates. If you don't 
see interest rates rise, you will not see crowding out of 
private-sector spending. Interest rates have not risen, so the 
overall crowd out of private-sector activity from the Recovery 
Act just hasn't happened.
    Also, one piece of evidence that the Recovery Act worked is 
actually that the turnaround in GDP was driven by a turnaround 
in consumer spending. Contrary to most presentations of the 
Recovery Act, that is what you should expect. Two-thirds of the 
act were not direct purchase of goods and services by the 
government; they were instead tax cuts and transfer payments to 
households to allow them to increase their consumer spending. 
So, that should be where you look for the footprint of the jobs 
and the economic activity created.
    Lastly, I will just wrap up quickly. Despite the 3 to 4 
million jobs the Recovery Act will create or save, today's 
economic situation remains unacceptable. We have got a 9.5 
percent unemployment rate, and the CBO says that even in 2013, 
the unemployment rate is going to average 6.3 percent, which is 
higher than the peak unemployment rate reached during the last 
recession. So that will be 6 years from the onset of the 
recession, we are still going to have an unemployment rate 
higher than the peak of the previous recession. That is 
unacceptable, and more support should be given to the economy.
    I will just note one thing, 30 months ago, Congress passed 
a $160 billion stimulus package, the Economic Stimulus Act of 
2008, to avoid the prospect of unemployment rising from 5 to 6 
percent. We now stand at 9.5 percent unemployment. Gross 
domestic product is lower today than when that act was passed 
30 months after the fact, and yet no further fiscal support to 
the economy seems to be forthcoming.
    I have tried to make the case that there is no compelling 
economic reason to think that anything has changed in the past 
30 months so as to make further fiscal support unwise. Fiscal 
support provided by the Recovery Act was needed. It was 
effective, and it was much cheaper than is commonly advertised, 
and further support is also clearly needed.
    Thank you, I would be happy to take your questions.
    [The prepared statement of Mr. Bivens follows:]

       Prepared Statement of Josh Bivens, Ph.D., Macroeconomist,
                       Economic Policy Institute

    Thank you Chairman Spratt and members of the committee for the 
opportunity to testify today. I am Josh Bivens, a macroeconomist at the 
Economic Policy Institute in Washington, DC.
    In assessing the economic impact of the American Recovery and 
Reinvestment Act (ARRA, the Recovery Act henceforth) there are 
essential four arguments I'd like to make today:
     First, the Recovery Act was needed, and badly. The 
American economy at the end of 2008 and the beginning of 2009 was 
essentially in freefall and all other policy tools that had been tried 
had little effect in arresting the decline.
     Second, it worked as advertised. It has created almost 5 
million full-time equivalent jobs and kept the unemployment rate from 
sitting well over 11% today. Unfortunately, the economic crisis that it 
was meant to address called for much stronger medicine than the 
Recovery Act by itself could provide.
     Third, it was cheap. While the sticker-price of the 
Recovery Act (estimated at $787 billion when passed) is often 
characterized in press accounts as enormous, it was less than half as 
large as the full-cost of the tax cuts enacted during the 2000s, 
smaller than the cost of wars in Iraq and Afghanistan, and, most 
importantly, small relative to the economic shock it was meant to 
absorb. Further, because it spurred economic activity and tax 
collections and reduced the need for safety net spending, its net 
budgetary impact was likely less than half the $787 billion amount.
     Fourth, lessons learned from the passage of the Recovery 
Act should be heeded: More fiscal support should be provided to prop up 
the economy and spur a genuine recovery in the jobs-market. While the 
Recovery Act worked as advertised and the economy today would be worse 
off if it had not been passed, unemployment still sits at 9.5% today 
and will surely rise above 10% over the coming year, returning to pre-
recession levels only several years from now unless more fiscal support 
is provided.
                             it was needed
    The root of the current recession is simple to identify: the 
bursting of the housing bubble and its fallout. Between 1997 and 2006, 
the real price of homes in the U.S. economy, which had been roughly 
flat for many decades, almost doubled. Given that the stock of housing 
in the U.S. is enormous, this led to a huge increase in wealth. Because 
so few influential economists correctly pointed out that this wealth 
increase was sure to be ephemeral, U.S. households began borrowing 
against the value of their homes to support current consumption. When 
the housing bubble popped, these same households realized that meeting 
long-run wealth targets (planning for retirement or sending their kids 
to college) could no longer be financed out of rising housing wealth, 
so they began saving. As households began saving, businesses, seeing a 
threat to new sales, stopped investing to expand their own capacity.
    This negative shock to private sector spending was enormous--
between the end of 2006 and the beginning of 2009, the private sector 
went from borrowing 3.6% of GDP to saving 5.6% of GDP. This 9.2% swing 
in private sector spending was a larger economic shock than the one 
that led to the Great Depression. Figure A below shows two concrete 
measures of this fallout: mortgage equity withdrawals that allowed 
households to extract wealth out of their homes and increase their 
purchasing and residential investment--the economic activity generated 
by the act of building homes. Both are expressed as shares of GDP, both 
soared during the housing bubble, and both collapsed when this bubble 
burst.


    Luckily, the U.S. economy is different now than compared to the 
1930s. In particular, today's economy has a larger public sector and 
one that contains many ``automatic stabilizers''--including progressive 
tax collections that fall more rapidly than private sector incomes and 
safety net spending (like unemployment insurance and food stamps and 
Medicaid) that provides increased transfers to households when the 
economy slows. These automatic stabilizers kicked in as private 
spending slowed. This led to a purely mechanical rise in the deficit--
roughly $329 billion of the increase in the deficit between 2007 and 
2009 can in fact be attributed to this purely mechanical effect of 
automatic stabilizers, according to the Congressional Budget Office.
    And this large increase in the deficit was a very good thing. The 
increase in public spending power leaned hard against the rapid decline 
in private spending power, and contributed to keeping the economy from 
entering another Depression.
    Of course, the increase in the deficit was not the only thing that 
helped support the economy--at the same time the Federal Reserve was 
aggressively fighting the downturn by cutting interest rates and 
supplying liquidity to the financial sector.
    Still, automatic stabilizers and Federal Reserve action were not 
enough to forestall a rapid economic deterioration. By February 2009, 
the economy had seen monthly job-loss that averaged 653,000 in each of 
the past 6 months, despite the fact that the short-term interest rates 
controlled by the Federal Reserve had been below 1% for 21 months.
    When an economy continues to spiral downward even when the monetary 
authority has reached the limit of what conventional policy can do to 
arrest the fall, it is often referred to as a liquidity trap. 
Essentially, the economy ``needs'' short-term interest rates that are 
steeply negative in order to boost business investment and consumer 
spending on durables sufficiently to exit the recession. But, interest 
rates cannot go below zero. Even worse, as the economy suffers from a 
dearth of spending, this creates pressure for disinflation--as firms 
cannot sell output and new jobs are scarce, prices and wages are all-
but-impossible to raise. This disinflation actually raises the 
``real'', or inflation-adjusted, interest rates facing businesses and 
consumers, even as the Fed's control over nominal rates is bound at 
zero.
    In short, because the primary tool that national policymakers use 
to fight recessions--lowering short-term interest rates--had been 
rendered ineffective, something else had to be done. This something was 
the Recovery Act, a deficit-financed combination of a roughly equal 
measure of tax cuts, transfer payments and direct government grants to 
support demand for goods and services and blunt the recession.
    It should be remembered that the size and composition of the 
Recovery Act was a compromise. Many, including myself, thought the 
overall size of the package would be too small to bring the economy 
back to recovery without further action. Many (also including myself) 
also thought tax cuts had too large a weight in the final package and 
that many of them (particularly the fix to the alternative minimum tax, 
or AMT) were ill-suited for short-term stimulus. Because of these 
compromises on the size and composition of the Act, many believed that 
it would not be sufficient by itself to provide the economic boost 
needed to the get the American job-market back to health in an 
acceptably rapid time-frame.
    All this said, passage of the Recovery Act was a serious response 
to the nation's economic crisis, and even with its somewhat-compromised 
composition, its forecasted impact was large--the best estimates were 
that it would create between 2-4 million jobs and boost GDP by roughly 
5% over the first 2 years of its implementation.
                               it worked
    And this estimate has been spot-on. For those most convinced by 
appeals to authority let's start with what private sector macroeconomic 
forecasters say about the Recovery Act. These are, remember, people 
whose salary relies on being closer than their competitors in 
forecasting economic trends. As a group, they are in near-universal 
agreement that the Recovery Act added roughly 3 percent to GDP by the 
end of June and that it created or saved between 2-3 million jobs. The 
non-partisan Congressional Budget Office (CBO) concurs, calculating 
that the Recovery Act contributed between $240 billion to $645 billion 
to the economy by the end of June, creating or saving up to 5.3 million 
full-time equivalent jobs and keeping the unemployment rate up to 2 
points lower than it would have been in the absence of the act.
    There are a number of factors that explain the near-unanimity among 
forecasters who have examined the impact of ARRA.
    First, it is firmly in line with what mainstream economic theory 
teaches is the likely effect of deficit-financed tax cuts, transfers 
and spending in an economy that has high unemployment even in the 
presence of rock-bottom interest rates (i.e., is in a liquidity trap). 
The effect of increasing deficits to finance tax cuts, transfers and 
spending in a healthy economy is ambiguous and there are many 
complications to assessing it. However, in a liquidity trap these 
complications fade away and the impact of these policy maneuvers become 
quite straightforward; they unambiguously push the economy closer to 
its potential, lowering the unemployment rate.
    Second, the timing of the Recovery Act coincides perfectly with the 
halt in the downward spiral of both economic output and employment.\1\ 
In the 6 months before the Act began paying out funds, gross domestic 
product contracted at a -5.9% annualized rate while in the 6 months 
after its passage the economy grew at a 0.75% annualized rate. In the 
first 3 months of 2010 it grew at an annualized rate of 2.7%. In the 6 
months before the Recovery Act took effect, average monthly employment 
declined by 653,000 while in the 6 months after its passage it average 
declines fell nearly in half to 369,000. In the first 6 months of this 
year average monthly employment has actually grown by 147,000. Figures 
B and C present growth in GDP and employment, respectively, in the 
periods before and after the onset of Recovery Act spending. The 
pattern is clear--the downward spiral is stopped and even reversed 
almost immediately after the onset of the Act.
---------------------------------------------------------------------------
    \1\ In what follows I date the effect of the Recovery Act as 
beginning April 1, 2009. While it was passed in late February and some 
money was spent before this, April 2009 is the first month that saw 
significant amounts of money being spent.


    Third, the turnaround in GDP growth between the 6 months before and 
the 6 months after the passage of the Recovery Act was driven 
predominantly by a reversal in consumer spending. This portion of GDP 
(accounting for almost 70% of the total) contracted by -1.25% in the 6 
months before the Act and actually grew by 0.95% in the six months 
after the Act's passage. Contrary to most descriptions of the Recovery 
Act, this is actually exactly what one would have expected if it was 
working. Two-thirds of the Act's provisions (the tax cuts and transfer 
payments) go directly to boosting the purchasing power of households, 
not in directly purchasing goods and services for the government. This 
boost to household disposable income helped to arrest the steep fall in 
consumer spending.\2\ Figure D shows the before and after Recovery Act 
comparisons of consumption spending.
---------------------------------------------------------------------------
    \2\ See the appendix to this report for evidence that the Recovery 
Act actually has not led to outsized growth in government expenditures.


    If one looks at total personal incomes (wages, profits, rental 
payments) and strips out the influence of government transfers, one can 
get a decent proxy for how robustly the private sector is generating 
income growth for households. This measure, personal income minus 
transfers, fell by 7.5% from peak to trough during the recession--the 
largest decline since World War II. Yet, consumer spending fell by less 
than a third as much--less than 2%. The wedge between these two can 
largely be explained by looking at personal disposable incomes--incomes 
after-taxes and after-transfers. This measure actually never fell more 
than 2.2% peak-to-trough during the recession and is actually a bit 
higher today than it was immediately before the recession. This is 
largely due to the Recovery Act, though some of this is also the 
automatic stabilizers mentioned earlier. Figure E shows each of these 
series in the period before and after the recession began, with each 
normalized at 100 in the last quarter before the recession hit.


    This evidence--the preponderance of opinion of macroeconomic 
forecasters, the timing of the Recovery Act taking effect and the 
reversal of the downward spiral in the middle of 2009, and the very 
large footprint of the Recovery Act provisions on personal disposable 
income and its correlation with consumer spending--adds up to an 
overwhelming case that the Recovery Act worked as advertised.
    Essentially, without it, GDP would be $600 billion lower today, 
there would 3 million fewer jobs in the economy, and the unemployment 
rate would be nearly 2% higher even with fewer Americans in the labor 
force. While there remains much to be done to make sure that all 
Americans looking for a job have a decent chance of finding one, it is 
clear that we would be digging out of a much deeper hole today had the 
Recovery Act not passed.
                              it was cheap
    Besides a general misunderstanding about its effectiveness, the 
primary resistance to providing more fiscal stimulus to today's 
economy, even in the face of historically high unemployment, is 
concerns about the federal budget deficit. This section will argue that 
in the context of the nation's actual challenge concerning the national 
debt--budget deficits that are forecast to rise in coming decades even 
during periods of healthy economic growth--the costs of the Recovery 
Act and further fiscal support to the economy are minimal. It further 
argues that a broader view of the Act's costs--not just its cost in 
terms of the federal budget but in terms of overall economic 
opportunity costs--show that these costs are actually negative; that is 
the Act resulted in greater, not less, private investment and 
employment.
    It is clear that the country faces long-run budget challenges that 
will require policy action in coming decades. A close look at the 
economics, however, shows that these budget challenges have nothing to 
do with the Recovery Act that was passed nor would they be appreciably 
exacerbated at all if more fiscal support was provided to the economy 
today.
    For example, the Recovery Act added between 0.1 to 0.2% to the 
long-run (50-year) fiscal gap.\3\ If one is a true budget pessimist and 
believes that the alternative fiscal scenario identified by CBO in 
their latest report on the long-run budget outlook is a good forecast 
of the most likely trajectory of deficits (I'm not, for the record, 
such a pessimist) then this would imply that the Recovery Act was 
responsible for less than about 1-2% of the long-run fiscal gap facing 
the country.
---------------------------------------------------------------------------
    \3\ The fiscal gap is a short-hand measure of the long-run fiscal 
imbalance. Essentially, it tells one how much some combination of tax 
increases and/or spending cuts (expressed as a share of GDP, enacted 
immediately, would be needed to close the long-run budget deficits.
---------------------------------------------------------------------------
    The reason for this non-effect of the Recovery Act on long-run 
budget challenges is simple: the Act is temporary and the main drivers 
of long-run deficits remain rising health care costs and low revenues 
as a share of GDP.
    Another reason why the Recovery Act was cheap (and why further 
fiscal action aimed at spurring the economy would be cheap) is that its 
headline cost ($787 billion in the case of Recovery Act) is actual far 
greater than its actual net impact on the budget deficit. Because the 
Recovery Act saved jobs and wage incomes, it generated new tax revenue. 
And because it kept people working, it kept them out of public safety 
net programs.
    Say that the overall multiplier of the Recovery Act was 1.25--this 
is the boost to total GDP per dollar increase in the deficit. The more 
effective parts of the Act (extensions of unemployment insurance and 
other safety net programs and investments in the nation's 
infrastructure and aid to fiscally strapped state and local 
governments) actually have multipliers significantly higher than this, 
but because the Recovery Act also included items like the AMT fix that 
provided very little bang-for-buck, the overall multiplier was lower. 
Given a multiplier of 1.25, the $600 billion in Recovery Act spending 
that is set to occur before the end of calendar year 2010 will result 
in GDP that is higher by roughly $750 billion by the end of this year.
    Other data from the Congressional Budget Office suggests that each 
$1 increase in GDP relative to potential yields a $0.35 decrease in the 
deficit as revenues rise and spending falls. Multiplying the $750 
billion in extra output by this $0.35 indicates that the economic 
activity spurred by the Recovery Act actually recoups just under $330 
billion--more than half the headline price tag of $600 billion. In 
short, well-designed policies aimed at spurring economic activity come 
with a built-in and significant offset to their total costs.
    This exercise also drives home the importance of designing stimulus 
packages well. Take the high and low-end of Recovery Act provisions in 
terms of bang-for-buck provided by Moody's Economy.com. If the entire 
Act consisted of provisions with a bang-for-buck as low as that 
provided by corporate tax cuts or providing the opportunity of 
businesses to ``carryback'' past losses against future taxes, the 
budget offset provided by the act would be less than $80 billion. If 
instead the entire Act consisted of provisions with bang-for-buck 
comparable to safety net expansions and infrastructure spending, the 
budget offset approaches $400 billion. Simple design of stimulus 
packages can make their final impact on the deficit differ by literally 
hundreds of billions of dollars. Besides just not providing effective 
stimulus, the less well-designed parts of the Act should have been 
excluded on the basis of fiscal responsibility.
    It has been rightly pointed out by some that one could overstate 
the degree to which additional support would provide built-in offsets 
to its net addition the national debt. In a given year, it is highly 
unlikely that economic multipliers are large enough to allow additional 
fiscal support to be entirely self-financing. Because of this, many 
commentators have warned against supporters of more support engaging in 
hyperbole similar to that of supply-side tax advocates who claim that 
cutting tax rates can spur enough economic activity to bring in 
sufficient additional revenue so as to make these rate-cuts self-
financing.
    While this caution may be useful, it should be made clear that the 
case for full self-financing over time of temporary fiscal support in 
an economy stuck in a liquidity trap is actually not totally 
implausible, while the prospect of self-financing permanent cuts in tax 
rates is indeed totally implausible.
    If fiscal support pushes the economy back to levels of GDP that are 
characterized by full-employment much quicker than in the absence of 
this support, then it is indeed possible for it to be all-but-totally 
self-financing. The economists' jargon for this is avoiding hysteresis 
in labor and product markets, but the insight is pretty simple--if 
fiscal support generates additional economic activity not only in the 
year of its implementation but also allows the economy to much more 
quickly reach its potential--this represents multiple years of 
additional revenue and less safety net spending and could indeed lower 
overall ratios of debts and deficits to GDP.
    How likely such a full offset is depends largely on how effectively 
the fiscal support is structured and how much time it shaves off the 
wait for the economy to regain its potential. Given that many of the 
mechanisms that tend to push recessed economies back to trend levels 
seem weak or inoperative in the current economy, it seems quite likely 
to me that the net fiscal cost of particularly well-structured fiscal 
support is essentially zero over the medium and long-term. And it is 
budget deficits over this medium and long-term which are forecast to 
rise even during times of healthy economic growth that are the proper 
focus of concern.
    Besides having a minimal impact on the stock of outstanding 
national debt, the Recovery Act was financed in an economic context of 
historically low long-term interest rates for government debt. These 
low rates are no fluke--they are low precisely because private spending 
and borrowing is at historic lows (i.e., the recession). Further fiscal 
support could also be financed at very low rates, as excess capacity 
and little competition for loanable funds continues to characterize the 
economy. Additionally, upward interest rate pressure stemming from 
Federal Reserve actions is extremely unlikely, given both the weakness 
of the overall economy and their stated intention to keep rates low 
until the economy has begun a robust recovery.
    While low interest rates contribute much to the relative cheapness 
of the Recovery Act, they also provide the clearest indication that the 
Act is also cheap in its broader economic opportunity costs. The most 
well-pedigreed argument against increasing budget deficits in healthy 
economies is the fear that increased government borrowing causes 
interest rates to rise as public demand competes with private demand 
for fixed savings of households and businesses. These rising interest 
rates spurred by growing deficits results in private investment 
``crowding out'' private capital formation and the lower value of the 
private capital stock leads to lower future growth. When economic 
commentators make arguments disparaging the ability of the Recovery Act 
(or government spending of any kind) to create jobs, they generally 
make variants of this crowding-out argument.
    The general failure of interest rates to rise in response to the 
increase in budget deficits, and to the Recovery Act in particular, is 
a prime piece of evidence that no crowding out of private investment is 
occurring, making the Recovery Act not just cheap, but essentially free 
in terms of its overall economic opportunity cost.\4\ This is, again, 
not unexpected. Economic theory teaches that increased public borrowing 
during a liquidity trap does not crowd-out private sector activity. 
Figure F shows the relationship between deficits, interest rates and 
recessions. It shows clearly that during recessions deficits rise (both 
due to automatic stabilizers as well as policy responses) while 
interest rates fall (in part due to Federal Reserve efforts to fight 
the recession but also because private demand for new loanable funds 
fall). Figure G shows that corporate demand for new debt has fallen so 
much since the latest recession began that essentially all new desired 
corporate investments could be financed out of internal funds--in the 
jargon, the corporate ``financing gap'' has turned negative.
---------------------------------------------------------------------------
    \4\ There is an additional channel through which increasing federal 
budget deficits in a healthy economy can lead to slower domestic income 
growth--if the increased borrowing spurred by them leads to greater 
borrowing from foreign investors. Very few (if any) detractors of the 
Recovery Act have made the argument that this has happened--and 
correctly so. The mechanism for this channel to work would have to be a 
rise in the trade deficit. But, the trade deficit fell significantly 
over the course of this recession.


    It is worth stressing this ``crowding out'' mechanism, given that 
many Recovery Act detractors have pointed to very low rates of overall 
investment as some sign that private activity is being stunted by 
increased public sector activity. The textbook presentation of the 
effects of fiscal policy requires higher interest rates as the 
mechanism through which private investment may be stunted by increased 
public borrowing in a healthy economy. Without the rise in interest 
rates, there is no way to link increased public borrowing and lower 
private investment.
    Some commentators, having neither theory nor evidence on their side 
in making the argument that increased public spending must by 
definition reduce private spending, have done the economic equivalent 
of banging the table--insisting that vague concerns about 
``uncertainty'' spurred by the economic policy actions of the 
administration explain the reduction in private investment. This is 
supremely unconvincing, for a few reasons.
    First, there is no particular reason to think that private 
investment is actually abnormally low at the moment. Numerous academic 
studies suggest that the prime determinant of private investment is in 
fact the simple state of the economy. Given that we are just emerging 
from the steepest and longest recession in post World War II history, 
it is far from surprising that investment spending is low.
    Further, the capacity utilization rate (think of this as the 
employment rate of factories instead of people) reached historic lows 
in the past year. With current capacity far from being fully utilized, 
why would businesses seek to spend money to build more of this 
capacity? Finally, it should be remembered that investment in 
structures, both residential and non-residential, is an important 
component (just under half) of overall investment. Given the massive 
overbuilding in the residential housing sector for the past decade and 
the sharply rising vacancy rates in commercial real estate, it is again 
hard to imagine why businesses would seek to expand investments in 
structures. Figure H demonstrates the tight relationship between 
capacity utilization and investment as a share of GDP.


    Second, there is very little evidence that economic uncertainty of 
any kind provides a the kind of sharp shock to private investment that 
would explain the very large fall-off in investment that characterized 
the worst phases of the last recession.\5\
---------------------------------------------------------------------------
    \5\ See Bachman, Elstner and Sims (2010) for the very low short-run 
impacts of business uncertainty on investment.
---------------------------------------------------------------------------
    Lastly, given that overall economic activity is a prime determinant 
of private investment and that the Recovery Act assuredly spurred 
greater activity, it is very likely that the Recovery Act actually 
``crowded in'' private investment--actually made the fall-off in 
private investment less steep that it would have been absent the Act's 
effects. Evidence for this can be seen in a number of papers that find 
very large multiplier effects of fiscal support when an economy is a 
liquidity trap.\6\
---------------------------------------------------------------------------
    \6\ See Eggerston (2010), Woodford (2009) and Hall (2009) for 
representatives of this finding.
---------------------------------------------------------------------------
                         it should be repeated
    So, while the Recovery Act saved the U.S. economy from a worse 
economic fate--today's economic fate is still poor. Today's 
unemployment rate stands at 9.5% and a series of economic overhangs--
the overhang of average hours decline, the overhang of the ``missing 
labor force'' (the 2 million workers who withdrew from the labor force 
since the recession began and who will certainly return looking for 
work in coming years), and the overhang of business and consumer debt 
that will keep spending in both sectors cautious in coming years--mean 
that, absent further support to the economy, it will take an 
agonizingly long time to bring it down to levels seen before the 
recession began. For example, the Congressional Budget Office (CBO) has 
forecast the unemployment rate will average 6.3% in 2013--this is 
higher than the peak rate reached during the recession and jobless 
recovery in the early 2000s recession. Figure I presents the simplest 
presentation of the current state of the labor market, documenting how 
many jobs are needed to return the unemployment rate even to its rather 
undistinguished level of December 2007.


    Further, even this grim forecast for unemployment assumes the 
economy grows consistently in the next couple of years. Given recent 
headwinds that have picked up steam in the past few months, even this 
cannot be assured. The most recent monthly employment situation 
demonstrated that the pace of private-sector hiring has decelerated and 
wages actually fell in inflation-adjusted terms. State and local 
spending has actually contracted in each of the past 3 quarters--only 
the 4th time in the post-war period that this has happened.\7\ Given 
that state and local budget holes look set to widen in coming years, 
this means that this important sector will be dragging on growth for 
quite some time. Lastly, many of the major trading partners of the 
United States have embraced fiscal austerity; this means that net 
exports will not be a source of strength moving forward either.
---------------------------------------------------------------------------
    \7\ See the appendix for evidence on the poor performance of state 
and local spending since the recession began.
---------------------------------------------------------------------------
    Economic data in the form of rapidly decelerating prices and wages 
is also sending strong signals that excess capacity in the economy is 
threatening to grow again. Essentially all indicators of overall price 
pressure in the economy show rapidly decelerating price growth, and 
several show outright deflation (falling prices) in recent months. 
Figure J shows one of the most reliable and well-measured of these 
series--the market-based deflator for personal consumption expenditures 
excluding food and energy. This is not only a symptom of poor economic 
performance, this disinflation also causes real interest rates to rise 
just when we want them to fall. In short, this disinflation not only 
signals slower growth, it also adds to the growth headwinds facing the 
economy.


    Perhaps most distressing, the boost to growth provided by the 
Recovery Act is actually fading--and fast. The current quarter (the 
third quarter of 2010) is probably the last time the Act will 
contribute 1% to annualized GDP growth. By the last quarter of this 
year, it will be contributing next to nothing. Given that GDP growth in 
the past 3 quarters would have likely been zero without the influence 
of Recovery Act spending--it seems clear that more support is needed to 
provide the bridge to the period where private incomes and spending can 
generate economic growth on their own.
                               conclusion
    The Recovery Act worked just as advertised, creating nearly 5 
million full-time equivalent jobs in the economy when such growth was 
desperately needed. However, the bulk of its effect has passed--and 
millions of jobs remain desperately needed.
    It seems amazing now, but 30 months ago Congress acted quickly to 
pass a $160 billion stimulus package to avoid the prospect of 
unemployment rising from 5 to 6%. The unemployment rate now stands at 
9.5% and further fiscal support does not seem to be forthcoming. This 
testimony tried to make the case that there is no economic reason to 
believe things have so changed in the past 30 months as to make further 
fiscal support unwise.
    The fiscal support provided by the Recovery Act was needed, 
effective, and cheap. Further support is clearly needed and, if 
structured well, could be very effective and cheap as well.
                               references
Bachmann, Ruediger and Steffen Elstner and Eric Sims (2010). 
        ``Uncertainty and Economic Activity: Evidence from Business 
        Survey Data''. Working Paper.
Eggerston, Gauti (2009). ``What fiscal policy is effective at zero 
        interest rates?'' Federal Reserve Bank of New York Staff 
        Report, No. 402, November 2009
Hall, Robert (2009). ``By How Much Does GDP Rise if the Government Buys 
        More Output?'' Brookings Papers on Economic Activity, 2009, 2, 
        pp. 183-231
Woodford, Michael (2009). ``Simple Analytics of the Government 
        Expenditure Multiplier''. Working Paper. Columbia University.
                                appendix
    A common misunderstanding of the Recovery Act is that it has led to 
a ``flood of government spending''. In fact, federal non-defense 
spending has actually grown essentially exactly in line with historical 
averages following recessions. Figure A1 below shows the growth of 
federal spending in this recession (solid black line) compared to the 
average growth following recessions in all business cycles since World 
War II (dashed line). The figure also shows (shaded gray areas) the 
highest and lowest episodes of federal non-defense spending. The clear 
takeaway from this figure is that there has been no historic ``flood'' 
of federal government spending following the onset of the most recent 
recession.
    Figure A2 shows that there also has been no flood of state and 
local spending. Even with the significant support provided to state 
governments through the Recovery Act, state and local spending has 
actually been at near-lows relative to other business cycles.



    Chairman Spratt. Thank you very much.
    Mr. Hensarling.
    Mr. Hensarling. Thank you, Mr. Chairman.
    Dr. Bivens, I have no doubt you have stellar economic 
credentials. I think your marketing skills are going to, 
unfortunately, need a little polish here. You have got a very 
great challenge in front of you trying to convince the American 
people that this act has worked largely as advertised, because 
what I heard the President of the United States say was that, 
if we pass this, then we weren't going to have unemployment 
exceed 8 percent, and we are still hovering around almost 
double-digit unemployment.
    I think you know that the underemployment figures are even 
worse. And, frankly, if it wasn't for our fellow citizens 
giving up ever finding employment and leaving the labor force, 
the unemployment rate would be even larger.
    When you said it was cheap, with the interest factor at 
$1.2 trillion, I hope I am never in this town so long that I 
can conclude that $1.2 trillion is cheap.
    I have got to tell you, I have tried to study this as close 
as I can. I don't have a Ph.D. in economics. I have an 
undergraduate degree in economics.
    I have no idea where the citation of these 3 million jobs 
created or saved comes from. It certainly is not reflected in 
the President's own Department of Labor data. I just have no--I 
hear the number repeated. I think some people think if they 
repeat it often enough, somebody will believe it. I don't think 
the American people are believing it.
    So, again, you have got a bit of a challenge there, as do 
other proponents. What I, again, what I see all over my part of 
America is people who are still struggling trying to see what 
good this has done.
    Dr. de Rugy, is that how I pronounce it?
    Ms. de Rugy. Yes.
    Mr. Hensarling. Is that close enough? Sorry.
    Ms. de Rugy. Close enough.
    Mr. Hensarling. Sorry. I didn't see it in your testimony, 
but someone had told me that you had studied the Japanese 
experience with their ``lost decade.'' We all know that they 
faced a similar real estate bubble burst. Theirs was 
commercial; ours, unfortunately, may still yet be commercial, 
but it has started out as residential.
    Have you studied their experience with various stimulus 
plans?
    Ms. de Rugy. Well, I mean, I have looked at the aggregate 
history of Japan and that area, and they had a different 
stimulus bill. And they spent a gigantic amount of money, and 
pretty much all they have to show for this is very nice roads--
I will concede that--but a pile of debt that won't go away and 
pretty much no economic growth. This is why it is called the 
``lost decade.''
    Mr. Hensarling. Aren't we really working in Japan on the 
second lost decade now?
    Ms. de Rugy. Yes.
    Mr. Hensarling. I mean, they essentially had flat economic 
growth for 15, 16 years now.
    Ms. de Rugy. Yes, probably. But they themselves call it the 
``lost decade.'' And so, they are not just labeled by 
Americans. They have had--they have tried stimulus. It has been 
a gigantic amount of money. They have massive amount of debt, 
way more----
    Mr. Hensarling. Don't they have the largest, I believe, the 
largest debt per capita of any industrialized nation in the 
world?
    Ms. de Rugy. Yes.
    Mr. Hensarling. And isn't it also true, as they embarked 
upon this stimulus mania that they have gone, I believe, from 
the second highest per capita GDP to, I believe, tenth? Do you 
know the data?
    Ms. de Rugy. I don't know. I mean, I can't remember exactly 
what their ranking is, but, I mean, not growing will do that to 
your economy. You will be passed by a lot of countries.
    And by the way, I come from France. I have a lot of 
experience, firsthand, of what government spending does to a 
country, and I would like to not see this happen to America.
    In the last 10 years, France, which is a bigger country 
than the U.K., has actually seen not only the U.K. pass them by 
in terms of income per capita, but also for GDP overall, and 
that is because the size of the French government has been 
gigantic for many years.
    Mr. Hensarling. Speaking of the size of government, can I 
have chart number 5, please?
    Doctor, did I hear you in your testimony say that, 
according to your analysis, at least of the jobs that actually 
appear in the hard data, that four out of five of these are 
government jobs; is that correct?
    Ms. de Rugy. Yes, that is correct.
    Mr. Hensarling. Which, to some extent, may help account for 
the increase of 400,000 jobs since the stimulus act was passed 
versus the 2.6 million that have been lost in the private 
sector?
    Ms. de Rugy. Yes.
    Mr. Hensarling. And did I also understand you say that, 
according to your analysis--I don't have that portion of your 
testimony.
    Ms. de Rugy. Can I add something about this?
    Mr. Hensarling. Please.
    Ms. de Rugy. This morning, I read actually an academic 
peer-reviewed study that actually looked at a selection of 
countries, OECD countries, and they looked at data for 40 
years, and they looked at the impact of increasing public 
employment that it would have, the impact on unemployment 
rates, and what they find--and this is, again, peer-reviewed 
articles, and I am happy to send it to everyone if you want it.
    What they show is that for every hundred jobs of government 
jobs created, the private sector lost 150 jobs.
    They also have this data point which means the more the 
private sector grows--the public sector grows, you can 
basically track for 100, you have 33 percent increase in 
unemployment rate.
    I mean, these, it has consequences. It is not one job for 
one job. It is not like, well, it is okay; you lose a job in 
the private sector, and you gain a job in the public sector.
    In fact, what this study shows is that actually when you 
gain a job in the public sector, you lose more than one job in 
the private sector.
    Mr. Hensarling. Just a couple of more questions, and then I 
will yield back. I don't have the quote right in front of me, 
but recently it got a fair amount of national air play when 
Speaker Pelosi said, and I hope I do the quote justice, that 
one of the best ways to create jobs is to send out more 
unemployment checks. And, again, I don't quite have the quote 
at my fingertips. I hope--I believe that to be a fair 
representation of what the Speaker said.
    Are you familiar with her comments? And in your studies as 
a professional economist, how valid of an economic theory do 
you believe that to be?
    Ms. de Rugy. What the American people who are unemployed 
need more than anything else is a job, and it is not until we 
get these people a job, a sustainable job, one that doesn't 
rely on the Federal Government keeping, pumping money in the 
economy----
    Mr. Hensarling. So, unemployment checks financed with more 
national debt does not sustain long-term paychecks?
    Ms. de Rugy. Well, it doesn't, and I understand that this 
is relief for the people who are unemployed, but this has a 
cost. We need to acknowledge that government spending has a 
cost, and that is because the Federal Government doesn't have a 
magic wand that actually produces money.
    When the government spends a dollar, it has to take it 
first out of the economy in the first place. And, in fact, what 
Robert Barro at Harvard has shown, it is not only that it needs 
to take a dollar out of the economy, but when they tax it--and 
by the way, it is kind of the same thing when you borrow it, 
because then you have to tax it again, and that is also money 
that is not available for the private sector to borrow, capital 
to borrow--what happens is that the economy shrinks by $1.10. 
It has true consequences, and we need to actually look at the 
data.
    Mr. Hensarling. Last question: can you elaborate on what 
you see as the long-term adverse consequences to this act, 
since it appears that some in Congress are wanting to pass yet 
another stimulus act? Clearly, we need to appreciate what the 
long-term cost and impact of the first act will be.
    Ms. de Rugy. Spending more stimulus will be like doubling 
down on a bad bet. We have to understand what the stimulus is 
doing. I mean, I am not saying that the people who are getting 
this money are not feeling the benefit of it when they are 
doing it. But imagine if I have a broken arm, and instead of 
the doctor fixing my arm or giving me the proper treatment, he 
was giving me morphine. I would feel better, surely, for a 
while. But it wouldn't change anything. When the morphine ran 
out, my arm would hurt again. And, worse, it might actually fix 
itself in a very unreversible way. The stimulus does this.
    You hear all the time about all the money that went to the 
States went to finance jobs that would have been lost in the 
public sector otherwise. What it did is allow State budgets 
that have, States who have real spending problems and budget 
gaps, to actually prolong the mistake of their past. This is 
what the stimulus is doing, and we should not, we should not 
allow this to continue.
    And moreover, the business community has acknowledged, the 
Business Roundtable has sent a letter--the Business Roundtable, 
that has been a very strong ally of President Obama, sent a 
letter to him to say that the business community is not 
creating jobs because of the policy of this Administration. 
They are not.
    All the government is doing right now is injecting 
uncertainty. And businesses and families, and American 
families, cannot move and won't move, create jobs, invest, or 
do anything, as long as the economic climate is so uncertain.
    Mr. Hensarling. Dr. de Rugy, thank you very much, and 
clearly, France's loss is America's gain.
    Ms. de Rugy. Thank you.
    Chairman Spratt. Dr. Bivens, would you like to respond to 
that?
    Mr. Bivens. Sure. There are a lot of points raised there, 
and I would like to just get to a couple of them. One I will 
absolutely concede; I am probably the world's worst marketer. 
That said, I think there is plenty of evidence and citations 
that I can give you have that supports this number of 3 to 4 
million jobs; I mean, Congressional Budget Office for one, 
numerous private macroeconomic forecasters.
    And I will say one thing, I think the other witness, with 
all due respect, has made the common mistake of looking at 
recovery.gov to see the full impact of the Recovery Act. I have 
got some, essentially--the direct spending on infrastructure 
and direct purchase of goods and services by government, that 
has been about one-eighth of the money that has gone out 
before.
    I mean, let's take a look at the Recovery Act. The Recovery 
Act was essentially one-third tax cuts, one-third transfer 
payments, one-third direct spending. The tax cuts and the 
transfer payments were in there to get out the door first. 
Spending takes some time to open the pipeline and get the 
projects up, especially when you are trying to be really 
scrupulous about making sure the money is not poorly spent.
    And so, the Recovery Act essentially so far has been tax 
cuts and transfer payments. And if you look at recovery.gov for 
those, you are not going to find them. If you look at 
recovery.gov over the next couple of months, what the 
Administration has called ``Recovery Summer,'' you are going to 
see that ramping up because, finally, that infrastructure part 
of it is now coming online. The tax cuts and transfers are 
actually fading out, which is a problem, because they are going 
to be fading out in the second half of this year when the 
economy needs more support, and the infrastructure projects 
will be ramping back up.
    The footprint of the Recovery Act in supporting the economy 
really should be seen in disposable personal income of 
households, and that is easy to see. Look at the macroeconomic 
data, the wedge between personal income minus transfers, minus 
government transfers, that is kind of the private sector 
incomes that are being generated in the economy, versus 
disposable personal income, that is more than $700 billion at 
this point. About $200 billion of that is due to the Recovery 
Act. The rest is just due to automatic stabilizers as people's 
incomes fall, tax collections fall, people start qualifying for 
programs for safety net spending. So, the footprint for the 
Recovery Act should be looked for in disposable personal 
income, and it is as clear as day there.
    It will start showing up more robustly on recovery.gov 
pretty soon, but so far, the Recovery Act has been mostly tax 
cuts and transfers.
    And I will just say one thing, every academic study that 
looks at data to say what does deficit finance, government 
spending, and tax cuts do to an economy? If it does not 
separate out periods where interest rates are at rock-bottom 
levels, like today, you should not listen to it.
    Because in 2005, I was not saying we should have a $1 
trillion deficit to spur the economy because, in 2005, the 
unemployment rate was maybe a little too high for my taste, but 
it was not a once-in-a-generation crisis, and interest rates 
were high enough that we could lower them if the economy did 
enter a crisis.
    When you look at the effect of a big stimulus package like 
the Recovery Act, and you look through history, you need to 
look at those episodes, like the Great Depression, like Japan 
in the 1990s, where interest rates have been at rock bottom.
    And I will say one thing about Japan, because it is often 
pointed to as a failure for fiscal policy. It turns out, they 
never committed to fiscal stimulus. I mean, they were 
completely stop and go. They would have the stimulus package in 
1993. They would raise taxes in 1994 and close the gap. They 
would have a stimulus package in 1995. Then, they would raise 
taxes in 1996.
    Adam Posen, who used to be at the Institute for 
International Economics--now he is on the Monetary Policy 
Committee of the Bank of England--pretty much the world's 
biggest expert on what happened in the Japanese macro economy 
in the 1990s, he said the clear lesson for that was fiscal 
policy worked when it was tried.
    And you see the same lesson from our own history. You had 
increased deficit spending helping pull the economy out of the 
Great Depression in the '30s, until 1937, when President 
Roosevelt listened to the people spreading fears about 
deficits, pulled back the spending, targeted the surplus, the 
economy fell right back into recession. We shouldn't make the 
same mistake twice.
    Ms. de Rugy. So, taxes shouldn't be increased, then.
    Mr. Bivens. Eventually they should, yes. But, no, in the 
next two years--or I would say this, if the question is about, 
should the Bush tax cuts be allowed to expire? Absolutely, on 
the top end, they should, and we should then inject more 
purchasing power in the economy with things like unemployment 
compensation, food stamps, infrastructure spending.
    Mr. Jordan. Would the gentleman yield?
    Chairman Spratt. Ms. Kaptur is next. Then, I will come to 
you right after.
    Mr. Jordan. I will wait.
    Chairman Spratt. Let me go to Ms. Kaptur and then Mr. 
Jordan.
    Ms. Kaptur. Thank you, this is a very good exchange, Mr. 
Chairman.
    Good witnesses. Thank you both.
    Let me just ask you, on the trade deficit of the United 
States and its impact on GDP. Neither of you focused on that, 
as I can tell, in your testimonies, but I think, last year and 
this year, we will accumulate another trillion dollars of trade 
imbalance with the world in our country. And I have read 
different studies that talk about how many points that reduces 
GDP.
    Do either of you have a comment on that? And then looking 
back over a decade of trade deficits in our country that 
probably total close to $9 trillion to $10 trillion, could you 
discuss the impact of that on an economy over time?
    Mr. Bivens. Do you care who goes first?
    Ms. Kaptur. No.
    Mr. Bivens. Thank you.
    Yes. I would say a couple things. I mean, one troubling 
chronic figure of the U.S. economy over the past decade has 
been exactly the trade imbalances you are talking about. 
Throughout the--after the onset of the recession that began at 
the end of 2007, the trade balance actually played a 
stabilizing role. We saw the trade deficit fall from about 6 
percent of GDP to about 3 percent at the peak, and that was 
pretty much the only bright spot in gross domestic product over 
the past, say, 30 months.
    That is one reason why I am very worried about the future. 
I think a serious headwind facing the U.S. economy today is 
precisely that we are not going to be able to rely on positive 
contributions from the trade balance as we go forward. And the 
main reason for that is many of our trading partners have 
embraced austerity. They have clamped down. They are going to 
target balanced budgets. You see this especially in Europe, and 
that is going to make it very, very hard for U.S. exporters to 
send stuff to the rest of the world and for exports to be an 
engine of growth.
    And so, based on that, I think the President was exactly 
right to go to the G-20 last month and try to get these 
countries on board with emphasizing growth first. So, I think 
the trade deficit, it is a big long-run problem, because it has 
us accumulate foreign debt, which is a problem. And I think 
over the next year and a half, 2 years, it is actually going to 
swing from being a bright spot in the economy to a drag on 
growth, and that is one reason why I am so worried about what 
happens to the economy when the Recovery Act peters out if we 
do not do more fiscal support.
    Ms. Kaptur. On the trade deficit, how many points does it 
knock off the GDP, just approximately, in a year. Let's say you 
have a 3, 4, 5 percent GDP. What percent does it knock off, a 
quarter?
    Mr. Bivens. Well, it kind of depends on the underlying 
state of the economy.
    So, for example, in 2000, we had a healthy economy. We had 
a 4 percent unemployment rate. We also had a 4 percent of GPD 
trade deficit. I would have said in that year the trade deficit 
was not knocking anything off GDP. Essentially, we were able to 
make up for any drag on the trade deficit because capital 
coming into the U.S. from the rest of the world was keeping 
interest rates low.
    I think for an economy like today that has a lot of excess 
capacity and a 10 percent unemployment rate, if we see the 
trade deficit rise by a percentage point of GDP, that will, one 
for one, lower domestic incomes in the United States. So, it 
depends on the underlying state of the economy. But I think, 
going forward, every increase in the trade deficit or 1 percent 
of GDP increase in the trade deficit essentially knocks a 
percentage point off of growth.
    Ms. de Rugy. I am not a trade expert, but I have always 
been very puzzled by all this worry about the trade deficit. I 
mean, the reason why we have a trade deficit is because we go 
and buy things cheaper abroad, and that is a good thing for the 
American people. It is a very good thing. Ultimately, it 
doesn't really matter where things are produced. Because, if 
Americans are able to buy goods cheaper, it means that they can 
either save more or buy other things, more of other things, and 
that is a very good thing. In fact, this is what economic 
growth is about. It is about being able to produce more things 
for a lower price.
    We used to spend a gigantic amount of money on food. I 
mean, that used to be like the biggest part of the American 
people's budget; and it is not anymore. That is because the 
American people have been able to actually buy food cheaper.
    So, in times where we don't have a trade deficit, we are 
worried because--and so, again, I am not an expert, but I am 
always really puzzled by this, this worry about----
    Ms. Kaptur. Well, I don't know about France, Doctor, but in 
our country we have seen the outsourcing of millions and 
millions and millions of jobs. One of the reasons for the 
unemployment is this just didn't start overnight. We have 
outsourced an enormous amount of good-paying jobs that this 
country used to have all over this country, and it is a serious 
issue for us.
    In France, I wanted to ask you, what percent of the GDP or 
what percent of the economic activity in France is actually 
publicly subsidized? Is it half yet? What percent is government 
of your economy in France?
    Ms. de Rugy. Well, I can tell you that everyone in France, 
no matter what your income is, gets something from the 
government.
    Ms. Kaptur. But, isn't it about half?
    Ms. de Rugy. It is more than half, yes.
    Ms. Kaptur. Well, we are nowhere close to that in this 
country.
    Ms. de Rugy. We are on our way. We have reached a benchmark 
where more than half of the American people actually get 
something from the government. That happened like a few years 
ago.
    Ms. Kaptur. Well, a lot of our people pay into the 
government, so they deserve to get something back. If it is 
unemployment compensation or Social Security, they have paid 
for those benefits.
    Ms. de Rugy. Except that the data shows that what they get 
back from the government has a lower return than if they had 
actually spent this money in the private sector, and this 
cannot be ignored.
    And if I can add something about the CBO projection that 
Dr. Bivens mentioned, I mean, these are projections. Even CBO 
acknowledged that they never went and checked whether these 
jobs were actually created. These are projection.
    Dr. Romer's testimony today, I read it, came and actually 
acknowledged that the 3 million jobs are just projections. 
There is not a name, there is not an American body behind each 
one of these jobs created that they are claiming. They rest on 
rosy projections about what government spending creates.
    Again, the CBO, the CBO itself, the Director was asked 
whether his projection came true, and he acknowledged that they 
didn't go and check. So, we keep repeating these numbers, these 
projection numbers, and no one went to check. It is like the 
weatherman who says tomorrow it is going to be 70. It turns out 
tomorrow it is 40, and the next day the weatherman still says 
it was 70.
    Ms. Kaptur. Thank you, Dr. de Rugy.
    Did Dr. Bivens want to respond to that? I can tell you in 
the district that I represent, where highway projects are going 
on right now, there are individuals who are working who would 
not be working. And, you know, they paid their gas tax. They 
have a right to get money back to fix the roads in the areas 
that they use.
    If I look around our community, police officers and 
teachers and people are working, and many of our small 
businesses are taking advantage of the tax credits that were 
provided to keep people on and to hire people. So, Dr. Bivens, 
did you want to comment? And then my time has expired.
    Mr. Bivens. Yes, very quickly. Thank you.
    I guess I don't understand this. They are not projections. 
They are statistical analyses. I mean, if we are going to throw 
out any statistical measure of how economics works, we are 
going to throw out a whole large body of knowledge.
    Like I said, two-thirds of the recovery package, tax cuts, 
transfer payments, were not directly government-hired jobs. So, 
there is not going to be a face. There is not going to be a 
name to them.
    Basically, I got--I can't remember the exact amount, but 
everyone who earned over $3,000 in a year got the Making Work 
Pay tax credit as part of the Recovery Act. It boosted my 
income by I think $600 to $800. I forget which. I spent it. 
That helped create economic activity in the country. Whose name 
is attached to that money I spent, I have no idea. But I did 
spend it, and it did go out, and it did support purchasing 
power in the economy.
    Same thing when somebody gets an unemployment check and 
they can actually afford to buy some new clothes for their kids 
to go back to school rather than making them wear the ones from 
last year. What was the name of the person that benefited 
because they went to Sears and bought the clothes? Of course we 
don't know that. You can't track that. You have to use 
statistics to do that. You look at the CEA. You look at the 
private sector and macro forecasting firms. They all say that 
those historical, statistical relationships applying in the 
recovery package get you that 3 to 4 million jobs.
    Ms. de Rugy. Well, actually, Dr. Romer's testimony today, 
she said she is not looking at historical data, and basically 
she admits she is guessing.
    Mr. Bivens. No, that is not right. Okay, maybe from today, 
but from the third quarterly report, they used VARs, they used 
historical relationships. They absolutely did.
    Ms. de Rugy. In her written testimony, she said she is not 
looking at historical data anymore, so that is why all these 
previous estimates of the multiplier doesn't hold. So, she says 
we are just like guessing.
    Chairman Spratt. Mr. Jordan.
    Mr. Jordan. Thank you, Mr. Chairman.
    Wouldn't you assume, though, the American people, when they 
hear the 3 million claim, they assume that the government is 
actually accounting for 3 million jobs created or saved? I 
mean, the people that are paying for this, that is what they 
assume. Agree?
    Mr. Bivens. I am sorry?
    Mr. Jordan. You would think the American people, though, 
when they hear the claim 3 million jobs, their assumption is 
those are jobs created. When the government says they are jobs 
created or saved, they actually think there is a real person 
that actually had a real job created or saved?
    Mr. Bivens. Yes, because there is a real person. But the 
idea that that real person's name is in a government database 
is what I am disputing.
    Mr. Jordan. Okay. Let me go here, if I could. I have 
reached kind of the same conclusion I think Dr. de Rugy 
reached, Dr. Bivens, when you were responding to Mr. 
Hensarling's comments when you were describing the lost decade 
in Japan and said stimulus followed by tax increased the 
stimulus fund. You suggested a pattern. It seemed to me you 
were indicating that we should not be raising taxes. Obviously, 
that is what this Administration plans to do.
    And if we can go further, I mean, January 1st of this year 
they plan to raise taxes by letting the tax cuts of 2001 and 
2003 expire. The highest marginal rate is going to go up, 
dividend is going to go up, capital gains is going to go up. 
And they are also talking--if you followed statements by 
Senator Feinstein, Senator Dorgan, and statements by Majority 
Leader Hoyer--to not keep the promise that the President made 
that families making $250,000 or less would not see a tax 
increase. So, do you think they are headed down the wrong path, 
based on your previous answer in describing what took place in 
Japan?
    Mr. Bivens. No, not necessarily.
    Mr. Jordan. Well, that surprises me, based on your previous 
answer.
    Mr. Bivens. Let me clarify.
    Mr. Jordan. I figured you would.
    Mr. Bivens. We have a budget problem in the long run, and 
we are going to need more revenue, and we are going to need 
taxes that are higher. And I, for one, sure don't feel bound by 
the pledge to not raise taxes on anyone earning less than 
$250,000. I think we will have to even go down the income scale 
when it comes time to close the budget deficit.
    Mr. Jordan. I always suspected that was the case with the 
left, but you are willing to say it. Go ahead.
    Mr. Bivens. In terms of the next couple of years, I think 
you could easily have a situation where you allowed the Bush 
tax cuts on the upper income earners to expire; and then, 
instead of then allowing that to clamp down on economic demand 
a little bit, you then do more fiscal support. You do the 
extension to COBRA, to unemployment insurance, to food stamps. 
In COBRA, that was very effective in the Recovery Act. So, I 
think it is easy to increase fiscal support going forward while 
still letting the Bush tax cuts on the high-end earners expire.
    Mr. Jordan. The government gets to control all that, which 
scares me as well.
    Let me ask you both about this; and, Dr. de Rugy, we will 
probably start with you. Art Laffer--and I asked this of 
Chairman Bernanke when he was here about 5 weeks ago. Art 
Laffer had a column about a month ago in the Wall Street 
Journal where he--and, frankly, on today's front page of the 
Wall Street Journal, the lead story is, ``Fed may revise their 
growth estimates for the remainder of this year and into next 
year.''
    Laffer's point was, look, people make decisions based on 
policy decisions about how they spend their money or when they 
take income, when they take profits. And his point was people 
are taking income and profits this year in anticipation of what 
is going to happen on January 1st, those tax cuts expiring. And 
we may not have the growth that some are even predicting for 
next year, again, kind of confirming, I think, what Dr. Bivens 
said earlier in response to Mr. Hensarling.
    Dr. de Rugy, would you like to comment on that?
    Ms. de Rugy. It is obvious that people make decisions--
whether it is families or businesses, they make decisions based 
on what is happening in the economy and what they project will 
happen in the economy. In fact, it explains why, when the 
government spends a dollar, then the economy shrinks rather 
than grows, because people revise their expectations and they 
know that they are going to be taxed in the future.
    On top of that, they also, there is all this uncertainty 
that has been injected that actually forces them or gives them 
an incentive to not use the dollars, even the ones that have 
not been taxed.
    The Federal Reserve came up, last week I think, with a 
number of $1.8 trillion of capital who are sitting on the 
sidelines because of the uncertainty injected by the government 
in the economy.
    Mr. Jordan. Dr. Bivens, would you agree with that?
    And I have heard those exact sentiments from constituents 
of ours, small business owners, larger business owners who say, 
look, we know that tax increases are expected. We still don't 
know what is going to happen with this cap-and-trade. We still 
haven't figured out what exactly this health care bill means 
for the bottom line of our business. And because of all that 
uncertainty, as the doctor talked about, they are not doing the 
things we would typically see as an economy starts to come out 
of a recession. Would you agree with that? I mean, I have heard 
it firsthand from constituents.
    Mr. Bivens. No, not really. I mean, I am sure there are 
some people out there who say that.
    But look at the NFIB study that somebody mentioned earlier, 
the National Federation of Independent Businesses. What has 
been spun a lot is uncertainty is what is hurting these 
businesses. If you look at the number one thing the actual 
business owners said was the problem facing them: not enough 
customers. And there is no reason to invoke uncertainty or 
anything as to why there are fewer customers than 2 years ago. 
The reason why there are fewer customers is because we have 
lost about $8 trillion in housing wealth, because we have about 
5 to 6 million more people unemployed.
    So, I don't think you have to go anywhere beyond looking at 
the aggregate data to see why the customers have dried up. I 
don't think you have to resort to psychology or anything like 
that. You can just look at the wealth and the incomes of 
American families. They have completely dried up. It has been a 
shock to private spending, and that is why you need public 
support to get the economy to a healthier place.
    Mr. Jordan. Mr. Chairman, if I could, this past month we 
went over $1 trillion in deficit for this year. We are at $13 
trillion national debt. Obviously, you cannot sustain that kind 
of spending in the long term.
    I have actually introduced a budget that gets to balance 
over the budget window time frame. We think it does the right 
things.
    But long term, to deal with, I mean, the unbelievable 
budget situation we are in, what do you think, how do you think 
we address that? I happen to think that the only way you get 
there, you first have to limit spending, which our budget does. 
You don't make the problem worse, in my judgment, by adding 
taxes. But the only way you deal with it is through economic 
growth.
    Would you both agree with that? I don't care who starts. I 
mean, you have to have--when you are talking about this kind of 
situation, you have got to have economic growth long term to 
actually begin to pay down the debt and deal with the 
situation.
    Ms. de Rugy. I mean, I would agree except that, considering 
the size--if you don't cut spending, we are not----
    Mr. Jordan. I am for that, too. I get that.
    Ms. de Rugy. But, I mean, we need to cut spending 
dramatically. Because we are not going to be able to grow 
ourselves out of the economy, especially if we continue 
growing.
    And, by the way, if you unpack the GDP number, you will see 
that the reason why GDP is growing is because of the injection 
of government funds. Are we willing to continue this? I mean, 
once you take away government spending, the GDP will fall down.
    And, by the way, we have spent, on this discretionary--it 
is not just tax cuts that has been spent. The money in the 
recovery act is almost $200 billion in contracts and grants and 
loans. So, it is not cheap change. So, a lot of the stimulus 
money has been spent. It is not just tax cuts, which most of 
them are spending. So, we are not going to grow ourselves out 
of this spending explosion that is coming our way, and we will 
see the most massive transfer of wealth from the relatively 
young and poor to the relatively old and wealthy.
    And so, we need to cut spending, and we need to cut it now. 
Because the looming entitlement crisis that we have been 
talking about is today, is starting now. The Social Security 
Trust Fund is in cash flow deficit. And even if it kind of 
maybe gains a little bit of money in the next few years--which 
is not sure if the economy doesn't grow. And, by the way, the 
Fed today has actually stipulated that it is going to slow down 
rather than grow. I mean, we are not going to get ourselves out 
of it. We need to cut spending, and we need to cut it now.
    Mr. Jordan. Doctor?
    Mr. Bivens. We absolutely need growth.
    Can I say one thing? Just based on the latest Congressional 
Budget Office long-term budget outlook, to me I read that 
document, and I see the number one thing you need to do is 
allow the health reforms that were passed to actually happen. 
If you look at the extended baseline where they allow the 
revenue to raise and the spending reductions caused by that 
health reform act to happen, we don't have much of a budget 
problem over the next 10, 15 years. If you renege on those, 
then you have got a big budget problem.
    So, I think we should actually, one, acknowledge that the 
health reform act was passed with the biggest deficit reduction 
effort maybe in history, absolutely in a long time. And the 
degree to which we have a budget problem over the next 10 to 15 
years is the degree to which we renege on what was put in place 
in that health reform package because health reform is the 
long-term driver of budget deficits.
    Chairman Spratt. Thank you both for your spirited 
testimony. We appreciate your patience also in waiting your 
turn, but that is why we gave you as much scope as we could for 
your discussions this afternoon. We benefited from what you had 
to say, and we appreciate you coming.
    One final housekeeping detail, I would ask unanimous 
consent that members who did not have the chance to ask 
questions may submit questions for the record within seven 
days.
    Thank you again very much for coming.
    The committee stands adjourned.
    [Questions submitted for the record and their responses 
follow:]

            Questions Submitted to Witnesses for the Record

                questions from congressman mike simpson
    Secretary Chu: I appreciate you appearing before the Committee. I 
wanted to ask you a question regarding funding for loan guarantees.
    As you know, I am a big supporter of the loan guarantee program and 
believe it is an important tool to enable energy projects to access 
credit markets during a time when credit is extremely hard to obtain.
    I understand that the Recovery Act included $4 billion in 
appropriations for loan guarantees for renewable energy projects, which 
I believe provides you with $32-$35 billion in additional authority, of 
which only 6% has been committed, correct?
    In addition, I understand that DOE has received $18.5 billion in 
loan guarantee authority for renewables through the regular 
appropriations process, of which 1.7%, or $2.4 billion, has been 
committed or guaranteed. If you add that all up, by my count, DOE has 
around $50 billion in unspent loan guarantee authority for renewable 
energy.
    Could you tell me if that number sounds accurate or how much loan 
guarantee authority for renewable remains at DOE? How much of the ARRA 
funding has been awarded?
    As I understand it, the goal of the ARRA funding particularly is to 
get the money out the door quickly to rapidly create jobs, and I am 
extremely concerned that very little of that funding has gone out. Are 
there an insufficient number of qualified projects applying? Could you 
please explain why DOE has been unable to obligate these funds more 
rapidly?
    Secretary Chu, I realize that while the budget requested additional 
funding for nuclear projects, it did not include more funding for 
renewable. Could you explain the reasoning behind that?

    Secretary Vilsack: I know that some companies that provide and 
build broadband infrastructure are having difficulty doing so because 
they have to compete against companies that have received federal 
subsidies under ARRA.
    I'm concerned that, in essence, the government is picking and 
choosing winners in the private market.
    Since more than $7 billion in federal funds were provided for 
broadband infrastructure development (half to USDA and half to 
Commerce) and it is also funded in regular appropriations bills, what 
criteria do you have in place to ensure that the government is not 
interfering in what the private sector is trying to do and is not 
creating an unfair advantage to grant recipients over their 
competitors?
               questions from congresswoman marcy kaptur
    1. The funding provided to the Department of Energy through the 
alternative energy loan guarantee program in the American Recovery and 
Reinvestment Act is critical in accelerating development of the 
domestic alternative energy market.
    Especially at a time when credit markets are frozen for large scale 
projects, the DOE loan program represents a critical opportunity for 
the domestic industry.
    In my district, a number of the worlds leading solar manufactures 
have invested millions in expanding manufacturing lines and are relying 
on the loan guarantee programs to create continuity in their 
manufacturing capacity.
    I am concerned that the interagency process required to process 
applications for the loan program needs attention to ensure that loan 
guarantee applications are processed with the required sense of 
urgency. What recent actions has the agency taken to accelerate 
approval of loan guarantees?
    2. Please update the committee on the progress you have made in 
obligating DOE Loan Guarantee funds in both project and dollar figures 
for approved loans.
    3. While the Department of Energy is the primary lead for these 
projects, OMB has exerted significant management authority of the 
program. What are the OMB's roles and responsibilities in reviewing, 
and approving loan guarantee applications?
    5. Are OMB's activities operational or consultative?
    6. What is the statutory authority basis for OMB's role in 
reviewing and approving these applications?
    7. Does OMB or the Department of Energy have established bench 
marks to complete the loan approval process? Does OMB take into 
consideration the timeline by which an applicant can start 
construction?
    8. Has the Department of Energy hired additional staff with the 
expertise to perform these activities and what role has OMB had in 
conducting the same review?
    9. To what degree does DOE review domestic content capacity for 
these proposed Loan Guarantee approvals?
    10. One of the projects currently under review by DOE is a large 
project in Southwestern Arizona proposed by First Solar called the Agua 
Caliente Solar Project. It is my understanding that this project, if 
approved, would allow First Solar to continue operations at their plant 
in Northwestern Ohio. Approving projects which have the potential for 
domestic sourcing should remain a priority for the administration. For 
the projects currently in the DOE loan guarantee pipeline either 
approved or pending, what can the administration tell us about the 
ripple effect of job creation or retention?
    11. Specifically for the Agua Caliente Solar Project, has DOE 
conducted any analysis of the number of jobs that this project would 
create/retain at the First Solar manufacturing facility in NW Ohio?

          Secretary Vilsack's Responses to Questions Submitted

                questions from congressman mike simpson
    Questions from Congressman Mike Simpson
    Secretary Vilsack: I know that some companies that provide and 
build broadband infrastructure are having difficulty doing so because 
they have to compete against companies that have received federal 
subsidies under ARRA.
    I'm concerned that, in essence, the government is picking and 
choosing winners in the private market.
    Since more than $7 billion in federal funds were provided for 
broadband infrastructure development (half to USDA and half to 
Commerce) and it is also funded in regular appropriations bills, what 
criteria do you have in place to ensure that the government is not 
interfering in what the private sector is trying to do and is not 
creating an unfair advantage to grant recipients over their 
competitors?

    Response: Many communities throughout rural America lack high speed 
broadband to facilitate economic development. To ensure that funding 
provided under the Recovery Act reached those needy communities, our 
Notices of Funding Availability (NOFAs) for the Broadband Initiatives 
Program (BIP) provided all types of entities--public, private, 
cooperative, non-profit, etc., with an opportunity to compete for 
funds. The NOFA's also required that all applicants map their proposed 
funded service areas (PFSA's) and clearly delineate areas that were 
unserved and underserved. These maps were then posted on our joint 
website with the Department of Commerce--www.broadbandusa.gov--and the 
public was provided with the opportunity to comment on whether 
broadband service was already available in the applicant's PFSAs. This 
ensured that USDA was not providing funding in PFSA's that were already 
served. USDA received thousands of comments, primarily from incumbent 
service providers regarding the PFSA of applicants. To ensure that 
funds reached areas that met the requirements of the NOFA, USDA staff 
carefully assessed the applicants PFSA's, publically available 
information, and comments filed by incumbent service providers on the 
PFSA's. In many cases, USDA Field Staff actually visited the PFSA's to 
ensure that precious Recovery Act funds went to projects that best meet 
the requirement of the NOFA. All projects awarded to date have meet the 
stringent requirements of the NOFA which provided all an opportunity to 
bring broadband service to underserved areas.

              Mr. Rogers' Responses to Questions Submitted

                questions from congressman mike simpson
    Q1. I appreciate you appearing before the Committee. I wanted to 
ask you a question regarding funding for loan guarantees.
    As you know, I am a big supporter of the loan guarantee program and 
believe it is an important tool to enable energy projects to access 
credit markets during a time when credit is extremely hard to obtain.
    I understand that the Recovery Act included $4 billion in 
appropriations for loan guarantees for renewable energy projects, which 
I believe provides you with $32-$35 billion in additional authority, of 
which only 6% has been committed, correct?

    A1. With the $1.5 billion rescission under H.R. 1586, the 
Department now has approximately $2.4 billion appropriated for Section 
1705 credit subsidy. The Department estimates this could support 
approximately $20 to $22 billion in loan guarantees; however, the 
actual loan level supported will depend on the final contract terms of 
each loan guarantee. As of September 7, 2010, the Department has closed 
four loan guarantees totaling approximately $794 million in loan 
guarantees and using approximately $61 million in budget authority. In 
addition, the Department has offered conditional commitments for six 
additional projects eligible under Section 1705 totaling approximately 
$3.4 billion in loan guarantee value. The actual credit subsidy for 
each project is determined at financial closing.

    Q2. In addition, I understand that DOE has received $18.5 billion 
in loan guarantee authority for renewable through the regular 
appropriations process, of which 1.7%, or $2.4 billion, has been 
committed or guaranteed. If you add that all up, by my count, DOE has 
around $50 billion in unspent loan guarantee authority for renewable 
energy.
    Could you tell me if that number sounds accurate or how much loan 
guarantee authority for renewable remains at DOE? How much of the ARRA 
funding has been awarded?

    A2. The Department estimates that the $2.4 billion in appropriated 
subsidy available under Section 1705, could support approximately $20 
to $ 22 billion in loan guarantees; however, the actual loan level will 
depend on the final contract terms and specific nature of each loan 
guarantee. As of September 7, 2010, DOE has closed four loans totaling 
approximately $794 million and using approximately $61 million in 
budget authority. DOE has issued conditional commitments for six 
additional Section 1705 projects totaling approximately $3.4 billion in 
loan guarantees. The credit subsidy costs for these loans will be 
calculated prior to financial closing, and reflect project specific 
factors including contract terms.
    With respect to non-ARRA authority, to date the Department has 
offered conditional commitments for loan guarantees to two projects 
totaling $317 million against the $18.5 billion in loan authority for 
innovative energy efficiency and renewable energy projects available 
under Section 1703 loan guarantee authority. This loan guarantee 
authority is underutilized because many of the Section 1703 renewable 
energy projects in the pipeline are also Section 1705 eligible, and are 
being processed under the Section 1705 program to receive appropriated 
credit subsidy. Because the 1705 program is lower cost to the borrower, 
borrowers obviously prefer to use that program when they are eligible 
to do so.

    Q3. As I understand it, the goal of the ARRA funding particularly 
is to get the money out the door quickly to rapidly create jobs, and I 
am extremely concerned that very little of that funding has gone out. 
Are there an insufficient number of qualified projects applying? Could 
you please explain why DOE has been unable to obligate these funds more 
rapidly?

    A3. The Department is committed to managing the Loan Guarantee 
Program to carry out its mission effectively while protecting the 
American taxpayer. While creation of jobs is clearly one of the goals 
of the program, it is not the only one: the objective is to help 
transform the energy economy to new clean technologies. The 
infrastructure investments in the Recovery Act were always intended to 
be longer-term than the more immediate efforts of tax reductions and 
assistance to states. This means that proper due diligence is in order 
to ensure that good projects are selected that meet the multiple goals 
set out in the directives given to the program by Congress in statute. 
Projects seeking loan guarantees under Title XVII are typically large, 
complex transactions. To this end, and to ensure compliance with the 
statutory requirement of a reasonable prospect of repayment, the 
Department performs a rigorous and professional underwriting analysis 
of each application--a process that necessarily requires time. However, 
the Department has instituted several changes to the Program that have 
resulted in greater efficiencies and is encouraged that the 
improvements are working.
    For example, the Program has implemented an online application 
portal to help accelerate the application review process and increase 
program transparency. The Program has also hired additional contractor 
support and federal staff and identified external experts to assist 
with legal, engineering, financial and marketing analysis of proposed 
projects. Furthermore, the Program has also streamlined the National 
Environmental Policy Act of 1969 (NEPA) review process, and established 
a monitoring team.

    Q4. Secretary Chu, I realize that while the budget requested 
additional funding for nuclear projects, it did not include more 
funding for renewable. Could you explain the reasoning behind that?

    A4. The 2011 budget includes $500 million in credit subsidy to 
support an estimated $3-5 billion in loan guarantees for innovative 
renewable energy and efficient end use energy projects; however, the 
actual loan level will depend on the final contract terms of each loan 
guarantee and other project specific characteristics.
               questions from congresswoman marcy kaptur

    Q1. The funding provided to the Department of Energy through the 
alternative energy loan guarantee program in the American Recovery and 
Reinvestment Act is critical in accelerating development of the 
domestic alternative energy market.
    Especially at a time when credit markets are frozen for large scale 
projects, the DOE loan program represents a critical opportunity for 
the domestic industry.
    In my district, a number of the world's leading solar manufacturers 
have invested millions in expanding manufacturing lines and are relying 
on the loan guarantee programs to create continuity in their 
manufacturing capacity.
    I am concerned that the interagency process required to process 
applications for the loan program needs attention to ensure that loan 
guarantee applications are processed with the required sense of 
urgency. What recent actions has the agency taken to accelerate 
approval of loan guarantees?

    A1. The Department is committed to managing the Loan Guarantee 
Program so that it carries out its mission effectively while protecting 
the American taxpayer. Some of the delays are the natural result of 
standing up a new program and getting procedures in place after 
appropriations were provided. Now that the Department has had some 
experience with those processes, the Department has instituted numerous 
changes to the Program resulting in greater efficiencies and is 
encouraged that the improvements are working.
    For example, the Program has developed an online application portal 
to help accelerate the application review process and increase program 
transparency. The Program has also added staff with relevant expertise. 
In addition, LPO has identified external experts to assist with legal, 
engineering, financial and marketing analysis of proposed projects. 
Furthermore, the Program has also streamlined the National 
Environmental Policy Act of 1969 (NEPA) review process, and established 
a monitoring team. The program continues to work on ways to streamline 
the review process.

    Q2. Please update the committee on the progress you have made in 
obligating DOE Loan Guarantee funds in both project and dollar figures 
for approved loans.
    A2. As of September 7, 2010, the Loan Guarantee Program has closed 
four loan guarantees totaling approximately $794 million and issued 
conditional commitments for ten additional projects totaling 
approximately $14.0 billion in loan guarantees.

    Q3. While the Department of Energy is the primary lead for these 
projects, OMB has exerted significant management authority of the 
program. What are the OMB's roles and responsibilities in reviewing, 
and approving loan guarantee applications?

    A3. Under the Federal Credit Reform Act of 1990 (Sec. 503), the 
Director of OMB is responsible for determining credit subsidy cost 
estimates. Under this authority, OMB delegates responsibility for the 
modeling to agencies, and reviews and must approve subsidy cost 
estimates for all loan and loan guarantee programs. OMB works closely 
with agencies to state accurately the costs of Federal credit programs. 
Accordingly, OMB reviews and must approve the credit subsidy cost 
estimates generated by the Department for the Title XVII program.

    Q5. Are OMB's activities operational or consultative?

    A5. OMB has statutory oversight for credit subsidy cost per the 
Federal Credit Reform Act of 1990, as amended. OMB reviews and must 
approve the credit subsidy cost computation generated by DOE, and works 
closely with DOE in the course of the approval process.

    Q6. What is the statutory authority basis for OMB's role in 
reviewing and approving these applications?

    A6. Section 503 of the Federal Credit Reform Act of 1990 states 
that the Director of OMB is responsible for determining credit subsidy 
estimates, in consultation with the agencies, to state accurately the 
costs of Federal credit programs. OMB has delegated the responsibility 
for generating costs to the agencies under this authority, and reviews 
and approves agency cost estimates for all Federal credit programs.

    Q7. Does OMB or the Department of Energy have established bench 
marks to complete the loan approval process? Does OMB take into 
consideration the timeline by which an applicant can start 
construction?

    A7. Since each transaction is unique, there are not benchmarks per 
se for the completion of the approval process. DOE must ensure each 
loan guarantee meets all statutory and regulatory requirements 
including, but not limited to, determining that each project has a 
reasonable prospect of repayment. Projects seeking loan guarantees 
under Title XVII are typically large, complex transactions which 
necessarily require time for DOE to analyze and underwrite. Similarly, 
the complexity of each transaction is a primary factor in the 
transactions timeline and approval process. In addition, once a 
borrower is offered a conditional commitment, there are often 
conditions which an applicant must meet before final loan documents can 
be completed and the loan ``closed''.
    That said, the process of evaluation does take project timelines 
into consideration, and the OMB review is the final step. DOE briefs 
OMB on project timelines, and OMB's review has often included queries 
about applicants' ability to meet timelines to ensure key milestones 
are met, e.g. eligibility deadlines for grants, tax credits, equity 
contributions, construction times etc., among other considerations, as 
these affect cash flows to and from the government.

    Q8. Has the Department of Energy hired additional staff with the 
expertise to perform these activities and what role has OMB had in 
conducting the same review?

    A8. DOE has hired a significant number of additional contractor 
support and federal staff including legal, engineering, financial, and 
market analysts all with relevant experience. Section 503 of the 
Federal Credit Reform Act of 1990 states that the Director of OMB is 
responsible for credit subsidy estimates, in consultation with the 
agencies, to state accurately the costs of Federal credit programs. OMB 
has worked with DOE to develop the credit subsidy estimation 
methodology used for the Title XVII and approved DOE's credit subsidy 
cost model in 2009. OMB's role in this process is consistent with the 
agency's role in all Federal credit programs. In addition, OMB plays 
its usual role in reviewing whether agency actions are consistent with 
relevant laws and Administration policies.

    Q9. To what degree does DOE review domestic content capacity for 
these proposed Loan Guarantee approvals?

    A9. In regard to its financial and technical review process, the 
Program does not give preference to projects that have more domestic 
content than other projects; it does, however, strongly encourage 
domestic sourcing of components where commercially and technically 
feasible.

    Q10. One of the projects currently under review by DOE is a large 
project in Southwestern Arizona proposed by First Solar called Agua 
Caliente Solar Project. It is my understanding that this project, if 
approved, would allow First Solar to continue operations at their plant 
in Northwestern Ohio. Approving projects which have the potential for 
domestic sourcing should remain a priority for the administration. For 
the projects currently in the DOE loan guarantee pipeline either 
approved or pending, what can the administration tell us about the 
ripple effect on job creation or retention?

    A10. As part of the review process for Recovery Act projects, the 
Loan Guarantee Program considers the number of jobs that a proposed 
project estimates it will create. While this specific applicant, First 
Solar, has a solar panel manufacturing plant in Northwestern Ohio, the 
company has six additional factories worldwide. The applicant 
anticipates that the panels for this project will come from a 
combination of these facilities.

    Q11. Specifically for Agua Caliente Solar Project, has DOE 
conducted any analysis of the number of jobs that this project would 
create/retain at the First Solar manufacturing facility in NW Ohio?

    A11. The Loan Guarantee Program considers the number of direct jobs 
that a proposed project estimates it will create at the site, not the 
number of jobs that result from the manufacturing of components that 
are used at the site.

    [Whereupon, at 5:25 p.m., the committee was adjourned.]

                                  
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