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


 
 TRACKING THE MONEY: HOW RECOVERY ACT RECIPIENTS ACCOUNT FOR THEIR USE 
                          OF STIMULUS DOLLARS 

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 19, 2009

                               __________

                           Serial No. 111-96

                               __________

Printed for the use of the Committee on Oversight and Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform























 TRACKING THE MONEY: HOW RECOVERY ACT RECIPIENTS ACCOUNT FOR THEIR USE 
                          OF STIMULUS DOLLARS























 TRACKING THE MONEY: HOW RECOVERY ACT RECIPIENTS ACCOUNT FOR THEIR USE 
                          OF STIMULUS DOLLARS

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 19, 2009

                               __________

                           Serial No. 111-96

                               __________

Printed for the use of the Committee on Oversight and Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform

                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

63-040 PDF                       WASHINGTON : 2011 

For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
Washington, DC 20402-0001 















              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
JOHN F. TIERNEY, Massachusetts       JOHN J. DUNCAN, Jr., Tennessee
WM. LACY CLAY, Missouri              MICHAEL R. TURNER, Ohio
DIANE E. WATSON, California          LYNN A. WESTMORELAND, Georgia
STEPHEN F. LYNCH, Massachusetts      PATRICK T. McHENRY, North Carolina
JIM COOPER, Tennessee                BRIAN P. BILBRAY, California
GERALD E. CONNOLLY, Virginia         JIM JORDAN, Ohio
MIKE QUIGLEY, Illinois               JEFF FLAKE, Arizona
MARCY KAPTUR, Ohio                   JEFF FORTENBERRY, Nebraska
ELEANOR HOLMES NORTON, District of   JASON CHAFFETZ, Utah
    Columbia                         AARON SCHOCK, Illinois
PATRICK J. KENNEDY, Rhode Island     BLAINE LUETKEMEYER, Missouri
DANNY K. DAVIS, Illinois             ANH ``JOSEPH'' CAO, Louisiana
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
JUDY CHU, California

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director
























                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on November 19, 2009................................     1
Statement of:
    Armey, Hon. Dick, chairman, Freedomworks; and John S. Irons, 
      research and policy director, Economic Policy Institute....    89
        Armey, Hon. Dick.........................................    89
        Irons, John S............................................   102
    Dodaro, Gene L., Acting Comptroller General, Government 
      Accountability Office; Earl Devaney, chairman, Recovery 
      Accountability and Transparency Board; Anthony Wilder 
      Miller, Deputy Secretary, U.S. Department of Education; and 
      John D. Porcari, Deputy Secretary, U.S. Department of 
      Transportation.............................................    14
        Devaney, Earl............................................    32
        Dodaro, Gene L...........................................    14
        Miller, Anthony Wilder...................................    40
        Porcari, John D..........................................    49
Letters, statements, etc., submitted for the record by:
    Armey, Hon. Dick, chairman, Freedomworks, prepared statement 
      of.........................................................    92
    Devaney, Earl, chairman, Recovery Accountability and 
      Transparency Board, prepared statement of..................    35
    Dodaro, Gene L., Acting Comptroller General, Government 
      Accountability Office, prepared statement of...............    16
    Irons, John S., research and policy director, Economic Policy 
      Institute, prepared statement of...........................   104
    Issa, Hon. Darrell E., a Representative in Congress from the 
      State of California, prepared statement of.................    11
    Miller, Anthony Wilder, Deputy Secretary, U.S. Department of 
      Education, prepared statement of...........................    43
    Porcari, John D., Deputy Secretary, U.S. Department of 
      Transportation, prepared statement of......................    51
    Towns, Chairman Edolphus, a Representative in Congress from 
      the State of New York, prepared statement of...............     4
    Turner, Hon. Michael R., a Representative in Congress from 
      the State of Ohio, prepared statement of...................   136


 TRACKING THE MONEY: HOW RECOVERY ACT RECIPIENTS ACCOUNT FOR THEIR USE 
                          OF STIMULUS DOLLARS

                              ----------                              


                      THURSDAY, NOVEMBER 19, 2009

                          House of Representatives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:12 a.m., in 
room 2154, Rayburn House Office Building, Hon. Edolphus Towns 
(chairman of the committee) presiding.
    Present: Representatives Towns, Issa, Cummings, Kucinich, 
Tierney, Clay, Watson, Lynch, Cooper, Quigley, Kaptur, Norton, 
Van Hollen, Cuellar, Murphy, Welch, Foster, Driehaus, Chu, 
Burton, Mica, Turner, Bilbray, Jordan, Chaffetz, Luetkemeyer, 
and Cao.
    Staff present: John Arlington, chief counsel--
investigations; Britton Fraser, counsel; Kwane Drabo and 
Katherine Graham, investigators; Brian Eiler, investigative 
counsel; Jean Gosa, clerk; Adam Hodge, deputy press secretary; 
Carla Hultberg, chief clerk; Marc Johnson, assistant clerk; 
Phyllis Love and Christopher Sanders, professional staff 
members; Mike McCarthy, deputy staff director; Leah Perry, 
senior counsel; Jason Powell, counsel and special policy 
advisor; Jenny Rosenberg, director of communications; Leneal 
Scott, IT specialist; Shrita Sterlin, deputy director of 
communications; Ron Stroman, staff director; Gerri Willis, 
special assistant; Lawrence Brady, minority staff director; 
John Cuaderes, minority deputy staff director; Rob Borden, 
minority general counsel; Jennifer Safavian, minority chief 
counsel for oversight and investigations; Frederick Hill, 
minority director of communications; Adam Fromm, minority chief 
clerk and Member liaison; Kurt Bardella, minority press 
secretary; Seamus Kraft and Benjamin Cole, minority deputy 
press secretaries; Christopher Hixon, minority senior counsel; 
Hudson Hollister, minority counsel; and Brien Beattie and Mark 
Marin, minority professional staff members.
    Chairman Towns. The committee will come to order. Our 
hearing today is entitled, ``How Recovery Act Recipients 
Account for their Use of Stimulus Dollars.''
    I want to thank all of you for being here this morning.
    Today, the committee continues its oversight of the largest 
spending bill in our Nation's history--the American Recovery 
and Reinvestment Act of 2009. Nine months ago, it appeared that 
our national economy was spiraling out of control, with nothing 
to slow the free fall. Now, with the help of the Recovery Act, 
our economy may be on the brink of recovery.
    This is the fourth in a series of hearings that examines 
the unprecedented rescue plan to jump start our economy, heal 
the hemorrhaging labor market, prevent drastic cuts in State 
budgets, and provide much needed assistance to our Nation's 
working families.
    With nearly $790 billion in taxpayer money on the line, the 
Recovery Act mandated extraordinary accountability and 
transparency provisions. Among these requirements, Section 1512 
of the act obligates recipients to report on their use of 
certain Recovery funds. On October 30th, the Recovery 
Accountability and Transparency Board (the Recovery Board), 
released the first recipient reports. And today, the GAO will 
release its first report analyzing the reporting process and 
results.
    The recipient reports indicate that the Recovery Act has 
directly created or saved approximately 640,000 jobs. And about 
400,000 of those jobs are in education or construction.
    In my home State of New York, over 40,000 jobs reportedly 
have been created or saved by Recovery Act funding. And in New 
York City, job placements in the third quarter were up 60 
percent from last year, with 3,043 job placements in Brooklyn 
alone. In downtown Brooklyn, the long-stalled revitalization 
project, City Point, has been resurrected and will generate 
more than 300 construction jobs and 100 permanent jobs. 
Additionally, Recovery Act funds are being used to build nearly 
740 affordable homes in Harlem and Brooklyn, generating 2,800 
new jobs.
    While stories like this are very encouraging, I am gravely 
concerned that the unemployment rate is now 10.2 percent, the 
highest in 26 years. It is even higher for African Americans 
and Hispanic Americans. For people who have lost their jobs, it 
is not very comforting to say we are making progress.
    Nevertheless, the experts tell us that employment recovery 
historically lags behind economic recovery. According to 
Federal Reserve Chairman Ben Bernanke, if the stimulus package 
did not exist, our Nation's unemployment situation would be far 
worse. And on the positive side, in the third quarter of this 
year we saw the first growth in GDP in over a year.
    That being said, today's hearing confronts the question 
``How do we know the Recovery Act is working?''
    The truth of the matter is that while recipient reports 
provided for an unprecedented level of transparency, we must be 
able to rely on the reported data. At this point, it is clear 
that errors found by GAO and others should be corrected 
immediately, not months later, no matter how difficult. 
Recipient reporting should be subject to strict quality 
control.
    The American taxpayer expects reporting to be done, and 
done well. And $787 billion weighing in the balance is 
certainly far from just general pocket change.
    Taken as a whole, the big picture seems to indicate that 
the job trend is positive. Overall, there are some signs that 
jobs are finally being created, both as a direct and indirect 
result of Recovery Act spending. But while we are on the brink 
of recovery, we have a long way to go.
    The important message that I get from these recipient 
reports is that we need to spend Recovery Act money on projects 
that actually create jobs, we need to get the money out there 
faster, and we need to make sure it is targeted on economically 
distressed areas. And we certainly need to make sure it is 
properly accounted for.
    I am looking today for assurance from our witnesses that 
there is a sense of urgency to do that.
    In addition, I think the Congress, working with the 
President, really needs to focus on the need for further job 
creation over the next several weeks. The American people are 
really hurting.
    Again, I want to thank our witnesses for appearing today, 
and I look forward to your testimony.
    [The prepared statement of Chairman Edolphus Towns 
follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman Towns. At this time, I yield 5 minutes to the 
ranking member of the committee, the gentleman from California, 
Congressman Issa.
    Mr. Issa. Thank you, Mr. Chairman.
    I want to thank all the members of the administration for 
being here. I want to first preface by saying that Recovery.gov 
is the right idea in reportability. It is a new idea and there 
are going to be bugs. I think we all recognize that we are not 
going to get it right the first time, but we can and must 
continue to make transparency in Government not just a goal, 
but a reality.
    Mr. Chairman, I am pleased that we have a panel of 
witnesses before us today who can answer questions about why, 
after the passage of a $787 billion stimulus, substantial job 
creation has not occurred and why members of the administration 
are peddling false saved jobs created. You yourself used the 
640,000 jobs created number, a number that is still on the 
board even though it has been discredited by both public and 
private sources.
    The American people, Mr. Chairman, are suffering. We 
learned this month that another 190,000 people joined the ranks 
of the unemployed, bringing the total number of jobs lost since 
President Obama took office to 3.8 million jobs, or 10.2 
percent of the work force. If you are that 10.2 percent, or an 
African-American at a 15 percent unemployment, or an African-
American youth at a 50 percent unemployment, it is 100 percent 
unemployment to you.
    We all remember, Mr. President, the stimulus pitch, a 
promise that unemployment would never rise above 7.8 percent 
and the stimulus would save 3\1/2\ to 4 million jobs. By the 
President's own metrics, this policy has been an abject 
failure.
    Vice President Biden, who is responsible, has in fact been 
the chief mis-reader of the economy by his own statements. If 
he had ever met with the chairman and myself on this issue, we 
certainly would have told him that, in fact, we needed to work 
more closely together and we needed not to predict these 
numbers without science.
    Then the same economists that misread the economy are 
creating a policy of miscalculation of what to do next, and 
steps in the recovery will clearly be in the wrong direction. 
The administration continues to misread the economy and 
misunderstand the nature of economic growth. They also continue 
to mislead the American people with the faulty jobs claims that 
missed the steps that the country needed for an economic 
recovery.
    The administration continues to rely on the discredited 
economic theory that puts misplaced belief in Government 
spending on pet projects and, in this case, taking credit for 
jobs saved that are substantially Government jobs. School 
teachers are important, Federal workers are important, but that 
is really where this has gone, rather than to the economic 
growth that this country is famous for.
    Unfortunately, the main thing about the stimulation of the 
policy is in fact the size of Government. Reports indicate that 
over half the jobs claimed so far have been in the public 
sector. The Federal Government stands to grow by 140,000 
permanent jobs by 2010. Clearly, the Federal Government is not 
feeling pain. Unemployment here in the Nation's Capital is 4 
percent.
    And we have to keep in mind that taxpayers' money is, in 
fact, by definition, always being wasted in Government 
programs. We try to keep it to a minimum. Clearly, it happens. 
If our stimulus had been one in which we allowed the American 
people to make their own determinations and simply supported 
them in that through investment tax credits and other systems 
that have historically worked, we would be only having the IRS 
making sure they truthfully made the investments; we wouldn't 
be trying to figure out where the California 99th Congressional 
District is--which, by the way, I hope it is a Republican 
district.
    Perhaps most relevant to today's hearing is the fact that 
the administration continues to try to cover up its mistakes 
with misleading job claims. Recovery.gov currently proclaims 
640,329 jobs have been created or saved by the stimulus. While 
the administration has continued to brag about this number as a 
fact, reports have indicated that it is wildly inaccurate.
    The whole jobs created/saved metrics is not only troubled, 
it is entirely deceitful. No Government agency, private sector 
group, or research economist has any idea what the reliable 
calculation track for these numbers would be.
    Mr. Chairman, I would like to put up at this time the 
Oxford English Dictionary's definition of propaganda. 
``Propaganda, a noun: information, especially of a biased or 
misleading nature, used to promote a political cause or point 
of view.''
    Mr. Chairman, it is very clear today, not by the witnesses 
here, not by, in fact, Recovery.gov directly, but by how this 
is being treated, how these jobs are being continued to be 
claimed, and how in fact we are dealing with 3.8 million lost 
jobs, and yet we are told to focus on the 640,000 saved jobs 
and how much worse it would be.
    Mr. Chairman, that is propaganda, plain and clear. The 
administration has to go back to the facts. As I said in the 
first part of my opening statement, I support the work of 
Recovery.gov trying to bring the facts to us and recognize 
there will be mistakes, but the fact is they have no idea how 
many jobs have been saved or created.
    With that, I yield back, Mr. Chairman.
    [The prepared statement of Hon. Darrell E. Issa follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Towns. Thank you very much.
    Now we will move to our witnesses.
    Mr. Earl Devaney is the chairman of the Recovery 
Accountability and Transparency Board--some people refer to it 
as ``RAT''; I am not going to call it RAT--which is the body 
created by the Recovery Act to ensure transparency in the use 
of Recovery funds and prevent the waste, fraud, and abuse of 
those taxpayer dollars. Prior to being named as chairman of the 
Recovery Board, Mr. Devaney served as the Inspector General of 
the Department of the Interior. Mr. Devaney has also served as 
the Director of the Office of Criminal Enforcement, Forensic 
and Training for the Environmental Protection Agency, and as an 
officer in the Secret Service.
    Welcome, Mr. Devaney. Look forward to your testimony.
    Mr. Devaney. Thank you, Mr. Chairman.
    Chairman Towns. Mr. Gene Dodaro is the Acting Comptroller 
General of the Government Accountability Office. Mr. Dodaro has 
held this position since March 13, 2008. Mr. Dodaro's career is 
well seasoned, spanning over 30 years of service at GAO. Over 
the course of the last 9 years, Mr. Dodaro has held a number of 
key senior level positions, including Chief Operating Officer 
and Head of the GAO's Accounting and Information Management 
Division.
    Welcome, Mr. Dodaro.
    The Honorable John Porcari is the Deputy Secretary of 
Transportation and is responsible for managing the day-to-day 
operations of the Department. Previously, Mr. Porcari served as 
Secretary of Maryland's Department of Transportation and was 
Assistant Secretary of Economic Development Policy at the 
Maryland Department of Business and Economic Development.
    Welcome, Mr. Porcari.
    The Honorable Anthony Wilder Miller was confirmed in July 
as the Deputy Secretary of Education. Mr. Miller serves as the 
Department's Chief Operating Officer. Deputy Secretary Miller 
has previously worked with the Los Angeles Unified School 
District, the Santa Monica-Malibu Unified School District, and 
served as an ex-officio member of the Board of Education for 
the city of Los Angeles Budget and Finance Committee.
    We welcome you to this hearing today.
    As a longstanding procedure, we always swear our witnesses 
in, so if you would be kind enough to stand and raise your 
right hands.
    [Witnesses sworn.]
    Chairman Towns. You may be seated.
    Why don't we just go right down the line? We will start 
with you, Mr. Dodaro, and just come right down the line.

   STATEMENTS OF GENE L. DODARO, ACTING COMPTROLLER GENERAL, 
   GOVERNMENT ACCOUNTABILITY OFFICE; EARL DEVANEY, CHAIRMAN, 
RECOVERY ACCOUNTABILITY AND TRANSPARENCY BOARD; ANTHONY WILDER 
  MILLER, DEPUTY SECRETARY, U.S. DEPARTMENT OF EDUCATION; AND 
     JOHN D. PORCARI, DEPUTY SECRETARY, U.S. DEPARTMENT OF 
                         TRANSPORTATION

                  STATEMENT OF GENE L. DODARO

    Mr. Dodaro. Thank you, Mr. Chairman. Good morning to you, 
Ranking Member Issa, and members of the committee. I am very 
pleased to be here today to have the opportunity to talk about 
GAO's views and suggestions regarding the first set of 
recipient reports filed under the Recovery Act.
    Given the national scope of this activity and the 
relatively limited timeframe to stand up the original reporting 
system, we think it was a good first start. However, there are 
a number of significant data quality and reporting issues that 
must be addressed.
    Based on our initial analysis, for example, of the data 
base that was released on October 30th, we found that there 
were some erroneous or questionable information in the data 
base that merits additional scrutiny. For example, we found 
about 4,000 reports that had no money expended, but yet claimed 
over 50,000 FTEs that had been reported. There are other 
reports where money has been expended but no FTEs have been 
reported under those reports. So this needs additional scrutiny 
and examination to determine the validity of that information.
    Second, the coverage. OMB estimates that about 90 percent 
of the recipients reported, but questions remain about the 
remaining 10 percent of the recipients that should have 
reported but potentially did not. There are also questions 
about the quality of the review that was done by Federal 
departments and agencies, and by prime recipients. While over 
75 percent of the reports were reviewed by Federal agencies, 
close to 1 in 5 were not, and far fewer reviews were done and 
documented in the system by the prime recipients. So that needs 
further inquiry and investigation as well.
    Another problem that we identified--and this was a fairly 
significant one--dealt with the different interpretations of 
full-time equivalent positions that were due to be reported. 
There was a lot of inconsistent application regarding this, 
especially as it related to the time period in which people 
made the calculations. This area, because of the different 
interpretation, really compromises the ability to aggregate the 
information across the recipient reports.
    We made a series of recommendations to OMB to work with the 
Recovery Board and Federal departments and agencies. First is 
to clarify and standardize the definition of full-time 
equivalent positions and set a standard period of measurement 
so the information can be collected and accumulated 
consistently and properly. Also, to be clearer in the guidance 
about the fact that the reporting focuses on hours worked that 
need to be reported in a consistent manner.
    We also believe that, given the issues that we and others 
have identified, that OMB should work with the Federal agency 
establishment and with the prime recipients to review lessons 
learned under this first reporting exercise and re-evaluate 
their quality assurance and reporting approaches to make 
necessary modifications to ensure that these data quality and 
reporting issues are addressed successfully.
    Because this is a cumulative reporting approach and GAO is 
required to review each of the quarterly reports that are filed 
by the recipients act, we will be following up on this, 
conducting additional analysis and making further reports to 
this committee and to the Congress regarding the extent to 
which these data quality reporting issues are addressed. I 
think it is important to address these issues both for the 
current set of recipients that are filing reports, but also 
there will be new recipients that did not have to file reports 
now. As the Recovery money gets spent over fiscal year 2010 and 
2011, there will be many more recipients filing, and those 
areas need to be addressed as well to prevent future problems 
from emerging in this area.
    So I thank you very much, Mr. Chairman, for the opportunity 
to summarize our findings. I would be happy to respond to 
questions at the appropriate point in time.
    [The prepared statement of Mr. Dodaro follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Towns. Thank you very much, Mr. Dodaro.
    Chairman Devaney.

                   STATEMENT OF EARL DEVANEY

    Mr. Devaney. Thank you, Mr. Chairman, Ranking Member Issa, 
and members of the committee. Thank you for the opportunity to 
appear before you today to discuss the activities of the 
Recovery Board and, in particular, the recipient reporting 
period that just ended October 30th.
    After I have made my opening remarks, I would be glad to 
answer any questions you might have.
    Much has transpired since the last time I testified before 
this committee in March, but I will start with a discussion of 
recipient reporting. Overall, the Board's two Web sites, the 
inbound reporting Web site, FederalReporting.gov, and the 
public facing portal, Recovery.gov, worked together as intended 
during this first reporting period. On October 1st, recipients 
of Recovery funds began reporting on their use of the funds, 
and between October 1st and October 30th over 130,000 prime and 
subprime recipient award reports were filed.
    Since this was the first time that recipients were 
submitting data reports and some States had been encountering 
technical challenges in filing bulk reports for the recipients, 
the Board decided to have a 10-day grace period where late 
filers were permitted to submit their required quarterly 
reports after the due date. However, they also were required to 
explain their reasons for the delayed reporting.
    Beginning October 11th, OMB and the awarding agencies began 
the review of the recipient reports, providing comments and 
posing questions to recipients. Following this data quality 
review, prime recipients and subrecipients worked to make 
corrections identified by the awarding agencies. As a result, 
about 21 percent of the recipient reports were modified. These 
changes are chronicled on a separate Web page for all users to 
see and are downloadable for more experienced users.
    While there were very few technical difficulties with the 
reporting process, that is not to say that recipients did not 
encounter problems either in reporting or their ability to 
digest the guidance. As you undoubtedly know, OMB created a 
large amount of guidance on reporting. However, there were 
apparently still some reporting questions the recipients were 
unable to solve, as GAO chronicled in their most recent report. 
Accordingly, we will continue to play an active role with OMB 
in crafting solutions to help resolve those reporting problems.
    Mr. Chairman, I believe these reporting problems can be 
divided into two categories: inaccurate data and non-
compliance. First, the data reported was riddled with 
inaccuracies and contradictions. For example, a misplaced 
decimal made it look as though a company had been awarded a $10 
billion contract, when it had really been awarded a $10 million 
contract. Another obvious error, more than one entity put 
dollars awarded in the data field for jobs created or saved. 
Even more notorious were significant errors relating to 
congressional districts.
    These mistakes do not surprise me, however, and in a way 
they are not unequivocally bad. In reality, this data should 
serve in the long run as evidence of what transparency can 
achieve. In the past, this data would have been scrubbed from 
top to bottom before its release and the agencies would never 
have released the information until it was near perfect. You 
and the American public are now seeing what agencies have seen 
internally for years.
    And what we are all seeing, at least following this first 
reporting period, is not particularly pretty. This raw form, 
unsanitized data may cause embarrassment for some agencies and 
recipients, but my expectation is that any embarrassment 
suffered will encourage self-correcting behavior and lead to 
better reporting in the future.
    In addition to incorrect data, the second major reporting 
problem was the considerable amount of non-reporting. The Board 
believes that the number of non-reporting recipients exceeds 
early OMB estimates, but we have not yet received their list. 
Given my decades of law enforcement experience, it should come 
as no surprise to anybody that I personally favor a penalty of 
some sort for non-compliers. The Recovery Act prescribes no 
penalties for failure to report, but perhaps an amendment to 
that effect would be something for Congress to consider.
    Even if criminal penalties are not practical, the fact that 
some would willfully not file is distressing and must be 
addressed. Agencies, at a minimum, will need to decide what 
actions they are willing to take to ensure the transparency and 
accountability aims of the Recovery Act are not disregarded. 
Perhaps an agency could refuse to provide any additional funds 
to a non-compliant recipient or demand that non-compliant 
recipients return funds not yet spent.
    For the Board's part, we intend to post those recipient 
names prominently on Recovery.gov. Although the Web site 
presents the most visible aspect to the Board's work, the 
transparency it provides is only half of the Board's dual 
mission of transparency and accountability. Over the past 
several months, we have also made great strides in furthering 
our goal of accountability and oversight.
    Simply stated, the Board will now be utilizing recently 
procured software tools and analytical tools to provide an in-
depth fraud analysis that interfaces with 8\1/2\ million public 
records with the recipient data to help identify non-obvious 
relationships. We believe these non-obvious relationships will 
unveil facts that may have not been transparent to Government 
officials at the time the contract or grant award was made. 
Today, I can assure you that every recipient of a contract, 
grant, or loan under the Recovery Act is being processed 
through this sophisticated multifaceted system.
    To further assist our accountability mission, the Board has 
implemented a robust hotline solution where citizens can reach 
us by phone, electronically, fax, or regular mail. To date, we 
have received more than 350 citizen complaints. As you might 
expect, not all of those complaints have concerned actual 
fraud, waste, or mismanagement, but those that did have been 
referred by our hotline staff to the appropriate IG for further 
inquiry. Meanwhile, the rest of the IG community has been 
working diligently to manage its Recovery-related oversight 
responsibilities with approximately 77 investigations having 
been opened and more than 390 audits, evaluations, and reviews 
underway.
    Mr. Chairman, I would like to conclude my oral remarks 
today with a thought about transparency. I believe that the 
principal downside of transparency is embarrassment, and there 
is enough of that here to go all around. All of those involved, 
including the Board I chair, will need to dedicate themselves 
to improve the quality of the data in the days and the weeks 
ahead. However, if I have learned anything yet about 
transparency, it is that it is harder to practice transparency 
than it is to talk about transparency. It is definitely not 
something for the faint of heart.
    Mr. Chairman, I will now be glad to answer any questions 
you might have.
    [The prepared statement of Mr. Devaney follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Towns. Thank you very much, Mr. Devaney.
    Deputy Secretary Miller.

               STATEMENT OF ANTHONY WILDER MILLER

    Mr. Miller. Thank you, Chairman Towns, Ranking Member Issa, 
and members of the committee.
    The American Recovery and Reinvestment Act provides nearly 
$100 billion in funding to the Department of Education. This is 
to help avert layoffs of teachers, school personnel, and other 
public employees, while advancing critical education reforms. 
We have distributed more than $67 billion of these funds and 
recipients have reported saving or creating almost 400,000 
jobs, including jobs for more than 300,000 teachers and others 
in public schools and in our colleges.
    The first Recovery Act funds released were supplements to 
existing formula grant programs such as Title I and the 
Individuals with Disabilities Education Act. These programs 
have well developed monitoring systems and regulatory 
requirements that control expenditures, thus minimizing the 
risk of misuse.
    The next round of awards were made under the State Fiscal 
Stabilization Fund. This Fund was used to support grants to 
help stabilize State and local government budgets in order to 
minimize reductions in education and other essential public 
services. This was done in exchange for a commitment to advance 
central education reforms.
    We were able to obligate these funds quickly by taking 
advantage of the Department's existing grant administration 
systems and working closely with OMB to ensure compliance with 
the statutory requirements. A percentage of the Stabilization 
Fund was withheld for a Phase Two application, which requires 
States to be transparent about their education reform efforts.
    Governors will need to provide data on four key areas of 
school reform, as outlined by Congress in the Recovery Act. 
Those are achieving equity and teacher distribution, improving 
the collection and use of data, implementing high standards and 
high quality assessments, and turning around our most 
struggling schools. The Phase Two requirements were published 
in the Federal Register on November 12th and applications are 
due on January 11th.
    The remaining Recovery Act funding, which is yet to be 
released, is for discretionary grants, including the ``Race to 
the Top Fund'' and the ``Investing in Innovation Fund.'' The 
requirements for Race to the Top were posted on the 
Department's Web site on November 12th and applications are due 
on January 19th.
    The Department is continuing to work hard to provide 
guidance and technical assistance to our grant recipients on 
the reporting requirements. We publish detailed official 
guidance and are holding biweekly Webinars and conducting 
significant outreach with State and local leaders to ensure 
that recipients are well aware of the Recovery Act's unique 
reporting requirements. We are keeping the lines of 
communication open with grantees and, when clarification is 
needed, we are responding quickly and publicly.
    To ensure adequate financial systems and control of these 
funds, the Department utilizes its centralized Grants 
Administration and Payment System [GAPS]. At any time we know 
exactly how much funding has been awarded to any grantee and 
how much funding has been drawn down. With GAPS, we not only 
screen any grantee requests for funds to be drawn down, but we 
also require grantees to certify that they will use the funds 
within three business days, as required by the Cash Management 
Improvement Act.
    GAPS also has an excessive payments monitoring feature that 
requires Recovery Act payments over a set amount to be approved 
by the program office before those funds can be drawn down. 
That is opposed to be drawn down automatically. We are 
expanding this process to apply to Department funds, not just 
Recovery Act funds.
    In our ongoing effort to prevent waste, fraud, and abuse of 
Recovery Act funds, our Office of Inspector General is a 
significant asset. Our OIG has held more than 160 meetings with 
State and local officials on issues related to the Recovery 
Act. They have conducted audits in seven States and Puerto Rico 
to assess their internal control systems for administering the 
Recovery Act funds. To ensure that their findings inform 
program implementation, the OIG staff are in regular contact 
with staff offices across the Department to alert them to 
potential issues in the field. OIG intends to initiate 
additional audits in the coming months, increasing its focus on 
the use of funds and data quality.
    The Recovery Act's recipient reporting provides a new tool 
in our efforts to ensure transparency. For the first time, 
grantees are required to provide quarterly reports, as you 
know, that account for their use of these funds. We are making 
considerable efforts to ensure recipients' compliance with the 
reporting requirements and help maximize the accuracy of their 
data.
    Due in large part to our extensive guidance and outreach 
effort, the Department achieved virtually 100 percent 
compliance with the reporting requirements among State 
agencies. A relatively small number of local level recipients 
encountered technical challenges in their reporting efforts and 
the Department is working closely with them and any other 
recipients experiencing difficulties, to ensure full compliance 
in the next round of reporting.
    The Department has forwarded to the Recovery Board any 
significant errors and material omissions that have been 
corrected, such as discrepancy in award size or funding agency. 
In instances where job data was flagged as being outside of the 
anticipated range, the Department has notified the recipient of 
the concern, provided a link to the relevant guidance, and 
maintained a record of how the guidance was being interpreted 
so that it can be clarified in the coming months. We will also 
develop a lessons learned document and begin another round of 
outreach in advance of the next period of reporting.
    In summary, as we work to refine the data reporting 
process, it is important to recognize the impressive level of 
transparency that has already been achieved. Every parent can 
go to Recovery.gov and see how much Recovery Act funding their 
school district has received. If any vendor receives more than 
$25,000 in payments, that information is available as well. 
This transparency provides an important tool for taxpayers to 
see how public funds are being used in their community and is a 
significant deterrent against fraud.
    In closing, I believe that the Department has been highly 
effective in implementing and overseeing its Recovery Act 
funds. We have received considerable feedback from our grantees 
on the guidance we have provided. We will continue to work to 
improve data quality and further the unprecedented level of 
transparency. Moreover, we are confident that the Recovery Act 
has succeeded in keeping hundreds of thousands of teachers and 
other staff in schools, helping to ensure that, despite the 
significant budget crisis that States face, our children can 
continue to get the education they need and deserve to prepare 
them for the future.
    Thank you again, and I would be happy to answer any 
questions.
    [The prepared statement of Mr. Miller follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Towns. Thank you very much, Secretary Miller.
    Deputy Secretary Porcari.

                  STATEMENT OF JOHN D. PORCARI

    Mr. Porcari. Chairman Towns, Ranking Member Issa, and 
members of the committee, thank you for having me here today. 
Let me begin by sharing information about our progress in 
implementing this historic legislation.
    The Department of Transportation received $48.1 billion in 
resources to support infrastructure improvements and create and 
sustain jobs throughout the transportation sector. In the 38 
weeks following enactment, we have obligated a total of $30.3 
billion on more than 10,000 projects nationwide. More than 
$5\1/2\ billion of these resources have been expended and more 
than 6,500 projects are underway or completed.
    In addition, work is underway to prepare for the award of 
$8 billion that the Recovery Act provided for high-speed 
passenger rail. On a parallel track, we are internally 
reviewing the applications for the $1\1/2\ billion provided to 
the Department in discretionary grants. We expect to award 
these grants in January 2010, ahead of the February 17th 
deadline. Overall, the Department has made substantial progress 
in implementing the Recovery Act, and the Secretary and I are 
very proud of these accomplishments.
    Recovery Act funds are improving our transportation 
infrastructure, while putting people back to work in cities and 
counties throughout the Nation. As I travel around the country, 
I have talked with construction workers who have shared with me 
how difficult it was to provide for their families until they 
were employed or re-employed after being laid off on a Recovery 
Act project.
    This program has been an economic lifeline for people like 
Brandon Nessler, a constructionsite foreman from Wisconsin who 
was laid off last year after 18 years of service, until a 
Recovery-funded project put him back to work full-time, 
overseeing grading work on I-94.
    Allison Barber, a new college graduate with a degree in 
construction management, had few job prospects until a 
construction company hired her as a full-time foreman on a 
major road project in Colorado.
    These workers and many thousands like them can look forward 
to a paycheck and ensure that their families have the resources 
they need.
    There is no question the Recovery Act is working as 
intended, putting Americans to work while making long-term 
investments in our infrastructure. Equally important is DOT's 
commitment to ensuring that all these funds are spent wisely, 
that the program meets all federally reporting requirements, 
and that we are able to share accurate information with the 
American people about our progress.
    The Recovery Act requires, among other things, that funding 
recipients provide independent reports of the numbers of direct 
jobs created and other project-related information. Section 
1512 of the Recovery Act requires recipients to report this 
information as of September 30, 2009, and then again at the end 
of each subsequent quarter through fiscal year 2010.
    Given that this reporting process was new for the recipient 
community, the Department of Transportation staff reached out 
to the State DOTs, affected Transit and Airport Authorities, 
and Amtrak to assist them in understanding the reporting 
guidelines provided by the Office of Management and Budget. We 
also conducted a series of Webinars and other training sessions 
to provide recipients with information needed to comply with 
the Section 1512 requirements. DOT staff continued to provide 
support to these recipients until the reporting data base was 
closed on October 20th.
    As a result of these efforts, the recipient community for 
DOT reported 45,250 direct jobs created. DOT contractors 
reported more than 1,000 additional jobs. More than 96 percent 
of our recipient community successfully reported their data in 
the reporting system.
    Overall, we are pleased with the Section 1512 reporting and 
anticipate even more success in the future quarterly reporting. 
We are in the process of contacting the recipient community to 
identify any errors that could be corrected in the next 
reporting cycle. In addition, we are asking for their help in 
identifying recommended process improvements and lessons 
learned to simplify future reporting.
    As we begin planning for the next Section 1512 reporting 
cycle, in January 2010, we will buildupon our initial training 
and outreach efforts to help ensure success with the future 
recipient reporting requirements.
    This concludes my testimony, and I would be pleased to 
answer your questions.
    [The prepared statement of Mr. Porcari follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Towns. Thank you very much. Let me thank all of 
you for your testimony. We will start the questioning and I 
will start off.
    Let me direct this to you, Mr. Dodaro, and also to you, Mr. 
Devaney. We all know how important this is, but is it really 
creating jobs, jobs being created out of the stimulus package?
    Mr. Dodaro. Well, I think it is clear that the use of the 
money is intended for that purpose. The real question that we 
are looking at in this case is what is the accuracy of the 
information that is being reported; and the accuracy of the 
information needs to be improved. That, I say, would be the 
bottom line because----
    Chairman Towns. But you do think jobs are being created?
    Mr. Dodaro. Well, the funds are being used for the 
appropriate purposes, from what we have seen. But the question 
is how many jobs are being created or not. There are several 
dimensions to this. First of all, of the $787 billion that is 
estimated to be spent, as of the reporting period here, only 22 
percent of that amount of money had been spent as of September 
30th, $173 billion.
    Point No. 2 is that was spent both in the tax cuts, the 
entitlement programs, unemployment insurance, Medicaid and 
others, and then in grants, contracts, and other things. The 
recipient reports only deal with the grants and contracts. So 
of the $173 billion that has been spent under the Recovery Act, 
only $47 billion is subject to the reporting requirements under 
the act. So even if you get an accurate count under the 
recipient reports, it is still a subset and it only focuses on 
job creation.
    We believe we made good recommendations to improve the 
accuracy so that there is a better basis for making informed 
judgments about how many jobs were created or saved.
    Chairman Towns. Mr. Devaney.
    Mr. Devaney. I think I would agree totally with that. I 
think there is probably no doubt jobs are being created or 
saved, it is just the number and the accuracy of the number. We 
have a number; it is based on what the recipients told us their 
interpretation of the guidance was. And as the Acting 
Comptroller suggests, that guidance needs to be clarified in a 
big way, in a big hurry to help recipients be a lot clearer the 
next time they report.
    I have no doubt that there are a lot of jobs being created. 
I think it could above or below 640. I think missing reports 
might drive the job numbers up, and I think there are enough 
inaccuracies in here to question the 640 number. It might go 
down. So somewhere in the middle there is a balancing act, and 
as the quarters go on and as the accuracy gets better and 
recipients get better at reporting accurately, I think we will 
get a much better picture. This was the first time and there 
were a lot of challenges for both recipients and agencies, and, 
quite frankly, for my Board. So my hope is that, as we go 
forward, this is all going to get better.
    Chairman Towns. You know, the non-compliance, do you think 
that is the fact in terms of the lack of staff or being an 
unfunded mandate? What do you think really creates the non-
compliance? Do you think that they are overworked, the request 
is just too much for them to handle at this time? I am trying 
to get a handle on this because I like the idea you indicated 
of maybe some kind of penalty. As you know, the ranking member 
and this committee has put forth legislation trying to create 
some relief, and, of course, that is another reason why I have 
interest in this, and, of course, maybe get your response even 
to our legislation.
    Mr. Devaney. I think there are probably a number of reasons 
why recipients didn't report. It could be as simple as they 
didn't want to, or they were confused and didn't know they had 
to. There are no penalties, and in that kind of a situation, 
just my enforcement background leads me to believe penalties 
are a deterrent effect, and if there were some I think we would 
have gotten better compliance.
    But the fact is I am still trying to get a handle on how 
many didn't. I think Mr. Dodaro suggested that it may be as 
high as 10 percent. I am in that range. We are in that range 
ourselves. That is a little higher than what OMB's early 
estimates are, but I am waiting for that list.
    Chairman Towns. OK, Mr. Porcari, you indicate your 
situation has been very different. I understand you said 96 
percent?
    Mr. Porcari. Yes, Mr. Chairman. Of our 1,037 recipients 
that were required to report, 96 percent did, and I would point 
out that they are widely varying in capabilities. Some were 
very large State DOTs; we also had municipalities like High 
Point, NC, where you had one person who was planning, 
designing, bidding the project, and doing all the reporting 
requirements. We believe that is one of the reasons that 4 
percent were not able to report.
    Chairman Towns. I yield to the gentleman from California, 
the ranking member, 5 minutes.
    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Devaney, Secretary LaHood said we know for a fact that 
Recovery Act investments have created or saved more than 
640,000 direct jobs so far. These are real, identifiable jobs 
directly funded by the act. Can you support that?
    Mr. Devaney. Well, I think, sir, it may be a fact that is 
what is my Web site, but that may not be the correct number.
    Mr. Issa. So to characterize, he may have been a little 
overzealous in saying real, identifiable, direct; and, in fact, 
it is just a damn estimate, isn't it?
    Mr. Devaney. It is what the recipients reported.
    Mr. Issa. OK. I was reminded, by the way, that when a fish 
hits a wall, he says dam. That is what we are talking about 
here.
    OK, so going through a couple of slides, the White House 
Press Secretary, Robert Gibbs, on October 30, 2009, says the 
direct jobs in that is, again, 640,329, referring to 
Recovery.gov.
    Same day, Vice President Biden's Chief Economic Advisor, 
those jobs accumulate to 650,000 jobs saved or created so far.
    Same day, Vice President Joe Biden, when the data is posted 
later today, it will show that we have created or saved 640,239 
jobs directly from contracting authority with the Federal 
Government.
    Last slide, CNN, headline, ``Stimulus Creates 640,000 
Jobs.''
    Pull up the propaganda again.
    Is there any reason, when you don't know what the number 
really is, that it is just an estimate, that, in fact, there is 
about 60,000 jobs you pulled off, and you didn't even pull off 
the 26,000 jobs the University of California says it claims, 
which would be half of its employees were saved by this act, 
and they don't have a net new hiring, so you had to save 
existing employees, half of them, isn't that just propaganda? 
Isn't it either misleading or designed to serve a political 
agenda, when in fact it can't be substantiated, it is not true 
and it is either misleading or designed to say we are doing a 
great job, when in fact we don't know?
    Mr. Devaney, you are the most honest man I know. Without a 
whole lot of in between, shouldn't we be more conservative and 
say, look, this is what the reports are. We are scrubbing it. 
This is a new system; it has its problem; we hope that at least 
they are reporting the dollars right and we have; and we have 
no idea whether those people have the ability to calculate 
accurately the full-time job equivalents, but we are going to 
get to the bottom of it. Wouldn't that be a fairer way to put 
it?
    Mr. Devaney. I like that statement.
    Mr. Issa. Thank you, Mr. Devaney.
    Now, I said, to begin with, that I commend you for what you 
are doing, and I am going to concentrate really on the fact 
that we know that the output is propaganda; we know we lost 3.8 
million jobs; we know, for example, Secretary Miller, when he 
says he saved 300,000 jobs, these are simply transfers to pay 
for teachers. So it is not created, it is simply they are 
alleged not to be laid off. The money was moved to other parts 
of the budgets, so those teachers kept their job and the State 
spent the same money they would have spent on teachers 
somewhere else. That is the reality of those 300,000 jobs.
    So now let's get down to the real question, which is, can 
you, with the money you have, Mr. Devaney, improve your site to 
have back engine capabilities, so that when somebody puts an 
erroneous number in, when somebody puts in a number that 
doesn't jive with what they were given, when somebody puts in a 
congressional district that doesn't exist--and I know you have 
scrubbed that now--but can you have the engine fact check it so 
that it comes back and says, hold it, you have these 
corrections?
    When I try to put the wrong credit card number in, I get a 
bounce back when I try to buy online. Can you do that with the 
money you have today, or should Congress be giving you more 
dollars so that your prototype for online reporting in 
Government can become robust enough to be everyone's prototype?
    Mr. Devaney. I think we can do that, sir, and I don't think 
we need any more money to do it. To be quite honest with you, I 
think we needed this first quarter to totally understand which 
pieces of the data were going to cause the most problems. So 
now that we know, we are doing that analysis. We certainly 
intend to build what we call internal logic checks into the 
system. So, for instance, if congressional district that is 
selected does not correspond with the zip code that is also put 
in there, there is a bong that goes off somewhere and the 
recipient is asked to spend some more time and come up with the 
right congressional district.
    Mr. Issa. One quick last followup. Will you also be 
producing the kind of software that would allow a single 
recipient trying to do their job and report properly to be able 
to do it at little or no cost? Will you create that so that the 
downstream--because I know the Department of Transportation, 
most of those people reported because they are used to 
reporting, it is pretty similar to what they have been doing. 
Can you create the ability to enable more and more people to be 
able to report accurate by delivering additional capability to 
them downstream? Is that part of your plan?
    Mr. Devaney. Well, we certainly work literally constantly 
with the States. Bear in mind, on this first reporting, 31 
States chose to do bulk reporting and literally report for 
everybody in their State, all the recipients; and that actually 
enabled us to work with the people that were doing the 
reporting. I think it worked well. I think there were problems 
encountered that we resolved rather quickly. So, yes, it is a 
constant ongoing dialog we are having with States and 
recipients how can we make it better for you; and to the extent 
we can, we will.
    Mr. Issa. Thank you.
    Thank you, Mr. Chairman.
    Chairman Towns. Thank you very much.
    The gentleman from Massachusetts, Mr. Tierney.
    Mr. Tierney. Thank you, Mr. Chairman.
    First of all, I want to thank everybody for their testimony 
here today. This is a difficult job that you all have, but I 
think the transparency issue is critical, and I suspect that 
the American people are grateful for it. The Recovery Act funds 
are going to amount, apparently, to about 10 percent of our 
deficit over the next 10 years.
    I wish that we had given scrutiny to the other 90 percent, 
which, of course, comes from the $1 to $3 trillion spent on the 
Iraq war, which obviously wasn't very well accounted for; what 
will probably amount to over $4 to $5 trillion for the 2001-
2003 tax cuts which weren't paid for; and we can go on and on 
with what brought us to this point. But I think it is very 
important that we have this transparency and accountability, 
and I think all of you for doing that.
    Let me ask you, Mr. Devaney, the Recovery and Reinvestment 
Act contained certain Buy American requirements that was 
intended to ensure that the stimulus money was spent on U.S. 
companies. It also allowed for agency heads to waive those 
requirements if it met certain criteria. I wanted to know 
whether or not you were aware that five agencies have granted 
more than two dozen exceptions to that Buy American rule.
    Mr. Devaney. I am aware that agencies are giving waivers.
    Mr. Tierney. Is it concerning to you at all that the 
information about those waivers is not really available on 
Recovery.gov?
    Mr. Devaney. I think that is something we should probably 
get and put on Recovery.gov.
    Mr. Tierney. So, if I am clear, in your opinion, at least, 
it would increase transparency on the use of the Recovery funds 
to have the information on those waivers and the rationale and 
the amount that is expected to be made on foreign-made goods 
noted publicly on Recovery.gov?
    Mr. Devaney. I agree with that.
    Mr. Tierney. Thank you.
    Mr. Dodaro, did you find that there was inadequate 
monitoring of subrecipients by the States?
    Mr. Dodaro. We are continuing to look at that issue. We do 
the bimonthly reviews on the use of the money. There have been 
some concerns that we have reported in our earlier reports 
about the need to have better reporting or to ensure reporting 
on subrecipients. So we are continuing to look at that issue as 
part of our bimonthly reports on the uses of the money by 
selected States and localities.
    Our next scheduled report there is due in early December, 
so we will be talking about that then. For this report we 
focused on analyzing the data base of the recipient reports. 
But we are very much attuned to that issue; it is very 
important, particularly where there are known reporting issues 
or known problems with some subrecipients.
    For example, HUD has identified high-risk subrecipients in 
the public housing authorities. There are some concerns in the 
local education agencies. So we are looking to see what the 
Federal agencies are doing, what State auditors are doing, and 
State program officials to monitor the use of the money at 
subrecipients.
    Mr. Tierney. Great. Thank you, sir.
    Mr. Miller, will the Department proactively review the 
State subrecipient monitoring plans and will they audit any of 
the States to determine whether or not those plans are accurate 
or flawed?
    Mr. Miller. As part of our guidance, we will be working 
with OMB to develop the final guidance. Even in this period we 
had 25 staff working during the review process, reaching out to 
all 50 States to help convey the guidance and understand the 
issues. So we will continue to build on that effort. To the 
degree that subrecipient issues have been identified, we will 
continue to work with them to resolve the subrecipient 
reporting issues as well.
    Mr. Tierney. Thank you.
    Mr. Porcari, how has transportation been monitoring the 
subrecipients of the act?
    Mr. Porcari. Congressman, we have been directly working 
with the recipients and, in turn, asking them to make sure 
their subrecipient data is correct. We are relying on the 
recipients to have correct data from their subrecipients.
    Mr. Tierney. Chairman Devaney, do you find that the lack of 
resources for the States has impacted their ability to report 
on the subrecipients, their inability to have the Inspectors 
General or other auditing facilities?
    Mr. Devaney. Sir, I think it creates an enormous challenge 
for the States. I will give you an example. I went out to 
Colorado when they were reporting, and I walked by a football-
sized field of empty cubicles. They had literally laid off a 
good part of their staff; they were facing a furlough the next 
week, and they had to report in 3 days. And they had regular 
State work as well.
    So there are challenges out there; States are hurting. 
There is no doubt that they made a Herculean effort to try and 
report on time, and that is why I felt a grace period for late 
reporters was appropriate in this first reporting cycle, and 
maybe another, because I think they are doing their best, but 
there are enormous monetary challenges out there.
    Mr. Tierney. Thank you.
    Mr. Dodaro.
    Mr. Dodaro. Congressman Tierney, we have been very 
concerned about the ability of the States and the auditors to 
oversee the funding. We have raised that issue in our earlier 
reports on the bimonthly reviews of the use of the money. A 
number of States are under fiscal stress; they have been 
cutting back in some of these administrative areas.
    We have recommended that the Congress allow a certain 
percentage of the money to be used for administrative oversight 
and auditing of those funds; we think it would be a prudent 
investment given the size of this whole endeavor. And I know 
this committee had passed legislation that has passed the 
House, but it is pending in the Senate right now.
    Mr. Tierney. What a shock to all of us that the Senate 
hasn't acted. [Laughter.]
    Mr. Tierney. Thank you, Mr. Chairman.
    Chairman Towns. Such a shock.
    Congressman Burton from Indiana.
    Mr. Burton. Thank you, Mr. Chairman.
    President Obama brushed off criticism over his 
administration's inaccurate reporting on job creation 
Wednesday, telling Fox News the accounting is an inexact 
science and that any errors are a side issue when compared with 
the goal of turning the economy around. He said job growth is 
his No. 1 responsibility. I think he said something like that 
back in January, and let's just look at what has happened since 
January.
    You want to put that slide up?
    Jobs that they claimed to have been saved or created, 
640,329, and there are 15.7 million Americans unemployed.
    He said he would create 3\1/2\ million jobs, and, instead, 
we have lost 3.8 million jobs. That is a difference of 7.3 
million jobs. And yet this is a side issue, it is not a big 
deal.
    We have authorized $787 billion, and you say you have spent 
$173 billion. I don't know what you have done with the rest of 
that money, but if it is available and it is supposed to 
stimulate job creation, why in the heck haven't you been doing 
it? It makes no sense to me. I mean, we are suffering one of 
the biggest recessions in the history of this country and you 
are telling me, out of the $787 billion, you have only spent 
$173 billion. I just don't understand it.
    And now the administration is talking about another 
stimulus.
    Now, if you take the $787 billion, and you have only spent 
$173 billion, why do you need another stimulus? This just 
doesn't make any sense.
    And then you read that--let me get my glasses here, because 
my eyes aren't as strong as they used to be. Now you have Peter 
Orszag at the White House saying that the Federal Government 
made $98 billion in improper payments, including fraud, abuse, 
and everything else, and they can't document where that money 
went.
    This administration has been an absolute disaster as far as 
the economy is concerned, and now they are coming up with some 
more minor things that they want to do like change the health 
care system and add another $1 to $3 trillion to the deficit. 
The deficit this year is $1.4 trillion, and we are still in the 
current fiscal year. That is over three times what it was when 
my Democratic colleagues were raising cane about it. It was 
$500 billion. They have really outdone themselves. The White 
House has not got it up to $1.4 trillion this year, and we 
still have 10.2 percent unemployed, and it is probably going to 
go up. And you can't document the 640,329 jobs you are talking 
about.
    I feel like I am listening to a baloney factory here, 
because people come down from the White House and they give us 
these figures, and they can't document the figures, and it just 
goes on and on and on. And then the President has the 
unmitigated gall to say job growth is his No. 1 responsibility. 
Where has he been the last 11 months? He said that was the 
first thing he wanted to do, was create jobs in this country, 
and he said he was going to create 3\1/2\ million new jobs. 
Instead, we lost 3.8 million, and we have over 15 million 
people out of work. Unemployment is at 10.2 percent. I have 
said that before, but I will say it again.
    This whole issue is just propaganda. It is political 
hyperbole. He is one of the most eloquent Presidents I have 
ever seen in my life, I have ever heard in my life, but the 
fact of the matter is all he does is campaign; and as far as 
getting results to help this economy, he is doing almost zero. 
Pretty doggone close to it.
    And I think it is just disgusting to me that the American 
people are being told that these jobs are being saved or 
created, and that jobs is No. 1. It is just not so. You can't 
even document these jobs; 640,000 jobs? How do you say a job is 
saved? Somebody just say it. How do you prove that a job has 
been saved? How do you prove that a job has been created when 
unemployment is now 10.2 percent? Anybody.
    Mr. Miller. I think in the case of education, since that 
represents a significant portion of the total jobs reported, I 
think we are confident. There have been many stories, that well 
preceded the reporting period, of layoff notices that were 
rescinded. I have been out talking, again, outside of this 
reporting contest, Ms. Cho, a fourth grade teacher in Los 
Angeles, many teachers who I have met with directly who said 
thank God for the stimulus package, because it, in fact, 
allowed me to save jobs.
    Mr. Burton. Mr. Devaney, can you audit these jobs that have 
been created or saved?
    Mr. Devaney. We are not in a position to audit them, no.
    Mr. Burton. So you can't audit it?
    Mr. Devaney. The jobs that we are reporting came directly 
from the recipients of the Recovery moneys because that is what 
the act said had to happen.
    Mr. Burton. But as far as auditing them, being able to 
document it, it is not really possible.
    Mr. Devaney. Well, it is the responsibility of the agencies 
to ensure the accuracy of those recipient reports, and that is 
what is happening. It is going to take time to get that 
accuracy.
    Mr. Burton. I know I am finished, Mr. Chairman.
    Mr. Issa asked you that question and you said there is no 
way to really prove all these jobs being saved or created.
    Chairman Towns. I can understand the gentleman's 
frustration. Eight years of failed economic policy. I can 
understand your frustration.
    Mr. Burton. You can't think that one up forever, Mr. 
Chairman.
    Chairman Towns. I yield to Congressman Van Hollen of 
Maryland, yield 5 minutes.
    Mr. Van Hollen. Thank you, Mr. Chairman.
    People are entitled to their own opinions, but they are not 
entitled to their own facts, so I think it is important to put 
this in a little bit of context.
    When President Obama was sworn in back in January, this 
economy was in total free fall, it was in collapse. We were in 
a rate of GDP 6\1/2\ negative growth. In that first quarter, in 
January, we saw 700,000 Americans a month losing their job. 
This past quarter, GDP growth, 3\1/2\ percent plus. And while 
it is unacceptable that people continue to lose their jobs, it 
dropped from around 700,000 a month to under 200,000 a month.
    So let's keep this in context. The fact of the matter is 
that the economic recovery plan is working.
    Now, Mr. Dodaro, let me just ask you a couple questions 
with respect to the expenditures. As my colleagues have said, 
the Recovery Plan had $787 billion, but as of today, $173 
billion has actually been expended. Is that correct?
    Mr. Dodaro. As of September 30th.
    Mr. Van Hollen. As of September 30th.
    Mr. Dodaro. That is correct. And we picked that date 
because that was the reporting period for these first set of 
reports.
    Mr. Van Hollen. And I know my colleagues, apparently, from 
their testimony, would like to rush all $787 billion into the 
economic bloodstream immediately, but I think you would agree, 
would you not, that would likely cause a lot of waste in the 
process?
    Mr. Dodaro. That definitely was a concern in the early 
stages, and I might say, in terms of the CBO estimates of the 
stimulus bill before it was passed by the Congress, it was 
clear that the amount of money would be spent out over a 
several year period.
    Mr. Van Hollen. That was planned, was it not?
    Mr. Dodaro. Yes, that is correct.
    Mr. Van Hollen. Thank you. And, as you pointed out, of the 
$173 billion that has been spent so far, the part that is the 
subject of your review and the reporting represented just $47 
billion of that, is that correct?
    Mr. Dodaro. That is correct.
    Mr. Van Hollen. OK. Do you have an economics background?
    Mr. Dodaro. No, but I have plenty of economists at GAO.
    Mr. Van Hollen. All right. So let's put this in context. 
There was also $6.3 billion in what is called entitlement 
spending, for example, for unemployment compensation, is that 
correct?
    Mr. Dodaro. That is correct.
    Mr. Van Hollen. And would you agree that most economists 
say that by making sure people who were unemployed through no 
fault of their own have a little money to spend, that also 
helps them go out and spend money in the economy and helps job 
creation?
    Mr. Dodaro. I think most economists would say that all 
three parts of the stimulus composition would create either 
direct or induce or indirect jobs.
    Mr. Van Hollen. Correct. So when we are talking about 
680,000 with that $47 billion, we are actually under-counting 
the number of jobs that are created as a result of this 
expenditure, isn't that correct?
    Mr. Dodaro. Well, there is no question that the recipient 
reports only entail a subset of the employment effects of the--
--
    Mr. Van Hollen. And based on what you said, it would mean 
that since about two-thirds are expended elsewhere, based on 
your experience and expertise, you would agree that there have 
been more jobs saved or created as a result of those 
expenditures, isn't that the case?
    Mr. Dodaro. Well, what we have said in our report is that 
you need to look at the macro economic estimates that have been 
made as a result of the expenditures in those areas, along with 
the recipient reports, to have a more complete picture.
    Mr. Van Hollen. Right. Let me just read from your report, 
because I think it is important to keep it in perspective. You 
said that this reporting mechanism, which is unprecedented in 
its transparency and accountability, represents a ``solid first 
step in moving toward more transparency and accountability,'' 
isn't that right?
    Mr. Dodaro. That is correct.
    Mr. Van Hollen. Have you ever seen any kind of transparency 
data collection effort of this magnitude in the United States?
    Mr. Dodaro. Not on a national scale like this. And that is 
why we said what we did, because it is national in scope and it 
was in a relatively limited timeframe given the size of its 
charge.
    Mr. Van Hollen. Right. And in addition to the direct jobs--
and these are only supposed to be counting direct jobs--as an 
economist or someone who is familiar with what economists say, 
you would agree that there is also an indirect multiplier, 
isn't that correct?
    Mr. Dodaro. As we say in our report, there are indirect and 
induced----
    Mr. Van Hollen. Of course. And that would obviously add. To 
the extent you have indirect jobs, that is on top of what is 
direct, is that not the case?
    Mr. Dodaro. That is correct.
    Mr. Van Hollen. Thank you.
    Mr. Porcari, before you took your position as Deputy 
Secretary at the Department of Transportation, you were the 
Secretary of Transportation for the State of Maryland, isn't 
that right?
    Mr. Porcari. That is correct.
    Mr. Van Hollen. OK. So you have seen the direct impact of 
the stimulus moneys in the State of Maryland, is that correct?
    Mr. Porcari. That is absolutely true. I have a unique 
perspective on this from the front lines, and I can tell you 
from firsthand experience, Congressman, that before the 
Recovery Act, while it was being considered and immediately 
after it, you could actually see the impact. We had contractors 
that were laying people off. We met with members of the 
contracting community, associations, laid out the timeframe for 
what we expected in the bill and asked them at the time not to 
lay off people because the work was coming.
    Mr. Van Hollen. Would you characterize a job and the 
ability to pay the rent as propaganda?
    Mr. Porcari. No, a job is a job and, in this industry right 
now, those jobs are very precious.
    Mr. Van Hollen. Thank you, Mr. Chairman. I think 
characterizing a real job and the ability to provide your 
family as propaganda is a disservice to the American people. 
Thank you.
    Chairman Towns. I now yield 5 minutes to the gentleman from 
Florida, Mr. Mica.
    Mr. Mica. Well, thank you, and thank you for holding this 
hearing.
    As Deputy Secretary of Transportation in our committee, we 
hold these followup hearings and oversight on transportation 
spending just about monthly, and we are trying to track, we are 
trying to get the money out. There appear to be some serious 
problems with the whole reporting system. Now, I was told that 
the reporting system, software and all, costs--and I am not 
sure about this--is it $73 or $84 million? Do you know, Mr. 
Devaney or Mr. Dodaro?
    Mr. Devaney. The $84 million figure, sir, is----
    Mr. Mica. $84 million?
    Mr. Devaney [continuing]. Is the budget for the Board for 
2\1/2\ years.
    Mr. Mica. The Board is one thing, but you have software 
that has been developed and reporting system and people. Is 
that the whole cost?
    Mr. Devaney. No.
    Mr. Mica. And then I hear there is maybe $10 million that 
you have paid to sort of clean up some of the software 
problems.
    Mr. Devaney. The Board has built two Web sites, one for 
reporting and one for displaying, and the costs for those so 
far is in the vicinity of $9 or $10 million.
    Mr. Mica. $9 to $10 million?
    Mr. Devaney. Right.
    Mr. Mica. OK. And you said there are a couple of problems, 
inaccurate data or noncompliance, those are the major problems. 
It is sort of like garbage in, garbage out.
    Mr. Dodaro, you said that there were 4,000 reports with no 
money spent and accounting for 50,000 jobs. That was one of the 
first things you led with?
    Mr. Dodaro. That is correct, Congressman.
    Mr. Mica. So, Mr. Devaney, if it is garbage in, it is 
basically garbage reported out. Is that the way it is devised? 
There is no qualitative measure of what is coming in done by 
you all, or is there?
    Mr. Devaney. I would say, sir, that there are a lot of 
inaccuracies in this data, and the data was put in by 
recipients. But there are a lot of accuracies in the data as 
well. There are probably----
    Mr. Mica. Well, inaccuracies, though, are simple things 
like--this isn't me or the Republican side, this is ABC News, 
they said it was reported in Arizona's 15th congressional 
district 30 jobs have been saved or created with just a 
$761,000 expenditure in Federal stimulus money. The problem is 
there is no 15th district. We have a multi-million dollar 
system to put the information in and this is the kind of data 
that we are getting in, and we are not getting correct 
information out. How could this happen?
    Mr. Devaney. It happened because a recipient put in the 
wrong district.
    Mr. Mica. So that is the first part. You said inaccurate 
data--the two problems with the system were inaccurate data and 
what was the other one? Non-compliance?
    Mr. Devaney. Right.
    Mr. Mica. OK, the other one is that it was reported non-
compliance 10 percent of the recipients did not even report. Is 
that correct?
    Mr. Devaney. We are trying to find that out, but it is 
probably pretty close.
    Mr. Mica. Well, no, wait. I didn't make that up, I heard 
one of you all say 10 percent of the recipients did not report.
    Mr. Devaney. I think that, if I am not wrong----
    Mr. Mica. That was in somebody's testimony.
    Mr. Dodaro. Congressman Mica, I said that was OMB's 
estimate.
    Mr. Mica. OK. Well, again----
    Mr. Issa. Would the gentleman just yield?
    Mr. Mica. Don't take much of my time, because I was just 
getting started,
    Mr. Issa. When did it become important for someone to know 
what congressional district they were in for reporting? Was 
there a reason that you had to have a congressional district? 
Was that for propaganda purposes?
    Mr. Mica. Well, I am not going to go into that right now, 
but let me take some other sources here. Chicago Tribune, 
garbage in, garbage out. More than 4.7--this is the story. More 
than $4.7 million in Federal stimulus so far has been funneled 
into schools, Mr. Miller, in North Chicago and State and 
Federal officials said that the money has saved 473 teachers' 
jobs. Somebody had to report that. The problem is the district 
only employs 290 teachers. Did you report that?
    Mr. Miller. No, these would have been reports made by 
subrecipients to the States; we didn't have access to that 
information.
    Mr. Mica. OK, you didn't have that, so that would have been 
a local district reporting that?
    Mr. Miller. Reporting to the State. I think, similarly, you 
had the largest school district in Illinois----
    Mr. Mica. Nobody checked to verify?
    Mr. Miller [continuing]. Being Chicago, who reported zero 
jobs saved. And we would also question that. So part of our 
followup is to understand all the----
    Mr. Mica. But did you count that as the 300,000 jobs saved 
by teachers, any of this 473, when the entire district only 
employs 290?
    Mr. Miller. We counted roughly, I believe it was, 18,000 
jobs as reported by the State of Illinois.
    Mr. Mica. Well, here is another one, this radical rag, the 
Sacramento Bee. It says up to one-fourth of the 110,000 jobs 
reported as saved by the Federal stimulus money in California 
probably never were in danger, a Bee review has found. 
California State University officials reported last week that 
they saved more jobs with stimulus money than the number of 
jobs saved in Texas and 44 other States.
    Is this another garbage in, garbage out, Mr. Dodaro, Mr. 
Devaney?
    Mr. Dodaro. In that case, there were different 
interpretations made on the calculation of the FTEs, and that 
needs to be addressed, and we have recommended that----
    Chairman Towns. The gentleman's time----
    Mr. Mica. And you did say that we have some definition----
    Chairman Towns. The gentleman's time has long expired.
    Mr. Mica. I have just one more quick one, Mr. Chairman, if 
I may.
    Chairman Towns. We have votes coming up----
    Mr. Mica. I know you want to get one more in.
    Chairman Towns. Yes.
    Mr. Mica. It is just about the jobs sent to China, but we 
don't want to hear that.
    Chairman Towns. We can answer that in writing.
    Mr. Mica. So I will hold that one for later. Thank you.
    Chairman Towns. Congresswoman Marcy Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.
    All I have to say is I am glad we have a Congress and an 
administration that is focused on creating jobs, and your data 
is helpful in assisting us in doing the best job we can 
possibly do for the American people.
    I wanted to ask you, in the transportation area, with the 
$8 billion that was dedicated to the high speed rail corridors, 
it is my understanding that it has been difficult for the 
Federal Railroad administration to assume these new duties. Are 
there concerns within the Department about your ability to move 
the dollars into the development of this important new 
infrastructure activity that could truly help transform 
certainly the Great Lakes region, and I am sure other areas of 
the country?
    Mr. Porcari. It is an excellent question. We are very 
focused on the $8 billion of high speed rail money. We are 
currently reviewing the applications. We have multi-
disciplinary teams that come from throughout the Department, 
not just the Federal Railroad Administration, and we are 
straining a little bit on this, but we are confident that this 
grant program, and the high speed rail program in general, that 
we can accomplish those, and we will be working to build that 
program over time.
    Ms. Kaptur. Could I ask you when you anticipate making your 
first awards, Mr. Porcari?
    Mr. Porcari. We currently anticipate making those awards in 
January 2010.
    Ms. Kaptur. All right.
    And I don't know, Mr. Devaney or Mr. Dodaro, if you can 
answer this question. If you look around the country, some 
areas census tracks have unemployment of over 55 percent. Some 
districts have unemployment, as does ours, of 11.1 to 18 
percent. Does your data lend itself to be able to see whether 
the targeting is accurate of the funds? Because so much of this 
went through the States and the States are in the State capital 
and things happen with the money.
    Is there a way for us to interactively work with the data 
to assure that the areas that are hurting the most are getting 
some of the benefit? Is there any way to do that with the data 
sets being prepared?
    Mr. Devaney. We do in fact have what we call a heat map on 
the Web site that shows unemployment, and it also shows where 
the recipients reported contracts, grants, and loans on that 
map, so we lay that on top of the unemployment areas across the 
country by State, by county, and you can go in there and see if 
areas of high unemployment have been getting their fair share 
of the grants, contracts, and loans.
    Ms. Kaptur. All right. Maybe your staff could contact 
members who are on the committee or other interested Members.
    Mr. Devaney. Of course.
    Ms. Kaptur. I would certainly be interested in seeing how 
that really layers in northern Ohio, which is extraordinarily 
hard hit.
    That leads me to my next question. Secretary Porcari, I 
understand that GAO's September 23rd bimonthly report indicated 
a significant number of bids under the Recovery Act that were 
funded, have come in under estimate, and that the Secretary is 
considering redirecting some of those dollars for economically 
distressed communities. My whole district is an economically 
distressed community. To your knowledge, have States redirected 
significant funding to these distressed communities yet, in 
response to Secretary LaHood's letter?
    Mr. Porcari. Yes. The short answer is yes. We have been 
working directly with States, asking them to redirect funds, 
wherever possible, to economically distressed areas. These EDAs 
make up about 33 percent of the population. I would point out 
that 57 percent of our highway funds and 60 percent of all of 
our projects overall are in those economically distressed 
areas.
    We have some States that have devoted 90 percent of their 
highway funds to economically distressed areas. That is in part 
because we have been asking them from the beginning to really 
focus on that. And where the bids have come in lower than 
engineers' estimates, which is a number of States, we have 
asked them to redirect the funding, wherever possible, to 
economically distressed areas.
    Ms. Kaptur. What is the next threshold for--you are saying 
22 percent or so of the dollars, a quarter of the dollars, have 
been committed to date. When do we expect 50 percent of the 
dollars to be committed from the Recovery bill, across the 
Government? Is there a threshold for February 1st or----
    Mr. Porcari. Well, first, we work on a reimbursable basis, 
so we have obligated $31 billion of our $48.1 billion. But the 
way the transportation projects work, it is like buying a car; 
you don't pay Ford when they are building it, you pay it when 
you buy it. So we are reimbursing the States when the projects 
are completed, as a way to be good stewards of Federal tax 
dollars. So the obligation is the best measure for us, and we 
are at $31 billion of $48 billion right now.
    Ms. Kaptur. I know the time is limited, but----
    Chairman Towns. The gentlewoman's time has expired.
    Ms. Kaptur [continuing]. Mr. Chairman, could you allow Mr. 
Dodaro to answer that?
    Mr. Dodaro. Congresswoman Kaptur, what we will do, we will 
go back and look at CBO's estimated outlay schedule, but I 
think by the end of Federal fiscal year 2010 it would be about 
halfway. But we will go back and take a look and I will submit 
something for the record.
    Ms. Kaptur. Thank you.
    Thank you, Mr. Chairman.
    Chairman Towns. The gentleman from Ohio, Mr. Turner.
    Mr. Turner. Thank you, Mr. Chairman.
    I want to thank each of our panelists for their efforts at 
assisting us in the issue of transparency for this $787 billion 
stimulus package. I voted against this package, and I voted 
against it because I thought that there were no achievable 
standards in the bill, there were no achievable goals, that it 
was ill defined, that the spending was going to be misdirected, 
and that the deficits that were going to be generated would 
have a negative impact on our ability to create jobs.
    Lo and behold, the President is now saying that he is 
concerned that our deficits, created in part by this almost 
trillion dollar stimulus package, might impact our ability to 
create jobs in the future.
    I appreciate the transparency that you are providing, 
because we are able to take a look at whether or not this was 
ill defined, with no achievable goals, no achievable standards. 
We are actually able to look at how the money is spent and make 
a decision as to whether or not this should have been done, and 
hopefully be able to make a decision as to whether or not, in 
the future, we should do something like this, which I think 
would be very unfortunate if we continue to try to spend in 
this manner, where there is no accountability on the spending, 
it is not directed and targeted toward job creation, and just 
generates additional deficits.
    Mr. Miller, you had said, about the jobs created on the 
education side--and I have two things I want to comment on 
that. One, we were reminded by the other side of the aisle that 
we should deal with facts, so let's talk about some of those 
facts. According to The Wall Street Journal and Jonathan Carl 
of ABC News, they looked at the job creation figures on the 
side of education and they found, for example, that Head Start 
in Augusta, GA claimed 317 jobs were created by a $790,000 
grant. In reality, Mr. Carl reports that the money went toward 
a one-off pay hike for 317 employees, not creating 317 jobs. 
And that would be in your numbers you report to us today.
    Mr. Miller. No. Actually, Head Start is out of the Health 
and Human Services [HHS], it is not out a Department of 
Education program.
    Mr. Turner. It is certainly out of the aggregate number of 
jobs that are created, and it is an example of the claim of a 
job created when there isn't a job created. There were in fact 
pay hikes that were provided, according to Mr. Carl.
    My concern is, in the education sector and in the 
Government sector, is that as these moneys are used in this 
manner, which obviously the bill and the act permits, that we 
are creating a cliff, then, for these Government agencies, we 
are providing a one-time subsidy for increased costs for their 
operation. When they go to that next year where the stimulus is 
not there, the gap is going to be greater between their revenue 
and their operational costs, creating perhaps a more difficult 
problem and one where they are going to turn to the Federal 
Government for additional assistance.
    In my community, in Dayton, OH, stimulus dollars were used 
for the paving of Main Street, and my concern is that although, 
in the transportation sector, we created jobs or jobs were 
assisted in that project moving forward, by the time that the 
project began until it ended, there were probably less jobs 
along Main Street than were there before. This is not the type 
of spending that is going to create the type of sustainable 
jobs that we need in certainly a State like Ohio that is 
struggling so much and needing job production.
    Now, in looking at this issue of the phantom congressional 
districts, according to the Recovery.org site, in my 
congressional district, $186,371,562 were spent creating 385.4 
jobs in my congressional district. It translates out to roughly 
about slightly less than $500,000 being spent in trying to 
create a job. And then on the phantom districts the number is 
the same. It claims that there were 11 jobs that were saved, 
over $5 million that were spent in phantom congressional 
districts, congressional districts that do not exist, 
translating to about $482,000 per job; not the type of 
investment that we want to continue.
    Now, what strikes me about the phantom congressional 
districts is that Ed Pound, the Director of Communications for 
the Obama administration's Recovery.org, said about this whole 
mess, Who knows, man? Who really knows? That is his quote in 
the Wall Street Journal today.
    Mr. Devaney, I want to know if you disagree with Mr. Pound.
    Mr. Devaney. Well, I certainly wouldn't have said it that 
way, and I will speak to him when I get back to the office. The 
fact is that the information may in fact be true about the jobs 
and the money spent, and the simple error has been the wrong 
congressional district. And we think we can fix that next time 
out, but the accuracy of the data, other than the congressional 
district----
    Mr. Turner. Excuse me. Would that include the jobs in 
Augusta, GA for the 317 jobs created, where apparently everyone 
just got a raise instead of real jobs being created?
    Mr. Devaney. I don't know why the recipient reported it 
that way, and it may have been the State of Georgia that 
reported it.
    Mr. Turner. Because, as you have said to us, and I 
appreciate your honesty, you are merely reporting what these 
people have told you. There really is no transparency. We don't 
really know how they spent this money. And apparently that 
accountability didn't occur in the beginning of the approval of 
receiving this money, either. I appreciate what you are doing, 
but it doesn't give us the type of information to ever believe 
that jobs have been created or saved.
    Mr. Devaney. Having said that--and I don't disagree with 
you, but at this point in time, the fact that we have 
transparency allows us to see these anomalies and to understand 
if they occurred or didn't. The old, non-transparent way, which 
is the way the Government has acted in the past, you never 
would have seen it.
    Mr. Turner. I agree with you and I thank you for your 
efforts in that.
    Chairman Towns. Thank you. The gentleman's time has 
expired.
    We have a vote on the floor, and we will return at 12:30. 
We have three votes and we will start again at 12:30. So recess 
until 12:30.
    [Recess.]
    Chairman Towns. Recognize the gentleman from Ohio, Mr. 
Driehaus.
    Mr. Driehaus. Thank you, Mr. Chairman. I appreciate very 
much the opportunity and I appreciate all the witnesses being 
here and providing the testimony with regard to how difficult 
it actually is to pinpoint the numbers of jobs created and the 
jobs being retained through the efforts of the stimulus 
package.
    But certainly we have heard a lot of propaganda. We have 
heard propaganda suggesting that this isn't having any effect, 
that we are not impacting the economy. It seems crystal clear 
to me that not only is this having a significant effect--and we 
can argue as to whether to not it is 600,000 jobs, 640,000 
jobs, 700,000 jobs in terms of direct benefit, but I would like 
to get, in a minute, talking about exactly what it is those 
jobs are in terms of direct spending, but then also talk about 
the multiplier effect that we see through this investment.
    So the jobs that you are referring to are only looking at a 
small portion, a relatively small portion of the spending 
itself; $63.7 billion went into entitlements, tax relief was 
another almost third of this. So this is only looking at a 
portion of the contracts, grants, and loans, correct? Mr. 
Dodaro, is that correct?
    Mr. Dodaro. That is correct.
    Mr. Driehaus. So when we look at just that portion and we 
say we believe that there are jobs upward of 600,000 that have 
been created, take, for instance, a construction job. And I 
just brought with me the spending that we have seen in Greater 
Cincinnati, which is now upward of almost $700 million. And 
they describe here a project that will directly employ 75 
people on a construction project.
    Now, I assume that 75 is reported. But the individuals that 
might be supplying the hardware for that job, the individuals 
that might be supplying the lumber for that job, the 
individuals and the companies that are supplying the roofing 
materials for that job, the transportation workers that bring 
the materials to the site, the uniform manufacturers that make 
the uniforms that help these people on the job; none of those 
are being included in this direct number, correct?
    Mr. Dodaro. That is correct. That is correct. The indirect 
costs or indirect benefits, rather, as you are talking about, 
all the materials and the supplies and all those things, as 
well as how much additional spending is then induced is not 
covered; it is just focused on the direct jobs that are 
created.
    Mr. Driehaus. And I assume we can use the same line of 
reasoning if we are talking about a construction project, a 
road that is being built and the cement manufacturers or the 
asphalt manufacturers, the designers, the architects, the 
engineers, all of the professional employees whose work goes 
into those jobs that are being created. So the multiplier 
effect here is that we are paying partial salaries through 
these contracts to hundreds of thousands of individuals who are 
participating and supporting these direct jobs that are being 
created.
    Mr. Dodaro. They are definitely indirect benefits, yes.
    Mr. Driehaus. I assume, Mr. Miller, that the same goes for 
education, that when we talk about retaining hundreds of 
thousands of jobs of teachers, that those teachers go out to 
the grocery store and buy groceries. I assume that those same 
teachers also buy clothing for their children and for their 
families.
    I assume that those teachers also drive automobiles and buy 
gas for those automobiles. I assume they also use electricity 
and use energy. I assume that the salaries that are going into 
those teachers and supporting the families of those teachers 
through that spending is going to create and support jobs 
across the economy. Is that correct?
    Mr. Miller. That is absolutely correct. And I would also 
say that we have seen other uses of funds, for example, in 
rural communities, where the districts have bought laptops for 
students, have put smart boards, electronic devices to help 
accelerate and improve learning and allow them to develop 
skills; that the jobs associated with the producers of those 
smart boards, the training that has been provided to teachers 
is also not reflected in the over 300,000 job numbers that we 
have reported.
    Mr. Driehaus. So, then, while you are reporting that 
several hundred thousand jobs have been retained in terms of 
teachers, is it fair to say that same direct creation of jobs 
we would see the inverse were that investment not made, so that 
we wouldn't see the 300,000 jobs or so that have been created 
for teachers, but we also would not see the ripple effect in 
the economy of that investment going into those teachers?
    Mr. Miller. Yes. I think looking at notices that were 
literally picked up, that were announced and then later 
rescinded because of the receipt of stimulus moneys, we are 
confident that hundreds of thousands of teachers and educated-
related jobs would have been not saved had it been not for this 
money. Moreover, the impact that would have had on education 
and students in their learning, frankly, the compromise that 
would have been to the long-term growth, because we need to 
have a student population that is prepared to compete, we think 
would also be at risk. So we actually see the impact.
    Mr. Driehaus. Outside of the direct contracts that you are 
reporting on, do you also believe, Mr. Dodaro, that the 
Medicaid transfer payments, for example, are critically 
important to supporting the health care industry and long-term 
care, I assume; nursing homes, I assume; assisted living 
providers; medical device manufacturers; doctors; nurses; 
physician aides; all of these individuals who work in the 
health care field. Do you believe that their jobs are being 
supported or retained due to the direct investment made by the 
Medicaid transfer payments?
    Mr. Dodaro. As we have reported in the past on the use of 
the moneys by selected States and localities, the Medicaid 
additional Federal matching shares had at least two effects: 
one, it has helped support the increased number of people on 
the Medicaid rolls as a result of unemployment and allowed the 
States to maintain eligibility requirements for Medicaid. So it 
has helped achieve one of the other objectives of the act in 
addition to jobs created and retained, to help those affected 
by the recession.
    It has also helped achieve another one of the goals of the 
act, which is to stabilize State and local government budgets. 
An increased Federal share meant that some of the State share 
could be reduced, particularly in those States with high 
unemployment, because they got additional Medicaid funding 
based upon the unemployment rate. So that allowed them to then 
use that State money for other purposes as well.
    Chairman Towns. The gentleman's time has expired.
    Mr. Driehaus. Thank you, Mr. Chairman.
    Chairman Towns. I yield to the gentleman from Ohio, Mr. 
Jordan.
    Mr. Jordan. Thank you, Mr. Chairman.
    Mr. Devaney, in your response to the ranking member's 
letter, you said there is no way to really audit or certify 
that the 640,000 jobs number is accurate. Earlier, you also 
said that the data, the information, the numbers you get comes 
directly from the recipients. But isn't it true it first goes 
to the State, and then to OMB, and then to you guys? This 
information, the recipients are getting the dollars, send it to 
the States, send it to OMB, then you get the information?
    Mr. Devaney. Actually, Congressman, it goes from recipients 
sometimes to States--in 31 States the States collected that 
information and sent it in; in other States we got information 
directly from the recipients. But it comes to something called 
FederalReporting.gov, which we built and own and maintain the 
integrity of.
    Mr. Jordan. So in some cases it comes directly to you, not 
through OMB?
    Mr. Devaney. That is true. The recipients are, for the most 
part, reporting directly to FederalReporting.gov.
    Mr. Jordan. In 31 States, though, there is at least some 
intermediate step. So there are a couple bites at the apple 
before this information goes public, is that right?
    Mr. Devaney. In 31 States--and the States did this 
differently, all States did it differently, but in some of 
those 31 States there was a quality review of that data before 
it was went----
    Mr. Jordan. The 12 projects, 12 programs that were left 
off, that were not reported because someone made a 
determination that there was so much ridiculous information 
there that they shouldn't be public, who made that decision, 
you guys or someone else?
    Mr. Devaney. OMB asked us to look at it and we concurred.
    Mr. Jordan. So in that case it went to OMB before it went 
to you.
    Mr. Devaney. No. No, sir. It was in the data base and OMB 
had access to the data base, along with the agencies.
    Mr. Jordan. So who makes the call? So now we are back to 
OMB doing it. Who is actually making the call on when this 
stuff goes public?
    Mr. Devaney. Well, at the end of the----
    Mr. Jordan. And how it is displayed, how it is reported?
    Mr. Devaney. At the end of the day, the Board makes the 
call as to whether or not there was significant error in that 
data and it would have caused public confusion----
    Mr. Jordan. OK, did the Board make the call on these 12 or 
did OMB make the call?
    Mr. Devaney. We both made the call.
    Mr. Jordan. Well, which is it? You said the Board makes the 
call, now you are saying both made the call.
    Mr. Devaney. OMB asked us to look at it; we concurred with 
their assessment that there was a lot going on with those 12, 
including 60,000 jobs that absolutely did not look right on the 
surface.
    Mr. Jordan. OK, a change in direction. Is there any penalty 
for people who provide you with false, misleading, or 
ridiculous information? Any penalty like--in other words, if we 
are getting ridiculous information, these folks should be--the 
money that was spent, if we can get some of it back, is there 
some kind of penalty for that?
    Mr. Devaney. No, there isn't.
    Mr. Jordan. No penalty?
    Mr. Devaney. No.
    Mr. Jordan. Do you find that strange? Think about this. Put 
it in context. Put it in the way the American people see it. We 
have a health care bill moving through the House, moving 
through the Congress, which says, if you don't buy health care, 
you can go to jail; and now people are getting taxpayer 
dollars, giving ridiculous information, 12 projects that are so 
ridiculous you don't even list it, and there is no penalty for 
that? How are we going to correct that matter?
    Mr. Devaney. Well, as I said earlier in my testimony this 
morning, I am a big advocate for having penalties, but the 
Congress didn't put any penalties in.
    Mr. Jordan. But you would be in favor of strong penalties?
    Mr. Devaney. I would be.
    Mr. Jordan. For people who take taxpayer dollars and report 
crazy information?
    Mr. Devaney. No. I would be interested in certainly 
penalties for people who didn't report, and I would be equally 
interested in looking at the issue of what happens when people 
knowingly false report.
    Mr. Jordan. OK.
    Mr. Devaney. I think that could be a criminal penalty.
    Mr. Jordan. Mr. Dodaro, how many years have you had 
experience with the General Accounting Office?
    Mr. Dodaro. Thirty-six years.
    Mr. Jordan. Thirty-six years. In 36 years of serving in 
that part of our Government, do you ever recall a time where we 
had this term ``created or saved?'' In other words, is this the 
first time, this past year, where we have used this kind of 
sort of measurement, if you can even use that term with it? Is 
this the first time in the 36 years you have been looking at 
what the Government does and accounting for how it spends 
taxpayer dollars? Is this the first time we have ever had that 
term?
    Mr. Dodaro. Well, it definitely--the whole issue of 
tracking the creating of jobs has always been a difficult 
methodological----
    Mr. Jordan. My question was real straightforward.
    Mr. Dodaro. I understand your question.
    Mr. Jordan. Created or saved. Is this the first time in 36 
years, your experience in Government, that you know of that we 
have ever had that term used as some, at least what some would 
call, some kind of measurement?
    Mr. Dodaro. Based upon my immediate recollection, I can't 
recall.
    Mr. Jordan. Do you think that is a little strange, that we 
have this new term?
    Mr. Dodaro. Well, it definitely is something that, given 
the context of what the act was trying to achieve with the 
multiple objectives, I don't think it is unreasonable. It is 
difficult to measure.
    Mr. Jordan. Thank you.
    Anyone else on the panel recall any time prior to this year 
we have ever had this measurement ``created or saved?''
    [No response.]
    Mr. Jordan. I will take that as a no.
    Last question I would have for our panel. I will start with 
the Deputy Secretary from Transportation. What kind of contact 
do you have on a weekly, biweekly, monthly basis with the 
administration, in particular Mr. Biden, whose responsibility 
it was to make sure we got this information in an accurate way? 
Do you have weekly meetings or what kind of contact do you 
normally have?
    Mr. Porcari. We have a number of contacts and virtually 
daily interactions, twice weekly calls, regular meetings, and 
the common theme is making sure that we are getting these 
projects out there, making sure----
    Mr. Jordan. My question was what kind of contact do you 
have with the Vice President, with the Office of the White 
House or the Vice President.
    Mr. Porcari. The Vice President leads periodic meetings 
that include all the departments on this topic.
    Mr. Jordan. If I could, Mr. Chairman, one last question for 
Mr. Devaney.
    Do you have any contact at all with the administration on a 
regular basis or with the White House, or is it strictly with 
OMB?
    Mr. Devaney. I do see the Vice President from time to time, 
probably average once a month.
    Mr. Jordan. Did the Vice President weigh in at all--if I 
could, Mr. Chairman--on keeping the 12 off the list? Did he 
weigh in on that decision?
    Mr. Devaney. No.
    Mr. Jordan. Thank you, Mr. Chairman. I yield back.
    Chairman Towns. Thank you. I thank the gentleman from Ohio.
    I now yield to the gentleman from Vermont, Mr. Welch.
    Mr. Welch. Good afternoon.
    I want to thank you gentlemen for being here. You have an 
incredibly important job. It is about accounting for the 
enormous amount of taxpayer money that has been invested in the 
stimulus program and you are doing a good job. You are doing a 
good job by helping us get what we want, just the facts. 
Congress authorized this program and asked you to report on how 
it is working, on whether the money has gone missing, and you 
are doing it.
    And I know that, on our side of the aisle, and I expect on 
the other side of the aisle, the goal here is for us to get 
information, as opposed to make political speeches. But we have 
heard quite a few political speeches, and, frankly, that is 
distressing to me, and I will tell you why.
    We have to rebuild America. And we know how we got to where 
we are at. We had a private sector financial system, led by our 
big banks and Wall Street, that completely disregarded the 
public trust that they have and nearly destroyed our economy. 
And it was so bad that one of the most conservative Presidents 
in my lifetime came to Congress with his Secretary of Treasury, 
the former chair of one of our major investment banking houses, 
and said that if Congress did not approve a $750 billion 
bailout over the weekend, then the economy as we knew it would 
be destroyed.
    I am just reciting that because it gives us some 
perspective of why we find ourselves in the situation that we 
are in. The private sector financial system put a gun to the 
head of the American economy and they pulled the trigger.
    Step one was to stabilize the financial system. I was one 
of the Members of Congress who had no desire whatsoever to vote 
for that legislation to take $750 billion of taxpayer dollars 
and stabilize the financial system that had suffered a self-
inflicted wound. But soon it did its damage to the rest of the 
economy. And when the economy went off the cliff about a year 
ago, we started seeing the unemployment rate skyrocket, and we 
saw hardworking Americans lose their jobs through no fault of 
their own, and that unemployment has continued to rise as we 
speak.
    President Obama came forward with a proposal and a stimulus 
package that, by the way, was endorsed, as you know, by 
Republican and Democratic economists. There was no dispute, 
except on the extreme edges, as to whether or not, in this dire 
situation, the Federal Government had to be the spender of last 
resort; again, this was not anything any of us wanted to do, 
but something that according to a broad consensus position had 
to be done. It had to be done so we could fight another day, 
not because we wanted to do it.
    And in the doing of it, the stimulus, there was a 
commitment that was made by Congress--and I think shared by 
Republicans and Democrats, whether they voted for it or not--
that the money should go to jobs, that it should be accounted 
for, it shouldn't be distributed on the basis of political 
party or affiliation; it should be broadly beneficial to 
America.
    Now, taking a look at how it works, that is a fair and 
square question, and there was a lot of debate in Congress 
about how much of the stimulus should be allocated to tax cuts, 
how much for infrastructure. I was among those who believed the 
more for infrastructure the better, because it would create 
more jobs than the tax cuts. In the House, there was a big 
debate about whether we should send stimulus money to the 
States to help our teachers, our firefighters, and our police, 
and maintain and preserve those jobs. I haven't heard any 
acknowledgment in the speeches here, but this has been a 
lifeline.
    The stimulus has been a lifeline for our States, and I can 
speak for Vermont. We would have had a catastrophe in Vermont 
if we had not had the stimulus funds. Even with the stimulus 
funds, Vermont, with a Democratic legislature and a Republican 
Governor, had to work together very hard to pass a budget, and 
we are continuing to experience a tough time.
    So it is not my custom generally to make speeches, but 
apparently today's hearing is very much about that, so the 
point I want to make is twofold. No. 1, I believe that the 
challenge for this Congress is to do things that are going to 
help buildup the American economy, find ways where we can work 
together; and No. 2, examining the stimulus is a necessary step 
that we take in order to maintain credibility with the American 
people. We have to make sure that it is transparent and that we 
can account for what has been spent and how effectively it has 
been spent. Those are just factual questions; just the facts, 
ma'am.
    Mr. Devaney, if you have suggestions about penalties, give 
them to us and we can vote on them. But I hope it is specific. 
I encourage you to continue doing the great work that you are 
doing and I encourage our members, Mr. Chairman, to focus on 
getting America back on its feet. Thank you.
    Chairman Towns. Thank you very much. The gentleman's time 
has expired.
    I now yield 5 minutes to the gentleman from Utah, Mr. 
Chaffetz.
    Mr. Chaffetz. Thank you, Mr. Chairman.
    Thank you all for your work and you being here.
    Mr. Devaney, following up on Mr. Jordan's question, when is 
the last time you personally spoke with the Vice President, 
Vice President Biden?
    Mr. Devaney. I believe it was--it may have been last week.
    Mr. Chaffetz. Is there a master list of who was supposed to 
get the stimulus money? Do you have like a master list, here is 
who was supposed to get the money?
    Mr. Devaney. I don't have that.
    Mr. Chaffetz. That is just mind-boggling to me, that we 
don't have a list of even who was supposed to get the money.
    Mr. Devaney. Congressman, I think it is fair to say that 
each of the 28 agencies that oversee the Recovery money have 
such a list, and they are in the process right now of trying to 
determine whether or not each and every one of the recipients 
on that list actually reported; and I hope to get that result 
soon.
    Mr. Chaffetz. It seems like a simple basic accounting 
process to understand--what it highlights is what we don't 
know, and that, to me, is a very scary proposition in moving 
forward. In my own State of Utah, Representative Bishop, one of 
my colleagues, has pointed out there was some $1.2 million that 
went to the 4th Congressional District of Utah. We only have 
three congressional districts. There was $529,834 that went to 
the 00 Congressional District of Utah. I simply do not 
understand how those very basic things can happen, and puts, to 
me, the entire reporting into question.
    Now, suddenly, you go to the Web site and it says, well, 
they are not accounted for, it is unattributed. How are we 
going to resolve this?
    Mr. Devaney. Well----
    Mr. Chaffetz. We don't even know who is supposed to get the 
money. Then when we say where it went to, it is going to 
congressional districts that don't even exist.
    Mr. Devaney. Well, Congressman, I think, first and 
foremost, the recipients in Utah put the wrong congressional 
district in. They are the ones that entered that data. Now, 
going forward, I think we can put technology in the system that 
says something like if you are in a State with only one 
district, you can't put anything other than that district in 
there. If you enter a 9-digit zip code, it has to correspond 
and match the congressional district. So I think, going 
forward, we can eliminate that.
    Mr. Chaffetz. Our time is so short. If we can followup with 
additional procedures, I would sincerely appreciate it.
    My understanding from your testimony is that there have 
been some 340 complaints, there are 77 investigations open, and 
more than 390 audits. Can you help explain those numbers to me, 
please?
    Mr. Devaney. Of course.
    Mr. Chaffetz. And how many people do you have dedicated to 
perform those functions?
    Mr. Devaney. The actual Board has a limited number, maybe 
perhaps a dozen people that work in that area. But we leverage 
the resources of the 29 Inspector Generals that oversee the 
money.
    Mr. Chaffetz. OK.
    Mr. Devaney. So some of those complaints are coming in on 
our hotline since the data has been released, some 350-plus, 
and some of them came in before the data was released and 
directly to Inspector Generals. So out of all the complaints we 
have had come in, 77 investigations have been opened and 390 or 
so audits have been----
    Mr. Chaffetz. OK. And, again, we will followup with some 
additional details, but that does help clarify it.
    Mr. Miller, having read through your testimony and heard 
what you had to say, at the top of at least the printed out 
portion here of page 5, it says we have accounted for 97 
percent of our Recovery Act obligations to date. What does that 
mean for the other 3 percent, that there is no--what does that 
mean?
    Mr. Miller. It means the bulk of our money is formula money 
in our large State fiscal stabilization that flows through 
States. In particular, there are two programs: impact aid and 
Federal work study, which goes directly--again, work study goes 
to individual students on part-time programs through colleges 
and universities. Given the very distributed nature of that, 
some of those recipients, colleges and universities, had 
difficulty understanding. But that represents such a small 
percentage.
    But specifically to answer your question, it would be the 
Federal study and impact aid----
    Mr. Chaffetz. You might think it is small, but it 
represents $2 billion. What I just want to make sure we 
understand is how we are going to account for what is 
unaccounted now, 2 billion worth of dollars.
    And I would just like to followup--I see my time is ending 
here. Let me ask one more question of you, Mr. Miller. It says, 
in your testimony, a total of 742 reports out of 2,229 were 
changed during this recent agency review period. There are 
concerns on many fronts that literally about a third of these 
reports had to be changed; either the information they are 
getting and the system and the process they have to go through 
is terribly flawed or there is fraud going--I mean, it is just 
such a staggeringly high number to have to go back and change 
literally a third of the reports that are coming in, I just----
    Mr. Miller. I think with the unprecedented transparency, 
what you will find is a change would be: we did have the 
incorrect Treasury code, we had the incorrect DUNS number. 
These were technical changes in terms of to be consistent with 
transparencies. These were not, in fact, changes to the jobs 
being reported.
    Chairman Towns. The gentleman's time has expired.
    I now yield to the gentlewoman from California, 
Congresswoman Watson.
    Ms. Watson. Thank you so much, Mr. Chairman.
    I think this is a very crucial hearing. The timing of it is 
great, and I am so glad to see Secretary Miller from my 
district, LA Unified, as our Deputy Secretary of Education. And 
he knows the condition of our State and our tremendous 
shortfall.
    So given the economic crisis in the State of California, I 
was especially glad to see that my school district, the Los 
Angeles Unified School District, was the third largest 
recipient of Recovery Act funds in the State. Can you explain 
the impact these funds are having on the quality of education 
that we are able to provide for our youth? And, I do know that 
we have a serious shortfall in our budget in LA Unified.
    Mr. Miller. And I think LA Unified, being the second 
largest school district in the country, is a great story in 
terms of the impact. I know from the press that there were 
thousands of jobs that were at risk, that the superintendent 
was desperately trying to address given the State's budget 
shortfall, and that the receipt of the stimulus money allowed, 
in this case, particularly thousands of pink slips to be picked 
up so that the school year for the 2009-2010 school year in 
fact could be preserved and have more integrity.
    And I think in a large urban school district which has 
substantial student achievement issues in terms of the gap 
between those of high poverty and low poverty, that the need to 
maintain class sizes and not have them skyrocket, the need to 
ensure that you have the latest equipment is paramount if we 
ever are going to close the achievement gap, and I think the 
stimulus moneys have very much helped us make progress and 
prevent us from falling back.
    Ms. Watson. We could use another traunch, couldn't we? 
Because even with the moneys that have been received, there is 
not enough there to close the gap, and I have heard the 
superintendent, just the beginning of this week, talking about 
the layoffs, shortened school weeks, time off at no pay, and so 
on, because I believe we are almost up to a million students.
    I understand, before I got to the committee meeting, that 
there were some challenges to the data and talking about 
propaganda, but I wish we would remind ourselves the mistaken 
war we fought in Iraq, costing us $15 billion a month; and now 
they are asking for more troops in Afghanistan, which will cost 
us $5 billion a month. If we could get just a portion of that 
to improve our education system, to improve our transportation 
system, we could do wonders in strengthening the education of 
our youth.
    I just attended a high-tech meeting this morning, and I 
mentioned to them around the table that we are going to do the 
best we can in educating our children in sciences and math so 
we can be competitive. Take India, you know, with their large 
$1.1 billion. They test their kids, and they send the most 
talented ones to a certain school. So I am hoping that we can 
stimulate, particularly in the educational field--and I want to 
get Mr. Dodaro to comment on this, but I hope that we can send 
moneys out to our educational institutions, our school boards, 
directly so that we can support their curriculum, and 
particularly in higher education. You know, we are turning away 
students from our community colleges.
    So to those who are saying that the figures are propaganda, 
I say come to my district. Our unemployment has always been two 
digits. And if we have a national unemployment of 10.2 percent, 
ours would be close to 11.
    Mr. Dodaro, in your overseeing, are you satisfied with the 
information you are getting about how we have used that 
stimulus money, and are we seeing jobs created? Can we look to 
the future with the stimulus--and if we have a second one--if 
we can indeed create jobs so that we can enhance school boards 
throughout this Nation--not just in mine, but through the 
Nation? Can you respond?
    Mr. Dodaro. Yes. On your first point, I thought that the 
national data collection system that was set up was a good 
first step, but there are a number of data quality and 
reporting issues that are significant and need to be addressed 
to improve the quality of the information and the accuracy and 
completeness of it. So that is a challenge. We have made some 
recommendations; OMB has agreed to implement those 
recommendations. The extent to which they are implemented will 
increase the quality of the information.
    Now, with regard to future stimulus, one of the other 
mandates we have under the current bill, the Recovery Act, is 
to look at the impact of economic downturns on State 
governments and what effects it has on them, on health care and 
other important areas like education. So I think we will be 
examining that. It asks us to go back to the 1974-1975 
recession and look historically, including the latest economic 
downturn.
    One of the areas I think is very important is the future 
targeting of assistance, whether it is based on unemployment 
levels or other factors. There was some targeting in this 
stimulus bill in the Medicaid area, but in other areas I think 
that is something that can be looked to to perhaps be improved 
in the future.
    Chairman Towns. The gentlewoman's time has expired.
    I now recognize the gentleman from Louisiana, Mr. Cao.
    Mr. Cao. Thank you, Mr. Chairman.
    I am not interested in whether or not the stimulus bill is 
right or wrong. What I am interested in is just plain number 
crunching.
    Now, Mr. Miller, based on your testimony, you said that $67 
billion have been spent through the Department of Education, 
and from the $67 billion, approximately 400,000 jobs have been 
created or saved. My question to you is of the 300,000 
educators, what is their average salary?
    Mr. Miller. As we look at the calculation, it would roughly 
represent dollars per jobs saved, roughly I believe $105,000, 
which, when we actually look at the percentage----
    Mr. Cao. No, my question to you is what is the average 
salary of an educator----
    Mr. Miller. On a fully-loaded basis, it is about $70,000. 
It should be 70 percent of the dollar.
    Mr. Cao. So $70,000, on the average, per educator.
    Mr. Miller. On a fully-loaded basis. So that is why, when 
we actually look at the total jobs saved in the context of 
awards to date, we triangulate and say, for $100,000, if, 
typically, 70 percent is personnel costs, the number seems to--
--
    Mr. Cao. I am sorry. Of the 100,000 jobs that are 
remaining, what kind of jobs are they?
    Mr. Miller. Excuse me?
    Mr. Cao. You say that there are 300,000----
    Mr. Miller. They are what we call government services. Many 
of them are government services, because----
    Mr. Cao. And what is the average salary for those 
positions?
    Mr. Miller. I don't believe I have that information, but I 
can get that information to you.
    Mr. Cao. Would it be safe to say $50,000 per job?
    Mr. Miller. Again, I wouldn't--I would hate to speculate.
    Mr. Cao. Now, based on my own number crunching, if you take 
$67 billion and you divide it by 400,000 jobs, the number comes 
out to be about $167,000 per job. Now, if an average educator 
makes about $70,000, my question to you here is where did the 
other $100,000 go?
    Mr. Miller. Where did the other 100,000 jobs go?
    Mr. Cao. No, where did the other $100,000 go? If an average 
educator makes $70,000 per year, based on your numbers, my 
calculation comes out to be about $167,000 per job. So my 
question to you is if we----
    Mr. Miller. For every dollar invested, 70 percent of it 
goes to personnel. So you would only expect 70 cents on the 
dollar to be for personnel costs. You would have the whole----
    Mr. Cao. So if 70 percent goes to personnel costs, the 
other 30 percent goes to what?
    Mr. Miller. Capital, computers, all the things that you 
would need to support. So there is a notion of you need an 
office, you need--on a fully loaded basis, beyond just 
benefits, you have personnel----
    Mr. Cao. So basically, based on your own testimony, the 
numbers don't come out correctly.
    Mr. Miller. No, the opposite. We have triangulated----
    Mr. Cao. If you have----
    Mr. Miller. We were confident that they actually--coming 
top down, that it actually matched.
    Mr. Cao. Sir, if you have 70 cents out of every dollar goes 
into personnel, in other words, going to the actual job saved 
or created, is that correct?
    Mr. Miller. Yes.
    Mr. Cao. So based on your calculation, then 70 percent of 
$167,000 would be approximately $140,000?
    Mr. Miller. No, we are talking about the education-related 
jobs. So part of this is understanding which math we are 
talking about. If you take the 325,000 educator-related jobs, 
if you actually looked at the average education job for salary, 
and you would say it is roughly just over $100,000, if you said 
70 percent of that, typically, if you look at the allocation of 
education budgets, 70 percent of the educational spend is 
personnel on a fully loaded basis, you would say roughly the 
math top down----
    Mr. Cao. Mr. Miller, I have taught middle school. I taught 
at the college level also. When I taught middle school, do you 
know what my salary was? Twenty thousand per year. When I 
taught at the college level, do you know what my salary was; 
$28,000 per year.
    Now, I am a little bit confused with respect to how you 
arrive at this $100,000 per educational job, because I know for 
a fact that teachers don't make $100,000 a year. All of the 
teachers in my district, if they are lucky, if they have a 20- 
or a 30-year experience, they would be lucky to make $60,000 or 
$70,000 per year. So my question to you here is, based on your 
numbers, it would cost $167,000 per job. If an average educator 
makes $67,000 per year, where did that $100,000 remaining go? 
Where did that $100,000 go?
    Mr. Miller. Again, if I could try to clarify. I believe, 
and I can followup with the details, the average salary, based 
on the National Center of Educational Science, is roughly 
$50,000. If you actually look at----
    Mr. Cao. So where did the other $127,000 go?
    Mr. Miller. Once you load for benefits, it is roughly 24 
percent. That is how you get to just under 70 percent of 
personnel-related costs in education. And that is, again, based 
on----
    Mr. Cao. My question to you here, if my constituents were 
to ask me how did you spend this money, I would have to tell 
them that, well, of $167,000 that went into an educational job, 
$50,000 went to an educator and I don't really know where the 
other $120,000 go.
    Mr. Miller. Again, if you can appreciate, I have spent the 
bulk of my professional career both in private equity and as an 
operating executive and, like you, very familiar with finance. 
I think one of the first things we did as we tried to scrub the 
numbers was to ensure that the math----
    Mr. Cao. You tried to scrub the numbers?
    Chairman Towns. The gentleman's time has expired.
    Mr. Cao. Thank you, Mr. Chairman.
    Chairman Towns. Let me just say to him, on the way to 
recognizing Mr. Clay, you should have been teaching in New York 
or California; you would have made some money. [Laughter.]
    Mr. Bilbray. The word is, though, what he wanted to teach.
    Chairman Towns. Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman.
    I thank the panel for being here.
    Let me start the question with Deputy Secretary Porcari. 
Transportation jobs allow for the awarding of contracts, loans, 
grants, and the creation of projects all around the country. 
What is being done to ensure that of the 46,000 jobs reported 
to be created or saved by the Recovery Act, a fair proportion 
are going to women and minority employees?
    Mr. Porcari. Congressman, it is an excellent question. 
First, none of the normal requirements, including disadvantaged 
business enterprise goals, were waived as part of the Recovery 
Act. So we started with the premise that in all the 
transportation projects--highway, transit, aviation--that those 
requirements apply. Our recipients are required to certify that 
they are actually doing that. We have been working, in 
addition, directly with the State DOTs and transit agencies, 
among others, to make sure that is the case. We focused on 
getting the projects underway quickly and making sure that it 
is equitable at the same time.
    Mr. Clay. You know, many of the Nation's transportation 
projects are less than or just more than 50 percent complete. 
Can you project future job numbers based on the reports you 
have received thus far?
    Mr. Porcari. Congressman, I am reluctant to project into 
the future on job numbers because, first of all, it is not 
linear; it is partly dependent on season. In many parts of the 
country, weather dependency is a big part of that. We also know 
that the actual outlays that we have lag the work; the work 
gets done under local funding and we reimburse at the end. So 
on the employment side it is not linear, but we know that we 
have many additional created and saved jobs to come. We also 
have portions of our transportation dollars, including the high 
speed rail program at $8 billion and the TIGER Grants at $1\1/
2\ billion that have not yet been awarded. So those will come 
as well.
    We were trying to get projects out the door quickly. I 
think we were largely successful in that. And we are trying to 
make sure that there is a steady flow of projects around the 
country throughout the entire time period of the Recovery Act, 
and we will be successful at that as well.
    Mr. Clay. Thank you for that response, Mr. Secretary. I 
will not bring up the rescission issue; I know that is a 
separate hearing for us.
    Let me go to Secretary Miller next. Mr. Secretary, in your 
report it shows that some of the greatest successes of the 
Recovery Act have occurred in school districts by saving or 
creating 325,000 education jobs for teachers and personnel. In 
my State of Missouri, an estimated 8,500 teachers have been 
saved from dismissal. Can you discuss what the short- and long-
term impact on our children and their schools would have been 
without the Recovery Act education funds?
    Mr. Miller. Yes. I think, as we have traveled around the 
country and talked firsthand to superintendents, to principals, 
and to teachers whose jobs literally were saved by the Recovery 
Act, what they tell us, and what parents tell us, is we could 
not afford to have those teachers not in the classroom at this 
critical time, and that without those jobs our children's 
ability to continue to learn and to be more college and career 
ready, at a time when it is so important that our high school 
graduates are prepared to go on to college and to go on to 
careers in an increasingly competitive world where more jobs 
are being competed in India and China, and as they make 
investments in their education system, that this is a critical 
time that we must sustain and enhance our investment in 
education. So they are very thankful and they feel that if this 
money hadn't been there, those jobs would not have been there 
and their children would have suffered.
    Mr. Clay. Thank you for your response.
    Real quickly, Mr. Devaney, given your experiences in 
Government, are you aware of any other efforts to collect data 
and publicly provide information on programs that are similar 
in scope to Recovery.gov?
    Mr. Devaney. No, sir.
    Mr. Clay. Are you aware of any similar Web site or tracking 
mechanism in the history of the Federal Government aimed at 
providing this level of transparency on Government spending?
    Mr. Devaney. No, sir.
    Mr. Clay. OK. Very good.
    Madam Chair, I am through with my questions and I yield 
back.
    Ms. Norton [presiding]. Thank you very much, Mr. Clay.
    Mr. Bilbray.
    Mr. Bilbray. Madam Chair, thank you.
    Mr. Chairman, I spent 18 years in local government filling 
out reports and applications to the Federal Government, so this 
process is very interesting, to say the least, starting, I 
guess, in 1976, before Jimmy Carter was elected, so I sort of 
date myself.
    Who decided what questions were going to be included in 
this survey?
    Mr. Devaney. Who decided what questions recipients----
    Mr. Bilbray. Which questions were going to be in this 
reporting process.
    Mr. Devaney. That would be OMB.
    Mr. Bilbray. OMB?
    Mr. Devaney. Right.
    Mr. Bilbray. Why in the world would a congressional seat be 
included in a report of this type?
    Mr. Devaney. I actually believe, sir, if my memory serves 
me right, that is embedded in the act, in the law itself, that 
the recipients were supposed to report that. So OMB put out the 
guidance that they had to.
    Mr. Bilbray. So the act was actually engineered to 
specifically identify political subdivisions within the Federal 
Government, rather than using the traditional, what we have 
used for 30, 40 years, and that is using the zip code?
    Mr. Devaney. Zip codes are included as well, but it is in 
the act that congressional districts will be reported.
    Mr. Bilbray. So the act we passed literally had this 
political element mandated into it?
    Mr. Devaney. It did.
    Mr. Bilbray. I guess it sort of indicates author intent 
when you see that kind of thing. In your experience, do you 
remember any identifications like this before, rather than just 
using the zip codes and extrapolating that item out?
    Mr. Devaney. Off the top of my head, I don't.
    Mr. Bilbray. Yes. I mean, this problem could have been 
avoided if the act itself hadn't included this political 
element and just stuck to the traditional zip code reporting.
    In this reporting, by using the districts, what if you had 
a situation like the improvement of the ride share lane on I-15 
in San Diego County that goes through Mr. Hunter's, Mr. Issa's, 
and my district? Does that count as three jobs?
    Mr. Devaney. No. I think that each of the--if it was a 
company--let's say it was a company that was building that, 
that contractor, as a vendor, would report to the State that 
they were building a highway and they would count the jobs no 
matter what State or what district they were in. So you are 
going to get a lot of projects that span multiple districts and 
States.
    Mr. Bilbray. OK. The transportation situation. As we are 
throwing this money or sending this money out to build 
projects, has there been any discussion at all, seeing that we 
took an extraordinary effort and did an emergency push to get 
that money out there, has there been an backup push on the 
regulatory issues that you will face?
    A good example is I was on the board that built the light 
rail system for San Diego. The environmental obstructionism of 
trying to use an existing rail technically is there, but you 
and I know logically it is absurd. If you are going to improve 
rail on a site that has been used for 200 years, there is not 
the issues environmentally out there.
    Has there been any discussion at all in your Department at 
coming back and getting us to fast-track the regulatory process 
to allow the projects like the high-speed rail in California to 
be able to move forward and spend the money on construction 
rather than litigation?
    Mr. Porcari. Congressman, there has been a lot of 
discussion about various ways to streamline the process, 
whether it is our internal working group on the New Starts 
transit streamlining process or in more general terms. What you 
will find with many of the transportation Recovery projects is 
States and authorities--aviation and transit--put an emphasis 
on ready-to-go, off-the-shelf projects that had been through 
those approval processes so that they could get underway 
quickly and the jobs would be either saved or created quickly. 
That is the bulk of what you see around the Nation in the 
projects that are underway. The transportation projects that 
are imminent tend to be the larger, more complex ones that 
needed either some final approvals or were finishing design.
    Mr. Bilbray. Well, we can go through the issue of what we 
see around, too, is all the advertising signs that were 
mandated, and then the mandate was withdrawn and the 
flexibility of costs going from 3,000 in one State to 500 in 
the other, but this whole process being engineered from the 
beginning with a political statement engineered into the 
accounting process, I mean, this kind of accounting, where you 
exaggerate the benefits, you underestimate the problems, is 
exactly how Enron got itself in trouble and ended up in jail. 
And, as public agencies, we damned them for doing this, and 
this accounting process seems to be reflecting that Enron 
approach.
    Ms. Norton. The gentleman's time is up.
    Mr. Bilbray. Thank you, Madam Chair.
    Ms. Norton. Thank you, Mr. Bilbray.
    Secretary Miller, your Department announced 325,000, I am 
told, education jobs a few weeks ago. How confident are you, 
given all we have heard today in this hearing, in those jobs 
and that we will not find the same problems as to those jobs?
    Mr. Miller. We, as a Department, are confident that 
300,000-plus jobs, educator jobs, have been saved.
    Ms. Norton. On what basis, sir?
    Mr. Miller. Excuse me?
    Ms. Norton. On what----
    Mr. Miller. On the basis--I think a variety of things give 
us that confidence. One, our actual guidance that we invested 
heavily in was really meant to get at the core issue of not 
just moneys allocated, but specifically, just to quote the 
guidance, ``A job retained is an existing position that would 
not have been continued to be filled were it not for Recovery 
Act funding.'' So the intent in the guidance that we invested 
in was in fact to get at this core issue; not some clever 
accounting for moneys allocated, but the core issue of did this 
money. So our investment in the guidance would be one.
    Two, while it may have been confusing, we actually looked 
at State budgets, the portion of State budgets that in fact 
were addressed by the stimulus moneys as reported by the 
States. We then did the calculations of the jobs that were 
reported by the States in aggregate; looked at what that would 
have translated to on a per job basis, understood how did that 
compare with historical trends--and that was another way that 
we could triangulate it.
    Third, we actually, independent of the reporting period, 
since the Recovery Act moneys first started being available 
last April, there had been well over 1,000 news stories, 
independent news stories talking and citing specific jobs 
saved, gave us confidence that the numbers that are being 
reported are accurate.
    As we scrubbed--and we have the process in terms of data 
quality--we had automatic programs that actually looked at 
recipient reporting, wither outliers, flagged outliers, 
contacted all 50 States that says, in aggregate, we are 
confident.
    Ms. Norton. OK, you know those words are going to be quoted 
back to you, so that is why I wanted to give you an 
opportunity. If you think that there is any pullback that 
should go on the record, you need to do it, because that is a 
very specific number and a very vital----
    Mr. Miller. And I think I understand. I think the question 
becomes, with 14,000 school districts, with 100,000 schools, as 
you then get to the precision of School A versus School B--and 
we don't have access in that level of transparency, so if you 
say do I expect, at that level, that will these numbers be 
fine-tuned from School A to School B, from District A to 
District B, I actually think we will see adjustments made over 
the course of the next quarter.
    But, again, I think, in aggregate, as this gets rebalanced 
and fine-tuned, do we think we will still be coming right back 
to jobs saved numbers, order of magnitude in 325,000, I think 
the answer is yes.
    Ms. Norton. Actually, I appreciate what we are trying to do 
for the first time ever here. We probably need to be operating 
in the plus or minuses or in some kind of range given the many 
levels of government with which we are dealing. We haven't even 
tried to do this kind of thing before. I think the problem may 
have much to do with the expectation that: here is a number, 
and nothing is more specific and finite as a number, so if I 
have a number, I have the goods on you. As far as we are 
concerned, or at least speaking for myself, the most important 
thing is the transparency here, tracking these numbers, 
correcting these errors.
    Let me ask you a question in that regard. Given human 
fallibility, even if all of this data were at one level, there 
has been established by OMB a way to do quality reviews so that 
here you have something very specific between the 22nd day and 
the 29th day, it seems, following the end of each quarter there 
is supposed to be a review, and this review is apparently 
intended to resolve just such material omissions and reporting 
errors as has been under discussion at this hearing today.
    If these reviews were conducted and if a material omission 
or significant reporting error was discovered, was there an 
immediate process for correcting it? Were people so quick to 
just get on to the next step to report the data? If you had a 
quality review period, why didn't that period work better?
    I can ask Secretary Miller, Porcari, either of you might 
be--or Chairman Devaney.
    Mr. Devaney. Let me take a stab at that. I think this was 
the very first time that so much data had been asked to be 
reported by recipients. It is also the very first time that 
agencies had to oversee that kind of an activity. They had to 
report by the 10th----
    Ms. Norton. Well, wait a minute. Was 10 days an adequate 
time?
    Mr. Devaney. Well----
    Ms. Norton. You gave 10 days--is 7 days, for that matter, 
enough time for Federal agencies to review the information?
    Mr. Devaney. Well, at the end of the day, I don't think it 
is. I think that----
    Ms. Norton. Are you considering what time period, given the 
experience you now have, might allow?
    Mr. Devaney. Given the experience we have had now, I think 
we are seriously considering trying to think of a way to extend 
the period of time in which corrections can be made.
    Ms. Norton. At this point, I think, since even the smallest 
error will be held against you, no matter how many jobs you 
provide, it probably would be better to engage in some delay. 
There are a whole lot of us here on this panel who are more 
interested in jobs created, recognizing that the United States 
has never undertaken quite the logarithm you have; how much 
were created, how much would have been created anyway. You can 
always come back saying they would have been created anyway, 
but you can't, not in this recession, we believe. The 
economists may need to get to work on their models, by the way, 
about how many jobs do you create on your own in a recession.
    OK, locality--you are in the deepest recession ever. Leave 
out the word depression. The deepest recession ever. There must 
be a model somewhere that tells me, in the midst of localities 
laying off everybody they can find even after they get stimulus 
money, there must be a model that says jobs get created, and 
the kinds of jobs that get created. When we see people, for 
example, in the District of Columbia dismissed after school 
starts, school has started and teachers dismissed, then we know 
for sure this is not a very exact science, and whatever models 
we are using have not had to confront this situation before.
    But, frankly, I have been very impressed by all the 
overlapping accountability, and given that overlapping 
accountability why it did not work. I am looking at the 
Recovery Board. Then we have the IGs and we have the State 
auditors and we have the prime recipients. Then all this gets 
publicized through Recovery.gov between OMB and the Recovery 
Board. Now, the first thing that occurred to me is if all these 
actors are involved, surely they are not stumbling all over one 
another.
    Forgive me if it seems to me that--maybe this comes out of 
my background of dealing with appeals--if one dealt 
sequentially so that one finds errors in the prior level, for 
example, I can understand that. But what I need to understand 
here is how these layers either get coordinated, whether they 
have specific roles--the IG, the Recovery Board, the people 
responsible within the States, the recipients themselves--have 
they been given any guidance that would sort them out so that 
they might be a check one on another, or are they all trying to 
go at the data at one time with their own version of how it 
should be interpreted?
    Mr. Devaney. Well, with respect to the IGs, they haven't 
gotten involved in the quality.
    Ms. Norton. All right, I will accept what you say about the 
IGs. But, of course, they are a possible layer.
    Mr. Devaney. And the Board has a small staff and OMB has a 
small staff. We are trying to be as helpful as we can be.
    Ms. Norton. So who does that really leave with the 
responsibility?
    Mr. Devaney. It leaves the recipients themselves 
responsible for not only what they put in, but for also 
checking later to make sure they didn't make any mistakes; and 
it also leaves the agencies in a position where they have to 
make darned sure those recipients are reporting as accurately 
as possible----
    Ms. Norton. At the Federal level or at the State level?
    Mr. Devaney. At both levels, quite frankly. I think the 
Federal agencies can only see so much, so as they look down, 
they are going to have to depend on their State counterparts as 
well to talk to the recipients. And as it cascades down, 
hopefully, at the end of the day, a recipient will get a 
notification that something is wrong and you need to look at 
that. But the way the OMB guidance is, only recipients can 
actually change the data; Federal agencies, the Board, OMB 
can't change the data. So the recipients have to be notified 
that we think there is a mistake and then they have to change 
the data.
    Ms. Norton. And that, of course, goes to how long it takes 
to make sure that all of that occurs.
    Mr. Devaney. It does, yes.
    Ms. Norton. I recognize that the administration, in fact, 
myself, was very pleased to have some data to use when the 
first, was it 30,000, jobs came out to indicate that this money 
was certainly producing something, and you have been under a 
lot of pressure to show that it is producing something. Now, of 
course, as is always the case with Congress when they do 
oversight, you continue to be under that pressure and under the 
same pressure to correct the errors. At least you have the 
understanding from me that you are doing what has never been 
done before.
    Let me ask you about analyzing what has occurred. I think 
this is pretty organic; this is one of those things, kind of 
like the common law you learn by doing it and you build on it 
and you build a better mouse trap each time or you perfect the 
mouse trap each time.
    In addition to OMB, agencies had to provide guidance to 
recipients to explain the requirements. Now we have the next 
quarterly reporting period, and that is going to be sometime in 
January, and each quarter thereafter the funds are going to 
continue to be spent. I guess that is the last year of the 
stimulus funding.
    Is there a way in which, as an administration, you are 
reviewing the first quarter reporting to analyze the problems, 
then to streamline or improve upon the process in some way so 
that everybody will be doing the same thing? Could you tell us 
what that process looks like, that review process, based on 
hard data now before you, where you have sorted out what kinds 
of mistakes were made--I think some of them inevitably made--so 
that you would then give, I take it, new or revised 
instructions to whom, and how is that being communicated across 
the Government?
    Mr. Devaney. Well, certainly everybody involved in this is 
engaged in a ``lessons learned'' exercise. We are all looking--
and I would include, I am sure, the agencies are as well. But 
OMB and the Board are engaged in this lessons learned activity 
right now and we have learned a lot from this first reporting 
period. We have learned a lot from the fine report that GAO put 
out today as well, and I know that OMB has responded that they 
are going to implement GAO's recommendations. I suspect the IGs 
will be involved in making some recommendations as well.
    And what we hope to do is make each and every reporting 
period run more smoothly than the last. And there are certainly 
some technical fixes that the Board can do on this next 
reporting period to make it easier for recipients to report, 
and additional guidance or clarification of guidance by OMB is 
going to be very helpful as well.
    Mr. Porcari. And if I may add, Madam Chair, in practical 
terms, even during this first reporting period, across agencies 
we have been trying to make these corrections in real time. We 
have these twice weekly conference calls that include all the 
agencies, where we are talking about recipient reporting, what 
we have seen----
    Ms. Norton. So these are conference calls among all the 
agencies involved?
    Mr. Porcari. Among all the agencies. We do this twice a 
week. I have personally found it, actually, to be very helpful 
because----
    Ms. Norton. And where do those emanate from, OMB?
    Mr. Porcari. The Recovery Office is actually leading those. 
But we are finding common issues on recipient reporting, for 
example, across agencies. We see where we should focus our 
assistance efforts, the kind of common errors. So I know that 
the recipient reporting will be better in the next quarter, but 
even getting through this first reporting cycle, some of the 
things that people have seen, we have been able to do that 
feedback very quickly.
    Ms. Norton. Again, you will know best, from your own 
feedback and from your own lessons learned, how this should be 
done. I must tell you, my own sense is that, in reporting hard 
numbers, one should be very careful. I, myself, would not use 
single numbers. I am not here to tell you how to do it, but 
people who engage in uncertainty every day have learned how to 
develop ranges so that people do not have raised expectations 
and so that people do not play a game of gotcha.
    And let me tell you something about gotcha. We have never 
had before this committee anything approaching quarterly 
reports. The way in which the Congress has operated, certainly 
in the years I was in the minority, is wait until something is 
all over. Then the easy thing to do is to call in people and 
recount the errors that occurred.
    What this hearing is doing is working with the 
administration to track what has never been tracked before so 
that we can get something out of a hearing that is corrective 
and helpful. So while we are disappointed that the numbers were 
erroneous, we believe that the importance of this hearing is 
the process you have just described. That may be the most 
important thing that could possibly happen, because the kind of 
errors that my agency found may be entirely different from that 
of another agency, and then, in the next quarter, I get that 
kind of error, but nobody forewarned me that kind of error 
comes up. So this sharing of errors and of corrections across 
the boundary lines of agencies, despite their different 
missions, could not be more helpful.
    What I am going to do is to recess this hearing for 15 
minutes, let us say until 2 p.m. We will recess until 2 p.m.
    [Recess.]
    Chairman Towns [presiding]. Thank you very, very much for 
your testimony.
    Now we move to our second panel. The Honorable Dick Armey 
is the chairman of the advocacy group FreedomWorks. Dr. Armey 
is the former Majority Leader and served in the U.S. House of 
Representatives for 18 years. Dr. Armey holds a Ph.D. in 
economics from the University of Oklahoma. And is the former 
chairman of the University of North Texas Economics Department.
    Of course, welcome. Good to see you. Happy to know there is 
life after this place.
    Now we also introduce Dr. Irons, the research and policy 
director at the Economic Policy Institute. His areas of 
expertise include the U.S. economy and economic policy, with an 
emphasis on Federal tax and budget policy. Dr. Irons earned his 
Ph.D. in economics from the Massachusetts Institute of 
Technology [MIT], and is the author of numerous publications. 
Dr. Irons formerly was an economic professor at Amherst College 
and worked at the Center of American Progress, OMB Watch, and, 
of course, Brookings Institute and Federal Reserve Board of 
Governors.
    Welcome, Dr. Irons.
    It is the longstanding tradition here that we swear our 
witnesses in, so if you both would stand and raise your right 
hands.
    [Witnesses sworn.]
    Chairman Towns. Let the record reflect that the witnesses 
answered in the affirmative.
    Dr. Armey, we will start with you first. As you know, the 
procedure is that we have 5 minutes and then, of course, we 
have opportunity after that to raise questions with you and 
further comments that you might have. So welcome, Dr. Armey.

STATEMENTS OF HON. DICK ARMEY, CHAIRMAN, FREEDOMWORKS; AND JOHN 
    S. IRONS, RESEARCH AND POLICY DIRECTOR, ECONOMIC POLICY 
                           INSTITUTE

                  STATEMENT OF HON. DICK ARMEY

    Mr. Armey. Thank you, Mr. Chairman, for the invitation. I 
would like to spend a few minutes in just a quick review.
    The intellectual gantry for such public policies as the 
stimulus package, of course, is John Maynard Keynes' general 
theory, and the notion was that in times of economic distress, 
downturned governments could put a spur to the economy by--I 
think they called it pump priming; in Texas we call it putting 
a spur to the economy--by either temporarily running deficits 
or by either increasing spending or cutting taxes.
    There is a mixed review of the history of the Keynesian 
policy prescriptions and their success. I would be one that 
would suggest that on the stimulate the economy through 
increasing spending side is a pretty de minimis record of 
success in the history of the application of these theories; 
while on the other side of the coin, stimulating the economy 
through reduction in taxes has been a fairly rich history of 
some success, the two most notable cases being the Kennedy tax 
cuts of 1962 and the Reagan tax cuts about 1982.
    I, of course, lived as an economist through both of these 
times, very exciting times for us in our profession, but one of 
the sweet ironies that I reflect back on in the academic 
community, when President Kennedy proposed stimulating the 
economy through cutting taxes so you could also increase 
revenues, it was considered an act of genius. He was celebrated 
in the academic community as being a president who was teaching 
us economics. When Ronald Reagan came back with exactly the 
same idea 20 years later, he was considered a moron in the 
academic community, despite the fact that his success has to be 
considered even greater than that temporary success of the 
Kennedy tax cuts.
    I would argue that the larger problem that beleaguers the 
American economy today is we have an economy that is 
institutionally, structurally out of balance, and by that I 
think you should look and say the strength of every economy is 
the private sector. Every nation state in the history of the 
world that has tried to grow a strong economy through the 
public sector has had abject failure, serious resource 
misallocations, and poverty and hardship; while the United 
States, on the other hand, building its economy on the basis of 
the sector's initiatives, has had the greatest track record in 
the history of the world.
    But there is a balance that must be struck between public 
and private activity, and there are various subscriptions. You 
can go back to Adam Smith's Wealth of Nations. He had a very 
good outline, but the general principle was the public sector 
should be de minimis and focused on such things as public 
capital; administering a system of justice, especially such 
things as a system of contracts, which, of course, if you have 
private enterprise, contracts are important and you must, of 
course, be confident that your government will protect your 
contractual rights; and, of course, security needs. But the 
basic notion here is that the government has a limited list of 
things that it must do and it must do well with efficiency, the 
primary product of their successful efforts, of course, 
increased productivity on the private side, such things as 
roads and transportation.
    I believe what has happened in the United States is we have 
crossed beyond the point of diminishing returns. As Government 
has grown out of control, we have gotten to the point of 
negative returns. This discussion is a lively discussion 
internationally. What is the appropriate size of the government 
relative to the economy? I am proud to tell you that this 
international discussion is being carried out, by and large, in 
terms of something called the Armey Curve, and the Armey Curve 
says there is a point that is optimal, where you have the 
necessary and sufficient rational devotion and resources to 
government enterprise in support of private sector initiatives 
and you maximize the performance of your economy; beyond that 
it becomes a burden.
    I think we have long since gone beyond that optimal point 
and we are now at a point where the biggest single problem that 
belabors the American economy is the fact that the Federal 
Government is such a burden. And my analogy is this: In the 
competition between world economies, the United States has the 
fastest, most beautiful horse in the race; there is no doubt 
about it. Our record of accomplishing in providing a standard 
of living for our citizenry is unparalleled, unchallenged, 
even. But the horse is carrying a 500 pound gluttonous jockey. 
And the whole theory that you can in fact improve your 
performance in this race of international economic competition 
by feeding the jockey and starving the horse is asinine. I 
don't know any other way to put it. But it is certainly 
counterproductive.
    So what I would suggest to you is that the difficulties 
that have belabored the American economy dramatically in the 
past year or year and a half have first been born out of 
misguided public policy, most importantly, two decades of too 
easy money. I asked myself, when I looked at the bubble burst 
on housing, how could so many people make so many bad 
decisions, irresponsible and counterproductive decisions? It is 
hard to imagine that. So my response was, well, the last time I 
did something foolish with money was the last time I had too 
much easy money.
    So what we had was a period where the Government created 
this enormous housing bubble, maybe for the best of misguided 
intentions, but still, nevertheless, it was the product of bad 
public policy. The market could have corrected that, as it did 
the dot.com crisis just a few years earlier if left alone, but 
the Government said, look, if we have too much of a good thing, 
the best way to improve on it is to have more of too much of a 
good thing. So we had first the Bush stimulus package, which 
was a failure; then the high drama of the Bush bailout, which 
was not only a failure, but very offensive failure to the 
citizenry at large; and then that was followed by this enormous 
package that is the current stimulus package.
    Now, there was one innovation in this recent effort that I 
find interesting, and that is the idea that we can track this 
money and make a direct tractability recording of the jobs. My 
own view is this effort is, by and large, becoming clearly seen 
as empirically a bogus effort, that is, from its conception in 
its administration, only politically defined.
    Finally, two observations on that. One, politics is morally 
and intellectually inferior to virtually everything, with the 
possible exception of sociology. So if you, in fact, are making 
decisions out of a politically defined motive, and you are 
letting your politics define your economics, you are probably 
going to come up with a bad notion. And just to be fair, 
because in my testimony I quote so many of the correct-thinking 
economics like Hayak Emesis and so forth, let me just end with 
a quote from John Kenneth Galbraith, related to this tracking 
exercise that is, frankly, comical, comicable at best. 
Galbraith said beware of politicians that manufacture numbers 
for the sake of testimony. I think he got a perfect example of 
what it is that he warned us against at that time.
    Thank you.
    [The prepared statement of Hon. Dick Armey follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Towns. I thank the gentleman. Thank you very much, 
Dr. Armey.
    Now, Dr. Irons.

                   STATEMENT OF JOHN S. IRONS

    Dr. Irons. Thank you for the opportunity today. And I 
should warn you that I am an economist who has manufactured 
numbers for the purpose of this testimony. Hopefully, my 
manufactured numbers are not made up, but actually good 
estimates.
    But let me start off by saying that there can be no 
accountability without transparency. And I applaud the efforts 
of this committee and the Congress and the administration to 
take transparency seriously. My testimony today will focus 
primarily on jobs. I want to make four main points. These 
points are elaborated in my written testimony, but let me cover 
the basics here.
    First, as you have already heard, the recipient reports 
displayed on Recovery.gov are not perfect. This should not be a 
surprise given the short timeframe in which the system was 
implemented, given the sheer number of reports, and given the 
problems inherent in this kind of endeavor. To err is indeed 
human. Nevertheless, errors and inconsistencies are 
unacceptable and should be addressed whenever they are found.
    Second, while many in the media have highlighted cases in 
which jobs have been overstated by recipients, the under-
reporting appears to be at least as significant of a problem as 
over-reporting. My written testimony has more detail on the 
kinds of problems, but let me highlight a couple examples.
    First, there are a number of cases in which the prime 
recipients do not appear to have correctly estimated saved 
jobs. One grant recipient stated, ``There were a number of jobs 
held by construction workers that were lengthened because of 
the funding and they reported zero jobs.'' This is a case where 
clearly they had jobs that were retained because of the 
Recovery Act, yet they reported zero.
    In many cases, subcontractors and subawardees are not 
required to report on job creation. It is often unclear if 
these jobs are included by prime recipients. One recipient of a 
$2\1/2\ million contract, of which 90 percent was awarded to 
subcontractors, stated, ``One full-time job was created with 
the prime contractor's organization as a result of this award. 
The job is titled Project Manager.'' Clearly, this is a person 
who is in charge of managing the subcontractors. So for $2\1/2\ 
million, they reported just one job created; they likely did 
not include the subcontractors.
    To give you a sense of the size of this potential problem, 
by my count, there are 2,181 reports in which projects have 
been started and recipients received more than $50,000, yet 
they reported zero jobs in their reports. There are 528 reports 
in which projects have been started, recipients received more 
than $1 million, yet fewer than two jobs were reported. So 
there may be legitimate explanations for these outliers, but we 
should not necessarily conclude that the 640,000 total, as 
presented by Recovery.gov is an overstatement of the recipient 
jobs. It might very well be an understatement.
    My third point, I want to stress that recipient reports, 
while providing valuable information on projects and 
employment, cannot and will not capture the full true impact of 
the Recovery Act. In fact, the true impact of the Recovery Act 
will be far greater than the sum total of the recipient 
reports. For example, the data only includes contracts, grants, 
and loans; tax benefits and entitlements are not included. Of 
the funds paid out so far, only about $52 billion, just one-
fourth of the total, is in the form of contracts, grants, and 
loans.
    Further, and importantly, these recipient reports only 
include direct jobs. For example, a new construction worker 
hired to install a new roof will be included; the data does not 
include the job impact of construction workers respending on 
car repairs or restaurant dining. The data does not also 
include upstream supplier jobs at the companies that 
manufacture, transport, and sell roofing supplies at the 
wholesale or resale level.
    My fourth and last point, despite the problems with 
individual reports, it appears that the recipient report totals 
are consistent with the counts of economic advisors' job 
estimates and with other macroeconomic data and estimates. The 
economic evidence clearly shows that the Recovery Act is having 
impact. Before the Recovery Act, employment was declining at an 
average monthly pace of over 500,000 jobs per month in the 
fourth quarter of 2008, and by nearly 700,000 jobs a month in 
the first 3 months of this year the economy was very much in 
free fall.
    In the most recent 3 month period, employment declines have 
averaged fewer than 200,000 jobs. Before the Recovery Act, GDP 
was declining at a rapid rate. In the 9-month period ending in 
March this year, we saw the most rapid decline in GDP since 
quarterly data was first collected, going all the way back to 
1947. So we had the most rapidly deteriorating economy in over 
60 years. The most recent data shows a turnaround; GDP grew at 
a 3\1/2\ percent annual rate in the most recent quarter.
    Now, using methodology more suited to capture the full 
impact of the Recovery Act, including tax cuts, aid to States, 
and direct investments, and also including responding and 
upstream supplier jobs, the total number of jobs created or 
saved so far is likely between 1 million and 1\1/2\ million 
jobs. This estimate is approximately consistent with the CEA's 
initial estimate in May of 1\1/2\ million in the fourth quarter 
of 2009. Other forecasters, including Goldman Sachs, 
Macroeconomic Advisors, Moody's Economy.com, and others have 
estimated GDP and employment impacts consistent with these 
estimates as well. These macro estimates are also consistent 
with the micro data from Recovery.gov recipient reports.
    In summary, it does appear that the Recovery Act is on 
track. Evidence from macro level data to model estimates to 
Recovery.gov recipient reports all point to a significant 
impact on jobs and the broader economy.
    Thank you. I look forward to your questions.
    [The prepared statement of Dr. Irons follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Towns. Thank you very much.
    Let me thank both of you for your testimony and let me 
begin by asking a question of both of you. The Recovery Act, 
what is your impression of it?
    Mr. Armey. My impression of the Recovery Act was that it 
was a wholly futile effort. If you take a look at, in my adult 
lifetime and all the years that I spent watching and studying 
our economic policy, what has worked to spur growth and 
recovery in the economy is cutting taxes and leaving the 
taxpayers who earn the money actually become more investment.
    We have some very grievous institutional dislocations in 
this fundamental structure of so much public policy, and we 
start with the tax code. If you go way back to Adam Smith's 
1776 The Wealth of Nations, he says the road to economic growth 
is abstinence, savings, and investment. Savings and investment 
are two economic activities that are double taxed, so they are 
given a double whammy disincentive to savings and investment.
    Every smart tax reduction we have ever made, that is, tax 
reduction aimed at diminishing the load on savers and investors 
of this activity has caused them to be more active and 
generated the economy. If in fact the Federal Government, by 
size and the magnitude of spending, is already redundant with 
even the interest on the national debt at that time being equal 
to the entire budget of the Defense Department, with already 
existing current deficits of $500 billion, to double down on 
what is redundant is not productive.
    Dr. Irons. Let me share a broad impression. I am afraid I 
don't have a good horse example, but let me use a different 
analogy. Before the Recovery Act was passed, the economy was in 
free fall. The economy had jumped out of a plane; it was 
declining at a very rapid rate. The recovery package was 
essentially a parachute; it opened up, it slowed the pace of 
decline.
    We still have jobs that are being lost, but they are being 
lost at a much smaller pace. It gave the economy a chance to 
recover. It is not going to be the end-all and be-all; it is 
not going to get us from where we are to a fantastic economy. 
No one is claiming that the economy that we currently are in is 
a great environment, but at least it stopped the worse from 
happening; it stopped us from going off the cliff.
    In terms of the policy, I tend to be more of a kitchen sink 
economist; I think we should try a little bit of everything. I 
think in the recovery package you saw that there were a number 
of investments, there was aid to States, there were tax cuts as 
part of the package, and I think that a problem of the size 
that we had demanded a comprehensive, broad-based solution. I 
think that is what the recovery package represented. So I am 
very optimistic that this gives the economy the chance to turn 
around; it stopped the downward spiral and gave us a chance to 
recover.
    On the tax cut component, I think there are components of 
the recovery package which I might no be as fond of as other 
parts, including some of the tax cuts, and I find it 
interesting that the Bush tax cuts were not listed as part of 
the success stories in terms of stimulus. In fact, we had one 
of the worst recoveries on record after the Bush tax cuts were 
passed.
    So I think the record in most recent times of the efficacy 
of tax cuts as stimulus has been, at best, mixed, and I think 
we need to think about what kinds of tax cuts. Tax cuts are not 
a generic thing. There are tax cuts, I think, for low- and 
middle-income Americans which can be respent, can be very 
effective stimulus. Tax cuts for businesses who need customers, 
not tax cuts, are in many ways probably not a good idea. So I 
don't think we should talk about tax cuts in the abstract; we 
should have a more nuanced view.
    Chairman Towns. Dr. Irons, I am deeply concerned that the 
unemployment rate has now surpassed 10 percent. Is this 
evidence that the Recovery Act is not working or that the 
projections of the Council of Economic Advisors were wrong?
    Dr. Irons. I don't think it is. I agree with you, I think 
the 10 percent unemployment rate is a huge problem. I think the 
high unemployment rate is a result of a disastrous economy that 
was in place before the Recovery Act was passed. And I think 
when you look at the projections of the Council of Economic 
Advisors, where they thought the economy would be, they, along 
with private forecasters, were overly optimistic about how high 
the unemployment rate would rise.
    So the fact that we have a 10 percent unemployment rate is 
a statement, not about the recovery package, but is a statement 
about the state of the economy before the recovery package was 
passed. In fact, if it were not for the recovery package, we 
would have a much higher unemployment rate. So my example of 
the economy in free fall and a parachute, it has slowed down 
the deceleration, but you still see some increase in the 
unemployment rate. At the same time, you don't want to cut 
yourself loose of that parachute; that would make things much 
worse. And that is the case we would be in if we did not have 
that parachute, if we did not have the Recovery Act in place.
    Chairman Towns. I yield to the gentleman from Missouri, Mr. 
Luetkemeyer.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    I have so many questions, I don't know where to start with 
this group.
    Thank you for your testimony, Mr. Armey. I am curious. I 
know that in the previous testimony we heard earlier, they were 
talking about all the jobs that have been created and saved, 
and one of my concerns is that two-thirds of jobs happen to be 
with the Department of Education. They have created 400,000 out 
of the 640,000 jobs, and in the testimony it appears that all 
they did was make sure that the teachers' budgets or the 
education budgets are funded for another year, which means what 
are we going to do next year?
    So it doesn't look like we have created or saved a 
permanent job, because we haven't fixed an economic problem 
that will allow that job to continue, unless we continue to 
find another stimulus that primes the pump again. What is your 
analysis of that?
    Mr. Armey. My own view is that, first of all, there has 
been very little distribution of this massive amount of money 
that shocked the world, but, by and large, it has been 
distribute intragovernmentally. So you are getting some public 
jobs that are perhaps being retained that might not otherwise 
have been, but certainly nothing constitutes a recovery.
    The thing that gives you recovery is when the private 
sector investor class engages. That is what happened in the 
aftermath of the Reagan taxes. And you are correct, I did not 
mention the Bush tax cut. We got an anemic recovery out of them 
because there was so much income redistribution in that 
package; tax cuts, as opposed to stimulation for investment and 
savings. That was a tax cut package that was too politically 
defined to be as effective as it might otherwise have been. I 
made the point earlier you need smart tax cuts. If they are 
just income redistributional tax comes, they do you very little 
good.
    So the fact of the matter is you have some demonstration of 
direct linkage between jobs in the Government sector with 
intragovernmental awards, but more than discouraging dramatic 
demonstration of declining employment in the private sector, 
that gives you 10 percent overall reduction in employment or 
unemployment rate.
    Mr. Luetkemeyer. Thank you. I sit on the Small Business 
Committee and it takes about 67,000 jobs, according to the 
testimony we have heard a number of times, to create a job for 
small business. Yet, the average in this package is about 
$246,000 it has created so far. I know that in this package 
there was $31 billion, roughly, of small business tax credits 
and things like that. Do you know, off the top of your head, 
Mr. Irons, how many jobs were created or saved as a result of 
those tax credits?
    Mr. Armey. No, I don't. Again, let me just say there is a 
generic rule of thumb I think you can apply that public sector 
job creation is very costly and results in virtually no 
enhanced productivity for the economy as a whole. Private 
sector job creation coming from the investment sector, where in 
fact you expand the application of science and engineering 
through new capital investment, increases productivity and, in 
fact, results in a much greater, as it were, bang for your buck 
in terms of the productivity gains that result in increased 
sustainability of the jobs. That is why you see a greater 
permanence in the jobs created on the private sector.
    Mr. Luetkemeyer. Also, with regards to--this stimulus 
package, we are incurring a huge amount of debt. Dr. Irons, 
what do you feel is an adequate level of debt for our economy 
to be able to live with?
    Dr. Irons. Oh, that is a good question, and I don't think 
it is a knowable question. There is no specific number where, 
if you are below it, you are fine; if you are above it, you are 
in trouble.
    Mr. Luetkemeyer. You mean a half a trillion dollars worth 
of interest is something we can continue to sustain forever?
    Dr. Irons. The question is what is a sustainable level. I 
think that is the key question. And I think there you have to 
look at how fast the economy grows and then how fast the 
deficit increases the debt. I think if you are underneath a 
threshold which keeps the debt from rising as a share of the 
economy, you are in OK territory. If the debt is rising faster 
than the economy as a whole, then you are in trouble. The way I 
describe it is Bill Gates can carry a bigger debt than I can 
because of his income. So long as our GDP is rising, we can 
continue to maintain higher levels of debt.
    Mr. Luetkemeyer. Our GDP is not doing very well right now. 
That is my question. Where do you think we need to go? Are we 
maxed out? Do we need to stop borrowing money?
    Dr. Irons. I don't think we are maxed out. I think we can 
still borrow money.
    Mr. Luetkemeyer. We can still borrow more money?
    Dr. Irons. We can absolutely still borrow money with the 
caveat that the----
    Mr. Luetkemeyer. Thank you.
    Mr. Armey, before I run out of my time. I apologize, but my 
time is limited.
    Mr. Armey. Well, of course, the market--finally, the market 
reveals everything eventually. One of the--what is it they 
say?--the canaries in the mine that I am looking at right now 
is the activity of the curry trade, the bet on currencies. For 
years recently they were betting against the Japanese currency, 
correctly so. Now they are betting against the U.S. currency 
because we are flooding the world with dollars and there is a 
decreasing willingness on the part of the world to own our 
debt.
    The fact is, the Government acquires money in three ways: 
they tax it directly or they borrow it. In a declining world 
willingness to do so, they end up printing it. If they print 
it, then they tax indirectly by inflating the currency, 
deflating its purchasing power, and it comes back. In almost 
every case the cost of current mismanaged fiscal policy falls 
on a future generation.
    Mr. Luetkemeyer. Thank you for your testimony.
    I yield back my time, Mr. Chairman.
    Chairman Towns. Thank you very much.
    I now yield to the gentleman who, at one point, chaired 
this committee for 6 years, Mr. Burton from Indiana.
    Mr. Burton. And I looked so young.
    You know, the President has said and his administration has 
said they created 640,329 jobs. That is pretty specific. You 
would think they would be able to account for those jobs since 
they are so specifically down to the axial job. 329? How do you 
account for that?
    Dr. Irons. Well, I think the number that is presented is--
--
    Mr. Burton. I know, but do you think that they can really 
be that accurate, right down to 329?
    Dr. Irons. No. Is the number actually 640,329? No. There 
are errors.
    Mr. Burton. It is something that they ``pulled out of their 
head.''
    Dr. Irons. Absolutely not. The administration did not 
pull this out of their heads;'' this is 
the sum total of the recipient reports.
    Mr. Burton. OK.
    Dr. Irons. So these are what the recipients reported, and 
they added that up.
    Mr. Burton. Where did you go to school?
    Dr. Irons. Graduate school? MIT.
    Mr. Burton. And before that, Swarthmore?
    Dr. Irons. Swarthmore College, yes. That is right.
    Mr. Burton. How old are you?
    Dr. Irons. That is a good question. What year is it? 
Thirty-nine.
    Mr. Burton. Thirty-nine.
    Dr. Irons. Yes.
    Mr. Burton. See, in 1982 where were you? How old would you 
have been in 1982?
    Dr. Irons. I would be 12.
    Mr. Burton. Well, in 1982, I became a Congressman, and I 
don't think you were here, Dick, but we had a guy that came 
into the White House and we had come out of the Carter 
administration with 14 percent inflation, 12 percent 
unemployment--called it a misery index, 26 percent--and they 
were throwing money at everything.
    He put on a sweater and said we had to turn our thermostats 
down and the world was going to hell in a hand basket. And this 
guy comes riding in from the West and they said you have to 
raise taxes; we have to get more money in the Treasury because 
everything is going south. And you know what he said? He said, 
well, I think that we ought to cut taxes, give people and 
business more disposable income to invest, and that ought to 
spur economic growth. And you know what? He was right. We had 
25 years of economic expansion, or 20-some years of economic 
expansion.
    This philosophy that you can spend yourself out of debt and 
solve the economic problems by spending, to me, is just 
anathema; I just can't get it. And when I hear people say, 
well, you spent $1.4 trillion more this year than you have 
taken in, but we can spend more and get out of debt, I think 
you have to be smoking something that is illegal. You know? 
This is crazy.
    The health bill we are talking about is going to cost at 
least another trillion dollars over the next decade; it is 
going to raise taxes of probably God only knows how much. We 
are already $1.4 trillion in the tank right now, and there is 
going to be more spending; they want to come up with more 
programs that are going to cost money and taxes like the cap-
and-trade. You can't spend your way out of the hole. When you 
get so deep, you have to stop digging. And that is the problem 
we have right now. I am putting this in very simple economic 
terms. We need to cut spending.
    There is a good book I wish you would read, Mr. Irons, it 
is called ``The Forgotten Man.'' Have you ever heard of that 
book?
    Dr. Irons. No, I haven't.
    Mr. Burton. Well, you being an intellectual, I wish you 
would read it. It is a book that goes from 1929 to 1941 and it 
tracks the Roosevelt administration and the things that they 
did to solve their economic problems. And they did almost the 
same thing you are talking about in the mid-1930's.
    And you know what happened? Things got worse. And it wasn't 
until the war started that they dug themselves out of that hole 
because everybody had to go back to work, women and everybody 
else, because they were fighting overseas.
    The only reason I bring all this up is, you know, I have 
been here for 27 years, and some people say, well, that is too 
long. I don't know, maybe it is. I don't know. But I have to 
tell you this. One thing I do know is that you can't spend more 
than you take in; inevitably, it is going to come back and bite 
you in the rear-end, and that is where we are going right now.
    I think I heard you say that we are in a position now where 
we could spend more money to get the economy moving and that 
sort of thing. I think, Mr. Irons, that you are incorrect. I 
hope you will read that book, and maybe the next time I see you 
you will have a different perspective on the way we spend money 
in this country.
    With that, Dick, it sure is good seeing you, buddy. I wish 
you were still here.
    Mr. Issa. And still majority leader, I would say.
    Mr. Burton. And still majority leader.
    Chairman Towns. Now you are going too far; you are 
dreaming.
    Mr. Armey. I am sure Steny Hoyer would have a different 
view of the matter. [Laughter.]
    Chairman Towns. Let me recognize the gentleman from 
Maryland, Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Mr. Chairman.
    Thank you, both gentlemen, for being here.
    Dr. Irons, I didn't know when it became a bad thing to know 
stuff. I think Mr. Armey would agree that although knowledge 
sometimes is a good thing, having the facts is a good thing. 
And I would point out that, yes, in World War II we pulled 
ourselves out of a recession. It was one of the greatest 
examples of big government investment, and U.S. debt was at 
extremely high levels during World War II and I think most 
economists would tell you that had a big part of pulling us out 
of the recession and depression at that time.
    Mr. Armey, do you support unemployment compensation during 
times like this?
    Mr. Armey. Well, obviously, we always like to help people 
who are truly distressed. There is always a question of what 
definition you give to that. Again, like almost everything I 
can think of, even unemployment compensation, which can be in 
fact a good and necessary thing, can be carried to extreme. If 
it becomes a fountainhead for dependence----
    Mr. Van Hollen. Let me--so we are on the same track--I 
understand where you are going. Let me rephrase the question. 
Do you agree that, for people who are out of work through no 
fault of their own and are continuing to look for a job in the 
economy and can't find one through no fault of their own, that 
they should receive unemployment compensation?
    Mr. Armey. I don't believe that the best public policy 
option is to make them less miserable in their continued 
unemployment for a longer period of time, as opposed to those 
policies that can be directly pursued that will give them the 
job opportunity.
    One of the things that frustrates me as I look at this past 
year and a half in the United States with public policy is the 
opportunities to expand employment opportunities for real 
people in the private sector that have been foregone, and the 
problem is office holders oftentimes tend to pacify their own 
feelings of inadequacy by saying, well, at least we made them 
more comfortable in their misery; and I don't find that a very 
attractive public policy.
    Mr. Van Hollen. Let me ask it this way, Mr. Armey. Would 
you have voted for the unemployment compensation packages that 
were in the economic recovery bill and the House has passed 
since then?
    Mr. Armey. I can't remember--I am sorry----
    Mr. Van Hollen. We passed unemployment compensation----
    Mr. Armey. I probably would have--I may very reluctantly 
have voted for them while I argued we ought to be doing 
something more productive, more responsible, with a greater 
heart and a greater sense of dignity and future for these folks 
by way of----
    Mr. Van Hollen. You would have voted yes? I just want to 
make it clear.
    Mr. Armey. I don't know. I haven't looked at that package.
    Mr. Van Hollen. You don't know?
    Mr. Armey. I didn't look at the package. I never voted on 
something I didn't read.
    Mr. Van Hollen. How about the tax reduction components of 
the economic recovery bill?
    Mr. Armey. If there were any tax reduction components that 
were not merely income redistributional and I could possibly 
assess they would have something to engage savers and investors 
and more of that activity, which would result in job creation, 
I would have been supportive of it.
    Mr. Van Hollen. Let me ask you this. You keep saying if 
there were. Did you read the economic recovery bill?
    Mr. Armey. No, I didn't. I had no reason to read it. I 
wasn't going to vote on it.
    Mr. Van Hollen. Well, now, Mr. Armey, you have been 
commenting an awful lot, both here and in the press, about the 
economic recovery bill. We ask Members of Congress to read it 
when they vote on it and are considering it. You said a lot 
about it, so I am a little surprised to learn that you 
haven't----
    Mr. Armey. Well, look. If my neighbor has a dead cat 
stinking up his yard, I don't have to know how it got there to 
know it is a dead cat stinking up the yard.
    Mr. Van Hollen. What is that? Well, I think it is important 
to read things. I understand there are some comments suggesting 
that knowing stuff is a bad thing, but it seems to me that we 
owe it to the people that we are communicating with that we 
have an understanding to read the information.
    Let me ask you this, because it is not clear yet whether 
you are for the unemployment compensation components or whether 
you would have supported the tax cut components. Both of those 
were significant components, by the way, of the economic 
recovery bill.
    Dr. Irons, can you talk a little bit to that fact? The 
economic recovery bill that we have been talking about today 
represents less than a third of what was in there for economic 
impact. Could you comment a little bit on that, please?
    Dr. Irons. Yes, that is right. The specific elements that 
have been reported on through Recovery.gov recipient reports 
will represent about a third of the total amount that is in the 
package. Right now there are about a quarter because they have 
gone a little more slowly than the tax cuts, the assistance to 
the States and some of the other components.
    So tax cuts are a significant part; the assistance for 
States is a significant part; and the direct investments, which 
largely show up in the reports you have been talking about 
today, are a significant part, about equal weight to each. So 
the numbers we have seen today are only a part of the overall 
impact.
    Mr. Van Hollen. Could you comment a little bit on the 
situation that the President inherited with respect to the 
deficit and debt following the last administration?
    Dr. Irons. Yes. The deficit, which is now well over a 
trillion dollars, is largely the result of policies that were 
put in place before the President took office, as well as 
deteriorating economy. The economic deterioration, which was, 
as I said before, the most rapid since 1947, is the prime 
culprit in terms of the reduction in revenues and the increase 
in outlays that have resulted from just the economy going down. 
That has been the prime driver of the higher deficit.
    So in thinking about how you solve a deficit problem, the 
No. 1 priority is get the economy moving again. We can't solve 
the deficit problem if we have a recession that is going to 
last for 5 years or 10 years. That needs to be the No. 1 
priority.
    Mr. Van Hollen. Thank you.
    Thank you, Mr. Chairman.
    Chairman Towns. Thank you very much.
    I now yield 5 minutes to the gentleman from Ohio, Mr. 
Jordan.
    Mr. Issa. Would the gentleman yield for just a moment?
    Mr. Jordan. Yes, a few seconds.
    Mr. Issa. Mr. Armey, since you didn't have a chance to read 
that entire document, let me assure you that those of us who 
had a chance to read it, not in the few hours before the air 
dropping at midnight and the vote, but afterwards, know there 
were no non-redistribution tax cuts and the tax cuts that were 
in there were de minimis to the investor class in any way, 
shape or form, unless you include the green jobs.
    I yield back and thank the gentleman.
    Chairman Towns. You know----
    Mr. Issa. It is on the gentleman's time.
    Chairman Towns. I must admit----
    Mr. Jordan. Mr. Chairman will give me plenty extra time, if 
I need it.
    Chairman Towns. I just think this is a little strange, 
knowing the kind of technical person that you were when you 
provided leadership here. That you are providing leadership for 
an organization that is totally against the bill and you 
haven't read it.
    Mr. Jordan. Thank you, Mr. Chairman.
    Dr. Irons, in one of your earlier statements you said that 
the recovery package was ``kind of try a little bit of 
everything.'' Is that right?
    Dr. Irons. I am not sure about the exact wording, but it is 
close.
    Mr. Jordan. It seems to me what a mischaracterization. I 
would argue what this Government has done--and, frankly, it 
goes back to the previous administration as well--is not try a 
little bit of everything; we have tried a lot of one thing, big 
government spending. I mean, think about it. The bailout 
package last fall, the stimulus package, the appropriations 
process that has moved forward, we are spending at 12 percent, 
14 percent increases.
    I mean, all we have done, I have argued many times that, if 
big spending was going to get us out of this mess, we should 
have been out of it a long time ago. That is all the Government 
has been doing. So to characterize it as we have tried a lot of 
everything or a little bit of everything is just totally, 
totally wrong.
    But here is what I want to focus with both of you guys. I 
want your response to this. Thinking now in a big picture 
sense, two questions. Are you troubled, either one of you, are 
you troubled by what I would characterize as an unprecedented 
involvement of the Government in the private sector? And let's 
go specifically to all the spending we know, but how about this 
fact, which when I think about this in the United States of 
America, we now have a Federal Government pay czar telling 
private American citizens how much money they can make.
    And I understand it is done in the context of the TARP 
repayment plan, but think about that, what is going on in the 
framework of Senator Schumer saying maybe we have to look at 
the idea of any publicly traded company Mr. Feinberg has 
jurisdiction over executives and their pay compensation.
    So are you troubled by where this administration seems to 
want to take this economy? And I will start quickly with Mr. 
Armey and then with Mr. Irons.
    Mr. Armey. Well, first of all, yes, I am troubled because--
on the first basis on the basis of individual liberty. Those of 
us who believe in personal freedom, and especially freedom of 
enterprise, and we witnessed the world great success story 
through private individual enterprise, understand that when the 
Government tries to manage, as they have tried in many other 
countries, they eventually get it wrong.
    Second, and more pragmatically, there is an incentive 
effect. In fact, you can go all the way back to Shakespeare or 
you can jump forward to Thomas Edison. Their point was it is 
not worth writing, it is not worth inventing unless it can be 
sold for a profit. There is no greater, more productive motive 
in the history of the world that has contributed to human well-
being by greater amounts and done less to negatively affect 
human well being than the profit motive. And if the Government 
is going to say, look, we will confiscate your salaries, your 
earnings and so forth, you disincentivize people from being 
productive.
    Mr. Jordan. Thank you.
    Dr. Irons, quickly.
    Dr. Irons. I mean, it is not a quick answer, unfortunately; 
it is a big question. The Government is involved in a number of 
different areas----
    Mr. Jordan. The question is are you troubled by the 
unprecedented level of Government involvement in the private 
sector.
    Dr. Irons. Well, I think you have to be more specific than 
that. I mean, there are areas where the Government should be 
involved----
    Mr. Jordan. But you can answer yes or no if you are 
troubled.
    Dr. Irons. I am not troubled by some and I am troubled by 
others.
    Mr. Jordan. OK.
    Dr. Irons. I would much rather the Government be out of the 
banking business, out of the car business. I think that once 
you are in it at the behest of banks, in the case of TARP, you 
need to do what you have to do to manage that effectively, be 
it a pay czar, be it oversight, reasonable oversight over the 
business practices of assets that you own. I think that is 
reasonable. I would like the Government to be out of the 
banking sector, so there are bits and pieces.
    Mr. Jordan. Let me frame the question in a slightly 
different manner. I would argue that one of the things holding 
us back from coming out of this recession with the type of job 
growth we would all like to see is business people are smart 
people; they take educated risk, they don't take crazy risk.
    So they are asking themselves, you know, I would like to 
bring those people I laid off, I would like to do that 
expansion that we were thinking about doing, but I don't know 
what these yahoos in Congress are going to do next. I don't 
know if they are going to pass this health care proposal, which 
raises my taxes. I don't know if they are going to pass this 
cap-and-trade, which is going to cost me more in energy costs.
    Would you argue that the uncertainty of the policies being 
promoted, policies being advanced, is hindering the ability to 
create jobs, whether they get done or not? And let's go quickly 
with Dr. Irons and then with Dr. Armey.
    Dr. Irons. I think uncertainty is not good for the private 
sector. Whether or not these are major uncertainties in the 
life of a business person, I don't think so. I think a lot of 
this is on your head; you can pass health care and remove that 
uncertainty. I think that----
    Mr. Jordan. We can get rid of the uncertainty; we can add a 
big tax if we do it, right?
    Dr. Irons. Well, I think that certainty is better, and the 
more we can forecast what we are going to do, what you are 
going to do, I agree that is a good way to go.
    Mr. Jordan. Dr. Armey, quickly.
    Mr. Armey. There is no doubt about it. The uncertainty kept 
the investor class on the sidelines throughout all of the 
1970's and they are sitting it out right now, specifically with 
what they see as the targeted industries of the big government 
ambitions of this administration.
    Mr. Jordan. Mr. Chairman, if I could, since you took a 
little bit, if you wouldn't mind, Mr. Chairman, one last 
question on the debt.
    We are at $12 trillion. We are slighted to go to $20 
trillion over the next decade. This scares me to death. I am 
the guy who offered a balance budget this past spring, who 
actually tried to cut some spending and get some sanity back in 
our Government. Think about what it takes to balance this.
    Chairman Towns. The gentleman's----
    Mr. Jordan. If I could, Mr. Chairman.
    Chairman Towns. I will give the gentleman 30 seconds.
    Mr. Jordan. To balance this, we first have to get to zero, 
then we have to run a trillion dollar surplus--I mean, to ever 
get to balance. So how serious--I mean, to me, this seems like 
the most serious thing--one of the most serious things facing 
our Government and our country. How serious is it, Dr. Irons?
    Dr. Irons. I think it is important to maintain a level of 
deficit and debt that is sustainable. Do we need to get exactly 
to zero? I don't think there is any economist who is going to 
say there is something magic about a zero balance. I think if 
you feel it is important to keep your books in balance, that is 
one thing. From an economic perspective, you can absolutely 
maintain permanent deficits, a permanent debt so long as you 
maintain the sustainability of the----
    Mr. Jordan. I understand. Thank you, Mr. Chairman.
    Chairman Towns. Now I will call on the gentleman from 
Louisiana, Mr. Cao.
    Mr. Cao. Thank you, Mr. Chairman.
    Dr. Armey, I was reading through some of your background, 
and it says here that ``When I was a professor,'' so I would 
assume that you taught at a university level? If you don't mind 
me asking, what was your salary teaching economics at the 
university?
    Mr. Armey. Well, I left teaching in 1985 or 1984. I was 
teaching both summer terms and my salary was $35,000 at that 
time, and it was a rather curious case in my point. I was one 
of the few people I knew that was qualified by way of 
comparable employment to actually leave my employment and go to 
Washington, in Congress, and double my salary. Very few people 
could do that; college professors could. So the pay isn't 
always all that good, but, still, if somebody is going to pay 
you to do nothing but what you enjoy doing, it is not a bad 
life.
    Mr. Cao. First of all, I would like to thank you for your 
answer. The reason why I asked the question was previously I 
questioned Deputy Secretary Miller on the amount of jobs 
created in connection with the amount of money actually spent. 
According to the numbers that Mr. Miller presented, the 
Department of Education has spent $67 billion in order to 
create approximately 400,000 jobs. And based on the numbers 
that he presented, I calculated that, on the average, it would 
cost $167,500 to create one educational-related job.
    My question to you, Dr. Armey, is this. Based on the 
average salary that Mr. Miller stated as about $70,000 per 
educator, which leaves about $100,000 remaining to be spent on 
what have you, how can your organization--I see that you are in 
charge of FreedomWorks. In what ways can the private sector or 
your organization improve on the efficiency of jobs creation?
    Mr. Armey. It is very hard to improve on the efficiency of 
the Government because cost efficiency is no part of their 
incentive structure. So what happens, when you devote yourself 
to sustaining employment in the public sector, you also sustain 
very high, costly, oftentimes not very productive super 
structure, support structure. Of course, there is not a college 
professor I know of that isn't aware that the college spends 
too much time and money sustaining redundant administrative 
positions, all of which have to be supported in order to 
support the faculty.
    The private sector is much more efficient. That is to say, 
it costs less money to sustain a job, because that job, more 
often than not, is of greater productivity, has a return to it, 
and they are incentivized to hold down overhead costs.
    Mr. Cao. Based on your experience as an educator, as well 
as being a majority leader, in your professional opinion, how 
would the Department of Education better spend its stimulus 
money in order to create jobs?
    Mr. Armey. Well, again, it is very difficult for me to 
envision very many ways in which Government can spend money and 
enhance production output, growth in total output, 
productivity. Governments are just, frankly, not very efficient 
in their use of people's money. So if in fact, rather than 
taxing more money either from me or my grandchildren to put 
more money in the hands of government agencies and bureaucrats 
who spend inefficiently now for very little gain in well-being 
for the community, leave the money in my hands; I will invest 
it wisely, we will have capital expansion.
    There was a great theory of business cycles called the 
Innovation Cycle, advanced by Joseph Schumpeter, and I remember 
John Kenneth Galbraith criticizing it because we have seen it 
all and there will never be another great invention. But look, 
in the 1980's, when the investors got--all that invention, all 
that creativity of the 1960's and the 1970's and the electronic 
sector of the economy just burst on the scene, so now we have 
all kinds of careers, jobs, opportunities for further 
employment and enhancement in the private side in product lines 
that didn't even exist in 1980.
    Mr. Cao. Thank you.
    I yield back my time.
    Chairman Towns. I now yield to the ranking member from 
California.
    Mr. Issa. Thank you, Mr. Chairman.
    If I could have the slide put up with the majority 
statement here. I have underlined a portion that says on 
October 30, 2009, the Recovery Accountability and Transparency 
Board, Recovery Board, released a consolidated account of those 
reports showing the Recovery Act funds have directly created or 
saved 640,329 jobs. That has been disputed here today.
    Mr. Armey, if I asked you to calculate what $1.73 billion 
would promote in the way of jobs if you gave it to the 
Government, would you be able to do it that accurately?
    Mr. Armey. Well, I would have to--first of all, I would 
have to brush up my shakes here and probably get in touch with 
the Department of Labor Statistics, one of the really reliably 
honest agencies of the Federal Government; probably rely also a 
little bit on some of the information I could get from the 
Government Accountability Office.
    Mr. Issa. Let me ask you one that you don't have to brush 
up on, which goes to the core of your economics training and 
theory. If we accept those figures, even though the earlier 
panel said it is plus or minus a whole bunch, there are 
inaccuracies and so on, if we accept those figures, then if we 
took fiscal year 2010, Mr. Obama's fiscal year, where we are 
going to spend $3.552 billion--just call it $3\1/2\ trillion--I 
am sorry, $3,552 billion, $3\1/2\ trillion, and using the same 
ratio, my whiz kids in the back came up with 13,145,253 jobs.
    So if we continue at that rate, that means that the Federal 
Government, which employs about 3 million people directly, can 
spend $13 million on Medicare, Medicaid, every social program, 
everything. We can save 13 million jobs with our current 
spending. And if we double the spending, we could nearly wipe 
out the 15 million unemployed.
    So, Dr. Irons, and Dr. Armey, but first Dr. Irons, is it 
logical to simply spend $3\1/2\ trillion more every year in 
order to get unemployment down, or is in fact the Keynesian 
concept simply unsustainable, that Government jobs are like 
feeding somebody fish for a day; you spend the $3\1/2\ 
trillion, you keep people on the Government payola, hanging 
around blue rooms, waiting for something to do, and not 
eliminating any inefficiencies, and then at the end of the year 
the $3\1/2\ trillion spent, and you have to spend it the next 
year if you want to keep those people off unemployment? Isn't 
that true, Dr. Irons?
    Dr. Irons. I think you are mixing apples and oranges to a 
great extent.
    Mr. Issa. OK, Dr. Armey, I understand you know about apples 
and oranges.
    Mr. Armey. Well, I think what you have to first go back to 
my initial observation. A very large portion of the existing 
expenditure and employment structure of the current Federal 
Government is redundant. So the fact of the matter--or even, 
for that matter, counterproductive. So if you add to that, you 
just add to the burden.
    Mr. Issa. So more rocks in a knapsack of somebody who can't 
carry 100 pound pack is not going to get it any better.
    Mr. Armey. Absolutely.
    Mr. Issa. Let me ask you about the hangover. Dr. Armey, if 
we were to spend the $3\1/2\ trillion additional that those who 
say more government would take care of unemployment, don't we 
have an inevitable hangover, where the debt burden--in other 
words, the amount of money that goes out just to pay to the 
Chinese for what we owe them--in fact mortgages the future of 
Government decisions? In other words, it creates a permanent 
overhead that you can't get passed even if you reduce the size 
of Government?
    Mr. Armey. Well, we are already there. If we were to meet 
our current obligations in Medicare and Social Security, we 
would pretty well consume the existing current Federal budget. 
Again, the problem still remains. The Government cannot get 
money unless they print it, unless they directly take it away 
from somebody else. People are not willing to buy our notes and 
lend us the money, and we burden our children with the taxes.
    Mr. Issa. Dr. Armey, obviously spending $167,000 for each 
job--and it is only a job for 1 year, it is 1 year full-time 
equivalent--could be compared to the private sector. Can you 
imagine your wildest dreams somebody saying if you give me 
$167,000, all I can do is create one job for 1 year? Can you 
imagine an investor being asked to do that? Wouldn't it 
typically be that if you invest, let's say, $1.6 million--in 
other words, 10 times that figure--I will create 10 jobs in 
perpetuity? Isn't that the normal business model, something 
along that job, of about 10 jobs per million that are 
permanently created in the private sector?
    Mr. Armey. Well, that is right, because the private sector 
produces a product that people want and there is a productivity 
enhancement that generally comes from expanding your capital 
stock and applying new science and engineering. But there is 
repeat sales. The fact of the matter is the Government doesn't 
produce anything.
    Mr. Issa. Last, because my time has expired, the old axiom 
that if you give a man a fish, he will eat for a day, and if 
you teach him how to fish he will feed his family for a 
lifetime, isn't this stimulus simply fish for Government 
employees for 1 year, even if you accept the figures given to 
us today?
    Mr. Armey. My own view is, again, we start with an already 
existing redundant capacity in the Federal Government, so it is 
in fact basically spending our money on their own operation, 
which leads to no enhancement in the overall well-being, 
productivity, productive capability of the economy. So that is 
like taking the groom's meals away to buy--or the horse's oats 
away from it to buy more steak sandwiches for the groom, yes.
    Chairman Towns. The gentleman's time has expired.
    I now yield 5 minutes to the gentleman from Ohio, Mr. 
Driehaus.
    Mr. Driehaus. Thank you very much, Mr. Chairman. I am sorry 
I wasn't here for the entire presentation; I was in another 
committee. But it seems as if we have gone from defining 
propaganda to engaging in propaganda in some of what we are 
doing here.
    Dr. Irons, could you help us? Do you believe that the 
estimates--and we are only talking about a small portion of the 
stimulus in terms of job creation--the estimates of 640,000 
jobs, even if the statistics aren't exactly specific, do you 
believe they are close to being accurate?
    Dr. Irons. I think they are ballpark. As I said in my 
testimony, the errors have been brought up and the mistakes. 
There are some that would underestimate the number of jobs and 
some that overestimate. So as a ballpark matter I think we are 
getting ballpark right numbers.
    Mr. Driehaus. And, Mr. Armey, I find the conversation that 
was just engaged in very curious. This notion that we are 
spending $167,000 per job, and that job being a temporary 
thing. When you create a bridge and you hire somebody to build 
a bridge, does the bridge have value, in and of itself?
    Mr. Armey. I am sorry, what?
    Mr. Driehaus. When you build a bridge and hire someone to 
build that bridge, does the bridge have value?
    Mr. Armey. Well, assuming that the bridge is a bridge to 
somewhere, yes, it would. Of course, probably the greatest 
observation in economic development theory is sound public 
capital increases the productivity of the private sector.
    Mr. Driehaus. Mr. Armey, if you are building a bridge, I 
assume that the iron that is coming for that bridge is coming 
from an iron factory; I am assuming that the tools that are 
used to create the bridge; I am assuming that the cranes coming 
to create the bridge are coming from the private sector. I also 
assume that the engineering studies and the architectural 
studies, those are private sector jobs, are they not?
    Mr. Armey. Certainly so.
    Mr. Driehaus. And so the one job that might be created to 
build the bridge or the multiple jobs that might be used to 
build the bridge are actually having a ripple effect in the 
economy in that the private sector is benefiting quite 
tremendously, just using this scenario, in that the supplies 
for the bridge are coming from the private sector, the tools 
being used to build the bridge are coming from the private 
sector, the engineering studies are coming from the private 
sector, the architectural studies are coming from the private 
sector. So is it a misrepresentation that the gentleman has 
made that one job that costs $167,000, that is really only that 
one job and that it is only temporary?
    Mr. Armey. First of all, you have to be very careful when 
you recognize--in order to get the money to build the bridge, 
you take it away from me. I might have bought something, and 
that would have been the same----
    Mr. Driehaus. Do you have the capacity to build a bridge? 
Do you have the capacity to build a bridge or a tax cut?
    Mr. Armey. Look, if in fact there were any substantial 
documented portion of these funds that were going to real 
public capital expenditures, I would be more encouraged by your 
argument.
    Mr. Driehaus. Well, there absolutely are, and I would point 
you to--and it is interesting that you bring this up, because 
the minority leader suggested--and he is from the State of 
Ohio--that there had been no projects that were capital in 
nature invested in the State of Ohio, and then the next day the 
Governor's office and the Department of Transportation in the 
State of Ohio said, in fact, while we engage in this hyperbole 
all the time about no infrastructure dollars going in, they 
laid out a whole series of projects that have been invested in 
in infrastructure in the State of Ohio. So are those job 
creation efforts?
    Mr. Armey. If in fact they build real productive public 
capital. You can go back to Adam Smith. Yes, this is good 
investment in the----
    Mr. Driehaus. So it is creating jobs.
    Mr. Armey. But I would argue that in this--frankly, 
President Bush's as well, there was very little expenditure of 
these big expansive funds allocated to real public capital 
structure, mostly to income redistributional efforts like tax 
rebates and things of this nature. So I guess in the memorable 
line of Shania Twain, I would have to say that don't impress me 
much.
    Mr. Driehaus. Well, I would like to get back to this notion 
that these are 1-year jobs. Are you familiar with, in the 
construction sector, jobs that continue ad infinitum? If you 
had a road project, if you build a house, if you build a hotel, 
if you build a building in downtown Cincinnati, if you build a 
bridge, do those jobs go on forever, or does it go project to 
project to project? And isn't the idea in investing in a 
project in fact to create that temporary employment to get them 
over that time when the economy is slow?
    Mr. Armey. Well, of course, if you are talking about 
capital investment, you build your plant, you build your road, 
you build your bridge, and then on that you have ongoing 
production and productivity and expanding in the economy if it 
is a real capital structure. Like I said, there is a big 
difference in whether or not it is a bridge to somewhere as 
opposed to a bridge to nowhere. If it is a bridge to nowhere, 
then there are no future employment opportunities that are 
pursuant to the bridge.
    Mr. Driehaus. Well, I wasn't in the Congress when they were 
building bridges to nowhere.
    Mr. Armey. Well, good for you.
    Mr. Driehaus. I am just in the Congress when we are putting 
money into bridges, and bridges that matter in Cincinnati and 
elsewhere. But this notion that these jobs, because they employ 
someone for a year, and that is how they are counted, somehow 
don't count, because a construction project apparently is 
supposed to last for years and years and years and years. I 
just don't understand that, and if you could help me with that, 
I would appreciate it.
    Mr. Armey. All right, there is a substantial difference in 
spending the money to build the bridge that enhances the 
production of the community, the movement of goods and 
services, or a plant or a facility, as opposed to paying 
another year's salary for a redundant person on a faculty 
someplace. And, in fact, if you make work--and this was an 
argument that Keynes himself engaged in. Keynes argued that you 
could actually improve well being by just having people dig 
holes and fill them back in.
    Mr. Driehaus. But I am curious as to your----
    Mr. Issa. Mr. Chairman, I would ask unanimous consent that 
the gentleman have more time to talk about this very small 
portion of the bill having very little to do about the earlier 
discussion, but if he wants to go on about the small amount of 
roads, even though there should have been a large amount of 
roads, I would ask he have another 30 seconds.
    Mr. Driehaus. I would just ask the witness one more time.
    You mentioned a redundant faculty member. Is it your belief 
that the teachers that are being supported through this 
legislation are redundant faculty members?
    Mr. Armey. Let me say very clearly about this. I was a 
professor for 20 years. I am intimately familiar with what goes 
on in universities and educational facilities, and they are 
extremely inefficient at internal resource allocation. And, 
yes, there are many, many redundant faculty members.
    Now, the heartbreak of that is where you could expand the 
faculty members where there is a true need, you are often 
blocked from doing so while you maintain the employability of 
the redundancy.
    Mr. Driehaus. So your experience as a university professor 
at a university allows you to suggest that the faculty members 
that are retaining employment through this legislation in K 
through 12 education across the country are redundant?
    Mr. Armey. Let me suggest to you that, first of all----
    Chairman Towns. You know, I am trying to be generous, and 
trying hard, but the gentleman's time has long expired. If he 
has any additional questions, may you put them in writing and 
then have Dr. Armey to respond to them?
    Mr. Driehaus. I appreciate the chairman's indulgence. Thank 
you.
    Mr. Armey. May I just conclude my point? I believe my 20 
years of experience in the university and in the administration 
of universities is a great degree more of experience than yours 
in building bridges.
    Chairman Towns. Well, let me thank both witnesses for your 
testimony, and I think that, of course, you have been very, 
very helpful. I think Dr. Irons pointed out that even though a 
few mistakes were made, that when you look at the overall 
picture, that it probably balances out because some information 
did not go forward. So when you look at the overall picture, it 
will balance out in terms of the actual amount of jobs that 
were created.
    The testimony we have heard today directly refutes the 
completely unsupported allegations of propaganda. It is not 
propaganda.
    Most of the witnesses agree that Recovery Act spending has 
created and saved hundreds of thousands of jobs.
    The 640,000 jobs that were reported as directly created or 
saved by just a portion of initial Recovery spending validates 
estimates by the Government and private forecasters that the 
Recovery Act is responsible for more than 1 million overall 
jobs so far, which includes jobs indirectly created and jobs 
saved and all these different categories that people talk about 
here.
    The stimulus package put forward to help every-day working 
Americans is a far cry from propaganda. This is putting food on 
the table of many families. To the real people whose jobs were 
saved and to those who have found work, it represents food on 
the table and a roof over their heads.
    The real issue is that we need to get Recovery Act projects 
under way faster, and we need to target them on economically 
distressed areas. The areas that really need it most, we need 
to make certain that we put it in there and make certain that 
jobs are created.
    At the same time, we need to continue our strict oversight 
of Recovery Act spending. The chairman of the Recovery Board 
testified that the Recovery Act contains the most extensive 
accountability and transparency provisions that we have ever 
seen. We intend to ensure that we make the most of them.
    Finally, I understand that politics is involved in 
everything we do up here on Capitol Hill. I understand that. I 
have been here 27 years. But the issue of job creation is too 
important to play politics with, and I refuse to play politics 
with it. We need to work together to get this economy back on 
its feet and get people back to work. This is serious. And I 
think that if we work together we can do that.
    We need to make certain that we have some penalties 
involved with agencies and groups that are not reporting. We 
need to make certain that we get the legislation through that 
makes it possible for people to have funding. I think that now 
it is an unfunded mandate, and I think that we really should 
make certain that they are able to get accountants, that they 
are able to get administrative people, they are able to get 
folks in that will be in a position to get information in in a 
reasonable period of time and making certain that information 
is accurate. I think it is very important to do that.
    I think to ignore it and just talk about this is not 
working and that is not working, at the same time people are 
suffering, and we cannot afford that luxury any longer. We have 
a job to do and we need to do it.
    So I want to thank you, Dr. Armey. I want to thank you, Dr. 
Irons. Dr. Armey, it is good to know that there is life after 
this place. Thank you very much.
    On that note, I yield back and the committee is now 
adjourned.
    [Whereupon, at 3:15 p.m., the committee was adjourned.]
    [The prepared statement on Hon. Michael R. Turner and 
additional information submitted for the hearing record 
follow:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 
