[Senate Hearing 111-381]
[From the U.S. Government Publishing Office]
S. Hrg. 111-381
TASK FORCE HEARINGS
=======================================================================
HEARING
before the
COMMITTEE ON THE BUDGET
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
----------
October 29, 2009-PERFORMANCE-INFORMED BUDGETING: OPPORTUNITIES TO
REDUCE COST AND IMPROVE SERVICE
November 10, 2009-BIPARTISAN PROCESS PROPOSAL FOR LONG-TERM FISCAL
STABILITY
December 10, 2009-DATA-DRIVEN PERFORMANCE: USING TECHNOLOGY TO DELIVER
RESULTS
S. Hrg. 111-381
TASK FORCE HEARINGS
=======================================================================
HEARING
before the
COMMITTEE ON THE BUDGET
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
October 29, 2009-PERFORMANCE-INFORMED BUDGETING: OPPORTUNITIES TO
REDUCE COST AND IMPROVE SERVICE
November 10, 2009-BIPARTISAN PROCESS PROPOSAL FOR LONG-TERM FISCAL
STABILITY
December 10, 2009-DATA-DRIVEN PERFORMANCE: USING TECHNOLOGY TO DELIVER
RESULTS
Printed for the use of the Committee on the Budget
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COMMITTEE ON THE BUDGET
KENT CONRAD, NORTH DAKOTA, CHAIRMAN
PATTY MURRAY, WASHINGTON JUDD GREGG, NEW HAMPSHIRE
RON WYDEN, OREGON CHARLES E. GRASSLEY, IOWA
RUSSELL D. FEINGOLD, WISCONSIN MICHAEL ENZI, WYOMING
ROBERT C. BYRD, WEST VIRGINIA JEFF SESSIONS, ALABAMA
BILL NELSON, FLORIDA JIM BUNNING, KENTUCKY
DEBBIE STABENOW, MICHIGAN MIKE CRAPO, IDAHO
ROBERT MENENDEZ, NEW JERSEY JOHN ENSIGN, NEVEDA
BENJAMIN CARDIN, MARYLAND JOHN CORNYN, TEXAS
BERNARD SANDERS, VERMONT LINDSEY O. GRAHAM, SOUTH CAROLINA
SHELDON WHITEHOUSE, RHODE ISLAND LAMAR ALEXANDER, TENNESSEE
MARK WARNER, VIRGINIA
JEFF MERKLEY, OREGON
Mary Ann Naylor, Majority Staff Director
Cheryl Janas Reidy, Minority Staff Director
(ii)
C O N T E N T S
__________
HEARINGS
Page
October 29, 2009--Performance-Informed Budgeting: Opportunites to
Reduce Cost and Improve Service................................ 1
November 10, 2009--Bipartisan Process Proposals for Long-term
Fiscal Stability............................................... 65
December 10, 2009--Data-Driven Performance: Using Technology to
Deliver Results................................................ 153
STATEMENTS BY COMMITTEE MEMBERS
Chairman Conrad.................................................. 1, 65
Ranking member Gregg............................................. 79
Senator Bunning.................................................. 7
Senator Byrd..................................................... 150
Senator Cardin................................................... 9
Senator Cornyn................................................... 151
Senator Session.................................................. 76
Senator Whitehouse............................................... 8
WITNESSES
Honorable Roger W. Baker, Assistant Secretary for Information and
Technology and Chief Information Office, US Department of
Veterans Affairs.............................................189, 191
Sir Michael Barber, Partner, McKinsey & Company, and Former Chief
Adviser on Delivery to Britis Prime Minister Tony Blair........26, 28
Honorable Evan Bayh, A United States Senator from the State of
Indiana........................................................86, 88
Honorable Aneesh Chopra, Assistant tot the President and Chief
Technology Officer, Associate Director for Technology, Office
of Science and Technology Policy.............................158, 162
Honorable Jim Cooper, A Representative in Congress from the State
of Tennessee...................................................90, 92
Mr. Brad Douglas, Commissioner, Department of Administrative
Services, State of Georgia...................................201, 206
Honorable Dianne Feinstein, A United States Senator from the
State of California............................................ 84
William A. Galston, The Ezra K. Zilkha Chair in Goverance Studies
and Senior Fellow, Brookings Institute.......................118, 121
Douglas Hotlz-Eakin, President, DHE Consulting, LLC, and Former
Director, Congressional Budget Office........................108, 111
Mr. Vivek Kundra, Federal Chief Information Officer,
Administrator for Electronic Government and Information
Technology, Office of Management and Budget..................168, 171
Honorable Joseph I. Lieberman, A United States Senator from the
State of Connecticut........................................... 77
Maya MacGuineas, President, Committee for a Responsible Federal
Budget.......................................................122, 125
Paul L. Posner, Ph.D, Director, Master's in Public Administration
Program, George Mason Univesity................................34, 37
Honorable George V. Voinovich, A United States Senator from the
State of Ohio..................................................81, 83
David Walker, President and Chief Executive Office, Peter G.
Peterson Foundation, and Former Comptroller General of the
United States.................................................99, 103
Honorable Frank Wolf, A Representative in Congress from the State
of Virginia....................................................94, 96
Honorable Jeffrey D. Zients, Deputy Director for Management and
Chief Performance Officer, Office of Management and Budget..... 9, 13
QUESTIONS AND ANSWERS
Questions and Answers...........................................61, 220
PERFORMANCE-INFORMED BUDGETING: OPPORTUNITIES TO REDUCE COST AND
IMPROVE SERVICE
----------
THURSDAY, OCTOBER 29, 2009
U.S. Senate,
Committee on the Budget and the Task Force on Government
Performance,
Washington, DC.
The Committee met, pursuant to notice, at 10:02 a.m., in
room SD-608, Dirksen Senate Office Building, Hon. Kent Conrad,
Chairman (ex officio), and Hon. Mark Warner, Chairman of the
Task Force, presiding.
Present: Senators Conrad, Warner, Nelson, Cardin,
Whitehouse, Bunning, and Ensign.
Staff present: Mary Ann Naylor, Majority Staff Director;
and Cheri Reidy, Minority Staff Director.
OPENING STATEMENT OF CHAIRMAN CONRAD
Chairman Conrad. The hearing will come to order. Welcome,
all.
Today's hearing will examine the issue of performance
budgeting, a topic that this Committee has a special interest
in. As Chairman of the Budget Committee, several months ago
Senator Whitehouse came to me and said, Senator, we have talked
before about the need to have greater oversight and to try to
focus on things that would improve the overall operations of
the Federal Government. It is very clear to members of this
Committee that insufficient time has been spent on oversight on
how the Government performs its function. How can it improve?
How can we affect efficiency throughout the Federal Government?
And Senator Whitehouse had the idea to form a Task Force of
this Committee to focus on these issues. More than that, he
also recommended that Senator Warner be made the head of this
Task Force based on his extraordinary performance as Governor
of Virginia.
I thought this was an exceptionally good idea of Senator
Whitehouse's, and I thought his suggestion that Senator Warner
lead the Task Force was not only gracious on his part but right
on point, because all of us who watched Governor Warner when he
was Governor of Virginia--we were close by following the way he
conducted himself as Governor--recognized that he has the
background in both the public and private sector to bring real
experience and real skills to this job.
And so we have put in place a Task Force on Government
Performance that will be led by Senator Warner, and Senator
Whitehouse and Senator Cardin on our side will serve. And I
also want to thank very much Senator Gregg, the Ranking Member
of this Committee, for his gracious and helpful agreement to go
forward with the Task Force on Government Performance.
We all know that our Government and our country faces very
tough choices, and choices that we are going to need to make
soon. Performance information can aid us in making those
decisions and making them in a way that makes the most sense.
Senator Warner, as I said, has the right experience and
background for this job. As Governor of Virginia, he
successfully used performance metrics and other private sector
best practices to transform Virginia into a model State in
terms of management. TIME magazine named him one of America's
five best Governors. In one notable example, Senator Warner led
the development of a centralized procurement system now used by
over 500 State and local agencies that has driven lower, more
competitive prices and generated more than $218 million in
cumulative savings for the State. We are fortunate to have
Senator Warner's experience on the Budget Committee.
I also want to thank the other members of the Task Force,
as I indicated, Senators Cardin and Whitehouse on our side, and
I am very grateful to Senator Bunning and Senator Crapo who
have agreed to serve on the Republican side. And I again want
to thank Senator Gregg for all he did to make this Task Force a
reality.
I would like to also welcome our first witness today,
Jeffrey Zients, Deputy Director of Management and the Chief
Performance Officer at OMB, an outstanding selection by
President Obama, I might add. I look forward to hearing about
the administration's plans for performance budgeting and how
this Committee can assist you in the effort.
In addition, we want to welcome Sir Michael Barber, a
partner at McKinsey & Company and, before that, the head of
British Prime Minister Tony Blair's very successful delivery
unity. And, finally, Dr. Paul Posner, the Director of Public
Administration at George Mason University, well known to this
Committee for his many years of service at the GAO--that is,
the Government Accountability Office--working on budget issues
where he enjoyed a very good reputation, and we are delighted
that he is here as well.
Let me stop there and turn to Senator Warner, who is going
to be running this Task Force. He is going to be chairing this
hearing. This Task Force is going to be under his leadership,
and I again want to thank the Republican side as well and
especially thank Senator Bunning, who is here today, who will
be an important member of this Task Force as well.
With that, I am going to turn the gavel and the chair over
to the Senator Warner, thank the witnesses for being here,
thank him for his leadership. We deeply appreciate it.
OPENING STATEMENT OF SENATOR WARNER
Senator Warner. Thank you, Chairman Conrad. Thank you for
this opportunity. I thank Senator Whitehouse for his good idea
and willingness to suggest me as someone who could take a lead
on this. I also want to thank Senator Bunning. I know this is
an issue that is terribly important to him as well.
You know, this is our first meeting of the Task Force on
Government Performance, and I again want to thank the Chairman
and the Ranking Member not only for giving us this opportunity,
but for a first-rate staff who have been working diligently
over the last couple of months to get ready not only for this
first hearing but for the ensuing actions that I think we will
be taking.
The Chairman has outlined our panels today: Jeff Zients,
the President's Chief Performance Officer; and then Sir Michael
Barber and Dr. Paul Posner, who will be on a second panel.
I want to make a couple opening comments, and then I will
turn to Senator Bunning and Senator Whitehouse if they want to
make any opening comments.
Anyone who has ever worked with me knows that I am kind of
obsessed about performance and trying to make sure that we
measure things. I have this phrase that ``What gets measures
gets done.'' That became a hallmark when I had the opportunity
to serve as Governor of Virginia.
Senator Conrad was very gracious in his comments about what
we are able to accomplish when I was Governor in this area. I
would love to say it was all driven purely by my obsession with
measurement, but it was also driven by necessity. I remember
becoming elected Governor only to discover that I had inherited
a $6 billion deficit on a $34 billion base. So the necessity of
making changes and thinking differently was truly born of
necessity. That led to a series of painful cuts in State
spending.
But what we also tried to do--and I think the analogy to
what we are facing now at the Federal level is similar--we
turned this budget shortfall and crisis into an opportunity to
reexamine how we spent our taxpayer dollars. We started to
think differently about budget planning, about measuring
performance. We set broad policy goals, and then we started to
look across agency lines and use these policy goals to gauge
how we were spending and what we were accomplishing.
Senator Conrad made mention of some of the recognition we
received. The thing I was proudest of was the fact that
Virginia was recognized as the best managed State in the
country for these efforts. And Virginia was also recognized by
three or four outside sources as the best State for business.
Oftentimes that best State for business was reflected based
upon our prioritization in terms of State spending.
I think some of those lessons that took place in Virginia--
and for that matter, in other States across the country--can be
brought here to Washington. And the Budget Committee under the
Chairman's leadership is the place do it.
I think we all know over the past 60 years Presidents of
both parties usually early on in their administration announced
some level of management review or Government performance
project, usually with great fanfare in the early days of the
administration, and then these efforts often fade into the
past. Well, our hope is that while this has been a focus of the
executive branch of Government, there is a very valuable role
that the legislative branch can play as well in making sure
that these efforts do not fade into obscurity.
For instance, the Government Performance and Results Act--
this was started under President Clinton--asked each agency to
lay out their goals and report the progress each year they make
toward their goals. I was actually, with the help of staff,
just recently looking at the 2008 USDA Performance and
Accountablility Report. You can see a fairly weighty tome based
upon their GPRA efforts, clearly a lot of information. I
sometimes think that we could do with a little less reporting
and a little more focus on more valuable data. But as we have
pointed out, in the area of food safety, there are literally 17
different programs that cross a series of agencies and areas.
We looked a little bit deeper under one goal in food safety
that I think is important to all of us. The policy goal was to
reduce the incidence of foodborne illness related to meat,
poultry, and egg products in the United States.
Well, we got a lot of results, but what we showed here was
while they made progress on poultry, the overall exposure of
the public in E. coli in terms of beef actually went up from
2007 to 2008. Well, this is great data, but what came out of
this data was there was nothing that said, Well, what are we
going to do about it? How are we going to take this data and
then actually turn it into productive, corrective action?
Well, my belief is, particularly, that part of our role on
the Budget Committee is to make sure that this voluminous
amount of information just does not go down a black hole and
that we actually ask these questions. And I think from the
Budget Committee's perspective, we have an opportunity to think
differently about performance, to look across agency lines, to
look at specific policy areas, and to examine the various
programs that might be gauged toward that specific policy goal,
but too often have very little coordination.
I can again recall as Governor one of the most frustrating
areas that I found was how we could try to right-size and
rationalize Government training. I found at a State level we
had a variety of different programs about employment and
training. They were all siloed. And too often, as we tried to
rationalize that approach, we found that the funding streams
all led to Washington, and there was actually no collaboration
at all.
For example, in employment and training, we have 44 Federal
programs in nine departments, and in fiscal year 2002, just
within employment and training we spent $12 billion and served
more than 30 million participants.
Well, that is great information. But amongst these 47
programs, there has been no analysis, to my mind at least, that
shows how do these programs compare, and how could we actually
look at perhaps collapsing some of these programs to get a more
effective bang for our dollar.
We need to start asking the right questions, and, again, I
would hope that part of the efforts we could do going forward
is not only look at the data that we collect, but perhaps
looking--and this might be of great service not only from our
first witness but to the Government employees who collect all
this data--how we might actually eliminate some of the data
collection and focus more tightly on the appropriate data
collected in the right way.
Now, Chairman Conrad mentioned as well, Why do we want to
do this? Well, partially, we want to do it, obviously, to have
better performance but, and I know this is something that
Senator Bunning will, I am sure, speak to, we want to save
money. There is enormous duplication and repetition.
Chairman Conrad mentioned the fact that in Virginia, by
leveraging our purchasing power, we were able to save over $200
million. Sometimes these numbers get lost, and that seemed like
a lot at the State level. When you get to the Federal level,
the numbers even become much larger.
The way I used to explain this to folks in Virginia, by
leveraging our purchasing power we were able to lower the price
of our light bulbs from 32 cents to 23 cents. Now, that did not
close the $6 billion shortfall, but we buy an awful lot of
light bulbs at a State level. That same type of leveraging our
purchasing power across the Federal level I think could have
similar results, if not greater.
So let us now get to our witnesses. I know we are going to
hear from Jeffrey Zients in a few moments. He is the Deputy
Director of Management for OMB. He is the Chief Performance
Officer. I have known Mr. Zients for years in the private
business area. I think the President made a great selection in
choosing him. We will be hearing from him in a few moments, and
then we will be hearing from our second panel. But, again, I
want to thank the Chairman for giving me this opportunity, and
I believe we will now hear from Senator Bunning.
OPENING STATEMENT OF SENATOR BUNNING
Senator Bunning. Thank you, Mr. Chairman and Senator Conrad
and Senator Whitehouse.
First of all, I would like to thank Senators Warner,
Conrad, and Gregg for forming the Task Force on Government
Performance. We have a lot of work to do on this subject.
I would also like to thank the witnesses that will be here
today for taking part and taking their time to come to appear
here. Their input and advice in this process is much
appreciated.
This is one of the most important things that this
Committee and these Senators can do. It is unfortunate but true
that there is a general perception among the American people
that we do not spend their money well. We owe it to them to see
that they get the most for their tax dollars. I am hoping that
this Task Force will be able to help us learn what Government
is doing right and what it is doing wrong. That is why I joined
the Task Force.
We do have some significant obstacles to our goals of
devising a comprehensive system of evaluating the performance
of Government programs. The three previous administrations have
all attempted to tackle the problem of performance evaluation.
During the Clinton administration, there was the National
Partnership for Reinventing Government, headed by Vice
President Al Gore. The Bush administration implemented the
Program Assistance Rating Tool, known as PART. Finally, earlier
this month, the Obama Administration released its own plan to
analyze Government performance. I look forward to hearing about
this effort today firsthand from Jeffrey Zients, who will be
implementing this program at the OMB.
I think this illustrates why Congress should play a large
role in this process. It appears that every time there is a new
administration, we get a new system of performance evaluation.
The involvement of the legislative branch ensures that we have
some stability in this area, even after the Presidencies have
been changed. However, the most important reason to do this,
hopefully, is to save money.
As I am sure just about every American knows, we are at a
historical level of debt. The Federal deficit stands just shy
of--it is hard for me to say it--$12 trillion. During fiscal
year 2009, which ended a month ago, we racked up about $1.4
trillion in debt. Under plans put forward by the
administration, the debt will double by 2013 and triple by
2019. In fact, just recently, the administration wrote to
Congress asking us that we raise the debt ceiling as soon as
possible because we have spent more than we have legally been
allowed to do.
This should motivate us to find savings. The first
undertaking of this Task Force will be to make sure we are
promptly measuring the performance of Government programs. And
as you saw from Senator Warner's charts, we have a lot of
measurements, but we do not have any results after we get them.
It will not be easy. However, our second job might be even
harder: to remove the wasteful spending that we find. It is no
secret that Congress is not very good at cutting programs.
Everybody has their little program, and they have their own
little fiefdom, and they protect that fiefdom as well as
possible. That is why it is critical that we include proper
enforcement in whatever product we produce. It will do us no
good if we come up with a way to identify wasteful spending but
then do nothing about it.
The American people know there is waste in Government, and
they expect us to do something about it. Let us make sure we do
not let them down.
Thank you for being here. Thanks.
Chairman Conrad. Let me just congratulate Senator Bunning
because the Phillies, his former team, won the first game of
the World Series last night and did it in fine fashion. And I
know he is going to be there, and I think he is going to be
throwing out the first pitch in one of the games coming up in
Philadelphia, and I am going to look forward to that as well.
So that was a great night.
I also want to again say how much I appreciate Senator
Warner's taking the lead on this Task Force. I want to thank
again Senator Whitehouse for his idea that this Task Force be
formed. I think it is critically important. And with that, I
want to hand the gavel formally to Senator Warner.
Senator Warner. Thank you, Mr. Chairman.
Senator Whitehouse.
OPENING STATEMENT OF SENATOR WHITEHOUSE
Senator Whitehouse. Mr. Chairman, first of all, let me
thank you for your kind words and let you know that it will
come as no surprise to my wife and family that I have been able
to think up an idea that involves other people doing more work.
[Laughter.]
Senator Whitehouse. I want to thank particularly Chairman
Conrad for his leadership on this. It is one thing to come up
with an idea. It is another thing to organize it, put the staff
behind it, and harness the considerable energies of our friend
Senator Warner toward that purpose. So my immense gratitude to
Senator Conrad and to Senator Warner for taking up this charge.
I know that some of what we do is not going to be very
thrilling. We will end up in sort of dull corridors of
governmental endeavor, like H.R. and IT and procurement. But I
do hope that real savings and real efficiencies will result,
and I hope that we will get to the point where we are able, in
future budgets, to actually identify by line item performance
savings. I think that might be a good metric for this Task
Force to shoot for.
So, without further ado, I see Senator Cardin has arrived,
but I did want to thank both of you for this, and I thank
Senator Bunning and Senator Crapo for participating. I hope
this will be a Committee that works in strong, technical, hard-
working, bipartisan fashion.
Chairman Conrad. If I could just say, Senator Cardin has
joined us now. He is the third member of the Task Force on our
side, and we selected Senator Cardin because he is somebody
that knows with great experience the functionings of
Government. He has served with distinction in the House. He has
served with distinction in his home State as a legislative
leader, and we are delighted to have him in the U.S. Senate.
One of the things you learn about Senator Cardin, he does
not do things without really digging in and drilling down, and
that is exactly what we need on this Task Force. We are
delighted that he agreed to serve on it.
Senator Cardin.
OPENING STATEMENT OF SENATOR CARDIN
Senator Cardin. Well, I am glad I came by for that
introduction. That was worth my morning. Let me thank you and
the Ranking Member for putting together this Task Force and
certainly thank Senator Warner for his leadership on this. He
has been working with all of us to try to focus us on areas
where we can really make a difference on Government efficiency.
Mr. Chairman, this may not be a glorious area in which to
work, but we all know that we can do a much better job on
efficiency, and we can do it without compromising the services
that the people of this Nation need and deserve.
I think we all are anxious to really understand this area
better. One of the problems is the Federal Government is so
big. It is just huge. And we all divide our time in such a way
that we want to get involved in policy issues, and we want to
do things that can make a difference for the people of our
State and our Nation. We can all contribute to that result by
figuring out how Government can operate more efficiently and
more accountably. I hope that will be the result of this work,
and I look forward to hearing from our witnesses.
Senator Warner. With that, we will have our first witness,
Deputy Director of OMB and Chief Performance Officer for
President Obama, my friend Jeffrey Zients. Jeff.
STATEMENT OF THE HONORABLE JEFFREY D. ZIENTS, DEPUTY DIRECTOR
FOR MANAGEMENT AND CHIEF PERFORMANCE OFFICER, OFFICE OF
MANAGEMENT AND BUDGET
Mr. Zients. Thank you, Chairman and members of the
Committee. I appreciate the opportunity to be here today, and I
applaud the Task Force coming together and look forward to
working closely with all of you.
The President believes that it is more important than ever
to maximize the effectiveness of every tax dollar we spend.
When programs work, we should support them and continue to push
for improved performance. When they do not work, we need to fix
them or end them. To accomplish this, we need to measure the
performance of programs and continually search for more
effective and efficient ways to operate and save money.
During my 20 years in the private sector, as a CEO and
adviser to CEOs, I found that leadership measurement and a
motivated work force create the foundation for good
performance. I am confident the same is true here in
Government.
Congress and previous administrations laid some of the
ground work for govermentwide performance management, including
the Clinton administration's GPRA and the Bush administration's
PART. The result is that today we have thousands of metrics and
plans.
I believe the test of a performance management system is
whether it is actually used. Despite the extent and breadth of
these historic efforts, the current system fails this test.
Congress does not use it. Agencies do not use it. And the
public does not have meaningful information.
There is too much focus on process and not enough focus on
outcomes. You do not track progress on goals that cut across
agencies. Overall, too much emphasis has been placed on
producing performance information to comply with a checklist of
requirements.
Senator Warner and I repeat over and over: what gets
measured gets done. At the same time, to measure everything is
to measure nothing. This must change. Federal managers and
employees at all levels must use performance goals and measures
to set priorities, monitor progress, and diagnose problems. We
can build on the promising performance management developments
in State and local governments and other countries. The
Virginia Performs website shows how government can clearly
communicate State performance priorities, track progress
against goals, and make these results transparent to the
public. Local governments--New York City and Baltimore and
others--have effectively used performance management practices
to improve outcomes and drive down costs. Other countries,
including the United Kingdom, offer instructive lessons.
We are committed to taking the best of what works
elsewhere--in other governments, in the private sector, and
within our own four walls--to create a new performance
management system. This system will be a foundation of our
efforts to improve the efficiency and effectiveness of the
Federal Government.
As we develop the new system, there are five key principles
we will follow.
First, senior leader ownership. It is critical that senior
agency leaders own the overall performance management process
and their agency goals and measurements. Secretaries and
Deputies will be charged with the setting of the agency goals,
and they will be held responsible for performance against these
goals.
Second, cascading goals. A clear line must link agencies'
strategic goals and measurements to program level and
individual targets.
Third, outcome-oriented, cross-agency targets. Outcome-
oriented goals and measures connect Government agencies to
their missions. Similarly, achieving broad Government outcomes
often requires contributions, as we saw on those charts, from
multiple actors across different agencies.
Fourth, relentless review. Measurement has no value if it
is not used. Clear communication of progress against targets
and frequent reviews of performance against plans are
essentials. These reviews must be performed at all levels of
Government.
Fifth, and last, transparency. Achieving important
Government goals requires the active engagement of Congress,
the public, and the overall Government work force. Transparency
plays a critical role in holding our feet to the fire--
accountability--and in creating innovation and new ideas.
Using these five principles, the administration is
committed to driving performance gains across the Federal
Government. We have already begun to move forward. In this
year's spring budget guidance, OMB asked every major agency to
identify a small number of outcome-oriented, high-priority
goals which they intend to achieve in the next 12 to 24 months.
Senior leaders are actively involved in this effort.
Secretaries and Deputy Secretaries are fully scrubbed in. This
level of involvement is a significant break from the past.
Agency leaders will review their progress against these goals
on an ongoing basis.
Agencies have also identified goals, such as climate change
and homelessness, that are a high priority for multiple
agencies and require close collaboration across agencies.
In June, we launched the IT Dashboard, which displays cost
and schedule variants for every major Federal IT program or
project. The IT Dashboard is already having an impact. The VA
has put 45 over-budget and/or behind-schedule projects on hold
until it decides whether those projects should continue with
new plans or be terminated altogether. We plan to roll out
similar dashboards across other functional areas.
In September, the United States Citizenship and Immigration
Service set up a system that allows applicants to see their
status via the Web or via e-mail updates, and they can see the
processing time of their case compared to the processing time
of other people's cases. This makes a notoriously opaque and
slow process much more transparent. We are encouraging agencies
to identify other service areas that can benefit from similar
customer-facing systems.
For certain types of programs, measurement alone is not
sufficient. These programs require periodic in-depth evaluation
to determine their effectiveness. On October 7th, OMB
encouraged Federal agencies to request fiscal year 2011 funding
to conduct significant evaluations and strengthen their own
agency evaluation capacity.
Among the Obama Administration's Cabinet and sub-Cabinet
appointments are several former colleagues of then-Governor
Warner, Governors and State officials who have experience using
performance goals and measures to drive Government performance.
We are enlisting them and other leaders across the Federal
agencies to work together as a vanguard for Federal performance
management with particular emphasis on adopting the best
practices from State and local governments to create
performance management systems that are used daily.
As we move forward, we will also identify measurement
efforts that are not used and are burdensome. We will either
eliminate them altogether or streamline them. This will include
making the performance and accountability reports more useful
by scaling back their hundreds of pages of work per agency per
year.
OMB is using performance information to inform the budget
decisions. The President's fiscal year 2010 budget proposed
reduced funding or termination of 121 programs. Agency goals
and relevant performance information are informing our internal
fiscal year 2011 budget discussions.
Overall, across the last several months, I believe we have
made progress in setting up a new performance management
system, and we have begun to pilot key parts of it. That said,
we are just at the beginning. We have a lot of work to do to
put in place a system that is used by senior decisionmakers
across Government to make decisions.
As we undertake these efforts, we would love to work with
you, and to make sure that the information that you receive
from agencies is useful. We look forward to partnering with you
as we learn more about the Committee's performance improvement
priorities. In particular--and the charts would support this--
we believe we have a unique perspective for examining how the
Government can more effectively achieve broad goals that cut
across agency borders.
I thank the Committee for holding the hearing and for
hosting me here today. I look forward to working with you to
accomplish our mutual objectives, and I look forward to
answering any questions you may have.
[The prepared statement of Mr. Zients follows:]
Senator Warner. Thank you, Mr. Zients, and we have been
joined as well by our colleague Senator Ensign. Senator, thank
you for being here as well. Since we have five of us here, we
will try to do 5-minute rounds. I will get right at it.
Senator Bunning mentioned the fact that the last two
administrations' GPRA and PART were both efforts that got some
fanfare and perhaps made some progress. Looking at those past
two administrations' efforts, were there parts of their
initiatives that you have kept, parts of them that you have
decided were not necessary? How do we not reinvent the wheel
with the beginnings of the Obama Administration?
Mr. Zients. Yes, we are in the middle of that right now,
but I absolutely believe we should not throw the baby out with
the bath water. There are usable, useful advances. I think
there is way too much, as you have talked about and I have
talked about in my comments. On PART in particular, many of the
metrics were more internal or more process-oriented and not
outcomes-based. We will maintain the more outcomes-based
metrics.
I think the annual performance accountability reports are
the right vector, but are too lengthy and too burdensome, so we
will scale those back. There are some citizen reports that
Interior and Education have produced which were much shorter,
25-page reports. Those are headed in the right direction.
We are committed to streamlining, becoming much more
outcomes-focused, making sure that you and others find the
information useful, and, most importantly, we are actually
holding people accountable to the results; and when the results
are not what we hoped for them to be, the way you pointed out
in your chart, we are actually doing something about it.
Senator Warner. You said in one of your five policy goals
senior leadership, ownership, and it would seem to me that one
of the ways you could perhaps gain some senior leadership buy-
in is actually eliminating some of the reporting requirements
so they could actually take ownership of a few key measurement
criteria. Have you thought in terms of either penalties or
incentives to make sure that the senior leadership buys into
this?
Mr. Zients. I think, Senator, you are right. Given the
scale of the historic efforts, almost definitionally senior
leaders are not going to be engaged. So with the high-priority
performance goals, we have asked for a handful by agency,
generally three to eight, developed by Secretaries and Deputy
Secretaries, the key management priorities for the next 12 to
24 months. We are in the process right now of making sure that
those priority goals are incorporated into the fiscal year 2011
budget.
So I think for better or for worse, our starting base is
that the senior team for the most part has not been involved
because it has been too burdensome and it has not been a high
priority. And we are starting this new administration, I
believe, with a good effort to have them focus on what are
truly the highest priority management objectives.
And so far so good. It is good work. We are going back and
forth with agencies in a collaborative fashion to refine their
goals and to make sure that they are tied to the budget.
Senator Warner. We would obviously like to see those goals
as well, so as we from the Budget Committee standpoint----
Mr. Zients. Absolutely. As we exit, the deliberative
process we are in right now by fiscal year 2011, we plan on
making these goals transparent and available to you and to the
public.
Senator Warner. One other area I want to go into, because
my time is running down--I want to make sure every member--you
know, one thing I have learned as a new member, if you make
sure everybody gets involved, they actually come back. So I do
not want to go over my time here, but, you know, one of the
comments I know we have talked about before, sometimes this
stuff gets a little bit esoteric in government-speak, and I
think it is terribly important that we have not only these
broad management goals, but that we actually have some customer
service goals.
Mr. Zients. Yes.
Senator Warner. You cited one example that I thought was
important around immigration. You might want to speak to that
again, and if there are other areas where we have put some low-
hanging fruit where our customers, the American taxpayer and
the American citizen, can actually see improved performance.
Mr. Zients. Yes, I do think that we all would agree that
people form their opinions of Government and the effectiveness
and the efficiency of Government when they touch Government. At
USCIS, that had been an area where you literally would have to
engage a lawyer to figure out where you were in the process,
and even then it would take probably several weeks to get an
answer. Now an applicant can instantly pull up on the Web or be
notified by an e-mail where he is in the process. I think that
is important, but as important, you can benchmark how your
processing speed compares to like cases in different processing
centers around the country. That inevitably creates
accountability and also spurs innovation, and what is happening
at the processing center where things are going faster or what
can we learn to improve service quality and to save money.
We are looking for other areas at the VA, Education,
Treasury, and elsewhere, where there are these customer-facing
services, to stand up systems that not only improve the service
but also provide better benchmarking and better visibility into
Government performance on these customer-facing services.
Senator Warner. So we could actually compare office to
office.
Mr. Zients. Yes.
Senator Warner. Which then might have some consequences.
Thank you.
Senator Bunning.
Senator Bunning. Thank you, Mr. Chairman.
The administration's plan will rely on voluntary
participation. Is that correct?
Mr. Zients. Sir, what you mentioned in your earlier
remarks, was a component of the plan. The component of the plan
that you are referring to is to ramp up our evaluations. This
is a periodic look at programs that are usually in the health
or social area.
Senator Bunning. The reason I bring that up, what incentive
have you given others for a program or agency to self-assess
their performance?
Mr. Zients. I think all programs are going to need to be
examined in this fiscal environment, and those programs the
outcomes are not clear, or the return on our taxpayer dollars
is not clear, will be subject to evaluation and potentially
either need to be fixed or terminated if their performance does
not seem appropriate or a good return on taxpayer dollars. So
you are referring----
Senator Bunning. Won't already performing programs or
agencies volunteer for something like this and non-performing
agencies choose not to participate?
Mr. Zients. Well, the decisions will not be made at the
program level. They will be made at the senior level across
the----
Senator Bunning. Well, you said you are having difficulty
getting senior-level people----
Mr. Zients. I think historically there has been difficulty
getting senior-level people involved. We are putting a lot of
effort to ensure that senior folks are involved. The areas for
evaluation are coming forward from senior folks who have a view
across programs, and they are picking programs where they
believe there are needs for evaluation in order to understand
the return on our taxpayer dollars.
So far so good, a lot of participation, and I think we are
going to have a very rigorous, unprecedented level of analysis,
which is required in these types of programs, to figure out
whether they are working or not. Measurement alone is not----
Senator Bunning. But didn't you mention that the first year
of the administration you have recommended approximately 120
programs be reevaluated or discontinued?
Mr. Zients. Yes, 121 programs in the fiscal year 2010
budget were recommended for termination.
Senator Bunning. The Bush administration recommended well
over 200. None that I know of were we able to discontinue, and
I am worried about the 121 that you have recommended. You know,
you have recommended it, but we sitting up here have to enact,
and----
Mr. Zients. Right. I think you mentioned that in your
opening comments. I could not agree more. I think making sure
that we work together early to ensure that we have the right
kind of metrics and evaluations needed to support decisions as
we make our recommendations is essential to ensuring that we
actually get some of this stuff done.
Senator Bunning. What ensures that agencies' self-
evaluation of performance will be accurate? Would you consider
some kind of third-party evaluation?
Mr. Zients. These are not self-evaluations by any stretch.
These are rigorous evaluations, often facilitated by third
parties. So when we talk about evaluations here----
Senator Bunning. In other words, you are going to seek
outside help.
Mr. Zients. Absolutely. These are randomized, controlled
samples. These are sophisticated, rigorous, analytic
evaluations of programs.
Senator Bunning. Would you support some of us sitting up
here at the table and/or this Task Force also being involved?
Mr. Zients. Sure, absolutely. We would love to work
together with the Committee and across Congress to understand
the programs----
Senator Bunning. If we are going to be the ones that
eventually are going to have to fight off those trying to
protect the program, even though it has been designated
inefficient or non-performing, and try to subtract their
budgets or do away with their budgets, we are going to need the
cooperation of both OMB and the people sitting at this table or
a lot more of us.
Mr. Zients. Yes, I think that these types of evaluations
create the rigorous analytics that are required to have real
conclusions and----
Senator Bunning. We have to have real facts to do it.
Mr. Zients. Real facts, and with real facts, we need real
cooperation to ensure we actually get it done.
Senator Bunning. Well, thank you very much, Mr. Chairman.
Senator Warner. You know, Senator Bunning, one of the
things that I--and there is a longer tenure on this Committee
than I have, but looking at the old OMB lists, sometimes they
are just lists of programs that may not be that effective, but
there is no interrelationship between a program that has been
listed as being ineffective and how it relates to the other
programs within that broad policy goal area. So the notion
that----
Senator Bunning. I think that is absolutely essential if we
are going to be effective in eliminating any of them.
Senator Warner. One of the things that we have started on
from the staffing standpoint is do a little bit of policy
mapping, take a policy goal and look at--we cited employment
and training and food safety----
Senator Bunning. I like the food safety one.
Senator Warner [continuing]. As examples where we might
want to kind of dive in, the working group might want to pick--
we cannot take all, but we might want to pick two or three
policy areas where we would dive in for the first few months to
try to get our arms around a couple of these----
Senator Bunning. It does no good for us to find out that E.
coli from 1 year to the next went up when we are evaluating it
and doing nothing about fixing it.
Senator Warner. And I would also argue that it does not do
any good to say program X has been ruled by OMB not to be
effective if you do not know how program X relates to the other
programs within that policy area.
Senator Whitehouse?
Senator Whitehouse. Thank you.
Mr. Zients, I am interested, since this is our very first
formative meeting, in your thoughts about what we should be
doing and what your advice is on the scope of our activities
given the fact that this is a relatively small Task Force of a
single Committee in one branch of the Congress looking into an
enormous landscape, as Senator Cardin described, of executive
agencies, boards, commissions, and so forth.
I assume that you would agree that the boring back office
stuff is worth us taking a good look at having seen how much
back-office efficiencies have saved in banking and retail and
other industries. Is that correct?
Mr. Zients. Yes.
Senator Whitehouse. What would you think about looking at
the role of contractors? And if we were to look at the role of
contractors--I do not have a number on how much of the Federal
expenditure goes out to----
Mr. Zients. Over $500 billion.
Senator Whitehouse. Yes, it is massive. And, again, given
our scope and size, what do you think would be the high-value
areas looking into contracting and contractors?
Mr. Zients. I just came off a hearing yesterday on
contracting with your colleagues in Homeland Security and
Governmental Affairs, and it certainly is a large--over $500
billion--and complex area where I believe we can save a lot of
money. $40 billion in the next couple of years is our target.
Senator Whitehouse. It strikes me, just to offer a thought,
that once a contract is let, we have very considerable
oversight apparatus to try to keep the contractor within the
scope of the contract and make sure the contractor is
performing and that funding is going out appropriately, you
know, that kind of stuff. But I think that we seem to have less
scrutiny and judgment applied to contractors before letting of
the contract; i.e., what is appropriate for a contractor to
have in the first place?
Mr. Zients. Yes.
Senator Whitehouse. And what are the discussions that led
to the decision to have that contract? And the time flow of a
particular contract, are there areas where you think the
Federal Government is good at overseeing and not so good at
overseeing looked at from the whole start-to-finish process of
the glimmer in somebody's eye that a contract would be a good
way to act through the letting of the contract and on?
Mr. Zients. Your insight is absolutely correct that getting
the requirements right up front is essential, and then there
needs to be good, cross-functional coordination across the life
of a contract, because it goes beyond procurement to program
management.
But to your question, I first, we would love to work
closely with the Task Force to understand, as we go about
creating this new performance management system, what your
priorities are and how we make sure that we create something
that is used by you to make your decisions. If we do that, we
will certainly have a system that will be used elsewhere,
knowing that it is ultimately going to be used by Congress to
make decisions.
I think as to the particular area of focus, I believe
Senator Warner is on to the right idea. I think too much of
what we do is in silos, so we look at a program. And sometimes
we look at a program and how it compares to other programs
within an agency. Rarely do we go beyond agency lines, and so
much of what we need to do to serve the American people does
not exist in the silo of a program or the silo of an agency. It
goes across. And employment and training are great examples.
Food safety is a great example. Housing issues--foreclosures,
homelessness. Picking a few of those, I think you are in a
unique position to do that.
Senator Whitehouse. In my last minute, let me touch on
agencies, boards, and commissions that are outside the direct
executive branch of Government, the so-called independents or
quasi's. Should we be looking at them as well since they are
part of what we fund?
Mr. Zients. It is not where we have focused our initial
efforts given how much we have to do and a $3 trillion
Government, but that is something I think over time we should
talk about.
Senator Whitehouse. OK. Thank you very much.
Senator Warner. Senator Ensign.
Senator Ensign. Thank you.
First of all, I want to applaud the work that you all are
attempting to do. I know others have tried, and I want to
encourage you to stay with it. The bureaucracies will try to
beat you down, as well as the interest groups. The problem is
when you have a program, you have an interest group. They want
to keep their jobs, so they come up and lobby. You know, one
Senator thinks, ``I have to keep that program,'' or one
Congressman, or whomever it is. So you have a huge challenge,
and we know there is a lot of duplication among Government
programs. We know just in job training, for instance, how many
different job training programs exist. And the metrics, I think
you are exactly right, the outcome metrics need to be the--
really need to be something that we are looking at. It is not a
question--for instance, whether a job training serves x number
of people but how many people actually got jobs from the job
training program. And we do not seem to look at those kinds of
things today. So I would very much encourage you.
I want to take, though, maybe just a little different
approach to this and even challenge you to look at some other
areas dealing with, for instance, procurement. And I have
thought about this when I was on the Senate Armed Services
Committee. Right now we know a lot of what happens with defense
procurement. We have programs. We go out there and we pay for
the research, and then somebody gets a big contract. Maybe they
are the lowest bid or whatever it is, and then they get that
10-year multi-billion-dollar contract, and inevitably we know
what happens. They come back to us and they say, ``Well, there
are cost overruns,'' and maybe some general wants something a
little different.
And my thought is that this whole idea of going back to the
X prize when folks design something, somebody put a prize out
there and said, ``You guys compete for these types of things.''
Well, what if the Government, whether it is a retrievable
vehicle for NASA, whether it is the next major weapons system
or whatever, that the Government decides that this is what we
want the private sector to develop, these are the parameters,
these are the specifics of the program or the weapons system.
And you put it out there and let the private sector put their
capital at risk, and when within that, if they meet that, then
they get the contract. But not just there. Maybe they get 70
percent of the contract and second place gets 30 percent of the
contract, and in 2 years you are going to reevaluate so that if
that person who got 70 percent of the contract comes back and
says, ``There are cost overruns,'' but that person who got 30
percent says, ``No, there really are not, and we can develop
the same product,'' we can encourage that kind of competition
in the private sector to keep the costs to the Government. This
presents the kind of the game playing that currently goes on
with so many of our Government programs and contracting.
It has been talked about, with regards to contracting, as
being a big issue, and I think that it is. But I think there
are perverse incentives that we set up as far as the
Government. We spend the money on the research. We give the
contract. And then when there are cost overruns, we pay the
cost overruns, because we have invested so much into the
system.
So I would challenge the Administration to look throughout
the Government at where you could apply these ideas. There is
expertise that is out there and there are actually people in
the private sector looking at how innovative ideas can be
applied in many areas within the Federal Government.
Mr. Zients. You are a step ahead. The contracting work we
need to do is to ramp up competition, which is part of what you
are saying. There also is a big movement that needs to move
faster toward performance-based acquisition. Starting with what
outcomes we want and asking vendors or suppliers to propose how
they are going to get us to those outcomes. Then we are going
to judge their performance against those outcomes, so it is the
same outcomes-based rather than process-based orientation.
If we want to save $40 billion in contracting across the
next couple of years, we need to do things like what you are
talking about--ramp up competition and focus on outcomes, not
process, in order to save that $40 billion, and at the same
time, improve the quality of the services that we are
receiving.
Senator Ensign. The challenge that you are going to have is
that, once again, it is a paradigm shift that is going to
happen through departments and agencies, and they are going to
try to beat you down. They just are, because that is not the
way--people do not like change. This change is going to have to
originate from the President to the Secretaries on down. And I
was glad to hear you say that there is that kind of involvement
because, if they are not that involved and they are not that
passionate about it, the bureaucracy will just say, yeah, we
have seen that before, you know?
Mr. Zients. Agreeing with the challenge, I think two
things: One, we have to prioritize. If we try to do things
across every area, we are not going to get anything done. So we
need to prioritize, start with what is most important, to show
that we can get things done. And how you do that I think is
just through relentless pursuit. Pick those few priorities,
track them very carefully, make mid-course corrections and
insist upon results.
Senator Ensign. Thank you.
Thank you, Mr. Chairman.
Senator Warner. Our hope is that we can reinforce those
efforts, and, again, echoing what you said and I think all of
us have said, we need to get some early winds in this effort.
Senator Cardin?
Senator Cardin. Thank you, Mr. Chairman, and let me just
underscore a couple of points.
First, I am glad you are looking at what the Governors have
done, what the States have done. In my own State of Maryland,
Governor O'Malley, with CityStat when he was mayor, used
exactly the type of metrics that you want on accountability. He
was able to look at bottom-line results for the people of
Baltimore City. The advantage he had is that Baltimore city is
small compared to the Federal Government.
Second, you have a system of government in which the mayor
can implement change almost immediately and eliminate programs
or make other reforms quickly. It gets more complicated at the
State level and we now have StateStat. As governor, he has to
deal with the legislature, which is different from a city
council, and much larger. Now, here at the Federal level, it
becomes huge.
This is not just about the metrics. The metrics are
important. They lend credibility to the recommendations that
are being made. But you must get the involvement of the
decisionmakers.
Now, it may be easy for you to come up with a list, and if
it does not have the enthusiastic support not only of the
agency but also of the White House, if it is not a priority,
then the chances of success are not that great. And you can
have all the support on the Budget Committee you want, but if
you do not have the support of the authorizing committees and
the appropriating committees, it is not going to get done.
So I do not know if I have the answer for you, but you
really have to have personal investment by the decisionmakers.
They must have confidence the metric is reliable, but they also
have to be part of the process so that they are prepared to
stand up for the right type of efficiencies in Government.
You are on the way to getting that done, but you have to
reach out a lot further than you have in the past.
Mr. Zients. I agree. I totally agree. And I think we have
started those efforts. We have been in close contact with this
Task Force, the Committee, and committees across both the House
and the Senate, and we will do a lot more of that. Early
involvement is important, and then a collaborative approach. I
think one of the criticisms, probably valid, of the last
administration's approach is that it was much more command and
control, tops down, especially between the White House and the
agencies. Our approach with the agencies was not to say, ``Here
are your three to eight goals.'' It was, ``Bring forward your
three to eight. Let us in a very collaborative, constructive
way, refine those goals and refine those metrics.'' It is
collaboration, early and frequent involvement, which will get
us there.
Senator Cardin. And I concur on Chairman's advice. Let us
look for some early victories, nothing beats early victories.
Mr. Zients. I agree.
Senator Cardin. Thank you, Mr. Chairman.
Senator Warner. Thank you, Senator Cardin.
I want to thank you, Mr. Zients, for being here. I think
you hear great enthusiasm from the members here that we want to
work with you, we want to collaborate. We think that as well
intentioned as past efforts of past administrations have been,
perhaps the missing piece has been an ongoing, cross-cutting
congressional support that goes beyond the specific authorizing
area or appropriating area, and I think you are going to have
that kind of partnership. So thank you for your attendance
here, and recognizing we have a second panel, we will ask the
panel to----
Mr. Zients. Thank you.
Senator Warner. Thank you. Let me go ahead and start to
introduce the second panel as they come to the table. First we
will be hearing from Sir Michael Barber. Sir Michael is
currently a partner at McKinsey & Company's Global Public
Sector Practices. From 2001 to 2005, Sir Michael Barber was the
founder and the first head of the British Prime Minister's
Delivery Unit where he oversaw implementation of former Prime
Minister Tony Blair's priority programs. Prior to joining
government, Sir Barber was professor at the Institute of
Education at the University of London. He is the author of
``Instruction to Deliver'' and numerous other books and
articles. Sir Michael Barber was actually the individual who
headed up for the U.K. under Tony Blair's government all of
these efforts in terms of government performance, and there
are, I think, a lot of lessons we can learn from some of the
U.K.'s efforts.
Also, let me not only introduce but I know someone who is
familiar to most of my colleagues Dr. Paul Posner. Dr. Posner
is the Director of the Public Administration Program at George
Mason University. Formerly, he served with the U.S. GAO where
he was Managing Director for the Federal Budget and
Intergovernmental Issues for many years. At GAO, he led the
agency's work on performance budgeting, the long-term Federal
budget outlook, and emerging challenges for public sector
finances. Dr. Posner has been a long-time resource to this
Committee, and we appreciate him being with us today.
We will ask each of the witnesses, so we can get to
questions, to try to limit their testimony to 5 minutes each.
Sir Michael?
STATEMENT OF SIR MICHAEL BARBER, PARTNER, McKINSEY & COMPANY,
AND FORMER CHIEF ADVISER ON DELIVERY TO BRITISH PRIME MINISTER
TONY BLAIR
Mr. Barber. Thank you very much, Senator Warner. It is
actually a great honor to appear before a Task Force of the
U.S. Senate and somewhat daunting for a British person. After
all, this is a body that was set up partly in reaction to an
overbearing British executive, and there were people----
[Laughter.]
Mr. Barber. There were people in Britain who accused me of
being part of an overbearing British executive, so thank you
for the honor of inviting me here.
The theme that you have chosen for this Task Force I think
is extremely important, not just for the United States but for
every government. It has always been important, but in the
current fiscal climate, it is more important than it has ever
been all around the world.
What I want to do very briefly is describe the approach we
developed in the Blair administration to driving delivery of
outcomes on the Prime Minister's top priorities, and there are
eight steps to that.
First of all, as the Senator said, Prime Minister Blair in
2001, after his second election victory, established the Prime
Minister's Delivery Unit, which he asked me to lead and
establish. And he gave us an agenda of 20 major domestic policy
priorities that he wanted to ensure were delivered during his
second term.
We then took those 20 priorities and debated them with
members of the cabinet, with the treasury, and so on and turned
them into a set of very clear goals, and they included things
such as improving the performance of elementary schools,
reducing wait times significantly in the National Health
Service, bringing about major reductions in crime, and
improving punctuality of the railways.
Of course, they were not the only things that the
government had to deal with; they were the things that the
Prime Minister thought were the most important to the citizens
over his second term and things that would benefit from a more
intensive focus from the center of government.
Then for each of those priority areas we set published
targets, measurable goals with a deadline, such as no one
should wait more than 4 hours to be seen and treated in an
emergency room of a hospital by December 2004; or a 30-percent
reduction in vehicle crime by December 2005. Those targets were
public, and citizens could track progress toward them on a
website.
In my view, successful reform does not require published
targets, but it does require clear, specific definitions of
what success would look like, and the targets have the benefit
of making everything transparent.
Having established those priorities and targets, we then,
on behalf of the Prime Minister, asked the relevant government
departments to draw up what we called delivery plans--plans for
making sure that those outcomes were delivered. It took a while
for them to get those plans in place. What we really wanted to
see were the major milestones, the major decision points, the
steps on the way toward implementation; and, above all, we
wanted to see a trajectory. How would the data change from
where it was in 2001 when we were beginning to the achievement
of the target in 2004, 2005, or 2006?
That required the departments to think hard about the
relationship between the actions they were taking and the
outcomes they would deliver, and that is often a missing piece
in government planning. It also required them to get better
data systems, exactly as the Senator did when he was the
Governor of Virginia.
Having gotten the plans in place, we then established a
series of routines. If I have one single insight from working
for 4 years in Downing Street, it was that government most of
the time is driven by crises and unexpected events, but it is
really effective routines that drive performance and deliver
results. So we established a set of routines.
Every month, we sent to the Prime Minister a briefing
note--very short, a couple of pages--updating him on each of
these 20 priorities. That meant that in literally a few
minutes, on a Sunday afternoon at Checkers, he could read what
was happening on his key priorities, he could comment back,
usually saying something like ``Couldn't they be bolder? Why
can't they go faster?'' That kind of comment that we would then
inject back into the system. But that way we kept him
completely in the loop on his key priorities.
Then every quarter, the Prime Minister held a stock-taking
meeting with each of the relevant cabinet ministers. So, for
example, the Minister of Health would come two or three
advisers and officials and sit on one side of the cabinet
table, the Prime Minister and his advisers on the other. I
would present the data, progress against trajectory, what are
the successes, what are the challenges, and then there would be
a performance management conversation between them.
I can remember the pleasure of hearing the Prime Minister
say for the first time to the Health Secretary, ``That looks
like a plateau to me, Alan. What are you going to do about
it?''
And then every 6 months, we reviewed the whole 20
priorities and rank-ordered them according to what we believed
was their likelihood of delivering on time, on standard, and
that meant the Prime Minister on one page could see his whole
program, which ones were likely to deliver, which ones were
unlikely to deliver, and then focus our attention on those ones
that needed most help.
So, for example, in 2004, we were able to identify a
significant underlying problem with progress toward the health
wait times target, which was then unlocked and solved in time
for the target to be hit. If we had not done that, we would
have really struggled to hit the target.
Then out of those routines, we were able to take problem-
solving actions, sometimes just a conversation with the
department, getting them to pay attention to it; sometimes an
in-depth review where we went out to the front line with the
department and looked at what the barriers to delivery were;
and occasionally full-scale crisis management involving the
Prime Minister, such as we did in street crime on 2002 when we
had crime going completely the wrong way, but we were able to
turn it around in about 6 months.
Above all, what we were trying to do was change the
culture. We were trying to get a culture of delivering results
embedded in the civil service, and we were challenging the
belief that it was always too difficult. We were challenging
the view that these targets were too ambitious. We took the
view from the Delivery Unit that the targets were achievable
and the amount of money that had been allocated was enough, and
we would not accept any excuses.
We were very persistent. We were very plain-speaking and
direct. We would not go away until the problem was solved, but
we never banged the table or shouted.
We also built a relationship by promising that if in 3 or 4
years the cabinet secretaries and departments did not like us,
we would abolish ourselves. But as it turned out, 3 or 4 years
later they found us very helpful because we kept them focused
on the agenda.
So what were the outcomes of this work? First of all,
around 80 percent of the targets we set in 2001 were achieved.
On the other 20 percent, in almost cases progress was made,
although we had fallen short of the target.
Prime Minister Blair described the Delivery Unit as the
best reform he ever made of government. We did build the
capacity of government to deliver results, and that has
continued since. And the focus on data and transparency made
sure that evidence-informed policymaking became the norm.
And then just to pick up one point from the previous
debate, I think the fact that we focused on the outcome and
then mapped back meant that we required departments and
agencies to collaborate in pursuit of a goal rather than just
monitoring agency performance or specific programs.
Thank you very much for your attention.
[The prepared statement of Mr. Barber follows:]
Senator Warner. Thank you, Sir Michael.
Dr. Posner.
STATEMENT OF PAUL L. POSNER, PH.D., DIRECTOR, MASTER'S IN
PUBLIC ADMINISTRATION PROGRAM, GEORGE MASON UNIVERSITY
Mr. Posner. Thank you. First of all, I want to applaud this
Committee for creating the Task Force. It is a very welcome
initiative.
I also want to say I am appearing in my own capacity as
well as as President of the American Society for Public
Administration this year. I am drawing on the expertise and
background of our 8,000 members who are practitioners and
academics in the field of public administration.
I think the Task Force comes at an opportune time in our
history. We are building on what is really one of the
unexpected successes in Government: the sustainable focus on
performance in the Federal Government for 16 years--something
nobody would have expected when we passed GPRA in the middle of
the night in 1993.
Both for GPRA and the PART, we have had several
administrations as well as the current one with a sustained
commitment to improving performance within the Federal
agencies, and, we have proceeded, as you demonstrated, to
develop a voluminous supply of information. What we need to do
is make people walk across that bridge and facilitate the
demand for that information.
But even with that, I think it is important to recognize
the progress agencies have made, and that is where this has
really taken root, not yet that much in the Congress, but
places like the Coast Guard, for example, that reexamined their
accident programs away from an investigative focus on the
condition of vessels to real understanding of what caused
accidents in marine waterways, resulting in a nearly 300-
percent decrease in towing accidents in the towing industry in
4 years. That is a result of applying the discipline of
performance analysis and metrics from GPRA. The FDA and the
Veterans Health Administration also have really made
sustainable changes to reduce death and improve efficiency in
Government programs, and we need to celebrate that.
It is also important, as we think about performance
budgeting, that we have adopted budgeting as the tail to wage
the performance dog because we know that is an annual process
that grabs people, and if we get the budget process, we have
their interest. However, it is important to understand what the
limits are, that performance budgeting is not taking politics
out of budgeting. Performance does not automatically tell us
how much to raise a program or how much to reduce a program.
If a program, for example, for drug control, we find that
we are increasing the number of cocaine deaths, we are not
going to reduce funding for drug control programs. We will try
to investigate why, but there is no mechanical result from
applying performance metrics to budgeting. Budgeting is still a
political process and a difficult one, particularly in the
times that we are sailing into.
We are now faced, I think, with a new dilemma that was
built on our success. We have now developed more sophisticated
information. Now, how can we use it to solve the more
significant problems that are facing the Congress, particularly
the greater fiscal challenges that we are facing? And I think
as we think about where do we go from here, I think there are
several areas that really need renewed emphasis, both in the
executive branch and in the Congress. One is to continue
strengthening the foundations in the agencies. This takes a
long time to develop metrics to measure things like Head Start
and other complex Federal interventions in highly difficult
settings.
We need to think about how we can build budget accounts
that more focus on performance rather than inputs, which is a
long-term process that must involve the Congress. And we need
to think about how to make budgeting more a strategic
enterprise. GPRA had a feature called a Governmentwide
Performance Plan that has never been implemented that would
have focused on the cross-cutting dimensions of performance
that are so critical. We have never done that. We still have a
budget that is largely stovepiped by accounts and agencies, and
we need to kind of step that up as well.
And, finally, I think we need to sustain a program
assessment emphasis like PART did, but we need to change it. It
needs to be more targeted, more selective, and broader purpose
to focus more on the broader outcomes rather than each narrow
budget account. I think that is going to be an important way
forward.
And, most importantly, as has been mentioned here, we need
to engage in the Congress. Anything that can be sustained in
this area has to involve the Congress. Whether it is
performance targets or new reforms in the agencies, why, we
need to get Congress on board.
And I do not think Congress has been a performance
wasteland by any means. There have been hearings up here on a
variety of programs and overseeing PART and GPRA in general. I
think what we need to think about is where do we go from here
and what is the role of this Committee. This Committee in some
sense fills a missing blank here, that there has never been a
focus, as you have said, on the broader outcomes that we are
shooting for in Government. Each Committee tends to focus on
its narrow programs, and its narrow stovepipes, go to speak.
In fact, there are profound disincentives for us to look
across the board at outcomes, across the different tools of
Government. There are walls that divide discretionary and
mandatory spending, for example, and disincentives to cross
those walls. There is tremendous disincentive to look at the
largest growth area in Federal activity, which is tax
expenditures. We now lose as much revenue in tax expenditures
as we spend in discretionary spending every year on over 150
particular tax credits and tax exclusions and deductions that
have extraordinary significance for performance, whether it is
in housing or health care.
If you held up the performance book for HUD, for example,
for many years, you would never find the largest tax program,
the largest Federal program for production of low-income
housing, which is the tax credit, because HUD did not take
ownership of that, since it came through the Tax Code. That was
Treasury's problem.
So we have tremendous fragmentation in what I call the
tools of Government. We have seen it from the health care
debate. On the one hand, we are trying to expand access and
control costs. On the other hand, we have a very expensive tax
exclusion for health benefits that is increasing the incentive
to raise costs in the health care system.
So these are the kinds of challenges that I think you face
with the fiscal winds behind you, if you will, and the mother
of necessity being fiscal crisis. I think you have the
opportunity to possibly overcome this fragmentation within the
Congress. This Committee is the only one that can do it. It has
the annual budget process. It has the budget functions and sub-
functions as the meaningful categories of analysis to transcend
the specific stovepipes. It has the ability to use outcomes as
the great unifier. The point is outcomes can unify the purposes
of a variety of programs. In the process, the Committee can
ask, as you did, how do each of these programs work. Do they
work together synergistically? Or do they work at cross
purposes?
To what extent is fragmentation causing overall substandard
performance? How do the programs compare with each other in
terms of their performance against these broader targets? And
which ones appear to be the better bets in terms of bang for
the buck?
And in my testimony, I have talked about three areas based
on GAO's work. You have already highlighted one--food safety--
which has legendary fragmentation that contributes to real
health and safety problems. The issues you should deal with are
things that really complicate people's lives, that not only
cause problems on paper but cause problems in practice.
GAO did a wonderful report on higher education subsidies
that chronicled the growing thickening of subsidies across
grants and loans and tax expenditures and how many of these
things work at cross purposes. Families and students are
confused, often do not take all the assistance they can get
because there is such confusion. Tax credits oftentimes results
in families being ineligible for grant programs and loan
programs and the like.
There has been little examination of the performance of
these different tools of Government with regard to higher
education. Nobody really knows, for example, whether the HOPE
and Lifelong Learning tax credit has really increased
participation in higher education or, worse, whether it has
actually caused universities to raise tuition, as some studies
have indicated.
Those are the kinds of analysis, I think, that this
Committee is uniquely positioned to do.
One of the things we need to think about when we look at
these various areas is not just the programs, but as you have
been indicating here, the tools of Government, because looking
across Government, Government uses tools that we really do not
understand that well. We have talked about contracts. The
problems there are legendary. We also have systemic design
problems in grants. You know, many grants are not well
targeted. Much grant money--we did a study at GAO 15 years ago
that showed overall, for every dollar of Federal funds that
gets sent to State and local governments, about 68 percent is
substituted for State and local money. They reduce their own
funds as a result.
How can we get better bang for the buck when we use a
grant? How can we get better accountability that ensures a
marrying of Federal and State and local objectives? How can we
get better assurance that loans are going to get paid back and
that we are going to actually involve banks in sharing risks
when we engage the financial community in that?
And, finally, and fundamentally, how can we get a handle on
tax expenditures to make them more performance oriented? We
added tax expenditures to GPRA. Frankly, it is the lagging
participant in the whole GPRA enterprise, and much work needs
to be done to document that.
Well, you have obviously a lot of candidates and targets
that you can focus on for your Task Force. I have also in my
testimony talked a little bit about how this Committee can go
beyond your own Task Force to develop a more institutionalized
focus in the Congress on these cross-cutting areas? And when I
was at GAO, we came up with this notion of a performance budget
resolution where possibly the budget process and the Congress
could marry up with the executive process. You know, the
executive process is not just about dollars anymore. It really
is about performance. There is a conversation that OMB has with
the agencies that focuses on both dollars and results. The
question is: Can congressional budget process come along with
that same trend? Can we encourage the committees of the
Congress to engage in a performance-related discussion
following the budget resolution process? That is something that
remains to be seen.
[The prepared statement of Mr. Posner follows:]
Senator Warner. Thank you, Dr. Posner. I guess I will take
it as kind of a left-handed compliment that Congress is not--
what did you say?--``a performance wasteland.'' And I do think
your----
Senator Whitehouse. An oasis.
Senator Warner. An oasis. But your comment that we do often
look at the spend piece but not the tax pieces is terribly
important.
Let me again try to limit each of ourselves to 5 minutes so
we can make sure everybody gets a chance to get their questions
in.
Sir Michael, one of the things that may have been a major
difference between the U.K. and the States is that you seem to
be able to do a better job of getting out of the silos. Perhaps
the governmental structure is so much different, but we have
both State, local, and Federal challenges. And then even within
the Federal level, we have an enormous challenge getting
outside of the agency-by-agency department.
When you took these broad policy goals that you outlined in
your project, you had to have some of the similar problems in
terms of a policy goal having programmatic efforts in different
agencies. How did you overcome that, No. 1? And, No. 2, did you
also look at kind of--I believe Senator Whitehouse talked about
the back-office functions, HR, procurement, IT, both from an
efficiency standpoint and how they led toward your achieving
your policy goal?
Mr. Barber. Thank you for the question. I am not sure
whether we do better or worse on the silos than the United
States, but we certainly faced that problem. So if I take an
example like some of the reforms we are bringing to the
criminal justice system where we have to get prosecutors,
police, prisons, and various other aspects of the criminal
justice system to collaborate around delivery of some of the
outcomes like reducing crime, that was very hard work. We had
three or four devices that we could use. One was simply using
the Prime Minister's authority to get the relevant ministers to
collaborate. The second was we used cabinet committees to which
we sometimes gave a budget that was not given to any particular
department. It was given to a committee to solve a particular
problem. So there was a criminal justice system budget that did
not go to the home office or the prosecutors or the prisons. It
went specifically to that committee, and that budget could only
be unlocked when the various players agreed how it was going to
be spent.
The other thing was the continuous pursuit by us of
delivery of the outcomes. The regular use of the data and the
sharing of that data with the Ministers meant that it was
persistently on the agenda of the top decisionmakers. You were
talking earlier on about the importance of this being an issue
for the people at the top. Because the Prime Minister was
focused on it, because we were sharing that data, and because
the Ministers were engaged, they were under pressure to solve
these problems. We did similar things on the national drug
strategy. But I would not say for a minute that we completely
overcame all those problems. But we did make progress.
On the back-office question, we were focused on delivering
the outcomes, so we went right out to the front line, wherever
that was, whether it was the trains running on time or the
hospitals or whatever, and then came back. And if procurement
was part of the problem, that would get picked up by our
process, and then there were other parts of Government dealing
with that.
We had a separate part of the treasury called the Office of
Government Commerce that dealt with procurement and
contracting, and so we would pass the problem on to them.
But we did come across major performance issues that were
down to procurement. For example, we discovered that whenever
we got new trains supplied to the British railway system,
performance got worse. And as amateurs at the center of
government asking about performance, we thought this was very
strange. Whenever we asked the Department of Transport, ``Why
does performance get worse when you get new trains?'' they
said, ``Oh, it is teething problems.''
So then we did what we often did. We phoned another
government. So we called the Government of Singapore and said,
``You get trains from the same supplier that we do. When the
new trains arrive, does performance get worse?'' And they said,
``No, it does not. Why would it?'' And we said, ``You do not
have teething problems?'' And they said, ``Not in Singapore we
don't.''
So then we go back to the minister, we summon the chief
executive of the company that is supplying the trains, and we
get the contract changed. So very often the pursuit of
performance reveals the problems in the way the contracts are
being let and managed.
Senator Warner. Thank you. I am very intrigued. I am not
sure how we could translate that, although maybe the Budget
Committee would be the place. This notion of--you said that you
would give a budget to actually a committee of agencies, and
those funds would not be unlocked until they agreed upon how
they would reach a policy goal.
Mr. Barber. Right.
Senator Warner. Very interesting.
Mr. Barber. That is what we did with the criminal justice
system, exactly.
Senator Warner. Very interesting. My time is about up, but,
Dr. Posner, could you--one of the things we want to try to do,
building on what Sir Michael said, is examples of other States
and/or countries that might be good places for us to look for
best practices, recognizing that I have only got a few more
seconds. I want to make sure everybody else gets their turn.
Mr. Posner. Yes. Well, of course, you do not need to look
farther than Virginia in some sense for a sustained focus on
performance. We did a study several years ago at GAO and were
really quite surprised at how longstanding many States were in
this game. Virginia, the State of Washington, even the State of
Maryland often have laws similar to GPRA.
I think some of the most impressive things have happened in
the crucible of fiscal crisis. One of the things we have seen
in OECD countries is something called program review, which is
similar to what we have been talking about with PART. Places
like the Netherlands do a series of studies, maybe ten every
year, that they call interdepartmental reviews, which is very
similar to what you are talking about. They cut across the
stovepipes. They involve the finance office and the program
office and academics on a task force to look at and evaluate a
whole set of programs that reach common goals, and they come up
with recommendations. The parliament accepts them or does not
accept them, whatever the case may be. But they have saved
extraordinary amounts of money over the years. This has
happened in Canada. It has happened in a number of other
systems. And so the program reviews are quite an interesting
parallel to what you are doing.
Senator Warner. Thank you.
Senator Bunning.
Senator Bunning. Thank you, Mr. Chairman.
Sir Michael, Congress and the executive are separate
branches of Government here in the United States--I do not have
to explain that to you--unlike the United Kingdom. How can we
ensure a balance between these branches in performance in
oversight? In other words, you were able to get Prime Minister
Blair at the table, and you were able to review those things
with him and get his direction and certainly get the attention
of the people you were reviewing.
Is that a potential problem here?
Mr. Barber. Well, as I said in my opening remarks, Senator,
in reaction to an overbearing British executive, you made
Government a whole lot more complicated in this country than we
have it.
Senator Bunning. Yes, we do.
Mr. Barber. And that has many, many benefits which we have
seen over the last 200 years, but it also has some challenges.
The way we thought about this in the Blair government,
first of all, we did have the Prime Minister actively involved,
and I think in the previous debate one of the Senators was
saying it is important to persist with this, not just at the
beginning of an administration but right the way through, and
Tony Blair did really pay attention to this all the way
through, which was very important.
Second, through him and about every year or 6 months, I
reported to the cabinet and updated the whole cabinet on the
process. And then periodically I was summoned, as in this case,
to the Public Administration Committee of the House of Commons,
and the Prime Minister reported to what was called the Liaison
Committee of Parliament on a two-monthly basis, and then once a
year he and I reported through his press conference to the
whole general public. So that is how we tried to take the
process outside of the executive through those means.
Here, I guess, as you were debating with Jeffrey Zients,
getting the executive and the legislature to collaborate around
a performance agenda would be the way forward. But it will
admittedly be substantially more difficult.
Senator Bunning. There is a barrier between the executive
and the legislative branch, and to get the executive to examine
and to get the Congress or the legislative to cooperate always
seems to be a very--and, of course, we have outside interests
always banging us one way or the other. So it is very difficult
to eliminate one agency or one program. They all have their own
little fiefdom or their own little lobbyist that they have
hired to continue something that might not be productive.
Mr. Barber. Right.
Senator Bunning. How do we overcome that? That is what I am
trying to find out.
Mr. Barber. Well, we fed the data we had on which
government programs were working and helping to deliver the
agreed outcomes. We fed that into the treasury. So for each
time the spending review went through, which is every 2 years,
where the budgets were reallocated, the treasury was taking
account of our data on which of these programs were working and
which ones were not. And they themselves began to gather data
in a similar way on the programs outside of the priorities. And
I think that was important.
The other way the legislature in the U.K. influences this
is through the Public Accounts Committee, which is an
independent body not usually chaired by the governing party.
The problem that I saw in that committee was very often the
debate was about point scoring rather than getting to the
fundamental problems of government expenditure. And I think
there is a lesson for the Public Accounts Committee in the way
that we went about that. They needed to get beneath the
relatively shallow point scoring that went on in that committee
to the underlying problems of government expenditure and the
deficits.
Senator Bunning. Mr. Posner, in your work on this subject,
do you know of any example where a performance evaluation had a
real impact on a program or agency's funding, either positive
or negative?
Mr. Posner. I hope so. I spent 30 years of my career at GAO
doing that.
Senator Bunning. Well, that is why I asked the question.
[Laughter.]
Mr. Posner. I have a self-interest in redeeming my career
here. I think there is an impact. It is somewhat indirect. I
remember one report we did at GAO on the taxation of the
insurance industry that sat on the shelves for several years.
In the tax reform deliberation in 1986 in the conference
committee, Mr. Rostenkowski called in the GAO staff that
prepared that report and adopted the recommendation to change
the tax acconting. This action saved considerable Federal
revenues and helped achieve fiscal balance for the bill itself.
That is the discursive--
Senator Bunning. For 8 years it sat.
Mr. Posner. For 8 years it sat, so you have--you know, it
is water on a stone in some cases. GAO's work on student loans
showed 20 percent of student loans were in default in the early
1990's. We worked together with the executive branch and the
congressional committees to design a package of wage
garnishment and a program to kick out some of the proprietary
schools that were the most seriously in default from their
students, and that student default rate has been cut from 20
percent to 8 percent.
There are real changes that happened as a result of
evaluations. The whole Medicare program has taken advantage of
some efficiencies as a result of work that GAO and others in
the evaluation community have done. Typically it happens when
there is a window of opportunity that opens in a budget
resolution, for example, and suddenly everything becomes
possible, and you have a window of opportunity opening. And
then people do reach for the studies to kind of at least
rationalize or find real budget cuts when it is needed.
Tthat kind of process requires some patience on the part of
analysts to really keep your powder dry.
I would say that on the question about our system, there is
no question it is more difficult to achieve change here. I
remember when President Clinton signed performance agreements
and targets with his Cabinet Secretaries, Secretary Babbitt of
the Interior Department came up to the Hill and was talking
with Mr. Conyers, who chaired one of his oversight committees.
And Mr. Conyers said, ``I understand that you have agreed to a
series of objectives on performance with the President.'' And
he says, ``Where is your agreement with me, Mr. Secretary?''
And, of course, he had not been part of that.
So the question is: How can you and the Congress
collaborate with people in OMB and the agencies early in the
process to agree on the performance targets? And when that
happens, it is quite a remarkable synergy. When IRS and the
Congress agreed on goals for electronic processing of tax
returns, that really had a big impact on the efficiency of the
tax system, for example, so it can happen.
Senator Bunning. My time is past due, and I appreciate your
answer. Thank you.
Senator Warner. My hope is, Senator Bunning, with the red
ink as far as the eye can see, if we do not see this as an
opportunity to actually move a little more quickly, then shame
on us.
Senator Whitehouse.
Senator Whitehouse. Thank you, Senator Warner.
Sir Michael, the enterprise that you undertook for the
Prime Minister to run the Delivery Unit had both an efficiency
component and a prioritization component. One could imagine
that a Delivery Unit could be very successful at producing the
20 top priorities for the Prime Minister at the expense of
cannibalizing every other program that those ministries were
obliged to discharge.
How effective were you at protecting the non-priority
programs while you were emphasizing and succeeding with the
delivery of the programs that had been assigned to the Delivery
Unit?
Mr. Barber. Thank you for the question. Can I just comment
before I answer that on this question of evaluations. I think
there are two different types of evaluation. One is post hoc
evaluations where something has happened and you are trying to
understand it, and then you are trying to improve performance
in the future. The other are evaluations which we tried to
develop in the Delivery Unit where inside the executive you are
trying to evaluate a program before there is a problem and
solve it in advance so that you avoid crisis management. And
those things need to be real-time and quite brief, whereas the
post hoc evaluations can be in-depth and profound. But I think
both are necessary to get effective delivery.
On the question you have just asked, which I think is very
important, we clearly focused on the priorities. That is what
it means to have priorities, and the Prime Minister was very
decisive in that respect, and I think that was important.
What we said to the departments was, ``We are going to
focus on the delivery of these priorities. Can you anticipate
for us what you think the perverse consequences might be or the
unintended consequences?'' So we would then measure those
things to make sure either that it turned out not to be the
case, or if they were happening, that was a tradeoff we wanted
to make.
So, for example, if you take a crime topic, as we were
trying to do in 2002, if you want to reduce street crime,
mugging and that kind of thing, which we did very well on, the
police said, ``We will be able to reduce this because we will
move police on to this, but other crimes will get worse.'' We
said, ``We will check.'' What we discovered, actually, was that
the police forces that did best in reducing street crime also
reduced other crimes, because good policing is good policing.
And many times the unintended consequences or perverse
consequences do not happen, but you need to know in order to
win the argument.
Clearly, if you are going to set priorities--sorry. If you
do not set priorities, it is very difficult to achieve
anything. But you do need to know what the consequences are.
And I would say, being straightforward about this, we did
see the best officials being moved onto these priority
programs. After all, they were the government's priorities, and
that may have had delaying consequences on some of the other
parts of the agenda. But any government has to set priorities
if it is going to achieve anything, and you just have to watch
that the costs that you pay in the other areas are not too
high.
Senator Whitehouse. Yes, we just need to make sure that
that distinction is clear in this Task Force because we are not
a prioritization Task Force. We do not have that authority or
role. We really are trying to drive the efficiency equation.
Dr. Posner, Senator Warner said something earlier about you
get what you measure, or words to that effect. The way I have
heard it says is, ``You do not get what you expect. You get
what you inspect.''
You have given, I think, very thoughtful testimony about
the role of this Committee, and as we are getting started and
feeling our way into this new area, I would encourage you to
stay in touch with us. I think it was very helpful testimony.
As you know, we are active from January 1st until the budget
passes, usually in April, and then we have time available to
move onto other projects. We do not quite hibernate
particularly the staff do not, because the next year is coming.
But we do have some time and effort to dedicate to this, and we
do have the ability in our oversight function to inspect. And I
hope that you will continue to be helpful to us at teeing up
not only bests but also worsts that you think might be helpful
to play a little bit of the legislative searchlight over.
Mr. Posner. Absolutely.
Senator Whitehouse. And the last question for Sir Michael,
what was the role of Parliament in your Delivery Unit, if any?
Did you have a consultative function? Did you have a pre-
warning function? Did you just let them know if a particular
prerogative was being effected?
Mr. Barber. As you know, in the British Parliament both the
Prime Minister weekly through the question time and ministers
monthly through their own question time in their own area are
accountable to Parliament. So I was accountable to the Prime
Minister, and he was accountable to Parliament. So I was
personally and the Delivery generally was rarely summoned to
Parliament, although I did give airing to the Public
Administration Select Committee and the Treasury Select
Committee. But basically the accountability to Parliament was
through the ministers, and we were an internal function inside
the executive helping the departments solve their problems. And
as I said in my testimony, at the beginning the departments
were somewhat suspicious of us thinking it was the Prime
Minister's spies checking up on them. But after a while, they
found us helpful because we kept the focus on the priorities,
we helped them solve their problems, and we gave them the
credit. But it was very important the way we functioned that we
did not get in the way of the direct accountability of
ministers to Parliament, and so we were generally in the
background in that process.
Senator Whitehouse. Thank you, Sir Michael.
Just before we conclude, I want to take a moment and
express my appreciation to Senator Warner for having stepped up
to this. I think even in this first hearing we have seen the
qualities of energy and inquiry that I think will help make
this a very valuable Task Force, and certainly he has a very
well established record from his time as Governor in this
performance area. And an obsession with performance, if I have
the quotation right, I think is a very good thing for us to
have, and I think that this Committee, given its hiatus, its
post-budget hiatus, does have significant opportunities here to
help either facilitate or drive this agenda.
So I am extremely grateful to Senator Warner and wish to
conclude with that observation.
Senator Warner. Well, thank you, Senator Whitehouse, and
thank you for your participation. And since it was your
original idea to the Chairman, I thank you for coming up with
the idea and volunteering my service. I feel we have had a very
productive morning. I want to thank again the Chairman and the
Ranking Member and all the members who participated. And I want
to thank the staff as well who have done a great deal of work
getting ready for this, and as we move forward, I think the
working group will focus on a few of these policy areas, and we
will try to do this policy mapping and look at how we can get
outside these silos.
I want to again thank all of the witnesses but particularly
Sir Michael for your examples of what happened and what worked
and did not work in the U.K. and you, Dr. Posner, for your
consultation, I know, both in advance of this hearing, and
echoing what Senator Whitehouse said, we look forward to
partnering with you on an ongoing basis.
For those in the room, this is a beginning of what we hope
will be an iterative process working with the administration. I
know I had a chance to meet a few of the folks who were here.
There is a lot of interest in this area. We are open to--we are
kind of going in uncharted waters here a little bit. We welcome
any other additional input.
I think at the end of the day clearly the goal, the actual
implementation will be the role and function of the executive
and Mr. Zients. But I think the Congress can be an active
partner to make sure that this effort, unlike perhaps past
administration efforts, does not start with great fanfare but
then fade off.
So I thank the witnesses, I thank all of my colleagues for
participating, and the hearing is adjourned.
[Whereupon, at 11:44 a.m., the Committee was adjourned.]
BIPARTISAN PROCESS PROPOSALS FOR LONG-TERM FISCAL STABILITY
----------
TUESDAY, NOVEMBER 10, 2009
U.S. Senate,
Committee on the Budget,
Washington, DC.
The Committee met, pursuant to notice, at 9:30 a.m., in
room SD-608, Dirksen Senate Office Building, Hon. Kent Conrad,
Chairman of the Committee, presiding.
Present: Senators Conrad, Whitehouse, Warner, Gregg,
Sessions, and Alexander.
Staff present: Mary Ann Naylor, Majority Staff Director;
and Cheri Reidy, Minority Staff Director.
OPENING STATEMENT OF CHAIRMAN CONRAD
Chairman Conrad. Welcome to today's hearing that will focus
on proposals to establish a special bipartisan process to
address the Nation's unsustainable long-term fiscal imbalance.
We have a number of distinguished witnesses. Our first
panel will include Senator Lieberman, Senator Voinovich,
Senator Feinstein, Senator Bayh, Representative Cooper, and
Representative Wolf. Senator Lieberman and Senator Voinovich
teamed up to develop a proposal for a special bipartisan
process. Senator Feinstein originally introduced a proposal
with Senator Domenici and is now working with Senator Cornyn.
Senator Bayh cosponsored the Conrad-Gregg bipartisan fiscal
task force proposal and is a leading advocate for establishing
such a bipartisan process.
Representatives Cooper and Wolf authored their own
bipartisan process proposal on the House side, which is very
thoughtful and very constructive.
All of your proposals are similar to what Senator Gregg and
I have offered in many respects. Most importantly, we all agree
that some kind of special bipartisan process is going to be
needed. The regular legislative process is simply not going to
get it done.
Our second panel includes David Walker, the former
Comptroller General and now head of the Peter Peterson
Foundation; Doug Holtz-Eakin, the former Director of the
Congressional Budget Office and now head of DHE Consulting;
William Galston, a senior fellow at the Brookings Institution;
and Maya MacGuineas, the President of the Committee for a
Responsible Federal Budget.
Before we turn to the first panel, I would like to
highlight the situation that we face. The health care reform
effort currently underway has the potential to improve our
long-term debt outlook, but it will not be enough. We must also
address the demographic challenge we face in Social Security
and the revenue challenge we face from an outdated and
inefficient revenue system.
Ideally, these problems would be addressed through the
regular order. The regular order would mean that House and
Senate committees with jurisdiction over health, retirement,
and revenue issues would individually take up legislation to
address the imbalances in their particular areas of legislative
responsibility and then move that legislation through Congress.
The simple reality is that will never happen.
I want to go to a first slide here because I want to remind
everyone of the dramatic deterioration we have seen in our
Nation's budget picture. The final deficit total in 2009 was
$1.4 trillion. Not million, not billion. Trillion. That should
sober us all--$1.4 trillion.
Looking over the next 10 years, we see a sea of red ink.
Let us go to the second slide if we could.
The deficits have led to an explosion of debt. Under the
10-year outlook I just described, gross Federal debt would rise
to more than 114 percent of gross domestic product by 2019.
That is approaching a record 121 percent of GDP debt level that
was reached at the end of World War II.
Slide 3. We need to remember that to finance these deficits
and debt, we are becoming increasingly indebted to foreign
nations. Last year, 68 percent of our debt was financed by
foreign entities. Here is the latest tally of the top ten
foreign holders of our national debt. We now owe China almost
$800 billion, we owe Japan $730 billion, and on and on it goes.
The worsening budget outlook can also be seen in the
worsening status of the Social Security and Medicare trust
funds. Because of the weak economy, the Social Security trust
fund is temporarily cash negative right now. It is projected to
go permanently cash negative in 2016 and to be insolvent by
2037--4 years earlier than forecast just last year. The
Medicare Hospital Insurance trust fund is in even worse shape.
It went cash negative last year and is projected to be
insolvent in 2017--2 years earlier than forecast just last
year.
We also have a severe revenue problem. We have an outdated
and inefficient tax system that is in desperate need of reform.
Here are some of the reasons that I believe we need
thoroughgoing tax reform.
No. 1, our tax system is simply out of date and is hurting
U.S. competitiveness.
Second, we are hemorrhaging revenue through the tax gap,
offshore tax havens, and abusive tax shelters.
Third, the alternative minimum tax continues to threaten
millions of middle-class taxpayers and has to be fixed.
Fourth, we have a long-term fiscal imbalance that must be
addressed.
And, fifth, simplification and reform can help keep rates
low.
Here is how the Congressional Budget Office summed up the
need for action on our long-term fiscal situation. This is what
they said in a hearing: ``The difficulty of the choices
notwithstanding, CBO's long-term budget projections make clear
that doing nothing is not an option.'' Doing nothing is not an
option. Legislation must ultimately be adopted that raises
revenue or reduces spending, or both. Moreover, delaying action
simply exacerbates the challenge.
I think there is growing consensus that the only way we are
going to get this done is through the enactment of a special
bipartisan process. This is what House Majority Leader Steny
Hoyer said in testimony before this Committee in 2007, and I
quote: ``I would like to believe that Congress could address
these issues through the regular legislative process. However,
the experience of recent years suggests that it is extremely
difficult in the current political environment. I have
reluctantly concluded that a task force or commission may be
the best way to bring us to the place where we can spur action
on this issue and reach agreement on solutions.''
And here is what Leon Panetta, who is former Chairman of
the House Budget Committee, former OMB Director, and former
chief of staff to the President of the United States, said at
the same hearing: ``It will never happen. The committees of
jurisdiction will never take on the kind of challenges that are
involved in this kind of effort. If you just leave them under
their own jurisdictions, that will never happen.''
And earlier this year, the Treasury Secretary, Mr.
Geithner, said: ``It is going to require a different approach
if we are going to solve the long-term fiscal imbalance. It is
going to require a fundamental change in approach because I
don't see realistically how we're going to get there through
the existing mechanisms.''
A Washington Post editorial last month said the same thing.
It stated: ``The Medicare payment formula is one of a number of
fiscal time bombs that will need diffusing soon. The
alternative minimum tax, the Bush tax cuts, the estate tax,
other expiring tax provisions--this is an enormous problem
practically and politically. It requires a comprehensive
solution, one that probably cannot be achieved within the
existing political framework, but that will require some kind
of bipartisan commission to craft.''
And, finally, let me conclude by reviewing the highlights
of the Conrad-Gregg bipartisan fiscal task force proposal, and
I might say that yesterday Senator Gregg and I reached
agreement on the composition of such a task force, and we will
be unveiling that at a later time. Today we wanted to hear from
all of our other colleagues before we reach a conclusion.
Many of the components of our task force are similar to the
proposals of the members on the first panel. The task force
would be tasked with addressing our long-term fiscal imbalance.
It would consist of a panel of lawmakers and administration
officials. Everything would be on the table. The panel's
legislative proposal would get fast-track consideration, and
Congress would have to vote on the proposal. And it would be
designed to ensure a bipartisan outcome.
The last point, I believe, is key to any proposal. The only
way the changes needed are going to be adopted is if we have a
bipartisan outcome. No one party can or will do this on its
own. The record is as clear as it can be on that. Both parties
must be invested in the outcome and committed to its success.
With that, Senator Sessions, did you want to make a
statement on behalf of your side? Or do you want to wait until
Senator Gregg arrives for his statement?
OPENING STATEMENT OF SENATOR SESSIONS
Senator Sessions. I would be glad to wait for Senator
Gregg, but a couple of minutes would be sufficient for
something that I would like to share.
I have given a lot of thought to this, and I know that this
commission has potential. I believe from a political sense this
debt limit extension provides an opportunity to do something
that would not happen any other time.
I would point out that we have to recognize that the
interest on the public debt was $170 billion this past year.
According to CBO under President Obama's 10-year budget, by
2019, 1 year's interest payments will be $800 billion. So when
you think about it, we spend $100 billion on education, $40 to
$50 billion on roads, and to go from 170 to 800 billion will
crowd out spending. One of the most dramatically dangerous
things in the budget that has been submitted is that in the
tenth year the deficit is going to be over $900 billion, almost
$1 trillion in 1 year, the tenth year, and there is no
projection that show the deficits going down and no projection
showing any reform.
So I think this kind of fundamental effort that we have
talked about but have not done is important. I would note that
of the discretionary spending bills, not counting the
incredible stimulus package, Transportation increased 23
percent; Interior-EPA increased 17 percent. That means a
baseline budget would double in less than 5 years. There was
also a 15-percent increase in Agriculture, a 33-percent
increase in Foreign Ops Appropriations.
So those are baseline budget bills that indicate we are not
in sync with the American people who would like to see us do
something, Mr. Chairman. I think the commission could at least
could be a start, but at some point we have to stop these huge
increases in spending.
Thank you.
Chairman Conrad. Thank you.
Now we will turn to our distinguished panel of witnesses.
Senator Lieberman, who has another Committee to chair at 10
o'clock, will go first, and then we will go to Senator
Voinovich, Senator Feinstein, Senator Bayh, and Representatives
Cooper and Wolf.
Welcome, Senator Lieberman. We appreciate very much the
effort that you and Senator Voinovich have initiated to make a
proposal with respect to a special process, and welcome to the
Budget Committee.
STATEMENT OF HON. JOSEPH I. LIEBERMAN, A UNITED STATES SENATOR
FROM THE STATE OF CONNECTICUT
Senator Lieberman. Thank you, Mr. Chairman. Thanks to the
members of the Committee. I am honored to be here with Senator
Voinovich, my cosponsor of the Securing America's Future
Economy Commission Act, the SAFE Commission Act, and Senators
Feinstein and Bayh and Congressmen Cooper and Wolf.
I thank you for convening this hearing. I thank you for
your leadership on this issue. You and I have talked about this
a lot. I am going to put my statement in the record, and I just
want to add a few points. Just to say to you personally and to
Senator Gregg in absentia, the two of you have given
extraordinary service to our country, but I honestly believe
that if you can lead the Senate to finally do something about
our fiscally irresponsible ways and the skyrocketing national
debt, you will have done the greatest service that anybody
could do to our country today to protect our future, to protect
the American dream, to make the country as full of opportunity
for our children and grandchildren as it has been for us.
When I hear you say that by 2019, I guess--maybe Senator
Sessions said it--$800 billion in interest payments on the
debt, I am thinking of my 21-year-old daughter, just got
married, 10 years from now, 31, and she and her husband are
going to have to pay their share of an $800 billion interest
payment that will not buy them anything--no service, no
security, no better environment, no health care for those who
cannot afford it. This is an outrage.
You have made the statement of the problem: $12 trillion of
debt today, commitments that are in law already that will add
$9 trillion to that in the next 10 years, $21 trillion. It is,
as we say, unsustainable. But what does it mean when we say
unsustainable. To me it means that we have reached a tipping
point, and if we don't do something, America's economy is going
to go over the cliff. Unsustainable means that at some point we
are going to have to raise interest rates higher and higher to
get people to buy our notes. That is going to bring about in
its wake inflation and then hyperinflation. We are going to
start printing more dollars. And the value of a dollar will
fall, perhaps even collapse.
The overall effect of that will be that our country may be
back in a recession or, worse, even deeper than the recession
that we are now fighting our way out of. So we have to get
together across party lines and do something to secure
America's future.
Second, Senator Voinovich and I have introduced this
proposal. It is very much like the proposal that Congressman
Wolf and Congressman Cooper have introduced in the House and,
frankly, not that different from the Conrad-Gregg proposal, and
Senator Feinstein and Senator Bayh and all the others as well.
The basic idea here is that we have proven ourselves as an
institution--Congress, political leadership, President--
incapable of dealing with this problem of stopping the
indebtedness. Our incapability does not originate from bad
intentions. Our intentions are very good. We simply are
unwilling to pay the cost of our intentions. And if you needed
any proof of it, you have it in the last couple of weeks here
when all of a sudden we were being asked--and it looks like we
will be asked again--to commit ourselves to over $200 billion,
$250 billion in the so-called SGR, what we call the Doctor's
Fix program, that is a good idea to do. But if we cannot pay
for it, we cannot do it.
We have come to a time when in the interest of our future
as a country, as a viable economy, we simply have to start
saying no. And as an institution in our normal course and the
regular order, we are not capable of it, I am afraid. That is
what the record shows.
So we need an extraordinary position. We need an irregular
order, if I can put it that way, and all these commissions
intend to do that, to take it out of the political process, to
have mostly Members of Congress, maybe some executive branch
people, pull them out of the process and set them on a mission
that is as important as any that they have ever been asked to
perform for their country, which is to get us out of hock and
back toward fiscal balance, and not to have it--we are not
trying to stack this commission so one side wins and the other
side loses. We are trying to organize it so that in the end
there has to be a bipartisan agreement of the commission
members which will make it possible to have a bipartisan
agreement on the floor and hopefully both chambers and
hopefully by the President as well.
I also feel very strongly that in the end we have to break
out of the regular order and simply not allow the normal
amendments to the process, because if this commission does its
job and presents it to us, it is going to be very
controversial. It is going to be unpopular with some interest
groups. And the tendency will be for amendments to be
introduced and passed which will take out the tough stuff, the
restraint, and leave in the spending, and we will be back in
the same tipping point to real problems.
I think the public has hit a tipping point here, too. I
think the American people get it, even though the debt is--the
worst consequences of the debt are over the horizon, they see
it coming now, and I think they have felt it with a particular
intensity through this recession because so many middle-class
families are tightening their belts. They are putting money in
the bank that they normally spend because they are worried
about the future. And then they look at Washington, and we just
keep spending. And there is nothing in the bank. So I think
they want us to act in this way, and they understand how
important it is.
I think this is going to be tough politically, and we have
to, together, those of us who feel strongly about this, seize
every opportunity that we have to try to make progress in
exactly the way we are all talking about.
I just want to indicate for the record, as you know, Mr.
Chairman, on October 14th ten Members of the Senate--in this
case, all members of the Democratic Caucus--wrote to Leader
Reid and described the problem as you and I have described and
said in conclusion, ``We strongly believe, as part of the
debate to increase the debt limit, Congress needs to put in
place a special process that allows Congress and the
administration to face up to our Nation's long-term fiscal
imbalances and allows for deliberation and a vote on a
comprehensive package addressing these issues.''
As we all know, we are going to have to increase the debt
limit in December. I hope that is the moment where we also do
something else we have to do, which is to create a commission
such as you have described and Senator Voinovich and I would
create under our bill that would restore fiscal balance and
hope for a better economic future for this great country of
ours.
Thank you.
Chairman Conrad. Thank you, Senator Lieberman. Thank you
for your leadership. We deeply appreciate the seriousness of
purpose that you have brought to this task to be part of the
group of ten that wrote that letter, and I joined--I did not
sign that letter because it is supporting something that we are
going to be talking about at this meeting.
Senator Lieberman. Understood.
Chairman Conrad. I completely agree with the contents of
that letter, and I have told the group that any subsequent
communication, now that we have had this hearing, I would feel
free to sign as well.
Senator Lieberman. Thank you.
Chairman Conrad. With that, Senator Gregg has now joined
us. Senator Gregg, would you like to make an opening statement
now or would you prefer to go to Senator----
OPENING STATEMENT OF SENATOR GREGG
Senator Gregg. Just a brief statement because I want to
hear from the panel, and I think the fact that the membership
of this panel is very strong and consists of experts that
basically represent a cross section of the Congress that it is
a very good sign for this effort, which is absolutely critical,
as the Chairman, I know, has outlined, but especially in the
context of the health care bill, because of the fact that with
this health care bill we are looking at a massive expansion in
the size of the Government, which will potentially create a new
entitlement of immense proportions, which will be unpaid for, I
am sure, over time.
It is necessary that we proceed now to face up to the long-
term structural instability of our fiscal situation as a
Nation, and if we do not do that, we will pass on to our
children a country which gives them less of a standard of
living than we have had. This will put them in a position where
the debt will be so high and so unsustainable that they will
not be able to bring it under control without either massive
tax increases or significant inflation--neither one of which
will lead to a better Nation.
So this initiative is an attempt to try to address these
concerns and to do it in a constructive, bipartisan way, and I
think we all recognize that if we do not join together in a
bipartisan and fair way, we will never get anything done, and
the reason it has to be done in this manner is because we have
proven that the regular legislative order does not work.
I have further statements that I make, but I want to hear
from the panel, and so, Mr. Chairman, I will yield back.
Chairman Conrad. Thank you.
I would also turn to Senator Warner for any opening
observations he might have, and then we will go to Senator
Voinovich. Senator Warner?
OPENING STATEMENT OF SENATOR WARNER
Senator Warner. Well, thank you, Mr. Chairman, and I am
pleased to see your leadership and Senator Gregg's leadership
on this issue.
Senator Lieberman mentioned the letter, and one of the
things that was, I think, important about the letter was that
of the ten Democrats, a number of us were new members. I am
proud to be one of the signatories to that letter. And I think
there is a real occasion here for a grand bargain with the
American people that as we wrestle with health care, try to get
it right, that at the same time taking on this issue of the
deficit in this bipartisan fashion is terribly important, and I
think at least from our side of the aisle, and I know some of
our Republican colleagues, the newer members who may not have
been as entwined in the system bring perhaps a fresh view. I
came from a Governorship where we actually had to balance our
budget each year, and we maintained that AAA bond rating,
something that Congressman Wolf and I have worked together on
in Virginia over the years. And I commend your efforts.
I would simply say, you know, there are legitimate
questions about the structure of this commission, and my only
hope as a new member would be that we not only have it
bipartisan but that those members, whether they are members or
outsiders--this is so important--that they would have to come
with an approach that everything truly is on the table, that no
program is sacred; that, yes, they have to look at cuts; that
we cannot rule out revenues; that all of this has to be up for
grabs. And my only hope would be that, you know, if we move
down this path, people on both sides would not come with
entrenched views about whether it is sacred cows on one side or
ruling out revenues on the other side. That would defeat the
purpose before we would even get started.
So I thank the Chairman and the Ranking Member for their
leadership on this, and there is an awful lot of new members
from both sides of the aisle, but particularly on our side of
the aisle, that want to be part of this effort and be
supportive.
Thank you.
Chairman Conrad. Thank you, Senator Warner, and thank you
for your energy and vision on this issue and so many others
that come before this Committee.
Senator Voinovich has been as committed as any member to
the need to deal with our long-term debt. And Senator Voinovich
has not just talked about it. He has not only talked the talk,
he has walked the walk, and he is before us, along with Senator
Lieberman, with a specific proposal. And over and over and
over, Senator Voinovich has demonstrated his commitment to
doing something serious and significant to get our long-term
debt under control.
We especially welcome you, Senator Voinovich, before the
Budget Committee.
If I could just say that at 10 o'clock, we will, along with
the rest of the Senate, observe a moment of silence for the
victims at Fort Hood. So we have about 4 minutes before that,
if you would proceed, but I just wanted to give you a heads up
that at 10 o'clock we will observe the moment of silence.
STATEMENT OF HON. GEORGE V. VOINOVICH, A UNITED STATES SENATOR
FROM THE STATE OF OHIO
Senator Voinovich. Thank you, Mr. Chairman, and thank you,
Senator Gregg, for holding this hearing on the most important
issue Congress and our Nation faces. The two of you have spoken
eloquently over the years about the need to deal with the debt,
the deficit, and tax reform. And I think it is really important
that finally the American people are recognizing the fiscal
crisis our Nation faces.
As everyone in and out of Congress knows, our Federal
spending is out of control, and as a result, our debt continues
to skyrocket. We have projected deficits as far as the eye can
see. It does not take an economist to realize our course is not
sustainable. The Federal Government is the worst credit card
abuser in the world, and we are putting everything on the tab
of our children and grandchildren. At a time when American
families are taking a close look at their own budgets and
credit card statements, the Federal Government is turning a
blind eye to the statements on our out-of-control Federal debt.
And internationally our credit and credibility are on the line.
Since 2006, I have introduced the Save America's Future
Economy Commission Act, the SAFE Act, to reform Social
Security, Medicare, our Tax Code, and to provide a process for
Congress' expedited consideration of legislation proposed by
the SAFE Act's committee. I am pleased that Senator Lieberman
and others have joined in this effort, and over on the House
side we have--and both of them are here today, who have worked
very hard--Congressman Cooper and Congressman Wolf.
Similar to the Base Realignment and Closure Commission, the
SAFE Act would break that legislative logjam in Washington by
creating a bipartisan, bicameral committee to draw up policy
prescriptions for the Government's long-term budget crisis that
would go before Congress for an up-or-down vote.
I know that some members question why Congress cannot pass
the necessary legislation. Mr. Chairman, you pointed it out in
your opening statement, and Senator Lieberman has been eloquent
in pointing it out also. The fact of the matter is that
Congress is not willing to take short-term pain for long-term
gain, period. And that is why we need a commission to provide
the solutions and the expedited procedure for an up-or-down
vote so that reform proposals do not die in committee or become
an exercise in political messaging, which we have too much of
around here.
While I believe the SAFE Commission is an example of
bipartisan compromise when it comes to a productive process, I
hope that this Committee and my colleagues do not make the
mistake we too often make around here of letting the perfect
get in the way of the good. In the 110th Congress, I was a
cosponsor of your legislation with Senator Gregg, the
Bipartisan Task Force for Fiscal Action Act, and frankly, I
will support any reasonable bill that we can get bipartisan
support from our Congress.
I am pleased to say also that it appears like President
Obama is finally starting to get it. In an interview with the
Washington Post, the President endorsed the idea of creating a
commission where, ``what you end up having to do in terms of
structural reforms realistically is you probably have to set up
some sort of commission or mechanism that reports back with the
prospect of maybe locking in a pledge for action.''
Mr. Chairman, we must find a compromise, and we have to act
now. I would hope that maybe this is one of the most important
hearings that we have had in my 11 years in the U.S. Senate.
Many people believe that this generation of Americans will be
the first whose standard of living is less than those before
them. Our failure to act now will guarantee that they are
right.
Thank you, Mr. Chairman.
[The prepared statement of Senator Voinovich follows:]
Chairman Conrad. Thank you, Senator Voinovich.
I am told that the Senate's moment of silence will actually
be at about 10:03. A staffer will come in once the moment of
silence starts so that we can coordinate throughout the Senate
family that moment of silence.
Senator Feinstein, we are delighted that you are here. We
very much appreciate the leadership you have provided. You were
an early advocate of a special process working with Senator
Domenici, the former distinguished Chairman of this Committee,
and now you are working with Senator Cornyn, who is also a
distinguished member of this Committee. We appreciate very much
your willingness to testify.
STATEMENT OF HON. DIANNE FEINSTEIN, A UNITED STATES SENATOR
FROM THE STATE OF CALIFORNIA
Senator Feinstein. Well, thank you very much, Mr. Chairman
and Ranking Member Gregg, Senator Warner, and Senator Sessions,
with whom I work on Judiciary. I thank you for those comments.
Senator Cornyn would be here would it not be for the
ceremony at Fort Hood, and I know he would want everyone to
know that.
As you mentioned, this was introduced by Senator Domenici
and me in February of 2007, and Senator Cornyn and I have
reintroduced the bill this year.
Perhaps because I am a mayor, I tend to look at things in
terms of what is actually spent, and so outlays have become a
critical criteria for me. So over the past, I guess, 10 to 12
years, I have been tracking outlays, and the entitlement
outlays run between 50 percent and 56 percent of everything the
Federal Government spends in a given year.
The August 2009 figures are 50 percent. Now, they would
have been higher except for the financial crisis numbers, which
are 11 percent so far of everything we send; interest, 5
percent; discretionary, defense 18 percent; and then everything
else, all the things Senator Sessions spoke about--
Transportation, Interior, Justice, Education--just 16 percent
of what is actually outlaid. So the entitlement picture looms
huge and, of course, that is Medicare, it is Medicaid, it is
Social Security, it is veterans' benefits. It is those things
that you cannot control that just keep going year in, year out.
So what we have put together is an entitlement commission.
Now, this commission would be an authority. This commission
would handle Social Security and Medicare, and it would do so
in the mode of the Greenspan commission. We took that model of
15 members, some members professional outside members, some
members from the House, some members from the Senate, set up an
appointment process and said they will have independent
actuaries who will actuarially survey these two systems on an
ongoing basis and will essentially send to the Congress every 5
years legislation with how to keep the system in balance.
Now, this is ongoing. It is not just a temporary commission
as the others. And the reason is, I believe, that the changes
and tweaks that have to be made really are going to take time
to do it. If you do it in one fell swoop, it is huge. So,
actuarially, the system is surveyed and every 5 years a plan is
sent to the Senate in the form of legislation. And I wanted to
get it as close to BRAC-like as possible.
The problem comes if there are taxes of giving an
independent commission the ability without the elected body of
doing that. So we have it in an expedited----
Chairman Conrad. If I can interrupt, Senator Feinstein.
Senator Feinstein. Of course.
Chairman Conrad. I am advised now that the Senate is
observing the moment of silence for the victims at Fort Hood,
and we would ask everyone to stand for the purposes of this
observance.
[A moment of silence.]
Chairman Conrad. We thank you all for this sign of respect
for those who were the victims at Fort Hood. Our thoughts and
prayers are with the families and the friends and the
colleagues of those who were wounded and killed.
I apologize to you, Senator Feinstein, for interrupting
your testimony.
Senator Feinstein. That is quite all right. Thank you very
much for doing that.
Chairman Conrad. Please proceed.
Senator Feinstein. I appreciate it.
So the recommendations of the commission would be sent to
the Congress every 5 years, and there would be an expedited
procedure of 120 days. Only germane amendments are acceptable,
and this is where I would prefer BRAC, a BRAC-like, vote it up,
vote it down. To be honest with you, our bill at the present
time does not have that because there was concern about taxes
being levied by people who are not elected.
The commission would be made up of 15, including the
Chairman and Ranking Member of the Senate Finance Committee and
the Chairman and Ranking Member of the House Ways and Means
Committee. Seven members of the commission would be chosen by
the President to include three Democrats, three Republicans,
and one independent. Eight members of the commission would be
chosen by the Congress to include four selected by the Senate
Majority and Minority Leaders, and they would concur. The
process would be that they agree on who it is to prevent, you
know, games or people from one particular venue, but basically
we want people who are knowledgeable, and four selected by the
Speaker and the House Minority Leader.
As I say, independent actuaries and outside experts would
be retained to continually review each entitlement program with
the goal of bringing it into fiscal balance and preserving its
viability for future generations.
That is essentially it, Mr. Chairman. I feel, as does
Senator Voinovich, I will vote for this. I will not vote for
raising the debt limit without a vehicle to handle this. I
agree that this is our moment. The only thing that I would
implore is that this be an ongoing process and that we take it
up every 5 years with a bill that hopefully a way can be found
to accept it or reject it as in BRAC. It is painful, but I
believe it has to be done. I also believe if the commission is
only Members of Congress, they will be subject to so much
importuning by various groups that--and they run for office--it
will make it difficult. And that is why we have put this hybrid
commission of independent people outside of the Congress with
key Members of the Congress.
I thank you for listening.
Chairman Conrad. Thank you, and thank you for your
description. Very helpful to the Committee and we appreciate
it.
Senator Feinstein. Thank you.
Chairman Conrad. Senator Bayh is the author of the letter
that went to the Majority Leader.
Senator Gregg. Very well written.
Chairman Conrad. It was very well written, very thoughtful.
Senator Bayh. You said that with such surprise.
[Laughter.]
Chairman Conrad. And very important. We are delighted that
you are here, Senator Bayh. Please proceed.
STATEMENT OF HON. EVAN BAYH, A UNITED STATES SENATOR FROM THE
STATE OF INDIANA
Senator Bayh. Thank you, Mr. Chairman, Ranking Member
Gregg, Senator Warner.
Mr. Chairman, there have been such eloquent statements made
by everyone so far. I have a statement that I would like to
submit for the record if that is acceptable to the Committee.
Chairman Conrad. Without objection.
Senator Bayh. Just a few brief observations, Mr. Chairman.
First, who would have thought that the Budget Committee
would be the site for the beginning of an institutional
insurrection, but here we are. And looking around the witness
table and the members of the Committee who are present today,
many of us count ourselves as pragmatists not ideologues, as
moderates not extremists. And yet here we are asking for a
change in the way that business is done in Washington. I think
that is pretty eloquent testimony in and of itself about the
magnitude of the problem and the urgency that we must bring to
doing something about this.
And, George, you warmed my heart listening to you testify.
That was a former Governor speaking here this morning. Dianne,
you described yourself as a mayor. I know Senator Warner
described himself as a Governor. You have your roots in State
government.
For those of us who have served in that capacity, we are no
strangers--and Senator Gregg, of course, a former Governor. We
are no strangers to having to make difficult decisions and to
occasionally say no, even if it is not popular because it is in
the long-term best interests of our State, our country, and
those who put their responsibility in us. That is the kind of
discipline we have to bring to the U.S. Congress in this
important moment.
The bottom line for me, Mr. Chairman, is that business as
usual in Washington is not going to solve this problem. The
path of least resistance which we have trod for so long now is
the path to national weakness. We can no longer afford to
continue on like this and must have a special process to help
correct the problem.
This to my mind has its roots in basic human psychology.
Some in the Congress like to spend more than we can afford, and
some like to cut taxes more than we can afford. The easy path
is just to simply borrow until the credit markets will no
longer allow that. Interest rates will go up. Economic growth
will go down. Our children and grandchildren are left with the
bill.
This violates something fundamental in the American
character. Every generation in our country, every single one,
has been willing to do the difficult work and make the
occasional sacrifices so that those who will follow can inherit
a better way of life and a stronger country. We are putting
that at risk if we are not willing to do the same.
So now is the time. I agree with the comments my colleagues
have made, particularly Senator Feinstein's about raising the
debt limit. I will not do this unless there is tangible
evidence that we are beginning to head in a better direction.
It would be deeply irresponsible.
As you know, Mr. Chairman, there are rare moments of
leverage in this institution where you can implement
fundamental change. This is one of those moments. We must seize
it.
I would simply conclude by saying we are all aware that
there are good people who will raise objections to this for
reasons that are satisfactory to them. And that is why I have
been for a slight modification of the Conrad-Gregg proposal. I
would say to our colleagues who believe that regular order can
produce a better result, give them an opportunity for 60 days.
Put them to the test. But if they are simply, in spite of their
best intentions, incapable of producing something that is in
the national interest, then their parochial concerns must give
way to doing what is in the best interest of this country.
So I salute you for your leadership, Senator Gregg, who is
someone I have immense respect for, we must press on here and
use this hearing as a catalyst for the kind of change that
Washington needs and that future generations will thank us for.
Thank you, Mr. Chairman.
[The prepared statement of Senator Bayh follows:]
Chairman Conrad. Thank you, Senator Bayh, for that eloquent
statement, and I hope, I very much hope people are listening. I
hope our colleagues are listening. I hope they are listening
downtown. This is a critical moment, and you rarely do have the
leverage to make a fundamental change, a fundamental break from
the current trend. And that is really what is required here.
We have had leaders not only in the Senate but leaders in
the House, no two more dedicated than Representative Cooper and
Representative Wolf who have for a long period of time
advocated a special process and gone to the hard work to
produce an agreement about how one would be structured. Welcome
to you both. We will begin with Representative Cooper. Welcome
to the Senate Budget Committee. We very much appreciate your
leadership and thoughtfulness on this issue, as on many others.
Representative Cooper?
STATEMENT OF HON. JIM COOPER, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF TENNESSEE
Mr. Cooper. Thank you very much, Chairman Conrad, Ranking
Member Gregg, my friend and former classmate, Senator Warner.
Speaking on such a panel of unlikely revolutionaries, it is
very important that we seize this moment of opportunity, this
moment of truth, to do the right thing for the country. I
believe that there is no more important issue for the strength
of our Nation than facing up to our long-term fiscal imbalance.
And, sadly, the long term is not very far away anymore.
In the 2008 fiscal year, the Treasury Department in its
``Financial Report of the United States Government'' reported
that the present value of unfunded obligations for our United
States is $56 trillion, or almost four times the GDP of
America. Now, this is a larger number than some of my
colleagues have used because this is the present value using
real accrual accounting.
I think it is very important to use real numbers in
Washington because the Federal Government is the only large
entity left in America that gets away without using real
numbers. Every for-profit and nonprofit entity of any size in
this country, every State and local government, has to use real
numbers, accrual accounting, except for the Federal Government.
And, sadly, I have been looking for a long time. I still cannot
find any major business group that will advocate that the
Federal Government also use real accounting the way they have
to use it.
In 2009, we do not know what the report will indicate, but
it is coming out in about a month, on December 15th. It is
likely that the unfunded obligations of the U.S. will rise from
$56 trillion to $60 trillion, a rate of worsening, a rate of
sinking of about $11 billion a day. That is hard to wrap your
mind around. But every citizen needs to do that.
In my opinion, the result of all this is we have fiscal
cancer, and it is metastasizing at the rate that very soon no
surgery, no chemotherapy, no radiation will be able to cure the
problem.
Albert Einstein is supposed to have said that the greatest
power on Earth is not nuclear power; it is compound interest.
And if you are a debtor nation, that works against every
citizen of this country.
The President and Congress have acknowledged that the bulk
of our budget problem lies in the health care, the area of
health care entitlements. That is why both the House and Senate
reform proposals make an effort to reduce the deficit now and
in the future, and we need to make a stronger effort. But each
of these bills contains what would be, if passed, the largest
cut in mandatory spending that our Nation has ever seen, larger
than the Balanced Budget Act of 1997--$100 billion larger--and
that is a good start.
But in addition to reducing our long-term problems by
facing health care reform, we need to face many of our other
problems in order to truly lower the cost curve or bend it
downward in the right direction.
I am not satisfied that the House bill does enough in this
regard, but I know that you, Senator Conrad in particular, have
taken a long-time interest in this topic, and I am hoping that
working with freshmen Senators and working with the Senate as a
whole we can substantially improve this bill. There is much to
be done.
As you have said, put bluntly, the decisionmaking process
in Congress is broken. It must be fixed. The first-choice
solution, as Senator Bayh said, is give the folks who think
that regular order will prevail a chance, another chance. They
have had decades of chances. The basic message is stop us
before we spend again.
I resisted, to be honest with you, the commission idea
because it is a second-choice proposal. But relying on my good
friend and colleague Congressman Wolf, who finally persuaded me
that this was absolutely necessary, and he is right, we need
this decision-forcing mechanism to do the right thing for the
country.
Traditionally, you know, Congress has had to really face up
to a crisis before we act, and I am hoping that this month or
next, even the blindest partisan will see that we must act.
Mr. Chairman, as you know, the whole world is watching us,
particularly nations like the Chinese, who are getting tired of
funding our lifestyles. A year or two ago, the leading rating
agencies on Wall Street, Standard & Poor's and Moody's, already
projected that the U.S. Treasury bond could lose its AAA rating
as soon as 2012. They went on to project that the Treasury bond
by 2015 could have the same credit rating as that of Estonia or
Greece. This is not a future that we want for our country. We
must change course and change course fast.
As you know, Mr. Chairman, the Treasury bond is the anchor
to the world's global financial markets. If it is allowed to
slip, we do not know what will happen, but it will not be good,
and it could even make the current financial recession look
like a sideshow.
I am glad to announce that the vast majority of Blue Dogs,
fiscally responsible Democrats in Congress, support the SAFE
Commission proposal. We are looking to persuade other members
to join us in this fight because it is absolutely vital for the
future of our country.
Family, in closing, Mr. Chairman, to quote the Nike slogan,
because this issue is even more important for our young people
than it is for anyone else, as the Nike slogan says, ``Just do
it.''
Thank you, Mr. Chairman.
[The prepared statement of Mr. Cooper follows:]
Chairman Conrad. Thank you, Congressman Cooper, and thank
you for your very powerful and persuasive testimony here today.
Next we will go to Congressman Wolf, who has been a long-
time leader in this effort, and, Senator Bayh, thank you again
for being here.
Congressman Wolf, welcome to the Senate Budget Committee.
STATEMENT OF HON. FRANK WOLF, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF VIRGINIA
Mr. Wolf. Thank you, Mr. Chairman and the other Senators. I
appreciate the opportunity for the hearing.
I have never been more concerned about the future of our
country. America is going broke. The Federal Government now
owes more in debts and commitments than the total combined net
worth of all Americans. The national debt is racing toward $12
trillion and growing at rates that have not been matched since
World War II.
In addition, we have amassed massive unfunded promises to
guarantee future entitlement benefits that, when added with
liabilities like the debt, total $57 trillion. Every man,
woman, and child in America owes $184,000.
The United States, as Jim said, will soon lose its AAA bond
rating. The dollar appears to be losing its important status as
the primary international reserve currency, meaning everything
traded internationally, such as food and oil, will increase in
price.
And our biggest bankers are Japan and China and oil-
exporting countries like Saudi Arabia. Is it really a good idea
to be so indebted to countries like Saudi Arabia, the home of
the 9/11 terrorists, and communist China, which is spying on
us--my computer was compromised by the Chinese--where human
rights are an afterthought, and Catholic bishops in jail,
plundered Tibet, Protestant pastors in jail?
Then the news we just got Friday: The unemployment rate has
hit 10.2 percent.
Can't you feel it? Can't you feel that something is just
not right?
There is no other way to deal with the problem. Congress is
never going to tackle the growing cancer of overspending on its
own. The system is broken. In my 29 years in Congress, I have
never--and I was elected with Mr. Gregg; we were in the same
class. I have never seen more partisanship and divisive
Congress than I have today.
I often refer to an old Simon and Garfunkel song when I
talk about this issue. It is called ``The Boxer,'' and you may
recall the lyrics: ``Man hears what he wants to hear and
disregards the rest.'' The Congress is disregarding the reality
of where we are. That is what is happening. That is why we need
a commission made up of men and women who care more about their
country than they care about their party; who are not
constantly looking over their shoulder worrying about how they
voted on this issue or that issue.
Simply put, a commission is the only way. Without it, we
will have the same old tired process, drawing lines in the sand
while the tsunami of debt comes crashing toward the shore.
The commission Jim and I envision would hold public
hearings across the country to hear from the American public.
Listening will be the key. There has to be honest discussion
with the American people about the choices. And as every other
witness said, everything--and as Senator Warner said--
everything, from entitlement spending to tax policy, would be
on the table. This is the only way to deal with the issue. If
we go in saying you cannot touch this or you cannot do that, it
will not work. Nothing should be prejudged or preconceived.
After listening to the American public, the commission
would then develop a series of recommendations to improve our
Nation's financial health. And under the enacting legislation,
Congress would be required to vote up or down. No avoiding the
hard choices.
More than 80 members of the House in both political parties
are now on this. Public interest groups, business leaders,
think tanks, syndicated columnists, and editorial pages across
the country have all endorsed it.
Let us face it. We are at a fork in the road, and we can no
longer continue to kick the can down. We can continue down the
same path if you want to do that, but that means that in 15
years every penny of the Federal budget will go toward
entitlement spending and retiring our debt, or we can start
making the hard choices now, knowing that it may be a little
rocky to start, but would give us the ability to build and
travel a road.
Let me close with this one statement that was made by Norm
Augustine, the former chairman and CEO of Lockheed Martin, at a
press conference earlier this year--and Jim was there--
unveiling a report from the well-respected Center for the Study
of the Presidency and Congress titled ``Saving America'
Future.'' The report paints a stark and troubling picture of
the Nation's challenges. One of the recommendations is to
create a panel a bipartisan panel to deal with the looming
financial tsunami.
Augustine, who was chairman of the group that prepared the
report, best captured the situation when he said the following,
and then I close. He said, ``In the technology-driven economy
in which we live, Americans have come to accept leadership as
the natural and enduring state of affairs. But leadership is
highly perishable. It must be constantly re-earned.''
``In the 16th century,'' he said, ``the citizens of Spain
no doubt thought they would remain the world leader. In the
17th century it was France. In the 19th century, Great Britain.
And in the 20th century it was the United States.''
And then he ended by saying, ``Unless we do things
dramatically``--and I think Senator Warner was there--
``different, including strengthening our investments in
research and education, the 21st century will belong to China
and India.''
I do not want my children and grandchildren to live in the
China century. I want them to live in the American century.
Thanks again for having the hearing.
[The prepared statement of Mr. Wolf follows:]
Chairman Conrad. Thank you, Congressman Wolf, for really
outstanding testimony.
I am delighted at the quality of this panel. I think the
message that has been sent is as clear as it can be. Now is the
time to move in a different direction, and we simply cannot
rely on the traditional, standard regular order to try to take
on a challenge of this magnitude. It simply will not work.
And so what is require is a special process, and I think we
have defined for us in the Budget Committee a series of
alternatives. All of them have merit, and our job will be to
try to sort out for the Senate side what proposal can advance.
I want to thank you all. I deeply appreciate your testimony
before the Committee this morning.
We will call to the witness table the second panel: the
Honorable David Walker, the President and CEO of the Peter
Peterson Foundation; Douglas Holtz-Eakin, the President of DHE
Consulting, the former head of the Congressional Budget Office;
William Galston, a senior fellow at the Brookings Institution;
and Maya MacGuineas, the President of the Committee for a
Responsible Federal Budget.
Thank you all for your willingness to testify here today.
We very much appreciate your taking the time to do that.
Senator Gregg. Can I make an addendum to my opening
statement?
Chairman Conrad. Senator Gregg.
Senator Gregg. Mr. Chairman, I apologize for being a little
late. The plane from New Hampshire was a little late this
morning. But I just wanted to reinforce the necessity that you
have pointed out of doing this not by regular order--I do not
mind giving regular order an opportunity, and I think we
should, but we have had an opportunity for years--and why this
structure that we have come up with, which is essentially
Members of Congress and the administration, and a non-amendable
event is a very important structure for the purposes of
accomplishing our goals.
The logic behind that is--with super majorities. The logic
is very simple. You have to have the American people feel that
this is an absolutely bipartisan and fair process, and for that
you need super majorities, and you need a balanced commission.
And, second, the commission has to have skin in the game. There
has to be a belief by every member of this commission that they
are basically involved in the process, and they have to
understand the process. And, yes, outside folks make sense in
many areas, but as a very practical matter, we have gone down
the road on all these issues so many times that expert
knowledge is always available to us, but it is not critical to
the--what is critical to the process is having the people on
the commission who are actually going to have to make the
decisions.
And the need for an up-or-down vote is, I think, the most
important part of any commission because there is a tendency to
hide in the corners of amendments around this place. Give
somebody an amendment, even if it is just one amendment, and
that gives somebody an excuse for not voting for final passage
or voting against final passage. And as a result, an amendable
vehicle inevitably has a fundamental flaw that it can be gamed
in the political process and be used--and the amendment can be
used as a way to make a political statement and thus avoid
making the tough vote on the final passage. So that is why I
think a non-amendable vehicle is so critical to this exercise.
Chairman Conrad. Thank you, Senator Gregg.
Senator Warner?
Senator Warner. Thank you, Mr. Chairman. I just again want
to commend you and Senator Gregg for being kind of at some
point lone voices on this issue for a long time, and I know
with some of the folks on the first panel. And I concur with
Senator Gregg that there is an enormous need to have an up-or-
down vote.
I am not as convinced on the issue that it needs to be all
necessarily members. I can understand arguments on both sides.
I guess the one--and I say this respectfully as a new member.
You know, the one concern I do have--and I know you and Senator
Gregg have spent an enormous amount of time thinking about
this, but under the proposal you have laid out, if the right
members were selected, I could see a very successful venture.
But if partisan pressure led to members being selected that
came in on either side of the aisle with either saying, you
know, we cannot look at certain numbers of programs or we can
never look at revenues or there are certain things off limits,
you know, you could almost derail the process from day one.
And I know you all have thought through this a long time,
and I think I can say if both of you were on the commission I
would have total confidence that you would come with that open
mind. But I do hope that that part of the process can be
something we can keep talking about, trying to make sure that
whoever is selecting the members of the commission, they would
select people that would not come with preconceived notions and
truly coming with an open mind that everything needs to be on
the table.
Chairman Conrad. Thank you. Again, Senator Warner, thank
you for your courageous leadership. This is tough to take on--
--
Senator Warner. As a new guy, this is being courageous?
Chairman Conrad. Yes, it is. And you know it is, because,
you know, you are taking on the institutional structures here,
and we all understand that. And we understand how strong they
are and how resistant to any extraordinary process they are.
Senator Gregg. Senator Bayh called it ``institutional
insurrection.'' I thought that was a fairly good term for him
to coin.
Chairman Conrad. We are going to turn now to David Walker,
the former head of the General Accounting Office, somebody who
has been a leading voice for a long time on the need for a
special process and the need to face up to our long-term
indebtedness. He has traveled the country as part of the Fiscal
Wake-Up Tour and done incredibly important work to help prepare
public opinion for what we know must be done. Mr. Walker?
STATEMENT OF DAVID WALKER, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, PETER G. PETERSON FOUNDATION, AND FORMER COMPTROLLER
GENERAL OF THE UNITED STATES
Mr. Walker. Thank you, Chairman Conrad, Senator Gregg,
Senator Warner. First, I would like to thank you for the
opportunity to be here and, second, commend the three of you as
well as the members of the panel before this for their
leadership on this critically important issue.
I would like for my full statement to be included in the
record, and I will move to summarize it now.
Chairman Conrad. Without objection.
Mr. Walker. Thank you.
Our Federal deficit for fiscal year 2009 was $1.42 trillion
or about 9.9 percent of the economy. That is almost nine times
what it was just 2 years ago.
This past weekend, the Federal debt passed the $12 trillion
mark, which is almost 85 percent of GDP. Federal debt almost
doubled during President George Walker Bush's Presidency, Bush
43; it could double again in the next 10 years if we do not
change course.
Our Nation has become increasingly dependent on foreign
lenders to finance our Federal deficits. Today over 50 percent
of the Nation's public debt is held by foreign lenders, and
that percentage is growing. This compares essentially to no
public debt at the end of World War II and only 19 percent in
1990.
Our Federal Government faces a Federal financial sinkhole
that is growing at a rapid rate. The $56.4 trillion number at
the end of last year has already been mentioned, which is
$184,000 per person, $483,000 per household--nine to ten times
median household income. The new number I expect will be around
$63 trillion plus, and we will not know it until the end of
this year because we do not know the commitments and
contingencies number.
If you think the current deficit and debt levels are bad,
you ain't seen nothing yet. Our huge unfunded promises will
translate to much larger deficits and debt burdens in the
future absent real transformational reforms on both sides of
the ledger.
For example, absent such reforms, total Federal spending
could exceed 40 percent of the economy by 2040. Interest alone
will be the single largest line item in the Federal budget
within 12 years, and we get nothing for it.
In reality, we will never make it to 2040. And by the way,
by that point in time, if we wanted to stop the bleeding, we
would have to over double Federal taxes alone by that point in
time.
As I note below, we will face an economic crisis much
bigger than the current one if we pass a tipping point and we
do not start to put our act together pretty soon.
The Congress is currently involved in a great debate over
health care reform, and I would just like to specifically say
that that has serious fiscal implications. I included in my
testimony a suggestion of four criteria that should be met in
order for health care reform to be deemed fiscally responsible.
I am sad to say that right now none of the bills currently meet
all four criteria. Hopefully that will change.
Irrespective of how the current health care reform debate
ends, we must recognize reality that the key factors that
contributed to the recent mortgage-related subprime crisis also
exist in connection with the Federal Government's finances.
There are, however, two big differences from the mortgage-
related subprime crisis: First, the numbers and stakes in
connection with the Federal Government's finances are much
greater; and, second, no one will bail out America. We must
make tough choices and solve our own problems.
We must take concrete steps to address our structural
fiscal challenge before we face a possible super subprime
crisis. This could result in foreign lenders lose confidence in
our ability to put our Government's financial house in order.
We must recognize that if they lose confidence or if they
otherwise decide to significantly reduce their appetite for
financing our deficits, we could experience a dramatic decline
in the dollar and a dramatic increase in interest rates. And,
by the way, that single largest line item in 12 years assumes
no significant increase in interest rates, which is an
unrealistic assumption. This would have a devastating impact on
America and Americans. It could also result in a global
depression, and we must take steps to avoid that.
With all of this as background, let me comment on the
primary subject of the hearing. Should Congress move to enact a
special process to address this Nation's large and growing
fiscal challenge? My answer to this question is a resounding
and unequivocal yes. Based on my experience in traveling to 46
States around America, meeting with hundreds of thousands of
people in town hall meetings, business community leaders,
editorial boards, as well as local media, it is now abundantly
clear that a majority of Americans have grown tired of too much
talk and not enough action in Washington. There is an
increasing disconnect between the public and Washington, and
that disconnect not only is resulting in a growing lack of
confidence in the regular order, it is resulting in growing
anger throughout the United States irrespective of political
party.
Importantly, based on a statistically valid survey funded
by our foundation, we found out this past spring that the No. 2
issue of concern to Americans exceed only by the economy was
escalating deficits and debt. Twenty points ahead of health
care, climate change, Iraq and Afghanistan, moving jobs
overseas, and other important issues to the Nation. Twenty
points plus ahead. And, in fact, they were also very concerned
about our increased reliance on foreign lenders. We have a new
survey in the field now, and I would be happy to provide the
results of that to you. I fully expect their concern will have
increased.
By the way, they also supported by roughly a 2:1 margin the
need for a special commission. And, furthermore, they supported
by roughly a 2:1 margin the need to have non-government experts
on it as well, recognizing the pressures that are brought on
elected officials.
In my view, the Congress and the President should take
action no later than early 2010 to be able to move to create a
special commission. I would respectfully suggest that doing
something as part of the debt ceiling limit is a good idea or
even possibly doing something as part of health care reform if
you cannot do it as part of the debt ceiling. But it is very
important we do it in early 2010. We must put a credible
process in place that would accomplish two key goals, and I
think these are really important based upon 5 years of being
out on the front lines in America.
First, to educate and engage a representative group of the
American people--not the fringes, a representative group of the
American people on the serious fiscal challenge that we face,
the range of tough choices that need to be made, the pros and
cons of various options, the prudence of acting sooner rather
than later, and the potential consequences to our country and
our families if we do not.
Second, which all the bills contemplate, we must create a
process that will set the table and provide needed political
cover for one or more tough votes in Congress, where everything
is on the table, literally everything. They should make
recommendations in areas like needed statutory budget controls,
social insurance program reforms, tax reforms, other spending,
including defense, constraints, additional health care reform,
because it is pretty clear that the tough decisions are not
going to be made on health care to reduce costs. We will need
round two, round three, round four of health care reform even
if something happens in other appropriate areas.
In my view, the composition of the commission is critically
important. Clearly, you need to have Members of Congress and
you need to have representatives of the administration, and
that representation should be balanced on both Houses and on
both sides of the political aisle. I believe that it is
strongly desirable to also have credible non-government experts
as part of the commission. Why? Because the truth is when you
go outside of Washington, people that have a strong D or R on
their sleeve are discounted significantly and that people who
are in elective office obviously face pressures that people who
are not in elective office do not face.
I respectfully suggest that we do not just need bipartisan
solutions, we need nonpartisan solutions, because, after all, a
plurality of Americans now consider themselves to be political
independents. And, therefore, I think that it is important that
with regard to any non-government experts, you do not just have
people that are experts, but you have some that are viewed to
be in form and substance independent. That is critically
important for it to be credible.
The parties who are not elected officials would bear a
disproportionate share of the burden for stating the facts and
speaking the truth to the American people outside the Beltway.
It is going to take a lot of time. It is a major time
commitment. Members and Cabinet officials just do not have time
for that.
In summary, we are at a critical crossroads in the history
of our country. We are approaching a tipping point. We must
avoid passing that tipping point because it could have
catastrophic consequences for our country and our families.
Some have said that the commission is not the right way to
go, that we should go the regular order. That ignores the fact
that the regular order is badly broken.
Some have said that we also have a situation where this is
something that Members of Congress should handle rather than
some special commission. They ignore the fact that in the final
analysis Members of Congress must vote, and the President must
either sign or veto the bill. Therefore, the constitutional
process is respected. But we must recognize this country's
future will not be better than its past unless w make tough
choices soon. And this is the way to get it done.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Walker follows:]
Chairman Conrad. Thank you, former GAO Director Walker, and
now head of the Peterson Foundation, for really powerful
testimony. I really do hope people are listening, paying close
attention, because the stakes are very high here.
We are also joined this morning by Doug Holtz-Eakin, the
former head of CBO, somebody that developed real respect from
colleagues on this Committee and throughout Congress for the
way he conducted himself in that important position. Welcome,
Doug. Good to have you back before the Committee.
STATEMENT OF DOUGLAS HOLTZ-EAKIN, PRESIDENT, DHE CONSULTING,
LLC, AND FORMER DIRECTOR, CONGRESSIONAL BUDGET OFFICE
Mr. Holtz-Eakin. Thank you, Mr. Chairman, Senator Gregg,
Senator Warner. It is a privilege to be back at this table
again, and I have had the opportunity in the past to discuss at
length the dismal fiscal future, which has been outlined by
many of the people preceding me, so I will not belabor that. I
do have a statement for the record which I would like to
submit.
Chairman Conrad. Without objection.
Mr. Holtz-Eakin. I would just make a couple of points that
I think are the most important about the current budget
outlook.
No. 1 I think is simply the time scale and how rapidly it
has shifted. What used to be a three-decade problem, which was,
you know, well understood but not addressed, is now something
that looks to be a one-decade problem, and that makes the
challenge, I think, much, much harder.
The second thing that I think is really quite important at
the moment is the perception of international capital markets.
One of the puzzles that has been around for a long, long time
has been why it is that the Congressional Budget Office, the
Government Accountability Office, private think tanks,
regardless of the source, we have the same basic picture of the
Federal Government's future, which is spending lines that point
ever northward and revenue lines that do not, and it simply
just does not add up. And international capital markets have
access to these reports, and the question is: Well, why are
they comfortable buying U.S. debt to begin with? And the
resolution of that has always been that they are implicitly
counting on America solving its problems and that, true to our
history, in a very pragmatic way we will ultimately make sure
these lines come together and do not ever go apart.
We now have one decade to do two things: No. 1, not
disappoint them in that expectation or, No. 2, genuinely
address the problem. And I think both of those are important
issues at this time.
One of my concerns that I outline in my testimony--I am not
going to spend a lot of time on it--is that if we pass bills in
the health care debate which are demonstrably unworthy of
passage from a fiscal point of view, we will send the message
to international capital markets not only that we are not
prepared to fix our problem, but we are prepared to make it
worse. And I cannot imagine a more dangerous thing to do at
this moment in time.
And so one of the things that I think it is useful to think
about as we talk about processes to address this is how rapidly
things are going to have to be done and how important it is to
send the right message to international lenders.
So if you turn to the topic of the hearing, this notion of
a task force or commission to deal with these problems, I just
want to say at the outset I am a reluctant convert. I have
always felt that this is Congress' job and, quite frankly, it
ought to just do it. And that attitude has earned me no friends
and has gotten us no action. So I have come around to the point
where I am in favor of something that is a special legislative
procedure to get this legislation in front of Congress and
passed, but in doing it, I think you should stay as close to
the sort of traditions of the Congress as possible in designing
it. So for that reason, I really believe strongly that it
should be dominated by Members of Congress who will ultimately
have to vote on this, who represent the committees of
traditional jurisdiction where it will have to be ultimately
sold at some level, and minimal participation, if any, from
outside experts. I, for example, would be of no use in this,
and I do not think that is the kind of people you want on a
commission. You want people who were elected to come solve
these problems, represented, and give them a better leverage in
the process to actually accomplish that goal.
I think a tougher call is whether you bring the
administration in or not. I think the political problems get
bigger as you bring the administration in, and so I would err
on the side of keeping the political problems as small as
possible and having it be a congressional effort. But I could
be talked out of that. It certainly ought to be bipartisan in
nature, both its composition and the rules for approval of
whatever legislation comes out.
Certainly this task force or commission should produce
legislative language, something which goes straight to the
floor for an up-or-down vote, and it ought to be supported by a
majority of both the minority and majority parties on the
commission. I think it is imperative that you get that kind of
a buy-in in any commission product before you send it out.
One of the things that I think is the most difficult
questions is the scope of the commission's mandate. I have
heard a lot today about the desire to have everything on the
table, from budget process to budget presentation to policy
decisions. And, quite frankly, I instinctively get nervous when
I hear that, and I am not sure that is the best way to go, for
two reasons.
No. 1, I think that if you go for a single large commission
as opposed to a commission dedicated to the tax problem, a
commission dedicated to the Medicare, Medicaid, health problem,
a commission dedicated to, say, Social Security, the large
commission makes it potentially much harder to get the kind of
outcome you want, which is an agreement on all of these moving
pieces in a single piece of legislation. And since action is
important, I think I would prefer less coordinated action by
many committees to well-coordinated stasis which continues our
problem. So I am sure others disagree with that, but it is a
tough call, in my view.
The second reason I am worried about the big commission is
if this Congress were to put out a large commission populated
by its members with the mandate to solve this problem and it
were to fail, I think that would be a very damaging moment in
the eyes of our international creditors. And to raise the
political stakes that high in this environment I think has some
real risks associated with it.
So in going forward, I think it is imperative, No. 1, that
something like this happen. I concur with that. I think that it
should be dominated by Members of Congress, but that its
mandate should be thought about very carefully so as to
maximize the odds that something actually get done and minimize
the fallout of a large failure to address a clear and
transparent problem.
Thank you.
[The prepared statement of Mr. Holtz-Eakin follows:]
Chairman Conrad. Thank you, Mr. Holtz-Eakin. Thank you for
very thoughtful testimony, as always.
We are also joined this morning by Dr. Galston, senior
fellow of the Brookings Institution, someone who has spent a
great deal of time studying and analyzing the budget process
and budget outcomes in this country. Welcome, Dr. Galston.
Please proceed.
STATEMENT OF WILLIAM A. GALSTON, THE EZRA K. ZILKHA CHAIR IN
GOVERNANCE STUDIES AND SENIOR FELLOW, BROOKINGS INSTITUTION
Mr. Galston. Well, thank you, Chairman Conrad, Ranking
Member Gregg, members of the Committee. I very much appreciate
the invitation to participate in this timely and important
hearing. Let me emphasize at the outset, although, as you say,
I am a senior fellow at the Brookings Institution as well as a
member of the bipartisan Fiscal Seminar convened under the
joint auspices of Brookings and the Heritage Foundation, I am
here in my personal capacity, and unless otherwise noted, the
views I express are mine alone.
I am not going to spend a lot of time discussing the
circumstances that form the backdrop to these proceedings.
Regardless of party, ideology, or branch of Government, almost
no one in possession of the facts believes that our current
fiscal course is sustainable. The level of deficits, debt, and
borrowing from abroad projected for the next decade alone
threatens not only our economic prosperity but also our
currency, our global leadership, and our national independence.
As soon as our economy emerges from recession and the job
market improves, we must adopt a new fiscal strategy, and the
planning needed to craft and implement it should begin without
delay.
If these facts are clear, as I believe they are, then why
have so many past efforts failed to yield major changes, and
why is there so little evidence that we are preparing to make
them now? While it is easy for partisans to point fingers at
one another, it is more useful to examine the deeper problems
that have thwarted action, and in my judgment, two are key. And
we have already heard about them today. First, these issues are
difficult, engaging them is risky, and in today's intensely
polarized national politics, no one wants to take the first
step, especially alone. Second, ordinary budget procedures are
not well designed to address problems that develop over not
years but decades. While we need sharp distance vision, what we
mostly have is institutional myopia. For these reasons, among
others, business as usual is unlikely to produce better fiscal
results in the next decade than it has in past decades.
Fortunately, to come to the topic of today's hearing, there
is an alternative--namely, institutions specifically designed
to address the problems of polarization and nearsightedness. In
a paper released last June, the bipartisan Fiscal Seminar to
which I referred earlier reviewed the century-long contribution
that commissions have made to U.S. policymaking. From the
establishment of the Federal Reserve Board and Social Security,
from military base restructuring to the struggle against
terrorism, the list of accomplishments is impressive. And the
challenge of developing a sustainable fiscal policy offers the
latest opportunity to put this institution to work.
While it is not my purpose this morning to evaluate the
relative merits of various commission proposals, I can, I
think, list the criteria that experience suggests are essential
to any commission's effectiveness.
First, the President and the congressional leaders of both
political parties must fully support its establishment. If they
cannot agree at the outset that the fiscal problem is too grave
and urgent to defer, they are unlikely to support any solution
the commission may propose.
Second, its membership must be truly bipartisan, and its
rules must ensure that it can take no action without
substantial support across party lines. Whether it has to be
majority support or substantial support we can argue about.
Recommendations reflecting the views of only one party will
simply replicate the polarization that has thwarted action up
to now.
Third--and here I echo all the testimony you have heard
this morning--it must be empowered to discuss the fullest
possible range of issues and options, with the fewest possible
preconditions. Artificial limitations on the agenda will almost
certainly tilt the deliberations toward a particular party or
outcome and reduce the incentives of others to participate
seriously. No deficit reduction commission can succeed if its
purview does not include both spending and revenue. Nor should
we focus on social insurance programs to the exclusion of our
Tax Code.
Finally--and here again I echo previous testimony--its
recommendations must go before Congress under procedures that
require expedited consideration and ensure an up-or-down vote.
Rules permitting endless delay or amendments that could
destabilize a balanced compromise are a formula for futility.
Beyond these core elements, there is room for legitimate
disagreement about the scope of a fiscal commission. Some
experts believe that a single commission should address all the
major issues simultaneously and seek to negotiate a ``grand
bargain.'' We have heard some arguments to that effect this
morning. Others think that breaking the problem up into more
focused and discrete issues would prove more workable, and we
have just heard that argument.
There, of course, is no guarantee that a commission will
succeed where ordinary procedures have failed. Because fiscal
policy raises issues that go to the heart of partisan and
ideological definition in our politics today, a commission
could yield yet more gridlock. And there is a possibility that
both Congress and the White House could use a commission to
evade their own responsibilities and defer a debate that very
much needs to occur. And so I echo my colleague Doug Holtz-
Eakin. I am for that reason a convert but a reluctant convert
to the idea of a commission. Nonetheless, at this juncture, in
my judgment, the potential gains outweigh the possible costs.
At the very least--and this is my conclusion--a commission
would force both parties to focus on our fiscal challenges and
send average Americans--whose concerns about deficits and debt
have risen substantially during the past year--a credible
signal that at long last their leaders are paying attention.
[The prepared statement of Mr. Galston follows:]
Chairman Conrad. Thank you, Dr. Galston, for that really
excellent testimony. I appreciate very much your putting your
powers of thought to this task.
We are also joined by Maya MacGuineas, who is the President
of the Committee for a Responsible Federal Budget. We
appreciate very much your being here, and please proceed.
STATEMENT OF MAYA MacGUINEAS, PRESIDENT, COMMITTEE FOR A
RESPONSIBLE FEDERAL BUDGET
Ms. MacGuineas. Thank you, Chairman Conrad, thank you,
Senator Gregg, thank you, Senator Whitehouse. It really is a
privilege to be here today. I am the President of the
bipartisan Committee for a Responsible Federal Budget, and I
also currently directing the Peterson-Pew Commission on budget
process reform, on budget reform, and we will soon be making a
number of recommendations on budget process and dealing with
the fiscal situation that we hope to work with members of this
Committee on. I have a longer statement that I would like to
submit for the record.
Under reasonable assumptions, the debt will be growing as a
share of the economy indefinitely, at some point creating a
vicious debt spiral. Part of the trickiness of the situation,
though, is that we do not know when. We do not even know
exactly what that would look like--whether it would take the
form of a precipitous plunge in economic activity, or a slow
but damaging erosion of our standard of living.
These long-term problems that we have all known about for
quite some time are now at our doorstep. And whereas before the
economic crisis, we could put off hard choices a little bit
longer, we no longer have the luxury of time. At the same time,
however, the economy is still in a delicate state, and if we
were immediately to start aggressive deficit reduction, which I
am not too worried we are about to, but were we, we could
easily push the economy back into recession. So policymakers
must chart a course where they reassure our creditors that the
U.S. is not a risky place to continue lend, without
destabilizing the recovery. The most prudent course of action,
we believe, would be to immediately announce a credible plan
for addressing the Nation's budgetary challenges, while phasing
in those policy changes more gradually while the economy is
still recovering. So that brings me to how a commission could
work. The potential benefits of a commission are many.
One, a commission could send a credible reassuring signal
to creditors and financial markets that the U.S. is indeed
serious about tackling our fiscal challenges.
Two, it could establish a shared fiscal goal, which I think
is critical.
Three, it creates a bipartisan forum where these issues can
be discussed.
Four, it establishes a process to ensure that the
recommendations are considered.
And, five, it lends political cover.
Establishing the commission is one potential way to meet
the twin goals of sending reassuring signals to markets that we
are serious without implementing contractionary policies too
quickly and harming the recovery.
The second advantage about the commission could well be
that we would create a shared fiscal goal. So the Peterson-Pew
Commission--I do not want to give away what we are going to be
focusing on, but we strongly believe that some kind of goal
looking at stabilizing the debt at a reasonable share of the
economy over a reasonable amount of time would be something
that our debt trajectory right now argues for. In the absence
of a single fiscal goal, it is too easy for lawmakers to oppose
any set of hard choices without suggesting other alternatives.
Related to the shared fiscal goal, any commission should not
start with preconditions of taking things off the table.
Third, while it seems simple, it is quite beneficial just
to create an organized forum where the discussion of how best
to achieve these fiscal goals can be hashed out between members
of different parties. As a political independent and a member
of a bipartisan organization, I strongly believe that the
benefits of creating safe environments for bipartisan discourse
are very important and that they should be done away from
cameras and pollsters.
Fourth, there should be an expedited process. Everybody I
think has talked about that. Otherwise, there are just too many
opportunities for delay and diversion by those who do not want
to face up to the tough choices that will be part of a
realistic plan.
Finally, a commission lends the political cover that will
be necessary in actually passing a plan. Any plan that
realistically tackles whichever challenge we choose to bite off
with a commission will involve difficult choices: spending
cuts, tax increases, probably both, and probably they will have
to be large. No area of the budget will be exempt from
consideration and probably reform.
There is no way a politician or a political party that is
understandably concerned about their own future can go out on a
limb and do this on their own. The benefit of a commission, or
any similar collaborative process, is that each member can
support the total package while acknowledging that it may not
have been their first choice.
So let me conclude by saying I wish we did not need to
consider a commission. I share that view of some of my other
colleagues. When it comes to fixing the budget situation, we
all wish that we could just do it. My preference would be to
get started on these policy decisions immediately, with a
bipartisan announcement that we would soon be phasing in a
bipartisan policy plan. It is easy for me to say sitting here,
however. I think due to the incredible political polarization
and the types of policies that will be involved, we have seen
that there is considerable resistance to doing it without a
different mechanism. Thus, a fiscal commission may well be the
best mechanism to jump-start the process and make the
decisionmaking a little bit easier.
There are many details to work out from the breadth of the
mandate to the make-up of the commission to the specifics of
the expedited process. I am happy to talk about any of these.
From our perspective, it really comes down to whatever works. A
commission will only work if it is backed by sufficient
political will. Therefore, I think in crafting the specifics of
a commission, it is most important that we include details
supported broadly within Congress. Members need to buy into the
process from the very beginning for it to be successful.
Ultimately, a commission is the beginning of the process.
It is not the end. The time is now to get started on this
process for dealing with these challenges, and I look forward
to any questions. Thank you.
[The prepared statement of Ms. MacGuineas follows:]
Chairman Conrad. Thank you. Again, really outstanding
testimony, and we have come to expect that from you, Maya, and
once again you delivered. We appreciate it very much.
Let me just begin with questions, and I will be brief in my
questioning round so that others have a chance, and we will go
several rounds if need be, given the time.
It seems to me there are broad areas of agreement that we
have heard here this morning, that we absolutely need a special
process focused on the debt. There is broad agreement that
everything has got to be on the table, that it is bipartisan in
nature, both in form and in substance, that it leads to an
assured vote. Those are the areas where I hear broad agreement.
On the question of everything on the table, maybe, Doug, you
had a little bit of a difference there, but not dramatically
so.
Where I hear differences is on the question of outsider/
insider. Should it all be members and representatives of the
administration? Or should there be some outside, as one person
described me, ``Big Foot'' economists or business people who
have national respect, who could help bring this out of
partisan conflict and put a focus on national interest?
One thing I have wondered is: Is there a possibility of
some kind of compromise in that area? Senator Gregg and I have
a proposal that includes all Members of Congress and the
administration on the idea you need people with skin in the
game. But in listening to Mr. Walker, he made a number of
points that are very important. One is the ability to go around
the country and listen and make the case to the American people
as to the necessity. And Members of Congress, by definition,
have limited time for that kind of enterprise.
One thing I thought of as I listened to Mr. Walker is: Is
there a potential for an advisory group to the commission that
would have people of national reputation who could be engaged
in this process to go around the country? Because at the end of
the day, we are going to have to get votes here in Congress,
and if we do not have the leaders of Congress--Maya, you made
the point. If we do not have leaders of Congress of both
parties bought into the process and deeply involved in the
production of a product, my fear is you will not get a
favorable vote.
And so one thing that crossed my mind is: Is there a
possibility of a working group or task force who has the
responsibility, made up of members, representatives of the
administration, as Senator Gregg and I have designed it, but
have an ancillary group that helps sell this to the American
people? Mr. Walker, what would you think of that?
Mr. Walker. Mr. Chairman, first I think it is critically
important that we have a commission that ends up meeting the
criteria that lay out. Reasonable people can and will differ
about what the composition ought to be. I think it is possible
to come up with some type of a compromise. My view is that
certain elements are essential. Whatever commission exists,
there must be a super majority of elected representatives on
it. Whether or not it is 100 percent, people can debate that. I
think the administration must have representatives because,
after all, the President has got to decide whether or not to
sign the bill or not. So I think that is critically important.
The reason that I think that it is desirable, strongly
desirable to have some non-government representatives is based
on two things: One, what do the American people think? The
American people think by over a 60-percent margin that it
should. Second, I have been to 46 States in the last 4 years,
and I can tell you that there is a significant time commitment
that is going to be required, and I can tell you that if
somebody has a D or an R on their sleeve, they will be
discounted dramatically, in addition to the fact that sitting
Members of Congress and administration Cabinet Secretaries do
not have time to participate.
The third point would be if you are going to divide it to
where you are going to have a certain group that is going to
bear a disproportionate share of the burden for the public
education and engagement, they have to have some official
designation because, otherwise, I think it is going to undercut
the credibility of that group. And I also think that it would
be important that you have at least a couple of members of the
commission attend each one of those in order to show that this
is linked directly to the commission. That way you might be
able to leverage the time commitment that otherwise--you know,
spread around the time commitment and leverage appropriately to
make sure you do have commission member participation, but
recognizing there is a limit as to how much they are going to
be able to do.
The last thing. I cannot overstate the importance of the
citizen education and engagement component of this commission.
In my view, the Bush 43 Social Security reform effort was
fundamentally flawed and had no chance of success from day one.
Irrespective of what you think about their proposals, the
process was fundamentally flawed. In my view, the current
health care reform process has been fundamentally flawed with
regard to citizen education and engagement. It is critically
important that this one not be. And that means the time
commitment and how you go about interacting with a
representative group of Americans, leverage the Internet for
public policy purposes in ways that it has never been
leveraged, get media involvement in these things that are going
to be critical to success, in my view. Thank you.
Chairman Conrad. Mr. Holtz-Eakin?
Mr. Holtz-Eakin. I guess I would differ with David in some
regards. In my view, the purpose of this is, in fact, to fix
the perception problem with Congress. I do not disagree with
the insight that Americans are suspicious of people with R's
and D's on their sleeve. But by addressing this widely
understood threatening problem, you would, in fact, immediately
address the concerns of the American people and the reason they
are suspicious of made-in-Washington solutions. You know,
solving a real problem is the best thing you can do at this
point in time.
So I think to structure it so that members solve the
problem will, in fact, address the credibility issue, and,
quite frankly, you know, legislation comes out of any such task
force, goes through the Congress, gets signed by the President,
we are going to have among the most dedicated salesmen you can
imagine on the planet, which are Members of Congress running
for re-election, explaining why they voted for this; the
President of the United States, any President, we have noticed,
does have the ability to reach the American people.
So I do not see the need in this venue to supplement the
ability to reach out to the American people. I think that gets
taken care of automatically. The credibility is restored. The
outreach is there.
I think the harder question, as I said in my opening
remarks, is about the composition and whether you bring the
administration in or not. You know, the goal is to have a nice,
level, bipartisan playing field within the commission so you
can grapple with very tough problems. There is no bigger Big
Foot than any President of the United States, and you will not
have a level playing field if the administration is in the
negotiations. The President belongs to a party. That party will
be perceived as having a greater say and a greater stake.
So I think that for the first attempt at this, it is better
to err on the side of not taking that step, but I could be
talked out of that. I think it is a hard call.
Chairman Conrad. All right. Mr. Galston?
Mr. Galston. Well, this is not an easy question, but I will
try to provide an answer. My point of departure is a problem I
have been studying for a long time--namely, trust in
Government. And, regrettably, trust in Government, particularly
the Federal Government, is near an all-time low as we convene
today. This is not a healthy situation for our Republic.
And two things that are contributing to mistrust are
excessive political polarization, which has developed over a
period of decades in our Nation's capital, and gridlock. And in
my judgment, the most important way to begin to rebuild trust
is for members of the two political parties to get together and
actually accomplish tasks that the American people want them to
accomplish. And any commission that contributes to that
objective is an important step in the right direction for
governance above and beyond the specific problem that it
solves, whether it is a fiscal problem or military bases or
whatever it may be.
Family, I am totally persuaded by the argument that the
commission should be dominated by people who have skin in the
game, that is to say, Members of Congress and representatives
of the administration. I do not think it should be one to the
exclusion of the other. Whether the commission also includes
one or two experts who do not fall into either of those
categories is, I think, a detail and not the most important
detail. I could go in that direction or not. But the point is
that the composition of the committee and the rules of the
committee must ensure that people with political skin in the
game from both sides of the aisle have to concur in the
results. If that is the product of the rules and the
composition of the committee, fine. If not, I think it will
fail.
Chairman Conrad. All right. Maya, what would you say to
that question?
Ms. MacGuineas. I love the idea. I think it is a great
idea. I have sat on the board of a number of organizations
where we have had a board of directors and a board of advisers
and they have played different roles. You have had the
decisionmakers in one capacity and the advisers intimately
involved in the discussion, but they at the end of the game
were not the people who were responsible for making the
decisions.
I think when you look at outsiders and members, there are
two different skill sets they bring. I think outsiders--and
take no offense to this, but oftentimes can come up with better
policy ideas because they are not politically realistic. I also
think those ideas might not go very far because they are
politically realistic. And I will tread where I probably should
not. I will give an example that is close to home right now.
But if you put a group of outsiders together on health care, we
would all say part of the problem with health care costs is on
the tax side, and we need to look at the employer-provided
exclusion of health care. If you then put that to a bunch of
politicians, they would say, ``That is really hard. The
farthest we can go is looking at taxing certain kinds of health
care plans.'' And in the end, it is the decisionmakers that
allow the policies that are actually implementable to get put
into the policies. They may not be the perfect solutions from
an outsider's perspective, but they are what can get done.
So, again, for me the bottom line is whatever works,
whatever the most colleagues in the Senate and the House think
is the right way to proceed is what we should do. But I think
having decisionmakers make up the panel is the right way to
proceed.
Chairman Conrad. All right. Senator Gregg?
Senator Gregg. Thank you. First off, your testimony was
superb, but that decision was excellent. This whole issue of
composition is critical to the effort.
I guess my reaction is: Who would you choose to put on it
besides Members of Congress? When you start choosing outside
individuals, you immediately have to take care of so many
different groups which have legitimate claims to participation,
from the AARP to the Concord Coalition, from the unions to the
chamber of commerce. I mean, you would end up with a very large
group of people, and in the end it would be very hard to be
assured that you had a bipartisan solution that was politically
bipartisan, because at the essence of this, for this to work,
the American people have to feel that both parties have joined
hands and it is fair and it is bipartisan. That means the
players who vote on it have to have that sort of risk. And that
is, I guess, why I still stick with the member only approach
and members of the administration.
But the independent advisory group, assuming you--I think
it is an excellent idea. I mean, I cannot imagine how there is
any downside to that, especially if you can get people who are
willing to do it knowing they did not have a vote, but who had
the status to do it and give you the really good additional
thought process which would come from that sort of group
participation and the outreach issue. So it is a difficult
question, but I do still come down on the side of members and
the administration.
I guess timing is an issue. Ms. MacGuineas, you made the
point that this could affect the recovery. I am sort of of the
view that if we were to actually put this in place, obviously a
legislative event is not going to occur for a year, at a
minimum, because this commission is going to take a year to act
and then your legislative events, which would have to be
legislated, then the actual action from the legislative events,
because you are dealing with 50-to 75-year actuarial times
frames here, would be very extended. I do not presume this
group would come back with anything that was immediately
precipitous in its proposals. I think what it would come back
with is a series of decisions which put you on glide path to a
much more solvent entitlement structure over 50 to 75 years. So
that would be a phased-in event. So I don't see this immediate
recession, which is severe and difficult, being impacted--
except that I think the value of the dollar might be impacted,
and our capacity to sell debt might be impacted if we actually
had a group like this that people took seriously.
So I guess I would like to get your reaction on timing.
Should the commission report be next year with action in the
following year? Should the commission report be next year with
action next year, recognizing next year is an election year?
Should the commission report be action after the election--
report after the election and action before this Congress
adjourns, in other words, in the period from November to
January being the legislative event? Do people have opinions on
timing? David.
Mr. Walker. Yes, Senator. Let me answer that question first
and then touch on a followup to what you said.
I think you need to announce the agreement to create such a
commission and hopefully enact it into law ASAP, no earlier
than early 2010.
Second, I think the----
Senator Gregg. No later?
Mr. Walker. I apologize. Thank you very much, Mr. Chairman.
As soon as possible, no later than early 2010.
Senator Gregg. That is the creation of the commission?
Mr. Walker. That is the creation of the commission.
Announce the intent to do so, pass the legislation in early
2010, and people can debate what ``early'' is. That will send a
signal that we are serious, we have a process in place.
I think you begin the citizen education and engagement
effort in 2010. You then ask the commission to be able to
potentially report on issues and installments, probably not
reporting on the first issue until after the midterm elections.
For example, it is possible to probably get more agreement on
statutory budget controls that would be put into effect once we
have turned the corner on the economy. It is probably easier to
get agreement on a Social Security set of reforms. So the
commission could report in installments on issues and then save
some of the tougher things to the end.
For example, I think the toughest thing is going to be
taxes and health care, and so I think set it up early in 2010,
get the public education and engagement effort started. Do not
have specific recommendations come until after the midterms,
but think about reporting installments.
Last thing. I think there is a difference if you talk about
outside people for the commission versus the advisory group.
For the commission, in my opinion, it should have nothing to do
with the organization that they are with. You should be picking
individuals based upon their knowledge, their credibility,
their ability, and their willingness to dedicate the amount of
time that would be necessary to do what needs to be done. On
the other hand--by the way, that means formers. That means like
former heads of--former members, former CEOs, former heads of
AARP or Government agencies or whatever. That is the kind of
people I think you would have to have.
On the other hand, if you have an advisory group, you may
face more pressure for groups to want to be represented, and I
think you need to think about that. Ideally, your advisory
group should also be based on individuals, not groups. But, on
the other hand, if you have an advisory group, I think you are
going to get a lot more pressure for current heads or current
representatives of various advisory groups, some of which have
very entrenched views and differing degrees of willingness to
be able to state the facts, speak the truth, have everything on
the table. You need to think about that.
Senator Gregg. Does anyone else wish to comment?
Mr. Holtz-Eakin. I think the timing issues are tough. The
easy ones are certainly set it up as quickly as possible, and I
do not worry about the substantive economic impacts in any way
impinging the recovery. They are just not going to happen fast
enough, and then their nature will be so incremental that I do
not think that is a serious issue. And, quite frankly, if you
will allow the economy to be an excuse to not act, we will
never deal with this because no one is ever going to see a good
time to do it.
The real tough one is if you report out, if you deliver it,
say, during calendar 2010 and you report out legislation of
some scope, I think the tradeoff is you are asking people to
vote before the 2012 election. That is going to be tough. But
if you do not, then the members who actually put it together
may not be around post-election, and so I think you have to
recognize that the members have to be there to defend the
product with their colleagues, and that does require that the
vote come before the election. And that will be--you know you
will hear about that. There is no question.
Mr. Galston. There is an additional factor that I think has
to be taken into account--namely, the proposition that I put on
the table that in order to have a chance to succeed, this
commission needs to be supported not only by bipartisan
congressional leadership but also by the administration. There
have been persistent rumors--I have no inside knowledge--that
members of President Obama's economic team are, in fact,
considering the idea of including some kind of commission in
their next budget submission. That would be important, if true,
and that I think has a bearing on the timing, on the timing at
least of the proposal to establish the commission.
As for the question of when the vote should occur, I think
that trying to time the establishment and the reporting of the
commission so that nobody has to take a vote until after
November of 2012 would not be the most responsible course of
action.
So if you are asking me, you know--it seems to me that a
reasonable timetable would be to establish the commission, give
it, say, a year to come up with a report, and then have serious
consideration of a plan in, let us say, spring of 2011. That I
think would be a reasonable timetable.
Ms. MacGuineas. Senator Gregg, you actually made sort of my
argument I think much better than I did. Clearly, I was not as
clear as I meant to be. But I think the benefit of the
commission is that it does signal to markets and to creditors
that we are very serious about this and then buys us a little
bit of time so that we do not have to phase in the policies
immediately to create that reassurance, but instead we have
time to consider them and phase them in more gradually.
So I think that positive announcement effect is something
we have actually seen. There are studies that the OECD has done
about how you have seen that in other countries, and as long as
the announcement is credible, believable, people really believe
that this will be implemented, you see the positive effect
immediately, very, very impressive experiences around the world
with that.
For the timing, I agree, like everybody else and all of
you, that we should announce this commission as quickly as
possible. Beyond that, I think the right time is to report the
decision in 2010. I think a year--I think there are arguments
for before the midterm and after. I do not have a very good
political ear, so whatever people think is more likely to make
it work. But, you know, in the 2010 year is when the decision
for the budget, whether it is just entitlements or everything,
should be arrived at and agreed upon and committed to.
I then think you phase in those policies more gradually.
Some of them will be phased in quickly. Some of them will be
phased in over time. For whatever plan to come out to really be
effective beyond just the short term but the long term, it has
to deal with the structural problems. That means it is going to
deal a lot with entitlements, and those are not things that you
can change abruptly. You cannot say today we are changing the
entitlement program starting tomorrow. So you are going to
stagger the phasing-in of the different parts of the plan.
I also think the need to phase things in, how quickly or
how slowly will depend to some extent on how many expiring
policies are extended because that will greatly affect our debt
situation. It will greatly affect how much stimulus there is in
the economy. So you cannot kind of separate what goes on in the
rest of the budget before 2010 and 2012, when things are phased
in. But I look at announce it immediately, come to a decision
in 2010, phase in the bulk of the policies beginning in
probably around 2012, depending on the economy.
Chairman Conrad. Senator Whitehouse.
Senator Whitehouse. Thank you, Chairman, and I thank the
panel for being here. I have three observations, and I will
fire them all off quickly and then ask you to react to
whichever ones you care to.
The first is that I think it is very important that
whatever this process is, it be as broad and inclusive as
possible. It is very easy to get a small number of people who
agree with each other in a room together and then try to shove
what they have decided down everybody else's throats, but that
will lead to, I think, a very violent kickback from those who
are excluded from the process. So as appealing as it may seem
on the way in to expedite things in this way, where you have a
little group that makes all the deciding and everybody else
gets told what to do in Congress, I think that the long-term
hazard of that is far worse than the short-term gain. And I
think we have seen examples of that very recently here in the
Senate.
The second point is that we have half--well, not half, but
we have one of the two major parties that have made it
apparently a categorical imperative to participate in this that
no additional revenues be raised. To me, that is a non-starter.
We have a country where 1 percent of the population controls
more wealth than the lowest 50 percent, in which CEO salaries
compared to regular pay have increased about 10 times. We have
Warren Buffett saying that he is offended that his tax rates
are so low. You have the hedge fund billionaire idling in his
private Lear jet at O'Hare getting ready to jet off to his
Caribbean vacation sipping champagne and paying a lower tax
rate than the fellow who is standing outside in the rain with
the orange flashlights waving the jet off. I mean, it is
preposterous.
So, to me, the idea that you cannot deal with revenues is
almost beyond logic and sanity, and yet we are faced with that
position from the other side.
And the final thing is that I think that health care is
different than everything else in our budget issues, and under
the theory that the person who only has a hammer sees the
solution to every project to require a nail, if you get fiscal
people in who do not understand the extreme dysfunction of our
health care system and do not have the patience or the
knowledge to go in and pick that apart so that our health care
system becomes more efficient, then you are going to end up
bringing an axe to a patient who may only require an
antibiotic. And whether you believe the President's Council on
Economic Advisers saying that there is $700 billion in annual
waste and excess cost in our health care system, $700 billion
with a``B'' annually, or the New England Health Care Institute
that says it is $850 billion annually, or Lewin or Secretary
O'Neill, who both agree that it is over $1 trillion annually,
to just treat that as a fiscal problem to me completely eludes
the real problem. And because it is the bulk of our fiscal
problem, if you have not carved that off, you have a fiscal
tail wagging a health care dog with no likelihood of a good
answer because you have brought the wrong people into the room.
And so those are my three concerns. I would love to have
your reactions.
Mr. Walker. First, Senator Whitehouse, I think it is
critically important that you have an inclusive approach. I
like the idea of the Chairman that you have first the
commission and then you have an advisory group. I think you
need to keep in mind that I think it would be desirable that
the commission, the people on the commission are picked because
of the individuals, again, balanced, super majority for Members
of Congress, representatives of the administration, you may
have others, but you are picking them because the individuals--
it is broad, it is balanced.
The advisory group could be a way to get organizations
involved, a broad cross section of interest groups so that they
are heard. On the other hand, they do not have a vote, and the
reason being is because some of them are pretty entrenched in
their position, whether it be do not raise taxes, do not modify
social insurance programs. They need to be heard, but we need
to have a process that has a chance of success.
Second, on taxes. Taxes are going up. They are going up on
a lot more people than those making $250,000 or more because of
a very simple four-letter word: math. The power of compounding.
And the longer that we wait in order to achieve a grand
bargain, the higher they are gong, for three reasons: one,
math; No. 2, demographics, more enfranchised in existing
entitlement programs; and, No. 3, political activism. Not all
segments of society are equally politically active, and the
people who are paying the price and bearing the burden for
today's irresponsible and immoral behavior are too young to
vote or are not born yet. And the third issue is health care.
It is about more than money, no question, and, clearly, you
know, you cannot be just focused on the money. I gave the
annual lecture at the Institute of Medicine for the Rosenthal
Lecture and talked about all the different dimensions. I would
be happy to provide you a copy. But understand this: Congress
is punting on the tough choices on health care. It is punting.
None of the bills are dealing with the real drivers of health
care and are coming up with actionable items to make sure that
we bend the total health care cost curve as a percentage of the
economy down rather than up. They all bend it up. And so,
therefore, the idea that you would not have something with
regard to health care as part of this, I think for the reason
that you said, it's the single largest driver, you would say,
well, that is a huge omission. I think if you cannot even
address the single largest driver, then, you know, we are not
going to be able to get the job done. But it is about more than
money, and you need to recognize that.
Mr. Holtz-Eakin. In terms of the broadness and
inclusiveness, I think it is important to recognize that these
approaches would require the Congress to pass a law and the
President to sign it, and so there is a buy-in at the front end
for the process that will deliver the legislation. And it will
be far from the case that any such commission or task force
would go into a black hole and come out. This would be a year-
long effort. Members are accessible during that period, and
people will be talking to them about what they thought they
ought to be doing. I think that this has a good chance of being
very successful in being broad and inclusive, you know, and the
membership we have discussed at length.
In terms of what is on the table, I think, you know, there
is broad concurrence you have to have everything on the table.
There is no question about that.
And I would echo what David said about health care. Health
care is different. The great promise of health care reform was
the opportunity to deliver the quality of care comparable to
what we have now or better at lower cost. There is bipartisan
research and evidence that that is where we should be going,
and that is not what the bills in Congress are doing. And so
there would be an enormous amount of opportunity for a
commission to take up that work.
Mr. Galston. Well, Senator Whitehouse, I am really glad
that you put your three propositions on the table. They are
challenging. I have not had the privilege of meeting you, but I
think it may be useful for you to understand where I am coming
from in this discussion.
I am a lifelong Democrat. I was Walter Mondale's issues
director during his Presidential campaign. I served in Bill
Clinton's White House, and I went down with the Good Ship Gore
not once, but twice. A privilege few can claim.
And, you know, I believe in universal health insurance. I
believe in robust programs of social insurance. My fear is that
we are not now on a track that will enable us to sustain those
commitments, which I think are important moral commitments.
That is what brings me to this table.
With regard to your specific points----
Senator Whitehouse. I agree with you there, by the way. Go
ahead.
Mr. Galston. With regard to your specific points, taxes are
going to have to go up. The idea that the Government of the
United States is not going to expand as a share of gross
domestic product over the next 10 years is in my judgment a
denial not only of reality but of necessity. We are now on
track, I think, to have a Government that consumes, say, 24 to
25 percent of gross domestic product, which is a step up from
average of previous decades. I see no way of avoiding that, and
so one question that is on the table is how we can finance that
in a responsible way so that the budget objective that Maya
MacGuineas put on the table earlier of stabilizing over time
the ratio of debt to our gross domestic product can be achieved
in a way that is consistent with all of the other commitments
that we want to maintain.
My belief is that as we think--it would be a mistake to
think only about the total size of the revenue piece. We also
have to think about its shape and composition. I think that the
Tax Code that we have is antiquated, distorted, and riddled
with unfairness, both horizontal and vertical. We need
fundamental tax reform that asks questions about a 21st century
tax system that promotes economic growth and raises revenue in
a fair and sustainable way. All of that has to be on the table
for discussion, and in my judgment, the sooner the better.
With regard to health care, yes, health care is different.
Unfortunately, it is part of the economy, and so one of the
dimensions of the discussion must be the economic dimension.
And I say with regret, but consistent with a very important
article on the front page of today's New York Times, that of
the two objectives that people had going into health care
reform--namely, expanding access and controlling costs--we are
on track to do a pretty good job on No. 1 and a very poor job
on No. 2. And so if we do not do No. 2 in this bill, we are
going to have to come back and do it in some subsequent bill
because it is not sustainable to expand access and to do
nothing about cost. It is just as simple as that. I am
interested in sustainable moral commitments.
Finally, with regard to broad and inclusive processes,
well, you know, it is very difficult, at least as a declaratory
position, to say I am in favor of a narrow and exclusionary
process, right? I am immediately at a disadvantage. I would say
this: that regular order in the Congress of the United States
has not produced terrific results on the fiscal front in the
past decade, and I see no reason to believe that regular order
will produce a better result in the next decade. And,
therefore, reluctantly, I have come to the conclusion that we
need what James Madison called auxiliary devices, of which a
commission is one.
Ms. MacGuineas. Senator Whitehouse, thank you for your
really important questions.
On the first, the question of buy-in, it is a tricky one
because you cannot have a group that is so large that it
becomes unmanageable. And then, on the other hand, you cannot
have a group that is so small that there just is not that broad
buy-in from people. It is going to be a tension. there is no
perfect solution.
I think one of the problems I have with people sort of
standing outside saying, ``Well, I wanted to be included,'' is
that so few people have been willing to put forward policies
that would actually move us in the right direction on this
issue. And I can kind of predict that the people who are on the
sidelines saying, ``Well, I want to be a part of this, and how
come I wasn't?'' will not be the same ones who are all along
coming up with tax ideas and entitlement ideas and budgetary
ideas to help move the process forward. I certainly hope that
all of those folks will be included. But I think you are right
that the perfect size is--there is no perfect size.
On taxes, taxes should be on the table, and beyond that I
completely agree with what David Walker said. Taxes are going
up, and they are going up for people who are making less than
$250,000. We just have to be realistic about this.
I just spent a couple months trying to do an exercise of
just a simulation of what it would take to stabilize the debt
at a reasonable level. We are going to have a lot of policy
choices that we are going to have to put out there, and they
are tough, and there is no way that you can realistically do
this on one side of the budget alone. So I hope that everybody
who is involved will be able to make that an easier decision
for people to back away from some of the promises that have
been made that we can no longer keep. The economy and the
budget have changed.
In terms of health care, for quite some time now we have
heard the narrative that the budget problem, that the fiscal
problem is really a health care problem. We have recently spent
months and months focused almost 100 percent on health care
reform, and, unfortunately, where we are is that health care
reform alone, at least what we have now, is not going to come
close to fixing the budgetary problems. We are going to have to
do a whole lot more.
That does not mean--and I think that those of us who care
about fiscal issues are also kind of often painted with a brush
of, you know, you just want the numbers to add up, you do not
care about the policies. That does not mean we can do this in a
non-thoughtful way. When we are dealing with basically the
entire Government, we have to think about fundamental tax
reform, how to do health care better, how to improve the lack
of Government investments. We have a real shortage in some
areas of the budget. This is not just cut, cut, cut, and
increase taxes. There are some areas that have to be funded
better and differently.
I know in the think tank where I work, when I walk by my
colleagues all think, ``Oh, here she comes again. She is going
to want us to pay for our new ideas.'' It is not a popular
position to be kind of the person who is concerned about the
budget. It should be part of the task to do it well, is to make
sure that the numbers add up.
Chairman Conrad. Can I just interrupt you and say I have
that experience almost every day around here. ``There he comes
again.''
Senator Alexander?
Senator Alexander. Thank you, Mr. Chairman.
I want to thank the Chairman and the Ranking Member for
their consistent leadership on this issue. They have been
terrific. And I want to thank the four witnesses. I have
enjoyed your testimony, and I appreciate your candor.
If I could make three or four observations and then ask a
single question. One is on the sense of urgency, you pretty
well stated it. The President was off in the right direction. I
went to the White House fiscal responsibility summit, and he
said to be sustainable we will have to address health care. And
then at the White House health reform summit, he even said if
we do not address health care, we will run out of money. We
will be bankrupt, and the State governments will be bankrupt.
So he started out right.
The Republican leader, Mitch McConnell, gave his first
address this year to the National Press Club and offered to the
President: if you would like to go to work on making Social
Security solvent, I am ready to go work on that, and you will
get more support from Republicans than the last President got
from Democrats. I think that turned out to be a missed
opportunity. Nothing happened there, so far as I know. And I
think all of you have said that the health care bill may have
many good parts to it, but it is not solving the cost problem.
It is even so obvious that Katherine Seelye in her Sunday
article in the New York Times talking about Americans going
overseas to get cheaper health care started out this way: ``No
matter what Congress does with health care legislation in the
next few weeks, one thing is already clear. The result will not
do much to control the climbing costs of medical care in the
United States.'' So there we are.
Adding to the sense of urgency is that some of the bills
shift to the States some of the costs, and as a former
Governor, it is startling to me, the amount of it. The
Democratic Governor of Tennessee, Governor Bredesen, estimated
over the weekend that the Medicaid shifts to the State of
Tennessee would be about $1.4 billion over 5 years, and as a
former Governor, I think that either means creating a new
income tax for the State or seriously damaging higher
education, or both. So that is sort of a back-door way of
avoiding dealing with our problems up here, just sending some
of the bill to the States.
Now on the points that you have raised, what about the
President? It seems to me the President has to be involved in a
big-time way sooner or later in this process. He may not have
to start it out. I know about separation of powers, but this
group should basically see itself as coming up with a way to
help the President solve the problem. The President is the
leader of the country. He is the agenda setter. He sees the
urgent problem. He comes out with a solution, and it is up to
him to persuade at least half of us that he is right. No one
else can come close to doing that. We cannot do that here. We
are legislators.
So the President has to be involved and if he wants to
persuade at least half the country he is right, he is probably
going to have to get the former Presidents involved in a
bipartisan way to persuade the country he is right.
In terms of timing, another point, you cannot avoid
politics on this. You have to stick it right into the middle of
politics. This is not the Soviet Union. This is de
Tocqueville's democracy. We have to solve our own problems by
our own votes.
In June 1992, Ross Perot was leading the Presidential race
against an incumbent President and a future President. In June
1992, he was ahead in the polls. Now, he was not prepared for
the Presidency, and he made some mistakes. But what was he
running on? He was running on a fiscal platform. So this
process should be done in such a way to stick it right in the
faces of the Presidential race and make everybody deal with it.
Otherwise, it will be an exercise in irrelevancy.
So here is my question: I left a budget meeting in my
second year as a Senator. I was so discouraged sitting here
listening to Senators Conrad and Gregg that I went down to the
National Academy of Sciences and asked them a specific question
about U.S. comptetitiveness. My feeling was that we are going
to just squeeze everything out of the budget that counts, and
we are going to spend all our money on war, welfare, Social
Security, health care, and debt. We are not going to have
anything, for example, for the investments in science and
technology that are big contributors to our standard of living.
So I went down to the National Academy of Sciences, and I
said, ``Could you tell us exactly the ten things we ought to
do, the first ten steps we ought to take to make us competitive
in the future?'' And they formed a commission, which Norm
Augustine chaired. They made 20 recommendations to us, and we
worked 2 years and passed most of the recommendations. We have
that done.
My point is that we do not do comprehensive well in the
Congress. Look at immigration. We had our best Senators working
on that, and by the time it got to the floor, it just sunk of
its own weight. Look at health care. We have a lot of good
people working on that. It is having a very hard time, and the
number of pages in the bill is growing faster than the debt. It
is 2,000 pages now. It is incomprehensible, what is going on.
Then look at economy-wide cap-and-trade legislation. It
sounds great, but it is full of mandates, surprises, and taxes
for something that instead we might do with three or four steps
in the right direction knowing what they cost.
My question is this: Shouldn't we say that we do not do
comprehensive well, that we should be skeptics about anyone who
comes forward and says, ``I have a grand plan for a big problem
to impose on a country this big and complicated'' and expect
that this commission's report will provide, as I asked the
National Academy of Science, the ten steps that we ought to
take in the right direction and that the members of the
commission ought to all be Members of Congress--there should
not be any advisers? You should not be having to worry about
the politics of advisers. Ask them what you think if you want.
Members of Congress and the President are elected to have the
responsibility to act, and if the President has 10 steps to
move in the right direction, or 20 or 15, then he can pick the
ones he thinks he can pass. He can sit down the way Lyndon
Johnson used to do with Everett Dirksen or the way Mitch
McConnell invited President Obama to do with him on Social
Security and say to us, ``We are going to do these four steps
first, and when we get these four done, we are going to do
these two steps, and then we are going to do these three steps,
and this is the biggest problem facing our country.''
So I am asking you: Isn't a step-by-step approach in the
right direction better than some big, grand, comprehensive
thing that is just doomed to fall of its own weight? Mr.
Walker, you mentioned 60 percent support for solving this
problem. It will not be 60 percent if we all go out there and
everybody says it will take Medicare cuts and higher taxes.
That will drop fast. So picking the steps you take, moving in
the right direction, I wonder if that is not a more likely way
to get where we want to go.
Mr. Walker. That is a lot, Senator. First, we have a
dysfunctional democracy. Congress does not do transformational
change well in any area.
Third, the historical way of doing things through, you
know, trust me, inside the Beltway, Andrews Air Force Base
commissions, are over. They will not work anymore. The level of
trust and confidence in Government has plummeted. It is not
just the partisan battles. It is the ideological divides, the
fact that too many people say we cannot raise taxes, we cannot
renegotiate the social insurance contract, et cetera, et
cetera.
We are going to have to have an extraordinary process. You
are going to have to have either an advisory way or in as
members some non-elected officials and members of the
administration involved who can go out, spend the time, state
the facts, tell the truth to the American people, and who are
not viewed as being part of the problem, who are viewed as
being part of the solution, and who can state it straight.
On health care, four tests for fiscally responsible health
care: must pay for itself over 10 years; must not add to
deficits beyond 10 years, because the country is going to last
more than 10 years and the future is more than 10 years; No. 3,
should result in a significant reduction in the tens of
trillions in unfunded promises we already have for health care;
and, No. 4, should bend total health care cost curve as a
percentage of the economy down, not up. No bill meets that.
Some do not come close to meeting it. Otherwise, you are adding
a wing to a house that is headed for condemnation and
bankruptcy, or foreclosure in today's terms.
Last, the President has to lead. Only the President has the
bully pulpit. The President is CEO in addition to commander in
chief. The President also has a veto pen. And, therefore, he
has got the lead. He has got to buy in. And I would
respectfully suggest that George Herbert Walker Bush, 41, and
William Jefferson Clinton should be part of this, because those
were two Presidents that were very fiscally responsible. They
did the following things: One, they broke campaign promises,
which this President is going to have to do, too. They broke
campaign promises on taxes. Second, they supported the
imposition of tough statutory budget controls. No. 3, they did
not expand entitlements. And I could go on. But they were
fiscally responsible. They need to be recognized, and they
could be part of this process, I think.
Thank you.
Mr. Holtz-Eakin. Well, I think in your question you gave a
much more articulate description of the problems with the one
big commission than I was able to. And one of the reasons that
I worry about just having a single commission with a large
mandate is the notion of the large unintended consequences that
are historically parts of comprehensive approaches to reform
and the skepticism that this brings to members and the public,
and as a result, the difficulty of actually getting action if
you take that as the sole route forward.
So, you know, as I said in my testimony, I see merit in
thinking hard about breaking this into compartmentalized pieces
that add up to a solution but which do not attempt to do it all
in one fell swoop.
Mr. Galston. Well, Senator Alexander, you have said a whole
lot that I agree with and some things that I need to comment
on.
First of all, I think you are absolutely right to say that
this has to involve the President and the White House. This is
not just a congressional issue. You know, given the design of
our Constitution, there are some things that Members of
Congress are better at doing than Presidents and vice versa.
And more to the point, if the President and the leaders of both
political parties in Congress are not in on the take-off of
this commission, or whatever it turns out to be, they will
almost certainly not be present at the landing.
And so I commented--I do not know whether you were in the
room or not--that there has been some discussion among the
President's economic team of actually including some sort of
commission in the next budget submission. That would be, I
believe, an important step forward toward the kind of
institutional guarantee of future Presidential leadership in
this area, and I think that would be a very positive step were
it to occur.
The second thing that needs comment, because I agree and,
therefore, I will agree vehemently, is the proposition that
there is no way of taking fiscal issues out of politics. That
is absolutely right. And these are issues that go to the heart
not only of public policy in this country but the way the
political parties define themselves and distinguished
themselves from one another. There is no way of evading that.
And the commission is not intended as an evasion of politics.
It is intended to organize a discussion and tee up decisions in
ways that facilitate the political process.
And if there is not substantial support among members of
both political parties, No. 1, no recommendations will emerge
from an appropriately designed commission. No. 2, the
recommendations will not pass Congress. And, No. 3, the
President will not sign the bill.
So this is political through and through, and it is
partisan, it is ideological, but it is more than that. And so
the task of the commission is to try to organize politics for
effective decisionmaking in a way that, regrettably, regular
order has not proven capable of accomplishing, at least in
recent decades.
Finally--actually, two finals. First of all, your reference
to the National Academy and the investment agenda I think puts
a very, very important piece of the overall problem on the
table--namely, that if we keep on going down this road, we are
going to have a harder and harder time sustaining the level of
future-oriented investments, whether it is in science,
technology, medical research, higher education, you name it.
And that will occur at both the Federal level and, as you
pointed out, at the State level, that we will squeeze out our
capacity to respond effectively and to invest effectively in
those areas.
Finally, with regard to the incremental approach, yes, with
the following caveat: In order to succeed in dealing either
with the grand problem or with a particular piece of it, be it
Social Security or fundamental tax reform or health insurance,
health care, and health security, there is going to have to be
a balance of proposals reflecting the range of opinions and the
kinds of divisions that now define our Nation's politics. And
an ``incremental approach'' that is not broadly balanced at the
same time is not going to succeed.
And so whether you are talking about a commission that
addresses the grand bargain or a commission that, say,
addresses Social Security, there is going to have to be an
element of grandeur, if I may put it that way, in the
deliberations because, otherwise, they will be one-sided and
doomed to failure. So I would sort of split the difference that
way.
Ms. MacGuineas. Senator, I agree with you that we just do
not do comprehensive well, and it may in part be a result of
how we all organize ourselves. The committee structure is
organized in a compartmentalized manner, kind of the policy
world is organized in a compartmentalized manner, and we
certainly need to find ways to have more cross-sectional
discussions.
That said--and I could go either way on this--I think the
comprehensive is a better way to think about the kinds of
budget reforms that we have to deal with because budgeting
really is about tradeoffs and priorities. And if we were able
to do it well, the best approach in my mind would be to take a
comprehensive look at the budget, with every single piece of
it, and be able to weigh what are our priorities, how do we
rank them, are we willing to fund them. If we are not willing
to fund them, are we willing to eliminate them?
And there may also be an advantage to this is going to be
such a difficult task, a more complex negotiation which
actually has more moving pieces, as overwhelming as it may be,
sometimes allows the job to get done more quickly. But for me,
I just come back to my bottom line of whatever works. If we
want to do a Social Security commission or a Social Security
working group and a tax commission and the rest of the budget,
fine. If we want to do a comprehensive approach and we can do
it well, I think probably even better. But whatever works.
And then just finally to your point about, you know, it is
going to be hard to get support if it is just about cutting
Medicare and raising taxes, one of the problems is we keep
giving our sweeteners away. If we proceed by creating a
prescription drug plan without reforming Medicare or patching
the AMT without reforming taxes or raising the debt ceiling
without linking it to some kind of reform, we keep giving our
sweeteners away, so it is going to be even harder to put
together a package that is politically viable.
Chairman Conrad. Put me in the MacGuineas camp. Really, you
know, Senator Gregg and I have spent, I do not know, over the
last 2 years, how many hours talking about all of these issues,
but it is probably in the hundreds of hours that we have
discussed this. And my own conclusion is that you got tradeoffs
that have to be made. This is a budget exercise. And, yes,
there are things--as Senator Whitehouse said, health care is
beyond a dollar issue, but it is also a dollar issue. Medicare
is going to go broke in 8 years. That is reality. It is cash
negative now. Social Security is cash negative now. Now, we
hope it is going to go cash positive in a couple of years, but
it will not be for long.
And so these are very real issues that are going to affect
whether or not these programs continue to exist or not or
whether they face dramatic and draconian reductions because of
a meltdown in the global financial system.
I just had a friend call me who had just been in China
meeting with top government leaders, and one of the things said
to him was that they have concluded that we are so
dysfunctional in our politics that we are unable to face up to
the debt load that is on this country that is growing. And they
are increasingly convinced that we are headed towards second-
class status. And the things that we have had that have
maintained our greatness and power as a Nation are in jeopardy.
I do not know how anybody can look at these trend lines and
not conclude that it is true that our position of economic
strength is at risk. And so something must be done.
I also have concluded, after I have served here 23 years,
that the regular order is not going to produce the result that
is necessary. If anybody believes that it was going to, all you
have to do is look at the health care reform exercise, which I
have been deeply involved in. And I would say the Finance
Committee plan comes the closest to facing up to it, because it
is paid for over 10 years. According to CBO, it does reduce the
deficit over the second year by a quarter to one-half percent
of GDP, which is big numbers. But as a share of the overall
challenge, it is modest. It does not solve the problem. And we
have been at this for 2 years, and the President gave a charge
to Congress to deal with the cost side of this equation in
order to prevent the 800-pound gorilla of deficit and debt
creation from swamping the boat. And what has happened? We have
made, again, the Finance Committee bill makes things a little
bit better. But does it solve the problem? No. It does not come
close.
So the regular order, I mean, the natural tendency in the
regular order is both sides get in their crouch, Democrats in
theirs, Republicans in theirs. And you cannot convince
colleagues to have something that really represents significant
deficit and debt reduction, because it becomes largely a
partisan exercise, and nobody wants to pay the price.
Senator Voinovich said it so well in his testimony. Nobody
wants to experience the short-term pain to deal with long-term
gain, because that is not our political system. People are
going to face election next year.
So it is so clear to me, it is beyond question to me that
you have to have a special process. History demonstrates it. We
have reconfirmed it this year with health care reform. But you
look back, Social Security, special process; the deficit and
debt circumstance we faced in the 1990's, special process.
Senator Gregg. BRAC.
Chairman Conrad. They are the only things that have
actually succeeded is when you had a special process. Senator
Gregg raises BRAC as well.
Anybody that thinks the regular order is going to deal with
these things, as Leon Panetta, former head of OMB, former chief
of staff to a President, told us--not head of OMB--well, head
of OMB, chief of staff, also Budget Committee Chairman, said
anybody that thinks the regular order is going to deal with
this, no way. It is not. Here we had the Majority Leader in the
House of Representatives here in a hearing before this
Committee, Steny Hoyer, who said, Dr. Galston, much like you,
that he reluctantly concluded--reluctantly--that it is not
going to happen, we are not going to face up to this debt bomb
absent some special process.
And let me just say with respect to the comprehensiveness
or the incremental approach, if it is not comprehensive, you do
not have the natural tradeoffs that will lead to the grand
compromise that is necessary, because people who do not want
any reductions in social programs--I do not. I do not want
reductions in social programs. But I recognize there is no
alternative. I do not want to raise additional revenue, but
there is no alternative if we are going to get this country
back on track. And there are a lot of ways to do it--let us
just take the revenue piece of it--to make our country more
competitive and have the revenue system be more fair and more
efficient. My calculation is our revenue system is only
collecting about 76 percent of what is actually owed. Now,
those are not the numbers you are going to get from the IRS. We
have done our own internal calculations about what is really
going on--tax gap, offshore tax havens, abusive tax shelters.
And it is very dramatic what has to be confronted here on
behalf of the country.
Senator Gregg, any final comment?
Senator Gregg. Let me associate myself with your passion,
Mr. Chairman. I agree with you.
Chairman Conrad. I want to thank----
Senator Whitehouse. Mr. Chairman, may I say two final
things before we go that I do not want to leave unsaid?
Chairman Conrad. Yes.
Senator Whitehouse. One is that I would hope that the
witnesses do not buy into the 2,000-page bill problem/concern.
If you actually take a look at the bill, it is written in real
big type so that elderly Senators can read it. If you do an
actual word count, it is not much longer than a Harry Potter
novel. When you are adjusting a sixth of the economy, to devote
a Harry Potter novel's worth of words to it isn't saying much,
particularly when about half of the language is plumbing
language that connects the operative language into the existing
code. So if you are looking at this from a point of view of
finding a reason to dislike this bill, find some, but do not
buy into the 2,000 pages as a serious criticism of the bill. It
is nonsense.
The second thing is I will dispute what appears to be the
unanimous view of the experts, which I am reluctant to do, but
I think the problem with cost in health care in this
legislation is slightly different than to simply say that the
bills are inadequate on that subject.
We had Elmendorf here, and his testimony was that in those
key areas that we need to transform in order to bring down the
cost of our health care system, electronic health records,
quality improvement to save costs, wellness and prevention
investment, increased value transparency, and payment
strategies that reward outcomes rather than more work, more
procedures. We do not really know very well yet what we are
doing. We know that those principles work, but there is going
to need to be a lot of fine-tuning and further experimentation
done before we get there. And that is very largely an executive
function.
The challenge to him was: Why didn't you cost out any of
this? He said, ``Well, there is a lot of great stuff in there,
and there is the potential for significant cost savings.'' But
how it gets administered by the executive branch is going to
make the difference. And, unfortunately, because it has been
left to us so far, I mean, I think it is a decision one can
debate one way or the other, the Obama administration has not
yet taken a hard and firm position on what its goals are going
to be implementing the tools that we give them. We can give
them a lot of tools, but they have to implement them. And so
far it has been pretty vapid, frankly, in terms of their pick-
up on that. But it is also early in the process. They do not
even have a final bill yet to evaluate and to work with.
So I would contend that the situation on health care costs
with respect to this legislation is not that it is a failure,
because I think to make it more prescriptive in those areas
risks hardening up directions that experimentation will find
were not the right ones. But it does shift an enormous burden
to the executive branch to take those tools and deploy them
rapidly and effectively and interactively so that we get the
result that we achieve.
That is my take on it. I think it is consistent with
Elmendorf's take on it. And it is inconsistent with the view of
the panel, so I just wanted to not be viewed as agreeing by
silence with that view. I wanted to state again where I think
we are on that.
I appreciate the Chairman's courtesy in indulging me to do
that.
Chairman Conrad. Let me just say on the cost question,
there are real differences between the five bills that are out
there, very dramatic differences. Some of them make the
situation on the cost front worse. That is a reality. That is
the direct testimony of Doug Elmendorf before this Committee.
Some of the proposals do improve the cost outlook, although
not enough to rescue our long-term situation. I think that is
also the fact and also the considered judgment of Mr.
Elmendorf, the head of CBO, after many discussions with him on
that front.
But the process has not ended. There are more opportunities
to face up to the cost challenge, and it is going to be
critically important that we succeed in this debate on that
issue. That does not take away for 1 minute from the overall
need for a much larger effort, because it is very clear now,
from any perspective, that we are not going to have dealt with
the underlying cost issues sufficiently. So what is being done
still has the prospect of being necessary but not sufficient.
We are going to have to do much, much more, and it deals with
Social Security, it deals with the health accounts, it deals
with the revenue side of the equation. All of those things have
to be brought before our colleagues, and we simply have to do
better. The consequence of failure from almost any economic
perspective is an extraordinary deterioration in the position
of the United States of America. None of us want to see that.
None of us want to leave here having been enablers for a policy
that weakened our country.
Senator Gregg?
Senator Gregg. Mr. Chairman, I just think it is important
to quantify this problem because the health care bills, as they
are pending, do not in any way significantly impact the fact
that we are facing a $60 trillion unfunded liability in our
entitlement accounts. In fact, they create a new entitlement--
two of them create a massive new entitlement which we know will
not be paid for in the long run and which will aggravate that
number. And, second, the size of this Government will have to
grow radically in order to bear the burden of the entitlement
accounts which we already have in place because we are doubling
the recipients as a result of the retirement of the baby-boom
generation.
These are demographic facts, these are fiscal facts which
just cannot be denied, and that is why we are going to have to
do something much more significant than what is presently being
proposed in the area of righting our fiscal house and our ship
here as we go forward, or else, as everyone has said, our kids
get a country which may be second class. Hopefully it will not
be, but it will certainly make the quality of life for them to
be dramatically less than what it was for us.
Thank you.
Chairman Conrad. Thank you, Senator Gregg. Thanks to all of
the colleagues for their participation. A special thanks to the
witnesses. I think you were absolutely outstanding. I enjoyed
very much the thoughtfulness, the wisdom of this panel, just
exceptional. The Committee is very much appreciative of your
assistance to us.
With that, we will stand adjourned.
[Whereupon, at 12:14 p.m., the Committee was adjourned.]
DATA-DRIVEN PERFORMANCE: USING TECHNOLOGY TO DELIVER RESULTS
THURSDAY, DECEMBER 10, 2009
U.S. Senate,
Committee on the Budget,
Washington, DC.
The Committee met, pursuant to notice, at 10 a.m. in room
2SD-608, Dirksen Senate Office Building, Hon. Mark Warner,
presiding.
Present: Senators Warner.
[presiding], Cardin, and Whitehouse.
OPENING STATEMENT OF SENATOR WARNER
Senator Warner. Thank you all for being here today to
discuss the importance of Data-Driven Performance and
Technology's Impact on Results.
I want to start my comments this morning by again thanking
Chairman Conrad and Ranking Member Gregg for starting this
Senate Budget Committee Task Force on Government Performance.
This task force is will be taking a broad look at how we
can improve the effectiveness of new and existing programs
within the Federal Government. As part of that charge, our
first hearing--and I'm glad to see a few folks back--examined
our current performance information base and we concluded that
we need more meaningful outcome data from across the government
agencies and programs. If we're going to make sure we are
collecting and assembling the right information, how do we make
sure that we really get that important data and do we have the
technology in place to deliver that information in a way that's
user-friendly to all of our constituencies, we the Congress,
the American people, and our Federal work force?
Today's hearing will examine the government's information
management challenges and factors that inhibit the ability to
get valuable performance information, and I want to say at the
outset we've got two great panels.
Our first panel, we'll hear from President Obama's two
chief technology leaders, both good friends, Aneesh Chopra, the
Federal Chief Technology Officer, and Vivek Kundra, the Federal
Chief Information Officer.
They will share information about their new plans to
increase availability and use of data and particularly in light
of the new Open Government Directive that was issued by OBM
Director Peter Orszag earlier this week.
We'll also hear from two leading practitioners--folks who
are trying to get it right within the technology sector. Mr.
Roger Baker, the CIO from Veterans Affairs, who recently halted
45 IT projects at the VA and is making progress toward
increasing the use of data to improve IT organizations.
Nothing sends a shock wave across the system more than
actually bringing some projects to a halt, to try to say hold
on here, let's see what's working and what's not. And someone
who is delivering more effective service at the state level.
I do think there are things we can learn at the state
level. As a former Governor, I clearly feel that way Mr. Brad
Douglas, Commissioner of Administrative Services from the State
of Georgia, who will discuss his work using data to transform
the state and how he got the right people, processes, and
technology in place to get results.
But before we hear from our witnesses, I'd like to again
take a few minutes to talk about our task force's progress
since our last hearing. I want to particularly thank all of our
staff who's been kind of a small band of metric-focused system-
delivery-focused program-saving activists who hopefully will,
while small in number, will be able to do some good things in
the coming months and years.
A couple reports. One, we continued our investigation into
the Federal Performance Reporting Requirements and are
developing recommendations on what to eliminate and what data
is needed.
One of the things we really want to do in this effort is
not simply add, from the congressional standpoint, a whole lot
of new reporting requirements without first perhaps giving some
relief to the Federal work force by saying, maybe there is some
of this that we don't really need. Let's focus on what we truly
need, not just simply volume, quality over volume.
In fact, we want to get some additional thoughts on that
subject and in the spirit of Tuesday's news from the White
House about Open Government, I've actually developed a new
feature on my Senate website that will collect suggestions from
Federal employees and the public on how to reduce and improve
our existing reporting requirements. So we want to hear from
our constituency, the Federal work force and from the public
itself in terms of what data we should be collecting and how it
can be more user-friendly.
I hope this new site will open up a dialog with the public
and the Federal work force on what they want and need in terms
of how government is performing.
The task force also has a separate challenge and one that I
know Senator Bunning raised at our first hearing. How do we
make sure that we're actually trying to find some savings? We
have been reviewing the OMB's Terminations, Reductions, or
Savings List.
We've been looking at this list not only from President
Obama's budget cycle but also from President Bush's cycle.
President Bush, actually OMB under President Bush, proposed a
190 programs for termination, reduction, or savings. President
Obama had proposed a 120.
The problem with this, my thought has been, that OMB kind
of takes these programs out of context, puts them either in the
terminations, reductions or savings category, but there's no
relationship between what that program actually does in
relation to other programs in the same policy goal area.
One of the things we talked about at our last hearing is
that we were taking a couple of broad policy areas, such as
Food Safety, higher education, and work force training for one.
We're looking at how we're doing some program mapping to
identify the overlap amongst these various programs.
Generally speaking, and Senator Bunning raised this at the
last hearing, OMB puts out this list each year and then
Congress, for the most part, proceeds to basically ignore the
list. Again, one of the reasons why, I think, is because
there's not that relationship of which programs should be
terminated or reduced or there might be great savings from in
placing them in the context of other programs in the policy
area. The other thing is we thought we would try is to zero in
on those programs where there's been overlap between both
President Bush and President Obama, so there's no question
about partisanship or particular president's agenda item. We
have found that there are 29 programs that overlap between the
Bush list and the Obama list and we really want to zero in at
those and see if we might be able to secure some savings.
Additionally, and this might be a bit more of a sensitive
subject to our first panel of witnesses, I've been looking at
the recovery.gov reporting and talking with Earl Devaney, the
head of the Recovery Accountability and Transparency Board, to
learn from his experiences about the quality and transparency
of Federal data.
I know there's been some efforts to get out the Recovery
Act information and it's had some fits and starts. Mr. Devaney
has been talking about the challenges he's seen as a result of
different reporting requirements, different time periods, and
varying data definitions.
For example, usaspending.gov and the Federal Procurement
Data System both provide reporting on essentially the same
system and now we're talking in terms of Federal contracting
and this is a big universe.
Amy. Just to give you a sense of the scope here, there are
about 600,000 registered vendors that create more than seven
million transactions and the spend is over $500 billion.
So we're talking about a huge universe here of Federal
spend across the whole state government and with these two
sites basically reporting the same information but in different
formats, measuring different time periods, it really causes, I
think, confusion amongst the public, the work force, and great
sometimes fodder for the press.
So we've got to have a better system and why do we need two
sites, which one is more accurate. We have to look at ways to
standardize this so we've got a common reference point where we
can all at least start to debate from.
I've also been looking at our current IT operational
structure and planning capacity. It appears that we need a
stronger governmentwide technology infrastructure to support
the growing demands for a more open and transparent government.
This is subject matter that both Aneesh and Vivek are very
familiar with because this is an effort that we took on in
Virginia where we tried to consolidate our more than 93
separate CIOs, where we had literally hundreds of different
systems that were not interoperable and we tried to bring them
under a single source of contracting oversight. And while I'm
anxious to hear from our colleague from Georgia, I know that
it's a great plan in theory, it is hard to implement. As we
still continue to have some bumps in Virginia, but that doesn't
mean we don't need to go down that path, and to my
understanding, I'm anxious to hear from Aneesh and Vivek to
make sure my understanding is correct.
Agencies have primary authority for IT planning and
acquisition and OMB's role is to provide overall oversight and
I know there is an Interagency CIO Council led by the OMB to
promote cross-agency collaboration. Some of the questions I
have: does the CIO Council offer enough governmentwide planning
capacity or do we need to strengthen planning for
governmentwide IT investments? Do we make sure that we're going
to have systems that are interoperable, that are truly cutting
edge, and to make sure that we approach this from a whole
enterprise-wide basis rather than agency by agency?
I'm also curious, and to that point, about the overlap
between agency investments and how can we leverage savings by
consolidating some of this spending? Again, bulk purchasing is
a common factor and common use that most businesses and most
households use. Can we do a better job on the Federal IT side
by leveraging our purchasing power across all these systems?
And is there a system for tracking what agencies spend on
IT software and hardware, and are there cost controls in place?
I know our witnesses today will share more about how we
improve the availability of governmentwide data, how we provide
examples of how we can actually use this data for better
performance, how we can measure and use this data to look at
these program overlaps in some of these areas, for example,
that OMB has already pointed out for savings reduction or
termination. We really would like to show some tangible early
results. I know both Aneesh and Vivek would, as well.
Senator Bunning is not with us yet. So why don't we go
ahead and go to the testimony.
First, we'll hear from Aneesh Chopra and it's great to have
Aneesh here. He's been a good friend and colleague for many
years. Mr. Chopra is the Federal Chief Technology Officer for
the United States. He previously served as Virginia's fourth
Secretary of Technology.
Prior to his government service, Mr. Chopra was Managing
Director for the Advisory Board Company, a healthcare think
tank for hospitals and healthcare systems.
And then we'll hear from Vivek Kundra, the Federal Chief
Information Officer and the Administrator the Office of
eGovernment and Information at the Office of Management and
Budget.
Mr. Kundra formerly served in the Mayor Fenty's Cabinet as
the Chief Technology Officer for the District of Columbia,
responsible for Technology and Operations and Strategy for 86
agencies. Perhaps more importantly, at least in my eyes, Mr.
Kundra came to the District because he served previously as
Assistant Secretary of Commerce and Technology for the
Commonwealth of Virginia.
I want to thank you both for being here. I want to thank
you for your commitment to not only this Administration but for
taking on this very challenging prospect of how we get
technology usage right, correct, and in a more efficient and
effective way.
So we'll start with Mr. Chopra, Aneesh.
STATEMENT OF THE HONORABLE ANEESH CHOPRA, ASSISTANT TO THE
PRESIDENT AND CHIEF TECHNOLOGY OFFICER, ASSOCIATE DIRECTOR FOR
TECHNOLOGY, OFFICE OF SCIENCE AND TECHNOLOGY POLICY
Mr. Chopra. Thank you, Chairman Warner. It is indeed an
honor to--let me push the button here. I have to get the
technology right, Chairman Warner.
Senator Warner. Got to get the technology right. Where's
the IT guy?
Mr. Chopra. Mr. Chairman, it is an honor to be here this
morning and, frankly, to thank you for your leadership on this
very, very important topic. It goes without saying that we look
forward to working with you in the weeks and months ahead on
this very, very important topic.
Just as a reminder, President Obama has focused on the
importance of technology and innovation in the effective and
efficient delivery of government services and no better to
reflect that commitment than the fact that on the same day he
announced his intent to nominate a chief technology officer and
chief performance officer, it was during an Internet address
back on April 18th in 2009 that actually had been focused on
reforming spending and reducing waste.
He asked that we work closely with the Chief Information
Officer Vivek and he directed us, and I quote, ``to give all
Americans a voice in their government and ensure that they know
exactly how we're spending their money and can hold us
accountable for the results.''
It is indeed my honor and privilege to serve as an
Assistant to the President in this capacity as Chief Technology
Officer where I'm mostly focused on harnessing the power and
potential of technology and innovation, to execute on the
President's vision for a 21st Century economy, one where we see
jobs more plentiful, American firms more competitive,
communications more affordable, broadband more abundant,
families more connected, and Americans more safe and secure.
I will reserve a great deal of our testimony for the
record, but instead in this hearing would like to highlight
three themes that directly relate to the question at hand.
The first is the role of technology to promote open
government, the second is how technology interfaces with
government performance, and, third, how this aligns with the
President's strategy for American innovation.
First, in the area of technology for open government, just
last Friday in my capacity as the chair of the National Science
and Technology Council's Committee on Technology, alongside my
co-chair Vivek Kundra, we organized over 20 agency technology
leaders who are squarely focused on the President's vision with
particular emphasis on improving government performance through
openness.
We have primarily focused on the Directive that you alluded
to in your opening remarks that is the foundation upon this set
of activities. To remind those who have not been privy to that
Directive, just on Tuesday of this week, Peter Orszag published
a document to hardwire accountability, access, and public
participation into government operations.
This activity reflects a set of recommendations that my
office had culled directly from the American people during the
summer of 2009. We had conducted a month-long pilot initiative
to demonstrate the benefits of emerging technologies, like
wikis, blogs, and crowd-sourcing ideas platforms, which in turn
attracted over a thousand-plus ideas, blog posts, and others
that I'm pleased to report were directly linked to the output.
We focused on three key deliverables in the Directive.
First, instructions to the agencies that they provide
information in open, accessible, and machine-readable formats.
The machine-readable aspect of this may sound a little bit like
an odd requirement but we view it as an essential criterion to
enable third party application development at very low marginal
cost.
Agencies are required to develop a timeline for publishing
new high-value information that we believe will increase agency
accountability and responsiveness, improve public knowledge of
the agency's operations themselves, furthering the core mission
of the agency, spurring economic opportunity, and to be
responsive to public need and demand through the processes of
open consultation.
Second, we believe this Directive will focus on the key
principles of the President's commitment to open government and
those being transparency, increasing participatory democracy,
and ensuring greater collaboration across all sectors, public,
private, and nonprofit.
This Directive calls on each agency to develop a very
unique roadmap that fits the needs of the agency itself, but to
do so in consultation with the American people as well as those
involved in the open government community, so that we don't
have a one-size-fits-all but rather a custom- tailored fit open
government plan for each agency, which, by the way, will be
available at each agency's website, www.agencyname.gov/open.
Third, and perhaps more importantly, the President directs
myself and the Chief Information Officer, along with the Chief
Performance Officer, who you had testify earlier in this
hearing proceedings, to review all governmentwide information
policies that might need updating or clarifying, as well as to
instruct a series of initiatives on the use of challenges and
other tools to promote innovation in government.
I'll ask my colleague, the CIO, to speak directly to the
information quality issue that you raised as it is directly
addressed in the Open Government Directive.
Now a word about what I've seen in my short tenure as Chief
Technology Officer. Briefly, given the time constraints, I
wanted to highlight three key case studies that I will leave to
my testimony for further review that demonstrate the power of
innovation to drive open and efficient government.
The first, how we can move research and development to
deployment. The case study here is of the Centers of Disease
Control's initiative demonstration project to allow a
grassroots voluntary network of local health departments and
state health departments to share information on syndromic
surveillance.
In light of the H1N1 challenge earlier this year, we turned
to this demonstration project for production to help us
dramatically accelerate the rate at which we can incorporate
public information about the challenges of H1N1.
I'm pleased to report that this proof of concept that we've
now moved into maturity, this RND project, has tripled the
number of emergency departments who are now providing syndromic
surveillance, from roughly 570 hospital emergency rooms in the
earlier version to well over 1,500, and that it did so at
dramatically lower costs and with unprecedented public
transparency. You can see 27 out of 30 jurisdictions were
voluntarily participating, publishing statistics on H1N1 at
isdsdistribute.org.
Second, I wanted to highlight the role of open standards to
promote government as a platform. Here, I'd like to highlight
the announcement Secretary Napolitano made yesterday promoting
a new platform called Virtual USA that has as its basic
condition that we are better off as a nation if we can share
information at the grassroots level to improve our response
times in case of a disaster, to improve more public safety
cooperation and collaboration.
I'm pleased to report that Virtual USA, at virtually no
cost to the taxpayer by promoting open standards, has already
demonstrated value. In the Commonwealth of Virginia, we've seen
a 70 percent improvement in response times in preparations for
disaster exercises related to a nuclear power exercise, and
cost effectively because they've shared more data, they're able
to staff their augmentation activities have fallen by 50
percent because they've had more access to information than
they had previously.
Last but not least, I thought I'd highlight this notion of
prizes and competitions to spur innovation toward national
priorities, and I'll highlight the case study of DARPA's
Network Challenge that was just recently conducted highlighting
the role of social networking strategies to dramatically
improve a particular outcome and here I'll simply say the
following.
DARPA wanted to test a very basic hypothesis. How quickly
can we mobilize the American people? In this case, it was a
competition to find 10 red balloons that would randomly be
located throughout the United States and within 9 hours, an MIT
team, using the power of social networking, spurred by the role
of incentives, enabled about 4,600 volunteers to share
information to quickly identify the latitude and longitude of
each of those balloons. Imagine the implications of this in
helping us to find criminals, helping us to identify missing
children, or any one of a number of topics where taking
advantage of the collective knowledge and expertise of the
American people would add value.
I've exceeded my time in this testimony, Mr. Chairman, but
I look forward to following up on any particular questions or
concerns that you may have.
Thank you.
[The prepared statement of Mr. Chopra follows:]
Senator Warner. Mr. Kundra.
STATEMENT OF MR. VIVEK KUNDRA, FEDERAL CHIEF INFORMATION
OFFICER, ADMINISTRATOR FOR ELECTRONIC GOVERNMENT AND
INFORMATION TECHNOLOGY, OFFICE OF MANAGEMENT AND BUDGET
Mr. Kundra. Good morning, Mr. Chairman, and thank you for
inviting me to testify on how the Federal Government can use
information technology to drive performance.
The American people deserve and expect a government that is
accountable and fully worthy of their trust, and the
Administration is committed to leveraging the power of
technology to drive results.
In the private sector, the competitive pressure powered by
technology has unleashed innovation, improved service delivery,
and generated savings. Data can be collected, analyzed, and
used to make decisions on a real- time basis.
For example, the way goods move around the world has been
transformed through technology. People can now track packages
with a click of a button and companies, like UPS, are using
route planning technology to eliminate millions of miles when
it comes to travel and save millions of dollars in fuel costs.
Customer feedback and performance data arms buyers with
information to make better decisions and compels sellers to
perform or face extinction. Unfortunately, the public sector
has lagged in using information technology to drive
performance. For example, the closed, secretive, and
compliance-based management approach to overseeing more than
$70 billion in IT investments has not served taxpayers well.
Investments identified as poorly-planned or managed are
placed on a management watch list, which is nothing more than a
static pdf document. This approach presumed that the government
has a monopoly on the best ideas and the debate was confined to
the four walls of Washington.
The Administration believes that an engaged and informed
public is a foundation for a government that works for the
people. On his first full day in office, the President issued a
memorandum directing Federal agencies to break down barriers to
transparency, participation and collaboration with the Federal
Government and the people it serves.
This week, the Administration issued the Open Government
Directive that you referred to, which will hardwire
accountability and instruct agencies to open its doors and data
to the American people. On June 30th, we launched the IT
Dashboard to provide transparency into the performance of
Federal IT investments. The Dashboard enables the public to see
how IT projects are performing and provide feedback directly to
agency CIOs.
To lower the reporting burden on agencies and to support
better decisionmaking, we also re-engineered the IT Capital
Planning Process. We significantly reduced the reporting burden
by eliminating data elements that were collected by 50 percent
and also using data feeds instead of paper-based reports on a
monthly basis.
The Dashboard is beginning to change the way agencies
manage information technology investments. In July, the
Department of Veterans Affairs, under the leadership of
Secretary Shinseki and Roger Baker, announced that it was
temporarily halting 45 IT projects that were either behind
schedule or over budget. Last week, the department canceled 12
of these poorly performing projects.
Moving forward, we need to adopt an evidence-based approach
of governance by employing platforms like the IT Dashboard
across other functional areas of government.
We're beginning to do this by making sure that we're
leveraging this in the Open Government Directive and Aneesh and
I are going to be jointly launching a dashboard that will make
sure we're held accountable for the performance of the Open
Government Directive.
Dashboards can help us report, analyze, monitor, and also
predict performance. The Administration is making high-value
datasets available to promote national priorities and improve
the every-day lives of Americans through data.gov. When the
Department of Agriculture makes nutrition information
available, families can make smarter eating choices. When the
Department of Education makes key information available about
colleges and universities, students make better informed
decisions about the quality and cost of their education. When
the Department of Labor makes safety information available,
employers can better protect their workers.
The transformative power of technology to improve
performance is evident in our every-day lives. We can track
packages, monitor flights, and evaluate the health of our
personal portfolios on a real-time basis. Similarly, the
American people should be able to track the status of the
student aid applications, monitor product recalls before making
a purchase and evaluate how their taxpayer dollars are
performing.
To change the way Washington works, leaders across the
government must establish a culture of openness and
accountability. The Chief Performance Officer, Jeff Zients,
outlines five key principles for successful performance
management program: buy-in from senior leaders, strategic
alignment, outcome-oriented targets, relentless review, and
transparency.
Technology can support these principles, but technology
will not magically translate them into reality. The Open
Government Directive demonstrates the Administration's
commitment to hardwire accountability and drive performance to
restore the American people's confidence in their government.
Through initiatives like the IT Dashboard and data.gov,
we're laying a new foundation that changes the default setting
of the government from that of being closed, secretive, and
opaque, to open, transparent, and participatory.
Thank you for the opportunity to testify, and I look
forward to your questions.
[The prepared statement of Mr. Kundra follows:]
Senator Warner. Well, thank you, Mr. Kundra. Thank you, Mr.
Chopra.
I appreciate your comments. I appreciate the good work
you've been doing so far.
I've got a lot of questions, and I want to--I know we're
going to hear from Mr. Baker a little bit later. I'm going to
circle around to how we make sure the experience at the VA
could be taking place across a series of other agencies and we
actually kind of shake things up.
I want to start, though, with Mr. Chopra. Aneesh, you
mentioned a couple of examples that were good. I wanted you to
come back to something we've discussed before, though, because
I think it's important, and Vivek mentioned this, as well, how
we get some early wins that have an appeal that is broadly
based and how we make sure that, if we've got this tool, that
we communicate it so again our customers, the American
citizens, can use it.
One of the things we talked about, that I think every
Member of Congress hears from folks regularly on, is really the
opaqueness of the INS in terms of if you deal with Immigration
issues, what the status of your request might be, kind of
getting through Customs and Immigration.
You've talked a little bit about an ability that you
started to see if we could get some real-time ability for
somebody who's got an application before the INS to check on
the status of their process.
Could you speak to that and see if there are any other kind
of early wins and if you've got an early wind, what's your
thoughts on how we get it out to something broader than just
the kind of folks who follow this day in and day out?
Mr. Chopra. Mr. Chairman, thank you very much for the
question, and you're absolutely right.
This came up in June of 2009. President Obama had been
meeting with Senator McCain and a few other folks on the Hill
talking about near-term strategies as we prepared for
comprehensive immigration reform.
Following that meeting, the President addressed the press
and a few others that had convened and issued a challenge to
Secretary Napolitano, directing her that we fundamentally
improve the customer service experience for those applying
within the U.S. CIS and asked that she work closely with the
Chief Information Office, myself, and the Chief Performance
Officer. By the way, we did so with no increase in the budget
and we did so with no change in any legal framework or
regulations.
We quickly identified three areas that we thought, to your
language, would be early wins. The first, we wanted to bring
greater transparency to what happens when an application
actually enters the agency. The systems were not designed to
track, like Vivek said, a package ala FedEx internal to the
agency. So we quickly uncovered in this first category how
might we organize in a more customer- friendly way the key
moments when your application is migrating through the system
and the agency identified seven steps.
Some of those steps would require more information from the
applicant, others would reflect on challenges about data-
sharing inside the Administration. So we created a transparent
approach to each of those seven steps by letting the American
people, the applicants, know where they stood in the queue.
Second insight was we reversed the communication path of
traditionally relying on inbound requests, whether they be
through a lawyer or through some other means, and actually
flipped it to be more open and push oriented.
So to your point, Mr. Chairman, we introduced text message
alerts as a free alternative. So that if your application moved
from Step 1 to 2 or 2 to 3, you'd be instantly notified and I
believe less than a month or so into the system, 25,000
applicants had registered for the new free text messaging
service.
The third pillar spoke more to the issue of performance
improvement across the board and what we had done in that
regard was to acknowledge that the processes take place when
you apply through New York versus Chicago versus, say, Dallas
would have different average turnaround times for the
application.
So we created a transparency initiative around the average
turnaround times by application type that would be made
available to the American people and in machine- readable
format so that accountability watchdog groups could sort of
report on the fluctuations in performance against national
goals as well as to compare New York against Chicago and
Dallas.
I'm pleased to report that all three of those principles
took place and were part of a launch that happened to the day
90 days after the President's call. So by September, I believe
it was, 21st or 22nd, this site went live. The implication, I
believe, Mr. Chairman, is that, as we look to these customer-
facing experiences, we can take a lot of lessons learned from
that storyline and apply them, as we are, in conversations
across the various agencies.
One final observation, Mr. Chairman. Now that the Directive
has been put in place, we have moved from a series of pilot
initiatives, which has been largely the demarcation of where we
were for the last many months, to one where we will have now a
more structured management coordinated approach to these
issues. So those kinds of early wins will now be part of the
dialog across the agencies.
Senator Warner. Vivek, do you want to add anything? I have
a couple followup questions.
Mr. Kundra. Yes, sir, I do. The other thing about the
launch of the U.S. CIS solution that's different is that it was
part of a trajectory that was supposed to go live within a 5-
year timeframe and what this shows is the classical approach to
technology investments across the Federal Government where
everybody believes you've got to have this big bang approach.
Five years later, you'll have some type of innovation.
One of the things that Aneesh and I did, working with the
U.S. CIS, was to sit down and disaggregate the complexities and
talk about how we create value today for the people that need
to know where their applications are in the process, Number 1,
and, Number 2, how we make sure by putting up this public-
facing dashboard we create the right pressures for U.S. CIS to
actually perform and improve the processing times. Also, we
engage the public in terms of looking at the Dashboard itself
and the interface to improve it rather than just doing it with
government employees in Washington who imagine what people may
want. So we actually engage the public in the development of
the solution itself.
Senator Warner. Well, a couple of questions. One, and let
me get them all so you can then respond, either one of you,
one, I thought it was pretty cool, this notion of the
competition between offices. You know, if one office is doing
better than the others and if that was launched in September,
you know, we're now a few months later, are we seeing any
improvement by the laggards? Number 1.
Second is when you first shared this with me, I thought it
was a pretty interesting win or progress being made, I don't
want to overstate it, progress being made. Two, why don't more
folks know about it because I still got a lot of folks knocking
on my Senate office door saying, you know, we're in the midst
of kind of this opaque area in the Immigration Service?
Three, how do you roll out that to make sure it's aware
and, for example, have you shared this with the Immigration
caseworkers and with every Member of Congress?
Mr. Chopra. Great questions, all three. Maybe I can take
the first stab and Vivek can go there.
We have essentially played this strategy with the VA, and
Roger Baker can speak a little bit about that, with our
processing capabilities on the G.I. Bill across the four
centers that are managing that activity and we're seeing
tremendous improvements in productivity in just the time in
which we've launched that initiative where we're a little bit
more active in the near term seeing the results.
I have not spoken to the U.S. CIS on the actual wait times
since the feedback has come out in October, but my presumption
is that we're seeing similar, but that same strategy of----
Senator Warner. You will get back, and----
Mr. Chopra. Absolutely.
Senator Warner [continuing]. I know it's still early, but
if we're----
Mr. Chopra. No, no, no.
Senator Warner [continuing]. Three months in now,----
Mr. Chopra. No. We will absolutely----
Senator Warner [continuing]. We will compare that wait
time, Dallas versus New York versus Chicago, but I'd like to
see, now that this information is out into the public, have the
laggard offices picked up that, has that seen any improvement?
Mr. Chopra. Absolutely. We will get that to you. But I am
confident that this same strategy of having the offices see
each other's productivity and drive to performance, that model
has worked and I'm pleased to report that.
The second aspect about telling folks about it, we had a
press conference with Secretary Napolitano to announce this to
the key stakeholders in September and there was a consistent
outreach effort by U.S. CIS to stakeholder groups. More can be
done and, given your feedback, more will be done.
Third, I believe we did a briefing for Hill staffers on how
we can improve feedback from them about this system as well as
awareness. If that has--perhaps we could do a round two of that
Hill briefing and I'll convey that message to the U.S. CIS.
Vivek, any feedback?
Mr. Kundra. The other thing to add is that the performance
improvements, if you look at internally, also, what the U.S.
CIS is doing, is looking at resource allocation against the
backlogs or the processing times.
We'll be happy to come back and get you details on what's
happening as far as reallocating resources where you have the
longest wait times. It's also giving us business intelligence
in terms of the operations of U.S. CIS beyond just making the
processing times transparent.
Senator Warner. So what's next in the queue? If you've got
CIS, and I know you've also received some attention on the G.I.
Bill, but are there other areas that we can expect to see soon?
Mr. Chopra. The answer is yes. I don't know if we're seeing
such more right now.
Mr. Kundra. We're working across the board. The committee
that Aneesh and I jointly launched, is going through a number
of initiatives where we can look at performance improvements.
For example, in January, the IRS and the Department of
Education are going to be launching a new improved student aid
application. It used to be that to fill out the student aid
application, individuals would have to input so much data that
is repetitive data that the IRS already had. And with the new
approach the two of them got together and now an individual
will get their own tax data with one click, and they're going
to be eliminating over 21 web screens that they had to fill
out. It was more complicated to fill out the student aid
application than the 1040 form.
So there are a number of innovations that we're looking at
in terms of information-sharing, and optimizing how we use
technology, whether it has to do with education or whether
we're looking at U.S. CIS.
Senator Warner. All right. Well, so that was a softball
question. Now we're going to go to the other side. You know,
let's go to where perhaps we don't have quite as good of
information reporting.
I mean, clearly, the first round of reporting on the
Recovery Act, to say the least, caused some consternation. I
didn't realize, for example, that Virginia had a 12th
Congressional District. To my knowledge, it still doesn't. You
know, how do we make sure we do a better job on the Recovery
Act reporting?
I go back again to some of the overlap. I mean, I
appreciate the fact that you've each mentioned a couple of new
sites and new initiatives and I commend the OMB for the Open
Government, but at some point, do we end up, we being our
customers and our citizens, more confused because again we're
just creating so many more sites and we may have a kind of
technology cognizente who follows each of these, but for the
average citizen or, for the matter, the average member, how do
we have a little more clarity here? How do we not have a repeat
of the kind of mistakes made in the first round of Recovery
reporting?
I go back again to my comments on the procurement side with
usaspending.gov and Federal Procurement Data Systems both
putting out different--you know, supposedly the same data but
because it's different timing, different formats, you know, you
leave Congress and the American citizens with a very confused
picture. How do you rectify that?
So take either the duplication, the Recovery Act, and then
specifically in terms of procurement.
Mr. Chopra. Let me take the broad themes and then I'll
defer to Vivek on the areas that he has responsibility for.
This is the reason, Mr. Chairman, why we've focused on the
machine-readable formats topic because the notion that people
have to know a government website or to think about visiting a
government website is, we believe, the wrong posture. We hope
that these key sources of data, by making them available in
machine-readable format, will enable a whole panoply of sites
that will be custom-tailored to meet your needs.
You might be pleased to know that, while the overall
reporting that you referenced might have been a challenge, the
American Academy of Sciences launched a portal focusing on the
science recovery investments that's very easy and accessible so
that researchers can now collaborate and share on what other
studies are being done that are in their general sphere so they
can promote more collaboration.
Those capabilities are born because those external sites
can consume the raw information and then present that in a more
customer-friendly way to meet the needs of that constituency.
I would also point out that's why we're pleased that the ,
we consider to be the newspaper of the Federal Government, is
now available in machine-readable format.
The notion that we need to have a really robust and fancy-
looking .gov site is the wrong question. What we want to do is
actually make those component parts available so that if you
happen to be interested in the healthcare set of issues, that
you can have compiled for you by some third party who's willing
to do that work the quick and easy kind of news clipping
service for what health-related clips are in the that meet your
needs.
So, philosophically, our focus is mostly on producing the
data out and encouraging those to consume it and then create
this broader ecosystem so that the American people can get that
information in ways that they may not know originally came out
of a website in Washington because, frankly, a very, very small
number of Americans know to visit those particular sites..
Now your point about the data quality is why in the
Directive we put a very explicit statement about data quality
and I think that's the right place to hand it off to Vivek.
Mr. Kundra. Sure. So before I jump into the data quality
itself, you're absolutely right when you talk about the
explosion of the number of websites across the Federal
Government and that's one of the areas we're looking at in
terms of rationalizing and moving much more toward a service-
centric approach instead of just webifying our brick and mortar
institutions and creating yet another website.
There are over 24,000 websites across the Federal
Government. That's one of the reasons there is usa.gov which is
supposed to serve as the single point of entry, a platform, for
the American people to engage online with their government and
the strategy that we're using is to move toward a service-
oriented architecture so we get more and more of the services
in that one place.
On data quality, that's a persistent problem and there's a
technology component of it and then there's a business side of
it. From a business perspective, the procurement community has
spent a decade in terms of defining what a contract means,
defining what it means as far as a data element, so it's
consistent across the Federal Government community.
If you look at the grants community, for example, that
hasn't happened. There isn't consistency in terms of
definitions across the board and part of what's happening in
these communities is, as they move forward in defining their
requirements and defining the data definitions, then comes in
the technology.
In the example of FPDS, which is the Procurement Data
System and USA Spending, FPDS is limited to tracking only the
procurement expenditures. So you're looking at the $500+
billion that we spend on contracting--whereas USA Spending is
responsible for tracking the entire expenditures of the U.S.
Government, from grants to contracts to loans, across the
board--part of the challenge that we're seeing is that because
you've got data available now in its raw format, you can slice
and dice it in many, many different ways and that's one of the
reasons Aneesh referred to the Directive itself.
The OMB Directive directs every single agency to ensure
they have an accountable official for data quality because it's
not enough to just put the data out there, we need to make sure
that the data is timely, it's comprehensive, and that it's
reliable. As we look at USA Spending right now, we're in the
process of rationalizing the information between USA Spending
and what's happening on the FPDS data base among the multitude
of other data bases that power various communities, whether
they be grants communities or they're the procurement
community.
Senator Warner. I've been joined by my colleague Senator
Whitehouse. I'm going to ask one more question, then I'll turn
it over.
I do think there is still--I get the fact that we're going
to try to make this data available in a machine- readable form
so people can slice and dice as they want. I do think, though,
as long as we have these literally now thousands of websites,
we do need some kind of more user- friendly front-end so that
we don't have the confusion we saw with USA Spends and FPDS in
terms of, you know, I know they're different measurements and I
don't know how we get there.
I know you're working through that. The sooner the better,
though, because we can't have a repeat, and I know this is a
whole different set of problems with the first round on
Recovery Act reporting, but I can assure you with questions
about the Recovery Act, particularly from some of our
colleagues on the other side, we can't have another round of
imaginary congressional districts appearing on the next round
of reporting.
I'm going to ask one more last question, then I'll turn it
to Senator Whitehouse, and particularly as there's an enormous
amount of interest on the procurement issues, and this goes to
Vivek in terms of the management within the overall Federal
Government of IT projects.
We're anxious on the second panel to hear from Mr. Baker
and we're anxious to hear from our colleague from Georgia in
terms of, you know, how we get an overall management structure
for IT system procurement and project management. I think it's
very important and I think it's great that we can celebrate the
VA's efforts.
I want to make sure we end up with a system, and I don't
know--you know, we don't need just a few brave CIOs out there.
We've got to have this with a system-wide approach and this
notion that you're opening up to the public and more of an open
system in terms of how the Federal Government does its IT
procurement, I actually commend.
But let's go back to the overall governing structure. Is
the CIO Council and leaving the agencies with the IT
procurement process with just advice from OMB and advice from
the CIO Council the right system, Number 1, and, Number 2, how
do we do a better job of leveraging our purchasing power within
the IT sector so we're getting the best value for the dollar,
and, Number 3, how do we put in place tripwires on IT projects
that are running behind?
And my sense from my exposure from the Governor's side is
that the common practice, which is to--and we'll come to this
more with Mr. Baker, where the government contracts with an IT
firm to do a relatively narrow scope project. You have an
original contract and that contract constantly expands and that
the average cost of an original contract doubles or triples by
the time because there's no kind of oversight over the--as the
government adds more bells and whistles to their IT requests,
obviously the private sector contractor's happy to agree to
that, but you end up with what appears on the front end to be a
small contract ballooning into a large contract. We're not sure
if we're really getting value for the dollar.
How do you put better oversight there? So those three
questions and then I'll turn to Senator Whitehouse.
Mr. Kundra. Sure. So a couple things. One, on the approach
to IT management, the challenge for far too long has been that
the CIOs, unfortunately, in a lot of agencies were not directly
communicating well with the business leaders, and business
owners.
If you look at what happened at the Census Bureau in when a
handheld was developed for their 2010 Census, yet we've
reverted back to a paperless project, part of the problem was
the CIO wasn't even in the conversations when they're
deliberating and making those decisions.
And if you look at the Cohen Act, under statute, the CIO is
ultimately responsible at the agency level to make sure that
they're driving the investments and management across the
agency itself.
The Federal CIO Council----
Senator Warner. Let me just interrupt you for a moment.
Senator Whitehouse has got another session coming up. I do want
to hear the balance of your answer and I want to get to the
second panel, but I really appreciate this whole initiative was
actually Senator Whitehouse's idea to start this Performance
Review Panel. I appreciate him being here on a very busy day.
So please.
Senator Whitehouse. I'm very happy to be here, Senator
Warner, and I'm sorry that I'm on two committees that are
actually marking up legislation and require quorums. So I've
got anxious chairmen needing me to appear in order that their
legislation can move forward. So I'm delighted to take a few
minutes, though.
In terms of general overview, I would, first of all, take
out health IT for a moment because I think that's sort of a
beast unto itself that requires its own attention.
On the IT side, if you'd indulge me in sort of carving the
question into the how effectively the government uses
information technology to support its customer relations versus
how effectively government uses information technology to
improve and make more efficient back office administration, and
then the third question, which I see as lesser than those two,
somewhat peripheral, how it participates as a purchaser in the
IT market., I'd love to hear your views on where you think the
best practices are in the country.
Are there industries that are particularly adept that have
taken these different areas to a very high level of expertise?
And measured against that benchmark, where does government
stand, and are there better or worse areas of government that
stand out as being comparable to, competitive with, better than
the private sector or lagging behind, kind of just a private
sector-government sector benchmarking across those areas?
Mr. Chopra.
Mr. Chopra. Well, thank you, Senator. Great set of
questions. I might take an angle on this and then I'll pass the
bulk of it to my colleague.
On the issue of customer service, I think the Open
Government Directive has opened the door for a healthier dialog
about how we engage the American people in the work of the
Administration not only in policymaking but in the execution
and in the delivery of services. I believe our greater
attention to this issue will strengthen an area that I believe
has been a lesser-performing asset.
In the area of best practices, I happen to be a strong
believer in customer experience design as a field of art that
is a critical component of large-scale IT projects. We do a
fairly exhaustive list of requirements in the back office for
these multibillion dollar IT projects, but I believe we do a
relatively poor job of understanding customer need, not just in
the narrow sense of what the computer screen should look like
when we move from green screen to a more modern platform but
actually what is the citizen's experience, almost an
anthropological question.
Senator Whitehouse. Mm-hmm.
Mr. Chopra. I turn to Proctor and Gamble's service delivery
and innovation capability as one of my favorites from a best
practices standpoint. I've been honored to have Chief
Technology Officer Bruce Brown as one of our advisors to think
through this notion of customer experience design.
I believe that, through the Open Government Initiative, as
we now have very explicit milestones with the agencies on
putting together plans and engaging the American people, we
will surface more opportunities. This is the distinction,
Senator Whitehouse, between what I would consider to be the
back office world view of IT and the front office new product
development opportunities that IT can enable.
If you look across the globe, it was techies in Finland
that had commissioned a study on customer experience design, a
government agency, I believe it was in Finland, that had
commissioned a U.S. best practices study on how did the
Enterprise Rental Car improve the customer experience, how did
Bank of America come up with Keep the Change Program improve
the customer experience, what are the lessons learned. All of
those ideas are powered by technology, but you wouldn't
normally think of them as a CIO activity.
That's why, as part of this Directive, having a senior
agency official reporting to the Cabinet Secretary focusing on
these issues in Open Government will create a new locus of
thinking around that customer question.
Mr. Kundra. And on the procurement space, one of the
biggest problems with the Federal Government is that we don't
act like the $76 billion enterprise that spends money on
information technology. We spend over $76 billion annually.
Now there are pockets of success. For example, there's a
Smart Buy Program at GSA which took, for example, DSSA from an
antivirus software program that was listed for $40 to $2
because they were able to pull an aggregate demand and that was
a purchase for over five million licenses that they were
looking at.
So part of what we're trying to do is figure out how do we
aggregate more and more demand and using the Smart Buy approach
and, second, how do we lower the threshold and make it a lot
easier for agencies to actually procure technology that's
enterprise in nature? That's one of the reasons the
Administration launched apps.gov, so that when agencies are
procuring applications online, we can actually monitor demand,
aggregate it, and make sure that we're saving money instead of
just buying technology for technology's sake.
And in terms of the back office in government operations,
one of the big challenges is, if you think about the public
sector itself, it used to be that people would go to work to
get access to the greatest technology. Now it's the opposite.
Most of us have better technology at home than we do when we
come to the office to work. Part of what we're trying to do is
figure out how do we introduce consumer technologies within the
public sector so we're not reinventing processes, we're not
spending billions of dollars recreating and innovating in space
that has already been innovated on and there's significant,
significant savings because of the pressures that are applied
in the consumer space.
Senator Whitehouse. Could I, because my time has expired,
could I ask as a question for the record for you to get back to
us in writing on both the extent to which you think that there
could be savings in the $76 billion acquisition portfolio that
you mentioned, Mr. Kundra, and to the extent you're capable of
putting a number to that, fine, and to the extent that you need
to qualify that number with some level of certainty or
uncertainty, but I would like whatever your statement is as to
where you think that number could be if we were operating
optimally and ditto looking at it not as an IT procurement
question but as an IT efficiency gains question, what are the
larger structural budgetary gains that you see as possible or
within the realm of reason?
I invite you to couch your answer in whatever way you are
comfortable and if you need to couch it in rather uncertain
terms because that's just the way it is, that's fine, too, but
I would like to try to arrive at a number, however qualified,
as to what potential budgetary impact, positive budgetary
impact there could be from optimal IT investment utilization.
Thank you.
Mr. Chopra. Thank you for the questions.
Senator Warner. Thank you, Senator Whitehouse. Briefly,
Vivek, because we want to get to the second panel, if you could
just again comment or finish your answer on do we have the
right CIO management structure in terms of being able to
aggregate purchasing power in place or do you need something
that strengthens the CIO Council so that you don't have a rogue
agency off here, going off purchasing on its own?
And then, quickly as well, so we can get to the second
panel, the issue of the kinds of problems we have in IT
contracting where you come in with a small price, a low- risk
price, and then you end up with three or four X because there's
no management of all the add-ons, and how, if we don't have
quality CIOs like Mr. Baker of Veterans Affairs, how do we make
sure that process is better managed and that there is some
look-back and accountability in terms of CIOs, not simply
adding on to these projects?
Mr. Kundra. On the first question, I think it's less about
the structure and more about the leadership. If you look at
what the President has done by appointing his CIO and CTO, he's
made it clear how important technology is to this
Administration and he's leading the way.
Across the board, what's happening is that agencies central
to this Administration's agenda are leveraging the power of
technology on how we reform government, how we drive savings,
and, more importantly, how we deliver better quality services
to the American people.
The challenge for CIOs for far too long has been that they
haven't been engaged and when IT projects fail, it's either
when you have very high level of engagement from the business
community but no technology engagement or very high level of
engagement from the technology community and no engagement from
the business side.
And one of the things we're doing with the CIO Council,
too, is sharing these best practices and the first step was
launching the IT Dashboard. Part of the reason we did that was
to unlock and lift the veil on how these decisions are being
made.
To your second question around contracting and what we
could do in that space, the challenge there is some of these
contracts where you have a billion dollars for one milestone
makes no sense. What we need to start doing is breaking down
these contracts into smaller chunks and moving more toward
fixed price contracts so that we clearly define requirements,
clearly define scope, and hold vendors accountable to make sure
that they are delivering. When they're not delivering, we need
to make sure that we're divesting from technology initiatives
that don't produce dividends.
Senator Warner. And I would hope that might include, and I
know we've had some offline conversations on this, some process
where there has to be perhaps a higher hurdle for that internal
government CIO to go back and further expand the original
contract, some oversight in that process, so a look-back in
that process, so again we don't end up with what has become the
norm, unfortunately, of contract that starts with X price and
ends up three or four or five X at the end of the day with add-
ons that may or may not have been necessary or, if we better
scope the project on the front end and hold that CIO
accountable for the appropriate scoping in the first place in
terms of his or her ultimate performance review, that would be
something we'd like to look at, as well.
I want to thank the panel. I have one other comment,
Senator Whitehouse. I did not get a chance to see it, but my
understanding is, in light of the Open Government announcement
earlier this week, that both Mr. Chopra and Mr. Kundra were the
subjects of Jon Stewart last night. I'm anxious to see the
video. There was some great expose about the Open Government
boys here and I'm sorry we don't have that clip, but I hope to
have it, and I'm sure we'll get a chance to share it with you.
Senator Whitehouse. Without objection, perhaps we could
make it a matter of record.
[Laughter.]
Senator Whitehouse. I seem to be hearing an objection, so
hold that request.
Senator Warner. Thank you, Senator Whitehouse, for being
here. Thank you, both, gentlemen.
Mr. Chopra. Thank you very much.
Mr. Kundra. Thank you.
Mr. Chopra. Our pleasure.
Senator Warner. We'll now, in moving along, bring up the
second panel, and we're now going to move from kind of the
macro level down to two specific wins at the state level and a
real-time/real-life example of the kind of better contract
management that I think we'd like to see in the Federal
Government. Both our witnesses have been at the front-line of
government reform, particularly in the IT area.
First, we're going to hear from Mr. Roger Baker, who we've
made a number of comments about already, the Assistant
Secretary of Information Technology and Chief Information
Officer at the Department of Veterans Affairs.
Mr. Baker manages over 6,500 IT professionals and oversees
an IT budget of $2.5 billion. We're going to particularly--one
of the things Mr. Baker has done recently is he recently put a
hold on 45 IT contracts within VA, something that was, I think,
perhaps shocked the community a bit and actually eliminated
some of those contracts because they were not being as well
managed and perhaps went to some of this contract growth that
we want to hear back from.
And then we'll hear from Mr. Brad Douglas, the Commissioner
of Administrative Services for the State of Georgia. Since
2006, Mr. Douglas has been leading an effort to transform state
operations with new procurement processes, technology and
skills, and we've asked him to share the results of his lessons
from his work.
Mr. Douglas brings not only his experience working in
Governor Perdue's Administration but also major experience in
the private sector.
So Mr. Baker and then Mr. Douglas.
Senator Whitehouse. If I might before you speak, I believe
both Senator Warner and I have read your testimony. So to
recite it back to us is not necessary. If you could focus on
the high points and we can embark on a discussion, that would
be helpful.
Mr. Baker. I will adhere to that.
STATEMENT OF THE HONORABLE ROGER W. BAKER, ASSISTANT SECRETARY
FOR INFORMATION AND TECHNOLOGY AND CHIEF INFORMATION OFFICER,
U.S. DEPARTMENT OF VETERANS AFFAIRS
Mr. Baker. So thank you for inviting me, Chairman Warner,
Senator Whitehouse. I request that the full testimony be
accepted for the record.
Mr. Chairman, as a fellow Virginian, it's a pleasure to be
invited to testify about one of my real passions which is
effectively managing government IT technology, and you
mentioned that we might be a little geeky in this, so we seem
to have that as a passion.
In the past 6 months, VA Office of Information Technology
has made substantial progress toward becoming a well-managed IT
organization. We've established strong customer service focus,
introduced program management accountability system or PMAS, as
you'll hear me refer to it, paused 45 of our most problematic
projects, and successfully restarted 30 of them. I think that's
important.
We've prioritized over a thousand spend items within IT and
made hard choices with our customers about which items can be
accomplished and which can't. We've begun tying together
planning, budgeting, spending, all the way down to quantifiable
results for every dollar we spend, and we will know who's
responsible for producing those results on each of those
dollars, and we've been tracking and reporting the operational
metrics of our field organization.
There are three causal factors to this progress. The first
is consolidation of all IT resources into a single organization
under the CIO. The second is a senior management team from
Secretary Shinseki on down, who understands the importance of
technology to organizational effectiveness. The third is
attracting a CIO with an understanding and an expectation level
of what can be achieved in an effective, well-managed IT
organization.
Because VA is unique among Federal departments at having
all IT spending and staff under the CIO, it's effectively a
pilot program. Over the next several years, our efforts at VA
will demonstrate whether consolidation of IT resources under a
single CIO at a Federal department can have a substantial
positive impact. I believe we will succeed and VA's
consolidated IT budget and management support we receive are
what attracted me to this job and convinced me we can
substantially improve the results of VA's IT investments,
despite the challenges of the bureaucracy.
I'll spend just a couple minutes describing three of the
program management techniques we've introduced. First is the
Program Management Accountability System. As Albert Einstein
once said, ``The definition of insanity is doing the same thing
over and over again and expecting different results.''
So the Program Management Accountability System ensures
substantial change in failing projects. We established PMAS in
June of this year and followed up by pausing 45 of our most
problematic development projects in July, following the release
of the IT Dashboard by the White House. Although pausing 45
projects garnered most of the popular press attention, the
greatest satisfaction has been in seeing many of those projects
restart with an increased probability of success. After all,
the real goal of the Program Management Accountability System
isn't to stop projects, it's to reliably complete the
development of the new systems our customers require.
To date, the greatest challenge with the Program Management
Accountability System has been working through all of the
program contractual issues involved with stopping projects.
Although it's counterintuitive to me, it turns out to be much
harder to stop an ongoing project than to start a new one.
Despite hard work by many people in our Development and
Acquisition Organizations, we still have work to do to finish
thoroughly stopping the 12 projects in the original 45 that we
have decided will not continue. However, I'm confident that we
will achieve our original goal of having all VA IT projects
managed under PMAS within 1 year.
Second, and I believe even more transformative in VA, is
prioritization. In implementing PMAS, we quickly found that
many of the projects failed to meet expectations because they
were under-resourced and they started out destined to fail.
To address the issue, we recently ranked all of our IT
spend items, probably more than a thousand at this point, from
most to least important. We obtained buy-in for the decisions
and have decided to cut spending on those projects that were
not above the priority line, as well. So based on that, last
week I ordered the stoppage of any ongoing spending item that
was not above the cut line on the priority list.
I expect that will generate substantial discussion inside
the agency as they understand what prioritization really means.
Third is operational metrics. In my experience, well-
managed IT organizations are heavily oriented toward tracking
their operational metrics. The real scorecard items in IT are
system availability, system response, customer service volumes,
and customer service response.
By focusing on operational metrics, IT organization quickly
determines how well it's serving its customers, where it's
weak, what it needs to do to provide better services.
Now our IT Operations staff, over 6,000 people at
hospitals, regional offices, and cemeteries around the country,
does a great job of ensuring that critical systems are up and
available to our customers at VHA, VBA, and NCA.
Just one thing I want to point out from my testimony for
folks to hear. As an example, the Vista Electronic Health
Record System that runs a 153 hospitals around the country is
up in excess of 99.95 percent of the time. That's an average
that rivals anything in the private sector for a system that
wasn't designed for 100 percent availability. Those folks do a
very, very good job and I'm very proud of the work that they
do.
Mr. Chairman, based on your private sector experience, each
of these items may seem obvious and I certainly agree, but
without a consolidated IT budget, they weren't happening at VA
and they don't happen in many other Federal organizations.
In closing, I'd like to thank you again for your continued
support, the opportunity to testify before this committee on
the important work we're undertaking.
Our unwavering goal is achieving Secretary Shinseki's and
President Obama's vision of a 21st Century department committed
to serving those who have selflessly served our nation.
I'll take any questions you'd like to ask. Thank you.
[The prepared statement of Mr. Baker follows:]
Senator Whitehouse. Director Baker, a question for the
record and that is what information you can give this committee
about what you think the savings potential is of the best
practices that you are engaged in. If you could provide us that
number, both within VA and as again couched however carefully
you want to in terms of recognizing that there's going to be
some uncertainty around what you say, if it were applied
governmentwide at the level of performance that you appear to
be demonstrating in VA, what sort of orders of magnitude we're
talking about.
Mr. Baker. We'll do that.
Senator Whitehouse. The other question has to do with less
the financial side than the performance side of the VA program,
particularly the Electronic Health Records Program.
VA has really distinguished itself, I think, as the early
leader in this area. It has had a closed system and so has been
able to capture the value of the investment in information
technology which is different than the general healthcare
market where the hospital or the practice has to make the
investment in information technology, but it doesn't capture
the value of it. The value of it goes to the payers, the
insurance companies, to the Federal Government, to other
people.
So we have sort of a systemic failure in terms of the risk/
reward loop for investment in health IT in the general market,
but the VA has not had that problem and has taken advantage of
that to be very effective.
The two concerns that I've heard on numerous occasions, and
again measured against what is a very distinguished track
record, one is that it got too bureaucratic and too centralized
and local changes to the programs became delayed so much
through the Central Information Office manager that it sort of
plugged up the system and made it far less robust and vibrant
than it was when, at the more local and hospital level, people
were experimenting with program changes and therefore
developing and working their way through glitches and that that
was accelerating the program forward and that the
centralization of that actually sort of compressed that energy
and pushed it back and has resulted in lowered rates of
improvement.
The second has to do with the initiatives to reach the
system outside of its current boundaries so that, for instance,
a veteran who is hit by a bus in Providence and is rushed to
the Rhode Island Hospital Emergency Room, at the Rhode Island
Hospital Emergency Room, they have a link and they can dial up
the electronic health record for that veteran and it's no
longer constrained. It follows the veteran wherever they go
rather than having its line of demarcation be the bureaucratic
structure of the Veterans Administration.
I know there are some pilot projects on that. That seems to
be a really high potential value return area and I'd like to
hear your assessment of how energetically those pilots are
being pursued and how rapidly we can see the value of the
Electronic Health Record VA Program expanded to include the
full medical reach of the veteran and not just his contacts or
her contacts with the VA bureaucracy.
Mr. Baker. Senator, thank you. I'll answer both those
questions, but I'm so excited about the answer to the second
one, I'd like to take that one first.
The President's vision of a virtual lifetime electronic
record really goes exactly to the question you're asking. When
we looked at the President's direction, we took the approach of
let's also look at what he didn't say. He did not say for some
veterans, he did not say for just inside the government. He
said I want this information available on service members and
veterans for use throughout their lifetime, and in our view
that includes the private sector.
We have already demonstrated that work. We have a pilot
going with Kaiser Permanente in San Diego. We have exchanged
patients and exchanged information on those patients in a live
setting. Interestingly, with the first two patients we did that
with, on both sides, the doctors saw information from the other
record that was not present in the record at the place they
were being seen, information about drug allergies and other
prescriptions that were important to the care that that veteran
received. So we've already seen the benefit of that.
In January, we will be live with a pilot with Kaiser
Permanente. We have solicited 1,500 veterans to opt into that
pilot so that they can be seen at a new place and all their
information is available. All this is being done through a
national standard. Most important to us is we are working with
HHS and DOD and other organizations to develop a national
standard, the Nationwide Health Information Network, that will
allow us to build, to exchange with Kaiser Permanente, but then
when other organizations, like Humana and others, come to that
standard, we will automatically be exchanging information with
them on the veterans.
Again, our focus is on great care for veterans wherever
they go. We believe they get it when they come to the VA. We
know they're also seen at lots of other places and the
President, when he laid out the vision of a virtual lifetime
electronic record, it was for all service members, all
veterans, throughout their lifetime wherever they're seen.
This is a very exciting program and we are--it is
absolutely one of the few top priorities in the Secretary's
view.
Senator Whitehouse. I'm delighted to hear you say that. I'm
delighted to see the animation with which you say it and the
sooner you can get it to Providence where we have a very
energetic Rhode Island Quality Institute developing with Number
1 or 2 state prescribing in the country and the medical
community is very engaged in a health information exchange
structure. So the sooner you get to Providence, you'll be
participating in a very active community on that and so God
speed.
Mr. Baker. Thank you.
Senator Whitehouse. And the other question?
Mr. Baker. About a month and a half ago, I introduced the
concept of utilizing an open source approach to the Vista
software for exactly the reason that you enunciated, which is
the system, through a variety of, I think, management changes
made at VA over the last 10 years, has begun to stagnate. Some
of that is a focus on what is the next generation.
Frankly, we have a great system right now and while we need
to be looking toward the next generation, we can't ignore the
current system as we look at that next generation.
The second is, as you pointed out, a lot of the work
happens throughout the country, not just in our development
labs but also in our field organizations. That, while it has
many benefits, from a computer science and a software person
standpoint, it can become a nightmare to maintain and we have
to balance between those two things. We have to have a system
that can be made available over 99.9 percent of the time but
also moves innovation forward at the same time. That's a
difficult balancing act and we have to manage that as we go
through.
So the purpose with moving toward open source is to get
much more of the community available, first, and, second, to
potentially make the Vista System available to many more
hospitals throughout the country and throughout the world than
are currently using it right now.
A little-talked-about fact is that there are more than 50
hospitals throughout the world outside the VA system that have
adopted the Vista Electronic Health Record System through open
source methods through companies that are providing that.
I think there's real opportunity there to both aid the VA,
which is my first goal, in moving that system forward and
keeping it the best electronic health record system in the
world and, second of all, helping electronic health records
expand throughout both the country and the world.
Again, the quality of care is the key focus here and that's
what Vista really brings is that increase in quality and care
in those hospitals.
Senator Whitehouse. Well, I appreciate it. Let me thank
Chairman Warner for his courtesy in allowing me to interrupt
with the questions.
Mr. Douglas, I'm sorry I'm not able to stay longer, but I'm
grateful to you for coming in and sharing your wisdom with us
in this area and again if, in terms of questions for the
record, in addition to answering the question I asked Director
Baker, if you have any numbers that you are aware of and can
cite to us or that you would be prepared to assert to some
degree of certainty, you can choose your level of certainty,
but this is ultimately a budget-setting interest that we are
embarked on and to the extent you can give us some
quantification of where you think various savings might lead, I
would ask that as a question for the record as I depart.
Senator Warner. Thank you, Senator Whitehouse. Mr. Douglas,
please. As somebody who I think has been down a fairly similar
path in Virginia, I'm very anxious to hear your testimony.
Please.
STATEMENT OF MR. BRAD DOUGLAS, COMMISSIONER, DEPARTMENT OF
ADMINISTRATIVE SERVICES, STATE OF GEORGIA
Mr. Douglas. Well, thank you, Chairman Warner, and
certainly to Senator Whitehouse, we will certainly put forth
any information along those lines that we can.
Chairman Warner, we're certainly very appreciative of the
opportunity to appear before you and during your time as
Governor of Virginia, obviously we worked very closely with
your team down there and Ron Bell and the folks in General
Services in particular. Quite a brotherhood there between
Georgia and Virginia.
We're honored to represent the great State of Georgia here
today and hopeful that some of the lessons learned in Georgia
can be applied on the Federal level. We applaud the creation of
the committee that you're chairing and we're very eager to
share some of the successes experienced in Georgia.
Early on in Governor Sonny Perdue's Administration,
beginning in 2003, the idea of tapping into the private sector
for innovative and proven ideas that could be applied in the
public sector really took hold. One of the first things that
Governor Perdue did was to create the Commission for A New
Georgia and this was a group that asked several private
industry executives and even consulting companies on a pro bono
basis to come in and take a look at government operations, the
back office operations of government, the inner workings, if
you will, and to ensure that those studies didn't gather dust,
as many studies do in government and elsewhere, the Governor
created his Office of Implementation.
This group was charged with making sure the rubber meets
the road, if you will, that the studies actually took life and
that things were implemented, measured, and tangible results
occurred from those.
Those results have been many. For instance, the Department
of Driver Services, while waiting in line to renew or get a new
driver's license, waits more than 2 hours were common before.
Now those waits average less than 10 minutes. The state really
didn't have an idea of capital assets that it had, how many
buildings it had, how many vehicles it had, how many aircraft
it has, and today we manage those on an active basis with data
bases of these state assets, and so, in addition to that,
agencies operated as they do here on the Federal level, in
silos somewhat, very decentralized, without a tremendous amount
of collaboration, and so to address those issues and many
others, several task forces were created by the Commission for
A New Georgia and one of those initial task forces was a task
force to review the state's procurement function.
In the state of Georgia, the procurement teams handle about
$4 billion in spend. Obviously that's a subset of what the Fed
spends but still to the state that's obviously an area that
presents a tremendous amount of opportunity.
At the time the state Purchasing Division was composed of
what I would say are transaction-focused workers or staff. To
be quite honest, they were paper pushers adding little, if any,
value to the process. If someone told them what to do, they
might do it, but there really wasn't a lot of strategic value
in terms of what made up the marketplace and some of the
drivers of the procurement market.
The state Purchasing Unit, as a central unit, is charged
with establishing statewide contracts, much like you're seeking
here, to where the leverage of the entire government, the
entire enterprise, could be brought together but yet the
collaboration between agencies and even the state universities,
of which we have 35, was virtually nonexistent and so therefore
the tremendous opportunity that was there just simply wasn't
being realized.
Purchasing processes and procedures were misaligned. There
was inconsistency rampant throughout the agencies as to how
purchasing was even conducted and in fact the state found
itself in court numerous times where aggrieved suppliers were
claiming that the state had not undergone a fair and level
procurement operation and in fact supplier challenges to our
purchasing solicitations, they were untracked. We had no idea
how many we had. We had no idea how long they were taking, who
was resolving them, had we lost any, and yet that's a customer
service facet, if you will, to both the end user who's waiting
as well as the supplier who feels aggrieved.
And beyond that, procurement technology was literally
nonexistent. There was a homegrown system that allowed the
state to post its procurement solicitations to the Web, but the
state had no idea how much it was spending on products or
services and so the Procurement Task Force recommended numerous
changes, nearly all of which have been implemented now.
Legislation was passed drastically revising the Procurement
Code in the state. A lot more authority was given to our
agency, the Department of Administrative Services, to be able
to aggregate the spend, to even set the skill sets and the
compensation levels of procurement staffs in the various
agencies and universities, to raise them to the current level.
I know Peter Orszag wrote a letter this summer that raising
the acquisition skill set throughout Federal Government was a
key initiative and the same thing in our state.
And the next step was to recruit a classically trained
procurement professional to come in and oversee this
procurement transformation and to also engage and manage a very
large consulting firm. In our case, it was A.T. Kearney who was
brought in to sort of serve as our transformation partner, if
you will, set the organization, take a look at processes and
procedures and then perform a fit-gap analysis for the correct
technology that needed to be put in place.
And to begin the process of revamping the state's
procurement function, the state decided that the proper course
of action was to focus specifically in this order: people,
processes, and then technology, technology being the last that
we focused on because, quite honestly, if we're automating a
flawed process, then all we've done is automate a flawed
process. We haven't improved anything. We've just hung
something on someone, if you will.
And so a new organization structure was defined. Commodity
teams were put in place to develop resident expertise among
different commodities for the products and services, the key
products and services that the state purchased throughout the
enterprise, and based on that, we also took a look at job
descriptions and rewrote those. We benchmarked the compensation
levels of the procurement staff against both the public and the
private sector to make sure that we had the proper job
descriptions and then the requisite skill sets defined as well
as the compensation levels. That allowed us to attract the best
and brightest procurement professionals in the country back to
our state, the State of Georgia.
Our Assistant Commissioner of Procurement we hired from the
University of Notre Dame, for instance. Our Director of
Strategic Sourcing, we went to a major Fortune 500 company and
hired from Microsoft, and those folks who had a focus on
strategic sourcing and for those who are not initiated,
strategic sourcing is having a vast knowledge of all the market
drivers, having high-level negotiating skills, and really being
able to form a modern procurement shop by attracting some of
those folks by revising the organizational structure and then
the skill sets required to perform the function.
And obviously a complete revamping of the purchasing
policies and procedures from top to bottom, eliminating delays,
eliminating inefficiencies in that process, and just really
streamlining overall.
I mentioned the supplier challenges. When we first started
measuring those, it was nearly a 60-day delay for suppliers to
have their challenges to a state procurement be adjudicated.
Those supplier challenges are now down to an average of 14 days
and so that is really a tell-tale sign, if you will, of the
focus on efficiency and then again the customer service aspect,
a very tangible result, and in that process we found that only
one and a half percent of our procurements were being
challenged anyway and so very valuable information for us.
Again, only when we put the right staff and the processes
in place did we try to automate the process and we did so and
the result was our new eProcurement platform known as Team
Georgia Marketplace. It's a combination of different software
packages that had the interoperability that you spoke of
earlier and since that time, nearly $800 million in state spend
has come through that system.
Now that system deployed January 20th this year. On January
19th, I didn't have any idea about any details on $800 million
of purchases. Sitting here on December 10th, I can tell you
just about anything you'd want to know about those $800 million
in purchases from various agencies and it's only a subset of
the agencies in the state because we're having an agency by
agency rollout throughout the state as we implement this
program. We didn't try to bite off too large of a chunk, if you
will.
That project, talking about IT implementation, had a very
formal governance oversight to it, if you will. We had a
Critical Projects Review Council to oversee the project. We are
a People Soft Financial house, if you will, so we have a
PeopleSoft Governance Council and that's chaired by the state
COO, CFO, CIO, the state Accounting Officer, I sit in on those
meetings as well as Procurement.
You have all of the requisite functions that are needed to
sit in and provide oversight on state IT projects that meet a
certain level, if you will, of magnitude and importance to the
state and that's made a real difference in the way the state
has managed its IT projects.
As a result of that system and another system that
subsequently we have partnered with the Pew Center of the state
and again with A.T. Kearney to develop a Spend Cube and that
takes disparate data sources from across the state, whether it
be a university that doesn't use our core PeopleSoft System,
purchasing cards, supplier sales data. It aggregates,
normalizes that data, and allows us to make better sense, if
you will, of what the state is purchasing, be it products,
services, or anything else it might be buying. That allows us
to target enterprise-wide contracts that could perhaps be put
into place.
A couple of examples, in closing, that we have experienced
in the state of Georgia, document imaging, just copying and
printing of various documents, a 9 to 42 percent savings over
the previous contract by going through the strategic sourcing
principles that we have employed for black and white copying,
Mr. Chairman, for color copying and printing, a 67 to 87
percent decrease in price over the previous contract.
Passenger vehicles that all state government workers need
virtually, a new contract covering four classes of sedans, a
hybrid sedan, pickup trucks, vans, SUVs, the average is 22.4
percent below dealer invoice, great time to be purchasing cars
right now. The state stepped in and took advantage of that.
Background checks to make sure that we're mitigating our
risk when hiring employees, background checks now, they used to
be $45, now $16, a savings of 65 percent. Different reports now
range 20 to 65 percent less than they used to be. Those are
just a few of the examples that we've cited, more in our
written testimony.
We've recently established a national contract for tires
and also are looking to establish one for buses that the
Federal Government could participate in, other states can
participate in, as I think of the collective leverage of states
and the Federal Government together, we also reach even down
into the municipalities within the state, to try to create that
purchasing leverage that you've been speaking about and go to
the marketplace, if you will, as the big gun in the market and
that's created a tremendous benefit for us.
To sustain this, we're trying to train the rest of the
purchasing staff throughout the state. Thus far, dozens of
classes have been put into place, 7,000 students have been
trained, 3,500 certifications have been handed out, and you
only get the certification if you test out that you retained
the knowledge and that you have the knowledge the training
delivered to you.
In closing, there's three key elements that have made this
successful in the state of Georgia. One, top-down leadership.
Two, the necessary legislative changes required to carry out
these changes. Third, obviously the budget to do so, but
certainly the budget has been paid back with the savings that
have been generated thus far and that investment has been very,
very fruitful for the state of Georgia.
We think that for years to come, this will have a profound
effect on the state. We certainly appreciate the opportunity to
come in today and present some of the lessons learned in the
state of Georgia and hopefully again the Fed can take some of
the lessons learned there and apply here.
[The prepared statement of Mr. Douglas follows:]
Senator Warner. Thank you, Mr. Douglas. We really
appreciate your testimony.
You cited a couple of examples around cars and printing. I
would always go around and talk about the fact of using the
same tools. We lowered the price of light bulbs from 30-32
cents to 23 cents and it didn't close a $6 billion budget gap
that we had but we buy an awful lot of light bulbs in the
Commonwealth of Virginia. So I'm very, very anxious to talk.
I've got very specific questions for both of you, but
recognizing that Senator Cardin and Senator Whitehouse are on
the same committee that's doing a mark-up, I'm going to let
Senator Cardin go first.
I appreciate him coming by and happy to have his questions.
Senator Cardin. Well, thank you very much, Mr. Chairman.
You're correct. Senator Whitehouse and I are dealing with the
Press Shield Issue in the Judiciary Committee. So we wanted to
be here because of the importance of the subject but we also
wanted to get away from the Press Shield for a little while. So
thank you for giving us a reason.
Let me thank Senator Warner first for his leadership on
this issue and because I want to come back to that, the need
for leadership if we're going to be able to make progress on
this subject. He brings not only a commitment to efficiency in
government but he brings the experience of a Governor, an
effective Governor, in dealing with budgetary issues, and this
brings me to the testimonies that both of you bring here.
Mr. Baker, you mentioned the importance of prioritizing
projects at the VA and I think that's critical. If you are not
selective you start to say, we're going to be efficient in
everything, and it becomes an impossible task. You really need
to prioritize and information technology is an area in which we
can make significant progress, and I applaud the VA for doing
that.
With regard to Georgia, Mr. Douglas, let me make this
observation as it relates to the last point you made about top-
down leadership being absolutely critical.
I use the example of Baltimore's CityStat program
implemented by Mayor O'Malley. Agencies had to report to the
mayor, who was going to check statistics with you, and it
caused the bureaucracy to understand that the chief was
interested in their progress and it made a huge difference.
Now, of course, Mayor O'Malley is now Governor O'Malley,
and he is using that same type of personal accountability,
developing a program that I know Senator Warner is interested
in, BayStats, where people are held accountable for results in
cleaning up the Chesapeake Bay.
That to me is top-down leadership, where a commitment
exists to alter a pattern of how contracts have always been
awarded, and ensuing that the initiative is identified as
coming from the leadership. That's why I think it's very, very
important that Congress shows that this is not just another
hearing to be followed by a couple more years of inaction
before we raise the issue again. We need a continued focus on
how to develop a workable strategy to bring about results.
You've shown when you do that, you do bring about savings,
you do bring about results, and, yes, you need the legislation
aand you need the budget to support that, no question about it.
So my question to you is, looking at the VA and at Georgia,
what is the toughest hurdle to overcome to get these programs
moving forward?
Some of this seems like common sense: you know these
savings are there, but what's the toughest hurdle, what's the
most important thing that Congress can do to encourage more
programs such as the VA has done with IT and what Georgia has
done in its efforts? State efficiency is going to save the
taxpayers of this country money. So we're interested in how we
can work together on this.
Any suggestions?
Mr. Douglas. Mr. Baker, I'll take that question, if you
don't mind, initially.
I think there are a couple things and, Senator Cardin, you
really hit upon it. It is that top-down leadership that is key.
In Georgia, one of the things that we discovered early on is
that the procurement team would sort of sit in an ivory closet,
if you will, and dream up ideas for specific contracts. There
really was no collaboration with the user base, the different
agencies. The collaboration simply wasn't there.
Whenever a statewide or enterprise-wide contract is put
into place, there's a sourcing team made up of both agencies
and universities. The Federal Government is absolutely huge.
Down in the state of Georgia, we think the state of Georgia is
huge in terms of the size of the enterprise, with 120 different
agencies, 35 universities. From mere absolute numbers, that is
large, even larger here on a scale of magnitude in the Federal
Government.
What I would tell you is that there are a core number of
agencies that form the vast majority of your spend. That's
where the focus needs to be. No one has a mouth big enough to
take a bite of this entire chunk of business that is here. We
need to hone in on where can we move the needle and the needle
has to be moved incrementally.
In Georgia, it's the top eight agencies that generate 80
percent of the executive branch spend, seven of the
universities generate 80 percent of their spend. We put those
together, that's 15 entities that we focus on for most of what
we do. We don't ignore the others but yet we focus on that core
group.
Senator Cardin. I think that's good advice.
Mr. Douglas. And that allows us to move the needle very
much.
The second thing that we do is the accountability and
celebrating victories and so we celebrate with those sourcing
teams when we put these types of contracts in place. By having
those sourcing teams, you create the upfront buy-in that this
is a good contract, that my needs were met, and in other cases
where you find the spend, if you will, the purchasing volume
isolated to, say, a single agency or a couple of agencies, we
employ what we call the natural ownership model and we would
advise them, as they go about putting a contract in place, that
that needs to reside with them versus being an enterprise-wide
contract to where they feel like they lose control of it.
Senator Cardin. I think the points you're raising are
extremely important. It seems to me that if the reward for
doing a job right is getting a smaller budget, that's not
necessarily going to encourage positive results. You've got to
be able to provide incentives for the savings that are being
achieved and that needs to be reinforced. Human nature being
what it is, if it's not, agencies are going to go back and do
things as they did before.
Mr. Douglas. And that's why our Governor, the first time
that we generated savings, he allowed the agencies to choose
how to redirect the funding to program areas that needed
funding and that's a challenge with our legislature, to be
quite honest, and in fact they wanted to come and sweep those
savings.
Really, in our group, you noticed the way that I presented
the contract pricing deltas is on a percentage basis because
it's very difficult for us to know what is on agency planning?
If they've just refreshed their PC hardware last year, that has
a three-or-four-year life cycle. That won't be replaced again
this year.
So to take last year's spend data and try to apply savings
to that and say that will reoccur this year, you could run
afoul if you aren't aware of the cycle time or what that
agency's planning to do.
I really think the Federal Government needs some type of
oversight and it may be very much more than OMB can employ, but
I know, for instance, the State of Tennessee sort of has an
internal swat team, if you will, an internal group of
consultants and that seems to be a very, very effective way. If
I know, for instance, that our tire contract has been decreased
by 22 percent in price, then I can start to make some estimate
as to, well, what might that purchasing activity be agency by
agency just for those key agencies who have the majority of the
volume and it makes it manageable that way.
Senator Cardin. Mr. Baker, were you rewarded for the good
job you did on IT or not?
Mr. Baker. Absolutely. As an Assistant Secretary, I get a
$153,200 a year. It's a great reward. I'm sorry to be a little
flip, sir.
Senator Cardin. No. We appreciate that. We are rewarded in
many ways, including our compensation, but again I see this
happen frequently, that those who develop with ways of
streamlining are rewarded with smaller budgets. It's redirected
outside of the savings that you've achieved or people come up
to you and say, you know, you should have padded the budget so
we could have kept it in the future.
Mr. Baker. I haven't found anything that indicates that
anyone's looking to cut our budget as the result of the savings
generated. I think there are a lot of things we can do for
veterans with the dollars that we're spending and spend them
better.
We have a great mission. I've gotten no--if you'll note in
our 2010 budget as that rolls forward, it looks like we will
see a substantial increase in technology for 2010 as a result
of some work that the Senate and the House and the Secretary
and the President have done to put that together.
The major thing, I think, is it makes our budget much more
defensible when we can point out here's where we're spending
the dollars. We know exactly what results we're getting. I'm
hoping that, as we roll into the 2012 budget cycle, my life is
very, very easy when it comes to budgeting because I can take
all of my thick spreadsheets and information about where all
the dollars are going and lay them out to OMB and to the
appropriators and have them be confident that a dollar spent
with VA is a dollar invested well in improving the life of
veterans.
Senator Cardin. I'd be interested in that; if you've gone
to OMB, you'd be one of the first people ever to tell us that
they were reasonable. So it'd be interesting to see that
reaction. I know they are trying. I have talked to people in
your position who tell us that they're not rewarded by the OMB
process. So we'd be interested in making sure that there is a
reward in the system for efficiency and ways in which, when you
come up with these ways in which you can get better value,
that--yes, we want savings for the taxpayer, we do, we want to
be able to bring the budget much better into balance, but we
also want to reward efficiency.
So congratulations for a job well done. Thank you, Mr.
Chairman.
Senator Warner. Thank you, Senator Cardin. And I've got to
head out in about eight or 9 minutes. So I've got a couple
questions for both of you, but I really appreciate Senator
Cardin coming by and asking, I think, very important questions.
I've got a ton of questions. I'll put them in for the
record, but I've got a couple very specific ones. Let me start
with you, Mr. Baker. I've got three specific questions.
One was I'm very interested in your comment that you said,
as you tried to stop some of these contracts how much more
difficult it was to stop a contract than start a contract. I
think we would be very interested in lessons learned from this
experience and are there--should there be some new standard
contract language across all our IT projects that allow for the
government to exit an in the project if it's not performing? So
this ongoing lesson you're learning right now as you stop these
12, we'd really love to get that.
Second, I am also interested, if you could comment briefly,
on what you're doing about contract creep, how do you make sure
that you've got a system that has your initial contract officer
scope the contract appropriately, and then, you know, what kind
of reward or penalty again is the contract officer given if he
doesn't have the kind of IT contract creep.
And third, you know, I think one of the comments you made
at the outset was that you, in effect, are a huge agency here.
You, in effect, really are a chief CIO and you've got that
direct responsibility for all procurement and oversight.
I'd love to see if we could--how we could replicate that
throughout other agencies and how important that is to making
sure you get your job done, and then I've got some questions
for you, Mr. Douglas.
Mr. Baker. Let me take those a little bit in reverse order
because it's interesting, Senator Cardin's point, about what
was the hardest part of this. For VA, and I think it would be
for any Federal organization, making the decision to
consolidate IT into a single organization was tremendously
painful. It took a lot of pressure from the Hill and it took,
frankly, a nearly catastrophic failure of losing the laptop
with 26 million veterans' information on it to make it happen.
Senator Warner. I've still got some scars from the effort
we did in Virginia, I can assure you.
Mr. Baker. Yeah.
Senator Warner. I understand.
Mr. Baker. So that is by far the hardest piece of it.
Lessons learned. It's interesting because what you find as you
look to stop some of these contracts is that sometimes the way
the contract is written, it can cost you more to stop it than
to just let it keep going. That certainly has issues around it.
We found that we were very intertwined in our contracts.
Multiple projects using the same contract, multiple contracts
on individual projects and that made things difficult as we
negotiated with the vendors to stop them.
So I think there are lessons learned in this. I certainly
have learned a number of lessons. When we started in July with
stopping 45 projects, my expectation was that by the end of
September, we would have them sorted out, done and moved on to
the next tranche of things. It's been three additional months
and working through all the contractual items. On the program
management side, we were ready to go at the end of September
with the rest of our IT projects, but until we got to the point
where we understood exactly how to handle every project we
decided to stop from our contractual standpoint, it caused us
to pause in pausing our projects, if you will, at that point.
We've got it figured out.
On contract creep,----
Senator Warner. And on that subject, I would like, I think,
our staff would like to see if there is a specific lesson
learned or language that should be added to future IT
contracts, not just within the VA but on a broader basis, so
that if we see your very good efforts replicated elsewhere in
the Federal Government, and another agency tries to go through
this process, they don't run into the same hurdles.
Mr. Baker. Absolutely. I think we probably need a
conversation with the staff on that whole topic.
Contract creep really is going to be managed by the
incremental nature of what we're doing at VA. The biggest
change is, as Vivek Kundra mentioned, getting away from big
bang contracts where they go for 5 years before they deliver
anything and, in general, if you look at the trends, that means
they're never going to deliver anything that the customer
really wants.
We've moved to saying that all of our IT projects have to
have deliverables at least every 6 months and those
deliverables have to go to the customer. So it's not a
document. It's actual software. What that ensures is that we're
getting value. We're getting released software that the
customer can look at and determine whether we're getting value
on it.
I'm not positive that's going to keep our contracts from
expanding in scope. What it will do is keep our contracts from
expanding in scope without something, without the equivalent
result being delivered for the additional dollars.
One of the things to recognize is that our business changes
all the time. Starting a project 1 year and expecting the
requirements to stay the same for the next 3 years is
impossible. So as those requirements change, the needs of the
contract are going to change slightly. We're going to find new
things that we want to do. So from that perspective, you build
a contract that anticipates the fact that you're going to have
additional things that you want to do.
The issue is when you put in place the contract where you
expect it to cost a $100 million for a certain set of
requirements and at the end you've spent your $100 million and
you haven't got any of those requirements fulfilled or it costs
you $300 million for those same set of requirements to get
fulfilled, I think that's where the real problem comes in in
this.
So it takes flexibility if you're going to move to an
incremental environment to work with the contractor and make
certain that you're getting what that end customer inside of
the organization wants, but I think it's going to be difficult
to say that contracts are only at a certain value because the
customer wants more things as it goes along and if we're
getting good value, if we're getting good results for the
dollars we're spending, that may well be OK.
Senator Warner. Again, I have to apologize. I'm getting the
hook from my staff. I've got Secretary Geithner waiting down
the hall.
You know, I still think we could use some more work on
better rewarding contract officers for scoping the contract
better on the front end so we have a better expectation.
I want to thank Mr. Douglas for coming up from Georgia and
I can assure you I'd like to continue offline on this
conversation, share some war stories. Our procurement system
was called EVA and I don't know, I would imagine we found some
of our most reluctant participants were our universities and I
also know that some of our legislators who talked the most
about savings were the most resistant when you actually stopped
making the local contract in their hometown and you actually
took that purchasing up to the state level and leveraged
purchasing power.
But I commend the job that you've done for Georgia and
under the leadership of Governor Perdue and we'd like to kind
of take some of those lessons learned and see how we can bring
them in, working with our first panel, with Aneesh and Vivek,
to bring those lessons to a broader implementation across the
whole Federal Government.
I thank you both. This is--I know again we've lost some of
our members. I think these are fascinating topics. I appreciate
what you're doing. It doesn't always get a lot of attention,
but, boy oh boy, in terms of value for the taxpayer at the
state level or the Federal level, it's terribly important.
Mr. Baker. Thank you.
Mr. Douglas. Thank you.
[Whereupon, at 11:5 a.m., the hearing was adjourned.]