[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.]





                                 
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