[Senate Hearing 111-1090]
[From the U.S. Government Publishing Office]


                                                       S. Hrg. 111-1090
 
                    NOMINATION OF HON. JACOB J. LEW 

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

                                HEARING

                               before the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION


                               __________

 NOMINATION OF HON. JACOB J. LEW TO BE DIRECTOR, OFFICE OF MANAGEMENT 
                               AND BUDGET

                               __________


                           SEPTEMBER 16, 2010

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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          GEORGE V. VOINOVICH, Ohio
CLAIRE McCASKILL, Missouri           JOHN ENSIGN, Nevada
JON TESTER, Montana                  LINDSEY GRAHAM, South Carolina
ROLAND W. BURRIS, Illinois
EDWARD E. KAUFMAN, Delaware

                  Michael L. Alexander, Staff Director
                   Lawrence B. Novey, Senior Counsel
               Kristine V. Lam, Professional Staff Member
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                   Jennifer L. Tarr, Minority Counsel
              Mark B. LeDuc, Minority Legislative Counsel
                  Trina Driessnack Tyrer, Chief Clerk
         Patricia R. Hogan, Publications Clerk and GPO Detailee
                    Laura W. Kilbride, Hearing Clerk






























                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Lieberman............................................     1
    Senator Collins..............................................     2
    Senator Akaka................................................    12
    Senator Carper...............................................    15
    Senator Tester...............................................    18
    Senator Brown................................................    20
Prepared statements:
    Senator Lieberman............................................    31
    Senator Collins..............................................    33
    Senator Akaka................................................    35

                               WITNESSES
                      Thursday, September 16, 2010

Hon. Charles E. Schumer, a U.S. Senator from the State of New 
  York...........................................................     4
Hon. Jacob J. Lew to be Director, Office of Management and Budget     6

                     Alphabetical List of Witnesses

Lew, Hon. Jacob J.:
    Testimony....................................................     6
    Prepared statement...........................................    39
    Biographical and financial information.......................    42
    Letter from the Office of Government Ethics..................    53
    Responses to pre-hearing questions...........................    54
    Responses to post-hearing questions for the Record...........   131

Schumer, Hon. Charles E.:
    Testimony....................................................     4
    Prepared statement...........................................    37

                                Appendix

Charts submitted for the Record by Senator Ensign................   153


                    NOMINATION OF HON. JACOB J. LEW

                              ----------                              


                      THURSDAY, SEPTEMBER 16, 2010

                                       U.S. Senate,
                       Committee on Homeland Security and  
                                      Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 3:05 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Joseph I. 
Lieberman, presiding.
    Present: Senators Lieberman, Levin, Akaka, Carper, Tester, 
Collins, and Brown.

            OPENING STATEMENT OF CHAIRMAN LIEBERMAN

    Chairman Lieberman. The hearing will come to order. Good 
afternoon and welcome. I note the virtual presence of Senator 
Schumer, but not the actual presence. Pardon? He is in the 
hall? Tell him--wait, the door is opening. Yes, ladies and 
gentlemen, from the State of New York----
    Senator Schumer. At your service.
    Senator Collins. Always making an entrance.
    Chairman Lieberman. A grand entrance. [Laughter.]
    Now, Senator Schumer, it is possible that you are very 
anxious to hear the opening statements----
    Senator Schumer. I am.
    Chairman Lieberman [continuing]. By Senator Collins and me, 
but if you are busy----
    Senator Schumer. No----
    Chairman Lieberman [continuing]. And because you are an 
extremely powerful Senator, we would welcome your opening 
statement first.
    Senator Schumer. I would be happy to sit and hear yours, 
Mr. Chairman and Madam Ranking Member.
    Chairman Lieberman. Really? That is very courteous. 
[Laughter.]
    Senator Collins does not think you will enjoy hearing her 
opening statement. [Laughter.]
    Senator Schumer. Does she not like you?
    Mr. Lew. I hope it is not about me.
    Chairman Lieberman. Mine will be brief.
    It is a pleasure to welcome Jack Lew for this hearing on 
the President's nomination for him to be the next Director of 
the Office of Management and Budget (OMB). We all know that 
everything in life is relative, and probably at different times 
in your work as Deputy Secretary of State, particularly dealing 
with Iraq and Afghanistan, you could not imagine you could have 
a more challenging job, but now you will, if confirmed.
    Your long career managing budgets, finances, technology, 
and operations in the government, private, and academic 
sectors, including having been the Director of OMB for 
President Clinton, makes your ability to do this job self-
evident, in my opinion.
    The career achievement that you have which gives me most 
hope is that as budget director under President Clinton, you 
left office with a $237 billion Federal budget surplus. We all 
know that times have changed and that our present economic 
challenges are different and more difficult than they were in 
the 1990s, and yet the experience that you had then, not just 
within the Administration but in negotiating with Congress to 
come up with the Balanced Budget Act, I think will serve you 
and the Administration and the American people very well in the 
months ahead.
    Obviously, we are facing two big problems now. One is to 
grow the economy and create more jobs, and that is the 
immediate problem. The other, longer term, is to get our budget 
back in balance.
    The President has appointed the National Commission on 
Fiscal Responsibility and Reform, which will be working on a 
proposal, led by our former colleague Alan Simpson and Erskine 
Bowles, former Chief of Staff. It is urgent, I think, that 
Congress act on these recommendations. If you are confirmed, as 
I believe you will be, I hope you will be able to work with the 
Commission, if that is appropriate, but certainly to work with 
us as we respond to the Commission's recommendations.
    As I believe you may have been made aware during the staff 
interview, Vice President Joe Biden sent a letter earlier this 
year to Senator Kent Conrad, who was the leader of a group of 
us negotiating around the time of the debt extension, stating 
the Administration's support for bringing the recommendations 
of the Commission up for a vote in this Congress. That is 
perhaps a tall order, but it was a commitment made, and I would 
like to hear from you about whether you support that 
commitment.
    I am going to put the rest of my statement in the record. I 
have some other matters more particularly related to 
governmental management that I would like to talk to you about 
in the question and answer period. But for now, I thank you for 
agreeing to take on the enormous challenge of being the 
Director of OMB at this time, and I look forward to working 
with you, if you are confirmed.
    Chairman Lieberman. Senator Collins.

              OPENING STATEMENT OF SENATOR COLLINS

    Senator Collins. Thank you, Mr. Chairman. Mr. Chairman, I 
am going to give our colleague from New York one more 
opportunity to do his introductory statement before I give my 
opening statement, if he would like to do so.
    Senator Schumer. I am a little worried what you are going 
to say, so I want to stay here. [Laughter.]
    Senator Collins. Then I shall proceed, Mr. Chairman.
    More than eight million Americans have lost their jobs 
since the ``Great Recession'' began in 2008. Unemployment 
remains unacceptably high, increasing to 9.6 percent just last 
month. What little job growth that we have seen has been 
disappointingly weak.
    The fiscal policies that the Administration and Congress 
undertake must acknowledge this reality, get the economy moving 
again, and put Americans back to work. Key to accomplishing 
these goals is an extension of the tax relief that is scheduled 
to expire at the end of this year. If we do not act, Americans 
will face one of the largest tax increases in U.S. history. 
This is no time to raise taxes. Indeed, it would be the worst 
time to increase the tax burden on America's families and small 
businesses.
    As Peter Orszag, President Obama's former OMB Director, 
recently pointed out, the failure to extend existing tax relief 
would ``make an already stagnating job market worse.'' I hope 
that the President will heed the advice of his former budget 
director and abandon his plan to raise taxes at this critical 
time.
    This Administration's policies have failed to stimulate 
private sector investment, which is key to creating permanent 
jobs. In fact, many of the fiscal, economic, and budget 
policies pursued by this Administration have made matters 
worse. The budget put forth by the President, which I opposed, 
would double the public debt in 5 years and triple it in 10 
years. The President's new health care law is already causing 
health insurance premiums to increase for many employers and 
employees, and the uncertainty over tax policies is hindering 
job creation.
    Actually, one small businessman in Maine told me over the 
recess that it was not the uncertainty, it was the certainty of 
higher costs, of more taxes, of higher health insurance 
premiums, and of more regulation that was causing him to delay 
purchasing a new business and creating new jobs.
    Everywhere I traveled in Maine last month, whether I was 
talking to a machine shop owner, a trucking company operator, a 
small residential contractor, or other employers, I heard the 
same refrain. Given the tax and economic policies coming out of 
Washington, we do not dare create any jobs, take any risks, or 
make any investments.
    Our Nation's future prosperity is shackled to an out-of-
control Federal debt. This year's deficit of $1.3 trillion, 9.1 
percent of Gross Domestic Product (GDP), is the second largest 
shortfall in 65 years. Only last year's deficit, which amounted 
to 9.9 percent of GDP, was larger. By the end of the upcoming 
fiscal year, the Congressional Budget Office estimates that 
publicly held debt will exceed $10 trillion, 66 percent of GDP, 
and will rise to nearly 90 percent of GDP by the end of this 
decade if current policies are continued.
    The cost of entitlement programs continues to escalate and 
is worsened by the President's health care law, which creates 
unsustainable new entitlement programs while failing to address 
spiraling health care costs. Like a perfect storm, rising 
entitlement costs will soon collide head on with the cresting 
waves of aging Baby Boomers set to leave their jobs. The result 
will put even more pressure on already strained Social Security 
and Medicare budgets.
    In other words, I fear that we could be seeing merely a 
preview of what is to come. Without bold, urgent action, we are 
heading toward a future of financial stagnation, bogged down by 
costly entitlements, slow job creation, and sluggish economic 
growth.
    This is the stark economic and fiscal environment that will 
confront the next OMB Director. OMB will continue to be the 
lead player as the Administration formulates policies, I hope 
in cooperation with Congress, to deal with these grim economic 
realities and unsustainable budgets.
    From the OMB Director, we need common-sense analyses of 
what is working and what is not. We require honest assessments 
of fiscal realities, untarnished by political calculus. And we 
expect the courage to admit mistakes and change course. 
Otherwise, the Executive Branch and Congress cannot make the 
bold moves, the difficult decisions needed to do what is right 
for the American taxpayer.
    If confirmed, Mr. Lew will need to develop a realistic plan 
that prevents the Federal budget from becoming a mammoth 
anchor, dragging down growth in jobs and personal income. The 
last time Mr. Lew served as OMB Director, a Democratic 
President worked with a Republican Congress to balance the 
Federal budget. I hope that this is a case where history 
repeats itself. [Laughter.]
    Thank you, Mr. Chairman.
    Chairman Lieberman. Thank you, Senator Collins. I was about 
to say, Senator Schumer, that was not so bad, until the end. 
[Laughter.]
    Senator Schumer. I was going to comment, Mr. Chairman, this 
is an amazingly bipartisan Committee----
    Chairman Lieberman. It is.
    Senator Schumer [continuing]. An Independent and 
Republicans surrounded by Democrats on either side----
    Chairman Lieberman. Yes.
    Senator Schumer [continuing]. But that comment might have 
been made better a few minutes earlier. [Laughter.]
    Chairman Lieberman. Anyway, we welcome you. We thank you 
for being here and for your patience in sitting through the 
opening statements. Please proceed.

 HON. CHARLES E. SCHUMER,\1\ A U.S. SENATOR FROM THE STATE OF 
                            NEW YORK

    Senator Schumer. Thank you, Mr. Chairman and Ranking 
Member, and it is great to be here to introduce both my friend 
and fellow New Yorker, Jack Lew.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Schumer appears in the 
Appendix on page 37.
---------------------------------------------------------------------------
    No matter how many years Mr. Lew spends here in Washington, 
he is a New Yorker. He grew up in Forest Hills, went to Forest 
Hills High School. His lovely wife, Ruth, grew up not far from 
where I grew up on Ocean Parkway in Brooklyn and went to Hunter 
High School. I went to Madison High School, and we used to play 
Forest Hills in basketball, but we always lost. Our team's 
motto, Mr. Chairman, was, we may be small, but we are slow. 
[Laughter.]
    Anyway, I am delighted to endorse Mr. Lew's nomination to 
serve as the next Director of the Office of Management and 
Budget.
    Mr. Lew, as everybody knows, is an accomplished public 
servant. He is renowned for his managerial prowess, his common-
sense approach to solving tough problems. He is uniquely well 
qualified to take the helm of OMB in these precarious times. He 
is no stranger to many of us in this room.
    Mr. Lew and I met three decades ago when I was a wide-eyed 
freshman Congressman and he was a top aide to House Speaker Tip 
O'Neill. I know that the Speaker had a tremendous influence on 
Mr. Lew, and it is clear that Mr. Lew shares the late Speaker's 
indefatigable work ethic and sense of civic duty.
    And, of course, Mr. Lew is no stranger to the OMB, either. 
He joined the Clinton OMB in 1994 and quickly distinguished 
himself not only as a knowledgeable policy wonk, adept at 
navigating the intricacies of the tax code and Federal budget, 
but also as an agile leader with a knack for operations. For 
that reason, he rose to become OMB's Chief Operating Officer, 
and then in 1998, he was named Director. As we all know, when 
he left the OMB at the end of the Clinton Administration, the 
Federal Government had an unprecedented surplus of $236 
billion, and we will not comment about what happened in the 
following 8 years.
    Anyway, Mr. Lew spent the past decade further honing his 
managerial skills in a number of high-stakes environments, from 
the private sector to academia, but public service always 
beckons for someone of such high quality, and once again he 
answered the call to public duty and returned to Washington, 
DC, to become the Deputy Secretary for Management and Resources 
at the State Department, a new position. According to his 
colleagues at State, he ``transformed'' the Department, cutting 
red tape and increasing cooperation throughout Foggy Bottom. I 
know that Secretary of State Hillary Clinton is sad to lose 
him, but I am confident he will prove to be a valuable asset to 
the President and to the American people in his new position.
    I look forward to working with him and the rest of the 
President's economic team as we focus on a growth agenda in the 
months and years to come. Job creation is my top priority in 
Congress, and I know he shares that commitment to jump-starting 
the American economy.
    In conclusion, Mr. Chairman, I am confident that he 
possesses the expertise and work ethic necessary to once again 
excel as the Director of OMB. Thank you for the opportunity to 
speak, and I hope the Committee will approve this nomination 
unanimously with the certitude that Deputy Secretary Lew's 
impressive credentials merit.
    Mr. Lew, to you, Ruth, and Shoshana, congratulations.
    Chairman Lieberman. Thanks, Senator Schumer. That was a 
wonderful statement. We appreciate the time that you took to be 
here, and I know it is a reflection of your confidence in the 
nominee. Thank you very much.
    Senator Schumer. Thank you, Mr. Chairman, and I thank the 
entire Committee.
    Chairman Lieberman. Thank you.
    Mr. Lew has filed responses to a biographical and financial 
questionnaire, answered pre-hearing questions submitted by the 
Committee, and had his financial statements reviewed by the 
Office of Government Ethics. Without objection, this 
information will be made part of the hearing record, with the 
exception of the financial data, which are on file and 
available for public inspection at the Committee offices.
    Mr. Lew, as you know probably, our Committee rules require 
that all witnesses at nomination hearings give their testimony 
under oath, so I would ask you to please stand and raise your 
right hand.
    Do you swear that the testimony you are about to give to 
the Committee will be the truth, the whole truth, and nothing 
but the truth, so help you, God?
    Mr. Lew. Yes.
    Chairman Lieberman. Thank you. Please be seated. We would 
welcome an opening statement and particularly would look 
forward to the introduction of your family members who are 
here.

 TESTIMONY OF HON. JACOB J. LEW \1\ TO BE DIRECTOR, OFFICE OF 
                     MANAGEMENT AND BUDGET

    Mr. Lew. Thank you very much, Mr. Chairman, and thank you, 
Ranking Member Collins and the Members of the Committee, for 
welcoming me here today. I take great pride in my current and 
prior government service, and it is a true honor to be 
considered today as the nominee to be Director of the Office of 
Management and Budget.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Lew appears in the Appendix on 
page 39.
---------------------------------------------------------------------------
    I thank Senator Schumer for his very kind introduction. I 
am proud to come before the Committee as a New Yorker.
    While I have spent many years in Washington, DC, New York 
will always be home.
    I am delighted that joining me today are my wife, Ruth, and 
my daughter, Shoshana. Together with my son, Danny, and my 
daughter-in-law, Zahava, who could not be here today--they are 
in New York--my family has supported me unfailingly and 
unconditionally during my career in public service. There have 
often been long hours, long days, long nights, and 
unfortunately, many missed family events. Their daily 
sacrifices make possible my public service, and for that, I am 
eternally grateful.
    I am also blessed to have had role models whose influence 
is always with me. My parents, Ruth and Irving Lew, taught me 
the importance of being involved in the community and the world 
around us. And the late Speaker Thomas P. O'Neill, Jr., was not 
just my boss for 8 years early in my career, but he was a 
mentor who shared his wisdom about the legislative process, the 
policy making process, and more generally about how to forge 
consensus.
    It has been my honor and privilege to serve under President 
Clinton and most recently as Deputy to Secretary of State 
Clinton, and I am deeply grateful to both of them for the 
opportunity to serve and for their continuing friendship.
    Finally, I am grateful to President Obama for nominating me 
to serve as the next Director of the Office of Management and 
Budget. I am humbled by the confidence he has shown in me as we 
face the enormous challenges that lie ahead.
    This is neither my first time testifying before this 
Committee nor my first time testifying before this Committee as 
the nominee to be Director of the Office of Management and 
Budget. My familiarity with OMB gives me a knowledge of the 
institution's workings and a respect that is deep and 
heartfelt. I appreciate the centrality of OMB to the efficient 
and effective operation of the Federal Government, and I have 
the greatest respect and admiration for the women and men who 
fulfill that critical mission. OMB is about helping to make 
policy and also ensuring that it can be implemented 
effectively.
    The American people rightfully expect their government to 
spend their tax dollars wisely and to avoid waste. They also 
have a right to expect their government to deliver services 
with the ease and convenience that can be found in so many 
other parts of daily life. If confirmed as OMB Director, making 
government more efficient and more effective, more open and 
responsive to the American people will be a key priority of 
mine, as it is of the President.
    Since my previous service at OMB, I have worked in similar 
management and budget roles in large nonprofit and private 
sector organizations and have experienced firsthand that all 
large organizations wrestle with the same challenge of how to 
fulfill strategic core missions with scarce resources and 
competing demands. Indeed, the process of forging consensus 
behind priorities, directing new resources where they are most 
critical, and finding internal savings to support new 
initiatives is a universal challenge.
    In addition, in my current role at the State Department, I 
have now been on the front lines not just setting policy, but 
working to implement it, often at the very finest levels of 
detail and with the greatest of stakes, the safety of our brave 
men and women who volunteer to serve in dangerous assignments. 
And I have gained visibility into the array of homeland 
security issues that this Committee spends so much time 
concentrating on.
    Together, these experiences from the past decade have 
broadened the perspective that I would bring to the position 
for which you are considering me again. As we know all too 
well, President Obama has asked me to serve in this position at 
a time that is very different from when I last sat in the 
Director's office. In the late 1990s, our challenge was how to 
maintain a prudent fiscal policy while making the transition 
into a world of budget surplus at a time of robust economic 
growth. Today, a series of policy choices and the worst 
economic downturn since the Great Depression present us with a 
very different set of challenges, specifically, how to sustain 
and deepen the economic recovery and spur new job creation in 
the face of unsustainable budget deficits.
    Indeed, the coming months may be the most critical time in 
fiscal policy in recent memory. As the President has said, it 
will take tough choices and putting partisan differences aside 
in order to do what is right for the country today and for our 
children and our grandchildren in the years ahead.
    Throughout my career, I have worked collaboratively across 
partisan and ideological divides, trying to cut through 
gridlock and solve seemingly intractable problems. If confirmed 
as OMB Director, I will work in that bipartisan fashion again 
with the Members of this Committee, the leadership of both 
chambers, and with all of those committed to taking 
constructive steps to rejuvenating our Nation's economy and its 
fiscal standing.
    And while we should aspire to never waste taxpayer dollars, 
regardless of whether the budget is in surplus or deficit, the 
management of the Federal Government is particularly important 
during lean times. If confirmed, I look forward to working with 
the Committee to make sure that every dollar we spend has a 
desired impact and makes a difference.
    Getting our economy back on track and our fiscal house in 
order will take hard work. I am honored that the President has 
asked me to join him in this endeavor, and I am grateful to 
this Committee for its consideration of my nomination. Thank 
you, and I would be happy to answer any questions that the 
Committee has.
    Chairman Lieberman. Thank you very much for that opening 
statement.
    Let me start with the three standard questions we ask of 
all of the nominees that come before the Committee. First, is 
there anything you are aware of in your background that might 
present a conflict of interest with the duties of the office to 
which you have been nominated?
    Mr. Lew. No.
    Chairman Lieberman. Second, do you know of anything 
personal or otherwise that would in any way prevent you from 
fully and honorably discharging the responsibilities of the 
office to which you have been nominated?
    Mr. Lew. No.
    Chairman Lieberman. And third, do you agree without 
reservation to respond to any reasonable summons to appear and 
testify before any duly constituted committee of Congress if 
you are confirmed?
    Mr. Lew. Yes, I do.
    Chairman Lieberman. Thank you. We will start with a first 
round of questions limited to 7 minutes each.
    Let me just pick up from something you said at the end of 
your opening statement about your record of working across 
party lines to try to solve problems. You played an important 
role for the late great Speaker O'Neill, and, of course, 
perhaps the most popular story told about Tip O'Neill these 
days, and there are a lot of great ones, is about his 
cooperation across party lines with President Reagan to solve 
some big fiscal problems, including obviously the Social 
Security crisis at that time.
    I think you come into this position, if confirmed, with 
great credibility in that regard, and I hope and I trust that 
the Administration knows that as we go into the difficult 
months ahead in the negotiations to try to begin to first 
improve the economy and then to deal with the enormous burden 
of national debt, that credibility of yours is a tremendous 
asset. I hope that you will not allow it to be squandered or in 
any way compromised because it is going to be critically 
necessary for somebody to be a bridge between the Executive 
Branch and Congress, members of both parties, if we are going 
to make progress on these very difficult economic and political 
questions related to the national debt.
    So I do not really invite an answer. I think you answered 
it in what you said in your opening statement.
    First, let me ask this, and I think maybe you suggested an 
answer to this. We are facing two enormous economic challenges 
now, both of which you will be involved in responding to. One 
is to sustain the economic recovery and have our economy 
produce more jobs. The second is to begin to reduce the 
national debt.
    Am I correct in assuming that you agree that the immediate 
priority is economic recovery and job creation?
    Mr. Lew. I think there is nothing more important facing us 
today than encouraging economic growth and creating jobs. We 
are at the beginning of a recovery, but it is not as strong or 
as deep as we want it to be. We cannot rest comfortably while 
we have 9.5 percent unemployment and while millions of 
Americans who want to work are looking for work.
    What I do not think is that one has to wait to take action. 
One can take action that does not have impact immediately.
    Chairman Lieberman. Action regarding the debt?
    Mr. Lew. Yes.
    Chairman Lieberman. Yes.
    Mr. Lew. I think that it is a mistake for us to wait until 
we have the kind of growth that we all want before we start 
thinking about taking steps that would show a real dedication 
to turning the corner at a period of time when the economy is, 
in fact, growing at a more healthy rate. It takes a long time 
to make changes in the Federal budget, whether it is the 
spending or the tax side, and if we wait and do them seriatim, 
I fear that we will lose the confidence that is needed, that 
the government officials are taking seriously the challenge 
that faces us very soon.
    Chairman Lieberman. That is a very important point. So you 
are saying with regard to economic recovery, jobs first, but 
that does not mean we cannot begin to act on the reduction of 
the debt. And I also take you to be saying that if we did begin 
to take action on debt reduction, that itself probably would 
have a positive effect on the economy.
    Mr. Lew. I believe that there is a fear in the country, 
both amongst the public and in the case of investment amongst 
businesses, that Washington may not understand how much of a 
problem it is to look at deficits that are growing at a rate 
that shows no natural turning point, the debt showing no 
natural turning point.
    I do not think last year or this year was a time when it 
would have been appropriate to cut the deficit or to try to 
reduce the debt. The need to get the economy moving again was 
of paramount importance. When President Obama took office, the 
economy was in a free-fall. There needed to be a floor, and I 
think the Recovery Act and other actions taken had a real 
impact. Millions of jobs were created. The unemployment rate is 
several points lower than it would be otherwise. I think what 
nobody knew was how deep the recession was, and when one is 
facing a recession of historic proportions, I do not think it 
is surprising that we will only know looking back how deep it 
really was.
    At the same time, business cycles, even bad business 
cycles, come to an end----
    Chairman Lieberman. Right.
    Mr. Lew [continuing]. And I think there is an expectation 
that we should be able to look beyond this year and next year 
and say that 3 years, 4 years, 5 years from now, we know that 
there need to be measures in place. And I think that the 
question of waiting until then to start having the kind of 
consensus formed to take action will cause a loss of 
confidence.
    In the private sector right now, there is a widespread 
understanding that businesses are sitting on enormous amounts 
of cash and not investing. There are trillions of dollars in 
cash that businesses are sitting on. If we could contribute to 
the confidence that would unlock the willingness to invest, 
that would have an enormously positive impact on the economy.
    I do not think it is one cause. I do not think it is as 
simple as if we take action on the deficit, then the next day, 
there will be an immediate response. I think it is a factor 
contributing to it because there has not been the sense that it 
is being taken seriously.
    Chairman Lieberman. I agree. I referenced the letter that 
Vice President Biden sent, actually on behalf of himself, 
Majority Leader Harry Reid, and Speaker Nancy Pelosi, to 
Senator Conrad and a group of us who had been negotiating 
because we had actually wanted to put a statutory proposal 
forward on a deficit reduction or debt reduction commission and 
a mandatory vote afterward, confirming that the Administration 
and the legislative leadership would commit to a vote in this 
Congress, that is presumably in December, after the Bowles-
Simpson Commission reports.
    I know now you were made aware of that in the staff 
interviews with you. Do you support that? It is a commitment, 
so I hope it can be honored. Do you think it is possible, 
consistent with what you have just said, that we might actually 
be able to take some first steps, even if their implementation 
is longer term, on debt reduction before the end of this 
Congress?
    Mr. Lew. I have read the letter, and I am familiar with the 
agreement, and I think it reflects the President's agreement 
and the Administration's agreement that there should be 
immediate action taken on recommendations from the Commission.
    The Administration has been careful not to prejudge the 
outcome of the Commission, to try to leave room for the 
Commission to do its work in a way that is not subject to the 
day-to-day pressures of the political process. I do not know 
whether there will be something issued in a form that is ready 
to be voted on, but I think that letter reflected the 
commitment that when there is something that is ready to be 
voted on, it should be voted on.
    Fundamentally, it is obviously a congressional decision 
when to schedule a vote, so even if confirmed, it will be 
something that ultimately requires the congressional leadership 
to follow up and schedule. But I think it does reflect the 
Administration's serious commitment that the results of the 
Commission should be brought forward.
    Chairman Lieberman. Very good. Thank you. Senator Collins.
    Senator Collins. Thank you, Mr. Chairman.
    Mr. Lew, you just testified that businesses are sitting on 
cash. They are not investing; they are holding back. And that 
is certainly what I have found in my conversations with 
business leaders of all sizes. One reason is because of the 
problems on the debt and spending side, but the other reason is 
the uncertainty about whether taxes are going to go up come 
January 1.
    I quoted in my opening statement from your predecessor's 
op-ed in the New York Times in which he argued that allowing 
the tax relief to expire would make the already stagnating jobs 
market worse. Peter Orszag went on to say, ``Higher taxes now 
would crimp consumer spending, further depressing the already 
inadequate demand for what firms are capable of producing at 
full tilt.'' Do you agree with that?
    Mr. Lew. I think that the article went on to argue that 2 
years from now, all the tax cuts should be allowed to expire, 
so I am not sure that the recommendations in that article would 
produce the kind of confidence that you are describing.
    My view on the issue of the tax cut, the President has made 
clear that he thinks the tax cut should be extended on all 
income for families at $250,000, for individuals $200,000 and 
below, and that means all individuals, whether they are above 
or below the line, the first $200,000, $250,000 of income, the 
taxes on that should be extended.
    He has equally made the case that it would be wrong to 
extend the tax cut above that line. The distribution of the tax 
cut above the line is heavily weighted at the very high end. It 
is partners in law firms. It is partners in financial 
institutions. It is not, for the most part, in the areas that 
people argue it is, which is the hands of small businesses in 
the communities.
    I do not believe that it would be appropriate to take $700 
billion over the next 10 years and devote it to a tax cut for 
the wealthiest Americans. I guess as a matter of fiscal policy, 
I do not believe it would stimulate the economy. I think that 
where there are savings, it is not contributing right now to 
economic growth, since what is driving growth right now is 
consumption.
    I think that if we were to follow the program that the 
President has advocated, to make permanent the tax cut below 
$250,000 and $200,000, it would be a very positive thing, and I 
believe it is correct that this would be the wrong time to 
increase taxes on middle-class Americans.
    Senator Collins. So you oppose even a 2-year extension of 
the current law and would allow taxes to go up on January 1, is 
that correct?
    Mr. Lew. What I have said is, I think that the tax cut 
below $250,000 and $200,000 should be made permanent. There is 
an array of other tax proposals that the Administration has 
proposed. So there would be a net tax reduction if the 
Administration's tax program was adopted. So I am not 
advocating a tax increase, no, but I am saying that the tax 
cut----
    Senator Collins. Well, you are advocating a tax increase 
for anyone above $250,000, and that includes some 750,000 small 
businesses that are Subchapter S Corporations and that employ 
literally 20 million Americans. As the Blue Dog group in the 
House has pointed out in its letter, 25 percent of national 
consumer spending is the result of those in those upper tax 
brackets. So I do not see how you can say that there would not 
be a negative impact on demand and on the economy if we hit 
those individuals with a substantial tax increase and those 
small businesses with a substantial tax increase come January 
1.
    Mr. Lew. I think that it is very important to stimulate 
small business investment, and there is an array of proposals 
that are pending that would have the effect of encouraging 
small business investment. I think that if what we want to do 
is encourage small business investment, that is the right route 
to go, to reduce the tax burden for small businesses rather 
than to have a tax cut that would continue to benefit the very 
wealthiest Americans, which I do not think has been proven to 
have the kind of benefit in terms of job creation or stimulus 
that we need.
    So I agree that it would be the wrong time to allow the tax 
cut for people earning $250,000 and below to expire as that 
would have a very detrimental effect. That is why the President 
has proposed extending it. I think there are more effective 
ways to encourage small business.
    Senator Collins. Let me turn quickly to the spending side 
of the ledger. The Republicans on the Appropriations Committee 
have endorsed a bipartisan proposal by Senators Jeff Sessions 
and Claire McCaskill that would essentially freeze 
discretionary spending for fiscal year 2011 at this year's 
level. That saves over the next decade $296 billion. Do you 
support that proposal?
    Mr. Lew. The Administration has proposed freezing non-
security spending for 3 years. It would bring us to the slowest 
rate of growth and the lowest levels of discretionary spending 
as a change in modern times.
    I am familiar with the proposal that Senators McCaskill and 
Sessions have proposed. I know that the Administration has 
taken a look at it and has generally supported the notion that 
we need to be focusing on reducing spending. My own view, and 
this really comes from the success of past budget agreements, 
is that caps on discretionary spending, when they are part of 
an overall budget agreement, are very effective and that the 
right place to have the debate about long-term caps on 
discretionary spending should be when everything is on the 
table and we are able to make real progress.
    The thing I fear is discretionary spending, while it is 
very important and we need to constrain it, is a small part of 
the total problem, and if the only thing we do is address 
discretionary spending and we do not address other forms of 
spending and we do not address the tax system at all, we are 
not going to be in a place where we have really turned the 
corner.
    Senator Collins. My time has expired. We will continue this 
debate, I am certain.
    Chairman Lieberman. Thanks, Senator Collins.
    As is the Committee's custom, we will call Senators in 
order of arrival. For the Senators' information, that is 
Senators Akaka, Carper, Tester, Brown, and Levin. Senator 
Akaka.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman.
    I would like to add my welcome to Mr. Lew and his family to 
this Committee. With so many of the challenges facing our 
Nation at this critical time, I am pleased that President Obama 
has nominated someone with Mr. Lew's unique experiences and 
credentials to be the next Director of the Office of Management 
and Budget. And, Mr. Chairman, I would like to include an 
opening statement in the record.
    Chairman Lieberman. Without objection, so ordered. Thanks, 
Senator Akaka.
    Senator Akaka. Mr. Lew, OMB is often thought of as the 
``Budget Office,'' but it has a critical role in driving and 
overseeing effective government management. During this 
Administration, OMB, with the leadership from Deputy Director 
for Management Jeffrey Zients, has been active in this role. 
For example, OMB has partnered with the Office of Personnel 
Management to push efforts to reform the Federal hiring 
process. What are your key priorities for government 
management, and how do you envision working with Mr. Zients to 
accomplish them?
    Mr. Lew. Thank you, Senator. I have had the pleasure of 
working with Jeff Zients in his role as Deputy Director for 
Management because as a Deputy Secretary, I have been a member 
of the President's Management Council, and I, too, have been 
very impressed with his performance in that role.
    I think it is a very important role. The budget demands on 
OMB take a lot of time and a lot of attention, and the 
challenge, I think, for OMB as an institution and for an OMB 
Director is not to let the budget issues dominate so completely 
that you cannot focus on running the government well.
    I tried, when I was at OMB the last time, to do it in two 
different ways. First, I focused on priority management issues. 
There was a list at the time of 10 or 12 issues where I was 
engaged with the Deputy Director for Management and the 
appropriate program office, trying to solve specific agency 
problems, where they came to me on a periodic basis and I was 
part of the management team. You cannot do it on 100 issues. If 
you try to do it on 100 issues, there just would not be time. 
But if you identify the top 10 or 12 issues, you can do it, 
even with the busy schedule that an OMB Director has.
    I think there are also functional areas that really require 
attention, and while the Deputy Director for Management has the 
full-time job, the Director needs to be engaged. When I was at 
OMB the last time, information technology (IT) procurement was 
one of those areas. I think it is still one of those areas. I 
think contracting reform is another one of those areas. And I 
think performance management is another one.
    Performance management was relatively new when I was at 
OMB. The Government Performance and Results Act (GPRA) was 
adopted when I was at OMB. The initial implementation happened 
when I was there. I would say it is still coming of age. We 
still have not gotten to the point where it is so tightly 
connected to what agencies are really trying to accomplish that 
it is helping to focus the attention of the agencies and OMB as 
much as I think it should. I think it has made great progress. 
It is considerably more effective than it was 10 years ago. But 
I think it still needs the attention of the Director, as well 
as the Deputy Director.
    Senator Akaka. I am glad you mentioned performance. Mr. 
Lew, during your previous tenure at OMB, you oversaw the 
implementation of the Government Performance and Results Act, 
which provides policy makers data to improve government 
performance. After nearly 20 years under GPRA, do you believe 
the law is meeting its objectives and could it be refined or 
strengthened?
    Mr. Lew. I think it has helped, and I think it is not 
necessarily a question of the law that needs to be changed but 
a question of how the law is implemented and used. I think that 
there was a period of time when performance measurement kind of 
shifted away from the core objectives of agencies and became 
less directly central to the question of are we getting done 
what we have set out to do. I think we are coming back to 
trying to measure the performance of an agency against what it 
puts out as its goals.
    I think it is important in any performance measurement 
system to separate the question of how we determine our core 
values, what do we need to do, from the question of are we 
doing it well. If you take an example of educating children K 
to 12, if you find out that your programs are not as effective 
as you want them to be, that does not mean you do not care 
about educating children K to 12. It means you have to take the 
resources and use them better.
    I think in the early days of GPRA, there was a fear that 
any indication of a performance weakness would lead to a 
funding cut, and I think if you really care about the 
objectives of an agency, GPRA ought to be a way to take the 
resources and focus them on high-performing ways of reaching 
your goals. It ought not to be the threat that the money will 
move to some other objective.
    I think that is a culture change. I think if agencies fear 
that an honest assessment means they will lose money, we will 
never get honest assessments. It has to be that if the 
commitment is, these are our core priorities, we will find a 
way to do it better, and I think that is a question of time, 
and it has been a long time, I know. Twenty years is a long 
time. But I do not think that we are yet at the place where it 
has come together the way I would hope it does.
    Senator Akaka. Mr. Lew, I am very concerned with protecting 
the privacy of Americans' personal information. In particular, 
I have been a strong advocate of enforcing current privacy laws 
at agencies and strengthening areas that may be weak. 
Unfortunately, many agencies do not have a comprehensive or 
robust privacy office and may lack clear guidance for how to 
manage privacy. There is no single government-wide privacy 
point person to provide leadership on these issues.
    Do you believe that OMB should designate a senior privacy 
official to ensure that all agencies are properly protecting 
Americans' privacy?
    Mr. Lew. I think it is critically important that OMB play a 
very significant leadership role, ensuring that government 
programs are implemented in a way that protects the privacy of 
Americans, and I think that there are a number of offices at 
OMB, the Office of Information and Regulatory Affairs (OIRA) 
and the Office of E-Government, that spend a good deal of their 
time working on those issues.
    When I was at OMB, we had a privacy counselor. We did not 
have an E-Government Office. I think that there are a lot of 
ways to organize and to do it effectively. What I know for a 
fact is that this Administration takes privacy issues very 
seriously, and if confirmed, as I get more familiar with how 
the operation is working, I will develop my own view as to 
whether the current organization works.
    I have no doubt that the current commitment is real and 
that it is a question of whether the current organizational 
structure works. I have no reason to believe it does not. I 
have met with the people who run these areas. They share the 
values that I have described, and I look forward, if confirmed, 
to being able to come back and give you a report after I have 
more firsthand knowledge.
    Senator Akaka. Thank you very much, Mr. Lew, for your 
responses. Thank you, Mr. Chairman.
    Chairman Lieberman. Thanks, Senator Akaka. Next is Senator 
Carper.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thanks, Mr. Chairman.
    Mr. Lew, it is good to see you and your family. I will just 
ask you to remember you are under oath as I ask this question. 
Looking at your biography, I note that you went to work for Tip 
O'Neill in, what was it, 1979?
    Mr. Lew. Correct.
    Senator Carper. Is it true that you were 14 at that time? 
[Laughter.]
    Mr. Lew. Well, I think I was 24 when I went to work for 
him.
    Senator Carper. Well, the years have been kind to you.
    I want to go back to 1997, when we last made a real serious 
run at budget deficits. Who was the Deputy Director of OMB at 
that time?
    Mr. Lew. I think John Koskinen was still there. I do not 
remember----
    Senator Carper. Deputy Director?
    Mr. Lew. For Management, you said?
    Senator Carper. No, just Deputy OMB Director.
    Mr. Lew. Well, I was the Deputy Director of OMB in 1997----
    Senator Carper. Thank you. Who was the Chief of Staff for 
President Clinton at that time?
    Mr. Lew. In 1997? I think it was----
    Senator Carper. It was Erskine Bowles. And what does he do 
now?
    Mr. Lew. Erskine Bowles chairs the Deficit Commission.
    Senator Carper. That is what I have heard. And you have a 
chance of becoming our OMB Director. So it is kind of like deja 
vu.
    Mr. Lew. Well, as I was making the rounds over the last 
couple of days, appointments with Members of this Committee and 
the Budget Committee, I did run into Erskine Bowles and Senator 
Alan Simpson in the hallway because we were talking to the same 
people.
    Senator Carper. Were they humming, ``Happy Days Are Here 
Again''?
    Mr. Lew. I was encouraged that they were in a lighter 
spirit than I would have expected.
    Senator Carper. Good. That is what I have heard.
    Back in the mid-1990s, the Congress passed and President 
Clinton signed legislation to provide the President with 
something like line item veto powers. I thought it went way 
overboard. It provided not only the ability to the President to 
line item all kinds of spending, tax policy, and entitlement 
programs, but it required a two-thirds override in both the 
House and the Senate to stop what the President wanted to do. 
It was declared unconstitutional by the courts. I do not think 
the vote was even close.
    A couple of us on this Committee, Senator McCain, Senator 
Russell Feingold, who is not on this Committee, but we have 
offered legislation to call for, I think, a more reasoned 
approach, one that is believed by most legal experts to be 
constitutionally sound, and that is to really provide what I 
call a 4-year test drive for the President's rescission powers. 
The President can sign spending bills into law and then send a 
rescission message to the Congress asking that spending be 
reduced in all kinds of ways. Our legislation is more measured. 
We have let the President for 4 years have the power to submit 
rescission proposals back to the Senate after signing a 
spending bill, but would not allow him to go after entitlement 
programs, would not allow him to go after tax provisions, would 
allow him to propose rescissions in appropriated spending.
    The other thing that is different about our proposal is we 
would have to vote affirmatively for the proposal. We could 
vote it down. A simple majority in the House or Senate would 
stop the rescission, basically kill the rescission, but we 
would have to vote on it. As it turns out, as you know, most 
times when the President sends a rescission message to the 
Congress, it is ignored, and we just never do anything about 
it.
    Some people think most governors have line item veto powers 
that go beyond what I just described. Some people think that is 
all we need to do to reduce the budget deficit. That is not all 
we need to do. We need this freeze on overall domestic 
discretionary spending. We need to do what Secretary Robert 
Gates wants to do, like taking $100 billion out of the defense 
budget. We need for this Deficit Commission to do good work. We 
need to go after all kinds of waste, fraud, abuse, improper 
spending, and all that.
    But let me have your take on this proposal of Senator 
Feingold, Senator McCain, and myself, the 4-year test drive to 
enhance the President's rescission powers, which I think has 
been endorsed by the President, by the way.
    Mr. Lew. Yes. I think it is important to have as many 
workable tools as we can to try to get our hands around 
reducing spending when it is not of the highest priority and 
when it could be reduced without doing damage.
    I was at OMB when the line item veto was passed. I had the 
unpleasant task of reviewing all of the laws that were subject 
to it. And I must say, it was not just the Supreme Court that 
had questions with the workability of that law. Going through 
it, just analytically, it was very challenging.
    I think that what has been designed seems to me to be a 
more workable approach. While I am a lawyer, it is not an area 
of law that I have special expertise in. I think it is more 
likely to sit past scrutiny than the line item veto in the 
1990s.
    I think the question with any of these mechanisms is: Is 
there a will to use it? Is there a will to make hard decisions? 
Because everything that would be subject to an enhanced 
rescission had supporters and sponsors or it would not have 
been there in the first place. And the challenge of identifying 
the list is one part of it. Then the challenge of having the 
will to reverse decisions is another.
    The line item veto that was found to be unconstitutional 
kind of took it out of the legislative process, which is one of 
the reasons that it was overturned. This will put it back in 
the legislative process, so it will be a two-part process.
    Senator Carper. As I said, I am not sure if we will have a 
chance to vote on this proposal this year. I think we have had 
a couple of hearings. We had a hearing on an earlier version of 
this proposal offered by Senator Feingold and Senator McCain. 
We had a hearing on an earlier version of this proposal that I 
think 20-some of us had cosponsored. We have about 23 
cosponsors of this latest version, which has been endorsed by 
the President, and we may want to tweak it further before we 
bring it up for a vote either this year or sometime early next 
year. But we look forward to working with you, and I appreciate 
the history of your involvement with this and your knowledge. 
You bring a lot to the table with respect to this tool.
    The last thing I want to raise is the tax gap. We are told 
that it is over $300 billion, money owed, not being collected 
by the Department of the Treasury. And there are a number of us 
who have worked in a piecemeal fashion and in some cases in a 
coordinated fashion to try to reduce the amount of money that 
is owed by individuals, by companies, that is not being paid, 
not being collected. Any thoughts you have for us on how we 
might work with you to take that $300 billion number and start 
squeezing it down?
    Mr. Lew. When I was at OMB the last time, we tried to add 
additional resources for tax enforcement in order to try to 
close that tax gap. I think it is effective to add enforcement 
resources because ultimately, enforcement or the expectation of 
enforcement is a powerful stimulus to compliance.
    I actually think this is an issue that is beyond its fiscal 
importance, just in terms of confidence in the tax system. 
Taxpayers of comparable income should feel that they are being 
treated fairly, each to the other. It is not a good thing for 
the confidence in the tax system for there to be this sense 
that people can get away with noncompliance.
    So I think it is an important matter of public policy. It 
is an important matter of fiscal policy. And I cannot say that 
I have current detailed knowledge of what the enforcement 
resources are, but I do know that in the 1990s, we thought one 
of the solutions was to increase enforcement, and I would look 
forward to working with you and with the Treasury Department on 
approaches that would be effective.
    Senator Carper. Good. I would just note, Mr. Chairman, for 
the record that this is not a Democratic or a Republican idea. 
It is not an Independent initiative. It is just, I think, good 
policy. We have worked together on a lot of stuff and my hope 
is this may be one that we can work together on, as well. 
Thanks. And frankly, a bunch of us introduced legislation today 
to do just that. Thanks.
    Chairman Lieberman. Thanks, Senator Carper. Senator Collins 
and I always enjoy your cross examinations of the witnesses, as 
you began today.
    Senator Tester, you are next.

              OPENING STATEMENT OF SENATOR TESTER

    Senator Tester. Thank you, Chairman Lieberman, and thank 
you, Mr. Lew, for being here today, and I appreciate your 
stopping by my office so we could have a visit earlier this 
week. Thank you for your service. Thank you for your repeated 
tour of this office. I think that your expertise and experience 
in this brings a unique quality. You have been there and done 
that. You have the budget surplus credentials behind you, and 
such significant ones during the Clinton Administration that I 
look forward to your service in this job.
    As we move forward and talk about things like the debt, 
which is talked about a lot here, you, more than anyone in this 
room, understand there are going to be some difficult decisions 
that have to be made, whether it is on the income side or the 
expenditure side.
    With a lot of those decisions, there has to be a level of 
education so that people get the facts to know what the impacts 
are and the real benefits to any decisions that are made to 
address the debt because they are going to be difficult. Do you 
see a role for OMB in that education process?
    Mr. Lew. I think that OMB has an enormously important role. 
Well, it has two very important roles. One is the analytic 
expertise and being able to provide information, which is the 
way you educate people on this. You make it transparent. You 
make it clear. And you do it in a way where the numbers have 
integrity, and it is not a war about whose numbers do you use.
    I think the other is that OMB plays an important role in 
the policy making process in the Administration, and I think 
the voice of OMB at the table is a voice that is both about 
what are the important goals, but it is also about how do you 
accomplish it? How do you make it work? How do you make the 
macro decisions work, and then when it is a series of 
individual pieces, how do you make them effective one by one?
    I think OMB at its best is a partner not just to the 
President, but to every agency of government and to the 
Congress. When OMB is in the room early, my experience was it 
led to more satisfaction in terms of the outcome on the part of 
all the participants.
    Senator Tester. But from an OMB perspective, how do you get 
that information out to the public, or is this something OMB 
can even do?
    Mr. Lew. OMB does not have a direct public program the way 
a lot of other agencies do, but increasingly in this day of e-
government and putting things out on Web sites, what I have 
noticed is different now than 10 years ago is you can look at 
the Web site and you can get information to the public. It is 
not forced on the public. The public has to go there to look 
for it. But there is much more accessible information than 
there was.
    One of the things that I think the leadership of OMB has to 
do is speak to these issues before Congress and publicly. It 
cannot just be something we have private conversations about. I 
did some of that when I was at OMB the last time. It may be 
that this is a time where there is a need for more of that. I 
do not have a strong sense yet of what the time demands are.
    Senator Tester. Montana is one of the few States that is 
not in a budget deficit situation. It did not happen by 
accident. There was some outstanding work done by the Governor 
of the State of Montana to put some money aside when times were 
good. That did not happen in this country. When times were 
good, the budget deficit continued to rise and we did not put 
any money aside. Do you see that as being a potential long-term 
solution for budget deficits, and if you do, how would that be 
done?
    Mr. Lew. Well, last time I left OMB, we were putting money 
aside, we thought, for the bad times. One of the arguments we 
made about protecting the surplus was that it would be a 
cushion for future times when we might need it. I thought it 
was a very ill advised decision to suspend pay-as-you-go 
(PAYGO) kinds of rules and have spending and tax policy made 
without the constraints of fiscal discipline for an extended 
period of time. I am not talking about the response to the 
recession. I am talking about in times when it was not required 
to have a deficit to get the economy moving again.
    I think you have to look at a cycle. There are times when a 
deficit is a very good thing, and that is, I think, the case 
for the last 2 years. When the economy is growing at a good 
rate, there ought not to be a big deficit. We need to get back 
to a place where we can, at a minimum, eliminate the deficit 
that is not related to reducing the debt, and then we have to 
get beyond that and start to reduce the debt so that we can 
reduce our interest payments.
    I wish I could say I thought that was something I saw in 
the very near term. Realistically, that is quite a ways down 
the road. But you have to do it one step at a time, and the 
Debt Commission's mandate to reduce the deficit to 3 percent of 
GDP, to come up with proposals, would eliminate the deficit 
other than the service of the debt. I think it is a worthy 
goal, and it is a goal we have to focus on.
    Senator Tester. I would agree, and I would hope that when 
the Deficit Commission comes back with their recommendation, we 
do not look for reasons to vote against it but rather look for 
reasons to vote for it so we can get our arms around the debt.
    The last thing I want to talk to you about is contracting. 
We visited a little bit about this in my office. I do not think 
there is any disagreement that contracting is, especially for 
small business, a complicated thing. It can take a lot of time 
and it can take a lot of staff, and quite frankly, in a State 
like Montana, we end up with a lot of businesses that just say, 
the heck with it.
    What I see happening at the Federal level is they are kind 
of using big general contractors and then subcontracting and 
hoping some of the small guys get it. Can you give me your 
perspective if anything can be done from your potential 
position as OMB Director to really encourage more contracting 
so that small business--not to tilt the field toward small 
business, but at least level it--could get a shot at it? And I 
am not talking about small business as businesses, again, under 
500 people. I am talking about small businesses.
    Mr. Lew. I think it is important that we maintain access to 
Federal contract work on a broad basis. I think it is important 
for two reasons. One, there are very important enterprises that 
ought to have a chance for their own benefit to get the work, 
but I think from the perspective of the public good, there 
ought to be the kind of competition that comes from knowing 
that if you are big and you do it, you do not have a lock on 
it, that somebody else might be nipping at your heels to take 
the work back.
    Senator Tester. Thank you.
    Mr. Lew. I do not know what we can do immediately. When I 
look at the contracting issues now, one of the things I am 
struck by is that Federal agencies are woefully understaffed in 
some of these areas in terms of the contracting professionals 
to make sure that the specifications are well designed, the 
monitoring is well implemented. One of the reasons there has 
been a drift to large contracts is it is easier to manage, with 
the number of people who are in agencies to do it, fewer pieces 
of work.
    I do not think I can say I see a huge growth in the Federal 
workforce as being the immediate solution, but I think we have 
to recognize that there is a tension there, that if you ask 
someone to go from one contract to 50 contracts, they are going 
to need some help.
    Senator Tester. Absolutely. Well, thank you very much. I 
wish you all the best. Hopefully, you will be confirmed quickly 
and unanimously. I just think you are a great person for the 
job and bring some real common sense to a position that needs 
it. Thank you.
    Mr. Lew. Thank you, Senator.
    Chairman Lieberman. Thanks, Senator Tester. Senator Brown.

               OPENING STATEMENT OF SENATOR BROWN

    Senator Brown. Thank you, Mr. Chairman.
    It is good to see you again. I appreciate your coming into 
my office. And I am glad that we have somebody that is going 
through the actual process of coming before the Committee. 
Being the new guy here, I have to admit I have enjoyed learning 
about our candidates, and I am hopeful that in the future other 
candidates will come forth like you and look for a full and 
fair vetting so we can learn about what your thoughts and ideas 
are, and I am hopeful the Administration will start to do just 
that.
    I know Senator Collins touched a little bit on the tax 
increases that will happen if nothing is done. I have concern 
that in the middle of a 2-year recession, we are going to be 
raising anybody's taxes. Some of those folks that are making 
$250,000 and up you cited, the lawyers and all those that 
traditionally people do not like, but they are also involving 
LLCs and small businesses that use their Social Security number 
that are actually creating jobs and that are also caught in 
that net. Two-hundred-and-fifty-thousand dollars in 
Massachusetts may be different than $250,000 in Montana, when 
you throw in the fact that you get absolutely no aid or 
assistance for college and the cost of living is traditionally 
higher. And these are, many times, the job creators, as well.
    I am also hopeful, and I am going to vote for you, as I 
told you, as well, but I think it is important for you to take 
a message back to the President that singling out various 
categories of people in the middle of a 2-year recession to 
bear a larger burden of the tax burden, I do not think, is 
appropriate at this point in time.
    But I was wondering if you have any position or 
recommendation on potentially a top-to-bottom review of every 
Federal program to save money, streamline, and consolidate. Do 
you have a position or a recommendation on that?
    Mr. Lew. Senator, if I may, just on the tax issue, the tax 
rate on people earning $250,000 or above would go back to a tax 
rate that is still lower than the tax rate that was in effect 
during the 1990s when we had the longest period of economic 
growth. So I actually think there is a lot of experience. We 
are not talking about an increase that we have not had 
experience with. We are talking about having it revert to 
something that was in place when the economy was quite healthy.
    Senator Brown. Right, but just to counter that, with all 
due respect, we did not have the economic meltdown that we are 
having now----
    Mr. Lew. No, we did not.
    Senator Brown [continuing]. So it is a totally different 
circumstance, in the middle of a 2-year recession, to think of 
raising anybody's taxes, coupled with the second-highest 
corporate tax rate in the world and a whole host of other 
regulations and burdens. I feel it is one of the worst business 
climates around in quite a while.
    Mr. Lew. I guess my core concern is that the tax cut for 
middle-income, middle-class Americans is where the real 
economic engine is and that is the piece where I think we are 
in total agreement. It would be a mistake to let that tax rate 
go up at the beginning of the year, and that is where the real 
economic benefit of the country is.
    On the question of reviewing Federal programs, one of the 
responsibilities of the OMB Director, and if confirmed, I would 
undertake this almost immediately upon going to OMB, is to do a 
review of every agency of the Federal Government. It is an 
exhaustive process and an exhausting process. It is the way 
that you use the very capable staff at OMB to ask questions 
about every program in the Federal Government.
    I took that process very seriously when I was there the 
last time. It is something that I know, if I am confirmed, I 
will again take seriously. I think that we cannot accept that 
everything we did before has to be done exactly the same way in 
the future. I have tried to manage the State Department that 
way, shifting resources around to accomplish our highest 
priorities, and not to just accept that what was the case last 
year is the case next year.
    I do not think it requires a new bureaucratic process to do 
that. The process that exists, if taken seriously, gives you 
the ability to make recommendations to the President, and if 
confirmed, it is something I would, I believe, spend the month 
of October and November deeply involved in.
    Senator Brown. I just want to go through kind of a 
checklist. Do you have any position or recommendation with 
regard to a freeze on Federal hires or pay increases for 
Federal employees?
    Mr. Lew. You know, I think that the question of a freeze on 
Federal hires----
    Senator Brown. Non-essential, I am talking about----
    Mr. Lew. Well, we should never have non-essential 
positions. I mean, we should give people work that is 
essential. We should not be having jobs that are not essential.
    The reason I am hesitating is that the contracting issue, 
this is something that if we want to move functions into 
government and it costs us more to do the work by hiring a 
contractor than it does to hire a government employee, I think 
we need to move away a little bit from the notion that it is 
just head count that matters. It is what does it cost to get 
the work done most effectively.
    Senator Brown. Right.
    Mr. Lew. I do not know the answer to that----
    Senator Brown. Well, I am glad you are bringing it up 
because I do have a question on acquisition reform and dealing 
with contractors. As you know, there are many contractors that 
have been overpaid. There is some type of fraud or waste and 
abuse. And there have been instances, not only are they getting 
their contracts renewed, but they are actually getting a bonus 
for doing faulty work. Is that something that you can get----
    Mr. Lew. I think we need to look at these issues. Early on 
in the Administration, the President put this out as an issue 
that he wanted the agencies to take very seriously. I know at 
the State Department, I have put a lot of time into looking at 
how we do contracting in the State Department and the U.S. 
Agency for International Development (USAID). It is a very 
difficult area to make quick change in because you do not have 
the personnel to take over the work unless you hire more 
people. And the question becomes, do you stop doing things or 
do you do it the way it was done?
    Senator Brown. Well, you need to do it at least on a 
competitive basis. With some of the ways these contracts are 
written, I have never seen anything like it.
    Mr. Lew. It should be done on a competitive basis----
    Senator Brown. Do you have any position or recommendation 
with regard to giving the President the ability to have a line 
item veto?
    Mr. Lew. I just was responding to questions from Senator 
Carper on the enhanced rescission. The last time a line item 
veto was enacted, the Supreme Court overruled it.
    Senator Brown. Right. I remember that conversation. What is 
your position?
    Mr. Lew. I supported the line item veto at the time. I 
helped to implement it, and the Supreme Court overruled it, so 
I think it is probably sensible to look at mechanisms that are 
more likely to withstand judicial scrutiny.
    Senator Brown. Do you have the ability through your 
position to make a recommendation or what is your position on 
entitlement issues? Do you make recommendations to the 
President on that?
    Mr. Lew. OMB reviews all aspects of the budget, including 
all the entitlement programs.
    Senator Brown. Is that an area you feel you will be making 
changes or making recommendations to the President on?
    Mr. Lew. I would imagine. It is an area where every year 
there is a set of mandatory provisions in the budget, and I 
assume that I would continue the practice of reviewing all 
programs of the Federal Government.
    Senator Brown. Well, in conclusion, I just want to wish you 
well. As you know, I told you before that I think you are one 
of the most qualified people for this job, and I am excited to 
be able to cast my vote, make it pretty public. As I said, I am 
a straight talker. If there is anything my office or the 
Chairman and the Ranking Member can do to give you the tools 
and resources you need to do it better, please let us know.
    Mr. Lew. Thank you, Senator. And as I said when we met in 
your office, it has always been a close call whether I call 
myself a son of New York or a son of Massachusetts. Many people 
get me confused.
    Senator Brown. Well, I did not think I would be here, and I 
apologize, but I wanted to come and inquire and give you my 
support. Thank you.
    Mr. Lew. I appreciate it. Thank you very much, Senator.
    Chairman Lieberman. Thanks, Senator Brown. Senator Brown is 
a straight talker----
    Senator Brown. So are you.
    Chairman Lieberman. And it has gotten both of us in 
trouble.
    Senator Brown. Absolutely. [Laughter.]
    Chairman Lieberman. But the fact that he said what he did 
really sort of validates the asset that you have and the 
credibility you are bringing into this, and we want to make 
sure when it is over you still have that credibility.
    Mr. Lew. I hope that I can do that.
    Chairman Lieberman. Because I am so supportive of your 
nomination, having heard this bi-State loyalty, I am not going 
to ask you whether you are a Yankees or Red Sox fan. 
[Laughter.]
    Mr. Lew. Well, it is actually an easy question to answer. I 
am a Mets fan. [Laughter.]
    Chairman Lieberman. That is perfect.
    Mr. Lew. It made it possible for me to be a Red Sox fan.
    Senator Brown. Patriots or Jets? [Laughter.]
    Chairman Lieberman. Senator Collins will start the second 
round.
    Senator Collins. Thank you so much, Mr. Chairman.
    Mr. Lew, many people do not realize that in addition to the 
budget responsibilities, OMB also is responsible for the review 
of all significant Federal regulations to ensure that the 
economic and other impacts are assessed as part of the 
regulatory decisionmaking, and there is the office known as 
OIRA within the OMB that is specifically responsible.
    I want to bring to your attention a proposed U.S. 
Environmental Protection Agency (EPA) regulation that would 
have an enormous impact on our economy at a time when our 
economy is very fragile. At the end of April, EPA released 
draft proposed rules for air emissions for industrial boilers 
powered by biomass, coal, natural gas, or oil, and this is 
being referred to as the ``boiler MACT'' regulations. According 
to EPA, the cost to implement those rules would be $9.5 billion 
nationwide. But according to industry experts, the cost to 
implement the rules in just the forest products industry would 
be approximately $7 billion.
    In my State, Maine companies have estimated that they would 
have to invest $640 million to comply with the rules, and this 
mainly would affect the paper mills in Maine, which are already 
struggling during this very difficult economy.
    Now, here is the irony. These rules also apply to 
hospitals, schools, or any entity that is using a large boiler, 
and I have heard from constituents who were planning to invest 
in a new renewable energy biomass boiler for a school, and they 
were going to get the money from the Department of Energy under 
the Recovery Act, only to find out that the boiler they would 
be purchasing, the new renewable energy biomass boiler that is 
encouraged by the Department of Energy, would not meet the 
EPA's new rules and they would not thus be allowed to operate 
the new renewable energy boiler.
    So this is the kind of thing that drives the public crazy. 
Here you have one department in the Federal Government 
subsidizing the purchase of a new biomass renewable energy 
boiler for a school while another Federal agency is saying, no, 
you cannot put that in. It does not meet the highest standards. 
So clearly, there are discrepancies and cost issues here that 
warrant the review by OMB.
    The industry experts that I have talked with are very 
concerned that the standards are being set so high that they 
are going to have to make a massive new investment at a time 
that they cannot afford it. It is totally contrary to what the 
Department of Energy is doing to try to get people to move away 
from fossil fuels to renewable energy.
    Now, several of my colleagues on both sides of the aisle, 
Senator Landrieu, Senator Ron Wyden, Senator Voinovich, Senator 
Lamar Alexander, and I are writing to the EPA, and we are going 
to copy Cass Sunstein at OIRA to take a look at this. I am not 
asking you for your opinion on this rule today.
    Mr. Lew. I appreciate that.
    Senator Collins. I realize that would be unfair. But I am 
asking you to commit to taking a close look at the economic 
impact of this rule.
    Mr. Lew. Senator, I appreciate your not putting me on the 
spot because I am not familiar with that specific rule. I am 
familiar generally with OMB's review of regulations, and I 
think it is a very important function that OMB has.
    I know that the record of this Administration, even 
compared to the record when I was there the last time, is that 
it has taken this cost-benefit process quite seriously, if the 
benefits of the rules outweigh the costs in general, and that 
has been a value that has been very important to the Director 
of OIRA and to the team there.
    When I was at OMB the last time, I would not say that I got 
involved in every OIRA matter, but when there were matters of 
very significant policy importance, particularly when they 
involved cross-currents between other Federal programs, I did 
get involved because it is appropriate for the Director to do 
that. I would intend to work closely with Cass Sunstein, who I 
have the highest regard for, who I think is an excellent OIRA 
Administrator, but I think it is also the Director's 
responsibility to pay attention to the regulatory 
responsibilities that OMB has.
    Senator Collins. This is a really important one, and I 
appreciate that commitment. Another responsibility OMB has that 
is generally not known by the public, and we have touched on it 
today, is some responsibility with the Office of Federal 
Procurement Policy (OFPP) to set Federal procurement rules, and 
I mentioned to you during our telephone call my concern that 
the Administration is considering a dramatic new government-
wide procurement policy, which is ironically called the ``High 
Road'' policy, that in my view would have a severe negative 
impact on the ability of small businesses to effectively 
compete for Federal contracts, would increase the cost of 
Federal contracts, and would jeopardize the integrity of the 
Federal procurement system.
    We have discussed this on the phone. I am very concerned 
that this goes away from a merit-based procurement policy and 
will actually increase the cost of Federal contracts at a time 
when we should be going in the opposite direction and trying to 
introduce more competition, more bidders, and decrease the 
cost.
    So I hope, given the strong support that you have expressed 
today for competition and the need to keep Federal contract 
costs down, that you will assure me that OMB will not issue any 
procurement preferences that create artificial barriers to 
competition and will hurt legitimate small business bidders.
    Mr. Lew. Senator, we did discuss this particular matter, 
and I have inquired. I am not aware of a rule that has the 
character that you have described. It may be working its way 
through the system. I do know that the issue itself takes two 
values that are very important and requires a careful 
balancing. There is the very important value of encouraging 
competition and making contracting available to small business, 
and there is also a set of values about what are the kinds of 
protections that ought to be available in the workplace. I 
think that it is important as this is considered to make sure 
that we ultimately make decisions that promote strong economic 
activity, but we also recognize that we have a lot of areas 
where we do things that protect individuals.
    I would look forward to working with you on this. I do not 
have specific knowledge of the rule, so it is hard for me to 
address the specific issue. But I do very much understand the 
concern that you are raising.
    Senator Collins. Well, I was a young staffer on Capitol 
Hill at the same time you were a young staffer on Capitol Hill, 
both on the House side where there actually was an initiative 
that Tip O'Neill and Bill Cohen did together that we always 
called the Cohen-O'Neill initiative, I would add. [Laughter.]
    But when I was in the Senate, I was the staffer who helped 
draft the Competition in Contracting Act, which still governs 
today, and I can tell you that I view it, if OMB goes ahead 
with this policy, as being totally contrary to the Competition 
in Contracting Act. The Congressional Research Service also 
agrees that it would require legislation and could not be done 
by Executive Order. So I hope that you will proceed with great 
care.
    Mr. Lew. I understand the concerns, and if confirmed, I 
will learn more about this and find out what, if anything, is 
going on, and I would make the commitment to staying in 
communication with you on it.
    Senator Collins. Thank you. And finally, Mr. Chairman, and 
you have been most generous by allowing me to precede you, I 
just want to mention that the Postal Service is in an enormous 
crisis. It has announced a loss of $5.4 billion for the first 
three quarters of fiscal year 2010, and the Postal Service, in 
my view, risks a death spiral of constantly hiking its rates, 
losing more volume, hiking its rates again, and losing ever 
more volume. And I disagree with many of the proposals that the 
Postal Service is making to address its problems.
    There is one, however, where I am very sympathetic, and 
that is the Postal Regulatory Commission has had an independent 
actuarial analysis that has shown that the Postal Service has 
been overpaying into the Civil Service Retirement System by 
between $50 to $55 billion, which is significant money. We have 
been trying to get the Office of Personnel Management (OPM) to 
redo the calculations. OPM points to a 2003 law, which was 
repealed in 2006, and it needs to recalculate what the 
obligation is.
    I do not want to get into that further today, nor do I 
expect you to have an answer to that today, but I am seeking 
attention. The answer is not to continually relieve the Postal 
Service of its health insurance liabilities for its retirees. 
We may be able to stretch out the amortization schedule, but 
those are real liabilities. But if, in fact, the Postal Service 
is paying $50 billion more than it should be, that should be 
corrected. And it is OMB and OPM that have the power to do 
that.
    Mr. Lew. This is an issue that I would not want to pretend 
to know in depth, but I am generally familiar with it, and I 
understand that OPM has been going through a review trying to 
determine to a high degree of accuracy what the overpayment 
estimate is. I also know that there are complicated issues as 
to whether it does or does not require additional legislation, 
and if so, whether or not it would obviously be subject to 
PAYGO requirements. If confirmed, I would make the commitment 
to learn more about it and, again, stay in communication with 
you on it. I think it is a separate issue from the health 
issue----
    Senator Collins. It is.
    Mr. Lew [continuing]. And the Postal Service generally 
presents a number of issues that will need to be addressed in 
terms of its financial state.
    Senator Collins. And the Postal Service needs to make some 
very hard decisions to reduce its cost structure to become more 
competitive. But this is an issue we need to look at, as well.
    Mr. Chairman, I have asked our witness a number of very 
difficult questions today, and as I leave this hearing, I do 
not want to leave the impression that I am other than impressed 
with the nominee, despite the grilling that I may have given 
him on a number of policy issues. As the Chairman will attest, 
I have urged that we do a very quick mark-up so that you can 
get right to work----
    Mr. Lew. Thank you, Senator.
    Senator Collins [continuing]. And I look forward to both 
casting my vote for you and supporting you. And again, Mr. 
Chairman, thank you so much for your courtesy.
    Chairman Lieberman. Not at all. Thanks, Senator Collins. We 
are going to try to schedule a meeting of this Committee on 
your nomination as early next week as we possibly can.
    I have one or two quick questions, and actually, Senator 
Collins asked one of them, about the Postal Service. The other 
big problems we have talked about, economic recovery and debt 
reduction, everybody knows. For most people, including most 
Members of Congress, the crisis in the Postal Service is, for 
want of a better metaphor, an iceberg that we do not see, and 
the management of the Postal Service has really been trying 
very hard to get ahead of the problem, and they have been 
working with the employees there. There have been significant 
reductions in the workforce. But the fact is that there are 
very profound long-term declines in mail volume. I will just 
give you the number from 2009, which is a decline in mail 
volume of 25 billion pieces, 12.7 percent, from the previous 
year. And, of course, that means deficits, $3.8 billion in 
2009, now running comparable, even a little bit higher.
    So we have to get together and deal with this problem, and 
OMB has been involved, playing a leadership role. As you know, 
the reason we ask is not only because we oversee OMB, but by a 
strange twist of legislative fate and history, the Postal 
Service is part of our jurisdiction, as well.
    Mr. Lew. Yes. I think that the kind of historical change in 
the way information is handled and managed has created 
challenges for the Postal Service. The amount of work we do by 
e-mail instead of letters is a reality.
    Chairman Lieberman. Right. That is exactly it.
    Mr. Lew. I know that the volumes in the Postal Service have 
shifted from First Class Mail to Third Class Mail, which is 
much lower revenue generation. I am not an expert on the Postal 
Service, but it does not take an expert to realize that there 
are structural changes that require some attention.
    Chairman Lieberman. Agreed. Let me ask you one final 
question, to go back to the deficit reduction and just to give 
you a chance to look back, and I am asking because I think it 
would be helpful to me and perhaps others who are going to be 
part of this process later in the year or next year, to compare 
the economic challenges that you faced during the later 1990s 
with regard to deficit reduction and the ones faced now, if you 
care to, to compare the political environments, and just 
generally help us to understand what lessons you took away from 
that successful bipartisan effort to get America back in the 
balance that can be helpful to us as we try to do the same.
    Mr. Lew. I think in the 1990s, it was a very different 
economic environment, and we did not have a recession, we had 
growth. We did not have high unemployment. And what was driving 
the focus on deficit reduction was the fear that government 
borrowing was going to become an impediment to the private 
economy and a very strong message from the public and from the 
business community that the Federal Government had to be 
brought under control in order for the future of economic 
growth to remain bright.
    We are in a very different environment right now. We have 
the lowest interest rates of any time that I am familiar with, 
and we have not an insufficient level of economic activity. The 
tools that we have to stimulate economic growth have been used, 
I think, effectively, but they have had the effect of driving 
up the deficit.
    The challenge today is that, as I think I was saying 
earlier, if we were to put the brakes on this year or next 
year, I think it would be profoundly problematic. This year, we 
should not be looking for massive deficit reduction. But we 
will emerge with a period of more sustained growth. We will see 
unemployment coming down. And at that point, with the very 
large Federal debt that we have, if we see higher interest 
rates, we are going to see the kind of pressure, both on the 
Federal budget and in terms of competition for capital, that 
will be a real problem in the economy.
    When you can see a problem down the road, the answer is not 
deal with it right now, but put things in place so that when 
you get there, you have planned ahead. That is not an easy 
thing for our political system to do. Part of 1983 was a 
somewhat engineered crisis where Social Security was going to 
run out of money and it would not have been able to pay the 
bills. It helped to focus the mind because not paying the bills 
was not an option. We are now in an environment where we have 
to create that sense of urgency, knowing that it is a bit 
farther down the road, but no less real.
    In terms of the challenges of working across the aisle, I 
have now been in this line of work long enough to have several 
times said it could not get worse than it is, only to be proven 
wrong, so I do not make predictions any more, whether it is 
better or worse than it will be in the future. What I do know 
is that at moments when you think partisanship is as bad as it 
can be, you still can get things done. In 1983, it was pretty 
bad. In 1990 and in 1997, it was pretty bad. The problems were 
urgent, and there were leaders who were willing to step forward 
and take action. I think if you define a problem as being 
critical to the national security and the national interest of 
the United States, leaders then can step forward.
    The prospect of unfettered deficit growth and debt growth 
is both a problem for our economy and for our national 
security. It is not a good thing if the United States loses its 
credibility in the world because it cannot manage its own 
fiscal affairs. I do not think we are there now. I do not think 
we are at the point where if we start to take action, we cannot 
reverse the situation. I think if we wait for 2 years, 3 years, 
or 4 years, we could get to a place we really do not want to 
be, which is why I see a sense of urgency to try to do this 
now, notwithstanding the fact that it is difficult and it will 
be very challenging to build the kind of consensus required to 
take meaningful action.
    Chairman Lieberman. Well, that was an excellent statement 
and an evocative statement, too, and I agree with you. 
Ultimately, this does require leadership, and leadership that 
puts the national interest first. You offer a hopeful 
perspective because at times in the not-so-distant past when 
partisanship seemed also to be quite high, people did rise to 
the occasion.
    I agree with you. If we begin to solve this debt problem, 
it will have effects that are positive for our country well 
beyond the enormous positive effects it will have on our 
economy, and I will just mention two that I know you are 
familiar with.
    The first is that here at home, I think part of the 
frustration and anger that my colleagues and I all hear is 
based on, in part, a feeling that our country has lost the 
ability to control its own destiny, that we are not the America 
that we used to be. And a big part of that is the debt. 
Everybody understands it. People may not be quite prepared to 
do what they have to do to start to deal with it, but if we can 
work together to show that we can begin over a period of time 
to reduce the debt, I think it will help to restore the 
public's confidence, not just in our government, but in our 
country and its future.
    The second thing is your point, just if I may expand it a 
bit, on national security. It struck me the other day, thinking 
about different sections of the world, people from the Middle 
East and Asia, that there is a fear about whether America has 
the staying power here, and it is very odd that they are asking 
that question because we are probably more engaged in places 
like the Middle East and Asia than we have ever been. There are 
a lot of reasons for it, but one, I think, is that they are 
worried that we may be declining, just as the American people 
are worried, as a power, and one element of that is our 
inability to control our own fiscal destiny, to live 
essentially within our means.
    So your willingness to come back to this position at this 
moment really is an act of great public service, and I think it 
is an opportunity for you, it is daunting, to really make an 
extraordinary contribution to this country even beyond what you 
have already done, and I am grateful that you are willing to do 
so.
    I thank you for your testimony today. Without objection, 
the record will be kept open until the close of business 
tomorrow for the submission of any written questions or 
statements for the record, and we are doing that, as Senator 
Collins and I said, because we want to move to confirm you in 
this Committee and then send you to the floor as soon as 
possible.
    Do you have any final words to say in your defense?
    Mr. Lew. Well, thank you, Mr. Chairman. I appreciate the 
Committee's cooperation and patience. While this is probably 
the most challenging undertaking I have ever looked ahead 
toward, it is probably also the most important. I look forward 
to being able to work together to make real progress because it 
is that important to our country and for the future.
    Chairman Lieberman. I agree. Thank you.
    Mr. Lew. Thank you.
    Chairman Lieberman. The hearing is adjourned.
    [Whereupon, at 4:43 p.m., the Committee was adjourned.]






























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