[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                        REPLACING THE SEQUESTER

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

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, APRIL 25, 2012

                               __________

                           Serial No. 112-25

                               __________

           Printed for the use of the Committee on the Budget


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                        COMMITTEE ON THE BUDGET

                     PAUL RYAN, Wisconsin, Chairman
SCOTT GARRETT, New Jersey            CHRIS VAN HOLLEN, Maryland,
MICHAEL K. SIMPSON, Idaho              Ranking Minority Member
JOHN CAMPBELL, California            ALLYSON Y. SCHWARTZ, Pennsylvania
KEN CALVERT, California              MARCY KAPTUR, Ohio
W. TODD AKIN, Missouri               LLOYD DOGGETT, Texas
TOM COLE, Oklahoma                   EARL BLUMENAUER, Oregon
TOM PRICE, Georgia                   BETTY McCOLLUM, Minnesota
TOM McCLINTOCK, California           JOHN A. YARMUTH, Kentucky
JASON CHAFFETZ, Utah                 BILL PASCRELL, Jr., New Jersey
MARLIN A. STUTZMAN, Indiana          MICHAEL M. HONDA, California
JAMES LANKFORD, Oklahoma             TIM RYAN, Ohio
DIANE BLACK, Tennessee               DEBBIE WASSERMAN SCHULTZ, Florida
REID J. RIBBLE, Wisconsin            GWEN MOORE, Wisconsin
BILL FLORES, Texas                   KATHY CASTOR, Florida
MICK MULVANEY, South Carolina        HEATH SHULER, North Carolina
TIM HUELSKAMP, Kansas                KAREN BASS, California
TODD C. YOUNG, Indiana               SUZANNE BONAMICI, Oregon
JUSTIN AMASH, Michigan
TODD ROKITA, Indiana
FRANK C. GUINTA, New Hampshire
ROB WOODALL, Georgia

                           Professional Staff

                     Austin Smythe, Staff Director
                Thomas S. Kahn, Minority Staff Director


                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, April 25, 2012...................     1

    Hon. Paul Ryan, Chairman, Committee on the Budget............     1
        Letter, dated April 23, 2012, from CBO Director Elmendorf     2
        Prepared statement of....................................     3
        Letter, dated May 25, 2012, from Jeffrey D. Zients, 
          Acting Director, Office of Management and Budget.......    50
    Hon. Chris Van Hollen, ranking member, Committee on the 
      Budget.....................................................     4
        Prepared statement of....................................     5
    Susan A. Poling, Deputy General Counsel, Government 
      Accountability Office......................................     6
        Prepared statement of....................................     8
    Daniel I. Werfel, Controller, Office of Management and Budget    18
        Prepared statement of....................................    20


                        REPLACING THE SEQUESTER

                              ----------                              


                       WEDNESDAY, APRIL 25, 2012

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:06 a.m. in room 
210, Cannon House Office Building, Hon. Paul Ryan [chairman of 
the committee] presiding.
    Present: Representatives Ryan, Calvert, Price, Chaffetz, 
Stutzman, Lankford, Black, Mulvaney, Huelskamp, Young, Woodall, 
Van Hollen, Kaptur, Doggett, Blumenauer, Yarmuth, Pascrell, 
Wasserman Schultz, and Bonamici.
    Chairman Ryan. The committee will come to order. Our 
attendance is taken.
    I want to thank our witnesses for appearing today to 
witness the looming sequester that has been hanging over the 
Nation's fiscal debate since the enactment of the Budget 
Control Act since August of last year.
    The 2013 sequester is a $109 billion across-the-board 
inflexible and arbitrary cut in spending that will occur under 
current law on January 2, 2013. The 10 percent across-the-board 
cut in defense spending from the sequester would, quote, 
``hollow out our national defense.'' Those aren't my words; 
those are the quotes from the Secretary of Defense as he 
describes it.
    The 8 percent across-the-board cut in nondefense 
discretionary spending from the sequester would, quote, 
``inflict great damage on critical domestic priorities.'' 
Again, those aren't my words. Those words come from the 
President's budget.
    The only way to avoid these dire results is for Congress to 
pass, and the President to sign, new legislation. This 
committee and this House have passed a budget that provides a 
plan for doing exactly that. In the coming weeks, this 
committee and this House will continue to lead by proposing 
legislation that will achieve more than 100 percent of the 
savings of the sequester that it would have achieved, while 
doing so in a responsible, priority driven way, rather than 
driving through the arbitrary meat-axe approach that is 
obtained in the sequester.
    We are joined by Danny Werfel, the controller and head of 
the Office of Financial Management at the OMB.
    Mr. Werfel, thank you for joining us today. It is great to 
have you here. We hope that your testimony will move beyond the 
vague generalities of the President's budget and offer specific 
proposals that the President is making to avoid the 
consequences of sequester.
    We are also joined by Susan Poling, deputy general counsel 
at the GAO.
    Ms. Poling, we look forward to your testimony on the legal 
regime in which the agencies are operating as they prepare for 
the possibility of the sequester.
    Before turning it over to my friend, Mr. Van Hollen, I want 
to quote the White House chief of staff who wrote in August of 
last year, quote, ``Make no mistake, the sequester is not meant 
to be policy,'' close quote. Whatever the intention, the 
sequester will take effect. It is law, and we will see abrupt 
and indiscriminate cuts in government spending unless we act. 
This is coming. It is there.
    So the smart, rational thing to do is to prepare for that. 
I don't believe this is in the national interest, and the 
President claims that he agrees. There is no reason why we 
cannot work together to help replace the sequester. House 
Republicans are bringing specific proposals to the table, and 
we invite the administration to do the same.
    At this time, I ask unanimous consent to insert in the 
record a letter from the CBO director cataloguing recent work 
they have done with respect to the sequester. Without 
objection, so ordered.
    [The information follows:]

                               Congressional Budget Office,
                                    Washington, DC, April 23, 2012.
Hon. Paul Ryan, Chairman,
Committee on the Budget, U.S. House of Representatives, Washington, DC 
        20515.
    Dear Mr. Chairman: In response to your request, the Congressional 
Budget Office has prepared a list of its publications that analyze the 
budgetary impact of the Budget Control Act of 2011 (P.L. 112-25).
     letters related to the consideration of the budget control act
     On July 26, 2011, CBO estimated the effect on the deficit 
of the Budget Control Act as posted on the Web site of the Committee on 
Rules on July 25, 2011.
     On July 27, 2011, CBO published an updated estimate of the 
effect on the deficit of the legislation as amended by the Faster FOIA 
Act of 2011.
     Also on July 27, 2011, CBO estimated the effect on the 
deficit of the Budget Control Act as proposed in the Senate on July 25, 
2011 (as an amendment to S. 1323).
     On August 1, 2011, CBO estimated the effect on the deficit 
of the Budget Control Act as posted on the Web site of the Committee on 
Rules that day. That version of the legislation was ultimately enacted.
             sequestration reports and related publications
     On August 12, 2011, CBO published its Sequestration Update 
Report for Fiscal Year 2012. That report detailed the caps on new 
discretionary budget authority established by the Budget Control Act, 
including applicable adjustments and the limits on security and 
nonsecurity budget authority for 2012 and 2013.
     On September 12, 2011, CBO published the Estimated Impact 
of Automatic Budget Enforcement Procedures Specified in the Budget 
Control Act. That report detailed the changes in discretionary and 
mandatory spending that would ensue if lawmakers did not enact 
legislation originating from the Joint Select Committee on Deficit 
Reduction that would reduce projected deficits by at least $1.2 
trillion over a 10-year period.
     On January 12, 2012, CBO published its Final Sequestration 
Report for Fiscal Year 2012. In that report, CBO estimated that a 
sequestration of budgetary resources, as prescribed by the Budget 
Control Act, will not be required in 2012.
                              testimonies
     On September 13, 2011, CBO's testimony entitled 
Confronting the Nation's Fiscal Policy Challenges before the Joint 
Select Committee on Deficit Reduction included a comprehensive 
discussion of the Budget Control Act and its estimated effect on the 
budget deficit and CBO's baseline budget projections, including the 
potential impact of the enforcement procedures of the law (see pages 22 
to 24).
     On October 26, 2011, CBO's testimony entitled 
Discretionary Spending before the same committee highlighted the Budget 
Control Act's estimated effect on discretionary budget authority and 
total outlays, again including the potential impact of the enforcement 
procedures of the law (see pages 14 to 23 and 33 to 36).
                           budget projections
     In August 2011, CBO published The Budget and Economic 
Outlook: An Update, which discussed the budgetary effects of the Budget 
Control Act (see Box 1-1 and Table 1-6) and presented baseline budget 
projections that incorporated those effects.
     In January 2012, CBO published The Budget and Economic 
Outlook: Fiscal Years 2012 to 2022, which updated the estimated effects 
of the Budget Control Act to reflect the fact that lawmakers did not 
enact legislation originating from the Joint Select Committee on 
Deficit Reduction that would reduce projected deficits by at least $1.2 
trillion over a 10-year period. (The enforcement procedures are 
highlighted on pages 12, 13, 18, 20, 103, and 104.)
     In March 2012, CBO published Updated Budget Projections: 
Fiscal Years 2012 to 2022, which continued to incorporate the budgetary 
effects of the enforcement procedures of the Budget Control Act.
     Also in March 2012, CBO published An Analysis of the 
President's 2013 Budget, which included CBO's assessment of the 
President's proposal to eliminate the automatic spending reductions 
that are scheduled to occur under the Budget Control Act.
    I hope this information is useful to you.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                          Director.

cc: Hon. Chris Van Hollen, Ranking Member.

    [The statement of Chairman Ryan follows:]

            Prepared Statement of Hon. Paul Ryan, Chairman,
                        Committee on the Budget

    I want to thank our witnesses for appearing today to address the 
looming sequester that has been hanging over the nation's fiscal debate 
since the enactment of the Budget Control Act in August of last year.
    The 2013 sequester is a $109 billion across-the-board, inflexible, 
and arbitrary cut in spending that will occur under current law on 
January 2, 2013.
    The 10% across-the-board cut in defense spending from the sequester 
would quote, ``hollow out'' our national defense. Those aren't my 
words. That is how the Secretary of Defense describes it.
    The 8% across-the-board cut in non-defense discretionary spending 
from the sequester would ``inflict great damage on critical domestic 
priorities.'' Those aren't my words. Those words come from the 
President's budget.
    The only way to avoid these dire results is for Congress to pass 
and the President to sign new legislation. This committee and this 
House have passed a budget that provides a plan for doing just that.
    In the coming weeks, this committee and this House will continue to 
lead by proposing legislation that will achieve more than 100% of the 
savings the sequester would achieve while doing it in a responsible, 
priority-driven way rather than through the arbitrary, meat-ax approach 
that is the sequester.
    We are joined today by Danny Werfel, the Controller and head of the 
Office of Federal Financial Management at the Office of Management and 
Budget.
    Mr. Werfel, thank you for joining us today. We hope that your 
testimony will move beyond the vague generalities of the President's 
budget and offer the specific proposals the President is making to 
avoid the consequences of the sequester.
    We are also joined by Susan Poling, the Deputy General Counsel of 
the Government Accountability Office. Ms. Poling, we look forward to 
your testimony on the legal regime in which agencies are operating as 
they prepare for the possibility of the sequester.
    Before turning it over to my friend, Mr. Van Hollen, I want to 
quote the White House Chief of Staff, who wrote in August of last year, 
quote, ``make no mistake: the sequester is not meant to be policy.''
    Whatever the intention, the sequester will take effect, and we will 
see abrupt and indiscriminate cuts in government spending, unless we 
act.
    I do not believe this is in the national interest, and the 
President claims that he agrees. There is no reason why we cannot work 
together to replace the sequester. House Republicans are bringing 
specific proposals to the table and we invite the administration to do 
the same.
    At this time, I ask unanimous consent to insert in the record a 
letter from the CBO Director cataloging recent work they have done with 
respect to the sequester. Without objection, so ordered.
    With that, I recognize the ranking member, Mr. Van Hollen of 
Maryland for his opening statement.

    Chairman Ryan. And with that, I recognize the ranking 
member, Mr. Van Hollen, for any statement he may have.
    Mr. Van Hollen. Thank you, Mr. Chairman.
    I want to join the chairman in welcoming the witnesses 
today.
    I think this hearing is an important opportunity to examine 
the budget sequester and how we got to this point. I think we 
all know that the Budget Control Act was a difficult compromise 
designed to avert an economic crisis and to avoid the default 
on the country's debt. It reduced spending over the next decade 
by about $900 billion and set in place an agreement to reduce 
the deficit by another $1.2 trillion.
    The sequester was included in the legislation as a last 
resort to encourage, to pressure the Congress to develop a 
bipartisan alternative to achieve long-term deficit reduction. 
However, as is well known, our Republican colleagues continue 
to resist the balanced approach to deficit reduction that has 
been recommended by every bipartisan group that has looked at 
the budget challenge. Our Republican colleagues continue to 
oppose the idea that we should close even one special interest 
tax loophole for the purpose of deficit reduction.
    This means that, come January, as the chairman said, the 
Sword of Damocles will go into effect, imposing indiscriminate 
across-the-board cuts of almost a trillion dollars, 50 percent 
from defense and 50 percent from nondefense spending. It is a 
meat-axe approach to deficit reduction that we should avoid.
    There is no question that we need to reduce our deficit. I 
think we all agree, as the chairman has said, that the meat-axe 
approach is not the way to go. The cuts would be both too deep 
and too arbitrary. That is why both the President's budget and 
the House Democratic alternative budget would replace those 
deep cuts with a plan to achieve greater deficit reduction from 
targeted, balanced policy choices.
    We have seen a number of proposals that are coming out of 
the process that was set up by our Republican colleagues to 
deal with the first year of the sequester, and unfortunately we 
continue to see that lopsided approach.
    The Ways and Means Committee has proposed eliminating the 
social services block grant, which helps 23 million children 
and adults get essential services, including the Meals on 
Wheels program, prevention of child abuse and neglect, and 
child care for low-income parents returning to work. Eliminate 
it.
    In the Ag Committee--in the Ag Committee, Mr. Chairman, not 
one ag subsidy was cut. Not one penny. Instead, the Republican 
proposal emerging from the Ag Committee will significantly cut 
food and nutrition programs for millions of families. Three 
hundred thousand children will lose their free lunch programs 
at school; and millions of Americans will see reduced support 
for food and nutrition, again at a time when not one subsidy 
for a major agribusiness was cut. That, Mr. Chairman, I think 
is a twisted result.
    Finally, in the Financial Services Committee, they proposed 
to eliminate the early intervention authority to shut down 
nonbank financial firms whose failures would have a significant 
negative impact on the economy. The consequence of this will be 
the next time around taxpayers will have to pick up the bill.
    We saw what happened last time. The Wall Street reform bill 
designed a process to make sure that the big banks and 
financial institutions pay for any future failure. Apparently, 
our Republican colleagues decided to put the taxpayer at risk 
instead.
    So, Mr. Chairman, I would just say that, unfortunately, 
what we have seen through the process so far is more of the 
same, more of the same meaning cutting important investments, 
shredding the social safety net, and again protecting tax 
breaks for the wealthiest Americans and for special interests.
    We can do a lot better. I hope we will all take the same 
balanced approach to reducing the deficit as has been 
recommended by bipartisan commissions, meaning combining tough 
cuts with cuts to tax breaks and tax loopholes for special 
interests.
    I thank you.
    [The statement of Mr. Van Hollen follows:]

      Prepared Statement of Hon. Chris Van Hollen, Ranking Member,
                        Committee on the Budget

    This hearing is an important opportunity to examine the budget 
sequester--and how it is we got to this point.
    The Budget Control Act (BCA) was a difficult compromise to avert 
economic crisis and avoid a default on the country's debt. It reduced 
spending over the next decade by about $900 billion and set in place an 
agreement to reduce the deficit by another $1.2 trillion. The sequester 
was included in the legislation as a last resort to encourage the 
Congress to develop a bipartisan alternative to achieve long-term 
deficit reduction. However, our Republican colleagues continue to 
resist the balanced approach to deficit reduction that has been 
recommended by every bipartisan group that has looked at the budget 
challenge. Republicans continue to oppose the idea that we should close 
even one special interest tax loophole for the purpose of deficit 
reduction.
    This means that come January, this ``Sword of Damocles'' will go 
into effect, imposing indiscriminate, across-the-board cuts of almost 
$1 trillion--50 percent from defense and 50 percent from non-defense 
spending. It is a meat-ax approach to deficit reduction that we should 
avoid.
    There is no question that we need to reduce our deficit--and I 
think we all agree that the BCA's slash-and-burn approach does not make 
sense for our country. These cuts would be too deep and too arbitrary. 
That's why both the President's budget and the House Democratic 
alternative budget would replace these deep cuts with a plan to achieve 
greater deficit reduction from targeted, balanced policy choices.
    But instead of working on a bipartisan solution to address these 
pending cuts, Republicans have doubled down on their lopsided approach 
to deficit reduction that protects the very wealthy and special 
interests at the expense of everyone else. Their solution is further 
cuts to vital services imposed through both the reconciliation 
instructions and the additional cuts in discretionary spending mandated 
by the Republican budget that violated the spending levels agreed upon 
in the Budget Control Act.
    The process is not yet complete, but three of the six committees 
have already recommended cuts to vital services that will affect 
Americans in many ways. In fact, some of the cuts will hurt millions of 
low-income and disabled Americans at a time when millions remain out of 
work through no fault of their own and are struggling to make ends 
meet. They include:
     Eliminating the Social Services Block grant, which helps 
23 million children and adults get essential services. This includes 
support for the Meals on Wheels program, prevention of child abuse and 
neglect, and child care for low-income parents returning to work.
     Cutting the Supplemental Nutrition Assistance Program 
(SNAP) that helps low-income households put food on the table--while 
not cutting a single unnecessary subsidy for big agri-business. The 
Republican plan reduces assistance to every single household receiving 
SNAP benefits almost immediately and cuts 1.8 million people off of 
food assistance entirely. 75% of these households are families with 
children. In addition, nearly 300,000 children would lose free school 
meals, on top of losing the SNAP benefits that provide food at home. 
Once again, special interests win out over American families.
     Repealing the FDIC's early intervention authority to shut 
down non-bank financial firms whose failures would have a significant 
negative impact. The Wall Street Reform law designed this early 
intervention authority to pay for itself over time, and repealing this 
authority will ensure that taxpayers will likely have to pay the price 
if we ever have to bail out financial firms in the future.
    This is all more of the same. The Republican budget ends the 
Medicare guarantee, raises the costs of student loans, increases the 
tax burden on middle-income Americans, and guts important investments 
in our economy--all to protect and expand tax breaks for the wealthy 
and special interests.
    Democrats have taken a different approach--one that preserves the 
promises we've made to seniors, boosts job growth, and makes critical 
investments in our nation's future. Both the President's budget and the 
very similar Democratic alternative budget include specific and 
balanced deficit reduction plans, replacing the meat-ax cuts in the 
sequester with a combination of reductions from mandatory programs and 
revenues generated by eliminating tax loopholes and asking millionaires 
to return to the same top tax rate they paid during the Clinton 
administration.
    I hope our Republican colleagues will ultimately choose to take the 
approach recommended by every bipartisan commission--a balanced 
approach to reducing the deficit and replacing the sequester.

    Chairman Ryan. Thank you.
    Ms. Poling, why don't we start with you?

    STATEMENTS OF SUSAN A. POLING, DEPUTY GENERAL COUNSEL, 
    GOVERNMENT ACCOUNTABILITY OFFICE; AND DANIEL I. WERFEL, 
 CONTROLLER, OFFICE OF FEDERAL FINANCIAL MANAGEMENT, OFFICE OF 
                     MANAGEMENT AND BUDGET

                  STATEMENT OF SUSAN A. POLING

    Ms. Poling. Good morning, Chairman Ryan, Ranking Member Van 
Hollen, and members of the committee. Thank you for inviting me 
to speak with you today.
    I am the deputy general counsel of the Government 
Accountability Office. Before assuming this position, I was 
responsible for GAO's appropriations law decisions and 
opinions, the Red Book, and legal support for, among other 
teams, our budget issues group.
    You asked GAO to speak about two topics today. First, you 
asked us to discuss the application of two fiscal laws, the 
Antideficiency Act and the Impoundment Control Act, as agencies 
prepare for a possible sequestration under the Budget Control 
Act. And, second, you asked us to discuss the meaning of 
``program, project, and activity'' under the Budget Control 
Act. GAO has an oversight role with regard to fiscal laws and 
is statutorily responsible for publishing and maintaining 
standard terms related to the Federal budget process.
    The Budget Control Act of 2011, which amended the Balanced 
Budget and Emergency Deficit Control Act of 1985, more commonly 
known as the Gramm-Rudman-Hollings Act, established a process 
to achieve a deficit reduction target of $1.2 trillion by the 
end of fiscal year 2021. Among other things, the Budget Control 
Act requires that the Office of Management and Budget 
calculate, and the President order, a sequestration of 
discretionary and direct spending on January 2, 2013, to 
achieve reductions for that fiscal year.
    Despite the possible impact of any sequestration, agencies 
must continue to comply with the requirements of the 
Antideficiency Act and the Impoundment Control Act. The Budget 
Control Act does not waive the application of these two very, 
very important fiscal laws, both of which underscore Congress's 
constitutional power of the purse.
    These two laws act in concert. The Antideficiency Act 
prohibits agencies from spending in excess of or in advance of 
their appropriation or an apportionment, while the Impoundment 
Control Act bars agencies from refusing to use the amounts that 
Congress has appropriated.
    Congress enacted the Impoundment Control Act to tighten 
congressional control over Presidential impoundments and to 
establish a procedure by which Congress could consider the 
merits of impoundments proposed by Presidents. Thus, the agency 
must carry out their appropriations regardless of the 
possibility of reductions in budget authority that could take 
place at the beginning of the second quarter of fiscal year 
2013.
    Agencies do have some experience in maintaining operations 
in uncertain budget times. In the past decade, agencies have 
continued to carry out their missions with temporary 
appropriations under continuing resolutions for many months 
into the fiscal year.
    The Budget Control Act also provides that sequestration for 
fiscal year 2013 will reduce each nonexempt account by a 
uniform percentage necessary to achieve the calculated 
reduction for that fiscal year. OMB is required to implement 
the sequestration such that the same percentage reduction 
applies across all programs, projects, and activities in a 
budget account.
    Programs, projects, and activities are to be identified 
with reference to the relevant appropriation act, the relevant 
committee reports, any report of the relevant fiscal year, or 
for accounts that are not included in the appropriations acts 
with reference to the most recently submitted President's 
budget. Under this framework, each budget account must be 
analyzed separately to determine its component programs, 
projects, and activities.
    In 1986, when agencies had to implement the same language 
in the first sequestration, GAO found that, despite the variety 
of definitions, most agencies had little difficulty in 
identifying information sources needed to determine what 
program, projects, or activities existed within a given 
account. We did identify in 1986 some ambiguities in various 
definitions and some oversights and omissions and some very 
practical problems, where the language of the appropriations 
act or the committee reports did not coincide with functional 
program or project information used by the agency budget 
officials for the actual program execution.
    In the final analysis, the Budget Control Act vests OMB 
with the authority to implement sequestration. The execution 
and impact of any spending reductions will depend on the legal 
interpretations and actions taken by OMB. To date, OMB has not 
issued guidance to agencies on preparing for the implementation 
of the Budget Control Act or how it would construe program, 
project, or activity.
    This concludes my prepared statement, and I would be happy 
to answer any questions that you or other members of the 
committee have at this time.
    [The prepared statement of Susan A. Poling follows:]
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman Ryan. Great. Thank you.
    Mr. Werfel.

                 STATEMENT OF DANIEL I. WERFEL

    Mr. Werfel. Mr. Chairman, Ranking Member Van Hollen, 
members of the committee, good morning.
    I am here at your request to provide input on issues 
related to the Budget Control Act of 2011 and the sequester, 
the President's proposal to replace the sequester, and OMB's 
role in implementing the sequester should it take effect on 
January 2, 2013.
    Currently, I serve in the position of controller at OMB. 
This position was created by the Chief Financial Officer's Act 
of 1990, with responsibilities for coordinating government-wide 
policy and reform efforts related to financial management. 
Historically, the controller, working with agency CFOs, plays 
an important role supporting the director of OMB in preparing 
for both ordinary and extraordinary financial circumstances 
across government. It is in this capacity that I am speaking 
before the committee today.
    The BCA, passed on a bipartisan basis, established caps on 
discretionary spending for fiscal years 2012 through 2021. The 
Act also created a Joint Select Committee on Deficit Reduction, 
instructed to develop a bill to reduce the Federal deficit by 
$1.5 trillion over a 10-year period ending in fiscal year 2021. 
If the joint committee failed to propose and Congress failed to 
enact a bill including at least $1.2 trillion in deficit 
reduction, the BCA put into place an automatic process of 
across-the-board cuts to reduce spending known as the 
sequester.
    The President has made clear that Congress can and should 
act to avoid the sequester. The intention of the sequester was 
to drive Congress to a compromise through the threat of 
mutually disagreeable cuts to both defense and nondefense 
discretionary funding. If allowed to occur, the sequester would 
be highly destructive to national security and domestic 
priorities and core government functions. The administration 
believes that taking action to avoid the sequester in a full 
and balanced and fiscally responsible manner must be the 
primary focus of Congress's deliberations in the coming months.
    OMB plays a central role in the management, oversight, and 
execution of appropriations and authorities provided to the 
executive branch. On occasion, congressional action or inaction 
requires OMB to plan for extenuating circumstances.
    Recently, this has included planning for potential 
government shutdowns and operating under continuing 
resolutions, as well as other contingencies. On these 
occasions, OMB, in coordination with other executive branch 
agencies, has demonstrated an ability to plan appropriately, 
provide required guidance to agencies, and take the necessary 
steps to implement plans of action.
    OMB will be prepared to draw on these experiences in 
implementing the sequester if Congress does not act to avoid 
it. But as the administration has made clear, it is our firm 
belief that the sequester is not an appropriate mechanism for 
deficit reduction and should not occur. The adverse impacts of 
the sequester cannot be substantially mitigated with advanced 
planning and executive action. In this sense, the sequester 
called for in the BCA can still operate as designed, a blunt 
instrument that is intended to spur action by imposing 
sweeping, across-the-board cuts.
    A CBO report released last November estimated the magnitude 
of the cuts that would be required by the sequester. It found 
that base defense discretionary spending would be cut by 
approximately 10 percent, while nondefense discretionary 
spending would be cut by almost 8 percent. These cuts would be 
generally applied in equal percentages, indiscriminately 
affecting programs without regard to priorities or function. 
For defense, this means that all operations, from procurement 
to programmatic activities, will be affected. For nondefense, 
the cuts would be equally harmful and wide ranging, for 
example, cutting funding for education, law enforcement, 
infrastructure, and research and development.
    That is why the administration believes that avoiding the 
sequester, not trying to mitigate its effects, should be the 
focus of responsible policymakers. To this end, the President 
has put forward a balanced deficit reduction package to avoid 
the sequester. This package achieves more than enough deficit 
reduction to avoid the sequester if Congress chooses to act and 
pass it.
    Last September, to support the work of the joint committee, 
the administration released the President's plan for economic 
growth and deficit reduction. This package identified specific 
proposals from across the spectrum that far exceeded the 
deficit reduction target set by Congress. When the joint 
committee announced last November that it would be unable to 
achieve its mandate for deficit reduction, the President made 
clear that he would veto any legislation that attempted to 
cancel the sequester in part or in full without achieving at 
least the minimum $1.2 trillion of deficit reduction agreed to 
in the BCA.
    In February of this year, the President transmitted the 
2013 budget, which again included a deficit reduction package 
that would not only meet but exceed the mandate given to the 
joint committee.
    Importantly, unlike the sequester scheduled in current law, 
both of the President's proposals would achieve deficit 
reduction in a balanced, responsible way by making clear policy 
choices and targeted reductions. The administration has 
repeatedly provided a blueprint for Congress to avoid the 
sequester, while meeting the Nation's fiscal challenges. Now, 
responsibility rests with Congress, and ample time remains for 
such action. OMB stands ready to coordinate government-wide 
planning and activities for any contingency, but today the more 
pressing need is for Congress to act to avoid the sequester.
    Thank you, and I am happy to answer any questions you may 
have.
    [The prepared statement of Daniel Werfel follows:]

          Prepared Statement of Daniel I. Werfel, Controller,
                    Office of Management and Budget

    Mr. Chairman, Ranking Member Van Hollen, members of the Committee, 
good morning.
    I am here at your request to provide input on issues related to the 
Budget Control Act of 2011 (BCA) and the sequester, the President's 
proposal to replace the sequester, and the Office of Management and 
Budget's (OMB) role in implementing the sequester should it take effect 
on January 2nd, 2013.
    Currently, I serve in the position of Controller at OMB. This 
position was created by the Chief Financial Officers (CFO) Act of 1990, 
with responsibilities for coordinating government-wide policy and 
reform efforts related to financial management. This includes, for 
example, coordinating financial reporting, audits, financial systems, 
and other accounting and internal control functions of agency CFOs. 
Historically, the Controller, working with agency CFOs and other 
related officials, has played an important role supporting the Deputy 
Director of Management and the Director of OMB in preparing for both 
ordinary and extraordinary financial circumstances across government. 
It is in this capacity that I am speaking before the Committee today.
    The BCA, passed on a bipartisan basis, established caps on 
discretionary spending for fiscal years (FY) 2012 through 2021. The Act 
also created a joint Select Committee on Deficit Reduction instructed 
to develop a bill to reduce the federal deficit by $1.5 trillion over 
the 10 year period ending in FY2021. If the Joint Committee failed to 
propose (and Congress failed to enact) a bill including at least $1.2 
trillion in deficit reduction, the BCA put into place an automatic 
process of across-the-board cuts to reduce spending, known as the 
sequester.
    The President has made clear that Congress can and should act to 
avoid the sequester. The intention of the sequester was to drive 
Congress to a compromise through the threat of mutually disagreeable 
cuts to both defense and non-defense discretionary funding. If allowed 
to occur, the sequester would be highly destructive to national 
security and domestic priorities, and core government functions. The 
Administration believes that taking action to avoid the sequester in 
full in a balanced and fiscally responsible manner must be the primary 
focus of Congress's deliberations in the coming months.
    As noted above, OMB plays a central role in the management, 
oversight, and execution of appropriations and authorities provided to 
the Executive Branch. As a matter of course, this involves managing the 
normal operations of the government as funded through annual 
appropriations and existing mandatory authorities. However, on 
occasion, Congressional action or inaction requires OMB to plan for 
extenuating circumstances.
    Recently, this has included planning for potential government 
shutdowns, operating under continuing resolutions, and managing 
operations when the government's borrowing limit was nearly reached. On 
these occasions, OMB, in coordination with other Executive Branch 
agencies, has demonstrated an ability to plan appropriately for 
necessary contingencies, provide required guidance to agencies, and, as 
needed, take the steps necessary to implement plans of action. OMB will 
be prepared to draw on these experiences in implementing the sequester 
if Congress does not act to avoid it. As the Administration has made 
clear, it is our firm belief that the sequester is not an appropriate 
mechanism for deficit reduction and should not occur.
    Sequesters serve as the enforcement mechanism for the two budget 
controls currently in place: PAYGO and discretionary caps. Many of the 
statutory principles underlying their enforcement are longstanding. 
They rely on the framework first established in the Balanced Budget and 
Emergency Deficit Control Act of 1985 (BBEDCA) and modified in the 
Budget Enforcement Act of 1990 (BEA), Statutory Pay-As-You-Go Act of 
2010 (PAYGO), and most recently in the BCA.
    Like many of the circumstances described above, the sequester would 
be severely disruptive to normal government operations and will have 
far reaching consequences. The adverse impacts of the sequester cannot 
be substantially mitigated with advance planning and executive action. 
In this sense, the sequester called for in the BCA can still operate as 
designed--a blunt instrument that is intended to spur action by 
imposing sweeping across-the-board cuts.
    A CBO report released last November estimated the magnitude of the 
cuts that would be required by the sequester. It found that base 
defense discretionary spending would be cut by approximately 10 percent 
while non-defense discretionary spending would be cut by almost 8 
percent. These cuts would generally be applied in equal percentages, 
indiscriminately affecting programs without regard to priorities or 
function. For defense, this means that all operations, from procurement 
to programmatic activities will be affected. For non-defense, the cuts 
would be equally harmful and wide-ranging, for example, cutting funding 
for education, law enforcement, infrastructure, and research and 
development. In his March 28 testimony before the House Committee on 
Education and the Workforce, Secretary Duncan explained:
    A 7.8 percent reduction in funding for large State formula grant 
programs that serve over 21 million students in high poverty schools 
and 6.6 million students with special needs could force States, school 
districts, and schools to slash teacher salaries, lay off teachers, or 
reduce services to these needy children. More specifically, the 
resulting cut of more than $1.1 billion to Title I could mean denying 
funding to nearly 4,000 schools serving more than 1.6 million 
disadvantaged students, and more than 16,000 teachers and aides could 
lose their jobs.
    These types of deep cuts undercut critical government programs that 
the American people rely on and eliminate investments needed for future 
economic growth. These cuts are not the result of policy decisions. 
That is why the Administration believes that avoiding the sequester--
not trying to mitigate its effects--should be the focus of responsible 
policymakers.
    To this end, the President has put forward a balanced deficit 
reduction package to avoid the sequester. This package achieves more 
than enough deficit reduction to avoid the sequester if Congress 
chooses to act and pass it. Last September, to support the work of the 
Joint Select Committee on Deficit Reduction that the bipartisan BCA 
established, the Administration released the President's Plan for 
Economic Growth and Deficit Reduction. This package identified specific 
proposals from across the spectrum that far exceeded the deficit 
reduction target set by Congress for the Joint Committee. When the 
Joint Committee announced last November that it would be unable to 
achieve its mandate for deficit reduction, the President made clear 
that he would veto any legislation that attempted to cancel the 
sequester--in part or in full--without achieving at least the minimum 
$1.2 trillion of deficit reduction agreed to in the BCA. In February of 
this year, the President transmitted his 2013 Budget, which again 
included a deficit reduction package that would not only meet but 
exceed the mandate given to the Joint Committee. Specifically, the 2013 
President's Budget implements the discretionary spending caps that were 
negotiated and agreed to as part of the BCA, generating more than $1 
trillion in deficit reduction over the next decade, and reducing 
discretionary spending to 5 percent of Gross Domestic Product (GDP) in 
2022. With these discretionary savings and other deficit reduction 
policies, including reforms to mandatory programs and new revenue, the 
President's Budget would cut the deficit by well over $4 trillion over 
the next decade. Importantly, unlike the sequester scheduled in current 
law, his proposals would achieve deficit reduction in a balanced, 
responsible way by making clear policy choices and targeted reductions.
    The Administration has repeatedly provided a blueprint for Congress 
to avoid the sequester while meeting the nation's fiscal challenges. 
Now responsibility rests with Congress and ample time remains for such 
action.
    OMB stands ready to coordinate government-wide planning and 
activities for any contingency. But today, the more pressing need is 
for Congress to act to avoid the sequester.
    Therefore, the Administration urges the Committee and this Congress 
to take action to enact balanced and significant deficit reduction. 
Thank you, and I am happy to answer any questions you may have.

    Chairman Ryan. Thank you.
    First off, I want to get the scoring right. CBO estimates 
that in the first year reductions of $55 billion in defense 
discretionary programs, which is a 10 percent reduction; $43 
billion in nondefense discretionary, an 8 percent reduction; 
and then $12 billion from mandatory accounts. Does that jibe 
with your interpretation of the sequester?
    Mr. Werfel. I think the CBO analysis is roughly correct. I 
think it provides a general framework that I think----
    Chairman Ryan. That is what we are basing our----
    Mr. Werfel. I think it is appropriate to rely on the CBO 
analysis in terms of getting a sense of what the anticipated 
impact of the sequester would be.
    Chairman Ryan. So the sequester formula--in no way is there 
a tax increase assumed or explicitly required as part of the 
sequester formula. Is that correct?
    Mr. Werfel. In terms of the sequester formula, I am not 
aware that a change in taxes, whether increase or decrease in 
revenue, is relevant to the sequester analysis.
    Chairman Ryan. Well, okay, but the sequester says--what--55 
from defense, 43 from nondefense, and then 12 from mandatory. 
And it is those three components that make up the sequester. 
Correct?
    Mr. Werfel. That is correct. It is defense, nondefense, 
roughly $55 billion a year across both categories. That is 
correct.
    Chairman Ryan. Right. Okay. Okay.
    Then the President's comments, that is where I am a 
little--they seemed a little ambiguous. He threatened to veto 
turning the sequester off. Any effort to get rid of those 
automatic spending cuts to domestic and defense spending he 
will veto. Is he saying he is going to veto it in the absence 
of not replacing it, and therefore is he in favor of replacing 
it? Or is he in favor of keeping it?
    Mr. Werfel. The President is in favor of avoiding the 
sequester.
    Chairman Ryan. And replacing the savings, not just allowing 
the $1.2 trillion to occur?
    Mr. Werfel. That is correct. He has put together a plan 
that includes sufficient deficit reduction to more than meet 
the original mandate of the BCA for $1.2 trillion in deficit 
reduction over 10 years.
    Chairman Ryan. That is what I want to get to. Okay, so you 
are claiming that his budget is his plan. But where in the 
budget is the specific proposal to ensure that the sequester 
won't happen? Where is in the budget the specific plan to deal 
with the sequester?
    Mr. Werfel. The President's framework would work as 
follows: Based on the fact that enactment of the President's 
policies, when building on already enacted legislation and 
activities, would create $4 trillion in deficit reduction over 
a 10-year window----
    Chairman Ryan. I understand.
    Mr. Werfel. Based on that framework, that is sufficient to 
avoid the sequester. And, therefore, if Congress were to pass 
legislation that could pass both Houses of Congress and the 
President can sign that has a balanced approach to deficit 
reduction, then the President would further sign any 
legislative language that would cancel the sequester at that 
point. But he is not going to do it before that point.
    Chairman Ryan. Okay, so that is the plan. Pass the 
President's budget.
    We had a vote on it about 4 weeks ago, and it got zero 
votes. It was 414 to 0. I don't know if the Senate is even 
going to have a vote or not, but last year they had a vote on 
the President's budget, and it was 97 to 0. So if that is the 
plan to prevent the sequester, just pass my budget, that is not 
much of a plan. That is already done.
    So knowing that this is happening, knowing that the law is 
the law, I think it would be wise for the Commander in Chief to 
at least have a plan B, knowing that his budget isn't going to 
pass. It has already failed. It hasn't passed.
    So January is coming, and I think it is probably in our 
interest to show how we are going to turn this off so that we 
are not in the middle of the fiscal year and all of a sudden we 
have a cliff. That is just a statement to OMB and to the 
President.
    The balanced approach, I hear this quite a bit these days. 
The President already has a pretty steep tax increase in his 
budget. That didn't pass. The BCA deal did not say raise taxes; 
it said cut spending. It actually had a specific formula 
backing up those spending cuts to achieve the deficit 
reduction. And so it strikes me that the President is changing 
the definition of the deal or that he is sort of moving the 
goalposts by going from spending cuts to tax increases.
    Now, I know we can claim that either achieve deficit 
reduction, but the spirit of the deal of the BCA for sure, but 
I think the law of the BCA also is focused on spending cuts. So 
is he now saying we can't cut spending to replace the 
sequester; we must raise taxes in order to replace the 
sequester? Is that what the new definition of success is or 
replacing the sequester is?
    Mr. Werfel. Several responses, Mr. Chairman, if you will 
allow me.
    First, I must go back and indicate that it is the 
administration's understanding that the President's budget has 
never been voted on by Congress. If you were referring to the 
amendment introduced by Congressman Mulvaney, it is our 
understanding that it did not include the various elements of 
the President's budget. It included some top-line numbers, but 
did not have all the specific policies.
    So I just wanted to get that on the record.
    Chairman Ryan. Sure.
    Mr. Werfel. In response to your second question regarding 
spending versus taxes, it is our belief that the deal that was 
agreed to in the Budget Control Act was for deficit reduction. 
And deficit reduction is going to have multiple components to 
it. In some cases, obviously, there will be spending cuts. In 
other cases, there will be revenue increases.
    The President's overall plan has a mixture. In fact, it has 
$2.50 of spending reductions for every dollar of revenue 
increase. So that is the type of balance that the President has 
been talking about, and that is the type of balance that the 
President is hoping Congress can work towards and get him a 
bill that he can sign so we can avoid the sequester.
    Chairman Ryan. So, well, those savings, by the way, are 
already enacted in law. So you can't say that your budget 
achieves those savings when they are already previously enacted 
savings by law. So I would just say a different definition.
    With respect to the vote we had, what Mr. Mulvaney did--I 
will try to speak for him; correct me if I am wrong, Mr. 
Mulvaney--is he took the CBO's score of the President's budget 
and simply put that into legislative text. So, as you know, 
budget resolutions are a series of numbers and totals of budget 
functions. We took CBO's interpretation of the President's 
budget, and that was the vote we took. It is the closest you 
can get to actually voting on a proposal. The point being the 
proposal didn't pass.
    So that plan for preempting and avoiding the sequester is 
not a viable plan anymore, and now we have do something else. 
And it sounds like the administration has not come up with 
their position as to how they would solve the sequester. That 
is the point we are trying to make here.
    And I also say you have a $2 trillion tax increase proposed 
in the President's budget, and are we now to conclude that this 
sequester won't happen unless we have a big tax increase, at 
least a $1.2 trillion tax increase?
    Mr. Werfel. Let me go back to one earlier point, and then 
we will quickly move past it.
    Again, I think it may be an issue of semantics, but the 
administration does not believe that the President's budget was 
truly voted on. But I think more importantly, whether the 
President's budget was voted on from a technical standpoint or 
not, what is more important to the American people is that we 
have a solution to the issue, and therefore the primary focus 
has to be that both Houses of Congress come together and send 
the President a bill he can sign.
    Now, to your second question in terms of whether the plan 
needs--did you say $2 trillion in tax-created revenue?
    Chairman Ryan. From the CBO score of your budget.
    Mr. Werfel. The President's budget--I just want to clarify, 
the net revenue impact of the President's tax proposals is $1.5 
trillion in increased revenue.
    And the other point that I would make is that the President 
has asked for balance, and I think the President is ready to 
work with Congress on a balanced approach. And so, you know, I 
don't know that we need to draw any lines in the sand on any 
particular elements here, but the guiding principle is balance, 
and that is what we should be focused on.
    Chairman Ryan. Just because I am running out of time and I 
want to be mindful of that, we use CBO's interpretation. Just 
like you say, the CBO interpretation of the formula for the 
sequester is pretty accurate. It is the same CBO interpretation 
we used for the revenues.
    I have got a technical question I want to ask you. There 
has been a discussion about the sequester base. I think you 
recently put out a letter yesterday on veterans' programs. We 
want to get a good understanding of this.
    So here is my question: Will you provide for the record in 
an electronic format a listing of each budget account, 
organized by its classification, that is exempt from the 
sequester, including the statutory basis for the exemption--
again, to clarify these concerns--nonexempt, or subject to a 
special rule in the event of a sequestration, including the 
statutory basis for this rule?
    So we want to make sure we are operating off the same 
understanding of what is and what is not in the sequester, what 
is the base, and what is the statutory basis for that. That is 
really--I mean this in a real technical way, so that as we 
prepare for our sequester mitigation efforts we are talking the 
same language.
    Mr. Werfel. So if I could respond, what we certainly can 
commit to is an explanation and a listing of those programs and 
activities that are explicitly exempt from sequester in the 
law, and I can go through some of those with you right now.
    Chairman Ryan. And your interpretation. Just give it to me 
in electronic format if you can, because we want to get the 
spreadsheets.
    Mr. Werfel. We can certainly provide that.
    Chairman Ryan. By account.
    Mr. Werfel. But what I want to clarify, because I don't 
want there to be any mistake about what I am indicating here, 
is that there are certain categories of activities that I 
think, and I believe, require further review before 
determination can be made in terms of whether they are exempt 
or not. And those reviews have not taken place in all cases and 
will likely not take place until some point in the future.
    Because the key is--and I want to, if I could, just key in 
on something that you said in your question. You said something 
associated with planning to mitigate. And I can't overstate 
enough it is so important to understand that planning, while we 
will do it when necessary and if necessary, is not going to 
mitigate the impacts of this sequester.
    Chairman Ryan. That is right. But we want know what it is 
so we can prepare for it.
    Mr. Werfel. Absolutely. But what our position is on the 
issue of planning for the sequester is that there are certain 
activities that would need to take place, but some of those 
activities are premature. There is still 8 months to go before 
the sequester would take place. And we want to make sure that 
the primary focus of everyone's efforts is on passing a bill 
and getting it to the President's desk to avoid the sequester. 
We don't want to create a scenario in which we are prematurely 
running a lot of different activities and drills for something 
that is 8 months in the future.
    Chairman Ryan. So you are saying you are not going to 
provide it, basically.
    Mr. Werfel. Saying what we will provide is those programs 
that are explicit in statute. But I cannot commit to provide 
you the programs that require further review because those 
reviews have not taken place yet.
    Chairman Ryan. So we don't know what is going to be 
affected in totality by an account basis by the sequester.
    Mr. Werfel. At this time there are still activities that 
need to be reviewed to determine their application under a 
sequester, yes.
    Chairman Ryan. All right. When should we expect it?
    Mr. Werfel. I don't know that there is a specific time 
frame here. I mean, again, I think our position would be the 
activities should be rendered moot by a plan that the President 
can sign to avoid the sequester. But at the appropriate time we 
will review the activities and we will provide Congress with 
that information.
    Chairman Ryan. So we don't even know how it is going to 
work when it hits. How can we prepare in Congress to replace it 
if we don't know what is going to happen? I don't understand 
that.
    Mr. Werfel. There is a couple of elements here, if you will 
allow me.
    Chairman Ryan. No, I am running out of my time.
    Mr. Van Hollen.
    Mr. Van Hollen. Well, thank you, Mr. Chairman.
    As you indicated in your opening statement, we know 
certainly in broad strokes what the impact will be both on 
defense and nondefense; and I think we all agree that that 
meat-axe, indiscriminate approach is the wrong way to go.
    Let's start by putting aside the phony baloney stuff about 
the President's budget. It was one of those, you know, 
congressional games. The reality is that they put up something 
that didn't contain any of the backup that the President 
provided in his extensive budget, and the White House made 
clear that that did not represent the President's budget. 
Moreover, the White House made clear that the Democratic 
alternative that we provided closely hewed in most respects, 
closely followed in most respects, the President's plan, and in 
that sense said that that was a better marker for support for 
the President's approach. And in fact, we got a very strong 
support, vote, Mr. Chairman, on that proposal.
    Just with respect to whether or not the $1.2 trillion is 
deficit reduction or just cutting, it is very clear that it is 
deficit reduction. The Supercommittee went through a number of 
efforts to try and get there. We could not get there because 
our Republican colleagues continue to take the position that we 
are not going to take one penny of revenue for the purpose of 
deficit reduction.
    And, Mr. Chairman, during the negotiations over the design 
of that sequester, it was proposed by the administration and 
others that, instead of some of the cuts on defense, we instead 
cut some special interest tax loopholes so that that is the way 
the sequester would operate. And, unfortunately, our Republican 
colleagues decided it was more important to protect some of 
those special interest tax loopholes than it was to protect the 
defense portion of the spending.
    Now, if you are going to take the position that sequester 
calls for spending only, which it doesn't, I don't see how you 
can't also take the position that 50 percent of that spending 
has to come from defense. That is the way it is written.
    I don't think either is true. I think that the sequester 
calls for $1.2 trillion in deficit reduction. The President has 
put forward a plan to get rid of that over 10 years and replace 
it with a balanced approach. The Democratic alternative did the 
same thing.
    And I would point out that both the President's proposal 
and the Democratic alternative replaced the sequester for the 
entire 10 years of the budget, whereas the Republican proposal 
only gets rid of the sequester for the first year. You leave 
defense exposed for the remaining 9 years. You leave everything 
else exposed for 9 years.
    So if you really want to protect against those across-the-
board and indiscriminate cuts for the 10-year period, you 
should embrace the Democratic alternative or something like the 
President's proposal.
    I would also point out that the process that we are seeing 
play out right here in the House shows why it was so important 
to come up with a balanced approach.
    Let's take the Ag Committee, for example. The sequester was 
designed to protect vulnerable populations during economic 
downturn. The sequester does not touch the food and nutrition 
programs. The sequester would hit some of the big ag subsidies, 
right? But in what is coming out of the Ag Committee, they 
flipped it on its head. The President's budget proposes cuts to 
ag subsidies.
    Chairman Ryan. So does ours.
    Mr. Van Hollen. But not what is being reported out of the 
Ag Committee. What you did was hit food and nutrition programs, 
about close to 100 percent of the cuts coming out of the ag, 
and not one penny from ag subsidies. So you were asking whether 
the administration has put anything on the table as part of its 
budget on the cutting side. Well, there is an example. They put 
ag subsidies on the table. So what we are seeing out of this 
process is a totally unbalanced approach.
    Now, we obviously at some point have to prepare for the 
worst, but first we want to avoid the worst. And that is what 
we hope we can do by taking the balanced approach we have had.
    Now, we also may face another issue as a result of the 
House Republican budget. That deals with discretionary 
spending. Because we all know that the Budget Control Act set a 
level of discretionary spending. Now, our Republican colleagues 
take the position, well, that spending is anywhere from $1.047 
billion to zero. Now, that would make a mockery of an 
agreement. Right? Why would you enter into an agreement where 
our Republican colleagues can come back and say well, hey, we 
can spend $1 billion on all the operations of the U.S. 
Government, and that is true to the agreement.
    And we have seen this sort of--we have seen this violation 
exposed. We just saw on the Senate side the other day 
Republican Senators, Senator Cochran, Senator McConnell, they 
all endorsed the level that was agreed to for discretionary 
spending under the Budget Control Act.
    So let's get the sequencing right here. I hope we are not 
going to be driven to a government shutdown by our Republican 
colleagues on the House side saying that we got to adopt their 
spending levels, which are a violation of the Budget Control 
Act, and if we don't they are going to threaten to shut down 
the government. I know you have had experience having to 
prepare for that last summer. But I assume that is the kind of 
thing you don't go into all the details about until you get to 
that point. But what kind of measures are you going to have to 
take if our Republican colleagues in the House continue to 
insist on violating that agreement when even their Senate 
Republican colleagues have said, you know, the levels are what 
they were in the Budget Control Act?
    Mr. Werfel. Thank you, Ranking Member Van Hollen.
    I think one of the major lessons learned of any government-
wide planning exercise like we saw in advance of the potential 
shutdown in April, 2011, is that that planning can be 
disruptive to ongoing government activities. In many measures, 
it involves pulling technical experts in the way in which the 
Federal Government runs, chief financial officers, chief 
acquisition officers, budget execution experts, and pulls them 
out of their normal rhythm and operations to plan for the types 
of contingencies that are involved in the event of a funding 
lapse like what we saw in April of 2011.
    That is what makes it so important, because of how 
disruptive that planning can be, to make sure that we don't do 
it prematurely and that we time and calibrate it effectively. 
Because, as we all know, we have a limited resource 
environment. And every asset, every individual that we pull off 
their current mission-critical activities and priorities to do 
planning for certain contingencies has a cost associated with 
it.
    It is really, really important I think for Congress and 
others to understand that there is a cost associated with these 
planning efforts. For shutdown, it involves bringing 
communities together to understand what are the common 
questions around things like technical accounting questions, 
systems, personnel, acquisition. We have to make sure that we 
are providing clear and consistent guidance. There is important 
interpretations of the Antideficiency Act in terms of what 
activities would be accepted or not and a lot of logistical 
implications. All of them, I believe, we successfully sorted 
through in advance of April.
    So we have done some of the groundwork, but that doesn't 
change the fact that we would have to reup that planning and it 
would be disruptive. So it is something that certainly I think 
everyone can agree is important to avoid.
    Mr. Van Hollen. Thank you.
    Mr. Chairman, I just want to close on this because I know 
your budget proposed cuts to ag subsidies.
    Chairman Ryan. Yes.
    Mr. Van Hollen. But that is not what the Ag Committee chose 
to do. What they chose to do was to cut food nutrition programs 
that will cut food assistance immediately to every single 
household receiving those food nutrition programs. It cuts $1.8 
million off of food assistance entirely. Seventy-five percent 
of those households are families with children. And, in the 
process, it will knock about 300,000 kids off the school lunch 
program.
    Now, that is not a balanced approach. Not one penny from 
big agribusiness, not one penny from ag subsidies. All of it 
from food and nutrition programs, almost all of it. At a time 
when the very thing we are talking about here, the sequester, 
was specifically designed to protect the most vulnerable 
populations in our country, especially at a tough economic 
time. So what we are seeing coming out of this process is the 
exact opposite of the balanced approach that we need.
    In addition to making those kind of cuts, we also should be 
cutting some of the big tax subsidies that are out there and 
asking the wealthiest Americans to go back to paying the same 
share that they were paying during the Clinton years, which was 
a time we know the economy was doing well.
    Chairman Ryan. When we mark up the reconciliation bill, I 
think we will have plenty of time to talk about these other 
points.
    I would say for the record this category, nutrition, has 
grown by over 200 percent. We just had testimony last week that 
said if it was just adjusted for the recession, it would have 
only grown 40 percent. What the Ag Committee said is you have 
to be eligible for the benefit to actually receive the benefit. 
That is hardly draconian.
    And with respect to the commodity programs, we do propose 
to cut ag subsidies at the same level, I think, the White House 
did. And the reason they didn't do it now is because they are 
trying to write a farm bill. And that is where the budget gives 
them the instructions to go after farm subsidies, because they 
are going do that in the farm bill.
    So I think first things first here.
    Mr. Van Hollen. If I could, Mr. Chairman, just on that. As 
you know, the farm bill includes the food nutrition programs, 
and so the same rule would apply with respect to cuts to the 
food and nutrition programs.
    Chairman Ryan. Right. But farm programs didn't increase by 
270 percent like food stamps.
    Mr. Van Hollen. A majority in this body, Mr. Chairman, on 
the Budget Control Act, voted to make sure that the programs 
like food and nutrition programs for the most vulnerable were 
not subject to these deep cuts; and now you are proposing to 
replace the sequester deep cuts with deep cuts in an area where 
a majority in this House voted to protect.
    Chairman Ryan. Two hundred seventy percent increase to me 
is just not sustainable. And, more importantly, let's make sure 
that people are actually eligible for the benefit if they 
receive it. These are common-sense reforms.
    Mr. Akin.
    Mr. Akin. Thank you, Mr. Chairman.
    On August 2, 2011, the President signed the Budget Control 
Act of 2011. And my question is, do you agree that section 302 
of the law requires a reduction of approximately about $109 
billion in spending on January of this next year? Is that 
correct?
    Mr. Werfel. That is correct.
    Mr. Akin. Okay. Thank you.
    Then the second thing is, does the Budget Control Act 
include any tax increases? Does it include any tax increases? 
Simple question. Yes or no.
    Mr. Werfel. I just want to make sure that you--I can't see 
you, and I want to make sure you are directing the question to 
me.
    Mr. Akin. Okay.
    Mr. Werfel. I thought I would give it a try.
    No, I am not aware that the Budget Control Act includes tax 
increases within it.
    Mr. Akin. Well, I am not, either. I just wanted to make 
sure of the facts.
    So it sounds like to me this thing that we keep calling the 
balanced approach, the President's balanced approach, it seems 
like it breaks the Budget Control Act's deal. Because there 
aren't any tax increases in it. It seems to me like we are kind 
of getting whipsawed. And it is almost like a blackmail. We are 
not going to do anything to help protect the national defense 
if you guys don't go along with a big tax increase. And so, to 
me, that doesn't seem like a balanced approach. It seems like 
breaking an agreement.
    But I appreciate your answering my questions.
    I yield back, Mr. Chairman.
    Chairman Ryan. That was fast.
    Mr. Blumenauer.
    Mr. Blumenauer. Thank you very much.
    I view this as sort of a continuing effort to kind of talk 
past each other. With all due respect, if I am catching the 
drift of your testimony, Mr. Werfel, you are suggesting that 
maybe we get on with our business, getting a budget enacted, 
working going forward. That if we spent all the time and energy 
like we have on hearings like this where nothing is 
accomplished, that maybe we wouldn't be dealing with 
sequestration in the fall. Is that the gist of what you----
    Mr. Werfel. That is correct.
    And if I could, Congressman----
    Mr. Blumenauer. I will come back to you in just a second. I 
will give you a chance to sum up.
    Mr. Werfel. Please.
    Mr. Blumenauer. But I am concerned, you know, that we have 
an exercise where the President's budget, absent the policy 
framework that would make it come alive, give it texture, give 
people reason to evaluate it, not just something to make out 
what they will and shoot at it, was defeated. I voted against 
it.
    I support the President's efforts. Mr. Van Hollen pointed 
out that we actually did something that had more of the policy 
detail that you can put your arms around. I think virtually 
every President's budget has been offered up in an unflattering 
way by people year in, year out. Reagan budgets were voted 
against by Republicans. I mean, this is something we do.
    But getting to the point where, you know, the fact is the 
Republican budget that has passed the House and embraced by the 
presumed Presidential nominee, Mr. Romney, people are running 
away from the details there. You know, we get a little whisper, 
Romney in a fundraiser talks about, well, we are going to go 
after certain departments and the mortgage home deduction 
because there is no detail that has been given to us about all 
these tax preferences that are going to be scaled down so that 
you can have a massive tax reduction for people who need it the 
least and make it deficit neutral.
    People run away from details, and we are putting off the 
day where we roll up our sleeves and get to work.
    The Senate has made a decision, Republicans, that they are 
going to stick by the deal, and we are going to be getting a 
budget from them, Democrats and Republicans, that at least has 
the same top line number so we can move forward. And I think 
that is important. Because I really believe in the heart of 
hearts of a number of my friends on the other side of the 
aisle--I know because I have had conversations with some of 
them--that they absolutely know that we can scale down defense 
spending and still have the most powerful military in the 
world. No question about it. Significantly. Would that, instead 
of playing this game, we get into doing that.
    I, Mr. Chairman, have worked with you on agriculture reform 
for a decade. I think we are closer to doing that than we have 
ever had before. But, instead, we have this missile launched up 
that is going to have real consequences on real people. You 
know, they tried to rewrite the farm bill in the committee of 
12. It wasn't up for reauthorization then, but they had a 
chance to try and work something through.
    And, again, that is sort of beside the point. We could have 
the Budget Committee actually get into the weeds and help 
provide momentum for doing things that I think we actually 
agree on, agriculture reform and reform of defense spending. 
But the longer we spend time like this and we have 
reconciliation instructions that will never be enacted but are 
really draconian, it complicates everybody's job, and it makes 
it less--it makes it actually more likely that the default of 
the sequester comes into play.
    Chairman Ryan. Would you yield just in a friendly way on 
that?
    Mr. Blumenauer. I would yield.
    Chairman Ryan. You say reconciliation instructions that 
will never be enacted. I think that is true given this current 
Congress. But I also think it is irresponsible for us not to 
show how we would replace the sequester if we don't think it 
should--the formula should be impacted as it is.
    So what we are doing is we are saying here is how we will 
fix this issue that everybody acknowledges needs to be fixed, 
and what we are not seeing from the administration, from the 
Senate is their solution on how to fix this issue before this 
moment comes. And that is what is frustrating to us.
    Mr. Blumenauer. Mr. Chairman, I really want to foster--I 
guess I only have 15 seconds left--I want to foster this 
discussion. I want you to be able to express your thoughts. But 
I truly think that there are areas here where we could have 
solutions if it isn't all about the next election, if it isn't 
all about positioning artificially with the Senate, running up 
to a deadline where there might be a shutdown, which could 
happen.
    Look what happened with the FAA. We put 70,000 people out 
of work last summer, furloughed 4,000 people before we ended up 
accepting what was essentially a bipartisan compromise that was 
supported by 90 Senators.
    And I just hope that we minimize this and get to the 
details, where I think we can avoid sequestration, I think we 
can an avoid a shutdown, and I think we can show that we 
actually agree on some stuff. But I appreciate what you do in 
agriculture.
    Chairman Ryan. Likewise, appreciate your work as well.
    Mr. Lankford.
    Mr. Lankford. Thank you, Mr. Chairman.
    Ms. Poling, let me ask a quick question on just some 
clarification on the nonexempt question. Veterans, some 
conversation about that. Would you consider the veterans, 
veterans' benefits as a nonexempt area that would avoid 
sequestration?
    Ms. Poling. GAO has a congressional request at this point 
in time for an opinion on whether the VA programs are exempt 
from sequestration; and as part of our process we reach out to 
the agencies involved, VA and Office of Management and Budget. 
And so we are working the issue right now. We expect to issue 
an opinion on this in the next several weeks.
    Mr. Lankford. Okay. What about transportation?
    Ms. Poling. We don't have any requests on transportation.
    Mr. Lankford. Okay. What about the payroll of our troops?
    Ms. Poling. The MILPERS appropriation, if the President 
chooses, he can exempt that.
    Mr. Lankford. Okay. It would just increase the sequester in 
other areas.
    Ms. Poling. That is exactly right.
    Mr. Lankford. Payroll can be protected based on the 
President's decision whether he is going to protect the payroll 
of military personnel, but it increases the sequester amount in 
other areas if that is done.
    Ms. Poling. That is true.
    Mr. Lankford. Okay. Mr. Werfel, good to see you. We have 
been in multiple Oversight and Government Reform meetings 
together. It is good to be able to see you again.
    The House budget makes a proposal, the one that we had 
passed, makes a proposal to bring down spending now, earlier 
and faster, starting to prepare for the sequester, and to get 
ready for that and its total reduction on that, reducing our 
spending in the nondefense area by about $28 billion. The BCA 
reduces it by $43 billion. So what we don't see is the budget 
as irresponsible. We see it as preparing for what is law at 
this point.
    Now, we may have some disagreements on what needs to be cut 
and what doesn't need to be cut, but the law does include the 
sequester. We can either ignore the law or abide by the law. We 
are in the process of preparing for that in that.
    So as we go through that process of preparation, are there 
areas the President--that you have that you would specifically 
suggest, the President is suggesting a cut in nondefense area? 
We have seen the cuts in the defense areas, but in the 
nondefense areas?
    Mr. Werfel. The President's budget for 2013 includes cuts 
associated with meeting the agreements that were made in the 
Budget Control Act. And the President's budget meets all of the 
relevant budget caps that were put in place for fiscal year 
2013.
    We don't agree with the premise that you can mitigate the 
impacts of the sequester. We don't agree that now is the time 
to be diverting resources away from an approach and a proposal 
that can avoid the sequester with steps to try to mitigate it. 
And we can go through the litany of different programmatic 
impacts on both the defense and nondefense side of the 
sequester. I am not aware of any activity, and nothing in the 
House Republican budget, that would create any kind of ramp 
downward that is going to help.
    The reality is that the implications of such reductions are 
going to be harsh; and, therefore, we can only reach the 
conclusion that, given the harshness of those realities and 
given that there is no way to mitigate it, that the best thing 
we can do on behalf of the American people is avoid it.
    Mr. Lankford. That is what I am trying to understand. We 
can't mitigate it, so we have got avoid it.
    Your previous statement was there has to be within this 
framework of a balanced approach that the only way the 
President is going to agree to any cuts in spending in any area 
is if we also agree to be able to raise taxes. So it has to be 
this framework that you have mentioned multiple times, if we 
are going to reduce spending, which you are saying he is 
willing to agree to, we have to also increase taxes.
    Is there some magic number the President is looking for? If 
we will just increase $5 billion in taxes? Ten billion? What is 
balanced? Because balanced has never been defined. Will it hit 
balance if we will increase taxes this many billion? Can you 
help us with that?
    Mr. Werfel. I think--in response to that, I think there is 
a couple of important points. First----
    Mr. Lankford. I am running short on time, so be as specific 
as you can. I am sorry.
    Mr. Werfel. I will try to be.
    There is no line in the sand. The President's proposal 
involves----
    Mr. Lankford. So if we increase taxes $5 million, that is a 
balanced approach? It just--it has to be something? Somewhere 
somebody has got to get hit?
    Mr. Werfel. The President's budget provides a framework 
that we think is an important starting point to discuss the 
parameters of appropriate balance. It has $2.50 in spending 
cuts----
    Mr. Lankford. A lot of it is the war cuts. It is proposing 
10 years of spending out of the war--we all know we are not 
going to spend at the same level for the next 10 years. We 
could just say we are going to spend $500 billion in 2020, and 
then we will cut it, and then suddenly we just saved $500 
billion. It is not a real cut.
    With that, I yield back.
    Chairman Ryan. Thank you.
    Ms. Bonamici.
    Ms. Bonamici. Thank you, Mr. Chairman.
    I want to start by reiterating the comments from my good 
colleague, Mr. Blumenauer, about the importance of avoiding the 
sequester. And I have no doubt that the public would like us to 
work together and get that done. I have no doubt about that at 
all.
    Mr. Werfel, you talked about an approximate 8 percent 
reduction in nondefense discretionary programs in your 
testimony. And in your written testimony you mentioned that in 
his March 28 testimony before the House Committee on Education 
and the Workforce Secretary Duncan explained that a 7.8 percent 
reduction in funding for large State formula grant programs 
that serve over 21 million students and high poverty schools 
and 6.6 million students with special needs could force States, 
school districts, and schools to slash teacher salaries, lay 
off teachers, or reduce services to those needy children.
    More specifically--and this is again Secretary Duncan--the 
resulting cut of more than $1.1 billion to Title 1 could mean 
denying funding to nearly 4,000 schools serving more than 1.6 
million disadvantaged students, and more than 16,000 teachers 
and aides could lose their jobs.
    Now, in my district I know school districts are already 
eliminating teaching positions. They have fewer counselors, 
they are cutting music and librarians, and that is especially 
challenging for low-income students. And, frankly, our children 
don't get those early years back. And what is going to happen 
to our efforts to rebuild the economy and our long-term 
competitiveness in a global market when we are doing this to 
our future leaders? And I am struggling to understand how 
protecting agriculture subsidies and tax breaks for 
millionaires can be more important than our children's 
education.
    So I wonder, Mr. Werfel, if you could tell me--I know 
Secretary Duncan talked about the numbers for Title 1. Could 
you tell me what these cuts in the sequester would mean for 
programs like the IDEA, Individuals with Disabilities Education 
Act, and the important Head Start programs across our State and 
Nation?
    Thank you.
    Mr. Werfel. Absolutely, Congresswoman.
    As I have mentioned and as has been articulated many times 
throughout the hearing, the sequester, if it is not avoided, 
will have severe impacts on domestic investments, on national 
security, and on core government services. To give more color 
into the impact on domestic investments, you asked about the 
Individuals with Disabilities Education Act program within the 
Education Department. Secretary Duncan has indicated that over 
10,000 special ed teachers, aides, and other staff serving 
children with disabilities could lose their job. That is 10,000 
jobs lost. And it is not just the job loss, which is obviously 
a significant economic impact, but also obviously the children 
with disabilities that they are serving are also impacted by 
those job losses as well.
    You mentioned Title 1. Four thousand schools serving 1.6 
million disadvantaged students could be denied funding; and, as 
you mentioned, 16,000 teachers and aides could lose their job. 
And, again, that is a double-edged impact of both job loss and 
economic impacts, as well as the students and the educational 
outcomes that those teachers are trying to and working hard to 
serve.
    Head Start, 100,000 low-income children would lose access 
to early childhood education, 100,000 low-income children.
    So that is a good way of providing real meaning to what the 
sequester would create, and that is why I think it gives more 
urgency for Congress to come together and work together and put 
a bill that both Houses can pass and the President can sign.
    And going back to the questions of Congressman Lankford, 
there is no bridge to try mitigate the impact of these job 
losses and the students and the student services that will be 
impacted. Those will occur whether there are bridges in place 
or not. And we must take action to avoid it.
    Ms. Bonamici. While I appreciate that funding education is 
primarily a State function, these important programs like IDEA, 
Title 1, Head Start fill a very critical need; and in our 
districts that are already struggling the impact that these 
further cuts would cause I fear will be devastating to the 
future.
    Thank you very much for your important testimony.
    I yield back.
    Chairman Ryan. Thank you.
    Mrs. Black.
    Mrs. Black. Thank you, Mr. Chairman.
    Mr. Werfel, I want to go to page 28 of the President's 
budget, and in there where it states that the sequester--and I 
quote here--``would inflict great damage on critical domestic 
priorities as well as the country's national security.'' So I 
am concerned about what it will do to our national security. 
The Secretary of Defense was here, and he testified as well to 
this committee that these cuts would hollow out our military. 
Do you agree that the sequester cuts would be detrimental to 
our national security and our military in particular?
    Mr. Werfel. Well, I would certainly rely on Secretary 
Panetta to provide the subject matter expertise and the input. 
And I have read his comments, and I have no reason to disagree 
with them.
    Mrs. Black. So can you tell us what the President's plans 
are to not hollow out our military and where we can go to make 
sure we sustain our strong military and national defense?
    Mr. Werfel. The President has put forward a framework that 
would avoid the sequester. Setting up a priority, things that 
we need to do and take action. And it is clear, and I think 
Secretary Panetta has been clear about this, we must make it a 
priority to avoid the sequester, given its impacts. And to 
avoid the sequester, the President is holding firm to the 
agreements that were made in the Budget Control Act, that we 
have to identify $1.2 trillion over 10 years of balanced 
deficit reduction in order to do that. And that is the 
framework of which we are operating under.
    I think the President's budget, advised closely by 
Secretary Panetta and other leaders, makes the right 
investments to have a sustainable military and a sustainable 
defense operation going forward.
    But if the sequester is triggered, that will certainly 
compromise that important objective. So priority one has to be 
avoiding the sequester. The President has a put forward a plan, 
and we would really like Congress to act and send a bill to the 
President's desk that he can sign.
    Mrs. Black. Let me also go to the question of whether the 
sequester is going to also affect--does the OMB consider funds 
appropriated for the war to be subject to the sequester?
    Mr. Werfel. If you are referring to the overseas 
contingency operations fund, we are examining--earlier, in 
response to a question from the chairman, I referenced that 
there are certain activities and programs that are explicit in 
law as being exempt, and there are certain activities that 
warrant further examination. The overseas contingency 
operations is one of those activities that warrant further 
examination. Once those reviews are complete, we would be happy 
to provide that answer and that conclusion back to the 
committee.
    Mrs. Black. Well, I am waiting to hear that. Because this 
is coming about and will come about very quickly. So we would 
like to hear a plan and like to know what the President plans 
to do.
    Let me go to another subject which has been in the news a 
lot, and that is the GSA. As the comptroller, you have the lead 
responsibility for determining accounting and financial 
controls and management of asset policies government-wide. Of 
course, we know about the $800,000 Las Vegas party, suggesting 
those policies may not be adequate or certainly not being 
followed if they are there. Can you help us with some of the 
steps that you are taking to review these policies and increase 
the compliance with this scandal?
    Mr. Werfel. Yes. Let me start by saying that the findings 
that you are referring to and what occurred with respect to 
this conference are both offensive and unacceptable. They are 
offensive to me as the controller. And I think, as you 
mentioned, one of my primary responsibility is to work across 
the Federal Government in mitigating instances of government 
waste and error and fraud and other activities. And we take 
that job and the President takes that job very seriously for 
both big items and small items that are involved in that 
portfolio mitigating fraud, error, and waste.
    In the case of the GSA, as I said, what occurred was 
offensive and unacceptable. The people involved have been held 
accountable and are being held accountable on an ongoing basis. 
We are taking steps in a variety of different ways to learn 
from this and make sure that we move forward in a capacity 
where this does not happen again.
    I think it is important to know that we have been taking 
steps from day one in the administration to tackle this issue 
and have had critical successes. Obviously, the GSA issue is an 
unacceptable outcome and we have to make sure that those things 
don't happen again.
    But the President has dedicated significant attention, his 
attention, to things like improper payments. He worked on a 
bipartisan basis on new legislation that would reduce improper 
payments, and we are making effective results there.
    Mrs. Black. Reclaiming my time--and I know I am out of 
time--but, with the limited dollars we have, this is something 
that, as the public looks at what is happening, they are 
outraged. Because we are talking about sequesters for our 
military and our national security and yet we have this going 
on. I hope we will hear more from you and the President on the 
seriousness of this issue.
    Thank you.
    Chairman Ryan. Thank you. 
    Mr. Mulvaney.
    Mr. Mulvaney. Thank you, Mr. Chairman, and I thank the 
witnesses for being here today.
    I wasn't going to talk about my amendment, but since it got 
a little bit of attention at the outset of hearing I thought I 
would make a couple of points about it.
    We recognize that it didn't have everything that the 
President's budget has in it because the President's budget 
isn't presented to us in a fashion that could be submitted as a 
bill. The same is true, by the way, of the Simpson-Bowles 
proposal. But the closest that we had a chance to vote to the 
President's budget was my amendment.
    The White House--and I think you referenced it, as did Mr. 
Van Hollen--released a statement encouraging Democrat members 
to vote for Mr. Van Hollen's budget. And I was going to ask 
you, Mr. Werfel, where is the statement from the White House 
encouraging the Democrats in the House to vote for his budget?
    Mr. Werfel. To vote for the President's budget?
    Mr. Mulvaney. Yes, sir. Did he ask any Democrats in the 
House to introduce his budget or vote for his budget?
    Mr. Werfel. I am not aware of a particular moment in time 
other than the President submitting his budget in February to 
Congress. And I think by both explicit and implicit nature of 
submitting his budget to Congress, he is submitting it for 
congressional consideration.
    Mr. Mulvaney. If it is his plan, though, for turning off 
the sequester, do you think he should have been pushing his 
budget a little bit more during the budget process?
    Mr. Werfel. I don't know that it is fair for me to comment 
on how hard we are pushing.
    I know, for example, that this committee has received 
testimony from both Acting Director Jeff Zients, from Secretary 
Tim Geithner. I have watched those hearings. They were 
emphatically urging the passage of the President's policies and 
priorities.
    Mr. Mulvaney. Reclaiming my time, let me ask it a different 
way.
    Did the President like Mr. Van Hollen's budget better than 
his budget? Mr. Van Hollen's budget doesn't raise taxes by as 
much as the President's does. It doesn't raise spending by as 
much as the President's does. Does the President like Mr. Van 
Hollen's budget better than his own?
    Mr. Werfel. The President is ready to roll up his sleeves 
and work on a plan that can pass both Houses of Congress and 
that he can sign. He has set out guiding principles for such a 
plan, and I don't think it is a question of like one versus the 
other. He wants to get to a point where we are in serious 
working mode towards a plan that can serve the American people 
the best.
    Mr. Mulvaney. I agree, and that is why we are here today 
having this hearing.
    You mentioned let us roll up our sleeves. It is a priority 
to get the sequester turned off because of its impacts. I think 
one of the thing you said today was that all of your activities 
are focused on getting a bill that the President can sign in 
order to turn off the budget.
    The President was at our school yesterday. You and I both 
attended the University of North Carolina Chapel Hill Law 
School, and he was there talking about student loans. Do you 
think that was helping turn off the sequester?
    Mr. Werfel. That is a very good question, if I can respond 
to it.
    We have existing actions and priorities that we need to 
take on behalf of the American people on a day-to-day basis, 
and there are things that we need to be focused on in multiple 
capacities. We have to work to make college more affordable. 
From my standpoint in my job, I have to work to make sure that 
funds are spent to the right people in the right amount for the 
right purpose and that we mitigate fraud, waste, and error.
    The President has submitted his budget. The plan is there. 
Congress now needs to act and send him a bill. You have heard 
testimony from multiple witnesses about the President's budget 
and about our plans. I think we are working as hard as we can 
on a variety of different priorities. But I would actually 
greatly support and endorse the President taking the steps that 
he is taking to improve college affordability. It is one of 
many priorities that we need to be working toward.
    Mr. Mulvaney. That is fair enough, Mr. Werfel.
    Later that same day he taped Late Night with Jimmy Fallon. 
Do you think that was helping us get to a bill that we could 
pass in order to turn off the sequester that you say is going 
to dramatically, severely impact domestic investments, national 
defense, and cut core government services?
    Mr. Werfel. I think the President's message here is that he 
is ready to roll up his sleeves and work. He has submitted a 
plan to Congress. It contains $4 trillion in deficit reduction 
over 10 years. It is a balanced approach.
    Mr. Mulvaney. Has he asked Secretary Panetta to roll up his 
sleeves to prepare for the sequester?
    Mr. Werfel. Secretary Panetta has a wide-ranging set of 
responsibilities. I am certainly not the subject matter expert 
on all of them.
    What I do know as a general matter is that Secretary 
Panetta, like others, have to make judgments about where they 
need to be deploying their resources at any given time. The 
sequester is 8 months away. The planning for it will not 
mitigate its impacts. We believe, based on our expertise, both 
at OMB--and we have decades of experience with this--and in 
consultation with Secretary Panetta, that we will find the 
right time between now and January 2, if necessary, to initiate 
a more formal planning exercise.
    But, right now, I think everyone needs to understand that 
there are costs associated with doing that type of planning. In 
particular, that is as clear as it can be in the Defense 
Department where they have ongoing, mission-critical priorities 
that need Secretary Panetta's attention and need the leadership 
attention at the Pentagon.
    Mr. Mulvaney. Mr. Chairman, I yield back the balance of my 
time, but I broke the microphone.
    Chairman Ryan. We will get on that.
    Mr. Huelskamp.
    Mr. Huelskamp. Thank you, Mr. Chairman.
    When Secretary Panetta appeared before this committee, I 
asked him if the DOD had put in place any plans for dealing 
with the sequester. And he answered no, which is a little 
different than what you suggested to my colleague. I asked him 
that, since this was the law of the land, why had they not 
planned for such contingency? And he responded that OMB 
directed him not to. Is this true, Mr. Werfel?
    Mr. Werfel. I am not aware of that testimony. I don't think 
I can comment on it. I have no personal knowledge of that. I 
will say that what I have provided and what I have talked about 
is a responsibility for us to meet our current priorities.
    Mr. Huelskamp. You are not aware of the OMB actually 
telling Secretary Panetta to ignore the sequester? Because 
that's what he told the committee, and I have a letter in hand 
that confirms that.
    Mr. Werfel. I am not aware of any direction to ignore the 
sequester.
    Our direction, that I am aware of, has been to carry out 
your mission-critical functions as effectively as we can, and 
that we will work together to determine the appropriate time to 
initiate planning for the sequester.
    Mr. Huelskamp. My question is whether or not OMB told the 
Secretary of the Department of Defense to ignore the law of the 
land. You say you do not know. Who would make that decision if 
not you? How high are you up in OMB as comptroller? Are you 
just in the press office, or do you actually make decisions?
    Mr. Werfel. I am definitely not in the press office. I am a 
division director. I report to the deputy director for 
management at OMB, who reports to the director of OMB.
    Mr. Huelskamp. So you are here today, and you are telling 
us that you do not know if someone above you, which is just a 
couple people, actually told the Department of Defense to 
ignore the sequester in their budget plans. This is pretty 
serious. It is not about a budget issue. It is if the House and 
Senate and Congress, along with the President, do not come to a 
decision before January 2, these devastating cuts will take 
place, and Secretary Panetta says I have made no plans in case 
that would occur.
    Mr. Werfel. And my answer is not only am I not aware of 
that communication but I am aware of communications that run 
inconsistent with what you are indicating.
    Mr. Huelskamp. Would you provide me with a copy of those 
communications?
    Mr. Werfel. I am not aware of any written communications.
    Mr. Huelskamp. What kind of communications do you have that 
suggest that perhaps Secretary Panetta misled the committee--
which I don't think he did. He actually sent a letter, and I 
presume that he is in communication with OMB when he sends that 
communication to the committee.
    Mr. Werfel. I am talking from my own personal knowledge. 
From my personal knowledge, I am unaware of a communication, 
written or otherwise, that would instruct the Defense 
Department to ignore the sequester. I am aware of general 
verbal communications that we provide to the Defense Department 
that revolves around back-and-forth discussions on planning for 
a variety of different contingencies. And at this time we have 
discussed that, with 8 months before the sequester would take 
place, formal planning is not initiated.
    I think what Secretary Panetta said specifically when asked 
was that planning would likely initiate in the summer. It is 
April 25. It is not yet the summer. I think the plan would be 
to consult with Secretary Panetta over time to find out when 
the right time is to initiate planning.
    But again, I have to emphasize: Planning will not mitigate 
the impacts. Secretary Panetta has been very vocal about the 
impacts of the sequester, and planning will not mitigate those 
impacts.
    Mr. Huelskamp. I appreciate that. But I am very concerned. 
Apparently, there is a lack of communication in OMB as far as 
the devastating sequester, and that is the language that comes 
from Mr. Panetta and others.
    My other question is more along the lines of you continue 
to use the words ``revenue increase.'' Is there a difference 
between revenue increase and tax increase in your mind, Mr. 
Werfel?
    Mr. Werfel. Well, there are many ways to generate revenue 
for the Federal Government. Taxes is one of them. I think it is 
important to point out that the generic concept of a tax 
increase is something that the President's budget is very 
specific with in terms of the individuals that are impacted by 
any tax increase, and those are individuals who are earning 
more than $250,000 a year. But revenue has many elements to it. 
The President's proposal has a revenue plan.
    Mr. Huelskamp. I appreciate that. I think 90-some percent, 
maybe 99 percent of it includes tax increases, not fee 
increases.
    You talk about the $250,000 threshold. In the President's 
budget, does it raise taxes on anyone, any families that makes 
less than $250,000?
    Mr. Werfel. It is my understanding that, overall, there is 
a net tax cut for the middle class and small businesses under 
the President's plan.
    Mr. Huelskamp. In the next decade? Over the 10-year plan? 
It will raise $1.5 trillion or $2 trillion in tax increases, 
and it all will be on the top 1 percent?
    Mr. Werfel. The way it works, as I understand it, it is 
$1.5 trillion in revenue. It includes the expiration of the 
2001 and 2003 tax cuts for the highest earners, it eliminates 
inefficient and unfair tax breaks, and there are, within that 
$1.5 trillion, net reduced revenue due to tax cuts for middle 
class and small businesses.
    Mr. Huelskamp. Thank you, Mr. Chairman. I yield back.
    Chairman Ryan. Mr. Young.
    Mr. Young. Thank you, Mr. Chairman.
    Thank you, Ms. Poling and Mr. Werfel, for being here today. 
I do appreciate it very much.
    Mr. Werfel, as far as the funds appropriated for this war 
that we continue to fight overseas, let me be clear, do you 
regard those funds as exempt from the sequester or not?
    Mr. Werfel. As I indicated, the overseas contingency 
operations funding is an area where more review needs to be 
taken before determination can be made on its applicability to 
the sequester. So my answer is it is premature for me to 
provide a definitive answer at this time. At the point in which 
the review is completed, we will provide our response to the 
committee.
    Mr. Young. Have you given any order of priority to 
different programs that might require the attention of OMB in 
making this determination?
    Mr. Werfel. I don't know that there has been an order of 
priority. I think it was mentioned earlier in the hearing that 
there was a determination made with regard to veterans affairs. 
It is my understanding that the issues associated with VA 
programs presented a very straightforward legal question that 
OMB general counsel was able to answer, and that is why we 
answered it.
    But in terms of other issues I am not aware right now of 
the nature of the complexity of those reviews. I do know that 
those reviews have not been initiated or completed, so it would 
be premature for me to comment on them.
    Mr. Young. You spoke with some level of specificity with 
respect to certain programs of government that would be 
adversely impacted, at least as characterized by you, by a 
sequester. For example, the Head Start program. You told us 
exactly the number of estimated people that would be impacted 
adversely through a sequester. Yet no attention whatever within 
OMB to the OCO function, to fighting a war overseas. It strikes 
me as this ought to be an urgent priority. Because as of 
January 2, it is conceivable that moneys will be pulled away 
from our fighting men and women, and our commander in chief has 
no plan. Right now, the plan seems to be to leave them in the 
lurch.
    Now I think your counter, of course, will be--and I will 
give you an opportunity to respond--is that we within Congress 
need to pursue a balanced approach. Before I give you an 
opportunity to respond, I am still trying to wrap my brain 
around what is meant by a ``balanced approach''. Because under 
the Budget Control Act, there were no tax increases; is that 
correct?
    Mr. Werfel. Yes. And hopefully you will give me an 
opportunity to respond more broadly. Because I understand, 
based on receiving this question several times, the question of 
whether there were tax cuts in the Budget Control Act, the 
particular point that is being made, and if I can have an 
opportunity to respond to it, I think I can give you some 
context to it.
    Mr. Young. I will. I will give you an opportunity both to 
respond to the fact that the President has not prepared for 
this contingency that moneys could be pulled away from the 
fight over in Afghanistan, leaving our men and women in the 
lurch, and the fact that the President signed on to a Budget 
Control Act without tax increases, thus seemingly violating his 
own mantra of a balanced approach.
    Please respond, Mr. Werfel.
    Mr. Werfel. I will take the issues in turn.
    First of all, when I outlined the implications of IDEA and 
Title 1, I didn't do so in a way that indicated that Secretary 
Panetta and others at the Defense Department aren't looking 
very closely at what the implications of the sequester would be 
in terms of programmatic impact. It is important for us to 
understand those programmatic impacts. Because I think if you 
know about it, if the American people know about it, then it 
will incentivize action.
    The President is very committed to a sustainable and an 
effective Defense Department going forward, and we have great 
leadership there, and they are doing everything they can. And 
no one is taking their eye off the ball on any issue. I can 
assure you of that.
    With respect to the question that I have received multiple 
times on whether there are tax increases in the Budget Control 
Act, my understanding of the framework and the parameters that 
surrounded the Budget Control Act was that the parties came 
together to come up with a deficit reduction plan, and the 
parties could not reach agreement on certain elements. And so 
what was put in place, the sequester, was intended to 
incentivize compromise, an agreement, across a broad set of 
parameters.
    The fact that there is no tax increases in there does not 
mean in any way, shape, or form that a parameter of the Budget 
Control Act is no agreement going forward can have a tax 
increase or a revenue impact. The sequester and the Budget 
Control Act set up a framework to compromise and negotiate and 
discuss a balanced approach that would meet the interests and 
the needs of both parties going forward. It is that type of 
balance that is needed.
    And the President has been clear the approach needs to have 
a revenue component to it. He has put forward a plan in the 
President's budget that has a revenue component. It has revenue 
generated by taxes to the highest earners in the country, and 
that is his plan.
    Chairman Ryan. Thank you.
    Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman and Mr. Van Hollen.
    The way I look at this, the hearing today is really about 
whether Congress is going to kill the patient to test a radical 
budget procedure here, given a name that most Americans really 
can't define, called sequester. If we fail to reach a 
reasonable budget compromise just 8 months from now, killing 
the patient with a meat axe will mean that nearly a trillion 
dollars of indiscriminate decisions will occur across 
discretionary spending, which accounts for a little less than 
40 percent of all Federal spending.
    People are not talking about mandatory spending. They are 
not talking about the tax side of the equation. They are just 
trying to solve the problem through one set of accounts.
    You know, you might recall we are in this pickle because 
about a year ago the world sat in disbelief when the Republican 
caucus rejected plan after plan after plan to raise the debt 
ceiling, and the sequester ended up being the last option to 
keep the government of the United States and the greatest 
Nation in the world from actually defaulting.
    We don't need meat axes in this country. We need to grow 
this economy and not give any more bad starts or fitful starts 
to harm growth and to rein in the deficit and restore our 
financial health.
    We have examples in the past, including under President 
Clinton, when this Congress measured up to its 
responsibilities. Truthfully, the Republican budget is not a 
serious proposal to do so. Republican math actually ends up 
hurting people; and their whole idea is that, in cutting the 
deficit, they are going to protect expanded tax cuts for the 
most wealthy and then cut programs for the most needy. We have 
seen them do that before.
    But, for me, that is morally and civilly unacceptable. Why 
should we give millionaires special tax rates, significantly 
lower for many of them, than what average working Americans pay 
and then say we are going to cut food assistance to people who 
are trying to hold it together out there across this country 
where unemployment still remains unacceptably high, hurting 
seniors, hurting children, and hurting the disabled? You just 
need to go to any food bank to see what is going on out there. 
This country needs a balanced approach to budget balancing.
    I wanted to ask Mr. Werfel, if you might, CBO estimated 
that the sequester, the meat axe, would result in a 7.8 percent 
cut to discretionary programs. Do you have any specifics on how 
individual programs on the discretionary side would be 
affected?
    And then I also wanted to ask Ms. Poling, the GAO has 
examined the impact that the sequester would have on programs 
that I view as contributing to economic growth, the Patent 
Office and a host of other functions that the American people 
depend on, the FAA. I would like to ask you: Where in the 
Republican proposal will we see the biggest economic 
disruptions?
    Those are my two questions, starting with Mr. Werfel.
    Mr. Werfel. Thank you, Congresswoman.
    We mentioned earlier--and I will summarize briefly--that in 
the area of education and Head Start the impact of the 
sequester would have 10,000 special ed teachers, aides, and 
other staff serving children with disabilities losing their 
jobs.
    We would have 4,000 schools serving more than 1.6 million 
disadvantaged students would be denied funding. Sixteen 
thousand teachers and aides would lose their job.
    In Head Start, 100,000 low-income children would lose 
access to early childhood education.
    In other areas, FAA cuts would have deleterious impacts on 
operations.
    In the area of global health, approximately 1.5 million at-
risk people would be denied treatment for the preventions and 
interventions from malaria, jeopardizing thousands of lives.
    Food safety inspections would be cut.
    Nine hundred and fifty thousand women and children being 
served by WIC would lose or be denied their benefits.
    At NIH, the number of grants awarded would be cut by 700, 
slowing research that would lead to new treatments to cure 
diseases such as cancer and Alzheimer's.
    The National Science Foundation would have 1,650 fewer 
competitive basic research and education grants, supporting 
almost 20,000 researchers, students, and teachers.
    Roughly 300 national parks would either be closed in full 
or partial.
    OSHA would reduce approximately 4,000 workplace 
inspections, leading to diminished protections for workers.
    And over 120,000 people with disabilities would be delayed 
in their decision or determination for SSA benefits.
    Mr. Kaptur. I guess my metaphor that the Republican budget 
kills the patient is absolutely true.
    Mr. Chairman, Ms. Poling wasn't able to answer the 
question. Could she spend 15 seconds at least on that?
    Ms. Poling. It will be very short.
    I am not aware of any specific work that GAO has in this 
area. You have a lawyer sitting here instead of a program 
person.
    Ms. Kaptur. Thank you.
    Chairman Ryan. Mr. Stutzman.
    Mr. Stutzman. Thank you, Mr. Chairman.
    Thank you to both of you for being here.
    I want to follow up real quickly to the question that Ms. 
Kaptur asked and the answer that you gave regarding all of the 
statistics of those folks who would be cut from services. It 
sounds like a pretty long list. I want to focus in a little bit 
on the SNAP program, and could you give us an idea of what the 
cuts would be to the SNAP program, Mr. Werfel?
    Mr. Werfel. Yes. That is a program where there is an 
explicit exemption in statute. So, in terms of SNAP, there 
would not be a direct impact on the SNAP program as a result of 
the sequester, because it is exempt.
    Mr. Stutzman. Okay. But I am assuming, just like every 
other program that you mentioned, we have seen increases in 
these particular programs over the past decade. SNAP has 
expanded over 270 percent over the past decade; and in the 
House Agriculture Committee, which I serve on, we have put 
forward a 4 percent spending reduction on that particular 
program.
    There seems to be a disconnect between the unemployment in 
this country and also the caseloads for programs like this. We 
are seeing unemployment fall between 2003 and 2007, but the 
caseloads go up over 20 percent. I am trying to figure out, if 
we are going to see such great cuts within these particular 
programs--as was mentioned earlier, the President's budget 
proposes to cut ag subsidies. But if you look at the 
administration line, there are no cuts to any of the 
bureaucracy that administers the program. Will there be any 
bureaucrats that lose their jobs due to these cuts?
    Mr. Werfel. Well, let me start by saying that it is 
important again to reiterate the premise that these cuts and 
these implications would occur. They don't need to occur. There 
is a path forward here to prevent them from occurring.
    Mr. Stutzman. You listed off the children, the women, the 
people who will be losing services. Is the bureaucracy, is the 
administration going to take any of the hit from these cuts?
    Mr. Werfel. The President's budget has numerous proposals 
in it that relate to cutting infrastructure and administrative 
expenses. In fact, there is a page in the President's budget 
that demonstrates--it is in the Cuts, Consolidations and 
Savings volume--that shows a commitment to reduce 
administration expenses by $8 billion between base year 2010 
and 2013. That's part of our overall effort to do more with 
less, to streamline our infrastructure. In fact, the Cuts, 
Consolidations and Savings volume has numerous examples of 
where government is becoming leaner and more efficient under 
the President's policies to move forward in a sustainable way.
    Mr. Stutzman. Can you share any of those with the Budget 
Committee in writing?
    Mr. Werfel. Absolutely.
    Mr. Stutzman. That would be helpful.
    What I see happening is there is this rhetoric of where we 
are going to be cutting services from children, from seniors, 
and those people who are out there receiving these benefits. 
And with the SNAP program, if there are going to be cuts, if 
these cuts even reach any children--I went to the USDA Web site 
and looked at the programs that are listed. You have Child and 
Adult Care Food Program; you have the Commodities Supplement 
Food Program; you have Eat Smart, Play Hard; Farmers' Market 
Nutrition Program; Food Distribution Program on Indian 
reservations, and a plethora of others. Do you believe any of 
those programs overlap where we can start consolidating some of 
these programs, making sure there is no waste in programs like 
this?
    Mr. Werfel. Certainly the President is interested in 
exploring a lot of different avenues for streamlining and 
reducing duplication. Within the budget volume that I 
mentioned, the Cuts, Consolidation, we have a variety of 
different efforts. We are consolidating 38 K-12 education 
programs. We are closing offices for both USDA and NOAA. We are 
consolidating 16 different Department of Homeland Security 
grant programs into one.
    If this committee or anyone in Congress has ideas for 
further consolidations, we are ready to work with you.
    Mr. Stutzman. What bothers me is the Federal Government has 
grown by 100,000 employees since President Obama has taken 
office. There seems to be more of an emphasis on hiring 
government employees rather than really focusing on making the 
cuts necessary and streamlining programs and making them more 
efficient. Just like I mentioned earlier with the ag cuts, I 
think there is bipartisan support to eliminate ag subsidies, 
but there is no cut within the workforce in the Federal 
Government.
    Thank you, and I yield back.
    Chairman Ryan. Ms. Wasserman Schultz.
    Ms. Wasserman Schultz. Thank you, Mr. Chairman.
    Mr. Werfel, welcome to the committee.
    Let me just emphasize again, Democrats and Republicans 
clearly both believe that sequestration is something that we 
should avoid and the path we are headed down needs to be 
altered. The difference, as you pointed out, is that Democrats 
believe that the Republicans through the Romney Ryan budget, 
their cuts-only approach to deficit reduction is irresponsible. 
It is not balanced. It makes sure that the social safety net is 
shredded. It makes sure that we end the Medicare guarantee. It 
reaches deficit reduction by giving more tax breaks to 
millionaires and billionaires, and it slashes key investments 
that are crucial to continuing our economic development and 
economic recovery.
    You have already detailed the really harmful impact that a 
cuts-only approach to deficit reduction--how it would affect 
children in Head Start programs. I want to ask you about 
something--some details that the National Education Association 
has talked about. Sequestration would effect 1.5 million low-
income kindergarten through 12th grade students who would be 
affected by harmful program cuts in Title 1 if sequestration 
happened. That would be at least a $1.1 billion cut in 2013. 
And if you apply CBO's estimated percentage cut, that is what 
that comes out to. That would also result in the loss of 16,000 
teachers and other education staff jobs.
    So do you agree with the NEA on those statistics, and how 
would a cut like that, again, an additional cuts-only approach 
to deficit reduction, affect the efforts of our school systems 
to improve the quality of education for low-income students?
    Mr. Werfel. Thank you, Congresswoman.
    The facts and figures that you referenced are the same ones 
that I have seen and understand to be further validated by 
Secretary Duncan as well, who is certainly concerned and 
certainly the administration's expert on these issues.
    As I testified earlier, the sequester, should it take 
place, would have its intended impact of serving as a blunt 
instrument and having both programmatic impacts such as 
significant deterioration in the current services that 
disadvantaged children are receiving in schools across the 
country but also job impacts, tens of thousands of teacher and 
aide jobs lost.
    I said that the sequester is having its intended impact. It 
was intended to be a blunt instrument to bring the parties 
together to come up with an approach that can pass both Houses 
of Congress and the President can sign. To do that, it is going 
to have to be multidimensional in its approach. An approach 
that only cuts spending and does not impact revenue is one that 
the President has indicated is not part of a path forward that 
he sees, a bill that he can sign.
    Ms. Wasserman Schultz. So let us be clear. In the 
President's budget, he proposed cuts to discretionary programs. 
So we are not suggesting that we achieve deficit reduction 
without cuts. In fact, Democrats have repeatedly voted for 
painful cuts. I can tell you I have voted for cuts in 
discretionary spending programs that I have opposed for my 
whole career. So we understand that compromise and working 
together is important. Unfortunately, we only have one side of 
the table willing to do that.
    Let's take a quick look at the reconciliation process that 
the Republicans have initiated. Republicans have put forth cuts 
in the reconciliation process, which is their alternative to 
actually achieving this balanced approach, that are going to 
hurt millions of low-income and disabled Americans. The 
Republican plan, through reconciliation, eliminates the social 
services block grant, which helps 23 million children and 
adults get services that they need to survive. And that 
includes support for the Meals on Wheels program, prevention of 
child abuse and neglect, and child care for low-income parents 
returning to work. It also includes cuts to the Supplemental 
Nutritional Assistance Program. Their plan reduces assistance 
to every single household receiving SNAP benefits and cuts 2 
million people off of food stamps entirely. So can you detail 
how harmful the reconciliation approach would be that the 
Republicans have been pursuing?
    Mr. Werfel. It is my understanding that when you take the 
House budget resolution and the reconciliation there is roughly 
$6 trillion in additional spending cuts above and beyond what 
the President's budget included. And if I understand it 
correctly, the way it is structured, it is taken on almost 
exclusively on the nondefense side of the ledger, going right 
at fundamental issues such as education, research, 
infrastructure, and many of the things you raised.
    Ms. Wasserman Schultz. The bottom line here is we are 
careening down an unsustainable path. The solution is to work 
together and take a balanced approach, not take a meat axe to 
important programs that are going to hurt people unless we work 
together.
    Chairman Ryan. Thank you.
    Dr. Price.
    Mr. Price. Thank you, Mr. Chairman.
    We look forward to working with anybody who is positively 
interested in solving the challenges that we face, and we hope 
that we have the President's input on that.
    You mentioned in your testimony: ``The sequester is not 
appropriate and should not occur.'' You stand by that position?
    Mr. Werfel. Absolutely.
    Mr. Price. The sequester--and I apologize for being out of 
the room if this was covered--the sequester was included in the 
BCA?
    Mr. Werfel. It was included in the BCA as a mechanism to 
put in place mutually disagreeable cuts to bring the parties 
together to find a path forward that can work.
    Mr. Price. And the President signed the BCA?
    Mr. Werfel. The President signed the BCA on the 
understanding that we would have efforts, including through the 
joint committee and other efforts, to bring together a plan 
again that both Houses can pass and the President can sign.
    Mr. Price. And those have moved forward. Sometimes they 
haven't been successful. We are working on hopefully what will 
be a successful plan as we move forward. But it is important to 
appreciate, I think, and for the American people to appreciate, 
that the President signed the Budget Control Act that included 
the sequester that the administration now says should not 
occur?
    Mr. Werfel. That is correct. The President wants to work 
with Congress to make sure that we avoid the sequester. His 
budget would do so.
    Mr. Price. I appreciate you saying that. The President has 
a budget that he has put forward. Has anybody introduced that 
budget in the Congress?
    Mr. Werfel. I am not aware of the procedural issues within 
the Congress in terms of whether it has been introduced or not. 
We talked earlier in the hearing about particular amendments, 
but I am not aware of a particular vote that has occurred on 
the President's budget in full.
    Mr. Price. But the fact of the matter is, on the 
President's budget, that nobody from his party has even 
introduced that budget?
    Mr. Werfel. Again, I am not aware of the congressional 
procedures on that.
    Mr. Price. I understand that you also said that the 
President's position is that the Democrat alternative in the 
House most closely paralleled and mirrored his budget; is that 
correct?
    Mr. Werfel. It is my understanding that the Democrats in 
the House have a proposal that is closer, particularly in terms 
of the balance between spending cuts and revenue.
    Mr. Price. And are you aware of the vote on that that 
occurred in the House?
    Mr. Werfel. I am not aware of the particular congressional 
procedures that occurred, no.
    Mr. Price. That budget was brought to the House floor and 
lost by about 100 votes. So, as the chairman has said, it is 
time to move forward positively and together to make it so, on 
these cuts and the sequester, that both sides, the President 
agrees ought not occur and we agree ought not occur.
    So what I am troubled by is, as the chairman mentioned 
early on, that we need to know the consequences. Everyone needs 
to know the consequences of the sequester so that we can plan. 
I was here early on and understand that you mentioned that the 
administration at ``the appropriate time'' will divulge what 
the consequences of the sequester are. When would the 
appropriate time be?
    Mr. Werfel. There are a couple of things within your 
question, if I can respond to them.
    We have looked at some of the programmatic impacts of the 
sequester, and I have outlined some of those in some detail 
today.
    There is a second question that revolves around the type of 
planning that would be necessary to implement or initiate the 
extraordinary circumstance of this type of sequester, and 
having decades of experience within OMB and having personal 
experience in these types of financial events we work to make 
sure that we are calibrating those planning activities as 
appropriate to make sure that we are planning at the right time 
and not planning prematurely.
    Mr. Price. But is it your understanding that the 
President's budget cannot pass the House?
    Mr. Werfel. I can't opine on that. I am not an expert on 
the congressional element of that.
    Mr. Price. The closest budget to it lost by nearly 100 
votes. The Senate has refused to bring up a budget. Let me 
assure you, the President's budget is not going to pass the 
House of Representatives.
    So let us move forward. Can we count on OMB to be able to 
give us the plan, the plan B, the working together option that 
allows us to move forward in a positive way so that these 
draconian cuts don't take place?
    Mr. Werfel. A couple of key points. The President has set 
up a proposal that would avoid the sequester. As I have 
mentioned, we need to roll up our sleeves.
    Mr. Price. It has failed, sir.
    Mr. Werfel. I understand. We need to roll up our sleeves. 
Congress needs to put together a package that can pass both 
Houses and the President can sign.
    Mr. Price. Unless we know what the administration believes 
are the consequences of the sequester, it is hard to get to 
that common ground; isn't it?
    Mr. Werfel. We can tell you, and I have done on several 
occasions during this hearing, some of the programmatic 
implications of the sequester.
    If you want to talk about the logistics associated with 
planning for sequester, I am happy to do that. That is 
different than the programmatic implications. The logistics of 
planning to sequester involve technical issues surrounding 
budget execution, accounting, acquisition. Again, it is our 
expertise that leads us to the conclusion that, with 8 months 
to go before the sequester would take place, diverting 
resources now to tackle those accounting and technical budget 
execution questions is not the right decision. We have enough 
time to handle those issues in advance of the sequesters.
    Mr. Price. I look forward to those meetings and would 
respectfully suggest that the American people expect us to come 
up with a plan. I hope that the administration is positively 
involved in that.
    Mr. Werfel. Our hope is that those meetings will not need 
to occur because we can avoid the sequester. But, if necessary, 
OMB will be ready.
    Chairman Ryan. So the takeaway is you don't have a specific 
proposal, and you are not going to tell us how it is going to 
be affected. It is clear as mud to us. The purpose of this 
hearing was to try to get more clarity. I think we have even 
less now. The sooner you can provide us with clarity, the 
better off everybody is going to be.
    Thank you very much. This hearing is adjourned.
    [Additional submission of Chairman Ryan follows:]
    
    
    
    
    [Whereupon, at 11:49 a.m., the committee was adjourned.]

                                  
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