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





  COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR 
                                  2013

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS
                             SECOND SESSION
                                ________

    SUBCOMMITTEE ON COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES
                    FRANK R. WOLF, Virginia, Chairman
 JOHN ABNEY CULBERSON, Texas        CHAKA FATTAH, Pennsylvania
 ROBERT B. ADERHOLT, Alabama        ADAM B. SCHIFF, California
 JO BONNER, Alabama                 MICHAEL M. HONDA, California
 STEVE AUSTRIA, Ohio                JOSE E. SERRANO, New York
 TOM GRAVES, Georgia                
 KEVIN YODER, Kansas                

 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mr. Dicks, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
             Mike Ringler, Stephanie Myers, Leslie Albright,
                    Diana Simpson, and Colin Samples,
                           Subcommittee Staff
                                ________

                                 PART 5
                                                                   Page
 Department of Commerce Budget Request............................    1
 Patent and Trademark Office Budget Request.......................  135
 National Oceanic and Atmospheric Administration Budget Request...  201
 American Manufacturing and Job Repatriation......................  265
 Hearing on Mismanagement of Appropriated Funds within the 
National Weather Service..........................................  375



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE

 76-713                     WASHINGTON : 2012














                      COMMITTEE ON APPROPRIATIONS

                   HAROLD ROGERS, Kentucky, Chairman

C. W. BILL YOUNG, Florida \1\        NORMAN D. DICKS, Washington
JERRY LEWIS, California \1\          MARCY KAPTUR, Ohio
FRANK R. WOLF, Virginia              PETER J. VISCLOSKY, Indiana
JACK KINGSTON, Georgia               NITA M. LOWEY, New York
RODNEY P. FRELINGHUYSEN, New Jersey  JOSE E. SERRANO, New York
TOM LATHAM, Iowa                     ROSA L. DeLAURO, Connecticut
ROBERT B. ADERHOLT, Alabama          JAMES P. MORAN, Virginia
JO ANN EMERSON, Missouri             JOHN W. OLVER, Massachusetts
KAY GRANGER, Texas                   ED PASTOR, Arizona
MICHAEL K. SIMPSON, Idaho            DAVID E. PRICE, North Carolina
JOHN ABNEY CULBERSON, Texas          MAURICE D. HINCHEY, New York
ANDER CRENSHAW, Florida              LUCILLE ROYBAL-ALLARD, California
DENNY REHBERG, Montana               SAM FARR, California
JOHN R. CARTER, Texas                JESSE L. JACKSON, Jr., Illinois
RODNEY ALEXANDER, Louisiana          CHAKA FATTAH, Pennsylvania
KEN CALVERT, California              STEVEN R. ROTHMAN, New Jersey
JO BONNER, Alabama                   SANFORD D. BISHOP, Jr., Georgia
STEVEN C. LaTOURETTE, Ohio           BARBARA LEE, California
TOM COLE, Oklahoma                   ADAM B. SCHIFF, California
JEFF FLAKE, Arizona                  MICHAEL M. HONDA, California
MARIO DIAZ-BALART, Florida           BETTY McCOLLUM, Minnesota
CHARLES W. DENT, Pennsylvania
STEVE AUSTRIA, Ohio
CYNTHIA M. LUMMIS, Wyoming
TOM GRAVES, Georgia
KEVIN YODER, Kansas
STEVE WOMACK, Arkansas
ALAN NUNNELEE, Mississippi
              William B. Inglee, Clerk and Staff Director

----------
\1\ Chairman Emeritus

 
  COMMERCE, JUSTICE, SCIENCE, AND RELATED AGENCIES APPROPRIATIONS FOR 
                                  2013


                                           Tuesday, March 20, 2012.

                      U.S. DEPARTMENT OF COMMERCE

                                WITNESS

HON. JOHN E. BRYSON, SECRETARY OF COMMERCE

                      Opening Statement--Mr. Wolf

    Mr. Wolf. The hearing will come to order.
    We welcome you, Mr. Secretary. We appreciate you being 
here. We have a number of issues to discuss with you today with 
respect to the fiscal year 2013 budget for the Department.
    Before we begin, I want to note that the Department's 
budget justification materials have been late and incomplete. 
This has greatly complicated the committee's review and 
analysis of your funding request. As you know, in this 
environment, programs that are not explained or justified will 
likely be cut. So I would urge you if you can correct this, 
particularly with regard to your staff.
    With respect to the fiscal year 2013 budget request, you 
are requesting $7.90 billion in new budget authority for the 
Department of Commerce. This amounts to $176 million or about 2 
percent higher than fiscal year 2012. The Commerce budget 
includes a number of program initiatives I will ask you about 
today.
    Giving the continued austere budget climate, it is unlikely 
we will be able to fund many of the requested increases. Of 
course, we will wait for the allocations to see where they are. 
The committee will continue to prioritize weather satellites, 
forecasting, research, innovation and manufacturing programs. 
The Department of Commerce can be a catalyst for changes that 
need to take place in the country with respect to 
manufacturing, scientific innovation and expanding 
international trade.
    We are holding a hearing on March 28th, where we will hear 
testimony on revitalizing American manufacturing as part of the 
larger strategy of economic growth. We have invited Dr. Patrick 
Gallagher, Director of the National Institute of Standards and 
Technology at the Department of Commerce, and Dr. Subra Suresh, 
Director of the National Science Foundation, to testify on how 
the government can work with the private sector to spare and 
assist innovation, research and manufacturing.
    We have also invited other outside expert witnesses to get 
a fresh perspective from those outside of government, and we 
hope to continue investing in these critically important areas 
in 2013. We have a number of questions. I will just summarize 
and just go to Mr. Fattah, the ranking member.
    And then you can proceed. Your full statement will be in 
the record, and you can proceed as you see appropriate.
    Mr. Fattah.

                     Opening Statement--Mr. Fattah

    Mr. Fattah. Thank you. Thank you, Mr. Chairman.
    And let me welcome you, Mr. Secretary, to the Committee for 
what will be your first budget hearing and appropriations 
hearing before the Committee.
    I attended your remarks at the Chamber of Commerce when you 
laid out a vision to build it here and sell it everywhere, 
focused on manufacturing, focused on unifying the entire 
government, not just the Commerce Department but around really 
promoting American manufacturing. I want to thank you for your 
over two decades of service as a CEO and coming to take over 
the helm of the Commerce Department.
    Obviously, shepherding the world's leading economy in a 
critical time is not a job for people who are looking for 
little to do. And you have taken this on with a great deal of 
vigor. I want to thank you for your tremendous leadership.
    I want to compliment the Department for its work over these 
last three years. We have had now some 25 months of consecutive 
private sector job growth in our economy. We see, both in terms 
of the stock market, in terms of durable goods, in terms of a 
whole set of indicators, that we are headed in the right 
direction. We may not be getting there as quickly as we want or 
some may want, but we are definitely headed in the right 
direction. And a large measure of this owes to the great work 
of those in your Department, and particularly the effort around 
exports and doubling the number of exports, you are ahead of 
the mark there.
    And I hope--I should put a plug in for the reauthorization 
of the Export-Import Bank while it is under consideration in 
the Senate. I hope they move that bill forward. But I cannot 
imagine why we would do anything to slow the efforts of the 
Commerce Department and the Administration to put Americans 
back to work. To have two solid years of private sector job 
growth, we should be applauding this and encouraging you to do 
even more with the variety of tools you have at your disposal.
    I am tremendously impressed with the advanced manufacturing 
initiative. I have been out to visit some of the leading 
beneficiaries of this work. Whether it is Pratt & Whitney and 
the United Technologies or Boeing or others, the work that is 
being done through a variety of ways to assist our leading 
manufacturers is to be commended. So I look forward to your 
testimony. There is a lot that we will have to get into as we 
go forward, as the Chairman mentioned. But as for myself, and I 
think for many Americans, we want to thank you for agreeing to 
take on this leadership role, and thank you for the leadership 
that you and your Department are providing as our economy 
recovers. Thank you.
    Secretary Bryson. Thank you very much.
    Mr. Wolf. You may proceed.

                  Opening Statement--Secretary Bryson

    Secretary Bryson. I will give brief opening remarks.
    Thank you very much, Chairman Wolf, Ranking Member Fattah, 
and members of the subcommittee. I am pleased to offer a 
written statement for the record and to discuss President 
Obama's fiscal year 2013 budget request for the Commerce 
Department.
    In these first five months as Secretary, I have seen many 
examples of how the Commerce Department supports American 
business. Just last Friday, I visited Pavilion Furniture, that 
is a small manufacturer in Miami, who we are helping to start 
exporting to the Caribbean and to Asia. The owner Mike Buzzella 
said, the introductions that the Commerce Department just made 
for us in Panama and the Pacific Rim are helping find new ways 
to grow for a small manufacturer in this global economy.
    This budget reflects a commitment to helping businesses 
like Mike's continue to drive competitiveness, innovation and 
job creation. It includes $8 billion in discretionary funding 
and $2.3 billion in mandatory funding. Throughout this budget, 
we have made smart and tough choices that cut costs while 
building only on programs that truly work. Key priorities are 
in areas where we see growth and promise, such as advanced 
manufacturing, exporting and attracting foreign direct 
investment.
    For example, the budget includes $135 million for R&D in 
areas like advanced materials and advanced manufacturing 
processes. These are critical areas where the U.S. must stay 
competitive. We will also continue to support the foundational 
building blocks of our economy, such as research and science, 
environmental sustainability and public safety. For example, 
NOAA's budget includes $1.8 billion for satellites, which 
provide 93 percent of the input to our Nation's weather 
prediction models. This directly impacts the daily flow of 
commerce and the ability of businesses and communities to 
prepare for disaster.
    Also, we have invested in stock assessments because our 
fishermen and our fisheries are culturally and economically 
vitally important to our country and to our competitiveness. At 
the same time, we are committed to serving as responsible 
stewards of taxpayer dollars. We propose eliminating 18 
programs, reducing funding for many others and achieving 
substantial administrative savings. Altogether, this will save 
taxpayers over $400 million.
    Let me just close by saying that as a CEO for nearly two 
decades, I strongly believe that any organization is most 
effective when it operates with a common vision. Our 12 bureaus 
are committed to functioning as what we call one Commerce. 
Collectively and collaboratively, we will continue to empower 
American businesses to drive our economy and to build on the 
nearly 4 million jobs that have been created over just the past 
two years.
    Thank you, all of you, for your continued support of the 
Commerce Department. I look forward to your comments, and I am 
pleased to answer questions.
    [The information follows:]


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    Mr. Wolf. Thank you Mr. Secretary.
    First, I am going to recognize Mr. Rogers, the Full 
Committee Chairman, and then Mr. Dicks, the ranking member.
    Mr. Rogers.

                     Opening Statement--Mr. Rogers

    Mr. Rogers. Mr. Secretary, welcome to your first hearing 
before this august group.
    Thank you, Mr. Chairman, for yielding me this time.
    You do not need to be a Ph.D. of economics to understand 
that the global economy, particularly Europe, is in a tailspin. 
China's economy, which had been on a vertical trajectory, is 
now slowing and sputtering. Japan's economy, once a bright star 
in the Pacific Rim, is fading, and our own economy is growing 
at a snail's pace.
    Unemployment continues at over 8 plus percent. Yesterday's 
newspapers tell a story that factory and manufacturing work in 
our country is failing to rebound, while continued trillion 
dollar deficits, including some $6 trillion already added under 
this Administration's watch, are creating pessimism globally 
that we will be able to meet our obligations and pay our bills.
    With this economic and fiscal backdrop, the Appropriations 
Committee has been the tip of the spear in Congress to roll 
back the trend of increasing and unsustainable discretionary 
spending and trillion dollar annual deficits. Last year we 
worked diligently to restore transparency to this process, to 
restore austerity and tough oversight to the appropriations 
process. And we were successful in reducing discretionary 
spending by some $95 billion from fiscal year 2010 levels. That 
is historic. It hasn't been done since World War II. This 
historic achievement involved thorough scrutiny of the 
Administration's budget proposals, including that of the 
Department of Commerce.
    There is no question that the Department of Commerce has a 
vital role to ensure that our country is focused on job 
creation, entrepreneurship and innovation and is competitive on 
the economic global playing field. We need to foster an 
environment where companies, big and small, feel confident 
investing here in the U.S. And we need to demonstrate to the 
world leadership to expand the market for U.S. products across 
the globe.
    Your job, of course, is crucial to identifying and removing 
obstacles to our economic growth and prosperity by reducing 
international trade borders, removing regulatory roadblocks, 
answering the shortage of small community capital or offering 
business expertise to our Nation's working men and women. 
Whether that is through small-scale EDA investments in rural 
communities, holding the toes of unwieldy trade partners to the 
fire through the Office of the U.S. Trade Representatives or 
supporting job-creating science-based research at NOAA and 
NIST, Commerce plays a critical role in turning our economy 
around.
    But it must do so cognizant of the fact that we can no 
longer go on spending money we do not have and borrowing like 
there is no tomorrow. Despite the Committee's efforts to 
responsibly reduce discretionary spending, it is mandatory 
spending, entitlement costs, that are the big driver of our 
debt and are largely outside the purview of this committee.
    Mandatory spending continues to skyrocket and place the 
future solvency of many programs in jeopardy. While your budget 
request contains $8 billion in discretionary funding, which in 
and of itself represents an increase of 5 percent above the 
fiscal 2012 enacted level, it also includes some $2.3 billion 
in mandatory funding for new programs. I remain concerned that 
as we move more and more spending to the mandatory side of the 
ledger to run amuck on auto pilot, absent congressional 
oversight, we do our great Nation a tremendous disservice and 
threaten its long-term economic and national security.
    This is further compounded by the concern I share with 
Chairman Wolf that your Department's congressional 
justifications were not timely or sufficiently thorough. We 
have got to continue to provide strong oversight and control 
spending to ensure that the American people receive the 
greatest value from each and every precious tax dollar they 
send us to spend. And this will not be possible without the 
best possible information from your Department. We look forward 
to hearing your testimony today and your plans, and we welcome 
you to the Committee.
    Secretary Bryson. Thank you.
    Mr. Wolf. Mr. Dicks.

                             CYBERSECURITY

    Mr. Dicks. Thank you.
    Mr. Secretary, it is good to have you here. One of the 
things I wanted to raise was the question of cyber crime, 
cybersecurity. General Keith Alexander, Commander of the U.S. 
Cyber Command and Director of the NSA, believes that malware, 
malicious software designed to disrupt computer operations, 
gather sensitive information or gain unauthorized access to 
computer systems, is being introduced at a rate of 55,000 
programs infecting computers each day.
    General Alexander has estimated the cost of cyber crime to 
the global economy is about $1 trillion annually. The U.S. 
portion of these global losses is likely measured in the 
hundreds of billions. The problem--already staggering--appears 
only to be getting worse. From your perspective as a business 
person, and I know that the Obama Administration is supporting 
the Lieberman legislation in the Senate, but tell us how you 
think this problem is affecting intellectual property, the loss 
of intellectual property, and is affecting the economy of the 
United States.
    Secretary Bryson. I think we have a very, very major 
challenge in protecting us from the problems of cyber attacks. 
We need greatly to enhance cybersecurity. I have spent time 
with General Alexander and many others on this subject. As 
perhaps you know, NIST has a key component of that, building 
the protection. At the Commerce Department, that work, which is 
work using the NIST model for setting standards, and that is an 
incredibly important and a dynamic model that will continue to 
strengthen our position. But we need to come together across 
the Federal Government with high intensity. And what we have 
before you does put some priority on requests for dollars with 
respect to building cybersecurity protections.

                           EXPORT-IMPORT BANK

    Mr. Dicks. Now, you are also, one of your jobs is to be a 
leading advocate for the export of goods from the United 
States, isn't that correct?
    Secretary Bryson. That is correct.
    Mr. Dicks. One of the things that we are trying to do up 
here is get reauthorization of the Export-Import Bank, and we 
are having difficulty doing that because one airline in 
particular is saying that this somehow adversely affects them, 
even though the planes that they buy mostly are Airbus, 
regrettably for a U.S. carrier. But isn't the, and I know this 
is not, the Export-Import Bank is not in this particular bill, 
but isn't getting this thing reauthorized important to the 
Administration's overall export strategy?
    Secretary Bryson. It is very important, not just, in my 
judgment, to this Administration but to economic position of 
our country. Ex-Im Bank is perhaps, as you know, in a position 
now in which its current funding is very close to running out. 
And our ability to compete in trade around the world and 
provide these exports that in turn provide jobs but also 
strengthen our economy and our competitiveness now and into the 
future will be somewhat diminished at the very least if we 
can't have Ex-Im Bank able to continue to provide the financing 
it has for both large and small companies.
    Mr. Dicks. I understand also that we make money on these 
transactions, that actually they are paid back, and we make 
several billion dollars every now and then based on these 
things being paid back. So it sounds like it is a good, it has 
been a good program, and it obviously is very important to 
Boeing out in Washington State where I am from. They estimate 
that if this thing is not reauthorized, they will lose 129 
sales at a time when the U.S. economy still needs to recover. 
With all due respect to my colleagues here, some of whom preach 
austerity, austerity is fine in the longer term. In the short 
term, we still have to get this economy moving. And the Ex-Im 
Bank I think is one of the tools to get it moving, and I hope 
that we can work with the Administration to get this 
legislation enacted.
    Also, you mentioned your satellite work. I know that takes 
a large part of your budget. But I must tell you the new 
Doppler radar out on the coast of Washington has just been 
remarkable. There was a gap on the coast of Washington that 
wasn't covered. Putting that radar in has done so much. Every 
night, it is mentioned by the local news people that they can 
see off the coast and see the developing weather conditions. 
And, as you know, weather on the coast of Washington State can 
be pretty rugged at times. And we have tribes that are 
vulnerable. We passed legislation to protect them. But this 
Doppler radar made a big difference, and I want to thank the 
Administration for their help on that.
    Secretary Bryson. It has made a big difference. Thank you.
    Mr. Dicks. Thank you. Thank you, Mr. Chairman.

                         REPORTING REQUIREMENTS

    Mr. Wolf. Thank you, Mr. Dicks.
    Mr. Secretary, in your opening statement, you complain 
about having to respond to reporting requirements. As members 
of the Appropriations Committee, we take our oversight 
responsibility very seriously. We asked various Commerce 
agencies to update us on the status of implementing 
improvements recommended by GAO and the Commerce Inspector 
General. It is probably a good idea to ask you how you are 
responding to the recommendations made by the GAO and the 
Commerce IG.
    And in addition, the Committee also has a responsibility to 
provide guidance and direction, and therefore, we ask you to do 
things that are important to the American people and to our 
country. For example, we asked you to put together a number of 
reports about manufacturing and bringing jobs back to this 
country. Your Department submitted a number of reports 
yesterday, and I will read the titles to you: ``Report on the 
Establishment of a Repatriation Task Force Implementation of 
the Jobs Repatriation Initiative and Status of the Online 
Calculator,'' that came in at 5:20 last night; ``Report on the 
Creation and Implementation of National Manufacturing 
Strategy,'' that came in at 6:30 last night; an ITA human 
rights training report, that came in at 5:42 last night; ITA's 
Rural Export Promotion Plan came in at 5:30 last night; also, 
the patent and trademark reports came in 4:30 last night. Do 
you think that is a good way to handle this?
    Secretary Bryson. I do not, Mr. Chairman. My apologies. We 
should get that to you earlier.
    Mr. Wolf. Okay. Well, and I appreciate that. And I think, I 
am not going to go into more, if maybe the staff can just call 
our staff and say we are working hard. I mean everyone has 
reasons. Perhaps there has been a personal issue that has come 
up. We understand that. But just to say, we are not going to 
have it, or we hope to get it up to you tomorrow at 4:30 or 
5:00; please understand, here is a preliminary draft of what we 
think we are going to say; it may change. I think that kind of 
relationship back and forth is really a good one. I don't think 
it would be a bad thing. So I would hope that you could do 
that.
    Secretary Bryson. I will put an emphasis on it. And I think 
you are generous to extend that courtesy to us. We should get 
it to you, and I will commit prospectively to see to it we get 
it to you earlier.

                  CHINESE TELECOMMUNICATIONS COMPANIES

    Mr. Wolf. Well, thank you very much.
    Yesterday I gave a statement on the House floor, detailing 
my concerns with the Chinese telecom company Huawei for its 
close connections to the People's Liberation Army and Chinese 
intelligence. I will provide you with a full copy of my report. 
Huawei, the concerns that I raise about the generous subsidies 
in the statement that the Chinese government has provided, been 
providing through its telecom industry, including Huawei, ZTE 
and others. As a result of these subsidies, which many believe 
are illegal under WTO, the Wall Street Journal reported that, 
``Huawei's network business has thrived at the expense of 
struggling Western network companies such as Alcatel-Lucent Co. 
and Nokia Siemens Networks.'' The bottom line is that these 
subsidies are costing American jobs and distorting the global 
market.
    As you know, Commerce has the authority to self-initiate 
reviews of foreign countervailing duties and dumping. Given the 
widespread concerns about these Chinese telecom subsidies--and 
the companies have now hired, I understand, former Members of 
Congress to lobby for them--would you take a look at this issue 
and let me know if you think there is something the Department 
would consider self-initiating?
    Secretary Bryson. Mr. Chairman, I think--let me make sure 
that I am responding to what you are asking. The Commerce 
Department has been very focused on Huawei. I think you are 
right in characterizing that as a considerable challenge to our 
country. It appears that Huawei has capabilities that we may 
not fully detect to divert information. It is a challenge to 
our country. We, in various respects, have not only been 
focused on Huawei but have taken some steps to not have Huawei 
advanced yet further in our country. But the reality is, in the 
market, they are advancing further so we need to address that 
further.
    Mr. Wolf. Well, I would hope you could inform the other 
members of the Cabinet, too, with regard to that. And members 
up here ought to understand Huawei, the connection to the 
Chinese government is serious. It has taken jobs away from 
Americans. But secondly, and I will say this again for your 
benefit, Mr. Secretary, the Chinese government has Catholic 
bishops under house arrest. The Chinese government in 
connection to Huawei, the People's Liberation Army has 
Protestant pastors, Protestant house pastors in jail. They have 
the 2010 Nobel Prize winner, Liu Xiaobo, in jail. They would 
not allow him to go to Oslo to pick up the award, nor would 
they let his wife go. Based on the policies of the Chinese 
government and the People's Liberation Army and the connection 
to Huawei, too--we have to keep that in mind all the time--if 
you have been reading the news, and I know you are from the 
West Coast, there have been a number of Chinese Buddhist monks 
and nuns who have--Tibetan Buddhist monks and nuns who have set 
themselves aflame because of the policies of this government. 
They are spying against us in a very aggressive manner. Could I 
ask you, have you been out to get the FBI briefing with regard 
to the cyber attacks that the Chinese government and others are 
doing against our government?
    Secretary Bryson. We have reached out to the FBI. We do not 
yet have the interview from the FBI, so we have not yet met 
with the FBI. We trust that will happen very soon.
    Mr. Wolf. Well, if you could, and the staff could follow up 
and help and do whatever, but I think the earlier you do it----
    Secretary Bryson. Thank you.
    Mr. Wolf. This is an important issue. If you could get let 
the other members of the Cabinet know, because Huawei has now 
retained, I understand, several former Members of Congress to 
lobby for them. And again, there is the Simon and Garfunkel 
song ``The Boxer,'' that says ``a man hears what he wants to 
hear and disregards the rest.'' We cannot disregard the 
fundamental connection of what Huawei is doing and who they are 
connected with in the Chinese government and the activities of 
the Chinese government.
    And lastly, there was a lot of news last week when George 
Clooney, to his credit, went to South Sudan. I was in South 
Sudan in the refugee camp in Yida. The Chinese government, the 
People's Liberation Army, connected to Huawei, are putting 
Chinese rockets that go 100 kilometers and are killing people. 
And we interviewed the people coming out, coming out of the 
Nuba Mountains, and they said they were being targeted because 
of the color of their skin.
    So when someone up here comes out and says that they are a 
lobbyist for Huawei and anybody approaches this Administration 
as a lobbyist for Huawei, go back and look at the press reports 
that George Clooney had. And I was in that camp several days 
before George Clooney, and I commend George Clooney personally 
for being so involved in doing what he did. And the other 
members of the Congress and Jim McGovern and others have been 
very, very active. Keep in mind we cannot forget the rest of 
the story. Huawei is connected to the People's Liberation Army, 
Huawei is connected to the Chinese government, Huawei is 
connected indirectly and directly in some--to all the 
atrocities that are taking place. So if you can let the other 
members of the Cabinet know, and I appreciate the fact that 
Congress has been very aggressive. I would appreciate that very 
much.
    Secretary Bryson. Thank you. And I appreciate your 
expanding. I didn't know the Sudan situation. But I will 
definitely reach out across the Cabinet.
    Mr. Wolf. The People's Liberation Army in connection to the 
Chinese government when President Bashir, who is an indicted 
war criminal, indicted war criminal for atrocities, crimes 
against humanity, visited China several months ago, they rolled 
out the red carpet for him. Here he is an indicted war 
criminal, and they still welcome him. So if you can do that, I 
would appreciate it.
    Secretary Bryson. Yes.
    Mr. Wolf. The fiscal year 2012 Appropriations Act included 
a number of reporting requirements.
    And that is important, too, because I saw that the 
President met with George Clooney. So there is no breakdown, I 
think it is important that the White House understand the whole 
Huawei connection so that this company does not hire Washington 
lawyers and lobbyists and people plugged in to begin to 
approach the White House to bypass the good work that you are 
going to be doing with regard to Huawei and go around you by 
going into the White House. Because as you can remind the White 
House, when the President met with George Clooney in essence on 
this issue, that is the connectivity to the whole Huawei issue.
    Secretary Bryson. Yes, thank you. And I do know actually 
firsthand that at least key people in the White House are very 
familiar with the Huawei challenge.

                        REPATRIATION TASK FORCE

    Mr. Wolf. Great. Thank you. The fiscal year 2012 
Appropriations Act included a number of reporting requirements 
regarding manufacturing and repatriation. The committee 
directed you to establish a task force to examine incentives 
and other activities needed to encourage U.S. companies to 
bring their manufacturing, research and development activities 
back to the United States. We asked the Department to undertake 
a number of activities with respect to manufacturing and job 
repatriation. We want to do everything we can to bring those 
jobs back. Has the task force met yet?
    Secretary Bryson. Yes. Let me make sure. I am getting it 
right I think. But the Commerce task force is what we are 
talking about?
    Mr. Wolf. Yes. The task force that the Committee directed 
you to establish to examine incentives, have they met yet?
    Secretary Bryson. Yes, yes, they have.
    Mr. Wolf. Can you furnish to the Committee who serves on 
that task force?
    Secretary Bryson. Yes, we can do that.
    Mr. Wolf. And can you tell us what their plans are, when 
they want to meet? Maybe we might want to have somebody from 
the staff to go to one of the meetings just to see.
    Secretary Bryson. Yes, we can certainly do that.
    [The information follows:]

                  Progress on Repatriation Initiatives

    We would be happy to report periodically to your staff on the 
progress we are making on the various repatriation initiatives.

    Mr. Wolf. Has it outlined any strategies or the number of 
firms that it will contact?
    Secretary Bryson. The number of firms that it will contact. 
On exactly that, I will have to get back to you. I can give you 
what the task force is working on now. The specifics of the 
number of firms, I would have to get back to you on.
    [The information follows:]

                     Clarifications for the Record

              number of firms participating in task force
    Given this is a new initiative, it is not possible to estimate the 
number of firms we will work with--we just do not know the demand.
         american manufacturing and job repatriation task force
    The Jobs Repatriation Task Force met as part of the Commerce 
Department's Manufacturing Task meetings as Mr. Wolf's interests were 
manufacturing specific (although longer term, this activity is closer 
aligned to the SelectUSA/Investment task force). Meetings occurred on a 
weekly basis, with a couple of exceptions, beginning February 16. The 
group prepared the attached report that outlines our initiatives going 
forward. This report has been delivered to Mr. Wolf. Meetings of the 
Task Force have been shifted to monthly as the report is written and 
activities are underway. The last meeting of the group was a 
teleconference on March 29 to review progress of the initiatives 
outlined in the report. Agencies represented include NIST, EDA, ESA, 
and ITA (SelectUSA).

    Mr. Wolf. Has the Secretary of Treasury been consulted or 
has the Ways and Means Committee been consulted about this 
because there may be some tax issues involved, tax credits to 
companies? What we talk about is to give incentives to 
companies. And EDA has now been given the ability to take some 
of the grants and use it as an incentive to a locality, an EDA 
administrator, somewhere, wherever they may be, whether 
Kentucky, Virginia, Texas, Pennsylvania, to use a tax credit, 
if you will, to incentivize to bring a company back. If you may 
have seen the New York Times piece 3 or 4 months ago, it said 
the President met with Steve Jobs. He said to Steve Jobs, ``how 
do we bring back the jobs?'' And Steve Jobs said it cannot be 
done. We want to see how we can. Because if you have an iPhone 
that is made in China, iPod made in China, iPad made in China. 
So have there been or had there been any talk to the Ways and 
Means Committee with regard to tax credits or ideas with regard 
to that?
    Secretary Bryson. I met with the Ways and Means Committee, 
with Ron Kirk, and with the Secretary of the Treasury, 
Secretary Geithner, about 3 weeks ago, and we covered a whole 
range of issues, by the way, including the tax issues.
    Mr. Wolf. Have you developed a ``best practices guide,'' 
for States and local communities to use to grow their 
manufacturing base so that they are able to go and see, what 
are the best practices? Have you developed that yet?
    [Clerk's note.--Attached is an excerpt from the Department 
of Commerce March 19, 2012 report to the Committee on 
Appropriations regarding the establishment of a Repatriation 
Task Force, implementation of the Jobs Repatriation Initiative 
and status of the Online Calculator. These activities are 
pursuant to the House Report accompanying the Consolidated and 
Further Continuing Appropriations Act, 2012 (P.L. 112-55).

    Disseminating Information and Best Practices--The Federal 
Government has a very important role to play in disseminating 
information and best practices and has been very active in fostering 
the resurgence of U.S. manufacturing. Following are some of the 
activities that the Bureaus active on the Repatriation Task Force will 
be supporting in coming months:
    Economic Development Administration (EDA).--EDA is partnering with 
Georgia Tech Research Corporation to support an examination of best 
practices in promoting exports and attracting foreign direct 
investment. This study is underway and is expected to be ready in 
summer of 2013.
    EDA is also partnering with the Institute for Strategy and 
Competitiveness at Harvard Business School on the development of a U.S. 
Cluster Mapping Web site, a new tool that can assist innovators and 
small business in creating jobs and spurring regional economic growth. 
A beta version of the site was recently launched and provides cluster 
initiatives and other economic development organizations an opportunity 
to register in a national database. The registry allows registrants and 
observers to showcase their cluster initiative data to a wider public, 
search for appropriate partners across the nation and support best 
practices through stronger data on industry relationships. The site 
will also provide free access to a rich database on the profile and 
performance of clusters and regional economies.
    Over time, the site will add a range of further functionalities, 
including geographic maps of cluster initiatives, data on regional 
business environments, and tools on the use of cluster data and 
concepts in economic development practice. It will provide users with 
multiple opportunities to upload their own data and conduct analysis 
based on their particular needs. The cluster registry will evolve 
towards a tiered structure, with specific criteria on data 
availability, underlying cluster strength, and other performance 
indicators differentiating between the tiers. This will provide 
effective information for firms and cluster initiatives looking for 
qualified partners and help federal, state, and local government 
agencies in their work in support of cluster development.
    EDA will soon begin work on the National Excess Manufacturing 
Capacity Catalog, to be developed by the University of Michigan and the 
Center for Automotive Research, which will serve as a solution to the 
problem of creating demand for the reuse of empty and underutilized 
manufacturing facilities in the U.S. The project will catalog the 
inventory and assets of the facilities and develop a portal for access 
to the inventory that will precisely match demand by companies to the 
excess manufacturing capacity supply with companies that have the need 
for advanced manufacturing facilities. The project is expected to begin 
in the spring of 2012.
    National Institute for Standards and Technology/Manufacturing 
Extension Partnership (NIST/MEP).--NIST MEP will continue our earlier 
efforts to address the needs of companies considering re-shoring. A 
critical piece in considering manufacturing location is the 
availability and technical capability of suppliers, the ``supply 
chain'' factor. Companies considering moving operations must consider 
the availability of local suppliers, infrastructure resources, and a 
skilled workforce in order to maximize the economic advantages of a 
location. Responding to supply chain needs, NIST MEP plans to build 
upon our earlier work with the Departments of Energy, Transportation, 
and Defense supporting ``Buy American'' legislation. NIST MEP has 
identified domestic manufacturing resources for products that were 
considered unavailable in many previous waiver request reviews. 
Leveraging our ability to connect resources using the National 
Innovation Marketplace (NIM) electronic databases and the NIST MEP 
partnership network of manufacturing field staff network to accelerate 
these business connections has resulted in more domestic manufacturers 
participating in new supply chain opportunities. As an example of MEP's 
outreach efforts to manufacturers in two collaborative forums with the 
Department of Transportation in February 2012, over 300 suppliers and 
10 larger equipment manufacturers met to discuss supply chain needs 
related to future rail procurements. NIST MEP has also engaged over 
1,000 manufacturers in the past year through its innovation engineering 
educational events. NIST MEP believes that based on these efforts and 
the combined collaboration with our agency partners, we can provide 
repatriation information to over 5,000 manufacturers in the next year.
    Supporting the workforce needs, NIST MEP is developing a talent-
centric solution supportive of a firm's future strategic business plan 
considering workforce development as a necessary element to achieving 
the company-wide strategies. This would include the ability for 
existing firms to pursue new products and new markets thereby 
maximizing the domestic supply chain competitiveness relative to the 
re-shoring considerations of larger companies.
    International Trade Administration (ITA).--ITA is seeking an 
increase in funds for FY 2013 to develop the next generation of 
Export.gov (Export.gov 2.0), which will integrate into a single web 
platform all export-related content and contacts across the 20 Federal 
government Trade Promotion Coordinating Committee (TPCC) agencies. The 
platform will enable ITA to greatly increase the number of companies it 
assists and equip U.S. firms with a comprehensive suite of exporting 
resources from across the U.S. Government. This investment will provide 
the technology and organizational foundation so that ITA can seamlessly 
deliver content and services dynamically to the BusinessUSA.gov 
platform. This innovative approach will help the SelectUSA program 
assist firms looking to repatriate jobs to the United States, as well 
as assist foreign firms looking to invest here.]

    Secretary Bryson. We are moving that along. So we, coming 
out of the tax provisions of the extension of the payroll tax, 
referred to sometimes as the middle class tax, that extension, 
as you know, provided some additional funding on spectrum to 
our Department. And allocation of those funds will enhance our 
ability to reach out to States in building the broadband 
spectrum capabilities, and we are under way with that. We are 
not far down the path. But working more effectively with the 
States with that additional support will be part of what we are 
doing there.
    Mr. Wolf. Okay. One last question on this area. We asked 
you to develop an online calculator----
    Secretary Bryson. Yes.
    Mr. Wolf [continuing]. To help companies more accurately 
compute potential costs. Have you done that?
    Secretary Bryson. Yes. We are underway with that. And I can 
give you a description of where we are if you would like that, 
or we can provide that to you beyond this.
    Mr. Wolf. Yes, if you can provide it for the record. But if 
you could tell us, we can find out, and then you can keep us 
posted.
    Secretary Bryson. I can readily do that and will do that, 
or if you would like more detail in the course of these 
questions, I can provide some of that.
    [Clerk's note.--Attached is an excerpt from the Department 
of Commerce March 19, 2012 report to the Committee on 
Appropriations regarding the establishment of a Repatriation 
Task Force, implementation of the Jobs Repatriation Initiative 
and status of the Online Calculator. These activities are 
pursuant to the House Report accompanying the Consolidated and 
Further Continuing Appropriations Act, 2012 (P.L. 112-55).

    Online Cost of-Doing Business Calculator--In its 2012 
appropriations bill, the Department of Commerce has been tasked to 
provide ``an online calculator that firms may use to determine `hidden 
costs' of offshore manufacturing, e.g. shipping costs and other 
factors, so that companies would be aware of the total cost of 
manufacturing overseas.'' The Economics and Statistics Administration 
(ESA) has been assigned to lead this project within Commerce. Interest 
in such a calculator cuts across the business sector and many 
government agencies. ESA already has had initial contacts with the 
NIST/MEP, CommerceConnect, SelectUSA within the ITA, the EDA, other 
government agencies, academics, and industry associations. These 
initial consultations have focused on both the content of the 
calculator and the development of a user-friendly, widely available 
Internet accessible tool.
    Lower labor cost is usually a principal factor leading U.S. firms 
to move their operations abroad. Yet, many firms do not take into 
consideration all the costs associated with such a move, such as higher 
transportation costs and costs from carrying extra inventory, and also 
particularly the less obvious or ``hidden'' costs arising from 
transportation, extra inventory, extra personnel, supply or supplier 
instability, political instability, and intellectual property loss. A 
complete accounting of these the full costs will better inform 
businesses when making decisions regarding locating manufacturing or 
locating service industries abroad. The calculator that the Department 
will provide aims to include a comprehensive list of costs associated 
with overseas operations. To outline and quantify these costs, the 
calculator will leverage existing resources and efforts, including the 
World Bank's ``Doing Business'' databases (www.doingbusiness.org) and 
the ``Total Cost of Ownership Estimator,'' (TCO estimator) developed by 
the Reshoring Initiative (http://www.reshorenow.org).
    ESA's goal is to provide by the end of 2012 an accurate, user-
friendly tool that allows businesses to estimate specific costs. NIST 
MEP will work with ESA to provide the tools and information needed to 
inform companies of the total costs to produce abroad relative to 
domestic production so that the full picture is available to companies 
considering U.S. manufacturing locations. NIST MEP will provide 
feedback directly from our interactions with manufacturers to 
continuously improve the relocation resources available. On average, 
the NIST MEP program reaches 30,000 manufacturers per year through our 
national partnership network of manufacturing extension field staff.
    It will also be important for the calculator to reflect the 
holistic approach followed by SelectUSA in gauging the advantages of 
locating in the United States relative to other locations, although 
this approach would likely include costs that could only be assessed 
qualitatively. One common thread between both MEP and SelectUSA is 
their close relationship with economic development authorities. It 
would be imperative for the Department to make the calculator easily 
available to economic development authorities and other local entities 
that could both direct users to the calculator and guide them in using 
it. One option we are exploring to facilitate this is to make the 
calculator a web widget, which could then be installed on web pages in 
various Department of Commerce websites as well as on websites of the 
Department's local partners.]

    Mr. Wolf. Have any companies approached the Commerce 
Department or EDA about how they may use this new authority 
that you currently have?
    Secretary Bryson. Let me give a response to your question 
this way, and then if it is not complete, please come back to 
me. So we are under way, as you say, with the EDA incentive 
already. So EDA has an initiative out right now. And one of the 
criteria for the EDA award of the outstanding grant will be 
repatriation.
    Mr. Wolf. Okay. When did that go out?
    Secretary Bryson. That has been out sometime in the last 2 
or 3 weeks approximately, but I can give you a more precise 
answer and will do that for your Committee staff and in 
writing.
    Mr. Wolf. Okay. Thank you.
    Mr. Fattah.

                       MOVING THE ECONOMY FORWARD

    Mr. Fattah. Thank you.
    Mr. Secretary, so the Administration over the last 3 years 
has been involved in a lot of activities. You have seen now, as 
we have stated, some 24 months of job growth, some 4 million 
jobs in the private sector. You have got the payroll tax 
extension in place. You have--you are already ahead of the 
curve on the export initiative. Where is the next focus for 
you? I know you come out of an energy background. We see now 
the European Energy Alliance say that they need to become 
better prepared to compete with us on these renewables. China 
is moving aggressively on renewables. Do you see energy as the 
next step along this road to continue to move the recovery 
along now with the reassurances on the street, you know, oil 
has dropped some $2 already today.
    But I would like to know, going forward, beyond the 
counting of the paper clips here, where is the big--where is 
the next two or three things that you see that you need to get 
done to help move this economy forward?
    Secretary Bryson. In general, yes, my background is in 
energy. In most respects, I defer to the Secretary of Energy 
with respect to energy issues. But on the question you ask, I 
think that the approach that is being taken by the President 
and this administration, which is across the board in the 
energy area, that is moving to greater, greater capacity to 
provide the energy here in the United States from U.S. sources 
and from North American sources in each of these categories, is 
a huge source of strength for us.
    So one of the things as you know that has happened is 
natural gas prices have come down very, very sharply. That is a 
big plus for our country. When natural gas is produced, oil can 
be produced as well. So we have more indigenous oil now here in 
the U.S. So we are becoming less reliant on the Mideast oil 
sources and more self independent. That is critically 
important.
    With regard to clean energy sources, I think that is very 
important and a significant part of the future. That will take 
a longer period of time. And what natural gas is providing us 
now is both to a degree disincentives for those that have been 
investing in clean energy because natural gas prices are so 
low. But that buys us time to be yet stronger in the 
technologies that reduce the cost. Because over the longer 
term, being able to rely significantly on broad bases of clean 
energy sources is another way to be self-sufficient.

                             MANUFACTURING

    Mr. Fattah. Well, I want to go to my next question, but I 
want to thank the Administration for moving forward on the two 
nuclear plants because we have not built a nuclear plant in 30 
years, and this is a source of clean energy, and I want to 
applaud the Administration.
    Let's go to manufacturing. I have made the Manufacturing 
Extension Partnership program, as you know, my number one 
priority in terms of assisting in this manufacturing space. It 
works with thousands of manufacturers all over the country, 
helping them solve real everyday problems. And I want to 
commend the Department. I want to thank the Chairman who has 
worked hand-in-hand with me in making sure that we provide 
additional resources to the Manufacturing Extension Partnership 
program because it really is helping actual people who are 
making things here in America, thousands and thousands of 
manufacturers. And so I am glad to see that the President's 
request and your request are to continue to put resources in 
that direction.
    We supplied some additional dollars for something called 
the National Innovation Marketplace, which is headquartered in 
your shop, which is focused on connecting up manufacturers with 
real opportunities at the Federal level in energy and in 
defense and so on. And that work is going quite well. And I 
want to thank your team for the work that is being done there.
    But there is a lot more for us to do. And the Chairman is 
correct to say that we have a lot of opportunity in this space. 
We need to find ways to work, not just with the Commerce 
Department, but across the continuum of incentives to attract 
people to build plants here and to make products here. I have 
some legislation that would have us take Federally funded 
research that leads to new widgets to require that the widgets 
be made and manufactured here in America. So we have a lot of 
Federally funded research. I am a big proponent; I think 
everybody up here is a proponent of Federally funded research. 
And it has really helped us with our quality of life. But we 
should not be taxing Americans coming up with new ideas and 
having those products made anywhere else. Those products should 
be made here. And we should require in the licensing or the 
utilization of this information that we require that they be 
manufactured here.
    So I think there is more work for us to do as a government 
to try to promote manufacturing beyond what you are doing. I 
think advanced manufacturing is great for the high-end team, 
the Boeings and the UTCs, but these small manufacturers make up 
the bulk of where the opportunity exists and also in this whole 
invention and patent area and Federally funded research and 
making sure that those products are made here. So I would be 
interested in your response to that.
    Secretary Bryson. Mr. Congressman, you have covered a wide 
range of very, very important points. Let me try to give a 
brief response. With regard to the Manufacturing Extension 
Partnership, that is a really excellent program. And it does 
reach out effectively, practically, to small manufacturers and 
larger manufacturers. And in a budget in which we have taken 
the view these are tough times, we have to make tough choices 
on allocations of our dollars, and we have eliminated 18 
programs altogether, tremendous cuts in other programs, so that 
we got down to the point at which what we are doing we believe 
is only the highest priority and most essential programs we 
have.
    As you know, we did not reduce at all funding available to 
the Manufacturing Extension Partnership Centers. With regard to 
the broader point about, you quoted me at the outset of your 
remarks, became a mantra for me and a mantra for the Commerce 
Department, build it here, sell it everywhere; we are still in 
a world in which only 1 percent of our U.S. businesses sell 
outside the country. And in a global economy, we have to take 
that further. And that is our task. And we are working in every 
way to extend and make more possible and less costly for small 
manufacturers to do that.
    [The information follows:]

                      Clarification for the Record

                nist manufacturing extension partnership
    The Secretary's comment that ``. . . we did not reduce at all the 
manufacturing extension partnership'' is not factually correct. The FY 
2013 Budget reduced MEP by $443K and is reflected in the FY13 
terminations and reductions summary in the Congressional Justification. 
However, the $443K reduction does not affect the amount of grants/
cooperative agreements that go to the MEP Centers. The reduction was 
taken elsewhere within the MEP budget. The Department suggests the 
following alternative: ``As you know we did not reduce at all funding 
available to the Manufacturing Extension Partnership Centers.''

    Mr. Fattah. Thank you.
    Mr. Wolf. Mr. Rogers, then Mr. Dicks.

                                 CHINA

    Mr. Rogers. Thank you, Mr. Chairman.
    Let me talk to you about China. And I like your slogan: 
build it here; sell it everywhere. But the problem is China. 
Everything we buy seems like anymore is made in China. And we 
have lost millions of jobs because I think, and I think 
probably you agree, that the China currency is extremely 
undervalued. Since 1994, the Chinese government has 
consistently sought to undervalue its currency. I think the 
biggest contributor to our annual trade deficits with China and 
with the world is the China effort to undercut our products. 
The result has been the cheap Chinese exports, more expensive 
U.S. exports, an imbalance which has proved extremely 
detrimental to our manufacturing sectors.
    The 2011 U.S. trade deficit with China, $272 billion in 
just a year, second largest in history. According to a 2011 
Economic Policy Institute report, the growth in the U.S. trade 
deficit with China displaced 2.8 million jobs between 2001 and 
2010 alone. Now they announced in 2005 that their exchange rate 
would become adjustable, ``based on market supply and demand.''
    But then China Central Bank insisted that reforms be done 
in a gradual way. And from 2005 to 2008, the exchange rate 
appreciated by 21 percent. But once the effects of the global 
economic crisis became apparent in 2008, China stopped the 
appreciation of the RMB in an effort to help Chinese industries 
dependent on trade. From 2008 to 2010, they kept their exchange 
rate relatively constant at 6.3 to the dollar. And while China 
resumed appreciation of the RMB in 2010, many of our officials 
criticized that the pace was too slow, especially given China's 
strong economic growth over the past few years.
    Now, in addition to their manipulation of the currency rate 
to their extreme advantage, the Chinese government subsidizes 
their industries, significant subsidies, very harmful to our 
producers. Competing with one hand tied behind their back by 
regulations here at home and a tax rate that is not conducive 
combined with the subsidization by the Chinese government of 
their industries is an unfair, unwinnable competition. There is 
no way we can win doing this.
    For example, Chinese production of steel between 2000 and 
2005 grew by 175 percent from 126 million tons to 348 million 
tons. That tremendous growth reflects the government policy 
there to funnel resources into the steel industry, particularly 
by way of cash grants and preferential loans, in clear 
violation of both its WTO commitments and free market 
principles.
    I guess my question is, what are we going to do about this? 
This is a cancer that is eating at our economy and is 
undermining our economy, and there is no way we can compete 
with a government that size manipulating the currency and 
preventing our home industries from being able to sell 
everywhere, as you would like to do. What do you think?
    Secretary Bryson. I think there is just no question but 
that we need to greatly intensify our insistence on compliance 
with trade laws. So China, and we played a significant role 10 
years ago in bringing China into the World Trade Organization, 
there was a set of commitments made around bringing China into 
the World Trade Organization. It is China's responsibility to 
fully comply with the commitments then made. They do not 
consistently comply with those commitments. As you indicate, 
they subsidize and subsidize contrary to the requirements of 
the law frequently, subsidize in ways that undermine U.S. 
businesses and take jobs away from U.S. businesses in many 
categories.
    We now have this additional step at the Federal Government 
level. The Commerce Department has critical priority, first 
priority responsibility in those areas. We take that very, very 
seriously. We now will also provide resources and support for 
what is called ITEC, which is the White House base bringing 
together the Federal Government across the entire government 
for enforcement of the trade laws, and we have to do that with 
substantially greater force. And that is going forth right now.
    Mr. Rogers. Well, I am glad to hear that something is going 
forward. I have seen no results. You have got a weapon, a bunch 
of weapons, and we have not used them: the countervailing duty, 
that is plain and simple and true and will get directly at the 
problem. If we put a countervailing duty on Chinese imports 
into the country, based upon unfair trade practices that 
violate the World Trade Organization laws and rules, clearly, 
there is hardly a dispute about that, and yet we have not used 
the weapon that we have in hand. And it is getting pretty late 
because the trade deficit is exploding yet. And we now see the 
Chinese government using those surplus monies that they 
generate from unfair trade practices to begin to corner the 
markets around the world and all sorts of things, and here we 
sit idly by. What do you think about using this weapon that we 
have?
    Secretary Bryson. It is essential that we use this tool. We 
have used this tool. We need to use it yet further and more 
intensely. But I want to give a special expression of 
appreciation to all of you Members of the Congress that acted 
at our request in a hugely intense exercise when the U.S. Court 
of Appeals for the Federal Circuit, that is basically the court 
for trade actions, in a case called GPX, the key case took away 
24 critical countervailing duty orders we had imposed, and made 
them invalid. And we came to the Congress, this came to the 
Congress, and there was this action taken 2 weeks ago that put 
all that back into full operation and effect and with no 
qualifications forever more. So that involved, 22 of those were 
from China of the 24. Those affected 37 States in the country. 
They affected tens of thousands of employees around the United 
States. So those are things that have been done in the past. 
But I am not disagreeing; I agree that we need to do yet more. 
And there will be, it has been announced. I cannot speak to it 
at all, but there will be another determination made at the 
Commerce Department by the end of the day today.
    Mr. Rogers. Good. Well, I am glad to hear that.
    Mr. Chairman, let me briefly, if I may.
    Mr. Wolf. Sure.

                            DISASTER RELIEF

    Mr. Rogers. Let me ask quickly about a parochial problem. 
We had a terrible disaster in my district and my State two 
weekends ago. Tornadoes ripped through the whole State, 
particularly in my district. I lost 18 people in just my 
district, with hundreds hospitalized, hundreds are homeless, 
although they are being taken care of by their neighbors and 
friends. It is a terrible disaster, particularly the town of 
West Liberty, which was wiped out. And I was talking to a lady 
last night who had a business there but no insurance against 
this loss. And she said, SBA came to me and said if I wanted a 
loan. She says, I have no resources, I have no way to repay a 
loan.
    So I am asking you, are EDA and other agencies within the 
Commerce Department capable and equipped and focused on 
disaster relief in the most extreme circumstances, and I am 
asking you if you would ask them to pay attention to the 
problems of that, particularly--well, there are several 
counties, but that whole region was ravaged by these storms.
    Secretary Bryson. I will look into this, Congressman, and 
have someone get back to you within the next two days at the 
most.
    Mr. Rogers. Thank you very much.
    That town of West Liberty, town of a few thousand, the 
entire downtown business section wiped out. There is not a 
single business that is left standing after that storm. And I 
worry about the future of the entire community and others. 
Thank you.
    Thank you, Mr. Secretary.
    [The information follows:]

    Matt Erskine, Acting Assistant Secretary of Commerce for Economic 
Development, met with Mr. Rogers on June 19th to discuss what EDA could 
do to assist the City of West Liberty. This request was made through 
his LD, Megan O'Donnell. He requested that we give consideration to the 
plight of the folks in his state, and in particular, West Liberty.

    Mr. Wolf. Mr. Dicks, then Mr. Bonner.

                             CYBERSECURITY

    Mr. Dicks. We mentioned--I mentioned cybersecurity 
previously. What can you tell us about the recent cybersecurity 
problems affecting the EDA? What improvements are being made to 
strengthen the Department's information technology posture to 
ensure the Department's systems remain safe and that these 
threats do not disrupt the Department's work in the future?
    Secretary Bryson. Yes. EDA was hit. We believe it was a 
cyber attack of some kind. It has now been about two months 
since that occurred, and we have all of the resources available 
in the Federal government working to identify what the attack 
was, what its significance was, where it came from. We don't 
have all of that. We are putting EDA back together in 
communications capabilities by combining it with the Census 
Bureau that has high capabilities within the Department of 
Commerce. But U.S.-CERT is focused on this. I regret, Mr. 
Congressman, that we don't know more than that yet.
    Mr. Dicks. That worries me. You know, you have General 
Alexander and the Defense Department, and they are doing their 
thing on the dot-mil. But on dot-com or dot-gov, it is up to 
Homeland Security and the other departments to strengthen the 
other side of the government. And there is a lot of 
apprehension--I just want to be candid here. There is a lot of 
apprehension on the Hill that, on the dot-gov side of the 
thing, we are not doing as well as we need to.
    And the other part of this is that Homeland Security also 
has jurisdiction over the private sector, private 
infrastructure. You are a business person. You know and 
understand the vulnerabilities of utilities and financial 
institutions and what that could mean in a conflict with the 
Chinese or whomever.
    I mean, again, don't we have to do more here and be better 
prepared to defend ourselves? I am told sometimes businesses 
don't even know that they have been infected by this malicious 
malware and that the FBI comes in and tells them. I don't know 
how the FBI finds out, but they do somehow.
    You are a private-sector person. What is your take on this? 
Can you give us any hope that the government is paying any 
attention to this?
    Secretary Bryson. I can certainly give you the sense that 
the government is paying attention to this. I would say that I 
have a meeting as much as at least once a week with key people 
in the Federal government across many dimensions of the Federal 
government with respect to cybersecurity, the challenge, the 
risks that it presents to us.
    As you suggest, there are very, very large numbers of these 
cyber attacks. They occur across the private sector as well as 
the public sector. Often, in the private sector, they are not 
reported for various reasons. Some of them, as you suggest, are 
cases where they are not even known to have taken place. This 
is a critically important priority.
    Mr. Dicks. Should we require them to be reported from the 
private sector? I know that the private sector gets very 
nervous about this, but there is concern. I have concern that 
maybe stockholders wouldn't know that a company has lost some 
of its intellectual property and whether the SEC should step 
into this and require that when companies are hit and lose 
something, that they should have to report it. I mean, this is 
pretty fundamental.
    Secretary Bryson. Mr. Congressman, I think there is merit, 
absolutely. Because if we don't know that these have taken 
place, our ability to act as quickly and with as much 
information as we need is somewhat handicapped at least and 
maybe more than just a little handicapped.
    Mr. Dicks. I think up here there is a lot of frustration 
about how do we respond to this. Talk about an asymmetrical 
threat to the United States when you can't even tell sometimes 
where these attacks are coming from and you can use devious 
means to protect where they were initiated. Or you can go out 
and hire Anonymous or Hackers International to come in and do 
the work for you.
    I mean, this could be devastating. It is already estimated 
to be a trillion dollars a year. This could have a devastating 
effect on the economy if we don't do something.
    The impression we get up here is this is kind of going 
along, and there is the Lieberman legislation. But I don't get 
a sense of urgency. I hope you go back and take that to your 
colleagues. I mean, the American people expect us to be doing 
more about this issue.
    Secretary Bryson. I just want to confirm, yes, absolutely, 
I concur. I agree with you. There is huge urgency and must be 
huge urgency with respect to that.

                               SATELLITES

    Mr. Dicks. Good.
    On DSCOVR, you know, we just saw evidence of the solar 
eruption, and I am told that this satellite, it was put in 
storage because somehow it had something to do with Al Gore. 
That was done by the previous Administration. Now they are 
going to bring it out of storage. This seems to me--because it 
affects GPS, power grids, radio--we ought to get this satellite 
up there. Can you do it by cutting $6.9 million or 23 percent 
of the money from the Deep Space Climate Observatory, or 
DSCOVR, satellite? Are you aware of this?
    Secretary Bryson. Mr. Congressman, I am not sure that I 
know the specific case.
    Mr. Dicks. Let me give you a little help here.
    Secretary Bryson. Yes.
    Mr. Dicks. Forecasters are dependent on a single and aged 
buoy in space to serve as an early warning system for solar 
storms headed towards Earth. A replacement for NASA's Advanced 
Composition Explorer, or ACE--we used to have some of those 
ACEs over in the Defense Department, by the way--the ACE 
satellite replacement is at least two years away. Solar storms 
can disrupt GPS, radio, and satellite communications. This 
satellite, nicknamed ACE, provides the only advanced notice of 
incoming high-energy particles from the sun, and it is 
dangerously old. Every time a giant solar storm like the one 
that blasted by Earth earlier this week rushes past NASA's 
Advanced Composition Explorer satellite, scientists at NOAA's 
space weather forecasting branch cringe. The satellite named 
ACE provides the only advanced notice of incoming high-energy 
particles from the sun, which can wreak havoc on radio, GPS, 
and satellite communications that are now embedded in modern 
life.
    So if we only have one of these things, and this seems to 
me to be a serious problem, that maybe it should be treated 
with a little more urgency. Maybe Congress is going to have to 
put this money back in, if it is in fact that urgent.
    Secretary Bryson. I have just been advised, and I regret 
that I didn't have an immediate response, nor know this very 
well, but, with respect to the DSCOVR satellite, the brief note 
I have is, yes, and that we are on schedule with respect to 
that. But what I will want to do is give you more complete 
information, and we will get that to your office promptly.
    Mr. Dicks. Thank you, Mr. Secretary. We appreciate that.
    Thank you, Mr. Chairman.
    Mr. Wolf. Mr. Bonner.

                             NATIONAL DEBT

    Mr. Bonner. Thank you, Mr. Chairman.
    Mr. Secretary, I am Jo Bonner from Alabama. It is good to 
have you here.
    I am going to start off--and I rarely like to quote the 
national news media, but CBS reported that the national debt 
has now increased more during President Obama's three years and 
two months in office than it did during the eight years of the 
George W. Bush presidency. The debt rose $4.899 trillion during 
the two terms of the Bush presidency. It has now gone up $4.939 
trillion since President Obama took office. The latest posting 
from the Bureau of Public Debt at the Treasury Department shows 
that the national debt now stands at $15.56 trillion. It was at 
$10.6 trillion on President Bush's last day, which coincided 
with President Obama's first.
    Here is the most disturbing line in this news report from 
where I sit: ``The national debt also now exceeds 100 percent 
of the Nation's gross domestic product, the total value of 
goods and services.''
    Oftentimes when we have Cabinet secretaries or other 
distinguished visitors come before this Committee, a lot of 
times we look at the glass and we see it half full or half 
empty. You were commenting in your testimony about eliminating 
18 programs. We commend you for that, although I have a 
question: How many programs are there at the Department of 
Commerce and are there others that could be eliminated?
    And, also, you talked about the 4 million jobs that have 
been created during this Administration's watch. So my first 
question is--I would like to get and I don't expect you to have 
an answer on the number of programs still available for review, 
but I would like to get that for the committee's benefit.
    [Clerk's note.--As of press time (December 2012), the 
Department of Commerce has failed to provide the requested 
responses.]
    Mr. Bonner. But how serious is the debt issue that we have 
got hanging over our Nation, even as this Committee struggles 
and this Congress struggles with making sure that we don't cut 
back too much but at the same time we deal with a very serious 
dark cloud that is hanging over our entire country's economy as 
well as the world economy?
    Secretary Bryson. Yes. First, these are tough times. There 
is just no question. They are tough times. The recession, the 
deep recession of 2008, put the entire country into an 
extremely difficult situation with a fractured economy and with 
a tough set of steps moving forward. And jobs were lost, and we 
remain in a situation where people don't get jobs. That has 
been the hardest single part of it, but it has affected every 
single business in the country. You know those things well.
    The only thing I can say with regard to the Commerce 
Department is this is what we call tough times and tough 
choices. So that the budget we have put before you today, 
including not only the 18 programs that we have dropped 
altogether but a wide range of programs we have cut 
substantially, we do those because we believe that the Federal 
debt has to be taken into account, has to be addressed.
    So let me give you one figure. We believe that we have to 
put full priority in the satellite programs. So that is the 
JPSS program and the GOES program. Because national security is 
absolutely at stake with our ability to go forward with those 
satellite programs, ensure there is not a meaningful gap, not a 
large gap beyond target dates of 2017 to having the JPSS 
program up in operations. And we have substantially--and I 
won't go into further detail on this, but we have substantially 
strengthened our capacity, created new people and new models 
for doing this work. We believe we can get that done.
    So we put our resources fully into the satellite program; 
and all of the other cuts, all of the other cuts, $400 million 
in cuts, we cut in order to protect the satellite program and 
then protect only the programs that we believe are the highest-
priority essential programs that affect the Nation's welfare 
deeply.
    So we have done that, we believe, in this program. We think 
that is the approach that needs to be taken.

                          BUSINESS REGULATIONS

    Mr. Bonner. Let me rephrase my question.
    Secretary Bryson. Okay.
    Mr. Bonner. We are just going to set aside the debt issue 
and the priorities of the Department.
    Is the Department doing everything that it can do to help 
make a significant difference in the life of small businesses, 
medium businesses, and large businesses in terms of the 
regulatory burden that the Federal government puts on these men 
and womens' backs?
    Let me give you an example. SBA, this administration's SBA, 
came out with a report in 2010 that said the Federal government 
puts an extra $1.7 trillion annually of burden with 
regulations. These are not issues that we debate in Congress. 
These are applied mostly through the administrative government. 
What is the Commerce Department doing as the champion of free 
enterprise to help lessen the burden on small, medium, and 
large businesses?
    Secretary Bryson. Yes. You are, in my judgment, absolutely 
right that we need--and let me make sure that I am getting the 
response to your question. You come back to me if I am not. On 
the regulation point and tying that to impacts on small and 
medium-sized and large businesses, that is a critical focus of 
ours.
    My personal experience was being very much affected by 
regulation in my years as the CEO of a company, and that was 
18\1/2\ years. I am actually very deeply impressed by the 
approach that has been taken by this Administration with regard 
to regulation. And the heart of the regulation commitment in 
the Federal government now is that we should have no more 
regulation than health, safety, and security the American 
people require.
    That has been led by Cass Sunstein, who operates out of the 
White House. He is a very capable guy. I talk with him 
frequently about this.
    So we are in a situation now in which the number of rules 
reviewed--and maybe you know that the President has required 
that with regard to every Department and now every independent 
agency that there is a presentation made and disclosure made of 
every regulatory step taken. And so what we have been able to 
do is issue significantly fewer regulation rules in these first 
years of this Administration than had been issued in the first 
three years of the prior Administration, and we will keep 
focusing on that and driving that down.
    As you say, I need to be an adamant voice in this 
Administration and with respect to businesses of all those 
sizes for cutting regulation to the extent we can possibly do 
that, and we will stay with that.
    Mr. Bonner. Mr. Secretary, according to the Bureau of Labor 
Statistics' latest data, they say that the number of new 
business start-ups fell last year to the lowest level since 
1994. The World Bank's ``Doing Business 2012'' report now ranks 
the United States as the 13th in the world in the ease of 
starting a new business, a steady decline since 2009.
    Notwithstanding your comments with the conversations you 
have with the gentleman at the White House or what the 
President's directive is, every day, on average, this 
Administration has saddled the economy with 1.71 economically 
significant rules, almost $273 million in compliance costs, 223 
pages in the Federal Register, and over 369,000 hours of 
paperwork requirements. So I think, at least from the position 
of this Member, from my part of America, we can still do more 
and more needs to be done.
    Do you remember--I know you came on the job in October last 
year.
    Secretary Bryson. Yes.
    Mr. Bonner. Did the Commerce Department have an official 
position on the conflict between the Obama administration's 
National Labor Relations Board--and I know you also were a 
member of Boeing at one time--and Boeing's decision as a 
private company to invest in a right-to-work State like South 
Carolina? Did the Commerce Department have an official position 
on that dispute?
    Secretary Bryson. I don't know. I had a position on it.
    Mr. Bonner. What was your position?
    Secretary Bryson. I thought that South Carolina's step was 
the right thing to do.
    Mr. Bonner. I agree with you, even though I am from 
Alabama, not South Carolina. I believe it was the right thing 
to do. But I think if the Commerce Department did not have a 
position, it should have had one.
    Because, again, we are talking about jobs in America, 
American jobs, an American company making an American 
investment. It just raises a question. If the Department didn't 
have one--it might have been under the previous Secretary's 
watch--but it would be good to know that going forward under 
your leadership, when we talk about creating jobs in America, 
it is something that we need to make sure that we are all 
singing off the same page on.

                           TRAVEL AND TOURISM

    Lastly, my last question is, along with Congressman Farr 
who is not here, but he is a member of this committee, he and I 
co-chair the Congressional Travel and Tourism Caucus. As you 
know, tourism and travel are a big part of the American 
economy. It is not just the Disneylands in California or the 
Disney Worlds in Orlando that make up a big part of the 
industry. Over $700 billion annually is contributed to the 
economy of this country, with over 10 million direct and 
indirect jobs.
    We are working to getting a briefing for congressional and 
industry leaders, and we would like to invite you and your 
staff to work with us in making sure that we have some type of 
face-to-face engagement at the highest levels at the 
Department. This is an informal invitation to get you to help 
us that with that engagement.
    Secretary Bryson. Mr. Congressman, we will do that. Travel 
and tourism, as you say, is an extraordinarily important part 
of our economy, and we at the Commerce Department have the 
Federal lead in respect of that, and we have a very strong 
staff and have exactly I believe the right person in mind who 
is leading this for us to work with you and your staff.

                           FOREIGN INVESTMENT

    Mr. Bonner. Let me throw one more observation out before I 
return my time to the chairman.
    Talking about jobs--and you mentioned this in your 
statement, that we welcome direct foreign investment in this 
country. But we really need to make sure that we are not saying 
that just with words but with actions, not just at the Commerce 
Department but at other departments in the Federal Government 
as well in terms of tariffs and in terms of other types of 
sometimes unwelcoming gestures about direct foreign investment 
in this country.
    For instance, in my home State of Alabama, 15 years ago we 
didn't make a single automobile. Today, we are the fifth 
largest manufacturer of automobiles. Now our friends in 
Michigan and other parts of the country who are legitimately 
proud of the big three American automakers have every reason to 
be proud of their heritage. But when we have a Mercedes Benz 
that comes from Alabama and creates 4,500 jobs directly and 
over 55,000 jobs now are tied to the automobile industry in 
Alabama, or a Hyundai or a Honda or a Toyota, it is important 
that we have a welcoming arm and consistent rules and 
regulations that apply when these companies from other 
countries choose to come here and invest. I would hope you 
agree with that.
    Secretary Bryson. I completely agree with that. As does, by 
the way, the President without any doubt. Because we are 
deeply, deeply committed to--in fact, we have a special 
program, SelectUSA, that we are putting a huge priority on 
reaching out to encourage yet more foreign direct investment 
here in the United States.
    And Alabama, having welcomed Mercedes Benz and those 
others, that is a great thing for us. Those are jobs. That is 
strengthening our economy. I have worked and have met a lot 
with each of these major automobile companies that have their 
headquarters somewhere outside the United States but are proud 
to be here. And it is thousands and thousands of jobs.
    Mr. Bonner. Thank you very much.
    Thank you, Mr. Chairman.

                           PROGRAM REDUCTIONS

    Mr. Fattah. Mr. Chairman, if you will yield for a second, I 
want to clear up a couple of things that were raised.
    One is that your entire budget request for the Department 
is $7.6 billion?
    Secretary Bryson. Yes. It is close to 8.
    Mr. Fattah. We were talking about whether you should be 
cutting more programs and the like. I have some concerns about 
the Weather Service cuts and the like, which we will get into 
not now but as we go down this road over the next few months.
    I want to make it clear to the Committee that we are going 
to spend more in Afghanistan this month than we are spending on 
the entire Commerce Department. We are spending $2 billion a 
week. This notion that we can't afford to invest in American 
business or in promoting manufacturing or in our National 
Weather Service or in NIST is nonsense. This is the wealthiest 
country in the world. We can make these investments. It is a 
matter of the political will.
    When the Chairman says that we have had tornadoes hit 
Kentucky and we should be responsive, we shouldn't hesitate to 
be responsive to natural disasters in our country. We are at a 
60-year low in tax rates. We are spending $2 billion a week. So 
this month, in 4 weeks, we will spend $8 billion in 
Afghanistan. This is more money than your entire budget 
request.
    I want to be sure that the record is clear that we 
shouldn't be cutting any programs that are going to affect the 
health and well-being or economic prosperity of American people 
because we are saying we can't afford it. We can afford it. It 
is a question of priorities and where we want to place our 
priorities.

                                 BOEING

    The second thing is, I went out and visited Boeing in the 
Philadelphia plant. A few years ago, they had 2,000 people 
working. They now have over 5,000. They have three shifts and a 
weekend shift. I am going out to Everett.
    And Boeing is operating in dozens and dozens of States. 
This Administration has given Boeing the largest contract in 
the history of any manufacturer in the country with the tanker 
deal. It has promoted and the President has held Boeing's hand 
in these foreign trade missions, and they have signed deals all 
over the world. And the complaint that was filed on South 
Carolina wasn't filed by the Administration. It was filed by 
the parties involved, and it was resolved.
    Mr. Bonner. Would the gentleman yield?
    Mr. Fattah. I just want to finish my point, but I would be 
glad to yield. Because we are talking about a matter that is 
already settled. I guess we don't want to talk about things 
that are in front of us. Go ahead.
    Mr. Bonner. I was just trying to get--because the Secretary 
is new to the position but in his prior life had served on the 
Boeing board, I thought he might have a unique perspective. I 
didn't know whether he knew whether the Department had taken an 
official position. But it was the National Labor Relations 
Board of this Administration that weighed in against Boeing's 
right, as I understood it, to invest their own money into South 
Carolina. I am very familiar with the tanker contract, because 
I was trying to get those jobs in Alabama and saw it a little 
bit differently than my friend.
    Mr. Fattah. Reclaiming my time, the administration never 
took a position in the Boeing matter. Just so we are clear, 
there was an action filed before the National Labor Relations 
Board, and it would have been improper for the administration 
to take a position. And the matter was resolved.
    But the point here, in terms of helping Boeing, there is no 
Administration that has ever done more. There are hundreds of 
billions of dollars of contracts, not just domestically but 
worldwide.
    So I just want the record to be clear that, rather than 
impeding Boeing--and the President was just out at the Everett 
site seeing the Dreamliner, which is just a fascinating and 
magnificent manufacturing feat for Boeing. So I just want the 
record in this Committee to be clear. We want to work together, 
and we want to make sure that we are responsive.
    If we are cutting programs because they are a waste of 
money, that is fine. If we are cutting programs because we no 
longer need them, that is fine. But we should not be cutting 
programs under some notion that we can't afford them vis-a-vis 
when we look at other choices that we are making as a country. 
If we can spend $8 billion a month in Afghanistan, we should 
not be selling short shrift to the economic fortunes of present 
and future American generations in terms of investments in the 
Commerce Department.
    Thank you, Mr. Chairman.
    Mr. Wolf. Before I recognize Mr. Culberson, I want to 
comment on both of those issues, and I am not getting into a 
big, big debate.
    On the Boeing issue, I think GE's Jeff Immelt signed a deal 
with the Chinese to sell avionics technology to the Chinese 
which will be a potential threat, Mr. Fattah, to the Boeing 
company. Congressman Forbes and I have raised this issue. 
Because Boeing--Mr. Fattah is right. Boeing is an important 
American company and exports are very, very important. Are you 
aware of the avionics deal that GE signed with the Chinese?
    Secretary Bryson. I know only from the newspapers. Beyond 
that, no. I have a general sense of it.
    Mr. Wolf. That can be a direct threat to Boeing, and I 
would appreciate if you would take a look at that.

                              AFGHANISTAN

    Secondly, if I can ask my friend from Philadelphia, if you 
can help me on something, and I think you will probably agree 
with me.
    Mr. Fattah. I always agree with my Chairman.
    Mr. Wolf. This Committee passed language last year that set 
up the Afghanistan-Pakistan Study Group. I was the author of 
the Iraq Study Group which was the Baker-Hamilton Commission. 
We then directed and gave the resources to the Secretary of 
Defense to put together five Republicans and five Democrats to 
look to see, on a bipartisan basis, what should be done in 
Afghanistan. And the language has been in law now for I guess 5 
or 6 months, and we cannot get the Secretary of Defense to move 
on that. I am not suggesting that I know what we should 
absolutely do in Afghanistan, but I believe it is time to have 
fresh eyes on the target. So the gentleman might want to write 
the Secretary.
    Mr. Fattah. I will join you in writing the Secretary.
    Mr. Wolf. I have written him eight times. I get no answers 
back. I think I have one answer in seven--and, for the record, 
I will submit all of the letters I have sent to him. And I 
would appreciate if you would look at that. I would ask you to 
take a look at that, too--a little outside of your 
perspective--but with regard to where we go in Afghanistan and 
what we do.
    [The information follows:]


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    Mr. Wolf. Mr. Culberson.
    Mr. Culberson. Thank you, Mr. Chairman.
    And thank you, Mr. Secretary, for your service to the 
country and for being here with us today. Yours is a complex 
and difficult job.
    It is our job not only to oversee the money that you spend 
but the responsibilities of the agency and to do what we can to 
help you fulfill the responsibilities of the Department as 
codified in title 15 of the U.S. Code. Section 1512 says, ``it 
shall be the province and duty of said Department to foster, 
promote, and develop the foreign and domestic commerce, the 
mining, manufacturing, and fishery industries of the United 
States.'' Our largest trading partner, I believe, is Canada at 
about $48 billion in January. The second largest is China, of 
course. I think they are at $45 billion, and then Mexico at 
about $42 billion in January. According to the numbers I have 
just seen recently.

                         TRADE LAWS ENFORCEMENT

    The Department of Commerce's responsibility is to foster 
and develop American commerce. You said you introduced a 
company to Central America in your opening statement, a small 
company, and helped promote their efforts overseas. Are you 
actively involved in introducing American companies to the 
Chinese, to open opportunities in China?
    Secretary Bryson. Yes.
    Mr. Culberson. And to foster development of economic ties 
between American companies and Chinese companies?
    Secretary Bryson. Yes.
    Mr. Culberson. It is obviously in our Nation's interest to 
do whatever we can to promote foreign trade, but Chairman 
Rogers correctly pointed out that the scale of the trade 
deficit with China is of great concern. They are obviously 
deliberately subsidizing the value of their currency and 
hammering us on every front. Chairman Wolf has quite correctly 
zeroed in on the cyber threat that the Chinese pose.
    In my opinion, the greatest national security threat we 
face I share with the Joint Chiefs of Staff. The previous Joint 
Chief Chairman said America's greatest long-term strategic 
threat is the national debt. There is the obvious threat from 
the Iranians, God bless the Israelis and the threat they face 
every day and our duty to stand by them, we have obviously got 
a threat from al-Qaeda and terrorism.
    But, strategically, our greatest strategic threat as a 
Nation is China. And it is my understanding that by the year 
2015, three short years from now, the Chinese military will be 
in a position to announce their own Monroe Doctrine for the 
South China Sea. They will be so powerful militarily and in 
such a strong position that they will be able to absorb Taiwan, 
if they wish, militarily, and no one will be in a position to 
stop them. Economically, I understand their economy will 
surpass ours by the year 2016.
    What I am leading up to, I really want to zero in on what 
specifically the Department of Commerce is doing to protect 
American companies, the American economy, from the predatory 
practices of the Chinese, not just in subsidizing their 
currency in unfair trade practices. You have the tools that 
Chairman Rogers mentioned earlier, the countervailing duties. 
You mentioned the GBX case, that you have now had those tools 
restored not only by the courts but by the Congress.
    So I would like to get real specific, in particular with 
countervailing duties and requiring China to fulfill their 
obligations as a member of the World Trade Organization. Can 
you talk to us specifically about what the Department is doing 
today and will do next week and next month to rein in Chinese 
abuses and ensure that they fulfill their obligations as a 
member of the World Trade Organization?
    Secretary Bryson. Yes. As I indicated, there will be a 
decision that will be announced later today in exactly that 
sector with respect to a China issue. We take very seriously 
our responsibilities for enforcement of the trade laws. This 
legislative step, restoring all those cases that we have over 
the last several years brought to conclusion for countervailing 
duties is an enormously important step. We will continue to do 
that and do more. We will also now have the support of the ITEC 
in carrying that yet further. It is critical.
    Mr. Culberson. What specifically are you going to do?
    Secretary Bryson. Case by case, the way as I think you 
know, is that countervailing duty processes, the antidumping 
processes, are quasi-legal processes, so we go through a series 
of open, transparent, law-abiding steps. So they don't--these 
things don't happen overnight. They are done with considerable 
care. Because we build cases that are enforceable cases. And we 
will continue to do that but at a yet higher intensity rate.
    Mr. Culberson. So later this afternoon we could expect 
fairly dramatic and decisive action from the Department?
    Secretary Bryson. In one particular but very important 
case, yes.
    Mr. Culberson. I hope that is designed not only to address 
a violation in that case, but is this also intended to be a 
signal to the Chinese that things have changed and more 
aggressive action is to come?
    Secretary Bryson. It is a very important case. I can't 
speculate in any way until this announcement takes place, but 
it is a specific case. It shouldn't be understood as 10 cases. 
It is the way this is done. It is a very important case. And it 
is a decision, not just the initiation of a case.
    Mr. Culberson. So the Chinese should not interpret this 
action later today as a signal that the Administration is going 
to really get tough in enforcing the law and compelling China 
to fulfill its obligations as a member of the World Trade 
Organization? China should not draw that conclusion? This is 
just an isolated case and you are not going to pursue 
aggressively other enforcement action?
    Secretary Bryson. Let me take you to the initiative that 
the President announced. I joined him in that. With respect to 
another case, the so-called rare earth case, a critically 
important case, that was--I believe that was Friday of last 
week, another vitally important case. The Chinese will see that 
this is high-intensity, very focused enforcement of the trade 
laws.
    Mr. Culberson. Let's talk briefly about rare earth then. I 
am sorry. I missed the announcement. What is the Administration 
doing to attempt to curtail China's aggressive attempt to 
control the rare earth supplies? I think they control 97 
percent of the rare earth element production on the face of the 
planet--97 percent--and they just used it against the Japanese.
    A Chinese military vessel, hit, deliberately rammed a 
Japanese ship two years ago; and the Japanese captain arrested 
the Chinese captain because the ships were apparently locked 
together. It was a deliberate collision. The Chinese were at 
fault. The Japanese arrested the captain. I think they took a 
couple of the officers into custody. Correct me if I am wrong, 
Mr. Secretary. But the Chinese responded by cutting off 
Japanese access to rare earth elements, and the Japanese 
released the captain of the Chinese vessel almost immediately.
    So what is this Administration doing to protect the United 
States of America and, for example, our semiconductor industry, 
our manufacturing from the obvious near monopoly the Chinese 
have of rare earth elements? You said that something was 
announced on Friday. I am looking for specifics.
    I gather you detect from virtually every question you have 
gotten from the Subcommittee has been focused on the strategic 
threat posed to the United States by China. What specifically 
are you going to do to protect our manufacturers against a 
monopoly exercised by China over rare earth elements, for 
example?
    Secretary Bryson. With regard to rare earth, the way this 
works, we do this with the U.S. Trade Representative. The U.S. 
Trade Representative takes the case. We at the Commerce 
Department provide the substantial backup analysis of these 
cases. The cases are filed, and this is an extremely important 
case.
    And you are right. What China has at this time is a 
monopoly effectively of rare earth around the world, and the 
rare earth materials are critical materials for a whole range 
of advanced technology. And what appears to have happened in 
these cases--and we go forth in this case now--is the Chinese 
have this monopoly so they can control the pricing around the 
world.
    Mr. Culberson. Right.
    Secretary Bryson. And the further belief we have is that 
they have not applied those prices toward China and state-owned 
enterprises or otherwise in China but apply those to the U.S. 
and others.
    Mr. Culberson. Sure. A classic monopoly.
    What was announced on Friday and what specifically----
    Secretary Bryson. They are going forth with a case.
    Mr. Culberson. What are you doing to open up American 
supplies of rare earth elements in, for example, Federally 
owned land in the United States?
    Secretary Bryson. There are efforts around the world. We 
know of no rare earth availability in the United States.
    Mr. Culberson. Australia has significant deposits, I 
believe.
    Secretary Bryson. Australia may have some. Vietnam may have 
some. Australia and we think Vietnam are both looking. But, 
right now, we are in a situation, and it may continue to be the 
case for some period of time, and that is that China has an 
effective monopoly.
    Mr. Culberson. The Chairman has been very generous with the 
time, as he always is with all of us, but I want to bring to 
your attention, and I want to share this with the Subcommittee 
members, an article that is just absolutely an incredible 
article that just was published on March 15 in Bloomberg 
involving an American superconductor corporation that 
manufactures computer systems that serve as electronic brains 
of wind turbines. Are you familiar with the case?
    Secretary Bryson. Yes, I am.
    Mr. Culberson. The Chinese stole the source code. AMSC had 
gone into business with a Chinese company called Sinovel, the 
largest manufacturer of wind turbines in China, and AMSC, the 
American semiconductor company, discovered that Sinovel had 
stolen the source code for the operating system that AMSC had 
developed to control the operation of wind turbines. And the 
theft had the result, once the Chinese had ahold of the source 
code, 40 percent of AMSC's value was erased in a single day on 
the stock market and 84 percent of their value was erased by 
September. AMSC's stock chart today looks like the 
electrocardiogram of a person rushing towards a white light.
    Let me just close with this, and I really want to ask you 
to talk again very specifically. The director of the National 
Security Agency said at a security conference in New York in 
January that Chinese theft of intellectual property is the 
greatest transfer of wealth in history. And, thanks to Chairman 
Wolf, I got a briefing at the FBI cyber warfare headquarters.
    I hope, Mr. Fattah, if you get some time, all of us ought 
to go out there and see it. It is really eye opening. It is the 
best briefing I have had in 10 years.
    They are like army ants. What the Chinese are doing is 
literally like army ants, systematically stripping every piece 
of intellectual property, anything of value. This is so far 
beyond the sack of Constantinople. This is beyond the sack of 
Rome. This is deliberate, systematic theft of every piece of 
intellectual property of any value on the Internet, organized, 
planned, and executed by the Chinese government. You 
essentially agree with that, right?
    Secretary Bryson. I absolutely agree with the AMSC case.
    Mr. Culberson. What about what I just described, is this is 
a systematic attempt by the Chinese to steal as much, if not 
all, intellectual property that they can get their hands on 
through the Internet and cyberspace?
    Secretary Bryson. There are a large number of violations of 
intellectual property.
    Mr. Culberson. We are all asking about this. So I hope you 
will raise this to a top priority.
    Secretary Bryson. It is a top priority right now.
    Mr. Culberson. What are you doing to protect American 
intellectual property when you foster these relationships 
between an American company and a Chinese company, when we know 
it is documented by the FBI, by the national 
counterintelligence agency, which just issued a report on the 
scale of Chinese theft? We know the Chinese are fostering these 
developments. It appears intentional, systematic, and 
comprehensive to steal intellectual property from American 
companies. What is the Department of Commerce doing to protect 
American intellectual property when these relationships are 
developed between a Chinese company and an American company?
    Secretary Bryson. What we are doing is what I have 
described in enforcement of the trade laws. You are asking a 
little broader.
    Mr. Culberson. I am asking about intellectual property and 
cyber theft; what can you do?
    Secretary Bryson. We simultaneously believe that providing 
U.S. exports to China from U.S. businesses is very important 
for the U.S. economy, and so we work hard on that. And those 
U.S. exports to China have increased very significantly.
    Mr. Culberson. What are you doing to protect American 
intellectual property?
    Secretary Bryson. The enforcement of the trade laws. That 
is what we do, and we do it with others. We believe that China 
is a factor in the global economy and will be in the future. We 
intend to have the U.S. remain the strongest country in the 
world in a global economy, and we think working with China to 
ensure that they in every respect----
    And, by the way, the case filed a week ago, you mentioned 
Japan, Japan joined us in filing that case on the rare earths. 
But we think it is right to do both, advance U.S. exports to 
China and ensure that the Chinese all the time face all of the 
challenges we can provide where they violate the rules.
    Mr. Culberson. Thank you.
    Mr. Chairman, you have been very generous with the time. I 
appreciate it.
    Obviously, enough is not being done. We are not doing 
enough, and the problem is immense. I hope you will do more.
    Mr. Wolf. Mr. Honda.
    Mr. Honda. Thank you, Mr. Chairman.
    Welcome, Secretary.
    Secretary Bryson. Thank you.

                          FOREIGN INVESTMENTS

    Mr. Honda. Let me just go off script for a moment.
    On the foreign investments, we are talking about foreign 
investments from China. The Department of Commerce and the 
State Department, what is their attitude about working with 
China and having them invest their moneys in our country for 
job creation, creating manufacturing, and things like that? 
What is our position on that?
    Secretary Bryson. Our position with regard to foreign 
direct investment in the United States, I take it you are 
asking that question investing here in facilities, operations, 
infrastructure, we have approached that with caution, but we 
are open to and would value investment in operations as we do 
with regard to other countries around the world in facilities 
here.
    So the Chinese invested very heavily in U.S. Treasury debt. 
We are open to having them invest in facilities here. And there 
is small but growing number of investments they are making, 
taking minority positions in some businesses here in the United 
States; and, under the right standards, we are supportive of 
that.
    Mr. Honda. The standards that you require they meet, are 
they any different than any other country that needs to meet 
those standards?
    Secretary Bryson. We take a more cautious position with 
regard to China investment, for example, in infrastructure in 
the United States, because we want to take a step at a time in 
the circumstances in which we believe that China in various 
respects is not giving us real compliance with international 
trade laws.
    Mr. Honda. So you are saying that we treat China 
differently because of how they are treating us in terms of our 
investments overseas?
    Secretary Bryson. Yes.
    Mr. Honda. So the Chinese government, are we making a 
distinction between investment by the Chinese government and 
those who are not with the government?
    Secretary Bryson. I am sorry, do we make a distinction 
between----
    Mr. Honda. Investments from the Chinese government----
    Secretary Bryson. As opposed to private?
    Mr. Honda [continuing]. Versus private?
    Secretary Bryson. That is a good question, and I would like 
to get back to you with a clearer response than I can provide 
right now.
    [The information follows:]


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    Secretary Bryson. China, as you know, is a Communist 
country, and it is a country with very central control. So 
there is for us the question of whether the private businesses 
in China are truly private and separate from the controls of 
the Federal government.
    Mr. Culberson. Thank you.
    Mr. Honda. Don't thank me yet.
    But I do want to make an effort to start to clarify some of 
our comments and some of our suspicions and to have it on a 
fair playing ground. We talk about manipulation of currency. Do 
we manipulate our currency in this country?
    Secretary Bryson. We do not. Our currency operates in the 
market, market forces.
    Mr. Honda. It seems to me that the finance director of 
Germany had stated that the way we use the Federal Reserve 
moneys to manipulate our inflation, he considered that a 
manipulation of currency. Is that a correct statement?
    Secretary Bryson. It doesn't seem to me a correct 
statement. We have market currency rates. That is what we do, 
and the world has known that for a very long time. And that is 
a reason why investments in U.S. Treasury bills, investments 
generally in the United States, have been the investments most 
made around the world. Foreign direct investment and in every 
other way.
    What we are saying with regard to China is they simply have 
to abide by the rules all the rest of us have to abide by. To 
the extent they don't, we have to take steps.
    Mr. Honda. So the way they do business in terms of trade, 
they have different exchange rates for every country that they 
have bilateral agreements with, and is that in violation of the 
WTO?
    Secretary Bryson. They have the same currency, controlled 
as it is in sales wherever they go.
    Mr. Honda. But they use it in a different manner?
    Secretary Bryson. Well, they control the currency, and so 
they have increased until they had a run for 10 or 12 months in 
which they began to step the currency rates. Now they have 
stopped that again.
    There is a larger set of questions here. They are now 
dealing with inflation in their economy. They are dealing with 
much higher cost of payments to their workers. They have more 
protesting workers. China is a major, major factor in the 
economy of the world, but I do not take the view at all that it 
is inevitable that somehow China will dominate us. I believe 
that doing the things that we do, and do right, we will 
continue to be the dominant economy, the largest economy in the 
world for decades or decades ahead.
    Mr. Honda. That is not the purpose of my question, whether 
we are dominant or not, or my fear of them dominating the world 
economy. I think history shows fluctuations between economies.
    I just want to be clear on terminologies. Because words 
carry images and sometimes images bring about anxiety, you 
know. So I think when we are strong in our own sense of this 
country, this country will be safer.

                 SURVEY OF INTERNATIONAL AIR TRAVELERS

    There is a question about the Office of Travel and Tourism 
industries. And we talk about our economy and businesses, and 
we talk about travel and tourism. I understand that the U.S. 
Travel Association supports SIAT and that the Office of Travel 
and Tourism has ended a survey that they were conducting. It 
seemed like the survey was an important tool to find out how we 
are doing in the area of tourism. Is there a reason that the 
OTTI had ended the survey?
    Secretary Bryson. So, Mr. Congressman, I am not sure that I 
am understanding. Would you state that again?
    Mr. Honda. Sure. The Office of Travel and Tourism 
Industries within the ITA ended a survey of international air 
travel, SAIT. This is a voluntary survey, and it is good 
information in terms of resources for travel and tourism 
industries to efficiently allocate resources. And I understand 
that the OTTI had ended that survey. Is there a reason why that 
was done?
    Secretary Bryson. I just don't know that. I am sorry, but I 
will get a response to you in the next few days.
    Mr. Honda. I appreciate that. I am surprised you know so 
much.
    [The information follows:]

                 Survey of International Air Travelers

    The Survey of International Air Travelers (SIAT) is still being 
conducted. However the Department of Commerce's FY13 budget request 
eliminated funding for SIAT and several other programs and initiatives 
in line with the President's budget reduction effort. We are trying to 
identify alternative options and sources of funding to put the SIAT on 
a sustainable financial footing. These alternatives include cooperative 
agreements with other agencies or organizations to collect the relevant 
data, and reducing the overall cost of SIAT through the use of new 
methodologies or technologies to collect and process the data.

                  MINORITY BUSINESS DEVELOPMENT AGENCY

    Mr. Honda. The other question I had was about the Minority 
Business Development Agency, MBDA, which I think is a very 
successful enterprise. Right now, it appears because of budget 
cuts that we are losing enterprise centers. I think the 
movement is to bring them all here to D.C. and let all of the 
work that the enterprise centers do work out of Washington, 
D.C.
    But the effectiveness and the efficiency and the outreach 
that these national centers have in their current locations 
seems to be of high importance and very effective. I don't know 
why we are doing this if we are trying to outreach and 
encourage a continuation of this effort of having minority 
business development continue.
    Mr. Fattah. If the gentleman would yield for one second, 
for the Secretary and the Chairman, we are going to have to 
wrap up around noon. I wanted everybody to be aware as we go 
forward we need to be more concise with questions and answers.
    Mr. Honda. I think we have been very concise on this side.
    Mr. Fattah. Always.
    Mr. Honda. Is there a decreasing support of the program, 
MBDA, in the Department? I just wonder what the strategy of the 
Commerce Department is for this program.
    Secretary Bryson. The strategy is to make the program yet 
more productive, and what is being done is reducing costs of 
sites where we have facilities and replacing them with the 38 
MBDA Business Centers that we have around the country that are 
very low-cost sites for us. So, yes, some people are being 
brought back to Washington, D.C. It is simply a way to reduce 
costs and we believe have yet higher value in reaching out to 
minority businesses.
    Mr. Honda. If I understand it correctly, we are not losing 
any staff. We are closing and terminating our contracts with 
GSA, whose impacts will not occur until the next year. And so 
the current year we seem to be looking at just the contracts 
that we have in terms of leases.
    It seems to me it is a small amount of money that we are 
looking at, and when you look at the small amount of money 
versus the efficiency that these five central offices have in 
the country, it seems like we are going backwards.
    Secretary Bryson. David Hinson, who heads that bureau, has 
made this judgment. I think it is a very good judgment. We can 
get better returns, reach more businesses, by not having any of 
the funding that we have diverted into costly locations. 
Instead, we will better support having these local MBDA 
Businesss Centers, 38 of them, if I recall.
    Mr. Honda. I guess I would disagree. If you received the 
funds that would cover the leases, would you reverse your 
position?
    Secretary Bryson. So what we are doing is saving over 
$800,000 a year.
    Mr. Honda. Starting when?
    Secretary Bryson. Starting as we make those changes. And, 
yes, those are under way.
    Mr. Honda. What are we sacrificing in terms of outreach and 
efficiency? Have we put a number to that?
    Secretary Bryson. We believe we enhance efficiency and 
productivity. We think that we get more.
    In light of the time, I don't want to take more time, but 
why don't we have David come and sit down and talk with you and 
take you through it. I think you have a great interest, and we 
admire and like that. We count on this program. I would like to 
have the bureau head of that program sit down with you when we 
can arrange that.
    Mr. Honda. And perhaps we can also talk about the 
redesigned proposals for the Native American Enterprise 
Centers, too, then. Because I think for these programs we 
should be investing, rather than pulling back, and there are 
probably other things that we can do. And I will wait for that 
meeting.

                       AMERICAN COMMUNITY SURVEY

    A quick question, Mr. Chairman, on the American Community 
Survey under the U.S. Census Bureau. I guess the Bureau is 
asking for a decrease of $11 million for the ACS. Can you 
explain the reason for the decrease? The money that was 
returned to the Bureau, is that still in the coffers? If it is, 
why don't we dip into that?
    Secretary Bryson. Yes. The money in the Census Bureau is 
there. The big focus and use of that money, and we think it is 
a valuable focus, is now taking the series of steps we can be 
taking now in advance of movement towards the 2020 decennial 
census by finding less costly ways to more effectively reach 
more people in our census count.
    That census count is so critically important and, to the 
extent that we don't reach people electronically in highly 
efficient ways, the costs of the census go up highly. So we are 
doing a series of pilot programs to test that. That is what 
that money is being used for, and we think it is a highly 
valuable use of the money so that we can more effectively reach 
with more reliable results the population that ought to be 
counted.
    Mr. Honda. So you are taking $11 million and redirecting it 
into pilot programs?
    Secretary Bryson. Yes. Right now. Right, for the 2013 
budget, the budget before you now. Yes.
    Mr. Honda. To reach more people electronically. Are you 
telling me that we will do a better job than we did last time 
on these kinds of equipment?
    Secretary Bryson. Yes. We believe we can do yet better than 
what was done in what I think was quite a good census in 2010.
    Mr. Honda. So I guess we should expect a more frequent 
reporting out on this program then if it is going to entail 
electronics, because the handheld stuff that we said we were 
going to do cost us time and money and a lot of aggravation. If 
you are looking at extending this to a greater population, I 
would be interested in how you are going to be looking at 
language assistance through other language-targeted communities 
so that we in fact eliminate this thing we call undercounting 
in language communities.
    Secretary Bryson. Yes, I believe we should provide you very 
approximate--when we get results in these programs, we should 
provide you that information and will.
    Mr. Honda. And you have an advisory group, I believe?
    Secretary Bryson. That is true.
    Mr. Honda. And I think that they should be included early 
on in planning because when we heard from them, they made some 
very pointed critical comments that should be incorporated in 
this go around.
    Secretary Bryson. Yes.
    Mr. Honda. Thank you.
    Mr. Wolf. Mr. Schiff.
    Mr. Schiff. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary. Nice to see you again. Thanks for 
your work.

                           VISA AVAILABILITY

    I just had one general question. I think that is all I will 
have time for. And that is the intersection of immigration and 
our economy and three different facets of it. Just to put it on 
your radar screen, Charlie Bass and I introduced a bill called 
the INVEST Act that would essentially create a new visa 
category for those that are foreign students studying, getting 
STEM degrees at institutions like CalTech in our neighborhood, 
who graduate, want to stay, start a business and hire 
Americans, and we kick them out of the country, which seems 
enormously counterproductive to me, given that we are not 
creating enough engineers and scientists here.
    But I am interested to get your thoughts on the challenges 
to continue to track the best and the brightest. Similar 
challenges in terms of my colleague asked about the tourism 
industry, we would benefit from a tremendous increase in 
tourism in places like New York, Los Angeles, elsewhere, if it 
were not so hard to get a visa to come here. That is deterring 
a lot of people from coming to visit. And similarly, the EB-5 
program would benefit, we would benefit from a lot of 
investment if we were able to more expeditiously process the 
security checks for the EB-5s.
    And I know a lot of these have similar issues. The conflict 
between the demands of our economy on the one hand and the need 
to make sure that we do not let people in the country who mean 
to do us harm. Can you shed any light on efforts you are making 
to increase tourism, as well as continue to track the best and 
the brightest and investments from around the world?
    Secretary Bryson. Yes, I will give a brief response with 
respect to that. Let's talk first maybe about the tourist 
visas. The President made a commitment about 1 month ago. We 
were at Walt Disney World, that happened to be the site for it. 
And he committed that 40 percent improvement in visa 
availability to key countries, including Brazil, as a notable 
jumping off point, conceivably from Miami, but with respect to 
China, with respect to India, and those steps have been taken 
now. So a special credit to the State Department and the 
Homeland Security Department, those steps have been taken.
    With regard to the point about the most talented students 
in the world and the great attraction and appeal of our premier 
universities and the fact that we have benefitted from having 
those students, the point is an incredibly important one. And 
there is almost everywhere I go talking with high-tech 
businesses, and I talk to a lot of them, they put a huge 
priority on that, that is an important step to be taken, and we 
need to address that in my judgment. So the homeland security, 
the response to 9/11, curtailed some of that, and that is 
hurting us, and we need to address it more fully.
    Mr. Schiff. Can you comment though just very briefly the 
EB-5 program and how you see that working, changing, not 
working?
    Secretary Bryson. I do not know enough to give you a good 
response to that.
    Mr. Schiff. I heard from a number of people that we would 
be able to attract a lot of financial investment if we had a 
better functioning EB-5 program, and we were able to get 
through the security clearances more expeditiously because they 
proved a great deterrent to foreign investment.
    Secretary Bryson. I understand the point, and I am sorry I 
do not--I will dig into it and I will.
    Mr. Schiff. Thank you.
    Thank you, Mr. Chairman.
    Mr. Wolf. Mr. Serrano.
    Mr. Serrano. Thank you, Mr. Chairman.
    I know we are very short on time so let me be very brief. 
First of all, I would like to associate myself with Mr. Honda's 
comments about the MBDAs and the importance of keeping them 
strong.
    Secretary Bryson. Yes.
    Mr. Serrano. And my only question, and I will submit the 
other questions for the record, Mr. Chairman----
    Mr. Wolf. Without objection.

                        TSUNAMI WARNING CENTERS

    Mr. Serrano [continuing]. We have tsunami warning centers 
in Hawaii. We have tsunami warning centers in Alaska. We have 
been asking for years what the possibility is of one in the 
Caribbean. And there is plenty of information, scientific 
information, and actual factual information that indicates that 
there have been many problems in that area and that that is 
possibly a danger area. Just recently, there was an earthquake 
just last May, a 5.4 earthquake in the Atlantic Ocean, 
northwest of Puerto Rico, causing tremors on the island and the 
Dominican Republic. And history shows that there have been 96 
tsunamis in that region for a long, long time.
    Very briefly, last year, Congressman Pierluisi, a 
Representative from Puerto Rico, and Congresswoman Christensen 
and myself, she being from the Virgin Islands, introduced H.R. 
1100, which would direct NOAA to establish and operate an 
additional tsunami warning center to be located in the 
Caribbean. So my question to you is, what is your agency's 
position on the establishment of a new tsunami warning center 
in the Caribbean? And understanding the difficulties and the 
budgeting these years, could we work together? My office really 
would be much willing, with Mr. Pierluisi and other members, to 
work with you to make this a reality. It is no longer a luxury 
or just a plum given to an area, but rather a very needed 
situation. What can you tell us on that?
    Secretary Bryson. The tsunami warning centers in Hawaii and 
Alaska were designed to and do reach very, very broadly. So the 
identification of the tsunami from those bases is critically 
important. And I believe the judgment of NOAA is that those 
centers reach the Caribbean and would offer protection.
    But you are raising a question, and I want to get back to 
you to make certain that what I am saying to you is sound. So 
let me not go any further on this, but have the right person at 
NOAA, a senior person at NOAA, come promptly to you with 
respect to that.
    Mr. Serrano. Well, I appreciate that. And I understand the 
argument that centers are set up in one place, and they can 
reach other places. But when you see what happened in other 
places of the world, where people could have, should have known 
that this was coming, and it did not happen, people did not 
know, they were taken by surprise, then you wonder how secure 
is it to say that you could have a place in Hawaii watching out 
for what happens in Puerto Rico and the Virgin Islands. That is 
a long, long way. And I am not disputing science and 
technology. These days, they can do anything they want. But I 
think there is a need to revisit the issue of whether Alaska 
and Hawaii can take care of what is happening in the Caribbean.
    Mr. Wolf. Thank you, Mr. Serrano.
    I share Mr. Serrano's concern. And I think we will ask that 
question, or you may want to come this afternoon when the head 
of NOAA is there. But I think he makes a legitimate point. I 
want to be sure so we will work with Mr. Serrano, too, but I 
share that and we want to make sure that we are making sure----
    Secretary Bryson. I will get that right back to you. And I 
know that outreach and education are done in the Caribbean. But 
you are asking the question the actual warning centers. We will 
get back to you with respect to that.
    Mr. Serrano. And keep in mind, Mr. Chairman, that this 
warning center, you know, a lot of what we do in this country 
helps other countries. That warning center will not just be 
helpful to our territories in the Caribbean, but it will also 
be helpful to all the other people in that area.
    Mr. Wolf. I thank you.
    Mr. Secretary, thank you very much for your testimony. We 
will have a number of other questions. And let me just say I 
think you did very well today. I just want to thank you. You 
are open, candid, did not duck, did not spin. And so for 
anybody who was concerned how you did, I will give you a very 
high grade. I think you did very well. Hearing adjourned.
    Secretary Bryson. Thank you very much.


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                                           Thursday, March 1, 2012.

                      U.S. DEPARTMENT OF COMMERCE

                                WITNESS

DAVID J. KAPPOS, UNDER SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY 
    AND DIRECTOR OF THE U.S. PATENT AND TRADEMARK OFFICE

                      Opening Statement--Mr. Wolf

    Mr. Wolf. Mr. Secretary, thank you for appearing before the 
committee. Congratulations again on the passage of the historic 
America Invents Act legislation late last summer.
    This legislation which includes the authority to adjust 
fees and a myriad of other changes to update the patent system 
has raised stakeholders' expectations significantly.
    The America Invents Act established a new fee reserve fund 
for fee collection in excess of PTO's annual appropriations.
    Our fiscal year 2012 Appropriation Act directs the PTO to 
submit a spending plan through the reprogramming process for 
any such excess. In this way, we have established a mechanism 
whereby all fees collected by the PTO during the fiscal year 
can be made available to spend on PTO activities.
    I disagree personally with much of the rhetoric and the 
talk about fee diversion that were circulating during the 
legislative process surrounding the America Invents Act.
    Over the years, the PTO gradually moved from being funded 
with regular appropriations to being partially funded to being 
fully fee funded.
    During this transition, there were years when the PTO 
collected more than what was appropriated. But in the period 
since 2004, the committee provided more in appropriated dollars 
than the PTO collected.
    I would also like to state that during the last ten years--
and nobody objected to say, Mr. Wolf, we did not collect all 
those fees, so, Mr. Mollohan, please do not do this. They were 
glad that we did it. And Mr. Mollohan did it.
    I would also like to state that during the last ten years, 
the PTO's budget and staffing have grown as has the backlog. To 
continue with the drumbeat that the backlog has grown to an 
unmanageable level because of lack of funding is disingenuous.
    The backlog grew because PTO had a hard time retaining 
seasoned examiners and because the applications are 
increasingly more complex.
    I wanted to take a few minutes to run through the history 
and to state that we will continue to provide the PTO with the 
support it needs to improve its processes.
    For fiscal year 2013, PTO estimates it will collect some 
$2.9 billion in fees. From the amount, PTO anticipates that it 
will collect $247 million in patent fee surcharges before it 
promulgates a new fee schedule during fiscal year 2013.
    I understand you have a rigorous process in place to ensure 
that you can meet all the requirements established in the 
America Invents Act and we look forward to hearing from you.
    I am going to recognize Mr. Fattah. But on this one comment 
where we said the backlog grew because PTO had a hard time 
retaining its fees and examiners, maybe during the testimony 
you might cover that.
    Are you talking to any outside groups, human resources 
groups to see if there is some change in order to retain or if 
it is just the fact that this has been the historical pattern, 
that they come in and they earn a lot from the Federal 
Government and then they go out with private firms? But is 
there something that is different now that could be changed 
whereby more would stay with the PTO?
    I just recognize Mr. Fattah.

                      Opening Statement--Mr. Fattah

    Mr. Fattah. Let me thank the Chairman.
    And let me welcome you again before the Committee and 
congratulate you on the work that you are doing to implement 
the America Invents Act and to manage probably the central 
linchpin of our innovation economy, that is the Patent Office.
    And I know you have done a tremendous amount of work. The 
Administration should be appropriately proud of its 
achievements to date, but there is a lot more work to do. And 
so I will be interested in your comments around the backlog.
    I know it is down, but it is still a challenge, and where 
you are on the hiring process, and along with the chairman, 
obviously what the Committee can do to help as you proceed 
forward with this implementation because obviously it is not 
just a money issue. I mean, this is a significant challenge.
    But you have done an extraordinary job to date. I look 
forward to your testimony.
    Mr. Wolf. Your full statement will appear in the record and 
proceed as you see appropriate.

                      Opening Statement--Mr. Kappos

    Mr. Kappos. Okay.
    Well, Chairman Wolf and Ranking Member Fattah, thank you 
very much for having me in this morning and for this 
opportunity to discuss the USPTO's operations and programs and 
initiatives and the President's 2013 budget request.
    Mr. Chairman, first, I would like to thank you and the 
committee on behalf of the over 10,000 employees at the USPTO 
for your and your subcommittee's efforts that ensured that our 
agency has access to our fee collections in the current fiscal 
year.
    Our fiscal year 2012 appropriation has enabled us to 
effectively begin implementing the America Invents Act and to 
continue our ongoing efforts to improve USPTO operations.
    I would like to share with the subcommittee the progress 
that USPTO and our employees have made over the last year.
    Our workload continues to increase to record setting 
levels. In fiscal year 2011, we received more than 500,000 
patent applications. We issued over 223,000 patents and we 
rejected almost 231,000 patent applications, all all-time 
records for USPTO.
    We expect approximately 533,000 filings this year, growth 
of more than five percent two years running if that occurs.
    On the trademark side, we received some 398,000 plus 
trademark applications in fiscal year 2011, an increase of 8.1 
percent and we expect to receive about 413,000 trademark 
applications this fiscal year. So we have got a lot going on.
    These figures in my view confirm that innovation is indeed 
alive and well and will help spur our Nation's economic 
resurgence.
    Mr. Chairman, we are making real progress at the USPTO in 
reducing our patent application backlog. This is critical to 
economic development because every application that sits in our 
backlog represents potential jobs that are waiting to be 
created.
    Currently the backlog is down to about 652,000 
applications. That is down from a high of something like 
770,000 applications.
    Mr. Wolf. What year was that in, 770,000?
    Mr. Kappos. 2009, early 2009, if I recall right.
    It is the lowest level in over five years now, five and a 
half years. Our first office action pendency has also improved 
and our final action pendency has also improved.
    Patent examiner hiring continues to be a priority. We 
currently have more than 6,800 patent examiners on board. Our 
plan is to hire a total of about 1,500 examiners this fiscal 
year. We have already hired several hundred of them to get that 
number up to about 7,780.
    And you will be interested to know that our attrition level 
is currently running at a very modest 3.28 percent. It is a 
very appropriate attrition. I will talk more about that later.
    Our patent hoteling program which is in large due to your 
leadership, Mr. Chairman, has enabled the agency to hire new 
employees without having to secure any additional real estate.
    A recent IG report, in fact, showed that the USPTO is 
realizing cost avoidance of many millions of dollars per year 
because of the success of our hoteling and teleworking efforts.
    Another means of attracting and retaining qualified 
examiners, the AIA, of course, directs the agency to establish 
satellite offices within two years. The USPTO is on schedule, 
on time to open our first office in Detroit this summer in 
July. We will get that done.
    As for additional offices, the general public and state and 
local officials were invited by a Federal Register notice to 
submit comments and suggestions. We received over 600 comments 
and suggestions and we are in the process of going through 
those right now.
    Mr. Chairman, the AIA, as you mentioned, signed into law 
last year represents the most significant modernization of our 
patent laws in generations. We are on schedule to implement all 
of the AIA provisions on time.
    Our outreach includes presentations that we are making 
literally around the globe as well as seven AIA road shows 
going on even as we speak at coast-to-coast locations in the 
U.S. to explain the proposed rules to implement the legislation 
and to get feedback from the public.
    Early last month, we published proposed fees for our patent 
services under our new fee setting authority under the AIA. We 
have invited feedback from the public and our Patent Public 
Advisory Committee has already conducted two public hearings on 
the proposed fees.
    The trademark side of our operations, I am very pleased to 
report that the trademark pendency is doing great. It is at 
historically low levels. Disposal pendency is 10.2 months, 
which is the lowest ever. First action pendency is at 3.2 
months at the end of the first quarter, which is right in line 
with community expectations for our work.
    Turning to the President's 2013 fiscal year budget briefly, 
we are pleased that the budget grants the USPTO access to all 
of our anticipated fee collections. The budget fully supports 
our priorities in reducing patent pendency further, reducing 
the backlog further, improving our information technology 
systems, and implementing the AIA.
    Importantly, the budget also begins to allow the USPTO to 
build up an operating reserve. We feel that with an operating 
reserve, we will be able to maintain USPTO operations through 
future economic downturns.
    So our key fiscal year 2013 funding priorities include 
hiring another 1,500 patent examiners to further reduce 
pendency and backlog: expanding the nationwide workforce 
initiative with additional satellite office locations as 
mandated by AIA; hiring additional trademark examining 
attorneys to maintain first action pendency at that 3.5 month 
level and total pendency under 12 months; meeting currently AIA 
driven workload and hiring demands for our patent board and 
Office of the General Counsel; and modernizing, continuing to 
modernize, the IT operations for both our patent and trademark 
sides.
    So, Mr. Chairman, while we feel the USPTO is making good 
progress, we acknowledge that significant challenges remain. We 
look forward to working with you to meet those challenges. And 
we truly appreciate the continued leadership and support of 
this committee for the employees and operations of the USPTO.
    Thank you, and I am happy to have a discussion.
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    Mr. Wolf. Great. Thank you.

                      FOREIGN PATENT APPLICATIONS

    I have some questions about your testimony. Applications 
U.S. versus foreign, what is that roughly?
    Mr. Kappos. So, of about 506,000 applications last year 
that we took in, a little over half of them originated from 
foreign enterprises.
    Mr. Wolf. And how would that apply to, say, ten years ago 
and twenty years ago?
    Mr. Kappos. Ten years ago, it would have been fewer than 
half and twenty years ago even fewer. The number of 
applications submitted that originate from outside the U.S. has 
been sort of steadily linearly growing over the years.
    Mr. Wolf. Do you break that down according to country?
    Mr. Kappos. We do.
    Mr. Wolf. If you could just submit that for the record.
    Mr. Kappos. Be happy to.
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                        PATENT EXAMINER TRAINING

    Mr. Wolf. And the other thing before I get to the regular 
questions, are there colleges that actually have a curriculum, 
a major in patent examination or do you have any relationship 
with any of the universities that train people or have you done 
that?
    Mr. Kappos. Well, yes, we do have quite a few.
    Mr. Wolf. Who are the top three in the country?
    Mr. Kappos. So I am going to sort of do this approximately, 
but top schools that send folks to the USPTO would be schools 
like George Washington University right here in D.C. We get 
students from George Mason University which I think is in 
northern Virginia----
    Mr. Wolf. Yes.
    Mr. Kappos [continuing]. Right across the river. We get 
students from a number of schools that we conduct a clinical 
program with around the country. University of Maine is one 
example that sends examiners.
    I was talking to a new examiner just last night from New 
York Law School in New York City. Our clinical program includes 
something like 12 law schools really spread all over the 
country. And we recruit, we help those law schools train 
students and then we recruit from those law schools to bring in 
examiners.
    Mr. Wolf. Are they all lawyers? Do you have to be a lawyer 
to be----
    Mr. Kappos. No, you do not.
    Mr. Wolf. So what is the average educational background of 
an incoming examiner? Just four years of college plus? I mean, 
what would their background be?
    Mr. Kappos. It would be four years plus. To qualify to be 
hired as an examiner, you have to have a technical bachelor's 
degree as a minimum requirement, so like a computer programmer, 
an engineer, a scientist.
    However, we have very high incidence of hiring people who 
have master's degrees in technology areas and many Ph.D.s. We 
have medical doctors and lots of lawyers, too.

                      PATENT BACKLOG AND PENDENCY

    Mr. Wolf. Okay. Your budget states that you were unable to 
achieve performance goals in fiscal year 2011 because Congress 
did not enact the surcharge which would have allowed you to 
collect more and spend more. Many disagree.
    First, PTO's funding has increased by more than almost any 
other U.S. government agency. The fiscal year 2012 
appropriation is an increase of $1.6 billion above fiscal year 
2002, an increase of 140 percent over ten years.
    Second, the America Invents Act was moving through Congress 
during fiscal year 2011 that included many changes to the 
Patent and Trademark Office including changes to its fee 
structure. This legislation was signed into law September of 
2011.
    Third, the PTO hired 561 new examiners in fiscal year 2010 
and another 840 in fiscal year 2011. Therefore, your workforce 
during fiscal year 2011 was higher than it had ever been.
    Fourth, PTO received a $129 million supplemental in fiscal 
year 2010 that PTO did not spend in fiscal year 2010. All of 
this funding was carried over to fiscal year 2011. Then you 
carried over $194 million from fiscal year 2011 into fiscal 
year 2012.
    In addition, incoming applications had been down over the 
past few years because of the economy. So unless we are missing 
something--you had more examiners, fewer incoming applications, 
and then you are carrying over funds from fiscal year 2011 into 
2012.
    So how does this work? I mean, did I have the figures 
wrong, or is it the funding that is the sole or was it even the 
main reason with regard to the goal because you did carry over 
the $194 million?
    Mr. Kappos. Well, so far as I know, you have got the 
statistics right, but it is precisely because----
    Mr. Wolf. We can thank the staff for that.
    Mr. Kappos. Great job by the team.
    It is precisely because the committee has done a great job 
at providing USPTO with funding this year that we have been 
able to make so much progress. And that was in part money that 
carried over, as you say, from fiscal year 2011 into 2012.
    We started making progress last year. We were finally able 
to cap that backlog off in 2011 and get it to go down to about 
690,000 applications or so in 2011 and we have continued to 
take it down this year.
    And it is really because we had the stability of funding 
more recently that it has enabled us to invest in all these 
increased efficiency initiatives as well as hire the numbers of 
examiners that we needed to overcome what this last year was, a 
five plus percent increase in filings which is continuing into 
2012 fiscal year.
    So to overcome the increase in filings and still bring the 
backlog down----
    Mr. Wolf. Would you explain to the Committee the 
correlation between not meeting your goal in patent pendency to 
the success you have achieved in working down the backlog with 
it being about 670,000 at the end of fiscal year 2011?
    We want to congratulate you and the rest of the PTO 
employees for this achievement.
    Can you explain the correlation between whittling down the 
backlog and first action pendency and the different success you 
had in addressing each?
    Mr. Kappos. Sure. So indeed the backlog is coming down 
pretty steadily at this point. As I mentioned earlier, it is 
652,000 now. I expect it to be below 650,000 probably within 
days.
    Mr. Wolf. What is the lowest it has ever been during a 
normal economy when we are not in a depression or a recession 
or what is the lowest it has----
    Mr. Kappos. On a sort of a normalized basis, the low and 
appropriate point would be about 325,000 applications.
    Mr. Wolf. And is that your goal?
    Mr. Kappos. That is our goal. So we have got a long way to 
go, but it is fair to say we are making progress.
    In answer to your question about how the backlog relates to 
pendency, indeed we are making some progress on pendency, too. 
Our first action pendency is now down to about 22 months or so.
    But the reason that pendency sometimes moves in an opposite 
direction from the backlog, in other words, sometimes the 
backlog is going down, but pendency is going up, is because we 
are focusing our attention right now on actually pulling 
applications that are the oldest ones in the agency, the ones 
that have in some cases been left behind, and getting those 
done and out because we know we have got to sort of clean out 
our attic and get our house in order in order to really get the 
pendency down to that ten month first action level and the 20 
month final action level that I promised you we were going to 
get to.
    So to do that, the first step is cleaning those old 
applications out. But when you clean those old applications 
out, ironically you produce numbers that actually look worse 
because you take applications that were just sitting there 
unreported. You examine them. They are old applications. They 
show up on your reports. And so even though the backlog is 
going down, at times it can look like pendency is going up.
    Mr. Wolf. What is the definition of an old application?
    Mr. Kappos. So for us right now, an old application is 
anything that was over 13 months old as of the beginning of 
this fiscal year. But there are some applications in that group 
of old applications that are much older, some that are three, 
four, five, or more years old, and we are trying really hard to 
get those done.

                      PATENT EXAMINER PRODUCTIVITY

    Mr. Wolf. Is that because they are more complex or because 
the people that worked on them were not doing a very good job?
    Mr. Kappos. You know, it is a little of everything. In some 
cases, they are very complex applications, hundreds and 
hundreds of claims, many issues. Some of them involve 
situations where the applicant asked us just to stop processing 
the application. Some of them we lost. That happens once in a 
while. So a whole variety of circumstances.
    Mr. Wolf. How many new examiners do you intend to hire 
during fiscal year 2013?
    Mr. Kappos. 2013 would be our last year in which we would 
need to do significant hiring to finish working on the backlog. 
We are proposing to hire another 1,500 examiners in fiscal year 
2013. But I promise you that will be it. After that, we will 
have adequate numbers of examiners. We will be able to then let 
attrition gradually take our head count down a little bit while 
we finish off the backlog in 2014 and 2015.
    Mr. Wolf. Okay. What is the average number of patent 
applications each examiner reviews in a given year?
    Mr. Kappos. Okay. So you are going to have me do a little 
bit of math.
    Mr. Wolf. And also how much time does the average person 
put in?
    Mr. Kappos. So the average examiner takes about roughly 20 
hours or so to do an application. So sort of roughly think of 
them doing something on the order of two applications a week or 
so. So, you know, with----
    Mr. Wolf. So per year, how many would they have and then 
how many--I am just trying to get a sense of how much would 
each examiner spend per application? Some they are really good, 
they are quick. They just come in and spend less time at the 
coffee grinder--so what is the average time and the average 
number? And I know each is not equal, everything is different, 
but average.
    Mr. Kappos. Right. So on average, an examiner will take 
about 20 hours on an application. And so thinking across the 
agency, we will easily grant 250,000 patents and finally reject 
another 250,000 a year. We are talking about on the order of 
half a million.
    Mr. Wolf. So what would the average examiner do per year 
and the number?
    Mr. Kappos. I am trying to work through the math.
    Mr. Wolf. Why don't you just submit it. I am just trying to 
see.
    Mr. Kappos. Probably better to submit something.
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    Mr. Wolf. And does each examiner know what they have done 
compared to the examiner Adam Montana who is living at the top 
of a mountain doing telework versus one who is in a downtown 
Alexandria community? I mean, is there an average given so 
everyone knows where they come out?
    Mr. Kappos. Yes, there is. And every examiner has a 
performance plan that very clearly documents and requires the 
examiner to handle a precise number of first actions, a precise 
number of second actions, a precise number of other things that 
examiners do, interviews and appeal, an examiner's answers to 
appeals and the many actions that they perform.
    They are very heavily measured, so we can compare that 
examiner in Montana to the examiner living out in Front Royal 
or whatever else and we know exactly----
    Mr. Wolf. Surely the Front Royal one is doing much better.
    Mr. Kappos. Our teleworkers across the board----
    Mr. Wolf. That was not going to be my question. I did not 
mean that for the question. That was just a joke. But I was 
leading up to the question, though, that I wanted you to either 
say reality-wise.

                                TELEWORK

    I mean, we did spend a lot of time on pushing telework, and 
I wanted to know from a quality, from the number of the hours 
and everything else how does somebody doing this through 
telework compare with somebody coming in every day.
    And then we are going to go to Mr. Fattah.
    Mr. Kappos. Right. So that is a great question. And we have 
extensive statistics on that.
    Mr. Wolf. And how many telework in the agency today?
    Mr. Kappos. So we have now about 3,400 people who are 
hoteling. That means they are working from home.
    Mr. Wolf. More than half?
    Mr. Kappos. Slightly less than half are. We have 10,000 
plus people. So think 30 percent or so are hoteling, but we 
have almost 7,000 people, 6,800 who are working at least one 
day from home a week which we refer to those as teleworkers.
    And indeed the legislation has been brilliant in terms of 
enabling the USPTO to get better efficiency at lower cost. We 
have extensive statistics. We are happy to share them with your 
team.
    Mr. Wolf. I would like to see it if we could.
    Mr. Kappos. I will happily send them in. They show that 
examiners who work at home actually have higher productivity. 
They get more hours of examination in a year. They are rated 
somewhat higher. Their productivity is higher. Their 
absenteeism is lower. Every criterion you can look at tells you 
that teleworking is clearly a great business now.
    Mr. Wolf. Well, I would like to see that because there was 
some criticism when we did it and so I would like to see that 
if you can.
    Mr. Kappos. Okay.
    Mr. Wolf. I am going to vote, run down. I will be right 
back. So you want to take over, Mr. Fattah? I will be right 
back.
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    Mr. Fattah [presiding]. Thank you, Mr. Chairman.
    It is good to see you again, and these votes are going to 
be going on for a minute, so I am going to try to--I have a 
question for the record having to do with a fairly technical 
issue that we will submit for the record.

                    NATIONAL INNOVATION MARKETPLACE

    But let me ask you, one of the items that we funded in the 
Commerce Department was this creation of a National Innovation 
Marketplace, which is around connecting up American 
manufacturers with opportunities.
    I know that they are now, the Commerce officials involved 
with that are now interacting with the Patent Office around 
making sure that there is a tie-in and that inventors can know 
about the capabilities, the individualized capabilities of 
various manufacturers around the country that this online 
portal will connect them up to.
    So I do not know that it has reached your level, but I know 
that these conversations are going on. And I wanted to express 
how important it is that we link the invention of new widgets 
to the jobs to manufacture those widgets.
    And, you know, you are really in the catbird's seat. So 
this is a very important project and I would like you to take a 
minute and comment if you have knowledge of it.
    Mr. Kappos. Yes. Well, thank you for the question, Ranking 
Member Fattah. This is indeed to me absolutely critical. You 
know, the patent system is not just about creating patents. It 
is about creating opportunity, development, jobs, and putting 
new products and services in the marketplace.
    So I think what you are referring to is the new Business 
USA system----
    Mr. Fattah. Yes.
    Mr. Kappos [continuing]. That the Administration has 
announced. And Commerce plays a role in that through our 
Commerce Connect Program----
    Mr. Fattah. Uh-huh.
    Mr. Kappos [continuing]. Which bundles together all of the 
services of the many bureaus in Commerce including the PTO and 
others to provide sort of a one portal, one stop shop so that 
any entrepreneur, inventor, small business in the U.S. can get 
access to the services they need.
    So, yes, we are heavily involved in it. USPTO, we are 
putting resources in it. We have done the IT work for it. We 
are putting people in. We have got people on detail to make 
sure at the Commerce level that this capability succeeds, it 
gets built out, and that we are doing a great job of making it 
really easy for American inventors to interact with the 
government and get the whole range of help they need.

                         INVENTORS HALL OF FAME

    Mr. Fattah. Okay. And the other thing I am interested in, 
skipping to a totally different subject, we were together for 
the Inventors Hall of Fame maybe about a year ago and one of 
the things that we have to do is create more interest among 
young people around the requirement that a percentage of people 
in this country actually are in the business of invention.
    And so I was wondering whether or not the Patent Office has 
the capacity to take all of your data and to localize it, say, 
by county so that we could share it with school districts or 
other things as a way to let young people know that there are 
people who in their own set of circumstances have played a 
role.
    Particularly I have been quite impressed with some of the 
work of women and others who heretofore have not gotten a lot 
of notice and I think we need to be doing a lot more to 
communicate to young people about the opportunities in terms of 
becoming inventors.
    And so I know this is not directly related to your work, 
but it is in my view part of the work all of us need to do. So 
I would love to talk to you about this in detail and follow-up 
with you.
    Mr. Kappos. Is it okay if I comment just briefly right now?
    Mr. Fattah. I want you to comment.
    Mr. Kappos. Okay.
    Mr. Fattah. Yes.
    Mr. Kappos. So that is an excellent point. We do indeed 
have and collect data on a county level and we would love to 
work with the committee, with your staff in order to get that 
data out on the county level. Incredibly important and 
empowering. So, yes, we would love to do that.
    Speaking for a moment of women inventors, could not agree 
more on the importance of getting constituencies that have 
historically made hugely important contributions to the patent 
system more involved.
    Mr. Fattah. Right.
    Mr. Kappos. In fact, today, this morning, right now at the 
USPTO, a women's inventors' conference is underway. I just 
stopped and chatted with folks on my way over here.
    And just yesterday we replaced our Steve Jobs memorial 
patent exhibit in our atrium with a brand new exhibit honoring 
women inventors.
    So we are all over this topic of honoring innovators who 
come from communities that need to be highlighted further.
    Mr. Fattah. Well, I hope that we can meet on these subjects 
and have a further dialogue about how we might move forward.
    Mr. Kappos. I will be sure to arrange time and come in and 
chat about that.
    Mr. Fattah. Thank you. And, again, I will have some other 
questions for the record on some of these other issues that are 
more technical in nature.
    I thank the gentleman for his answers and I will turn the 
Committee rightfully back to the Chairman. I am going to go 
vote.

                             PATENT BACKLOG

    Mr. Wolf [presiding]. Okay. Mr. Schiff.
    Mr. Schiff. Thank you, Mr. Chairman.
    Good to see you again, Director.
    I wanted to just make sure I understood the numbers that 
the chairman went over. Over the last year or so, have filings 
have been up or down?
    Mr. Kappos. Up by over five percent to over 500,000 
applications.
    Mr. Schiff. And in the last year, it looks like you made 
considerable progress on the patent backlog which is very good 
to see.
    But the planned trajectory is pretty steep. I mean, the 
targets are pretty low meaning pretty high because from this 
point on, you pretty much have to reduce the backlog almost by 
a hundred thousand a year.
    Is that really doable?
    Mr. Kappos. It is very much doable, so I am quite confident 
we will have the backlog down to at least 620,000 by the end of 
this fiscal year, probably a little lower than that because our 
estimates of performance have slightly been on the conservative 
side.
    So think near 600,000 by the end of this year. So we will 
have 1,500 more examiners on board. The many efficiency 
measures that we put in place are taking hold. We are clearly 
getting more efficient at the PTO.
    And so if you combine all those efficiency moves with a 
significant increase in horsepower and people doing the work, I 
am actually quite confident that we will be able to achieve our 
goals.
    Mr. Schiff. And certainly if we can help keep to our guns 
in terms of any fee diversion, I will help you a great deal. 
And given that you asked the stakeholders to pay more, I think 
it appropriate that we make sure those enhanced revenues go to 
reducing the backlog.
    One of the concerns that I have, as you will recall, over 
the America Invents Act was moving to a first to file system.
    Do you expect that the result of that may be increased 
filings as a result of people feeling they need to rush to the 
Patent Office? If so, how will that affect your ability to meet 
your targets?
    One other related question is, one of the concerns that was 
raised with me, I know you are aware, from many California 
inventors was the impact it may have on small or mid size 
inventors having to compete with larger companies that have a 
more established practice, legal staff, etc., to make the 
patent applications.
    Are there any steps that you are taking to try to address 
those concerns and make sure that the small- and mid-size 
inventor does not get run over in the race to the Patent 
Office?
    Mr. Kappos. So great questions. In terms of increased 
filings, you know, I really do not expect much in the way of 
increased filings. We are planning on a five percent increase 
this year in part driven a little by the changeover to first 
inventor to file.
    I do not expect much additional over that. The histories 
and other systems that have changed over have been that, you 
know, the increases went at historical levels and did not have 
major step functions in them.
    I think, frankly, though, the----
    Mr. Schiff. Before you move on from that point, you expect 
a five percent overall increase in filings or five percent due 
to first to file?
    Mr. Kappos. A five percent overall increase in filings. But 
part of that five percent would be attributable to folks 
wanting to make sure that they get in ahead of the first to 
file.
    Mr. Schiff. And the other would be the improvement in the 
economy?
    Mr. Kappos. A lot of it is improvement in the economy. 
Actually, I think part of it will be, you know, if the fees do 
increase as we proposed to our user community, you will have a 
little bit of step function of folks trying to file 
applications before those fee increases----
    Mr. Schiff. I see.
    Mr. Kappos [continuing]. Go into effect.
    Mr. Schiff. So I am sorry I cut you off before you went to 
the second question.
    Mr. Kappos. Yes. So in terms of helping the small and 
medium sized companies to be able to navigate the new system, 
this is why, number one, we have got this extremely aggressive, 
coast-to-coast educational program that we are conducting.
    We have done already a road show in northern Virginia. I 
personally did one in northern California. We have had them 
going on in Salt Lake City, Utah; Dallas, Texas; and Florida. 
Tomorrow I will be in Boston and Chicago next week. I am 
speaking shortly after that at another event, but I will talk 
about AIA in southern California.
    So we are literally all over the place specifically 
focusing on the issues for the small inventors. We are 
actually, you know, taking care to hold these meetings and 
hearings in places like public libraries where the small 
inventors and independent folks have better access.
    No fee is charged, right? So we are trying to be 
extraordinarily accessible. And we are talking about first 
inventor to file and other provisions of the legislation. So we 
make sure folks understand them and understand how to navigate 
them.
    The other thing I will mention is if you recall, the 
legislation has a study in it that will be conducted. It is not 
one we started yet and I think it might even be SBA that is in 
charge of that one. But there is a study that is required of 
the effects of first inventor to file. So we will be measuring 
the impact.

                           SATELLITE OFFICES

    Mr. Schiff. Well, finally, I would like to just put out a 
recommendation, which I am sure all of my colleagues will 
second, that when you are considering the new patent officers 
you think of southern California.
    Thank you, Mr. Chairman.
    Mr. Honda. How far south?
    Mr. Wolf. Mr. Honda.
    Mr. Honda. Thank you, Mr. Chairman, and welcome.
    You may have discussed this issue already. It sounds like 
you might have, the satellite office pilot program. And I 
understand that you are on your way in completing establishing 
the Detroit office. And then you would be looking at two more 
offices, the sites to be determined.
    And my colleague and my good friend, my buddy is advocating 
southern California which is closer than Detroit. But I was 
hoping that you had received a letter from northern California, 
the Silicon Valley Group advocating for an office in northern 
California, Silicon Valley.
    And have you seen the letter or----
    Mr. Kappos. Yes, in addition to many other letters from 
folks in California.
    Mr. Honda. See, he acknowledges other letters, too.
    And what are some of the things you look at in order for 
you to make a decision on, you know, placing another office?
    Mr. Kappos. Yes. Well, I am happy to talk about that. And 
as a fellow native Californian, you know, I certainly love 
everything about the Golden State.
    What we are looking at, so we are trying to be very metrics 
based and objective about the approach we are using. So we are 
looking at criteria that would first and foremost indicate that 
we can be successful at operating a patent satellite office in 
a particular area.
    So one thing, one particular metric that we are looking at 
is how many patent applications are being filed from applicants 
in that area because those are people we are going to be 
interacting with a lot.
    Second metric we are looking at is universities that are 
training technologists and lawyers that could potentially be 
either interacting with our agency or potentially be applicants 
or candidates for hiring as patent examiners at the PTO.
    A third criterion that we are looking at is the number of 
registered patent practitioners in the area because they are 
certainly going to be interacting with our agency and some of 
them may want to come and work for the USPTO.
    A fourth criterion that we look at is cost of living in the 
area. Everybody knows the government is limited in what it can 
pay----
    Mr. Schiff. Well, that shuts out the Silicon Valley.
    Mr. Kappos. But there is Gilroy and other areas.
    Mr. Honda. We can talk.
    Mr. Kappos. So those and a number of other factors that we 
are looking at to try and get a quantitative sense for whether 
we can first and foremost hire and retain and especially 
retain.
    As the chairman pointed out earlier, retention is a major, 
major factor in success at the USPTO. And as the director, I am 
very concerned about choosing satellite locations where 
retention will be a good possibility for us.
    Mr. Wolf. So you will have Mr. Schiff and Mr. Honda doing 
arm wrestling.
    Mr. Honda. No. He is going to tire us out, then he is going 
to get in it. Yeah.
    Mr. Schiff. If you pick Gilroy, your patent examiners would 
have way too much garlic on their breath.
    Mr. Honda. That will keep them home until the commute.
    Those are helpful criteria.

                             FEE STRUCTURE

    The other is if it is going to be fee based, what are some 
of the oversights and controls that you have in terms of not 
overcharging? Do you have a different fee structure for large 
companies and small first time folks and things like that so it 
is not prohibitive?
    Mr. Kappos. Right. That is a great question. And the answer 
is we do. So we already provide a 50 percent discount for small 
entities. We use the SBA's definition of small entities, so 
they are actually not----
    Mr. Honda. That is not a very good definition.
    Mr. Kappos. Well, you know, it is what we have to work 
with. So we provide a 50 percent discount for small entities.
    And now under the AIA, we provide or will provide as soon 
as our fees, new fees get in place a 75 percent discount for 
micro entities and those include universities. So the 
university community will get a huge discount as will other 
very small filers.
    We are also trying to be careful in the proposed fees that 
we have got out and are being discussed among our applicant 
community right now to provide new paths through the patent 
system that actually reduce the cost to get a patent even for 
large entities.
    So we are very sensitive to fees and charging fees in a way 
that makes the patent system as accessible as it possibly can 
be really to entities of all sizes, but starting with the 
really small ones.
    The last thing I will mention, if I can, is that we have 
also initiated first ever, that we know of, on the planet a 
patent pro bono program that works with universities and bar 
associations around the country to provide low cost or even 
free access to patent legal services for inventors who cannot 
afford to pay legal fees.
    So we have got that program already started in Minneapolis-
St. Paul, Minnesota and we are working on starting it up in a 
number of other cities around the country. I believe the San 
Francisco Bay area is one of the areas that we are working on 
getting started now.
    Mr. Honda. Yeah. Well, I would hope that there is 
continuous review on this because I would hate to hear people 
saying that, you know, they have been feed out.
    And, you know, fee for recovery of service is something 
that is real popular, but I do not know whether it is the best 
system. And there has to be some internal review and 
reevaluation whether this system is meeting its goal or not. 
And I want to make sure that we have that oversight.
    So let's see. I think that that is probably the question I 
have, the most important question I have. I appreciate you 
being here and we will call you and find out where that letter 
is.
    Thank you.
    Mr. Kappos. Thank you very much.
    Mr. Schiff [presiding]. Mr. Director, I guess I get another 
second round until the chairman comes back.
    I know you are working on setting a new fee schedule that 
will allow you to meet the goals for backlog and pendency. And 
I think a really important focus in setting the fee schedule is 
to ensure again that we are looking out for the smaller 
entities and small inventors.
    This may mean that larger entities are paying more than 
some smaller entities or those that make significant use of the 
Patent Office have to pay more.
    How do you expect your proposed higher fee schedule will 
affect the number of applications? How elastic do you think the 
demand for patents is? Where do maintenance fees, the fees that 
patent holders pay to maintain an issued patent over its life 
span fit into that discussion, and are you contemplating a 
scaling of fees depending on the use of the Patent Office?
    Mr. Kappos. So a lot of questions there. We are, you know, 
very sensitive per the last question and answer series there to 
the effect on the small and micro entity community. And we 
think it is actually going to be a lot less expensive to get 
through the patent system because of the new micro entity fee 
system, as well as I mentioned providing some more streamlined 
paths through the system. So even large entities, but 
especially small ones, can actually get patents less 
expensively than before.
    In terms of elasticity, you know, we have tried to estimate 
that in our new proposed fee structure, which by the way 
continues to heavily subsidize the patent filing process using 
maintenance fees, right? So we are continuing on that 
traditional congressional mandate to keep the initial fees low, 
keep the entry barriers low, and subsidize low entry barriers 
through a maintenance fee program. In fact, we are proposing to 
increase the out-year maintenance fees, the maintenance fees 
that are paid by the most successful applicants for the most 
important patents, in order to increase that sort of 
subsidization effect.
    So we really think that the impact on filings will be, of 
the fee changes, will be very modest if any. I do believe there 
will be probably a step function in filing shortly before the 
new fees go into effect as part of, because they are going into 
effect at about the same time that the switch over to first 
inventor to file takes place. So you will see a little bit of 
discontinuity there. Applicants will be using tactical measures 
in order to try and get filing dates before and after the first 
inventor to file date. I think that will work its way through 
the system pretty quickly. And in the end it will be innovation 
and the value of the American patent that drives these 
continued increases in filing.
    Mr. Schiff. Thank you, Mr. Director. And I will yield back, 
Mr. Chairman.
    Mr. Wolf. Okay, thank you very much. Mr. Fattah.
    Mr. Fattah. No, I am done.

                                TELEWORK

    Mr. Wolf. On the telework issue, can you give us an update 
on efforts to allow patent examiners to exchange their duty 
stations to locations outside of the 50-mile radius?
    Mr. Kappos. Yes. I am very happy to report that we 
diligently after, Mr. Chairman, your leadership that produced 
the USPTO teleworking pilot legislation went through the past 
Congress we immediately began implementing, we produced the 
required reports within the administration. We got their 
approval last year, and we have already implemented the 
legislation. We have examiners who have already changed their 
duty station and are operating under the legislation that you 
passed. So we have extremely aggressively implemented it and 
are out there doing what Congress authorized us to do.
    Mr. Wolf. On the satellite office, how many will be in 
Detroit and when will it be operational, when will it actually 
open up?
    Mr. Kappos. Detroit will open and become operational in 
July this year. We already have fiber. We have the build out 
taking place as we speak. We have vacancy notices out, both for 
examiners and board judges. We have received an incredible 
amount of response from the Detroit community. So we will be--
--
    Mr. Wolf. How many will be there?
    Mr. Kappos. So the number of examiners that we will have to 
start will go to 100 within about a year, I think actually less 
than a year. So I think initially 100 examiners. But there is 
no reason we could not increase that number over time if we are 
successful.
    Mr. Wolf. Okay, good. When there is a vote I will run down, 
and then there is one more, and then I will be back. Additional 
offices is three more, did you say? A total of three?
    Mr. Kappos. The legislation asked us to open a total of 
three offices, so Detroit and two more.
    Mr. Wolf. Have you been looking, I mean, there will be one 
in California and I think there should be. The question is, 
where else are you looking at?
    Mr. Kappos. We are looking at 54 cities----
    Mr. Wolf. Fifty-four?
    Mr. Kappos [continuing]. And regions in the country sent us 
submissions telling us why they were the perfect place to have 
satellite offices. So we are actually looking without 
discrimination at all of them equally.

                         INFORMATION TECHNOLOGY

    Mr. Wolf. Okay. You are requesting $465 million for 
information technology. Would you give the Committee an update 
on Patent End to End, what is the project's life cycle and what 
is the cost of it? We are going to have one more vote and then 
we can just continue, but go ahead.
    Mr. Kappos. Sure. So Patent End to End is our complete 
redesign, reengineering of our patent examination 
infrastructure. We are well underway with that project. In 
fact, our central reexamination unit, which is a part of the 
agency that handles particularly challenging cases, is already 
using in production, I am not talking about a prototype, they 
are already using in production the Patent End to End system, 
the first components of it. And I personally demoed it with our 
central reexamination unit and the examiners raved about how it 
improves their productivity. Clearly a long way to go still.
    Mr. Wolf. Whose idea was that?
    Mr. Kappos. Whose idea was----
    Mr. Wolf. I mean, this. Was it, has this been, have you 
talked about it for years?
    Mr. Kappos. I think it is fair to say it was our examiners' 
idea. We reached out to our examining corps and our union and 
asked them to tell us what they wanted us to build for them. 
And this is what they told us they wanted. But we have got a 
long way to go. We spent something like $18 million, if I 
recall right, last year. We can get your team the exact 
numbers. We are scheduled to spend something like $45 million 
or so this year. We are in the busiest year, 2012-2013 will be 
the biggest years to build this project out.
    We will be starting to put our line examiners on it early 
in 2013, which means our gigantic examining corps. And we will 
be transitioning over to it during 2014. We should be 
essentially fully operational on patents by the end of 2013.
    Mr. Wolf. Good. I am going to turn this over to Mr. Fattah 
and I will be right back.

                    DIVERSITY IN THE EXAMINER CORPS

    Mr. Fattah [presiding]. Can you talk to me about where you 
are in terms of diversity issues in the examiner corps, and 
where you hope to be at the end of the day in terms of making 
sure that there are ample opportunities for qualified people of 
diverse backgrounds to participate?
    Mr. Kappos. Okay. Well thanks for that question. So where 
we are with the examining corps today, I think it is fair to 
say that the USPTO has a very strong focus and has been 
successful, and I do not have the exact stats at my disposal 
but we can certainly get them to you. I watch them carefully, 
though. My EEO lead reports directly to me, not to anyone else 
at the agency. He is at the table in my executive committee 
meetings. He reports directly to me and to our executive 
committee about how we are doing on diversity.
    We have made major improvements at the USPTO at the 
examiner level. We were good at the administrative level for a 
long time, way ahead of the rest of the government in terms of 
diversity at the administrative level. The examiner level we 
are quite good also. And again, we can share the statistics 
with you.
    [The information follows:] 


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Quite frankly, where we are not as good as I would like us 
to be is as you get up into management and executive levels. 
The number of diverse employees starts to fall off as you get 
up into management, and it falls off more as you get into the 
executive level. So we have a specific push going on that at 
the USPTO.
    We are currently putting together a very comprehensive 
program that includes the early identification of candidates; 
providing them with the mentoring and the development programs 
that they need; ensuring that they are being encouraged to 
apply for management jobs and then senior management jobs; 
tracking our results; and holding ourselves accountable for 
making real improvements in terms of the diversity of our 
management team. Again we are happy to share those plans with 
you in detail.

                         INFORMATION TECHNOLOGY

    Mr. Fattah. Let us go to this technology issue. The PE2E 
system, where are you at in terms of, I know you are going to 
make major investments this year, around $130 million in that 
effort. Can you talk to the Committee about where you see this 
at at this point?
    Mr. Kappos. Sure. Well so just in terms of the numbers, if 
I recall correctly we are going to be investing somewhere 
around $45 million or so in PE2E this year so somewhat lower 
than that.
    Mr. Fattah. Okay.
    Mr. Kappos. We are working to completely move the USPTO off 
of a system in which we take applications in electronically but 
essentially take them in, as we currently do, as image files, 
and as we currently do try to then scan them and correct 
errors, and then process them in a kind of a, I will say silo 
fashion, where it is very difficult for each examiner to see 
what other examiners are looking at relative to prior art and 
patent applications. It is even difficult currently for them to 
search over their own docket. So we are trying to replace that.
    The design theory for Patents End to End is that everything 
in the agency will be in electronic text format, meaning like 
XML text that is fully searchable. So patent applications will 
be submitted in XML format. We will not be trying to scan them, 
and OCR them, and correct errors, and any of that stuff 
anymore. They will all be 100 percent accurate because we are 
getting exactly what the applicant submitted.
    Having them in that format and by getting prior art also in 
that format, we will be able to then have all data 
electronically available in full text searchable by every 
examiner for the first time in the history of the agency. I do 
not even think there is any other patent granting authority 
that has that capability. So it will dramatically improve our 
examiners' visibility to information and make them more 
effective. Thereby enabling us to provide automated 
preexamination searches for our examiners and provide the kind 
of workflow that will enable the agency to run end to end 
electronically.
    Mr. Fattah. I have a question that we will submit on the 
record on this issue. But I have got to go vote. I have got 
seven seconds.
    Mr. Kappos. Okay.
    Mr. Wolf. Okay. Mr. Honda, do you want to? Go ahead.

                          HUMANITARIAN PATENTS

    Mr. Honda. Thank you, Mr. Chairman. What are the programs, 
I understand that you are engaged in as the technology sharing 
for international humanitarian assistance. Could you talk a 
little bit about that? And what that means, and why it is 
important, and where its application can be?
    Mr. Kappos. Sure. So I am very proud of our humanitarian 
patents program announced at the White House I think it was 
just last month, in February. The first program of its kind I 
am aware of anywhere, you know, again anywhere on the planet 
frankly. What we are doing with this program is providing 
incentives through access on an accelerated basis to USPTO 
services for patentees who put their patents to humanitarian 
uses. So this could be, as an example or a hypothetical, a 
patent for a water filtration system that is put to some 
humanitarian use in some developing part of the world, could 
even be in the U.S., could be any other country, we will accept 
a request from that party. We are running it as a contest and 
we are going to be granting for folks who do those kinds of 
things, again, accelerated access to USPTO services for patent 
applications that they have pending in their agency. An 
underlying effort there is to show the world how the patent 
system is an accelerant to development and how it can benefit 
the development agenda, wherever it is, all over the planet.
    Mr. Honda. You mentioned it is a contest. What does that 
mean? Are there winners and losers? Or you have a limited 
amount of folks that you want to process? Or I do not, I am not 
quite sure I understand that.
    Mr. Kappos. Right. So the way we worked it out was to run 
it as a contest in the sense of a panel of judges who will be 
from the private sector who will look at the applications sent 
in, the requests to participate sent in, and will judge whether 
they meet the criteria. And if so then, you know, they get 
entry. We are targeting something like, if I recall right, 50 
winners if you will in this first pilot period. But there is 
absolutely no reason why we cannot extend this if it works or 
make this program larger, and I really would hope to do that.
    Mr. Honda. So, to the chair, I guess I am trying to figure 
out how do you define, and who will define, what humanitarian 
is in its use and its distribution? And how do you keep folks 
out of the loop in terms of them snatching it, if you would, 
and taking off with it on their own, or keeping it from being 
plagiarized?
    Mr. Kappos. Right. Well we have set up some what I would 
call general criteria. We did not want to be too prescriptive 
because we wanted the water pump, as well as the pharmaceutical 
idea, as well as the bio idea, as well as, right, everything 
else in the patent system to potentially be eligible. So we 
defined humanitarian but we defined it generally. We would be 
happy to provide you with the full information on the way we 
set the program up.
    We will be charging the judges and selecting the judges 
with an eye toward, you know, folks who will be knowledgeable 
about applying general criteria in a fair and equitable way in 
order to be sure that the program works. And then obviously 
since it is a pilot we will take a careful look at the results 
that we achieve and be not only willing but anxious to improve 
the program if we can.
    Mr. Honda. So the contestant can be Squibb or any 
pharmaceutical, or a scientist who found the cure for polio, 
for instance? And saying, ``I do not want anything back I just 
want this to be put out there.'' Does that qualify? And would 
there be any way of snagging that so that it does not get out 
that way? And because you could make a lot of money off of 
that.
    Mr. Kappos. Well, yes. Any of those examples would be 
potentially eligible for the program. And we would invite both 
the individual who has created the cure for some disease and 
wants to put it in the public domain, as that would be a great 
example, as well as the, you know, entrant who is doing some 
other humanitarian thing with their patent to enter the 
program.
    I am not sure I understand how the program would be subject 
to ready abuse. It requires you first of all to have a patent, 
and be making some use of it in a way that relates to 
humanitarian improvement. And then to apply, the judges to be 
able to judge whether it meets the requirements. And then if it 
does for us to, in the USPTO to provide accelerated processing 
for another application in the agency. So it seems to me to be 
well enough bounded that I do not see obvious abuses as being 
easy for this program.
    Mr. Honda. So it is transparent. And will the contestants 
be, you know, is it all transparent in terms of public, it is a 
public list that people can see and be able to access and as a 
matter of oversight or curiosity?
    Mr. Kappos. Well that is a great question. Frankly, my 
recollection is we are not far enough into the program to have 
gone through sort of all the publication issues. But my 
expectation would be that it would be completely transparent. I 
do not see any reason why it would not. Patent data is by 
definition public, so there is no reason why it would not be.
    Mr. Honda. Okay.
    Mr. Kappos. And we would be happy to work with the 
Committee to ensure that everything we are doing gets all the 
oversight we can benefit from.
    Mr. Honda. Yeah. Given our history in this country of, not 
to talk about, or not to consider oversight, or to allow it to 
move along in its own nature, a lot of times there could be, 
you know, a possibility of it being taken advantage of or 
misused. So, you know, oversight is something I think is 
important. I am not talking about regulation, but just an 
oversight so that people have confidence that when they apply, 
you know, they have confidence in the process. And so will the 
public. Thank you, Mr. Chairman.
    Mr. Wolf. Based on what Mr. Honda said, and I agree with 
him, but I think it is a good idea, though. I commend you for 
it. I did not know about it, to be honest with you. My fault 
for probably not looking at the announcement. But I think 
anytime you could come up with something that would have a 
major impact on water, or on health in a third world country 
that you could expedite. You should be congratulated for doing 
that. I think it is good. But I, obviously what Mr. Honda said, 
you want to make sure it is all transparent.
    But is there, I was wondering too, is there a mechanism, do 
you have a mechanism in the Patent and Trademark Office, and 
maybe this is to take care of it, that if somebody says, ``Mr. 
Kappos, we have got to get this thing out.'' I mean, that there 
is an appeals process to, I do not mean no political 
involvement, but that it is life or death and world peace, if 
you will. Is there a process that you can look at? And I know 
you would have to be very selective because you want to make 
sure that nothing was, you did not hire some high-powered 
downtown attorney who knew somebody at the Patent Office to do 
that. Is there a mechanism to do that? To move something ahead? 
Or is this the mechanism?
    Mr. Kappos. Well, there is. And I will say there finally is 
because there was not until the AIA passed.
    Mr. Wolf. Okay.
    Mr. Kappos. But the AIA authorized us to, for the first 
time really, create a fast track process that simply requires 
paying a fee.
    Mr. Wolf. Oh, no, I know about the paying. But, so there is 
just the paying then? There is not even a faster track than 
that? There is not life or death, world peace, this goes we are 
great, this does not go it is over. I paid my fee but can we 
move this ahead, there is no process that does that? You have 
still got to get in line once you pay your fee on the fast 
track? Maybe I am not being clear. I just wondered is there any 
mechanism within the Patent Office, I know everyone pays 
attention, that you can jump something up in light of an 
emergency or something like that?
    Mr. Kappos. Well yeah, there is a longstanding ability to 
have applications declared special because of things like age 
or poor health or----
    Mr. Wolf. Right. And do you do that? Or do you have a 
committee that does that? Who makes that determination?
    Mr. Kappos. The determination is made by the PTO. And you 
know, I am doing this from memory, I think it is a petition 
that goes to the Director and I have an office of petitions 
that evaluates those and regularly grants them.

                            FUTURE STAFFING

    Mr. Wolf. Okay. Will you reduce the numbers of examiners in 
the out years if the technology that you deploy enables your 
examiners to work more efficiently?
    Mr. Kappos. Yes. That in fact is the plan, to stop hiring 
after 2013 and let our workforce attrit as the backlog goes 
down and our efficiencies improve.
    Mr. Wolf. Okay. Do you have any projections for that?
    Mr. Kappos. We do, actually. And we would be happy to 
provide them at the staff level. But we expect the workforce 
to, you know, have a normal sort of attrition rate and to 
gradually decline in '15, '16, '17 and beyond.

                           OPERATING RESERVE

    Mr. Wolf. Okay. On your operating reserve the PTO budget 
states your intent to maintain a operating reserve equal to 
three months of your annual budget level with an operating 
reserve at the end of fiscal year 2013 of $378 million. The 
reserve would grow to $557 million in fiscal year 2014, and 
$858 million in fiscal year 2015. The figures for fiscal years 
'16 and '17 are more like $1 billion in reserve at the end of 
fiscal year. Why is it a good idea to have such a large amount 
of money like that?
    Mr. Kappos. Well we are trying to build up a reasonable 
operating reserve of about three months. The out year number of 
$1 billion will not happen----
    Mr. Wolf. What is your top? Do you have a number that says 
this is it, gang? We----
    Mr. Kappos. Given the size that we expect to be in 2015, 
the number is in that $700 million range or so. That the number 
that you read is the right number.
    Mr. Wolf. Is that based on your operating expenses for 
three months, that would be?
    Mr. Kappos. Yes.
    Mr. Wolf. Okay.
    Mr. Kappos. Yes. And so we will be resetting our fees to 
avoid that operating reserve growing to $1 billion.
    Mr. Wolf. So then maybe at that time fees would begin to 
decrease, then?
    Mr. Kappos. Yes. I fully expect that.
    Mr. Wolf. Okay, good.
    Mr. Kappos. One, because there will not be as many 
examiners, right? And two, because we will not need to fund the 
operating reserve any further.
    Mr. Wolf. Right. And everyone will be living in Front Royal 
and nobody will come in. The building will be empty. Walking 
down the halls, and nobody will be there.
    Mr. Kappos. Just the Director there.
    Mr. Wolf. The wind will be blowing through the halls. What 
process do you have in place to determine what the reserves 
will be spent on each year, then? Will the PTO notify the 
Committee when these resources are reprogrammed to patents, 
trademarks, or other programs?
    Mr. Kappos. Well we certainly can. What I would hope that 
the reserve actually does not need to get spent, because the 
purpose of the reserve is----
    Mr. Wolf. It is a reserve.
    Mr. Kappos. Yeah, in case something happens like happened 
in 2008, and we hope that never happens again. We certainly can 
and would be happy with the Committee's oversight to work out a 
notification system if we ever do have to use it.
    Mr. Wolf. Okay, good. Mr. Fattah.

                           ECONOMIC SECURITY

    Mr. Fattah. I am done. I have exhausted my questions.
    Mr. Wolf. Okay. I have a special order about 11:30 or 11:35 
or so. The fiscal year 2012 appropriations include a number of 
reporting requirements related to national economic security. I 
appreciate the work you have done to convene relevant federal 
agencies to discuss the need to update so-called secrecy 
orders. But I am concerned that the agencies are not being 
aggressive enough. And I do appreciate you have been open to 
some of these ideas. And much has changed in the world since 
those secrecy orders were last updated. Would you please 
provide the committee with an update on those efforts? I 
understand the same guidelines have been in place for a number 
of years and that State and Defense do not believe that any new 
criteria need to be established. What about the Department of 
Homeland Security? What are their thoughts, since that agency 
was not in existence when the secrecy order criteria was last 
reviewed?
    Mr. Kappos. Well right, yeah, we are, Mr. Chairman, we 
share your concern about national security and economic 
security issues. We did convene with the Defense Technology 
Security Administration, Army, Navy, Air Force, National 
Security Agency, Department of Energy, and as you mentioned 
Homeland Security, and Justice. And those agencies felt like 
their processes were okay. That is not to say we cannot push 
more, and we would love to work with the Committee to do that.
    Now Homeland Security was the one group of that, the one 
agency of that group, that indicated they may be taking another 
look at their definitions that they give us that we use to 
evaluate applications. And I do not have any more recent 
information about what their determination has been but I am 
happy to follow up on that.
    Mr. Wolf. If you would? And let us know. I know you have 
proposed going out with a Federal Register notice to get public 
comments on whether or not some applications should be kept 
secret for national security concerns. We have seen drafts of 
the proposed notices and we have some misgivings. Should not 
the determination to keep an application secret be made by the 
executive branch, and in particular the national security 
agencies? And are you consulting such agencies in addition to 
soliciting public comment? The public comment may be 
interesting but they may have a vested interest that is very 
different than the security agencies.
    Mr. Kappos. Well yes, understood. And so let me just back 
up a little bit. The Federal Register notice focuses largely on 
the economic security question as opposed to----
    Mr. Wolf. Right.
    Mr. Kappos [continuing]. National security.
    Mr. Wolf. National security.
    Mr. Kappos. Although it does ask about both. So, and we are 
interested in the public's view but we certainly will be 
reaching out to the national security agencies. And I fully 
agree that at the end of the day it is the national security 
agencies that need to make the decision about what kind of 
information is required and what criteria are used.
    Mr. Wolf. Without getting into detail, what was your 
reaction to the briefing that you saw that we asked you to go 
to?
    Mr. Kappos. I was shocked. I was distraught.
    Mr. Wolf. We are going to have that for the Committee. When 
are we going to have it? March 27th. But I do appreciate your 
going there. And I have asked others to go out. And you know, 
you were fairly responsive. Others just listened, but everyone 
who has seen it said, ``My goodness gracious.'' And so, thanks 
for doing that.

                             CYBERSECURITY

    Another reporting requirement directs PTO to develop 
recommendations for ensuring that third parties who have patent 
applications that are of national security importance have 
adequate protection on the information technology 
infrastructure so they are not hacked. Where are you with 
respect to providing this report to the Committee? What do you 
think needs to be done to direct or encourage these firms to 
ensure that their information technology systems are hardened 
against cyber intrusion? What have you done with respect to 
developing a framework for suggested improvements? Can the PTO 
promulgate regulations that would enable it to determine the 
parameters by which third parties must secure their information 
technology systems so they cannot be hacked.
    I had a law firm come and tell me they were hacked. The 
Chinese took it all. Now they did not want to tell anybody. 
They told me. That is not a good thing for Baker, Baker, and 
Baker to say, you know, our computer system is so lax that the 
Chinese can come in and take it whenever they want to. But they 
have done that. So with regard to that being the case, what can 
be done and are you doing it to make sure that they meet 
certain standards?
    Mr. Kappos. So this is an area where I would tell you more 
work is needed. Now speaking for USPTO we actually are not 
authorized to keep security information on our IT system. So 
what we do when a patent application is deemed by the national 
security agencies to be subject to a secrecy order, or a 
national security issue, the first thing we do is remove all 
copies from our IT systems and handle those applications 
entirely in paper form under lock and key and safes and, you 
know, all the traditional security. We are very satisfied with 
our own internal security. It is highly manual of course. But 
it totally avoids any issues of electronic intrusion. So we are 
not a great expert resource on how to electronically protect 
relative to national security.
    Mr. Wolf. Do you think some of these law firms should be 
doing the same thing? I mean, they are stealing the family 
jewels. And you know, everyone has computers and all, but there 
are some select cases. Do you think some of the law firms, some 
of whom are probably sitting here and are all going to read the 
newsletter should be doing that? Should be required, and I do 
not think I am going to do this, but should we require in a 
bill that every law firm that is hacked that has any contact 
with PTO come forward on the steps of the Capitol and announce 
that they have been stripped and hacked by the Chinese? Or 
should we give them code names? We are trying to do this in a 
voluntary way.
    But do you think there are some firms that know they have 
been hacked, and frankly most of them have been hacked. There 
are two kinds of firms downtown, those who have been hacked and 
know it, and those who have been hacked and do not know it. And 
shame on the ones who do not know it. But the ones who do know 
it, do you think they should be doing different procedures, 
similar to what you are doing, you know, lock and key and 
paper, not on everything but on ones that you have that 
particular concern?
    Mr. Kappos. Well so I do not know the security measures 
that law firms have. I would not----
    Mr. Wolf. Almost zero, most of them.
    Mr. Kappos. I would not be surprised if there are some 
issues.
    Mr. Wolf. The billable hour I am thinking, just think about 
it, let us think about it, okay. We will put 15 minutes down 
for that hour. We will bill that. Look at all, and they know. 
But I do think it is a serious issue, it is both industrial, 
but it is economic, it is all that. But I just think it might 
be helpful.
    And I do appreciate, you know, you and I had our 
differences when you first came up, and maybe at IBM you did 
not have to answer to anybody but here you had to. And but I 
think you have done a good job. And I think you have been open 
to some of these things. And I think you understand some of 
these things better than some people who have had your job 
before. Do you think maybe Patent and Trademark Office ought to 
put out sort of a general recommendation? Not specific to 
Baker, Baker, and Baker to--I hope there is not a Baker, Baker, 
and Baker but I am just throwing it out. Not that they have got 
to do it, but sort of say based on what you understand they 
should be doing, they should be sensitive to something coming 
out from you on a general notice would be helpful rather than 
coming to a particular firm and telling them?
    Mr. Kappos. The answer is yes, I think we can and I would 
like to do that. We are going to need to work with the security 
agencies because they are the ones who have the competency. But 
we have contact with the applicants and we certainly know which 
applications are under secrecy order. We actually do already 
provide notification when an application is under secrecy 
order. We tell the applicant, ``You have got to protect this. 
It is a criminal violation if you do not do it right.''
    So we send what you would say is sort of first level 
notification. But to be quite frank, we do not go further at 
this point and try to provide any kind of guidance, or 
guidelines, or even connect the applicants with the security 
agencies.
    Mr. Wolf. Right. But do you think you could put out a 
general notice that----
    Mr. Kappos. Oh yeah, easily.
    Mr. Wolf. If you could? I do not know. But if you can I 
would, we can take a look at it----
    Mr. Kappos. We would be happy to do that. And even work 
with your team to make sure it is as clear as it can be.

                                 CHINA

    Mr. Wolf. Okay, thank you. With respect to China and 
intellectual property, how many employees does PTO have in 
China? And do they speak Chinese?
    Mr. Kappos. We have----
    Mr. Wolf. Can they read Chinese?
    Mr. Kappos. We have attaches and their teams in China. We 
have currently two attaches, we are getting ready to put a 
third one in Shanghai. We have one in Guangzhou and Beijing 
right now. And we do require Chinese fluency with the folks 
that we are sending over now. Frankly I know that one of our 
current attaches is completely Chinese fluent, reading and 
writing. The other one I am not sure about. But as we replace 
them our current requirement, our new requirement is Chinese 
language competency. We also have, you know, people who are 
below the attache level who, and every one of those that I have 
met is Chinese fluent.
    Mr. Wolf. Okay. It would be helpful if as you replace 
everyone can read and write and speak. And do you have a 
cooperative arrangement with the Foreign Service Institute out 
in Arlington to send your people to training? Or do you have to 
find, when you search for somebody, that is not the easiest 
language so you do not, how will you in the future make sure? 
Will you find somebody and send them to the Foreign Service 
Institute to learn? Or will you----
    Mr. Kappos. Well what we are doing right now is we are 
requiring people to have the language skills when we hire them. 
So we are not going down a road of, you know, training folks in 
Chinese.
    Mr. Wolf. Is that easy? Like the Trade Rep's office has 
people in China that cannot speak Chinese. I mean----
    Mr. Kappos. Yeah.
    Mr. Wolf. All the Chinese in Washington speak English, and 
all the Americans in Beijing speak English. So it is kind of 
a----
    Mr. Kappos. Yeah, a mismatch.
    Mr. Wolf. Yes. And so I think you should maybe have a 
relationship with the Foreign Service Institute out in 
Arlington. Other agencies do to make sure. And we could, we 
would be glad to contact them.
    Mr. Kappos. Yeah. We may already have a relationship with 
them. I do not know. But if we do not I would be happy to make 
sure that we do, and your point is very well taken that we need 
to hire people who speak both English and Chinese, and write 
both English and Chinese for----
    Mr. Wolf. Right. And if you needed us to we can write the 
Foreign Service Institute to----
    Mr. Honda. Will the chair yield for a moment?
    Mr. Wolf. Yes, excuse me, Mr. Honda.
    Mr. Honda. Yes, thank you very much for that discourse. 
Because I think that you are correct. When we, since we are a 
global activity and a global society that, you know, we should 
be looking at language and, you know, bilingual and biliterate 
skills. Not only at the lower level but certainly at the 
director level or at the highest position. Because they will be 
making decisions that is going to require that kind of 
knowledge and skill. So I appreciate very much this line of 
dialogue. And in your hiring activities, it would seem to me 
that you would reach out to the diaspora we have in this 
country, where you have folks by their normal daily activities 
they have learned the language and be skilled in both the 
written and the spoken language, not only in Chinese Mandarin 
but also other languages. And I think that is the untapped 
resource that we have in this country, is our diaspora. And 
they tend to be the most patriotic because they understand how 
important it is to make sure that, you know, their 
participation in this country is pristine. So I would be 
interested in what kind of programs or activities you have been 
entailing and how you have gone about engaging the chairman and 
some others of us who are interested in lending a hand and 
doing this. And I thank you, Mr. Chairman. I appreciate the----
    Mr. Wolf. I agree with Mr. Honda. In fact, there is a whole 
series of Chinese lawyers who come into my office, many who 
were dissidents that are now living here. And they understand. 
And Mr. Honda is right, if you are in a restaurant, if you are 
just walking through a store, and there is a radio, not to 
understand. And it has been amazing. I have been in some 
countries, without having to tear it down so I do not look like 
I am talking about, where the ambassador cannot speak the 
language. And if the ambassador cannot speak the language, how 
do you understand? And I think, but I think Mr. Honda is right. 
There ought to be kind of a targeting of people from those 
countries who speak the language, very patriotic, love the 
country, and understand who can really kind of get directly in. 
But maybe we should carry language here, you know, urging and 
the other agencies that they do this, the attaches and all 
that. I do think it is important that your people speak and 
read and write the language. So when they are negotiating with 
the people or talking to the people in China, or in whatever 
other country but China in particularly, they are on par.
    Mr. Kappos. I agree. And Mr. Chairman, we will make sure we 
make that a priority. First and foremost in China, but not 
exclusively there.
    Mr. Honda. Yeah. Not to be humorous, but you know, Sunday 
mornings you would go to restaurants and see them reading three 
or four newspapers while they are having their dim sum.
    Mr. Wolf. Well it makes a difference. I have just one or 
two other questions, I think. How many people in your Office of 
Policy and External Affairs are assigned to specifically handle 
China-related issues?
    Mr. Kappos. I am going to have to get you that exact 
number. We are just in the process of bringing in at least two 
more dedicated China experts. And we----
    Mr. Wolf. Hopefully they will speak Chinese, too?
    Mr. Kappos. I know at least one of them does. I am not sure 
about the other one. But they will be assigned in the U.S., not 
in China. China is the only country that we have a dedicated 
team, we have a China team. There is no other country that we 
have a full team for. And we can get you the exact numbers, but 
it is several people who are essentially, you know, full time 
on China. And we are expanding that.
    [Clerk's note.--This question is answered in the questions 
for the record on page 191.]
    Mr. Wolf. Okay, well that is good. I appreciate that. I 
think that is pretty much it. Mr. Fattah, do you have others?
    Mr. Fattah. I am done, Mr. Chairman.
    Mr. Wolf. Mr. Honda.
    Mr. Honda. No.
    Mr. Wolf. Do you have any other special----
    Mr. Honda. No, thank you, Mr. Chairman.
    Mr. Wolf. We have some other questions that we will just 
submit for the record. Let me just say, I do appreciate your 
testimony and I appreciate, I think you have really done a good 
job. And so I want to thank you, and thank----
    Mr. Fattah. Mr. Chairman, I know that you have a special 
order. Just while you were out I asked if the Patent Office 
would work with us on taking all of the historical information 
and making it available county by county, maybe to schools.
    Mr. Wolf. Sure.
    Mr. Fattah. So that kids could learn that in their own 
communities, people have patents. That they have invented 
things, and that they too might have an interest in that. So we 
are going to follow up with a meeting on this, all right?
    Mr. Wolf. Okay, okay, yeah, that would be great. Unless 
there are any other, the hearing is adjourned. Thank you very 
much.


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                                           Tuesday, March 20, 2012.

               DEPARTMENT OF COMMERCE--NOAA ADMINISTRATOR

                                WITNESS

JANE LUBCHENCO, UNDER SECRETARY OF COMMERCE FOR OCEANS AND ATMOSPHERE 
    AND NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION ADMINISTRATOR

                      Opening Statement--Mr. Wolf

    Mr. Wolf. The hearing will come to order. We are going to 
welcome Dr. Lubchenco.
    Good afternoon. Thank you for being here.
    We are here to discuss the National Oceanic and Atmospheric 
Administration's fiscal year 2013 budget request which is about 
$5.1 billion. This amount is $155 million or three percent 
higher than fiscal year 2012.
    Before we begin questions, I would just note that the 
committee did not receive NOAA's congressional budget 
justification until a month after the President released his 
budget.
    Further, it is my understanding that NOAA made the decision 
to concentrate its efforts on first publishing its ``Blue 
Book'' which contains high-level information in the budget 
request and is a marketing document for NOAA's constituencies.
    The Appropriations Committee, though, and the staff depends 
on the timely production of the congressional justification in 
order to conduct oversight and make funding decisions.
    It is difficult to understand why it took so long to 
complete your budget materials, particularly since NOAA has 
more than 150 budget personnel at headquarters alone. I am 
disappointed in the decision to publish the Blue Book first, as 
opposed to prioritizing the detailed budget that this committee 
requires to conduct oversight and complete our work.
    I do expect that in the future you and your chief financial 
officer will have developed procedures to ensure that 
publications of the NOAA congressional justification materials 
occur on time.
    Second, I am concerned about cuts you are proposing to the 
Tsunami Program. I do not know if Mr. Serrano has come in, but 
he may have some questions. But if he does not, I will ask them 
for him.
    I asked you to host two tsunami conferences last year and 
you did, convening a range of Federal, State, and local 
government officials. I went to the opening session of the 
conference you held in the visitor's center last spring and I 
thank you very much for your efforts.
    But now I see that you are proposing reductions to this 
program. I have a number of questions for you about these 
reductions and want to hear your rationale.
    And as I was just walking by the television out there, it 
said that there was an earthquake in Acapulco, a 7.6 magnitude 
earthquake.
    Have you heard of any results from that?
    Ms. Lubchenco. No, Mr. Chairman. We know that the 
earthquake just happened, but I have not heard anything beyond 
that.
    Mr. Wolf. I am concerned with the reductions with regard to 
the tsunami program. We will have a number of questions about 
these and other issues.
    And with that, I think I will end and turn it over to Mr. 
Fattah.

                     Opening Statement--Mr. Fattah

    Mr. Fattah. Let me welcome you again to the committee, and 
I look forward to the testimony and congratulate you on the 
work you have done and in particular the settlement with BP for 
the early restoration in the Gulf. I think that is a 
substantial step forward.
    And I share with the Chairman some concerns about some of 
the proposals relative to cuts in the National Weather Service 
and the tsunami program.
    But we understand that this is the President's proposal, 
and we look forward to your testimony. And we are obviously at 
the beginning of this process, and we will work through it and 
see where we end up.
    Thank you very much.
    Mr. Wolf. Your full statement will appear in the record. 
You can proceed as you see appropriate.
    Ms. Lubchenco. Thank you, Mr. Chairman.
    Chairman Wolf and Ranking Member Fattah, Members of the 
subcommittee, I really appreciate the opportunity to testify 
today on the President's fiscal year 2013 budget request.
    Mr. Wolf. Excuse me.
    Ms. Lubchenco. Sure.

                      Opening Statement--Mr. Dicks

    Mr. Dicks. I snuck in the back door here. I apologize.
    I also want to welcome NOAA's administrator, Jane 
Lubchenco, to testify here today before the Commerce, Justice, 
Science Subcommittee.
    I must say I am deeply concerned about the NOAA budget that 
has been proposed for fiscal year 2013 and the effect that it 
could have on programs I strongly support.
    I understand that NOAA has a growing problem with the cost 
of satellite procurement. In fact, just a few years ago, in 
fiscal year 2010, satellite procurement represented just over 
25 percent of the NOAA budget.
    In this fiscal year 2013 proposal, the percentage jumps to 
36.6 percent. This situation seems unsustainable and I will be 
interested to hear from you how NOAA expects to meet these 
growing satellite costs without making paupers out of many 
other important programs.
    One of my deep concerns over the last few decades has been 
the health of Pacific salmon. At the end of the last century, 
many stocks of Pacific salmon were listed under the Endangered 
Species Act.
    Since then, NOAA largely has been a good partner to the 
States, local governments, and tribes in the ESA recovery 
efforts, but the fiscal year 2013 budget request gives me 
pause.
    There is a proposed 23 percent cut to the Pacific Coastal 
Salmon Recovery Fund, which I helped start with President 
Clinton back in 1999.
    There is nearly a 20 percent cut for the salmon management 
activities line item that includes the Mitchell Act hatcheries 
on the lower Columbia River. This proposed cut will preclude 
NOAA from continuing to reform the operation of the Mitchell 
Act hatcheries along with guidelines developed by scientists 
for ESA compliance.
    The proposed budget includes cuts of 14 percent for the 
regional fisheries councils and commissions that are citizen-
based bodies making important decisions on harvest and 
conservation matters.
    I must also note that the proposed budget would cut funding 
for the tsunami warning system by nearly 20 percent. Having 
represented the Washington coast since the early 1990s, I 
understand the danger of tsunamis to folks living there.
    In fact, over the past few years, I have had legislation 
passed into law to relocate two tribes, the Hohs and the 
Quileutes outside the tsunami zone.
    After listing some of my concerns about proposed budget 
cuts, I do want to highlight a few positive budget proposals.
    I appreciate the increase to the Integrated Ocean Observing 
System, or IOOS. This program and its arrays of buoys and other 
observation tools are important to Washington State, where 
NANOOS is the Pacific Northwest regional ocean observing 
system.
    I also support the proposed increase for the Regional Ocean 
Partnerships Program.
    In closing, I must express the concerns brought to me about 
the proposal to consolidate the management of the northwest and 
southwest regional offices. From a parochial point of view, I 
do not want Washington State to lose any more NOAA jobs, 
especially after the research fleet was transferred from 
Seattle down to Oregon a few years ago.
    But I have heard concerns that the cost savings through job 
cuts would result in the elimination of some very senior 
positions. If too many of these senior positions are 
eliminated, then the mission of NOAA would be compromised.
    I look forward to hearing your testimony and I look forward 
to the questions.
    Thank you, Mr. Chairman.
    Mr. Wolf. Thank you, Mr. Dicks.
    You may proceed.

                    Opening Statement--Dr. Lubchenco

    Ms. Lubchenco. Thank you, Mr. Chairman.
    I would like to begin by apologizing for the delay in 
submitting the NOAA congressional justification to you. The 
major reason for the delay was that the fiscal year 2012 spend 
plan was not finalized until February 22nd. This kept the base 
levels of many programs in flux.
    [Clerk's note.--The fiscal year 2012 spend plans were due 
to the Committee by January 4, 2012, or 45 days after enactment 
of Public Law 112-55. The Department of Commerce submitted its 
fiscal year 2012 spend plans to the Committee on January 20, 
2012. The NOAA spend plan was not part of this initial 
submission. The Committee received NOAA's portion of the spend 
plan on January 25, 2012, three weeks late. After the 
Department responded to questions about the spend plans, the 
Committee approved the spend plans on February 15, 2012.]
    Furthermore, adjustments that were made to the fiscal year 
2012 spend plan when it was being finalized also led to late 
changes in the fiscal year 2013 funding levels.
    The result was uncertainty surrounding many of the numbers 
which affected a large portion of the CJ until very recently.
    We are committed to reviewing the process of the production 
of the CJ and hope to ensure timely delivery in the future. 
And, again, my apologies.
    I am honored to be here today to discuss the President's 
fiscal year 2013 budget request. Tough choices are required and 
NOAA has prioritized our activities.
    Our budget reflects our dedication to providing some of the 
most critical life supporting and job supporting services that 
American citizens and communities rely upon.
    NOAA has outstanding accomplishments in 2011. I would like 
to highlight three, one of which has already been mentioned.
    NOAA and the other natural resource damage trustees reached 
an unprecedented agreement with BP to provide a billion dollars 
for early restoration projects in the Gulf of Mexico.
    Second, NOAA put in place annual catch limits and 
accountability measures for almost all of the 528 federally 
managed stocks and stock complexes. There is still a lot of 
work to be done, but the Nation's fisheries are on the long 
path to sustainability.
    And, third, NOAA skillfully forecasted Hurricane Irene's 
track as she threatened the East Coast.
    These and other accomplishments set the stage for our 
request for the fiscal year 2013 which totals $5.1 billion. 
This is an increase, as you noted, Mr. Chairman, of $153.9 
million, 3.1 percent above fiscal year 2012. To accomplish 
this, we sought administrative savings and made tough choices 
to enable our top priorities.
    NOAA anticipates reaching our fiscal year 2012 target of 
$68 million in administrative savings and an additional $16 
million is targeted for fiscal year 2013. So we have done 
everything possible we can to find administrative savings and 
protect programs wherever possible.
    One of the greatest challenges facing NOAA is the 
continuity of our satellite operations. We greatly appreciate 
the strong bipartisan support from Congress that these programs 
received last year.
    The Joint Polar Satellite System and the Geostationary 
Operational Environment Satellite-R series are two of our 
budget's highest priorities. We have done everything possible 
to contain their costs.
    Funding is critical to minimize the duration of the 
expected gap between the recently launched Suomi NPP satellite 
and JPSS.
    In 2011 we rewrote the record books on extreme weather. In 
response, the National Weather Service recently launched an 
initiative called weather ready nation that envisions a society 
prepared for and responding to severe weather events.
    The fiscal year 2013 budget requests $972 million for the 
National Weather Service. The 2013 request also includes $413.8 
million for the Office of Oceanic and Atmospheric Research 
focusing on the highest priority services for building this 
weather ready nation. It also requires NOAA's ships and planes 
which are critical data acquisition platforms.
    Our coastal communities are major contributors to the 
economy. Commercial and recreational fishing industries play a 
key role supporting 1.5 million full- and part-time jobs and 
contributing $79 billion to GDP in 2010.
    We request $880 million for NOAA fisheries including an 
increase of $4.3 million to expand stock assessments. Vibrant 
coastal communities depend on healthy oceans and thriving 
maritime commerce.
    NOAA's request includes $478 million for the National Ocean 
Service. Port activities alone are responsible for 8.4 million 
American jobs and nearly $2 trillion in economic output.
    Thank you again for the opportunity to testify before you 
today and I look forward to our discussions.
    [The information follows:]


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    Mr. Wolf. Thank you very much.

                        NATIONAL WEATHER SERVICE

    The fiscal year 2013 request for the National Weather 
Service is $875 million and includes a reduction of $36 
million. One of the proposals is to eliminate 98 information 
technology officers, one from each of the weather forecast 
offices around the country.
    These reductions are a bit of a concern, particularly with 
all the severe weather that occurs, particularly as NOAA 
continues to warn that severe weather is going to continue to 
be the norm.
    What are the information technology officers responsible 
for now and how does that currently work?
    Ms. Lubchenco. Mr. Chairman, the proposal to eliminate 98 
jobs takes advantage of new technologies that have become 
available that we believe we can utilize to provide the same 
service and to do so in a more uniform and reliable fashion.
    We do not believe that this proposal will in any way 
diminish the quality of the forecasts or the disaster warnings.
    Mr. Wolf. How many personnel are at each weather forecast 
office?
    Ms. Lubchenco. I cannot tell you that right off the top of 
my head, but I would be happy to get back to you on that.
    Mr. Wolf. How many meteorologists are at each office now 
and how many--do they work around a shift? How does that work?
    Ms. Lubchenco. So I do not have precise numbers in my head, 
Mr. Chairman, I am sorry, for all of the weather forecast 
offices. I know that we have taken, you know, my team has taken 
a good hard look at this proposal to really try to understand 
what the function of each individual is and how we can ensure 
that the quality of the forecasts and warnings is not in any 
way compromised.
    We think that we can execute this plan in a way that does 
not diminish any of the quality of the services.
    Mr. Wolf. The proposal is to replace the personnel with 
four mobile teams.
    If something goes wrong with any of the information 
technology at any given weather forecast office, how long will 
it take to deploy the team and where will the teams be located? 
Will they be spread around the country?
    Ms. Lubchenco. They are regionally focused.
    Mr. Wolf. So how many will be on a team? There will be four 
teams. How many will be on a team?
    Ms. Lubchenco. I do not know that, sir.
    Mr. Wolf. Okay. And how would it work? Let's say something 
comes up. Where will they be, first of all?
    Ms. Lubchenco. So I cannot tell you that. I do not know 
that level of detail.
    Mr. Wolf. Okay.
    Ms. Lubchenco. What I can tell you is that we have looked 
very hard at this and our folks are convinced that this is 
quite doable and that, in fact, this takes advantage of 
technologies. We can have better and more reliable, uniform 
service with this new plan. But I am happy to provide you 
additional detail on the actual specifics of exactly how it 
would work.
    Mr. Wolf. Okay. If you can, I would appreciate that.
    [Clerk's note.--As of press time (December 2012), NOAA has 
failed to provide the requested responses.]
    Ms. Lubchenco. Certainly.

                            TSUNAMI PROGRAM

    Mr. Wolf. On the tsunami issue, your budget proposes a $4.5 
million reduction to terminate funding for education and 
awareness programs of the National Tsunami Hazard Mitigation 
Program.
    Why are you terminating this program and isn't education 
the key to success?
    Ms. Lubchenco. Education has been vitally important and 
will continue to be so. We will be able to continue our 
TsunamiReady Program. And so that program will remain, is not 
affected by these cuts.
    I think you will remember that the 2006 WARN Act (Warning, 
Alert, and Response Network Act) provided additional funds for 
us to utilize to make faster headway with getting communities 
tsunami ready with giving grants to partners to help accomplish 
some of that.
    Mr. Wolf. Well, how many localities on the West Coast and 
on the East Coast and down in the Caribbean are not up to speed 
on education and tsunami ready, if you will? Last year, it was 
quite a bit, if I recall.
    Ms. Lubchenco. It is quite a bit. And we will continue with 
the TsunamiReady Programs. What that 2005 funding allowed us to 
do was to make much faster progress, sir. We are way ahead of 
where we thought we would be by now had we not had that extra 
infusion of funds from the WARN Act.
    And so the decrease that you see in this year's budget is a 
reflection of the fact that we do not have those additional 
funds that we had. They are due to expire this year. And so 
those additional funds we were not able to replace in the 
budget.
    What is in the budget is our funds to continue both of the 
tsunami warning centers, to continue the TsunamiReady Program, 
to be able to service the DART buoys, although not at the same 
rate that we were before.
    I do not believe that these funds will in any way affect 
the caliber of the warnings, the tsunami warnings that we are 
able to issue. They will slow down the rate at which we are 
able to make more communities prepared and----
    Mr. Wolf. Well, you are also cutting $1 million from 
operation and maintenance funds for the Deep Assessment and 
Reporting the Tsunamis (DART) buoys. This reduction will 
increase the time to repair operational buoys that experience 
failing instruments and broken moorings.
    How many buoys are there now?
    Ms. Lubchenco. There are 39, sir.
    Mr. Wolf. How many are out of order at any one time?
    Ms. Lubchenco. Our target has been to maintain 80 percent 
of them in functional order. The consequence of the cut you 
just mentioned would be that we would have 72 percent in 
functional order.
    Mr. Wolf. You know, when I look at the picture of the 
tsunami, I have some concerns about it. Let's see what the 
other Members feel.
    Isn't there a million-dollar savings somewhere else in the 
budget?
    I mean, the staff was saying, for instance, I understand 
that NOAA sponsors a whale Wednesday at Waikiki Aquarium in 
Hawaii.
    How much does that cost to have whale Wednesday?
    Ms. Lubchenco. I do not know that answer.
    Mr. Wolf. But is it important that we want to have whale 
Wednesday or whale Thursday? Isn't it more important to look at 
programs like that and maybe put it into the tsunami issue 
rather than--maybe that is a program that is very meritorious. 
But when you look at a whale Wednesday compared to this, I 
would not want it on my conscience.
    And my sense is maybe NOAA has said, well, you know, I know 
Wolf in there, they are going to be a patsy for this. They will 
plus this up. We will go somewhere else and then they will put 
it back in. I hope that is not----
    Ms. Lubchenco. I do not play those games, Mr. Chairman.
    Mr. Wolf. There is not a lie detector test testing you, but 
I worry a little bit about that.
    One question from Mr. Serrano. Then I will go to Mr. Fattah 
and then Mr. Bonner.
    He raised the question at an earlier hearing this morning 
with the Secretary that NOAA has tsunami warning centers in 
Hawaii and Alaska. He asked, do you not need another one in the 
Caribbean?
    And could you comment on that?
    Ms. Lubchenco. Certainly. The tsunami warning centers in 
Alaska and Hawaii both receive signals from an earthquake 
immediately and generate tsunami warnings for every place that 
affects U.S. shores. They do so for the Caribbean. They do so 
for the Pacific. They do so for the Atlantic.
    And this is all done remotely and they have the models for 
every place. So the fact that they are not in the Caribbean has 
no bearing on their ability to forecast where there are 
warnings and get information out to the communities in the 
Caribbean.
    Mr. Wolf. Is there a time delay at all?
    Ms. Lubchenco. No. It is immediate. They put out a warning 
and it is an immediate warning that goes to wherever the area 
is. And so the fact that they are, you know, in Alaska or in 
Hawaii does not really matter. They can function from any place 
and----
    Mr. Wolf. Okay. I will go to Mr. Dicks. Do you want to?
    Mr. Dicks. Thank you, Mr. Chairman.

                      JOINT POLAR SATELLITE SYSTEM

    Dr. Lubchenco, with regard to the Joint Polar Satellite 
System and its associated climate sensors, I understand that 
two of the climate sensors, the Ozone Mapping and Profiler 
Suite and the Total and Spectral Solar Irradiance Sensor will 
be built. But because of budget constraints, it is unclear 
which satellite will fly these instruments.
    I understand the White House Office of Science and 
Technology Policy is studying this issue together with the 
Commerce Department and NASA.
    What is the status of these discussions?
    Ms. Lubchenco. Congressman, we fully appreciate how 
important those instruments are and we were simply unable to 
accommodate them in this year's budget request.
    We are hopeful that there will be some way to do so in the 
future and that is why we are having these discussions. They 
are ongoing.
    Mr. Dicks. Do you believe an effective solution can be 
worked out?
    Ms. Lubchenco. It is my sincere hope that it can be.
    Mr. Dicks. Well, will additional funding be needed above 
the amount requested for JPSS in the fiscal year 2013 budget, 
above the amount requested in the fiscal year 2013 budget?
    Ms. Lubchenco. No.
    Mr. Dicks. So is this being incrementally funded? Are you 
going to have to have more money next year in 2014?
    Ms. Lubchenco. So we have committed to cap the total 
lifecycle cost of JPSS at $12.9 billion. And we have laid out 
what we expect the funding to be in this year and subsequent 
years.
    We greatly appreciate last year's support. Should we 
receive the requested amount this year of $916 million, that 
will be vitally important to keep us on schedule and on path 
with the goal of minimizing the duration of the gap in coverage 
that we believe is still likely that resulted from the previous 
delays in funding.
    Mr. Dicks. How many satellites?
    Ms. Lubchenco. JPSS Program will fund two satellites, JPSS1 
and JPSS2.
    [The information follows:]

                      Clarification--JPSS Program

    The JPSS program will also fund two small free flyers that will 
carry search and rescue and advanced data collection instruments.

    Mr. Dicks. And the total cost is $12.9 billion?
    Ms. Lubchenco. Correct. That is the satellites and 
instruments.
    Mr. Dicks. That is pretty pricey.
    Ms. Lubchenco. It is very pricey. Satellites are expensive 
and that in a nutshell is what is putting a lot of pressure on 
a lot of our programs. And we have tried to make very tough 
choices. But in light of the importance of these satellites to 
provide weather warnings, disaster warnings, we believe that 
they are vitally important. And, again, we have done everything 
we can to keep the cost down.
    Mr. Dicks. What people are concerned about in the field is 
that this is now up from 25.3 percent in 2010 to 36.6 percent 
of your fiscal year 2013 budget request.
    Is this the high-water mark? Is it going to go down now as 
a percentage of the budget or does it keep going up?
    Ms. Lubchenco. The costs for JPSS will not increase. They 
are going down. But if you look at the entire satellite 
portfolio, it depends on what choices are made in subsequent 
years, you know.

                     DEEP SPACE CLIMATE OBSERVATORY

    Mr. Dicks. Are these on sensors or on other satellites that 
you are going to build beyond these two?
    Ms. Lubchenco. So two that are the largest items in our 
budget are the geostationary satellites, GOES-R, and the polar 
orbiting satellites, JPSS. There are other satellites in our 
budget, the Deep Space Climate Observatory (DSCOVR), for 
example, that is important in alerting us about space weather 
and other satellites.
    And there are many satellites that are not in there that we 
think would be useful to have but have not been as high a 
priority. So we have tried to be as smart as possible in only 
requesting those that we think absolutely essential. But I----
    Mr. Dicks. You mentioned DSCOVR. There is a cut there of 
$6.9 million or 23 percent. And the DSCOVR satellite, this is 
the one that is going to provide information on solar wind data 
for geomagnetic storm warnings. These storms have the potential 
to wreak havoc on power grids, radio, and satellite 
communications and GPS. This satellite is designed to replace a 
very old existing satellite and is scheduled to launch in 
fiscal year 2014.
    Do you believe that this schedule still holds even with the 
proposed cut in the budget?
    Ms. Lubchenco. We believe that the schedule now for DSCOVR 
has a launch date of late 2014 or early 2015 and when it 
launches will be a function of the resources it has 
essentially.
    [The information follows:]

                   Clarification--DISCOVR Launch Date

    The Launch Readiness Date (LRD) for DSCOVR is the third quarter of 
fiscal year 2014.

    And you are absolutely right to flag how critically 
important it is in providing us warning about space weather 
events that can have significant impacts here on earth.
    Mr. Dicks. Okay. Thank you, Mr. Chairman.
    Mr. Wolf. Thank you.
    Mr. Bonner.
    Mr. Bonner. Dr. Lubchenco, welcome back.
    Ms. Lubchenco. Thank you.

                       GULF OF MEXICO FISH STOCKS

    Mr. Bonner. The Gulf Coast states comprise the fastest 
growing U.S. coastline by population and account for 27 percent 
of our Nation's ocean economy.
    With only 1.3 percent of the land, the Gulf's coastal 
communities contribute 4.7 percent or $496 billion to our 
Nation's GDP.
    The Gulf of Mexico marine fisheries are a powerful economic 
engine for the region and Nation, providing 21 percent of the 
total U.S. seafood landings, $735 million in annual dockside 
first handler revenue, and 18 percent of total U.S. dockside 
value.
    As NOAA policy stands today, stock assessments are being 
set and enforced at 500 plus stocks without current 
assessments; is that correct?
    Ms. Lubchenco. No, sir, I do not believe it is. Can you say 
that again? There are 528 federally managed stocks and stock 
complexes and we have stock assessments for those that are the 
most economically important.
    Mr. Bonner. Of that 528, how many would be deemed most 
economically important?
    Ms. Lubchenco. I do not know that number.
    Mr. Bonner. If we could get that information, that would be 
helpful.
    Ms. Lubchenco. Happy to get that for you.
    [The information follows:]

                Most Important NOAA-Managed Fish Stocks

    Of the 528 stocks that NOAA manages, 230 stocks are deemed the most 
important to commercial and recreational fisheries, Landings of these 
stocks represent about 90% of all commercially and recreational 
landings for federally-managed species and as of March 2012, 132 out of 
these 230 stocks have adequate assessments.

    Mr. Bonner. Because my next question was going to be as a 
scientist, does it concern you that 75 percent of the fisheries 
management decisions are made with at best outdated information 
and often without no data whatsoever?
    Ms. Lubchenco. Congressman, we would love to have 
sufficient data for all of those stocks and that is one of the 
reasons we are requesting an increase in stock assessments for 
this year's budget.
    But I think the fact remains that we will still have quite 
a few stocks where we do not have as much data as would be 
nice. We still use all the best information we can and through 
time are attempting to whittle away at the backlog of those for 
which we have minimal data.
    Mr. Bonner. As we have discussed previously, you have been 
in Alabama and other areas along the Gulf Coast. And as you 
know, fishermen along the Gulf of Mexico know the red snapper 
population has rebounded. They see abundant large fish in the 
water, but the recreational fishing season keeps getting 
shorter and shorter. And this situation creates enormous 
frustration, damages the local economy, and undermines 
confidence in the agency as well as the fisheries management in 
general.
    The modest increase in stock assessment funding in the 
President's fiscal year 2013 request, at least in the opinion 
of this Member, will not bridge the data gap.
    What is NOAA doing to innovate and/or prioritize its data 
collection and how will this eliminate the shortfall in data, 
and how long will it take to assure that we have full data 
coverage of our Nation's fisheries?
    Ms. Lubchenco. Congressman Bonner, the red snapper fishery 
is obviously a very important one not only to your State but 
others as well. There are two things that are planned to help 
address some of the issues you indicated.
    One is our program that obtains information on what 
recreational fishermen are fishing has been significantly 
revamped and is significantly improved. We are in the process 
of putting that into place and I think it has received good 
feedback from fishermen. I think they think it is on a much 
better path than it was before, so I am pleased that that is 
happening.
    We also have planned for this summer a benchmark stock 
assessment for red snapper which will, I think, give us much 
more complete and better information. The signs that we have on 
red snapper tell us exactly what the fishermen are seeing and 
that is that there are more abundant fish out there and that 
they are bigger. The stock is rebuilding which is really good 
news.
    The challenge is that as that is happening we still need to 
not overfish it and so there is a quota each year. And the 
quota tells us or we calculate how many days we think it will 
take the fishermen to reach that quota. And because there are 
bigger fish and there are more of them, they are catching them 
faster, there are more fishermen, all of that is resulting in a 
shorter and shorter season.
    So it is very challenging as we continue to rebuild this 
stock. I think that it is very encouraging that the stock is 
healthy, is becoming rebuilt. I can appreciate that it is 
frustrating from everybody's standpoint to not have more days 
to fish.
    Mr. Bonner. Or even any flexibility upon which to determine 
what those days are.
    Do you know what the season is this year?
    Ms. Lubchenco. I do not believe it has been set yet. I 
think we anticipate it will likely be on the order of 40 days, 
but what they do is at the beginning of the season determine 
what they think will be and then adjust as the season goes 
along.
    Mr. Bonner. But it is very frustrating and it is hard for 
me. Maybe I am not talented enough in this job to be able to 
convince someone who has gone out and mortgaged their home for 
a million and a half, two million dollar boat for the privilege 
of fishing for 40 days, that they do not get to determine when 
they are, it could be in the middle of a tornado or of 
hurricane season, gas prices might go through the roof which 
they are, so fuel prices have an impact, and to tell them that 
their Federal Government acknowledges that the snapper fishery 
has rebounded, but it is just very hard for me to find words to 
convince them that their government is really at their back, 
not stabbing them in their back in terms of trying to make 
sense out of some of these policy regulations.
    Ms. Lubchenco. Congressman, I think there is a difference 
between the stock being rebuilt and it being rebuilt. I did not 
say that very well. Let me try that again.
    The stock is in the process of rebuilding. It has not 
completely gotten there yet. And so it is important that we not 
over-fish it and go back to the seriously over-fished position 
that it was in.
    And I think it is challenging for individual anglers to see 
the big picture, but the reality is, you know, all of those 
fishermen fishing on all those fish actually have a significant 
impact. And I do not think anybody would want to have a 
situation where we had to close it down or that it was not 
becoming more healthy which is the situation we are in now. You 
know, it is challenging, I think in part because there are so 
many fishermen. It is very popular.
    Mr. Bonner. Well, on the charter fleet, there are a lot 
fewer fishermen today than there were a few years ago.
    What are the agency's plans for expanding existing or 
creating new fishery independent surveys that capture abundance 
trends for key species on the Gulf of Mexico throughout that 
range?
    Ms. Lubchenco. We do have plans to obtain fishery 
independent data and that is part of what this increased 
request of $4.3 million will go toward.
    Mr. Bonner. And you will be willing to share with us any 
information that you gather?
    Ms. Lubchenco. Of course.
    Mr. Bonner. What level of annual funding would be needed to 
fully implement an adequate fishery independent survey on the 
Gulf of Mexico?
    Ms. Lubchenco. I do not know that right off the top of my 
head, but I am happy to see if we cannot get that for you.
    Mr. Bonner. It would be interesting to know even with the 
tight budgets that we are operating under.
    [Clerk's note.--NOAA provided subsequent briefings to Mr. 
Bonner.]
    I have just got a couple more questions, Mr. Chairman.
    How is the agency going to address the current recreational 
management concerns of exceeding catch limits and shrinking 
seasons for some key recreational species that are already in 
the rebuilding plans?
    Ms. Lubchenco. So if I understand your question, I think it 
is the same situation we were just talking about. Red snapper 
would be one of those that are in the process of being rebuilt. 
And this year----
    Mr. Bonner. The red snapper, the impact that it has has an 
impact on trigger fish and other fish----
    Ms. Lubchenco. Correct.
    Mr. Bonner [continuing]. In the Gulf of Mexico.
    Ms. Lubchenco. Right. And so what are you asking?
    Mr. Bonner. Just how the agency intends to address the 
current management concerns exceeding catch limits for other 
key species in the Gulf.
    Ms. Lubchenco. Part of what we do when we conduct a 
benchmark assessment is take a look at what are the other 
species that are out there and how do they interact with one 
another. That is part of the information that goes into 
determining the particular quotas.
    And it is absolutely true that some species are either by-
catch and other fisheries or are predators or competitors with 
others. And so understanding how those different species relate 
in the system is vitally important.

                           NOAA VESSEL PISCES

    Mr. Bonner. There has been some concern, Mr. Dicks 
mentioned it in a different light from his vantage point in the 
Northwest, but there has been some concern expressed to me 
regarding the possible effort to move the research vessel 
Pisces from the Gulf of Mexico to the Northeast.
    This vessel is currently the lead observation platform for 
fishery independent data research on red snapper in the Gulf of 
Mexico. And any effort to move that vessel to the Northeast 
would frustrate and delay the critical research that is taking 
place there.
    So I would like to encourage you and also give you an 
opportunity to respond if you have a response that if at all 
possible that NOAA keep this vessel or whatever vessels that 
you might have at your disposal in the Gulf and try to find 
some alternatives.
    Are there any alternatives or is this plan actually moving 
forward?
    Ms. Lubchenco. Congressman, the Pisces survey vessel is 
currently home ported in Pascagoula and it is our plan to keep 
her home ported there. She has been and will continue to both 
do fishery survey work in the Gulf as well as along the 
Atlantic Coast.
    And we have some very significant challenges with our fleet 
overall and our needing to essentially share resources, share 
vessels across multiple places to meet all of the needs 
adequately.
    Those vessels are another infrastructure item that is 
vitally important to our ability to do stock assessments but 
also do mapping and other kinds of things. And they are 
expensive. Our fleet is aging and it is putting very real 
pressure on our budget in addition to a lot of other things.
    So you have identified one of the major challenges that we 
have. We believe that the Pisces will be able to do justice to 
the work in the Gulf as well as in the Atlantic. We just have 
to be smart about scheduling.
    Mr. Bonner. Clearly any time the Pisces or any vessel needs 
to be off the coast of Virginia or Pennsylvania where the chair 
and the ranking member are, then that is a good place, but we 
appreciate her being home ported in Gulf port.

                 REGIONAL FISHERIES MANAGEMENT COUNCILS

    My last question is, I mentioned and obviously the thrust 
of many of the questions that I had deals with the short 
recreational red snapper seasons. Acknowledging the 
circumstances that we are up against, my question is this. Is 
it too much to ask that our Federal Government encourage 
fishermen as well as the regional fisheries management councils 
to have more freedom to innovate and explore new management 
strategies and if that is a fair request, what specifically can 
the fishermen and the regional management councils expect from 
NOAA with regard to any new management strategies that the 
agency might be pursuing in the Gulf of Mexico?
    Ms. Lubchenco. Congressman, the Regional Fishery Management 
Councils on which fishermen sit propose a particular management 
plan for each of the different major fisheries. So they are the 
ones who actually propose the plan to us and then we approve it 
or send it back for further work.
    So the councils really are the place where innovation does 
happen and we have seen that in many different parts of the 
country. We strongly encourage that innovation. If there are 
better ideas out there about how to manage a fishery, the 
council is typically open to those and we would welcome that.
    I am not sure what kind of innovations folks have in mind. 
I would be happy to hear about them. But, you know, that would 
be great.
    Mr. Bonner. I will try to provide you a list of ideas of 
suggestions we have gotten.
    Ms. Lubchenco. And have they gotten to the Council?
    Mr. Bonner. In many instances, they have. And the 
perception that I have gotten back is is that the council said 
that they could only do so much, but they needed more 
encouragement for flexibility and thinking outside the box from 
NOAA. But we will work with you on that and we will share some 
of those ideas that we have gotten.
    Ms. Lubchenco. That would be welcome.
    Mr. Bonner. Thank you very much.
    Thank you, Mr. Chairman.
    Ms. Lubchenco. Mr. Chairman, may I give you a quick update 
on the earthquake? It is my understanding that the earthquake 
is 115 miles east of Acapulco. It was at a depth of 11 miles. 
USGS just revised the magnitude from 7.9 to 7.6 and the Mexican 
president says there is no evidence of any damage as far as 
anybody knows yet.
    Mr. Fattah. Yes. Thank you.
    It is good to see you again. I think we were maybe last 
together at a coastal zone conference in Chicago or one of your 
other many stops. You have been quite active.
    And I want to again for the record thank you for agreeing 
to serve in this capacity as one of the leading scientists in 
the world on ocean science. You bring a great deal of knowledge 
to your work.

                      JOINT POLAR SATELLITE SYSTEM

    I want to focus in on the big ticket item here which is 
these satellites.
    Ms. Lubchenco. Uh-huh.
    Mr. Fattah. So for JPSS, we are shooting at 2017, total 
cost somewhere in the roughly $13 billion number. And I am 
trying to figure out the life of the satellite after launch for 
our purposes is, what is the guesstimate, about how long?
    Ms. Lubchenco. For an operational weather satellite, it is 
typically about seven years.
    Mr. Fattah. Seven years. So I am trying to figure out how 
we are spacing out the cost, whether we could even out the flow 
of dollars over your budget over the lifetime of the use of 
these satellites versus front-loading so much of the dollars 
and whether you looked at that.
    Ms. Lubchenco. Uh-huh. The costs are not incurred evenly, 
but it would make a lot of sense and it would certainly be 
appealing from a budgeting standpoint from the agency--I cannot 
speak for Congress--to have it be more uniform from year to 
year.
    But that would mean front-loading--not front-loading, but 
essentially I think it would have to mean setting aside some 
money before you were actually spending it in a particular 
year.
    Mr. Fattah. Well, it would require as is done in other 
instances, you know, creating some type of credit facility or, 
for lack of a better term, a satellite leasing authority with a 
connection to NOAA that could lease and acquire the dollars to 
build, launch, and then to budget it out on a regular basis.
    I think almost all of us experience this when we buy a 
house or car, you know, that we even out the flow over a period 
of time versus these very significant hits on your budget.
    I mean, we need these satellites. I appreciate the fact 
that you have made it an extraordinary priority, but it is 
eating at other needed services and raising concerns.
    So I would love to try to engage with some of your team 
about whether or not there is some ability for us to think 
through--we are in March, this is going to take a while for us 
to get to a final resolution--whether there is some way to 
think about the financing on the satellites a little bit 
differently.
    And I am sure there is a great deal of expertise at NOAA 
and OMB, and I would be interested in trying to see what could 
be done.
    Ms. Lubchenco. Congressman, we would welcome that. I think 
it would be ideal to have more uniformity in the funding of the 
satellites. And they are important. Everybody appreciates that 
they are. The way we fund them now is challenging.
    Mr. Fattah. All right. Well, let me move on then and I will 
take that to be a yes.
    Ms. Lubchenco. Yes. Happy to have those discussions.
    Mr. Fattah. And I look forward to having an opportunity to 
follow-up.
    Now, the settlement in the Gulf is, as I mentioned in my 
opening statement, a very significant accomplishment, but it is 
just the front end. There is still going to be significant and 
more efforts going forward both on the litigation side and 
other respects.
    And so we want to encourage you as you interact around the 
Gulf issues. I mean, I do not live in the Gulf, but it is a big 
concern, and economically, it is vitally important obviously to 
the country.

                        NATIONAL WEATHER SERVICE

    But I am interested in the education programs and the fact 
that you have some cuts and also the issue that the chairman 
raised about these IT personnel, the 98 positions.
    You say in your testimony, and we know as a fact, that we 
have had the most severe weather seasons that we have ever 
experienced in terms of billion-dollar events. We know that 
forecasting is critical and that knowing where these events are 
going to take place helps with evacuations on the ground, and 
that there is a real cost both in lives saved and in terms of 
evacuations.
    And you have almost eliminated the mischaracterization of 
these events so that it has saved a lot of money and a lot of 
lives because you can focus efforts in areas where the storms 
are actually going to hit or the tornadoes, but we still lost 
500 plus lives last season. So I am very interested in how we 
avoid these cuts.
    And you may not be able to comment on this now, but both in 
substance and in symbolism, it seems to suggest that even 
though we have had all these severe events that somehow the 
Federal Government is retreating versus taking the weather 
circumstances seriously. And I am concerned about the message 
that is sending or suggesting.
    So I know that you have made the proposal and you have to 
stand behind it at this moment, but I share the chairman's 
concern about these IT cuts.
    Ms. Lubchenco. Congressman, I think the best way to think 
about this proposal is one that makes us more efficient without 
losing any functionality.
    Mr. Fattah. Well, we will leave it at that at this point. I 
have concern about what it suggests. And I do not think that we 
want to in light of--if we take just the empirical information, 
which is that we have had the most severe weather events ever 
in terms of billion dollar plus events, and we had the chairman 
earlier today, Chairman Rogers of the full committee, talking 
about the tornadoes and as they have hit Kentucky, the idea 
that at this particular moment we would be removing local 
people from the, you know, an ability to help think about where 
these events might be taking place, I just think the timing is 
bad.
    Ms. Lubchenco. I hear what you are saying.
    Mr. Fattah. So I just wanted to add that. But thank you 
very much.

                             NOAA--VESSELS

    Mr. Wolf. Just bouncing around a little bit, I want to get 
back to some things. But on the fleet, much emphasis continues 
to focus on funding the satellites. And the fact is they are 
almost beginning to be the James Webb Satellite, which you have 
nothing to do with, which is consuming a lot of money in the 
NASA budget requiring cuts to the Mars Program that Mr. Schiff, 
who is not here is interested in and Europa that Mr. Culberson 
is interested in. And I worry that the satellite program could 
do the same thing.
    What is the current status of the NOAA fleet of ships and 
vessels and what are the recapitalization plans for those?
    I note there are no out-year cost estimates in the budget 
for upgrading or replacing these assets. And why aren't those 
out-year cost estimates in your budget? Do you intend to update 
the last fleet recapitalization plan that was proposed in 2008? 
And the wear and tear on the ships is incredible. How many 
ships do you have?
    Ms. Lubchenco. I am trying to remember how many we have 
that are active right now. It has been in flux. The----
    Mr. Wolf. Roughly.
    Ms. Lubchenco. So we have----
    Mr. Wolf. And active.
    Ms. Lubchenco. It is in that ballpark.
    Mr. Wolf. Okay.
    Ms. Lubchenco. And, you know, a whole series of our ships 
were ones that were hand-me-downs, if you will, from the Navy. 
And many of them are aging. And we were on a schedule to repair 
them.
    The funds that we have have been insufficient to do that 
and so we are actually in the process of considering what the 
best way to move forward with the whole fleet plan is. And we 
are not through with that process.
    This is a list of our ships. And, you know, I think the--
    Mr. Wolf. How many are there?
    Ms. Lubchenco. Two, four, six, eight, 10, 12, 14, 16, 18, 
20, but they are not all active. One, two, three, four, four 
that are inactive right now.
    So the funding that is in the current budget, Mr. Chairman, 
will support 16 active ships.

                         NOAA AIRFLEET--PLANES

    Mr. Wolf. And have you updated the capitalization plan for 
NOAA's aircraft?
    Ms. Lubchenco. We have----
    Mr. Wolf. How many aircraft do you have?
    Ms. Lubchenco. So we have three P-3s that are hurricane 
hunters. We have a G-IV. We have a couple of Twin Otters. And 
we have a King Air.
    Mr. Wolf. So have you updated a capitalization plan for the 
aircraft?
    Ms. Lubchenco. We are in the process of doing that as well. 
There is a funding request in this year's budget for aviation 
operations which essentially are for the hurricane hunters to 
restore the number of flight hours to what it was in current--
not last year, but historic flight hours.
    Mr. Wolf. So their time is down?
    Ms. Lubchenco. The time was down last year. We had 
insufficient funds to have them fly as many hours. And so the 
request this year which is an addition of $2 million is to 
restore them to historic number of hours.
    Mr. Wolf. Do you think anything was missed by not flying?
    Ms. Lubchenco. The hurricane hunters take data on the 
hurricanes to help us better understand. They are our research 
platform. They help us understand and enable us to better 
predict down the road.
    Mr. Wolf. Right.
    Ms. Lubchenco. So there is no immediate consequence. It is 
just loss of information that enables us to get better down the 
road.

                   HURRICANE RESEARCH AND PREDICTION

    Mr. Wolf. Okay. What is the prediction for this year for 
hurricanes?
    Ms. Lubchenco. Hurricanes?
    Mr. Wolf. Yes.
    Ms. Lubchenco. We typically issue a hurricane outlook in 
June.
    Mr. Wolf. June?
    Ms. Lubchenco. And that depends on the temperatures in the 
Atlantic, what the El Nino is doing, and a couple of other 
factors.
    Mr. Wolf. The fact that we have had these early tornadoes 
and the weather the last couple weeks, does that have a bearing 
that if you were an expert looking to say with regard to 
hurricanes when we had similar experiences in an X year that 
meant for that summer and fall? Is there any connection there 
or is it----
    Ms. Lubchenco. I do not think that our level of 
understanding allows us to make those connections if they 
exist. Tornadoes are a very small scale phenomenon. They are 
very, very localized. Hurricanes occupy much bigger space.
    Mr. Wolf. Right.
    Ms. Lubchenco. And we know from the research that has been 
done what the conditions are that are conducive to hurricanes 
which is why we are able to make an outlook for the season, 
but----
    Mr. Wolf. Do you have any indication of this season coming 
up?
    Ms. Lubchenco. I do not. And I think we wait and see. It is 
still very early on now to know what the--one key factor is 
what the sea surface temperatures are right off the Horn of 
Africa, in that area where a lot of hurricanes are born.
    And knowing what the temperature is now is not really what 
you need to know. You need to know what it is going to be like 
in the summer. And the same thing with El Nino. It is still too 
early in the season to have a good sense of what the hurricane 
season is likely to hold for us.
    Mr. Wolf. Has NOAA examined the breadth of its data 
collection efforts in the various platforms to determine which 
existing data collection methods will be or are being 
outperformed by satellites or other technological advances?
    Ms. Lubchenco. Mr. Chairman, we have a very active group 
that is looking at all of the platforms we use to gather 
environmental data from satellites, from ships, from buoys, 
from gliders, and are asking exactly the question that you 
posed.
    How can we best utilize the combination of assets that we 
have at the cheapest price and where could we start 
substituting some of the newer technologies that are coming on 
line?
    So that is a very active discussion and we would be happy 
to brief you on it when we have----
    Mr. Wolf. Please. Thank you.
    Ms. Lubchenco [continuing]. Some clarity on where we think 
we are headed.

                             SEAFOOD SAFETY

    Mr. Wolf. When Mr. Bonner was asking the fisheries 
question, a thought came. Do you feel comfortable eating 
seafood from Vietnam personally?
    I mean, when I look at some of the stories of shrimp and 
seafood in Vietnam and shrimp and seafood in China, and I was 
out on the West Coast at a fisheries museum and they had some 
very powerful comments with regard to shrimp and certain other 
fisheries from places like Vietnam and China.
    Do you have any concerns if you were to be shopping and 
they said imported from Vietnam versus imported from Louisiana 
or Alabama?
    Ms. Lubchenco. Mr. Chairman, I would have a much higher 
degree of confidence in seafood either farmed or caught from 
the United States. Because I know what kind of regulations we 
have. And it is both from a seafood safety standpoint as well 
as whether the methods used to do them are environmentally 
responsible.
    Mr. Wolf. Right.
    Ms. Lubchenco. And I think both of those are important. One 
of the things that we are trying to do at NOAA is to work with 
other countries to level the playing field so that our 
fishermen are not disadvantaged by having to abide by higher 
standards than is true in many other countries. That pertains 
more to the methods that are used to catch fish than it does to 
things that would be for health concern. But I mention it 
simply because it is an area that we have been promoting very 
heavily. We have been working closely with the Europeans on 
this because we are like minded in this regard. And many other 
countries do not have the kind of compliance and enforcement 
that we do. And it has historically disadvantaged our 
fishermen. And we are trying to get to a better place where we 
are leveling the playing field and having others abide by the 
stricter standards that we have.
    Mr. Wolf. What percentage of the seafood is imported and 
what percentage comes from the United States? Let us say 
shrimp, for instance? Do you know----

                            Imported Shrimp

    Imported shrimp constitutes over 90 percent of U.S. shrimp 
consumption, whereas the percentage of domestic harvest that is 
exported is over 10 percent. This means that most of the shrimp 
consumed in the U.S. is imported, and that most of the shrimp we 
produce is consumed in the U.S.]

    Ms. Lubchenco. For shrimp, so I do not know the actual 
numbers for shrimp. But we can get that.
    Mr. Wolf. Overall then, if you have that? What percentage?
    Ms. Lubchenco. I think on the order of about half the 
seafood that is consumed in the U.S. is imported. I am not sure 
about that number and I will verify that.
    [The information follows:] 


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Wolf. If you could? And tell us what countries. If a 
person is out purchasing shrimp, and it is coming from Vietnam, 
how do they know it is coming from Vietnam and not Alabama or 
Louisiana?
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Ms. Lubchenco. We had legislation that was passed a while 
ago that was called the Country of Origin Labeling that was 
intended to address this problem. I am not an expert in this 
area, but it is my recollection that we ran into some 
challenges with WTO over that. I will get back to you on that.
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Wolf. Could you? Now that was a decision that you were 
making, or the Department of Commerce and NOAA was making, and 
you had a push back from the WTO? Or you had a push back from 
Mr. Kirk's office, the Trade Rep? How was that----
    Ms. Lubchenco. So----
    Mr. Wolf. I mean, I think the American people should know 
whether they are buying shrimp from a farm in Vietnam where the 
human rights and religious freedom are terrible, and they are 
being raised in filth, versus coming from off the Gulf Coast 
from the great State of Texas, or Louisiana----
    Ms. Lubchenco. Mm-hmm.
    Mr. Wolf [continuing]. Or Alabama, or Florida, or 
Mississippi.
    Mr. Culberson. It is required in beef.
    Mr. Wolf. Yeah. I do not understand, I would urge you, why 
would you not just move ahead? Could I ask you to move ahead? 
Could we ask you, if we carry language? I am trying to get some 
reason why we have stopped. Do you know, were you stopped from 
labeling seafood when you were there or somebody else was 
there?
    Ms. Lubchenco. I do not know the history of this. But I 
will find out.
    Mr. Wolf. Okay. Well I think, and I hope the committee 
would agree, I think we ought to carry language----
    Mr. Culberson. Absolutely.
    Mr. Wolf. The American people, I mean if you are going to 
buy a baseball cap made in Vietnam you can see the label. I 
think Mr. and Mrs. American ought to know what they are putting 
in their children's meal, whether it came from Vietnam or 
whether it came from someplace like that. So I think we should 
just carry language directing that this be done. And if there 
is, I think Mr. Fattah would probably agree with that, would 
you not? So all in favor say, ``Aye.'' Aye. Opposed? Motion 
carried.
    Anyway, I think we will try to do that. Because I do think 
that there are some health and problems and potential problems. 
And I think we should do everything we can, I am sure, and Mr. 
Bonner is not here, to help American domestic industry. So I 
think we will try to carry that.
    Ms. Lubchenco. Mr. Chairman.
    Mr. Wolf. Mr. Austria. Excuse me, did you want to say 
something?
    Ms. Lubchenco. Yes. My staff has corrected me. They say 
about 80 percent of the seafood----
    Mr. Wolf. Eight or 80?
    Ms. Lubchenco. Eight-zero is imported, and about half of 
that is farmed.
    Mr. Wolf. Eight-zero?
    Ms. Lubchenco. Eight-zero is imported. I would note that 
NOAA does not have responsibility for certifying the safety of 
seafood from a health seafood. That is the----
    Mr. Wolf. But does not fisheries come under a separate 
agency than FDA? Is that not----
    Ms. Lubchenco. Fisheries, safety of seafood comes under 
FDA.
    Mr. Wolf. Does it?
    Ms. Lubchenco. Mm-hmm. So NOAA regulates fisheries, but we 
do not certify the safety of seafood. And I know that because 
when we were dealing with the Gulf oil spill we closed areas to 
fishing when there was oil there. But we had to work with FDA 
to come up with the protocols to do the testing to then reopen.
    Mr. Wolf. So what, as we put language in, what can we 
direct you to do in such a way that protects the labeling, the 
American taxpayer, with regard to whether the seafood is coming 
from Vietnam or coming from----
    Ms. Lubchenco. So I think labeling, if you are not saying 
this is safe or unsafe, if you are just saying where it is 
from, I think that is a little more straightforward. I do not 
know----
    Mr. Wolf. Well we will carry that then.
    Ms. Lubchenco. Let us work with you on that. Because I do 
not really know whose authority that is to actually----
    Mr. Wolf. We will probably hear from all the lobbyists who 
will be screaming and coming up.
    Ms. Lubchenco. I am sure.
    Mr. Wolf. And I think if I am lobbied on this issue I will 
put the names of the companies and the restaurants and the 
lobbyists in the Congressional Record. So if you are lobbied, I 
would ask you if any big law firm in this town comes and rolls 
in and says, ``I understand this guy Wolf and Fattah want to do 
this.'' If you would tell us who contacts you? And whoever 
contacts us, because we are going to carry language like this, 
I will put it in the Congressional Record so that we know. And 
I will stand with the people of Louisiana and Alabama and 
Florida versus Saigon and Ho Chi Minh City with regard to that. 
Mr. Austria.
    Mr. Austria. Thank you, Mr. Chairman. Mr. Fattah, did you 
want to comment on that?
    Mr. Fattah. I want to reaffirm that I am holding with the 
Chairman on this. I think it is a, they are legitimate 
concerns. And I think that, knowing the country of origin is 
good information. And when people have good information they 
can make good decisions.
    Mr. Austria. Thank you, Mr. Chairman. You can count me in, 
too. I will certainly be wondering where my seafood comes from 
when I eat it this week, and will be asking. But 80 percent? I 
mean, I would agree with you, Mr. Chairman.

                      JOINT POLAR SATELLITE SYSTEM

    But let me switch subjects, if I could very quickly. JPSS, 
getting back to JPSS, of the $12.9 billion lifetime for JPSS, 
and first of all, Administrator, thank you for being here. I 
appreciate you sharing your thoughts. Are you able, or can you 
detail the number of satellites and sensors included in that 
number? For example, sensors that are climate sensors and, you 
know, what determines a different classification?
    Ms. Lubchenco. The JPSS program is to build two satellites, 
JPSS-1 and JPSS-2. And then to put the instruments on them that 
enable us to get the information we need to make weather 
forecasts or do disaster warnings for severe weather. The $12.9 
billion for the lifecycle costs, in capping that we were not 
able to accommodate all of the instruments, all of the sensors 
that were originally envisioned. And we may need to jettison 
some of the climate sensors that are not included in that 
because there was not enough money.
    Mr. Austria. How much of that $12.9 billion is required or 
used for the climate sensors? And then the other equipment you 
are talking about, does that all fit on the JPSS satellite? So 
I can better understand how this is all being put together.
    Ms. Lubchenco. So the funds that we have are for the 
instruments that would fit on the satellite and that we would 
fly. Most of those instruments are in direct support of getting 
information that allows us to do the weather forecasts. So over 
90 percent of the data that go into our numerical weather 
models come from satellites. And these are both, so this 
program is a polar orbiting satellite. And its complement is 
the GOES-R program, which are geostationary satellites. So we 
take data from both the geostationary satellites that are 
sitting in the same place above the Earth constantly, and we 
put that together with the data from the polar orbiting 
satellites that go around the Earth as the Earth is turning. 
And that combination allows us to both get down close to the 
Earth as well as see up high, and see, you know, the images 
that you see on the TV screen, on the weather in the evening, 
for example, or morning, those are a GOES-R image. Or the 
images that you see of a hurricane. That is a GOES image. It is 
from the geostationary satellites. So both of those programs 
together are vitally important in enabling us to do the 
warnings that we do now.
    Mr. Austria. I appreciate that. Let me ask you, because 
given the tight budgets and the need to minimize risk on space 
programs, especially the nation's weather program, it seems to 
me that building the same spacecraft and sensors for JPSS would 
be the lowest risk approach. Can you describe the difference 
between NPP and JPSS-1, and JPSS-1 and JPSS-2?
    Ms. Lubchenco. Mm-hmm, certainly.
    Mr. Austria. And if there is any new developments on this 
new JPSS-2, and what the difference is?
    Ms. Lubchenco. Congressman, a bit of history here. When the 
program that is now JPSS was originally designed the idea was 
to build multiple satellites, more than two. But because you 
get, you save money if you buy in bulk, essentially. And that 
program became too expensive. We had to restructure it. And so 
we have just the two satellites, JPSS-1 and JPSS-2 in the JPSS 
program.
    In anticipation of the new instruments in this JPSS 
program, NPP was designed to try out and test out some of the 
new instruments. New advances in science led to new ideas about 
how we could get better information and do an even better job 
of weather forecasts. And those instruments are now flying on 
Suomi NPP, which was launched last October, and is in space now 
doing her check out of all the instruments.
    So Suomi NPP was designed as an experimental satellite to 
test out these instruments, make sure they are going to work, 
do any midcourse corrections before putting them on a satellite 
that would be an operational satellite with a longer life span. 
So because of the delays in this former program that we had to 
restructure well before my time, the NPP needed to be converted 
to an operational status and that is what it will be doing now. 
We are going to rely on it. It is not just trying out new 
instruments. We are actually going to be using all the data 
from them to make up for the delays that were incurred in the 
JPSS program. We are now on track. It is really important that 
we stay on track. We think we have a good program that is going 
to be able to deliver the really important weather information 
that we need.
    Mr. Austria. And one last question. Again, given the very 
tight budget environment that we are faced with today, I mean, 
it seems likely that by using a block buy procurement, using 
fixed price contracts, will result in efficiencies and lower 
costs and risk. Has NOAA explored this possibility relative to 
JPSS?
    Ms. Lubchenco. We have.
    Mr. Austria. And what is your conclusion? Or what have 
you----
    Ms. Lubchenco. So that is why we are building two instead 
of one, for example.
    Mr. Austria. Right.
    Ms. Lubchenco. We are using every cost saving mechanism 
that we can to keep those costs down. That was not the way the 
program was originally structured and we had to restructure it 
in order to make it more efficient. That took, that was 
something that we did a couple of years ago in light of the 
need to keep the costs down.
    Mr. Austria. Sure. And I appreciate your explanation, 
because I think there was concern when you start restructuring 
from JPSS-1 to JPSS-2, why you need to do all that----
    Ms. Lubchenco. So we are not restructuring from one to two. 
They will virtually be the same.
    Mr. Austria. They will be the same?
    Ms. Lubchenco. Mm-hmm.
    Mr. Austria. Okay.
    Ms. Lubchenco. Mm-hmm.
    Mr. Austria. All right.
    Ms. Lubchenco. For exactly the reasons you are identifying.
    Mr. Austria. Perfect. I think that is all I have got. Thank 
you, Administrator.
    Ms. Lubchenco. Thank you.
    Mr. Austria. Thank you, Mr. Chairman.
    Mr. Wolf. Mr. Serrano.
    Mr. Serrano. Thank you. I came in late, and I apologize, 
Mr. Chairman. And I want to join my colleagues, if I understand 
the issue correctly, in saying that we need to know where our 
seafood is coming from. Of course, I have another issue which 
is not part of this Committee. And that is people outside of 
New York who claim to be selling New York pizza and New York 
bagels. You know, I know English is a second language to me. 
But English, New York style pizza, okay, I will take that. New 
York style bagels. But New York bagels? Come on, I mean, I 
would never say, you know, in New York we say Maryland crabs, 
because we know. Right? I mean, we know that. Carolina BBQ, we 
know. We do not say Bronx BBQ, you know? It does not--anyway.
    I had only one question. You know, if people had laughed 
this much at me 50 years, 40 years ago I would have kept up 
that stand up career I tried. I really did, but I was terrible. 
I kept speaking in Spanish in other places, and it was 
terrible. I did have a question and I understand you brought up 
the subject, so with your permission if I can just revive the 
subject momentarily and that is the subject, and welcome, thank 
you. You know, you have an agency that is one of those agencies 
I have always said that everybody loves because it does not 
hurt anyone. It just does good stuff, you know? I mean, some 
would like to hurt you but they do not mean that, it is just 
budget cuts. You know? But you do great work. And it is just 
wonderful for the country.

                            TSUNAMI PROGRAM

    But this whole issue of a tsunami warning center in the 
Caribbean. Interesting enough, Mr. Chairman, I said at the last 
hearing this morning that it was not just for the Caribbean, 
for the help we could give other parts of the area. Well 
between that hearing and this hearing Mexico had a serious 
quake which speaks to this subject.
    So the argument has been for years, and there is 
legislation put in by Mr. Pierluisi and myself, and Ms. 
Christensen from the Virgin Islands, saying simply that yes, we 
have a warning center in Alaska, and we have a warning center 
in Hawaii. And we understand that modern technology can reach 
far. But a lot of these things, even with modern technology 
happening on the spur of the moment, and you wonder just how 
well these things can be read. There are folks in Japan and 
other places that will tell you that they thought they were 
protected and yet this happened the way it did, and in such a 
devastating fashion.
    So we will continue to make the argument that there should 
be a tsunami warning center in the Caribbean, not only for our 
territories there and for the coast of the United States but 
for our neighbors in the area, the Dominican Republic and so 
on, that we can be helpful to. What can you tell us? And I 
know, please try not to tell me we do not have the money. That 
is, you know, because the way I have my question written is the 
way that I always like to try this. Can you work with me to 
make this happen? You know, can you work with the committee to 
make it happen? And it is not always that you get myself and 
the chairman agreeing and the chairman has gone on the record 
as saying that this is something that should be looked at 
seriously. I will stop there. I did not hear you say you wanted 
it to happen. But I will take the looking at it very seriously 
as a very positive sign.
    Ms. Lubchenco. Congressman, thank you for recognizing a lot 
of the really good work that we do. We appreciate that. And 
thank you for your support over the years.
    I think you did mention the earthquake in Mexico. NOAA did 
not issue a tsunami warning following the earthquake, so that 
is new information. And it is typical of what is done at both 
of the tsunami warning centers in Alaska and in Hawaii. And 
that is too, I visited one of these recently and I actually saw 
this play out in real time. When an earthquake happens they get 
notified, there is an international seismic network that is 
activated and they immediately know where it is and get 
instantaneous information on the depth and the strength. And 
based on that they run models. And they can run models that 
have to do with the Caribbean, the Atlantic, any place in the 
Pacific. Their focus is on areas that would, where U.S. 
citizens are present, U.S. shorelines. And they immediately 
issue a warning if it is warranted. And project when the 
tsunami will arrive, how fast it will, you know, how fast it 
will travel, when it will arrive. And then they update it as 
new information continues to come in. For example, as the 
tsunami goes across the buoys in the ocean that detect it, and 
that gives it, then they can update the models.
    So those models can be issued from any place. And if there 
are tsunamis that, if there are earthquakes or slumps or 
something else that would trigger a tsunami for the Caribbean 
that warning can be issued from those other centers. And in 
fact that is what they are prepared to do. So their ability to 
function does not really depend on where they are. I understand 
the desirability of having a tsunami warning center in the 
Caribbean from the standpoint of some, certainly from 
reassurance, to know that somebody is there, paying attention. 
But in fact that is happening already. They are paying 
attention. They are active. They have an ability to warn 
people.
    What is particularly important, and we have spent a lot of 
time and energy doing, is making sure that not only our, that 
communities know what to do when in fact they receive a tsunami 
warning. And we have been working with communities throughout 
the Caribbean to help, have them become tsunami ready. And that 
is very, very important. And that is underway, and we will 
continue to do that through the TsunamiReady program.
    Mr. Serrano. Okay, I will not use the phrase ``what was the 
political reason for it?'' Because we were not around then. But 
what was the scientific reason for Hawaii and Alaska and not 
for the Caribbean, which is very far away? Notwithstanding what 
scientists tell you. I mean, people who live in the Caribbean 
and see what happened in Chile, happens in Mexico every so 
often, happens in the Dominican Republic, and Puerto Rico with 
earthquakes and all kinds of reactions from the land are not 
easily sold on the fact that scientists in Alaska can tell you 
what is going to happen in Venezuela. Or that scientists in 
Hawaii. You know, those were our last two states so you wonder 
if the state of Puerto Rico will get a tsunami warning center. 
But that is another subject altogether, as you know.
    So how do we make people feel comfortable? They are not 
comfortable. And people who are there who are professionals are 
not comfortable that they can get the information in time to do 
something. Now if I am not comfortable, I am not an expert. But 
when experts are not comfortable, then we have an issue. And 
they are not comfortable.
    Ms. Lubchenco. Congressman, I have no idea what the history 
was as to what, you know, where they were placed. But I can 
tell you that those scientists have, what they do is they run 
models of an ocean basin. And it is just as easy to run a model 
of the Caribbean basin as it is to run a model of the Pacific 
basin, or the Atlantic.
    Mr. Serrano. I understand that. And I am not going to give 
you a hard time. Obviously you have your words set as to what 
should happen. But one could argue that the one in Hawaii could 
have told Alaska what was going to happen, or the one in Alaska 
was going to tell Hawaii what is going to happen, makes more 
sense than either of them can tell Mexico or Puerto Rico or the 
Virgin Islands where, and you say we pay attention to where 
American citizens live, Puerto Rico and the Virgin Islands, and 
the American coastline. Well, Louisiana, Florida, Texas, so and 
so.
    So I do not know why people would think that you need two 
in that part of the world and none in this part of the world, 
or this close to the nation. But we will not give up on 
discussing that and we hope to get a better answer in the 
future. Thank you, Mr. Chairman.
    Mr. Wolf. Also Florida was very impacted. We had asked 
about Florida, they were very susceptible according to the 
experts that spoke to us. So. Mr. Culberson?

                   GULF OF MEXICO FISHERY RESTORATION

    Mr. Culberson. Oh, thank you. Thank you, Mr. Chairman. I 
just had a couple of questions for Dr. Lubchenco. Thank you for 
your service and for being here with us today. The money that 
the federal government worked out in the settlement with BP in 
the Gulf of Mexico, the billion dollar settlement that was put 
into a trust fund for economic and ecological recovery, what 
portion of that flows through NOAA for your projects?
    Ms. Lubchenco. Congressman----
    Mr. Culberson. Restoration, or----
    Ms. Lubchenco [continuing]. The $1 billion for early 
restoration, the use of those funds is decided upon by the 
Natural Resource Damage Trustee Council. That includes 
representatives from each state, including Texas, and two 
federal agencies, NOAA and the Department of the Interior. And 
that Trustee Council agreed upon a formula for allocating that 
$1 billion and are proceeding with making decisions about early 
restoration efforts. Some of that money has already been 
allocated and some of it is under deliberation right now with I 
think decisions expected in the next couple of months.
    Mr. Culberson. So you, NOAA is a part of that decision 
making process?
    Ms. Lubchenco. NOAA is one of the trustees on the Trustee 
Council, that is correct.
    Mr. Culberson. Right. So most of it has not yet been 
distributed?
    Ms. Lubchenco. Most of it has not been allocated. The 
agencies do not have that fund, that money, they just make 
decisions about which projects it will be used for.
    Mr. Culberson. Is that something they notify us about, of 
how that money is used? Do you all notify the----
    Ms. Lubchenco. So it is a matter----
    Mr. Culberson [continuing]. Subcommittees with jurisdiction 
on Appropriations?
    Ms. Lubchenco [continuing]. Of public record. So the 
Natural Resource Damage Assessment Trustee Council is a 
mechanism that was set up in the Oil Pollution Act of 1990 in 
the aftermath of the Exxon Valdez oil spill. And so its 
operation is determined under that authorization. And the 
decisions that they make are certainly public and I am happy to 
give you a report on what money has been allocated, what it 
went for. Some of it was allocated for projects in each state 
and other funds were allocated for projects that would benefit 
all states together. So it was a formula.
    Mr. Culberson. Sure. Well I know the committee would be 
very interested. I am confident that the chairman and the 
ranking member, all of us would be interested to know how the 
money is going to be used. How much of it has already been 
allocated or obligated?
    Ms. Lubchenco. I do not recall the exact amount. Of the $1 
billion it is tens of millions, but not a lot.
    Mr. Culberson. Okay.
    Ms. Lubchenco. But I can, I can----
    Mr. Culberson. A fraction of the----
    Ms. Lubchenco. A fraction.
    Mr. Culberson [continuing]. Billion.
    Ms. Lubchenco. But I want to make sure that one thing is 
understood, and that is that these funds are only for natural 
resources that were damaged or the public's access to those 
natural resources.
    Mr. Culberson. Okay.
    Ms. Lubchenco. So this process is completely separate from 
individual claims----
    Mr. Culberson. Yes, I understand.
    Ms. Lubchenco [continuing]. Or any of the settlement 
discussion that is underway.
    Mr. Culberson. I, as a native Houstonian spent all of my 
life down at the beach on and off in Galveston, and up and down 
the whole Gulf Coast.
    Ms. Lubchenco. Mm-hmm.
    Mr. Culberson. And know lots of folks, talk to lots of 
people, up and down the entire Gulf of Mexico coastline. And we 
cannot find any fisheries that were damaged, we cannot find a 
dead shrimp, a dead fish. We have not found any real, Mother 
Nature absorbed it pretty beautifully between the dispersants, 
the, it was obviously a catastrophe of epic proportions and a 
horrible human error. I think people got ahead of themselves. 
They cut corners. This kind of stuff just does not happen 
unless they cut corners. I worked in the oil field in the 
summers in college and whenever you cut corners you get in 
trouble, and I think that is what happened here.
    But is it not, my impression is accurate, largely Mother 
Nature pretty well absorbed it. I do not know that there has 
been much damage. I have not found a fisherman yet that has 
been able to identify any damaged fisheries.
    Ms. Lubchenco. So I think Texas was relatively----
    Mr. Culberson. Well for Louisiana or Florida, too.
    Ms. Lubchenco [continuing]. Unscathed. There was a lot more 
oil that came ashore, for example in Louisiana.
    Mr. Culberson. Right. No question the marshes, those 
freshwater marshes where a lot of shrimp hatch. No question. 
There is some damage there.
    Ms. Lubchenco. There also were significant mortalities of 
sea turtles, of dolphins, of other wildlife birds. What is 
harder to quantify is the impact that even small droplets of 
oil could have on small fishes, for example. Of especially the 
young, developing fish. We know from work done both in the 
aftermath of the Exxon Valdez spill and the Cosco Busan spill 
in San Francisco----
    Mr. Culberson. Right. But I think it is undetectable. I 
thought we had a witness here last year, Mr. Chairman, or in 
one of our hearings, I know I have asked lots of questions, and 
they have not been able to even find any fish that have any 
detectable levels of oil.
    Ms. Lubchenco. So----
    Mr. Culberson. That is correct, is it not?
    Ms. Lubchenco. So we tested--that was NOAA who was testing 
extensively with the states and with FDA.
    Mr. Culberson. Right.
    Ms. Lubchenco. And we did not reopen fisheries unless they 
were completely free of the oil compounds.
    Mr. Culberson. Right. They reopened very rapidly, though, 
and I don't know that they--what I'm driving at is that I'm not 
sure how you're going to spend a billion dollars. What are you 
going to use it on if there was very little, if any, damage to 
fisheries and the environment basically absorbed it.
    Ms. Lubchenco. So there actually was considerable damage.
    Mr. Culberson. Ma'am?
    Ms. Lubchenco. There was considerable damage.
    Mr. Culberson. Economic damage, of course, to people that 
lost--who've lost jobs, obviously, en masse, economic damage, 
damage to the marshes. What I'm trying to figure out, this is 
for--it's for economic and ecological recovery. What ecological 
recovery?
    Ms. Lubchenco. There was significant damage that was done. 
We don't know the exact amount because that's what the trial 
would be about. And part of the trial involves the government 
and--both the federal government and the states providing 
evidence about the damage that was done. We don't know what 
that totals to because most of that has been done out of the 
limelight, if you will----
    Mr. Culberson. Sure.
    Ms. Lubchenco [continuing]. And is being prepared for 
trial. So I think it's premature to say that there was no 
damage because we actually had----
    Mr. Culberson. Not no damage, very little damage.
    Ms. Lubchenco. Well, I----
    Mr. Culberson. We agreed it was very little damage.
    Ms. Lubchenco. Well, I would disagree with that strongly. I 
think there was probably considerable damage.
    Mr. Culberson. The fisheries. We'll say the fisheries 
offshore.
    Ms. Lubchenco. It's hard to know to the fisheries.
    Mr. Culberson. I'm going to a particular place with this.
    Ms. Lubchenco. Okay. So it's hard to know for the fisheries 
how much damage was done.
    Mr. Culberson. It's not evident.
    Ms. Lubchenco. When you, let's say, so we do know that oil 
is very damaging to very young fishes. Let's just say for the 
sake of argument that all of the baby fishes in the area where 
there was oil in the Gulf were affected. We wouldn't be seeing 
them now. You would only notice their absence in two or three 
years---- 
    Mr. Culberson. Exactly. There would be a die off. But I 
mean in terms of----
    Ms. Lubchenco [continuing]. When we don't--they're not out 
there. So that's the kind of evidence that the scientists----
    Mr. Culberson. Mm-hm.
    Ms. Lubchenco [continuing]. That are working on this case 
are in the process of gathering. And you don't know long-term 
effects for a long time.
    Mr. Culberson. Sure. What I'm also driving at is I see that 
the fiscal year 2013 budget request includes $880 million for 
NOAA to keep America's fishing industry on a sustainable and 
profitable path. Surely some of this billion dollars that was 
received as a result of a settlement with BP will be used for 
fisheries in the Gulf.
    Ms. Lubchenco. The BP money is completely independent of 
what we do to regulate fisheries or to know how many fish are 
out there.
    Mr. Culberson. There's no overlap between the use of the 
billion dollars and some of the existing functions of NOAA 
regarding fisheries? No overlap?
    Ms. Lubchenco. The billion dollars----
    Mr. Culberson. Because I know the----
    Ms. Lubchenco [continuing]. For early restoration goes to 
projects that may be habitat restoration, they may be fisheries 
related. It's whatever the trustee council decides they will 
be.
    Mr. Culberson. Of course. I understand that.
    Ms. Lubchenco. But they don't go in support of our normal 
day-to-day business of managing fisheries.
    Mr. Culberson. I understand. But you got a windfall of a 
billion dollars that was obviously justified. There was 
terrible damage to the Gulf. If there's overlap between them, 
it's important I think for the chairman and the ranking member 
for us to know and the committee if there's overlap, if you've 
got access to a tremendous windfall that can help I mean, 
because we've got, as you know, a terrible budget problem this 
year and, if there's overlap that you can use some of that 
billion dollars for in trying to give the chairman and the 
committee some extra maneuvering room. That's where I'm going 
with it.
    Ms. Lubchenco. We can't use that money for anything.
    Mr. Culberson. I don't think they need it all. My 
impression is I'm a Gulf Coast guy. You don't need a billion 
dollars. Maybe for economic recovery, for people, tourism, 
damage to tourism or damage to people that lost their jobs, of 
course, compensation there. That's valid. I honestly can't find 
anybody--nobody has been able to find any damage to the 
fisheries except maybe the--and the marshes, of course. There 
is some damage to the marshes. The Gulf absorbed it, the 
incredible resilience of Mother Nature.
    Ms. Lubchenco. We were fortunate that the oil did disappear 
faster than we thought it would.
    Mr. Culberson. Right.
    Ms. Lubchenco. That does not mean it had negligible impact.
    Mr. Culberson. I didn't say that.
    Ms. Lubchenco. And I think that the impact was actually 
quite substantial. But the fact remains that that's a 
completely separate pot of money. BP made a downpayment on what 
it will need to pay at some point for the damages that the 
spill caused. And that's completely separate from our budget.
    Mr.  Culberson. I just want to bring it to the committee's 
attention. It's something that we should be aware of that's 
sort of in my mind like punitive damages that they're paying. 
Well deserved, because I think they were pushing the driller. I 
think they were pushing the concrete guys. There were people 
cutting corners out there that should not have. That, really, 
it just doesn't happen in the industry.
    Thank you very much for your service and I appreciate the 
chairman allowing me a little extra time. I think this is worth 
keeping an eye on because it's a pretty good windfall that I 
think will overlap some of your functions and maybe you might 
not need all that $880 million if you're going to get a pretty 
good windfall out of that billion.
    Mr. Wolf. We did have a question on that, Louisiana, 
Mississippi, Texas. The Department of Interior and NOAA are 
each receiving $250 million. Has NOAA received any of the 
funding yet?
    Ms. Lubchenco. Mr. Chairman, we don't receive that money. 
It is under--it is money that----
    Mr. Wolf. But you'll get it in a trust fund?
    Ms. Lubchenco [continuing]. Will be used.
    Mr. Wolf. Do you get it, I mean, does BP get it? Do you get 
it to wherever or do you----
    Ms. Lubchenco. It's put in a fund.
    Mr. Wolf. So it is in a fund.
    Ms. Lubchenco. The BP Council can use it for projects that 
they decide are to restore the damage that was done. And it's 
not money that ever goes to NOAA. It's not used for the normal 
fishery operation or other things that we would normally do. It 
in no way overlaps with our functions.
    Mr. Wolf. Does the money go directly to the States then? Do 
they get it, Alabama, Louisiana? Do they get money directly?
    Ms. Lubchenco. They did not get money directly. That 
formula that you're referring to was an agreement within the 
trustee council----
    Mr. Wolf. Right.
    Ms. Lubchenco [continuing]. As to who would have what say 
about the total billion dollars.
    Mr. Wolf. Okay.
    Ms. Lubchenco. And so----
    Mr. Wolf. So the trustee----
    Ms. Lubchenco. The trustee council make decisions about all 
of them.
    Mr. Wolf. Do they have a time factor involved? By a certain 
time?
    Ms. Lubchenco. There's no limit, but I think there's great 
urgency in getting on with the restoration to make up for the 
damage that was done. And it's not just the damage to the 
resources, it's the public's loss to the access of those 
resources that's also taken into consideration. Clearly, 
there's a lot of interest in the natural resource damage 
assessment (NRDA) process. We'd be happy to provide the 
committee with a briefing on that, if that would be helpful.

                           EDUCATION PROGRAMS

    Mr. Wolf. Okay. That may be a good idea. And I have another 
question. I want to get to the JPSS. But on the oceans issue, 
there is $25 million provided in fiscal year 2012 for education 
programs. Do you intend to open up the grants competition again 
or will you only fund projects that are applied for funding in 
fiscal year 2011? And why when you--we were told that there 
were some groups that were coming in to apply competitively and 
they were told they would not be able to apply because you were 
going to just go with the 2011 competition. So I guess the 
question is why not run another competition for entities to 
apply for the fiscal year 2012?
    Ms. Lubchenco. I'm confused, Mr. Chairman.
    Mr. Wolf. This is the education program.
    Ms. Lubchenco. This is the education program for 2012.
    Mr. Wolf. Right.
    Ms. Lubchenco. I don't know the answer to that but I'm 
happy to get back to you on that.
    Mr. Wolf. So it's your understanding that you don't know if 
that's been foreclosed? I mean, I think----
    Ms. Lubchenco. I do not know.
    Mr. Wolf. Is there anybody in the audience there with you 
that knows that?
    Ms. Lubchenco. No.
    Mr. Wolf. You know, I think it already opened for 
competitive bidding. The Congress made a decision with regards 
to the earmarks and to make it competitive, but I think the 
earmark process would go the same way from the administration 
and I think it ought to be open and competitive for any group 
to come in and compete fairly. And then whatever happens, 
happens. So if you could check on that.
    Ms. Lubchenco. We'll find out and get back to you on that.

                      JOINT POLAR SATELLITE SYSTEM

    Mr. Wolf. Okay. Your revised plan for the JPSS involves 
dropping or deferring climate instruments that were--and let me 
just say before I ask you this question. I think you and your 
people have done an excellent job on the early warning system. 
I saw one news report the other day on that one town where no 
one was killed and the devastation was incredible. And they 
said it was because of the early warning system----
    Ms. Lubchenco. Mm-hm.
    Mr. Wolf [continuing]. That enabled people to get out. And 
but for your people, there would have been death there. And so 
I want to congratulate you and congratulate your people because 
I think as a result of that lives were saved. And I think the 
Committee is trying to be very sensitive to those things, you 
know. So, well done.
    Ms. Lubchenco. Thank you, Mr. Chairman. I really appreciate 
that. And our ability to do those early warnings is a result of 
the satellites. That's why we've made them such high priority. 
And the geostationary satellites enable us to do one to two 
days in advance, but it's the polar orbiting satellites that 
enable us to do a much better job of the two to seven days. And 
so, if we give them a five day heads up for tornadoes, for 
example, that we did last year for many places, that made all 
the difference in terms of emergency managers and others being 
ready and being able to get out of harm's way.
    Mr. Wolf. I want to thank you for that. What specific 
capabilities since the revised plan for JPSS involved dropping 
or deferring climate instruments that were to measure radiation 
and ozone? What specific capabilities will be dropped under the 
new budget proposal and what are the impacts and the 
alternatives? Is the administration requesting funding to 
continue to develop these instruments? But what will the impact 
be?
    Ms. Lubchenco. So the impact is that we aren't able to 
include--so we don't have funds for those sensors for now.
    Mr. Wolf. And what will that mean?
    Ms. Lubchenco. So those sensors measure the radiation of 
the earth and tell us--and give us information about sort of 
environmental changes that are happening on earth. We are 
working with other agencies to try to find some way to keep 
those instruments alive, but they are sort of in limbo right 
now.
    Mr. Wolf. Well, that was the real question. What do you 
foresee is the impact of these data gaps on forecast accuracy 
and what is NOAA doing to minimize the impact? In the 
Department of Defense, will the satellites fill the gap and 
what about the Europeans? Is there any European country that's 
had or doing this? And we cooperate, I understand, very well 
with each other. So is DOD cooperating and helping to fill the 
gaps or is any other European country for instance, helping?
    Ms. Lubchenco. So we're shifting from the climate sensors 
to the weather sensors now in your question just to clarify, 
and the other----
    Mr. Wolf. Excuse me. But look at it all because it's all 
very important.
    Ms. Lubchenco. Mm-hm.
    Mr. Wolf. Where there are gaps, are there any agencies that 
are doing the same thing? As you look at GAO will do a study 
and find out that agency A and B are doing the same thing and 
didn't even know? Are there any--because of the importance of 
it, and it is important, and because of watching and NASA, 
James Webb has just sucked out so much money from the Europa 
Program that he's interested in and with the shift from the 
Mars Rover, it's history, it's gone if the Congress doesn't 
deal with this issue. Are there any things that are--is there 
an overlap? You like to do your own, but the overlap could fill 
in on all of them.
    Ms. Lubchenco. So we do not have overlap for the JPSS 
Program. It flies in the afternoon orbit and there is no 
other--there are no other polar-orbiting satellites that fly in 
that afternoon orbit. There is a military satellite. Department 
of Defense. It's called DMSP. It flies in the early morning 
orbit, which is not very good for weather information. And the 
weather instruments that they have on that satellite are not 
sufficient quality to give us what we need for our weather 
forecasts.
    The Europeans also have a polar orbiting-satellite and 
that--we currently utilize their data along with our polar-
orbiting satellite data and together they give us our ability 
to do those long-term weather forecasts and other things. When 
we have the gap in data that we still expect will happen when 
Suomi NPP is no longer functioning and before JPSS-1 is 
operational----
    Mr. Wolf. How long is that? We have to enquire. How long 
will that be?
    Ms. Lubchenco. We--our best guess, and this is a guess, 
because you don't know. You know, space is a very harsh place 
and you don't know exactly how long things are going to last. 
Our best guess is that it's about 22 to 24 months long will be 
that gap in coverage. During that time, we will have only the 
European satellite that flies in the late morning orbit and 
that means we'll have half the amount of data that we have now. 
We will utilize it, but it means our weather forecasts will be 
significantly degraded because they have half the amount of 
information.
    Mr. Wolf. And that will be for 24 months.
    Ms. Lubchenco. That's our best guess.
    Mr. Wolf. What country participates in Europe? Is it a 
European or----
    Ms. Lubchenco. It's a European. The agency is called 
EUMETSAT. It's a European agency that flies this particular 
satellite and we coordinate with them a lot. I think you may 
recall that we were trying to understand last year what the 
consequences of having only the European information, not 
theirs, plus ours, which is what we have now. And so we took 
the snowmageddon example that we had, that massive snowstorm 
that I'm sure you remember----
    Mr. Wolf. I do.
    Ms. Lubchenco [continuing]. And said how well would we have 
predicted that storm if we'd had only the European information? 
And the answer was that we would have underestimated the 
intensity of the storm and the amount of snowfall by about half 
and the track would have been off about 500 miles.
    Mr. Wolf. Well, that's pretty significant.
    Ms. Lubchenco. So it would have been--so when I say that 
our weather forecast, especially the longer term ones, would be 
significantly degraded, that's what I mean.
    Mr. Wolf. So there will be a degrading for a period of 24 
months.
    Ms. Lubchenco. It could be as long as that. And that 
underscores the importance of full funding for that satellite 
this year and our doing everything we can to keep this program 
on track and not have any further slips.
    Mr. Wolf. Could the space station play any role in it?
    Ms. Lubchenco. Unfortunately not.
    Mr. Wolf. Okay. All right. Okay. I think you've covered 
this, but please give us an update on the Suomi NPP system that 
was successful, what data are we getting from the satellite and 
why is it important. But I think you indirectly covered that.
    Ms. Lubchenco. I'm happy to report, Mr. Chairman, that the 
Suomi NPP satellite that's up there now that we launched in 
October is checking out well. Her instruments are functioning 
and we're pleased with her performance. So, so far, so good.

                   HYDROGRAPHIC SURVEY VESSEL REPAIR

    Mr. Wolf. Okay. On the hydrographic survey vessel, you're 
requesting an increase of $10.7 million for a total program 
level of about $12 million to initiate a major repair period 
for the Thomas Jefferson, a NOAA hydrographic survey vessel 
that is currently the only NOAA ship conducting hydrographic 
surveys in the Atlantic and Gulf of Mexico. Mr. Culberson must 
have been involved in the naming of it because, if I were 
naming it, I would have called it the George Washington. How 
long will these repairs take and how will NOAA make up for the 
lack of data collection while the Jefferson is undergoing 
repairs?
    Ms. Lubchenco. Mr. Chairman, I don't know how long the 
repair period will take, in part because it's hard to know what 
will need repairing until we actually go into her. In other 
words, what happens is there is often rust accumulating from 
the inside and it's not until you actually open it up and see 
how bad it is to know how much you have to fix it. That's one 
of the challenges with essentially fixing aging ships. You're 
not quite sure how bad it's going to be until you look at it.
    Mr. Wolf. Where does that operate out of?
    Ms. Lubchenco. The Thomas Jefferson is at Norfolk, 
Virginia.
    Mr. Wolf. That's appropriate I think. They say we're going 
to get a vote pretty soon. Do you have a couple more that you 
want to--they're all restoration projects. I think we covered 
that. We covered the competition. You'll get back to us on 
that, won't you?
    Ms. Lubchenco. We will.
    Mr. Wolf. Do you have anything in particular? Mr. Serrano, 
do you have any? Go ahead.

                     EDUCATION PARTNERSHIP PROGRAM

    Mr. Serrano. Thank you Mr. Chairman. In 2012, Congress 
allocated $14.3 million to the Education Partnership Program, 
but NOAA subsequently reduced it to $11.2 million, but later 
increased it to $12.56 million per congressional request. The 
FY13 budget request is for $10 million.
    The Education Partnership Program is vitally important for 
supporting students from underserved communities as they study 
and receive advanced degrees. In fact, the program partners in 
a case that I'm familiar with, with the City University of New 
York. What is the possibility that this this program will 
become a line item in future NOAA budgets so as to guarantee 
robust funding for such an invaluable program? There seems to 
be so much uncertainty about its future and we wonder if 
there's a way to get it straightened out.
    Ms. Lubchenco. I know that you appreciate how important 
those programs are and thank you for mentioning them. They are 
very important to us, as well. I think the reality is that we 
simply did not have enough funds this year to fund all of the 
very important programs that we have and what you see is the 
consequence. It is very challenging and they are undoubtedly 
really excellent programs.
    Mr. Serrano. Well, one would think that some of those 
decisions were not based on the budget, but rather on in-house 
decisions considering that Congress allocated $14.3 million and 
then folks at NOAA changed that. So, yes, I understand the 
budget issues. Believe me, I'm not one of those members that 
says ``cut, cut, cut.'' I think you have to invest, as you try 
to do other things. But it seems that some of this was caused 
not by budget cuts, but by in-house decisions by NOAA. So 
what's wrong with the program that NOAA wouldn't want to keep 
it at least at levels that Congress has provided?
    Ms. Lubchenco. I think there's nothing wrong with the 
program. I think there's a lot of enthusiasm for the program. 
It's simply not having enough money to fund it at the level 
that would be desirable.
    Mr. Serrano. Okay. Again, you lost me, but that's all 
right. I mean, we gave you a certain amount of money, you 
reduced it on your own in-house, so why would you not have 
enough money when you reduced the amount we gave you and you 
didn't use it fully as is my understanding? That was an in-
house decision. That wasn't a congressional decision.
    Ms. Lubchenco. So our----
    Mr. Serrano. In fact, Congress had to come back and ask you 
to bring it up again.
    Ms. Lubchenco. So I'm not sure that I--oh. So are we 
talking about FY12?
    Mr. Serrano. Yes.
    Ms. Lubchenco. Okay. I'm sorry. I was misunderstanding. I 
thought we were talking about '13. When----
    Mr. Serrano. For '13, we haven't given you any money yet.
    Ms. Lubchenco. Really? Darn. No, I understand this is very 
early in the decision-making process for '13. When the 
decisions were made for '12, we had items that were allocated 
and then we were also given an undistributed additional $90 
million that we had to take from someplace. So what you see is 
the result of that. There were other programs where Congress 
did not make the decision where the cuts should be taken. They 
said make these additional cuts and tell us. And so that's what 
happened.
    Mr. Serrano. Okay. I think in the future, with very tight 
budgeting, if Congress says spend money on this, there should 
be a good explanation as to why it wasn't spent on that, 
especially for those of us that advocate for more, as we do.
    Ms. Lubchenco. Uh-huh.
    Mr. Serrano. In other words, it's pretty embarrassing to 
those of us who advocate for NOAA to find out that those things 
we thought were agreed upon ended up not being agreed upon.
    Ms. Lubchenco. I understand and I hear you. You know, the 
challenges of being told to take an undistributed cut and being 
told you can't do it here and you can't do it here make for 
outcomes that might not have been foreseen.
    Mr. Serrano. Okay. Thank you.
    Mr. Wolf. Thank you.

               OKEANOS EXPLORER AND EXPLORATION NAUTILUS

    Mr. Culberson. I forgot to ask about a marvelous program. I 
understand what my good friend Mr. Serrano was asking about. 
This is a terrific both education and ocean exploration 
program. I understand NOAA's got two ships for exploration, the 
Okeanos Explorer and the EV Nautilus, that are operated under 
contract by NOAA by the Ocean Exploration Trust.
    Those programs have yielded great benefits to education. 
They are programs that Dr. Robert Ballard has worked on for 
many, many years on the Jason Project to encourage kids to--it 
gives them a chance interactively and live to see ocean 
exploration, in addition to all the other work that is being 
done. I hope you'll continue that program. I wanted to ask 
about its status and the 2013 budget. I'm sorry I don't have 
the numbers in front of me about what happens to it in the 2013 
budget, but it's been very successful in the past and I hope 
you'll continue it.
    Ms. Lubchenco. They are very exciting programs. They have 
brought a wealth of new knowledge, as well as good education 
programs. I don't have the numbers in front of me. Oh, wait. 
Here. So I don't have the numbers in front of me. It's my 
recollection that it's level funded, that the request in '13 is 
the same as what it was in '12.
    Mr. Culberson. Okay. But you're going to continue with the 
program because----
    Ms. Lubchenco. For those programs that you mentioned.
    Mr. Culberson. Those two ships.
    Ms. Lubchenco. For those--that's right.
    Mr. Culberson. Terrific. We're coming up, I can't believe 
it, on the 100th anniversary of the loss of the Titanic, and I 
just thought of Dr. Ballard the other day. And, anyway, I 
appreciate very much the work that you do.
    Ms. Lubchenco. Thank you.
    Mr. Culberson. I admire very, very much what NOAA does, you 
know, the subcommittee is very supportive----
    Ms. Lubchenco. We appreciate that.
    Mr. Culberson [continuing]. Of the work that you do. Thank 
you so much for your service to the country.
    Ms. Lubchenco. Thank you.
    Mr. Culberson. Thank you, Mr. Chairman.

                       AFRICA WEATHER PREDICTION

    Mr. Wolf. I have one last question. I wonder do you 
forecast, is there a form that you put out or NOAA puts out, a 
monthly forecast that would be available for people in Africa 
and other areas where there's been a history of famine before 
it, to say next year we believe in Ethiopia that during this 
period of time there will be so much rainfall? Do you do that? 
Is that a regular publication? Or do you work with a AID or 
could you or should you do that?
    Ms. Lubchenco. Mr. Chairman, as far as I know, the only--
what we do is work through the World Meteorological 
Organization, which is an international organization that does 
provide some weather information for other parts of the world. 
We do not in the U.S. routinely do that for Africa, as far as I 
know. We do--I will look in--I don't know as much about that 
program as I would like to, so I will find out more and get 
back to you. We do work with USAID on a number of different 
instances. I don't know if we do that for Africa or not, but I 
will find out.
    [Clerk's note follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Wolf. If you would. It would seem like, if there was an 
early warning system, that we knew next year at this time we 
were going to be facing a drought in Somalia or where 
eventually America and the West puts a lot of resources into 
feeding them to let them know. We do know that next year, based 
on what we have seen. We raised this one at a time and I don't 
know that anything was ever done. If you could, maybe we would 
even carry a language. So we're not asking to spend more money, 
but if the satellite is going and we know the information, most 
of the embassies will be the South Sudan or Mauritania or here 
in the United States. But just to be able to, if we know 
something, it would be helpful I think to let them know and, 
also, working with the World Food Program. Have you ever worked 
with the World Food Program?
    Ms. Lubchenco. Yes.
    Mr. Wolf. You do. Well, if you could let us know what is 
being done and, while we're not looking to spend a lot more 
money, but if there's some information. There could be a 
bulletin published once a year or twice a year with the 
projections as to what the following year looks like, I think 
it may very well be helpful.
    Ms. Lubchenco. Mr. Chairman, I know that it would not be 
possible for us to do routine weather forecasts on a day-to-day 
basis.
    Mr. Wolf. No.
    Ms. Lubchenco. What I think you're talking about is more a 
heads up conditions are likely that you're going to have a 
drought situation.
    Mr. Wolf. Right. What will the rainy season be like in Juba 
next year?
    Ms. Lubchenco. We may well already do something like that. 
I'm told--thank you, John--that USAID uses our satellite 
information already, but I'll find out more and get back to you 
to give you more information.
    Mr. Wolf. Okay. And, also, how it is published. There may 
be something you're doing, but maybe the Embassy of Ghana or 
Kenya doesn't know. So some mechanism to make sure that 
whatever information we have would be published, but not a 
daily weather forecast.
    Ms. Lubchenco. Right. So that would have to be through 
USAID to get to those embassies, for example.
    Mr. Wolf. Sure.
    Ms. Lubchenco. That would probably be the most logical.
    Mr. Wolf. Okay. Again, Mr. Serrano, before I--anything?
    Mr. Serrano. I don't have anything. Thank you.
    Mr. Wolf. Well, thank you very much for joining us here.
    Ms. Lubchenco. Thank you very much.


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                                         Wednesday, March 28, 2012.

              AMERICAN MANUFACTURING AND JOB REPATRIATION

                               WITNESSES

DR. NIALL FERGUSON, PROFESSOR, HARVARD UNIVERSITY
HARRY MOSER, FOUNDER, RESHORING INITIATIVE
SCOTT PAUL, EXECUTIVE DIRECTOR, ALLIANCE FOR AMERICAN MANUFACTURING
JIM PHILLIPS, CHAIRMAN AND CEO, NANOMECH
DR. PATRICK GALLAGHER, DIRECTOR, NATIONAL INSTITUTE OF STANDARDS AND 
    TECHNOLOGY
DR. SUBRA SURESH, DIRECTOR, NATIONAL SCIENCE FOUNDATION

                      Opening Statement--Mr. Wolf

    Mr. Wolf. The hearing will come to order.
    And there will be other Members coming. Apparently there 
are some meetings.
    And so what I am going to do for your statement is we are 
going to ask you to summarize, but we are going to put it in 
the Congressional Record and send a copy to every Member of the 
House so they can take a look at it.
    The committee will come to order. Today the committee will 
hear testimony from a number of distinguished witnesses on what 
can be done to reinvigorate the American economy, in particular 
our manufacturing sector, and how to bring manufacturing jobs 
back to the United States.
    It has become commonplace to hear that America is in 
decline. The fact is, you see that over and over and over. And 
my sense is decline is a condition. Decline is a choice.
    And so there is nothing foreordained that decline must take 
place, but it will if people fail to come together to do what 
they have to do.
    And so I particularly want to just say, Dr. Ferguson, I 
appreciate your book. I have read it and I have quoted from it. 
And I have actually used it for my newsletter.
    I do not know if they gave you copies. We will send you 
copies of my newsletter, but you are all through my newsletter.
    I have five kids and 16 grandkids, and I think this place 
is dysfunctional. This Congress is dysfunctional and the 
Administration is dysfunctional. And nobody will work with 
anybody and all it is is criticize, condemn, and complain and 
attack.
    But I do not think decline is an inevitability. I think it 
is a condition. And hopefully this can be the beginning whereby 
we can come together and do some things so that we can honestly 
say America's best days are yet ahead and the sun has barely 
begun to rise on our country.
    But where we are today, I think, is very, very troubling, 
and it has become commonplace to hear that America is in 
decline. We have suffered financial crises. We continue to 
endure high unemployment and slow growth.
    At the same time, other nations' economies have been on the 
rise, particularly China. Our trade deficit with China and our 
indebtedness are serious concerns, as is our loss of 
manufacturing jobs to China and to other countries.
    However, as we will discuss with our first witness, our 
decline is not inevitable. If we focus on strengthening the 
institutions and fundamental ideas that have served us well in 
the past--education, scientific innovation, competition, hard 
work--I believe we can and we will see a resurgence.
    One of the areas where we can achieve such a resurgence is 
in manufacturing. Recent years have seen a dramatic decline in 
American manufacturing employment as companies chose to move 
functions overseas, where labor and production costs were 
lower.
    Our manufacturing workforce declined by 27 percent between 
2002 and 2010. That trend has recently been reversed with 
modest gains in the last two years, and total manufacturing 
employment currently stands at 11.9 million people.
    Our first witness today is Dr. Niall Ferguson, a 
distinguished historian from Harvard University. Dr. Ferguson 
has written extensively about the rise and fall of 
civilizations. His latest work entitled Civilization charts the 
rise of the western civilization and attributes this rise to 
certain ideas that we can choose to embody once again.
    Following Dr. Ferguson, we will have a panel of three 
witnesses who have specific expertise and experience in 
manufacturing and enhancing America's competitiveness.
    They are Scott Paul, the Alliance for American 
Manufacturing; Harry Moser of the Reshoring Initiative; and Jim 
Phillips, chairman and CEO of NanoMech.
    Finally, our third panel will consist of Dr. Subra Suresh, 
the director of the National Science Foundation, and Dr. 
Patrick Gallagher, the director of the National Institute of 
Standards and Technology.
    These two agencies under the jurisdiction of this 
subcommittee play significant roles in scientific research and 
development, providing assistance to American manufacturing and 
promoting excellence in competitiveness and science education, 
the cornerstone of strengthening our competitiveness.
    Dr. Ferguson, we would like to welcome you. We would 
normally go to Mr. Fattah. He is going to be here about 9:30 
hopefully to catch the end of your statement.
    But with it being the case that he is not here, there is no 
slight intended at all. And, again, we are going to make sure 
that everyone not only on the committee but in the Congress 
sees your testimony.
    So with that, your full statement will appear in the 
record. You can proceed as you see fit. But thank you again.

                    Testimony of Dr. Niall Ferguson

    Dr. Ferguson. Well, thank you very much, Mr. Chairman and 
Members or Member of the committee. It is a great honor to be 
invited to testify here today.
    I should say with all due apologies that I am a professor 
and an historian and so will tend to see these issues from 
35,000 feet, but I am also in my own small way a businessman.
    I have experience of starting companies on both sides of 
the Atlantic. So part of what I am going to say is based not 
just on academic research but on personal experience.
    As you know, the IMF estimates that in four years' time, 
the United States will cease to be the largest economy in the 
world, will be overtaken by China on a purchasing power parity 
adjusted basis of gross domestic product. That will be the 
first time since the 1880s that the United States is not the 
world's largest economy. It is a major change in the balance of 
economic power that we are witnessing.
    As you also know, the United States needs to create some 
seven million jobs just to get back to where it was before the 
financial crisis began, plus another five million to catch up 
with population growth in the intervening period.
    Manufacturing employment used to be about 20 percent of 
total employment in the United States. It is now down to 10 
percent. And all of this despite massive fiscal and monetary 
stimulus which has roughly doubled the debt to GDP ratio and 
tripled the size of the Federal Reserve's balance sheet.
    I, frankly, doubt, Mr. Chairman that further fiscal or 
monetary stimulus can solve the kind of problems that I am 
delineating here because they are structural more than cyclical 
problems and they predate the onset of the financial crisis in 
2007, 2008.
    What is the nature of this structural crisis? I do not 
think this is well understood. Some blame globalization and it 
is certainly true that foreign competition has made certain 
manufacturing sectors' lives difficult since it got underway in 
earnest after the 1970s.
    However, only a fraction of manufacturing jobs lost since 
2008 can be attributed to the effects of globalization. It is 
not that work was shipped overseas. It is that businesses 
simply shed labor.
    Some have blamed the decline of innovation, a subject of 
great relevance to this committee's work. But, in fact, there 
is some evidence that manufacturing jobs have been lost 
precisely because of innovation and, in fact, it is the effect 
of technological advance that is reducing the demand for labor 
in U.S. manufacturing.
    I want to try and define competitiveness for you in a way 
that is broader than normal. If you define it narrowly in terms 
of unit labor costs or simply in terms of the real exchange 
rate, the U.S. does not actually have a problem.
    It has controlled unit labor costs better than almost any 
developed economy since the 1980s, significantly more 
successfully than even Germany, and we do not see the kind of 
problems of excessive dollar strength that we experienced, say, 
in the mid 1980s. Actually, the dollar is in its real trade 
weighted exchange rate somewhat weaker than it was ten years 
ago.
    So this is not really the key and we should not expect any 
massive benefit from either cost control in terms of labor or 
exchange rate weakness.
    My colleagues at Harvard, Mike Porter and Jan Rivkin, have 
been involved in a tremendously illuminating study of 
competitiveness that was just published by Harvard Business 
School early this year.
    They defined competitiveness much more broadly. In fact, 
they have 17 different macroeconomic and microeconomic 
variables. I do not have time to list them all. I do not want 
to talk for more than ten minutes this morning.
    But let me single out a few that strike me as highly 
relevant to our discussion: effective laws, intellectual 
property rights, and lack of corruption, the efficiency of the 
legal framework, modest legal costs, swift adjudication, the 
complexity of the national tax code, the ease of setting up new 
business, and effective and predictable regulations.
    If these are determinants of competitiveness, then I 
believe the United States has a problem, a problem of 
relatively recent origin, and--and this is an important point 
that you have already raised, Mr. Chairman--a solvable problem. 
This is not foreordained decline we are talking about here but 
an institutional problem that is eminently solvable.
    Let me briefly summarize the findings of ``Prosperity at 
Risk,'' the recent Harvard Business School study I just 
mentioned.
    It is a survey of around 1,700 Harvard Business School 
alumni, all now working as senior executives in U.S. companies 
mostly. And what is explores is their decision making and their 
assessment of the competitiveness of the U.S. economy.
    There were 607 instances of decisions on whether or not to 
offshore particular operations. In those 607 cases, the U.S. 
retained the activity just 96 times, that is 16 percent, and 
lost it in the rest, 84 percent.
    When they were asked to rank the reasons why they felt U.S. 
competitiveness was declining, why they opted for other 
locations over the U.S., the alumni came up with the top six 
weaknesses of the U.S. economy: (1) the effectiveness of the 
political system; (2) the K-12 education system; (3) the 
complexity of the tax code; (4) uncertainty of macroeconomic 
policy; (5) excess regulation; and (6) the inefficiency of the 
legal framework.
    These are the top six reasons why some of our best 
qualified executives choose other locations over the United 
States.
    Between two-fifths and three-quarters of those surveyed 
expect the United States to deteriorate in these six areas in 
the foreseeable future. I find these very troubling findings 
indeed.
    If this was just one survey, you could perhaps dismiss it. 
But what I want to try and show you this morning is that all of 
the available empirical research on institutional 
competitiveness rates the United States as a declining economy.
    The World Economic Forum publishes, as you may be aware, an 
annual global competitiveness index. It has not changed its 
methodology since 2004. Since that time, the aggregate score 
for the United States has declined by seven percent while 
scores for economies like China, Hong Kong, and Germany, to 
name just three, have improved.
    China's score and competitiveness ranks by the WEF has gone 
up by 14 percent in the same time period.
    If I could welcome the ranking member of the committee. You 
have not missed much.
    Mr. Wolf. For Mr. Fattah's benefit, would you go back and 
cover those six points?
    Dr. Ferguson. Certainly.
    Mr. Fattah, I will just briefly summarize the argument I 
have made so far.
    That we should not look for explanations of declining 
competitiveness and loss of manufacturing jobs in terms of 
narrow issues of competitiveness like unit labor costs or the 
real exchange rate nor should we expect salvation to come from 
continued fiscal and monetary stimulus.
    The structural problems that are causing firms to choose 
foreign locations over the United States are essentially 
institutional.
    And the recent Harvard Business School survey entitled 
``Prosperity at Risk'' just published a couple of months ago 
surveyed 1,700 alums of HBS, asked them why they were opting to 
locate operations overseas rather than in the U.S. and asked 
them in particular to rank the lack of competitiveness, the 
problems of competitiveness from which they see the United 
States is suffering.
    The six that they highlight in order of importance were, 
(1) the ineffectiveness of the political system; (2) defects of 
the K-12 education system; (3) the complexity of the tax code; 
(4) uncertainty about future macroeconomic policy; (5) 
excessive burdensome regulation; and (6) the inefficiency of 
the legal framework.
    And just as you came in, I was saying that we can find 
compelling supporting evidence from every single available 
international assessment of institutional efficiency that there 
is starting with the World Economic Forum's annual global 
competitiveness survey, a very sophisticated survey which has 
had excellent methodology since 2004.
    By its measure, U.S. competitiveness since 2004 has 
declined by seven percent, whereas China's has risen by 14 
percent.
    The World Economic Forum bases its competitiveness index 
partly on measures of institutional quality and I single out 15 
in my written testimony, 15 measures of the efficacy of the 
rule of law broadly defined, ranging from security of property 
rights to quality of governance.
    In 15 out of 15, the World Economic Forum ranks Hong Kong 
significantly ahead of the United States. In fact, the United 
States does not get into the top 20 for 14 out of 15 of these 
measures of institutional health.
    Taiwan outranks the U.S. in nine out of 15 areas and even 
the PRC, the Peoples Republic of China, beats the U.S. in two. 
And that supports a society with a relatively underdeveloped 
system of rule of law.
    The details, I think, are extremely important and 
impressive and they have not received sufficient attention in 
the media and in Congress.
    The Heritage Foundation, of course, the conservative think 
tank has a freedom index. It ranks the U.S. ninth in the world 
in terms of economic freedom, a long way behind Hong Kong and 
Singapore.
    The International Finance Corporation rates the ease of 
doing business in various countries. In terms of ease of doing 
business, the U.S. now ranks 72nd in the world, in terms of 
dealing with construction permits 17th, in terms of registering 
a property 16th, in terms of resolving solvency 15th, in terms 
of the ease of starting a business 13th.
    And I can confirm that it is not easy to start a business 
in the United States. I recently have been trying to do so.
    The World Justice Project has a rule of law index. It has 
not been going for very long, but it is fascinating to find 
that that project ranks the United States 21st out of 66 
countries surveyed in terms of access to civil justice, 20th 
for the effectiveness of criminal justice, 19th for the 
protection of fundamental rights, 17th for the absence of 
corruption, 16th for the limiting of government powers, 15th 
for regulatory enforcement, 13th for order and security, and 
12th for the openness of government.
    But for me the most compelling evidence is actually from 
the World Bank's world governance assessment. And I have 
supplied charts in my written testimony to illustrate a very, 
very disturbing tendency.
    The world governance survey suggests that since 1996, the 
U.S. has suffered a decline in the quality of its governance in 
five different dimensions, accountability, government 
effectiveness, regulatory quality, rule of law, and control of 
corruption.
    I compare it with just two examples, Hong Kong and Germany, 
and it has fallen behind both in every one of these measures.
    Let me now relate this to my own work. As an historian, I 
have written most recently in Civilization about the importance 
of institutions in economic development and in terms of 
geopolitical power.
    The argument that I made in Civilization was that there 
were six institutions and ideas that caused the West, led 
ultimately by the United States, to rise ahead of the rest of 
the world in a dramatic fashion after around 1500.
    The big story in economic history from 1500 to the 1970s is 
the inexorable rise of the West. And I explain it in terms of 
six I call them killer applications, but I could equally well 
have said six institutions and ideas, (1) competition, which is 
what I have mostly been talking about; (2) the scientific 
method; (3) the rule of law; (4) modern medicine; (5) the 
consumer society; and (6) the work ethic.
    Up until the late 1970s, the U.S. led the world in all six 
of these areas. Indeed it monopolized many of these 
institutional advantages. That is no longer true.
    Beginning with Japan, non-Western societies realized that 
they could download these killer applications and they 
proceeded to do so. The pace of this spread of good 
institutions stepped up from the late 1970s when China began 
its process of economic reform.
    And the result, I think, is very striking. Not only has the 
rest of the world gotten better institutionally at everything 
from competition to the work ethic, but we, and it is an 
unrelated process, have been getting worse at all of these 
things.
    There is not, of course, time to go in detail into all six, 
but one obvious example of what is going wrong is the decline 
in quality of American education. And this, of course, is 
something that greatly concerns the committee, I know.
    The recent OECD PISA study is perhaps the most startling 
evidence of the problem. American 15-year-olds now lag behind 
Chinese 15-year-olds in terms of mathematical competence by as 
much as Albanian and Tunisian teenagers lag behind their 
American counterparts. The gap is equally large. And that must 
be a grave cause for concern as we look ahead to this 21st 
century.
    The question is what causes educational decline of this 
sort? And I want to suggest to you that it is partly, if not 
largely the result of the institutional problems that I have 
been talking about.
    I want to cite here briefly the work of Phillip Howard of 
Common Good who cites the example of the special education law 
enacted in 1975. This was, ``structured as an open-ended 
mandate, and soon spun out of control. Today special ed 
consumes 20 percent of the total K-12 budget in America. 
Programs for gifted children get less than half of one percent, 
and pre-K education gets almost nothing.''
    The Government Accountability Office has found 82 separate 
programs for teacher quality. I do not think one of them is 
working.
    Howard calls for a legal spring cleaning to clear away the 
accumulation of decades of obsolete legislation as well as for 
mandatory sunset provisions in all future laws which have a 
budgetary impact. I support that suggestion.
    He also highlights some really glaring examples of 
regulation run amuck. So the number of healthcare reimbursement 
categories will soon increase from 18,000 to 140,000 including, 
believe it or not, 21 separate categories for spacecraft 
accidents, a problem that most small businesses in the United 
States must regularly grapple with.
    There are 140 million words of binding federal statutes and 
regulations, and the States and municipalities add about a few 
billion more.
    Howard calls not only for a stripping down or spring 
cleaning of legislation but also for a new approach to 
regulation that legislators need to take. We need to get away 
from instructional manual regulation which tries to cover every 
conceivable eventuality including the danger that my employees 
will suffer spacecraft accidents to something far simpler in 
which judgment and prudence once again play a part.
    Nothing illustrates the problem that we face more clearly 
to my mind than the Wall Street Reform and Consumer Protection 
Act known for short as Dodd-Frank, 2,319 pages of which I have 
read the lot, which requires that regulators create 243 new 
rules, conduct 67 studies, and issue 22 periodic reports. 
Incredibly it reduced the number of regulatory agencies 
responsible by the financial sector not one bit. In net terms, 
it actually added one.
    Let me conclude. In my view, Mr. Chairman and Members of 
the committee, all discussions about U.S. competitiveness, 
whether in relation to manufacturing or the service sector, 
need to focus far more than we have so far on the phenomenon of 
a measurable degeneration in the quality of this country's 
institutional framework.
    When executives complain about the effectiveness of the 
political system, the defects of high school education, the 
complexity of the tax code, inconsistency in macroeconomic 
policy, the burdens of regulation, and the inefficiency of the 
legal framework, they are not fantasizing and nor are they 
trying to pass the buck.
    You might call it, and forgive me if I overstate my case, 
the problem of Soviet America. The United States was victorious 
in the Cold War but imperceptibly certain traits we used to 
associate with the communist enemy have been creeping into 
American life.
    Over-mighty bureaucracy, excessive regulation, a sham rule 
of law, corruption, these are very dangerous tendencies. And 
economic stagnation is only one of their likely consequences. 
Others might very well include political decadence and 
geopolitical decline.
    At the very least, to understate the case, we are seeing 
here the emergence of a more European America, but European in 
the sense of Italy, not Germany.
    Let me conclude by saying simply that reform is urgently 
needed, reform in this city, in this institution, to restore 
the transparency and efficiency that used to characterize the 
American systems of legislation, regulation, and justice.
    Thank you very much.


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           EFFECT OF POLITICAL SYSTEM ON ECONOMIC ENVIRONMENT

    Mr. Wolf. Well, thank you very much. We have a number of 
questions.
    I read your testimony last evening and I kind of want to 
digest it and think about it a little bit, but here are a 
couple of questions. I will bypass some of the ones that we had 
had.
    When you say the political system is ineffective, tell us a 
little bit. I mean, I think this place is dysfunctional, I 
think it is absolutely a bipartisan dysfunction. I think we are 
ready to see it today on this whole budget issue. I think the 
only bill that really probably has an opportunity to really 
make a difference is the Simpson-Bowles Commission, which has 
defects that one could improve or change, but yet when it is 
offered probably I am going to support it. If it is offered we 
will probably barely get a handful of votes--so tell me what 
you think about the political effectiveness and its 
ineffectiveness.
    Dr. Ferguson. Well, as a British citizen, though I hope 
ultimately to become an American one, I should be extremely 
cautious in expressing criticism of this country's political 
system, but having lived and worked here now for around eight 
years I can't help but notice a deterioration, and that 
expresses itself most clearly as you say, Mr. Chairman, in the 
inability of the Congress to take rational decisions about the 
future path of fiscal policy.
    The United States has a profound structural crisis of 
public finance. It is living literally as well as 
metaphorically on borrowed time. By some measures its fiscal 
health is comparably bad with the fiscal health of the so-
called PIGS in Europe. Portugal, Ireland, Greece and Spain.
    The reason the bond market has not called time on the 
excessive deficits is simply that as the printer of the 
international reserve currency the U.S. has breathing space 
that was clearly denied European peripheral countries, but this 
I think is part of a wider problem, but it may be a mistake for 
us to focus too narrowly on questions of deficit reduction, 
crucial though they are.
    One lesson of history is that a great power can borrow a 
surprisingly large amount of money at surprisingly low rates 
before it finally enters the kind of tailspin that we saw the 
European countries enter in the course of last year.
    There may be more breathing space than we realize. The U.S. 
debt to GDP ratio may raise as high as 200 percent before 
investors finally lose their faith. We can't know the timing, 
all we know is that there is an upper bound.
    If you look at the Congressional Budget Office projections 
and take the alternative fiscal scenario, which they say is the 
more likely, the extraordinary prospect is that by the middle 
of this century on present policies 100 percent of all federal 
tax revenues will be absorbed by interest payments in the 
federal debt even if interest rates remain at a relatively low 
level. Well that is clearly an impossibility. So we know that 
at some point something has to give.
    The fatal thing would be to wait for that point to be 
reached, because we know what happens then. Borrowing costs 
rise and government enters a tailspin of falling credibility 
and rising deficits.
    The problem is I don't see this institution taking 
preemptive action until it is forced to take action by the 
markets.
    So that would be one I think manifestation of the kind of 
problem that I am talking about.
    But let me emphasize, I think it goes much more broadly 
than just fiscal policy. I think what we see in the way that 
Dodd-Frank was produced is a dysfunctional process of 
legislation itself in which over-complex statutes emerge that 
create burdens for all businesses large and small in the case 
of the financial sector.
    They principally benefit lawyers. The difference between 
the rule of law and the rule of lawyers is a very large 
difference. I think the United States once was famous for the 
rule of law, but today is now notorious for the rule of 
lawyers.
    Mr. Wolf. I had two other questions, the last one is kind 
of open-ended, but I have noticed that the business community 
in the United States has not participated in this process to 
the degree that it used to. We had great leaders in the 
business community. Do you have any comment or thought about 
that? Do you think there is--how would you do this? Is the 
business community falling short? Should there be a greater 
effort whereby----
    Dr. Ferguson. Well, I think this is an important point, Mr. 
Chairman. There have been times in American history when the 
business community has played a major and very positive role in 
policy making. Perhaps the most obvious example which I wrote 
about in the book, War of the World, is World War II when an 
enormous amount of executive talent came into the government on 
a dollar a day and helped the United States not only win World 
War II, but perhaps more importantly transform its 
manufacturing base, so that by the end of World War II the 
United States was at the peak of its global preeminence in 
terms of manufacturing and particularly in terms of 
productivity and technological sophistication. So it has been 
done.
    The relationship between business and government does not 
have to be as poisoned and adversarial as it has become.
    The point I would make is this: in the past major fiscal 
crises of the sort we see today were caused by war primarily, 
the First World War and the Second World War, and both of these 
crises involved substantial and painful reform to be resolved. 
Our fiscal crisis has only in quite a small way been 
attributable to the cost of war. Most of the increase of the 
debt that we have seen in the last decade has not been caused 
by the conflicts in Iraq and Afghanistan, which by historic 
standards have been quite small, most of the increase is due to 
a structural imbalance between expenditures through mandatory 
programs and revenue from established federal sources. That is 
the problem. The difficulty is that if you are not engaged in a 
major national effort like a war, if all you are really doing 
is welfare, not warfare, there is not the national temperament, 
the national mood for radical reform, and nor is there a sense 
of national crisis to mobilize people from the business 
community into sorting the problem out. And that is I think our 
biggest problem. If all you knew about the United States, Mr. 
Chairman, was the fiscal numbers and the monetary numbers you 
would conclude that World War III had been under way since 
around 2007. If that was all you knew you would think they must 
be involved in some massive conflict to be running a trillion 
dollar deficit a year and to be massively expanding the 
monetary base. But we are not, in fact we have more or less 
wound up our military engagements overseas. The main problem 
now is domestic. It is not imperial overstretch the United 
States is suffering from; that was a catch phrase of the late 
1980s, it is not. The overstretch is at home, it is the 
domestic programs, particularly Medicare, and because it is not 
a military crisis the political will for radical reform is 
missing. I could go on to talk a little bit about political 
polarization, but I am sure----

       RAMIFICATIONS OF A FAILURE TO ADDRESS SYMPTOMS OF DECLINE

    Mr. Wolf. No, I think that is--I have a number of other 
questions. One of the reasons I think there has been difficulty 
moving this into the political process is that people are not 
able to see what the ramifications of failure are. If, as you 
say in your book, great nations decline and they decline 
rapidly, should there be a decline--and as a grandfather of 16 
grandkids from 14 down to three months I am not prepared to 
say--but if that were the case, what would we see? I was in 
Sudan three weeks ago, we were in South Sudan up on the border 
north of Juba, and in the camp we were in there, the food was 
coming from the West and the rockets were coming from China. It 
was such a contrast--so what are the ramifications for my 
grandchildren, your grandchildren, my children, your children, 
our constituents should there with be decline?
    Dr. Ferguson. Sometimes I think decline is the wrong word 
because it implies a gradual downward move. In Civilization and 
also in an earlier article in Foreign Affairs I tried to make 
the argument that complex systems like great powers or empires 
or civilizations don't tend to gradually decline, they tend to 
collapse quite suddenly, they reach a tipping point and then 
some relatively minor shock sends them over the edge. That is 
actually how history works from the Roman empire right through 
the collapse of the Soviet Union. It is actually something that 
happens very fast when institutions have become fundamentally 
internally weak. And I think the big concern that I have as 
somebody who wants to make his future and his youngest child's 
future in the United States is that we are sleepwalking towards 
one of those moments for crisis when the credibility of the 
United States as a borrower is suddenly called into question, 
when the credibility of its currency is suddenly called into 
question and when its credibility as a great power in military 
terms is suddenly called into question. Your example of Sudan 
is a good one, throughout Africa, particularly in Sub-Saharan 
Africa, a major scramble for resources is under way, comparable 
with that of the late 19th century, but only one country is 
scrambling, and that is China. The United States is content to 
regard Africa as a recipient of aid rather than as a major 
strategic theater of the future in a world of scarce 
commodities. I spent much of last summer traveling in China 
trying to understand better that country's priorities, and the 
contrast between their priorities and ours is very striking and 
it manifests itself not only in China--not only in Africa. Of 
course China lags behind the United States in a great many ways 
of which you are aware ranging from per capita income down to 
naval capability. But just to take one strategic area which is 
highly relevant to this committee, in the realm of cyberspace I 
believe there is almost no gap now between the United States 
and China in terms of capability. And if you want to imagine a 
scenario in which the United States experiences a sudden loss 
of power it will be there when the United States finds itself 
the victim of a successful large scale cyber warfare attack. So 
I think we should be very wary of assuming that our problems 
are your grandchildren's problems, that it is that far off, 
that we can therefore postpone serious decisions about fiscal 
policy or about the institutional problems I am discussing for 
a generation or so and focus our minds on November's election. 
In fact the crisis of American power may be as imminent as 
November. Whether we talk about it in fiscal terms, in monetary 
terms or geopolitical terms I think the United States is far 
more vulnerable than most Americans realize. Not only because 
of the rise of China, that is certainly a factor, but also 
because of our own internal weaknesses.
    Mr. Wolf. Well, thank you, I am going to go to Mr. Fattah. 
I am not going to ask you to develop your argument, but as you 
think about it as you are flying back to Boston some time, I 
would like you to think in terms of what I would say to 
somebody when I am in McLean and I talk to somebody and they 
say, congressman, why did you support the Simpson-Bowles 
commission when that did such and such then I can tell them 
that I did it for the following reasons: because I wanted to 
save America from the ramifications of failure. So if you could 
think in terms of what America would be like if we do reach 
that rapid point of collapse, what would that mean for the 
average person here in the United States? But thank you for 
your testimony.
    Dr. Ferguson. Thank you.
    Mr. Wolf. Mr. Fattah.
    Mr. Fattah. Well, let me thank you for your testimony. I 
don't have any questions. I can't imagine that I could disagree 
as much as I do with the relevance of this to manufacturing, so 
we are going to get to some of the other witnesses, but you 
know, there has been a lot of talk. I am convinced that America 
is number one in the world, and yes, we have our set of 
competitors and we welcome competition. I agree with our guest 
from Harvard that if I guess in the final analysis he is going 
to seek citizenship in the United States that this is where he 
is betting that at the end of the day the world's future is 
going to be shaped. So but much of everything else that has 
been said, it has got a certain flow to it that is not as 
relevant as I think the question of manufacturing, and as we 
look at what is going on, in part because of the Chairman's 
help, we see many companies moving jobs back here, 
manufacturing on the peak, we see manufacturing at the leading 
edge of this recovery, 24 months of growth in private sector 
jobs, but this is essentially a political viewpoint beyond, you 
know, getting to the meat and gravy of manufacturing. So I want 
to welcome, I respect the work that you have done, I totally 
disagree generally with where you think the country is headed 
and what we need to do, and vis-a-vis our competitors. I don't 
think that any other country in the world would not trade 
places with us, and the fact that we have a mortgage on the 
house, that is that we have a debt, I do understand, and in 
fact I am the author of the only bill in the Congress to get 
the country out of debt. So but the fact that we have a debt 
doesn't take away from the fact that we are the leading nation 
in the world by far and that as dysfunctional as our political 
system might be to those who want to criticize it, it is 
through this process that decisions have been made that have 
put our country at the lead in the world, and I think that it 
might be a terrible system, but it is better than any of the 
other ones. So thank you, and I thank you for your 
participation today.
    Dr. Ferguson. May I briefly respond, Mr. Chairman?
    Mr. Wolf. Sure.
    Dr. Ferguson. It is of course extraordinarily enjoyable to 
say that the United States is number one.
    Mr. Fattah. Mr. Chairman, I didn't ask a question, I am not 
looking for a joust, I think the witness has made his point, 
but--he can comment if he wants, but you know----
    Dr. Ferguson. I will be very brief.
    Mr. Fattah [continuing]. At some point we are going to get 
to manufacturing in America.
    Dr. Ferguson. I don't want you to think with all due 
respect, Mr. Fattah, that I was not talking about manufacturing 
in America because I was. If you look at the narrow competitive 
advantages that the United States has in terms of labor costs 
and its exchange rate many, many more manufacturing jobs should 
have by now been created in the United States than have been. 
Recovery should have been far more rapid with the kind of 
fiscal and monetary stimulus we have seen than it has been, and 
my former students at Harvard Business School should have been 
opting to relocate or locate their new operations 100 percent 
in the United States rather than 16 percent. If you ask 
yourself why manufacturing recovery has not been faster, which 
is the right question to ask, the answer is that the United 
States is no longer number one in terms of the effectiveness of 
its political system. The K-12 education system, the complexity 
of the tax code, and so forth. That is why businesses are not 
locating here more. To tell yourself you are number one when 
you are actually not it seems to me is the most dangerous kind 
of complacency that a great power can engage in. And by the 
way, the British used to make this mistake.
    Mr. Wolf. Mr. Aderholt.

                    VALUE OF BUY AMERICA PROVISIONS

    Mr. Aderholt. Thank you, Dr. Ferguson, for being here. Let 
me--I would like to get your thoughts and your opinion on 
something that we have looked at in our office and concern, and 
I represent the 4th district in the State of Alabama, but one 
thing is to--and as far as increasing jobs in the United States 
is enacting Buy America preferences. One thing that we've 
looked at in particular is for water projects under the state 
revolving loan fund. These are taxpayer funded projects and the 
American worker we believe should get a preference on the jobs 
funded by their tax dollars. When we have seen these types of 
provisions in the past we have seen foreign companies opening 
up American operations here on American soil and employing 
American workers so that materials can compete for these 
projects. Since a Buy America provision would allow materials 
from countries, and this is one example we have looked at, to 
have their markets open to us and our materials, it would also 
serve as an incentive for other countries to open their markets 
to manufacturers. So this has been something we have looked at, 
I would just like to get to know your thoughts if going toward 
a preference toward Buy America is something that you think is 
worthy.
    Dr. Ferguson. Well, you will be glad to hear, Mr. Aderholt, 
that yesterday I bought a new true pair of running shoes that 
proudly advertised that they were made in America by the New 
Balance company. I think Buy America is an important marketing 
slogan and I would like to see it used by more companies. But I 
am against any distortionary measures that are intended 
directly or indirectly to provide protection whether through 
tariffs or other measures for U.S. manufacturers against the 
competition. I am a passionate believer in free trade, I think 
that Adam Smith's accounts in The Wealth of Nations is the 
right account of how prosperity is generated, and I think that 
we should do whatever we can to ensure that the rules developed 
and posed by the World Trade Organization are observed by our 
trading partners. What we need is a level playing field. With a 
level playing field I have no doubt that the United States is 
capable of competing, not necessarily in every sector of 
manufacturing, that I think would be the wrong goal to pursue, 
but to compete in terms of quality with the best in the world. 
The key issue I think is not to protect American companies from 
competition but to make competition fair and to ensure that the 
institutional framework is one in which a market economy can 
flourish at its best. That I think should be the focus of our 
efforts. By all means Buy America should be a slogan, but I 
don't think it should be a policy in which we seek to distort 
free trade.
    Mr. Aderholt. What you referred to as far as a level 
playing field how do you see us trying to get more toward a 
level playing field in that regard?
    Dr. Ferguson. Well, obviously the most important 
institution for ensuring fairness and freedom in trade is the 
World Trade Organization, and I think it is good to see that 
that organization is being used to apply pressure, for example, 
on China with respect to rare earths right now. There are other 
things, there is more that could be done. In a whole range of 
areas it seems to me questionable that China is fully compliant 
with its WTO obligations, probably most obviously in the area 
of the protection of intellectual property rights, and there I 
think the United States should be more assertive and would find 
international support in being more assertive. In many ways 
European economies are even more vulnerable than the United 
States to the loss of intellectual property and to essential 
theft of IP and brand identity. So I think we need to regard 
the WTO as our friend in applying pressure on China to play by 
fair rules in respect of trade.
    Mr. Aderholt. Thank you.

  POLICY PRESCRIPTIONS TO BRING MANUFACTURING JOBS BACK TO THE UNITED 
                                 STATES

    Mr. Wolf. The last question I have was the genesis of this 
hearing. I saw the article in the New York Times a couple 
months ago where it said that President Obama was meeting with 
Steve Jobs, and the President asked Steve Jobs on 
manufacturing, ``how do you bring back those jobs?'' He was 
referring to the iPhone and the iPod and the iPad, and Steve 
Jobs--and I am sure you may have seen the article--said, ``you 
can't bring those jobs back.'' We asked the NSF and other 
witnesses to tell us respectfully--we are not picking a fight 
if you will--but how you would bring those jobs back if you 
were to ask. Was Steve Jobs right or was the President and what 
he is requesting right, whereby you can say how will you bring 
those jobs back? Did you read that article?
    Dr. Ferguson. Yes, I did.
    Mr. Wolf. Yeah. How would you, if you were assigned the 
responsibility to bring those jobs back, get the iPhone, iPad, 
iPod here to be manufactured in the United States or a large 
portion of them?
    Dr. Ferguson. Well, Mr. Chairman, I think in some ways 
shifts in the global economic balance are beginning to make 
that happen in a small way that the ranking member, Mr. Fattah, 
already alluded to. We are seeing some recoveries. And the 
reason is easy to see in terms of the narrow measures of 
competitiveness. The cost of labor has come down, the U.S. 
worker remains in productivity terms competitive with the best 
in the world, and there are massive advantages to local 
location if you are serving the United States, which is still 
the biggest market in the world. Offshoring, outsourcing, these 
two things have turned out to be less advantageous than many 
corporations thought when they embarked on them. There has been 
good work at Harvard Business School on what might be called 
the unexpected downsides of offshoring. So I think there are 
some forces at work already that are bringing manufacturing 
jobs back to the United States. But I want to reiterate the 
point I made earlier to Mr. Fattah, if all that mattered was 
narrow measures of competitiveness many, many, many more jobs 
should be created right now in the United States. What is 
surprising to me is the anemic quality of the recovery and the 
relatively small number of manufacturing jobs being created 
here, and that is because there are broader issues of 
competitiveness that deter U.S. and foreign corporations from 
creating new plants here and employing new workers here. That 
is why I want to conclude by emphasizing this issue of 
institutional deterioration. It is a broader measure of 
competiveness that we need to look at, and if we address those 
issues, try to make regulation less burdensome, try to make the 
tax code less complex, try to reduce the real uncertainty that 
executives feel about the future path of taxation and the 
future path of inflation in the aftermath of massive monetary 
expansion, if we address those issues then I think we will see 
a substantial growth in U.S. manufacturing employment. The 
potential is there. The other thing which is much harder to 
address in the short term is that the quality of the American 
worker in relative educational terms has declined. If you think 
back to the zenith of American power in the 1940s and 1950s the 
gap then between an American worker and the rest of the world 
in terms of educational aptitude, educational achievement, and 
productivity was immense. I mean the gap in terms of 
productivity between the United States and Germany or Britain 
which were then the other big economies was absolutely huge in 
the mid 20th century mainly because of education. The great 
scandal of education in the United States is low quality of 
high school education in what might be called the poorer zip 
codes. We have the greatest universities in the world, I teach 
at the best university in the world, but if you go down a tier 
you will see an appalling--there must be somebody from Yale 
here--check out the rankings--if you look down a tier at high 
school education it is a catastrophe. Charles Murray of the 
American Enterprise Institute's recent book, Coming Apart, 
tells among other things a devastating story of educational 
decline at the lower reaches of the income distribution, and 
that is a much tougher problem to fix. Even if we could wave a 
magic wand, simplify the tax code tomorrow in ways that I know 
some of your colleagues would like to do, and which obviously I 
think the President is sympathetic to, simplify the burdens of 
regulation, strip away much of the overcomplex bureaucracy that 
has sprung up, even if we did that there would still be a 
problem in terms of the quality of our educated young people. 
The choice to locate here or locate in Asia is getting harder 
and harder to make in favor of the United States. Let me 
reiterate, the gap between the educational attainment of 
teenagers in Shanghai and teenagers in Washington is as big as 
the gap between the teenagers in Washington and the teenagers 
in Albania and Tunisia. That is a tougher problem to fix.
    Mr. Wolf. Is there any circumstance in previous history 
where a nation has turned that around? And we don't have to get 
into it today, but are there papers showing from a 
nonpartisan--we are not trying to get into the right, the left, 
and that--how you would do that? You know, I come from an inner 
city neighborhood. A couple of my kids have been very active in 
working in the inner city neighborhoods and I feel a real 
burden for the inner city neighborhoods, where if I were a 
parent there I would feel angry about what my children were not 
getting. So are there deep studies that really can show this?
    Dr. Ferguson. Yeah, I believe there are. I mean the great 
advantage of economic history is that we have spent a great 
deal of time over the last 30 or 40 years looking at 
improvements in education systems. Most countries over the last 
200 years achieved major improvements in primary, secondary, 
and tertiary education. There are two routes you can go down, 
one which we might call the Scandinavian model is to try to 
make your public schools use best practice, improve the quality 
of teaching, improve the quality of assessment. I think that is 
hard to do in a country this size with a culture, a political 
culture which is significantly more individualistic than the 
Scandinavian. The alternative model which I prefer is one in 
which competition plays a bigger role. The reason that the 
United States has the best universities in the world is a very 
healthy competition goes on between private and public 
institutions and within those two sectors. It is in marked 
contrast to monopoly systems of universities that one 
encounters in Europe. My argument would be that we need to see 
the same kind of competition going on at the high school level, 
which is why I am a supporter of charter schools and any 
initiative that can create choice for parents, particularly in 
urban areas. I agree with you entirely, there is no bigger 
scandal in this country than the way we are failing teenagers. 
We are creating an unemployable generation. When we look at 
Europe we have a warning, if we go down that route we are going 
to end up with youth unemployment unlike anything this Nation 
has seen in its history where a generation will face a life on 
benefits. That is the situation today in Spain, it is a 
situation in much of Mediterranean Europe. If we don't address 
the kind of issues that I am talking about here it is 
conceivable it will become the problem for the generation that 
is currently in school.
    Mr. Wolf. Well, doctor, thank you very much for your 
testimony. Your full testimony will be in the record, and I 
will circulate it to all the members of the House and we will 
put it in the Congressional Record. But thank you again for 
your time. And as you think about it, take any opportunity for 
describing ramifications so that we are able to explain them to 
people. I think it is somehow helpful when people can see that 
tough choices have to be made now and that if they are not, 
this is what the conditions will be. We all love our children 
and our grandchildren, but we all love the current situation. 
And, you know, I agree with Mr. Fattah. I come from an inner 
city neighborhood. My dad was a policeman, my mom worked in a 
cafeteria. I think she went to seventh grade, my dad went to 
sixth grade, but they pushed and pushed education, and it was 
an opportunity, and I think it ought to be available to 
everyone. When you go into Independence Hall, there is a great 
story about the chair that General Washington sat in when he 
was proceeding over the constitutional convention in 1787. Ben 
Franklin, at the signing of the Constitution, he begins to 
weep, and he says, I looked at the chair that Mr. Washington 
sat in and there is a sun--if you go there you can see it, I 
urge you to see it at some time, there is a sun painted on the 
back of the chair--and he said, I never knew if it was a rising 
sun or a setting sun. He said now with the signing of the 
Constitution I believe that it is a rising sun. Every 
politician loves to say that America's best days are yet ahead 
and the sun has barely begun to rise on our country, the 
question is what do we have to do with manufacturing and all 
these other very important issues to make sure that America's 
best days are really yet ahead for our citizens. Thank you for 
your testimony. I appreciate it.
    Dr. Ferguson. Thank you very much, Mr. Chairman. Thank you.
    Mr. Wolf. Our next panel will be Scott Paul of the Alliance 
for American Manufacturing, Harry Moser of the Reshoring 
Initiative, and Jim Phillips, the Chairman and CEO of NanoMech. 
Why don't you come up to the table. Your full statements will 
appear in the record. And I think in fairness, too, we will 
over the course of the time put your statements in the 
Congressional Record so that people can have that opportunity 
just to see. But why don't we begin in the order that we 
announced the witnesses. Mr. Phillips?
    Mr. Phillips. You would like me to go first?
    Mr. Wolf. Yes, sir.
    Mr. Phillips. Okay.
    Mr. Wolf. Well, I said Scott Paul first, so maybe we will 
do Scott Paul.
    Mr. Phillips. Either way.
    Mr. Wolf. Then Harry Moser, Jim Phillips. The last shall be 
least it says in the Bible, so you are going to----
    Mr. Phillips. I represent the Nano company, we are----
    Mr. Wolf. You are good.
    Mr. Phillips. Think big though.
    Mr. Wolf. Okay, thank you. Your full statement again will 
appear in the record, if you could summarize we would 
appreciate it. Yeah.

                      Testimony of Mr. Scott Paul

    Mr. Paul. Great. Mr. Chairman, thank you very much. My name 
is Scott Paul, I am the executive director of the Alliance for 
American Manufacturing. It is a pleasure to appear before you, 
before Mr. Fattah, and Mr. Aderholt, and I wanted to just say a 
brief word about the Alliance. We are trying to take the dys 
out of dysfunction. We are a labor-management partnership 
proving that business and labor can work together. We work with 
companies that are committed to hiring workers and producing in 
the United States. We have been at the forefront of efforts to 
get legislation passed to hold China accountable for its 
currency manipulation, to strengthen buy America laws, which I 
know Mr. Aderholt supports and I would be happy to elaborate on 
during question and answer, and also support for our 
manufacturing base and specific programs within the committee's 
jurisdiction, which I know Mr. Fattah, Mr. Wolf, and all of you 
have supported.
    I wanted to say that there are some encouraging signs in 
manufacturing recently, but a renaissance is far from certain. 
We need the right policies to get there, and I think it is 
important to understand the trough from which we are emerging.
    The last decade was the worst decade on record for American 
manufacturing, even worst than the Great Depression by any 
measurement, and I would argue that the causes are both 
cyclical and structural. There was a shock to the system in 
2007 obviously with the collapse of the housing industry, the 
auto industry, the financial sector. But in my mind the damage 
has been done in great part since 2000 because of the advent of 
China as a global competitor and the lack of our response to 
that. We lost five and a half million manufacturing jobs last 
decade, that is one-third of all manufacturing jobs in this 
industry, we quadrupled our trade deficit in manufactured goods 
during that time period, more than 50,000 manufacturing 
facilities closed their doors, and we recorded a drop in 
industrial output from the beginning of the decade to the end 
for the very first time in our country's history. That has 
never happened before.
    What caused this decline? First I think as I mentioned to 
you open trade with China, our lack of response to China's 
failure to adhere to its trade obligations played a big role. 
We now have a $295 billion trade deficit with China which was 
recorded last year. That is far and away the highest trade 
deficit of any bilateral trading relationship in the history of 
the world. None even comes close to that. It is so egregious.
    Second I do think that financial deregulation at the end of 
the 1990s made Wall Street a master of manufacturing rather 
than the provider of capital to manufacturing and I think that 
made our firms much more shortsighted and less competitive over 
the long run.
    Third, there is no doubt that technology and productivity 
have played some role in the decline of manufacturing 
employment, but I think some recent and very good work done by 
economist Susan Houseman and Michael Mandell shows that 
productivity gains are not responsible for the large share of 
manufacturing job loss, it is import substitution that has 
caused it, and if you look at times where we have had high 
productivity in manufacturing we actually haven't had high job 
loss. We have had periods of low productivity in manufacturing 
and it doesn't mean we have had low job loss, it does not 
follow that productivity inevitably leads to lower 
manufacturing employment.
    Fourth, although Dr. Ferguson indicated that there has been 
some adjustment, for several decades in the United States we 
had a very strong dollar policy that made our goods far less 
competitive on the global market. When you couple that with 
currency manipulation in other countries, primarily in China, 
that leads to a competitive disadvantage which has been as high 
as 40 percent or more for your goods on the global market.
    And I would say that lastly most of your government 
policies have been geared away from manufacturing. Our tax 
benefits, our education system, and the support structure have 
been geared away from production in the United States for a 
very long time. I see that beginning to change, but I think 
that is worth noting. I do think that it is worth investing in 
manufacturing because we are incredibly cost competitive as I 
think our other witnesses will say, we need the right policies 
to support the private sector in this regard. I think we have 
missed several opportunities along the way.
    First China's mercantilism has gone virtually unabated and 
we have had six opportunities to name China as a currency 
manipulator since the President took office, he has failed to 
do that, I am very disappointed, in that, I hope the House of 
Representatives will pass legislation that would require--which 
would compel China to stop manipulating its currency. I believe 
all of you have supported that effort in the past and this is 
legislation that passed in the Senate overwhelmingly despite 
the political dysfunction that we are seeing last year.
    Second I do think that we need substantial resources 
devoted to this trend. Educational reform, investment in 
vocational education will not happen on its own, it will need a 
shift in priorities that I think is very important. And I do 
think that it is possible to expect some degree of success 
here. Let me tell you why from a historical perspective. You 
referred to the signing of the Declaration of Independence. 
Shortly after that in 1791 Alexander Hamilton, our first 
Treasury secretary, articulated industrial policy as the 
foundation of economic policy in the United States. It was 
structured much differently than, we had different challenges, 
but from 1791 until the end of World War II we had industrial 
policy as a primary foundation of our economic policy in the 
United States. That has deteriorated for a variety of reasons 
since then, but today we have nothing that even remotely 
resembles any sort of a coordinated support for our 
manufacturing industry. This administration has begun to talk 
about it, there are some efforts in Congress under way, but we 
are making up for lost time.
    So let me talk briefly about what I think some of those 
policies would be and include some specific things that I know 
are within the subcommittee's jurisdiction. First our tax 
system. All of our industrial competitors have a value added 
tax that is rebated for exports. We do not have a system like 
that. I am not endorsing necessarily such a system, but we do 
need to make changes in our tax code to recognize that our 
manufacturers are at an incredible competitive disadvantage 
when competing against exports from overseas, and indirectly 
because of this system we are for instance financing Germany's 
health care system or other governments, and our manufacturers 
face, you know, in the case of Mexico, some other countries, up 
to a 18, 20 percent cost disadvantage because of this disparity 
in tax systems.
    I believe that there should be incentives to make capital 
more patient. One of the reasons why Germany has been so 
successful in manufacturing--and again this is a country that 
has manufacturing wages that average $48 an hour, in the United 
States they are $32 an hour. Germany has a thick regulatory 
environment, in some ways much thicker than the United States, 
yet Germany has about 22, 23 percent of its economy in 
manufacturing, it has balanced trade with China, it has a 
surplus with the rest of the world, and it is viewed around the 
world as a skilled manufacturing country. There is no reason 
why we couldn't replicate that, we can be incredibly cost 
competitive, but we lack the support structure for vocational 
education that Germany has and we lack the patience for capital 
that Germany has. Our companies are focused on quarterly 
earnings, their companies are more focused on long term value 
and sustainability, and I think we should explore some changes 
in that regard.
    On trade policy we have a trade policy that is very focused 
towards opening up markets towards exports. That is fine, but 
it ignores one-half of the checkbook which is imports, and we 
need to focus much more effort on battling unfair trade 
practices from overseas in addition to intellectual properties 
as Dr. Ferguson indicated, we must have a much stronger focus 
on subsidies coming from China, on other commitments that China 
has failed to make in the course of its membership in the World 
Trade Organization. And Mr. Chairman, Mr. Ranking member, Mr. 
Aderholt, I would submit to you that this is not a secret. 
China has five year plans that it publishes on a regular basis 
stating exactly how it is going support its industries, but our 
Import Administration is on its heels rather than its toes and 
we wait until the damage has been done, until industries have 
been almost entirely lost. We can't afford to do that if we 
want to make manufacturing far more competitive.
    I do believe that we need smart public investments in our 
infrastructure to increase the efficiency of our economy. I 
believe that as Mr. Aderholt indicated that we should leverage 
those to give a preference to American firms. This is a common 
practice around the world. If we don't do it we are not in the 
game, and we have had long standing Buy America policies in the 
country since the 1930s. President Reagan expanded them to 
transit programs in the 1980s. They should be strengthened, 
they should be made more transparent, and they should be 
applied very aggressively by all of our agencies. And you are 
exactly right, we will get foreign firms to locate their 
production here. It is the reason why Siemens is making rail 
cars in Sacramento rather than in Germany, precisely because we 
have Buy America policies, they really do work. I do think that 
we also need to rebuild the industrial innovation commons in 
this country which has been lost.
    There was good work, I think Dr. Ferguson alluded to it, by 
Gary Pisano and Willie Shih at the Harvard Business School, a 
terrific article that was published in the Harvard Business 
Review and just updated last month that shows that innovation 
is lost once production leaves our country, and this has been 
proven true in many types of industrial activities, including 
advanced batteries, that is one reason why we are trying to go 
claw that back now from Asia and not having an easy time doing 
it.
    And with respect to some specific issues within the 
subcommittee's purview I do want to say that I think the MEP 
program, the Manufacturing Extension Partnership has a huge 
return on investment. There are often barriers and problems 
that individual firms, particularly small- and mid-size 
enterprises cannot solve on their own, that is why having 
public-private partnerships like the Manufacturing Extension 
Partnership program makes so much sense. It provides that 
bridge between academic thought or some sort of a process and 
connecting with a small- and mid-sized enterprise and also 
connecting it with a skilled workforce. I think that is a 
critically important program. I want to commend your support 
for it.
    I also believe that the Import Administration and the 
Interagency Trade Enforcement Center that the administration 
announced need to be aggressively focused on battling imports 
for which there is unfair competition, either subsidies, 
dumping or other sorts of anticompetitive practices. If we ever 
want to balance our trade deficit we will not do it by 
increasing exports alone, it is going to take a balance on both 
sides, and I would like to ensure that the efforts of the 
Commerce Department are equally focused on both increasing our 
exports and also making sure that our firms that are committed 
to producing here have a level playing field against their 
foreign competitors.
    I just wanted to conclude with this thought, and this is my 
stab at history. I do think that we are in a competition with 
China. I do not think that China is necessarily the Soviet 
Union--we don't know what China is right now and what sort of 
intentions it has, but we can't assume that they are benign at 
all. And the wealth, the jobs, the debt that we have seen go to 
China is in fact funding China's cyber warfare capabilities, 
their traditional military capabilities, and it is in a sense a 
perfect system for China right now. It is not like the Soviet 
Union that we tried to starve for resources. China is building 
up its military in some cases on the backs of our taxpayers, 
and that is just wrong, and I believe both that direct 
bilateral competition is one reason why we want to make sure 
that we have the ability to continue to produce, to 
manufacture, to grow economically, and I also think that 
countries around the world, citizens around the world are 
looking at this competition and they do see dysfunction in the 
United States, they see a question about which direction our 
country is headed, they look at China, they see a lot of 
benefits from that model, even though in the long run with the 
brutality, with the authoritarianism it is not a sustainable 
system, however it looks attractive because of the economic 
growth. I think, Mr. Chairman, it is important to support 
manufacturing for job creation reasons, for economic security 
reasons, but also national security reasons, and I look forward 
to working with the subcommittee. Thank you very much.
    [The information follows:]


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    Mr. Wolf. Thank you very much. Mr. Moser.

                      Testimony of Mr. Harry Moser

    Mr. Moser. Chairman Wolf, Ranking Member Fattah, Mr. 
Aderholt, Mr. Yoder, thank you for the opportunity to testify 
today on how to achieve manufacturing job repatriation.
    My name is Harry Moser, I am the president of the Reshoring 
Initiative, a nonprofit corporation sponsored by 28 
manufacturing associations and companies. Our mission is to 
bring solid, well paying manufacturing jobs back to the U.S. I 
founded the initiative in 2010 because during my 45 year 
manufacturing career I had seen too many plants close in my 
hometown and around the country. Since then I have traveled the 
country full-time speaking to industry, government, labor, and 
academia about the importance of reshoring and also providing 
the analytical tools to motivate and justify corporate 
decisions to reshore. We provide a real partial solution that 
is being implemented now, also a reason why work has not been 
reshored.
    Offshoring has been the major factor in the steep decline 
in U.S. manufacturing jobs. I agree with Scott entirely on 
this. For many companies the decision to offshore was mostly 
about finding the cheapest price. In addition many companies 
that offshored ignored a broad range of other costs, what's 
often called the hidden costs, which typically make the total 
cost of ownership, I will refer to that as TCO, total cost of 
ownership 20 to 30 percent higher than price. Motivating these 
companies to reshore now requires them to understand the 
difference between cheapest price, which is how too many of 
them make the decision versus lowest total cost which is how 
they should make the decision in their own self-interest and 
coincidentally in the country's self-interest.
    To help businesses fully understand this difference the 
reshoring initiative developed a free online tool called the 
total cost of ownership estimator that enables a company to 
assess all of the costs and risk factors into one cost for more 
objective decision making. Thanks to the leadership of Chairman 
Wolf and this committee the fiscal year 2012 CJS appropriations 
bill directed the Department of Commerce to report to the 
committee on the development of such a tool as part of a 
manufacturing job repatriation initiative.
    In my written testimony is a list of efforts between the 
Reshoring Initiative and the Commerce Department to implement 
this directive. I will meet with NIST MEP tomorrow at 
Gaithersburg to further plan implementation. Industry is 
recognizing that it is time to reevaluate offshoring and decide 
when and what to offshore.
    My written testimony contains seven examples in the States 
of the subcommittee members of reshoring. I believe the most 
illustrative is Wham-O which brought back 50 percent of its 
Frisbee production from China to California and Michigan. You 
know, if we can make Frisbees competitively in the U.S. a broad 
range of products are reshorable.
    Labor costs in China followed by the rest of Asia are 
rapidly rising making offshoring less and less attractive. 
Three recent studies detailed in the written testimony conclude 
first by 2015 convergence of Chinese and U.S. total costs--I 
emphasize total costs--for sale in the U.S. Second U.S. 
manufacturers are now generally competitive for sales in the 
U.S. market if all costs are considered. And third, 40 percent 
of companies are considering returning some manufacturing to 
the U.S. with cost the dominant reason, the latter analysis 
done by MIT.
    If more companies had access to the TCO software we would 
see more companies creating and reshoring jobs. In multiple 
sampling of user cases from our database, 25 to 30 percent of 
the offshored work would return to the U.S. if companies 
decided based on this TCO, total cost of ownership, instead of 
price.
    The U.S. government should put as much effort into 
promoting reshores as it does into promoting exports. To help 
get the companies to make these decisions we train them 
directly, I also have been training the current MBAs so they 
will make better business decisions tomorrow. And I would 
certainly appreciate an invitation to do this training at the 
world's best university if the invitation could be made 
available.
    Reshoring will occur more rapidly if lawmakers help make 
the United States a better place to do business. Real trade 
enforcement and an end to currency manipulation, regulatory 
reform, broad tax overhaul are all critical to restoring 
business confidence and leveling the global playing field.
    The lack of skilled workers must be addressed. I believe it 
is probably the most critical problem if we are to be 
competitive in the future. This afternoon immediately after 
this hearing I am meeting with the assistant secretary of ETA, 
Jane Oates, to encourage the Labor Department to provide the 
public with data that more fully describes the attractiveness 
of skilled manufacturing careers, because the data they provide 
tends to direct more people to universities when we need more 
people in the skilled manufacturing careers.
    In conclusion addressing these issues will minimize the 
U.S. total cost of ownership, and explaining the difference 
between lowest price and total cost will significantly improve 
the rate of reshoring. Thank you, Chairman Wolf, for holding 
this hearing to discuss these issues and giving me the 
opportunity to further explain TCO, total cost of ownership. 
Congress and the administration have an important role to play 
in encouraging reshoring and in making our society competitive 
enough to seize the rapidly growing reshoring opportunity. 
Thanks partly to your efforts the Commerce Department has made 
a good start promoting the economic and job creation benefits 
of reshoring and the important role TCO can play in the 
decision making process. I am available for question and look 
forward to supporting your efforts. Thank you.
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    Mr. Wolf. Thank you, Mr. Moser. Mr. Phillips.

                     Testimony of Mr. Jim Phillips

    Mr. Phillips. Chairman Wolf and Ranking Member Fattah, 
distinguished members of the subcommittee I appreciate the 
opportunity to be here today.
    I appreciate your opening comments, Chairman Wolf. I share 
a lot of the same sentiments, but I also share the sentiment 
that impossible is just an opinion and to that extent there is 
just a--this is really a great time to be alive in the United 
States and worldwide. To that extent, you know, our generation 
has seen and is experiencing right now the advent of these 
amazing inventions of the chip, software, storage, and the 
internet, and what that has created worldwide and certainly the 
university has been early in taking advantage of that, is an 
acceleration of invention. This never happened before and so 
much of an acceleration of an invention that probably more will 
be invented in the next 10 to 20 years than in the history of 
all mankind. To that extent the United States is going to have 
to keep its eye on the ball in every kind of way.
    The next two decades are going to see huge shifts in have 
and have-not nations, have and have-not communities really 
based on new technologies. We called the first one the digital 
divide. Anybody that has gone through that and experienced that 
in the 90s at first probably didn't believe it and now with 
digital destruction of many, many industries and almost 
economies people have taken notice of this, and now we have the 
opportunity to enter a phase called smart manufacturing and it 
will have a huge impact on competitiveness for this country, 
for all countries. As never really before in our history today 
we should be more than ever encouraging and trying to 
accelerate the American cycle of ideation, invention, 
innovation, implementation or the execution of those into 
businesses, commercialization, and even improvization of those 
inventions as fast as we can.
    I have had the opportunity to participate over the last 
nine years in the Council on Competitiveness and more recently 
on the U.S. Manufacturing Competitiveness Initiative that have 
circulated this publication to Congress. I hope all of you had 
a chance to take a look at it. It is put together by 30 or 40 
of the top CEOs in America facing all the things you have heard 
today in the testimonies in terms not only of competition but 
regulations and things that we don't have a lot of control of, 
but you know, to our shareholders things that we have to report 
on to try and make a profit every quarter and make things 
happen in a positive way for our company.
    The report contains many important insights, I would like 
to share a few of them with you today. You know, unfortunately 
the image of manufacturing as dumb, dirty, dangerous, and 
disappearing--and I have heard a little bit of that today--is 
actually far from accurate. Today manufacturing is actually 
very smart, more--probably smarter than ever before, safe, 
sustainable, and in effect surging, not only here but all over 
the world, and it has evolved over the last 20 years amazingly 
fast into things like digital, mechanical, materials 
technologies that are changing everything literally in minutes, 
and it is revolutionizing design of all products, fabrication 
of all products, the entire process of manufacturing goods. 
This includes high-tech modeling, simulation robotics, you hear 
about these all the time, artificial intelligence, AIs 
everywhere. When you land on a--I am an old Air Force guy who 
flew a little bit in the Air Force--you know, when you land on 
a plane today and you have a category three landing meaning you 
have got a ceiling of about 300 feet and you are landing for 
the last 15 years we have turned it over to a thing called 
artificial intelligence. For the sake of the customers in the 
back of the plane we call it auto pilot, but it has been around 
for quite a while. That AI has now seeped itself into 
manufacturing in a very fast way into robotics and other 
applications, but a lot of people didn't even believe AI 
existed, probably don't believe it exists today, but it is 
moving very fast.
    Nothing is moving any faster in terms of absolutely 
transforming business and manufacturing worldwide though than 
nanomanufacturing, producing a whole new generation of products 
that are better, safe, lighter, stronger, and actually less 
expensive and all at the speed of innovation. I have the 
privilege of running a nanomanufacturing company.
    We actually--you know, I heard about education and so forth 
and obviously offer education but at the speed of innovation 
today while STEM is fantastic and we need to support it, STEM 
won't save America's manufacturing or technology in the next 
five, ten years, it is going to take that long for STEM to have 
an effect because we are that far behind in terms of our 
science and education. I don't know if anybody in here has a 
child in high school today, but I guarantee you they do not 
have a shop class. Shop classes don't even exist today in our 
high schools like they do in countries like China.
    So in the 90s, you know, the world experienced an impact of 
what we call that digital information revolution and it was 
more profound than even the industrial revolution that we all 
read about in high school and college that occurred at the turn 
of the 19th century with the invention of machines which of 
course led to the invention of factories. America clearly led 
this digital revolution driving our global economic might and 
performance to new heights.
    Hopefully we can lead the next revolution that is coming, 
because as exciting and productive as the information 
revolution was for our country it may pale in comparison to the 
next revolution in manufacturing, which is to a great extent 
the nanotechnology revolution. We are already in another moon 
race, it is already happening. Private-public investment to the 
tune of billions of billions of dollars led by countries like 
China, others, and the United States, this time to see which 
major country emerges as a leader in the nanotechnology 
revolution. It is without question, it is without question the 
most disruptive science and technology ever and it will lead 
the way in almost all future innovations whether it be in 
production processes, health care, all consumer products and 
electronics, and yes, even in weapons and national defense, 
literally bringing comparisons very quickly to the days of bow 
and arrows and the coming of guns and bullets. It will change 
that fast.
    With a new world that is much flatter, faster manufacturing 
in the United States now centers on high value added activities 
that require highly skilled workers, knowledge from inventors, 
and sophisticated infrastructure. My four sectors, my four 
divisions of my company are led by four fantastic scientists, 
all of which came here from foreign countries. To grow my 
companies fast in a competitive arena like today I need people 
who are the best, they don't have to necessarily have been born 
in this country, but in this case they have all become American 
citizens, I am very proud of that, their wives are also 
typically Ph.D.s, they teach in our schools in northwest 
Arkansas where my business is. It is a good thing and we ought 
to make it easier to retain our future Einsteins, or Wernher 
von Brauns, instead of having a visa program that when they 
finish school subsidized typically in the United States that we 
almost literally ask them to leave after a year.
    Emerging manufacturing nations' growing consumer class and 
revolutions in digital and other technologies create a 
hypercompetitive manufacturing environment and not surprisingly 
firms are growing more sophisticated in their ability to react 
to these changes and where possible leverage them to their 
advantage to the marketplace, thus my scientists.
    It is important to be here today because a broad array of 
government policies have important impacts on innovation and 
the production process from research funding to taxes to market 
access. The policy program strategies and business models that 
worked in the past are inadequate to secure America's future in 
the digital and now the nano age. For example, U.S. policies 
are not aligned with the full life cycle perspective of 
innovation that includes production at scale. Government, 
business, labor, and academic leaders must completely rethink 
and retool the Nation's business environment to seize arising 
opportunities and address these shortcomings.
    The leveling effects of globalization that have been 
testified previous to me in here are now diminishing though in 
some ways both in our innovation, the rise of our innovation, 
and the low cost advantages offered in emerging economies, 
which potentially opens the door to increased manufacturing in 
the United States, but only if we get in behind every day, you 
know, supporting innovation, supporting the agencies, to 
support innovation in this country. Federal investment is 
critical in science and the science underlying products 
represents the best of the American R&D enterprise when the 
resulting innovative products proliferate through the 
industrial base. The economic benefits are a return on the 
taxpayer's investment.
    Over the last decade the nanotechnology field has turned 
the corner from science fiction to multibillion dollar business 
and has made major game changing innovations in clean energy, 
electronics, biotechnology, and especially manufacturing. 
Earlier in my career I had the chance to--I introduced the 
cable modem to the United States, I introduced instant 
messaging to the United States through a couple of American 
companies, one was Skytel and the other was Motorola. Both 
times I introduced those technologies the cable modem I 
typically was met with who needs it, what good will it be? Of 
course it became broadband in the United States for instant 
communications. The same thing I felt when I was putting out 
instant messaging to the extent that well, only plumbers need 
that, doctors need that, and then we sold that company for $3 
billion to another American company, and gee, it took off.
    So a lot of times in innovation you have to pay very close 
attention to it like nanotechnology in the early stage because 
it moves so fast. You have no idea how important it can be to 
the productivity of a Nation. At NanoMech in northwest Arkansas 
where my company is, my manufacturing operations are down the 
street from companies called Wal-Mart that do a billion, $180 
million a day in revenue for this country even on Saturdays and 
Sundays, and another company called Tyson. We have invented and 
are producing for this nation near frictionless nanolubricants 
that will drastically increase efficiency and performance of 
all machines and decrease America's dependence overnight on 
foreign oil. We are providing nanocoatings that allow 
manufacturing cutting tools to last 1,000 percent longer, 
saving million of dollars every year in cost, perhaps billions, 
raw and increasingly precious materials are saved that are 
becoming more and more precious with what's going on in China, 
and paving the way for new amazing machines we have barely 
dreamed of, as well as lighter, more durable body armor for 
soldiers and public safety officers.
    For more than 200 years the United States has prospered 
because it is the home for people from every nation who are 
drawn to freedom, the pursuit of happiness, confident in their 
abilities to carve out a better life. You know, in technology 
time is never on your side. Congress cannot forget that in 
support of manufacturing and research in this country. We must 
capitalize immediately on our great university system, it truly 
is the best. Our national labs and our tremendous agencies like 
the National Science Foundation to be sure that this unique and 
best in class innovation ecosystem is organized in a way that 
promotes tech transfer, and commercialization in dramatic 
laser-focused ways so that we can capture the best ideas into 
patents quickly, that are easily transferred into our 
capitalistic economy so that our Nation's best ideas and 
inventions are never, ever left stranded for others to take, 
but instead accelerate it to market here in the United States 
at the speed of innovation so that we do build these good jobs 
we always talk about, these knowledge jobs and improve the 
quality of life and security for our citizens faster and better 
than any country on this planet. I really appreciate the 
opportunity to have a chance to speak these comments to this 
panel. Thank you.
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     SUGGESTIONS FOR POTENTIAL CJS ACTIONS ADDRESSING MANUFACTURING

    Mr. Wolf. Well, thank you very much. I want to thank the 
three of you. I have just two questions and then I will go to 
Mr. Fattah. One, we are not the supreme committee in this 
Congress, but any practical ideas that you have that we could 
implement, we will be marking up within the next couple of 
weeks, and I would ask you to get the practical ideas here for 
the committee. Your testimony will be looked at. But if there 
is something that you just said gee whiz, if only that could be 
done from a practical point of view, tell us. You want to----
    Mr. Moser. I would offer one. To get total cost of 
ownership use, which again could bring back 25 percent of what 
has been offshored we need a lead company to demonstrate its 
effectiveness. And I have tried to get an appointment with Jeff 
Immelt, our head of the jobs and competitiveness council, but 
any great company, American company like that that now 
offshores enough or a lot, if any of you could get me an 
appointment with the CEO I would go in and convince them to 
apply the total cost of ownership system and be a poster boy 
for the rest of U.S. industry. We need such an example.
    Mr. Wolf. Well, let me just say for the record I am the 
last person that can get you an appointment with Jeff.
    Mr. Moser. But I will settle for any great company.

        CHALLENGES POSED BY CHINESE INTELLECTUAL PROPERTY THEFT

    Mr. Wolf. I have been critical of him for signing a 
contract with the Chinese on avionics, and also I think we have 
to close these tax loopholes. They pay no taxes in the United 
States and were one of the number one taxpayers in the country 
of China. So I don't think I could ever get you an appointment. 
I don't know if Mr. Fattah or some of the others can. But if 
there is something practical, we want to know. One last 
question, then I am going to go to Mr. Fattah. Under this 
committee comes the FBI. I have seen the number of companies 
that have been hit aggressively by the Chinese, not to find out 
military secrets, but to find out what the ingredient is. And 
secondly, I have never seen, having been here since 1980, 
during the `80s no law firm in this town would have ever 
represented the Soviet Union. The Soviet Union was considered 
the evil empire. I remember one time one law firm did want to 
and President Reagan spoke out. Now the number of law firms in 
this time that are representing the Chinese is a disgrace. That 
is my own opinion, I may not speak for other members of the 
House, but I have a right to speak for what I think and what I 
see. My district is just across the river and I see. What is 
the impact on manufacturing the Chinese stealing a tremendous--
and all of you can answer--tremendous amount of information? 
Many of their gains in the space program have been because of 
espionage and the cyber attacks that have been done. So what 
impact does this have on American manufacturers? If we can just 
narrow it down to the Chinese with the cyber attacks and what 
they are doing. As you are working, there have been law firms 
in this town that are involved in cases where the Chinese will 
hit them. There are foundations that they are hitting. When you 
look at the list it is quite--as Chairman Rogers of the intel 
committee said, there are two kinds of companies: those who 
have been hit and know about it and don't want to tell anybody, 
and those who have been hit and don't know about it. So what 
impact does that have on the difficulty of America with regard 
to creating jobs in manufacturing?
    Mr. Phillips. A couple points on that.
    Mr. Wolf. Yeah.
    Mr. Phillips. Number one, you are right, and not only on 
the cyber side of China, but you know, and I am in total 
agreement about that. I am going shift a little bit but stick 
to China to your comment, and that is that, you know, the 
American dream can be turned into the American nightmare 
especially in manufacturing literally in the next year to two 
years, because what China is doing is not getting enough press. 
It is getting some recently, but they are absolutely 
monopolizing all the natural resources, all the raw materials, 
not just the rarest, but copper, the basic elements out there 
today to the extent that, you know, you could see a situation 
in the next 10 years where American companies are forced to go 
manufacture in China and that is certainly their plan in China 
right now. To the extent that if you get access to those raw 
materials that you have to have to build any products you are 
going to have to locate in China and that is their plan, that 
is their absolute plan because they control about 90 percent of 
all the raw materials. So everything in this room, you know, 
was made out of some type of raw material, especially in the 
metals, and now, you know, if it weren't for rare earths this 
cell phone would be about the size of a washing machine because 
of the ability to take raw materials and create products like 
GPS or any type of electronic device and reduce that size. This 
is very, very scary. I would recommend again everyone read this 
book called Red Alert that is just out and it describes all of 
this in--I hate to use the word--but gory detail, and it is 
very, very accurate. So that is the biggest problem.
    The other one given just the opportunity as my biggest 
concern is we are spending billions at NIH, NSF, other agencies 
that are phenomenal agencies run by phenomenal people, but it 
comes down the university system, it hits in every university 
and really at our national labs at a place called tech transfer 
commercialization, we always hear about that. You know, at our 
colleges when we hire football coaches and when we hire 
basketball coaches we hire these, you know, in a way fanatical 
extremists that are just go, go, go and they are phenomenal and 
we pay them millions of dollars and we have a tremendous return 
on investment typically for those colleges. We also have this 
thing called tech transfer commercialization. Anything Congress 
can do to put more money at that very juncture where we tech 
transfer commercialize, and in fact move out to producing and 
getting ahead of the competition, especially the foreign 
competition, there needs to be more funds to beef those 
departments up. They represent typically about a hundreth to 
almost as much as a thousandth of the--and I love football and 
I love college--the sports programs at those universities, and 
that is the juncture where we typically lose our intellectual 
property after spending billions down this funnel of NSF, NIH 
down through. And they are wonderful people that run those, but 
we could put more investment there. And the ROI out of that 
would be second to nothing where we could spend our money as a 
country. Thank you.
    Mr. Paul. Thank you, Mr. Chairman, I wanted to briefly 
respond to both questions that you asked. On some practical 
ideas that the subcommittee could do: I mean one is certainly 
to your question about the Chinese government, you are 
perfectly within your rights to bar procurement from state-
owned firms in China. But how is that a level playing field to 
our private sector firms that have to compete with the Chinese 
government for U.S. contracts across the board?
    Mr. Wolf. Would Huawei be one of those?
    Mr. Paul. Huawei is certainly one of those, but even, you 
know, McWane in Alabama and others are forced to compete for 
contracts against state-subsidized firms in China. That is 
certainly not a level playing field, that is certainly a 
restriction that the subcommittee could put on its funding.
    I believe that the supplier scouting program of the 
Manufacturing Extension Partnership program is a good one 
because it seeks out American companies that can supply 
government contracts and it is a fabulous example of how you 
can take one aspect of Buy America and make sure all of the 
small- and mid-size enterprises that have the ability to supply 
that are identified in the United States.
    A couple of other thoughts. R&D tax credits. They are 
hugely politically popular, but really what is the jobs benefit 
to the American economy of research and development tax credits 
if it is going to be produced offshore? That is why I support 
the research and development tax credit, but I think it should 
be skewed towards also production in the United States and that 
the benefits of that innovation tax credit should go towards 
research that is actually produced in the United States and not 
abroad. That would be better stewardship of tax dollars with a 
higher return for taxpayers as well.
    You asked a question about the jobs impact. The jobs impact 
overall of the trade deficit with China from 2001 to 2009 is 
2.3 million lost jobs. I know you are going to have witnesses 
from the National Science Foundation on the next panel, they 
just produced amazing research January on high-tech job loss in 
particular and what has happened in recent times, and I hope 
that they can speak to that.
    And finally to your question of law firms representing the 
Chinese. This speaks to our two systems. I mean everyone in the 
United States is entitled to representation, it is in the 
Constitution, I suppose that even includes the Chinese 
government, and--but it speaks to what we are not able to do. 
We could not cover the China Daily in China with Alliance for 
American manufacturing propaganda like they do here on the 
Washington Post and other outlets. We could not seek to lobby 
the Chinese government on this. In fact, you know, we have 
faced cyber attacks as well when we have put out research that 
has been critical of the Chinese government. And so I think 
that has to be aggressively confronted. I do think when these 
issues generally come up for a vote members of Congress have 
said we want to hold China accountable for this. I am hoping--I 
think the loudest message that the Congress could send to 
Beijing is if Speaker Boehner would allow the bipartisan 
legislation to deter China from its currency manipulation to 
come for a vote as quickly as possible. Thank you.
    Mr. Moser. Two points. First I agree entirely with Scott on 
the R&D tax credit that it should be dependent upon the 
products that come out from the R&D being actually manufactured 
in the U.S. If there are no jobs producing the products I would 
not give the tax credit. Second, as a measure of the 
intellectual property----
    Mr. Wolf. Your mic.
    Mr. Moser. Is it on?
    Mr. Wolf. Yeah.
    Mr. Moser. Should I repeat?
    Mr. Wolf. No, that is fine.
    Mr. Moser. Okay. As a measure of the intellectual property 
loss that has occurred in our data--we have a database of 240 
articles about companies that have reshored and you can go in 
and sort, for example, by intellectual property loss being the 
reason that they reshored and just as an estimate 10 to 15 
percent of them have reshored because of the loss of 
intellectual property when they were in China. So it has 
actually impacted the U.S. You know, in a small reverse way the 
loss of intellectual property is forcing them to come back to 
eliminate the loss of intellectual property.
    Mr. Phillips. Just as a follow up to that our company from 
a manufacturing side is all American-made. It is so bad that in 
our early stage of this incredible science as we are producing 
the product I am refusing to ship anything overseas. The chance 
of it being reverse engineered in ten minutes is--even though 
it is phenomenal science, it is patented and everything, it is 
just too great. And so I am going to make my market for the 
next five years probably, five years, maybe even longer, just 
in the United States for that reason alone. IP theft overseas 
is rampant, it is everywhere, it is every minute, it is every 
second.
    Mr. Wolf. Mr. Fattah?

 REQUIRING PRODUCTS USING FEDERAL IP TO BE MANUFACTURED IN THE UNITED 
                                 STATES

    Mr. Fattah. Thank you very much. Let me start on what I 
think the heart of this is. One is innovation. I agree with you 
totally in the Federal investment both through our Federal 
labs, through NIST, through the National Science Foundation, 
and I could go on and on, through NASA, has been at the heart 
of our ability to lead the world economically for a long time 
and for our national security purposes. So we need to continue 
to invest and innovate, we need to do a lot more than we are 
doing. I am also interested in this tech transfer issue, 
because we don't commercialize as quickly as we should, and 
that is a challenge that we have to kind of work through. The 
administration has done a very thorough analysis of this and I 
want to spend a few minutes and then ask you a question about 
it. So you know, NASA has got 17,000 patents, you didn't 
mention our space agency, and our national labs if you go out 
to Sandia and look at the nanotechnology centers, it is a half 
billion dollar investment to build, it is $50 million a year 
just to be able to walk in the door, but it is the world's 
finest nanotechnology development facility anywhere, and it is 
critical in a continuum of activities that are connected in 
some ways to the National Science Foundation's efforts, to make 
major grants to universities, and in this area of development 
of composite material, or I guess to say it in more plain 
English, replacement material----
    Mr. Phillips. Right.
    Mr. Fattah. When we see the Dreamliner take off and see 
that more than half the plane is composite material, we 
understand that even though there may be a monopoly that has 
been developed by one of our economic competitors, i.e. China, 
that Americans with ingenuity can overcome almost any of these 
obstacles, but we do have to make the investments. So I am for 
making the investments and I am actually for doing more, and I 
have introduced legislation that would have the nation do more. 
I also think we should tie it to jobs, that is that one of the 
disappointing things that I think the public would find 
disturbing is that we have never connected up American 
discoveries to American jobs. Now they more often than not led 
earlier on in our history to American jobs, but now, a lot of 
times we have federally funded research that, when 
commercialized, leaves the jobs not where your plant is in 
Arkansas, but in faraway places and among our economic 
competitors. This does not make a lot of sense for us to be 
taxing people in the United States of America, funding research 
that leads to new widgets, and then have those new widgets 
produced somewhere else. It actually works against itself over 
the long term. So I do think that we need to be tying these 
licensing agreements or agreements to commercialize Federal 
research, federally funded research should be tied to 
production here in the United States of America. And I have 
authored some legislation in that regard entitled American 
Discoveries, American Jobs, and I think that the spirit of it 
is simple and quite understandable even if you didn't go to the 
finest university, I mean even if you went to like a Wharton 
school or some other place where you are a little handicapped 
now might be able to follow this. So the point here is I think 
innovation is at the heart of the world economy, it is the 
heart of our economy, we have to continue to be a nation 
focused on innovation in every respect. So I appreciate your 
comments in that regard. And I think American industry needs to 
speak up. We have some people in this town who don't believe 
that the government has a role to play, but at the heart of all 
of our major industries has been government investment at the 
front ends. In research that at the time that it was made would 
not have been made by the private sector because they could not 
have realized a profit, not in the next quarter or the next 
decade, but it was research that eventually led to technology 
transfers that have created the world's wealthiest economy. So 
I appreciate your comments on innovation. I would like to hear 
your comments on whether or not licensing agreements or the 
patent--the uses of these patents in tying it to American 
production and jobs. Obviously you know there may be some 
concern about that, in a sense that we wouldn't have the free 
choice of being able to take American-financed research and go 
set up a plant in some other country, but I think that is a 
fair transaction between the taxpayer and American industry.
    Mr. Phillips. Mr. Fattah, thank you. I am 100 percent in 
agreement. We had a Chinese--we had a company next door to us 
literally that just moved to China lock, stock, and barrel, 
that was creating all based on research at the University of 
Arkansas and based on intellectual property that came out of 
there in the area of diodes and so forth and they just picked 
up and left about a few weeks ago and went completely over to 
China. You have got to I think impose some of those 
restrictions, to the extent that if you are going to get U.S. 
government funding, U.S. government money whether they are 
former research grants there are two things that need to happen 
at all times. Number one there needs to be matching funds I 
believe on most all of this money to the extent that, you know, 
the private enterprise has to intersect with that public 
funding. And then typically you have got to have buy in. There 
is no easier money to spend than, you know, OPM, other people's 
money or the government's money, and to the extent that you 
have got your own money into the business it makes a huge 
difference. So I think your point is very valid. In terms of 
the tech transfer commercialization side. Again, walk on a 
university campus, go typically--especially to a state 
university campus, you know, Georgia Tech has a tremendous tech 
transfer commercialization program, but go into more, you know, 
typical large, you know, land grant universities and so forth 
and take the tours and typically the first thing you are going 
to hear about is the football program. I love football, I 
played college sports, you know, maybe the basketball program, 
what have you. We need to be, you know, just as attuned and 
just as excited about that tech transfer commercialization 
department. I mean and the same thing in our labs. At our labs 
today we have phenomenal labs, we have amazing amounts of 
research. It beats anything out there in terms of other 
countries and competitors from that standpoint, but it is 
stranded to a great extent. I mean we don't have the people to 
take that in a symbiotic way, connect it to the companies that 
are out there that would use this technology and to safeguard 
it with the internet. The internet is a double-edged sword as 
we know. I mean it is phenomenal for collaboration both, you 
know, here and internationally and it advances science very 
fast, but in a world of publish or perish sometimes these 
things are up on the internet prior to us being able to patent 
them in the United States and they are being patented in China 
before we have even put them through the patent process in the 
U.S.

          FEDERAL ROLE IN ADDRESSING MANUFACTURING CHALLENGES

    Mr. Fattah. I totally agree with you. Let me ask a question 
of you, Scott. You just stated in your last comment that 
between 2001 and the end of 2008 that we lost the largest 
amount of manufacturing jobs that the Nation has ever seen, and 
I think the number is close to three million, but the bottom 
line is we actually saw thousands of small, medium 
manufacturers close down during that period of time. This 
Administration has come in and has put a focus on 
manufacturing, and they have been criticized. In fact, some 
very well known economists have said that this is folly that 
the Nation is going to recapture its glory days in 
manufacturing and that this administration is kind of, you 
know, that this is a push towards a political whim versus an 
actual practical economic plan for the country in terms of 
manufacturing. And your efforts are totally contrary to that 
point of view, but I want to give you a chance to talk about 
how we are in a situation where we lost a segment of these 
jobs, we are still the leading manufacturer in the world, and 
then we have this debate in America about whether or not we are 
going to continue to be and actually build on our manufacturing 
base. Because I am convinced that some part of our job base has 
to be in manufacturing, that the notion we are going to have an 
information-based economy or a service-based economy in total 
and that we are not going to make anything that people are 
buying and somehow remain a wealthy nation and a powerful 
nation is problematic. So if you would just say what you think 
about it. This criticism has been very recent actually on the 
pages of, you know, some of our major newspapers from 
economists saying that this focus on manufacturing is off base.
    Mr. Paul. Absolutely. Well, first of all, Mr. Fattah, I am 
not burdened by being an economist, I see what is going on in 
the real world and I make any judgments that way, an economic 
theory can be correct or incorrect, oftentimes it is incorrect. 
So let us look at manufacturing in particular. I mean some 
people think the decline is inevitable, but the fact that from 
1960--if you look at the number of manufacturing jobs in the 
United States in 1965 and in 1999 they are virtually the same. 
I mean they went up and down during business cycles. And 
granted they declined relative to the rest of the economy, no 
doubt about that, and granted productivity, technology, 
automation, but also globalization played a role in that. We 
have only seen this steep decline over the last decade. And 
what has changed in the United States over the last decade from 
before? The big answer to me is China and that we just didn't 
have an answer for China and that we let China have access to 
our markets without insisting----
    Mr. Fattah. I heard your comments on that earlier, what I 
am asking you is that when you hear economists argue that we--
that it is the incorrect policy focus, whether we deal with it 
through challenging imports, whether we deal with it by 
innovation and technology transfer, whether we deal with it as 
one suggested in terms of tax changes.
    Mr. Paul. Sure.
    Mr. Fattah. They are suggesting that we should not be 
trying to retain or grow manufacturing jobs.
    Mr. Paul. Right, absolutely. Well, there is a good response 
to that, Mr. Fattah. First of all, manufacturing, even though, 
you know, it employs relatively few Americans, about 12 million 
compared to the past, plays an outsized role in the in the 
economy, it plays--no other type of economic activity has that 
type of multiplier effect, it supports four or five other jobs 
or in the case of aerospace or auto assembly, seven or eight 
other jobs in the economy. I think it is fair to say--and this 
is the one theory I will propose--with the exception of the 
Wal-Mart headquarters, but if you locate a Wal-Mart in a town 
it doesn't mean a factory is going to be there. In fact, you 
know, there is probably no correlation to that. If you locate a 
factory in a town your odds are pretty good of getting a Wal-
Mart, and it shows the dependence of the service economy on 
manufacturing. And this fact is also true. One of the quickest 
ways we can get towards fiscal balance is to restore 
manufacturing in this country. The manufacturing jobs pay 
better than other types of jobs, they spur more types of 
economic activity, and at the state this is certainly true, if 
every state wanted to balance its budget all it had to do was 
keep its share of manufacturing jobs pretty steady. It is not 
rocket science.

              MANUFACTURING SKILLS CERTIFICATION PROGRAMS

    Mr. Fattah. Let me ask you one last question. The National 
Association of Manufacturers has come out with a kind of 
certification program to train workers for manufacturing so 
that rather than people guessing about what type of training 
people need to get, and this is a big issue for when you talk 
to manufacturers, this issue of finding a skilled workforce is 
critically important. Is this program that they have laid out 
for communities, is this something that you have reviewed or 
the alliance has reviewed, and do you concur that it is a good 
boilerplate for education programs?
    Mr. Paul. Yes, having skill certification is critically 
important to having a set of portable skills. That in itself 
isn't going to create a skilled workforce. I think that we need 
obviously a focus on resources, shop classes. I completely 
agree that these are critically important. We need to get more 
kids interested in manufacturing. Right now the talent pool 
that is going into manufacturing needs 18 months of remediation 
when they get to community college and that speaks to STEM, 
that speaks to a lot of things, but have to--we need the skill 
certification, but we need to do a lot more. That in and of 
itself is not going to create a skilled workforce.
    Mr. Fattah. And let us go to the favorite subject.

                          COSTS OF OFFSHORING

    This offshoring initiative, and the Chairman has done some 
tremendous work in last year's bill, we provided resources to 
the Department to be of help here. I met with some of the top 
CEOs of the chemical companies on Monday, and they showed me a 
chart focused on the cost curve differential between locating 
in other places and locating here, and it showed how now it has 
become much more profitable to locate production facilities 
here in America, and many of them are in the process of doing 
that. And of course I was meeting with them because the 
Philadelphia area has a very significant niche in this 
particular field in terms of our workforce. But it doesn't 
matter whether it is on ATM machines, if we are talking GE. GE 
has just made an announcement that they are bringing jobs back 
home in very significant numbers. And so you see it all across 
the spectrum. So I think your message is getting through. I 
just want to make sure that, for the record, that we can kind 
of walk through this total cost estimation. So what you are 
arguing is that--and the numbers bear it out--that when you 
look at the--not just the labor cost but the transportation 
cost for your goods back to the United States or to other 
markets and some of the other costs associated with doing 
business overseas and other places, not just China, but in many 
other places, that when you factor in all these costs that for 
a lot of American manufacturers or for foreign manufacturers, 
it may be better to manufacture those goods in the United 
States or at least it may be a toss up, right? So that the 
conventional wisdom was that it is always cheaper, but when you 
go company-by-company, case-by-case and look at these numbers, 
a case can be made. Now you said that we should be putting as 
much focus on this as we are putting on exports, right? That 
the Administration should be.
    Now the Administration has noted that only one percent of 
our companies export to anywhere in the world, which is 
unfortunate. And about 57 percent of those only export to one 
other country. So I think that we need to be promoting exports. 
I do not see it as a, it is not a competition. When we are 
going to chase manufacturing companies to relocate here, you 
know, there is a lot of room to run. Because I think that not 
only can you look at the total cost but you can also look at, I 
do not know whether you factor into this the kind of incentives 
that could be brought to bear on a local or state level to help 
them make such a decision if they were bringing manufacturing 
jobs to that state in terms of additional tax abatement, access 
to land, and so on. Is that part of the calculation?
    Mr. Moser. Let me try to describe it in its entirety. It 
starts with price or exports price from the factory offshore, 
or the U.S. factory. And then adds in about 29 different costs, 
price, duty, freight, things like that, but then also the 
carrying cost of the inventory, the travel cost to check on the 
supplier, the intellectual property risk. A series of these 
things including, for example, incentives that are given to 
promote. There are blanks at the end where they can put that 
in. But the idea is to get them to look at all these 29 costs 
where typically they only look at one or two costs. And the 
difficulty for them is that there is a 30 percent or 40 percent 
saving of price, and then you have got 30 costs that have only 
one or two percent each. And the idea is to get them to add 
those together.
    Let me, allow me to go back to the certificate subject. I 
am on the board of NIMS, the National Institute for 
Metalworking Skills, which is one of the ones that is part of 
that program. And it provides a professionalism for that worker 
that makes them proud to become a tool maker, a precision 
machinist. And I believe it does help to motivate that 
profession.

                  ACCESS TO CAPITAL FOR MANUFACTURING

    Mr. Fattah. And one last question for any who may want to 
respond. The one thing I have not heard mentioned from any of 
our witnesses today is a problem that I have heard, and I have 
spent a lot of time traveling, visiting manufacturers in 
different places in the country, working with the Manufacturing 
Extension Partnership. And it is this problem around access to 
capital for good, you know, excellent run, small manufacturers. 
They say they have problems accessing capital for start-ups. I 
have got a guy who got two or three patents try to open up 
plants here, trying an office, and free land, training, tax 
abatement, and so on. So is this a problem in which we need 
some type of credit facility? Or some type of instrument 
created that may have more patient, I guess the word patient 
capital, in which they would be able, because the manufacturing 
process is a fairly long process. You go through the whole 
steps of the molding, and the machining, you have got to sell 
it, you have got to get paid for it. You have got to, you know, 
it is not the normal quick financial transaction that happens 
on Wall Street.
    So I would be interested in whether there is anything that 
we ought to be thinking about in terms of government 
intervention, or a public/private, or some type of incentive to 
create or transform something that already exists, to provide 
the kind of banking needs, capital needs, that small and medium 
manufacturers need to have access to.
    Mr. Phillips. Great question. Certainly coming off the last 
three years this economy here, and in obviously other 
countries, is in tough shape to the extent that your typical 
angel capital, venture capital even, has gone to the sidelines. 
Beginning to come back a little bit right now, but to that 
extent your smaller companies, you know, in the U.S. in the 
capitalistic enterprise compared to state-run countries, okay, 
that throw that capital down, I would not trade our situation 
here in the U.S. ever for being part of a state-run industry 
where it is always available.
    Mr. Fattah. I do not think anyone would.
    Mr. Phillips. Nobody would. And to that extent competing 
for funds I think is healthy. To the extent that our company 
has competed for funds both from the private sector and the 
public sector. There is no doubt that, you know, and my opening 
comments talked about we are at this phase where with the 
invention of the chip software, the internet, that you have 
this accelerator of innovation. More is going to be invented, 
truly more is going to be invented in the next ten, 20 years 
than in the history of mankind. So it is the last time you 
would want the U.S. to be handicapped in terms of its small 
businesses which create, you know, two out of three jobs, over 
half the jobs in the U.S. And to that extent I think you almost 
need a Manhattan Project to look at this.
    Because we are in a situation right now, up against state-
run, I mean, it is China, Inc. You know, we used to hear Japan, 
Inc. It is China, Inc. It is now almost Russia, Inc. They even 
have a nano program called RUSNANO, $5 billion, ready to come 
either swoop in and buy my company, or put money in it and so 
forth. And I do not see quite that type of support from our 
government. But at the end of the day something we have to pay 
a lot of attention to is how we are going to capitalize this 
growth in an arena of amazing innovation as it is happening 
right now. So.
    Mr. Paul. Just very briefly, Mr. Fattah, your anecdotal 
evidence is certainly backed up by surveys at various Federal 
Reserve Banks, that there is indeed a challenge for small- and 
mid-sized manufacturers in particular to get access to credit. 
So yes, there is a problem. There are some government programs, 
including at the SBA, that are supposed to help fill this gap. 
There is some evidence that they were not implemented 
aggressively enough after the recession, in particular at the 
SBA. I think they are trying to make up for lost time. But I do 
think that there is a bit of a market failure, as Jim 
indicated. And that our small- and mid-sized manufacturers in 
particular, not the Fortune 500 guys, they will probably figure 
something out. But the small----
    Mr. Fattah. Now you are talking about the 30,000.
    Mr. Paul. That is right, the small- and mid-sized folks, 
having lending facilities available with favorable tax 
treatment is good, because getting venture capital to make 
something in the United States is very difficult. You can get 
it to innovate. You can get it to do a lot of service stuff. 
But getting it to actually make something here is incredibly 
difficult and we would look forward to working with you on 
that.
    Mr. Moser. If I may, at President Obama's insourcing forum 
I suggested to Secretary Karen Mills a solution. And that would 
be that the SBA would provide guarantees on loans for the 
tougher credits, the people that cannot get the loans from the 
banks. But in exchange those companies would have to, let us 
say for every quarter million dollars of guarantee they would 
have to hire and train one certified apprentice in the 
technical field in which they exist. So you wind up with the 
society contributing to the company by guaranteeing and 
providing the loan, and the company providing to society by 
training the skilled workforce that we need. So I think you 
solve two problems with one program.
    Mr. Honda. Will the gentleman yield for a second on that?
    Mr. Fattah. I am concluding, yeah. I will turn it back over 
to----
    Mr. Wolf. Sure. And then we are going to go to Mr. 
Aderholt, but go ahead.
    Mr. Honda. Yeah, on the SBA, the guarantees are fine. But 
if you take your SBA guarantee and go to the bank and cannot 
get that loan, it is good for nothing. So we have got to look 
at that and make sure that that happens. Too many people get--
--
    Mr. Moser. Thank you.
    Mr. Honda [continuing]. Disillusioned on our process. Thank 
you, Mr. Chairman. And Mr. Chairman, I want to thank you for 
having this panel here because I think it is timely and I think 
it is something that will engage everyone regardless of our 
partisanship. Because I think we all care about creating an 
economy that is robust for everyone.
    Coming from Silicon Valley I understand the kinds of things 
you are talking about. You mentioned in the past dialogue that 
during the years 2001 to 2008 we lost quite a bit of business 
and lost a lot of advantages. Part of it, I think, when I was 
on the Science Committee we tried to fund, you know, NASA 
research, and the administration would zero everything out. So 
we had to use our earmarking system in order to backfill that 
stuff. So it is almost as if, you know, science and technology 
and those kinds of things were not even taking the backseat but 
were off the bus.
    Today with our committee here and with our leadership here 
we are revisiting that whole thing. So part of the reason we 
are behind is that we have not been investing. We have not been 
looking at our youngsters in terms of education. We have not 
been looking at our immigration in terms of, you know, keeping 
other people out and engaging them here in our higher 
institutions of learning. So, you know, part of that is our 
problem. And I think that this whole issue about manufacturing 
is an important one because no one has forced our companies to 
leave us. They were incentivized and they saw something out 
there. Now it is changing. Even in China the cost of living has 
gone up. They even have now what we call minimum wage laws that 
are making Hong Kong a little bit crazy, I think, because they 
base their economy on the dollar.
    So having said that, hopefully you will look into our 
backgrounds and see the kinds of things we try to do in terms 
of our policy making so that you will know, you know, that you 
have partners up here. On the nano, which I love, and it is not 
something that Robin Williams used to say, ``Nano, nano.'' But 
it is something that is so large because of its size. We wrote 
the first nano bill back in December 2003. It went to the 
Senate side and it took on Senators' names because they added a 
billion dollars more. That is okay. I just wanted to give some 
accolades to my staff and to people over here who worked on it.

     MARKET-BASED INCENTIVES FOR INNOVATION, R&D AND MANUFACTURING

    Having said all that, you know, I heard the policy 
objectives that were talked about and some of the objectives 
are not necessarily things that are specifically about 
manufacturing that we could adopt, would promote advanced 
manufacturing in the U.S. I propose a couple of ideas. One that 
I have already introduced is market-based manufacturing 
incentives, that is H.R. 3495. This proposal would identify the 
next ten game changing technologies, or we used to call it 
disruptive technologies, and provide tax credits to consumers 
who buy these products, if they are made in the U.S.A., 
creating a clear incentive to locate manufacturers in the U.S. 
I wanted some comments on that.
    But before I finish, I am also continuing to work with 
stakeholders to develop my idea of scaling a manufacturing 
proposal which would make it cheaper for entrepreneurs to build 
or lease their first domestically located manufacturing 
facility through a robust syndicated credit system. This would 
allow companies to cross that dreaded, what we call the second 
Valley of Death, and scale up domestic hiring and thrive here 
at the same time. And then keep the federal government out of 
the business of picking winners and losers but have a system 
that would allow us to look at these game changing 
technologies.
    I do not disagree that creating innovation here and then 
going overseas is a game loser. Because once you go into 
product development that is where you start to create a greater 
concentric circle of job creation, building on past 
technologies. Much like the iTunes that went right into the 
iPads, but we went overseas. If we kept it here the innovation 
would be here and the jobs would be here. So I was hoping that 
we could get some sort of comments from all of you. And then if 
it is positive, get your support. And I think that this 
committee would appreciate that also.
    Mr. Phillips. Well if I could? Would that be all right to 
respond first? I agree 100 percent. I do not think that our 
government has anything to apologize for if you get government 
funding that we put certain restrictions on that funding in 
terms of staying in the United States, making it in the United 
States, there is absolutely nothing wrong with that. That idea 
in the fifties and sixties and seventies would be considered 
just normal, you know? Not only normal but absolute. And, you 
know, I have the concern. I love iPad. I think iPad is great. I 
just got the 3, you know? So I have gone through three in a 
row. And it does confuse me that, when you think about it being 
built where it is built, assembled in California, designed in 
America, you know? Designed here. To the extent that when it is 
made somewhere else then that technology flows to that place 
very, very fast, like in 24 hours, 48 hours. And so I think our 
government putting certain restrictions on it, I am an American 
manufacturer, American research and development company. And 
there is nothing wrong with that at all.
    We would not be here today, NanoMech, without National 
Science Foundation SBIR funds early on to generate the early 
stage part of our business. It is not necessary today, but 
without it we would not be here. Some of it came with 
restrictions, some of it did not. But to the extent that we get 
those restrictions, you know, I welcome them.
    You know, made in American is very important. I mean, if we 
do not make things are we really even a country at the end of 
the day?
    Mr. Honda. Well that is reinforcing page three of your 
testimony.
    Mr. Fattah. Yeah and if I could, if the gentleman would 
yield for one minute, I mean the fact that we have competition 
is not, there is nothing wrong with it. And we have got 
competition. I could take you out to a national lab, this is 
not classified, top secret information, that I was at the 
Argonne Lab out in Chicago. They take apart foreign cars. They 
reengineer them. They find out exactly what is going on and how 
they are doing what they are doing, and they share information 
that they think can be helpful with American car companies. 
This is what countries, you know, you look at what the 
competition is doing, it happens. But the fact that we have 
competition means that it should bring the best out in us, 
alright?
    Mr. Phillips. On that point, just real quick, being a 
former aviator, being in the Air Force and talking about some 
of this technology, especially nano, the country that wins 
always has the best weapons and typically the best economy. You 
know, if you talk to people like Lockheed Martin and others 
there will not be any biology in our aircraft in the next 
generation of aircraft. Period. You know, with the metals and 
composites and things you talked about, the stress on the 
biology, the pilot, will be such that in order to gain that 
kind of performance advantage, competitive advantage in the 
field of battle will require that it be a UAV. And the country 
with the UAVs wins.
    So we are not only competing in terms of manufacturing, 
consumer goods, process type goods, and so forth. But in terms 
of our national security. And to that extent we need to do 
everything we can to make sure that we make things here and we 
retain that technology here and we do not transfer it overnight 
to countries that compete not only on a business standpoint but 
on a military standpoint.
    Mr. Honda. Mr. Paul.
    Mr. Paul. Yes. First Mr. Honda on your bill, I would say it 
sounds good to me. We will take a close look at it but it 
sounds exactly like the types of policy changes we need because 
people respond to incentives. I mean, that is one of the iron 
laws of economics. And having the right incentives is 
incredibly important. I think it is a great idea and that we 
need more of that.
    I want to point out we are strong supporters of Mr. Wolf's 
bill to bring American jobs home. I think it is H.R. 516 that 
many of you have supported as well and I know some of that has 
been incorporated through the appropriations process. But we 
think that is a fabulous idea.
    On the point about competition, I absolutely agree. We 
should be hyper-competitive. But it is not a fair competition 
if our private sector firms are competing against state-owned 
firms in China. And that is the, I think that is one of the 
challenges that the committee can directly address through the 
Commerce Department, through the USTR. And I know you are all 
committed to that. You all have strong records of enforcing 
America's trade laws and I commend you for that. But I think 
that is something that is certainly underappreciated. And I 
would add that along with MEP as a great value for the 
investment that the committee puts in the federal government. 
Trade enforcement, the returns to the economy are tremendous. 
If we do have a level playing field we can make it here.
    Mr. Wolf. Yeah, thank you.
    Mr. Fattah. Mr. Chairman, I did not hear him say he was in 
strong support of my bill. But I guess----
    Mr. Paul. Oh, and I would add, Mr. Fattah, I apologize. I 
assumed you knew I was in strong support of your bill, of 
course I am.
    Mr. Wolf. Well thank you----
    Mr. Honda. And I think what I heard also was that Chairman 
Wolf's bill is also in concert with what it is we are talking 
about, because we want to attract people back home. And 
creating the policies that replicate the kind of incentives 
that people think they see overseas, if we replicate that and 
we address some of the issues, without giving up our 
environmental protection and our concern about health and 
safety of our workers, we do not have to give that up. But we 
have to look at it and figure out how we are going to do that 
better.
    Mr. Moser. Very quickly, concerning the ten game changing 
technologies, I would say also take a look at which products 
are likely to be competitively manufactured in the U.S. For 
example, one of the studies I cited was by Booz and Company and 
they take 20 different industries and they position them and 
show how competitive the U.S. is in those industries versus 
China. So I would say at least give some consideration to 
technologies that will result in a product that will be 
competitively made here so they practically will be made here.
    Secondly, on the innovators, I continually run into a 
culture in the venture capital field where they say develop it 
here and immediately have it made in China. And so, you know, I 
am trying to get through to that group also to give them some 
understanding about the benefits of U.S. manufacturing. Because 
if we do not change them then all those innovations will be 
made in China.
    Mr. Honda. You know, we can do this kind of competition. 
And we can do it without, when we talk about national security, 
we can do it without thinking about going to arms. I think in 
my book, in my mind, you know that is a nonstarter. I think 
competition is great. And how we use our innovation, how we use 
our power of innovating here in this country. And we hold it in 
ways that we can use it as trade commodity. If they have got 
control of 80 percent of our Earth they want something with the 
stuff that we have got, we can trade it. I mean, our companies 
go overseas to China but when they go there they know that they 
have to give up some of their IP. They do not even have to 
reverse engineer some of the stuff because they are giving up 
some stuff in order to create that production that they can 
sell back here. That is crazy. But to say, you know, and I want 
to be real careful about the words that we use because words in 
policy making and in politics can engender some heat that is 
not necessary. And being an Asian American in this country I 
understand what that means, and I think Mr. Fattah understands 
what that means.
    So our policy, our rhetoric, has to be in line with our, 
the kind of character that we have in this country. And 
competition, let us have at it now. But I think we need to be 
smart in doing that and in picking our words, and how we go 
about, you know, making this kind of an exchange. And we are 
two different systems. Ours is open, theirs is closed. But I 
will tell you, they are getting so much pressure in their own 
country and other countries whose folks came here to study and 
work here, went back, they are putting pressure to bring their 
countries, other countries in line with how we go about doing 
things. Entrepreneurship is a real strong innovator and a real 
strong motivator in other countries. They even push the states 
to a different position. So, you know, evolution is one thing. 
Bringing rule of law and the rule of man to a certain point I 
think is something that we need to look at. So we need to learn 
how to play three-dimensional chess and when we do that, you 
know, we can win. But we do not have to win with guns and 
bullets. We can do it with butter and ballots. Thank you.

                 PROTECTION OF DOMESTICALLY PRODUCED IP

    Mr. Wolf. Thank you. I want to thank the panel. I want to 
insert in the record at this time a Wall Street Journal piece, 
and I will just read briefly from it. It was March 27. It said, 
``the Federal Bureau of Investigation's top cyber cop offered a 
grim appraisal of the nation's efforts to keep computer hackers 
from plundering corporate data networks: `We are not winning,' 
he said, Shawn Henry, who is currently preparing to leave the 
FBI after more than two decades with the bureau, said in an 
interview that the current public and private approach to 
fending off hackers is `unsustainable.' '' Later in the article 
he said, ``I don't see how we ever come out of this without 
changes in technology or changes in behavior, because with the 
status quo, it's an unsustainable model. Unsustainable in that 
you never get ahead, never become secure, never have a 
reasonable expectation of privacy or security.''
    The article continues. ``James A. Lewis, Senior Fellow on 
cybersecurity at the Center for Strategic and International 
Studies, said that as gloomy as Mr. Henry's assessment may 
sound, `I am actually a bit gloomier. I think we've lost the 
opening battle with hackers.' Mr. Lewis said he didn't believe 
there was a single secure, unclassified computer network in the 
U.S.' '' The article also says, ``Mr. Henry said FBI agents are 
increasingly coming across data stolen from companies whose 
executives had no idea their systems had been accessed.''
    Then it goes on, and I will kind of end, the chief of 
security of a company called Mandiant, ``said that in cases 
handled by his firm where intrusions were traced back to 
Chinese hackers, 94% of the targeted companies did not realize 
they had been breached until someone else told them. The median 
number of days between the start of an intrusion and its 
detective was 416, or more than a year.''
    And I think, you know, I just submit this for the record. 
And I think that becomes a real problem so that we do not put 
our companies at a disadvantage.
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    Mr. Fattah. I want to thank the panel. I want to concur 
with the chairman about the import of the substance of the 
article. Thank you.
    Mr. Wolf. Great, thank you. And I want to thank you all 
again. I appreciate it.
    The last two witnesses will be NIST and NSF. And I know you 
have to give testimony some other place somewhere. So you can 
summarize your statement, and the full statement will appear in 
the record. And why do we not begin directly. Good morning, how 
are you? We will go with Dr. Subra Suresh first, and then Dr. 
Gallagher.

                     Testimony of Dr. Subra Suresh

    Dr. Suresh. Chairman Wolf, Ranking Member Fattah, I am very 
pleased to be here with you today to discuss the National 
Science Foundation's role in advanced manufacturing.
    Advanced manufacturing holds a tremendous potential for 
significant short term and long term economic impact. By 
creating new methodologies and inspiring novel paradigms we 
can--and are--transforming traditional manufacturing.
    NSF has played a significant role in U.S. prosperity and in 
the education and development of the Nation's science and 
engineering workforce. NSF will continue its role as the 
Nation's innovation engine. The fuel for that engine is 
fundamental research. Scientific research with its long term 
perspective, strong emphasis on disciplinary excellence and 
multidisciplinary interactions is a critical foundation for 
both transformational science and economic competitiveness.
    So today I would like to touch on three areas that drive 
these ecosystems of innovation. One, NSF's long term 
involvement in manufacturing research. Two, the value of 
public/private partnerships. And three, NSF's latest 
initiatives.
    NSF's support for engineered systems research has laid the 
groundwork for technology advances for decades. In the 1960's 
and 1970's NSF provided funding for mathematical and process 
innovations that led directly to rapid prototyping which 
revolutionized how products are designed and manufactured. As 
the needs of the nation evolved NSF launched the engineering 
research centers in 1985 to further enhance the connections 
between the basic research enterprise and industry. The ERCs 
provided an environment where university research and industry 
learned to work side by side on problems of mutual interest. 
Today there are over 550 industry members working with NSF 
funded engineering research centers.
    The Industry and University Cooperative Research Program, 
IUCRC Centers, offer another public/private partnership model. 
Established in 1979, NSF provides IUCRCs with a modest amount 
of funding as base support to focus on precompetitive 
fundamental research. The vast majority of research funds are 
then contributed by center sponsors, including 700 industry 
partners, 100 member universities, state governments, and 
national laboratories.
    As an example, in 2009 alone, $8 million invested by NSF 
attracted more than $80 million in support to IUCRCs, 
leveraging federal dollars at a ten to one ratio, a significant 
return on taxpayers' investment.
    Just last summer we launched the NSF Innovation Corps, or 
I-Corps. And just last week, we announced 25 new programs. Last 
summer there were 21 programs announced. Early indications are 
that a significant fraction of these activities will go well 
beyond basic research to commercial viability. Again, this is 
another example of the strength of public/private partnerships.
    These strong links between the public and private sectors 
help speed the transformation of research discoveries into 
products that benefit the greater good, support researchers, 
and advance NSF's role to spur innovation. One such partnership 
is our work with the Semiconductor Industry Association through 
the Nanoelectronics Research Initiative. This effort helps to 
enhance nanoelectronics research and education, strengthen 
industry linkages with NSF centers, and develop future 
researchers to help drive the field.
    NSF continues to foster active collaborations in materials 
research through its materials research science and engineering 
centers. These centers have resulted in 60 start-up companies 
in 13 States, employing more than a thousand people. These 
results underscore examples of the value of public/private 
partnerships as pillars of innovation and job creation.
    Perhaps most important is the value of a trained workforce. 
Of special note is the advanced technological education program 
that supports community colleges to address industry workforce 
needs. At the same time, we are working with the American 
Society for Engineering Education to place postdoctoral fellows 
in industrial settings to strengthen the linkages between NSF-
supported research and industrial partners.
    Let me conclude by mentioning some of NSF's latest 
initiatives in this critical area. In fiscal year 2013 NSF 
Cyber Enabled Materials Manufacturing and Smart Systems 
(CEMMSS) will invest $257 million in a path breaking effort to 
develop smart systems that can sense, respond and adapt to 
changes in the environment. The program brings together 
researchers and educators from the fields of advanced 
manufacturing, materials science, and robotics to build an 
integrated community of interest and stimulate new directions 
in research. CEMMSS will help develop smart systems of tomorrow 
that will vastly exceed those of today in terms of 
adaptability, autonomy, functionality, efficiency, reliability, 
safety, and usability.
    This research includes $149 million for the President's 
Advanced Manufacturing Initiative and includes NSF 
participation in the Materials Genome Initiative and the 
National Robotics Initiative. Let us take the Materials Genome 
Initiative as an example. Typically if you take structural 
materials it takes 20 years from the conception of a new 
material to putting that material into practice. The goal of 
the Materials Genome Initiative is to accelerate that time by 
more than a factor of two. So instead of 20 years it is less 
then ten years. And this is the goal by employing the latest 
tools, technologies, computations, real-time data, and data 
sharing networks.
    Let me give you another example from the National 
Nanotechnology Initiative, since we heard testimony earlier 
today about nano. Since the National Nanotechnology Initiative 
was announced in 1999 NSF-funded nanoscience and 
nanoengineering centers alone, which were funded to further 
fundamental research and create new knowledge, have created 
more than 180 companies that also involved 1,200 major 
corporations, and many of them engaged in new areas of 
manufacturing. So that is a byproduct of fundamental research.
    All these activities are cross agency initiatives and they 
will help stem the decline in U.S. manufacturing as a share of 
GDP and employment. This leap ahead effort is needed to meet 
challenges to U.S. competitiveness and to create high quality 
manufacturing jobs across the country.
    Mr. Chairman, these few examples will only scratch the 
surface of the work at NSF. I look forward to continued working 
with the subcommittee as we strive to ensure that America 
remains at the epicenter of research, innovation, and learning 
that is driving our economies. I would be happy to answer any 
questions. Thank you.
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    Mr. Wolf. Dr. Gallagher.

                   Testimony of Dr. Patrick Gallagher

    Dr. Gallagher. Thank you, Mr. Chairman, Ranking Member 
Fattah. Let me start by thanking both of your personally for 
your leadership on this topic. You have been out in front 
talking and really demanding of us that we focus on 
manufacturing long before this hearing and long before it was 
fashionable to do that. And I think today we find ourselves in 
the middle of one of the strongest national discussions about 
the role of manufacturing that I have seen in my 18 years in 
government. And I think your leadership has played no small 
role in this, and I really appreciate that. In fact the 
President has embraced this as well. As he has said recently, 
``An economy built to last demands that we keep doing 
everything we can do to strengthen American manufacturing.''
    And echoing a lot of the themes we have heard today, the 
President's Council of Advisors on Science and Technology 
released a report last summer on advanced manufacturing that 
laid out the case about why advanced manufacturing remains so 
essential to our country. And that includes the type of jobs it 
creates, it includes the deep interplay between manufacturing 
and trade. It is tied to national security. And, in particular, 
it is deeply entwined with the role of innovation. 
Manufacturing and innovation in fact are deeply interdependent. 
And it made the case that the government should play an 
important role through the development of an innovation policy 
as compared to an industrial policy, and that difference is 
crucial.
    Innovation policy, according to the report, would have the 
Federal Government not only support the sustained investment in 
basic research but also promote and coinvest in the 
precompetitive applied research, to make sure that we do not 
drop the ball, if you will, on the maturation and scale up that 
we need to reap the benefits in manufacturing.
    Given the breadth of manufacturing, which is really one of 
the key challenges we face, the report ended up looking at a 
broad range of approaches to support this key sector of our 
economy. And it covered research and development, tax, trade, 
workforce, small business assistance, education, and all of 
these different areas. The breadth of issues is one of the 
characteristics of manufacturing policy, as you well know.
    One of the outgrowths of this report is the White House has 
established an Office of Manufacturing Policy. This is the 
cabinet level coordination for the federal government's effort 
across these areas, and the office is cochaired by Secretary of 
Commerce John Bryson and the Director of the National Economic 
Council, Gene Sperling.
    Today what I would like to do is focus on the advanced 
manufacturing, and particularly the interplay with innovation. 
This committee as well as our authorizing committees in both 
the House and Senate has recognized for a number of years now 
the importance of advanced manufacturing and the role that NIST 
and NSF play, and, in fact, embedded those roles in the America 
COMPETES Reauthorization Act. It tasked NIST to focus and 
increase its attention on the manufacturing sector and, in 
fact, to do a study. And, just a few weeks ago the 
administration released a national strategy plan for advanced 
manufacturing that was a product of the National Science and 
Technology Council.
    In June of last summer when the PCAST released its report 
in manufacturing the President called for the formation of an 
advanced manufacturing partnership, it has been called AMP. And 
the purpose was to bring together an all of industry, all of 
academia, and all of government effort to work together on 
creating the conditions to support high quality, high tech 
manufacturing and improve its competitiveness. In response to 
that partnership NIST was designated as the national program 
office to support an interagency effort to coordinate the work 
of all the federal agencies in this area and we are working 
closely with my colleagues at NSF, the Energy Department, and 
the Defense Department in particular.
    An important part of any solution around manufacturing is 
the role around public/private partnerships. And I think this 
happens because you are talking about the interplay between our 
publicly funded R&D and this commercial activity that is 
happening in the private sector. And what happens in the middle 
now really matters to this process.
    Last week I had the privilege of speaking to the National 
Association of Development Organizations, NADO, which 
represents regional, multicounty organizations heavily involved 
in economic development and service delivery. They are 
passionate about advanced manufacturing. And, in fact, I made 
the case that they will have a critical role to play.
    At NIST manufacturing is driving everything we do. At a 
fundamental level I reorganized the agency to increase the 
focus of the agency on manufacturing, increase its relevance 
and make it more responsive to industry. Today we are including 
a deep dive into assessing the quality of these laboratory 
programs at NIST by leadership from industry. At the practice 
level our budget request reflects the President's strong 
commitment to manufacturing. And the majority of the increases 
that we are proposing are specifically focused on 
manufacturing, particularly in these emerging technology areas 
where the role of measurement is so central.
    We have also called for efforts to work in this space, in 
between the public and private sector. One of these is the 
Advanced Manufacturing Technology program which seeks to 
promote the formation of consortia, where we can get competing 
companies to work collectively together to tackle 
precompetitive research issues that if we solve them it 
benefits all of the participants. The MEP program has been 
central to supporting manufacturing, particularly the critical 
small- and mid-sized manufacturing base. And that program is 
focusing on what we call next generation MEP strategies that 
move beyond simple productivity and looking at opening up new 
markets and accelerating technology adoption. This leads to 
business growth. And we are also looking and playing a key role 
in the administration's new focus on technology transfer. Dr. 
Singerman behind me is playing a lead role there.
    And Mr. Chairman, when you talked to me about holding this 
hearing you said, ``We are looking for some big ideas of things 
that we can work together on advanced manufacturing.'' And I 
guess for me the one theme that I would hold out is we need to 
find a way to have government, or let us say public sector 
because it includes state and local governments as well as the 
federal sector, work in concert with our business sector. And I 
think that is really where the heart of this answer lies.
    The President announced as part of his initiative, a big 
idea. This National Network for Manufacturing Innovation. This 
was a billion dollars, one time funding, to form institutes 
where our leading academic research community can work 
alongside industry on industrially relevant problems, very much 
like our large companies used to do when they had corporate R&D 
activities, like Bell Labs. And that would accelerate, this is 
really about tech transfer, innovation and its adoption by 
industry. A key part of almost any program we look at is these 
partnerships. The synergy is really where I think the creative 
spark is contained. And I think it is where the solutions lie 
in our approach to manufacturing. And I want to thank you once 
again for the opportunity to talk to you.
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Fattah. I did note the President has said he is putting 
the first one in Virginia, right?
    Dr. Gallagher. He announced it in Virginia. The pilot will 
actually be competitive.
    Mr. Fattah. No, the one he is funding through already 
available dollars?
    Dr. Gallagher. It has not been announced yet. And I do not 
believe it actually will be in Virginia, as far as I know. I 
think the pilot is leveraging funding from the Defense 
Department and so----
    Mr. Fattah. Okay. I thought it was Virginia, but I could be 
wrong.
    Dr. Gallagher. I do not want to say you are wrong----
    Mr. Wolf. It is a good place to be. I think it is a 
wonderful----
    Mr. Fattah. I know that is the Chairman's home state, so 
that would be a good place to be. That is where it was 
announced, too.
    Mr. Wolf. Yeah, it was. It was down in the Richmond area. 
Yeah. In the interest of time I am just going to have a couple 
of questions, because you have to go over to the Senate side, 
too, in a little while. I do not know, what is your schedule, 
so I know? What time does the upper body, the royal body expect 
you to----
    Dr. Suresh. In a couple of hours or so, something like 
that.

               OUTSOURCING OF COMMERCIALIZED FEDERAL R&D

    Mr. Wolf. Okay. So we will try to keep it within that time 
frame. And you know both Mr. Fattah and I, and the other 
members, are very strong supporters of NIST and NSF. And so do 
not take a question the wrong way. I mean, we worked hard to 
plus up your budgets and we hope we can protect the funding 
here. But the previous panel, I think Mr. Phillips left, but 
the previous panel raised an interesting issue that I had 
really not thought too much about. I know Mr. Fattah has 
mentioned it a few times. But that is Federal tax dollars that 
have gone into innovation research and development that is then 
transferred overseas, for instance by GE. The previous 
gentleman asked if I could not get him an appointment with GE, 
because I have been critical. Because they have taken their 
avionics deal to China and I worry that will in essence, in a 
few years, hurt Boeing, the Piasecki plant out there, and will 
really devastate that.
    I was raised five doors from a GE plant. It was the switch 
gear division. They were at 70th and Elmwood Avenue. You would 
know where that is. I had a paper box and I would sell papers 
outside the plant, but now it is gone. It is all gone. It is 
desolate now. It is just desolate. And yet Jeff Immelt 
announced several months ago that he was moving the GE 
healthcare facility, and the MRIs, from Waukesha, Wisconsin, 
where I have never been, to Beijing. And so, there are really 
two questions. One is I am going to ask you should we carry 
language that says that money that we put in for research and 
development must stay here. But can you think of R&D money that 
has been federally funded that has resulted in great innovation 
and new ideas, which are now being produced overseas, whether 
in Beijing or Moscow or wherever the case may be? I am not 
trying to put you on the spot so do not worry. And you are 
close enough that we can ask you to get the examples. All this 
would have been before you were there. I am trying to give you 
a way out so that you do not feel that you are being singled 
out, but can you think of major funding that has been given by 
the Federal Government that has resulted in major manufacturing 
and jobs abroad?
    Dr. Gallagher. Well I think both of us could probably 
generate a list, actually, of cases where federal R&D 
investments have resulted in largely manufacturing capacity 
abroad. In fact Secretary Chu is fond of looking specifically 
at photovoltaic technology which is now largely manufactured 
out of China. Those are really American; results of American 
investments in R&D.
    I think the tricky issue here is this interplay between 
investments in R&D, which has a big public investment aspect to 
it, and where we reap the benefits. In other words, where the 
commercial activity takes place is actually central to this 
whole issue. And manufacturing sits right at that point. And I 
think that is why we are talking about manufacturing.
    Mr. Fattah. But you can simplify it. That is in this gray 
area. But where there is no gray, you have got a federal lab, 
they hold a patent. You have got NASA, they hold 17,000 
patents. They give a licensing agreement, in many instances for 
free, to the private sector to manufacture their new widget. 
The plant is then put some other place. The jobs are some other 
place. The licensing agreement, I believe Mr. Chairman, should 
require in that instance that if you are going to exercise the 
right to produce on that patent that those jobs take place here 
in America.
    Mr. Wolf. So what is your feeling about what Mr. Fattah 
said?
    Dr. Gallagher. So I do not disagree, that I think when you 
have IP and you are looking at license agreements that part of 
the discussion has to be where the activity takes place. I 
cannot disagree. What I am pointing out is that there are other 
types of knowledge transfer that are happening upstream of when 
you have a licensable patent that you are discussing. And we 
have an equal obligation to make sure that the conditions are 
such that we promote manufacturing being located alongside R&D. 
That is actually when both are healthiest. And I think if we do 
that we will have to lean less on restrictive type controls to 
ensure. Because one of the problems we will face is that in 
some cases the job creation activities occur long after the R&D 
activities. And so if we start looking at, it just could become 
a complicated----
    Mr. Wolf. But as manufacturing leaves, the R&D eventually 
follows it. I mean, we are seeing that.
    Dr. Gallagher. And I, well no, and I think that is fatal. I 
think that is, I would strongly agree that----
    Mr. Wolf. So, I mean, I think this is really a very, very 
important issue. I mean, can you think of NSF funding that has 
gone to R&D innovation that has resulted in a large number of 
jobs abroad?
    Dr. Suresh. I am sure we can come up with examples, you 
know, of this. But NSF is unique in a way because we do not do 
any in house research whatsoever.
    Mr. Wolf. Yeah, but you fund though. You fund R&D.
    Dr. Suresh. We fund but----
    Mr. Wolf. You fund universities. Mr. Phillips was out of 
the room when I asked this question, but we were referencing 
you, your comments. As Mr. Phillips made the comment, in the 
sixties and the seventies and the eighties, it was sort of the 
understanding that if it was American tax dollars that it would 
produce and result in American companies making things here in 
America. Because otherwise you are asking the American people 
to pay for something that later transfers out, for instance the 
avionics deal. Was any of that technology funded by American 
taxpayers that they are now going to be using to create jobs 
in----
    Dr. Gallagher. I do not know, directly.
    Mr. Wolf. Yeah. Could you both look at that and see?
    Mr. Fattah. We can look right at NASA research in 
aeronautics.
    Dr. Gallagher. Yes.
    [The information follows:]

         Taxpayer-Funded Research and Creating Jobs in the U.S.

    NIST is not aware of any data to answer this question. It is 
important to come up with more effective responses to what we know 
happens; namely, offshoring of R&D and manufacturing occurs when 
industry is funding these two activities.
    Most federally funded R&D is going to be conducted domestically 
because the funding goes to entities with demonstrated domestic 
research capabilities; hence, the direct employment gain (in R&D) is 
domestic.
    However, the potential for offshoring jobs is much greater when 
industry takes over the a) funding of R&D--typically the more applied 
R&D leading directly to commercialization--and b) the subsequent 
manufacturing. In areas, such as aerospace, where government (DoD) 
intensively funds both early-phase (i.e.: proof-of-concept) research 
and the subsequent applied R&D, the job impact is largely domestic. 
Still, in manufacturing the 787 Dreamliner, Boeing has offshored a 
large fraction of the effort, which is probably some applied R&D in 
addition to the actual manufacturing. In other industries, government 
only funds the early-phase technology research, such as in energy to a 
degree and more so in other areas of technology. Although this tends to 
induce domestic conduct of the subsequent industry-funded applied R&D, 
it doesn't always happen in today's global technology-based markets. 
Certainly, domestic manufacturing is not guaranteed, as the Boeing 
example indicates.
    Also, there is often a significant lag between initial federal R&D 
and eventual manufacturing of a product. In the case of the iPad, for 
instance, the technology that enables a person to use one's fingers to 
zoom in on text was supported in its early stage through federal R&D 
investments in the 1970s. Much later in time, Apple bought the company 
that developed the technology and then integrated that technology into 
the iPad and other Apple products.

    Mr. Wolf. I think he really pointed this out. This is 
important. I am going to go to Mr. Fattah in the interest of 
time, but there is a patriotism issue, too. This is a great 
country. My father-in-law served in the Mexican Border War, 
World War I, and World War II, and he was not from here. My dad 
fought in the Pacific. There is a certain patriotism that I 
think the American people expect. Now I speak now only for 
myself. I am not trying to bring other people in. There gets to 
be a moral----
    Mr. Fattah. Are you trying to say I am unpatriotic, Mr. 
Chairman?
    Mr. Wolf. No, no, because I think you agree with me. But I 
am very careful. There becomes a moral issue surrounding this. 
There are many companies that cooperated with the Nazis. I read 
a book and it is pretty fascinating. Now I will not mention for 
interest some of the companies. But to have history later show 
that you cooperated with the Nazis. Have you ever been to 
Dachau?
    Dr. Gallagher. I have not, no.
    Mr. Wolf. Well I think everyone should go to the Holocaust 
Museum and go to Dachau. Some American companies and western 
companies cooperated. And this committee has heard me speak 
about China, where the Catholic Church is going through a very 
difficult time. There are a large number of Catholic bishops 
that are under house arrest, and the Bishop of Hong Kong was in 
to see me now only six months ago telling me that the Catholic 
Church is just being persecuted. I was in China, and we had a 
meeting with house church leaders. And everyone who was coming 
to the meeting with me was arrested but one. And there are 
Protestant pastors under arrest. And in China today, I went to 
Tibet a number of years ago, you have had now 31 Tibetan monks 
and nuns that have set themselves aflame. And I could go on. I 
mean we saw the piece that I read about the cyber attacks.
    Maybe some might think that I am moralizing. If they do, 
they can do it. I mean, I do not really care, because I think 
this all comes together. But there is a sense of 
responsibility. Jeff Immelt has a responsibility to create jobs 
here in the United States. I am not going to say they can never 
go abroad. But, per Mr. Phillips' comment, it might be American 
taxpayer funding creating jobs abroad in a place that may very 
well be a direct threat to our country. There are some that 
believe, if you read a history, that the PLA is moving and 
doing things which I will not get into here.
    So I think, and I think Mr. Fattah agrees with me because 
now he has raised it----
    Mr. Fattah. I concur, Mr. Chairman.
    Mr. Wolf. Yeah. It just might have been in the Philadelphia 
water. We both drank that. We were both raised in Philly. So, I 
think that is an interesting thing. Do you concur that there 
ought to be a connectivity?
    Dr. Suresh. We are trying to, one of the things----
    Mr. Wolf. I mean, we are talking literally about the future 
of this country. And I come from an immigrant family who came 
here from another place because they loved America. They were 
not hyphenated, they loved America. They came for America. 
Ronald Reagan said that the words in the Constitution ratified 
in Philadelphia were really words for the entire world. And the 
words that Jefferson penned in the Declaration of Independence 
in Philadelphia, which I used to walk through that building 
almost everyday when I was a mail boy, were really literally 
for the entire world. ``All men are created equal, endowed by 
their Creator with Life, Liberty.'' So if it is to be the tax 
dollar of somebody living in Southwest Philadelphia, or 
Northeast Philadelphia, or McLean, Virginia, or Great Falls, 
then we do not ask too much to say that production ought to be 
here. And I appreciate the last panel coming. And I think we 
ought to look at that. With that I am just going to go now to 
Mr. Fattah.
    Mr. Fattah. Thank you, Mr. Chairman. And let me thank you 
for convening the hearing. And I am going to be brief because 
none of us want to hold up the upper chamber in its 
deliberations. But I do want to make just one final point on 
this tech transfer issue.
    Where there is a gray area, where there has been basic 
research that then someone else figures out can lead to a gold 
mine, that is one thing. It's another thing when it is IP that 
has been patented by a federal entity, like NASA, like a 
national lab. And the lab I am thinking about at the moment is 
not even under the jurisdiction of this committee, and great 
people, the lab director says, ``Look, I have got four patents 
and I am manufacturing somewhere else.'' I do not want anyone 
to tell the Chairman where he is manufacturing because he was 
able to get financing, able to do a lot of other things. But 
you are taxing the woman or young man, probably a woman, who 
cleaned the hotel room that some of our witnesses stayed in 
last night, investing her taxes in this research, and those 
jobs are going somewhere else. It does not make sense. It just 
does not make common sense.
    So we should tie that together. I know the administration 
has done some very good work on identifying where tech 
transfers happen, because it happens throughout the government. 
We should capture that and we should make sure that we at least 
tie in the jobs.
    We also might want to inform the American public that GPS 
and MRIs and all of these other inventions are from federally 
funded research. So when people walk around under some notion 
that the government does not do anything worthwhile, they might 
actually be informed that when they are looking for their golf 
ball, or they do not have to have exploratory surgery because 
they can use the MRI, that these are things that have come from 
these federal investments. So we could not just create jobs, 
but we might even build support for more investment in research 
if the public saw all of the ways that they have benefitted.
    So, I think we have said enough about that. The important 
thing is I think that manufacturing is a critical part of our 
economy today. It has got to be key to our economy going 
forward. MEP is very important. It is in your shop. It is, I 
think, the most important of a range of efforts to help small 
manufacturers. And I want to thank the Chairman because he has 
worked with me, and we have gotten that program up to the 
highest level ever. MEP gives you real help. I have been in 
some of the meetings with local manufacturers where they 
literally get tangible assistance, and I think that is 
critically important. And whether it is a fishing reel 
manufacturer, or I have got a guy who makes tarp for the 
Washington Nationals and the Phillies and other baseball teams, 
they are getting real help.
    I have visited with manufacturers around the country, major 
manufacturers like UTC, who makes jet engines out in East 
Hartford. And they have got a young woman who is not yet 30, 
she is a scientist, a jet engine scientist that has come up 
with a new approach on how jet engines work, and it is 
fascinating, Mr. Chairman. Now they have got people from all 
over the world coming there to buy engines. The Russians are 
buying engines. They have got thousands of people working and 
it is great. And it shows the connected nature between 
education and innovation and jobs here. And I think it is 
important that we continue. That is why the programs that you 
outlined where you are really tying in the knowledge base of 
the National Science Foundation to work with manufacturers are 
important.
    The other thing is, I have been to the Boeing plant in 
Philadelphia, or right outside Philadelphia in Reading in the 
Ridley Park, Mr. Chairman. Where two years ago they had 2,000 
people working, now they have got 6,000. They have got three 
shifts, they have a Sunday shift, they have a Saturday shift. 
And when they are making these Chinooks they have some new 
technology that is doing some of the work that otherwise would 
have been done by hand. Most people think normally when you 
introduce technology to the plant, you lose jobs. Well in this 
case, they have actually been able to add jobs through this 
efficiency because they have been able to push more helicopters 
out, quicker than they normally would, and at a cheaper price.
    So, the conventional wisdom is not always the fact. The 
technology doesn't always mean the loss of jobs. It can aid in 
jobs and education. We just need people who are going to lift 
things up and carry them someplace. You know, when they first 
started making jet engines at that plant there were not a lot 
of women who were going to engineering school learning how to 
be jet engine engineers, literally almost rocket scientists. 
But the idea that you have that contribution, people thinking 
about things differently, has led to innovation.
    So I want to thank both of you for what you are doing. And 
I wish you well in the Senate.
    Dr. Gallagher. Thank you.
    Dr. Suresh. Thank you.
    Mr. Wolf. All right, thank you. We will end. We will look 
at your statements, and we will ask you if you have any ideas 
as we mark up. Obviously we cannot be talking about massive new 
expenditures. But if you would do a fast drill for us to see if 
some of the innovations that you funded, both in universities 
and labs, have resulted not in major jobs here but in major 
jobs abroad. And you ought not be defensive because both of you 
are new. This is not something that took place during your 
watch.
    We will have a number of other questions for you that we 
will put together. But in the interest of time we will submit 
them for the record. And I thank both of you, and I thank the 
entire panel. The second panel, and Mr. Ferguson who has since 
left for other testimony. I appreciate it. The hearing is 
adjourned.


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                                           Thursday, June 21, 2012.

    INTERNAL INQUIRY INTO ALLEGED MISMANAGEMENT OF FUNDS WITHIN THE 
                        NATIONAL WEATHER SERVICE

                               WITNESSES

JANE LUBCHENCO, PH.D., UNDER SECRETARY OF COMMERCE FOR OCEANS AND 
    ATMOSPHERE AND NOAA ADMINISTRATOR, NATIONAL OCEANIC AND ATMOSPHERIC 
    ADMINISTRATION; U.S. DEPARTMENT OF COMMERCE.
KATHY SULLIVAN, PH.D., DEPUTY ADMINISTRATOR AND ASSISTANT SECRETARY OF 
    COMMERCE FOR ENVIRONMENTAL OBSERVATION AND PREDICTION, NATIONAL 
    OCEANIC AND ATMOSPHERIC ADMINISTRATION

                      Opening Statement--Mr. Wolf

    Mr. Wolf. Good morning. The hearing will come to order.
    Welcome, Dr. Lubchenco. You are accompanied this morning by 
Dr. Kathy Sullivan, the Deputy Administrator and Assistant 
Secretary of Commerce for Environmental Observation and 
Prediction for the National Oceanic and Atmospheric 
Administration.
    Dr. Sullivan, along with the Department of Commerce's 
Deputy Assistant Secretary for Resource Management, led the 
investigative team that looked into the matter we will be 
discussing today.
    You are here this morning to discuss the findings of a 
joint Department of Commerce and National Oceanic and 
Atmospheric Administration internal inquiry into the alleged 
mismanagement of appropriated funds in the National Weather 
Service. The Department's Deputy General Counsel submitted this 
report to the Committee on June 5, 2012. The Committee's 
hearing will focus on the internal inquiry, next steps in 
investigating and auditing the Weather Service, steps taken and 
planned to correct these lapses and ensure that similar 
situations are not occurring elsewhere in NOAA or elsewhere in 
the Department of Commerce.
    We will also have questions on the ramifications of the 
proposed fiscal year 2012 reprogramming, including impacts on 
critical Weather Service programs and on the fiscal year 2013 
funding requirements for the National Weather Service.
    The report brings to light some very serious and disturbing 
allegations. The Subcommittee will be asking you a series of 
questions about the impacts of this financial mismanagement on 
current weather forecasting and future forecasting 
improvements.
    In summary, the report found that NOAA personnel engaged in 
the unauthorized reprogramming of appropriated funds in 
violation of the fiscal year 2010 and fiscal year 2011 
Appropriations Acts, and possibly the Antideficiency Act. It 
was also found that significant management, leadership, budget 
and financial control problems led to the environment in which 
these unauthorized reprogrammings took place.
    The Department of Commerce Inspector General has received 
the internal investigation report and is reviewing whether 
there may have been criminal violation of the Antideficiency 
Act. Under the Inspector General Act of 1978, as amended, an 
Inspector General is required to ``report expeditiously'' to 
the Attorney General whenever there are reasonable grounds for 
believing there was a violation of Federal criminal law. 
According to the Office of the Inspector General, they intend 
to promptly engage the Department of Justice in discussions on 
this matter.
    In order to belatedly account for these previous 
unauthorized funding shifts, on May 24, 2012, the Department of 
Commerce submitted a reprogramming for fiscal year 2012 to 
reallocate $35.6 million within NOAA. This reprogramming is 
required to ensure that the National Weather Service has the 
funds necessary to provide continuity of operations for the 
remainder of this fiscal year and to provide funds for the 
deployment of previously planned upgrades to weather radars.
    Of the $35.6 million requested, the National Weather 
Service is seeking approval to increase its Local Warnings and 
Forecasts Base by $26.2 million. The other increase of $9.4 
million is for the Next Generation Radar program. These 
increases are offset by a number of smaller decreases totaling 
about $30 million from within the National Weather Service 
while the remaining $5.5 million would be cut from other 
programs within NOAA.
    The Subcommittee will ask you to review with us the 
specific increases and decreases, why the increases are 
necessary, and the impact on programs that you are proposing 
now to reduce. In particular, we will ask you to review the 
list of reductions--you are requesting approval to cut programs 
that previously have been raided by these unauthorized 
reprogrammings that are the subject of this inquiry.
    It is my understanding that if the Committee does not 
approve this reprogramming, the National Weather Service would 
have to begin furloughing employees around July 1, 2012 in 
order to avoid deficiency. We will work to ensure that 
furloughs do not occur.
    I want to emphasize and point out that the fiscal year 2012 
Appropriations Act--and I think this is important for everybody 
to understand--included more funding than requested by the 
Administration for the National Weather Service. That was done 
in a bipartisan way here so it was nothing to do with a hard 
pressed moment of struggle, there was more funding than 
requested, and that the House-passed fiscal year 2013 funding 
level for the National Weather Service is again more than the 
request. And that is highly unusual in this economic 
environment to have more than the request. Even in these 
fiscally constrained times, the Committee remains fully 
supportive of the National Weather Service. In fact, the 
National Weather Service funding is one of our highest 
priorities, and it was one of only a few areas that saw a 
significant increase in the fiscal year 2013 bill. Over the 
last five fiscal years funding for Local Warnings and 
Forecasts, the program within the National Weather Service that 
pays for the bulk of the salaries of the Weather Service, has 
grown from $579 million in fiscal year 2008 to $631 million in 
fiscal year 2012, an increase of $52 million, or 9 percent.
    Clearly, this Committee on both sides of the aisle has been 
supportive of the National Weather Service, and for good 
reason. The men and women of the National Weather Service 
provide a vital, daily, round the clock service, serving a 
vital life and safety role. It really is unfathomable that 
employees resorted to this sort of illegal movement of 
appropriations in order to fully fund agency operations. If the 
Department of Commerce had come to the Committee and asked to 
reprogram funds, we would have worked with you and the National 
Weather Service to ensure that basic requirements were met and 
program impacts were acknowledged and understood.
    We will also ask you to discuss a ``structural'' deficit 
within the National Weather Service. It appears from the report 
that the ``structural deficit'' was discussed within the 
Weather Service for a number of years and that in September 
2010 a presentation was made to the National Weather Service 
Corporate Board on this structural deficit, but that nothing 
ever came of this discussion about additional funding needs of 
the National Weather Service. This structural deficit was 
apparently a perceived shortage of funds within the agency that 
compelled Weather Service staff to illegally move funds out of 
the key Weather Service operating programs in order to pay 
common services and salaries and expenses. The Committee is 
particularly concerned about the impacts of these unauthorized 
cuts to the core forecasting capabilities of the National 
Weather Service; namely, to the Advanced Weather Interactive 
Processing System, Next Generation Weather Radar, and NOAA 
Weather Radio programs.
    While the investigation we will discuss today covers fiscal 
years 2010 and 2011, it is my understanding and I think that it 
is appropriate that an audit will be conducted to look at 
additional prior fiscal years. We will ask you to comment on 
this also.
    We also want to stress the seriousness of this matter to 
the Committee. Adherence to the law, in this case, the 
Department's annual Appropriations Act, is a very serious 
matter. And it is well understood by the Congress and by this 
Committee that unforeseen circumstances may arise that call for 
a reallocation among the purposes for which funds have been 
appropriated. It is for this very reason that we include bill 
language laying out the procedures for such reprogrammings, 
ensuring that Congress, which holds the Constitutional power of 
the purse, is notified of and consents to any such 
reallocations. It seems clear that what went on at the National 
Weather Service was a very serious violation of these 
procedures. We are hoping that we can get your commitment to 
get to the bottom of this matter, and further, to ensure that 
this never happens again, not only within the Weather Service 
but throughout NOAA and the entire Department of Commerce, and, 
quite frankly, all the agencies that fund the bureaus that come 
before this Committee.
    Before I recognize Mr. Fattah I want to say one other 
thing. We are going to have a series of votes around 10:30 or 
10:45. So in order not to keep you here we have about 65 other 
questions, very detailed. We either have the option of coming 
back at 2:30 or 3:00 or submitting them to you. So what we are 
going to do is we will ask the questions, we are going to keep 
the hearing to this issue, and then ask you and your staff to 
bring the answers back to the committee by 5:00 on Monday and 
based on the response we will then deal with the reprogramming, 
so that is the way unless you have a difference with that or 
would like to stay we will give you the questions, but we are 
asking that they be answered fully by 5:00 on Monday. So with 
that I that I turn to Mr. Fattah.

                     Opening Statement--Mr. Fattah

    Mr. Fattah. Let me thank the Chairman. I wasn't aware we 
had votes that quickly. So I will abbreviate my opening 
statement so that we can get to the questions at hand. But this 
is unique among Washington scandals, no personal gain of any 
sort, but there is still a very important issue and I think 
that that is why you have taken the action you have taken, 
Madam Administrator, to go at this aggressively because it is 
very, very important that the Congressional appropriations 
process and the rules related thereto are followed in each and 
every agency so that we can have orderly processes of 
government. But what apparently took place here was--and the 
Chairman referenced this, this concern around structural 
deficit in the Weather Service led to some what I think were 
accounting methods that I think give rise to the concerns of 
the Committee and to your own investigative team that in order 
to supplement accounts that were important in the National 
Weather Service maybe not all costs were recognized 
appropriately. So we want to get to this. But in a town full of 
scandals this is unique and rare among them.
    So I thank the Chairman and I appreciate the thoroughness 
of the Chairman and his staff in moving at this very 
aggressively, and the agency's willingness to turn over 
information so that we can be fully prepared for today's 
hearing.
    Thank you, Mr. Chairman.
    Mr. Wolf. Thank you. You can proceed. Your full statement 
will appear in the Record. If you can summarize I would 
appreciate it.

                    Opening Statement--Dr. Lubchenco

    Ms. Lubchenco. Thank you, Mr. Chairman, Ranking Member 
Fattah and members of the Committee. I want to begin by 
thanking you for your very strong support for NOAA and for the 
Weather Service in particular. We share your admiration for the 
men and women of the National Weather Service that day in and 
day out provide life- and property-saving services to all of 
us.
    I am here today to testify on the misconduct in budget 
formulation and execution carried out by a few individuals at 
the Weather Service.
    I want to be absolutely clear, the life- and property-
saving forecasts and warnings and the core mission of the 
Weather Service were not jeopardized by this misconduct. 
Nonetheless what happened was very wrong and in my view was 
gross misconduct.
    I first learned of the alleged misconduct in late November 
of 2011. I took decisive action immediately. Within 24 hours I 
notified the Deputy Secretary, Becky Blank. I placed a 
government employee on administrative leave and reassigned the 
CFO from NOAA Fisheries to serve as National Weather Service 
acting CFO.
    Within the next 48 hours, Dr. Blank and I launched an 
internal investigation, informed the Department of Commerce 
Inspector General, and notified this Committee and your 
counterpart in the Senate. The investigation concluded in May.
    The findings were as follows: one, the Weather Service 
reprogrammed funds in fiscal year 2010 and 2011 without 
appropriate Congressional notification; two, the mechanisms 
used were complex, clever and undetectable by existing 
financial controls; three, there was a lack of transparency and 
oversight in the Weather Service budget execution; and four, 
importantly, the report did not find fraud or personal 
financial gain by any employee.
    Further, the Weather Service was not operating in the red 
or as a whole with insufficient funds to accomplish its core 
mission. However, it is clear that the Weather Service did not 
have the right amount of money in the right accounts for its 
labor and operating costs.
    On May 25, then-Deputy Secretary Blank and I issued 
decision memos directing a series of corrective actions. We 
have now ensured that all financial misconduct within the 
Weather Service has stopped. I directed the Weather Service to 
change supervision of their CFO. We are expanding the NOAA 
CFO's supervision of one of the accounting mechanisms used 
inappropriately and we have initiated steps to contract for an 
independent financial review and analysis.
    I ordered in total 12 corrective actions to increase 
transparency and financial controls.
    I have heard three questions that remain unanswered. The 
first is ``how much money was moved inappropriately?'' I assure 
you, I want this answer as much as you do. Because our 
investigative team was not equipped to make this determination, 
I ordered an outside financial review and analysis. The second 
question is ``what motivated this misconduct?'' I cannot 
speculate on individuals' motives but from the report it 
appears that the actions were intended to protect warning and 
forecast operations. This leads to the third question, ``why 
did we not ask for more funds in the right accounts in the 
first place?'' The answer to this is simple. Prior to this 
investigation, I did not know that the level of requested funds 
for certain programs were insufficient for those programs. Had 
I known, NOAA could have requested the accurate levels of 
funding in the right places. Now that we know, we are acting 
decisively to address the problem.
    As you know, we submitted a reprogramming to balance the 
accounts and protect our employees and core mission. This 
reprogramming will sustain current levels of weather forecast 
and warning services to the Nation. The reprogramming moves 
funds out of research, spare part inventories and will delay 
some improvements. These cuts minimize risk to core operations 
and will not jeopardize existing warnings and forecasts. 
Importantly, these cuts can be implemented this late in the 
fiscal year.
    We are here to discuss this investigation and 
reprogramming, but I hope that this can be a starting point for 
a longer dialogue. This investigation shows that the Weather 
Service has been living with an unsustainable operations model, 
one that is too inflexible to adapt and adjust to differing 
fiscal environments and changing demands for services. The 
Weather Service must become more resilient and flexible. In the 
coming months, we need a dialogue in formulating a strategic 
vision for what the Nation needs from the 21st century Weather 
Service, one that enables employees, operations and technology 
to evolve while continuing to deliver services that protect 
public safety.
    Thank you again for the opportunity to testify. Dr. 
Sullivan and I are here to answer your questions to the best of 
our abilities.
    [The statement of Ms. Lubchenco follows:]


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                        NWS INVESTIGATION REPORT

    Mr. Wolf. Thank you very much. Can you assure us that the 
National Weather Service's ability to accurately forecast the 
weather has not been compromised given what has been revealed 
in the investigation you have just outlined?
    Ms. Lubchenco. To the best of my knowledge, yes, sir.
    Mr. Wolf. Funding for three of the Weather Service's 
cornerstone systems were raided during at least the last two 
fiscal years and perhaps longer, and it probably must have had 
some impact, otherwise if it didn't make any difference why was 
it even there?
    Would you please briefly describe the Advanced Weather 
Interactive Processing System and why it is important? Funds 
requested and appropriated for this program were raided during 
at least the last two fiscal years. What is the status of this 
system? And how long do you think this went on before being 
discovered?
    Ms. Lubchenco. Mr. Chairman, the investigation focused on 
fiscal years 2010 and 2011 because that is what the complaints 
that alerted us to the problem----
    Mr. Wolf. Are more complaints coming over the transom now 
saying it actually goes back longer?
    Ms. Lubchenco. We do not know if it goes back, and that is 
one reason that I have ordered an outside financial review and 
analysis that would go back a number of years so that we have a 
better handle on when this, if it started earlier, when, and 
exactly what the full impact is.
    To your first question, we, the investigation was unable to 
discover the full impact, which is why this outside fiscal 
analysis is so important.
    Mr. Wolf. Who is doing the outside investigation?
    Ms. Lubchenco. We will be issuing a contract for an outside 
firm to come in and help us with this. That has not been, we 
put together what the contract looks like, what the 
specifications are. We would be happy to share that with you, 
and at this point it will be an open contract.
    Mr. Wolf. Would you describe the Advanced Weather 
Interactive Processing System and why it is important?
    Ms. Lubchenco. AWIPS is the acronym for that program. It is 
a combination of hardware and software that pretty much 
underpins everything that happens at the weather forecast 
offices. It enables the forecasters to analyze, process, see in 
realtime what is happening and be able to make weather 
forecasts based on that.
    Mr. Wolf. What is the status of the Next Generation Radar 
program? This was also raided.
    Ms. Lubchenco. NextGen is a program that is designed to 
significantly improve the--I am sorry, yeah, I was thinking of 
NEXRAD. There are two programs that have similar names. NextGen 
is a program that is a collaboration with FAA. It is designed 
to improve the quality of the forecasting that we can provide 
to the aviation industry, vitally important and dependent on 
our operations.
    In this particular case, we are on track with our part of 
the bargain for what we needed to deliver for NextGen. FAA is 
delayed in its part of the program by a year, and so we believe 
that we can push the pause button, if you will, on our 
operation so that we can then be synched up with FAA, without 
any adverse impact to this particular program. It is a very 
important program.
    Mr. Wolf. NOAA's Weather Radio program was also the victim 
of these unauthorized transfers of funds. We all know how 
important the Weather Radio program is in times of severe 
weather. Does NOAA have an agreement with the Department of 
Homeland Security to use the system in the event of a national 
security emergency? And what is the status of the NOAA Weather 
Radio system?
    Ms. Lubchenco. The NOAA Weather Radio system is utilized to 
disseminate information about both weather and warnings that we 
issue and it is also utilized by FEMA and the Department of 
Homeland Security to issue more general alerts.
    Mr. Wolf. But you said before that this was not impacted 
and that was not impacted. Who gave you the assurances that 
these were not impacted?
    Ms. Lubchenco. Are you asking specifically about the----
    Mr. Wolf. The Weather Service's capacity to provide 
warnings and forecasts.
    Ms. Lubchenco. For the requested reprogramming?
    Mr. Wolf. Right.
    Ms. Lubchenco. In this particular case, we believe that for 
these transmitters we have spare parts that are on hand. They 
are stockpiled, if you will. And what we would do for the rest 
of this fiscal year is not replace those spare parts as they 
are used. So we believe that we can reprogram those funds 
without any adverse impact to the program.
    Mr. Wolf. What was negatively impacted as a result of this 
activity?
    Ms. Lubchenco. We don't completely----
    Mr. Wolf. I mean we can't say nothing because if it is 
nothing then we don't have--we can just forget about this place 
because you can do whatever. So there must be some impact. So 
what impact?
    Ms. Lubchenco. Dr. Sullivan is asking to respond to this 
one.
    Ms. Sullivan. Mr. Chairman, the program against which 
expenses were transferred is the Weather Radio Improvement 
Program. And the core of that is both a software and a hardware 
improvement effort to the current radio system that will allow 
automatic conversion of the text forecasts and warnings that 
the AWIP System generates very speedily off of templates.
    Today, those are actually voiced into the radio by a human 
being. There is a delay, it is slower, the new improvement is 
intended to let that be automatic text voice. The pacing of 
that improvement, the progress of that improvement was, 
probably was affected. Again, we need to do a more detailed 
program audit of deeper scope than we were able to accomplish 
during the financial investigation. So, what was not impacted 
is the current weather radio system, the coverage that we have 
of transmitters across the United States, which is 97 or so 
percent of U.S. population. Existing weather radios still work 
as intended. They will still function for the homeland security 
function. But the greater efficiency and effectiveness of 
letting AWIPS generated products convert directly automatically 
into the broadcast has been slowed.
    Mr. Wolf. Have these prior unauthorized transfers had any 
negative impact on the future stability or on the future 
improvements to any of these programs other than the one that 
you just mentioned?
    Ms. Lubchenco. We don't completely know what the full 
impact is. We suspect there are delays in a number of them, and 
that is why we are doing a deeper dive to totally understand 
what the consequences have been.
    Mr. Chairman, there was no obvious indication that 
something was wrong. There were no red flags, the forecasts and 
warnings were going out as they are supposed to, the Weather 
Radio system was working as it was supposed to. There were no 
obvious red flags when this was going on. There was no clear 
signal that there was something amiss. It really took 
individuals from the inside that knew about the reprogramming 
to sound the alert. There were no external indicators that 
there was something going on.
    Mr. Wolf. A couple more and then I will go to Mr. Fattah.
    Do you have confidence in the senior managers in place now 
at the Weather Service? And were any of them involved or aware 
that funds were being siphoned away from operational 
forecasting? Did none of them express concern that the National 
Weather Service was violating the reprogramming law and also 
possibly the Antideficiency Act and did any ever express 
concerns about the health or reliability of the system from 
which the funds were being transferred? Did anyone ever say 
anything? And do you have confidence in the people?
    Ms. Lubchenco. Mr. Chairman, I do have confidence in the 
people that are in place now. The investigation was a 
significant, thorough investigation. They interviewed over 20 
people, over 30 interviews, pored through thousands of pages of 
documents. And I believe that we have identified the 
individuals that were involved, that it was a handful.
    Mr. Wolf. How many are there?
    Ms. Lubchenco. It was only a handful of individuals.
    Mr. Wolf. A handful meaning five? Four?
    Ms. Lubchenco. Fewer.
    Mr. Wolf. Are any of them working there now?
    Ms. Lubchenco. I have to be careful in how I respond to 
that because the Federal protections that are given to all 
Federal employees through the Privacy Act prevent me from 
saying anything that would identify individuals. I can tell you 
that we have taken or initiated appropriate administrative 
action against those individuals, and in some cases that 
continues to proceed today.
    If you want additional information, I would be happy to 
provide that to you in private.
    Mr. Wolf. One or two last questions that shift from the 
reprogramming. The reprogramming that was submitted to the 
Committee is proposing to reduce funds from programs, 
previously raided programs, that are the cornerstone of the 
National Weather Service. And we took from there and then we 
will reprogram you.
    Why would you take even more funding from those programs 
again? Are they indeed overfunded as some National Weather 
Service personnel had thought? Can you give the Committee any 
assurances that these further reductions will not harm the 
operations of the Weather Service?
    Ms. Lubchenco. Mr. Chairman, as you know very well, it is 
very late in the fiscal year. We only have ten days left in the 
third quarter. This late in the fiscal year we had very few 
options for how to do the reprogramming. Our goal in doing that 
was twofold, to not jeopardize the critically important mission 
of weather forecasts and warnings and, number two, to avoid 
furloughs. So that gave us not a lot of options.
    We chose those options that would not cause any adverse 
impact to weather forecasts and warnings, where we thought that 
we could take funds from programs without significant impact 
and put them in the programs so that we can actually avoid 
furloughs and maintain the high caliber of the warnings and 
forecasts.
    So I believe that the reprogramming that we have proposed 
can, in fact, be executed in a way that accomplishes those 
goals. There will be some delays. We are not doing some 
research that we would like to be doing that will have future 
benefits. We are not replacing spare parts. It is those kinds 
of things that were the best options at this point in the 
fiscal year.
    Mr. Wolf. And you are pretty sure that nothing will result 
in the loss of life or the impact of a locality that if only 
there had been for the want of a nail the shoe was lost, if you 
will, you are pretty confident that--and I don't want to put 
words in your mouth--but are you confident that none of this 
will have any impact on public safety? Are you giving up the 
cookie or are you giving up the vegetables, the spinach?
    Ms. Lubchenco. We believe that the reprogramming that we 
have proposed to you will not have any significant adverse 
impact on saving lives and property, a very important mission.
    Mr. Wolf. One last question and then I will go to Mr. 
Fattah.
    What is the so-called structural deficit at the National 
Weather Service and do you believe it exists?
    Ms. Lubchenco. Mr. Chairman, different people mean 
different things with language. What I believe the 
investigation found is that there is no evidence that there 
were insufficient funds overall in the Weather Service. There 
is evidence that there were insufficient funds in certain 
programs within the Weather Service.
    And the actions, the misconduct, was moving expenses from 
one program to another. Had we known that, we could have fixed 
that. Now that we do know it, we can, and that is part of what 
this reprogramming is intended to do to rebalance funds. Doing 
that in 2013 will be equally important. To fully inform how we 
need to think about rebalancing those programs in the future, 
will be informed by this outside financial analysis and review 
and a study that the National Academy of Sciences is undergoing 
to help us think about what the future of the Weather Service 
would look like.
    Mr. Wolf. Okay. Mr. Fattah.
    Mr. Fattah. Thank you, Mr. Chairman.
    Madam Administrator, it is good to see you again and I 
guess as you try to put in context winning the MacArthur Genius 
Award and being one of the world's leading scientists and now 
being here in Washington dealing with some of our challenges, 
these rules and regulations and particularly the Antideficiency 
Act, the reprogramming rules, these are very complex, arcane 
but very, very important institutional safeguards for our 
government operations.
    My interest is in this less-than-a-handful group of people 
who are shifting monies from one Weather Service program to 
another, not for any personal gain but to, in their view, deal 
with the challenges of the Weather Service, whether they had 
the training necessary to understand the rules as it relates to 
reprogramming and the regulations as to when is it management 
flexibility to move a dollar from one account to another and 
when is it a violation of the appropriations process to move 
money from one account to another. So you are dealing with 
almost $1 billion in the operational accounts here. So I am not 
trying to minimize this matter at all. Again these rules are in 
place for a reason. But my interest is because a lot of 
different terms have been used. We have heard the word 
``illegal''; you used the world ``misconduct''; and I am not 
one to rush to judgment so especially because we have heard 
some discussion about what accounts were harmed by these 
summary level transfers. We haven't gotten to what accounts 
benefited, which I want to get to first. But before we go 
there, I want to know if as part of your review you think it 
might be useful to not only have your team at the National 
Weather Service but throughout NOAA not just understand that 
there are errors of expertise but also get more grounded in how 
it is that the Congress expects, and particularly the 
Appropriations Committee expects, to be informed and notified 
about various transfers from account to account.
    I know that when yesterday you successfully got your 
reprogramming requests approved by the other Chamber or the 
upper Chamber, depending on one's perspective, which sometimes 
has to do with whether you are running for the Senate or not, 
right? And this Committee has been very supportive under 
Chairman Wolf's leadership of NOAA and the National Weather 
Service. So it is not like you are not able to negotiate your 
way through this process.
    But I am concerned about where we are in this particular 
process relative to what these employees knew about their 
responsibilities vis-a-vis how they carried it out.
    Ms. Lubchenco. Congressman Fattah, you have identified a 
number of very important issues. Regardless of the individuals' 
motivation, what they did was wrong, and we have acted 
decisively and quickly to put things right. It is clear the 
investigation uncovered a number of things that touched on 
different elements of what you mentioned. And the actions, the 
corrective actions that we have put in place are designed to 
address some of those issues. The understanding of 
appropriations law, we are going to be doing new training to 
make sure that all individuals who are involved in financial 
transactions fully understand appropriations law, what is and 
is not allowed; two, the report, the investigation also 
uncovered that there were some people who were trying to alert 
us that there was misconduct underway, their complaints were 
not handled the way they should be and so we are going to be 
having training so that all managers understand completely how 
to deal appropriately with and track complaints that come in.
    NOAA received only one anonymous complaint, and it was not 
handled the way it should have been. So there was an alert to 
us and we dropped the ball on that. So we will fix that.
    In addition to that, the lines of supervision for 
individuals in the CFO's office have been identified as part of 
the problem and are being fixed.
    Mr. Fattah. You mean too large a span of control or too----
    Ms. Lubchenco. Oversight by only one individual instead of 
multiple individuals. And so that also is being changed.
    The Department is taking this very, very seriously as well. 
Dr. Blank has been very involved throughout, and her decision 
memo mirrors many of the things that we are doing internally in 
NOAA but is looking more broadly across the Department at the 
kind of training, to make sure that we have the right kind of 
training, the right kind of supervisory structure, and, 
finally, better financial controls over the very clever, 
inappropriate use of a legitimate financial accounting 
mechanism. The transfer of funds was very clever. It was 
hidden. It was difficult to figure out. And the normal kinds of 
financial controls did not pick that up.
    We have changed that. We now have financial controls in 
place to alert us and elsewhere in the Department if this kind 
of financial transaction is being inappropriately used. So all 
of those things have been set in motion.
    Mr. Fattah. Thank you very much.
    Dr. Sullivan, maybe you could help me. We have heard in the 
questions and answers from the Chairman about which accounts 
these transfers harmed. Which accounts did these transfers 
benefit?

                  LOCAL WARNINGS AND FORECASTS ACCOUNT

    Ms. Sullivan. Mr. Fattah, they primarily benefited an 
account that is called Local Warnings and Forecasts. That is 
the large account, it is the largest single account within the 
National Weather Service budget. It funds basically----
    Mr. Fattah. Can you quantify that and give us a sense of 
percentage when you say it is the largest? Is it half?
    Ms. Sullivan. It is greater than half, it is about $680 
something million out of just under $1 billion so it is closer 
to two-thirds, significantly. Eighty percent of the Weather 
Service's total labor costs are contained within Local Warnings 
and Forecasts. We have a network, as you know, of 122 weather 
forecast offices, 13 river forecast centers, two tsunami 
warning centers, across the country, telecommunications to and 
from those offices which are required, they must be high 
bandwidth because we run the core models for all of our 
services here in the Washington metro area and that data flows 
out to those centers, telecommunications, rents, salaries, 
benefits. All of that combined are in the Local Warnings and 
Forecasts.
    Mr. Fattah. So that as this accounting mechanism was being 
utilized, this summary level transfer process, and it was 
taking money from certain accounts and it was moving money into 
this account which represents about two-thirds of the operating 
accounts, it is all the local weather forecasting and warnings. 
So, it is the big elephant in the room, right?
    Ms. Sullivan. It is the largest account.
    Mr. Fattah. So now in the way this process that the 
Administrator says was clever did this was that in identifying 
costs in these other accounts, it gave them a lower profile 
than they ought to have, and therefore freed up dollars and 
recognized more significant costs in this larger account? 
    Ms. Sullivan. Effectively, yes. Expenses that were 
initially charged legitimately to the Local Warnings and 
Forecasts were transferred over and charged against a different 
code so the money that had been depleted, if you will, from the 
Local Warnings and Forecasts bank account now was not depleted 
and a charge was levied against a program that was not normally 
involved in those activities. So that was the transfer of 
expenses that freed up----
    Mr. Fattah. And this is concurrent with the increase in 
severity of weather events and so on, so the pressure or the 
perceived pressure on the local warning and forecasting was 
that there was more of a--I am not trying to ask you to discern 
peoples' motivation, but that I am certain the only reason you 
would be trying to move more money into local forecasting and 
warnings is there was some either real draw on that account 
that was more severe or a perceived need. But did the account 
fluctuate, were there increases?
    As we went through these past 24 months we have had the 
most severe number of severe weather events, billion dollar 
plus events, calamities, hurricanes and the like, but did this 
create an additional cost that needed to be recognized in the 
local weather, warning and forecast program account or 
operating account?
    Ms. Sullivan. I can't of course speculate as to peoples' 
motives. I will say I know from my visits through our field 
offices, the men and women of the National Weather Service put 
top quality service at the highest priority on their lists. 
They are absolutely passionately dedicated, as are we, to the 
life and property protecting mission of the Weather Service. It 
is the case that certain severe weather events, tornado 
outbreaks come to mind immediately, do deplete some 
consumables, we launch more weather balloons to get timely 
detailed profiles through the atmosphere as convective masses 
are bearing down.
    Mr. Fattah. And NOAA flies more flights into hurricanes----
    Ms. Sullivan. Fly flights as the storm season requires, 
happily this year is forecast to be a lower than average 
season.
    Mr. Fattah. Again I appreciate the Administrator's point 
that moving these monies between accounts is wrong, and it is 
definitely our concern as appropriators that when we are 
appropriating by accounts that we want accounts followed. But 
again this is a unique circumstance in which what was being 
done that was wrong wasn't being done for any personal gain. 
This was being done to put more dollars into local forecasting 
and warnings, rightly or wrongly, in some perceived need that 
there were more dollars needed there.
    So I just think that the Chairman and staff have done an 
excellent job in getting to all of the information and data, 
and we feel well-briefed on this, and I think that the 
Administrator's immediate actions within 24 hours of 
notification were entirely appropriate.
    But I do think that the Chairman, that the most important 
question he has asked is, is there a structural deficit in the 
Weather Service? This is because at the end of the day, this is 
really about protecting lives and giving appropriate warnings 
to communities, because we can't actually control the weather, 
so forecasting is important, and the ability to in places like 
my colleague who suffered greatly in Alabama, and forecasting 
accuracy has improved over these last few years quite 
significantly. I mean this means a lot, in terms of moving 
families out of harm's way. Active forecasting is critically 
important.
    So I just think that whatever the result of all of this, I 
don't want anyone to think that the Congress is not prepared to 
make sure that the weather forecasting and the local warning 
systems are very high priorities for us.
    Thank you, Mr. Chairman.
    Mr. Wolf. Thank you Mr. Fattah. I am going to go to Mr. 
Bonner. Let me just say I appreciate Mr. Fattah's comments, 
too. I worry a little bit about we are a nation of laws. The 
Founding Fathers, whether you like it or not, made this 
decision that this is the way it was going to be. And even 
though something can be a meritorious action in the sense that 
if you only knew why they were doing it you would understand, 
but that is not the process. The process requires, and you have 
Democratic Congresses here and you have Republican Congresses 
all who want to do the best interests as they see fit for the 
American people.
    But if people that are working in an agency can just willy-
nilly decide, as meritorious as something may be, the next time 
it may be not meritorious. The Weather Bureau, I usually before 
I go to bed I listen to the weather, it is kind of the last 
thing you do. But the future of people's lives can depend on 
the forecast. So if a person had done something that was bad, 
that put it in a different program, maybe they put it in a 
different line, and I am not saying they did but put it in a 
building and didn't put it in weather forecasting. So that is 
what this is all about. And if agencies can just pick it up and 
change or do whatever.
    Mr. Fattah. I totally agree with the Chairman.
    Mr. Wolf. I know you do. And Mr. Mollohan would have 
agreed, Mr. Mollohan was one of the finest guys. He would have 
reprogrammed that money. I don't have any doubt. I spoke to him 
the other day. I don't have any doubt that he would have said, 
and the same way for our side but I think it is the principle 
behind. And I worry, where else is this going on in other 
places? I don't mean in NOAA but in other places.
    But with that, Mr. Bonner.
    Mr. Bonner. Mr. Chairman, I want to follow your comments 
and the ranking member's as well. I doubt very seriously that 
tomorrow's Washington Post is going to have a 72 point headline 
that says ``Scandal in the Weather Service Costs Lives''. That 
did not happen. But just to be perfectly clear, this isn't a 
matter of hurting our feelings. This is a matter about 
potentially breaking the law. And it is not just appropriations 
law, it really goes back to the Constitution itself, which 
gives Congress--Democrat Congress, Republican Congress--the 
first step in the process of the purse strings. And Mr. Fattah 
is right, for those of us who live on the Gulf Coast and deal 
with hurricanes or for those of us who live in States like my 
State, Texas, Kansas, Missouri, any State is vulnerable to 
tornadoes.
    The sad thing is over the last few months I think there are 
two agencies that in the minds of most Americans represent the 
gold standard of public service, the Secret Service, which we 
for years believed--and most instances I think we have every 
right to continue to believe--would literally risk their lives 
to take a bullet for the President of the United States, and 
the Weather Service. As the Chairman said, when we go bed at 
night or wake up in the morning one of the first things most of 
us do is to check to see what the forecast of the day is.
    And so the concern that I have and the Chairman has 
indicated that because of a constraint on time that we will 
submit questions and you all have agreed to get us the answers 
back, we appreciate your taking this matter seriously and no 
one is saying that you are not. We appreciate your taking it 
seriously but it should be taken seriously because quite 
frankly if this were an isolated incident we would probably 
just have a conversation and move on. But for some here, this 
is yet the latest example of an Administration that seems to 
just basically give the finger to Congress, whether it is 
withholding information that the legislative branch of 
government asks for, whether it is--there are more czars 
appointed--this is not what this is about, but there have been 
more czars appointed in this Administration than existed in 
Russia from 1613 to 1918. But that is the Senate's problem. 
They let that occur, since they have the constitutional 
authority to consent and to confer with regard to appointments.
    There has just been a lot of disappointment where it looks 
like people are keeping information from the legislative branch 
of government. And again, we appreciate your being here, we 
appreciate your taking this seriously. At the end of the day 
the American people should have no question but that the 
National Weather Service is doing its work on behalf of 
American taxpayer, on behalf of the American people to provide 
the information we need.
    And some of us were troubled in light of some of the other 
things that are taking place when the President last week told 
the Hispanic civil rights groups I would like to bypass 
Congress and change the laws on my own. He said, ``believe me, 
the idea of doing things on my own is very tempting.'' I am not 
suggesting this rises to the Oval Office. But it does seem to 
be an attitude of just ignoring Congress when it pleases those 
who are in a position to do so.
    And that is really troubling. It should be troubling to all 
of us. So again I will submit my questions to the Chairman. 
They will go into the list of questions that he and other 
Members have--this is something, Mr. Wolf mentioned, Mr. 
Mollohan would have gladly done this. Mr. Wolf would have 
gladly done this. But there has to be a relationship built on 
trust and respect where the Administration when it is needing 
to seek reprogramming comes to Congress and we work together 
and I think that would have happened.
    So thank you very much.
    Mr. Fattah. If the Gentleman would yield just for a second. 
I notice you brought the Administration in a couple of times. 
None of the handful of people involved here came to town with 
this Administration. So it is not political, it doesn't have 
anything to do with this Administration. These are employees of 
the National Weather Service from times during which there were 
Republican Presidents so, and the actions that they took, 
whether illegal or misconduct or wrong were well-intentioned or 
whatever the case may be, I don't think were colored by any 
political considerations. They were taking money from an 
improvement program for the weather radio system and putting it 
into Local Warnings and Forecasts. So I can't discern any 
political motivations thereto. So I just wanted to make the 
record clear.
    Mr. Bonner. And to my friend, the Ranking Member, I was 
just saying that there is a pattern to some at least----
    Mr. Fattah. Some can find a pattern in anything. I just 
want to make it clear in this matter that this handful of 
people were not brought as part of the Administration. In fact 
the people who the Administration brought in are the ones who 
brought this to the attention of the Congress, who stopped it, 
and the Administrator has taken 12 corrective steps within the 
24 hours starting from the time she found out about it. So we, 
to try to ascribe this to the Administration I think is, as 
with many of the things going on around here, a little maybe 
slightly tainted toward something that is not relevant to the 
Weather Service.
    Thank you.
    Ms. Lubchenco. Congressman, may I comment briefly on one 
thing you mentioned----
    Mr. Bonner. Sure.

          RESPECT FOR THE ROLE OF THE APPROPRIATIONS COMMITTEE

    Ms. Lubchenco [continuing]. That I think is extremely 
important and about which I want there to be no 
misunderstanding. I take Congress' role on responsibility very, 
very seriously. You should not have any concerns that had I 
known there was a problem I would have come and we would have 
requested a solution to this. I do believe completely that what 
was happening was wrong, was inappropriate, and when we learned 
about it, I was outraged, I was just furious that this was 
happening.
    I think it is good news that the gold standard of our 
weather forecast and warnings have not been compromised, that 
the vast majority of individuals in the Weather Service are 
doing what they are supposed to be doing. But those individuals 
that did this were in the wrong. And we are acting very 
decisively to fix that.
    But I completely respect this Committee. I greatly 
appreciate the very collaborative, cordial, cooperative 
interactions that we have had respecting each other's 
responsibilities, and I think it is that very positive 
interaction that gives us a way to move forward and to address 
the problems that exist, to continue to respect the Committee's 
appropriate jurisdiction and oversight and to do a better job 
on my part of making sure that all of our employees fully 
understand what is and is not appropriate and what is Congress' 
role.
    Mr. Bonner. And Dr. Lubchenco, I would say that I can't 
speak for the Chairman or any other member of the Committee but 
I remember when I met you for the first time and looked at your 
very impressive background and felt comfortable that the 
President had picked someone with an impeccable character and 
reputation to take over your very important position.
    Again, I was not suggesting that this was a scandal that 
rises to the level--in fact I didn't even use the word 
``scandal.'' My friend Mr. Fattah did in his opening comments. 
But it is an unfortunate incident that potentially is breaking 
the law. And I do think it is kind of like when your children 
see the parents misbehaving, then sometimes it is--and I am not 
in any way suggesting that the people who work, the 2.6, 2.8 
million people who work in the Federal bureaucracy of the 
government are children--but when people see others ignoring 
the rule of law, then maybe they think, and as Mr. Wolf said, 
this might have been for a noble purpose but what if other 
things are happening and it is not. So your reputation in 
bringing this to us is consistent with the reputation that you 
had when you were appointed and we do want to have confidence 
that the National Weather Service is doing its job and that the 
people who work there, most, 99 percent of whom are extremely 
talented and loyal that they don't get tarred or scarred by 
this unfortunate incident.
    Thank you, Mr. Chairman.
    Mr. Wolf. Thank you. I am going to go to Mr. Dicks. Let me 
just say I think what Mr. Bonner was saying and I kind of share 
the concern, you trigger the thought. There is a pretty 
powerful column, it was in the Wall Street Journal by Peggy 
Noonan about two weeks ago. I will get it for everybody. And 
she made the very comment, I don't know if you read the column, 
but she wrote the column, and I am one of the strongest 
defenders of the Federal employee in the Congress, more than 
many on this side. We have the Military Construction and 
Veterans Affairs bill and I voted against it because of what it 
did to Federal employees. But I think the Peggy Noonan piece 
made the comment who would have ever thought that the Secret 
Service the day that Timothy McCarthy--Timothy McCarthy was a 
hero in my mind--Timothy McCarthy stopped the bullet that would 
have killed one of the greatest Presidents we have ever had, 
Ronald Reagan. And the Secret Service was always just revered. 
I mean, in my district many Secret Service agents live and I 
know many of them and then to see this sort of thing, and I 
think that's what Mr. Bonner was saying, and I will share the 
Peggy Noonan piece with everybody here.
    It is not only a Republican or a Democratic thing. I think 
it is just a shift and change. And I can almost see the person 
saying, ``well, you know, it is a good thing, so we will just 
kind of do it and they will understand.'' And I heard there is 
tension. I used to work for a cabinet secretary who used to be 
a Member of Congress, who I think Mr. Dicks knew very, very 
well, Rogers C.B. Morton.
    Mr. Dicks. Absolutely.
    Mr. Wolf. The agencies really don't like Congress. But I 
think what Mr. Bonner was saying is we see this shift and I 
don't think it is your fault and we are not doing it, but I 
think it is important. And I guess how we deal with it will 
send a message to other agencies. I don't think this Committee 
wants to be rooting out and finding people and putting people 
in jail and all. But just so the message goes forth that 
whether it is a Republican Congress, Republican Administration, 
Democratic Congress, Democratic Administration, it is important 
to follow the law regardless of our own personal opinion. Mr. 
Dicks didn't have a right and Mr. Wolf didn't have a right. 
This is what the law says and that is the way it is supposed to 
be set up.
    Mr. Dicks. Thank you very much. First of all, I appreciate 
the very decisive action that you did take in dealing with this 
problem. I think our committee should be supportive of Jane 
Lubchenco for the way she has dealt with this. And I think, you 
know, obviously we do not like to see situations where there is 
a violation of the reprogramming rules. But apparently in this 
case there is no indication that anyone personally financially 
benefited. It was somebody trying to do what they thought was 
the right thing for a program that is very important and there 
was no indication of any personal gain.
    So I think she has handled this well. I appreciate the 
Chairman having the hearing. Can I ask just one brief question 
on another subject.
    Mr. Wolf. Yes.

                             MARINE DEBRIS

    Mr. Dicks. Thank you. I want to talk about debris on the 
West Coast from the Japanese tsunami. Can you tell us what you 
are doing on this?
    Ms. Lubchenco. Certainly, Congressman.
    Mr. Dicks. I understand there is an interagency group.
    Ms. Lubchenco. There is. NOAA has a Marine Debris Program 
which this committee and other committees have supported 
through the years. We are doing a number of things. We are 
working with many local communities in your State and other 
States up and down the West Coast as well as the Pacific 
islands to give them information about what they can expect, 
how to handle debris should it come ashore. We are in the 
process of working with other Federal agencies to try to 
identify what assets exist in terms of our resources, 
personnel, knowledge to tackle this problem. Our scientists 
have been modeling where the debris is and where it is most 
likely to go so that we can have a good understanding of what 
the likely possible outcomes are.
    When the debris was washed into the ocean, it was a big 
debris field that was a very significant mass. Through time as 
it has moved across the Pacific it has become more and more 
dispersed, some pieces moving quickly if they are blown faster 
by the wind than other things that are sitting low in the 
water. As you know full well, in your State some of it has 
begun washing up and started coming over in December and 
January.
    We are seeing more and more objects and will likely 
continue to see objects of a variety of sizes and constitution 
for a number of years.
    Mr. Dicks. As you could imagine, the States are saying, 
``well, this wasn't our fault'' and they are looking to the 
Federal Government, the Governor of our State, Governor 
Gregoire, who I have great respect for. The States don't have 
enough money in their emergency funds to deal with this. And 
now as I understand it, how much funding do we have to deal 
with debris, ocean debris in this bill? It is like $4 or $5 
million. It is a very modest amount of money.
    Ms. Lubchenco. It is a very modest amount of money, 
Congressman. And it is nowhere near what is likely to be needed 
to deal with this disaster.
    Mr. Dicks. We are talking about tens of millions, right, or 
hundreds of millions.
    Ms. Lubchenco. We don't know how much. It is likely to be a 
very big number, but we don't know exactly how much.
    Mr. Dicks. Will FEMA be involved in this, is FEMA part of 
your interagency group?
    Ms. Lubchenco. FEMA is part of the interagency group that 
has been convened by the Council on Environmental Quality, FEMA 
and other agencies.
    Mr. Dicks. But isn't there a bit of a concern that this 
won't quite be a disaster, this stuff will just come in 
randomly and therefore FEMA may not have the ability or the 
legal authority to get in the middle. They are kind of backing 
away from this, that is very disconcerting.
    Ms. Lubchenco. I agree with you.
    Mr. Dicks. There has got to be somebody who is going to 
take responsibility and this is a national issue.
    Ms. Lubchenco. It is absolutely a national issue. There are 
different agencies that have different responsibilities. This 
is unprecedented, and it is presenting new challenges for us. 
And we would like to not only have the discussion within the 
Administration but with Congress about what kinds of 
opportunities there are for us to be collectively addressing 
this very important problem.
    Mr. Dicks. And we have serious scientific concerns here 
about invasive species that could be attached to these things. 
There are all kinds of barnacles on these things. There was a 
big dock that came in. Just to give my colleagues some 
impression of the magnitude of what we are talking about.
    Ms. Lubchenco. There was a very significant dock that 
washed up along the Oregon coast a week and a half ago or so.
    Mr. Honda. A piece of a pier.
    Ms. Lubchenco. I am sorry, a pier. It was larger than this 
room and it clearly had been in the water in Japan for a long 
time and had a lot of marine life on it that is potentially 
invasive. There is very real reason to be concerned about not 
only the physical damage but also the potential for invasive 
species. This is a very real problem.
    Mr. Dicks. And we have to dispose of it. I mean what do you 
do with this stuff once you get it? All I am saying here is 
that I have been worried about this. It is not only affecting 
my State, but it is Alaska, it is California, Oregon. It is a 
serious matter, and I know you are engaged, I know there is an 
interagency group, but I just hope that we can--and I would 
hope that we would look to our international friends, too, to 
be involved in this in some possible way.
    Mr. Culberson. How big is the debris field?
    Mr. Dicks. Oh, it is huge, it is huge.
    Mr. Fattah. All kinds of stuff.
    Mr. Dicks. All because of the tsunami in Japan.
    Mr. Culberson. I understand it is immense.
    Mr. Dicks. I mean all this stuff just was torn and ripped 
off the shores of Japan and out into the ocean and just like 
what happened with Mt. Saint Helens, the debris field was 
unbelievable. This is huge. And we already have the size of 
Texas out there in the Pacific ocean with debris. This debris 
thing is a serious matter to ocean health. And this just adds 
to that and some things that could be very dangerous.
    Mr. Honda. Would the gentleman yield for a minute?
    Mr. Dicks. I yield.
    Mr. Fattah. You are not saying Texas is dangerous, did you?
    Mr. Dicks. Well, I said the debris field that was there 
before is about the size of the State of Texas, not to say that 
it was the State of Texas.
    Mr. Honda. Would the gentleman yield?
    Mr. Dicks. I yield.
    Mr. Honda. You can talk about the magnitude of this debris 
area, but it would be miniscule compared to the size of the 
plastic vortex that is out there right now.
    Mr. Dicks. Right.
    Mr. Honda. So it is a piece of a larger question that the 
Chairman already knew about when he talked about tsunami 
anticipation, who would anticipate water movement because of 
tsunamis, I think they are all connected.
    Mr. Dicks. Maybe we could borrow some EPA drones and have 
it go out and take--oh, that was a joke.
    Also we have the possibility of radiation. You have to 
check these things to see if they are radioactive, too, and 
that is being done I am told.
    Ms. Lubchenco. Congressman, we don't believe that most of 
the debris was likely radioactive because it was washed in well 
before the radiation would have been contaminating things in 
the near shore water. Out of an abundance of caution we have 
been checking just to make sure. However, some of the debris is 
potentially hazardous, if not radioactive.
    Mr. Dicks. Yeah.
    Ms. Lubchenco. There may be petrochemicals, there may be 
sharp objects, there may be hazardous chemicals that are there. 
And part of our training to local communities is informing them 
what to do and what not to do with any debris they find because 
first and foremost we want to protect lives.
    Mr. Dicks. Any other closing suggestions on what should be 
done?
    Ms. Lubchenco. I think the challenge is partly one of 
scale, both in space and in time. When the debris field was 
washed out, it was a field, you could fly over with planes and 
see it. It is now so dispersed that when you fly over you don't 
see--you might see one thing here, one thing way over here. 
Most of it has sunk. What is left is very, very spread out. And 
so it is difficult to go out and see exactly where it is and to 
track it through time. So that presents an additional challenge 
in anticipating exactly what is going to happen when.
    We can give probabilistic ideas about when most of it is 
likely to arrive and it is going to be through time because 
some things that stand up like a fishing boat that stands up 
out of the water gets blown by the winds faster than just a 
piece of wood that is right at the surface. So the problem is 
spread out in space, and it is spread out in time and is a very 
significant issue on top of, as Congressman Honda has very 
appropriately pointed out, the existing marine debris problem 
which was already significant and not as appreciated as it 
needs to be.
    Mr. Dicks. Thank you, Mr. Chairman.
    Mr. Wolf. Mr. Culberson.

                         ADMINISTRATIVE ACTIONS

    Mr. Culberson. Thank you. Thank you, Mr. Chairman. 
Appreciate your responses to the Chairman on this. When did you 
first learn of misappropriation of funding within the agency?
    Ms. Lubchenco. Congressman, I learned of the allegations of 
misconduct on November 29th when I was informed of a very 
preliminary investigation that had been done within the Weather 
Service in response to an anonymous complaint that was 
received.
    Mr. Culberson. How many people were involved in making 
these summary line transfers?
    Ms. Lubchenco. Just a handful.
    Mr. Culberson. How many is that?
    Ms. Lubchenco. We believe that there were just a few 
individuals involved.
    Mr. Culberson. Two, three, four?
    Ms. Lubchenco. That is ballpark.
    Mr. Culberson. How many?
    Ms. Lubchenco. We believe----
    Mr. Culberson. You don't have to tell me names, but who--I 
mean how many?
    Ms. Lubchenco. Three individuals were involved.
    Mr. Culberson. Okay. Have any of the three been fired?
    Ms. Lubchenco. As I mentioned to the Chairman, we have 
taken or are in the process of appropriate administrative 
actions. Those are underway or have been completed.
    Mr. Culberson. What is an appropriate administrative action 
for misallocation of $36 million or 4 percent--that is 4 
percent of your total annual budget misappropriated by three 
individuals, an obvious and intentional violation of the law.
    Ms. Lubchenco. I fully understand the magnitude of the 
problem. The appropriate administrative action, it might be 
different depending on what individuals did.
    Mr. Culberson. Let's look at this case in particular. What 
is an appropriate administrative action for these three people?
    Ms. Lubchenco. There are a range of actions that might be 
taken. We have set those in motion. I would be more than happy 
to brief you in private on this. I am being careful here 
because I don't want to do anything that could jeopardize those 
actions or to violate the privacy protection afforded to 
Federal individuals.
    Mr. Culberson. We are not asking about anyone individually, 
it is just an important question because this is, I think the 
Chairman is right, going on all over the Federal Government. I 
think this is the tip of the iceberg. I think it is evidence of 
a pattern of behavior discovered in my Subcommittee that the VA 
is moving money around, that the law says 1, 2, 3. I mean flat 
out statutory 1, 2, 3 and they just go do 4, 5, 6. I think it 
is bigger than just NOAA.
    Ms. Lubchenco. I can't comment on that, but for these----
    Mr. Culberson. What can you do? What type of administrative 
action is possible? I could not even get, by the way, Members, 
the cemetery director in Houston, Texas who deliberately and 
repeatedly interfered with veterans to have a right to have a 
prayer said over their grave over and over and over again. They 
wouldn't fire her. I could only get her transferred. There is 
really a fundamental, I think, systematic problem in the 
Federal Government. If this were the private sector, if you 
misallocated 4 percent of a private company's total annual 
budget you would be fired immediately.
    Mr. Dicks. Would the Gentleman yield?
    Mr. Culberson. Yes, sir.
    Mr. Dicks. Maybe we should think about Surveys and 
investigations staff review of this.
    Mr. Culberson. Right.
    Mr. Dicks. Maybe something the Chairman and Mr. Rogers can 
sign off on.
    Mr. Culberson. Yes, sir.
    Mr. Dicks. That way we can do this in a very professional 
way without making it sound like we are trying to make 
allegations on the whole process. You know, we have some 
evidence, but this S&I group I have found very professional or 
GAO, whatever you----
    Mr. Culberson. I think so, particularly with the scale of 
the problem that Chairman Dicks----
    Mr. Dicks. Reprogramming funds in Defense is unbelievable. 
Intelligence, it is unbelievable.
    Mr. Culberson. Yeah, it is huge. Yeah, right. I think it is 
a much bigger problem. And particularly the scale in your 
jurisdiction on the Defense Subcommittee.
    Mr. Dicks. It has gotten much larger. I am not saying it is 
a problem. I am just saying the magnitude of the reprogramming 
has gotten much larger, and it may be a good time to take a 
look.
    Mr. Wolf. Would the gentleman yield, please?
    Mr. Culberson. Sure.
    Mr. Wolf. That is a good idea. Mr. Rogers mentioned about a 
week ago, he mentioned Surveys and Investigations and I think 
you came to the same thing. That is a very good idea, that way 
it takes----
    Mr. Culberson. Sure, so we can get an idea of the scale of 
the problem. It is a superb idea, where did it happen, does it 
appear to be a pattern. Instinctively I feel like it is a 
pattern because I am seeing it under the jurisdiction of my 
Committee and we see it here. To my knowledge no one has ever 
been--if you think about it, no one has been fired for 9/11. 
Can anybody identify anybody that has ever been fired for 9/11? 
Nobody. The entire Federal government, it is like there is a 
phantom parallel universe government out there driving, we 
appropriate the money and say very clearly the law has to be 
used in this way or whether there is another statute that says 
1, 2, 3 has to happen, what are the consequences? In the 
private sector it is very clear, you get fired immediately. 
There are civil or criminal liability in the event of a 
personal profit. I understand nobody personally profited from 
this, but there was clearly a pattern. This went back to 2006 
apparently. So these folks have been doing it for a long time.
    Ms. Lubchenco. Congressman, I obviously don't know about 
those instances. I can tell you for that for NOAA----
    Mr. Culberson. Well, the Inspector General's report says 
this has been going on as far back since 2006.
    Ms. Lubchenco. In NOAA?
    Mr. Culberson. Yes.
    Ms. Lubchenco. We do not know how----
    Mr. Culberson. But that is what the Inspector General 
concluded. It appeared that it had be going on since 2006, 
correct?
    Ms. Lubchenco. I believe that those were allegations that 
were made by individuals who were interviewed, and that is 
exactly why I have ordered an independent financial review and 
analysis to understand if this was happening earlier than the 
period that was the focus of our investigation, which was 2010 
and 2011.
    Mr. Culberson. And I appreciate that. What are the 
consequences, though? Talk to me about consequences. In the 
private sector it is just immediate, dramatic, you are fired 
and there will be either civil or criminal consequences. What 
are the consequences?
    Ms. Lubchenco. The consequences are very real and very 
serious.
    Mr. Culberson. Such as.
    Ms. Lubchenco. And we are taking the appropriate steps. I 
would be delighted to brief you in private and to describe what 
is being done. I want to be careful. Because there were so few 
individuals involved I want to be very careful here.
    Mr. Culberson. What civil service law prevents them from 
being just fired immediately? Why can't you just fire them 
immediately?
    Ms. Lubchenco. There are appropriate steps to take in 
taking administrative action. There are a series of steps that 
one has to take. I cannot just fire someone.
    Mr. Culberson. Why? That is my question, why? Why can't you 
just fire somebody?
    Ms. Lubchenco. Because of the legal protections that 
exist----
    Mr. Culberson. Such as?
    Ms. Lubchenco [continuing]. For Federal employees.
    Mr. Culberson. Such as?
    Ms. Lubchenco. I am not completely familiar with all of the 
appropriate laws. I know that there is a process that is to be 
followed and that we have followed it.
    Mr. Culberson. What are you told? For example, the cemetery 
director of Houston, I mean I even went out and saw it myself 
because they were lying to me and I knew they were lying. And I 
went out and actually sat in on a funeral in Houston and she 
did it again. And she actually told the veterans, the honor 
guard that they had to intercept the widow as she was being 
lifted out of the vehicle sobbing, going to the grave site, and 
ask her are you sure you want the ritual said over the grave 
because it has the word ``God'' in there three times. Are you 
sure?
    It is insane and I couldn't get her fired. All I could do, 
and I am Chairman of the Subcommittee on VA, all they would do 
is transfer her to headquarters and she is now in charge of 
proofreading memos I am told, but they would not fire her.
    So the Chairman is on to something really much, much bigger 
here, and we appreciate what you have done. And I understand 
you are handcuffed to a certain extent by Federal law. What 
Federal law? What do your lawyers tell you prevent you from 
just firing somebody who would misappropriate 4 percent of your 
entire annual budget?
    Ms. Lubchenco. Congressman, I am happy to get that 
information to you. I don't know that on the top of my head. I 
am happy to get that to you as a matter for the record.
    Mr. Culberson. Did you ask that somebody be fired? I mean 
once you found out this had actually happened, was your 
response fire them?
    Ms. Lubchenco. Congressman, I think what is behind your 
question is outrage that this behavior occurred at all and, 
secondly, a desire to have justice be done and to not only fix 
the problems that caused it, but make sure that this doesn't 
happen again by dealing with individuals appropriately. I 
completely concur with all of that. I was outraged, I was 
furious.
    Mr. Culberson. Was your response that someone be fired? Did 
you ask that someone be fired?
    Ms. Lubchenco. I have taken steps to deal with those 
individuals in the most aggressive and severe fashion possible.
    Mr. Culberson. Yeah, I think what this proves is that truly 
between my case in Houston with cemetery--I mean if you can't 
fire somebody for interfering with a prayer said over a 
veteran's grave you can't fire anybody for anything. If you 
can't fire someone for misappropriating 4 percent of your 
entire annual budget you can't fire anybody for anything. So 
everybody is a lifer, everybody in the Federal government is a 
lifer; the Post Office can be as incompetent as they want and 
nobody can be fired. It is the biggest disaster.
    I once asked when I was on the Transportation Subcommittee 
we had the head of Union Pacific Railroad and Northern--several 
the major railroads, and I said if we gave you Amtrak would you 
take Amtrak for free? And they said, no. You would have to 
change the law so we could fire people and we can hold them 
accountable. You really can't obviously hold anyone 
accountable. No one in the Federal government can be held 
accountable and that is really the root of the problem. And I 
really genuinely--I am not picking on you I genuinely 
appreciate it. It is just a vivid illustration of a fundamental 
and systematic crippling problem with our Federal government. 
It is beyond--it is obvious the social safety net has gotten 
out of control which is going to bankrupt us, but there is a 
whole other parallel problem I think, Mr. Chairman. You can't 
fire anybody. The civil service laws have gotten so out of 
control, I don't know what it is, the unions--please, I would 
like a memo, would you please have--whoever--I bet there is a 
lawyer out there behind you somewhere, I bet there is a 
personnel lawyer somewhere out there behind you. Is there any 
personnel lawyers--someone in your organization. I am a lawyer 
by training, and I want to see a detailed memo from you, 
please, why can't you fire any of these people? What civil 
service laws or protections prevent you from firing people for 
misallocation of funding of this blatant, deliberate, 
intentional, repeated, systematic violations of the law?
    Mr. Honda. Would the gentleman yield for a second?
    Mr. Culberson. Yes, please.
    Mr. Honda. I understand your emotion and your outrage and 
everything, but it seems to me as an attorney one would 
understand that one goes about gathering information before 
they pass judgment. And it feels like there is judgment being 
passed in asking if there is any kind of a finality in 
personnel rulings that someone is going to get fired when it 
appears that it is not complete yet. And I think I hear her 
saying that they have done everything as aggressively as they 
can. And I don't know all the issues either, but it would seem 
to be more prudent to keep in check our emotions until such 
time that we get complete information.
    Mr. Culberson. I think Mr. Dicks had a good suggestion that 
I think the Chairman supports, and that is to look at this in a 
comprehensive way. My instincts have rarely failed me and my 
instincts tell me this is just an indication of a far larger 
problem in the Federal government is what I am driving at. And 
if I could get a memo from your personnel lawyers explaining to 
me that. I obviously would share with the Chairman, I mean 
direct it to the Chairman, but I would like to know and I know 
he would like to know, our staff would like to know, what laws 
prevent you from holding people accountable in the same way 
that would occur obviously in the private sector. Because they 
clearly misallocated almost $36 million, I think it is $35.4 
million.
    [Clerk's note.--As of press time (December 2012), NOAA and 
the Department of Commerce have failed to provide the requested 
responses.]
    Mr. Graves. Would the gentleman yield?
    Mr. Culberson. Yes, please.
    Mr. Graves. I appreciate the point you are bringing up 
because this is everywhere, this is all over. The Department of 
Justice, any action been taken there? And we know that we have 
an American citizen who was guarding our borders killed.
    Mr. Culberson. Right.
    Mr. Graves. No action has been taken from an administrative 
perspective and proper administrative actions don't seem so 
proper.
    Mr. Culberson. Yeah.
    Mr. Graves. This even from the statement here, and from the 
statement the gentlelady has given us is November 29th of last 
year.
    Mr. Culberson. Right.
    Mr. Graves. Is when this was discovered.
    Mr. Culberson. She knew about it, right, 7 months.
    Mr. Graves. Seven months ago, I guess now, and still no 
action. So I would be happy to support you in this effort to 
find out why is it that the Federal Government employees are 
protected?
    Mr. Fattah. If the Gentleman would yield, I think what you 
just put on the record is completely inaccurate, that once this 
was found out within 24 hours this Administrator took 
corrective action. So I just want--I know we are getting 
excited, and we want to fire people, and we have got 
conclusions already, but let's just see if we can keep the 
facts straight.
    Ms. Lubchenco. Can I keep the record straight here?
    Mr. Graves. Please.
    Mr. Fattah. That is completely inaccurate.
    Mr. Graves. If I misstated it, I am sorry.
    Ms. Lubchenco. November 29th I learned about the 
allegations. I immediately placed an individual on 
administrative leave. I brought in a replacement. I set in 
motion an investigation that looked into the allegations, due 
process, looking into very complicated things that had been 
done. I received a report in May and initiated immediately the 
rest of the appropriate administrative actions as well as all 
the other things that are detailed in what I have described. I 
think that it is not appropriate to conclude from what I said 
that one cannot fire individuals. It is appropriate that due 
process be followed, and that is exactly what we are doing.
    Mr. Graves. Well, thank you for clarifying that. 
Administrative leave still intact I assume today with those 
same individuals?
    Ms. Lubchenco. That is correct.
    Mr. Graves. I know I am on the gentleman's time here a 
second.
    Mr. Culberson. Oh, please.
    Mr. Graves. When would you suspect that a conclusion would 
be reached?
    Ms. Lubchenco. I am not in control of that. I hope it is as 
soon as possible. I can tell you that and, Congressman, I want 
to make sure you heard what I said earlier, which was that it 
is possible to fire people, one has to follow due process. And 
that is what we are in the middle of doing. Whatever the 
appropriate administrative action for different individuals is, 
is underway or has been concluded.
    Mr. Culberson. And you will have your lawyers please send 
me a detailed memo that lays that whole process out, what does 
it take to fire somebody in the Federal Government and what 
prevents you from doing so like they do in the private sector?
    Mr. Wolf. Mr. Honda.
    Mr. Honda. Thank you, Mr. Chairman, and thank you very much 
for this opportunity to air some of these issues that I have 
heard about, I have read about. And I haven't finished reading 
all the details, but I really would appreciate the rest of the 
information and some timelines. I appreciate the fact that you 
made a distinction between what would be considered a cautious 
criminal kind of action versus some administrative kinds of 
action that was not very wise I suppose. And I think that 
distinction being made gives me the sense that, you know, you 
will be following some process that will make sure that truth 
will come out and then out of that truth some corrections can 
be made administrative so that this will not occur again.
    We have a lot of processes, accounting processes in place 
already where we can move monies around, not break the law and 
do some things with the funds that perhaps could cause some 
controversy but it is not illegal. And so, you know, I think 
that we just need to keep that in mind.
    I don't want to have you or your office become a political 
football, but I think what the Chairman--and I shouldn't speak 
for the Chairman, but I think what his intent is, is to get to 
the bottom of it because he has got a very strong sense of 
ethics.

                             MARINE DEBRIS

    So having said that, I would like to go back to the issue 
of the debris. When we talk about the debris it makes me a 
little uncomfortable when we say Japanese debris as if it were 
an intentional action, so I think we need to go back in time 
and say this is a natural disaster that was the result of a 9.0 
Richter scale movement of the Earth's, the ocean bottom that 
created a series of tsunamis that created devastation on the 
eastern coast of Japan. Much of the debris was washed into the 
ocean, but I guess the question I have is if we know that it is 
out there and we understand tidal movements, currents, wind and 
wave action, is there anybody that was following this to be 
able to anticipate? I know I have heard news saying that we can 
anticipate the arrival of debris off Hawaii, off Alaska, and 
off the Oregon and the Washington shores. It seems to me that 
if we could anticipate that somewhere along the line we should 
have been calling up folks to anticipate its arrival or do 
something anticipatory before it does hit land. And so, you 
know, I guess the question is, you know, did we do that, did we 
know that, and did we send a red flag up so that we have 
somebody in our system that would respond to it or get to the 
legislators and say this is the issue, this is what we need, 
now it is up to you because you are the government, we are the 
civilians that are responsible to give you the information but 
you have to make a decision both as a nation, as a country, and 
to allocate appropriate funds to do that?
    The second question I have is it seems to me that the 
movement of the debris is just a small part of a larger human 
habit that we have of disposal of trash. If you talk about 
Texas, the plastic vortex that exists in the Pacific is twice 
the size of Texas. We are not sure how deep it goes anymore 
because the particles have become smaller but not 
biodegradable. That seems to be a potential problem in both the 
health of the ocean and human health eventually because we 
eventually eat something that comes out of that area. And if it 
is embedded in animal or marine fats it must be transferable to 
us in very toxic form.
    So I don't know if you have any comments to that or any 
paperwork that has been built up over time that you can share 
with us too.
    So thank you, Mr. Chairman, for this opportunity to ask my 
question.
    Ms. Lubchenco. Congressman, I greatly appreciate your 
drawing our attention to language. That is very important. We 
typically say the tsunami debris. And I think that for the very 
reasons you articulated that is more appropriate language, so 
thank you for that.
    We have in fact done extensive modeling that takes into 
account realtime winds and currents that have happened since 
the disaster. So we have a reasonably good idea of where most 
of the debris is likely to be now. We also are modeling where 
it is most likely to go. And those models are completely 
consistent with what we have seen in terms of when it started 
to arrive.
    Mr. Honda. May I interrupt just a second? You used the word 
``modeling.'' There is so much information and statistics that 
you derive from modeling. Did it come from technology that 
Chairman Wolf had insisted on putting out into the ocean? There 
is an addition to that and then he has advocated for more. Are 
those the kind of technologies that you are depending upon to 
be able to model the movement of the water and the currents?
    Ms. Lubchenco. The technology that I believe the Chairman 
was referring to are tsunami buoys that he has championed 
putting in place and maintaining, very appropriate. We have 
other instruments in the ocean that give us information about 
where the water is moving and at what rate, and also on land 
measurements of winds. And if you put the ocean movements and 
the wind movements together, those are part of our observing 
systems, that helps us understand what typical conditions are 
and what they are like at any one particular time. So we 
utilize that information in our modeling. And we have worked 
closely with many of the coastal communities, Members of 
Congress, members of the press, to alert them, this is what you 
can expect and this is how you should be dealing with any 
debris that you find because we want to keep people informed 
and safe. So we have been doing all of those. Our resources are 
significantly stretched in doing that. We have a very small 
core team of people that typically deal with marine debris. It 
is not really at the magnitude that is needed for this 
particular disaster, which is why we are reaching out to our 
State partners and other Federal partners that can put together 
a larger group that can really begin to address the magnitude 
of this problem.
    Mr. Honda. Is there a Pacific Rim team that you are looking 
at that would not rely just upon our Pacific coast lines, but 
to engage the other Pacific Rim countries and entities?
    Ms. Lubchenco. We have indeed engaged them. We have also 
engaged fishermen and shippers, commercial fisherman. We have a 
hotline set up, and so when they are moving across the ocean 
and they encounter something they alert us so we can track and 
know and get realtime information. We have been utilizing 
satellites to the extent that it is possible to try to see 
where different big pieces are, most of it is so small you 
can't see it from satellites, but we have been sort of pulling 
out all the stops with every different possible thing that we 
can imagine to get a better handle on exactly what is it, where 
is it, when will it appear and trying to keep everyone 
informed.
    We would be happy to get materials to you. We have 
information that we have developed and maps of where it is now 
and where we think it is likely to go over time.
    Mr. Honda. So the Pacific Rim kinds of teamwork is 
something I am looking at, and a lot of this concern about the 
tsunami monitoring came about because of the chairman's concern 
about the aftermath of the Indonesian tsunami.
    Ms. Lubchenco. Right.
    Mr. Honda. And just extrapolate in that whole concern to 
the rest of the Pacific Rim because the ocean floor is going to 
continue to be active. If we think that 9.0 was big, wait until 
some of the plates really start to move. I think that if we do 
it right now then the Chairman's anticipation would save a lot 
of lives and a lot of economies, too.
    So I appreciate it. Thank you.
    Mr. Wolf. Thank you, Mr. Honda. Maybe you can have a group 
go up and brief Mr. Honda.
    Ms. Lubchenco. We would be happy to do that.
    Mr. Wolf. We have votes on, and there is just one other 
last question that we want to ask and then we are going to 
submit the rest. Does the Department intend to make available a 
redacted version of the internal investigation? The Committee 
requests that the Department submit a redacted version for 
inclusion in the record.
    Ms. Lubchenco. I would be happy to discuss with the 
Department what we are able to provide to you. I know that the 
Committee has an unredacted copy. Obviously that is not for the 
record.
    Mr. Wolf. No, right.
    Ms. Lubchenco. I understand what you are asking, and we 
would like to be as helpful as we can in this. We want to make 
sure that to protect privacy information that is in the primary 
report that you have seen. It is a challenge to be able to 
protect that and also have a report that makes any sense. So 
that is sort of the struggle. So we are happy to have a 
conversation with you about how we can best meet the intent, 
which is what you are describing, to have something in the 
record.
    Mr. Wolf. I am going to go to Mr. Fattah for any last 
questions. What we are going to do is we are asking about, we 
have 65 other questions, but obviously we can't take the time. 
And I thought it was inappropriate to keep the Administrator 
and everyone here for 2\1/2\ hours and then come back. So we 
will submit them. And if any other Member has any questions you 
would like to have submitted, if you would get them to the 
staff by close of business today. And we would ask that you 
could get the responses back by say 5:30 on Monday, because we 
want to do the reprogramming. We want to reassure the employees 
that we are not looking to tie the reprogramming up. We want to 
make sure that that can be done without RIFs and furloughs and 
nobody can say there is a storm that has been missed or 
something like that. So if we can do that we would appreciate 
it. We will just submit it all for the record.
    And Mr. Fattah.
    Mr. Fattah. I want to thank the Chairman for the hearing 
and thank the Administrator. Thank you. If you can do anything 
about this 100-degree heat, I'd appreciate it. Thank you very 
much, Mr. Chairman.
    Mr. Wolf. Mr. Graves.
    Mr. Graves. One quick clarification, thank you, Mr. 
Chairman. Back to the administrative leave, in your written 
statement it says that an employee was placed on administrative 
leave. For clarification you had also indicated there were 
three employees. Were all three placed on administrative leave 
or just a single?
    Ms. Lubchenco. A single employee was placed on 
administrative leave.
    Mr. Graves. Okay. And that single employee is paid 
administrative leave or unpaid?
    Ms. Lubchenco. It was paid.
    Mr. Graves. Thank you. Thank you, Mr. Chairman.
    Mr. Wolf. Hearing adjourned. Thank you.


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