[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
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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
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\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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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.
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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.
[The information follows:]
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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.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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:]
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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:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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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