    [Senate Hearing 113-897]
    [From the U.S. Government Publishing Office]

                                                         S. Hrg. 113-897

                      NOMINATION OF BRIAN C. DEESE, OF
                      MASSACHUSETTS, TO BE DEPUTY DI-
                      RECTOR OF THE OFFICE OF MANAGE-
                      MENT AND BUDGET
    =======================================================================

                                    HEARING

                                   BEFORE THE

                            COMMITTEE ON THE BUDGET
                              UNITED STATES SENATE

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   ----------

      May 21, 2013--NOMINATION OF BRIAN C. DEESE, OF MASSACHUSETTS, TO BE
             DEPUTY DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET

                                   ----------

               Printed for the use of the Committee on the Budget
                                  www.govinfo.gov

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                     ______

                        U.S. GOVERNMENT PUBLISHING OFFICE
    56-109                     WASHINGTON : 2026
    =======================================================================

                            COMMITTEE ON THE BUDGET

                       PATTY MURRAY, WASHINGTON, CHAIRMAN
    RON WYDEN, OREGON                    JEFF SESSIONS, ALABAMA
    BILL NELSON, FLORIDA                 CHARLES E. GRASSLEY, IOWA
    DEBBIE STABENOW, MICHIGAN            MICHAEL ENZI, WYOMING
    BERNARD SANDERS, VERMONT             MIKE CRAPO, IDAHO
    SHELDON WHITEHOUSE, RHODE ISLAND     LINDSEY O. GRAHAM, SOUTH CAROLINA
    MARK R. WARNER, VIRGINIA             ROB PORTMAN, OHIO
    JEFF MERKLEY, OREGON                 PAT TOOMEY, PENNSYLVANIA
    CHRISTOPHER A. COONS, DELAWARE       RON JOHNSON, WISCONSIN
    TAMMY BALDWIN, WISCONSIN             KELLY AYOTTE, NEW HAMPSHIRE
    TIM KAINE, VIRGINIA                  ROGER F. WICKER, MISSISSIPPI
    ANGUS S. KING, Jr., MAINE

                         Evan T. Schatz, Staff Director
                     Eric Ueland, Republican Staff Director

                                C O N T E N T S

                                  ----------

                             TUESDAY, MAY 21, 2013
                                    HEARING

                                                                       Page
    May 21, 2013--Nomination of Brian C. Deese, of Massachusetts, to
      be Deputy Director of the Office of Management and Budget......     1

                        STATEMENTS BY COMMITTEE MEMBERS

    Chairman Murray..................................................     1

                                   WITNESSES

    Deese, Brian, of Massachusetts, Nominee to be Deputy Director of
      the Office of Management and Budget............................     4

                            BIOGRAPHICAL INFORMATION

    Statement of Biographical and Financial Information Requested of
      Presidential Nominee Brian C. Deese to be Deputy Director of
      the Office of Management and Budget............................    19

                  ANSWERS TO QUESTIONS SUBMITTED *

    Chairman Murray..................................................    31
    Ranking Member Sessions..........................................    40
    Senator Wyden....................................................    59
    Senator Whitehouse...............................................    61

    * Questions and statements to the record may be found
      on file with the Committee.

                       THE NOMINATION OF BRIAN C. DEESE,
                         OF MASSACHUSETTS, TO BE DEPUTY
                           DIRECTOR OF THE OFFICE OF
                             MANAGEMENT AND BUDGET

                                  ----------

                             TUESDAY, MAY 21, 2013

                                               Committee on the Budget,
                                                           U.S. Senate,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 10:36 a.m., in
    Room 608, Dirksen Senate Office Building, Hon. Patty Murray,
    chairman of the committee, presiding.
        Present: Senators Murray, Whitehouse, and Kaine.
        Staff Present: Evan T. Schatz, Majority Staff Director; and
    Marcus Peacock, Minority Staff Director.

                  OPENING STATEMENT OF CHAIRMAN MURRAY

        Chairman Murray. This hearing will come to order.
        And before we begin, I do want to just take a moment to
    join the President in expressing my sadness at the
    heartbreaking destruction in Oklahoma. Too many people have
    lost so much--their loved ones, their children, their homes,
    their livelihood--and a lot more are injured and fighting for
    their lives as we speak. So I know I join the President, all of
    my colleagues here, and all Americans in saying that my
    thoughts are with those who are affected by this horrendous
    tragedy. At times like this, I know that we are also incredibly
    grateful for the heroic work of our first responders, who are
    working to help those who have been impacted by this storm, and
    I will work with all of our colleagues to do everything I can
    to provide them and the communities affected with the resources
    they need for relief and to recover from this horrific disaster
    as soon as possible.
        With that, I want to thank my Ranking Member, Senator
    Sessions, and we will have some of our colleagues who are
    joining us throughout this morning's hearing, as well. To all
    the members of the public here or watching online, thank you
    for being here.
        Today, we are considering President Obama's nomination of
    Brian Deese to be the next Deputy Director of the Office of
    Management and Budget. Brian, thank you for joining us here
    today.
        I want to recognize and welcome Brian's family, who are
    also with us today, his wife, Kara, his parents, Patricia and
    David, and extended family. As we all know, the support of
    families is so important to those of us in public service, so
    thank you to all of you for your dedication and sacrifice, as
    well.
        This nomination comes at a critical time for our country.
    We continue to face serious fiscal and economic challenges that
    we need to work together to address. The American people are
    looking to us to end the constant artificial crises and
    political brinkmanship that is threatening our fragile economic
    recovery. It is time we stop governing from crisis to crisis
    and return stability and regular order to our budget process.
    That is why I am so proud of the work we did here in this
    Budget Committee and on the Senate floor to write, debate, and
    pass a responsible budget plan that puts economic growth and
    the middle class first and that tackles our deficit and debt
    responsibly.
        It has now been 59 days since the Senate and House have
    each passed budgets. The President has weighed in with his
    proposal, and the next step in the budget process is for the
    two sides to come together in a Conference Committee and work
    towards a bipartisan deal. Democrats and Republicans have been
    talking about the need to return to regular order, including
    some of my Republican colleagues on this committee who just a
    few months ago were very explicit about the fact that once the
    two chambers passed their budgets, the work of conferencing
    must begin.
        So I have been very disappointed that Senate Republicans
    seem to now be backtracking from that and have blocked us from
    moving to conference every single time we have asked over the
    past few weeks. I am hopeful that this obstruction ends soon,
    because I had thought the one thing that Democrats and
    Republicans could agree on is that we should be working
    together to return stability and regular order to a budget
    process that has been broken and chaotic for far too along.
        Aside from the recent Budget Conference obstruction, there
    have been some recent positive steps. Last month, the Senate
    voted unanimously, 96 to zero, to confirm Sylvia Burwell as the
    next Director of OMB. It is critical we continue to have strong
    and consistent leadership at OMB, especially now as we work
    towards a responsible bipartisan budget agreement. I know
    Sylvia will be a great leader, but we cannot afford to have
    vacancies in other key budget positions during this important
    time for our economy.
        That is why today's hearing in consideration of Brian Deese
    to be the next Deputy Director of OMB is so important. Brian
    has been a key part of the administration's economic team over
    the past six years as a top economic advisor on the campaign
    and transition team, then as Special Assistant to the President
    for Economic Policy, and now as Deputy Director to the National
    Economic Council. In these roles, he was instrumental in
    pulling our economy back from the great recession, making sure
    key American industries remained healthy and strong and
    investing in policies that boosted the economy and created
    millions of new jobs.
        As the chief architect of the auto rescue plan, Brian
    reinvigorated a definitive American industry during a time of
    deep economic uncertainty and did it in a way that it helped
    our economy recover. Brian recognized that letting Detroit go
    bankrupt would actually increase Federal spending on programs
    like Medicaid and unemployment insurance, and if instead we
    invested in American workers and jobs, we could actually spur
    economic growth, and he was right. The auto rescue helped save
    a million American jobs and the auto industry today is
    thriving.
        We have also started to see the government make important
    headway on reducing our deficit responsibly during Brian's time
    in the administration. Just last week, CBO released its latest
    baseline. These revisions show we have begun to make
    significant progress on reducing our short- and medium-term
    deficits, and that is welcome news. CBO now estimates the
    deficit for 2013 will be more than $200 billion less than its
    February projection. This means that in two years, CBO expects
    the deficit will have fallen in half.
        To be clear, we still have important work to do to continue
    to tackle our longer-term debt and deficit challenges in a
    responsible and fair way, but we should acknowledge that under
    this administration, we have begun to make significant
    progress. In fact, just on Friday, CBO informed us the
    President's 2014 budget continues this important progress by,
    first, stabilizing the debt by 2015, and then lowering it
    further as a share of the economy to down below 70 percent by
    2023.
        As a key economic expert over the past four-and-a-half
    years in the administration, Brian has been part of these
    efforts, so I am pleased he will bring this important knowledge
    of fiscal and economic policy with him to his new role at OMB,
    and we will discuss those issues with you today.
        Brian also made comprehensive Wall Street reform a priority
    during his time in the administration, working to put in place
    measures to protect the country against the devastating impact
    of another financial crisis. As someone who grew up working at
    my dad's five-and-dime store on Main Street in small town
    Bothell, Washington, I could not agree more we need to bring
    Main Street values back to our financial system.
        That is why, as Chair of this Budget Committee, I have made
    an effort to bring those values to our budget process, as well.
    I believe budgets are a reflection of our nation's priorities
    and they are about families across America who are impacted by
    the decisions that we make. So I am glad Brian has a track
    record of putting middle class families over Wall Street
    profits, and it is my belief he will bring these values to the
    budget process at OMB.
        Brian also knows we need to create a sustainable path for
    future economic growth. Our country has serious deficit and
    debt challenges, but we also face equally significant deficits
    in education, worker skills, infrastructure, and innovation. We
    need to keep investing in infrastructure, jobs, our students,
    and our workers. We cannot continue to sacrifice long-term
    investments to solve short-term problems.
        So I appreciate that as Deputy Director of the National
    Economic Council, Brian emphasized we need to do more than just
    recover from our current fiscal challenges. We need to invest
    in future growth and ensure we can compete in the global
    economy of tomorrow. I share this commitment to investing in
    our future and I look forward to working with you, Brian, to
    make sure these important investment priorities are reflected
    in our budget process.
        There are tough challenges before Brian and Sylvia and all
    of us here on the Budget Committee. I had a chance to sit down
    with Brian earlier this month. I am looking forward to hearing
    from him today. It is clear he has a strong understanding of
    economic and budgetary policy and knows firsthand how to create
    fiscal policies that work for middle class families and help
    our economy grow.
        So I am confident Brian possesses the kind of experience,
    knowledge, and judgment necessary to succeed in this leadership
    position and to help bring a balanced and responsible approach
    to our budget challenges. I hope we can quickly move on this
    nomination since we need to return stability to our budget
    process and filling this position is a very important part of
    that effort. So I hope to schedule a committee vote on this
    nomination soon so the full Senate can confirm the nominee in a
    timely manner.
        Brian, I look forward to asking you some questions
    following your testimony, so at this time, I would ask you to
    stand. Our nominees are required to testify under oath, so if
    you will rise, I will administer that oath.
        Do you swear the testimony that you will give to the Senate
    Budget Committee will be the truth, the whole truth, and
    nothing but the truth?
        Mr. Deese. I do.
        Chairman Murray. If asked to do so and if given reasonable
    notice, will you agree to appear before this committee in the
    future and answer any question that members of the committee
    might have?
        Mr. Deese. I will.
        Chairman Murray. Okay. Please be seated.
        We will now have a chance to hear from Mr. Deese, and then
    members will have an opportunity to ask him questions. So, Mr.
    Deese, again, thank you very much to you and your family for
    being here and please proceed with your testimony.

    TESTIMONY OF BRIAN C. DEESE, OF MASSACHUSETTS, NOMINATED TO BE
         DEPUTY DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET

        Mr. Deese. Thank you. Thank you, Chairman Murray, and thank
    you to this committee for welcoming me here today.
        Before I begin, I want to join with you in reinforcing that
    all of our thoughts and prayers are with the people of Oklahoma
    this morning. The devastation that we have seen is unspeakable
    and we are still in the process of emergency activities and
    recovery, and the road to rebuilding will be long, but our
    country will stand with the people of Oklahoma, and I know that
    all of our thoughts are with them this morning.
        It is an honor to be considered by this committee as the
    President's nominee to be Deputy Director of the Office of
    Management and Budget.
        I am very pleased that members of my family could join me
    today. As you mentioned, both my mother and my father, my step-
    father, are here today. My family instilled in me a deep
    commitment to public service and it is something that I have
    taken with me throughout my career, and so it is very
    gratifying to have them here with me today.
        I particularly want to recognize my wife, Kara. As you
    said, Madam Chairman, these jobs are really a family affair and
    that is certainly true for us. My five-and-a-half-month-old
    daughter, Adeline, was not able to make it today. [Laughter.]
        Mr. Deese. She joined us at the hearing last week and did
    not enjoy it, so----
        [Laughter.]
        Mr. Deese [continuing]. We made the executive decision to
    not impose this one on her, but she is watching somewhere.
        I would also like to thank President Obama for nominating
    me to this position and to Director Burwell for her support and
    her confidence in me.
        And, finally, I want to thank members of this committee and
    their staff for taking the time to meet with me over the last
    few weeks. And if confirmed, I look forward to continuing those
    conversations and strengthening the vital relationship between
    OMB and this committee.
        Over the past several years, I have had an opportunity to
    work with many officials at OMB and across the executive branch
    to develop and implement administration priorities and this
    experience has given me a deep respect for the role that OMB
    plays in setting budget priorities, in improving the
    performance of government, and, importantly to me, for the
    skill and the commitment of the professionals who work there.
        I am humbled to be considered for this position, and
    particularly at a moment where our nation faces such critical
    work of strengthening our economy and our fiscal position, as
    well.
        We have made important progress. Our economy is growing. We
    are seeing promising growth in several sectors, including the
    housing market. Our manufacturing sector is showing signs of
    strength. Our businesses are creating jobs on a consistent
    basis. And, importantly, Congress and the President have begun
    the work together of bringing down our deficit and
    strengthening our nation's long-term financial position.
        But there is a lot more work that we need to do, work that
    we need to do together to deliver on what I believe must be our
    ultimate goal, which is an economy that provides opportunity
    and stability for working families.
        Much of my professional work has focused on the role that
    fiscal policy can play in promoting stronger and more durable
    economic growth, and I believe that sound fiscal policy
    requires all of us to not shy away from our long-term fiscal
    challenges and to work diligently to reduce our deficits in a
    way that will strengthen our economy for both current and
    future generations.
        If confirmed, I will work very closely with Director
    Burwell to build on the progress that we have made and we have
    seen, including, as you referenced, the return to regular
    order, and help try to find common ground on the type of
    comprehensive deficit reduction plan that would achieve these
    economic objectives.
        Another important area of focus, particularly in this
    period of fiscal and economic challenges, must be to make our
    government more efficient and more effective. Over the last
    several years, most recently as Deputy Director of the National
    Economic Council, I have developed a deep appreciation for the
    importance of applying sound management practices across the
    Federal Government, and I look forward to working with this
    committee and with Congress to make progress on our shared
    priorities in that area, as well.
        Finally, I believe that a budget is fundamentally a vision
    for how those of us in public service can deliver better
    outcomes for our economy and for middle class families. At its
    core, it is a reflection of our values and our priorities as a
    country. And if confirmed, I would work every day to uphold
    those values and those priorities.
        I want to thank the committee today for considering my
    nomination and I look forward to answering your questions.
        [The prepared statement of Mr. Deese follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Murray. Well, thank you very much.
        Let me begin. My understanding is you have ten years of
    experience working on economic and policy matters, including
    the last four-and-a-half at the National Economic Council
    working on the kinds of issues that you would oversee at OMB.
    And as part of your role as Deputy Director of the National
    Economic Council, you also do a fair amount of coordination and
    oversight across the Federal Government, helping to manage and
    oversee the President's fiscal and economic agenda.
        I am interested in hearing from you about your policy and
    managerial experience and how you see these experiences as
    helping you prepare for the job of Deputy Director.
        Mr. Deese. Thank you for the question. When I think about
    the role of Deputy Director at OMB, I think there is at least
    three sets of skills that I could bring to bear.
        The first is a strong understanding of the Federal budget
    and budget process. That is something that I have developed
    over the last several years, working closely on the development
    of the President's budgets and implementation of budget
    priorities, including working closely with OMB in that effort.
        The second is an understanding of how fiscal policy fits
    into a broader economic strategy for growth and job creation.
    That has been the principal focus of my professional work and I
    think it is something that is particularly important right now
    at the economic moment we find ourselves in, where our economic
    challenges are so interrelated with our fiscal challenges.
        And the third is a pragmatic understanding of how to get
    things done in government. One of the key responsibilities that
    I had as Deputy Director at the National Economic Council was
    to coordinate policy development and implementation across the
    executive branch, which involved working with senior management
    in the agencies across government, identifying teams,
    identifying goals, and driving to actually execute against our
    budget and fiscal priorities. I think that that is a set of
    skills that I can bring to bear in this new role in OMB, as
    well, if confirmed.
        Chairman Murray. Okay. I do not think there is any question
    you have the necessary training and experience in budgetary and
    economic matters, but in addition to policy making duties, you
    would be tasked with overseeing an agency of about 500
    employees during an extremely challenging time, given the
    sequester and the continued demands on OMB and the budgetary
    process. Talk with us a little about how you view the specific
    challenge of stepping in at this point in time to help guide
    OMB through the sequester and the intense budget negotiations.
        Mr. Deese. I think it is an incredibly important question,
    and I think that when I--when I think about the priorities for
    OMB and how to manage toward those priorities, this is
    something that Director Burwell and I have had a chance to
    discuss, and I think that we have to be very focused on
    executing against our core priorities.
        First and foremost is presenting and implementing a sound
    budget framework, which includes in this environment managing
    in an environment--in a sequestration environment.
        Second, I think, is to identify goals and responsibilities
    across the management agenda, and that is a place where OMB
    plays a vital role, and I think that the Director and the
    Deputy Director, working with the Deputy Director for
    Management, have an obligation to set out a vision for
    management priorities and make sure that we are effectively
    demonstrating to the American people that we can manage our
    resources wisely.
        And the third goes to OMB as an institution. I think this
    is going to have to be an area of focus for the management team
    because it is an incredible institution with a vital mission
    and a really dedicated professional staff. It is also facing a
    lot of challenges in the current environment and has for the
    last couple of years.
        So focusing on the management challenge of ensuring that
    OMB is able to play the vital role that the administration and
    Congress expects of it, is able to continue to attract and
    retain top-flight talent is going to be a priority, and I think
    that that is going to require a strong management team at OMB
    that works together well, that is able to identify priorities,
    and then able to execute against those priorities. And I think
    that that is something that I can contribute to.
        Chairman Murray. Okay. One policy area that you are
    particularly well known for is your work in restructuring
    General Motors and Chrysler, helping to rescue the U.S. auto
    industry, and, as I mentioned earlier, save a million jobs.
    That really was an extraordinary effort and one that required
    you to coordinate with and oversee a wide variety of
    stakeholders. Can you talk a little bit about that process and
    your involvement in it and why you think that policy ultimately
    was successful and what you see as the take-aways from that
    experience.
        Mr. Deese. Sure. In terms of my role, I was part of a team
    that worked within the administration to provide guidance on
    how to manage the crisis in the American auto industry. And as
    you have referenced, both the prior administration and the
    current administration faced a difficult set of choices in the
    face of deep economic concerns that had GM and Chrysler
    liquidated at the end of 2008 or the beginning of 2009, then it
    would have had a cascading effect throughout their supply base
    and through the industrial economy, and the estimates at the
    time were that over a million jobs were at stake.
        I think the decision of both the prior and the current
    administration to provide resources was ultimately the right
    one. I think the President drew a very difficult line in saying
    that those resources were only available if those companies
    could come forward with strong viability plans to return
    themselves to financial viability. Our role was to assess those
    viability plans in a clear-headed way, and I do believe that
    decision was the right one.
        Two take-aways for me. One is the importance of having
    strong teams and executing against priorities within
    government. The team that I had an opportunity to work with was
    made up of a lot of people who had distinguished careers in the
    private sector, had not served in government before, came to
    serve their country during a unique moment, and we tried to
    stay very focused on what our objective was during that period.
    I think that is very important.
        Another take-away for me, though, was that we all need to
    work incredibly hard to make sure that we never put our
    economy, our financial markets, in that kind of unique crisis
    situation again. It was not--outside of those extreme crisis
    situations, this was not an appropriate role for government to
    be in. The President made these decisions quite reluctantly and
    it was because of the unique degree of crisis that those
    decisions were necessary. And from my perspective, it reaffirms
    my commitment that we need to work together to build a
    stronger, more durable economy that does not face the kind of
    extreme crisis that we saw at the end of 2008, the beginning of
    2009.
        Chairman Murray. So we do not want to go through that
    again.
        Mr. Deese. Absolutely not.
        Chairman Murray. So we had better be making the right
    investments and policies now.
        Mr. Deese. I think for the sake of the economy and for
    future generations, we absolutely have to.
        Chairman Murray. Okay. Senator Kaine.
        Senator Kaine. Thank you, Madam Chair. It is good to be
    back in this room with you. We spent a lot of time here
    together in March, and I am still struck by the fact that all
    of that great work product to produce a Senate budget is
    languishing with a determined opposition to even placing the
    budget in conference. I just am hoping for the day when you
    will be conferring with your House colleagues and showing the
    American public the difference between the two budgets.
        Chairman Murray. Well, I agree. I cannot believe we are not
    there. We should be there. That is what the American people
    expect and deserve.
        Senator Kaine. Indeed. Indeed.
        And, Mr. Deese, congratulations to you. I am excited to
    support your nomination.
        You know, the best anti-deficit strategy--so I cannot now
    resist to get your take on this--the best anti-deficit strategy
    is growth, and it strikes me that as we are looking at these
    two budgets that are on the table right now, there is a House
    budget that I think proceeds from the fundamental philosophical
    position that the goal of the budget should be to reduce
    Federal spending and a Senate budget that proceeds from the
    position that the goal of the budget should be to produce
    economic growth, facilitate economic growth.
        You have been known for your work on sort of the growth
    ideas. What are some of the kinds of things in your role
    working with your Director and working with the administration,
    pro-growth policies that you would most encourage us to
    embrace, or the things that you will be most excited to work
    on?
        Mr. Deese. Well, thank you for the question. When I
    approach this basic question of fiscal policy, I do start from
    that question of what is the right overall economic strategy
    for the country, and fiscal policy plays a very important role,
    but it is a part of an overall economic strategy.
        I think in the current environment, we face interrelated
    economic challenges. We face a near-term challenge associated
    with increasing the rate of growth, increasing the rate of job
    creation, to try to move our economy into a stronger position.
    Over the medium and long term, we face a set of fiscal
    challenges that are real and that, if left unaddressed, will
    undermine our nation's long-term growth potential.
        So when I think about how to address those challenges, I
    think it takes the form of putting together a set of wise
    investments that would help support the economy and couple
    those with an overall comprehensive approach to deficit
    reduction that would send signals to the markets and the
    American people that we are getting serious about our longer-
    term fiscal challenges.
        I think when you think about the kinds of growth enhancing
    investments that you referenced, the way I think about it is
    what are the drivers of long-term productivity growth in this
    country, and I think that among them are a strong and educated
    workforce and strong assets in this country that make this
    place an attractive place for businesses to come and invest. So
    when I think about something like infrastructure investments,
    if we do it right, that is the kind of investment that can have
    a long-term productivity-enhancing impact by making this a more
    attractive place to invest.
        So that is the approach that I take to thinking about where
    should we be investing, and I think it is useful to do that as
    part of an overall fiscal strategy that is sending strong
    signals about our commitment to get our long-term deficits
    under control.
        Senator Kaine. I have been heartened, as the Chair
    mentioned in her opening comments, about some of the CBO recent
    discussions of the deficit being cut essentially in half over
    the period of two years, and there is much more work to do, as
    we know, but I commend the administration for the progress that
    has been made.
        One of the issues about growth, I think, that is also
    important, is that growth ought to be sustainable rather than,
    you know, episodic, unreliable. I think we had a growth
    strategy that was a growth strategy of an earlier decade that
    was a strategy of trying to promote growth through overreliance
    on debt and leverage. You know, families drove their savings
    rate down from seven percent to less than two percent.
    Governments, businesses, others overused debt. Consumer debt
    dramatically increased. And that produced growth for a short
    period of time, but then it led to kind of a sugar-high growth
    and then a major collapse.
        So I think the challenge that you have addressed in your
    answer is what is the next growth model that does not over-rely
    on leverage but that is more sustainable, and the
    infrastructure and human capital investments of the kind that
    you discuss are the ones that, I think, we also embrace and
    that were evident in the committee's budget.
        We talked when you came to my office, Mr. Deese, about kind
    of regular order. I am kind of a regular order fanatic, partly
    because it is the rules, but also partly because I think it
    sends the right signals to others that we take it seriously,
    and I know this committee embraces it. In my questioning of
    Director Burwell and in my private questioning of you, you
    indicate you also see the connection between sort of following
    the basic rules, and it enables us to do our work better and
    sends the right signals of confidence and I just wanted to get
    you to confirm that.
        Mr. Deese. Yes, sir. I think that this is an economic
    issue, not just a fiscal issue, because one of the things that
    has not helped our overall growth prospects over the last
    couple of years has been a process, a fiscal process that has
    been characterized by a rolling set of crises. And so I think
    that returning to a process where we are all expressing a
    shared commitment to follow a more regular order and actually
    then delivering on that and showing concrete steps in that
    direction will help reaffirm the sense that we can budget
    responsibly, we can make choices. And so I think it is an
    important part of our overall economic strategy.
        Senator Kaine. And then, lastly, and this is really just an
    encouragement, I think within the OMB portfolio, there is often
    sort of a sense that the budget is one side and the management
    is the other. But I do want to just connect the two sides.
        One of the many things that is wrong with the sequester is
    the non-strategic and across-the-board nature of the cuts. It
    makes no sense. If you are going to make cuts, you ought to be
    making them in a targeted way, and how do you make targeted
    cuts? Well, you have to use performance data and priority
    judgments to help you determine what are the things that should
    be cut, how much should they be cut, and then what are the
    things that should not be cut and, in fact, that may even need
    more investment?
        And I think the management wing of OMB really is very
    valuable, because we will continue to be looking for targeted
    cuts. The Senate's budget had an assumption of some targeted
    cuts going forward. The stronger that management muscle within
    OMB, the more sophisticated the work product in determining
    where cuts can be made that will not jeopardize economic
    growth. And, actually, if you cut things that are not really
    needed, then you create opportunities when revenues come back
    to use them for their highest and best use tomorrow rather than
    do the same old thing the same old way. So I would just
    encourage the management part of the portfolio, as well, to
    assist in these challenging budget times.
        Mr. Deese. Well, I agree. I think it is a priority, and one
    of the things I think about the Deputy Director role,
    certainly, if confirmed, I think the Deputy Director role is
    vitally important in making sure that the ``M'' and the ``B''
    sides of OMB are working seamlessly together and that those
    priorities and the tools that are on the ``M'' side are
    integrated fully into the budget and vice-versa. So that would
    certainly be a priority for me, if confirmed.
        Senator Kaine. Great. Thank you.
        Thank you, Madam Chair.
        Chairman Murray. Thank you.
        Senator Whitehouse.
        Senator Whitehouse. Thank you very much, Madam Chair, and
    let me add my voice to those who are looking forward to trying
    to resolve these budget differences through the regular order
    of the Senate. I think we have a very important debate ahead of
    us. We have a well-established structure for that debate to
    take place. We had a litany of calls for regular order, and I
    would hope that now, those calls would be matched with action
    that allowed the Chairmen to negotiate and for the process to
    continue forward.
        I have four specific topics that I want to touch on with
    you today, Mr. Deese. The first is the health care problem that
    we have, the spectacular cost of it, and I very strongly
    believe that there are immense savings to be had by gaining
    efficiencies in our health care delivery system, that those
    costs will redound to the benefit of corporate budgets, the
    Federal budget, military budgets, that we can bring down the
    cost of the entire system, which now lies like a terrible
    weight across our entire economy, all while making the system
    work better for people--better as patients, better as
    consumers, better as people who want to take command of their
    own health care destinies.
        I think that one of the challenges has been that those
    methods are hard to do what is called scoring in this budget
    environment, and although they cannot be scored, perhaps, or
    they can only be scored pretty late in the game, we know enough
    about what is going on in this part of the world now that the
    administration could start setting hard budget targets, not
    predictions, directions. I want to see this much in savings,
    hard dollar number, by this period, hard date, and that that
    would help guide and direct the efforts of a very big
    government more energetically and more focusedly [sic].
        So I would urge you to try to produce as soon as you can
    that number and that date, a dollar and a deadline, because I
    think that will really help us move forward, and I think it
    will also help in the budget discussions. If the
    administration, with all of its administrative capabilities to
    determine how quickly this takes place and how effectively,
    will not set a number out there for itself, then we in Congress
    have no way to try to come up with a number. You have to act
    first, and I very much hope that you will.
        I hope, also, you will clear the backlog at OMB. You guys
    are supposed to be making decisions in 120 days on regulations,
    according to Executive Orders. Just to use two examples, there
    is a Clean Water regulation that has been sitting over there
    for 455 days and there is a chemical safety regulation that has
    been sitting over there for over 1,100 days. You are closing in
    on ten times the amount of time in which you are supposed to
    have cleared that.
        We want to continue to work with you both on the speed with
    which you move through these things and also the transparency
    of the process. Things kind of disappear at OMB, and who knows
    who is talking to whom and how things are getting--why things
    are being delayed. It is not a model of transparency for those
    of us on the outside looking in.
        The third thing, I hope you will work with us and the
    Department of Justice to try to figure out what the best way
    going forward is with cyber. The Department of Justice, I do
    not think, is resourced the way it should be. They, obviously,
    are not keen to ask for additional resources behind OMB's back.
    So getting the Department of Justice and OMB in the room
    together to have that discussion, I think, is very important.
    Senator Graham and I are working on bipartisan legislation that
    I hope will address this. So I would ask you to help with that.
        And, last of all, regulatory capture is a doctrine that
    goes back to the days of Woodrow Wilson. It has enormous
    foundation in administrative law. It has enormous foundation in
    economics. Nobel Prize winners have written about it. And yet,
    we do not have any established mechanism for identifying and
    trying to head off the capture of regulatory agencies by the
    industries that they seek to regulate. We have experience of it
    with Minerals Management Service and, I think to a degree, with
    the Securities and Exchange Commission, but we do not have a
    mechanism for dealing with it in a thoughtful and official way.
        So those are the four topics I would like to work with you
    on and I would like to hear your thoughts on any and all of
    them, DSR, OMB delays, DOJ cyber, and regulatory capture.
        Mr. Deese. Great. I will try to hit on all of those. First,
    on your points on health care costs, I believe that the--
    addressing the rate of growth of health care costs across our
    health care system is the principal long-term fiscal challenge
    that the country faces. And I believe that we absolutely have
    to take serious steps and be very rigorous about how we go
    about addressing it. I think we do have some reason for
    optimism. We have seen the rate of growth of health care costs
    come down over the last couple of years.
        One of the things that was promising about the CBO report
    that has been mentioned was that beyond 2013, if you look over
    the ten-year budget window, much of the reduction in out-year
    deficits was associated with reductions in projections about
    health care spending, which, I think, suggests that some of the
    reductions in the growth rate of spending that have happened
    over the last couple of years may be sustained.
        But I agree with you that the way that that is going to
    happen is by identifying delivery system reforms that actually
    work and then being rigorous about implementing those across
    the entire health care system. And, if confirmed, I certainly
    want to both learn more about your ideas for goal setting and
    also then think about OMB and how OMB can participate in that
    process as part of the management activities of OMB, rigorous
    goal setting in an accountability framework where we are not
    only setting a goal, but then having real culture change within
    agencies I around being accountable for that goal as a
    priority. So I think that we definitely want to work more with
    you on that.
        With respect to regulations, both on the backlog and the
    issue of regulatory capture, I think that, to me, there are a
    number of issues at play. One of is the regulatory process has
    to, at base, provide trust to the public that this is a process
    that they understand and can rely on. They may not agree with
    every individual decision, but they understand how the process
    unfolds and they understand transparency, transparently how
    balances are being made between important protections for
    health, safety, and the environment, and promoting and
    sustaining economic growth.
        And I think that--so I think transparency is a real
    important part of that, because I think that that does go to
    this question of trust. And so this is not an issue that I have
    been closely involved in or worked on over the last several
    years, but I know it is an issue that Director Burwell is very
    focused on and, if confirmed, that I would focus on, as well,
    to try to ask--bring fresh eyes and ask a set of questions
    about what could we do to improve the transparency of the
    process and then also the rigor of the process, including
    looking at issues like the issue of regulatory capture that you
    have raised.
        And, finally, with respect to cybersecurity, it is a major
    priority for the President. It is a big economic challenge, as
    well. And I think that the economic risks to our country from
    being exposed by cyber attacks are real and they are
    substantial and so we have to treat them with that level of
    seriousness. And that is, in part, about making sure that we
    have effective tools and effective ability to share information
    while also protecting privacy, but some of it is about
    resources and making sure that we have the resources to protect
    our critical infrastructure, secure Federal networks, and
    effectively prosecute potential wrongdoing.
        So I think that it is a priority for us and certainly, if
    confirmed, I would look forward to working with you and other
    members of the committee to make sure that we are adequately
    resourcing those activities.
        Senator Whitehouse. Thank you very much.
        Chairman Murray. Thank you.
        The House, as you are aware, recently released their 302(b)
    allocations, which show large cuts--very large cuts to some
    critical investments in programs like health and education. You
    have written articles regarding the ability of foreign nations
    to invest in human capital. At the Center for American
    Progress, you actually outlined strategies to keep America
    competitive in a global economy where you have argued in favor
    of improving research and education while simultaneously
    returning to fiscal discipline and seeking deficit reduction. I
    wanted to ask you, what does fiscal discipline mean to you and
    how do we go about deficit reduction?
        Mr. Deese. Well, I think, for me, this comes back to what
    is our overall economic strategy and then how does fiscal
    policy fit into that overall strategy, because at the end of
    the day, the fiscal choices we make are about the resources we
    need to invest in the functions that we believe are necessary
    to support an economy that is consistent with our values and to
    protect the vulnerable among us.
        I think that the question about choices and trade-offs
    within that fiscal strategy and how to have a fiscally
    disciplined approach, from my perspective, should start with
    asking, where do we have long-term challenges and what is a
    responsible way to address them? And so when I look across
    our--the Federal budget, I think our long-term challenges are
    largely in our mandatory programs and they connect to this
    issue of health care cost growth that we were discussing as
    well as the demographics of our country. And I think the Budget
    Control Act has already imposed substantial discipline on the
    discretionary side of the budget, both defense and non-defense,
    and I think that when we think about a long-term fiscal
    strategy, our real challenges are in those mandatory programs.
        And so I think the key questions for us are how can we
    implement sensible and thoughtful reforms that actually protect
    and strengthen the core promise, the core purpose of those
    mandatory programs? And how can we couple that with looking at
    sensible reforms to our tax system that are designed to reduce
    complexity, support overall economic growth, but also
    contribute to deficit reduction, as well? So that is how I
    think about the issue broadly.
        Chairman Murray. Okay. The long-term goals of this country,
    I think, are being really threatened by the sequester being put
    in place right now. How are we going to invest in critical
    programs that are so important for this country's long-term
    future in this environment?
        Mr. Deese. Well, I think it starts with coming up with a
    strategy to replace the sequester with a more thoughtful
    approach, a more thoughtful fiscal approach. I think the
    sequester is problematic for two reasons. The first is that the
    magnitude of cuts imposed in an indiscriminate way are doing
    harm to our economy. The second is, when you think about our
    long-term fiscal challenges, it does not address any of the
    serious challenges we face. We were just talking about the
    growth rate of health care costs and our mandatory programs.
    The sequester does not have meaningful long-term deficit
    reduction associated with it. In fact, after ten years, it goes
    away altogether.
        So I think that that provides us an opportunity to develop
    a plan that is more sensible both in the short-term and in the
    long-term than the sequester and work to replace the sequester
    with that kind of approach. I think that the Senate budget lays
    out a strategy. The President's budget is quite consistent with
    that overall strategy. I think that that allows us for an
    opportunity to have this conversation, as you say, as we move
    to regular order and have a conversation about a truly
    bipartisan approach that says, we can do much better than the
    sequester for our economy and for our long-term fiscal goals.
        Chairman Murray. So replacing the sequester is a very
    important short-term goal for this country, economically?
        Mr. Deese. I think if you are focused on the economic and
    fiscal health of the country, then replacing the sequester has
    got to be a priority.
        Chairman Murray. I appreciate that.
        Senator Kaine, do you have any additional questions?
        Senator Kaine. Just two quick ones. On the sequester, you
    know, one of the things, Madam Chair, that I liked about the
    Senate budget is it really did three things with sequester.
    First, it reduced the amount of the cuts. Second, it made them
    strategic and targeted rather than across-the-board and
    indiscriminate. And, third, it phased the cuts so that they
    were a little bit steeper toward the back end of the ten-year
    budget window instead of sort of straight line across, which
    was a better reflection of trying to grow the economy in the
    short-term, and also gave agencies more time to sort of plan
    the cuts as they went into place. And I think that that
    sequester approach is far preferable and I was pleased to see a
    President's budget that sort of had a similar philosophy as the
    Senate budget.
        The other comment I wanted to make is to follow up on your
    comment, your colloquy with Senator Whitehouse about health
    care costs. Just to remind you, you have got a great ally in
    your CMS Director. So the Affordable Care Act, if you look at
    the health care system in the country, how is it financed, a
    portion of the pie chart is Medicaid plus Medicare, and what
    the ACA did is it took that portion of the pie chart and made
    it greater. So since that is a bigger sort of center of gravity
    of how health care is financed in the United States post-ACA,
    any changes within that portion of the pie chart not only have
    the ability to drive down costs, but they can be innovations
    that can sort of bleed over into the rest of how health care is
    financed.
        And I really think CMS can be an innovator, and they are
    being innovative in things like bundling payments, payment
    reforms. Let us pay for quality, let us pay for outcomes rather
    than pay for procedures. We pay for procedures in this country
    and we get the best procedures in the world and we get a lot of
    them, but we do not necessarily get health. In other nations
    that pay for health or outcome, they get more health and they
    spend less money.
        I think CMS is a critical place, and the Administrator that
    we just confirmed I know well, because she was my cabinet
    secretary when I was Governor, and we were having to shrink a
    State budget in real dollar terms. I did not have anyone who
    was a more creative cost saver than Marilyn Tavenner, and yet
    because she was a nurse, she always approached the project with
    a patient-first attitude that meant she was not just saving
    costs by putting on the green eyeshade and looking at it as a
    numbers exercise. She realized it was patients involved.
        And I think using the demonstrated cost-cutting expertise
    of your CMS Administrator, coupled with the fact that CMS
    reforms now have such an ability to drive cost curves down, but
    also influence other players in the health care financing
    model, I think you have got a great ally that you can utilize
    in the work that OMB is trying to do on this health care cost
    issue and I just would encourage that to you.
        Mr. Deese. Well, thank you. I think this effort is going to
    require a strong team across the administration and working
    closely with Congress to make sure that we identify those
    interventions that actually work and implementing them
    systemwide. So we are, if confirmed, I, as part of the OMB
    team, would look to work closely with CMS and HHS on this
    issue.
        Chairman Murray. Thank you very much, Senator Kaine. Thank
    you for the participation and cooperation of all of our
    colleagues on this committee.
        Mr. Deese, thank you so much for your willingness to serve,
    particularly during such a difficult and very consequential
    time. This committee greatly appreciates the sacrifice of you
    and all of your family.
        As a reminder to my colleagues, additional statements or
    questions for the record for today's hearings are due in by
    6:00 p.m. today, to be signed and submitted to the Chief Clerk.
        Also for the information of our colleagues, it is my
    intention that we move Mr. Deese's nomination as expeditiously
    as possible. This committee does have a 48-hour notice
    requirement. I will be talking with Senator Sessions about when
    we can give that notice, but it is my intention that we vote on
    this nomination quickly when we return from the State Work
    Period.
        Finally, this committee will meet again tomorrow,
    Wednesday, to consider supporting broad-based economic growth
    and fiscal responsibility through tax reform. I encourage the
    attendance of all of our committee members for that important
    hearing.
        With that, this hearing is adjourned. Thank you.
        [Whereupon, at 11:24 a.m., the committee was adjourned.]
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