[Senate Hearing 113-120]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 113-120

                      NOMINATION OF BRIAN C. DEESE

                              Before The 

                              COMMITTEE ON
                          UNITED STATES SENATE


                             FIRST SESSION


                         MANAGEMENT AND BUDGET


                              MAY 13, 2013

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        Committee on Homeland Security and Governmental Affairs


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                  THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan                 TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri           ROB PORTMAN, Ohio
JON TESTER, Montana                  RAND PAUL, Kentucky
MARK BEGICH, Alaska                  MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin             KELLY AYOTTE, New Hampshire

                   Richard J. Kessler, Staff Director
               John P. Kilvington, Deputy Staff Director
            Deirdre G. Armstrong, Professional Staff Member
               Kristine V. Lam, Professional Staff Member
       Lawrence B. Novey, Chief Counsel for Governmental Affairs
         Troy H. Cribb, Chief Counsel for Governmental Affairs
               Keith B. Ashdown, Minority Staff Director
         Christopher J. Barkley, Minority Deputy Staff Director
               Andrew C. Dockham, Minority Chief Counsel
                     Trina D. Shiffman, Chief Clerk
                    Laura W. Kilbride, Hearing Clerk
                            C O N T E N T S

Opening statements:
    Senator Carper...............................................     1
    Senator Levin................................................     4
Prepared statements:
    Senator Carper...............................................    27
    Senator Coburn...............................................    30

                          Monday, May 13, 2013

Brian C. Deese, Nominee to Serve as Deputy Director, Office of 
  Management and Budget
    Testimony....................................................     4
    Prepared statement...........................................    32
    Biographical and financial information.......................    34
    Responses to pre-hearing questions...........................    53
    Letter from the Office of Government Ethics..................    89

                      NOMINATION OF BRIAN C. DEESE


                          MONDAY, MAY 13, 2013

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 3:07 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Thomas R. 
Carper, Chairman of the Committee, presiding.
    Present: Senators Carper and Levin.


    Chairman Carper. The hearing will come to order, although 
this is a hearing that is already in order, even with a 5\1/2\ 
month old baby girl, remarkably. I wish my boys were that well-
behaved, Senator Levin, when they were 5\1/2\ months old.
    Senator Levin. Almost as pretty as mine.
    Chairman Carper. Almost as pretty as his, huh? Maybe so.
    I am going to start off with a statement and introduce our 
witness, and we are going to ask him to take an oath in a few 
minutes. Then we will get into your statement and then we will 
just ask some questions.
    Today we are pleased to consider the nomination of Brian 
Deese, President Obama's choice to serve as our Deputy Director 
of the Office of Management and Budget (OMB), and we are 
pleased to note at the outset of this hearing, that the 
nomination process in this case is preceding, we believe as it 
should. The position for which Mr. Deese is nominated, became 
vacant in February of this year when OMB Deputy Director 
Heather Higginbottom took a new assignment at the Department of 
State with our incoming Secretary of State John Kerry, our 
former colleague. By early April, the President submitted the 
nomination of Mr. Deese, and Dr. Coburn and I have worked to 
review and bring the nomination before the full Committee 
    In terms of process, I think this nomination has worked 
well at both ends of Pennsylvania Avenue. I hope it is a model 
that the White House and the Senate will continue to follow 
often in the weeks and months ahead. And in recent decades 
through both Democratic and Republican Administrations, the 
nomination and confirmation process have become unacceptably 
slow. At any given time, there are far too many vacant senior 
positions throughout our Federal Government. This lack of 
critical leadership undermines the effectiveness of our 
government, and a slow partisan process discourages talented 
people from wanting to serve in our government.
    This problem has become so prevalent, I started referring 
to it as Executive Branch Swiss Cheese. That is I believe it is 
so important for our Committee to move forward promptly on 
nominations that fall within our jurisdiction. We have an 
obligation to vet them, to do our proper oversight, but once we 
are convinced that the President has made a good choice, we 
have, I think, an obligation to try to move it promptly.
    Nominations for the senior positions at the Office of 
Management and Budget are among the most important that our 
Committee will consider this year, or any year.
    As most of the folks in this room know, on April 24, by a 
vote of 96 to 0, the Senate confirmed the nomination of Sylvia 
Mathews Burwell to be Director of the Office of Management and 
Budget. She will be a strong and capable leader. Now the 
President and Senate share the job of surrounding her with a 
terrific team.
    Following today's consideration of Mr. Deese's nomination, 
we will soon consider the nomination of Howard Shelanski to be 
the Administrator of the Office of Information and Regulatory 
Affairs (OIRA). I hope that in short order, the President will 
submit a nomination for the position of Deputy Director for 
Management, which was recently vacated by Jeff Zients. I am not 
sure if Jeff Zients is off the payroll and has returned to 
private life, but if he is anywhere within the sound of my 
voice, I just want to express, on behalf of all of us, our 
heartfelt thanks for his hard work and leadership in very 
difficult times. Good man.
    Having strong leadership at OMB is important at any time, 
but particularly at this moment when our Nation is desperately 
in need of a long-term budget plan to rein in our Federal 
deficit and our debt. I have said it a time or two before, but 
it is just something here that bears repeating often.
    The grand budget compromise that I believe we need in order 
to address this fiscal crisis must have three essential 
elements to it. It must address both spending and revenues in a 
balanced approach; it must rein in the costs of our entitlement 
programs in a way that does not savage the poor or the elderly, 
but in a way to preserve those programs for the long haul; and 
it must, through better management of government programs, 
deliver better service to the American people at a lower cost.
    This Committee is an important partner with the Office of 
Management and Budget in all of these areas, but especially in 
ensuring that our government achieves better results for less 
money or better results for the same amount of money. We have a 
full agenda then, and Dr. Coburn and I are working in full 
partnership, along with many of our colleagues, including with 
Senator Levin.
    For example, we save billions of dollars by shedding 
Federal property that is no longer used, or at least we can and 
we should be. We can save tens of billions of dollars every 
year by reducing the amount of improper payments that the 
government makes. We can bring in billions of dollars of 
revenue by doing a better job of collecting taxes that are owed 
but not paid, and that is something, seriously, that Senator 
Levin, along with Dr. Coburn, has led the way on.
    We can save billions of dollars in Federal contracting 
every year through efforts such as so-called strategic sourcing 
initiatives which include buying more in bulk when that makes 
sense. We can save billions of dollars through better 
management of the information technology (IT) that our 
government buys. And we can improve the transparency of 
government spending so that the American people have a better 
understanding of how their tax dollars are used.
    These are just a few examples of the ways this Committee 
and the Office of Management and Budget, in concert, are 
striving to make our government work better, and, I might add, 
in concert with the Government Accountability Office (GAO), in 
concert with our Inspectors General (IGs) across the 
government, and in concert with private non-profit 
    I am pleased that we have before us today a nominee who has 
a firm grasp of the role of both the ``M'' and the ``B'' in 
OMB. And with respect to the ``M,'' the management, Mr. Deese 
understands the importance of driving innovations and 
efficiencies across the government so that agencies not only 
save money, but deliver better services to the American people. 
And with respect to the ``B,'' he is someone who is committed 
to achieving a comprehensive deficit reduction plan that will 
help our economy grow even as we reduce the budget deficits.
    Mr. Deese comes well-prepared for these challenges from his 
two positions at the National Economic Council, first, as a 
Special Assistant to the President for Economic Policy, and 
then as the Deputy Assistant to the President and Deputy 
Director of the National Economic Council.
    Mr. Deese has earned a well-justified reputation as someone 
who can absorb a tremendous amount of economic data, synthesize 
it, and translate it into viable options for the President and 
his economic team and also translate it into terms that even 
mere mortals like I can understand.
    On issues ranging from the auto bailout to housing issues 
to tax policy, Mr. Deese has helped our country recover from 
the recession, helped our economy before President Obama took 
office. He is someone who understands that our fiscal policies 
are intrinsically linked to the prosperity of the American 
    Brian's father, who is sitting right over his left 
shoulder, is a college professor, and his mom is an engineer. 
He clearly has inherited their smarts. He has an undergraduate 
degree from Middlebury College and a law degree from Yale Law 
School. Before going to law school, he spent time doing policy 
analysis for the Carnegie Endowment for International Peace, 
the Center for Global Development, and the Center for American 
    I think anyone who meets Brian quickly realizes that he has 
the brainpower to pursue whatever profession he chooses, but he 
has a passion for public policy, and we are fortunate, 
specifically a passion for finding ways for our government to 
make smart choices so that individuals and businesses can 
    In short, he is someone who quickly impresses his 
colleagues in the Administration. I believe he will quickly 
impress my colleagues in the Senate.
    Normally I would turn to Dr. Coburn for any comments he 
would like to make, but in his absence, I am going to ask 
Senator Levin if there is anything you would like to say before 
I swear this man in and let him give his statement.


    Senator Levin. No, just to thank you, Mr. Chairman, for 
your usual speed and thoroughness in moving a nomination. I 
share your hopes that this nomination can be acted upon 
quickly. I do have a number of questions for Mr. Deese, but I 
just want to thank him for his willingness to continue serving, 
and to thank you for the way in which you handle this 
Committee, along with Dr. Coburn.
    Chairman Carper. Thank you. Well, I learned from the best.
    A little introduction, if I can, and then I will ask you to 
stand and raise your right hand. But Brian Deese has filed 
responses to a biographical and financial questionnaire, 
answered pre-hearing questions submitted by the Committee. He 
has had financial statements reviewed by the Office of 
Government Ethics. Without objection, this information will be 
made part of the hearing record, with the exception of the 
financial data, which are on file and available for public 
inspection in the Committee's offices.
    Our Committee rules require that all witnesses at 
nomination hearings give their testimony under oath, and, Mr. 
Deese, I am going to ask you to stand and raise your right 
hand. I am going to ask a couple of questions.
    Do you swear that the testimony you are about to give to 
the Committee will be the truth, the whole truth, and nothing 
but the truth, so help you, God?
    Mr. Deese. I do.
    Chairman Carper. Please be seated. At this point, you may 
proceed with your statement. I am going to ask you to introduce 
your mom, dad, and your bride, and I do not know if your 
daughter is still around here, but she may have taken an exit. 
But please introduce your family. We are just delighted that 
you are all here. I think it is a matter of family pride and I 
know you are proud of him and I am sure he is proud of all of 
you. Please.


    Mr. Deese. Thank you, Chairman Carper.
    \1\ The prepared statement of Mr. Deese appears in the Appendix on 
page 32.
    Thank you, Senator Levin. And thank you for welcoming me 
here today. It is a real honor to be considered as the 
President's nominee to be Deputy Director of the Office of 
Management and Budget. As you have mentioned, I am joined by my 
family, my father David, my mother Patricia, my wife Kara, and 
my baby girl Adeline who promised me that she would behave and 
that is a promise I am not going to hold her to. And my sister 
    Chairman Carper. Tell us a little bit about your mom and 
dad, your wife, and your sister. This will not count on your 
time. We will stop the clock. Just tell us a little bit, a 
thumbnail sketch about each of them.
    Mr. Deese. I have been really privileged to have an 
incredible family, a mother and father who have supported me 
over the years and who have instilled in me both a real passion 
for ideas and education and also a commitment that for those of 
us who are fortunate enough to have opportunities in education 
and life, we should look for opportunities to give back, commit 
to public service.
    In particular, my sister who I am very close with. She is 2 
years older than I am and she has been a rock in my life for 
the last 35 years, and I thank her for that.
    Chairman Carper. She is the one whose lips are moving while 
you speak?
    Mr. Deese. She is very nervous on my behalf. But most of 
all, I would like to thank my wife Kara. Serving in these types 
of jobs is truly a team effort. I could not do it alone and she 
has been unbelievably supportive, particularly when we have 
been through harder times, and I know that the challenges of 
this job will be significant. And so, I am very grateful to her 
for all of her support.
    Chairman Carper. For you, Kara, no purgatory, straight to 
heaven. Thank you.
    Mr. Deese. I second that. I would also like to thank 
President Obama for nominating me to this position, and also 
Director Burwell, who you referenced, for her support and her 
confidence in me. And I hope that if confirmed, I can meet 
their high standards for performance on behalf of the American 
    And finally, I do want to thank Members of this Committee 
and their staffs for taking the time to meet with me over the 
last couple of weeks, and if confirmed, I look forward to 
continuing the conversations that we have had and investing in 
the strong relationship between OMB and this Committee going 
    Over the past several years, I have had an opportunity to 
work with many officials at OMB, as well as across Executive 
Branch agencies, to develop and implement Administration 
policies, and this experience has given me a deep respect for 
OMB as an institution and the vital role that it plays. And 
perhaps more importantly, a real respect for the skills and the 
commitment of the professionals who work at OMB.
    That is just one of the reasons why I am very humbled to be 
considered for this position, and particularly at this time in 
our economy when we face very substantial fiscal challenges and 
economic challenges that we will need to address together. We 
have made important progress in the economy. Our economy is 
growing. We are seeing some important signs of strength in 
sectors from housing to our manufacturing industry. Most 
importantly, our businesses are creating jobs on a consistent 
basis. And I think together, Congress and the President have 
begun to make progress on the important work of bringing down 
our deficits and strengthening our Nation's long-term fiscal 
    But there is a lot more work that we need to do together to 
reach what I believe is the ultimate goal of an economy that is 
providing opportunity and real stability for working families.
    Much of my professional work has focused on the role that 
fiscal policy can play in that effort in promoting a stronger 
and more durable economy. And if confirmed, I will work closely 
with Director Burwell to build on the progress that we have 
made to try to reach the type of comprehensive deficit 
reduction agreement you referenced that can support a stronger 
economy in both the short and the long run.
    Another key area of focus, particularly in this moment of 
fiscal challenges, has to be making our government more 
efficient and more effective and showing the American people 
how we can do more effectively with less. This is an area where 
this Committee has shown great leadership, and if confirmed, I 
look forward to working with you to make progress on many of 
our shared priorities.
    And finally, I do believe that the budget is fundamentally 
a vision for how we in public service can deliver better 
outcomes for the economy and for American families. It is a 
reflection of our values and our priorities, and if confirmed, 
I will work every day to uphold those values and priorities to 
the best of my ability.
    I want to thank the Committee for your time today and for 
considering my nomination and I look forward to answering all 
of your questions.
    Chairman Carper. All right. Thanks very much. As you 
probably know, we begin the questioning of our witnesses in a 
confirmation hearing by asking the same three questions we have 
asked for as long as I have been here. I have been here for 
about 12 years, each year these hearings are the same. I am 
just going to ask you. Each of these questions is easy to 
    The first one, is there anything you are aware of in your 
background that might present a conflict of interest with the 
duties of the office to which you have been nominated?
    Mr. Deese. No.
    Chairman Carper. Do you know of anything, personal or 
otherwise, that would in any way prevent you from fully and 
honorably discharging the responsibilities of the office to 
which you have been nominated?
    Mr. Deese. No.
    Chairman Carper. And finally, do you agree without 
reservation to respond to any reasonable summons to appear and 
testify before any duly constituted Committee of Congress if 
you are confirmed?
    Mr. Deese. I do.
    Chairman Carper. All right. Senator Levin and I are big 
baseball fans, in fact, of the same team, the Detroit Tigers. I 
would say he is three for three. It is still early.
    Senator Levin. They have the same problem with their 
current closer, too. Losing too much sleep over it.
    Chairman Carper. I know. Oh, well, our team lost today two 
out of three.
    Senator Levin. That is on the record.
    Chairman Carper. In any event, we will turn to that problem 
    I am going to start off by saying, if confirmed, why do you 
not just lead off by telling us what your, maybe, top three 
priorities would be.
    Mr. Deese. Sure. This is something that I have had a chance 
to talk to Director Burwell about and I think that in terms of 
priorities in the Deputy Director role, first would be to work 
with Director Burwell in setting out a budget framework for the 
government. And I think in the current context, that means in 
particular trying to work to encourage the movement that we 
have seen toward a more regular order budget process and also 
to try, however challenging, to work toward the kind of 
comprehensive deficit reduction agreement that I think could 
benefit the economy.
    A second priority is to work to set priorities to make the 
government more efficient and effective, and I think that the 
Deputy Director plays an important role in setting those inside 
priorities and then also making sure that we as a team at OMB 
would be well-positioned to execute on those.
    And I think in particular, from my perspective, the 
relationship between the Deputy Director and the Deputy 
Director for Management is vital in that context. And so, if I 
am confirmed, that would be something that I would invest in, 
in particular.
    And third, a priority would be OMB as an institution. And 
OMB has a strong reputation for strong analysis and excellent 
professional staff. It is also facing a lot of challenges 
today, and so I think that investing and making sure that the 
institution is able to continue to attract and recruit top 
flight talent, continue to do the analyses and play the vital 
role that it needs to play in our system would be another 
    Chairman Carper. Have you had the opportunity to discuss at 
all with our new Director, Sylvia Burwell, how your role--her 
role as Director and the role of the Deputy for Management, 
what that would intertwine?
    Mr. Deese. I have.
    Chairman Carper. Maybe give us some practical examples of 
how that would be.
    Mr. Deese. Sure. I have and I think that Director Burwell 
has talked about building a great team, and I think that is the 
way that both of us would approach this, is having a great team 
in place to make sure that we are achieving all of the 
objectives that we need to achieve.
    I think that one particular priority for the Deputy 
Director, my role if confirmed, would be to work on setting out 
that budget framework and making sure that we are working 
across agencies to incorporate their points of view into the 
budget process and the budget framework and making sure that we 
are implementing key budget priorities.
    But as I mentioned earlier, I think that the other 
important role of the Deputy Director is to make sure that the 
``M'' side and the ``B'' side are working seamlessly together. 
And so, I think that means, one, being a part of setting the 
priorities for the management side of OMB; and then having a 
close relationship with the Deputy Director of Management and 
making sure that where there are priority areas for providing 
sufficient guidance and sufficient attention to make sure we 
are executing on our goals.
    Chairman Carper. Would you share with us your overall 
philosophy on addressing the Federal deficit and our long-term 
debt, please?
    Mr. Deese. Sure. I think that we are at a moment, an 
economic moment, right now where the need for deficit reduction 
also presents an economic opportunity where we have a set of 
long-term fiscal challenges and we have a set of short-term 
economic challenges, and that if we could come together around 
a comprehensive deficit reduction agreement that provided more 
confidence about our long-term path, we would also be able to 
provide more support to the economy in the short run.
    And so, when I think about what are the most important 
priorities in that space, I think that the areas we need to 
focus on are entitlement reform and tax reform. And I think as 
you mentioned in your opening statement, entitlement reform 
that is designed to strengthen the core programs that our 
seniors and vulnerable Americans rely on, but then look for 
ways to address, in particular, the rising cost of health care 
and look for ways to increase efficiencies and actually drive 
systematic change to drive down the rate of growth of health 
care across our system.
    And I think on tax reform, we have an opportunity to reform 
in a way that reduces complexity, encourages greater economic 
growth, and also contributes to reducing the deficit as well. 
And I think that there are real opportunities in that space, 
economic opportunities to bring those things together as part 
of an overall approach.
    Chairman Carper. How does your work leading up to this 
point help to prepare you for the responsibilities that you 
have been nominated to undertake?
    Mr. Deese. Well, when I think about the Deputy Director 
role and the responsibilities that we were just talking about, 
I think there are three sets of skills that I could bring to 
bear. The first is a sound understanding of the Federal budget. 
I think that is important and it is something that I have 
developed over the last several years, worked closely on the 
development of the last several budgets, and also in 
implementing it, working with the staff at OMB and other 
    The second is an understanding of how fiscal policy fits 
into an overall economic strategy to try to help grow the 
economy and create jobs. And that has been the focus of much of 
my professional work, and I think it is particularly important 
now because we are at an economic moment where we have these 
interrelated fiscal and economic challenges.
    And the third is a more pragmatic understanding of how to 
get things done in government, and I think that the work most 
recently as Deputy Director of the National Economic Council 
that I have done has prepared me to know how to work across 
agencies, identify teams, bring together senior management 
across the Federal Government, set a priority, and try to drive 
for results. And I think those are the kind of skills that I 
think I could bring to this job.
    Chairman Carper. OK. Not long ago Ben Bernanke, the 
Chairman of the Federal Reserve, came to meet with the Senate 
Finance Committee, Democrats and Republicans, not an open 
meeting, but a very informative meeting. He was going to talk 
to us largely about budget deficits, how to reduce the deficit, 
and how to do it at the same time that we strengthen our 
economic recovery.
    And I asked him, I said, as we rein in the growth of 
spending broadly across the government, are there any 
particular places where we should invest more? And he picked 
out three. One he said the workforce, world class workforce; 
No. 2, he mentioned we should focus on infrastructure broadly 
defined; No. 3, research and development that could create 
technologies and products, goods and services that we could 
commercialize and sell all over the world.
    Would you just react to what he told us that day?
    Mr. Deese. Sure. I think that, when you think about those 
three areas, I think the thing that all three of them share is 
that they are linked to long-term productivity growth in our 
economy. And so, when we think about where are the places where 
we need to make targeted investments, even in the context of a 
difficult fiscal environment, I think that using that as a 
metric of where can we identify the strongest linkages to 
future productivity growth and future competitiveness is 
    And so, I think that infrastructure, for example, is a good 
example of that where smart, well-designed targeted investments 
in improving our infrastructure has been shown to increase 
productivity because it makes it easier for businesses to come 
and invest and create jobs. And I think identifying those kinds 
of opportunities is very important as part of this overall 
fiscal strategy.
    Chairman Carper. All right. Thanks very much. I have used 
up my time and we will come back for a second round. Senator 
Levin, please.
    Senator Levin. Thank you, Mr. Chairman. First, let me thank 
you, Mr. Deese, for your accessibility in the past. You have 
been helpful in the area of the auto issue that you were very 
actively involved in. You were always available to me and my 
staff and we were grateful for that. You have been hard-
working, and I think there is no doubt about your 
qualifications for this office.
    I do have a couple questions, however, as to where Gene 
Sperling has been and where you have been on the question of 
revenues to address our deficit. I take it from your answer to 
the Chairman's question that you believe that tax reform, as 
you talk about it generically, needs to contribute to the 
deficit reduction effort.
    Mr. Deese. I do. I think that is important.
    Senator Levin. And so, what I want to focus on is one part 
of tax reform. I have spoken to Mr. Sperling, and I think I 
have probably spoken to you, on a number of occasions, but at 
least I have to him, about how is it that some of these 
egregious tax loopholes that corporations utilize to avoid 
paying taxes, when they are closed, if they are closed, why the 
revenues from those closures of those unfair, unjustified tax 
loopholes--and I am going to go through a few of them with 
you--should not be used for deficit reduction to also fight for 
programs which are being cut through sequestration such as 
education and health care and the environment and food safety, 
and you name it.
    Why should those revenues that would come from closing 
those corporate tax loopholes not be used for any number of 
extremely important goals from deficit reduction to ending 
sequestration to, again, trying to fund the programs that are 
important to our people that are now being cut? So first 
generally, should those revenues be available for those 
    Mr. Deese. Well, I think just to go at the question of tax 
reform for a second----
    Senator Levin. But talk about the corporate tax that I have 
    Mr. Deese. Sure.
    Senator Levin. I will get more specific, but I think you 
have read enough of the stuff I have sent to your office to 
know where I am going to go in the next few minutes.
    Mr. Deese. Absolutely. Look, I think the most important 
issue on corporate tax reform, as we undertake it, is to judge 
any reform by the metric of, is it going to improve economic 
growth and, in particular, are you going to improve incentives 
to invest in the United States? And I think that is the real 
opportunity with respect to corporate tax reform.
    I think you are correct that when you look at the corporate 
tax code today, it represents and opportunity because we have 
this somewhat perverse situation where we have the highest 
statutory rate in the industrialized world, and yet we are not 
collecting revenues. We are sort of in the middle of the pack 
at best, and that is a function of the fact that there are a 
lot of tax expenditures that are either inefficient or they are 
not serving their intended purpose.
    And that creates an opportunity to reform the system, 
broaden the base, and also----
    Senator Levin. Why do you not focus also on the effective 
tax rate, which is not one of the highest in the world?
    Mr. Deese. That is right. And so, it is exactly that 
dynamic that creates an effective tax rate sort of in the 
middle or to the lower of the industrialized countries. So I 
think the question is, can we reform that tax code in a way 
that actually is for growth and improves domestic incentives to 
invest? I think the answer to that is yes.
    So, I think there is an opportunity here and I think that 
with respect to specific corporate tax expenditures, I think 
the President has put forward a whole set of them in the budget 
that he put out and those are ones that I think we could afford 
to close efficiently without doing harm to the economy.
    Senator Levin. Well, a bunch of these loopholes that are 
being used to drain our Treasury, to ship money offshore, serve 
no economic purpose. They are not pro-growth. They do not 
promote people to invest in the United States; quite the 
opposite. You have Apple that has what, $120 billion now in 
cash, most of it offshore. They are not going to bring it back 
unless they get a lower tax rate. So there it sits.
    We have companies that transfer their intellectual property 
to themselves in tax havens and shell corporations and then pay 
themselves to use their own property. There is no economic 
purpose served in that. It is nothing more than tax avoidance. 
The President says he wants to close them. The President, when 
he was a Senator, co-sponsored much of the legislation that 
would have closed at least some of those egregious tax 
avoidance tactics, which costs our Treasury God knows how many 
tens of billions a year and maybe $100 billion a year.
    We could end sequestration, at least for this year and 
next, if we closed some of those schemes which drain our 
Treasury and ship revenue offshore. Why should we not do that?
    Mr. Deese. Well, I think the framework the President has 
put forward----
    Senator Levin. Why should we not do what I am saying? I am 
not talking about the President's framework which just talks 
about cutting corporate rates, which, by the way, are already 
low as an effective tax rate. By the way, corporate tax 
revenues to this Treasury are at an all-time low. There are 
something like 9 percent of our revenues come for corporations.
    We have 30 corporations, the biggest corporations in the 
world that have not paid taxes for the 3-year period studied. 
Paid zero in taxes. Why not close those egregious, 
unjustifiable loopholes, that are costing our Treasury so much 
money, and use that revenue to end sequestration this year and 
next year? Why not?
    Mr. Deese. Well, I think that what the President has said 
is we should close----
    Senator Levin. No, for that purpose, why not close them and 
use the revenue for that purpose? That is my question.
    Mr. Deese. Well, again, the reason why I raised the 
framework is because if you look at the budget, it has a set of 
specific corporate tax expenditures and corporate tax loopholes 
that it would close. That is revenue that could be used to 
reduce the deficit or invest in other priorities.
    Senator Levin. Why is it in the budget said to be used only 
for rate reductions?
    Mr. Deese. Well, I think what the President has said is 
twofold, which is if we can move to close those loopholes, let 
us do so. Let us try to work together to do so. But if there is 
a good faith commitment to try to do comprehensive corporate 
tax reform and if that can be done in a way that actually is 
pro-growth and actually would increase incentives to invest in 
the United States, then he is willing to consider doing that in 
a revenue-neutral manner.
    Senator Levin. But if that cannot be done or is not done 
this year, why not take the revenues from these loopholes which 
have no economic purpose, other than tax avoidance, and take 
that revenue to end sequestration? If we cannot do the 
individual tax increases or revenue increases from the Buffet 
Rule or whatever, if we cannot succeed in getting that revenue, 
if the President does not succeed, why not take the revenue 
which should come to the Treasury, frankly, if there were no 
deficit from these tax avoidance schemes? Why not?
    Mr. Deese. So again, I think the budget lays out those 
parameters and if we cannot move on corporate tax reform, we 
should move to close those types of loopholes.
    Senator Levin. Mr. Chairman, my time is up, but I do have a 
few more questions. But thank you. Sorry I went over.
    Chairman Carper. No. I would have let you use more.
    Let me go back and just revisit something I said earlier 
and just try to draw out some further discussion. I mentioned 
the conversation we had with the Federal Reserve Chairman, 
talking about investments that we should make even as we rein 
in the spending, the important investments to make to grow the 
size of the economic pie in our country.
    We had a previous Vice Chairman of the Federal Reserve come 
and testify in a hearing last year on deficit reduction, Alan 
Blinder, who is back now teaching economics, I think, at 
Princeton. And he was one of, I think, a four-or five-member 
panel discussing with us a year or so ago how we could go about 
reducing our deficits.
    I will never forget what Dr. Blinder said. He said the 800-
pound gorilla in the room on deficit reduction for the Federal 
Government is health care costs. And he did not say this, but 
as we know, we spend roughly 16, 17, 18 percent of GDP for 
health care in this country. In Japan, they spend about 8 
percent. They cover everybody and they get better results in 
many respects. I would like to say they cannot be that smart; 
we cannot be that dumb.
    But Dr. Blinder went to say, the 800-pound gorilla in the 
room on deficit reduction is health care costs. If we do not 
get our heads around it, get our arms around it, we are, in so 
many words, doomed.
    When it came time to ask questions, a question I asked of 
him, referring to his statement about the 800-pound gorilla in 
the room, and said, What would be your advice to us? If we are 
serious about deficit reduction, we know a big piece has to be 
health care costs. What should we do? And he thought for a 
moment and he said, I am not an expert on this matter. He said, 
I am not a health economist, but this would be my advice to 
you. Find out what works, do more of that. That is all he said. 
Find out what works, do more of that.
    My response to that was, I said, find out what does not 
work and do less of that, and he said, yes. But I think there 
is great wisdom in that, not just for spending money in health 
care more wisely, but for education, housing, transportation, 
all kinds of issues.
    One of my guiding principles, and I owe it to him, knowing 
how important reining in the growth of health care costs is, 
talk to us about how we might do that, some ways that we might 
do that, particularly with respect to Medicaid and Medicare, in 
ways where we do our best not to savage old people, poor 
people, but at the same time, we get a better result for less 
money or better result for the same amount of money because we 
need to. Please.
    Mr. Deese. Well, I think there is a lot of wisdom in that 
statement and, in particular, that in the health system, we 
really do need to identify those things that are going to drive 
innovation across the system and then make sure that they are 
spread broadly.
    I think the good news is that there is a lot of very 
exciting activity going on in our health care system right now, 
a lot of anecdotal, and in some cases, more than anecdotal 
evidence of what Dr. Blinder was referring to, places where we 
are seeing things that work, things like accountable care 
organizations where you are actually starting to structure 
payments and incentives around providing certain quality of 
care outcomes, rather than just paying for inputs independent 
of outcomes.
    Those are the kinds of potential measures that if we can 
identify them, we can measure them. We can actually verify that 
those work. And then we can spread them across the system. That 
is going to be the way that we help to really drive systematic 
change in the health care system. I think that we have a number 
of tools out there to help on that front to try to identify 
these game-changers, as some people refer to them, and I think 
that we need to look for additional ways to do that as well.
    You mentioned outside of the health care space, and I think 
that is an important component as well, and one of the things 
that I know that OMB has been working on and that if confirmed 
I would want to learn more about. I think the focus should be 
on evidence-based investment and evidence-based grant-making 
because there are a number of places where we can do better 
and, in fact, we can be more effective with the same or fewer 
dollars if we actually have better systems to measure and test 
results and then scale programs when we actually see positive 
    So I think that it is an important principle. It is 
applicable beyond the health care space, but I agree that the 
health care area is the place of both the greatest need and the 
greatest opportunity.
    Chairman Carper. Just before I caught the train to come 
down here today, we met with representatives from a large 
health insurance company back in the part of the world where I 
live and my family lives. We talked about some of these issues, 
delivering health care, better results for less money. What we 
talked about--you mentioned the accountable care organizations. 
We talked about patient-centered medical homes.
    What I think they do is represent a way to encourage 
collaboration, encourage a sense of teamwork in terms of 
delivering health care, to move away from fee-for-service, to 
just a lot of stovepipes that operate almost independently of 
each other without a lot of collaboration. Quite a different 
    If you look at Medicare, Medicare is pretty much a fee-for-
service animal, and we have some elements in Medicare where we 
actually do something like coordinate the delivery of health 
care better than we do in a straight fee-for-service.
    They had a problem in the past with Medicare Advantage 
being over-priced and we tried to address that to provide a 
smaller reimbursement so that the pricing is more reasonable, 
but at the same time, to encourage people to take advantage of 
a health care delivery system that moves away from fee-for-
    We could just talk about this. How do we move away from 
fee-for-service? How do you do it in a way that actually saves 
some money? What role does Medicare Advantage play here?
    Mr. Deese. Well, I think that has to be the goal and we 
have to figure out ways to do it that, as you say, end up 
strengthening the program, while also making the program more 
efficient. I think that the recent changes to Medicare 
Advantage which you referenced, I think, are being effectively 
implemented. We have seen premiums come down, enrollment go up, 
and we are saving money at the same time.
    I think that the most effective way that we can do this is 
by continuing the process of experimentation, identifying what 
works, and then scaling it. And I think that is, in a health 
care system, not just Medicare, but also across the health care 
system that is as complex as the one that we have in our 
economy, we have to make sure that we are testing results and 
then scaling them so that we know what works.
    And I think the linkage between Medicare and the rest of 
the health care system is important because I think ultimately, 
what our goal here is to do is to drive down the rate of growth 
of health care costs systemwide, because if the savings only 
accrue in Medicare and costs are increasing outside, we are not 
going to address the overall economic challenge that you 
referenced earlier of a larger and larger share of our gross 
domestic product (GDP) being eaten up by health care.
    So I think that it is about looking for ways to make 
programs like Medicare Advantage more efficient. I think we 
have seen some progress on that front, and I think it is about 
identifying successful interventions and scaling them over 
    Chairman Carper. All right. I will probably come back and 
revisit this in our next round, but let me yield now to Senator 
Levin. Thank you.
    Senator Levin. Thank you, Mr. Chairman. How important is it 
that we reverse sequestration?
    Mr. Deese. I come at this issue from an economic point of 
view, and when I look at the data and the independent analyses 
that have been done, I think that there are two problems. The 
first is that the sequester is a relatively blunt tool and it 
is forcing indiscriminate cuts, about which I think there is 
wide agreement, are not sensible.
    But second, the magnitude of the cuts imposed over such a 
short period of time, it is hard to do that without having a 
really material negative impact, and the Congressional Budget 
Office and others who have looked at the issue, have concluded 
that you are going to have a material negative economic impact.
    And so, I think that it is very important from an economic 
perspective that we look for a way to replace what is a blunt 
instrument that is going to do damage to our economy now with 
an approach that actually achieves greater deficit reduction, 
has more long-term reforms that actually will get at some of 
the issues that we were talking about, but that has a more 
sensible approach economically in the short term as well.
    Senator Levin. And is it important that the deficit 
reduction that you are talking about be balanced?
    Mr. Deese. I think----
    Senator Levin. In other words, that it have revenue and 
entitlement reform and it have more prioritized or targeted 
discretionary spending cuts? Should all three of those be part 
of a balanced deficit reduction?
    Mr. Deese. I think the short answer is yes, when you look 
at the deficit reduction as part of an overall economic 
strategy. We have to ask the question of, what is going to make 
sense for the economy in the short and the long term, and I 
think that in order to maintain the kinds of productivity-
enhancing investments, like infrastructure and basic research 
that we were talking about earlier, while also hitting our 
long-term deficit reduction goals, that the best way to do that 
is to try to bring revenues from tax reform and entitlement 
reform together done in a way that actually strengthens our 
entitlement programs in the future.
    Senator Levin. Donald Regan, who was the Secretary of the 
Treasury under President Reagan, wrote a book and this is a 
conversation that he recounted from the Oval Office. He said 
that President Reagan liked to start off every meeting with a 
story or a joke. So Don Regan decided he wanted to introduce a 
very serious subject, so he asked the President this question.
    He said, What do these 60 big corporations have in common? 
He rattled off the biggest corporations in America. And 
President Reagan's interest, he said, was immediately aroused. 
He said, I do not know, what do they have in common? And so, 
the Treasury Secretary said, Let me tell you, Mr. President. 
What these outfits have in common is that not one of them pays 
a penny in taxes to the U.S. Government.
    What the President said? His shock was genuine. A 
dumbfounded silence settled over his economic advisors. What 
unconventional idea was I trying to plant in the President's 
mind now? Believe it or not, Mr. President, your secretary paid 
more Federal taxes last year than all those giant companies put 
together. The President flushed, a sure sign of surprise and 
    I just cannot believe that, he said. His Treasury Secretary 
says, I do not blame you for doubting it, but it is the truth. 
I checked it out. It is perfectly legal, but it is wrong, Mr. 
President, when a hard-working secretary pays more to support 
her government than 60 of the richest corporations in the land. 
He said, I agree, Don. I just did not realize that things had 
gotten that far out of line.
    Well, things are that far out of line and it seems to me 
that what we need is some of that getting disturbed, bothered, 
troubled when we have some of the largest corporations in the 
country either paying no tax or using these gimmicks to shift 
revenue offshore to avoid paying taxes.
    I would love to see someone in the White House, the 
economic advisors, or you now as the Deputy Director of OMB to 
get mighty mad at this situation. We are facing sequestration. 
It is incredibly bad. It is the wrong way to budget. Everybody 
knows that, I think. Just about everybody knows it.
    And to say that we are not going to do the right thing in 
terms of closing these loopholes unless we can get corporate 
rates reduced, it seems to me, is ignoring a very troubled 
reality, and that is something else which Donald Regan, a 
conservative Republican, said in his book.
    The accumulated weight of the inefficiency and selfishness 
that they had created had become a burden on the economy and an 
affront to economic and social justice. Donald Regan is talking 
about economic and social justice. If he can do it, I would 
hope the Administration can do it. I would hope the OMB can do 
    The American people, by survey after survey, say they want 
these tax loopholes closed when they are informed particularly 
of the loopholes which allow corporations to shift revenue to a 
tax haven. And they are asked, No. 1, what do you want to do 
about it? End it.
    No. 2, what do you want to do with the revenue? They 
specifically say, in about a five-to-one margin, reduce the 
deficit, and fight to avoid cuts in education or in health care 
or in the infrastructure. That is what they want to do with it.
    You are going to be in a position where I would hope that 
there would be some serious thinking in the White House about 
whether or not we can, No. 1, continue a sequestration and if 
the way to avoid it is to get a balanced approach with revenues 
coming from a source that nobody can justify. I have not heard 
anybody justify these kind of loopholes.
    You can justify an oil and gas deduction. I do not favor 
it, but you can justify it. At least it is an incentive to 
produce oil and gas. You can justify accelerated depreciation, 
which I do favor, because it will give an incentive to buy 
equipment and new machinery, increase productivity, and create 
    But these are at least arguably useful deductions. The ones 
I am talking about, which have been sent consistently, 
regularly to your office, have no economic justification. They 
ought to be closed if we had no deficit, but surely with a 
deficit and sequestration, I would hope that you will take 
another look at these and not link their closing to reducing 
corporate tax rates. There is no logic to that.
    If these are unfair, unjustified tax loopholes, we need the 
revenue and we ought to get it, surely, as part of a balanced 
approach to deficit reduction. So you have already commented on 
that and I just would leave that thought in your mind as you 
are hopefully confirmed to be the Deputy at OMB. There are lots 
of other issues, obviously, that you have to face. It is a huge 
job. We wish you well.
    Mr. Deese. Senator, thank you, and I will say that I am 
happy to look further into that and to work with you and your 
office on that issue if confirmed.
    Senator Levin. Thank you, Mr. Chairman.
    Chairman Carper. Thank you, Senator Levin. There has been 
no shortage of initiatives that have focused on Medicare led by 
people like Alice Rivlin, people that include like Tom Daschle, 
and folks that are practitioners, very smart people, Jonathan 
Gruber from the Massachusetts Institute of Technology (MIT), 
that have actually looked at Medicare and said, These are some 
ways where we can save some money, save these programs in the 
long haul, and do so in a way that does not savage older people 
or poor people.
    What do you think are some of the most promising ideas? Not 
the ones we absolutely have to do, but what do you think are 
some more promising ideas that you have heard?
    Mr. Deese. Well, I think all of the most promising ideas 
share a similar character which is they go at incentives. And 
so, the accountable care organizations that we were talking 
about earlier try to address the incentives for teams of 
doctors to try to focus on outcomes rather than inputs.
    Another specific example is how to get at the issue of bad 
debt payments. If a hospital cannot collect bad debt payments, 
then Medicare reimburses. And what that creates is a system 
where there is no accountability, there is limited incentive to 
actually go out and seek reimbursement.
    I think that is a place where if we were to change some of 
the rules in Medicare we could try to put more of an incentive 
for hospitals to take on that kind of activity on their own. 
That is another way, again, where I think what you do is you 
are driving efficiency by changing incentives.
    And I think that we also have to be willing to look at 
whether there are things that we should do with respect to, on 
the beneficiary side, that are smart and that meet the 
principle of strengthening the program and strengthening the 
core commitment of the program.
    And so, I think it is appropriate to look at means testing 
Medicare. I think the President has put a proposal out that I 
think makes some sense, because as part of these overall 
reforms, I think we have to ask the questions about whether 
those who are the most fortunate should be paying a little bit 
more. It is still going to be a good deal for them as part of 
the system.
    So I think that if you can package together a set of these 
types of reforms that go after incentives that make sure that 
we are putting a program into the future that is actually going 
to be able to be viable, then that is the way we are going to 
start making progress.
    Chairman Carper. Dr. Coburn could not join us today. I do 
not think he is going to be able to arrive before our hearing 
concludes. But among the many issues that he has been focused 
on and has done a lot of work, with the help of his staff, is 
on the area of duplication. With an enterprise as large as the 
Federal Government we should not be surprised that there is 
    There is in any large corporation and we have it in spades 
in the Federal Government, as you know. The GAO has given both 
Congress and the Administration a number of recommendations to 
reduce duplication and there is a whole lot of work to be done.
    How will you work in your new post, if confirmed, to go 
after some of that duplication?
    Mr. Deese. Well, the issue is one that I know Dr. Coburn 
has taken a leadership role on and others in the Committee as 
well, and I think that GAO is playing a constructive role in 
the process by doing a set of reports that actually help to 
identify and flesh out because it helps focus attention and 
identify areas for progress.
    I think in the role, if confirmed, I would approach the 
issue from two ways. One is, where are there places within the 
Executive Branch's authority today that we can help make 
progress in addressing inefficient duplication? I know there is 
a whole range of proposals that have been put on the table and 
I think the Administration has already started to make progress 
on a number of counts.
    But if confirmed, I want to ask a set of questions about 
where are we and can we accelerate some of that, some of that 
progress. And in places where we have not moved, why is it? And 
are we sure that we cannot make some progress there as well.
    And then the second is in trying to work with Members of 
this Committee to identify where are the highest value places 
where legislation may be needed, but where we think there is a 
pragmatic opportunity to actually make progress.
    So the President's budget puts forward a couple specific 
proposals on duplication, one in the area of science, 
technology, engineering, and math (STEM) where we have a myriad 
of programs across the government, all well-meaning, but a real 
opportunity to deliver better results if we consolidate 
    And likewise in the area of job training. But what I would 
like to do if confirmed is understand and learn from Members of 
this Committee where you think and where we think we could 
actually make some tangible progress in the legislative front 
and then try to build some momentum there.
    Chairman Carper. One of the things I would keep in mind, if 
you have, we will say, 100 programs across the government that 
are focused on raising student achievement in the science, 
technology, engineering, math fields, one of the logical steps 
would be, in my judgment, is to be able to measure which of 
these programs are getting the kind of result that we are 
looking for and which ones are not, and being able to push more 
money toward the ones that are working and less money toward 
those that are not. That means we have to be able to measure 
progress and then be able to convince folks like Senator Levin, 
Dr. Coburn, and myself of that.
    I want to just focus a little bit on one of the areas that 
Dr. Coburn and I and others on this Committee have focused on 
which is improper payments. People looked pretty amazed to find 
out about 10 years ago, that the amount of improper payments 
that our Federal Government was paying were largely mistakes, 
counting errors, duplicate payments, or erroneous refunds.
    But in there we found that it added up to about, I want to 
say about $40 billion when we first passed legislation, I 
think, in 2002, that said Federal agencies have to start 
reporting your improper payments.
    Not everybody did right away, but over time, more and more 
did. We finally passed legislation about 2010--Dr. Coburn and I 
co-authored it--on improper payments that said basically four 
things. Not only, Federal agencies, do we want you to report 
improper payments, we want you to stop making them.
    And we also want you to go out and recover improper 
payments when you report all this, and we want to start 
rewarding or incentivizing managers. Part of their performance 
evaluation is to be evaluated on how well they and their 
agencies reduce improper payments, and recover over-payments.
    We saw, I think in 2010, improper payments peak out at 
about $121 billion. It is a lot of money. And we have seen the 
numbers drop over the last 2 years now down to about $108 
billion. I think a reduction, if my number if right, about $13 
billion over 2 years. Pretty encouraging. We still have a lot 
out there.
    And at the same time, I think we have seen recoveries of 
improper payments where we have gone out and recovered, I 
think, between $4 billion and $5 billion maybe in the last year 
or so. But there is plenty of work still to do.
    I am going to ask you just to take a moment and think out 
loud for us, if you will, what more we can do to go after that 
$108 billion number of improper payments.
    Mr. Deese. Yes.
    Chairman Carper. That is not all fraud. I mean, a lot of it 
is not even fraud. It is just mistakes.
    Mr. Deese. I think that it is a very important issue and I 
think that you are right that while we have seen some real 
tangible progress and some that is stemming from the important 
legislation that you and others have worked on and passed, the 
current level is unacceptably high, and so we have to be 
committed to moving to do more.
    I guess when I think about how to do that, I think about 
two issues. One is technology and data, and the other is 
evidence. And so, on the technology and data side, I think that 
as I understand it, a lot of the issues associated with 
improper payments are a function of not having effective data 
sharing between agencies to actually identify whether and when 
payments should and should not be made.
    And so, I think there are opportunities to try to improve 
the way that we are sharing data through better use of 
technology. And we have to be careful about protecting privacy 
in that process, but I think that is an opportunity.
    The other place, and this goes back to some of the 
conversations we were having about Medicare, that I think that 
the program integrity efforts that we have identified that we 
know are based in evidence and can return several dollars, 
eight-to-one, nine-to-one returns include things like in 
Medicare and Social Security with respect to continuing 
disability reviews, and also at the Internal Revenue Service 
    Those are places where I think we know there is an 
opportunity and that we have evidence to back that up. And so, 
we should think about how we can do more in those spaces.
    Chairman Carper. One of the initiatives that Dr. Coburn and 
I worked on in the last Congress, something called the Medicare 
and Medicaid Fighting Fraud and Abuse to Save Taxpayers' 
Dollars Act (FAST Act), and the focus there is how do we save 
money, particularly in Medicare and Medicaid. We have had a 
situation for a number of years where dead doctors have 
provided medical services to folks who may be alive, but they 
may not be. They may not be eligible for services.
    And we see situations where we are paying enormous amounts 
of money, in some cases, for medical equipment. We are not 
using competition. We are finding out if we do, we could 
actually save some money.
    But Dr. Coburn and I are reintroducing an updated version 
of the FAST Act, probably in the next week or two, and 
certainly in the next month. And let me just ask, is this 
something that you have ever heard of? And if you have any 
thoughts about how we might work together on this? I would 
welcome those thoughts.
    Mr. Deese. I have heard of it. I am not that familiar with 
the legislation, and so I would want to hold off and actually 
take a look at the legislation before giving you a full 
response. But I think generally speaking, it is an area where I 
am very interested and I understand that there is real 
potential. And so, I would look forward to taking a look at 
that and working on the issue, if confirmed.
    Chairman Carper. All right. Thank you. I want to delve into 
an area called Government Performance and Results Act (GPRA), 
and I do not know if you are at all familiar with that, but 
Congress, in 2010, updated the Act, thanks to the work of one 
of our former colleagues here, Danny Akaka from Hawaii. I think 
former Governor, now Senator, Mark Warner was involved in this. 
I worked on this, my staff and I, but it is a bipartisan kind 
of issue that our Republican colleagues, especially on this 
Committee, are very much interested in.
    But it requires, as you know, data-driven performance 
reviews. And I wonder if you could just tell us if you see this 
particular approach as a useful tool in measuring performance. 
And if you will, what should be the role of OMB in implementing 
this law?
    Mr. Deese. I think it is an incredibly valuable tool 
because one of the things that I think is very important when 
we think about performance in the government is setting 
priorities. And as Director Burwell has said on numerous 
occasions, if we try to do everything we will not do everything 
    And I think that having a framework to actually set goals 
and set priorities, but then also use that as a way to actually 
drive real accountability and culture change within the 
agencies, that has got to be our objective. And I think, as you 
said, the GPRA framework allows us to do that.
    And I think one of the things that is important about that 
is the link between goal-setting and accountability. And so, I 
think, for example, when I go on the Web site and I can 
actually pull up a goal and I see the picture of the person at 
the agency, this is the senior level manager, this is the 
senior person who is accountable for executing on that goal. I 
think that is the kind of positive development that this 
framework allows, because ultimately, it is moving from a 
compliance mentality to more of an accountability mentality 
that I think is actually going to help get results.
    I think the role that OMB can play, my understanding is 
that OMB plays an important role in coordinating the goal-
setting process across the agencies and then helping to make 
sure that agencies have the tools that they need to hit these 
accountability metrics. And so, that is certainly a role that I 
think is going to become even more important over time and 
something that I would want to prioritize myself if I were 
    Chairman Carper. It is not everybody who runs for office, 
who says I want to be a Senator, a Representative, President, 
or Vice President because I want to make sure that we do our 
dead-level best to use this GPRA law to get things done and to 
do more in a more cost-effective way.
    Not everybody wants to say, well, we have to figure out how 
many data centers that we are going to have and how much of our 
information we are going to put up on the cloud. You do not 
find many people who come here with the idea of doing those 
kinds of things.
    But everybody is intent on hammering down and getting rid 
of improper payments. We have been chasing down the fraud. But 
a lot of people on this Committee are. It is a Committee that 
draws and attracts those kind of people, in some cases, because 
we are former Governors or mayors or maybe attorneys general.
    I spoke earlier about the three things that I think are 
three components I hear over and over again, if we are serious 
about deficit reduction progress. One, we need some additional 
revenues closer to the level that persisted when balanced 
budgets were in the Clinton Administration or revenues as a 
percentage of GDP range between 19.5 and maybe 20.5 percent, or 
right around 20 percent. Spending was also right around 20 
    And as Dr. Coburn suggested, it does not have to be based 
on rates. If we are smart about it, we will find other ways 
just to get the effective tax rate up by going after provisions 
in the Tax Code that, frankly, do not make a lot of sense, or 
maybe are unfair, and do not enhance economic development.
    The other thing that we need to do, and I keep coming back 
to this one, and we as Democrats especially need to keep this 
in mind is the third piece, how do we get better results for 
less money in everything we do. It almost is like a culture 
change where we look in every nook and cranny of the Federal 
Government and ask that question and try to move from a culture 
of spendthrift to a culture of thrift.
    It is hard for one Committee to do that. It is impossible. 
It is hard for one Committee, even if you have a lot of people 
who are interested in this stuff and folks on our staff, it is 
hard even if you work with OMB. It is hard to get that done. 
Even if you are working with the House, it is hard to get it 
done. It is hard if you are working with the Government 
Accountability Office or with all the IGs, all the inspector 
generals across the Federal Government.
    What we try to do is to leverage the effectiveness of our 
Committee in going after ineffective spending by partnering 
with all the above. And we need to--this is again, as I said, 
is a shared responsibility, all hands on deck.
    Would you just talk a little bit about how you think, in 
your position at OMB, how OMB can be maybe a better partner in 
that leveraging activities?
    Mr. Deese. Sure. I think there is a couple things that OMB 
is particularly well-positioned to do. I think the first is to 
invest in a relationship based on transparency and trust with 
both this Committee and some of the other actors that have a 
vital role to play in this overall process.
    And I think that having a sense that we are working 
together to set those priorities that I was just referring to, 
that we are looking for opportunities to incorporate different 
points of view. I think that is important in building a 
relationship that actually will be effective at getting things 
done, as you say, when it is an effort that is going to require 
everybody together.
    I think the other thing that OMB is very well-positioned 
and it plays to OMB's strengths is to provide best practices 
and information across the agencies. And so, whether it is on 
the IT side and doing things like, in a portfolio stat, you go 
into an agency and you really look top to bottom, what kind of 
technology improvements can be made, but then OMB is in a 
position to actually cross-fertilize and make sure that the 
lessons learned from that particular intervention are actually 
available to the other agencies.
    And so, I think, in a very pragmatic way, we at OMB need to 
make sure that we are using that resource as effectively as 
possible and need input on how we can do that better.
    And then I think the third area really is in helping to set 
the priorities for the Federal Government because the policy 
process that OMB can oversee and the fact that we have 
responsibility for the budget framework as well means that is 
the opportunity to make sure they are full integrated and that 
when you are trying to identify these areas to make government 
more efficient and effective, that they are reflected in the 
budget that is out there as well.
    So I think there are several opportunities where OMB can 
and should play a vital role. But I agree with your basic 
premise that at the end of the day, to make real progress, we 
all have to be working constructively and pragmatically 
together. That is, again, if confirmed, something that I 
appreciate and I want to learn more about from you and others.
    Chairman Carper. As it turns out, GAO can be enormously 
helpful in this area. Every other year actually, GAO puts out 
something they call their High Risk List, and someone asked me 
once, what is the High Risk List. It is a compliation of high 
risk ways to waste taxpayer money.
    They have a lot of ideas and they involve the way we manage 
our data, they have the way we procure our weapon systems where 
they contract for all kinds of things, the way we handle our 
Federal property and dispose of Federal property or do not. I 
call the GAO High Risk List this Committee's to-do list.
    And I would just suggest that for OMB, it is not a bad to-
do list for the Administration. And again, it is so hard to get 
anything done around here, even if we agree on things, but if 
you have a particular set of policy initiatives that really 
could, arguably, save a fair amount of money and the 
Administration is not only just talking about it but putting it 
in their budget.
    And you have GAO in their High Risk List saying these are 
things we need to do, we have the Committees in the Senate and 
in the House that are doing proper oversight that includes 
matching up behavior of Federal agencies and so forth, their 
policies, measuring those against the high risks from GAO, and 
then finding folks within the IGs ranks, inspector general 
ranks, and then outside of government groups like Citizens 
Against Government Waste and other kinds of organizations.
    If you can put them all together you can get actually a 
synergy going here. And I think we are going to need that in a 
huge way if we are serious about deficit reduction. That is the 
third piece.
    I have people all the time who say to me, I do not mind 
paying more taxes, but I do not want you to waste my money. You 
would be amazed how often I hear that. I do not mind paying 
more taxes. I do not want you to waste my money. And if we 
realize that more revenue is part of the solution, not 
necessarily higher rates, if we realize that more revenue is 
part of the solution. We realize that they are not anxious to 
pay more in revenue or taxes, but if you do, we do not want you 
to waste that money.
    If we can convince clearly people that are determined to 
work on that front as well, I think we help ourselves and our 
country in the end.
    Among the items on GAO's High Risk List many deal with 
building space. We own hundreds of thousands of pieces of 
property around the country and some of them are well-utilized, 
others are not.
    One of the things that troubles me--and Dr. Coburn focused 
on this almost as soon as he came to the Committee in 2005--was 
the way we lease space for Federal agencies to use when 
actually it would be more cost-effective to buy it. But if you 
buy it, you have to pay for it. You cannot, because we do not 
have a capital budget, you cannot basically write it off over 
time. You have to take it up right up front. A billion-dollar 
complex, its first year, you would have to offset it. That is a 
hard thing to do.
    Would you talk with us a little bit about that idea, a 
long-term lease versus actually paying something outright and 
how we deal with the scoring? Because the incentives are all 
wrong. It may be, in a lot of cases, more cost-effective to buy 
and to own than it is to lease long term. Can you talk to us 
about the incentives there and how, if anything, we can and do 
need to do?
    Mr. Deese. Sure. I mean, I think there is a real 
opportunity in better managing the Federal footprint, and I 
think there is an opportunity to actually generate savings, 
deficit reduction, but also to just operate our Federal 
facilities more efficiently and effectively.
    I think that the way to go about it is to think about how 
to create more tools to effectively manage this large footprint 
that we have. The issue that you mentioned is one of those 
tools. I think there are other tools that we should look at, 
and are there ways that agencies can swap facilities when that 
would be, an economic improvement for both agencies.
    I know that there is an initiative that has been undertaken 
to basically have PAYGO within an agency that says, you cannot 
expand in a new facility if you have not actually already 
looked at whether there are places where you need to 
consolidate. I think that is an effective forcing mechanism as 
    I think if you put together these pieces and you look at 
what other pieces are out there, it is going to be those types 
of pieces together that are going to get us to a more efficient 
outcome, a more efficient management of the Federal footprint.
    It is a real opportunity and I think it is one that, if 
confirmed, I would want to work with you and your staff, as 
well as Dr. Coburn and his staff and others, to make sure that 
I fully understand exactly what type of tools are going to be 
the most effective, but I agree completely that we need more 
tools in the toolkit to try to go at this problem, and there is 
a real opportunity there.
    Chairman Carper. Maybe one last question. One of the things 
I like to do at a hearing, usually I do it at a hearing when 
there are a number of witnesses and where we are trying to 
develop consensus around a particular issue. We were doing that 
last week on, among other things, improper payments and how to 
reduce them.
    I am going to ask you to give a closing statement, not a 
long one, but just some things you would like to mention, maybe 
reemphasize, or some thoughts that have come to mind that you 
did not have a chance to put in your original statement, so 
think about that, if you will.
    The job of government with respect to job creation is, 
people think sometimes their Senators think that they create 
jobs, or Governors create jobs, or Presidents create jobs, and 
I always say, No, we do not create jobs. What we do is help 
create the nurturing environment for job creation, which is 
workforce, infrastructure, access to capital, common-sense 
    There are about 7 or 8 million jobs in the country that 
depend on a vibrant and cost-effective Postal Service and we 
have been wrestling for a couple years now to try to get it 
right in a day and age where you have people change very 
dramatically the way they communicate.
    As you know, first-class mail volume is way down. And that 
we still need a Postal Service. But I do not know if you have 
any thoughts about how to move us toward a vibrant, sustainable 
system where we can maybe maintain a unique distribution system 
that we have, but find ways to use that to generate more 
revenues, just to be more innovative.
    But we need thoughts you have on the postal reform, which I 
think is going to be seriously addressed this spring and this 
summer. My hope is that we will be able to find common ground 
not only here in the Senate, but also in the House and with the 
    Mr. Deese. Well, I think it is an important area to find 
common ground because this is, as you say, a service that 
provides a vital service to Americans, but also, as currently 
structured, is unsustainable and if left unaddressed, is going 
to end up being a harder problem to solve and one that could 
potentially be a larger liability for taxpayers down the road.
    So I think this is the moment to try to take a very serious 
look at reform. And I know that the President's budget has put 
forward an approach to reform. I know that others have thought 
very deeply about what the right approach to do that is.
    I do not have a particular magic formula in that respect, 
but I do think that the right way to go at this issue is to 
look for the areas of common ground and try to build a 
consensus, that if addressed now and in a sensible way, this 
will be easier.
    It is never going to be easy, but it is going to be easier 
now if we address this in a sensible way than if we leave it 
and wait and have to address a bigger problem down the road.
    Chairman Carper. Good. Well, if you are confirmed, it is 
one of the first things that we are going to try to hammer out, 
we will certainly need your involvement and guidance and 
support in doing that.
    If you have a just brief closing statement you would like 
to offer, we are all ears. We would like to hear it.
    Mr. Deese. Sure. Well, first of all, thank you for this 
hearing and again the opportunity to speak with you and with 
Senator Levin. I look forward to speaking with other Members of 
the Committee. And I guess in addition to what I have said, I 
guess I would just say this, that I understand that we face 
very serious challenges as a country, economic challenges and 
fiscal challenges, but I am also very energized by the 
opportunity ahead and the potential opportunity if confirmed 
for this role at OMB.
    And I think that in addition to the opportunity to work 
with a second-to-none professional staff at OMB, the 
opportunity to be part of a pragmatic group, as you said, this 
Committee and other stakeholders that you have identified, that 
are trying to actually just identify where can we find good 
ideas and how can we move forward to show the American people 
that we can be effective stewards of taxpayer dollars.
    We can do more with less, we can operate their government 
more efficiently. It is something that is extremely exciting 
for me and, again, I am very humbled and honored to be here and 
thank you for your time.
    Chairman Carper. Well, we thank you for your time. We thank 
you for your willingness to take this on. I want to thank your 
mom and dad, David and Patricia, for raising you and your 
sister Heather to be so smart and to have good values and a 
good work ethic and good judgment in spouses.
    Kara, we are grateful for your willingness to share your 
husband with us. It is a sacrifice to do these kinds of things. 
We are mindful it is not just a sacrifice on his part, but on 
yours as well. I am deeply grateful. And I look forward to 
working with you if confirmed, look forward to working with you 
closely going forward.
    I will close with the words I used earlier. A big part of 
what we need to do is find out what works and do more of that, 
find out what works and do more of that. And it is not any one 
person's responsibility. It is not mine, it is not yours, it is 
not the responsibility of Sylvia Mathews Burwell, it is not the 
OMB Deputy for Management. It is everybody's responsibility.
    And we look forward to finding those ideas that work and 
doing more of that and seeing if we cannot continue the 
progress we are making in getting this country moving in the 
right direction in terms of our economy, but also keeping our 
deficit moving in the right direction and that is down. We are 
anxious to get you on the job and at work so we can continue 
that progress.
    I understand, according to our crack staff back here, that 
the hearing record will remain open until close of business 
tomorrow. That is May 14 at 5 p.m. for the submission of 
statements and questions for the record. Have you had a chance 
to meet with most of the Members of our Committee?
    Mr. Deese. I have had a chance to meet with some of them, 
    Chairman Carper. Yes. You want to meet with as many of us 
as you can. Not everybody can. Some people serve on five 
Committees and they are--we are all busy. But I would urge you 
to make yourself as available as you can. That will help you, 
and in the end, it will help us to move your nomination along 
    I think that is a wrap. Thank you so much. And with that, 
this hearing is adjourned. Thanks so much.
    [Whereupon, at 4:32 p.m., the hearing was adjourned.]
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