[Senate Hearing 113-703]
[From the U.S. Government Publishing Office]
S. Hrg. 113-703
NOMINATION OF HON. SHAUN L.S. DONOVAN
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HEARING
before the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
NOMINATION OF HON. SHAUN L.S. DONOVAN TO BE DIRECTOR, OFFICE OF
MANAGEMENT AND BUDGET
__________
JUNE 11, 2014
Available via the World Wide Web: http://www.fdsys.gov/
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Committee on Homeland Security and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
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
HEIDI HEITKAMP, North Dakota
Gabrielle A. Batkin, Staff Director
John P. Kilvington, Deputy Staff Director
Mary Beth Schultz, Chief Counsel
Troy H. Cribb, Chief Counsel for Governmental Affairs
Deirdre G. Armstrong, Professional Staff Member
Keith B. Ashdown, Minority Staff Director
Christopher J. Barkley, Minority Deputy Staff Director
Andrew C. Dockham, Minority Chief Counsel
Laura W. Kilbride, Chief Clerk
Lauren M. Corcoran, Hearing Clerk
C O N T E N T S
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Opening statements:
Page
Senator Carper............................................... 5
Senator Coburn............................................... 7
Senator Enzi................................................. 16
Senator Johnson.............................................. 18
Senator Begich............................................... 21
Senator Tester............................................... 24
Senator Baldwin.............................................. 27
Senator Portman.............................................. 30
Senator Levin................................................ 33
Prepared statement:
Senator Carper............................................... 39
Senator Collins.............................................. 41
Senator Landrieu............................................. 44
WITNESSES
Wednesday, June 11, 2014
Hon. Susan M. Collins, a United States Senator from the State of
Maine.......................................................... 1
Hon. Mary L. Landrieu, a United States Senator from the State of
Louisiana...................................................... 3
Hon. Shaun L.S. Donovan, Nominated to be Director, U.S. Office of
Management and Budget
Testimony.................................................... 8
Prepared statement........................................... 46
Biographical and financial information....................... 49
Letter from the Office of Government Ethics.................. 68
Responses to pre-hearing questions........................... 70
Responses to post-hearing questions.......................... 116
NOMINATION OF HON. SHAUN L.S. DONOVAN
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WEDNESDAY, JUNE 11, 2014
U.S. Senate,
Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 10:12 a.m., in
room SD-342, Dirksen Senate Office Building, Hon. Thomas R.
Carper, Chairman of the Committee, presiding.
Present: Senators Carper, Levin, Pryor, Landrieu, Tester,
Begich, Baldwin, Coburn, McCain, Johnson, Portman, and Enzi.
Chairman Carper. Good morning. Senator Collins, have you
been in this room before? [Laughter.]
We actually thought of naming it after you at some point in
time.
Senator Collins. Only about 5,000 times. I think that is a
rough count.
Chairman Carper. Something seems wrong with you sitting on
that side of the table.
Senator Collins. It does to me, too.
Chairman Carper. Do you want to come up here? [Laughter.]
I am sure you would do well.
Senator Landrieu is going to join us, I think, shortly, and
if it is OK with Dr. Coburn, I think we will just go ahead and
recognize you to make some introductory remarks, and then if
she is here, we will let her take over, and if not, we will
proceed. Thank you. It is nice to see you.
And, Shaun, to you and your family, welcome. We are
especially happy to see your bride and those two sons of yours.
We are happy you are all here.
Susan, please proceed.
TESTIMONY OF THE HONORABLE SUSAN M. COLLINS,\1\ A UNITED STATES
SENATOR FROM THE STATE OF MAINE
Senator Collins. Thank you very much. Chairman Carper,
Ranking Member Coburn, Members of the Committee whom I am sure
will be joining us shortly, I come before you this morning to
introduce Shaun Donovan, who has been nominated to be the
Director of the Office of Management and Budget (OMB).
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\1\ The prepared statement of Senator Collins appears in the
Appendix on page 41.
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In many ways, my appearance here today is, as the Chairman
indicated, a homecoming, as I served for 16 years on this
Committee. And introducing Secretary Donovan is, in many ways,
bittersweet. I very much enjoyed the opportunity to work
closely with him since becoming the Ranking Member of the
Appropriations Subcommittee on Transportation and the
Department of Housing and Urban Development (HUD) in 2011. So,
we have worked very closely together, and I will miss working
with him.
During his tenure as HUD Secretary, Secretary Donovan has
been widely recognized as an effective and knowledgeable
leader, and not just in terms of HUD's own programs. As this
Committee may well be aware, he has been centrally involved in
shaping the future of the government's role in housing finance
and he also led the recovery efforts following Hurricane Sandy.
Having served on this Committee for many years, I know that
I frequently was frustrated by the OMB Directors ignoring the
``M'' in OMB. Effective management of Federal procurement
policy, analysis of proposed Federal regulations, and the
reduction of unnecessary government paperwork are core
functions of OMB, and yet oftentimes the focus of the OMB
Director has been solely on budget issues. Important as those
are, it is also important that there be a concentrated focus on
the management issues that are so important and in which OMB
plays such a key role.
So, I think it may be of considerable interest to this
Committee to know about the data-driven approach that Secretary
Donovan brings to improving the effectiveness and efficiency of
Federal programs. At HUD, he instituted quarterly reviews,
known as HUDStat, to improve the Department's performance and
to ensure that HUD programs are meeting their goals. Central to
these reviews has been the use of data to develop plans to
overcome challenges and strengthen the effectiveness of
programs.
I have no doubt that the Federal Government would benefit
from the broader application of these efforts by having him
lead the Office of Management and Budget. I know this is an
issue that Senator Coburn has been interested in for many
years, the need to have metrics so that we are actually
measuring whether or not our programs are working and whether
the taxpayers' investment has been warranted, and that is
exactly the kind of data-driven system that Secretary Donovan
instituted at HUD that was not there prior to his becoming the
leader of that Department.
He has demonstrated the ability to achieve meaningful
results by measuring programs, and perhaps nowhere is that more
evident than the goal of reducing homelessness. It is one thing
to have a broad goal to reduce homelessness and put some money
behind it and create some new programs. The question is, does
it work? Since 2010, due in large measure to data-driven
solutions leading to more effective programs, chronic
homelessness in this country has been reduced by 16 percent,
and veterans' homelessness has been reduced by 24 percent.
Not only is Secretary Donovan knowledgeable and data-
driven, but he has also demonstrated his responsiveness to
Congress, and I cannot say that about every member of this
cabinet or this Administration. I would like to briefly cite to
you just one example.
We had reports surface in my State of Maine of poor
conditions at HUD subsidized housing. The problem was first
brought to my attention by a local fire chief in western Maine
who was really worried that some of this housing was so
dangerous, it was at risk of serious fires. I turned to the
Secretary, requested assistance from him, and he understood how
important it was to resolve these issues as quickly as
possible. He worked with HUD's Inspector General (IG) to have
HUD and the Office of Inspector General (OIG) staff come to
Maine, inspect the properties, identify the underlying
oversight deficiencies in the inspections that the State
housing authority was doing, and formulate a correction plan.
The board of the Maine State Housing Authority used these
findings and recommendations to implement sweeping reforms,
including much-needed leadership changes to prevent these
unacceptable problems from happening again.
I mention that example because it demonstrates the
Secretary's commitment to protecting not only the tenants who
were living in squalor, in some cases, and really dangerous
conditions, but also to protecting the taxpayers who were
subsidizing this unacceptable housing.
With the confirmation, if you choose to do so, of Secretary
Shaun Donovan as Director of OMB, I can assure you that the
American people will have a leader of integrity and
intelligence in a critical job. I want to thank him personally
for his service at HUD, and I would respectfully urge this
Committee to give him your support.
Thank you for the opportunity to introduce him to the
Committee today. I, of course, would welcome any very hard
questions that you would like to direct to the nominee.
[Laughter.]
Chairman Carper. All right. Here is my first question.
Where is Senator Landrieu?
Senator Landrieu. Right here.
Senator Collins. She has arrived right on time.
Chairman Carper. You called it. That was a wonderful
statement. Thank you.
Senator Landrieu, great to see you. Thank you.
Senator Landrieu. Mr. Chairman, thank you.
Chairman Carper. Senator Collins just wrapped up. She had
nothing good to say about him, but maybe you will. [Laughter.]
TESTIMONY OF THE HONORABLE MARY L. LANDRIEU,\1\ A UNITED STATES
SENATOR FROM THE STATE OF LOUISIANA
Senator Landrieu. I do not believe that.
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\1\ The prepared statement of Senator Landrieu appears in the
Appendix on page 44.
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Hello, family.
Good morning to the Chairman and Ranking Member, and I
apologize for being a few minutes late and I thank my
colleague, Senator Collins, for going ahead, because we are
both here so privileged and grateful for the opportunity to
introduce someone who I believe, and I think shared by Senator
Collins, is one of the brightest lights in President Obama's
cabinet and one of the best collaborative leaders I have ever
known in my career. And, I have been now doing this quite a
long time. In fact, Senator Collins and I have similar careers,
having started much earlier and served at our State level and
now have the privilege to serve here in Washington for almost
the exact same time.
So, I know that she has given some background of this
nominee, but let me just remind the Committee of his
extraordinary educational background at Harvard University,
Master's of Public Administration and a Master's Degree in
Architecture. And, I find that his work as a scholar in those
fields really comes into play every day that he is here working
in the jobs that this Administration and others have entrusted
to him in really building a better Nation, and that is really
what we are all here to do. I know, Mr. Chairman, you feel very
strongly about that, as does your Ranking Member, building a
greater democracy, more fair, more generous, and a government
that is more effective and more efficient every day.
During the President Clinton and President Bush
Administrations, Secretary Donovan served as Deputy Assistant
Secretary for Multifamily Housing at HUD, and Acting
Commissioner of the Federal Housing Administration (FHA). In
2004, he became Commissioner of New York City Housing
Preservation and Development, which is no easy job to take on.
It is really just a monumental assignment, a $500 million
budget, having to work with a variety of different stakeholder
groups. I can only imagine. Every time I fly into the city of
New York, I am always amazed that it can be run at all, it is
so huge, and he did his part in doing it.
But, on a more personal note--and, Mr. Chairman, I think
you will get a chuckle out of this--as you know, I am the
daughter of a HUD Secretary, and my father served proudly for
President Carter. I have said in front of my father that I
thought once he was the best Secretary of HUD that ever served,
but I have met one even better. Now, Shaun gets very
embarrassed, and my Dad does not like it, but it is true.
So, I am thrilled to be here, and let me just say in
conclusion, because I know we want to hear his testimony, that
when Hurricanes Katrina and Rita struck, the two fiercest
natural disasters to strike our country, and unfortunately
struck within 3 weeks along the same coast about 9 years ago,
it was this Secretary that really stepped up in his first trip
as Secretary, came down to New Orleans and the Gulf Coast, went
to Mississippi, as well. He has visited multiple times. He has
really been the light and the strength that has helped us to
rebuild, which starts with schools and hospitals and housing,
primarily, in neighborhoods, so that cities and communities can
come back. He also understands small business coming back as
soon as possible.
So, I just want to say, because of all my dealings with him
in a variety of different fields, I have watched him on the
ground with people. I have watched him, literally, as he has
jogged through neighborhoods in New Orleans. I have seen him on
the stump. And, I have been in many conferences with him,
trying to work out very difficult problems. And, I find him to
be very straightforward, very honest, and most importantly,
hard working and caring.
So, this is a big job he has been nominated for, a really
big one, but I know that he can do it and I have every
confidence and would give him my strong support and would ask
the Members of this Committee to support him in every way they
can.
Thank you, and I will submit the rest of my testimony for
the record.
Chairman Carper. Senator Landrieu, thank you so much.
Senator Collins, before you arrived, was good enough to
offer to answer any questions that we had, and I asked one,
just as you were coming in. I would ask one question of you
before you leave, and that is, would you say that Secretary
Donovan is one of the two best HUD Secretaries that our country
has ever had. [Laughter.]
Senator Landrieu. Yes. He would be among the top two.
Chairman Carper. OK. Fair enough. [Laughter.]
I am glad we got that on the record.
Senator Landrieu. Thank you.
Chairman Carper. Dr. Coburn, do you have anything?
Senator Coburn. No.
Chairman Carper. Susan, Mary, great to see you both. It
means a lot, I know, to our nominee and to us that you are
here. Thank you. Welcome home.
OPENING STATEMENT OF CHAIRMAN CARPER
Chairman Carper. All right, ladies and gentlemen. As we all
know, our previous OMB Director, Sylvia Mathews Burwell got
another job. You knew her when she was Sylvia Mathews, did you
not? She has been confirmed as Secretary of Health and Human
Services (HHS). In the past, this might have left us with a
vacancy at the top of OMB for a long time. Fortunately, in this
case, the President has moved promptly to nominate a
replacement for Secretary Burwell, and we are glad that he has.
Our Committee has, in turn, moved forward with a similar
sense of urgency. I want to thank Dr. Coburn--I want to thank
his staff, and mine, as well--for working with us on a
bipartisan basis to move this nomination forward, but with due
diligence.
Our Nation's fiscal crisis may have receded from the
headlines in recent months, but, in fact, we are still dealing
with the same challenges we faced for years now. As I have
stated before, our country needs a comprehensive, long-term
budget plan that really does three things. One of those is to
raise some revenues, hopefully, to do tax reform that looks at
corporate rates. We need to really overhaul some of our
entitlement programs in ways that save money, save the programs
for our future generations, and does not savage old people or
poor people. And, we need to look at everything that we do and
ask, how do we get a better result for less money? And you,
your purview, your job, if confirmed, will really encompass all
of those, so we are anxious to drill down on each of them.
But, the Director of OMB is a critical player in making
decisions and making progress in these areas, including helping
to put our country forward on a fiscally sustainable path. We
need a leader in this role who will be a strong voice for
fiscal responsibility and for effective government management,
as our two introducers have said.
We have had the privilege of working with Sylvia Mathews
Burwell, who played, as you know, an integral part in achieving
the bipartisan budget deal reached late last year. I believe,
colleagues, that we have the same kind of leader in Shaun
Donovan, as well.
And to those of us in Congress and so many other Americans,
Secretary Donovan is a familiar face, having served as
Secretary of HUD for the last 5 years now. From his work there,
we know he can take on and solve tough problems. We have heard
that from our two introducers already. During his time at the
Department, he has guided Federal housing programs through
economic crisis and helped millions of Americans modify their
mortgages and avoid foreclosures.
He has also demonstrated an ability to cut through red tape
and find ways for agencies to work together more effectively.
He did this with President Obama asking him to be Chair of the
Hurricane Sandy Rebuilding Task Force, and he has done so on a
number of other issues, including transportation, energy
efficiency, and veterans' homelessness.
Secretary Donovan's tenure at the Department of Housing and
Urban Development gives him a strong foundation when it comes
to understanding how agencies tick. He also knows how the
Federal budget process works. And, just as importantly, he has
also worked in local government and in the private and
nonprofit sector. He knows from those experiences how decisions
at the Federal level can impact communities, businesses, and
individual citizens.
In each job that he has held, Secretary Donovan has earned
a reputation as someone who uses data and evidence to get
better results and to save money for taxpayers. He is someone
who wants to find out what is working and do more of that, and
to find out what is not working and do less of that.
Secretary Donovan is also someone who values strong public-
private partnerships. He has consistently championed ideas that
further the public good while also spurring economic
development.
This Committee works in close partnership with the Office
of Management and Budget in all areas, but especially as we try
to identify areas where we could achieve results throughout the
Federal Government while spending fewer taxpayer dollars. Based
on his previous experience and our past conversations, I
believe that Secretary Donovan is committed to continuing those
efforts at OMB and governmentwide.
Everything I know about Secretary Donovan's
accomplishments, commitment to public service, tell me he is
going to be a strong and effective leader at the Office of
Management and Budget and a good partner with this Committee if
he is confirmed.
His predecessor at OMB is an exceptional leader, and left
big shoes to fill at the agency, a tough act to follow. Dr.
Coburn and I thought and think the world of her and the team
that she has put together. But, I think Secretary Donovan,
colleagues, is ready to hit the ground running. I expect
Secretary Donovan to work just as hard and to continue the same
bipartisan approach and to be as accessible as Sylvia was. She
was incredibly accessible, as were the senior members of her
team.
I look forward to your testimony today--we look forward to
it--and we hope the full Senate will consider your nomination
as soon as possible.
And with that, I will turn it to Dr. Coburn for any
comments he might like to make. Thank you. Dr. Coburn.
OPENING STATEMENT OF SENATOR COBURN
Senator Coburn. Well, Mr. Secretary, thank you for spending
the time with me yesterday. I enjoyed it and got to know you
better.
We talked a lot about management yesterday, and I am not
going to talk about that today. I feel pretty comfortable in
that area.
But, I am going to raise some questions with you during the
question and answer period about responsiveness. I sent several
letters to HUD that, on the replies, multiple questions that
were asked in the letter never were answered, which is in
contrast to Sylvia Burwell. The No. 1 thing we think is we have
an obligation to get answers to our questions. And so, for me,
that is a troubling track record. Most of the time, Mr.
Secretary, you do not write the answers to those. Somebody else
writes them for you, and you are not necessarily fully
informed. So, that, to me, is concerning and would relate to
management in terms of really knowing.
The second area of concern was your testimony before this
Committee on Hurricane Sandy and the Task Force and the details
of what was testified versus what the actual facts were. And,
again, I think that is totally excusable, given your position,
but again, it is important for us to have testimony that is
accurate and clear. And, no malicious motive is implied in
that. The fact is, the facts that we were given were not
exactly the facts, as we later found out.
So, I would welcome you to the Committee. I have no doubt
that you are going to be approved. What I would like to do is
establish with you the kind of rapport we had with Ms. Burwell,
which means that we got answers to every question. Sometimes we
did not like the answers, but we got answers. No. 2, she was
timely and responsive, which I think is an important
characteristic.
And so I have a lot of questions for you on specific
details of OMB's obligations and some of your personal
philosophy in terms of some of the things that have happened
around here on the big problem in terms of solving our fiscal
issues, and you are going to be the key for this Administration
in directing that and leading that.
I would also say, I thank you very much for being willing
to serve, seeing your two young boys. I have some advice for
you. This job will consume you, and what you have to do--I know
you called me on a Saturday, I think, at home, and I was pretty
short. But, the fact is, I have reserved weekends for my
family, and what I do, and my recommendation to you, is get out
of there at a decent time every day so you can spend time with
your boys and your wife because they are far more important
than that job.
Chairman Carper. I am Tom Carper and I approve this
message.
Let me just take a moment to again welcome our witness, his
wife, Liza, and sons Milo and Lucas. Thank you for joining us.
In a moment, you will have an opportunity when you speak to
make some further introductions of them and others that you
might wish to recognize in the audience.
Our nominee, as you know, currently serves as the Secretary
of HUD. While at that position, he also served as the Chair of
the Hurricane Sandy Rebuilding Task Force. Secretary Donovan
also previously has served in a variety of important roles,
including Commissioner of the New York City Department of
Housing Preservation and Development, and as Deputy Assistant
Secretary for Multifamily Housing at the Department of Housing
and Urban Development. Secretary Donovan also worked in the
private sector on ways to finance affordable housing and as a
consultant to the Millennial Housing Commission, which seeks
ways to increase the number of multi-family housing options.
Secretary Donovan, before you proceed with your Statement,
our Committee rules require that all witnesses at nomination
hearings give their testimony under oath, so I am going to ask
you to stand, raise your right hand, if you will, and here we
go.
Mr. Donovan, do you swear that the testimony you will give
before this Committee will be the truth, the whole truth, and
nothing but the truth, so help you ,God?
Secretary Donovan. I do.
Chairman Carper. Please be seated. OK. Secretary Donovan,
feel free to proceed with your statement, and again, introduce
family and friends as you would like. We are happy you are
here.
TESTIMONY OF THE HONORABLE SHAUN L.S. DONOVAN,\1\ NOMINATED TO
BE DIRECTOR, U.S. OFFICE OF MANAGEMENT AND BUDGET
Secretary Donovan. Thank you, Chairman Carper, Dr. Coburn,
Members of the Committee, for welcoming me here today. It is a
privilege to be considered by this Committee as the President's
nominee to be the Director of the Office of Management and
Budget.
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\1\ The prepared statement of Mr. Donovan appears in the Appendix
on page 46.
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I want to begin by thanking Senator Landrieu and Senator
Collins for their kind words. I have had the great pleasure of
working with these distinguished public servants on a broad
range of issues over the years. As you heard, Senator Landrieu
and I have collaborated to improve the way our Nation responds
and rebuilds after a natural disaster strikes. Senator Collins
and I have worked together to make HUD operate better and on
many other issues, particularly her great leadership, along
with Chairman Patty Murray, in making sure that we get our
heroes off of our streets around this country. They have been
great partners and I am deeply grateful for them being here
today and for their leadership and friendship.
I also want to thank my wife, Liza, and my two sons, Milo
and Lucas. In public service, the biggest burdens and
sacrifices often fall on our families. So, I deeply appreciate
their continued support as I seek to take on this new
challenge.
I am also grateful to President Obama for nominating me. I
continue to be honored and humbled by the confidence he has
shown in me.
Finally, I want to thank Members of the Committee and their
staffs for meeting with me over the last few weeks and for
sharing your insights. If I am confirmed, I very much look
forward to continuing these conversations.
I recognize that now-Secretary Burwell has set a high bar
for OMB Directors going forward, both with her strong
leadership and her efforts to maintain solid relationships with
Congress. If confirmed, I would look forward to picking up
where Secretary Burwell left off by engaging with you and your
colleagues to achieve common goals, to meet deadlines, and to
work with Congress to restore regular order.
During my time as the Secretary of the Department of
Housing and Urban Development, I worked tirelessly to ensure
that the Federal Government is doing its part to help the
American people secure access to safe and affordable housing.
Homes are the center of every person's life. They play a key
role in shaping safe neighborhoods, good schools, solid
businesses, and, ultimately, a strong economy.
For the past 5\1/2\ years, HUD has been creative in helping
families obtain this key part of the American dream, and during
these tough fiscal times, have done so in a fiscally
responsible fashion. Working with colleagues across the
Administration, we have helped millions of families fight off
foreclosure, reduced the number of veterans experiencing
homelessness by 24 percent in 3 years, revitalized distressed
neighborhoods, and helped communities hit by natural disaster
rebuild stronger than before.
Through all this work, I have seen firsthand how critical
the Federal budget process is and how it makes an impact on the
people we serve. The Federal budget is not just numbers on a
page. It is a reflection of our values, and it is important to
our future.
I believe the President's budget shows a responsible path
forward for the Nation. It creates jobs and lays a foundation
for growth by investing in infrastructure, research, and
manufacturing. It expands opportunity by ensuring health care
is affordable and reliable, expands access to housing, invests
in job training and preschool, and provides pro-work tax cuts.
And, it ensures our long-term fiscal strength by fixing our
broken immigration system and addressing the primary drivers of
long-term debt and deficits, health care cost growth, and
inadequate revenues to meet the needs of our aging population.
Over the last 5 years, the deficit has been cut in half as
a share of the economy, the largest sustained period of deficit
reduction since World War II. Our Nation can continue this
progress while focusing on the critical goals of accelerating
economic growth, creating jobs, and expanding opportunity for
all Americans.
I would like to briefly outline my priorities, if I am
confirmed as Director. First, if confirmed, I look forward to
working with Congress to continue the important progress made
on the budget over the past year. The Bipartisan Budget Act and
Consolidated Appropriations Act for Fiscal Year 2014 were good
first steps in moving beyond the manufactured crises of the
past few years and providing some measure of relief from the
damaging cuts caused by sequestration. But, there is more that
we must do to invest in our economy, create jobs, promote
national security, while continuing to promote fiscal stability
by addressing the key drivers of our long-term debt and
deficits.
Second, I want to acknowledge the critical management side
of OMB's responsibilities. I would work to advance the
President's Management Agenda, which is focused on making the
Federal Government more efficient, effective, and supportive of
economic growth. Under the President's leadership, the
Administration is working to improve key citizen and business-
facing transactions with Federal agencies. It is working to
increase the quality and value in core government operations
and enhance productivity to achieve cost savings to the
American taxpayer. It is working to open Federal Government
assets to the public, including data from Federally funded
research, to create a platform for innovation and job creation.
And, it is working to unlock the potential of the Federal
workforce and build the workforce we need for tomorrow by
investing in training and ensuring agencies can hire the best
talent from all segments of society.
Third, it is critical that OMB's Office of Information and
Regulatory Affairs (OIRA) continue the Administration's
regulatory focus on maintaining a balance between protecting
the health, welfare, and safety of Americans, and promoting
economic growth, job creation, competitiveness, and innovation.
And, I would seek to continue the President's successful
regulatory retrospective review, or regulatory look-back, where
the Administration is streamlining, modifying, or repealing
regulations to reduce unnecessary costs and burdens.
Finally, I want to note what a particular honor it would be
for me to serve as the head of OMB. OMB plays a unique and
critical role in the functioning of the Federal Government. As
HUD Secretary, I work closely with OMB's leadership, including
Deputy Directors Brian Deese and Beth Cobert, and I have seen
the outstanding contributions made by the talented men and
women who work throughout this institution.
To give just one example, in my role as the Chair of the
Hurricane Sandy Rebuilding Task Force, I saw the tireless
efforts made by OMB staff, many of them long-serving career
employees, as they worked literally day and night for weeks and
even months to ensure that disaster relief was delivered
swiftly, fairly, and responsibly. It was OMB employees who had
the expertise, knowledge, and governmentwide perspective to
help coordinate the effort and make sure it was done right.
Again, I want to thank the President for giving me this
opportunity and the Committee for considering my nomination. I
look forward to answering any questions you may have.
Chairman Carper. Thanks so much for that statement.
I need to start our questioning today with three standard
questions we ask of all nominees.
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?
Secretary Donovan. No, there is not.
Chairman Carper. All right. No. 2, 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?
Secretary Donovan. No, I do not.
Chairman Carper. No. 3, 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?
Secretary Donovan. I agree.
Chairman Carper. All right. I want to go back to that first
question, about conflict of interest, and I want you to talk
about any potential conflict of interest that might flow from
your 12-year-old son, Lucas, performing in a rock-and-roll band
with Jay Carney's son and Michael Froman's son. I think they
are called Twenty20. Is there a conflict of interest there, any
that you can think of?
Secretary Donovan. I promise not to depend too much on my
retirement being dependent on his success in his rock band.
[Laughter.]
Chairman Carper. All right. Milo there will probably be
managing the band, and we look forward to great things from all
of you.
I just want to say, Dr. Coburn and others have mentioned
the sacrifice that families make on behalf of their moms or
dads who serve in these positions. Your sacrifice begins today
by giving up a part of a day in school, so thank you for your
willingness to do that and to join us here.
Let us talk about Sylvia Mathews Burwell. I understand you
have known her for a while. Where did you all meet?
Secretary Donovan. We met in our dorm, freshman year at
college, actually.
Chairman Carper. No kidding.
Secretary Donovan. We have been friends ever since.
Chairman Carper. OK. Why do you think she has been just
enormously successful, highly regarded, highly respected here
and really kind of taken the place by storm over the last year
or so? Why do you think that has been the case?
Secretary Donovan. Well, from the thank you note that I got
from her freshman year when we actually went on a double-date
together, through my long experience with her since, I would
say, first and foremost, something that Dr. Coburn really
focused on is her responsiveness and outreach. And, one of the
key things that I would want to do, if confirmed, is to
continue in what I think she has built as a very strong set of
relationships with the Committee and more broadly with
Congress.
I also think when she came in, she was very focused on
making sure, not just that the ``M'' side of OMB was not
forgotten, but that, in fact, the ``M'' side and the ``B'' wide
of OMB worked very closely together. I believe very deeply, as
I think you have heard a little bit about today--I often say to
my team, too often, we do not know what success looks like in
Government, and by measuring, setting clear goals, measuring
those goals, I believe we not only can achieve success in
achieving the ends of Government, we can also save money for
taxpayers, and that is really, for me, where we have to make
sure the ``M'' and the ``B'' in OMB are connecting.
And, finally, I would say that Sylvia is beloved within the
institution of OMB, despite a short time there, because she has
really focused on building the institution. To be frank, if I
am confirmed, 2\1/2\ years is not a long time, and I do believe
that it is absolutely critical to make sure that OMB is adding
to the terrific team that is there with the best and the
brightest and to making sure that the institution is strong,
particularly among the career staff that is there. So, not just
managing across government, but managing OMB itself as an
institution is something that she has focused on and I would
want to continue.
Chairman Carper. Good. When you and I met, we talked a
little bit about regulations. This Administration, every one of
them, put out a lot of regulations and OMB plays a critical
role in that process. We probably have a lot of regulations
that are still in effect that maybe are not worth much and we
ought to do something about them. Cass Sunstein in his earlier
role as the head of OIRA within OMB sought to do that. Tell us
a little about your approach to the regulatory side----
Secretary Donovan. Yes.
Chairman Carper [continuing]. Of OMB and how we--what kind
of look-backs you would be interested in, updating regulations'
timeliness, that sort of thing.
Secretary Donovan. I am glad you raised this, Mr. Chairman,
because it really is one of the most important functions that
OMB plays through OIRA. And, I think, we absolutely have to be
focused on a common sense balance between protecting the air
that we breathe, the water that we drink, the safety of the
American people, with ensuring that our regulatory framework
supports economic growth, more jobs, and building as strong an
economy as we possibly can.
I mentioned the regulatory look-back in my remarks. I think
that is a very good example of how we can work together on a
bipartisan basis to make our regulatory system work more
effectively. And, I thought maybe I would just give you a
couple examples of work we have been doing at HUD. Obviously,
given the crisis----
Chairman Carper. Just make them fairly brief----
Secretary Donovan. OK.
Chairman Carper [continuing]. Because I have one more
question.
Secretary Donovan. I am happy to do that. So, within the
mortgage world, obviously, this has been a major area of focus,
and as Senator Tester knows from his service on the Banking
Committee, he and a number of other members have expressed an
interest in making sure that we are not necessarily treating
our community banks and small lenders in the same way we treat
the largest banks, that we have to have a real focus on small
business. And, so, one of the rules that we have issued
recently streamlined the way that we oversee smaller
institutions, the reporting requirements we have for them
within the FHA program. I think that is a very good example.
Another example I would give you is we have adopted e-
signatures in FHA. We are one of the first agencies across the
Federal Government to do that. And what I have heard
consistently from citizens and small lenders is it has made
their process not only less expensive and faster, but it has
allowed consumers to sit at their kitchen table and read those
stack of documents we usually get at mortgage closings to make
those simpler, more accessible, but also give families time to
really look at them rather than being rushed at the closing
table.
So, those are two examples at HUD of the kinds of things
that I think we really need to do more of.
Chairman Carper. Good. Thanks.
Let us go back to the ``M'' in OMB and talk a little bit
about management. In the Navy, when you are trying to do
something really hard, what we used to say is like trying to
turn an aircraft carrier, you need the whole crew in order to
be able to do that, and you are going to need not just the crew
at OMB to actually affect and implement the President's
management budget. But, talk to us about how you plan to
network, to build a sense of team and coordinate working with
us, with the Government Accountability Office (GAO), working
with the Inspector Generals and others that can help implement
a thoughtful management agenda.
Secretary Donovan. I think this is a really important area
in the sense that what I saw in local government, some of my
frustrations, frankly, with the Federal Government is that, too
often as a Federal Government, we operate in our silos of
agencies and we do not necessarily connect with other agencies,
with local government, and with Congress effectively or the
private sector.
And so I think one of the hallmarks of the work that I have
tried to do at HUD, whether it is on the mortgage crisis,
whether it is in our response to natural disasters, whether it
is on homelessness, where health is a critical savings we
actually get out of the work that we do on homelessness, with
education, with the Department of Energy, I have built strong
cross-governmental relationships where we have actually set
shared goals and we have looked to achieve those in a
coordinated way.
And so one of the reasons I am excited about taking on OMB,
if I am concerned, is it occupies a special position in working
to coordinate and make sure that we are working as one
government as effectively as possible.
Chairman Carper. All right. Thanks very much. Dr. Coburn.
Senator Coburn. Thank you.
One of the things that has not been able to be achieved yet
is a consensus between the Administration and Congress on
tackling the big elephant in the room, which is deficit
reduction, in a way that will solve the problem into the years.
We have a $17.5 trillion debt, predicted to go back to a
trillion dollars a year deficit in the next few years. And OMB
plays a critical role for the Administration, but also for the
country.
So, my first question is, I have worked very closely with
the Government Accountability Office. I recommended that you
spend time with GAO. When you see the last 4 years' reports
from GAO on duplication--and, by the way, the Administration
has done a fairly good job at outlining some of those things in
the annual budgets--what is your level of frustration when you
see that, according to my staff's calculation, we have about
$250 billion a year in duplication with minimal metrics
outlined by the GAO? What is the position within the
Administration in terms of addressing that, in terms of the
real leadership of asking Congress, fix this?
Secretary Donovan. Well, Senator, you and I spoke a little
bit about this and it is an area where I think we have made
some real progress. Just to give you one example, the
President's budget for 2015 outlines about 130 programs where
we can achieve cuts, consolidations, other types of savings,
for a total of about $17 billion.
Certainly, my experience at HUD has been that there is a
lot that we can do. One of the primary areas I focused on as
soon as I arrived, we have 13 different rental assistance
programs at HUD, and some of that makes sense. We have a
program for seniors, a program for people with disabilities
that have logical differences. But, too often, those
differences are just history and circumstance rather than being
logical.
So, I started an effort called the Rental Assistance
Demonstration, which is already about two-thirds of the way
consolidating older, frankly, obsolete programs into a single
program, and we have been working with Congress, and, in fact,
in our Senate budget--Senator Collins really should get some
credit for this--we have been able to start to consolidate
about one-fifth of all public housing into the Section 8
program.
And, so, I think there is more work that we can do with
executive authority. To be frank, Senator, I think, too often,
what is hard is achieving bipartisan consensus about whether it
is reducing the number of offices that we have around the
country or reducing programs. And, so, I do think we need to
find ways, and I would love to talk to you further about it,
get suggestions, on ways that we could drive not just ideas
about consolidation, but get to actual bipartisan consensus
where we can achieve legislative reforms, both in the budget
and otherwise, as well.
Senator Coburn. My understanding is OMB has the power to
require agencies to put metrics on programs. Do you agree with
that?
Secretary Donovan. Yes, I do, and, in fact, I would
compliment the Committee. The Government Performance and
Results Act (GPRA) Modernization has been a very important
tool. I am a particularly big believer, referencing something I
said earlier, in cross-agency goals.
Senator Coburn. Fine.
Secretary Donovan. That is the reason we have been able to
achieve such success on veterans' homelessness, is because we
built a data system that was shared between HUD and the
Veterans Administration (VA) and we meet on a very regular
basis with the most senior leadership to really look at the
progress we are achieving, not just nationally, but place by
place, to see what is working and what is not.
Senator Coburn. But, the way to find out if things are
working is to have metrics on the things, which you testified
in your opening statement----
Secretary Donovan. Absolutely.
Senator Coburn [continuing]. And we agree with that. So, I
guess, my question for you is, are you committed to trying to
implement that across the government through both the GPRA
Modernization Act as well as your authority as OMB Director,
because if you cannot measure these programs, you cannot manage
them effectively and we will not know. And, that is one of
GAO's biggest recommendations, is there are no metrics on most
of the programs. We do not know what we are doing.
Secretary Donovan. I could not agree more. And, in fact,
not just in the last 5\1/2\ years, but my 5 years working under
Mayor Michael Bloomberg in New York, as you know, the CompStat
process was started at the Police Department in New York City.
Senator Coburn. Yes.
Secretary Donovan. And, I created, both in my agency in New
York and here at HUD, an Office of Strategic Planning and
Management whose specific responsibility it was to create and
track those metrics across the most critical programs and,
frankly, to do process improvement work, as well, because it is
one thing to identify the problem. You have then got to fix it,
and having the capacity to actually have a team that can go in,
almost like an internal consultant within the agency to do
that, I think, is absolutely critical.
And to be frank, many people--this is not an area that they
think is one of the most interesting or sort of most noteworthy
around--I am not only interested in doing this, I am actually
passionate about it and I drive my team crazy at HUD in terms
of my wanting to understand the numbers.
Senator Coburn. Congress and this Committee recently passed
the Digital Accountability and Transparency Act (DATA) and it
has some deference to the Defense Department (DOD). It gives
them some extra time. But, one of the things that is going to
be required by that is the head of OMB to keep the commitment
that we are going to meet the goals of that legislation. Will
you state before this Committee that you will do everything in
your power to keep the commitment that the DATA Act timelines
are fulfilled?
Secretary Donovan. Senator, I am committed to working with
you very closely to make sure that we can achieve those goals
of the DATA Act. I am getting up to speed on this. I know there
was lots of bipartisan work on that bill. I know that OMB is
currently trying to understand with agencies what system
changes, what investments are going to be required. So, you
have my commitment to come back very quickly, if I am
confirmed, and work with you to meet those timelines.
Senator Coburn. You just made a statement that shows what
kind of trouble we are in. The agencies do not have that
information now to comply with the DATA Act. And, the very fact
that they have to get up to speed to comply tells you that they
do not know what they doing in terms of management because they
do not know where they are spending the money. This is pretty
straightforward. Where did you spend your money? It is a pretty
straightforward bill. And the very fact, across the government,
agencies do not know where they are spending their money and do
not aggregate those to look at it so that they could comply
with the DATA Act is the very reason we wanted the DATA Act in
the first place, is to force that consolidation of data so that
they will actually know what they are doing and where they are
spending the money.
In your statement, you mentioned investing in our economy.
How would you reconcile additional spending with the need for
additional deficit reduction, given the fact that the
Congressional Budget Office (CBO) has a point line mainly based
on the entitlement programs, the mandatory programs. In your
own mind, outside of what the Administration policy would be--
how do you reconcile those two positions?
Secretary Donovan. Senator, I think about this in terms of
the work that I have done on housing, which is obviously one of
the most significant drivers of our economy. What we have to
do, and at times it can be a difficult balance, but it is
absolutely critical, there are critical functions that we need
to invest in. We have not just a fiscal deficit, we have
deficits in our infrastructure, we have deficits in our
educational system, we have deficits in the investments we are
making in research and development, which we know contribute in
the long run to the economic competitiveness of our country and
ultimately to economic growth.
We have to find ways to invest in those critical things
while at the same time dealing with what are really, as I
mentioned in my statement, the two primary drivers of our long-
term deficits. Our health care costs have grown more quickly
than we have been able to control in our budget, and, at the
same time, we have a wave--the Baby Boom generation--that will
be adding to, given the commitments we have to seniors, to
those long-term costs. And so, we have to find a bipartisan way
to make those critical investments in the medium-term while at
the same time dealing with those long-term drivers of the
deficit.
Senator Coburn. OK. I am past my time.
Chairman Carper. OK. I am just going to run through the
list. This is in order of appearance. Senator Enzi, you are
next, followed by Senator Johnson, Senator Begich, Senator
Landrieu, Senator Tester, Senator Baldwin, Senator Pryor,
Senator McCain, and then, after we have lunch, we will probably
get around to Senator Portman, or maybe even before lunch.
All right. Michael, you are up. Please proceed.
OPENING STATEMENT OF SENATOR ENZI
Senator Enzi. Thank you, Mr. Chairman, and thank you, Mr.
Donovan, for being here and testifying.
I am kind of curious as to why you would want to switch
from an agency that you already have good control over and a
lot of potential for solving some big problems that are the
drivers for the economy in the United States to move over to
OMB and start over again.
Secretary Donovan. Other than the fact that I love data and
management, it is a chance to work on the big challenges that
face my kids that are sitting right behind me. And, as I often
say, public service is tough work. I do not necessarily like it
every day, but I love it every day and it is a challenge that I
want to take on.
Senator Enzi. Well, I appreciate your being willing to do
that, and I am assuming that you are going to make it through
the process fine and want to give you----
Secretary Donovan. I appreciate your confidence.
Senator Enzi. I want to give you a small task to start
with. [Laughter.]
A huge priority for my State is something called Abandoned
Mine Land Money. This was a program that was started when they
started mining coal in the Powder River Basin. Of course, there
has been coal mining going on all over the United States for
years and years. Our State agreed, rather than taxing and
keeping it all for ourselves, that we would allow a Federal tax
and half of that would go into a trust fund for Wyoming and the
other half would go for reclamation east of the Mississippi
River, where they did not have nearly as much mining going on.
When I got to the Senate, no money had been given out of
that trust fund yet and it had grown to a substantial number,
and Senator Kennedy, in a bipartisan way, helped me to get that
released. It took a super-majority to do it. We got the backlog
released over a 7-year period.
But, right now, the Office of Surface Mining (OSM) is
reinterpreting that and determining that we do not get all of
that back pay. So, it is something that I would like for you to
look into and to help me work on, because I like numbers, too,
and I am keeping track of this, and so I know that it was
supposed to be given to us over a 7-year period. Five of the
years passed, and the balance that is still owed us, without
interest, is $165,401,519---- [Laughter.]
Which might not sound like a lot in the Federal scheme of
things, but for a small population State like Wyoming, it is a
real big thing. So, I hope you can commit to me to work with
OSM to get a correct interpretation on how the money is to be
distributed so that this trust fund can truly be a trust fund.
Secretary Donovan. Senator, should I be confirmed, this is
an issue I look forward to getting up to speed on it and seeing
what I can do to help resolve it.
Senator Enzi. Thank you. Now, on the broader scale, and
Senator Coburn started on this and I want to pursue it a little
bit more, and that is the $17 trillion in debt that we have and
how we are going to get some kind of control over the spending
that we are doing, and you are in a prime position to do that.
Do you have any kind of an idea of a plan where we can start to
get toward a balanced budget and perhaps a mechanism for
actually doing some prioritization? That is what Senator Coburn
was talking about earlier, the GPRA process. Do you have any
ideas for how to implement those?
Secretary Donovan. Generally speaking, Senator, what I
would say is I think we have begun to make some bipartisan
progress on the deficit. Over the last few years, we have seen
the deficit coming down faster than at any time since World War
II. But, there is more that needs to be done, and I think, in
particular, if you look at the President's budget, over the
budget window, it would bring down deficits as a share of the
gross domestic product (GDP) from nearly 4 percent to about 1.6
percent. So, I think there are some important things to build
on there.
In particular, I think the $400 billion in savings that are
contained in the budget in Medicare and Medicaid are critically
important. I would also point to places where we can really
look at wasteful spending that we have in our tax code through
closing loopholes and other efforts. I think those are a very
good beginning to a longer-term solution.
Senator Enzi. Well, I appreciate those comments. I hope
that you will look at the duplication that there is out there
and maybe get some kind of a system for prioritization.
Wyoming was faced with needing to make a 6-percent cut,
partly because of the money that I just mentioned a little bit
ago, but the Governor came up with a mechanism. If you just ask
agencies, what is your top priority, or can you give me a
priority, everything is a top priority. So, he asked them to
prepare lists showing what they would cut if they had to cut 2
percent, 4 percent, 6 percent, and 8 percent, and then he could
look at the lists. And if it showed up on all four, it was one
they were probably willing to cut. But, if it only showed up on
the 8 percent list, it was probably pretty important.
You are welcome to that idea from one of the laboratories
of the States, which in this case happens to come from Wyoming,
but I think they have a lot of ideas out there that will work.
I know that you headed up the recovery effort following
Hurricane Sandy. In that process, did you discover any waste or
inefficiencies that we ought to be correcting?
Secretary Donovan. And, I would share the frustrations of,
I think, many of your colleagues in seeing places where we can
speed up and improve the way government works, and I would
actually just recognize Senator Landrieu, who was very focused
on working after Hurricane Katrina to rationalize, simplify,
streamline the approval processes, and I would say particularly
around the environmental review process.
So, for example, when we worked with Congress to pass the
Sandy Supplemental Appropriations Bill, we included a provision
that allowed any community that was using multiple sources of
Federal dollars to rely on one single environmental review. Too
often, we end up having to require multiple agencies to do
environmental reviews for a single project, and that is
obviously one example, but one very expensive example, of an
inefficiency.
And, I would say I am very encouraged by the bipartisan
work that has been done in the Committee around infrastructure
permitting more broadly. That is something, given how much
investment is going into infrastructure after Hurricane Sandy,
we created a regional working group with every critical Federal
agency, with State and local government, to dramatically
streamline how we are going to get those large infrastructure
projects done. And, as I think you know, there has been great
work that the Committee has done with OMB and the Department of
Transportation to implement that around high-priority
infrastructure projects.
The best example of that is the Tappan Zee Bridge in my
home State of New York, where we took a process that would have
been probably 3 to 5 years to get the permitting done and
dramatically cut that to under 2 years.
Senator Enzi. Thank you, and my time has expired.
Chairman Carper. Thanks, Senator Enzi.
Senator Johnson, and then Senator Begich.
OPENING STATEMENT OF SENATOR JOHNSON
Senator Johnson. Thank you, Mr. Chairman.
Secretary Donovan, welcome.
Secretary Donovan. Nice to see you, Senator.
Senator Johnson. I appreciate you spending the time to meet
in my office and I appreciate your willingness to serve. It is
a big job, and I agree with you, OMB is right at the center of
addressing so many challenges we face in this Nation.
Let me start first by getting your take, and assessment of
where we are economically. In terms of recoveries after big
recessions, our post-World War II average after 19 quarters--
and that is how far we are into the recovery now, 19 quarters--
economies have, on average, recovered by about 23 percent, in
other words, grown by 23 percent. After the 1980 recession,
during the Ronald Reagan recovery, our economy had grown at
25.6 percent. Following the Great Recession here under
President Obama, our economy is growing at 10.8 percent. So, we
have not even achieved half the average growth of post-World
War II recoveries. Do you have any explanation of why do you
think that is?
Secretary Donovan. So, it is interesting you asked this,
Senator. We actually spent some time with the economic team and
the President just yesterday on this issue and a range of
factors. The biggest factor, most economists agree, is actually
the demographic changes that we are undergoing, and that
accounts for about half of the difference between this recovery
and other historical ones.
Other factors that are very important, the debt overhang
that we have from this crisis. Financial crises, in general,
are slower to recover from. We see that across the world in the
performance of world economies relative--the United States is
actually relatively doing better, but that has made it a slow
recovery overall.
The dramatic cuts in government spending, local government
and State government spending, is actually a significant
contributor, as well. There are a few other factors, but----
Senator Johnson. Are you saying the Federal Government has
cut spending?
Secretary Donovan. There were reductions in State and local
government that were very unusual.
Senator Johnson. OK, but you are working for the Federal
Government. We have not cut spending in the Federal Government,
correct? We have not increased it as much as people wanted, but
it has actually been flat for a couple years. We have not cut
anything, right?
Secretary Donovan. As a share of our economy, which is the
traditional way that budget experts look at this, we have
reduced discretionary spending significantly relative to the
expectations we----
Senator Johnson. But, as a percent share of our economy,
last year, we spent 20.8 percent, and for 50 years, the average
is about 20.2 percent, so as a percent share of our economy, we
are spending a little bit more than average. And, that has
actually come down from a high of close to 25 percent early in
the Administration, correct?
Secretary Donovan. In terms of overall outlays, you are
talking about, Senator----
Senator Johnson. Yes, the Federal Government.
Secretary Donovan. Again, our estimates are that we have
reduced overall the deficit, and this is on a bipartisan basis,
about $3 trillion. Most of that has come from reductions in
spending relative to what our expectations were.
Senator Johnson. You talked about investing in our economy.
Can you give me your opinion, who is the better allocator of
capital, the private sector or government?
Secretary Donovan. I would answer, the private sector.
Senator Johnson. OK. All things being equal, is it good to
have low-cost energy if you want to manufacture, if you want to
get your economy going, or high-cost energy?
Secretary Donovan. Low-cost energy, and, in fact, one of
the bright spots in our recovery has been that we have
significantly increased our production of energy domestically.
I think, as you know, as we talked about the other day, we are
now actually producing more here in this country than we are
importing from overseas at this point. We have seen a doubling
of our renewable generation, and particularly for
manufacturers, an area you know very well, the production of
natural gas has been a huge boost----
Senator Johnson. As a candidate, President Obama did say
that because of his cap and trade proposal, electricity rates
would necessarily skyrocket, and now we are trying to, through
regulatory agencies, enact those cap and trade proposals or
something similar to that. Do you think that is a good thing or
a bad thing?
Secretary Donovan. Senator, I am not an expert. I assume
you are referring to the new rule----
Senator Johnson. Right.
Secretary Donovan [continuing]. That has been issued. I am
not an expert in talking great detail about that----
Senator Johnson. But, in general, if government regulations
or policy drives up the cost of energy, that is not good for
economic growth, is it?
Secretary Donovan. Generally, low energy costs are good. As
I said, the policies under this Administration have actually
led to a significant expansion of domestic energy production, a
doubling of renewables which is one of the strengths in the
economy that I hear out there as I talk to the private sector.
Senator Johnson. Let us talk about it. Let us talk about
allocation of capital and government investing, because I hear
this word ``investing'' all the time, and generally, it means
spending. But, President Obama in his acceptance speech said he
would invest $150 billion over the next 10 years, the next
decade, in affordable renewable sources of energy, wind power,
solar power, and the next generation of biofuels, an investment
that will lead to new industries and five million new jobs that
pay well.
There have been a number of reports, the most recent one
from the Institute for Energy Research, that says that we have
spent about $26 billion, and 17.5 percent of that $150 billion
investment. They calculate we have produced about 2,300 jobs,
about 0.046 percent of the five million jobs.
You mentioned you have to measure your goals. Do you think
that was an achievable goal? Do you think it was a wise goal?
Do you think that was a wise investment? And, do you think it
worked?
Secretary Donovan. Senator, to be honest, I am not familiar
with the report that you are quoting from. I would be happy to
look at it and tell you my assessment. Should I be confirmed, I
would love to spend more time talking to you about it, but I
cannot give you an answer about the report----
Senator Johnson. The point I am making is we have spent
about $26 billion on green energy jobs, created about 2,300
jobs at a cost of about $11.5 million per job. And, from my
standpoint, if you really want to take a look at what is
happening in terms of this economy and why it is not growing as
rapidly as it really should be is the onerous nature of the
size of government, a regulatory environment that, according to
the Competitive Enterprise Institute, cost $1.8 trillion per
year to comply with, and OMB is right at the center of trying
to rein in that regulatory burden. I wish you all the best luck
in trying to do just that. Thank you.
Secretary Donovan. Thank you.
Chairman Carper. Senator Johnson, thanks for those
questions.
Senator Begich, you are next, then Senator Landrieu and
Senator Tester.
OPENING STATEMENT OF SENATOR BEGICH
Senator Begich. Thank you very much, and thank you for
being here and appreciate you being here.
I am going to actually have some questions, but I am going
to wrap back around at the end, if I have time, on the energy
issue----
Secretary Donovan. Yes.
Senator Begich [continuing]. Because I come from a State
that understands energy, not only from an oil and gas
perspective, but we also will be 50 percent renewable energy
for State consumption by 2025. No other State will meet us in
that kind of percentage. We are a leader in this area. So, I am
going to hold that for a second, but I want to be specific on
some Alaska issues.
As we talked about, one was the Transportation Security
Administration (TSA) and the current recent proposal to
eliminate the definition of round-trip in assessing Passenger
Security Fees. This, in my view, exceeds the Congressional
intention which was laid out in the Budget Control Act. And,
what this means for Alaska, as you know, you have been there.
You know it is not one flight and you land. It is multiple
flights. And, because of that, it adds additional burden,
especially in our rural areas, on the cost.
And, I would hope and ask if you would be willing to take a
look at this, because I think the intent of Congress is not
what I think now the regulation is attempting to do, which is
basically grab every dime they can from every time you stop.
And, in Alaska, in a rural State, and, I can tell you, I am
sure from Senator Tester's State, Montana has the same
situation, that I think this would be a concern, and would you
be willing to kind of reexamine this and work with us to make
sure this does not do damage to rural travel and the ability
for people to afford to move from one place to the other.
Secretary Donovan. Senator, as you mentioned, I have spent
time with you, many others on the Committee, seeing the needs
in rural communities, in Native American communities, and
should I be confirmed, I would be happy to sit down with you,
talk more about this, and see if there is a resolution we could
reach.
Senator Begich. Fantastic, and especially, 80 percent of
our communities are not accessible by road, so the air is the
road for us, so it is important.
Secretary Donovan. Hooper Bay, good example.
Senator Begich. Hooper Bay is a great example. Thank you
for, again, coming up.
Another one which you talked about was the Department of
Labor's (DOL) recent proposed change to the Employment
Retirement Security Act, or their view of what they have the
role and responsibility there, which would have a direct impact
to 401(k)'s and the Individual Retirement Accounts (IRAs) and
how they are managed and how average, everyday Americans
utilize their broker or their individual manager of those
accounts. And, it seems they are chasing a problem that does
not exist. This is now under the Securities and Exchange
Commission (SEC) and they manage it well. I am not getting a
lot of complaints about the people they are working with, but
for some reason, the Department of Labor sees this as an
opportunity, which I do not know what that means. It just seems
to me another layer of bureaucracy that would impact smaller
investors who invest in an IRA or 401(k).
And, again, we talked about this, and again, I just want to
put on the record, are you willing to take a look at that and
see if there is an opportunity to understand and see if maybe
there is an overreach by the Department of Labor here.
Secretary Donovan. If I am confirmed, Senator, I would look
forward to sitting down to talk to you more about it.
Senator Begich. Fantastic. The other one, and we have been
doing a lot of work in my Subcommittee on Emergency Management,
Intergovernmental Relations, and the District of Columbia here
on getting agencies to look at how monies can be utilized, and
there was some discussion here about post-Sandy and some of the
review we have done through my Subcommittee here on trying to
make sure agencies have flexibility on using their funds, not
just for response, but mitigation, which seems to be the better
use long-term. I know there is a short-term always, disaster,
we have to deal with it----
Secretary Donovan. Yes.
Senator Begich [continuing]. But, really, the front end is
the more important, mitigation. And, OMB has a huge role here
by policy guidance in how agencies can be more flexible.
Based on your experience on Hurricane Sandy and your work
that you have now, is this an area that you will look at and
try to help us understand what we can do to make a better use
of our Federal resource here?
Secretary Donovan. Senator, I think you put your finger on
something that is enormously critical. And, just to sort of
boil it all down, we now have very good evidence that for every
dollar we spend on mitigation, on making communities safer, we
save four dollars the next time a storm comes. So, this not
only saves lives, it saves taxpayer dollars, and I think there
are a range of things, not only that we can do, that we are
doing, much of it coming out of the work that we did on the
Sandy Recovery Task Force, starting with how do we get families
and communities the best information about what risks are.
I think the Federal Government is in a unique position to
have the best science available for communities, and we have
done that in transparent ways, creating websites that a family
can go and click and figure out what the risk is on their
street, to their home, 50, 100 years into the future, but also,
frankly, working to figure out where the government can get out
of the way on this. At times, we found that many of the Federal
agencies had different standards about how we should rebuild,
and so we created for Hurricane Sandy a single, consistent
standard that cut across all the rebuilding programs, as much
as we could under existing laws, and that just makes life a lot
easier as a family is rebuilding, not have to understand what
four different agencies require, but actually that there is a
single, simple standard.
Senator Begich. Very good. We will work with you in that
arena, because I think it is an important opportunity.
The other last thing that I will do--if I have seconds
left, I will say something about the energy--but, I do want to
have a conversation at some point with you in regards to
revenue sharing on the Outer Continental Shelf. The Gulf States
receive it. Alaska does not. We have legislation pending. OMB
is always concerned, because they always want the money, but we
also know the impact on Outer Continental Shelf development of
oil and gas is felt by communities that are attached to it.
And, so, we will work with you on that. I just more want to put
it on your radar screen. I did not have time the last time when
we talked. I forgot to kind of put that on the list. I think it
is pretty important not only for Alaska, but other Coastal
States that are dealing with Outer Continental Shelf oil and
gas development.
Let me, if I can--and I just will make a general comment.
You do not necessarily need to respond. I understand my
colleague's concern about investment, but, when you think about
the military who invested in the Internet, I am sure it was not
a moneymaker back then. They probably were investing because
they had to because of communication capacity and new
technology. Well, today, it spawned enormous amounts of
business.
Renewable and alternative energy, as I said, for Alaska, we
are an oil and gas State, but we also are going to be a 50
percent renewable energy by 2025. The State of Alaska has put,
literally, hundreds of millions of dollars in this investment
because we know it is the right thing, because the more you get
off of energy from foreign countries that hate us means we get
more money staying in our economy here, no matter what the mix
of energy profile is.
And, so, when I hear these arguments that it is almost,
like, a waste of investment, it is not a waste of investment if
we are turning around, not spending money with people who hate
us, running two trillion-dollar wars trying to defend oil and
gas issues overseas. It makes sense long-term. So, I would love
to have--I am using you as a conduit here, but I would love to
have that debate, because we spend a lot of money, a lot of
lives, protecting oil and gas and energy sources around the
world when the more we diversify our base here, the better off
it is. And, it does produce jobs. It produces opportunity and
new innovation.
So, I thank you for your time. Thank you for allowing me to
rant there for a minute. Thank you, Mr. Chairman.
Secretary Donovan. Thank you, Senator.
Chairman Carper. Thank you for serving as a conduit for
Senator Begich and others.
All right. Senator Landrieu is next. She has stepped out.
Senator Tester, and then Senator Baldwin.
OPENING STATEMENT OF SENATOR TESTER
Senator Tester. Thank you, Mr. Chairman.
Chairman Carper. Senator Tester.
Senator Tester. Thank you, Mr. Chairman, and I want to
thank you for being here today, Shaun, and it is great to see
your family.
Secretary Donovan. Thank you.
Senator Tester. I just want to echo what some have said
today, and that is I appreciate your service, but I really
appreciate your family sharing you with us. You are one of the
smart guys around here, and I do not mean that in the negative
sense. I mean it in a positive sense. [Laughter.]
And, I think you have vision and I think we are blessed to
have you as a part of the Administration, so thank you very
much.
Secretary Donovan. Senator, thank you. I appreciate it.
Senator Tester. I want to talk about duplication for a
second because I think it is one of those things that
frustrates all of us, but sometimes we are the ones that create
it. Now, let me give you an example, and these are all programs
I love.
You are the Secretary of HUD that deals with housing. We
have a housing program in the U.S. Department of Agriculture
(USDA). We have a housing program in VA. From my perspective, I
am a rural guy, so USDA is a good thing, and I love veterans,
and so the VA is a good thing. But, the truth is, if we want
true accountability, it ought to be consolidated under one lid.
How do we do that, and how do you encourage--or, you can
pick another one, too. There are more egregious ones out there
than housing. But, how do you, as OMB Director, how do you get
us to a point where you can impact the duplication and impact
Congress to reducing duplication?
Secretary Donovan. Well, Senator, let me take an example
that we have, and I mentioned earlier 13 different rental
assistance programs at HUD. We have actually worked with our
Appropriations Committee and have started to make real
progress.
Another example is on homelessness. We actually worked with
GAO. They came to us with a report that looked at homelessness
programs across the Federal Government, and we agreed. We have
an Interagency Council on Homelessness, 19 different agencies
represented. We have very clear metrics and goals for what we
are trying to achieve, and because of that, this is where I
think OMB can be very helpful in leading measuring success and
being able to say not just there are too many programs, but
which are the programs that are actually achieving success.
What they found was that at HUD, the homelessness programs
were actually more integrated, and working with Congress, we
actually got some streamlining through the Homeless Emergency
Assistance and Rapid Transition to Housing (HEARTH) Act of our
homeless programs. But, there was a food program at the Federal
Emergency Management Agency (FEMA), an emergency food program,
that was basically going to shelters. It was not just being
used for food, but that was the primary, and their
recommendation was it is not as effective, in their view. Could
we basically consolidate it with the Continuum of Care--that is
what we call our programs at HUD. We liked what they said in
their report. We thought it made sense. We have actually
proposed in our budget this year to take that program from FEMA
and consolidate it into the work that we are doing at HUD.
So, I think that is exactly the way it should work. You
have to measure it, find out what is successful, and OMB can
help drive that coordination because it has a unique perch to
look across Federal agencies rather than being in a particular
silo.
To be frank, the challenge, we have talked about this--that
you find is, every program has its supporters.
Senator Tester. That is correct.
Secretary Donovan. Sometimes, there are different
Committees----
Senator Tester. Yes.
Secretary Donovan [continuing]. As in this case, where you
have--and, I think there is no substitute for the leadership of
OMB and the agencies rolling up their sleeves, sitting down
with Congress, and working those issues hard. But, I also
think--and I would love to get your advice--we have to find
ways to build more Democratic and Republican support,
bipartisan support, for those kind of changes. And, I think
what we can do on our side in the Administration is make sure
that we are publicizing, making it very apparent what is
working and what is not.
Senator Tester. Yes.
Secretary Donovan. That is why I am a big believer in the
transparency this Committee has worked on. But, the political
obstacles are real and, your advice on how we overcome those
would be helpful, too.
Senator Tester. Well, I wish that I had all the answers. I
can tell you that I think that you can make a difference. I
appreciate what you have just said. I think that
recommendations from OMB on possible ways that we can make
government more efficient, more effective----
Secretary Donovan. Yes.
Senator Tester [continuing]. And get more of the dollars we
spend to the ground, I think, is critically important for us.
In another area, yesterday, Senator Portman and I chaired a
Committee meeting on information technology (IT) investments.
We spend a lot of dough--Senator Baldwin was there, too--we
spend a lot of money on IT, some of it with success, a lot of
it without much success. The coordination is getting better,
but it certainly is not where I believe it needs to be between
agencies. Such things as the Dashboard at OMB----
Secretary Donovan. Yes.
Senator Tester [continuing]. The IT Council, all those
things are good. I mean, how do you envision, as OMB Director,
assuming you get confirmed, how do you envision your position
between the agencies, empowering them to coordinate better?
Secretary Donovan. So, this is an area--and I appreciate
your work on it, Senator, your focus on it--our IT investments
are some of the largest and most important investments that we
make, and through my own experience, not just at HUD but in
other leadership positions in the private sector, as well, they
are also some of the places where it is easiest to go wrong.
And, to give you the example I had, I came in. We were in
the middle of a major reinvention of our financial systems at
HUD. It was behind schedule. It was over budget. We had spent
about $100 million, close to that, already, and, frankly, it
did not look likely it was going to get us the results that we
had wanted, and this had started almost 10 years before I had
arrived.
And, so, what was incredibly helpful is through the
PortfolioStat process, OMB brought us ideas, and the shared
services model in particular. We are now, to use the technical
term, the poster child at HUD for shared services. We are in
the process of migrating our entire financial systems over to
Treasury. Starting by the first of the fiscal year, we will
have the first piece of that system moved over. And, it is not
a model--I would not have known that the Bureau of Fiscal
Services at Treasury was really good at this, but they have
credit reform programs. They do a lot of the things that we do
at HUD, so it is a similar sort of financial system. And, we
are going to get a better product, faster, at lower cost, than
if we continued pursuing our own reinvention of our system.
So, I am a big believer that OMB can play a very important
role because I have lived it. I have seen it. And, we are now
in the process of pursuing this shared services venture.
Senator Tester. I appreciate that work and appreciate the--
I was going to ask another question about security clearances.
My time is up, but we will get to that----
Chairman Carper. Go ahead. Just make it brief, if you
would. Go ahead.
Senator Tester. Really? OK. Well, I am somebody who thinks
we have too many people with security clearances, and I am also
somebody that thinks that the kind of due diligence that is
necessary to give those security clearances is somewhat
lacking. We contract a lot of the work out, not a lot of
oversight, from my perspective. And, I could be wrong on that.
Actually, I hope I am wrong, but I do not think the record
bears that out.
As OMB Director, what role do you see yourself playing in
the security clearance platform, if that is what you want to
call it, and what role do you see us--what role can you play--
--
Secretary Donovan. Yes.
Senator Tester [continuing]. Allowing us to make the
necessary reforms?
Secretary Donovan. Well, first of all, Senator, I think you
are already playing a very constructive role. I know you have a
number of pieces of legislation in this area that you put
together, and I, should I be confirmed, I look forward to
working with you specifically on those.
Where I am encouraged by this is the 120-day review that
the President ordered that was completed in March, I think, is
a very good sort of analysis of the problem and starting point.
I know that OMB is working with agencies to get detailed action
plans as part of the priority goal setting process. And, in
fact, the fact that this is one of our 15 priority goals across
the whole government, I think, is an indication that it is
really important to us.
The thing that I think, of the many things that we are
working on, the thing that seems most important in the work
that I have done to sort of get up to speed on this over the
last few weeks is that we have to have a process that does
continuous evaluation, right. We have this big backlog in our
security clearances, right. But, even if we could catch up on
that, the idea that you are only checking once every year, once
every 5 years, given the technology that we have today, just
does not make sense.
And, so, how we move to a continuous evaluation process,
where you have an automated way to check information, combined
with working with State and local actors who may have--there
may be a problem that an employee runs into with an arrest or
something like that. If you do not have those access to those
records----
Senator Tester. That is correct.
Secretary Donovan [continuing]. In real time, you are just
not going to find stuff. So, that combination of automated data
systems to do continuous evaluation with better data sharing, I
think those, from what I have learned so far--you are more of
an expert than I am on this--feel to me like critical things
that we can do to move forward on this.
Senator Tester. Just really quickly--thank you, Mr.
Chairman--I wish you the best in the confirmation. I wish you
the best in this job. As you know, you have a standing
invitation to come to Montana. You can bring your family, too.
We would actually rather have them come than you. [Laughter.]
But, because we will put your kids to work. [Laughter.]
But, the truth is, you have a lot of work to do here in
Washington, D.C., but I hope you have the opportunity to get
around the country to be able to continue seeing the challenges
that are out there, because I think it is important. So, thank
you. Thank you very much.
Secretary Donovan. Well, I appreciate it. I will just say
with my sons here that it is an important way they will earn
their allowance. [Laughter.]
But, I have been waiting--now that Milo has turned 15 and
he has passed me in height, I think he will be a much more
productive worker on the ranch than he would have been a few
years ago. [Laughter.]
Senator Tester. He can pick bales. That is good.
[Laughter.]
Chairman Carper. All right. Senator Baldwin.
OPENING STATEMENT OF SENATOR BALDWIN
Senator Baldwin. Thank you, Mr. Chairman.
I want to thank you for also meeting with me, and I know
you did with many Members of the Committee, prior to this
hearing.
Secretary Donovan. My pleasure.
Senator Baldwin. We had a chance to talk quite specifically
about three issues that concern me a lot. But, I want to say
that the thing that I took away from our meeting was a phrase
that you shared with us in your opening statement today, that
you do not necessarily like your job every day, but you love it
every day. And, I tend to be a pretty hopeful and optimistic
person myself, but when we ended up talking about the very
specific things that I brought to your attention, those are the
things that, that I do not like.
And, so, I do want to actually talk through the same three
topics, but perhaps in a sort of broader sense, because you
have not been confirmed yet, so you are not necessarily getting
around to the details of working on these issues, but I want to
know what you can do when you are confirmed, should you be
confirmed, and what OMB can do and what sort of tools you can
bring to these issues.
And, the first one relates to a land transfer issue in the
State of Wisconsin, one that has been pending for nearly 17
years. And, I had a chance to work on it during my 14 years in
the House, and, of course, I am continuing to work on it now.
But, it, unfortunately, has been slowed by a difference between
the Department of Defense and the Department of the Interior
relating to a land transfer to a third party, a Tribe in the
State of Wisconsin.
I have engaged extensively with both Departments and it
just does not seem like any are willing to take their heels out
of the--they have dug their heels in. What can OMB do, as
Office of Management and Budget, to prod, push, bring to
resolution--because this is not the only such issue that has
been pending for many years beyond what is rationale and should
be expected.
Secretary Donovan. Senator, as you mentioned, we talked
briefly about this, and should I be confirmed, I, as I said to
you the other day, look forward to talking to you more and
trying to figure out how this might be resolved. It is hard for
me to comment specifically----
Senator Baldwin. Yes----
Secretary Donovan. But more broadly, to go to your
question, my experience, issues like this come up at HUD where
different parts of HUD might be in disagreement, and my general
experience has been--and I think if you talk to my team, they
would tell you, I can be pretty impatient about this stuff--
that what you have to do is get everybody in the same room and
figure out that everybody is communicating.
What I often find is that these problems come down to an
issue of, the interpretation--it is like a game of telephone--
is not necessarily the same. Get everybody in the same room and
push to see if there are creative ways. I often find that if
you are just in a view of, this is the way we have always done
it, or, this is the way we have done it before, but looking for
possible ways creatively to solve problems, you can often come
up with a solution that--it may not be perfect, but it works.
And the other thing, to be frank, is that what I often find
sometimes is that agencies do not want to deliver disappointing
news. If we really cannot do something, if there really is a
statutory restriction against doing something, we owe it to
you, to every Member of Congress, to come back and say, here is
where the situation is, right. And, I have no idea on this
issue----
Senator Baldwin. Right we have not gotten into that level
of detail----
Secretary Donovan [continuing]. But, that communication and
cooperation and being able to get back quickly, whatever the
news is, to communicate it, I feel like, is something that I
would want to prioritize at OMB, if I am confirmed.
Senator Baldwin. Well, I appreciate your commitment to give
attention to this. It is enormously frustrating, and it is one
of those things that, I think, gives government, in general, a
bad reputation. Seventeen years is unacceptable to all
involved, and we really have not heard satisfactory answers,
and I do not think it is a matter of giving somebody hard news
or bad news. It is intractability that, in this case, is just
unacceptable.
I wanted to talk about the U.S. Forest Service budget and
the issue of fire borrowing. Right now, as we have seen a
lengthening of the fire season in the United States, as we have
seen more extreme fire events, we have seen the movement of the
Forest Service budget from the things that they anticipate
doing on an annual basis to respond to the emergencies that
seem to come up with much greater regularity. And, it is, in
fact, making it much more difficult to do the very things that
the Forest Service might do to prevent forest fires in the
future, to manage and maintain healthy forests. It is certainly
something that we are seeing have significant events in
Wisconsin. I know in the Western States, this is very
significant.
Well, I know that we many of us on this Committee,
actually, have sponsored a bill that would allow for the most
extreme fire events to be funded through disaster spending
rather than the Forest Service account. The President's budget
for 2015 incorporates that proposal. So, I guess I would ask
you, if confirmed, what can OMB do to see this through, and
what impact does fire borrowing have, in your observation, on
the Forest Service's ability to do what it is supposed to do?
Secretary Donovan. Yes. I am glad you raised this, Senator,
because I think it is an important issue and it is one where I
am hopeful that there can be bipartisan progress on it. I know
that it is important to many other Members of the Committee, as
well, and thank you for your leadership on it.
The cap adjustment proposal that you referenced, I think,
makes a lot of sense in a number of ways. First, it would
expand the ability of the cap adjustment to cover the kinds of
forest fire fighting, particularly the most extreme fires. One
percent of the fires account, typically, for about 30 percent
of the costs, and those are the kind of extreme examples that
we really ought to be creating some flexibility around. But, it
would do so by offsetting the cap for others. So, it does not
increase overall the cap adjustment, and I think that is a
fiscally responsible thing to do.
But, as you well know--we talked about this, and we just
talked about it with Senator Begich--often, we force ourselves
into short-sighted decisions. In this case, we are reducing the
kinds of smart things that would actually limit forest fires
going forward, clearing out kind of low-lying vegetation in
forests that can help spark these fires, a whole range of
things. If we are not doing that kind of regular maintenance we
create greater risk of forest fires going forward. And, so, by
making this cap adjustment, we are actually going to ensure
that we are doing the kind of smart things in the short term
that are going to limit these costs going forward. It is
exactly the kind of mitigation, smart mitigation measures that
we talked about before with Senator Begich.
So, I am very encouraged by your focus on this and I
appreciate it.
Senator Begich. Thank you.
Chairman Carper. Senator Baldwin, thanks very much for
joining us today.
Senator Pryor is not here. Senator McCain had to leave.
Senator Portman, you would be next. I do not know if you were
here in the room when, in answer to a question about the DATA
Act from Dr. Coburn--I know you and Senator Warner spent a lot
of time on the DATA Act. You just need to know, the Secretary
trashed it pretty badly---- [Laughter.]
And, now it is your time to ask questions. Go ahead.
OPENING STATEMENT OF SENATOR PORTMAN
Senator Portman. What a set-up. It just gives me another
question, number 25 now, not just 24. [Laughter.]
Well, first of all, thanks for coming before us and being
willing to go through confirmation again. We had a nice
opportunity to talk about this job that I once held and that
is, as I told you, the worst job in government, but also the
best job in government. It can be both, but it is a very
important job, I think, some times over.
In Administration, as we saw in the last and this
Administration, people change back and forth, but the
continuity is the management people there and the budget people
there who are career professionals who do an amazing job, and I
was honored to lead them, and a lot of them are still there. I
know that will be the best part of your job.
The worst part will be having to work with us, probably.
But, there are lots of things that I would like to talk to you
about today. I do not have time for all of them. I guess a big
one is just understanding that you are now in a cabinet agency.
Your job is going to be very different, and I know you
acknowledge that and understand it. Let me give you an example.
During your tenure at HUD, the paperwork burden has more
than doubled on the American economy. In 2008, HUD regulations
produced 27 million hours of paperwork. Today, that number is
58 million hours of paperwork. At the end of 2013, HUD's
paperwork burden imposed a $1.7 billion cost on the economy. I
think a lot of that is Dodd-Frank, probably about half of it.
Now, at OMB, you are going to be the primary enforcer of
the Paperwork Reduction Act, so I hope you are prepared to
change your focus a little bit. It is always said that the OMB
job is the ``Dr. No'' job. That certainly was my experience.
But, since I assume you have committed today to put the ``M''
back in OMB, which is what every new OMB Director says, I hope
you also focus on this issue of Management: paperwork and
regulations.
In particular, there is a great opportunity with the DATA
Act, since the Chairman mentioned it, to move quickly on making
the data that is available to the public and to you, as a
manager, more uniform. Standardize it. Ensure that you have the
kind of transparency and visibility. What you do not know, you
cannot manage. I know, earlier, there was a comment made that
it is very difficult to manage something that you cannot
measure. Well, the DATA Act is all about that. It is about
measuring things accurately and uniformly across government.
We do think it is a really important bill. Senator Warner
and I worked on this for a few years and came up with what we
thought was a very realistic and practical timeline for
implementation. I have to say, what I have heard from OMB since
the DATA Act passed the Senate and the House about a month ago
has not been encouraging. Instead of committing to meet the
deadlines in the law, OMB has committed to, and I quote,
``implementing its requirements based on current funding and
timeframes that permits.'' Not very encouraging.
So, we left 3 years for implementation for parts of it. The
uniform Federal financial data would not be made available to
the public until May 2017. And, I tell you what, if you are not
committed at OMB to that timeframe, it will never happen. You
have to drive that.
So, I am looking for a commitment from you today that you
will drive it and America and you, as a manager will finally be
able to see in detail how the government spends our hard-earned
tax dollars.
I did this when I was Director because I had to implement
what was called the Federal Funding Accounting and Transparency
Act (FFATA), a great acronym---- [Laughter.]
Federal Funding Accountability and Transparency Act. It was
actually Tom Coburn and Barack Obama who introduced that
legislation, and it put all grants and contracts online over a
certain threshold, and the DATA Act really is building on that
to be able to track and report on Federal financial information
more accurately.
And, so I understand that it is a challenge, because I went
through this, and the only way to have it work is if you drive
it from the top. And, it has to be a huge priority of yours
personally and of the agency. So, I guess I would--I know you
are going to say to me, appropriated funds might not be there.
They were not for me, either, but there are appropriated funds
for Federal management, Federal financial management, in
particular, and I just believe that a sustained leadership
focus is going to be required.
Will this be a priority of yours, implementing the DATA Act
under your leadership, and do you think you can meet the DATA
Act implementation day one priority that is critical to the
timely implementation?
Secretary Donovan. Senator, I commit to you, it will be a
priority of mine. For me, the whole question of knowing what
success looks like, measuring it, you cannot do that without
good data. You talked about personal leadership--I, personally,
attended every single HUDStat meeting that we have had over the
last 5\1/2\ years. We created HUDStat and I attended every one
of those meetings because I believe strongly in what you said,
that it is about personal leadership and you need to take that
kind of personal role to demonstrate the importance and to
create work across the agencies.
I also will make sure that I am not giving you answers
without knowing the facts, and this is a significant
undertaking and I do want to make sure, if I am confirmed, that
I dig into this quickly and be able to come back and talk to
you about implementation, what it looks like and what we can do
on that, because I take it--this will be one of my highest
priorities, is not just the implementation of the Act itself,
but also, more broadly speaking, how do we make government more
evidence-based, more focused on data, and I want to do that.
I do want to take a moment, at some risk, to disagree with
you on two things. One is that I am not going to promise to put
the ``M'' back in OMB because I think Secretary Burwell has
done that, and----
Senator Portman. Did you say that? [Laughter.]
I think I said it. I am going to put the ``M'' back in
OMB. So----
Secretary Donovan. I think it is going to be continuing the
focus.
Senator Portman. Yes.
Secretary Donovan. I think, not only Sylvia, but also Beth,
has done a good job working with all of you. And, I am going to
disagree that dealing with this Committee is going to be the
toughest part of the job. I do not think that is true, and I
particularly look forward to getting your advice and guidance,
given your personal experience.
Senator Portman. Two other quick ones on the regulatory
front. We do not have time to go into it in detail, but one is
independent agencies. As you know, about 25 percent of the new
rules are coming from independent agencies. There is
legislation that is bipartisan here on the Hill that says, let
us apply the cost-benefit analysis in an appropriate way to
independent agencies. Senator Warner and I have been working on
that for some time. Senator Pryor and I have worked on that----
Secretary Donovan. Yes.
Senator Portman [continuing]. In the larger Regulatory
Accountability Act, really important. I just met with a bunch
of manufacturers and they were talking about some of these
agencies that have these acronyms like SEC and Federal Energy
Regulatory Commission (FERC) and others. And, so, we want to
work with you on that.
And then on permitting, America just keeps falling behind
in terms of permitting. Again, I just met with some folks that
volunteered to me just moments ago, it is tougher to get
investment here because investors are looking around the globe,
and they look at America and they say, gosh, it is going to
take 4 or 5 years to get this energy project up and going. It
might be a wind farm, it might be oil and gas development, it
might be just a commercial shopping center. And, so, they look
elsewhere because of these permits and the problems with
permitting. Sometimes, there are 34 Federal permits, sometimes
seriatim. You have to get through one, then the other, on some
of these energy projects, for instance. So, we hope you will
work with us on that, too. That is a bill that Senator
McCaskill and I have that is a common sense bill that would get
at this permitting issue.
And then, finally, thank you for your help with the City
Gospel Mission. As you know, this is a great organization in
Cincinnati. There is also one in Cleveland that has a similar
issue. And, it is a distressing issue because this homeless
shelter is not able to move forward right now with certainty
because of a HUD deed restriction that has posed an obstacle
to, really, an innovative and expanded way to deal with the
homeless in our area of Cincinnati, Ohio. So, I know we are
getting close to resolving this issue. I would ask for your
sustained focus on that as we try to get across the finish
line.
Secretary Donovan. You will have it.
Senator Portman. Thank you. Thank you, Mr. Chairman.
Chairman Carper. Thank you, Senator Portman.
Last, but not least, Senator Levin.
OPENING STATEMENT OF SENATOR LEVIN
Senator Levin. Thank you. Let me have 10 seconds.
[Pause.]
First, let me welcome you and your family, and I think your
two boys deserve some kind of a special award this weekend----
[Laughter.]
For not only staying awake, but looking interested.
[Laughter.]
Secretary Donovan. They love data, too. [Laughter.]
Senator Levin. I think they probably love baseball a heck
of a lot more. [Laughter.]
At any rate, thanks for your ongoing service to the
country.
I also, by the way, have an interest in the independent
agencies and the cost-benefit analysis as it applies to them
and whether they should be bound by the exact same cost-benefit
analyses that all the other agencies are bound by and I would
appreciate your thoughts about the independence of those
agencies, whether or not they need a measure of independence
from the President and, frankly, from political pressure.
Secretary Donovan. Senator, this is an area where,
obviously, given, in particular, the challenges we had in the
housing market and its connection to the broader financial
system, I have spent a lot of time with not just the Federal
Housing Finance Agency (FHFA) that oversees Fannie and Freddie,
the Federal Deposit Insurance Corporation (FDIC), SEC, a range
of other independent agencies, now the Consumer Financial
Protection Board (CFPB). So, I have gained a healthy respect
for the importance of the independence of those agencies.
I do think there are roles that OMB can play in creating
best practices, in sharing information and technical
assistance. But, I do have a healthy respect for the
independence of those agencies and the importance of respecting
that independence.
Senator Levin. Well, I hope that you are confirmed and
confirmed promptly, and shortly after you are confirmed,
because there is a bill which I believe is pending on this
subject, I think it would be important for us to have your
views after you are confirmed on this. Can you commit to give
us that quick review of that bill? You know the bill number, I
think--do you? Or you can----
Secretary Donovan. I have it in my notes----
Senator Levin. You know the bill I am referring to?
Secretary Donovan. I do----
Senator Levin. If you could give us that, to the Committee,
after you are confirmed, after you have had a chance to look at
that bill, but promptly, because I think it is on the calendar.
Could you do that?
Secretary Donovan. Should I be confirmed, I look forward to
spending time with OMB staff quickly and getting up to speed on
this, yes.
Senator Levin. All right. And, then letting the Committee
know what your views are?
Secretary Donovan. Yes, sir.
Senator Levin. In terms of, by the way, the discretionary
spending in this country, I was trying to get a quick bunch of
numbers here, since we are all numbers people today. On this
question of discretionary spending, you and Senator Johnson had
a conversation about it, and the way it looks to me is that in
terms of even nominal dollars, at least in the last 5 years, we
are spending fewer nominal dollars than we did 5 years ago, and
less than any years since then. And, in terms of percentage of
GDP, which you were also talking about, it is a smaller
percentage of GDP since 2007. Does that sound about right to
you?
Secretary Donovan. Yes. And, in fact, if you look out
through the President's budget proposal, we would end up in
2024 with the lowest discretionary spending as a percentage of
our economy in more than 50 years. So, this is not just a
recent trend, it is a historical trend, as well.
Senator Levin. And it is something which, I think, is
creating all kinds of problems in terms of economic growth, as
you point out. But, that kind of leads me to the subject which
you and I have spent some time talking about, which is the
question of tax avoidance, tax loopholes, corporate revenue,
particularly, going down as a result of the use of a number of
tax avoidance gimmicks, mechanisms, schemes, loopholes,
inversions, you name it.
I think that this Committee has really led the way in a
number of ways at looking at wasteful spending, and it should
be high up on the radar and I am all for it, because when we
can identify it, we ought to get rid of it.
But, there are also tax loopholes, which are wasteful, as
well, which do not serve any economic purpose except tax
avoidance. We have mechanisms which the most profitable
corporations in the world use to avoid paying taxes. Inversion
is one of the mechanisms. We have a way in which companies can
transfer their income to themselves in tax havens and avoid
paying taxes. We have mechanisms by which profitable companies
transfer their intellectual property to themselves in tax
havens and avoid paying taxes. We have a tax loophole called
carried interest where the folks that run hedge funds pay a
lower tax rate than people who work for them.
There is a lot of debate over deductions and credits which
serve purposes, and I understand that. But, I think we ought to
distinguish between those kind of tax credits and those kind of
deductions and the loopholes which do not have any economic
purpose except to avoid paying taxes.
And, the question is, when it comes to trying to fill some
of the gaps in our economy--we are going to run out of highway
funds in a couple of months, I mean, we are going to stop
highway projects right in the middle of the project unless we
do something about it, so we have a great debate going on as to
how do we fill that gap. We have a big problem with trying to
do the right thing for our veterans. We have a need for some
additional funds. At least, in the Senate bill, we sure do. The
House bill does not have any additional funds.
So, we have a need for additional revenues. I think it is
clear, both in terms of the number on Gross Domestic Product,
the discretionary spending as a percentage of our economy, and
the reduction in defense spending, as well, by the way, which
is very troubling for me as Chairman of the Armed Services
Committee, impact on our security.
And, so, my question of you is whether or not you see the
closing of at least some of the tax loopholes as a way of
raising revenue, or should we look at closing even those kind
of loopholes, the ones that serve no economic purpose except
tax avoidance, as exclusively a way, if we do close them, of
reducing rates?
Secretary Donovan. So, Senator, the President is committed
to comprehensive business tax reform. We think that is an
important goal and that there should be a continued focus on a
bipartisan basis on achieving that. At the same time, the
President has proposed in his budget that we use one-time
revenues from reform of our business tax code to invest in
infrastructure, to go precisely to your point about making
critical investments.
And, should I be confirmed, I would certainly be open to
working with you and others in the Senate on ways that we can
eliminate wasteful spending in our tax code in shorter-term
ways that would not necessarily be part of a comprehensive
business tax reform. So, we would be open to those
conversations.
Senator Levin. Thank you. Good luck to you and we thank
your family for their contribution that they make to your
contribution.
Secretary Donovan. And thank you for your service, Senator.
Chairman Carper. Secretary Donovan, I have just a couple of
more questions to ask, and I am going to ask you just to
respond to them very briefly. I am supposed to be somewhere
else right now. You probably are, too.
Secretary Donovan. I appreciate your staying.
Chairman Carper. The 800-pound gorilla in the room on
deficit reduction, I believe, is entitlement programs. A big
piece of that is health care, a big, major driver. And, I am
going to submit some questions for the record, but I would just
ask that you be especially mindful, that I am sure you are, the
one piece of that is improper payments.
And, if you look at the improper payments--for those who do
not know what improper payments are, that is not necessarily
fraud, but it is just mistaken payments, overpayments,
mistakes, and so forth. And, I think we saw improper payments
peak out at about $120 billion 4 years ago. They have dropped
steadily to about $106, $108 billion today. But, we saw the
number for Medicare actually rise over the last several years,
and I am not sure--maybe my staff can tell me what it is, but
it seems like it is around $45 billion. It has gone up, not
down.
I would just ask that you be especially mindful--and, we
had an ongoing discussion, dialogue with Sylvia Mathews Burwell
on this and Dr. Coburn and I have been all over this issue for
the last decade, and he and I will continue it this year, but
we really want to focus on that with you and your folks,
assuming you are confirmed. After this hearing, you just never
know, though, so we will see. [Laughter.]
The other thing I want to mention, Dan Tangherlini and Beth
Cobert sat right here with us 2 months ago. We had a wonderful
hearing on the President's management agenda. And, one of the
items we talked a lot about was strategic sourcing and how--my
recollection is that some of the major companies in the world
and in this country, private sector companies, I think they
manage as much as 80, 90 percent of their contract spending
through strategic sourcing and they save money. In the Federal
Government, I am told that major Federal agencies examined by
GAO only managed about 5 percent of their contract spending
through strategic sourcing. That is dramatic. It may be
unrealistic that we could get to 80 or 90, but we could sure do
better than five, and we are going to be counting on you to do
that and to work with Mr. Tangherlini and others, with Beth and
your own shop, to get us there.
There will be some other questions that my colleagues and I
will have.
[Pause.]
My staff had given me a script here to use as the closing
statement. [Laughter.]
I just look to your sons back there. You guys, you have
been here for the whole thing and you can give your Dad, like,
one thumb up, or maybe two if you think he has really been
exceptional. What do you think?
I see two--OK, I see a couple. That is good. [Laughter.]
OK. All right.
Secretary Donovan. The check is in the mail, boys.
[Laughter.]
Chairman Carper. Well, I want to thank you all for showing
up. I think one of my favorite sayings in life, showing up is
about 80 percent of it. So, thank you for showing up and
lending your support.
You have a beautiful family, and I know you are very proud
of them and I suspect they are fairly proud of you, as well.
Dr. Coburn admonished you that there are priorities, as well,
and I am sure that you are mindful of that. It is hard to find
that balance. People ask me, what is the hardest thing in my
life, in my work here and as Governor and so forth, and it is
always finding the right balance between family and all the
responsibilities there and trying to be a good public servant.
I appreciate you going through this process. We are
grateful to your family for their willingness to share you a
bit longer with the people of our country.
And, with that, I will say that the nominee, I am told, has
filed responses to biographical and financial questionnaires,
answered prehearing questions submitted by the Committee, and
had his financial statements reviewed by the Office of
Government Ethics. Without objection, this information will be
made a part of the hearing record,\1\ with the exception of the
financial data, which are on file and available for public
inspection in the Committee offices.
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\1\ The biographical and financial questionnaire for Mr. Donovan
can be found in the Appendix on page 49.
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The hearing record will remain open, until noon tomorrow,
for the submission of statements and questions for the record
(QFRs).
Dr. Coburn had mentioned to me his belief that before we
vote here in the Committee, that the QFRs should be completed
so, I just ask that you try to do that and we will look forward
to, hopefully, having a business meeting soon and being able to
work with you in this new capacity.
With that, I bid you all a good day and this Committee is
adjourned. Thank you.
Secretary Donovan. Thank you, Senator.
[Whereupon, at 12:05 p.m., the Committee was adjourned.]
A P P E N D I X
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