    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

                          THE PRESIDENT'S FISCAL YEAR
                                  2019 BUDGET

    =======================================================================

                                    HEARING

                                   before the

                            COMMITTEE ON THE BUDGET
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

              HEARING HELD IN WASHINGTON, D.C., FEBRUARY 14, 2018

                                   __________

                                Serial No. 115-9

                                   __________

               Printed for the use of the Committee on the Budget

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                           Available on the Internet:
                                www.govinfo.gov

                    U.S. GOVERNMENT PUBLISHING OFFICE

    30-531                   WASHINGTON : 2018

                            COMMITTEE ON THE BUDGET

                        STEVE WOMACK, Arkansas, Chairman
    TODD ROKITA, Indiana, Vice Chairman  JOHN A. YARMUTH, Kentucky,
    DIANE BLACK, Tennessee                 Ranking Minority Member
    MARIO DIAZ-BALART, Florida           BARBARA LEE, California
    TOM COLE, Oklahoma                   MICHELLE LUJAN GRISHAM, New Mexico
    TOM McCLINTOCK, California           SETH MOULTON, Massachusetts
    ROB WOODALL, Georgia                 HAKEEM S. JEFFRIES, New York
    MARK SANFORD, South Carolina         BRIAN HIGGINS, New York
    DAVE BRAT, Virginia                  SUZAN K. DelBENE, Washington
    GLENN GROTHMAN, Wisconsin            DEBBIE WASSERMAN SCHULTZ, Florida
    GARY J. PALMER, Alabama              BRENDAN F. BOYLE, Pennsylvania
    BRUCE WESTERMAN, Arkansas            RO KHANNA, California
    JAMES B. RENACCI, Ohio               PRAMILA JAYAPAL, Washington,
    BILL JOHNSON, Ohio                     Vice Ranking Minority Member
    JASON SMITH, Missouri                SALUD O. CARBAJAL, California
    JASON LEWIS, Minnesota               SHEILA JACKSON LEE, Texas
    JACK BERGMAN, Michigan               JANICE D. SCHAKOWSKY, Illinois
    JOHN J. FASO, New York
    LLOYD SMUCKER, Pennsylvania
    MATT GAETZ, Florida
    JODEY C. ARRINGTON, Texas
    A. DREW FERGUSON IV, Georgia

                               Professional Staff

                           Dan Keniry, Staff Director
                      Ellen Balis, Minority Staff Director

                                    CONTENTS

                                                                       Page
    Hearing held in Washington D.C., February 14, 2018...............     1
        Hon. Steve Womack, Chairman, Committee on the Budget.........     1
            Prepared statement of....................................     3
        Hon. John A. Yarmuth, Ranking Member, Committee on the Budget     6
            Prepared statement of....................................     8
        Mick Mulvaney, Director, Office of Management and Budget.....    10
            Prepared statement of....................................    13
        Hon. Gary Palmer, Member, Committee on the Budget, reports
          submitted for the record...................................    45
        Hon. John Faso, Member, Committee on the Budget, questions
          submitted for the record...................................   138
        Mick Mulvaney's responses to questions submitted for the
          record.....................................................   139

                    THE PRESIDENT'S FISCAL YEAR 2019 BUDGET

                                  ----------

                          WEDNESDAY, FEBRUARY 14, 2018

                              House of Representatives,
                                       Committee on the Budget,
                                                       Washington, D.C.
        The Committee met, pursuant to call, at 10:00 a.m., in Room
    1334, Longworth House Office Building, Hon. Steve Womack
    [Chairman of the Committee] presiding.
        Present: Representatives Womack, Black, Diaz-Balart, Cole,
    McClintock, Sanford, Palmer, Renacci, Johnson, Lewis, Smucker,
    Ferguson, Grothman, Woodall, Arrington, Smith, Yarmuth, Lee,
    Lujan Grisham, Moulton, Higgins, DelBene, Wasserman Schultz,
    Jayapal, Carbajal, Jackson Lee, Jeffries, and Khanna.
        Chairman Womack. Good morning. The hearing will come to
    order. Welcome to the Committee on the Budget's hearing on the
    President's fiscal year 2019 budget. Today we will hear
    testimony from the director of the Office of Management and
    Budget, the honorable Mick Mulvaney. During our hearing, we
    will hear directly from the director of OMB, and we appreciate
    you being with us here today, Mr. Director. Your insight will
    be very helpful in our understanding.
        Receipt of the President's budget each year marks the
    beginning of the Federal budgeting process, or budget season as
    we like to call it, and the White House officially kicked it
    off on Monday. While Congress ultimately controls the purse
    strings, the President's budget request is still an important
    document for lawmakers to consider along the way.
        Each fiscal year, the administration's budget documents the
    President's policy and spending priorities. These
    recommendations to Congress are important for the Budget
    Committees in both chambers to consider as work crafting the
    budget resolution begins in earnest.
        Without question, there are plenty of worthwhile ideas
    included in the President's budget this year. First, I am
    encouraged that the administration prioritizes and boosts the
    investment in our national defense. With mounting threats to
    our security both at home and abroad, it is critical that we
    provide for a strong and capable military. And we must ensure
    our warfighters have the necessary resources and training to
    complete the missions with which they are tasked today and
    those with which they will be tasked in the future.
        I am also glad to see the administration confront head on
    the issue of opioid abuse, which has turned into a nationwide
    epidemic. More than 115 Americans die every single day from
    opioid overdoses, so we can all agree this is a serious,
    rampant problem that can no longer be ignored.
        Additionally, the administration's budget request calls for
    enhancement in security at America's borders, reflecting
    President Trump's commitment to address our broken immigration
    system. And there is no question that America's infrastructure
    is in dire need of attention.
        This request also proposes funding for an infrastructure
    overhaul. More detail on the initiative was also released
    earlier in the week. I welcome President Trump's plan to cure
    decades of neglect and ultimately build a safe, fast, reliable,
    and modern infrastructure to meet the needs of the American
    people and the economy.
        Last in this list of examples but certainly not least, I
    appreciate that the President's budget, an American budget,
    acknowledges fiscal reality and takes significant steps toward
    reducing the deficit. The President's budget projects $3
    trillion in deficit reduction, including $1.7 trillion in
    mandatory savings, bringing us to within 1 percent of GDP in
    the 10-year window.
        The budget emphasizes a need for efficient, effective, and
    accountable use of taxpayer dollars and takes real steps to
    target waste, fraud, and abuse in government. These are all
    good things for our country, and we will certainly consider
    embracing the President's best ideas.
        However, it is important to remember that even with a
    positive economic impact of tax reform that is being felt
    across the Nation by hardworking Americans, the financial state
    of our country is still undeniably grave, and the President's
    budget certainly highlights this sobering reality.
        And while there are many worthy policy proposals in this
    budget request, it is also very telling of our financial
    situation that the proposal does not get to balance. It should
    always be the goal to balance our books. Every year we neglect
    to do so, the task becomes more daunting and more difficult.
        In order to slow down and ultimately pay down our Nation's
    unsustainable debt, we have to make some tough choices. And so,
    our work writing the budget resolution begins within the House
    Budget Committee. Balance does remain the ultimate goal.
    However, today and in the coming days our Committee will
    carefully consider the President's suggestions and work to
    incorporate many of his budget ideas.
        Thank you for this initial time, and with that I will yield
    to the Ranking Member, the gentleman from the Commonwealth of
    Kentucky, Mr. Yarmuth.
        [The prepared statement of Chairman Womack follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Yarmuth. Thank you very much, Mr. Chairman. Welcome,
    Director Mulvaney. I appreciate your coming here to testify on
    the President's budget and to answer our questions, and I would
    like to publicly thank you as well for coming to meet with our
    Democratic members yesterday. I know it was valuable for us and
    I hope it was good for you too.
        Last year when we received the President's budget for 2018,
    I described it as a betrayal with a long list of broken
    promises, which it was. This year, I am going to start with the
    positive. In this budget, the Trump administration has done
    something extraordinary. They have finally realized that you
    cannot balance the Federal budget by cutting taxes, you cannot
    balance the Federal budget by cutting spending, and you cannot
    balance the Federal budget through gimmicks. God knows we have
    tried all of those.
        So with this new acknowledgement or enlighten, whichever
    the case may be, maybe there is hope that we can work together
    in a bipartisan way to advance a responsible budget that truly
    addresses the needs and priorities of the American people, but
    it cannot start with the values reflected in the rest of the
    Trump budget.
        Let's be clear: this is an irresponsibly extreme budget
    that reflects a disdain for working families as well as a
    disheartening lack of vision for a stronger society. This
    budget calls for massive cuts to healthcare, antipoverty
    programs, and investments in economic growth all to blunt the
    deficit-exploding impact of the President's tax cuts. It takes
    aim at the bipartisan budget agreement the President signed
    into law just last week, cutting non-defense spending in 2019
    by at least $57 billion below the level called for in the 2-
    year agreement.
        This is funding that would go to veterans' programs, law
    enforcement, diplomatic operations, education, research, and
    other investments to boost jobs, revitalize communities, and
    improve economic security.
        Beyond 2019, the budget sets nondefense spending on a steep
    and steady downward trajectory so that by 2028, nondefense
    discretionary funding would be cut by 33 percent below the
    bipartisan budget agreement level for this year, and that is
    without accounting for inflation. That is such a dangerously
    low level of funding, it would leave the government unable to
    carry out its basic functions.
        The budget, then, goes directly after mandatory spending,
    brutally targeting programs that help Americans living paycheck
    to paycheck. It cuts $263 billion from mandatory programs that
    safeguard basic living standards, including a $214 billion cut
    to the Supplemental Nutrition Assistance Program that protects
    44 million people including 20 million children from going
    hungry each night.
        It takes $72 billion from disability programs, including
    Social Security and more than half $1 trillion from Medicare, a
    full betrayal of the promises the President made to the
    American people not to touch either program.
        And despite the public's outright rejection last summer,
    the President's budget continues the Republican obsession with
    dismantling and destabilizing healthcare for millions of
    Americans. It makes another attempt to repeal the Affordable
    Care Act and replace it with an already-rejected plan that will
    leave millions more people without meaningful health coverage
    and weakened protections for people with pre-existing
    conditions.
        As part of this continuing attack, the budget cuts $1.4
    trillion from Medicaid, jeopardizing care for seniors in
    nursing homes, children with disabilities, and low-income
    families.
        Even where this budget claims to increase investments, it
    fails. This proposal pretends to make infrastructure a priority
    with $200 billion in Federal funding, a figure that falls
    embarrassingly short of our Nation's infrastructure needs. But
    then the budget simultaneously cuts $122 billion in highway
    programs while severely cutting or eliminating other
    infrastructure investments our cities and states need.
        But even after all of these reckless cuts, the budget
    cannot hide the true devastation of the tax cuts, so it once
    again relies on unrealistic economic assumptions to make its
    deficit projections look less ominous. It counts $800 billion
    in deficit reduction from some magical policy growth effects,
    even though independent economists predict those high growth
    rates are not sustainable given trends in our labor supply.
        So while this budget includes some honesty by acknowledging
    that their tax cuts did not pay for themselves, it turns to
    gimmicks to hide the full consequences of these cuts while
    decimating critical investments the American people need.
        The Federal budget is about choices, choices that have
    major impacts on the American people. Not a single millionaire
    would have gone hungry without the new tax cuts my Republican
    colleagues just gave them, but many American families will not
    be able to put food on the table under this budget. Others
    would not be able to afford healthcare or housing or to heat
    their homes in the winter. These are choices my Republican
    colleagues are making and they are reprehensible.
        Our task here is to build a stronger society and to do what
    we need to do that, we need investments in education,
    healthcare, job training, innovation, infrastructure, and more.
    If you believe America is better off by gutting these
    investments, you fundamentally misunderstand the true source of
    our Nation's strength. I yield back.
        [The prepared statement of Mr. Yarmuth follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Womack. I thank the gentleman. In the interest of
    time, if other members have opening statements they would like
    to make, I ask that you submit them for the record.
        Chairman Womack. And now, I would like to introduce and
    recognize the director of the Office of Management and Budget,
    Director Mulvaney. We appreciate your time today, Mr. Director.
    The Committee has received your written statement. It will be
    made part of the formal hearing record. You will have 10
    minutes for your opening remarks and the floor is yours.

    STATEMENT OF MICK MULVANEY, DIRECTOR, OFFICE OF MANAGEMENT AND
                                 BUDGET

        Mr. Mulvaney. Thank you, Chairman. Thank you, Ranking
    Member Yarmuth, former Chairwoman Black. It is good to be back
    at the Committee. Thank you very much for having me, giving me
    the opportunity today to talk a little bit about the
    President's budget. I am not going to read the opening
    statement that we have submitted for the record. I am going to
    just talk very briefly about sort of an introduction, then we
    will move straight to your questions.
        When I was before you last year, it was an unusual year. We
    had sort of broken the budget into two pieces. We had a skinny
    budget and a discretionary budget only first, and then sort of
    a fuller budget later in last spring. That is not unusual in a
    transition year.
        This year has been another unusual year in that the
    Congress and the White House negotiated and signed a caps deal
    as recently as, I think, Friday afternoon or early Friday
    morning, which as you can imagine threw all of the budget
    process in a good bit of turmoil.
        So, what we have actually brought you today is almost two
    budgets. What we have submitted to Congress is an addendum to
    the 2018 budget, which purports to take the budget we had
    previously submitted to you in the spring and bring up the
    spending to the levels of the caps deal that was executed a
    couple days ago.
        In addition, we have also sent you the original 2019 budget
    we were working on until Friday that was written to last year's
    caps level. I believe it was 1091 or 1092. However, that
    changed as well. We have decided not to write an addendum to
    the 2019 budget that takes us all the way up to the caps, but
    instead spends less than the caps. Why is that? Because this
    is, as everyone is quick to point out, a messaging document
    from the administration to the legislature.
        And what is the message by doing those two budgets? A
    couple different messages. Number one, we do not believe you
    have to spend all of the money. In fact, you saw the
    President's tweets over the weekend that said that we believe
    that we had to spend more or pay out more in non-defense
    discretionary during the negotiations in order to get the
    defense spending that we wanted as the administration, and we
    do not think you have to spend all of that money. That is
    reflected in the 2019 budget and the 2019 addendum.
        However, if you do, you also now have the 2018 budget and
    the 2018 addendum that does spend all the way up to the caps.
    Keep in mind, when you look at the two numbers, the caps are
    not that different. It is a $10 billion difference from one
    year to the next.
        So if you decide going into the omnibus appropriation that
    you are going to have I believe before the end of March and
    decide to spend up the caps, which we fully expect that you
    would, you have a guide from the administration as to how the
    administration would purport to spend that amount of money.
        Between March and the end of the fiscal year in September,
    if you decide to, again, spend up to the caps on 2019, then you
    could use the 2018 number as a guide because the numbers are
    not that different. If, however, intervening circumstances
    prompt you for whatever reason to not want to spend all the way
    up to the caps, then you also have guidance already in your
    hand from the administration on how we would spend that money.
    That is the 2019 budget with the 2019 addendum. So that first
    message is that you do not have to spend it all, but if you do,
    here's how we would spend it.
        The second message behind this budget is pretty
    straightforward, which is that we are not condemned to year
    after year after year of trillion-dollar deficits. There is a
    way to get off of that ride, and that is the larger,
    overarching message of this budget that there is probably more
    than one way, but we have offered at least one way to get off
    of that cycle of trillion-dollar deficits. So as you start to
    look into the out years in this budget, you see that we
    dramatically reduce the overall size of the deficit and the
    debt as a percentage of GDP.
        No, it does not balance. I believe that I said to you when
    I was here last year that we had worked very hard last year to
    try and show a budget that balanced in 10 years, and I also
    pointed out, as many of you have individually, especially in
    the Republican side of the room, that if we did not start to
    make changes earlier rather than later, it would become more
    and more difficult to balance the budget every single year. And
    I think I actually told a couple of folks last year that I was
    unlikely to be able to balance the budget this year, and that
    turned out to be the case.
        In hindsight, I probably could have brought you a budget
    today that balanced, but it would have been made up of funny
    numbers. I did not want to do that. I wanted to give you a
    budget that you could look at and know the numbers were solid,
    know that they were truthful, know that there was a lot of
    transparency in this budget, and know that this budget,
    especially for 2018 and 2019, reflects the actual physical
    condition of the country. So even though it does not balance,
    we are extraordinarily proud of it.
        And to that end, by the way, I read in the newspapers this
    morning that someone reported that I would not support this
    budget if I was in Congress. That is absolutely false. I
    absolutely and without reservation support this budget. I think
    someone was making a reference to the caps deal. This is a
    really good budget. You all may be able to do a little bit
    better than this.
        The Chairman and I have already talked about things that
    might be done in addition to it or instead of it. But we are
    very proud of this budget that the administration and I
    wholeheartedly support it and endorse it and would vote for it
    if it would ever come to the floor, which I understand was my
    job when I was here.
        Anyway, with that, Mr. Chairman, I am happy to go over the
    details over the course of the next couple of hours, but we do
    welcome the opportunity to come in here and tell you and show
    you, give you examples of the specific message that the
    administration has for the Congress when it comes to the fiscal
    year 2018 and the fiscal year 2019 budget, and I thank you very
    much.
        [The statement of Mick Mulvaney follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Womack. Thank you, Mr. Director, for your opening
    remarks, and, again, we appreciate you being here today. And
    you are going to get an opportunity, I am sure, because I have
    absolute confidence in the people to my right and my left that
    they are going to ask some really direct questions and give you
    an opportunity to expound. And I am going to lead off here this
    morning.
        I am glad to hear you talk about deficits and debt.
    Because, at the end of the day, what we do with our budgets and
    how we appropriate the dollars that fund our government has to
    be checked by what we are doing to future generations insofar
    as running up deficits and piling up more debt that will surely
    fall on future generations.
        And I am reminded of the many times the people on my side
    of the aisle have talked about shrinking the size of
    government, the cost of government, and giving some relief to
    the fact that there is just a certain amount of money out there
    and sometimes we kind of overpromise our government to our
    people.
        But generally speaking, we talk about this in terms of
    numbers, and sometimes these numbers are so large. In fact,
    they are often so large that they just fly over the head of
    most people because of the number of zeroes and the number of
    commas in these numbers. But what is our moral obligation as
    the legislative branch of government who has the Article I
    authority to fund this government? What is our moral obligation
    to make sure that we get our arms around these deficits and
    debt?
        Mr. Mulvaney. I am disappointed Mr. McClintock stepped out
    for just a second, because I am actually going to use one of
    his lines that I have always liked, which is, ``There is no
    such thing as a deficit. It is simply a future tax increase
    delayed.'' If you assume that we are eventually going to pay
    all of our debts, which I think everybody in the room assumes
    that we will, you are going to have to pay for it at some time.
    And since the only way the government raises money is through
    taxes, then what we are really simply doing is spending money
    now that we are going to raise in the future.
        So I think the moral obligation there is to do as little of
    that as you possibly can. Does it disappoint me that we do not
    balance in 10 years? It does. Do I think it is a failure
    because of that? I do not. This budget proposes $3 trillion in
    savings against the baseline, which is essentially what we
    would spend about for the budget. That is the second largest
    production spending of any administration budget in history
    exceeded only by last year's budget.
        There is $1.7 trillion here. Did I say billion? I meant
    trillion. I am sorry. They run together after a while. We saved
    $1.7 trillion against the baseline in mandatory spending. This
    administration has been accused of not being willing to tackle
    the difficult question of mandatory spending. $1.7 trillion of
    mandatory proposals here in this budget, the largest ever by
    any administration, so we do make some difficult decisions.
        Is it easier to spend money than it is to cut? Absolutely.
    In fact, I did it. We went through the plus-ups when we took
    the 2018 budget and spent up to the caps as part of the
    addendum and took the 2019 budget and almost spent up to the
    caps.
        I have got to tell you, those meetings are a lot more fun
    when you get to spend money than they are when you have to cut,
    but this is not supposed to be fun. This is supposed to be
    responsible and honest, and sometimes that does take making
    difficult decisions. Sometimes doing the moral thing does take
    difficult decisions, and we think that we have done that with
    this budget.
        We look forward to working with you on yours, because I
    know you all are going to be doing the same thing.
        Chairman Womack. There is a difference between cutting and
    slowing the growth, although those terms sometimes in the way
    we approach the numbers are used interchangeably. Does it not
    make sense that we have got a slow growth first, and if so, how
    in the world do we do it particularly on the side of spending
    that is on autopilot?
        Mr. Mulvaney. It does. I am always fascinated in
    Washington, D.C. that the word ``reduce spending'' does not
    seem to exist. It is ``gutting'' and ``slashing'' and
    ``cutting,'' but we do seem to use a different language here.
        Plus we always compare spending against the baseline, that
    if you spend up to the baseline, that is not an increase. It is
    not a reduction, although back home if we spent more money one
    year than we did the previous year, we would call that
    increase. Here, sometimes we call it a freeze or we actually
    call it gutting or cutting. You are absolutely right.
        In fact, if you look at our proposals, especially in the
    mandatory area, Mr. Chairman, we continue to spend more money
    from one year to the next. We simply slow that spending.
    Medicaid is a good example in terms of the proposals that we
    have. We can talk more today about Graham-Cassidy and about our
    proposals for how fast healthcare programs should grow.
        And I would contend to you that you are absolutely correct:
    growing something more slowly than it might otherwise grow does
    not constitute a cut or a slash or a gutting. It might instead
    be the responsible thing to do.
        Chairman Womack. The CBO, in their last economic forecast--
    this is June of 2017--expected economic growth to average under
    2 percent, at 1.9 percent over the next 10 years. Your economic
    forecast counts on 3 percent sustained growth in that budget
    window.
        Specifically, because I believe in my heart that the
    interest rate environment is going to likely rear its ugly head
    if, in fact, we accelerate growth in this economy, how do you
    anticipate higher economic growth impacting interest rates and
    the impact it will have on the net interests on our debt?
        Mr. Mulvaney. As we did last year, we think we have made
    some very reasonable and defensible estimates and assumptions
    regarding economic growth. We have slightly ratcheted up our
    estimates for economic growth in the next couple of years from
    last year's budget. Keep in mind, I do remember being in here
    last year and even taking a little bit of heat from my former
    delegation mates from South Carolina for having overly rosy
    economic assumptions that in the real world we actually beat.
        As a result of the economic performance of the economy of
    the Nation for the last 12 months, we have made some slight
    increases in our assumptions for the next couple of years, some
    slight reductions in our assumptions in the out years as we
    think we bring them more in line with reality.
        We have made some changes to our interest rates, but we
    still think these are entirely defensible. They are slightly
    lower than they were last year, simply because we think the
    environment has certainly been that interest rates are lower
    than everybody thought that they would be.
        In fact, if you read some of the economic literature, what
    you will discover is that there is a discussion worldwide right
    now as to where the inflation is. We saw a little bit of an
    uptick this morning, but still I think economists around the
    world would tell you that they are surprised at the low rate of
    inflation and the corresponding low rates on government debt,
    keeping in mind that our assumptions are still well within
    where we are seeing debt today. So, we think the assumptions
    continue to be defensible.
        And importantly, Mr. Chairman, they generate something
    absolutely critical. They generate more money for the Federal
    Government. We took a lot of heat as an administration and you
    did as a legislature for passing the tax bill that supposedly
    would run up the deficit.
        And the fact of the matter is that our numbers indicate
    that over the course of the 10 years that we have--it is
    technically a 9-year window because the CBO has not updated its
    numbers yet--as a result of the tax bill, we will generate more
    money for the Federal Treasury than we would have but for the
    tax bill.
        In the final year that we have some comparisons, which is
    2027, that policy combined with the other administration
    policies generate almost $350 billion more in government
    receipts in 2027 and that number continues to increase outside
    the budget window.
        So we absolutely believe that what we have done to try and
    fix the economy to get away from those slow rates of growth,
    the Obama economy as we like to call it, of 1.6, 1.9 percent
    growth forever, and move to a more stable and more traditional
    growth rate of 3 percent not only is good for everybody in the
    country, it is good for the government.
        Chairman Womack. Growing the government creates savings
    because it provides more revenues for us to be able to play
    down on this deficit structure, but there is always a net
    effect of it because you grow and then you have the potential
    for the interest rate hike, and then so there is a net effect
    in there. Do you have numbers that show maybe on average what a
    certain amount of growth in the GDP would do as opposed to a
    certain amount of growth in the interest rate environment?
        Mr. Mulvaney. We do, and you and I have had a chance to
    talk about this, and I think I talked about it with both
    parties in our private meetings before this. Our estimates are
    that an additional 1 percent increase in GDP over the course of
    the 10-year window reduces the deficit by roughly $3.25
    trillion. About 2.5 of that looks to be additional revenue to
    the government and the balance is on reduced expenditures by
    the government. Keep in mind if you have a healthy economy for
    a long period of time, we expect fewer people to need means-
    tested welfare programs.
        So not only do we generate more money in for the government
    through a healthy economy, we have to spend less to help take
    care of people because the economy is allowing them to take
    care of themselves, so a 1 percent increase across the window
    in GDP and the growth of the economy about $3.25 trillion. We
    weigh that against a 100 basis points or a 1 percent increase
    in interest, which across that same window generates about an
    addition $1.6 trillion in interest costs.
        So clearly the challenge is to grow the economy without
    adding dramatically to inflation or to the costs of borrowing
    money. We believe that we are in a position to do that. We have
    already started to see that. Again, there are some questions as
    to why inflation is not higher than it already is, but we do
    believe that some of the policies that we have undertaken will
    allow us to keep inflation under control and also the slack in
    the labor market will allow us to do the same thing.
        So, yes, all things considered, how do you pay down this
    debt in the long term? You have to grow your way out of it. You
    combine that growth with fiscal discipline, spending restraint.
    The good news here, ladies and gentlemen, is that we have a
    model on how to balance the budget because we did it; both
    parties take credit for it in the 1990s.
        We grew the economy faster than we thought we otherwise
    would and we kept spending under control. You have to grow your
    revenues faster than your expenses. The money you take in has
    to get bigger, faster than the money that is going out. That is
    how you end up paying down the deficit and that is how you end
    up paying down the debt.
        Then we think that the policies the administration has
    already put forward have started to do that and the policies
    that we put forward again in the budget will continue that
    trend.
        Chairman Womack. Thank you, Mr. Director. I am out of time.
    I yield now to the Ranking Member, Mr. Yarmuth.
        Mr. Yarmuth. Mr. Chairman, I am going to defer to my
    members and question last.
        Chairman Womack. With that, Ms. Lee of California.
        Ms. Lee. Thank you, very much. Thank you, Mr. Chairman, to
    our Ranking Member, and thank you, Mr. Director, for being
    here. Good to see you. First, let me just say, this budget is
    really shameful. It dismantles our basic living of standards
    that Americans have turned to for decades and pushes millions
    of people into poverty. It will destroy people's lives.
        Now, let me list a few of these cuts. You have cut $213
    billion in SNAP, $72 billion in disability programs, $3 billion
    in rental assistance. You cut in half adult employment and
    training programs. You eliminate, mind you, the Workforce
    Innovation Fund. You cut education by 10 percent. You eliminate
    the Minority AIDS Program, and at the Office of Minority
    Health, you eliminate this program specifically for people of
    color to being to help close these health disparities. You just
    totally eliminate these programs. You eliminate TIGER grants
    which have created thousands of jobs. You cut $1.4 million in
    Medicaid and you eliminate education programs important to low-
    income and students of color like GEAR UP.
        It is hard to imagine how you could be proud of this
    budget, Mr. Director, especially since these cuts are to pay
    for the tax cuts for the wealthy billionaires, millionaires,
    and corporations. It is clear to me that you do not care about
    paying down the debt or the deficit, because this budget really
    shows exactly what this tax scam was all about.
        So let me ask you about a family, for instance, in
    Kentucky. I think the minimum wage there is about $7.25 an
    hour, $7.50 an hour. A family of four, $24,000, $25,000. What
    in the world is this going to do that family who is struggling,
    working each and every day to take care of their family, then
    you come up with this kind of a budget?
        And secondly, I want to ask you about this military parade
    that the President is proposing, you know, the parade that is
    very similar to those held in authoritarian countries like
    North Korea. How much is that parade going to cost and where is
    that money coming from?
        Mr. Mulvaney. Thank you, Congresswoman. On to the second
    question first, we actually had military parades in this
    country before. I think we had one as recently as the 1990s or
    maybe more recently than that. I have seen various different
    cost estimates from between I think $10 million and $30 million
    depending on the size of the parade, the scope of it, the
    length of it, those types of things. We have not accounted for
    it in this year's budget simply because it has come up at the
    last minute, so we will continue to work with you folks if we
    decided to push forward with that initiative.
        Ms. Lee. No, if who decides to push forward? Do you mean
    the President?
        Mr. Mulvaney. Yes, ma'am. That is who I work for.
        Ms. Lee. Oh, okay. I am sorry. I thought you said, ``we.''
        Mr. Mulvaney. ``We'' being the administration. I am sorry.
        Ms. Lee. Oh, okay.
        Mr. Mulvaney. Yeah, no.
        Ms. Lee. I am sorry.
        Mr. Mulvaney. But of course, you have to appropriate funds
    for it and we have to find funds for it that you have already
    appropriated.
        Ms. Lee. That would be an estimate, $10 to $11 million----
        Mr. Mulvaney. Again, they are very preliminary, so it is
    between 10 and 30 depending upon the length. Obviously, an hour
    parade is different than a 5-hour parade in terms of the cost
    and the equipment and those types of things. So, you have asked
    a straight question. I have tried to give you a straight
    answer.
        Ms. Lee. Okay.
        Mr. Mulvaney. We have not done much research on it yet.
        Ms. Lee.--I just wanted to verify that so we can----
        Mr. Mulvaney. Regarding pushing people into poverty, your
    family in Kentucky, for example. Congresswoman, it probably
    does not come as a surprise, Republicans and Democrats do see
    things a little bit differently. We see the best welfare
    program as a job and we see a healthy economy as a way to push
    people out of poverty, allow them to lift themselves out of
    poverty. The reason you see reductions in SNAP and TANF and the
    other types of programs is, yes, we offer reforms, improvements
    to the programs that we think can work better, but we also
    assume that there are fewer people on there. I would think that
    would be a goal that we all share.
        If you propose continual increases in SNAP and TANF, are
    you not just assuming that you are never solving the problem?
    In fact, I think we would all want to see a world where we do
    not even have to spend any money there, because no one should
    need the program in a perfect world. And we do not get there
    with this budget, but we do think we move in that direction.
    That is one of the reasons you see less spending on those types
    of programs.
        Ms. Lee. But, sir, $7, $8 an hour people need a little bit
    of help from their government. First of all, in terms of job
    training, in terms of job retraining, you are cutting all of
    these programs in the Department of Labor. You are cutting out
    the TIGER grants. You are cutting funds that actually create
    jobs and economic growth. And so, this budget goes in the
    opposite direction for people who are living on the edge. And
    believe me, I understand what SNAP is about. I formerly was a
    SNAP recipient, because I had needed that bridge over troubled
    water raising my kids. It was not permanent. It was just so I
    could get through what I was going through, and that is the
    majority of people in this country.
        And so to take that away now, and what you want to do is
    put them in a Depression-era box with food that is high in
    sodium and sugar content, it is a way that you are trying to
    make sure that we do not believe that they have the dignity
    that they deserve the way you are reforming and trying to put
    SNAP into a box now. And I think it is a shame and disgrace
    that you are treating low-income and working families in this
    manner.
        Chairman Womack. Thank you. Mrs. Black from Tennessee?
        Mrs. Black. Thank you, Mr. Chairman, and thank you,
    Director Mulvaney, for being here with us today. This obviously
    is a very important subject for us to discuss and that is
    because if we continue to spend the way we are, we are not
    going to be able to afford any of the programs.
        But I want to go to the idea of cut versus reform. As the
    previous Budget Chair, and now we have a distinguished member
    sitting in the Chair seat; I know that he will continue to look
    at those kinds of reforms that we talked about in here last
    year. And we had 11 of our authorizing committees take a look
    at each one of their areas of authorization to look at possible
    reforms. You know, when programs are out there for 30 years,
    they maybe need to be reformed. They need to be looked at.
        And one of those programs that I do think needs to be
    reformed in Medicaid. Medicaid was originally put into place
    for those that were disabled and aged and children, and now we
    see that we have people who are able-bodied workers on
    Medicaid, which only takes away from those that the program was
    originally intended for and we have less and less opportunity
    to take care of people that truly, truly do need those
    services.
        And so, what I wanted to ask you was in the President's
    budget, do we look back and say, ``Is there a way to reform the
    Medicaid that is currently in place to actually have that
    program be there for those that are the most in need, and do
    you put a work requirement in there?'' And I want to say it is
    not just to save money. We obviously will say money, but there
    is something about a dignity of life and the loss of that
    dignity of life when people are not working. And so do you have
    a proposal for a work requirement in the program?
        Mr. Mulvaney. We do. In fact, we have work requirements
    across various different welfare programs. We have proposed
    that this is actually one of the best ways to make sure those
    programs are available for folks who truly need it. We could
    talk about rent support. We could talk about TANF. We could
    talk about SNAP if you like. We could talk about Medicaid. But
    we try and bring this able-bodied worker concept to a lot of
    the welfare programs so that folks who can work do.
        We need folks to go back to work. You talk about the
    dignity of work. You are absolutely right. The country needs
    those folks to go back to work. I got asked last year, ``What
    would you tell somebody who wants a job but cannot find one?''
    I said, ``Thank you. You are the people who are going to save
    the Nation.''
        The folks who want to work are the people that we are
    relying on to grow the workforce, to grow the economy, to grow
    the GDP. We do need folks to go back to work. I think we have
    deemphasized the dignity of work for generations now and I
    think the budget starts to move things in a different
    direction.
        More writ, more large, Congresswoman, on Medicaid, what we
    assume is the Graham-Cassidy bill. We could talk about that if
    you would like. We also changed some of the growth rates there
    if you would like to talk about that. And by the way, as part
    of that, we give the states a level of control over whether or
    not they want to do work requirements as well.
        Mrs. Black. That was my second question, is that I believe
    that one size does not fit all and we are culturally different
    from one side of this country to the other. And so, I did have
    that as a question, is what do you have in there for state
    flexibility?
        Mr. Mulvaney. We anticipate a dramatic improvement or
    expansion of state flexibility. I was in the state legislature
    in both the House and the Senate before I came here and I can
    assure you that, those of you who have served, probably one of
    the things you recognize, the difference between there and here
    is that it works back home. Somehow, we managed to muddle
    through all the partisan divide and you actually get state
    governments that work.
        They also know what is best for their state. I was
    tremendously frustrated year in and year out in the South
    Carolina legislature when mandates would come down from
    Washington and we would look at them and go, ``This is just not
    tailored to the folks who need this care in South Carolina.'' I
    do not know why we automatically assume that state legislatures
    do not want to take care of folks back home just as much as we
    do.
        I also do not know why we think that I, being from South
    Carolina, understand the folks in Kentucky or the folks in
    California, Tennessee, better than the folks who live there.
    So, we do try and move a lot of that decision making to the
    states.
        Mrs. Black. Mr. Director, I only have a brief period of
    time left and I will probably have to submit the rest of this
    for the record, but I am concerned about the medical equipment
    competitive bidding, and we are losing more and more of our
    providers and less and less services that are available to
    those in need. I know there is an interim final rule that is
    pending at OIRA, and I would like to know more about where we
    are on that rule to get this moving forward so that we can open
    that back up again.
        Mr. Mulvaney. And I apologize, Mr. Chairman. I cannot see
    the time, so I do not know how long I have to respond to that.
        Mrs. Black. Forty-one seconds.
        Mr. Mulvaney. Thank you. Very quickly, we are aware of the
    interest that many folks from both sides of the aisle have
    about the DME rule. That is under consideration right now at
    OIRA, the Office of Information Regulatory Affairs. It is not
    appropriate for me to comment on the status, but we are working
    with HHS to take into consideration all of the issues that have
    been raised by members of both parties and we look forward to
    getting that rule out expeditiously.
        Mrs. Black. Thank you. I yield back.
        Chairman Womack. Young lady from New Mexico, Ms. Lujan
    Grisham.
        Ms. Lujan Grisham. Thank you, Mr. Chairman, and welcome to
    the Budget Committee again, Mr. Mulvaney. And while I certainly
    respect your work in putting together a budget, I think that
    with many of my Democratic colleagues in particular, I am going
    to disagree that the budget reflects something that you just
    said, which is we can do a budget and we can do spending that
    is both in a responsible and honorable way. And I am going to
    take, I hope, a different tact about pointing out what I think
    are some real, concerning issues.
        So this poor Committee has heard me over and over and over
    again, because I am lucky. I got to spend 30 years--I still do
    it now--doing direct services, largely in health and long-term
    care, but most of my constituents and clients, disabled adults,
    grandparents, grandparents raising grandchildren, are folks who
    need an array of services. And not just was I responsible for
    doing the budget and figuring out what those expenditures look
    like and having to demonstrate to the legislature what the
    impact on the individuals I was serving, but the impact on the
    state budget and the sustainability of those investments would
    look like.
        But, maybe a bit differently--and I do not know for sure--
    but maybe a bit differently is that I spent a lot of time
    actually directly in the homes, hospitals, nursing homes, even
    went undercover in a nursing home to expose terrible care. I
    really spent time navigating those services, and in fact, I
    spent a great deal of my current career still navigating those
    services and still get calls from people in rehab facilities
    and nursing homes that need my help getting out and figuring
    out housing and a variety of services.
        And so, I want to give you a quick example. Most people
    have never read a Medicare bill. Most policymakers have no idea
    about what the deductibles and some of those benefits really
    are and are not. And so, for example, if you need dialysis,
    which is a great number of Medicare beneficiaries in my home
    state of New Mexico, a huge percentage in fact, and many of
    these Medicare beneficiaries live in rural and isolated areas
    which means they have to travel to limited dialysis clinics.
    That, when you pay your Part B deductible and then you are
    responsible for 20 percent of that Medicare cost for dialysis,
    you are spending about $18,000 a year, to be exact, $17,946.
        The average Medicare beneficiary has just over $23,000, to
    be exact, $23,500. So, simple math, you cannot afford that
    lifesaving treatment, and that is before we deal with figuring
    out your transportation.
        And when we talk about people's dignity, I have to help
    them find a ride. I have to figure out what kind of food and
    services. And often these are men and women who served our
    military, who have worked their whole lives, and as you know,
    in both Medicare and Medicaid, the vast majority of individuals
    and the highest expenditures are seniors in long-term care with
    their prescription drugs and long-term care services.
        And while it does not cost as much money, the vast number
    of individuals covered by Medicaid are children. So, this whole
    notion that able-bodied adults somehow are going to save the
    Medicaid system if we do work requirement reforms, the math--
    and I know you are good at this math--it does not work out,
    right? So these are not reforms when it is a $1.4 trillion cut,
    a $500 billion cut, to Medicare and Medicaid, those two
    combined, $72 billion to disability programs.
        And in my state, which everyone knows we are one of the
    poorest states in the country, so I wanted to go about this
    with a minute left a little differently. Twenty percent of New
    Mexicans live in poverty. We have some of the hungriest
    families in the country. A third of us are on SNAP. We have
    some of the highest unemployment rates in the country. We have
    a governor who, I would say, has applied many of these same
    principles to running state government and to making reforms or
    cuts, and we are in real trouble. It is the worst trouble the
    state has ever been in, ever.
        So, I was wondering. I think there is nothing better than a
    partnership, and I would like to invite you to come with me to
    New Mexico and we can go to the Navajo Nation, we can go to
    some of the most remote areas, and I want to introduce you to
    some of these very beneficiaries.
        I would provide with their support a list of things that
    keep them afloat and the kinds of things that would go away
    under this budget, and maybe you and I could think about a
    different approach to creating meaningful, lifesaving, long-
    term reforms, but without creating vast more harm and, quite
    literally to that dialysis patient, a death sentence for these
    cuts in Medicare. Would you be willing to do that?
        Mr. Mulvaney. In the 1 second I have left, I would be happy
    to talk to you about it. In fact, I think it would satisfy Mr.
    Pearce who has been asking me to do that since 2011, so maybe
    we can all do it together.
        Ms. Lujan Grisham. We could do it. I would be happy to do
    it with Representative Pearce because I know he knows many of
    these same constituents. Thank you. I will be in touch, Mr.
    Chairman.
        Chairman Womack. I thank the gentlelady. To Florida, the
    gentleman from Florida, Mr. Diaz-Balart.
        Mr. Diaz-Balart. Mr. Chairman, thank you very much. Mr.
    Director, good to see you. Look, all of us who have known you
    and who have worked with you, whether we have disagreed with
    you or not in the past, and I have had both, know that you are
    a straight shooter. And I will just tell you, as a member of
    this Committee and also as the Chairman of an Appropriations
    Subcommittee, I look forward to continuing to work with you on
    these very important issues.
        You know, when you were here last time, Mr. Director, as
    the Chairman said, the CBO projected that the growth of our
    economy would be 2 percent or less for the foreseeable future.
    You mentioned some of the things that were said by some of our
    distinguished colleagues about you in that hearing. I do not
    want to point fingers, but without mentioning who they are, let
    me read some of those things.
        ``No economist will approve your budget in terms of it
    working. There will not be 3 percent growth.'' They went on to
    say that, ``This is a betrayal of the American people.''
    Another distinguished friend and colleague said, ``I think the
    media are doing a pretty good job of documenting many of the
    problems with the assumptions that were made in this budget,
    the 3 percent growth rate that no economist thinks is
    reasonable.''
        I could go on and on how it was said that in essence your 3
    percent growth projections were fantasyland projections or a
    pipe dream. So now that we know that despite very costly
    natural disasters, we are basically now at that pipe dream
    fantasy that was so impossible. But, again, I thank you for
    your leadership and for actually coming up with real
    projections.
        The leadership of the administration and your decisive
    actions have also reversed unnecessary regulations, but we are
    really choking small and mid-size businesses and I think that
    has been a major factor of that 3 percent growth. With that in
    mind, I want to go talk to you about an industry that has a
    rich history in south Florida, the cigar industry. It has been
    struggling in the face of excessive, burdensome regulations
    imposed by the FDA.
        It is my understanding, Mr. Director, that the FDA is
    currently reviewing these regulations and plans to release an
    advanced notice of proposed rulemaking in the coming months.
    So, if I may, very quickly, how is your office going to work to
    ensure that the FDA's decision on the topic is supported by
    appropriate cost benefit and regulatory flexibility analysis?
        And also, I would be grateful if you could have some folks
    from your team reach out to my team to make sure that that is
    in fact going to be happening. So kind of pose it as a question
    or as a statement, but if you would like to try to address
    that, please?
        Mr. Mulvaney. Thank you, Congressman, and I have enjoyed
    talking to you about this before and I was just checking behind
    me to make sure that this was not in OIRA similar to the DME
    question that came up, but it appears that it is not. So, it
    looks like it is still over at the FDA.
        We have absolute confidence that the FDA is going to apply
    the administration's sort of new standard when it comes to
    cost-benefit analyses, which is that we are actually going to
    do them, and we hope to actually have science and numbers
    behind them as opposed to the qualitative type of analyses that
    were done by the previous administration. I have learned a
    great deal about cost-benefit analyses in the last 13 months
    and have been extraordinarily disappointed to see what passed
    for a cost-benefit analyses under the previous administration.
        So I think one of the things you can count on with Director
    Gottlieb at the FDA is a much more rational approach to the
    process, and when it comes to OIRA, really our job is to make
    sure that that is exactly what has happened.
        We are sort of the policy police and regulatory police just
    to make sure that the folks are following the rules of the
    various agencies. We do not supplement our view for theirs. We
    simply make sure they have gone about it in the proper process.
    So we look forward to working with you and with all of the
    stakeholders on that issue going forward.
        Mr. Diaz-Balart. Mr. Director, I do too as well and I agree
    with you that I think that we have seen a different change in
    attitude in actually looking at signs versus just, you know,
    gut or whatever. So I look forward to working with you.
        I would be remiss if I did not mention that, you know, I
    also sit on the Defense Subcommittee of Appropriations, and I
    just want to thank you for recognizing and putting in your
    budget in essence what is desperately needed, which is a
    rebuilding of our national defense.
        And so, again, I also look forward to continuing working
    with you on that. This is not the only conversation. This is
    the first public conversation, but as I mentioned before, you
    have been accessible, you have been easy to deal with, you have
    been straightforward, and I look forward to further discussions
    and communications. I thank you and I yield back, Mr. Chairman.
        Mr. Mulvaney. Thank you, sir.
        Chairman Womack. Gentleman from Massachusetts, Mr. Moulton?
        Mr. Moulton. Thank you, Mr. Chairman, for the time.
    Director Mulvaney, thank you for coming back, and I especially
    appreciate your willingness to meet with Democratic members to
    hear our concerns and have an open discussion about how to
    prioritize government spending, so thank you for that.
        Mr. Director, I would like to start with a statement from a
    freshman Congressman. ``One of the most frustrating and
    disappointing lessons I have learned about Congress since I
    arrived here about a year ago is the simple truth that
    Washington does not know how to count. If we tried to run a
    private business using the same accounting methods that the
    government uses, we would likely end up in jail. This has
    brought us to a place where our spending and debt levels are
    unsustainable.'' Do you agree with that statement, Mr.
    Director?
        Mr. Mulvaney. I do. In fact, I seem to recall someone
    saying something like that. I really liked that person at one
    time.
        One of the things that you will see in this budget,
    Congressman, that I hope has bipartisan support is that we have
    taken advantage of the additional spending available under the
    caps to close a lot of the loopholes that gave rise, in part,
    to that statement. CHIPs, for example--and I know I have just
    put half of the room to sleep, but we actually----
        Mr. Moulton. Mr. Director, you have put me to sleep too.
    So, I may ask? You have said before that deficits are
    dangerous. Do you still believe that deficits are dangerous or
    have you changed your mind?
        Mr. Mulvaney. No, no, I do. In fact, I continue to agree
    with the statement of the head of the Joint Chiefs several
    years ago that said one of the greatest threats to the Nation
    was the debt.
        Mr. Moulton. So, I could not agree more. The
    administration's budget request would add $984 billion to the
    Federal deficit next year and add a total of $7 trillion to the
    deficit over the next 10 years. Do you find it hypocritical for
    the President who claimed that he would get rid of the national
    debt, and I quote, ``over a period of 8 years,'' to send this
    budget to Congress?
        Mr. Mulvaney. It is not hypocritical. Again, keep in mind,
    what the budget does, Congressman, it simply assumes and
    supports the caps deal that was approved by this body just 5
    days ago.
        Mr. Moulton. But either the President meant what he said or
    he did not.
        Mr. Mulvaney. I am sorry. I could not hear----
        Mr. Moulton. Either the President meant what he said, or he
    did not.
        Mr. Mulvaney. The President takes deficits very clearly,
    but also recognize we live in a world where in order to get the
    funding that we needed for the Defense Department that we
    considered critical and to be a priority of ours, we had to
    agree to higher non-defense discretionary spending levels than
    we otherwise would have liked.
        Mr. Moulton. So is it safe to say that the President no
    longer intends to end the national debt after 8 years, which is
    what he said?
        Mr. Mulvaney. I do not think it is possible at this point,
    given what has happened in the last 12 months especially, to
    pay off the debt in 8 years.
        Mr. Moulton. Do you think it is hypocritical for
    Republicans to have slammed the Obama administration for not
    eliminating the deficit when his Republican administration is
    now making it far, far worse? Do you think that is
    hypocritical, Mr. Director?
        Mr. Mulvaney. In fact, what was hypocritical about it--and
    I have sat in this room. I do not remember if you and I were on
    the Committee before. One of the things that was most
    hypocritical about the previous administration was the numbers
    they used in not being able to balance.
        Mr. Moulton. But I am not asking about the hypocrisy of the
    previous administration----
        Mr. Mulvaney. Well, that is what I want to talk about.
        Mr. Moulton.--talking about the hypocrisy of yours, Mr.
    Director. You are here to represent your administration. Do you
    think it is hypocritical for Republicans to have slammed the
    Obama administration over deficits and yet support your deficit
    spending?
        Mr. Mulvaney. I think it is fair to say that we are
    disappointed in the size of the deficit, disappointed in the
    fact that it does not balance. But again, this recognizes that
    the reality in Washington, D.C. right now, which is that, with
    all respect, sir, your party insists on nearly a dollar for
    dollar ransom for military spending, and we cannot change that,
    especially with the 60-vote rule in the Senate.
        Mr. Moulton. But your ransom is my investment, and that is
    as a veteran of the military----
        Mr. Mulvaney. Right.
        Mr. Moulton.--I think there is nothing that we can do to
    further our chances of defeating great world adversaries like
    Russia and China than to invest in things like education, to
    invest and science and technology. That is how we maintain an
    edge over our greatest adversaries.
        But I have another question about the assumptions you have
    made. It seems that they are overly optimistic. Last year, you
    project annualized economic growth of 3.1 percent over the next
    three years. In December, the Federal Reserve projected an
    annualized growth of 2.2 percent over that period. A survey of
    professional economic forecasters has estimated an annualized
    growth rate of about 2.4 percent. You mentioned earlier the
    Obama economy. It seems that the Trump economy growth estimates
    are already in a nosedive and you are yet just a year in.
        The Trump administration now, to your credit, Mr. Director,
    created 2.06 million jobs over the past year. That sounds
    pretty good, except that more jobs were created by President
    Obama in 2011, in 2012, in 2013, in 2014, in 2015, and in 2016.
        And finally, you take credit for being willing to make
    tough decisions on Social Security and Medicare. Can you
    explain this quote, Mr. Director? ``I was the first and only
    President potential GOP candidate to state that there will be
    no cuts to Social Security, Medicare, and Medicaid.''
        Mr. Mulvaney. May I?
        Chairman Womack. The gentleman will take a few seconds to
    respond.
        Mr. Mulvaney. Yeah. First of all, I think your jobs numbers
    are probably correct. I think your GEP numbers are just flat
    out wrong. But to the point about Medicare and Social Security,
    we do not touch anybody's benefits. We do not means test. We do
    not raise ages. We do not do anything to Social Security
    retirement. It is very similar to some of the proposals we had
    last year on Social Security. But I look forward to talking
    with you about it more. Thank you, Congressman.
        Mr. Moulton. I look forward to it as well. Thank you, Mr.
    Director, and thank you----
        Chairman Womack. Thank you, gentleman. Members, please, if
    you have got a question for the director, do not wait until you
    have got 5 seconds left in your time before you ask that
    question, and we will give the director a little bit of time to
    respond. Gentleman from Oklahoma, Mr. Cole?
        Mr. Cole. Thank you very much, Mr. Chairman, and Mr.
    Director, thank you for being here. It is always a pleasure to
    have you.
        I want to begin like the Chairman did and complement you on
    some things because I think this is a better budget than last
    year, and I know you did not have a lot of time last year. This
    shows that and, of course, we complicated things for you at the
    end, and I think you have adjusted that as well as you could.
    But I agree with what the Chairman had to say.
        I appreciate the emphasis on defense. I appreciate the
    emphasis on border security. I appreciate the recognition that
    the opioid crisis is a crisis and you are trying to move and
    respond that way. That is something the President mentioned in
    the campaign and I think deserves bipartisan praise and
    support.
        I like the idea there is more mandatory reforms in here
    than last time. I do not agree with them all, but I
    particularly like the Graham-Cassidy embrace. I think that is
    an important initiative. It is going to take a while, but I
    think you are right to seize on it.
        And I also want to point to one particular area that I am
    interested in because I chair the Subcommittee where you had
    one proposal last year. I think you have listened to some of
    the things that we had to say in that Committee, and that is
    the National Institutes of Health, where you have not only
    level-funded, you actually have had a modest increase, and that
    is very important for us. It is very important, obviously, for
    the health and security of the American people.
        But it is even more important in a sense long-term for
    bending the cost curve out there. I mean, we spend $259 billion
    a year in Medicaid looking after Alzheimer's patients. We have
    no cure. We have no way to really slow the progression, so that
    is an area that we have made a lot of emphasis on in the last 2
    or 3 years.
        Honestly, it is the right thing to do, it is the
    humanitarian thing to do, but also ultimately, if we do not get
    our hands on that disease, it will be over $1 trillion on the
    line it is on by 2050. So, you know, preserving those
    initiatives is really important. You are to be commended on
    that.
        I want to engage you with a little bit in the time that I
    have left on an area that you have not addressed, and I am not
    being critical of the President or anybody else, but I just
    want to offer a path forward, and that is Social Security, to
    pick up a little bit on the discussion we just had. We all
    know, politically, that is a very sensitive and difficult area
    to address, so I am never too critical. The last President did
    not do anything to address Social Security. The last one that
    tried, Mr. Bush, got savaged over it.
        But I think there is a way forward here and I would just
    ask you to study it, and I would not expect you to embrace it
    today, but Mr. Delaney and I have a bipartisan proposal that
    really goes back and mirrors what Ronald Reagan, Tip O'Neill,
    and Howard Baker did working together in 1983. And the idea is
    a commission, and people always argue they never work. Well,
    that one did. It was the Greenspan Commission.
        You know, Social Security was much closer to going bankrupt
    then than it is today. As a matter of fact, the reason we have
    it today is because of the work that commission did and the
    surplus that was piled up in intervening years until finally
    the baby boomer generation began to retire and they are now
    drawing it down pretty rapidly.
        I think that an opportunity exists to do that again, and if
    we could reform something like that--and again, Mr. Delaney and
    I have presented this for three consecutive Congresses--I think
    this President could actually be the person who saves Social
    Security, who puts it on firm footing, and it would be done in
    a very bipartisan way.
        I would be the first to tell my friends on the other side
    of the aisle that are always concerned that this means
    slashing. Go back and look at what Ronald Reagan did with that
    commission with Tipp O'Neill. And by the way, Ronald Reagan in
    the next year won reelection with 49 states and Tipp O'Neill
    remained Speaker of the House, so you can do this in a
    bipartisan way as long as you are protecting the program
    because it is a popular program.
        But the way they did it is frankly, was they very gradually
    raised the age. I was 34. They told me, ``You are going to
    retire at 66, not 65. Your 1-year-old is going to retire at
    67.'' They raise the cap, so they put more income in there as
    well. They made a modest increase in the deduction as well. In
    other words, there were a lot of little tweaks that could be
    done that would have a huge advantage.
        So I would just ask you in the time you have left what
    thoughts you have going forward because that is over a $1
    trillion program now, and we are either going to put it on firm
    footing or not.
        Mr. Mulvaney. A couple of different things very briefly, we
    do make some small proposed changes to the S.S. program, not in
    retirement. We are talking about SSDI and SSI, and those have
    some marginal improvements on the state of the trust fund. But
    you are absolutely right. There is going to be a bigger issue
    to deal with and I think the best point you make is you talk
    about making small changes. The longer you wait, the larger
    those changes must be. I would look forward to talking with you
    further about that.
        I also encourage you to look just as closely at Medicare
    and Medicaid, which are actually larger drivers of our deficit
    right now than Social Security are and are probably a little
    bit more complicated to fix, but we can deal with those and I
    look forward to working with Congress on behalf of the
    administration.
        Mr. Cole. I absolutely agree. I spoke with the Speaker
    about that last year. I yield back.
        Chairman Womack. The gentleman from New York, Mr. Higgins?
        Mr. Higgins. Thank you, Mr. Chairman, and Director, thank
    you for being here. We appreciate very much your accessibility.
    You have got a folksy and modest approach to things and that is
    very, very refreshing here in Washington.
        Infrastructure is obviously a centerpiece of this bill with
    159,000 structurally deficient bridges in America. Every second
    of every day seven cars drive on a bridge in this country that
    is structurally deficient. It should be the centerpiece of this
    bill. However, the White House infrastructure plan, in my
    estimation, is another thinly veiled hit on local and state
    taxpayers. For every $6.50 of local and state road and bridge
    spending, the Federal Government will spend $1, so more state
    and local taxes to fund roads and bridges.
        So people get more taxes at the state and local level, they
    already pay an 18.4 cents a gallon gas tax to fund the Federal
    Highway Fund, and then this plan relies on tolls. So, people at
    the local and state level will be taxed three times to finance
    this bill.
        Secondly, total spending over the next decade in this plan
    will not exceed $200 billion. Oddly, that amount of Federal
    spending is nearly equal to the U.S. road and bridge spending
    in Iraq, in Afghanistan over the past decade, but Iraq and
    Afghanistan get a much better deal. The $180 billion that we
    have spent over the last decade, there was no local match.
    There were no toll roads. It was entirely deficit financed by
    the American people, by American taxpayers. So, no local match,
    no gas tax, and no toll roads. Every American, Democrat,
    Republican, and Independent, should find this truth to be
    sickening and highly insulting.
        On Tuesday, September 25th, 2017, I was at a meeting with
    the President and members of the House Ways and Means
    Committee. I personally had asked the President about
    infrastructure and he categorically rejected the viability, the
    workability of public-private partnerships. In fact, he pointed
    to the Vice President, Vice President Pence, and told the
    entire group--I was not the only one there--that public-private
    schemes did not work, and he cited Indiana as a glaring
    example.
        In August of 2017, the headline was, ``Indiana Highway
    Gives Black Eye to Public-Private Partnerships Funding
    Infrastructure.'' The President was referring to a 21-mile
    stretch of highway in Indiana. They call it the ``Highway to
    Hell.'' The project, private and state partnership, was signed
    by Vice President Pence back in 2014 when he was the governor.
    The project was 2 years behind schedule and only 60 percent
    built before the state took over the entire project and issued
    debt to finance the project in a more traditional way.
        Nothing here adds up. You not only have a math problem--you
    have a math problem for certain--but there is also a values
    problem here, and this is not an American-first budget. And I
    think the infrastructure piece in this plan is but one example
    of that. In order to grow the American economy, you have to
    invest in it, and infrastructure, based on any objective
    analysis, has been identified as an essential piece to growth.
        I applaud the administration's goals of achieving 3 to 4
    percent growth. If we could achieve that over an 8-year period
    or a 4-year period, that would solve a lot of problems. But the
    budget that you have does not do that because it takes away
    from the very people that you depend on to spend money because
    the fundamentals of economics are that with higher incomes,
    there is more spending. Where there is more spending, there is
    more demand.
        Where there is more demand, there is more growth. And I
    would submit to you, Mr. Director, that we have a growth
    problem, and getting and addressing that issue requires
    investing in growth. I have gone on, but you have got 20
    seconds.
        Mr. Mulvaney. I am not sure what to do with the 15 seconds
    I have left. I will tell you that the infrastructure plan has
    specific provisions--maybe we can talk about it with some of
    the other folks--to overcome the shortcomings that we saw in
    the Obama stimulus from a decade ago, where we threw a bunch of
    money at a problem and did not solve any of those problems.
    That is one of the reasons you see public-private partnerships.
    It is one of the reasons you see a focus on shortening the
    regulatory pipeline.
        As I have told the President, you can throw $10 trillion at
    infrastructure today and it is unlikely that a single new road
    would be built within 10 years because of the pipeline and how
    long it takes to get stuff built. So we did try to learn from
    things that have been done in the past that did not work, but I
    look forward to talking about that more.
        Chairman Womack. Mr. McClintock, California?
        Mr. McClintock. Well, I have often reflected on just how
    much more infrastructure we could have if the government would
    simply get out of the way, and we have seen that across the
    country, but I do want to compliment you. This budget proposal
    has already achieved a miracle. It has made the Democrats
    suddenly very concerned about the debt.
        You know, for 8 years, the Obama administration literally
    doubled the entire debt of the United States and there was not
    a single protest from the other side. In fact, they were
    cheering it. Now they are concerned, although their response is
    to spend more money. I do not see how that addresses the debt,
    but that is a subject for a different day.
        This sort of hypocrisy, though, is not an excuse for
    Republicans to suddenly become very complacent about the debt.
    At a budget briefing a year ago, I asked one of the experts how
    long we have before a sovereign debt crisis, and he said, you
    know, there is no way to make such a prediction.
        There are many different variables that could trigger such
    a crisis. But he said if we start approaching trillion-dollar
    deficits, things will start to get very unstable very quickly,
    and we will have set the stage for a sovereign debt crisis.
    Now, as I look at these numbers, that is next year. What can
    you offer to allay these concerns?
        Mr. Mulvaney. Keep in mind that a trillion-dollar deficit
    does mean something different in a 1.9 percent growth
    environment than it does in a 3.4 percent growth environment. I
    think you would agree with that. The real question is the
    relationship between the size of the debt to the size of the
    economy. It is not an excuse for not being able to balance. I
    am not trying to minimize the challenges that we face. But I
    think you would agree that a $1 trillion deficit in a $20
    trillion economy is not the same as a $1 trillion deficit in a
    $25 trillion economy.
        Mr. McClintock. Agreed, but the only other time we have had
    a debt this large proportional to our economy was at the end of
    World War II when we had exhausted all of our resources and our
    credit fighting that war. We are at that level percentage-wise
    now. That concerns me greatly.
        Now Truman's response was to cut spending dramatically. He
    took the Federal budget from $85 billion down to $30 billion in
    a single year. He fired 10 million Federal employees. It was
    called war demobilization. The Keynesians predicted a 25
    percent unemployment and a second Great Depression. Instead, we
    had the post-war economic boom. He also cut taxes, but he cut
    taxes while he was cutting spending. Now we just cut taxes.
    That is absolutely vital for economic growth.
        There are strong early indications that it is working
    beyond our expectations, which were very high, but having cut
    taxes, we also have a keen responsibility to restrain spending.
    I appreciate being quoted by the budget director. That is a
    first for me, and I am glad somebody was listening over these
    years.
        Mr. Mulvaney. I heard it for 6 years, Tom. I was going to
    pay attention.
        Mr. McClintock. I keep repeating it until somebody hears
    it, and I thank you for recognizing that taxes and debt are not
    opposites. They are exactly the same thing. A debt is simply a
    future tax. Once we have decided to spend a dollar, we have
    already decided to tax it, either now or in the future.
        But borrowing from the future also has very real
    implications in the present, because we borrow it from the same
    capital pool that would otherwise be available to loan to
    consumers, to make consumer purchases, to homebuyers to buy
    homes, to businesses seeking to expand. That money is now not
    there for economic growth because the government has consumed
    it.
        My concern is we are working across purposes, but with the
    tax bill. By cutting taxes, we are in the process of producing
    I think a remarkable economic revival, but at the same time, we
    are undermining that by increasing borrowing against that
    capital pool that the private sector desperately needs to
    expand. How do we deal with this problem?
        Mr. Mulvaney. One of the messages that I tried to convey in
    my opening statement was that one of the primary messages we
    hope this budget conveys to the legislature is that you do not
    have to go down that road to permanent trillion-dollar
    deficits. You do not have to worry about the perpetual crowding
    out, which is the economic phenomenon you are describing.
        Even though this budget does not balance in year 10, the
    deficit is just slightly over 1 percent of GDP, and the total
    debt as a size of the overall economy actually starts to come
    down. Yes, it peaks around 80 percent, which is one of those
    numbers that economists fear when crowding out becomes a very
    real economic concern, but it then bends the cost curve down
    almost immediately after reaching that peak.
        So, the answer to your question ``how do we solve some of
    the problems'' is we simply encourage you to take the ideas
    that you like in this budget and incorporate it into your own
    and try and help work with us to solve the problems that you
    just laid out.
        Chairman Womack. Gentlelady from Washington, Ms. DelBene.
        Ms. DelBene. Thank you, Mr. Chair, and thank you, Director,
    for being with us today. You know, I am disappointed that when
    there has been talk about cuts or reforms, there has not been
    talk about return on investment, and as a budget person, I
    would think that would be an important concept. Let's talk
    about, you know, when we make investments. There are many
    investments that we make that give us a great return and
    actually save us much more money long into the future--
    education, infrastructure, research, and important programs.
        So let's talk about SNAP. The administration's budget cuts
    $213 billion from Supplemental Nutrition Assistance Program,
    SNAP, over the next 10 years, which would place millions of
    vulnerable Americans at unnecessary risk of losing the most
    basic critical nutrition assistance. The SNAP benefit is $4.50
    a day. Mr. Director, have you ever taken the SNAP challenge and
    had all your food, $4.50 a day?
        Mr. Mulvaney. No, ma'am, I have not.
        Ms. DelBene. Well, I would encourage you to do that,
    because I have and it is very difficult to get by on a SNAP
    benefit. You are not able to get fresh fruits and vegetables
    and healthy foods. And if we expect people to be able to do
    their best job at work, to be able to be a great student,
    children to grow up healthy, then we need to make sure they
    have healthy, nutritious food.
        We also cared a lot that we could do what we could to make
    sure that people did not have to stay on nutrition programs, to
    be in a place where they could take care of themselves and
    their families. In the last farm bill, I served on the Ag
    Committee and on the Conference Committee. When you put
    together a program based on work done in my state, the Basic
    Food Employment and Training Program, that took people on SNAP
    and gave them training so they were able to find employment in
    jobs where they are able to be self-sufficient.
        I, then, help secured $200 million for USDA competitive
    grant pilot programs to expand job training opportunities for
    recipients of SNAP. Those programs have been going in USDA. And
    if we want to talk about something that works and helps people
    in a place where they do not need nutrition benefits because
    they are in a place where they are able to get a good job,
    those seem to be great investments that actually we get a good
    return on.
        But I worry, because now the focus of this budget seems to
    be just on cutting SNAP and putting people in a vulnerable
    position. Approximately 44 percent of people who rely on SNAP
    have at least one person in the family who is working. This is
    not about people who are not working. In the many cases people
    are working and just do not make enough to get by. So, in the
    meantime, I guess we are saying we should punish them by taking
    away their access to food, and I actually think that would have
    a terrible impact on families across our country.
        I am also trying to understand the proposal that families
    receiving $90 or more per month would receive a portion of
    their benefits in the form of a USDA foods package, something
    you talked about as a Blue Apron-type program that would have
    only nonperishable products, and when we hear from others about
    the need for healthy food and fresh fruits and vegetables. This
    would also move in the wrong direction.
        So I have questions since you are relying on such a
    program, how would it actually work? You know, how much would
    it cost the government to set up the physical infrastructure
    that would be necessary to package and distribute boxes like
    these?
        Mr. Mulvaney. Thank you for the questions, Congresswoman.
    One of the ways you can stretch that $4.50 a day further is by
    buying food wholesale instead of retail, which the government
    can do and individuals cannot, so we actually get more bang for
    the buck by doing this program. And I would point out to you
    that Democrats have actually supported this program in the
    past. One of the biggest defenders of the program has been
    Senator Feinstein from California when it comes to the food box
    program that we have had for many years for seniors.
        It does work. It is one of the reasons we were very excited
    to see the USDA proposed to expand it because it is one of
    those programs because it seems like it actually works.
        Ms. DelBene. How do the people actually get these? What is
    the budget for actually getting them? Do you have a database so
    that you know what people's allergies are, what their dietary
    restrictions are? There are no fresh fruits and vegetables that
    would be part of this? What if a person's housing is unstable?
    How do you know how to get them the package? They do not have a
    concierge with someone who is going to sign for a package. How
    do you know it even actually gets to them? Have you thought
    through any of these things?
        Mr. Mulvaney. Again, the challenges to actually get the box
    are very similar to the challenges to get them their EBT cards
    in the first place because if you are homeless, it is hard to
    find you.
        Ms. DelBene. Someone carries an EBT card with them and can
    use them wherever they are. This is an ill-conceived policy. It
    is going to deprive people of the most basic nutrition
    assistance and cost everyone more not only in quality of life,
    but more money in the long term. I yield back.
        Chairman Womack. Gentleman from South Carolina, Mr.
    Sanford?
        Mr. Sanford. Thank you, Chairman. Let me first say, Mick, I
    admire you. I appreciate your competence, the way you handle
    yourself. I think you make the state of South Carolina proud.
        Mr. Mulvaney. Usually when he talks like that there is a
    ``but'' at the end of the sentence.
        Mr. Sanford. All these things are true. There is a ``but.''
    I guess I struggle with this budget, and I will say this. I
    applaud the fact that you all have cuts. I mean, it is hard to
    come up with cuts in public policy, and yet you all have
    stepped to the plate on that front. But let me get to the
    ``but.'' I think that this budget perpetuates this myth that we
    can balance the budget without impacting entitlements. I think
    that is a really dangerous myth to perpetuate. I think that we
    are sleepwalking our way to the largest financial crisis in the
    history of our country.
        And it was interesting that the Wall Street Journal
    entitled the budget deal a ``Guns and Butter'' budget deal. I
    would argue that this budget is the, you know, ``Guns and
    Optimism'' budget deal in that, you know, Gordon Sullivan, who
    is former Chief of Staff of the United States Army, once
    observed that hope is not a method. But there is a lot of hope
    that is built into this, and I know that you are an optimistic
    guy by nature.
        But I want to go back to this reality, which is if we have
    a budget that never balances and we predicate it on certain
    things that are stretches at minimum and they are somewhere
    between optimism and stretches. But, I mean, you look at this
    notion of in essence saying we are not going to have a
    meaningful economic downturn in the next 10 years as a
    component of the growth numbers that are built into this
    budget, I think that that is widely optimistic. And if it is
    wrong, we are off by trillions of dollars. We are not talking
    billions. We are talking trillions.
        My colleague on the Democratic side just a moment ago
    mentioned the other projections in terms of economic forecast.
    The fed says 2.2. Private consensus is 2.4. CBO says 1.9. And
    yet, we are going to go at 3 percent.
        You know, it is not that I am not optimistic. I am. But if
    you look at the building blocks of growth, as you well know, it
    is labor force growth and it is productivity growth that gets
    you to final growth. In an aging population, labor force growth
    is really, really difficult. That leaves you other variables.
        I pulled some numbers here. This is actually from the
    Committee for Responsible Government. Their point is to hit the
    3 percent growth number, it would take a doubling of the
    current immigrant population. I do not think that one is
    realistic. Okay.
        If we are not going to do that, how about put every single
    working-age adult to working including full-time parents, the
    unemployed, the disabled, those in prison, and those in
    graduate school--that is probably not going to happen. Initiate
    two simultaneous dot-com size booms--difficult. Develop and
    utilize innovations more consequential than electricity, or--
    how about this one--phase out the weekend?
        It is really mathematically difficult to get there and stay
    there. So, we have had something of a running back and forth on
    this. You certainly won the first quarter, but a couple of
    quarters at the front end do not make a 10-year buildout.
        And so, I think you have got a question on growth. I think
    you have a question on interest rate. You know, you cannot have
    the growth that you all project without a consequent
    simultaneous rise in interest rates. It has never happened in
    the history of man. CBO's numbers are a close correlation
    there.
        And so, I would just say, you know, how do we get to these
    numbers because what they perpetuate is this myth that we can
    balance a budget or move toward balance without affecting
    entitlements, and I think that is a really dangerous myth to
    hold onto whether on the Democratic or the Republican side of
    the aisle.
        Mr. Mulvaney. Really quickly, in reverse order, yes.
    Interest rates, yes, we do have something that is a little bit
    lower than the CBO for the first couple of years, which we
    think reflects reality. We are actually slightly higher than
    CBO in a couple of the out years. Labor force productivity, I
    encourage you to look at the fourth quarter capital investment
    numbers.
        While the GDP numbers were less than we expect, the capital
    investment numbers were almost four times what we expected. And
    it is that capital investment as part of the tax bill that you
    all voted for that we know we have to have in order to get that
    productivity growth. So this is all part of a plan. Capital
    investment leads to future productivity growth through
    additional machinery, additional education, additional
    innovation.
        Keep in mind, all economic analyses are done like that. You
    can never know when the recession is coming. You go back and
    you look at the period from the Great Recession. Now, we
    averaged over 3 percent. Yes, we had a Great Depression in the
    middle of that. You go from just about every period of time up
    until the 2007s or 2008s and we had that 3 percent even though
    we had dramatic downturns in the middle. So these are simply--
    --
        Mr. Sanford. But we did not have a baby boom generation
    retiring as we do now.
        Mr. Mulvaney. I will look forward to doing this on the next
    flight home, because you know how I much I enjoy this, but
    thank you for your questions.
        Mr. Sanford. Thank you. That is right.
        Chairman Womack. Gentlelady from Florida, Ms. Wasserman
    Schultz.
        Ms. Wasserman Schultz. Thank you, Mr. Chairman. Mr.
    Mulvaney, it is good to see you. Thank you for joining us this
    morning. On the screen, I would direct your attention to a
    tweet from the President that he wrote in 2015 as a candidate
    which reads, ``I was the first and only potential GOP candidate
    to state there will be no cuts to Social Security, Medicare,
    and Medicaid. Huckabee copied me.'' As I am sure you know and
    as Mr. Moulton has already asked you, this budget would cut all
    three of those programs--breaking that promise along with many
    others that have already been broken, so the track record is
    clear--and that threatens the health and dignity of seniors,
    children, and people with disabilities.
        The budget would cut Social Security by $72 billion over 10
    years, Medicare by $266 billion, and Medicaid by $1.4 trillion.
    And I know you referenced in your answer to Mr. Moulton that
    you do not cut benefits for any of these programs. Well, I beg
    to differ because you do cut benefits for more than a million
    households in Social Security Disability Insurance and SSI,
    more than a third of whom have multiple individuals in those
    households with disabilities.
        In cutting Medicare, you can argue that you are not cutting
    benefits directly to patients, but the provider benefit cuts
    make it far less likely that providers will continue to
    participate in the Medicare program, diminishing the quality of
    access to healthcare that seniors have and also the diversity.
        You know, in many places in this country, you know, going
    to a specialist and then adding a sparsity of providers who are
    participating in Medicare is really, really a challenge. I
    represent, as you know, the state of Florida with the largest
    percentage of seniors in the country by population, and so
    these cuts disproportionately impact our seniors.
        The Social Security disability cuts will make it
    excruciatingly more difficult for people to qualify for SSI,
    and I do not know when you were a legislator if you ever helped
    a constituent try to get through the SSI and that disability
    process, but it takes years, which is insane to begin with, and
    now you will make it even harder. We are talking about an
    extremely vulnerable population.
        So I am trying to understand why President Trump broke his
    promise to the American people and, frankly, if you are going
    to raise the issue of our deficits and debt, that does not hold
    water given that you added $1.5 trillion to the deficit in the
    tax cut scam bill that President Trump signed into law at the
    end of last year.
        Mr. Mulvaney. Thank you, Congresswoman, a couple of
    different things in response to that. Lowering drug prices,
    which is what we do in this budget, does not break that
    promise. Ending the abuse that you and I have both railed
    against that pharmaceutical companies commit in the way price
    drugs within Medicare does not break that promise, and so I
    thought it was something we could both support. Putting a cap
    for the first time on true out of pocket expenses for seniors
    in part D does not break that promise. I think it is something
    we could all be able to support. For the first time,
    introducing a zero copay for some needy seniors in part D does
    not break that promise.
        Ms. Wasserman Schultz. You are trying to distract----
        Mr. Mulvaney. Oh, every single one of those things is in
    this budget.
        Ms. Wasserman Schultz. You are trying to distract from the
    fact that the President promised--I will direct your attention
    to the screen again--specifically that he would not cut
    Medicare, Social Security, and Medicaid in writing, black and
    white----
        Mr. Mulvaney. So you think lowering drug prices for seniors
    is a bad idea?
        Ms. Wasserman Schultz. No. What I am saying is that----
        Mr. Mulvaney. Good. Then I would look forward to your
    support for these programs.
        Ms. Wasserman Schultz. Mr. Mulvaney, what I do not support
    is when the President makes a commitment to the American people
    and breaks that promise. He specifically said here that he
    would not, as President, cut any of these programs. This budget
    does cut all of those programs and directly targets the most
    vulnerable recipients who participate in those programs, and
    there is no denying that. You can point to other window
    dressing things that you have put in this budget, which on top
    of that further explodes the deficit.
        Let me just ask you also about an issue of great concern to
    Floridians. The budget would also cut NOAA, climate research,
    by 37 percent, and despite what you might think about climate
    change, there is no denying--and you are from a state that is
    in hurricane alley on occasion--we are still recovering from
    one of the destructive hurricane seasons in recent memory. We
    have got more and more coastal areas dealing with flooding. I
    have neighborhoods in my district, Mr. Mulvaney, that flood
    even when it does not rain now even on clear days.
        So why does this budget turn away from national efforts to
    assist communities like mine that are bearing the brunt of
    severe weather and climate change----
        Mr. Mulvaney. I am sorry, floods on clear days? Did I hear
    it correctly?
        Ms. Wasserman Schultz. Yes, even on clear days, there are
    times when the coastal parts of my district----
        Mr. Mulvaney. Oh, okay.
        Ms. Wasserman Schultz.--the neighborhoods flood.
        Mr. Mulvaney. All right. All right. We do reprioritize
    within NOAA, within the Department of Commerce, to move away
    from climate change and more towards weather. We think that
    would more efficiently serve the needs that you have described.
        Ms. Wasserman Schultz. You cut regional coastal resilience
    grants. How are communities like mine supposed to be able to
    make sure they can gird against flooding when you are cutting
    the very funding that will prevent flooding from occurring----
        Chairman Womack. The gentleman will have to take that one
    for the record. Let's go to Alabama, Mr. Palmer.
        Mr. Palmer. Thank you, Mr. Chairman. I have sat here and
    listened to this, and I wish I had about 30 minutes to talk
    about climate change, for instance. We had a record 142 months
    with no hurricanes. We talk about rising ocean levels, and I do
    not know how many people in this room realize that Alabama was
    once a seabed. Something happened to cause the seas to recede.
    But I do not want to get into science, because I think it would
    take too long to explain it all.
        But I have some major concerns about the budget as you
    know. You and I have had conversations privately and I want to
    continue to work with the White House to figure a way forward.
    But I do want to point out some things that I think are
    important and helpful in this budget, and that is the work
    requirements and some of the things that are being suggested
    and implemented by this administration, Mr. Director.
        For instance, Kansas implemented work requirements back in
    2011, and I just want to point out that since that time,
    incomes for the people who left TANF and SNAP, the nutrition
    program as our colleagues referred to it, their income
    increased 247 percent. Costs came down for the state and for
    the Federal Government, but their incomes went up 247 percent.
        Now, my dad was blind in one eye, had an eighth-grade
    education, and I grew up skidding logs from mules. I grew up
    dirt poor, and I understand the benefit of work. I have heard
    our colleagues attack the tax reform bill, the first time in 30
    years that we have reformed taxes, and I would just like to
    point out when you give tax cuts to small businesses and to
    major corporations, it benefits people who grew up like I did
    because, frankly, I never had a poor person give me a job.
        I also want to point out that they implemented the work
    requirements in Maine, and about 7,000 people were removed from
    the rolls. Now these are able-bodied adults with no kids, all
    right, not everybody, able-bodied adults with no children, and
    their income went up a combined $18 million per year. That is
    not crumbs, is it?
        All right, now let me get back to some more fundamental
    issues here, and, you know, I wish that we could have a
    dialogue where both sides were really working for what is best
    for the country instead of throwing out political talking
    points. It is not a political campaign when you get to the
    budget. It is really an effort to get us on a sound physical
    path. I am not sure we are there yet, and you and I have had
    these conversations.
        I could literally sit down on a napkin and show you $1.2 to
    $1.6 trillion in additional revenues or savings that we could
    get. But if we do not fix the appropriations process, if we do
    not get back to making the House and Senate work, making this
    government work, it does not matter, does it?
        Mr. Mulvaney. No, sir, it does not. In fact, one of the
    reasons that we supported the caps deal was to encourage a
    return to regular order in the appropriations process. It is
    the proper way for money to flow, the proper way for the
    administration to participate in the process, the proper way
    for all of you all to be heard, and we would very much like to
    see a return to that paradigm.
        Mr. Palmer. Well, in that regard, if we can get the
    appropriations process restored the way it should work--and by
    the way, I think everybody in this room knows we passed all 12
    appropriations bills last year. We did them in two packages,
    and we only had five Democrats vote for either one of them. So
    we did our appropriations work.
        But in regard to some of the issues that, I think, we can
    deal with in terms of trying to reduce our spending is--and you
    and I have talked about the improper payments. In 2010, when
    the Democrats had both Houses of Congress and the White House,
    they passed the Improper Payments and Recovery Act.
        In 2012, they amended that act and passed Improper Payments
    and Recovery Improvement Act. What is going on right now is
    that even though we have tried to address this issue, we never
    did real enforcement, so the improper payments rate has
    continued to go up.
        Last year, it was $144.3 billion, yet you are only showing
    a savings of about $150 billion over 10. I think we can do
    better, and I think it should be a bipartisan effort. Would you
    agree with that?
        Mr. Mulvaney. I would. We try to be conservative. As I
    said, I probably could have run that number up 10 times what we
    had and come in and said, ``I am going to balance the budget,''
    but we have just not shown an ability yet to reduce the
    payments much larger than we have in the budget, so we think
    the numbers are a lot more solid.
        We look forward to working with Congress on reducing the
    amount of improper payments, keeping in mind that improper
    payments cover a wide variety of things. Everybody thinks it is
    simply a check written to somebody that should not receive a
    check, and it is a lot more than that as you know.
        Mr. Palmer. I know, and every dollar we send out improperly
    is a borrowed dollar that we are paying interest on. Thank you,
    Mr. Director. Mr. Chairman, I would like to enter into the
    record the report on Kansas, and I will print the report from
    Maine's Department of Health and Human Services.
        Chairman Womack. Without objection.
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Palmer. Thank you, sir.
        Chairman Womack. I thank the gentleman. Let's go to
    Washington, Ms. Jayapal.
        Ms. Jayapal. Thank you, Mr. Chairman. Thank you, Director,
    for being with us. Director, I am calling this the ``Three
    Strikes, You Are Out'' budget, and it is the American people
    and working people who are rounding the bases and they are
    being called out by this President and this administration. And
    I just want to walk through those strikes.
        Strike one was when you transferred $1.3 trillion from
    working people to the wealthiest in this country and the
    wealthiest corporations, and strike two, I will give this to
    you in this budget. You admit that that was a tax scam, that
    you do not have the growth to pay for those tax cuts to the
    wealthiest, and you are now going to saddle this generation and
    future generations with $1 trillion in debt, $1 trillion in
    this next year, $7 trillion over the next 10 years.
        And then, strike three is cut all the programs that people
    actually rely on to have a decent life, and some of these have
    been called out, but I have to say it again: Temporary
    Assistance for Needy Families cut by $1.7 billion in this
    budget; economic opportunity programs cutting half a billion
    from rural and wastewater programs; cutting job training
    programs for workers across the country; Economic Development
    Agency that invested millions in coal communities that Donald
    Trump said he was going to save; and programs that help
    struggling manufacturers.
        But I also want to talk about SNAP, because my good friend
    from Alabama just mentioned Kansas and Maine, and I want to
    tell you what actually happened in Kansas and Maine. A year
    after instituting work requirements in Kansas, 40 percent of
    unemployed were still unemployed, and the SNAP participants who
    lost their benefits had an average annual income of $5,562. I
    would hardly say that that was a success.
        Here is what happened in Maine. Eighty percent reduction
    immediately, that is true, but a year later 60 percent still
    did not have any income, and as Secretary Purdue himself said,
    ``SNAP is a,'' and these are his words, a ``very important,
    effective program.''
        Let's talk about Medicaid for a second. $1.4 trillion cut
    to Medicaid, and I think this administration would like people
    to think that Medicaid is somehow just benefitting the poor,
    lazy, black, brown. Who knows what you are thinking? But 11
    million adults with disabilities, 70 percent of those folks get
    their coverage through Medicaid. You look at the number of
    long-stay nursing home residents. Sixty percent of those
    residents get their coverage through Medicaid. So I do not know
    how you can call this a moral budget in any way, shape, or
    form, Mr. Director.
        And I want to talk about two specific things that are
    separate from everything I just mentioned. Yesterday when you
    came to visit us, and thank you for doing that, I asked you
    about DACA and what assumptions you have made in this budget
    around DACA. And I believe you told me that you have assumed
    that the DACA recipients get to stay, that there is some
    permanent solution for DACA.
        Mr. Mulvaney. What I have said, that is mostly correct.
    What I said was that we assume that an agreement is reached on
    immigration, on DACA, between Republicans and Democrats, I was
    very disappointed to see that Democrats in the Senate did not
    allow the debate to go forward yesterday after demanding that
    they do for such a long time.
        Ms. Jayapal. Thank you, Director Mulvaney, but let me----
        Mr. Mulvaney. We do assume that there is an agreement.
        Ms. Jayapal. I am sorry. This is my time.
        Mr. Mulvaney. Yep.
        Ms. Jayapal. Let me just point out that the President
    rescinded DACA and put 800,000 Dreamers at risk of being
    deported and the economic impact of that, estimates are that
    280 to $430 billion in either a cut to our GDP or an increase
    to our GDP, so what happens if this Republican-led legislature
    in the Senate and the House--Paul Ryan has not committed to
    bring a real DACA bill to the floor that would pass--what
    happens if DACA is rescinded?
        Mr. Mulvaney. A couple different things. I would suggest to
    you that it was the law that rescinded DACA and not the
    President.
        Ms. Jayapal. That is not the answer to my question. So
    reclaiming my time to answer the question. Thank you.
        Mr. Mulvaney. I am sorry. Your question was what?
        Ms. Jayapal. Well, I actually think I just answered my own
    question, so I will let you pass that. Let me ask you about
    whether you know what the suspense earnings fund is.
        Mr. Mulvaney. The suspense earnings fund. No, ma'am, I do
    not know that one off the top of my head.
        Ms. Jayapal. Well, that is a fund that basically is
    earnings that are contributed to Social Security, where the
    names of the people and the earnings and the Social Security
    numbers do not match. There is about $1.2 trillion in that fund
    as of 2012. That is about $200 billion contributed to Social
    Security by undocumented immigrants into the Social Security
    that is paying for older Americans today. So if you assume
    increases in enforcement as you have done in your budget, have
    you accounted for the decreases to the economy and to the
    Social Security fund if that were to pass?
        Chairman Womack. The gentleman will have to take that one
    for the record. Gentleman from Ohio, Mr. Renacci.
        Mr. Renacci. Thank you, Mr. Chairman. I want to thank you,
    Director Mulvaney, for being here today and for all your hard
    work on putting together this budget. While I may not agree
    with every policy decision made in the budget, I am encouraged
    that the President remains committed to reducing our national
    debt and deficit.
        And again, this will be my last time in a Budget Committee
    hearing where we are talking about a budget. It is interesting,
    because Mr. Carbajal and I this morning had a bipartisan
    breakfast where we talked about how we have got to get politics
    out of the way. And the frustrating thing about the Budget
    Committee is we get into politics versus into substance too
    often.
        But I was taking some notes. One of the things you said, it
    is easier to spend than to cut. Yes, it is. God help our
    children and grandchildren. Too often we worry about the next
    election and not the next generation, which is a problem with
    the politics many times that show up in this Committee.
        You also said something that was interesting. Both parties
    have taken credit for balancing the budget in the 1990s.
    Neither party should take credit for balancing the budget in
    the 1990s. If you go back to those years you will find out that
    there were $2 trillion budgeted and 4 trillion spent. We could
    not even control our spending back there and thank goodness we
    had something called the tech bump, which grew our economy by
    over 5 percent for most of those years, which gave us the
    ability to balance the budget. Otherwise no Democrat or no
    Republican could ever take credit for that balanced budget.
        The last thing I want to bring up, and I was listening and
    I apologize. I had run down to a Ways and Means hearing. I
    heard one of my colleagues on the other side say that this
    budget will destroy people's lives. Let me explain something.
    As the Comptroller General said, a Democrat, a Comptroller
    General who sat in that same seat last year, said we are
    heading for an unsustainable situation. And that is what will
    destroy people's lives.
        So, as this budget reflects, I believe that we need to take
    a serious look at the non-defense discretionary programs we
    currently fund and where we can cut out disputative and
    unnecessary spending. However, I also understand and I know you
    understand that the drivers of our drivers of our long-term
    debt and deficit today are the mandatory spending.
        Seventy percent of Federal spending today is as we--and 70
    percent of mandatory spending in the next 20 years, that
    percentage will increase to 80 percent is mandatory spending.
        So Director Mulvaney, by the way, I give you and the
    President credit that you have included 1.7 trillion in
    mandatory cuts, but do you believe it does enough in the
    mandatory spending to correct the mandatory spending problem?
        Mr. Mulvaney. Well again, I think it preserves the
    President's promises. We have talked about this last year and
    talked about the process we went through with the President to
    write the budget. That I gave the President certain options
    within Medicare, within Social Security, that Congressman
    Mulvaney probably would have supported. The President said,
    ``Now wait a second. Now I promised people I would not change
    retirement. I promised people I would not means test. I
    promised people I would not change their benefits in
    Medicare.''
        So what we have done is to try and show you in this budget
    you can still have dramatic savings in mandatory spending--$1.7
    trillion in a 10-year window--and not touch those programs. So
    I think that we have at least given you some ideas of things
    that you can do short of that if you do not want to do that as
    well.
        Mr. Renacci. Thank you. And you would probably also agree,
    and that is why I want to go back to the tax cut and jobs act.
    As someone who has spent most of my career in the business
    world creating jobs and looking for opportunities to expand my
    business, I believe that bill will help the economy grow. I
    know you have projected 3 percent growth. I actually believe it
    will be higher than 3 percent in the early years as this tax
    bill starts to roll in. I am not an economist who can judge
    whether it will stay at 3 percent, but I know we have used 3
    percent.
        But just going back to what I talked about in the 90s. We
    balanced our budget by having 5 and 6 percent growth, not
    cutting spending, and where do you see us in the near term and
    the long term with your thoughts on that?
        Mr. Mulvaney. We continue to think the numbers that we put
    forth in the budget are defensible and actually towards the
    conservative side. As evidence of that I would suggest that, I
    would point to the Atlanta Federal Reserve that just tends to
    or is in the practice now of projecting the next quarter's GDP,
    and I think the number they put forth last week or 2 weeks ago
    was a projection of 5.4 percent for the first quarter of this
    year.
        To Governor Sanford's point, there will be declines over
    the course of a 10-year window, most normal 10-year windows,
    but we also expect there to be times above 3 percent. These
    numbers that we put in the budget are averages and they are
    extraordinarily defensible, and we have the policies critically
    to back them up and to get us there.
        Mr. Renacci. Well, thank you, and like many of my
    colleagues, including you, we were elected in 2010 with a
    mandate to reduce government spending and ensure that our
    children and grandchildren are not held with this debt crisis.
    Right now we are quite simply on an unsustainable path. I
    appreciate what you are doing and thank you, and I yield back.
        Chairman Womack. Thank the gentleman. Mr. Carbajal from
    California.
        Mr. Carbajal. Thank you very much. Thank you, Mr. Mulvaney,
    for being here today and thank you, Mr. Renacci, for touching
    on those bipartisan discussions we try to have to see if we can
    find common ground, which oftentimes eludes us.
        Mr. Mulvaney, I am incredibly troubled by this budget.
    Budget cuts to domestic programs. Just to name a few: this
    budget calls for a 10.5 percent cut to the Department of
    Education, including eliminating the subsidized student loan
    program and the public service loan forgiveness program; a 34-
    percent cut to the Environmental Protection Agency, which is
    yet another attempt to undermine environmental safeguards; a
    $1.4 trillion and actually more than $2 trillion, if you
    include Medicare, cut to Medicaid over the next 10 years; a
    $214 billion cut to SNAP over 10 years, including the new food
    box proposal that takes choices away from households to buy
    groceries that they need.
        This budget pretends to make infrastructure a priority by
    highlighting the President's 200 billion infrastructure
    proposal with one hand while taking away infrastructure funding
    with the other hand. The budget assumes a 122 billion cut in
    highway programs after the expiration of the current highway
    bill. It also cuts discretionary transportation accounts,
    including reductions in Amtrak and the elimination of TIGER
    grants and cuts the capital investment grants program.
        Director Mulvaney, can you explain to me how the budget
    incorporates the President's new $200 billion infrastructure
    proposal. Would the infrastructure plan actually lead to a net
    increase in Federal investment in transportation
    infrastructure?
        Mr. Mulvaney. It would, and I am discouraged to hear you
    reference Mr. Schumer's numbers, because they are just flat-out
    wrong, which is unfortunate that he has chosen to demagogue the
    issue. But if you look at Mr. Schumer's numbers, what he is
    assuming is a $122-billion cut because of the highway trust
    fund. The highway trust fund is $122 billion short. We all know
    it and unless you all make a separate appropriations for it,
    that money is not going to get spent anyway. So it is one of
    those classic examples, Mr. Carbajal, where we compare
    something to a baseline that everybody knows is not right. It
    is one of the ways that Washington counts that is different
    from the way the rest of the world counts.
        He takes, I think, into consideration a reduction in the
    CDBG program, which might be infrastructure and might not. So
    really it is demagoguing an issue instead of talking about ways
    to actually pass an infrastructure bill that works. My concern
    is that Mr. Schumer is heavily invested in simply seeing the
    President fail as opposed to talking about the issues that are
    important to people back home.
        Mr. Carbajal. Mr. Mulvaney, help me understand--if the
    TIGER grants go away--this is a priority of mine. Both Santa
    Barbara and San Luis Obispo counties in my district have
    applied for TIGER grants to widen the U.S. 101 corridor, which
    is a critical link for the regional movement of goods, and to
    widen highway 46, another critical economic connector, which
    recently served as an alternative route when the disaster hit
    and mudslides shut down the 101. Without TIGER grants, where do
    you suggest communities like mine pursue funds for this type of
    infrastructure?
        Mr. Mulvaney. Through the new infrastructure program that
    we are proposing. If TIGER grants were the answer, Mr.
    Carbajal, we would not have this problem in the first place. If
    just throwing money at the problem was the answer, then the
    stimulus 10 years ago would have solved the problem.
        Clearly, what we have been doing in the past, which
    includes TIGER grants, does not work. It is one of the reasons
    we have the crumbling infrastructure that we have. I give
    tremendous credit to the President for at least coming up with
    new ideas on how to fix the problem. Because, again, if we
    simply do the same thing we have always done, we are going to
    get the same results we have already gotten.
        Mr. Carbajal. Mr. Mulvaney, but we are actually inverting
    the formula that the Federal Government has always utilized to
    help local communities. That is, they used to do 80 percent
    funding and allow local communities to come up with 20 percent.
    Now we are saying you come up with 80 percent and we will come
    up with only 20 percent. How is that helping?
        Mr. Mulvaney. Because we also found that when we increase
    Federal spending on infrastructure, as we did during the Obama
    stimulus, all it did was displace state funding. No additional
    roads actually got built. What happened, was states took money
    they were going to spend on building roads and bridges and
    other infrastructure, and moved it to other priorities, and the
    Federal money displaced that so that nothing additional got
    built.
        Mr. Carbajal. Well, we will agree to disagree on how that
    impacted local communities. I was in local government and I
    will tell you we saw the benefits of those investments, which
    is not the case with what is being proposed here.
        Mr. Mulvaney. Thank you, sir.
        Chairman Womack. Gentleman yields back. Gentleman from
    Ohio, Mr. Johnson is recognized for five minutes.
        Mr. Johnson. I thank you, Mr. Chairman and Director
    Mulvaney, thanks for being with us today. I still need my
    baseball pants back, by the way. That is an inside joke.
        Mr. Mulvaney. He lent me a pair of part of my baseball
    uniform a couple of years. I want to point out that it was much
    too large.
        Chairman Womack. That will be stricken from the record.
        Mr. Johnson. Well, thank you, Director Mulvaney. I am
    optimistic, and I am glad to see that you and the President,
    the administration is looking at the other side of the ledger
    sheet--cost and controlling spending as we move forward. And I
    think his budget reflects it.
        Now, I do have some questions about the budget, but last
    May when you came before this Committee to President Trump's
    fiscal year 2018 budget I expressed to you at that time--we had
    a private conversation about the fact that the funding for the
    Appalachian Regional Commission had been zeroed out based on a
    dated study.
        This year, however, I am very quite pleased that the
    administration's budget has maintained level funding for ARC at
    152 million. This funding is so critically important for
    reinvestment and development of the Appalachian region,
    including eastern and southeastern Ohio, where I live, and to
    ensure that Appalachia does not continue to get left behind. I
    know the President is very concerned about that area of the
    country.
        I am also pleased that the administration has taken
    seriously the opioid epidemic. As President Trump declared last
    August, this is a national emergency and one that is hitting
    eastern and southeastern Ohio particularly hard. Addiction does
    not discriminate by age, race, social status, economic status,
    or political party. Solving the problem is going to take
    communities, families, local elected officials, churches,
    faith-based organizations, and elected officials from the
    President all the way down to the lowest level. It is going to
    be an American solution. We are all going to have to be vested
    in the fight. And I am pleased to see that the President's
    budgeting includes approximately 20 billion to combat the
    opioid crisis.
        So here is my question. Specifically, can you give us an
    idea what the administration is doing to combat the opioid
    crisis and can you expand on how the administration intends to
    use these funds and how it will coordinate between the agencies
    and the departments to ensure that these funds are used most
    efficiently?
        Mr. Mulvaney. Thank you, Congressman. It gives me an
    opportunity to let everybody know, if they have not heard
    already, that I believe we have named a Director of the Office
    of National Drug Control Policy, which is going to be
    extraordinarily helpful.
        If you look at the line items in the budget, Congressman,
    you will see a dramatic reduction in the ONDCP budget. That,
    however, is a result of simply moving the grant programs that
    were managed out of the White House over to, I believe it is
    HHS and DOJ. So while it appears on a piece of paper as a
    reduction, actually it is simply a movement from one section to
    another.
        We have $3 billion, I think, in the 2018 budget; $10
    billion in the 2019 budget for opioids. And then, a bunch of
    other money in other places to bring up that number close to 20
    billion that you have mentioned. The various things the
    President has talked about is a national advertising campaign
    similar to what we were able to do to simply discourage people
    from using it. There are some very powerful tools we have
    there.
        One of the most interesting things is the work Congressman
    Cole mentioned earlier. The NIH, we have tasked the NIH with
    trying to come up with a non-addictive painkilling replacement
    for opioids. So there are a bunch of different initiatives and,
    obviously, with $20 billion you can do a bunch of different
    things.
        But I think no one can, I think, doubt the President's
    commitment to this, not in terms just of money because money is
    not always the best measure of whether or not we are committed
    to something. But the commitment of energy and time and
    attention, I think, is encouraging.
        Mr. Johnson. I would agree. This is, the opioid epidemic is
    not something that we are going to be able to spend our way out
    of, arrest, or incarcerate our way out of. It is a big problem.
    Shifting gears just a little bit, the President requests 647
    billion in base Defense discretionary spending in fiscal 2019.
    I think I know the answer but I want to give you a chance to
    respond. Why is funding of that magnitude necessary?
        Mr. Mulvaney. I would defer for the details to Secretary
    Mattis, because I only have 10 seconds left but the long and
    the short of it is that to deal with some of the new threats,
    including North Korea, we needed a considerable up fit to some
    of our capabilities and also to undo some of the decay that was
    experienced over the last several years.
        Mr. Johnson. Okay. Thank you. Chairman, I yield back, and
    you can keep the baseball pants.
        Chairman Womack. Thank the gentleman. The gentleman's time
    has expired. Ms. Jackson Lee--where are we? Mr. Jeffries, you
    are recognized for 5 minutes.
        Mr. Jeffries. Thank you, Mr. Chair, and thank you, Mr.
    Director, for your presence here today. I was confused by a
    statement that you made in November, so hopefully you can
    clarify it for me. You stated in defense of the tax bill's
    obliteration of the state and local tax deduction that ``it is
    simply not fair, it is not right, that the folks who live in
    low-tax jurisdictions are actually subsidizing the folks that
    live in high-tax jurisdictions.'' Did you make that statement?
        Mr. Mulvaney. Yes, sir. Several times.
        Mr. Jeffries. Now, there are two types of states in this
    country: donor states and taker states. Is that correct?
        Mr. Mulvaney. There are, but that deals with the receipts
    from the government, not the pays in.
        Mr. Jeffries. Okay. So a donor state, like New York, New
    Jersey, or Connecticut regularly send more money to the Federal
    Government than we get back in return. Is that correct?
        Mr. Mulvaney. I believe that to be true. Yes, sir.
        Mr. Jeffries. Okay. So, I do not understand how there can
    be any other distinction as it relates to Washington-speak that
    you have previously descried, when you talk about high-tax
    jurisdictions like New York, New Jersey, and Connecticut
    subsidizing the Federal Government. We actually receive less
    regularly from the Federal Government than we get back in
    return. In fact, New York, a high-tax state, generates 9.4
    percent of the Federal Government's income tax receipts. We
    receive only 5.9 percent of Federal spending allocated to
    States.
        Similarly, as I think you are familiar with, a real taker
    state--states like North Dakota, South Carolina, Alabama,
    Kentucky, West Virginia, Indiana--get more than $2 back in
    Federal spending for every dollar they send to the Federal
    Government in taxes. Is not that the real donor state/taker
    state dichotomy?
        Mr. Mulvaney. The distinction, Congressman, is that you are
    looking at it at a state-wide basis, and I am looking at it at
    an individual basis. My comment was and remains that if you and
    I live in two different states but make the exact same amount
    of money and you lived in a higher-tax state and I lived in a
    lower-tax state, you were actually paying less Federal tax than
    I was, which we did not think was fair. And it did act as a
    subsidy, where I was paying more so that you could pay less.
        Mr. Jeffries. Okay. That strikes me as sort of the
    Washington-speak that you have consistently descried, but I
    will take your answer as one rendered in good faith. In 2011
    you called President Obama's fiscal year 2012 budget a joke.
    Correct?
        Mr. Mulvaney. I do not remember that, but that sounds like
    something I would say.
        Mr. Jeffries. Okay. And that budget, you indicated it is
    hard to explain from detached from reality this is to think
    that the country can spend another $1.6 trillion when it does
    not have the means. Do you recall making that statement?
        Mr. Mulvaney. Again, not specifically but I absolutely
    believe I said something like that.
        Mr. Jeffries. Okay. And then back in 2011 you told
    attendees at a town hall in Sun City Carolina Lakes
    development----
        Mr. Mulvaney. Wonderful place.
        Mr. Jeffries. ``I am sure that the country's debt is much
    worse than I ever thought. Allowing this figure to increase
    compromises U.S. foreign policy.'' Do you recall making that
    statement?
        Mr. Mulvaney. Again, no, but I absolutely believe that I
    made it.
        Mr. Jeffries. Okay. And then, in April of 2011 you said,
    when asked whether you would vote to raise the debt limit,
    which some had called Armageddon, you said, ``It is no more
    Armageddon and no more catastrophic than what we are doing
    right now, spending $1.5 trillion that we do not have every
    year.'' You recall making that statement?
        Mr. Mulvaney. That one I actually do remember, yes.
        Mr. Jeffries. Okay. And then in 2015 during another debt-
    ceiling standoff, you stated--this is a great one--``If
    reconciliation is used to try and raise the debt ceiling there
    may well be blood on the floor of the House Chamber.'' Do you
    recall making that statement?
        Mr. Mulvaney. No, but that is a really good one. I like
    that one.
        Mr. Jeffries. I agree. Now, you voted against raising the
    debt ceiling in October of 2015. Correct?
        Mr. Mulvaney. I do not recall but I voted against debt
    ceilings several times. I voted to raise the debt ceiling a
    couple of times as well, but I do remember voting against the
    debt ceiling more than once. Yes, sir.
        Mr. Jeffries. And in May of 2017 before this Committee,
    when asked by Representative Barbara Lee about the cut to food
    assistance to the poor, you responded that we should be
    focusing on the standard of living of your unborn
    grandchildren. Is that correct?
        Mr. Mulvaney. Again, I do not remember that, but that is
    consistent with what I believe. Yes, sir.
        Mr. Jeffries. Okay. Now, the debt, which you once descried,
    was previously $14 trillion. It is now in excess of $20
    trillion. Is that correct?
        Mr. Mulvaney. Yes, sir. I believe the total debt is 20
    trillion. I think the debt held by the public is about 16 and
    change.
        Mr. Jeffries. Okay. What confuses me, in the time that I
    have remaining, is the absence of real intellectual consistency
    here. Not doubting your good faith, but you take one set of
    positions as a Member of Congress and then come forward with an
    administration supporting a bill that saddles our children and
    grandchildren with more than $1.5 trillion in additional debt
    simply to pay for tax cuts for millionaires, billionaires, big
    donors to the Republican Party, and special interest
    corporations, and then triple down on that by presenting a
    budget that would increase the debt by $7 trillion.
        I think that, unfortunately, is a shameful abdication of
    the fiscal responsibility that I always believed the Republican
    Party stood for in this Nation. I yield back.
        Chairman Womack. Thank you, sir. Gentleman yields back. Mr.
    Lewis, gentleman from Minnesota is recognized for five minutes.
        Mr. Lewis. Director Mulvaney, thanks for coming today. I
    think I only have one quote of yours going back a couple of
    days I am going to use. So, you will be relieved to hear that,
    probably.
        Mr. Mulvaney. Remember.
        Mr. Lewis. And I do want to talk about intellectual honesty
    in a moment, and I will get to that. But first I am not going
    to sit up here and defend the spending in this budget. But then
    again I will not defend the spending in a number of
    congressional budgets either. The fact is, last Sunday you made
    the salient point that you had hoped the Democrats would come
    along on the defense side, but without giving us additional
    money for welfare spending. But they refused and that is just
    the world we live in.
        And I think that is absolutely true. In fact, I do not
    think it is possible in this world to plus-up defense from $549
    billion to $716 and say we will just zero out social programs.
    That is not going to pass anybody, let alone the United States
    Senate.
        So, instead of a shared sacrifice being everybody tightens
    their belt across the Federal budget, we get these stair steps.
    You fund mine, I will fund yours. Except in the budget you have
    got discretionary spending in the President's budget request
    taking defense up all the way but social spending goes from
    about $591 with the BBA all the way down to under $400 billion
    in 2028. How is that not possible now but it is going to be
    possible over 10 years?
        Mr. Mulvaney. Keep in mind that in 2018 we do spend up to
    the caps, as I have mentioned before, and in 2019 we do not.
    Those are the two budgets that are sort of in front of you
    right now. Once we start talking about 2020, that is the vision
    for the future. It is not next year's budget. It is the vision
    for the future.
        And what we are saying is look, there is a way to get off
    of this trillion-dollar trolley, right? Off of this carousel of
    trillion-dollar deficits, and one of the ways that you could do
    it is to look at what the President would call the two-penny
    plan, which is to reduce these programs over the course of
    time. We do not put any specifics behind it because these are
    the out years. This is how budgets work, right? So we have
    details for 2018 and 2019 and then policies, general ideas
    going forward. And that is what we do: offer one way to get off
    of that trillion-dollar deficit.
        Mr. Lewis. I just think, Director, it's going to be a
    challenge and I do think we have to sort of get religion on the
    Budget Committee, get it in Congress, that real fiscal
    restraint means restraint across the budget. This sort of red
    versus blue tribalism is not working and we end up with a sort
    of a scratch your back, you fund mine, I will fund yours. And
    they are all Federal programs and they all can take some belt-
    tightening.
        I do want to spend the rest of the time talking about
    intellectual honesty and two kinds of deficits. You will see on
    the screen a President a few decades ago said, ``Our true
    choice is not between tax reduction, on the one hand, and the
    avoidance of large Federal deficits on the other. It is
    increasingly clear that no matter what party is in power, so
    long as our national security needs keep rising, an economy
    hampered by restrictive tax rates will never produce enough
    revenues to balance the budget.''
        I repeat, ``Our practical choice is not between the tax-cut
    deficit and a budgetary surplus. It is between two kinds of
    deficits. A chronic deficit of inertia has the unwanted result
    of inadequate revenues in a restrictive economy, or a temporary
    deficit of transition resulting from a tax cut designed to
    boost the economy, increase tax revenues, and achieve, I
    believe, and I believe it can be done, a budget surplus. The
    first type of deficit is a sign of waste and weakness. The
    second reflects an investment in the future.''
        Now, if some of our colleagues were really concerned about
    intellectual honesty, they would have to disavow John F.
    Kennedy's speech to the Economic Club of New York in 1962
    because the former President made a specific distinction
    between a deficit that is caused by increased spending, which
    comes out of the capital market and a deficit caused by tax
    reduction designed to boost the economy but does not increase--
    let me put it to you this way real quick. Would you rather have
    a balanced budget of $4.4 trillion by raising taxes or a budge
    out of balance of 1 trillion? What is going to be more
    deleterious to the economy?
        Mr. Mulvaney. I would rather have the latter.
        Mr. Lewis. So there is a difference between these two kinds
    of deficits, and I hear the other side constantly say, ``Oh,
    gosh, the tax cut scam bill. Raise the deficit.'' You do not
    care about deficits. It does not matter whether you tax,
    borrow, or inflate. It is the amount of spending that comes out
    of the capital markets. Is not that true, Director?
        Mr. Mulvaney. And the type of spending the government does,
    recognizing that letting people keep more of their own money is
    not spending. It is the most efficient allocation of capital
    that we can have.
        Mr. Lewis. It is the most efficient allocation, because the
    productivity increases. So, I just want to make certain we
    understand that we could ``balance the budget by raising
    taxes.'' But you are still crowding out the capital markets if
    disposable personal income is basically the amount of money you
    earn minus the taxes you pay. That is disposable income.
    Consumption can stay the same. But if you raise taxes, what
    happens? Actual disposable income goes down, so that is
    crowding out.
        Mr. Mulvaney. Spending is the crowding out. There is no
    question.
        Mr. Lewis. So, I would just encourage everyone if you
    really want to keep your eye on the prize, it is a problem, no
    question, interest on the debt. But it is not necessarily all
    the time how we finance government. It is how much government
    we choose to finance. I will yield back.
        Mr. Mulvaney. Am I the only one who feels like I am on a
    radio program right now?
        Chairman Womack. That was cheap.
        Mr. Mulvaney. It is not cheap. I enjoyed the show.
        Chairman Womack. Gentleman yields back. Ms. Jackson Lee is
    recognized for 5 minutes.
        Ms. Jackson Lee. Mr. Director, it is good to see you again.
    I thank the Chairman and the Ranking Member for this time and
    the time is obviously short. There have been a lot of quotes
    drawn by some of your statements, Mr. Mulvaney. I am going to
    quote one of my predecessors of many years ago. When the
    Honorable Barbara Jordan sat on the Judiciary Committee during
    the impeachment hearings of President Richard Milhous Nixon,
    and she said that she was not going to allow the Constitution
    to be diminished.
        And what I would say to you, with all due respect, that I
    am not going to allow the American people to be debased and to
    have them publicly excoriated by a morally bankrupt budget.
    This is not a personal statement because you were so kind to
    tell us that a budget is a statement of policy and beliefs of
    the particular administration that offers it. So, I think it is
    important to allow just a quick rundown.
        Your budget zeroes out the Federal Work Study Program. It
    zeroes out community service's block grant. It zeroes out
    LIHEAP, that helps for those seniors and others who need
    support for heat in the winter and air conditioning in the
    summer. It zeroes out the community development block grant
    that so many urban and rural areas are dependent on. I think it
    zeroes out the rule of development under agriculture that my
    own small cities depend on. It zeroes out the senior community
    service program.
        It zeroes out a very important asset of the United States,
    which is the National Aeronautics and Space Administration,
    their science missions. It zeroes it out. It zeroes out the
    TIGER grants. It eviscerates the Legal Services Corporation. It
    eviscerates the arts. And this is a poor statement on what
    America is about and how the American people voted.
        I do not believe they voted for the President to destroy
    the very fabric of this Nation. So, let me raise the question:
    I believe you have a policy to eliminate Federal workers. Right
    now as relates to the Bureau of Prison, which comes under the
    Department of Justice, of which I sit on the Judiciary
    Committee.
        They are looking to cut 6,000 jobs nationwide; in my own
    community 37 jobs. They have preemptively cut these jobs. You
    are killing Federal workers. You are now causing Federal
    workers to vet prisoners to send out to private prisons.
    Private prisons do not allow FOIA requests to know what they
    are doing. Disturbance control is now done by our Federal
    employees dispatched out to private prisons, because they are
    not capable of putting down disruptions.
        So, I will be asking a question along these lines: Violence
    against Women Act or violence or domestic abuse has been a
    major issue over the last couple of days. We have found that to
    be a problem in your own White House. The inability to speak
    against it; the inability to denounce it. But yet your budget
    does not have a separate line item for violence against women.
    You have put it in the victim's fund that does have about $13
    billion.
        You are taking out a sizeable amount for this and many
    other things, and therefore, what you are saying is America's
    tax dollars do not believe in fighting against domestic
    violence. Because you have thrown it into a fund that really,
    the victims of crime across America should be aware that they
    can be able to apply for the victim's fund, but you are
    throwing the domestic violence in that.
        Would you answer the question about getting rid of Federal
    employees and the insignificance of the violence against women
    funding so much so that it is thrown into a pot of money that
    should be for those victims of other crimes?
        Mr. Mulvaney. I would be happy to. Thank you for that,
    Congresswoman, and I appreciate your perspective on that. We
    just respectfully disagree. We moved the VOWA program into that
    fund because we thought it was the absolute best place to
    guarantee the flow of funds. There is a tremendous amount of
    money there. We are actually fully funding VOWA. I think it is
    a tremendous commitment by the administration to do exactly
    that. We may disagree, ma'am, over the source of the funds, but
    not over the use of the funds. You and I would both agree that
    that program needs to be fully funded, and we do exactly that.
        Ms. Jackson Lee. Would you comment about getting rid of
    Federal employees across America?
        Mr. Mulvaney. I cannot speak to the prison program in
    particular. I apologize. I do know that we have proposed
    reductions in force at places like the EPA as a result of our
    reductions there. But I cannot speak to the Federal program.
        Ms. Jackson Lee. May I reclaim my time with only the few
    seconds I have. As I indicated as I started, I believe this is
    morally bankrupt. I believe we can do a better job. And I
    believe that we are not here to crush the American people and
    to deny them the very sources of Medicare, Social Security, and
    basic living standards. With that I yield back. I thank you,
    Mr. Director.
        Mr. Rokita. [Presiding.] Gentlewoman's time has expired.
    Mr. Smucker from Pennsylvania, you are recognized for 5
    minutes.
        Mr. Smucker. Thank you, Mr. Chairman, and good afternoon,
    Director. There has been a lot of discussion around the debt
    and the deficit. I share the concerns that have been discussed
    but on both sides of the aisle; I think it is a threat to our
    economic future and to our country if we are not able to get it
    under control.
        I would like to thank the administration, thank the
    President, for taking what I think is a very important first
    step and that is generating strong economic growth. I believe
    that we cannot at 1.9 percent growth get this under control,
    and so the regulatory relief the tax reform that the President
    has shown the leadership in really is the first step needed to
    solve the deficit.
        I am disappointed that the budget does not balance, as you
    have testified, within a 10-year period, but I understand you
    are saying that you expect annual deficits to decrease. Could
    you expand on that and further, do you think we are, if not
    within 10 years, are we putting, with this budget, ourselves on
    a path of balancing the budget within a certain period of time.
    And if so, how long will that take?
        Mr. Mulvaney. Sure. The projections right now, keep in
    mind, these projections may change a little bit, ladies and
    gentlemen, simply because we have not had a chance to fully
    digest the caps deal. These are bits and pieces. The example I
    give is, there is a 2-year extension to the mandatory sequester
    that we have to factor in, I think, but these numbers should
    roughly stay the same, which is that we are looking at $948
    billion in deficits this year. That goes down to $448 in 2028.
        Keep in mind, a big piece of that in the out years is--we
    have not raised this yet, Mr. Smucker--our assumption that the
    reduction in individual tax rates that phase out under the tax
    bill are actually made permanent. So, if you actually ran this
    against the tax law itself verbatim, the numbers would actually
    be smaller. But we always thought it was a fair point to make
    the case that we thought that was good policy. The only reason
    it was not permanent in the first place was to deal with the
    reconciliation rules in the Senate, so the budget assumes
    something that actually goes beyond what the tax bill does. But
    we sort of trend down.
        You have heard me say earlier that that gets the deficit
    down around 1, I think 1.1 percent of GDP in the last year.
        To your larger question, outside the budget window we went
    back and forth in this sort of philosophically within the
    office. I did not want to go any further than that. I think
    that coming to you and saying oh, do not worry. The budget
    balances in 17 years or 27 years or 37 years. I thought that
    undermined the credibility of the numbers. I thought it was
    much more difficult for the administration to come in and admit
    that it was not going to balance, but I think it is a lot more
    honest and transparent and accountable to do exactly that,
    which is why we did it.
        Mr. Smucker. I would love to follow up on that but I have
    an additional question I would like to ask you.
        Mr. Mulvaney. And I will try and give shorter answers. I
    apologize.
        Mr. Smucker. After serving on the Budget Committee for one
    year, in the past year one of the biggest takeaways is how
    broken the process is. And that is certainly, it is recognized
    by probably everyone in this room. It is very difficult to even
    argue that the Federal budget process is working when in the
    past 20 years we have had more than 100 CRs, an average of five
    per year. And under the current budget process, there have been
    19 government shutdowns. It is just simply unacceptable.
        I have seen the difference in--this is Pennsylvania State
    Senate--I have seen the difference in the process there from
    here. Very decentralized, not a lot of accountability in the
    process. Do you believe that there needs to be greater
    coordination between Federal agencies, such as OMB and Congress
    throughout the current budget process to ensure more fiscal
    responsibility?
        Mr. Mulvaney. I would welcome that. In fact, I would have
    been pleasantly surprised to hear some of my Democrat folks,
    especially commend me and my staff for being much more
    available than in previous administrations of both parties, so
    we have looked forward to doing that, continuing that.
        I would suggest to you, however, that really the hurdle
    right now to the appropriations process functioning is not OMB
    and it is not the House. It is the Senate. And until they
    figure out a way to either work together or figure out a way to
    change the rules to allow them to pass bills with a majority
    and not a super-majority, it is unlikely that we will see an
    end to the current budget impasses that we have.
        Mr. Smucker. Yes. I believe there are other changes that we
    could make in the process to drive additional accountability.
    In fact, a few weeks ago I introduced a bill that would create
    a joint commission on budget process. And this is modeled after
    something we did in Pennsylvania, where we had a similar
    difficult problem there for decades and created a sort of
    inside commission with appointed members from the House and in
    that case, the Senate, and the administration. And my idea
    would be to do that here as well. We would include folks from
    the administration--potentially yourself.
        I just wanted to get your thoughts on that. Do you believe
    that the administration should be involved in efforts by
    Congress to reform the Federal budget process?
        Mr. Mulvaney. We would absolutely welcome it. In fact, I
    encourage you to reach out to your counterpart, Mr. Enzi in the
    Senate. He is one of the leading voices over there on budget
    process reform. Also Senator Daines, a former member of this
    body. Very interested in trying to figure out a way to reform
    the system so that it works and we can spend money
    appropriately.
        Mr. Smucker. I think it is a bipartisan issue. It is one
    that we should all look to, to try to solve. So thank you. I
    look forward to continued discussions on that.
        Mr. Rokita. Gentleman yields back. Gentleman from
    California, Mr. Khanna is recognized for 5 minutes.
        Mr. Khanna. Thank you, Mr. Chairman. Thank you, Director
    Mulvaney. I want to associate myself with my colleague's
    comments of concern about the cuts and so many social programs.
    It is why I oppose this budget. Given that I am the last person
    to ask questions, I do not want to cover ground that has
    already been covered. And so, I want to bring up two different
    issues.
        First, in the interest of proving that Democrats can say
    something nice when we do agree with a policy perspective, I
    want to commend you for supporting the Will Hurd/Robin Kelly
    bill on modernizing government technology. It is $210 million
    to help make the government better with the internet and
    technology, and I think that is common sense. I really hope the
    Appropriations Committee will fund that bipartisan effort and I
    appreciate that being part of the budget.
        My question is a more philosophical question, because I do
    not think there is a person on this Committee who does not
    believe or does not want America to succeed and outstrip China
    and be the dominant economy in the 21st century. I read a
    report a few days ago by Bain. You cannot accuse Bain of being
    like the New York Times or CNN or biased. I mean, you know,
    Mitt Romney worked there.
        And here is what Bain's report said. Bain's report said,
    basically, we are going through a technology revolution similar
    to the industrial revolution. The industrial revolution took 40
    years. The transition from manufacturing to services took 20
    years. This technology revolution is probably going to take 10
    years. It is going to displace potentially 20 percent of
    workers. And they said that the biggest challenge to America's
    economic growth is actually income inequality, because there
    may not be enough people with money to buy things.
        Now, we know China has their problem. China does not care
    about the consumer welfare of their individuals. It is all an
    export-driven economy. The success of our country has been a
    strong middle class that buys things. Not just from a
    perspective of fairness. From an actual perspective of economic
    growth and making sure we outstrip China in the 21st century.
        So, I guess my question is just, is simple and it is really
    not partisan, but do you see the world from a similar lens,
    that we have to tackle income inequality and care about the
    growth of the middle class if we care about America's success?
        Mr. Mulvaney. I will surprise you and say that we do, and I
    think many of my party do. I think one of the places
    philosophically where we start to vary is how to remedy this
    situation. There are many folks in your party, writ large, who
    would say well, the way to solve that gap is to have government
    get involved to redistribute wealth. Folks on this side of the
    aisle would say no.
        The best way to do it is to allow folks to lift themselves
    up out of poverty to close the gap. I have always contended
    that people really do not care much about how much other people
    make. They care a lot more about how much they make. It is not
    income inequality that I care about as much as it is my own
    income.
        And if I feel like I am able to provide for my family, I am
    able to provide my children with what I want to give them, that
    I am happy. I do not care that you make 10 times or 100 times
    what I do.
        I would point out on the Bain thing--I have not seen that
    but I have seen similar reports. I would encourage you to, and
    again, I know it was a philosophical question. I will draw it
    back to the budget very quickly. Displacement does not always
    mean unemployment. That it never has. When cars displaced the
    horse and buggy all it did was create new opportunities at
    higher-paying jobs. That is why it is so critical, obviously,
    to have education as part of this. I know we have taken some
    criticisms today from your side of the aisle regarding some of
    the proposals on education. What has not been mentioned is the
    doubling of the commitment we make to apprenticeship programs
    because we have proof that they work.
        A classic example is trade adjustment assistance, which the
    data actually suggests if you go through that Federal program
    you are worse off than not having gone through it. But if you
    go through an apprenticeship program you are actually much
    better off. So, we would move money around in order to fund
    those types of things. So I would agree philosophically we
    would look forward to working with you on ways that maybe we
    can work together to accomplish that same end.
        Mr. Khanna. I appreciate the acknowledgement on income
    inequality, and I agree with you that new jobs are going to be
    created. And Bain says that the challenge is, it took 40 years
    from the transition when we went from agriculture to
    industrialization. And the question is how long is it going to
    take for these new jobs and what are we going to do on the
    transition?
        But my hope would be given the recognition in income
    inequality, maybe there are productive investments, whether it
    is in technology credentialing, whether it is in public
    colleges, universities, expanding access to the internet--that
    people on both sides could come together on to say look, we
    have got to do this because this is what is going to make
    America competitive in the 21st century. And I hope sometime in
    the next year or few years we can actually start working on
    some of that in a bipartisan basis.
        Mr. Mulvaney. Thank you, sir.
        Chairman Womack. Thank the gentleman. To Wisconsin, Mr.
    Grothman.
        Mr. Grothman. Yes. First of all, thanks for coming over
    here, Mr. Secretary. We are glad to see you. I will do a
    follow-up on that last question. I personally believe one of
    the reasons for the widening income gap is for whatever
    motivation, there are a lot of programs out there that are
    designed to make sure that people do not make more money or
    they lose their benefits.
        And there is no question, I think, that the widening gap--
    both the wealth gap and income gap--is caused maybe
    intentionally by people who like to keep people dependent and
    maybe unintentionally, you know, to make sure people do not
    make more money.
        But I notice while I thank you for doing what you can to
    reduce some of these programs, you did not really touch the
    housing assistance programs, which I think are sometimes almost
    as pernicious as the SNAP programs. Is there any reason why you
    did not, you know, do things on the housing assistance
    programs, which also discourage people from working or getting
    married?
        Mr. Mulvaney. Actually, I think you will find that we did
    make some proposals there, Congressman, deep down in the
    details in the weeds in the budget. But we try to encourage
    folks to work so that they can pay a larger percentage of their
    income towards their rent. Those are folks who actually can
    work. Again, we have taken some criticism that I think is----
        Mr. Grothman. And I just mean people of working age who are
    not disabled.
        Mr. Mulvaney. Correct. And that is who it should be.
        Mr. Grothman. There is no question those programs right now
    are like designed to keep the income gap as great as possible.
        Mr. Mulvaney. We agree.
        Mr. Grothman. Okay. Next question. I voted for the budget
    last week. A very difficult vote. And sometimes when you take a
    vote in this business you either have a choice of voting for
    bad things if you vote yes and worse things if you vote no. But
    as I get the numbers, there was about a 10.4 percent increase
    in defense discretionary and 9.4 in non-defense discretionary.
    And I believe what happened in the negotiation on it was there
    was the executive branch. I know there was Paul Ryan. I know
    there was Mitch McConnell. I think in order to go up on one you
    had to go up on the other as a practical matter.
        I wondered if you would be willing to weigh in and say when
    we reach the final deal, rather than going up 10.4 or 9.4, if
    say we would go up 8.4 and 6.4. Do you think that would be
    advantageous for the administration to weigh in on something
    like that?
        Mr. Mulvaney. Well, again, the administration's priority
    was not in terms of a percentage increase as much as it was a
    raw dollar increase. I think Secretary Mattis admitted the case
    to both parties that he thought a funding level of $700 billion
    this year and $716 next year was what was necessary. So that
    was, that was our starting point.
        Mr. Grothman. I did not mean to cut you off but I only have
    5 minutes.
        Mr. Mulvaney. No. That is fine.
        Mr. Grothman. When you were before us a year ago you were
    talking about a 5.5 percent increase in defense. Now you
    thinking a 10.5 percent increase?
        Mr. Mulvaney. I do. I do not think we got a lot of the
    increases last year that we hoped to get, so we had to make up
    for some lost time.
        Mr. Grothman. Okay. Next question. I am afraid in this
    budget that because you are giving these increases and the
    agencies, be it Defense or other agencies, have to spend this
    whole 9 or 10 percent increase in the second half of the year,
    that these agencies will just be shoveling money out the door
    because that is the only way they can absorb such a big
    increase.
        Do you have any suggestions you can give our negotiators so
    that these agencies, some of which will get a 10 percent
    increase this year compared to last year and only have the
    final 6 months of the year to spend it, to not spend it
    wastefully?
        Mr. Mulvaney. Keep in mind, they cannot spend all that
    money in the last 6 months of the year. What will happen, is
    that the money that they have already spent under the CRs will
    sort of be taken into consideration. So you do not get to spend
    $100 if your budget for the year is $150 and you have already
    spent $75 on a CR; you cannot spend $125.
        Mr. Grothman. What I understand is this. Let's say your
    budget is $10, okay, and you decide to give them a 10 percent
    increase and now they get $110. Presumably they were going
    along at $10. In the first six months of the year they spent $5
    and all of a sudden the second half you are saying, ``Well, you
    do not have $5. You have $6. So you have a 20 percent
    increase.'' See what I am saying? In the final.
        Mr. Mulvaney. But the point is they do not have 11 to spend
    in the second half. It is 5 plus 6, not 5 plus 11.
        Mr. Grothman. Okay. I do believe that is a potential
    problem. You see what I am saying?
        Mr. Mulvaney. And we tend to agree. One of the things we
    are very proud of because of the work the Congress had done and
    previous administrations had done of both parties, the Defense
    Department announced they are now ready for an audit and they
    are going through that process.
        Mr. Grothman. Okay. My final question for you: since this
    kind of a high amount of spending is discretionary, would you
    be willing to again and again publicly weigh in on it till the
    Senate agrees to reconciliation instructions to take up some of
    these welfare-type programs that the public believes is so
    abused. I know right now Mitch McConnell is not there, but
    would you guys be willing to strongly push to get in there?
        Mr. Mulvaney. Again, the priorities for us this year,
    Congressman, are the infrastructure, obviously getting a DACA
    deal, which we are hoping would be debated today and apparently
    I am not sure if it is or not, and then infrastructure would
    come after that.
        Chairman Womack. Mr. Woodall of Georgia.
        Mr. Woodall. Thank you, Mr. Chairman, and thank you,
    director, for being here. Thank you for your service. I wanted
    to thank you for the seriousness of the document that you
    prepared. It makes our job harder, as you recall from your time
    on this Committee, if you do not get a serious document out of
    the administration. It would always be easy to come up with
    some funny numbers and optimistic options and say you got to
    balance when you did not. So thank you for doing that.
        I also want to thank you for your work in the shutdown a
    few weeks ago. In yet another opportunity you can make those
    events as painful as possible or you can make them as non-
    painful as possible for the people that we all represent, and
    this administration obviously made it as least painful as they
    could. And I am grateful to you for that.
        I wanted to ask you in part of that shutdown context if
    there were any discussions--you may remember in the Carter
    administration our great President from the state of Georgia--
    government shut down six times for more than 60 days during
    that 48-month presidency. Two of those months were shut down,
    but prior to Reagan's attorney general, Mr. Civiletti and his
    decision that you actually had to close the doors and padlock
    them, shutdowns meant something different. Was there any
    discussion about what a shutdown means and whether that has to
    be a painful event for the American people?
        Mr. Mulvaney. There was. In fact I got direct instructions
    from the President to try to make it as painless as possible,
    to keep as many people at work as possible. To keep as much of
    the government open as possible. In fact, he and I commented
    that he was extraordinarily proud that the monuments were open
    for the folks who were here to protest against him on that
    Saturday. We thought that sent a message that the President
    really did care about the importance of managing the shutdown
    properly.
        What we found was that the previous administration probably
    was not as aggressive as it could have been on using carry-
    forward funds and the transfer authorities that various
    agencies have. And that you could make the argument, and I have
    made the argument that they weaponized that shutdown for
    political purposes as opposed to trying to make it as painless
    as possible for both Federal workers and for folks who use
    Federal services.
        Mr. Woodall. Well, as you have seen demonstrated here
    today, a lot of these disagreements are thoughtful,
    representative disagreements about how dollars ought to be
    spent. When we allow a shutdown to weaponize the policy
    discussion, I think we end up with less thoughtful decisions at
    the end. So, thank you for what you did to make that less of an
    extortive event and if we can do that more going forward, I
    would be grateful.
        My colleague, Mr. Khanna, mentioned that America's success
    had been a strong middle class that buys things. I happen to
    disagree. I think it is a strong middle class that dreams
    things, that produces things, that builds things, and provides
    things, and I appreciate what the administration has been doing
    to make the American worker more competitive with what is going
    on around the globe. We have at least several trade deals going
    on right now, several tariff conversations going on right now.
    I am grateful for that.
        I see OCO falls in the tail end of the budget window. I
    remember you and I worked together on some amendments to try to
    make OCO represent exactly what it was to represent instead of
    pad the DOD budget. Does that reduction OCO in the out years
    represent a movement of fundamental defense dollars into
    defense spending or in anticipation that we will be withdrawing
    from conflicts around the globe?
        Mr. Mulvaney. No. That is exactly what it is. We took
    advantage of the opportunity, given the increase in the caps,
    to move stuff that should not have been OCO in the first place
    onto the base so that the OCO number more appropriately
    reflected OCO, which is the overseas contingency operations,
    the war budget, for example. So no, it actually accomplishes,
    if we choose to do it together, exactly what you and I set out
    to do several years ago.
        Mr. Woodall. And it is obvious from your seat now why we
    require an extra OCO account as opposed to moving that in? In
    the absence of a caps system of any kind, it does not seem to
    be a necessary component.
        Mr. Mulvaney. It does. I have learned that. Also the
    importance of the supplemental process. For example, we came to
    the supplemental request last fall to deal especially with the
    North Korean threat and some of the things we wanted to
    accomplish immediately regarding missile defense and so forth.
    So, some of the flexibility that OCO gives, some of the
    flexibility that emergency supplemental gives are important. It
    is also important at the same time not to abuse them and to use
    them for things that they were not originally intended.
        Mr. Woodall. I appreciate what you all are doing to squeeze
    every nickel. I would call attention to the Corps of Engineers
    funding particularly in the out years. As you know, we have a
    big project going on of national significance at the Port of
    Savannah in Georgia. Is there any conversation about what would
    be pennywise and pound foolish in terms of reducing some of
    those infrastructure investments when those investments are so
    close to paying off?
        Mr. Mulvaney. A couple different things. Obviously, you all
    set aside a good bit of money in the emergency supplementals
    that might be available to other Army Corps projects, which
    could free up money for projects like Savannah. We also offer
    some new ideas on how to do capital spending, capital
    budgeting. Not doing a full capital budget. But I look forward
    to talking to you about that in more detail because there are
    some ideas floating out there that could be extraordinarily
    productive.
        Mr. Woodall. Thank you very much for your service. Mr.
    Chairman.
        Chairman Womack. Ms. Schakowsky from Illinois.
        Ms. Schakowsky. Thank you, Mr. Chairman. Thank you, Mr.
    Mulvaney, and thank you for meeting with Democratic members
    yesterday. Appreciate that.
        Last year, I asked you about proposed cuts to Social
    Security Disability and cuts that are repeated in the 2019
    budget. You told me, ``Social Security Disability is not Social
    Security. Social Security Disability Insurance is disability
    insurance. It is a welfare program for the disabled.'' And I
    wanted to give you a chance to clarify the answer, but I just
    want to say that it was added to Social Security in 1954 and
    the money for both, the retirement and disability, are paid for
    by everyone through the same FICA contributions and yet you
    distinguish them. So, I wondered if you could clarify your
    answer.
        Mr. Mulvaney. Sure. And I think--and I do not remember the
    exact context but I do remember talking with you and with
    others about it last year--was regarding the President's
    promises and I think what I tried to make the case last year
    could make again right now, will make again right now, is that
    there is something different about Social Security Disability.
        There is something different about SSI as well and what a
    lot of people associate with Social Security, which is old-age
    retirement. You are absolutely correct. SSDI is funded through
    FICA. It is managed through the Social Security Administration.
    SSI is not funded through FICA, I do not believe. But again,
    neither of those are what a lot of folks would consider
    mainline Social Security.
        Ms. Schakowsky. Even though a lot of people might think of
    it as retirement it is also an insurance program for families,
    right? So maybe many people do not think about it as for widows
    and children as well. Regardless of what people think about it,
    I would argue that it is Social Security. Let me ask you about
    just SSA, the Social Security Administration.
        So, the operating budget for the Social Security
    Administration dropped 11 percent in real terms from 2010 to
    2017. Last year, SSA reported that the average hold time on the
    phone when you call is 16 minutes, up from 3 minutes in 2010.
    Half of callers hang up before getting services and 12 percent
    get busy signals. So do you consider that an acceptable level
    of customer service for Americans?
        Mr. Mulvaney. Having served in your position--you have been
    a Member of Congress for 6 years--I do not like the wait times
    and the hold times any more than you do.
        Ms. Schakowsky. Are you saying that it is mismanaged in
    some way?
        Mr. Mulvaney. No, and I apologize, Ms. Schakowsky. I am not
    as familiar with this off the top of my head so I am looking at
    our notes on this right now. But it looks like that part of the
    argument we make is that the Social Security Administration has
    not done as good a job as it probably can on modernization, on
    its IT work, and it could do better than that. We have asked
    many other agencies to become more efficient. We are asking SSA
    to do the same thing.
        Ms. Schakowsky. So the 2019 request for the Social Security
    Administration is 5 percent lower than the current funding
    level, and meanwhile SSA is expected to serve an additional $1
    million beneficiaries each year as baby boomers retire. So, how
    is the Social Security Administration supposed to handle its
    increased workload and fewer resources? I am sure all our
    agencies probably could be more efficient but it seems to me
    with the tremendous increase in need that SSA is in a very
    difficult position without more resources. I wonder if you
    could comment.
        Mr. Mulvaney. I think yeah, we have asked many
    administrations, many parts of the bureaucracy, to be more
    efficient. A lot of them have been slow to take up improvements
    in their systems simply because they have not been required to.
    They have always resolved their problems by asking for more
    money and often getting it. And until you force them to start
    making some difficult decisions, they will not change.
        Ms. Schakowsky. Well, I certainly hope you will look at
    that because the service aspect is very important to consumers
    in every single district in this country. Regarding Social
    Security Disability Insurance, the wait time for hearing
    decisions for disability claims spiked to 21 months in 2017.
    Those claims go through the Social Security Administration.
    This budget proposal to limit retroactive SSDI benefits for
    Americans with legitimate disability claims at the same it cuts
    funding for Social Security Administration is a real problem.
        Mr. Mulvaney. Actually, there we agree with you and think
    that our research indicates that part of the difficulty, in
    fact a good part of the difficulty when it comes to the delay
    on SSDI and some of the other programs, is the administrative
    law process. We are not the best at hiring in that particular
    area, and our proposal includes a way to reform that program so
    that we can actually get decent ALJ--administrative law
    judges--in there to move things through the system. I think
    what you will see, the research would indicate that there is
    actually a small number of judges account for a large part of
    the backlog.
        Ms. Schakowsky. Thank you. I yield back.
        Chairman Womack. Mr. Ferguson of Georgia.
        Mr. Ferguson. Director, thank you for being here today and,
    Mr. Chairman, thank you for recognizing me. I want to start
    with something that was said early on by our colleague from New
    Mexico, Ms. Grisham. She talked about the dire straits of New
    Mexico, 20 percent poverty, right? And I think she invited you
    to go and see that first-hand. You know, very dire straits in
    New Mexico. I compare that with my state of Georgia, where we
    are thriving in many, many areas.
        Do not you agree that policy and what is reflected here in
    the budget should reflect those differences and allow states to
    have flexibility so that New Mexico can address their issues in
    a different way than Georgia, and the fact that this budget is
    growing the economy and creating opportunities for Americans?
        Mr. Mulvaney. The administration does not believe that any
    particular state is condemned to permanent poverty, any group
    of people is condemned to permanent poverty; that everyone in
    every state has the ability to improve themselves.
        Mr. Ferguson. Okay. I want to focus for just a minute on
    the process that we go through here. I find it very
    disingenuous. I have written an op-ed talking about the big lie
    we tell ourselves is the budget process. Since 1974 this
    process has worked, I think, four times properly. We have seen
    Republicans in the White House, Democrats in the White House,
    Republicans in control of the House and Senate, and any various
    form that you want. And yet we are $20 trillion in debt. We
    have put in budget caps. We have gone down the road of removing
    earmarks.
        No matter what we do we wind up having these same
    conversations where the minority voice shuts down the
    government no matter which party is in control, and that is how
    they get their legislative agenda pushed to the front. Do you
    agree that we need to reform our budget process?
        Mr. Mulvaney. Absolutely. And would look forward to working
    with you on ideas. Again, I do not think that this is the
    chamber that is necessarily broken at this particular time.
        Mr. Ferguson. That is an interesting perspective. I think
    the entire process is, and while this chamber, while the House
    may be doing some really good work and strong work, we have to
    do it in the context of realizing that we have got to do this
    in conjunction with the administration and the Senate.
        Mr. Mulvaney. We do. I just point out as, I think, someone
    else pointed out rightly so that you all have actually done a
    pretty good job of passing the appropriations bill since I have
    been here. I think we have passed them more often than not. I
    think they get out of Committee a good bit. Sometimes they do
    not get across the Floor but I think last year you all passed
    all 12 of your props' bills, so, you are to be commended for
    that.
        Mr. Ferguson. The other thing that I want to touch on, and
    everybody, we have had a lot of conversation on this today. And
    that is the mandatory spending side of the equation. What I
    think we have got to do is we have got to change how we have
    this conversation. We sit in this particular hearing and look
    at how we frame the conversations. It is either you are cutting
    or you are doing something crazy to it.
        I mean it becomes a very political environment. Our side
    demonizes the minority party. The minority party demonizes us.
    And we are not having an honest and transparent conversation
    about what the future of these programs look like, where we can
    keep our promises to our seniors.
        Yet we can have an honest conversation about what the
    future of those programs looks like for somebody in their 50's,
    40's, and 30's. How do you think we should go about having that
    conversation differently, realizing that the only way that we
    are probably going to be able to do that is for that to be a
    bipartisan conversation?
        Mr. Mulvaney. You know, I do not know if I have any magic
    answers to that, Mr. Ferguson, as to how to solve the toxicity
    in the government right now. I think that a good start would
    probably be to get back to regular order.
        I cannot tell you, and this is not the question you asked,
    how disappointed I am and we are, as an administration, that
    Mr. Schumer is holding up debate on DACA in the Senate. He may
    have relented and allowed it today, but for the last day or so
    did not allow something that he insisted on having in the first
    place. It was a golden opportunity.
        You have probably not even seen real debate in the House. I
    only saw it once in the 6 years I was here. There are folks in
    the Senate who are really welcoming the opportunity today to
    have a floor debate on an issue with everybody able to offer
    their ideas and have them voted up or down. That is a fantastic
    concept. I just wish it would be allowed to run its course.
        Mr. Ferguson. One final thing. We have had a couple of
    hearings with the Congressional Budget Office on scoring. One
    of the things that strikes me is that the CBO, I asked the
    question do you have accurate number, if you go for any 10-year
    period, your projections in year one, how accurate were they in
    year 10?
        And they only get to year 6 and yet there is no data and no
    determination of accuracy in year 7, 8, 9, and 10. Yet we are
    being asked, and every Congress has been asked, to make 10-year
    budget decisions on a number that we have absolutely no idea
    how accurate it is. How would you address that?
        Mr. Mulvaney. The 10-year budget window is voluntary. I
    think the act does not specify the amount of window you have to
    take. Different administrations have done five, seven, 10. We
    looked at the possibility of doing 20. So if that is an issue
    to you, I encourage you all to look at possibly doing longer or
    shorter budgets. Again, really what matters, that when the
    rubber meets the road is this year and next, right? The rest of
    it is aspirational and a messaging document.
        Mr. Ferguson. Thank you.
        Chairman Womack. Mr. Arrington, Texas.
        Mr. Arrington. Thank you, Mr. Chairman and thank you, Mr.
    Mulvaney, for your heart for public service, and your love for
    our country, and your support for our President. I am
    encouraged by what I have seen, the results and the actions of
    this President, and so I want to start with a praise that this
    President has put our safety and security first. And it is
    about time. And our troops are desperately in need of those
    resources, so thank you for that and I want to say through you
    to him how much I appreciate his unwavering commitment.
        Also, from a national security perspective, to border
    security, and then, of course, your efforts and his efforts to
    support our moving tax reform through so we could unleash the
    full potential of our economy. In west Texas, I can tell you
    our folks are delighted with keeping more of their money and
    jobs coming online and wages increasing. And so, there is just
    hope for a better and brighter tomorrow for their families.
        And I think the best thing, though, from my perspective,
    that this President has done, and it is what is most needed in
    this country--it is not changing of the course that we were on
    over the last several years, although I am fully committed to
    that and obviously by his actions he is and you are. But it is
    the change in the culture. See, he has done exactly what he
    said he would do. Now, I wish he said he would take on
    entitlement reform in a much bigger and more meaningful way,
    but he has done exactly what he said he would do, and he is a
    promise keeper and I appreciate that.
        I wish we could add to his proposition of promises that we
    would go more aggressively at what I believe is the greatest
    threat to the future of this country and to our children and
    grandchildren. And I believe you believe that. It is obvious by
    looking at you and others that this is the beginning of Lent.
        This is Ash Wednesday, and the theme is repentance for the
    church. And just to kind of borrow from that and in the spirit
    of Lent, repentance means to turn from something, turn away and
    go a different direction. Where do we need to repent, Mr.
    Mulvaney, in this government with respect to our spending, our
    budget, and fiscal reforms? Where do we need to repent the
    most?
        Mr. Mulvaney. Well, every dollar is a dollar, Mr.
    Arrington. And every dollar you can save is one fewer dollar
    that you are going to not have to borrow, which is why our
    budget, we think, does offer an idea on how to save a bunch of
    money.
        Now, we do focus on the non-defense discretionary side of
    the budget, but we also, as I mentioned earlier, have $1.7
    trillion of reductions in mandatory spending over the course of
    the 10 years. So, we are open-minded about how to do better. We
    think this is one idea and a really good idea on how to get off
    of that road to permanent trillion-dollar deficits, but we look
    forward to working with both parties to see if there are ways
    to supplement this or do things in addition to it.
        Mr. Arrington. And I appreciate the efforts to reduce
    spending on both sides of the equation, mandatory and the non-
    defense discretionary, while we are making the appropriate
    investment in our military and other core functions of the
    government.
        But I know you know that if we are really going to solve
    the debt issue and stave off a crisis and commit to our
    children a strong, safe, and free America, we have got to go
    bigger on these entitlement reforms. And I think the issue is
    the political will just is not there, that I have observed in
    Congress, to do that.
        But this President is a fighter and he has got amazing will
    and he has risen above what is the typical political culture,
    and I just plead with him through you to make this a priority.
    Everything he has made a priority and everything he has
    promised, he has done. So I just, I want him to embrace this.
    For such a time as this he is there and--what do they say?
    Leaders do the right things; managers do things right. This is
    the right thing. You know it. I know it. The American people
    know it. And I think he could make a big difference there. That
    is just my two cents.
        Mr. Mulvaney. And I will certainly deliver that message,
    thank you, Congressman.
        Mr. Arrington. I come from a big swath of rural Texas and
    as you know, these are the food, fuel, and fiber producers.
    These are the backbone of this country from a traditional
    American value standpoint, but they do not just contribute to
    our economy. They contribute to food security and energy
    independence. Now, 75 percent of the geography--rural America.
    But one of only every six Americans lives in rural communities,
    but virtually 100 percent of the food, fuel, and fiber produced
    by these country boys and country girls living in country
    places. Thank you for the commitment to rural infrastructure.
        Tell me how that process is going to work and how would
    broadband and access to the internet, which is not having in 50
    percent of rural communities, and you know it is the
    underpinning for the economy and the community, et cetera.
        Mr. Mulvaney. Very quickly; what we try to do is a large
    portion of the infrastructure bill is focused on things that we
    know could cash flow, could generate receipts: an airport, a
    port, a toll bridge, that type of thing. But we also recognize
    in a large of the country, as you mentioned, those models do
    not work, which is why we earmarked, for lack of a better word,
    I think it is $50 billion for things specifically like rural
    broadband, because we know they are absolutely critical to the
    long-term infrastructure of the country, the long-term economic
    health of the country. And that they could not be leveraged the
    way that other programs might be.
        Mr. Arrington. Thank you. I yield back.
        Chairman Womack. To Michigan. General Bergman.
        Mr. Bergman. Thank you, Mr. Chairman, and is there anybody
    left other than me? Okay. I was going to say I am last, but I
    guess I am not last.
        Mr. Mulvaney. We still have the Ranking Member, too, so.
    That is what I am sticking around waiting for.
        Mr. Bergman. But I would like to start with a general
    comment, small G. In being from where I am in the first
    district of Michigan, I have got more big water, Great Lake
    shoreline bigger than any other district in the country. And
    the Great Lakes are truly our lifeblood and not only of our
    people in our communities but also our economies, when it comes
    to the types of industries we have up there. And
    notwithstanding that 20 percent of the world's fresh surface
    water resides in the Great Lakes.
        So the Great Lakes is a, I would say a global resource,
    definitely a national resource that we need to preserve and
    make sure it is healthy.
        A year ago when we came out with the Great Lakes, the
    original Presidential Budget, the Great Lakes got, you know,
    cut to zero. The Great Lakes Restoration Initiative. Working
    with some colleagues, we got it funded back to the 300 million.
        I see in this budget, it concerns me, a 90 percent cut.
    There are about 3,500 line items in that GLRI, and I would
    suggest to you probably about 10 percent of them are being
    spent in such a way that we need to give them more money
    because they are great stewards. And 80 percent are probably
    doing okay. And there is probably 10 percent that that funding
    line needs to dry up.
        But my concern in this budget right now is that with that
    90 percent cut. I am hopeful to work with the administration
    and my colleagues in those 22 other districts that border the
    Great Lakes to work with you to make that number realistic so
    that we truly, as we look at the health of our natural and
    national resources, that would be fresh water, that we do not
    make a mistake there with this 90 percent cut.
        Now, we agree on more than we differ. And that is the
    beauty and why I am excited positively about the budget. But I
    have a couple of questions on the opioid crisis. We have
    started about a month and a half ago in the district to have
    listening sessions with the people who are boots on the
    ground--you know, the healthcare providers, the courts, the law
    enforcement, the social workers, the teachers, all of that--to
    find out what it is like in our district, what we are dealing
    with.
        So when we come to a national level of how do we handle
    this addiction crisis, any thought or detail you can give me on
    how this 20 billion that has been allocated, how it is going to
    be allocated on the front end here?
        Mr. Mulvaney. Sure. A couple different things. And you may
    not have heard me mention before, I would encourage you to not
    be misled by a reduction dealing with opioids that appears in
    the budget that is not a true reduction. There is about a 95
    percent reduction in the line item for the ONDCP, the Office of
    National Drug Control Policy. All that reflects, Congressman,
    is a move of the grant programs that currently resided in that
    program over to the Department of Justice and HHS.
        So please do not be misled and allow people to say that is
    an indication of our lack of commitment. All we did was move
    them to where they thought they could be better administered.
        So we will do that. Some of the money will be spent, as I
    mentioned earlier today, on NIH programs to try and develop
    non-addictive alternatives. We also have a proposal in this
    budget, I have not mentioned it before, to cover methadone
    treatment in both Medicare and Medicaid. We also have money set
    aside for a fairly aggressive national ad campaign to try and
    discourage people from taking----
        Mr. Bergman. Well, since you have answered it a couple
    times I apologize. I was in and out.
        Mr. Mulvaney. No, that is fine, and I did not mean say----
        Mr. Bergman. Thank you.
        Mr. Mulvaney. I honestly forgot what I have said a couple
    times already, so.
        Mr. Bergman. It does not hurt to repeat good, solid policy.
    Any update on the status of the DOD audit?
        Mr. Mulvaney. Yes, sir. They are undergoing now and I think
    you saw the first fruits of it this past week, where they said
    they had discovered about $800 million's worth of improper
    payments. I want to be very clear on that, by the way. First of
    all, the system is working. The reasons we found that money is
    because they have prepared themselves for audit and they are
    going through the process now, and they are able to find stuff
    that they would not have found before. So that is good.
        I do want to point out, however, that just because we say
    it is an improper payment does not mean we sent a dollar to you
    and we should not have. Improper payments also include sending
    you 95 cents when we are supposed to send you a dollar or $1.02
    instead of a dollar, or not having the paperwork. So I think it
    will be curious to see what type of improper payments they
    discover.
        Mr. Bergman. I have 15 seconds left. Any final thoughts on
    does this budget really start to look at duplicative actions
    and how do we eliminate those?
        Mr. Mulvaney. We could do an entire hearing on the number
    of programs that we condense because they are duplicative.
        Mr. Bergman. Thank you very much. I yield back.
        Chairman Womack. Gentleman from Indiana, Mr. Rokita.
        Mr. Rokita. I thank the Chairman. Thank you, Director
    Mulvaney, for being back.
        Mr. Mulvaney. Hello, Mr. Rokita, sir.
        Mr. Rokita. Yes, and Happy New Year. Appreciate your work.
    We all saw the benefit that the people of South Carolina saw
    with you when you were a member of Congress and now the whole
    country is seeing your work. Greatly appreciate your
    leadership, sir. Greatly appreciate the President's leadership.
        I am particularly heartened to see that in your budget you
    are calling for the idea that Federal employees, when they do a
    bad job, can actually be fired. And at the same time, you are
    proposing a bonus pool so that Federal employees who do a good
    job, and there are those who do excellent work, who serve with
    servant's hearts like you do, for the people who understand
    that when some professions, when you enter them, it is not
    about you. It is not about yourself. It is about service to
    others.
        The Federal bureaucracy used to be that way a long time
    ago, but now the average salary for a Federal public official
    is sometimes double that of a private-sector counterpart and,
    you know, all things being equal, that is not right.
        Mr. Mulvaney. And I do not want to interrupt you,
    Congressman, but 99.7 of them get their performance bonuses
    every single year--performance increases.
        Mr. Rokita. Yes. And you are reforming that, so count me in
    as a soldier in that effort to reform that effort. Like I was
    saying, bonus pools for those who actually do a good job. You
    know, I think that is the right way; make this place run like
    more of the private-sector counterparts, again recognizing that
    some professions are about public service and service to
    others.
        I have a pay check, by the way, that would do a lot of
    these things from two Congresses ago. We still continue to
    fight for it, so again, if you could have your staff note that
    I would be happy to help in these efforts, this part of the
    budget.
        Inland waterways. You are proposing some for the industry
    for a lot of us some pretty bold ways to make ends meet, help
    our infrastructure. I come from a state that values and has
    successfully privatized different assets.
        We never turned them over to an industry or various users
    of an industry. It was always about putting out the concession
    to be run and seeing who had the best bid and who we wanted to
    run it and what the best deal was, but at all times the
    legislature kept control of fees and caps and what could be
    done and made sure people had the equal access and all that.
        We had this discussion a little bit the last time when we
    talked about air traffic control. Now it is not the same as air
    traffic control but it is an idea that we might turn over the
    inland waterways, the operation and maintenance of locks and
    dams and those things, to private actors. The industry puts in
    about $100 to $200 million of a $1 billion yearly operational
    cost. So, I do not think the industry can take all that on.
    There has been some concerns. I think we ought to work on it.
        I think you should, if you do not mind, the Olmsted Lock
    and Dam Project. It, for years, was ballooning in costs.
    Previous administrations were letting cost overruns control. It
    is not unheard of for the corps to get halfway through a
    project, Mick, and then stop.
        But as I have talked with you about the Olmsted Project, it
    is going to get done now because of an adjustment in the cost-
    sharing formula that we were able to do on the Transportation-
    Infrastructure Committee. It is going to come down under
    budget, come in under budget and ahead of schedule; and it was
    heading for disaster.
        I do not have to tell you, given your previous work, about
    the disaster it would be if we cannot get grain and steel and
    all our raw products out of our inland waterways and onto the
    world market. It is helping with our trade deficit.
        So I would encourage you and your staff and the
    administration to look at the Olmsted Project as a poster child
    for, you know, just say you do not get the votes for
    privatization for the inland waterways. You know, a few crazier
    things have happened in Congress than not getting the votes,
    but this might be privatization-lite or way too organized----
        Mr. Mulvaney. Keep in mind, the infrastructure bill, and
    the reason I say this is that name has come up before, so I
    know we have looked at that as a potential model. There are a
    bunch of different models. One of the beauties of the
    infrastructure bill, Congressman, is not that it is married to
    one program. You do not have to have privatization. You do not
    have to have public-private partnerships. You could do
    concessions. You could give states financial incentive to sell
    the stuff that they have now and to move it off of their books.
    There are a bunch of different models and we do look forward to
    working with you on examples of things that actually work.
        Mr. Rokita. Great. Thank you, sir. Jodey Arrington
    eloquently put forth the argument for automatic spending
    reform. I do want to note, and you may have talked about this
    earlier, you are doing some autopilot spending reform in terms
    of TANF, SNAP, and some of the other programs, correct? And how
    much will that yield?
        Mr. Mulvaney. Honestly, Congressman, off the top of my head
    I have no idea what those proposals are because the number gets
    wrapped in with some of the other reforms that we----
        Mr. Rokita. It will keep compounding and returning savings
    even outside a 10-year window.
        Mr. Mulvaney. That is absolutely correct. These are
    structural returns that reap benefits for many years.
        Chairman Womack. I thank the gentleman. And finally, he
    reserved his questions to the end, and I am pleased to
    recognize the Ranking Member, Mr. Yarmuth from the Commonwealth
    of Kentucky.
        Mr. Yarmuth. Thank you very much, Mr. Chairman. Director
    Mulvaney, thank you for hanging around this long. In the spirit
    of Valentine's Day, I will be very nice.
        Mr. Mulvaney. Thank you for having me and for being nice.
        Mr. Yarmuth. Now, any discussion of the budget is going to
    involve a judgment as to what the appropriate role of
    government is, and many of us in this room have different
    philosophies about what is the appropriate role of the Federal
    government, what we should be doing more of and less of. And I
    think that is a very healthy debate to have always.
        But it has to be an honest debate, and that requires that
    we make sure the American people understand the discussion we
    are having. So, with that in mind, this week on Face the
    Nation, you were asked about the spending levels of the
    President's budget, and you said that the Democrats--you said
    this actually again today, ``would not give us a single
    additional dollar for defense unless we gave them dollars for
    social programs.'' And, again, you made a similar comment
    earlier today.
        Mr. Mulvaney. Yes, sir. I believe those are my words.
        Mr. Yarmuth. So with that in mind, I want to ask you do you
    consider the FBI a social program?
        Mr. Mulvaney. No, sir. And I see where you are going. Non-
    defense discretionary is a better description of that money.
    Yes, sir.
        Mr. Yarmuth. Right. So, okay, I will not go through the
    laborious task of going through everyone, but whether it is
    DEA--Drug Enforcement Administration--veterans' healthcare,
    Centers for Disease Control, the FDA, TSA, IRS, the Federal
    court system, NIH, Census Bureau, ICE, border patrol. These are
    all things that are in the non-defense discretionary side of
    the budget.
        Mr. Mulvaney. And I hope we have your support for
    increasing spending on those types of things.
        Mr. Yarmuth. Well, you know, we know what happens when
    people say social programs. Many Americans think welfare. As a
    matter of fact, Mr. Lewis used the terms interchangeably. I
    think Mr. Grothman did the same thing, and we actually kind of
    ran an analysis and we made our own definition of social
    program, and we defined it as something that is based on
    income. Okay?
        Mr. Mulvaney. Means tested.
        Mr. Yarmuth. Means-tested programs.
        Mr. Mulvaney. Okay.
        Mr. Yarmuth. With that standard in mind, basically
    somewhere less than 11 percent of non-defense discretionary
    could be categorized as a social program. So, again, I hope we
    never get to the point in this debate or in this country where
    we are trying to pit tanks against teachers or many of these
    other things--border security against soldiers--things where we
    would argue that most of the non-defense discretionary side of
    the budget is as much involved in national security--whether it
    is physical security, economic security, or personal security,
    health security--as the defense budget. So I would appreciate
    it if you----
        Mr. Mulvaney. Again, your point is well-made. I do not know
    if I would go as far as you would, which is not surprising,
    since we have different political philosophies, to say that
    some of the matters that you have addressed are as critical as
    national defense. They are critical. There is no question. But
    in terms of the prioritization, which is what this discussion
    is about, right?
        Mr. Yarmuth. Always is.
        Mr. Mulvaney. We have, regardless of how big the pie is, at
    some point the pie runs out. We can choose to borrow nothing or
    $1 trillion, but there are limited resources at some level.
        Mr. Yarmuth. Absolutely.
        Mr. Mulvaney. What the priorities are, and I think that is
    what the debate is about.
        Mr. Yarmuth. I always agree with you on that. Now, with
    that in mind, we are talking about adding to the Federal
    budget, the defense side of the budget, essentially $195
    billion over 2 years: 80, 85, and then some other things.
        Mr. Mulvaney. It is 165 before you count--it is $80 billion
    in 2018; 85 in 2019; 165 billion. And a lot of it depends on
    how you want to call it OCO in the out years. But that is a
    rough estimate. Yes, sir.
        Mr. Yarmuth. Exactly. Okay. Plus or minus, we will say, 195
    billion. A huge increase in what we are spending on defense.
    Absolutely a huge amount of increase, and you have already
    mentioned that, until January, the Pentagon has never been
    audited. They have begun an audit. Just in the initial stages
    they have discovered billions of dollars that they cannot
    account for.
        And my question is with an increase like that, which I
    think amounts to about a 14-percent increase overall in the
    defense budget--close enough for government work--that we have
    done this. And I know the defense committees, the Armed
    Services Committee meet and they do an authorization bill and
    so forth.
        But my question is has the administration really dug into
    the question of what this military needs and what our missions
    are? Because as I recall during the campaign, the President has
    been unabashed when talking about basically reconsidering our
    role throughout the world, talking about our involvement in
    Afghanistan. And so, that is my question to you, is what kind
    of review of our military objectives, our short- and long-term
    military needs are?
        Mr. Mulvaney. Yes, sir. The answer to your question is yes.
    I have been extraordinarily impressed not just with Secretary
    Mattis, who is the one everybody recognizes. But there is a
    Deputy Secretary by the name of Pat Shanahan, who came over
    from the Boeing Corporation. I believe he was able to turn
    around their 787 program, and he is sort of running the
    business of the Defense Department right now, and he and I work
    together regularly.
        And I think he would be able to convince you, sir, that
    this is not a number they have picked out of the air. In fact,
    it is the entire opposite. I think they have backed into a
    strategy-driven amount of money.
        We have often talked about that here, which is instead of
    picking a number and then picking a strategy, pick the strategy
    first and then figure out what it costs to do that. And I think
    that is how they got here. I would be more than happy, you and
    I and Secretary Shanahan, go to lunch and talk about that
    because I am absolutely convinced that they are doing the work
    necessary to justify these types of requests.
        Mr. Yarmuth. I would really appreciate that opportunity. So
    we talked about Medicare earlier, cuts in Medicare, and you
    basically, I think, claimed that it was unfair that we talk
    about cuts to Medicare because we are not cutting patient care.
    We are actually just cutting----
        Mr. Mulvaney. No, sir. I was trying to discourage that $500
    billion number, as I mentioned to you yesterday in private. I
    did not think that was accurate, but go ahead.
        Mr. Yarmuth. Okay. Well, I was going to say, whatever the
    number is, if it is $200 billion that it is going to be reduced
    or whatever it is, I vividly remember in 2010--and now while I
    was not following your campaign individually very closely--I
    know Republican candidates all over the country were beating us
    to death with the fact that we were proposing to cut $750
    billion out of Medicare, when in fact none of that came out of
    patient services.
        Actually, we expanded patient services and we were crying
    foul. So if we beat you over the head with it, your party over
    the head with it this year, I hope you will not cry foul.
        Mr. Mulvaney. I will cry foul as you probably did in 2010
    and the Republicans will not believe you and the Democrats will
    not believe me.
        Mr. Yarmuth. That is probably right. So, you compare your
    current tax revenue estimates in this budget to last year's CBO
    baseline. Given that we do not have an updated CBO estimate yet
    based on the Tax Act that was enacted, to get an apples to
    apples comparison, let's instead look at how your estimates
    changed from last year to this year. And you estimated, last
    year, $3.7 trillion more in tax revenues over the period 2018
    to 2027 than your current estimates. How much of that reduction
    and revenue projection is from the tax cut?
        Mr. Mulvaney. Roughly 1.8 trillion.
        Mr. Yarmuth. 1.8 trillion, okay.
        Mr. Mulvaney. And I would be happy to explain the
    difference between the 1.8 trillion that the OTA came up with
    at Treasury and the CBO. You all scored it at 1.5. We scored it
    after the fact at 1.8. The difference is the way that the CBO
    and the Treasury, who does all these numbers for us, deal with
    the individual mandate.
        CBO has often said that if you get rid of the individual
    mandate, folks will drop off of Medicaid, and that actually
    generates a huge savings. We simply do not believe that to be
    the case. So we do not believe that we will experience the same
    savings from folks not taking Medicaid as the CBO assumes.
        Mr. Yarmuth. Okay. So, basically, half of the change in
    revenue estimates is that you are projecting this budget came
    from tax cuts. Okay.
        Mr. Mulvaney. Yes, sir. Another $0.5 trillion, as you and
    I, I think, discussed yesterday, came from the extension of the
    individual tax rate reductions. The law that passed phases that
    out, I believe, after 5 years. We have it being permanent.
        Mr. Yarmuth. Right. Got you. One quick question and this is
    not a contentious question at all. I am just curious. And I do
    not know what you have in your budget, but you talked about
    interest rates and you are projecting that interest rates
    actually stay fairly low over the period.
        Mr. Mulvaney. Yes, sir. I could read them to you, if you
    like, or I can share them with you.
        Mr. Yarmuth. No. I just referenced, because I know over the
    past 6 months the 10-year Treasury note has gone up by 70 basis
    points, which is a pretty significant rise in a short period of
    time. So yeah, just out of curiosity, what do you project?
        Mr. Mulvaney. For the 2019 budget, 3.1--this is a 10-year
    number. So we are talking apples to apples because I think the
    reference and the 70 basis points is to the 10-year.
        Mr. Yarmuth. Ten-year number. Right.
        Mr. Mulvaney. 2019: 3.1. 2020: 3.4. 2021: 3.6. Then 3.7,
    3.6 out to sort of the end of the 10-year budget window. Again,
    we are slightly higher than the CBO baselines from January
    17th. A little bit lower, perhaps, than their numbers from
    June, and then roughly in line with the CBO for the out years.
        Mr. Yarmuth. Okay. Thanks for that information and thank
    you for your testimony. I greatly appreciate it.
        Mr. Mulvaney. It is always a pleasure. Thank you, sir.
        Mr. Yarmuth. I yield back.
        Chairman Womack. I thank the Ranking Member. Director
    Mulvaney, you have been very generous with your time today.
        Mr. Mulvaney. I think I have destroyed your table here, Mr.
    Chairman.
        Chairman Womack. That is quite all right. We will add that
    to the budget. Members are advised to submit written questions
    to be answered later in writing. Those questions and your
    answers will be made part of the formal hearing record. Any
    members who wish to submit questions or any extraneous material
    for the record may do so within 7 days. And with that, the
    Committee stands adjourned.
        [Whereupon, at 1:07 p.m., the Committee was adjourned.]

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