[Senate Hearing 115-43]
[From the U.S. Government Publishing Office]


      NOMINATION OF THE HONORABLE MICK MULVANEY, OF SOUTH CAROLINA, TO BE 
            DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET

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

                          HEARING & EXECUTIVE
                            BUSINESS MEETING

                               BEFORE THE

                        COMMITTEE ON THE BUDGET

                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

   January 24, 2017--HEARING ON THE NOMINATION OF THE HONORABLE MICK 
MULVANEY, OF SOUTH CAROLINA, TO BE DIRECTOR OF THE OFFICE OF MANAGEMENT 
                               AND BUDGET

 February 2, 2017--EXECUTIVE BUSINESS MEETING ON THE NOMINATION OF THE 
   HONORABLE MICK MULVANEY, OF SOUTH CAROLINA, TO BE DIRECTOR OF THE 
                    OFFICE OF MANAGEMENT AND BUDGET
                    
                    
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                        COMMITTEE ON THE BUDGET

                   MICHAEL B. ENZI, Wyoming, Chairman
CHARLES E. GRASSLEY, Iowa            BERNARD SANDERS, Vermont
JEFF SESSIONS, Alabama               PATTY MURRAY, Washington
MIKE CRAPO, Idaho                    RON WYDEN, Oregon
LINDSEY O. GRAHAM, South Carolina    DEBBIE STABENOW, Michigan
PATRICK TOOMEY, Pennsylvania         SHELDON WHITEHOUSE, Rhode Island
RON JOHNSON, Wisconsin               MARK R. WARNER, Virginia
BOB CORKER, Tennessee                JEFF MERKLEY, Oregon
DAVID A. PERDUE, Georgia             TIM KAINE, Virginia
CORY GARDNER, Colorado               ANGUS S. KING, Jr., Maine
JOHN KENNEDY, Louisiana              CHRIS VAN HOLLEN, Maryland
JOHN BOOZMAN, Arkansas               KAMALA HARRIS, California
                 Eric Ueland, Republican Staff Director
                Warren Gunnels, Minority Staff Director
                            
                            
                            
                            C O N T E N T S

                              ----------                              

                                HEARING

                                                                   Page
January 24, 2017--Hearing on the Nomination of The Honorable Mick 
  Mulvaney, of South Carolina, to be Director of the Office of 
  Management and Budget..........................................     1

                OPENING STATEMENTS BY COMMITTEE MEMBERS

Chairman Enzi....................................................     1
Ranking Member Sanders...........................................     2

                               WITNESSES

Honorable Tom Cotton, A United States Senator from the State of 
  Arkansas.......................................................     6
Honorable Lindsey Graham, A United States Senator from the State 
  of South Carolina..............................................     5
Honorable Mick Mulvaney, of South Carolina, Nominee to be 
  Director of the Office of Management and Budget 




                   MATERIALS SUBMITTED FOR THE RECORD

Statement of Biographical and Financial Information Requested of 
  Presidential Nominee Mick Mulvaney to be Director of the Office 
  of Management and Budget.......................................   104
Pre-hearing questions from Chairman Enzi with answers by Mick 
  Mulvaney.......................................................   133
Pre-hearing questions from Ranking Member Sanders with answers by 
  Mick Mulvaney..................................................   137
Pre-hearing questions from Senator Merkley with answers by Mick 
  Mulvaney.......................................................   142
Post-hearing questions from Ranking Member Sanders with answers 
  by Mick Mulvaney...............................................   160
Post-hearing questions from Budget Committee members with answers 
  by Mick Mulvaney...............................................   145
    Senator Corker...............................................   146
    Senator Grassley.............................................   147
    Senator Merkley..............................................   148
    Senator Murray...............................................   154
    Senator Stabenow.............................................   175
    Senator Warner...............................................   180
    Senator Whitehouse...........................................   192
    Senator Wyden................................................   208

                       
                       EXECUTIVE BUSINESS MEETING

February 2, 2017--Executive Business Meeting on the Nomination of 
  The Honorable Mick Mulvaney, of South Carolina, to be Director 
  of the Office of Management and Budget.........................   239
Committee Votes..................................................   242

                OPENING STATEMENTS BY COMMITTEE MEMBERS

Chairman Enzi....................................................   239
Ranking Member Sanders...........................................   240

                  STATEMENTS SUBMITTED FOR THE RECORD

Senator Merkley..................................................   244
Senator Murray...................................................   245
Senator Whitehouse...............................................   249

 
THE NOMINATION OF THE HONORABLE MICK MULVANEY, OF SOUTH CAROLINA, TO BE 
            DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET

                              ----------                              


                       TUESDAY, JANUARY 24, 2017

                              United States Senate,
                                   Committee on the Budget,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:31 a.m., in 
Room SD-608, Dirksen Senate Office Building, Hon. Michael B. 
Enzi, Chairman of the Committee, presiding.
    Present: Senators Enzi, Grassley, Crapo, Graham, Toomey, 
Johnson, Corker, Perdue, Gardner, Kennedy, Boozman, Sanders, 
Murray, Stabenow, Whitehouse, Warner, Merkley, Kaine, King, Van 
Hollen, and Harris.
    Staff Present: Dan Kowalski, Republican Deputy Staff 
Director; George Everly, Chief Counsel; for the Minority: 
Warren Gunnels, Minority Staff Director; Robert Etter, Minority 
Chief Counsel; and Joshua Smith, Budget Policy Director

               OPENING STATEMENT OF CHAIRMAN ENZI

    Chairman Enzi. Good morning, and welcome to everyone here. 
I will call this hearing to order.
    We are here today to consider the nomination of 
Representative Mick Mulvaney of South Carolina to be the next 
Director of the Office of Management and Budget. I am going to 
try to keep my opening remarks brief since we have a pair of 
Senators before us who are going to give some introductory 
remarks of their own concerning the nominee.
    President Trump indicated his intent to nominate 
Representative Mulvaney for this position a little over a month 
ago. I think all the members of this Committee can agree that 
we would like to see a confirmed OMB Director in place as soon 
as possible, so I am happy to note that the other committee of 
jurisdiction over OMB, the Homeland Security and Governmental 
Affairs Committee, will be convening this afternoon to hold 
their own hearing with Representative Mulvaney.
    We need an OMB Director in place with so many pressing 
budgetary issues requiring the attention of the new 
administration. Foremost among these is the staggering $20 
trillion debt burden America now shoulders. Congress needs an 
OMB Director who we can work with to put our Nation on a 
responsible fiscal path. That is why I am pleased that 
President Trump nominated a fiscal conservative for this key 
post. The Representative has been a vigilant budget hawk during 
his 6 years in Congress, including during his tenure on the 
House Budget and Oversight committees. He has been a vocal 
contributor to the great budget debates of recent years, 
focused on questions of how we ultimately stop the Federal 
Government from overspending while continuing to fund the 
country's core priorities and responsibilities.
    Representative Mulvaney has been a prominent voice arguing 
for fiscal restraint, balanced budgets, and honest budgeting 
that avoids the use of gimmicks such as emergency funding 
designation for non-emergencies. I have also discussed with 
Representative Mulvaney the urgent need to reform the broken 
budget process, which has contributed to the budgetary 
stalemate and recurrent continuing resolutions to which 
Congress now routinely resorts in order to postpone hard 
decisions about spending and debt.
    There is an urgent need for important reforms to the 
process such as implementing biennial budgeting and the 
overhaul of outdated budget accounting concepts that have 
outlived their usefulness. Ultimately, my goal is to produce 
comprehensive and lasting budget process reforms that put our 
Nation on a better fiscal path.
    Despite its significance, the preparation of the 
President's annual budget submission is only one of the 
responsibilities of OMB. As an entity within the Executive 
Office of the President, OMB has numerous government wide 
management responsibilities in addition to budgeting and 
spending that concern various activities carried out by Federal 
agencies. These include: agency rulemaking, contracting, grants 
management, financial management, information technology, 
program assessment, personnel policy, property management, and 
several others.
    I am particularly interested in hearing Representative 
Mulvaney's view on the role played by the Office of Information 
and Regulatory Affairs, or OIRA, in vetting agency regulations. 
This Committee has been exploring the concept of a regulatory 
budget as one way to produce a check on the growing burden of 
regulations on the American economy and more so to small 
business.
    Also, since he is the House sponsor of a companion bill to 
recently enacted legislation concerning improper payments, I am 
interested in Representative Mulvaney's view on how he believes 
we can reduce the growing volume of improper payments made by 
the Federal Government each year. The annual amount reached 
$144 billion in 2016, and the cumulative amount of improper 
payments since we started counting them in 2003 exceeds $1 
trillion.
    Senator Sanders.

              OPENING STATEMENT OF SENATOR SANDERS

    Senator Sanders. Mr. Chairman, thank you very much, and we 
welcome the discussion that we will be having with Mr. Mulvaney 
for this very, very important position. And I would also like 
to take this opportunity to welcome the new members of this 
Committee, Senator Van Hollen and Senator Harris on our side, 
and Senator Gardner, Senator Kennedy, and Senator Boozman on 
your side. And I look forward to working with all of you.
    Mr. Chairman, you and I may not agree on too much, but I 
think we can all agree that President Trump ran a very 
unconventional campaign and that he told the American people 
that he would govern as a very unconventional Republican. I 
think that is fair. We can maybe get unanimous consent on that 
one.
    And over and over again, in fact, the cornerstone--one of 
the cornerstones of his campaign was that he was not going to 
cut Social Security, Medicare, and Medicaid. He was not 
ambiguous about this. He did not say this in an ambush 
interview at 3 o'clock in the morning. He said this over and 
over and over again. And I suspect that many millions of senior 
citizens in this country or millions of working-class people 
who do not want to see Social Security, Medicare, or Medicaid 
cut voted for him for that reason. And I am just going to read 
a few of the quotes--with your permission, Mr. Chairman, I 
would enter into the record many of the quotes--that President 
Trump said on the campaign trail.
    He said on May 7, 2015, ``I was the first and only 
potential GOP candidate to state there will be no cuts to 
Social Security, Medicare, and Medicaid.''
    April 18, 2015, Trump said, ``Every Republican wants to do 
a big number on Social Security. They want to do it on 
Medicare; they want to do it on Medicaid. And we cannot do 
that. And it is not fair to the people that have been paying in 
for years. And now all of a sudden, they want to be cut.''
    August 10, 2015, Trump said, ``I will save Medicare, 
Medicaid, and Social Security without cuts. We have to do it. 
People have been paying in for years, and now many of these 
candidates want to cut it.''
    Last quote, March 29, 2016, Trump said, ``You know, Paul 
Ryan wants to knock out Social Security, knock it down, way 
down. He wants to knock Medicare way down. And, frankly, well, 
two things: number one, you are going to lose the election if 
you are going to do that. I am not going to cut it. And I am 
not going to raise ages, and I am not going to do all of the 
things they want to do. But they want to really cut it, and 
they want to cut it very substantially, the Republicans. And I 
am not going to do that.''
    Those are quotes from the President of the United States 
when he was on the campaign trail.
    Now the election is over. Mr. Trump or President Trump 
still sends out a whole lot of tweets. But, surprisingly 
enough, I have not seen that tweet where he says, ``I am going 
to keep my campaign promise, and I will not cut Social 
Security, Medicare, and Medicaid.'' I am waiting eagerly for 
that tweet, as are millions of seniors and working people in 
this country.
    So the issue that we are discussing today is: A, will the 
President keep his campaign promises, and B, will he appoint 
people to his Cabinet who will help him keep those campaign 
promises?
    And now we get to Congressman Mulvaney. And to Congressman 
Mulvaney, I want to thank him for coming into our office. We 
had, I thought, a very productive, interesting discussion. But 
his views on Social Security, Medicare, and Medicaid are 
exactly opposite of what Trump campaigned on. Let me quickly 
run through Congressman Mulvaney's record.
    May 15, 2011, Congressman Mulvaney said on Fox Business 
News, ``We have to end Medicare as we know it.''
    April 28, 2011, Congressman Mulvaney said, ``Medicare as it 
exists today is finished.''
    August 1, 2011, Congressman Mulvaney said, ``You have to 
raise the retirement age, lower a payout, change the 
reimbursement system. You simply cannot leave Social Security 
the way it is.''
    On May 17, 2011, Congressman Mulvaney said, ``I honestly do 
not think we went far enough with the Ryan budget because it 
did not cut Social Security and Medicare rapidly enough.''
    And, in fact, just last year, Congressman Mulvaney voted 
against the budget proposed by House Budget Committee Chairman 
Tom Price and House Speaker Ryan, opting instead to vote in 
favor of an even more extreme budget by the Republican Study 
Committee.
    This radical right-wing budget that Congressman Mulvaney 
supported cut Medicare by $69 billion more than the Price-Ryan 
budget. It cut Social Security by $184 billion more, and it cut 
Medicaid and other health programs by $255 billion more than 
the budget proposed by Chairman Price and Speaker Ryan.
    Moreover--and this is also interesting--in May of 2009, 
when Congressman Mulvaney was a member of the South Carolina 
State Senate, he voted for an amendment declaring Social 
Security, Medicaid, and the U.S. Department of Education 
unconstitutional. And let me read the text of that amendment:
    ``Whereas, many Federal mandates, such as those which 
created the U.S. Department of Education, Medicaid, and the 
United States Social Security Administration, are directly in 
violation of the Tenth Amendment to the United States 
Constitution.'' That amendment in the South Carolina Senate was 
defeated by a vote of 35-6. Mr. Mulvaney was one of the six.
    In my view, the opinions and ideas of Mr. Mulvaney are way 
out of touch with what the American people want and, more 
importantly, they are way, way out of touch with what President 
Trump campaigned on. And while we can all disagree on many 
issues, I would hope we can agree that if somebody campaigns--
as I am sure many of my Republican colleagues have, you 
campaign on a set of issues--that you keep your promise. And I 
suspect Chairman Enzi does that. He tells people how he feels, 
and then he keeps his word. We disagree; he keeps his word. But 
it does not make sense to me to have a key adviser to the 
President having views directly in opposition to what the 
President campaigned on.
    Last point: I have come to learn during the confirmation 
review process--we have come to learn during the nominating 
process here that Mr. Mulvaney failed to pay over $15,000 in 
taxes for a nanny that he employed from 2000 to 2004. And here 
is what Congressman Mulvaney wrote about this issue in response 
to a question that I asked him on January 11th: ``I have come 
to learn during the confirmation review process that I failed 
to pay FICA and Federal and State unemployment taxes on a 
household employee for the years 2000 through 2004. Upon 
discovery of that shortfall, I paid the Federal taxes. The 
amount in question for Federal FICA and unemployment was 
$15,583.60, exclusive of penalties and interest which are not 
yet determined. The State amounts are not yet determined.''
    Mr. Chairman, this is a serious issue. As you will recall, 
8 years ago Senator Daschle withdrew his nomination as 
Secretary of HHS after it was discovered that he failed to pay 
his fair share of taxes.
    Mr. Chairman, on this issue I agree with Minority Leader 
Schumer, who said, ``When other previous Cabinet nominees 
failed to pay their fair share in taxes, Senate Republicans 
forced those nominees to withdraw from consideration. If 
failure to pay taxes was disqualifying for Democratic nominees, 
then the same should be true for Republican nominees.'' End of 
Schumer quote.
    In 2015, Mr. Chairman, Congressman Mulvaney voted for a 
bill in the House that clearly stated, and I quote, ``Any 
individual who has a seriously delinquent tax debt should be 
ineligible to be appointed or to continue serving as an 
employee of the Federal Government.''
    Mr. Chairman, I look forward to asking Mr. Mulvaney 
questions, and thank you for the time.
    Chairman Enzi. Thank you, Senator Sanders.
    Before we swear in the witness and hear his testimony, we 
will hear today a little about the nominee from our Budget 
Committee colleague, Senator Graham, as well as Senator Cotton. 
Senator Graham and Representative Mulvaney are fellow South 
Carolinians, and Senator Cotton served in the House with 
Representative Mulvaney.
    Senator Graham.

  STATEMENT OF THE HONORABLE LINDSEY GRAHAM, A UNITED STATES 
            SENATOR FROM THE STATE OF SOUTH CAROLINA

    Senator Graham. Well, thank you, Mr. Chairman. I am honored 
to be here to introduce Congressman Mulvaney, ``Mick.'' He is 
my buddy. We do not agree on everything, but I think he is one 
of the most capable people I have met during my time in public 
service. And we have a real friendship. We play golf. He always 
beats me. I accept that.
    He has a beautiful wife and triplets. Just remember that 
when you talk to him.
    He is sincere. Clearly, Senator Sanders would not have 
chosen him for his OMB Director. I think we have established 
that. Why would Trump, President Trump, pick a man, according 
to Senator Sanders, that does not agree with anything he stands 
for? I would argue that he picked Congressman Mulvaney because 
he understands he knows the budget, he will be a good overseer 
of the Government, he is a practical guy, and he will follow 
the President's vision.
    President Trump understands everything you said about 
Congressman Mulvaney, and he has confidence in this man's 
ability to do a job for his administration. I share that 
confidence.
    To those on the defense side, he will follow the call of 
the President to increase defense spending. He does believe in 
entitlement reform, and I think he is right to do so, to save 
these programs. So from a personal point of view, I have never 
had an occasion where he would not tell me exactly what he 
believed even if he knew I disagreed with it. And he is able to 
disagree with people in an honorable fashion, and he is 
incredibly smart. He has made it his life's work to understand 
what is wrong with our Government, and he will be dedicated to 
fixing it.
    And one final point of personal privilege. I voted, I 
think, for every nominee of President Obama. I think every one 
of them. I asked myself why I did that now. The reason I did it 
is I think elections have consequences. And while I disagreed 
with almost every nominee about the basic structure of 
Government, I understood that President Obama needed his team 
and deserved his team, if they were qualified. And here is what 
I would ask this Committee to consider: Give this man's life 
experience, his background in the public sector and the private 
sector, his time in Congress, do you believe he is qualified to 
understand how the Federal Government works and to reform it 
consistent with what the President will direct him to do? I 
believe that with all my heart and soul, and I appreciate you 
listening to Congressman Mulvaney. And any hard question you 
can ask, you are doing your job. Just realize elections have 
consequences for you as they did for me.
    Chairman Enzi. Thank you.
    Senator Cotton.

STATEMENT OF THE HONORABLE TOM COTTON, A UNITED STATES SENATOR 
                   FROM THE STATE OF ARKANSAS

    Senator Cotton. Chairman Enzi, Senator Sanders, thank you 
for allowing me to appear today.
    I want to add my voice in support of confirming Mick 
Mulvaney as the next Director of the Office of Management and 
Budget. Mick and I have known each other for many years now. We 
served together in the House of Representatives. He is a good 
friend of mine and a trusted confidant. So I speak from 
personal experience when I say he will serve our President and 
our Nation with distinction.
    The way I see it, the Director's chief job is to give the 
President the unvarnished truth. He has to tell the President 
exactly what things cost, partly to the President's agenda, but 
mostly to the taxpayer. The President, of course, sets the 
agenda, but he deserves a clear-eyed view, not rose-colored 
glasses.
    And for the last 6 years, Mick has been telling many hard 
truths: We are spending too much. Regulations are strangling 
our small businesses. And short-changing our military will only 
cost us more in the long run.
    He also understands perhaps the hardest truth of all, at 
least for the big spenders in Washington: It is the American 
people who earned this money through their hard work and 
sacrifice. Mick will treat every taxpayer dollar as if it were 
his own. And trust me, that means he will watch it like a hawk.
    In Arkansas, many people stop me to ask what we are doing 
about the national debt. It is a huge concern. So with his 
eagle-eyed focus on spending, Mick will be a crucial voice in 
the Cabinet. He will represent millions of Americans who are 
deeply worried about the burden we are leaving our children. 
And while Mick is deeply principled, he knows how to work with 
others and make progress wherever we can.
    In short, Mick is a fine choice to run the Office of 
Management and Budget, so I urge you not only to advance his 
nomination, but to do so as soon as possible. Under the law, 
the President is required to submit a budget to Congress early 
next month, which will be very difficult without a new 
Director. I hope the full Senate will also confirm him 
promptly.
    Thank you for your time today and your consideration of a 
passionate advocate for the taxpayer, a bold truth teller, and 
my friend, Mick Mulvaney.
    Chairman Enzi. Thank you, Senator Graham and Senator 
Cotton. You have done a great job speaking about Representative 
Mulvaney, so I will keep my own remarks very brief.
    Representative Mulvaney is now in his fourth term as a 
Member of the U.S. House of Representatives, representing the 
5th District of South Carolina. He holds an undergraduate 
degree from Georgetown University and a law degree from the 
University of North Carolina. He is a husband, and he is the 
father of triplets.
    We thank you for joining us today, Representative Mulvaney, 
and we look forward to a productive dialogue, which will begin 
with your own testimony. But, first, under the rules of the 
Committee, nominees are required to testify under oath. So 
would you please join me as I administer the oath? Do you swear 
the testimony that you will give to the Senate Budget Committee 
will be the truth, the whole truth, and nothing but the truth?
    Mr. Mulvaney. I do.
    Chairman Enzi. If asked to do so and if given reasonable 
notice, will you agree to appear before this Committee in the 
future and answer any questions that members of the Committee 
might have?
    Mr. Mulvaney. Yes, sir.
    Chairman Enzi. Thank you. Please be seated. We now have a 
chance to hear from you.

TESTIMONY OF THE HONORABLE MICK MULVANEY, OF SOUTH CAROLINA, TO 
          BE DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET

    Mr. Mulvaney. I thank the Committee, I thank the Chairman, 
I thank the Ranking Member. It is an honor to be here today to 
present my qualifications and my vision for the Office of 
Management and Budget.
    I want to thank the President for nominating me and showing 
confidence in me in doing so.
    I thank especially Senators Graham and Cotton, friends of 
mind, for their kind words.
    I want to thank especially, before we get started, my 
family. As the members of this Committee know, the burdens of 
our public service so often fall on those at home, and I am--we 
do not get a chance to say this nearly enough, and we certainly 
do not get a chance to say it very often on national 
television: I am extraordinarily proud of the young people that 
my 17-year-old triplets have become. I do not know if it is 
because I have been away from home or despite the fact I have 
been away from home, but the fact that they are the young 
people they are is a tremendous testament to my wife, who is 
with me today. The children are back in school. I am 
extraordinarily happy and proud to have her in my life, and I 
could not be here today but for the support of my family.
    Finally, I am grateful to the members of the Committee for 
taking all the time over the course of the last couple of weeks 
to get together and talk about the issues, as we talked about 
my vision for the OMB and what type of OMB Director I might be, 
if you see fit to confirm me. I look forward to continuing 
those conversations and getting your guidance and wisdom, 
because I think we all know that no one--no one--can do this 
job alone. Perhaps a Member of Congress knows that better than 
most. Several former Members of these bodies have served at 
OMB. Senator Portman, Jim Nussle, Leon Panetta--they all served 
with distinction, and they all set a very high bar and provided 
a good example of how OMB is supposed to function to serve the 
President and to work with Congress and the American people. If 
confirmed, I will use them as models. You deserve the truth 
about budget matters, as do the American people and the 
President, and it is the OMB Director's responsibility to tell 
you and the President the truth, even from time to time when 
that might be hard to hear.
    One truth is this: For the first time in America's history, 
the next generation could be less prosperous than the previous. 
I know that is unacceptable to every single person in this 
room, as it is unacceptable to me. We can turn the economy 
around. We can turn the country around. But it is going to take 
difficult decisions today in order to avoid nearly impossible 
decisions tomorrow.
    Our gross national debt has increased to almost $20 
trillion. That is a number so large as to almost defy 
description. I choose to look at it in a different fashion. I 
choose to look at it through the lens of the ordinary American 
family. If you are an ordinary American family, the equivalent 
to you of a $20 trillion debt is a credit card bill of 
$260,000. American families know what that would mean to them, 
and it is time that this Government learns what it means to us.
    I believe, as a matter of principle, that the debt is a 
problem that must be addressed sooner rather than later. I also 
know that fundamental changes are necessary in the way 
Washington spends and taxes if we truly want a healthy economy. 
This must include changing our Government's long term fiscal 
path, which is unsustainable.
    Part of that also means taking a hard look at Government 
waste--and ending it. American taxpayers deserve a Government 
that is efficient, effective, and accountable. They earn their 
money honestly, and they deserve a Government that spends it in 
the same fashion.
    But fixing the economy does not mean just taking a green 
eyeshade approach to the budget. Our country is more than just 
numbers. A strong, healthy economy also allows us to take care 
of our most vulnerable. My mother-in-law relied on Social 
Security in her retirement; she relied on Medicare to help her 
before she died of cancer. Pam and I were happy to have that 
safety net there for her. Pam and I would also like that safety 
net to be there for her grandchildren, our triplets.
    All of that being said, I know many of the members of this 
Committee will want to know my positions, should I be Director, 
as OMB Director. I am, of course, not yet in that position and 
do not presume to know about decisions I might make, much less 
what decisions the President might make after consulting with 
his Cabinet and his advisers.
    I do know what I believe, however, and I look forward to 
discussing whatever topics you consider relevant today. I have 
not exactly been a shy Member of Congress in my 6 years here, 
and I do not expect to end that today, or as Director of OMB if 
you see fit to confirm me.
    At the same time, I recognize that good public service--
whether that in the State legislature, the House, the Senate, 
OMB--takes both courage and wisdom, the courage to lead, and 
the wisdom to listen. I have learned in my time in Washington 
that I do not have a monopoly on good ideas. Facts--and the 
cogent arguments of others--matter. My commitment to you today 
is to take a fact-based approach and to listen to various ideas 
on how to get our financial house in order.
    OMB also fulfills significant management responsibilities, 
performs a regulatory role, has a bunch of other 
responsibilities that I know you folks are as familiar with as 
anybody, and I look forward to talking about those today as 
well. I look forward to talking about all of those issues, my 
qualifications, and anything else the Committee sees fit. If 
confirmed, I look forward to working with Congress--and serving 
the President--to address all the challenges on behalf of the 
American people.
    Again, Mr. Chairman, I thank you for your time and for the 
opportunity to be here.
    [The prepared statement of Mr. Mulvaney follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Enzi. Thank you.
    Now we will turn to questions for Representative Mulvaney. 
Let me take a minute to explain the process for all Committee 
members before we start. Each member will have 5 minutes for 
questions, beginning with myself and Senator Sanders. Following 
the two of us, I will alternate questions between the 
Republicans and the minority. All members who were in 
attendance when the hearing began will be recognized in order 
of seniority. For those who arrived after the hearing began, 
you are on the list in the order of arrival. If it is your turn 
to be on the list to be recognized and you are not here, you 
will be moved to the bottom of the list and get to ask 
questions at that point. When everyone else is done, you will 
be recognized.
    Now, once all the Senators present have had an opportunity 
to question the nominee, I will allow a second round of 
questions if there is interest in doing that. Representative 
Mulvaney is scheduled to appear before the Homeland Security 
and Governmental Affairs Committee later this afternoon, so 
this hearing will end no later than 1:30 p.m. to accommodate 
that schedule.
    With that, I have a few questions. I believe that 
significant savings could be found by eliminating duplication 
and waste, fraud, and overpayment across the Federal 
Government. You introduced the companion bill in the House to 
legislation signed into law last Congress as the Federal 
Improper Payments Coordination Act. That was a bipartisan bill 
that addresses a very real and growing problem that you would 
be in a position to help tackle as OMB Director. I even saw a 
recent report that the Department of Defense lost $125 billion. 
I do not know what ``lost'' means.
    Do you believe that significant budgetary savings can be 
found by reducing duplication, waste, fraud, and overpayment? 
And what do you see is the role of OMB in identifying and 
addressing these problems?
    Mr. Mulvaney. Chairman, I think you mentioned in your 
opening statement the recent finding that the amount of 
improper payments has now grown to historic levels. It is now 
past $100 million and on its way to--excuse me, $100 billion 
and on its way to $200 billion. I think it is one of the 
reasons that the improper payments bill, which I believe 
Senator Johnson and Mrs. McCaskill, Senator McCaskill, also 
worked on in the Senate, and passed on a bipartisan basis in 
the House.
    I will never forget when we actually started working on 
that bill in the House. I was working on it with Patrick Murphy 
from Florida, and he is a Democrat, and we were talking about 
it one day. And I said, ``Patrick, it is kind of unusual 
working on this together.'' He said, ``Mick, what you have to 
understand is that I am a Democrat and I believe the Government 
should be doing more. You are Republican, and you probably 
believe that Government should be doing less. But we all hate 
bad Government.'' And I think that is right, and I think you 
have hit the nail on the head on an opportunity that we have on 
a bipartisan basis to be better stewards of the taxpayer 
dollars.
    The Improper Payments Act, as I understand it, has gotten 
off to a choppy start. The report that is required by the 
legislation I believe is either finished or close to being 
finished. But in terms of actually putting the plan of action 
into place, it is already behind schedule. And to your point 
about who can help fix that, the answer is OMB. OMB could use 
the budget function to make sure that these agencies comply 
with the law. They are required by law to start using these 
best management practices, to start using--there are several 
agencies that do a great job of preventing improper payments. I 
will never forget when my uncle died a few years ago, I got a 
letter--I was the executor of his estate. I got a letter within 
a week of his death from the Social Security Administration 
saying, ``When you get his next check, do not cash it, or else 
you will be violating Federal law.''
    So, clearly, there are agencies that do a good job. The 
question is: Why aren't those agencies sharing their best 
practices? That was part of the motivation behind the improper 
payments bill that we passed. I just think that it is time to 
take it a little bit more seriously, and if given the 
opportunity at OMB, I would certainly do that.
    Chairman Enzi. Thank you, and I appreciate your service and 
your willingness to serve. It was mentioned in the opening 
remarks of the Ranking Member, and I notice that you chose to 
bring to the attention of this Committee an issue recently 
identified that resulted in you amending prior tax returns. Can 
you describe this issue and whether you brought it to the 
attention of the IRS or whether it was discovered through an 
audit? Have you voluntarily paid any and all additional taxes, 
fees, and penalties that you discovered that you owed?
    Mr. Mulvaney. I have, Senator. Thank you for that, and I 
have been happy to discuss it with anybody who has raised it 
during my various meetings.
    In 2000, we had triplets. When they came home, we hired 
someone to help my wife take care of the children. In our 
minds, she was a babysitter. She did not live with us. She did 
not spend the night there. She did not cook, she did not clean, 
she did not educate the children. She helped my wife with the 
kids. I did not consider her a household employee for purposes 
of withholding and did not withhold--and did not think about it 
again until 2 days after the President had nominated me for 
this position. And during the transition, I got a checklist: 
Have you ever had a babysitter, a nanny, an au pair, a 
governess, whatever? And I said yes. And then they sent me an 
IRS circular. It was the first time I had seen it, and I read 
it, and it made it immediately clear to me that I had made a 
mistake and that the IRS viewed our babysitter as a household 
employee for whom we should have withheld taxes.
    I did the only thing I knew to do, which is simply tell 
everybody who I thought would care. I told the President, I 
told the transition team. I called my CPA and said, ``Look, 
what is the best way to fix this? It is a mistake. It has been 
made. I now know about it. How do we fix it?''
    The CPA and I went through the process of filing, I 
believe, Schedule H for the relevant years. We paid the taxes, 
also notified the IRS of what we were doing and why. And then I 
told everybody on this Committee--in fact, I told everybody in 
the Senate and apparently told the media as well. It is the 
only thing I knew to do, Mr. Chairman. We made a mistake in my 
family, and as soon as it was brought to my attention, I did 
the only thing I knew to do, which was to take every step to 
fix it. I will pay any penalties, any interest, any late fees, 
and abide by the law to the best of my ability.
    Chairman Enzi. Thank you. And to put this in context for 
the Committee, in 1993, President Clinton nominated Mr. Ron 
Brown to be the Secretary of Commerce and Mr. Federico Pena to 
be the Secretary of Transportation. Both of these nominees had 
to pay back taxes on domestic employees, and yet both were 
confirmed.
    President Clinton also nominated Mrs. Zoe Baird to be the 
Attorney General. Mrs. Baird withdrew her nomination because 
she had hired an illegal immigrant and failed to pay taxes. 
While she did not become Attorney General, Mrs. Baird did serve 
in the Clinton administration on the Foreign Intelligence 
Advisory Committee and in the Obama administration on the U.S. 
Secretary of Commerce's Digital Economy Board of Advisers.
    In 2009, President Obama nominated Mr. Timothy Geithner to 
be the Secretary of the Treasury. Even though Mr. Geithner 
failed to pay $35,000 in Social Security and Medicare payroll 
taxes on his own income and was in charge of the IRS after 
being confirmed, he was confirmed.
    Mr. Sanders.
    Senator Sanders. Thank you, Mr. Chairman.
    Congressman Mulvaney, I have talked to some Members of the 
House whose views are very different than yours, but they say 
you are a straight shooter, that you are honest, and I 
appreciate that. That is a good quality in a Member of 
Congress.
    Over the weekend, I happened to bump into a psychologist, 
and she told me that her patients are getting very nervous, 
those who are on disability benefits, that they might lose 
their benefits. And, in fact, their conditions are getting 
worse. I have heard that all over the country, that people now 
are worried that they may lose Social Security, may lose 
Medicare, may lose Medicaid, disability benefits.
    I happen to believe that Social Security is one of the most 
significant and important and positive programs that the United 
States Government has; that Medicare, by and large, is an 
enormously successful health care program; and, in fact, the 
majority of the American people would like to see Medicare 
expanded to all Americans, something that I believe; and that 
Medicaid right now is saving the lives of millions of people. 
But you are on record time after time after time--and I read 
the quotes--as saying cut Social Security, cut Medicare, cut 
Medicaid.
    Now, what concerns me is you are more than entitled to your 
views. You get elected by the people in your own district. But 
what does disturb me is we have a President who ran on a set of 
principles that he would not cut Social Security, Medicare, and 
Medicaid, and yet he is nominating somebody whose views are 
very, very different. So I have a real problem with that.
    So my question to you is: What will you tell the President 
when he says, ``I ran on a set of principles that I will not 
cut Social Security, Medicare, and Medicaid''? Will you tell 
the President of the United States, ``Mr. President, keep your 
word, be honest with the American people, do not cut Social 
Security, Medicare, and Medicaid''?
    Mr. Mulvaney. Senator, your question was what would I tell 
the President, and I listened as Senator Cotton was giving his 
introduction, and I really liked what he said. I did not know 
what he was going to say until he said it. But he gave you the 
answer, which is the only thing I know to do is to tell the 
President the truth, and the truth is that if we do not reform 
these programs that are so important to your constituents in 
Vermont and to mine in South Carolina, I believe in 9 or 10 
years the Medicaid trust fund is empty. In roughly 17 or 18 
years, the Social Security trust fund is empty.
    We can choose to do something about that now, or we can 
choose to do something about that----
    Senator Sanders. Well, there is a lot--forgive me for 
interrupting. I only have 5 minutes. There is a lot that we can 
do, including lifting the cap on income above $250,000, which 
would enable us to extend and expand Social Security very 
significantly. But the problem that I am having right now is 
not just your nomination but the integrity and the honesty of 
somebody who ran for office on one set of principles, 
nominating somebody else whose views are very different.
    But let me ask you another question. When you were a member 
of the South Carolina Senate, you voted for a proposition that 
said Social Security is unconstitutional. Do you believe that 
Social Security is unconstitutional?
    Mr. Mulvaney. No, sir. That was brought to my attention 
this morning before the hearing. I do not remember the vote, 
but I can assure you as I sit here today, I do not believe that 
Social Security or Medicare are unconstitutional.
    Senator Sanders. You were one of six members of the South 
Carolina State Legislature to vote on a proposition that said 
Social Security, the Department of Education, and Medicaid are 
in violation of the Tenth Amendment. You no longer hold the 
view that Social Security is unconstitutional?
    Mr. Mulvaney. I believe you, Senator. I have no reason to 
disbelieve that. But, again, as I sit here, I will not be 
arguing to the President of the United States that Social 
Security and Medicare are unconstitutional.
    Senator Sanders. Mr. Mulvaney, Congressman, in July 2015, 
you wrote a letter stating, and I quote, ``I vehemently urge 
House Republican leadership to use every available tool to 
strip Planned Parenthood of any and all taxpayer funds and take 
measures to prevent the group from receiving taxpayer dollars 
in the future.''
    Some 2.5 million Americans, many of them low-income women, 
now get their health care through Planned Parenthood. At a time 
when we have 28 million people who have no health insurance 
today, despite the gains of the Affordable Care Act, you really 
believe that we should tell 2.5 million Americans, many of them 
low-income women, who get high quality care at Planned 
Parenthood, that they should no longer have access to Planned 
Parenthood? I hear a lot of talk in this body from our 
Republican friends about choice, we want to give people choice. 
Two and a half million Americans, many low-income women, choose 
Planned Parenthood as their choice for health care. Why would 
you deny them that choice?
    Mr. Mulvaney. Senator, I do not have the letter in front of 
me, but I do remember the debate, and I also remember what I 
voted for, and it may have been addressed in the letter. The 
proposal that the House put forward in July of 2015 would have 
moved the money from Planned Parenthood to the federally 
qualified health care clinics, which are more prevalent, more 
available, and actually serve more needy women than Planned----
    Senator Sanders. Congressman, I know a lot about the 
community health centers. I am one of the leading advocates for 
them here and helped increase funding for them. But 2.5 million 
people, mostly women, have chosen Planned Parenthood. And after 
all the talk about choice, that we want a health care system 
which allows people to go anyplace they want, your 
recommendation is that we should deny 2.5 million women their 
choice of health care.
    Thank you, Mr. Chairman.
    Chairman Enzi. Thank you.
    Senator Graham.
    Senator Graham. What percent of GDP will be spent on 
defense if we go back into sequestration by 2021?
    Mr. Mulvaney. Let me see. If we go back into sequestration 
by twenty--it is going to be down, Lindsey--excuse me, Senator 
Graham, it is going to be well below 4 percent. It may be 
closer to 2. But it is between 2 and 4 percent.
    Senator Graham. 2.3 percent.
    Mr. Mulvaney. Okay.
    Senator Graham. Okay. What is the historical average of 
defense spending since World War II?
    Mr. Mulvaney. 4-ish?
    Senator Graham. Closer to 5.
    Mr. Mulvaney. Okay.
    Senator Graham. Do you support President Trump's initiative 
to increase defense spending?
    Mr. Mulvaney. I do.
    Senator Graham. Are you aware that almost 50 percent of 
defense spending involves personnel costs?
    Mr. Mulvaney. I do.
    Senator Graham. So if you want a bigger army, you are going 
to have more personnel costs. If you want a bigger navy, you 
are going to have personnel costs.
    Mr. Mulvaney. That is what the numbers would tell you, yes.
    Senator Graham. Are you willing to reform personnel 
programs to make it more sustainable, generous but sustainable?
    Mr. Mulvaney. I am looking forward to having the 
opportunity to do just that.
    Senator Graham. Entitlement reform: What drives the debt? 
What is the chief driver of the debt?
    Mr. Mulvaney. The entitlement programs--Medicare, Medicaid, 
and Social Security.
    Senator Graham. Okay. The deficit and the debt are 
different things. Explain it very quickly, the difference 
between the deficit and the debt.
    Mr. Mulvaney. The deficit is this year's shortfalls between 
revenues and expenditures. The debt is the accumulation of 
deficits over the years.
    Senator Graham. The baby-boom generation will be retiring 
en masse here. What happens to Medicare and Social Security 
over the next 25 years?
    Mr. Mulvaney. They go up.
    Senator Graham. Okay. In 1950, how many workers were there 
for every Social Security recipient?
    Mr. Mulvaney. 15, 16 at some point.
    Senator Graham. 16. How many are there today?
    Mr. Mulvaney. Three.
    Senator Graham. How many will there be in 20 years?
    Mr. Mulvaney. Two.
    Senator Graham. How can two people do what 16 people used 
to do?
    Mr. Mulvaney. The short answer is that they cannot.
    Senator Graham. Are we living longer or shorter?
    Mr. Mulvaney. Longer.
    Senator Graham. So we are living longer, there are fewer 
workers, and more people are retiring.
    Mr. Mulvaney. Those are the hard facts, yes, sir.
    Senator Graham. Will you tell President Trump that if he 
ignores that, he can never get us out of debt?
    Mr. Mulvaney. Yes, sir.
    Senator Graham. Will you tell him that the promise you made 
about Medicare and Social Security is going to lead to their 
demise if you do not change that promise?
    Mr. Mulvaney. Yes, sir.
    Senator Graham. Will you tell him that there is a 
bipartisan way to do this that has been studied extensively 
without gutting the program but saving the program?
    Mr. Mulvaney. I am familiar with that, yes, sir.
    Senator Graham. Would you agree with me that for younger 
workers, they may have to work longer before they enter the 
program to save the program?
    Mr. Mulvaney. I have already told my children to prepare 
for exactly that.
    Senator Graham. Ronald Reagan and Tip O'Neill adjusted the 
age of retirement from 65 to 67 to save Social Security. Is 
that accurate?
    Mr. Mulvaney. That is true.
    Senator Graham. Do you think we need to look at adjusting 
the age yet again because we live longer?
    Mr. Mulvaney. I do, yes, sir.
    Senator Graham. Do you think people in my income level 
should get a subsidy to pay their Medicare bill?
    Mr. Mulvaney. I believe that Medicare benefits should and 
could be means-tested.
    Senator Graham. What percentage of Medicare comes from the 
general treasury?
    Mr. Mulvaney. Senator, that is one I do not know.
    Senator Graham. I think it is over 60 percent. Isn't it 
true that if we do not change that, Medicare, Medicaid, and 
Social Security combined will consume all the revenue that the 
American people send in taxes by 2042?
    Mr. Mulvaney. Yes, sir. In fact, I think this year it will 
be close to 75 percent for just those three major programs 
alone.
    Senator Graham. Isn't it true that if we do nothing, we are 
going to have to either dramatically increase taxes or cut 
benefits in the next decade to 15 years?
    Mr. Mulvaney. If we do nothing, then by the time I retire, 
there will be an across-the-board 22-percent cut to Social 
Security benefits.
    Senator Graham. Are you in a situation where you could give 
up some of your promised benefits from Social Security if you 
had to?
    Mr. Mulvaney. Senator, if I may--and I enjoy the rapid fire 
because this is what we do when we talk, right? But I would 
want to take a second to tell a story. I talked about the ideas 
to save Social Security at a Sun City Retirement Community in 
my district. You have been there several times. And I talked 
about slowly raising the retirement age. And there was a 
gentleman there who was 59--you have to be 55 to live there--
and he goes, ``Well, I do not want to work until I am 70.'' And 
I said, ``Well, no, our proposal''--at the time in the House--
``would require you to work an extra 2 months.'' And he was 
flabbergasted. He said, ``Wait a second. You mean I can help 
fix this by working 2 more months?'' And I said yeah. And he 
was angry that it was actually that easy to do. And I said, 
``Well, if you want to really be angry, if we had fixed it 20 
years ago, it might be 2 extra weeks. But if we wait another 10 
years, it might be 2 years.'' So we do have the chance to fix 
these programs now.
    Senator Graham. Very well said. Senator Sanders says that 
one way to save Social Security is to increase--lift the cap on 
people that make over $250,000. Can you repair the gap between 
Medicare and the unfunded liability by doing that?
    Mr. Mulvaney. No, sir. As I have told people and as I have 
shared with----
    Senator Graham. You cannot even come close.
    Mr. Mulvaney. No, sir. Social Security----
    Senator Graham. So if you took the entire wealth of the 1 
percent, everything including their dogs, could you repair the 
gap?
    Mr. Mulvaney. You can confiscate everything they have, and 
the answer to your question would be no.
    Senator Graham. Could you grow the economy at 8 percent and 
close the gap?
    Mr. Mulvaney. No, sir.
    Senator Graham. Thank you.
    Chairman Enzi. Senator Stabenow.
    Senator Stabenow. Well, thank you very much, Mr. Chairman. 
And welcome, Congressman Mulvaney, to you and your family. I 
have to say after that interchange, I think folks on Social 
Security and Medicare ought to be really worried, and it just 
demonstrated the difference between what President Trump has 
indicated he would do and what, in fact, you will be advising 
him, Congressman Mulvaney, if, in fact, as you indicated and 
Senator Cotton indicated, you would give him the unvarnished 
truth.
    So I believe people sitting on this side of the aisle 
believe Medicare and Social Security are great American success 
stories that have lifted a generation of seniors out of poverty 
and created health care certainty for many, many Americans. And 
I am thinking after that exchange that for the 57 million 
seniors and people with disabilities and surviving spouses and 
children who receive Social Security benefits, the alarm bells 
should be going off right now.
    But let me go back. As a straight shooter, which I 
certainly respect, you did indicate that Social Security is a 
Ponzi scheme. Is that something that you will say to the 
President? And you did indicate that both Social Security and 
Medicaid and the Department of Education were unconstitutional. 
So just keeping it to Social Security, do you intend to 
indicate to the President that you believe Social Security is a 
Ponzi scheme?
    Mr. Mulvaney. Thank you for that, Senator, and I had a very 
similar conversation on this exact same topic with Senator 
Sanders in his office when he asked me about that.
    And I said, ``Well, what I described it as was a plan that 
takes money from people now in order to give money to people 
now.'' And he explained--and I think he was accurate in doing 
so--that Social Security has always been like that. So I would 
not read too much into the description of it as a ``Ponzi 
scheme.'' It is simply describing to people how the cash flows. 
And the difficulty that we face was contained in what Mr. 
Graham just laid through, which is 50 years ago, 15 people were 
paying in and 1 person was taking out. And by the time my kids 
are paying for my retirement, two of them will be paying in for 
every one that is taking out.
    Senator Stabenow. And is it also true, though--you and I 
talked in the office about the fact the cap was set in 1983, 
awhile ago, at 90 percent of wage income. And it goes up a 
little bit. But one significant way to take a burden off of 
Social Security and keep it going strong for those who rely on 
it--and, by the way, about a third of seniors basically live on 
the money solely from Social Security, maybe a little bit of a 
pension, but those pensions are being challenged right now as 
well.
    So do you think the cap should be increased as a basic 
sense of fairness in terms of the fact that the last cap was 
set in 1983?
    Mr. Mulvaney. Thank you for that. If the Senate sees fit to 
confirm me, Senator--and I believe I had this conversation with 
just about everybody from both parties that I met with, 
including the Independent, who is not from any party--there are 
really five levers in Social Security that you can pull----
    Senator Stabenow. No, I understand all five, and I am 
sorry, because I have one more question I want to ask after 
this.
    Mr. Mulvaney. Sure.
    Senator Stabenow. I know there are five. I am asking you 
about one.
    Mr. Mulvaney. And you have mentioned one, and I think if 
you pull one lever, you have to pull it a long way. And if you 
pulled three or four or five levers, you do not have to pull 
them nearly as far.
    Senator Stabenow. Okay. Thank you. And I want to completely 
change to something that I may be the only one to raise, 
although a couple of colleagues on the other side may as well, 
and that is, a very important part of the budget called ``the 
farm bill,'' which is less than 2 percent of Federal spending 
and affects every small town in Michigan, every farmer, as well 
as all of our food assistance programs. And in the last go-
around, we were very proud on a bipartisan basis to be the only 
Committee to actually cut spending in our own jurisdiction of 
$23 billion. And we are now coming into another time where we 
fully expect to work together on a bipartisan basis to invest 
in rural economy, small towns, agriculture, food programs, and 
so on. We are in a better position in the sense that food 
program spending has actually gone down because of the economy 
getting better. But do you intend to propose reductions to farm 
bill investments in rural America in your budget, despite the 
fact that farmers and families already contributed significant 
savings towards deficit reduction?
    Mr. Mulvaney. Senator, I know that the farm bill is 
absolutely critical to you, as it is to many other members, 
including Mr. Grassley, and he and I spoke about this. I 
apologize. It has been several years now, I think, since the 
House has taken it up, so I am not in a position to give you an 
intelligent answer to the question, but would look forward to 
talking to members of all parties about how to both maintain 
and to improve and make more efficient the farm bill.
    Senator Stabenow. Thank you.
    Chairman Enzi. Senator Toomey.
    Senator Toomey. Thanks very much, Mr. Chairman. And, 
Congressman Mulvaney, welcome. Thanks for being here. Thank you 
for your willingness to serve, and thanks for the great work 
you have done in the House of Representatives.
    Let me follow up on a couple of the subject matters that 
have been raised. First of all, is it your understanding that 
historically the reason that we have had a cap on the wages 
subject to the Social Security tax is because we also have a 
cap on the benefits that are paid out to somebody? Is that your 
understanding?
    Mr. Mulvaney. It is my understanding, yes, Senator.
    Senator Toomey. And that remains the case?
    Mr. Mulvaney. Yes, sir.
    Senator Toomey. And, in addition, if we eliminated the cap, 
we would not solve the problem.
    Mr. Mulvaney. Correct.
    Senator Toomey. Right. Getting back to the bigger budget 
picture, it is my understanding that today the revenue the 
Federal Government takes in as a percentage of GDP is greater 
than its post-war historical average. Is that your 
understanding?
    Mr. Mulvaney. Correct. I think it will be about 18.5, 19 
percent this year.
    Senator Toomey. And an average of like 17.9. So we are 
taking in more revenue than we historically have done. 
Discretionary spending has been declining as a percentage of 
GDP--in fact, even in some recent years, in absolute terms. Is 
that your understanding?
    Mr. Mulvaney. That is correct.
    Senator Toomey. So revenue is higher than it has 
historically been. Discretionary spending is lower than it has 
historically been. And yet we have got large deficits, and the 
projection is that they will get worse.
    Isn't it pretty unavoidable to look at the entitlement 
programs and acknowledge that this is the problem?
    Mr. Mulvaney. It is the problem, and I think Congress has 
done a pretty good job over the course of the last couple of 
years to deal with the discretionary part of the budget.
    Senator Toomey. So one of my colleagues suggested that 
people on Social Security should be concerned about the things 
you have said. So if you are a Pennsylvanian who is in his or 
her, I do not know, early 70s and has a modest income and 
depends on Social Security, are you advocating cuts to their 
benefits?
    Mr. Mulvaney. No, sir.
    Senator Toomey. You are not advocating cuts to their----
    Mr. Mulvaney. No.
    Senator Toomey. What about somebody who is 69 and receiving 
Social Security? Are you advocating that their benefits be cut?
    Mr. Mulvaney. I do not think that any proposal that the 
House has come up and certainly no proposal that I would take 
to the President, should I be confirmed, would suggest that we 
touch folks anywhere who are already--I am not making my 
parents go back to work. They are 74 years old. That is not 
what this is about. This is about trying to preserve those 
programs. Those folks--Senator Stabenow has stepped out. The 
folks who are 75 years old and relying on Social Security, be 
it in Pennsylvania or in Michigan, they do not have to worry 
about----
    Senator Toomey. Is there anybody of any age on Social 
Security where you want to cut their benefits?
    Mr. Mulvaney. I am sorry, sir?
    Senator Toomey. Is there anybody of any age on Social 
Security where you want to cut their benefits that they are 
receiving now?
    Mr. Mulvaney. No, sir.
    Senator Toomey. You do not want to cut any existing 
benefits?
    Mr. Mulvaney. Absolutely not. I would not recommend that to 
the President.
    Senator Toomey. So then it is not at all clear to me why 
someone who is currently on Social Security needs to be afraid 
of this.
    How about somebody who is 40 years old and is expected to 
work for another, I do not know, 25 or 30 years? Can we deliver 
on the promise that Social Security currently makes to that 
person? Is there any way that, without change to the structure 
of the program, we are going to be able to follow through on 
that commitment?
    Mr. Mulvaney. Without changing the current Social Security 
program, a 40-year-old today will receive roughly 77 percent of 
what they have been promised for their adult life.
    Senator Toomey. So to continue to suggest that we do not 
have to do anything here is just being dishonest to the young 
people, and if I understand correctly, the changes that you 
would advocate would be for people who have many years left in 
their working lives to plan accordingly and to prepare for the 
eventuality. Is that fair?
    Mr. Mulvaney. Correct. It would require--I think one of the 
proposals would require me to work an extra couple of months 
before I retire. It would require my children to work until 
they are 70.
    Senator Toomey. And you are how old?
    Mr. Mulvaney. I am--I am still 49.
    Senator Toomey. I think it is public information.
    Mr. Mulvaney. I am 49.
    Senator Toomey. Okay. Let me switch real quickly to the 
regulatory side. When I have met with small business owners and 
other people who are working across Pennsylvania, they have 
been stunned by the avalanche of new regulations and the 
cumulative weight of all of these regulations, whether it is 
Obamacare, Dodd-Frank, and EPA, the entire alphabet soup of 
agencies. In my view--and I have heard this from them--it is 
having a devastating effect on economic growth.
    The OMB Director is responsible for the Office of 
Information and Regulatory Affairs, and in that capacity you 
have a lot of say about new regulations.
    So, number one, do you support the REINS Act, which would 
hold that any major new regulation has to be approved by 
Congress before it goes into effect?
    Mr. Mulvaney. I do, sir, and I have voted for that in the 
House.
    Senator Toomey. How do you feel about a regulatory PAYGO 
system where, before we impose new regulations, we look at 
outdated, excessive, counterproductive regulations and repeal 
them before we impose new ones?
    Mr. Mulvaney. Actually, I think the law currently requires 
OMB to do a retrospective analysis of regulations, and it has 
probably been falling short on that. So I would approve of such 
a system and think it is actually already the law.
    Senator Toomey. And just lastly, how high a priority do you 
think the administration should assign to rolling back the 
current level of regulation? And do you have any other 
procedures or analyses that you would intend to use to achieve 
that?
    Mr. Mulvaney. Thank you, Senator. My very distinct 
impression from working with the transition team is that 
regulatory reform is going to be an absolute priority for this 
President. In fact, I think you saw him mention yesterday that 
he wants to cut 75 percent of the regulations. He is absolutely 
dead serious about this. I believe he is the first person to 
campaign for President on regulatory reform since Ronald 
Reagan.
    I have some plans or ideas of how OMB could help to do 
that, but I absolutely believe that you will see this be a 
priority for President Trump.
    Senator Toomey. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Enzi. Senator Whitehouse.
    Senator Whitehouse. Let me lead with an observation, Mr. 
Chairman, and that is that in the time that I have been in the 
Senate, I do not think I have actually ever seen a sincere 
effort at regulatory reform or relief. What I have seen is a 
really good game of talk about regulatory reform. But every 
time it rears its ugly head, it is for one of two special 
interests: Wall Street or polluters. Period. And sure enough, 
the two examples that the Senator from Pennsylvania just used 
were--guess what?--Dodd-Frank on Wall Street and the EPA on 
polluters.
    I would suggest to you that on our side of the aisle, there 
may be a much broader appetite for regulatory reform if it were 
not simply a device, a curtain to put over helping Wall Street 
and big polluters, and I urge you to explore that.
    Second, you indicated in response to the question regarding 
lifting the Social Security contribution cap so that really, 
really high earners are not capped from contributing to Social 
Security, the question was if we raised the cap, we would not 
solve the problem, and you answered a simple yes. But isn't it 
true that that would sure contribute significantly to solving 
the problem? It is one of the levers that should be on the 
table?
    Mr. Mulvaney. Sure. As I mentioned, Senator--and, again, I 
think when we talked--you could raise the retirement age to 
100, and that would solve the problems in Social Security. You 
can pull every lever a long way and fix it. I guess you could 
take the tax rate to 75 percent. I do not know what the number 
would be.
    Senator Whitehouse. I just want to make sure you do not 
dismiss that particular lever simply because it affects high-
income people.
    Mr. Mulvaney. No, sir. Again, my intention is to lay 
exactly what you and I have discussed--and I have discussed 
this--out for the President and say, ``Mr. President, if you 
want to look at Social Security, here are your five levers. 
Where would you like us to focus?''
    Senator Whitehouse. One of the issues that we focus on in 
this Committee is the question of how you balance the budget. 
And what we have here is different levels of expenditure for 
different kind of things. Over on the far right is $560 billion 
in 2016 for non-defense discretionary, the entire non-defense 
appropriated budget; $607 billion for defense discretionary, 
our entire military operation; $910 billion out the door in 
Social Security, not counting what comes in; and $1.1 trillion 
in all the Federal health care programs together--Medicare, 
Medicaid, veterans' benefits, the works.
    What is here is tax expenditures, and we have had your 
former Speaker say that tax expenditures are just another way 
of spending money for people. We have had Ronald Reagan's 
Budget adviser say if you want to get after the budget problem, 
you have got to get after tax expenditures; it is just another 
way of spending money. It is a particularly tricky way of 
spending money, though, because it tends to help people who pay 
big taxes so that they can get big benefits through the tax 
code, corporations, billionaires, and so forth. And it tends to 
be baked into the tax code. So unlike an appropriation you have 
got to fight for year after year and it gets reviewed by the 
Appropriations Committee year after year, there it is, there it 
sits, there it stays.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    The problem that I have with some of my colleagues on the 
other side of the aisle is they talk a really big game about 
the debt and the deficit. But when it comes to the biggest 
expenditure, the tax expenditures, we cannot get them to budge 
on anything--not the carried interest exception that lets 
billionaires pay lower tax rates than their chauffeurs, than 
brick masons, than truck drivers. That is just, I think, an 
outrage from simple fairness. Cannot get it touched.
    Fossil fuel companies make more money than any other 
companies on the face of the planet. They get big subsidies 
from the taxpayer. Makes no sense.
    Private jet owners can depreciate their jets faster than 
the airlines that fly regular people around. Makes no sense.
    We cannot get one piece of that through the other side of 
the aisle. They will go to the mat to defend every special 
interest, in my experience. We have never been able to do it.
    So if you want to put something together on this, I would 
urge that this administration, which says it is different from 
everything else before and is not just purely allied to 
Republican special interests, really take a hard look at these 
tax expenditures. More money goes out the back door of the tax 
code than goes out through any of these individual programs. A 
one-word answer.
    Mr. Mulvaney. Yes, sir, it may be that you and the 
President get to the same place through a different avenue, but 
you may have just made a very effective case for why we need 
tax reform in this country.
    That being said, if I can borrow your graph, that would be 
great.
    Senator Whitehouse. You got it.
    Mr. Mulvaney. Thanks.
    Chairman Enzi. Senator Corker.
    Senator Corker. Thank you, Mr. Chairman. And, Mr. Mulvaney, 
thank you for being here. You told me in the office that being 
OMB Director was your dream job, I think that's slightly odd, 
but I thank you for your----
    [Laughter.]
    Senator Corker [continuing]. Desire to want to do this.
    I was looking at the forecasts that were laid out today. We 
are $20.355 trillion in debt, and over the next 10 years, we 
are going to add $9.7 trillion. And in spite of some of the 
comments, I think there is actually a large group of people 
here that realize the immorality of that. People speak a great 
deal about jerking the rug out from under seniors. I do not 
think anybody has ever proposed anything like that. But we all, 
I think, are disgusted at ourselves with the immorality of 
living in comfort here today in the United States Senate and 
Congress and not dealing with these issues which we know will 
be hugely problematic.
    Do you believe that this is one of the greatest threats to 
our Nation today?
    Mr. Mulvaney. I do, and that really sank in for me, 
Senator, my very first week here. When I arrived in 2011, I was 
fortunate enough to get on the Budget Committee over in the 
House, and we had a presentation, and one of the--I cannot 
remember if he was there or if someone was talking about his 
presentation, but the Chairman of the Joint Chiefs of Staff, 
Admiral Mullen, had recently made a comment that he thought 
that the national debt was the greatest threat to the national 
security of the United States. And as a new Member of Congress, 
that put the fear of God in me in a hurry.
    Senator Corker. Only 31 percent of our expenditures are 
discretionary spending. I find actually what you said earlier 
about the five levers--I certainly would not want to focus on 
any of my friends on the other side of the aisle, but my guess 
is there are numbers of them that would be willing to look at 
all five of those levers to solve problems. And so I actually 
find your views today to be very much in the mainstream, that 
these are the kinds of things that we all know we need to deal 
with, knowing we face two workers down the road for every one 
person retired. I think most of us fear that we are not going 
to deal with this issue until we are in crisis mode.
    My question is: Mr. Trump did say some things during the 
campaign that I wish he had not said. They are totally 
unrealistic, make no sense whatsoever. And I just wonder, is it 
your sense when you talk with him about the five levers and 
when you talk with him about the fact that it is impossible for 
us to balance the budget with 31 percent of our spending being 
discretionary without dealing with these other programs, do you 
think he understands that?
    Mr. Mulvaney. Senator, I think Senator Graham made this 
comment during his opening statement, which is that--and as I 
mentioned, I have not been quiet and shy since I have been 
here. It is fairly easy to find quotations from me and so 
forth.
    I have to imagine that the President knew what he was 
getting when he asked me to fill this role, so I look forward--
--
    Senator Corker. So you think he understands that we have to 
deal with all of these issues to solve----
    Mr. Mulvaney. I would like to think it is why he hired me--
or wanted to hire me.
    Senator Corker. Let me ask you this: All of us love and 
greatly respect the men and women in uniform, people like Tim 
Kaine's son and the two people who introduced you. When people 
serve in our military, we just have the utmost respect and 
admiration. But do you think OCO funding is an intelligent way 
of building a budget using overseas contingency operations ad 
infinitum, year after year, as a way of solving our budget 
problems?
    Mr. Mulvaney. No, sir, I do not. In fact, I think it is 
beyond not being intelligent. I think it is----
    Senator Corker. It is dishonest, isn't it?
    Mr. Mulvaney. That is the word I was going to use.
    Senator Corker. Okay. Let me ask you this, and in spite of 
the fact that we love our men and women in uniform who serve on 
our behalf, do you think the Pentagon is well run?
    Mr. Mulvaney. I do. I think it does a tremendous job of 
defending the Nation.
    Senator Corker. In acquisitions programs, do you think it 
is a well-run organization?
    Mr. Mulvaney. I look forward to doing more investigation 
and possibly reforming there when possible.
    Senator Corker. What bothers me is we, in the name of 
patriotism, get to the end of a budget, and just about the time 
we are pressing the Pentagon to do some things that it should 
do, we let the pressure off with OCO. And to me, it is 
irresponsible, and I hope you are going to correct that.
    I know that my time is almost up. You and I talked about 
Freddie and Fannie, the two organizations that have to do with 
housing reform. It is your belief, as I understand it, that 
anything related to reforming our housing finance system and to 
the conservatorship that Fannie and Freddie, should be 
legislated by Congress and not done by the executive branch 
through the flick of a pen. Is that correct?
    Mr. Mulvaney. I think the law needs to be changed, yes, 
sir.
    Senator Corker. Thank you so much.
    Chairman Enzi. Senator Warner.
    Senator Warner. Thank you, Mr. Chairman. And I have a 
series of areas I want to go into, Mr. Mulvaney. I enjoyed our 
conversation, but I first want to follow up on Senator Corker's 
last comment.
    As someone on this issue of Fannie and Freddie, I was 
gravely concerned about legislation that you introduced that 
allowed basically a recap and release. Mr. Mnuchin last week in 
his hearing also agreed that we needed to do this through 
legislation. That recap and release that would, frankly, 
greatly have enhanced the financial position of a lot of the 
hedge funds who bought in at very cheap rates would not--if 
they recap and release, would leave a system in place that 
would allow private sector gain when things are going well and 
the taxpayer holding the bag when things happened as they did 
in 2008; we had to put up $188 billion. My hope would be you 
would work with Congress on reform and not simply advocate to 
the President the recap-and-release approach.
    Mr. Mulvaney. Thank you, Senator. I think that various 
members of both the House and Senate have different ideas on 
Fannie and Freddie. I am heartened by the fact that I think we 
are all trying to get to the same end, which is to protect the 
taxpayer, to make sure what happened before does not happen 
again.
    Senator Warner. Again, this is not the time--we do not have 
enough time to go through it, but I believe that the 
legislation you had introduced would not address that.
    I have got a couple other areas I want to get cleared up 
with you. Again, last week, with Mr. Mnuchin, one of the things 
I did like about what he said was, you know, the United States 
is the reserve currency; the United States debt obligations are 
absolutely sacrosanct. We should never jeopardize the full 
faith and credit of the United States.
    Mr. Mnuchin said that the U.S. Government should absolutely 
not have the ability to prioritize our payments and there 
should be no uncertainty when it comes to paying our bills, 
although in the House you voted for prioritization, which in 
effect would say we are going to repay bond holders at a higher 
level than perhaps payments to States or payments to FBI or CIA 
employees. I think that would dramatically undermine the full 
faith and credit, and I think most experts have said that 
prioritization scheme would be a disaster.
    Do you still share that view that prioritization of our 
debts is a reasonable approach? And would that not jeopardize 
the full faith and credit of the United States?
    Mr. Mulvaney. Well, I think it is undesirable to get to a 
situation, Senator, where this is a relevant conversation. But 
if we are simply talking about the principles involved, I do 
believe that the GAO letter from 1985 is still--it is not law, 
but it is good guidance.
    Senator Warner. I sincerely disagree with you, and we will 
again have a chance perhaps to continue this.
    Mr. Mulvaney. Sure.
    Senator Warner. Also, I appreciate your comments about 
Social Security. I would take exception to what the Senator 
from Pennsylvania said. It is true that Federal revenues are 
slightly above the 50-year average. I would point out, over 
that 50-year average, we have run deficits every year that we 
have run at that average. And as a matter of fact, the United 
States, when you consider Federal, State, and local taxes 
combined, is actually 31st out of 34 OECD nations in terms of 
total revenues. Now, we can argue--I do not want us to go to 
those European areas, but you have also signed the Grover 
Norquist no-tax pledge. If you are going to be willing to take 
a look at revenues on Social Security or revenues in terms of 
tax reform, are you going to be able to remain faithful to that 
taxpayer protection pledge? Don't you think having all things 
on the table would be a more appropriate role if you were 
accepted as OMB Director?
    Mr. Mulvaney. Senator, very briefly, because I know your 
time is limited, and we can go into it longer if you would like 
to. But the pledge I think applies to candidates for office, 
which I am giving up, if you all see fit to confirm me. So I 
will not be bound by that. What I would be bound to is telling 
the President the truth and telling him what I believe his 
options to be.
    Senator Warner. Well, I hope that would mean, as you have 
said here today, that that would look at both sides of the 
balance sheet, and clearly, as you list the various levers in 
Social Security, one of those would be looking at additional 
revenues.
    When we met, I am concerned about the administration's 
current position on Federal workers. Many of these Federal 
workers serve their country, and they do jobs with enormous 
passion and pride. They view it as a calling. I know the 
President-elect--or the President has put in place a Federal 
employee hiring freeze. He says that was to address the 
dramatic expansion of the Federal workforce in recent years. 
But, Mr. Mulvaney, are you aware that the size of the Federal 
civilian workforce relative to the country's population has 
actually declined dramatically over the last number of decades 
and that it is actually smaller now than it was under President 
Reagan?
    Mr. Mulvaney. I was not aware of that piece of data.
    Senator Warner. I would hope you would relay that. Are you 
aware that, according to the GAO, nearly one-third of the 
Federal workforce is eligible for retirement between now and 
2019?
    Mr. Mulvaney. I was not aware of that, but that does not 
surprise me.
    Senator Warner. Do you agree that if we are going to 
recruit and retain the best workers--and they are going to have 
to do a job that continues there are going to be challenges as 
we all look at ways that we can get our budget into balance. 
How are we going to do that when we have got disparity between 
public and private sector payment, when we send these kind of 
messages about the value of Federal workers on a going-forward 
basis? How will you reinforce that value statement to a 
workforce that right now is very concerned?
    Mr. Mulvaney. Senator, as I think you and I discussed, I 
think the Federal Government probably could do better in 
dealing with employees who are exemplary and better with 
dealing with employees who fall below our expectations. And all 
I can say to you is I look forward to figuring out a way to 
solve both ends of that problem.
    Senator Warner. Thank you, Mr. Chairman.
    Chairman Enzi. Senator Kennedy.
    Senator Kennedy. Congressman, I am new here, which means I 
have lived in America longer than I have lived in Washington, 
and I want to share a perspective. A lot of Americans are very 
frustrated about what goes on here. Not all of them, but many 
of them. They believe that our country was founded by geniuses 
but it is being run by idiots. They look around, and they see 
incredible things happening in our country. Our people can 
unravel the human genome. They can take a diseased human heart 
and replace it with a new one and make it beat. They can send a 
person to the moon. But their representatives cannot balance a 
budget like they have to do at home or in their small business.
    Now, here is what I would like to know. I do not have 
enough time for you to give me an elaborate answer, but if you 
could give me the high points. If you were king for a day, how 
would you balance our budget?
    Mr. Mulvaney. That is a very tempting question, Senator, to 
ask any elected official, and I am trying to remind myself that 
my goal--my role at OMB is to advise the President. So maybe--
--
    Senator Kennedy. I understand, but I am asking you.
    Mr. Mulvaney. What would we do? We would grow the economy 
first, Senator. In fact, that is probably the only way that we 
ever balance the budget, truly, given the political situation 
that exists in Washington, D.C. There are folks amongst us who 
would want to take a bigger slice of the existing pie. I do not 
think that is a formula for healthy economic growth or success, 
and certainly not----
    Senator Kennedy. Okay. Grow the economy is one. What else?
    Mr. Mulvaney. Well, if you grow the economy, if you end up 
with 10 years of 3- or 4-percent growth, you are talking about 
doubling the size of the economy, which doubles the size of 
Federal receipts, which allows you to balance the budget. In 
fact, I believe it was Mr. Warner or maybe Mr. Whitehouse who 
correctly pointed out that one of the times that we have been 
able to balance the budget was when the economy was growing so 
rapidly.
    Senator Kennedy. I do not mean to interrupt you, but I have 
only got 5 minutes. Anything else?
    Mr. Mulvaney. I would like to figure out a way to end waste 
in Government. If you even assume it is 10 percent within the 
discretionary budget, that is almost $100 billion this year.
    Senator Kennedy. Okay. Let me ask you about waste.
    Mr. Mulvaney. Yes, sir.
    Senator Kennedy. In 2012, Dr. Donald Berwick, a very 
accomplished physician, Harvard trained, he ran CMS for 
President Obama. He testified before Congress that 10 percent 
of our Medicaid spending is fraud.
    Mr. Mulvaney. Okay.
    Senator Kennedy. Not just fraud by patients. Fraud by 
providers. In some States, they get $2 of Federal money for $1 
of State money. So for some, not all, there is not an incentive 
to combat fraud. Is there any way you can use the power at OMB 
to incent States to try to combat Medicaid fraud?
    Mr. Mulvaney. Sir, I do not know off the top of my head. I 
would be happy to take a look at that. And, again, I think I 
will get specific instructions from the President to explore 
doing exactly that, because I think if you say one thing about 
this President, it is that he will not tolerate the type of 
waste and fraud that you have mentioned.
    Senator Kennedy. Okay. I hear from a lot of Louisianians 
and other Americans, not all but many. They believe that--and I 
want to ask you if you agree with this. They believe that part 
of the problem in American society today and with our economy 
and with our culture is that we have too many undeserving--I 
want to emphasize ``undeserving,'' because I do not want to 
paint with too broad a brush. We have too many undeserving 
people at the top getting bailouts, as Sheldon pointed out, and 
we have too many undeserving, not all but too many undeserving 
people at the bottom getting handouts. And the people in the 
middle get stuck with the bill, and they cannot pay it anymore, 
because their health insurance has gone up and their taxes have 
gone up and their kids' tuition has gone up. Do you agree with 
that?
    Mr. Mulvaney. Senator, I think those folks would be 
heartened by what they saw out of the President on Saturday, 
because I believe that was the theme of the inaugural speech 
that he gave, that those folks who have been forgotten for so 
long will not be forgotten anymore, and that he will listen to 
them. And if I get the opportunity to work at OMB, I will do 
whatever I can to help him do just that.
    Senator Kennedy. Thank you, Congressman. I think you will 
do a great job at OMB.
    Mr. Mulvaney. Thank you, Senator. Welcome here.
    Chairman Enzi. Senator Kaine.
    Senator Kaine. Thank you, Congressman. Great meeting in my 
office.
    In announcing as a candidate in October that he would do a 
Federal hiring freeze, Candidate Trump said that it was 
necessary to reduce ``corruption and special interest 
collusion.'' If you know, why is the administration pitching 
the false view that Federal workers are corrupt or beholden to 
special interests?
    Mr. Mulvaney. I am not familiar with the statement, Senator 
Kaine, so I am not really comfortable commenting on it.
    Senator Kaine. Okay. A freeze has a lot of effects. The 
most direct effect would be on people seeking to work with the 
Trump administration. Why would there be an assumption that 
people coming to work with the Trump administration would come 
with corruption or special interest collusion problems?
    Mr. Mulvaney. Again, I do not think there is an assumption 
hard-wired in to any system that the Federal workers are 
corrupt. I think you and I both know as----
    Senator Kaine. I am happy to hear you do not share what the 
President stated was the reason for this. Let me ask you this--
--
    Mr. Mulvaney. There are--yes, sir.
    Senator Kaine. You had legislation on hiring freezes that 
said if three people left by attrition or got other jobs, you 
could hire one in. My understanding of the hiring freeze that 
was announced yesterday, it is even more strict than that. 
Isn't that your understanding, no new hires?
    Mr. Mulvaney. I am not familiar with the details of what 
they laid out yesterday. I am happy to talk about my own bill, 
if you like.
    Senator Kaine. Many applicants for Federal employment are 
veterans because of a significant veteran's preference. It 
seems like a bad idea to me to do a freeze that would have the 
effect of putting roadblocks up to veterans seeking Federal 
employment.
    Do you worry, like I do, about backlogs in processing of 
Social Security disability claims, veterans' benefit claims, 
backlogs in getting drugs permitted, potentially lifesaving 
drugs permitted to go on the market?
    Mr. Mulvaney. I worry about inefficiencies at many levels 
of Government.
    Senator Kaine. And I am concerned that hiring freezes in 
some of these areas where we are already seeing backlogs could 
have the effect of even making it harder for citizens to get 
the service they need. Am I wrong to be concerned about that?
    Mr. Mulvaney. I do not think you are wrong to be concerned 
about it, Senator. I do not think it automatically follows that 
hiring more people will create more efficiency.
    Senator Kaine. Have you read the GAO studies of blanket 
hiring freezes under earlier administrations, Democratic and 
Republican, that suggest that they are ineffective, that they 
hurt service to citizens and they may cost more money than they 
save?
    Mr. Mulvaney. I have not seen those, sir.
    Senator Kaine. Do you know whether the administration 
reviewed those before announcing the hiring freeze?
    Mr. Mulvaney. I do not know.
    Senator Kaine. The House resurrected the Holman rule, 
allowing Congress the power to slash individual Federal 
workers' salaries as low as $1 per year. Did you vote for that?
    Mr. Mulvaney. I believe I did, yes, sir.
    Senator Kaine. There have been reports about the incoming 
administration----
    Mr. Mulvaney. Excuse me. I am sorry. Senator, let me 
correct that. I believe that may have been contained in our 
rules package this year, and if that is the case, then I did 
not vote on it. I apologize.
    Senator Kaine. Okay. We will check the record. Thanks for 
that clarification. Did you support it?
    Mr. Mulvaney. As you and I have discussed, I do support 
some application of the Holman rule in some circumstances.
    Senator Kaine. Okay. There have been reports that the 
incoming administration has been trying to gather intelligence 
about whether employees worked on priorities that they do not 
like, for example, Department of Energy employees that worked 
on climate activities. Were you aware of those reports?
    Mr. Mulvaney. I am not; no, sir.
    Senator Kaine. So you were not aware that they have been 
widely perceived as sort of being intimidating of employees 
that worked on priorities that the President does not share?
    Mr. Mulvaney. Again, I am not familiar with them.
    Senator Kaine. Do you want a high-morale, high performance 
Federal workforce or a low-morale, low performance Federal 
workforce?
    Mr. Mulvaney. High morale, high performance.
    Senator Kaine. How is calling Federal employees ``corrupt'' 
and ``beholden to special interests,'' freezing any new hiring 
into Federal employment, gathering information about employees 
who have worked on priorities that the new President does not 
share, and supporting a role that could target individual 
employees for massive salary reductions likely to build a high-
morale, high-performance organization?
    Mr. Mulvaney. I think that rhetoric taps into a concern, 
shared by many, including yourself, that there are Federal 
workers who do not live up to our expectations, and it is 
hard----
    Senator Kaine. But we should not paint them with a broad 
brush, should we, Congressman?
    Mr. Mulvaney. Anytime you paint with a broad brush, 
Senator, you run the risk of going outside the lines.
    Senator Kaine. In your prepared testimony, you state, ``I 
have learned that I do not have a monopoly on good ideas. 
Facts--and the cogent arguments of others--matter. I will be 
loyal to the facts and to the American people . . . I serve.'' 
Let me ask you some questions about facts.
    Mr. Mulvaney. Sure.
    Senator Kaine. Agree or disagree. A full repeal of the ACA 
with no replacement will cause many people to lose health 
insurance. Agree or----
    Mr. Mulvaney. With no replacement, that is a true 
statement.
    Senator Kaine. A full repeal of the ACA with no replacement 
will be a massive tax break for wealthy Americans because of 
two high-earner taxes in the law. Agree or disagree?
    Mr. Mulvaney. Again, I have seen these lists, Senator, but 
I do not think anybody is proposing that we repeal without 
replacing. So the answer to your question is yes.
    Senator Kaine. A full repeal of the ACA with no replacement 
will increase the deficit. Agree or disagree?
    Mr. Mulvaney. Again, if you assume that there is no 
replacement, I think that--no, actually, I think the CBO report 
says that a full repeal with no replacement actually decreases 
the deficit.
    Senator Kaine. No. The CBO says it increases the deficit by 
$137 billion a year in 10 years if you assume dynamic scoring, 
$350 billion a year if you do not, over 10 years.
    Mr. Mulvaney. I saw the report that I think Mr. Enzi asked 
for in 2015 that gave a different conclusion, but I would be 
happy to look at the one you----
    Senator Kaine. All right. Thank you. A full repeal of the 
ACA with no replacement would once again allow insurance 
companies to discriminate against women and those with 
preexisting health conditions.
    Mr. Mulvaney. Again, I have not seen reports on that, but--
--
    Senator Kaine. With no replacement.
    Mr. Mulvaney. But no one is proposing no replacement.
    Senator Kaine. A full repeal of the ACA with no replacement 
would raise prescription drug costs for seniors under Medicare 
Part D because of reopening the donut hole.
    Mr. Mulvaney. I am not sure about that one.
    Senator Kaine. Okay. Climate change, driven partly by 
human-generated CO2 emissions, is a huge risk. Agree 
or disagree?
    Mr. Mulvaney. Again, you and I have talked about this. I 
have talked about this with Mr. Sanders. I am not really sure 
of the nexus between the OMB operation----
    Senator Kaine. I am not asking about OMB. I am off OMB now.
    Mr. Mulvaney. Okay.
    Senator Kaine. Just a statement of fact, agree or disagree. 
You are going to follow the facts. Climate change, driven 
partly by human-generated CO2 emissions, is a huge 
risk. Agree or disagree?
    Mr. Mulvaney. I am not convinced we are at the point where 
we have to--start to require American citizens to pay high 
prices----
    Senator Kaine. I am just asking do you agree with the fact. 
Is climate change, driven by human-generated CO2 
emissions, a huge risk?
    Mr. Mulvaney. Yeah, I challenge the premise of your fact.
    Senator Kaine. You do not agree with--and, finally, the 
Federal workforce is at its lowest as a percentage of the total 
workforce in 70 years. Agree or disagree?
    Mr. Mulvaney. Mr. Warner mentioned that, and I have no 
reason to believe he was not telling me the truth.
    Senator Kaine. Okay. Thank you.
    Thank you, Mr. Chair.
    Chairman Enzi. Senator Johnson.
    Senator Johnson. Thank you, Mr. Chairman.
    Congressman Mulvaney, Mrs. Mulvaney, I really want to thank 
both you and your family for your willingness to serve. I know 
Senator Corker used the word ``odd.'' I think when we met, I 
said ``crazy.''
    Mr. Mulvaney. I have been called worse.
    Senator Johnson. I hope you are enjoying this.
    As an accountant, as a business person, what drives me nuts 
in the Federal Government is lack of information, cherrypicking 
of information. I think we have seen some of that already 
today. I would say, as Chairman of Homeland Security, I am 
often asked: What is the greatest threat facing this country 
right now? And it is not climate change. I have been answering, 
and sometimes I am usually saying the denial of reality. We 
simply are not facing up to these enormous problems.
    I want to talk to you a little bit about real information, 
what is really going to drive this, but I want to go back to 
Senator Kennedy talking from my standpoint, the number one 
component of the solution, which is growth. And let us talk 
about actual information in terms of how effective that would 
be. If we go from 2 to 3 percent, that is another $14 trillion 
added to our economy over 10 years; 2 to 4 percent is $29 
trillion. Even with the meager economic growth we have had 
since 2009, revenues flowing into the Federal Government have 
increased by $1.1 trillion. So, clearly, focusing on economic 
growth is the number one component to the solution.
    For me, there are four elements, and I want to talk about 
two because it is going to completely fall in your bailiwick as 
OMB Director. The first one, though, is energy, and it looks 
like this administration is dedicated to utilizing our energy 
resource, which is a good thing. We have to reform our tax 
code. It is a disaster, costs somewhere $200 to $300 billion to 
comply with, which is part of that regulatory burden, which is 
in your bailiwick. We have numerous studies saying it is coming 
close to $2 trillion per year to comply with Federal 
regulations.
    You have debt per household, $260,000 per household. The 
regulatory burden is $14,800 per household. That is an enormous 
burden.
    Then we can talk about debt, but let us focus a little bit 
just on providing information so we can actually start managing 
the Federal Government properly. Social Security--no, let us 
talk about debt, deficit. Over the next 30 years, the deficit, 
according to CBO, will accumulate $103 trillion. That is tacked 
onto our $20 trillion. Now, that is clearly unsustainable. We 
were talking about Social Security earlier. Of that $103 
trillion, $14 trillion is in Social Security, $34 trillion is 
in Medicare, over $50 trillion is in interest on the debt. So 
if we do not want to pay creditors over the next 30 years, $50 
trillion interest on the debt, we have to address Social 
Security and Medicare.
    And, again, I want to talk a little--again, we use the 
demagoguery. We can talk about, you know, hey, just raise the 
retirement age. According to the Social Security trustees, 
increasing the retirement age from 67 to 70, over 4 years, 
fills $1 trillion of that $14 trillion deficit of Social 
Security. So, again, I agree with you. You have got multiple 
levers. You are going to have to pull all of them.
    Just talk to me about your dedication as OMB Director to 
provide Congress and, even more importantly, the American 
people with real information on a macro basis so we can 
actually address these problems.
    Mr. Mulvaney. Senator, you left off one, at the risk of 
trying to correct a Senator in the middle of a Senate hearing.
    Senator Johnson. Be my guest.
    Mr. Mulvaney. And we have not talked about it today. There 
is a CBO report out--and I cannot remember if it is 2054 or 
2044--where under the current baseline, the assumptions that 
things stay the way that we are, 100 percent--by the mid-2050s, 
100 percent of what we take in goes to one item and one item 
only, and that is interest payments on the debt. No money for 
Social Security, none for Medicare, none for Medicaid, none for 
national defense, none for any of the things we have talked 
about here today. That frightens me. I do not want to be 
alarmist, but the point of the matter is we have allowed things 
to get in a bad situation, and now it will fall to us to make 
some very difficult decisions.
    What do I see as my job? And why do I think I might be good 
at it? I see my job as giving some really, really hard facts to 
some really, really important people under very difficult 
circumstances. I think I have the ability to do that. It is not 
easy to go into a retirement community and tell people, ``Look, 
we have to talk about ways to fix Social Security.'' I think 
that probably pales in comparison to walking into the Oval 
Office and saying, ``Now, Mr. President, here is where we stand 
on Social Security, here is where we stand on Medicare, here is 
where we stand on all of the other items.'' That is not easy to 
do. So maybe you are right and I am crazy to want to have this 
job, but somebody has to do it, because we cannot get to a 
point 20 years from now where people throw their hands up and 
say, ``Well, I did not know this was going to happen.'' We know 
it is going to happen, and the time to start trying to fix it 
is now.
    Senator Johnson. So my only question is: Are you dedicated 
to providing us the information, the facts, so we can start 
ending the denial of reality and start addressing these 
enormous challenges? Because this is clearly unsustainable.
    Mr. Mulvaney. It is one of the few things that would allow 
me to leave my family for the next several years, as long as 
the President would have me, so that I could do just that. I 
could look at my kids 20 years from now and say the time that I 
was away from you, from age 11 to age whatever, was worth it 
because I was able to do exactly what you just said.
    Senator Johnson. Thank you for your willingness to do that.
    Thank you, Mr. Chairman.
    Mr. Mulvaney. Thank you, Senator.
    Chairman Enzi. Senator Van Hollen.
    Senator Van Hollen. Thank you, Mr. Chairman.
    Mr. Mulvaney, great to see you. It was good to serve with 
you in the House and on the Budget Committee, and I have told 
my colleagues who asked that you were a straight shooter and 
that you had a consistent set of views--I would argue in many 
cases consistently wrong, but, clearly, you have held to your 
positions and you have been straight in your communications 
with members in this Committee.
    One area where I think you have got it exactly right--and I 
think this came out in the questioning by Senator Corker--was 
with respect to the fact that Congress has tried to use the 
overseas contingency account, the war savings account, as a 
slush fund in order to escape the budget agreement. Do you 
still hold the view that that is a runaround on the budget 
agreement, and that if we are going to address those issues, we 
should address them in a straightforward manner rather than 
what was referred to by Senator Corker, I think, as a dishonest 
manner?
    Mr. Mulvaney. And I think this has become fairly an 
orthodox position in both parties, is that everyone admits now 
that the overseas contingency operations budget, the war 
budget, is used for that specific purpose. In fact, I think it 
was part of the omnibus agreement last year to use OCO for 
items that were not war related.
    Senator Van Hollen. And do you agree that that is a wrong--
that is an abuse of the budget process?
    Mr. Mulvaney. I do. It is not emergency spending. It puts 
us in a situation--imagine, Mr. Van Hollen, if the budget was 
balanced----
    Senator Van Hollen. I have limited time.
    Mr. Mulvaney. Yes. The answer is yes.
    Senator Van Hollen. You agree it is an abuse of the 
process, and as OMB Director, if you are confirmed, you will 
not pursue----
    Mr. Mulvaney. I will look forward to having an opportunity 
to explain to the President why I think it is not a good way to 
spend American taxpayer dollars.
    Senator Van Hollen. Okay. My concern relates largely to 
some of the judgments you have made on issues, and some of them 
were raised earlier by Senator Warner and others. One incident 
was around the whole issue of the debt ceiling, because we were 
introduced over the weekend to the phrase, the expression 
``alternative facts.'' And I think as OMB Director and as a 
country, we have got to be very rooted in reality and not in 
alternative reality.
    Here is what the former chief Republican economist of this 
Budget Committee said about getting too close to the debt 
ceiling--too close, not even going over it: ``New research from 
academics and the GAO strongly indicates that the movement 
toward expiration is accompanied by an increase in the 
Government's cost of issuing new debt.'' Translation: Taxpayers 
pay more.
    Douglas Holtz-Eakin, former CBO Director appointed by 
Republicans: ``Failure to raise the debt ceiling leads to very 
bad economic outcomes and chaos in the financial markets.'' 
Translation: It hurts the economy, it hurts working people.
    You have been part of legislation in the past to suggest 
that the Federal Government could violate its obligations, and 
so long as it was not an obligation to bond holders, like the 
Chinese Government and others, that that would be somehow 
acceptable.
    As OMB Director, will you abandon that view, or are you 
going to continue to pursue that view?
    Mr. Mulvaney. Certainly bumping up against the debt ceiling 
is an undesired situation. We know what is going to happen. 
There are additional facts, however, which you left off, which 
is the fact is that historically--and this goes back to the 
Roosevelt administration--the debt ceiling was always used and 
has regularly been used as the opportunity for us to sit back 
and say, ``Now, wait a second. Why do we have to raise the debt 
ceiling again?'' So it is a fact that it has regularly been 
used to try and pass reform legislation to help solve some of 
the issues that are driving the debt in the first place.
    Senator Van Hollen. Do you dispute the GAO finding that it 
cost the taxpayers over $1 billion the last time we had a real 
showdown on this issue? Do you dispute--I am just asking a 
question. Do you dispute the GAO finding? You cited them for 
other--in positive ways. Do you dispute that finding?
    Mr. Mulvaney. I do not dispute there was a short-term cost. 
I do not know if I agree with the exact billion dollar figure.
    Senator Van Hollen. Yeah, and that was--we did not even 
breach it, right? And so, obviously, if you actually breach it, 
you are going to have a huge cost to taxpayers.
    Let me ask you a question, to pursue Senator Whitehouse's 
earlier chart. It is absolutely true the Congressional Budget 
Office says the tax expenditure category is far greater than 
what we pay on Social Security.
    In other words, if you add up all the tax breaks, all the 
tax loopholes, on an annual basis that is a greater number than 
we spend on Social Security, a greater number than we spend on 
discretionary spending.
    Simple question: The President has said that he wants to 
close the carried interest tax break. Will you agree to close 
that tax break for the purpose of reducing the deficit and the 
debt?
    Mr. Mulvaney. I have not had the opportunity to talk with 
the President about that. I look forward to having that 
conversation. I will tell you that I have seen various tax 
reform proposals that do that along with----
    Senator Van Hollen. Well, it is a simple question, because 
it goes to your statements about how important it is to reduce 
the deficit and the debt. I agree we have a long-term 
challenge. You have signed in the past the Grover Norquist 
pledge that says you will not reduce one tax break for the 
purpose of reducing the deficit, that every contribution from 
closing the carried interest tax loophole, for example, has to 
go into reducing tax rates for somebody else.
    If we are going to address the deficit and the debt, aren't 
we going to have to look at new tax revenue, including closing 
down special interest tax breaks for that purpose?
    Mr. Mulvaney. You have raised a couple different issues. 
One short answer would be that one way to get new tax revenues 
would be to grow the size of the economy. But to the specific 
point about the role going forward--and I think I have 
mentioned this before--I fully recognize and accept and welcome 
the fact I am changing from being a Representative of 750,000 
people back home to advising the President of the United 
States.
    Senator Van Hollen. Thank you.
    Thank you, Mr. Chairman.
    Chairman Enzi. Senator Grassley.
    Senator Grassley. In our office meeting, we discussed the 
continued inability of the Defense Department to get its books 
in order so that a clean financial audit can be justified. 
Without accurate and complete financial information, the 
leadership does not know how the money is being spent and what 
things cost. Bad information leads to bad decisions.
    It is important that you as OMB Director take a personal 
interest in helping get the Defense Department's audit 
readiness initiative back on track. Unfortunately, the upcoming 
statutory deadline of September 30th this year that was 
actually set 6 years ago to be audit ready is becoming a sham. 
It is time to either deploy a finance and accounting system 
that can generate reliable information or clean house in DOD's 
chief financial office.
    So I hope you are willing to hold the Defense Department's 
feet to the fire and see that they are taking meaningful action 
to be audit ready. That is a question.
    Mr. Mulvaney. Yes, sir, and I have been more than a little 
pleased about my very brief discussion so far with General, now 
Secretary Mattis, who I believe shares your, my, and apparently 
the President's commitment to driving efficiencies in to the 
operations at the Defense Department.
    Senator Grassley. The next question leads to the point that 
your work as Management Director as opposed to Budget Director 
may actually do more good for our country. I do not have a 
question, but I would like you to hear me out and commit to 
consider my point of view on pending regulations relating to 
EB-5 Immigrant Visa Program. The program was intended to bring 
much needed jobs and capital to rural and economically 
distressed areas. But as we have proven over and over, the EB-5 
Regional Center Program has been plagued by fraud and abuse. 
The Obama administration produced regulations, thank God, to 
improve the EB-5 Immigrant Visa Program. The regulations would 
clean up the program by stopping gerrymandering and increasing 
investment levels for the first time since this program was 
created in 1991.
    I bring this up because right now these regulations were 
published last week and need to be finalized and need to be 
kept by the Trump administration. This is a bipartisan and 
bicameral issue, and all Judiciary leadership in both the House 
and Senate, Republican and Democrat, support the regulations. 
So I hope you will take our support for these regulations 
seriously.
    Mr. Mulvaney. I will, and I was pleased to have the 
opportunity for you to inform me about some of the things I was 
not aware of, for example, the gerrymandering issue. And you 
have my commitment that I will take that directly to the 
President if given the opportunity.
    Senator Grassley. Okay. The Chairman brought this issue up. 
I want to bring it up in a little different way. I have worked 
for years to tackle abuse of Federal charge cards. In 2012, 
Congress passed my legislation to establish a set of controls 
for each agency that they must have in place to prevent misuse 
of Government-issued charge cards. Of course, your agency is in 
charge of issuing guidance and ensuring agency compliance. 
While there have been reductions in abuse, agencies must remain 
vigilant. OMB needs to make sure the agencies continue to 
comply. I know you were an active Member in Congress to reduce 
improper payments. Will you commit that OMB under your 
leadership will remain vigilant in ensuring agencies do 
everything they can to prevent misuse of Government-issued 
charge cards?
    Mr. Mulvaney. Senator, this President will not tolerate the 
type of abuse that you just referenced, and you have my 
absolute commitment to do just as you request.
    Senator Grassley. Okay. Last question. The previous 
administration believed in deficit spending in order to invest 
in Government initiatives to help the middle class. CBO has 
analyzed in great detail the long-term consequences of deficit 
spending. They have found that in future years, a growing 
portion of people's savings would go towards buying Government 
debt rather than productive capital investment. That is 
crowding out, as you know. The smaller capital stock would 
result in lower wages and incomes, making future generations 
worse off.
    Now, this may sound like a softball question, but it is 
very basic. What is your view on the impact of deficits and 
debt on future generations?
    Mr. Mulvaney. The crowding out is real. The numbers I have 
seen in the academic research would indicate that, give or 
take, when debt approaches 85 percent of GDP, you start to see 
real effects of crowding out. And there is a correlation 
between the size of the debt and the reduction in the growth of 
GDP and the reduction in the growth of employment.
    I think the current CBO projections are that--the way they 
measure the debt will be at 85 percent roughly by 2024 or 2025. 
This is a very real and pressing issue. It affects your family; 
it affects my children, their ability to get a job going 
forward, and I take it deadly seriously, sir.
    Senator Grassley. Thank you for your good answers.
    Chairman Enzi. Senator King.
    Senator King. Thank you, Mr. Chairman.
    Congressman Mulvaney, welcome. First, I want to associate 
myself with the comments of Senator Corker and yourself on OCO. 
OCO is too easy, and it is really not an honest way to deal 
with the defense budget, which has real needs, but it should 
not be done through the borrowing and not paying for it.
    Also, I completely share your view that the debt and the 
deficit are a grave issue facing this country. My particular 
concern is about interest rates. Interest rates, as you know, 
are at a historic low right now, and it is pretty easy to 
calculate. For every 1 percent an interest rate goes up, we are 
out 100--well, now $200 billion. And that can very rapidly eat 
up almost the entire current discretionary budget in a hurry, 
just by forces over which we have no control. So absolutely 
right to be concerned about that.
    Let me talk a bit about the issue of management. The title 
of your job is the Office of Management and Budget. Most of 
today has been talking about budget. The Chairman at the 
beginning talked about overpayments in the Federal Government, 
something like $144 billion. Another piece of that is 
undercollection of revenues by the IRS, which is estimated as 
high as $500 to $600 billion. Most of us pay our taxes that are 
owed. Some people do not. Those who do not are not paying their 
fair share. If you put those two together, $600 billion a year, 
that would eliminate the current deficit just through better 
management.
    Now, the problem is it is going to take more people to 
provide that management. You cannot expect the IRS to improve 
their collection with fewer people. So I hope that you will 
take seriously these opportunities, but you cannot move in two 
directions at once by reducing the Federal workforce and still 
expecting more results in terms of monitoring overpayments or 
collecting more efficiently through the IRS.
    Mr. Mulvaney. I recognize that, and that is an excellent 
point, Senator. I would encourage you at the same time to 
consider that another way to increase collection without having 
to hire more people is to have a simpler tax code, and that one 
of the reasons--certainly there are people who choose not to 
pay. They are devious. They do not want to follow the law. They 
get all that. But there are a lot of folks who do not pay just 
because it is really, really hard to do. And it might make it 
actually easier to collect if we had a tax code that was easier 
for folks to comply with.
    Senator King. I remember once when I worked here many years 
ago, there was a proposal that Members of Congress should have 
to prepare their own tax returns. That might solve a lot of 
these complexity problems.
    Should tax cuts be revenue neutral?
    Mr. Mulvaney. If I have a chance to sit and talk to the 
President about this, I would encourage him to look first and 
foremost on the effects on the overall economy, on the effects 
of growth of any tax cuts, because as I have mentioned here a 
couple times today, given the political situation we face in 
this country, I think the best chance you have to reduce the 
deficit or balance the budget is to accomplish economic growth. 
That should be the first-
    Senator King. I would agree with that, but there is this 
theology out there that lowering taxes equals greater economic 
growth. I have tried seriously to find economic studies that 
substantiate that. I have not been able to find them. For the 
record, I would appreciate your supplying whatever data you 
have or studies that have indicated that that is the case. The 
Bush tax cuts in the middle of the last decade did not have 
that effect. My understanding of the experiment going on in 
Kansas is that it has not had that effect.
    So I think we need to be careful with a cavalier assumption 
that tax cuts will indeed stimulate growth and, therefore, be 
self-funding. That is an idea that kicks around here. But I do 
not think there is much data to support it, and the problem is 
if it does not work, you have only dug the hole deeper. And if 
you add the proposed tax cuts, $450, $500 billion a year, to 
increased defense spending, to the current deficit, you are 
talking about a $1 trillion a year further deficits.
    Mr. Mulvaney. And I would like, Senator, for you to share 
that information as well. My commitment to you in the opening 
statement stands. In fact, it is how I look at the job, very 
seriously, which I want to take a fact-based approach when 
advising the President. So if there is data that you would like 
me to see on that point, I would welcome it.
    Senator King. Well, and on the question of tax cuts, I had 
a friend, a guy in a hardware store, a clerk, tell me that 
there is no such thing as a tax cut when you are in a deficit 
situation because if you cut taxes and borrow the money to fill 
the hole, all you are really doing is shifting those taxes to 
your kids. And I think that is an important point. So we have 
to be really careful about this, that we not simply give 
ourselves a tax cut and then lay it on our kids who are going 
to have to eventually pay it with interest.
    Mr. Mulvaney. It is amazing sometimes how much sage advice 
you can get in a rural hardware store. I have had the same 
experience.
    Senator King. Particularly in Maine. [Laughter.]
    Mr. Mulvaney. I like the ones in South Carolina, but I take 
you at your word.
    Senator King. A final quick question. There has been some 
discussion about the debt ceiling, and you voted against it, 
and you feel this is an opportunity for a conversation. Will 
you counsel the President that violating the debt ceiling is 
not a big deal?
    Mr. Mulvaney. I will counsel the President as to the 
ramifications of raising the debt ceiling and of not raising 
the debt ceiling. I feel like I have a grasp of both sides of 
that issue and look forward to conveying both--all of the 
arguments to him so that he can make the best decision 
possible. And then I will----
    Senator King. I hope you will----
    Mr. Mulvaney [continuing]. Defend his position.
    Senator King. I hope you will take that very seriously, 
because I have never seen any particular data or studies that 
indicate that violating the debt ceiling would be good for the 
American economy. Thank you, Congressman Mulvaney.
    Mr. Mulvaney. Thank you, Senator.
    Senator King. Thank you, Mr. Chairman.
    Chairman Enzi. Senator Boozman.
    Senator Boozman. Thank you, Mr. Chairman. And thank you for 
being here. We have talked a lot about the fact that we are $20 
trillion in debt, looking at significant indebtedness in the 
next 10 years. The point that Senator King brought up about the 
interest rate, I would like to follow up on that in the sense 
that--what is the interest rate that we are paying now on the 
national debt? Not as far as dollars, but the percent.
    Mr. Mulvaney. I think your effective rate is probably right 
around 2 percent. You are going to pay about $400 billion of 
interest this year.
    Senator Boozman. And we talk about the economy heating up, 
which we desperately want, and yet that is going to cause 
interest rates to go up.
    Is it true that traditionally the debt is serviced at 5 to 
6 percent?
    Mr. Mulvaney. I think the historical 40-year average, which 
is roughly my adult lifetime, is about 6 percent, yes, sir. And 
it has been as high as 16 or 18 in the 1970s and 1980s.
    Senator Boozman. But 5 or 6 percent is a conservative 
number----
    Mr. Mulvaney. Yes, sir.
    Senator Boozman [continuing]. That we could all agree on. 
What does it cost for every 1 percent increase in the----
    Mr. Mulvaney. A good rule of thumb right now is $200 
billion.
    Senator Boozman. $200 billion per year?
    Mr. Mulvaney. Yes.
    Senator Boozman. Okay. Very good. So you are talking about 
a tremendous amount of money over a 10-year period.
    Mr. Mulvaney. Yes, sir.
    Senator Boozman. And as Senator King pointed out, you get 
in a situation, just like individuals get, where you simply 
cannot service the debt. So $200 billion, that is a third of 
our defense budget.
    Mr. Mulvaney. That is correct. Yes, sir. It is almost 
exactly that.
    Senator Boozman. So, again, I think it really highlights 
the importance of getting these things under control, as my 
constituents understand.
    Mr. Mulvaney. Yes, sir.
    Senator Boozman. One of the things I think we can all agree 
here is that the budget process, the appropriations process, is 
broken. Here we are into almost February. The fiscal year 
started in October, and we are not going to have this thing 
resolved for another couple months as far as fiscal year 2017, 
much less fiscal year 2018. So how do our agencies, how can 
they spend efficiently? We talk a lot about Government waste. 
How can you be efficient when you are facing that kind of 
scenario?
    Senator Enzi, myself, I talked to you when you were in the 
office about biennial budgeting, things like that. Do you have 
any ideas as to how we can, again, as a Congress, attack the 
situation that we have so that we can make the process more 
efficient and ultimately save a lot of money?
    Mr. Mulvaney. You are exactly right, Senator. The 
Government agencies, most specifically the Defense Department, 
struggle to operate efficiently under a continuing resolution, 
which is typically what we have done here for the last several 
years. And as I have discussed with you and many members of 
this Committee, reinvigorating the ordinary regular 
appropriations process should be not only a priority of 
Congress, but I hope to help make it a priority for the 
administration and have the opportunity to explain to the 
President why it is important that appropriations work, not 
only for political purposes but for actual practical purposes 
and why having an appropriations bill allows the Department of 
Defense, for example, to operate more efficiently.
    So I am hopeful that you will have whatever support you 
need from the White House in order to reinvigorate the 
appropriations process.
    Senator Boozman. Very good. On the issue of improper 
payments, which we have talked about, during your time on the 
House Oversight Committee, you sponsored legislation to empower 
States to access Treasury's Do Not Pay database. Despite 
similar legislation actually being signed into law, it appears 
OMB has yet to give States the access. Can we look forward to 
seeing these resources being made available to the States for 
their use?
    Mr. Mulvaney. Yes, sir. I think one of the advantages of 
having one of the co-authors of an improper payments bill 
running OMB is that you can pretty much count on the fact that 
we will take that very, very seriously.
    Senator Boozman. Very good. Under President George W. Bush, 
OMB instituted an administrative PAYGO rule requiring any rules 
or other administrative actions which increase the deficit be 
offset by other actions that would reduce the deficit. 
President Obama opted not to use this ability. Will you go back 
to enforcing this rule as OMB Director?
    Mr. Mulvaney. Yeah, I would like to point out I believe 
that rule was actually originally attached to a debt ceiling 
debate. That is one of the specific examples of how we do take 
that opportunity to step back and try and reform our spending 
system. I look forward to advocating to the President that it 
would be fiscally sound for this administration to encourage 
PAYGO.
    Senator Boozman. One of the problems we have had not only 
in the past administrations but administrations in general is, 
as we ask for things from OMB, ask for things from the various 
agencies, sometimes those are not given to us in a timely 
fashion. I know you have been frustrated with this as a Member 
of Congress. I think everybody in this room has been 
frustrated.
    Will you tell us that you will be very responsible in doing 
that so that we can get the information that we request?
    Mr. Mulvaney. As I believe I mentioned in my opening 
statement, I have been on the other side of that. Having been a 
Member of Congress and seeing what it does to the way we 
operate when we do not talk to each other, do not communicate, 
and one side hides information from another, it is not helpful 
to anybody, and it is certainly not helpful to the people that 
we represent. So I do look forward to helping the information 
flow again and to having a good relationship with all parties 
on both sides of the Hill.
    Senator Boozman. Good. Thank you, Mr. Chairman.
    Chairman Enzi. Senator Merkley.
    Senator Merkley. Thank you very much, Mr. Chairman. We have 
a lot of hearings in different parts of the building, in this 
case in the Capitol, and I wanted to start with where Senator 
Cotton was when he was introducing you, which he referred to 
you as a ``bold truth teller.''
    I have behind me two pictures that were taken at about the 
same time of day in 2009 and 2017. Which crowd is larger--the 
2009 crowd or the 2017 crowd?
    Mr. Mulvaney. Senator, if you will allow me to give the 
disclaimer that I am not really sure how this ties to OMB, I 
will be happy to answer your question, which is: From that 
picture, it does appear that the crowd on the left-hand side is 
bigger than the crowd on the right-hand side.
    Senator Merkley. Thank you. The President disagreed about 
this in his news report. He said, ``It is a lie. We caught 
them. We caught them in a beauty,'' referring to the press 
reporting. He said, ``It looked like a million, a million and a 
half people.''
    The reason I am raising this is because budgets often 
contain buried deceptions. You and I talked in my office about 
the magic asterisks. This is an example of where the 
President's team on something very simple and straightforward 
wants to embrace a fantasy rather than a reality. In fact, it 
has come up a lot because Sean Spicer, the Press Secretary, 
said that the photographers framed their photos to minimize the 
enormous support on The Mall--in other words, a conspiracy 
thesis--and went on to say it was ``the largest audience to 
witness an inauguration, period.'' I gather you would disagree 
with the Press Secretary.
    Mr. Mulvaney. Again, I would be happy to comment on the 
photograph----
    Senator Merkley. With your caveat.
    Mr. Mulvaney. I am not familiar with the statements. I do 
agree that the photographs were as you represented them.
    Senator Merkley. Thank you. Chuck Todd noted in his 
conversation with Kellyanne Conway that you had just had a 
Press Secretary at the start of his time in his office present 
a falsehood to the press and to the American people. And 
Kellyanne Conway responded, ``You are saying it is a falsehood. 
Sean Spicer gave alternative facts.''
    Are you comfortable, as you proceed as a key budget 
adviser, presenting falsehoods as simply an alternative fact?
    Mr. Mulvaney. As you and I discussed in your office, I have 
every intent and believe that I have shown up to this point in 
my time in Congress that I am deadly serious about giving you 
hard numbers, and I intend to follow through on that.
    Senator Merkley. One of the false facts that has been 
repeated in previous budgets is to say that tax cuts for 
corporations and tax cuts for the rich in America will increase 
revenue. I have gone through the numbers from 1981, from 2001, 
and 2003. I am sure you are familiar with this. Did President 
Reagan's 1981 tax cut increase or decrease revenue?
    Mr. Mulvaney. Senator, we just had a chance to discuss that 
with Senator King, and I will invite him to do--you to do the 
same thing I invited him to do, which is, as I commit to you to 
take a fact-based approach to the budget, I would welcome any 
information you have on those types of matters.
    Senator Merkley. Are you unfamiliar with the 1981 tax cut?
    Mr. Mulvaney. I am familiar with it generally. I was 14 
years old.
    Senator Merkley. Did revenue go up or down in the 2 or 3 
years following that?
    Mr. Mulvaney. I honestly do not remember, sir.
    Senator Merkley. Okay. It went down. In 2001, President 
Bush's tax cut, did it increase or decrease revenue?
    Mr. Mulvaney. I do not know.
    Senator Merkley. It went down substantially. In his 2003 
tax cut, did it increase or decrease revenue?
    Mr. Mulvaney. I am not familiar with the numbers.
    Senator Merkley. So if you review the numbers and you see 
that this is a falsehood, this argument, this kind of magic 
gift, if we can cut taxes for the rich and powerful but somehow 
it will increase revenue, if you find that that is false, will 
you take that truth, the falsity of that often repeated claim, 
and make sure the President knows what is true and what is 
false?
    Mr. Mulvaney. Senator, let me say--let me answer your 
question this way, and I will try to be as straightforward as I 
can. In order to do the best possible job for the President, I 
think it is incumbent upon me to present him with all possible 
cogent arguments on both sides. And if there is data that--and 
I have no reason to think you are lying to me. I actually 
believe you to be telling the truth. But if there is data that 
backs that up, if there are academic studies, I would tend to 
use those, just as I would if there are academic studies on the 
other side of that argument.
    Senator Merkley. Often this strategy is used to say--and 
this is particularly true, unfortunately, in Republican 
administrations--that this is a way we can claim to be fiscally 
responsible while doing a lot of favors for very powerful 
people we like, and not talking about the many giveaways that 
are already in the tax code for the very rich and powerful.
    There is a CBO study that lays out an extensive--I think it 
was a 2011 study. I will be happy to--I will not put it in the 
record because it is so long, but I will be happy to make sure 
you have a copy that goes through multitudinous strategies for 
improving the deficit, decreasing the deficit. But a lot of 
those things that would improve the deficit are the result of 
tax code positions taken that are making the affluent more 
affluent and increasing income inequality.
    Will you take a serious look at these opportunities and not 
just be in the mode of let us cut taxes on the rich and 
decrease services for struggling American families?
    Mr. Mulvaney. And I think it was Senator Whitehouse and I 
who discussed this earlier, but I told him that I think that 
maybe he and the President were getting to the same conclusion 
by different roads, which is that the tax code needs to be 
reformed so that it is fairer and simpler.
    Senator Merkley. But a strategy that decreases taxes on the 
rich while decreasing programs for struggling families, would 
you oppose or support that?
    Mr. Mulvaney. Again, my job will be to advise the President 
of the economic ramifications of all of the options that are 
presented to him.
    Senator Merkley. Your sense of internal justice, though, is 
that just? Decreasing taxes on the rich, decreasing programs 
for struggling American families?
    Mr. Mulvaney. Again, Senator, I am not in a position to 
give a comment on a tax plan I have not seen yet. If you are 
asking my sense of justice of robbing from the rich and giving 
to the poor----
    Senator Merkley. No, that was not what I was asking.
    Mr. Mulvaney. Okay.
    Senator Merkley. But tax fairness for the rich and program 
fairness for struggling families.
    Mr. Mulvaney. I agree with you on tax fairness, yes, sir.
    Chairman Enzi. Senator Perdue.
    Senator Perdue. You do not really want to call on me right 
now, Mr. Chairman. I am thoroughly disgusted. It is amazing to 
me. This is what is wrong--and I apologize to you, Congressman. 
I have sat in here for the better part of this meeting, and I 
have to tell you, this is probably one of the most blatant 
partisan committees that I sit on, and, unfortunately, it deals 
with the financial future of our kids and grandkids, as you 
well point out.
    Would you agree, sir, that our budget process is broken? 
You have been on the House Budget Committee for 6 years, as I 
understand it.
    Mr. Mulvaney. No, sir. I have served 2 years, but I did 
additional work on budget matters after that.
    Senator Perdue. Would you agree or disagree that the 
overall budget process is broken in Congress?
    Mr. Mulvaney. Yes, sir.
    Senator Perdue. In my opinion--and let me just offer some 
observations. I fully support your nomination. We had a great 
opportunity in my office to go through my questions. I have a 
statement, Mr. Chairman, that I would like to submit for the 
record.
    Chairman Enzi. Without objection.
    [The prepared statement of Senator Perdue follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Perdue. In 2000, under Bill Clinton, President 
Clinton, our Federal Government spent $2.4 trillion running 
itself, total, all in. That is all mandatory, all 
discretionary, everything, 2.4. Last year, we spent 3.7. So one 
Democratic administration, one Republican administration. We 
have exploded the Federal Government from $2.4 to $3.7 
trillion. And that is not military expense.
    At the same time, we grew revenue from $2.4 trillion to 
$3.4 trillion. Those are constant 2015 dollars. So I would 
submit that the process is broken. As a matter of fact, the 
evidence is there. Since 1974, when the Budget Act was created, 
we have only funded the Government the way that Budget Act 
calls for in its law, we have only done that as a Congress four 
times. As a matter of fact, in those 42 years, we have used 175 
continuing resolutions to fund the Government.
    As a matter of fact, over those 42 years, now up until 2000 
we had 13 appropriation bills. Post 2000, we had 12 
appropriation bills that we have to appropriate and pass in 
order to fund the Federal Government. It shocked me to find out 
that the average number of appropriation bills is only two and 
a half, the average, per year of actually being passed into 
law.
    You made a comment earlier that you wanted the President of 
the United States to rely on that process. I would submit, sir, 
that it is broken process, it will not ever work. It 
contributes to this debt. We are going to--in the last 10 
years--or in the last 8 years, we have borrowed 35 percent of 
what we spent as a Federal Government. Over the next 10 years, 
we are going to borrow--under the baseline, as you said, we are 
going to borrow another 30 percent, which will add about $9.5 
trillion to a $20 trillion debt.
    Today, if interest rates were just at their 30-year average 
of about 5 percent--we can do the math--it is untenable. There 
is no way that we can fund $1 trillion of interest.
    So all the conversations we have here, all the 
polarizations you see in here, is because fundamentally the 
budget process is broken. It does not give us a politically 
neutral platform upon which to have the debate about tax 
expenditures, about tax cuts, about spending cuts, about all 
the things that both sides think are important in terms of 
solving the debt crisis.
    My question to you, sir, this morning is very simple. At 
OMB, you have looked--I presume you will or have looked at the 
1921 act that created the Office of Management and Budget.
    Mr. Mulvaney. Yes.
    Senator Perdue. I have two concerns. One is we need help 
breaking through this gridlock here in Congress. Can you do 
that from OMB? And, two, does the office of OMB today, because 
of the legislative total dysfunction, total fraudulent 
dishonesty that this Congress and every Congress since 1974 has 
perpetrated on the American people--because of that withdrawal 
from its responsibility in Congress, OMB in my opinion has 
overstepped what was outlined in the 1921 act and certainly in 
Article II. Are you concerned that with this dysfunction in 
Congress that OMB is, in fact, overstepping its Article II 
restrictions?
    Mr. Mulvaney. I am not familiar with the specific mandate 
of Article II. I can----
    Senator Perdue. Would you look at that some time as you get 
your feet on the ground? That is one that I would love to 
engage on.
    Mr. Mulvaney. On your first point about what we could do to 
help break the gridlock, your point is well made, which is that 
it is going to be something that Congress will have to drive 
the process on because it is a congressional appropriations 
process. But, again, I will be encouraging the President to do 
everything he can to allow that appropriations process to work. 
What does that mean? For the last several Congresses, I am of 
the opinion that various elements in the Congress have used the 
defense appropriations bill as a hostage, that we probably 
could have passed a defense appropriations bill and one that I 
voted for from time to time and that could have been signed by 
the President but was held up intentionally in order to 
leverage items on other appropriations bills, and it created a 
logjam and part of that gridlock that you create--that you 
correctly reference.
    And so one of the things that I would be encouraging the 
President to do is, ``Mr. President, not only should you allow 
the appropriations process to flow, but you should actively 
engage to encourage it to happen, because it is the best way to 
spend taxpayer dollars.''
    Senator Perdue. Thank you.
    Thank you, Mr. Chairman.
    Chairman Enzi. Senator Harris.
    Senator Harris. I think you are nearing the end. I think I 
am number 98 among all the Senators. [Laughter.]
    Mr. Mulvaney. But number one in my heart, Senator.
    Senator Harris. Oh, oh. You must have a very big heart. So, 
Congressman, in January of 2013, you opposed Federal relief for 
families and businesses in New Jersey and New York that were 
hit by Hurricane Sandy, and at the time you said it was because 
it was not paid for. But in 2015, South Carolina benefitted 
from Federal relief for flooding even though it was not paid 
for.
    In advocating for that relief, you said there will ``be a 
time for a discussion about aid and how to pay for it, but that 
time is not now.''
    As you probably know, California has had its share of 
natural disasters, whether it be drought or forest fires or 
earthquakes or severe storms, which result in safety hazards 
for millions of people and millions of dollars of damage to 
infrastructure and in some cases death.
    For me to consider your nomination as the Director of OMB, 
the main person, of course, who would be in charge of assessing 
governmental spending, can you assure me that when natural 
disasters hit various parts of the country like California, 
that you will be willing to put the immediate interests of 
people in need as the first priority for you? Or will you 
insist that the budget cuts be made before agreeing to provide 
critical assistance to those victims?
    Mr. Mulvaney. Thank you, Senator. A couple different 
answers to your question, or ways to answer your question.
    First of all, I do believe that there is a proper Federal 
role in dealing with natural disaster relief. Sandy is a 
tremendous example. It is something that is simply so large, it 
is too large for one State or local government to deal with. It 
is an appropriate function of the Federal Government.
    Senator Harris. And you would agree that the need is 
immediate after a disaster?
    Mr. Mulvaney. I did, and that is why I want to point out 
your quotation, because I believe your quotation--I believe it 
to be accurate, but I believe the circumstance for this was 
that I believe I was asked by the media on the day of the event 
how I was going to pay for this, and that gave rise to my 
response. There will be a discussion about how to pay for it, 
but the time is not now because the event was actually 
happening. It was not at the time that we appropriated the 
relief.
    On the appropriated relief for South Carolina, I believe 
that my position was entirely consistent. My position on Sandy 
was that I wanted to help the folks who had been injured----
    Senator Harris. So can you assure me that if a natural 
disaster hits other States, like California, for example, that 
you will not hold up relief for the State waiting to determine 
whether there are going to be budget cuts or cuts in order to 
provide that relief? Or are you going to sit back and crunch 
the numbers while people are waiting for help?
    Mr. Mulvaney. I see my role in that particular circumstance 
as advising the President: ``Mr. President, here is what we 
have done in the past. Here is how it has worked out. Here is 
how I think we should proceed in this circumstance, and here is 
why.'' And then whatever the President says to do, I will 
enforce.
    Senator Harris. Even if the Governor of those various 
States suggests to you that people may be harmed because of 
that delay?
    Mr. Mulvaney. I can only imagine that that would carry a 
great deal of weight with the President, but it would not be up 
to me to respond to the Governors. My responsibility would be 
to the President of the United States.
    Senator Harris. Okay. In September of 2016, you voted 
against funding for the Zika outbreak, and then on Facebook you 
said, ``Do we really need Government-funded research at all?'' 
I assume you must be in favor of supporting American innovation 
and new industries. Is that correct?
    Mr. Mulvaney. Yes, ma'am. Generally, on the Zika matter, I 
do recall that.
    Senator Harris. So let me--I am not finished.
    Mr. Mulvaney. Sure.
    Senator Harris. And I am sure you agree that scientific 
innovation and breakthroughs can create entirely new 
industries, which, of course, will spur growth and economic 
development.
    Mr. Mulvaney. I think our American history shows that to be 
true.
    Senator Harris. So let me read you what a globally leading 
scientist says about this issue: ``America has made big 
scientific breakthroughs for decades because Federal funding 
allows scientists to pursue research that businesses would not 
fund because they have no immediate commercial application. 
Breakthroughs from federally funded curiosity-driven research 
have not only created new business, but entire new 
industries.'' That is a quote from a woman who happens to be at 
the University of California and won the Breakthrough Prize for 
advances in genetics. Do you agree with that statement that she 
made?
    Mr. Mulvaney. Again, I do not recall the entire statement, 
but generally----
    Senator Harris. Shall I read it to you again?
    Mr. Mulvaney. No. Generally, yes. Generally, I do believe 
that there is a proper role for the Federal Government in 
research, but I think you hit the nail on the head in that 
quote when they said that where the private sector would not go 
in because of the circumstances and time. And I have actually 
supported that, Senator.
    Senator Harris. Fantastic. And so, in fact, NSF and NIH 
spent more than $4.4 billion in research grants for California 
in 2016. This money has dealt with some of our Nation's most 
difficult diseases, and scientists are trying to discover, of 
course, new ways to provide food, water, and energy for our 
Nation's growing population.
    Do you believe that Government-funded research should be a 
priority?
    Mr. Mulvaney. I believe that when we look at grant 
programs, like the one that you just mentioned, the key is not 
the amount of the grant to begin with but what we are getting 
for the taxpayer dollars.
    Senator Harris. So you are not opposed----
    Mr. Mulvaney. I have hopefully answered the question.
    Senator Harris [continuing]. To the notion of Government 
funding research for scientific purposes?
    Mr. Mulvaney. I have actually supported funding what they 
call ``orphan diseases.'' You and I may have a chance to talk 
about that more.
    Senator Harris. I would like that.
    Mr. Mulvaney. Thank you.
    Senator Harris. Thank you.
    Chairman Enzi. Patient Senator Gardner.
    Senator Gardner. Thank you, Mr. Enzi.
    Mr. Mulvaney, Congressman Mulvaney, thank you for your 
willingness to serve. To your family, thank you very much for 
your willingness to serve as well. This is a public service 
commitment.
    When we came into Congress together in 2010, I remember 
hearing your thought process on budget, talking to you about 
the way we could make this Government be a better Government, 
more effective, more efficient for the people of this country. 
And I commend you for your time in the House and the work that 
you have done, and I thank you for it. And while not always 
agreeing with everyone, while not always agreeing with 
leadership, sometimes being accused perhaps of being a thorn in 
the side of some, you have never been one who just prides 
himself in being that thorn but has found a way to work forward 
to find a solution. And I think that is what this place needs, 
somebody who is not just go-along, get-along, but somebody who 
is going to try to figure out a way forward given the resources 
and the challenges that this country faces.
    Mr. Mulvaney. Thank you, Senator.
    Senator Gardner. When we have difficult days like today, 
where you have a Commerce Committee hearing and we confirmed a 
couple of nominees out of the Commerce Committee today, and the 
Foreign Relations Committee that I also serve on, we had Nikki 
Haley's nomination today, and I am bouncing back and forth 
between this Committee and those other two hearings, I only get 
to hear parts and pieces of the questions. And coming into this 
Committee at times, I heard several different questions that 
you were asked which can only lead me to conclude that some 
must believe that you only think that we are a better country 
if the poor get poorer. That is absolutely incorrect. And I 
think that this--what I have heard from some people here who 
believe that if we simply raised taxes, then the inequalities 
of this country will disappear.
    What has happened over the past 8 years has actually 
increased the challenges in this country, and I would just ask 
you a question. Have the wealthy become wealthier over the last 
8 years?
    Mr. Mulvaney. Yes, sir.
    Senator Gardner. And so it is not the policies of 
increasing taxes that we can look--that were the problem, 
because that happened over the last 8 years in some respects. 
And so actually if we decrease taxes, decrease regulation, it 
is going to lift everyone up. Is that correct?
    Mr. Mulvaney. There used to be a Democrat around here who 
said that a rising tide raises all ships.
    Senator Gardner. And so just a couple basic questions.
    Does overregulation hurt our economy?
    Mr. Mulvaney. It does.
    Senator Gardner. Is there any doubt that overregulation 
hurts the economy?
    Mr. Mulvaney. No, sir.
    Senator Gardner. Left or right, liberal economists, do they 
believe that overregulation is bad?
    Mr. Mulvaney. No, and it has actually been encouraging to 
me as I have talked to members of both parties, that there does 
seem to be some common ground and some bipartisan work in favor 
of regulatory relief because we see it from our constituents in 
these offices every single day.
    Senator Gardner. Does economic growth help the budget?
    Mr. Mulvaney. It helps everybody.
    Senator Gardner. And so if you have overregulation, then it 
hurts the budget. Is that correct?
    Mr. Mulvaney. Correct.
    Senator Gardner. So by eliminating overregulation, then you 
can help the budget, correct?
    Mr. Mulvaney. There is some really good academic 
literature----
    Senator Gardner. Is there any debate on that?
    Mr. Mulvaney [continuing]. That suggests that regulatory 
cost is actually one of the most regressive taxes that we have, 
that it falls most heavily on the poor.
    Senator Gardner. And there is no university think tank out 
there that says we will grow our way out of this budget problem 
through overregulation.
    Mr. Mulvaney. I have never seen that.
    Senator Gardner. Do you agree that we are in a state of 
overregulation at this point?
    Mr. Mulvaney. I do. I have seen it firsthand.
    Senator Gardner. Now, it seems like that is the entire 
premise that I have listened to, at least in the times that I 
have come in and out of this Committee today, talk of very 
different approaches to our budget and our economy. But I think 
everybody, as you just identified agrees with that basic point, 
that overregulation is bad, growth of the economy is good, and 
that helps the budget. We have a significant debt. What are our 
outstanding liabilities on our balance sheet today?
    Mr. Mulvaney. Almost $20 trillion.
    Senator Gardner. Almost $20 trillion.
    Mr. Mulvaney. That is what is reported. I think if you 
wanted to actually project, it could be closer to 100. But the 
actual on--the ones we report right now. $20 trillion.
    Senator Gardner. And there is no way under our current 
economic growth that we have a way to pay for that, those 
obligations that we have spent?
    Mr. Mulvaney. I do not believe so. No, sir.
    Senator Gardner. And one of the ways, I think, that we 
could grow this economy is legislation that Senator Lee and I 
have introduced. It is called the ``Reducing Excessive 
Government Act,'' or the REG Act. This is an idea that if we 
increase the debt limit--which this place has done. If we 
increase the debt limit, then we also ought to decrease the 
amount of regulations that are in--on the economy at some 
degree in order to help grow the economy, as you have 
identified, which helps the budget. So our idea is for every $1 
in debt limit increase, then you reduce regulations by a 
commensurate 15 percent. Is that something that we could work 
with you on?
    Mr. Mulvaney. I would love to see something about that, 
because I believe, as I think you do, that probably the best 
thing we can do immediately to help the economy would be to 
reform the regulatory climate.
    Senator Gardner. And the other thing that I think we have 
to talk about when it comes to budget is finding ways that the 
private sector can help reduce spending. One of the things that 
you and I have talked about, you have been very effective in, 
is energy savings performance contracts. If you think about 
what we can do with the private sector, without spending a 
single dime in taxpayer funding, we have the potential to save 
$20 billion in taxpayer spending, simply by making our 
Government buildings, the millions and millions of square feet 
in office space that this Government has right now, more energy 
efficient. Will you pledge to continue working with this 
administration and me on energy efficiency?
    Mr. Mulvaney. It would be easy for me to make that 
commitment. One of the first bills I wrote was with my friend 
Peter Welch from Vermont on that exact topic.
    Senator Gardner. Mr. Mulvaney, thank you for your patience 
and perseverance today, the grace with which you have handled 
this, and I look forward to working with you to grow and expand 
our economy.
    Mr. Mulvaney. Thank you, Senator.
    Chairman Enzi. And now the senior person on the Committee 
and very patient Senator Murray.
    Senator Murray. Well, thank you very much, Chairman Enzi. 
Welcome, Congressman Mulvaney. I know we have not found time in 
our schedules to do a one-on-one meeting. I look forward to 
hopefully being able to do that.
    I do want to be very up front. I have serious concerns with 
your nomination. I am, of course, troubled by your failure to 
pay taxes and comply with the law over a period of several 
years, and it is simply not credible to me it never crossed 
your mind before now that you might owe taxes on behalf of your 
household employee. And I do think the failure to pay taxes 
just kind of underlines the need for all committees to require 
tax reforms from our nominees as Democrats are asking in the 
HELP Committee that I am on and committees that do not 
currently receive taxes.
    Unpaid taxes, however, are not my only concern with your 
fitness for this job. I am a former Chairman of this Committee. 
I am very proud of the work that we have been able to do to 
reach across the aisle and move away from the constant budget 
crises. We were able to do that because we set aside some 
serious differences and worked to find common ground. And, 
frankly, I do not see a similar willingness to do that in your 
background.
    You were a member of the Tea Party, correct?
    Mr. Mulvaney. I was a member of the Tea Party Caucus, yes, 
ma'am, in the previous Congress.
    Senator Murray. You supported shutting down the Government 
in the fall of 2013, correct?
    Mr. Mulvaney. I think that is, in all fairness, Senator, an 
oversimplification. I did believe that the House bill that 
passed was a good bill that would have delayed the individual 
mandate for a year. The Senate refused to take that up, and as 
a result, there was a lapse in appropriations, which the media 
now called ``a Government shutdown.''
    Senator Murray. Well, it was a support of getting to that. 
And you opposed, my understanding is, the subsequent bipartisan 
deal that I reached with now-Speaker Ryan later that year to 
keep the Government open, correct?
    Mr. Mulvaney. I opposed the approval of the deal and then 
voted for the omnibus spending bill that grew out of it.
    Senator Murray. Well, I understand, in fact, you also 
opposed the Budget Control Act in the 2015 bipartisan deal, 
correct?
    Mr. Mulvaney. That is a true statement.
    Senator Murray. Okay. Do you acknowledge that you will have 
to work with Democrats in the next round of budget and debt 
limit deals?
    Mr. Mulvaney. Oh, sure, and I have worked with Democrats 
many, many times in the past, so I have no difficulties and no 
concerns about my ability to do that in the job, should the 
Senate confirm me.
    Senator Murray. So will you commit to pushing back against 
the Tea Party if they pressure you to not work on a bipartisan 
basis?
    Mr. Mulvaney. My commitment, if you confirm me, is to the 
President of the United States. My commitment right now, 
Senator, is to the 750,000 people that I represent in South 
Carolina, a very conservative place. They seem to like the job 
that I have been doing. But my boss would change upon 
confirmation, and my commitment would be to represent the 
President of the United States to the best of my ability.
    Senator Murray. Okay. Well, let me just say there are 
reports that the transition team is preparing a first Trump 
budget with $10.5 trillion in spending cuts within that, and I 
sort of put those two things together. And, clearly, we, to me, 
are headed right back to more Tea Party extremism and 
ideological purity and dysfunction and brinkmanship and 
partisanship, all that went with that. And that approach is 
going to have very harmful consequences.
    I want to just give one small example. I was really honored 
to participate in the Women's March on Saturday, and I want 
those that are watching this to know that I stand ready to do 
whatever it takes to protect the health and safety of women. So 
I was outraged actually to read that the $10.5 trillion in cuts 
is built from a blueprint that, among other massive cuts that 
we can all talk about, would eliminate the funding for the 
Violence Against Women Act that actually helps support 
survivors of sexual assault and violence. Is that really the 
message that this new administration wants to send to women?
    Mr. Mulvaney. Senator, I have read some of the same 
newspaper reports you have, but I am not familiar with the 
details of the budget. In fact, my understanding is that--and 
there are some strange rules that I am not familiar with on 
transitions. I have not been allowed to see the details of that 
budget, so I am not comfortable commenting on them.
    Senator Murray. I will just say I just still am outraged at 
the comments that were recorded by President Trump where he was 
bragging about kissing and groping and having sex with women 
without their consent. Those kind of cuts would double down on 
that type of behavior, and I would just say I hope one of the 
first actions of this President is not to eliminate the very 
funding that protects women against violence.
    So let me just ask you this, Mr. Mulvaney. Have you 
previously supported eliminating funding for VAWA?
    Mr. Mulvaney. I voted against a lot of funding bills, 
Senator Murray. I am not familiar if there was a specific one 
on funding for VAWA.
    Senator Murray. Well, let me just say, if confirmed, would 
you commit today to oppose eliminating or cutting funding that 
protects women from violence?
    Mr. Mulvaney. My commitment has been as it has been all day 
today, is to try to advise the President to the best of my 
ability and then enforce the policies that he sets.
    Senator Murray. Well, Mr. Chairman, as someone who has sat 
in that chair and knows the numbers, I do not believe that you 
can cut $10.5 trillion without having serious impact, as 
Senator Sanders talks to us about all the time, on Medicare and 
Medicaid and Social Security, but also on programs that are 
extremely important to protecting people in this country, many 
of them who were out on the streets last Saturday.
    Chairman Enzi. Thank you.
    That, I think, completes the first round. We will begin a 
second round. Again, we have a deadline of 1:30 for completing 
this round so that he can get ready for the Homeland Security 
questions at 2:30. So I will begin the second round I hope with 
a little easier question than some of them. How does this 
hearing compare with the bar exam? [Laughter.]
    Mr. Mulvaney. In fact, a good friend of mine and my law 
school roommate is here. We took the bar exam together.
    He came up to give me moral support, and I pointed out to 
him it was very similar to taking the bar exam, except it is on 
television and my mom and dad are watching this. So that does 
make it a little different. [Laughter.]
    Chairman Enzi. Yes. Well, again, we appreciate your 
willingness to serve. And one of the things that this Committee 
has been working on is trying to come up with a budget process 
that will actually make a difference. One of the problems that 
we noted was that the President's budget is not the same as the 
congressional budget, which is not the same as the 
appropriations spending, which is not the same in some of the 
departments to any of those. And after we looked at it, we kind 
of came up with the impression that maybe that was intentional 
so that nobody could follow the dollars.
    So I hope that you would agree that it would be helpful to 
harmonize the format of the President's budget submission with 
the congressional budget, with the appropriations budget, and 
particularly with the Department of Defense so that--they have 
not been able to have a clean audit yet, and I hope you would 
agree with that.
    Mr. Mulvaney. It goes deeper than that, actually, Mr. 
Chairman, I think. We did not get a chance to talk today about 
the DATA Act and some of the reforms that we tried to be put in 
place on a bipartisan basis. It is almost as if the computer 
systems in the agencies are set up to not even allow the men 
and women working there to understand how the money is getting 
spent. So you are right, there will be a lot of structural 
reforms that we could put in place that OMB could drive in 
order to make it easier to understand how the Government works.
    We are living in an age of big data, and then here we are 
as the Federal Government, and we probably have some of the 
best big data available anywhere, but we cannot use it because 
no one can share it or read it.
    Chairman Enzi. Another one of the things that we have 
talked about is having a capital budget. What we found out was 
that we do not even know what the Federal Government owns, let 
alone how long it will last and when we need to replace it. 
And, of course, we replace everything out of cash. So what do 
you think about having a capital budget?
    Mr. Mulvaney. I remember when I got here, Senator, and I 
had been familiar with budgets in one of my businesses, and 
remember remarking, ``There is no capital budget. There is no 
budget versus actual. There is no this year versus last year.'' 
I think ultimately you can find them deep, deep down in the 
appendices.
    But one of the things I struggled to sort of explain to my 
friends who were still in the private sector that the 
Government budget process is similar to the private sector 
budgeting that many of us were familiar with before we got here 
in the word only. They both use the word ``budget'' but the 
system they describe is entirely different. Not to say that you 
could entirely run the Government like a business or that you 
could budget for it like a business, but there are some 
structural inefficiencies into the way our budget and 
appropriations system run that could benefit from more exposure 
to outside forces.
    Chairman Enzi. I look forward to working with you on that. 
We have talked a little bit about having a debt-to GDP number 
as some guardrails to work into the future to get to that 
balanced budget and to keep our Government afloat. And Senator 
Kaine has been a strong advocate on that. We had a lot of 
bipartisan things that we thought could help to straighten 
things out.
    Another thing was biennial budgeting. Since we do not seem 
to be able to make it through the process every year, maybe we 
could make it through once every 2 years. And, of course, one 
of the provisions that I put out there was one of having the 
budgets divided into--the 12 budgets into two halves so that we 
do the six tough ones right after an election and the six easy 
ones just before an election.
    Do you have any ideas on things that we might do with the 
budget?
    Mr. Mulvaney. Yes, sir, I will always remember that 
conversation because you put a House Member in the very, very 
difficult situation of having to admit that the Senate bill 
might be better than the House bill.
    I was a cosponsor of the biennial bill in the House and was 
very intrigued by your comments and your ideas about taking 
that 2-year budget and bifurcating it so you had rolling 
appropriations bills of six each year for 2 years and allowing 
the appropriations process to function, giving the 
appropriations process the deference and the respect that it 
deserves, at the same time doing what biennial budgets do, 
which is to increase the horsepower available to do oversight 
on the budget process and on the appropriations process. So I 
was very enthusiastic about that and look forward to extolling 
the praises of that to the President, if given the chance.
    Chairman Enzi. Well, when you are confirmed, I look forward 
to working with you on all of these things and hope that we can 
pull the Committee together for some good bipartisan 
suggestions for ways that will help to improve knowing where we 
are and where we are going.
    Senator Sanders.
    Senator Sanders. Thank you, Mr. Chairman.
    Congressman, my friends in the House have said that you are 
honest and a straight shooter, and I think that is how you have 
presented yourself today, and I appreciate that.
    Mr. Mulvaney. Thank you, Senator.
    Senator Sanders. Let me ask you a philosophical question 
because, if selected, if appointed, you will be a key adviser 
to the President. As I mentioned earlier, the President made a 
cornerstone of his campaign his belief that Social Security, 
Medicare, and Medicaid should not be cut in any way. He said it 
over and over again, and I suspect he won the election based on 
that promise.
    You disagree with him, and that is certainly your right. 
You believe we should raise the retirement age. You have voted 
over and over again to cut Social Security in one way or 
another.
    When you talk to the President about Social Security, 
Medicare, and Medicaid, do you tell the President that it is 
more important that he keep faith with democracy, keep faith 
with what he told the American people, or should he acknowledge 
that he lied and then change his views and cut Social Security? 
What is----
    Mr. Mulvaney. Senator, I have no reason to believe that the 
President has changed his mind from the statements he made 
during the campaign. As we have talked about here today, 
though, my job is to do exactly what you just said in your very 
kind introduction, which is to be completely and brutally 
honest with him about----
    Senator Sanders. Do you believe then that the President 
will keep his word and not cut Social Security,
    Medicare, and Medicaid?
    Mr. Mulvaney. I have no basis right now for telling you 
what the President of the United States is thinking. I know 
what I want to be able to do as the OMB chairman, which is lay 
out the facts----
    Senator Sanders. But my question was--and it is an 
interesting question, because you do advise the President on 
budget. But it is a deeper sense. You know and I know and 
everybody here knows, no matter what our politics may be, there 
is a lot of disgust with politics in America today.
    People run for office, they say one thing; they get 
elected, they do something else.
    Would you tell the President that it is more important to 
keep his word, keep faith with the American people, or do what 
you think is better policy? That is my question.
    Mr. Mulvaney. It is a fair question, Senator. I think you 
are probably asking the wrong person. I do not think it is the 
role of the Director of the Office of Management and Budget to 
advise the President on that. My role would be to advise him on 
the financial and economic ramifications of the decisions he 
makes.
    Senator Sanders. I think close advisers to the President 
will advise him on many things.
    All right. Let me ask you this. You know, we have talked a 
lot today about the deficit and the debt. Important issues. 
What we have not talked about is the grotesque level of income 
and wealth inequality in America. What we have not talked about 
is that from 1985 to 2013 there has been a massive transfer of 
wealth from the middle class to the top one-tenth of 1 percent. 
Okay?
    My question is: When we talk about the budget, we have 
multi-billionaires like Donald Trump who proudly tell the 
American people he has not paid a nickel in Federal taxes. And 
yet we have people talking about cutting Social Security, 
Medicare, and Medicaid. Do you think it is more important that 
we tell billionaires like President Trump and others, that we 
tell large multinational corporations like General Electric and 
others, who in a given year did not pay a nickel in Federal 
taxes because they harbor their money in the Cayman Islands and 
elsewhere, do you think it is more important to tell the rich 
and the powerful that maybe they should start paying their fair 
share of taxes before we cut Social Security, Medicare, and 
Medicaid or the Violence Against Women Act or defund Planned 
Parenthood?
    Mr. Mulvaney. Senator, I think the most important thing to 
tell people is the truth, which is what I see my role being.
    Senator Sanders. Is it true, Congressman, that over the 
last 30 years we have seen a massive shift in wealth from the 
middle class to the top one-tenth of 1 percent? Is that true?
    Mr. Mulvaney. I will not split hairs with you on what the 
term ``massive'' means, but if you give me a chance, I will 
agree with you and say that I do believe that income inequality 
is growing and it is unhealthy----
    Senator Sanders. Well, there has been--well, right, we can 
argue about what ``massive'' means. It is trillions of dollars. 
Right now you have the top one-tenth of 1 percent owning almost 
as much wealth as the bottom 90 percent. So my question is: 
Given that massive, grotesque level of income and wealth 
inequality, and having people like President Trump not paying a 
nickel in Federal taxes, and then having people wanting to cut 
programs for the elderly or the sick and the poor, don't you 
think maybe we would want to go to the very, very wealthy, the 
top one-tenth of 1 percent, and maybe to large corporations 
that do not pay a nickel in taxes?
    Mr. Mulvaney. Senator, I welcome the philosophical 
conversation. I did enjoy the conversation in your office and 
look forward to doing it again. If you ask me about the 
disparities between the most wealthy and the worst off, I am 
more concerned in the wealth that is controlled by the folks 
who do not have----
    Senator Sanders. But that has shrunk--the middle-class 
wealth has shrunk. In fact, from 1985 to 2013, the bottom 90 
percent has seen its share of wealth go down from 35 percent to 
22.8 percent. That is a huge contraction of wealth for the 
middle class, is it not?
    Mr. Mulvaney. And I think what you saw on Saturday is 
President Trump's ideas on how to fix that problem.
    Senator Sanders. No. What I saw on Sunday were millions of 
people saying that we do not want more tax breaks for 
billionaires.
    Mr. Mulvaney. I said Saturday. I meant Friday. I apologize.
    Senator Sanders. Okay. Thank you very much.
    Mr. Mulvaney. Thank you, Senator.
    Chairman Enzi. Senator Whitehouse.
    Senator Whitehouse.. Thank you, Chairman.
    Congressman, let me show you----
    Mr. Mulvaney. You have another chart for me?
    Senator Whitehouse [continuing]. Another chart, in the 
grand traditions of Kent Conrad, who used to be a chart-master 
here. So this is a fairly self-explanatory chart. Going up this 
axis is life expectancy, starting at 72 years of life up to 86 
years of life. And across the bottom is the amount that the 
society spends on health care, going from zero dollars per year 
per capita to $9,000 per year per capita. And the thing that I 
take away--this is OECD data from 2014. It is the latest we 
have. What I see in this graph is these boxes right here, the 
ones that I have shaded lightly just now with my handy-dandy 
little pen, that covers--if you are in that box, you have a 
country whose life expectancy is between 80 and 84 years. And 
if you are in that box, your per capita expenditure on health 
care is $3,000 to $5,000. And as you can see, the bulk of our 
economic competitors are in that box. And here we are, way the 
heck out there.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Now, I am a believer in American exceptionalism, but not in 
this way, because our life expectancy is equivalent to like 
Czechoslovakia and Croatia. That is not where it should be 
compared to all of our competitor economies. And our spending 
is worse than Switzerland and the Netherlands, which are the 
least efficient and most expensive per capita health care 
systems among those OECD nations.
    So it seems to me that it should not be asking too much of 
us to try to get into a place where we are competitive with 
England and France and Germany and Australia and Austria and so 
many other countries who manage to provide good health care to 
their populations at a reasonable cost.
    So with that background, I think what I am trying to urge 
you here is that when you go back to our other graph, everybody 
is super excited on the Republican side about figuring out how 
you cut the health programs, block grant in Medicaid so you can 
cut it, let fewer people on Medicare so you can cut it, reduce 
benefits so you can cut it. But it seems to me that if this is 
really going to be your focus, even though it is a small number 
than all the tax stuff going out the back door that we already 
talked about to special interests mostly, or largely, then in 
addressing that number, trying to figure out how we get to be 
more like what so many other civilized and economically 
developed societies have figured out how to do, which is to 
improve our Nation's life expectancy and reducing the cost of 
care, should be a prime mechanism in making that adjustment 
with that number.
    And, you know, the whole prospect of delivery system reform 
is making progress. The two largest primary care providers in 
Rhode Island have reduced their per capita expenditure for 
their patients, one by $4 million in a year, the other by $24 
million over 3 years. That is not big money for an OMB guy, but 
in a small State, that is real money, and those are real 
reductions in cost. And they were accompanied by better service 
to the patients. They were accompanied by having nurse managers 
on at night to take phone calls. They were accompanied by being 
engaged more with the patient and making sure that they stayed 
healthy--a little bit like the article in the recent New Yorker 
by Atul Gawande, that primary care stuff works if people are 
compensated in the right way and have the right flexibility to 
actually treat their patients as human beings and not just as 
ways to grind the machine for money, and everybody is better 
off.
    So I am urging you very, very strongly that in your 
position you focus on that. I know our friends want to have all 
this political brouhaha about repealing Obamacare. That is a 
fine fight. If you want to have it, great, good luck to you. 
You have not got an alternative. Everything is a complete 
wreck, as I can tell, on your side of the aisle in terms of 
trying to generate an alternative. If you want to drive into 
that wreck, great. But I think if you pay attention to delivery 
system reform, pay attention to increasing the ways we improve 
the quality of care and report the quality of care, increasing 
information in the health care space, and increasing the way in 
which we compensate doctors for keeping their people healthy, 
not only will you make a big difference on that graph, not only 
will you bring down what you say is the biggest cost in the 
out-years, which is our health care expenditure, but you will 
also find an open lane with all of us, because there really is 
room for progress there.
    Could you comment?
    Mr. Mulvaney. I could make a lot of comments. It is always 
nice to find another graph fanatic, and I can tell I am going 
to look forward to working with you, should you confirm me. You 
and I may disagree on the conclusions, but I would enjoy going 
through the process.
    If I was going to agree or disagree with something, I would 
like to take the graph down to the President, along with the 
other one, to show him. But I would hope you would understand 
that your graph does have some weaknesses in it. It assumes a 
direct causal effect between the two components on the graph, 
and I think you might agree that there are other things that 
may contribute to life expectancy at birth in the United States 
of America other than just health care.
    Chairman Enzi. Senator Kaine.
    Senator Kaine. Thank you, Mr. Chair. First, two items for 
the record. I would like to put into the record a chart from--
it was published in the Washington Post, but the source is the 
Federal Reserve Bank of St. Louis showing that the Federal 
workforce is at its lowest as a percentage of the total non-
farm workforce in 70 years.
    Chairman Enzi. Without objection.
    [The chart follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Kaine. And, second, a CBO report, Budgetary and 
Economic Effects of Repealing the Affordable Care Act.
    Chairman Enzi. Without objection.
    [The report follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Senator Kaine. Congressman, to follow up on an answer that 
was right at the end of my first line of questioning, I was 
asking you about climate change, and from the look on your 
face, I kind of thought like you were thinking, ``Wait a 
minute. I am the OMB guy.'' I just wanted to come back to it.
    We spend a lot of money dealing with climate-related 
issues: storm relief from Superstorm Sandy, rewriting the 
Federal Flood Insurance Program, dealing with sea level rise in 
Virginia and South Carolina, military budgets that try to move 
infrastructure around because of sea level rise or drought or 
other climate conditions. That was why I asked you the 
question, and I asked you just to agree or disagree with 
something that actually had a couple of facts in it. Climate 
change, driven partly by human-generated CO2 
emissions, is a huge risk. You disagreed with my premise, my 
factual premise. That was your statement. Do you disagree that 
there is climate change? Do you disagree that it is driven 
partly by human-generated CO2 emissions? Or do you 
disagree that it is a huge risk? Or do you disagree with all 
three of those things?
    Mr. Mulvaney. Let me see if I can break that one down. 
Again, as much as I enjoy the conversation, I still keep trying 
to come back to the issue of how this relates to OMB, and I 
think I found it, Mr. Kaine----
    Senator Kaine. Yeah, because you will put these investments 
in the budget or not.
    Mr. Mulvaney. Well, and what you have just described are 
costs, right? Or benefits, depending on the side of the 
equation that you are under. And what I see my job as doing is 
analyzing the costs and the benefits of various regulatory 
policies, various legislation. If the House or the Senate were 
to pass climate change regulation, it would fall to the OMB to 
brief the President on those issues, and I would see that one 
of the roles that I would have is to lay out the costs and the 
benefits to the President.
    Again, my opinion may enter into the analysis a little 
bit----
    Senator Kaine. Well, here is why I think it enters----
    Mr. Mulvaney [continuing]. But for the most part, I do not 
think it does.
    Senator Kaine. Here is where I think it enters in. If you 
do not believe in climate change, say right now somebody does 
not, you are not going to be proposing investments to help 
military bases deal with the effects of climate change.
    Mr. Mulvaney. Yeah, but I do not know----
    Senator Kaine. If you do not believe in the fact, you will 
not be proposing budgetary allocations to deal with it. So I am 
curious. Just on this factual question, do you accept that 
climate change is caused by human activity, at least in part, 
and that poses a risk?
    Mr. Mulvaney. That is the straightforward question. I am 
sorry I did not--if that is what you are getting at, because I 
have had this exact same conversation with Mr. Sanders. I 
recognize the fact there is some science that would indicate 
that. I am not yet convinced that it is a direct correlation 
between manmade activity and the change in the climate, which I 
do believe is real.
    Senator Kaine. Thank you for answering the question.
    Mr. Mulvaney. You are welcome.
    Senator Kaine. Did you have anything to do with the 
President's first Executive order that increased fees on low- 
and moderate-income home buyers who get loans through the FHA 
by about $500 a year?
    Mr. Mulvaney. No, sir.
    Senator Kaine. Now let me ask you a question that is a hard 
question, but it is a very low bar for an answer, because I 
have asked witnesses this for 4 years, Obama nominees, outside 
witnesses, Republican-called nominees. I have not yet gotten a 
coherent answer--even a coherent one that I disagreed with. We 
talk about debt and a lot of your job at OMB is producing 
budgets that will have effect on deficit and debt.
    What level of debt is too dangerous? How do you look at 
that question? When I was a Governor, we never looked at a 
number, just, you know, $20 trillion, that is too dangerous. We 
looked at ratios. We looked at a ratio of debt to State GDP, or 
we looked at a ratio, as the Chairman said, of debt service 
payment to outlay. But when I asked from Janet Yellen to every 
witness that appears before this Committee, what level of debt 
is acceptable and what level of debt is dangerous, nobody gives 
me a coherent answer. I would like to hear how you are going to 
approach that question as you prepare budgets.
    Mr. Mulvaney. Let me see if I can do that, because I think 
I got asked earlier--you may have been out of the room. There 
is probably some disagreement as to the specific level amongst 
some of the academic research that I have seen. I have seen 
numbers ranging as low as 65 percent of GDP to 105 percent of 
GDP.
    Senator Kaine. And that is for publicly held debt to GDP?
    Mr. Mulvaney. Correct. I think we are talking about the 
same thing. And it seems like the sweet spot, for sake of the 
discussion, is about 85 percent, which is about where we expect 
to be under the current CBO projections in roughly 6 or 7 
years.
    Senator Kaine. If we make no changes.
    Mr. Mulvaney. That is correct. Then beyond that, then you 
start to really--you will see some evidence of the economic 
concept of crowding out at any level of debt, because every 
level of private dollars that leaves the private marketplace to 
go into the public debt markets is not available for private 
investment. So you see some crowding out on dollar one. But the 
real question, I think your question, is: At what point does 
that sort of really start to negatively impact? I can put it to 
you there is a negative impact now because we are spending $400 
billion this year on interest instead of spending it on 
programs that you all might prioritize over interest.
    Senator Kaine. But States send money on debt and families 
spend money on debt.
    Mr. Mulvaney. Exactly. So I think the best I can do to 
answer your question is say that the evidence that I have seen 
so far would indicate that that point of no return may be 85 
percent of GDP.
    Senator Kaine. Thanks for answering the question.
    Thanks, Mr. Chair.
    Chairman Enzi. Thank you.
    Senator Merkley.
    Senator Merkley. Thank you very much, Mr. Chairman.
    I wanted to turn to the Consumer Financial Protection 
Bureau. I believe that there was a time at which you were quite 
critical of the CFPB, stating that--and I have got to get the 
right page in front of me, but if I paraphrase, that it is a 
sad, sick joke.
    Now, millions of people have gotten reimbursements back 
because the CFPB has held financial agencies accountable to the 
law. They have returned approximately $12 billion to consumers, 
consumers who thought they had nobody in their square fighting 
for them, making sure that there were honest dealings with 
financial organizations. Do you still believe that CFPB is a 
sad, sick joke?
    Mr. Mulvaney. Yes, sir, I do, and I will be happy to tell 
you why. It is to me, sir, one of the most offensive concepts, 
I think, in a representative Government, which is an almost 
completely unaccountable Government bureaucracy, Government 
regulatory agency. One of the most frustrating experiences I 
have had since I have been in Congress is people walking into 
my office and asking me for help and having me look them in the 
eye and say, ``I am sorry. There is no way under any 
circumstance that I can help you.'' And that is what I have 
been forced to do with the CFPB, because they are off 
appropriations, because we do not budget for them, because they 
are run by essentially a one-person dictator who believes he 
cannot even be fired by the President but for cause.
    We have created, perhaps inadvertently, the very worst kind 
of Government entity.
    Senator Merkley. So let me stop you there and just say I 
understand you do not like the structure of the CFPB.
    Mr. Mulvaney. Yes, sir.
    Senator Merkley. But when you look at the fact that they 
have returned millions of dollars from organizations that 
essentially admitted--because these were largely settlements--
admitted that they had misled borrowers or cheated them outside 
the law, isn't that a good thing to have somebody holding those 
folks accountable?
    Mr. Mulvaney. It is a fair point, Senator. I would suggest 
to you there is no evidence that the same or a better result 
would have been reached under the regime that existed 
beforehand. As you know, the CFPB essentially took over 
functions that were already being performed by various 
regulatory agencies, and there is evidence that the CFPB has 
actually failed miserably in some very high circumstance--or 
high-profile circumstances, such as the Wells Fargo debacle 
where I think CFPB may have been resident in Wells Fargo for 4 
years and still failed to discover the wrongdoing that was 
taking place there.
    Senator Merkley. Recently, the CFPB is suing Navient, which 
it says, and I quote, ``misled borrowers, illegally driving up 
loan repayment for millions of students.'' Do you consider that 
to be a positive thing that we have an organization that is 
taking on actions that are deliberately misleading our students 
who have enormous loan debts?
    Mr. Mulvaney. Oh, I absolutely do believe it is a good idea 
to have an organization that would enforce the law. I would 
question whether or not the CFPB is the best way to do that, 
question whether or not that enforcement would have taken 
place. And I would remind everyone who discusses this issue 
that what is alleged--and I have no facts and circumstances to 
know one way or the other--is already against the law and would 
be against the law regardless of whether or not the CFPB 
existed.
    Senator Merkley. A lot of the challenge that we have in 
that in ordinary transactions companies have arbitration 
clauses that make it basically impossible for them to have any 
leverage. If you are familiar with how an arbitration clause 
works, the individual has to go to someone selected by the 
company, and that individual does not get business unless they 
find on the company's behalf. So it is a terribly rigged 
system.
    But here we have a way, an effective strategy, that has 
taken on misdeeds in all kinds of groups. You say they did not 
act fast enough on Wells Fargo, but they have acted more 
quickly than any other agency. And you also said that just the 
same would have happened in the previous period, if we compare 
it before we had the CFPB. But that is just not the case. We 
did not get this kind of action on behalf of consumers before. 
We did not get $12 billion returned to 29 million consumers.
    So given there are 29 million people out there who have 
benefitted--you have a dispute over the structure of the 
funding and the structure of the board. I hear that. But isn't 
that kind of looking at the tree and not the forest?
    Mr. Mulvaney. No, sir. I think that there is a fundamental 
objection, a principled objection to an agency that is not 
accountable to the people that it is supposed to serve. So----
    Senator Merkley. But it actually was designed this way, in 
fact, so it would be accountable, and you have to understand 
that the reason why is because ordinary citizens have very 
little power compared to the fabulous power concentrated in 
Wall Street. Large financial institutions do not want there to 
be a consumer watchdog that holds them accountable to the law. 
We finally have that consumer watchdog. We know what would 
happen if we had structured the funding differently. You would 
have stepped on the air hose--not you personally, but Congress, 
with the enormous clout of Wall Street pushing them, would have 
stepped on the air hose and shut them down. And we have seen 
the--you want a type of board that has worked miserably for all 
kinds of other organizations where there is no quorum or it is 
a 2-2 tie and no action. This has actually worked. I mean, if 
you take a look at how to create an effective organization 
fighting for ordinary working Americans, I mean, this is it.
    Mr. Mulvaney. Senator, all I can tell you is I have had 
probably more complaints about the CFPB in my office from small 
local banks and credit unions, which I am not from a big bank 
area, than every other Government agency put together. So I 
would respectfully disagree with you, sir.
    Senator Merkley. Well, I can tell you----
    Chairman Enzi. Senator Merkley, you----
    Senator Merkley. I have been gaveled down. But it is an 
important debate because the President said he campaigned on 
fighting for working people, and this is working for working 
people, and it sounds like you are going to go in and say, 
``No, do not help working people. Help big banks.''
    Chairman Enzi. I am happy to have that discussion with you 
as well. I am the one who got an Inspector General for the CFPB 
and found out that he had no right to inspect.
    Senator Merkley. I would love to----
    Chairman Enzi. There is no oversight by Congress----
    Senator Merkley. I would love to have this Committee have a 
full examination, including inviting the public to come in and 
testify about the many times that this has been the only way 
that they have gained justice.
    Chairman Enzi. We will be doing something in that area, I 
assure you.
    I want to thank the witness for his testimony and all the 
people that showed up to ask questions today.
    I also have several letters that I want to make a part of 
the record in support of the nominee. Without objection.
    [The letters follow:]
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    Chairman Enzi. I want to thank the witness.
    As information, all Senators' questions for the record are 
due by 6:00 p.m. today, with a hard copy delivered to the 
Committee clerk in Dirksen 624. Under our rules, the witness 
will have 7 days from receipt of our questions to respond with 
answers.
    With no further business, the hearing is adjourned.
    [Whereupon, at 1:21 p.m., the Committee was adjourned.]
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  EXECUTIVE BUSINESS MEETING ON THE NOMINATION OF THE HONORABLE MICK 
MULVANEY, OF SOUTH CAROLINA, TO BE DIRECTOR OF THE OFFICE OF MANAGEMENT 
                               AND BUDGET

                              ----------                              


                       THURSDAY, FEBRUARY 2, 2017

                              United States Senate,
                                   Committee on the Budget,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 11:11 a.m., in 
Room SD-608, Dirksen Senate Office Building, Hon. Michael B. 
Enzi, Chairman of the Committee, presiding.
    Present: Senators Enzi, Grassley, Sessions, Crapo, Graham, 
Toomey, Johnson, Corker, Perdue, Gardner, Kennedy, Boozman, 
Sanders, Murray, Stabenow, Whitehouse, Warner, Merkley, Kaine, 
King, Van Hollen, and Harris.
    Staff Present: Eric Ueland, Republican Staff Director; and 
Warren Gunnels, Minority Staff Director.

               OPENING STATEMENT OF CHAIRMAN ENZI

    Chairman Enzi. I will call this meeting to order.
    I want to thank you for meeting today to consider the 
nomination of Representative Mick Mulvaney to be the Director 
of the Office of Management and Budget. I believe that Mr. 
Mulvaney's experience as a small business owner and Member of 
Congress makes him uniquely qualified to lead the Office of 
Management and Budget. He is a proven budget hawk that has been 
vocal about our need to rein in Government overspending and 
debt. I strongly support Mr. Mulvaney and will be voting 
favorably to report his nomination.
    Now, Committee practice and precedent allow for statements 
from the Chairman and Ranking Member before moving immediately 
to a vote. Other Committee members may submit statements for 
the record prior to 6:00 p.m. this evening. This is how Budget 
Chairmen from both sides of the aisle have conducted the 
Committee's previous nomination hearings, and today's hearing 
will follow those precedents.
    Committee members have had a month to review Representative 
Mulvaney's background and financial information. He complied 
with Committee rules by submitting all required documents on 
time; he responded in a timely fashion to all pre- and post-
hearing questions; and he participated in a thorough public 
hearing in which members were allowed two full rounds of 
questioning.
    There are many pressing budgetary issues requiring the 
attention of a new administration. Foremost among those is the 
staggering $20 trillion debt burden that America now shoulders. 
We need the OMB Director confirmed as quickly as possible so 
that the administration can confront these hard fiscal 
realities and explain to us how they are going to solve them. 
The nominee has received full consideration by this Committee 
and deserves a vote today.
    Would Senator Sanders like to make a statement?
    Senator Sanders. I would and I will. I would hope--Mr. 
Chairman, given the importance of this nomination, this nominee 
will be the most important one that this Committee deals with. 
I would hope that members on both sides would be able to make 
brief statements given the importance of this nomination. Is 
that something that you would consider?
    Chairman Enzi. Actually, the precedent on this has been for 
people to submit their statements, and they become a part of 
the record.
    Senator Sanders. Well, I think that is unfortunate because 
I think this is a nomination of significant consequence, and I 
know that members on my side would like the opportunity to say 
a few words. I do not know about your side.
    Chairman Enzi. I appreciate that. I delayed this vote by a 
day so that you would have the opportunity to review the FBI 
files.
    Senator Sanders. Which I did.
    Chairman Enzi. I would like to get on with it. So do you 
want to give your statement?

              OPENING STATEMENT OF SENATOR SANDERS

    Senator Sanders. I do, and the essence of my statement is 
really less about Mick Mulvaney, who seems to be an honest and 
straightforward gentleman who has an extreme right wing 
economic point of view, which is his prerogative. But what 
disturbs me very much about this nomination is that virtually 
everything economically that Mr. Mulvaney stands for and has 
fought for is in direct contrast to what President Bush told 
the American people----
    Senator Murray. Trump.
    Senator Sanders. And that bothers me very much. President 
Bush, when he campaigned----
    Staff. Trump.
    Senator Sanders. Trump, Trump. Thank you. Sorry.
    [Laughter.]
    Senator Sanders. President Trump, when he campaigned, when 
he campaigned for his office, said to the elderly and working 
people that he was going to stand with them, that he would not 
cut Social Security, that he would not cut Medicare, that he 
would not cut Medicaid. And yet you have a nominee who prides 
himself, who is a deficit hawk, who has said over and over 
again that he will do exactly the opposite of what President 
Trump campaigned on. As I mentioned before, on November 3, 
2015, Trump said, ``I will save Social Security, I will save 
Medicare. People love Medicare. I am not going to cut it.''
    But Mr. Mulvaney has a different point of view. When he 
talked about programs like Social Security, he called it a 
``Ponzi scheme.'' He talked about raising the retirement age of 
Social Security to 70 years of age. Now, that is his point of 
view, and as a Congressman, more than entitled to hold that 
point of view. But it is not the point of view that President 
Trump talked to the American people about.
    The truth is we have a major retirement crisis in this 
country today. Half of older workers in America, not widely 
talked about, have zero in their savings account as they 
prepare for retirement. And yet we have a nominee who thinks it 
is appropriate to cut Social Security and a President who has 
nominated that gentleman.
    In 2015, Congressman Mulvaney led the effort to shut down 
the Federal Government in order to deny 2.5 million women the 
health care they need by defunding Planned Parenthood.
    Last week, Congressman Mulvaney told this Committee that he 
doubted that human beings are contributing to climate change, 
in direct opposition to what virtually the entire scientific 
community believes. And they believe that climate change is a 
great threat to this planet.
    Finally, Mr. Chairman, there is the issue of Mr. Mulvaney's 
taxes. After Congressman Mulvaney was nominated to become the 
next OMB Director, it was revealed that he failed to pay over 
$15,000 in taxes for a nanny that he employed from 2000 to 
2004. Here is what Congressman Mulvaney wrote about this issue 
in response to a question I asked him on January 11th, and he 
said, and I quote: ``I have come to learn during the 
confirmation review process that I failed to pay FICA and 
Federal and State unemployment taxes on a household employee 
for the years 2000 to 2004. Upon discovery of that shortfall, I 
paid the Federal taxes. The amount in question for Federal FICA 
and unemployment was $15,583.60, exclusive of penalties and 
interest, which are not yet determined. The State amounts are 
not yet determined.''
    Now, Mr. Chairman, this is a very serious issue. As you 
will recall, 8 years ago Senator Daschle withdrew his 
nomination as Secretary of HHS after it was discovered that he 
failed to pay taxes for one of his domestic workers.
    Mr. Chairman, on this issue I agree wholeheartedly with 
Minority Leader Schumer, who said, ``When other previous 
Cabinet nominees failed to pay their fair share in taxes, 
Senate Republicans forced those nominees to withdraw from 
consideration. If failure to pay taxes was disqualifying for 
Democratic nominees, then the same should be true for 
Republican nominees.''
    So, in conclusion, we have a nominee whose ideology is in 
direct contrast to what President Trump ran on. Trump told 
working people and seniors he would not cut Social Security, 
Medicare, and Medicaid. Congressman Mulvaney is on record as 
wanting to cut Social Security, Medicare, and Medicaid. So over 
and beyond Mr. Mulvaney's, Congressman Mulvaney's 
qualifications is the issue of whether we should be voting for 
somebody whose views are in direct contrast to what the 
President of the United States campaigned on.
    Thank you, Mr. Chairman.
    Chairman Enzi. Thank you, Senator Sanders. And I would be 
remiss if I did not mention that the Secretary of the Treasury, 
Mr. Geithner, did not pay personal income taxes and headed up 
the IRS after being confirmed. So it is not--and on Daschle, I 
do not think that it was Republicans that drove him out. It was 
the thought of what was going to happen.
    So Senator Sanders has requested a roll call vote, so we 
will proceed to that now. ``No'' votes can be by proxy, but 
``aye'' votes have to be present.
    The question before the Committee is the nomination of Mick 
Mulvaney to be the Director of the Office of Management and 
Budget. A quorum is present. I support the nominee and urge a 
``yes'' vote. I move that the Committee report this nomination 
to the Senate with the recommendation that the nominee be 
confirmed. Is there a second?
    Senator Grassley. I second.
    Chairman Enzi. There is. The clerk will call the roll.
    The Clerk. Mr. Grassley.
    Senator Grassley. Aye.
    The Clerk. Mr. Sessions.
    Senator Sessions. Aye.
    The Clerk. Mr. Crapo.
    Senator Crapo. Aye.
    The Clerk. Mr. Graham.
    Senator Graham. Aye.
    The Clerk. Mr. Toomey.
    Senator Toomey. Aye.
    The Clerk. Mr. Johnson.
    Senator Johnson. Aye.
    The Clerk. Mr. Corker.
    Senator Corker. Aye.
    The Clerk. Mr. Perdue.
    Senator Perdue. Aye.
    The Clerk. Mr. Gardner.
    Senator Gardner. Aye.
    The Clerk. Mr. Kennedy.
    Senator Kennedy. Aye.
    The Clerk. Mr. Boozman.
    Senator Boozman. Yes.
    The Clerk. Mr. Chairman.
    Chairman Enzi. Aye.
    The Clerk. Mr. Sanders.
    Senator Sanders. No.
    The Clerk. Mrs. Murray.
    Senator Murray. No.
    The Clerk. Mr. Wyden.
    Senator Sanders. No, by proxy.
    The Clerk. Ms. Stabenow.
    Senator Sanders. No, by proxy.
    The Clerk. Mr. Whitehouse.
    Senator Whitehouse. No.
    The Clerk. Mr. Warner.
    Senator Warner. No.
    The Clerk. Mr. Merkley.
    Senator Merkley. No.
    The Clerk. Mr. Kaine.
    Senator Kaine. No.
    The Clerk. Mr. King.
    Senator King. No.
    The Clerk. Mr. Van Hollen.
    Senator Van Hollen. No.
    The Clerk. Ms. Harris.
    Senator Harris. No.
    Chairman Enzi. The clerk will report.
    The Clerk. Mr. Chairman, 12 yeas, 11 nays.
    Chairman Enzi. The nomination is reported with the 
recommendation that the nominee be confirmed. Thank you for 
your time. Statements can be submitted until 6:00 p.m. tonight.
    The meeting is adjourned.
    [Whereupon, at 11:38 a.m., the Committee was adjourned.]
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