[Senate Hearing 113-120]
[From the U.S. Government Publishing Office]
S. Hrg. 113-120
NOMINATION OF BRIAN C. DEESE
=======================================================================
HEARING
Before The
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
NOMINATION OF BRIAN C. DEESE, TO BE DEPUTY DIRECTOR OF THE OFFICE OF
MANAGEMENT AND BUDGET
__________
MAY 13, 2013
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri ROB PORTMAN, Ohio
JON TESTER, Montana RAND PAUL, Kentucky
MARK BEGICH, Alaska MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin KELLY AYOTTE, New Hampshire
HEIDI HEITKAMP, North Dakota
Richard J. Kessler, Staff Director
John P. Kilvington, Deputy Staff Director
Deirdre G. Armstrong, Professional Staff Member
Kristine V. Lam, Professional Staff Member
Lawrence B. Novey, Chief Counsel for Governmental Affairs
Troy H. Cribb, Chief Counsel for Governmental Affairs
Keith B. Ashdown, Minority Staff Director
Christopher J. Barkley, Minority Deputy Staff Director
Andrew C. Dockham, Minority Chief Counsel
Trina D. Shiffman, Chief Clerk
Laura W. Kilbride, Hearing Clerk
C O N T E N T S
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Opening statements:
Page
Senator Carper............................................... 1
Senator Levin................................................ 4
Prepared statements:
Senator Carper............................................... 27
Senator Coburn............................................... 30
WITNESSES
Monday, May 13, 2013
Brian C. Deese, Nominee to Serve as Deputy Director, Office of
Management and Budget
Testimony.................................................... 4
Prepared statement........................................... 32
Biographical and financial information....................... 34
Responses to pre-hearing questions........................... 53
Letter from the Office of Government Ethics.................. 89
NOMINATION OF BRIAN C. DEESE
----------
MONDAY, MAY 13, 2013
U.S. Senate,
Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 3:07 p.m., in
room SD-342, Dirksen Senate Office Building, Hon. Thomas R.
Carper, Chairman of the Committee, presiding.
Present: Senators Carper and Levin.
OPENING STATEMENT OF CHAIRMAN CARPER
Chairman Carper. The hearing will come to order, although
this is a hearing that is already in order, even with a 5\1/2\
month old baby girl, remarkably. I wish my boys were that well-
behaved, Senator Levin, when they were 5\1/2\ months old.
Senator Levin. Almost as pretty as mine.
Chairman Carper. Almost as pretty as his, huh? Maybe so.
I am going to start off with a statement and introduce our
witness, and we are going to ask him to take an oath in a few
minutes. Then we will get into your statement and then we will
just ask some questions.
Today we are pleased to consider the nomination of Brian
Deese, President Obama's choice to serve as our Deputy Director
of the Office of Management and Budget (OMB), and we are
pleased to note at the outset of this hearing, that the
nomination process in this case is preceding, we believe as it
should. The position for which Mr. Deese is nominated, became
vacant in February of this year when OMB Deputy Director
Heather Higginbottom took a new assignment at the Department of
State with our incoming Secretary of State John Kerry, our
former colleague. By early April, the President submitted the
nomination of Mr. Deese, and Dr. Coburn and I have worked to
review and bring the nomination before the full Committee
expeditiously.
In terms of process, I think this nomination has worked
well at both ends of Pennsylvania Avenue. I hope it is a model
that the White House and the Senate will continue to follow
often in the weeks and months ahead. And in recent decades
through both Democratic and Republican Administrations, the
nomination and confirmation process have become unacceptably
slow. At any given time, there are far too many vacant senior
positions throughout our Federal Government. This lack of
critical leadership undermines the effectiveness of our
government, and a slow partisan process discourages talented
people from wanting to serve in our government.
This problem has become so prevalent, I started referring
to it as Executive Branch Swiss Cheese. That is I believe it is
so important for our Committee to move forward promptly on
nominations that fall within our jurisdiction. We have an
obligation to vet them, to do our proper oversight, but once we
are convinced that the President has made a good choice, we
have, I think, an obligation to try to move it promptly.
Nominations for the senior positions at the Office of
Management and Budget are among the most important that our
Committee will consider this year, or any year.
As most of the folks in this room know, on April 24, by a
vote of 96 to 0, the Senate confirmed the nomination of Sylvia
Mathews Burwell to be Director of the Office of Management and
Budget. She will be a strong and capable leader. Now the
President and Senate share the job of surrounding her with a
terrific team.
Following today's consideration of Mr. Deese's nomination,
we will soon consider the nomination of Howard Shelanski to be
the Administrator of the Office of Information and Regulatory
Affairs (OIRA). I hope that in short order, the President will
submit a nomination for the position of Deputy Director for
Management, which was recently vacated by Jeff Zients. I am not
sure if Jeff Zients is off the payroll and has returned to
private life, but if he is anywhere within the sound of my
voice, I just want to express, on behalf of all of us, our
heartfelt thanks for his hard work and leadership in very
difficult times. Good man.
Having strong leadership at OMB is important at any time,
but particularly at this moment when our Nation is desperately
in need of a long-term budget plan to rein in our Federal
deficit and our debt. I have said it a time or two before, but
it is just something here that bears repeating often.
The grand budget compromise that I believe we need in order
to address this fiscal crisis must have three essential
elements to it. It must address both spending and revenues in a
balanced approach; it must rein in the costs of our entitlement
programs in a way that does not savage the poor or the elderly,
but in a way to preserve those programs for the long haul; and
it must, through better management of government programs,
deliver better service to the American people at a lower cost.
This Committee is an important partner with the Office of
Management and Budget in all of these areas, but especially in
ensuring that our government achieves better results for less
money or better results for the same amount of money. We have a
full agenda then, and Dr. Coburn and I are working in full
partnership, along with many of our colleagues, including with
Senator Levin.
For example, we save billions of dollars by shedding
Federal property that is no longer used, or at least we can and
we should be. We can save tens of billions of dollars every
year by reducing the amount of improper payments that the
government makes. We can bring in billions of dollars of
revenue by doing a better job of collecting taxes that are owed
but not paid, and that is something, seriously, that Senator
Levin, along with Dr. Coburn, has led the way on.
We can save billions of dollars in Federal contracting
every year through efforts such as so-called strategic sourcing
initiatives which include buying more in bulk when that makes
sense. We can save billions of dollars through better
management of the information technology (IT) that our
government buys. And we can improve the transparency of
government spending so that the American people have a better
understanding of how their tax dollars are used.
These are just a few examples of the ways this Committee
and the Office of Management and Budget, in concert, are
striving to make our government work better, and, I might add,
in concert with the Government Accountability Office (GAO), in
concert with our Inspectors General (IGs) across the
government, and in concert with private non-profit
organizations.
I am pleased that we have before us today a nominee who has
a firm grasp of the role of both the ``M'' and the ``B'' in
OMB. And with respect to the ``M,'' the management, Mr. Deese
understands the importance of driving innovations and
efficiencies across the government so that agencies not only
save money, but deliver better services to the American people.
And with respect to the ``B,'' he is someone who is committed
to achieving a comprehensive deficit reduction plan that will
help our economy grow even as we reduce the budget deficits.
Mr. Deese comes well-prepared for these challenges from his
two positions at the National Economic Council, first, as a
Special Assistant to the President for Economic Policy, and
then as the Deputy Assistant to the President and Deputy
Director of the National Economic Council.
Mr. Deese has earned a well-justified reputation as someone
who can absorb a tremendous amount of economic data, synthesize
it, and translate it into viable options for the President and
his economic team and also translate it into terms that even
mere mortals like I can understand.
On issues ranging from the auto bailout to housing issues
to tax policy, Mr. Deese has helped our country recover from
the recession, helped our economy before President Obama took
office. He is someone who understands that our fiscal policies
are intrinsically linked to the prosperity of the American
people.
Brian's father, who is sitting right over his left
shoulder, is a college professor, and his mom is an engineer.
He clearly has inherited their smarts. He has an undergraduate
degree from Middlebury College and a law degree from Yale Law
School. Before going to law school, he spent time doing policy
analysis for the Carnegie Endowment for International Peace,
the Center for Global Development, and the Center for American
Progress.
I think anyone who meets Brian quickly realizes that he has
the brainpower to pursue whatever profession he chooses, but he
has a passion for public policy, and we are fortunate,
specifically a passion for finding ways for our government to
make smart choices so that individuals and businesses can
prosper.
In short, he is someone who quickly impresses his
colleagues in the Administration. I believe he will quickly
impress my colleagues in the Senate.
Normally I would turn to Dr. Coburn for any comments he
would like to make, but in his absence, I am going to ask
Senator Levin if there is anything you would like to say before
I swear this man in and let him give his statement.
OPENING STATEMENT OF SENATOR LEVIN
Senator Levin. No, just to thank you, Mr. Chairman, for
your usual speed and thoroughness in moving a nomination. I
share your hopes that this nomination can be acted upon
quickly. I do have a number of questions for Mr. Deese, but I
just want to thank him for his willingness to continue serving,
and to thank you for the way in which you handle this
Committee, along with Dr. Coburn.
Chairman Carper. Thank you. Well, I learned from the best.
A little introduction, if I can, and then I will ask you to
stand and raise your right hand. But Brian Deese has filed
responses to a biographical and financial questionnaire,
answered pre-hearing questions submitted by the Committee. He
has had financial statements reviewed by the Office of
Government Ethics. Without objection, this information will be
made part of the hearing record, with the exception of the
financial data, which are on file and available for public
inspection in the Committee's offices.
Our Committee rules require that all witnesses at
nomination hearings give their testimony under oath, and, Mr.
Deese, I am going to ask you to stand and raise your right
hand. I am going to ask a couple of questions.
Do you swear that the testimony you are about to give to
the Committee will be the truth, the whole truth, and nothing
but the truth, so help you, God?
Mr. Deese. I do.
Chairman Carper. Please be seated. At this point, you may
proceed with your statement. I am going to ask you to introduce
your mom, dad, and your bride, and I do not know if your
daughter is still around here, but she may have taken an exit.
But please introduce your family. We are just delighted that
you are all here. I think it is a matter of family pride and I
know you are proud of him and I am sure he is proud of all of
you. Please.
TESTIMONY OF BRIAN C. DEESE,\1\ NOMINATED TO BE DEPUTY
DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET
Mr. Deese. Thank you, Chairman Carper.
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\1\ The prepared statement of Mr. Deese appears in the Appendix on
page 32.
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Thank you, Senator Levin. And thank you for welcoming me
here today. It is a real honor to be considered as the
President's nominee to be Deputy Director of the Office of
Management and Budget. As you have mentioned, I am joined by my
family, my father David, my mother Patricia, my wife Kara, and
my baby girl Adeline who promised me that she would behave and
that is a promise I am not going to hold her to. And my sister
Heather.
Chairman Carper. Tell us a little bit about your mom and
dad, your wife, and your sister. This will not count on your
time. We will stop the clock. Just tell us a little bit, a
thumbnail sketch about each of them.
Mr. Deese. I have been really privileged to have an
incredible family, a mother and father who have supported me
over the years and who have instilled in me both a real passion
for ideas and education and also a commitment that for those of
us who are fortunate enough to have opportunities in education
and life, we should look for opportunities to give back, commit
to public service.
In particular, my sister who I am very close with. She is 2
years older than I am and she has been a rock in my life for
the last 35 years, and I thank her for that.
Chairman Carper. She is the one whose lips are moving while
you speak?
Mr. Deese. She is very nervous on my behalf. But most of
all, I would like to thank my wife Kara. Serving in these types
of jobs is truly a team effort. I could not do it alone and she
has been unbelievably supportive, particularly when we have
been through harder times, and I know that the challenges of
this job will be significant. And so, I am very grateful to her
for all of her support.
Chairman Carper. For you, Kara, no purgatory, straight to
heaven. Thank you.
Mr. Deese. I second that. I would also like to thank
President Obama for nominating me to this position, and also
Director Burwell, who you referenced, for her support and her
confidence in me. And I hope that if confirmed, I can meet
their high standards for performance on behalf of the American
people.
And finally, I do want to thank Members of this Committee
and their staffs for taking the time to meet with me over the
last couple of weeks, and if confirmed, I look forward to
continuing the conversations that we have had and investing in
the strong relationship between OMB and this Committee going
forward.
Over the past several years, I have had an opportunity to
work with many officials at OMB, as well as across Executive
Branch agencies, to develop and implement Administration
policies, and this experience has given me a deep respect for
OMB as an institution and the vital role that it plays. And
perhaps more importantly, a real respect for the skills and the
commitment of the professionals who work at OMB.
That is just one of the reasons why I am very humbled to be
considered for this position, and particularly at this time in
our economy when we face very substantial fiscal challenges and
economic challenges that we will need to address together. We
have made important progress in the economy. Our economy is
growing. We are seeing some important signs of strength in
sectors from housing to our manufacturing industry. Most
importantly, our businesses are creating jobs on a consistent
basis. And I think together, Congress and the President have
begun to make progress on the important work of bringing down
our deficits and strengthening our Nation's long-term fiscal
position.
But there is a lot more work that we need to do together to
reach what I believe is the ultimate goal of an economy that is
providing opportunity and real stability for working families.
Much of my professional work has focused on the role that
fiscal policy can play in that effort in promoting a stronger
and more durable economy. And if confirmed, I will work closely
with Director Burwell to build on the progress that we have
made to try to reach the type of comprehensive deficit
reduction agreement you referenced that can support a stronger
economy in both the short and the long run.
Another key area of focus, particularly in this moment of
fiscal challenges, has to be making our government more
efficient and more effective and showing the American people
how we can do more effectively with less. This is an area where
this Committee has shown great leadership, and if confirmed, I
look forward to working with you to make progress on many of
our shared priorities.
And finally, I do believe that the budget is fundamentally
a vision for how we in public service can deliver better
outcomes for the economy and for American families. It is a
reflection of our values and our priorities, and if confirmed,
I will work every day to uphold those values and priorities to
the best of my ability.
I want to thank the Committee for your time today and for
considering my nomination and I look forward to answering all
of your questions.
Chairman Carper. All right. Thanks very much. As you
probably know, we begin the questioning of our witnesses in a
confirmation hearing by asking the same three questions we have
asked for as long as I have been here. I have been here for
about 12 years, each year these hearings are the same. I am
just going to ask you. Each of these questions is easy to
answer.
The first one, is there anything you are aware of in your
background that might present a conflict of interest with the
duties of the office to which you have been nominated?
Mr. Deese. No.
Chairman Carper. Do you know of anything, personal or
otherwise, that would in any way prevent you from fully and
honorably discharging the responsibilities of the office to
which you have been nominated?
Mr. Deese. No.
Chairman Carper. And finally, do you agree without
reservation to respond to any reasonable summons to appear and
testify before any duly constituted Committee of Congress if
you are confirmed?
Mr. Deese. I do.
Chairman Carper. All right. Senator Levin and I are big
baseball fans, in fact, of the same team, the Detroit Tigers. I
would say he is three for three. It is still early.
Senator Levin. They have the same problem with their
current closer, too. Losing too much sleep over it.
Chairman Carper. I know. Oh, well, our team lost today two
out of three.
Senator Levin. That is on the record.
Chairman Carper. In any event, we will turn to that problem
tomorrow.
I am going to start off by saying, if confirmed, why do you
not just lead off by telling us what your, maybe, top three
priorities would be.
Mr. Deese. Sure. This is something that I have had a chance
to talk to Director Burwell about and I think that in terms of
priorities in the Deputy Director role, first would be to work
with Director Burwell in setting out a budget framework for the
government. And I think in the current context, that means in
particular trying to work to encourage the movement that we
have seen toward a more regular order budget process and also
to try, however challenging, to work toward the kind of
comprehensive deficit reduction agreement that I think could
benefit the economy.
A second priority is to work to set priorities to make the
government more efficient and effective, and I think that the
Deputy Director plays an important role in setting those inside
priorities and then also making sure that we as a team at OMB
would be well-positioned to execute on those.
And I think in particular, from my perspective, the
relationship between the Deputy Director and the Deputy
Director for Management is vital in that context. And so, if I
am confirmed, that would be something that I would invest in,
in particular.
And third, a priority would be OMB as an institution. And
OMB has a strong reputation for strong analysis and excellent
professional staff. It is also facing a lot of challenges
today, and so I think that investing and making sure that the
institution is able to continue to attract and recruit top
flight talent, continue to do the analyses and play the vital
role that it needs to play in our system would be another
priority.
Chairman Carper. Have you had the opportunity to discuss at
all with our new Director, Sylvia Burwell, how your role--her
role as Director and the role of the Deputy for Management,
what that would intertwine?
Mr. Deese. I have.
Chairman Carper. Maybe give us some practical examples of
how that would be.
Mr. Deese. Sure. I have and I think that Director Burwell
has talked about building a great team, and I think that is the
way that both of us would approach this, is having a great team
in place to make sure that we are achieving all of the
objectives that we need to achieve.
I think that one particular priority for the Deputy
Director, my role if confirmed, would be to work on setting out
that budget framework and making sure that we are working
across agencies to incorporate their points of view into the
budget process and the budget framework and making sure that we
are implementing key budget priorities.
But as I mentioned earlier, I think that the other
important role of the Deputy Director is to make sure that the
``M'' side and the ``B'' side are working seamlessly together.
And so, I think that means, one, being a part of setting the
priorities for the management side of OMB; and then having a
close relationship with the Deputy Director of Management and
making sure that where there are priority areas for providing
sufficient guidance and sufficient attention to make sure we
are executing on our goals.
Chairman Carper. Would you share with us your overall
philosophy on addressing the Federal deficit and our long-term
debt, please?
Mr. Deese. Sure. I think that we are at a moment, an
economic moment, right now where the need for deficit reduction
also presents an economic opportunity where we have a set of
long-term fiscal challenges and we have a set of short-term
economic challenges, and that if we could come together around
a comprehensive deficit reduction agreement that provided more
confidence about our long-term path, we would also be able to
provide more support to the economy in the short run.
And so, when I think about what are the most important
priorities in that space, I think that the areas we need to
focus on are entitlement reform and tax reform. And I think as
you mentioned in your opening statement, entitlement reform
that is designed to strengthen the core programs that our
seniors and vulnerable Americans rely on, but then look for
ways to address, in particular, the rising cost of health care
and look for ways to increase efficiencies and actually drive
systematic change to drive down the rate of growth of health
care across our system.
And I think on tax reform, we have an opportunity to reform
in a way that reduces complexity, encourages greater economic
growth, and also contributes to reducing the deficit as well.
And I think that there are real opportunities in that space,
economic opportunities to bring those things together as part
of an overall approach.
Chairman Carper. How does your work leading up to this
point help to prepare you for the responsibilities that you
have been nominated to undertake?
Mr. Deese. Well, when I think about the Deputy Director
role and the responsibilities that we were just talking about,
I think there are three sets of skills that I could bring to
bear. The first is a sound understanding of the Federal budget.
I think that is important and it is something that I have
developed over the last several years, worked closely on the
development of the last several budgets, and also in
implementing it, working with the staff at OMB and other
agencies.
The second is an understanding of how fiscal policy fits
into an overall economic strategy to try to help grow the
economy and create jobs. And that has been the focus of much of
my professional work, and I think it is particularly important
now because we are at an economic moment where we have these
interrelated fiscal and economic challenges.
And the third is a more pragmatic understanding of how to
get things done in government, and I think that the work most
recently as Deputy Director of the National Economic Council
that I have done has prepared me to know how to work across
agencies, identify teams, bring together senior management
across the Federal Government, set a priority, and try to drive
for results. And I think those are the kind of skills that I
think I could bring to this job.
Chairman Carper. OK. Not long ago Ben Bernanke, the
Chairman of the Federal Reserve, came to meet with the Senate
Finance Committee, Democrats and Republicans, not an open
meeting, but a very informative meeting. He was going to talk
to us largely about budget deficits, how to reduce the deficit,
and how to do it at the same time that we strengthen our
economic recovery.
And I asked him, I said, as we rein in the growth of
spending broadly across the government, are there any
particular places where we should invest more? And he picked
out three. One he said the workforce, world class workforce;
No. 2, he mentioned we should focus on infrastructure broadly
defined; No. 3, research and development that could create
technologies and products, goods and services that we could
commercialize and sell all over the world.
Would you just react to what he told us that day?
Mr. Deese. Sure. I think that, when you think about those
three areas, I think the thing that all three of them share is
that they are linked to long-term productivity growth in our
economy. And so, when we think about where are the places where
we need to make targeted investments, even in the context of a
difficult fiscal environment, I think that using that as a
metric of where can we identify the strongest linkages to
future productivity growth and future competitiveness is
important.
And so, I think that infrastructure, for example, is a good
example of that where smart, well-designed targeted investments
in improving our infrastructure has been shown to increase
productivity because it makes it easier for businesses to come
and invest and create jobs. And I think identifying those kinds
of opportunities is very important as part of this overall
fiscal strategy.
Chairman Carper. All right. Thanks very much. I have used
up my time and we will come back for a second round. Senator
Levin, please.
Senator Levin. Thank you, Mr. Chairman. First, let me thank
you, Mr. Deese, for your accessibility in the past. You have
been helpful in the area of the auto issue that you were very
actively involved in. You were always available to me and my
staff and we were grateful for that. You have been hard-
working, and I think there is no doubt about your
qualifications for this office.
I do have a couple questions, however, as to where Gene
Sperling has been and where you have been on the question of
revenues to address our deficit. I take it from your answer to
the Chairman's question that you believe that tax reform, as
you talk about it generically, needs to contribute to the
deficit reduction effort.
Mr. Deese. I do. I think that is important.
Senator Levin. And so, what I want to focus on is one part
of tax reform. I have spoken to Mr. Sperling, and I think I
have probably spoken to you, on a number of occasions, but at
least I have to him, about how is it that some of these
egregious tax loopholes that corporations utilize to avoid
paying taxes, when they are closed, if they are closed, why the
revenues from those closures of those unfair, unjustified tax
loopholes--and I am going to go through a few of them with
you--should not be used for deficit reduction to also fight for
programs which are being cut through sequestration such as
education and health care and the environment and food safety,
and you name it.
Why should those revenues that would come from closing
those corporate tax loopholes not be used for any number of
extremely important goals from deficit reduction to ending
sequestration to, again, trying to fund the programs that are
important to our people that are now being cut? So first
generally, should those revenues be available for those
purposes?
Mr. Deese. Well, I think just to go at the question of tax
reform for a second----
Senator Levin. But talk about the corporate tax that I have
identified.
Mr. Deese. Sure.
Senator Levin. I will get more specific, but I think you
have read enough of the stuff I have sent to your office to
know where I am going to go in the next few minutes.
Mr. Deese. Absolutely. Look, I think the most important
issue on corporate tax reform, as we undertake it, is to judge
any reform by the metric of, is it going to improve economic
growth and, in particular, are you going to improve incentives
to invest in the United States? And I think that is the real
opportunity with respect to corporate tax reform.
I think you are correct that when you look at the corporate
tax code today, it represents and opportunity because we have
this somewhat perverse situation where we have the highest
statutory rate in the industrialized world, and yet we are not
collecting revenues. We are sort of in the middle of the pack
at best, and that is a function of the fact that there are a
lot of tax expenditures that are either inefficient or they are
not serving their intended purpose.
And that creates an opportunity to reform the system,
broaden the base, and also----
Senator Levin. Why do you not focus also on the effective
tax rate, which is not one of the highest in the world?
Mr. Deese. That is right. And so, it is exactly that
dynamic that creates an effective tax rate sort of in the
middle or to the lower of the industrialized countries. So I
think the question is, can we reform that tax code in a way
that actually is for growth and improves domestic incentives to
invest? I think the answer to that is yes.
So, I think there is an opportunity here and I think that
with respect to specific corporate tax expenditures, I think
the President has put forward a whole set of them in the budget
that he put out and those are ones that I think we could afford
to close efficiently without doing harm to the economy.
Senator Levin. Well, a bunch of these loopholes that are
being used to drain our Treasury, to ship money offshore, serve
no economic purpose. They are not pro-growth. They do not
promote people to invest in the United States; quite the
opposite. You have Apple that has what, $120 billion now in
cash, most of it offshore. They are not going to bring it back
unless they get a lower tax rate. So there it sits.
We have companies that transfer their intellectual property
to themselves in tax havens and shell corporations and then pay
themselves to use their own property. There is no economic
purpose served in that. It is nothing more than tax avoidance.
The President says he wants to close them. The President, when
he was a Senator, co-sponsored much of the legislation that
would have closed at least some of those egregious tax
avoidance tactics, which costs our Treasury God knows how many
tens of billions a year and maybe $100 billion a year.
We could end sequestration, at least for this year and
next, if we closed some of those schemes which drain our
Treasury and ship revenue offshore. Why should we not do that?
Mr. Deese. Well, I think the framework the President has
put forward----
Senator Levin. Why should we not do what I am saying? I am
not talking about the President's framework which just talks
about cutting corporate rates, which, by the way, are already
low as an effective tax rate. By the way, corporate tax
revenues to this Treasury are at an all-time low. There are
something like 9 percent of our revenues come for corporations.
We have 30 corporations, the biggest corporations in the
world that have not paid taxes for the 3-year period studied.
Paid zero in taxes. Why not close those egregious,
unjustifiable loopholes, that are costing our Treasury so much
money, and use that revenue to end sequestration this year and
next year? Why not?
Mr. Deese. Well, I think that what the President has said
is we should close----
Senator Levin. No, for that purpose, why not close them and
use the revenue for that purpose? That is my question.
Mr. Deese. Well, again, the reason why I raised the
framework is because if you look at the budget, it has a set of
specific corporate tax expenditures and corporate tax loopholes
that it would close. That is revenue that could be used to
reduce the deficit or invest in other priorities.
Senator Levin. Why is it in the budget said to be used only
for rate reductions?
Mr. Deese. Well, I think what the President has said is
twofold, which is if we can move to close those loopholes, let
us do so. Let us try to work together to do so. But if there is
a good faith commitment to try to do comprehensive corporate
tax reform and if that can be done in a way that actually is
pro-growth and actually would increase incentives to invest in
the United States, then he is willing to consider doing that in
a revenue-neutral manner.
Senator Levin. But if that cannot be done or is not done
this year, why not take the revenues from these loopholes which
have no economic purpose, other than tax avoidance, and take
that revenue to end sequestration? If we cannot do the
individual tax increases or revenue increases from the Buffet
Rule or whatever, if we cannot succeed in getting that revenue,
if the President does not succeed, why not take the revenue
which should come to the Treasury, frankly, if there were no
deficit from these tax avoidance schemes? Why not?
Mr. Deese. So again, I think the budget lays out those
parameters and if we cannot move on corporate tax reform, we
should move to close those types of loopholes.
Senator Levin. Mr. Chairman, my time is up, but I do have a
few more questions. But thank you. Sorry I went over.
Chairman Carper. No. I would have let you use more.
Let me go back and just revisit something I said earlier
and just try to draw out some further discussion. I mentioned
the conversation we had with the Federal Reserve Chairman,
talking about investments that we should make even as we rein
in the spending, the important investments to make to grow the
size of the economic pie in our country.
We had a previous Vice Chairman of the Federal Reserve come
and testify in a hearing last year on deficit reduction, Alan
Blinder, who is back now teaching economics, I think, at
Princeton. And he was one of, I think, a four-or five-member
panel discussing with us a year or so ago how we could go about
reducing our deficits.
I will never forget what Dr. Blinder said. He said the 800-
pound gorilla in the room on deficit reduction for the Federal
Government is health care costs. And he did not say this, but
as we know, we spend roughly 16, 17, 18 percent of GDP for
health care in this country. In Japan, they spend about 8
percent. They cover everybody and they get better results in
many respects. I would like to say they cannot be that smart;
we cannot be that dumb.
But Dr. Blinder went to say, the 800-pound gorilla in the
room on deficit reduction is health care costs. If we do not
get our heads around it, get our arms around it, we are, in so
many words, doomed.
When it came time to ask questions, a question I asked of
him, referring to his statement about the 800-pound gorilla in
the room, and said, What would be your advice to us? If we are
serious about deficit reduction, we know a big piece has to be
health care costs. What should we do? And he thought for a
moment and he said, I am not an expert on this matter. He said,
I am not a health economist, but this would be my advice to
you. Find out what works, do more of that. That is all he said.
Find out what works, do more of that.
My response to that was, I said, find out what does not
work and do less of that, and he said, yes. But I think there
is great wisdom in that, not just for spending money in health
care more wisely, but for education, housing, transportation,
all kinds of issues.
One of my guiding principles, and I owe it to him, knowing
how important reining in the growth of health care costs is,
talk to us about how we might do that, some ways that we might
do that, particularly with respect to Medicaid and Medicare, in
ways where we do our best not to savage old people, poor
people, but at the same time, we get a better result for less
money or better result for the same amount of money because we
need to. Please.
Mr. Deese. Well, I think there is a lot of wisdom in that
statement and, in particular, that in the health system, we
really do need to identify those things that are going to drive
innovation across the system and then make sure that they are
spread broadly.
I think the good news is that there is a lot of very
exciting activity going on in our health care system right now,
a lot of anecdotal, and in some cases, more than anecdotal
evidence of what Dr. Blinder was referring to, places where we
are seeing things that work, things like accountable care
organizations where you are actually starting to structure
payments and incentives around providing certain quality of
care outcomes, rather than just paying for inputs independent
of outcomes.
Those are the kinds of potential measures that if we can
identify them, we can measure them. We can actually verify that
those work. And then we can spread them across the system. That
is going to be the way that we help to really drive systematic
change in the health care system. I think that we have a number
of tools out there to help on that front to try to identify
these game-changers, as some people refer to them, and I think
that we need to look for additional ways to do that as well.
You mentioned outside of the health care space, and I think
that is an important component as well, and one of the things
that I know that OMB has been working on and that if confirmed
I would want to learn more about. I think the focus should be
on evidence-based investment and evidence-based grant-making
because there are a number of places where we can do better
and, in fact, we can be more effective with the same or fewer
dollars if we actually have better systems to measure and test
results and then scale programs when we actually see positive
effects.
So I think that it is an important principle. It is
applicable beyond the health care space, but I agree that the
health care area is the place of both the greatest need and the
greatest opportunity.
Chairman Carper. Just before I caught the train to come
down here today, we met with representatives from a large
health insurance company back in the part of the world where I
live and my family lives. We talked about some of these issues,
delivering health care, better results for less money. What we
talked about--you mentioned the accountable care organizations.
We talked about patient-centered medical homes.
What I think they do is represent a way to encourage
collaboration, encourage a sense of teamwork in terms of
delivering health care, to move away from fee-for-service, to
just a lot of stovepipes that operate almost independently of
each other without a lot of collaboration. Quite a different
approach.
If you look at Medicare, Medicare is pretty much a fee-for-
service animal, and we have some elements in Medicare where we
actually do something like coordinate the delivery of health
care better than we do in a straight fee-for-service.
They had a problem in the past with Medicare Advantage
being over-priced and we tried to address that to provide a
smaller reimbursement so that the pricing is more reasonable,
but at the same time, to encourage people to take advantage of
a health care delivery system that moves away from fee-for-
service.
We could just talk about this. How do we move away from
fee-for-service? How do you do it in a way that actually saves
some money? What role does Medicare Advantage play here?
Mr. Deese. Well, I think that has to be the goal and we
have to figure out ways to do it that, as you say, end up
strengthening the program, while also making the program more
efficient. I think that the recent changes to Medicare
Advantage which you referenced, I think, are being effectively
implemented. We have seen premiums come down, enrollment go up,
and we are saving money at the same time.
I think that the most effective way that we can do this is
by continuing the process of experimentation, identifying what
works, and then scaling it. And I think that is, in a health
care system, not just Medicare, but also across the health care
system that is as complex as the one that we have in our
economy, we have to make sure that we are testing results and
then scaling them so that we know what works.
And I think the linkage between Medicare and the rest of
the health care system is important because I think ultimately,
what our goal here is to do is to drive down the rate of growth
of health care costs systemwide, because if the savings only
accrue in Medicare and costs are increasing outside, we are not
going to address the overall economic challenge that you
referenced earlier of a larger and larger share of our gross
domestic product (GDP) being eaten up by health care.
So I think that it is about looking for ways to make
programs like Medicare Advantage more efficient. I think we
have seen some progress on that front, and I think it is about
identifying successful interventions and scaling them over
time.
Chairman Carper. All right. I will probably come back and
revisit this in our next round, but let me yield now to Senator
Levin. Thank you.
Senator Levin. Thank you, Mr. Chairman. How important is it
that we reverse sequestration?
Mr. Deese. I come at this issue from an economic point of
view, and when I look at the data and the independent analyses
that have been done, I think that there are two problems. The
first is that the sequester is a relatively blunt tool and it
is forcing indiscriminate cuts, about which I think there is
wide agreement, are not sensible.
But second, the magnitude of the cuts imposed over such a
short period of time, it is hard to do that without having a
really material negative impact, and the Congressional Budget
Office and others who have looked at the issue, have concluded
that you are going to have a material negative economic impact.
And so, I think that it is very important from an economic
perspective that we look for a way to replace what is a blunt
instrument that is going to do damage to our economy now with
an approach that actually achieves greater deficit reduction,
has more long-term reforms that actually will get at some of
the issues that we were talking about, but that has a more
sensible approach economically in the short term as well.
Senator Levin. And is it important that the deficit
reduction that you are talking about be balanced?
Mr. Deese. I think----
Senator Levin. In other words, that it have revenue and
entitlement reform and it have more prioritized or targeted
discretionary spending cuts? Should all three of those be part
of a balanced deficit reduction?
Mr. Deese. I think the short answer is yes, when you look
at the deficit reduction as part of an overall economic
strategy. We have to ask the question of, what is going to make
sense for the economy in the short and the long term, and I
think that in order to maintain the kinds of productivity-
enhancing investments, like infrastructure and basic research
that we were talking about earlier, while also hitting our
long-term deficit reduction goals, that the best way to do that
is to try to bring revenues from tax reform and entitlement
reform together done in a way that actually strengthens our
entitlement programs in the future.
Senator Levin. Donald Regan, who was the Secretary of the
Treasury under President Reagan, wrote a book and this is a
conversation that he recounted from the Oval Office. He said
that President Reagan liked to start off every meeting with a
story or a joke. So Don Regan decided he wanted to introduce a
very serious subject, so he asked the President this question.
He said, What do these 60 big corporations have in common?
He rattled off the biggest corporations in America. And
President Reagan's interest, he said, was immediately aroused.
He said, I do not know, what do they have in common? And so,
the Treasury Secretary said, Let me tell you, Mr. President.
What these outfits have in common is that not one of them pays
a penny in taxes to the U.S. Government.
What the President said? His shock was genuine. A
dumbfounded silence settled over his economic advisors. What
unconventional idea was I trying to plant in the President's
mind now? Believe it or not, Mr. President, your secretary paid
more Federal taxes last year than all those giant companies put
together. The President flushed, a sure sign of surprise and
discomfort.
I just cannot believe that, he said. His Treasury Secretary
says, I do not blame you for doubting it, but it is the truth.
I checked it out. It is perfectly legal, but it is wrong, Mr.
President, when a hard-working secretary pays more to support
her government than 60 of the richest corporations in the land.
He said, I agree, Don. I just did not realize that things had
gotten that far out of line.
Well, things are that far out of line and it seems to me
that what we need is some of that getting disturbed, bothered,
troubled when we have some of the largest corporations in the
country either paying no tax or using these gimmicks to shift
revenue offshore to avoid paying taxes.
I would love to see someone in the White House, the
economic advisors, or you now as the Deputy Director of OMB to
get mighty mad at this situation. We are facing sequestration.
It is incredibly bad. It is the wrong way to budget. Everybody
knows that, I think. Just about everybody knows it.
And to say that we are not going to do the right thing in
terms of closing these loopholes unless we can get corporate
rates reduced, it seems to me, is ignoring a very troubled
reality, and that is something else which Donald Regan, a
conservative Republican, said in his book.
The accumulated weight of the inefficiency and selfishness
that they had created had become a burden on the economy and an
affront to economic and social justice. Donald Regan is talking
about economic and social justice. If he can do it, I would
hope the Administration can do it. I would hope the OMB can do
it.
The American people, by survey after survey, say they want
these tax loopholes closed when they are informed particularly
of the loopholes which allow corporations to shift revenue to a
tax haven. And they are asked, No. 1, what do you want to do
about it? End it.
No. 2, what do you want to do with the revenue? They
specifically say, in about a five-to-one margin, reduce the
deficit, and fight to avoid cuts in education or in health care
or in the infrastructure. That is what they want to do with it.
You are going to be in a position where I would hope that
there would be some serious thinking in the White House about
whether or not we can, No. 1, continue a sequestration and if
the way to avoid it is to get a balanced approach with revenues
coming from a source that nobody can justify. I have not heard
anybody justify these kind of loopholes.
You can justify an oil and gas deduction. I do not favor
it, but you can justify it. At least it is an incentive to
produce oil and gas. You can justify accelerated depreciation,
which I do favor, because it will give an incentive to buy
equipment and new machinery, increase productivity, and create
jobs.
But these are at least arguably useful deductions. The ones
I am talking about, which have been sent consistently,
regularly to your office, have no economic justification. They
ought to be closed if we had no deficit, but surely with a
deficit and sequestration, I would hope that you will take
another look at these and not link their closing to reducing
corporate tax rates. There is no logic to that.
If these are unfair, unjustified tax loopholes, we need the
revenue and we ought to get it, surely, as part of a balanced
approach to deficit reduction. So you have already commented on
that and I just would leave that thought in your mind as you
are hopefully confirmed to be the Deputy at OMB. There are lots
of other issues, obviously, that you have to face. It is a huge
job. We wish you well.
Mr. Deese. Senator, thank you, and I will say that I am
happy to look further into that and to work with you and your
office on that issue if confirmed.
Senator Levin. Thank you, Mr. Chairman.
Chairman Carper. Thank you, Senator Levin. There has been
no shortage of initiatives that have focused on Medicare led by
people like Alice Rivlin, people that include like Tom Daschle,
and folks that are practitioners, very smart people, Jonathan
Gruber from the Massachusetts Institute of Technology (MIT),
that have actually looked at Medicare and said, These are some
ways where we can save some money, save these programs in the
long haul, and do so in a way that does not savage older people
or poor people.
What do you think are some of the most promising ideas? Not
the ones we absolutely have to do, but what do you think are
some more promising ideas that you have heard?
Mr. Deese. Well, I think all of the most promising ideas
share a similar character which is they go at incentives. And
so, the accountable care organizations that we were talking
about earlier try to address the incentives for teams of
doctors to try to focus on outcomes rather than inputs.
Another specific example is how to get at the issue of bad
debt payments. If a hospital cannot collect bad debt payments,
then Medicare reimburses. And what that creates is a system
where there is no accountability, there is limited incentive to
actually go out and seek reimbursement.
I think that is a place where if we were to change some of
the rules in Medicare we could try to put more of an incentive
for hospitals to take on that kind of activity on their own.
That is another way, again, where I think what you do is you
are driving efficiency by changing incentives.
And I think that we also have to be willing to look at
whether there are things that we should do with respect to, on
the beneficiary side, that are smart and that meet the
principle of strengthening the program and strengthening the
core commitment of the program.
And so, I think it is appropriate to look at means testing
Medicare. I think the President has put a proposal out that I
think makes some sense, because as part of these overall
reforms, I think we have to ask the questions about whether
those who are the most fortunate should be paying a little bit
more. It is still going to be a good deal for them as part of
the system.
So I think that if you can package together a set of these
types of reforms that go after incentives that make sure that
we are putting a program into the future that is actually going
to be able to be viable, then that is the way we are going to
start making progress.
Chairman Carper. Dr. Coburn could not join us today. I do
not think he is going to be able to arrive before our hearing
concludes. But among the many issues that he has been focused
on and has done a lot of work, with the help of his staff, is
on the area of duplication. With an enterprise as large as the
Federal Government we should not be surprised that there is
duplication.
There is in any large corporation and we have it in spades
in the Federal Government, as you know. The GAO has given both
Congress and the Administration a number of recommendations to
reduce duplication and there is a whole lot of work to be done.
How will you work in your new post, if confirmed, to go
after some of that duplication?
Mr. Deese. Well, the issue is one that I know Dr. Coburn
has taken a leadership role on and others in the Committee as
well, and I think that GAO is playing a constructive role in
the process by doing a set of reports that actually help to
identify and flesh out because it helps focus attention and
identify areas for progress.
I think in the role, if confirmed, I would approach the
issue from two ways. One is, where are there places within the
Executive Branch's authority today that we can help make
progress in addressing inefficient duplication? I know there is
a whole range of proposals that have been put on the table and
I think the Administration has already started to make progress
on a number of counts.
But if confirmed, I want to ask a set of questions about
where are we and can we accelerate some of that, some of that
progress. And in places where we have not moved, why is it? And
are we sure that we cannot make some progress there as well.
And then the second is in trying to work with Members of
this Committee to identify where are the highest value places
where legislation may be needed, but where we think there is a
pragmatic opportunity to actually make progress.
So the President's budget puts forward a couple specific
proposals on duplication, one in the area of science,
technology, engineering, and math (STEM) where we have a myriad
of programs across the government, all well-meaning, but a real
opportunity to deliver better results if we consolidate
programs.
And likewise in the area of job training. But what I would
like to do if confirmed is understand and learn from Members of
this Committee where you think and where we think we could
actually make some tangible progress in the legislative front
and then try to build some momentum there.
Chairman Carper. One of the things I would keep in mind, if
you have, we will say, 100 programs across the government that
are focused on raising student achievement in the science,
technology, engineering, math fields, one of the logical steps
would be, in my judgment, is to be able to measure which of
these programs are getting the kind of result that we are
looking for and which ones are not, and being able to push more
money toward the ones that are working and less money toward
those that are not. That means we have to be able to measure
progress and then be able to convince folks like Senator Levin,
Dr. Coburn, and myself of that.
I want to just focus a little bit on one of the areas that
Dr. Coburn and I and others on this Committee have focused on
which is improper payments. People looked pretty amazed to find
out about 10 years ago, that the amount of improper payments
that our Federal Government was paying were largely mistakes,
counting errors, duplicate payments, or erroneous refunds.
But in there we found that it added up to about, I want to
say about $40 billion when we first passed legislation, I
think, in 2002, that said Federal agencies have to start
reporting your improper payments.
Not everybody did right away, but over time, more and more
did. We finally passed legislation about 2010--Dr. Coburn and I
co-authored it--on improper payments that said basically four
things. Not only, Federal agencies, do we want you to report
improper payments, we want you to stop making them.
And we also want you to go out and recover improper
payments when you report all this, and we want to start
rewarding or incentivizing managers. Part of their performance
evaluation is to be evaluated on how well they and their
agencies reduce improper payments, and recover over-payments.
We saw, I think in 2010, improper payments peak out at
about $121 billion. It is a lot of money. And we have seen the
numbers drop over the last 2 years now down to about $108
billion. I think a reduction, if my number if right, about $13
billion over 2 years. Pretty encouraging. We still have a lot
out there.
And at the same time, I think we have seen recoveries of
improper payments where we have gone out and recovered, I
think, between $4 billion and $5 billion maybe in the last year
or so. But there is plenty of work still to do.
I am going to ask you just to take a moment and think out
loud for us, if you will, what more we can do to go after that
$108 billion number of improper payments.
Mr. Deese. Yes.
Chairman Carper. That is not all fraud. I mean, a lot of it
is not even fraud. It is just mistakes.
Mr. Deese. I think that it is a very important issue and I
think that you are right that while we have seen some real
tangible progress and some that is stemming from the important
legislation that you and others have worked on and passed, the
current level is unacceptably high, and so we have to be
committed to moving to do more.
I guess when I think about how to do that, I think about
two issues. One is technology and data, and the other is
evidence. And so, on the technology and data side, I think that
as I understand it, a lot of the issues associated with
improper payments are a function of not having effective data
sharing between agencies to actually identify whether and when
payments should and should not be made.
And so, I think there are opportunities to try to improve
the way that we are sharing data through better use of
technology. And we have to be careful about protecting privacy
in that process, but I think that is an opportunity.
The other place, and this goes back to some of the
conversations we were having about Medicare, that I think that
the program integrity efforts that we have identified that we
know are based in evidence and can return several dollars,
eight-to-one, nine-to-one returns include things like in
Medicare and Social Security with respect to continuing
disability reviews, and also at the Internal Revenue Service
(IRS).
Those are places where I think we know there is an
opportunity and that we have evidence to back that up. And so,
we should think about how we can do more in those spaces.
Chairman Carper. One of the initiatives that Dr. Coburn and
I worked on in the last Congress, something called the Medicare
and Medicaid Fighting Fraud and Abuse to Save Taxpayers'
Dollars Act (FAST Act), and the focus there is how do we save
money, particularly in Medicare and Medicaid. We have had a
situation for a number of years where dead doctors have
provided medical services to folks who may be alive, but they
may not be. They may not be eligible for services.
And we see situations where we are paying enormous amounts
of money, in some cases, for medical equipment. We are not
using competition. We are finding out if we do, we could
actually save some money.
But Dr. Coburn and I are reintroducing an updated version
of the FAST Act, probably in the next week or two, and
certainly in the next month. And let me just ask, is this
something that you have ever heard of? And if you have any
thoughts about how we might work together on this? I would
welcome those thoughts.
Mr. Deese. I have heard of it. I am not that familiar with
the legislation, and so I would want to hold off and actually
take a look at the legislation before giving you a full
response. But I think generally speaking, it is an area where I
am very interested and I understand that there is real
potential. And so, I would look forward to taking a look at
that and working on the issue, if confirmed.
Chairman Carper. All right. Thank you. I want to delve into
an area called Government Performance and Results Act (GPRA),
and I do not know if you are at all familiar with that, but
Congress, in 2010, updated the Act, thanks to the work of one
of our former colleagues here, Danny Akaka from Hawaii. I think
former Governor, now Senator, Mark Warner was involved in this.
I worked on this, my staff and I, but it is a bipartisan kind
of issue that our Republican colleagues, especially on this
Committee, are very much interested in.
But it requires, as you know, data-driven performance
reviews. And I wonder if you could just tell us if you see this
particular approach as a useful tool in measuring performance.
And if you will, what should be the role of OMB in implementing
this law?
Mr. Deese. I think it is an incredibly valuable tool
because one of the things that I think is very important when
we think about performance in the government is setting
priorities. And as Director Burwell has said on numerous
occasions, if we try to do everything we will not do everything
well.
And I think that having a framework to actually set goals
and set priorities, but then also use that as a way to actually
drive real accountability and culture change within the
agencies, that has got to be our objective. And I think, as you
said, the GPRA framework allows us to do that.
And I think one of the things that is important about that
is the link between goal-setting and accountability. And so, I
think, for example, when I go on the Web site and I can
actually pull up a goal and I see the picture of the person at
the agency, this is the senior level manager, this is the
senior person who is accountable for executing on that goal. I
think that is the kind of positive development that this
framework allows, because ultimately, it is moving from a
compliance mentality to more of an accountability mentality
that I think is actually going to help get results.
I think the role that OMB can play, my understanding is
that OMB plays an important role in coordinating the goal-
setting process across the agencies and then helping to make
sure that agencies have the tools that they need to hit these
accountability metrics. And so, that is certainly a role that I
think is going to become even more important over time and
something that I would want to prioritize myself if I were
confirmed.
Chairman Carper. It is not everybody who runs for office,
who says I want to be a Senator, a Representative, President,
or Vice President because I want to make sure that we do our
dead-level best to use this GPRA law to get things done and to
do more in a more cost-effective way.
Not everybody wants to say, well, we have to figure out how
many data centers that we are going to have and how much of our
information we are going to put up on the cloud. You do not
find many people who come here with the idea of doing those
kinds of things.
But everybody is intent on hammering down and getting rid
of improper payments. We have been chasing down the fraud. But
a lot of people on this Committee are. It is a Committee that
draws and attracts those kind of people, in some cases, because
we are former Governors or mayors or maybe attorneys general.
I spoke earlier about the three things that I think are
three components I hear over and over again, if we are serious
about deficit reduction progress. One, we need some additional
revenues closer to the level that persisted when balanced
budgets were in the Clinton Administration or revenues as a
percentage of GDP range between 19.5 and maybe 20.5 percent, or
right around 20 percent. Spending was also right around 20
percent.
And as Dr. Coburn suggested, it does not have to be based
on rates. If we are smart about it, we will find other ways
just to get the effective tax rate up by going after provisions
in the Tax Code that, frankly, do not make a lot of sense, or
maybe are unfair, and do not enhance economic development.
The other thing that we need to do, and I keep coming back
to this one, and we as Democrats especially need to keep this
in mind is the third piece, how do we get better results for
less money in everything we do. It almost is like a culture
change where we look in every nook and cranny of the Federal
Government and ask that question and try to move from a culture
of spendthrift to a culture of thrift.
It is hard for one Committee to do that. It is impossible.
It is hard for one Committee, even if you have a lot of people
who are interested in this stuff and folks on our staff, it is
hard even if you work with OMB. It is hard to get that done.
Even if you are working with the House, it is hard to get it
done. It is hard if you are working with the Government
Accountability Office or with all the IGs, all the inspector
generals across the Federal Government.
What we try to do is to leverage the effectiveness of our
Committee in going after ineffective spending by partnering
with all the above. And we need to--this is again, as I said,
is a shared responsibility, all hands on deck.
Would you just talk a little bit about how you think, in
your position at OMB, how OMB can be maybe a better partner in
that leveraging activities?
Mr. Deese. Sure. I think there is a couple things that OMB
is particularly well-positioned to do. I think the first is to
invest in a relationship based on transparency and trust with
both this Committee and some of the other actors that have a
vital role to play in this overall process.
And I think that having a sense that we are working
together to set those priorities that I was just referring to,
that we are looking for opportunities to incorporate different
points of view. I think that is important in building a
relationship that actually will be effective at getting things
done, as you say, when it is an effort that is going to require
everybody together.
I think the other thing that OMB is very well-positioned
and it plays to OMB's strengths is to provide best practices
and information across the agencies. And so, whether it is on
the IT side and doing things like, in a portfolio stat, you go
into an agency and you really look top to bottom, what kind of
technology improvements can be made, but then OMB is in a
position to actually cross-fertilize and make sure that the
lessons learned from that particular intervention are actually
available to the other agencies.
And so, I think, in a very pragmatic way, we at OMB need to
make sure that we are using that resource as effectively as
possible and need input on how we can do that better.
And then I think the third area really is in helping to set
the priorities for the Federal Government because the policy
process that OMB can oversee and the fact that we have
responsibility for the budget framework as well means that is
the opportunity to make sure they are full integrated and that
when you are trying to identify these areas to make government
more efficient and effective, that they are reflected in the
budget that is out there as well.
So I think there are several opportunities where OMB can
and should play a vital role. But I agree with your basic
premise that at the end of the day, to make real progress, we
all have to be working constructively and pragmatically
together. That is, again, if confirmed, something that I
appreciate and I want to learn more about from you and others.
Chairman Carper. As it turns out, GAO can be enormously
helpful in this area. Every other year actually, GAO puts out
something they call their High Risk List, and someone asked me
once, what is the High Risk List. It is a compliation of high
risk ways to waste taxpayer money.
They have a lot of ideas and they involve the way we manage
our data, they have the way we procure our weapon systems where
they contract for all kinds of things, the way we handle our
Federal property and dispose of Federal property or do not. I
call the GAO High Risk List this Committee's to-do list.
And I would just suggest that for OMB, it is not a bad to-
do list for the Administration. And again, it is so hard to get
anything done around here, even if we agree on things, but if
you have a particular set of policy initiatives that really
could, arguably, save a fair amount of money and the
Administration is not only just talking about it but putting it
in their budget.
And you have GAO in their High Risk List saying these are
things we need to do, we have the Committees in the Senate and
in the House that are doing proper oversight that includes
matching up behavior of Federal agencies and so forth, their
policies, measuring those against the high risks from GAO, and
then finding folks within the IGs ranks, inspector general
ranks, and then outside of government groups like Citizens
Against Government Waste and other kinds of organizations.
If you can put them all together you can get actually a
synergy going here. And I think we are going to need that in a
huge way if we are serious about deficit reduction. That is the
third piece.
I have people all the time who say to me, I do not mind
paying more taxes, but I do not want you to waste my money. You
would be amazed how often I hear that. I do not mind paying
more taxes. I do not want you to waste my money. And if we
realize that more revenue is part of the solution, not
necessarily higher rates, if we realize that more revenue is
part of the solution. We realize that they are not anxious to
pay more in revenue or taxes, but if you do, we do not want you
to waste that money.
If we can convince clearly people that are determined to
work on that front as well, I think we help ourselves and our
country in the end.
Among the items on GAO's High Risk List many deal with
building space. We own hundreds of thousands of pieces of
property around the country and some of them are well-utilized,
others are not.
One of the things that troubles me--and Dr. Coburn focused
on this almost as soon as he came to the Committee in 2005--was
the way we lease space for Federal agencies to use when
actually it would be more cost-effective to buy it. But if you
buy it, you have to pay for it. You cannot, because we do not
have a capital budget, you cannot basically write it off over
time. You have to take it up right up front. A billion-dollar
complex, its first year, you would have to offset it. That is a
hard thing to do.
Would you talk with us a little bit about that idea, a
long-term lease versus actually paying something outright and
how we deal with the scoring? Because the incentives are all
wrong. It may be, in a lot of cases, more cost-effective to buy
and to own than it is to lease long term. Can you talk to us
about the incentives there and how, if anything, we can and do
need to do?
Mr. Deese. Sure. I mean, I think there is a real
opportunity in better managing the Federal footprint, and I
think there is an opportunity to actually generate savings,
deficit reduction, but also to just operate our Federal
facilities more efficiently and effectively.
I think that the way to go about it is to think about how
to create more tools to effectively manage this large footprint
that we have. The issue that you mentioned is one of those
tools. I think there are other tools that we should look at,
and are there ways that agencies can swap facilities when that
would be, an economic improvement for both agencies.
I know that there is an initiative that has been undertaken
to basically have PAYGO within an agency that says, you cannot
expand in a new facility if you have not actually already
looked at whether there are places where you need to
consolidate. I think that is an effective forcing mechanism as
well.
I think if you put together these pieces and you look at
what other pieces are out there, it is going to be those types
of pieces together that are going to get us to a more efficient
outcome, a more efficient management of the Federal footprint.
It is a real opportunity and I think it is one that, if
confirmed, I would want to work with you and your staff, as
well as Dr. Coburn and his staff and others, to make sure that
I fully understand exactly what type of tools are going to be
the most effective, but I agree completely that we need more
tools in the toolkit to try to go at this problem, and there is
a real opportunity there.
Chairman Carper. Maybe one last question. One of the things
I like to do at a hearing, usually I do it at a hearing when
there are a number of witnesses and where we are trying to
develop consensus around a particular issue. We were doing that
last week on, among other things, improper payments and how to
reduce them.
I am going to ask you to give a closing statement, not a
long one, but just some things you would like to mention, maybe
reemphasize, or some thoughts that have come to mind that you
did not have a chance to put in your original statement, so
think about that, if you will.
The job of government with respect to job creation is,
people think sometimes their Senators think that they create
jobs, or Governors create jobs, or Presidents create jobs, and
I always say, No, we do not create jobs. What we do is help
create the nurturing environment for job creation, which is
workforce, infrastructure, access to capital, common-sense
regulation.
There are about 7 or 8 million jobs in the country that
depend on a vibrant and cost-effective Postal Service and we
have been wrestling for a couple years now to try to get it
right in a day and age where you have people change very
dramatically the way they communicate.
As you know, first-class mail volume is way down. And that
we still need a Postal Service. But I do not know if you have
any thoughts about how to move us toward a vibrant, sustainable
system where we can maybe maintain a unique distribution system
that we have, but find ways to use that to generate more
revenues, just to be more innovative.
But we need thoughts you have on the postal reform, which I
think is going to be seriously addressed this spring and this
summer. My hope is that we will be able to find common ground
not only here in the Senate, but also in the House and with the
Administration.
Mr. Deese. Well, I think it is an important area to find
common ground because this is, as you say, a service that
provides a vital service to Americans, but also, as currently
structured, is unsustainable and if left unaddressed, is going
to end up being a harder problem to solve and one that could
potentially be a larger liability for taxpayers down the road.
So I think this is the moment to try to take a very serious
look at reform. And I know that the President's budget has put
forward an approach to reform. I know that others have thought
very deeply about what the right approach to do that is.
I do not have a particular magic formula in that respect,
but I do think that the right way to go at this issue is to
look for the areas of common ground and try to build a
consensus, that if addressed now and in a sensible way, this
will be easier.
It is never going to be easy, but it is going to be easier
now if we address this in a sensible way than if we leave it
and wait and have to address a bigger problem down the road.
Chairman Carper. Good. Well, if you are confirmed, it is
one of the first things that we are going to try to hammer out,
we will certainly need your involvement and guidance and
support in doing that.
If you have a just brief closing statement you would like
to offer, we are all ears. We would like to hear it.
Mr. Deese. Sure. Well, first of all, thank you for this
hearing and again the opportunity to speak with you and with
Senator Levin. I look forward to speaking with other Members of
the Committee. And I guess in addition to what I have said, I
guess I would just say this, that I understand that we face
very serious challenges as a country, economic challenges and
fiscal challenges, but I am also very energized by the
opportunity ahead and the potential opportunity if confirmed
for this role at OMB.
And I think that in addition to the opportunity to work
with a second-to-none professional staff at OMB, the
opportunity to be part of a pragmatic group, as you said, this
Committee and other stakeholders that you have identified, that
are trying to actually just identify where can we find good
ideas and how can we move forward to show the American people
that we can be effective stewards of taxpayer dollars.
We can do more with less, we can operate their government
more efficiently. It is something that is extremely exciting
for me and, again, I am very humbled and honored to be here and
thank you for your time.
Chairman Carper. Well, we thank you for your time. We thank
you for your willingness to take this on. I want to thank your
mom and dad, David and Patricia, for raising you and your
sister Heather to be so smart and to have good values and a
good work ethic and good judgment in spouses.
Kara, we are grateful for your willingness to share your
husband with us. It is a sacrifice to do these kinds of things.
We are mindful it is not just a sacrifice on his part, but on
yours as well. I am deeply grateful. And I look forward to
working with you if confirmed, look forward to working with you
closely going forward.
I will close with the words I used earlier. A big part of
what we need to do is find out what works and do more of that,
find out what works and do more of that. And it is not any one
person's responsibility. It is not mine, it is not yours, it is
not the responsibility of Sylvia Mathews Burwell, it is not the
OMB Deputy for Management. It is everybody's responsibility.
And we look forward to finding those ideas that work and
doing more of that and seeing if we cannot continue the
progress we are making in getting this country moving in the
right direction in terms of our economy, but also keeping our
deficit moving in the right direction and that is down. We are
anxious to get you on the job and at work so we can continue
that progress.
I understand, according to our crack staff back here, that
the hearing record will remain open until close of business
tomorrow. That is May 14 at 5 p.m. for the submission of
statements and questions for the record. Have you had a chance
to meet with most of the Members of our Committee?
Mr. Deese. I have had a chance to meet with some of them,
yes.
Chairman Carper. Yes. You want to meet with as many of us
as you can. Not everybody can. Some people serve on five
Committees and they are--we are all busy. But I would urge you
to make yourself as available as you can. That will help you,
and in the end, it will help us to move your nomination along
promptly.
I think that is a wrap. Thank you so much. And with that,
this hearing is adjourned. Thanks so much.
[Whereupon, at 4:32 p.m., the hearing was adjourned.]
A P P E N D I X
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