[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
GOVERNMENT SPENDING: HOW CAN WE BEST
ADDRESS THE BILLIONS OF DOLLARS WASTED EVERY YEAR?
=======================================================================
HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 5, 2013
__________
Serial No. 113-6
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee MATTHEW A. CARTWRIGHT,
TREY GOWDY, South Carolina Pennsylvania
BLAKE FARENTHOLD, Texas MARK POCAN, Wisconsin
DOC HASTINGS, Washington TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming DANNY K. DAVIS, Illinois
ROB WOODALL, Georgia PETER WELCH, Vermont
THOMAS MASSIE, Kentucky TONY CARDENAS, California
DOUG COLLINS, Georgia STEVEN A. HORSFORD, Nevada
MARK MEADOWS, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
KERRY L. BENTIVOLIO, Michigan
RON DeSANTIS, Florida
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
C O N T E N T S
----------
Page
Hearing held on February 5, 2013................................. 1
WITNESSES
Mr. Thomas A. Schatz, President, Citizens Against Government
Waste
Oral Statement............................................... 5
Written Statement............................................ 7
Mr. Ryan Alexander, President, Taxpayers for Common Sense
Oral Statement............................................... 30
Written Statement............................................ 33
The Honorable Dan G. Blair, President, National Academy of Public
Administration
Oral Statement............................................... 61
Written Statement............................................ 63
Mr. Jonathan M. Kamensky, Senior Fellow, IBM Center for the
Business of Government
Oral Statement............................................... 75
Written Statement............................................ 77
APPENDIX
Record Taxpayer Cost Is Seen for Crop Insurance, The New York
Times Article Submitted by Rep. Cummings....................... 121
The Honorable Elijah E. Cummings, a Member of Congress from the
State of Maryland, Opening Statement........................... 123
National Academy of Public Administration, Responses for the
Record......................................................... 125
Sliding Past Sequestration, Taxpayers for Common Sense Article
Submitted by Rep. Mica......................................... 127
GOVERNMENT SPENDING: HOW CAN WE BEST ADDRESS THE BILLIONS OF DOLLARS
WASTED EVERY YEAR?
----------
Tuesday, February 5, 2013
House of Representatives
Committee on Oversight and Government Reform,
Washington, D.C.
The committee met, pursuant to call, at 12:59 p.m., in Room
2154, Rayburn House Office Building, Hon. Darrell E. Issa
[chairman of the committee] presiding.
Present: Representatives Issa, Mica, Turner, Duncan,
Jordan, Chaffetz, Lankford, Amash, Gosar, DesJarlais,
Farenthold, Lummis, Massie, Collins, Meadows, Bentivolio,
DeSantis, Cummings, Maloney, Norton, Tierney, Cooper, Connolly,
Speier, Cartwright, Pocan, Duckworth, Davis, Cardenas,
Horsford, and Lujan Grisham.
Staff Present: Ali Ahmad, Majority Communications Advisor;
Robert Borden, Majority General Counsel; Molly Boyl, Majority
Parliamentarian; Joseph A. Brazauskas, Majority Counsel;
Caitlin Carroll, Majority Deputy Press Secretary; Sharon Casey,
Majority Senior Assistant Clerk; Steve Castor, Majority Chief
Counsel, Investigations; John Cuaderes, Majority Deputy Staff
Director; Adam P. Fromm, Majority Director of Member Services
and Committee Operations; Linda Good, Majority Chief Clerk;
Ryan M. Hambleton, Majority Professional Staff Member; Jennifer
Hemingway, Majority Senior Professional Staff Member; Mark D.
Marin, Majority Director of Oversight; Scott Schmidt, Majority
Deputy Director of Digital Strategy; Matthew Tallmer, Majority
Investigator; Peter Warren, Majority Legislative Policy
Director; Rebecca Watkins, Majority Deputy Director of
Communications; Meghan Berroya, Minority Counsel; Jaron Bourke,
Minority Director of Administration; Krista Boyd, Minority
Deputy Director of Legislation/Counsel; Ashley Etienne,
Minority Director of Communications; Devon Hill, Minority
Research Assistant; Carla Hultberg, Minority Chief Clerk; Elisa
LaNier, Minority Deputy Clerk; Dave Rapallo, Minority Staff
Director; and Mark Stephenson, Minority Director of
Legislation.
Chairman Issa. The committee will come to order one minute
early.
The Oversight Committee exists to secure two fundamental
principles: first, Americans have a right to know that the
money Washington takes from them is well spent and, second,
Americans deserve an efficient, effective government that works
for them. Our duty on the Oversight and Government Reform
Committee is to protect these rights. Our solemn responsibility
is to hold government accountable to taxpayers, because
taxpayers have a right to know what they get from their
government. It is our job to work tirelessly in partnership
with citizen watchdogs to deliver the facts to the American
people and bring genuine reform to Federal bureaucracy.
Today we continue that mission. For months we have been
engaged in a national discussion about how government takes and
spends money from hardworking taxpayers. As this debate has
unfolded, a lot of attention centers on which taxpayers should
be paying more so that government could keep spending more. The
question that hasn't been asked enough, although it has been
asked, whether or not Washington should be taking more.
I come from a business background, and the only way you can
make more is to deliver a better product. You need to be
transparent and you need your services to be delivered
efficiently. Understanding we are not questioning that services
need to be delivered here today but, rather, ensuring that the
delivery of services be done in the most cost-effective
possible way. Too often the distinction between needed services
and wasteful government gets blurred. Perhaps it is for
political purposes on occasion; perhaps it is simply because
attacking waste in government often looks like you are
attacking the underlying program.
We are not an authorization committee, for the most part.
We do not authorize most major spending programs. So I believe
we can be an honest broker. We will end no programs, but we
will work, and are working in our hearing today, at finding
places to find out if in fact these financial realities need to
be fixed and that they are clearly broken. Ignoring the problem
is no longer an option. We are running out of time because,
when government doesn't function properly, American people lose
access to important government services.
In any other enterprise producing nearly a $1 trillion
deficit for the foreseeable future every year would in fact be
shut down. Last year the government reported a total of $108
billion in improper payments. It would have taken us down by
one-tenth of our problem. In 2011, the inspector general
community identified potential savings produced from government
reform totaling another $100 billion.
The General Accountability Office has published report
after report identifying dozens and dozens of government
agencies that do duplicate and overlapping and cost-inefficient
projects that hardworking Americans pay tens of billions of
dollars a year for.
We need, and have, a blueprint to change that. What we need
is the political will, from both parties and the President, to
do so; and we have never had a better reason. Ultimately, as
the debate in other committees is on tax increases or simply
cutting programs to spend less money, we are the committee that
needs to be part of a fix that is a win-win: a win for the
taxpayer because he doesn't have to pay more; a win for the
service recipient because, in fact, services can be delivered
for less. That is our challenge; it is what we are here today
to talk about.
I don't believe it falls anywhere from the far left to the
far right of the ideological spectrum to reform government.
Just the opposite; I believe it is in the interest of all of
us, no matter where you are in the spectrum, to spend less
doing what we have agreed or disagreed to do so that, in fact,
the American people have a smaller burden than they do today. I
believe today's hearing will take us a long way in that
direction. We have a distinguished panel here to tell us about
it.
With that, I would like to recognize the ranking member for
his opening statement.
Mr. Cummings. I want to thank you very much, Mr. Chairman,
for holding this hearing. It is very encouraging that the first
two committee hearings of this committee have been bipartisan
and focused on the core jurisdiction of this committee. Your
staff did an exemplary job leading up to this hearing in
sharing information and making the planning of this hearing a
bipartisan effort.
The title of this hearing gets right to the heart of the
issues we are examining today. The title is Government
Spending: How Can We Best Address the Billions of Dollars
Wasted Every Year?
We in Congress talk all the time about cutting waste and
making the government more efficient. It is time to go from
talking to acting. I am looking forward to hearing from the
witnesses testifying today about concrete actions the
Administration and Congress can take to save taxpayers money.
The Department of Defense is responsible for an appalling
amount of wasteful spending each year through its contracts.
DOD obligated $365 billion for contracts in fiscal year 2012
and the Department has had significant problems with contract
management and oversight.
The Congressional Research Service recently reported that
DOD acquisition programs have experienced ``poor performance
against the backdrop of war in Afghanistan, spiraling contract
costs, and decline in the size of the defense acquisition
workforce.''
In testimony before this committee last month, a witness
from the Government Accountability Office said that several DOD
IT investments ``experienced significant performance problems
and were indeed high-risk.'' One of the specific examples the
chairman and GAO pointed out in that hearing was a contract
that the Air Force canceled last December, after having spent
$1 billion. The Expeditionary Combat Support System was plagued
by delays and cost overruns.
Representative Speier highlighted this issue in a letter to
us in December, Mr. Chairman, and I agree that it makes sense
for the committee to adopt her proposal to investigate this
contract further.
Another example is the $750 million in overpayments by DOD
to the contractor that provides food supplies to United States
troops in Afghanistan. This is an issue that has been
highlighted by the ranking member of the National Security
Subcommittee, John Tierney, and the subcommittee's chairman,
Mr. Chaffetz. Ranking Member Tierney has also been a leader in
exposing problems with DOD's F-35 Joint Strike Fighter, the
largest weapons procurement program in history, which has had
substantial cost overruns and repeated schedule delays. Full
production of the Joint Strike Fighter Program has been delayed
by six years and the cost per unit have doubled.
We are better than that. We can do much, much better.
Another area of significant Federal spending is crop
insurance. I ask unanimous consent to enter into the record a
New York Times article from January 15, 2013, titled ``Record
Taxpayer Cost Is Seen for Crop Insurance.''
Chairman Issa. Without objection, so ordered.
Mr. Cummings. Thank you very much, Mr. Chairman.
Mr. Cummings. According to this article, the government
pays $1.3 billion, $1.3 billion each year to 15 insurance
companies. The article states ``government documents show the
taxpayers have paid nearly $7 billion so far to subsidize
premiums for 2012. The documents also show that taxpayers could
pay another $7 billion to underwrite losses by the insurance
companies and other costs.''
These are just a few examples of government waste. There
are many, many more. And I hope the committee will conduct
vigorous oversight to expose these and other sources of
wasteful spending and ensure that necessary actions are taken
to address the root problems. As I have said many times, and I
said just here today, that taxpayers want to make sure that
their tax dollars are spent effectively and efficiently; and,
Mr. Chairman, we are committed to work with you in a bipartisan
way to not only see where that waste is taking place, but then
to come up with meaningful solutions to try to address them.
With that, Mr. Chairman, I yield back.
Chairman Issa. I thank the gentleman, and we will.
We now recognize our distinguished panel of witnesses.
Mr. Tom Schatz is president of Citizens Against Government
Waste; Ms. Ryan Alexander is the president of Taxpayers for
Common Sense; the Honorable Dan Blair is president and CEO of
the National Academy of Public Administration; and Mr. Jon
Kamensky is a senior fellow at the IBM Center for The Business
of Government.
Lady and gentlemen, pursuant to the committee rules, would
you please rise to take an oath and be sworn? And raise your
right hands.
Do you solemnly swear or affirm that the testimony you are
about to give will be the truth, the whole truth, and nothing
but the truth?
[Witnesses respond in the affirmative.]
Chairman Issa. Please be seated.
Let the record indicate all witnesses answered in the
affirmative.
Before I recognize Mr. Schatz, I just want to thank you all
for being here. Often we talk about individuals coming before
us as witnesses. Ultimately, you are all partners in the
process of understanding and exposing waste in government, so I
am particularly pleased to start off this oversight hearing
with this panel.
With that, you all are experienced; you know the five
minutes, you know the red, green, black, blue, the whole bit,
so I know you will finish up pretty close to that five minutes.
With that, I recognize Mr. Schatz.
WITNESSES STATEMENTS
STATEMENT OF THOMAS A. SCHATZ
Mr. Schatz. Thank you very much, Mr. Chairman. I ask that
my full testimony be submitted for the record.
Chairman Issa. Without objection, all testimonies will be
entered in the record.
Mr. Schatz. My name is Thomas Schatz. I am the president of
Citizens Against Government Waste, a nonprofit organization
with more than one million members and supporters nationwide.
It is no secret that government waste is present throughout
every agency and all functions could be performed more
effectively and efficiently. Recommendations to eliminate
waste, fraud, abuse, and mismanagement are regularly provided
by GAO, CBO, the President's budget, and congressional
committees. Outside of Congress, think tanks, advocacy groups,
and private sector companies also provide information on
government expenditures.
For example, since 1993, CAGW has released Prime Cuts, a
compendium of recommendations that emanate from both public and
private sources. The most recent edition of Prime Cuts
identified 691 recommendations that would save taxpayers $391.9
billion in the first year and $1.8 trillion over five years.
Over the years, there have really only been two large
comprehensive studies of government spending, the Hoover
Commission under President Truman and the Grace Commission
under President Reagan. The Hoover Commission inspired many
States to establish similar entities, especially the Little
Hoover Commission in California, which has been operating
continuously since 1962. However, there is no similar permanent
entity at the Federal level.
Now, any evaluation of government programs should both
determine whether or not the expenditures are complying with
statutory requirements and how the programs could and should
function in today's world. In addition to thinking about how
programs relate to current needs, there should also be a
mechanism in place to prevent the establishment of new programs
when current programs already serve a particular need.
Indeed, an underlying reason for government waste and
mismanagement is Congress's tendency to create a program to
solve a problem. Unfortunately, neither the House nor Senate
has adopted proposed rule changes that would require committee
reports to contain an analysis by CRS on whether or not the
bill creates a new Federal program that would duplicate or
overlap any existing program. The reporting committee would
also be required to explain why the creation of the new program
would be necessary if a similar program already existed.
On the other hand, Congress could act at any time to
terminate or consolidate duplicative and overlapping programs,
and particular findings that were produced by GAO in two annual
reports published in 2011 and 2012. For example, in 2012, GAO
recommended consolidating Federal offices, selling excess
uranium at the Department of Energy, and cutting improper
payments by Medicare and Medicaid.
The 2012 report cited 209 Science, Technology, Engineering,
and Math programs costing $3.1 billion spread across 13
agencies in fiscal year 2010. More than one-third of those
programs were adopted and first funded between fiscal years
2005 and 2010, yet the United States still does not have enough
future workers in STEM fields and U.S. students are still
behind in math and science, compared to other highly
technological nations.
GAO found 47 job training programs in nine agencies that
cost $18 billion in 2009. Only five have had an impact study
completed since 2004 to determine whether or not participants
secured a job as a result of the program, rather than a
separate cause.
Finally, and most absurdly, there are more than 50 programs
across 20 agencies to promote financial literacy. There is no
reliable data on the total cost of those programs, and a
government that itself is going broke has no business trying to
teach the American people how to balance their checkbooks.
My written testimony contains several specific proposals to
cut wasteful spending and improve efficiency, including
replacing the one dollar bill with the one dollar coin,
eliminating the Medium Extended Air Defense System, reducing
identity theft at the IRS, increasing the use of Recovery Audit
Contractors, and reducing or eliminating farm subsidies,
particularly the sugar program and the proposed dairy market
stabilization program.
In regard to information technology, we commend the efforts
by this committee to address wasteful spending in this area.
Agencies should also be increasing the use of cloud services
and, at the same time, reducing the number of unnecessary or
excessive IT software licenses.
Finally, we urge the committee to adopt structural reforms
of the U.S. Postal Service, while avoiding a taxpayer bailout.
While programs can be consolidated, reformed, or terminated
by Congress at any time, such actions have been few and far
between. In addition to taking action on specific proposals to
cut wasteful spending, Congress should also consider
establishing a new commission to provide recommendations to
reorganize Federal agencies, as well as a sunset commission.
I appreciate the opportunity to testify before the
committee today and would be glad to answer any questions.
[Prepared statement of Mr. Schatz follows:]
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Mr. Mica. [Presiding.] Well, thank you so much, Mr. Schatz,
for your testimony. We will withhold questions until we have
heard from all of the witnesses, but appreciate your testimony.
Let me now recognize Ryan Alexander, president of Taxpayers
for Common Cause. You are welcome and recognized.
STATEMENT OF RYAN ALEXANDER
Ms. Alexander. Thank you. Thank you for inviting me to
testify this afternoon. I am president of Taxpayers for Common
Sense, a national nonprofit budget watchdog.
I sat before this committee nearly two years ago testifying
on GAO's high-risk and duplicative program reports. I want to
recognize one positive change since then: the wasteful
volumetric ethanol excise tax credit expired in 2011. So there
is some good news, but there is much more work to be done.
Almost every major piece of legislation of the 112th
Congress, from the Budget Control Act to the transportation
bill to the fiscal cliff deal, highlighted the need to reduce
waste without really reducing waste.
The Department of Defense is the world's largest
bureaucracy and extremely vulnerable to waste and duplication.
The cost of TRICARE has more than doubled in the last decade
and in fiscal year 2012 will exceed more than $50 billion due
to unchanged premiums. We can modernize the program and
maintain the promise of health care coverage for the men and
women who have served our Country.
Significant savings can also be found through acquisition
and contracting reform. The Pentagon is the government's
largest buyer, and many contractors rely on the government for
the vast majority of their business. We are concerned that the
2.0 version of DOD's Better Buying Power turns away from fixed
price contracts. Contracts are not one size fits all, but this
factor of losing billions of taxpayer dollars should be
sufficient incentive for a company to control costs.
The National Nuclear Security Administration's nuclear
weapon laboratories and production plants are operated and
managed by private corporations. These government-owned
contractor-operated contracts have in some cases actually
increased NNSA's persistent problems with inflated overhead
costs, security breaches, and construction cost overruns.
On the positive side, lawmakers appear ready to uphold the
funding freeze on the CMRR project at Los Alamos National
Laboratory. A similar fate should meet the Mixed-Oxide Fuel
Program.
Acquisition is a major challenge across Federal agencies,
as evidenced by the failures of Future Combat Systems, SBInet,
US-VISIT, Deepwater, and others. A common thread among these
programs is the use of Lead System Integrators, where the
government relies on the contractor to define and meet its
needs. As then Senator Truman observed, I have never yet found
a contractor who, if not watched, would not leave the
government holding the bag.
Public lands are taxpayer assets and should be managed in
ways that preserve their value and ensure a fair return for
taxpayers. Securing a fair return for the hundreds of newly
proposed wind and solar projects on Federal lands is vital.
Similarly, taxpayers are shortchanged by coal leases which
allow companies to pay royalties based on domestic prices, not
their actual export prices.
Finally, the General Mining Law of 1872 collects no royalty
from hard rock mining on Federal lands. Taxpayers cannot
continue to simply give gold away.
The Title XVII Loan Guarantee program jeopardizes billions
of dollars if project loans default. Solyndra's $535 million
default brought the program under increased scrutiny, but the
$2 billion loan guarantee for the nearly bankrupt USEC and the
$8.3 billion loan guarantee for the Southern Company carry much
greater potential losses.
Ineffective and duplicative agriculture policies waste
billions of dollars. Direct payments must end immediately. The
highly subsidized crop insurance program, which cost taxpayers
a record $14 billion in fiscal year 2012, must be reined in and
efforts to create shallow loss programs that crowd out private
sector risk management options must be rejected.
Congress consolidated programs and included performance
measurements in MAP-21, but failed to address the underlying
issue of demand for transportation projects exceeding revenue
generated to cover their costs. In just five years, Congress
transferred more than 50 billion to backfill the Highway Trust
Fund.
The Essential Air Service, which subsidizes flights between
rural communities and regional hub airports, costing up to
$1,000 per flight, should be eliminated except in Alaska,
saving $1 billion. Many communities can maintain transportation
links through intercity bus service with little or no subsidy.
Tens of billions of dollars are lost to waste and fraud in
Medicare and Medicaid. Last Congress, Senators Carper and
Coburn introduced the Medicare and Medicaid Fighting Fraud and
Abuse to Save Taxpayer Dollars Act and Representative Roskam
introduced a companion. More needs to be done, but this
represents a start.
More than $1 trillion in Federal revenue is foregone each
year due to nearly 200 tax expenditures, spending channel
through the tax system that lacks oversight. Some tax
expenditures Congress should look at for 10-year savings
include prohibiting last in, first out accounting, any deferral
on foreign earnings, and converting the mortgage interest
deduction to tax credit and limiting it to one home totaling
$500,000.
The Army Corps of Engineers needs a prioritization system
with explicit criteria from Congress. Up until the earmark
moratorium, prioritization and guidance came in the form of
project-by-project funding in annual appropriations. The Sandy
supplemental and regular Energy and Water appropriations have
pots of funding without enough guidance. Congress needs to
increase the strings and direction without resorting to
earmarks.
We always like to point out that the Corps motto should be:
we may take twice as long, but we cost twice as much.
Superstorm Sandy brought into relief problems surrounding
our approach to disasters. The current ad hoc, scattershot
approach to disaster funding creates an opportunity for waste,
fraud, and abuse. Worse, sometimes the money actually puts
people and infrastructure back in harm's way. The number and
cost of major disaster declarations has increased in recent
decades due to an increase of major weather events, but also
because our Nation's programs are more generous responding to
disasters than pre-sponding to them.
Through both the National Flood Insurance Program and the
U.S. Army Corps of Engineers flood and storm damage reduction
programs we encourage development in an unsustainable manner.
Furthermore, research indicates that every dollar spent on
mitigation saves four or more dollars in recovery. We should be
helping people, communities, and States prepare for disaster
and respond to disaster in a way that protects taxpayers and
reduces future risks and costs.
Thank you for the opportunity to testify today. My written
testimony and reports we submitted contain much greater detail,
and Taxpayers for Common Sense would be happy to work with the
committee to identify other ways to ensure that our tax dollars
are spent wisely and effectively. Sorry for the overrun.
[Prepared statement of Ms. Alexander follows:]
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Mr. Mica. Thank you for your testimony, and we will include
your entire testimony and additional comments for the record.
We will now recognize and welcome Dan Blair. Mr. Blair is
president of the National Academy of Public Administration.
Welcome, sir, and you are recognized.
STATEMENT OF THE HONORABLE DAN G. BLAIR
Mr. Blair. Thank you, Mr. Mica. It is good to see you, Mr.
Cummings. I appreciate this opportunity to testify today and
thank the committee members.
I am Dan Blair, president and CEO with the National Academy
of Public Administration. The Academy is a nationally
recognized, nonpartisan, not-for-profit chartered by Congress
to address and advise all levels of government on pressing
issues of public administration. We are comprised of almost 750
fellows who are selected by our membership for their
significant contributions in the field of public
administration. I ask consent that my entire written statement
be accepted for the record, and I am pleased to summarize.
Mr. Mica. Without objection.
Mr. Blair. Your hearing today is timely and helps key up
many important management issues that Congress and the
Administration could tackle to solve some of the most pressing
problems in government. Government has become increasingly
complex, and actions on the Federal level resonate at the State
and local level. We have, today, an opportunity to begin to
find common ground to address long-term structural fiscal and
governance problems before they potentially overwhelm our
budget.
Collaboration between Federal, State, local, and private
sector stakeholders is critical for improving program delivery
and minimizing waste, fraud, and abuse. To that end, the
Academy began work with the Office of Management and Budget in
October 2011 to involve stakeholders nationwide in developing
pilot projects that test innovations in how States administer
federally funded programs.
Funded through the Partnership Fund for Program Integrity
Innovation, the Collaborative Forum network has increased more
than 750 in-person and online participants who share best
practices and lessons learned for how to improve payment
accuracy, improve service delivery and administrative
efficiency, and reduce barriers to program access. To date,
this work has resulted in the funding of nine pilot projects,
with more expected to come.
In addition to collaboration, evidence-based decision-
making can aid in identifying those programs worthy of
continued government support. One use of this approach can be
found in what is called Pay for Success. This approach utilizes
a financing organization where private investors provide up-
front funding to help achieve a specific result and the
government only pays if the agreed-upon goal is achieved. Using
this third-party approach enables government to partner with
private and nonprofit entities who already have demonstrated
their ability to produce high returns on investments. The
approach also maximizes flexibility and allows the government
to piggyback on already existing infrastructures and networks,
and, importantly, the risk if borne by the third party for
producing the results.
Another example of evidence-based decision-making involves
a Washington State model. This model provides State
administrators with tools to identify which programs are
working and worthy of continued funding. This allows cuts in
funding to be targeted to those programs which are not working.
Apart from identifying ways of identifying government
investment, challenges remain for agencies in identifying
prospects for waste, fraud, and abuse. Such tools include
greater use of data and analytics to strengthen financial
management controls and facilitate improved mechanisms for
preventing and detecting improper payments.
My written statement identifies additional opportunities to
streamline programs across the Federal Government. As Mr.
Schatz noted, the 2012 and 2011 GAO reports on duplication
overlap identified many areas for review. While a belts-and-
suspenders approach for some programs may be desirable, this
overlap in duplication is often an unintended consequence of
the proliferation in government programs.
One way to address this is through the consolidation of
programs within a department. Another way is through a virtual
reorganization and the establishment of interagency councils.
Broader structural reorganizations can compensate for
deficiencies of current ones, but can be challenging in
practice.
In conclusion, Congress and the executive branch have an
opportunity to work together to reduce waste, fraud, and abuse;
invest in effective evidence-based programs; and create a
results-oriented culture inside the Federal Government. The
Memos to Leaders project my testimony highlights addresses
issues in nine critical government management areas that are
ripe for reform. Key areas include the nominations process,
budget process reform, civil service reform, managing large
public-private partnerships, rationalizing the
intergovernmental system, and IT transparency.
The Academy possesses a unique set of fellows who stand
ready to assist in these critical management challenges. Thank
you for the opportunity to testify this afternoon. I would be
pleased to answer questions.
[Prepared statement of Mr. Blair follows:]
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Mr. Mica. Well, thank you, and we will, as I said, withhold
questions.
We will hear our last witness next, and that is Mr.
Jonathan Kamensky, and he is a senior fellow with the IBM
Center for The Business of Government.
Welcome, sir, and you are recognized.
STATEMENT OF JONATHAN M. KAMENSKY
Mr. Kamensky. Thank you very much, Mr. Chairman.
I am pleased to have the opportunity to testify before you
on strategies to reduce cost and improve performance in the
Federal Government's mission-support functions. I think this
gets at your win-win criteria that you mentioned earlier.
I am a senior fellow with the IBM Center for The Business
of Government. The IBM Center connects public sector research
with practice by sponsoring independent research by top minds
in both academia and the nonprofit sector.
Two years ago the IBM Center produced a report, summarized
here, identifying seven leading commercial strategies that
could contribute up to $1 trillion in reduced cost of Federal
operations over a 10-year period, while improving performance.
I would like to share these with you today, but, first, why do
we think this magnitude of savings is possible?
The mission-support costs in the Federal Government, for
cross-government activities such as personnel processing,
contracting, supply chain management, historically average
about 30 percent of total operating costs, compared to about 15
percent in the private sector. While the precise numbers may
not compare well, they do suggest that changing the way
mission-support functions are operated to reflect leading
practices in the private sector may provide opportunities for
cost savings.
I would like to highlight four of the seven strategies
outlined in our report. All seven are in my written statement.
Strategy 1: Consolidate information technology
infrastructure to the extent possible. The government's cost of
operating its IT infrastructure are high when compared to the
private sector. In addition, according to GAO, only about one-
third of the government's IT investment in fiscal year 2011 was
actually spent on direct mission-related IT, such as air
traffic control systems or the veterans benefit determination
system. The Gartner Group reports that by reducing IT overhead
management costs, consolidating data centers, eliminating
redundant networks, and standardizing applications could lead
to savings of 20 to 30 percent.
Strategy 2: Streamline government supply chains to be more
efficient and effective. The government annually procures about
$550 billion in goods and services. These are purchased largely
through independent procurement processes and individual
agencies. In contrast, large corporations have transformed
their procurement and supply chain systems by integrating them
across the enterprise.
Now, there have been efforts to do this in the Federal
Government. For example, starting in 2005, OMB launched a
strategic sourcing initiative to leverage the purchasing scale
of the Federal Government. Progress to date has resulted in
savings, but these savings have been less than one-half of one
percent of the Federal Government's procurement spending. In
contrast, private sector companies report savings of 10 percent
or more. GAO, last year, concludes that if the government could
achieve a 10 percent savings level, that could be savings of up
to about $50 billion.
Strategy 3: Apply advanced business analytics to reduce
improper payments. The Administration is moving aggressively to
reduce improper payments with strong congressional support.
However, GAO says more could be done, and industry experience
suggests that this is a valid conclusion. Industry experts
believe that expanding the use of recovery audits and advanced
business analytics could increase the identification rate of
improper payments to about 40 percent. This could potentially
generate an additional $200 billion over the next decade.
Strategy 4: Move to a greater reliance on electronic self-
service and reduce the government's field operations footprint.
Most government agencies have citizen-facing services that rely
on largely manual, paper-based business processes. The
government could both reduce cost and improve citizens'
experiences by moving as many touch points to electronic
platforms as possible and rethink the footprint of its field
operations.
Other countries have done this by creating a one-stop
approach to social services. For example, Service Canada is an
agency that delivers 70 services on behalf of 13 other agencies
online, in person, and on the phone. This has allowed the
Canadian Government to reduce the number of field offices,
reduce costs, and improve service delivery at the same time.
In conclusion, Mr. Chairman, it is important to emphasize
that leadership and governance are key to implementation. The
seven strategies outlined in my testimony are being addressed
by the Administration, but with different levels of intensity.
One approach to create concerted action might be for the OMB
director to appoint a steering committee led by the deputy
director for the management at OMB and a subset of departmental
secretaries.
A small central support team could be created, operating
out of OMB or the President's Management Council, not unlike
the Recovery Act implementation team, to ensure action. For
each of the seven areas, a cross-agency sub-team could be
created and work under the direction of a departmental deputy
secretary who is charged with action.
So I would like to conclude at this point and thank you
again for the opportunity to speak before you, and I would be
pleased to answer any of your questions.
[Prepared statement of Mr. Kamensky follows:]
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Mr. Mica. Well, thank you.
We will now turn to some questions. I want to thank all of
the panelists for their contribution today. It is interesting
to have you all suggest these potential areas in which we can
cut and save and be on that side of the aisle sometimes from a
practical position. It is much more difficult on our side,
again, of the witness table.
But I recognize myself for five minutes, and then we will
turn to other Members for questions.
First of all, I think we are facing the prospect of
sequestration. It is coming down the road and I my guess right
now, I didn't think this before the holidays, but I think after
the holidays I think it is going to go into effect, and that is
going to, of course, impact dramatically probably Defense has
the biggest cut, and some other programs. Most of the sort of
core programs are protected.
This is an opportunity to save some money, to institute
some savings.
Mr. Schatz, you cited a number of past studies and
commissions, etcetera, several major commissions. Maybe another
commission is necessary, but it still ends up coming back to
Congress. Here we are in a situation where these cuts are going
to come. I think the cuts could go beyond, and some of you
described other potential areas of savings. Maybe we could go
down and get your take on what you would do, again, with
sequestration looming, to make cuts. You have talked about some
things, but maybe some specifics you might suggest to Congress,
since that looks like it is pretty imminent.
Mr. Schatz, first.
Mr. Schatz. Thank you, Mr. Mica. Sequestration, if it does
go into effect, may push Congress to look at spending across
the board because there is a large part of government
expenditures that are simply not included in sequestration.
Certainly, we have been very critical of excessive Defense
spending. We led the effort to eliminate the alternate engine
for the Joint Strike Fighter. Certainly TCS and other taxpayer
groups were very helpful in that effort. And, yes, you can find
specific examples, but across-the-board cuts eliminate both
wasteful spending and what might be essential spending at the
same time.
Mr. Mica. But that could be targeted, could it not?
Mr. Schatz. Well, my understanding of sequestration is
that, at least the way it is set up now, it is across the
board.
Mr. Mica. But, again, sequestration will probably go into
effect, and then what will happen is Congress will say----
Mr. Schatz. Maybe they will wake up and say let's do this
the right thing, or a better way.
Mr. Mica. Exactly. Well, I am asking you, and you have a
couple minutes here. Maybe we could impose something that
redirects the cuts. Go beyond, of course, the big gouge for
Defense. People talked about Defense contracting being out of
control and IT across-the-board solutions that can save
billions of dollars. You all gave lots of areas we could save.
Here we have an opportunity, with sequestration coming up, and
if it goes into effect there are going to be a lot of people
who are going to run around with their hair on fire. But we
have an opportunity to redirect that. How would you do that?
Mr. Schatz. Well, again, I would look at everything.
Mr. Mica. Okay, everything is on the table. There is
probably not an agency, you would agree, that couldn't stand
some trimming efficiencies, et cetera.
Mr. Schatz. Oh, absolutely. Any organization can cut
between 10 and 15 percent of its expenditures.
Mr. Mica. Well, that is well within the range of what we
are talking.
Ms. Alexander?
Ms. Alexander. We released a report last fall with $1.2
trillion in deficit reduction called Sliding Past
Sequestration, so one thing is people could just adopt all our
recommendations, although I wouldn't expect that.
Mr. Mica. Okay, we will look at those.
Ms. Alexander. That was submitted with our testimony as
part of the record, which we would like to be submitted into
the record.
I think a couple points, just to point out, I do think
within the context of Defense spending, looking at service
contracts as a particular area where there could be reductions
in spending without necessarily affecting core function, I
think that this committee in particular has a huge opportunity
to help reshape how we do disaster spending. We waste a huge
amount of money through disaster spending and both the recent
disaster funds. There is just an opportunity to look at a
better way.
Mr. Mica. Well, we put in some of those things, although
they got pretty hoggy at the end and funded projects.
Ms. Alexander. And we made some reforms to the flood
insurance program.
Mr. Mica. Well, maybe the chairman gets a little bit of
discretion here, or acting chairman. But you slammed
transportation and the MAP program. The problem is sometimes
you don't get the support from the groups. I remember FAA, on
the twentieth extension, when I said this can't go on, this
madness, because that cost millions of dollars, those
extensions, leaving our programs at bay.
So I sent out one extension, just cutting out airline
ticket subsidies of $1,000 or more, and we closed down the FAA
partially for two weeks; all hell broke loose. Where were you
then, Ms. Alexander, when I was getting my brains beat out?
Ms. Alexander. Well, A, I am pretty sure I can find a press
release where we thanked you for doing that.
Mr. Mica. I want to see that. We will make it part of the
record.
Mr. Blair and Mr. Kamensky, would you answer the
sequestration and how we target? What would you do, again, in
our shoes?
Mr. Blair. I think that Congress will have a blueprint
before it when GAO comes out with its new overlap and
duplication list. I think that is going to give you an idea of
areas in which efficiencies can be achieved that shows that
multiple agencies or multiple departments are trying to deliver
to the same constituency group on similar, non-duplicative
programs, and that is a start.
Mr. Mica. And I might say that I think in the Republican
rules we put in the reports have to now show if it is
duplicative, in addition to constitutionality.
Mr. Kamensky, real quickly?
Mr. Kamensky. Thank you, Mr. Chairman. Sequestration does
not allow tradeoffs.
Mr. Mica. We write the law. It will be the revised, come
what may after sequestration A.
Mr. Kamensky. But just plus or minus dollars will not solve
the challenge. What will need to happen is changing the way
government does business. For example, in energy efficiency, in
order to be able to have much more energy efficient operations,
sometimes it requires an investment up front for longer term
savings. If you look only at the how do we cut dollars next
month, sequestration will do that, but it may not actually
improve operations very well.
Mr. Mica. Look at long-term, too. Thank you.
Ms. Norton?
Ms. Norton. Thank you, Mr. Chairman. I am grateful to this
panel for all of your very specific testimony and ideas. It
brings to mind the words waste, fraud, and abuse. That is
always thrown out when people can't think of what should be cut
or how to preserve. I found your testimony edifying, indeed.
I would like to ask Mr. Kamensky a question, because he
pointed to a specific example that was, in part, under my own
jurisdiction in another committee; it was your discussion of
improper payments. Mr. Mica is aware of this because he was on
the same committee, it was the committee that had jurisdiction
over a great many of the Recovery Act funds, and my particular
subcommittee, the subcommittee which I chaired, had
jurisdiction over more than $5 billion of those funds, which
were to go to each and every State, District of Columbia, and
every territory, and we had to deliver the funds swiftly
because of the recession. The whole point was to stimulate the
economy and create jobs. So I was intrigued.
I am now going to your testimony. I am intrigued by your
discussion of the Administration's recovery board, apparently
the first time anything of the sort had been used, and you say
in preventing, rather than recovering, improper payments. And
you say this shows the value of a concerted effort essentially
up front and across agencies. Now, you point out that the
Recovery Act was dealing with upwards of more than 25 agencies
and we had nothing in place in those agencies beforehand to
carry that out.
So my question goes to how did this pilot, I will call it,
effort prevent these overpayments through this special board? I
don't know if this board still exists or whether you think we
could apply this to other circumstances, because there are many
instances where essentially you are distributing funds through
many agencies or to all the States. I want to know how did
they, given the speed with which this money had to go out, how
did they prevent, rather than catch after the fact, these
improper payments?
Mr. Kamensky. Well, the Congress, as part of the
legislation, required quarterly reporting, which actually
turned into much more frequent reporting internally, within the
agencies, and all the spending data were shared through this
recovery operation center that Mr. Earl Devaney, who was the
chair of the board, set up; and that way they were able to look
at data from a number of different agencies at the same time
and look for patterns that were suspicious.
So, for example, when you notice funds from three or four
different Recovery Act programs going to a yacht in the harbor
of Miami, which is one of the examples that we gave, he said
let's go look there and see whether this is a legitimate
operation. So it is an ability to quickly find where things
were being requested or being spent, and then moving in
quickly.
Ms. Norton. Well, now, I don't know if you know if the
board exists or if you think this board would be useful in
other circumstances. That was a very special circumstance.
Recovery Act building is still going on; money is all out. Are
there circumstances within the government today, in the usual
course of business, where you think something similar, or would
we be accused of establishing another ``bureaucracy''?
Mr. Kamensky. The Recovery Act Transparency Board I believe
is authorized through the end of this fiscal year. There is a
Government Accountability Transparency Board that was
administratively developed by President Obama, which is looking
at ways of taking some of the lessons from the Recovery Board
and extending them administratively, at least, and potentially
even legislatively.
Agencies such as the Center for Medicare and Medicaid
Services have something like this for payments that they make.
They make like one billion payments or transactions a year, so
they have a mini version of it. But oftentimes it is when you
are able to compare funding flows across agencies that you are
able to detect patterns that are sort of anomalies. So
something equivalent to that may be one of the lessons that
comes out of the Recovery Act legislation.
Ms. Norton. Well, the chairman of our full committee has
shown an interest in institutionalizing some of that lessons
learned. Thank you very much.
Mr. Mica. I thank the gentlelady.
The gentleman from Oklahoma, Mr. Lankford.
Mr. Lankford. Thank you, Mr. Chairman. This is an area that
we can have bipartisan agreement on. I go back to President
Obama's inauguration speech, where he identified some Federal
programs as outworn and inadequate. I would agree that we have
some Federal programs that do need to be sunset, and we need to
be able to identify and be able to work together, Republicans
and Democrats, identify those programs and let's sunset them.
Let's deal with that.
But I do have a series of questions and one piece of good
news for you, Mr. Schatz. I noticed in your testimony you
referred to a Senate action to try to put into the Senate rules
a duplication requirement, that that failed in the Senate last
time. That is something I personally worked on and is in the
House rules for this year, to be able to identify duplicative
programs before they go into effect. So I need to get you a
copy of the latest House rules so you get a chance to identify
that, because that is a very important thing to us.
There are two ways to deal with duplication: one is to get
it out once it is there and one is to prevent it from starting.
And our focus in the House is to try to find ways to prevent
duplicative programs from beginning so we can take those on.
In the middle of all your testimony, though, you also
mentioned the RAC Audit process. You called it an effective
process. There are billions of dollars that have been recovered
in the RAC Audit process, still in Medicare and Medicaid, and
how they are not doing pay-and-chase anymore; they are trying
to identify some of those things. We do have some issues on
that and I wanted to be able to just have some conversation
about it as well.
They are pulling about 30 percent of the files from these
hospitals and now from doctors' offices for certain payments
for just a normal doctor's visit; identifying those, not paying
them for any length of time. It becomes a hostile exchange back
and forth because 30 percent of their cash flow gets pulled. It
is pulling honest physicians, their files, the same as it is
for fraudsters and their files, and it can go back as far as
they want it to.
As of September of last year, if they want to go back to 10
years ago and pull on a doctor or pull on a hospital and say we
are going to pull this file and we are going to check it as
well, they can. Since they are paid a commission, basically,
somewhere between 9 and 12 percent per whatever fraud that they
find, or wrong coding, they have great incentive to go back and
search and go as far as they want to go.
How do we identify fraud and waste, and not create a
hostile relationship with good doctors and good physicians and
hospitals that are doing the right job? How do you strike a
balance on that?
Mr. Schatz. Well, I think anybody who is asked questions
about payments is going to have concerns about whether or not
they were legitimate, and also be concerned about how they are
conducting their business, but improper payments, as you know,
constitute about $29 billion out of the $108 billion that was
mentioned earlier, so it is a large amount, about a third of
what is out there now.
Mr. Lankford. A lot of those are paperwork; they miscoded.
They go back and check them; they are not really fraud, they
are just, in all the checks and everything that is going on.
There is a tremendous amount of fraud as well, but just trying
to narrow down what was just coded wrong and what is actually
fraud. And that is what we want to go after initially.
Mr. Schatz. Well, I think it is different. I think the RAC
process is to look more at the waste, rather than the fraud. In
terms of fraud, you have to have prosecution, and contractors
can't prosecute somebody who is committing fraud; they can
report it, of course. But our understanding is that they can
only look at about 2 percent of the billings over a three-month
period. Now, in some cases it may require some more paperwork;
in others it may not.
And everything can always be improved. There was a big
objection to RAC when it first started, particularly from some
of the Members of the California delegation. When it spread
across the Country, clearly, as it moves ahead, there are going
to be issues that can be addressed. But we think the process
works well. They have saved billions of dollars for taxpayers
so far, and when that $29 billion goes down further, that frees
up more money for Medicare beneficiaries, and I think that is
the ultimate goal, is to help the people that truly need help,
and not keep the money out there that shouldn't be paid.
Mr. Lankford. I completely agree. We have to be able to
make those payments, but we have to find a way that doesn't
trash the relationship. The Federal Government doesn't have a
great relationship with several contractors anyway. Those that
are doing a good job, we want to maintain we have a good
relationship in the process.
This is for any of you, as well. Quick story. Last weekend
my MasterCard is stopped; I get a phone call immediately saying
I no longer can use it until I call in. I do a quick call-in in
automation; within 10 minutes it is back active again, as they
have identified something.
Is there anything comparable to that in the Federal program
for identifying any of the anomalies that may come up, to say
we are going to stop this and then can correct it in a 10-
minute turnaround?
Mr. Schatz. Not that I know of. That would be nice to have.
But that also is a function of incompatible accounting systems,
financial systems that have been abysmal for years. One of the
original Grace Commission findings, and I think it is still
true, there are hundreds of incompatible systems across
government. It makes it difficult to find out how the money is
being spent.
Mr. Lankford. Do we have any agency that is trying to
implement something within payments close to that that we can
raise up as an example and be able to encourage other agencies
to look at? Yes, sir.
Mr. Kamensky. There is a database that has been created by
the Administration called the Do Not Pay List, and it is an
integration of seven or eight different databases from
different agencies to ensure that somebody that has been
disbarred by one agency for improper dealings won't be given a
contract in another agency.
Mr. Lankford. Right, the suspension and debarment list.
Okay, thank you.
I yield back.
Mr. Mica. The gentleman from Virginia I think is next, Mr.
Connolly.
Mr. Connolly. Thank you, Mr. Chairman.
Welcome to our panel. Let me ask Mr. Blair, first. When we
look at something like improper payments, one of the
subcommittees, formerly, of this full committee looked at
improperly payments and the estimate was something like $125
billion a year. Maybe 50 of it is fraud, and Medicare fraud
particularly. A lot of it is, as Mr. Lankford was saying, just
bad coding, getting it wrong in terms of who is eligible and
not eligible, and the like.
If we are going to get our arms around $125 billion a year,
that is not raising anyone's taxes, it is not cutting any
strategic investment, it is just managing more efficiently,
what would we have to do?
Mr. Blair. I think you need to better engage stakeholders
into what exactly the improper payment is. Also keep in mind
that improper payments are not just overpayments or
underpayments, as well. So you need to keep in mind that, as
government goes about doing its business and putting out money,
it needs to keep an accurate check as to what it is expending
and what it is authorized to pay for.
I think one of the ways that you can look at this is to
look at what is going on in the States and localities, as well,
and one of the things that we have been involved with at the
National Academy is what is called a Collaborative Forum in
which we brought in stakeholders from State, local, nonprofits,
the cities in order to identify best practices and also lessons
learned in trying to identify how to stop these kinds of
improper payments and what more can be done to improve the
administration of these programs.
Mr. Connolly. Mr. Kamensky, I was kind of hoping Mr. Blair
would include, however, in his answer the better deployment of
technology. Maybe you could address that.
Mr. Kamensky. Thank you very much, Mr. Connolly.
Mr. Connolly. By the way, has anyone ever told you, if we
close our eyes, you sound exactly like Harry Reid?
[Laughter.]
Mr. Connolly. And that is a compliment on this side of the
aisle.
[Laughter.]
Mr. Kamensky. Thank you, sir. There are concrete examples
of this happening. For example, IBM has worked with the New
York Department of Taxation and Finance, and developed analytic
applications which has saved over $2 billion. Its optimizer
software uses a combination of data analytics and models that
increase the efficiency of field agents so that they know which
audits to go follow.
In 2010 there was an overall increase in collections by 12
percent as a result of better targeting which returns to go
check out. The average age of a case decreased by about 10
percent, so they were able to get quicker turnaround. So the
use of analytics in figuring out where the risks are and where
the potential returns are help place the agents where they need
to be.
The U.S. IRS recently created an Office of Compliance
Analytics and they were able to identify, last year, during the
tax season, where tax preparers were making consistent
mistakes. They were able to send out notices to those people
saying here is what you need to do to change it, and they
managed to prevent over $100 million of money going out
improperly during the course of the year so they wouldn't have
to go back and recover it.
Mr. Connolly. Right. I just point out the chairman
rightfully pointed out sequestration. Sequestration, we are all
worried about, is $1.2 trillion over 10 years. Improper
payments are $1.25 trillion over 10 years. Getting our arms
around that would be a really good downpayment in terms of the
problem.
One more question. GAO found that the Department of Defense
relies heavily on contractors and then concluded, however, that
the lack of an adequate number of trained acquisition and
contract oversight personnel contribute to unmet expectations
and placed the Department at risk of potentially paying more
than necessary. An understatement if there ever was one.
I would like your feedback in terms of how much does the
lack of adequate training, adequate skilled procurement and
contract personnel, perhaps, contribute to the problem of
government waste.
Mr. Blair. I think the backbone of attacking this problem
is making sure you have the right people with the right people
with the right skills in the right jobs to get this done. If
you don't have the proper training or the proper skill sets, it
is just pouring good money after bad. One of the things that
sequestration and also across-the-board cuts do is puts in
jeopardy and effectively negates any further efforts at
training, because that is among the first monies that goes when
you have these kind of cuts.
So I think that Congress is going to have to be mindful
that in the future. Our Federal workforce is at a crossroads,
and has been over the last two decades, in terms of the
changeover from people retiring, bringing in new people,
recruitment and retention; and training is an integral part of
that and you need to make sure that that money doesn't go when
the budgets are cut for the departments and agencies,
especially across the board.
Mr. Connolly. Thank you.
Chairman Issa. [Presiding.] I thank the gentleman.
We now go to the gentleman from Arizona, Mr. Gosar.
Mr. Gosar. Thank you, Mr. Chairman.
I think you highlight a good starting point, but I also
think that we have to start with a culture of accountability,
and that starts with secretary heads, it starts with agency
heads, and you have a whole mantra. I am from the private
sector, so you are constantly reviewing our your workforce; you
hold people accountable for that process.
And I think there is also you can label this in we tend to
be politically correct. A lot of this is theft, point blank
theft. We had a hearing here. We actually had a large State in
regards to Medicaid fraud, which was perpetrated within the
State bureaucracy. I don't care how you slice it and dice it,
it is theft, and we need to hold people accountable for it.
The private sector is held to a different standard than
public service. I mean, here you just get rotating chairs, and
I think there is where we also have to have that accountability
process. You have to be able to fire people. You have to have
them, when they do intentional wrong, be held accountable for
those services and restitution, as well as losing benefits. I
think then you will have many eyes on the prize.
I have a couple questions. As a practicing dentist, we have
seen some of the problems within the Medicaid programs and
Medicare programs. For Mr. Blair, in your testimony you
mentioned that the OMB's Collaborative Forum has improved HHS
grants, Medicare and Medicaid. What were those improvements?
Mr. Blair. Those improvements were due to the fact that you
could bring in State and local health care officials and the
types of people who actually are the beneficiary of these
programs to look at better ways of accounting for the money and
for better ways of obtaining those results that they are trying
to do. What the beauty of the Forum does is that it brings
together multiple parties from Federal, State, and local
sectors, the nonprofit sector, to talk about these types of
things in an environment which encourages collaboration, best
practices sharing, and also looking at problems and the common
solution.
It is an ongoing process, but to date we have brought in
more than 750 local people, 750 participants, which include
local, as well as State officials, and the beauty of this is
that it recognizes that not all wisdom resides here in
Washington, whether it is going back to the State and the
locals in order to look at these problems and look at it not
from a top-down solution, but from a bottom-up.
Mr. Gosar. Interesting. So you would do that on like micro
targeting, or would you have a bigger forum? How would you put
those pieces together?
Mr. Blair. Well, what we have done so far is we have
targeted a few pilot projects. One was with the earned income
tax credit, which was done through the Department of the
Treasury, and the second one is looking at health care through
the Washington State model, which uses analytics looking at
what programs are actually working and what will continue to be
funded.
One of the other promising areas to look at in terms of
this is what is called Pay for Success, in which a government
grant is administered through a third party, and that grant is
not given to that third party until certain results are
achieved by way of the program.
For instance, if you were doing health care or justice
programs and you are looking at recidivism, you could say that
the third party could agree with the State or local who is
going to receive this money that you are going to reduce
recidivism by X percent. And if it is not achieved and that
third party doesn't get paid and the government is not at risk,
it shifts the risk to these third-party payers.
So what you are doing with this is you are giving up a
little bit of control, but in fact you are actually enhancing
accountability and responsibility by saying that the government
is not at risk in these types of grant programs.
Mr. Gosar. But I think in some of those that are patient-
specific, you are also dependent upon the patient base to be
compliant as well, so you are going to have to be very careful
with your metrics and how you measure that, because you could
also skew it in an inappropriate way.
Mr. Blair. The beauty of this, though, is that it is done
through a third-party such as a philanthropic organization, a
nonprofit, a local investor; and that way you don't have the
Federal Government at risk. Most of these grants that the
Federal Government does now with State and local governments is
that they just pass the check through and you hope for results.
This way money is not paid by the Federal Government until
results are achieved.
Mr. Gosar. But wouldn't you also want to have some risk to
the Federal Government because they have skin in the game? You
don't want to advocate that.
Mr. Blair. You want skin in the game on all parties in
order for something like this to be successful.
Mr. Gosar. Absolutely. Okay. Thank you very much.
I yield back.
Chairman Issa. I thank the gentleman.
We now go to the gentleman from Pennsylvania, Mr.
Cartwright.
Mr. Cartwright. Thank you, Mr. Chairman.
My questions are for you, Mr. Kamensky. Thank you for
coming here today, sir. What I am going to ask you to do is
elaborate on your testimony a little bit regarding the efforts
of the Federal Government to reduce its energy use. And in your
comments I hope you will include the Department of Defense.
We freshman in Congress were treated to a CRS seminar some
weeks ago, where they informed us, some panel members there,
that as much as one-third of the DOD budget goes to energy
consumption. In fact, you heard here today Ranking Member
Cummings quoting CRS and its evaluation of DOD's overall
efficiency as being poor performance.
As you note in your testimony, the Federal Government is
the Country's largest consumer of both energy and water. The
Federal Government can lead by example in increasing energy
efficiency, reducing greenhouse gas emissions, conserving
water, and preventing pollution. And your organization has
written about the ambitious efforts that the Administration has
undertaken to make this a reality.
Mr. Kamensky, tell us a little bit more about the Executive
order President Obama issued that was aimed at making
government operations more sustainable. What do you believe
will be the short-and long-term impacts of that Executive
order?
Mr. Kamensky. Thank you, Mr. Cartwright. The Executive
order draws upon a number of other Executive orders and
statutes, and it sets a target of reducing greenhouse gas and
increasing the reliance on alternative energy sources other
than coal base.
One of the things that we had a report that was done on the
implementation of this Executive order by a Dr. Fiorino, who
used to be, actually, at the Environmental Protection Agency
and is now at American University, and he had a number of
findings. He said there was mismatch between the expectations
in the Executive order versus what can actually be done in
terms of action by the agencies, in part because there is not
an investment or a set of incentives. And one of the things
that he was suggesting, much like in the private sector, is to
allow sort of trading of energy costs between agencies, and the
other is allow an investment fund so that agencies can borrow
money, but have to then pay it back once there is energy
savings that have been incurred. So this becomes something that
takes place over a period of years.
The Department of Defense has something similar to that
where private industry will come in, they will put something in
place, and then they will get paid back out of the energy
savings that come out of that program, and that has been used
in a number of military bases. I don't believe it is a
widespread initiative across the Department, but it does show
that there is a return on investment that comes from energy
savings.
Mr. Cartwright. And I know it has only been two years since
that Executive order was issued, but how do you think the
Administration has done so far in terms of implementing it?
Mr. Kamensky. The Administration sent energy savings as a
cross-agency priority goal. There are 14 in the Government
Performance and Results Act modernization law earlier this
year, or earlier last year. One of the 14 cross-cutting goals
was around energy savings and it said that it would reduce
greenhouse gas emissions by 28 percent by 2020 and indirect
greenhouse gases by 13 percent from a 2008 baseline.
So they have real measures. And they are reporting every
quarter on the progress against their goals in a report that is
posted on the Web. They are looking at the impact on 500,000
buildings that the Federal Government manages, and in 2011 they
reduced emissions by 8.3 percent from the 2008 fiscal year
baseline. So there is progress being made against the targets
that were set, in part because the Executive order helped put
these things into motion.
Mr. Cartwright. Thank you. Finally, where do you see a need
for improvement in the Administration's implementation efforts?
Mr. Kamensky. Well, one of the things, as Dr. Fiorino
mentioned, is this ability to create incentives, much like in
the private sector, of allowing tradeoffs between agencies, and
the other is creating an investment fund so that agencies can
go in with an ROI where they are going to recover the cost and
therefore make longer term investments.
Mr. Cartwright. Thank you very much.
Chairman Issa. Would the gentleman yield for a question?
Mr. Cartwright. Yield.
Chairman Issa. Mr. Cartwright, I enjoyed this exchange. I
think it was very good for us to hear it, but at the beginning,
when you mentioned that as much as a third of DOD's budget went
for energy, is it a little bit more minute than that? No one on
our side seems to be able to find a third. In other words, when
you get past labor, which is so much, there isn't a third left
that we could find after labor and outsource contracting. Could
you elaborate on what the nuance of that one-third is?
Mr. Cartwright. That is why I raised it, Mr. Chairman. I
was shocked when I heard that number. It was from one of the
panelists presented by the CRS. I think that merits further
investigation.
Chairman Issa. Excellent. I would ask that you try to get
the details of that. We will include it in the record, because
I think that is an extremely important point and I was glad you
made it.
Mr. Cartwright. Thank you, sir.
Chairman Issa. Thank you.
I will now recognize myself for a round of questions.
Ms. Alexander, you have the best title in Washington:
Taxpayers for Common Sense. Now, next week we are going to have
our annual high-risk list coming out, the 2013 list, and it is
no surprise to you or Mr. Schatz, or any of you, that that list
will include DOD, Medicare, Medicaid, the Post Office has
managed to get on that. For the most part, the people that are
on it are always on it and they never get off it, isn't that
basically the truism?
Ms. Alexander. Absolutely. I mean, they narrow or broaden
or alter, but it seems like it is much more static of a list
than we would like to see.
Chairman Issa. Well, let me ask you a detailed question,
but I will make it a little bit long. There is that expression
about Albert Einstein saying if you keep doing the same thing
over and over again, expecting a different result, that is the
definition of insanity. We keep doing the same thing over and
over again.
Is it time, and I think it is, but is it time that we
seriously look at our inspectors general at the act and the
power to not just make suggestions, not just tell people that
there is huge waste, but in fact take a more active role, an
enforcement role in insisting those changes occur? Isn't it
essentially at the GAO and the IG that we have recognized
repeatedly these hundreds of billions, and through both
Republican and Democratic administrations we have seen them
come back saying they are going to do it, and then we see the
exact same things or more on the list the next year? Either of
you.
Ms. Alexander. I absolutely think that there needs to be
increased powers for GAO and the IGS in terms of enforcement. I
know this committee has been looking at legislation to make
that possible, and that is something we support. I think there
are some agencies where we would be particularly happy to see
that happen; of course, DOD because of the scale. Taxpayers for
Common Sense has talked at length about the concerns about the
Army Corps of Engineers. I think the Department of Interior,
just, again, because of the sheer scale of what they manage in
both revenue and programs. So we definitely would support
efforts to give the IGS and GAO more authority and power to get
information and enforce issues.
Chairman Issa. Mr. Schatz?
Mr. Schatz. Well, I agree generally with that point, but if
there were no consequences for wasting money, money will
continue to be wasted; and those consequences either come in
the form of changing a program, eliminating a program, or
sending someone to jail, though the last time I remember
probably was the Boeing tank release, the original tank release
debacle.
Chairman Issa. The so-called lease.
Mr. Schatz. The so-called lease, yes. So I am not
suggesting that there are people out there that should be
incarcerated, but either there should be an incentive for
performing your job at a certain level; there have been
suggestions that agencies retain some of the money they get
back if they recover it; and there should also be a
disincentive for performing your job incorrectly, and that
really, rarely happens.
Congress doesn't have the power to hire and fire people;
neither does the President. You can do it by reducing budgets
or cutting staff in an appropriations bill, but that is pretty
rare.
Chairman Issa. Well, let me ask you a question, a very
tight question here. Currently, if you are an IG, you can talk
about debarment, but you are not able to do it. Is that an
example of something where actually bringing a debarment action
by the IGS as a regular part of enforcing against contractors,
and then perhaps other motions that could be brought where the
IG would have direct standing even when it was not criminal.
For example, the GSA scandal. All of you got to see them
sitting here. You got to see the former administrator telling
all us, to our amazement, that the reason that the individual
in the bathtub got his bonus was because he was entitled to it.
That is an example that the question is should we change the
dynamic so that somebody other than the next person up the
chain has input into whether you either deny somebody's ability
to continue doing business with the government or at least, in
the case if they are employees of the government, deny some of
their ups and adds, affect their promotions, affect their pay
grade increases, and certainly affect their bonuses.
Mr. Schatz. You would probably have to change the Civil
Service Act to address misconduct, for one, because I am sure
there are rules that prevent that from happening.
Chairman Issa. Well, bonuses are currently, by law,
discretionary. It doesn't appear that way when you look at the
performance versus the bonuses. And I will say that in a report
that I recently reviewed of ours, what I noticed was that there
are agencies that have very small bonuses and there are
agencies that have huge percentage bonuses. And I can't say
that as a bonus goes up as a percentage, that those agencies
are the ones that you would be pleased with.
Ms. Alexander. I mean, I certainly think that increasing
the ability of IGs and kind of independent actors to do
something would be positive, and I also think it may also have
an effect on Congress' ability to respond to some of the waste
they see, because we, all the time, criticize things that
happen, but we know that it is difficult to find real agreement
across party lines and across committee lines when you are
trying to make a change. So I think if there is more action
within the agency. And I think the question on bonuses, I mean,
for debarment, for bonus payments on contracts, those legal
issues are different than they are for government employees,
but they are probably solvable without a statutory change, I
would think.
Chairman Issa. Okay, any other comments, Mr. Blair, Mr.
Kamensky?
Mr. Blair. I found really curious that statement about the
bonuses being entitled, too, because, as you point out, they
are not. Bonuses are supposed to be awarded for exceptional
achievement, and it seems to be an abuse of that system when it
is viewed as an entitlement and as part of your everyday
salary.
One of the questions that I would have about debarment and
giving more authority to the IGs is is there a way that we can
use this not after the fact, but before the fact, because we
see a lot of these scandals occur and we are always looking at
them after the money has already gone out the door, after the
bad acting has occurred, and oftentimes after the bad actors
may be out of government.
Chairman Issa. And that is a great question for another
hearing, and we will be picking up where you left off.
With that, I am going to announce that we are going to go
to the gentlemen from Wisconsin for five minutes, but we will
then recess until immediately following the second vote. The
gentleman is recognized.
Mr. Pocan. Well, thank you, Mr. Chair, and thank you to the
panel. I had a chance to read your reports last night and they
were very comprehensive and very thoughtful, and some might
even say fearless in some of the areas that you decided to
point out to us. As a local government official, when I was on
a county board I used to co-chair a reinventing government
committee, where we looked at efficiencies and savings, and as
a State legislator I served on Governor Scott Walker's waste,
fraud, and abuse commission, where we did, again, the same
thing at the State level. So I really appreciate this
conversation, especially when we look at the thoughtful ways to
do it.
I guess one of the concerns I have, and when Mr. Mica was
chairing he brought up sequestration. I have to admit, being
one of the freshman and being new, there seems to be a
Washington way of doing things and then a way the rest of the
Country operates, especially those of us in the Midwest; I
think we like to think we are a little more commonsense. If the
car is about to run out of oil, we put oil in the tank rather
than let it completely grind to a grinding halt and then try to
fix it later.
And sequestration is one of those issues that is coming up,
as was talked about, it is in a few weeks. We can always come
back and try to fix something later, but it just doesn't
necessarily make sense.
Ms. Alexander, I appreciated reading your report, Sliding
Past Sequestration, and I notice you have a little bit of that
midwestern common sense. You went to school in Wisconsin.
Congratulations. And you have a line in here that says
specifically sequestration is bad; it would cut the good along
with the bad, the effective and the wasteful. It is
irresponsible.
Again, coming in new, not being from Washington or around
when this happened, I would kind of concur with your thoughts
on that, but I also have fears, as I talk to a lot of
constituents about what is going to happen in the next few
weeks, rather than trying to fix it after the fact.
I was just wondering if you could maybe address, just for
some of us who are new, although everyone is kind of running
off to a vote right now, but some of the areas if we do the
sequestration. You have done a great job in, and I think very
fearless, covering a lot of different areas of cuts. What are
some of the areas that, if sequestration happens, are some of
those effective and some of those good that are going to
potentially be hurt?
Ms. Alexander. Well, I am midwestern, so I appreciate the
midwestern kind of practicalness, and I think that is part of
the reason why I do what I do. Coming from Wisconsin and
Illinois, I have always looked for solutions.
I think that if you look across the board, I mean,
everybody agrees that we have a need for a strong national
defense. Everybody agrees we need the Pentagon to operate at a
very high level of efficiency, and there are good programs
within the Pentagon. But that kind of conviction and consensus
that we need a strong national defense has been exactly what
has allowed the waste that exists at the Pentagon to thrive and
grow.
So I think there is kind of no way other than doing the
very hard work of looking at things program by program, dollar
by dollar, to say, actually, you know what, a return on
investment for this is really good; we are reducing risk or we
are getting something for it.
I am trying to think of kind of within the context of the
Pentagon. We are in the business of we are kind of naysayers a
lot of the time, so I am much quicker with what not to do than
with what to do. But I think that, again, I was thinking about
what is our approach to reducing waste, our approach to
reducing waste is just to do it. So you really just have to
look program by program, because every program started for a
reason, because somebody thought it was a good idea. There is
going to be somebody to defend it.
So you just have to make sure you are looking through and
saying this has delivered on the promise that we said would be
there, so, okay, let's give it a little more money or tweak it
this way, and look at other things. Mr. Schatz and I have both
worked on kind of the strike fighter and other programs, the
alternate engine program, where it is just like we are just
throwing good money after bad and we just have to stop.
Mr. Schatz. If I could throw in one thing quickly. We did
talk about these GAO reports a few times. Senators Coburn and
Sessions estimate that the information shows about $400 billion
in annual waste, duplication. Let's just call it duplication
and overlap; it may not all be waste. But you have 209 of these
stem programs. No one knows which one works. The GAO says the
duplication is causing ineffectiveness. So if we are trying to
improve something and get higher science and math achievement,
get rid of the programs that don't work. And that is really
where all of this should start.
Mr. Pocan. And, Mr. Chair, again, I want to thank the
panel. I really thought you went into a lot of areas of sacred
cows, like we talked about, that are a little difficult
sometimes for people to talk about, and I really appreciated
the suggestions.
With that, I would yield back time.
Chairman Issa. I thank the gentleman, and, as promised, we
will stand in recess until immediately following the second
vote.
[Recess.]
Chairman Issa. The committee will come to order.
I am going to yield to the first person that walks in the
room, but you do understand the advantage of being the chair
and back here first.
We were talking, a little bit earlier, about IG
empowerment, but the GAO, which is a part of this branch of
government, does all this work again and again and again, but,
Mr. Kamensky, maybe looking at it a little more from the IBM
and the private enterprise standpoint, recognizing we have
limitations in our branches and our separation, is there a
fundamental problem in that administration after administration
doesn't have, if you will, the continuity of government to
really go after some of the deep problems and fix them?
Well, Congress doesn't take an active role in oversight,
meaning the GAO is almost the controller, the honest ombudsman
and yet it has no authority, Congress, for the most part, and
you saw it earlier in the discussion on CMS, for 20 years
ignoring a law as to how much you could reimburse and 35 times
giving reimbursement amounts greater than the law allowed,
without recourse.
Do any of you have institutional changes, in other words,
major government reform changes that you believe structurally
would help us and our successors do a better job here in this
body for the benefit of the executive branch?
Mr. Kamensky. If you are looking at specifically IT.
Chairman Issa. Well, we could look at IT. The Data Act that
we are trying to get out of the House again and get the Senate
to live up to creates more transparency, an easier recognizing
of the problems. Ms. Norton, I understand, while I was out over
at judiciary, talked in terms of the RAC board and how they
were able to look through and identify misspending better than
in the past. Those would be examples of structural change where
you actually have a process change that makes accountability
easier.
Mr. Kamensky. Well, there are several broad conceptual
frameworks, and part of it is how do you create incentives to
do the right thing, to do the win-win that you mentioned
earlier. And one of these is disclosing hidden costs, and these
are the costs that are buried into programs that are just
accepted unless somebody asks a question about them.
But you can't ask a question about them unless you can see
them. Some of them in State and local governments are using
budget capital charging. In other countries there was a very
interesting initiative in New Zealand, probably about 20 years
ago, that they had to budget explicitly for all capital costs
in the agency and had to pay like interest to the government if
you had capital that you had, and if you didn't use it, if you
didn't want to be paying this interest charge on it----
Chairman Issa. So it was sort of define your cap X, define
your ROI, and pay on it.
Mr. Kamensky. Well, that was for the agencies that actually
had the ability to do some sort of revenue charging. For
example, the forest service in New Zealand, they were given a
target of 6 percent return to the government for whatever their
activities were, with exceptions for like you can't chop down
Yosemite Park type things.
Chairman Issa. I knew a politician who once said it was a
renewable resource, and he didn't win that election.
Mr. Kamensky. But what was interesting was by creating this
incentive for people to look at excess capital costs, because
they were being charged for owning them, they would get rid of,
automatically, things that were excess buildings. The New
Zealand Embassy here sent a painting of Queen Elizabeth back,
saying we don't need it, we will deal with a print. We don't
want to have to pay the capital costs.
Chairman Issa. Okay. That certainly would be a game-
changer.
Let me ask a question. Many decades ago, before John Dingle
was in Congress, there was a Hoover Commission, and my
understanding is it is the poster child for the one time
reorganization worked. Is it, in your opinions, time to do that
again, to have that kind of a continuity of big thinking,
reorganization at all levels, and then a continuity of doing it
through multiple administrations?
Mr. Blair?
Mr. Blair. Mr. Chairman, I think it is time for that kind
of big thinking. I think you need to look at what government
does. I think one of the things that you can look at, you have
a menu of options available to you, from looking within the
departments and agencies themselves, and looking at overlap and
duplication. But I would urge you to look at government from a
unitary or a corporate perspective and saying what are we
actually trying to do.
In my testimony I built off the GAO list of overlap and
duplicative programs, and some of those are intentionally
duplicative. As I said in my testimony, you wants belts and
suspenders on some programs because you want to avoid program
failure or you want to avoid the risks associated with program
failure.
Chairman Issa. But is that the reason we do breast cancer
research at DOD?
Mr. Blair. Well, that is exactly the question.
Chairman Issa. Or is it just because we can stick a little
funding there?
Mr. Blair. Do you need NIH and DOD? And now you fund breast
cancer research through the Postal Service. So you can look at
these kinds of things.
Chairman Issa. But they deliver.
Mr. Blair. That is right, they do, six days a week.
Chairman Issa. Five very soon.
Mr. Blair. That is right.
[Laughter.]
Mr. Blair. So what you can do, and one of the efforts that
we have been involved with, it is called Smart Lean Government,
and it takes a look at these programs and says what is the most
effective way of delivering on these programs? That you don't
need multiple agencies or departments doing the same thing with
similar programs and similar mandates in order to accomplish
the delivery of the service to the constituency group.
If you eliminate that duplication and overlap, you can
achieve savings while avoiding cutting the actual benefit. For
instance, veterans health care. How many agencies are involved
in something like that? Do you need that many agencies in order
to get that final benefit down to the veteran?
Chairman Issa. Well, I want to thank you.
And I promised to yield as soon as someone came in, so I
will get to you, Mr. Schatz.
Mr. Collins, I will go to you in a second.
I just wanted you to know the question was, is it time for
a Hoover commission again, and the answer seemed to be yes.
And, Mr. Schatz, if you could be brief.
Mr. Schatz. Yes, Mr. Chairman. I appreciate that.
I agree with Mr. Blair that this is something that should
be done. It has been a long time. Of course, the Grace
Commission, from which CAGW arose and was kind of the
predecessor to our work, looked at more waste than
reorganization, although there was certainly some
reorganization. And also looking at a sunset commission, which
has been very successful in the State of Texas, where, for
every dollar that has been spent on the sunset process,
taxpayers have saved $29. They have abolished 78 agencies; 37
completely abolished, 41 transferred or moved into new agencies
or existing agencies. That is another way that programs can be
evaluated and agencies can be evaluated over time.
Chairman Issa. Great idea; second only to closing law
offices.
Mr. Collins.
Mr. Collins. Thank you, Mr. Chairman. I appreciate the
opportunity.
I thank you for being here. This is, I think, going to be
one of the big topics as we go on government spending, and I
have several questions.
I will start with Ms. Alexander. In your prepared testimony
you stated that loan guarantees for two nuclear reactors at
Plant Vogtle in Georgia are now loans given to Solyndra.
However, there is a major difference in the two situations.
Solyndra was a startup company based on unproven technology
with no history and assets to protect taxpayers; in the case of
Plant Vogtle, in my home State of Georgia, the loans are backed
by a 100-year-old A-rated investment company with $25 billion
or more in assets.
In the case of Plant Vogtle, taxpayers also have first lien
to recover taxpayer money. Expansion of nuclear power will not
only help lessen our dependency on foreign oil, but it provides
a steady cost-effective source of power for customers.
Having dealt with this in different ways in Georgia, based
on these facts, is it not comparing apples and oranges when you
are looking at these types of loan guarantees?
Ms. Alexander. I don't think that it is comparing apples
and oranges. I should just be clear for the record that our
organization opposed the Title XVII Loan Guarantee program in
2005. We opposed it all the way along the way. We think that
the taxpayer protections in the program are just inadequate
across the board. Our concerns specifically about the Vogtle
loan guarantee really go to the fact that it has been a
conditional loan guarantee where there is renegotiation after
renegotiation without real transparency for the taxpayers, and
it is a lot of money. It is just a lot of money.
Mr. Collins. I don't disagree, but in the word of
hyperbole, which is thrown around these halls very quickly,
comparing a startup company with absolutely no history to a
company that has been around forever, that is publicly traded,
that is publicly regulated and others, I get the prospect. We
are okay with where we are at. I think the Title XVII needs
some issues, but are we not being a little hyperbolic when we
state that and we put it in with Solyndra?
Ms. Alexander. We didn't put it in with Solyndra.
Mr. Collins. You did. You did in your testimony.
Ms. Alexander. I did in my testimony and I will again, I am
sure, but I don't want to back off on my statement.
Mr. Collins. Okay, well, is that not apples and oranges?
Ms. Alexander. But I am just saying the Title XVII Loan
Guarantee program was created and expanded to include lots of
different kinds of technology. It is the Title XVII Loan
Guarantee program that we believe puts taxpayers at risk. There
is not a single project in the pipeline that we don't have
concerns about because we think the program does not adequately
protect taxpayers. And time and again the protections we have
seen for taxpayers we think have been eroded.
Mr. Collins. Okay. I get your point. I think my concern is,
especially in this situation here with a lot of transparency,
what has been going on back where there is protection that has
been made for this, especially in the two companies, my concern
is you are just simply over-generalizing to make a point, and
that is my concern there.
I agree with you on the need for better consolidation,
better treatment of that; it just struck me as very odd when
you started comparing a very political favored industry such as
Solyndra, which there was a lot of bad issues there, as
compared to say you or I, when we were 17 and a loan given to
us then when we had nothing, to now, when we probably have a
decent backing. So I just wanted to state that for the record.
I believe it to be apples and oranges.
Mr. Schatz, I have a question for you. As a State
representative in Georgia, I had authored a bill that
consolidated State agencies as one of the things. For the first
time in history as a Republican, we actually were able to
follow through on what we believed, and that is a limited
government, smaller government, and we were able to do that.
On this committee we have discussed ways in which taxpayer
funds can be saved through IT reform. Maybe a bigger question
here. Redundant services, redundant services. I know this has
been discussed some more, but I would like to hear your
thoughts. Do you see potential cost savings through
consolidated services or maybe even I'll go on and say entire
agencies?
Mr. Schatz. I think that every program should be examined
to determine how it should function in today's world, which is
what the Little Hoover Commission has been doing in California;
also similar to, I imagine, the sunset process in Texas and
other States.
But in software, for example, agencies have hundreds of
software assets that are unnecessary or excessive, particularly
in licensing. GAO issued a report in July of 2011 noting that
15 agencies did not list all of their software assets in their
reports. Software is expensive, of course, and certainly if it
is unnecessary, it shouldn't be purchased.
The IT budget is $80 billion and this committee had a
hearing a week or two ago identifying almost $20 billion in
annual waste. We favor investment and modernization of
information technology, but not when it is not managed
properly; and that is true of how the money is spent in all
agencies.
The problem is listing all of the duplication and overlap,
as GAO has done, is helpful, but without an evaluation of which
of those programs are effective, Congress just keeps adding new
programs.
Mr. Collins. One last little follow-up. And that is why I
am looking at it. Let's put a bill out there and let's let them
fight over it, let's decide which is best; which one needs to
be run and which one doesn't. And I believe in the end if one
proves better than the other, then that is the one that wins,
but if they both prove to be inadequate, then we may have a
situation where we get rid of the entire program.
So I appreciate your comments there and I think that is
something we can definitely look at. It is something I am going
to be looking at greatly.
Chairman Issa. Mr. Collins, could you yield for a second?
Mr. Collins. Definitely, Chairman.
Chairman Issa. Ms. Alexander, I want to follow up on his
question and ask it a little differently, his first question.
Regardless of the challenges and the safeguards of Title XVII,
if in fact a company has substantial skin in the game, very
substantial, doesn't it, in general, reduce that risk? In other
words, with Solyndra, they were operating to a great extent on
our money, and some of the other entities even started with
their money and then got a loan or a grant and substituted
Federal money for the money that in fact they had.
Isn't the gentleman's question valid, that if in fact any
program the government does with the private sector, the
private sector has a large percentage of skin in the game, that
reduces the risk of failure simply because those companies are
at least going to invest their money, generally, more wisely?
Ms. Alexander. I mean, I don't mean to gloss over the fact
that there are operational differences between the Solyndra
loan, where the credit subsidy cost was covered by an
appropriation, and Vogtle, which will have to cover the credit
subsidy cost. We have concerns about the calculation of the
credit subsidy cost. We have concern about whether or not their
skin in the game is sufficient. If it is 90 percent or 100
percent of the loan, we are very concerned about the credit
subsidy cost calculation.
So, yes, there is a difference between whether or not you
have zero skin in the game. That is worse, I agree. But we
still think this is not good.
Chairman Issa. I appreciate that and I appreciate the
clarification.
Mr. Horsford, welcome to a committee that asks these kinds
of questions a lot.
Mr. Horsford. Thank you.
Chairman Issa. The gentleman is recognized.
Mr. Horsford. Thank you very much, Mr. Chairman, and it is
an honor to be on this committee, particularly at a time when
we are trying to find every way to responsibly balance the
budget, while protecting the most essential parts of services
that are provided. And as a former State legislator in Nevada,
that is what we had to do over the last four years, with 30
percent less revenue, was to basically comb through the budget
and find areas that we had to cut back on.
And I look at all of these issues and say that everything
really needs to be on the table for consideration and
discussion, so specifically I would like to ask that during
these challenging economic times there have been certain
companies, I will use oil and gas companies in this example,
who have remained highly profitable. Taxpayers for Common Sense
issued a report in May of 2011, I believe, that described these
record profits, and in the report it said, ``In 2008, Exxon
posted the largest annual corporate profit in U.S. history.
Chevron became the second most profitable company in the United
States. Shell, Exxon, Total S.A., BP, and Chevron together made
a total of almost $150 billion.''
So even with these profits, oil and gas companies continue
to receive tax breaks and other corporate entitlements. The
Office of Management and Budget estimates that taxpayers could
save more than $43 billion over the next 10 years if these
corporate entitlements were repealed.
So my question to Ms. Alexander is do you believe that the
oil and gas companies should be getting these tax breaks and
corporate entitlements? And if not, how should Congress deal
with that?
Ms. Alexander. We have been on the record for a long time
against oil and gas subsidies, whether through the direct
spending or through the tax code. We have always treated
subsidies through the tax code the same as financing mechanisms
and spending mechanisms, or at least on equal footing in terms
of analysis. So we would say the last in, first out accounting,
prohibiting the use of that in U.S. tax returns is something
that we think should be prohibited for all businesses, but is a
particular benefit for oil and gas. The intangible drilling
cost tax deduction is something that we would also support
appealing.
All of the subsidies that are listed in our 2011 report are
things that we would be very happy to see Congress appeal. I
will note that VEETC, which did go to oil companies, but also
to the benefit of corn growers, has been eliminated, so that is
awesome.
I think that this is one of those very difficult issues
because we work on energy subsidies and we work with Members
from both sides of the aisle. There is kind of a starting point
of when we say we think tax breaks that are targeted towards
individual industries or significantly benefit individual
agencies or subsidies, a lot of times we talk to people who
just don't agree with that statement. We think that. We have
been doing this for 17 years; we think that.
So we think that is something you should look at, at kind
of how are we picking winners and losers through the tax code,
how are we picking winners and losers through spending. So we
look at energy subsidies across the board, and for industries
that have been profitable for so long and that have been around
for so long. These are mature industries.
It is hard to understand why we need to continue to give
them the kind of tax preferences that they have received for
100 years.
Mr. Horsford. As a follow-up, Mr. Chairman, if I may, can
you give any specific recommendations for ways that the
Department of Interior can improve its oversight on the
royalties that are provided to oil and gas companies?
Ms. Alexander. I would be happy to follow up on the record
with kind of longer detailed responses to that because that is
something we have given a lot of thought to. I think certainly
in the reorganization of the Department of Interior, since the
Deepwater Horizon spill, we have seen some movement towards
improvement in terms of making sure we hope we are getting
better enforcement and collection of royalties from both
offshore and onshore drilling.
I think that the terms of leases need to be very carefully
examined to make sure that we are getting a fair return on any
kind of development, on public lands. But we would be happy to
kind of give you the kind of specific recommendations that we
have advanced over the years and work with you further on that.
Mr. Horsford. Thank you.
Mr. Jordan. [Presiding.] I recognize the gentleman from
Tennessee, Mr. Duncan.
Mr. Duncan. Well, thank you very much, Mr. Chairman. This
is my 25th year here, and I can tell you that when I first came
our national debt was, I think, $2.8 trillion, $2.9 trillion,
and I thought that was too much. I was voting to reduce
spending even then. Now it is $16,400,000,000,000, and they
tell us under the most optimistic scenario it is going to go to
$20 trillion, probably, more realistically, $22 trillion in the
next four years; and we just passed major legislation that the
CBO says is going to add another $4 trillion to our debt over
the next 10 years. I mean, it is just incomprehensible, and I
think that is the problem.
But I remember Edward Rendell, when he was mayor of
Philadelphia and, of course, later became governor of
Pennsylvania, he was having trouble with city unions when he
was mayor, and he testified, I think, in front of one of our
committees and he said government does not work because it was
not designed to. He said there is no incentive for people to
work hard, so many do not. There is no incentive for people to
save money, so much of it is squandered.
I have always remembered that, and I think the problem and
the reason there is so much waste, people are spending money
that is not coming out of their own pockets and there is just
not the incentives to save money. There are not the same
incentives or pressures that there are in the private sector.
And I am wondering, I would like to ask all of the witnesses,
do you know of ways that we could create more incentives for
Federal employees to save money? I mean, we hear these stories.
For years we have all heard stories about how agencies use 60
percent of their budget the first 11 months and then scramble
around the last month to try to spend it so they won't be cut
the next year. Can we come up with a program to give Federal
employees bonuses if they hold down or save money within their
particular agencies or programs?
Mr. Schatz? How long have you been here?
Mr. Schatz. I have been at Citizens Against Government
Waste since 1986, and we certainly appreciate your voting
record, because most people who come to Washington end up
voting for more spending over time.
Mr. Duncan. So you have been here slightly longer than I
have.
Mr. Schatz. Slightly longer, yes. Even before that; worked
on the Hill before that.
But I mentioned earlier the idea of having some kind of
remuneration for either individuals or agencies that go out and
either save money or collect money. Unfortunately, we probably
need that kind of incentive to do a better job of managing our
money. So that is something we have always supported.
Mr. Duncan. Anybody else? Yes.
Mr. Kamensky. Mr. Duncan, I have been in Washington, first
with GAO, since 1977, so I have seen a lot of changes over
time, and when I was given the opportunity to work for Vice
President Gore, his deputy for reinventing government, this
very issue was something that he raised, and there were pilots,
gain-sharing programs in some agencies that were used that if
they were able to save money, they were allowed,
administratively, to give that money either back to the
employees or to invest it in, for example, an upgrade in their
technology in the office, or to paint the office. So it was
done as a team rather than as individuals.
Another thing that was done, and this was in the 1990s, is
the Vice President said that a lot of employees are more than
willing to do something if there is some recognition. So he
created something called the Hammer Award, which was given to
teams of employees that were able to put customers first, cut
red tape, or to cut costs; and that award was given to about
1400 teams. And as we were doing this over a period of years,
we said that there are some savings associated, and we asked
agency budget officers to calculate, behind each team's award,
what kinds of savings were accruing or cost avoidances, and it
totaled about $50 billion.
And this wasn't something that came from Congress, it
wasn't an IG report, it wasn't GAO, it wasn't OMB; it was the
employees themselves.
Mr. Duncan. And you said $50 billion with a B?
Mr. Kamensky. Billion dollars. So, in part, I think
employees, if given the inspiration or the incentive, are more
than willing to do something. I had the opportunity to actually
deliver some of these awards in ceremonies around the Country,
and there were people in tears saying, I worked for 30 or 40
years for the Federal Government and no one has ever told me
thank you.
Mr. Duncan. Well, we have to do more in this way because
this debt problem gets worse and worse, and I can tell you many
cities around the Country have had to come in and cut their
pensions. Well, the Congress won't come in and cut Social
Security, but we will just print more money and more money and
more money, and pretty soon these veterans pensions and Social
Security won't be able to buy anything.
Mr. Blair, you want to say something?
Mr. Blair. I do, Mr. Duncan. I think you bring up a good
point, and you can look at it from more of a micro level of
look at the Federal compensation system. It rewards longevity,
not performance. There are ways of changing that, and it is
difficult. There are a lot of employee groups and unions that
oppose that, but at the end of the day compensation is the
single largest tool you have in order to spur performance, so
it needs to be more performance-oriented.
It is interesting. I have heard this expression several
times this afternoon, skin in the game. I think you need to
give some agencies some skin in the game to reward them if they
are doing a good job in managing and functioning well. You have
this high-risk list that is coming out.
Well, you have been here since 1986. I started in 1985 on
the predecessor to this committee and I have seen a lot of
this, and it seems like every year, every time the high-risk
list comes out, Congress brings the agencies up, fusses at
them, and then nothing really happens; Congress throws some
money at them to correct the problem.
But you have to have some real consequences, and I think
that that, at the end of the day, is the largest issue in
government, is you have to hold people accountable. And this
diffusion of accountability by saying, well, if an agency head
doesn't do this, let's give authority to this person. You have
to hold the individual accountable.
So I think that you can look at it on multiple levels, but
at the end of the day it is about accountability and holding
agency heads accountable and making sure they are answerable to
Congress and holding Congress accountable as well. I mean, look
at the budget process; it has been in shambles for years now,
and I think that is just one of the things that can be done to
strengthen that accountability.
Mr. Duncan. Well, I appreciate your testimony. I know my
time is up, but I will say, since it is a veteran panel, that
when I am telling some of the newer Members that I have been
here this long, they look at me; it sort of boggles their
minds. But I will tell you they will be amazed at how fast the
time passes.
Thank you, Mr. Chairman.
Mr. Jordan. Thank you, Mr. Duncan.
Let me just pick up real quickly and then I will turn to
Mr. DeSantis.
So you can incentivize, as the panel talked about and as
Mr. Duncan talked about. It seems to me you can also penalize.
One of the things I am reading that our Majority staff put
together is GSA sets a benchmark for what Federal agencies can
spend at their conferences. The benchmark is $3,000 per
attendee per conference, $6,000 per attendee per day.
One hundred and eighty-three times the Federal Government,
the various agencies, went above the benchmark. In fact, 64
conferences the Department of Defense held they went above the
benchmark; Social Security, 22 times at 22 different
conferences; Department of Energy, 21 times. And, of course,
GSA, which set the benchmark, went above the benchmark when
they had their big shindig in Las Vegas.
So it seems to me you can incentivize, but, frankly, we
should penalize them. One simple piece of legislation, just
after reading this here a few minutes ago, that I would be
looking at doing is if you go above the benchmark and you spend
more per conference, next year your budget gets cut by that
exact amount. That is an incentive to do the right thing. That
is the way everyone operates; you do something wrong, you
should get penalized.
So it seems to me we can do both of those as we are looking
to save some dollars to deal with the $16.5 trillion debt that
we now face.
That is just me rambling; you don't have to answer that.
We will go next to the gentleman from Florida.
Mr. DeSantis. Good afternoon. Over here. Over here. Out in
left field.
Mr. Jordan. Hang on. I messed up. I didn't see the
gentlelady from California. We have to go back and forth. She
gets to go, then we will go to you and I won't interject next
time.
Mr. DeSantis. No problem, Mr. Chairman.
Ms. Speier. Thank you, Mr. Jordan. I will join you in that
amendment, if you want to offer it on the floor, because unless
we start, as a committee, requiring accountability in these
various departments, nothing is going to happen.
And I am thrilled that each of you are here today to
testify. If we spent the next year just implementing the
recommendations that are in these great people's testimony
today, we will have done something for the American people. The
problem is is that we know what the problems are; we just never
effectuate the changes that need to take place. The inspector
general, the GAO constantly tell us where we should be making
cuts, where we should be making reevaluations, and we just
never act on it.
So we, as a Congress, have got to take some blame for what
is going on; and I think this committee is poised to do the
right thing, and we are poised to do it in a bipartisan
fashion. If we just take the recommendations that were
presented here today, we will have done our work on behalf of
the American people this year. So I hope that we can work
together on that moving forward, and you can count me in on any
of your efforts on that behalf.
Let me just go back to something that is truly troubling,
and any of you that have any perspective, I would appreciate
it.
The fact that the Air Force wasted $1 billion on the
Expeditionary Combat Support System, that it came before us as
a Congress a number of times, I believe the GAO had made
recommendations, and we kept allowing it to continue to foment,
and then finally it only got pulled after the Air Force said,
hey, this isn't working. But we had already spent $1 billion.
And then on top of it we ended up paying $8.2 billion as a
parting gift to CSC for terminating the contract? Is that true?
Or is it $8.2 million? Actually, this is a typo. It is $8.2
million in contract termination fees. So they screw up, we
spend $1 billion of taxpayer money on a system that doesn't
work; finally the Air Force says it is not going to work; we
terminate the contract and we pay them another $8.2 million.
Does anyone have any perspective of why it got as bad as it
did, went on for as long as it did without someone pulling the
plug?
Mr. Schatz. Unfortunately, it is not the first time,
although we hope it is one of the last times, because there
have been many other examples of projects, programs, not just
in information technology, but elsewhere, that go over budget
and, unfortunately, since there are really no consequences for
spending more money by Congress to hope the program works
eventually, that is one of the reasons why they keep going. It
is not just the agencies that continue to come in and say we
need more; it is Congress that doesn't put their foot down and
say no.
Ms. Speier. Exactly.
Mr. Schatz. So ultimately, not to lecture the committee or
the Congress, but it is their responsibility as a body to say
this should just stop. Let's do something different or let's
just not do it at all. And, unfortunately, it doesn't happen
often enough.
Ms. Alexander. I would say the one other thing I would add
is I think that it is just incredibly important, and all we
talk about in contract and acquisition reform is to have very
clear consequences for failure to deliver what you say you are
going to deliver. The cost of the termination fee was less than
continuing the program, so that is the good news, but they
didn't deliver what they said they were going to deliver which,
ironically, was to help the Air Force meet its audit
requirements. Of course, they still haven't done.
So I think we just need to hold, make sure that in DOD, in
particular just because it is so large, but across the
government that when a contract is let to whatever service
provider, that we have clear consequences; that we don't have
to pay when they don't deliver. I think that is something that
anybody who has been in business, if you enter into a contract
with somebody, you know, there are some areas of gray, did you
give me exactly what you I contract for, but there are some
areas that are not gray, where it is pretty clear. We didn't
get what we paid for, so we shouldn't have to pay for the rest
of it.
Ms. Speier. Mr. Chairman, I believe I only have 20 seconds,
but if I could, any kind of discussion that we could have, a
rational discussion on TRICARE would be greatly appreciated,
because right now TRICARE is costing us an extraordinary amount
of money and over time is going to eclipse what we pay in
Defense expenditures for, I believe, other personnel costs. And
TRICARE is being paid for individuals who have retired from the
military, but are working in employment settings where they
could get health insurance through their employer, and I want
to know if you have any number as to how much that would save
us.
Ms. Alexander. We have done a little analysis, and we can
follow up and send you some numbers on the record. But I think
that this committee has a huge opportunity to play a role in
that, somewhat difficult conversation about reforming TRICARE.
It shouldn't be that difficult because we of course we are
going to take care of the people who have served the Country so
well, but we are subsidizing employers who have great employees
who got trained by the U.S. Government, and we should think
about that before we continue to spend money on it.
I think that it is just worth noting that Congress has
actually blocked some efforts by the Pentagon to put in cost
reforms to TRICARE, so it is important that this committee lead
the way.
Ms. Speier. It is important to remember that, up until the
year 2000, those who retired from the military were in the
Social Security system, and TRICARE is actually a fairly new
incarnation.
Mr. Jordan. I thank the lady.
The gentleman from Florida is recognized.
Mr. DeSantis. Thank you, Mr. Chairman.
Thank you for your testimony. The material that you
provided is great.
After he got elected in 2008, the President, then
President-Elect, said that he thought it was important to go
through the budget page by page, line by line, to eliminate
unnecessary programs and operate existing programs in a cost-
effective way. As individuals who study this, has the
Administration ever put forward a list of these programs that
needed to be eliminated? Have they actually eliminated any
programs? Have they introduced some legislation in Congress to
make good on this promise four years later?
Mr. Schatz. Not to defend everything they have done, but
there are certainly some education programs that appeared in
the President's budget: National Institute for Literacy, Even
Start, Leveraging Educational Assistance Partnership. Others
have been eliminated by Congress, but in that case maybe a few
hundred million dollars in savings.
So every President produces a list of terminations.
Unfortunately, Congress only adopts about usually less than $15
billion, often under $10 billion, less than one-half of one
percent of Federal spending. But there are lists. Many of them
have programs that have been around for, unfortunately, 10, 20,
30 years; and overall it is a small percentage, but the answer
is yes, there are lists that President Obama and others have
put forward. They are just not large enough.
Mr. DeSantis. And they haven't been actually enacted into
law, by and large?
Mr. Schatz. Some have, yes. There are some changes that
have.
Mr. DeSantis. But it is in the hundreds of millions, not
billions, of dollars?
Mr. Schatz. Well, again, just in the information we have on
education programs, because that was the easiest to find, it is
a few hundred million. But overall anywhere between $10 billion
and $15 billion a year, I would say, gets adopted by Congress
from the President's budget.
Mr. DeSantis. Okay.
Yes, sir.
Mr. Kamensky. Mr. Congressman, the line-by-line review of a
budget doesn't capture a lot of the costs that could be saved.
There are system costs that are just hidden in the procurement
system, in the personnel systems, etcetera. But there is also
cost or savings potential by looking at tax expenditures, which
is an alternative way of buying things for the Federal
Government, and that is almost $1 trillion, about the
equivalent of the general discretionary spending each year; and
there is also money that is hidden through regulatory costs
that are in the hundreds of billions of dollars, that you are
shifting cost to the private sector that do things.
There are also laws that are just hidden programs. For
example, the General Mining Act of 1872 allows the miners to
extract resources from Federal lands at costs far below the
market value of the minerals that they are mining.
So if you just restrict the look or the view only to what
is in the discretionary budget, you wind up missing something
that may be two or three times as large.
Mr. DeSantis. I totally agree with that. I appreciate that.
I was just trying to isolate what has been done; where do we
stand four years out; what more can we do.
My second question is we talk about individual items that
can be cut, we talk about different things that can be done to
save the Federal Government money, but I am wondering, in your
judgments, what is the capacity of this body in the Congress to
actually follow through on some of these things. And I guess my
point is if you look at the last several decades, it seems that
the incentive is always to spend more. And I am wondering if
you think that we need an external pressure, constraint, such
as a balanced budget amendment to the Constitution, to finally
get us on a path to fiscal solvency.
Mr. Schatz. Well, we have always supported a balanced
budget amendment, but, again, all of this could be done. It is
a political will issue. A good example of one project that was
eliminated after 2010, that was kept in 2009, is the alternate
engine to the joint strike fighter, which, before the change in
the control of the House, I believe it was about 230 Members
voted to keep it going. The Senate, by the way, always rejected
it. In 2009 that vote took place, excuse me, 2010, prior to the
election. In 2011 the vote was reversed.
So perhaps, one by one, some of these wasteful programs can
be eliminated. The House has done a much better job of voting
to reduce wasteful spending; it simply has gotten stuck over in
the Senate. But I think it is all a matter of finding 218 votes
in the House and 60 or so in the Senate that agree that these
changes should be made.
Mr. DeSantis. My final question is I look through some of
the materials about a lot of the improper payments. This is
billions and billions of dollars, so it is a lot of good stuff
that would be great to save. But I am wondering to what extent
is that something that you can just isolate and fix, or to what
extent is that just simply inherent in the nature of a big
bureaucracy, so that the answer isn't that we can simply
identify this $10 billion in improper payments and snap our
fingers, but we actually may need to simply reduce the size and
scope of the bureaucracy as the best way to be able to save
money.
Mr. Blair. I think there are ways of isolating certain of
those improper payments. For example, paying dead Federal
employees their retirement annuities. I think that was
highlighted in one of the recent reports that came out a couple
years ago, that we continue to pay these retirement annuities
to people who died a year, two, or three years ago. I think
that if you go through each of these you can identify areas
where you can actually make a difference now.
But you are, with a government as large and as broad as
what we have, addressing waste, fraud, and abuse, you have to
look in terms of the sheer volume, but you also have to look at
it as part as a holistic part of government and something that
we are going to have to live with. We just have to make sure
that we have the processes in place that are stringent enough
to keep it at a minimum, and that is what we don't have in
place right now.
Our government has grown up over the past 225 years to a
point that, if we were reorganizing government today, it
wouldn't look at all what we have in place now; it would be a
totally different function. But we have, through the years,
departments and agencies reform to respond to specific
constituencies and to specific programs, and it is time to take
a look at how governments administer and how governments
organize in order to cut down the systemic waste that we have
seen over the past few years.
Mr. DeSantis. Thank you.
Mr. Jordan. I thank the gentleman.
Let me go back to where I just was. Mr. Schatz had said
something earlier, before we went for votes: if there is no
consequence for wasting money, money will continue to be
wasted. The one example that jumped out to me was the one I
gave just a few minutes ago, where we have this benchmark and
183 times various Federal agencies exceeded the benchmark. Ms.
Speier and I are going to do legislation on that specific
thing.
But I just wanted to know if there are no consequences, you
are going to see money continue to be wasted. What other
specific things, specific, would you point to that we can get
at where there are consequences for wasting taxpayer money? We
can just go down the line.
Mr. Schatz. Well, one consequence would be to, again,
penalize Members of Congress who vote to waste money in some
manner.
Mr. Jordan. Well, that happens on election day. I get that.
Mr. Schatz. Well, that would help. Because, again, the
Congress cannot fire people who overspend; they can change how
the budget process works.
What seems to happen, however, is when something is either
not working or something is trying to be achieved, the STEM
programs really strike me as the best example because a third
of those 209 STEM programs were added between 2005 and 2010,
which means that both sides of the aisle were responsible.
Somebody sees a science and math failure; we need to achieve
more, we will spend more.
Spending money does not solve problems. So this is a
fundamental change in the approach to spending. That is one of
the reasons that one of the Grace Commission recommendations
was to change the Office of Management and Budget to the Office
of Federal Management.
So management comes first; the spending comes later,
because the planning here is totally different than it is
outside of Congress, where someone looks at a problem, says can
we solve it, how do we solve it, and then how do we either
raise the money to resolve it or can we afford to do this, or
is there something else that exists that already achieves this;
all the questions that really don't get asked. So I am happy to
see that there now is this rule that identifies duplicative
programs, because at least that information is there. It
doesn't mean Congress won't vote to create a new program, but
at least there will be more transparency on that, and that may
help, in and of itself.
Mr. Jordan. Anyone else?
Ms. Alexander. I think in the context of contract reforms,
I think looking at kind of when contractors are entitled to
termination fees.
Mr. Jordan. Okay. That is a specific.
Ms. Alexander. And going back into the context of fixed
price contracts particularly for goods, where kind of having
the government as a client should be a pretty good incentive to
keep your costs down. So looking at kind of the very specific
things to make sure that contractors have adequate skin in the
game, to use the phrase of the day, but also just adequate
controls so that we don't have to pay people who aren't doing
what we want them to do.
Mr. Jordan. Okay.
Mr. Blair. We talked about, earlier, a more accountable pay
system for Federal employees and also a reorganized government,
but one of the things I would urge you to take just a brief
look at is a project that the Academy worked on with the
American Society for Public Administration called Memos to
National Leaders. It was intended to be addressed to both
Congress and the Administration over the next four years in
identifying the toughest management areas in government. And
some of the things to look at is better use of technology. We
talked about realtime technology, more analytics to identify
waste, fraud, and abuse; better use of social media to inform
constituency groups. FEMA has used this in the past, but how
about other agencies as well?
One of the things that our memos talked about was
strengthening the intergovernmental system. I say in my
testimony that actions at the Federal level reverberate on both
the State and local level, and we don't seem to have, here in
Washington, as firm a grip on this as we need, because we still
haven't funded mandates that trickle down to the State and
local level.
We need to do a better job of recognizing the budget
constraints that they have at the State and local level and
really strengthen that Federal system so that, while
recognizing the independence that our States and localities
have, the Federal Government should be a unified approach at
least with some of the programs, and there are ways of doing
that; better collaboration, bringing stakeholders together
through online dialogues and other technological innovations.
But the bottom line is that we really need to do a better
job of communicating and highlighting the transparency and
accountability of government.
Mr. Jordan. Mr. Kamensky, do you want to comment?
Mr. Kamensky. Thank you. The emphasis on greater
transparency is a good one. The overall goal should be trying
to create some sort of incentive to save money. One of the
things that has been interesting is a barrier for some of the
savings that I mentioned that were around the back-off as
administrative costs is because many of those savings are not
scoreable; and because it is not scoreable, neither OMB, nor
the Congress, seem to want to pay attention to them, even
though there will be savings that result from them.
There are processes to make things like that scoreable, but
it takes a lot of effort. So the transparency, by creating more
scoreable savings figures, can be a strategy that would help.
Mr. Jordan. One last thing. Maybe what you have suggested
is part of the inspectors generals' reports. But we have 73
different inspectors generals who, in 2011, their reports, when
you total it up, is almost $94 billion that the government
save. It seems to me these are sharp people; they make good
salary; they have a staff. I think the average salary of an
inspector general is $165,000; sharp people working identifying
things.
Do you agree with the inspectors generals' report, the
compilation of all that, that there is that kind of savings
achievable? And, if so, what do we need to do to make sure that
happens? Obviously, we need to pass a law or whatever, but give
me your thoughts on that real quick. And I apologize if you
talked about it before I was here, but let's just, real quick,
do that, then I will let you all go.
Mr. Blair. Well, one of the things I would look at in that
inspector general report, and I am not that familiar with it,
is I recall what I think is something like $75 billion in that
was achieved through the savings of the Postal Service IG
looking at the pension system.
Mr. Jordan. Okay. I have not looked at it that closely.
Mr. Blair. And correct me if I am wrong on this, but if you
take that off the table, you look at the other instances of
potential waste, fraud, and abuse, I think it is important to
say that a lot of that is potential; and I think more work
needs to be done in addressing and highlighting exactly what
can be done, because I think that would give Congress a good
blueprint from which to start.
I would also urge you, in addition to the IG report, to
look at this upcoming GAO list of duplicative programs, because
I think that that gives you the starting point from which to
ask why are we continuing to do that.
Mr. Jordan. Oh, we can do that anywhere. I just haven't
done a little bit of work in the welfare reform area. We have,
I think, 73 different means tested social welfare programs, job
training, education, nutrition, health care, scattered all over
the various agencies in government. We might help families a
little better if we didn't have 73.
Mr. Blair. And you might get that money to the families who
need it a little quicker.
Mr. Jordan. Exactly. No, that is the whole point.
Mr. Blair. Rather than going through 73 different agencies.
Mr. Jordan. Save money and help more people. Imagine that.
Imagine that.
Mr. Schatz.
Mr. Schatz. Well, I think that is also an approach that
should be taken in discussing what to do about duplication and
waste, because whenever someone talks about it, and we have all
seen this over the years, well, we are going to ``eliminate,
terminate,'' someone thinks they are not going to get something
that they may or may not deserve, but certainly expect. But to
show how more people will be helped through the consolidation
of programs, through better management of programs, through
more information about programs is something that needs to be
better communicated, I think.
Mr. Jordan. We are actually having a subcommittee hearing
on that very subject next week.
Mr. Schatz. Right. Because it will enable Members of
Congress to feel a little better about talking about how these
things are going to work and how people will be helped.
Ms. Alexander. I just think the one other thing I would say
that I think this committee is in a position to do is factor in
the duplication within the congressional process, because
sometimes there is a lot of duplication in programs because
there are multiple committees of jurisdiction; and this
committee is in a unique position to do oversight over multiple
programs that have jurisdiction of other committees.
Mr. Jordan. That will win us a lot of friends with our
colleagues.
Ms. Alexander. Win friends and influence people, I know,
but it is something that this committee can do.
Mr. Jordan. I understand. No, good idea.
I had one other thing and it has escaped me. Oh, I am just
curious. And I should know this, and our staff will work on
finding this out. Is the scheduled sequester, the $85 billion
in reductions and spending scheduled to happen in twenty-some
days, would that be one of the largest cuts government has ever
implemented since, I would assume, World War II, in the modern
times? Do you know? Mr. Schatz said you have been here twenty-
some years, since 1986. I am just curious.
Mr. Schatz. Well, again, remember, it is reduction of an
increase, so it is not necessarily a cut. It may be a cut for
some areas, but maybe under Gramm-Rudman. I don't recall what
that number was.
Mr. Kamensky. That was in 1986.
Mr. Schatz. A hundred billion, maybe? I think. I am trying
to remember.
Mr. Kamensky. But it didn't last.
Mr. Schatz. Right.
Mr. Jordan. We know they don't. They never last.
Mr. Schatz. Right.
Mr. Jordan. We are trying to make some of them last.
Mr. Blair. I think it was for a period of a few years.
Mr. Schatz. I think Gramm-Rudman might have been larger,
but not by much.
Mr. Jordan. Okay.
Mr. Blair. Gramm-Rudman was only for a few days, wasn't it?
Didn't Congress act that sequester? I can't recall.
Mr. Schatz. We remember a lot more about how much they
spend.
Mr. Jordan. You are highlighting the problem. You are
highlighting the problem.
I want to thank you all for being here. I know it has been
a while and you had to break in the middle. We appreciate the
good work you are doing and the work you have helped with the
committee.
We are adjourned.
[Whereupon, at 3:38 p.m., the committee was adjourned.]
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