[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                    FINANCIAL SERVICES AND GENERAL 
                  GOVERNMENT APPROPRIATIONS FOR 2023
====================================================================

                                 HEARINGS

                                 BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SEVENTEENTH CONGRESS

                              SECOND SESSION
                                __________

        SUBCOMMITTEE ON FINANCIAL SERVICES AND GENERAL GOVERNMENT

                     MIKE QUIGLEY, Illinois, Chairman

  MATT CARTWRIGHT, Pennsylvania		STEVE WOMACK, Arkansas
  SANFORD D. BISHOP, Jr., Georgia	MARK E. AMODEI, Nevada
  MARK POCAN, Wisconsin			CHRIS STEWART, Utah
  BRENDA L. LAWRENCE, Michigan		DAVID P. JOYCE, Ohio
  NORMA J. TORRES, California
  ANN KIRKPATRICK, Arizona

  NOTE: Under committee rules, Ms. DeLauro, as chair of the full 
committee, and Ms. Granger, as ranking minority member of the full 
committee, are authorized to sit as members of all subcommittees.

         Matt Smith, Laura Cylke, Marybeth Nassif, Elliot Doomes,
                   Aalok Mehta, and Parker Van de Water
                            Subcommittee Staff
                                 __________

                                  PART 5

                                                                   Page
  Fiscal Year 2023 Budget Request for The Judiciary...............    1
  Office of Management and Budget.................................  125
  Internal Revenue Service........................................  147
  Federal Trade Commission/Securities and Exchange Commission...... 179

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                                 

          Printed for the use of the Committee on Appropriations
          
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
49-393                     WASHINGTON : 2022                     
          
-----------------------------------------------------------------------------------          

                      COMMITTEE ON APPROPRIATIONS

                                ----------                              
                  ROSA L. DeLAURO, Connecticut, Chair


MARCY KAPTUR, Ohio			KAY GRANGER, Texas			
DAVID E. PRICE, North Carolina		HAROLD ROGERS, Kentucky	
LUCILLE ROYBAL-ALLARD, California	ROBERT B. ADERHOLT, Alabama
SANFORD D. BISHOP, Jr., 		Georgia	MICHAEL K. SIMPSON, Idaho
BARBARA LEE, California			JOHN R. CARTER, Texas
BETTY McCOLLUM, Minnesota		KEN CALVERT, California
TIM RYAN, Ohio				TOM COLE, Oklahoma
C. A. DUTCH RUPPERSBERGER, Maryland	MARIO DIAZ-BALART, Florida
DEBBIE WASSERMAN SCHULTZ, Florida	STEVE WOMACK, Arkansas
HENRY CUELLAR, Texas			JEFF FORTENBERRY, Nebraska
CHELLIE PINGREE, Maine			CHUCK FLEISCHMANN, Tennessee
MIKE QUIGLEY, Illinois	        	JAIME HERRERA BEUTLER, Washington
DEREK KILMER, Washington		DAVID P. JOYCE, Ohio
MATT CARTWRIGHT, Pennsylvania		ANDY HARRIS, Maryland
GRACE MENG, New York			MARK E. AMODEI, Nevada
MARK POCAN, Wisconsin			CHRIS STEWART, Utah
KATHERINE M. CLARK, Massachusetts	STEVEN M. PALAZZO, Mississippi
PETE AGUILAR, California		DAVID G. VALADAO, California
LOIS FRANKEL, Florida			DAN NEWHOUSE, Washington
CHERI BUSTOS, Illinois			JOHN R. MOOLENAAR, Michigan
BONNIE WATSON COLEMAN, New Jersey	JOHN H. RUTHERFORD, Florida
BRENDA L. LAWRENCE, Michigan		BEN CLINE, Virginia
NORMA J. TORRES, California		GUY RESCHENTHALER, Pennsylvania
CHARLIE CRIST, Florida			MIKE GARCIA, California
ANN KIRKPATRICK, Arizona		ASHLEY HINSON, Iowa
ED CASE, Hawaii				TONY GONZALES, Texas
ADRIANO ESPAILLAT, New York		JULIA LETLOW, Louisiana
JOSH HARDER, California
JENNIFER WEXTON, Virginia
DAVID J. TRONE, Maryland
LAUREN UNDERWOOD, Illinois
SUSIE LEE, Nevada

                 Robin Juliano, Clerk and Staff Director

                                   (ii)

 
   FINANCIAL SERVICES AND GENERAL GOVERNMENT APPROPRIATIONS FOR 2023
                                __________


                                            Thursday, May 12, 2022.

           FISCAL YEAR 2023 BUDGET REQUEST FOR THE JUDICIARY

                               WITNESSES

HON. ROSLYNN R. MAUSKOPF, DIRECTOR, ADMININSTRATIVE OFFICE OF THE U.S. 
    COURTS,
HON. AMY ST. EVE, CHAIR, JUDICIAL CONFERENCE COMMITTEE ON BUDGET
    Mr. Quigley [presiding]. Good morning.
    This morning we welcome the Honorable Roslynn Mauskopf, the 
Director of the Administrative Office of the U.S. Courts, and 
the Honorable Judge Amy St. Eve, Chair of the Judicial 
Conference Committee on Budget, to testify on the judiciary's 
fiscal year 2023 budget.
    It is nice to welcome you both for your first in-person 
hearing before this subcommittee. In fact, this is the first 
in-person hearing we have had in more than two years, and we 
are excited to gather here today to discuss the judiciary's 
budget request.
    To begin, I want to remind my colleagues that today's 
witnesses represent the lower courts and not the Supreme Court, 
which sets its own operational and investigatory policies 
involving leaks.
    From my years in the courtroom, I truly believe a well-
functioning federal court system is a key pillar of our 
democracy and is fundamental to ensuring the constitutional 
rights of all Americans are protected. That is why I worked 
with my colleagues to pass the Courthouse Ethics and 
Transparency Act and to introduce the Twenty-First Century 
Courts Act. These bills will ensure more oversight and 
integrity to the judicial process, particularly on misconduct 
issues.
    Greater public access to the federal courts also increases 
accountability in the judicial system and builds faith in our 
democracy. I am pleased that the Judicial Conference, under the 
CARES Act, expanded their access policies to include 
livestreaming audio in circuit courts and in selected civil 
proceedings, as well as livestreaming video for some criminal 
proceedings. These are all steps in the right direction.
    However, I am concerned that these measures might be seen 
as temporary fixes to continue judicial operations during the 
pandemic. I would encourage the Conference to explore the 
benefits of permanently expanding its livestreaming practices, 
creating more ways for the American people to view and 
understand our democracy in action.
    Moving on, we know the federal court system cannot properly 
function without the support of this committee. We appreciate 
the submission of your fiscal year 2023 request totaling $8.6 
billion, an increase of $655 million over 2022 enacted. I 
strongly believe that sufficient funds for our judicial system 
should not be a partisan issue and will advocate for highest 
possible funding to support the judiciary's priorities.
    In addition to this request, the committee notes the 
judiciary's physical security, cybersecurity, and IT 
modernization request of $516 million. I know this was not sent 
to us lightly and is the culmination of a coordinated analysis 
to evaluate the judiciary's critical IT security risk, 
vulnerabilities, and aging systems. I look forward to hearing 
more about this request.
    On the topic of safety, I am interested in hearing about 
the return-to-office guidance from the judiciary's COVID-19 
Task Force. The judiciary's transition back is more complicated 
than many other federal agencies, since it must accommodate 
jurors and courthouse visitors, in addition to staff.
    Equally important, we hope you share updates on the 
progress made to create a safe and respectful workplace for all 
employees. I am interested in learning about changes to the 
judiciary's code of conduct and workplace conduct policies, as 
well as any progress on the climate survey.
    Once again, thank you for joining us this morning, and I 
look forward to working with you both.
    I now turn to the ranking member, Mr. Womack, for his 
opening remarks.
    Mr. Womack. Thank you, Chairman Quigley.
    And, Judge St. Eve and Judge Mauskopf, thank you for 
appearing before this panel today.
    The rule of law is the bedrock of American society. Our 
Founders wisely designed our judicial branch to protect our 
constitutional rights, both faithfully and impartially, and 
uphold justice for all.
    An independent judiciary that holds the trust and respect 
of citizens and can resolve criminal, civil, and bankruptcy 
disputes in a fair and expeditious manner is fundamental to our 
Nation.
    In addition, each year the judiciary's Probation and 
Pretrial Service Officers perform a critical public safety 
mission by supervising over 200,000 offenders and defendants 
living in our communities.
    While this hearing isn't on the activities of the Supreme 
Court, I will say that the leaking of Justice Alito's draft 
opinion is disappointing. I am glad that Chief Justice Roberts 
has ordered an investigation into the leak. I know the vast 
majority of judiciary employees are dedicated and loyal public 
servants. I am hopeful that further leaks do not damage the 
work of the Supreme Court and all the federal appellate and 
district courts.
    Regarding the budget, the judiciary has many funding 
requirements to keep up with the growing court and probation 
workloads and to address both physical and cyber security 
threats. I am anxious to help you address those.
    However, your fiscal year 2023 request is for $655 million, 
or an 8 percent increase over the current year, and that is 
going to be difficult for this committee to provide. We are $30 
trillion in debt, and I believe the committee, the overall 
committee, has to take a look--a careful look, if you will--at 
all federal spending and responsibly reduce where we can. I 
think we have a moral obligation to future generations to get 
our fiscal house in order, and that means making some tough 
choices and discerning between our wants and our needs. And 
there is no agency, there is no funding recipient that should 
be omitted from this discussion.
    I appreciate the important work that the judiciary 
performs. I look forward to your testimony.
    And I yield back my time. Thank you, Mr. Chairman.
    Mr. Quigley. Now, we will hear from our judges. Please 
begin your opening statements.
    Judge St. Eve. Good morning. Chairman Quigley, Ranking 
Member Womack, and members of the Subcommittee, my name is Amy 
St. Eve, and I am pleased to make my first appearance before 
you today, alongside Judge Roslynn Mauskopf, to present the 
fiscal year 2023 budget request of the federal judiciary.
    I am here today as Chair of the Judicial Conference's 
Committee on the Budget, which is charged with formulating and 
justifying the Conference's budget request to Congress.
    I would like to begin by thanking the Subcommittee for the 
strong and consistent support that it has shown to the 
judiciary, including in the recent fiscal year 2022 omnibus. We 
understand that you faced many hard choices about how to invest 
your resources, and the $8 billion provided to the judiciary 
will allow us to implement some important priorities.
    At the same time, fiscal year 2022 will be a difficult 
budget year. The 3.5 percent increase provided in the omnibus 
is below the 6.3 percent increase we requested, and that 
difference will require the branch to forgo some necessary 
staff and to scale back or defer some strategic investments.
    We know that we aren't alone in facing budget challenges, 
but we hope the Subcommittee will continue prioritizing funds 
for the judiciary to allow us to carry out our constitutional 
and our statutory missions.
    The judiciary's fiscal year 2023 budget request has been 
impacted by several big cross-cutting issues. The first of 
these issues is the ongoing COVID pandemic. Conditions still 
have not returned to normal across the judicial branch, 
challenging our ability to accurately predict future workload 
and fee collections.
    In addition, we have significant unmet needs remaining from 
several emergency off-cycle funding requests intended to 
address a worsening physical security threat environment and a 
greater understanding of the vulnerabilities and challenges we 
face in the areas of cybersecurity and IT modernization.
    We briefed the Subcommittee's leadership on these 
challenges recently. And though we cannot share more in this 
setting, we can provide additional details through other means.
    We have begun migrating some of our most critical off-cycle 
needs into our annual budget and will soon provide a plan 
showing how we will fully incorporate our supplemental requests 
into our annual budget over the course of the next five years.
    The final dynamic is the continuing impact of significant 
external cost drivers, including the Supreme Court's 2020 
decision in McGirt v. Oklahoma and the ongoing implementation 
of the First Step Act. We have done our best to capture these 
and other dynamics in our request and will inform the 
Subcommittee as early as possible when an external event is 
going to have a significant impact on our required resources.
    Turning now to the overview of our request, the judiciary's 
fiscal year 2023 budget totals $8.6 billion in discretionary 
appropriations, a $577 million increase above our assumed 
fiscal year 2022 level. More than $200 million of that increase 
is needed just to fund the proposed federal employee pay raise 
and inflation-related costs. I urge the subcommittee to 
consider the impact of failing to fund these base adjustments, 
which must otherwise largely be absorbed by staffing reductions 
that diminish our ability to provide critical public services.
    Beyond base adjustments, the judiciary's request includes a 
little more than $100 million for new investments across our 
four primary accounts. These investments are detailed more 
fully in my written statement, but they include funds for 
increased staffing needs, particularly among probation officers 
and federal defenders; new magistrate judges and law clerks; 
cybersecurity and IT modernization; and physical security such 
as contract guards and security systems, equipment, and 
infrastructure.
    Finally, I would like to note the high priority that we 
continue to place on cost containment. Our current focus is on 
assessing lessons learned during the pandemic. I am committed 
to evaluating and pursuing the long-term adoption of any 
temporary pandemic-driven change in policy or in practice that 
can contain costs without harming judicial operations.
    Again, thank you for the opportunity to appear today and 
for your support of the judiciary. I ask that you please make a 
part of the record my statement and those provided by other 
judiciary entities on whose behalf we submit requests. And I 
would be pleased to answer any questions.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Judge Mauskopf. Chairman Quigley, Ranking Member Womack, 
and members of the subcommittee, I, too, am pleased to appear 
before you today to present the Administrative Office's fiscal 
year 2023 budget request, which totals $111.3 million.
    These funds will enable us to continue our work 
facilitating national programs and policymaking processes, and 
supporting courts, probation and pretrial services offices, and 
federal defender offices across the country. In addition to 
standard pay and non-pay adjustments, our request includes 
$306,000 for several new positions at the AO in our Risk and 
Compliance Office and for background investigations of 
contractors working at the AO.
    My written testimony highlights several important ongoing 
priorities. The AO continues to play a central role in 
assisting courts and federal defender offices to address 
operations during the pandemic, with a shift in recent months 
to a focus on long-term recovery and returning the judiciary to 
pre-pandemic operations.
    We also continue our work to ensure a safe and harassment-
free workplace for judiciary employees. I chair the Judiciary 
Workplace Conduct Working Group, and my written statement 
discusses the Working Group's latest recommendations to further 
strengthen workplace protections.
    And we have discussed at length with the Subcommittee our 
need for additional resources to address the sharp increase in 
the number of cyber-attacks on judiciary IT systems and the 
need to modernize those systems. I cannot overstate the gravity 
of the broad impacts across our society of cyber-attacks on the 
judicial branch. These attacks pose risks to our entire justice 
system and, more broadly, are an attack on our democracy 
itself. I look forward to discussing these topics in more 
detail at today's hearing.
    The Judicial Conference also has several important 
priorities beyond the judiciary's own budget that are relevant 
to the Subcommittee.
    First, we very much appreciate the Subcommittee's ongoing 
strong support of our Court Security appropriation to address 
the physical security needs of the judiciary in light of the 
increasing number of acts of violence and vandalism, both on 
and off courthouse premises, including the tragic murder of 
Judge Esther Salas' son and critical wounding of her husband in 
2020. The Daniel Anderl Judicial Security and Privacy Act, 
named in honor of Judge Salas' son, has been introduced in both 
chambers, and we urge prompt passage.
    We again ask this Subcommittee's support for one-year 
extensions for nine temporary district judgeships in fiscal 
year 2023. These temporary judgeships meet the criteria for 
conversion to permanent status, and short-term extensions keep 
them from expiring while Congress considers comprehensive 
judgeship legislation.
    We ask for consideration of the Judicial Conference's space 
priorities within the GSA's budget for new courthouse 
construction projects and the Judiciary Capital Security 
Program. Our courthouse priorities for fiscal year 2023 include 
construction funding for the space emergency courthouse project 
in Puerto Rico and for new courthouse projects in Hartford, 
Connecticut, and Chattanooga, Tennessee. We thank the 
Subcommittee for the funding provided in the fiscal year 2022 
omnibus and ask that the balance to fully fund these projects 
be provided in fiscal year 2023. The Capital Security Program 
makes security improvements to courthouses, and we seek 2023 
funding for projects in Augusta, Georgia and Fort Wayne, 
Indiana.
    Lastly, we are taking steps to modernize our case 
management System, CM/ECF for short, and the PACER system used 
to access online court records. After extensive analysis, we 
have concluded that both CM/ECF and PACER are outdated and 
require replacement. We expect to fund the bulk of our 
modernization efforts from PACER user fees. As Congress 
considers legislation related to CM/ECF and PACER 
modernization, our primary concern is that there is a stable, 
predictable funding stream going forward to modernize and 
operate these systems. We will continue to keep the 
subcommittee apprised of our modernization efforts, as well as 
the impact of any legislation on our ability to finance CM/ECF 
and PACER activities.
    Chairman Quigley, Ranking Member Womack, and members of the 
subcommittee, I want to thank you for your ongoing support of 
the AO and the judicial branch as a whole, and to thank you 
again for the opportunity to testify today. I would be pleased 
to answer questions.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Quigley. Thank you for your opening statements.
    And I would, respectfully, ask you both to provide a deeper 
dive on the cybersecurity needs that you are addressing. What 
are the long-term needs? What is your best effort at addressing 
this in annual appropriations versus the need for a 
supplemental? How much of this needs to happen and how quickly, 
and what are the costs involved with both?
    Judge St. Eve. Thank you, Chairman Quigley.
    As you know, we have submitted a supplemental request that 
totals $403 million for our IT security and modernization 
needs. And they really go hand-in-hand. In order to enhance our 
cybersecurity, we need to modernize our IT, which has become in 
some instances obsolete.
    We have a Judiciary IT Security Task Force that has been 
looking closely at these issues, and that Task Force includes 
members of DOJ who are experts in cybersecurity, as well as a 
member from the Department of Homeland Security's Cybersecurity 
and Infrastructure Security Agency. They are looking at our IT 
and coming up with recommendations. Our goal is to put in place 
zero trust architecture which will include IT verification, 
multifactor authentication, network segmentation, and other 
pieces to put the necessary security in place.
    In terms of the cost, we are vulnerable. I know we have 
shared some of our vulnerabilities with you and Ranking Member 
Womack, and we are happy to provide, outside of this hearing, 
additional information. We are trying to take care of those 
vulnerabilities through modernization and enhancing our 
cybersecurity.
    To answer the second part of your question about the timing 
of it, ideally, we would prefer to have a supplemental lump sum 
for this. That would, for one, take some of the pressure off of 
this subcommittee in terms of funding it, but it also will 
allow us to know that we can start and complete multiyear 
projects. This is going to be an ongoing project. We have a 
five-year plan that we are working on for it. If we don't get 
supplemental funding, we will have to incorporate those funds 
into our annual requests and we have done so, or started to do 
so, with fiscal year 2023.
    Judge Mauskopf. I will just add, as I said in my opening 
remarks, I can't overstate the gravity of the need to do this. 
We are a repository. We, the judiciary, are the repository of 
some of our Nation's most sensitive law enforcement and 
national security information in the cases that get filed 
within our courts.
    We also know that we are vulnerable. We are an 
organization, an entity, a branch of government, that is like 
many others in government. We need to modernize our systems. We 
are not alone in this effort.
    Chairman Quigley, as you noted, we make our funding request 
not lightly and after significant study of our own systems by 
GSA's 18F consultancy, by the Department of Homeland Security, 
and the Department of Justice, all of which are experts in this 
field. We have met with the White House cyber czar and his team 
to make sure that we are part of the entire federal 
government's effort.
    Mr. Quigley. And let me ask you, how do you coordinate with 
other federal agencies on an ongoing basis?
    Judge Mauskopf. With respect to cybersecurity, in 
particular, over the past year, we have developed seamless 
relationships with our executive branch partners that are 
expert in areas of cybersecurity, that are responsible for 
investigating issues with respect to cybersecurity, and that 
are helpful to us in assessing our needs and developing the 
systems that we need in the most secure and cost-effective 
ways. Our partnerships have really brought to our table the 
necessary components for us to put together the request that 
you see and to move forward on our modernization efforts.
    Mr. Quigley. Thank you.
    Mr. Womack.
    Mr. Womack. Whenever I hear the word ``modernization,'' I 
think new things, new shiny objects, new stuff, expensive 
stuff. And, look, all these vendors, they are smart. You know, 
they provide certain platforms that will probably have a shelf 
life before their technology is changed, maybe even slightly, 
to warrant new stuff.
    I mean, I have got, I guess, the latest, greatest iPhone. I 
don't know much more of what it does that my previous one 
didn't do, but I do have it. This stuff gets expensive.
    So, Judge St. Eve, help me understand how archaic our 
systems are in terms of how old they are. Because, once upon a 
time, they were new and they served our purposes. So, can you 
kind of put into context, when we talk about all of these 
modernization needs that we have--and they do become very 
expensive--what are we trying to replace; why are we trying to 
replace it, and what will making this kind of investment 
actually do for the services you render?
    Judge St. Eve. Thank you, Ranking Member Womack.
    We have underinvested in our IT in the past because we have 
had other priorities, and we are not alone in that. I think 
many government agencies are in the same position.
    What we are trying to do is not replace all of the 
equipment, but bring new objectives to achieve what is called 
zero trust architecture. That will involve changing some 
policies, which won't cost any money. We are doing that as 
well. But that will also involve bringing additional technology 
to our IT systems to verify user identities, for example, and 
to engage in network segmentation, where you can't get from one 
place to another without going through additional hoops that 
will bring more security to the system.
    Mr. Womack. So, the things that we are replacing, how old 
are they?
    Judge St. Eve. I don't know exactly how old they are. I 
think it varies depending upon the court since the different 
districts and Circuits use different systems.
    Mr. Womack. I mentioned in my opening about leaks. Leaks 
are never good, whether it is your oil pan or your indoor 
plumbing. Leaks in the federal judiciary, particularly at the 
Supreme Court, are profoundly--profoundly--troublesome to me.
    Is keeping draft opinions at the district and appellate 
court levels, keeping all that confidential, is that difficult? 
Do we have these issues at that level?
    Judge St. Eve. I can only talk about my own experience at 
the district court in the Northern District of Illinois and in 
the Seventh Circuit. I speak with my staff and my law clerks 
when they come onboard and make clear how important 
confidentiality is. I am not aware of a problem that we have 
had in the Northern District of Illinois or the Seventh 
Circuit.
    Mr. Womack. About it, Judge Mauskopf?
    Judge Mauskopf. I would echo that experience, as a judge. 
And since we have been talking about cybersecurity, and we have 
mentioned segmentation and zero trust architecture, I note that 
one of the things that we are concerned about in the cyber 
arena is that we are a systems of systems, and our systems 
house draft opinions. That is another category of very 
sensitive predecisional information that we house within our 
systems, which is yet another reason why we need to take steps 
to modernize our systems and to ensure that those types of 
controls are put in place.
    Mr. Womack. I acknowledge the work in the probation and 
pretrial service arena. You have got a $28 million increase for 
those services. And I am sure it is related to the growth in 
offenders and defendants living in our communities. Of the $28 
million, if you don't get all that $28 million, what happens? I 
mean, how does it impact the probation and pretrial service 
piece?
    Judge St. Eve. I agree, Ranking Member Womack, with what 
you said at the beginning of the hearing about the critical 
public safety role that probation officers play, and they 
really do. If we don't get all of the money we requested for 
probation we will have to cut back and won't be able to hire 
and bring on as many probation officers as we would like.
    We have seen, over the past couple of years, the workload 
increase for probation officers for a couple of reasons. Those 
reasons are all driving toward the fact that they are 
supervising now a higher-risk category of offender. The First 
Step Act resulted in additional early releases through the 
retroactive release program----
    Mr. Womack. So, that put a lot of pressure----
    Judge St. Eve. That put a lot of pressure----
    Mr. Womack [continuing]. On an already heavily leveraged 
organization?
    Judge St. Eve. Exactly. So, because of that, probation 
officers ended up supervising more individuals than they 
previously were and, generally, they supervise a higher-risk 
population.
    Another factor that has had a significant impact over the 
last year is part of the First Step Act, and that is 
compassionate release motions. Individual defendants can now 
file compassionate release motions directly with the court. 
They don't have to go through the Bureau of Prisons anymore. 
The First Step Act permitted that change.
    When COVID first began, we saw thousands of applications 
and motions being made. Early on, before vaccines were 
available in the Bureau of Prisons, many of these motions were 
being granted. Approximately 3600 were granted between January 
of 2020 and June of 2021. Out of those that were granted, about 
29 percent of those defendants had a criminal history Category 
of VI. That is the highest category you can get in the 
Sentencing Guidelines.
    Mr. Womack. Yes.
    Judge St. Eve. So, those are the defendants they are 
supervising.
    Mr. Womack. Yes. So, it, basically, serves as an unfunded 
mandate when something like that passes and it impacts you 
downstream.
    Mr. Chairman, I appreciate the fact that I have gone a 
little bit over. I apologize for that, but I think it is very 
important to note that, when we pass measures in the Congress 
that do put pressure on a judiciary like that, we need to be 
mindful of it.
    And I yield back.
    Mr. Quigley. Absolutely, and chairmen and rankers have 
their ``magic minutes,'' too.
    Mr. Pocan.
    Mr. Pocan. Thank you, Mr. Chairman.
    Thank you to the witnesses.
    I apologize, as I have two hearings going on, or I would be 
there in person.
    Just so you know, we don't have a timer for those of us who 
are remote. So, I have set my own timer, but I just thought you 
might want to know that for other purposes.
    My first question would be, you know, I recently spoke with 
a federal judge in my district about some very much-needed 
repairs at the federal courthouse in Madison, Wisconsin. My 
understanding is that they have got a number of exterior 
issues, including rusting and other items.
    How does that funding work for repairs? And how can this 
subcommittee support those types of needed repairs?
    Judge Mauskopf. Thank you very much, Member Pocan.
    There are different types of budgets that are available to 
address issues at courthouses. We don't like to build 
courthouses if we can repair courthouses and put them back to 
good use. So, there are mechanisms that are available to do 
those types of exterior fixes through GSA's repairs and 
alterations program.
    There is also the Capital Security Program. Where repairs 
are necessary to improve the security aspect of a building, 
there is funding available to do those types of projects. We 
are very thankful for the funding that was put into the Capital 
Security Program in the fiscal year 2022 omnibus, as that 
program had not been funded for several years.
    Mr. Pocan. Great. Thank you.
    Another question around staffing, and I know that was one 
of the areas that you mentioned there is just no funding for. 
So, there, also, in my State is an open federal judgeship that, 
because of silly Senate rules, as the best way I can describe 
it, it is an open position, but you are paying someone to come 
in and be a temporary judge at a full-time level. What does 
that cost compared to just having someone confirmed by the 
Senate? Is there an additional cost to having someone full-time 
filling at that level? I am just trying to get an idea of what 
is happening because of inaction.
    Judge Mauskopf. If it is an Article III vacancy, I take it 
that you are talking about a visiting judge who is coming in to 
take on some of the caseload----
    Mr. Pocan. Yes.
    Judge Mauskop [continuing]. Where there are not sufficient 
authorized judgeships filled. Is that right?
    Mr. Pocan. Yes, correct.
    Judge Mauskopf. So, I don't think we have a breakdown of 
how much that costs, but, of course, there is travel involved. 
Judges need support, whether it is court reporter support or 
law clerk support. In this day and age, we try to do some of 
that remotely and we have good communication back with our home 
courts to avoid expense. We often try and leverage the 
resources that are available within the court itself for the 
visiting judge.
    But it is not without cost. It is not without additional 
burden. Of course, filling vacancies is critical to make sure 
that all courts in the country have their authorized strength 
of judgeships to get the job done.
    Mr. Pocan. How would I get an estimate of what additional 
cost that is for the Eastern District in Wisconsin? Because it 
has been vacant for about six months, and I am just kind of 
curious how much extra we are spending because of that.
    Judge Mauskopf. I can take that question back and get you 
some additional information.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Pocan. Great. I appreciate that. Thank you very much.
    I have 45 seconds. I don't know if it adequate time, but, 
hopefully, someone will ask you more about the Federal Public 
Defenders Program, because I was curious about it. I know you 
said that you don't have enough, that fewer than 10 percent of 
federal defendants can afford counsel. If that comes up, I will 
be glad to hear those answers.
    And I will yield back, Mr. Chairman. Thank you.
    Mr. Quigley. Mrs. Torres.
    Mrs. Torres. Thank you, Chairman Quigley.
    And thank you, Judge St. Eve and Judge Mauskopf, for being 
here with us today.
    Congress heard disturbing and heartbreaking testimony this 
March of sexual harassment, workplace abuse, retaliation, and 
the use of non-disclosure agreements by the judiciary against 
its own employees. I am disappointed with Chief Justice 
Roberts' response to these reports by declaring inappropriate 
workplace conduct is not pervasive within the judiciary.
    So, I want to emphasize how important it is that the 
Administrative Office and the Judicial Conference respond to 
claims of sexual harassment and workplace misconduct by taking 
active steps to welcome those brave individuals that come 
forward and the bystanders that witness this harassment; and 
that more emphasis and attention needs to be paid to the 
victims of this harassment.
    So, Judge Mauskopf, I understand that the Office of 
Judicial Integrity is supposed to provide confidential advice 
to judiciary staff on workplace issues, such as sexual 
harassment, and coordinate staff training programs, and ensure 
consistency in workplace policies and protections across the 
circuit. I read your statement, your opening statement, here as 
it relates to that report and the working group.
    I am not sure that I am confident that this climate survey 
of judiciary employees at regular intervals, or the survey that 
was just posted, how reliable that information is, since I 
understand that, in January, the AO sent a form to thousands of 
judiciary staffers asking if they had witnessed wrongful 
conduct in the workplace. After the first 40 responses, which 
85 percent of those 40 respondents said yes--yes--that question 
was shut down. So, how reliable truly is this report that is 
made public?
    Judge Mauskopf. Thank you very much, Representative Torres.
    I know your commitment to workplace conduct issues, and I 
assure you that the entire judiciary and the Administrative 
Office is committed to sustaining an exemplary workplace within 
the judiciary. There has been considerable work done over the 
past several years to enhance the protections that are 
available to judiciary employees--in fact, protections that go 
beyond the statutory protections against discrimination, 
harassment, sexual abuse, sexual harassment.
    Let me make a clear distinction between the climate survey 
that the Workplace Conduct Working Group has recommended in its 
recent report and the incident that you mention in January with 
respect to a question that was put to employees.
    In January, the Office of Judicial Integrity and the 
Directors of Workplace Relations were conducting a nationwide 
training program for chambers staff, both law clerks and 
administrative staff in chambers. There was a registration 
form. You had to sign up because it was a virtual presentation.
    An administrative clerical person on their own decided to 
ask a very broad question about, have you ever witnessed 
harassment in the workplace?
    Mrs. Torres. Why would that question not be encouraged in 
such a wide questionnaire?
    We have like 16 seconds. So, I just want to, for the 
record, ask you, is it true that there are only two staffers, 
full-time employees, for the 33,000 judiciary staff? And are 
two staffers to investigate these harassment complaints enough?
    Judge Mauskopf. There are many more than two in the 
judiciary. There are two in every district court and bankruptcy 
court. There is a Director of Workplace Relations and two EDR 
Coordinators in each circuit, and there is a central Office of 
Judicial Integrity. So, there is----
    Mrs. Torres. My time is up, but I promise you that I will 
give you more time in the next round.
    Judge Mauskopf. Thank you very much. I would appreciate 
that.
     Mr. Quigley. Mrs. Kirkpatrick was on the screen. I am just 
asking if she is still there.
    Mrs. Kirkpatrick. Yes.
    Mr. Quigley. Well, there you go. Mrs. Kirkpatrick.
    Mrs. Kirkpatrick. One of the areas I am most concerned 
about is court capacity. Federal judges in Arizona where I live 
have some of the highest caseloads in the country. This is, in 
part, due to our proximity to the southern border, among other 
reasons. These high caseloads and lack of general court 
capacity have led to significant consequences and erosion of 
the court's ability to maintain normal order.
    For instance, we have seen a number of reports of judges 
curtailing or fully eliminating oral arguments; severe delays 
in case processing; high stress and burnout among judges and 
staff, among other detrimental effects.
    Judge Mauskopf, you indicated in your testimony that 
failing to extend temporary judgeships across the country, 
including in Arizona, would be harmful to the administration of 
justice in a timely manner. Would you please share some of the 
specific challenges you have seen coming out of Arizona, and 
what sort of impacts failing to extend these temporary 
judgeships would have on my State? Additionally, please speak 
to the overall scope of need for more judges throughout Arizona 
and the greater southern border region.
    Judge Mauskopf. Thank you very much, Representative 
Kirkpatrick.
    As you note, Arizona has one of the temporary judgeships 
that we are requesting be extended yet another time. In 
addition to that temporary judgeship, the Judicial Conference 
has recommended four additional permanent judgeships for the 
District of Arizona. The caseload in Arizona is such that it 
can support not only the conversion to permanent of the one 
temporary judgeship, but four additional judgeships. That is 
representative of the high volume of cases on the Southwest 
border.
    I know that we have used visiting judges on the Southwest 
border, including in Arizona, to meet the needs of the courts, 
particularly with respect to criminal cases, but there is also 
a need for additional judges to handle all of the caseload in 
Arizona.
    We have talked about probation and pretrial services, and 
how important that is to public safety. There is a particularly 
acute need to focus on resources for probation and pretrial 
offices in the District of Arizona. There is unique geography 
in the District of Arizona. There are tribal nations that need 
to be served that also bring unique needs to probation and 
pretrial in the District of Arizona. Again, this is also true, 
across many districts on the Southwest border. So, there is an 
acute need for judgeships and an acute need for additional 
resources to handle that type of probation and pretrial 
caseload.
    Mrs. Kirkpatrick. I have another question. Over the past 
few years, Congress has endeavored to modernize its practices 
in a number of areas, in an effort to improve efficiency, 
collaboration, and effectiveness. Modernizing systems across 
the entirety of the federal government must be a priority.
    One of the concerns I have heard surrounding the judiciary 
is the archaic nature of its systems, particularly the Case 
Management System. Judge, thank you for your written testimony 
on this matter. And I would appreciate that you expound on the 
current Case Management System's shortcomings and the efforts 
to modernize it.
    Judge Mauskopf. Our case management system, CM/ECF, is the 
backbone for two things. It is the backbone for our operations 
within the courts. It is the public filing system for 
litigants. It is how judges manage their cases. It is also the 
backbone to the public access system, the PACER system, by 
which the general public accesses judiciary records.
    Judge St. Eve has been involved with CM/ECF for quite some 
time. It was built long ago. It has had a lot of bells and 
whistles added to it over time. But we commissioned GSA's 18F 
consultancy to do a complete analysis of our CM/ECF system. It 
is unsustainable. It is no longer up-to-speed. We need to 
completely rebuild it and we need to maintain it while we 
completely rebuild it. But we have already embarked on that 
process to build a new CM/ECF.
    Mrs. Kirkpatrick. Thank you so much. Thank you for your 
testimony. Thank you for answering my questions.
    And I yield back.
    Mr. Quigley. Thank you.
    Mrs. Lawrence I believe hopped on. Is she still there?
    [No response.]
    If not, we will go to a quick second round. A few people 
have----
    Mrs. Lawrence. I am here.
    Mr. Quigley. Oh, there you are.
    Mrs. Lawrence. Yes. Sorry.
    Thank you so much.
    Judge Mauskopf, you mentioned in your prepared testimony 
that the fiscal year 2022 will be a difficult budget year for 
much of the judiciary. Can you elaborate on this point and talk 
about some of the constraints you see going forward, especially 
as it relates to staffing?
    Judge St. Eve. Thank you, Representative Lawrence.
    We appreciate the support from this Committee for our 
fiscal year 2022 budget, but the enacted appropriation was 
short of what we asked for. We asked for a 6.3 percent increase 
and received a little bit over a 3 percent increase, which will 
have the largest impact on our Salaries and Expenses account. 
Most of our staff is paid from that account.
    We won't be able to bring staff on that we need in certain 
areas. Our IT mission will lack that additional staff that it 
could use, and we won't be able to go forward with as many 
changes as we would like to. We will have to wait for the next 
year. So, not getting the amount that we asked for certainly 
will have an impact on the Salaries and Expenses account.
    Mrs. Lawrence. Okay. Judge St. Eve, what efforts are being 
taken by the judiciary--I understand the budget is not where 
you want it to be--to recruit, hire, and retain a highly 
qualified, diverse workforce?
    Judge Mauskopf. Representative Lawrence, there are a number 
of initiatives going on across the judiciary to recruit and 
ensure that we have a diverse and qualified workforce.
    Prior to becoming the Director, I chaired the Judicial 
Conference's Judicial Resources Committee and its Subcommittee 
on Diversity. One of the initiatives started at that Committee 
was the Diversity Roundtable, and it brings together 
representatives of a number of committees, including in the 
magistrate judges community and the bankruptcy judges 
community.
    We are all sharing and employing best practices to do 
outreach to broad segments of our communities to make sure that 
people are aware of positions that are available, to talk to 
people about how to become a magistrate judge or a bankruptcy 
judge, and to make sure that we get a broad and diverse pool of 
qualified applicants for every position that we are hiring.
    The Defender Services Program----
    Mrs. Lawrence. Thank you.
    Yes, I wanted to get this next question in. Thank you so 
much.
    Judge Mauskopf, the Sixth Amendment of the Constitution 
guarantees the accused a right to be represented by counsel in 
serious criminal prosecution, and rightfully so. But there is 
an 8.2 percent increase over fiscal year 2022 level to maintain 
current services within the defender services budget. How will 
this budget that we are talking about work to ensure that the 
administration of the Judiciary addresses the workload 
challenges? I hear what you are saying, and we are making a 
commitment for a diverse workforce. But are we going to be able 
to meet the goals of the Constitution?
    Judge St. Eve. We certainly will meet the goals. The 
defender services workload, as you indicated, is up. Caseload 
filings went down during the pandemic. So, there were fewer 
criminal case filings. Those are now starting to go up, and the 
defenders are seeing those cases. But pending cases have gone 
up during the pandemic because trials were slow to resume, and 
even once they resumed in the courtrooms, you can't try as many 
cases at once as you used to because of pandemic restrictions. 
So, the defenders are facing a higher pending caseload.
    I think 7.8 percent of the defender services request is 
needed just to maintain current services. So, we are hoping 
that the defenders will get that.
    Mrs. Lawrence. Well, I look forward to staying in touch 
with you because this is really important, and the staffing 
issue is something that I am very concerned about.
    And I thank you, and I yield back.
    Mr. Quigley. We are going to go to--a few members have a 
second question. We appreciate your patience.
    And we will turn to Mr. Womack first.
    Mr. Womack. Yes, just very quickly, Judge Mauskopf, you 
were, in response to my colleague, Mrs. Torres' question, you 
were in the process of talking about the survey that was done 
back in January. And I think mid-sentence she took her time 
back. But you were about to say something about a question 
offered by a staffer that was one of those, ``Have you ever. . 
.?''-type questions. So, do you want to finish that thought for 
us, please?
    Judge Mauskopf. The question was asked on a registration 
form. It was merely asking, ``Are you attending this program?'' 
And on the initiative of a clerical staffer, the question was 
included. The question was broad. It did not even ask about the 
judiciary as the workplace. It didn't have a timeframe, and it 
was a broad-based question: ``Have you ever witnessed 
harassment or workplace misconduct?''
    There were some people who responded yes. Every single one 
of those individuals who responded yes was contacted by the 
Office of Judicial Integrity to make sure that it was not an 
issue within our workplace and that if it was an issue within 
the judiciary workplace, that it was followed up on. In fact, 
many of the respondents said, ``I wasn't even talking about the 
judiciary.''
    The reason the question was pulled was because, as you can 
imagine, workplace conduct issues are sensitive. They need to 
be reported. We encourage reporting. But they shouldn't be 
reported on a registration form for a video training program. 
That is why we felt very strongly about following up with each 
and every one of those respondents to make sure that, if there 
were issues within the judiciary that needed to be addressed, 
they would be addressed.
    Mr. Womack. Thank you for clarifying, yes.
    Mr. Quigley. In my opening statement, I talked about the 
livestream audio and video that has taken place during the 
pandemic. I would like your thoughts on how this has worked and 
the likelihood that this might continue post-pandemic.
    It was a Supreme Court Justice that said that sunlight is 
the best of disinfectants. However anyone views it, the fact of 
the matter is public perceptions are reality and people want to 
see what is happening. Warts and all, people can watch 
everything we do here in Congress. We certainly hope and 
appreciate that you can continue this livestreaming.
    Judge Mauskopf. So, thank you, Chairman Quigley.
    I think we have learned a lot over the past two years about 
the use of technology with respect to improving public access 
to the judiciary. I think there are lots of different levels. 
Some are much more complicated than others.
    In the appellate courts, for example, all 13 courts of 
appeals are using some type of livestreaming, whether it is 
audio streaming or, in some courts of appeals, such as the 
Ninth Circuit, and to a lesser degree the Second Circuit, there 
is video livestreaming. That seems to be working quite well and 
I believe that many of the circuits are discussing keeping 
those types of practices post-pandemic.
    In the district Courts, in the bankruptcy Courts, things 
get a little bit more complicated. That is especially true 
within the district Courts, where you have both the criminal 
side and the civil side.
    The CARES Act has been critical to the district Courts' 
ability to keep justice moving forward during the pandemic. 
Pleas and sentences have moved along with dispatch during the 
pandemic, although I must say, based on my own experience as a 
judge--I think, Judge St. Eve, being a former district court 
judge, can understand this as well--it hasn't been perfect.
    One area that is particularly difficult is the fact that 
the federal defender community and the Criminal Justice Act 
community, has had to navigate significant challenges in 
building a relationship of trust with their clients using 
technology.
    Where we have had successes, as you know, Chairman Quigley, 
is broadening public access through the use of the CARES Act by 
allowing participants to come into proceedings virtually. I 
think there is room in many areas to be able to use technology 
to broaden public access.
    In the bankruptcy courts, for example, there are consumers 
who are required to come to court to explain their 
circumstances. Technology has allowed them to come to court 
virtually and not to have to take a day off from work or to 
travel long distances to come. It also allows others to come 
and listen to proceedings who are interested.
    Of course, we are not streaming trials. The rules of 
criminal procedure prohibit that. And I don't think the 
pandemic has changed the concerns that the judiciary has long 
held about the concerns of streaming trials--the privacy 
concerns, witness concerns, and the safety concerns for trial 
participants. I don't think those have changed.
    But I think there is real ground to improve public access 
to the courts through the use of technology, based on our 
experience during the pandemic.
    Mr. Quigley. I appreciate that.
    Mrs. Torres.
    Mrs. Torres. Yes. Thank you for finishing your thoughts.
    In the Office of Judicial Integrity, how many employees do 
we have there?
    Judge Mauskopf. There are now two. There will be three.
    Mrs. Torres. Okay. So, those two--or soon to be three--
employees will oversee 33,000 staff, judiciary staff, 
complaints/concerns?
    Judge Mauskopf. No, they are not the only place that takes 
these types of complaints or gives advice. We have----
    Mrs. Torres. But they are the last?
    Judge Mauskopf. No, I wouldn't say that. They could be the 
first.
    Mrs. Torres. Okay.
    Judge Mauskopf. There are Directors of Workplace Relations 
in each of the circuits. There are Employment Dispute 
Resolution Coordinators, two in every district court and in 
every bankruptcy court. They take complaints. They give 
confidential advice.
    So, there is a network that is available to each and every 
employee, based on their own comfort level of where they would 
like to bring a complaint or where they would like to seek 
advice. They can do it within their court. They can go out of 
their court to the circuit. They can go out of their court 
system to the Office of Judicial Integrity.
    Mrs. Torres. I am going to ask a follow-up on that in 
written form.
    Right now, I want to ask you about the individuals that 
were contacted on that very broad question. Because, you know, 
I believe that, with 85 percent of the respondents, maybe the 
survey could have been resent and the question could be asked 
more specifically.
    So, of the individuals contacted, what was that approach? 
Were they given their rights as individuals to report? Were 
they given opportunities to anonymously report misconduct? Were 
they put through training, and what kind of training?
    You know, in Congress, we have a lot of issues with Members 
of Congress harassing their employees, including offering a 
payment to surrogate a baby. I mean, these are just outrageous 
issues that we were seeing until there was skin in the game, 
where now Members of Congress have to pay out of their own 
pocket when they harass an employee, sexually harass an 
employee, and they are found to be guilty.
    So, this is where I am going. Like what are we doing to 
change the climate? This is a really important issue that you 
oversee every single day.
    Judge Mauskopf. We have done quite a bit in terms of 
changing the climate. The codes of conduct for judges have been 
changed to require judges to report misconduct that they, 
themselves, see, including with respect to their own 
colleagues. A failure to report is misconduct in and of itself.
    Mrs. Torres. What is that? What does that mean?
    Judge Mauskopf. I think you are familiar with the judicial 
conduct and disability process. There are judicial conduct and 
disability sanctions that flow from violations of the codes of 
conduct.
    Mrs. Torres. Without naming a judge, can you give me an 
example of how an incident was managed, punished?
    Judge Mauskopf. Well, I think there are----
    Mrs. Torres. Adjudicated?
    Judge Mauskopf. I think there are a number of publicly 
available reports of ways in which judicial misconduct has been 
handled through the JC&D process that resulted in judges 
resigning from the bench. I mean, obviously, impeachment is the 
potential for wrongful behavior by a judge.
    Mrs. Torres. In writing, I will ask you to further explain 
and provide an example.
    Judge Mauskopf. We welcome that.
    Mrs. Torres. But are you confident that the judiciary has 
everything it needs to actually protect employees from sexual 
harassment, discrimination, and retaliation?
    Judge Mauskopf. I am confident that we have a system that 
protects employees against all of those things; a system that 
will root out those things; and a system where employees, 
including law clerks, can be comfortable reporting those things 
without fear of retaliation.
    Every workplace has to strive to do as much as it can to 
sustain the systems that it has and to improve the systems that 
it has. That is why the Workplace Conduct Working Group 
continues its efforts and has made the recommendations that it 
has recently made, including to conduct a comprehensive climate 
survey of the judiciary itself, where employees will be able to 
anonymously report how well our systems are working and what 
they, themselves, have experienced or witnessed.
    Mrs. Torres. My time is up. I look forward to reading your 
answers, and I look forward to you expanding on that. Thank 
you.
    Judge Mauskopf. Thank you.
    Mr. Quigley. Thank you.
    Mrs. Kirkpatrick.
    Mrs. Kirkpatrick. Thank you.
    Judge, I have just a couple of questions.
    Given the rising distrust in the court system, especially 
as it pertains to the Supreme Court, how do you balance 
providing adequate security to judges and Justices with every 
American's right to protest? Is it the judiciary's view that 
Justices and judges should be immune from public scrutiny and 
protest? Or should they be subject to free speech and protest, 
like other public officials?
    Judge Mauskopf. Representative Kirkpatrick, I think there 
is a profound difference between the First Amendment right to 
protest and concerns and threats against judges and justices.
    And unfortunately--and I will speak about the lower courts 
here--I mentioned the just horrific tragedy that befell Judge 
Esther Salas' family, including the murder of her son, the 
serious wounding of her husband.
    Unfortunately, that is not the only example of violence 
against judges. We have Judge Lefkow in Chicago, Judge Vance in 
Alabama, Judge Daronco in New York. There are so many actual 
incidents of violence against federal judges in the lower 
courts.
    The lower court judges--magistrate judges, bankruptcy 
judges, district judges--are on the frontlines in litigation, 
where, unfortunately, sometimes people are not happy with the 
outcome of their proceeding or the way their proceeding is 
handled. It is these types of acts that the judiciary needs to 
be protected against.
    It is these types of acts that underlie the motivation 
behind the Daniel Anderl Judicial Security and Privacy Act that 
we have put forth to try and protect the public information 
available about judges so that dossiers about judges' homes or 
where they travel day-in and day-out--as was done with respect 
to Judge Salas, Justice Sotomayor--can't be compiled and can't 
be used to threaten or to bring violence to a judge or a 
judge's family. There is a big difference between that and 
peaceful public protest.
    Mrs. Kirkpatrick. Thank you. Thank you for answering my 
questions.
    And I yield back.
    Mr. Quigley. Thank you.
    We want to thank our witnesses today. Judges, we appreciate 
your input.
    Ranking Member Womack and I, and the committee, look 
forward to working with you during this budgetary process, as 
appropriations begins.
    Thank you so much for everyone who was involved today.
    This meeting is adjourned.
    [Questions and answers submitted for the record follow:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                             Tuesday, May 17, 2022.

                    OFFICE OF MANAGEMENT AND BUDGET

                                WITNESS

HON. SHALANDA YOUNG, DIRECTOR, UNITED STATES OFFICE OF MANAGEMENT AND 
    BUDGET
    Mr. Quigley. Good afternoon. The Approps Subcommittee on 
Financial Services and General Government, Fiscal Year 2023 
Budget Request for the Office of Management and Budget 
committee hearing will begin. I will begin with the opening 
statement.
    This afternoon we welcome back the Honorable Shalanda 
Young, the Director of the Office of Management and Budget, to 
testify on OMB's fiscal year 2023 budget.
    Director Young is very familiar to us, having previously 
served as staff director to this committee.
    Last year, she testified before this subcommittee as the 
acting OMB director. I could not be more thrilled that the 
President nominated her and the Senate confirmed her to be the 
permanent head of the agency. Congratulations.
    Of course, Director Young's title is hardly the only thing 
she has changed in the past year at OMB.
    I want to highlight a few of these items.
    First, as a supporter of government transparency, I have 
pushed for years for more openness when it comes to the 
President's budget and OMB's apportionment authority. So, I am 
glad that we were able to secure several new transparency 
requirements in the fiscal year 2022 bill, including the 
creation of a single landing page with links to federal agency 
budget justifications and public disclosure of OMB 
apportionments.
    These are important changes that will provide the public 
with insight into billions of dollars of federal spending, 
while ensuring this committee, and Congress, can perform its 
oversight work and ensure the executive branch is faithfully 
implementing appropriations law.
    I know OMB has already met several deadlines specified in 
these new provisions, and I look forward to hearing more about 
the remaining requirements and when they will be completed.
    Last year, Congress also passed the Infrastructure 
Investment and Jobs Act. This bill is a historic investment in 
U.S. infrastructure priorities, including broadband, roads and 
transit, water and power systems, and more, and will provide 
real benefits to every community in the country.
    But it also adds to the oversight responsibility of OMB, 
which is already monitoring trillions in spending for 
coronavirus relief, as well as supplemental funding for 
Ukraine, all in addition to regular approps.
    OMB is also grappling with significant government-wide 
challenges and opportunities.
    For example, we expect that increased use of remote work 
will last far beyond the pandemic, allowing agencies to 
diversify their hiring pools, reduce office space requirements, 
and cut their greenhouse gas emissions.
    The Ukraine situation has also highlighted ongoing 
deficiencies and vulnerabilities in agency cybersecurity, 
accentuating OMB's work coordinating government-wide IT and 
cyber spending.
    We hope to learn more today about how OMB is incorporating 
these factors into government policy and long-term federal 
budget planning.
    In recognition of these and other responsibilities, OMB has 
requested $128 million--a $12 million, or 10 percent increase, 
over the fiscal year 2022 enacted budget. This builds on a 9 
percent increase in funding we provided this year.
    In addition, the request includes a $6 million increase for 
the Information Technology Oversight & Reform account, which 
partially funds OMB's Office of the Federal Chief Information 
Officer.
    We look forward to a robust discussion about how these 
funding increases will be used to benefit the public, including 
combating the inflation that is hitting so many Americans right 
in their checkbooks.
    I now turn to the Ranking Member Mr. Womack for his opening 
remarks.
    Mr. Womack. Thank you, Mr. Chairman. And welcome back to 
the committee, Director Young.
    I, too, congratulate you on your confirmation. Who would 
have ever thought that a management fellow at NIH, what, 20 
years ago?
    Ms. Young. Twenty-one.
    Mr. Womack. Twenty-one years ago would have, would have led 
to being Director of the Office of Management and Budget, and 
we are all very proud of you. Miss your work here, but 
nonetheless, you are doing remarkable things in this country. 
And we congratulate you.
    You are leading OMB during a very challenging time, as the 
country struggles with the health and economic impact of COVID-
19, staggering inflation, and the war in Ukraine. I appreciate 
the hard work of all the staff at OMB to help address the needs 
of the country.
    Regarding the fiscal 2023 budget, I am disappointed that 
once again it proposes massive non-defense increases, 
inadequate defense spending, and the elimination of 
longstanding life protections, such as Hyde. Last year, when 
you testified, I said that I was concerned at the excessive 
level of federal spending by this Administration would lead to 
both inflation and historically high debt that will hinder the 
recovery and burden future generations of Americans. 
Unfortunately, my concerns have materialized.
    Inflation is at the highest level since 1981. The budget 
proposes increases in both taxes and spending, which will 
likely grow inflation even higher.
    Now, regarding the nation's debt, it currently exceeds 30 
trillion. And the President's budget estimates it will grow to 
over 44 trillion in the next 10 years. This debt, along with 
increasing interest rates, will hurt future generations' 
economic opportunities, and hinder the Federal Government's 
ability to fund the future security needs of the country.
    I was hoping that as the pandemic waned and the economy 
grew, we could reduce non-defense spending. Yet, the 
President's request proposes even more.
    I am also troubled with the Administration's tax proposals. 
I don't see how increasing taxes on American corporations will 
help reduce inflation, address supply chain disruption, or help 
American companies compete on a global basis. I understand the 
Administration can propose an aspirational budget, especially 
in a year without budget caps. However, we all know that in 
order for the committee to complete its work for fiscal 2023, 
defense spending will need to go up, non-defense will have to 
come down.
    We also know that longstanding provisions, such as Hyde, 
will be restored.
    In recent years, the appropriations process has broken 
down, resulting in CR after CR, and ending in omnibus 
appropriations bills enacted several months into the fiscal 
year. I hope you will work with the committee in crafting 
bipartisan appropriation bills that can be enacted before the 
start of the fiscal year 2023.
    Regarding the budget request for OMB's operations, I 
believe the 10 percent increase over the current year is 
excessive, but I will work with Chairman Quigley to ensure that 
you have an appropriate level of resources to complete your 
work.
    Director Young, I look forward to working with you and am 
hopeful we have a successful bipartisan appropriations process 
this year. I thank you.
    Mr. Chairman, I yield back my time.
    Mr. Quigley. Thank you, Mr. Womack.
    Director Young, thank you again for being here today. 
Without objection, your full written testimony will be entered 
into the record. With that in mind, we would ask you to please 
summarize your opening statement in 5 minutes.
    Ms. Young. Will do.
    Chairman Quigley, Ranking Member Womack, Mr. Pocan, Mr. 
Stewart, if people might be up late at night and watching us 
over C-SPAN and wonder why we are all smiling, it is because I 
would like to say I grew up on this committee. This is where I 
cut my professional chops. And really see a lot of people who 
are like family to me sitting at the dais and behind the dais.
    So, I think that the best of Washington is found on the 
Appropriations Committee, and I was very proud to work as Staff 
Director and staff on this committee for about 14 years.
    Thank you for the opportunity to appear here today to 
present the President's 2023 Budget request for the Office of 
Management and Budget. I would like to start by thanking 
members of this committee from both parties for their support 
for OMB's budget in the 2022 Omnibus. These additional 
resources have allowed us to begin refilling career staff who 
those jobs have been vacant for, for many years.
    For example, we have been able to fill longstanding key 
leadership positions, such as the Chief Statistician, at OIRA, 
our regulatory office, which has been vacant for well over 2 
years, and other critical staff-level positions across all 
offices, some of which were vacant for far longer, including 
examiner positions in OMB's Health Division, Medicare Branch, 
and Social Security and Human Service positions in the 
Education, Income Maintenance, and Labor Division.
    As you can see with our 2023 request, rebuilding our career 
staff remains a top priority for OMB. This is the second-lowest 
our staffing level has been in 15 years. Even as OMB continues 
to take significant new areas of responsibility--you have laid 
out many of those--we are implementing the bipartisan 
infrastructure law, Leading the Made in America agenda. The 
bipartisan infrastructure law made our Made in America Office 
permanent.
    We want to transform federal customer service delivery. 
People should not have to guess which 3- or 4-letter agencies 
they have to go to to find services. We should develop a 
government that leads people where they are through life 
experiences.
    And we are answering the call on key issues, like the war 
in Ukraine, and much, much more.
    Our fiscal year 2023 request totals $128 million, an 
increase of 10 percent over fiscal year 2022. These resources 
will allow OMB to continue our work rebuilding and maintaining 
our career staff. And that includes funding to maintain a 
robust Student Pathway to Intern Program, which will help 
strengthen OMB's employee pipeline.
    OMB is also requesting 13.7 million for the Information and 
Technology Oversight and Reform Fund, or ITOR. OMB's Office of 
the Federal CIO would use these funds to reach 53 FTE, which is 
the number of personnel the office needs to do its work 
improving the nation's cybersecurity.
    I would also like to say a few words about the President's 
overall fiscal year 2023 budget request. Under the President's 
leadership, our country has made historic progress in the face 
of significant challenges. We have created 8.3 million jobs. 
The unemployment rate has fallen to 3.6 percent. Last year saw 
the strongest economic growth in nearly 40 years. And we are on 
track to cut the deficit by more than 1.5 trillion this year, 
based on the latest Treasury data.
    The President's 2023 Budget details his vision on this 
progress. It expands our economic capacity, improves our public 
health infrastructure, combats the climate crisis, and advances 
equity, dignity, and security for all Americans. During what 
will be a decisive decade for the world, the budget strengthens 
our military and leverages America's renewed strength at home 
so our nation is prepared to meet pressing global challenges 
and manage crises as they arise. And it makes these investments 
in a fiscally responsible way, reducing the deficit by $1 
trillion over the coming decade.
    Thank you for the opportunity to be here today. It feels 
like coming home. We will see if I have that same sentiment in 
a couple of hours. But I look forward to answering your 
questions.
    Mr. Quigley. Home isn't always fun.
    Again, thank you, Director.
    As I mentioned in my opening statement, I was pleased the 
fiscal year 2022 appropriation package includes several of the 
new transparency provisions that will make the budget process 
more accessible to the public, and help this committee do our 
oversight work.
    Can you outline a little the progress OMB has made in 
meeting the new statutory requirements under 204, many of which 
require public disclosure of apportionments?
    Do you anticipate meeting the deadlines outlined in 204, 
especially for automated apportionment?
    And, again, I was pleased to see the enactment of the 
Congressional Budget Justification Act. This has been a 
priority. The bill requires the OMB director to create and 
continuously update a website that lists budget justification 
information. Can you tell us progress on that matter as well, 
please?
    Ms. Young. Absolutely. And I know you have been a leader on 
transparency issues.
    OMB has already begun to implement the new apportionment 
transparency requirements on March 25th, as required by the 
law. We began posting final apportionment to a MAX Community 
page, so your committee staff can access that.
    Within 15 days after the Omnibus was signed, OMB was 
required to submit our apportionment delegation to the Federal 
Register. We have done that. And we are working to comply to 
our next time frame, which requires apportionments be put on a 
public website. And we intend to meet that time frame.
    On congressional budget justifications, which I know is the 
Chairman's bill, we are working to meet the requirements of the 
Congressional Budget Justification Transparency Act. We have 
already met the Act's requirement that OMB maintain a 
centralized website. The act also requires OMB to develop data 
standards for agency CJs, and we are working on how to meet 
those further requirements, but we are on track to do so, Mr. 
Chairman.
    Mr. Quigley. Thank you.
    The Russian invasion of Ukraine has revived questions about 
the vulnerability of U.S. critical infrastructure, including 
the federal agency system, to potential Russian cyber attacks. 
During the 2023 budget, President's budget--does the 
President's 2023 Budget incorporate such concerns into the 
proposed spending levels on the agency's side for IT needs?
    What is your strategy for addressing these concerns in the 
fiscal 2024 President's budget?
    Ms. Young. Given all that the Appropriations Committee has 
to fund, it is easy for cybersecurity to get left behind. You 
have a lot of obligations; the same with putting together the 
President's Budget. But we have seen through various attacks, 
from Colonial Pipeline to SolarWinds, that we cannot afford to 
let this lapse, and we have to do a better job as a government.
    Cybersecurity is a priority in the 2023 budget. It includes 
$2.5 billion for CISA in the Department of Homeland Security. 
You heard us, we are asking for a little over $13 million for 
our CIO, who oversees cybersecurity efforts across the 
government. And we are doing good work with our technology 
modernization fund, which this committee has supported in the 
past.
    That fund resides at GSA. OMB and GSA run that program. And 
agencies come to us and submit applications for innovative 
projects to strengthen their technology and cybersecurity 
needs. We are seeing that is needed more than ever.
    You mentioned Russia, as well as China. We have to stay on 
top of this threat. And many of our systems are not ready. And 
we often do a good job responding after an event, and we are 
trying to position ourselves, including with the new Zero Trust 
strategy, getting ahead of the issue.
    Mr. Quigley. Thank you.
    Mr. Ranking Member.
    Mr. Womack. Let's go down memory lane a minute, back to 
'18.
    You remember well the budget process, Joint Select 
Committee. Sixteen members: 8 Senators, 8 members of the House. 
And I co-chaired that, that committee with our friend Nita 
Lowey. We talked about a lot of things. But the overarching 
theme was what can we do to fix what most people would 
characterize as a broken budget process in this country.
    And, sadly, you know this is my 12th year, but, sadly, in 
the course of the entire time I have been in Congress we 
haven't seen regular order the way, the way it was designed to 
perform. So, a couple of questions for you.
    Out of that committee, Director Young, we talked about 
biennial budgeting. Do you have any thoughts on it?
    Is it still, do you think it would still be a fresh 
alternative, a more effective alternative to what we are doing 
now?
    Ms. Young. You know, one, I like to clarify when this comes 
up. There is biennial budgeting and biennial appropriating. I 
think there is a lot----
    Mr. Womack. We are talking about budgets right now.
    Ms. Young. We are talking about budgeting. And I do think 
we did some version of biennial budgeting. And I think it works 
fairly well when we had to do 2-year budget deals in order to 
statutorily change the caps that you mentioned.
    We are out of the cap season, but during caps we often 
passed a 2-year budget. That second year was often a smoother 
process. So, I think we have an example that worked in recent 
memory.
    So, I certainly would want to work with several of you. You 
are not the first member. I think there is interest on both 
sides of the aisle and both sides of the Capitol to do 
something.
    From the seat I sit in now, I will tell you CRs are 
detrimental. You know, we did Ukraine funding. We started to 
see Russian aggression while the Department of Defense was in 
CR. That is not an effective way to run a government.
    I will say we can't give grants to state and locals. We 
hold those during a continuing resolution to see what the final 
numbers are. Your communities are used to dealing with that 
uncertainty, but it is not acceptable.
    So, I look forward to working with you to figure out 
something to get us on schedule.
    Mr. Womack. Another frustration I have, and it was 
exacerbated by the COVID pandemic, and that is that we don't 
talk up here a lot about deficits and debt unless there is some 
kind of, you know, consequence as a result from not dealing 
with it.
    You know, we are $30 trillion in debt now. We will add to 
the debt this year and for the foreseeable future. But in that 
Joint Select Committee we, you know, we advocated for a debt-
to-GDP target.
    What are your thoughts on debt-to-GDP? If you can't get to 
a balanced budget, at least some metric out there that you can 
work toward where there are some guardrails that keep Congress 
from sidestepping the issue. Your thoughts on it?
    Ms. Young. Yeah. And I think we, we talked about this. The 
one thing that comes to my mind I would hope would be avoided, 
I think that is the frustration on the discretionary side. I 
wouldn't want to see us go down a road of doing something with 
similar consequences on the mandatory side.
    When we talk about debt, many of the things that are 
included in that number you cite are spending on entitlements, 
not what the Appropriations Committee is considering, but 
Medicare, Medicaid, Social Security. So, we have to be very 
careful about triggers to make sure there are unintended--not 
unintended consequences.
    I do think the way we are going to have to deal with this 
as we face cliffs in the entitlement programs are both parties 
are going to have to come together and find solutions that deal 
with the issues of the day, and maybe not necessarily triggers, 
where we don't have to make targeted decisions.
    Mr. Womack. That is a key word you mentioned: cliffs. I am 
a proponent of when you recognize that you have a problem, not 
to wait till you get ready to drive off the cliff, but to begin 
addressing the solutions to the problem as soon as you 
recognize you have a problem, so that you never really see the 
cliff.
    But up here, it seems as though we are not motivated until 
there is a danger sign ahead.
    Would you agree with that?
    Ms. Young. I will let you speak about how things run here. 
I am no longer on Capitol Hill. But I do believe these are 
major issues.
    The population is aging, there are structural issues tied 
into those debt numbers and the benefits numbers. And my guess 
is both parties are going to have to hold hands and come up 
with some creative solutions that rise above politics of the 
day.
    Mr. Womack. I would not disagree with that.
    So, so let's get back to what we do up here. We are 
appropriators. We deal with the discretionary part of the 
budget, which is about a third of Government spending.
    I make the argument all the time to anybody willing to 
listen that the, the continued lack of leadership on the part 
of the Congress to deal with the side of the spending ledger 
that is outside of the appropriations jurisdiction--and we are 
talking about mandatory spending, you just mentioned the big 
ones, Social Security, Medicare, Medicaid, I would add net 
interest to the debt, on the debt to that equation--but the 
inability of Congress to actually deal with those programs is 
creating intense pressure on the part of the budget that the 
appropriators have to deal with, and that is a discretionary 
budget.
    And so, would you not agree that at some point in time, or 
as you said, hold hands, we are going to have to have an adult-
level discussion as a country about just how far we can 
continue to go without addressing that side of the spending 
ledger.
    We have about 10 seconds.
    Ms. Young. Yes. Well, I understand, you know, you mentioned 
the high-level, non-defense discretionary. I will point out 
that that much is needed to return non-defense discretionary to 
its historic level as a percent of GDP. So, we are woefully 
behind in the investments we have been able to make over the 
last 10 years.
    So, I couldn't agree with you more: you can't, you can't 
deal with a third of budget and expect to see a lot of results 
on the bottom line.
    Mr. Womack. Thank you so much.
    Yield back.
    Mr. Quigley. Thank you.
    Ms. Kirkpatrick.
    Ms. Kirkpatrick. Thank you, Mr. Chairman. Thank you. Thank 
you, witnesses. I really appreciate having this hearing today.
    And, you know, Director Young, it is nice to see you again. 
And it is great to have you as, as the acting--no longer as 
acting, but actually as the OMB director. So, I thank you for 
that. It is great to see you.
    My question is, since you took office, President Biden's 
budgets have focused on investing in domestic programs for the 
betterment of the country. As you and others have said, the 
President's budget is about advancing equity across-the-board.
    To that end, I have some questions related to how the 
budget advances equity in a few different areas.
    So, my first question has to do with Arizona, which has a 
significantly higher percentage of veterans than the broad 
United States. A huge number of those veterans live in my 
Southern Arizona district. So, one of my top priorities since 
getting to Congress years ago has been advancing the quality 
and availability of veterans' medical care.
    I am proud to see that the President's budget proposes 
increasing the overall scope of veterans' medical care funding 
by over 20 percent. It would be great to hear from you about 
the importance of these investments to the broader veterans' 
health care landscape, as well as high veterans population 
states like Arizona.
    So, my, my question has to do with, you know, how are we 
going to, how are we going to significantly advance health care 
for our veterans?
    Ms. Young. Thank you, Congresswoman Kirkpatrick. And good 
to see you as well.
    I would like every member to take, you know, a hard look at 
how we present VA medical care. We often talk about defense and 
non-defense. That split was, you know, done over a decade ago. 
It is a way we talk about the budget. But it doesn't have to be 
the final way we talk about a budget.
    VA medical care, the budget presented it as its own 
separate category. We believe it is important enough and our 
obligations to our veterans, who have earned benefits of 
medical care should not be squeezed by the traditional caps 
that we talk about a budget in.
    So, we believe a way to protect VA medical care, the 
traditional VA system, the brick-and-mortar system, and also 
allow our veterans to use community care, a way to protect that 
and ensure that it grows at the level our veterans deserve is 
to create its own separate category, separate from defense and 
non-defense.
    Ms. Kirkpatrick. Second question has to do, you know I grew 
up on tribal land in Apache country. And I have really 
dedicated my career toward, toward advancing the betterment of 
our state. I have seen firsthand the challenges these 
communities, tribal communities face on a daily basis. Like our 
veteran population, again, one of the most serious challenges 
Native American communities face is lack of accessible, quality 
health care.
    I know the President's budget proposes to increase the 
Indian Health Services to make the funding mandatory. What is 
the importance of making the funding mandatory? And how would 
such a funding increase broaden availability of health care for 
Native Americans in Arizona and throughout the country?
    Ms. Young. Congresswoman, you have me talking to the 
Appropriations Committee about taking something out and making 
it mandatory. So, it might not be widely well received.
    But no one, I believe, could argue that our Indian brothers 
and sisters have not always gotten their fair share from our 
government. And one place in particular, Indian Health Service.
    We have listened. We have done tribal consultation. One 
thing that came out of those consultations and those 
conversations was a more steady path to pay for medical care. 
You heard me talk about veterans, how we approach that.
    On our Indian Health Service side, last year we put forward 
a proposal to do advance funding. We weren't able to get that 
done, so we are trying a new idea, which is to provide steady, 
consistent, known funding through a mandatory stream.
    I think as I leave here, regardless of what Congress does, 
I just ask that we do something to ensure that our Indian 
Health Service is adequately funded, which it currently is not.
    Ms. Kirkpatrick. Thank you so much for your leadership. And 
I yield back.
    Mr. Quigley. Thank you.
    Mr. Stewart.
    Mr. Stewart. Thank you, Chairman. And thanks, Director 
Young. Thanks for being with us. It is good to see you.
    You at the beginning comments said you hoped you that when 
you left we would still be friends. I promise you we will be 
because I think all of us can respect you and the work that you 
do, while at the same time disagree, and disagree 
wholeheartedly with some of the actions or the divisions of the 
Administration.
    You did mention the discretionary budget proposal. I am so 
glad you did. It is the thing I would like to focus on, if I 
could.
    $1.6 trillion sounds like a lot of money. Americans listen 
to that, they go, well, it seems like a lot. But they, we 
really don't appreciate what that really is. It is nearly, as 
you said, 10 percent more than in 2022. It is a whole boatload 
more than 2021.
    And which, by the way, at the same time we have got a 10 
percent there, only a 4 percent increase in defense, which I 
hope we have time to talk about as well.
    Before we do, I do want to focus on this:
    In the last couple years we have spent something like $10 
trillion. We spent 2.2 on the original COVID package, another 
2.1 on the second, 1.9 in interest structure. And that is on 
top of the normal budget, which is close to 5 trillion. And the 
result of that is generational inflation.
    And I know, Director Young, you have this experience, at 
least I hope you do, of talking with just normal working 
families. You know, hardworking Americans, this is devastating 
to them. If someone picks you up in a car in the morning and 
drives you to work and you haven't filled up the gas tank in 
that car in a long time, you don't worry that much about what 
the price of fuel is.
    And if you are doing well, and you have someone who maybe 
shops or cooks for you, you don't care what the price of milk 
or the price of bread is. But the vast majority of Americans 
do. Including, for example, my 6 kids, who are all young and 
they are starting their careers. And they think about it, and 
it impacts them all the time.
    And, Director Young, I know that you are sympathetic to 
that. I wish that the President and other members of the 
Administration were more sympathetic to it.
    But my question to you is this: does the Administration 
recognize that Government spending, once again something like 
$10 trillion in a couple years, has impacted inflation?
    And I am going to ask my second question and allow you to 
answer both, if you could.
    And the second question is tied to that, if they don't 
believe that now, how high would inflation have to be before 
they would consider cutting double spending?
    Ms. Young. Thank you, Mr. Stewart.
    One, you are talking to a parent of an almost 7-month-old. 
So, one of the things the President has pointed out is we need 
to do things to bring down costs for the American people. He 
gets that. You have heard him address the American people and 
one of his top, if not the top, economic concern is bringing 
down the cost of goods for people, including child care. I can 
tell you, for parents it is one of the drivers keeping women 
out of the workplace.
    We need to bring down the cost of health care.
    We need to bring down the cost of energy for families. The 
President has presented ways to do that and has called on 
Congress to do that.
    Speaking of, you know, spending and saving, we are on track 
to bring down the deficit by $1.5 trillion this year. And the 
President does believe and has stated that is central to his 
effort in fighting inflation.
     Mr. Stewart. Director, I appreciate that.
    You mentioned, for example, the President has focused on 
bringing down costs of energy. In fact, it seems to me his 
focus has been on increasing the price of energy. There are 
many in the opposite party who think that is actually a good 
thing. They want to drive the cost, high prices of energy up in 
order to compel some of the incentives for the Green New Deal, 
for example.
    But I am puzzled, because I really don't know the answer to 
this question. Give me an example of where the President's 
policies are actually provided to drive down the cost of 
energy, and not just to do the opposite? Which I could go 
through the list of things that I think could cause that, but I 
think you are familiar with them. Help me understand why this 
President, what he has done to drive down the cost and not put 
up the price of energy?
    Ms. Young. I think we all know energy, especially oil, 
prices are guided by the market. But what the President has 
done is use all the tools at his disposal, including releasing 
tens of millions of barrels of oil from the Strategic Petroleum 
Reserve.
    So, this President is quite aware of the cost impact on 
everyday families, and is using every tool at his disposal to 
deal with those rising costs.
    Mr. Stewart. Well, I am almost out of time. I don't have a 
timer in front of me. I will just conclude by saying this: 
killing Keystone Pipeline, shutting down oil and gas permits in 
the West, in Alaska, offshore, but more than that, and that is 
demonizing the oil and gas industry and trying to demonetize 
it, and allow them not to have access to financial markets so 
now they don't have the resources they need to go and explore 
and to drill, I think those have far, far--in fact, I don't 
think, I know they have far, far more impacts than the few, few 
million barrels of oil that comes out of the Strategic Oil 
Petroleum Reserve.
    But, Director Young, thank you once again. I will look 
forward to continuing conversations with you.
    Ms. Young. Thank you.
    Mr. Quigley. Mr. Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman. And thank you, 
Director Young, for joining us this afternoon. It is great to 
be able to call you that, Director Young, and drop the 
``acting'' part of that title.
    All of the years that you worked hard on the Appropriations 
Committee gave you an insight that I have no doubt will serve 
you well in the White House.
    The ranking member talked a little bit about continuing 
resolutions, which really are the bane of federal 
appropriations. We are here today to discuss the fiscal year 
2023 budget.
    But we only passed last year's budget, the fiscal year 2022 
Omnibus two months ago, in March. The Federal Government has 
been funded under these continuing resolutions for months, 
often at the very last minute before the last continuing 
resolution expires.
    And, you know, if you are scoring along at home, what a 
continuing resolution is is an agreement that whatever we spent 
last year we will spend again. Can you imagine operating a 
family budget that way? Well, we bought a new car two years 
ago, so every year after that we have to keep buying a new car.
    It is ridiculous. And it is ridiculous to run a government 
like that, too. And I think our ranking member agrees with me.
    Operating under continuing resolutions places financial 
uncertainty and impositions on all federal offices. Office of 
Management and Budget faces additional uncertainty and 
impositions because it has two sets of responsibilities: your 
own internal responsibilities to keep OMB in operations; and 
your responsibilities to oversee other federal agencies.
    So, my questions is, what additional challenges to its 
internal and interagency operations did your office take as a 
result of last year's string of continuing resolutions? And how 
did you handle those challenges?
    Ms. Young. I have a very small agency in the context of 
Government agencies. But if other agencies like Department of 
Defense looked at the risks of hiring, for example, in the 
midst of CRs the way I do, then it really does impede an 
agency's ability to operate.
    I just won't do it. I won't put at risk trying to guess 
where Congress is going to, going to head. So, we put off 
critical vacancy fills, we put off critical hiring citizens, we 
don't invest in our contracts the way we should. And that is 
with a tiny agency by the scale of federal agencies.
    So, looking government-wide, it really is one of, one of 
the worst ways to manage the United States Government. I don't 
think anyone looking from the outside in would think that we 
would do--fund agencies by 2, 3, -month increments, sometimes 
2, 3, -week increments.
    So, you and Ranking Member Womack have certainly hit on an 
issue that I know we all share and that we have to find some 
way of getting out of.
    And one way we can help do that is to work with the 
leadership of this committee, get the budget to you, start the 
process and really enter into constructive conversations on how 
we can ensure that a timely, a timely budget as close to 
October 1st can be achieved.
    Mr. Cartwright. Thank you for that.
    I know you are also working on streamlining customer 
service in the Federal Government. We have all heard from our 
constituents how hard it is to navigate Government websites to 
find the right service that fits their needs, speak to the 
right person, and find somebody who can help them navigate the 
Federal Government.
    This help is particularly critical for citizens who have 
recently suffered a sudden financial loss and need help 
receiving Government services. I know OMB is working on 
improving government-wide customer service, and helping 
citizens who face these accessibility challenges.
    The question is, how is OMB leading the charge to 
streamline federal services and make them more accessible to 
all customers?
    Ms. Young. It is one of the things I am most excited about. 
People shouldn't have to know the ins-and-outs of government 
programs and laws to figure out which government agency to go 
to to get a service.
    If you have a housing need, how would you know that rural 
housing is mostly taken care of at USDA versus the Housing and 
Urban Development Agency?
    So, we have got to, the Government has got to do a better 
job of meeting people where they are. People shouldn't have to 
guess which 3- and 4-letter agency to go to to find assistance.
    And so, we are committed, OMB led the charge on an 
Executive Order, a customer service Executive Order which talks 
about these life experiences. And we have specific things, like 
getting passports for travel, like knowing how to get housing 
services, and like knowing how to get food services. And we 
think we can meet some achievable milestones and make real 
change for people who want, and need, and deserve those 
government services to be able to find them.
    Mr. Cartwright. Well, thank you. I know you are going to 
find some willing and able partners on this subcommittee in 
that effort.
    Mr. Chairman, I yield back.
    Mr. Quigley. Thank you.
    Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chair.
    Director Young, it is an absolute pleasure to see you here 
today.
    As we have already touched on this afternoon, Americans are 
bearing the brunt of record-breaking inflation on all products, 
from grocery to gas. The White House has pinned blame on 
several sources but doesn't speak much about its plan to craft 
fiscal policy that is mindful of inflation.
    Can you provide a few specific examples of how OMB worked 
to lower inflation and developing the President's $5.8 trillion 
2023 budget?
    Ms. Young. One, I think it is important to know that 
economic assumptions are built into the budget. And inflation 
is an interesting thing. It has offsetting triggers--you bring 
in more revenue and you spend more with inflation.
    So, this budget does assume some rise in inflation to 
ensure that what we presented, which is over a trillion dollars 
in deficit reduction over 10 years, is actually reflective of 
assuming some rising inflation.
    So, one, we tried to be honest about what the economic 
picture would be over the, over the 10 years. And we still see 
a production of a trillion-dollar deficit saving over this 
budget window.
    Mr. Joyce. Well, your office has requested $128 million 
through 2023, a 10 percent increase from last year. The budget 
attributes 4.5 million of that spending to inflationary 
adjustments.
    Obviously, you are also not immune to the impacts of 
inflation. What costs have gone up for OMB to require this 
extra funding?
    Ms. Young. So, every government agency, I am very proud 
that the President set up a 4.6 percent federal employee pay 
increase. That pay increase is done by formula, and it is tied 
to the Consumer Price Index. So, most of OMB are people. So, 
our people will cost more from year to year. And that is mostly 
built on the pay adjustment the President has put forward for 
all federal workers.
    Mr. Joyce. Your office also estimates that the deficit will 
remain above a trillion dollars every year for the next decade, 
increasing to 1.4 trillion this year to around 1.8 trillion in 
2032. With rising interest rates, our debt load will become 
more of an expensive pressing problem.
    At some point the White House and Congress need to have a 
responsible conversation about reigning in federal spending 
levels.
    What are some meaningful steps your office believes we 
could take to reduce the deficit over the next decade and 
improve upon these dire deficit projections?
    Ms. Young. So, one thing we haven't talked a lot about here 
are the pay-fors in the budget. The President believes that we 
are going--we should invest in the American people, but the 
fiscally responsible way to do that--and we may disagree on 
this--is through tax reform: ensuring that corporations pay 
their fair share, that we go back to some levels, not even all 
the way back, to tax levels for the richest Americans before 
the 2017 tax cuts.
    So, we believe we can do both: bring down the deficit, so 
that is what the budget is showing, and invest in the American 
people. And also, we do that by increasing taxes for the 
wealthiest Americans.
    Mr. Joyce. Thank you for your response. And I yield back.
    Mr. Quigley. Thank you.
    Mr. Pocan.
    Mr. Pocan. Thank you very much, Mr. Chair.
    And thank you, Director Young. We are very glad to have 
you. I was pretty ecstatic when I saw your name was going 
forward and you got confirmed. And, you know, having worked 
with you, the President and the White House is very lucky to 
have you in that position.
    Let me just say, I agree with Mr. Womack. I used to be on 
Reid Ribble's bill as well to do the biennial budget process, 
not appropriations but budget process. And just so you know, I 
think in a bipartisan way a lot of us who came from state 
legislatures who operated that way it was efficient. And I 
agree with him on many of those points.
    One point that he and I may not agree on much, as much 
though, is while you have a lot of great investments for 
working families, and we really appreciate what you have put 
together in this, as well as the attention that you have talked 
about in the deficit, the defense budget still is ballooning.
    You know, Congress doubled what the President requested in 
the last budget. We just keep moving forward. And, yet, this is 
one of the very few agencies that never seems to get any real 
scrutiny or real review.
    You know, this is when you talk about national security, I 
have asked this question of Dr. Fauci, Dr. Tabak from the head 
of the NIH, Dr. Jahn. They have all said that COVID was a 
national security threat. And, yet, the NIH budget is about a 
12th of the defense budget. The CDC budget is about one-
seventieth of the defense budget. And, you know, I would argue 
things like cybersecurity, climate change, pandemics clearly 
are all things that fall under national security.
    But one of the problems that we have had with Department of 
Defense is they take the language that they consider to be how 
they can spend money very strictly. So, they say because of, I 
think these five words, ``state and non-state actors,'' that 
they can't put money into a lot of other areas.
    So, while there is some research on breast cancer, for 
example, because of women in the military, they won't take care 
of things like noise abatement when you bring F-35s to a 
district like mine. So, those 800 deficiencies, that two got 
fixed one year for the F-35s, so there is very, very little 
review on that. But then I can't get support because they say 
it doesn't fall under their purview.
    And I would argue that when you have the most recent class 
of aircraft carrier, the Ford Class, when the toilets get 
plugged it is $400,000 worth of assets have to be flushed down 
the toilet, you are going to be flushing money down the toilet.
    We have amphibious vehicles that sink but don't float, and 
that is a problem with amphibious vehicles.
    As I mentioned, the F-35, 800 plus deficiencies.
    Don't you think that the Pentagon should have to pass a 
budget to--or, I am sorry, an audit in order to get some of the 
continued funding, and that perhaps a broader look at national 
security? COVID-19 clearly was the biggest security threat we 
had in the last several years. That we could possibly be 
looking at ways to open up how we spend that besides just 
defense contractors?
    Ms. Young. Well, I hinted at this earlier. I do think the 
way we look at the budget the last, over the last decade is, 
you know, we landed there and we haven't moved from it, 
defense/non-defense. Even taking a conservative change to that, 
security/non-security. If Department of Defense is central to 
our security, so is the FBI. But that is counted with the 
Labor/HHS bill and the many social services we fund.
    We can certainly take a broader look at what security of 
the nation is: Department of Homeland Security, for example, 
veterans, you know, outside of medical care.
    So, count me in to re-look at how we kind of pit these 
things against each other, and should we take a broader look at 
what security is. Even in the conservative view, I think there 
is room to grow what is real security.
    I think any congressperson would tell you it should, our 
agencies should pass an audit. I don't think we can not invest 
in the Department of Defense, unfortunately, until they do so. 
But it should be something any commonsense person would tell 
you we expect all our agencies to do.
    Mr. Pocan. And I appreciate that. I just think it is time 
for a more modern definition of defense. And I think there are 
other things clearly pandemic-related, and other areas that 
could receive better funding since the CDC's entire budget is 
one-seventieth of the Pentagon's budget, to address those sorts 
of things.
    And I am glad you shared what you thought about the audits 
because, you know, I think there are many things that are very 
important. We want to support our military personnel, but there 
are so many examples of things that don't do well. And if that 
happened in any other agency, I think we would have serious 
problems. But especially this idea of being able to spend for 
the national security, perhaps funding a broader definition.
    And I don't know how we could work together like that, but 
I would really love to work with your office on trying to 
figure out how to do that.
    And I yield back, Mr. Chairman. Thank you.
    Mr. Quigley. Thank you.
    Ms. Torres.
    Ms. Torres. Thank you, Chairman.
    Director Young, it is really great to see you again. 
Congratulations on everything that you have achieved. I am 
thrilled that your position has not been misclassified.
    I say that because I think you know where I am going. As a 
former 911 dispatcher for 17.5 years, I dealt with some very, 
very tough issues. People do not call 911 because they are 
having a great day. They dial 911 because most often it is the 
worst day in their lives.
    I have handled calls from suicide callers, domestic 
violence involving children, shootings in progress. I have had 
to negotiate, you know, with barricaded suspects, with victims 
being held hostage.
    These are real life situations that 911 dispatchers have to 
go through. The work that they do, the work that I did, you 
know, way back, was protective service. It may, it may surprise 
people to hear that. In fact, due to the protective and 
stressful nature of this work, PTSD rates for this profession 
are about 18 to 25 percent, in line with combat veterans.
    However, OMB's Standard Occupational Classification catalog 
categorizes public safety telecommunicators as office and 
administrative support occupations. This includes secretaries, 
office clerks, and taxicab dispatcher.
    This topic may seem like just a technical issue, 
insignificant. But the real world impacts are substantial for 
this group of employees. Classifying public safety 
telecommunicators, who are primarily female, heads of 
households, as secretaries is based on a 1950's view of the 
work of this profession. It is biased, you know, to put it 
mildly.
    In the year of the Lord, to quote, you know, our vice 
President, we have to correct this, this problem. 911 
dispatchers when I worked the 911 center--in November of 2008 I 
took my last call--I had four screens. Now they have eight. 
They follow bank robberies, robbers. You know, their work is 
tremendously changed from that secretarial work when the 911 
line was first implemented.
    So, to address this problem I introduced the 911 SAVES Act, 
a bipartisan bill that directs OMB to classify public safety 
telecommunicators as protective service occupations. The good 
news is that we don't have to wait for this bill to pass 
because last year I introduced an amendment, and the language 
was agreed. This committee instructed OMB to reexamine the 
classification of public safety telecommunicators.
    So, my question to you is how much longer do 911 
dispatchers have to wait to get the good news? How much longer, 
you know, do we have to wait to ensure that there is a path for 
Congress to focus on this profession and provide them with the 
training and profession--to professionalize this profession?
    Ms. Young. So, one, I will say the statistical analysis, 
and that is what it is, and without the context which you bring 
to us--and I thank you for your leadership there--one, I think 
it would be truly helpful to have you over and talk to the 
staff that work on this. I think your perspective is awfully 
compelling. I have heard you tell the stories. And one could 
not help but be moved by those.
    Two, this is--should not be what jurisdictions are using to 
base their stature, their compensation for 911 responders. So, 
we certainly encourage them to adequately compensate. The 
statistical categorization should not be the thing that 
determines how we treat and professionalize this service across 
the country.
    But we got your report language. We are taking it to heart. 
Just so you know, these changes usually are a 10-year process. 
Your report language has us speeding that up. And I think 
meetings with interested parties is a good place to start.
    So, thank you for the report language. And in addition to 
the hearings, that has really sped up our consideration. But it 
is, typically, a long process. And we last changed the 
classifications in 2018.
    Ms. Torres. Well, we are going to give you a bigger budget 
so you can help improve conditions.
    I yield back.
    Mr. Quigley. Thank you.
    We are honored to be joined by the ranking member of the 
full committee, Ms. Granger.
    Ms. Granger. Mr. Chairman, quickly, thank you for yielding. 
Sorry I had to miss the opening. I had something I had to do.
    Just a personal privilege, I would like to congratulate 
Shalanda on your confirmation to OMB. You will do a wonderful 
job.
    I have known her for years. And she can be a very tough 
negotiator, but she works well with members on both sides of 
the aisle. And I am so glad that you are willing to serve in 
this very, very important position.
    I just have a question.
    The President's budget proposes a percentage increase for 
defense. To put it simply, I don't think it enough to address 
current threats. How do you explain this request that doesn't 
even keep up with inflation at a time when other countries are 
becoming more aggressive around the world?
    Ms. Young. I am sorry you missed Mr. Pocan so you can see 
the extremes of opinion on this topic.
    Ms. Granger. Okay.
    Ms. Young. And for me, the safe place to be in developing 
this was with the National Defense Strategy. And I can truly 
say, for probably the first time in a long time, OMB, I and the 
Secretary of Defense held hands and did a budget based on the 
National Strategy. You don't often hear that from within 
administrations, but that was the case.
    Now, what I also realized, I am working with you all for 
many years, is this is the beginning of a process. I understand 
that. And not just the Department of Defense, other agencies, 
we want to make sure that we are using the latest data on--that 
ensure that we aren't losing spending power at the Department 
of Defense or any other agency.
    So, you have my commitment to working. I think I have said 
it over and over, the most important thing is to make sure we 
get bills done and we start this discussion, and speed it up as 
fast as possible to get bills done by the beginning of October.
    Ms. Granger. I have great confidence in you. You are very 
practical and very straightforward, and a pleasure to work 
with. So, thank you for that answer. I appreciate it very much.
    Ms. Young. Thank you.
    Mr. Quigley. Ms. Lawrence.
    Ms. Lawrence. Thank you, Chairman.
    I am, too. I know this has been a choir, but I can't tell 
you how proud I am of you, and so glad that we have the right 
person in the job.
    But in addition to that, welcome to motherhood. It will 
definitely change your life.
    I am the co-chair of the bipartisan Congressional Caucus on 
Foster Youth. And we work to ensure that foster youth have the 
resources that they need to be successful in their transition 
to adulthood. I firmly believe that increasing opportunities 
and federal internships can help foster youth enter the 
workforce and gain critical experience.
    Can you talk to me about how your budget will work to 
strengthen that pipeline of diverse and underrepresented 
candidates in the Office of Management and Budget?
    Ms. Young. Well, I think any time--and you all led, the 
House has a paid internship program. We are trying to do a 
little catch-up.
    And I think any time you pay kids, I am not sure, I worked 
at a dry cleaner. Free work was not something my family 
understood well. We have, we have to be employed in my family. 
So, it is a way to get people who would not otherwise have the 
resources to experience something, like working for Congress, 
like working for OMB.
     So, I certainly hope the ability to pay brings people in. 
Families across the country want to do this for their kids. I 
think they would find resources as best as possible. But any 
help, including paying the children so they could at least pay 
for their own living expenses while they are here, I think will 
help open up pipelines.
    But, specifically for foster youth, I am proud of what this 
budget does. It includes a 30 percent increase in 
discretionary, funding for child welfare programs. As part of 
the increase we proposed a hundred million dollars competitive 
grant program to advance racial equity in the child welfare 
system and support struggling families who are in need for 
foster care, and a $10 million mandatory funding package to 
safely keep struggling families together, which is the goal of 
many foster programs, if we can.
    So, I am proud of what we have put forth. I know it is the 
beginning of a conversation, but it is often a part of, you 
know, government services and budget overlooked. And so, I 
really asked for strong consideration of those, those 
proposals.
    Ms. Lawrence. Thank you. And you started my next question.
    I am thrilled you are a working mom. When you have women in 
the workforce, especially those of us who are responsible for 
policy, it does change the conversation. The President calls it 
the nerve center of government.
    Talk to me about how this budget addresses inequities 
facing women, especially women of color?
    Ms. Young. So, one, becoming a mother I have also seen many 
of you in different lights. I know Representative Granger, for 
example, is a mother of twins. I don't know how that is 
possible, especially seeing the things any of you, I know a 
couple mayors on the table, and all raised children.
    Ms. Lawrence. Yes.
    Ms. Young. Those examples show younger people, they showed 
me it was possible to be a parent and also continue to serve 
this country in the way that I want to. I didn't have to pick.
    So, I appreciate the leadership you all have shown, and 
those stories, having people hear those is really life changing 
more than anything.
    The President has put forward, as you know, a robust child 
care package. We believe, I know from personal experience, if 
you do not have adequate child care that is dependable, no one 
wants to drop their kid off in a place that they feel unsafe in 
order to go to a job. No one is efficient in their workplace 
when that happens.
    So, we, we have seen bipartisan support for child care 
packages in the past. And I know if we work together, we can do 
something to help struggling families get their kids into--and 
these child care facilities are hurting coming out of the 
pandemic. So, making sure some of them have to reopen. Some are 
struggling to get staff back in. So, we certainly believe that 
families shouldn't be paying more than 7 percent of their 
income in order to make sure their kids are taken care of.
    Ms. Lawrence. Can you talk to me about what, in your view, 
the additional steps the Administration takes to address hate 
crimes will do? I am the founder of the Black-Jewish Caucus, 
and we have seen an epidemic of that.
    And how can we ensure effective implementation?
    And what moves or steps are we taking in our budget that 
will start addressing this increase in shooting and hate 
crimes?
    Ms. Young. Well, one, I have to start with extending my 
sympathies to the victims in Buffalo. The President was just in 
Buffalo, gave a speech about this sort of thing not being 
tolerated. We have seen too much of it over the last years. And 
I can only imagine what those families are going through as it 
is still fresh. So, I have to start there.
    And the budget, unfortunately, Buffalo just happened. But 
we have many examples of this type of shooting previous to 
Buffalo. So, this budget did contemplate resources to deal with 
this sort of thing. $49 million for FBI to address domestic 
terrorism and hate crimes; $23 million for DHS's Center for 
Prevention, Programs, and Partnerships; and $20 million for 
DHS's Targeted Violence and Terrorism Prevention Grant Program.
    Also, I would be remiss if I didn't mention a popular 
bipartisan program, $360 million for nonprofit security grants 
to harden critical infrastructure for communities.
    Ms. Lawrence. Thank you so much.
    I yield back.
    Mr. Quigley. Thank you.
    Director, there will be a few more questions in a quick 
second round. I wanted to let the ranking member start that 
off.
    Mr. Womack. Thank you, Chairman Quigley.
    And mine is going to be under the, kind of under the 
umbrella of COVID relief and the pandemic as we see it today. 
Now, I realize it is not over. And I also realize that some 
areas of the, you know, of the economy have suffered more than 
others. Maybe even some states have suffered more than others 
and this sort of thing.
    But, you know, in that COVID relief package that was passed 
last year there was $350 billion for grants to state and local 
governments. I am a former mayor. So, I look at this kind of 
money kind of in an objective way.
    In some cases, I believe that the tranche of money that has 
gone to some local political subdivisions might have rivaled 
the entire amount of that jurisdiction's annual budget. I could 
be wrong on that, but I bet I am pretty close. So, I sometimes 
question--and the first tranche was done in 2021, the next 
tranche I think comes out later this spring, maybe this 
summer--and even in my own state there are arguments being made 
among these political subdivisions as to how, what are we going 
to spend this money on?
    And so, I look back and I think, we took a pandemic and we 
threw a bunch of money at the pandemic. And in some cases the 
money was not all that necessary because the political 
subdivision wasn't in all that hardship.
    For example, in the State of Arkansas--and I, you know, 
that is the one I pay attention to--it announced in April that 
the state had the largest month of revenue collection in its 
history--in its history. Revenue for the month of April up in a 
lot of states, every--while everyday families are suffering 
from high gas prices, other inflationary spirals, and this sort 
of thing.
    So, the larger question is--that is one example of how we 
put a bunch of money into the hands of a lot of governments.
    So, I guess my overarching question to you is, given the 
state of the federal debt, given the conditions we have with 
employment, with low unemployment and everybody has a help 
wanted sign in their window, with unprecedented inflation, 
should we not take a look at rescinding, clawing back some of 
these borrowed dollars that are still sitting in healthy 
balances in places where we have now created fights among 
political subdivisions as to how best to spend it for non-
COVID-related projects and issues?
    So, that is my question. Should we not take a look at 
clawing back some of this money, or using it as offsets?
    Ms. Young. I think you did a couple of times. And those 
proposals were rejected for one reason or another.
    You know, we, you and I went down memory lane the first, 
the first round of questions. Memory lane is more recent on 
this one. There have been efforts in Congress to rescind that 
money and use it for future pandemic needs which, you know, we 
are still seeking for vaccines and therapeutics.
    The Congress spoke. That money was deemed too important. 
And we, we live to discuss how to move forward on COVID without 
clawing back those state and open funds.
    We have been open in conversation about looking for other 
offsets in ARP and past COVID bills before ARP. Just so you 
know, we sent out balances recently: about 160 billion remains 
unobligated. Most of that is for multi-employer pensions. That 
is hard to rescind. The rest mostly consists of veterans' money 
for VA, and Disaster Relief Fund.
    So, as we have sought COVID, new COVID money for vaccines 
and therapeutics, while we don't believe that emergencies 
should be offset, this Administration has been willing, has 
worked with members on both side of the House and looked for 
adequate and acceptable offsets.
    And let me tell you, you run into stone walls when you say, 
What about disaster relief? No, we are entering hurricane 
season. We can't take from veterans. So, the pool is getting 
tighter and tighter.
    And by the way, state and local funding, while it is going 
out in tranches, it is still all obligated because we know 
where it is going.
    So, the pool of unobligated funding is shrinking as the 
days go on.
    Mr. Womack. I guess all I am asking is, as leaders, we are 
all leaders, and certainly from your position as the--and you 
have got the bully pulpit on the budget side because you are 
OMB--is to continue to help promote the notion that before we 
borrow more money for whatever is next, that we take a look at 
what is unobligated today and try to use it before we commit to 
other projects down the road.
    Anyway, that is, sometimes I wonder how many people truly 
care about passing on this debt situation to future 
generations. But when I look at my three grandsons in their 
eyes, and I see that they had nothing to do with creating the 
problem, but yet we are going to give them the opportunity to 
pay for it, I just think that is morally wrong on our part.
    So, just looking for some help and some leadership to help 
promote this thing.
    Ms. Young. We have been at the table, especially on the 
COVID relief funding. And as you have seen, we have been open 
to offsetting future pandemic funding needs. And we continue to 
not want to enter the fall with Americans without adequate 
vaccines and antivirals. So, we are willing partners to see 
what we can do to get that funding. And many have said offsets 
are necessary, so we continue to press that.
    Mr. Womack. Thank you.
    Mr. Quigley. Director, we have one last question.
    Lessons from the pandemic. Teleworking is going to be with 
us. Can we predict, or rationalize office space needs based on 
what we think needs are going to be, and perhaps reduce the 
burden we put on GSA in other areas?
    Ms. Young. I think we are going to, going to have to.
    I sit in a GSA building. Let me tell you, they have a lot 
on their plates. And I think this is an opportunity for 
agencies. And OMB, you are right, has a central role to this, 
to push agencies to really look at their future work.
    OMB is doing that internally and looking at what it looks 
like to work. Workers have options, as Ranking Member Womack 
pointed out. So, we have to stay competitive with the private 
sector.
    So, I think those things go hand in hand. What, what do we 
have to do to retain and get good staff? And I think that comes 
down to are we providing a flexible workplace? Are we hoteling? 
Do we have maximum telework?
    And those things should have savings in the space realm. 
So, I think it will help us in space, and retain and recruit 
the best federal workers.
    Mr. Quigley. Very good.
    I want to thank both ranking members and all those who 
participated.
    Director, I want to thank you for being here today, your 
staff's work, and your dedication to service. We look forward 
to working with you through this unique year of budgeting and 
appropriating.
    We are adjourned. Thank you.

                                           Wednesday, May 18, 2022.

                        INTERNAL REVENUE SERVICE

                                WITNESS

HON. CHARLES P. RETTIG, COMMISSIONER, INTERNAL REVENUE SERVICE
    Mr. Quigley. Good afternoon. This afternoon we welcome 
Charles Rettig, Commissioner of the Internal Revenue Service, 
to testify on the IRS fiscal year 2023 budget request.
    Commissioner, I know you've been making the rounds on 
Capitol Hill, and we are your fifth hearing this spring. We are 
pleased that you could fit us into your schedule.
    Since your term ends in November, this is conceivably your 
last time appearing before us as Commissioner of the IRS. If 
so, I would like to thank you for your public service.
    It is no small task to lead the IRS in normal times, but 
the last two years have been anything but normal. As a result 
of the pandemic, the IRS has had to deal with office closures 
that disrupted tax filing seasons, increased responsibility 
such as administering three rounds of economic stimulus 
payments, the new monthly Child Tax Credit and the creation of 
new portals and partnerships to increase customer outreach.
    Our time today provides us with an opportunity to focus on 
how we can work together to fulfill the IRS's mission to 
provide American taxpayers with top quality service and enforce 
tax laws with integrity and fairness for all.
    The IRS began the filing season with a historic backlog. 
Many taxpayers tried to call for assistance on how to properly 
file their returns only to turn away disappointed after being 
unable to reach anyone.
    Congress responded to this dire situation in the most 
recent appropriations bill by providing the IRS with additional 
funding to hire customer service representatives and special 
authorities to expedite hiring.
    I am pleased that the IRS is taking full advantage of this 
authority to bring aboard 10,000 new workers. I am eager to 
hear about the progress in meeting your recruiting goals and 
the impact this is having on reducing the backlog and improving 
customer service metrics.
    We understand, however, that this is just a down payment on 
restoring the IRS to where it needs to be after years of 
underfunding.
    The fiscal year 2023 IRS budget request is $6.3 billion for 
enforcement. This is an $835 million or 15 percent increase 
above the enacted level. These funds will make a dent in 
restoring critical enforcement staff, which has experienced a 
30 percent decrease in personnel.
    It is critical that the IRS has the skilled examiners, 
auditors and criminal investigators to ensure that everyone is 
paying their fair of taxes and wealthy individuals and 
corporations comply with the law. Doing so was also a key step 
toward reducing a tax gap that is estimated at over $600 
billion.
    I am happy to report that we recently secured $52 million 
in the Ukraine supplemental to support the Treasury 
Department's work to trace financial activities associated with 
Russian oligarchs. I am eager to discuss the IRS' progress in 
this area and what more we can do to adequately fund this 
division.
    I know the IRS also had critical long-term initiatives 
including the 6-year Integrated Business Systems Modernization 
Plan, a roadmap to modernize and retire its legacy IT systems. 
And the Taxpayer First Act includes 45 provisions, including 
specific mandates to improve the taxpayer experience that will 
take years to fully implement.
    Progress in this area may have been interrupted because of 
the pandemic, but I hope these mandates are not overlooked and 
remain priorities.
    Lastly, I want to take this time to thank the hardworking 
staff at the IRS for their continued commitment, expertise, and 
dedication to the IRS's mission. I know the last two years have 
not been easy, and we look forward to hearing about IRS's 
progress.
    Once again, thank you Commissioner for joining us this 
afternoon. And I now turn to the ranking member, Mr. Womack, 
for his opening remarks.
    Mr. Womack. Thank you, Chairman Quigley. Welcome back to 
the committee, Commissioner. Always good to see you. Thank you 
for your service.
    I want to acknowledge your work and the employees that 
serve under you. And I say that sincerely. We have been through 
a couple of really tough years. And I know I am preaching to 
the choir. But, you know, anytime you've got, you know, a group 
of dedicated people like you have at the agency that are 
looking after the demands of your office, it means a lot to me. 
And I want them to know that. And I know there will probably be 
some of them watching the proceedings here today, and they need 
to hear it from guys like me and Mike Quigley that we 
appreciate them because we really do.
    And as you said, getting multiple economic relief payments, 
implementing new Tax Code changes and the various COVID relief 
bills, dealing with the impact of COVID on your staff and their 
families, a lot of challenges.
    Completing your core mission, however, has suffered as a 
result of that and, of course, you had millions of unprocessed 
paper returns, amended returns, and returns under review going 
into this tax filing season, and that's always a difficult 
thing to execute.
    I know the administration will say that years of budget 
cuts have hurt the IRS. It is true that during the Obama 
administration, when the Senate was controlled by Democrats, 
IRS appropriations were significantly reduced. However, for the 
past three years, the IRS has received significant resources.
    Fiscal 2020, more than $200 million increase in 
discretionary appropriations, $766 million in supplemental 
funds. Fiscal 2021, more than $400 million in discretionary 
appropriations and $2.4 billion in supplemental, more than a 
billion from the American Rescue Plan still available at the 
start of the fiscal year.
    In fiscal 2022, the IRS received a $675 million increase 
with an emphasis on reducing the backlog, including a 9 percent 
increase in the taxpayer services appropriation, authority to 
transfer funds from enforcement and operations to address the 
backlog, and, of course, direct hiring authority, which we're 
going to be anxious to hear how that has helped you solve some 
of these pressing issues.
    Regarding your fiscal 2023 request, before I consider 
providing additional funding, I would like to see that the 
significant funding you have already received has been 
successfully and appropriately utilized, specifically headway 
on getting the backlog of last year eliminated, the amount of 
additional phone calls answered, and the IRS using enhanced 
technology to assist taxpayers and improve staff efficiency.
    On another note, the administration's recently proposed 
Build Back Better Plan would have provided the IRS with nearly 
$80 billion to hire more than 85,000 additional staff over 10 
years.
    While I recognize the IRS staff has been overtaxed these 
past couple of years, I am currently opposed to providing the 
IRS or any other agency with a blank check of mandatory funding 
to more than double the size of their operations. I know that 
the administration will say the IRS needs sustainable multiyear 
funding. I agree.
    In recent years, the appropriations process has resulted in 
CR after CR or omnibus packages enacted months after the start 
of the fiscal year. No reputable business or government agency 
should operate that way. It hurts every agency across the 
government, including the military, the FBI, and the Small 
Business Administration, not just the Internal Revenue Service.
    I've called for reforms to the process to help get our 
bills enacted on time and provide more certainty for agency 
budgets across the government. However, I do not believe 
providing excessive amounts of mandatory funding outside the 
appropriations process is an effective solution to the 
challenges we face.
    Commissioner Rettig, you have a very challenging job. I 
know that you and your team are committed to improving the 
agency. I look forward to hearing how you plan to enhance the 
service provided to American taxpayers. And I can assure you 
this. I will work with Chairman Quigley to ensure that you have 
an appropriate level of resources in fiscal 2023. And with 
that, I yield back my time.
    Mr. Quigley. Thank you, Mr. Womack.
    Commissioner, again, thank you for being here today. 
Without objection, your full written testimony will be entered 
into the record. And with that in mind, we would ask you to 
please summarize your opening statement in five minutes.
    Mr. Rettig. Thank you, Chairman Quigley, Ranking Member 
Womack and members of the Subcommittee. Thank you for the 
opportunity to discuss the current IRS operations, the funding 
request for fiscal year 2023 and obviously any other issues or 
comments that you might want to discuss.
    As you know, fiscal year 2021 gross receipts to the IRS 
were approximately $4.1 trillion, which represents 
approximately 96 percent of the gross receipts of the United 
States of America. A successful, fully functioning IRS is 
important to the continued success of the country.
    We have been at the forefront of successfully providing 
rapid economic relief to taxpayers, including issuing more than 
$1.5 trillion in combined historic economic relief in 
individual refunds during the pandemic.
    The President's fiscal year 2023 budget request proposal is 
for the IRS to receive $14.1 billion, which would allow the 
Agency to take important steps forward in improving taxpayer 
service, modernizing our systems, ensuring fairness in the tax 
law, and earning the trust and respect of every American.
    The President's proposal supports fair and equitable tax 
administration for all Americans, increased oversight of high 
wealth individuals, ensures our efforts to ensure that we stay 
current with the paper inventory that I am sure we are going to 
discuss today, and initiatives to accelerate the development of 
digital tools on behalf of taxpayers improving taxpayer service 
in our interactions with everybody.
    As you know, the Internal Revenue Service interacts with 
more Americans than any other public or private organization on 
earth. It is important, and it is important to the success of 
this country.
    With the signing of the recent omnibus legislation 
providing for our fiscal year 2022 budget, we adjusted our 
American Rescue Plan spend plan, which had been delivered to 
the Committees on February 12th, for funds received under the 
ARP and funds received under the omnibus.
    As of May 10, we have obligated $984 million of the three-
year ARP funds to maximize taxpayer service, including 
responding to taxpayer questions about Economic Impact 
Payments, Advance Child Tax Credit payments, and modernizing 
our technology.
    Taxpayer service remains the most significant priority of 
the Internal Revenue Service and of every employee at the 
Internal Revenue Service.
    Using funds provided by Congress, including ARP, we have 
implemented many new innovative strategies. We have reduced our 
unprecedented current and projected inventories. We are on 
target to get healthy by the end of this tax year. But we need 
to do more. We know it, and you know it.
    And when it comes to the funding, I have to say I go back 
to my confirmation hearing. I invited oversight at my 
confirmation hearing in front of the Senate Finance Committee 
and in most every hearing since then, and I believe every 
commissioner should and would invite oversight.
    We are in this together. It is not just the IRS. Tax 
administration in this country is a privilege for all of us, 
including members of Congress, including taxpayers, including 
tax professionals, and obviously including members of the 
government.
    While I won't go into detail because I think that all of 
your staff have been briefed, the 2022 filing season by and 
large went smooth. It was exceptionally smooth with respect to 
individuals who electronically filed an accurate return 
requesting a direct deposit of their refund. We continued to 
get those refunds deposited within 21 days. In many cases, the 
refunds were deposited within 3 or 4 days.
    Paper returns continue to be an issue for the Internal 
Revenue Service. We did a lot of messaging out to taxpayers 
trying to get them into preparing and filing an electronic 
return. From what we see year-to-date 2022 to 2021, these 
efforts have been successful. Our projections were higher than 
what we are seeing so we will get into that.
    Through May 6, we processed more than 138 million returns, 
issued more than 94 million refunds totaling more than $285 
billion to individuals in this country.
    Our mitigation efforts are making a difference and our 
inventories are trending in a good direction. We're working to 
make sure that IRS inventories get back to normal by the end of 
this year. The terminology you will hear me and others use is 
``get healthy,'' which is through the eyes of the taxpayer, 
meeting their expectations for our efforts.
    Almost every Commissioner over the past few decades has 
stated that inconsistent funding is among the most frustrating 
experiences, that they can have. Americans deserve a fully 
functioning, successful Internal Revenue Service. We look 
forward to working with your Committee and providing whatever 
information, as often as you want. I am available. The rest of 
our Agency is available. We will be where you want us to be to 
assist you in the process of determining the appropriate 
appropriations for the Internal Revenue Service for fiscal year 
2023.
    With that I conclude my statement and look forward to your 
questions.
    Mr. Quigley. Thank you Commissioner. Before we begin with 
questions, House rules require me to remind you that we have 
set up an email address to which members can send anything they 
wish to submit in writing at any of our hearings or markups. 
That email address has been provided in advance to your staff. 
We will begin with questions.
    Commissioner, I know the IRS Criminal Investigations 
Division is part of the special task force set up by the 
President to help trace Russian financial activities. Can you 
explain their unique role in going after Russian oligarchs who 
evade U.S. sanctions and are they partnering with other law 
enforcement agencies?
    Mr. Rettig. The IRS Criminal Investigation Division and the 
individuals on the front lines are referred to as Special 
Agents. IRS Criminal Investigation Special Agents are the 
absolute best financial investigators on the planet, bar none, 
any country--our country, any other country, bar none.
    We have been tasked as part of, the KleptoCapture Task 
Force to go after resources and assets, both real and 
financial, belonging to sanctioned individuals.
    We have not yet received the funding for that task but that 
didn't slow us up. We started in March. We're aggressively 
doing what we're capable of doing. We will get the job done in 
that space.
    We are actively tracing cryptocurrency transactions, 
identifying digital assets of the sanctioned individuals and 
entities. We have already successfully identified both real and 
financial hidden assets. We have discovered cryptocurrency 
transactions. We have contributed to the Specially Designated 
Nationals and blocked persons list. We currently have 25 active 
investigations within this particular space.
    We are also working to investigate, disrupt and dismantle 
the efforts of the sanctioned individuals and entities blocking 
their efforts. When it is public knowledge that the sanctions 
are out there, when they know that countries like the United 
States are coming, they try to move the assets, and we are 
trying to get ahead of the efforts and block those efforts 
around the world.
    We are working with international law enforcement partners, 
which we have an ongoing relationship with throughout the 
world. This is the space that the IRS Criminal Investigation 
functions in and the cyber teams within IRS CI lead the world. 
There is a lot that we could go through to give you the 
examples.
    I think the people of this country should be comfortable 
that the Agency and in particular IRS Criminal Investigation, 
tasked with this work is the best. We will get our job done. We 
would appreciate funding, but we will get our job done.
    Mr. Quigley. Let's talk about the funding. Can you explain 
priorities and allocation of the House included money and the 
supplemental, Ukraine supplemental, to the Treasury relating to 
this, to trace Russian financial activities and then the fiscal 
year 2023 budget request for Criminal Investigation Division, a 
$785 million, 18 percent increase, above 2022. Why is more than 
$5 billion requested for enforcement dedicated to the Criminal 
Investigations Division? To your understanding, how will this 
play out to get the resources you need?
    Mr. Rettig. The Criminal Investigation staff are federal 
law enforcement officers. They get trained through the Federal 
Law Enforcement Training Center down in Georgia. We push as 
many people through that, called FLETC, program as we can so we 
try to maximize the number of special agents that we have. We 
are down about 25 percent on field special agents over the last 
10 years.
    You all know my background before I came on board at the 
Internal Revenue Service, and I think that one of the most 
important functions of the Internal Revenue Service, is 
Criminal Investigation, whether it is an illegal source income, 
whether it is in narcotics-related income, financial crimes or 
also traditional crimes, they help keep the taxpayer more 
honest, and they are important for us. Their activities do not 
become visible until there might be an indictment or such.
    Getting appropriate funding for Criminal Investigation is 
important, but there is an absorption issue. When we ask for 
money through Treasury, it is based on what CI is able to 
onboard and train.
    As you indicated Mr. Chair, my term expires at the end of 
this year, and it is something that I would ask every Member of 
Congress to keep an eye on. It is how we can expand not only 
the workforce within IRS Criminal Investigation but also, the 
tools and techniques. They are at the forefront of protecting 
our country in all these spaces, both legal and illegal sources 
and are critical.
    I think being called upon with respect to the Russian 
sanctions and the oligarchs is an example of why we need to be 
ready. The agency, whether it is IRS CI or whether it is the 
rest of the agency, needs to be prepared for the next crisis. 
Is it the Russian oligarchs? Is it the pandemic? Is it 
something that we don't know of yet today? That's where the 
funding and oversight in my mind come together.
    Mr. Quigley. Thank you. Mr. Womack.
    Mr. Womack. In our conversation this week, you indicated 
that it looks like we are at about 95 percent E-filers right 
now, which is up but still not where it ought to be. We are in 
the 21st century.
    You would think that based on those extraordinary payouts 
that were going to taxpayers that there would have been a lot 
of motivation for those who were paper filers to get it done 
electronically. Is it still surprising to you that there are so 
many people out there that just simply are stuck in the former 
technology?
    Mr. Rettig. There are a few forms that we need to get to 
the point where people can E-file. So, a very small percentage 
of the folks who paper file have forms that cannot be E-filed. 
But in terms of the availability and access to E-filing for 
literally every American, there is the Free File program, the 
other commercial filing programs, and the VITA sites and Tax 
Counseling for the Elderly sites around the country, which are 
pro bono in their communities. Many operate at libraries and 
people have access to it.
    I don't have the answer as to why people continue to file 
on paper, and I particularly don't have the answer during the 
pandemic when we thought we did a good job telegraphing if you 
E-file your refund the check would be issued quickly. But if 
you give us direct deposit information, we can do that in days. 
And we continued that process during 2020, 2021 and into 2022. 
That process continued smoothly.
    Mr. Womack. How can we help you in this regard? What can 
Congress do?
    Mr. Rettig. You got us to where we are with E-filing. It 
started in about 1990. There were incentives to get people to 
electronically file. We need to continue the messaging. And it 
is not typically in underserved communities. We are pretty good 
in our interactions in those communities. Proudly, we are on 
the ground in underserved communities around the country. When 
I came onboard, we had relationships with about 3,000 community 
organizations. We now have relationships with about 18,000 
community organizations. We now have relationships with 13,000 
public school districts around the country. We get our 
information proudly into those arenas.
    If we could get to a version of where a possible mandatory 
E-file, now keeping in mind we have people who do not have 
broadband. We have rural communities, et cetera. I will say in 
the last few years the IRS, and this I give to the employees, 
we significantly expanded our multicultural, multilingual 
outreach. The Form 1040 for the first time in history for 2020 
and 2021 is in Spanish. We have gone way out in those regards. 
I don't see it as an inability to contact some of the 
communities that might historically have been more on paper. I 
think it is more the mainstream folks.
    Mr. Womack. But it is to their advantage.
    Mr. Rettig. On the outside I ran into people who filed on 
paper, and when I asked why there is a wrong belief that we 
audit fewer paper returns. Let me, for the record, say that 
belief is not accurate. We do not distinguish between 
electronic filing and paper filing on what might come out in 
the audit process.
    Mr. Womack. We talked about backlog. And you said in your 
opening that your get healthy, get well date is toward the end 
of this year. Are we making regular incremental progress on the 
subject?
    Mr. Rettig. We are. Chuck Rettig is committed to you, and I 
think I said this to you on the phone, the IRS Commissioner 
Chuck Rettig is committed to you and to the American public 
that we will be healthy by the end of this year.
    An example I can give you--when I say we are trending in 
the right direction, you may want to say, show us some data, 
give us where you are.
    Year-to-date on what we refer to as Error Resolution cases, 
which is really where a taxpayer maybe couldn't appropriately 
reconcile two Economic Impact Payments or the Advance Child Tax 
Credit payments and those returns kicked out of the system 
required a manual review--as of April 28th in error resolution, 
we had 1.5 million individual matters this year.
    Last year, same time year-to-date, we had 8.8 million. The 
volumes are going down. We did get a spike, as we would expect, 
around April 15 and a little bit beyond that, but this was 
anticipated because a lot of people file at or about the filing 
deadline. The numbers are definitely trending in the right 
direction. I will commit to each of you that if we see a change 
in this direction, you will hear from me.
    Mr. Womack. Thank you.
    Mr. Quigley. I see we are joined by the Chairwoman of the 
full committee, Ms. DeLauro. She is recognized for questions.
    The Chair. Thank you so much, Mr. Chairman, and I thank my 
colleagues on the committee. Commissioner Rettig, first of all 
let me just say an unequivocal thank you to you and to the IRS 
staff. You all did unbelievable work last year. You distributed 
more than $200 million monthly child tax credit payments, $93 
billion. This was to children and their families from July 
through December of last year.
    I know at the outset there was a lot of concern and that 
people did not feel that this could happen and that the agency 
would not be able to deliver these monthly payments. But you 
did it. You did it successfully, and I want to congratulate you 
on that.
    And I am not alone in saying how many constituents come up 
to me and talk about the impact of the monthly Child Tax Credit 
payments, the impact on their families, a game changer, a life 
line to middle class families, to working families and to the 
most vulnerable families. And I am going to continue to work 
with my colleagues to make the monthly expanded child tax 
credit permanent.
    And before I get to my questions, I would like to make a 
brief PSA, a public service announcements, that families that 
do not usually file taxes can visit getctc.org online to claim 
their Child Tax Credit, the Child Tax Credit for January to 
June. They need to be able to collect that.
    My questions quickly, how fast can the IRS resume the CTC 
monthly distribution program if it were included in future 
legislation? What improvements could be made with outreach to 
ensure more families are receiving the Child Tax Credit?
    Mr. Rettig. The system that we have in place that we did 
the six monthly payments--and by the way thank you for your 
comments. They are very well received. And, as well, thank you 
for appearing at one of our Taxpayer Assistance Centers when we 
had a public day. So I appreciate that. I am not going to 
mention the pizzas, but I think you know what I mean.
    Those efforts are not lost on me, nor are they lost on our 
employees. The system we have in place for the six monthly 
payments would need to be adjusted if it was to be made 
permanent. It would be different. So, it would not be an 
instant change. But IRS employees are resilient. They rise to 
the challenges.
    I would tell you that we would get it up to speed and start 
issuing those payments faster than any other federal agency 
could do it. Our IT folks, our technology folks and our 
operating divisions who do this, this is what they do.
    I think evidence of that is that we did those six monthly 
payments. We did the three rounds of Economic Impact Payments 
in two weeks, 48 hours and 24 hours. And I don't think anybody 
else has the talent pool that would match us.
    We would need to see what is passed as to what adjustments 
are there. I am not hedging on the answer with you, but I would 
commit to you and pledge to you that myself and the IRS would 
get that up to speed as quickly as possible. If there is 
legislation pending, I think you are fully aware we would very 
much appreciate the opportunity to participate in helping make 
that legislation administrable as opposed to getting 
legislation that is difficult to administer and that would 
impact the timing as well.
    The Chair. Well, I'm so much appreciative of--and the other 
piece of this is how can we--and you might mention your 
outreach efforts here, and how then can we--how can we deal 
with further outreach efforts to ensure that more families 
receive that Child Tax Credit?
    Mr. Rettig. I think the employees of the IRS and myself, we 
have greatly, I indicated, expanded our outreach efforts both 
on the ground, virtual and otherwise. I earlier said we have 
relationships with more than 18,000 community organizations. We 
also have a relationship with ethnic media outlets, and we do 
interact with more than 150 different ethnic media markets 
around the country.
    These relationships did not exist--and this is not 
attributed to me, it's really because of the EIP--but they did 
not exist when I came onboard. Our employees have aggressively 
been going out to try to get to the communities.
    Our movement in the languages that I mentioned earlier has 
really opened doors for us in a lot of communities. We have a 
lot of employees who are from these communities and go back 
into the community. They are going into where they live and 
distributing flyers. I think that you are aware that on the 
EIP, we distributed the EIP outreach material for EIP 1 in 35 
different languages.
    I know that when I came onboard we more or less did 
activities in four languages. So, you all can make a 
difference. I'm looking at the staff in the room, you all can 
make a difference. Can one person make a difference? My 
challenge and my encouragement is for everybody here to carry 
on with this after the expiration of my term.
    The Chair. Well, listen, please, let's continue to be in 
touch. And I know the chair of the committee, the subcommittee, 
is as anxious as I am. We want to make sure that you have the 
resources that you need as you deal with enforcement, as you 
have been collecting taxes but also as to how in fact we can 
make this tax credit, and as I said I'll continue to pursue the 
extension of it, of making it permanent.
    And the monthly basis has been a godsend to people. No one 
pays their bills on a yearly basis. They pay them on a monthly 
basis. And all the information coming to us has shown that 
quite honestly this has been--I have never seen a federal 
program that has resulted in so much success in such a short 
period of time.
    And you and the IRS have been instrumental in making that 
happen. We have really lifted over 3 million youngsters out of 
poverty. And it is not--what we don't want to do is we see the 
numbers on poverty. They are up in January. What we don't want 
to do is to throw these folks back into poverty. And this Child 
Tax Credit is the biggest middle income tax cut to people in 
history. And so we want to make sure that we have the delivery 
capacity of it. So thank you so much for the work of yourself 
and your staff.
    Mr. Rettig. If you pass the law, we'll implement it. We got 
it.
    The Chair. Hear, hear. Thank you. Thank you for that 
attitude. Appreciate it. Thanks so much. And I want to say a 
thank you to the chairman for allowing my participation. Thank 
you so much.
    Mr. Quigley. Thank you. Mr. Stewart is recognized.
    Mr. Stewart. Thank you, Chairman. Thanks, Commissioner for 
being with us. I have respected your work. I'm familiar with 
your work. One thing I want to recognize you for, for example, 
previous to your work as commissioner some of the philanthropic 
work you have done, especially as a former Air Force pilot, a 
veteran. I love the work you did with the Vets Count at UCLA 
and some of the other things. So thanks for that.
    The second thing is I am making this point before I lead to 
my question, trust in the IRS is essential for the work that 
you do and just actually for any of this process to work. Tax 
compliance is essentially a volunteer proposal.
    Now I know there are enforcement mechanisms and if people 
cheat you will seek to find them and to prosecute them. But for 
the vast majority of Americans, it comes down to this. They 
recognize the federal government needs money. They hope that 
the IRS is fair. They hope that they are ethical. And they hope 
that they will be treated the same regardless of their 
background or their political beliefs.
    And I know that you would agree with that. I won't take the 
time to ask you to reply. I mean, it is essential that we 
maintain trust in the IRS. And the average American just feels 
like, yeah, I don't like paying taxes, but I recognize I have 
to in order to live in this great country.
    I would read you four or five names. And I know these would 
be familiar with you. I'll start with President Trump, Jeff 
Bezos, with Warren Buffet, Mr. Zuckerberg, Mr. Murdock, there 
are a number of others. And those are just some that we know 
about whose tax returns or portions of their tax returns were 
deliberately leaked by obviously an IRS employee and clearly 
leaked for really raw political purposes.
    Coming back to this idea of how essential trust is, I would 
ask you, have these leaks been investigated? How serious do you 
view them? And if you view them seriously, what efforts have 
you taken to prosecute and have any people been held to account 
for this?
    And, Commissioner, I would ask you to be brief in your 
response because there is one other issue I do want to talk to 
you about in the limited time I have, but representing just 
normal Americans, this such a critical question. I feel like it 
has to be asked and presented to you.
    Mr. Rettig. As you know, I can't speak to any individual 
taxpayers, but as to the information mentioned there, that is 
being investigated by TIGTA. That information was published one 
morning, and within an hour, I reached out directly to the 
Director of TIGTA. TIGTA confirmed at that point that they are 
conducting an investigation.
    The Secretary, on the same day was testifying, I believe, 
and indicated that the U.S. Attorney's Office for the District 
of Columbia, the FBI, as well as TIGTA were also investigating. 
Appropriately so, somebody outside of the Agency investigates 
what may or may not have happened in the Agency.
    I don't believe that there has been any information 
indicating that it was leaked by an IRS employee. But those 
investigations are ongoing. I would suggest that people that 
have questions reach out to TIGTA. I believe TIGTA has briefed 
some folks on the Hill.
    Moving to the other side, as to leaks of information and 
trust in the IRS, the IRS takes this seriously. It is probably 
the highest priority of every person at the IRS, which is to 
maintain the confidential nature and private nature of 
information that people give us as well as that people are 
required to give us.
    And, to me, both as Chuck Rettig and as Commissioner, at 
the end of the day, you referenced about prosecuting this. The 
IRS is an investigative agency. I fully believe that the 
appropriate individuals, if it can be determined that a crime 
was committed and, I am not hedging on that, I'm just telling 
you the sort of public approach to these kinds of things, I 
fully believe that the individuals should be prosecuted to the 
fullest extent of the law. This goes to the core of what we 
consider to be tax administration, people filing with us. I am 
cutting off because you asked to preserve some time. But I hope 
you get my passion on that, right?
    Mr. Stewart. I do. And I appreciate that. But, I mean, I 
hope you understand as well that a lot of Americans feel like, 
hey, there are rules and law that apply to me and then there 
are rules and laws that seem to apply to other people or in 
this case not to apply. And I know in some of these cases where 
more than two years past the event and yet so far as I know, 
there has been no announcement or anyone prosecuted, anyone 
charged with these, it seems to be, criminal activity very 
clearly and that breaks down that faith in the rule of law.
    Let me, Commissioner, if I could, I want to come back to my 
original opening statement of a concern I have, and I will have 
to pursue this either in a private conversation with you or 
perhaps in writing. And that is the IRS' intention to, you 
know, take financial transactions on Venmo and PayPal. I would 
imagine the vast majority of which are just people, you know, 
sharing the cost of a meal or sharing the cost of a vacation or 
whatever it might be, and then to put a $600 limit on that and 
to investigate some of those and to require additional 1099-Ks 
for every transaction greater than that, I mean, I cannot 
imagine the number of people that are going to be confused. 
They are going to be caught in this web, unsure of what to do, 
unsure of how to get an answer from the IRS.
    It seems incredibly intrusive for something that is meant 
to be--you know, ease financial transactions, not to be a tax 
event. I am out of time. I would like to follow-up with you on 
that though and look forward to your conversation.
    Mr. Rettig. Thank you.
    Mr. Quigley. Thank you. Mr. Bishop is recognized.
    Mr. Bishop. Thank you very much. I am going to be brief. I 
want to ask four questions. First off, many of my constituents 
in rural areas don't have access to high speed internet, and so 
they have to file their returns by paper. And according to an 
NBC report, paper returns will take five to eight months to 
process, which is unacceptable, particularly for people who 
need those refunds.
    So can you tell me what you are going to be able to do to 
expedite that?
    Second, I want to ask you about the Intuit settlement. The 
sum of $141 million was agreed to for a settlement for injuries 
for low income toward their paid products and away from the 
free tax prep as provided by the IRS. Can you tell me how and 
when the taxpayers who would have been eligible for the IRS' 
free tax service will be compensated and how will they be 
notified? I think that's about $4 million out of the $141 
million total that's due for people in Georgia.
    And the third question, we're still getting complaints 
about the IRS not answering the phones and not being able to 
talk to anybody about questions and having appointments 
cancelled and not having people in the offices for walk-ins. 
When and how is that going to be dealt with?
     And finally the tax gap, with the $600 billion annually 
and $7 trillion in lost revenue over the next decades, what are 
we going to be able to do to collect that? And if we are able 
to do it, will the resources that we are making available help 
you to accomplish that? And if you could sort of touch on 
those, I would be most appreciative.
    Mr. Rettig. I will. I also want to assure you and all of 
the other members of the Subcommittee that I am available to 
meet with you personally as well as our folks are available to 
meet with you.
    As to constituent issues, if we can coordinate a call or a 
meeting where you have waivers allowing us to discuss the 
matter with you, we can probably identify matters and where 
they are in the process for all of your constituents.
    As to the paper issues, I am very familiar with your 
district. I am a military family. I have a son who is a Major 
Medical Officer at Fort Benning and have been into your 
district more than a few times, I am proud to say.
    As to the paper issues, it's pretty public. We have surge 
teams. We brought in contractors. We are processing paper as 
quickly as we can. We are committed to what we call ``getting 
healthy'' by the end of calendar year 2022, which is this year. 
The importance of that is ``getting healthly'' before we go 
into the filing season for it next year.
    We have encouraged folks to file electronically. There are 
people for a variety of reasons that filed on paper. Part of 
the funding request is to increase our Taxpayer Assistance 
Centers staffing. It is in the fiscal 2023 funding request to 
actually put three people in each of our 358 taxpayer 
assistance centers, which could help a lot of these problems. 
These are walk-in centers where people can actually do an 
appointment or walk-in without an appointment.
    The fact is more than half the people who call into our 
centers requesting an appointment get their matter resolved on 
that particular phone call. If you have people with unresolved 
matters, we can coordinate to discuss that separately.
    As to the Intuit settlement, the IRS is not part of the 
Intuit settlement. That was between the 50 states and Intuit, 
and the terms of the settlement are not something that IRS is a 
party to. I can't really speak to the timing of that piece.
    As to the tax gap, I was focused on the tax gap before I 
came onboard. It's a combination of education, outreach, and 
helping compliant taxpayers. Enforcement supports compliant 
taxpayers, reassures them that they know they are doing the 
right thing. And this is really a funding and budget issue.
    On the enforcement side, we are down about 17,000 
enforcement personnel since FY 2010. The attrition rates for 
our experienced front line field revenue agents are the highest 
in our agency. As you would imagine, it takes somebody a while 
to get the experience to be in that position.
    To just give you one sense of the volume that we deal with, 
I have 6,500 front line field revenue agents to handle the 
complex examinations. Last year, we got over 4 million 
partnership returns. That's a single lane.
    If we put all 6,500 revenue agents on that, we still would 
not have a significant impact. These same folks have to go 
after the bigs, the super bigs, the complex transactions for 
individuals in closely held businesses.
    Mr. Bishop. Thank you very much, Commissioner. My time has 
expired. And thank you for expediting your answers. I think you 
covered everything.
    Mr. Rettig. I tried. I'm not the most concise speaker. I'm 
working on that. Four years in, I'm trying.
    Mr. Bishop. Thank you.
    Mr. Quigley. Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chair. Commissioner Rettig, nice 
to see you again.
    Mr. Rettig. Nice to see you.
    Mr. Joyce. And I'm going to ask you some questions and then 
I'm going to leave. And I apologize for that ahead of time, but 
I have another hearing that I have to be the ranking member at 
2 o'clock.
    Mr. Rettig. It's just like at home. My wife asks and 
assumes I am going to answer. I'm with you on that.
    Mr. Joyce. Okay. I understand the pandemic has created 
challenges for the IRS. And you've worked hard to reduce the 
significant backlogs, which created delays for American 
taxpayers.
    Can you speak about the lessons learned at your agency over 
the last several years which might help you permanently 
eliminate those backlogs so Americans no longer face problems 
and delays processing their tax information with the IRS?
    Mr. Rettig. Okay. I thought you were going to ask me 
questions and take off, so I get it.
    In terms of lessons learned, one thing that we did was 
issue 257 million letters to taxpayers reconciling their 
Economic Impact Payments as well as their Advance Child Tax 
Credit payments because we had more than, I think about 13 
million individuals a year ago that couldn't reconcile two 
payments. When they come into our system electronically, those 
get kicked out to manual processing.
    Lessons learned for us was to get that information to 
people upfront and also to advise people that they could go to 
their online account to verify these numbers. Having the return 
be electronically filed, having it be accurate and having them 
request a refund in direct deposit is critical to move through 
our electronic systems quickly. Where we can and get people off 
paper. It has been really significant. I would say if there was 
one arena that was maybe the most significant for us that that 
was it.
    The other part of it is we did use our funding to 
modernize, in the same lane, a portion of this process where we 
had the manual review and an individual IRS employee could do 
100 a day. We have modernized three of 20 steps that that 
employee would have to do. Now that employee does thousands per 
day. As you can imagine, that's taking care of the inventories.
    Having people interact with us and having us be on the 
streets in the communities, we are still a people-oriented 
organization. Our employees are proud to be in those streets. 
Speaking after my term, I think it would be remiss if the 
Agency flipped to an entirely technology driven organization. 
That is not reflective of the country we live in.
    I will also say and I mentioned earlier that for the first 
time in history the Form 1040 is in a language other than 
English. It is in Spanish. You can call in to our systems. We 
have over 350 different languages available for interpretive 
services, and last year over 90 million page visits on our non-
English speaking pages. That's another area where people are 
trying to get it right. It is up to us to get into their 
community and the language they are most comfortable in. We are 
not done, but we have done well in that.
    Mr. Joyce. How do millions of American individuals and 
businesses trust some of their most private and valuable 
information to the IRS each year? You have got the IRS that has 
come under repeat criticism for struggling to modernize its 
technology and respond to cybersecurity risks.
    The Treasury Inspector General report from December 
indicates that these issues persist. The IG gave a mixed 
evaluation of IRS progress on technology and cybersecurity 
problems.
    Congress appropriated an extra $1 billion in the American 
Rescue Plan to help fund modernization of IRS technology and 
security. How is the IRS using this extra money and what 
progress is being made under the IRS modernization plan and why 
have these inadequacies persisted for so long?
    Mr. Rettig. I would take exception to anybody believing 
that we have vulnerabilities in the cyber space. You know that 
we receive about 1.4 to 1.5 billion sophisticated cyber attacks 
per year, which are not from 8-year-old children. These are 
from nation states that you and I both know. You're not seeing 
that they're getting into our systems.
    I think it is a disparagement to our employee's efforts, to 
the quality of the people that we have online 24/7, and they do 
work 24/7 in this space. I'm not speaking to you, sir. I'm just 
saying in general. I'm on the inside. I see what we have.
    TIGTA can certainly step in and say, you need to square off 
this corner as opposed to how it looks today. A million dollars 
when we're going up against nation states around the world, 
1.4-1.6 billion times per year, millions of times per day, I 
think that the employees of the IRS in this particular space 
should really be congratulated for their efforts and where they 
are--you know, there are certain things I can't say in a public 
hearing, right?
    Mr. Joyce. Oh, yeah, and it didn't come from me, sir. It's 
coming from the Inspector General.
    Mr. Rettig. No, no. And that's why--I saw you look at me, 
like, ``hey, what are you doing?'' So, that's why I said, you 
know.
    Mr. Joyce. And lastly, quick, I know I don't have much time 
left. Does the IRS plan to release further details as to how 
the cyber, crypto and then blockchain technology, how you are 
going to get the guidance from you on how you are interpreting 
that--what department or broker is with respect to digital 
assets and cryptocurrency industry was weighed in?
    Mr. Rettig. The entire virtual currency world is moving 
faster than the rest of the world.
    Mr. Joyce. Sure.
    Mr. Rettig. Quite frankly. You know, then some----
    Mr. Joyce. You're getting attacked on one end and you're 
getting----
    Mr. Rettig. Exactly.
    Mr. Joyce [continuing]. Attacked on the other.
    Mr. Rettig. The answer is we have to. We have to get out 
there. We have to give the appropriate guidance where it's 
necessary. The other side of that is that we added to the 
income tax return. I think it was for 2019, for 2020 and for 
2021. Have you had any transactions? That's a yes/no question. 
That's not a difficult tax question. The people who answered no 
where they do have those transactions should be concerned.
    Mr. Joyce. Thank you for your time. I yield back, Mr. 
Chairman.
    Mr. Quigley. Thank you. Mr. Pocan.
    Mr. Pocan. Thank you very much, Mr. Chairman, and thank 
you, Commissioner Rettig, for being here and, you know, thank 
you to all the people who work at the IRS who have been doing 
an awful lot of work, especially given COVID, a lot of extra 
programming and definitely you have had insufficient resources 
to do much of what you needed to do.
    Let me dig a little deeper into Mr. Bishop's last question 
about audit rates and the tax gap. You know, I know you 
mentioned the lack of employees. And I understand that. But it 
is estimated that the U.S. is losing about $547 billion per 
year through unpaid taxes. And we also know that high income 
taxpayers are responsible for much more of that unpaid tax than 
lower wage earner, whose income is easier for the IRS to 
monitor.
    What I am concerned about is that recent data shows the IRS 
is auditing low income people at a rate of 13.5 per thousand up 
from 13 per thousand and that is compared to a rate of 2.2 
thousand for other individuals.
    I guess my questions are, can you assure us that any 
increases for budget would be used to ensure that the 
wealthiest and corporations are paying their fair share and not 
just continuing going after the easier low income individuals? 
And how can that additional money help you go after those 
specifically?
    Mr. Rettig. I first would appreciate the opportunity to 
meet with you at your convenience in your office on the phone 
or on Zoom to go through what is wrong with the figures that 
came out.
    GAO issued a report yesterday that confirms that the IRS 
audits high income individuals far more than all lower income 
individuals, as a percentage of the people who come in.
    The other part is, can I assure you that any resources the 
IRS might receive will be focused on higher income individuals, 
more complex transactions, the big and super big corporations? 
Absolutely. That is where all our experienced revenue agents 
are currently. Those are the people that we are trying to 
expand and to go into that direction.
    The only reason the Internal Revenue Service looks at lower 
income individuals deals with IPERA. We have been trying to get 
the improper payment rates associated with the EITCs out of 
IPERA since long before I came onboard. The effort is to try to 
ensure compliance for everyone at the higher income levels. The 
administration has requested that specifically. I think 
everybody inside the IRS is interested in that.
    We need experienced technical agents to be able to get into 
those spaces and figure out where to audit and--as important, 
as where not to audit. We are using a lot of artificial 
intelligence data. We have a lot of analysts in our return 
selection process in the higher income areas. You should expect 
us to continue to do so and again, beyond my term, hold the 
agency accountable for that. Hold me accountable now, but this 
is important. People need to know. We need to be transparent.
    Mr. Pocan. And I think some of what you say may relate to 
this. In your budget justification, you pointed out that 
insufficient resources have led to just a 7.7 percent audit 
rate for large corporate compliance programs in the most recent 
year that data was available. Do you have an estimate of how 
much tax revenue we forego because of that insufficient amount 
of resources?
    Mr. Rettig. A couple years ago, Senator Wyden asked me that 
question. I said it could be up to a trillion dollars. We have 
to look at how we get to the trillion dollars. If you consider 
that virtual currency, there were $14 trillion in transactions 
last year over $2 trillion market gap and the US GDP to the 
world is somewhere between 30 and 40 percent. You can probably 
do the math to get you to the trillion.
    A lot of people came back at us on that, but our RAAS 
group, our research group, supported the comments that I made. 
Also know, this comes back to conversations about the Russians 
and the oligarchs, that illegal source income is also subject 
to tax in this country.
    Getting us and getting Criminal Investigation the resources 
to go after the illegal source people for prosecutions. But 
there's always a component where it comes back to a civil 
issue.
    Maybe I should have just condensed to this to say we will 
issue a tax gap estimate this summer. Look for it to cover the 
next three years. I think it is 2014, 2015, 2016, but that's 
outdated information. Look at the virtual currency market in 
2016 compared to today. You would not have developed a work 
plan based on something from 2016 nor should we.
    It will also give some projections for 2019. We have put a 
lot of effort, myself included, into getting current 
information and developing a work plan based on current 
information not based on old information.
    We will issue that--and I apologize time-wise, Mr. Chair--
but we will issue that this summer. Again, I am available to 
meet with you, and I appreciate your questions.
    Mr. Pocan. Sure. Thank you, Commissioner. I yield back, Mr. 
Chairman.
    Mr. Quigley. Ms. Torres.
    Ms. Torres. Thank you, Mr. Chairman. And good to see you 
again, Commissioner. I want to go back to the tax filing 
because it is such a big concern and a big issue.
    In 2021, as you know, more than 160 million people filed 
their tax returns with the IRS. An estimated 10 percent of all 
federal tax returns are paper filed.
    Mr. Rettig. About 17 million.
    Ms. Torres. Including me.
    Mr. Rettig. Mm-hmm.
    Ms. Torres. Okay. I am kind of feeling like we are trying 
to say it is the fault of paper filers that they are--I 
understand maybe you did not mean to say that. But I think it 
is--we need to be very clear. We want people to file their 
taxes in whichever way that they can file them. What we want is 
for those taxes to be filed.
    Last year at this very same hearing, I asked about the IRS 
decision to use several trailers to store unopened tax returns. 
At that hearing, you assured me that the agency was caught up 
and processing those returns.
    So I'm going to read you a letter from the IRS to my 
constituent. This letter was written on July 21, 2021, we 
received a request for verification of non-filing of a tax 
return. As of the date of this letter, we have no record of a 
processed tax return for the tax period listed above. If you 
have any questions, call this number, which no one ever 
answers.
    My question to you, sir, is it, you know, a typical way of 
doing business at the IRS office for paper filers to open up 
the return, cash the check but then brown file the paperwork?
    Mr. Rettig. We are required to remove the checks and 
process the checks within 48 hours by law, so the initial 
answer to that is yes. We also have three large submission 
processing centers, Ogden, Kansas City and Austin. Depending 
upon the volume and the flow of paper processing in those 
centers, we move returns among those centers. If one is ahead 
of the curve, we will move volume from one of the other centers 
to that center. Those movements happen in trucks.
    I heard you say that I said we were caught up last year. I 
don't think I said that. And if I----
    Ms. Torres. You did. We can send you back the tape. You can 
look for it yourself.
    Mr. Rettig. It may have been that I was not answering the 
right question for you because we still have 1.6 million paper 
returns that were received in calendar year 2021 but know that 
is down from about 10 million paper returns from 2021 at the 
start of the filing season 2022. We're processing paper in the 
order received, first in/first out. We have all hands on deck 
to get that paper processed.
    Ms. Torres. So I want to be very clear with you. I'm on 
your side.
    Mr. Rettig. Yeah.
    Ms. Torres. I want to help you do your job.
    Mr. Rettig. We have had this discussion.
    Ms. Torres. It is disappointing to hear concerns and 
complaints from constituents day in and day out. It is 
disappointing that we would prioritize because, you know, we 
say it in a state law to prioritize to cash those checks, to 
bring in the revenue, but we do not prioritize uploading that 
document.
    How much more work are you creating, not you, but is your 
staff creating by doing one and not the other? And at which 
point, how many months or how much time is going to go by 
before those documents actually get uploaded into the system? 
Because for this constituent, it still has not been done. That 
means that that constituent----
    Mr. Rettig. If you give me that constituent's information, 
we will try to find it. We probably can find it in our system. 
I have made this offer to everybody. And I know you have my 
cell phone because we have talked.
    Ms. Torres. Yes.
    Mr. Rettig. We are there. But it is not a special lane kind 
of a thing. But we are working hard, myself included on this.
    Ms. Torres. I am trying to assess as to what is the 
timeline?
    Mr. Rettig. Know that, here is sort of the background and 
we can go through this when we do have more time. The structure 
of the Internal Revenue Service is the folks who answer the 
phones, when the phone volume is down, they got onto processing 
the paper returns. That would be a logical structure but for a 
pandemic, but for when you are receiving 1,500 phone calls per 
second to----
    Ms. Torres. We are giving you a lot of work. I get it. My 
time is expired. Like I said, I am on your side. Okay. I give 
back.
    Mr. Rettig. I am available to meet with you.
    Mr. Quigley. Thank you. Ms. Kirkpatrick, please.
    Ms. Kirkpatrick. Thank you, Mr. Chairman, and thank you, 
Commissioner, very much for appearing before the committee. We 
really appreciate your time.
    Last week I was fortunate to meet with the FTC Chair Khan. 
While I couldn't attend our hearing this morning because I had 
another hearing, one of the topics that the chairman and I 
discussed in our conversation was the increasing rate of 
identity theft and fraud in Arizona.
    Could you please share some of how the IRS is protecting 
taxpayers from identity theft and fraud? In particular, could 
you give attention to states like Arizona where identity theft 
is prevalent and on the rise?
    Mr. Rettig. It used to be taxpayers who were victims of 
identity theft could get an IP PIN and that coded PIN would be 
mailed to their address and it would ensure that we have the 
right taxpayer.
    The last two years taxpayers have been able to apply for an 
IP PIN without having been a victim of identity theft. Last 
year we had between 5 and 6 million IP PINs generated. That 
would be my first comment for folks.
    I got a comment the other day. I was not aware of a spike 
in Arizona. I would say generally in the identity theft world 
it has been a public/private partnership with IRS and what we 
refer to as CERCA, which is a lot of folks.
    It has come down about 90 percent from where it was in 
2014-15. But what we keep saying is 1 is 1, right? We try to 
help everyone.
    What it may be, and I would like to get back to you, is 
that maybe we need to increase the outreach and what people 
should do, not only in Arizona, but in other parts of the 
country, to be responsive to because as we all know, when 
somebody takes your identity for whatever purpose, here it is 
tax, it is not an easy future couple of years.
    Messaging is important. Messaging with your office, through 
your office in your community is important and look for us to 
step that up. I would suggest, and most people completed their 
filing season by April 18th date, that going forward if there 
is a spike in the community, we need to have more people get 
this IP PIN.
    Ms. Fitzpatrick. Thank you. And I appreciate that answer. 
My next question has to do with the Child Tax Credit. I've 
heard from families throughout my district and the rest of 
Arizona about how the Child Tax Credit has impacted their 
lives.
    Our failure to extend it is shameful and has directly 
increased child poverty rates. While I know you have no say in 
whether a program like that is extended or not, I would be 
curious to hear from you about the scope and impact of the 
program. For example, how many families took the credit, how 
many children were lifted out of poverty and any other examples 
regarding scope that you can think of.
    Mr. Rettig. We sent out 57 million reconciliation letters 
on the Advance Child Tax Credit. Some of those may be a both 
parents type of a situation. But that would show the volume of 
folks engaged with that.
    I think that overall IRS employees did a tremendous job of 
getting these payments out. You may recall that in early March 
of 2020, I was testifying on the Senate side and indicated to 
back off on getting us more projects if you want us to get this 
Advance Child Tax Credit out on a timely basis. By the end of 
March, I had a separate testimony, I said do not worry. We have 
it. We got this. You can rely on us. We are proud of what we 
were able to do there.
    As to the future of it, I am just the head of an 
administrative agency, a public school kid from LA. You are way 
over my head on this stuff, right?
    Ms. Fitzpatrick. Thank you very much. Thank you for your 
answer. I am almost out of time and so I am going to yield 
back. Thank you, Mr. Chairman.
    Mr. Rettig. Thank you.
    Mr. Quigley. Thank you. Ms. Lawrence.
    Ms. Lawrence. Thank you, Mr. Chairman, and welcome back.
    Mr. Rettig. Good to see you.
    Ms. Lawrence. In March, the IRS announced the creation of a 
surge team. It was to address the massive backlog of tax 
returns and correspondence. Can you talk to me about how the 
hiring efforts are going? How are you working to quickly train 
so many new people? And will this effort help settle the 
backlog?
    Mr. Rettig. This effort combined with other efforts will 
get us healthy this year. A surge team was one of many 
different lanes that we have approached to get through the 
inventories. It is an absolute must that we--my terminology is 
pretty blunt--crush these inventories.
    We took people off the phones, which did not help the level 
of service, the ability of people to have a phone call 
answered, and pushed them into working the inventory. Then we 
added surge teams of people who were two or three years out of 
this space and promoted to another space, and we essentially 
forced them back into this.
    Many were very happy. Many were less than very happy 
because they saw themselves moving forward, but they understand 
the bigger task at hand. It is two different lanes: It is 
Submission Processing and Accounts Management.
    We have also engaged contractors. We have over 2,500 
contractors coming onboard to upscale our people and have the 
contractors handle the less specific tasks. We have done a lot 
in the technology field in order to accelerate processing of 
what we have.
    Ms. Lawrence. Is it working?
    Mr. Rettig. It is absolutely working. I indicated that we 
are trending in the right direction. There is no question. I 
commit to you as Chuck Rettig and as the Commissioner, we will 
be healthy. If there is something that happens, I always have 
to hedge because somebody will remember maybe what I said, but, 
you know, if we have a COVID or we have a this or we have a 
that, I deal in a world of uncertainties. I only know what we 
know.
    If the environment through the rest of this year is as it 
is today, we will be healthy, which means we will be at current 
inventory levels going into the next filing season. I 
understand how every taxpayer, how every representative, 
everybody wants this; trust me, nobody wants this more than the 
employees at the Internal Revenue Service. They're proud of 
what they do.
    Ms. Lawrence. Thank you. I'm glad to hear that. Let's talk 
again about the paper returns. Have you implemented scanning 
technology to process the paper tax returns versus employees 
you have that transcribe the paper returns manually? So where 
are we in handling of the paper?
    Mr. Rettig. We requested funding for scanning in 2013, 
2014, 2015, 2016 and 2017, and we did not receive funding. In 
2018, we moved to emphasize the electronic filing of returns 
because we did not have the specific funds to go down that 
lane.
    Know that the scanning technology that is out there is not 
completely the answer--it doesn't work, transparently, with our 
systems. These are paper returns that individuals would still 
have to go in and tick and tie once the scan went through. It 
doesn't eliminate those job categories, and it doesn't 
eliminate paper.
    We are looking at this and many other things. In the 
President's fiscal year 2023 budget, there is funding to take 
us in that direction, and we want to get there.
    Ms. Lawrence. We need to get there. We really do. The last 
question I have, my district includes one of the most diverse 
communities in the State of Michigan with many cultures and 
languages represented. How are you working to improve services 
and enhance customer experience for those who are using a 
language other than English?
    Mr. Rettig. I'm a public school kid from LA. Put me in a 
Spanish speaking country, and in 3 days I will be fluent in 
Spanish. I came onboard in the Internal Revenue Service, and on 
week two, and I said how many languages do we operate in, and 
somebody said four. I think my response was, that is 
unacceptable when you serve every American in the country.
    Ms. Lawrence. It is.
    Mr. Rettig. It is not a coincidence that you have a public 
school kid from a very multicultural environment. I was saying 
to somebody the other day, we used to brag about something, 
which was the fact that my mom was born in the United States in 
our neighborhood, it shows you how the rest of our neighborhood 
was. I'm sure you are aware, I am the first commissioner whose 
spouse came into this country as a refugee.
    Ms. Lawrence. Yes.
    Mr. Rettig. My in-laws live in Little Saigon in Southern 
California and do not speak English. I am very proud of that. I 
didn't come in unmindful to real people. The 1040 is in Spanish 
because I said get it in Spanish.
    Ms. Lawrence. Yes.
    Mr. Rettig. You call into our services, and we have 
interpretive services in over 350 different languages. We had 
over 90 million page hits on our non-English speaking pages 
last year. What I did here was open the door and our employees 
passionately went through this. Our employees live, work, and 
proudly serve the communities that you are referring to as well 
as all other communities.
    If there is an area that I can say I delivered a pride 
factor to our employees during the pandemic, it is opening the 
doors and doing this work.
    I will add in, since this might be my last time before the 
committee--and I am going to use a few seconds here, sir--look 
at what we have done in Puerto Rico. You will have the largest 
call center of any federal agency in Puerto Rico. We went to 
Puerto Rico because of hiring challenges we have in large 
cities here.
    Watch our Lifting Communities Up program initiative. We're 
in the Mississippi Delta. We have facilities there.
    Ms. Lawrence. Right.
    Mr. Rettig. We will have one of the largest facilities 
anywhere at some point in time. We have five other communities 
that we are going to.
    We are doing job skills training with four-year and two-
year colleges and high schools to bring into the IRS and change 
these communities.
    Ms. Lawrence. I want to say thank you for everything you 
have done and maybe you will enjoy some more romantic comedies.
    Mr. Rettig. We are proud of where we are. But we get it 
that we need to do more, you know.
    Ms. Lawrence. Thank you. I yield back.
    Mr. Quigley. I am not sure about the romantic comedies.
    Mr. Rettig. You know my wife watches these.
    Mr. Quigley. I get it. And I appreciate that.
    Mr. Rettig. She grills me when I get home so, you know.
    Mr. Quigley. Commissioner, there may be a few second 
rounders. And I'll let the ranking member begin that.
    Mr. Womack. Thank you. Real quickly, in my opening, I 
talked about direct hiring authority. Months ago you and I 
talked about the difficulty you were having in finding 
employees. You just spoke to it just a minute ago. So for the 
committee, for the committee's benefit, tell me what this 
hiring authority did for you and how it ultimately helped the 
American taxpayer.
    Mr. Rettig. The Appropriations Committees rescued the 
Internal Revenue Service and the ability of the Internal 
Revenue Service to get through these inventories. You gave us 
direct hiring authority. We had been asking for that 
administratively. It was not coming.
    Know that we have an administrative ask for three years, 
400 a year, 1,200 total, in IT that's been outstanding for more 
than a year. Expect us to come back for direct hiring authority 
in some of the more technical fields. We can't exist without 
that. For federal agencies, it's a six to eight month process 
to onboard people. That doesn't work. It just doesn't. It's 
unacceptable.
    With the direct hiring authority we got, which came on 
March 15th, we immediately opened job fairs in our three big 
processing cities, Kansas City, Austin and Ogden. Over 90 
percent of the people who show up at our job fairs are getting 
tentative offers, subject to background checks.
    We've been able to accelerate the background checks--
fingerprints, for example. But when I talk about being healthy 
by the end of this year, we will crush these inventories. 
Without that direct hiring authority, you would not be hearing 
me say that. There is no way I could commit to that on the 
normal process.
    I am sure other federal agencies would love to have that 
same ability. But, let me remind the world 96 percent of the 
gross revenue in the United States of America goes through the 
Internal Revenue Service. Congress and the Administrations turn 
to the Internal Revenue Service to issue historic, epic, timely 
economic relief.
    I said something recently, it is notable to me, and I think 
it should be notable to others, Congress and the 
administrations didn't turn to the VA or the SSA, who have 
processes in place to issue benefits. They turned to the 
Internal Revenue Service during two different filing seasons to 
get it done, and we got it done.
    Mr. Womack. Please express, as I said in my opening, to 
your rank and file employees how much we appreciate their hard 
work and dedication and under sometimes thankless conditions. 
And I thank you again for your service.
    Mr. Rettig. Thank you.
    Mr. Quigley. I want to just echo what the ranking member 
just said. Please pass our gratitude on. Sir, is there anything 
you want to close with?
    Mr. Rettig. Just thank you very much. As you said, my term 
is set to expire November 12th of this year. For a public 
school kid--nobody in my neighborhood grew up and moved to 
Washington, D.C. for anything. I am the first in my family to 
graduate from college.
    One of the in-house jokes is among my non-lawyer friends is 
that none of them went to college. I come from a very proud but 
normal background and couldn't be more prouder than to be on 
the journey that I am on with you and the respect that you all 
have shown throughout for myself as well as for the employees 
of the Internal Revenue Service.
    It's meaningful. I happen to be the figurehead for the 
employees. But, you know, I couldn't be more prouder of the 
people I am working alongside on this journey. IRS employees 
have gone far beyond. I have asked more of our employees during 
the pandemic than I ever would have asked on the private sector 
on the outside. They exceeded my ask every single time.
    I want people to understand that of the challenges the IRS 
has undergone during the pandemic are not due to a lack of 
dedication or desire of any employee. When we opened up in June 
of 2020 in some of our processing facilities, we had to go to 
50 percent capacity. In some of the facilities, 70 percent of 
the employees showed up. We had to say no, no, you can't be 
here.
    Former IRS employees were calling me routinely, executives 
all the way through, ``can I help, Chuck? I can answer 
phones.'' I would tease and say, ``I don't really think you are 
capable of answering the phones.'' But, people need to know 
that story and the pride factor of the people.
    The IRS employees understood exactly what was asked of them 
to help the country at the worst time of what, I believe, will 
be most of our lives, and they performed. I hope that, if I end 
up moving on after November 12th, that that story is not lost 
and that you all continue to support the employees, where and 
how you can. They are the backbone of this country. Thank you.
    Mr. Quigley. I thank you and your staff for participating, 
the members of this committee, the ranking member and our staff 
for all their good work. And we are adjourned. Thank you.
    [Questions and answers submitted for the record follow:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    

                                           Wednesday, May 18, 2022.

                        FEDERAL TRADE COMMISSION

                   SECURITIES AND EXCHANGE COMMISSION

                               WITNESSES

HON. LINA KHAN, CHAIR, FEDERAL TRADE COMMISSION
HON. GARY GENSLER, CHAIR, U.S. SECURITIES AND EXCHANGE COMMISSION
    Mr. Quigley. The hearing will come to order. This morning 
we welcome the chairs of the Federal Trade Commission and 
Securities and Exchange Commission to discuss their Fiscal Year 
2023 budget request. This is the first time we have hosted FTC 
Chair Khan, but SEC Chair Gensler testified before this 
subcommittee last year. It is a pleasure to have you both here 
today. And while it is a double header, we won't do the 
seventh-inning variety like MLB copped out with.
    Today, you as agencies serve as cops on the beat, 
protecting consumers across vast swaths of the economy. They 
set rules and expectations for corporate behavior, ensure 
Americans have the information they need to make prudent 
decisions and investigate allegations of wrongdoing. 
Collectively, these agencies provide billions in redress each 
year for consumers affected by unfair, deceptive, or illegal 
practices.
    I applaud both chairs for reinvigorating their agencies to 
robust enforcement actions, a proactive rulemaking agenda, and 
a willingness to think creatively about better ways to protect 
consumers.
    Unfortunately, this is not the only similarity between 
these agencies. They are both seriously out resourced by the 
industries they oversee. The FTC assesses mergers and 
acquisitions and other competition issues for much of the U.S. 
economy, including technology, healthcare, energy, and 
pharmaceutical. It also investigates unfair and deceptive 
practices related to privacy, cyber security, credit reporting, 
misleading advertising, and numerous other areas.
    The SEC monitors more than 29,000 registered entities, as 
well as numerous national security exchanges, alternative 
trading systems, credit rating agencies, clearing agencies, and 
self-regulatory organizations. Both agencies have some of the 
brightest and hardest working employees in government, but 
these broad responsibilities mean the agencies must make hard 
decisions about what investigations to pursue. For example, we 
have heard reports that these agencies may be out staffed ten 
to one in high-profile litigation. So we appreciate that both 
agencies have requested substantial funding increases in FY2023 
to support their enforcement, rulemaking, and research 
priorities.
    The FTC has requested a significant funding increase of 
$113.5 million or 30 percent over Fiscal Year 2022 enacted to 
hire more staff across nearly every part of the agency and 
support its IT and expert witness needs. But because of an 
unprecedented surge in merger and acquisition activity, the FTC 
will also collect more filing fees which will offset some of 
the proposed increase.
    We look forward to discussing how the FTC will use these 
funds effectively to support its consumer protection and 
competition work including important activities that I have 
long supported like increasing consumer rights to repair the 
things that they own.
    We also hope to hear more about how the FTC is addressing 
the merger surge, the Supreme Court ruling curtailing its 
ability to award refunds to consumers under Section 13(b), and 
increasing expert witness costs.
    The SEC has also asked for $2.21 billion in Fiscal Year 
2023, a 10 percent increase over Fiscal Year '22 enacted. Much 
of this is for additional staff, particularly in the 
enforcement and examinations divisions. The SEC plans to use 
these resources to address a variety of emergent issues 
including cryptocurrency exchanges and tokens, increasing 
numbers of initial public offerings and single-purpose 
acquisition companies, and a growing number of private funds. 
These funds will also support the SEC's ambitious rulemaking 
agenda.
    I anticipate an informative discussion about the SEC's 
progress in ensuring that consumers have the data they need to 
make informed investment decisions, particularly related to 
climate change impacts. I am also heartened to see that the SEC 
recently reopened or extended some of its comment periods. 
Robust public engagement ensures that critical feedback can be 
provided in the rulemaking process and minimizes the risk of 
cost for litigation. I encourage the SEC to consider further 
changes to ensure substantial public comment.
    Thank you both, again for joining us this morning. I now 
turn to the Ranking Member, Mr. Womack, for his opening 
remarks.
    Mr. Womack. Thank you, Mr. Chairman. And I would like to 
welcome the witnesses, Chair Khan and Chair Gensler. Welcome to 
our committee. Thank you for appearing.
    Our economy is fragile as we are recovering from the 
pandemic, experiencing dramatic inflation and struggling with 
supply chain shortages along with the impact of the conflict in 
Ukraine. Now is not the time for federal regulators to further 
burden the economy with ideologically-based rulemakings that 
saddle American business with new costly requirements.
    The FTC is charged with protecting American consumers 
against unfair, deceptive, or fraudulent practices such as 
identity theft, false advertising, and unwanted telemarketing 
calls. Alongside the Department of Justice's Antitrust 
Division, the FTC is also responsible for enforcing our 
nation's anti-trust laws and conducting pre-merger reviews.
    Under the Biden administration, the FTC is contemplating a 
dramatic shift in its approach to traditional antitrust 
enforcement which could have far-reaching impacts on American 
competition and participants in our economy. To that end, for 
Fiscal '23, the FTC is requesting more than a 30 percent 
funding increase over the Fiscal '22 enacted level after the 
agency has already enjoyed significant funding increases in 
recent years. Under any circumstances, I would be reluctant to 
consider increasing an agency's operating budget by 30 percent 
in one year. Given the Federal Government's current financial 
situation with more than $30 trillion in debt, I am especially 
reluctant to support such an enormous increase.
    The SEC plays a critical role in protecting investors, 
maintaining fair, orderly, and efficient markets, and 
facilitating capital formation. The SEC should focus on those 
core responsibilities. With high-speed trading, uncertainty in 
the economy, and cyber security concerns, the SEC has many 
important issues to focus on to ensure our markets are 
efficient and facilitating capital formation. Instead, the SEC 
appears to be moving forward with an aggressive partisan 
agenda. Rules are complex and could have far-reaching impact. 
However, they do not provide the public with a sufficient time 
to conduct in-depth analysis of the impact. The short period of 
time the public is given to provide comments gives the 
appearance the SEC has already determined the outcome, and is 
not all that interested in meaningful public input.
    While I appreciate that the SEC recently extended the 
comment period for a few proposed rules, I believe the SEC is 
trying to do too much too quickly. I am also concerned the SEC 
is involved in areas that are outside of its core mission, such 
as climate change and political spending. The EPA is the 
primary federal regulator for climate change, the FEC for 
campaign spending. The SEC should not use its authority over 
public companies to require costly and ideologically-based 
disclosures that do not provide material information relevant 
to making investment decisions.
    Regarding the work of this committee, as the appropriations 
process unfolds, I will work with my chairman, Chairman 
Quigley, to make sure each of the agencies have an appropriate 
level of resources to complete your important core mission.
    And let me say one more thing before I yield back and that 
is that given the likely scenario that we are going to be in a 
continuing resolution, and I know that my colleagues up here 
would like to believe that we could get our work done on time 
and by the October 1 fiscal date, the likelihood--I don't think 
there are any handicappers in Las Vegas giving us good odds at 
making sure that we get our work done on time. We haven't in a 
long time. And with that in mind, higher budgets and a shorter, 
more compressed time to spend I think can be terribly 
inefficient for the taxpayers. So I caution us about the 
evaluation of these higher budgets.
    And with that, Mr. Chairman, I yield back my time.
    Mr. Quigley. And I appreciate the Ranking Member's remarks. 
It has been a pleasure to work with you, but I must--I must 
disagree. I believe that we are going to get all 12 bills 
passed and approved and we won't need a CR. And as a Cub fan, a 
big supporter of Santa Clause and the Easter Bunny, I want you 
to know my credentials are behind me.
    We are joined by the chairwoman of the full committee, is 
that correct? Ms. DeLauro? Okay. I was just given the timing. I 
wanted to see if she wanted to go ahead.
    We will go with the statements first. And then we will let 
her go and the questions first if she is here.
    So Chair Khan, thank you for being here today. Without 
objection, your full written testimony will be entered into the 
record. With that in mind, we ask you to please summarize your 
opening statement in five minutes.
    Ms. Khan. Chairman Quigley, Ranking Member Womack, and 
members of the subcommittee, thank you for inviting me to 
testify today. It is an honor and pleasure to be here alongside 
my friend and colleague, Chair Gensler. This testimony reflects 
my own views and not the views of the Commission or any other 
commissioner.
    The FTC has requested a substantial increase in funding 
next year, specifically, an additional $113.5 million, and I 
appreciate this opportunity to discuss this request with you. 
The FTC is on the front lines of many of the most pressing 
issues that Americans face today from corporate mergers that 
can enable firms to hike prices and slash wages, to massive 
data breaches that can expose Americans' most sensitive and 
personal information.
    The Commission is charged with tackling unfair or deceptive 
practices, be it businesses who lie about products being made 
in America or fraudsters who peddle fake COVID cures. And we 
are responsible for rooting out unfair methods of competition 
that can crush entrepreneurs and stifle innovation.
    It has been terrific this past week to meet with many 
members of this Subcommittee, and the range of topics that you 
have raised reflects the breadth and critical importance of the 
FTC's work. Our jurisdiction spans the entirety of the U.S. 
economy and Congress has assigned us the task of enforcing or 
administering provisions spanning more than 80 statutes, 
spanning children's privacy and energy market manipulation to 
telemarketing and horse racing.
    Given the urgent problems facing Americans, we are 
assertively using the full set of tools and authorities that 
Congress has granted us. I continue to be deeply impressed by 
the tenacity and creativity of our talented staff in the face 
of an ever-increasing workload, defendants with seemingly 
endless resources, and legal challenges to our authority. But 
there is much more we need to do.
    An essential component to meeting these challenges is 
additional resources, which is why the Commission has requested 
the additional funding for the next fiscal year. I am confident 
with this type of increase we would be able to more fully and 
effectively deliver on our mission.
    Indeed, funding increases that Congress provided the FTC in 
recent years have been put to important use. This critical 
support has helped the agency continue its far-reaching work to 
protect Americans, particularly in the wake of an on-going 
pandemic and an unprecedented merger wave. That work includes 
ensuring that consumers maintain access to affordable 
healthcare threatened by proposed consolidation of hospitals, 
and it includes obtaining a ground-breaking ruling against 
``Pharma bro'' Martin Shkreli for jacking up the price of a 
life-saving drug with the court issuing an unprecedented 
lifetime ban on Shkreli from working in the pharmaceutical 
industry.
    A few months ago, we also won a motion to dismiss in our 
monopolization case against Facebook, now known as Meta, where 
we alleged that the company engaged in an illegal buy-or-bury 
scheme to crush competition after suffering a string of failed 
attempts to innovate.
    We are using our newly granted authority to seek civil 
penalties against fraudsters pedaling fake COVID cures and we 
are looking closely at geolocation data brokers and aggregators 
who sell personal location information on Americans that may 
reveal their religious observations, political views, and even 
their healthcare decisions. This is just some of the important 
work that the agency has been able to pursue with the 
additional funding.
    I take seriously the importance of ensuring that agency 
funds are put to the most effective use. Accordingly, I have 
asked our staff to orient our enforcement efforts around 
targeting and rectifying underlying root causes rather than a 
whack-a-mole approach that imposes significant enforcement 
costs with seemingly few long-term benefits.
    We are also ensuring that our work is tackling the most 
significant harm across markets, particularly by dominant firms 
whose business practices affect huge swaths of Americans.
    Lastly, we are focused on the need to be forward looking 
and anticipating problems and taking swift action, especially 
as it concerns next generation technologies and nascent 
markets. I believe that these principles can help maximize our 
efficacy.
    The additional funding would enable us to hire an 
additional 215 full-time employees. We anticipate that the 
majority of this increase would go towards expanding our 
enforcement teams and litigators who are on the front lines of 
fighting unlawful business practices. We would also use the 
funds to continue building in-house expertise including 
technologists, economists, and financial analysts and others 
who can help ensure that our tools and skill sets are keeping 
pace with changing market realities.
    Congress created the FTC in 1914 against the backdrop of an 
Industrial Revolution that delivered sweeping technological 
advances, but also enabled intense consolidation in industries 
ranging from oil and steel to sugar and tobacco, creating deep 
national unease about the unchecked power that these 
monopolists could wield. Since then, the agency's mission and 
scope has only expanded, covering key protections for 
consumers.
    The job that Congress has given us is enormous. And we hear 
weekly from lawmakers about new issues and problems that we 
should address. I am enormously keen for us to do so and fully 
deliver on our mission, but without the additional funding, it 
will continue to be a challenge.
    Thank you again for the opportunity to appear before you 
today and I am happy to answer any questions. Thank you.
    Mr. Quigley. Thank you. We will now turn to Chair Gensler. 
Please summarize your opening statement in five minutes.
    Mr. Gensler. Thank you so much. Good morning, Chair 
Quigley, Ranking Member Womack. It was good to talk with both 
of you yesterday and members of this subcommittee. I am honored 
to appear before you alongside Federal Trade Commission Chair 
Khan.
    As is customary, I would like to note that my views are my 
own and I am not speaking on behalf of my fellow commissioners 
or SEC staff.
    I would like to actually just open this in an unusual way 
by discussing two key years in policymaking. It was 1933 and 
1934. You see, we were in the midst of the Great Depression, 
but FDR and Congress addressed the crisis through a number of 
hallmark policies. And amongst them, Congress and FDR came 
together to craft two federal securities laws. In 1933, 
President Roosevelt formally suspended also the gold standard. 
In 1934, Congress working with the President said institutions 
were prohibited from redeeming dollars for gold. So in other 
words, if I can just--a little play on words here, but what 
Congress did and the President did in those two key years one 
could say replaced one gold standard which what I think was 
another, the securities laws.
    I believe the core principles of the securities markets 
have contributed to America's geopolitical standing around the 
globe, the three that Ranking Member Womack and the Chair 
referenced: investor protection, issuer--facilitating issuers, 
and the markets in between.
    We have $100 trillion capital market, the largest, most 
innovative in the world. It is 38 percent of the world's 
capital markets. We are only 24 percent of the world's economy 
and of course, 3 percent of the world's population. We can't 
take the leadership though for granted.
    New financial technologies and business models from 
predictive data analytics to yes, cryptocurrencies, continue to 
change the face of finance, but also other countries are 
developing deep, competitive, capital markets. And yes, those 
other countries want to surpass us. I mean there is a large one 
sitting in China, a government that would like to surpass us.
    We are also in the midst of uncertain geopolitical times. 
Growing cybersecurity risks have been really on our minds for 
these last six months with the war in Ukraine, but even beyond 
that, around the globe central banks have started to transition 
from an accommodating phase to a tightening policy stance. 
Further, the nature of finance itself will constantly challenge 
even a gold standard. And let's remind ourselves, even gold 
medalists have to practice and usually, they are the ones who 
pay the most attention to practice.
    In recent years, we have seen as much whether the market 
events in March 2020, the meme stock volatility, the 
speculative cryptomarkets, or the collapse of Archegos Capital 
Management, or a case we bought with the Department of Justice 
yesterday against Allianz which was an $11 billion situation 
where they were defrauding their investors.
    Given these trends, we should have grown during these past 
five years. Instead, the opposite happened. When I testified 
last year, I mentioned that we were four percent fewer than we 
were in 2016. We are still two percent smaller than we were in 
2016. In the past five years, our registrants have grown by 12 
percent. Last year alone, we got 46,000 tips, complaints, and 
referrals, three times what we got seven years ago. Again, 
three times what we got seven years ago.
     So we oversee these national securities exchanges, credit 
rating agencies, and the like that the chair mentioned. We have 
processed thousands of periodic filings, the measure is 
actually in the tens of thousands. So even though the SEC 
shrank, I think we should do everything to maintain and enhance 
our oversight of the markets and one way to do that is ensure 
we are adequately resourced. Thus, I am pleased to support the 
President's budget of $2.149 billion. Our capital markets are a 
national treasure and we at the SEC must work to keep them that 
way.
    But we can't do it alone. We need your help. It is not a 
good time to scrimp with the SEC resources, but fortunately, 
there is some good news is that we are fully budget neutral.
    Congress set up a mechanism decades ago that we charge fees 
to the industry we oversee and the way that I understand 
appropriations work if you were to fortunately give us $10 or 
$20 million more in appropriations, it doesn't take from any of 
the 30 other agencies, FTC being one of them, that 30 other 
entities I understand you oversee. So thus our budget request 
doesn't compete with other decision. But of course, we welcome 
the insights and how we should spend the money.
    In sum, markets can't stand still. The world isn't standing 
still. We have got a lot of geopolitical competitors who would 
like to take this gold standard away from us. The SEC resources 
can't stand still either. I hope we can come to some agreement 
on that. And I thank you.
    Mr. Quigley. Thank you, both. Before we begin with 
questions, House rules require me to remind you that we have 
set up an email address to which members can send anything they 
wish to submit in writing at any of our hearings or markups. 
That email address has been provided in advance to your staff.
    We will now begin with questions. We will first go to the 
Chairwoman of the Full Committee, Ms. DeLauro.
    Ms. DeLauro. Thank you very, very much, Mr. Chairman. I 
thank the committee for allowing me to jump the line so to 
speak here, so I really do appreciate it. And I want to say 
thank you to our witnesses this morning and thank you for the 
work that you do.
    My question is to Chair Khan. On February 17th of this 
year, there was a recall--was issued on Abbot Nutrition infant 
formula products due to bacterial contamination at the 
company's Sturgis, Michigan plant. Resulted in infant deaths 
and hospitalizations. As a course of tracking, the National 
Infant Formula shortage driven by Abbott's recalled products in 
March, I called for an OIG investigation into the FDA's 
handling of the recall. In April, I acquired a report from the 
whistleblower who worked at the Abbott facility and I made 
public the damning findings of the report.
    And while I introduced an emergency supplemental 
appropriation to restore the domestic supply of infant formula, 
I want to look at the long term root causes so the issue does 
not happen again.
    During your recall of this unsafe product and market 
consolidation, supply is limited and families are struggling to 
secure infant formula for their children. We have four 
companies who control 90 percent of the infant formula market. 
Abbott alone controls around 43 percent of the market. The 
level of concentration has created a fraudulent system unable 
to adequately respond to shock in the supply chain.
    Currently, an estimated 50 to 66 percent of all infant 
formula sold in the United States is purchased through the 
Women, Infants, and Children Program, the WIC Program, meaning 
the impact is heaviest on the most vulnerable Americans.
    So my question, Chair Khan, you are a known scholar of 
anti-trust law and history. Can you explain how the infant 
formula industry became so concentrated and how that 
contributes to the current shortage?
    What authorities can the FTC bring to bear to help address 
this shortage both in the short and long term?
    What issues has the FTC worked on jointly with USDA or FDA 
in the past? And does the FTC have strong working relationships 
with the agencies that would allow for quick and effective 
joint coordination?
    Ms. Khan. Thanks, Congresswoman. I will say up front, the 
baby formula shortages that we are seeing are deeply concerning 
and troubling. And it is something that we are watching quite 
closely.
    As you noted, it wasn't inevitable that this one plant 
being taken off would lead to such outside defects. And so we 
are doing everything we can to make sure that even though a lot 
of these issues are in USDA and FDA's wheelhouse, we are using 
our tools at hand.
    I think you are right that this situation has revealed a 
couple of underlying factors that has exacerbated the effect of 
this situation. One, as you noted, is the high concentration 
that we see in this market where three to four companies 
control the U.S. market.
    And the second is that states grant exclusive WIC contracts 
to manufacturers which in practice means that you are further 
consolidating the distribution system, so that when you have a 
shock to the system like this, other manufacturers are not 
willing to step in as quickly because of those long term 
contractual arrangements.
    So there are a few areas for the FTC here. First, and one 
of the most immediate things that we can do is monitor the 
markets for any deceptive or fraudulent conduct to ensure that 
bad actors are not taking advantage of the situation and 
exploiting the panic and anxiety that parents are facing. We 
also want to avoid situations where online bots are being 
automated to buy up product and then jack up prices.
    A second issue that we are able to look at is whether there 
is economic discrimination occurring in the market that would 
somehow disfavor smaller retailers and further exacerbate some 
of these supply issues.
    And third, we are really stepping back to understand how we 
got to this state where we have such deep concentration in this 
market, look at the mergers that contribute to it, and figure 
out how we can apply these lessons to make sure that other 
markets for these types of essential goods are not in such a 
fragile state.
    Ms. DeLauro. Can you tell me whether or not you are working 
with or can work with USDA and FDA and sign a deal with some of 
these--and some of these issues? And I don't know if you are in 
conversation with them or can do so as quickly as possible?
    Ms. Khan. Yes, we are in contact with USDA and FDA and see 
these types of agency partnerships as force multipliers, so 
definitely want to make sure we are sharing information, 
sharing tools, and resources where we can to address this 
problem as quickly as possible.
    Ms. DeLauro. I would like to work with you all on this. 
Because this is just one example. I am not going to talk about 
this, but you have got a meat packing industry that is also--
that is another area of consolidation. And we are dealing with 
this and it is a detriment to the American public and we see 
price gouging as it has to do with food and pork products.
    And I am delighted to hear that you are looking at whether 
or not there would be price gouging on infant formula, but to 
the concept of consolidation of--and concentration in the 
market, it is an underlying fact here. I am not going to talk 
about FDA dragging its feet, you know, and not doing something 
about this earlier on, but we have a very fundamental 
underlying problem of what is going on in some very critical 
issues that face people's lives and their economic security and 
in this case, the lives of their children at stake.
    So I am hopeful that we can work together and that you all 
will be a major force in helping to get us on a long-term 
solution to this issue. So I thank you very much and I yield 
back. And I thank the chairman for allowing me to, as I said, 
to jump the line and I thank the members for their indulgence 
as well. Thank you.
    Mr. Quigley. Thank you. Thank you. Ranking Member Womack.
    Mr. Womack. Thank you, Mr. Chair. Again, thanks to the 
witnesses.
    Chair Khan, I will start with you. In Fiscals '21 and '22, 
as I said in my opening statement, the committee generously 
provided the FTC with increases of more than 5 percent in those 
years. For Fiscal '23, you are requesting a $113 million or 30 
percent increase over the current year, an enormous proposed 
increase, that is not supported by the Republican 
Commissioners. Commissioners Phillips and Wilson even issued a 
public statement criticizing the request. And you heard my 
remarks about CRs and how a compressed spending time line could 
lead to some inefficiencies.
    Have there been partisan disagreements on budget requests 
in the FTC in the past?
    Ms. Khan. I understand there have been instances when 
commissioners have dissented from budget requests in the past, 
yes.
    Mr. Womack. In their statement opposing the request, 
Commissioners Phillips and Wilson said that enforcement 
productivity of the FTC has declined substantially under your 
leadership. Now how would you respond to those concerns?
    Ms. Khan. I would disagree with that characterization. We 
are actually seeing trends that are on par with previous years 
and we are now in a position to actually be increasing over 
those rates.
    I would say a deeper question that we confront is what does 
it mean for the FTC to be an effective law enforcer? I think we 
have seen instances of repeat violations, recidivism, and so we 
need to make sure not just that we are bringing lawsuit after 
lawsuit, but that we are structuring these lawsuits and 
structuring any remedies and settlements to make sure that we 
are not incentivizing these types of repeat violations. And 
that is where we are really keeping front of mind as we are 
pursuing our work, to not just kind of count the number of 
lawsuits, but make sure they are actually effective and they 
are actually deterring unlawful behavior.
    Mr. Womack. In my opinion, a 30 percent increase in one 
year is based on a kind of a best-case scenario where as 
Chairman Quigley has said, even though he is a Cubs fan, that 
he believes in some of the things that might appear to others 
to be somewhat not practical or maybe even downright 
impossible.
    And gosh, I call on my old days as a broker at Merrill 
Lynch, Chairman Gensler, that past performance does not 
guarantee future results, except in the case of Congress. I 
think past performance does somewhat guarantee some future 
results or at least I haven't seen anything counter to that.
    So let's just play this out, Chair Khan. Thirty percent 
increase. Let's assume for the sake of the argument that if you 
got--if we got our appropriations work done on time by October 
1st, that you would be able to efficiently commit those funds, 
if you got them, in a responsible way. But let's say for the 
sake of the argument that we don't get appropriations done. 
Maybe we kick it to the lame duck session and maybe it is 
January 1. What happens?
    Ms. Khan. Of course, any time where you are delaying when 
we have that certainty, that compresses any time that we would 
have to do that type of hiring, so earlier, getting that 
information is better. That said, just halfway through FY2022, 
we have been able to bring on board 114 FTEs. So we are on 
track to be able to basically proceed at the rate that would 
position us to bring on the full number of employees if we are 
able.
    Mr. Womack. Is there a point in the next fiscal year where 
you would say gosh, if we don't have our funding by X date, it 
would be difficult for me to spend that kind of money?
    Ms. Khan. I mean I think, look, I think, you know, we in 
past, the FTC when it has been on these continuing resolutions 
have had to make hard decisions about prioritization. In 
certain instances, the agency has been able to over hire, 
expecting that there might be some instances where later on be 
able to even that out. I think those are the types of tactics 
that we would look to in this type of instance as well.
    Mr. Womack. Quickly to Chair Gensler, you have a statutory 
obligation to do cost benefit analysis. You have been--I know 
the Federal Government gets accused of not being very fast, 
although I don't think it applies to the SEC. There have been a 
lot of rulemaking proposals in the first quarter of this year. 
So help me understand how we are dealing with the cost-benefit 
analysis requirement with so many rulemakings under way?
    Mr. Gensler. I thank you. Let me address both parts of your 
question.
    In terms of the cost-benefit analysis, we include such 
cost-benefit analysis. We actually call it economic analysis 
under the congressional mandate that considers efficiency, 
competition, and capital formation. Those are the three things 
we must consider in every one of our proposals. And we take a 
considerable amount of time putting together those proposals, 
putting them out to public comment. I truly believe that is the 
core of what we do, is this economic analysis. I was even for a 
short time honored to be a professor of global economics and 
management up at a school up in Massachusetts. And so, I really 
think that is critical.
    But, then, the public feedback, to your second point. We 
put out things on our website and say that it will be a minimum 
of two months, 60 days from when we put it on the website, or 
because there is a delay often getting in The Federal Register, 
30 days from when it is in The Federal Register, the longer of 
that. So, it is always at least two months. We did, as I 
earlier said, we put some of these out, particularly the 
climate rollout for further input. Because we benefit from that 
input.
    And lastly, you said something in the opening. I couldn't 
agree with you more; investors get to decide what information 
is really relevant for them. And whether it is our climate 
proposal, or we have something on cyber disclosure, it is 
really hearing from those investors: is this what you make 
investment decisions about? And hearing from the issuers on the 
other side as to whether this works in this conversation that 
is already going on amongst and between investors and issuers.
    Mr. Womack. Thank you very much. I know I am out of time. 
We will come back in another round.
    Mr. Quigley. Thank you.
    Chair Khan, you referenced the surge in volume of mergers 
and acquisitions. There were nearly 8,000 transactions and more 
than $2.5 trillion in deals in 2021, both all-time records. So, 
tell us a little bit about that challenge. Has the FTC changed 
its enforcement procedures and policies in response? And how is 
it prioritized, this need? And obviously, this is a significant 
request. How does this actually play into the needs you are 
going to have?
    Ms. Khan. Yes, thanks for the question, Congressman.
    As you noted, there was just a surge in dealmaking. It was 
a record year. We had filings that were around 60 percent 
higher than the prior 10-year high. And it created enormous 
strain for our staff, because we understand that illegal 
mergers/unlawful deals have deep consequences for Americans, 
including some of the consequences that the Chair was talking 
about earlier in terms of concentrating supply, creating more 
fragile supply chains. So that, when you have these shocks to 
the system, we are not as resilient.
    So, we recognize that there are deep costs to missing some 
of these illegal deals. So, we have had to triage. We have had 
to really make difficult decisions about what are the mergers 
we are investigating; what are the mergers we are not 
investigating.
    With this type of increase, we would, of course, be able to 
hire more attorneys to make sure we have more folks looking at 
these deals. But we also have a couple of longer-term 
initiatives underway to make the situation more manageable in 
the future.
    So, one effort that we have underway, in tandem with the 
Antitrust Division at the Justice Department, is a revision of 
our merger guidelines. This is kind of the enforcement manual 
that we use to help us detect what are the illegal deals.
    And one key goal here is to make sure these guidelines are 
reflecting the current market realities; that they are aligned 
with the underlying laws that Congress has passed, but also 
that they are creating an administrable and predictable system. 
I think the current system that we have can create a lot of 
ambiguity, a lot of uncertainty, and contribute to some of the 
delays. So, we are hoping that that process will help 
streamline.
    And the other effort that we have underway is a revision to 
our HSR form. So, this is the form that merging parties use on 
the front end, when they are filing their deal with us. And as 
of right now, the information that we are collecting is not all 
that probative. We are going to be updating that, so that we 
can also cut down on the time that our attorneys are having to 
review some of these deals. So, an increase in resources would 
further help us on all those fronts.
    Mr. Quigley. So, all things being equal, the issues you see 
in a merger that drives the FTC to investigate one or another: 
a lack of competition, just one of those variables, or what are 
the others that really strike the interest?
    Ms. Khan. Yes, I mean, the core underlying statute charges 
us with prohibiting mergers that may substantially lessen 
competition or tend to create a monopoly. And so, we are trying 
to understand if deals could have that effect. There are a few 
ways to be assessing that. One is if the companies are direct 
competitors; they are both in the same market, selling the same 
good and service. We also see instances of vertical 
integration, so different firms within the same supply chain 
that are merging. That, in certain cases, we have seen 
historically can also lead to problems.
    This past year, the FTC unanimously challenged two vertical 
deals, Lockheed Martin and Nvidia/Arm. Both of those parties 
ended up abandoning the deal, which was a big win for us.
    And so, those are two types of issues that we look at. We 
also look at instances in which firms may not be direct 
competitors today, but may be positioned to be competitors in 
the future. So, this is a type of nascent or potential 
competitors that might occur. Our major lawsuit against 
Facebook alleges that Facebook purchased Instagram and WhatsApp 
because it recognized that each of those were, basically, 
nascent threats to its dominance. So, those are some of the 
types of factors that we look at.
    Ms. Khan. Let me ask you both, quickly, Chair Khan, you 
talked about bringing on 116 FTEs and the need for more. Chair 
Gensler, you talked about the need to up your FTEs. How 
difficult is it at this time? We hear in the private sector 
that there is a shortage of qualified labor in key positions. 
What are the challenges you are facing, beginning with you, 
Chair Gensler?
    Mr. Gensler. You raise a good point. We are finding that we 
have a little bit higher turnover these days, whether that is 
because of the pandemic, whether that is because the legal 
market is able to recruit some of our really great talent. But 
we have been finding talent to backfill. And I do have 
confidence that, if you are good enough to support our 
increase--we are just trying to get back to about 6 percent 
greater than where we were in head count from 2016. We are a 
bigger agency than Chair Khan's, but I do have confidence that 
we would be able to use the money.
    Ms. Khan. Likewise, despite the legal market being very 
competitive, and the FTC not being able to compete even with 
some other federal agencies because we are at a lower pay 
scale, we have, nonetheless, been able to hire. One core part 
of our expansion strategy would also be leveraging our existing 
regional offices. So, the FTC has eight regional offices spread 
across the country. And if we are able to hire in those cities, 
that would just dramatically expand the talent pool that we 
would be able to draw from. As you all know, the D.C. market 
for lawyers and economists can be extremely competitive. So, we 
think that would boost our efforts as well.
    Mr. Quigley. Thank you both.
    Mr. Joyce.
    Mr. Joyce. Thank you, Chairman.
    And as a long-suffering Cleveland sports fan, I can 
appreciate your idea of tomorrow this is all going to happen.
    Chairman Gensler, thank you for coming.
    My understanding is the SEC has three responsibilities: to 
protect investors; to maintain fair, orderly, and efficient 
markets, and to facilitate capital formation. The SEC, under 
your leadership, has pursued an aggressive agenda, primarily 
concerned with investor protection, without balancing its 
responsibilities towards capital formation. Your agency's 
proposed rules on everything from private fund advisors to 
climate are already impacting companies and investors. With 
record-high inflation and rising interest rates, our capital 
markets shouldn't face more headaches from regulators. The SEC 
should pursue a policy agenda that promotes stability. Instead, 
the SEC has proposed a wide range of aggressive rules with 
short comment periods which only increases uncertainty in our 
capital markets.
    I am particularly concerned about the SEC's climate rule's 
disclosures on greenhouse gas emissions. Now more than ever, 
our capital market regulations should not discourage 
investments; we should advance America's energy independence. 
How do you think the SEC's proposed climate rules impact 
investments in American energy producers?
    Mr. Gensler. Thank you so much for that question.
    I think that the SEC has a longstanding role to help this 
conversation between issuers, on the one hand, the companies 
trying to raise money for good ideas and to build factories, 
and the investors on the other. And what we have today in our 
capital markets is that companies are already making 
disclosures around climate risk and the greenhouse gas 
component of that, and I think that we can lend a role to bring 
some consistency comparability--almost thinking of this as like 
a data standardization.
    And in that regard, it can help issuers in terms of, if 
somebody wants to say, you know, this market is overpricing 
this risk; I think, in fact, I want to make more investments in 
one part of the economy rather than the other. So, I am 
neutral. In the role I am in, I am not a merit-based regulator. 
It is just about trying to bring standardization to the 
disclosures, which I think helps both the issuers and the 
investors. It helps to sort of be a little bit anti-
greenwashing as well. But the public input is going to be 
really important.
    Mr. Joyce. Well, I am concerned about the climate rule's 
impact on public companies, but I am also very concerned about 
its impact on small businesses. As you well know, in 
northeastern Ohio, where I am from, we had had auto 
manufacturing companies that were public; you also have a lot 
of small businesses, what I would call ``mom and pops'' who 
make pieces, parts, and clips that go into that. What is their 
duty to report?
    Mr. Gensler. This is about public issuers, public companies 
reporting, not about private companies reporting at all. We 
also are very careful that even small companies, you know, 
those that are public, but small companies, we try to, I would 
say, tailor and tier the proposal--again, we will hear more 
from the public--that they are out of certain obligations, the 
smaller. We have about 7 to 8 thousand issuers in the United 
States, but 5,000-plus are called smaller issuers. And we sort 
of try to tailor and tier those out of a bunch of this.
    Mr. Joyce. If I'm hearing you correctly, then you are 
saying SEC's new climate rule will not make these people liable 
for calculating and reporting their small businesses' 
greenhouse gas emissions if they are privately held?
    Mr. Gensler. This is a public company disclosure regime, 
not private companies. And I would say this: around the globe, 
other regulators around the globe are trying to do this as 
well, and that puts, shall I say, responsibilities on U.S. 
issuers that might be operating in France and other countries, 
and so forth. So, I think that we want to be part of that 
conversation, try to get it right through the right economic 
analysis, the right public comment, with the issuers giving us 
feedback.
    Mr. Joyce. I also want to focus on the materiality 
standard, which has been the bedrock of the SEC's disclosure 
regime for almost 90 years. Looking for a quick answer here, 
since my time is running short, am I correct that the public 
companies are already required to disclose information that 
presents a material risk to a company, including climate-
related risks?
    Mr. Gensler. It is correct, but, also, over the decades, we 
have taken an opportunity to try to lend some consistency and 
comparability, this standardization, to those disclosures.
    Mr. Joyce. Does the current SEC leadership no longer view 
the materials standard as the cornerstone of the securities 
disclosure regime?
    Mr. Gensler. Everything that I do is guided by this. It is, 
basically, what is the substantial likelihood that a reasonable 
investor finds it important/significant in their investment 
decision? That is the cornerstone.
    Mr. Joyce. We managed to get to the full 5 minutes, and I 
yield back nothing to you, Mr. Chairman. Sorry.
    Mr. Joyce. I do want to say that I am old enough to 
remember when you took our beautiful Baltimore Colts over--we 
stole them back, you know. I guess it is true Indianapolis took 
it, and then, we stole them back. [Laughter.]
    Well, they are still around.
    Mr. Gensler. Yes, yes.
    Mr. Quigley. The sports great inception will come later. 
[Laughter.]
    Mr. Cartwright.
    Mr. Cartwright. Thank you, Mr. Chairman.
    And thank you, Chair Khan, for pointing out something that 
I hadn't thought of. We all know that inflation is caused by 
many things. One of them is price gouging by a lack of 
competition and excessive consolidation of industry. Everybody 
knows that. But you have added the point today that, when you 
have excessive consolidation and not enough competition, it 
makes our economy logistically vulnerable to supply chain 
shortages as well. So, thank you for that.
    And thank you, Chair Gensler. You have very much heartened 
me by calling American securities laws the gold standard of the 
world. They are. We all know that, in order for our crown 
jewel, our capital markets to work, investors have to have 
trust that they will be protected from fraud and abuse.
    Now I am concerned about Registered Investment Advisors. I 
want to talk about that for a moment. There are about 14,000 
Registered Investment Advisors, RIAs, registered with the SEC. 
They attracted my attention because they are not required to be 
FINRA members. FINRA, of course, is the Financial Industry 
Regulatory Authority that Mr. Womack would have been a member 
of when he was a broker.
    And there are a lot of protections involved in FINRA that 
have evolved over the years. FINRA requires clear disclosure of 
the arbitration provisions. And within the arbitration 
provisions, FINRA prohibits designation of inaccessible venues 
for arbitrations; prohibits limiting claims in the arbitration 
clauses; prohibits arbitration clauses from preventing class 
actions from going forward. And it also charges minimal fees. 
We are protecting mom-and-pop investors with FINRA, and it does 
a pretty good job of disclosure.
    The problem is that, with Registered Investment Advisors, 
they don't belong to FINRA and none of that applies. And what 
we know is that they are using arbitration clauses without any 
of these protections; for example, protections against 
inaccessible venues; protections against excessive fees, like 
with certain arbitration organizations that charge a lot of 
money that moms and pops can't afford to take claims against 
Registered Investment Advisors to court.
    So, we don't know things that we know about FINRA 
arbitrations and arbitrators; for example, how many claims 
succeed; how many unpaid awards exist; where the forums are 
that these arbitrations take place. Policymakers, when we deal 
with Registered Investment Advisors, we lack information about 
how many claims succeed and how many fail, and how many claims 
have been filed against certain Registered Investment Advisors. 
It's kind of the Wild West. It is not the gold standard right 
now.
    And so, here is my question to you: I think we need to work 
on better understanding what is going on with RIA arbitrations. 
The question for you is: will you work with us on a plan to 
gather information about RIA arbitration practices, so that we 
can figure out if American investors dealing with RIAs are 
sufficiently protected?
    Mr. Gensler. I would be glad to work with you and your 
staff and other committee staff.
    Just a little bit of history. The Congress decided again in 
the 1930s to have a self-regulatory organization for broker-
dealers in something that was called the Maloney Act in the 
1930s, but did not decide to do that around investment advisors 
because that law didn't pass until three years in the 
Investment Act of 1940. So, it would really be up to Congress 
if that were to change. That is not within our remit.
    But to work with you to try to get better information, it 
is part of why we have such a large exams function. Two-thirds 
of our examiners, fully two-thirds of our examiners, are 
examining investment advisors because we cannot rely on FINRA 
to do it. There is no self-regulatory organization.
    Mr. Cartwright. Thank you. Let's work together.
    Mr. Chairman, I yield back.
    Mr. Quigley. Thank you.
    Mr. Amodei.
    Mr. Amodei. Thank you, Mr. Chairman. I appreciate it.
    Chair Gensler, I have got a couple of questions that are 
just kind of related to the rulemaking, to follow up a little 
bit on what Ranking Member Womack talked to you about briefly.
    I am looking at the short-term history and the opportunity 
for public comments, and in the face of--my understanding is 54 
percent--or there are presently 54 discretionary rulemakings on 
your short-term agenda. And there are 28 proposals pending 
right now. And so, obviously, that is your job. And so, I don't 
want to get into, you know, what are you going to do, or 
whatever the heck, although it would be nice to have some idea 
of where things are heading before it is announcement on a 
Friday afternoon, or something like that.
    But I am looking at this, and I would kind of like to know, 
first of all, the section of your staff that handles 
rulemakings, can you give me an idea of what is the number of 
those folks? Is it kind of what it has been before in the past? 
Are you guys fully staffed or are you dealing with--what does 
the workforce look like on your rulemaking, on what--I will use 
my phrase--``ambitious rulemaking agenda'' that is before you 
right now? Are we fully staffed?
    Mr. Gensler. It is a terrific question. We have some 
vacancies, but throughout the agency--it is about 4,500 people 
total--but throughout the agency we have rulemaking units in 
each of the big program offices, and those are usually like six 
to ten people in each of these units. And then, of course, our 
entire 140 economists, that economic unit, most of them from 
time to time work on rulemaking, but they also work on 
enforcement matters. But, at any given time, you could assume 
that probably it is split pretty evenly amongst the 140 and so 
in the economic unit, and there is probably another 20 to 30 
people in our Office of General Counsel at some time.
    We have not expanded the numbers, or if we have, we can 
come back to you. It might be modestly. It is just that good 
folks are working diligently through these agenda items.
    Mr. Amodei. Okay. I mean, I know it is probably not apples 
and apples, but I look back at a very ambitious rulemaking that 
was associated with the enactment of Dodd-Frank, and that was 
about 67, and not that anybody accuses anybody of being nimble 
or quick, but that took the agency, before you were there, 
about 10 years to do.
    And so, I look at the number that is there now, and I am 
going, well, we are clearly not on a 10-year pace. And so, that 
is why I am like, well, so how does staffing look?
    And then, I guess the other thing is, as I am looking at 
comment periods here, the present record under your tenure for 
comment periods is significantly different than your 
predecessors, on the shorter side. So, if you have got about 
the same staffing and the comment periods are less, give me an 
idea of how you think that dynamic is good for the end product 
of the rulemaking with less time for public comment, and 
obviously, much less time than the last time a major rulemaking 
event transpired, as in Dodd-Frank.
    I just kind of want a sense because it seems like it is 
like, hey, we are in kind of a big hurry here, and we haven't 
done anything to change our resources. We have done something 
to shorten up the rulemakings or the public comment in terms of 
the 45 days or less, as opposed to 60 and 90. So, give me a 
sense on what the method is to the madness there, if you would.
    Mr. Gensler. So, I thank you for the question.
    The SEC actually got about 120 Dodd-Frank mandates. The 67 
you reference might be when I was at the CFTC, and that was the 
exact number we did at the CFTC.
    But what we have endeavored to do is put things out for 60 
days from when we vote on it or the day after we put it on our 
website. What we have found is The Federal Register, which is 
another part of the U.S. Government, The Federal Register can 
sometimes take a week or even up to 50 or 60 days to put 
something on their site. And so, we have said it would always 
be the later of 60 days from when we put it on our site or at 
least a month after it finally gets into The Federal Register.
    So, we do feel that we are giving adequate time for the 
public to comment. We have gotten really robust comments on 
that which we put out before. And as was mentioned earlier, we 
have, from time to time, even lengthened comment periods. We 
have done it at least four times since I have been at the SEC.
    Mr. Amodei. Thank you, Mr. Chairman. I yield back, Mr. 
Chairman.
    Mr. Quigley. Thank you.
    Mr. Pocan.
    Mr. Pocan. Thank you very much, Mr. Chairman.
    And thanks to both of our witnesses.
    Chair Khan, I want to follow up on something that Chair 
DeLauro started to ask, or at least brought up. It was the four 
companies that control 85 percent of the beef industry. The 
concentration has allowed meat packers like National Beef, JBS, 
Cargill, and Tyson to squeeze consumers and producers alike. I 
have been concerned about concentration in the meat packing 
industry for years, and I fear that right now it is 
contributing to the high prices that we are seeing at the 
grocery store.
    Just looking at the paper in the last week, The Washington 
Post reported how the meat industry hyped baseless shortages to 
keep the plants open amid COVID. Clearly, this is another 
concern, much like with the formula, but I think right now 
people are paying more than they need to because of this 
concentration. What is your jurisdiction over meat packers and 
what can we expect from your agency in addressing high food 
prices?
    Ms. Khan. So interestingly back in 1919 the FTC did a big 
investigation into meat packers, finding that there was, you 
know, a big meat trust that then was exploiting its power. As a 
result of that report the FTC's jurisdiction over some of these 
areas, including meat packing, was actually stripped. So--so 
that--the antitrust component of that is now in the Antitrust 
Division's wheelhouse.
    That said, you know, we do have a whole set of areas where 
we intersect with rural America and, you know, potentially some 
of the price increases that we're seeing. In December we 
initiated a--a market-wide inquiry into the supply chain 
disruptions.
    We've been hearing from a whole set of market participants 
including grocery stores about some potential, you know, 
economic discrimination in the supply chain that could have 
been exacerbating some of the disruptions, so we sent out a 
whole set of orders to some big retailers, wholesalers, to try 
to understand what's really going on here?
    Of course a lot of the supply chain disruptions are--are 
tied up in the aftermath of--of COVID, but I think inasmuch as 
there might be unlawful activity contributing, that's something 
that we definitely want to know about.
    Another area where the FTC enforces the law is in the 
context of--of grocery stores. So inasmuch as we see mergers 
and acquisitions being proposed among grocers, that's very much 
in our wheelhouse, too.
    Another issue that we've heard about from farmers in 
particular is potentially unlawful repair restrictions on their 
equipment. This was an issue that the Chair raised where you 
have, you know, equipment manufacturers that are limiting how 
farmers can fix their tractors, can fix other key goods and 
service--key goods and equipment. And that can also add costs 
that then can get further passed along to consumers. So those 
are some of the issues that we're looking at and working on.
    Mr. Pocan. Thank you. And that second part I have 
absolutely heard in my district as well about the repair 
restrictions, so I am glad you are looking at that.
    Also last year I wrote to the commission urging you to 
scrutinize military contractor monopolies. I want to thank you 
for blocking the proposed merger between Lockheed Martin and 
Aerojet Rocketdyne earlier this year.
    The Department of Defense regularly talks about cost 
increases due to lack of competition, but the commission 
approved a merger between Northrup Grumman and Orbital ATK in 
2018, and it expressed concerns that it could limit Northrup's 
incentives to provide sophisticated systems to the Department 
of Defense at a competitive price.
    Could the FTC unwind this merger between those two and what 
resources do you need to continue to go after consolidation in 
defense?
    Ms. Khan. So the FTC certainly has the legal authority to 
challenge mergers and acquisitions after the fact, even if 
they've been consummated. In instances where certain types of, 
you know, promises or commitments did not actually materialize 
including potential cost savings for the Defense Department 
those types of facts can be relevant as well.
    In these types of instances with defense mergers in 
particular the FTC does end up being somewhat dependent on the 
Defense Department's use since they are oftentimes the--the 
major, if not the main customer. And so we would be curious to 
hear how that deal from their vantage point has transpired, 
if--if the cost savings have actually been generated. But 
certainly these types of merger challenges, either on the front 
end or after the fact, are enormously resource-intensive.
    And the FTC today, the staffing of the FTC is--is still 
less than two-thirds of what it was in the 1980s. So we are 
operating at a--at a lower level and it creates a lot of 
strain. Our staff has done heroic work during the pandemic, 
especially during this merger surge, but it definitely takes a 
toll.
    Mr. Pocan. Great. Thank you very much, Mr. Chairman. I have 
got 14 seconds, so I will yield back.
    Mr. Quigley. Thank you.
    Mrs. Torres.
    Mrs. Torres. Thank you, chairman.
    And Chair Khan, and Chair Gensler, thank you for being here 
today with our committee.
    Chair Khan, good to see you again. As you know, individual 
safety concerns are high in the priority of all Americans. 
Members of Congress or political figures, for example, do not 
provide their schedules. They don't publicly disclose their 
schedules because of concerns of tracking their movements to 
and from--and safety concerns.
    So as it relates to companies, internet companies' unfair 
data practices, I want to go back to your opening statement and 
ask about what these organizations are doing, how you have been 
dealing with them as it relates to women trying to access 
health care at Planned Parenthood for example.
    It is my understanding that these tracking components of 
these apps have been sold for as cheap as $160. In the State of 
Texas for example the government there has signed a law that 
would--that promotes vigilantes to target women who are seeking 
abortions. Planned Parenthood provides much more than 
abortions. So I am very concerned about women not being able to 
safely access cancer screenings, HIV screenings, and other 
types of health care in addition to abortions, should they 
choose to do that.
    So my question to you is what more can you do to ensure 
that--whether we as individuals acknowledge and accepted 
tracking that this tracking information is not being used 
illegally to endanger someone or prosecute them for seeking 
health care?
    Ms. Khan. Yes, thank you for the question, Congresswoman. 
It is enormously concerning the degree to which we've seen 
tracking of people's location basically emerge into a very 
lucrative market where all sorts of companies ranging from data 
brokers to aggregators are now trafficking in this data, which 
as you noted can be extremely informative and insightful. It 
can tell you when people are going to church, if they're 
accessing reproductive health services, and can be exploited by 
a whole set of bad actors. So this is certainly something that 
is on the FTC's radar.
    The FTC in the past has done workshops and enforcement 
actions in this area. Just this past year the FTC brought an 
enforcement action against a company called SpyFone, which was 
a stalkerware company that was actually enabling--selling the--
the location data in real time to people including potential 
stalkers, you know, endangering people, really putting their 
lives in--in danger.
    So--so we were able to take a strong enforcement action 
there. And--and the remedy that we pursued basically prohibited 
both the CEO and the company from ever operating in this market 
again. But of course the problem is much more persistent and 
prevalent. I think the fact that we have an entire sub-economy 
on this that's incentivizing the endless collection of this 
data--even if the app or service doesn't require your location, 
I think that invites us to, you know, think hard about whether 
we need to be setting clear limits on this type of thing. And 
of course there are a lot of discussions in Congress as well 
around potential privacy legislation.
    Mrs. Torres. This is something that I hope that you will 
continue to work on and be extremely aggressive. On a personal 
note I have been a target of foreign actors, MS13, and I 
certainly would hate for these actors who know where I live, 
who know where my son and my grandson live, to purchase this 
information online. They have come and targeted--threatened me 
and my spouse and graffitied my home and fired a shot at my 
district office. I would hate for them to pay $160 as a price 
on my life. And it is not just me, but it is all of these young 
women who are simply trying to get--to have access to health 
care. So this has to be of utmost priority to your office. 
Thank you.
    And I yield back.
    Mr. Quigley. Thank you.
    Ms. Lawrence.
    Ms. Lawrence. Thank you, chairman.
    I want to thank you for being here today.
    And Chair Khan, I have a question for you. In fiscal year 
2021 the FTC received more than 5 million complaints from 
unwanted calls including 3.4 million reports about robocalls. 
Now I am a politician. I understand that this causes so much 
frustration to the consumer, so my question is will the 
commission use every tool available to tackle this problem?
    Ms. Khan. Thanks for the question. Yes, absolutely. 
Unwanted calls are a scourge and they're actually the--the 
highest--the source of the highest number of complaints that we 
get at the FTC: unwanted calls, robocalls. The FTC has long 
been a player in this space including more recently we've been 
going after these VoIP providers, these providers that are 
basically enabling the mass dissemination of robocalls. So 
they're--they're enabling and facilitating robocalls on a 
massive scale.
    And we've reminded these companies that facilitating or 
assisting in illegal robocalls is also unlawful. And so we've 
been able to pursue strong enforcement action there, which I 
think is useful because it's really going upstream to look at 
some of the companies that are facilitating these robocalls, 
not just the fly-by-night scammers that appear one day and then 
another day even after you go after them.
    I'd also note that we work closely with the FCC on this 
since they have jurisdiction over the carriers whose networks 
are being used for robocalls and the FCC I think has a lot of 
latitude to also be looking upstream and--and making sure that 
we're cutting down on these robocalls, because as you noted 
it's just a huge invasion of--of privacy. It creates an 
enormous cost for people.
    Ms. Lawrence. So I have a question--cryptocurrencies are 
attracting more Black and minority investors who have 
historically been left out of our investment options, but these 
communities, the Black minority investors--have the most to 
lose given the shakiness of this industry. What new tools or 
resources will the SEC need to deal with the increased 
financial risk, fraud, and misconduct associated with digital 
currencies?
    Mr. Gensler. I thank you, congresswoman, for that question. 
I think you're right, this is a highly speculative asset class 
that has caught the attention of the public around the globe, 
not--not just here in the U.S., but around the globe. And there 
are some underlying innovations around how to keep data ledgers 
and how to move money on the internet or value on the internet, 
and innovations even in finance.
    Having said that, it's the basic principles of that gold 
standard I mentioned. If you're raising money from the public, 
you're an entrepreneur raising money from the public, you 
should have full and fair disclosure, and guess what, not lie 
to them. And those are the token offerings that are going on 
these days, many of which; I can't prejudge any one, but I 
would even say most of which come under our securities laws. 
They're--they're investment contracts, they're securities.
    We're trying to work with the crypto trading platforms to 
get them registered, which again because most of the tokens are 
likely to be securities, if you have even one on your platform 
you should register the SEC. And we'll use our enforcement 
tools to being enforcement actions, but I'd prefer if they'd 
come in. We can also use our exemptive authorities. But right 
now the investing public in all communities are not well-
protected.
    In terms of what this committee can do is help us get--
again we're not trying to grow really significantly, but 
resources to grow at least six percent and grow our enforcement 
arm in this space.
    Ms. Lawrence. Thank you so much. I support that 100 percent 
because when we are moving to this new rapidly growing concept 
of crypto financial industry, we must regulate it and protect 
the public. So I look forward to talking to you about more 
tools such as registering it to make sure we can validate the 
currency transfer.
    Thank you so much and I will yield back.
    Mr. Quigley. Thank you, chair.
    So thank you. We are going to do a second round for the 
members who are still here, and I am going to let the ranking 
member lead that off.
    Mr. Womack. Thank you, Mr. Chairman.
    Did you think you were going to sit through this hearing 
and not talk about crypto?
    Mr. Gensler. I--I--I would have been a little bit surprised 
and even disappointed.
    Mr. Womack. Well, as Lee Corso says on game day, ``Not so 
fast,'' because we--I am going to follow up with some questions 
about crypto.
    Speaking of football, before an official can throw a flag, 
do an enforcement action, you got to know the rules.
    Mr. Gensler. Yes.
    Mr. Womack. There have to be a set of rules. So help me 
understand where we are in the--and you and I talked off line 
about the difference between a securities piece in this whole 
cybersecurity market and the commodity piece in it. So help us 
understand the difference and where we are in creating the 
rules for this whole system that is now well over a decade old. 
Seems to me that we still have a lot more questions than we 
have answers.
    Mr. Gensler. So I--I thank you for that question. The SEC 
oversees an issuer marketplace, the 7 or 8,000 issuers. And 
Congress painted with a very broad brush--and I think the rules 
are actually quite clear that if you're raising money from the 
public and the public anticipates a profit based on that--
efforts of that sponsor, that entrepreneurs, that's a security. 
In fact, Congress had 32 different terms that are entered into 
the definition and the Supreme Court, Thurgood Marshall, wrote, 
``Congress painted with a broad brush to protect the public 
against scammers and fraud and so forth.''
    A commodity, when you think of corn or wheat or gold or oil 
doesn't have an issuer. It doesn't have like one party sitting 
there behind it and the public's not anticipating based on the 
efforts of that one party. So over the decades we found--
literally the seminal big case was about orange groves in 
Florida, but subsequently there was even an ostrich farm. I 
think it was in--it might have been in Texas. I'm trying to 
remember. Are--are all sorts of different ways to raise money 
from the public that were securities. So that's what we--we see 
now.
    We would also enter into and work with the Commodity 
Futures Trading Commission and we're working on trying to do 
that. So to the extent that there's a commodity token, a crypto 
commodity token; and there might be a very small number of 
those, that that information would all go--sent over the--to 
the CFTC and--and--but we have jurisdiction over probably the 
vast number of these. Bitcoin is--maybe that's a commodity 
token, so that is a big market value, but that goes over there. 
I--I hope that helps.
    Mr. Womack. Yes, so we are talking about budgets, so what--
help me understand the resources that you allocate to this part 
of your portfolio.
    Mr. Gensler. I wish we had more to be able to dedicate to 
this. We brought probably in the last six years about 85 or 90 
enforcement actions. We have a unit in our Enforcement 
Division. Enforcement's 1,300 people, but we have a unit that 
we've just decided recently now, so we're trying to move 20 
people over to grow it. It--it would be slightly to--into the 
low 50s, to just give you a sense. We're really out-personed.
    This is a field that--well, recently it's only worth $1.2 
trillion. Two weeks ago it was supposedly worth $2 trillion. 
There was--there was one crypto complex that--that went from 
like $50 billion of value to near zero just in the last three 
weeks. I mean, these are highly speculative, volatile, and I 
would dare say often the public is not protected. They don't 
have the disclosures from these entrepreneurs. They don't have 
the--the crypto exchanges should come in and register or 
frankly we're going to continue to bring--you know, use what 
Congress has given us in our enforcement and examination 
function.
    Mr. Womack. Real quick question about consolidated auto--
audit trail. We have heard concerns regarding security of the 
system. Help us understand with regard to your oversight of CAT 
what the SEC is doing to ensure the system is secure and 
personal identifiable information is protected.
    Mr. Gensler. So it was just--just about when my predecessor 
was finishing up his job, Chair Clayton. They put in place 
something on personal identifying information to ensure that 
for instance key parts of that were no longer collected. I 
think this is a 10-year project that's been going on between 
the securities industry and the SEC and FINRA. And so he sort 
of did that, put out a proposal on data security that augmented 
that. We continue to work with members of the industry, data 
scientists of course as well, to try to finalize that rule 
around data security.
    Mr. Womack. I yield back.
    Mr. Quigley. Mrs. Torres.
    Mrs. Torres. Chairwoman Khan, several journalists' 
investigations have brought to light very disturbing rental car 
company failures to keep accurate records of the vehicles that 
were rented. They have properly reported some of these vehicles 
as stolen, which were not, were returned by the customer. The 
police has made several arrests. People have spent weeks in 
prison as a result of these false reports. It appears to be 
very little that has been done to punish these inaccurate 
reports. As a private citizen if you make a false report, there 
are punitive damages, but these rental companies have been able 
to get away with imprisoning people, with threatening people.
    So what is the FTC doing? Do you have enough funding, 
enough resources to ensure that you are focused also on this 
issue that puts so many of our constituents in danger?
    Ms. Khan. Yes, it's a phenomenally important question and 
the reporting on this has really just been horrific, really 
horrible set of circumstances. And we received a--a letter from 
members of Congress asking us to look into this, so it's 
definitely something that's on our radar. Of course we can't 
disclose if we have a non-public investigation, but I can 
assure you that it's something that we take very seriously.
    I know there's been a--a theme about, you know, looking at 
different markets and--and underscoring how we actually have 
deep consolidation and concentration in all sorts of pockets of 
our economy. I would note that the rental car industry and 
market is another area where we now see three to four companies 
really dominate the U.S. market. And I think we see how in 
these types of instances if companies don't have to compete for 
consumers, they kind of can become too big to care and in 
certain instances be able to get away with this type of 
conduct. So I think there is also a deep connection between the 
kind of competition issues and these types of consumer 
protection abuses.
    In terms of resources, I mean, you know, we are charged 
with looking at these types of things all across the economy. 
In the last couple of years in particular we were very focused 
on COVID fraud since the pandemic was being exploited by all 
sorts of bad actors pedaling fake cures, you know, pretending 
to be the government and--and providing loans and all sorts of 
scams and--and fraudulent activity that was harming all sorts 
of communities. So that's been a big area of focus for us. But 
of course additional resources can always help boost our 
ability to look into these types of things and act quickly, 
because I think that's incredibly important as well.
    Mrs. Torres. Well, there certainly appears to be a great 
need for you to hire up people that can focus on protecting 
consumers. You do not know who you are renting a company--a car 
from because while you might rented a vehicle from Thrifty, 
when you show up at the counter it is Hertz, as an example. So 
it becomes very confusing for consumers.
    And again, like the tracking issue, a consumer that does 
everything right, pays their rental vehicle, returns it on time 
should not be subject to arrest and false prosecution as a 
result of irresponsible data entry mistakes and irresponsible 
refusal to acknowledge their mistake.
    So with that, I yield back.
    Mr. Quigley. Thank you.
    Mr. Amodei.
    All right. Mr. Joyce.
    Mr. Joyce. Thank you, Mr. Chair.
    Chair Khan, it was lovely chatting with you yesterday. As 
we have discussed, you requested a 30 percent increase for what 
you believe is the commission's ability to challenge 
meritorious cases because it is in danger. To justify such a 
large increase this committee would need to agree that the 
cases the FTC has acted upon so far under your leadership do in 
fact deserve antitrust-related scrutiny. I am not confident in 
how these funds will be used when I consider for example the 
recent FTC action to block the Illunina acquisition of GRAIL, 
and acquisition which would speed the deployment of lifesaving 
multi-cancer-related detections tests to Americans.
    Can you explain what concerns you have with this 
acquisition as whether you believe the FTC action conflicts 
with the Biden administration's Cancer Moonshot goal to 
decrease the death rate for cancer from 50 percent to over the 
next 25 years?
    Ms. Khan. Thanks for the question, congressman. This deal 
was challenged before my arrival. I've never taken any votes on 
this matter, so I can't opine on--on any of the specifics. It 
is currently pending at the agency in our Part 3 proceeding, so 
there's a--a strict wall up that limits what--what we can share 
in terms of our substantive views, but I assure you that our 
staff only recommends challenging deals when the facts and--and 
law warrant it, and this was a unanimous decision by the 
commission.
    Mr. Joyce. Thank you.
    Mr. Chair, I'd like to enter into the record a letter 
from--that has been signed by a number of members to the FTC 
Inspector General on this matter.
    Mr. Quigley. Without objection.
    Mr. Joyce. What I would also like to then follow up on, 
chair, is I would like to focus for a moment on the repair 
restrictions, specifically those restrictions that drive up the 
cost auto repair.
    As I am sure you are aware, with record inflation it is set 
to cost American families and extra $5,200 this year, 
considering that a repair for a simple fender-bender averages 
nearly $4,000 today, a 26.4 increase in just five years. What 
more do you believe we can--can be done with respect to 
automobile repair restrictions, whether on patent abuse or data 
controls to bring down the cost of auto repairs for American 
consumers?
    Ms. Khan. Yes, it's a terrific question and--and definitely 
something that we're looking at closely. Before my arrival the 
FTC issued a report on repair restrictions really getting deep 
into understanding where we are seeing these? Are there any 
legitimate justifications? What are instances in which they 
might be illegitimate? And last summer we issued a policy 
statement noting the various legal authorities that we have to 
go after this, be it in the consumer protection vein, be it in 
the competition vein.
    We also have the statute that Congress gave us, the 
Magnuson-Moss Tying Act--Warranty Tying Act, which basically 
specifically addresses our ability to go after some of these 
unlawful ties that we see where--where goods are being sold 
conditioned on warranty also governing that same entity and the 
repair only being able to be done by that same entity.
    So this is something that's a top priority for--for the 
commission. I think you're absolutely right that we've seen how 
it can significantly increase the costs of goods including 
auto.
    I think these data issues underlying a lot of this is very 
concerning because we can see the ways in which the growing 
digitization just gives additional tools and levers for these 
equipment manufacturers or auto manufacturers to be 
manipulating what types of repairs can and cannot occur. So I 
think it's just another axis on which we see some of this 
conduct potentially getting worse.
    Mr. Joyce. Thank you.
    Chair Gensler, since the matter or cryptocurrency was 
brought up, you indicated that you wanted more money so you 
could go after those in this cryptocurrency field, but with no 
clear comprehensive final SEC rules regulating 
cryptocurrencies, can you explain how it is appropriate for the 
SEC to ramp up crypto-related enforcement efforts?
    Mr. Gensler. I thank you, Representative Joyce. I actually 
think there's very clear rules. If you're--if you're raising 
money from the public and the public's betting on that, you've 
got to disclose certain things. That's called disclosure. And--
and--and it's pretty straight.
    If you have a--a--an exchange, a crypto exchange that has 
these tokens on those exchanges and those tokens are securities 
under the securities laws, then that exchange should register 
with us as a national exchange. We've actually said publicly; 
and we've talked to many of these exchanges one on one, come 
in, work with us. We can even use some of our exemptive 
authority to work to get them registered.
    These exchanges are trading against their customers. They 
literally are making markets versus their customers, they're 
holding the--what's called the private key. If they lose them 
or there's hacks, guess what, they--they public will just have 
to get in line like they're in bankruptcy court. So we're 
trying to build in the protections that are already in the 
securities laws and get folks registered. But yes, we also have 
a robust enforcement effort to try to help best be a cop on the 
beat.
    Mr. Joyce. As you work to regulate the industry what kind 
of benefits do you see blockchain technologies providing to our 
financial services infrastructure?
    Mr. Gensler. It's interesting. I--I was honored to teach 
this up at MIT as well and start this, a course called 
Blockchain and Money. And folks can watch it online apparently. 
It's got rather--it's free. It's free.
    There were two innovations that Satoshi Nakamoto had: 
moving value on the internet and avoiding something called 
double spending. And this underlying accounting ledger really, 
a database called blockchain technology, and--and to avoid 
double spending.
    Not many people have picked up the second piece of it. The 
actual use of blockchain technology is very limited. When I was 
at MIT I was intrigued by it. I still am intrigued as a private 
citizen. In my current role I have to be technology-neutral, 
but I think it's important not to be technology-naive. And 
we've got to still protect the public in this field.
    But to answer your question, really if you go across the 
financial sector, very few if any have actually adopted 
blockchain technology because it's higher cost to keep it 
databased and it's also more copies. More people can see the--
the records as well.
     If I could just say one thing that was raised by others, 
there's an overlap between our two commissions in one way. We 
are also seeing increasing consolidation in the financial 
sector. Only a few market makers are making markets in stocks 
now, particularly for the retail public. The wholesalers, 
there's three or four that really dominate that market. We're 
starting to see much more consolidation in the investment funds 
space and the like. So we're using our authorities to try to 
promote through transparency greater competition and through 
rules of the road. And that's part of what is behind our 
private funds rule as well, is just trying to have more 
competition through greater transparency about fees and 
performance.
    Mr. Joyce. Thank you.
    Thank you for the excess time, Mr. Chair.
    Mr. Quigley. No problem.
    Chair Khan, do you wish to add to that in any way or 
anything else?
    Ms. Khan. No, I would just echo that, you know, we're 
seeing this type of--I think the--the degree of concentration 
and consolidation that we've seen, it's fair to say now is more 
of a systemic feature of parts or economy rather than isolated.
    And I would just note that there's a lot of empirical work, 
but also experience showing that when you have more 
consolidation and more concentration, that creates the 
underlying conditions for more illegal behavior, be that 
monopolization--be that--basically when you have this type of 
underlying concentration or consolidation, that creates the 
underlying conditions for illegal behavior, be that collusion 
or be it monopolization.
    And so I would just note that the degree to which we now 
see this type of underlying consolidation as more of a systemic 
feature, it just underscores how there's a huge need for the 
FTC really being the cop on the beat to make sure these market 
structures are now not being exploited to engage in illegal 
behavior.
    Mr. Quigley. Very good.
    Mr. Ranking Member, do you have anything to add?
    Mr. Womack. I'm good.
    Mr. Quigley. Very good. We want to thank you both for your 
participation today, the work your staff does and your service 
to our country. Thank you, both.
    We are adjourned.
    [Questions and answers submitted for the record follow:]
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