[Senate Hearing 110-620]
[From the U.S. Government Printing Office]



                                                        S. Hrg. 110-620
 
                   NOMINATION OF HON. JAMES A. NUSSLE

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                                 ON THE

NOMINATION OF HON. JAMES A. NUSSLE TO BE DIRECTOR, OFFICE OF MANAGEMENT 
                               AND BUDGET


                               __________

                             JULY 24, 2007

                               __________

        Available via http://www.access.gpo.gov/congress/senate

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs



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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TED STEVENS, Alaska
THOMAS R. CARPER, Delaware           GEORGE V. VOINOVICH, Ohio
MARK L. PRYOR, Arkansas              NORM COLEMAN, Minnesota
MARY L. LANDRIEU, Louisiana          TOM COBURN, Oklahoma
BARACK OBAMA, Illinois               PETE V. DOMENICI, New Mexico
CLAIRE MCCASKILL, Missouri           JOHN WARNER, Virginia
JON TESTER, Montana                  JOHN E. SUNUNU, New Hampshire

                  Michael L. Alexander, Staff Director
                   Lawrence B. Novey, Senior Counsel
                  Kristine V. Lam, Research Assistant
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
        Amy L. Hall, Minority Director for Governmental Affairs
                   Jennifer L. Tarr, Minority Counsel
                  Trina Driessnack Tyrer, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Lieberman............................................     1
    Senator Collins..............................................     3
    Senator Levin................................................    15
    Senator Warner...............................................    17
    Senator Carper...............................................    19
    Senator Sununu...............................................    22
    Senator Tester...............................................    25
    Senator Voinovich............................................    28
    Senator Akaka................................................    31
    Senator Coleman..............................................    33
    Senator McCaskill............................................    35
Prepared statement:
    Senator Obama................................................    43

                               WITNESSES
                         Tuesday, July 24, 2007

Hon. Chuck Grassley, a U.S. Senator from the State of Iowa.......     4
Hon. Tom Harkin, a U.S. Senator from the State of Iowa...........     6
Hon. James A. Nussle to be Director, Office of Management and 
  Budget:
    Testimony....................................................     8
    Prepared statement...........................................    44
    Letter from U.S. Office of Government Ethics.................    46
    Biographical and professional information....................    47
    Responses to pre-hearing questions...........................    54
    Responses to post-hearing questions..........................   107


                   NOMINATION OF HON. JAMES A. NUSSLE

                              ----------                              


                         TUESDAY, JULY 24, 2007

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:01 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Joseph I. 
Lieberman, Chairman of the Committee, presiding.
    Present: Senators Lieberman, Levin, Akaka, Carper, 
McCaskill, Tester, Collins, Voinovich, Coleman, Warner, and 
Sununu.

            OPENING STATEMENT OF CHAIRMAN LIEBERMAN

    Chairman Lieberman. Good morning, and welcome to the 
hearing. Today we are going to consider the nomination of the 
Hon. James Nussle to be Director of the Office of Management 
and Budget.
    The Senate will apparently have two or perhaps three roll 
call votes at around 10:30 a.m., so I hope that we can get 
through the opening statements by Senator Collins and me, and 
then perhaps go to the introductions and your opening 
statement, and then recess when the votes occur.
    But we welcome you here, Congressman Nussle. Your 
nomination comes at a moment of particular budgetary peril for 
the Administration and for Congress. In less than 3 months, we 
must enact 12 appropriations bills to fund the vital functions 
of the Federal Government for the fiscal year beginning October 
1, 2007, that would enable the government to continue to do 
everything from providing for the common defense to educating 
our children, from securing the homeland to providing health 
care for those who cannot themselves afford it, and from taking 
care of our veterans to enabling the agencies responsible, for 
instance, for food safety to do their protective work.
    In other words, these are actions of government that the 
American people depend on, and they are enabled, they only 
happen if we pass these appropriations bills. So we have a lot 
of work to do for our country in a short time, and it can only 
be done if we work together.
    That is why I am troubled by some of the budgetary rhetoric 
emanating at this moment from the White House. It is not 
surprising, obviously, that the President believes in the 
budget he submitted to Congress. That is his responsibility 
and, of course, his right. But I think to threaten vetoes at 
this point of any appropriations bills that in any way exceed 
the Administration's top line does not in the first instance 
respect the responsibility and right of Congress to reach its 
own budgetary conclusions. It also, I fear, sets us up for 
another round of political posturing and mudslinging that could 
shut down parts of our government and definitely will further 
push down the rapidly plummeting opinion the American people 
have of all of us who were sent to Washington to work for them.
    And what will this fight be over? The difference between 
the $933 billion discretionary spending level recommended by 
the President for fiscal year 2008 and the $953 billion top-
line recommendation for discretionary spending set in the 
budget resolution that passed both Houses of Congress. That is 
a $20 billion difference--equal to 2 percent of the 
discretionary spending of the Federal Government for next year, 
and a small fraction of 1 percent of the overall $2.9 trillion 
spending that the Federal Government will do next year.
    It is not to say that $20 billion is not a real difference. 
It is. But it is, in my opinion, one that is not so great in 
either size or substance that it should imperil the operations 
of our government for the fiscal year that will begin on 
October 1.
    I grew up in Connecticut and was greatly influenced by 
then-Governor of Connecticut Abraham A. Ribicoff, who became a 
Senator, in fact, became Chairman of this Committee for a 
period of time. He was a real mentor, and I remember in his 
first term as Governor--I was very young and not following it 
at the time. This I know from history, of course. He was a 
Democrat, and he had a legislature controlled by Republicans. 
And he gave a famous State of the State speech in which he 
described what he called ``the integrity of compromise,'' that 
there are differences of opinion that are sincerely taken, but 
we can never get to a point where we think that compromise--not 
compromise of real principle, but compromise of the positions 
we start with to find common ground--somehow lacks integrity. 
In fact, it is the very essence of government.
    If you will allow me a brief additional moment of 
parochialism, the founding generation of Americans, as we all 
know, had a major disagreement about how to constitute the 
Congress and how to reflect the balance between States of large 
population and small population. This was resolved by what is 
known and has been known ever since as the ``Connecticut 
Compromise'' because two of the Connecticut delegates to the 
Constitutional Convention, Sherman and Ellsworth, which created 
the Senate--which still obviously exists to this day--with two 
Senators from every State regardless of the population and a 
House which reflects population.
    So compromise was honored at the outset of our government 
and has sustained it since, and I think that spirit is what we 
need in the months ahead immediately. You are stepping right 
into a tough situation. You fortunately come to it with very 
broad experience, generally in government but also particularly 
in budgetary matters, having served as chairman of the House 
Budget Committee from 2001 to 2006 and on the House Ways and 
Means Committee for several years.
    The challenges that confront the next Director of OMB, I 
think, will require not only technical and fiscal experience 
and expertise, which you have, but they will also require you 
to use some skills that I know from those who served with you 
that you also showed you had in Congress, which is to serve as 
a bridge builder, a credible intermediary, that obviously you 
have a responsibility to represent the Administration that has 
asked you to take on this significant responsibility, but to do 
so in a way that helps take all of us above political conflict 
to find common ground, to forge the kinds of compromises, 
honorable compromises, that will make our Federal Government 
work better for our country and our people. It is in that 
spirit of respect and challenge that I welcome you here today 
and thank you for your willingness to take on this 
responsibility.
    Senator Collins.

              OPENING STATEMENT OF SENATOR COLLINS

    Senator Collins. Thank you, Mr. Chairman.
    Mr. Chairman, your discussion of the Connecticut Compromise 
brings to mind another famous historical compromise in 1820, 
the Missouri-Maine Compromise, which brought in Missouri as a 
slave State, and Maine, of course, as a free State. But in the 
interest of time, that will be the end of my digression on 
American history and famous compromises throughout the ages. 
[Laughter.]
    I am pleased to welcome Representative Nussle to the 
Committee. His congressional service, particularly as chairman 
of the House Budget Committee, has given him a solid 
understanding of the budget, the legislative process, and, I 
hope, the importance of good relations between the Executive 
Branch and Congress.
    Close cooperation, as the Chairman indicated, will be 
essential as we address the enormous budget deficit and as we 
confront the looming structural deficit born of baby-boom 
demographics and unfunded entitlement obligations. Finding a 
mix of fiscal policies that will honor commitments and meet 
vital needs without throttling economic growth will be a huge 
challenge.
    Following PAYGO rule discipline for entitlement spending 
increases and for additional tax cuts will create a powerful 
tool for budget restraint, yet in my view it is unfortunate 
that the President opposes this tool. This is a subject that I 
intend to explore with Representative Nussle today.
    As recognized in the President's Management Agenda in 2001, 
another tool for meeting the challenge is to improve the 
management and performance of the Federal Government. The 
Management Scorecard for each Federal agency indicates that, 
for most agencies, the weak spot is financial management. Poor 
financial management translates into billions of dollars lost 
to wasteful practices, excessive sole-source contracting, and 
outright fraud.
    In particular, I would welcome the nominee's thoughts on 
how we can best improve Federal contracting procedures. Four 
colleagues--the Chairman, Senators Carper, Coleman, and 
McCaskill--are cosponsors of the Accountability in Government 
Contracting Act that I introduced earlier this year to increase 
competition and transparency in the contracting process and to 
promote a better trained acquisition workforce.
    We must also take care that fiscally driven management 
initiatives do not undermine government's fundamental 
obligation to protect the American people. Reductions in 
homeland security grants to State and local governments, as 
well as the President's proposed cuts in port security and 
infrastructure protection funding, are troubling trends.
    I look forward to hearing the nominee's views of what he 
sees as the top management challenges, what might improve 
agencies' financial management scores, and, most of all, what 
can be done to achieve the political consensus necessary to 
tackle the fiscal imbalance in the Federal budget.
    Thank you, Mr. Chairman.
    Chairman Liberman. Thank you, Senator Collins.
    The Committee is honored to have with us Senators Grassley 
and Harkin to introduce Congressman Nussle. Senator Grassley, 
we welcome you and look forward to your statement now.

TESTIMONY OF HON. CHUCK GRASSLEY, A U.S. SENATOR FROM THE STATE 
                            OF IOWA

    Senator Grassley. Thank you, and I would appreciate both my 
off-the-cuff remarks as well as my statement be printed in the 
record.
    Chairman Lieberman. Without objection, so ordered.
    Senator Grassley. Thank you. Thanks to both you and Senator 
Collins for your leadership here in entertaining this 
nomination, and I notice you are very ecumenical on this 
Committee how you sit Republicans among Democrats. The public 
would be shocked if they saw that.
    This is a very important nomination, and I am sure I am 
going to say some things that will embarrass Congressman 
Nussle, but I think they are important so you know of our 
relationship. When I was running for the Senate the first time, 
he was a student at Luther College, and he drove me around in 
his old Ford to help me get elected, so I feel some obligation 
to him for his early support of my candidacy.
    Second, I have five children, and they all hated politics 
because I spent so much time at it. So I always thought, well, 
it would be nice to have somebody like me in the U.S. Senate. 
So when he ran for the Congress, I backed him, and I considered 
him kind of a little Grassley. And I made that point very clear 
when I was at breakfasts for him in what was then the 3rd 
District of Iowa. But I think he has grown to be a very 
qualified public servant, and I am proud that I worked for him, 
as I hope he is proud that he worked for me that first time.
    He has come to Washington, then, following some of those 
principles he campaigned on--to be a wise steward of taxpayers' 
money. Very early in his congressional career, he took that 
responsibility very seriously. I think he worked hard to ferret 
out wasteful and unnecessary Federal spending, and if 
confirmed, and for the President, not for himself, I think he 
would continue that same thing as OMB Director.
    Being chairman of the House Budget Committee puts you in 
the middle of budgeting, so you understand it. I think that he 
followed on his early Senate career as one example working hard 
for the Deficit Reduction Act of 2005, in which he worked to 
save the taxpayers $40 billion.
    He also understands that the Federal budget process can be 
improved, and I think he demonstrated that by chairing the 
bipartisan task force in the late 1990s, developing a 
bipartisan initiative that is obviously not law, but he worked 
with one of our colleagues now, then-Congressman Ben Cardin, to 
do that.
    With this project, he demonstrated his ability to work 
across the aisle and develop bipartisan projects, and that is 
going to be very important. As the President has one opinion, 
Congress might have another opinion. He is the go-between who 
is going to have to bring common sense to both extremes, and I 
think he can do that. And I think maybe the bipartisanship is 
shown also by the fact that now Chairman Spratt but then 
Ranking Member Spratt intends to testify before the Senate 
Budget Committee in support.
    Given Congressman Nussle's experience, knowledge, and 
commitment to public service, I think it is very fitting that 
the President nominated him, and I think you are going to find 
a very highly qualified candidate as he responds to your 
questions here and you become better acquainted with him. And 
if there is anything you want to know that I have not told you 
about his other-than-public life, I can discuss that with you, 
too.
    Chairman Lieberman. In open session.
    Senator Grassley. In open session.
    [The prepared statement of Senator Grassley follows:]

                  PREPARED STATEMENT SENATOR GRASSLEY

    Mr. Chairman, I'm pleased to have the opportunity to introduce my 
former Congressman and former Chairman of the House Budget Committee.
    Thank you, Chairman Lieberman, for holding a hearing on this 
important nomination.
    I've known Jim Nussle for nearly 30 years. I first met him when, as 
a college student, he drove me around the State of Iowa as I campaigned 
for my first run for the United States Senate in 1980.
    Jim Nussle was elected to the U.S. House in 1991, at the age of 30. 
Congressman Nussle quickly rose through the ranks to chair a committee 
and he excelled in that leadership position.
    One thing Congressman Nussle and I share is our strong belief that 
we here in Washington hold a great responsibility to be wise stewards 
of the taxpayers' money. He took very seriously this responsibility 
early in his Congressional career.
    Few worked as hard to ferret out wasteful and unnecessary Federal 
spending as Congressman Nussle. If confirmed, I'm certain he'll 
continue to be one of the taxpayers' best advocates.
    As Chairman of the House Budget Committee, Jim Nussle didn't just 
focus on the short-term goals. He looked down the road at the long-term 
challenges. An example is the Deficit Reduction Act. With Jim Nussle's 
leadership at the Budget Committee, this was an important first step in 
reforming our entitlement spending. This step saved taxpayers nearly 
$40 billion over 5 years.
    Jim Nussle also understands that the Federal budget process can be 
improved. He chaired a bipartisan task force in the late 1990s, and 
developed a bipartisan initiative--the Comprehensive Budget Process 
Reform Act in 1998--with then-Congressman Ben Cardin. With this 
project, he demonstrated his ability to work across the aisle and 
develop a bipartisan product.
    This respect for the other side continued during his time as Budget 
Chairman. Chairman Spratt intends to testify to this effect later this 
week at a hearing of the Senate Budget Committee.
    Given Congressman Nussle's experience, knowledge, and commitment to 
public service, it is fitting that he's been nominated to be the 
Director of the Office of Management and Budget. Jim Nussle is a highly 
qualified candidate for this post in the President's cabinet. He knows 
the budget; he knows Congress; and he is a decent and honorable public 
servant.
    Jim Nussle has my respect, my trust, and my confidence. I hope this 
Committee will see fit to favorably report his nomination so the full 
Senate may act prior to the August recess.

    Chairman Lieberman. Thanks very much, Senator Grassley, and 
I cannot help but comment that this little Grassley has grown 
to be a mighty Nussle. [Laughter.]
    Senator Harkin. Interesting play on words.
    Chairman Lieberman. Senator Harkin, thanks very much for 
being here.

TESTIMONY OF HON. TOM HARKIN, A U.S. SENATOR FROM THE STATE OF 
                              IOWA

    Senator Harkin. Thank you, Mr. Chairman, Senator Collins, 
other Members of the Committee. I am pleased to join with my 
senior colleague from Iowa in introducing Congressman Jim 
Nussle to this Committee, and as I am sure Members of the 
Committee already appreciate, Congressman Nussle is superbly 
qualified to take on the job of the Director of the Office of 
Management and Budget.
    First elected to represent Iowa's 1st Congressional 
District in 1990, he served for eight terms; joined the House 
Budget Committee in January 1995, elected Chairman in January 
2001, a position he served in for the next 6 years. Congressman 
Nussle is a recognized and well-respected, genuine expert on 
the budget and a master of the budgeting process.
    Now, I have known Congressman Nussle and I have worked with 
him--and against him--for 16 years, and I can tell you, in 
those 16 years of my running and his running, I have searched 
my memory, never once can I think of any one time when Jim 
Nussle ever in my campaigns or others ever did anything 
untoward or underhanded or even anything bordering on the 
unethical. He is a tough campaigner. Don't get me wrong. He is 
a tough guy. But you know where he is coming from, and he is 
always aboveboard. He is a skilled and savvy operator. He is a 
very hard worker. Again, I can attest to that. He is a straight 
shooter whose word is his bond and who can be counted on to 
follow through with the commitments he makes. As Chairman of 
the Budget Committee, he reached out to majority and minority 
members, gave everyone a very fair hearing.
    In addition, Congressman Nussle will bring to the job an 
impressive array of political skills. I think I can attest to 
that, too. He is accessible. He is an excellent communicator. 
He is a formidable advocate for the causes he believes in. And 
if I can be a little bit parochial here, the things that we 
have agreed on and have fought very hard for in the past are 
things that help rural America. Here is a great spokesman and 
advocate for people who live in small towns and rural America, 
our farm families all over the country, not just Iowa. He has 
been a strong supporter of agriculture for all the years he has 
been here. And, again, maybe I am speaking a little bit 
parochially here, but we do not have a lot of clout--well, 
except for Senator Grassley and a few others around here. In 
agriculture, in the Congress, our numbers have dwindled. But 
Congressman Nussle always made sure that he watched out for and 
made sure that in the budgets that came through that our farm 
families and people that live in small towns, Senator Warner, 
were represented in those budget debates.
    One other thing that I have admired Congressman Nussle for 
in the past in his budget work is his support for renewable 
energy. All the things that we have to do to become energy 
independent in this country, and it is not just ethanol, it is 
everything else. Whether it is wind energy, all these other 
things, Congressman Nussle has been really in the forefront of 
that fight.
    I think we need someone like that as the head of the Budget 
Committee who really can see the future and see what we need in 
terms of renewable energy.
    So I will just close by saying that as members of different 
political parties, Jim Nussle and I have often disagreed on 
principles and priorities. That is the way it ought to be. But 
in Jim Nussle, the President has chosen a person of exceptional 
intelligence, competence, and experience. I urge the Committee 
Members to send his nomination to the full Senate with a 
positive recommendation, and I hope we can act on it before we 
leave for the August break.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Senator Harkin follows:]

                  PREPARED STATEMENT OF SENATOR HARKIN

    Mr. Chairman, I am pleased to join with my senior colleague from 
Iowa in introducing Congressman Jim Nussle to the Committee.
    As I'm sure Members of the Committee already appreciate, 
Congressman Nussle is superbly qualified to take on the job of Director 
of the Office of Management and Budget. He was first elected to 
represent Iowa's First Congressional District in 1990, and served for 
eight terms. He joined the House Budget Committee in January 1995, and 
was elected chairman in January 2001--a position he served in for the 
next 6 years. Congressman Nussle is a genuine expert on the budget, and 
a master of the budgeting process.
    I have known Jim Nussle, and worked with him, for more than 16 
years. And I can tell you that he is a skilled and savvy operator. He 
is a straight-shooter whose word is his bond, and who can be counted on 
to follow through with the commitments he makes. As chairman of the 
Budget Committee, he reached out to majority and minority members, and 
gave everyone a hearing.
    In addition, Congressman Nussle will bring to the job an impressive 
array of political skills. He is accessible. He is an excellent 
communicator. And he is a formidable advocate for the causes he 
believes in.
    As members of different political parties, Congressman Nussle and I 
have often disagreed on principles and priorities. But, in Jim Nussle, 
the President has chosen a person of exceptional intelligence, 
competence, and experience. I urge Committee Members to send his 
nomination to the full Senate with a positive recommendation.

    Chairman Lieberman. Thank you, Senator Harkin.
    Congressman Nussle, it obviously speaks very well of you 
that Senator Grassley and Senator Harkin have both been here to 
introduce you. I thank them both. Obviously, I know they are 
both very busy, so we thank them for their presence, and feel 
free to leave at any time that your schedule requires you to. 
Thank you.
    Congressman Nussle has filed responses to a biographical 
and financial questionnaire, answered prehearing questions 
submitted by the Committee, and had his financial statements 
reviewed by the Office of Government Ethics. Without objection, 
this information will be made a part of the hearing record with 
the exception of the financial data, which are on file and 
available for public inspection in the Committee offices 
according to the Committee's custom.
    Our Committee rules require that all witnesses at 
nomination hearings give their testimony under oath. 
Congressman Nussle, would you please stand and raise your right 
hand? Do you swear that the testimony you are about to give the 
Committee will be the truth, the whole truth, and nothing but 
the truth, so help you, God?
    Mr. Nussle. I do.
    Chairman Lieberman. Thank you very much. Please be seated, 
and please proceed with your statement, including we invite you 
to introduce any members of your family who are here.

TESTIMONY OF HON. JAMES A. NUSSLE \1\ TO BE DIRECTOR, OFFICE OF 
                     MANAGEMENT AND BUDGET

    Mr. Nussle. Well, Mr. Chairman and Ranking Member Collins 
and Senators, thank you so much for the opportunity to be here 
today and for the introduction. I appreciate the opportunity to 
testify and to be considered. I want to thank you both for the 
time that you have given me in these past weeks for personal 
conversations, as well as a number of Members on this Committee 
and throughout the Senate. I appreciate the advice and counsel. 
The Chairman spoke very eloquently about the challenge that we 
find ourselves in, and I can report to each one of you that it 
was a challenge that was felt in a bipartisan way in every 
conversation that I had.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Nussle appears in the Appendix on 
page 44.
---------------------------------------------------------------------------
    Many nominees are given the luxury of coming before you at 
possibly calmer times in our history and during the cycle. This 
is not one of those times. Judging from the rhetoric, picking 
up the newspaper, I understand that. But I also enjoy a 
challenge. I am an optimist. I am someone who likes to dive 
right in and tackle tough problems. And I am very interested in 
doing that on behalf of the President and also with, I believe, 
a unique understanding of not only the budget process but maybe 
more importantly how Congress works.
    I will not suggest to you, as I have told you in private, 
that I understand the Senate possibly as well as I understand 
the House. Former colleagues that have served with me in the 
House that have come over to the Senate have reported back that 
it is a little different in the Senate. So it is one of those 
parts of the job that I hope to continue to learn with your 
advice and counsel. But I very much look forward to continuing 
our dialogue, our discussions, and our meetings on a regular 
basis.
    I also want to thank my two home-state Senators. First, my 
``Dad,'' Senator Grassley. It is funny--he told that story on 
the campaign trail when he was campaigning for me about the 
fact that he had hoped that a son--and it is a story that has 
tickled me ever since. He is not always that way when we have 
disagreements, I will say, but he treats me very respectfully 
and has always been there as a mentor, and I appreciate that.
    And Senator Harkin, wow, I wish he was here for me to say 
thank you again in public, because he is right. Many of us are 
not going to agree on every single thing, but there is a way to 
do it. And the Chairman mentioned, I think so well, and it is 
this whole notion--we hear about you can disagree without being 
disagreeable. And, boy, we need that. We really need that, 
because we are passionate about what we believe. Each and every 
one of us come with backgrounds, philosophies, upbringing, 
principles that we fought hard to get here. We wouldn't be here 
if we did not have that. But there is a way to do it, and as 
the Chairman spoke of compromise, we do not have an Iowa 
Compromise in history that I can think of, and we probably, 
like many people from Missouri, are accused of being stubborn. 
There is a song about Iowa being stubborn and sometimes that 
precedes us. But it is passion. It is not partisanship; it is 
passion. And I think you can be passionate without having 
necessarily to be partisan in the negative sense of that word. 
And I believe I can do that.
    So I thank Senator Harkin for the tone that he set that 
suggests that even though Senator Harkin and I have had our 
differences on public policy, we are able to sit next to each 
other and have this kind of discussion and discourse. And I am 
proud of the service that they have provided our State.
    I would also like to thank your staff, Mr. Chairman and 
Ranking Member Collins. They interviewed me this past week, and 
I enjoyed that session. I have a feeling they were not as tough 
on me as you all will be, but it was a good beginning to the 
relationship that I know is a unique one between OMB and this 
Committee. And I look forward to that continuing.
    Also, if I may, Mr. Chairman, I want to thank the OMB 
staff. You do not know--at least I did not know when I accepted 
the President's invitation for nomination--what happens next. 
And some may think that what happens next is you come before 
the Committee. There are a number of preparation sessions; they 
provide briefings. I have no doubt I have so much more to 
learn, but they have done an excellent job, and I want to thank 
them for their professionalism. OMB, the staff at OMB, as I 
have always heard, has a great reputation. I want to continue 
to build on that, Mr. Chairman. I can speak for so many public 
officials who interact with them, and I just want to say thank 
you.
    You are right, I have family here today. My wife, Karen, is 
here, and I want to thank her for her support. She stands by me 
with grace. It cannot be easy to do that. As we all know who 
have spouses who deal with our public service, that is a 
challenge. But she does it with an inordinate amount of grace 
and understanding and patience, and I am very blessed to have 
her by my side.
    As I stated when the President nominated me, Mr. Chairman, 
I feel truly humbled and privileged at this opportunity. If 
confirmed, I look forward to helping to develop the policies 
that will help keep us on the path to balance, keep our economy 
growing, address some of the biggest budget challenges that 
many of us discussed at our meetings in private--about 
entitlement spending growing at an unsustainable rate, 
Medicare, Medicaid, Social Security--huge out-year challenges 
that we are not tackling yet, but that we need to tackle if we 
are going to be serious.
    If I should be confirmed by the Senate, I intend to work 
every day, wake up every morning to try to deal with these 
challenges as straightforward as possible and honor the 
responsibilities the President has nominated me to and that I 
hope you will place upon me.
    I also have to tell you that it feels good to be back in 
Congress. It was in these halls that I learned some really 
amazing things. I have learned some very valuable lessons and 
met some incredible people and formed friendships that will 
last a lifetime. My very first Chairman is in the room here 
today, Chairman Carper, who I served with in the House on the 
Banking Committee when I was detailed to that Committee. I 
remember when then-Minority Leader Bob Michel called me up and 
said, ``You have to serve on the Banking Committee,'' but it 
was a pleasure serving with Chairman Carper.
    And my first Vice Chairman is in the room here today, 
Senator John Sununu. And Senator Sununu and I forged a 
friendship after we actually competed for the job. I don't know 
how it is, but----
    Senator Sununu. It was not very close. [Laughter.]
    Mr. Nussle. There are days, I have to say, where I wish you 
would have won, Senator. But I appreciate that friendship.
    I really do appreciate the chance to follow in the 
footsteps of Rob Portman and Josh Bolten and so many others who 
have demonstrated an ability to not only be a professional 
advocate and representative of the President, but to do so with 
grace and dignity, to be able to reach across party lines, and 
to forge and continue to forge relationships here on the Hill.
    As I was trying to think of how to present this today, I 
cannot help but flash back to a time that Senator Grassley was 
mentioning when I was a student 30 years ago at Luther College 
and a political science class, and my professor, Joan Thompson, 
who is now a professor up in Pennsylvania, decided that during 
our Introduction to Congress class, she was going to teach us 
about the Federal budget process. And I have to tell you, at 
that time I thought to myself, ``When in the world am I ever 
going to find this information useful at all? Do I really need 
to know this stuff about the budget?''
    And what I learned, as you all know, is that the budget 
process interweaves everything we do--you do, I used to do--on 
Capitol Hill, and it is an important part of everything that we 
do.
    I got hooked in this class on the budget, and I will have 
to admit it, I am a budget wonk. I love the budget, the budget 
process, and everything about it that goes along with it. But 
never in a million years as a 19-year-old college student at 
Luther in Decorah, Iowa, would I have thought I would be 
sitting here today, let alone having been chosen by my peers to 
serve on the House Budget Committee and to be chairman, and I 
am honored by that. It is truly an awesome thought for me, and 
I hope my daughter, Sarah, and son, Mark, who are teenagers, 
learn a lesson from this, as well as many other students, who 
sometimes I hear, when they say, ``Why do I have to know 
this?'' My story, I suppose, is a lesson of listening and 
learning even at times when you do not know exactly why you are 
doing it because you really do not know where life is going to 
take you.
    Listening and learning has been something that I have 
always taken very much to heart in my 16 years as I was blessed 
to represent Iowa in the House of Representatives. I believe we 
all govern better when we listen and learn from not only each 
other, but the people that we represent.
    Should I be confirmed by the Senate, I intend to continue 
that philosophy that my parents first taught me was important 
and that the people of Iowa really cemented for me, that 
listening, learning, teamwork, and honesty are paramount.
    Mr. Chairman and Ranking Member Collins and Members of the 
Committee, I am eager to answer your questions and the 
Committee's questions, and I very much look forward to 
continuing to work with you, and I ask for consideration in my 
nomination.
    Chairman Lieberman. Thank you very much, Mr. Nussle, for 
that outstanding opening statement.
    I am going to start my questioning with the standard 
questions we ask all nominees. Incidentally, it strikes me, as 
I heard your statement, that you are starting with a kind of 
unfair advantage with this Committee based on your past 
experience with Senators Carper and Sununu, and the fact that 
you have our former Staff Director, Michael Bopp, advising you 
as to what each of us will do.
    Mr. Nussle. Please do not hold any of that against me.
    Chairman Lieberman. I am going to start with the standard 
questions that we ask all nominees.
    First, is there anything that you are aware of in your 
background that might present a conflict of interest with the 
duties of the office to which you have been nominated?
    Mr. Nussle. No, sir.
    Chairman Lieberman. Do you know of anything personal or 
otherwise that would in any way prevent you from fully and 
honorably discharging the responsibilities of the office to 
which you have been nominated?
    Mr. Nussle. No, sir.
    Chairman Lieberman. Do you agree without reservation to 
respond to any reasonable summons to appear and testify before 
any duly constituted Committee of Congress if you are 
confirmed?
    Mr. Nussle. Yes, sir.
    Chairman Lieberman. We are going to start with the first 
round of questions limited to 6 minutes each. The vote 
apparently will not go off until around 10:40 a.m., so 
hopefully we will have some time for a few Senators to ask 
questions.
    Let me begin with the short-term challenge and what may 
become a crisis that you will step into if you are confirmed. 
What is your view of how to negotiate our way, your way, 
through the difference of opinion between the President and the 
congressional majority on the top-line spending so that, in 
fact, we can keep our government functioning?
    Mr. Nussle. Mr. Chairman, we have been through these 
challenges before. While we are in a new challenge and it may 
seem daunting given the fact that we have, as I understand it, 
27 legislative days before the end of the fiscal year, given 
the August recess and other impediments that I am sure will be 
there to success, as I said in my opening statement, I am an 
optimist. I believe that while there are two speeding trains 
heading at each other--I have always been amazed--none of us 
has ever seen a real train wreck, but we always refer to it as 
a train wreck around here as part of the end of the cycle. 
There is one, as you said, that was going at $953 billion, I 
believe you said, and one that is heading at $922 billion, and 
they are heading at each other.
    Chairman Lieberman. Nine hundred thirty-three billion.
    Mr. Nussle. Excuse me; $933 billion. The sooner that these 
two trains can get onto a side track, the sooner you have 
someone who is in place at OMB who can wake up every day to not 
only work with the President but also work with you to build 
that side track--the sooner that happens, Mr. Chairman, I 
believe the better.
    Exactly how we are going to build that, I have learned also 
in my time as Budget Chairman that you sometimes do not always 
see that clearly, exactly how it is going to come about until 
possibly later in the session.
    But the one thing that we do know, the one thing that is 
almost always clear, is that failure is never the final answer. 
Our country must endure. The Federal Government will continue. 
We need to be able to solve this problem. And I believe it is 
my role, if confirmed by you and the Senate, to do just that, 
to wake up every day to figure out how we can avoid that kind 
of final collision that, while it will not be the final answer, 
will be a very challenging one for all of us, let alone for the 
American people to watch.
    Chairman Lieberman. I appreciate what you have said. Let me 
ask you this specific question: Will you remain open in pursuit 
of an agreement to continue the functioning of our government, 
which is what the public expects from us, to advising the 
President to compromise in any way on spending levels to avoid, 
for instance, a shutdown of the government?
    Mr. Nussle. You asked me if I would remain open. The answer 
is yes, sir.
    Chairman Lieberman. I appreciate that, and I----
    Mr. Nussle. If I may add to that, though. As you know, it 
is a new role, and I have been told this by others that have 
come forward that used to be Congressmen or Senators, that had 
been in that position where you were your own boss.
    Chairman Lieberman. Yes.
    Mr. Nussle. I will have a new boss, and certainly my first 
duty is to uphold the Constitution. But I also know that anyone 
who sits in this chair from the Administration has to report 
back and has to follow the decisions made by that Chief 
Executive. I also know I will need to and intend to do that as 
well. But, yes, sir, I will remain open, and I need to remain 
open if we are going to have the conversations we are going to 
need to have in not only those next 27 days but beyond. We have 
much more work to do than just finishing the end of this fiscal 
year. That is job one. But we have much more to do that we need 
to be able to do together.
    Chairman Lieberman. Let me ask you a big question, and you 
only have about 2 minutes of my time to answer, but it is a 
beginning. So I have asked you a question about the short term. 
In some sense, for you as OMB Director, the long term is going 
to be 18 months for the remaining time of this Administration. 
You referred to the long-term imbalances particularly in 
entitlement programs that jeopardize what our country has 
promised the baby boomers and those who follow them.
    What initiatives do you contemplate during the 18-month 
period to deal with those long-term imbalances?
    Mr. Nussle. If confirmed, Mr. Chairman, I intend to 
continue to be a voice in the Administration that we need to 
continue to break our pick on that rock. It is one, as you know 
from past experience, that may not be solved in 18 months. It 
may not be solved in a comprehensive way in one fell swoop. But 
it needs to be dealt with, if nothing else, with downpayments 
on a regular basis. It is the reason why I, as Budget Chairman, 
tried every year to have a small reconciliation for us to at 
least begin the conversation of reform. And I believe Congress 
and the President should get in that habit together to work on 
small downpayments. If nothing else--and you know these numbers 
better than I do, but 2017 for Social Security, as an example, 
used to sound like a long time away. It is 10 years; 2017 is 
when we stop taking in enough money in the payroll tax to pay 
the benefits for Social Security. That used to sound like a 
long way off. It is 10 years.
    And so we have to begin that process, and while many 
proposals on both sides have been rejected, I suppose, we need 
to keep trying. And I hope to be an advocate in the 
Administration and on behalf of the President for that.
    Chairman Lieberman. I appreciate the answer, and I will 
just conclude by saying, as you said, that the problems, the 
entitlement balances long term are too big and we took too long 
to get to this place we are at to solve them in the next year 
and a half. But as this term of this President ends with you as 
his OMB Director, I think you do have an opportunity to start 
some things that will lead to a solution, perhaps beginning 
some institutional processes, bipartisan, to work us in that 
direction and maybe turn some recommendations over to the 
incoming administration. So I thank you for your commitment to 
do that.
    Senator Collins.
    Senator Collins. Thank you, Mr. Chairman.
    Congressman, I am very impressed with the support that you 
have received today from Senator Harkin and also from Chairman 
Spratt with whom you have worked so closely over the years, and 
they both have attested to your ability to work across party 
lines. You do have some critics, however, who suggest that you 
are simply too partisan for a job that requires extensive 
outreach to Congress.
    I want to start my questioning today by giving you the 
opportunity to respond to those charges.
    Mr. Nussle. Well, first of all, Senator, I appreciate the 
opportunity to do that, but let me suggest that probably all of 
us from time to time could have those charges leveled at us, 
particularly when you are given the role of leading a charge on 
probably one of the most partisan things that we do around 
here, and that is the budget.
    We have never passed a bipartisan budget. We have passed 
bipartisan agreements at the end of the year, omnibus plans, 
funding agreements, things like that. But the very first thing 
we do in Congress, to my frustration and I know to many of 
yours, is the budget, where we break up into shirts versus 
skins, Republicans versus Democrats, and we form these two 
teams, and we go at each other on the priorities. And as the 
Chairman said, sometimes we argue about 2 percent here and 1 
percent there, and maybe just a variation on a reform measure. 
But it would seem like we would never be able to come together 
at the beginning of the year, but at the end of the year 
somehow we find the ability to do that.
    My role, fortunately--and I appreciated the role--was to 
not only gain the consensus of my colleagues in the House, but 
also to present that. And oftentimes that is presented in a way 
that seems very passionate, as I said in my opening statement, 
but often perceived to be partisan.
    I believe that the way I would like to be judged is not 
only by how you battle each other on the floor and during 
debates like that when passions certainly can sometimes even 
get the best of you, but it is also how you conduct yourself 
behind closed doors and with colleagues and honoring agreements 
and working together to find consensus when that becomes the 
opportunity. And I believe I have done that as well.
    So I confess to being a passionate person. Sometimes that 
is perceived to be partisan. But it is never intended to be.
    Senator Collins. Thank you. I now would like to turn to an 
issue that is very important to my constituents, and that is 
the Low-Income Home Energy Assistance Program (LIHEAP). If you 
look back at the hearing records for OMB Directors, you will 
find that I raised this issue with every single one of them.
    If we would release the funding for the LIHEAP program 
during the summer months, we would allow it to serve far more 
people because the cost of home heating oil, for example, is 
lower in the summer months than during the height of the 
winter.
    Now, last year, shortly after he was confirmed, Director 
Portman in response to my concern raised at his nomination 
hearing released $80 million in unspent fiscal year 2006 
emergency LIHEAP funds for the purpose of providing a limited 
summer fill program. And it was a huge success. It allowed us 
to help more of our neediest citizens before the winter months 
hit.
    Now, currently there is about $200 million in fiscal year 
2007 emergency LIHEAP funds. It would be extremely beneficial, 
not only to my constituents but to others throughout this 
country who rely on this important program, if the funding were 
released now. I am asking: Would you be willing to take a look 
at the issue of releasing advance funding to see if at least 
some of that $200 million in unspent emergency funding could be 
used to help those who are really struggling with the high cost 
of energy to heat their homes?
    Mr. Nussle. Yes, Senator Collins. If I am confirmed by the 
Senate, I would be very pleased to not only take a look at it, 
but to work with you to try to address this. My understanding, 
again, because of our knowledge of your concern in this area 
and your leadership in this area, is that the Director is 
looking at that actively even this summer. But I do not have 
that information about what he is doing any more than I am able 
to until I am confirmed. But I would be honored to be able to 
work with you on that, and, yes, I would be interested in 
talking to you about that further.
    Senator Collins. Thank you. Let me now very quickly switch 
to another issue. A mission of OMB's that is not well known is 
the responsibilities that OMB has for providing guidance to 
agencies for the security of private information that agencies 
collect, whether it is birth dates or addresses or Social 
Security numbers. And in the last year, we have seen a number 
of very troubling breaches where private information of our 
citizens has been lost, stolen, or inadvertently released by 
Federal agencies.
    What do you plan to do, if you are confirmed, to ensure 
that individuals' sensitive, private information is better 
protected than it is now?
    Mr. Nussle. Well, Senator, if I am confirmed, I will be 
working with the administrator of E-Government that, as you 
know, is part of OMB to ensure that this information is 
secured. It is troubling to me, as well, as I hear of those 
kinds of reports. I cannot speak to them specifically, not 
having been in the position yet. But I understand and would 
take it very seriously as the role of the Director to work with 
those agencies, to ensure that this information is protected. I 
know that is part of the role of the legislation that has been 
passed, and I know that is an important issue for this 
Committee. And I would work with you and other Committee 
Members to ensure that this mission is carried forward to 
success.
    Senator Collins. Thank you.
    Chairman Lieberman. Thanks very much, Senator Collins.
    I have just been informed, in the spirit of the Senate and 
the tempo of the Senate, that the votes will now not occur 
until 12:20 p.m. So we can actually have a hearing here.
    Senator Levin, your turn.
    Senator Levin. Thank you, Mr. Chairman, and let me add my 
welcome, Congressman Nussle.
    Mr. Nussle. Thank you.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. As Chairman of this Committee's Permanent 
Subcommittee on Investigations and formerly as its Ranking 
Member, we have spent a great deal of time looking at what is 
called the ``tax gap,'' which the IRS has estimated to be about 
$350 billion. That is the gap each year between the amount of 
taxes owed and the amount collected.
    One of the sources of that tax gap is abusive tax shelters, 
and these are the illegitimate ones that have no economic 
substance other than to attempt to provide large tax benefits 
to the individuals that are using them. And so we end up with 
people not paying their fair share of taxes, usually upper-
income folks, and the rest of us then have to pick up the 
burden.
    Can you tell us your position in terms of going after these 
abusive tax shelters? Have you supported that effort in the 
House? And, generally, what is your position?
    Mr. Nussle. I have, Senator. As you know, it has been an 
issue that has come to the forefront more recently. But during 
my time as Budget Chairman, it was an area that we did look 
into and continue to be concerned about. And I would not only 
work with Treasury but also with you, if I am confirmed, to do 
what we can to ensure that we are collecting the taxes that are 
due.
    Let me say further, if I may, that I am someone who was a 
proponent of looking at our entire Tax Code for comprehensive 
reform. I believe that we should consider reforming our entire 
Tax Code, and as part of that, I believe we can and have the 
opportunity to take a look at all of these different areas that 
you are suggesting as part of that comprehensive reform.
    So yes, sir, I think it is an important issue that we 
should and I would be happy to work with you to sink our teeth 
into.
    Senator Levin. Thank you. We have lost 3 million 
manufacturing jobs in this country in the last 6 years. I know 
that you, by reputation and by the introductions today, have a 
special sensitivity for rural areas, and that is great. We need 
to do that wherever those rural areas are. But in the area of 
manufacturing, we have lost 3 million jobs without much of a 
peep from this Administration.
    Other countries support their industry. They partner with 
their industry. Our companies are not competing with companies 
overseas. They are competing with countries that support their 
industries.
    Have you taken a position on a couple of programs that are 
important in terms of manufacturing? One is called the Advanced 
Technology Partnership, and the other one is called the 
Manufacturing Extension Partnership. Have you supported those 
programs in the House?
    Mr. Nussle. Honestly, I would have to look back in my 
record, Senator, to give you an accurate answer. I am not sure 
what my record would be on that.
    Senator Levin. Do you believe there is a very important 
vigorous role that is essential for the Federal Government in 
terms of support of manufacturing in America?
    Mr. Nussle. Yes, sir, and please do not let the name 
``rural'' disguise the fact that Iowa has a number of small 
rural companies and also some pretty large manufacturers as 
well. We lost just recently Maytag, as an example, in Iowa and 
over the years have had some enormous challenges with John 
Deere, as an example. So we have some small and large 
manufacturers. I am very sensitive to that, represented those 
areas in my district. I believe in order for us to be 
competitive, one of the areas, as we were just talking, is our 
Tax Code, because one thing that we have always prided 
ourselves on in this country is that we have an arm's-length 
relationship with those businesses. Some countries are very 
overt in their partnerships with those companies. We try and 
take an arm's-length relationship with them.
    But one of the ways that we can ensure that they are 
competitive is through our Tax Code, and I believe that is an 
area that should be ripe for discussion and for proposals 
within comprehensive tax reform.
    Senator Levin. The OMB's Office of Information and 
Regulatory Affairs, OIRA, has as its primary job the review of 
draft agency rules before they are published. They are 
published for public comment before they are adopted. Under the 
existing Executive Order, the process of those rules and their 
consideration during the drafting process is supposed to be a 
transparent one, and the current Executive Order says that it 
must be disclosed to the public those changes in the regulatory 
action that were made at the suggestion or recommendation of 
OIRA. In other words, the relationship between the agencies and 
OIRA is a critical one.
    But OIRA has now circumvented the Executive Order by 
establishing a process of informally reviewing--the word 
``informally'' being the key one--agency-proposed rules before 
the proposed rule is formally presented to OIRA.
    Now, changes that are made because of these informal 
reviews are not disclosed to the public, although the Executive 
Order does not make a distinction between changes based on 
formal presentation or informal presentation by an agency to 
OIRA. It says ``changes that are made at the recommendation or 
suggestion'' are supposed to be disclosed to the public.
    Will you see to it that the Executive Order's spirit as 
well as its letter is maintained and that changes that are 
proposed, recommended, or result from conversations between the 
agencies and OIRA are disclosed to the public?
    Mr. Nussle. Senator, if confirmed, I will take a look at 
that. I have been made aware that this is an area of concern, 
and it is a challenging area because, of course, you need to 
have something to look at. And until a regulation is formally 
presented, until there is a regulation to discuss, it may be 
difficult--and I think we are going to have to talk to counsel 
to understand exactly how that process works--to know when that 
Executive Order formally kicks in.
    I am not sure I am in a good position, having not held the 
job yet, to do more than say I am aware of the challenge. I am 
for transparency. I believe that our processes should be 
transparent. My understanding is that there is a new website 
where these regulations are posted so that we have better 
transparency for the general public as well as you and the 
staff as to how these regulations are promulgated. The 
Executive Order in and of itself commands transparency that was 
not there prior to the last two Administrations.
    So we are working to become more transparent. That would be 
my endeavor. I would be happy to work with you, if I am 
confirmed, to ensure that continues. But to jump into the 
middle of that legal, should I say, interpretation at this 
point without having had the job, I think, would be a challenge 
for me.
    Senator Levin. Thank you. Thank you, Mr. Chairman.
    Chairman Lieberman. Thanks, Senator Levin. Senator Warner.

              OPENING STATEMENT OF SENATOR WARNER

    Senator Warner. Thank you, Mr. Chairman.
    We welcome, as American citizens, your willingness to 
return to public life and have your family accept the long 
hours and heavy burdens of the office to which you are about to 
be confirmed.
    Mr. Nussle. I did not tell her about that. Don't---- 
[Laughter.]
    Senator Warner. Well, I could give a little advice having 
been in a position comparable in my past years. All the 
decisions made after 8 p.m. are usually reviewed and reversed 
in the morning. [Laughter.]
    So get him home.
    My dear friend here Carl Levin and I came to the Senate 
together 29 years ago and joined the Armed Services Committee, 
and since that time the distinguished Chairman has become a 
member of the committee, Ranking Member Collins, and Senator 
Akaka, so there are at least five of us on this Committee that 
have the privilege to be on that historic and great committee.
    But we have watched here under the Administration of 
President Bush the repeated necessity--I will use that word for 
the moment, ``necessity''--to have a major part of our defense 
expenditures processed quickly by the Appropriations Committee 
and passed on to the President.
    That just does not work. It does not work for the benefit 
of the men and women of the armed forces, the overall 
programming, the long-term programming. The Armed Services 
Committee is an authorizing Committee. It is there for a 
specific purpose. The Appropriations Committee is to make 
allocations, important decisions as to the quantum of money for 
the various programs that we authorize.
    We have extensive hearings going into all aspects of 
defense spending, and predicated on our findings in those 
hearings are the decisions made to authorize or not authorize 
or to authorize at levels that we deem appropriate.
    It has gotten to a point where it has almost broken down, 
and I am not faulting the appropriators. This burden, in a 
sense, has been cast upon them.
    I would like to have your views--fortunately, you have been 
in the Congress, and you understand the difference between an 
authorizing committee and an appropriations committee--and what 
steps you will take hopefully to correct the major departure 
from the historic way the Congress of the United States has 
handled this all-important budget for our national defense.
    Mr. Nussle. Well, Senator, first of all, for you to ask my 
advice on this matter honors me because there is no one that I 
am aware of that is any stronger advocate and has more 
expertise when it comes to defense matters. And so I am honored 
that you would even ask me the question.
    Let me suggest that this is an area where my passions may 
have spilled over, maybe even in a nonpartisan way. I believe I 
was the first Republican, and certainly the only Chairman that 
I am aware of, that criticized the Administration for the 
method by which it has funded the war going back to the very 
beginning of that war and suggested that appropriation by 
supplemental after supplemental after supplemental is part of 
the challenge that not only our overall budget has but that we 
have seen continue as a challenge for giving the kind of 
predictability you spoke of for our men and women in harm's 
way.
    If confirmed, I will continue to be a strong voice even if 
that is to the disagreement of others within the Administration 
that I believe that, as much as possible, this needs to be 
budgeted. That is what a budget is. It is a plan. It is 
indicating what your priorities are. It is indicating how long 
that challenge or that opportunity may be out there. It is 
recognizing the costs not only from a fiscal standpoint, but it 
is recognizing how it is balanced within those priorities. And 
I wanted to see that built into the Administration's plan.
    The good news--and I am certainly not willing to take any 
credit for this because there were many who have joined in that 
chorus on both sides of the aisle in a bipartisan way--is that 
the Administration now does that to a much better job than it 
did in year one, two, and three of the war. This year, as an 
example, it does build that into the budget, and it does not 
only build in the supplemental into the budget, but also 
recognizes certain out-year obligations.
    But we could do a far better job, and Senator, I think the 
challenge between authorizers and appropriators is one that, 
while I would wish you and I would be able to change, is a 
natural tension that has been there for quite some time within 
the Congress. Sometimes that tension is good. It provides 
oversight. It provides for the kinds of debate and discourse 
that needs to occur within very challenging areas, such as 
homeland security, such as defense. They are paramount 
responsibilities of the Federal Government.
    But other times it can be very problematic where an 
authorizing Committee comes in at a very high level of 
spending, and then when the appropriators do not match it, 
there is confusion over, well, wait a minute, wasn't there 
supposed to be a little extra money there?
    So it is a natural tendency----
    Senator Warner. I am fully familiar with that. That has 
always been a historic part of the disagreement between the two 
Committees. But it is this constant enormity of these 
supplementals that come through without even a glimpse by those 
of us who spend our whole time on defense. Appropriations 
scatters itself over all the issues before the Congress.
    Mr. Nussle. Well, sir, I share that concern. I have been an 
advocate, as I know you have, in that regard. I may not win 
every battle that I wage, but when I believe in something, I 
will be glad to tell you that, and I will be glad to tell 
colleagues on the other side of the aisle, or my boss.
    Senator Warner. Well, there may be some means by which on a 
supplemental the authorizers could take a quick look at it--not 
hold it up, but a quick look--to give its views before it went 
on to the Appropriations Committee.
    Thank you very much. Good luck.
    Mr. Nussle. Thank you. Yes, sir.
    Chairman Lieberman. Thank you very much, Senator Warner.
    Senator Akaka was next, but he had to leave, so Senator 
Carper.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thanks very much.
    Welcome, Congressman Nussle, it is good to see you, and we 
are delighted that you are before us today.
    I would say to my colleagues, I came to the House of 
Representatives in 1982 following the election that November, 
and a member of our freshman class was John Spratt, who, as we 
know, has been working with Congressman Nussle for some time on 
the Budget Committee in the House.
    I do not know about the rest of you, but when I am trying 
to find out whether to hire somebody, one of the things that my 
staff and I always like to do is call folks, on the Q.T., who 
have worked with the particular candidate and just say, well, 
what do you think, what was this man or woman like to work 
with. And I took advantage of my friendship of long standing 
with John Spratt, just to call him and say, ``Talk to me about 
Jim Nussle. What was he like to work with? What was he like to 
serve with? Talk to me about his intellect, his honesty, his 
ability to keep a promise.'' And I would just share with all of 
you, as I am sure Congressman Spratt will share with the Budget 
Committee, his high regard for Jim Nussle and his belief that 
he will serve ably in this post. It was a pleasure to serve 
with him in the House as a member, and I was privileged to be 
among the folks that served with him on the Banking Committee.
    I want to really ask you to comment on three things. First, 
I want to go back to, I guess it was, 1995 and 1996 when there 
was a meltdown in the budget process. The Federal Government 
came to a halt. We had a President of one party; we had a 
Congress with the majority of the other party. And let me just 
ask what lessons do we take from that experience--not a very 
good experience for any of us. But what lessons do we take from 
that experience and how can we avert that today when we have a 
President of one party and a Congress with a majority of the 
opposite party?
    Mr. Nussle. Well, as the Senator knows, you were governor, 
I believe, at that time, but I was here for that, and I guess a 
couple of lessons.
    First of all, it wasn't the final answer, and the one thing 
that we know about it is that it certainly is one of the 
chapters in the challenge, but it is not the final answer. Even 
when there is a breakdown, there needs to continue to be the 
kind of communications and conversation, debate, discussion 
that needs to occur to find a solution. That would be lesson 
No. 1.
    Lesson No. 2 is that we need to start earlier, and every 
one of my reform proposals that I have put forth has always 
tried to force earlier conversations about what we know is 
going to be a problem. On day one, when the President came out 
with $933 billion, I can tell you if the Chairman is as able as 
I know he is, Kent Conrad and John Spratt, I know they knew 
that was going to be a difficult budget. And by the same token, 
the President was put on pretty early alert when the budgets 
were passed at $953 billion. So there was an early warning 
signal that we had a problem.
    Since then there has not been the kind of communications 
that needs to, I believe, go on. Part of it is because there 
have been a number of other very challenging subjects that have 
come up. But early communication, which is why I am stressing 
the need to, with only 27 legislative days left in the fiscal 
year, have someone who wakes up every day and goes to OMB and 
works on this problem on behalf of the President, as well as 
recognizing the sensibilities of what's happening here on the 
Hill, I think, is vitally important if we are going to find 
that answer.
    Senator Carper. Alright. Thank you. I want to return and 
visit just very briefly with you a matter we touched on when 
you were kind enough to visit with me. One of my focuses in my 
6 years that I have been here has been how do we provide cost-
effective airlift in the 21st Century for our country. And we 
do that with a combination of airlift and sealift. Most of the 
cargo that we move around the world to support our troops we do 
with ships. Most of the people that we move around the world, 
our military personnel, we do it with aircraft. Roughly half 
the folks go on commercial aircraft and half the folks go on 
military aircraft.
    I talk about an air bridge that includes C-5s, that 
includes C-17s, that includes C-130s. We are operating 
currently with a game plan going forward of eventually flying 
190 C-17s, a wonderful aircraft. We are just getting a new 
squadron of them in the Dover Air Force Base. We are also 
calling for--the Department of Defense is calling for 110 C-5s, 
and then a bunch of C-130s to supplement those aircraft.
    About 2 or 3 years ago, the Congress passed legislation 
that said, before we retire additional C-5s, we want to make 
sure that a modernization effort is underway to fully modernize 
the aircraft--new engines, new hydraulics, 70 new systems in 
all, new cockpits--we want to make sure that we have the 
opportunity to update, fully modernize three aircraft, flight-
test them for 18 months, and evaluate them before we decide 
whether or not to retire any additional aircraft.
    This is probably something you have not given a lot of 
thought to, but I want you to keep your eye on this ball, and I 
would just ask that you do that as we go forward.
    Mr. Nussle. I appreciated the conversation we had, Senator, 
and I would be very happy to work with you on this issue. I 
thought your arguments were very compelling. But you are right, 
I do not have a lot of independent information about that, but 
I would be very happy to work with you because I know it is a 
concern to you.
    Senator Carper. Thank you. The last thing I want to say in 
the few seconds that are remaining, we are going through a time 
in our country--and one of our colleagues has already 
mentioned, I think Senator Levin, the loss of 3 million 
manufacturing jobs. We are seeing a diminution, almost a scary 
diminution, of our manufacturing base with respect to 
automobiles.
    One of the things that several of us--Senator Voinovich and 
myself, Senator Levin and others on the Committee--have focused 
on is how do we, on the one hand, reduce our reliance on 
foreign oil, how do we reduce the emission of harmful stuff 
into the air, and how do we maintain a manufacturing base, 
including an automotive manufacturing base.
    As I see it, there are several roles that the Federal 
Government can and should take. One of those is R&D 
investments, including investments in new battery technology, 
to make available the creation of plug-in hybrid vehicles that 
will enable us to compete around the world; second, using the 
government's purchasing power to help commercialize new 
technologies and advance the technology business, both on the 
civilian side and on the defense side. Maybe a third is to use 
tax policy to incentivize folks to buy more energy-efficient 
vehicles in this country and to reduce our reliance on foreign 
oil, to clean up our air, and to try to make sure we have a 
manufacturing basis.
    Your thoughts on those three roles: Again, R&D investments, 
including new battery technology; using the Federal 
Government's purchasing power to help commercialize new 
technology; and, lastly, a tax policy to help incentivize 
people to buy more energy-efficient vehicles.
    Mr. Nussle. Well, Senator, I know of your leadership in 
these areas, and I agree with all three. If I may be permitted 
to add one more in addition to that, I would add education, and 
I understand that the States take the primary lead with regard 
to education, but science education and entrepreneurial 
mentoring, if you will, because we need to create not only the 
jobs of the future, but we also need to create the job creators 
of the future if we are going to be successful. And certainly 
within that atmosphere that you are creating, with energy 
policy, with R&D through a more competitive tax policy, we have 
to make sure that our young people, and others, through non-
traditional ways are constantly learning and keeping up with 
the skills they are going to need to be able to not only take 
those jobs but create those jobs.
    Senator Carper. Thanks very much, and good luck.
    Mr. Nussle. Thank you.
    Senator Carper. Thanks, Mr. Chairman.
    Chairman Lieberman. Thank you, Senator Carper.
    Just for the information of my colleagues, the order in 
terms of arrival is Senators Sununu, Tester, Voinovich, and 
Coleman.
    Senator Sununu.

              OPENING STATEMENT OF SENATOR SUNUNU

    Senator Sununu. Thank you, Mr. Chairman, and it is great to 
see Mr. Nussle here. I am only a little bit disappointed that 
he brought up our campaign to be Budget Chairman, although that 
probably worked out very well for both of us. He did a great 
job at the Budget Committee, and obviously the next year was 
the year that I ran for the Senate, and I was very pleased to 
be assigned to this Committee, Mr. Chairman.
    I want to make a few observations about this process, and 
then I have a question about the ``M'' in OMB, the management 
responsibilities in oversight and what you hope to bring to the 
agency from that perspective.
    Both you and a few of the Senators, who have already 
spoken, I think made some important points, but they really 
should be emphasized because, despite the support you may have 
here, any nomination can be a little bit challenging. A lot was 
made of bipartisanship. Bipartisanship is important. In the 
legislative process, we look for bipartisan relationships 
because they might help us to enact legislation more quickly.
    But as was pointed out, whether we like it or not, the way 
the 1974 Budget Act was written, it created a very partisan 
process. I think this Committee probably ought to look at why 
that is and what the shortcomings of the 1974 Budget Act are. 
Because if we are frustrated by the partisanship of that 
process, then we need to look at the law because that is 
largely what drove it. Under Democrats or Republicans, the 
budget process has been extremely partisan, and that is 
certainly not Jim Nussle's fault.
    In fact, I think the point we have to look at is in a 
partisan environment, what are the characteristics that we 
really want in a leader. Whether it is the leader of OMB or 
leader in any other part of the Executive or Legislative 
Branch, we want professionalism, we want civility, we want 
integrity, and we want credibility. And if we listen to Senator 
Harkin, Senator Grassley, and their personal experiences, and 
Congressman Spratt, with whom I was pleased to work with in the 
House on a lot of partisan matters, those are the 
characteristics that Mr. Nussle has brought to his job in the 
House and I know he will bring to OMB.
    So I think it is at least as important as we talk about 
those characteristics of professionalism, civility, and 
integrity as we ask the question of what kind of a job Mr. 
Nussle will do at OMB.
    And as a corollary to that, if someone does not think that 
Mr. Nussle has those characteristics or has not exhibited them 
to the extent that they might have liked to have seen in the 
past, I hope they will be up front, honest, and professional 
about describing those instances where Mr. Nussle may have 
fallen short. And I will say to date what I have heard mostly 
from the few voices that have provided some criticism is 
phrases like people have said to me that they felt Mr. Nussle 
was ``a little confrontational at times,'' or ``I heard that 
someone said that they had a problem with him.''
    Well, that is not appropriate. It is simply not appropriate 
to criticize someone's performance by repeating rumors or 
secondhand information that you may or may not have heard from 
someone else. If someone has a criticism, I hope that they will 
absolutely be public and give Mr. Nussle the opportunity to 
deal with that very directly, as I know he always has. Whether 
Republican or Democrat, as we have heard, if you have had a 
disagreement with him, he is happy to talk to you about it 
directly and honestly, and that is what professionalism, 
civility, and credibility is all about.
    Finally, on matters of policy, it is important that we 
bring up policy initiatives that we care about as senators or 
House members in dealing with the Director of OMB. But I do 
hope that a disagreement on a particular vote or a particular 
issue is not a requisite for not supporting the nominee. 
Otherwise--not that any of us harbor any aspirations to ever be 
nominated by any executive to any position, but if disagreement 
on one vote one time is a reason to vote against a nominee, 
none of us are going anywhere.
    So I think this is a terrific nominee from personal 
experience, but also observing from afar the work that Mr. 
Nussle has done in his past. And as I said, I want to come back 
to this issue of management. There is responsibility for 
financial management within OMB, for transparency issues and 
accountability, for the financial systems that other 
departments and agencies bring. I want to give you an 
opportunity to talk about one or two areas that you think we 
can really improve the way the Executive Branch goes about day-
to-day management and oversight and accountability on the 
financial management side.
    Mr. Nussle. Well, Senator, first let me say thank you for 
your comments, and I, too, while I have observed people on the 
other side who have disagreed with me from time to time, cannot 
think of a time where I have ever questioned their motives. 
They sincerely disagree, and they sincerely and very 
passionately disagree with me on issues. That does not mean 
they are partisan. That means they have passionate 
disagreement. And that is healthy for our system. In some 
countries, that spills out into the streets. Thankfully it only 
spills into a committee room now and then, and sometimes to the 
floor. And while we find that distasteful, it is better left 
there than on the street.
    With regard to management, I have had a chance to be 
briefed on a number of these, and I would be very interested, 
if I am confirmed, to work with you and others on this 
Committee who I know are very concerned about the ``M'' in OMB, 
and appropriately so. The three that I observed and have asked 
questions about maybe more intensely than others:
    First, the fact that in the next 10 years, 60 percent of 
our Federal workforce will be eligible for retirement. We are 
going to lose a lot of good people to retirement, appropriately 
so. How do we replace them? How do we find the kind of quality 
individuals who are willing to be in public service and serve 
the needs of our country, our communities, and our 
constituents?
    Second, keeping up with technology. The whole E-Government 
office that is part of OMB has a monstrous task; $66 billion is 
the number I was told that the Federal Government is purchasing 
and has under its control, assets involving information 
technology. It is a daunting task, and if you are in a small 
business in Iowa just trying to keep up with the advances in 
technology, it is hard enough. Trying to do it as a Federal 
Government with $66 billion plus in your ledger for financing, 
making sure they communicate, making sure they are adequate, 
making sure they are doing the things you wanted them to do, 
all of that is very important.
    The third is financial management in general. I remember 
one of my very first hearings on the Budget Committee, a 
hearing about some of the financial management challenges at 
the Defense Department, as an example, and others where we are 
just not able to do an audit. People find money all the time. 
They find that they lost money all the time. I picked up the 
paper the other day, and dead farmers are getting farm 
payments. We pick up the paper, and we find that ice is shipped 
some place away from Hurricane Katrina and melted at taxpayers' 
expense, according to the GAO report. I mean, we find this all 
the time, and we wonder why can't we do a better job of 
managing those billions, let alone the nickels and dimes that 
go around.
    So those are the three big management challenges, and they 
involve enormous sums of money. We will argue and debate and 
discuss and hopefully come to a conclusion over this 2 percent. 
But I can tell you, we probably and unfortunately waste more 
than that in the Federal Government just this year alone. And 
the President's budget has a number of areas that I have been 
informed about that work on these improper payments, and there 
has been some savings--I believe $9 billion just in the last 2 
years have been saved through some reforms in improper 
payments. But much more work needs to be done there, and so 
those would be the three huge management challenges, I would 
say, that confront the next Director, and I hope I am confirmed 
to be able to take those on and tackle them.
    Senator Sununu. Thank you, Mr. Chairman.
    Chairman Lieberman. Thanks, Senator Sununu. I was thinking 
as Senator Sununu was raising the question of the allegations 
of your partisanship, some say from your record in the House 
you were quite bipartisan. Others say you were quite partisan, 
and they cite a single incident. So I think to make the record 
of this hearing complete, I should ask you, if confirmed, 
whether you pledge never to put a paper bag over your head 
again. [Laughter.]
    Mr. Nussle. Mr. Chairman, everyone is--at least I have 
always thought everyone is allowed at least one freshman 
mistake. It is one of those incidents that--I am proud of the 
fact that it rooted out what was, I think, a bipartisan 
scandal. It was not a partisan scandal.
    Chairman Lieberman. Right.
    Mr. Nussle. It actually was a bipartisan scandal. But I 
believe I can safely commit to you, Mr. Chairman, that I will 
not be doing that.
    Chairman Lieberman. That is very reassuring. [Laughter.]
    Not just to the Committee, but I am sure to the 
Administration.
    Mr. Nussle. And to my family as well, I would have to say.
    Chairman Lieberman. Thank you very much. Senator Tester.

              OPENING STATEMENT OF SENATOR TESTER

    Senator Tester. Thank you, Mr. Chairman. I want to thank 
Jim Nussle for being here today.
    I appreciate your comment on Senator Warner's question 
about the war in Iraq being funded not through the regular 
budget process but through supplementals and how you would 
fight to make sure that changes back. At least that is what I 
heard you say.
    Mr. Nussle. Yes, sir.
    Senator Tester. And I would be interested to know, just on 
a side note, if you could tell me why it was done that way. It 
does not make any sense. You were chairman of the Budget 
Committee in the House for most of the time that was going on. 
Why did they go the supplemental route? I could see it maybe 
the first year, but 4 years out, 5 years out?
    Mr. Nussle. Senator, I can only give you the answers that I 
was given at the time and that you have probably been given as 
well, and I will not dwell on them except to say most of the 
reason for having a supplemental ever is because during the 
normal budget process, something could not have been budgeted 
for. It was an emergency. But let me get to why I was 
frustrated.
    Senator Tester. Sure.
    Mr. Nussle. But that is the argument that is always made: 
We do not know how much it is going to cost; we do not know 
what the exigency will be; we do not know what challenges will 
lay out there.
    But it was never zero. The challenge I saw was they would 
fail to fund it in the year, and then in the out-years pretend 
as though they were not going to be there. And that was 
frustrating to me.
    So I agree with you that at least there ought to be some 
acknowledgment, and that is what was not there until this year. 
Finally, there has been, I think, some good work in 
acknowledging that challenge.
    Senator Tester. Well, I appreciate your leadership in 
pushing that forward to make sure it is done right in the 
regular budget.
    On veterans, there has been a lot of talk about the funding 
for veterans. There has been a lot of talk about the needs in 
the Veterans Administration with Operation Iraqi Freedom and 
Enduring Freedom, the war in Afghanistan, on and on, disability 
claims, health care. The list goes on and on.
    Your perspective? Where are we at? Are we headed in the 
right direction as far as veterans benefits and the allocation 
of the dollars? And is it getting to the veterans on the 
ground? Are we moving in the right direction?
    Mr. Nussle. Well, Senator, in a bipartisan way, together 
with members of my committee, I never saw a President's budget 
that we were not willing to plus up a little bit for the 
veterans because of their service. This was true during the 
Clinton Administration; it was true during the Bush 
Administration. It will probably be true for a time to come. We 
need to honor their service. We need to make sure that their 
benefits are paid. We need to make sure that they have adequate 
access to those services.
    But I also believe we should constantly look at ways to 
deliver those services that recognize a changing world. I 
represented a rural area, and you, obviously, probably 
represent one of the most rural areas in the country. And 
access to veterans' services is challenging.
    We came up with this clinic system as an example where 
outpatient clinics could be put forth. Those are bipartisan 
discussions as a way to be able to serve veterans in a new way 
than maybe the outdated ways that were done during the 1960s 
and 1970s. We need to constantly look at reforming the system 
to make sure those dollars are delivered to the veterans.
    Senator Tester. I appreciate that, and I appreciate your 
commitment to the people who served, making sure they get the 
benefits that are owed.
    Native Americans, the trust responsibility, the fact that 
we had a hearing in the Indian Affairs Committee not long ago 
where a person from the Bureau of Indian Affairs (BIA) said, 
``I have to choose between allocating dollars to abused 
children and roads.'' And the question is, there has been a lot 
of funding, whether it is Indian health, whether it is roads, 
whether it is social services, where a lot of those funds have 
been reduced.
    What is your perspective? Do you think that is reasonable? 
Do you think that the BIA is accountable enough? What is your 
perspective on that budget? And do you think it needs to be 
bumped up or maintained?
    Mr. Nussle. Senator, this is an area in which I have to 
admit not having a lot of personal knowledge during my time in 
Congress, but I would commit to listening to you and working 
with you to understand the challenge that not only you have but 
that Native Americans have throughout our country. So let me 
commit to doing that rather than try to fumble through a guess.
    Senator Tester. Outstanding. You talked about a path to 
balance the mandatory spending. I assume you are talking about 
Social Security and Medicare in particular. What are your 
suggestions? What are you going to advocate?
    Mr. Nussle. Well, it is not so much balance; it is 
recognizing that the amount of revenue that has been obligated 
for those amounts are either running out or we know they are 
inadequate. They are unfunded in the out-years. As I say, we 
have 10 years to solve Social Security. We probably do not even 
have that.
    Senator Tester. Undeniable. What would you advocate?
    Mr. Nussle. I think at this point in time the proposals are 
imperfect on both sides. Both sides have rejected proposals 
that the other sides have come up with. More than anything 
else, we need to continue this conversation. We cannot just 
assume that we will wait for the calm of a non-election year. 
As you and I both know, it is always an election year, it 
seems, and if we are waiting for that calm, my guess is that 
calm will never come. We need to recognize the storm and get to 
work, at least talking to one another, all of us, about the 
kind of proposals that could work to solve that problem.
    Senator Tester. OK. Well, I certainly appreciate it, and I 
think the priorities of listening, learning, teamwork, and 
honesty are good foundations to work off.
    I am new to this body at the Federal level. You were Budget 
Chairman from 2001 to 2007. The national debt has increased 
from $5.8 trillion in 2001 to $9 trillion, about a 50- percent 
increase.
    You were chairman of the Budget Committee in the House. You 
had Republican comrades in the Senate, a Republican 
administration. Can you explain how we have had a 50-percent 
increase in our national debt under folks who claim to be 
fiscally conservative?
    Mr. Nussle. Well, Senator Tester, let me just recount for 
you--and this is probably why I like a challenge. I was elected 
at a time when we had the dot-com bubble burst; we had the 
corporate scandals that put shivers into the marketplace; we 
had the attacks of September 11 during one of my very first 
months as Chairman; we had the emergency spending that came 
after that; of course, the war on terror; Hurricanes Katrina 
and Rita. And the list goes on and on, and that drove up 
enormous amounts of spending.
    I will tell you, though, that one of my very first 
experiences, in addition to submitting a budget, was to work 
together with Republicans and Democrats in the aftermath of 
September 11 to respond. And I can tell you, there was never a 
brighter moment, even though it was deficit, even though it was 
a struggle, even though people had differences of opinion, we 
came together in a bipartisan budget way that people forget 
about and responded. And I think it was one of the foundations 
that has kept our country moving in a positive direction, which 
would have been a gut punch to other countries that they would 
have never gotten up from.
    Senator Tester. And I appreciate that, by the way. I think 
just a closing comment and then I will shut it down because I 
know my time has run out. But on my farm, I look at income and 
I look at expenses. I just don't look at expenses. I look at 
income, too. And the fact that income tax has been static for 
the last 7 years tells me something is going on there, either 
that the schedule is flawed or we do not have the kind of 
growth we need or we have reduced our ability to get those 
funds.
    But I do know one thing. If I continue to increase my debt 
by 50 percent over 5 or 6 years--you know this, too, coming 
from Iowa--you are not going to be in business long. And my 
concern is for our kids and our grandkids in this country.
    I want to thank you very much for being here. I want to 
thank you very much for making your answers as concise as 
possible. And I appreciate your candidness.
    Mr. Nussle. I look forward to working with you. Thank you.
    Senator Tester. Thank you.
    Chairman Lieberman. Thank you, Senator Tester. Senator 
Voinovich.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. Thank you, Mr. Chairman. I ask unanimous 
consent that my statement be made part of the record.
    Chairman Lieberman. Without objection.
    [The prepared statement of Senator Voinovich follows:]

                PREPARED STATEMENT OF SENATOR VOINOVICH

    Good morning. I would like thank the Chairman for this Committee's 
timely consideration of the nomination of Jim Nussle to be the Director 
of the Office of Management and Budget (OMB). I had the privilege of 
meeting with Mr. Nussle last week and was impressed with his 
understanding of the fundamental issues facing our nation. If 
confirmed, Mr. Nussle would come to this position as our nation faces 
some of the most daunting financial challenges in its history.
    I arrived in Washington in 1999, and in the eight short years 
since, our national debt has increased by over 50 percent from $5.6 
trillion to a staggering $8.7 trillion. It represents 67 percent of the 
GDP--the worst number in 50 years. This means that each man, woman, and 
child in the United States owes $29,000 of the federal government's 
debt. And yet, these numbers pale in comparison with the budget 
problems looming in our future as the Baby Boom generation begins to 
retire 161 days from now, on January 1, 2008. Reality is setting in 
that this is not just a far-off prediction. It's a growing storm on the 
horizon that threatens to overwhelm our economy if we do not act now.
    In today's dollars, we face a long-term fiscal imbalance of $50 
trillion; that's such a big number it's hard for any of us to even 
grasp, but it works out to $440,000 for every household in the United 
States. When I warned of our fiscal problems last year, the fiscal gap 
was $46 trillion, or $405,000 per household. In just that one year, our 
future debt obligations have grown by $35,000 per household. Every year 
that we wait and do nothing, this debt continues to grow. Just six 
years ago, the fiscal gap was ``only''--and I put the word ``only'' in 
quotes--$175,000 for every household, less than half of what it is 
today. This is not a can we can kick down the road.
    What is of growing concern to me is that 55 percent of the 
privately owned national debt is held by foreign creditors--mostly 
foreign central banks. That's up from 35 percent just five years ago. 
Foreign creditors--including China and OPEC--provided more than 80 
percent of the funds the United States has borrowed since 2001, 
according to the Wall Street Journal. Borrowing hundreds of billions of 
dollars from foreign governments puts not only our future economy, but 
also our national security, at risk. It is critical that we ensure that 
countries that hold our debt do not control our future.
    Mr. Chairman, we cannot continue to ignore the fiscal crisis 
confronting our nation. The Comptroller General of the United States 
has been participating in a series of fiscal wake up tour events--
including one in Columbus, Ohio, that Mr. Nussle's predecessor, Rob 
Portman, attended; and another in Cincinnati that I helped organize--to 
discuss with Americans the real state of the nation's fiscal health. I 
share the Comptroller General's concern, which is why I have partnered 
with Representative Frank Wolf to introduce the SAFE Commission Act. 
The SAFE Commission would establish a bipartisan commission to propose 
tax and entitlement reforms. Congress would be forced to consider those 
proposals under fast-track procedures similar to BRAC or trade 
promotion authority.
    Furthermore, I believe Mr. Nussle and I agree that for a long time, 
the M in OMB had been forgotten. Under strong leadership from Deputy 
Director Clay Johnson, I believe this Administration has brought much 
needed focus to management. Of particular interest to me are the 
challenges confronting the federal government in recruiting and 
retaining the world class workforce necessary to lead this nation 
through the 21st Century. OMB has a partner in this endeavor with 
Director Linda Springer at the Office of Personnel Management. In 
addition, during the last two and a half years, I have been working 
with OMB and the Government Accountability Office (GAO), and various 
federal departments, including the Department of Defense, to address 
GAO's High Risk list. The High Risk list identifies federal programs 
that are highly vulnerable to waste, fraud, abuse, or mismanagement. In 
developing partnerships among all involved, the government has crafted 
a strategic plan for all but one of the 21 programs identified on the 
High Risk list. Mr. Nussle, as Director of the Office of Management and 
Budget, I would expect you to continue this partnership, ensure 
resources are available to address problem areas, and hold departments 
accountable for progress.
    A great challenge in government is for organizations to retain 
appointees in key leadership positions. As executive branch agencies 
begin to prepare for the 2009 budget cycle, I hope Congresses 
recognizes the need for a Director of Management and Budget to be in 
place to communicate funding priorities through the government and to 
the Congress.
    Thank you.

    Senator Voinovich. Mr. Nussle, thank you very much for 
taking time out of your schedule to visit with me in my office. 
You have come to Washington to continue your public service at 
a very important time for our President and also for our 
country.
    As you know, I am very interested in management, and one of 
the things that you ought to know is that the agency you have 
been nominated to lead, the Office of Management and Budget, 
ranks very low on the President's Management Agenda. Are you 
aware of that?
    Mr. Nussle. I am.
    Senator Voinovich. Yes, OMB received red marks on all 
categories but one where it received a yellow rating, and I 
hope that this something you will focus on during your term.
    This Committee has worked hard to re-establish the ``M'' in 
OMB. I think about management in terms of working harder and 
smarter and doing more with less. I think about having the 
right people with the right knowledge and skills at the right 
place and time, and also being able to recruit, retain, and 
reward workers. I believe Clay Johnson has done a pretty good 
job in this area, but there is still a whole lot more that 
needs to be done. I would hope that you would particularly look 
at the need to reform our security clearance process, which has 
been on GAO's high-risk list for a long time. I would also call 
your attention to the work that Senator Akaka and I have done 
on the issue of supply chain management. It looks like maybe we 
are going to make some progress there. And what I hope you will 
do is look at the high-risk list, review the strategic plan 
that Clay Johnson has put together, and then make sure there 
are adequate performance metrics in place.
    In addition, I would like you to look at whether we need a 
Chief Management Officer (CMO) for certain agencies. I would 
like to see one in the Department of Homeland Security. DHS 
continues to face numerous challenges as it merges 22 agencies 
and more than 200,000 employees. DHS will remain a mess unless 
we have somebody who is going to pay attention to management.
    I believe the Defense Department is another agency that 
would benefit from a CMO where I think maybe we need someone 
with a 5-year term to ensure the Department's business 
transformation finally gets done.
    I also, as you know, have been interested in tax reform and 
in entitlement reform. I remain very disappointed in the 
Administration that they did nothing with the report that came 
back from the Breaux-Mack Commission.
    As you know, Congressman Frank Wolf and I also have 
introduced legislation, the SAFE Commission Act, to try to put 
a BRAC process in place to do tax and entitlement reform. I 
would like your opinion on the possibility of advancing reform 
in either of these areas. The alternative minimum tax (AMT) 
needs to be dealt with.
    How do you feel about these issues? Will you be an advocate 
in the Administration for tax reform?
    Mr. Nussle. Senator, I happen to believe that the 
alternative minimum tax may very well be the fuel that could 
help us with this project that you and I have visited about in 
private as well, and that is on reforming the Tax Code. It 
unfortunately never seems to have the critical mass behind it 
that it needs in order for the engine to start running toward 
reform. But AMT is probably one of the more challenging issues, 
budget issues, tax issues, that all of us are grappling with. 
And it is possible--I am suggesting that this could be the fuel 
that fuels that.
    So, yes, sir, I will be an advocate for comprehensive tax 
reform, to work on that with the Secretary of the Treasury, 
whom I also know is interested in that, or I have been told 
that and have read that, as well as a number of Members of 
Congress on both sides of the aisle who recognize, as Senator 
Levin suggested, that competitiveness is at issue, and so many 
others that recognize that our Tax Code is broken and needs to 
be overhauled.
    So, yes, sir, I would be an advocate and would enjoy, if I 
am confirmed, working with you on not only the tax reform 
issue, but also, knowing of your interest in the management 
area, any help we can get from you and others to help us push 
through continuing management successes and improvements I 
think would also be important for this Administration.
    Senator Voinovich. Well, I can tell you that in terms of 
tax reform, we have not really been encouraged. Your 
predecessor and I talked about it over and over again, and I 
know he was very interested in it. I think if you want to do 
something that is relevant at the end for the American people, 
at least get started with tax reform. It is so needed today. 
Everybody that you talk to says we have to do it. And I think 
that this Administration as part of their legacy could lay the 
groundwork for real reform.
    I think that would resonate with the American people, and 
it would be so important, I think, as part of this President's 
legacy to this country.
    Mr. Nussle. Thank you. As I say, I would be happy to work 
with you on that. I happen to agree. One of the things I have 
learned in my 16 years in Congress is that oftentimes you need 
a little extra push, a little gas for the engine, so to speak. 
The engine of reform does not always run on its own. It needs a 
little fuel, and sometimes that fuel is negative reaction from 
our constituents. I do not know of one that could be any more 
negative than the AMT, and it may very well be the engine's 
fuel that we need to help push this forward.
    So I would be honored, if confirmed, to work with you and 
others on that project.
    Senator Voinovich. By the way, Breaux-Mack included AMT 
reform. Thank you.
    Chairman Lieberman. That is true. Thanks very much, Senator 
Voinovich.
    I would like to ask the indulgence of Senator Coleman and 
Senator McCaskill. Senator Akaka was here earlier and had to go 
to another committee, so he did not get his round of questions. 
I would like to call on Senator Akaka now.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman.
    It is good to have you here, Congressman Nussle. I also 
want to welcome your wife, Karen, to this hearing. I know how 
important a role she plays in all that you do.
    I understand that you were a part of the 2000 White House 
political transition team. However, from a management 
perspective, preparing for goverment-wide departmental 
transitions, which will occur in just 18 months, is an even 
bigger task, especially at DHS. Do you have any plans to have 
OMB begin laying the groundwork to ensure that agencies are 
prepared to carry on management initiatives into the next 
administration?
    Mr. Nussle. Thank you, Senator. I do not have any specific 
plans today that I can report to you. Having had an opportunity 
to be briefed on the part of the staff, Clay Johnson, and 
others who are working in this area, the management legacy is 
one that will be carried on, in part because of the bipartisan 
support it enjoys on Capitol Hill as much as anything.
    I believe that the next administration will ignore the 
management piece of OMB at their peril. I think it is smart 
from a business standpoint. I think it is smart from a 
budgetary standpoint. I think it is smart from a political 
standpoint. How embarrassing is it to pick up the newspaper and 
hear of waste, fraud, and abuse within your administration? And 
so ignoring this peril of managing these resources, I think, 
would be to the detriment of any administration, and having the 
backing of yourself and so many others with regard to the ``M'' 
in OMB, I think, will be a legacy that will live on almost 
regardless of who takes the directorship or who takes the 
Presidency.
    Senator Akaka. In many of your pre-hearing questions, 
Congressman, you focused on budgetary issues, with little 
emphasis on management. What do you see as the relationship 
between OMB's dual roles of directing management and 
formulating a budget?
    Mr. Nussle. Management is how you get it done. You are so 
right. The dollars are what usually grabs the headlines. The 
dollars are usually what we fight about and where we oftentimes 
see problems come up. But it really can be alleviated with 
better management.
    As I was saying before to a previous question, we are 
talking about a potential challenge in ending this fiscal year 
and beginning a new one over $20 billion--please do not 
misunderstand me, that is a lot of money. I am not suggesting 
it is not. But we have more than $20 billion that have been 
identified in overpayments in the Federal Government that 
through better management needs to be dealt with, needs to be 
alleviated, needs to be eliminated, and those resources 
redirected to either the appropriate parties or be plowed back 
into savings that can go to help reduce the deficit and pay 
down our debt.
    So I believe the management side of this equation is very 
important. The ``M'' comes before the ``B,'' and everybody who 
is in business recognizes that you cannot be successful in your 
business or in your personal life if you do not manage those 
resources properly.
    Senator Akaka. You are very correct on that. Many of the 
problems we have relating to fraud and waste are usually due to 
poor management. This is something that would be your 
responsibility if confirmed.
    I would like to ask one final question. Under current rules 
for contracting for services, contractors can be hired to 
develop, manage, and even oversee other contracts or 
contractors. At a hearing last week, Comptroller General David 
Walker said that it was time to redefine what we should 
consider inherently governmental functions.
    Do you think that the Federal Government relies too much on 
contractors?
    Mr. Nussle. It is a fair question, Senator, and I am not 
sure in the aggregate I am able to answer that, if it is too 
much or not enough. But I would say that you are correct--at 
least I agree with you that there should be a concern about 
particularly contractors managing contractors managing 
contractors in some instances it has been, as I understand it. 
I saw that question in the hearing packet that was sent to me, 
this is an area that we have talked about in my briefing, and I 
am told that this is an area that is not intended as anything 
but an inherently governmental role, meaning overseeing 
taxpayers' dollars, the spending of those dollars, the 
management of contractors, where contractors are appropriate. 
That management is inherently governmental.
    I am not confirmed yet. I cannot negotiate with you what 
that definition would be. But let me say to you, Senator, that 
I believe that to be an inherently governmental role, and I 
would be happy to work with you, if I am confirmed, to make 
sure that definition is clear so that in our oversight from OMB 
of contracts, my responsibility and role is clear in making 
sure that there is oversight of those contracts.
    Senator Akaka. Well, thank you very much. I really 
appreciate your responses.
    Thank you, Mr. Chairman.
    [The prepared statement of Senator Akaka follows:]
                  PREPARED STATEMENT OF SENATOR AKAKA
    I would like to welcome Congressman Nussle and his family to this 
hearing. With the fiscal and management challenges facing our nation, 
finding someone capable of strong leadership and a spirit of 
cooperation is essential for heading the Office of Management and 
Budget.
    With a budget approaching 1 trillion dollars, on top of a spiraling 
national debt, it is only natural that the Office of Management and 
budget focus on the ``B'' in OMB. However, the management 
responsibilities of the Director of OMB are every bit as important. In 
fact, government management is tied very closely with the budgetary 
powers wielded by OMB.
    There are now 27 areas on the Government Accountability Office's 
High Risk List, which are indicators of programs across the government 
at risk for waste, fraud or abuse. Almost all of these areas are tied 
directly to poor management at the agencies.
    It is the responsibility of OMB to set guidance for the Federal 
Government to ensure sound management. The Federal Government now faces 
weaknesses in contracting management, human capital management, and 
financial management. As Chairman of the Oversight of Government 
Management subcommittee, I have witnessed first hand how a failure to 
manage effectively can waste taxpayer dollars and harm government 
missions.
    I understand that the nominee has little experience in management. 
I look forward to hearing how he intends to address management issues 
effectively in light of this inexperience.
    I am also greatly concerned over the budgetary crisis this country 
now faces. While you will face more questions on this on Thursday 
before the Budget Committee, budgetary issues are also of very great 
importance to this committee.
    The Federal dollar continues to be stretched to meet the needs of 
the wars in Iraq and Afghanistan, the Global War on Terror, the 
continuing aftermath of the 2005 hurricane season, and our other 
domestic priorities. At the same time, this Administration has 
attempted to push through tax cut after tax cut.
    Adding over $200 billion a year to the national debt is simply not 
sustainable. This heavy burden should not and cannot be laid at the 
feet of our children and our grandchildren. I am hopeful that Congress 
has finally started to right the fiscal course, which I have not been 
satisfied with throughout the current Administration.
    However, the Administration has threatened to veto many of the 
spending bills that Congress intends to pass in the coming months. This 
Administration must understand that in a divided government, it is 
essential that we all work together. It is my hope that whoever is at 
the helm of OMB will understand this imperative and work cooperatively 
with Congress on spending.

    Chairman Lieberman. Thanks very much, Senator Akaka. 
Senator Coleman.

              OPENING STATEMENT OF SENATOR COLEMAN

    Senator Coleman. Thank you, Mr. Chairman. I want to start 
off by saying I am very pleased the President has nominated 
Representative Nussle for this position. I think he brings the 
expertise and he brings leadership. I think he brings the 
judgment that we need at this time. And so I look forward to 
supporting this nomination.
    I just want to respond to a comment my colleague from 
Montana raised and asked about, which is how did we get in this 
deficit situation with folks who are supposed to be firm 
against deficits. I could respond by saying, well, when I was 
in the majority I voted against a trillion dollars of 
additional spending by my friends on the other side. I could 
say that right now the deficit is only 1.5 percent of the 
overall economy, the 40-year average is 2.4 percent. I could 
say a lot of things.
    I am reminded of the ``Pogo'' cartoon that said, ``We have 
seen the enemy and it is us.'' The reality is--you are going to 
be in a position where there are programs that are important to 
us that you are going to come in and recommend spending less 
than we want to spend. I have had battles with OMB over 
community development block grants (CDBG). You have been a 
champion of that during your time in the House.
    I say that because--I have also used the position as 
Chairman of the Permanent Subcommittee on Investigations to 
fight waste, fraud, and abuse--significant waste, fraud, and 
abuse. I want to make sure that we do not bring green eyeshades 
to the equation, that there are things that we invest in, like 
community development block grants (CDBG), that then promote 
economic growth in our communities.
    And so as we go through this process--and we could play 
political football one way or the other. But I am not looking 
for an answer on this because I know you have been there. You 
have been in the trenches. But there are those things that do 
generate growth, that are investment, that are infrastructure, 
and I hope we do not forget that.
    When you were talking about the ``M'' in management, the 
second piece was technology. Congress passed the Federal 
Information Security Management Act in 2002, and it focused on 
cyber security. I believe Federal agencies scored an average of 
C-minus in the last year's information security card. This is a 
critical issue. This is a national security issue.
    Can you tell me as Director of OMB what you would do 
differently to address cyber security? I do not want the FISMA 
thing to be simply seen as a patchwork responding to a report. 
I think we need a real commitment to cyber security; otherwise 
we will pay a very big price. Can we hold agencies more 
accountable? Can we do more things with the private sector? Do 
we need additional resources? I would love your perspective on 
that issue.
    Mr. Nussle. Senator, all of those answers that you just 
gave or particular potential alternatives may be correct, and I 
am not in a position, having not held the position of OMB 
Director, to be able to maybe give you enough wisdom or advice 
on exactly how that should be dealt with. But let me suggest to 
you, if I am confirmed, I am certainly much more in tune to 
that than I was as House Budget Chairman, not only how much 
responsibility lays within OMB, but how much the Director has 
to be personally committed to that.
    I am still learning the role, I would have to suggest, and 
so I may not be clear on all of the ways that I can apply 
pressure. But I would suggest that, first and foremost, I need 
to work with those different department heads, secretaries, 
agency administrators, etc., to ensure they understand--I 
believe they do, but how we can ensure that the resources that 
have been allocated deal with those challenges, work with 
Congress to make sure that we provide the kind of oversight and 
lessons learned, best practices, so that when there is an 
agency or a department that goes in one direction it should 
not, we can quickly snap that back and learn from that 
experience and move in a more positive direction.
    So I would commit, if I am confirmed, to work with you on 
this issue and to work with our E-Government Office to ensure 
that this is a commitment that is held throughout the 
government.
    Senator Coleman. My concern is that this becomes more than 
a paperwork drill. We had the VA reporting stolen external 
drive hardware impacting 26 million veterans. I think Commerce, 
Agriculture, and TSA have all reported incidents. I just think 
it is important.
    And then a last comment about technology. One of the 
comments I have heard from a number of agencies has been the 
difficulty in meeting--when we did the Hurricane Katrina 
hearing, we had a situation where FEMA said they knew stuff was 
in the pipeline, but they did not know where it was. And my 
comment was, ``Why don't you call FedEx?'' I mean, the 21st 
Century, you should not be losing anything today. You should 
know where it is. And the response has come back a number of 
times of the difficulty in getting IT personnel, the level of 
expertise, in the Federal Government. The problem is that 
consumers really expect us to operate like the private sector 
does. They put the bank card in the ATM machine, and they get 
money out right away all over the world. And I have heard this 
from a number of agencies that it is difficult to get the level 
of talent, and so when the GAO says you need to come back with 
a change in 2003, they are still looking at getting it done in 
2006 and 2008, and maybe later.
    So I raise that again, without looking for an answer right 
now, to simply raise the issue that in the end these are things 
that will make us cost-effective, that will make us safer, and 
apparently we are facing some grave challenges in getting the 
talent and moving forward at the level of the private sector. 
It really should not be way ahead of government on these 
things.
    Mr. Nussle. Well, thank you, Senator. It is the reason I 
made my comment to Senator Sununu that I did. I think it is one 
of the most important management challenges that OMB has, and 
that is the fact that we are losing--it is not only 
recruitment, but we are losing the ones that are experienced, 
too. So there are both sides to that coin, and so I appreciate 
that, and I appreciate your highlighting that with me. And if 
confirmed, I would be glad to work with you on that challenge.
    Senator Coleman. Thank you. Thank you, Mr. Chairman.
    Chairman Lieberman. Thank you, Senator Coleman. Senator 
McCaskill, welcome.

             OPENING STATEMENT OF SENATOR MCCASKILL

    Senator McCaskill. Thank you, Senator Lieberman.
    Thank you, Mr. Nussle, for being here today. My colleague 
from Montana talked about the deficits under the watch of 
President Bush and the Republican-led Congress. I would like to 
talk about earmarks.
    It is unbelievable to me the growth in earmarking in the 
last decade. In 2005, when President Bush traveled to Illinois 
to sign the highway bill into law, it contained more earmarks 
in one piece of legislation than the entire history of the 
Highway Trust Fund going back to 1956. So in one stroke of the 
pen, the President enacted more--including the Bridge to 
Nowhere, which was later pulled out after people figured out it 
was in there. But there was lots of other stuff in there.
    In 1995, when the Republicans took over Congress, there had 
never been up until that point an earmark in the Labor, Health 
and Human Services appropriation bill, and look at it now.
    Just this year, the Republican Party in the House has 
requested 10,000 earmarks in this budget. And the President is 
now making noise--this is the big irony. You talk about 
hypocrisy. The President is now making noise about earmarks, 
and he has been earmarking at a record pace for a President.
    I understand that people in Congress want to fund special 
projects at home. I think they incorrectly believe that most of 
their constituents want them to. I think they are wrong. I 
think most of their constituents want them to have the 
discipline to not participate. And, by the way, it has gotten 
to the point, as you well know, Congressman, that there was a 
spread sheet in the back room. I mean, this is a spread sheet. 
People are going in a back room, and you are told, ``You get 
this much money. Tell us what you want.'' And that is it, and 
then it got in the bill.
    Now, you were here as that process really took root. And I 
am not saying that Democrats aren't doing the same thing. This 
is a nonpartisan criticism.
    As the Chairman of OMB, what can you do to say the emperor 
wears no clothes? I mean, the idea that now we are talking 
about vetoing appropriation bills because of earmarks? Give me 
a break. I mean, he signed a thousand of them with all kinds of 
earmarks, and yet never said a word about earmarking. And it 
has become this political football, which, frankly, there are a 
few Republicans who do not participate in the earmark process. 
You probably know who they are. There are not that many of 
them. There are even fewer, probably, Democrats who do not 
participate in the earmark process. I am going to try to be one 
of them. I had over 300 groups come to my office saying they 
had been promised earmarks by my predecessor.
    Now, how are we going to get a handle on this? How are we 
going to push everyone away from the trough? Because this is 
not only bad budgeting, it is bad management.
    Mr. Nussle. Senator, I recall even my own thoughts in that 
regard, and the challenge, of course, comes up when those 300 
constituent groups come to your office and they tell you that--
and I do not have knowledge in this instance--the last person 
they talked to, the last Senator they spoke to, or your 
neighboring district Congressman promised them the same 
earmarks, why aren't you supporting Iowa, or Missouri, whatever 
it might be?
    So you are right, it is not only the pressure that comes 
from within the Congress, but it is also the pressure that 
comes from home when they don't quite understand why they can 
get the same commitment from someone else in the delegation. 
And I think all of that is runaway.
    I would say what I tried to do--and I do not come to this 
with clean hands. I am not suggesting I do. If you got that 
impression from me, I will admit to the fact that I cheerfully 
attempted to get earmarks for my district and was successful 
and issued press releases hoping to take a little credit for 
that.
    But what I will say is that I did suggest during that same 
period of time, those 2 years, those two cycles when I was 
House Budget Committee Chairman where this became an issue, 
that we stop the practice for everyone, that we have a 
moratorium on any new earmarks. I did not want to prejudge, 
let's say, an earmark that someone had gotten that had gone 
through the process and had been approved. But I said no new 
ones, let's just have a moratorium, and even that was not 
acceptable.
    So I do not come to this with clean hands. I also do not 
come to this with a certain amount of success in doing that. 
But we have to start somewhere, and I believe the most 
important part of what the President has put out there is one 
other area that you did not mention that I would just throw out 
for your consideration, and that is transparency.
    The one thing that I believe your earmarks and my earmarks 
should be able to withstand is the light of day, whether it is 
the light of day from our constituents or maybe more 
importantly the light of day from our members and colleagues 
that we serve with. Too often, I think the challenges with 
earmarks are the ones that no one ever saw, the ones that were 
dropped in at the last moment, the ones that seemed to go to 
certain members of committees or certain people with fancy 
titles. That is where people get frustrated, or at least I got 
frustrated as a member.
    So I would think that the transparency of the goals the 
President has laid out is the most important goal that we need 
to live within, and if we do that, I think that transparency, 
that disinfectant of the light of day will solve much of this 
challenge.
    Senator McCaskill. Are you willing to advocate that the 
President make all of his earmarks transparent as he submits a 
budget?
    Mr. Nussle. Yes, ma'am, and----
    Senator McCaskill. Because frankly, Congress looks like 
pikers in this budget compared to the President in terms of how 
many earmarks are in it.
    Mr. Nussle. Well, if I may offer to you, the one difference 
that I would suggest to you is that, of course, the President 
has to put all of that on the table in the budget to start 
with. So if you want to call it an earmark, I certainly respect 
that. But you know it is there. The difference, as I was 
saying, that I think is frustrating to people is they do not 
see them.
    Senator McCaskill. Well, but sometimes you cannot tell it 
is there, though. I mean, you know that knowledge is power, and 
you know the reason this process has grown and there has been 
no accountability is because--and frankly, I have been critical 
of some of my colleagues on my side of the aisle. The idea that 
we need to vet earmarks internally--I will tell you who are the 
best people to vet earmarks. It is the public. That is the best 
vetting of earmarks. It is not Chairman Obey and it is not a 
committee--it is not a subcommittee chairman of an 
Appropriations Committee in the Senate. It is the public. And 
if the President is willing to put his name with specificity on 
projects that this is one he wants, then I think the public 
can--and I do not care whether it is a Democrat or Republican 
President. I think you are right. I think that would go a long 
way because, frankly, some of this stuff people are going to be 
embarrassed to put their name on. And so I think that might 
help.
    Then just briefly, if I could, Mr. Chairman, just one more 
question. Besides the earmark issue, noncompetitiveness. There 
was $200 billion in noncompetitive contracts in our government, 
which is more than 10 times the amount of earmarks. We have 
seen a growth in noncompetitiveness in terms of contracts in 
this Administration unlike any other.
    What will you do, if confirmed as OMB Director, to reverse 
the very dangerous trend, which is the worst kind of management 
you could ever have in a public body, of letting all of these 
contracts without competition?
    Mr. Nussle. If I may first just say one thing for the 
record, I am told by a note that was passed to me that the 
President has not specifically threatened a veto based on 
earmarks. I am not interested in arguing. I know what your 
point is, and I respect it.
    Senator McCaskill. The politics has already started on 
this.
    Mr. Nussle. I understand.
    Senator McCaskill. And it is all of a sudden the Democrats 
are the big bad boys in spending, which is just nuts.
    Mr. Nussle. All I am saying is I do not think any specific 
threat has been made based on that.
    Senator McCaskill. OK.
    Mr. Nussle. But I take your comment very sincerely, and I 
appreciate it.
    As far as the contracting goes, I, too, have been 
frustrated by some of that, and I have done some research on it 
to learn a little bit about why the government does these sole-
source contracting or contracts that are not competed for. 
There are some situations where, because of an emergency, 
because of the exigency of getting a job done, you have to do 
it that way quick, and go get it done. The other, of course, is 
that there are some instances where there is only one source 
that makes a particular product or provides a particular 
service. Those are maybe rare, but they do happen, and there 
are reasons why that would occur.
    I think the goal here should be even in those instances 
where that might be the first order of business, we should look 
to constantly work toward a more competitive model. And so when 
you ask me what I would do, I would say to the gentlelady, if I 
have the opportunity to be confirmed, I will take that very 
much as a priority that we need to work toward a more 
competitive model and do so across the board where that is 
available, and that it should be transparent so that oversight 
not only on the part of the Administration through OMB as well 
as the primary contracting agency can provide oversight, but so 
that you can provide oversight as a Member of the Senate.
    So both of those need to be part of the commitment that I 
make, and I am happy to work on that with you.
    Senator McCaskill. OK. Thank you very much. Thank you, Mr. 
Chairman.
    Chairman Lieberman. Thank you, Senator McCaskill.
    Mr. Nussle, you have been excellent and given good 
responses. I am going to exercise the prerogative of the Chair 
and ask you a few more questions.
    Mr. Nussle. Please.
    Chairman Lieberman. The first is on defense spending and 
defense budgeting. It seems to me--and it is there in the 
numbers--that one of the most significant reasons why we have 
added to the Federal debt over the last 5-plus years is that we 
have increased spending on defense and homeland security post-
September 11.
    Personally, I am on record as having said and still 
believing that I wish we had adopted a special war on terrorism 
tax at the outset post-September 11 to both fund increases in 
spending that were necessitated for homeland security and also 
particularly after we got into the wars in Afghanistan and 
Iraq, which have been very costly, and that we had asked as 
effectively as we could every American to pay something 
according to their tax bracket.
    But that has not happened. Defense spending has, 
nonetheless, increased necessarily quite significantly, and yet 
I think on the facts there is a very compelling argument to be 
made that we are still not spending enough.
    I can tell you as a member of the Armed Services Committee 
that the service chiefs presented to us more than $50 billion 
of what they consider to be unfunded priorities. These are not 
just ``it would be nice if I could have them.'' These generally 
fall into the category of ``I really need them and the troops 
need them, but it is not within the budget limits that you have 
given me,'' either in the President's budget or in the 
congressional budget resolution.
    Now, as you know, some Members of Congress in both parties 
have looked at possibly tying defense spending to a percentage 
of the GDP on the argument, which is a factual argument, that 
we are spending significantly less as a percentage of GDP on 
defense now than we did certainly during Vietnam, which was 
about twice as high a percentage. Korea was extremely high, 
much higher. We are at about 4 to 5 percent--now closer to 4 
percent, probably; Vietnam was over 9 percent; Korea was 13 
percent; and, of course, the Second World War was over 33 
percent at one point.
    So I know that in the questioning with the Committee staff 
you rejected that kind of tie to a fixed percentage of GDP. I 
wanted to ask you to speak a little bit about defense spending, 
whether you think, in fact, there are priority needs that are 
being unmet, and if you don't accept the goal of getting to a 
certain percentage of GDP, what is the metric, what is the 
standard that, as the Director of OMB, you would apply to 
defense spending?
    Mr. Nussle. Well, first of all, Senator, it is the most 
important priority of our government to maintain our freedom, 
and so we should take this very seriously. And I think it is 
illustrative to compare it to GDP because GDP is one 
denominator that we can use to compare a number of things, 
whether it is health care costs, defense, or taxes. I think it 
is a good measure. But the reason I saw it as maybe too 
imperfect was it seems to me to be arbitrary to tie it to a 
number and take the prerogative either away from the Commander-
in-Chief in determining whether it should be higher or lower 
or, for that matter, from the Congress in its Article I 
responsibility of the power of the purse to make that decision, 
again, outside of that arbitrary match to GDP.
    Second, GDP is hard to measure. In fact, I should not say 
it is hard to measure, it is awkward in that you will get a new 
GDP number here shortly, and the number, let's say, will come 
out with growth at 2 percent. And then it is adjusted 6 months 
later, and adjusted after that, either up or down, imperfectly 
making it a match to use as a denominator here.
    Finally, you asked me the direct question, are there needs 
that are being unmet? Yes, sir, I am sure there are. There are 
also areas where money is being wasted and not accounted for. I 
am sure they are there as well. And it is a constant pressure 
or tension on both sides that I think we need to grapple with. 
When you say what will be my metrics, obviously the Commander-
in-Chief's judgment and that of the Secretary of Defense in 
concert with the authorizing committees will be an important 
measure in determining what those priorities should be. I will 
do my best to balance those priorities with all of the rest in 
making my recommendations to the President. I do not have a 
magic bullet metrics I can whip out for you and say this is 
exactly how it is going to be measured. But I would end where I 
started, and that is, it is the most important thing we do, and 
that is providing for the security of our country.
    Chairman Lieberman. On that we agree. I want to talk 
briefly about PAYGO. As you know, one of the ideas in 
legislative statutory proposals we had for a considerable 
period of time through the 1990s is PAYGO, that anytime you 
raise spending or cut taxes, you have to cover that so that we 
do not go into deficit. And I gather from the staff interview 
that you support PAYGO for spending but not for cuts in taxes, 
and that the reason--and you correct me if I am wrong--is that 
you believe tax cuts pay for themselves. There are obviously a 
lot of reasons to adopt tax cuts, either because they are fair 
or because they stimulate some other general activity that is 
good for the country. But where is the evidence, if I am 
quoting you correctly, that they pay for themselves?
    Mr. Nussle. Well, that quote was one of those passionate 
moments where we were debating tax policy, and I would, if I 
may, rephrase it slightly. There are some tax cuts that are 
much more dynamic in their economic effect in stimulating the 
economy and bringing more revenue into the Federal Government 
than others. That is not true across the board. If I made that 
blanket statement, it was in error.
    Having said that, though, the whole notion of PAYGO, as you 
know, Senator, is a congressional rule. The President has come 
out against PAYGO. My position on PAYGO has generally been 
negative. But I will tell you, I have entertained the 
possibility of extending PAYGO within a comprehensive model. If 
you looked at the proposed legislation that I drafted together 
with Ben Cardin in a bipartisan way, we actually extended PAYGO 
as part of a comprehensive model.
    What I see as problematic is when you use PAYGO almost as a 
way to try to get Congress to do what it might normally not be 
in favor of doing. It is a political speed bump to a process 
which is political, small ``p''--meaning if the Congress works 
its will and decides to reduce taxes, as it did, I believe, in 
a couple of instances throughout the 1990s when PAYGO was in 
effect, PAYGO was waived.
    So PAYGO is there as a speed bump. We know it is there. 
Whether or not we spring over the top of it or allow it to stop 
the vehicle in motion is still a political decision. And that 
is why I found it to be imperfect as a way to determine whether 
or not legislation ought to be considered.
    Within an overall comprehensive reform package, I would 
keep an open mind with you, Senator, as we would possibly 
consider that; not to prejudge that, but I believe it is a 
spending challenge that we face in our country more so than 
ensuring more revenue is coming into the Federal Government.
    Chairman Lieberman. OK. Last question, and this takes me 
back to the beginning, and I present you with this 
hypothetical, but it is in all likelihood a probable scenario: 
that appropriations bills begin to be passed, and one reaches 
the President which takes us, by the projections, over the $933 
billion that he has in his budget as the top line for domestic 
discretionary spending, so he vetoes it.
    As OMB Director, what do you do next?
    Mr. Nussle. Well, and your question presupposes what I 
stated to begin with as well, and that is, that is not the 
final answer. It cannot be. Our government must continue. Our 
country must be successful, and in order to do that, the 
Congress and the President must work together to work out their 
differences. And I would hope that we do not get to that first 
scenario. The first veto is what we need to avoid.
    There is always this comment about the fact that the 
President never vetoed these bills in the past, and I would 
just relate that one of the reasons why I believe that is 
true--and I cannot speak for the President or read his mind--is 
that during those times, even when there was Democratic control 
of the Senate during my time as Budget Chairman, we held the 
line in the 302(a) number to the discretionary number in the 
President's budget. It was awkward, it was challenging. We had 
fights, we had discussions, we had debates. People were not 
exactly satisfied, but we always held to that number.
    The challenge this year that we have is that the President 
is suggesting that this number is being breached, and I believe 
that is the reason why Rob Portman has made the suggestions he 
has made to the President about vetoing it.
    We are going to have to work through that, and I do not 
have a silver-bullet answer for you on exactly where that is 
going to end up. But I know, as I said to start with, it has to 
begin with conversation and communication in the 27 legislative 
days that we have remaining. And you have been very considerate 
to me, not only in working through this process with your staff 
and questions, but in meeting with me and giving me a timely 
hearing. I appreciate that because I know that, as I say, 
having watched this process, I believe one of the things that 
could help is having a Director in place that wakes up every 
day and works to resolve this.
    Chairman Lieberman. Well, I thank you for the answer. That 
is exactly the challenge that you are going to have, and I 
think your background in Congress, and particularly some of the 
bipartisan work you did, will enable you to take action that 
will avoid crises that are unnecessary and, most of all, that 
will allow us to dispatch our responsibility to the people of 
our country.
    So I thank you for your testimony today, for your 
willingness to accept this responsibility, for your wife's 
willingness to be supportive of you as you do that.
    The record, without objection, for this hearing will be 
kept open until 12 noon tomorrow for the submission of any 
written questions or statements. In the meantime, I thank you 
again and look forward to working with you.
    The hearing is adjourned.
    [Whereupon, at 12:13 p.m., the Committee was adjourned.]

                            A P P E N D I X

                              ----------                              


                  PREPARED STATEMENT OF SENATOR OBAMA

    The position of Director of the Office of Management and Budget is 
critical to the effective running of our government. On issues of 
fiscal policy, regulatory compliance, and government management, the 
Director of OMB must work with all Executive Branch departments and 
agencies, the White House, and Congress to ensure adequate and 
transparent budgets, satisfactory compliance, and the effective and 
responsive performance of government functions.
    I approach this nomination, like all nominations, with an open mind 
because I believe a President should generally get the benefit of the 
doubt in assembling his or her cabinet. The nomination process is not 
the best place either for petty political squabbles or major 
substantive debates. Our duty to advise and consent on nominations 
requires us to judge the competence and qualifications of nominees and 
to ensure that they have the character and commitment to uphold our 
Constitution and respect their role within it. Basically, will a 
nominee be an asset or an obstacle to the important work the American 
people expect us to be doing?
    It seems to me that a successful Director of OMB needs good policy 
judgment and political sense, integrity, and effective working 
relations with leaders in Congress. I believe that a successful 
Director also needs to prefer evidence to ideology, collaboration over 
confrontation, and concern for the common good over special interests.
    Congressman Nussle comes to us with a significant amount of Federal 
budget experience. He is not new to the political debates of the annual 
budget process and not unaware of the steps involved and compromises 
required in getting from the President's Budget Proposal to a 
Concurrent Resolution by both houses of Congress to Conference 
Committee Reports on the various Appropriations bills. He understands 
the tasks that will confront him if he is confirmed.
    Whether or not Rep. Nussle has the appropriate appreciation for the 
regulatory and management functions of the job and whether his budget 
experience demonstrates the capacity to effectively perform the key 
functions of the job are the questions that will be probed today by the 
Homeland Security and Government Affairs Committee and on Thursday by 
the Budget Committee.
    I had the opportunity to submit some questions to Rep. Nussle prior 
to the hearing and I have just a few more questions that I'd ask 
unanimous consent to submit today for the record. I look forward to 
reviewing his answers to my questions and the questions of my 
colleagues before reaching a conclusion on this nomination.

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