[Senate Hearing 115-292]
[From the U.S. Government Publishing Office]







                                                        S. Hrg. 115-292

                 NOMINATION OF HON. J. MICHAEL MULVANEY

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

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS


                             FIRST SESSION

                               __________

NOMINATION OF THE HONORABLE J. MICHAEL MULVANEY TO BE DIRECTOR, OFFICE 
                        OF MANAGEMENT AND BUDGET

                               __________

                            JANUARY 24, 2017

        Available via the World Wide Web: http://www.fdsys.gov/

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        Committee on Homeland Security and Governmental Affairs




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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona                 CLAIRE McCASKILL, Missouri
ROB PORTMAN, Ohio                    THOMAS R. CARPER, Delaware
RAND PAUL, Kentucky                  JON TESTER, Montana
JAMES LANKFORD, Oklahoma             HEIDI HEITKAMP, North Dakota
MICHAEL B. ENZI, Wyoming             GARY C. PETERS, Michigan
JOHN HOEVEN, North Dakota            MAGGIE HASSAN, New Hampshire
STEVE DAINES, Montana                KAMALA D. HARRIS, California

                  Christopher R. Hixon, Staff Director
                Gabrielle D'Adamo Singer, Chief Counsel
       Patrick J. Bailey, Chief Counsel for Governmental Affairs
               Margaret E. Daum, Minority Staff Director
                Anna E. Laitin, Minority Senior Advisor
                     Laura W. Kilbride, Chief Clerk
                   Bonni E. Dinerstein, Hearing Clerk




















                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Johnson..............................................     3
    Senator McCaskill............................................     6
    Senator McCain...............................................    14
    Senator Carper...............................................    17
    Senator Paul.................................................    20
    Senator Tester...............................................    22
    Senator Lankford.............................................    25
    Senator Peters...............................................    28
    Senator Daines...............................................    32
    Senator Hassan...............................................    34
    Senator Heitkamp.............................................    37
    Senator Portman..............................................    39
    Senator Hoeven...............................................    48
Prepared statements:
    Senator Johnson..............................................    55
    Senator McCaskill............................................    56

                               WITNESSES
                       Tuesday, January 24, 2017

Hon. Lindsey Graham, a U.S. Senator from the State of South 
  Carolina                                                            1
Hon. Tom Cotton, a U.S. Senator from the State of Arkansas.......     2
    Prepared statement...........................................    61
Hon. J. Michael ``Mick'' Mulvaney to be Director, Office of 
  Management and Budget
    Testimony....................................................     8
    Prepared statement...........................................    62
    Biographical and financial information.......................    66
    Letter from the Office of Government Ethics..................   104
    Responses to pre-hearing questions...........................   108
    Responses to post-hearing questions..........................   169

                                APPENDIX

30-year Projected Deficits chart submitted by Senator Johnson....   254
Federal Budget FY16 chart submitted by Senator Johnson...........   255
Income statement submitted by Senator Johnson....................   256

 
                      NOMINATION OF THE HONORABLE 
                          J. MICHAEL MULVANEY

                              ----------                              


                       TUESDAY, JANUARY 24, 2017

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 2:35 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Ron Johnson, 
Chairman of the Committee, presiding.
    Present: Senators Johnson, McCain, Portman, Paul, Lankford, 
Hoeven, Daines, McCaskill, Carper, Tester, Heitkamp, Peters, 
Hassan, and Harris.
    Chairman Johnson. This hearing of the Senate Committee on 
Homeland Security and Governmental Affairs will come to order. 
We are here to have a confirmation hearing for Congressman Mick 
Mulvaney for the position of the Director of Office of 
Management and Budget (OMB).
    I am going to switch the script around a little bit to be 
respectful of our Senators' time here who are going to be doing 
some introductions, so I certainly want to welcome Senator 
Cotton and Senator Graham. Lindsey, you have a whole new 
calling in life, introducing Cabinet appointees. [Laughter.]
    Senator Graham. Yes, I am looking for a fallback plan.
    Chairman Johnson. We will go with seniority, and we will 
have Senator Graham start with his introduction of Congressman 
Mulvaney.

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

    Senator Graham. Well, thank you, Mr. Chairman. I know you 
were at the Budget Committee hearing today, and I just want to 
tell Mick I thought you did a very good job of answering hard 
questions and being yourself.
    To the Committee, I am honored to be here. It is a pleasure 
to introduce Congressman Mulvaney. He is from South Carolina. 
We are a small State, so we know each other pretty well.
    President Trump has picked a lot of talented people, some 
people from the private sector without a whole lot of 
experience in the job which they have been nominated for. I 
think President Obama did that also, and that is a good thing. 
People can learn jobs if they have the right skill set.
    The one thing I can tell you about the nominee here is he 
understands the budget. He is not a guy who is going to need to 
get caught up on how the Federal Government works. He has made 
it sort of his passion in politics to be involved in all things 
fiscal.
    I have known him personally for many years now--and we all 
say we are friends. And, in the Senate it is very well true 
because it is such a small group. But we play golf together. We 
actually are friends. He beats me all the time. And he is 
meticulously honest on the golf course, which is a good 
indication of what kind of public servant would be.
    I like him. He has a beautiful wife and triplets. Anybody 
who can raise triplets probably can help the government.
    From an academic background, he is very gifted. From his 
time in Congress, he has been a very fiscally conservative 
person. Sometimes we do not agree about this part of the 
government versus that part of the government.
    I think I voted for every President Obama nominee without 
exception. Maybe there is one or two I did not. And let me tell 
you why I chose to support President Obama's nominees as a 
point of personal privilege. Consequences to an election really 
matter, and the people he nominated, I had different views of 
what they should do in their job, but I came to conclude they 
were qualified.
    The one thing I can say without any hesitation, whether you 
agree with Congressman Mulvaney about a particular issue, I 
think he is extremely capable and qualified. It is up to you 
how to vote. You can use any standard you would like. I have 
chosen to kind of look at the person's qualifications.
    You will soon hear over the next few hours a man who 
understands the budget, and it was brought up that he is so 
different than President Trump in terms of entitlements and 
spending on certain areas of the government. I think President 
Trump sees in Congressman Mulvaney somebody that he can trust, 
that is smart, and will speak truth to power.
    I completely disagree with President Trump's view about 
entitlements. If we do not reform them, we are going to lose 
them. And you are going to hear a man who will be 
excruciatingly honest, who has the background to go into the 
job from day one, and understands what the job is all about. 
Whether you agree with him or not, if he disagrees with you, it 
is not because of anything other than he just disagrees. In his 
own way, he is trying to help the country as much as you are. 
And sincerity goes a long way with me, and Congressman Mulvaney 
is very smart, talented, but incredibly sincere.
    Thank you for having me.
    Chairman Johnson. Thank you, Senator Graham. Senator 
Cotton.

  OPENING STATEMENT OF THE HONORABLE TOM COTTON,\1\ A UNITED 
           STATES SENATOR FROM THE STATE OF ARKANSAS

    Senator Cotton. Mr. Chairman, Ranking Member, thank you for 
allowing me to appear. I want to add your voice in support of 
confirming Mick Mulvaney as the next Director of the Office of 
Management and Budget. Mick and I have known each other for 
many years now. We served together in the House of 
Representatives. He is a good friend and a trusted confidant, 
so I speak today from personal experience when I say he will 
serve our President and our Nation with distinction, as you may 
have seen this morning at the Budget Committee.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Cotton appears in the 
Appendix on page 61.
---------------------------------------------------------------------------
    The way I see it, the Director's job is to give the 
President the unvarnished truth. He has to tell the President 
exactly what things cost, partly for the President's agenda, 
but mostly for the taxpayer. The President, of course, sets the 
agenda, but he deserves a clear-eyed view, not rose-colored 
glasses.
    And for the last 6 years, Mick has been telling many hard 
truths: We are spending too much. Regulations are strangling 
our small businesses. And short-changing our military will only 
cost us more in the long run.
    Mick also understands the hardest truth of all, at least 
for big spenders here in Washington: It is the American people 
who earned this money through their hard work and sacrifice. 
Mick will treat every taxpayer dollar as if it were his own. 
And trust me, that means that he will watch those dollars like 
a hawk.
    In Arkansas, many people still stop to ask me what we are 
doing about the national debt. It is a huge concern. So with 
his eagle-eyed focus on spending, Mick will be a crucial voice 
in the President's Cabinet. He will represent millions of 
Americans who are deeply worried about the burden we are 
leaving our children. And while Mick is deeply principled, he 
also knows how to work with others and make progress wherever 
we can.
    In short, Mick is a fine choice to run the Office of 
Management and Budget. I urge you not only to advance his 
nomination, but also to do so as soon as possible. Under the 
law, the President is required to submit a budget to Congress 
early next month, which will be very difficult without a new 
Director. I also hope the full Senate will confirm him 
promptly.
    Thank you for your time today and for your consideration of 
this passionate advocate for the taxpayer, a bold truth teller, 
and my friend, Mick Mulvaney.

             OPENING STATEMENT OF CHAIRMAN JOHNSON

    Chairman Johnson. Thank you, Senator Cotton. And, again, 
thank you Senator Graham.
    Congressman Mulvaney, we would like to welcome you, your 
wife, Pam. Did your son James get through the tunnel?
    Mr. Mulvaney. He just barely made it in time.
    Chairman Johnson. Well, that is great. Again, we thank you 
for your past service to this country and your willingness to 
serve again. And we certainly thank your family. This will be 
more than a full-time job, so you are also making a sacrifice.
    I was at the Budget Committee hearing, and obviously we 
focused on the budgetary aspects of this job. But it is the 
Office of Management and Budget. This Committee has a mission 
statement: to enhance the economic and national security of 
America. Your position is going to be critical in terms of that 
enhancement. And no matter what problem we are dealing with, no 
matter what challenge this Nation faces, from my standpoint the 
number one component of the solution is economic growth.
    But we are not even coming close to realizing the full 
potential of the American economy. Since the Great Depression, 
our economy has grown about 3.2 percent. Since the Great 
Recession, it has been growing right about 2 percent.
    From my standpoint, there are four basic reasons for that. 
We are not utilizing our energy resources to the extent we 
should; we must begin to. We do not have a competitive tax 
system. But the other two main reasons, I would argue, come 
fully under the jurisdiction of this Committee, but also under 
the purview of your new responsibility if you are confirmed as 
Office of Management and Budget Director, and it is regulation 
and debt and the deficit.
    I would like to start on a couple charts here. I know in 
the Budget Committee Senator Whitehouse had a pretty good chart 
that you liked. I have my own. We will start with the 30-year 
deficit.\1\ Just like a family that is in debt over its head, 
you could ask that family: How can you grow your personal 
economy if every cent of income is really devoted to the basic 
necessities and servicing the debt? Well, a nation-state is the 
exact same way. And not only are we almost $20 trillion in 
debt--in other words, we are in debt over our head as a 
Nation--but over the next 30 years, according to the 
Congressional Budget Office (CBO), the deficit is projected to 
be $103 trillion--$10 trillion the first decade, $20 trillion 
the second, $68 trillion the third. And that compares, by the 
way, just to show you the magnitude of this, to the entire net 
private asset base of America at $116 trillion. Clearly, that 
is unsustainable. It is something that the Federal Government 
have to grapple with, or we will never achieve the type of 
economic prosperity that certainly our children should expect 
from our economy.
---------------------------------------------------------------------------
    \1\ The chart referenced by Senator Johnson appears in the Appendix 
on page 254.
---------------------------------------------------------------------------
    That is why I want to just throw up the fiscal year (FY) 
2016 Federal budget as a bar chart.\2\ Get that up there. You 
will notice on this bar chart there are two colors: there is 
red and there is blue.
---------------------------------------------------------------------------
    \2\ The chart referenced by Senator Johnson appears in the Appendix 
on page 255.
---------------------------------------------------------------------------
    Red represents all the mandatory spending--Social Security, 
Medicare, Medicaid, interest on the debt. So many dollars are 
spent where there is no appropriation. It is on automatic 
pilot, and it is out of control. It is about 70 percent of our 
budget.
    The blue represents discretionary spending. That is what we 
fight over in terms of the budget. That is what is 
appropriated. It is a little over $1 trillion out of our $3,854 
billion current year budget.
    This clearly has to be brought under control if we are ever 
going to restrain the growth in debt so we can achieve the type 
of prosperity we need.
    The components--and everybody has these charts in front of 
them in terms of a piece of paper. I have another piece of 
paper in front of the Senators. I think it might be in front of 
you, Congressman Mulvaney. I call this the income statement\3\ 
of the United States, and this is over that same 30-year 
period, just demonstrating that the component of that $103 
trillion deficit is $14 trillion over the next 30 years of 
deficit in Social Security, $34 trillion Medicare, and the 
rest, $54, $55 trillion, is interest on the debt. So if we do 
not want to pay over the next 30 years $55 trillion to our 
creditors, we have to address the unsustainable situation in 
both Social Security, but in particular Medicare.
---------------------------------------------------------------------------
    \3\ The chart referenced by Senator Johnson appears in the Appendix 
on page 256.
---------------------------------------------------------------------------
    So those are just the facts. Those are the realities. That 
is the reality that collectively here in the Federal Government 
we have been denying for far too many years. But at some point 
in time there will be a point of reckoning. So, again, that is 
the budget reality that we are faced with.
    The other thing we are going to have to grapple with in 
terms of economic growth, the other thing that is really 
restraining the growth of our economy, is overregulation. It is 
a massive burden. We have held a number of hearings in this 
Committee on it. A number of studies show that we are 
approaching $2 trillion per year as the cost of complying with 
Federal regulations.
    I know in your testimony, Congressman, you talk about the 
debt burden per family. I will not steal your thunder. But the 
regulatory burden is about $14,800 per year per family.
    I was talking to a Chief Executive Officer (CEO) of a 
Wisconsin paper manufacturer. By the way, I cannot tell you who 
it is because that CEO feared retaliation by his government, 
which is a pretty sad commentary. But he did the cost 
calculation on just four regulations recently issued. The cost 
was the equivalent of $12,000 per year per employee. Just four 
regulations. Now, that is $12,000 that the Wisconsin paper 
manufacturer does not have available for increasing wages and 
benefits and investing in the business to grow it to create 
more jobs. It is that regulatory burden that really is, I 
think, the number one reason why our economy is not realizing 
its full potential.
    One last anecdote on overregulation. For the last 2 years, 
the chancellor of the University of Wisconsin-Madison has come 
into my office complaining about overregulation as it relates 
to the university system. This last year, she came in with a 
study commissioned by other research universities. The 
conclusion of that study said that 42 percent of researcher 
time spent on Federal Government grants was spent complying 
with Federal regulations. Think of the opportunity cost, think 
of the diseases where we are spending 42 percent of the time 
filling out paperwork as opposed to trying to determine a cure 
for those.
    So the overregulation has an enormous cost to our economy, 
and that is something that, as Director of OMB, hopefully you 
will have a great deal of input in terms of cutting back and 
curbing so we can realize our full potential.
    I do have a written statement that I would ask unanimous 
consent to enter into the record.\1\
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Johnson appears in the 
Appendix on page 55.
---------------------------------------------------------------------------
    With that, I will turn it over to Senator McCaskill, my 
Ranking Member.

           OPENING STATEMENT OF SENATOR MCCASKILL\1\

    Senator McCaskill. Thank you. Thank you, Congressman 
Mulvaney, for being here, and thank you, Mr. Chairman. I wish I 
did not have to begin my opening talking about process. Mr. 
Mulvaney has submitted all the necessary documents for 
consideration by the Committee, including 3 years of tax 
returns, and the Office of Government Ethics has completed its 
review of conflicts. And we have a signed letter regarding 
Congressman Mulvaney's agreement to address potential conflicts 
of interest.
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator McCaskill appears in the 
Appendix on page 56.
---------------------------------------------------------------------------
    However, I am not aware that there has been a precedent for 
us going forward with a hearing when we have not had an 
opportunity to review the nominee's Federal Bureau of 
Investigation (FBI) background check. I was told we would see 
it last week, and then it was moved up to yesterday, and then 
we learned today that it is still was not ready.
    I do not fault the nominee for this, but it is evidence of 
a rushed process that we are witnessing. I am disappointed that 
we are holding this hearing without the FBI review being 
completed. I think it is a bad precedent for this Committee to 
do that, and I would like to work with you and the FBI to 
ensure this does not happen with any future nominees.
    I look forward to a commitment from you that we will not 
hold a markup or a vote on moving forward on this nomination to 
the full Senate for confirmation.
    Chairman Johnson. You can have that commitment. I want to 
see the FBI file, as you do, too. We will do our due diligence. 
You will have plenty of time, I am sure, Congressman Mulvaney 
will come back in and answer any questions we have based on 
whatever that FBI file tells us.
    Senator McCaskill. Since November 9th, Americans have been 
searching to understand what is next for this country. The 
growth of our economy and the jobs of so many Americans depend 
on our country remaining a stable and relatively predictable 
place to do business--where businesses and the Federal 
Government alike have the ability to plan for the future.
    Despite this, to date the Trump Administration's plan for 
the economy changes with each news cycle, and the strategy 
appears to shift depending on which nominee or which member of 
the transition team is speaking.
    Just last week at a hearing, Mr. Mnuchin, the nominee for 
the Secretary of the Treasury, said that after the 
inauguration, the Trump Administration would speak with ``a 
unified voice.''
    Four days ago, President Trump was sworn in, and the Trump 
Administration began. Despite the transition of power and the 
start of a new Administration, on issues like Social Security, 
health care, Medicare, and taxes, we are still searching for 
that unified voice.
    The Director of the Office of Management and Budget is 
charged with implementing and articulating the President's 
policy agenda. If confirmed, Representative Mulvaney, you will 
hold a post that influences policy proposals, budget 
appropriations, the management of Federal workers, and the 
safeguarding of our regulatory process. Your core job will be 
to take the President's ideas and make them clear and cohesive 
policy.
    Despite your willingness to serve, I cannot help but 
question how you will achieve this when the views that you have 
expressed for so long do not align with those of the President 
or other members of the Cabinet. You are a self-described 
``hard-core conservative.'' You support cuts to Medicare and 
Social Security and drastically shrinking the size of 
government through the elimination of agencies, Federal 
programs, and Federal workers. You have voted for and supported 
the shutdown of the Federal Government several times and have 
dismissed concerns about failing to lift the debt ceiling as 
``just posturing.'' You have said that, ``We have to end 
Medicare as we know it.'' And you have advocated cuts and full-
scale overhauls of the program. Meanwhile, during his campaign 
President Trump said that he would make no changes to Medicare.
    Representative Price, the nominee for Secretary of the 
Department of Health and Human Services (HHS), who has also 
advocated for changes in the Medicare system and block granting 
Medicaid, told a Senate Committee last week that the 
President's plan remains the same.
    The situation is almost the exact same on Social Security. 
You have advocated changes and cuts and at one point in time 
actually called Social Security like a ``Ponzi scheme,'' while 
the President said during his campaign he would not alter 
Social Security at all.
    In voting against emergency funding after Hurricane Sandy, 
you said, ``We have mismanaged our own finances to the point 
where we are now no longer capable of taking care of our own.'' 
The President has made clear that he intends to increase 
spending by initiating massive infrastructure projects, such as 
the Wall, even if we have to pay for it, as promised on Friday 
during his inaugural address, building ``new roads, highways, 
bridges, airports, tunnels, and railways all across our 
wonderful Nation.''
    After this hearing, we will understand more about your 
background and beliefs, but we may not have a better 
understanding of how and whether those beliefs will have any 
impact on the Trump Administration. How will we know which 
policies will be implemented when the President and his Cabinet 
have such different views on such important topics?
    Not only am I worried that we will not have the stability 
we are looking for from the incoming Administration, I am not 
certain that you, a man who has stuck to his principles 
admirably and has not often been forced to compromise, fully 
grasp the responsibilities of the position that you have been 
nominated to.
    Many of your proposals, like your willingness to allow the 
Federal Government to default on its obligations, would have 
far worse implications than I believe you are willing to 
concede. In fact, you once said that you had yet to meet 
someone who could articulate the negative consequences of the 
United States failing to raise the debt ceiling. If that is the 
case, you simply have not been listening to the economists, the 
Treasury Secretary, to the nominee for Treasury Secretary of 
this President, or even former OMB Directors of both parties, 
who tell a much different story.
    But perhaps there was comfort in being able to say these 
things knowing that cooler heads would prevail and no one would 
ever have to find out the consequences of your rhetoric. But 
now you are seeking confirmation to a Cabinet-level post with 
great responsibility and power. What will happen if your views 
and proposals are adopted wholesale? If that happens, I fear 
the American people and the global economy are in for a rude 
awakening.
    Throughout this hearing I will be listening closely to 
better understand how you will reconcile your beliefs with 
those of the President and how as Director of the Office of 
Management and Budget you will implement the vision of a Trump 
Administration that speaks with ``a unified voice.'' I look 
forward to hearing your answers. Thank you, Congressman.
    Thank you, Mr. Chairman.
    Chairman Johnson. Thank you, Senator McCaskill.
    It is the tradition of this Committee to swear in 
witnesses, so please rise and raise your right hand. Do you 
swear the testimony you will give before this Committee will be 
the truth, the whole truth, and nothing but the truth, so help 
you, God?
    Mr. Mulvaney. I do.
    Chairman Johnson. Please be seated.
    Congressman Mick Mulvaney has represented the 5th District 
of South Carolina since 2010 and was a State representative 
from 2006 to 2010. In the House of Representatives, Congressman 
Mulvaney has served on the Oversight and Government Reform 
Committee, the Budget Committee, and the Financial Services 
Committee. He is a graduate of Georgetown University and holds 
a law degree from the University of North Carolina and an 
executive degree from Harvard Business School. If confirmed, 
Congressman Mulvaney will bring with him to the position, in 
addition to that experience in government, a wealth of 
knowledge from his experience as a small business owner in the 
real estate, construction, and restaurant industries. 
Congressman Mulvaney.

 TESTIMONY OF THE HONORABLE J. MICHAEL ``MICK'' MULVANEY\1\ TO 
          BE DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET

    Mr. Mulvaney. Chairman Johnson, Ranking Member McCaskill, 
thank you again for having me. It is an honor and a privilege 
to be here, and I am pleased to offer my qualifications for the 
position of the Director of the Office of Management and 
Budget. I also want to thank the President for the confidence 
that he has shown in me in nominating me for this post.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Mulvaney appears in the Appendix 
on page 62.
---------------------------------------------------------------------------
    I also want to especially thank Senators Graham and Cotton 
for taking the time to introduce me. It is nice to have my 
friends be able to do that.
    I also want to especially thank my family, a few of whom 
are here today. My wife is seated behind me, and you saw one of 
the triplets slip in a little bit late, but at least he put on 
a tie, which is kind of nice. James is here. His siblings 
Caroline and Finnegan are home in South Carolina at school.
    I think as Members of this Committee know as well as 
anybody, the burdens of what we do, the public service we do, 
falls probably most heavily on our families, and we probably do 
not get a chance often enough to say this, and we certainly do 
not get a chance to do it on national television. So with the 
permission of the Chairman, I am going to say this: I am 
extraordinarily proud of my family, my children, the young 
people that they have become, and my wife. I was asked during 
this process one time to sum up who I was in one sentence, and 
all I could think to say was that I love my wife, and I am glad 
that she is here today and in my life.
    Finally, I am grateful to the Members of the Committee for 
taking the time over the course of the last couple weeks to sit 
down and talk about issues, to talk about your views. And 
should I be confirmed, I look forward to continuing to do that 
because I think anyone who is familiar with the Office of 
Management and Budget knows that you cannot do this job alone. 
And I think maybe a Member of Congress knows that better than 
most. Several former members of the House and the Senate, 
including Senator Portman, Mr. Nussle, and Mr. Panetta, have 
all served in the Office of OMB with distinction. They have set 
an extraordinarily high bar and provided a good example for all 
of those who follow, set a good example of how the OMB Director 
should interact with and serve the President, the Congress, and 
the American people. And if confirmed, I will use those as role 
models.
    You deserve the truth, as do the American public, and it is 
the OMB Director's responsibility to tell you--and the 
President--the truth, even when that might be hard to hear.
    Part of the thing that is hard to hear is that for the 
first time in our history, there is a chance that the next 
generation may be less prosperous than that that preceded it. 
To me, and to the people in this room, I know that that is 
completely unacceptable. We can turn this economy around. We 
can turn this country around. But it is going to take difficult 
decisions today in order to avoid taking nearly impossible 
decisions tomorrow.
    Our gross national debt is roughly $20 trillion. That 
number that is so large, it is hard for most people, myself 
included, to grasp. I prefer to look at it another way: If you 
convert that amount of money in what we make or take in as a 
Nation every single year to the ordinary American family that 
makes $55,000 a year as a household, that is the equivalent of 
that family having a credit card debt of $260,000. American 
families know what that would mean to them, and it is time for 
government to figure out that same lesson.
    I believe as a matter of principle, that the debt is a 
problem that must be addressed sooner rather than later. I also 
know that fundamental changes are needed in the way we spend 
and tax if we truly want a healthy economy. This must include 
changing our long-term fiscal path, which is unsustainable.
    Part of fixing our problem also means taking a hard look at 
government waste and then ending it. American taxpayers deserve 
a government that is efficient, effective, and accountable. 
American families earn their money honestly; they deserve to 
have us spend it in the same fashion.
    But fixing the economy does not mean just taking a green 
eyeshade approach to the budget. Our government is more than 
just numbers. A strong and healthy economy allows us to take 
care of our most vulnerable. Pam's mom relied on Social 
Security in her retirement. She relied on Medicare before she 
passed away from cancer. We were glad that that safety net was 
there for her. We would like very much for that safety net to 
be there for her grandchildren, our triplets.
    All that being said, I know many of the Members of this 
Committee will want to know what my positions will be as the 
OMB Director. I am, of course, not yet in the position, and I 
do not presume to know about decisions I might make, much less 
what the decisions of the President will be after consulting 
his Cabinet and other advisors. I do know what I believe, 
however, and I look forward to discussing whatever topics you 
consider relevant today. I have not exactly been a shy Member 
of Congress for the last 6 years, and I do not expect to begin 
today or, should you confirm me, over at the Office of 
Management and Budget.
    At the same time, I recognize that good public service--
whether it is the State legislature, the Federal legislature, 
or in the Executive Branch--takes both courage and wisdom, the 
courage to lead and the wisdom to listen. I have learned that I 
do not have a 
monopoly of good ideas. Facts--and the cogent arguments of 
others--matter. And my commitment to you today is to take a 
fact-based approach and to listen to various ideas about how to 
get our financial house in order.
    As you know, OMB also performs other significant functions 
regarding management, plays a significant role in the 
regulatory climate, as well as many other duties, as all of you 
folks know. I look forward to talking to you about all of those 
issues as you see fit. And if confirmed, I look forward to 
working with Congress--and serving the President--to address 
the challenges on behalf of all the American people.
    With that, I thank you for your time, Mr. Chairman.
    Chairman Johnson. Thank you, Congressman Mulvaney.
    There are three questions the Committee asks of every 
nominee for the record. First, is there anything you are aware 
of in your background that might present a conflict of interest 
for the duties of the office to which you have been nominated?
    Mr. Mulvaney. No, sir.
    Chairman Johnson. 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. Mulvaney. No, sir.
    Chairman Johnson. Do you agree without reservation to 
comply with any request or summons to appear and testify before 
any duly constituted Committee of Congress if you are 
confirmed?
    Mr. Mulvaney. I will fully cooperate with all those 
requests.
    Chairman Johnson. Thank you. Let me just ask one question, 
and then I will reserve the balance of my time. I know you are 
very forthright regarding the issue you had with paying back 
taxes and payroll taxes for a babysitter, so I would like to 
give you this opportunity to start off the hearing to explain 
the situation with the babysitter for your premature triplets?
    Mr. Mulvaney. Sure, and I would be happy to do that, and I 
think we had a chance to talk about it with various Members of 
the Committee. My children were born, the triplets were born in 
2000, and when they came home, we hired someone to help with 
them. And we hired what we considered to be a babysitter. It 
was a young woman who did not live with us, did not teach the 
children, did not cook or clean. She helped my wife with the 
children. And we did not withhold Federal taxes or State and 
Federal unemployment taxes on them. And, honestly, I did not 
think about it again until December.
    When you are nominated for one of these positions, you get 
information from the transition team, and one of them was a 
checklist that says, ``Have you ever had a babysitter, nanny, 
governess, or au pair?'' And I checked, ``Yes.'' And they 
immediately sent me an Internal Revenue Service (IRS) circular. 
And when I looked at it, I immediately realized that we had 
made a mistake and that we should have withheld those taxes and 
should have paid unemployment.
    I did the only thing I know to do under the circumstances, 
which is to simply tell everybody. I told the transition team. 
They communicated to the President. I told my accountant. And 
we sat down trying to figure out how to make amends, how to 
redress the situation.
    And so what we have done is we notified the IRS; we paid 
all the taxes that were outstanding. We refiled I think 
Schedule H for the relevant years, and we are waiting to hear 
back from the Federal Government regarding penalties, late 
fees, and so forth.
    I recognize the fact that I made a mistake. It was my 
responsibility. But once it was brought to my attention, I did 
the only thing I know to do, which is simply be straightforward 
about it, admit the problem, and then try and fix it.
    Chairman Johnson. Thank you. Again, I will reserve the 
balance of my time. Senator McCaskill.
    Senator McCaskill. Thank you. I want to explore a little 
bit the inconsistencies, if I could, and see if we can try to 
reconcile any of them. Let me start first on the debt limit, 
and I am going to start with your quote:
    ``I have heard people say that if we do not raise the debt 
limit, it will be the end of the world. I have yet to meet 
someone who can articulate the negative consequences.''
    And, in fact, in my office, we had a chance to talk about 
how you would prioritize payments if we did not raise the debt 
ceiling, who would get paid first and who would be at the end 
of the line, envisioning a potential failure to raise the debt 
ceiling.
    I was then surprised when we questioned Steve Mnuchin, the 
nominee to be Treasury Secretary, when he said absolutely 
raising the debt ceiling, that is not about spending, that is 
about paying obligations that have already been made. He went 
on to say that he supported raising the debt ceiling 100 
percent. He said, ``The President-elect has made it perfectly 
clear''--I am quoting him now--``that honoring the U.S. debt is 
the most important thing.'' And, finally, he said in the 
hearing, ``I would like to see us raise the debt ceiling sooner 
rather than later.''
    Now, how do you reconcile those two positions, Congressman?
    Mr. Mulvaney. Thank you for that, Senator. A couple 
different things.
    As you will recall, back during, I believe, the last time 
we had a debt ceiling discussion in this country was 2013, and 
the rhetoric was extraordinarily high. My comment that you made 
was something I believe I said--the statement is accurate--was 
that I had not found anybody yet who could explain to me 
exactly why that rhetoric was so high. And I was surprised to 
find that at the time the Treasury Secretary, who you would 
expect to be out trying to calm markets, was actually doing the 
exact opposite.
    We did happen to find out after the fact, by the way, that 
while he was publicly saying that we would default, he was 
privately telling the primary dealers in Federal debt that he 
would pay the interest on the debt. So I think that goes to the 
environment at the time.
    Senator McCaskill. But, Congressman, let me interrupt you 
there just to try to point this out. The discussion about 
whether or not we are going to raise the debt ceiling is a 
debate on whether or not we are going to honor our obligations. 
That, of course, is going to roil the markets. It does not 
matter who is Secretary Treasury. I mean, the whole discussion 
that it would be considered that we would not raise the debt 
ceiling in order to meet previous obligations, with some of the 
rhetoric, in all due respect, from your side of the equation, 
gave people the impression that raising the debt ceiling was 
allowing more spending. And that is just not true.
    Mr. Mulvaney. That is a true statement. Raising the debt 
ceiling does not allow more spending. That is appropriations 
bills that do that. But I encourage you to recognize the fact 
that this is not a new discussion. Yes, we had one recently in 
2013. But debt ceiling debates go back a long ways. As a matter 
of fact, there is a Government Accountability Office (GAO) 
letter that was issued in 1985, which I still believe it is 
technically not law, but it is still effective guidance--that 
dealt with what would happen in terms of prioritization back in 
1985 if we bumped up against the debt ceiling.
    So, again, my interest was in lowering the temperature of 
the rhetoric, not in stirring things up.
    Senator McCaskill. OK. So you disagree with the would-be 
Secretary of Treasury, Secretary Mnuchin. Will you try to 
influence him that, in fact, you should withhold support for 
raising the debt ceiling?
    Mr. Mulvaney. No, ma'am. A couple different things. I think 
the quotation you attributed to him was that he thought that 
paying debts was the most important thing we could----
    Senator McCaskill. No. Raising the debt ceiling.
    Mr. Mulvaney. I thought----
    Senator McCaskill. He said sooner rather than later. He 
said, ``I would like to raise the debt ceiling sooner rather 
than later.''
    Mr. Mulvaney. Then I believe he went on and said that 
paying the debts was one of the most important things we could 
do.
    Senator McCaskill. I am quoting Mnuchin saying, ``The 
President-elect has made it perfectly clear that honoring the 
U.S. debt is the most important thing.''
    Mr. Mulvaney. I could agree with that.
    Senator McCaskill. OK. And what about the Congress raising 
the debt ceiling? Will you be over here lobbying for Congress 
to raise the debt ceiling?
    Mr. Mulvaney. I will be doing whatever the President asks 
me to do. I hope----
    Senator McCaskill. OK. That is what I wanted to hear.
    Mr. Mulvaney. Right.
    Senator McCaskill. I also want to point out that in 2013 
you said, ``We believe the 2013 government shutdown was good 
policy.'' Do you still believe that?
    Mr. Mulvaney. Yes, ma'am. I think the last bill that the 
House sent over to you--I think the discussion in 2013 turned 
on something that was counterfactual. It said that we tried to 
shut the government down over defunding Obamacare, which is 
wrong at many levels. What the House did is send an 
appropriations bill that would delay the implementation of 
Obamacare's individual mandate for 1 year.
    Senator McCaskill. OK.
    Mr. Mulvaney. We did that for a reason, because the 
President had just recently given that exact accommodation to 
corporations in this country.
    Senator McCaskill. You were trying to make a point with it.
    Mr. Mulvaney. That is correct.
    Senator McCaskill. I get that. And it was a point that you 
felt very strongly about, which I respect. But I am just 
wondering if you still believe a government shutdown could be 
good policy if it is to make a political point.
    Mr. Mulvaney. A government shutdown is never a desirable 
end.
    Senator McCaskill. OK. Defense spending. I hate to cut in 
my friend's questioning because I have a feeling he might ask 
about this, but I am quoting you now: ``Defense has to be cut. 
It has to be on the table, no question.''
    Once again, another quote: ``I am comfortable that the 
government will continue to exist after the sequester.''
    Versus the President, who said, ``As soon as I take office, 
I will ask Congress to fully eliminate the defense sequester 
and will submit a new budget to rebuild our military.''
    Have you changed your mind about military cuts?
    Mr. Mulvaney. No, ma'am. I have voted many times for 
exactly what the President just laid out, which was to increase 
the top-line defense number. And I have had a chance to discuss 
with General Mattis, although we have not talked specifics 
because I do not want to get into that prior to the Senate 
making its determination. But I am absolutely in lockstep with 
the President in terms of trying to figure out ways to increase 
the top-line defense number.
    Your first statement, which I think harkens back to when I 
first got here, is something that I have been talking about 
since I arrived here, which is that I think it is incumbent 
upon my party to treat all waste equally.
    Senator McCaskill. OK.
    Mr. Mulvaney. That waste in the welfare department and 
waste in the Agriculture Department is waste just like waste in 
the Defense Department, and that if we are not willing to talk 
about those things equally, it undermines our credibility.
    Senator McCaskill. OK. On health care, ``I do not believe 
that health care is a fundamental right, because once you 
declare that it is a fundamental right, that means someone has 
a fundamental obligation to pay for it.'' You said that in 
2010.
    Versus the President, who said: ``You know, there are many 
people talking about many forms of health care where people 
with no money are not covered. We cannot have that.''
    Do you agree with the President that we cannot have people 
with no money not having health care?
    Mr. Mulvaney. I think it is important to recognize that in 
each of these examples, what you have done is correctly point 
out a position that I took as an elected Representative of the 
5th District of South Carolina, and I have done the very best I 
could to represent those people to the best of my ability. I 
come from a very conservative part of South Carolina, and I 
think they are very happy with my representation.
    Senator McCaskill. You are not telling the people of South 
Carolina you are going to get more liberal now that you are 
working for President Trump, are you?
    Mr. Mulvaney. No. I will tell you the same thing I tell 
them, which my role is getting ready to change. I would like to 
think that the President has invited me to join his Cabinet in 
order to bring those perspectives to the table. But at the end 
of the day, when the President gets together with all of his 
advisers and says, ``Here is the plan going forward,'' then it 
would be my job to enforce those policies to the best of my 
ability. And I am absolutely comfortable doing that.
    Senator McCaskill. Thank you, Mr. Chairman. I will save the 
rest of mine for next.
    Chairman Johnson. Senator McCain.

              OPENING STATEMENT OF SENATOR MCCAIN

    Senator McCain. Mr. Mulvaney, in 2011, did you vote for the 
immediate withdrawal of U.S. troops from Afghanistan?
    Mr. Mulvaney. You and I talked about that in your office, 
and I believe that I----
    Senator McCain. Please, I have a short period of time.
    Mr. Mulvaney. Sure.
    Senator McCain. It is a pretty simple question. Did you 
vote for the immediate withdrawal of U.S. troops from 
Afghanistan?
    Mr. Mulvaney. I believe that I did, sir, yes.
    Senator McCain. In 2012, did you vote to withdraw two 
brigade combat teams from Europe?
    Mr. Mulvaney. That one I do not remember.
    Senator McCain. I think I would remember if I wanted to 
withdraw troops from Europe.
    In 2013, did you vote to withdraw the 2nd Cavalry Regiment 
from Europe?
    Mr. Mulvaney. Again, I do not remember the specifics. I 
know that I have taken similar votes in the past, yes, sir.
    Senator McCain. In 2011, did you offer an amendment to cut 
the defense top line by $17 billion?
    Mr. Mulvaney. I believe that was an Overseas Contingency 
Operations (OCO) budget. I do not think it was the top-line 
defense appropriations bill.
    Senator McCain. So you voted against OCO, so we are talking 
semantics here. Did you vote to cut $17 billion from our 
defense?
    Mr. Mulvaney. From the overseas contingency operation 
budget, yes, sir.
    Senator McCain. I see. Did you offer an amendment in 2013 
to cut the budget by $3.5 billion?
    Mr. Mulvaney. That I do not remember.
    Senator McCain. Well, I will tell you, I would remember if 
I voted to cut our defenses the way that you did, Congressman. 
Maybe you do not take it with the seriousness that it deserves.
    I am not interested in playing semantic games with you. I 
am interested in what our military needs and whether they are 
receiving it. It is clear from your record that you have been 
an impediment to that for years.
    Do you believe we should repeal the Budget Control Act?
    Mr. Mulvaney. I believe that we should repeal it or replace 
it with something that is more efficient. Yes, sir. I voted 
against the Budget Control Act for just that reason.
    Senator McCain. Do you believe that defense increases must 
be conditioned on offsets elsewhere?
    Mr. Mulvaney. I believe that we made a promise in 2011 as 
part of a debt ceiling increase to save money, and I am 
interested in keeping that promise.
    Senator McCain. What is the highest priority--reducing the 
debt or rebuilding the military?
    Mr. Mulvaney. The number one priority of the United States 
Federal Government is to defend the Nation.
    Senator McCain. It is nice to hear that you believe they 
are important because you have spent your entire congressional 
career pitting the debt against our military, and each time, at 
least for you, our military was less important.
    As OMB Director, you will be advising the President on 
ongoing budget matters. In your response to the Committee, you 
have stated that government shutdowns ``always contain some 
element of good policy.'' Will you be advising the President 
that a government shutdown or, as you--and maybe George 
Orwell--would like to call it, as you did in your responses to 
questions, ``temporary lapse in appropriations'' are an 
acceptable outcome during budget negotiations?
    Mr. Mulvaney. Actually, the term ``temporary lapse in 
appropriation'' is the term that the government used to 
describe that circumstance up until, I believe, 1994.
    Senator McCain. That is what you believe it is?
    Mr. Mulvaney. To get to your direct point, I do not intend 
to be recommending to the President that we negotiate or govern 
by crisis.
    Senator McCain. But you supported the government shutdowns?
    Mr. Mulvaney. I voted for an appropriations bill that the 
Senate failed to take up. I think in a system, Senator, where 
you have to have the approval of the House----
    Senator McCain. Did you make statements in support of the 
shutdown during the shutdown?
    Mr. Mulvaney. I made statements in support of the House 
bill to keep the government open.
    Senator McCain. Which you knew would not succeed because it 
was not going to pass the U.S. Senate.
    Mr. Mulvaney. I do not pretend to know, sir, what the 
Senate chooses to do.
    Senator McCain. Will there be a corresponding increase in 
the defense base budget for every dollar of OCO, which you have 
opposed, transferred to the base?
    Mr. Mulvaney. I have proposed moving stuff from the OCO to 
the top-line defense budget because I think it is more 
transparent.
    Senator McCain. So you believe there should be--the 
President has advocated increases in defense spending. Do you 
believe that that should be tied to decreases in spending in 
other areas of government?
    Mr. Mulvaney. I have voted regularly and hope to continue 
to advise the President that the best possible route forward is 
to raise the top-line defense number and have corresponding 
reductions in the non-defense discretionary.
    Senator McCain. And if you are not able through Congress to 
reduce the spending, will you still support increases in 
defense spending?
    Mr. Mulvaney. I will make my case to the President. Again, 
I think he is looking for my perspective----
    Senator McCain. I am asking for your personal opinion 
before this Committee, not what you would advise the President. 
I want to know whether you would support an increase in defense 
spending without a commensurate cut in non-defense spending?
    Mr. Mulvaney. I would make the argument--again, I recognize 
what you are asking me, Senator, but you also asked me what I 
would do as an elected official, and that is not my job. My job 
is to make the case to the President, and I am trying to answer 
your question to the best of my ability, which is I would lay 
out to the President what the implications of doing that would 
be.
    Senator McCain. Well, since it is obvious that you and your 
friends supported the shutdown--in fact, I remember it 
vividly--as a ``temporary lapse in appropriations,'' I would 
like you to maybe go to Arizona and tell the folks up around 
the Grand Canyon when we shut down the Grand Canyon and we had 
to fly food up to them, the concessions around the Grand 
Canyon. And I remember it very well, and I think it is a 
shameful chapter, and I think it is a reason why the people 
have such a low opinion of us and the work we do when we have 
``temporary lapses in appropriations,'' as you described them.
    All I can say to you, sir, is that I am deeply concerned 
about your lack of support for our military, about your 
continued votes of withdrawals from Europe when we see a world 
on fire, withdrawing combat teams. What were you thinking, 
honestly, when you voted for an immediate withdrawal of all 
U.S. troops from Afghanistan? Help me out here.
    Mr. Mulvaney. Senator, if you would give me the time, I 
will tell you the story, because it is a true story. With your 
indulgence, I had----
    Senator McCain. I have about 50 seconds. Go ahead.
    Mr. Mulvaney. I had a group of Vietnam veterans come into 
my office--a gentleman about 6-foot-5, long gray hair in a 
ponytail, leather vest--to come and talk to me about the 
Department of Veterans Affairs (VA) issues, which was 
appropriate at the time. At the end of the meeting, walking out 
in the parking lot, he pulled me aside. This giant mountain of 
a man pulled me aside and started crying and said, ``Look, I 
have done thus and such for my country. My son has been 
overseas now four times in 5 years, and it is killing his 
family. You know South Carolina''----
    Senator McCain. So the answer to that is withdraw all 
troops from Afghanistan?
    Mr. Mulvaney. I was doing the best----
    Senator McCain. Congressman, that is crazy.
    Mr. Mulvaney. I was doing the best I could to represent the 
people in South Carolina.
    Senator McCain. Because one person came up----
    Mr. Mulvaney. I was doing the best I can----
    Senator McCain. Because one person came up to you and was 
subject to the sacrifices that the men and women make, then you 
voted to withdraw all troops from Afghanistan? Don't you know 
where September 11, 2001 (9/11) came from?
    Mr. Mulvaney. Senator, you know as well as any how pro-
military South Carolina is, and I could tell you had the full 
support----
    Senator McCain. I can tell you that from--I know one thing 
about South Carolina. The majority of them do not support a 
vote in favor of withdrawing all troops from Afghanistan. I can 
tell you that. And I will take a poll anytime, that they do not 
want to--there is too much many sacrifices. That is where 9/11 
began. I know of no reputable member of the military leadership 
that would say that because of that we should withdraw all 
troops from Afghanistan.
    My time has expired.
    Chairman Johnson. Senator Carper.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thanks, Mr. Chairman.
    Mr. Mulvaney, welcome. It is good to see you. Thanks for 
stopping by and visiting with me yesterday.
    Mr. Mulvaney. Yes, sir.
    Senator Carper. Do you recall when you met with President 
Trump and when he subsequently nominated you for this post?
    Mr. Mulvaney. Yes, sir. I met President Trump the first 
week in December, I believe.
    Senator Carper. And do you recall the last time you met 
with him?
    Mr. Mulvaney. That is the only time I have met with the 
President personally.
    Senator Carper. So since that time you have not met with 
him?
    Mr. Mulvaney. That is correct, sir.
    Senator Carper. All right. He has spoken, as I am sure you 
know, in favor of a number of steps or actions that are of 
interest to us, I think to us all. One, he has called for what 
I would describe almost as ``massive tax cuts.'' Some would 
suggest that they are largely to benefit people in upper-income 
levels. But that is one of the things. And he has also proposed 
raising defense spending by quite a bit.
    Medicare and Social Security, apparently he has said those 
were off limits and we are not going to touch those.
    I understand he has said and continues to say that we ought 
to build a wall. He says that the Mexicans will pay for it. I 
am not sure they are ready to do that. But the cost is anywhere 
from $15 to $25 billion.
    He wants to repeal the Affordable Care Act (ACA), but the 
Committee for a Responsible Budget tells us that the cost of 
doing so in terms of our budget deficit is to increase it by 
anywhere from $150 to $350 billion.
    I think when Senator Cotton talked about you earlier when 
he introduced you, he said something about ``speaking truth to 
power.'' Somebody needs to speak the truth to our President 
about how you cannot do all those things and reduce our budget 
deficit. Are you that person?
    Mr. Mulvaney. I like to think so, yes, sir. In fact, I am 
looking forward to fulfilling that exact role. I see my role as 
telling the President the facts as I can determine them, giving 
him options as I see fit or as I figure out a way to present 
him with a range of options, and then to try to advise him to 
the best of my ability, and then to follow through on his 
policies once he establishes them.
    Senator Carper. We had a couple of people who have been 
nominated by the President--one, General Kelly, and the other 
fellow's nickname is ``Mad Dog.'' And they were asked if they 
were essentially asked by the President to do something that 
they felt was wrong, they gave him their advice, and they said, 
``I think that is wrong,'' and it was not accepted, I believe 
they both said that they would step down just as a matter of 
principle.
    Let me ask a similar kind of question of you. If you 
present your best judgment to the President that he is 
literally going down the wrong track--and I mentioned some of 
the very expensive ideas that he has put forward. But if he 
chooses to ignore what you have recommended in terms of having 
a more balanced and responsible fiscal policy, what would you 
do? And that is not an easy question, but what would you do?
    Mr. Mulvaney. No, it is not an easy question, but it is not 
a particularly hard question. I do not think any of us expect--
I know I do not--to have the President agree with me all of the 
time. And I do expect there will be circumstances where I make 
the best case for what I happen to believe on a particular 
issue, and that based upon other information or the advice of 
other counselors the President may make a decision that I would 
not have made myself, but I do not think that prompts one to 
leave the office.
    Senator Carper. OK. Thank you.
    The last time we had a balanced budget--actually, we had 
four of them in a row, as you will recall--I think it was 
fiscal years 1998 to 2001, the last four budgets of the Clinton 
Administration. And those were also part of 8 years where we 
had the most jobs created in the history of the country in an 
8-year period.
    During those 4 years when we had balanced budgets, revenues 
as a percentage of gross domestic product (GDP) were just about 
20 percent in each of those years, spending also about 20 
percent for each of those years. Do you recall what last year 
revenues were as a percentage of GDP and spending as a 
percentage of GDP?
    Mr. Mulvaney. Ballpark, I think revenues were about 18.5 
and spending was about 20 or 21. Twenty?
    Senator Carper. All right. Do you believe that we need just 
to focus on the spending side, or is there some reasonable 
balance where, as they found in the 4 years of the Clinton 
Administration when we actually had four balanced budgets in a 
row, that there is some need for revenues? I shared a story 
with you yesterday from a town hall meeting where a lady at one 
of my town hall meetings when I was a Congressman, she said to 
me, ``I do not mind paying extra taxes. I just do not want you 
to waste my money.'' But is there a role for both spending and 
smarter spending and revenues?
    Mr. Mulvaney. I think the lady that you reference probably 
represents a lot of the American public. They do not mind 
paying their taxes as long as they do not think we are wasting 
it.
    Senator Carper. OK.
    Mr. Mulvaney. I think the difference between it, Senator, 
would be when some of us talk about looking at the revenue 
side, they talk about looking at the pie as its current size 
and taking a bigger slice of it; whereas, I look at the revenue 
side looking at a bigger pie but taking a smaller slice.
    Senator Carper. The regulatory process has been mentioned. 
Earlier we had something--I think the name of the law under 
which we develop regulations is the Administrative Procedures 
Act (APA), if I am not mistaken.
    Mr. Mulvaney. Part of it is.
    Senator Carper. And it calls for, when a Federal agency is 
interested in thinking about promulgating regulation, they put 
out a notice and say, ``We are thinking about promulgating a 
regulation in a particular area.'' Then folks who are 
interested in that, business groups or others who are 
interested in that, individuals, those of us who are interested 
in it as legislators, we can make some comments and say, 
``Well, that is a good idea. You do need to do something.'' Or, 
``That is a crazy idea.'' And the agency can then act on that 
or choose not to. They can do nothing, or they can actually 
propose draft regulations. They are generally taking comments 
throughout the drafting period of time, and ultimately, when 
they finish their drafting, eventually they may or may not 
promulgate a final regulation.
    But between the time they promulgate the draft until they 
promulgate the final regulation, we again have the opportunity 
to weigh in, all of us, if we want to, and to say that we think 
that is a good idea or not.
    At the end of the day, if they promulgate something that we 
think is crazy, people can sue, and they do all the time, as 
you know.
    What is wrong with that process?
    Mr. Mulvaney. The first thing that comes to mind, Senator, 
with the process is the role of the cost-benefit analysis that 
is done as part of that process and to the type of data that is 
used. Sometimes I think we use extraordinarily good data; other 
times I think you could raise a question as to whether or not 
the data is defensible. And I think that we could probably do a 
good job, and I hope at OMB, which has a role in that process 
as you just laid out, one of the things I hope to be able to 
do, should I be confirmed, is to make sure that we are using 
data not just from one source but from a variety of sources so 
we can try and get the best information we possibly can.
    Senator Carper. In conclusion, I would just say that one of 
the things you said is we can turn this economy around. Well, 
that is what happened 8 years ago, and over the last 8 years we 
have turned the economy around. You remember where we were 8 
years ago, and we are just coming off the end of the longest, 
continuously running economic expansion in the history of the 
country, 16 million new jobs have been created, and we are 
covering a lot of people for health care. We can do better than 
that. But I remember where we were 8 years ago, and I know 
where we are today as we shift the baton to a new leadership 
team. I would be careful about turning it around because I 
remember what it was 8 years ago.
    Thank you.
    Mr. Mulvaney. Thank you, sir.
    Chairman Johnson. Thank you, Senator Carper.
    I am going to use a minute of my time here just to lay out 
a couple facts on economic growth. Since the Great Depression, 
the economy has grown about 3.2 percent on average. Since the 
Great Recession, it has grown about 2 percent. That is a 
tremendous difference. If you go from 2 to 3 percent growth, 
that is $14 trillion of added economic activity just in a 10-
year period; 2 to 4 percent is $29 trillion. Even with the 2-
percent growth we have had since 2009, revenue has increased to 
the Federal Government by $1.1 trillion. So that is why I think 
regulatory reform, having a competitive tax system, using 
energy resources is just crucial.
    The other point I want to make is we have heard now a 
couple times talking about the government shutdown. I just want 
to quick ask Congressman Mulvaney, do you have a handle on how 
much the government actually shut down? I know they shut down 
the painful parts, like, concessions at the Grand Canyon. But 
do you have any sense of that? I cannot get a real figure on 
it, but I----
    Mr. Mulvaney. It depends on how you want to measure it. The 
number that I have used is that about 15 percent of the 
government shut down. I think that number has been confirmed, 
if you look at it in terms of the amount of dollars that still 
flowed out the door.
    Chairman Johnson. OK. Thank you. Senator Paul.

               OPENING STATEMENT OF SENATOR PAUL

    Senator Paul. Congratulations, Congressman Mulvaney, on 
your nomination. You said in your testimony that the number one 
priority, either yours or of the Federal Government, is to 
defend the country. Is that correct?
    Mr. Mulvaney. I think it is one of the few things that are 
actually affirmatively stated in the Constitution.
    Senator Paul. Admiral Michael Mullen is a career military 
guy. Nobody would question his honor or whether he served 
honorably. Are you familiar with his statement when he said 
that the greatest risk to our national security is our debt?
    Mr. Mulvaney. It was raised at my very first Budget 
Committee hearing in 2011, and it put the fear of God in me as 
soon as I got to Washington, D.C.
    Senator Paul. Do you think it is fair, people can 
characterize you or your positions in any way, but do you think 
it is fair maybe to characterize your concern for debt as being 
also a concern for national defense, that maybe we cannot be a 
strong Nation if we are indebted or if we borrow $1 million a 
minute, maybe we will not be able to afford, and there might be 
a day that there is a calamitous economic crisis concerning our 
debt and that would make us vulnerable to invasion?
    Mr. Mulvaney. I think history would teach us--and I think 
perhaps Admiral Mullen was considering this--that great nations 
throughout history have traditionally failed from within, they 
have rotted from within because of their inability to manage 
their finances.
    Senator Paul. I think sometimes in partisan politics people 
tend to question the motives of their opponents, and I think 
that is a mistake. We have many disagreements, Republican and 
Democrat, on how we fix things. Even among our own party we 
have some disagreement on how to fix things. But, I think that 
understanding that your motives are for your country, for 
defending the country, and that your concern over the debt is 
not over numbers but over a concern for the future of your 
country.
    When we talked about raising the debt ceiling--and much has 
been made about, oh, you are advocating for shutdown. I 
remember those debates. I had just gotten here, and I think you 
had just gotten here. And the debates in 2011 were not over 
advocates for shutdown. They were over whether or not we should 
reform the process at the same time we raise the debt ceiling. 
So there was a bill at that time that I believe you supported, 
Cut, Cap, and Balance, and this was a bill that said basically 
we will agree to raise the debt ceiling. It is going to have to 
go up at some time. But when we had this big, calamitous 
debate, we should try to fix things instead of doing the same-
old, same-old.
    Some of the discussion has been over waste. I am all for 
getting rid of waste and fraud. You know why it has been here 
forever? I remember as a kid in high school seeing the Golden 
Fleece report. Senator William Proxmire would talk about this 
waste. The reason it is here is we do not do our job. Our job 
is to pass the individual appropriations bill. And what do we 
do? We lump them all together in one enormous bill called a 
``continuing resolution (CR),'' which I am sure you voted 
against a few, as I have, because we do not fix the problem. 
But it does not mean we are against all the spending in 
government. We want to fix the problems, do our job, pass the 
individual appropriations bills.
    But I think the thing is that it is a mischaracterization, 
I think, of your position and many conservatives that we are 
for shutting the government down. No, we are for not keeping it 
open without reforming it. We want to reform it. And when we 
have these debates and we come to a head, should it be easy to 
raise the debt ceiling? Some on the other side want to have the 
debt ceiling just go up automatically. In fact, the last time 
we raised the debt ceiling, they raised it without a dollar 
amount. They just said, oh, let it go up as much as it can for 
a year and a half.
    With regard to entitlements, I saw the care and, I believe, 
the emotion in your voice about taking care of your mother-in-
law and stuff. What are your motives? Are your goals to try to 
preserve Social Security and preserve Medicare? Are your 
motives to destroy the entitlements? What are your motives?
    Mr. Mulvaney. I think I have said many times that the real 
risk we run is doing nothing, and by doing nothing, we will 
ruin those programs. We will make sure that when you and I 
retire there will be a 22-percent across-the-board reduction.
    Senator Paul. And these statistics are coming from the 
Social Security trustees saying that this is going to happen. 
Within about a decade or so, we would have a massive across-
the-board cut.
    And so, really, the debate should not be, oh, these people 
do not care about the elderly. We all have parents, we all have 
grandparents. We all care about the elderly. It is about how we 
fix it. But I think what is really inexcusable are those who 
berate one side and say, oh, you do not care, when in reality I 
think doing nothing shows a lack of caring. If you do nothing 
to fix Medicare, if you do nothing to fix Social Security--and, 
sure, we can attach emotions to this and attach false motives, 
but I think we should listen to what our candidates say, listen 
to what the electorate said, and really try to judge people on 
whether or not you think they are honest and sincere.
    He went above and beyond the law to pay taxes on something 
that was well beyond what the law would have said. He did it 
because he was honest in answering his questionnaire.
    So I wish you the best of luck in your position. I hope 
people on the other side will not question your motives, will 
look at that it is a sincerely held belief that the debt is 
hurting the country, that the debt hurts our national defense; 
that if you could expand national defense and not add to the 
debt, that should be a commendable position, not something that 
we should denigrate.
    So I wish you the best of luck going forward, and I think 
there needs to be a balance of concern for debt and 
expenditure. And I thank you for your service.
    Mr. Mulvaney. Thank you, Senator.
    Chairman Johnson. Thank you, Senator Paul. Senator Tester.

              OPENING STATEMENT OF SENATOR TESTER

    Senator Tester. Thank you, Mr. Chairman, Ranking Member, 
for this hearing. And thank you for being here, Congressman 
Mulvaney. I am going to call you ``Mick,'' if that is OK.
    We had a good meeting in my office, and I appreciate you 
coming in. There is an issue that came up, and I am sorry I was 
not here for the opening statement because I understand that 
you did talk about it some. But it deals with the nanny.
    Mr. Mulvaney. Sure.
    Senator Tester. How many hours a week did she work for you?
    Mr. Mulvaney. She was with us roughly full-time.
    Senator Tester. OK, so 40 hours a week. And then for how 
long?
    Mr. Mulvaney. Up until the time the kids left for school.
    Senator Tester. So how many years was that?
    Mr. Mulvaney. We could not remember if it was three or 
four, so we filed for five.
    Senator Tester. All right. Well, OK, sounds good. So there 
were 3 or 4 years that you paid back taxes on her?
    Mr. Mulvaney. No, we paid back taxes on all five.
    Senator Tester. OK. All right. Sounds good. Thank you.
    The President announced a hiring freeze today. There was 
some question on who it applied to. I just came out of a VA 
hearing, and it applies to the entirety of the VA, is what I 
was told. I am sure you are familiar with the VA and its job. 
Do you believe its mission is for the VA to provide timely care 
to the folks who serve this country?
    Mr. Mulvaney. I do, yes, sir.
    Senator Tester. Do you believe that the veterans of this 
country are having trouble accessing care?
    Mr. Mulvaney. I have seen it firsthand. I know it to be the 
case.
    Senator Tester. All right.
    Mr. Mulvaney. By the way, Senator, the story I hear from my 
veterans is that the quality of care they get is actually 
excellent, once they get it.
    Senator Tester. You hear the same story I hear.
    Mr. Mulvaney. It is just difficult getting it.
    Senator Tester. To get through the door. And so I would 
assume, with your answer to the previous two, that you would 
agree that there is a medical workforce shortage within the VA? 
You do not have to. Do not let me put words in----
    Mr. Mulvaney. That I do not have any information on.
    Senator Tester. OK. USA Today reported 41,500 medical 
professional vacancies within the VA.
    So the question becomes--and you are in a very important 
position that nobody knows about on the street. The question 
becomes: How do we address the backlog in the VA with this 
hiring freeze? Yes, go ahead.
    Mr. Mulvaney. Well, a couple of different things, Senator, 
off the top of my head. I am having a difficult time 
automatically coming to the conclusion that the best way to 
make the VA more efficient is to hire more people. I would 
certainly be willing to consider, as I think I filled out 
either the questionnaire for this Committee or another 
Committee, that there may be circumstances where you can 
actually provide a more cost-effective and efficient government 
by adding people in certain areas. That might be limited 
examples, but they could certainly exist. But I would be more 
than willing to work with you and your office on trying to 
figure out a way to do that because I am just as interested as 
you are in taking care of our vets.
    Senator Tester. Let me give you an example. In eastern 
Montana, east of Billings, it is about 200 miles to the North 
Dakota border, and at the last check, there might be two or 
three psychologists, psychiatrists, family counselors in that 
region. How do we address mental health issues, post-traumatic 
stress disorder (PTSD), traumatic brain injury (TBI) if we do 
not hire additional folks?
    Mr. Mulvaney. I think the Veterans Choice Act that Senator 
McCain worked so hard on was part of addressing that, allowing 
them to access the private system, especially in 
circumstances----
    Senator Tester. But those three I am talking about are not 
people within the VA. That is the private sector and the works.
    Mr. Mulvaney. Oh, I got you. I have not been to Montana. 
That sounds like it is a pretty sparsely populated area.
    Senator Tester. Well, the problem is we have a ton of 
veterans that live there because it is sparsely populated, and 
they still need to get the benefits.
    I look forward to working with you on these issues. I think 
they are critically important. And oftentimes I agree with you 
that manpower does not necessarily result in good results. But 
when you have the kind of backlog they have in the VA, manpower 
does have its impacts.
    I want to talk about Medicaid block grants for a second. Do 
you support turning Medicaid into a block grant program?
    Mr. Mulvaney. I have voted for that when given the chance 
in the House. As I have told many Members of this Committee and 
other committees, if there are other ways to find efficiencies 
and savings in Medicaid, I am more than willing to talk about 
that. I think that Medicaid and Medicare probably present 
bigger challenges to us in terms of their complexity.
    Senator Tester. So with that previous support for Medicaid 
block grants, would you also support a cap on Medicaid block 
grants?
    Mr. Mulvaney. I believe that was part of the proposal that 
the House made in order to give the States the incentive 
necessary to reform and drive some efficiencies in their 
programs.
    Senator Tester. In your previous life--and excuse me for 
not knowing this. I came out of the State legislature.
    Mr. Mulvaney. So did I.
    Senator Tester. And I can tell you that in Montana the 
State is not exactly flush with dough, and they do have that 
balanced budget amendment that you talked about with the 
previous Senator. They are not going to be able to absorb, so 
is their option going to be to cut benefits or kick folks off?
    Mr. Mulvaney. Well, I do not know what the options are. You 
would like to think----
    Senator Tester. If they do not have the dough, what other 
options do they have?
    Mr. Mulvaney. Well, this is my experience in the South 
Carolina Legislature. I remember we had a program come down, 
and it was very clear that the program for Medicaid--we were 
required to use it--was aimed toward providing Medicaid care in 
urban areas. We do not have very many of those in South 
Carolina, and we would have very much liked to have come up 
with our own plan to provide for our most needy because we 
wanted to do that, despite what people said, to Senator Paul's 
point. We want to provide for those folks as well, but we 
thought there was a better way to do it given the locale of 
South Carolina. But we did not have that flexibility because of 
the Federal law.
    Senator Tester. I got you. The problem that I see--and 
enlighten me if I am looking at this wrong--is, populated areas 
differ on the size of the State. We have two cities of 100,000 
people. Those are big cities for Montana. We have a lot of 
other cities that are less than 50,000 and a lot of them less 
than 1,000. And in all three of those cases, there are tons of 
folks that are on Medicaid, and my concern is that whether they 
are in a rural frontier or what we would call ``bigger 
cities,'' we have folks that are depending on it, that if it is 
block-granted in and the State cannot make up the difference, 
they are going to be without care.
    Mr. Mulvaney. Senator, again, it sounds like we have some 
of the same experiences, and if there are other ideas on how to 
fix Medicaid, I would be more than happy to do it. I would like 
to give the States the flexibility to try. It might be that 
Montana and South Carolina do not solve them, but if Wyoming 
does, maybe it provides a model that other States could follow.
    Senator Tester. Yes, I mean, I guess my concern is in the 
meantime, there are a lot of folks that are going to be really 
in life-and-death situations. That is my concern.
    Real quickly, and I will put this in for the record, but it 
deals with the National Background Investigation Bureau (NBIB). 
We stood that up last year, I believe, for background checks. 
You are a critical component in bringing the Director of 
National Intelligence (DNI) and the Office of Personnel 
Management (OPM) and Department of Defense (DOD) together to 
make sure these work, and they were brought about because we 
were failing miserably on our background checks. And I look 
forward to working, upon confirmation, with you on that.
    Thank you, Mr. Chairman. Oh, by the way, just for a side 
remark, in 2008 we were losing 800,000 jobs a month, and today, 
for the past year, we gained about 220,000 jobs a month. So I 
guess it depends upon the metric. Thank you very much.
    Chairman Johnson. Senator Lankford.

             OPENING STATEMENT OF SENATOR LANKFORD

    Senator Lankford. Thank you, Mr. Chairman.
    Congressman Mulvaney, good to see you again.
    Mr. Mulvaney. Senator.
    Senator Lankford. You and I came in the same class, in 
2011. We got to now each other from orientation on and had the 
opportunity to be able to serve together in the House for 4 
years.
    I do have to tell you I was very pleased when I saw the 
announcement from the Trump Administration of your selection 
because of what I saw from you in our time serving together in 
the House. You were a serious student. You looked hard at 
difficult issues, understood there were difficult decisions 
that needed to be made, and made proposals to do that.
    You have a fairly decent business background as well and 
working with businesses before that, in addition to Georgetown 
University, graduating with honors in international economics, 
commerce, finance as an honors scholar, law school in North 
Carolina, Chapel Hill, and then Harvard Business School. That 
is not a bad background to be able to walk into this type of 
role.
    But as you know, every person that enters into the 
Administration is on the job, and it is on-the-job training. It 
is an entirely different role. So I would like to get some 
background from you just on some key philosophical perspectives 
that you and I have talked about some as well, when we talk 
about regulatory issues and regulatory priorities and how we 
can fix the regulatory State. Senator Carper brought it up 
earlier. I can assure you Senator Heitkamp and I would bring it 
up to you often as we work together on regulatory reform.
    What do you see as key aspects of regulatory reform?
    Mr. Mulvaney. I think a couple of different things, 
Senator. I think it offers us perhaps the best opportunity to 
have an immediate impact on getting the economy ramped up even 
further. There seems to be, in talking with all the folks on 
this Committee and the other Committee, a good bit of 
bipartisan support in this House--or in this chamber for 
regulatory reform, and I have seen some really good academic 
data that would suggest that the number one thing we could do 
to boost GDP, to boost economic activity, would be to engage in 
significant regulatory reform.
    We also have the advantage of being able to do it rather 
quickly, not only because there is some bipartisan support for 
it, but there are certain things the President can do by 
himself in a perfectly legitimate exercise of his Executive 
authority.
    So the general idea is that regulatory reform offers us 
probably the best option right now to help get the economy 
doing even better.
    Senator Lankford. So the grand challenge of this is I could 
find 50-plus of my colleagues easily in regulatory reform for 
President Obama. Now I am going to work with a Republican 
Administration, and I still have the same perspective. We need 
to do regulatory reform. We need to be able to fix the process 
of how regulations are done. And I think there will be a 
greater eagerness from my Democratic colleagues to say, yes, 
this is a great time to reform the process of regulations. For 
Senator Heitkamp and I, as we walk through this, we are looking 
for a partner in the Administration that is not just looking at 
what controls now but looks toward the future and says for 
every President and how we do regulations, there should be a 
predictable, reliable system of that.
    Mr. Mulvaney. Something broke down, Senator. When I meet 
with a Domino's Pizza or a Papa John's pizza franchisee--I used 
to be in a franchise business--and they lay out for me that if 
they followed the regulations regarding disclosures on caloric 
intake on their product, the boards that you see when you walk 
into a restaurant would be the size of football fields in order 
to follow the law. When that happens, then something has broken 
down in the process.
    Now, granted, we did fix that one, but the simple fact that 
that got beyond all of the process and actually made it into 
the real world before someone caught that means that we do have 
a regulatory process problem that I will look forward to 
helping you work on.
    Senator Lankford. You brought up earlier one of the major 
key reforms would be the cost-benefit analysis. I had mentioned 
to you when we visited in the office that my fear is that the 
cost-benefit analysis from any Administration has become a 
justification because there is a way to be able to find a 
benefit large enough to be able to say no matter what the cost 
is on you, I found a benefit large enough that you are going to 
do this, rather than looking for what is the least expensive, 
most effective option that is out there.
    What are some ideas that you have on the cost-benefit side 
of things to be able to help reform that process?
    Mr. Mulvaney. As I sit here and I contemplate what it would 
be like at the OMB should you all confirm me, it would be to go 
to the President and say, look, here is data, here is real hard 
data. It may be from this source; it may be from that source; 
it may be from a variety of sources. In fact, I think we can do 
a better job of getting information from a variety of sources 
as we drive these cost-benefit analyses. And then explain to 
the President what the real-world implication of these 
regulations would be, not in a justification standpoint, not in 
terms of shoe-horning a regulation that we say we want into--a 
square peg into a round hole, so to speak, but to actually look 
at the facts and the circumstances of these regulations. And 
the President to say, you know what, that one makes sense and 
those four do not.
    One of the things I am very excited about coming in with 
this Administration is that everything the President has talked 
about on the campaign trail has included regulatory reform. He 
has I think, in his second day full-time in office, today or 
yesterday, he talked about regulatory reform. He made a very 
high profile hiring of Carl Icahn to help deal with regulatory 
reform. You read his books, and you will actually see chapters 
about how government regulation is an impediment to growth.
    So say what you want to about the President, he has his 
critics and his supporters, but I am absolutely convinced that 
his dedication to fixing the regulatory requirement will work 
hand in hand with yours.
    Senator Lankford. OK. We will work through that process in 
the days ahead. Obviously, as we work through budget issues--it 
has been a major part of what you worked on in the House as 
well--one of the hardest things to get in Washington, D.C., is 
the real number for anything. How can you help us get the real 
number coming from the White House and coming from your 
estimates from OMB?
    Mr. Mulvaney. Well, the first step, obviously, is to get 
them myself, right? Which is why the Digital Accountability and 
Transparency Act of 2014 (DATA) is so important. It is behind 
schedule, as I understand, as we try and figure out a way to 
get data that we can actually all use. In this age of big data, 
the government has all of this data, but it is incapable of 
using it because it cannot even talk to itself about the 
numbers.
    So, of course, one of the keys is to try and figure out a 
way to fix the system so that the data that we all have access 
to is the best possible number, and then simply be honest about 
those numbers with the President and say, look, Mr. President, 
this is a hard number, this is real. And if we do this, then 
that will happen; if we do that, then this will happen. And to 
try and give him the best possible advice I have and the best 
possible data that I have. But the first is trying to figure 
out a way to allow the government to function properly so that 
every single one of us in decisionmaking position has good 
information.
    Senator Lankford. Well, I would hope to get that. I would 
hope that we could also work together on all the budget 
gimmicks that are out there, whether we change the mandatory 
programs, whether it be multiple other entities that are out 
there in the budget system that gives us fake numbers rather 
than real numbers, that we can help agree on a set of numbers.
    I would tell you as well Senator McCaskill and I have 
worked for the past couple of years on something called the 
``Taxpayer's Right to Know.'' We worked extensively with the 
previous OMB to be able to negotiate a process so that we can 
deal with duplication and exposing that. I would anticipate 
that she and I would come back to you pretty quickly as well to 
be able to help finalize this with you as OMB Director so we 
can deal with the duplication in government. We cannot deal 
with duplication if you cannot see it, and it is something she 
and I have worked extensively on, and we hope that we can get 
this finished in the days ahead.
    With that, thank you, Mr. Chairman.
    Mr. Mulvaney. Thank you, Senator.
    Chairman Johnson. Senator Peters.

              OPENING STATEMENT OF SENATOR PETERS

    Senator Peters. Thank you, Mr. Chairman. And, Mr. Mulvaney, 
thank you for being here--and congratulations on your 
nomination--and taking our questions here today.
    You mentioned you have a fair amount of business 
experience. You had a franchise?
    Mr. Mulvaney. I did, yes, sir.
    Senator Peters. What sort of franchise?
    Mr. Mulvaney. We were in the fast, fresh Mexican business. 
I was a franchisor and a franchisee.
    Senator Peters. OK. And you ran a law firm as well?
    Mr. Mulvaney. I have done that as well. I get bored easily, 
yes, sir.
    Senator Peters. Well, a lot of activities on your plate.
    Well, I know you mentioned the issue of your nanny and how 
you dealt with the payment of back taxes, and I believe from a 
question earlier that she was employed by you for about 4 years 
or so. Is that correct?
    Mr. Mulvaney. Yes, sir.
    Senator Peters. And I believe you also said that she worked 
40 hours a week?
    Mr. Mulvaney. Roughly, yes, sir.
    Senator Peters. A full work week, then.
    Mr. Mulvaney. Yes, sir.
    Senator Peters. How much did she make?
    Mr. Mulvaney. $400 a week.
    Senator Peters. About $400 a week.
    Mr. Mulvaney. That was our recollection, that the last 
payments were $400 per week, yes.
    Senator Peters. OK. So at the same time that you employed 
your nanny, you were then running the law firm. Is that 
accurate?
    Mr. Mulvaney. No, sir. I am trying to think. I transitioned 
from running the law firm to working for the family real estate 
business about that same time.
    Senator Peters. So you were involved in another business at 
that time?
    Mr. Mulvaney. Yes, sir.
    Senator Peters. And you had employees at that time as well?
    Mr. Mulvaney. I did. Yes, sir.
    Senator Peters. And how many hours a week did those 
employees work?
    Mr. Mulvaney. They worked full-time. Sometimes that would 
be 40; sometimes that would be more.
    Senator Peters. So they were working the same number of 
hours as your nanny basically?
    Mr. Mulvaney. From time to time, yes, sir.
    Senator Peters. And did you pay employment taxes for each 
of these employees?
    Mr. Mulvaney. Yes, we did. Yes, sir.
    Senator Peters. And did you collect and retain I-9s for all 
of the employees that worked in those firms?
    Mr. Mulvaney. I would imagine that we probably did. Yes, 
sir.
    Senator Peters. So I guess what I am failing to see here 
is: What is the difference between your nanny, who clearly was 
working full-time, as you mentioned, over 40 hours, and the 
employees that worked at the law firm or all of these other 
firms? What was the difference there?
    Mr. Mulvaney. It is a fair question, sir, and it is easy 
now in hindsight to look back and say that I was wrong, and we 
fully admit that. I think at the time there was simply a 
differentiation in my mind between someone who came into my 
house to help with the children and the folks who worked at the 
law firm, worked at the restaurant, or worked at the real 
estate company.
    Senator Peters. So what is the difference? Is the value of 
the work different?
    Mr. Mulvaney. No, sir. Again, we never considered that a 
babysitter would fall into that category. I fully admit that--I 
wish now that I had seen the IRS circular at the time, but I 
did not and was not aware of this until December, recognize 
that I should have done it differently, would have done it 
differently if I had known. But again, I have done everything 
that I know to do to make it right.
    Senator Peters. So you did not consider an employee a 
household employee. What would you define a household 
employee--how would you define one that you would have paid? 
You are an experienced business person. You are not someone who 
has never had a deal with collecting taxes and dealing with I-
9s. You had to----
    Mr. Mulvaney. And the reason we did not----
    Senator Peters [continuing]. Deal with those regulations 
that you want to eliminate.
    Mr. Mulvaney. True, and I guess the reason that we did not 
consider her a nanny was for some of the reasons I mentioned: 
she did not live with us, and my impression of a nanny is 
someone who stays over; did not do any housekeeping, cleaning. 
She simply helped Pam with the children. We considered here a 
babysitter.
    Senator Peters. So simply taking care of your children 
really is not something you thought was that valuable or really 
an employee.
    Mr. Mulvaney. Oh, no, sir. It was very valuable. I just did 
not think it fell into what the IRS clearly does, in fact, 
consider to be a household employee.
    Senator Peters. OK. Well, I would like to take a look at 
some of the work that you did in the Congress. In my 
understanding, you were very involved in the Republican Study 
Committee, a leader in that committee.
    Mr. Mulvaney. I was active in it the first two terms, yes, 
sir. I have been a member all three, but was not very active 
the last 2 years.
    Senator Peters. OK. Fair enough. So I think it is 
important, as the OMB Director, you are going to have the 
President's ear. You are going to be talking about things that 
you believe that he should be doing. He obviously nominated you 
because he wants to hear your advice. He believes that that is 
good advice and things that he will very likely follow, I would 
expect, or you probably would not have taken this job if you 
did not think you would have the opportunity to have his ear 
and hopefully be able to convince him.
    So I want to look at the budgets that you have voted for 
because I think the American people should just have an 
understanding----
    Mr. Mulvaney. Sure.
    Senator Peters [continuing]. As you are looking at how we 
deal with the fiscal situation in the country as to what these 
cuts really mean. And I think you may have mentioned this at a 
previous hearing, but you voted in the House to raise the 
Social Security full retirement age to 70. So you believe it 
should be 70 years old as the retirement age?
    Mr. Mulvaney. I did. We did that as--and, again, I have had 
a chance to talk about this at the other Committee and again 
with several members in terms of how to fix the ideas available 
to fix Social Security, the five levers, one of them being----
    Senator Peters. So 70 is where you would like to see it, 70 
as the retirement age?
    Mr. Mulvaney. Given the fact that people live longer, I do 
not think that is inappropriate. I think my children would have 
enough time to adjust. I am not requiring anybody or would not 
ever think to ask anybody who is 65 now to change to 70, but my 
17-year-old triplets, I have already told them that I do not 
expect to be able to have them retire at 67, and they should 
make plans now----
    Senator Peters. So you are saying not at 65, but if I look 
at the legislation, those who are age 60 and under would now 
have to start to move up toward 70? Is that what you are 
saying?
    Mr. Mulvaney. Correct. The proposal----
    Senator Peters. If you are 60 years old or under, under 
your plan, plan to wait until 70 for full retirement?
    Mr. Mulvaney. I think it was 59 is where we started, 
Senator, and we have done this a couple times, so I apologize 
if I do not have the exact details, because they may have 
changed slightly from year to year. But one of the proposals 
was that if you were 59 years old, instead of retiring at 67, 
you might retire at 67 plus 2 months.
    Senator Peters. And the same for Medicare, the eligibility 
would be 67. You would raise it to 67? That is what you will be 
advising the President to do?
    Mr. Mulvaney. Well, there is two different--you did not ask 
me that question the first time.
    Senator Peters. No. This is Medicare now. I apologize. So 
Medicare.
    Mr. Mulvaney. You asked me what I voted for. When I come to 
advise the President, my intention, if you all give me the 
chance to do so, is to lay out a list of options for the 
President, say, ``Mr. President, if you want to balance the 
budget in X number of years, here is what you would have to do. 
If you want to balance it in this many years, this is what you 
would have to do.'' So I see my job at OMB as giving the 
President a many viable options as possible and as good 
information as possible. I am sorry. I thought you asked me 
about things that I had voted for.
    Senator Peters. That is true.
    Mr. Mulvaney. The roles are different.
    Senator Peters. I did. But I assume when you vote for 
something, it is something that you believe should be the law 
of the land.
    Mr. Mulvaney. It is.
    Senator Peters. You went back to tell your constituents, 
``This is how I voted.'' It was not, ``I just did this for the 
heck of it, and I have a variety of other ideas.''
    Mr. Mulvaney. No, absolutely, Senator. I am not trying to 
avoid--I voted for those things, and it gets that seal of 
approval that goes with the vote. But when you are in the 
policymaking and advising position to the President, I do think 
you get a chance to lay out more options. As you know, 
sometimes we do not get to choose what we vote for. We can 
either vote it up or vote it down. And by the time it comes 
before us, all of that work has already happened. I am looking 
forward to being involved earlier in the process to be able to 
lay out the options for the President.
    Senator Peters. Very good. I think I am out of time. Thank 
you.
    Chairman Johnson. Thank you, Senator Peters.
    Again, just to reinforce, I will take another minute. Over 
the next 30 years, according to the Social Security trustees, 
Social Security will pay out about $14 trillion more in 
benefits than it brings in in payroll tax. And I think, 
Congressman, you testified that if we do nothing, when the 
accounting convention of the trust fund with the U.S. 
Government bonds being brought to the Treasury for 
reimbursement, when that accounting convention runs out, 
according to law, Social Security benefits will be reduced by 
22 percent if we do nothing.
    Mr. Mulvaney. That is the current number that I have seen 
from the CBO, yes, sir.
    Chairman Johnson. So your attempts in terms of voting--I 
would say courageous votes because people get attacked for 
trying to solve these problems--was just that: you are 
addressing that reality, a $14 trillion shortfall over the next 
30 years, so that hopefully you do not have a 22-percent cut in 
benefits somewhere in the 2030 timeframe.
    Mr. Mulvaney. We have to do something.
    Chairman Johnson. OK. Senator Daines.

              OPENING STATEMENT OF SENATOR DAINES

    Senator Daines. Thank you, Mr. Chairman. And I want to 
congratulate you on your nomination, Congressman Mulvaney. It 
was an honor to serve with you in the U.S. House as well. I 
share Senator Lankford's comments as well on the respect that 
you had in the House. I am grateful that your wife, Pamela, and 
one of the triplets, James, is here today as well. I am the 
father of four children, and I think sometimes up here in this 
job we lose sight of the forest because the trees get in the 
way.
    You said in the first question on your questionnaire, it 
says, ``Did the President-elect give you any specific reasons 
why he nominated you to be the next Director of the Office of 
Management and Budget?'' And you answered it: ``When President-
elect Trump announced my nomination, he noted that our Nation 
is nearly $20 trillion in debt.''
    If you stop by my office in Hart 320, you will see the debt 
clock. Every Montanan that walks into my office sees that. 
Every person who walks into my office sees that.
    I think what Senator Johnson pointed out earlier is this 
chart\1\ that shows what is going to happen here in our debt. 
We are going to add $10 trillion to our debt over the course of 
the next 10 years, and then the 10 years following that, we are 
going to add another $28 trillion. That is $60 trillion all in 
between now and the year 2035 of debt. That is staggering when 
we think about it.
---------------------------------------------------------------------------
    \1\ The chart referenced by Senator Daines appears in the Appendix 
on page 254.
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    And as Senator Paul mentioned--in fact, I met Admiral 
Mullen's son this weekend--Admiral Mullen who was the Chairman 
of the Joint Chief of Staff, did say the most significant 
threat to our Nation--and I went back and Googled it. He 
doubled down, he tripled down on his statement. He said, ``The 
most significant threat to our national security is our debt,'' 
coming from the former Chairman of the Joint Chiefs of Staff.
    We spoke in my office, Congressman, in great detail. I know 
you know the importance of balancing a budget. But unlike 
hardworking families in this country, Congress is not required 
to pass a balanced budget. In my home State of Montana, our 
legislature is meeting as we speak. I did not serve in the 
legislature. I was 28 years in the private sector. I know when 
I am in the private sector, I had to produce a budget that not 
only balanced but revenues need to exceed expenses. That is 
called profit. But in my State of Montana, it is 
constitutionally required that the State balance its budget.
    But year after year up here in Washington, D.C., we 
continue to leverage the future of our children, James' future, 
your triplets' future, with an unsustainable fiscal path. And 
there will be a day when the piper is going to have to be paid. 
That is why for the third Congress in a row I have introduced a 
simple bill--it is very simple. It simply states this: ``If 
Members of Congress cannot pass a balanced budget, then they 
should not get paid.'' We need to put the pain back on the 
Members of Congress. It is the way it works when you are in 
business. It is the way it works in the real world. It does not 
work that way up here.
    Congressman, I know we spoke about my bill, and that was 
referred to this very Committee, in fact. Do you support my 
bill?
    Mr. Mulvaney. I do, Senator. Thank you for the question. I 
want to make one thing perfectly clear, is that, if I am 
confirmed, I will no longer be a voting member of the 
legislature. So if I may, I would couch it in different terms, 
which is that if your bill were to become law and it comes down 
to OMB, as all bills do--they go to OMB for review before 
presentation to the President--I would give the President the 
unqualified recommendation that he sign that into law.
    Senator Daines. And you will be presenting the budgets here 
to the Hill once you are confirmed. What are your views of 
ensuring that that budget balances over a 10-year period?
    Mr. Mulvaney. My hope, if I am confirmed, is to get to work 
very quickly because we owe you a budget by the end of 
February. I recognize that deadline sometimes moves during a 
transition year, but there is work to be done immediately. And 
what I hope to be able to do is to go to the President with a 
range of options and say, ``Mr. President, here is one that 
balances in a year; here is one that balances in 8; here is one 
that balances in 15,'' and to explain to him what it would take 
to accomplish that and what it would mean to choose one over 
another.
    You and I have both worked very hard to make sure in the 
past that the budgets that our parties have presented here in 
the Senate and House are balanced within 10 years, and I intend 
to maintain that attitude if I get the chance to advise the 
President on that issue.
    Senator Daines. I think you also have a great opportunity 
to help bring clarity to the spending picture. I think up here 
we are oftentimes drowning in data, we are starving for wisdom. 
I think you could bring much needed guidance to that 
organization.
    As I mentioned, Congressman, I did spend 28 years in the 
private sector before coming to the Hill. In fact, the last 12 
years was as an executive of a cloud computing company, which 
was eventually acquired by Oracle. In 28 years, I never 
received a letter when I was in the private sector that my own 
personal information had been compromised, that I had been 
hacked. It was not until I became a Federal employee that I 
received a letter from the OPM.
    This past October, OMB launched cyber.gov where agencies 
can now find the best practices in cybersecurity. And, by the 
way, I was the very first Senator to call for the resignation 
of the Director of OPM when over 20 million American Federal 
employees' information was compromised where we had our 
Personal Identifiable Information (PII) in the hands of 
potential adversaries.
    But I was glad to see the cyber.gov site come up. It is a 
long overdue website. It was meant to guard against hacks like 
we saw at OPM.
    Tell me that you are going to continue to strengthen these 
efforts and protect Americans' cybersecurity.
    Mr. Mulvaney. I hope to be able to do just that, Senator. 
We actually saw something similar to the OPM hack--not similar. 
We did a hearing on the risks that are out there today, and I 
think one of the things we learned is that the Defense 
Department actually does a pretty good job in defending against 
cyber attacks, and that is in large part because of the culture 
that exists within the defense community, that they know they 
are under attack all the time.
    But for some reason, that culture does not extend to many 
of the other non-defense agencies, and that is where the 
weaknesses should be--which really should worry us, because 
there is a great deal of information about you, me, Senator 
Hassan's children at the Department of Education (DOE), at the 
Internal Revenue Service. There is real information out there 
that we need to protect. So I can give you the commitment to 
continue to try and improve the defenses in those areas.
    Senator Daines. I think you will have a great opportunity, 
when confirmed, to not only change the outcomes and the 
results, but also change the culture of that entire 
organization, which I look forward to working with you in doing 
so.
    Mr. Mulvaney. Thank you.
    Senator Daines. Thank you.
    Chairman Johnson. Senator Hassan.

              OPENING STATEMENT OF SENATOR HASSAN

    Senator Hassan. Well, thank you, Mr. Chairman and Ranking 
Member McCaskill. Thanks for being here, Congressman Mulvaney, 
and I did enjoy our meeting in my office, and you and I found 
some common ground on the importance of fiscal responsibility. 
We are both firmly committed to good government. And we agreed 
on some steps we could take to improve the Federal budget 
process. For instance, biennial budgeting is something we do in 
my home State of New Hampshire.
    But I did want to take a minute to reiterate a couple of 
things that we have touched on here today. I was Governor of 
New Hampshire when the 2013 Federal Government shutdown 
occurred, and I can tell you it had a major impact in my State. 
It shut down facilities in the White Mountain National Forest 
over Columbus Day weekend, which is the height of our leaf 
peeping season and one of our biggest tourism weekends of the 
year. Hundreds of New Hampshire National Guard employees were 
furloughed. Other furloughs happened at the State level. Not 
only did that impact those families, but obviously businesses 
throughout my State were impacted. When people do not have 
their paychecks, they do not engage in consumer activity.
    So I would ask you, in light of your earlier comments that 
have been highlighted here already, about the shutdown being 
good policy, just to understand that when people actually live 
through it, it is not an abstract concept or idea. It really 
hurts. It hurt our economy, and it hurt a lot of people. When I 
furlough National Guard employees, it compromises my State.
    So do you still really think it was good policy?
    Mr. Mulvaney. I appreciate that, Senator. I appreciated 
having the chance to talk about it in your office, and I do 
hear your criticisms of what happened. And let me put it to you 
this way: I do not believe that shutdown is a strategy. I do 
not believe that shutdown is desirable. What I do believe is 
that sometimes it is an unfortunate result of us not being able 
to agree. People say, ``You voted for the shutdown.'' That is 
not true. There was no such thing as a vote for a shutdown. I 
voted for an appropriations bill that did not pass.
    So I look forward to being able to encourage the President 
not to use that as a tool because it is not an effective tool.
    Senator Hassan. It is not an ineffective tool; it hurts 
people. And I think our job here is not to just refer to it as 
``unfortunate,'' but to acknowledge that it impacts real 
people.
    I wanted to talk a little bit, too, about the impact and 
importance of Medicaid, especially to the substance abuse 
epidemic that my State and many others are facing.
    Drug overdose deaths now kill more than 50,000 people per 
year in our country. That is more than other leading causes of 
death such as car crashes. My State of New Hampshire has the 
second highest rate of drug overdose deaths in the country. And 
as Governor, I worked with Republicans in my State as well as 
the business community to expand Medicaid to cover over 50,000 
hardworking Granite Staters. Thousands in New Hampshire are now 
getting coverage for substance use disorder treatment, and 
experts have said it is an absolutely critical tool for 
addressing this epidemic. And Medicaid expansion is now under 
attack from this Administration, as we talk about--this 
Administration talks about repealing the Affordable Care Act.
    And then there is this discussion of block-granting 
Medicaid which would likely result in a 20-to 30-percent cut in 
Medicaid funding to States within just a few years, which has 
raised concern from Republican as well as Democratic Governors. 
Republicans Governors like John Kasich, Rick Snyder, and 
Charlie Baker have been speaking out against block grants and 
Medicaid cuts that would hurt their States. So you have 
supported Medicaid cuts, such as the ones that are being 
suggested, in the past. So can you agree that substance use 
experts say that Medicaid is critical for combating the crisis? 
And you do not think that removing Federal assistance for 
treatment will harm people suffering from substance use 
disorders?
    Mr. Mulvaney. I can say this, Senator, which is that I know 
the President talked about those exact same things on the 
campaign trail. In fact, I think he may have talked about it in 
your State or certainly in your part of the country, and I know 
it is important to him. So I see my role, if he sets out the 
policy, our policy of the Trump Administration is going to be X 
on opioid abuse, then my goal is to try to figure out a way how 
to pay for that, how to implement that as efficiently as 
possible, work with whatever other Federal agencies are 
involved so that we can satisfy and meet the President's 
policy.
    You have asked me again, as many people here have today, 
how I voted in the past, and I defend those votes. Again, I was 
voting on behalf of the people I represent in South Carolina. 
But I do see my role changing to an adviser and then an 
implementer of the Presidential policy.
    Senator Hassan. Well, and I thank you for that, and I do 
appreciate it. I will just ask you all to consider as you 
advise the President that we have Medicaid expansion in place. 
In my State it was a bipartisan plan. It has helped us begin to 
build the kind of treatment infrastructure we need, and to 
repeal it and destabilize it, even if you replace it with 
something else, seems to me to be less than wise. So I hope you 
will take that back.
    Toward that end, I just wanted to touch on one other area 
where your new role may be perhaps at odds with past votes. One 
of the most trusted family planning and reproductive health 
providers in the country is Planned Parenthood. In your 
potential role at OMB, the goal is to assess the quality of 
agency programs and procedures. So I am troubled with your 
record that indicates a bias in opposition to programs that 
impact women's health. Programs like the Title X family 
planning program help provide essential family planning and 
preventive health services to women nationwide.
    As a steward of good government, I believe that when we 
award grants to organizations, we need to take an account which 
organizations are best able to provide the services. I think 
funds should be awarded based on a provider's ability to serve 
patients and not based on an ideological or politically 
motivated agenda. Do you agree?
    Mr. Mulvaney. Senator, I do believe that money should be 
allocated based upon an ability to serve patients. I would 
point out that the President has said very complimentary things 
about Planned Parenthood during the campaign, except as it 
comes to the providing of abortion. Where I think he and I are 
probably on the same page as to what I have supported in the 
past, what I might recommend to him in the future is that 
moving money to the federally qualified health care clinics 
could be an even more effective way to provide those services.
    Senator Hassan. And I am going to interrupt you just 
because my time is almost up.
    Mr. Mulvaney. Yes, ma'am.
    Senator Hassan. My federally qualified health centers say 
they cannot absorb the thousands of women in New Hampshire who 
use Planned Parenthood. A lot of those women do not have 
geographical proximity to those centers. I will let you know 
that when I was at Planned Parenthood in New Hampshire, one of 
the centers there just a couple of weeks ago, most of what they 
do is family planning and reproductive health services for 
women who cannot get their care otherwise. There were women 
there who, once they got private insurance, still went to 
Planned Parenthood because they said the care was so superb. 
And Planned Parenthood also takes care of women during their 
pregnancies when women want to continue their pregnancies, and 
do a superb job of that as well. It is a really important 
resource, and it is a very cost-effective one from all the 
data.
    So I hope that we can get to making data-driven decisions 
around settled law and recognize the importance of this 
particular provider nationwide to the women of our country. 
Thank you.
    Mr. Mulvaney. Thank you, Senator.
    Chairman Johnson. Senator Heitkamp.

             OPENING STATEMENT OF SENATOR HEITKAMP

    Senator Heitkamp. Thank you, Mr. Chairman.
    Not for reply, but I find it ironic almost that the mantra 
on the Affordable Care Act is the concern about if you like 
your doctor, you can keep your doctor, except if your doctor is 
employed by Planned Parenthood. There is a certain amount of 
hypocrisy to that statement. So I move beyond.
    One of the things I want to examine is your position on 
Social Security. You have said that you would not affect anyone 
who is 60 or over, right? So it would not require that they 
wait until they are 70 in order to basically access the Social 
Security program. That means the 59-year-old oil rig worker 
would now have to work until they are 70. That is hard work. I 
can tell you that, and lots of problems in terms of health care 
and maintaining. But yet my husband, who is a physician, who 
maxes out on the cap, he is not asked to sacrifice anything. 
And he can clearly work until he is 70 because he is not 
working outside in the elements.
    I am not sure I understand how that philosophy could ever 
be consistent with the President who has really, I think, 
spoken to that oil rig worker saying, ``We are on your team. We 
are on your side.''
    So I just ask you to be really careful when you look at 
broad generalities, especially as it relates to Social 
Security, and especially when every person here gets a tax 
break every year when they reach the cap. So if we are looking 
at solving the problem of Social Security--and we recognize you 
all took a pledge, but that pledge is not necessarily good 
public policy. From my standpoint, we have to solve the 
problem. But we have to be intellectually honest about the 
other side of solving this budget crisis.
    And so I am going to ask in response to Senator McCain's 
discussion, you said, look, we are going to cut domestic 
programs to basically plus-up on the defense side. Obviously, 
OCO, you and I can share an opinion about whether that is real 
money or not. But let us examine on that domestic-side, non-
defense domestic. Where are you cutting? Because programs like 
funding for flood control programs are critically important to 
my State and important to those same folks who live in housing 
where they are going to see huge increases in their flood 
insurance without a flood program.
    We have to be really careful about how we do this and how 
we respond to the needs of the American people. So right off 
the bat, not looking at so-called entitlement programs, where 
would you see an opportunity to cut domestic spending?
    Mr. Mulvaney. Senator, thank you, and I have read, as I 
believe I may have mentioned earlier--the two hearings are 
starting to run together--that I have read some of the same 
things you did about the early versions of the budget. But I 
have not been involved with those, so I have no idea what the 
proposals are or even if the reports have been accurate. I 
think the rules are that I am supposed to be excluded from 
that, which I agree with. So I am not familiar with the 
proposals that the President has made.
    Senator Heitkamp. I am really concerned, and I think we can 
take a look at Medicaid funding, and we can say if we stop 
research on Alzheimer's and Parkinson's--you think you have a 
Medicaid funding problem right now? You are going to have a 
bigger Medicaid funding problem going forward.
    And so let us not be so quick to criticize things like 
flood control and the domestic programs because those are 
investments that could, in fact, in the long run save our 
budget and really, I think, make investments.
    I do not have a lot of time. I want to get to the Export-
Import (Ex-Im) Bank. I am probably a one-note person here 
frequently, but for the life of me, I do not understand, other 
than kowtowing to maybe folks who write things like ``Crony 
Capitalism,'' why there would ever be opposition to the Ex-Im 
Bank. We have billions of dollars of export financing in the 
pipeline right now that could mean American jobs. In fact, in 
your own State, we have lost thousands of jobs in South 
Carolina because we have not had a quorum on the Ex-Im Bank. 
This should be a no-brainer.
    Explain to me your opposition to the Ex-Im Bank and why you 
took the position that you took.
    Mr. Mulvaney. Sure, and, again, you are asking about 
something that I did when I was an elected official.
    Senator Heitkamp. Right.
    Mr. Mulvaney. I am hoping to change that, but if the 
President came to me and said, ``Mulvaney, what do you think 
about the Ex-Im Bank?'' I would try and lay out for him some of 
the impacts it has on the market about favoring exporters over 
domestic producers. The example is fairly easy to give to the 
President: Mr. President, if Senator Heitkamp and I are both in 
the business of making glasses and she happens to export some 
of hers and I do not, we compete domestically but she also 
exports, she has advantages that are available to her--low 
interest financing, can buy equipment cheaper--that she can use 
to compete against me that actually come from the government. 
And I think that warps the marketplace and puts our purely 
domestic producers at risk.
    To the larger point about is there a better way to do it, I 
did participate in and would be happy to talk to the President 
about some of the ideas that came out of it--not a bipartisan 
group but a Republican group that included people who were 
opposed to the Ex-Im Bank and those who supported it. I think 
one of the things that there was a rally of support for was 
using the Bank as a true lender of last resort.
    Senator Heitkamp. Well, I would be curious about all that 
because, obviously, I was heavily involved in negotiation of 
the reauthorization and very concerned about what is happening 
right now with export finance. I did have a chance to talk to 
then-President-elect Trump who I believe has some varying 
opinions about the Ex-Im Bank than what you do.
    Finally, I want to extend the opportunity to work on reg 
reform. Senator Portman and I are in discussions, along with 
Senator Lankford. We think that there is a real opportunity 
here. We want to make sure that reg reform gets done sooner 
rather than later and that we have a process that provides a 
real opportunity for Americans to participate and a real cost-
benefit analysis that we can evaluate. I think it is critically 
important.
    The last point I want to make is carried interest, and we 
have talked so much about the expenditure side, but I like to 
make this point: That same rig worker pays a higher percentage 
in tax than someone who has the good fortune to be born into a 
family with a trust fund. There are some real problems with 
that as well. I would ask you to at least consider the other 
side of this and eliminate what I consider the inequities to 
the working people in this country.
    Mr. Mulvaney. Thank you, Senator.
    Senator Heitkamp. Thank you.
    Chairman Johnson. Senator Portman.

              OPENING STATEMENT OF SENATOR PORTMAN

    Senator Portman. Thank you, Chairman. And let me follow up 
on regulations, but first to welcome you to the Committee, tell 
you you are about to join the ranks of the OMB where you have a 
number of just incredibly qualified career people, as I talked 
to you about in our meeting.
    Mr. Mulvaney. I also said nice things about you before you 
came here.
    Senator Portman. Ok.
    Senator McCaskill. He did. I will testify.
    Senator Portman. Did he? OK. I guess I should not say this: 
It is also the worst job in Washington--unless you like saying 
no to people, then it is really fun, because you are in a 
position of telling Cabinet members as they come to you with 
all their grand ideas and new spending programs. We have to 
keep this thing under control. We have a budget that is now 
approaching over the next 10 years, we were just told by CBO 
today with their new baseline, $1.4 trillion a year deficits in 
10 years. We are looking at another $8 trillion roughly on top 
of the almost $20 trillion of debt. So it is a tough job, and I 
know based on your background that you are willing to make 
tough decisions. So I know wish you luck and look forward to 
working with you.
    On regulatory reform, Senator Heitkamp is right. We have a 
great opportunity here. And it has been bipartisan, typically. 
Over here on this side of the Capitol, we have been able to get 
some things done. In fact, Senator McCaskill and I did a 
permitting bill together that is really making a difference. It 
is to streamline construction projects. And what better time to 
do that when we are talking about infrastructure. We actually 
slipped it into the highway bill in 2015. It requires 
accountability, one agency in charge. It requires more 
transparency, a dashboard where anybody can go online and find 
out where a project is. It reduces the statute of limitations 
from 6 years to 2 years, which is really important. It also 
sets up a new council over at OMB. OMB was not really wild 
about having this council, but we knew it was the right place 
to put it because OMB is such a powerful job. And the council 
is called the ``Federal Permitting Improvement Steering 
Council,'' and we have been concerned that the previous 
Administration was not moving quickly enough in terms of 
getting an executive director in place, getting this moving. 
And I will say I have been concerned about that.
    I would want you to work with us on that. I wonder if you 
would make a commitment to me today to ensure that we find a 
strong executive director for this council and that we fully 
implement this legislation to ensure we can ensure that this 
money that is going toward infrastructure and other projects is 
better spent.
    Mr. Mulvaney. I can commit to that and also commit to you 
to encourage the President to give us whatever tools we need 
necessary for OMB to do that.
    Senator Portman. Excellent.
    With regard to regulations, there is legislation called the 
``Regulatory Accountability Act.'' Senator Johnson is very 
interested in this bill, and Senator McCaskill. Senator 
Heitkamp just mentioned Senator Lankford. It has always been 
bipartisan. We have introduced it in each of the Congresses 
over the past 6 years. It is the first major reform to the APA 
that you talked about with Senator Carper earlier, the 
Administrative Procedures Act, in almost 70 years, and it 
basically says cost-benefit analysis for everybody, it has to 
be more rigorous. You also have to go through a much more 
transparent process as you make rules, and including for major 
rules, having a separate hearing.
    It also talks about your issue you talked earlier about, 
which is information. I would ask you this question: Do you 
agree that agencies should be required to use the best 
available scientific, technical, and economic data when writing 
rules?
    Mr. Mulvaney. Absolutely. In fact, I was a little surprised 
to find out they were not already required to do that.
    Senator Portman. That is the legislation because they are 
not. It also codified, as you know, the famous Executive Order 
12866 that President Reagan initially issued and then President 
Clinton after him and every President since. So it puts into 
statute what is required in terms of cost-benefit.
    Do you agree that independent agencies that have more and 
more authority out there should be required to go through a 
cost-benefit analysis much like the executive branch agencies 
are?
    Mr. Mulvaney. I do, sir. I think it would help add 
accountability to those agencies.
    Senator Portman. That is in the legislation, too, so we 
look forward to working with you on a number of items, but this 
is one where I actually think we can get it done--again, 
assuming that working with my colleagues on both sides of the 
aisle we are able to get it through the House and the Senate. 
It has passed the House before, as you know. You voted for it. 
And I think you had 16 Democrats on board during that time 
period where you frankly had a pretty partisan atmosphere with 
other reg reform bills that were not bipartisan.
    Let me ask you a little about just your view of management. 
You and I talked about the OMB focusing more on ``B'' and less 
on ``M'' sometimes and the management function being so 
important, particularly as you are looking to try to reduce 
costs and increase efficiency in government. Waste in 
government is something I know you have talked about and the 
President has talked about.
    We took a full review of the mission effectiveness and 
efficiency of every Federal program when I was there. It was 
called the Program Assessment Rating Tool (PART) program. It 
took a lot of time. Not everybody loved it. Some of the career 
people thought it was too time-consuming. It was an enormous 
undertaking. But this tool, having this Program Assessment 
Rating Tool, really helped to force us to dig more deeply into 
every program and determine if there was a better way of doing 
things.
    The result was that in our budget, some programs were 
increased in their funding that had performed well; others were 
reduced or reformed. Others were eliminated altogether. And I 
just wondered if you had considered undertaking a similar 
initiative as Director of OMB.
    Mr. Mulvaney. I have. Yes, sir. In fact, I appreciated the 
opportunity to talk to you about your expert with the PART 
program, and I think we talked about the importance of adding 
quantitative data to OMB's analysis, that ending the PART 
program denied us that management tool. You cannot manage 
exclusively by connotative data, it is pretty difficult to 
manage at all with no quantitative data at all.
    So whether or not we reinstitute PART in its old form or do 
something similar, I am looking forward to adding to OMB's 
management tools along the same lines you have when you were 
there.
    Senator Portman. Great. Again, we would love to work with 
you on that, and you are right, there is some controversy about 
what you use as your qualitative and quantitative data.
    Mr. Mulvaney. Yes.
    Senator Portman. But if you do not have any, you do not 
have anything to help direct these agencies and make tough 
decisions because the priorities are going to be difficult in 
this budget climate.
    Mr. Mulvaney. And it is hard to measure if you do not have 
a yardstick.
    Senator Portman. President Trump just made a lot of 
promises. Rebuilding our military, cutting taxes, while 
important, they also create budgetary challenges, particularly 
the kind of tax reform commitments that he has generally made. 
We do not know the specifics yet. And even without these 
policies, as I said, CBO today told us the situation is getting 
worse, not better, in terms of our debt and deficit.
    CBO also tells us that Social Security, health care, and 
interest on the national debt are responsible for 84 percent of 
all projected new spending over the next decade and nearly 100 
percent of the increased budget deficits projected over the 
next several decades.
    So we know on the mandatory side is where we see the big 
increases. Simply put, we cannot avert these massive deficits 
coming forward without some sort of reform of these programs. 
They are incredibly important programs. They are safety net 
programs, but they have to be reformed and saved. It is not 
about green eyeshade accounting either, because as you know, we 
are looking at the Social Security Trust Fund that is going 
belly up and Medicare going bankrupt, 17 years and 11 years, 
respectively, which could be devastating to millions of 
seniors.
    So my question to you is: What steps do you plan to take to 
ensure that saving entitlements remains a priority in this new 
Administration?
    Mr. Mulvaney. I intend to make it a priority in my 
discussions with the President on fiscal matters. We had a 
chance to talk here earlier today about going to the President 
with information regarding the ramifications of various 
decisions: ``Mr. President, if we do not do anything on Social 
Security and Medicare, here is what happens.'' You have 
mentioned some of the things, about the trust funds going to 
zero--I do not like to use the term ``going bankrupt'' because 
that is not an accurate statement.
    Senator Portman. Insolvent.
    Mr. Mulvaney. Exactly. ``Here is what happens if you do not 
do anything. And if you do not do anything, then 11 years from 
now there could be a 22-percent across-the-board cut. Here are 
some of the options available to you to make improvements to 
the system, to not only make sure it will be there for the next 
generations, but also to impact positively the deficit 
situation that you just laid out.''
    So, no, I expect to be having regular conversations with 
the President, with all the rest of the advisers, about the 
fiscal impacts of the entitlement programs. It will ultimately 
be up to the President what we decide to do because that is his 
call, but I see it as my job to make sure he understands 
exactly the economic and fiscal ramifications of any of those 
decisions.
    Senator Portman. Great. Thank you, Mr. Chairman.
    Chairman Johnson. Thank you, Senator Portman.
    Congressman Mulvaney, we have talked in the Budget hearing 
and a number of people have brought up just information, and I 
told you in the Budget Committee hearing it drives me nuts as 
an accountant, as a businessperson, it is just so hard to get 
information out of the government and to really drive the 
management decisions.
    Certainly, in terms of this Committee, the Government 
Accountability Office, Inspectors General (IGs), these are 
sources of really good information, and yet we do not utilize 
the information to the full extent. For example, GAO has done 
their case studies. Agencies and departments have implemented 
about 41 percent of those recommendations saving $56 billion 
from 2010 to 2015, with the projection of another $69 billion 
potential.
    Senator Grassley and I wrote to the IGs and asked them to 
report on different recommendations that had been 
unimplemented; over 15,000, with a potential cost saving of $87 
billion.
    As head of OMB, what would be your thoughts in terms of how 
do you actually utilize that information, how to put pressure 
on departments and agencies to utilize them so that we can save 
literally more than $100 billion?
    Mr. Mulvaney. Yes, and as a numbers guy, you can probably 
appreciate one of the things that jumped out in the work that 
you and Senator Grassley and various others had done on the 
IGs' offices, the return is like 14:1. For every $1 that an 
Inspector General uses, they end up saving $14 of taxpayer 
money. That is a pretty good return.
    So I do appreciate the work that you all have done. I 
understand that OMB is directly involved in that. I think that 
the Deputy Director for Management, which is one of the 
positions within OMB, actually sits on that Council of the 
Inspectors General on Integrity and Efficiency (CIGIE). We deal 
with it over on the Oversight and Government Reform (OGR) 
Committee in the House as well. I think we are underutilizing a 
tool. In fact, certain agencies are simply abusing the 
Inspector General and do not even pay any attention to them at 
all. But, generally speaking, the concept of having this person 
in those agencies, resident in those agencies, who can give us 
good information--I cannot tell you--and, again, your 
experience may be the same here. Most of the data, a lot of 
times, that we have in our Oversight and Government Reform 
hearings are driven by the Inspectors General. We do not have 
the ability, because of all the things that are on our plate, 
to do all the oversight that we want to, and Congress needs to 
have those Inspectors General, the President needs to have 
those Inspectors General doing their job and helping us give 
information, helping us collect information so that we can make 
good decisions about how to fix and reform various 
institutions.
    So I do look forward to making that a priority at OMB. I 
have learned firsthand, as you have, how frustrating it is when 
Inspectors General are ignored or when no one can give them 
data. I think I learned today, for example, in a previous 
hearing from Senator Enzi that the Inspector General at the 
Consumer Financial Protection Bureau (CFPB) actually has no 
authority at all. That was news to me.
    So I do look forward to reinvigorating the Inspector 
General's office, giving them the respect and the credibility 
that they need. They are an absolutely critical function of 
government when it comes to trying to make government more 
accountable and more efficient.
    Chairman Johnson. There are a number of rules that we 
impose on ourselves that, from my standpoint, prevent us from 
making good policy decisions, whether it is a tax law or 
whatever. One of them is just the difference between dynamic 
and static scoring. Can you give us your thoughts on that, 
particularly when I will go back to the benefit of growth, and 
if we do not take into account the reality of increasing taxes, 
taxes are going to harm economic growth, oftentimes decreasing 
taxes can produce more revenue than you are getting on a static 
basis? Can you just kind of give us your thoughts on that?
    Mr. Mulvaney. Sure. And, of course, the relevance here is 
that OMB does play a process in sort of the executive branch 
process of doing economic analysis, and that the short answer 
is we live in a dynamic world, not a static world. I do believe 
that there is an implicit bias into a static model for tax 
increases over economic growth. It is very difficult to measure 
future economic growth, for example, fairly easy to measure, 
well, if you had that $16 trillion economy last year and you 
generated $2 trillion worth of revenues, if you double taxes, 
you take in four. Those are the type of misleading results that 
I think a static model gives.
    Dynamic models are not perfect. It is very difficult to 
model out an economy that is $16, $18, $20 trillion in size. 
But to completely ignore macroeconomic feedback I think is 
probably shortsighted of us, and I look forward to possibly 
bringing reforms to that area at OMB.
    Chairman Johnson. One area I want to go back to because you 
have been accused a number of times of voting for a shutdown, 
and I think you very, appropriately said you did not vote for a 
shutdown. I just want to give you the opportunity to describe 
that in greater detail, because I think that it really is that 
type of misrepresentation of what you are doing that--as I have 
talked about, too, we never shut down the government, the full 
government. We shut down actually a relatively small portion of 
it, oftentimes with the greatest amount of pain. But just talk 
a little bit about exactly what happened.
    Mr. Mulvaney. I think if you go back in time, what was 
happening--Obamacare was rolling on. Obamacare, the Affordable 
Care Act, did not turn on at one time. It came in in bits and 
pieces. And we had noticed with great interest that the 
President had issued certain unilateral waivers or delays, 
specifically, as I mentioned earlier, to corporations. We also 
know that the Department of Health and Human Services had given 
special privileges to various businesses all across the country 
but not given them to anybody. That was violative of some 
principles that many of us--myself--had regarding equal 
protection under the law. If we are going to have the 
Affordable Care Act, it should affect businesses in South 
Carolina, Wisconsin, and all the way across the Nation the 
same.
    And so what we decided to do was try and make a point there 
by adding to the appropriations language a 1-year delay in the 
individual mandate under the theory that if it was good enough 
for the President to give to corporations, it was good enough 
for us to give to our individual citizens. That is what we 
bogged down over. The House passed a bill. The Senate did not. 
We passed individual smaller spending bills to open the parks 
in the various States because we do know, to Senator Hassan's 
point, it is real, and we do recognize that there were impacts 
in your State and in my State, which is why the House passed a 
series of smaller bills that would open the Federal parks, fund 
a Planned Parenthood, believe it or not, do all of those things 
while still trying to drive that discussion about equal 
protection and fairness.
    Again, anytime you have a system where the House, the 
Senate, and the White House have to agree on something, if they 
do not agree, that is when you end up in----
    Chairman Johnson. Which, by the way, the way the process 
should work is the House should pass individual appropriation 
bills. You tried to do that. It just was not taken up in the 
Senate.
    Mr. Mulvaney. Correct. And one of the things I would like 
to say--we did not get a chance to talk about it in this 
Committee; we did get a chance to talk about it in Budget--is 
the importance, and I hope to be able to have the opportunity 
to drive home for the President the importance to both parties, 
to the Nation, of a properly functioning appropriations 
process. It is the way the Constitution set it out for us to 
function, and I think we need to do what we can in the 
Administration, if I am lucky enough to be there, to encourage 
you folks to get back to the properly functioning appropriation 
process.
    Chairman Johnson. Thank you. Senator McCaskill.
    Senator McCaskill. Yes, and this is an equal opportunity 
sin. I heard for years, ``Oh, the Democrats have not done a 
budget.'' Then the Republicans take over and guess what 
happens? There is no budget. So it is really, the partisan 
back-and-forth sometimes is hard, especially around the subject 
of who is failing when it comes to regular order on 
appropriations and doing budget bills, because from where I 
stand, Democrats have been guilty, but so have Republicans. So 
I do not know how we get that fixed, Congressman.
    Let me talk to you about something that I think is pretty 
important, and that is, the hiring freeze as it relates to 
contractors. Do you have any idea what percentage of the 
workforce is contractors as you go into this job?
    Mr. Mulvaney. I do not know, ma'am.
    Senator McCaskill. Well, I will tell you. It is way more 
than you think it is. The Department of Energy, for example, is 
primarily contractors. There are not that many full-time 
employees (FTEs). And the thing that is so frustrating to me is 
that people who lead this government sometimes think that by--
and, frankly, during the Bush Administration, they actually did 
a pretty good job of limiting the growth of FTEs in the Federal 
Government. But guess what happened? They blew up contracting. 
You go to Homeland Security, you go to Energy, you go to the 
Department of Defense. I cannot tell you how many times in this 
Committee room I have asked people who run giant agencies, 
``How much of your workforce is contractors?'' and they go, ``I 
do not know. I do not know.''
    So there was no freeze on contractors that the President 
enacted, correct?
    Mr. Mulvaney. I am not familiar with the freeze that they 
imposed yesterday. I am familiar with our discussions about the 
importance of treating them the same, if you are going to look 
at them in that fashion.
    Senator McCaskill. Yes, and, this cost-benefit analysis, 
that door needs to swing both ways. I think there has been 
analysis of the private workers that has been compared to FTEs, 
and in many instances it has not saved us a dime. In fact, it 
has driven up costs, not driven down costs.
    So I think it is really on the backs of Federal employees 
to say that, making sure we freeze them. And you know what is 
going to happen at the VA for those critical medical positions? 
They are going to hire contractors. So it is not like we are 
stopping the hiring of workers.
    So I would implore you to explain to the President that if 
you are going to do a freeze on employees, maybe you ought to 
freeze contractors first and freeze employees later, because I 
do not think we have had the kind of oversight on contractors 
that we have on employees.
    Mr. Mulvaney. You and I have had a chance to discuss this, 
and I think I agreed with you. This was one of your written 
questions, and I think the response I gave is what I would hope 
to be able to advocate to the President, that painting with a 
broad brush may not be the most effective way to deal with the 
issue and what needs to drive the discussion regarding FTEs 
versus contractors is the economic consideration. And I agreed 
with you that there may be circumstances under which it is 
actually more cost-effective and better for the taxpayer to use 
an FTE versus a contractor. And I welcome further discussions 
about those specific examples.
    Senator McCaskill. Great. I think we can work together on 
that.
    Mr. Mulvaney. Yes, ma'am.
    Senator McCaskill. I am worried about data coming out of 
your shop, and I am going to be honest with you. This is an 
awkward and uncomfortable line of questioning for me, but I 
think it is really important we put it on the record.
    I have been astounded over the last 3 days at what has 
occurred, that the President sent his Press Secretary out to 
utter falsehoods in a press briefing that had been--there was 
not only photographic evidence but numeric evidence to show 
that they were just simply not true. You had one of his 
advisers go on TV on Sunday and say, well, they were 
``alternative facts.'' And then, yesterday, he says he was 
denied the popular vote because of millions of illegal 
immigrants, and there is not one iota of evidence to back up 
that claim.
    Now, I get campaigning, I get campaign promises. But I want 
to ask you, Congressman, if the President asks you to not issue 
real data or asks you to alter data according to his narrative, 
what would your reaction be?
    Mr. Mulvaney. Thank you for that, Senator. The credibility 
that I think I bring to this job is that I believe very firmly 
in real numbers. My job is to tell the President the truth. My 
job is to tell you the truth.
    Senator McCaskill. What if he tells you to say something 
other than the truth? Do you resign at that point?
    Mr. Mulvaney. Well, I do not imagine the President of the 
United States would tell me to lie.
    Senator McCaskill. I beg your pardon. He told Sean Spicer 
to go out there and say things that were demonstrably untrue.
    Mr. Mulvaney. I am not privy to the conversations between 
the President and Mr. Spicer, so I cannot comment on that. I am 
not sure if that conversation took place or not.
    Senator McCaskill. OK. But you get my point.
    Mr. Mulvaney. Yes, ma'am.
    Senator McCaskill. And you will not do it.
    Mr. Mulvaney. Like I said, my value in this job is my 
credibility when it comes to numbers. We have had discussions, 
I think, today about the magic asterisk and about making 
assumptions that are completely unreasonable. I have been one 
of the biggest critics of that during this administration. I do 
not plan on exposing myself to claims of hypocrisy.
    Senator McCaskill. I think that is great, and I appreciate 
that answer on the record.
    OMB has to review rules. This week we are in new territory 
also with President Trump because he is going to hold onto all 
of his businesses. He is not divesting. And he has made it very 
clear he is going back to his businesses when he leaves office. 
So whatever happens to those businesses in the meantime will 
directly impact how much money he has. So, I mean, he even 
said, ``If I go back to my businesses when I am done being 
President and my sons have not done a good job, I am going to 
fire them.'' So we know that what happens to the Trump 
enterprises, international businesses, between now and when he 
leaves office will impact his fiscal bottom line. So that means 
every regulation that is changed, every regulation that is 
enacted, could have an impact on the finances of the President 
of the United States. Will you analyze those regulations and be 
transparent with the public when the President is going to make 
money off the regulations that you change?
    Mr. Mulvaney. Senator, I am not familiar with the 
President's businesses or his plans on divestiture. I thought I 
saw----
    Senator McCaskill. Well, let us just assume he has 
licensing deals in 22 countries, that he has hotels and golf 
courses, he has loads of employees, he has--I mean, I think you 
kind of know what his business--we do not know because we have 
not seen any documents, but we kind of know what his businesses 
are, and obviously they are going to be impacted by rule 
changes.
    Mr. Mulvaney. Yes, and without that information myself, I 
am not sure how I could do it. My job would be to explain to 
the President what the general impacts are. I do not foresee a 
situation where I say this company will be impacted this way or 
that company impacted that way. I will be looking at the 
macroeconomic implications of what decisions we are making. 
And, again, I am not trying to be----
    Senator McCaskill. Do you believe there is a duty that the 
President has to the American people to be transparent about 
making money off changes of regulations that you would, in 
fact, push for?
    Mr. Mulvaney. I believe in transparency, Senator McCaskill, 
but I do not know if I am in a position to tell the President 
how to conduct himself.
    Senator McCaskill. OK. I would you urge him to be more 
transparent about when regulations are going to affect his 
financial status?
    Mr. Mulvaney. Again, I am not sure if that is the role of 
the OMB Director. My job would be to say, ``Look, this is how 
this particular regulation will affect the economy.'' Again, I 
do not know if it is the proper role of the OMB Director to do 
anything more than that.
    Senator McCaskill. You understand this is completely 
uncharted territory, we have never had this situation before 
where a government run by a businessman who has not divested 
could, in fact, enrich himself by what his government does. You 
understand that has not occurred before.
    Mr. Mulvaney. I believe it has been a long time, if ever, 
that we have had a person with this business----
    Senator McCaskill. I would love you to tell me in history 
who it was that----
    Mr. Mulvaney. I cannot--I said it has been a long time. I 
do not remember.
    Senator McCaskill. Yes.
    Mr. Mulvaney. I know that the----
    Senator McCaskill. OK. Thank you, Mr. Chairman.
    Chairman Johnson. Thank you, Senator McCaskill.
    Just before I turn it over to Senator Hoeven, just for 
accuracy, in fact, when Republicans took over control of the 
Senate, we did pass a budget. We reconciled with the House for 
fiscal year 2015. There was a budget deal that set the top-line 
figures for fiscal year 2016----
    Senator McCaskill. Oh, no. I am talking about last year, 
Ron.
    Chairman Johnson. Well, I am just laying out the facts. We 
did pass a budget reconciled, had a budget agreement that set 
the top-line figures. I believe, Senator Hoeven, you are on the 
Appropriations Committee. We passed all 12 appropriation bills 
for fiscal year 2015. We were blocked from bringing those on 
the floor of the Senate. Passed an awful lot of appropriation 
bills this year, repeatedly blocked us on defense appropriation 
bills.
    Senator McCaskill. We could go back and forth, Ron, because 
we did the same thing--we passed all the appropriations bills, 
and you guys blocked it. I remember the day it happened.
    Chairman Johnson. Just trying to be accurate.
    Senator McCaskill. And there was no budget last year. Just 
to be accurate. If you are going to do this, I am going to come 
back.
    Chairman Johnson. We had a top-line number. Senator Hoeven.

              OPENING STATEMENT OF SENATOR HOEVEN

    Senator Hoeven. Congressman, thanks for being here today. 
Welcome to the Senate.
    Mr. Mulvaney. I am having a good time, Senator.
    Senator Hoeven. Yes, good to have you here. I want to ask 
you questions in three areas. One is: How do we get on top of 
the regulatory burden? You have a role, obviously, or will have 
a role, if confirmed, with the Office of Information and 
Regulatory Affairs (OIRA). How do we get on top of that 
regulatory burden so we can get this economy growing and help 
our small businesses?
    The second area is: How do we get the debt and deficit down 
and under control, get back to fiscal responsibility? And, 
obviously, that is something that you will work with at OMB.
    And then the third area is I just want to ask if you are 
familiar with P3 projects, public-private partnerships, and do 
you see them as a way to both not only get things done like 
building infrastructure but also helping to cut into the 
backlog of projects and do it in a way where we leverage 
resources and, again, save money for the taxpayer.
    So we can start with the regulatory burden. Do you think a 
Federal one-size-fits-all is the way to go? Or do you think we 
ought to give States flexibility and more control over what 
goes on in their State? Because there are differences among the 
50 States, and they are the laboratories of democracy.
    Mr. Mulvaney. Yes, and I think it is always a good idea to 
look at the States for an opportunity for new ideas and being 
more creative. We talked earlier today about Medicaid, for 
example, not a regulatory issue but there may be ideas out 
there for how to use Medicaid in the Carolinas or the Dakotas 
or a different way than they are used in New Hampshire, 
Missouri, or California. So that is always something that I 
think we should explore.
    Other things you could do to get on top of the regulatory 
burden would be to actually enforce the laws that exist today 
regarding retroactive analysis of regulations. I do not think 
we have done a very good job with that. We have not cleared old 
regulations off the books after they become no longer 
pertinent.
    You could improve the cost-benefit analysis process during 
the regulatory process. That involves getting better 
information.
    So there are many things you can do within the regulatory 
regime to try and improve the process and end what we have 
ended up with right now, which is this system where somehow we 
have the very best of intentions with regulations at the 
beginning of the pipeline, and at the end of the pipeline a 
regulation comes out that crushes small business and often does 
not even accomplish what the intention was at the beginning.
    So the regulatory process is broken. OMB can play a role in 
fixing that, and I look forward to doing that with members of 
both parties on both sides of the Hill.
    Senator Hoeven. Do you believe in the role as OMB Director 
you should help provide legal and regulatory certainty and that 
you should help encourage and empower investment in our economy 
and job growth?
    Mr. Mulvaney. Absolutely, and that goes to your second 
point, which is what is one of the things you can do to get the 
debt under control. I think if we would be perfectly candid 
with each other, the best way for us to reduce the size of the 
deficit is to grow the economy. And as Chairman Johnson has 
pointed out several times here today, moving from 2-percent 
growth to 3-percent growth could be an extra $16 trillion, I 
think it was, going to 4 percent an extra $29 trillion in terms 
of the size of the pie. And I can assure you if the government 
continues to take 17 or 18 percent out, it is better from a 
balanced budget possible to take 17 or 18 percent of $32 
trillion than it is 16.
    Senator Hoeven. Talk about your role in terms of savings 
and reforms and those kind of things as we work to both grow 
the economy and then find savings. How do you go about that at 
OMB?
    Mr. Mulvaney. That is one of the things I am most excited 
about. I think we are in a situation now where so many of 
us--and I imagine the same thing has happened to you in your 
time here on the Hill. The number one complaint of people who 
take time out of their day to come visit me over in the Rayburn 
Office Building is, ``Look, this is how regulation is crushing 
me.'' To be perfectly candid, I get that a lot more than I get 
questions about taxes. And I think enough members of both 
parties have finally gotten to the point where they realize 
maybe the regulatory burden has gotten out of control. So now 
you have that critical mass, I hope, in the House and the 
Senate. You have a President for the first time since the 1980s 
who ran explicitly on regulatory reform. You have various 
agency heads who he has nominated, some of which the Senate has 
already confirmed, who have said that driving efficiencies into 
their departments is one of their priorities. Again, I harken 
back to the conversation I had earlier this week with General 
Mattis where I assured him that he could count on me to help 
look at the top-line defense needs. If I could count on him to 
help look at driving efficiency in the DOD, I look forward to 
being his partner in that.
    So I think we have finally reached a critical mass where 
all of the stars have aligned and we get a chance to actually 
reform our regulatory process and environment.
    Senator Hoeven. In regard to some of the questions asked by 
the Ranking Member, you do have a reputation in the House as 
somebody who speaks truth to power pretty directly and have 
been more than willing to get out there in uncomfortable 
situations and say just exactly what you think and be very 
transparent about it.
    Mr. Mulvaney. That may be the nicest way that anybody has 
ever described it.
    Senator Hoeven. And then talk about P3. I have spent a lot 
of time working on P3 projects, particular U.S. Army Corps of 
Engineers. They have a huge backlog. But with P3, we have an 
opportunity for States and localities that have funding ready 
to go and have private sector companies that want to co-invest 
in some of these innovative infrastructure projects that may be 
a way to reduce the Federal cost share and cut into that big 
backlog. And we need to build infrastructure in this country 
very badly. And the Trump Administration has made this an 
absolute priority, and it is a priority for us. So talk a 
little bit about your sense of P3 projects.
    Mr. Mulvaney. Not only has the President made it a 
priority, from what I know about some of his nominations to key 
Cabinet positions, he is actually seeking to hire people who 
know a great deal about this. So I get every impression, again, 
that the President is deadly serious about figuring out new and 
creative ways specifically to build infrastructure, and public-
private partnerships do offer an opportunity to do just that.
    Under the theory of speaking truth to power, I will tell 
you my reservation, but the one thing I will be looking out for 
at OMB is to make sure that when the government does partner 
with private industry, that we do in a way that is entirely 
transparent so as to avoid any appearance of impropriety and 
giving favors to well-connected corporations over those who 
have perhaps fewer relationships.
    Senator Hoeven. Well, transparency is very important, and 
clearly this Administration wants to be creative and move 
forward on infrastructure. At OMB, you will play a key role in 
making sure we can do it, doing it right, doing it in a 
transparent way. But you will have a big role to play there. My 
understanding is that you are supportive of not only the 
infrastructure development but looking at these innovative ways 
to make things happen.
    Mr. Mulvaney. Oh, I have told the President--not the 
President because I have not had a chance to talk with him 
directly, but I have told other nominees and folks in all of 
these committees that I would support an infrastructure 
program. I think it is one of those appropriate functions of 
government in many circumstances. I am interested in how it is 
going to be paid for. I am not interested in seeing us blow a 
$1 trillion hole in the balance sheet in order to accomplish 
this, but I think I will give the President's transition team 
some credit. I have seen some very creative ideas on how to pay 
for things, including public-private partnerships.
    Senator Hoeven. Well, and that is the key, is it not? 
Finding a way to do it and pay for it and get the economy 
growing. I think it all goes together.
    Mr. Mulvaney. Yes, sir.
    Senator Hoeven. Again, thanks for being here today.
    Mr. Mulvaney. Thank you for having me.
    Chairman Johnson. Thank you, Senator Hoeven.
    By the way, I totally agree with you. Over the last 6 
years, it has been almost universal. The first thing out of 
anybody I meet with, they are talking about what can we do to 
reduce the regulatory burden. The good news for you is the 
President has set a pretty low bar, only a 75-percent 
reduction. Actually, I would call that a ``stretch budget.'' 
Senator Hassan.
    Senator Hassan. Thank you very much, and, Congressman, 
thank you for putting up with a long stretch of questions. You 
have had a long day, and I appreciate that very much. And I 
just wanted to follow up quickly on a couple of things and then 
just ask one question.
    There has been a lot of discussion about reforming Medicaid 
and flexibility in the program, and should you be confirmed, I 
would like to offer to work with you on that since, in my 
experience as a Governor, there has been a lot of flexibility 
in the Medicaid program. We are going through an 1115 waiver 
process right now in New Hampshire, which is really allowing us 
to integrate our behavioral health and primary care in ways 
that are very promising. And so before kind of throwing the 
baby out with the bath water here, you might want to learn from 
Governors who are currently working well with the Federal 
Government and finding that the government is willing to be 
quite flexible to help us meet the needs of our States.
    Mr. Mulvaney. I absolutely welcome the opportunity to do 
that.
    Senator Hassan. Well, thank you.
    The question I wanted to ask was on climate change. Earlier 
today, it is my understanding that you had an exchange with 
Senator Kaine about climate change. I obviously was not there, 
but my understanding is that you told him that you agreed the 
climate is changing, but the science on how much impact humans 
are having is unsettled.
    Mr. Mulvaney. I do not think that is verbatim, but that is 
a fair recalculation, yes, ma'am.
    Senator Hassan. OK. So I am a little concerned with that 
because, first of all, the OMB Director does have a significant 
role to play when it comes to climate change. You need to know 
the science in order to allocate the budget effectively. You 
need to know the science in order to run the OIRA process 
effectively. You just had a really good exchange with Senator 
Portman about the importance of data and evidence-based 
policymaking.
    So here is what scientists say. They are clear in their 
understanding of the climate change science. The American 
Association for the Advancement of Science says the scientific 
evidence is clear. Global climate change caused by human 
activities is occurring now, and it is a growing threat to 
society.
    The American Geophysical Union said humanity is the major 
influence on the global climate change observed over the past 
50 years.
    The American Meteorological Society says it is clear from 
extensive scientific evidence that the dominant cause of the 
rapid change in climate of the past half-century is human-
induced increases in the amount of atmospheric greenhouse 
gases.
    The Intergovernmental Panel on Climate Change says warming 
of the climate system is unequivocal and human influence on the 
climate system is clear.
    So I would like to understand what you find unclear about 
this science that these scientists have been so clear about and 
why you or I, with our non-scientific backgrounds, would be 
qualified to disagree with these climate scientists in their 
area of expertise.
    Mr. Mulvaney. It is fair enough, and, again, every time I 
have a conversation about climate change--I had some very, as 
you can imagine, colorful conversations with Senator Sanders 
about this in his office. I will try and figure out a way to 
draw it back to OMB, and the way I do that is by recognizing 
the fact that OMB may be called upon at some point to give an 
opinion on some type of regulation regarding carbon, for the 
sake of this discussion. OK?
    In my role as OMB Director overseeing the Office of 
Information and Regulatory Affairs, it would be my job to look 
at exactly what you have just laid out and also look at those 
folks who have other sides of that opinion and then try and 
balance that with things such as the costs related with the 
regulation, bearing in mind in particular that regulatory costs 
have been described as some of the most regressive costs that 
we have. It falls on the poor much more than it does on the 
rich.
    So it is a complex dance that the OMB Director has to do 
before giving the President an opinion. Do I bring certain 
biases to that? Yes. Would you? Certainly. That is what we do. 
It is the nature of our business. But my job would be to take 
that information that you just laid out, see if there is other 
information that may be to the contrary, and try and give the 
very best summary to the President of the United States as I 
possibly can.
    Senator Hassan. And I respect that. I would ask you to look 
at peer-reviewed science, not----
    Mr. Mulvaney. Yes, ma'am.
    Senator Hassan [continuing]. Industry-based attempts to 
mask the science, which we have seen a fair amount of. And in 
terms of regulatory burden, I have worked as a Governor, we 
have all worked to reduce regulations. But, when you talk about 
burdens, when we have polluted air, more kids get asthma. When 
more kids get asthma, especially if they are low-income and 
especially if we do things like repeal the Affordable Care Act 
and they cannot get access to primary care and health 
insurance, that costs us money in different ways. There is a 
reason my business community in New Hampshire supported 
Medicaid expansion so strongly, because they understand the 
value of a healthy workforce.
    When we do not have clean water, that costs us enormously, 
and it particularly costs low-income families who do not have 
the budgets to go out and buy bottled water. Right?
    So I just would ask you to think about the balance in terms 
of regulations, not just with a dollar amount and not just from 

concerns that I understand--I was a business attorney for 25 
years--about how hard it can be to navigate regulations when 
you are running a business and the impact that that can have.
    But there is an impact on families. There is an impact on 
natural resources. There is an impact on the economy. I can 
tell you, the maple sugarers in New Hampshire feel the impact 
of climate change, and so does my ski industry. And so it 
really behooves us to listen to the scientists, the predictions 
they made about climate change, and the impact of human 
behavior on it decades ago is playing out in front of us. So we 
might want to really just start listening to them.
    Mr. Mulvaney. Thank you, Senator.
    Chairman Johnson. Thank you, Senator Hassan.
    Congressman Mulvaney, you have had a long day in the 
witness chair, not only in this Committee hearing but also in 
the Budget hearing, so this is a pretty good time to end your 
day. I want to thank you for your testimony, for being willing 
to subject yourself to this process. I want to thank you, your 
wife, Pam, and your three children for your willingness to 
sacrifice your time and your willingness to serve this Nation. 
So I really do appreciate it.
    The nominee has made financial disclosures and provided 
responses to biographical and prehearing questions submitted by 
the Committee. Without objection, this information will be made 
part of the hearing record,\1\ with the exception of the 
financial data, which are on file and available for public 
inspection in the Committee offices.
---------------------------------------------------------------------------
    \1\ The information submitted by Congressman Mulvaney appears in 
the Appendix on page 66.
---------------------------------------------------------------------------
    Senator McCaskill, I will again reiterate my commitment 
that we will not hold a markup----
    Senator McCaskill. Thank you so much, Mr. Chairman.
    Chairman Johnson [continuing]. Until we get that background 
check. And, Congressman Mulvaney, you will agree to answer any 
questions that might arise from that.
    Mr. Mulvaney. Absolutely.
    Chairman Johnson. With that, the hearing record will remain 
open until 5 p.m. tomorrow, January 25th, for the submission of 
statements and questions for the record.
    This hearing is adjourned.
    [Whereupon, at 4:59 p.m., the Committee was adjourned.]

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