S. HRG. 109–651 

NOMINATION OF HON. ROBERT J. 

PORTMAN 

HEARINGS 

BEFORE THE 

COMMITTEE ON THE BUDGET 

UNITED STATES SENATE 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

ON THE 

NOMINATION OF HON. ROBERT J. PORTMAN, TO BE DIRECTOR, OFFICE 

AND MANAGEMENT AND BUDGET 

MAY 11, 2006 

Printed for the use of the Committee on the Budget 

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COMMITTEE ON THE BUDGET 

JUDD GREGG, New Hampshire, Chairman 

PETE V. DOMENICI, New Mexico KENT CONRAD, North Dakota 

CHARLES E. GRASSLEY, Iowa PAUL S. SARBANES, Maryland 

WAYNE ALLARD, Colorado PATTY MURRAY, Washington 

MICHAEL ENZI, Wyoming RON WYDEN, Oregon 

JEFF SESSIONS, Alabama RUSSELL D. FEINGOLD, Wisconsin 

JIM BUNNING, Kentucky TIM JOHNSON, South Dakota 

MIKE CRAPO, Idaho ROBERT C. BYRD, West Virginia 

JOHN ENSIGN, Nevada BILL NELSON, Florida 

JOHN CORNYN, Texas DEBBIE STABENOW, Michigan 

LAMAR ALEXANDER, Tennessee ROBERT MENEDEZ, New Jersey 

LINDSEY O. GRAHAM, South Carolina 

SCOTT GUDES, Majority Staff Director 

MARY NAYLOR, Staff Director 

ii 

C O N T E N T S 

HEARINGS 

Page 

May 11, 2006—Nomination of Hon. Robert J. Portman, of Ohio, to be Director 

of the Office of Management and Budget ........................................................... 1 

STATEMENTS BY COMMITTEE MEMBERS 

Chairman Judd Gregg ............................................................................................. 1 

Ranking Member Kent Conrad ............................................................................... 6 

WITNESSES 

Honorable Jim Bunning .......................................................................................... 1, 3 

Honorable Mike DeWine, A United States Senator from the State of Ohio ....... 4 

Honorable Robert J. Portman, of Ohio, Nominee to be Director of the Office 

of Management and Budget ................................................................................23, 76 

Statement of Biographical and Financial Information Requested of Presidential Nominees ................................................................................................. 79 

ADDITIONAL STATEMENTS 

Senator Michael B. Enzi ......................................................................................... 88 

APPENDIX 

Ranking Member Kent Conrad ............................................................................... 90 

Senator Paul Sarbanes ............................................................................................ 109 

Senator Patty Murray ............................................................................................. 110 

Senator Roy Wyden ................................................................................................. 111 

Senator Johnson ...................................................................................................... 118 

Senator Menendez ................................................................................................... 123 

iii 

NOMINATION OF HON. ROBERT J. PORTMAN 

THURSDAY, MAY 11, 2006 

U.S. SENATE, COMMITTEE ON THE BUDGET, Washington, DC. 

The committee met, pursuant to notice, at 9:59 a.m., in room 

SD–608, Dirksen Senate Office Building, Hon. Judd Gregg, chairman of the committee, presiding. 

Present: Senators Gregg, Domenici, Allard, Sessions, Bunning, 

Crapo, Alexander, Conrad, Sarbanes, Murray, Wyden, Stabenow, 

and Menendez. 

Staff present: Scott Gudes, Majority Staff Director; and Denzel 

McGuire, deputy staff director. 

Staff present: Mary Naylor, Staff Director for the Minority; and 

John Righter, deputy staff director & commerce and housing credit. 

OPENING STATEMENT OF CHAIRMAN JUDD GREGG 

Chairman GREGG. We are going to call the hearing to order a lit- tle early and thank everybody for being here on time, obviously, 

and for having Ambassador Portman here as nominee to be the Di- rector of OMB. 

As a courtesy to the people who are going to be introducing him, 

the Senators who are going to be introducing him, we thought we 

would let the Senators who are introducing Ambassador Portman 

go first, and then we will do our opening statements. And then we 

will go to Ambassador Portman for his opening statement and then 

we will proceed to questions. 

So I understand that the Ambassador is going to be introduced 

by Senator Jim Bunning from Kentucky, who is a neighbor and has 

been for many years of the Ambassador; and Senator Mike DeWine 

who represents Ohio, which is the residence and the home of the 

Ambassador. 

So why do we not proceed with Senator Bunning as a member 

of the Committee. 

STATEMENT OF THE HONORABLE JIM BUNNING, A UNITED 

STATES SENATOR FROM THE STATE OF KENTUCKY 

Senator BUNNING. Thank you, Mr. Chairman. 

I am honored to have the opportunity to introduce my good 

friend Rob Portman to the Committee today. 

As my colleagues all know, Rob served in the House of Representatives for over 10 years, representing the Cincinnati area 

District just across the river from where I live in Kentucky. We 

also served together for 4 years on the House Ways and Means 

(1) 

2 

Committee, and worked on everything from trade to pensions to 

health care, even constituency case work. 

Just as importantly, Rob and I and our wives, Mary and Jane, 

have spent many hours together, more of them than we care to 

count, talking as we sat on planes going back and forth from Washington and Cincinnati, which, is always like to remind Rob, the 

Cincinnati airport is in Northern Kentucky. 

Over the past year or so, I have gotten to know Rob Portman as 

well as any Member of Congress. I can tell my colleagues wholeheartedly that President Bush could not have picked a better man 

to trust with the important responsibilities that come with being 

the Director off the Office of Management and Budget. 

Rob is one of the smartest guys I know. He works hard. He is 

destined for great things. He did a wonderful job as our trade representative, and would do a fine job as head of OMB. 

I urge my colleagues to act favorably and quickly on his nomination. 

Thank you, Mr. Chairman. 

[The prepared statement of Senator Bunning follows:] 

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4 

Chairman GREGG. Thank you, Senator. It is an honor and a 

privilege to have you here testifying, as well as a member of the 

Committee. 

Senator DEWINE. 

STATEMENT OF THE HONORABLE MIKE DEWINE, A UNITED 

STATES SENATOR FROM THE STATE OF OHIO 

Senator DEWINE. Mr. Chairman, thank you very much for allowing me a few minutes to speak on behalf of my good friend and fellow Ohioan, Rob Portman. 

Let me first congratulate Rob on this nomination. Really no one 

is more qualified or more prepared or more ready to be our next 

Director of the Office of Management and Budget than Rob. He 

brings commitment, sincerity, intelligence, expertise, and skill to 

this position. 

Mr. Chairman and members of the Committee, I have known 

Rob for many, many years. I have worked with him in Congress on 

many issues. 

Rob Portman, as I think we all know, is the real deal. He is thorough and thoughtful on all of the issues that he undertakes. He is 

as honest and genuine and sincere as they come. He is a devoted, 

serious, hard-working, and caring man who always puts his family 

first. 

It does not seem that long ago that I had the opportunity to introduce Rob to the Senate Finance Committee after he was nominated to be our U.S. Trade Representative. I jokingly told Rob that 

I was just going to get my old introduction out and read it again 

today. 

But during that introduction, I talked about Rob’s diplomacy and 

his skills as a negotiator, and he certainly has shown that over the 

last year or so. 

In his new position, Rob, you are certainly going to need those 

skills even more. 

In all seriousness, Mr. Chairman and members of the Committee, I know Rob Portman. In Rob Portman, we are going to have 

a man who will listen to our concerns and while we may not always 

agree with him, we know that he will take our concerns into consideration and we know that he will always shoot straight with us. 

Rob’s legislative accomplishments speak for themselves. He has 

helped make Government more accountable through his efforts to 

overhaul the IRS and his efforts to reform pension law. I am very 

proud to have worked on several legislative issues with him over 

the years. He has always been there to make a difference for Ohioans and for our country. He has been a true champion in the fight 

to get illegal drugs out of our communities. And he has been instrumental in turning the vision of an Underground Railroad Freedom Center into a reality. Because of his commitment and his hard 

work, Cincinnati is now home to our Nation’s premier history center dedicated to telling the story of freedom and perseverance 

through the legacy of the underground railroad network. 

Again, let me congratulate Rob, and I thank you, Mr. Chairman, 

for giving me the opportunity to appear here today to introduce my 

good friend to this Committee. 

5 

Chairman GREGG. Thank you, Senator, and thank you both for 

presenting the nominee today. It is obviously a reflection of his 

quality and caliber that he would have folks of your quality and 

caliber representing him and presenting him today. 

It is a pleasure, obviously, to have the nominee before us today 

for the OMB directorship. Congressman, Ambassador Portman has 

been a tremendous public servant, somebody that has set an ex- traordinary track record of ability and intelligence as he has ap- proached issues which have faced our Nation. 

One must ask the question, however, why someone would leave 

the USTR to become head of OMB. That may be the most signifi- cant issue we have to address in this hearing. 

But the fact that he is willing to take on the job of OMB is clear- ly a reflection of the fact that he is willing to take on significant 

challenges. The OMB directorship is the center, the epicenter of fis- cal policy at the Federal level. And the OMB Director is put in the 

position of having to discipline spending throughout the Govern- ment and make sure that that spending is done effectively when 

it is done. It is a job that does not win a whole lot of friends, but 

does play an absolute critical role in maintaining fiscal discipline. 

I know that Ambassador Congressman Portman has all the tal- ent and ability to accomplish and carry forward what I think was 

an extraordinary job done by his predecessor in Director Bolton, 

who I enjoyed working with immensely and who was moved on to 

be Chief of Staff, obviously, for the President. 

There are a lot of things going on today that involve fiscal policy. 

Ironically, on the floor of the Senate today we have the extension 

of the tax rates relative to a number of areas that were put in place 

in 2003. 

The tax cuts of 2003 are producing huge dividends to this coun- try. The revenues are up dramatically. Just in the first 6 months 

of this year we have seen an 11 percent jump in revenues over the 

baseline projection, $134 billion of additional revenues coming in. 

Last year it was a 14 percent jump. We have seen, as a result of 

the economic activity energized by these tax cuts, tremendous increase in job growth, 5.3 million new jobs added to the economy. 

We have seen once again the philosophies of John Kennedy and 

Ronald Reagan and now George W. Bush, which says that if you 

put a fair tax rate in place, especially on the formation of capital, 

what you get is much more entrepreneurship, much more creativity, much more willingness to go out and take risk and as a result create jobs. And the result of creating jobs and economic activity in an economy is that you generate revenues to the Federal 

Government. 

We are a government which is seeing huge explosions in our revenue growth and that does not appear to be abating at all. In fact, 

it appears to be going up, as this economy continues to grow and 

grow in a very positive and effective way. We have not had any significant inflation. 

I think that the Administration’s policies relative to tax policies 

can take a lot of credit for this economic turnaround. We were confronted obviously with a major recession, the attack of 9/11 and the 

right policies were put in place to bring us out of that and they 

have brought us out of that in a way which has shown a robust 

6 

and aggressive growth in our economies and has proven once again 

that if you give people an incentive to go out and work and be pro- ductive in our economy they do. And as a result they generate reve- nues to us as a Government. 

But on the only other side of the ledger, we still have the ques- tion of fiscal discipline. Especially in the entitlement accounts, we 

confront some very serious problems. The biggest problem we con- front is a demographic problem. Clearly the deficit is moving down- wards, moving in the right direction. In fact, deficit projections are 

well below what they were just three or 4 months ago and dramati- cally below what they were 6 months ago. 

But those deficit projections, which are moving down, are good 

and they are positive and they reflect good economic policies. But 

in the long run we still have to face up to the fact that as we head 

out into the next decade the baby boom generation is going to re- tire on us. Most of us here are members of that generation. And 

the effects of that retirement is that it will put tremendous strain 

on our Government, but more importantly tremendous strain on 

our children as they try to pay for the cost of those fiscal policies 

of maintaining a retired generation which is twice the size of any 

generation that has ever retired before. 

This becomes an issue for this Government and for us as policymakers. We should not allow ourselves to get to this precipice. We 

should anticipate it and try to make it less of a precipice. And so 

that is something I would like to hear about when the witness 

speaks, relative to what the policies will be to address the issues 

of the demographic shift in our country and how it is going to affect 

entitlement spending. 

In addition, of course, we have the question of discretionary 

spending, and specifically the issue of how we are budgeting. The 

fact that we have adopted this two-tier budgeting approach where 

we are basically running a budget that is under the control of the 

budget policies, which hopefully we will be seeing passed by the 

House this week, and a budget which is under no control, the emergency budget. And the emergency budget being a function of our 

fighting the war and the function of the Katrina situation. 

Obviously, those numbers are going to start to fall, we hope. 

They will fall, there is no question about that. Clearly, the Katrina 

situation is being addressed. And the war, at least in Iraq will, it 

appears to me, start to cost us less. 

So I will be interested to hear what the witness has to say relative to that issue of discretionary budgeting and how we handle 

it effectively. 

But we do congratulate him for being willing to step into this 

turf to take on this job. It is one of the most challenging jobs in 

the Government and, in my experience of working with Ambassador Portman, I think he is the right guy to do the job and I know 

he will do it well. 

At this point, I will yield to the Senator from North Dakota for 

his thoughts. 

Senator CONRAD. Thank you, Mr. Chairman. 

OPENING STATEMENT OF RANKING MEMBER KENT CONRAD 

Welcome, Ambassador Portman. 

7 

First of all, I want to say you had the good fortune to be introduced to the Committee by a respected member of this Committee, 

Senator Bunning. We know that you are very close neighbors there, 

that border between Ohio and Kentucky. 

First of all, I want to say I like Ambassador Portman personally 

and have high regard for him professionally. He certainly was an 

outstanding member of the House of Representatives and we welcome him here before the Committee. 

With that said, I think you would expect that we also have serious policy differences. The great thing about our democracy is we 

express those openly and honestly, and we will do that here today. 

With that I would like to, Ambassador Portman, take you back 

to 2001 when this fiscal policy was put in place. And the time you 

said, ‘‘President Bush outlined his budget last week, which showed 

for the first time in decades we are going to be able to actually preserve the Social Security and Medicare Trust Funds. We have 

never done that before. It is historic. We are also going to be able 

to pay down all of the available public debt, $2 trillion of it, also 

be able to increase spending for important priorities like education, 

national defense, and yet there is almost $2 trillion left over for tax 

relief for the American people.’’ 

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I would just go back now and test those claims against what has 

actually happened. 

What has actually occurred is quite different. The fact is none of 

the Social Security Trust Funds have been preserved or lock-boxed 

or used to pay down the liability. Instead, all of it has been spent 

and will be spent for other things, $2.5 trillion from 2006 to 2015. 

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And on the assertion that all of the public debt was going to be 

paid down, instead of debt being paid down what we have seen is 

the debt sky rocket. In fact, the debt, just in the first 5 years of 

this Administration, has increased by $3 trillion, $450 billion of increase in 2002, $984 billion in 2003, $800 billion in 2004, $781 billion in 2006. So there is no debt being paid down here. None. The 

debt is exploding. 

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And in large measure, I believe, because of the failed fiscal policies of this Administration. 

The result is we are building a wall of debt that is really unprecedented in American history. At the end of the President’s first 

year in office the gross debt of the United States stood at $5.8 trillion. If we continue on the current course with the budget that is 

before Congress, the estimates are now that it will reach $11.8 trillion in 2011. That is truly an astounding buildup of debt, about a 

doubling of the debt of the country on this president’s watch. 

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Perhaps even of deeper concern is how much of this debt is being 

financed by foreigners. As I have pointed out before with this chart, 

it took 42 presidents 224 years to run up to $1 trillion of external 

debt, U.S. debt held abroad. This president has more than doubled 

that amount in just 5 years. 

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Some see that as a sign of strength. I do not. It seems to me to 

be an extraordinary vulnerability for our country. Just as the 

President said we are addicted to oil, I also believe we are addicted 

to foreign capital. 

Our Chairman indicated that revenues have exploded because of 

this fiscal policy. He is talking about the recent few months. If you 

go back to where revenue was in 2000, you see that it was over $2 

trillion. And after all of the tax cuts that we were repeatedly promised would lead to this explosion in revenue, we see we did not get 

back to 2000 revenue until 2005. In fact, after 2000 revenue went 

down in 2001, we had big tax cuts. That was supposed to lead to 

the explosion of revenue. But in 2002 revenue went down. In 2003 

revenue went down some more. In 2004 revenue stayed down. 

Only when we got to 2005 have we seen revenue get back to 

where it was in 2000. 

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As a share of GDP the numbers are even more stark. As a share 

of GDP this chart shows we went from a record in 2000 of 20.9 percent to in 2004 revenue was 16.3 percent, the lowest it had been 

since 1959. 

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Finally, even now we see that the revenue for this year has not 

come anywhere close to what the prediction was in 2001. In 2001 

they said that revenue now would be $2.7 trillion. Instead it we see 

revenue in the range of $2.3 trillion, far below what the estimates 

were in 2001. 

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The result of all of this is a massive run-up in debt, increasingly 

financed by foreigners. Many of us are deeply concerned about 

what that means for the future of the country because all of this 

is happening before the baby boomers retire. And when the baby 

boomers retire, as the Chairman has correctly described, then we 

face a real tsunami of debt. It is incumbent on all of us to work 

to change direction to get this country back on a more firm fiscal 

footing. 

With that, I again welcome the Ambassador and look forward to 

your statement. 

Chairman GREGG. Mr. Ambassador, you have received the true 

Budget Committee welcome, chart-wash we call it. 

Mr. Ambassador, under the committee rules, I have to swear in 

for your testimony, if you would rise, please? 

Do you swear the testimony you are about to give will be the 

truth, the whole truth, and nothing but the truth? 

Ambassador PORTMAN. I do. 

Chairman GREGG. Mr. Ambassador, we look forward to hearing 

you. 

16 

STATEMENT OF THE HONORABLE ROBERT J. PORTMAN OF 

OHIO, NOMINEE TO BE DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET 

Ambassador PORTMAN. Thank you, Mr. Chairman. I was looking 

forward to some charts today and I was not disappointed. I hope 

my friend, Mr. Conrad, is not done with those charts because I 

would love to have the opportunity to address them perhaps in 

more detail during the question and answer period. 

I want to thank both the Chair and ranking member for the introductions and for the input and, again, I look forward to getting 

into some more detail about the fiscal situation. 

I also want to thank them for meeting with me before this hearing. I want to thank the other members of the Committee for 

spending some time with me prior to the hearing. It was very helpful and I look forward to continuing to stay in close touch with you. 

I want to thank my friend and your colleague, my former Ways 

and Means colleague, Jim Bunning, for that very kind introduction. 

I accused him of having his wife, Mary, write it because it was so 

kind. 

But as was noted, Jim Bunning and I shared a border when he 

represented a Northern Kentucky District in the House, actually 

about 100 miles of the Ohio River. And through that we got to 

know each other quite well. He was not only my neighbor but also 

he and his wife, Mary, are dear friends of my wife, Jane’s, and 

mine. And I appreciate his support and comments this morning. 

I know in his questions he will be as tough as any member of 

the Committee, by the way, which I also love about him. 

And to Mike DeWine, who has since had to depart, I thank him 

for his nice words. As a fellow Ohioan, we have worked very closely 

together on a number issues, as he said, economic, education issues 

and others. He has been a good sounding board and a good friend. 

Mr. Chairman, as you know, a little more than a year ago I left 

the House Budget Committee to assume the role of U.S. Trade Representative. Now I find myself happily back in the budget world as 

the President’s nominee to be the Director of the Office of Management and Budget. 

It was a great honor and has been a great honor to serve as U.S. 

Trade Representative. I have enjoyed the job immensely. I have 

also enjoyed working with, as I look around the room, every member of this Committee who is present at least on trade issues. And 

should I be confirmed as Director of OMB, I intend to continue that 

kind of close Congressional consultation in both the House and the 

Senate and on both sides of the aisle. 

As a former House member, I place a very high value on open 

lines of communication with the U.S. Congress. I also believe that 

with the budget challenges we face, which were just discussed in 

the two opening statements, we can only solve them through a constructive dialog with both sides of the aisle about the very real 

issues again that have been addressed in the opening statements. 

As you know well, OMB has a unique role in our system of government. All spending decisions and major regulatory changes are 

within its purview. It also oversees the management of the executive branch and the agencies. It is a serious responsibility. And if 

17 

confirmed, I will approach it with a seriousness of purpose and 

with the interests of our country at the forefront. 

Working together which this Committee, which includes a num- ber of key budget policymakers, we can help influence the legacy 

that we are leaving to our kids and our grandkids. 

In the last 5 years our country and its budget have faced a num- ber of very serious challenges, from the 2001 recession, the cor- porate scandals, the stock market decline, to the horror of 9/11, the 

ensuing war on terror, and of course most recently the unprece- dented natural disasters on the Gulf Coast with Hurricanes 

Katrina and Rita. 

In facing these challenges, the American people and our economy 

have proven up to the task. With help from the bold steps the 

President took, our resilient economy has bounced back. We are 

now experiencing strong and positive growth in the economy in 

general, and in jobs and in revenue, as the Chairman said, in par- ticular. 

From a budget perspective we are on track to meeting the Presi- dent’s target of cutting the deficit in half by 2009. We have done 

this by working with Congress in recent years to focus spending on 

our national priorities while reducing spending elsewhere. We need 

to do more and I look forward to your thoughts and recommenda- tions on how we can accomplish this goal while continuing to pro- tect Americans at home and fight terrorism around the globe. 

Restraining discretionary spending, as we have done in recent 

years, is an essential part of deficit reduction. But I think the 

greatest threat to our budget comes from the unsustainable growth 

in entitlement programs, including Medicare, Medicaid, and Social 

Security. It is absolutely critical that we work together to develop 

sound policies that address the long-term fiscal danger and put 

these programs on a sustainable footing for future generations. 

There, too, I welcome your input as to how we can achieve this dif- ficult task together. 

As we work to rein in spending I hope we will always keep in 

mind that need to continue our strong economic expansion. GDP 

grew at a healthy 4.8 percent in the first quarter of this year. That 

follows our economic growth of 3.5 percent in 2005, the fastest rate 

of any industrialized nation. Productivity increased at a strong annual rate of 3.2 percent in the first quarter. And just last week we 

learned that hourly compensation rose sharply at a 5.7 percent rate 

in the first quarter. 

Together with Congress, the President has put in place progrowth policies to create the environment for this economic expansion. I believe keeping these pro-growth policies in place is critical 

if we are to continue benefiting from strong economic growth and 

growing revenues that are essential to deficit reduction and entitlement program solvency. 

As you know, in 2005 tax receipts grew by 14.5 percent, or more 

than twice as fast as the economy itself. In February, the Administration estimated that receipts would grow. This year again the estimate was 6.1 percent growth in 2006. Most private sector and 

other Government forecasters have since estimated that revenues 

this year will be significantly higher than that, higher than was 

just projected in February. 

18 

Just yesterday the Treasury Department reported that Federal 

revenues surge in April with corporate receipts at a record $46 billion. Tax receipts for the first 7 months of the fiscal year, fiscal 

year 2006, are now at an all-time high. Obviously, this higher revenue growth will have a very positive effect on deficit reduction. 

Even with this good news, there is a lot of hard work ahead to 

ensure our fiscal house is in order. I am optimistic that working 

together we can be creative and find solutions to the challenges we 

face in ways that will continue to strengthen our economy, meet 

our national priorities and serve the American people. 

Again, Mr. Chairman, I appreciate the Committee’s consideration 

of my nomination today and I look forward to your input and to 

your questions. 

Chairman GREGG. Thank you for your statement. Do you like to 

be called Ambassador or Congressmen or what is the right term for 

somebody who has had as many jobs as you have had and done so 

well at all of them. 

Ambassador PORTMAN. You know, it is interesting, I never really 

got used to be Ambassador thing. I would prefer rob, if you are 

comfortable with that. 

Chairman GREGG. I think we will stick with Ambassador, as a 

term of reflection of your success, which has been considerable obviously. And you have seen the Government from a variety of different angles. 

I am interested that you outlined some of the things that have 

been happening. There were some statistics that you did not mention that I think should be noted. For example, you are probably 

aware of this, but capital gains receipts last year were $30 billion 

higher than projections. Capital gains receipts this year are going 

to be $30 billion higher than projections. 

And when you see that type of revenue coming in as a result of 

the President’s policies on capital gains, you see a win-win situation where not only is the Government getting more revenues but 

people are out there recognizing gains and then taking those dollars and reinvesting them probably in a more productive way because they are taking out assets that have been locked up and investing them in assets which logically are going to give them an 

even better return. As a result the bottom line is you are going to 

create more jobs, more economic activity, and then again more receipts. 

So it is very, very positive. 

In addition, another number, you mentioned it, alluded to it, that 

individual income tax revenues are up about 10 percent. In fact, 

the vast majority that revenue is coming from the top taxpayers. 

I saw a chart a while ago, a couple days ago in I think it was the 

Post, that said how these tax rates affected different income 

groups. What it did not put in, they should put up another chart, 

is the taxes being paid by those income groups and the fact that 

we have seen a dramatic increase in the amount of taxes being 

paid by higher income individuals. 

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19 

There is a chart there that reflects that 85 percent of the taxes 

today are now being paid by people with incomes over about 

$80,000. The vast majority of that is coming from people with incomes over $180,000. And that reflects the fact that these folks are 

paying a higher tax because they are being more active. They are 

generating more capital gains activity instead of sitting on assets. 

In addition debt, and my colleague from North Dakota talks a lot 

about debt. But the publicly held debt, non-government held debt, 

is actually below the average of the publicly held debt as a percentage of GDP—which is the right way to value it rather than in dollar terms—throughout the Clinton Administration. The Clinton Administration average of publicly held debt was about 38 percent. 

Today it is about 36 percent and has been through this Administration. 

20 

So the stewardship of this economy, considering the cards that 

were dealt to this president, has really been rather extraordinary 

in that this president was dealt the bursting of the largest bubble 

in the history of the world, the Internet bubble, which was bigger 

than the Tulip bubble and bigger than the South Sea bubble. And 

when that burst, we should have had probably a huge recession. 

Instead, we had a shallow recession because we put in place tax 

cuts that worked. 

That hit was then geometrically increased by the attack of 9/11, 

was obviously dislocated this country in a long of a lot of ways, not 

the least of which was the fact that so many Americans were so 

viciously killed and injured. But in addition, the economy was vi- ciously attacked by that. So we did have a recession. And those re- flect, those revenues reflect the fact we went through a recession 

of the Internet bubble, and a recession of the 9/11 attacks. But be- cause we put in tax cuts which energized economic activity, we 

have turned that around. 

So I guess my question to you is do you not think that was pretty 

good policy? I mean, it is a tough question, but let me ask it? Tell 

us your thoughts on that policy. 

Ambassador PORTMAN. First, I thought your opening comments 

and the statement you just made were absolutely accurate in terms 

of what has happened. Senator Conrad talked about the projections 

in 2001 and that we were going to have a big surplus. That was 

a mere projection and I am glad to see that he does not believe, 

based on his comments about my comments at the time, that we 

should be viewing that as anything more than a projection. 

Unfortunately, what happened is this President found a reces- sion on his doorstep. Literally, the economy started to go down in 

2000, and 2001. In early 2001 we had a recession. And then as you 

say, we had the corporate scandals. We had the stock market bub- ble burst. Then 9/11, the ensuing war on terror, and of course more 

easily over $100 billion out of our Federal deficit has been added 

just by Hurricanes Katrina and Rita. 

These are big challenges. And despite all of that, what we have 

seen is not just a growing economy and growing jobs, but actually 

substantially increased revenues. 

You mentioned the capital gains increases and I will go back to 

your opening statement where you talked about the fact that we 

want to encourage people to take risk. Why? Because that encourages entrepreneurial activity and economic activity and therefore 

jobs and revenue. And so I think you are absolutely right about the 

capital gains changes that have resulted in more revenue coming 

in, as you say $30 billion more than projected last year. 

I will also say though, Mr. Chairman, if you look at what happened last year, we had a 14.5 percent increase in revenue overall 

which means $274 billion more revenue came in last year than the 

year before. 

This year we had predicted it would be about a 6 percent increase even on that relatively high 14.5 percent, which was the 

highest revenue increase in a couple of decades. We are seeing, in 

the first 7 months, that it is higher than that. 

Not to be one that relies too much on projections for the next 5 

months, but that increase over the first 7 months of this year has 

21 

been 11.2 percent increase. Again, that is a substantial increase. It 

means about $241 billion in additional revenue this year, should 

we continue to have this 11.2 percent over the next 5 months. 

This is substantial and it does help us to get the deficit numbers 

down. The deficit we projected in February, before I was involved 

in this budget process, will be substantially less thanks to the in- crease in revenue. 

So I think you are absolutely right. What has happened is that 

the tax relief was well timed to deal with the very serious chal- lenges that we faced. When you look back now at what happened 

since May of 2003, which is when all the tax relief that you passed 

was implemented, you see an amazing correlation between those 

tax cuts being implemented and economic growth, job growth, now 

over 5 million jobs created since that time period, and revenue in- creases as those tax cuts began to take hold. 

So it is a very positive story and it is a story that I think, for 

all of us, we should take the lesson that we need to do everything 

we can to continue to encourage economic growth. That means it 

would be, in my view, a great risk for us to raise taxes at this time. 

Rather we should be continuing what has been a successful process 

of encouraging investment, savings, and as you say, encouraging 

entrepreneurs to take risk and therefore growing the economy. 

Can I mention one other statistic that you did not mention but 

is implied in your remarks? That is what should be the take? What 

should be the percentage of our economy represented by taxes? It 

was mentioned by Senator Conrad at the outset and it is very in- teresting because if you look at the historical numbers on revenues, 

historically we see about 18.2 percent GDP represented by taxes. 

And this President, as you know, has been criticized sometimes by 

some saying that we are not paying enough taxes. 

My view is that it was very necessary to put the tax rates in 

place. As we have seen it has resulted in exactly the kind of eco- nomic growth and increased revenue we had hoped it would. But 

even as a percentage of the economy, I ran some numbers this 

morning showing that if we continue to have this relatively high 

revenue surge this year, and again it is a risk because we have five 

more months left in the fiscal year, but we will actually be above 

the historical average, barely, in terms of the percentage of the 

economy represented by taxes. That is extraordinary. No one has 

predicted that. 

If you look back in February, in fact, it was predicted we would 

be in the 17, I think 17.6 or 17.8 range. 

So what we are seeing here is, I think to address your opening 

statement and your question, is that the tax relief is working in a 

few ways. One is it is growing the economy. It is growing jobs. It 

is creating a better environment for all Americans. Working Americans are better off. Wages are up, as I said in my opening statement. 

But second, its impact on the deficit is actually going to be very 

positive this year, as it was last year. It is the only way, in my 

view, that we are going to get back to the kind of fiscal discipline 

that we all seek. 

Chairman GREGG. Thank you. 

Senator Conrad. 

28459.046

22 

Senator CONRAD. You know, sometimes I feel like I am in a 

surreal setting. When I hear you describe what is occurring as a 

great success, all I can tell you is I would hate to see a failure. If 

this is a success, I would hate to see what you would describe as 

failure. 

Here is what is happening to the debt of the country. Now the 

Chairman just wanted to talk about publicly held debt. But we all 

know that leaves out something pretty big. That leaves out all of 

the money that this Government under this Administration is borrowing from Social Security. Trillions of dollars, over $1 trillion so 

far, another $2 trillion to come. All of it has to be paid back. None 

of it is in the debt numbers he is talking about. it is all in this 

chart that shows the total debt, because this is what has to be paid 

back. 

This is not my view of a success. 

Let me go to the next one. 

Even more, I think, stunning, in terms of the fiscal pair of this 

Administration is this chart. It took 42 presidents 224 years to run 

up $1 trillion of debt held by foreigners, U.S. debt held by for-

28459.043

23 

eigners. This president has more than doubled that amount in 5 

years. 

This is not a success. This is a failure. It is a stunning failure. 

I would say to you, Mr. Portman, you said at the time this fiscal 

policy was adopted that it was going to lead to maximum pay down 

of debt. There is no pay down of debt going on here, as you well 

know. The debt has exploded. 

Let us go to the questions on performance of the economy. I 

think there was a reference that the economic performance has 

been extraordinary. Yes, it has been extraordinary. It has been extraordinarily bad. 

If you compare this recovery to the nine previous recoveries since 

World War II, what you see is this is the weakest of all and by a 

big margin, not even close. We have seen real median household 

income decline for 4 years in a row. That is a pretty good indicator 

of whether this strategy is successful. 

28459.047

24 

Let us go to the question of business investment. Business investment, the dotted red line shows the average of the nine recoveries since World War II. That is the dotted red line. The black line 

is this recovery. We are running 45 percent behind the typical recovery. 

28459.048

25 

Something is wrong here. Something is not working. 

Let us go to the next one. There was a mention of job creation. 

Well, you compare this recovery to the nine previous recoveries 

since World War II, look at the difference. The dotted red line is 

the average of the nine recoveries since World War II. The black 

line is this recovery. We are 6.5 million private sector jobs behind 

the typical recovery. Something is wrong. 

28459.049

26 

We have an economy that, in comparison to other recoveries, is 

under performing. Can you tell us why do you think we see these 

shortfalls compared to previous recoveries? 

Ambassador PORTMAN. Partly because the recession was not as 

deep, as Senator Gregg said. The fact is, Senator, I have spent the 

last year spending a lot of time, as you know, with trading partners 

around the world. Whether it is in Europe or Japan, they look at 

us and say how do you all do it? Our economy has grown over the 

last few years at twice the rate of our other G–7 partners, the 

other industrialized countries. 

Senator CONRAD. Let me just answer that and say to you, you 

know you can get amazing results if you write hundreds of billions 

of dollars of hot checks. You can get pretty good economic performance. 

It kind of reminds me of—— 

27 

Ambassador PORTMAN. You said it was a good economic performance. 

Senator CONRAD. Yes, you have economic performance that is utterly unsustainable because it is all based on borrowed money. 

I will tell you, this reminds me of a guy, in my previous life before I came here, I remember very well a guy that came to me and 

told me he was doing great. And I said to him well, share with me 

what your financial situation was. 

He had maxed out every one of his credit cards. He had completely tapped out his home equity line. He was borrowing money 

from his parents and his in-laws. And he told me everything was 

great. Everything was great for the moment. 

That reminds me very much of what is going on here because 

you have doubled the National debt. You have more than doubled 

the amount that we owe foreign countries. And I hear you saying 

everything is fine. 

We compare this recovery to the nine previous recoveries and we 

are way behind in job creation, in business investment, and revenue. By the way, if you look at revenue growth, we are lagging 

far behind the average of the previous business cycles. 

So your answer is the reason, as I hear you say it, the reason 

that we are lagging behind is because the recession was shallower? 

Why would that not—if the recession were shallower, why would 

we not have better performance than previous recoveries? 

Ambassador PORTMAN. Your question was you were comparing 

this recovery to other recoveries. And I was saying that the recession was not as deep as other recessions because, in my view, of 

the bold steps the President took in 2001 to put tax relief in place 

that helped us get out of not just that recession but the other challenges that we faced. 

Let me give you a couple of numbers that are statistics that I do 

not think we would quibble with. Last year we had a $274 billion 

increase in revenue. That is the largest increase in 24 years. We 

have 4.7 percent unemployment. 

I do not know how to compare that except to say that it is lower 

than it was on average during the Clinton years, the 1970’s, the 

1980’s or the 1990’s. We have created over 5 million new jobs. 

And when I talked about the U.S. being the envy of the other 

countries in the world, they have not seen that kind of growth or 

that kind of job growth. 

Senator CONRAD. They have not seen this kind of growth in debt 

either, have they? 

Ambassador PORTMAN. On the debt, as you know, you and I have 

talked about this, I could not agree with you more. You are absolutely right. The challenge we face, in my view, is unsustainability 

of our mandatory spending over time, which creates those charts 

that you put up, which show the stepping up of the debt. That is 

a huge challenge. 

And I hope that nothing that I have said indicates to you or any 

other member of the Committee that I do not see that as a huge 

problem that this Committee and the Administration and future 

administrations are going to have to deal with. And I look forward 

to working with you on that. 

28 

But in terms of the economy, my gosh, something is happening 

very positive in terms of revenue growth that is helping on the def- icit short-term. I do not think we should look at that and say that 

economic growth is not both important to the people we represent 

and to the deficit. And, we should take lessons for the importance 

of keeping that growth going while restraining spending in terms 

of the domestic discretionary issues we talked about and so on. But 

looking, as you rightly point out, and as you have said many times 

to me, not just in this time period, in prior discussions we have 

had, looking at that long-term issue which is how do we sustain 

that steady growth on the entitlement side, over 6 percent growth 

in Medicaid, over 7 percent growth in Medicare, Social Security, 

and how do we deal with that? 

And that is your internal debt issue that you talked about, as 

well. 

Senator CONRAD. My time has expired. let me just conclude by 

saying look, we agree on economic growth. That has to be the top 

priority. 

The grave question I have and the grave doubts I have about this 

strategy is that it is built on a mountain of debt. And that is 

unsustainable. I see this economic performance as not doing well 

compared to the previous recoveries since World War II. I think the 

statistics are very clear on that. 

So I welcome the opportunity to work with you. The place we 

clearly agree on two things, economic growth is the key to our future. And No. 2, that we have a situation long-term that is 

unsustainable. And together we have to face up to it. 

Chairman GREGG. Thank you. Senator Bunning. 

Senator BUNNING. Thank you, Mr. Chairman. 

Welcome Ambassador Portman. 

I am going to get a little more specific as far as things that OMB 

and the current budget address. America is blessed with an abundance of coal—that black stuff—that comes out of the ground. Coal 

is essential in producing electricity and helping our country achieve 

energy independence. 

President Bush highlighted this importance in his State of the Union Address and previously pledged $2 billion for this initiative. 

Yet this year the Department of Energy proposed nearly $50 mil- lion in budget cuts for coal R&D programs. 

As Director of OMB, will you work to fully fund these programs? 

Ambassador PORTMAN. Thank you Mr. Bunning. 

Did I not tell you he would ask me tough questions, tougher than 

anybody else probably by the end of the day. 

If confirmed, I am going to be looking into this, but let me tell 

you what I have learned so far, based on our conversation of a few 

days ago. One is that you are right, the budget this year for overall 

coal research is a reduction of about $33 million. But my understanding is that that reflects a drop in new funds for the Clean 

Coal Power Initiative, which has a backlog. The backlog, I am told, 

is over $500 million. 

Senator BUNNING. Only because of permitting, state permitting. 

Ambassador PORTMAN. But it is an unused balance that is that 

account. I am told that is why there is any reduction at all. I am 

also told that the commitment that was made will be kept. I cer-

29 

tainly would be the first to say that that is important to keep. Rep- resenting Southwest Ohio, as I did, and understanding the impor- tance of coal to our economy, and particularly given our current en- ergy issues, I concur with you. 

So I look forward, if confirmed, to working with you on this. I 

also agree with you that we need to be sure that we can use those 

hundreds of years of coal that is in the ground in a productive way. 

Senator BUNNING. Here is the problem: getting a site permitted 

for a Clean Coal Initiative or recycling of a plant and getting it per- mitted for clean coal technology to be introduced into that plant. 

If we do not get it permitted and you do not fund, through OMB, 

the Clean Coal Initiatives at full dollars, even though they are not 

used immediately, you stymie the growth in the initiative on clean 

coal and clean coal technology initiatives. So I urge you, I know there is a $500 million backlog of appro- priated funds currently. Many of these unused balances are obli- gated but waiting for permitting. 

Without additional funding, the next round of project solicita- tions will be delayed. So please have OMB maintain the future 

projects and fund them. Because if we do not get them funded, they 

will not get in line for the money. And if we do not get them fund- ed, we surely will not get the people asking for those new permits. 

TVA and SEC. I have been watching TVA for years, since I got 

to the Congress, because we have a big group of TVA customers in 

Kentucky inside the fence. We finally have regulations in place 

that the TVA had to file their debt, TVA had to file their debt with 

the SEC. The President’s Budget this year, for the first time, has 

required TVA to register their debt securities with the SEC, pro- viding the needed oversight of other utilities. 

I support the OMB proposal. Someone needs to keep a watchful 

eye on TVA. If you become OMB Director, will the OMB continue 

to push for more oversight of TVA? 

Ambassador PORTMAN. Again, Mr. Bunning, having not had the 

time to look into this issue closely, I am not sure I can answer your 

question in any detail except to say that I support what was in the 

President’s budget, which you just mentioned, which requires TVA 

to register its debt securities with the SEC. 

And I will certainly support that proposal and continue to work 

with you and others to ensure that we do have appropriate over- sight on TVA. 

Senator BUNNING. Maybe if we get a GSE law or regulator out 

somewhere between the Committee on the floor right now and get 

it to the floor, maybe we can do something else on TVA. 

Thank you very much. 

Ambassador PORTMAN. Thank you. 

Chairman GREGG. Senator Stabenow. 

Senator STABENOW. Thank you, Mr. Chairman, and welcome, 

Ambassador Portman. 

I enjoyed working with you in the House and in your current po- sition, and I am supportive of your move to this new position and 

wish you well. 

I do not know what is more difficult, trying to get other countries 

to obey trade rules or trying to deal with the current deficits and 

challenges of the budget. 

30 

But I do want to followup on some of the things that Senator 

Conrad said. First of all, I will start by saying when we talk about 

what President Bush walked into, the reality of what this Adminis- tration walked into was a $5.6 trillion projected surplus over 10 

years, which has now become the largest series of deficits in the 

history of the country. So that is what the president did. He magi- cally turned huge surpluses into huge deficits, which we are now 

having to deal with. 

What I want to speak specifically to, though, is a series of num- bers. You have talked about how things are going so well. I would 

like to present a different picture. I think it depends on who you 

are in this country as to how things are going. I represent Michi- gan. You come from Ohio. My guess is Ohio is lot like Michigan, 

in the Midwest, where folks really feel like they are in a fight for 

their way of life right now. They are not seeing big increases in sal- aries. 

In fact, the average weekly wage since President Bush has come into power has been $1.52. The average weekly wage has gone up 

$1.52, adjusted for inflation. So $1.50 basically as what we have 

seen the average person’s wages go up. 

But we all know gas prices are up, the cost of college tuition is up. We saw a $12 billion in interest to college loans which are 

being shifted over to the people that we represent now, so they are 

going to be paying more for college. Interest rates on home mort- gages are up. Lord knows health care costs are up. Anxiety about 

losing pensions, and I think that is immoral that anybody who has 

paid into a pension their whole life would lose it, but that is cer- tainly up. Costs for small businesses are up. 

So there is a very different picture here. 

On the other hand, if you are an oil company, if you are the former head of ExxonMobile, who was making $110,000 a day, 

which is more than the average person in Michigan makes in a 

year or I would guess Ohio or the majority of America. If you are 

ExxonMobile, you are feeling pretty good right now. You are feeling 

pretty great. 

If you have been making over $100 billion a year in profits, when 

we look at the oil companies, you are feeling pretty good. 

So I think it depends on where you sit in this country. I think 

the majority of people are feeling squeezed on all sides. And what 

we are seeing because of their costs going up, their jobs being in 

jeopardy, their health care, their pensions being in jeopardy, what 

is happening as it relates to trade and jobs going overseas. You 

have folks who really believe they are in a fight for their way of 

life. 

So what is the answer here? Well, we have a tax bill in front of 

us that will give somebody making $20,000 a year, $2, $2. That 

will not even buy maybe half a tank of gas, maybe two-thirds of 

the tank—I mean a gallon of gas, $2. 

If you are making $100,000 or less, you get less than $100. 

But if you are making over $1 million a year, you are going to 

get $42,000 or more back on the tax cut we are going to be voting 

on today. 

So what I am concerned about is the fact that middle America 

is being squeezed on all sides, and frankly split apart. So that the 

31 

rosy numbers you talk about, the majority of Americans are not 

feeling those rosy numbers. 

The question that I have for you relates to a provision in the tax 

bill right now, because there are ways for us to save money and 

there are ways for us to help with the deficit. One of those is a pro- vision that the Senate tax bill passed, we included in that was clos- ing loopholes for oil companies that would create almost a $5 bil- lion closing of loopholes that could be used to help pay down the 

deficit. And this was taken out in the final bill. 

So here we have the highest gas prices that people are paying 

right now, the highest profits by the oil companies, and we are 

going to continue to subsidize them, one of many subsidies which 

is in this tax bill which is about a $5 billion continued tax subsidy 

for them with no accountability on what is happening for con- sumers. 

I wondered if you might comment on that because we could find $5 billion for you to put on that deficit right now if we would tell 

the oil companies, who make more than anybody else right now in 

the country or the world, that we are not going to have taxpayers 

continue to subsidize them with that $5 billion. 

Ambassador PORTMAN. Thank you, Ms. Stabenow, and again I 

have enjoyed working with you on some of the trade issues and ap- preciate your leadership there. I think there is now plenty of work 

for us to do, as you said, on another issue which is our fiscal situa- tion. 

On the $5.6 trillion surplus you talked about, if I could restate 

what I said earlier, that was a projection. And it was based on eco- nomic growth, and it was based on not having some of the external 

factors that I talked about like 9/11, like the corporate scandals 

and the stock market bubble bursting. And what happened instead 

was we went into a recession. 

So I just want to make it clear, when I made my comments that 

Senator Conrad was talking about, or others made comments, as 

I am sure you did and others, based on that projection, it was a 

projection based on something that ended up not happening, which 

is instead, starting in 2000 and then a recession in 2001, our economy went down to the point that revenues were dramatically decreased. 

Senator STABENOW. With all due respect, though, I might just 

say is that where I disagree is with the policies that came after 

that, which have kept the hole getting bigger and bigger. 

Chairman GREGG. Senator, we have a lot of members who want 

to ask questions. We are going to have to stay to the 5-minute time 

limit. 

Ambassador PORTMAN. Let me just quickly say, I was just asking 

about the budget proposal. I think the President’s budget proposal 

does deal with some of these oil and gas incentives. And I believe 

that even in the legislation that you are going to be considering 

there are some incentives which are changed in ways that you 

would find helpful, from what you said. I think this one particular provision you talked about on the $5 

billion is not likely to be in the conference report. But I just do not 

know enough about these issues yet to be able to give you the specifics. 

32 

I will tell you I am happy to sit with you and talk about what 

is actually in the President’s budget with regard to some of these 

incentives because we do make some suggestions in the 2007 budg- et to change some of those incentives, to reduce some of those in- centives, and eliminate some all together, along the lines that you 

talked about. 

Senator STABENOW. Thank you. 

Chairman GREGG. Senator Crapo. 

Senator CRAPO. Thank you very much, Mr. Chairman. 

Ambassador, I welcome you here. 

I, too, have very fond memories of the time I served in the House 

with you and the friendships we have developed and look forward 

to working with you in this new position. I am glad the President 

nominated you and look forward to your prompt confirmation by 

the Senate. 

I hope to get to two questions. I have about a dozen but just a 

couple I would hope to get to in my 5 minutes. 

I want to go back, frankly, into the debate that we are having 

here among ourselves on the Committee about the policies of man- agement that the Administration and this Congress are pursuing 

as we face the challenges that we have as a Nation these days. 

I want to also reiterate that as we talk about what has happened 

over the last term, the two terms of this president, we have to re- member that when all of us were debating these issues at the be- ginning we did not know then that the stock market bubble was 

going to pop. We did not know then that 9/11 was going to occur. 

I believe that very few people can deny that 9/11 changed this 

country in many, many ways, not the least of which was economi- cally in terms of what it did to our budgets both in terms of spend- ing and in terms of revenue. 

So while we can debate these things endlessly, what I would like 

to do is come back to you to an issue that has been raised by Sen- ator Conrad and has been discussed to some extent, and that is the 

effort to blame the growth in debt on this president. 

I know that Senator Conrad has talked a lot about the debt and 

he has referred to the hot checks that this country is apparently 

issuing because we engaging in so much debt. And you have indicated that you agree that the growing debt that we are incurring 

in this country, as I do, is a serious problem. 

But what I would like to ask you to do is to talk with us a little 

bit about that debt. What is the major cause or causes or what are 

the major causes, in your opinion, of the mounting debt? And who 

is responsible for it? 

Ambassador PORTMAN. Thank you, Mr. Crapo, and I appreciate 

you giving me the opportunity to do that. 

One, the public debt, of course, is an accumulation of deficits. 

And this current debt we have, of course, reflects deficits not just 

in this administration but in all previous administrations. So it is 

an accumulation. 

We had one short period, as you know, you were part of this, a 

balanced budget in 1997 and going to 1999 and 2000 where we ac- tually reduced some of that debt, over $500 billion of it. So we did 

reduce some of it, not all of it, not nearly all of it. 

But the point is this is an accumulation. That is the public debt. 

33 

The internal debt that was talked about, or the governmental 

debt, would be debt that relates to these entitlement programs we 

talked about, primarily Social Security and Medicare. And those 

are the long-term issues that we addressed earlier. 

Again, I agree wholeheartedly with those on the Committee, in- cluding Senator Conrad, who believe we need to focus on the 

unsustainable growth there and the debt that is being built up in- ternally. 

With regard to the public debt, the historical average is about 

35.4 percent of our GDP. As Senator Gregg indicated, currently we 

are within that historical average. We are a little higher than that, 

as I see on my figures for this year. We may be a little lower than 

that coming up, but we are basically within that range. 

It was mentioned by Senator Gregg that during the Clinton years 

that percentage was higher. I do not have those data points in 

front of me here. 

But the point is our public debt, which is what most economists 

will focus on as the critical element because it can affect our econ- omy, including interest rates and inflation, is within the historical 

average. Should we have it come down? Absolutely. 

The way you get it down is you restrain spending and grow the 

economy, which is exactly what we have been trying to do. 

Senator CRAPO. In terms of spending, for those who would like 

to create the impression that we have an uncontrolled spending 

here, which I believe we do, is it not correct that we are approach- ing the point at which about 63 percent or 64 percent of the spend- ing on an annual basis is mandatory? Meaning it is either entitle- ment spending or interest on the national debt? 

Ambassador PORTMAN. That is roughly correct. As I understand 

the figures, roughly 20 percent for defense and homeland security, 

roughly 19 percent for so-called discretionary spending that is nonsecurity and non-homeland related, which would include the dayto-day operations of the Government. And the rest, just over 60 

percent, would be as you indicated sort of on autopilot. In a sense, 

it is the entitlement programs and it is payment on the debt. 

Senator CRAPO. And until this Congress will authorize the presi- dent to be able to submit a budget that addresses Medicare and ad- dresses Social Security, that is spending that is on autopilot at this 

point; is that not correct? 

Ambassador PORTMAN. That is correct. It takes a change in law. 

Again members of this Committee, as I said at the outset, are 

going to be absolutely critical to making those changes to enable 

not for us to cut anything. It is about reducing the rate of growth 

so that it is sustainable and doing it in smart ways, so that we are 

keeping our promises to seniors and others. 

And I believe, maybe I am too optimistic, Mr. Crapo, but I believe that we can do it. And we have time to do if we act now. If 

we wait too long, as Chairman Gregg has said, and wait until we 

are on the precipice as he has said, or as Senator Conrad has said, 

looking at the way the debt increases, that would be a major prob- lem for our economy and for many Americans. So we need to act 

and act now. 

Senator CRAPO. I have not had a chance to get to my next question but my time is up so I will yield back. Thank you. 

34 

Ambassador PORTMAN. Thank you, Mr. Crapo. 

Chairman GREGG. Thank you, Senator. 

Senator WYDEN. Senator WYDEN. Thank you, Mr. Chairman, and welcome, Mr. 

Ambassador. I have two questions, as well. 

As you know, the Administration wants to sell off hundreds of 

thousands of acres of public land in order to pay for rural schools. 

This proposal makes no sense because nobody thinks you ought to 

sell off your crown jewels to pay your operating expenses. 

Last week, before Senator Domenici’s Committee, Dirk Kemp- thorne, who is sort in your shoes as a nominee coming before us, 

said that he was going to back away from the Administration’s 

funding proposal for those rural schools. He said he would work 

with Senator Craig and myself to develop an alternative funding 

mechanism. 

I want to see if you will do a Dirk Kempthorne here, because you 

are the person who counts. We are very pleased about Dirk 

Kempthorne’s statement that he will not support that funding 

mechanism. I would like you to say what Dirk Kempthorne said 

last week, that you will work with Senator Craig and I for an alter- native. 

What is your view on that? 

Ambassador PORTMAN. First of all, I appreciated, Mr. Wyden, 

talking to me about this the other day. It sounds like, if confirmed 

by this Committee and the Senate, I may have some interesting 

challenges on my hands in terms of this issue. 

But as you and I talked about, it is important that we continue 

to provide funding that is provided in the budget, although as you 

know, originally this was to be transition funding. 

Senator WYDEN. That is not correct. There is no history that it 

was a transition. 

Ambassador PORTMAN. Well, it expired. And in the process of reauthorizing it, my understanding is the Administration was looking 

for offsets, which I think is reasonable. And the question is what 

should the offsets be? And because it has to do with Forest Service 

lands, I suppose they thought gee, it would make sense to do it 

within the Forest Service budget. 

That is what I have been told and there is a certain logic to that. 

The question is are these lands surplus lands and isolated lands, 

as some have said? Or are they, as you said, the jewels—or maybe 

not crown jewels but they are the jewels of the Forest Service system? 

I will certainly take a careful look at it. I committed to you to 

do that when I met with you. And I look forward to trying to work 

with you to find the appropriate offsets in this program. 

Senator WYDEN. I appreciate that. Please look at Dirk 

Kempthorne’s statement to the Energy Committee. 

Ambassador PORTMAN. I will now. That is very interesting. 

Thank you. 

Senator WYDEN. Because I want you to do a Kempthorne. That 

will give us a chance, on a bipartisan basis, to fund this program 

properly. 

Let me turn to an area that I think is particularly fruitful for 

bipartisan support, and that is tax reform. 

35 

To me, I want a tax code that gives everybody in the United 

States the chance to accumulate wealth. I want a tax code that is 

simpler and fairer. I have introduced a proposal that I think could 

be the basis of a bipartisan effort. It is called the Fair Flat Tax and 

it will save the Government, according to the Congressional Research Service, $100 billion—a modest step toward paying down 

the deficit. A simplified system, according to the Tax Advocate for 

the Internal Revenue Service, would save the American people billions of dollars on tax compliance. 

Where are we in terms of getting the Administration moving on 

a tax reform proposal that is simpler, gives everybody the chance 

to accumulate wealth in this country, and gets out these ridiculous 

expenditures we have for tax compliance? 

This year the American people spent more complying with their 

taxes than the Government spent on higher education. This is a 

disgrace. The President had a Commission but then the Administration just sort of vanished. And I would like to work with you all 

on what could be done on a bipartisan basis in this area. 

Ambassador PORTMAN. As I told you in our meeting, I applaud 

your efforts in this regard and your interest in it. Senator Conrad 

and I have talked about another issue, which is the tax gap, and 

the fact that our current system is not collecting all the revenue 

due, and there may be ways to reform the system to be able to do 

a better job in that, which is to the tune of hundreds of billions of 

dollars now. 

As you know, through my career I have been an advocate for tax 

reform and worked on a bipartisan basis to try to promote some 

major changes in our tax system. 

I like what you said about simpler and fairer. You also talked 

about, in essence, savings and allowing people to accumulate 

wealth which help our economy and is one of the issues we have 

with regard to our economy today. 

And the other one I would mention that you and I talked about 

is competitiveness, is to be able to compete in our new global economy, which is increasingly focused on competition as the world gets 

more and more integrated in an economic basis. 

So I look forward to working with you on that. My understanding 

is the President’s Commission has now given its report to the Secretary of the Treasury. The Treasury is analyzing the proposals 

and is going to make a recommendation to the President. 

So I think that is where the status is. But I think with the information we have from the Commission, with the work that has been 

done over the last couple of decades, I would love to work with you, 

with the Treasury Department and others on this. 

Senator WYDEN. My time has expired. I just hope that you can 

be a catalyst for speeding this up. I would really like to work with 

you on a bipartisan basis. I have talked with Mr. Bolton about this. 

I think there is a real chance to come up with something that could 

be seen like what was done in 1986, where Ronald Reagan got together with folks on a bipartisan basis and did something that 

really resembles my Fair Flat Tax Act. 

Thank you, Mr. Chairman. 

Chairman GREGG. Thank you. Senator Allard. 

36 

Senator ALLARD. Thank you, Mr. Chairman. I also would like to 

welcome Ambassador Portman to the Committee. I also had an opportunity to serve in the House and appreciated his leadership in 

working with him over a number of years. 

I have been working with you on trade issues as recently as this 

past week. And I think your capacity as United States Trade Ambassador, those responsibilities have been carried on very well. 

I look forward to continuing to work with you as Director of 

OMB. 

I have to say that I think the economy right now is experiencing 

unprecedented growth, particularly in light of some of the adversarial things that have been happening out here that could have 

really—any one of them separately could have driven our economy 

really down into the doldrums. We have a record number of Americans that are working. We have revenues that are coming into the 

Government at record levels. 

This is all a reflection, I believe, of the President’s economic policies. 

I do not think we should downplay those at all. I recall back in 

the late 1970’s, during the Carter Administration, when we had energy problems that were driving high energy costs. It drove this 

economy right into double digit inflation, double digit interest 

rates, double digit unemployment. 

We are facing a similar situation today with very high energy 

costs, but we are not seeing the economic impact that happened in 

the 1970’s, the late 1970’s. And I think this reflects the strength 

of the President’s economic and incentive growth package that he 

presented to the Congress and the Congress passed. We now have 

that package before the Senate, trying to get those tax incentives 

put in and extended out so that we do not have tax increases occur 

in what I think would be a very unfortunate thing to happen during this economy when we are experiencing the growth that we are 

having. 

My question that I have for you is that in the President’s past 

budget he had talked about the deficits, and right now our deficits 

are going down at a very encouraging rate. But he talked about 

2009 having the deficit cut in half. 

I wondered if you feel like we are on—are we meeting that goal? 

And how you feel about that personally? 

Ambassador PORTMAN. Thank you, Mr. Allard. 

With regard to the trade issues, I have enjoyed working with 

you. And as recently as this week I have still got my day job, which 

is U.S. Trade Representative, and I am very interested in trying to 

solve some of the issues we talked about, including the SOC issue 

and with regard to the China textile agreement. I appreciate your 

giving me some more input on that this past week. 

We are on track to achieve the President’s goal of reducing the 

deficit in half by 2009. If the spending restraints that we have been 

able to put in place over the last couple of years on the domestic 

discretionary side, non-homeland and non-defense, continue which 

I think is crucial, if the economy continues to grow as projected— 

and I say as projected having warned others that those were projections in 2000 and 2001 and they are projections now. 

37 

If revenues continue particularly to increase, as they have in 

2005, and in the first 7 months of 2006, we will achieve those tar- gets. 

In fact, if you look at the trajectory we would more than achieve 

those targets. Now that assumes we will not have some other 

major hits on the economy. As Mr. Crapo said, 9/11 was not just 

increased Federal spending which affected our deficit, but also re- duction of economic growth. But assuming that, we are on track. 

And we are on track because I think we are getting the message, 

all of us, that fiscal discipline requires two things. One is making 

tough decisions on spending. We have to continue to that. And sec- ond, do everything we can to continue to grow this economy. 

After 2009, and in those out years, we then have the baby 

boomers retirement beginning to hit the budget, and therefore our 

deficits, in more significant ways. So I do not want to leave with 

just assuming that we are on track to have balanced budgets for- ever. 

In fact, we face a very real challenge in terms of the 

unsustainable growth in the entitlement programs. That is some- thing that I look forward to working with you and other members 

of the Committee on. 

Senator ALLARD. The fact remains is the President’s economic 

package, built around tax reduction rates that would stimulate the 

economy, has worked. You have affirmed that in your comments 

and I thank you. 

Mr. Chairman, I see my time has just expired. 

Ambassador PORTMAN. Thank you, Mr. Allard. 

Chairman GREGG. Senator Sarbanes. 

Senator SARBANES. Congressman Portman, I join my colleagues 

in welcoming you before the Committee. I use the ‘‘Congressman’’ 

advisedly. Avril Harriman, who held many, many distinguished positions in our Government, always wanted to be called Governor 

Harriman. When asked about that, since he had held some very 

high ranking sub-Cabinet positions and so forth, he said in a demo- cratic society, the highest appellation is the recognition that comes 

from the people in choosing you for elected public office. 

Ambassador PORTMAN. Yes, sir. 

Senator SARBANES. Presumably, we will soon be calling you Di- rector. But I want to put some questions to you before we get to 

that stage. I have a number of them. I will try to be brief, and if 

you could be brief in response, maybe we can get them all in. 

Do you think it is appropriate and relevant, in judging the unemployment rate, to look at the labor force participation rate? 

Ambassador PORTMAN. I think it is one thing that should be 

looked at. I think the way we have measured unemployment over 

the years, through Republican and Democrat administrations alike, 

through payrolls also, the appropriate measure if we are to benchmark from past years. 

Senator SARBANES. I ask the question because the participation 

rate right now is about 66 percent. Before the recession it was 67.2 

percent. If you were to assume the same labor force participation 

rate, the unemployment rate today would be not quite 6 percent. 

So I think it is a relevant criterion as we are looking at the performance of the economy. If people drop out of the labor force, we 

38 

do not count them as unemployed. And a fair number of people do 

that if they are discouraged by job prospects and so forth. So I just 

wanted to add that. 

The next question I have, is it your intention as Budget Director 

to put the war on budget? How long are we going to go on with 

this fiction where we fund the war, now to the tune of some $280 

billion over the period of the war, off budget in emergency 

supplementals? Do you not think it ought to be on budget? 

Ambassador PORTMAN. Senator, you and I talked briefly about 

this in our meeting. And I was pleased, frankly, to see the 2007 

proposal from the Administration in February include, for the first 

time ever, an amount for the war in Iraq and Afghanistan. 

Senator SARBANES. I regarded that as a small down payment on 

honesty in budgeting, and I am just looking forward to what the 

future might bring. 

Ambassador PORTMAN. Well, I think the $50 billion will probably 

not cover the full cost. But it is a step, I believe, in the right direction. 

The difficulty, of course, is predicting what those costs will be. 

The budgets are put together about 2 years in advance and then 

about 9 months in advance presented. So it is difficult to know. 

None of us, with certainty, are going to be able to know what the 

amount is. So some supplemental funding will be necessary. 

Senator SARBANES. Let me ask you this question: do you recall 

any previous instance in which, in time of war, we cut taxes? 

Ambassador PORTMAN. I do not know the answer to that, Sen- ator. 

Senator SARBANES. I urge you to take a look. My understanding 

is there has not been a case where we are in a wartime context 

that we cut taxes. 

Given the way the tax cuts are weighted, very much to the upper 

end of the income scale, the consequence of that is that the people 

at the top are making no sacrifice in this war. And the people in 

the middle and on down are making a very substantial sacrifice, 

since the overwhelming number of the men and women who go to 

fight in Iraq and risk their lives and their limbs come from those 

categories in our society. 

So you have not only the inequity in terms of the tax structure 

but you have an inequity in terms of the burden being borne with 

respect to the war. And I think that ought to enter into the calculations. 

I want to ask you a question about the current account deficit. 

In 2005, last year, the current account deficit rose to the staggering 

figure of $805 billion. Of course, you are familiar with this because 

you have been the Trade Representative so it is an important part 

of your portfolio. That is more than 6 percent of GDP, over 6 percent. And so foreigners are financing our deficit to absolute record 

amounts and many have expressed a deep concern about that. 

Furthermore, a recent column in the Wall Street Journal said 

there is growing concern that foreign governments may decide for 

political reasons to reduce their appetite for U.S. dollars. The argument is always made, they will not do it for economic reasons because it is counter to their own economic interest. 

That is not an altogether empty argument and I recognize that. 

39 

But this went on to say, and I quote the column, ‘‘Economists 

speak in particular of the danger that China, in defending its vital 

interests, Taiwan’s status or threats to a key energy providing 

friend like Iran, might significantly reduce its buying of U.S. treas- uries or sell billions of dollars. Politics in such a case might prompt 

China to overlook the damage it would do to its biggest overseas 

market by showing the muscle to drive the dollar value down, U.S. 

home mortgage rates up, and demonstrate the limits to American 

clout.’’ 

How serious a problem is this? 

Ambassador PORTMAN. If I could address those two last questions 

quickly, the current account deficit is driven by a lot of factors, 

macroeconomic factors. Significantly, it is our economic growth, as 

you know. More recently it is oil. In particular, about 60 percent 

of the growth last year, as you know, in our trade deficit, came 

from increased prices of energy, which is foreign oil almost exclu- sively. 

Second is the way in which the U.S. has driven economic growth 

globally, along with China, over the last several years. This has led 

to us consuming more and, in fact, other countries, Japan and Eu- rope in particular, have not grown as fast, meaning they have not 

been absorbing the imports we have. 

Finally, it is a structure issue with the way our economy works 

as compared to some other economies. Our savings rate, we talked 

about earlier, is relatively low, particularly our personal savings 

rate. Whereas in other countries, China as an example, over 50 

percent personal savings rate. Here our personal savings rate is 

below zero now. So there are a lot of factors that affect it in terms 

of the impact. 

I agree with you there is a concern that at some point, if this im- balance is not corrected, you could have an issue. What we are hop- ing for, of course, is a soft landing not, as that column might indi- cate, a harder landing. And I think that is the more likely scenario. 

Why? Because it is in their interest both economically and in 

terms of keeping stability in our economy with the large amount 

of investment those countries and their investors have in the 

United States. As long as we continue to grow the economy, as long 

as we continue our unique political stability in this country, we will 

be a good place to invest. 

So it does not concern me particularly, in terms of the possibility 

of that hard landing. But I do think we need to start working toward the soft landing. 

As you see, with Japan beginning to grow this year, and some 

countries in Europe beginning to grow, and some changes in terms 

of the policies that China at least is saying that they are advocating, some of those factors are now in place for a softer landing. 

The one that I would like to see more of here, obviously, is increasing our savings rate. And that goes to some of the issues we 

are addressing today on the public side, as well as the personal 

savings rate. 

Just quickly on taxes, Mr. Sarbanes, not a lot of concern has 

been raised here about the tax relief, and particularly the relief on 

the floor this week. The only point I want to make to your point 

about who should be bearing the burden, particular during war-

40 

time, is that actually the wealthiest taxpayers, whether it is the 

top 1 percent of taxpayers, the top 5 percent, or the top 10 percent, 

are paying a bigger burden of the taxes, a bigger percentage overall 

than they were before the tax cuts were in place. 

Why? Because the tax relief included, as you know, the Child 

Tax Credit, the 10 percent bracket, and other relief that went pri- marily to the middle income—— 

Senator SARBANES. Of course, they are realizing a bigger share 

of the income, too. It is like Willie Sutton. He went to the banks 

because that is where the money was. You have had a marked con- centration of income and wealth at the top of the scale, so when 

you cite these figures that they are contributing more in revenues 

you have to keep that in mind. I mean if they had all the revenues, 

they presumably would pay all of the taxes. 

Well, my time is up. I do, Mr. Chairman, look forward to further 

exchanges with soon-to-be, I think, Director Portman. And I wel- comed his statement at the outset that he looks forward to having 

open lines of communication with the Congress, which I think is 

extremely important. 

Thank you. 

Ambassador PORTMAN. Thank you. 

Chairman GREGG. Thank you, Senator. 

Senator DOMENICI. Senator DOMENICI. Senator Sarbanes, let me just say I listened 

attentively to your questions and I commend you on the probative 

value of the questions, very interesting and to the point questions 

that you have asked today. 

The one on who is the work force, what part of the work force 

is seeking work, I just wanted to suggest I have been wondering 

about that myself, but from a different point. It would seem to me 

that there may be a growing percentage of the American popu- lation that just does not seek work period. And it may be bigger 

than we think, if you understand what I am saying. 

It is because of what is going on in this society. I think whatever 

the percent was, I think it is getting bigger of those who just do 

not seek work in the country. They are not counted anywhere in 

the numbers you have been referring to, and I think your questions 

were very probative. 

First, let me commend you on this new job. I came almost singularly to look you over and see if you were really sane. 

Ambassador PORTMAN. I wonder myself sometimes, Senator. 

Senator DOMENICI. Why in God’s earth you leave the wonderful 

safety and accomplished potential job you had to take this one, but 

everybody says that you are just that kind of person. From what 

I have heard so far, I think that is correct. And I commend you for 

the courage to take the job. 

It is a tough job, no matter how you cut it. It is very difficult because the American budget is made up of untouchables that you 

have to continue to explain away. Whatever we call them, they are 

untouchable. 

I would like to talk a little bit about something that I think is 

very important that is waiting here in the wings and that was dis- cussed in the President’s State of the Union Address. He talked 

about a number of very exciting things, but one that it just seemed 

41 

to me he threw in. And that was a statement about a commission 

to be appointed to look at and recommend to him and the Congress 

solutions to the problems of Medicare and the problems we have 

with our over-promises to the people versus the real expectations 

that you and I know should be there. 

I would like to ask you do you not think it would be good for the 

President to get on with pursuing that bipartisan commission and 

get it appointed so that it can be referred to as looking at this 

major, major problem of the entitlements on the health care side 

and studying them and referring, in a bipartisan way, some real 

solutions to us as soon as possible? 

Ambassador PORTMAN. Mr. Domenici, you are absolutely right, it 

is critical. You and I talked a little bit about this during our meeting. And I told you that you have been at this longer than I have, 

and I asked your advice on what the proper form should be. 

The critical element is that, as I said earlier, we address the 

unsustainable growth in these programs not by cutting them but 

by reducing the rate of growth. And we do it in a bipartisan way. 

Because in my experience, and I think you confirmed that in our 

meeting, that is the only way we are going to have success here, 

both in getting it through the process but also in having it be sustained over time. 

The commission was something that the President felt strongly 

about. he also talked about it including Members of Congress, 

which I like, because I have always thought that these commissions are more productive where Members of Congress are directly 

involved, those who have a stake in it and therefore can move it 

through the legislative process. 

My understanding is there is a consultation process going on 

right now with leadership on both sides of the aisle in both houses, 

and it has not been named yet. But I think there is a good faith 

effort going on to determine who the members should be and what 

its scope might be. 

But whether it is a commission or whether it is a group of you 

who, with the right experience and clout, including members of this 

Committee, and good will are willing to look at it, I think it is abso- lutely critical. 

And I intend to, in my role, if confirmed, be encouraging from the 

administration side that we engage directly with you on that crit- ical issue. 

Because if you look at the budget, as I said earlier, we are making good progress in the short term, some would say even in the 

mid-term. But the long-term continues to be unsustainable. That is 

because we cannot continue to have this high growth, as you said, 

particularly in the health care area, but also in Social Security. 

This is something that we all now recognize on a bipartisan basis 

and we need to deal with it. 

Senator DOMENICI. Let me once again repeat to you here and, 

publicly for the record, state that I see no solution to the problem 

unless it is done in a bipartisan manner. And I do not see a bipartisan development unless it is done in some way by Presidential 

commission. 

We cannot get it done here. The House cannot get it done. We 

are in a box where the first party to speak on the issue of changing 

42 

significantly Medicare, so as to save money and deliver what we 

can afford rather than to leave out there the expectations that cannot be paid for, the first party that does that is dead at the next 

election. At least that is what is perceived. 

So it has to be done in a bipartisan way.And this Senator sees 

no way, short of something like this commission. And so I urge you, 

in your position as OMB Director, to push vigorously for that commission to be appointed. You have just stated publicly, and I am 

glad to hear it, that the White House is engaged in trying to put 

it together. Is that a pretty good assessment of what you said? 

Ambassador PORTMAN. Yes, sir. 

Senator DOMENICI. They are trying to see who should be on it 

out, how do you put it together in a way that is satisfactory? 

Ambassador PORTMAN. That is my understanding. 

Senator DOMENICI. Because if you do not put it together in that 

way, then everything I said about its potential is also for naught. 

It cannot be something Congress disagrees with. 

So the chairman, whoever it is, is going to be a very powerful 

person. But Congress is more or less going to have to say we concur, or he will be engaged in a battle from the beginning. 

I have been through this where you attempt to make changes. 

And let me tell you it gets to the point where you cannot put up 

your hand before the other guy on a change. We even invented 

words to describe what that was. I invented one called the simultaneity test, the simultaneity test. We had to vote on a change in Social Security and everybody had to see your hands at the same 

time. 

So that commission is going to have a tough job. The sooner they 

get started the better. 

We are doing more than a good job on the domestic programs 

under this Chairman. We are on a path on the domestic spending. 

In my opinion, that is almost not sustainable it is so vigorous, in 

terms of the reductions and the restraint. And I say that publicly. 

The domestic programs that are controllable are being controlled, 

in spite of all the talk about us wasting money. They are being controlled in a way that if the American people could just get the overall message, they would be proud of us, proud of the way this Committee has helped do that. 

But that is not the issue. Because we can do all of that and still 

end up with this mounting debt and say well we have everything 

under control. What happened? 

Well, Medicare, Medicaid, Social Security and other entitlements 

related principally to pension-type activities are just commitments 

in the out years, in the future years, that we have over committed 

compared to the available resource. That is what is showing up 

there as that gigantic overage. 

I just want you to know that many of us understand it. We are 

empathetic. We want to help you. It just cannot be done, it seems 

to me, unless we do it through this commission. And I urge that 

we do that quickly. 

Thank you. 

Ambassador PORTMAN. Thank you for the counsel. 

43 

Chairman GREGG. Thank you, Senator. Those are very wise 

words. I know the Administration will listen to them, I would hope, 

and is listening to them hopefully. 

Senator MENENDEZ. Senator MENENDEZ. Thank you, Mr. Chairman. 

Ambassador, welcome, and I enjoyed the working relationship we 

had in the House. And I think you are well on your way toward 

moving to this new position and we look forward to having that 

same type of attitude you brought to the House that while is strong 

partisan in some respects, is also reaching out to the other side. so 

we look forward to that in your role as the OMB Director. 

I have two specific lines of questioning. 

One is OMB utilizes the Program Assessment Rating Tool as a 

way to assess the results of discretionary programs and helping to 

achieve better results. There is no equivalent mechanism to look at 

the effectiveness of tax expenditures, which are an increasingly 

large revenue loss, $872 billion in the 2007 President’s budget. 

Given our fiscal climate that we are looking for ways to cut the 

deficit and cut unnecessary or ineffective spending, and considering 

the countless tax provisions Congress has created, I am wondering 

if you support or will support as the OMB Director using that same 

PART system to assess tax expenditures? 

Ambassador PORTMAN. That is a very interesting question and 

not one I have thought about honestly, Bob. 

The program you talked about, what you call the Program As- sessment Rating Tool, as you know is a way to rate the effective- ness of programs. It is not perfect because it does not look at 

whether it is a Federal role or not, or how important the Federal 

involvement ought to be. But I think it has been very helpful, from 

what I can understand. 

Applying that to the tax side, which I guess would be something 

the Treasury Department would have the expertise in, not OMB, 

I guess would be looking at not performance in a management 

sense but performance in an economic sense. 

Senator MENENDEZ. GAO, in its report last year, said that it rec- ommended that the Director of OMB, in consultation with the Sec- retary of the Treasury, take that has one of four actions. I certainly 

think that I would urge it to your consideration. 

Ambassador PORTMAN. I will take a look at it. 

Senator MENENDEZ. Because as I read your statement upon accepting the nomination as the OMB Director, I think one of the 

problems with what you said is that there is a significant part of 

the equation you did not consider. I think it is a false paradigm to 

simply talk about spending in entitlement but not talk about the 

fiscal picture, as well. 

And when you do not automatically include that, then I think 

you are undercutting the ability to truly dig into both the deficit 

and the debt, which I think are the most challenging parts the 

country has to meeting its long-term and short-term needs. 

The question is who is this economy working for? Even if we ac- cept the statements of our colleagues about this economy, who is 

this economy working for? If you talk to families in New Jersey, 

they will tell you that they are treading water just to keep their 

head above it and to be able to try to make ends meet. 

44 

So in my mind, we have to look at the effectiveness of tax spend- ing, as well. We extend tax breaks that are not even expiring, and 

yet we have a vast middle class in which we will put a patch on 

the AMT, 15 million people in this country, who are at the very 

core of the underpinning of this Nation’s economy by virtue of the 

middle-class efforts that they promote. 

So it seems to me that that has to be a big part of the equation. 

And PAYGO provisions, which seem to be have been rejected 

here, something that I know when you were in the House you were 

a big supporter of. I would assume that we would hope to see those 

again, and talk about fiscal responsibility, something that has been 

jettisoned, in my mind, by the majority. 

And second, I looked with great interest on you talking about 

greater transparency in budgeting. If we talk about transparency 

in budgeting, it seems to me that the President’s budget for 2006 

and 2007 did not provide details for program funding beyond the 

immediate budget year, which is a break from past Presidential 

budgets. 

Yet when OMB documents surfaced and they were taken by 

some public entities to do a vetting of, under those projections 

there are some very deep cuts that some question are either so se- vere that they will affect the very fabric of the essential programs 

in our society or really not very serious. 

So I just want to ask you, under those projections over the next 5 years, domestic discretionary programs would be cut $183 billion, 

meaning that higher ed would be cut by nearly $16 million, ele- mentary and secondary education by $18 million, veterans benefits 

by $10 billion, and so on. 

Is that the Administration’s intent, to pursue those cuts in that 

way? Is it your interpretation that these are to be taken seriously? 

Ambassador PORTMAN. Mr. Menendez, I am not sure what you 

are referring to in terms of the greater transparency that was pre- viously provided. I will look into that. 

In terms of the 5-year versus 10 year, maybe that is part of the 

concern that you are raising. I understand that during the Clinton 

Administration for a short time there was a 10-year projection but 

that typically it has been 5 years. And we have found that these 

projections—— 

Senator MENENDEZ. Actually, the President’s budget for 2006 

and 2007 do not provide details for program funding beyond the 

immediate budget year, beyond the immediate budget year. 

Ambassador PORTMAN. You are talking about the second through 

fifth year. 

Senator MENENDEZ. Some of us believe in 10 years, but 5 years 

might be a good starter to look at the real results of some of these 

cuts along the way. 

Brian Riedl at the Heritage Foundation, not someone who is 

loath to necessarily be of my view all of the time, takes the view 

that in fact the figures should not be taken as serious. 

So the question is, as we are talking about this debt, and I will 

close up on this, the reality is there should be transparency in 

budgeting. And it should start with the Administration who, in the 

first instance, moves the budget. There needs to be long-term opportunities to understand the long-term consequences of the presi-

45 

dent’s suggested cuts. And you need to put tax spending on the 

table, as well, if you want to be intellectually honest about where 

we are going on the debt. 

Thank you. 

Chairman GREGG. Thank you, Senator. 

Senator ALEXANDER. 

Senator ALEXANDER. Thank you, Mr. Chairman. 

Mr. Ambassador, thank you for joining us. I look forward to 

working with you and appreciate your service. 

Just one comment about Senator Domenici’s comments and the 

frequent comments about Medicare and Medicaid. 

We have to get Medicare and Medicaid under control. That is 

where the spending problem is. But it seems to me that this commission that the President is working on appointing somehow has 

to also look at transforming health care policy before we start figuring out how to restrain growth in spending. Because if we restrain growth in spending on the old model, it might not work. 

I do not know whether that is part of the goal but I want to observe that. 

What I want to ask you about, though, is a different subject upon 

which we seem to agree around here, and that is the subject of 

helping our country keep its edge in science and technology so that 

we can keep our good jobs from going to China and India and other 

places. We have a remarkable economy in the United States and 

most studies show that since World War II 85 percent of our 

growth in per capita income have come from advances in science 

and technology. 

But it was as a result of a budget hearing last year that some 

of us asked the National Academy of Sciences to tell us exactly 

what we needed to do to keep our edge in science and technology. 

Because we could see that if we continued to grow with 

unsustainable Medicare and Medicaid that we would not make the 

investments in engineering, education, science and research to fuel 

this economy. 

In other words, if we spent all of our money on war and welfare 

and debt and Medicare and Medicaid, we would not have an economy to support these urgent needs. 

The Academy did a tremendous job with a report from Norm Augustine and others. And they came back with 20 specific proposals. 

And there were other proposals around. Much of this work has 

been going on for quite a while, as you well know. But there is a 

consensus now. We have a consensus document, the Augustine Report, written by the National Academy of Sciences and Engineering, Institute of Medicine—IRS 20 recommendations are broadly 

supported across the country. 

In the Senate we have a consensus, 70 Senators have sponsored 

legislation that fairly closely resembles the PACE recommendations, 35 Republicans, 35 Democrats, including Senator Frist, the 

leader, and Senator Reid, the Democratic leader. It is hard to find 

anything else around here about which there is that much consensus. 

The President’s budget was very generous toward this idea, and 

he proposed his own American competitiveness initiative, for which 

46 

I give him great credit, exactly the kind of Presidential leadership 

that we need for our country. 

According to my figures—and he recognized the need. 

For example, the proposal would increase Federal funding for re- search. It would provide fellowships to grow more of our own sci- entists. A Nobel Prize winner told me earlier this week that he just 

hired his postdoctoral students. He did not hire a single 

postdoctoral fellow who was not from another country. University 

of North Carolina, over the last 5 years, has graduated 9,500 teach- ers. Three of them have been physics teachers. So we are not grow- ing our own scientists and engineers. 

I am now coming to my question. The President has done a ter- rific job here, taking the lead. His budget has about $6 billion, as 

I see it, for a competitiveness initiative. That is a lot of money in 

a tight budget. About $4.6 billion of it is for the research and devel- opment tax credit. 

The PACE recommendations, which we support, have a little more than that, $8.8 billion in the first year. We set aside the ma- jority of that, too, for the Research and development tax credit. So 

in the area of Federal expenditures for the research and education 

and energy, we are about $2 billion apart. 

I would describe this as having gotten the ball down to the red 

zone, within the 20 yard line. And we need your help to help get 

it passed and help find the money in the rest of this year. 

So my question is what will you be doing to make sure we prop- erly fund the President’s American Competitive Initiative and the 

recommendations of the Augustine Commission, so we can meet 

these urgent needs in this year? 

Ambassador PORTMAN. First, Senator Alexander, if I could say 

your leadership in putting together a bipartisan group of members 

and then a nonpartisan group of experts is one reason you see 

these budget numbers. This is in the context of a budget proposal 

from the president in this general area, which is discretionary 

spending that is not homeland or defense spending of a minus 0.5 

percent, in other words below a freeze. 

We think that is necessary to keep spending under control, but 

we also think it is important to prioritize key programs. And that 

is why there is an increase in the American Competitiveness Initia- tives, which are entirely consistent, as I look at them, with the 

Gathering Storm Report that you shared with me that came out of 

this group of experts led by Chairman Augustine, and the PACE 

legislation that you now—you did not say how many cosponsors. I 

understand it is—— 

Senator ALEXANDER. 70. 

Ambassador PORTMAN. —the majority of the Senate. 

So you have moved this ball down the field substantially. That 

red zone, it is always hardest to move it within the red zone. But 

you should be receiving a lot of credit for where we are in terms 

of prioritizing, as you say, science and technology and being sure 

America has a competitive edge there. 

I will take a look at this. If confirmed, I will be working closely 

with you on it. One of the issues you raised with me was the R&D 

tax credit being made permanent and how that compares to some 

of the other initiatives you have talked about. 

47 

One of the concerns, honestly, that I have heard as I have looked 

into this even since our conversation is the issue of creating new 

programs when in the Department of Education, which you know 

better than anyone, there are a lot of programs that do not meet 

some of the effectiveness standards that we talked about earlier, 

whether it is a PART analysis or other analyses. 

So there is some concern about creating new programs at a time 

when we are trying to figure how to consolidate and make more efficient the programs that we have. 

But there is a substantial increase in the budget for these areas 

that are, again, entirely consistent with where you are headed. And 

I look forward to working with you going forward on that. 

Senator ALEXANDER. Thank you. 

Chairman GREGG. Thank you. 

Senator MURRAY. 

Senator MURRAY. Thank you, Mr. Chairman. 

Welcome, Ambassador Portman. And we appreciate your willingness to take on this tremendous responsibility. 

As we told you when we met, I really appreciated your excellent 

leadership where you are now. We will miss you there. But I hope 

that we can continue to rely on your knowledge and openness and 

in the new role and wish you the very best. 

You certainly are taking this on at a very challenging time and 

I want to share some of the concerns that I heard Senator Sarbanes allude to, in terms of continuing to see budgets, as I have 

said many times, that do not reflect the true cost of the war or the 

tax cuts. I am deeply concerned that we seem to be governing by 

emergency supplemental, which I think is a dangerous way to go. 

And I hope that we get, from the Administration, budgets that 

really reflect the expenditures that we are having today. 

I also just will say I am concerned that we are just focused solely 

on the earmark as a way of walking us out of this debt. I think 

that is not going to get us there. And I hope that we look at a much 

more fiscally responsible budget, with real costs, coming from your 

agency. 

Having said that, let me focus on a national issue that resides 

in my home State, that of the Hanford site, which we had a chance 

to talk about when I met with you. But I wanted to reiterate it. 

I have been working on Hanford for 13 years. I have worked with 

a number of OMB Directors and Energy Secretaries, every one of 

them who come and see this financial plan as a way to solve other 

problems. 

As I told you, we have a radioactive plume that is moving into 

the groundwater and toward the Columbia River with a very complex funding that is in place that we need to keep in place because 

of the danger to not only the people in the region but to the entire 

country if we do not get that solved. 

I just wanted to ask you a personal request, that if you see anybody in your agency come forward with a proposal to rescind funding for Hanford, will you please contact me so that we can talk and 

your agency can be aware of the significance of that before we see 

it publicly? 

Ambassador PORTMAN. Thank you, Senator. 

48 

I did appreciate our opportunity to visit on this and some other 

issues. And I told you at the time that when I was in Congress I 

had the opportunity to work a lot on a smaller facility, but an im- portant one, at Fernault, where we were able to expedite the clean- up and save the taxpayers billions of dollars. These costs are tre- mendous. They are a huge burden on the budget. But this is a re- sponsibility for the Federal Government. 

As you know, the Hanford site in this 2007 budget receives an 

increase. Overall the environmental management budget is reduced 

because of some of these cleanups, including Fernault. But there is 

a substantial increase here. So far you have been very persuasive. 

It is an 8 percent increase above the 2006 level, again in the con- text of the part of the budget that overall is under a freeze. 

So my understanding is that the cleanup—— 

Senator MURRAY. Right, and I am most concerned about the VIP 

Plant because it is a complex spending plan that has been in place 

that we talked about. But I just want to make sure that we are 

on track. 

Ambassador PORTMAN. It continues the money for the Hanford 

waste treatment plant, I think which is one of your concerns. 

Senator MURRAY. Let me ask you about funding for the VA be- cause we faced a very serious $3 billion shortfall last year, as you 

well know, and had to go through a lot of work here in Congress 

to make that up at a time when we are asking young men and 

women to service overseas as well as seeing an increasing number 

of veterans who are facing this. 

I am positive that that shortfall was due to the fact that we were 

not looking at realistic projections to our service members who are 

now accessing the VA. And I wanted to find out from you what we 

can expect when it comes to making a VA budget based on real 

numbers and real expectations? 

Ambassador PORTMAN. Thank you. 

Again, I do not pretend to know all of these issues yet. But I do 

believe that there has been a change in the 2007 budget. I think 

you see it reflected in the numbers, which is that OMB is now not 

just working with but in agreement with the actuaries at the VA, 

which apparently was not always the case, in terms of coming up 

with a more realistic model showing, I assume, increased utiliza- tion. And so I think you will find that the resource projections have 

been improved. 

Senator MURRAY. I would just ask your personal attention to that 

because we do not want to get back to that point again. So I hope 

that you can focus on that. 

In my last few seconds I am going to ask you a question I am 

positive you do not have the answer to but I hope you can get back 

to me. 

That is because for the past of 5 years I have been working to 

try and ban the production and importation of asbestos in this 

country. We still allow asbestos to be used in many products. And 

we are now looking at billions of dollars in Federal liability to bail 

out that industry. 

OSHA and EPA have been working really hard to implement 

some workplace safety and indoor quality standards to reduce the 

exposure of asbestos and their efforts have been hindered so far by 

49 

OMB. They are trying to deal with this very serious public health 

threat. 

And I would like you to get back to me if you could. If you can 

look into this issue and let me know what is holding up, in par- ticular, the publication of the OSHA fact sheet at EPA. I under- stand that that is being held up at OMB. It is a critical health 

issue in this country. 

And I want to find out if you can provide me with information 

on when EPA is going to be sending their brake mechanic guidance 

around for review as a part of that, as well. 

So if you and your staff could get back to us, I Would really ap- preciate it. It is a serious health issue in this country. 

Ambassador PORTMAN. Thank you, Senator. 

If confirmed, I look forward to working with you on that, too. 

Senator MURRAY. Thank you very much. 

Chairman GREGG. Thank you, Senator. 

Senator SESSIONS. 

Senator SESSIONS. Thank you, Chairman Gregg, for your leader- ship and your effort to make sure that we manage the taxpayer 

moneys wisely. 

Mr. Portman, you are moving into a difficult spot. But I think, 

based on what I hear about your reputation and what your col- leagues have said about you in the House, how well you performed 

as a Trade Representative, and the bipartisan respect that you 

have engendered, I think you are a good person for the job. 

It certainly looks to me that you will not have any serious opposi- tion to your confirmation. And we look forward to working with 

you. 

As a matter of perspective, of course OMB prepares the budget 

for the president, and that comes to the Congress. You, therefore, 

coordinate with every Federal agency and department to review 

their budgets. And you do have an opportunity and play a key role 

in containing the growth of spending and management. I believe 

you are committed in that area. 

Let me ask you this: Tell me what were the latest numbers that 

just came out showing an increase in revenue, projected revenue, 

for the U.S. Treasury? 

And then I would like to ask you a followup question about that. 

Ambassador PORTMAN. My understanding is Treasury just issued 

a report saying that the first 7 months, through as I understand 

the first week of May, there was an increase in Federal revenue 

over last year of 11.2 percent. 

Last year, as you know, was 14.6 percent increase in revenues, 

which is a substantial jump. In fact, in absolute terms, the biggest 

increase in Federal revenue in 24 years. So this is an increase even 

above last year’s relatively high increase. 

Senator SESSIONS. So it would be 11 percent on top of 14 percent, 

which will really be more than 25 or 26 percent over 2 years. 

Ambassador PORTMAN. This is again to caution the Committee, 

this is the first 7 months of the year. So we still have 5 months 

left to go. 

Senator SESSIONS. What I would like to ask you to state for us, 

should we feel great about that? I think we should. Should we 

therefore assume that we can spend more money? Or should this 

50 

not give us encouragement that if we contain spending and stay 

disciplined, we can make more progress on reducing this deficit 

than a lot of people have projected? 

Ambassador PORTMAN. I like the latter option a lot better. We 

should not look at this as an opportunity to spend more. I think 

we have made that mistake. I think we made it when I was in the 

House in the late 1990’s and early part of this decade, and we can- not afford to do that. The last year of the Clinton Administration, 

we had an increase of 15 percent in our domestic discretionary 

spending. 

That cannot be the reaction of Congress or the Administration to 

this increased revenue. Rather it needs to be what many members 

have talked about here, which is keeping our fiscal belt tight and 

reducing these deficits and eventually reducing these debts and 

then dealing with our long-term issue of entitlement. 

Senator SESSIONS. I could not agree more. To repeat, we are in 

a position where we can make a real dent in this deficit if we stay 

on course and hold our spending down, and we should be proud of 

that. 

I am looking at potential legislation that would authorize the 

president to effect efficiencies in various departments, in every department. It may be limiting that number to 2 or 3 or 4 percent, 

and requiring or allowing the president who affects those efficiencies to pay that down on the national debt. 

Right now some agencies feel like every dollar that is authorized 

and appropriated by Congress they must spend. And if they do not 

spend it, somebody else will. 

Do you think that might encourage the various agencies to be 

more responsible in creating efficiencies? 

Ambassador PORTMAN. Senator, I think it is an interesting proposal and I am happy to look at it further. You did share a copy 

of that with me yesterday, which I appreciated. And although not 

confirmed, I took the liberty of sharing it with the OMB staff. 

I think you are right, that every agency and department of gov- ernment, and I am coming from one right now at USTR, we have 

our annual budget and go through this process, needs to look at 

ways to save on the administrative side or you say the overhead 

side, but also to have the proper incentive in place so that there 

is an incentive to look at these efficiencies rather than an incentive 

working the other way, which would be to keep the funding, to ensure perhaps that you have adequate funding in the next fiscal 

year. 

I like the idea of creating the kinds of incentives to encourage 

that the taxpayer dollars are spent as wisely as possible. 

Senator SESSIONS. And having been in the Congress and now assuming this new job, do you feel like your life could be made easier, 

Congress’s life could be made easier, and the agencies’ lives could 

be made easier if we had a 2-year budget instead of a 1-year budget? Have you thought about that and do you have any opinions on 

that? 

Ambassador PORTMAN. Senator, you are trying to get me into 

some hot water here and I will step into it. 

I have supported that in the past. More importantly, the President has supported that. My understanding is again this year the 

51 

President has indicated his support for biannual budgeting, in part 

because, as I read the material and I happen to agree with this, 

it encourages more oversight. Some would say that maybe that is 

not something we want to encourage. I think it is good to have the 

opportunity to be focused more on oversight here in the Congress 

and also at the Office of Management and Budget. 

Senator SESSIONS. Thank you, Mr. Chairman. 

Chairman GREGG. Thank you. 

Senator Conrad for the last set of questions. 

Senator CONRAD. Let me just say, first of all, on the question of 

biannual budgeting, the most important oversight is budgeting. 

And I think it is a profound—myself, I think it is a profound mistake to go to biannual budgeting. I think absolutely the most important discipline we exercise is the budget process and we need 

to go through it every year. 

I really suspect you would not get more oversight. I suspect you 

would get less. 

With that said, I want to say, Ambassador Portman, before I go 

to my final questions, I intend to support your confirmation. As I 

told you privately, and as I have said publicly, I think you are a 

high quality person. Although we have profound disagreements on 

fiscal policy, and we do, I think you are an outstanding person. And 

I look forward to working with you. 

I want to try to get you to think a little more about the question 

I asked you earlier. Let me first mention this. While the deficit is 

showing some improvement, the difference between the deficit and 

the debt is very dramatic. 

So this year we have just been told by CBO that the deficit will 

be in the $300 billion to $350 billion range. We took the midpoint 

of that range, $325 billion, for this comparison. 

We then looked at how much the debt is going to increase this 

year. And it is not $325 billion. it is over $600 billion. 

And I find in my own constituency people think the deficit is the 

amount by which the debt will increase. But of course, you know 

that it is not. And there are these other factors, the biggest one 

among them Social Security, money that is being borrowed that is 

not counted as part of the deficit but is part of the debt and does 

have to be repaid. 

Let me go to the thing I really wanted to focus on, though, Ambassador Portman. I go back to these charts. Looking at the typical 

recoveries since World War II, there have been nine of them, nine 

of them. And your suggestion was the reason we have been lagging 

in all of these measures on this recovery of what we have seen in 

the nine previous recoveries is that we had a shallower recession. 

But as I look at it, I do not see that. On job creation, the dotted 

red line is the nine previous recoveries since World War II. The 

black line is this recovery. You can see the job loss on the front end 

was almost identical to previous recoveries. 

But look at the gap here between the other recoveries, the dotted 

red line, and this recovery where we are running way beyond what 

we have seen in other recoveries. In fact, we are now 6.5 million 

private sector jobs behind the typical recovery. 

28459.049

52 

Let me go to the next one, and then I am going to ask you to 

seriously help me understand what you think is going on. Because 

I find these numbers very troubling, that there is something else 

going on here that perhaps we do not fully appreciate. 

This is business investment. Again, the dotted red line is the average for nine previous recoveries and the black is this recovery. 

In fact, we saw a steeper falloff in business investment in this recovery than the nine previous recoveries. And these are in real 

terms here, so we are comparing apples to apples. 

28459.048

53 

Something is wrong here. Something is not going right. And 

what I am trying to understand is why is this recovery lagging the 

previous recoveries? Is it because of international competitiveness? 

Is it because, and I have had people in the business sector tell me 

at this stage of the recovery they should be doing much better than 

they are. 

Let me go to the next one, which is the question of revenues. 

Here is the nine previous recoveries. The dotted red line is what 

happened to revenue. This is this recovery. And again, the revenue 

falloff was far sharper on this downturn, and we are still far below 

where we should have been compared to the nine previous recoveries. 

28459.046

54 

So your earlier answer to me is that it is because the recession 

was shallower. I do not see that in the data. Do you have any other 

ideas as to why this recovery seems to be so badly lagging the nine 

previous recoveries since World War II? 

Ambassador PORTMAN. Senator Conrad, I should probably restrain myself from answering, since I have not thought about it 

carefully, but let me give you a couple of observations anyway. 

One, this is, from my understanding, one of if not the shallowest 

recession we have experienced measured by GDP. In other words, 

when you look at the other recessions, they were deeper, the trough 

was longer in most cases. 

Senator CONRAD. In terms of loss of GDP? 

Ambassador PORTMAN. Yes, which is how you measure recessions. Is it not two successive quarters of negative GDP? So it was 

a more shallow recession, technically speaking. 

In terms of jobs, when you look at what has happened in terms 

of the unemployment numbers, and we can talk about whether unemployment numbers are properly reflected, but it is the same 

standard that was used in previous administrations and recessions, 

55 

this 4.7 percent number someone earlier was talking about the significance of that and some would say that is close to full employment. 

If you look at the 5 million jobs, 5.3 million jobs that have been 

created since 2003, which was when the tax relief took hold and 

was fully implemented, compare that to other recoveries, I do not 

have the data in front of me but I cannot believe that this is not 

a substantial both increase in jobs but also the percentage. 

What does this mean? It probably means, in terms of those other 

recessions, that we had higher unemployment. 

If you look at, even within our adult lifetimes, other times when 

there has been a downturn in the economy, we have had unemployment in double digits. We never had that. We never experienced it 

in this one. 

So again, I am jumping in here where I probably should not because I do not have all the data that you do. But I would say that 

part of the answer to this is that because we did not have as deep 

a recession, because unemployment numbers never got as high as 

they have in previous downturns, that the upturn in the economy 

may not look as a dramatic. 

But what is important to you and to me, I think, is where we 

are now. And at 4.7 percent unemployment nationally, that is relatively low, as I said, both in terms of the average in the 1970’s, 

1980’s and 1990’s, below that of course, but also significantly in the 

time during the 1990’s in the Clinton Administration when we had 

substantial economic growth. So these are good numbers, strong 

numbers. 

In terms of revenue, gosh again, looking at these projections that 

were talked about, we will see whether they are true or not. But 

if they are, to have that kind of growth last year, the best growth 

in 24 years in revenues, and then to build on it this year with 

something even approaching 11 percent would be pretty dramatic 

and frankly outstrip any of our estimates. 

Senator CONRAD. Let me just end on this. I am really not trying 

to score political points. I really am struggling to understand. I am 

struggling to understand what is going on. 

Because I suspect there is something going on here that we have 

not correctly analyzed. And I go back to this job creation. That red 

line is the nine previous recoveries. 

28459.049

56 

And you see, this is from business cycle peak. So we tried to do 

this on a fair comparison. The initial job loss tracked very closely, 

the nine previous recessions and this one. Do you see what I am 

saying? Initially it tracked very closely. You had about 2.5 percent 

job loss. This is private sector jobs. 

But then you had, in these nine previous recoveries, much faster 

recovery. In this one, recovery has really been stalled. 

Ambassador PORTMAN. But 2.5 percent from what base, though? 

Senator CONRAD. That is from the cycle peak. 

Ambassador PORTMAN. No, but I mean what was the unemployment percentage at the bottom of that trough? In other words, 

what was it from? 

Senator CONRAD. This is jobs. This is jobs, not unemployment. 

This is job creation. 

So job creation in both of these, in the nine previous recoveries 

job creation was off about 2.5 percent. Job creation, not unemployment. And in this recovery, as well. But then we saw, in all of the 

other recoveries, much faster recovery on private sector jobs than 

we are seeing in this one. 

57 

Now remember unemployment, this year we are on a war foot- ing. Of course, that affects employment. I think we also have a lot 

of people who just quit looking for jobs so they do not get counted, 

which is what Senator Domenici was talking about. 

But I do think we need to seriously analyze this gap and try to 

understand is there something structural going on here? I suspect 

there is. I suspect our dominance in the world economy and our 

vulnerability on energy and on borrowing money has something to 

do with this gap. 

In any event, we look forward to working with you. 

Ambassador PORTMAN. If I could just add one issue here that is 

critical to determining whether we are losing footing, would be pro- ductivity. Every economist turns that issue to determine whether 

or not we are losing our competitive edge. 

It has been high. A 3.2 percent growth—— 

Senator CONRAD. That may be part of the reason for the gap. 

Ambassador PORTMAN. It is increased efficiency. We are doing 

more with less. Our industrial output is actually up. Our manufacturing output is up. Our manufacturing exports are up. But there 

are fewer jobs. 

Senator CONRAD. Well productivity, that may be one of the ele- ments here as to why the private sector—— 

Ambassador PORTMAN. But that keeps us competitive inter- nationally. It enables us to have strong economic growth. 

Chairman GREGG. We have actually had, we are now at a histor- ical level, post-World War II period our productivity is the highest 

in history. Last year we had a 3.2 percent growth in productivity. 

We have had 32 months of consecutive expansion and growth. 

And so the numbers are very good. You can compare them to 

other recessions, but the fact is there are more people working 

today than ever before, and 4.7 percent is full employment or his- torically is deemed to be full employment. Revenues are up to their 

historic levels. They are closing in on the historic levels, as you 

said in your opening statement. 

So to the extent we continue to have a deficit, I think it is really 

a function of we are spending too much money. That is a function 

of entitlement spending and the fact that we are at war and the 

Katrina event. 

In two of those areas on the discretionary side I think we are 

going to start to see a lessening of the pressure on the budget. But 

on the entitlement side we really need is still address that, something which Senator Conrad and I totally agree on. 

In any event, just for the record, this record will stay open until 

6 p.m. tonight for other questions or comments. I have talked with 

Senator Conrad. I intend to support your nomination, also. So that 

is two of us and so you are doing pretty well. You are on a roll. 

Senator CONRAD. The rest of the votes look a little shaky. 

Ambassador PORTMAN. They were fine until today. 

Chairman GREGG. Senator Conrad has been generous enough to 

say that we can move on your nomination probably. So I would 

hope that we will probably do it next Tuesday after a vote off the 

floor. Staff may advise their staffs of that. 

And ironically you are, I think, the only member of the administration who is subjected to two committees for your nomination. 

58 

You have to be approved by two different committees. So I know 

you still have the Government oversight committee to go before. 

But we do intend to expeditiously move your nomination and appreciate the fact you are willing to continue to participate in public 

service. 

Thank you very much. 

Ambassador PORTMAN. Thanks for expediting this hearing and 

thanks for the input today. I appreciate it. 

[The prepared statement of Ambassador Portman follows:] 

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59 

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60 

61 

Chairman GREGG. Thank you. We are adjourned. [Whereupon, at 12:16 p.m., the committee was adjourned.] 

62 

United States Senate Committee on the Budget 

Room SD–624 

(202) 224–0642 

Washington, DC 20510–6250 

STATEMENT OF BIOGRAPHICAL AND FINANCIAL 

INFORMATION REQUESTED OF PRESIDENTIAL NOMINEES 

A. BIOGRAPHICAL INFORMATION 

1. Name: Robert Jones Portman 

2. Position to which nominated: Director, Office of Management and Budget 

3. Date of nomination: April 27, 2006 

4. Address: Office: Office of the United States Trade Representative, 600 17th 

Street, NW, Washington, DC 20508 

5. Date and place of birth: December 19, 1955; Cincinnati, Ohio 

6. Martial status: Married to Jane Dudley Portman (maiden name Dudley) 

7. Names and ages of children: 

8. Education: University of Michigan Law School, 9/81–6/84, J.D. 5/84; Dartmouth 

College 9/74–5/79, B.A., 5/79 

9. Employment Record: 

• 5/81 Select Commission on Immigration; Research Assistant; Washington, DC 

• 6/82–8/82 Taft, Stettinus & Hollister; Summer Law Clerk, Cincinnati, OH 

• 6/83–9/83 Surrey & Morse; Summer Law Clerk; Washington, DC 

• 9/83–12/83 US Department of State; Legal Extern; Washington, DC 

• 10/84–10/86 Patton, Boggs & Blow; Associate (Attorney); Washington, DC 

• 11/86–3/89 Graydon, Head & Ritchey; Associate (Attorney); Washington, DC 

• 3/89–9/89 White House, Executive Office of the President; Associate Counsel; 

Washington, DC 

• 3/89–5/91 Executive Office of the President, Deputy Assistant to the President 

and Director, White House Office of Legislative Affairs 

• 9/91–4/93 Graydon, Head & Ritchey; Partner (Attorney); Cincinnati, Ohio 

• 5/93–4/29/05 US House of Representatives; US Representative; Washington, 

DC 

• 4/29/05–present Office of the United States Trade Representative, Executive 

Office of the President, United States Trade Representative. 

10. Government Experience: 

• Co-Chairman, National Commission on Restructuring the Internal Revenue 

Service (1996–97) 

11. Business relationships: 

63 

• Board of Trustees 1991–2000, The Springer School (Elementary School for 

learning disabled) 

• Government Relations Committee, 1999–2002, United Way of America 

• State and Federal Relations Committee, 1996–2002, Greater Cincinnati Cham- ber of Commerce 

• Board of Directors, 1996–2000, Community Anti-Drug Coalition of America 

(CADCA) 

• Member, Congressional Advisory Committee 2003–2005 

• Founder and President, 1996–2001, Coalition for a Drug-free Cincinnati 

• Chairman, 2001–2003 

• Founding Chairman, 2003–4/2005 

• Board of Directors, 2002–4/2005, The Clement and Ann Buenger Foundation, 

Cincinnati, Ohio 

(Section 501(c)(3) private charitable foundation) 

• CincyTech USA Leadership Council, Cincinnati, Ohio (non-profit regional tech- nology initiative) 2002–4/2005 

• Board of Directors, 2002–4/2005, Jobs for America’s Graduates, Inc. 

• Advisory Board Member, 2003–4/2005, The Nelson A. Rockefeller Center for 

Public Policy at Dartmouth College 

• Member-Board, 2003–4/2005 Coalition to save Hillcrest Cemetery, Cincinnati, 

Ohio 

• Co-Chair, Fundraising Committee, 2002–4/2005, ACT (Accountability & Credi- bility Together), Cincinnati, OH 

• Honorary co-chairperson, 2002–4/2005, Promount House Museum Campaign, 

Milford, OH 

• Government relations Committee, 1991–2004, Greater Cincinnati United Way 

& Community Chest 

• Reginal Public Policy Council, 2004/2005, Greater Cincinnati United Way & 

Community Chest 

• Honoray Member, (non-voting), 2003–4/2005, Clermont County Convention & 

Visitors Bureau Board of Trustees 

• Board of Selectors, 2001–4/2005, Jefferson Awards for Public Service 

• Honorary Chairman, 2002–March 25, 2005, America’s Majority Trust 

• Limited and General Partner, Portman Investors Limited Partnership, 2003– 

3/31/2005 

• LLC Member, Peavler Partnership, General Partner, 1988–4/2005 

• Limited Partners Interest, Village Properties, 1992–2004 

• LLC Member, Shaker Properties, Managing Member, 1996–4/2005 

• LLC Member, Graustark, Managing Member, 1997–4/2005 

• Shareholder, Portman Equipment Company, (1960–2004) 

• Board of Directors, Portman Equipment Company, (1991–5/1993) 

64 

12. Memberships: 

Member, The Explorers Club, NYC 

13. Political affiliations and activities 

(a) List all offices with a political party which you have held or any public office 

for which you have been a candidate. 

US Representative-Ohio–2002 

(b) List all memberships and offices held in and services rendered to all political 

parties or election committees during the last 10 years. 

Vice Chairman, Hamilton County Republican Party (4/11/2000 until 2/13/2001) 

(c) Itemize all political contributions to any individual, campaign organization, 

political party, political action committee, or similar entity of $50 or more for the 

past 5 years. 

• 07/06/2005, $1,000 Schmidt, Jeannette 

• 07/25/2005, $1,000, Schmidt, Jeannette 

• 11/7/2000, $1,000, Shaw, E. Clay Jr. 

• 6/30/1999, $500, Baker, Richard 

• 8/9/2000, $1,000, Lazio, Rick A. 

• 9/30/2003, $2,000, Bush, George W. 

• 7/30/1999, $500, Bush, George W. 

• 10/11/1994, $500, Ney, Bob 

• 4/11/1994, $500, DeWine, Mike 

14. Honors and awards: 

• Emergency Committee for American Trade 2006 Trade and Investment Leadership Award 

• Clermont County Leadership Award 2005 

• Honorary Degree Chatfield College 2005 

• Ohio Parents for Drug-Free Youth, Annual Hope Taft Substance Abuse Prevention Advocacy Award, 2005 

• Securities Industry Association, Foundation for Investor Education, for support 

of the Stock Market Game program at Ripley-Union-Lewis-Huntington High School, 

Spring 2004 

• Coalition for a DrugFree Greater Cincinnati, Portman Award, May 5, 2003 

• American for Tax Reform, Hero of the American Taxpayer Award 2004, 2000 

• Southern Ohio Health Services Network, 2003 Community Health Award 

• Honorary Degree Urbana University 2002 

• American Bar Association, for commitment to simplification of tax and pension 

laws, May 7, 2002 

• National Conference of State Legislatures, Restoring the Balance Award, for 

leadership on pension portability and simplification and service to our federal system of government, February 2002 

• National Defined Contribution Council, Public Sector Leadership Award, 2002 

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• The Small Business Council of America Special Congressional Appreciation 

Award, 2002 

• Friend of the Farm Bureau 

• FMI/FDI Thomas Jefferson Award, 1994–2004 

• National Federation of Independent Business, Guardian of Small Business 

Award, 103rd–108th Congresses 

• National Association of Manufacturers, Award for Manufacturing Legislative 

Excellence, 105th and 107th Congresses 

• Coalition to Preserve Retirement Security, for Outstanding Leadership, Janu- ary 30, 2001 

• Institute for Electrical and Electronics Engineers Distinguished Public Service 

Award, 2001 

• National Defined Contribution Council, in recognition of bipartisan leadership 

on pension reform and simplification in the US, September 2000 

• American Shareholder Association, 2000 Friend of the Shareholder Award 

• Cincinnati Health Network and Affiliated Organizations, in appreciation, 2000 

• Savings Coalition of America, Philadelphia Financial Freedom Award, 2000 

• Citizens Against Government Waste, 1999 Taxpayer Hero Award 

• National Association of Professional Employees, 1999 Millennium Award 

• Association of Ohio Philanthropic Homes and Housing for the Aging Board of 

Trustees, Citation Award, 1998 

• Christian Coalition, Friend of the Family Award, 1998 

• National Family Partnership, 1998 Kiki Camarena Award 

• Mid-American Multicultural Travel and Tourism Network, Beacon of Freedom 

Special Legislator of the Year, September 17, 1998 

• Boston University School of Public Health Join Together Certificate of Appreciation for leadership in promoting interdisciplinary collaborations to create safe and 

health communities, 1997 

• Community Anti-Drug Coalitions of America, Congressional Leadership Award, 

1997 

• National Association of Enrolled Agents, Tax Legislator of the Year, 1997 

• Community Anti-Drug Coalition of America, Congressional Leadership Award, 

1996 

• Pride, Special Achievement Award, 1996 

• S Corporation Association Crusader of the Year Award, 1996 

• Young Republicans, Award of Special Recognition, March 31, 1995 

• National Association of Counties, Legislator of the Year Award, March 5, 1995 

• U.S. Chamber of Commerce, Spirit of Enterprise Award, 1993–2002 

• Citizens Against Government Waste, in appreciation of dedication to taxpayers 

of America, March 15, 1994 

66 

• Free Congress Foundation, Sound Dollar Award, 1994 

• SBSC Small Business Advocate, 1994–2004 

• Associated Builders and Contractors, Award, 103rd–106th Congresses 

• Citizens for a Sound Economy, Jefferson Award, 103rd Congress 

• Watchdogs of the Treasury, Inc., 103rd–106th Congresses 

• National Association of Government Defined Contribution Administrators, 

Award of Appreciation 

• National League of Cities Award 

• National Society of Accountants, Champion of Small Business 

• Young President’s Organization, Sharing of Knowledge Award 

15. Published writings: 

Wisdom’s Paradise: The Forgotten Shakers of Union Village (with Cheryl Bauer) Orange Frazer Press, December 31, 2004, 296 pages, ISBN 1882203402 

16. Speeches: 

17. Selection: 

(a) What do you believe in your background or employment experience affirmatively qualifies you for this particular appointment? 

House Member, 1994–2005 

Member, Ways & Means Committee 

Member, then Vice-Chairman, House Budget Committee 

Previous White House experience as Associate Counsel to the President 1998 

and Director, White House Office of Legislative Affairs 1989–1991 

(b) Were there any conditions, expressed or implied, attached to your nomination? If so, please explain. 

No. 

(c) Have you made any commitment(s) with respect to the policies and principles you will attempt to implement in the position for which you have been nominated? If so please identify such commitments and all persons to whom such commitments have been made. 

No. 

B. FUTURE EMPLOYMENT RELATIONSHIPS 

1. Will you sever all connections with your present employers, business firms, business associations or business organizations if you are confirmed by the Senate? 

Yes, other than the limited partnerships and LLC interests I have listed in 

question 11 of this Questionnaire and in my SF–278 report. 

2. Do you have any plans, commitments or agreements to pursue outside employment, with or without compensation, during your service with the government? If 

so, please explain. 

No. 

3. Do you have any plans, commitments or agreements after completing government 

service to resume employment, affiliation or practice with your previous employer, 

business firm, association or organization? 

No. 

4. Has anybody made a commitment to employ your services in any capacity after 

you leave government service? If so, please identify such person(s) and commitment(s) and explain. 

67 

No. 

5. If confirmed, do you expect to serve out your full term or until the next Presidential election, whichever is applicable? If not, please explain. 

Yes. 

C. POTENTIAL CONFLICTS OF INTEREST 

1. If confirmed, are there any issues from which you may have to recuse or disqualify yourself because of a conflict of interest or the appearance of a conflict of 

interest? If so, please explain. 

None to my knowledge. 

2. Identify and describe all investments, obligations, liabilities, business relationships, dealings, financial transactions, and other financial relationships which you 

currently have or have had during the last 10 years, whether for yourself, on behalf 

of a client, or acting as an agent, that could in any way constitute or result in a 

possible conflict of interest in the position to which you have been nominated. 

None to my knowledge. 

3. Describe any activity during the past 10 years in which you have engaged for the 

purpose of directly or indirectly influencing the passage, defeat or modification of 

any legislation or affecting the administration and execution of law or public policy 

other than while in a federal government capacity. 

None to my knowledge. 

4. Do you agree to have written opinions provided to the Committee by the designated agency ethics officer of the Office of Management and Budget and by the 

Office of Government Ethics concerning potential conflicts of interest or any legal 

impediments to your serving in this position? 

Yes. 

5. Explain how you will resolve potential conflicts of interest, including any disclosed by your response to the above questions. 

I am not aware of any financial holdings or personal relationships that would 

create a conflict of interest. Should I ever become aware of any potential conflict 

of interest, I will notify the Designated Agency Ethics Official to seek appropriate 

advice. 

D. LEGAL MATTERS 

1. Have you ever been disciplined or cited for a breach of ethics for unprofessional 

conduct by, or been the subject of a complaint to any court, administrative agency, 

professional association, disciplinary committee, or other professional group? If so, 

provide details. 

None to my knowledge. 

2. To your knowledge, have you ever been investigated, arrested, charged or convicted (including pleas of guilty or nolo contendre) by any Federal, State, or other 

law enforcement authority for violation of any Federal, State, county or municipal 

law, regulation, or ordinance, other than a minor traffic offense? If so, provide details. 

None to my knowledge. 

3. Have you or any business of which you are or were an officer, director or owner 

ever been involved as a party of interest in any administrative agency proceeding 

or civil litigation? If so, provide details. 

None to my knowledge. 

4. Please advise the Committee of any additional information, favorable or unfavorable, which you feel should be considered in connection with our nomination. 

None to my knowledge. 

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E. TESTIFYING BEFORE CONGRESS 

1. If confirmed, are you willing to appear and testify before any duly constituted 

committee of the Congress on such occasions as you may be reasonably requested 

to do so? 

Yes. 

2. If confirmed, are you willing to provide such information as may be requested by 

any committee of the Congress? 

Yes, all appropriate information. 

F. FINANCIAL DATA 

All information requested under this heading must be provided for yourself, your 

spouse, and your dependents. (This information will not be published in the record 

of the hearing on your nomination, but it will be retained in the Committee’s files 

and will be available for public inspection.) 

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2. Ambassador Portman, when we met previously, I spoke to you about the importance of the Vit Plant out at the Hanford Site in my home State. 

I’ve been working on Hanford for 13 years, and I’ve worked with many different 

OMB directors and Energy secretaries. At times, I’ve had to explain to them the history of this project and the legal obligations that the Federal Government has under 

the Tri-Party agreement. 

As you know, this is the Department of Energy’s largest construction project, and 

it’s a priority for me. 

Last year, under the previous director, OMB offered the Vit Plant as an offset to 

fund a supplemental package. That proposal ignored the spending plan for Hanford 

and complicated my efforts to fund the clean up. 

If enacted, it would have delayed the cleanup and threatened families in the TriCities as that radioactive plume moves toward the Columbia River. 

Fortunately, in the end, I was able to intervene and prevent that outcome. 

This is a complex project, and the funding schedule called for a build-up of fund 

for anticipated peak years of construction. That money wasn’t really available, but 

someone at OMB either didn’t know that or didn’t care to ask. 

To prevent a repeat of last year’s mistake, I’d like to make a personal request of 

you. 

If you see—somewhere in your agency—a proposal to rescind funding for Hanford, 

will you reach out to me so that I can make sure you understand the implications 

of any proposed recession? 

Will you offer me that courtesy? 

I have dedicated myself to the clean up of Hanford, and I hope that OMB will 

work with me in that effort. 

Answer 

I enjoyed the chance to talk to you about the issues at the Hanford site, and appreciate your dedication to the clean up. I will work with you to ensure that the 

Hanford site is cleaned up in a cost-effective manner that protects the public and 

the environment. As I hear of the Hanford site issues, I will certainly have in mind 

you and your special interest in the site. 

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3. Ambassador Portman, as you know, last year it was announced that the VA 

faced a nearly $3 billion shortfall. 

I worked with my colleagues to provide emergency funding to cover this shortfall, 

but it has been made clear by the VA, GAO and others that much of this shortfall 

was due to the fact that the VA did not base its budget on the real demands it faces, 

and did not adequately take into account programmatic efforts within the VA. 

I believe much of that was due—in part—to pressure from OMB for the VA to 

do ‘‘more and more’’ with ‘‘less and less’’ funding. 

In the end, our veterans are the victims. As you know for every service member 

killed in Iraq, we have 1,000 returning home wounded. 

Recent reports indicate that over one-third of all those who return are in need 

of mental health services. I am very worried that when these veterans turn to the 

VA in need, the VA won’t be able to help them. 

What can we expect from you when it comes to making the VA budget based 

on real numbers and real expectations? 

Answer: 

I understand that VA and OMB jointly developed the FY 2007 budget and 

worked to improve projection models. Together, both organizations are also closely 

monitoring performance and workload to ensure that veterans’ needs are covered. 

The 2007 Budget proposed $34.3 billion for medical care—an 11.3 percent increase over the 2006 enacted level and over 69 percent more than the budget in effect when President Bush took office. 

If confirmed, I will work to ensure that these efforts continue and that the appropriate resources are requested to meet our veterans’ physical and mental health 

care needs. 

4. As you may know, I’ve been working for the past 5 years to ban the production 

and importation of asbestos into the US. It has been a frustrating and difficult challenge. 

As we are looking at billions of dollars in Federal liability to bail out the asbestos 

industry, we have done little to actually ban the use of asbestos. 

It is my understanding that OSHA and EPA have been working to implement 

workplace safety and indoor air quality standards to reduce the expousre to asbestos, but these efforts have been hindered by OMB. 

OSHA and EPA are trying to address the serious public health threat, and OMB 

is killing these efforts. 

Will you look into this issue and let me know what is holding up the publication 

of the OSHA fact sheet at EPA? 

Will you also provide me with information on when EPA will be sending their 

brake mechanic guidance around for review by OSHA, NIOSH and other government agencies? 

And, finally when will EPA’s new version of their brake mechanic guidance be 

released for public comment? 

I urge you to do whatever you can to move OMB on these efforts. Every day that 

OMB delays progress is another day that workers are exposed to deadly asbestos. 

Answer: 

It is my understanding that, in 2003, in response to an Information Quality Act 

correction request, the Environmental Protection Agency (EPA) committed to updating its ‘‘Guidance for Preventing Asbestos Disease Among Auto Mechanics,’’ which 

is also known as the ‘‘Gold Book.’’ EPA also committed to engaging the public in 

the process. 

If confirmed, I will look into this matter and will work with EPA, and OSHA, 

to find out when they plan to release their respective drafts for review. 

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