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[Senate Hearing 110-585]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 110-585
 
       THE PRESIDENT'S FISCAL YEAR 2008 WAR SUPPLEMENTAL REQUEST 

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

                                HEARING

                               before the

            COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                            SPECIAL HEARING

                     APRIL 16, 2008--WASHINGTON, DC

                               __________

         Printed for the use of the Committee on Appropriations

  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html

                               __________

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43-288 PDF                       WASHINGTON : 2008 

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Washington, DC 20402-0001 

                      COMMITTEE ON APPROPRIATIONS

                ROBERT C. BYRD, West Virginia, Chairman
DANIEL K. INOUYE, Hawaii             THAD COCHRAN, Mississippi
PATRICK J. LEAHY, Vermont            TED STEVENS, Alaska
TOM HARKIN, Iowa                     ARLEN SPECTER, Pennsylvania
BARBARA A. MIKULSKI, Maryland        PETE V. DOMENICI, New Mexico
HERB KOHL, Wisconsin                 CHRISTOPHER S. BOND, Missouri
PATTY MURRAY, Washington             MITCH McCONNELL, Kentucky
BYRON L. DORGAN, North Dakota        RICHARD C. SHELBY, Alabama
DIANNE FEINSTEIN, California         JUDD GREGG, New Hampshire
RICHARD J. DURBIN, Illinois          ROBERT F. BENNETT, Utah
TIM JOHNSON, South Dakota            LARRY CRAIG, Idaho
MARY L. LANDRIEU, Louisiana          KAY BAILEY HUTCHISON, Texas
JACK REED, Rhode Island              SAM BROWNBACK, Kansas
FRANK R. LAUTENBERG, New Jersey      WAYNE ALLARD, Colorado
BEN NELSON, Nebraska                 LAMAR ALEXANDER, Tennessee

                    Charles Kieffer, Staff Director
                  Bruce Evans, Minority Staff Director

                            C O N T E N T S

                              ----------                              
                                                                   Page

Opening Statement of Chairman Robert C. Byrd.....................     1
Statement of Senator Thad Cochran................................     3
Statement of Hon. Jim Nussle, Director, Office of Management and 
  Budget.........................................................     4
    Prepared Statement...........................................     7
Prepared Statement of Senator Ben Nelson.........................    35
Additional Committee Questions...................................    38
Question Submitted by Senator Robert C. Byrd.....................    38
Questions Submitted by Senator Daniel K. Inouye..................    39
Questions Submitted by Senator Patrick J. Leahy..................    41
State and Local Law Enforcement Assistance Grants................    41
Crime Victims Fund...............................................    42
Transportation/Infrastructure Needs..............................    44
Government Contractors Avoiding U.S. Payroll Taxes...............    45

       THE PRESIDENT'S FISCAL YEAR 2008 WAR SUPPLEMENTAL REQUEST

                              ----------                              

                       WEDNESDAY, APRIL 16, 2008

                                       U.S. Senate,
                               Committee on Appropriations,
                                                    Washington, DC.
    The committee met at 12 noon, in room SD-106, Dirksen 
Senate Office Building, Hon. Robert C. Byrd (chairman) 
presiding.
    Present: Senators Byrd, Inouye, Leahy, Harkin, Mikulski, 
Kohl, Murray, Dorgan, Feinstein, Durbin, Landrieu, Reed, 
Nelson, Cochran, Stevens, Gregg, Bennett, and Craig.

              opening statement of chairman robert c. byrd

    Chairman Byrd. Good afternoon, ladies and gentlemen.
    Senator Specter announced yesterday that his health has hit 
a small bump in the road. While many of us know what it is like 
to face a health challenge, I know this man. His strong, 
fighting spirit will quickly lead him on the path to recovery.
    On September 26, 2007, we heard from Secretary of Defense 
Gates and Deputy Secretary of State Negroponte. Today we will 
hear testimony from the Director of the Office of Management 
and Budget, Jim Nussle. Welcome, Mr. Nussle.
    Eleven months ago, Congress sent the President a war 
funding supplemental that included clear direction to bring our 
troops home by December 2007. The President chose to veto that 
bill. If he had signed that bill, most of our troops would 
already be home. But instead of bringing our troops home, the 
President decided to increase our commitment of U.S. troops and 
treasure to a war that has now entered its sixth year. Over 
4,000 U.S. servicemembers have died, dead, dead, dead. Over 
30,000 U.S. servicemembers have been wounded. By the end of 
2008, the war in Iraq will have cost a whopping--did you hear 
that? A whopping $600 billion, spelled with a ``B''. $600 
billion.
    In the next few weeks, the Appropriations Committee will 
consider the President's request for Congress to approve 
another $108 billion of emergency funding, mostly for this war 
in Iraq. We will be considering the President's request at a 
time when the U.S. economy is by most accounts in serious 
trouble, and I do not mean maybe. Under the President's fiscal 
leadership, the U.S. Government will have piled up the five 
largest deficits in the history of this republic. It took 212 
years. Remember that. 212 years and 42 U.S. Presidents to 
accumulate $1 trillion of foreign-held debt. But in only 7 
years, President George W. Bush has more than doubled the debt 
our country owes to China, Japan, and other foreign countries.
    Economic growth came to a virtual halt at the end of 2007, 
with the gross domestic product for our economy falling from 
4.9 percent in the third quarter to 0.6 percent in the fourth 
quarter. The unemployment rate rose in March to 5 percent from 
4.8 percent in February. The construction trades have lost 
394,000 jobs since September 2006. Manufacturing employment has 
fallen by 310,000 jobs within the last 12 months. Since March 
2007, the number of unemployed has increased by 1.1 million 
workers to 7.8 million. Meanwhile, food and fuel prices are 
climbing dramatically. Dramatically I say. 8.8 million 
homeowners have mortgages that exceed the value of their homes, 
and foreclosures have increased 57 percent.
    A careful review of President Bush's request reveals no 
evidence--none--of funding to bolster our country's economy or 
to help Americans deal with lost jobs or mortgages, 
foreclosures, and the rising cost of living. Food costs have 
grown by 10 percent, and yet there is nothing--nothing in the 
President's supplemental request to strengthen the Women, 
Infants, and Children's (WIC) Nutrition Program.
    Home heating oil costs have climbed 37 percent, and yet 
there is no additional funding for low income home energy 
assistance. None.
    And there is nothing in the President's request to address 
the alarming crumbling of our infrastructure. Yet, the 
President has thrown down the gauntlet and threatens to veto 
the supplemental bill if the Congress has the temerity--get 
that--to add one thin dime to his request in order to help our 
citizens cope with the situation.
    What a contrast to the President's request for assistance 
for Iraq. We have already poured $45 billion--B--capital B--$45 
billion of our citizens' hard-earned tax dollars and poured our 
citizens' sweat and blood and tears into reconstruction 
projects in Iraq, projects that have done little to promote 
political reconciliation. That is 45 billion American dollars 
gifted to Iraq despite the fact that the Iraqi Government is 
running a huge surplus due to its excess oil revenues.
    Now, the President is asking this Congress to shovel yet 
another $3 billion of American taxpayers' dollars to continue 
rebuilding Iraq. Well, I say charity begins at home. The 
President wants money to build schools in Sadr City but not in 
Seattle. Why does he demand money for roads in Ramadi and 
nothing for roads in Richmond? Why? Why I say? The President 
wants money for Mosul but not one thin dime for Minneapolis. 
Why is he determined to reconstruct Baghdad but nothing for 
Baltimore, or Biloxi, or Birmingham?
    Mr. Director, the President repeatedly states that Congress 
should show support for the troops by rubber stamping a $108 
billion war supplemental that ignores American needs.
    We supported the troops last year when we sent the 
President a war supplemental that increased funding to provide 
better healthcare to our service members, better healthcare to 
our veterans, more funding to equip and train the National 
Guard and Reserves, more funding for mine resistant vehicles, 
and clear direction to bring our troops home.
    This year, we will once again take good care of our troops, 
but we must also invest in our own economy and take care of our 
people here at home. To fail to do so will only further dampen 
our economy, work a hardship on our citizens, and deplete our 
ability to pay these endless--endless--ever-climbing requests 
for more money to fund this dreadful, intolerable, hateful war 
in Iraq. The well is running dry and it is time to prime the 
pump.
    One note to the audience. You better listen now. I will 
not, 
n-o-t, not--tolerate disruptions of this hearing. I have 
instructed the Capitol Police to immediately remove any 
member--and do not think I will not do it--any member of the 
audience--any member of the audience who attempts to disrupt or 
interfere with this proceeding. Did you hear that?
    Director Nussle, we look forward to your testimony today.
    I now turn to Senator Cochran for any opening statement 
that he may wish to make.

                   statement of senator thad cochran

    Senator Cochran. Mr. Chairman, I am pleased to welcome the 
Director of the Office of Management and Budget (OMB), Jim 
Nussle, to our committee.
    It has now been over 14 months since the President 
submitted his fiscal year 2008 supplemental request to support 
our efforts in Iraq and Afghanistan. The President requested 
these funds to give our armed forces and our diplomatic core 
the tools they need to implement the policies of the United 
States Government, to advance our national security interests, 
and to improve the opportunity for the people of Afghanistan 
and Iraq for a free and stable future.
    Of the President's initial request, more than $108 billion 
has yet to be acted on by Congress. I hope this hearing is an 
indication that the committee and the Congress as a whole is 
prepared to act expeditiously on the remainder of the request.
    At the end of last year, Congress approved only $70 billion 
of the President's outstanding supplemental request. Enacting 
even that amount required a protracted struggle between the 
House and the Senate and the President. As a result, the 
Department of Defense (DOD) had to issue furlough notices, make 
a series of transfers and reprogramming of funds, and it 
undermined its efficiency in the process.
    I hope that we will not repeat that process, but I fear we 
are headed in that direction. Perhaps Director Nussle can tell 
us today how much time we have to work with and the 
ramifications of our failing to act promptly.
    I am not suggesting that this committee or the Congress 
simply approve the President's request without any question. We 
have a duty to analyze the request and make changes where we 
think they are appropriate. But we must not lose sight of a 
greater duty to give the men and women of our armed forces and 
diplomatic corps the resources they need to succeed in their 
mission.
    We have had the President's request for 14 months. We have 
held hearings. Members and staff have had numerous meetings 
with administration officials and other interested parties and 
we have received an updated report from General Petraeus and 
Ambassador Crocker.
    It is time to act and to get this supplemental to the 
President.
    Chairman Byrd. Mr. Nussle.
STATEMENT OF HON. JIM NUSSLE, DIRECTOR, OFFICE OF 
            MANAGEMENT AND BUDGET
    Mr. Nussle. Thank you, Mr. Chairman. I appreciate the 
opportunity and the invitation to appear before you today. I 
look forward to discussing the critical and urgent needs of our 
men and women in uniform and diplomatic corps, and I thank you 
for the bipartisan support that has been shown for previous war 
funding requests.
    The President has two key budget priorities that he keeps 
in mind constantly that I am instructed in my position to 
uphold, and that is to keep America safe and secure and to 
strengthen the U.S. economy. These twin goals of national 
security and economic growth are really interlinked. Our 
country really cannot prosper and cannot be successful if we 
are not both safe and free at the same time.
    Our war funding request, which has been pending before 
Congress now for more than 1 year, directly addresses the 
President's national security goal, and last week the President 
asked Congress to quickly pass a fiscally responsible bill that 
meets the needs of our troops and does not tie the hands of our 
military commanders. And he did pledge, as the chairman said, 
to veto a bill that does not meet this criteria or spends more 
than the requested amount of $108.1 billion. The Secretary of 
Defense has provided you with the most up-to-date details that 
we have and that he has to support the needs of our troops in 
the field and to support this process.
    The timely consideration of the bill is as important as its 
contents. Congress, I believe, needs to fund our troops by 
Memorial Day. Senator Cochran mentioned when. I believe 
Memorial Day is the time that we need to function under. 
Failure to act quickly could result in an unfortunate replay of 
what happened last December when furlough warnings were issued 
by the Department of Defense. So I suggest that no one here 
believes that would be an acceptable outcome. It is not good as 
a way to budget, and it is certainly not good for the morale of 
our troops and members of the diplomatic corps and their 
families.
    So while strengthening our national defense, the President 
also continues to focus his attention and time to helping to 
ensure that our economy builds momentum. He worked with you and 
the rest of the Congress on a bipartisan $160 billion stimulus 
package that was aimed at bolstering economic growth. And you 
passed it and he signed it in a bipartisan way. Families will 
soon be receiving the tax rebates. Small businesses are already 
beginning to use the incentives to encourage new investment and 
job creation, and the administration has also taken concrete 
steps to help Americans stay in their homes.
    To help aid in job creation, he also proposes to open new 
markets for American farmers and manufacturers and workers. And 
to bring certainty in an uncertain economic environment, the 
President's budget seeks to make tax relief permanent, a step 
that will prevent over 116 million taxpayers from facing an 
average tax hike in the next 2 years of about $1,800. So that 
is an important part of the dynamic here today.
    In addition to all of this, we had prompt administrative 
action. We are still, I believe, needing to do work together on 
housing, and I urge the Congress to consider and approve the 
Federal Housing Administration (FHA) reform that was first 
submitted by the administration to the Congress more than 2 
years ago.
    We share your economic concerns. However, we need to trust 
and allow the bipartisan stimulus that we all agreed to--give 
that package time to work, as we all agreed to back in January. 
The answer is, I believe, not at this point in time to meet our 
economic challenges, to take more money away from families and 
from small businesses and individuals and just use it for more 
Government spending. Expanding Government in my opinion does 
not create one more job in my hometown of Manchester, Iowa, but 
it does take money out of the private economy that would, I 
believe, help put families in a better position. It would be 
put to better use by those families and small businesses and 
people that are creating jobs in my hometown and all of yours.
    There are always many worthy ideas that, if could be 
funded, would be funded if resources were unlimited. And I can 
say that after 7 months in my job here at OMB, I can testify to 
you with certainty that many of these ideas that we are asked 
to fund reflect a sort of a sky is the limit mind set, but this 
money does not belong to us, as the chairman well knows. It 
belongs to the people of America. It belongs to the taxpayers.
    As you are well aware, there are two processes for 
allocating Federal funding that this committee steers: the 
regular appropriations process and, of course, the emergency 
supplemental appropriation process. And I believe we have a 
different philosophy in approaching these two types of funding.
    The administration chose to request war funding as an 
emergency supplemental in order to provide flexibility to the 
Department of Defense and our military commanders in order to 
address the changes that inevitably occur on the ground. The 
ability to respond to changing conditions and requirements in 
the field has and will continue to ensure that our troops have 
the very best resources to succeed in their mission. We also 
chose to request war funding as an emergency to ensure that 
when our troops come home, we have not left the Department of 
Defense with an over-inflated budget that could be difficult to 
adjust in the future.
    This is the request that has been pending before the 
Congress basically for the past 14 months. This committee heard 
testimony, as the chairman said, from the Secretaries of 
Defense and State approximately 1 year ago. But today, we need 
to act.
    I believe we are here today, unfortunately, to discuss how 
we can add to that bill and load up the troop funding bill with 
tens of billions of additional dollars of spending, perhaps 
because it may be viewed by members and Senators as the last 
money train out of town. Having served in the Congress, I 
understand that tendency. The President has made it clear that 
he will veto any attempt to hijack this much needed troop 
funding bill.
    So let me be clear. That is not to say that Congress in its 
wisdom, obviously, cannot pursue funding for other items it 
deems important. Of course, that is appropriate, and I do not 
need to tell you that. But there is a time and place that we 
believe these programs should be debated and considered on 
their merits, and that is during the annual appropriations 
process. This committee is poised to consider 12 appropriation 
bills, totaling nearly $1 trillion, and I believe within that 
total proposed by the President, Congress would be able to find 
room for many good ideas that the members have in order to 
address the concerns and priorities. And I believe it can and 
should be done soon.
    I know this committee wants to get its work done and wants 
to get it done on time and wants to get it done within budget. 
But it is disturbing to hear from some corners of Congress that 
we should put the Government on auto pilot until next year. If 
that is so important to possibly get a better deal from the 
next President, if it is so important to the economy, if it is 
so important to the priorities that I am sure we will talk 
about here today and in the future, then I think it is also 
important to accelerate the process of the annual 
appropriations process rather than deflect or delay that 
responsibility for the next President.
    So I hope the committee will consider to deliberate over 
providing funding for programs critical to many of our most 
vulnerable citizens, but holding troop funding hostage for this 
purpose I do not believe is acceptable to any American.
    And just adding more Government spending does not really 
solve our Nation's economic challenges, especially when 
measured against the already large $3 trillion annual budget 
that is spent for many of those purposes. Any infrastructure 
that is necessary and appropriate for Federal spending can and 
should be funded like any other regular appropriation bill and 
priority through that annual process.
    A bill to fund our troops that are serving in harm's way 
should not be transformed into a vehicle for lawmakers to fund 
domestic programs that were underfunded last year during the 
appropriations process and possibly even push the deficit even 
higher. It will be a difficult road ahead to balance the 
budget. We know that for the short term, but it still remains a 
high priority, I believe, on both sides of the aisle and on 
both sides of Pennsylvania Avenue. But we believe that the war 
funding request before you is already factored not only into 
those budget projections, but the tens of billions of 
additional spending in the committee that may be considered 
over and above that have not been factored into that 
consideration and the deficit would only go higher.
    So I look forward to hearing the committee's perspective 
and answering the questions. And, Mr. Chairman, it is an honor 
to be before you here today. If I may say personally, having 
been a chairman myself, if I could write the contract today to 
look as good as you do today as a chairman, I would sign up for 
it. And I appreciate the honor of being before you here today. 
Thank you.
    Chairman Byrd. Thank you. You get an A-plus for that.
    Mr. Nussle. I am doing the best I can, Mr. Chairman.
    Chairman Byrd. You are doing all right.
    [The statement follows:]
                    Prepared Statement of Jim Nussle
    Mr. Chairman, Senator Cochran, and members of the Committee, I 
thank you for the opportunity to appear before you today. I look 
forward to discussing the critical and urgent needs of our men and 
women in uniform, and I thank you for the bipartisan support for 
previous war funding requests.
    The President has two key budget priorities: keeping Americans safe 
and secure, and strengthening the U.S. economy. These twin goals of 
national security and economic growth are interlinked. Our country 
cannot prosper if it is not both safe and free.
    Our war funding request, which has been pending before Congress for 
more than a year, directly addresses the President's national security 
goal. Last week, the President asked Congress to quickly pass a 
fiscally responsible bill that meets the needs of our troops and does 
not tie the hands of military commanders. And he pledged to veto a bill 
that doesn't meet these criteria or spends more than the requested 
amount of $108.1 billion. The Secretary of Defense has provided you the 
most up to date details to support these needs for our troops in the 
field.
    The timely consideration of the bill is as important as its 
contents. Congress needs to fund our troops by Memorial Day. Failure to 
act quickly could result in an unfortunate replay of last December, 
when furlough warnings were issued by the Department of Defense. No one 
thinks that is an acceptable outcome--it's not a good way to budget and 
it's bad for the morale of our troops and their families.
    While strengthening our national security, the President continues 
his focus on helping our economy build momentum. He worked with 
Congress on a bipartisan $160 billion stimulus package aimed at 
bolstering economic growth. Families will soon receive the tax rebate 
payments, small businesses are beginning to use incentives that 
encourage new investment and the Administration has also taken concrete 
steps to help Americans stay in their homes.
    To help aid job creation, he proposes to open new markets for 
American farmers, manufacturers and workers. And to bring certainty in 
an uncertain economic environment, the President's budget makes tax 
relief permanent--a step that will prevent 116 million taxpayers from 
facing an average tax hike of $1,800. In addition to prompt 
Administrative action, there is still work to do on housing, and I urge 
Congress to approve the FHA reform first submitted by the 
Administration more than two years ago. We share your economic 
concerns, however we should trust and allow the bipartisan stimulus 
time to work.
    The answer to our economic challenges is not to take more money 
away from people through higher taxes to then use it for more 
government spending in Washington. Expanding government doesn't create 
one job in my hometown of Manchester, Iowa but it does take money out 
of the private economy that would be put to better use by families and 
job-creators. There are many worthy ideas that could be funded if 
resources were unlimited. And after seven months in this OMB job, I can 
testify that many of the ideas we're asked to fund reflect a sky is the 
limit mindset. But this money doesn't belong to us--it's the taxpayers' 
money.
    As you are all well aware, there are two processes for allocating 
federal funding that this Committee steers: The regular appropriations 
process, and emergency supplemental bills. I believe we have two very 
different philosophies with respect to these types of funding.
    This Administration chose to request war funding as an emergency 
supplemental request to provide flexibility to the Department of 
Defense and our military commanders to address changes on the ground. 
The ability to respond to changing conditions or requirements in the 
field has and will continue to ensure our troops have the very best 
resources to succeed in their mission. We also chose to request war 
funding as an emergency to ensure that when our troops come home we 
have not left the Department of Defense with an over-inflated budget 
that could be difficult to adjust in the future.
    This is the request that has been pending before Congress basically 
for the last 14 months. This Committee heard testimony on this request 
from the Secretaries of Defense and State approximately one year ago. 
But today, rather than acting on that request, I believe we are here 
today discussing the desire of some in Congress to load up this troop 
funding bill with tens of billions in additional spending, perhaps 
because it's viewed as the last big money train out of town before the 
election. The President has made clear that he will veto any attempt to 
hijack this much needed troop funding bill.
    Let me be clear--that it is not to say Congress in its wisdom 
cannot pursue funding for other items it deems important. But there is 
a time and a place for these programs to be debated and considered on 
their merits, and that is during the annual appropriations process. 
This Committee is poised to consider 12 annual spending bills totaling 
nearly one trillion dollars, and within that total proposed by the 
President, Congress should be able to find room for whatever good ideas 
members may have, and do so soon.
    I know this Committee wants to get its work done, on time and 
within budget, but it's disturbing to hear from some corners of 
Congress that we should put the government on auto pilot until next 
year. If it is so important for the economy to accelerate new spending, 
then why would Congress punt until the next President? I hope this 
Committee will seek to deliberate over and provide funding for programs 
critical to many of our most vulnerable citizens, but holding troop 
funding hostage for this purpose should not be acceptable to any 
American.
    Just adding more government spending does not solve our Nation's 
economic challenges--especially when measured against an already large 
$3 trillion annual budget. Any infrastructure spending that is 
necessary and appropriate for Federal spending can and should be funded 
like any other regular Federal priority, through the annual spending 
bills. A bill to fund our troops serving in harm's way should not be 
transformed into a vehicle for lawmakers to fund domestic programs that 
were last year and to push the deficit even higher.
    It will be a difficult road to balance the budget in the short-
term, but it remains a high priority not just for the Administration, 
but more importantly, for the American people. The war funding request 
before you is already factored into our budget projections. The tens of 
billions in additional spending this Committee may consider are not.
    I look forward to hearing the Committee's perspective and answering 
your questions.

    Chairman Byrd. Director Nussle, according to the American 
Society of Engineers, our Nation has 590,000 bridges, and one 
out of every four is structurally deficient or functionally 
obsolete. One of those bridges was the I-35 bridge that 
collapsed in Minnesota last year. Because of congested roads, 
Americans sit in traffic for 3.5 billion hours annually at a 
cost of $63 billion to the economy.
    Our airways are not much better. Airports are struggling to 
accommodate an increasing number of airplanes and jumbo jets, 
and passengers are forced to wait interminably on runways.
    Inter-city passenger rail service is in a precarious state 
of near bankruptcy.
    There are 3,500 deficient and unsafe dams, posing a direct 
risk to human life should they fail.
    Water facilities are unable to comply with safe drinking 
water regulations. Outdated wastewater facilities discharge 
billions--with a ``B''--billions of gallons of untreated sewage 
into surface waters every year.
    Existing transmission facilities within the national power 
grid are overwhelmed by bottlenecks which elevate the risk of 
regional blackouts.
    In your written testimony, you noted that expanded 
Government will not create one job in your hometown of 
Manchester, Iowa. But when you came to Washington, your plane 
took off from an airport funded with public funds and the 
Federal Aviation Administration (FAA) controllers helped you to 
get here safely. You drove on a highway across a bridge that 
was federally funded and you drank water from a system that was 
supported with U.S. tax dollars.
    When this committee meets to mark up the supplemental, I 
will recommend that we approve a significant supplemental for 
infrastructure spending across the Nation. I believe that this 
committee has a responsibility to help our State and local 
partners provide an infrastructure that will create jobs in the 
short term and promote a growing economy in the long term.
    Why is it, may I say, that President Bush is satisfied with 
leaving a legacy built on a crumbling infrastructure?
    Mr. Nussle. Mr. Chairman, I do not believe the President 
either wants to have that legacy or, for that matter, will have 
that legacy. Since 2003, obviously together, the administration 
and the Congress have increased transportation investment in 
this country by 17 percent, an 11 percent increase this year 
alone. Certainly jobs are created in that kind of a purview. 
But the concern that we have is that this can be done and 
should be done in the annual appropriations process. That is 
where these expenditures have been increased. That is where the 
commitment has been made, again on both sides, and it again can 
and should be done now.
    And the concern the administration has and that I expressed 
today is that if, in fact, it is urgent, it would seem to me 
that moving the transportation appropriation bill and moving it 
quickly through the process in both the House and the Senate 
would be a priority. So it concerns us when we hear that, in 
fact, we may be operating under a continuing resolution at the 
end of the year and that, in fact, we have heard directly from 
the Senate Majority Leader that, in fact, he may decide to wait 
for, I believe as he put it, a better deal from the next 
President.
    So those are the reasons why I believe we are concerned, 
but I do not believe either one of us has a legacy of not 
supporting our infrastructure. And I believe that bears out in 
the kinds of bills and budgets that we have passed over the 
last number of years.
    Chairman Byrd. The President proposes in fiscal year 2009 
to reduce grants to State and local governments by over $13 
billion, including cuts of over $4.4 billion for 
infrastructure. He has threatened to veto any appropriations 
bill that exceeds his request. So in reality, the President 
intends to block any effort--any effort--to improve our 
infrastructure.
    Senator Cochran.
    Senator Cochran. Mr. Chairman, Mr. Nussle, we are more than 
halfway through the fiscal year and the Department of Defense 
and the Department of State have received less than half of the 
funding the administration has requested to carry out the 
missions of those two Departments.
    The two military services most committed in Iraq and 
Afghanistan are the Army and the Marine Corps. At what point do 
the Army and Marine Corps run out of funding that they need to 
fight the global war on terrorism?
    Mr. Nussle. Thank you, Senator Cochran. As the Senator and 
other members of the committee know, this is not an exact 
science. The exact date and hour when that occurs is not 
something that can be perfectly precise, but I have asked that 
question of our Department of Defense and Secretary Gates and 
England, and I am informed that will occur in early summer, 
toward the end of June. And that is why we continue to be as 
concerned and express the urgency for the funding before any 
notices of furlough go out, which are, according to the 
practice that occurred in December, approximately 30 days. Or 
that is what it is by law. It could be 60, but 30 days, I 
believe, is what the Department of Defense was contemplating in 
December. That being the case, Memorial Day and that recess is 
the timeframe that I testified to today for that reason.
    Chairman Byrd. Senator Inouye.
    Senator Inouye. Thank you very much, Mr. Chairman.
    Mr. Director, contrary to requirements of current law, the 
President's budget request for fiscal year 2009 does not 
include an estimate of the full-year cost of the ongoing 
operations in Iraq and Afghanistan. Instead, the administration 
submitted a $70 billion placeholder without any details, which 
it says will fund roughly 6 months of operation.
    Are we to conclude from this that the Department plans to 
reprogram an additional $70 billion for its peacetime budget to 
support operations in Iraq and Afghanistan for the second half 
of fiscal year 2009?
    Mr. Nussle. No, sir. Senator, what we did--I guess two 
parts to this. First--when I served in the Congress and was 
chairman of the Budget Committee, I joined with many of you and 
colleagues that said the President should include the war 
funding in the budget when it is submitted. And that practice 
occurred. In fact, we are still discussing the emergency 
supplemental that embodied that practice as the President 
included it in his fiscal year 2008 budget.
    However, because of how long it has taken for 
consideration, starting with, number one, and number two, 
because the President made the decision that he did not want to 
tie the hands of the next Commander in Chief in determining 
what the strategy and corresponding funding would be after 
taking office after the election this year, we would put a 
placeholder in there, recognizing the tendency and the practice 
on the part of Congress to fund a bridge as you did in the last 
emergency supplemental and may very well contemplate to do 
again this year.
    So it was not at all--and I testified when I came to the 
Senate the last time to roll out the budget that we recognize 
this is not the full cost. We acknowledge that. Secretary Gates 
testified to that as well. But we felt it was the appropriate 
responsible practice, given the way Congress was managing the 
resources and we were doing that together and also to embody 
what the President was concerned about, and that was tying the 
hands of the commanders or the next Commander in Chief.
    Senator Inouye. In this supplemental request, the 
administration included something over $4.8 billion for 
reconstruction efforts in Iraq, while at the same time Iraq is 
benefiting from a budget surplus and billions in oil revenues. 
Why are we continuing to finance these projects and not 
increase the pressure on the Government of Iraq to execute 
their budget toward the projects proposed with U.S. taxpayer 
financing?
    Mr. Nussle. Well, Senator, this is a narrow question of a 
bigger one that I know you and I know I did when I served in 
the Congress received every time I went home. Why are we 
sending money overseas? Why do we fund the Foreign Service? Why 
do we have foreign aid? And it is always a complicated question 
to explain to your constituents why it is, when there are 
certainly priorities at home, why you would be funding these 
types of activities.
    But we know with Iraq--and it was testified much more ably 
than I could here today by Ambassador Crocker and General 
Petraeus--that in order for us to have that return on success, 
in order for Iraq and Afghanistan and, for that matter, many 
other challenges around the world to be successful, that it 
does require resources in order for us to accomplish that.
    I would be very interested in exploring a change in that 
direction, to have Iraq step up even to a greater extent than 
it is now. And it has, as Ambassador Crocker has testified to, 
to a much greater extent for security, much greater extent for 
reconstruction. That is something that could and I believe 
should be discussed with Iraq as we consider moving forward.
    But here and now today, and judging from what we need over 
the next 2 months, we believe we submitted a supplemental that 
meets those needs and addresses those concerns so that we can 
be successful and continue to be successful and our men and 
women can come home.
    Senator Inouye. But as you know, Mr. Director, when we 
provide foreign aid or assistance programs to places like 
Darfur in Africa, those people are poor. They do not have any 
surplus. Here in Iraq, we are told that the Iraqi Government 
has a surplus, a big one, in billions of dollars. We are paying 
high gas prices so that they can have a surplus and the income 
they make in oil.
    How do we explain to our constituents that here is a 
country with surpluses, something we do not have, here is a 
country that is making billions of dollars at our expense, and 
yet we are paying for their reconstruction? That is the 
question.
    Mr. Nussle. Well, first of all, Iraq is paying for more and 
more of its reconstruction and more and more of its security. I 
am certainly not suggesting that they are poor, but I do not 
know if that can be measured specifically or distinctly by the 
fact that they have a surplus. They may be rich in their bank 
account, but they do not yet have a rich tradition of 
democracy. They do not yet have a rich tradition of security. 
They do not have yet a rich tradition and demonstration of 
political stability. That is coming, as it was reported to you. 
It is improving. It is building, but it is not to the point yet 
where the lack of support from the American people and the 
generosity of the American people would result in further 
success. And it was their concern, expressed again more ably 
than I could, that now would not be the time to change that 
policy. And it is for that reason that I make the request on 
behalf of the President.
    Senator Inouye. Can you give us an estimate of how much 
surplus Iraq should gather before they can help themselves?
    Mr. Nussle. I believe that is something that should not be 
determined unilaterally between two sovereign countries, but 
rather something that should be worked out between those two 
countries. As I said, I would be open and I believe the 
administration would be open to that consideration. I do not 
have a proposal I can present to you today either procedurally 
or in dollar amount, but I would believe, working together, 
that we can achieve that. But it is something that needs to be 
done together and not in a unilateral but in a bilateral type 
approach and agreement so as not to destabilize and have any 
less success than we have seen of late.
    Chairman Byrd. I note that Iraq is expecting a $16 billion 
surplus this year.
    Senator Gregg.
    Senator Gregg. Mr. Chairman, thank you.
    I want to follow up on that question and the point made by 
the chairman because I do think this is a legitimate issue. It 
does seem to me that Iraq is not bearing a fair portion of the 
load here, especially in light of its surpluses and especially 
in light of the fact that the Inspector General, Mr. Bowen, 
came up with a number. I believe it was $9 billion that he has 
identified of funds which were supposed to be spent on 
reconstruction which have been stolen, misplaced, lost, or in 
some bank account that we do not know about. Is that the right 
number? $9 billion? Or was it $15 billion?
    Mr. Nussle. I am doing this from recollection. That sounds 
right, but again, that would only be from my recollection.
    Senator Gregg. So should we not put in this bill fairly 
significant and stringent language which says that any dollars 
we spend on reconstruction should at least be matched one for 
one by the Iraqi Government?
    Mr. Nussle. Well, Senator Gregg, I like you am in a 
position where, obviously, if they could pay for more, that 
would be a positive. I agree with that. But I am not in a 
position to be able to negotiate on that point on behalf of the 
United States with the Iraqi Government. That is something that 
the Secretary of State should do not in a unilateral fashion, 
but in a bilateral fashion, working out an agreement between 
the----
    Senator Gregg. Well, I simply note that we are funding in a 
unilateral fashion. We are not funding in a bilateral fashion. 
We are spending this money unilaterally. It seems to me that 
the Iraqi Government has been grotesquely irresponsible with 
the money we have given them and that before we put more money 
into reconstruction, we ought to be getting some sort of 
commitment from them that they are going to bear a larger share 
of the burden.
    On another issue, I like other Senators am concerned with 
the fact that the administration did not send up a realistic 
figure for next year, $70 billion. And I am equally concerned 
that the Democratic budget as passed by the Congress does not 
have a realistic figure. They took the leadership of the White 
House and did $70 billion.
    What was the number that Secretary Gates or that the 
Pentagon actually believes it will cost next year?
    Mr. Nussle. I do not have that number.
    Senator Gregg. I believe he said it was $170 billion.
    Mr. Nussle. Actually what he said was he could guess, but 
he would be pulling a number out of the air. And I do not think 
he was either expecting or wanting to be held to that number, 
but he was testifying and was asked to make a guess. And so he 
said he would pull a number out of the air, and that is where 
that came from.
    Senator Gregg. Well, it is certainly closer to a realistic 
number than $70 billion, would you not say, since it came from 
the Secretary of Defense out of the air?
    Mr. Nussle. Unfortunately, though, we have not seen action 
from the Congress on budgeting that far in advance. Rather it--
--
    Senator Gregg. Well, it is hard for the Congress to lead 
when the White House does not lead. You have given this 
Congress, this Democratic Congress, all the cover they need to 
not put the money necessary to fund the troops in the budget, 
and I think you have acted irresponsibly there.
    Let me go to another issue which I am concerned about on 
this whole budget question. This will be the sixth year that we 
are going to get a supplemental, and it is going to be 
designated as emergency. What claim does this proposal have on 
the term ``emergency?''
    I mean, I can understand that you want to keep it separate 
and you should keep it separate from the underlying operational 
budget of the Pentagon so that we do not end up merging these 
funds in. But I cannot see any logic any longer for a claim 
that this is an emergency. It is almost a matter of course. I 
mean, we have got troops in field. We know they are in the 
field. We know they are going to be in the field for this year 
and next year and certainly for the terms of this budget, and 
they have been in the field for the last 5 to 6 years.
    Under what justification do you call this an emergency 
other than the fact that gives you protection, procedural 
protection?
    Mr. Nussle. Well, it has not given us much procedural 
protection.
    Senator Gregg. It gives you a lot of procedural protection 
in the Senate. If you do not want the emergency designation, I 
am sure my colleagues on the other side would be happy to 
remove it.
    Mr. Nussle. Well, the designation for us is based on the 
fact that we are believing that this should not be built into 
the base of the----
    Senator Gregg. That is not the issue. You can send a 
supplemental out that is not built into the base without using 
the term ``emergency'' to designate it. The issue is why do you 
claim this to continue to be an emergency and be given the 
procedural protection that emergencies get.
    Mr. Nussle. There are only two requests that we can make. 
We can make it during the regular budget as part of the regular 
appropriations, or we can do it as a supplemental request.
    Senator Gregg. That is correct.
    Mr. Nussle. And we are making it as a supplemental request.
    Senator Gregg. So you do not want emergency designation on 
this supplemental. Is that what you are saying?
    Mr. Nussle. I will leave that to the judgment of the 
Senate. That is not something that I am sure you will pay much 
attention to the administration's instruction on that anyway. 
So I will leave that to your designation.
    But we believe this is something that is over and above 
what is necessary for the regular operations of the Defense 
Department. Therefore, as a result--and many other expenditures 
for wars in the past have been funded in a similar way, and it 
is for that reason that we make the request the way we do.
    Senator Gregg. Well, that is good clarification. I 
appreciate that. Thank you.
    Chairman Byrd. Senator Leahy.
    Senator Leahy. Thank you, Mr. Chairman. Thank you for 
having this hearing. I think it is extremely important. It is 
good to see you here.
    Chairman Byrd. I am glad to see you.
    Senator Leahy. Thank you.
    Chairman Byrd. And all the others here.
    Senator Leahy. Director Nussle, I was reading, when you 
were nominated by the President, that one of your main 
accomplishments, according to the press, over in the other body 
was wearing a bag over your head during a debate, and I am glad 
you are not doing that today.
    But I listened to your statement. It sounds almost as 
though George Orwell wrote it. Also the answers, as Senator 
Inouye and Senator Gregg and Senator Byrd have pointed out, do 
not necessarily respond to the questions.
    Let us take a look at what we have. We spent nearly $700 
billion on the President's war. The latest supplemental request 
would increase that by about $108 billion. Overall costs of the 
Iraq war will soon exceed an incredible $1 trillion.
    Doing it as an emergency supplemental, you simply put it on 
the credit card, put it on the national debt, borrow all the 
money from China, Saudi Arabia, and whatnot and pass it on to 
the next generation.
    Now, budgets are expressions of a government's real 
priorities. It appears that the Bush administration's 
priorities are in Iraq, not here at home. The President and 
those who support him seem to find no inconsistencies. Every 
few months, they demand billions, almost a blank check, earmark 
for Iraq. We do not have the money for healthcare, education, 
housing, security, infrastructure, heating needs here in the 
United States.
    I am not saying we should not be helping Iraq rebuild. As 
chairman of the subcommittee that handles the Senate's work in 
drafting the budget for foreign assistance, I know the need for 
funds for stabilization and construction programs in Iraq, and 
I have voted for those. I think it is also time we started 
telling the Iraq Government to begin contributing part of those 
rebuilding costs.
    We are paying close to $4 a gallon for gasoline certainly 
in my State of Vermont. Iraq is getting well over $100 a barrel 
for their oil. They are going to have a budget surplus over $25 
billion. But we cannot pay for things here at home. In fact, 
the President says he will veto any supplemental that pays for 
those things at home and does not go into the blank check for 
Iraq.
    I think this war has cost Americans far too much, too much 
money, too much damage to our lives, most importantly, too many 
deaths, too many maimed soldiers coming home, too many families 
destroyed.
    Now, let us take one of the things here at home. Violent 
crime has been rising, but the administration has dismantled 
front-line support for State and local law enforcement here in 
the United States. But the administration's view is that no 
expense is too large for the hiring and equipment needs of the 
Iraqi police force at around $21 billion and very questionable 
results.
    It is a very different story for our own police departments 
in the United States that have been stretched thin for years. 
And what we spend in just 5 days--5 days--on the Iraq war, we 
could fully fund the COPS program. We could fully fund the 
Byrne justice assistance grant. That alone would be put 9,000 
new police officers on the beat to make American communities 
safer instead of just going down and disappearing in Iraq. It 
would allow us to shore up our multi-jurisdictional drug and 
gang task force efforts. This is National Crime Victims Week. 
Let us think what some of that money would do for the crime 
victims fund, which has also been cut.
    You know, unlike us, the Iraqi Government actually has a 
surplus, and we cannot pay for law enforcement here. I use that 
as one example.
    So let me ask you this. Would the administration support 
asking the Iraqi Government to assume part of what the United 
States is paying for the Iraqi police force? Yes? No? Easy 
answer.
    Mr. Nussle. Let me just give you a couple of these because 
I think these are important. The Iraqis have outspent the 
United States in 2008 by more than 10 to 1 on reconstruction.
    Senator Leahy. No, no. Please, Mr. Nussle, there is only a 
certain amount of time, and you have a wonderful habit of 
answering a question different than the one that was asked, as 
you did with Senator Inouye, and he called you on it.
    I am asking you about the police force. Are they willing to 
pay part of the costs of the money we are funneling in there so 
maybe we could use some of that money to pay for police 
officers in the United States of America?
    Mr. Nussle. All right. The Iraq budget provides more than 
$9 billion for security forces this year alone, which is three-
quarters of what it needs in order to provide the security for 
Iraq.
    Senator Leahy. So the money that is going to the police 
force is being well spent? I understand we sent over thousands 
of handguns. We could not even find out what happened to them. 
We sent them to the police department--until they started being 
used against our brave men and women over there.
    Mr. Nussle. Well, I will trust the testimony of Ambassador 
Crocker and General Petraeus on those issues. All I can report 
to you--you asked me how much and what we were providing, and I 
can respond to that.
    Senator Leahy. Well, we have provided a total of $33 
billion for the readiness and effectiveness of training efforts 
of both Afghan and Iraqi security forces. On the front page of 
the paper today, the Americans begged them to actually stay 
where they were doing something for security. They packed up 
and left.
    In the President's budget, he has proposed rescinding all 
amounts in the crime victims fund, leave the fund empty. Again, 
we keep sending money over there. Now, this is a program that 
is funded entirely through criminal fines, forfeited bail 
bonds, penalties and special assessments, not taxpayer dollars 
or appropriations. What is the administration's reason in 
gutting it?
    Mr. Nussle. Well, what we did was we provided--instead of a 
number of stovepipe grant programs, we consolidated all of 
those grants into four so that they could be better 
administered and easier for local law enforcement to take full 
advantage of those funds at home and use them in a much more 
flexible way as opposed to the stovepipe way that we currently 
have.
    Senator Leahy. But is it true that you have proposed 
rescinding all the amounts remaining in the crime victims fund?
    Mr. Nussle. To be used for that purpose. To be used for 
those purposes, yes.
    Senator Leahy. It would be nice--some of us, though, have 
voted to have it used for the purposes of the crime victims.
    My time is up, Mr. Chairman, but I thank you again for 
being here and I thank you for holding this hearing. I think it 
is very important to the Senate.
    Chairman Byrd. Thank you.
    Senator Craig.
    Senator Craig. Mr. Chairman, thank you very much.
    Jim, thank you for being with us. We appreciate your 
testimony and your directness as we deal with this issue.
    I must tell you I am extremely frustrated. I understand 
your admonishment about a clean emergency supplemental or 
supplemental depending on the words we wish to use in titling 
it. And the reason I am frustrated by that is because while we 
do not know for sure yet, it appears it is the collective will 
of the leadership of this Congress not to work the 
appropriation process this year in a timely and responsible 
manner for a variety of reasons expressed by some in our 
leadership.
    And yet, I and members of this committee are continuing to 
have hearings on the budget. Each one of our particular areas 
of expertise is being properly vented with administration 
people. And it appears, Mr. Chairman, we are shaping bills, and 
I am wondering what all of that means if, in fact, we do not 
plan to act because if we do not plan to act, there are 
emergency or near-emergency situations that some of us would 
like to deal with in a timely fashion this year.
    Senator Feinstein and I out in agriculture country are 
hearing phenomenal appeals from agricultural America that the 
workforce is diminishing so rapidly it may send us into an 
agricultural crisis. We would at least like to do something in 
a temporary and an emergency fashion to supply a workforce.
    We have firefighting needs on our public lands that may be 
very dramatic, Mr. Chairman, if we go through another fire 
scenario of the kind that we have gone through in the last 
several years.
    So I am extremely frustrated that the only vehicle 
potentially moving, other than DOD and a few others, may be 
this supplemental, no matter how we describe it. And there will 
be a great tendency on the part of this Senator and others to 
try to add things to it if it appears that we are not in a 
timely and responsible fashion going to complete our work here 
this year. That frustrates me a great deal.
    This is not necessarily a question, Jim, but it is in 
response to the appeal from the administration to keep it 
clean. We are in a phenomenal catch-22 at this moment that is 
going to create the kind of pressures that could well establish 
a loggerhead on this issue.
    Last, Mr. Chairman--and I will not use all of my time--I 
think it is responsible for this committee to address the Iraqi 
Government in a way that causes them to spend their money in an 
appropriate and responsible fashion in cooperation with some of 
our resources. I am going to have a very difficult time going 
home and telling the people of Idaho that we are going to spend 
their money while the Iraqi money is drawing interest in some 
bank somewhere in the world. We invested in their 
infrastructure to get their oil systems back in place and 
flowing into the world oil supply. It appears that has been 
accomplished and they are now reaping the benefits of it.
    So I think it is going to be very important for you--and 
you have done some of that already, Jim--to express where this 
money is going and how it is being spent. We have only heard of 
lump sums so far. There has to be much greater transparency in 
that process of understanding how much is going to be spent and 
what is out there drawing interest before this Senator is going 
to find it easy to keep supplying money into infrastructure, 
not to our troops, not to our men and women in uniform who 
stand at risk at this moment, but building the kind of 
infrastructure when ours goes wanting.
    Thank you. Thank you, Mr. Chairman.
    Chairman Byrd. Thank you.
    Senator Harkin.
    Senator Harkin. Director Nussle, good to see you again.
    I just want to point out in your written testimony you did 
say you chose to request war funding as an emergency 
supplemental, and you also chose to request war funding as an 
emergency. I heard that exchange between you and Senator Gregg, 
but it says right here that you are requesting it as an 
emergency. So I just wanted to clear that up.
    Second, I cannot help but comment on this statement of 
yours here about after ``7 months in this OMB job, many of the 
ideas we are asked to fund reflect a sky is the limit mind set. 
But this money does not belong to us. It is the taxpayers' 
money.'' We hear that a lot. It is the taxpayers' money. It is 
true. It is the taxpayers' money.
    But you know what I hear from the taxpayers in your home 
county and all over Iowa? They want better roads. They want 
safer bridges. They need their schools repaired. They need 
clean water. We have got over $3 billion in backlog for rural 
water and wastewater. We put some of that out a few years ago 
and it went out right away. And these are systems that the 
engineering work is done. The plans are there. All they need is 
the money to put them in. And I can tell you our small towns 
and communities all over our State of Iowa need this. Right 
now, a lot of them are being asked to pay enormous amounts of 
money for water and wastewater, and they are not meeting some 
of the environmental regulations that they need to meet. So we 
have got a big unmet need out there.
    So, again, it just seems to me that--from your standpoint, 
it seems to me, and this administration--you represent the 
administration--that Government spending for reconstruction is 
fine in Iraq, but somehow it is onerous here in America. And 
then you go to great lengths in your statement to say there is 
a time and a place for that. Well, do it in a regular, not an 
emergency supplemental. Well, it seems to me the time and the 
place for it is when the need is here, and the need is here 
right now for the things I just mentioned.
    I read your testimony earlier and you mentioned about 
Manchester. You said expanding Government does not create one 
job in my hometown of Manchester. Well, quite frankly, I was 
just looking lately just on school construction alone, Delaware 
County got $295,199 for school reconstruction. That put jobs in 
those communities and made the schools safer for our kids.
    Road projects. The Iowa Department of Transportation wants 
to do a bridge and culvert replacement near Edgewood. Well, 
that is jobs that could go to people this summer in the State 
of Iowa and in your home county and put people to work and get 
the jobs done. I suppose it could wait another year, but 
everything can be put off I guess. But then it costs more and 
more money to get it back up the longer you wait.
    So just put me down as someone who says, yes, I recognize 
this is the taxpayers' money too, but I also recognize that 
some of these things cannot be done by an individual taxpayer. 
They cannot be done by a family. They cannot even be done by 
the community. It has to be the community at large, the United 
States of America. And that is our job as appropriators.
    And so I think the need is there now with us facing--we do 
not know if it is a recession or what it is. We know it is a 
downturn, and we know that we have unmet reconstruction needs 
here in our own country. So I would hope that we would look 
upon the need here just as greatly as we look upon the need in 
Iraq.
    So that is my speech. I took a little too long on that. I 
assume that is just a philosophical difference that we have.
    But I do want to know about one thing, and Senator Mikulski 
is certainly our lead on this in terms of funding for the Byrne 
grant program. You know this as well as anybody, Jim, and you 
know what it has done in Iowa, what it has done for our drug 
task forces. In Iowa, cuts that occurred in 2008 will eliminate 
15 of 21 successful drug task forces unless we restore it. The 
cuts in the Byrne grant program, that the President asked for, 
will have a devastating effect on our law enforcement all over 
Iowa. I just say Iowa because I represent Iowa, but it is true 
of the Nation at large.
    And I would like to know what you, as OMB Director, are 
doing within the framework of the White House to get the Byrne 
funding back up to where it should be. Again, we cannot wait 
till next year, Jim. We have got to do it now on this bill--on 
this bill. And I would like to have your thoughts on whether or 
not you would be willing to accept the increase, the bump-up--I 
think it is about $490 million to get it to $660 million for 
the Byrne grant program to get it to last year's level that 
passed the Senate, and do it on this supplemental.
    Mr. Nussle. Well, first, to my friend from Iowa, thank you.
    With regard to Byrne--and I think that may be as good a 
place to jump off as any. First, on moving forward on the 
budget that we are requesting--and I was just stating this 
before--what we have tried to do is we have tried to take a lot 
of successful, in many instances, often well-meaning grant 
programs, many of them across the Justice Department and 
consolidate them into four so that our law enforcement agencies 
back home can take better advantage of them. Byrne would be 
included in that. So it is not that it is cut. It has been 
adjusted.
    The cut--the interesting part about this, which I was 
surprised about too is that actually Congress decided last year 
to cut funding. Almost $350 million was cut in 2008 in the 
appropriation from the 2007 level.
    So I think we know there are limited resources. I think 
both Congress and the President recognize that, and what we are 
trying to do is say how can we best spend those resources, how 
can we get them out as efficiently as possible to the law 
enforcement who are on the front lines, as the Senator knows, 
as well as I do, doing that work. And that is the reason that 
we made the request in this year's budget the way we did.
    So I believe there is a regular appropriations process to 
deal with this and deal with it effectively, but we should not 
make up for an omnibus bill or an omnibus appropriation that 
cut the funding just now 5 months later by increasing it again 
and suggesting that that is somehow now an emergency.
    Senator Harkin. Well, I am sorry to hear you say that 
because I think it is an emergency. Plus the fact, you put 
those four together. Then you cut the funding. So everything 
takes a cut. Those four you put together, if you add up all the 
funding for those, it is more than what you put in for that 
combined program.
    Mr. Nussle. That is correct. But also, that is in part 
because we recognize that Congress cut $350 million from the 
Byrne grant program just this last year alone.
    Senator Harkin. Well, that was only after the President 
vetoed the bill. We did not cut it before, did we? No. We only 
cut it after the President vetoed the bill and insisted on huge 
domestic spending cuts. So that is what we were confronted 
with.
    Mr. Nussle. What he insisted on was that the budget conform 
to a top line, recognizing we did not want the deficit to go up 
or, for that matter, taxes to go up. And so, obviously, 
tradeoffs within that budget had to be made. And that is the 
reason that the President made that suggestion, but Congress 
made the determination of where that priority----
    Senator Harkin. And I hate to go on, but under the Byrne 
grant program, the amount that we have missed from last October 
to right now--we have had a little bit of a cushion. People 
have been able to make it up. If we have to go to next October 
before it is funded again, we are going to lose a lot of these 
people. The task forces will be decimated. They will lose a lot 
of the things that they have built up.
    So we could take a little gap, but we cannot take a year's 
gap. And that is what you are asking us to do. And that is why 
I think it is so necessary to put the Byrne money in this 
supplemental before we lose all those people and our law 
enforcement people that are in place right now because of the 
Byrne program.
    Mr. Nussle. Well, again, we believe that is a discussion 
that needs to happen within the regular appropriations process, 
and we should not hold up the troop funding in order to have 
that debate.
    Senator Harkin. Well, we will not hold up the troop 
funding. We will just add it. We will not hold it up. We will 
just add it to the troop funding.
    Mr. Nussle. But it has already been 14 months since it was 
sent up. So it has been held up, we feel, a long time.
    Senator Harkin. Well, it is not holding it. We are just 
going to add it.
    I am sorry I ran over my time. Thank you, Mr. Chairman.
    Chairman Byrd. Thank you.
    Senator Bennett.
    Senator Bennett. Thank you, Mr. Chairman.
    Mr. Nussle, you have one of the toughest jobs in town and 
today's experience will confirm that.
    I am sympathetic with the issue that Senator Craig raised. 
I am caught between the desire to support the President in his 
request for a clean supplemental and the recognition that this, 
in many cases, is the only vehicle leaving town because we are 
probably looking at an omnibus bill that we will deal with 
after the election in a lame duck session. And we have done 
that enough times in the past to realize that it is not the 
most orderly of processes when we get to that, and a lot of the 
issues that we need to deal with in an orderly process could be 
dealt with in this supplemental if, indeed, we do what Senator 
Harkin has just asked and break the requirement that it be a 
clean one. So it is a dilemma that we are all in, and I am 
sympathetic with the administration. I like the idea of a clean 
supplemental, but I also recognize the reality that there are 
some other problems that we have to tackle.
    So let me take one that came up in our hearing yesterday 
with Senator Kohl's chairmanship in the Agriculture 
Subcommittee. In this supplemental, you are asking for $350 
million in additional funding for Public Law 480, title II 
grants. Interestingly enough, last year the administration 
asked for $350 million in additional funding for Public Law 
480, title II grants. The year before that, the administration 
asked for $350 million in additional funding for Public Law 
480, title II grants.
    This is a pretty striking coincidence that 3 years in a row 
it is exactly $350 million that is the additional amount that 
is needed. It raises the obvious question of why is this not in 
the annual budget submission. If it is going to be $350 million 
more every year, why is $350 million more not included every 
year? If it is, indeed, a 1-year kind of thing, why is it 
always $350 million? That seems to be a number you have fixed 
on.
    Now, the World Food Program has said we need an additional 
$500 million to deal with increased food and transportation 
costs. One of the major problems that we face around the world 
is that food costs are going up very dramatically. In our 
subcommittee, we have to increase the amount of money for WIC 
just to keep the number of WIC participants level. We are not 
sending the money up to take care of an increased workload. 
Just to take care of the people we have and feed them the same 
amount of food, the dollar cost goes up.
    The corn cost is going up dramatically as we plant more and 
more corn in order to turn it into ethanol, and that is another 
issue that I will not get into with the Senator and the former 
Congressman from Iowa. I have demonstrated that I will never 
run for President because I voted against ethanol. So I am not 
going to be campaigning in Iowa.
    But as the corn prices go up, there are segments of our 
population for whom corn is the dominant food staple. And then 
people start plowing up their wheat fields in order to plant 
more corn in order to get in on the ethanol boom, and the wheat 
prices go up.
    So it is not surprising to me that there is an amount in 
here for additional Public Law 480 grants, but it seems to be 
insufficient. And if we were to add something to that, would 
that draw a veto threat from the President?
    Mr. Nussle. Well, Senator, first of all, with regard to 
your point about it is always $350 million, I am not sure I can 
directly respond to that, but it is and continues to be 
frustrating anytime you have to request something outside of 
the annual appropriations process and where you cannot plan 
ahead. I can only report to you that I believe those accounts 
and amounts were necessary at the time they were requested.
    Senator Bennett. I do not question that they are necessary. 
I think they are turning out to be predictable is my point.
    Mr. Nussle. Well, and in that regard, if they, in fact, are 
that predictable, then they should be candidates for 
consideration as part of the regular budget.
    In this instance, we believe that we have addressed both of 
those concerns first with an announcement that was made, I 
believe, just a couple of days ago from the White House where 
another $200 million would be increased for emergency food aid 
through a drawdown from the Emerson Trust.
    Senator Bennett. Yes. I am familiar with that, but that is 
not the same kind of thing.
    Mr. Nussle. No, but it is something that we believe will 
help address the concerns that you raised.
    Senator Bennett. Right.
    Mr. Nussle. And in addition to that, with regard to the WIC 
program, as the Senator, I am sure, is aware, there is a 
contingency fund at the Department of Agriculture for those 
types of----
    Senator Bennett. I am not talking about putting WIC in this 
budget. I just use that as an example of the upward pressure on 
food prices that is hitting Public Law 480 in a very real way.
    Mr. Nussle. Well, but to use those as the examples, in an 
instance where we do not have the flexibility, we request the 
funds. That is Public Law 480. In an instance where we do have 
the flexibility and where contingency funds are available such 
as WIC, we will make a transfer, and in fact, notification to 
Congress I believe is forthcoming on a transfer from that 
contingency fund to WIC in order to meet that need. But those 
are, again, flexibilities that we currently have that does not 
require us then to add to the supplemental for those purposes, 
and they can be dealt with during the regular appropriations 
process.
    Senator Bennett. One last quick question. The other thing 
that came out of our hearing yesterday was the status of the 
Food and Drug Administration (FDA). The FDA regulates 20 
percent of all consumer expenditures, nearly $1.5 trillion. And 
the Science Board has said that in order to fulfill its 
mission, the FDA needs an increase of $375 million. Now, Dr. 
von Eschenbach said we could not absorb $375 million in 1 year. 
Yet the increase for FDA just to take care of the cost-of-
living increase in pay is $59 million, and they need an 
additional $50 million plus over that $59 million to take care 
of its duties.
    We have gone through this with Dr. von Eschenbach, but I 
just wanted to alert you to the fact that we are paying 
attention to that and that is one thing we would like to 
increase, if not in this supplemental, we would like to 
increase--this is my only shot at you. So this is a warning 
that FDA funding is one that on the Agriculture Subcommittee at 
least we think has been inadequate.
    Mr. Nussle. I would be happy to take your call anytime. So 
this hopefully will not be your only shot.
    But I share your concern about the regular appropriations 
process. If it is, in fact, as you say, a reality that this is 
the last train, I can understand why you and anyone else would 
want to be on that train. But I hope it is not the last train, 
and I believe the President is hoping that it is not the last 
train and that more work can and should be done if, in fact, 
the urgency and the needs are there. And I think they have been 
very well expressed here today that, in fact, we need to get 
that regular appropriations process moving and not wait till 
after the election or, for that matter, the next President to 
help make that determination.
    Senator Bennett. Thank you.
    Mr. Nussle. Thank you.
    Chairman Byrd. Senator Mikulski.
    Senator Mikulski. Thank you, Mr. Chairman. And thank you 
very much for calling this hearing. I think it is an essential 
thing we need to do.
    Mr. Nussle, I got to tell you I am really disappointed in 
your testimony. It has been some time that I have heard the 
kind of tone that has been expressed by a representative of the 
Bush administration. Your testimony has been disappointing in 
both tone and substance. I personally take offense at the 
snarky, scolding, dismissive way that this testimony was 
presented, and I think it is inappropriate.
    We just left an excellent bipartisan hearing on military 
medicine about how we can support our troops. Later on this 
afternoon at 2 o'clock, I will be chairing a hearing on the 
Federal Bureau of Investigation (FBI) with my dear colleague, 
Senator Shelby, again in the spirit of bipartisanship.
    Your testimony is an ideological commentary, not the 
testimony of OMB. So since you are pugnacious, guess what. I am 
going to be pretty pugnacious too, only my pugnaciousness is 
not going to be directed at the Congress. It is going to be 
pugnacious about the people I represent. So let us get to it. 
Pugnacious? You bet.
    Let us pick up on what Leahy and Harkin said about Byrne 
grants. You want the regular order? I am the regular order. I 
chair the Commerce, Justice, Science (CJS) Subcommittee and 
what this administration has done here has been outrageous.
    Number one, let us go to safety and security. We have 
funded the surge at Baghdad, but we have not funded the surge 
of violent crime in Baltimore, Biloxi, or other places. You 
have zeroed out the COPS program. You have zeroed out the Byrne 
grant program. When Shelby and Mikulski tried to do something 
last year in the regular budget, we were told eat $3 billion or 
face a veto threat. So we foraged and we skimped and we 
squeezed in to be able to make sure that our bill did not get a 
veto threat, and we came up with $170 million.
    You can talk about all your smoke stacks and whatever, but 
you bet there is smoke. There is smoke right here now and there 
is frustration from State and local police officers that say 
they need help. They need help. And this administration has 
funded $5 billion over the last couple of years to fund the 
training of Iraqi police. You bet they need training, but I am 
telling you I need the money. Senator Shelby and I need the 
money to make sure that our local law enforcement, the thin 
blue line, gets the money that they need to fight violent 
crime.
    So I am going to ask in plain English if, in fact, we can, 
through this supplemental, restore the Byrne grants and only 
the Byrne grants to the needed level of $660 million, will you 
support it or will we face a veto threat?
    Mr. Nussle. Well, Senator, I can only repeat what the 
President has said on----
    Senator Mikulski. The President did not say anything about 
this. You think if I went to see the President, he would say 
no?
    Mr. Nussle. Senator, I can only repeat what the President 
said, and his two priorities that he stated were that the bill 
stay within the $108.1 billion request and that it support the 
troops. That is what he has said on the topic. Beyond that, I 
do not believe he has--I think the Senator is correct--not 
spoken directly to those issues. But I also believe that the 
regular appropriations process is the time and the place to 
deal with those challenges that----
    Senator Mikulski. But you eliminated it. You eliminated the 
COPS program and you eliminated the Byrne grant program in your 
regular appropriations request. So you are saying do not fund 
it in the supplemental. The President does not request it in 
the regular order, and now you are telling me you cannot accept 
it in the supplemental because the President did not talk about 
it. And when you sent us the CJS President's request, it is not 
in there for 2009.
    Mr. Nussle. Well, Senator, I apologize in advance if this 
appears to be snarky, but when I hear from the Majority Leader 
that he is going to wait until next year to resolve this issue, 
that to me sends a signal to the President and to our 
administration that, in fact, this is not urgent. It is not 
something that needs to be dealt with now. Otherwise, it is 
possible--and having been a Member of Congress, I am aware, as 
you are--for the appropriations process to continue and to be 
done expeditiously and to deal with those challenges.
    Senator Mikulski. Let us come back to the Byrne grant 
program. We can get tone later. Let us come back to the Byrne 
program. If I am successful, working with Senator Byrd and 
Senator Cochran--and when I say I, I mean, Senator Shelby and 
myself, again, a bipartisan effort to keep the streets and 
neighborhoods of America safe--will you encourage the President 
to issue a veto threat?
    Mr. Nussle. I would encourage the President to veto 
anything that was over $108.1 billion, did not meet the needs 
of our troops, for that matter, in this instance, dealt with a 
problem that could have been handled in the 2008 appropriations 
process but was underfunded by the Congress by----
    Senator Mikulski. It was underfunded because you had a veto 
threat. I sat there for hours with Senator Shelby and myself 
trying to comply with yet every little bit and piece from the 
White House about this. We were ready to go. We had the money 
in the Federal checkbook. We had worked assiduously on a 
bipartisan basis to fund State and local government. Do not 
tell me Congress underfunded it. You had a veto threat of over 
$3 billion on my CJS bill.
    Mr. Nussle. It was not because the CJS bill was over its 
amount. It was because the Congress had decided that all the 
appropriations added together were over the top line that the 
President had put forward in his budget. So it was not 
specifically for Byrne grant programs. It was not specifically 
on these issues. It was overall the Congress was not living 
within what the President felt was a reasonable and fiscally 
responsible top line Federal budget.
    Senator Mikulski. I totally disagree with you. I disagree 
on your recollection of history. I disagree with you on the 
President's budget submission to you, and I disagree with you 
on this matter.
    I have other questions related to the National Guard, which 
I feel has been treated like an Orphan Annie in this 
President's appropriation both in funding for equipment and 
return home. I will put that there.
    And then we are going to have a big deal on trying to deal 
with the census.
    But my time is up, Mr. Chairman. I am going to force this 
issue. Mr. Chairman, with your cooperation, I hope that we fund 
it. If we are talking about a safe and secure America, I want 
to make sure the streets of the United States of America are 
safe and secure, and I will work on a bipartisan basis to do 
it.
    Chairman Byrd. Right on.
    Senator Murray.
    Senator Murray. Mr. Chairman, thank you very much for 
having this hearing.
    Mr. Nussle, I share the anger, frustration, I guess 
pugnaciousness of the Senator from Maryland. It is extremely 
disturbing to me that we are getting an emergency supplemental 
request for Iraq and Afghanistan 5\1/2\ years into this war 
that is being paid for off the books. I listened to your 
testimony. You say that this has to be emergency because of 
changes on the ground.
    Well, what about the changes on the ground here at home? 
What about those? What about the fact that we have many, many 
road projects that are a result of floods, natural disasters 
that have occurred, that are changes on the ground here at 
home? What about the changes on the ground in the economy where 
people are being laid off in community after community, where 
mortgages are going into foreclosure, where housing is a number 
one concern for Americans? What about the healthcare crisis? 
What about the fact that your budget that you sent to us is 
absolutely inadequate when it comes to investment in our 
infrastructure? Those are changes on the ground that we have an 
obligation to respond to.
    Now, here we are 5\1/2\ years into this war and we are 
getting a supplemental request that takes care of Iraq. Well, 
we are creating jobs in Iraq. We are building schools in Iraq. 
We are building roads in Iraq, and we have a President and a 
White House who is fighting this Congress' efforts to try and 
build schools here, to try and take care of our roads, to try 
and take care of the infrastructure, to try and give our 
families here at home security again. So, yes, you are seeing a 
little bit of anger here.
    My friend and colleague, Senator Dorgan, has talked about 
the waste, fraud, and abuse--and I share that concern--
uncovered by the Government Accountability Office (GAO) and the 
inspector general when it comes to these funds. Yes, we are 
having a hearing on that. But we are also having a hearing 
because we believe that there are emergencies here at home and 
infrastructure costs here at home that have to be paid for and 
met.
    And you bet our constituents are angry that their taxpayer 
dollars that you so jealously guard are going over to Iraq and 
Afghanistan to rebuild them when, as you heard, they have oil 
revenues that are sitting in our banks here, $60 billion I have 
heard, $34 billion to $60 billion. No wonder you are hearing 
the frustration on a bipartisan level here from all of us. We 
are frustrated, 5\1/2\ years into the war, that we are facing 
an administration who can blithely come before this committee 
and say the only emergency we have is a war that has lasted 
5\1/2\ years. There are emergencies in every one of our 
communities, and we have a responsibility to address them.
    Once again, we have a supplemental request sent to us that 
does not have one dime for the men and women who are fighting 
for us when they come home. As Senator Mikulski said, we had a 
very good bipartisan hearing this morning to listen to the 
medical personnel talk to us about the long-term costs for 
those soldiers who are coming home with those invisible wounds 
of war of post-traumatic stress syndrome and TBI, and it is 
going to cost us going into the future. And we have got an 
administration that says they are not part of the cost of war.
    Well, this Congress disagrees. Last year we added $1.8 
billion on the supplemental. We said they are a cost of war. 
And again, we have to look at that because we do not get a 
request from this administration that is real. And I find it 
just really disconcerting that this administration continues to 
deny that the cost of caring for our soldiers is a part of the 
cost of war.
    Now, Mr. Nussle, my obligation as chairman of 
Transportation and Housing is to look at what those requests 
that are coming from your administration. Once again, in this 
budget, we are seeing requests in a supplemental for roads and 
bridges not here at home but in Iraq and Afghanistan. The 
President has committed to improving the infrastructure in Iraq 
and Afghanistan as a way to improve the lives of their 
citizens. Well, when you look across the board at the 
supplemental requests in the Defense Department, State 
Department, and military construction, you are asking for more 
than three-quarters of $1 billion for road construction in Iraq 
and Afghanistan.
    Meanwhile, right here at home, we have a Federal highway 
emergency relief program that is shut down because it is out of 
money. There is a backlog of eligible requests of more than 
$560 million for roads and bridges not in Iraq but here at home 
that have been damaged or destroyed and declared disasters in 
21 of our States. None of them are going to get a dime without 
a supplemental appropriation. But somehow you are saying that 
we have to take care of roads in Iraq and Afghanistan, funding 
over $725 million, and here at home our roads that are in need 
of emergency repair that are in backlog do not get requested a 
dime.
    And I hear you sitting here saying that you are going to 
recommend a veto if we add those to the supplemental, and those 
are roads and bridges that our constituents need to cross to 
get to work, to take care of their families, and to make sure 
they have got security here at home. So perhaps you could 
explain to us why you are going to recommend vetoing those 
emergency road repairs here at home.
    Mr. Nussle. Well, first, Senator, I do not take your tone 
or Senator Mikulski's tone as anything but passion for the 
issues you are concerned about and for your constituents. I do 
not take it any other way than that. Number one.
    Number two, when it comes to transportation, certainly 
there are funds that are needed in Iraq in order to fund the 
transportation needs----
    Senator Murray. Aside from Iraq, what about the ones here 
at home?
    Mr. Nussle [continuing]. That directly support----
    Senator Murray. What about our emergency requests for here 
at home?
    Mr. Nussle. But I think it is here for you to understand or 
for you to hear that those directly support the troops and 
their movements in Iraq. It is not just----
    Senator Murray. Fair enough. I am not saying----
    Mr. Nussle [continuing]. Building a bridge----
    Senator Murray. I am not saying we are not going to fund 
that. I am asking you about the ones here at home.
    Mr. Nussle. Okay. And the Senator has, obviously, taken a 
leadership role. We have had a 17 percent increase in the last 
3 years. We have an 11 percent increase that we have right now 
in 2008 for these transportation projects.
    Senator Murray. The emergency funds are at zero.
    Mr. Nussle. There are other funds that can be reobligated 
within and transferred within those accounts in order to meet 
those challenges when there are emergencies.
    Senator Murray. Mr. Chairman, I would just like to point 
out that the President's budget request for 2009 slashes our 
highway and airport investments by $2.6 billion. I am not sure 
where we are going to be transferring funds from.
    Mr. Nussle. Well, as the Senator is well aware, it is in 
part because the Highway Trust Fund itself is running out of 
money because of the challenges of not only over obligation but 
also challenges from the gas tax.
    Senator Murray. Absolutely, and Congress needs to deal with 
that. But the fact is that when you send over a budget request 
that is $2.6 billion below what we need, we are going to have 
to make that up.
    And I take exception, in my last 15 seconds here, to your 
comments that, well, Congress is not doing its job because we 
are not doing our appropriations. And you have heard the 
Majority Leader say he may do it after the election. No 
surprise. When we get budget requests that are well below what 
any Member of Congress can support. We cannot fund them because 
they do not adequately meet the needs of America and what we 
hear--we get budgets from your office that slash highway and 
airport funding by $2.6 billion. We had hearings in Senator 
Dorgan's subcommittee on the Corps of Engineers projects, and 
those poor individuals are sent over here to testify before us 
and have to defend their budgets when they know they cannot 
because we are not adequately investing in critical projects 
across the country or for Hanford cleanup where the 
administration's budget didn't even come close to meeting its 
moral and legal obligations. And yet, you say to us, we make up 
those funds, they get vetoed.
    So rightfully, we are saying, well, we are not going to 
pass budgets that are just going to go over there and get 
vetoed one after the other simply on some partisan basis. We 
are going to do them in a responsible way, and if that means 
that we have to wait until we get a President who is willing to 
meet us and work with us, that is what this Congress is going 
to do.
    Chairman Byrd. That is right, Patty.
    Senator Dorgan.
    Senator Dorgan. Mr. Chairman, thank you very much.
    Director Nussle, I am not going to ask you a question, but 
I am going to tell you what disturbs me. You told us what 
disturbs you and you have a right to come at our invitation and 
tell us what is disturbing to you. So let me tell you what is 
disturbing to me.
    With this request and the two requests we expect next year, 
including a placeholder and the money above the placeholder, I 
estimate that we will be at $974 billion--$974 billion--2001 to 
2008 for the war in Iraq and Afghanistan. That is almost $1 
trillion, all of it required by this President as an emergency, 
all of it borrowed. So the President sent soldiers to war, 
asked them to strap on body armor in the morning, get shot at 
during the day, but he did not have the courage to ask the 
American people to pay for the war. In fact, he said we will 
send soldiers to war and let us offer more tax cuts. That is 
disturbing to me. It is unbelievable to me.
    Fighting this war, a war whose justification, by the way, 
was based on bad intelligence and would never be authorized 
today with what we now know and fighting it on borrowed money, 
year after year after year declared as an emergency by this 
President when he knows it is not an emergency--he knows that 
he is supposed to put this in the budget. Senator Byrd required 
him to put it in the budget, but they do not do it.
    Now, let me tell you what else is disturbing to me. Last 
year you asked for urgent money. We provided urgent money. I 
want to tell you where--only because of some really good work 
by the New York Times do we know this, by the way. Oversight 
that is not done by the administration or by this Congress. Let 
me show you what the New York Times with some really thoughtful 
investigative reporting has shown us.
    One-third of $1 billion, nearly, went to this man, 22-year-
old Ephraim Devaroli, chief executive officer (CEO) of a firm 
in Florida. CEO, okay? Now, he had a vice chairman of his firm. 
Let me show you a picture of the vice chairman. He is a massage 
therapist. This company they had was a shell company by the 
CEO's dad. Well, the CEO becomes 22. He has got a massage 
therapist as a vice chairman of the firm or vice president of 
the firm. They get over $300 million from this Defense 
Department to provide ammunition to the Iraqi fighters. And 
guess what. The Iraqi fighters end up with a box full of 
shells, some of it from the mid-1960's from China.
    Now, I would like to ask how on Earth does over $300 
million go to a company like this. It is shameful. And this is 
just one small chapter. I have held 12 hearings in the policy 
committee on these issues. This is just one.
    I would like the general who heads the Army Sustainment 
Command to sit at this table and explain that, and I would like 
to have subpoenaed both of these folks. In fact, I have written 
to the chairman on this point.
    This is just one. One. I could sit here and describe a 
dozen exactly like it. That is disturbing to me. I think it is 
shameful this is happening. Waste, fraud, and abuse, the most 
significant in the history of this country.
    Now, we know that Kellogg, Brown & Root, Halliburton, are 
hiring people, sending them--because they get contracts from 
this Government, I assume with this money, and they run the 
payroll through the Cayman Islands so they can avoid paying 
payroll taxes to this Government. Shameful in my judgment. Does 
anybody care about it? They are still getting contracts. Is 
anybody doing anything about it? I think it shameful.
    Judge al-Rahdi showed up, by the way. Judge al-Rahdi came 
to this committee, sat where you are sitting. And you know 
what? He was appointed by Bremer when we had Bremer in Iraq. 
Judge al-Rahdi was the head of the Iraq Commission on Public 
Integrity appointed by Mr. Bremer. They tried to kill him three 
times. He sat just where you are sitting a month ago, and he 
told us $18 billion of waste was uncovered, most of it American 
money. $5 billion in the defense ministry in Iraq, $3 billion 
in electricity, $2 billion in transportation, all of that 
American money, all of that from the U.S. taxpayer.
    Now, instead of plugging the rat hole, what you are 
suggesting is to let us just throw more money at this.
    It is just unbelievable to me. And at some point, we have 
got to stop it.
    Chairman Byrd. Right.
    Senator Dorgan. You show up here on behalf of the President 
saying I want more money, it is urgent, I want it as an 
emergency, I do not want you to pay for it, get us up to $1 
trillion, it does not matter. I am saying to you the game is 
over. At some point, this Congress has to say we are not going 
to do this.
    Chairman Byrd. Right.
    Senator Dorgan. Somebody justify to me that $300 million 
goes to a 22 year old in a shell company with a massage 
therapist for a vice president and the American taxpayer should 
pay for that. Somebody needs to come and answer for these 
things. And it is hundreds of examples just exactly like it.
    So that is what disturbs me. I am disturbed we are sitting 
here. This administration is conservative? No, no. 
Conservatives would never ask that we send soldiers to war and 
not pay for it. In fact, not only ask, this President insisted 
that we send soldiers to war, demand the money for it, and we 
insist that it not be paid for.
    Now, you say, Mr. Nussle, that our budget deficit this year 
is $400 billion plus. It is not. Take a look at what you are 
going to borrow in fiscal policy. You are going to borrow over 
$800 billion. This country is so far off track it is 
unbelievable. You think the currency traders and the electronic 
herd out there that take a look at the fundamentals of a 
country do not recognize this? It seems to me responsibility 
starts in the White House and your office, and yes, it belongs 
here as well. I am tired of rubber stamping so-called urgent 
requests that send $300 million to a company that is going to 
buy 45-year-old ammunition and have the American taxpayer pay 
for it, ship it to the Afghan fighters who say the ammunition 
is no good.
    I must also say that it bothers me that it took some 
enterprising reporting by the New York Times to get this. It 
should have not taken that.
    So you came and you told us why you are disturbed. I am 
telling you why I am disturbed. I am not going to just sit here 
anymore and say, yes, let us just keep playing this game. You 
know better. The President knows better, and so does this 
Congress. This has to stop. You want money? Then tell us how 
you want to pay for it. At some point, you have got to stop 
saying to soldiers, we will send you to war, and by the way, 
when you come back, you and your kids can pay the bill.
    Now, I am sorry for sounding angry. I am angry because all 
of us have been a part of this, and we have allowed this to 
happen. And there comes a time when we say we are not going to 
allow this anymore. Somehow, some way, some day, somebody has 
got to stay stop.
    Chairman Byrd. Mr. Nussle, do you want to respond? Take a 
couple minutes.
    Senator Dorgan. I did not ask him any questions, Mr. 
Chairman, but I certainly understand the need to respond.
    Mr. Nussle. No, I do not feel I need to respond except to 
say I agree with much of what the Senator said, particularly 
with regard to responsibility and oversight. And I appreciate 
not only the tone, but I share it particularly with the case 
that the Senator has brought up. So I do not have any other 
response other than to say thank you for bringing that to our 
attention, and I will follow up. Thank you.
    Chairman Byrd. Senator Feinstein.
    Senator Feinstein. Thank you very much, Mr. Chairman.
    I think, Mr. Nussle, that my colleagues said it very well. 
I think it is more than frustration. I think we see this Nation 
really going into a period of great financial jeopardy. The 
debt has gone up 68 percent during this administration. 
Entitlements and interest on that debt are now 62 percent of 
everything that is spent in a year. Everything that people ask 
us for, the expenditure for those items, every single domestic 
Department is just 18 percent of what is spent, and defense is 
another 20 percent.
    Mr. Chairman, I do not think we should do a supplemental 
this large. I think we ought to break it down. I think we ought 
to know where every dime goes. Never before in history has a 
war been funded on the debt. Every single war has been fought 
with additional revenues, except for this one. And the debt is 
now at what? $9 trillion and going up. I think it is a very 
real problem for the survival of the Nation in a healthy way. I 
think it is going to be very hard to vote for a $108 billion 
emergency supplemental that puts that amount on the debt. And I 
think Senator Dorgan and Senator Murray have said it really 
very, very well.
    I left home yesterday and CNN had the weather map up and a 
big swath of the United States was under threat of catastrophic 
fire. Yesterday we had a hearing on the Interior appropriations 
bill. Secretary Kempthorne testified. And the bill eliminates 
everything for wildfire firefighting, and we are $350 million 
short for fire suppression in this country. We have just lost 
people in Colorado in a fire. And I do not understand.
    And so we fight over this 18 percent that is left, and it 
is not enough. We cannot fix levees in California that could 
inundate 20 percent or 30 percent of Sacramento with 20 feet of 
water. We cannot fix bridges. Senator Murray is absolutely 
right. We cannot take care of the transportation needs of our 
people on this 18 percent of what we are spending. And as 
Senator Dorgan pointed out, there is so much waste, fraud, and 
abuse in the Iraq money.
    So my question to you is why should we not break it down--I 
mean $10 billion is a lot of money--and really monitor every 
dollar and where it goes. Why should, with this record, we give 
you $108 billion with essentially no accountability, not 
budgeted, on the debt?
    Mr. Nussle. Well, Senator, first of all, I do believe there 
is accountability. There should be accountability. I join you 
in that and I share your and Senator Dorgan's anger and 
frustration whenever a dollar is wasted. Period. I think you 
both have said it very well.
    As far as holding accountable, I also believe that you 
should, as you have with me today, haul up the people who are 
responsible and ask them those questions, which has been done. 
There have been hearings on this supplemental for the Secretary 
of Defense, the Deputy Secretary of Defense, both the Secretary 
and Deputy Secretary for State, as well as the Joint Chiefs. So 
I believe you are expressing that accountability and that 
oversight.
    I am not suggesting you could not do more. We all could. 
Clearly, there are funds, as Senator Dorgan stated and stated 
quite well, that continue to slip through the cracks not just 
in Iraq, but even here at home. That continues to happen. And 
we monitor a high risk list of inappropriate payments that we 
and the GAO work on constantly. We have made some progress. 
Never enough.
    So I share your anger whenever a dollar is wasted, and I 
believe that type of oversight should be done. And we have 
joined you in that and will continue to join you in that.
    But as far as splitting it up, splitting it up suggests to 
me that you may also be talking about splitting up the 
appropriations, which for this at least, we believe is 
difficult to do particularly in theater over in the Middle 
East.
    Senator Feinstein. My problem is I have got a part of the 
State that could well burn this summer again. We cannot provide 
the amount of money we need for wildfire protection. It seems 
to me that if you are going to come here with an Iraq 
supplemental, it is just as much an emergency that we have 
adequate law enforcement, adequate firefighting protection in 
the United States as Iraq.
    And maybe the administration ought to think about that a 
little bit because it is rather cynical what happens. You fund 
the war off budget on the debt and you press for continued tax 
reductions and everything that is hurt is the domestic agenda. 
So the bridges collapse. The gridlock is more. We cannot fight 
wildfire appropriately. We cannot support our law enforcement 
people. And maybe that is what you all want. That is the 
result. That is the result. If you do not fund the war based on 
present-day revenues, it all goes on the debt.
    I think maybe the time has come when we do have to put our 
foot down and say we are not going to continue to do it.
    Chairman Byrd. Let us have order.
    Senator Feinstein. So, Mr. Chairman, this is bigger than 
Mr. Nussle, but it is really for us. I am going to have a very 
hard time voting for $108 billion knowing what is happening in 
the United States, knowing the violence is going up, knowing 
that we need to do some things just to protect our own people 
and cannot do it. It is not right. It is not why we came to 
this place.
    And the administration will not sit down, will not work in 
a collegial style, will not say let us work it out. It is your 
way or the highway. And you reach a point where you get filled 
up to here with it and just make a decision not to do it 
anymore. I think that is where some of us are.
    Thank you, Mr. Chairman.
    Chairman Byrd. I thank the Senator.
    By agreement with our witness, Mr. Nussle needs to leave at 
2 p.m., and we have a floor vote at 2:15. I beg the indulgence 
of the three remaining Senators to limit their remarks to 5 
minutes. Senator Durbin.
    Senator Durbin. Thank you, Senator Byrd, and thank you for 
this hearing. It has been a good one, an important one, and I 
appreciate you gathering us together. Mr. Nussle, thank you for 
joining us too.
    In your opening statement, you have what I think really 
tells the story when you refer to your hometown and you say 
expanding Government does not create one job in my hometown of 
Manchester, Iowa. I have seen that movie before. I saw that 
movie in 1994, if you will recall, when the Gingrich folks 
closed down the Government, and Rush Limbaugh said nobody is 
going to notice. But they did because whether you like it or 
not or want to concede it or not, there are some fundamental 
functions of Government which are important to every American.
    And you never know what tomorrow will bring. Do you think 
that Senator Landrieu had any idea a month in advance what was 
going to happen to her poor town of New Orleans? Do you think 
she anticipated that if something awful happened to New 
Orleans, as you might anticipate in Manchester, Iowa with maybe 
a tornado, that the Government would be prepared to respond? 
She counted on it and it did not happen.
    This mind set that you peddle, that the Government is our 
enemy, there is nothing they do that is right, we do not really 
need them, if it went away, life would not change, is just 
plain wrong. You and I were on an airplane together recently 
flying out here to Washington, trusting that the air traffic 
controllers were well skilled and there were enough of them to 
land that plane safely and that somebody had inspected that 
plane to make sure that it was safe to get on board for you and 
your wife and for me. So this concept, this notion that 
Government can be dismissed and ignored and it really is not 
important--I am afraid the record of this administration proves 
just the opposite.
    I share the frustration of others here. I voted against 
this war, and for the longest time, I voted to fund it 
believing that was the only way to do the right thing for the 
troops and bring it to a conclusion. And now I have reached a 
different conclusion. Sending a blank check to this President 
for this war is going to prolong the killing, prolong the 
deaths, the injuries that will return, and this President wants 
to hand off the ball on January 20, 2009 and walk away. That is 
not the way we should deal with it. We should deal with it 
honestly in terms of what is happening on the ground.
    To think in this room that we celebrated the first 
anniversary of a temporary surge--next year does the military 
want to celebrate the second anniversary of a temporary surge? 
There comes a point where it is not temporary anymore. There 
comes a point where this is not an emergency spending bill. 
Emergency suggests something unanticipated. Sadly, we have had 
to anticipate another year of war for the last 5 and maybe 
beyond.
    But let me get down to a real emergency. A lot of things 
have been mentioned here, and this is something unanticipated.
    I left here to go out in the hall and meet with the head of 
the world food program. She is a lovely woman who is doing her 
darnedest to try to feed a lot of starving people around the 
world. She is in trouble. There has been a dramatic increase in 
food prices. The price of rice in the last few months has gone 
up 83 percent. There are people starving. Mr. Zoellick at the 
World Bank warns us that over 30 nations may be facing food 
riots and instability. We may see their governments fall 
because of this. Now, that was unanticipated. Maybe somebody 
saw it coming. I did not.
    So I just have to tell you when she asked for $500 million 
more in food aid, I want to ask you do you believe that is the 
kind of emergency we should include in this supplemental to 
avert a crisis of starvation and political instability around 
the world.
    I met with Secretary Rice last week and had breakfast with 
her, and she said we need it. Give us the authority to buy some 
things locally so we can stretch it even further, but we need 
it.
    So based on that, do you believe this administration should 
take this world food crisis and put it in the emergency 
category of things we need to do right now?
    Mr. Nussle. Well, first of all, Senator, you know this from 
both of our proud traditions from the corn belt and the food 
belt that we stand behind absolutely no one in the world when 
it comes to the generosity of the American people.
    Senator Durbin. It is not enough, Jim. It is not enough. 
They need more.
    Mr. Nussle. But we should not forget that that is also 
done, I would say very respectfully. We do a lot. We do more 
than any other country. We take leadership roles in this.
    Senator Durbin. But is that the reason to do nothing now?
    Mr. Nussle. See, that is the reason I bring that up because 
that is suggesting we are doing nothing now, and that is simply 
not the case.
    Senator Durbin. We need to do more, Jim. If your neighbor 
is starving----
    Mr. Nussle. And we are doing more.
    Senator Durbin [continuing]. Even though you have helped 
them yesterday and they are starving today, what are you going 
to do about it?
    Mr. Nussle. But we are helping them today.
    Senator Durbin. Say do you not remember the good things we 
did yesterday?
    Mr. Nussle. But we are helping them today.
    Senator Durbin. No. We are not helping enough. $200 million 
under the Emerson program is not enough. She made it clear to 
me in the hallway. She needs $500 million, emergency money. Do 
you believe that is the kind of emergency that should be 
included in the supplemental?
    Mr. Nussle. I believe it should not be forgotten what the 
American people already do and the generosity we already show--
--
    Senator Durbin. So the answer is no?
    Mr. Nussle [continuing]. To the rest of the world. And we 
are doing more, as we just announced on Monday.
    Senator Durbin. So the answer is yes or no.
    Mr. Nussle. And we need partners around the world to step 
up in order to help assist in this as well.
    Senator Durbin. Come on, Jim. Stick with me, buddy. Yes or 
no.
    Mr. Nussle. I believe that not only have we requested funds 
not only in this appropriation but in others to meet that 
challenge, plus the announcement that we made Monday.
    Senator Durbin. Straight-talking Iowa talk. Yes or no.
    Mr. Nussle. We have $500 million in this request alone.
    Senator Durbin. $500 million in this supplemental request 
for world----
    Mr. Nussle. 40 percent of this is what we have been asked 
for of the $500 million. At least, that was my understanding.
    Senator Durbin. No, no.
    Mr. Nussle. And that is what we announced on Monday.
    Senator Durbin. No. Let me just tell you. This is a crisis 
and we cannot avert it. Some day someone is going to play back 
the videotape after this global food crisis and say why did 
America's Director of OMB not acknowledge the obvious if the 
head of the World Bank is acknowledging it.
    Mr. Chairman, you have been kind with your time. I yield.
    Chairman Byrd. Senator Landrieu.
    Senator Landrieu. Thank you, Mr. Director.
    When you came to my office some time ago to talk about the 
confirmation process, Mr. Director, you assured me that you 
would remember the emergency situation on the gulf coast. I 
have looked through all of the pages of this request for $108 
billion. I do not see one page on the gulf coast recovery which 
is still an emergency which happened less than 3 years ago. Is 
there some reason that it was left out? Was it done 
inadvertently or intentionally?
    Mr. Nussle. It was done based on the amount of 
appropriations that are already in the process, already in the 
stream, as well as the fact that we have requested funds for 
the next--in the coming year in order to meet those needs. So 
we believe those needs are being met based on the regular 
appropriations that have been done, as well as the emergency 
supplemental appropriations that have been requested and 
granted by the Congress in the past and the ones that we are 
requesting for the future. We are requesting $5.8 billion of 
emergency funding for 2009 alone.
    Senator Landrieu. Let me ask you that. That is a good place 
to stop. You are asking for $5 billion in the regular 
appropriations bill, which is Byron Dorgan's subcommittee. Do 
you know how much the country spends on new construction every 
year for the whole entire country?
    Mr. Nussle. I do not have that at my fingertips.
    Senator Landrieu. It is less than $5 billion. So explain in 
30 seconds or less how I am going to go to the committee to get 
100 percent of all the money Byron Dorgan has to fix the levee 
in New Orleans when there have got to be thousands of miles of 
levees around the country? How are we going to do that?
    Mr. Nussle. We have asked for those funds as an emergency 
over and above the regular appropriations process.
    Senator Landrieu. In the regular budget. In this 
supplemental.
    Mr. Nussle. Not in this supplemental, but for 2009. We 
believe there is enough resources right now in order to meet 
the current needs. That has been already agreed to and already 
funded. But for 2009, which we hope begins--at least fiscal 
year 2009 begins in October, we have requested $5.8 billion in 
emergency funding over and above the regular appropriations for 
Katrina.
    Senator Landrieu. Well, let me ask you this. On what basis 
did you all recommend the shift in cost share, which is 
normally 25/75, to 35/65 for that project when it was Federal 
levees that failed at no fault to the local community? On what 
basis was that cost share shifted?
    Mr. Nussle. Well----
    Senator Landrieu. And if you do not have the answer 
readily, you can get it back to me----
    Mr. Nussle. Why do I not do that rather than try and find 
that because I would be happy to----
    Senator Landrieu [continuing]. Because this is truly an 
emergency when the Federal levees that should have held failed 
and 80 percent of the city went underwater and 100 percent of 
St. Bernard went underwater. That is truly an emergency, just 
like the fires in California or the tornadoes, totally 
unexpected, thought about but unexpected.
    The second question I have is the Byrne grant program, 
which is something that our law enforcement feel very strongly 
about. It provides critical support to sheriffs and police 
around the country. Many of my colleagues have worked to 
restore it. Can we count on the White House's support to 
restore the Byrne grant, and if not, why?
    Mr. Nussle. What we have done, Senator, is we have taken 
all of those stovepipe grant programs within Justice and moved 
them into four that our local law enforcement, we believe, can 
access easier, can use in a much more flexible, local-need 
priority. And that is the reason that we have done that.
    Senator Landrieu. Well, let the record reflect that you 
have consolidated programs that each individually, let us say, 
cost $1 billion. You took four $1 billion programs each and put 
them into one program and attached $2 billion to it and claim 
that you are increasing support for local law enforcement. If 
you admitted that you reduced support for local law 
enforcement, we could accept it, but you do it and claim that 
you are adding money.
    And finally, let me say in my 20 seconds that is left I 
want to associate myself with the remarks of particularly 
Senator Dorgan. The legacy that this President will leave is 
that he drove the country into a war and then for the next 6 
years--and that might be 8, it might be 9 depending on how 
long--refused to submit a plan whatsoever to pay for it.
    There is nothing, Director, clean about this bill. It is 
either a dirty, rotten trick, it is a messy cover up, or it is 
a sloppy sales job. But this is not a clean bill.
    Chairman Byrd. Senator Nelson.
    Senator Nelson. Thank you, Mr. Chairman, and I would like 
to submit a written statement for the record.
    [The statement follows:]

                Prepared Statement of Senator Ben Nelson

    Mr. Nussle, as we all know, the war in Iraq has come at a 
great cost to this nation in both lives and taxpayer dollars. 
This war has cost us over $500 billion so far and continues to 
increase at a rate of nearly $12 billion per month. This cost 
is borne by the American taxpayer and goes directly to the 
national debt--financed by China and other foreign countries. 
Nearly every dollar spent on this war has been straight-to-debt 
spending--outside the budget process, not paid for and a debt 
passed along to future generations.
    The United States has spent more than $45 billion on Iraq's 
reconstruction. Meanwhile, Iraq is expected to collect a 
windfall in oil revenue this year and will experience a 
surplus, while our nation faces record prices at the pump, 
continued deficits and a declining economic situation. It is 
time to end this blank check policy to the Iraqi government, 
and once again look out for our interests at home.
    While continuing this policy we have had to make deep cuts 
in critical domestic programs such as Byrne Justice Assistance 
Grants which helps our local law enforcement combat violent 
crime and makes an enormous difference in rural areas. In 
Nebraska, we use the bulk of our very modest allocation of 
Byrne funds to operate multijurisdictional anti-drug task 
forces. If the 70 percent cut in Byrne funding for 2008 is not 
addressed, most of our task forces face elimination this summer 
which is simply unacceptable.
    I am proud to have joined over 50 of my colleagues in 
requesting Byrne funding in this supplemental. Ask anyone 
involved in law enforcement in Nebraska, and they will tell you 
the irresponsible Byrne cuts made in fiscal year 2008 have 
without a doubt left us in an emergency situation where one of 
our most effective law enforcement tools is facing total 
elimination.
    I understand OMB's Program Assessment Rating Tool--or PART, 
for short--has assigned a rating of ``Results Not 
Demonstrated'' to the Byrne grant program. No doubt this is one 
of the reasons it recommend ``replacing the program because it 
. . . cannot demonstrate results.'' Well, that's just not true 
in Nebraska--I have the 2007 results right here . . . and keep 
in mind that our share of the Byrne formula is just slightly 
more than one-half of one percent. In 2007, Nebraska's Byrne 
task forces made 4,380 arrests; seized almost 1,000 pounds of 
cocaine and methamphetamine and over 9,000 pounds of marijuana; 
developed 511 confidential informants, made 1,412 controlled 
drug buys, and seized over $1.3 million in cash and goods. 
These results speak for themselves, and I think it certainly 
qualifies as an emergency that all the progress Nebraska law 
enforcement has made with Byrne funds over the years could be 
undone with one stroke of the President's pen. Mr. Nussle, I 
hope you will reconsider your threats to veto any additional 
spending in this bill.
    In addition, as our budgets have become more and more 
constrained we have not been able to address a looming 
transportation infrastructure crisis. If the supplemental is 
used as a vehicle for additional stimulus funding, 
transportation infrastructure spending should be included. As 
we invest in reconstruction in Iraq, we are facing an 
infrastructure funding crisis here at home. During debate on 
the fiscal year 2009 Budget Act, I was successful in getting $7 
billion set aside for economic stimulus spending for ``ready-
to-go'' infrastructure projects. This additional spending will 
not only stimulate the economy in the short term, but will also 
begin to address the long-term investment we need to make in 
our country's transportation system. State departments of 
transportation have already identified billions of dollars 
worth of projects that could be underway in a very short time. 
Targeted spending on these kinds of projects would create jobs 
and have an immediate impact on the economy. I also believe we 
must waive any state and local matching requirements to ensure 
this money can be used as quickly as possible. Waiving the 
match will allow more projects to be undertaken in a shorter 
amount of time.
    Investing in infrastructure makes sense. We can immediately 
impact the economy in a positive manner, while reaping the 
long-term benefits of an investment in our infrastructure that 
will outlive the current economic downturn. Again, if a 
stimulus package is added to the supplemental, I advocate for 
including infrastructure spending.
    With that, I would just reiterate that during debate of the 
fiscal year 2008 Supplemental, Senator Collins, Senator Bayh 
and I intend to require any reconstruction funding to the Iraqi 
government be made in the form of a loan and I hope that the 
committee can address the most critical domestic priorities as 
a part of this process.

    Senator Nelson. Mr. Nussle, you have heard it several times 
from my colleagues, as I understand it, that there is a concern 
about the United States continuing to fund largely the war in 
Iraq without much in the way of support from the Iraqi budget 
for our total costs. In 2003, Senator Evan Bayh and I 
introduced legislation--it passed the Senate. It got blocked by 
the administration and the House--which would have required all 
reconstruction money to be in the form of a loan. Now, $45 
billion later and expenditures in that reconstruction account, 
we have nothing to show for it in terms of an IOU or a loan or 
what have you.
    As we look to the future expenditures to avoid having what 
I truly believe has become a blank check policy, I think we 
ought to look at loaning where lending is appropriate. We ought 
to insist on direct payments where direct payments are 
appropriate, and we should seek reimbursement where 
appropriate.
    Fortunately, Steven Hadley, the National Security Adviser, 
agreed this last Sunday on one of the talk shows.
    As we do that, are you looking at ways that we might be 
able to recover or avoid having to pay directly and could get 
reimbursed, for example, for fuel that we pay for at the 
current time in connection with Iraq?
    Mr. Nussle. I think all of those areas could or should be 
explored. I do not have a plan I can propose to you today, but 
I do appreciate your leadership on that issue and many others 
who have led on that issue, and I believe that it is a notion 
that is worth continuing to explore, but not in a unilateral 
way, I would just suggest, in a bilateral way between our 
country and the sovereign country of Iraq.
    Senator Nelson. Well, I am not averse to trying to do it 
bilaterally. I wish we had done it bilaterally before. So far 
it has been unilaterally.
    In that regard, would it not be appropriate to include as 
part of this supplemental an approach that Senators Collins and 
Bayh and I and others will be introducing to do just that as 
part of this supplemental? Certainly it would be germane to 
what we are doing in appropriating money to go to Iraq. We 
ought to have a way to recover it at the same time that we are 
seeking to appropriate it. I would like your thoughts about 
that.
    Mr. Nussle. It is awkward, Senator, for the President's 
Budget Director to try and act like the Secretary of State, so 
I will not. But I would suggest that from an OMB standpoint, I 
believe it is a worthy notion and one that we should continue 
to explore. And I believe Steven Hadley made that same case. I 
believe it is now in the proper lane of the Secretary of State 
to begin to explore that kind of possibility or arrangement on 
a bilateral basis with the country of Iraq rather than--I say I 
think it may be awkward for us to demand in that kind of nature 
to change that kind of a situation with Iraq given the lack of 
stability tradition that has not yet taken maybe full foothold 
there.
    Senator Nelson. What is awkward for me is to explain to my 
grandchildren that we are borrowing from their future, 
borrowing from China to provide for the cost of a war as we 
grow a deficit and grow our debt at the same time that the 
Iraqi Government continues to increase its surplus, maybe $50 
billion to $60 billion this year, $25 billion to $30 billion in 
banks in New York unspent, not necessarily going to be spent. 
Fraud, waste, and abuse prevents some of it from being spent. 
It is also awkward to continue the status quo the way we are 
doing it, and yet that is what we are going to be asked to do 
with this supplement.
    So I think it is totally appropriate and I hope you do not 
think it is inappropriate if we try to put forth some sort of 
requirements in connection with loans, direct payments, and/or 
reimbursements.
    Mr. Nussle. Again, I find it awkward for me is all I am 
suggesting to act like the Secretary of State----
    Senator Nelson. I know that you are a Director and not 
Secretary of State.
    Mr. Nussle [continuing]. Not something I ought to do. So I 
would refer you to her for that purpose.
    But as I suggested, I believe it is a worthy goal and 
notion, and I believe it is something that can and should be 
pursued. It does not have to be pursued in an appropriation 
bill in order to accomplish it, but I will leave that to your 
determination.
    Senator Nelson. But once the money is spent, we are unable 
to do it after the fact. $45 billion that would be in the way 
of an IOU today has been an outright grant because of the 
blocking of the effort in 2003. I guess I can take from what 
you are saying we should not look for you to block it if we try 
to do it.
    Mr. Nussle. No. In fact, I may very well be likely to be 
part of the team that tries to help figure it out, but I am 
just saying with regard to directly negotiating with Iraq and 
making the determination what the different provisions would be 
in order to accomplish that, I would have to leave that to the 
Secretary of State.
    Senator Nelson. We may have an idea or two on it too, Mr. 
Director.
    Mr. Nussle. I have no doubt, and I appreciate that.
    Senator Nelson. Thank you, and thank you, Mr. Chairman.
    Chairman Byrd. Thank you.
    Senator Cochran, do you have any closing remarks?
    Senator Cochran. Mr. Chairman, my observations are and 
recollections of our earlier conversation with the witness are 
that there is no doubt that the continued delay in the approval 
of requested funds for our troops in Iraq and Afghanistan is 
putting in jeopardy our opportunities to help bring peace and 
stability to that region.
    In closing, I just want to be sure I understood the 
Director of OMB correctly, that further delays are going to put 
in jeopardy our ability to furnish the troops in the field with 
the equipment they need, with training they need, and the 
ability to succeed in this war against terrorism in that very 
volatile region of the world. Is that correct?
    Mr. Nussle. I believe that to be true, yes, sir.
    Senator Cochran. And is it not also true that continued 
delays and approval of the administration's request for 
procurement programs to pay contractors, to pay for the 
materials and armaments that we need will also add to the risk 
that we run in losing this battle against terrorism?
    Mr. Nussle. I also believe that to be true, yes.
    Senator Cochran. Mr. Chairman, thank you very much for your 
patience through the hearings and your evenhanded way in which 
you handled this hearing.
    Chairman Byrd. Thank you, Senator.
    Director Nussle, the President has said that he will veto 
the supplemental if it exceeds his request. He has said that he 
will veto any of the regular appropriation bills if they exceed 
his request.
    Well, this does not leave much room--any room--for the 
Congress to meet a critical need to invest in infrastructure 
and to help the American people to deal with a troubled 
economy. That is why you are hearing frustration from Senators 
on both sides of the aisle. In the next few weeks, the 
committee will mark up a supplemental that meets the needs of 
our troops and the American people. I hope that the President 
will listen to the voices of the American people and the 
Congress.

                     ADDITIONAL COMMITTEE QUESTIONS

    I thank Senator Cochran and all Senators for their 
cooperation and the Director for his testimony.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
              Question Submitted by Senator Robert C. Byrd
    Question. Since 2002, Congress has provided over $525 billion to 
fund the ongoing war in Iraq. The President is requesting another $100 
billion for DOD in the supplemental. All of that money has been 
borrowed. My grandchildren will be paying for this war. The Committee 
recently learned that despite widespread reports of fraud and 
corruption in both Iraq and Afghanistan amounting to billions of 
dollars, the Federal Bureau of Investigation has only five people in 
Iraq, Kuwait, and Afghanistan devoted to investigating these abuses. 
Five. By comparison, the FBI has over 760 people devoted to 
investigating health care fraud here in the United States.
    There are no funds in the President's supplemental request to 
increase fraud investigations in Iraq. Why is it that the President is 
satisfied with only five FBI agents investigating waste and fraud in 
Iraq and Afghanistan?
    Answer. The Administration supports all efforts to identify, 
investigate, and prosecute fraud and corruption. The Department of 
Justice (DOJ) has established a unified and coordinated approach to 
combat procurement fraud, including fraud relating to the wars in Iraq 
and Afghanistan and reconstruction efforts in those countries. The 2009 
President's budget continues to provide resources for the Criminal 
Division, U.S. Attorney's Offices, the Federal Bureau of Investigation, 
and the Office of the Inspector General to ensure that reports of 
contract fraud are investigated in a timely manner and, where 
appropriate, prosecuted.
    In addition to DOJ's internal efforts, DOJ and the FBI both 
contribute to government-wide efforts to address contractor fraud and 
abuse. In coordination with DOJ, a number of law enforcement agencies, 
including FBI, DOD OIG, Department of State OIG, USAID OIG, and the 
Special Inspector General for Iraq Reconstruction (SIGIR), have 
established the International Contract Corruption Task Force (ICCTF). 
The mission of the ICCTF is that of a joint agency task force to detect 
and investigate corruption and contract fraud resulting primarily from 
the GWOT. The ICCTF member agencies currently have agents deployed 
throughout Europe and the Middle East, including 5 FBI agents deployed 
in Iraq, Kuwait, and Afghanistan. The 2009 President's budget continues 
to provide support for these activities.
    The Administration has supported significant funding for the 
Special Inspector General for Iraq Reconstruction (SIGIR) to look into 
waste, fraud, and abuse in our reconstruction programs in Iraq. To 
date, SIGIR has been appropriated $134 million to conduct audit 
oversight and refer potential criminal cases to the Department of 
Justice. SIGIR is also required, by law, to conduct a ``final forensic 
audit'' of reconstruction funds in Iraq. The Administration sought 
additional funding for SIGIR in the fiscal year 2009 ``bridge'' to 
ensure that SIGIR has the resources necessary to conduct proper 
oversight.
    In Afghanistan, the Inspector General Offices of Defense, State, 
and USAID are providing comprehensive oversight of reconstruction and 
development programs in the country through their collective presence 
in the country.
                                 ______
                                 
            Questions Submitted by Senator Daniel K. Inouye
    Question. Mr. Nussle, the Administration submitted its supplemental 
budget request for fiscal year 2008 15 months ago. Since that time, 
many of the underlying assumptions in that request have changed. Given 
the fluidity of the situation, why did the Administration limit the 
types of changes that could be made in the October 2007 budget 
amendment and why hasn't the Administration submitted a subsequent 
budget amendment to reflect the true requirements of the Department of 
Defense?
    Answer. The President's fiscal year 2008 war request, submitted in 
February 2007, funded military, intelligence, and foreign affairs 
operations in support of the Global War on Terror (GWOT). Conditions in 
Iraq and Afghanistan have evolved since then. Our goal in submitting 
the fiscal year 20008 supplemental amendment in October 2007 was to 
provide Congress with the most up-to-date information regarding the 
requirements of the commanders and diplomats on the ground--in 
particular, funding to produce, field, and support Mine Resistant 
Ambush Protected vehicles, other war-related procurement and extension 
of the surge. Subsequently, the Department of Defense (DOD) conferred 
with the appropriate congressional committees regarding additional 
adjustments to the pending fiscal year 2008 request to ensure that the 
Congress was fully briefed on DOD's current requirements. The President 
is committed to providing DOD with the resources necessary for the GWOT 
and appreciates Congressional action which led to the enactment of the 
fiscal year 2008 Supplemental on June 30th.
    Question. Mr. Nussle, the Department of Defense has proposed 
transferring $174 million of requested supplemental funds for the 
Global War on Terror to the Department of State. I am told that 
Secretary Rice sought OMB's help with these additional resources and 
was directed to request these funds from the Department of Defense. If 
the Administration supports these additional requirements, why didn't 
you submit a budget amendment to request the funds for the Department 
of State?
    Answer. The adjustment in the fiscal year 2008 supplemental request 
was proposed to help meet Department of State priority GWOT needs in 
fiscal year 2008. The Department of Defense supported this additional 
funding for the Department of State and sought to enable a funding 
shift by reallocating from within DOD's existing request. The 
Administration proposed that, on a one-time basis, DOD would use a 
small amount of its funding to pay expenses incurred by the Department 
of State for DOD-provided services in Iraq. Due to the anticipated 
mark-up of the pending fiscal year 2008 supplemental request, informal 
discussions seemed to be the most expeditious method to convey this 
request to the Congress.
    Question. Mr. Nussle, the President's budget request for fiscal 
year 2009 included a bridge fund of $70 billion for the Global War on 
Terror but has not provided Congress with any details. It was my 
understanding that details on the $70 billion request would be 
submitted to Congress after General Patreaus' testimony, yet no 
additional information has been provided. When will the Administration 
be submitting the details of the $70 billion request?
    Answer. On May 2, 2008, the President submitted for Congress' 
timely action amendments to his fiscal year 2009 budget that would 
provide necessary resources for ongoing military and intelligence 
operations, as well as foreign assistance activities in support of the 
Global War on Terror (GWOT). These amendments distribute by account $70 
billion of discretionary budget authority, and do not affect the total 
discretionary budget authority proposed in the fiscal year 2009 
President's budget. Of the $70 billion allocation, $63 billion is for 
the Department of Defense (DOD), $4 billion is for State Department 
programs, and another $3 billion is for classified activities.
    More than half of the State request is for diplomatic operations 
and assistance programs in Iraq and Afghanistan. Funds are also 
included to deal with Iraqi refugees.
    $45.1 billion of the request is needed to sustain combat operations 
in Iraq and Afghanistan. The additional $3 billion in funding for 
classified programs would fund a portion of the National Intelligence 
Program's fiscal year 2009 GWOT requirements, including intelligence 
activities that Congress has funded through previous supplemental 
requests.
    Additional detail for the request can be found in the budget 
amendments transmitted to Congress on May 2, 2008.
    Question. Mr. Nussle, for decades, the economies of the U.S. 
territorial economies were supported by special tax and trade policies 
to compensate for their inherent economic disadvantages. However, 
recent trends in trade globalization and tax policy have eroded the 
value of these policies. In the past few years, the Northern Mariana 
Islands has lost 35 percent of government revenue. American Samoa may 
soon lose 70 percent of revenue with the likely departure of its only 
industry, fish canning. Does the Administration recognize the crises in 
these two communities and have contingency plans for emergency funding 
to assure maintenance of essential services?
    Answer. The Administration closely monitors the economic and fiscal 
conditions in both CNMI and American Samoa, and recognizes the ongoing 
challenges due to declines in economic activity in both of these 
territories.
    The Administration remains committed to working with the 
territorial governments to address these challenges by monitoring of 
economic conditions within the territories, focusing current resources 
on the highest priority needs of the territories, and helping the 
governments to plan for various contingencies.
    Question. Mr. Nussle, in January, the Department of Labor reported 
that the Samoa and Northern Mariana Islands economies are particularly 
vulnerable to disruption. Given the unique circumstances in these two 
communities, does the Administration support a delay in the scheduled 
increase in their minimum wage levels?
    Answer. The Administration would support a delay in the scheduled 
minimum wage increase in American Samoa and the Commonwealth of the 
Northern Mariana Islands (CNMI).
    As noted in the Department of Labor's January 2008 report, ``Impact 
of Increased Minimum Wages on the Economies of American Samoa and the 
Commonwealth of the Northern Mariana Islands,'' future increases in the 
minimum wage rate have the potential to cause economic and financial 
harm to the territories, which face unique challenges in attracting 
private sector businesses because of their geographic isolation and 
location in a part of the world where neighboring economies have lower 
minimum wages and living standards.
    In American Samoa, minimum wage increases have the potential to 
threaten the viability of tuna canneries, a significant component of 
the private sector economy. There appears to be genuine cause for 
concern that production will be shifted to facilities outside U.S. 
jurisdiction where labor costs are significantly lower. Without the 
canneries as an anchor for the private sector tax base, cutbacks in 
local government operations and services could be necessary.
    The scheduled minimum wage increases for CNMI are expected to add 
further challenges to an already declining economy. With both of its 
major industries--the tourism and garment industries--in decline, its 
current economic situation makes it especially vulnerable to additional 
shocks. While data are not available to precisely quantify the impact 
of the recent and scheduled future minimum wage increases, it seems 
likely that minimum wage increases may worsen the current economic 
situation.
    Question. Mr. Nussle, the U.S. military has begun a substantial 
military build-up in Guam that is expected to increase the population 
by at least 20 percent. The DOD budget, and funding from the Government 
of Japan, will meet the new infrastructure needs of the military. What 
steps has OMB taken to assure that there is a coordinated plan among 
Federal agencies and Guam to identify the infrastructure needs of 
Guam's civilian community and to identify a source of funds to meet 
these needs? For example, has OMB requested an interagency MOA among 
Federal Departments and Guam to identify needs, costs, and funding 
sources?
    Answer. The Interagency Task Force on Guam co-led by the Joint Guam 
Project Office from DOD and Interior's Office of Insular Affairs is 
meeting regularly with federal agencies (including Departments of 
Labor, Education, Health and Human Services, Transportation, 
Agriculture and agencies such as the Small Business Administration and 
Environmental Protection Agency) and the Government of Guam. The Task 
Force will determine what infrastructure and social system needs Guam 
should have as a result of DOD's construction project and the increased 
military and civilian personnel presence once the Marines move to Guam. 
The Task Force is also identifying assistance different agencies can 
provide to Guam. OMB staff have been participating in these interagency 
meetings, and due to the strong commitment of all participating 
agencies, OMB believes the interagency process, with the active 
participation of the Government of Guam, is a more effective means for 
addressing the current and future resourcing needs of the Government of 
Guam than the development of an MOA among federal agencies and the 
Government of Guam. OMB is also reviewing potential sources of Federal 
funding for high priority infrastructure improvements associated with 
the buildup.
                                 ______
                                 
            Questions Submitted by Senator Patrick J. Leahy
           state and local law enforcement assistance grants
    Question. Violent crime here at home has been rising, but the 
Administration has dismantled front-line support for State and local 
law enforcement here at home. Compare this with the Administration's 
view that no expense is too large for the hiring and equipment needs of 
the Iraqi police force, on which we have spent nearly $21 billion, with 
questionable results.
    It's a different story for our own police departments, which have 
been stretched thin for years as they shoulder both traditional crime 
fighting duties and new homeland security demands. In what we spend in 
just five days on the Iraq War, we could fully fund the COPS Program at 
$1.15 billion and Byrne/Justice Assistance Grants at $1.095 billion. 
That alone would put 9,000 new police officers on the beat to make our 
communities safer, and it would allow us to shore up our multi-
jurisdictional drug and gang task force efforts. And during this 
National Crime Victims Week, I would ask the Bush Administration to 
reflect on what its proposed cuts to the Crime Victims Fund will mean 
to crime victims across this nation.
    It is past time for this Administration to cooperate with Congress 
and to get the real priorities of the American people straight. How 
about if we start by asking Iraq to shoulder part of the burden of its 
own law enforcement needs? After all, the major revenue source for the 
Iraqi government is oil, which has risen dramatically over the past 
year to more than $114 a barrel. Unlike us, the Iraqi government 
actually is running a budget surplus! For a tiny fraction of the money 
we spend each year on the Iraq War, we could make our own towns and 
cities safer in practical, proven and successful ways. Instead, the 
Bush Administration sends us a 2009 budget that cuts the help to state 
and local law enforcement agencies by $1.6 billion--that's a staggering 
64 percent.
    Director Nussle, would the Administration support asking the Iraqi 
government to assume part of what the United States is paying for the 
Iraqi police force? We should dedicate those savings from an Iraqi cost 
share to restoring the cuts that you have proposed in the COPS and 
Byrne/JAG programs.
    Answer. The Administration supports the Government of Iraq 
increasing its resourcing for the Iraqi police force, budgeting more 
than 3 times the U.S. government contribution in 2008. While the U.S. 
government contribution for Iraqi police forces has steadily declined, 
the U.S. funding has significantly developed police force capabilities 
and ministerial capacity within the Ministry of Interior. This 
partnership has permitted the Iraqi government to assume greater 
responsibility and control of the internal security of their nation, as 
shown by the transfer of control to the Iraqis of 9 of their 18 
provinces. However, there are no savings to redirect toward the COPS 
and Byrne/JAG programs.
    Question. Why does the Administration keep trying to eliminate 
programs that are universally acknowledged to work in the bringing down 
crime rates?
    Answer. The Administration believes that the federal government 
should be a reliable partner with state and local law enforcement and 
that taxpayer dollars must be spent wisely to help meet that goal. 
Competition should be the guiding principle used to ensure that 
Department of Justice state and local law enforcement assistance flows 
to the areas of greatest need. The fiscal year 2009 budget proposes $1 
billion in spending for state and local law enforcement assistance 
programs, and consolidates more than 70 different programs, many of 
which are small, earmarked, or have not demonstrated results, into four 
flexible grants. Each grant program will permit States and localities 
to compete for funding based on local needs, as well as national 
priorities. The Byrne JAG, which is formula-based, and COPS grants 
programs, which have $269 million in earmarks in fiscal year 2008, are 
among those that would become part of the new, flexible grant 
structure.
    One of the competitive programs we propose, the Violent Crime 
Reduction Partnership (VCRP) Initiative, will help State and local law 
enforcement agencies form multi-jurisdictional partnerships with 
Federal law enforcement agencies to tackle the most serious crime 
issues in their areas. This new program, funded at $200 million, 
focuses on building and supporting multi-jurisdictional partnerships to 
prevent and, where necessary, investigate and prosecute particular 
types of crime where they are becoming too great a challenge for local 
law enforcement to handle alone.
    Question. Congress has raised considerable concerns about the 
readiness and effectiveness of training efforts of both Afghan and 
Iraqi security forces, but we have provided a total of $33 billion for 
these purposes because of the high stakes involved. What oversight 
mechanisms do we have in place to monitor that these funds are being 
used effectively?
    Answer. The Administration takes the oversight of funding provided 
to the Afghan and Iraqi security forces very seriously. The Department 
of Defense (DOD) has policies and procedures in place to ensure that 
all of its funding is used effectively and responsibly, including the 
Iraq Security Forces Fund (ISFF) and the Afghan Security Forces Fund 
(ASFF). War zones pose unique challenges to rigorous financial 
management, though DOD has worked consistently to improve its 
accounting and budgeting practices in both Afghanistan and Iraq. The 
DOD Inspector General has ongoing projects that assess the financial 
management of the ISFF and ASFF, which have led to greater transparency 
and accountability. DOD has also benefited from the reviews and 
recommendations of the Special Inspector General for Iraq 
Reconstruction (SIGIR) and will work closely with the Special Inspector 
General for Afghanistan Reconstruction (SIGAR).
                           crime victims fund
    Question. The week of April 13 marks the 27th National Crime 
Victims Rights Week where as a nation we honor and renew our commitment 
to crime victims and their families. In particular, I have been honored 
to support passage of the Victims of Crime Act of 1984 (VOCA), which 
established the Crime Victims Fund (``the Fund''). The Fund allows the 
Federal Government to provide grants to State crime victim compensation 
programs, direct victim assistance services and services to victims of 
federal crimes.
    In the President's fiscal year 2009 budget proposal, the 
Administration has yet again proposed rescinding all amounts remaining 
in the Crime Victims Fund, an estimated total of $2.024 billion, which 
will leave the Fund empty at the start of 2010. A rescission of the 
Fund combined with the proposals to lower the cap of the Fund, will 
leave victim assistance programs nationwide at risk of large cuts to 
their programs or even having to discontinue services.
    In my home State of Vermont, the President's proposal would be 
devastating. Many of the programs that VOCA provides funding for help 
the most vulnerable populations in Vermont. For example, transitional 
housing programs funded through VOCA allowed a mother and her 9 year 
old daughter to escape a sexually abusive husband and father. Through 
counseling services and emergency financial assistance they are now 
living independently and free from abuse. Emergency legal advocacy 
funded by VOCA grants helped 75-year old Mary stop a cycle of abuse by 
her husband during his visits to her nursing home. These support 
services and dozens of others would be in jeopardy should the 
president's proposal go forward.
    For a program that is funded entirely through criminal fines, 
forfeited bail bonds, penalties, and special assessments--not taxpayer 
dollars or appropriations--what is the Administration's reason, other 
than recording a budgetary savings, for gutting a program that provides 
essential services for victims of crime?
    Answer. The Administration has not proposed reducing assistance for 
crime victims. In fact, the fiscal year 2009 budget proposes the same 
level of funding--$590 million--as allocated by the Congress in fiscal 
year 2008 for the crime victims' programs funded by the Crime Victims 
Fund.
    Each year, the Congress imposes an obligation limitation on the 
Fund, permitting excess balances to roll forward and scoring a 
budgetary savings that frees up spending for other discretionary 
programs. By proposing to cancel $2 billion in excess balances, the 
Administration is proposing to end what has become a recurring budget 
gimmick.
    Question. When I asked you about where the rescinded monies from 
the Crime Victims Fund during the April 16 hearing before the 
Appropriations Committee, you answered that the rescinded funds would 
be put towards the four ``stovepipe'' programs for state and local law 
enforcement assistance and would therefore aid victims of crime. This 
is incorrect, as there is no proposal in the President's budget request 
to designate these funds for those purposes. In reality, the rescinded 
monies will go toward paying down the budget deficit accrued by this 
Administration. Please explain why you stated what you did and explain 
your response.
    Answer. The Administration has proposed to consolidate 70+ state 
and local law enforcement grant programs, and to consolidate these 
programs into just four competitive grants. However, this proposal does 
not affect the crime victims' compensation and assistance programs 
funded by the Crime Victims Fund.
    The Administration is proposing to cancel excess Crime Victims Fund 
balances in order to end a recurring practice of scoring budget savings 
from obligation limitations imposed by the Congress each year. Like an 
obligation limitation, the cancellation of balances will yield a budget 
savings in fiscal year 2009. However, this will be a one-time impact 
and does have the benefit of ending a recurring discretionary budget 
offset used by both the Congress and the Administration. The effect in 
fiscal year 2009 of both the President's proposal and what Congress 
regularly includes in annual appropriations bills, is to make available 
for spending on other priorities an amount of funding equivalent to the 
excess Crime Victims Fund balances. Congress does this through a 
gimmick that allows it to score ``savings'' on the same CVF resources, 
year after year. The Administration's proposal includes no such gimmick 
and would therefore achieve savings only for one year.
    Question. Please state whether you believe that the $1 billion 
requested by the Administration for all grants assistance programs 
within the Office of Justice Programs, COPS, the Weed and Seed Program 
and the Office on Violence Against Women will be sufficient to meet the 
needs required by State and local law enforcement to combat rising 
violent crime and assist crime victim survivors, and explain your 
response in detail.
    Answer. While the crime rate has fluctuated recently in selected 
cities, the overall violent crime rate remains well below historical 
levels. In fact, FBI data shows that, nationally, violent crime dropped 
by 1.8 percent in the first half of 2007 compared to a year ago. 
Nevertheless, the Administration remains concerned about violent crime 
and believes that the Federal government must be a reliable and 
effective partner for state and local law enforcement. Taxpayer dollars 
must be spent smarter to help meet that goal, however. The 
Administration believes that it is possible to provide effective 
assistance without spending $675 million on earmarks, over $500 million 
on formulas, and $400 million on programs that do not influence crime 
(e.g., the State Criminal Alien Assistance Program). Competition and 
merit should be the guiding principles used to ensure that state and 
local law enforcement assistance flows to the States, communities, and 
organizations that are most deserving of assistance. Further, the 
Administration's proposal introduces more flexibility for the grantees 
by consolidating more than 70 different stovepiped programs into four, 
which will enable States and localities to compete for funding based on 
local needs, as well as national priorities. The Administration 
believes that it is possible to provide assistance to state and local 
law enforcement more wisely, and more effectively, as the fiscal year 
2009 budget proposes.
    One of the competitive programs proposed in the fiscal year 2009 
budget, the Violent Crime Reduction Partnership (VCRP) Initiative, is 
intended specifically to help State and local law enforcement agencies 
form multi-jurisdictional partnerships with Federal law enforcement 
agencies to tackle the most serious and violent crime issues in their 
communities. The Byrne Public Safety and Protection Program, for which 
the budget requests $200 million, will be used to address high priority 
crime problems and multiple public safety needs. The budget also 
proposes the Violence Against Women Grants ($280 million) and the Child 
Safety and Juvenile Justice Program ($185 million)--which will better 
target the traditional, multiple funding streams for programs violence 
against women, child safety, and juvenile justice to the areas of 
greatest need. In addition, the budget also provides $148 million for 
information sharing among law enforcement agencies, criminal justice 
statistics and research, and other programs.
    Question. Given that the Justice Department has yet to submit to 
Congress a detailed plan for this consolidated ``stovepipe'' approach, 
the fact that the President has proposed a $1.6 billion cut to law 
enforcement assistance with this approach, and that the Administration 
basically eliminates the dedicated funding stream for victims services, 
how do you mean to ensure that funding is set aside for victims?
    Answer. The Department of Justice shared draft authorizing 
legislation with the Congress following the release of the fiscal year 
2008 budget, which would implement the Administration's consolidated 
grant proposal. We would be happy to share the draft legislation again. 
Again, the aim of this proposal is to consolidate more than 70 
stovepiped programs into four competitive and flexible grants.
    The Administration has proposed cancelling excess balances from the 
Crime Victims Fund, but does not propose changing the funding mechanism 
for the crime victims' compensation and services programs provided for 
by the Fund. As in the past, those programs will continue to be 
financed by continued collection of criminal fines and penalties, just 
as they are now. The fiscal year 2009 budget proposes appropriations 
language that would permit funding for the crime victims' programs to 
be made available at the beginning of each fiscal year, to be repaid by 
fines and penalties collected throughout the year.
                  transportation/infrastructure needs
    Question. While the Bush administration has spent billions to 
rebuild roads and bridges in Iraq, it has neglected the critical 
transportation infrastructure needs of this country. The Transportation 
Secretary recently chaired a national commission on transportation 
financing that concluded we are not spending nearly enough to build and 
maintain our transportation infrastructure. That panel determined that 
the United States needs over $225 billion in new infrastructure 
investment in order to upgrade our aging transportation system.
    In Vermont, for instance, we face a transportation funding 
shortfall of over $100 million for projects that are just sitting on 
the shelf waiting for funding--including a highway and bridge backlog 
of over $55 million; a public transit bus replacement backlog of over 
$18 million; and a rail backlog of over $10 million.
    Yet instead of spending limited taxpayer resources on important 
projects that could jumpstart the U.S. economy and create American 
jobs, this administration has made the conscious decision to fritter 
those precious American dollars a world away on the infrastructure of 
Iraq. To top it off, we're once again being asked to spend billions on 
roads and bridges in Iraq, no questions asked, but we cannot move a 
bill in the Senate this week that for a fraction of the cost would fix 
U.S. infrastructure and provide hardworking Americans with jobs. It 
boggles the mind.
    Since you have to take the big picture view of the President's 
budget request, do you think that American taxpayers are being treated 
fairly and equitably under this budget proposal that time and time 
again emphasizes the priorities of Iraq over the priorities of the 
United States?
    Answer. The President is committed to both the priorities of 
American people at home and abroad. The current level of annual Federal 
funding requested by the President for domestic needs is evidence of 
his support of the American taxpayers and their domestic priorities.
    With regard to infrastructure specifically, it is important to note 
that Federal spending on transportation infrastructure is on the rise 
and has been for some time. Transportation spending is projected to 
jump significantly this year--the President's 2009 budget request for 
DOT will result in a 53 percent increase in grant outlays to states and 
localities compared to 2001. The 2009 budget also estimates that, in 
total, DOT programs will outlay 10 percent more grants to state and 
local governments in 2008 than in 2007, including an 11 percent 
increase by Federal Aid Highways.
    At a national level, we have seen tangible improvements in the 
condition of infrastructure. For example, the percentage of Vehicle 
Miles Traveled (VMT) on National Highway System (NHS) pavement with 
good to very good ride quality (i.e., International Roughness Index 
(IRI) of less than or equal to 95 in/mi) has increased from 52 percent 
in 2002 to 57 percent in 2007. The percentage of bridge deck area on 
National Highway System (NHS) bridges that are rated as either 
structurally deficient or functionally obsolete has decreased from 32.6 
percent in 1998 to 29.6 percent in 2007, and has decreased from 32.5 
percent in 1998 to 30.5 in 2007 for non-NHS bridges.
    However, the Administration continues to believe that the overall 
funding model for transportation infrastructure--involving thousands of 
earmarks and inadequate targeting based on need and cost-benefit--is 
broken. As is noted in the Minority Views section of the report that 
you are referencing, which was advanced by the Secretary and two 
Commissioners, continuing to rely on a tax-based financing system that 
has little or nothing to do with the true costs of using or providing 
transportation infrastructure is a flawed mechanism for improving 
system performance and reliability. Furthermore, the Minority Views 
called for a much more focused Federal role in funding transportation 
infrastructure, consistent with the views of the Government 
Accountability Office. The next surface transportation authorization 
will provide an opportunity to advance more fundamental reform, which 
would have a far more profound effect on the condition of the country's 
transportation infrastructure than additional Federal spending at this 
time.
           government contractors avoiding u.s. payroll taxes
    Question. While our domestic spending priorities suffer because of 
the ongoing war in Iraq, several enriched defense contractors have set 
up offshore shell companies to avoid U.S. Social Security and Medicare 
payroll taxes.
    According to recent press reports in the Boston Globe, Kellogg 
Brown & Root has avoided U.S. payroll taxes by hiring workers through 
shell companies in the Cayman Islands. Through a loophole in our tax 
code, American companies that are benefiting from U.S. government 
contracts are able to set up foreign subsidiaries in tax havens and 
treat American workers employed in connection with the contract as 
employees of the subsidiary. As a result, these employers can avoid 
paying Social Security and Medicare payroll taxes.
    Director Nussle, do you agree with me that Defense contractors 
should be paying their fair share of payroll taxes?
    Answer. Yes, I do. Regarding offshore companies, we generally would 
not object to the concept of holding U.S. companies liable for 
collecting and paying payroll taxes on U.S. employees working on 
government contracts overseas, even if they are employed by a foreign 
subsidiary. However, I would refer the question to the Department of 
the Treasury to provide technical assistance because this requirement 
could have unintended consequences, such as creating artificial hurdles 
for foreign companies to hire U.S. workers overseas or disrupting 
international social security agreements.
    In addition, we are concerned that a minority of contractors 
continue to owe tax debts. It is unacceptable for contractors doing 
business with the government to be delinquent in paying their taxes. 
The Administration is taking significant steps to boost accountability 
and ensure contractor tax compliance.
    On April 22nd, a rule was published in the Federal Register 
amending the Federal Acquisition Regulation (FAR) to authorize federal 
officials to use tax delinquency as sufficient grounds for proposing 
debarment or suspension. The rule is available for viewing at: http://
federalregister.gov/OFRUpload/OFRData/2008-08508_PI.pdf
    In addition, the Federal Contractor Tax Compliance Task Force, led 
by the Department of the Treasury has made a number of significant 
improvements to policies and processes that directly result in 
increased debt collection. Levy collections from Federal payments to 
contractors increased from $7 million in fiscal year 2003 to $48 
million in fiscal year 2007. This number reflects only collections 
received through the levy program and does not include additional 
collections paid to IRS upon the contractor's receipt of the due 
process notice of the intended levy action.

                         CONCLUSION OF HEARING

    Chairman Byrd. The committee is recessed.
    [Whereupon, at 2:09 p.m., Wednesday, April 16, the hearing 
was concluded, and the committee was recessed, to reconvene 
subject to the call of the Chair.]

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