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NOMINATION OF PETER R. ORSZAG 

HEARING 

BEFORE THE

COMMITTEE ON 

HOMELAND SECURITY AND 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE 

OF THE

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

NOMINATION OF PETER R. ORSZAG TO BE DIRECTOR, OFFICE OF 

MANAGEMENT AND BUDGET 

JANUARY 14, 2009 

Available via http://www.gpoaccess.gov/congress/index.html 

Printed for the use of the 

Committee on Homeland Security and Governmental Affairs 

( 
(II) 

COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS 

JOSEPH I. LIEBERMAN, Connecticut, Chairman 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

THOMAS R. CARPER, Delaware 

MARK L. PRYOR, Arkansas 

MARY L. LANDRIEU, Louisiana 

CLAIRE MCCASKILL, Missouri 

JON TESTER, Montana 

ROLAND W. BURRIS, Illinois 

MICHAEL F. BENNET, Colorado 

SUSAN M. COLLINS, Maine 

TOM COBURN, Oklahoma 

JOHN MCCAIN, Arizona 

GEORGE V. VOINOVICH, Ohio 

JOHN ENSIGN, Nevada 

LINDSEY GRAHAM, South Carolina 

MICHAEL L. ALEXANDER, Staff Director 

LAWRENCE B. NOVEY, Senior Counsel 

KRISTINE V. LAM, Professional Staff Member 

BRANDON L. MILHORN, Minority Staff Director and Chief Counsel 

JENNIFER L. TARR, Minority Counsel 

TRINA DRIESSNACK TYRER, Chief Clerk 

PATRICIA R. HOGAN, Publications Clerk and GPO Detailee 

LAURA W. KILBRIDE, Hearing Clerk 
(III) 

C O N T E N T S 

Opening statements: Page 

Senator Lieberman ........................................................................................... 1 

Senator Collins ................................................................................................. 5 

Senator Levin .................................................................................................... 17 

Senator Akaka .................................................................................................. 21 

Senator Tester .................................................................................................. 23 

Senator Voinovich ............................................................................................. 27 

Senator Carper ................................................................................................. 29 

Senator Landrieu .............................................................................................. 32 

Senator McCaskill ............................................................................................ 35 

WITNESSES 

WEDNESDAY, JANUARY 14, 2009 

Hon. John M. Spratt Jr., a Representative in Congress from the State of 

South Carolina ..................................................................................................... 8 

Hon. Paul Ryan, a Representative in Congress from the State of Wisconsin .... 8 

Peter R. Orszag to be Director, Office of Management and Budget .................... 10 

ALPHABETICAL LIST OF WITNESSES

Orszag, Peter R.: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 46 

Biographical and financial information with attachments ........................... 51 

Responses to pre-hearing questions ................................................................ 85 

Letter from the Office of Government Ethics with an attachment .............. 143 

Responses to post-hearing questions for the Record ..................................... 145 

Ryan, Hon. Paul: 

Testimony .......................................................................................................... 8 

Spratt, Hon. John M., Jr.: 

Testimony .......................................................................................................... 8 

Prepared statement .......................................................................................... 41 

APPENDIX 

Chart titled ‘‘Civil Works Capital Investment as a Percentage of GDP,’’ submitted for the Record by Senator Landrieu ....................................................... 169 

(1) 

NOMINATION OF PETER R. ORSZAG 

WEDNESDAY, JANUARY 14, 2009 

U.S. SENATE, COMMITTEE ON HOMELAND SECURITY

AND GOVERNMENTAL AFFAIRS, Washington, DC. 

The Committee met, pursuant to notice, at 2:03 p.m., in room 

342, Dirksen Senate Office Building, Hon. Joseph I. Lieberman, 

Chairman of the Committee, presiding. 

Present: Senators Lieberman, Levin, Akaka, Carper, Pryor, 

Landrieu, McCaskill, Tester, Collins, Voinovich, and Coburn. 

OPENING STATEMENT OF CHAIRMAN LIEBERMAN 

Chairman LIEBERMAN. Good afternoon and welcome to our hearing today. Today, we are going to hold two hearings back-to-back 

for the nominees to lead the Office of Management and Budget 

(OMB). First, we will consider the nomination of Peter R. Orszag 

to be Director of OMB. That child of yours, I would say, is absolutely adorable. I am going to give you a moment later on to introduce him. But I would say as a parent and now a grandparent, I 

am greatly admiring of his posture. He is sitting right up there. 

[Laughter.] 

Senator LEVIN. He is embarrassing the rest of us. 

Chairman LIEBERMAN. After Mr. Orszag, immediately after, we 

will hear the nomination separately of Robert L. Nabors to be Deputy Director. 

At this point, I would welcome both of you. We are happy to have 

you with us today, and thank you for your service to our country 

and your willingness to serve once again. 

These nominations come at a time of unprecedented budgetary 

and economic peril for our Nation beyond even the normal for the 

Office of Management and Budget and those who lead it. The economy, after all, is facing a painful recession at the same time our 

government faces massive budget deficits. In response, the incoming Obama Administration is putting together a major economic recovery and reinvestment package, developing plans to achieve longterm budget stability, and at the same time instituting an ambitious program to improve performance and reduce the cost of government. 

Those are difficult, important, and enormous undertakings, and 

OMB must be a leader in all of them. So the two of you have your 

work cut out for you. 

Dr. Orszag, with your extensive experience in budget and public 

policy, you are well qualified to assume the big responsibilities of 
2 

the position to which you have been nominated. Your government 

experience includes nearly 2 years as Director of the Congressional 

Budget Office (CBO) and several years as a Senior Economic Advisor in the Clinton White House. You have also held prominent academic and private-sector positions in a wide range of economic and 

policy areas. 

The Director of OMB is a key member of the President’s economic team, helping the President prepare and execute the budget 

across 14 Cabinet departments and more than 100 executive agencies, boards, and commissions. The OMB Director recommends how 

to spend every tax dollar, oversees the management of every Federal Government agency program, and reviews rules, every rule, 

really, but rules, I mention by example, vital to our public health, 

worker safety, environmental protection, and regulation of our financial institutions. 

If confirmed as OMB Director, you will be overseeing more new 

government money being spent more rapidly than I think we have 

ever experienced in our history. The stimulus package that the new 

Administration is putting together, between $750 and $800 billion, 

dwarfs the size of the budgets of most of the countries in the world 

and if enacted would be more than eight times the size of the annual budget of our largest State, California. 

So I look forward to hearing from both of you today about the 

measures you intend to take to ensure that these enormous sums 

that will be spent quickly will also be spent wisely and responsibly. 

Beyond the immediate crisis, we face long-term fiscal imbalances 

that have been rising for years while we here in Congress and in 

the Executive Branch, as well, have acted as if they were not there. 

Now, the moment of truth, and I hope the moment of responsibility, has arrived. 

Last week, the Congressional Budget Office projected a $1.2 trillion national deficit in fiscal year 2009, this year, and a cumulative 

deficit of over $3 trillion over 10 years. These numbers don’t even 

take into account the cost of the stimulus package that I have just 

talked about or the long-term costs of rising health care and Social 

Security expenditures beyond the 10-year budget window. 

Mr. Orszag, in both academia and government, you have been a 

leader in identifying and analyzing the major long-term budgetary 

challenges of our time, so I am eager to hear this afternoon your 

thoughts on how the new Administration can move our country 

with Congress toward fiscal responsibility. 

For decades, we have depended on the willingness of our trading 

partners to subsidize our consumer and government deficits. The 

result has been large trade deficits and a gradual transfer of 

wealth from the United States to foreign countries, notably China 

and countries in the Middle East. Over the long term and perhaps 

shorter than that now, this is not just undesirable, it is 

unsustainable. I want to know how you would begin to right these 

imbalances, both at the governmental and macro-economic levels. 

The OMB Director, I presume and hope, will also be a key player 

in helping to strengthen what we all agree now is our fragmented 

and inadequate financial regulatory structure to prevent the type 

of meltdown we are now experiencing from happening again. Failure of our regulatory agencies to police Wall Street adequately has 
3 

certainly contributed mightily to the current national economic crisis. 

I personally believe that rather than adding layers of regulation 

to the patchwork that already exists, real reform must begin by 

clearing the table of the entire existing Federal framework of financial governance so that we can begin by building a new regulatory 

system that really will protect America’s investors, institutions, 

consumers, and economy. On this, too, I look forward to hearing 

your views today. 

Oversight of Federal acquisition of goods and services is another 

increasingly important responsibility of the OMB Director. Federal 

purchasing has exceeded $400 billion for the past several years, 

and OMB must wring every possible efficiency out of the contracting process. 

Finally, the OMB Director has critical responsibilities to guide 

implementation of information technology and e-Government across 

the Federal Government. I personally am excited that the President-Elect has big plans to use technology to increase public accessibility to government and government accountability. This Committee has done extensive work in authorizing e-Government legislation, and we look forward to working with you to help this shared 

vision become a reality. 

So we have a lot of ground to cover today. It is important, critical 

ground, and, of course, a lot of important work to do together in 

the years ahead. I, for one, look forward to it. Thank you. 

[The opening prepared statement of Senator Lieberman follows:] 

OPENING PREPARED STATEMENT OF SENATOR LIEBERMAN 

Good afternoon. Today we hold two back-to-back hearings for the nominees to lead 

the Office of Management and Budget. First, we will consider the nomination of 

Peter R. Orszag to be Director of OMB, and immediately afterward, we will consider 

the nomination of Robert L. Nabors to be Deputy Director. 

Dr. Orszag and Mr. Nabors, I welcome you both. We’re happy to have you with 

us today and thank you for your service to our country. 

These nominations come at a time of unprecedented budgetary and economic peril 

for the nation, which means challenge beyond even the normal for OMB and those 

who will lead it. The economy is facing a painful recession at the same time our 

government faces massive budget deficits. In response, the incoming Administration 

is putting together a major recovery package, developing plans to achieve long-term 

budget stability, and at the same time instituting an ambitious process to improve 

performance and reduce costs of government. Those are difficult and critically important undertakings, and OMB must be a leader in all of them. So the two of you 

have your work cut out for you. 

Dr. Orszag, with your extensive experience in budget and public policy, you are 

well qualified to assume the big responsibilities of the position to which you have 

been nominated. Your government experience includes nearly two years as director 

of the Congressional Budget Office and several years as a senior economic advisor 

in the Clinton White House. You have also held prominent academic and privatesector positions in a wide range of economic and policy areas. 

The Director of OMB is a key member of the President’s economic team, helping 

the President prepare and execute the budget across 14 cabinet departments and 

more than 100 executive agencies, boards, and commissions. The OMB Director recommends how to spend every tax dollar, oversees the management of every Federal 

Government agency program, and reviews rules vital to the public health, worker 

safety, environmental protection, and regulation of our financial institutions. 

I do not believe I am overstating the gravity of the situation to say that we are 

at a defining moment in our history. GDP is falling and unemployment is rising. 

In the last year, America’s stock markets and housing sector have lost more than 

$12 trillion in value. Consumers are not spending, banks are not lending, manufacturing plants are closing down, and icons of American industry—such as General 

Motors and Chrysler—are on the brink of bankruptcy. Over half a million workers 
4 

lost their jobs in December, bringing the total jobs lost in 2008 to 2.6 million. The 

national unemployment rate is 7.2 percent and rising. Most economists now predict 

that the current downturn will be the worst since the Great Depression. 

The incoming Administration has adopted an aggressive and activist approach to 

jumpstart the economy based on an economic recovery and reinvestment program 

which will inject a massive increase in demand for goods and services—a demand 

that would come from the government through public works spending, and from consumers and businesses through tax relief. The price tag of $800 billion or more is 

jaw dropping, unprecedented, and, in this case, necessary. 

If confirmed as OMB Director, you will therefore be overseeing government spending like none we have ever witnessed. The stimulus package alone dwarfs the size 

of most nations’ budgets and, if enacted, it would be more than eight times the size 

of the annual budget of our largest State—California. I look forward to hearing from 

both of you today about the measures you intend to take to ensure the maximum 

benefit for our people and our economy. 

Beyond the immediate crisis, we face long-term fiscal imbalances that have been 

rising for years, while we have acted as if they were not there. Now, the moment 

of truth and responsibility has arrived. Last week, the Congressional Budget Office 

projected a $1.2 trillion national deficit in fiscal year 2009 and a cumulative deficit 

of over $3 trillion over 10 years. And these numbers don’t even take into account 

the cost of the stimulus package or the long-term costs of rising health care and 

Social Security expenditures beyond the 10-year budget window. In both academia 

and government, Mr. Orszag, you have been a leader in identifying and analyzing 

the major long-term budgetary challenges of our time, so I am eager to hear your 

thoughts on how the new Administration can move our country, with Congress, toward fiscal responsibility. 

For decades, we have depended on the willingness of our trading partners to subsidize our consumer and government deficits. The result has been large trade deficits and a gradual transfer of wealth from the United States to foreign nations, notably China and the Middle East. Over the long term, and perhaps now in the short 

term, this is not just undesirable, it is unsustainable. I want to know how you would 

recommend we begin to right these imbalances, both at the governmental and 

macro-economic levels. 

The OMB Director will also be a key player in helping to strengthen what we all 

agree is our fragmented financial regulatory structure to prevent the type of financial melt-down we are now experiencing from happening again. The failure of our 

regulatory agencies to police Wall Street adequately has contributed mightily to the 

current crisis. I personally believe that rather than adding layers of regulation to 

the patchwork that already exists, real reform must begin by clearing the table of 

the entire Federal framework of financial governance so we can build a new regulatory system that will work to protect America’s investors and institutions. The 

OMB Director will have an important voice in any substantial reorganization of the 

financial regulatory structure, and so I would like to hear your views on what 

should be done. 

Oversight of Federal acquisition of goods and services is another increasingly important responsibility of the OMB Director. Federal purchasing has exceeded $400 

billion a year for the past several years, and OMB must wring every possible efficiency out of the contracting process. We simply cannot afford the cost overruns or 

wasteful spending that we too often see. The government’s increased reliance on 

contractors has created a need for more sophisticated and demanding management 

across agencies on a range of complex issues, including oversight of contractor performance, safeguards against conflicts of interest, prohibitions on contractors performing inherently governmental work, and the replenishment of the acquisition 

workforce. 

Finally, the OMB Director has critical responsibilities to guide implementation of 

information technology and e-Government across the Federal Government. I personally am excited that the President elect has big plans to use technology to increase 

accessibility and accountability. This Committee has done extensive work in authorizing e-Government legislation, and I look forward to working with you to help this 

shared vision become a reality. 

We have a lot of important ground we must cover today, and a lot of critically 

important work we must do together in the years ahead. 

Senator LIEBERMAN. Senator Collins. 
5 

OPENING STATEMENT OF SENATOR COLLINS 

Senator COLLINS. Thank you, Mr. Chairman. The fact that our 

opening statements are so similar does not indicate collusion but 

just the fact that there is bipartisan concern about the issues that 

you raise. 

As you indicated, seldom have nominees for the Director and 

Deputy Director of the Office of Management and Budget come before this Committee at a more critical time. The Federal budget is 

under tremendous stress from the impact of a deep recession and 

the costs of rescue and stimulus packages. Spiraling entitlement 

costs are driving long-term budgetary imbalances. And the next 

few years will also see the cresting waves of baby boom retirements 

with enormous effects on Social Security and Medicare expenditures as well as on our own Federal workforce. 

Pointing to these trends and to the estimated $1.2 trillion deficit 

for the current fiscal year, the President-Elect has prudently 

warned that unless strong measures are taken, the outlook is for 

‘‘red ink for as far as the eye can see.’’ Our Nation’s public debt 

has reached $6.3 trillion, about 45 percent of our gross domestic 

product (GDP). According to the CBO, Federal spending will climb 

to an astonishing 25 percent of GDP this year, more than at any 

time in American history outside of World War II, and I know 

given our nominee’s background that he will not contest those CBO 

figures in this case. With a stimulus package worth another perhaps $800 billion, our 

Nation’s debt as a percentage of GDP could rise to 60 percent, the 

highest level since World War II. That is, of course, an unacceptable and unsustainable scenario in the long-term for our government, for the economy, and for the families and business owners 

who pay the government’s bills. 

OMB will be the leading player as the incoming Administration 

formulates policy to deal with the grim present and an uncertain 

future. OMB will also be an indispensable link to Congress as the 

Executive and Legislative Branches work toward consensus on 

finding a sustainable path forward. 

Dr. Orszag comes before the Committee with an impressive set 

of skills and experiences. As the former Director of the CBO, he is 

very familiar with the Legislative Branch as well as with the intricacies of the budgets and policy analysis. 

I take special interest in several issues for which the OMB Director is a key player. The overriding concern, of course, is the Federal 

budget. Dr. Orszag has already indicated that the economy and 

stimulus measures portend a near-term rise in the deficit. But as 

he knows and as we have heard from former Comptroller General, 

David Walker, and other experts, the outlays in recent years and 

the growth of unfunded entitlements are unsustainable. 

This recession will not last forever, so we desperately need a realistic plan to avoid having the Federal budget become an enormous drag on opportunities for job growth and higher personal income, for people’s ability to decide what to do with their own 

money. And let me add that the public expects from the next Administration far better oversight and aggressive stewardship of the 

Troubled Asset Relief Program (TARP) and of any future economic 

recovery packages. 
6 

Another major OMB responsibility falls under the general heading of Executive Branch management. This Committee has repeatedly documented a voluminous, shocking waste of taxpayer dollars 

by the Federal Government in virtually every program and department. Many of these examples have arisen in the realm of government contracting. Our Committee has successfully passed important reform legislation to improve the Federal acquisition process, 

but additional reforms, particularly the revitalization of the Federal acquisition workforce, must be high on OMB’s list of targets 

for critical improvements. 

Effectiveness and equity are other key management concerns. 

Homeland Security grants, for example, are essential to ensure 

that every State can achieve a baseline level of readiness and response capability for both manmade and natural disasters. OMB 

needs to examine budget plans carefully to ensure that they are 

consistent with that goal. 

Other special concerns, which the nominee has recognized in his 

responses to our pre-hearing questions, include transparency in 

government operations, an issue of vital importance, I know, to Dr. 

Coburn and to many on this panel; metrics for agency performance, 

so we actually can measure and evaluate more effectively; closer attention to the Government Accountability Office (GAO) High-Risk 

List; and the need to tackle escalating costs of health care and entitlement programs. 

Today, the Committee will also consider the nominee for one of 

the Deputy Directors at OMB, Robert Nabors. I look forward to 

learning more about his background, particularly his experience as 

a program examiner at OMB during the Clinton Administration. 

That past OMB service included oversight of a previous census, 

and this Committee is painfully aware of the failures, particularly 

in the area of technology and planning for the upcoming census. 

Our exploration today with both nominees of the financial and 

management hurdles facing the Federal Government makes this a 

critically important hearing. 

Thank you, Mr. Chairman. 

[The opening prepared statement of Senator Collins follows:] 

OPENING PREPARED STATEMENT OF SENATOR COLLINS 

Seldom have nominees for director and deputy director of the Office of Management and Budget come before this Committee at a more critical time. 

The Federal budget is under tremendous stress from the impacts of a deep recession, and the costs of rescue and stimulus packages. Spiraling entitlement costs are 

driving long-term budgetary imbalances. And the next few years will also see the 

cresting waves of Baby Boom retirements, with enormous impacts on Social Security 

and Medicare expenditures, as well as on our Federal workforce. 

Pointing to these trends and to the estimated $1.2 trillion deficit for the current 

fiscal year, the President-Elect has prudently warned that unless strong measures 

are taken, the outlook is for ‘‘red ink as far as the eye can see.’’ 

Our Nation’s public debt has reached $6.3 trillion—about 45 percent of gross domestic product. According to the Congressional Budget Office, Federal spending will 

climb to an astonishing 25 percent of GDP this year—more than any time in American history outside of World War II. With a stimulus package worth another $800 

billion or more, our Nation’s debt as a percentage of GDP could rise to 60 percent, 

the highest level since World War II. That is, of course, an unacceptable and 

unsustainable scenario for the government, for the economy, and for the households 

and business owners who pay the government’s bills. 

OMB will be the leading player as the incoming administration formulates policy 

to deal with a grim present and uncertain future. OMB will also be an indispensable 
7 

link to Congress as the Executive and Legislative branches work toward consensus 

on a sustainable path forward. 

Dr. Orszag comes before the Committee with an impressive set of skills and experiences. As a former director of the non-partisan Congressional Budget Office, he is 

familiar with the legislative branch, as well as with the intricacies of budgets and 

policy analysis. His earlier service as an economic advisor, as a scholar, and as a 

consultant has given him other important perspectives that will prove valuable if 

confirmed as OMB director. 

I take special interest in several issues for which the OMB Director is a key player. 

The overriding concern, of course, is the Federal budget. Dr. Orszag has already 

indicated that the economy and stimulus measures portend a near-term rise in the 

deficit. But as he knows—and as we have heard from former Comptroller General 

David Walker and other experts—recent years’ outlays and the growth of unfunded 

entitlements are unsustainable. 

The recession will not last forever, so we desperately need a realistic plan to avoid 

having the Federal budget become a mammoth drag on opportunities for job growth 

and higher personal income—and for people’s ability to decide what to do with their 

own money. And let me add that the public expects far better oversight of the Troubled Asset Relief Program and of any future economic-recovery package. 

Another major OMB responsibility falls under the general heading of Executive 

Branch management. This Committee has documented a voluminous record of 

shocking waste of taxpayer dollars by the Federal Government in virtually every 

program and department. 

Many of these examples have arisen in the realm of contracting. This Committee 

has successfully passed legislation to improve the Federal acquisition process, but 

additional reforms, including revitalization of the Federal acquisition workforce, 

must be high on OMB’s list of targets for critical improvements. 

Effectiveness and equity are other key management concerns. Homeland Security 

Grants, for example, are essential to ensure that every state can achieve a baseline 

level of readiness and response capability for natural or man-made disasters. OMB 

needs to examine budget plans carefully to ensure that they consistently support 

our Nation’s first responders and help achieve our national goal for all-hazards 

emergency preparedness. 

Other special concerns—which Dr. Orszag recognizes in responses to pre-hearing 

questions—include transparency in government operations, metrics for agency performance, close attention to GAO’s High-Risk List, and the need to tackle the escalating costs of health care. 

Today the Committee will also consider the nominee for one of the deputy directors at OMB, Robert Nabors. 

I look forward to learning more about Mr. Nabors’ background, particularly his 

experience as a program examiner at OMB during the Clinton Administration. That 

past OMB service included oversight of a previous Census and of agency technology 

investments, both areas of considerable concern today. 

Our exploration with these nominees of the financial and management hurdles 

facing the Federal Government makes this a critically important hearing. Thank 

you, Mr. Chairman. 

Chairman LIEBERMAN. Thanks very much, Senator Collins. 

We are really honored to have with us today to introduce Mr. 

Orszag, Congressman John Spratt, Congressman Paul Ryan, the 

Chairman and Ranking Member, respectively, of the House Budget 

Committee. I gather that a vote has gone off in the House, so I 

want to let you two go forward. Speak as long or short as time allows, and then we will understand if you depart. But your presence 

is appreciated. 
8 

1The prepared statement of Mr. Spratt appears in the Appendix on page 41. 

TESTIMONY OF HON. JOHN M. SPRATT JR.,1 A REPRESENTATIVE IN CONGRESS FROM THE STATE OF SOUTH CAROLINA 

Mr. SPRATT. Mr. Chairman, what I will do is read the opening 

paragraph and the concluding paragraph and submit my testimony 

for the record, with your consent. 

Chairman LIEBERMAN. That is a good precedent for this Committee. [Laughter.] 

Mr. SPRATT. Given the questions you outlined for Mr. Orszag, I 

don’t think we need to be here anyway because I think you will be 

occupied for the rest of the afternoon. 

Chairman Lieberman, Ranking Member Collins, and Members of 

the Homeland Security Committee, thank you for allowing me to 

testify on behalf of Peter Orszag for Director of OMB. 

As I told the Budget Committee earlier this week, had the choice 

been mine, Peter Orszag is exactly the person I would have chosen 

for OMB, and indeed, 2 years ago, when the nomination for the Directorship of CBO was ours, Senator Conrad and I picked Peter 

Orszag, and let me tell you, he has fulfilled or exceeded our expectations in every way. 

Mr. Chairman, our economy is in recession, but this is not your 

garden-variety business cycle recession, and there is no off-theshelf traditional solution for us to turn to. In times like these, we 

need our best and our brightest, and Peter Orszag fills that bill. 

He has the skills, the temperament, the intelligence, and the experience needed at OMB. 

I urge his confirmation and hope it will come swiftly because the 

work to be done at OMB is already laid out, which includes next 

year’s budget coming on the heels of this year’s stimulus bill. He 

has enough to do for us to confirm him as swiftly as possible and 

put him to work, where I know he will be an enormous help to the 

Government of the United States. 

I, without qualification and with the highest recommendation, 

recommend him for this post. 

Chairman LIEBERMAN. Thanks very much, Congressman Spratt. 

Congressman Ryan. 

TESTIMONY OF HON. PAUL RYAN, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF WISCONSIN 

Mr. RYAN. Chairman Lieberman, Ranking Member Collins, it is 

a pleasure for me to be here, as well, with Mr. Spratt to support 

Mr. Orszag’s nomination. 

The three of us have spent a lot of time together over the last 

2 years, and I always enjoy the fact that when you typically have 

a witness, usually they put a glass of water in front of you. With 

him, we put a pitcher of Diet Coke in front of him. [Laughter.] 

Mr. RYAN. He is a high-octane, high-energy individual. 

One of the reasons why I am here to support his nomination is 

because of how he conducted himself and how he ran the CBO over 

the last 2 years. We budgeters really expect great integrity, fairness, and impartiality from the Congressional Budget Office. That 

is exactly the kind of leadership he provided to the CBO. 
9 

While Mr. Orszag and I may come from and have different economic philosophies and doctrines, we have great respect for one another. This is a job at a time when we have the largest economic 

challenges in a generation, arguably the greatest fiscal challenges 

in the history of our Nation, and we need somebody to hit the 

ground running. He will not miss a beat on that. 

And I have every expectation and confidence that he will bring 

that sense of integrity in the numbers, that sense of impartiality 

to this new job. He is going from a job as an impartial referee to 

a job as an advocate for a particular Administration. And while I 

have concerns with the fiscal direction of this Administration on 

some levels, I have much more comfort. I am very pleased that he 

is going to be over there as the Director of the OMB. 

So it is with those thoughts in mind that I am here also to offer 

my support for his nomination. 

Chairman LIEBERMAN. Thanks very much, Congressman Ryan. 

The presence of both of you means a lot to us, as I know it does 

to Mr. Orszag, so please feel free to go back and vote, and thanks 

for your attendance here. 

Mr. SPRATT. Thank you, Mr. Chairman. 

Chairman LIEBERMAN. All the best. 

Mr. Orszag has filed responses to a biographical and financial 

questionnaire, answered pre-hearing questions submitted by the 

Committee, and had his financial statements reviewed by the Office of Government Ethics. Without objection, this information will 

be part of the hearing record, with the exception of the financial 

data, which is on file and available for public inspection in the 

Committee offices. 

Our Committee rules require that all witnesses at nomination 

hearings give their testimony under oath. Mr. Orszag, would you 

please stand and raise your right hand. 

Do you swear that the testimony you are about to give to the 

Committee will be the truth, the whole truth, and nothing but the 

truth, so help you, God? 

Mr. ORSZAG. I do. 

Chairman LIEBERMAN. Thank you very much. Please be seated. 

Mr. Orszag, we have previously referred to at least one member 

of your family who is here. If there are others, family or friends you 

would like to introduce, this is a good time. 

Mr. ORSZAG. Yes. In addition to my son, Joshua, I would also like 

to introduce my significant other, Claire. Joshua has joined me at 

the witness table. [Laughter.] 

Chairman LIEBERMAN. You are welcome to call on Joshua. 

Senator CARPER. Should we ask him to take an oath? [Laughter.] 

Senator LEVIN. Representative Ryan thinks you are high octane. 

He should meet your son. 

Mr. ORSZAG. Yes, I have to keep up with him. 

Chairman LIEBERMAN. That is true. 

Before we proceed with your statement, and I promise you that 

this is the last time I will do this in public, but it is too irresistible 

for me. In the interest of full disclosure, Mr. Orszag, having taken 

the oath, I want to disclose a relationship that the two of us have. 

His mother grew up in Stamford, Connecticut, in the neighborhood of my mother, where my family grew up. Both Peter and I 
10 

1The prepared statement of Mr. Orszag appears in the Appendix on page 46. 

have found out from his mother and mine, different generations, 

that her father, Peter’s grandfather, courted my mother when they 

were both teenagers living in the same neighborhood. And to give 

you a sense of what the courtship was like in those days, my mother remembers—he has passed away now, but she remembers your 

grandfather with great warmth—that he used to come over and 

help my mom, who was one of six children in a family whose father 

had died very early, do the family wash. A good man. [Laughter.] 

Undoubtedly, with a genetic interest in budgetary control and 

thrift, but anyway, now that is over and I have gotten that out—— 

Senator COLLINS. Now the questions are going to come. [Laughter.] 

Chairman LIEBERMAN. Please proceed with your statement at 

this time. 

TESTIMONY PETER R. ORSZAG,1 TO BE DIRECTOR, U.S. OFFICE 

OF MANAGEMENT AND BUDGET 

Mr. ORSZAG. Thank you very much. Senator Lieberman, Senator 

Collins, and Members of the Committee, I am honored to come before you as President-Elect Obama’s nominee for Director of the Office of Management and Budget. 

I would also like to thank Mr. Spratt and Mr. Ryan for their introductions. As Director of the Congressional Budget Office, I 

worked to establish good relationships with members of both parties, and I hope to continue that spirit of bipartisanship if I am 

confirmed as Director of OMB. 

It is a momentous time to be holding this hearing. In the shortrun, we face the worst economic crisis since the Great Depression, 

with job losses of more than 2.5 million over the last year and projected job losses of 3 to 4 million more over the coming year unless 

we act and act aggressively. Over the medium- to long-run, we face 

the prospect of daunting fiscal deficits that reflect an unsustainable 

course that the Federal budget is on. 

But what I want to spend most of my time with you on this 

morning is government performance. I am particularly pleased to 

be before this Committee because I believe that government performance and budget must be one. Government performance must 

be reflected in our budgetary priorities, and then the results of improved performance will yield benefits to the budget. So if I am 

confirmed, I would seek an OMB Version 2.0 where those two arms 

of the agency are better integrated and you see a more unified 

whole between performance and budgeting. 

Most of the performance issues the government faces today have 

developed over decades and will take time to address, but there is 

an urgency to begin now. We need to be open to new ideas and new 

ways of doing things. Improving performance overall requires not 

only sustained focus, but also a better set of metrics. After all, it 

is hard to change what you can’t see or measure. Significant improvements to the existing performance management system are 

both possible and necessary. 

Let me touch briefly on several areas in which we can do better, 

many of which have already been discussed. 
11 

First, procurement and contracting. The dollar value of Federal 

contracts has more than doubled over the past 8 years to more 

than $400 billion in 2007, but the number of qualified contract officers has remained flat at about 28,000. Given that disjuncture, it 

is not surprising that problems have arisen, especially at the Department of Defense. In addition to reviewing the use of no-bid, 

cost-plus, and interagency contract vehicles, we must improve the 

quality and quantity of the Federal acquisition workforce, and I am 

pleased that OMB is already working with the Federal Acquisition 

Institute to do this. 

We also need to use technology to create more transparency 

around procurement and contracting. Current vehicles, such as 

USAspending.gov, suffer from a lack of timely and accurate data 

and a presentation that is not seen as engaging enough to attract 

widespread visits. Technology can be a great way to create transparency that will spur competition and help identify problems. 

We also need to clarify what is and what is not an inherently 

governmental function, a line that has become too blurred in recent 

years. The use of contractors has grown dramatically, and the result is often that we are depleting the core skills of government 

agencies. 

That leads me to the second topic of human capital. Central to 

any effort to improve the performance of Federal programs has to 

be a strategy to restore the prestige to and increase the capacity 

of our Federal workforce. Over the next decade, roughly 60 percent 

of the Federal Government’s 1.6 million white-collar employees and 

90 percent of the 6,000 Federal executives will be eligible to retire. 

To mitigate and offset these expected retirements, we need to take 

a number of actions, including perhaps most importantly, as President-Elect Obama has said, making government cool again. We 

need to dramatically improve the Federal hiring process, and we 

need to provide more opportunities for civil servants to rise to policy-level offices so that they can aspire to seeing the results of their 

hard work in promotions. 

A third key topic is information technology (IT). The government 

currently spends $70 billion in non-classified information technology and perhaps another $20 to $30 billion in the intelligence 

community on information technology. On the one hand, IT investments can provide much better transparency and provide a platform for more extensive interaction with the American public. On 

the other hand, historically, IT investments have not been well integrated into the budget process and have often not been aligned 

with agency missions. They also need stronger management and 

auditing. Major IT projects have a poor track record in government. 

We also need to promote better cyber security. The number of 

threats continues to grow and represents risk to both key financial 

and other infrastructure, as well as data. If confirmed, I look forward to renewing OMB’s commitment to cyber security through the 

comprehensive National Cyber Security Initiative and other efforts. 

A fourth key topic is financial management. Improper payments 

in programs such as Medicare, disability, and the tax code amount 

to perhaps $70 billion a year. These significant opportunities 

should be pursued vigorously. I have already heard about the results that have resulted from recovery auditing and other steps, 
12 

and I think those are promising measures that we should be exploring more aggressively. In addition to paying more attention to 

the problem and recovery auditing, we can create stronger incentives for enforcement in the first place. 

We also must improve the management of the Federal Government’s real property holdings. The Federal Government owns 1.2 

billion structures valued at more than $1.5 trillion. Ten percent of 

these facilities are either under-used or empty. That is unacceptable. We need to more aggressively pursue opportunities for disposition and terminating inefficient leases so that we can better 

manage the Federal Government’s own portfolio of real properties. 

Finally, we need to reexamine how we can best protect public 

health, the environment, and public safety through the regulatory 

process. I am pleased that the President-Elect has announced his 

intention to nominate Cass Sunstein, one of the Nation’s leading 

law professors and thinkers and a specialist on regulation, to run 

the office within OMB responsible for coordinating regulatory policy. 

With that, Mr. Chairman, let me just reaffirm my commitment 

to working in a bipartisan manner with all of you, if I am confirmed, to tackle the very important challenges that we as a Nation 

face. Thank you very much. 

Chairman LIEBERMAN. Thanks, Mr. Orszag. That was a very 

thoughtful and practical opening statement. In all the years I have 

been on this Committee, we always say that the ‘‘M’’ in OMB is 

often not given enough attention. That is the management part of 

the job. Some Administrations do better, some not so good. I appreciate your focus on it right from the beginning. Maybe it is time 

to change it to the Office of Performance and Budgeting. 

Mr. ORSZAG. That would be OK by me. We can talk more about 

that. 

Chairman LIEBERMAN. Let me start my questioning with—— 

Mr. ORSZAG. OPM. There already is one. [Laughter.] 

Chairman LIEBERMAN [continuing]. The standard questions we 

ask of all nominees. First, is there anything you are aware of in 

your background that might present a conflict of interest with the 

duties of the office to which you have been nominated? 

Mr. ORSZAG. No. 

Chairman LIEBERMAN. Do you know of anything, personal or otherwise, that would in any way prevent you from fully and honorably discharging the responsibilities of the office to which you have 

been nominated? 

Mr. ORSZAG. No. 

Chairman LIEBERMAN. Do you agree without reservation to respond to any reasonable summons to appear and testify before any 

duly constituted Committee of Congress if you are confirmed? 

Mr. ORSZAG. Yes. 

Chairman LIEBERMAN. Thank you. We are going to start with a 

first round of 7 minutes for questions. I appreciate the number of 

Members of the Committee here, which speaks to the interest, of 

course, in your nomination. 

Let me ask you a couple of questions that relate to the immediate challenge we face, and that is the condition of our economy 

and the recommended Economic Recovery and Reinvestment Act. 
13 

We have heard a lot of back-and-forth debate about whether the 

proposed Obama Administration stimulus package is big enough or 

whether it is too big. I wanted to ask you to comment on that and 

also, in your role as an economist, help us to reach an informed 

judgment about how we can reach a reasonable conclusion about 

what size stimulus is the right size to help us out of our current 

economic crisis. 

Mr. ORSZAG. Well, let me just begin by noting that in the current 

economic environment, which is highly unusual, the key impediment to economic growth—and this is not normal, normally other 

conditions apply—is how much demand for goods and services that 

firms and other entities could produce. That is the key issue. The 

gap between how much the economy could produce and how much 

it is currently producing is estimated to be about $1 trillion now 

per year. That is lost income of about $12,000 a year for a family 

of four, on average. So it is that huge GDP gap that is at the heart 

of why we need to act, and it is reflected in lost jobs and lost income. 

Now, that perspective may suggest a very large number for an 

economic recovery plan, and in fact, there are academic economists 

who are suggesting numbers that are much larger than what is 

under discussion in the policy process because they look at numbers like $1 trillion a year over 2 years or so and you get very large 

numbers. That is one perspective. 

The second perspective is let us look at all of the specific policy 

proposals that you can put together that immediately add to aggregate demand in an effective way, that have relatively high bang for 

the buck, and you add those all up together. And there is some tension because you cannot get a collection of policies that add up to 

anything close to numbers that are commensurate to the GDP gap. 

So you then have a judgment call. Where do you cut off the package, balancing the macro-economic risk against the fiscal condition 

that we are in and the declining bang for the buck that comes as 

you go down the list of possible initiatives or interventions. 

Chairman LIEBERMAN. The macro-economic risk of the growing 

long-term debt, you mean? 

Mr. ORSZAG. No, let us say that you only came up with $150 billion of economic recovery spending. 

Chairman LIEBERMAN. OK. 

Mr. ORSZAG. You are then leaving a GDP gap that could be $800 

or $900 billion, a very large gap. You are assuming a very significant gap. 

Chairman LIEBERMAN. Right. That gap. 

Mr. ORSZAG. It is the judgment of the economic policy team that 

the incoming Administration has put together that it is worth tolerating some slippage, that is some things that might not spend 

out immediately over the next 3 or 6 months, given the severity of 

the economic downturn and the projected length of the economic 

downturn, especially if those things then lead to investments that 

will improve long-term economic performance. 

So there is this balancing act between getting money out the 

door quickly and addressing the macro-economic risk, and when 

you start to loosen up on that a little bit in terms of things that 
14 

may not fully spend out over 6 months, are you at least getting 

something that you sort of wanted anyway? 

Chairman LIEBERMAN. That is a helpful beginning. 

Just as a point of clarification, when we are talking about the 

total size of the stimulus or Economic Recovery and Reinvestment 

Act, $750 billion, $800 billion, are we talking about a 2-year period 

of time for spending it out? 

Mr. ORSZAG. That is correct. 

Chairman LIEBERMAN. So that if you go with that $1 trillion deficit in demand, reaching the potential in the economy, we are talking about $2 trillion over 2 years. 

Mr. ORSZAG. Correct. 

Chairman LIEBERMAN. But we are trying to figure out also what 

the multiplier effects are of every dollar we spend. 

Mr. ORSZAG. That is correct, also. 

Chairman LIEBERMAN. This is another point of discussion here 

on the Hill, as you know, which is the balance in the economic 

stimulus package between spending and tax cuts, in simplistic 

terms. There are obviously some people who feel that tax cuts do 

not bring much of a return. Spending is the way to go. The Obama 

Administration is clearly moving in a different direction, a more 

balanced package. Give us your justification for that. 

Mr. ORSZAG. Well, if you just look at bang for the buck, so in 

terms of immediately adding to aggregate demand, I think there is 

widespread agreement among economists that the highest bang for 

the buck is direct Federal Government spending on infrastructure 

or on real goods and services. 

One layer below that is assistance to States because that avoids 

laying off of teachers and other steps that State and local governments would take in the absence of assistance. 

And then in general, one layer below that are tax provisions, and 

the reason tax provisions are somewhat less effective, at least from 

a short-term stimulus perspective, is that part of the money is 

saved rather than spent. So you provide a dollar in tax relief. Part 

of that is saved rather than consumed, and the result then is that 

you do not get a full dollar added to aggregate demand. 

However, and the reason there is some balance is if you look 

down the individual items of Federal Government spending that 

you could get out the door quickly, there is a limit to that. So 

again, if you face a GDP gap of $2 trillion over 2 years, you are 

either going to stop at things that have the maximum bang for the 

buck and then assume a very substantial macro-economic risk, or 

you are going to include in the package things like State fiscal relief and tax relief that provide some macro-economic benefit but 

might have slightly lower bang for the buck. 

Chairman LIEBERMAN. Let me ask you a final question in this 

round. The President-Elect has spoken about the need for and 

promised the American people that there would be oversight of this 

money. This is a lot of money to spend quickly—— 

Mr. ORSZAG. It is a lot of money. 

Chairman LIEBERMAN [continuing]. And the risk of waste or even 

fraud becomes higher. Are there specific mechanisms that you have 

in mind for doing this, or is it just going to be put through the regular OMB process? 
15 

Mr. ORSZAG. No. We are thinking of special oversight and auditing processes for this. So I will give you two examples. 

Chairman LIEBERMAN. OK. 

Mr. ORSZAG. We plan to create a website that will contain information about the contracts and include PDFs or contracts themselves and also financial information about the contracts—— 

Chairman LIEBERMAN. Define PDFs. 

Mr. ORSZAG. Sorry, an electronic document that is posted on the 

Internet so the public can see the contract—— 

Chairman LIEBERMAN. Right. 

Mr. ORSZAG [continuing]. On the web. One of the difficulties in 

existing Federal financial management payment flows is that the 

time between when a contract is signed and when the information 

shows up on Federal Government websites is so long that we didn’t 

want to allow that time lapse to occur. So we would propose that 

the contract officer, when you sign the contract, would be required 

to go to a simple web-based portal and fill out a simple template 

basically to create a faster flow of information, at least at an aggregate level, on specific contracts, post the contract so you see that 

information, too. 

In addition to those kinds of steps, we would favor creating a 

special board, an oversight board composed of the Inspectors General of the relevant departments and chaired by the Chief Performance Officer that would review problems and that would conduct 

regular meetings to examine specific problems that might be identified, for example, by folks who are looking at that website and saying, wait a minute. That doesn’t look right. 

Chairman LIEBERMAN. That is great, very reassuring. Thank 

you. Senator Collins. 

Senator COLLINS. Thank you. 

Dr. Orszag, I mentioned in my opening statement my concern not 

only about our current economic crisis, but the long-term spiraling, 

troubling increase in the public debt. The Peterson Foundation 

headed by the former Comptroller General, David Walker, recently 

noted that America now owes more than its citizens are worth, a 

startling way of focusing our attention on the growth in the Federal debt. 

Many people have proposed a bipartisan commission that would 

tackle the issue of entitlement reform. All of us know in Washington and throughout the country that the current structure of Social Security and Medicare is simply not sustainable in the long 

term. 

Do you agree that entitlement reform is an issue that the new 

Administration must tackle, and do you support the creation of an 

outside commission to come back to Congress with specific reforms? 

Mr. ORSZAG. Let me answer it very directly. First, the Federal 

budget is on an unsustainable course, and the course that we are 

on needs to be rectified as we emerge from the current downturn 

or we will face a fiscal crisis at a time that is difficult to predict. 

That fiscal imbalance is driven mostly by rising health care costs, 

and I think there are huge opportunities to improve the efficiency 

of the health care system to reduce cost without harming health 

outcomes reflected in the fact that we have huge variations across 

parts of the United States in costs per beneficiary that are not cor-
16 

related with and that do not reflect better outcomes in the highercost areas. 

With regard to the process, I will also say I think our existing 

system does not deal well with gradual long-term problems, and 

you can look across a variety of areas. Our system seems to respond to crises and not to gradual long-term problems like rising 

health care costs, like a gradually growing fiscal gap, like climate 

change and other gradual problems. That opens up the possibility 

of changes in the process, and there are a variety that have been 

discussed. One, Senators Conrad and Gregg have a proposal—— 

Senator COLLINS. Yes. 

Mr. ORSZAG [continuing]. For a long-term fiscal commission. Senator Baucus has a proposal that focuses more on how health care 

decisions are made. And I think those process changes are things 

that we are carefully examining, and I just come back again to the 

conclusion that the existing system is not working very well and 

therefore some changes would seem warranted. 

Senator COLLINS. I recognize that the new Administration needs 

to get past the current fiscal crisis, but I assume from your comments that you do recognize the long-term budget imbalance and 

the threat to our long-term economy and that the Administration 

is committed to tackling those budget issues, as well. 

Mr. ORSZAG. And let me be more specific. If I am confirmed, I 

will be part of the process that puts together the fiscal year 2010 

budget, which will be released in mid- to late-February, and perhaps, actually, Mr. Chairman, if I could just say a general caveat, 

‘‘if I am confirmed’’ for all questions so that I do not have to keep 

repeating that and just assume it is implicit in my answers. 

Chairman LIEBERMAN. Without objection. 

Mr. ORSZAG. Thank you. 

Senator COLLINS. We will assume that appropriate caveat. 

Turning now to the economic stimulus package, you mentioned 

in response to Senator Lieberman your intention to have some sort 

of State fiscal relief included in the package. As you know from our 

conversations, I support that, as well. There are some who have 

suggested, however, that while helping States in order to prevent 

layoffs and budget cuts that might exacerbate the recession is appropriate now, that should be structured in terms of loans rather 

than grants. What is your opinion on that? 

Mr. ORSZAG. I think there are two issues that need to be examined with regard to that thought. The first is that for many States, 

such loans would face the same sorts of constraints as debt 

issuance and other borrowing that they undertake, and so for many 

States, it is actually not that easy to engage in such credit transactions. 

The second point, though, is we have to be clear about what we 

are trying to accomplish through that State fiscal relief. If it is to 

avoid layoffs and to help the macro economy, which is what I believe is the case, rather than just pure benevolence—it is not just 

benevolence, there is a macro-economic imperative—that would 

also in my mind, at least, raise questions about the loan approach 

as opposed to a grant approach. 

So I understand the theory, the case behind the idea, but I guess 

there are both practical and then a sort of philosophical question 
17 

that arises with regard to whether it would impede the macro-economic impact that you are trying to achieve through that assistance. 

Senator COLLINS. I think the concern is while we recognize the 

need to help States, you do not want to be creating a situation 

where States in good times are spending too much money growing 

their programs too much with the knowledge that Uncle Sam will 

come along and bail them out in the bad times, and thus they are 

reaching unsustainable levels of spending. 

Mr. ORSZAG. Yes, and I think that is a legitimate concern. I appreciate the concern. 

Senator COLLINS. Many of us have also advocated a significant 

portion of the stimulus package be devoted to infrastructure spending. There is a backlog in the State of Maine and virtually every 

State of shovel-ready transportation projects, and the reason I am 

for that kind of spending is it not only creates good jobs, but it 

leaves communities with lasting assets that they really need. 

I think, however, we need to look beyond just the transportation 

sector. There are other kinds of investments that are needed, and 

of particular interest to this Committee are the land ports of entry. 

The U.S. Customs and Border Protection faces significant infrastructure challenges. Some of the land ports of entry are over 70 

years old. There has been increased traffic volume, security requirements. In my State, there are three ports of entry that are on 

the list but have been waiting for funding for quite some time. Are 

you looking beyond the transportation infrastructure at such needs 

as the land ports of entry, military construction? There are a lot 

of projects in the queue. 

Mr. ORSZAG. Yes, and with respect to the ports of entry question 

in particular, I have had discussions with Governor Janet 

Napolitano on precisely that topic and explored the possibility of 

funding as part of an economic recovery plan to speed investments 

in the land ports of entry. 

Senator COLLINS. Thank you. 

Chairman LIEBERMAN. Thanks very much, Senator Collins. 

We will go to the other Members of the Committee, as is our 

rule, in order of arrival. Just for the information of Members, the 

order I have as kept by the Clerk is Senators Levin, Tester, Akaka, 

Coburn, Voinovich, Carper, Landrieu, and Pryor. 

Senator Levin. 

OPENING STATEMENT OF SENATOR LEVIN 

Senator LEVIN. Thank you, Mr. Chairman, and we welcome Peter 

Orszag. You are going to make a great OMB Director. We welcome 

your family and particularly your son, who has been trying to look 

interested during this last hour and has done very well. 

I want to pick up this idea about TARP and the conditions and 

the assurances that are going to be provided as part of the second 

half of the program, which were not there for the first half. The 

failure to do that on the first half has created a real credibility 

problem about the use of $350 billion of taxpayers’ money. So I 

want to ask you what is reasonable for us to expect in terms of assurances on the second half before we vote on it. I will be writing 
18 

a letter to Larry Summers about this and hoping to get an answer 

on this by the morning before we vote. 

Is it reasonable for us to expect that TARP recipients are going 

to be required by the Treasury to track and report their use of 

TARP funds? 

Mr. ORSZAG. I know that the incoming Administration is committed to a heightened transparency and accountability. I can’t 

commit, given that is more of a Treasury responsibility. 

Senator LEVIN. Should we not be able to expect that we will be 

told by recipients how they spent those funds and that will be reported publicly, just the way the contract is going to be on the web? 

And by the way, I commend you for that. It has taken the threat 

of a subpoena to get the current Treasury Department to produce 

the documents, which should be made public, are public documents, 

and involve public funds. Senator Collins and I have been involved 

in that go-around with them, and hopefully these documents are 

coming in today. We do that as the Permanent Subcommittee on 

Investigations, not on behalf of the full Committee, which, of 

course, would involve the good offices of our Chairman. 

So should we not reasonably expect that the recipients of TARP 

funds would be required to report on their use of TARP funds? 

Mr. ORSZAG. It seems to me like that is the kind of change that 

the incoming Administration will be looking at and examining. It 

seems reasonable to me, but again, I am not—— 

Senator LEVIN. I understand. 

Mr. ORSZAG [continuing]. The official responsible for that program. 

Senator LEVIN. Would it be reasonable for you, in your judgment, 

for us to expect a requirement that TARP recipients provide 

agreed-to benchmarks which need to be met relative to the use of 

those funds? 

Mr. ORSZAG. I think I am going to be repeating my answer—— 

Senator LEVIN. That is fair enough. That is a good enough answer. 

Mr. ORSZAG. OK. 

Senator LEVIN. If you think that is reasonable, that is good 

enough. We will use that argument. 

Mr. ORSZAG. Again, I want to respect the work that the Treasury 

and Mr. Summers and others are doing. It seems to me like those 

are questions that are better directed to them than me. 

Senator LEVIN. Well, they will be directed. 

Mr. ORSZAG. OK. 

Senator LEVIN. It is also appropriate that we ask you whether 

you think this would be a reasonable requirement. 

Mr. ORSZAG. It does not seem unreasonable to me, but again, I 

am not the official responsible. 

Senator LEVIN. Would the same answer be forthcoming as to 

whether or not it is reasonable that Congress be assured that 

banks receiving these funds would extend credit with those funds 

to a reasonable extent? 

Mr. ORSZAG. That again seems reasonable to me with the caveats 

that we have already discussed. 
19 

Senator LEVIN. All right. Would that answer also be accurate relative to the use of a reasonable portion of those funds for mitigating foreclosures on residential mortgages? 

Mr. ORSZAG. Yes, and I know that is something specifically that 

the incoming Administration would like to explore. 

Senator LEVIN. All right. Finally, what about a written viability 

plan? We required the auto manufacturers to give us those plans, 

and that was proper. Should we not require at least the major recipients of these funds, the TARP funds, the other recipients, such 

as the banks that receive significant funds, to provide those same 

kind of viability plans? 

Mr. ORSZAG. Again, with the caveat that especially in the financial sector, things may sometimes move very rapidly, and with the 

caveat about timeliness and also that it is not really my jurisdiction, it doesn’t seem unreasonable to me. 

Senator LEVIN. All right. Thank you. As you know, Dr. Orszag, 

the Permanent Subcommittee on Investigations, which I chair, has 

spent a lot of time looking at offshore tax havens. 

Mr. ORSZAG. Yes. 

Senator LEVIN. These secrecy havens whose use has denied our 

Treasury the funds that could be as much perhaps as $100 billion. 

That was one estimate, which we have been using at the Permanent Subcommittee on Investigations. When we met last week, I 

shared with you a copy of a bill, which had been cosponsored by 

then-Senator Obama and Senator Coleman, so it is a bipartisan 

bill, but even more significantly has the imprimatur of the President-Elect. 

Mr. ORSZAG. Yes. 

Senator LEVIN. The purpose of the bill is to shut down the offshore tax abuses. Have you had a chance to review the bill, and 

whether you have had that chance or not, what do you think about 

our cracking down on the use of those tax havens? We can’t stop 

them from existing, but we sure as heck ought to do what we can 

to stop taxpayers who owe the Treasury money from using those 

tax havens. Could you give us your thoughts on that issue? 

Mr. ORSZAG. There is no question in my mind that increased enforcement and better enforcement of the tax code is a beneficial 

thing that we need to be more aggressively pursuing, including 

international transactions. 

Senator LEVIN. Does that include specifically going after these 

secrecy jurisdictions that American citizens, including individuals 

and corporations, have been utilizing to avoid paying their taxes? 

Mr. ORSZAG. Again, that is aligned with the overall objective of 

improving the enforcement of the tax code. I do not want to comment specifically on exactly which provisions are most auspicious 

given that, again, that is not my jurisdiction. 

Senator LEVIN. All right. Relative to that question, and this goes 

to the issue of scoring, we take initiatives, or try to around here, 

to enforce our tax laws, and you very properly have gone in very 

accurately and, I think, thoroughly and effectively have gone 

through the measures that are going to be before us to try to get 

this economy going again. That testimony is very helpful. 
20 

But one of the things that is overlooked because it will take a 

little more time than doing this in the next couple of weeks is tax 

enforcement. 

Mr. ORSZAG. Yes. 

Senator LEVIN. We talk about tax cuts as a stimulus, direct expenditures as a stimulus, but in terms of reducing the impact on 

our deficits, which is a concern of all of us, one of the things that 

has to be considered is surely enforcing the tax laws which exist. 

When we try to put money in for collection, and the payback is 

about $4 to every $1 that we put in there, roughly, it is scored as 

an expenditure instead of a revenue. You have personal experience 

with that from CBO. Is there some way where you have that kind 

of investment in increasing revenue through tax enforcement that 

instead of having a cost, which makes it more difficult for us to get 

that adopted because it is scored, we could change that in some 

way, at least relative to the direct revenue raising which would result from an expenditure? 

Mr. ORSZAG. Let me first again say, I think improved enforcement of the tax code is not only an important fiscal issue, but it 

is just important as a civic question, that American citizens should 

expect that their fellow citizens are paying their fair share and 

complying with and that there is full enforcement of the tax code. 

That having been said, you have identified one of the possible 

reasons we do not have as much enforcement as might be optimal. 

Those scoring rules have developed over a long period of time. They 

exist for technical reasons. I do see them in some cases as an impediment to effective enforcement, so I would like to explore ways 

in which they possibly could be changed, working with the Budget 

Committees and other budgeters, and cognizant of the fact that 

they have developed for a reason, but nonetheless do seem to me 

to be an impediment to enforcement not only in this area, but in 

Medicare and other areas. And given that we should improve 

enforcement, I think we should be looking at incentives for the 

agencies to do better and incentives for you all to provide more resources to that activity. 

Senator LEVIN. Well, we thank you and congratulate you. I think 

you will make a terrific OMB Director. 

Mr. ORSZAG. Thank you. 

Senator LEVIN. Thank you, Mr. Chairman. 

Chairman LIEBERMAN. Thanks, Senator Levin. One of the great 

mental exercises for witnesses before this Committee is to handle 

Senator Levin’s questions. You did pretty well. 

Mr. ORSZAG. Did I succeed? 

Chairman LIEBERMAN. You did pretty well. 

Senator LEVIN. Too well on the first set. [Laughter.] 

Chairman LIEBERMAN. Senator Akaka is next. Senator Akaka, I 

want to say, along with Senator Voinovich, as you probably know, 

Dr. Orszag, going to something you mentioned in your opening 

statement, have done truly extraordinary, largely unsung work on 

behalf of human capital improvement and management of our Federal Government. So with that, I am happy to call on Senator 

Akaka. 
21 

OPENING STATEMENT OF SENATOR AKAKA 

Senator AKAKA. Thank you. Thank you very much, Mr. Chairman. I want to thank you for your leadership of this Committee. 

I have really enjoyed my work with Senator Voinovich over the 

years. We have worked together so well trying to bring about some 

good changes. 

Let me welcome you, Dr. Orszag, and also Joshua, your son. 

Mr. ORSZAG. Could I just point out, he used to call the CBO the 

Congressional Boring Office? [Laughter.] 

We need to come up with a new name for OMB. 

Senator AKAKA. Well, thank you very much for being here. 

In my role as Chairman of the Oversight of Government Management Subcommittee, I am very concerned about the management 

challenges facing the incoming Administration. It is more important than ever for the Office of Management and Budget to focus 

on better management and not only budgetary issues. I have taken 

your statement of providing better government performance as a 

step ahead, past management, and I am thinking that government 

performance means that there is management and there is accountability that brings on better performance. 

The Government Accountability Office has identified about 27 

issues and programs that are high risk for waste, fraud, or abuse 

due to poor management. OMB will be critical to addressing these 

management issues as well as several other issues throughout the 

government. I have been especially worried about contracting management at agencies and human capital planning. 

Mr. ORSZAG. Yes. 

Senator AKAKA. I have also been very focused on ensuring that 

the Federal Government protects Americans’ personal privacy, 

where OMB must play a critical role. 

So I look forward to working with you and your team on this in 

the future. 

But before I move on to my questions, Mr. Chairman, I ask that 

my full statement be placed in and made a part of the record. 

Senator LIEBERMAN. Without objection, so ordered. 

[The opening prepared statement of Senator Akaka follows:] 

OPENING PREPARED STATEMENT OF SENATOR AKAKA 

I would like to welcome Dr. Peter Orszag to this hearing. With the fiscal and 

management challenges facing our nation, finding capable and strong individuals to 

lead the Office of Management and Budget (OMB) in the next Administration is 

critical. I am very pleased that the President-elect has recognized this and announced this nomination so early. 

With a budget deficit predicted to be over one trillion dollars next year adding 

to the already trillions of dollars in debt, it is only natural that the Office of Management and Budget focus on the ‘‘B’’ in OMB. While budget and management are 

closely linked, it is important that OMB also keep a close focus on the unique management challenges currently facing agencies throughout the Federal Government. 

The Government Accountability Office has placed 27 programs and management 

issues on its High Risk List, which identifies areas at risk for waste, fraud, or 

abuse. Better management practices would significantly aid in addressing almost 

every one of these cases. 

As Chairman of the Subcommittee on Oversight of Government Management, 

over the past several years I have witnessed how poor management has compromised taxpayer dollars and harmed government missions. I will continue to 

closely work with the incoming OMB leadership to address weaknesses in government management. 
22 

I believe that it is time that the Federal Government reexamine the Privacy Act 

and make needed updates to reflect the changing times. Stronger and more consistent protection of personally identifiable information is needed at agencies. OMB 

can play a vital role in that by providing for strong centralized leadership in setting 

privacy policy for all agencies. 

The Federal Government also faces a looming workforce crisis as many Federal 

employees prepare for retirement in the coming years. If we do not begin to form 

strategies to recruit, train, and retain an outstanding Federal workforce, agencies 

face a brain drain and will be forced to rely even more heavily on Federal contractors to perform vital agency functions. 

I am especially concerned about contract management. Procurement and contracting management have been lacking for years, yet the money spent on contracting has exploded. Stronger oversight by Federal agencies and better training 

of contract specialists and project managers are needed, especially in the civilian 

agencies. Again, OMB can play a strong role in demanding better outcomes by all 

agencies. 

Finally, I want to say a word about security clearance reform, which has been one 

of my Subcommittee’s most important oversight projects since 2004. Senator 

Voinovich and I have worked with OMB, and now the Department of Defense and 

the Director of National Intelligence, to press for modernization of this outdated 

clearance framework. Much progress has been made, and as I indicated to the outgoing OMB leadership, I will continue to press for the needed reforms in the upcoming administration. 

I want to again thank the nominees for appearing here today and taking our 

questions. I am eager to start working with the new Office of Management and 

Budget to improve the performance and management of the Federal Government. 

In these unprecedented and difficult economic times, it is important to assure the 

American people that their government is using wise management to spend their 

dollars effectively while avoiding waste, fraud, and abuse. 

Thank you, Mr. Chairman. 

Senator AKAKA. Dr. Orszag, several large acquisition projects at 

the Department of Homeland Security, including SBInet and the 

Coast Guard’s Deepwater project, have experienced significant contracting problems and cost overruns. Despite repeated problems 

with contract management at agencies in recent years, OMB has 

not played an active role in most large contracting decisions or policy. Instead, contracting problems have been handled at the agency 

level. 

What are your plans to enhance OMB’s role in contracting decisions and oversight at agencies? 

Mr. ORSZAG. Again, coming back to the basic issue, which is that 

acquisition procurement has doubled since 2000, the number of acquisition officers has stayed flat, it is not surprising to me that 

agencies are struggling in overseeing their procurement budgets. 

In addition to that, there is not sufficient scoping out of procurement tasking ahead of time, and then there is not sufficient auditing and oversight as the project proceeds. Again, not surprising 

that you run into trouble in the middle of even long-term procurement projects. 

It is absolutely OMB’s responsibility to provide oversight and 

guidance on procurement issues. We have a statutory office, as you 

know, that is dedicated to that topic. I know that it has already 

started to work actively to increase the number of acquisition officers because I do think that is one of the key steps that is required 

in fixing this problem, and without that, you are going to be tilting 

at windmills. That is necessary, but not sufficient. If we had more 

acquisition officers, we would have more ability to mitigate some 

of these problems, but you need to do more than that. 

We need, again, to address better scoping out of projects and 

then monitor them as they go along, and OMB plays a key role in 
23 

that process, in part through the budget process, which is to say 

we can use the budget process to make sure that we are providing 

leverage when there are problems to fix them. 

Senator AKAKA. Is one of the problems staffing? 

Mr. ORSZAG. At OMB or out in the agencies? 

Senator AKAKA. Well, anywhere—— 

Mr. ORSZAG. I think in acquisition, if you double the procurement 

budget and the number of procurement officers stays flat, then unless you think the productivity of those officers has doubled over 

the same period of time somehow magically, it is not surprising 

that things get sloppy and problems arise. So absolutely, staffing 

is one of the key steps, and this is an area, coming back to enforcement—I mean, you might not think of it exactly as enforcement— 

where some increased costs will actually save money. By constraining acquisition officers, we are being penny-wise and poundfoolish because you might save a little bit on human capital costs, 

but you are losing a lot in terms of cost overruns and other problems in the procurement budget. 

Senator AKAKA. Dr. Orszag, as you are aware, I am very concerned about protecting the privacy of Americans’ personally identifiable information. In particular, I have been a strong advocate of 

enforcing current privacy laws at agencies and strengthening areas 

that may be weak. Currently, different agencies have widely differing programs in place to protect privacy. 

At the Department of Homeland Security, this Committee ensured that a robust privacy office was established, and I have been 

impressed by the work that they do. However, many agencies do 

not provide such comprehensive and focused attention to privacy. 

Do you believe that OMB should serve as a strong governmentwide advocate to ensure that all agencies are implementing the Privacy Act correctly, and if so, how do you anticipate OMB fulfilling 

that mission? 

Mr. ORSZAG. First, yes, privacy is absolutely crucial, especially as 

information technology advances. Protecting the information that is 

contained in various Federal databases and other IT structures is 

crucially important to all of us. 

Questions have arisen—for example, when IT investments are 

made, the agencies are supposed to conduct privacy impact assessments. Those are done, and my understanding is they are not as 

rigorous and they are not as rigorously applied as could be the 

case, so we could improve there. Questions have arisen with regard 

to OMB’s structure and whether we should have a Chief Privacy 

Officer internally at OMB like occurred during the 1990s, and that 

would be something that I would want to look at very carefully. 

But I can tell you that the importance of the privacy issue, 

whether it is lodged with the e-Government administrator or the 

head of OIRA or a Chief Privacy Officer, has to be at the top of 

our thinking as information technology evolves. 

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

Chairman LIEBERMAN. Thanks very much, Senator Akaka. 

Senator Tester, you are next, and then Senator Voinovich. 

OPENING STATEMENT OF SENATOR TESTER 

Senator TESTER. Thank you, Mr. Chairman. I appreciate that. 
24 

First of all, thanks for being here, Mr. Orszag. I particularly appreciate your boots. 

Mr. ORSZAG. Thank you. 

Senator TESTER. Is that regular attire for you? 

Mr. ORSZAG. It is a subtle act of rebellion, yes. 

Senator TESTER. OK, good. 

Chairman LIEBERMAN. They didn’t wear them on Hawthorne 

Street in Stamford. 

Mr. ORSZAG. Exactly. [Laughter.] 

Senator TESTER. I wear them every day, so maybe I rebel every 

day. 

Could you talk about some of the methods that you plan on using 

to gauge Federal programs’ effectiveness? 

Mr. ORSZAG. Yes, and let me talk to the performance metric system in particular. There currently is a system, the Program Assessment Rating Tool (PART) system, that had been designed and is 

in use. It is not particularly effective for two reasons. One is, frankly, most Federal officials do not even know about it. I just read a 

study that something under a quarter of senior Federal Government officials have even heard of PART, and then of those who are 

knowledgeable about it, most do not use it—there is a lot of going 

through the motions of filling out forms without as much impact 

as it could have, and I think that is for two reasons. First, it was 

developed without consultation with the Congress and with the 

agencies, and second, it is too focused on process rather than outcomes. 

So let me give you a specific example. We were talking about tax 

enforcement before. The PART process for tax enforcement measures the number of audits. That is great, but it is not what we really care about. What we really care about is the tax gap or the error 

rate or the compliance rate. 

So my view is we should be focusing our metric system on that 

ultimate outcome and not what we are doing to get there, and then 

let the agencies focus on how to get there. I would like to see a performance metric system that tells the Treasury Department and 

the IRS, hit this compliance rate for the tax code. You are going 

to have lots of internal measures that you need to use from a process, whether it is audit rates, risk, this, that, and other things, to 

hit it, but do not just tell me what your audit rate is because I do 

not really care about that. I care about what the tax compliance 

rate is. 

As I said earlier, it is really hard to do anything if you do not 

measure it because you do not know what you are trying to change 

and where you are going. I think it is crucially important, again, 

if I am confirmed, that we revamp and revise. The PART system 

is something that could be built upon, but it needs to be revamped 

in consultation with you all and with the agencies to be something 

that they have bought into and they will actually use and that is 

more outcome measured. 

Senator TESTER. You have a number of years of experience. Do 

you have any programs in mind for termination? 

Mr. ORSZAG. The President-Elect will be releasing a budget and 

economic overview in mid- to late-February, and that will contain 

some program eliminations, yes. 
25 

Senator TESTER. Are you willing to—— 

Mr. ORSZAG. No. 

Senator TESTER. No. [Laughter.] 

You have to ask. 

Mr. ORSZAG. Yes. 

Senator TESTER. On expiring tax cuts, President-Elect Obama 

has talked about them a lot during the campaign. Can you tell us 

which ones he is going to keep, which ones he is going to let expire? 

Mr. ORSZAG. The President-Elect, during the campaign, made a 

series of specific statements about tax provisions under $250,000, 

and I, at this point, see no reason that has changed in any way, 

and I haven’t heard any discussion of any change in that. 

Senator TESTER. Do you want to talk about TARP funds any 

more or just Department of Treasury—— 

Mr. ORSZAG. No, thank you. 

Senator TESTER. You do not want to? 

Mr. ORSZAG. Not really, but I will. [Laughter.] 

Senator TESTER. Well, we will see. 

Mr. ORSZAG. OK. [Laughter.] 

Senator TESTER. Can you give me any additional details—and 

you have seen the Summers letter—beyond the Summers letter on 

how the funds will be spent differently in this batch than it was 

in the first $350 billion, even though I am not sure anybody can 

tell us how the first $350 billion was spent to begin with? 

Mr. ORSZAG. No. Again, I think that is a question for Mr. Summers—— 

Senator TESTER. OK. 

Mr. ORSZAG [continuing]. And the Treasury Secretary Designate. 

Senator TESTER. OK. Debt limit. 

Mr. ORSZAG. Yes. 

Senator TESTER. Big issue, something that I am very concerned 

about, and not for me but far more for my kids and grandkids. 

Where does the debt fall into our choices in critical areas, like 

health care, for example? I mean, what are your recommendations 

going to be when we are talking about trying to tackle a problem 

as complex and as costly as health care in this country, weighing 

in the issues of the debt? 

Mr. ORSZAG. Let me talk specifically about health care because 

it really is the key to our fiscal future. For example, on our current 

path, if health care costs grow at the same rate over the next four 

decades as they did over the past four decades, Medicare and Medicaid are going to go from 5 percent of GDP to 20 percent by 2050. 

Twenty percent of GDP is the entire size of the Federal Government today. That is basically the whole ballgame. 

I think there are huge opportunities to reduce costs because if 

you look across parts of the United States—for example, if you look 

at the last 6 months of life at the UCLA Medical Center versus the 

Mayo Clinic, at the UCLA Medical Center, Medicare beneficiaries 

on average cost $50,000 a year, at the Mayo Clinic, $25,000 a year, 

twice as much at the UCLA Medical Center. There is no improved 

quality at the UCLA Medical Center. In fact, quality indicators 

suggest that the Mayo Clinic does better. All that happens is you 

have more tests, you see more specialists, you spend more days in 

the hospital at the UCLA Medical Center. Across regions in the 
26 

United States, across hospitals within a region, across doctors within a hospital, we see those kinds of variations with the higher cost 

not correlating with better outcomes. 

To tackle it, we need dramatically expanded health information 

technology to get the data on what works and what doesn’t. We 

need to examine through comparative effectiveness research what 

works and what doesn’t. We have to provide financial incentives for 

better care rather than more care. Currently, we have incentives 

for more care. Guess what we get? And then we need prevention 

and healthy living. And I think all of those components will lead 

to a new health care system that will be much more efficient and 

that will be key not only to addressing our long-term fiscal problem, but also helping State governments and, frankly, helping 

workers because workers’ take-home pay is now being reduced to 

a degree that is under-appreciated and unnecessarily large because 

of the high costs of health care to their employers. 

Senator TESTER. So what you are saying is, in health care as 

long as we are talking about it, the policy decisions that you would 

advocate would actually reduce the debt? 

Mr. ORSZAG. Over time, what would happen is instead of going 

to 20 percent of GDP in Medicare and Medicaid, you would be 

bending that curve. The key to our fiscal future is bending that 

health care curve. It wouldn’t necessarily reduce the debt relative 

to where it is today, but it would avoid an unsustainable explosion 

in that debt. 

Senator TESTER. I have to let you go because I am down to 15 

seconds, but the other side of that coin is that when you are advising us on what decisions we should be making, what impact is that 

debt going to have on your recommendations? None? 

Mr. ORSZAG. Oh, no. The reason that I would suggest we need 

to tackle the medium-term budget problem and health care costs 

over the long term is precisely that debt is—the growth in debt 

that would ensue would be unsustainable and a huge problem, and 

let me actually comment on that for a second. 

In the current environment, in the current economic crisis, we 

are in a highly unusual position in which we can issue substantial 

amounts of Federal debt at very low interest rates because investors have full confidence in Treasury securities, as they should. If 

we do not act, however, over the medium- to long-term to bend the 

curve on health care costs, if we allow deficits to grow and grow 

and grow and debt to increase exponentially, at some point, investors will no longer have that confidence. And if we were ever to 

face an economic crisis like we do today without that full confidence of investors, we would have much less maneuvering room 

to do various steps because we wouldn’t be able to issue huge 

amounts of debt on an emergency basis. 

That is only one of many reasons, in addition to our kids and 

grandkids, that we need to avoid this fiscal path that we are on 

over the medium- to long-term. 

Senator TESTER. Just one thing, and this is a very easy question 

to ask. When do we need to start addressing the health care 

issues? Six months? A year? Three months? 

Mr. ORSZAG. Five years ago. 

Senator TESTER. Thank you, Mr. Chairman. 
27 

Chairman LIEBERMAN. Thank you, Senator Tester. Very good 

round of questions. 

Senator Voinovich is next. Senator Voinovich, when you were out 

of the room, I thanked you and Senator Akaka for the extraordinary work you have done on human capital management, which 

reminds me that somebody told me long ago that people are always 

praising one another in Washington, but you know somebody really 

means it when you are praised when you are not in the room. 

[Laughter.] 

In your case, I really do mean it—— 

Senator VOINOVICH. Thank you. 

Chairman LIEBERMAN [continuing]. And I say that because you 

have announced your decision to retire in 2 years. We are going to 

miss you, but you made a great contribution, but you have 2 years 

to make even greater contributions, so with that, I am happy to 

call on you. 

OPENING STATEMENT OF SENATOR VOINOVICH 

Senator VOINOVICH. Thank you very much. Thanks for your nice 

words. Senator Akaka and I have worked together as a great team 

over a long period of time. 

Mr. Orszag, I am glad that you are willing to take this job. As 

you know, over the last 5 or 6 years, I have tried to get elected officials to enact tax reform and entitlement reform. The Bush Administration said they would work with Senator Max Baucus on tax reform. Nothing happened. Then Congressman Frank Wolf and I put 

together the Saving America’s Future Economy Act, or SAFE Act. 

Then we came up with the Bipartisan Task Force Responsible Fiscal Action Act. 

Last year, I was trying to get everyone to agree on the language 

of the 16-member commission so that the new Administration could 

get going on it. 

Now, what I would like to know is this. Is this Administration 

going to do something about tax reform and entitlement reform because when I approached the issue of the commission with Kent 

Conrad, he said, ‘‘I am getting push-back from the Administration.’’ 

When I talk with the House members, they say they are getting 

push-back from the Administration. 

Is the Administration going to go forward and do something 

about tax and entitlement reform? And I want you to know this. 

Most of us believe that if you do not have this type of commission 

with fast track procedures, I do not think it will ever happen. And 

a lot of people will not participate because they will think, why 

should I bother with this when I know I am not going to get a vote 

after all the hard work that I have done? What is this Administration going to do? 

Mr. ORSZAG. The President-Elect has stated that it is his intention that we will address entitlement reform. I spoke earlier about 

the fact that the existing process doesn’t seem to work so well either on the long-term budget process or on health care specifically. 

I think working with you and exploring the best way of adopting 

a process change, whether it is the Conrad-Gregg Commission or 

other commissions or whether it is the Baucus Health Board idea, 

is something that you should expect from me if I am confirmed. 
28 

Senator VOINOVICH. Good. That is great to hear. The other thing 

is, and this is a pet peeve with me and I am going on the Appropriations Committee, I asked the other Administration to make a 

case of why it is important for Congress to pass appropriations on 

time, and I hope you agree that it is a wonderful thing. That would 

be the greatest gift that we could probably give the Obama Administration, is to get our appropriations done on time and not have 

what we are going through with the continuing resolutions. How do 

you feel about that? 

Mr. ORSZAG. That would be a wonderful gift, yes. 

Senator VOINOVICH. Good. Now I’d like to discuss the GAO HighRisk List. Senator Collins and I and all of us have been working 

on the High-Risk List. We got a lot of cooperation from Clay Johnson, who worked with GAO and agencies to put together strategic 

plans on how to get the stuff off the list. Are you familiar with 

those plans? 

Mr. ORSZAG. Yes, and I have them in my book. 

Senator VOINOVICH. And you are going to make that kind of a 

strategic plan part of their budget submission to try to make sure 

that this happens? 

Mr. ORSZAG. That is one approach that I think can be effective. 

The Chief Performance Officer that the President-Elect has identified is going to be very focused on—let me step back. One of the 

key things I think we need to do, and the High-Risk List is an example of that, is not just diffuse our focus across a whole variety 

of things but to the extent we can focus on the biggest problems, 

just on a risk-based assessment, and the High-Risk List does that. 

Focusing on those areas makes a lot of sense to me. 

Senator VOINOVICH. There are two areas that Senator Akaka and 

I have been working on really hard. One is security clearance reform. Are you familiar with it? 

Mr. ORSZAG. Yes, and still my understanding is only, if memory 

serves, something like half of the relevant workforce has gone 

through that process. 

Senator VOINOVICH. Well, it improved it a bit—— 

Mr. ORSZAG. Yes. 

Senator VOINOVICH [continuing]. But they have come up with a 

new proposal, and I would really appreciate your looking at what 

they put together. 

Mr. ORSZAG. Yes. 

Senator VOINOVICH. The other one that we have been working on 

is supply chain management. 

Mr. ORSZAG. Yes. 

Senator VOINOVICH. And Ken Krieg was working on it over in the 

Defense Department. I would like you to look at where they are to 

just see if we can continue to complete reform of our supply chain 

processes. Former Secretary Donald Rumsfeld said we could save 

$27 billion a year. So I would really like you to look at it. 

The other thing is that we provided a Deputy Secretary for Management, or Chief Management Officer, for the Department of 

Homeland Security (DHS). I do not know if you know Paul Schneider or not. We think that there ought to maybe be a term. We tried 

to get it done over in the Defense Department, but we have more 

work to do. It seems to me that places like Defense, where you 
29 

have real management problems, and Homeland Security—Secretary Janet Napolitano, we talked with her, and she seems good, 

but it is still screwed up. 

The point is, have you thought about transformation and how to 

make sure that it gets done because people get tied up with other 

things. It takes their mind off of it, and they do not get it done. 

Mr. ORSZAG. Yes, and in fact, that is a broader theme, which is 

on many of these performance issues, it requires sustained focus, 

even when the cameras are not here, day after day, to get it done 

because this is not just a snap-your-fingers kind of thing. 

And let me just return for a second to the background issue. All 

agencies now, my understanding is, do have in place a procedure 

for issuing personal identity verification credentials, and 52 percent 

of Federal employees have gone through the required background 

checks. 

Senator VOINOVICH. Right, but I am just talking about new security clearances and the many backlogs. 

Mr. ORSZAG. Oh, and the time involved. Yes. 

Senator VOINOVICH. When Gordon England was confirmed, he 

had to go through another security clearance process. 

Mr. ORSZAG. As someone who has just recently gone through 

multiple security clearances, I am very sympathetic to that 

thought. 

Senator VOINOVICH. Well, I would really like you to look at it because I think we have made some progress, and I think if you 

would stay on top of that reform, we might be able to take that off 

the list. 

Mr. ORSZAG. OK. 

Senator VOINOVICH. Thank you. 

Mr. ORSZAG. Thank you. 

Chairman LIEBERMAN. Thank you, Senator Voinovich. Senator 

Carper. 

Senator CARPER. Thank you, Mr. Chairman. 

Is it Mr. Orszag or Dr. Orszag? Which do you prefer? 

Mr. ORSZAG. Whatever you would like. It has been pointed out 

to me that when people call me ‘‘Doctor,’’ I am not the right kind 

of doctor and that I do not have the authority to issue prescriptions. 

Senator LANDRIEU. And his son told him he was boring. 

Mr. ORSZAG. Yes, so I am having a rough day. [Laughter.] 

Chairman LIEBERMAN. How about Dr. O? 

Mr. ORSZAG. Dr. O. [Laughter.] 

Yesterday, I was told to become Dr. No. 

Senator CARPER. We already have one of those. 

Mr. ORSZAG. There you go. 

Senator CARPER. I do not know if we can handle two. [Laughter.] 

Senator CARPER. Well, Dr. O, whoever you are, we are glad you 

are here. Thank you for taking this on. 

Mr. ORSZAG. Thank you. 

OPENING STATEMENT OF SENATOR CARPER 

Senator CARPER. You were good enough to come by and spend 

some time with me yesterday, and I appreciate that very much. 

One of the issues I raised with you was when Governor Voinovich 
30 

was governor, I suspect he had line-item veto power. I had lineitem veto power as governor, as well. I think line-item veto power, 

frankly, is a little bit oversold in terms of its utility to make big 

differences in budget deficits, like when we are looking at the ones 

we have right now. Having said that, I think it can be a helpful 

tool to have in one’s toolbox. 

During the Clinton Administration, the Congress passed and 

President Clinton signed legislation, it was not a constitutional 

amendment, it was a statutory change that provided for enhanced 

rescission powers for the President, as you may recall, and it was 

not just for spending, but I think it also dealt with revenues. I 

think it may have dealt with entitlements, too. And the Supreme 

Court knocked it down. They said it wasn’t constitutional, and I am 

embarrassed to say I cannot tell you exactly why. But it required, 

in this case, the President to sign an appropriations bill, send a rescission, if you wanted to send a rescission, to the Congress, and 

the Congress needed, I think, a two-thirds vote in both the House 

and Senate in order to defeat the rescission. Otherwise, it took effect. But they had to vote. That was knocked down as unconstitutional by the Court. 

When I was in my last term in the House, we authored legislation and said, let us take a little different approach. What it called 

for was what I describe as a 2-year test drive that would say the 

President could sign an appropriations bill and then send a rescission message to the Congress, House and Senate, but we would 

have to vote on it. We could vote it down, and a simple majority 

in either the House or Senate would defeat it. We restricted somewhat the ability of the President to rescind spending. If programs 

were fully authorized, he could rescind them more than 25 percent 

of the authorized spending, and if the programs were not authorized, there was no restriction. He could rescind up to 100 percent 

of those. 

And after 2 years, the bill we passed in the House by a 3–1 margin, the power went away unless it was renewed. It sunsetted. And 

that was in case it served to create an imbalance between the authority of the Congress, Legislative versus the Executive Branch, 

in terms of spending. It passed 3–1, came over to the Senate. It 

died in the Senate, and it did not become law. And then subsequently, in the Clinton Administration several years later, they 

passed the legislation that I described. It was deemed unconstitutional. 

We have reintroduced the legislation. Senator Collins, who is not 

here, is a cosponsor, and I think Senator Bayh, Senator Snowe, and 

others joined us in the last Congress. We are going to brush it off, 

dust it off, and reintroduce it this time. Do you have any advice for 

us as we attempt to put something like this in place, again, as a 

tool. I am not going to suggest it is going to turn a $1 trillion deficit into half of that, but it can be one of the tools in the President’s 

tool box. Any advice for us as we try to cobble together something 

that is responsible and maybe constitutional? 

Mr. ORSZAG. Well, this is a topic that I know the President-Elect 

had spoken about during the campaign. I am also aware of concern 

among some of your colleagues about the balance between the Legislative and Executive Branches. 
31 

Senator CARPER. And they should have that concern. 

Mr. ORSZAG. And again, if I am confirmed, I would look forward 

to discussing it with you further and providing perhaps technical 

advice that we might be able to provide. 

Senator CARPER. Do you recall why the legislation that President 

Clinton signed was deemed unconstitutional? 

Mr. ORSZAG. I think it reflects the balance between the Executive 

and the Legislative Branches and the respective roles of the two 

that are defined in the Constitution. 

Senator CARPER. What we did in the last Congress in reintroducing the legislation, we made it not a 2-year test drive, but a 4- 

year test drive, and if it were abused, we have an opportunity not 

to restore that authority. 

If you get confirmed, and I hear you might, then we will hopefully have the opportunity to talk about this further and you can 

give us some advice, technical assistance, if you will. 

Mr. ORSZAG. Terrific. 

Senator CARPER. Talk just a little bit about improper payments, 

and we talked about it the other day and you have mentioned it, 

I think, today. One of the things that Senator Coburn and I have 

focused on a bit is improper payments and updating the Federal 

law and trying to make sure, first of all, that agencies simply fess 

up when they have made improper payments and tell us what they 

have done, and for the most part, most agencies now do that. The 

government-wide improper payments total has gone to about $70 

billion as of last year. 

Mr. ORSZAG. Yes. 

Senator CARPER. I think Medicare Part D is not reported. I think 

maybe parts of Homeland Security do not report. But for the most 

part, agencies are reporting. 

It is good that they are reporting. Most of those improper payments are, as you know, overpayments, and I am not sure that we 

do a very good job of going after the money and doing what are 

called post-audit recoveries. Although in Medicare, now for 3 years, 

I think, we have done post-audit recoveries for Medicare in three 

States, and we have gotten almost nothing back the first year, a 

little bit back the second year, and I think about $600 million back 

in the third year, just with three States. So there is real money 

there to be recovered. 

But what are your thoughts on improper payments, especially 

post-audit recoveries and how we might use them going forward. 

Mr. ORSZAG. Well, again, as I mentioned in my opening statement, I think those are a promising tool. You are right that implicit in your question is that while additional reporting might be 

beneficial, we need to start focusing on actually getting at the 

money that has been reported and reducing that $70 billion figure. 

The step that you mentioned is one possibility and should be explored. Again, more enforcement resources is also part of the solution here. 

Senator CARPER. All right. 

Mr. ORSZAG. But a core principle that the right amount should 

go to the right person at the right time should be a bedrock principle that we apply throughout the Federal Government. 
32 

Senator CARPER. A sort of related issue is surplus property. As 

you know, we have a lot of Federal property that we do not use. 

We pay utilities on it. We insure it. We have to do all kinds of 

things to maintain it, heat it, cool it, utilities and so forth. We 

spend a lot of money for it. We do not do a very good job identifying 

those surplus properties and retiring them, allowing agencies to 

dispose of them. 

One of the reasons, I am convinced, is that we do not allow agencies to participate in the proceeds—— 

Mr. ORSZAG. Yes. 

Senator CARPER. If you have a building and you get $100 for it, 

agencies get nothing for it, for the most part—there are some exceptions to that. 

With respect to improper payments and post-audit recovery, I 

wonder if one of the reasons why we do not do a very good job of 

going after and getting that money is there is not a real financial 

incentive for the agencies to go after the money, to allow them to 

keep it for some good purpose. 

Would you talk about both of those in the context of the incentives, please? Thanks. 

Mr. ORSZAG. Well, first, with regard to real property, yes, a few 

agencies have retention authority. They can basically keep the proceeds, but many agencies do not, and that impedes their incentives 

to dispose of or efficiently manage the property that they are using. 

More broadly, there is evidence from other examples. For example, there is evidence that when local law enforcement agencies 

were able to keep some of the proceeds from captured stolen goods 

or what have you, there was improved enforcement that resulted. 

I think it is just a natural observation that if people do not have 

adequate incentives to do the right thing, they often do not do it. 

So it is at least worth exploring, returning to the earlier discussion 

that occurred, the incentives on both the Legislative side and on 

the Executive side for improved enforcement. 

Let me go broader again. Improved enforcement is going to require the sustained focus that we were talking about before. It is 

also going to require resources. I think it is also going to require 

thinking creatively about the incentives that we are creating and 

whether we can improve them and strengthen them because this 

is a problem that has always existed and the thought that we are 

going to get rid of it immediately is unrealistic. But surely we can 

do better, and examining why we haven’t done better in the past 

is part of the solution. 

Senator CARPER. Mr. Chairman, do you think I have used enough 

time? 

Chairman LIEBERMAN. You used it, and you used it well. 

Senator CARPER. Thank you, sir. 

Chairman LIEBERMAN. Did I give the right answer? 

Senator CARPER. That was great. 

Chairman LIEBERMAN. Thanks, Senator Carper. Senator Landrieu. 

OPENING STATEMENT OF SENATOR LANDRIEU 

Senator LANDRIEU. Thank you. Mr. Orszag, I think you are truly 

an excellent nominee for this position. You come with all the aca-
33 

demic essentials, but more than that, you come with the right kind 

of set of experiences to do this job, which is, I think, going to be 

one of the toughest jobs in any Administration, but particularly for 

this new President. I know that he is going to come to rely on your 

expertise, as we are, to help us through this very difficult time and 

to set a course for fiscal responsibility. 

I have just three specific questions. One, I want to start by 

agreeing with your assessment that one of the first things that we 

should do to get a handle on our long-range fiscal situation is to 

focus on health care. I read an article the other day that said we 

do not have a health care system. We have a disease management 

system that is badly broken and flawed, and we need to quickly get 

to a health care system in America, an efficient one, in order not 

only to do what our citizens are expecting us to do, but to basically 

get a handle on the finances that are wholly unsustainable. 

So we have worked very closely together on some various approaches, and Ron Wyden and others have a bipartisan group, so 

I think you are right on and just want to encourage you and look 

forward to working with you on that. 

Mr. ORSZAG. Senator, if I could just note—— 

Senator LANDRIEU. Go ahead. 

Mr. ORSZAG. If you think we have a health care system, that may 

be right until you try to change it, and then all of a sudden we 

have a system that cannot be changed. It is absolutely crucial, and 

I do not want to eat up any time, but I do want to emphasize one 

of the primary reasons that I was interested in this job is to help 

Tom Daschle and the rest of the Administration tackle health care 

costs. 

Senator LANDRIEU. And I want to say I think you are exactly 

right. It is a little unusual for an OMB Director, but you are going 

to be an unusual OMB Director because you actually understand 

what is running up the cost in the government and where you have 

to focus your time and resources, and that is an area that we have 

to get right. So I just want to say how pleased I am. 

But specifically, two things that are right before us. On the stimulus package, and it goes with your idea, which I just want to 

quote from your own document, you say, ‘‘I am looking forward to, 

or we will launch a pilot program with individual agencies to serve 

as demonstration projects through which we can test our approaches to improve effectiveness, efficiency, share best practices, 

and further improve performance.’’ 

We can do that actually right now in the stimulus package with 

approximately $3.5 billion of money that has already been appropriated, which if we could shake loose from a bureaucracy that is 

not functioning could actually do two things at once: Create hundreds, if not thousands, of jobs in an area that has been devastated 

by natural disaster and save the Federal Government money by 

not requiring additional funding. 

So on the stimulus package, I want to know if you would be open 

to this idea if we could present to you some real evidence as to why 

there are billions of dollars that are tied up and how just some language change would free that money up and create jobs. Would you 

be open to receive this, and do you understand what I am pointing 
34 

1The chart submitted by Senator Landrieu appears in the Appendix on page 169. 

to relative to the billions of dollars that are caught in this pipeline 

between Washington and the Gulf Coast area? 

Mr. ORSZAG. I am absolutely open. Again, if I am confirmed, I am 

going to be open to receiving all of your ideas because I think we 

need to be reexamining what we are doing. 

Senator LANDRIEU. And just for the interest of the press, I am 

going to give this to them in more detail, but it is specifically Circular A–87 that states a cost is reasonable if in its nature and 

amount it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made. That is very reasonable. 

The Federal Emergency Management Agency (FEMA) right now 

is not operating under this circular that is mandated by this government. I will not go into the details, but just let me give you one 

example. FEMA today refuses to reimburse communities if they fail 

to traverse floodwaters in an insecure communication dead zone to 

turn on a humidifier the day after the hurricane. If you did not traverse through four feet of water to turn on a humidifier in your 

house underwater, they are claiming that you did not do everything 

you reasonably could, so they will not reimburse you. 

I could give you a list of things. We are looking for a person like 

you with common sense that will simply apply the current law, free 

up this money, and get people back to work. 

I have only another minute, so let me bring your attention to this 

chart.1 This is a chart, Mr. Chairman and Members, that we really 

have to focus on. It is a chart from 1929 to the present time of the 

level of spending relative to Corps of Engineers investments in this 

country relative to the gross national product. When you get to 

2007, way down at the end, the last dot, or 2005, Mr. Chairman, 

that is when the levees broke in New Orleans because that is what 

starts happening when you under-invest significantly over time in 

a dangerous way in core infrastructure. 

Now, we hear a lot about highways. We hear about land ports. 

We hear a little bit about water ports. But if you ask Senator Murray and Senator Cantwell about this last weekend when they went 

home, what they heard about was dikes and levees because all over 

this country these levees do not exist or they are breaking, or the 

dikes are nonexistent or they are flooding—issues extraordinaire of 

which we, of course, are in ground zero. 

While health care is truly a need, could you comment just briefly 

on your understanding of the current status of Corps of Engineers 

infrastructure spending relative to the GDP and maybe perhaps 

some creative ways that we can begin to reverse this obviously 

dangerous trend for the United States of America? 

Mr. ORSZAG. Senator, I know this is an issue that has arisen 

with regard to the Economic Recovery Act and whether there are 

specific projects through the Corps of Engineers that could be accelerated as one tangible example of the attention or concern that surrounds this area of activity. 

Senator LANDRIEU. I would appreciate your continued focus on 

this and this Committee because we have an obligation to try to 
35 

prevent disasters when we can. Now, we can’t always predict terrorist attacks, although we are trying to do a better job. 

But we must certainly, Mr. Chairman, even though we are not 

an appropriations committee, ring the alarm bell. I think this 

graph is an alarm bell about the gross and dangerous under-investment and how we can reverse it. 

I have some suggestions, but I think we need to be attentive to the $120 billion that it cost this government because we failed to 

put up a few billion dollars to get the levees straight in the first 

place. It broke and basically cost the government $120 billion. So 

when we think about saving money, this would be a good place to 

start. Thank you. 

Chairman LIEBERMAN. Thanks very much, Senator Landrieu. I 

appreciate what you said. I agree with it, and I thank you for your 

advocacy, not only for the Gulf Coast, but for learning the lessons 

from Hurricane Katrina so that we can protect other parts of 

America from anything like that. 

Senator McCaskill, thanks for being here. 

OPENING STATEMENT OF SENATOR MCCASKILL 

Senator MCCASKILL. Thank you very much. 

I first want to thank you and your family for your willingness to 

embark on this endeavor. There is no question with your background that you are not in this for the money, and there is no 

question, given the position you have taken, that you are not in it 

for the glory. So if it isn’t money or glory, it is something much 

more noble, and I congratulate you and your family for your willingness to do it. 

I know that you and the Chairman visited a little bit about contracting reform, and you and I have talked about contracting reform. It is an area that I think we have some real ground to plow 

in terms of money savings. 

I want to spend just a couple of minutes on the Inspector General (IG) community overall. The Chairman and the Ranking Member and others on this Committee have helped. We did a bill that 

I think strengthens the independence of the IG community in 

terms of allowing their budgets to be transparent, that is, we can 

see how much they are requesting and whether or not the agency 

is working with them, and allowing them their own legal counsel. 

I first want to ask about the IG community, about the report 

that was prepared concerning all the recommendations that have 

been allowed to languish and what kind of sense of urgency do you 

see within OMB about looking at this low-hanging fruit, documented with good factual basis for the recommendations, ways that 

we can begin to at least make a downpayment to the American 

people that we are worried about the way we are spending their 

money. 

Mr. ORSZAG. I am personally aware of that list of IG recommendations, and again, if confirmed, we are going to make sure 

that the Cabinet Secretary-designees, or hopefully at that point the 

Cabinet Secretaries, are also aware of the IG recommendations in 

their areas and that they are attentive to those recommendations 

because at least from a cursory look, there does seem to be issues 

that need to be addressed, and OMB plays a crucial role, as you 
36 

know, in chairing an interagency group of IGs, so we are a natural 

place for a lot of that activity to occur. 

Senator MCCASKILL. The council that was codified in the bill and 

that your Deputy Director serves on is a great place for you guys 

to push from the inside because, frankly, we haven’t had a lot of 

help from the inside. In fact, in many agencies, the IGs have been 

ostracized with no support. In fact, in some agencies, we have received reports, whistleblower reports, after we have said that they 

have to do their own budget, they have lost the administrative support of their agency in preparing their budget, which, of course, 

was not the idea behind the bill. 

Mr. ORSZAG. Right. 

Senator MCCASKILL. It was not that they were supposed to become self-sufficient in terms of administrative support. As we look 

at the stimulus, has there been any thought given to the resources 

of the oversight committee because of the enormous amount of 

money that is going to be expended? It is unrealistic that we are 

going to grow spending so exponentially in some of these agencies 

and expect the GAO and the IG community to do the job they really need to do because the scary part about spending a lot of money 

at once is that is usually when things get sloppy because it does 

not feel like the money is quite as precious. I am curious if you all 

have thought about putting in the stimulus package additional resources for the IG community and GAO. 

Mr. ORSZAG. There has been significant thought given to program integrity funding and also, as was mentioned before, a special 

oversight board comprising the IGs and chaired by the Chief Performance Officer specifically on this topic that will hold regular 

meetings to identify and examine problems, in addition to a special 

website that will have information about the contracts so that we 

would be transparent about what is happening and information 

through whistleblower and other mechanisms could be fed back 

into the IG community and that oversight board. 

Senator MCCASKILL. I think that is great. I would stress that I 

think that the best whistleblowers are the employees of GAO and 

the IG, especially if you look at the responsibilities of GAO and the 

amount of money they generate. Some IGs are better than others 

in terms of how much money they generate for every dollar we 

spend. But all of them make money for us. They are all money 

makers. It seems to me that we are needing some money makers 

around this place right now, so I am hoping that you all look at 

actually staff levels within GAO and these IG departments as you 

look at the stimulus. 

Earmarking, obviously, it is something that has become a lightning rod in many ways. Has there been discussion about the Bush 

Executive Order and how you all are going to handle the Executive 

Order as it relates to earmarking? 

Mr. ORSZAG. Two things. First, we are reviewing all Executive 

Orders for their appropriateness for a new Administration. 

Second, with regard to earmarks, the President-Elect has stated 

that he is quite concerned about the issue and would like earmarks 

reduced. My understanding is that the Chairmen of the House Appropriations Committee and the Senate Appropriations Committee 

have reached an agreement that has been publicly released on re-
37 

ducing earmarks to 50 percent of their level from 2006, if I remember correctly, and that is certainly a step in the right direction. 

Senator MCCASKILL. One other piece of legislation that has not 

been introduced yet but that I will be introducing is looking at 

whether or not at this juncture in our government we can afford 

any earmarking to private or not-for-profit entities. Can we really 

afford at this point to be earmarking to private endeavors when we 

have so much that needs to be done in the public sector? I would 

just ask that you all, as you are considering your earmark policy 

going forward, look at the amount of money that is being spent by 

the Federal Government in the private sector through earmarking 

as opposed to some process that involves competitive grants. 

And finally, on competitive grants, as someone who has not done 

earmarking and who has spent a lot of time encouraging people 

into competitive grants and talking to my constituents about the 

competitive grant process, imagine my horror when I learned that 

a program in my State that had competed for a grant and had gotten one of the highest scores for the grant was not considered for 

the grant because the agency that was doing the competitive grants 

decided they were going to pick someone that had not even applied. 

In other words, it was not a competitive grant. It was bureaucracy 

earmarking under the guise of a competitive grant. And by the 

way, the amount of time and resources that agencies take to prepare grants is a significant expenditure of public dollars. 

So I wanted to put on your radar this notion of, from your position, talking about the process of competitive grants and how there 

is nothing, frankly, that is more susceptible to undermining this 

idea that we pay attention to how we spend our money than calling 

something a competitive grant that is just a good-old-boy or goodold-girl system. 

So I wanted to put that on your radar. I know you have hardly 

anything on your radar right now, but I thought I would add another small thing to it because I think it is something that is very 

important. We have had a lot of growth in competitive grants. We 

have to make sure that the process is rigorous. 

Thank you very much, and welcome. 

Mr. ORSZAG. Thank you. 

Chairman LIEBERMAN. Thanks very much, Senator McCaskill. 

I think Senator Collins and I will each ask one question, and 

then I will let you go. We want to get to Mr. Nabors. Chairman 

Obey is here. Like Elvis, he is in the building. He is actually in the 

room, I believe. I compared Chairman Obey to Elvis because you 

can never say too many positive things about the Chairman of the 

Appropriations Committee here in Congress. We welcome Dave 

Obey. 

Very briefly, if I can, and if you want to take this under advisement, this sort of combines the tax cut with the TARP functions. 

I had a suggestion from someone that it might be constructive to 

allow investors who buy deeply discounted mortgage-backed securities to treat income, return of principal on these investments, as 

capital gain rather than ordinary income. Obviously, that would 

make it a lower tax. The argument is that would encourage investment. Private investment in those mortgage-backed securities 

would help shore up mortgage values and reduce the pressure on 
38 

the Federal Government to buy the assets directly through TARP 

or the Federal Reserve. 

I wonder if you have heard that idea and whether or not you 

have an impression of whether it makes sense. 

Mr. ORSZAG. I would again refer to the Treasury folks, and I am 

sure they could follow up with you. I guess the only thing I would 

say is the tax code generally treats debt instruments, like mortgage-backed securities, in a particular way—— 

Chairman LIEBERMAN. Right. 

Mr. ORSZAG [continuing]. And equity investments are what get 

capital gains treatment—— 

Chairman LIEBERMAN. Correct. 

Mr. ORSZAG [continuing]. So that would be an unusual—— 

Chairman LIEBERMAN. It would be a change. 

Mr. ORSZAG. It would be a change that may be difficult to limit 

with creative financial engineering to the instrument that you 

think you are targeting. 

Chairman LIEBERMAN. Thank you. Senator Collins. 

Senator COLLINS. Thank you. The Federal Government will 

spend more than $70 billion in this fiscal year on information technology projects. OMB consistently identifies more than $1 billion 

worth of these IT projects as poorly planned and/or poorly performing, usually both. The number of investments that the Federal 

Government is making each year in IT continues to grow, yet the 

problems continue to grow, as well. We have had enormous failures 

in IT projects at the FBI, at the Census Bureau. The list goes on 

and on. And OMB is responsible under the Cohen-Clinger Act for 

overseeing the major IT investments. 

How do you propose that OMB exercise better oversight to get 

these IT contracts back on track? 

Mr. ORSZAG. I think there are several steps, and one of the issues 

that I am examining is whether the e-Government administrator is 

a sufficient staffing internal resource or whether we also could use 

a Chief Information Officer internally at OMB. 

As you noted, we have a variety of statutory responsibilities, not 

only in the Clinger-Cohen Act, but under the e-Government Act, 

etc. I would identify a few things. 

First, I think the IT investments need to be better aligned with 

agency budgets. Currently, the Exhibit 300s, which are the way 

that IT budgeting occurs, are sort of in their own world, agency by 

agency, not aligned with the non-IT part of the budget process. 

Those need to come together to ensure better alignment of IT and 

what you are trying to accomplish with the IT. 

And then we come back to this general theme, which we have 

discussed previously, that there is simply not enough oversight and 

auditing of performance throughout not just IT investments, but 

throughout many other areas of what we are doing, and that requires sustained focus. So coming back to a theme that we touched 

upon before, and if I am confirmed, this will require regular work 

with this Committee and the Chief Performance Officer on an ongoing basis in order to get real results because it is not going to happen overnight and it is not going to happen by snapping our fingers. 
39 

Senator COLLINS. That is true, and this Committee approved at 

the end of the last session some very important legislation that 

would provide additional reporting to the appropriate committees 

of Congress as well as to OMB that I encourage you to take a look 

at. 

I have been very impressed with your answers today. I do want 

to tell you the Chairman at the beginning asked three routine 

questions that we ask every nominee. I would be remiss in my capacity as the Ranking Minority Member if I did not tell you that 

the Minority Members of this Committee also expect that you will 

be responsive to our requests for information as well. 

Mr. ORSZAG. Absolutely. 

Senator COLLINS. Ninety-nine percent of the time, fortunately, on 

this Committee, those requests are going to be joint, but thank you, 

and thank you, Mr. Chairman. 

Mr. ORSZAG. It makes it even easier. 

Chairman LIEBERMAN. Amen. Thanks very much, Mr. Orszag. To 

use Senator Collins’ words, just to show how bipartisan we are, 

your testimony has been quite impressive. We look forward to 

working with you. 

I would actually like to explore the possibility that we might get 

together informally on a regular basis without a public hearing 

context but just to talk about projects that we are working on that 

overlap, and I hope you will be willing to do that. 

Mr. ORSZAG. I would look forward to it. 

Chairman LIEBERMAN. Thank you very much. 

Without objection, the record will be kept open until 12 noon tomorrow for the submission of any written questions or statements 

for the record. We are doing it on that short of time frame because 

we want very much to have this critical nomination and that of 

your deputy be ready for Senate action, hopefully unanimously by 

consent, as soon after President Obama takes office next Tuesday 

as is possible. 

Mr. ORSZAG. Thank you. 

Chairman LIEBERMAN. Thank you very much, and with that, we 

will adjourn this hearing and immediately reconvene for Mr. 

Nabors. 

[Whereupon, at 3:56 p.m., the Committee was adjourned.] 

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