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THE AMERICAN RECOVERY 

AND REINVESTMENT ACT 

OF 2009, AN UPDATE 

HEARING 

BEFORE THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

HEARING HELD IN WASHINGTON, DC, JULY 14, 2010 

Serial No. 111–29 

Printed for the use of the Committee on the Budget 

( 

Available on the Internet: 

http://www.gpoaccess.gov/congress/house/budget/index.html 
(II) 

COMMITTEE ON THE BUDGET 

JOHN M. SPRATT, JR., South Carolina, Chairman 

ALLYSON Y. SCHWARTZ, Pennsylvania 

MARCY KAPTUR, Ohio 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL BLUMENAUER, Oregon 

MARION BERRY, Arkansas 

ALLEN BOYD, Florida 

JAMES P. MCGOVERN, Massachusetts 

NIKI TSONGAS, Massachusetts 

BOB ETHERIDGE, North Carolina 

BETTY MCCOLLUM, Minnesota 

JOHN A. YARMUTH, Kentucky 

ROBERT E. ANDREWS, New Jersey 

ROSA L. DELAURO, Connecticut, 

CHET EDWARDS, Texas 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

JAMES R. LANGEVIN, Rhode Island 

RICK LARSEN, Washington 

TIMOTHY H. BISHOP, New York 

GWEN MOORE, Wisconsin 

GERALD E. CONNOLLY, Virginia 

KURT SCHRADER, Oregon 

DENNIS MOORE, Kansas 

PAUL RYAN, Wisconsin, 

Ranking Minority Member 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

MARIO DIAZ–BALART, Florida 

MICHAEL K. SIMPSON, Idaho 

PATRICK T. MCHENRY, North Carolina 

CONNIE MACK, Florida 

JOHN CAMPBELL, California 

JIM JORDAN, Ohio 

DEVIN NUNES, California 

ROBERT B. ADERHOLT, Alabama 

CYNTHIA M. LUMMIS, Wyoming 

STEVE AUSTRIA, Ohio 

GREGG HARPER, Mississippi 

CHARLES K. DJOU, Hawaii 

PROFESSIONAL STAFF

THOMAS S. KAHN, Staff Director and Chief Counsel 

AUSTIN SMYTHE, Minority Staff Director 
(III) 

C O N T E N T S 

Page 

Hearing held in Washington, DC, July 14, 2010 .................................................. 1 

Hon. John M. Spratt, Jr., Chairman, Committee on the Budget ................. 1 

Hon. Paul Ryan, Ranking Minority Member, Committee on the Budget .... 2 

Submission for the record: letter, dated April 22, 2010, to President 

Obama ..................................................................................................... 13 

Hon. Thomas J. Vilsack, Secretary, U.S. Department of Agriculture .......... 4 

Prepared statement of ............................................................................... 6 

Responses to questions submitted ........................................................... 97 

Matt Rogers, Senior Advisor to the Secretary, U.S. Department of Energy ................................................................................................................ 40 

Prepared statement of ............................................................................... 42 

Responses to questions submitted ........................................................... 97 

Veronique de Rugy, Ph.D., senior research fellow, Mercatus Center, 

George Mason University ............................................................................. 64 

Prepared statement of ............................................................................... 65 

Josh Bivens, Ph.D., macroeconomist, Economic Policy Institute ................. 73 

Prepared statement of ............................................................................... 75 

Hon. Michael K. Simpson, a Representative in Congress from the State 

of Idaho, questions submitted for the record .............................................. 96 

Hon. Marcy Kaptur, a Representative in Congress from the State of 

Ohio, questions submitted for the record .................................................... 96 

(1) 

THE AMERICAN RECOVERY AND 

REINVESTMENT ACT OF 2009, AN UPDATE 

WEDNESDAY, JULY 14, 2010 

HOUSE OF REPRESENTATIVES, COMMITTEE ON THE BUDGET, Washington, DC. 

The committee met, pursuant to call, at 1:00 p.m. in room 210, 

Cannon House Office Building, Hon. John Spratt [chairman of the 

committee] presiding. 

Present: Representatives Spratt, Kaptur, Becerra, Doggett, 

McGovern, Etheridge, DeLauro, Edwards, Scott, Langevin, Connolly, Schrader, Ryan, Hensarling, Garrett, Diaz-Balart, Campbell, 

Jordan, and Djou. 

Chairman SPRATT. I am going to call the hearing to order. Secretary Vilsack, welcome. We look forward to your testimony. 

We have a vote on the floor and what we propose to do is do 

opening statements, go vote, come back and proceed with the hearing if that is agreeable with you. 

We are here today for an update on the Recovery Act and our 

economy. 

The baseline in which we begin is January, 2009, the month 

prior to passage of the Recovery Act. The economy was shrinking 

an annualized rate of 5.4 percent; 779,000 jobs were lost in that 

month alone, 2 million in the previous quarter. The deficit at that starting point was projected to be $1.3 trillion 

for fiscal 2009. Now, after adoption of the Recovery Act and after 

18 months of other fiscal and monetary relief, the economy is in its 

third straight quarter of growth and a net of nearly 900,000 jobs 

have been created since January 2010. 

Because of the economy and the aggressive measures we took to 

deal with the worst recession since the Depression, the deficit rose 

to $1.4 trillion for 2009. That is far more than we can sustain, but 

it is not substantially more than CBO foresaw in January of 2009. 

Most economists agree that it is counterproductive to try and balance the Federal budget in the midst of a recession. But we have 

been taking steps to make sure that the budget recovers as the 

economy recovers. We have made pay-as-you-go statutory; created 

a fiscal commission; and approved in the House a discretionary 

spending cap for 2001 at a level that is $7 billion below the President’s request. 

This is the third hearing that this committee has held to examine the State of the economy and the recovery. In June, Federal Reserve Chairman Ben Bernanke testified that the Fed anticipates 

that real gross domestic product will grow in the neighborhood of 
2 

1—3.5 percent over the course of the coming year as a whole and 

maybe at a somewhat faster pace next year. 

When I asked Chairman Bernanke whether TARP and the Recovery Act had been necessary to rescue the financial system and 

our economy, Bernanke replied, ‘‘Certainly, we have averted what 

I think would have been, absent these interventions, an extraordinarily severe downturn, perhaps a great depression’’—that from 

a man who is characteristically understated. 

Two weeks ago, we heard from a panel of economists, including 

Mark Zandi. Zandi said that, by his estimate, the economy will 

grow nearly twice as fast over the course of 2010 as it would have 

fared without the Recovery Act. The Congressional Budget Office 

has estimated the Recovery Act is contributing significantly to economic turnaround, raising GDP by 1.7 to 4.2 percentage points in 

the first quarter of 2010 and increasing employment by between 

1.2 million and 2.8 million jobs in that quarter alone. 

Yet, the economic recovery is not proceeding as fast and as steadily as we would like. And for too many Americans, jobs are still 

scarce and hard to find, and credit is still tight and hard to get. 

So, we hold today’s hearing to examine the impact the Recovery 

Act has had on the economy and consider impacts that it may have 

yet. We are pleased to have to testify representatives from two 

Cabinet departments that have responsibility for a considerable 

portion of the Recovery Act funding. First, we will hear from Secretary Tom Vilsack from the Department of Agriculture. 

We had originally been scheduled to hear from the Energy Secretary Steven Chu as well, but a last-minute scheduling issue kept 

him from being here, and he will be represented by Matt Rogers, 

who is his senior adviser. We will hear testimony from Mr. Rogers 

after we hear Secretary Vilsack’s testimony and members have had 

a chance to ask questions. We will hear from both witnesses in detail about the impact of the funding and tax provisions contained 

in the Recovery Act. 

After hearing from our Administration witnesses, we will then 

turn to economists from the Economic Policy Institute and the 

Mercatus Center at George Mason University. But before we go to 

Secretary Vilsack, let me recognize the Ranking Member, Mr. 

Ryan, for his opening statement. 

Mr. Ryan. 

Mr. RYAN. Thank you, Chairman. 

Thank you for calling this hearing to assess the stimulus and its 

impact on the economy and the Federal budget. I also want to extend a warm welcome to our witness again. 

Secretary Vilsack, good to have you again. Thanks for taking 

time out of your busy schedule. 

I also want to take a moment to recognize Veronique de Rugy— 

I just took a little time to practice that name, I think I got it 

right—who will join the next panel. 

Veronique is a distinguished economist and senior research fellow at the Mercatus Center at George Mason University, and she 

has done a tremendous amount of work on tracking stimulus 

spending. 

Over a year ago, Congress enacted a stimulus bill that spread 

huge spending increases across the government. By every objective 
3 

measure, from jobs and economic growth to the rising price tag, the 

stimulus has failed. 

It has failed to create the jobs promised. Rather than save or create 3 to 4 million jobs, the economy has shed 2.7 million jobs since 

the stimulus passed. It has failed to keep the unemployment rate 

below 8 percent as promised. Unemployment still hovers near 10 

percent. It has failed to revive the economy, as growth remains 

sluggish and there are growing fears of a double-dip recession. 

A year ago, we were told that the stimulus would cost us $787 

billion. That cost has risen in the latest estimate to $862 billion. 

The total price eclipses $1 trillion when you include the borrowing 

costs. 

Rather than acknowledge the limitations of this borrow-andspend approach, the Administration and this Congress have opted 

to move goal posts and to double down. We will be likely told today, 

as Americans have been lectured throughout the so-called ‘‘Recovery Summer’’ campaign blitz, that those promises were based on 

miscalculations of the severity of the situation. The proponents will 

tell us that we should all be grateful that the pain isn’t more acute 

and that it is not fair to hold policymakers accountable for the failures of their policies. 

The economic models that were overpromising on the stimulus 

were clearly wrong, yet the Administration relies on these same 

economic models to make the case to double down on this failed 

borrow-and-spend economic experiment. The failed stimulus is unfortunately typical of Washington’s destructive economic agenda. 

The government cannot spend, tax, and regulate its way into economic prosperity, but that is exactly the policy course this majority 

has chosen. 

Washington’s economic overreach is paralyzing investment and 

growth. It is fostering an environment of anxiety and uncertainty 

and further eroding the American people’s trust in their elected 

leaders. 

From health care and the financial sector to the auto industry 

and the costly cap-and-trade national energy tax, this Administration and this Congress seem to believe that the answer to every 

problem is to explode the size of government and to centralize 

power in Washington. And while the Administration will be quick 

to highlight what it sees as its accomplishments from deficit spending on its stimulus program, we still have no budget. 

We just learned that the Administration’s budget and economic 

update, which was due tomorrow, will be delayed this year. We still 

haven’t received the Trustees’ report on Medicare and Social Security’s financial health, which we usually receive in April. The 

American people are fed up with the relentless push to spend 

money we don’t have, add to our crushing burden of debt, and 

evade accountability for the dismal results. 

We need to chart a new course. Let’s cancel the remaining stimulus funds. Let’s get a grip on runaway Federal spending, and let’s 

advance pro-growth economic policies. We need to spur sustained 

job creation, rebuild confidence in our future, and restart the American engine of prosperity. 

Thanks again to all of our witnesses. Obviously, we have differences of opinion, and I look forward to your testimony. 
4 

Chairman SPRATT. I think we have framed the issues adequately 

for the forthcoming hearing. We will be back as quickly as possible. 

Thank you, again, Secretary Vilsack, for your indulgence. 

[Recess.] 

Chairman SPRATT. I call the committee back to order, and before 

proceeding to hear from our witnesses, I would simply ask unanimous consent that all Members be allowed to submit an opening 

statement for the record at this point. 

Without objection, so ordered. 

I also welcome again our witnesses and would tell each of them 

that their statements have been filed and will be made part of the 

record in their entirety, so they can summarize as they see fit. 

Secretary Vilsack, thanks for coming. We look forward to your 

testimony, the floor is yours. 

STATEMENT OF HON. THOMAS J. VILSACK, SECRETARY, 

U.S. DEPARTMENT OF AGRICULTURE 

Secretary VILSACK. Mr. Chairman, thank you very much. 

And to Representative Ryan and other members of the committee, thank you for the opportunity to be here today to speak to 

you briefly about the American Recovery and Reinvestment Act. 

The chair has done a good job of discussing the role that the Recovery and Reinvestment Act has played in helping to rescue our 

economy from a potentially serious depression, as reflected in increased growth in our gross domestic product and in private-sector 

job numbers. 

I would like to direct the committee’s attention for just a few 

minutes to the state of rural America and the impact that the Recovery Act has had and will continue to have on a resurgence and 

revitalization in rural America. 

This is an area, Mr. Chairman, where we have seen high unemployment, significant poverty, income disparities, aging populations 

and declining populations, not for the last couple of years but for 

a number of decades. 

The Recovery and Reinvestment Act, in my view, provides a real 

shot in the arm for rural America, and it is the linchpin to a revitalization of the economy. Consider what we have been able to do 

at USDA with the Recovery and Reinvestment dollars. Today over 

800 communities have seen improvement in community facilities as 

a result of projects funded through the Recovery and Reinvestment 

Act. Our Community Facility Grant Program has allowed us to expand hospitals, libraries, police stations and fire stations, creating 

jobs and providing strengthened communities that will impact and 

affect over 10 million Americans. 

The same is also true for the reinvestments that have been done 

in wastewater and sewer projects. Again, over 800 projects have 

been impacted already by the recovery dollars. This has allowed us 

to improve water quality for over 2 million Americans, reducing the 

threat of water-borne illness, and more importantly and perhaps as 

importantly, creating an opportunity for these communities across 

the country to be able to attract real economic development because 

they have the capacity to fulfill water needs of growing and expanding businesses. 
5 

Speaking of growing and expanding businesses, the Recovery and 

Reinvestment Act has provided an opportunity for us to assist over 

1,000 rural businesses, helping to create and retain jobs that are 

so vital to our recovery. Nine hundred business and industry loans 

have already been made by USDA and more to come. A hundred 

and eighty-eight projects under the Rural Enterprise Grant Program have been funded, spurring entrepreneurial opportunity. 

At the same time this is taking place, we are also working aggressively to expand broadband access in rural and remote areas 

across the country. To date, 137 projects have been funded and obligated. This will provide broadband coverage to over 500,000 

households, over 100,000 businesses, well on the way to reaching 

our goal of 1.2 million households positively impacted by having access to broadband and over 230,000 businesses being able to access 

the opportunity this presents. Small businesses will be able to expand markets. Farmers and ranchers will be able to have real-time 

information. Homeowners will be able to access online education 

without having to leave their homes. In addition, anchor institutions, 7,800 anchor institutions, will be assisted in expanding opportunities in schools with class opportunities for small rural 

schools that are unable to hire teachers but can have access to online courses. 

At the same time, we are working hard through the Forest Service to impact and affect the 193 million acres of our forest and 

grassland properties. With the Recovery and Reinvestment Act, we 

have already been able to improve 8,400 miles of roads, an additional 1,900 miles of trails, and 25,000 acres have been improved 

in terms of soil and water conservation. This, in addition to the fact 

that we have expanded the opportunity for the American dream of 

homeownership to 89,000 individuals across the country through 

our Direct and Guaranteed Loan Programs. 

All of this will help create opportunity today and, as importantly, 

will continue progress in creating a more vibrant and revitalized 

rural economy tomorrow. This goes along with the recovery aspect 

of the Recovery and Reinvestment Act, where we have already provided over 2,600 farm families with direct loan assistance to allow 

them to maintain their farms; $350 million in disaster assistance 

has been provided under the Recovery Act; and over 40 million 

Americans are currently receiving SNAP payments. Thousands of 

school children will also receive assistance, as will those who are 

food bank recipients, as a result of the recovery and reinvestment. 

At the same time, Mr. Chairman, that we are trying to revitalize 

the economy, we want to make sure that what we do is transparent 

and that we are held accountable, and so we have actively involved 

our staff in working together to try to create interactive maps, such 

as the one I am holding up in my hand here on housing. 

We have similar sheets on our Web site that will tell people exactly what is taking place within their State. We are also keeping 

track of contract performance. This book is a series of contract performance measures to make sure that we are continually on track, 

to make sure that projects move forward, creating the jobs and opportunities that were promised through the Recovery and Reinvestment Act. 
6 

We received $28 billion in the form of appropriations: $17.2 billion has been obligated; $14.1 billion has been outlaid; and we are 

awaiting projects in the Forest Service and broadband to expand on 

those numbers. 

With that, Mr. Chairman, I would be happy to answer questions 

that the committee has. 

[The prepared statement of Secretary Vilsack follows:] 

PREPARED STATEMENT OF HON. THOMAS J. VILSACK, SECRETARY, 

U.S. DEPARTMENT OF AGRICULTURE

Mr. Chairman and Members of the Committee, thank you for the opportunity to 

appear here today before the House Committee on the Budget to provide an update 

and highlight the many successes of the American Recovery and Reinvestment Act 

of 2009 (Recovery Act) for the United States Department of Agriculture (USDA). I 

am pleased to be here, along with Secretary Chu, to report that the Recovery Act 

is working. The investments we are making are not only creating jobs and economic 

stability, but also funding the technology and infrastructure that will lay the 

groundwork for future economic growth. 

I am pleased to be here this morning to report that the Recovery Act is accomplishing even more. It is restoring America in terms of economic growth and vitality 

and building a new sense of community across our nation. And at the most fundamental level, the Recovery Act is enabling Americans to own homes and is preserving housing for the people all across our country. This is the very core of the 

American Dream—and supports and renews the very values that our nation was 

founded upon. 

THE RECOVERY ACT IN RURAL AMERICA

Mr. Chairman, it is especially important to highlight what the Recovery Act 

means specifically to Rural America. While the economic downturn in the past two 

years was more severe than any other in generations, the difficulties experienced 

by Rural America have been more acute and long lasting. From all perspectives, 

Rural America has been in a state of recession for more than two decades. As such, 

rural communities have struggled to maintain the population and businesses needed 

for economic growth, and income growth rates have suffered accordingly. The Recovery Act addressed these issues facing Rural America, by funding critical infrastructure and providing new economic opportunities. 

The Obama Administration moved quickly to provide immediate relief for hardhit families and businesses. The short-term rescue funding provided through the Recovery Act was necessary to get Americans back on their feet and get our economy 

growing again. 

At the same time we began making targeted investments in critical infrastructure 

projects like expanded broadband access and a smart energy grid that help to lay 

the foundation for economic growth in the 21st century. 

Today, both public and private economists say the Recovery Act is a driving force 

behind recent GDP growth and is responsible for millions of jobs. The Recovery Act 

has pulled us back from an economic crisis and put us on a path toward economic 

growth. 

STATUS OF RECOVERY ACT IMPLEMENTATION

In just over one year, USDA has announced all of the $28 billion of ARRA funds 

provided to the Department. As of June 30, we have obligated $17.2 billion and 

outlayed $14.1 billion of the funds provided to the Department. 

Last year we were in the ‘‘rescue’’ phase. We were funding many of our relief programs to help families get back on their feet. For example, over 40 million Americans now receive a 13.6 percent increase in benefits under the Supplemental Nutrition Assistance Program (SNAP, formerly named Food Stamps). For most families 

of four, this is an extra eighty dollars per month at the grocery store, totaling $800 

million a month in direct stimulus to the economy. Our estimates show that money 

spent on SNAP may have even larger effects on economic activity than other types 

of government spending. And further, our data indicates that 97 percent of funding 

received through this program is spent within 30 days of receipt. Not only does this 

assistance allow families to provide more nutritious and abundant meals for families, it is also a direct form of stimulus to our economy and goes to people who are 

already certified as being in need. 
7 

With the rescue phase of Recovery Act implementation fully underway, we have 

now been able to focus more on the ‘‘recovery and reinvestment’’ phase this year. 

With most of our funding fully obligated and projects now underway or beginning, 

more jobs and additional economic growth are being realized. For example, this 

summer approximately 800 Water and Waste Treatment projects will be underway, 

as compared to 370 last summer. With more than twice as many projects underway, 

the full possibilities of the Recovery Act are beginning to take shape. Similarly, 

about 500 rural businesses will receive loans this summer compared to 100 last 

summer—or a five-fold increase. Even more important than the shear scope and 

magnitude of the Recovery Act projects, it is also important to consider the qualitative impact on communities. Loans for businesses and industry mean the development of better paying jobs, and jobs with benefits and future occupational opportunities. For Rural America, this is absolutely vital in maintaining the fabric of a community and providing young people the prospect of a better future. Recovery Act dollars are being put to work, making long-overdue infrastructure improvements, creating new opportunities for local economic growth and supporting well-paid jobs. 

UNITED STATES DEPARTMENT OF AGRICULTURE ACHIEVEMENTS IN RECOVERY ACT

IMPLEMENTATION

As a result of the Recovery Act, we are building stronger, healthier communities 

and laying the groundwork for a new 21st century economy in Rural America. 

The Recovery Act also provided critical emergency funding to help our farmers 

and ranchers keep their operations going strong, and to better enable USDA to support production agriculture in field offices across the country. Within 24 hours after 

the signing of the Recovery Act, USDA had disbursed $173 million in additional Direct Farm Operating Loans authorized under the Act; this helped more than 2,600 

farmers and ranchers across the United States buy the fuel, feed and other supplies 

they needed to continue day-to-day operations. The Recovery Act provided $50 million to help aquaculture producers offset the dramatically-rising feed costs that 

threatened to force them out of business, and extended much-needed disaster assistance totaling $744 million to help farmers weather devastating losses due to natural 

disaster. Finally, by providing $50 million for critical modernization of Farm Service 

Agency information technology systems, the Recovery Act will help USDA’s dedicated field staff to deliver services faster and easier to farmers and ranchers in our 

Service Centers around the country. 

Through the Recovery Act, significant resources have been dedicated to help increase access to critical health, safety, and educational resources. For example, with 

ARRA funding from USDA, over 800 essential community facilities including libraries, hospitals, and fire stations will be built or repaired in Rural America and over 

9,000 rural businesses will receive loans or grants to help start a new business or 

prevent one from failing. Additionally, over 85,000 rural Americans will receive the 

assistance they need to purchase or repair a home. As a result of this investment, 

fire fighters will have the resources they need to keep communities safe, rural 

Americans will be closer to critical health care needs, and businesses will have the 

resources they need to stay competitive. Access to these vital community facilities 

and assistance to buy a home will help Rural America become a place where younger generations will want to stay and raise a family. 

Moreover, USDA has committed to using $100 million in loans and grants of 

ARRA funding to build or repair libraries in Rural America, which will provide increased educational access to 2.5 million rural residents. Such access will provide 

increased educational opportunities and therefore increased economic competitiveness for Rural Americans. Libraries not only play a vital role in educating their patrons, they also enhance the economic vitality of a rural community. Rural businesses are able to access an array of informational resources, including new state 

of the art communications tools and technologies that often aren’t otherwise available in their community. Libraries are also a source for connecting people to the 

internet. Many rural Americans don’t have computers at home and wouldn’t be able 

to afford monthly internet fees even if they did. Public libraries offer free internet 

access and computer training—keys to bridging the digital divide and improving the 

quality of life in Rural America. Recognizing this significance, USDA is using the 

Broadband Improvement Program, funded through ARRA, to help advance this commitment. Specific funding has been set aside and is available to allow applicants 

to request grant funds to reimburse the associated costs for connecting any rural 

library in their proposed funded service area with funding from an award from 

USDA’s Community Facilities program. Because of this commitment, rural communities will have increased educational and economic opportunities. 
8 

Building a critical infrastructure is imperative to the future of Rural America. 

Without access to clean, safe water supply, or access to new competitive technologies, Rural America will continue to experience population loss. As a result of 

Recovery Act funding, communities in Rural America are getting the infrastructure 

needed to become competitive in a 21st century economy. For example, approximately 2 million rural residents will benefit from new or improved water and waste 

treatment systems provided by USDA’s Water and Environmental Program. As a result of this ARRA investment, over 800 rural communities will have clean drinking 

water, safe waste disposal, and reduced environmental impact from their sewer systems. The health-related improvements from these projects to Rural Americans are 

worth the investment-alone. On average these projects will reduce each rural population’s potential for water-borne illness by 6 percent. But even further, the waterrelated projects are essential to rural economies. Water and waste water initiatives 

are absolutely essential in attracting new business opportunities to these areas, as 

businesses place access to clean and abundant water as a prerequisite in site selection for growth and expansion. 

In addition, nearly 400 Natural Resources Conservation Service projects, totaling $340 million in Recovery Act funding, will provide significant public and environmental benefits to Rural America through the restoration of floodplains and investments in watershed improvements, including critical infrastructure. Nearly $230 

million has been obligated towards these projects to date and approximately 170 

projects have commenced construction or are in the process of restoration. These 

projects will protect communities from potential loss of life and property from natural disasters, as well as help develop better green infrastructure by restoring natural vegetation and riparian corridors. These investments will create quality, green 

jobs connected to environmental restoration and protection of areas safe for new 

business development. 

The Forest Service has already funded 705 Recovery Act projects across the nation. Forest Service Recovery Act projects will provide multiple resource benefits including healthy ecosystems; reduced fire risk; clean abundant water; safe accessible 

recreation opportunities; energy-efficient facilities; and technology to convert wood 

to clean energy on federal, as well as state, private, and tribal owned lands. 

This summer, as field season kicks into high gear, the investments made last year 

will transform dollars to action with thousands of projects beginning and others dramatically ramping up hiring and activity. Already, we are seeing a tremendous increase in accomplishments on the ground when compared to last field season. For 

example, last summer we maintained 128 miles of trail; this field season already, 

we have treated over 1,770 miles of trail. Last summer, we maintained 427 miles 

of roads; this field season, we have already treated over 7,170.miles of roads. Last 

summer, we treated 33,874 acres of forest to reduce wildfire risk; this field season 

we have already treated over 266,000 acres to reduce wildfire threat. Much more 

will be accomplished by the end of this field season 

Also, with funding from the Recovery Act, we are making the investment to bring 

broadband to rural communities for the first time ever. The Recovery Act will bring 

broadband to an estimated 1.2 million households, 230,000 businesses, and 7,800 

anchor institutions. As a result of this investment, many individuals, schools, libraries, and healthcare facilities will obtain broadband capabilities for the first time. 

Farmers will have access to real time market information, businesses will have the 

tools to compete in a global marketplace, and rural residents will have increased 

educational and medical opportunities. 

The Recovery Act provided clear direction and a historic opportunity to bring 

broadband into rural areas that otherwise would not have the resources to install 

broadband. Rural areas are most often the areas that are not considered good investments by companies installing broadband. We have an opportunity to give communities that might otherwise be overlooked a chance to be positioned for the next 

generation of technology and the next phase of U.S. economic growth. Broadband 

technology is essential to job growth in Rural America since broadband connections 

provide a platform for rural Americans to be connected to their counterparts in 

urban areas of the U.S. and beyond. This connection would help business owners 

tighten their distribution channels, increase efficiency in their processes and reach 

a larger market. Furthermore, American farmers will be able to use broadband connections to watch product prices, obtain weather forecasts, buy and sell commodity 

futures, track the progress of supplies ordered or products shipped, and find markets. 

As Broadband reaches Rural Americans, who would not have been served otherwise, it is easy to see the kind of transformational impact that the Recovery Act 

is having on our Nation. The result is a new sense of community in rural areas, 

who can now communicate more effectively with their neighbors, with the nation, 
9 

and with the rest of the world. Young people will be able to grow up and become 

more competitive with youth from around the globe, in terms of educational capacity, but also as part of a global community. 

Access to broadband in rural communities will also likely enhance the 

attractiveness of these locations to firms able to operate remotely. Rural communities linked to broadband will be able to host call centers, information technology 

hotlines and other industries that require remote connection to businesses. Extending broadband access to Rural America means better and quicker access to information and the infrastructure to operate and compete in a 21st century economy. And 

the capacity of rural communities to provide highly skilled and highly technical information technology-related jobs in the future will be vitally important to attracting young people to Rural America as a place to live and work. 

A NEW WAY OF DOING BUSINESS

In the past, government policies have not been strategic or focused on long-term 

economic growth and sustainability. Rural communities have suffered as a result. 

However, the enactment and implementation of the Recovery Act created an opportunity to reexamine how government operates and begin making necessary changes 

to ensure every dollar being spent is achieving its maximum potential. A priority 

for President Obama is to restore the trust of the American people in their government. 

Transparency and accountability with government spending is of vital importance 

so taxpayers can ensure their money is being spent in the best way possible. These 

principles are also important to guarantee government takes a close look at where 

and how money is being spent. Starting with the Recovery Act, this Administration 

set a new standard for transparency and accountability with government spending. 

Recovery Act projects go through several layers of approval before getting funded. 

Wasteful or unwise projects are rooted out and rejected up front. Moreover, all Recovery Act spending is tracked and recorded so the public can see where each dollar 

is being spent. 

RURAL AMERICA: PRESENT AND FUTURE

Mr. Chairman, the American Recovery and Reinvestment Act has provided Rural 

America with the funding necessary to withstand the economic devastation caused 

by our nation’s financial crisis. Through Recovery Act rescue funding, struggling 

rural Americans, who lost their jobs, could not afford food, housing or proper health 

care have been transitioned from tough times to better times. 

But the Recovery Act is accomplishing so much more than just rescuing our economy. The Recovery Act allowed us to look forward—making unprecedented investments in rural communities. The Recovery Act invested in infrastructure, industries, and new ventures well-positioned to make the most of the strategic assets 

found in Rural America, ensuring the long-term vitality of these communities and 

America’s economy more broadly. 

While there is certainly much work to be done to bring jobs and new businesses 

to communities that have been shedding both for decades, the Recovery Act has 

taken a giant first step forward. I am certainly proud of the efforts of USDA and 

all of the Executive Branch team who serve day in and day out to ensure the promise of the Recovery Act is realized. But I also want to point out that absolutely none 

of the accomplishments could be possible without the partnership and tenacious 

commitment of state and local governments and all of the hard work of individuals 

and groups at the local level across Rural America. It is their dedication and commitment that embody the spirit and heart of our nation. 

Mr. Chairman, I believe that our Nation’s experience in Recovery Act implementation embody the very principles and ideals of the United States. Time and time 

again, our country has proven that when difficult times and hardship affect our nation, we come back stronger and even more resilient for the future. Americans have 

always been up to the challenges that have been presented to them, and have overcome every obstacle that has emerged over our history. We are at our best as a nation when we work together to rise up to meet and overcome new challenges. Mr. 

Chairman, I view our nation’s response to the global financial crisis and our concerted efforts to rescue, renew, and revitalize America through the Recovery Act as 

prime examples of what our country is capable of. It is our dedication to the American Dream and the single-minded focus that we can adapt, transform, and emerge 

better prepared as a nation and become stronger than ever. 

Mr. Chairman, I am proud to be part of this effort and I look forward to responding to any questions that members of the Committee might have. 
10 

Chairman SPRATT. Governor Vilsack, you have been—well, I just 

said that, Governor Vilsack; that is how we originally knew you. 

You have been Governor. You have been Secretary of Agriculture, 

and you have seen, I know, many of these projects throughout the 

country. 

Are you satisfied, first of all, that they are worthwhile investments and, secondly, that they are doing something beyond the 

communities where they are spent to boost the economy? 

Secretary VILSACK. Mr. Chairman, in addition to being a Governor for eight years and a State senator for six, I was also mayor 

of a small town for five years. I can assure you, just take the 

wastewater projects, for example, I can assure you that the 800 

communities that have received assistance to improve water quality are in a much better position to attract people, young couples, 

housing developments, and business developments as a result of 

these investments. 

They will not only impact and affect the community in which 

these investments are made, but they will also have a positive impact on economic opportunity within the region of that community. 

Many of these communities are county seat towns that are basically the economic hub for their county and their region. 

To the extent that we have helped over a thousand businesses 

retain jobs or create jobs and expanded opportunity, that, too, will 

have a positive impact for some time. 

Perhaps the one thing that has the greatest potential is the work 

that is being done in broadband. I mean, I am excited, having come 

from a State that had a statewide fiber optic system that was developed a number of years ago, I saw, firsthand, the impact that 

that has had on small-town schools; on hospitals being able to link 

up to tertiary care centers; our National Guard; our library systems 

being able to expand dramatically their services and operations; 

businesses that will absolutely be able to expand markets from 

their local market to regional and global markets. The ability of 

farmers and ranchers to have real-time information makes a real 

difference in terms of their bottom line. And I will tell you, to the 

extent that you have got homeowners who are taking care of children who want to expand their educational opportunity, access to 

online courses makes a difference. 

There is no question that this Recovery Act has made a significant impact in the lives of 89,000 families who would otherwise, 

but for this act, would not have had the homeownership opportunities that we have created through USDA. And I suspect that there 

are similar stories and indications throughout the various Departments of the Federal Government that were impacted by the Recovery and Reinvestment Act. 

Chairman SPRATT. How much in the way of funding do you still 

have left to commit or distribute? 

Secretary VILSACK. As I indicated, we had $28 billion of announced, the $28 billion in our appropriation, that has all been announced. We have outlaid it, roughly half of that. We have obligated about $17 million, so there is another $11 million or so to 

obligate. A lot of that is in SNAP, which is, as you know, spaced 

out over a period of some time. 
11 

And I might add that even SNAP has an economic benefit. The 

reality is, for every $5 we invest in SNAP, there is $9.20 of economic activity. When more people can buy more food, somebody has 

got to stock that food, someone has got to shelve it, someone has 

got to truck it, someone’s got to process it, someone’s got to pack 

it, someone has to produce it. All of that equates to potential job 

opportunities, both saved and increased. 

We also have additional resources with broadband that will be 

obligated before the September 30th deadline. 

Chairman SPRATT. Where do you think the money is likely to be 

spent, the money yet to be obligated and spent? Which of these programs is it likely to be invested in? 

Secretary VILSACK. There are still resources available in 

broadband, which we had over a thousand applications in our second round of funding. We have reviewed those applications, and we 

are in the process of finalizing decisions. We have already made 

announcements with one group. We have two more sets of announcements to make very shortly, and then there will be ongoing 

announcements over the summer. 

In addition, there are still some resources left in the Community 

Facilities Grant Program and some resources in the business and 

industry programs, but those will all be committed before September 30. We are on track to make sure that these resources are 

obligated, and then we will make sure that they create the kinds 

of opportunities by tracking them. 

Sometimes, it doesn’t look as if the money has been paid out because we are waiting, based on our programs, for projects to be 

completed. We get the sign from a city that is involved in the 

wastewater facility project, for example, that they have finished the 

project. That is—at that point in time, we cut the check and reimburse the city for their costs. So, a number of these projects are 

currently working, and as soon as they are completed, we will pay 

out the resource. 

There is still additional money to be spent on the Forest Service, 

which has also a profound economic impact. We now know from a 

recent study that there are 173.5 million people that visit our forests, over 300 million people who drive through it, and that they 

have collectively about a $27 billion impact on economies within 50 

miles of forests. So, as we improve trails, roads, and so forth, we 

increase opportunity for outdoor recreation. 

All of this is going to take place as a result of what we have invested through the Recovery and Reinvestment Act through the 

USDA. 

Chairman SPRATT. Mr. Secretary, thank you for your excellent 

testimony and your time in being here. 

I turn now to Mr. Ryan. 

Mr. RYAN. Hi, Mr. Secretary. We are starting to see some of the 

Democratic leaders here in the House come around to kind of our 

way of thinking on unspent stimulus funds. The Majority Leader 

Hoyer the other day said that spending fatigue is occurring across 

the country, and Congress ought to look at redirecting some of that 

money. The House’s war supplemental took some money from 

unspent stimulus funds to offset some of the war supplemental 

spending. 
12 

Does the Administration share this change of heart? Are you 

looking at possible ways of rescinding unspent stimulus money to 

go toward deficit reduction? 

Secretary VILSACK. Representative, thank you for that question. 

It is an important question, and I know a serious debate will take 

place. Let me say that, at USDA, we do take deficit reduction seriously. It is one of the reasons why we recently completed negotiations with the reinsurance, standard reinsurance agreement for 

crop insurance. As a result of that re-negotiation, we essentially 

saved $6 billion, $4 billion of it which we dedicated to deficit reduction. 

So, we are already taking steps at USDA. I would say that it 

would be shortsighted as it relates to USDA programs, particularly 

the reinvestment part of the USDA programs, to take resources 

away, given the opportunities that these programs create for benefits today and in the long term. 

We will, obviously, work with Congress to do whatever has to be 

done within the parameters that you all set, but I would say that 

USDA is stepping up on deficit reduction in a very meaningful way 

with the $4 billion from the Recovery and Reinvestment Act. 

Mr. RYAN. Let me take a stab at bipartisanship then. Do you 

think, with the $1.5 trillion deficit, we ought to be offering subsidies to wealthy farmers? I think we agree on this. You are an 

Iowa guy, and I am a Wisconsin guy. I think we agree on some of 

these things. 

Secretary VILSACK. I think there are opportunities for us to continue to look at ways in which we can utilize our resources within 

USDA and the safety net to do what the safety net is designed to 

do. 

If I might say, though, I see rural development and job growth 

and creation in rural America as part of the safety net. That is why 

I am insisting on trying to save as much of this resource as possible. 

Here is why: 45 to 50 percent of our farm families require offfarm income in order to keep the farm. So, it is really important 

for us to maintain that part of the safety net. 

Can there be adjustments? As you well know, we have proposed, 

in a number of budgets, reductions to some of the farmers in the 

top tier. We obviously support that. The President supports that. 

We would appreciate your help in getting that done. 

Mr. RYAN. Yes, I mean, I would say the term ‘‘safety net’’ implies 

targeting and focusing on those who need a safety net. And so, I 

think there is an area where we ought to be able to agree. I hope 

you are forceful with OMB in its submission of the next budget, 

and we can work on that. 

There is a specific thing I want to ask you. I sent a letter, along 

with Congressman Flake, Ron Kind, and Barney Frank, a bipartisan letter, to the President on April 22nd dealing with the BrazilWTO cotton dispute. 

Secretary VILSACK. Yes. 

Mr. RYAN. We are, I think, shelling out, under this agreement, $147 million a year to Brazilian agribusiness so we can continue 

paying about $3 billion a year to large U.S. agri-businesses. This 

is an unsustainable position. 
13 

We were facing large tariff retaliation against a whole slew of 

American businesses. Obviously, when we enter into agreements, 

we should fulfill those agreements. It is tough to expect the same 

from other countries when we don’t do it ourselves. 

We haven’t gotten a response from this letter yet. Would you— 

I would like to ask unanimous consent to submit it for the record. 

Chairman SPRATT. Without objection. 

[The information follows:] 
14 

Mr. RYAN. But would you comment on this? 

Secretary VILSACK. Sure. 

Mr. RYAN. Where is your thinking on this? What are you going 

to propose to do? Are we going to wait until the next farm bill to 

revisit this issue, or can we get on with reforming the cotton program, save taxpayer dollars, stop paying $147 million a year, and 

make some sense out of this and get some deficit reduction? 

Secretary VILSACK. I think it is important to characterize this as 

a situation that we inherited. 
15 

Mr. RYAN. No two ways about it, absolutely. 

Secretary VILSACK. Okay, and we were confronted with the fact 

that Brazil, because of a WTO ruling, had the capacity to penalize 

American farm interests and business interests to the tune of $850 

million annually. It would have increased over time well north of 

a billion dollars on an annual basis. 

What was of deep concern was their capacity to actually look at 

technical information and trade secrets and that type of opportunity to open up to the world things that we were trying to protect 

under our patent laws. So, we felt it was necessary to do something 

in the short term to ensure that that did not happen. That is the 

reason we negotiated the agreement we did. 

It required us to do three things, two of which we have, I believe, 

done and one of which we are currently working on. One was that 

we had to look at certain regulatory decisions that we had to make 

within APHIS as it related to Brazilian goods, which we are in the 

process of doing, so that markets could be more open. 

Secondly, we needed to look at the GSM Export Assistance Program, and we have made changes to that. The WTO did not take 

that into consideration. We think that they ought to take that into 

consideration, because we believe, by the changes that we have 

made to that program, that we have addressed the concern expressed in the case. 

Mr. RYAN. So the price triggers are set at market-based levels? 

Secretary VILSACK. We believe that we have done what needs to 

be done in that particular program. I will tell you I am not confident enough with the details of the specifics, but I have just been 

advised that we are fairly confident the GSM issue is in the process 

of a resolution. 

The issue, as you have mentioned, is the cotton program. I do 

think there has been a reluctance on the part of both Democrats 

and Republicans to reopen the farm bill on a variety of occasions 

and circumstances. We would stand ready to provide assistance to 

whatever committee or group, if that is something that folks want 

to reopen. I suspect, given the fact that we have begun 2012 farm 

bill discussions, that it will most likely be adjudicated and resolved 

in that discussion. 

Mr. RYAN. So, I understand why you did it, the 147, you got dealt 

this card. But if we are trying to project this out, it is 147 a year 

until a new farm bill, perhaps, changes it, until 2012. Is that kind 

of what we should be expecting here? 

Secretary VILSACK. Well, if Congress wants to reopen the 2008 

farm bill, we will be happy to assist in that effort. I have not seen 

any indication from anyone on either side of the aisle that there 

is an appetite for that. 

Mr. RYAN. That is a fair assessment. Thank you. 

Chairman SPRATT. Mr. Becerra. 

I don’t believe Mr. Becerra is here. 

Mr. Etheridge. 

Mr. ETHERIDGE. Thank you, Mr. Chairman. 

Thank you, Mr. Secretary, for being here today. 

Much of my district is small towns and rural areas. It is probably 

more representative of America—maybe only one other district in 

the country, because one of the test sites for the Census was in my 
16 

district several years ago, and they have been hit pretty hard by 

the recession. 

We have seen some pretty bad policies over recent years that sort 

of got us in this ditch, and we are still struggling to get out of it. 

As a matter of fact, folks in my district have paid a pretty heavy 

price. 

But we have worked hard here in Congress to put in place what 

I think are some common-sense policies to help turn this around 

and put people back to work. And the Recovery Act we are talking 

about today is a big part of that, and it has played a central role. 

Every county, save one, in my district has been above the national average, and unemployment numbers are still terribly high. 

That is significant, but they are coming down. As a matter of fact, 

today, every county is lower, the unemployment rates are lower 

than they were a year ago, so I happen to believe that the Act had 

something to do with it. 

Mr. Secretary, would you comment a little bit more on the farmoperating direct loans, which have had a real impact on districts 

like mine, that were included in the Recovery Act as well? You 

touched on it, but could you get into more detail about how many 

have been made, do we still have funds to make some more for 

some of these folks who are now hurting, need them to operate 

with, and what impacts they have had on the farm economy across 

this country? 

And finally, how is USDA using recovery funds to improve public 

services? You touched on the community issues, but here I am talking about fire departments, rescue squads. In these rural areas, 

you know, we have the nicest hospital in the world, but if you don’t 

arrive alive, you can’t survive, and that is a critical piece of that 

process. 

Secretary VILSACK. Representative, we essentially expended all 

of the direct loan resources under the Recovery and Reinvestment 

Act to assist 2,636 farm families with the direct loan portion. We 

then transitioned to our regular programming resource to provide 

assistance and help, and we have seen, frankly, a rather significant 

increase in the interest in both our Direct and Guaranteed Loan 

Programs. 

We will, and, very shortly, reach the maximum capabilities with 

reference to the Guaranteed Loan Program and very shortly will 

also do the same in our Direct Loan Program, which is why we 

have asked for some assistance in taking a look at those programs 

and seeing if there is a way in which greater authority can be 

given to us. If it requires structuring the fees so that there is no 

impact on the budget, we understand and appreciate that. But we 

are now becoming more and more the lender of first resort as opposed to the lender of last resort. 

Mr. ETHERIDGE. Mr. Secretary, do you have any idea how many 

of these people were first-timer folks coming to USDA, given the 

economic situation? 

Secretary VILSACK. Oh, I would say a significant percentage. And 

the reason why I say that is, historically, we were looking at Direct 

and Guaranteed Loan numbers about a half of what we have today. 

We saw a dramatic increase in 2009. We increased it under the 
17 

2010 budget, what we thought would be enough. We went through 

that in the first 5 or 6 months of the fiscal year. 

So, there is a tightening of the credit at the commercial lending 

level. We have tried to speak to commercial banks about the necessity of working with us. We have also worked within our own systems to restructure loans, to extend payments, to look for ways in 

which we could provide some assistance, short of voluntary or 

forced liquidation, which we don’t want to do. We want to keep people on the farm. We want to repopulate the rural communities. We 

don’t want to continue to see a decline. 

You mentioned the public services aspect of our mission area. I 

think the Community Facilities Grant Program has done a good job 

of responding to the need of the communities for ambulances, for 

fire trucks, for fire stations, for police stations, for police cruisers. 

Those projects have been funded, not just through the Recovery 

and Reinvestment Act, but also through our regular program. 

We have tried not to focus on just simply the Recovery Act. We 

have tried to do as best we can to utilize our regular programming 

resources as well. So, we are seeing community facility projects in 

addition to the 800 that I mentioned in the Recovery Act. 

We have also seen an opportunity that was not taken in the previous administration to expand dramatically assistance to libraries. 

Libraries are the campfire of the 21st century. It is the place where 

folks who don’t have access to computer technology can access it. 

It is the place where grandparents can connect with their grandchildren, who potentially are far away. It is an opportunity for us 

to really provide a learning center, and we have seen a rather significant commitment in this Administration to libraries. 

Mr. ETHERIDGE. Thank you. 

Thank you, Mr. Secretary. 

Thank you, Mr. Chairman, I yield back. 

Chairman SPRATT. Mr. Hensarling. 

Mr. HENSARLING. Thank you, Mr. Chairman. 

I am certainly glad that you have called this hearing, although 

I do lament that, unfortunately, it is obviously not to have a budget 

markup. We continue to be a Budget Committee without a budget, 

3 months and counting. 

I think you, Mr. Chairman, probably said it best, and that is, if 

you can’t budget, you can’t govern. 

I hope sometime before the next recess comes, we will actually 

have an opportunity to come here and mark up a budget, instead 

of debating spending discipline and budget priorities, as I wish we 

could. 

I fear that we may be having a debate today about, in many respects, how to take the largest deficits in history, the largest debt 

in history, and make them even larger with yet another stimulus 

plan. I hope that is not our purpose here. 

I respectfully disagree with those of my colleagues and the Secretary who believe that the stimulus act has been effective. I personally see the only thing that it has stimulated is a larger deficit 

and a larger debt. 

We know, over the break, we just learned that we had the third 

largest 1-day increase of the national debt in our Nation’s history. 

I know there are a number of reasons for that, timing reasons, but 
18 

at $168 billion, it should still weigh very heavily upon our minds. 

That, of course, is worse than the entire deficit for fiscal year 2007. 

We just learned that we just passed the $1 trillion deficit mark 

for this year, which will be our second year in a row and the second 

time ever to have a trillion dollar deficit, on the way to $1.5 trillion. 

Mr. Chairman, you know, along with the Ranking Member and 

myself, and I don’t know if Mr. Becerra is here, that those of us 

who serve on the President’s Fiscal Responsibility Commission 

have heard testimony that when a nation’s gross debt to GDP approaches 90 percent, bad things happen. Historically, you can lose 

a percentage of GDP, which, in our case, means we could go from 

3 to 2 percent of GDP, lose an entire third of our economic growth. 

And we know, Mr. Chairman, that today, the U.S. stands at 89 percent gross debt to GDP. 

And so, I have no doubt that any time you spend money, you can 

do good things with it, but there are also bad things that happen 

with it. 

We just had a vote on the House floor as part of the ‘‘YouCut’’ 

program, dealing with all of this signage around the Nation about 

the stimulus act. 

Unfortunately, it went down in defeat. I sometimes think that 

better verbiage on the signs might be, we are borrowing 43 cents 

on the dollar, mainly from the Chinese and sending the bill to our 

children and our grandchildren. 

I continue to believe that the biggest problem impeding job creation today is not so much a lack of capital, but more so a lack of 

confidence. I certainly hear it from the small business people in my 

district. 

And most recently, I must admit, I have heard it on national television when I woke up the other morning to the Ranking Member, 

who clearly got up earlier than I did. But the chief economist for 

the NFIB, the largest small business organization in the Nation, 

apparently was being interviewed and I will quote from that interview: ‘‘It is not just expectations on the tax rates, per se, but just 

the cost of carrying labor under the health care bill, the promise 

and heavy discussion on a VAT. The deficit scares us to death. We 

don’t understand how we can keep doing this, so everyone you look 

at, everything that Congress seems to be thinking about is not 

helpful for small business, and they don’t see it as helpful to the 

economies. There is no stimulus here; it is just drawing resources 

out and deploying them in the government sector, not helping the 

private sector.’’ 

In fact, may I have chart 5, please? It shows that since the stimulus act was passed, we have lost about 2.6 million private-sector 

jobs. Certainly we have had a gain in government jobs. 
19 

So, I don’t see all the benefit, Mr. Secretary, that I know you do. 

In the remaining seconds that I have, I don’t want to talk so 

much about what the government may be doing to create uncertainty, but maybe what the government is not doing, and privately, 

before we started, I had a chance to mention this to you. 

I represent a lot of agricultural interests, particularly beef interests, in east Texas. One thing we could to do to create jobs is to 

pass some free trade agreements around here with Colombia, Panama, and South Korea. And I am just curious when the Administration and the President is going to demand that Congress take 

a vote on these free trade agreements. 

Secretary VILSACK. Representative, I appreciate that question. 

Let me preface it by saying that we are enjoying a fairly robust 

ag export year at USDA. We anticipate it will be the second best 

export year we have had since we began keeping records; well, an 

increase of $8 billion increase in additional exports over last year. 

That is a broad range of commodities that are being exported, 

and we have, consistent with the President’s export initiative, redoubled our efforts to make sure that we have aggressive opportunities in all parts of the world. 

Heartened by the President’s directive to Ambassador Kirk to 

complete discussions with Korea on issues relating to both a wider 

opportunity for beef, as you and I privately discussed before the 

hearing, the importance of that to your constituents and to all of 

agriculture, as well as making sure that whatever deal is struck is 

appropriate and fair to the auto manufacturers of this country and 

the consumers of this country. 

As it relates to Colombia and Panama, we continue to fine tune 

the negotiations on that. I know that there are still some environmental issues that need to be resolved, but there is a commitment 

to getting those resolved and getting those to Congress. 
20 

As the President indicated, he is hopeful of having the Korean 

agreement before he has the opportunity to travel to Korea. And 

I would anticipate and expect that shortly after that, Congress will 

have the opportunity to take a look at it. We are certainly supportive of it. 

In the meantime, we are aggressively promoting expanded opportunities in China, Japan, as you and I talked about, trying to make 

sure that the Taiwanese live up to their responsibilities, reopening 

the pork and poultry markets, which were very important in both 

China and Russia. The President’s involvement, specifically and 

personally, in reopening the poultry market in Russia is an $800 

million to $900 million opportunity for us to expand trade. 

So, while we still have work to do, we are hopeful, given the 

numbers, and we know that every billion dollars of ag trade represents somewhere between 800,000 and 900,000 jobs, so we are 

very, very focused on this at USDA. 

Chairman SPRATT. Mr. McGovern. 

Mr. MCGOVERN. Thank you, Mr. Chairman. 

And thank you, Mr. Secretary, for being here. 

Like all of my colleagues, I am concerned about the state of the 

economy and the direction of the recovery. My friends on the other 

side of the aisle sometimes let hyperbole get in the way of the facts, 

so let me state the obvious. 

President Obama inherited the worst economy since the Great 

Depression. President Bush increased the size of the government 

and the size of the deficit in astronomical amounts. Republicans 

passed tax cut after tax cut, mostly for the rich, without paying for 

them. They decided to use America’s credit card to finance two 

wars. These same Republicans abdicated any oversight responsibility of the financial industry, all of which led to the recession that 

we have yet to recover from. And all of this is what led to the need 

for the passage of the American Recovery and Reinvestment Act. 

According to CBO, there are 1.8 million to 2.8 million more jobs 

in America as a result of the Recovery Act. That is a start, but 

clearly, it is not enough. Yet, my Republican colleagues continue to 

attack the Recovery Act as wasteful spending. 

Ironically, many of them have no problem promoting the Recovery Act in their own districts, as 114 Republicans who voted 

against the Recovery Act have taken credit for its successes back 

in their home districts. So, I should point out to my colleague from 

Texas that in his district alone, there was over $110 million worth 

of projects funded, from energy efficiency to senior centers to public 

transportation to buses to police officers—I could go on and on and 

on and on and on. I don’t know whether he wants to send all that 

money back and negate all those projects, but nonetheless—— 

Mr. HENSARLING. Will the gentleman yield? 

Mr. MCGOVERN. I yield to the gentleman. 

Mr. HENSARLING. The answer is, if we will use it to pay off the 

national debt, absolutely. 

Mr. MCGOVERN. In other words, the gentleman would like all of 

these projects in his district unfunded. 

Mr. HENSARLING. If we will pay off the national debt, the answer 

is, yes. 
21 

Mr. MCGOVERN. The answer is fewer police officers. I can go on, 

less money for schools. 

But anyway, my Republican friends have no problem for calling 

for an extension for the Bush tax cuts, even as they have the audacity to say the tax cuts don’t have to be paid for. 

It is ironic, however, and it is callous and cruel that they have 

found fiscal religion when it comes to programs like unemployment, 

that directly help our recovery and the people who are suffering 

most during this recession. 

Our Republican friends seem to have forgotten that extending 

the Bush tax cuts will increase the deficit by $3.7 trillion. 

One of the more important parts of the Recovery Act are the 

safety net provisions, programs that help people keep their health 

care, have a steady income while they look for work and put food 

on their table. 

I am particularly pleased with the SNAP provisions that provided a boost of 13.6 percent in the maximum food stamp benefit. 

This means that most households received about $40 to $50 more 

per month in 2009 as a result of the increase provided in the Recovery Act. This means families who are struggling with losing 

their job or less income had a little more money for groceries because Congress passed the Recovery Act. 

In addition, these provisions provided the biggest bang for their 

buck. As the Secretary stated, economist Mark Zandi, an adviser 

to John McCain, said that an increase of $1 in SNAP results in 

$1.86 in economic activity. But now, Republicans are refusing to 

pass extensions for unemployment without providing an offset. 

These are the same Republicans, mind you, who refused to offset 

trillions of dollars of tax cuts. 

One of the offsets proposed in the Senate was to sunset these 

SNAP provisions included in the Recovery Act. While some may 

say that this is just unspent money, improperly referring to this as 

a slush fund, this is really a $9 billion cut in SNAP benefits, and 

it will result in deep cuts for families and seniors currently on 

SNAP. In other words, supporters of this offset would make it 

harder for families to put food on their table at a time when jobs 

are still scarce and incomes are still stagnant. 

Now personally, I think this is wrong in every sense of the word 

to take food away from hungry families, which is what this cut 

would do. It is also important to note that the number of people 

enrolled in SNAP will go down as the economy improves. 

So, Secretary Vilsack, I have just a few questions, and I will ask 

them all at once. First, how has the Recovery Act affected people 

who have struggled to put food on their table? And do you consider 

this funding successful? 

Second, addressing this potential cut in SNAP benefits, has Congress, under any party leadership, ever enacted SNAP cuts this 

big? Has Congress ever enacted cuts that will reduce benefits to 

every single household on the program? 

Third, can you explain to me how taking away $45 a month in 

SNAP benefits from low-income working families might affect the 

Administration’s commitment to eliminate childhood hunger by the 

year 2015? And what do you think the impact will be on food and 
22 

security here in America if 20 million children see their food 

stamps cut over the next few years? 

Secretary VILSACK. Representative, I would certainly indicate to 

you that the families who have been benefited from the SNAP increase are appreciative of that, and I think it is, I think it is important for us to discuss this, not in terms of solely expenditure but 

also investment. I mean, the reality, as you indicated, is that SNAP 

benefits have a tendency to turn around in the economy more 

quickly; 97 percent of the SNAP benefits are invested and spent by 

those families within 30 days. So, if you talk about something to 

stimulate the economy and get things rolling and to get things 

going, there is no quicker stimulus than what you see in a SNAP 

program. 

And as I said earlier, when you increase the opportunities for 

families to buy more, they, in fact, buy more, which means that 

grocery stores have to shelve more, they have to truck more, they 

have to process more, they have to package more. All of that is related in some way, shape or form to job creation and saving jobs. 

Depending upon the multiplier you use, we are talking about tens 

of thousands of jobs that are impacted by this. So, I think it is important to take a look at SNAP in that context. 

Obviously, the hope that I have is that we will continue to see 

private job growth, as we have the last several months. We will 

continue to see an expanded GDP, as we have the last several 

quarters. And as we do, more and more people will have the confidence; more and more investment will take place by the private 

sector; and we will begin to see unemployment numbers come down 

and the need for SNAP hopefully reduced. 

I would say that there are ways in which we can do a better job 

of utilizing the SNAP education dollars. If you are looking for an 

opportunity to take a look at how we might be able to better utilize, we have proposed a new partnership with States that could 

potentially increase SNAP-Ed but at the same time potentially reduce the overall cost of the program, without impacting and affecting the beneficiaries of the program. There are some States, obviously, that need to do an even better job of expanding awareness 

about SNAP. There are, unfortunately, States today where a little 

bit over 50 percent of the people who qualify for SNAP are actually 

taking the benefits of SNAP. We would like to see that, obviously, 

increased. 

As it relates to the issue of childhood hunger, I think every 

American shares the goal that the President articulated during the 

campaign and has reminded people of recently, which is that we do 

need to make a concerted effort to eliminate childhood hunger. We 

also have to, as the First Lady has indicated, deal with childhood 

obesity. We at the USDA are committed to doing both of those. You 

will see over the course of the next couple of weeks that we are engaging the private sector as well in a real effort to try to eliminate 

childhood hunger. 

Mr. MCGOVERN. But as it relates to the offsets that are being 

talked about in the Senate, that is what I am concerned about; is 

that the offsets that have been proposed by some in the Senate to 

pay for the tax extenders and the unemployment compensation, 

their point of taking money out of the Recovery Act that is directed 
23 

toward SNAP, but I am concerned that that might have an adverse 

impact on the issues that we are talking about. 

Secretary VILSACK. Well, I would just simply say that if there is 

a conversation about offsets, that it ought to be in the context of 

improving nutritional opportunities, and I think that there is a tremendous opportunity with the reauthorization act of the Child Nutrition Act. That is a discussion I would like to have with you in 

terms of where we can best utilize resources and address this issue 

of childhood hunger. 

Chairman SPRATT. Mr. Garrett. 

Mr. GARRETT. And, I thank the chairman. 

And before I begin, in reference to the gentleman from Massachusetts’ opening remarks, lamenting the fact that our President 

inherited a worsening economic climate and increasing deficit picture; a week or so ago, we had another gentleman sitting in your 

chair, a great economist, Chairman of the Federal Reserve. I had 

the chart up here at the time. But I asked him a question. I put 

up a chart at that time, and I said, can you tell us which direction 

the deficit was going around, up until around 2006 or so? And he 

sort of smiled, and he said, well, it is going down. And I said, can 

you tell us where the direction of the deficit is going from 2007 forward? He said, well, that is going up. 

And so, to the gentleman from Massachusetts, you are right, our 

President did inherit a worsening economy and a worsening deficit. 

Unfortunately, he inherited it from you and your party, because it 

was your party who controlled this House and this committee with 

the budget process, and the chairman sat here, was the author of 

the budget, which saw those—— 

Mr. MCGOVERN. I didn’t vote for those tax cuts that added trillions of dollars. 

Mr. GARRETT. Well, reclaiming my time, which I didn’t yield, so 

just remember where all appropriation bills begin, by the Constitution, and it is here in this House. And it was this committee, under 

this chairman, and under these, your side of the aisle, that saw the 

worsening of the economy. 

But to the point, Mr. Secretary, on the bill, or on your Department, one area I just want to talk about, you spoke a little bit 

about, and that is the broadband stimulus funding. Broadband 

stimulus funding, as I have been looking at it recently and talking 

to some folks, is very capital-intensive in order to execute properly. 

Now, what I hear is that many private providers have already 

sunk, whether it is millions or billions of dollars, into projects to 

bring broadband technology to consumers and to consumers in 

rural areas as well. So, I am troubled when I heard that a number 

of the stimulus projects, rather than providing the broadband to 

unserved areas, were actually building on top of existing networks, 

where broadband service had already begun to be implemented. 

So, when you think about it, the last thing that we need to be 

doing with limited Federal dollars—although it seems from this 

Administration those dollars are unlimited—but to the extent they 

are limited, is allocating taxpayers’ resources to compete against 

private businesses where, as I said, broadband is already in the 

process of being established. 
24 

When you do that, you basically deprive the underserved communities where the money should be going of limited Federal resources; and you are doing something that we saw on Financial 

Services as well—some of us serve on that committee—where you 

are picking winners and losers. In essence, you are using taxpayer 

dollars to pick who is going to win and who is going to lose in 

theirs. 

And another problem with doing that is you create disincentives. 

If we are going to start building out in areas that building has already begun, you create a disincentive for any other private enterprise to go into those areas and provide additional services going 

forward. Actually, you create disincentives for future broadband investment. 

So, first of all, for a moment, could you just comment on the 

overlying development that you are seeing in certain areas? 

Secretary VILSACK. Well, we made a concerted effort, Representative, to focus on rural and remote areas that were underserved or 

not served at all by broadband with the application process in both 

the first and second round. Most of our projects that we are funding are our last-mile projects, which is to say that there may be 

an existing enterprise but they have not connected to the home, 

they have not connected to the anchor institution, they have not 

connected to the business. That last mile is extremely important, 

particularly in rural areas; and so our focus has been on making 

sure that those connections are made. 

The Commerce Department is focusing on middle mile, linking 

up existing systems so that there is greater, expanded coverage. 

I would be happy to work with you, but I think you will find, at 

least within USDA, that there is not the significant overlap that 

you have suggested, that in fact we have really made a concerted 

effort to avoid that. This is not about driving the cost down. This 

is really about expanding the service. 

Mr. GARRETT. And I only have limited time, so there are just two 

other questions on this. One is, we hear you say that you want to 

go into underserved areas and more rural areas; and yet I understand that some of the service areas that we have seen in the past, 

such as Mount Washington Ski Resort in Bretton Woods, New 

Hampshire, were to compete against the Eagle Communications in 

Hays, Kansas, so there at least I saw a couple of examples where 

maybe we are not looking at the most rural areas and areas where 

we should be questioning whether USDA should be doing it on. 

And the second question is—— 

Secretary VILSACK. Can I just mention—respond to that? 

Mr. GARRETT. Yes. 

Secretary VILSACK. The one area that you mentioned had one of 

the highest unemployment rates in that State, the ski area, and it 

did meet the definition of ‘‘rural’’ based on the broadband application process. 

Mr. GARRETT. And very quickly, in my last two seconds, the 

USDA has only obligated $480 million out of the $2.5 billion appropriated. I guess you are authorized to the end of September. 

Secretary VILSACK. I don’t think that is accurate, sir. I think we 

actually have announced projects totaling $1.7 billion. 

Mr. GARRETT. You have obligated that? 
25 

Secretary VILSACK. We have identified projects and have made 

announcements of those projects. There are 137 projects that we 

have announced we are going to fund; and with the announcements 

that we are going to make in the next week or so, it totals about 

$1.7 billion. 

Mr. GARRETT. Because we were told by the leadership on the 

other side of the aisle that we have to spend this money and vote 

on this bill immediately; and that, of course, was last year. And so, 

if we are just announcing yet not fully obligating spending until 

somewhere down the road, maybe we didn’t need to rush to judgment on it? 

Secretary VILSACK. I don’t think that is accurate, especially as it 

relates to broadband, because there were literally thousands of applications. In USDA, we had close to 3,000 applications. These are 

very technical applications that have to be reviewed, both on a 

technical and a financial respect. I think we will obligate the resources before September 30th, all the resources that you have provided; and the potential impact of this, as we said earlier, 1.2 million households, 230,000 businesses are going to be impacted and 

affected and 7,800 anchor institutions. I think that is a significant 

commitment and an important commitment, particularly in rural 

areas. 

Mr. GARRETT. My time is up. Thank you. 

Chairman SPRATT. Mr. Edwards. 

Mr. EDWARDS. Mr. Chairman, thank you. 

I just want to comment. I came here to hear the Secretary but 

must comment in response to Mr. Garrett and my friend and colleague and neighbor from Texas, Mr. Hensarling’s, comments. I 

share their concern about the deficit. I think it is genuine. And I 

want to give the three gentlemen credit. I think they believe it is 

important to reduce the deficit, as we all do in this room. But I just 

cannot share the fiction that today’s deficits are primarily the fault 

of Democrats. 

Mr. Garrett’s chart—I have seen it. I wish we had it here—kind 

of reminds me of the person who drives the car off the cliff and the 

other passenger in the car says, ‘‘How are we doing?’’ And he says, 

‘‘So far so well,’’ but hands him the keys and says, ‘‘Now, if we have 

a wreck, it is your fault.’’ 

The facts are that when President Clinton left office we had the 

largest surpluses in American history. The fact is that when President Bush came into office, OMB and CBO were projecting a $4 to 

$5 trillion surplus during that 8-year period. The fact is at the end 

of that 8-year period—during which the Republicans controlled the 

Congress in 6 of those 8 years—Republicans passed the 2001 and 

2003 tax cut bills, not paid for, on a partisan basis and a prescription drug bill at least half as expensive as the entire health care 

reform bill. They did that on a partisan basis, and in doing so they 

helped drive our economy and the deficits off the cliff. 

They, through predominantly partisan budgets, turned the largest surpluses in American history into the largest deficits in American history. And the reality is, the fact is that when President 

Bush left office, after those 8 years of predominantly Republicandriven budgets, we were losing 700,000 jobs a month. 
26 

Now, I hear some people say, Mr. Secretary, Mr. Chairman, that 

Democrats’ efforts at recovery haven’t done a thing, haven’t created 

a job. Well, I don’t know what the numbers were last month, but 

I know in, I believe, in April or May we were creating over 300,000 

jobs a month, many of those private-sector jobs. That is a turnaround of over 1 million jobs a month. I don’t think that is nothing. 

I think for 1 million Americans that makes a huge difference in 

their day-to-day lives. 

The fact is that after 8 years of the Bush administration, supported by the Republicans on this committee and their budget proposals, tax cuts for the wealthiest, from August 29 to October 10, 

2008, the stock market went down 27 percent. Households, seniors, 

families saving for their children’s college education fund lost 27 

percent of their savings because of the predominantly Republicandriven partisan budgets of that decade. 

The fact is—it is an inconvenient fact, perhaps—but the fact is 

when President Obama was sworn into office the deficit projected 

for 2009 was $1.3 trillion. Before President Obama did a single 

thing, the deficit left by the previous Republican administration 

was going to be $1.3 trillion. At the end of that year of efforts, 

stimulus recovery efforts, I believe the total deficit was about $1.4 

trillion. So, where does the majority of the blame lie there? 

I wish we could get away from the blame game. I think Mr. Hensarling, Mr. Ryan, and Mr. Garrett are genuine about wanting to 

reduce the deficit. I disagree. I think their conference, when they 

had control of this House for 12 years—by the way, during 4 of 

those 12 years they failed to pass a budget through the House and 

Senate and final passage of a budget, and I didn’t hear the partisan attacks on themselves during those 4 years when they were 

in control and did not pass a budget. 

I wish we could get past some of that partisanship. I wish we 

could work together, but I don’t want to be a part of putting back 

in place the captain of the economic Titanic if he is just simply 

going to put back in place the same sailing lessons that wrecked 

that Titanic. Perhaps working together we can find some bipartisan 

common ground—I hope so—but we won’t find it if those who were 

the architects of the greatest recession since the Great Depression 

and the architects of partisan budgets that turned the largest surpluses into the largest deficits just simply try to cover their tracks 

and point fingers at Democrats. 

I will be critical of Democrats and I have voted against some 

Democratic funding because I thought that funding was not affordable, given our present deficits, but I would like to see some bipartisanship on both sides of the aisle here to reduce this deficit and 

to get our economy back on solid ground. 

Mr. Secretary, thank you for your service to our country and 

your work during these difficult times. 

Chairman SPRATT. Thank you, Mr. Edwards. 

Mr. Diaz-Balart. 

Mr. DIAZ-BALART. Thank you, Mr. Chairman. 

I want to thank Mr. Edwards for saying that we really need to 

stop this blame game, and the way to do that is to move forward. 

We do know where we are at, by the way. The co-chairman of the 

President’s, what is it, Fiscal Responsibility Commission, Mr. 
27 

Bowles, said that we are basically going towards bankruptcy, the 

country is bankrupt. That is a new phenomenon. It is a recent phenomenon. We can blame or not blame. But the way to deal with 

it, by the way, is to just mark up a budget. 

Now, this is the first time, however, that we are not even attempting to mark up a budget, and you have got to ask the question, why? Because the numbers are, frankly, so out of whack that 

I guess we are trying to hide it from the American people? I don’t 

know. But that is a new phenomenon as well. And the way to get 

over the blame game and to get bipartisan is to mark up a budget. 

And this is the first Congress clearly since I have been here where 

there is not even an attempt to mark up the budget. That is not 

showing good bipartisan effort. 

But we have the honor to have the Secretary here, and I want 

to mention, I want to thank you for mentioning exports. You talk 

about China and Japan. The President himself said in the State of 

the Union—in fact, I have it here, so I may quote it. He said, ‘‘We 

will double our exports over the next 5 years, an increase that will 

support 2 million jobs in America.’’ And I support that, and that 

makes sense. 

Now, over the last 5 years, one of our Nation’s closest allies, a 

democracy that just had elections, transparent elections, they are 

fighting these narcoterrorists, narcotraffickers, Colombia, has been 

the largest market for U.S. agricultural exports in South America, 

exports totaling $4.3 billion. Those have been declining steadily because we haven’t passed a free trade deal with Colombia. And it 

is ready to go. In the meantime, while we haven’t done it, Colombia 

has signed free trade deals with six other nations, including our 

neighbor, Canada. 

So, Mr. Secretary, here is an issue. You talked about exports. 

The President talked about exports. Getting this free trade deal 

pushed—the President brought it over to Congress and then helped 

us try to get the votes to push it, and I think the votes were here 

in a bipartisan fashion—would immediately create jobs. You mentioned exports. You mentioned—actually, I don’t remember the 

number that you put out there, how many jobs are created per billion dollars of ag exports, to our best ally, it is ready to go. 

And with all due respect, sir, it doesn’t cost one penny of the taxpayers’ money. Colombia already has preferential treatment for 

their exports coming to the United States. It would even the playing field. And with all due respect, sir, other than, you know, nice 

words, where is the effort? Where is the lobbying effort? Where are 

the members of the Cabinet lobbying the Speaker, going to every 

office of Congress pushing for this effort, which wouldn’t cost one 

penny, which would help our ally, which would help our economy, 

which would immediately create jobs, and would do exactly what 

you are saying? Where are your efforts on the Colombia free trade 

deal? 

Secretary VILSACK. Well, Representative, let me say that we are 

working with Ambassador Kirk to finalize that agreement. As the 

President indicated, he wants the Ambassador to focus on the 

Korea Free Trade Agreement because there is a real opportunity 

for us to get that done. That would obviously be significant for 

American agriculture. 
28 

Let me say that as important as free trade agreements are—and 

they are and we support them—that is just one aspect of an overall 

effort in terms of trade. We have aggressively tried to reopen markets that have been shut down because of nonscientific barriers 

that have been created. We have aggressively looked for opportunities for engagement in multilateral discussions, which is why the 

President is focused on the Trans-Pacific partnership, which we are 

also engaged in. 

I have traveled on a number of occasions to China and Japan, 

designed in part to reopen markets, to expand markets. China 

right now is now the third leading market for us in the first half 

of the year, fiscal year. It was the number one market for the first 

time ever in terms of trade. 

And we are seeing an increase in ag trade. I think you will continue to see a commitment on the part of this Administration to 

focus on trade. We understand in agriculture there is a trade surplus—— 

Mr. DIAZ-BALART. Colombia, specifically Colombia. 

Secretary VILSACK. Specifically Colombia, as I said, Ambassador 

Kirk still has work to do. There are still aspects of that agreement 

that have not been finalized. It is part of the negotiations. It is in 

the process of being negotiated. And as soon as that is completed, 

I can assure you that we will be very much interested in encouraging participation by the Congress and passage by the Congress. 

Mr. DIAZ-BALART. Any idea of when we are looking at? When, 

roughly? We are obviously not looking at this Congress, so are we 

looking at the beginning of next Congress? Any idea? 

Secretary VILSACK. Well, obviously, sooner rather than later. And 

as the President indicated, he clearly wants the Korean agreement 

to be completed before he travels to Korea. 

So, there is work being done on Korea. There is work being done 

on Colombia. There is work being done on Panama. There is work 

being done on removing barriers. There is work being done on reopening markets that have been shut down. There is work being 

done in international forums to make sure that the rules are fair 

to the United States. There is work being done to expand opportunities for biotechnology crops. There is work being done in increasing our commitment to collaborators in country. There is work 

being done on research. 

There is a holistic and comprehensive approach that is being 

taken. It is not just one single aspect of this that is a silver bullet. 

We have to do all of this, and we are engaged. 

Mr. DIAZ-BALART. I appreciate that. I would just respectfully ask 

that you please start focusing a little bit more on Colombia. It is 

ready to go. You know, it’s—every day losing market share, including to our neighbor to the north, Canada. Colombia is our best ally, 

they are ready to go, and it just seems to me that there are always 

excuses why that just doesn’t come up. And this is not a couple of 

months. It has been years now. It frankly doesn’t cost a penny. 

I would just respectfully request that you all look at that and 

kind of emphasize that, because we have an ally that is ready to 

go. We are losing market share. It doesn’t cost a penny. It would 

create jobs. And, frankly, it just seems like there are all these reasons and excuses why it just doesn’t happen, and we have heard 
29 

them before, and I just would respectfully ask that you please look 

at that. 

Chairman SPRATT. Ms. DeLauro. 

Ms. DELAURO. Thank you, Mr. Chairman. 

Welcome, Mr. Secretary. It is a delight to have you here today; 

And thank you for your outstanding work on all fronts, whether it 

is nutrition, whether it is rural development, and indeed trying to 

help to open markets. 

I would suggest to my friend, Mr. Diaz-Balart, that one way in 

which we could immediately increase imports and exports, quite 

frankly, is lift the embargo on Cuba; and our agricultural interests 

would certainly—who are clamoring for new markets—it would 

open up an area which is very close by us. And as far as the last 

time that I looked, Cuba had not been engaged and participated in 

killing maybe 50 or more union leaders. 

So, let’s get real. Let’s open up markets. Let’s look to Cuba so 

our agricultural interests can really get off the ground. And if you 

take a look at the recent newspapers, you will see that American 

farmers are asking for this to get done. 

I would also add, with regard to the budget, as far as I know, 

Democrats voted for a budget $7 billion below the President’s call 

for discretionary spending, in addition to which we have not seen 

a Republican budget come forward in any way. 

Let me move to rural development, which is, I know, an area of 

your passion, Secretary Vilsack. We are appreciative of your work 

in this area. 

Under ARRA, USDA was appropriated $4.3 billion toward rural 

development programs, expanding opportunities for broadband 

loans and grants to rural communities, providing 80,000 home 

loans in rural areas, constructing and repairing rural water waste 

treatment facilities, protecting and conserving our farmland, improving the economic and environmental climate in rural communities. 

I am going to ask you to highlight the progress the Department 

has made in improving rural economies through ARRA. But before 

I do that—I am sure you have read it. My colleagues ought to look 

at it and read it—is that in the Saturday, July 10th’s, business section of the New York Times: ‘‘High speed for the sparsely wired. 

Stimulus projects widen access to broadband.’’ 

I want to talk about Cynthia Wegner and her husband, owners 

of a farm and horse breeding business in western Kansas, will be 

able to upload a photograph of a horse to show a potential buyer 

in seconds, not the 20 or 30 minutes they now need with dial-up 

service. ‘‘I just cannot begin to tell you how frustrating it is to do 

anything with it,’’ she said. 

I will just go to the jump page and read what the Chairman of 

the FCC said: ‘‘The extension of Internet service was a significant 

moment in communications. Extending broadband in rural America 

is as important to jobs and growth in the 21st century as extending 

electricity was in the 20th century,’’ he said. 

By all accounts, if you take a look at this and what has happened 

with broadband and extending it to rural America, we have been— 

you have been successful, Mr. Secretary; and I would ask you to 
30 

comment on some of the areas in rural development and the 

progress that we are making there. 

Secretary VILSACK. Thank you. I am not sure whether I am supposed to refer to you as Madam Chairman or Representative. 

Ms. DELAURO. In this body, it is Representative. The chair is 

there. 

Secretary VILSACK. I appreciate the opportunity to sort of expound on my opening remarks. 

Let me give you some percentages in terms of the resources that 

have been obligated and that are currently working in the rural development area. 

With reference to rural water and waste disposal programs, 80 

percent of the resources made available to the Department have 

been obligated. In terms of the community facility program, 70 percent have been obligated. The single-family housing guarantee, 99 

percent have been obligated. The direct housing guarantee, 69 percent have been closed. The rural enterprise grants, 99 percent. And 

the Business and Industry Loan Program, 93 percent. 

So, in terms of broadband, as I explained earlier, we have committed to 137 projects, about $1.7 billion of the resource made 

available to us. We will meet the September 30th deadline in terms 

of commitments on that resource. 

The impact of these funds are as follows: Eight hundred community facility projects have been funded, and there are more to come. 

Eight hundred wastewater and sewer projects have been funded, 

more to come. Nine hundred businesses have received help from 

the Business and Industry Loan Program, and 188 projects have 

been funded through the Rural Enterprise Loan Program. Eightynine thousand home loans have been closed, expanding the American dream of homeownership to those folks. And we are currently 

working on broadband, 137 projects, as I indicated, helping over 

500,000 households, 100,000 businesses, and several thousand anchor institutions. And I think when it is all said and done, we will 

positively impact 1.2 million households, 230,000 businesses, and 

7,800 anchor institutions. 

Representative, I think this is, in my view, a very, very significant framework that you all have put in place. When you combine 

it with the energy title of the farm bill that we are in the process 

of implementing together with work we are doing at USDA, I think 

what you have is the framework for a revitalized and a new rural 

economy, and it is long, long overdue. 

With due respect to the concerns expressed here today about the 

recession—and they are real—rural America has expressed and experienced this for decades, high unemployment, high poverty. Ninety percent of persistent poverty counties in this country are located 

in rural America, 90 percent. Aging populations, declining populations, income disparities, this is the shot in the arm that rural 

America needed. It is an indication that someone is paying attention to those good folks. 

And this is why it is important, if I could just have 30 seconds. 

It is important because the value system of this country is rooted 

in rural communities. One-sixth of the population of the country 

lives in rural America, but 45 percent of the people who serve us 

in uniform come from rural America. And it is because those young 
31 

men and women are taught something at a very early age, and 

that is that you can’t keep taking. You obviously have to replenish 

the soil in order for the soil to continue to give you bounty. The 

same thing is true of a country. And the ability to create opportunities for those young people to come back, live, work, and raise their 

families in the same small communities that raised them I think 

is very, very important. 

So, we are working night and day with our regular programming 

and with this recovery and reinvestment resources to try to build 

a revitalized rural economy. And as long as I am Secretary, that 

is going to be an important focus of what we do at the USDA. 

Ms. DELAURO. I want to say thank you, Mr. Secretary, again and 

say that I would like to work with you so that when this information gets out, as it should get out, that really rural America knows 

who is on their side. Thank you for being on the side of rural 

America. 

Chairman SPRATT. Mr. Djou. 

Mr. DJOU. Thank you very much, Mr. Chairman; and thank you 

very much, Mr. Secretary. 

Mr. Secretary, I have two sets of questions. I am, of course, concerned—as I am sure the Administration is—about our ballooning 

budget deficits and our languishing economy. And here thus far 

this afternoon we have heard more than enough blame to go 

around here. I am far more concerned about fixing things and looking forward in the future than continuing to lay partisan blame. 

So, I have two sets of questions for you. The first set of questions 

that I have is, I hear your testimony and I fully understand and 

appreciate that the Administration’s testimony is that we are not 

hearing enough of the so-called ‘‘good news’’ from the stimulus, that 

there are more things happening out there that is just not being 

reported properly. From my perspective, I guess, as a freshman, it 

sounds a lot like to me what the Bush Administration was saying 

about the war in Iraq in 2004 and 2005. But I think what turned 

things around when General Petraeus took over was he set out 

some very clear metrics and standards, dates and targets and 

goals. 

So, my first question actually to you is, when can the American 

people see unemployment reduced below 8 percent? Or maybe I will 

ask a little bit more open-ended. What specific targets do you think 

are realistic to achieve and by what date? When can unemployment 

and real economic recovery—— 

Secretary VILSACK. Representative, to the 2 to 3 million people 

whose jobs have been saved or whose jobs have been created as a 

result of the Recovery and Reinvestment Act, the recovery has 

come to them. There are obviously still tens of millions of Americans who are impacted and many Americans who are concerned 

about the future. We deal with this in rural development all the 

time. And I think it is important to note that what you have done 

with the Recovery and Reinvestment Act is to create a sense of momentum, which I think you will see build over the course of the 

next year or two. 

Mr. DJOU. So by this time next year, will unemployment be 

below 8 percent? 
32 

Secretary VILSACK. Well, that obviously depends in large part 

upon the confidence that the private sector has. It depends on circumstances. I don’t think it is appropriate for me to talk about hypothetical circumstances. I can only tell you about what is happening today. And what is happening today is that there is at least 

a sense of opportunity that did not exist in rural communities prior 

to—— 

Mr. DJOU. Mr. Secretary, what I am trying to pin you down on 

is what tangible metric do you think can be achieved and by when? 

Because that is what I really think turned things around in Iraq. 

Secretary VILSACK. I think the tangible marker was 3 to 4 million jobs being created as a result of the Recovery and Reinvestment Act, and we are on our way to meeting that goal. And we will 

meet it by the end of the process, in terms of the monies being distributed and put into effect. So, I think in the next 12 months you 

are going to see a continued drop, a number of job growth related 

to the Recovery and Reinvestment Act. Depending upon which 

number you look at today, it is somewhere between 2 and 3 million. 

I think you will see it somewhere between 3 and 4 million. 

Mr. DJOU. My second set of questions relates to the amount of 

stimulus money that has already been spent. I hear from your testimony—correct me if I am wrong—about 50 percent has been 

outlaid so far that was allocated to the Department of Agriculture; 

is that correct? 

Secretary VILSACK. That is correct. 

Mr. DJOU. With 50 percent still to go, does this mean that there 

is no need for further fiscal stimulus? 

Secretary VILSACK. I think it is really important to understand 

how this works in the rural development sphere. When you have 

a community facility grant, you can essentially obligate that grant, 

but that grant is the last dollar that is paid. So, it requires a city, 

for example, to design a wastewater treatment project, to get a contractor, to have the contractor build the facility, to have interim financing by the city put in place; and then, ultimately, the contractor is paid, the project is approved, and the signoff occurs. At 

that point in time, our resources are outlaid. These resources are 

committed, but it will take some time before they are actually paid 

out. 

Mr. DJOU. So, I guess my question is, is there any need for another stimulus package beyond what was already allocated in 

2009? Are you confident that—I mean, with 50 percent still to go, 

is there any reason that we need more stimulus? 

Secretary VILSACK. Let me suggest to you that I think it is imperative that there be some attention paid to the unemployed and 

that benefits are provided to the unemployed and continued benefits are provided because these families that are currently cut off 

from unemployment, they are really struggling. What are they to 

do? 

Mr. DJOU. Okay. That actually goes back to my first point. When 

are we going to see the unemployment rate drop below 8 percent 

or 7 percent? 

Secretary VILSACK. Well, the Recovery Act’s responsibility was to 

generate somewhere between 3 and 4 million jobs. That will be 

done. I think it is imperative that we approach the future with 
33 

greater confidence, frankly. I think the fact that we are having conversations about deficits are an important and positive step in 

sending a message to the market. I think the stock market’s improvement is a message. I think the private-sector job growth over 

the last several months is an indication. That has to continue. 

I am confident in the capacity of this Recovery Act to continue 

to create job opportunities. I am confident in the capacity to meet 

the goal which we set, somewhere between 3 and 4 million jobs retained and saved. We are well on our way to doing that. I think 

that is very important. And I am very confident in the capacity of 

the investments that you are making in rural America to have 

long-standing benefits to rural America. 

When you look at return on investment, I think it is important 

to look at the long term; and I think you are going to see a significant return on the investment in broadband, in business expansion, 

and new opportunities for education. I think you are going to see 

a return on investment for community facilities in wastewater. 

Take a town in Missouri recently who needed this wastewater 

treatment facility in order to restart a hospital project that was 

shut down because they didn’t have access to clean water. Our recovery and reinvestment resources investing is going to allow that 

wastewater treatment facility to be built and also that hospital to 

be completed. How many lives will be saved as a result? 

I think that is the kind of thing that I think we have to look 

longer term. I think there is going to be tremendous benefit in 

rural America as a result of what you all have done here. 

Mr. DJOU. Great. Thank you, Mr. Secretary. 

Thank you, Mr. Chairman. 

Chairman SPRATT. Mr. Langevin. 

Mr. LANGEVIN. Thank you, Mr. Chairman. 

Mr. Secretary, thank you for being here; and let me just say how 

much I appreciate the hard work that you and the other members 

of the Administration are doing to try to get this economy turned 

around. And, as Mr. Djou has pointed out, we hope that we are 

going to be able to create the jobs in the very near future. They 

are going to get us to where we know our economy should be performing and can be performing. 

I also think it is important to understand and reflect on how we 

got here so that we can look forward and we don’t repeat the mistakes that got us into the mess that we are in in the first place. 

We look back at the years of the Clinton administration and we see 

all the positive things that were put in place that allowed for job 

growth and record budget surpluses, and then the administration 

after that that allowed for a great deal in terms of tax cuts and 

such but heaped on the national debt and didn’t have an accounting of how we paid for these kinds of things. 

Thankfully, under the leadership of this committee, the Chairman, and this Congress, we have put PAYGO legislation back in 

place, which was a major factor in the Clinton years of why we had 

a balanced budget, and it led to surpluses and job growth. That 

PAYGO legislation expired in 2002, and it was just made permanent again this year, so that for every dollar of increased spending 

or every kind of a tax cut that there is an offset in either spending 

cuts somewhere else or tax increases in order to account for that. 
34 

So, we have laid the foundation for solid growth in the future in 

responsible budgeting. It is my hope in the very near future that, 

once we have this economy turned around, we have things back on 

track, then I know we are going to also turn our attention aggressively to getting our fiscal house in order and getting our budget 

deficits under control. 

In the meantime, let me talk about some of the important work 

that is being done under the American Recovery and Reinvestment 

Act, particularly in essential benefits getting people through this 

time, the SNAP program. 

My home State of Rhode Island was hit really hard by this economic recession. Right now, we currently have the fourth highest 

unemployment rate in the country. And from the beginning of the 

recession in June, 2008, until June, 2010, the number of Rhode Islanders enrolled in SNAP increased 66 percent, from 87,285 people 

to 145,361 individuals. Just shocking numbers in so many ways, 

and it speaks to the need right now and the types of essential support that things like the Recovery Act are helping to provide right 

now to get people through this difficult time. 

The Recovery Act provided critical assistance to Rhode Islanders 

by increasing the amount of SNAP benefits which directly stimulated our State’s economy. So, it was about helping people, but it 

was also about stimulating the economy. And according to the 

Rhode Island Community Food Bank, this is the greatest demand 

that officials have seen in the organization’s 28-year history. 

So, my questions are, given these circumstances: do you believe 

that the $20 billion of the Recovery Act allocated for nutrition assistance is enough to meet the sustained demand until we have 

gotten ourselves out of this situation right now in the current 

downturn? What effect would a decrease in SNAP benefits have at 

this point in the recovery? 

And then the second half of that question is, has the total 

amount for nutrition assistance in the Recovery Act been exhausted? 

And then, finally, if so, what additional steps are being taken or 

are needed to continue assisting families that are really hit hard 

by the recession? 

Secretary VILSACK. Let me answer the last question. 

The total amount of resources available to SNAP—actually, the 

way it was structured is to be stretched out over another year or 

so. So the total amount has not been expended, but we are on 

track, obviously, to do that. 

We work very closely with States to try to encourage greater participation in SNAP. As I said—I believe I said earlier that there 

are some States that do a very good job of getting the people who 

qualify for SNAP aware of SNAP program and participating in the 

SNAP program. There are others who still have work to do; and 

we have been aggressively trying to work with States to improve 

their outreach, to improve the education component under SNAPEd to make sure people understand. That is one of the reasons why 

we suggested a move to category eligibility to make it a little bit 

easier to qualify for SNAP so that there aren’t bureaucratic barriers to participation. 
35 

We will do the job as best we can with the resources that you 

all provide. As I indicated, I think there are ways in which we 

could probably use the SNAP-Ed dollars more effectively to leverage greater opportunities for education and at the same time potentially save resources. 

Representative, we take deficit reduction at USDA very seriously, as reflected in the work that we did on the standard reinsurance agreement for crop insurance, where we negotiated a significant savings and used $4 billion of that savings to reduce the deficit. So, we are cognizant, we are working, we are constantly looking for ways within USDA to more effectively and efficiently use 

resources; and we are going to continue to work with States to 

make sure that we get to as many people who qualify for SNAP 

as possible. 

Mr. LANGEVIN. I appreciate it. 

Can you just answer that last part of the question of what effect 

a decrease in the SNAP benefits would have at this point in the 

recovery? 

Secretary VILSACK. Well, if you were to decrease benefits right 

now, obviously, it would mean that people who are currently receiving benefits would receive less. That would have a rippling effect. 

They would obviously be able to purchase less at the grocery store. 

And that, as I said earlier, does have a ripple effect. If you are selling less, then perhaps you don’t have to shelve as much, you don’t 

have to process as much, you don’t have to package as much, you 

don’t have to truck as much, you don’t have to produce as much. 

All of that impacts, in terms of the supply chain, potential employment opportunities for people. And so, longer term, our hope is that 

an improved economy requires less of a dependence and need for 

SNAP. 

I would say, as I said earlier, I think it is imperative that we not 

only focus on SNAP but that we also look for opportunities to extend unemployment compensation to those who have been out of 

work for an extended period of time. Because, without that, they 

really have very, very little hope of being able to keep their home 

or take care of their families. 

Mr. LANGEVIN. Mr. Secretary, thank you for the job you are 

doing. 

Thank you, Mr. Chairman. I yield back. 

Chairman SPRATT. Mr. Jordan. 

Mr. JORDAN. Thank you, Mr. Chairman; and thank you, Mr. Secretary. 

Just a couple comments. 

First, to the gentlelady who is no longer here from New York, 

some of her comments and her questioning. I have introduced a 

balanced budget on behalf of the Republican Study Committee. I 

would appreciate it that the Secretary gets a chance to take a look 

at that. 

We think it does the right things. It protects Social Security. It 

keeps the tax cuts in place that are set to expire this January. It 

does the right thing with national defense but also cuts some 

spending which, frankly, we have to do around this place. 

Also, I would just mention I think there is a big difference between trading with Colombia and trading with Cuba. Cuba is a 
36 

state sponsor of terror. Their former leader just this week made the 

ridiculous statement that somehow he believes the United States 

is responsible for the South Korean military vessel that was sunk. 

So, I think we have got to keep all that in mind. 

I do appreciate the Secretary’s comments when he talks about 

the values of rural America. I have the privilege of representing 

west central and north central Ohio, many strong ag counties in 

the 11 counties I get to represent there. 

But I was just curious, because you made another statement, Mr. 

Secretary. Let me ask it this way. Do you think that government 

policies can actually undermine the values that I believe that rural 

America encourages? And specifically, you talked about the unemployment compensation. Do you ever think that we can go with 

something too long where we are maybe encouraging the wrong 

kind of behavior and not rewarding the proper behavior? 

Secretary VILSACK. Representative, in my capacity in public 

life—again, as a Mayor, a State Senator, a Governor, and now as 

Secretary of Agriculture—I have talked to a lot of folks who have 

lost their jobs and lost their farms—— 

Mr. JORDAN. I understand that. My question goes to the 99 

weeks, almost 2 years of assistance. Do you ever think we can go 

maybe too far with that and we undermine the same values that 

you and I both believe are important to America, in particular 

rural America? 

Secretary VILSACK. If this were a normal situation and not as severe and deep a recession as we have suffered, your point might 

be well taken. But I think this is an unusual circumstance. 

Mr. JORDAN. Is there ever a time when it should end? 

Secretary VILSACK. Yeah, when—— 

Mr. JORDAN. No, no, no, no, no. Should we continue to extend it 

further than 99 weeks? Is there a time you would cut it off? 

Secretary VILSACK. I think you extend it for the time necessary 

to get people back on their feet. 

Mr. JORDAN. That is not what I asked. Do you think it should 

go further than 99 weeks or do you think 99 weeks is when it 

should stop? 

Secretary VILSACK. I think there should be a current extension 

for those who have been unemployed in terms of chronic—— 

Mr. JORDAN. Have you had any employers, as I have, come up 

to you and say, you know what? We have actually had people 

hired. They found out that the extension kicks in; and they said, 

you know what? We are not going to take the job because we can 

get by by not working and get money from the taxpayer in compensation. 

Secretary VILSACK. If that is true, then under—— 

Mr. JORDAN. Have you had anyone say that to you? I have had 

people say that to me. 

Secretary VILSACK. No. But as I understand it, if that were to 

take place, then they would potentially be disqualified from receiving unemployment. 

Mr. JORDAN. Okay. Let me ask a line of questioning. I did this 

when we had Secretary Duncan in here with the Department of 

Education. 

How many people work at the Department of Agriculture? 
37 

Secretary VILSACK. Roughly 103,000 to 104,000, somewhere in 

that neighborhood. 

Mr. JORDAN. And is that number higher this year than last year? 

What is the trend? 

Secretary VILSACK. Well, we are in the process, actually, of taking a look at how we might be able to restructure—— 

Mr. JORDAN. Is it up or down? 

Secretary VILSACK. I think it is about the same. 

Mr. JORDAN. And what is the average salary of folks who work 

at the Department of Agriculture? 

Secretary VILSACK. You know, I don’t know a specific number. I 

would be happy to get that to you. 

Mr. JORDAN. Can you hazard a guess? 

Secretary VILSACK. I would be reluctant to do that. 

Mr. JORDAN. What is the average salary of a farmer across the 

country? 

Secretary VILSACK. It depends on the size of the farm. 

Mr. JORDAN. Our staff has said approximately $63,000. 

Would the average salary for the Department of Agriculture be 

higher than the average salary of a farmer of $63,000. 

Secretary VILSACK. I think it would be comparable, perhaps less. 

Mr. JORDAN. Do you know how many people at the Department 

make over $100,000? 

Secretary VILSACK. I don’t know that number. 

Mr. JORDAN. Will you be able to get that to us? 

Secretary VILSACK. Sure. 

And let me just say what we are trying to do. We are taking a 

look at the supervisor to front line worker ratio as a way to figure 

out how we will be able to deal with the President’s directive to us 

to reduce our discretionary spending, as we did—we kept our discretionary spending at about $1 billion less with the budget that 

was proposed for 2011 as the President instructed us to do. And as 

I indicated further, we have discovered $4 billion in savings 

through the Standard Reinsurance Agreement. 

So, we are constantly looking for ways. We are taking a look at 

our buildings, trying to figure out how we might be able to consolidate our building holdings to save resources. So, we are constantly 

involved in trying to figure out ways to do a better job—— 

Mr. JORDAN. I have 5 seconds. I want to get one other question 

if I could, Mr. Chairman. 

The GAO did a study looking at dollars that the organization 

Planned Parenthood gets. In that study—I was actually part of a 

press conference. Representative Olson from Texas had called for 

this study. In there—I forget what page, and I wish I would have 

brought the document with me—the Department of Agriculture actually gave some money to Planned Parenthood. Do you know if 

that in fact is the case—according to GAO, it was—and if so, what 

was the money for? 

Secretary VILSACK. You would have to be more specific in terms 

of time, in terms of date. It could very well be that a facility, a 

health care facility, could have received a community facility grant 

that leased property to Planned Parenthood. I don’t know. 

Mr. JORDAN. Does it strike you as sort of strange that your Department would be using taxpayer dollars and awarding those dol-
38 

lars to an organization like Planned Parenthood? I mean, the Department of Agriculture giving money to Planned Parenthood, does 

that strike you as strange just on the surface? 

Secretary VILSACK. Not necessarily. Because if you understand 

the rural development component of our mission area and the impact that we have with community facility grants on expanding 

health care coverage and expansion—— 

Mr. JORDAN. Do you think most farmers in America would be 

comfortable with you giving dollars to Planned Parenthood? 

Secretary VILSACK. I think it is important for people to understand the significance of health care in rural America and how difficult it was and is to get care in rural America. 

Mr. JORDAN. Would you answer that question? Do you think 

most farmers would be comfortable with dollars going from the Department of Agriculture to Planned Parenthood? 

Secretary VILSACK. I think if they understood the connection 

with health care and they understood the connection of their own 

family planning efforts, they might very well understand that. 

Mr. JORDAN. Really? Okay. Thank you, Mr. Secretary. 

Chairman SPRATT. Ms. Kaptur. 

Ms. KAPTUR. Thank you, Mr. Chairman. 

Mr. Secretary, thank you so very much for being here. Thank you 

for being the most important lifeline to America’s families right 

now who are enduring unemployment and this very difficult economy. Truly, you are their vital link. 

And I want to thank you on behalf of the people of Ohio where 

we have—counting the over 670,000 still unemployed, many working in part-time jobs, and those that have fallen out of the workforce—I would say, out of 11 million people, we have 1 million people on the bubble; and without the Department of Agriculture, I 

honestly don’t know where we would be. So I want to thank you. 

You have a tremendous burden. 

I really don’t understand my colleague, who represents some districts south of me, how he can even say some of what he said here 

today during this session. We ought to be supporting the value of 

work in this country, and those people that have worked and are 

unemployed through no fault of their own, as he and his colleagues 

voted to outsource jobs to China and Mexico and everyplace else, 

we are at risk of losing the value of work. People are starting not 

to believe that you can earn a living in this country anymore. That 

unemployment check is a lifeline. 

And the food that you provide from the Department on behalf of 

the American people, we simply couldn’t get along without it in our 

area. In fact, our food pantries and feeding sites are stressed right 

now, Mr. Secretary. And the TFAT program, the Commodity Supplemental Food Program, we need more right now. We have nearly 

350 feeding sites around our region. People are having to swallow 

their pride and go in for bags of food, and it is not a very pretty 

picture out there. So, the situation faced by our food banks is dire. 

And with donations down and demands up, I just am very concerned about the next several months. 

And I am interested, from your perspective nationally, what you 

are hearing from our food banks and from our helpers around the 

country that are holding life and limb together for our families? 
39 

Secretary VILSACK. Representative, I have actually been to a 

number of food banks in a number of cities and communities across 

the country, and I think your observations are correct. They have 

a tremendous need. They feel a great deal of stress. They were very 

appreciative of the resources made available through the Recovery 

and Reinvestment Act. It was a lifeline. It allowed them to assist 

us in helping to offset some of the problems that we experienced 

in some of our markets when other countries shut down access to 

pork, to poultry. It gave us some opportunity for us to purchase 

surplus product. And the need, obviously, continues. We are working as best we can to provide the resources and the assistance that 

we can. But I will tell you that they were very, very, very appreciative of what was done in the Recovery and Reinvestment Act. It 

was clearly an important thing to do. 

Ms. KAPTUR. Mr. Secretary, I don’t know if you have any ability 

to put in a good word on this, but for the last several years, as our 

employment rate has ticked up, we have been gleaning fields, harvesting fields in the fall. The Ohio Farm Bureau even helped us on 

this by helping us harvest cabbage and corn and so forth. 

In Ohio, if farmers in places like Ohio where the unemployment 

rate is so high, this fall, as food remains in the field, encouraging 

through the USDA, not-for-profit groups, church groups, religious 

groups, other groups, student groups, to go out and help us glean 

the fields, move that product through our food banks—Ohio Farm 

Bureau was able to help us pick up lots of cabbage, acres of cabbage that were left. 

I went to every major food bank in Ohio. And where we can grow 

some of our own food, we are plowing under lots of it just because 

we don’t have these gleaners networks in place. But just in one 

food bank in our area we collected 769,000 pounds last year, up 

from about 350,000. This year, we want to go over 1 million 

pounds. 

I don’t know who at USDA might take an interest in that at your 

Farm Service Agencies or whatever, but I am telling you in the 

Midwest where unemployment is so high, gleaning those fields is 

another piece of the answer for us. 

Secretary VILSACK. I would say two things. 

First of all, we would be happy to participate in that. 

Secondly, we have our own effort to try to collect over 1 million 

pounds of food to donate through USDA employees to food banks 

across the country since we have offices in virtually every county. 

So, there is a collection process under way. And we have over 450 

people’s gardens, some of which are producing produce which is 

being made available to food banks. I know the one we have at 

USDA’s Washington, D.C., office, our main office, is helping to fund 

the Central Kitchen here in Washington, D.C. 

Ms. KAPTUR. I think that is so important. In our community of 

Toledo, we have over 100 community gardens now. We are 

ratcheting up production. I know USDA is taking an interest in 

these food short areas and these food desert areas. I would encourage you on in those efforts, and thank you so very much for your 

leadership during a critical time for our country. 

Chairman SPRATT. Secretary Vilsack, thank you very much for 

your forthright answers, your excellent information, and not the 
40 

least your equanimity. We appreciate your forbearance as we made 

our way through this. It has been a very helpful hearing, and we 

appreciate your participation. 

For our other witnesses, we will be back as quickly as we can. 

We have three votes, one momentarily and two following that. And 

we will be back just as soon as we can. We are sorry to hold you 

up. 

[Recess.] 

Chairman SPRATT. Mr. Rogers, we appreciate your forbearance 

and patience. You are here today to testify as the pinch hitter, so 

to speak, for the Secretary, who could not be here due to the fact 

that he has been detained in Texas. 

We welcome you here. We will make your full statement part of 

the record so that you can summarize it, but the floor is yours to 

proceed. 

STATEMENT OF MATT ROGERS, SENIOR ADVISOR TO THE 

SECRETARY, U.S. DEPARTMENT OF ENERGY 

Mr. ROGERS. Thank you, Mr. Chairman; and I will try to make 

a very brief statement. 

Chairman Spratt, Ranking Member Ryan, members of the committee, thank you for the opportunity to testify today on the importance and good work of the American Recovery and Reinvestment 

Act. 

As you know, Secretary Chu had to stay in Houston longer than 

expected to help with work on the BP oil spill, and he sends his 

regrets. Hopefully, I will prove an acceptable substitute. 

I also want to thank Secretary Vilsack for his good work. The collaboration between DOE and USDA on biofuels, on ‘‘Feds Feed 

Families,’’ and on a variety of rural development issues has been 

quite exceptional. 

When President Obama took office, we were facing the greatest 

economic crisis since the Great Depression, and today a Council of 

Economic Adviser’s report estimates that between 2.4 and 3.6 million jobs have been created already with the Recovery and Reinvestment Act. This is a start, obviously not enough, but a very important start on rebuilding the economy. 

What the Recovery Act did was it put a floor under an economy 

in free fall. It restarted job reaction, and it laid the foundation for 

long-term economic growth and prosperity. 

The CEA report today also highlights the critical role that the 

Recovery Act is playing in bringing private capital off the sidelines 

and back into high-return, job-creating projects. 

The Recovery Act made a $90 billion down payment on our clean 

energy future with historic investments in energy efficiency, renewable energy, transportation electrification, carbon capture and storage, environmental cleanup, breakthrough innovation, and smarter 

electric grids. We have been working to invest the Department of 

Energy’s share of this funding quite quickly and wisely; and I am 

pleased to report that these projects are creating good jobs today, 

reducing pollution, and laying the foundation for the United States 

to establish global leadership in multiple high-technology, clean energy sectors. 

Mr. Chairman, let me give you three specific examples. 
41 

First, an advanced vehicle industry is beginning to take root in 

America. One year ago, American businesses had just 2 percent of 

the global market for advanced batteries that will power the vehicles of the future. Over the next 5 years, thanks to the Recovery 

Act, American factories are projected to have up to 40 percent of 

the world’s capacity to produce these batteries. In fact, President 

Obama will be on the ground at a ground-breaking for Compact 

Power in Holland, Michigan, tomorrow to highlight this momentum 

and the new jobs that come with it. 

Second, because of the Recovery Act programs that we administer with Treasury, we are on track to double America’s renewable 

energy generation and, perhaps more importantly, our clean energy 

manufacturing capacity by 2012. The Recovery Act is contributing 

to making the United States once again a great place to invest in 

manufacturing. 

Third, we are jump-starting a new home weatherization industry 

in America. After a slow start due to the difficulty of taking a program up by 10 times, the Weatherization Assistance Program is delivering on its promise, improving the energy efficiency of between 

25,000 and 30,000 homes across America every month. 

Mr. Chairman, the Department of Energy has been accelerating 

performance while minimizing risk to taxpayers. We have already 

made selections for 98 percent of the Department’s $32.7 billion in 

contract and grant authority. We have obligated 90 percent of these 

funds, accelerating job creation across the country. 

As our partners ramp up their projects, we reimburse them for 

the projects made and the projects complete. We reimbursed $472 

million in March, $569 million in April, $695 million in May, $747 

million in June, and in July we expect to hit our target run rate 

of between $800 million and $1 billion every month of outlays to 

our recipients. 

We think about this as the zone between 55 miles an hour and 

65 miles an hour. At $800 million a month, we are running at highway speed, creating jobs as rapidly as these projects can. At above 

$1 billion a month, we begin to be worried that perhaps we are 

going too fast and creating too much risk. 

We are also approaching our top rate of job creation. In the first 

quarter of this year, the Department’s investments created or 

saved nearly 30,000 jobs. We expect the final numbers will show 

that we created or saved more than 40,000 jobs in the April to 

June quarter just finished. We expect to create or save 50,000 to 

60,000 jobs for the July to September quarter and to remain at this 

rate of job creation through the spring of 2012. 

Not included in these quarterly numbers reported in to 

Federalreporting.gov are the more than 45,000 additional jobs created through the tax programs and even more jobs created up and 

down the supply chain of the clean energy economy that we are 

building. 

Mr. Chairman, the Recovery Act projects demonstrate how core 

American values—innovation and entrepreneurship, discipline and 

team work, self-determination and competition—are bringing 

America back, allowing this country once again to assert global 

leadership in industries where we, in fact, can produce the best 

products in the world. If we can pass comprehensive energy and cli-
42 

mate legislation this year, we can unlock funds that are trapped on 

the sidelines in the private sector, bringing those funds off the sidelines to create even more jobs and building on the momentum that 

has been created by the Recovery Act. 

Thank you very much for this opportunity to testify today, and 

I am very pleased to take any questions that you may have. 

[The prepared statement of Matt Rogers follows:] 
43 
44 
45 
46 
47 
48 
49 
50 
51 

Chairman SPRATT. In your position of reviewing grants, grant applications, do you get out in the field and actually see and witness 

these projects taking shape? 

Mr. ROGERS. One of the great privileges of this role has been to 

be able to go out across the country and to look at these projects 

as they take shape. 

I was out in Colorado a couple weeks ago with the Vice President 

at UQM, which is an electric drive manufacturer for electric vehi-
52 

cles. And what was powerful about that was to see the workers 

going back to work in a facility, a set of folks who had gotten laid 

off who get to go back to work now to make the most competitive 

products in the world. And the pride with which those workers 

were able to come back because of this kind of Recovery Act funding is the kind of thing that motivates what I do every day. 

Chairman SPRATT. I was in Charlotte, North Carolina, when the 

President came there for that very purpose of unique components 

in lithium batteries. Would you expound a little bit on the technology that’s being developed there? What is the industrial policy 

that underlies your approach to using government funding to build 

private-sector capacity? 

Mr. ROGERS. Let’s take the batteries and transportation electrification awards where North Carolina, and Celgard, has been a 

very important player in that. 

Chairman SPRATT. Let me interrupt you. As I recall, that was a 

dollar-for-dollar match, too. The company put up a dollar for every 

dollar you awarded. 

Mr. ROGERS. That is correct. So, for every dollar that the Department of Energy has under the Recovery Act, we have been matched 

more than dollar for dollar by private-sector funds coming into 

these projects. 

These are a set of projects where the United States across the 

last decade or more missed a product cycle. All of a sudden, we allowed Asia to take over the manufacturing base for advanced technology batteries. 

The great opportunity that we have is to reestablish the linkage 

between innovation, manufacturing, and deployment in a strong 

and vibrant domestic marketplace. Where we do that, we create attractive, high-paying, long-term jobs, and we create the kind of 

growth that we expect in our economy. 

We take batteries as a simple one. We expect these markets to 

be growing in the order of 7 percent every year, as opposed to in 

a world that perhaps is growing 2 to 3 percent a year. So, we have 

a very high-growth marketplace where the United States only had 

2 percent of the world capacity because we had allowed it to go 

overseas. 

The great news is, with U.S. innovation, we can bring that base 

back; and because of the investments we have made under the Recovery Act, the United States has the potential to have 40 percent 

of the world’s market share in batteries by 2012. This kind of investment reestablishes the United States as a major competitor in 

a very high-growth market where our innovations are the best in 

the world. 

Chairman SPRATT. Are there other technologies to which you 

have made this dramatic a commitment? 

Mr. ROGERS. There are a broad range of technologies. The great 

opportunity that I have had a chance to witness in this is the 

power of innovation in the United States to establish global leadership positions. So, we will take a company in North Carolina, Cree, 

that makes a set of light bulbs that take about 5 percent of the energy as the light bulbs in this room. This is a technology that the 

United States invented where a set of the manufacturing went 

across to Asia, where we are now bringing that kind of manufac-
53 

turing capacity back here to the United States. And the great opportunity we have is we have about a dozen different companies 

who are beneficiaries under the Recovery Act who are inventing 

the most efficient and most competitive products in the world in 

that particular area. 

We take a look at the smart grid, another area where the United 

States has a great chance to lead the globe. Itron, which is a company that is based in Washington State and in South Carolina, has 

substantially increased its employment because of our build-out of 

the smart grid activities. We now have 138 different projects in 48 

different States across the country. 

And one of the things that we are doing as part of this, this is 

just a down payment on an investment in U.S. infrastructure that, 

frankly, hasn’t happened in the grid since I was 5 years old; and 

the opportunity that we have by investing in these projects is to 

have U.S. manufacturers like Itron develop the capabilities to serve 

a very rapidly growing U.S. domestic market and, frankly, take positions on a global basis. The United States has the best technology; and if we can combine that with manufacturing in a vibrant domestic market, we are really on our way. And that is what 

the Recovery Act has allowed us to do. 

Chairman SPRATT. Five billion dollars has gone to help low-income families make their homes more efficient, heating efficient 

and cooling efficient. In South Carolina, my home State, I understand the allocation is $59 million to scale up existing efforts. Will 

that money be regranted to State-wide beneficiaries? 

Mr. ROGERS. That is correct. So, the State receives the funds, 

and then we actually deploy it through a network of 916 community action agencies across the country. So, in South Carolina there 

is a portfolio of community action agencies in the local community 

who understand where the local centers of poverty are, where the 

elderly are most in need. The opportunity that the weatherization 

program gives us is the ability to create jobs, to make homes more 

livable, to put money back in the pockets of hardworking homeowners, and then to make sure that we actually reduce pollution 

in our communities. 

This weatherization program is one of the great success stories 

of the Recovery Act, now delivering again between 25,000 and 

30,000 homes every month of weatherization assistance across the 

country. 

Chairman SPRATT. Thank you very much for your testimony; and 

thank you, too, again for your patience. 

Mr. Hensarling. 

Mr. HENSARLING. Thank you, Mr. Chairman. 

Mr. Rogers, I didn’t quite catch it in your testimony, but is it 

roughly $30 billion that your Department has under the stimulus 

bill? 

Mr. ROGERS. That is correct. We have a total of appropriations 

of $36.7 billion, of which $32.7 is contract and grant authority. 

Mr. HENSARLING. And then I think you said that the Department 

has outlaid 16 percent of that; is that correct? 

Mr. ROGERS. The Department has outlaid cumulatively 16 per- cent of that. We are outlaying it now, as of June, at a rate of $800 

million a month. 
54 

Mr. HENSARLING. Well, I am certainly not an adherent to 

Keynesian economics, but for those who are, doesn’t it have something to do with the timing and the essentially shovel-ready nature 

of the projects? And so, I am just curious, when you talk about all 

the benefits, it doesn’t seem to comport with Keynesian theory that 

so little of this money has actually gone out the door. 

Mr. ROGERS. Well, again, I think that Secretary Vilsack talked 

about this at some level. Our primary task is to make sure that 

the funds move out the door to projects that create jobs and have 

a long-term economic, positive economic impact. If you look at the 

infrastructure investments, the primary event is the event of obligating those funds, and we have obligated 90 percent of those 

funds. We have actually selected 98 percent of the projects. 

When the funds are obligated, people—you start ordering capital 

equipment, and people get hired. We then reimburse the recipients 

after they hit major milestones or after they complete the project. 

And so what you see then is the outlay rate as a lagging indicator. 

Mr. HENSARLING. Let me ask about these milestones. As I understand it, the bulk of this money appears to be going to the Office 

of Energy Efficiency and Renewable Energy, $16 billion, I think 

that is kind of the centerpiece of your green energy initiative, is 

that correct? 

Mr. ROGERS. The Office of Energy Efficiency and Renewable Energy did administer about $16 billion of the funds, which then go 

out to a portfolio of private companies. 

Mr. HENSARLING. Well, let me ask you this question and you can 

tell me whether or not they are behind the power curve, but if you 

go to the Web site of recovery.gov, under this particular program, 

percent of funds obligated, it says no data available; number of 

homes weatherized, no data available; estimated energy savings 

from projects, no data available; schedules and milestones to be determined. I think this information was accurate as of the last 24 

or 48 hours, unless you can disabuse me of the notion. 

Mr. ROGERS. I will have to go look at recovery.gov. If you go to 

our Web site, you can see exactly the answers to each of those 

questions that are posted on our Web site every day. 

Mr. HENSARLING. Okay, well, perhaps, one part of the Administration might do a little better of communicating with the other 

part of the Administration. 

In your mind, and I am curious about how your department 

thinks about this, but when you are talking about all these great 

things that you are doing with this stimulus money, where do you 

think the stimulus money is coming from? 

Mr. ROGERS. The stimulus money comes from America’s taxpayers, and we take our stewardship of the taxpayers’ dollars very, 

very seriously. What we are working to do is to lay a foundation 

for America’s economic future by investing in a portfolio of projects 

and technologies that hold the potential for long-term economic 

growth and job creation. 

I think that is what we have been able to do under the Recovery 

Act, and I think the American taxpayer gets a great return on this 

investment. 

Mr. HENSARLING. The American taxpayer is drowning in debt. 

We are looking at the single largest deficits we have ever seen in 
55 

our Nation’s history. We just hit a trillion dollar deficit milestone. 

We have got trillion dollar deficits as far as the eye can see. Our 

gross debt to GDP is now approaching the danger zone of 90 percent. 

Greece is at 110 percent. They are having to sell sovereign territory to pay for their debt. 

So, listen, I understand you take pride in your work. I have no 

doubt that good things can be done with what seemingly looks like 

free money, but sooner or later, you have got to live within a budget. Unfortunately, we have passed no budget. We appear not to be 

on track to pass any budget, first time in the history of the House, 

as I understand it, that we would not have passed a budget. 

But I have got to tell you, at least in the folks I talk to in my 

neck of the woods in East Alice and rural east Texas, there is a 

huge concern about this wave of debt, and it is one of the reasons— 

again, it is not a lack of capital we are seeing as much as it is a 

lack of confidence. 

You, yourself, talked about funds on the sideline. By most estimates, there is $2 trillion of capital sitting on the sidelines that 

would come into the economy if there was any confidence in the 

policies of the Administration. I just hope at some time that people 

will recalibrate—I know we continue to have debates on who to 

blame here, whether it be Bush, Ford, Nixon, Coolidge, Harding, 

Grant, Lincoln, I don’t know who—but I just have a hard time seeing, by any discernible measure, that this thing is working. 

I don’t even know how you come up with your jobs-saved figure. 

What I know is that since this bill has passed, we are still essentially mired in almost double-digit unemployment, the highest level 

in a generation, and all I see and most of my constituents see is 

a wave of debt. Now, you know, you can borrow 43 cents on the 

dollar from mainly the Chinese and send the bill to our children 

and grandchildren; I am sure you can do a few good things with 

it now. 

But I certainly don’t think it is worth the cost, and I think that 

entrepreneurs, small businesses, investors are living in fear of this 

debt, as they well should, and I know you are not the decisionmaker here, but somebody in this administration had better put 

forth a plan to deal with this long-term structural debt and do it 

quickly, or all this capital will continue to sit on the sidelines, and 

whatever efforts you are doing at the Department of Energy will 

be all for naught. 

And one of the things that was leading to uncertainty is the increased rhetoric on your cap-and-trade, which I believe, if I recall 

right, it has been a while, but at least the House-passed version, 

I think had about an $800 billion price tag to the economy. I think 

that is the CBO number. Maybe it is $600 billion. Maybe it is $800 

billion. 

But how that is going to create jobs at a time when we have historic unemployment is beyond me. 

Anyway, I know we have another panel. I will yield back, Mr. 

Chairman. 

Chairman SPRATT. Mr. Connolly. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 
56 

Mr. Rogers, not to belabor an issue, but—and I know you don’t 

purport necessarily to be an expert on how the budget works, but 

is it your understanding, as it is mine, that the unpaid Bush tax 

cuts cost about $700 billion roughly? Is that your understanding? 

Mr. ROGERS. Again, I am not a good budget economist. I am trying to drive a whole set of energy projects through the system, so 

I will regrettably have to pass. 

Mr. CONNOLLY. Well, let’s stipulate for the record, that is about 

right. And is it your impression, just as a layman, watching the 

economic record of previous Congresses controlled by the other 

party and the Bush administration, that that $700 billion investment, which was promised to lift all boats in a rising tide and create unprecedented prosperity and numerous jobs, did it work? 

Mr. ROGERS. Across the last decade, in the markets that I know 

the best, we have had two fundamental challenges. We confused arbitrage for innovation, and we lost track of the core innovative spirit of the United States of America. And we ended up allowing a 

whole series of industries to move overseas. We allowed a whole set 

of renewable industries to move to Europe, allowed batteries and 

transportation to move to Asia, because we forgot the core basis 

around manufacturing. 

So, innovation and manufacturing, if we can keep our focus 

there, as opposed to where it has been for the last decade, we will 

be much better off. 

Mr. CONNOLLY. And to the point you are making, would it surprise you then to learn that if you measured job growth with those 

promised prosperity from those tax cuts that, in fact, the net job 

growth from March of 2001 to March of 2009 was a negative 

430,000? Would that surprise you? 

Mr. ROGERS. That would not surprise me. 

Mr. CONNOLLY. And what has been the net negative job situation 

growth or negative growth since we passed the recovery bill? 

Mr. ROGERS. Well, since the—if you take a look at this year, we 

have seen positive job growth in 6 out of the last 7 months. And 

I think the important part to some of the earlier dialogue is, certainly in the energy projects that I deal with, substantially all the 

job growth that we are seeing is private-sector jobs. 

What we are doing is, every time the Federal Government is putting out a dollar, we are being matched more than 1 for 1 by private dollars, and these projects are ending up creating a foundation 

for long-term competitiveness that I think we can all be proud of. 

Mr. CONNOLLY. Mr. Chairman, can we put up the graph on economic expansion in the third quarter that shows current and projected GDP growth? I don’t know what chart number that is—yes. 
57 

Now, Mr. Rogers, if I am looking at GDP and, again, the promise 

of those who want to criticize the Recovery Act, who were great 

champions of the Bush tax cuts that weren’t paid for and that created huge holes in the deficit that they now say they decry, produced that kind of economic record in terms of GDP growth. Is that 

your understanding? 

Mr. ROGERS. Yes, if you look at, again, at the Recovery Act, what 

makes me excited is to see the Recovery Act again delivering 3 million jobs already, clearly on the way to the 3 to 4 million that CEA 

originally projected and contributing to a turnaround in GDP 

growth. If the United States can grow at that kind of rate with the 

kind of innovation that we see, all of a sudden, our ability to create 

wealth for all Americans grows dramatically. 

Mr. CONNOLLY. And some seem to have trouble with the idea of, 

you know, that there is spending and then there are investments, 

investments involved with up-front expenditure, but they have a 

return on them. 

I was intrigued to hear you talk about the Advanced Battery. 

You said, if I heard you correctly, that we were reduced to like 2 

percent of the world market. 

Mr. ROGERS. Two percent. 

Mr. CONNOLLY. Two percent, and you said that, by 2012, because 

of the investments we are making through the recovery, we are on 

track to get 40 percent by 2012; is that correct? 

Mr. ROGERS. We will have the capacity to deliver 40 percent. 

Mr. CONNOLLY. And could you just give us real quickly, what was 

the investment? And what is the—any kind of projected economic 

value to that 40 percent by 2012? 

Mr. ROGERS. So we invested $2.4 billion of taxpayer funds in 

these projects. We were matched more than dollar-for-dollar by the 

private sector to create a total of more than $4.8 billion of projects. 

These projects then are growing at, again, the expected rate for 
58 

these markets is to grow at 7 percent a year, so we get a set of 

jobs today, and we get more jobs tomorrow, and we get more jobs 

the year after that. 

It is those kinds of investments that I think, a decade from now, 

as we look back at the Recovery Act, that we will say, we saw an 

inflection point in the way the United States uses energy, and we 

saw an inflection point in the way the U.S. thought about infrastructure and innovation. 

Mr. CONNOLLY. Mr. Chairman, my time is up, but I do think that 

this concept of a return on investment is well worth exploring because sometimes, in our debate here, to make political points, we 

descend into sort of a mindless view about all expenditures being 

the same. Investments are not the same, and many of them have 

incredible returns on them that make them very worthwhile and 

create jobs and expand the U.S. economy. 

Thank you, I yield back. 

Mr. ROGERS. Mr. Djou. 

Mr. DJOU. Thank you, Mr. Chairman. 

Mr. Rogers, my questioning also is similar to the Secretary of Agriculture’s, earlier today and that is, I want to see some clear 

metrics. You are spending a lot of money. You are saying it is helping. I think this is all good. We all, I think, have the same objective, Republicans and Democrats. We want to see the American 

economy turned around. We want to see Americans put back to 

work. 

The amount of money being spent by the stimulus, by the Department of Energy, can you give me some clear, tangible metrics 

in terms of when and how much you are going to see—what rate, 

are we going to see the unemployment rate go down? When are we 

going to see it? 

And I will leave it open-ended to the Administration to give me 

a clear benchmark to gauge success. 

Mr. ROGERS. So, I spent 25 years in the private sector before I 

took on this role a year and a half ago. When I came in—— 

Mr. DJOU. I know, McKinsey is very well-known for that, and I 

will leave McKinsey to do the benchmarking here. 

Mr. ROGERS. When I came in, the mantra that we established for 

the Department was accountability every day. This is about accountability and making sure that we move these funds out in a 

timely way with great stewardship of the taxpayers’ resources. We 

took the funding that we received from the Federal Government 

and turned that into 144 different projects, each of which have a 

very clear set of milestones and the tasks that we have. We now 

have 5,000 individual recipients. 

For each recipient we have a very clear set of milestones. We 

think about them as earned-value milestones, that you get paid 

when you hit your earned-value milestones, and we have to make 

sure that we are hitting those marks on time, on budget. 

The very good news is that we continue to hit all of our marks 

on time, on budget, and what we are seeing is a rate of innovation 

that is faster, I think, than we would have expected. 

If we take a look at your State of Hawaii, where substantially 

all of the power is generated by fossil fuel, by the import of crude 
59 

oil, so you have among the highest energy costs in the whole country. 

We started yesterday, the first wind Kahuku wind project, which 

is funded by a loan from the Department of Energy. It is a great 

project to reduce the amount of oil required in Hawaii. We are 

doing the same thing in biofuels in Hawaii, where there are some 

great opportunities both for algae biofuels as well as for cane 

biofuels. And the ability to take a State like Hawaii and significantly reduce its exposure to the imports of crude oil, enormously 

important for the health of the economy, not to mention the immediate and direct jobs that you are receiving under the Recovery Act. 

Mr. DJOU. Well, Mr. Rogers, my follow-up question, then, is do 

you have enough? Do you need more? Is what we have already allocated and appropriated to the Department of Energy sufficient? Are 

we going to hit all of these milestones? 

Mr. ROGERS. So, we continue to hit all the milestones on time, 

on budget. What we have faced is the fact that, for every dollar we 

had, we were oversubscribed 5-1. So, every time we made an 

award, I got to turn down 80 percent of the people while the Secretary came out and made awards to the 20 percent who were successful. 

You take a look at programs like the 48C tax credits for clean 

energy manufacturing, $2.3 billion; 181 different projects across the 

country, terrific stories, and yet we were oversubscribed in that 

case by 3 to 5 to 1. 

The President has asked for another $5 billion to reestablish U.S. 

leadership in industry after industry. And those kinds of funds are 

among the highest return funds that Congress can provide. 

Mr. DJOU. Now, okay, my final question, do any of these projects, 

all of these billions of dollars that were spent, do you believe that 

it has any impact on the unemployment rate? And, if it does, is it 

a positive effect on the unemployment rate? And if it does have a 

positive effect on the unemployment rate, when will we start seeing 

the unemployment rate go down? 

Mr. ROGERS. If you look across the portfolio of projects that we 

have funded under the Department of Energy and with our colleagues at Treasury in the energy arena, these are having a clear 

and demonstrable impact on employment in these sectors. You are 

seeing employment in clean energy technologies grow quite rapidly, 

and we are very proud of the kinds of jobs we have created, both 

in deployment but also in the manufacturing of the technologies 

further up the supply chain. And those kinds of pieces are all 

pieces of the puzzle that are contributing to the 3 to 4 million jobs 

that CEA is expecting, the 3 million jobs that we believe have already been created, according to the Council of Economic Advisers, 

under the Recovery Act. 

So we are seeing the kind of job creation—clearly, in a world 

where we lost 89 million jobs in the course of the great recession, 

3 million doesn’t solve the problem. But what we are doing is we 

are turning the corner. And what you are seeing is the private 

markets now beginning to go take up the pace. The engine is turning over, and we are moving in the right direction. 

Mr. DJOU. So, will we see the unemployment rate go down, and 

if so, when, because of the stimulus package? 
60 

Mr. ROGERS. What I can see in the energy arena is the employment going up consistently. And I think you can ask Christy Romer 

as to exactly how that translates into the national accounts. But 

from a Recovery Act standpoint, it is unquestionable that the Recovery Act is working and is creating jobs, even, and beginning to 

turn the GDP growth around in a way that is exactly what we 

were looking for. 

Mr. DJOU. Thank you. 

Thank you, Mr. Chairman. 

Chairman SPRATT. Ms. Kaptur. 

Ms. KAPTUR. Thank you, Mr. Chairman. 

And welcome, Mr. Rogers. Thank you so much for coming today. 

I can tell you there couldn’t be any department more important 

than yours to the region that I represent in northern Ohio, the 

southern rim of Lake Erie from Toledo to Cleveland, where energy 

rates are sky high. It is the biggest job killer we have. 

We have worked hard over the last quarter century to spawn a 

solar industry. We now feel we have—with companies like First 

Solar. We feel we probably have 6,000 jobs related to solar manufacturing that pivots off of our very well-known glass industry in 

our region, and we would like five times that many jobs overnight 

in our area. 

The Obama Administration inherited a country in shambles and 

a Department of Energy stuck in the 20th century, and I want to 

thank you for spending part of your life in helping America move 

into this new century and new opportunity. 

The other day, there was a story—it was reported in our local 

paper—that over in Switzerland, a pilot had actually flown a solar 

plane for 24 hours, and I am glad a Swiss pilot did that. I wish 

it had been an American pilot here on our soil, but to remain aloft 

for 24 hours with the batteries charged by the sun was, it kind of 

reminded me of the modern day Wright brothers, an analogy for 

that. 

So, my question of you really is, to expand on your Department’s 

perspective on job creation in this new emerging energy sector, 

what more can you tell us about that, the chief engines of growth? 

How do I make sure that a region like mine, which is suffering 

from such high unemployment, accesses all the important programs that we can propel innovation that produces jobs, as we are 

beginning to do in the solar sector? 

Are there ways for the Department to move funding out more 

quickly? I don’t know how much of the recovery dollars are actually 

committed at this point from the Department, but I think it is 

probably fair to say that my region doesn’t apply as aggressively 

as places that have MIT and Stanford and, you know, sort of the 

typical places. How can we better connect to you? 

Mr. ROGERS. I think Ohio provides a wonderful microcosm of how 

the energy story is beginning to play out. One of the things that 

we have seen over the last 18 months is how the United States can 

really lead in a global clean energy economy. You take a company 

like First Solar, which drives a set of fundamental innovations in 

thin-film solar panels and has among the most competitive products in the world. Their challenge is, how do you make sure that 

it is competitive to manufacture in the United States? And what 
61 

they did was they applied for a 48C Clean Energy Manufacturing 

Tax Credit from the U.S. Treasury; were awarded that because of 

their level of innovation, and then their customers are benefiting 

from the 1603 program, the tax grants for renewable energy deployment. 

Over the last decade, we forgot that we actually have to have a 

vibrant domestic demand market. We have to actually invest in 

manufacturing. We thought that maybe we could just innovate and 

then arbitrage, and that was, kind of, you know, that was all that 

it really took to grow an economy. 

And I think what First Solar demonstrates, what Cardinal Fastener in Ohio demonstrates, is that if we drive the innovation 

through manufacturing and through a vibrant domestic demand 

market, all of a sudden, we can grow entire industries that not only 

can compete in the United States but can compete all the way 

around the world. I mean, First Solar is very competitive in the 

Middle East, in Europe. It is a terrific story. And there are multiple companies like that in Ohio and around the country. 

If you look at our Recovery Act funding, again, 98 percent of our 

grants are done. We moved that money out the door very, very 

quickly. We still have a few—some money available still for loans 

and have a very attractive loan pipeline as we move forward. 

But as we look forward, I think the key is to establish the rules 

of the road so that we have long-term incentives for manufacturing, 

that we have long-term incentives for renewable energy deployment in this country and that we continue marrying innovation 

with it. If you look at some of the great institutions in Ohio, if you 

look, Ohio State was one of the recipients of one of our science 

awards. And the ability to start all the way back at the basic 

science and then move all the way through to new products, manufacturing and out into the marketplace, that is the story of growth 

that we are committed to in the Department of Energy. And that 

is the story of growth that you can see in each of the projects that 

we have been able to fund. 

Ms. KAPTUR. I would cordially invite you to the only renewable 

energy campus in America at the University of Toledo, up in our 

area, and if you ever have the time, if you are flying over that part 

of the country, Ohio, we would love to welcome you, introduce you 

to some of our companies. And perhaps you could talk about the 

Department’s perspective, what you are trying to encourage, to 

make sure that we are tooling up in every possible way, because 

we do view ourselves as leaders in this new energy world. So, I 

would cordially extend that invitation to you and your colleagues. 

Mr. ROGERS. Thank you. 

Chairman SPRATT. One last question from me. 

Once this technology has been developed and brought to maturity 

and demonstrated, how do we assure ourselves that it won’t then 

be outsourced overseas in some manufacturing country like China? 

Mr. ROGERS. I think there are two answers to that question. This 

notion of making sure that the innovations that we have stay here 

and really build industries here in the United States is enormously 

important to the Department, to the Secretary, to the President. 

If you look at the most exciting projects that we are funding 

under the Advanced Research Projects Agency for Energy, ARPA- 
62 

E, which is, if you will, for energy, the equivalent of what DARPA 

for the Defense Department, one of the things that we are requiring is that when those projects, when that technology reaches maturity, that they build their manufacturing here in the United 

States. Because what we don’t want to be doing is funding, all of 

a sudden, a set of bench research, and then when it goes to manufacturing, all of a sudden we are moving abroad. 

What we are observing though, and the thing that gives me the 

greatest degree of confidence, is the rate of innovation is so high, 

that the United States can be very, very competitive. So, we funded, on Monday, a set of projects around power conversion devices, 

right; these are things that are transformers, if you think about it. 

The United States owned the global market for transformers all 

the way from the end of World War II into the middle of the 1970s, 

and then we gave it up. We lost it to Europe, and then we lost it 

to Asia. The innovations that U.S. companies are now driving in 

that area are between 10 and 100 times more efficient than the 

current products on the market today. 

If I drive a performance improvement of tenfold versus what the 

Chinese competitor has, frankly, I can manufacture here in the 

United States because there is no labor cost difference that can 

make up for a tenfold innovation performance, improvement difference. So, that is the opportunity that we have, is to take that 

innovation, and then we have to be thoughtful about our manufacturing incentives here in the United States. 

If you go around the world, this is a global competition for manufacturing centers. And what we have observed under the Recovery 

Act is we have seen investors from all over the world bring their 

manufacturing base here to the United States. In renewable energy 

alone, we have seen $10 billion of foreign direct investment into the 

United States, where companies that have the choice to build anywhere in the world choose to build their manufacturing in the 

United States. 

Nissan is going to, for example, begin building their Leaf technology, their new electric car, in Smyrna, Tennessee. Why are they 

building in it in Smyrna, Tennessee? Because we had the Advanced 

Technology Vehicles Manufacturing Program here that made it attractive to manufacture in the United States, one of the most competitive cars in the world. 

The great opportunity that we have is to make the United States 

a source of innovation and manufacturing excellence because we 

do, in fact, have a vibrant local demand market. But I do think it 

is very, very important to think about that linkage and to work the 

entire supply chain. That is what we have had the opportunity to 

do under the Recovery Act. 

I think we can learn some lessons from how the Recovery Act has 

worked as we think about policy on a long-term basis. 

Chairman SPRATT. Mr. Hensarling. 

Ms. Kaptur. 

Ms. KAPTUR. Mr. Chairman, I had a follow-up question, if the 

gentleman would yield, on what you had asked. I had a follow-up 

question. Would that be all right? 
63 

Chairman SPRATT. Yes, if you confine it to that, I would recognize you for that purpose, but we do have another panel waiting 

to testify. 

Ms. KAPTUR. All right. I wanted to follow on your question with 

a concern and ask Mr. Rogers what his thoughts are on this. I 

talked about the company First Solar, and their successes are very 

well-known, but they recently have worked with the government of 

China and will be building a facility there. And one of my questions 

is, how does one, when one manufactures in another country, especially a country like China, how does one assure that no interest 

there would actually assume your intellectual property? 

How does a U.S. company function in an environment like China 

and then not have the chief counterfeiter of the world, industries 

in China, steal our technology and duplicate that? How does the 

company protect itself? 

Mr. ROGERS. This is a very important question. It is one that 

Secretary Locke is spending a good deal of time on in Commerce, 

making sure that we think about protecting U.S. intellectual property on a global basis. My observation, again from my time in the 

private sector, was that many companies, a company like General 

Electric, will do some manufacturing in China but won’t actually 

take another block of manufacturing into China where their most 

important intellectual property resides. 

The reason for that is, it is very, very hard to protect trade secrets, because innovation occurs at two different levels. It occurs in 

the product, but it also occurs in the manufacturing process. 

If you move that to another country, it is very, very easy. I mean, 

you go back, Thomas Jefferson was actually very, very good at taking technology from England and bringing it to the United States. 

So, it is very easy to take that kind of process technology and product technology when you manufacture in another place. 

And I think, again, many companies are very, very good at managing that. It is something that Commerce takes very, very seriously. But it is one of the advantages of making the United States 

an attractive place to invest in innovation and in manufacturing. 

If we create the kinds of platforms from which we can export to 

a global marketplace, it is much easier to protect your intellectual 

property here than it is anywhere else in the world. 

Ms. KAPTUR. I want to thank also Congressman Hensarling for 

allowing me that question. I truly appreciate it. 

Chairman SPRATT. Mr. Rogers, thank you very much for your responsive answers, your excellent presentation. We very much appreciate it, and we appreciate, once again, your patience today. 

Mr. ROGERS. Thank you. 

Chairman SPRATT. Thank you very much indeed. 

Now we have a final panel, Josh Bivens with the Economic Policy 

Institute; and Veronique de Rugy of the Mercatus Center of George 

Mason University. 
64 

STATEMENTS OF VERONIQUE DE RUGY, PH.D., SENIOR RESEARCH FELLOW, MERCATUS CENTER, GEORGE MASON UNIVERSITY; AND JOSH BIVENS, PH.D., MACROECONOMIST, 

ECONOMIC POLICY INSTITUTE 

Chairman SPRATT. Ms. de Rugy, we will allow you to go first if 

that is your preference. 

STATEMENT OF VERONIQUE DE RUGY, PH.D. 

Ms. DE RUGY. Good afternoon, Chairman Spratt, Ranking Member Ryan and member of the committee. 

My name is Veronique de Rugy. I am a senior research fellow at 

the Mercatus Center at George Mason University where I study 

tax and fiscal policy, the Federal budget process, and the implication of government spending for economic growth. 

It is an honor to be here today to discuss what stimulus means 

for the long-term economic health of our country. I would like to 

focus my testimony on two main areas. First, I would like to discuss why government spending to stimulate the economy does not 

work. Second, I will summarize some preliminary findings from my 

quarterly report on stimulus spending data that will further illustrate why stimulus spending doesn’t work. 

When President Obama signed into law the American Recovery and Reinvestment Act at a cost of $787 billion, he promised that 

it would create or save 3.5 million jobs over the next 2 years, 90 

percent of these jobs in the private sector. The Administration also 

claimed that, without the Recovery Act, the unemployment rate 

would reach 8.8 percent, while with the Act, it would begin to decline. 

Since then, the U.S. economy has shed another 2.5 million jobs 

and the unemployment rate has climbed to 9.5 percent. That is 

higher than the White House predicted it would have reached even 

without the stimulus. 

The Administration and its team can repeat as much as they 

want that the stimulus is working and has created 3 million jobs. 

It won’t make it true. 

The actual data, the actual data, tells a very different story. The 

American people want to know why the economy is still weak, why 

they don’t have jobs. After all, the Administration promised that, 

if only the government spent money, it would create much more 

than originally invested in economic growth. Why spend the money 

otherwise, right? 

This increasing gross domestic product is what economists call 

the multiplier effect, but academics disagree. Harvard professor Dr. 

Robert Barro and Charles Redlick explain the historical value of 

the multiplier in the United States. Their work shows that in the 

best-case scenario, a dollar of government spending produces much 

less than a dollar in economic growth, between 40 cents and 70 

cents. Imagine if that were the return on our private sector’s investment; America would not be the economic engine of the world. 

Moreover, Barro also calculates the impact on the economy if the 

government funds this spending with taxes. He found, based, 

again, on actual data, that if the government spends a dollar and 

raises taxes to pay for it, the economy will shrink by $1.10. In 

other words, greater spending financed by taxes hurts the economy. 
65 

The stimulus isn’t working, because it is based on faulty economic theory. 

Now, let me tell you what I found looking at actual recovery 

data. Using the tens of thousands of stimulus recipients reports 

published on recovery.gov each quarter and economic and political 

data from the Bureau of Labor Statistics, the Census Bureau, 

GovTrack.us and others, my preliminary findings are the following: 

First, the total number of jobs claimed from the stimulus is 

682,000, not 3 million. Four out of five jobs were created in the 

public sector, not the private sector, as promised. The average cost 

of each job created or saved is $282,000. That is a lot of money. 

Now, you would expect that the government would invest relatively more money in districts that have the highest unemployment rate and less money in districts with lower unemployment 

rates, but it does not appear to be the case. The data shows no correlation between how the money is spent and unemployment rates. 

The understandable temptation to take action in times of recession should not lead lawmakers to take counterproductive measures. The data shows the stimulus has not worked. The American 

people know the stimulus has not worked. 

But if stimulus funds are about investment, is there anything 

policymakers can do to help the economy? Yes, there is. The first 

step in real job creation is for government to acknowledge its limitations. Private businesses are the true drivers of job creation. 

They flourish when they have a reasonable expectation that the 

government will be noninvasive, nonburdensome and fiscally responsible. By creating a stable economic environment, which isn’t 

the case right now, the Federal Government would do more to aid 

job creation than any stimulus package could. 

I am happy to answer any questions you may have. Thank you. 

[The prepared statement of Ms. de Rugy follows:] 

PREPARED STATEMENT OF VERONIQUE DE RUGY, SENIOR RESEARCH FELLOW, 

MERCATUS CENTER, GEORGE MASON UNIVERSITY

Good afternoon Chairman Spratt, Ranking Member Ryan, and members of the 

committee. My name is Veronique de Rugy, I am a senior research fellow at the 

Mercatus Center at George Mason University where I study tax and fiscal policy, 

the federal budget process, and the implications of government spending for economic growth. 

Since the Great Recession began in December 2007, employment has shrunk by 

7.5 million jobs,1 long-term unemployment is higher now than in any previous recession,2 and real GDP has plummeted to 2006 levels.3 The understandable temptation 

to take action in time of recession however should not lead lawmakers to take counterproductive actions. On February 13th 2009, President Obama signed into law the 

American Recovery and Reinvestment Act (ARRA) at a cost of $787 billion with the 

promise that it would ‘‘create or save’’ 3.5 million jobs over the next two years, mostly in the private sector.4 What’s more, based on a study by Christina Romer, the 

Chairman of the Council of Economic Advisors, and Jared Bernstein, the administration claimed that without the Recovery Act unemployment rate would reach 8.8 

percent while with the act it would immediately start declining (see figure 1).5
66 

FIGURE 1: UNEMPLOYMENT RATE WITH AND WITHOUT THE RECOVERY PLAN

Since the president signed the stimulus package into law, the U.S. economy has 

shed another 2.5 million jobs and the unemployment rate has climbed to 9.7 percent 

from 7 percent, higher than the White House predicted it would have reached even 

without the stimulus. 

While the stimulus may have appeared to have been a wise investment when it 

was made, it was really no wiser than a junk-rated mortgage-backed security: 

though the stimulus claimed a good rate of return, in reality it appears to have lost 

money by destroying growth. At best, it shifted jobs from privately funded to publicly funded ones. 

The first step in real job creation is government to acknowledge its limitations. 

Private businesses are the true drivers of job creation; they flourish when they have 

a reasonable expectation that the government will be noninvasive, non-burdensome, 

and fiscally responsible. By creating such an environment, the federal government 

would do more to aid job creation than any stimulus package could. 

PROMISES, PROMISES

The stimulus bill draws on the views of economist John Maynard Keynes. In 

Keynesian thought, a fall in economic demand causes a fall in spending. Since one 

person’s spending is someone else’s income, a fall in demand makes a nation poorer. 

When that poorer nation prudently cuts back on spending, it sets off yet another 

wave of falling income. So a big shock to consumer spending or business confidence 

sets off waves of job losses and layoffs. 

Can anything stop this cycle? Keynesians say yes: government spending can take 

the place of private spending during a crisis. If the government increases its own 

spending, it will create new employment. These new workers should consume more, 

and businesses should then buy more machines and equipment to meet the government’s and the revitalized public’s demands. 

This increase in gross domestic product is what economists call the multiplier effect. It means that one dollar of government spending will end up creating more 

than a dollar of new national income. 

THE THEORY OF MULTIPLIERS

It is difficult to get solid evidence on the economy’s response to changes in government spending. Direct reporting measures—such as those employed by Recovery.gov, the U.S. government’s website for tracking stimulus spending—capture the 

direct and observable effects of government spending on economic activity. These 

measures can be helpful, but they fail to account for the indirect, less-easily observable effects of government spending. To capture the big-picture effect of government 

spending, economists turn to the spending multiplier. 

As explained above, the multiplier effect or spending multiplier refers to the idea 

that an initial amount of government spending leads to a change in the activity of 

the larger economy. In other words, an initial change in the total demand for goods 

and services (what economists term aggregate demand) causes a change in total output for the economy that is a multiple of the initial change. For example, if the government spends one dollar and, as a result of this spending, the economy (as ex-
67 

pressed by the Gross Domestic Product, or GDP) grows by $2, the spending multiplier is 2. If the economy grows by $1.50, the spending multiplier is 1.5. However, 

if the economy only grows by 50 cents (a loss from the original $1 spent), the spending multiplier is 0.5. 

THE SPENDING MULTIPLIER DEBATES

The theory sounds pat, but economists have been debating aspects of government 

spending multipliers for years. One crucial debate centers on how to measure a multiplier’s value. Some economists find spending multipliers that are smaller than 1.6

Other economists, however, assert that spending multipliers are much larger.7 Still 

others argue that multipliers can’t even be credibly measured.8

Another debate surrounds the implications of spending multipliers. For Keynesians, consumption is the ultimate goal of government spending, and even with a 

multiplier smaller than 1, spending can still increase GDP. Thus Keynesians argue 

that, during a recession, when people tend to save their money rather than investing it in the private market,9 a small increase in GDP is better than nothing. 

Simple Keynesian macroeconomics assumes that in times of high unemployment, 

the government is better than the private market at guiding idle resources to create 

economic output. Government spending puts unemployed labor and capital to work 

at zero social cost.10 When the government puts this previously unemployed labor 

and capital to work, the mobilized labor and capital produce added goods and services that private sector was unable to create. 

A New Classical understanding of the multiplier starts with the idea that government spending has some social cost (i.e. a rise in government spending requires a 

fall in other parts of GDP, such as consumption and investment). As such, the value 

of the public projects (bridge construction or roads) needs to justify that social cost. 

This view doesn’t assume that an increase in consumption at any cost is a good 

thing: if the multiplier’s value is less than 1, then government spending has crowded out the private investment and spending that would have otherwise happened. 

Even government spending where the multiplier is higher than 1 could still be 

a poor use of taxpayer dollars. For instance, though $1 in government spending 

could lead to a GDP boost of $1.50 in the short run, it could also make it harder 

to solve the longer-term debt problem. 

THE DATA OF DEFENSE

So what is the historical value of the multiplier in the United States? A new study 

by Harvard professor Dr. Robert Barro and Charles Redlick answer this question 

in details by using defense spending as a proxy for overall government spending.11

FIGURE 2: REAL GOVERNMENT SPENDING AND REAL GDP

First, the economists explain that in order to understand the effects of government spending on the economy, one must know how much of the economic change 
68 

is due to government spending and how much is due to other factors. Unfortunately, 

it is impossible to figure this out with general government spending, since the level 

of government spending often expands and contracts along with the economy.12

When the economy grows, income and tax receipts increase. This, in turn, leads to 

increased government spending (see figure 2). 

However, they argue that there is a useful, much more isolated proxy for overall 

government spending: defense spending. Using defense spending as a proxy has several advantages.13 First, government does not set defense spending levels based on 

the state of the economy. Non-economic factors drive defense spending. Second, 

changes in defense spending are very large and include sharply positive and negative values (see figure 3). Finally, the historical data on defense spending covers periods of high unemployment. Thus this data set should reveal whether government 

spending creates increased economic growth in a slack economy. 

FIGURE 3: CHANGES IN DEFENSE AND NON-DEFENSE GOVERNMENT PURCHASES, 

1914–2006 (EXPRESSED AS RATIOS TO THE PREVIOUS YEAR’S GDP)

Moreover, studying the effects of defense spending on the economy gives the bestcase scenario of the spending-multiplier effect of government spending on the economy because defense spending leads to economic growth in ways that general government spending does not. For example, in times of war, the government mandates 

the increased production of particular goods, and the scarcity of domestic labor due 

to military enlistment and resources also forces economic resources to go to innovative and productive uses that did not exist before the war.14

Barro and Redlick’s research estimates that the multiplier for changes in defense 

spending that people think will be temporary—spending for the Iraq war, for example—is between 0.4 and 0.5 at the time of the spending and between 0.6 and 0.7 

over two years. If the change in defense spending becomes permanent, then these 

multipliers increase by 0.1 to 0.2.15 Over time, this is a maximum multiplier of 0.9. 

Thus even in the government’s best-case spending scenario, all of the estimated 

multipliers are significantly less than one. This means greater government spending 

crowds out other components of GDP, particularly investment. 
69 

In addition, they calculate the impact on the economy if the government funds the 

spending with taxes. They find that the tax multiplier—the effect on GDP of an increase in taxes—is—1.1. This means that if the government raises taxes by $1, the 

economy will shrink by $1.1. When this tax multiplier is combined with the effects 

of the spending multiplier, the overall effect is negative. Barro and Redlick write 

that, ‘‘Since the tax multiplier is larger in magnitude than the spending multipliers, 

our estimates imply that GDP declines in response to higher defense spending and 

correspondingly higher tax revenue.’’ 16 Thus, they conclude that greater government 

spending financed by tax increases hurts the economy. 

MORE DATA

Other economist have also calculated defense spending multipliers of less than or 

equal to 1.17 Economists Bob Hall and Susan Woodward recently examined spending increases from World War II and the Korean War and found that the government spending multiplier is about 1.18 Economist Valerie Ramey’s work on how U.S. 

military spending influences GDP gives a multiplier estimate of 1.2 in the short 

term, but in the long term, she finds that consumer and business spending fall after 

a rise in government purchases, offsetting the initial effect of the government spending.19

In a recent blog post over at Neighborhood Effects, my colleague Matt Mitchell 

reports on a number of peer-reviewed studies have also examined the relationship 

between government size, somehow measured, and economic growth. 

‘‘Here is a sample: Barro (1991 and 1989); Folster and Henrekson (2001); RomeroAvila and Strauch (2008); Afonso and Furceri (2008); Chobanov and Mladenova 

(2009); Roy (2009); and Bergh and Karlsson (2010). Each of these studies finds a 

strong, statistically significant, negative relationship between the size of government and economic growth. 

What about the short run? Here again the evidence seems weak at best. Consider 

new research by Harvard’s Robert Barro and Charles Redlick. They find that for 

every dollar the government spends on the military (read: takes out of the private 

economy), the economy gains just 40 to 70 cents. Spending a dollar to obtain 40 to 

70 cents does not a good deal make. Or consider another study by Harvard’s Laruen 

Cohen, Joshua Coval and Christopher Malloy. They rely on the fact that the federal 

government tends to spend more money in districts whose congressional members 

are chairs of powerful committees than in districts whose members are just rankand-file. They find that firms actually cut capital expenditures by 15 percent following the ascendency of a congressman to the chairmanship. Moreover, firms seem 

to scale back employment and experience declines in sales.’’ 20

JOB CREATING OR JUST JOB SHIFTING?

It’s obvious that the government can hire people. But how many of these jobs will 

be taken by people already working in the private sector? This is a statistic that 

desperately needs to be calculated. After all, if most stimulus jobs are taken by people just switching over from privately funded jobs to publicly funded ones, that 

hurts any short-run Keynesian stimulus effect. In fact, in the last year, some people 

have switched from private to public sector jobs. According to the Boston Globe, 

these people were willing to take a cut in pay because they valued the security and 

fringe benefits of a government job.21 Every worker who switches to a government 

job for the good benefits hurts the Keynesian story. 

In a 2007 paper, economists Quadrini and Trigari posed another important question: if a government routinely hires more workers during a recession, will the unemployed intentionally stay unemployed longer, in hopes of getting a good government job? 22 Since government jobs and stimulus-funded Davis-Bacon prevailing 

wage jobs tend to have high wages and good benefits, there might be a strong incentive for unemployed workers to search a bit longer before settling for a private-sector job. In a simulation, Quadrini and Trigari found that when government spending 

stimulates the economy during a recession, it makes the typical recession worse. 

Many of the unemployed stay unemployed a few weeks longer, in the hopes of finding a high-paying, secure, stimulus-funded job. Common sense for an unemployed 

worker—searching for the best job possible—means a longer recession for all of us. 

So the Quadrini/Trigari multiplier isn’t just zero: It’s negative, even in the short 

run. 

If stimulus jobs paid market wages rather than high Davis-Bacon wages, this 

would be less of a problem, but a problem it is.23 And it’s a problem that only points 

in one direction: a smaller multiplier. Perhaps it won’t push the short-run multiplier 

down to zero (or less than zero) but a multiplier between zero and one starts to 
70 

sound much more plausible. And if that’s the case, then fiscal ‘‘stimulus’’ grows the 

government at the cost of shrinking the private sector. 

WHY DOES IT MATTER?

Getting the multiplier wrong has big consequences when understanding the effects of fiscal stimulus on the economy. The government uses multipliers to estimate 

the widely cited projections of unemployment, job creation, and economic output. In 

the time leading up to the passage of the ARRA, Council of Economic Advisors 

(CEA) economists Christina Romer and Jared Bernstein used spending multipliers 

greater than 1 to promote the economic effects of the fiscal stimulus package.24 In 

the months following the implementation of this package, the Congressional Budget 

Office (CBO) used estimates of a spending multiplier between 1.0 and 2.5,25 relying 

on macroeconomic models that ignore the possibility that the growth of the economy 

may be affecting the level of government spending and not the reverse.26 By extrapolating from these multipliers, CBO and CEA have made important projections 

about the effects of fiscal stimulus on the economy. These projections, however, have 

been largely wrong. 

For example, in their January 2009 report,27 Romer and Bernstein used multipliers of between 1.0 and 1.55 to determine the effect of the proposed stimulus 

spending (then $775 billion) would have on GDP and job creation. They assumed 

that each 1 percent increase in real GDP would create an additional 1 million jobs. 

Based on that assumption and their estimated spending multiplier, they estimated 

that the fiscal stimulus would create 3.5 million jobs by the end of 2010. While we 

cannot be certain how many jobs would have been lost or created without a stimulus 

package, we do know that since February 2009, 2.55 million jobs have been lost.28

THE WORST-POSSIBLE STIMULUS

Leaving the multiplier debate aside, there are other important reasons why the 

stimulus bill will have deleterious consequences for the economy. The Recovery Act 

took the form of increased government spending through federal and state bureaucracies, going to areas such as education, infrastructure, and energy spending. 

For months now then, the stimulus bill has routed the bulk of the stimulus money 

through various government bureaucracies. As economist Keith Hennessey explains, 

this spending will be ‘‘inefficient—It will be inefficient in two senses. The spending 

represents the policy preferences of legislators (and all their ugly legislative deals 

and compromises), rather than the choices of hundreds of millions of Americans who 

presumably know better how they would like money spent on them. The spending 

will also be wasteful, and we are starting to see signs of this in the press.’’ 29

The spending is also occurring very slowly. According to the recovery.org data, 16 

months after the adoption of the Recovery Act, agencies, firms, and citizens spent 

some $190 billion in grants and contracts—that is a mere 60 percent of discretionary spending in the bill (highways, mass transit, energy efficiency, broadband, 

education, state aid).30 And only $20 billion in additional spending was reported 

during the last quarter of the 2010 for which the data is available. Congress has 

expended most of the $267 billion for set aside for entitlement spending (food 

stamps, unemployment, and Medicare refundable tax credits), but the bulk of that 

sum went to Medicaid spending, which flows to the states, not into the private economy. Spending in states defers, not mitigates, the economic impact of the recession. 

By extending unsustainable spending programs, this spending has simply prolonged 

the lag time until needed spending adjustments occur, not created jobs. 

Thus even if you believe that Keynesian aggregate demand theory is correct in 

saying increased government spending stimulates the economy—in this case of this 

‘‘stimulus,’’ the spending is happening so slowly and inefficiently that it does not 

even meet the conditions for a Keynesian economic stimulus, regardless of whether 

you believe one would have worked in the first place. 

This spending may increase elements reported as part of GDP: increasing cash 

in people’s pockets might produce some increase in consumer spending. Throwing 

more money at roads might lead to more investment. Bailing out the states will 

yield more state spending. But, unless you believe that federal spending magically 

conjures up purchasing power, the total GDP will remain unchanged, because the 

federal government has to borrow the stimulus money from either domestic or foreign sources. This borrowing in turn reduces other areas of demand and/or increases 

the net trade deficit. In the end, the stimulus spending does not increase total demand it just reshuffles it, leaving the economy just as weak—if not weaker because 

the national debt is higher—as before. 
71 

STIMULUS FACTS

Using the tens of thousands of stimulus recipient reports published on recovery.gov each quarter and economic and political data from the Bureau of Labor Statistics, the Census Bureau, GovTrack.us, and others, I am writing a series of quarterly reports that put this aggregate information into a larger context. 

I am about to release the third of that series. Today I would like to highlight some 

preliminary findings based on this data. (The data and results presented here encompass the first quarter of the calendar year 2010 reports of Recovery Act contracts and grants only. The complete dataset used for this report will be available 

for download at Mercatus.org when the full report is released at the end of July 

2010.) 

First, in the third quarter for which Recovery.gov reports are available, federal 

agencies awarded over 69,717 contracts and grants. Total spending reached over 

$192.2 billion. That is roughly $22 billion more reported received than in the previous quarter. At that rate, the government should be done awarding stimulus dollars by 2020. In other words, the money is being spent very slowly. 

Second, the total number of jobs the stimulus has created or saved is claimed to 

be 679,814. However, it is hard to know what these jobs represent since the administration recently changed how it counts jobs. According to the new rules, the administration no longer keeps a cumulative tally of jobs created and saved by the 

stimulus. Instead, it posts only a count of jobs for each quarter. Also, instead of 

counting only created and saved jobs, it counts any person who works on a project 

funded with stimulus money—even if that person never lost his or her original job.31

These changes highlight the near impossibility of accounting for how many jobs 

were saved by the (expenditure or allocation of) stimulus funds, but what we do 

know from these numbers is that of the 679,814 jobs reported created or saved, four 

times as many of these jobs were in the public rather than the private sector. 

Total jobs ‘‘created or saved’’ in public entities: 550,749 

Total jobs ‘‘created or saved’’ in private entities: 127,306 

Third, the average cost of each job created or saved is $282,000. However, the average cost per private sector job created or saved is over $647,000. 

Fourth, controlling for the percentage of the district employed in the construction 

industry, which is often used as a proxy for the vulnerability to recession of a district, the preliminary results find no statistical correlation between all relevant unemployment indicators and the allocation of funds. This preliminary result, which 

is similar to the ones in the two previous reports, suggests that unemployment, at 

least thus far, has not been the factor leading the awards. Also, I found no correlation between other economic indicators, such income, and stimulus funding. As the 

main argument for enacting the $787 billion stimulus bill was that if government 

spends money where it is the most needed, that expenditure would create jobs and 

trigger economic growth, one would have expected the government would invest relatively more money in districts that have the highest unemployment rates and less 

money in districts with lower unemployment rates. Such does not appear to be the 

case. 

CONCLUSION

The understandable temptation to take action in time of recession should not lead 

lawmakers to take counterproductive actions. Economists have shown that stimulus 

by government spending is not productive, and Barro and Redlick’s data show that 

the CBO’s multiplier overestimates the return on government spending almost by 

a factor of two. 

What’s more, the stimulus’s effect on job creation is unclear. Did it create productive jobs? Is the stimulus money simply funding public jobs for some who had jobs 

in the private sector but switched over for reasons of security? Is the stimulus simply funding pay raises that would have happened stimulus money or not? Is the 

stimulus money simply funding jobs that existed and were not at risk? 

Unfortunately, we cannot know. In fact, a recent report by the Government Accountability Office highlights that Recovery.gov is not transparent and the data displayed on it doesn’t promote the transparency agenda of the Obama administration.32

If stimulus funds are a bad investment, is there anything Congress can do to help 

the economy? A few years ago, Christina and David Romer looked at the impact of 

tax cuts on the economy and concluded that the tax multiplier is about three: a dollar of tax cuts raises GDP by about three dollars.33 Their finding suggests that the 

economy might get more bang for the buck with tax cuts rather than spending 

hikes. 
72 

ENDNOTES

1Statistics from the Bureau of Labor Statistics National Current Employment Statistics survey at http://bls.gov. Job loss calculated by author using non-farm payroll employment change 

from December 2007 to June 2010. 2 Randy Ilg, ‘‘Long-Term Unemployment Experience of the Jobless,’’ Issues in Labor Statistics, 

Summary 10-05 (2010). 3 Author’s calculation based on data from NIPA Table 1.1.6. Real Gross Domestic Product, 

Chained Dollars from the Bureau of Economic Analysis. 4 Barack Obama, ‘‘Address to Joint Session of Congress’’ (speech, The United States Capitol, 

Washington, D.C., February 24, 2009), http://www.whitehouse.gov/the—press—office/remarksof-president-barack-obama-address-to-joint-session-of-congress/. 5 Christina Romer and Jared Bernstein, ‘‘ The Job Impact of the American Recovery and Reinvestment Plan’’, news release, January 9, 2009. 6 Robert Barro, ‘‘Government Spending Is No Free Lunch,’’ Wall Street Journal, January 22, 

2009, http://online.wsj.com/article/SB123258618204604599.html. 7For estimates of multipliers greater than 1, see Marianne Baxter and Robert G. King, ‘‘Fiscal 

Policy in General Equilibrium,’’ American Economic Review 83, no. 3 (1993): 315—334; Christina Romer, Jared Bernstein, ‘‘The Job Impact of the American Recovery and Reinvestment 

Plan,’’ news release, January 10, 2009, and Andrew Mountford and Harald Uhlig, ‘‘What are 

the Effects of Fiscal Policy Shocks’’ (working paper no. 14551, National Bureau of Economic Research, December 2008). 8Murray Rothbard, ‘‘Money and Its Purchasing Power,’’ in Man, Economy and State, With 

Power and Market, http://mises.org/rothbard/mes/chap11a.asp. 9Michael Woodford, ‘‘Simple Analytics of the Government Expenditure Multiplier’’ (working 

paper, Columbia University, January 27, 2010), 43, http://www.columbia.edu/?mw2230/G— 

ASSA.pdf. 10 Another way to think of this is that there is something wrong with the price system. To 

learn more about why this is not the case in a world with rational actors, see Robert Barro, 

‘‘Long-term contracting, sticky prices, and monetary policy,’’ Journal of Monetary Economics 3, 

no. 3 (July 1977): 305—316. 11 Robert Barro and Charles Redlick, ‘‘Macroeconomic Effects from Government Purchases and 

Taxes’’ (working paper, Mercatus Center at George Mason University, Arlington, VA, 2010). 12Zvi Hercowitz and Michel Strawczynski, ‘‘Cyclical Ratcheting in Government Spending: Evidence from the OECD,’’ The Review of Economics and Statistics 86, no. 1 (February 2004): 353— 

361 and Graciela L. Kaminsky, Carmen M. Reinhart, and Carlos A. Ve ́gh, ‘‘When It Rains, It 

Pours: Procyclical Capital Flows and Macroeconomic Policies,’’ NBER Macroeconomics Annual 

19, (2004): 11—53. 13The use of defense spending as an exogenous shock to study the effect of government spending has been explored in-depth in Roberto Perrotti, ‘‘In Search of the Transmission Mechanism 

of Fiscal Policy,’’ (working paper 13143, National Bureau of Economic Research). In addition, 

it has been used as an econometric tool to study the effects of fiscal stimulus on the economy 

in a number of studies. including Olivier Blanchard and Roberto Perotti, ‘‘An Empirical Characterization of the Dynamic Effects of Changes in Government Spending,’’ Quarterly Journal of 

Economics 107, no. 4 (November 2002): 1329—1368 and Miguel Almunia and others, ‘‘From 

Great Depression to Great Credit Crisis: similarities, differences and lessons’’ Economic Policy 

25, no. 62 (2010): 219—265, among others. 14 Robert Barro and Charles Redlick, ‘‘Macroeconomic Effects from Government Purchases and 

Taxes,’’ 32. 15 Ibid, 44. 16 Ibid, 29. 17See Olivier Blanchard and Roberto Perotti, ‘‘An Empirical Characterization of the Dynamic 

Effects of Changes in Government Spending and Taxes on Output,’’ and Robert E. Hall, ‘‘By 

How Much Does GDP Rise If the Government Buys More Output?’’ Brookings Papers on Economic Activity, forthcoming. 18 Bob Hall and Susan Woodward, ‘‘Measuring the Effect of Infrastructure Spending on GDP,’’ 

in Financial Crisis and Recession, http://woodwardhall.wordpress.com/2008/12/11/measuringthe-effect-of-infrastructure-spending-on-gdp/. 19 Valerie Ramey, ‘‘Identifying Government Spending Shocks: It’s All in the Timing,’’ unpublished, University of California San Diego, October 2009. 20Matt Mitchell, ‘‘Why This Isn’t The Time to Worry that Government Is Spending Too Little,’’ Neighborhood Effects, June 30 2010. http://neighborhoodeffects.mercatus.org/2010/06/30/ 

why-this-isnt-a-time-to-worry-that-government-is-spending-too-little/ 21Megan Woolhouse, ‘‘Now hiring, your Uncle Sam,’’ Boston Globe, May 30, 2009, http:// 

www.boston.com/jobs/news/articles/2009/05/30/unlike—rest—of—us—federal—government— 

is—hiring—a—lot/. 22Quadrini and Trigari, (2007) ‘‘Public Employment and the Business Cycle,’’ http://wwwrcf.usc.edu/?quadrini/papers/PublicEmployPap.pdf, later published in Economic Inquiry. 23 Indeed, if government jobs paid market wages, then recessions would be a great time to 

build roads and hospitals at a much lower cost than usual: Taxpayers could save money, hiring 

employees who were waiting for the private-sector to improve. 24 Christina Romer and Jared Bernstein, ‘‘The Job Impact of the American Recovery and Reinvestment Plan,’’ 12. 25 Congressional Budget Office, Estimated Impact of the American Recovery and Reinvestment 

Act, January 2010 through March 2010 (Washington, DC: Congressional Budget Office, May 

2010), http://www.cbo.gov/ftpdocs/115xx/doc11525/05-25-ARRA.pdf. 
73 

26 Ibid, Appendix. For an example of models operating under similar assumptions, see R. C. 

Fair, ‘‘Estimated Macroeconomic Effects of the U.S. Stimulus Bill,’’ unpublished, Yale University, March 2010. 27 Christina Romer and Jared Bernstein, The Job Impact of the American Recovery and Reinvestment Act (January 9, 2009), http://otrans.3cdn.net/45593e8ecbd339d074—l3m6bt1te.pdf. 28 Authors’ calculations using data from the Bureau of Labor Statistics, Employment, Hours, 

and Earnings from the Current Employment Statistics Survey, total change in nonfarm payroll 

employment, January 2009 to June 2010. 29Keith Hennessey, ‘‘Will the Stimulus Come Too Late,’’ June 3, 2009. http:// 

keithhennessey.com/2009/06/03/will-the-stimulus-come-too-late/print/ 30 Congressional Budget Office, Implementation Lags of Fiscal Policy: http://www.cbo.gov/ 

ftpdocs/102xx/doc10255/06-02-IMF.pdf 31For example: When Chrysler reported a $53 million contract to build 3,000 government vehicles last fall, it listed zero jobs because it used existing employees to fill the orders. But under 

the new rules, those workers would have counted. Also, now recipients can count pay raises as 

stimulus jobs as long as they are counted as fractions of a job 32Government Accountability office, ‘‘Increasing the Public’s Understanding of What Funds 

are being Spent on and What Outcomes are Expected,’’ May 2010. http://www.gao.gov/highlights/d10581high.pdf full report: http://www.gao.gov/new.items/d10581.pdf 33 Christina D. Romer and David H. Romer, ‘‘The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks,’’ (working paper, University of California— 

Berkeley, March 2007), http://www.econ.berkeley.edu/?cromer/RomerDraft307.pdf. 

Chairman SPRATT. Let’s turn next to Dr. Bivens, and then we 

will put questions to the panel. 

Dr. Bivens. 

STATEMENT OF JOSH BIVENS, PH.D. 

Mr. BIVENS. Thank you, I would like to thank the committee for 

the opportunity to testify today. I am Josh Bivens, an economist at 

the Economic Policy Institute here in Washington D.C. 

In assessing the American Recovery and Reinvestment Act, I 

want to make four arguments today, and I will try to make them 

very quickly, in my opening statement. 

First, it was badly needed. I think we can get through that. Most 

people agree the economy in late 2008 or early 2009 was in a tough 

spot; something needed to be done. 

Second, contrary to a lot of criticism, it worked essentially as advertised. What was not advertised was the depth of the downturn, 

which was much more worse than people thought, and I would be 

happy to talk a little bit more about this in Q&A. 

Third, it was cheap. The sticker price of the Recovery Act was 

estimated at $787 billion when it was passed. It is often characterized as enormous. It was less than half as large as the tax cuts enacted during 2000; smaller than the cost of wars in Iraq and Afghanistan; and, most importantly, small relative to the economic 

shock it was meant to absorb. 

Further, because it spurred economic activity and tax collections 

reduced the need for safety net spending, its net budgetary income 

impact was probably less than half the headline figure. 

Lastly, despite the millions of jobs created or saved by the act, 

unemployment does sit at 9.5 percent today and will surely rise to 

over 10 percent again in the coming year. We should provide further fiscal support. 

Quickly, argument one, it was needed. People talked about this 

a lot. I just want to make one statement here. I mean, the negative 

shock to private-sector spending due to the bursting housing bubble 

was, by most macroeconomists’ estimation, larger than the economic shock that led to the Great Depression. This was a once-ina-generation economic shock facing the U.S. economy. 
74 

By February 2009, the month that the Recovery Act was passed, 

the U.S. economy was losing 750,000 jobs per month, and this is 

crucial, even though the Federal Reserve had kept interest rates 

below 1 percent for the previous 21 months. This is crucial. This 

is why you needed something like the Recovery Act. The primary 

tool most people use or most people think should be used when the 

economy faces recession is to lower short-term interest rates. We 

had done that. Nothing had happened. The Fed was out of conventional ammunition. Something else had to be done. 

That is why economists like me, we don’t argue for a stimulus 

package every 5 years or so or every time there is a hiccup in the 

economy; we argue for it when there is a once-in-a-generation economic shock. 

Argument two is that it worked. I mean, the estimates of the Recovery Act were that it would create about 3 to 4 million jobs. If 

you look at private sector, macroeconomic forecasts, people whose 

salary relies on being closer to their competitors in forecasting economic trends, they are essentially unanimous that the Recovery 

Act will add 2 to 3 million jobs before it is over. The Congressional 

Budget Office concurs. 

This is firmly in line with what mainstream economic theory 

teaches is the effect of fiscal stimulus when interest rates are near 

zero. And the timing of the Recovery Act coincides perfectly with 

the halt in the downward spiral, both in economic output and unemployment. 

I will just give you one example, in the 6 months before the Act 

took effect, GDP contracted by almost 6 percent at an annualized 

rate. In the 6 months after, the economy grew at a slightly less 

than 1 percent annualized rate, and the growth has just gotten better since then. 

Argument three, it was cheap. It is clear the country faces real, 

long-run budget challenges. It is also equally clear that the Recovery Act adds almost nothing to those long-run budget challenges, 

and further fiscal support today would add very little to it. I mean, 

one example, if you are a true budget pessimist and you believe 

that the alternative fiscal scenario identified by CBO in their latest 

long-term budget outlook is the most likely future trajectory of deficits—I am not such a pessimist, but it is a pessimistic outlook— 

if you believe that, this would imply that the Recovery Act was responsible for about 1 percent of the long-run fiscal gap facing the 

country. The big drivers of the long-run fiscal gap are health care 

costs and revenue as a share of GDP, not the support we provided 

in response to the once-in-a-generation economic shock. 

Another issue besides its purely budgetary cost, which also was 

cheaper because the economic activity it spurred actually created 

more tax collections and reduced the need for public sector public 

safety net spending, its overall economic opportunity cost was low. 

And we know it was low because interest rates have not risen in 

any appreciable fashion since it was passed. 

For the people who say increased public-sector spending necessarily crowds out private spending, the mechanism through 

which that works has to be rising interest rates. If you don’t see 

interest rates rise, you will not see crowding out of private-sector 
75 

spending. Interest rates have not risen, so the overall crowd out of 

private-sector activity from the Recovery Act just hasn’t happened. 

Also, one piece of evidence that the Recovery Act worked is actually that the turnaround in GDP was driven by a turnaround in 

consumer spending. Contrary to most presentations of the Recovery 

Act, that is what you should expect. Two-thirds of the act were not 

direct purchase of goods and services by the government; they were 

instead tax cuts and transfer payments to households to allow 

them to increase their consumer spending. So, that should be 

where you look for the footprint of the jobs and the economic activity created. 

Lastly, I will just wrap up quickly. Despite the 3 to 4 million jobs 

the Recovery Act will create or save, today’s economic situation remains unacceptable. We have got a 9.5 percent unemployment rate, 

and the CBO says that even in 2013, the unemployment rate is 

going to average 6.3 percent, which is higher than the peak unemployment rate reached during the last recession. So that will be 6 

years from the onset of the recession, we are still going to have an 

unemployment rate higher than the peak of the previous recession. 

That is unacceptable, and more support should be given to the 

economy. 

I will just note one thing, 30 months ago, Congress passed a $160 

billion stimulus package, the Economic Stimulus Act of 2008, to 

avoid the prospect of unemployment rising from 5 to 6 percent. We 

now stand at 9.5 percent unemployment. Gross domestic product is 

lower today than when that act was passed 30 months after the 

fact, and yet no further fiscal support to the economy seems to be 

forthcoming. 

I have tried to make the case that there is no compelling economic reason to think that anything has changed in the past 30 

months so as to make further fiscal support unwise. Fiscal support 

provided by the Recovery Act was needed. It was effective, and it 

was much cheaper than is commonly advertised, and further support is also clearly needed. 

Thank you, I would be happy to take your questions. 

[The prepared statement of Mr. Bivens follows:] 

PREPARED STATEMENT OF JOSH BIVENS, PH.D., MACROECONOMIST, 

ECONOMIC POLICY INSTITUTE

Thank you Chairman Spratt and members of the committee for the opportunity 

to testify today. I am Josh Bivens, a macroeconomist at the Economic Policy Institute in Washington, DC. 

In assessing the economic impact of the American Recovery and Reinvestment Act 

(ARRA, the Recovery Act henceforth) there are essential four arguments I’d like to 

make today: 

• First, the Recovery Act was needed, and badly. The American economy at the 

end of 2008 and the beginning of 2009 was essentially in freefall and all other policy 

tools that had been tried had little effect in arresting the decline. 

• Second, it worked as advertised. It has created almost 5 million full-time equivalent jobs and kept the unemployment rate from sitting well over 11% today. Unfortunately, the economic crisis that it was meant to address called for much stronger 

medicine than the Recovery Act by itself could provide. 

• Third, it was cheap. While the sticker-price of the Recovery Act (estimated at 

$787 billion when passed) is often characterized in press accounts as enormous, it 

was less than half as large as the full-cost of the tax cuts enacted during the 2000s, 

smaller than the cost of wars in Iraq and Afghanistan, and, most importantly, small 

relative to the economic shock it was meant to absorb. Further, because it spurred 
76 

economic activity and tax collections and reduced the need for safety net spending, 

its net budgetary impact was likely less than half the $787 billion amount. 

• Fourth, lessons learned from the passage of the Recovery Act should be heeded: 

More fiscal support should be provided to prop up the economy and spur a genuine 

recovery in the jobs-market. While the Recovery Act worked as advertised and the 

economy today would be worse off if it had not been passed, unemployment still sits 

at 9.5% today and will surely rise above 10% over the coming year, returning to prerecession levels only several years from now unless more fiscal support is provided. 

IT WAS NEEDED

The root of the current recession is simple to identify: the bursting of the housing 

bubble and its fallout. Between 1997 and 2006, the real price of homes in the U.S. 

economy, which had been roughly flat for many decades, almost doubled. Given that 

the stock of housing in the U.S. is enormous, this led to a huge increase in wealth. 

Because so few influential economists correctly pointed out that this wealth increase 

was sure to be ephemeral, U.S. households began borrowing against the value of 

their homes to support current consumption. When the housing bubble popped, 

these same households realized that meeting long-run wealth targets (planning for 

retirement or sending their kids to college) could no longer be financed out of rising 

housing wealth, so they began saving. As households began saving, businesses, seeing a threat to new sales, stopped investing to expand their own capacity. 

This negative shock to private sector spending was enormous—between the end 

of 2006 and the beginning of 2009, the private sector went from borrowing 3.6% of 

GDP to saving 5.6% of GDP. This 9.2% swing in private sector spending was a larger economic shock than the one that led to the Great Depression. Figure A below 

shows two concrete measures of this fallout: mortgage equity withdrawals that allowed households to extract wealth out of their homes and increase their purchasing 

and residential investment—the economic activity generated by the act of building 

homes. Both are expressed as shares of GDP, both soared during the housing bubble, and both collapsed when this bubble burst. 

Luckily, the U.S. economy is different now than compared to the 1930s. In particular, today’s economy has a larger public sector and one that contains many 

‘‘automatic stabilizers’’—including progressive tax collections that fall more rapidly 

than private sector incomes and safety net spending (like unemployment insurance 

and food stamps and Medicaid) that provides increased transfers to households 

when the economy slows. These automatic stabilizers kicked in as private spending 

slowed. This led to a purely mechanical rise in the deficit—roughly $329 billion of 

the increase in the deficit between 2007 and 2009 can in fact be attributed to this 

purely mechanical effect of automatic stabilizers, according to the Congressional 

Budget Office. 

And this large increase in the deficit was a very good thing. The increase in public 

spending power leaned hard against the rapid decline in private spending power, 

and contributed to keeping the economy from entering another Depression. 

Of course, the increase in the deficit was not the only thing that helped support 

the economy—at the same time the Federal Reserve was aggressively fighting the 

downturn by cutting interest rates and supplying liquidity to the financial sector. 

Still, automatic stabilizers and Federal Reserve action were not enough to forestall a rapid economic deterioration. By February 2009, the economy had seen 

monthly job-loss that averaged 653,000 in each of the past 6 months, despite the 

fact that the short-term interest rates controlled by the Federal Reserve had been 

below 1% for 21 months. 

When an economy continues to spiral downward even when the monetary authority has reached the limit of what conventional policy can do to arrest the fall, it is 
77 

1 In what follows I date the effect of the Recovery Act as beginning April 1, 2009. While it 

was passed in late February and some money was spent before this, April 2009 is the first 

month that saw significant amounts of money being spent. 

often referred to as a liquidity trap. Essentially, the economy ‘‘needs’’ short-term interest rates that are steeply negative in order to boost business investment and consumer spending on durables sufficiently to exit the recession. But, interest rates 

cannot go below zero. Even worse, as the economy suffers from a dearth of spending, 

this creates pressure for disinflation—as firms cannot sell output and new jobs are 

scarce, prices and wages are all-but-impossible to raise. This disinflation actually 

raises the ‘‘real’’, or inflation-adjusted, interest rates facing businesses and consumers, even as the Fed’s control over nominal rates is bound at zero. 

In short, because the primary tool that national policymakers use to fight recessions—lowering short-term interest rates—had been rendered ineffective, something 

else had to be done. This something was the Recovery Act, a deficit-financed combination of a roughly equal measure of tax cuts, transfer payments and direct government grants to support demand for goods and services and blunt the recession. 

It should be remembered that the size and composition of the Recovery Act was 

a compromise. Many, including myself, thought the overall size of the package 

would be too small to bring the economy back to recovery without further action. 

Many (also including myself) also thought tax cuts had too large a weight in the 

final package and that many of them (particularly the fix to the alternative minimum tax, or AMT) were ill-suited for short-term stimulus. Because of these compromises on the size and composition of the Act, many believed that it would not 

be sufficient by itself to provide the economic boost needed to the get the American 

job-market back to health in an acceptably rapid time-frame. 

All this said, passage of the Recovery Act was a serious response to the nation’s 

economic crisis, and even with its somewhat-compromised composition, its forecasted impact was large—the best estimates were that it would create between 2- 

4 million jobs and boost GDP by roughly 5% over the first 2 years of its implementation. 

IT WORKED

And this estimate has been spot-on. For those most convinced by appeals to authority let’s start with what private sector macroeconomic forecasters say about the 

Recovery Act. These are, remember, people whose salary relies on being closer than 

their competitors in forecasting economic trends. As a group, they are in near-universal agreement that the Recovery Act added roughly 3 percent to GDP by the end 

of June and that it created or saved between 2-3 million jobs. The non-partisan Congressional Budget Office (CBO) concurs, calculating that the Recovery Act contributed between $240 billion to $645 billion to the economy by the end of June, creating or saving up to 5.3 million full-time equivalent jobs and keeping the unemployment rate up to 2 points lower than it would have been in the absence of the 

act. 

There are a number of factors that explain the near-unanimity among forecasters 

who have examined the impact of ARRA. 

First, it is firmly in line with what mainstream economic theory teaches is the 

likely effect of deficit-financed tax cuts, transfers and spending in an economy that 

has high unemployment even in the presence of rock-bottom interest rates (i.e., is 

in a liquidity trap). The effect of increasing deficits to finance tax cuts, transfers 

and spending in a healthy economy is ambiguous and there are many complications 

to assessing it. However, in a liquidity trap these complications fade away and the 

impact of these policy maneuvers become quite straightforward; they unambiguously 

push the economy closer to its potential, lowering the unemployment rate. 

Second, the timing of the Recovery Act coincides perfectly with the halt in the 

downward spiral of both economic output and employment.1 In the 6 months before 

the Act began paying out funds, gross domestic product contracted at a ¥5.9% 

annualized rate while in the 6 months after its passage the economy grew at a 

0.75% annualized rate. In the first 3 months of 2010 it grew at an annualized rate 

of 2.7%. In the 6 months before the Recovery Act took effect, average monthly employment declined by 653,000 while in the 6 months after its passage it average declines fell nearly in half to 369,000. In the first 6 months of this year average 

monthly employment has actually grown by 147,000. Figures B and C present 

growth in GDP and employment, respectively, in the periods before and after the 

onset of Recovery Act spending. The pattern is clear—the downward spiral is 

stopped and even reversed almost immediately after the onset of the Act. 
78 

2See the appendix to this report for evidence that the Recovery Act actually has not led to 

outsized growth in government expenditures. 

Third, the turnaround in GDP growth between the 6 months before and the 6 

months after the passage of the Recovery Act was driven predominantly by a reversal in consumer spending. This portion of GDP (accounting for almost 70% of the 

total) contracted by ¥1.25% in the 6 months before the Act and actually grew by 

0.95% in the six months after the Act’s passage. Contrary to most descriptions of 

the Recovery Act, this is actually exactly what one would have expected if it was 

working. Two-thirds of the Act’s provisions (the tax cuts and transfer payments) go 

directly to boosting the purchasing power of households, not in directly purchasing 

goods and services for the government. This boost to household disposable income 

helped to arrest the steep fall in consumer spending.2 Figure D shows the before 

and after Recovery Act comparisons of consumption spending. 

If one looks at total personal incomes (wages, profits, rental payments) and strips 

out the influence of government transfers, one can get a decent proxy for how 

robustly the private sector is generating income growth for households. This measure, personal income minus transfers, fell by 7.5% from peak to trough during the 

recession—the largest decline since World War II. Yet, consumer spending fell by 

less than a third as much—less than 2%. The wedge between these two can largely 

be explained by looking at personal disposable incomes—incomes after-taxes and 

after-transfers. This measure actually never fell more than 2.2% peak-to-trough during the recession and is actually a bit higher today than it was immediately before 

the recession. This is largely due to the Recovery Act, though some of this is also 

the automatic stabilizers mentioned earlier. Figure E shows each of these series in 

the period before and after the recession began, with each normalized at 100 in the 

last quarter before the recession hit. 
79 

3The fiscal gap is a short-hand measure of the long-run fiscal imbalance. Essentially, it tells 

one how much some combination of tax increases and/or spending cuts (expressed as a share 

of GDP, enacted immediately, would be needed to close the long-run budget deficits. 

This evidence—the preponderance of opinion of macroeconomic forecasters, the 

timing of the Recovery Act taking effect and the reversal of the downward spiral 

in the middle of 2009, and the very large footprint of the Recovery Act provisions 

on personal disposable income and its correlation with consumer spending—adds up 

to an overwhelming case that the Recovery Act worked as advertised. Essentially, without it, GDP would be $600 billion lower today, there would 3 million fewer jobs in the economy, and the unemployment rate would be nearly 2% 

higher even with fewer Americans in the labor force. While there remains much to 

be done to make sure that all Americans looking for a job have a decent chance of 

finding one, it is clear that we would be digging out of a much deeper hole today 

had the Recovery Act not passed. 

IT WAS CHEAP

Besides a general misunderstanding about its effectiveness, the primary resistance to providing more fiscal stimulus to today’s economy, even in the face of historically high unemployment, is concerns about the federal budget deficit. This section will argue that in the context of the nation’s actual challenge concerning the 

national debt—budget deficits that are forecast to rise in coming decades even during periods of healthy economic growth—the costs of the Recovery Act and further 

fiscal support to the economy are minimal. It further argues that a broader view 

of the Act’s costs—not just its cost in terms of the federal budget but in terms of 

overall economic opportunity costs—show that these costs are actually negative; 

that is the Act resulted in greater, not less, private investment and employment. 

It is clear that the country faces long-run budget challenges that will require policy action in coming decades. A close look at the economics, however, shows that 

these budget challenges have nothing to do with the Recovery Act that was passed 

nor would they be appreciably exacerbated at all if more fiscal support was provided 

to the economy today. 

For example, the Recovery Act added between 0.1 to 0.2% to the long-run (50- 

year) fiscal gap.3 If one is a true budget pessimist and believes that the alternative 

fiscal scenario identified by CBO in their latest report on the long-run budget outlook is a good forecast of the most likely trajectory of deficits (I’m not, for the record, 

such a pessimist) then this would imply that the Recovery Act was responsible for 

less than about 1-2% of the long-run fiscal gap facing the country. 

The reason for this non-effect of the Recovery Act on long-run budget challenges 

is simple: the Act is temporary and the main drivers of long-run deficits remain rising health care costs and low revenues as a share of GDP. 

Another reason why the Recovery Act was cheap (and why further fiscal action 

aimed at spurring the economy would be cheap) is that its headline cost ($787 billion in the case of Recovery Act) is actual far greater than its actual net impact on 

the budget deficit. Because the Recovery Act saved jobs and wage incomes, it generated new tax revenue. And because it kept people working, it kept them out of 

public safety net programs. 

Say that the overall multiplier of the Recovery Act was 1.25—this is the boost to 

total GDP per dollar increase in the deficit. The more effective parts of the Act (extensions of unemployment insurance and other safety net programs and investments 

in the nation’s infrastructure and aid to fiscally strapped state and local governments) actually have multipliers significantly higher than this, but because the Recovery Act also included items like the AMT fix that provided very little bang-for- 
80 

buck, the overall multiplier was lower. Given a multiplier of 1.25, the $600 billion 

in Recovery Act spending that is set to occur before the end of calendar year 2010 

will result in GDP that is higher by roughly $750 billion by the end of this year. Other data from the Congressional Budget Office suggests that each $1 increase in GDP relative to potential yields a $0.35 decrease in the deficit as revenues rise 

and spending falls. Multiplying the $750 billion in extra output by this $0.35 indicates that the economic activity spurred by the Recovery Act actually recoups just 

under $330 billion—more than half the headline price tag of $600 billion. In short, 

well-designed policies aimed at spurring economic activity come with a built-in and 

significant offset to their total costs. 

This exercise also drives home the importance of designing stimulus packages 

well. Take the high and low-end of Recovery Act provisions in terms of bang-forbuck provided by Moody’s Economy.com. If the entire Act consisted of provisions 

with a bang-for-buck as low as that provided by corporate tax cuts or providing the 

opportunity of businesses to ‘‘carryback’’ past losses against future taxes, the budget 

offset provided by the act would be less than $80 billion. If instead the entire Act 

consisted of provisions with bang-for-buck comparable to safety net expansions and 

infrastructure spending, the budget offset approaches $400 billion. Simple design of 

stimulus packages can make their final impact on the deficit differ by literally hundreds of billions of dollars. Besides just not providing effective stimulus, the less 

well-designed parts of the Act should have been excluded on the basis of fiscal responsibility. 

It has been rightly pointed out by some that one could overstate the degree to 

which additional support would provide built-in offsets to its net addition the national debt. In a given year, it is highly unlikely that economic multipliers are large 

enough to allow additional fiscal support to be entirely self-financing. Because of 

this, many commentators have warned against supporters of more support engaging 

in hyperbole similar to that of supply-side tax advocates who claim that cutting tax 

rates can spur enough economic activity to bring in sufficient additional revenue so 

as to make these rate-cuts self-financing. 

While this caution may be useful, it should be made clear that the case for full 

self-financing over time of temporary fiscal support in an economy stuck in a liquidity trap is actually not totally implausible, while the prospect of self-financing permanent cuts in tax rates is indeed totally implausible. 

If fiscal support pushes the economy back to levels of GDP that are characterized 

by full-employment much quicker than in the absence of this support, then it is indeed possible for it to be all-but-totally self-financing. The economists’ jargon for this 

is avoiding hysteresis in labor and product markets, but the insight is pretty simple—if fiscal support generates additional economic activity not only in the year of 

its implementation but also allows the economy to much more quickly reach its potential—this represents multiple years of additional revenue and less safety net 

spending and could indeed lower overall ratios of debts and deficits to GDP. 

How likely such a full offset is depends largely on how effectively the fiscal support is structured and how much time it shaves off the wait for the economy to regain its potential. Given that many of the mechanisms that tend to push recessed 

economies back to trend levels seem weak or inoperative in the current economy, 

it seems quite likely to me that the net fiscal cost of particularly well-structured 

fiscal support is essentially zero over the medium and long-term. And it is budget 

deficits over this medium and long-term which are forecast to rise even during times 

of healthy economic growth that are the proper focus of concern. 

Besides having a minimal impact on the stock of outstanding national debt, the 

Recovery Act was financed in an economic context of historically low long-term interest rates for government debt. These low rates are no fluke—they are low precisely because private spending and borrowing is at historic lows (i.e., the recession). 

Further fiscal support could also be financed at very low rates, as excess capacity 

and little competition for loanable funds continues to characterize the economy. Additionally, upward interest rate pressure stemming from Federal Reserve actions is 

extremely unlikely, given both the weakness of the overall economy and their stated 

intention to keep rates low until the economy has begun a robust recovery. 

While low interest rates contribute much to the relative cheapness of the Recovery 

Act, they also provide the clearest indication that the Act is also cheap in its broader economic opportunity costs. The most well-pedigreed argument against increasing 

budget deficits in healthy economies is the fear that increased government borrowing causes interest rates to rise as public demand competes with private demand 

for fixed savings of households and businesses. These rising interest rates spurred 

by growing deficits results in private investment ‘‘crowding out’’ private capital formation and the lower value of the private capital stock leads to lower future growth. 

When economic commentators make arguments disparaging the ability of the Recov-
81 

4There is an additional channel through which increasing federal budget deficits in a healthy 

economy can lead to slower domestic income growth—if the increased borrowing spurred by 

them leads to greater borrowing from foreign investors. Very few (if any) detractors of the Recovery Act have made the argument that this has happened—and correctly so. The mechanism 

for this channel to work would have to be a rise in the trade deficit. But, the trade deficit fell 

significantly over the course of this recession. 

ery Act (or government spending of any kind) to create jobs, they generally make 

variants of this crowding-out argument. 

The general failure of interest rates to rise in response to the increase in budget 

deficits, and to the Recovery Act in particular, is a prime piece of evidence that no 

crowding out of private investment is occurring, making the Recovery Act not just 

cheap, but essentially free in terms of its overall economic opportunity cost.4 This 

is, again, not unexpected. Economic theory teaches that increased public borrowing 

during a liquidity trap does not crowd-out private sector activity. Figure F shows 

the relationship between deficits, interest rates and recessions. It shows clearly that 

during recessions deficits rise (both due to automatic stabilizers as well as policy 

responses) while interest rates fall (in part due to Federal Reserve efforts to fight 

the recession but also because private demand for new loanable funds fall). Figure 

G shows that corporate demand for new debt has fallen so much since the latest 

recession began that essentially all new desired corporate investments could be financed out of internal funds—in the jargon, the corporate ‘‘financing gap’’ has 

turned negative. 

It is worth stressing this ‘‘crowding out’’ mechanism, given that many Recovery 

Act detractors have pointed to very low rates of overall investment as some sign 

that private activity is being stunted by increased public sector activity. The textbook presentation of the effects of fiscal policy requires higher interest rates as the 

mechanism through which private investment may be stunted by increased public 

borrowing in a healthy economy. Without the rise in interest rates, there is no way 

to link increased public borrowing and lower private investment. 

Some commentators, having neither theory nor evidence on their side in making 

the argument that increased public spending must by definition reduce private 

spending, have done the economic equivalent of banging the table—insisting that 

vague concerns about ‘‘uncertainty’’ spurred by the economic policy actions of the administration explain the reduction in private investment. This is supremely unconvincing, for a few reasons. 

First, there is no particular reason to think that private investment is actually 

abnormally low at the moment. Numerous academic studies suggest that the prime 

determinant of private investment is in fact the simple state of the economy. Given 
82 

5See Bachman, Elstner and Sims (2010) for the very low short-run impacts of business uncertainty on investment. 6See Eggerston (2010), Woodford (2009) and Hall (2009) for representatives of this finding. 

that we are just emerging from the steepest and longest recession in post World 

War II history, it is far from surprising that investment spending is low. 

Further, the capacity utilization rate (think of this as the employment rate of factories instead of people) reached historic lows in the past year. With current capacity far from being fully utilized, why would businesses seek to spend money to build 

more of this capacity? Finally, it should be remembered that investment in structures, both residential and non-residential, is an important component (just under 

half) of overall investment. Given the massive overbuilding in the residential housing sector for the past decade and the sharply rising vacancy rates in commercial 

real estate, it is again hard to imagine why businesses would seek to expand investments in structures. Figure H demonstrates the tight relationship between capacity 

utilization and investment as a share of GDP. 

Second, there is very little evidence that economic uncertainty of any kind provides a the kind of sharp shock to private investment that would explain the very 

large fall-off in investment that characterized the worst phases of the last recession.5

Lastly, given that overall economic activity is a prime determinant of private investment and that the Recovery Act assuredly spurred greater activity, it is very 

likely that the Recovery Act actually ‘‘crowded in’’ private investment—actually 

made the fall-off in private investment less steep that it would have been absent 

the Act’s effects. Evidence for this can be seen in a number of papers that find very 

large multiplier effects of fiscal support when an economy is a liquidity trap.6

IT SHOULD BE REPEATED

So, while the Recovery Act saved the U.S. economy from a worse economic fate— 

today’s economic fate is still poor. Today’s unemployment rate stands at 9.5% and 

a series of economic overhangs—the overhang of average hours decline, the overhang of the ‘‘missing labor force’’ (the 2 million workers who withdrew from the 

labor force since the recession began and who will certainly return looking for work 

in coming years), and the overhang of business and consumer debt that will keep 

spending in both sectors cautious in coming years—mean that, absent further support to the economy, it will take an agonizingly long time to bring it down to levels 

seen before the recession began. For example, the Congressional Budget Office 

(CBO) has forecast the unemployment rate will average 6.3% in 2013—this is higher 

than the peak rate reached during the recession and jobless recovery in the early 

2000s recession. Figure I presents the simplest presentation of the current state of 

the labor market, documenting how many jobs are needed to return the unemployment rate even to its rather undistinguished level of December 2007. 
83 

7See the appendix for evidence on the poor performance of state and local spending since the 

recession began. 

Further, even this grim forecast for unemployment assumes the economy grows 

consistently in the next couple of years. Given recent headwinds that have picked 

up steam in the past few months, even this cannot be assured. The most recent 

monthly employment situation demonstrated that the pace of private-sector hiring 

has decelerated and wages actually fell in inflation-adjusted terms. State and local 

spending has actually contracted in each of the past 3 quarters—only the 4th time 

in the post-war period that this has happened.7 Given that state and local budget 

holes look set to widen in coming years, this means that this important sector will 

be dragging on growth for quite some time. Lastly, many of the major trading partners of the United States have embraced fiscal austerity; this means that net exports will not be a source of strength moving forward either. 

Economic data in the form of rapidly decelerating prices and wages is also sending 

strong signals that excess capacity in the economy is threatening to grow again. Essentially all indicators of overall price pressure in the economy show rapidly decelerating price growth, and several show outright deflation (falling prices) in recent 

months. Figure J shows one of the most reliable and well-measured of these series— 

the market-based deflator for personal consumption expenditures excluding food and 

energy. This is not only a symptom of poor economic performance, this disinflation 

also causes real interest rates to rise just when we want them to fall. In short, this 

disinflation not only signals slower growth, it also adds to the growth headwinds 

facing the economy. 

Perhaps most distressing, the boost to growth provided by the Recovery Act is actually fading—and fast. The current quarter (the third quarter of 2010) is probably 

the last time the Act will contribute 1% to annualized GDP growth. By the last 

quarter of this year, it will be contributing next to nothing. Given that GDP growth 

in the past 3 quarters would have likely been zero without the influence of Recovery 

Act spending—it seems clear that more support is needed to provide the bridge to 

the period where private incomes and spending can generate economic growth on 

their own. 

CONCLUSION

The Recovery Act worked just as advertised, creating nearly 5 million full-time 

equivalent jobs in the economy when such growth was desperately needed. However, 

the bulk of its effect has passed—and millions of jobs remain desperately needed. 
84 

It seems amazing now, but 30 months ago Congress acted quickly to pass a $160 

billion stimulus package to avoid the prospect of unemployment rising from 5 to 6%. 

The unemployment rate now stands at 9.5% and further fiscal support does not 

seem to be forthcoming. This testimony tried to make the case that there is no economic reason to believe things have so changed in the past 30 months as to make 

further fiscal support unwise. 

The fiscal support provided by the Recovery Act was needed, effective, and cheap. 

Further support is clearly needed and, if structured well, could be very effective and 

cheap as well. 

REFERENCES

Bachmann, Ruediger and Steffen Elstner and Eric Sims (2010). ‘‘Uncertainty and 

Economic Activity: Evidence from Business Survey Data’’. Working Paper. 

Eggerston, Gauti (2009). ‘‘What fiscal policy is effective at zero interest rates?’’ Federal Reserve Bank of New York Staff Report, No. 402, November 2009 

Hall, Robert (2009). ‘‘By How Much Does GDP Rise if the Government Buys More 

Output?’’ Brookings Papers on Economic Activity, 2009, 2, pp. 183-231 

Woodford, Michael (2009). ‘‘Simple Analytics of the Government Expenditure Multiplier’’. Working Paper. Columbia University. 

APPENDIX

A common misunderstanding of the Recovery Act is that it has led to a ‘‘flood of 

government spending’’. In fact, federal non-defense spending has actually grown essentially exactly in line with historical averages following recessions. Figure A1 

below shows the growth of federal spending in this recession (solid black line) compared to the average growth following recessions in all business cycles since World 

War II (dashed line). The figure also shows (shaded gray areas) the highest and lowest episodes of federal non-defense spending. The clear takeaway from this figure 

is that there has been no historic ‘‘flood’’ of federal government spending following 

the onset of the most recent recession. 

Figure A2 shows that there also has been no flood of state and local spending. 

Even with the significant support provided to state governments through the Recovery Act, state and local spending has actually been at near-lows relative to other 

business cycles. 

Chairman SPRATT. Thank you very much. 

Mr. Hensarling. 

Mr. HENSARLING. Thank you, Mr. Chairman. 
85 

Dr. Bivens, I have no doubt you have stellar economic credentials. I think your marketing skills are going to, unfortunately, 

need a little polish here. You have got a very great challenge in 

front of you trying to convince the American people that this act 

has worked largely as advertised, because what I heard the President of the United States say was that, if we pass this, then we 

weren’t going to have unemployment exceed 8 percent, and we are 

still hovering around almost double-digit unemployment. 

I think you know that the underemployment figures are even 

worse. And, frankly, if it wasn’t for our fellow citizens giving up 

ever finding employment and leaving the labor force, the unemployment rate would be even larger. 

When you said it was cheap, with the interest factor at $1.2 trillion, I hope I am never in this town so long that I can conclude 

that $1.2 trillion is cheap. 

I have got to tell you, I have tried to study this as close as I can. 

I don’t have a Ph.D. in economics. I have an undergraduate degree 

in economics. 

I have no idea where the citation of these 3 million jobs created 

or saved comes from. It certainly is not reflected in the President’s 

own Department of Labor data. I just have no—I hear the number 

repeated. I think some people think if they repeat it often enough, 

somebody will believe it. I don’t think the American people are believing it. 

So, again, you have got a bit of a challenge there, as do other 

proponents. What I, again, what I see all over my part of America 

is people who are still struggling trying to see what good this has 

done. 

Dr. de Rugy, is that how I pronounce it? 

Ms. DE RUGY. Yes. 

Mr. HENSARLING. Is that close enough? Sorry. 

Ms. DE RUGY. Close enough. 

Mr. HENSARLING. Sorry. I didn’t see it in your testimony, but 

someone had told me that you had studied the Japanese experience 

with their ‘‘lost decade.’’ We all know that they faced a similar real 

estate bubble burst. Theirs was commercial; ours, unfortunately, 

may still yet be commercial, but it has started out as residential. 

Have you studied their experience with various stimulus plans? 

Ms. DE RUGY. Well, I mean, I have looked at the aggregate history of Japan and that area, and they had a different stimulus bill. 

And they spent a gigantic amount of money, and pretty much all 

they have to show for this is very nice roads—I will concede that— 

but a pile of debt that won’t go away and pretty much no economic 

growth. This is why it is called the ‘‘lost decade.’’ 

Mr. HENSARLING. Aren’t we really working in Japan on the second lost decade now? 

Ms. DE RUGY. Yes. 

Mr. HENSARLING. I mean, they essentially had flat economic 

growth for 15, 16 years now. 

Ms. DE RUGY. Yes, probably. But they themselves call it the ‘‘lost 

decade.’’ And so, they are not just labeled by Americans. They have 

had—they have tried stimulus. It has been a gigantic amount of 

money. They have massive amount of debt, way more—— 
86 

Mr. HENSARLING. Don’t they have the largest, I believe, the largest debt per capita of any industrialized nation in the world? 

Ms. DE RUGY. Yes. 

Mr. HENSARLING. And isn’t it also true, as they embarked upon 

this stimulus mania that they have gone, I believe, from the second 

highest per capita GDP to, I believe, tenth? Do you know the data? 

Ms. DE RUGY. I don’t know. I mean, I can’t remember exactly 

what their ranking is, but, I mean, not growing will do that to your 

economy. You will be passed by a lot of countries. 

And by the way, I come from France. I have a lot of experience, 

firsthand, of what government spending does to a country, and I 

would like to not see this happen to America. 

In the last 10 years, France, which is a bigger country than the 

U.K., has actually seen not only the U.K. pass them by in terms 

of income per capita, but also for GDP overall, and that is because 

the size of the French government has been gigantic for many 

years. 

Mr. HENSARLING. Speaking of the size of government, can I have 

chart number 5, please? 

Doctor, did I hear you in your testimony say that, according to 

your analysis, at least of the jobs that actually appear in the hard 

data, that four out of five of these are government jobs; is that correct? 

Ms. DE RUGY. Yes, that is correct. 

Mr. HENSARLING. Which, to some extent, may help account for 

the increase of 400,000 jobs since the stimulus act was passed 

versus the 2.6 million that have been lost in the private sector? 

Ms. DE RUGY. Yes. 

Mr. HENSARLING. And did I also understand you say that, according to your analysis—I don’t have that portion of your testimony. 

Ms. DE RUGY. Can I add something about this? 

Mr. HENSARLING. Please. 

Ms. DE RUGY. This morning, I read actually an academic peerreviewed study that actually looked at a selection of countries, 

OECD countries, and they looked at data for 40 years, and they 

looked at the impact of increasing public employment that it would 

have, the impact on unemployment rates, and what they find—and 

this is, again, peer-reviewed articles, and I am happy to send it to 

everyone if you want it. 

What they show is that for every hundred jobs of government 

jobs created, the private sector lost 150 jobs. 

They also have this data point which means the more the private 

sector grows—the public sector grows, you can basically track for 

100, you have 33 percent increase in unemployment rate. 

I mean, these, it has consequences. It is not one job for one job. 

It is not like, well, it is okay; you lose a job in the private sector, 

and you gain a job in the public sector. 

In fact, what this study shows is that actually when you gain a 

job in the public sector, you lose more than one job in the private 

sector. 

Mr. HENSARLING. Just a couple of more questions, and then I will 

yield back. I don’t have the quote right in front of me, but recently 

it got a fair amount of national air play when Speaker Pelosi said, 

and I hope I do the quote justice, that one of the best ways to cre-
87 

ate jobs is to send out more unemployment checks. And, again, I 

don’t quite have the quote at my fingertips. I hope—I believe that 

to be a fair representation of what the Speaker said. 

Are you familiar with her comments? And in your studies as a 

professional economist, how valid of an economic theory do you believe that to be? 

Ms. DE RUGY. What the American people who are unemployed 

need more than anything else is a job, and it is not until we get 

these people a job, a sustainable job, one that doesn’t rely on the 

Federal Government keeping, pumping money in the economy—— 

Mr. HENSARLING. So, unemployment checks financed with more 

national debt does not sustain long-term paychecks? 

Ms. DE RUGY. Well, it doesn’t, and I understand that this is relief 

for the people who are unemployed, but this has a cost. We need 

to acknowledge that government spending has a cost, and that is 

because the Federal Government doesn’t have a magic wand that 

actually produces money. 

When the government spends a dollar, it has to take it first out 

of the economy in the first place. And, in fact, what Robert Barro 

at Harvard has shown, it is not only that it needs to take a dollar 

out of the economy, but when they tax it—and by the way, it is 

kind of the same thing when you borrow it, because then you have 

to tax it again, and that is also money that is not available for the 

private sector to borrow, capital to borrow—what happens is that 

the economy shrinks by $1.10. It has true consequences, and we 

need to actually look at the data. 

Mr. HENSARLING. Last question: can you elaborate on what you 

see as the long-term adverse consequences to this act, since it appears that some in Congress are wanting to pass yet another stimulus act? Clearly, we need to appreciate what the long-term cost 

and impact of the first act will be. 

Ms. DE RUGY. Spending more stimulus will be like doubling down 

on a bad bet. We have to understand what the stimulus is doing. 

I mean, I am not saying that the people who are getting this money 

are not feeling the benefit of it when they are doing it. But imagine 

if I have a broken arm, and instead of the doctor fixing my arm 

or giving me the proper treatment, he was giving me morphine. I 

would feel better, surely, for a while. But it wouldn’t change anything. When the morphine ran out, my arm would hurt again. And, 

worse, it might actually fix itself in a very unreversible way. The 

stimulus does this. 

You hear all the time about all the money that went to the 

States went to finance jobs that would have been lost in the public 

sector otherwise. What it did is allow State budgets that have, 

States who have real spending problems and budget gaps, to actually prolong the mistake of their past. This is what the stimulus 

is doing, and we should not, we should not allow this to continue. 

And moreover, the business community has acknowledged, the 

Business Roundtable has sent a letter—the Business Roundtable, 

that has been a very strong ally of President Obama, sent a letter 

to him to say that the business community is not creating jobs because of the policy of this Administration. They are not. 

All the government is doing right now is injecting uncertainty. 

And businesses and families, and American families, cannot move 
88 

and won’t move, create jobs, invest, or do anything, as long as the 

economic climate is so uncertain. 

Mr. HENSARLING. Dr. de Rugy, thank you very much, and clearly, 

France’s loss is America’s gain. 

Ms. DE RUGY. Thank you. 

Chairman SPRATT. Dr. Bivens, would you like to respond to that? 

Mr. BIVENS. Sure. There are a lot of points raised there, and I 

would like to just get to a couple of them. One I will absolutely concede; I am probably the world’s worst marketer. That said, I think 

there is plenty of evidence and citations that I can give you have 

that supports this number of 3 to 4 million jobs; I mean, Congressional Budget Office for one, numerous private macroeconomic forecasters. 

And I will say one thing, I think the other witness, with all due 

respect, has made the common mistake of looking at recovery.gov 

to see the full impact of the Recovery Act. I have got some, essentially—the direct spending on infrastructure and direct purchase of 

goods and services by government, that has been about one-eighth 

of the money that has gone out before. 

I mean, let’s take a look at the Recovery Act. The Recovery Act 

was essentially one-third tax cuts, one-third transfer payments, 

one-third direct spending. The tax cuts and the transfer payments 

were in there to get out the door first. Spending takes some time 

to open the pipeline and get the projects up, especially when you 

are trying to be really scrupulous about making sure the money is 

not poorly spent. 

And so, the Recovery Act essentially so far has been tax cuts and 

transfer payments. And if you look at recovery.gov for those, you 

are not going to find them. If you look at recovery.gov over the next 

couple of months, what the Administration has called ‘‘Recovery 

Summer,’’ you are going to see that ramping up because, finally, 

that infrastructure part of it is now coming online. The tax cuts 

and transfers are actually fading out, which is a problem, because 

they are going to be fading out in the second half of this year when 

the economy needs more support, and the infrastructure projects 

will be ramping back up. 

The footprint of the Recovery Act in supporting the economy really should be seen in disposable personal income of households, and 

that is easy to see. Look at the macroeconomic data, the wedge between personal income minus transfers, minus government transfers, that is kind of the private sector incomes that are being generated in the economy, versus disposable personal income, that is 

more than $700 billion at this point. About $200 billion of that is 

due to the Recovery Act. The rest is just due to automatic stabilizers as people’s incomes fall, tax collections fall, people start 

qualifying for programs for safety net spending. So, the footprint 

for the Recovery Act should be looked for in disposable personal income, and it is as clear as day there. 

It will start showing up more robustly on recovery.gov pretty 

soon, but so far, the Recovery Act has been mostly tax cuts and 

transfers. 

And I will just say one thing, every academic study that looks 

at data to say what does deficit finance, government spending, and 

tax cuts do to an economy? If it does not separate out periods 
89 

where interest rates are at rock-bottom levels, like today, you 

should not listen to it. 

Because in 2005, I was not saying we should have a $1 trillion 

deficit to spur the economy because, in 2005, the unemployment 

rate was maybe a little too high for my taste, but it was not a oncein-a-generation crisis, and interest rates were high enough that we 

could lower them if the economy did enter a crisis. 

When you look at the effect of a big stimulus package like the 

Recovery Act, and you look through history, you need to look at 

those episodes, like the Great Depression, like Japan in the 1990s, 

where interest rates have been at rock bottom. 

And I will say one thing about Japan, because it is often pointed 

to as a failure for fiscal policy. It turns out, they never committed 

to fiscal stimulus. I mean, they were completely stop and go. They 

would have the stimulus package in 1993. They would raise taxes 

in 1994 and close the gap. They would have a stimulus package in 

1995. Then, they would raise taxes in 1996. 

Adam Posen, who used to be at the Institute for International 

Economics—now he is on the Monetary Policy Committee of the 

Bank of England—pretty much the world’s biggest expert on what 

happened in the Japanese macro economy in the 1990s, he said the 

clear lesson for that was fiscal policy worked when it was tried. 

And you see the same lesson from our own history. You had increased deficit spending helping pull the economy out of the Great 

Depression in the ’30s, until 1937, when President Roosevelt listened to the people spreading fears about deficits, pulled back the 

spending, targeted the surplus, the economy fell right back into recession. We shouldn’t make the same mistake twice. 

Ms. DE RUGY. So, taxes shouldn’t be increased, then. 

Mr. BIVENS. Eventually they should, yes. But, no, in the next two 

years—or I would say this, if the question is about, should the 

Bush tax cuts be allowed to expire? Absolutely, on the top end, 

they should, and we should then inject more purchasing power in 

the economy with things like unemployment compensation, food 

stamps, infrastructure spending. 

Mr. JORDAN. Would the gentleman yield? 

Chairman SPRATT. Ms. Kaptur is next. Then, I will come to you 

right after. 

Mr. JORDAN. I will wait. 

Chairman SPRATT. Let me go to Ms. Kaptur and then Mr. Jordan. 

Ms. KAPTUR. Thank you, this is a very good exchange, Mr. Chairman. 

Good witnesses. Thank you both. 

Let me just ask you, on the trade deficit of the United States and 

its impact on GDP. Neither of you focused on that, as I can tell, 

in your testimonies, but I think, last year and this year, we will 

accumulate another trillion dollars of trade imbalance with the 

world in our country. And I have read different studies that talk 

about how many points that reduces GDP. 

Do either of you have a comment on that? And then looking back 

over a decade of trade deficits in our country that probably total 

close to $9 trillion to $10 trillion, could you discuss the impact of 

that on an economy over time? 
90 

Mr. BIVENS. Do you care who goes first? 

Ms. KAPTUR. No. 

Mr. BIVENS. Thank you. 

Yes. I would say a couple things. I mean, one troubling chronic 

figure of the U.S. economy over the past decade has been exactly 

the trade imbalances you are talking about. Throughout the—after 

the onset of the recession that began at the end of 2007, the trade 

balance actually played a stabilizing role. We saw the trade deficit 

fall from about 6 percent of GDP to about 3 percent at the peak, 

and that was pretty much the only bright spot in gross domestic 

product over the past, say, 30 months. 

That is one reason why I am very worried about the future. I 

think a serious headwind facing the U.S. economy today is precisely that we are not going to be able to rely on positive contributions from the trade balance as we go forward. And the main reason for that is many of our trading partners have embraced austerity. They have clamped down. They are going to target balanced 

budgets. You see this especially in Europe, and that is going to 

make it very, very hard for U.S. exporters to send stuff to the rest 

of the world and for exports to be an engine of growth. 

And so, based on that, I think the President was exactly right 

to go to the G-20 last month and try to get these countries on board 

with emphasizing growth first. So, I think the trade deficit, it is a 

big long-run problem, because it has us accumulate foreign debt, 

which is a problem. And I think over the next year and a half, 2 

years, it is actually going to swing from being a bright spot in the 

economy to a drag on growth, and that is one reason why I am so 

worried about what happens to the economy when the Recovery Act 

peters out if we do not do more fiscal support. 

Ms. KAPTUR. On the trade deficit, how many points does it knock 

off the GDP, just approximately, in a year. Let’s say you have a 3, 

4, 5 percent GDP. What percent does it knock off, a quarter? 

Mr. BIVENS. Well, it kind of depends on the underlying state of 

the economy. 

So, for example, in 2000, we had a healthy economy. We had a 

4 percent unemployment rate. We also had a 4 percent of GPD 

trade deficit. I would have said in that year the trade deficit was 

not knocking anything off GDP. Essentially, we were able to make 

up for any drag on the trade deficit because capital coming into the 

U.S. from the rest of the world was keeping interest rates low. 

I think for an economy like today that has a lot of excess capacity 

and a 10 percent unemployment rate, if we see the trade deficit 

rise by a percentage point of GDP, that will, one for one, lower domestic incomes in the United States. So, it depends on the underlying state of the economy. But I think, going forward, every increase in the trade deficit or 1 percent of GDP increase in the trade 

deficit essentially knocks a percentage point off of growth. 

Ms. DE RUGY. I am not a trade expert, but I have always been 

very puzzled by all this worry about the trade deficit. I mean, the 

reason why we have a trade deficit is because we go and buy things 

cheaper abroad, and that is a good thing for the American people. 

It is a very good thing. Ultimately, it doesn’t really matter where 

things are produced. Because, if Americans are able to buy goods 

cheaper, it means that they can either save more or buy other 
91 

things, more of other things, and that is a very good thing. In fact, 

this is what economic growth is about. It is about being able to 

produce more things for a lower price. 

We used to spend a gigantic amount of money on food. I mean, 

that used to be like the biggest part of the American people’s budget; and it is not anymore. That is because the American people 

have been able to actually buy food cheaper. 

So, in times where we don’t have a trade deficit, we are worried 

because—and so, again, I am not an expert, but I am always really 

puzzled by this, this worry about—— 

Ms. KAPTUR. Well, I don’t know about France, Doctor, but in our 

country we have seen the outsourcing of millions and millions and 

millions of jobs. One of the reasons for the unemployment is this 

just didn’t start overnight. We have outsourced an enormous 

amount of good-paying jobs that this country used to have all over 

this country, and it is a serious issue for us. 

In France, I wanted to ask you, what percent of the GDP or what 

percent of the economic activity in France is actually publicly subsidized? Is it half yet? What percent is government of your economy 

in France? 

Ms. DE RUGY. Well, I can tell you that everyone in France, no 

matter what your income is, gets something from the government. 

Ms. KAPTUR. But, isn’t it about half? 

Ms. DE RUGY. It is more than half, yes. 

Ms. KAPTUR. Well, we are nowhere close to that in this country. 

Ms. DE RUGY. We are on our way. We have reached a benchmark 

where more than half of the American people actually get something from the government. That happened like a few years ago. 

Ms. KAPTUR. Well, a lot of our people pay into the government, 

so they deserve to get something back. If it is unemployment compensation or Social Security, they have paid for those benefits. 

Ms. DE RUGY. Except that the data shows that what they get 

back from the government has a lower return than if they had actually spent this money in the private sector, and this cannot be 

ignored. 

And if I can add something about the CBO projection that Dr. 

Bivens mentioned, I mean, these are projections. Even CBO acknowledged that they never went and checked whether these jobs 

were actually created. These are projection. 

Dr. Romer’s testimony today, I read it, came and actually acknowledged that the 3 million jobs are just projections. There is not 

a name, there is not an American body behind each one of these 

jobs created that they are claiming. They rest on rosy projections 

about what government spending creates. 

Again, the CBO, the CBO itself, the Director was asked whether 

his projection came true, and he acknowledged that they didn’t go 

and check. So, we keep repeating these numbers, these projection 

numbers, and no one went to check. It is like the weatherman who 

says tomorrow it is going to be 70. It turns out tomorrow it is 40, 

and the next day the weatherman still says it was 70. 

Ms. KAPTUR. Thank you, Dr. de Rugy. 

Did Dr. Bivens want to respond to that? I can tell you in the district that I represent, where highway projects are going on right 

now, there are individuals who are working who would not be 
92 

working. And, you know, they paid their gas tax. They have a right 

to get money back to fix the roads in the areas that they use. 

If I look around our community, police officers and teachers and 

people are working, and many of our small businesses are taking 

advantage of the tax credits that were provided to keep people on 

and to hire people. So, Dr. Bivens, did you want to comment? And 

then my time has expired. 

Mr. BIVENS. Yes, very quickly. Thank you. 

I guess I don’t understand this. They are not projections. They 

are statistical analyses. I mean, if we are going to throw out any 

statistical measure of how economics works, we are going to throw 

out a whole large body of knowledge. 

Like I said, two-thirds of the recovery package, tax cuts, transfer 

payments, were not directly government-hired jobs. So, there is not 

going to be a face. There is not going to be a name to them. 

Basically, I got—I can’t remember the exact amount, but everyone who earned over $3,000 in a year got the Making Work Pay 

tax credit as part of the Recovery Act. It boosted my income by I 

think $600 to $800. I forget which. I spent it. That helped create 

economic activity in the country. Whose name is attached to that 

money I spent, I have no idea. But I did spend it, and it did go 

out, and it did support purchasing power in the economy. 

Same thing when somebody gets an unemployment check and 

they can actually afford to buy some new clothes for their kids to 

go back to school rather than making them wear the ones from last 

year. What was the name of the person that benefited because they 

went to Sears and bought the clothes? Of course we don’t know 

that. You can’t track that. You have to use statistics to do that. 

You look at the CEA. You look at the private sector and macro 

forecasting firms. They all say that those historical, statistical relationships applying in the recovery package get you that 3 to 4 million jobs. 

Ms. DE RUGY. Well, actually, Dr. Romer’s testimony today, she 

said she is not looking at historical data, and basically she admits 

she is guessing. 

Mr. BIVENS. No, that is not right. Okay, maybe from today, but 

from the third quarterly report, they used VARs, they used historical relationships. They absolutely did. 

Ms. DE RUGY. In her written testimony, she said she is not looking at historical data anymore, so that is why all these previous estimates of the multiplier doesn’t hold. So, she says we are just like 

guessing. 

Chairman SPRATT. Mr. Jordan. 

Mr. JORDAN. Thank you, Mr. Chairman. 

Wouldn’t you assume, though, the American people, when they 

hear the 3 million claim, they assume that the government is actually accounting for 3 million jobs created or saved? I mean, the people that are paying for this, that is what they assume. Agree? 

Mr. BIVENS. I am sorry? 

Mr. JORDAN. You would think the American people, though, 

when they hear the claim 3 million jobs, their assumption is those 

are jobs created. When the government says they are jobs created 

or saved, they actually think there is a real person that actually 

had a real job created or saved? 
93 

Mr. BIVENS. Yes, because there is a real person. But the idea 

that that real person’s name is in a government database is what 

I am disputing. 

Mr. JORDAN. Okay. Let me go here, if I could. I have reached 

kind of the same conclusion I think Dr. de Rugy reached, Dr. 

Bivens, when you were responding to Mr. Hensarling’s comments 

when you were describing the lost decade in Japan and said stimulus followed by tax increased the stimulus fund. You suggested a 

pattern. It seemed to me you were indicating that we should not 

be raising taxes. Obviously, that is what this Administration plans 

to do. 

And if we can go further, I mean, January 1st of this year they 

plan to raise taxes by letting the tax cuts of 2001 and 2003 expire. 

The highest marginal rate is going to go up, dividend is going to 

go up, capital gains is going to go up. And they are also talking— 

if you followed statements by Senator Feinstein, Senator Dorgan, 

and statements by Majority Leader Hoyer—to not keep the promise 

that the President made that families making $250,000 or less 

would not see a tax increase. So, do you think they are headed 

down the wrong path, based on your previous answer in describing 

what took place in Japan? 

Mr. BIVENS. No, not necessarily. 

Mr. JORDAN. Well, that surprises me, based on your previous answer. 

Mr. BIVENS. Let me clarify. 

Mr. JORDAN. I figured you would. 

Mr. BIVENS. We have a budget problem in the long run, and we 

are going to need more revenue, and we are going to need taxes 

that are higher. And I, for one, sure don’t feel bound by the pledge 

to not raise taxes on anyone earning less than $250,000. I think 

we will have to even go down the income scale when it comes time 

to close the budget deficit. 

Mr. JORDAN. I always suspected that was the case with the left, 

but you are willing to say it. Go ahead. 

Mr. BIVENS. In terms of the next couple of years, I think you 

could easily have a situation where you allowed the Bush tax cuts 

on the upper income earners to expire; and then, instead of then 

allowing that to clamp down on economic demand a little bit, you 

then do more fiscal support. You do the extension to COBRA, to 

unemployment insurance, to food stamps. In COBRA, that was 

very effective in the Recovery Act. So, I think it is easy to increase 

fiscal support going forward while still letting the Bush tax cuts on 

the high-end earners expire. 

Mr. JORDAN. The government gets to control all that, which 

scares me as well. 

Let me ask you both about this; and, Dr. de Rugy, we will probably start with you. Art Laffer—and I asked this of Chairman 

Bernanke when he was here about 5 weeks ago. Art Laffer had a 

column about a month ago in the Wall Street Journal where he— 

and, frankly, on today’s front page of the Wall Street Journal, the 

lead story is, ‘‘Fed may revise their growth estimates for the remainder of this year and into next year.’’ 

Laffer’s point was, look, people make decisions based on policy 

decisions about how they spend their money or when they take in-
94 

come, when they take profits. And his point was people are taking 

income and profits this year in anticipation of what is going to happen on January 1st, those tax cuts expiring. And we may not have 

the growth that some are even predicting for next year, again, kind 

of confirming, I think, what Dr. Bivens said earlier in response to 

Mr. Hensarling. 

Dr. de Rugy, would you like to comment on that? 

Ms. DE RUGY. It is obvious that people make decisions—whether 

it is families or businesses, they make decisions based on what is 

happening in the economy and what they project will happen in the 

economy. In fact, it explains why, when the government spends a 

dollar, then the economy shrinks rather than grows, because people 

revise their expectations and they know that they are going to be 

taxed in the future. 

On top of that, they also, there is all this uncertainty that has 

been injected that actually forces them or gives them an incentive 

to not use the dollars, even the ones that have not been taxed. 

The Federal Reserve came up, last week I think, with a number 

of $1.8 trillion of capital who are sitting on the sidelines because 

of the uncertainty injected by the government in the economy. 

Mr. JORDAN. Dr. Bivens, would you agree with that? 

And I have heard those exact sentiments from constituents of 

ours, small business owners, larger business owners who say, look, 

we know that tax increases are expected. We still don’t know what 

is going to happen with this cap-and-trade. We still haven’t figured 

out what exactly this health care bill means for the bottom line of 

our business. And because of all that uncertainty, as the doctor 

talked about, they are not doing the things we would typically see 

as an economy starts to come out of a recession. Would you agree 

with that? I mean, I have heard it firsthand from constituents. 

Mr. BIVENS. No, not really. I mean, I am sure there are some 

people out there who say that. 

But look at the NFIB study that somebody mentioned earlier, the 

National Federation of Independent Businesses. What has been 

spun a lot is uncertainty is what is hurting these businesses. If you 

look at the number one thing the actual business owners said was 

the problem facing them: not enough customers. And there is no 

reason to invoke uncertainty or anything as to why there are fewer 

customers than 2 years ago. The reason why there are fewer customers is because we have lost about $8 trillion in housing wealth, 

because we have about 5 to 6 million more people unemployed. 

So, I don’t think you have to go anywhere beyond looking at the 

aggregate data to see why the customers have dried up. I don’t 

think you have to resort to psychology or anything like that. You 

can just look at the wealth and the incomes of American families. 

They have completely dried up. It has been a shock to private 

spending, and that is why you need public support to get the economy to a healthier place. 

Mr. JORDAN. Mr. Chairman, if I could, this past month we went 

over $1 trillion in deficit for this year. We are at $13 trillion national debt. Obviously, you cannot sustain that kind of spending in 

the long term. 

I have actually introduced a budget that gets to balance over the 

budget window time frame. We think it does the right things. 
95 

But long term, to deal with, I mean, the unbelievable budget situation we are in, what do you think, how do you think we address 

that? I happen to think that the only way you get there, you first 

have to limit spending, which our budget does. You don’t make the 

problem worse, in my judgment, by adding taxes. But the only way 

you deal with it is through economic growth. 

Would you both agree with that? I don’t care who starts. I mean, 

you have to have—when you are talking about this kind of situation, you have got to have economic growth long term to actually 

begin to pay down the debt and deal with the situation. 

Ms. DE RUGY. I mean, I would agree except that, considering the 

size—if you don’t cut spending, we are not—— 

Mr. JORDAN. I am for that, too. I get that. 

Ms. DE RUGY. But, I mean, we need to cut spending dramatically. 

Because we are not going to be able to grow ourselves out of the 

economy, especially if we continue growing. 

And, by the way, if you unpack the GDP number, you will see 

that the reason why GDP is growing is because of the injection of 

government funds. Are we willing to continue this? I mean, once 

you take away government spending, the GDP will fall down. 

And, by the way, we have spent, on this discretionary—it is not 

just tax cuts that has been spent. The money in the recovery act 

is almost $200 billion in contracts and grants and loans. So, it is 

not cheap change. So, a lot of the stimulus money has been spent. 

It is not just tax cuts, which most of them are spending. So, we are 

not going to grow ourselves out of this spending explosion that is 

coming our way, and we will see the most massive transfer of 

wealth from the relatively young and poor to the relatively old and 

wealthy. 

And so, we need to cut spending, and we need to cut it now. Because the looming entitlement crisis that we have been talking 

about is today, is starting now. The Social Security Trust Fund is 

in cash flow deficit. And even if it kind of maybe gains a little bit 

of money in the next few years—which is not sure if the economy 

doesn’t grow. And, by the way, the Fed today has actually stipulated that it is going to slow down rather than grow. I mean, we 

are not going to get ourselves out of it. We need to cut spending, 

and we need to cut it now. 

Mr. JORDAN. Doctor? 

Mr. BIVENS. We absolutely need growth. 

Can I say one thing? Just based on the latest Congressional 

Budget Office long-term budget outlook, to me I read that document, and I see the number one thing you need to do is allow the 

health reforms that were passed to actually happen. If you look at 

the extended baseline where they allow the revenue to raise and 

the spending reductions caused by that health reform act to happen, we don’t have much of a budget problem over the next 10, 15 

years. If you renege on those, then you have got a big budget problem. 

So, I think we should actually, one, acknowledge that the health 

reform act was passed with the biggest deficit reduction effort 

maybe in history, absolutely in a long time. And the degree to 

which we have a budget problem over the next 10 to 15 years is 

the degree to which we renege on what was put in place in that 
96 

health reform package because health reform is the long-term driver of budget deficits. 

Chairman SPRATT. Thank you both for your spirited testimony. 

We appreciate your patience also in waiting your turn, but that is 

why we gave you as much scope as we could for your discussions 

this afternoon. We benefited from what you had to say, and we appreciate you coming. 

One final housekeeping detail, I would ask unanimous consent 

that members who did not have the chance to ask questions may 

submit questions for the record within seven days. 

Thank you again very much for coming. 

The committee stands adjourned. 

[Questions submitted for the record and their responses follow:] 

QUESTIONS SUBMITTED TO WITNESSES FOR THE RECORD

QUESTIONS FROM CONGRESSMAN MIKE SIMPSON

SECRETARY CHU: I appreciate you appearing before the Committee. I wanted to 

ask you a question regarding funding for loan guarantees. 

As you know, I am a big supporter of the loan guarantee program and believe 

it is an important tool to enable energy projects to access credit markets during a 

time when credit is extremely hard to obtain. 

I understand that the Recovery Act included $4 billion in appropriations for loan 

guarantees for renewable energy projects, which I believe provides you with $32-$35 

billion in additional authority, of which only 6% has been committed, correct? 

In addition, I understand that DOE has received $18.5 billion in loan guarantee 

authority for renewables through the regular appropriations process, of which 1.7%, 

or $2.4 billion, has been committed or guaranteed. If you add that all up, by my 

count, DOE has around $50 billion in unspent loan guarantee authority for renewable energy. 

Could you tell me if that number sounds accurate or how much loan guarantee 

authority for renewable remains at DOE? How much of the ARRA funding has been 

awarded? 

As I understand it, the goal of the ARRA funding particularly is to get the money 

out the door quickly to rapidly create jobs, and I am extremely concerned that very 

little of that funding has gone out. Are there an insufficient number of qualified 

projects applying? Could you please explain why DOE has been unable to obligate 

these funds more rapidly? 

Secretary Chu, I realize that while the budget requested additional funding for 

nuclear projects, it did not include more funding for renewable. Could you explain 

the reasoning behind that? 

SECRETARY VILSACK: I know that some companies that provide and build 

broadband infrastructure are having difficulty doing so because they have to compete against companies that have received federal subsidies under ARRA. 

I’m concerned that, in essence, the government is picking and choosing winners 

in the private market. 

Since more than $7 billion in federal funds were provided for broadband infrastructure development (half to USDA and half to Commerce) and it is also funded 

in regular appropriations bills, what criteria do you have in place to ensure that 

the government is not interfering in what the private sector is trying to do and is 

not creating an unfair advantage to grant recipients over their competitors? 

QUESTIONS FROM CONGRESSWOMAN MARCY KAPTUR

1. The funding provided to the Department of Energy through the alternative energy loan guarantee program in the American Recovery and Reinvestment Act is 

critical in accelerating development of the domestic alternative energy market. 

Especially at a time when credit markets are frozen for large scale projects, the 

DOE loan program represents a critical opportunity for the domestic industry. 

In my district, a number of the worlds leading solar manufactures have invested 

millions in expanding manufacturing lines and are relying on the loan guarantee 

programs to create continuity in their manufacturing capacity. 

I am concerned that the interagency process required to process applications for 

the loan program needs attention to ensure that loan guarantee applications are 
97 

processed with the required sense of urgency. What recent actions has the agency 

taken to accelerate approval of loan guarantees? 

2. Please update the committee on the progress you have made in obligating DOE 

Loan Guarantee funds in both project and dollar figures for approved loans. 

3. While the Department of Energy is the primary lead for these projects, OMB 

has exerted significant management authority of the program. What are the OMB’s 

roles and responsibilities in reviewing, and approving loan guarantee applications? 

5. Are OMB’s activities operational or consultative? 

6. What is the statutory authority basis for OMB’s role in reviewing and approving these applications? 

7. Does OMB or the Department of Energy have established bench marks to complete the loan approval process? Does OMB take into consideration the timeline by 

which an applicant can start construction? 

8. Has the Department of Energy hired additional staff with the expertise to perform these activities and what role has OMB had in conducting the same review? 

9. To what degree does DOE review domestic content capacity for these proposed 

Loan Guarantee approvals? 

10. One of the projects currently under review by DOE is a large project in Southwestern Arizona proposed by First Solar called the Agua Caliente Solar Project. It 

is my understanding that this project, if approved, would allow First Solar to continue operations at their plant in Northwestern Ohio. Approving projects which 

have the potential for domestic sourcing should remain a priority for the administration. For the projects currently in the DOE loan guarantee pipeline either approved or pending, what can the administration tell us about the ripple effect of job 

creation or retention? 

11. Specifically for the Agua Caliente Solar Project, has DOE conducted any analysis of the number of jobs that this project would create/retain at the First Solar 

manufacturing facility in NW Ohio? 

SECRETARY VILSACK’S RESPONSES TO QUESTIONS SUBMITTED

QUESTIONS FROM CONGRESSMAN MIKE SIMPSON

Questions from Congressman Mike Simpson 

Secretary Vilsack: I know that some companies that provide and build broadband 

infrastructure are having difficulty doing so because they have to compete against 

companies that have received federal subsidies under ARRA. 

I’m concerned that, in essence, the government is picking and choosing winners 

in the private market. 

Since more than $7 billion in federal funds were provided for broadband infrastructure development (half to USDA and half to Commerce) and it is also funded 

in regular appropriations bills, what criteria do you have in place to ensure that 

the government is not interfering in what the private sector is trying to do and is 

not creating an unfair advantage to grant recipients over their competitors? 

Response: Many communities throughout rural America lack high speed 

broadband to facilitate economic development. To ensure that funding provided 

under the Recovery Act reached those needy communities, our Notices of Funding 

Availability (NOFAs) for the Broadband Initiatives Program (BIP) provided all types 

of entities—public, private, cooperative, non-profit, etc., with an opportunity to compete for funds. The NOFA’s also required that all applicants map their proposed 

funded service areas (PFSA’s) and clearly delineate areas that were unserved and 

underserved. These maps were then posted on our joint website with the Department of Commerce—www.broadbandusa.gov—and the public was provided with the 

opportunity to comment on whether broadband service was already available in the 

applicant’s PFSAs. This ensured that USDA was not providing funding in PFSA’s 

that were already served. USDA received thousands of comments, primarily from 

incumbent service providers regarding the PFSA of applicants. To ensure that funds 

reached areas that met the requirements of the NOFA, USDA staff carefully assessed the applicants PFSA’s, publically available information, and comments filed 

by incumbent service providers on the PFSA’s. In many cases, USDA Field Staff actually visited the PFSA’s to ensure that precious Recovery Act funds went to 

projects that best meet the requirement of the NOFA. All projects awarded to date 

have meet the stringent requirements of the NOFA which provided all an opportunity to bring broadband service to underserved areas. 
98 

MR. ROGERS’ RESPONSES TO QUESTIONS SUBMITTED

QUESTIONS FROM CONGRESSMAN MIKE SIMPSON

Q1. I appreciate you appearing before the Committee. I wanted to ask you a question regarding funding for loan guarantees. 

As you know, I am a big supporter of the loan guarantee program and believe it 

is an important tool to enable energy projects to access credit markets during a time 

when credit is extremely hard to obtain. 

I understand that the Recovery Act included $4 billion in appropriations for loan 

guarantees for renewable energy projects, which I believe provides you with $32-$35 

billion in additional authority, of which only 6% has been committed, correct? 

A1. With the $1.5 billion rescission under H.R. 1586, the Department now has approximately $2.4 billion appropriated for Section 1705 credit subsidy. The Department estimates this could support approximately $20 to $22 billion in loan guarantees; however, the actual loan level supported will depend on the final contract 

terms of each loan guarantee. As of September 7, 2010, the Department has closed 

four loan guarantees totaling approximately $794 million in loan guarantees and 

using approximately $61 million in budget authority. In addition, the Department 

has offered conditional commitments for six additional projects eligible under Section 1705 totaling approximately $3.4 billion in loan guarantee value. The actual 

credit subsidy for each project is determined at financial closing. 

Q2. In addition, I understand that DOE has received $18.5 billion in loan guarantee authority for renewable through the regular appropriations process, of which 

1.7%, or $2.4 billion, has been committed or guaranteed. If you add that all up, by 

my count, DOE has around $50 billion in unspent loan guarantee authority for renewable energy. 

Could you tell me if that number sounds accurate or how much loan guarantee 

authority for renewable remains at DOE? How much of the ARRA funding has been 

awarded? 

A2. The Department estimates that the $2.4 billion in appropriated subsidy available under Section 1705, could support approximately $20 to $ 22 billion in loan 

guarantees; however, the actual loan level will depend on the final contract terms 

and specific nature of each loan guarantee. As of September 7, 2010, DOE has 

closed four loans totaling approximately $794 million and using approximately $61 

million in budget authority. DOE has issued conditional commitments for six additional Section 1705 projects totaling approximately $3.4 billion in loan guarantees. 

The credit subsidy costs for these loans will be calculated prior to financial closing, 

and reflect project specific factors including contract terms. 

With respect to non-ARRA authority, to date the Department has offered conditional commitments for loan guarantees to two projects totaling $317 million against 

the $18.5 billion in loan authority for innovative energy efficiency and renewable energy projects available under Section 1703 loan guarantee authority. This loan guarantee authority is underutilized because many of the Section 1703 renewable energy 

projects in the pipeline are also Section 1705 eligible, and are being processed under 

the Section 1705 program to receive appropriated credit subsidy. Because the 1705 

program is lower cost to the borrower, borrowers obviously prefer to use that program when they are eligible to do so. 

Q3. As I understand it, the goal of the ARRA funding particularly is to get the 

money out the door quickly to rapidly create jobs, and I am extremely concerned that 

very little of that funding has gone out. Are there an insufficient number of qualified 

projects applying? Could you please explain why DOE has been unable to obligate 

these funds more rapidly? 

A3. The Department is committed to managing the Loan Guarantee Program to 

carry out its mission effectively while protecting the American taxpayer. While creation of jobs is clearly one of the goals of the program, it is not the only one: the 

objective is to help transform the energy economy to new clean technologies. The 

infrastructure investments in the Recovery Act were always intended to be longerterm than the more immediate efforts of tax reductions and assistance to states. 

This means that proper due diligence is in order to ensure that good projects are 

selected that meet the multiple goals set out in the directives given to the program 

by Congress in statute. Projects seeking loan guarantees under Title XVII are typically large, complex transactions. To this end, and to ensure compliance with the 

statutory requirement of a reasonable prospect of repayment, the Department performs a rigorous and professional underwriting analysis of each application—a process that necessarily requires time. However, the Department has instituted several 
99 

changes to the Program that have resulted in greater efficiencies and is encouraged 

that the improvements are working. 

For example, the Program has implemented an online application portal to help 

accelerate the application review process and increase program transparency. The 

Program has also hired additional contractor support and federal staff and identified 

external experts to assist with legal, engineering, financial and marketing analysis 

of proposed projects. Furthermore, the Program has also streamlined the National 

Environmental Policy Act of 1969 (NEPA) review process, and established a monitoring team. 

Q4. Secretary Chu, I realize that while the budget requested additional funding 

for nuclear projects, it did not include more funding for renewable. Could you explain the reasoning behind that? 

A4. The 2011 budget includes $500 million in credit subsidy to support an estimated $3-5 billion in loan guarantees for innovative renewable energy and efficient 

end use energy projects; however, the actual loan level will depend on the final contract terms of each loan guarantee and other project specific characteristics. 

QUESTIONS FROM CONGRESSWOMAN MARCY KAPTUR

Q1. The funding provided to the Department of Energy through the alternative energy loan guarantee program in the American Recovery and Reinvestment Act is critical in accelerating development of the domestic alternative energy market. 

Especially at a time when credit markets are frozen for large scale projects, the 

DOE loan program represents a critical opportunity for the domestic industry. 

In my district, a number of the world’s leading solar manufacturers have invested 

millions in expanding manufacturing lines and are relying on the loan guarantee 

programs to create continuity in their manufacturing capacity. 

I am concerned that the interagency process required to process applications for the 

loan program needs attention to ensure that loan guarantee applications are processed with the required sense of urgency. What recent actions has the agency taken 

to accelerate approval of loan guarantees? 

A1. The Department is committed to managing the Loan Guarantee Program so 

that it carries out its mission effectively while protecting the American taxpayer. 

Some of the delays are the natural result of standing up a new program and getting 

procedures in place after appropriations were provided. Now that the Department 

has had some experience with those processes, the Department has instituted numerous changes to the Program resulting in greater efficiencies and is encouraged 

that the improvements are working. 

For example, the Program has developed an online application portal to help accelerate the application review process and increase program transparency. The Program has also added staff with relevant expertise. In addition, LPO has identified 

external experts to assist with legal, engineering, financial and marketing analysis 

of proposed projects. Furthermore, the Program has also streamlined the National 

Environmental Policy Act of 1969 (NEPA) review process, and established a monitoring team. The program continues to work on ways to streamline the review process. 

Q2. Please update the committee on the progress you have made in obligating DOE 

Loan Guarantee funds in both project and dollar figures for approved loans. 

A2. As of September 7, 2010, the Loan Guarantee Program has closed four loan 

guarantees totaling approximately $794 million and issued conditional commitments 

for ten additional projects totaling approximately $14.0 billion in loan guarantees. 

Q3. While the Department of Energy is the primary lead for these projects, OMB 

has exerted significant management authority of the program. What are the OMB’s 

roles and responsibilities in reviewing, and approving loan guarantee applications? 

A3. Under the Federal Credit Reform Act of 1990 (Sec. 503), the Director of OMB 

is responsible for determining credit subsidy cost estimates. Under this authority, 

OMB delegates responsibility for the modeling to agencies, and reviews and must 

approve subsidy cost estimates for all loan and loan guarantee programs. OMB 

works closely with agencies to state accurately the costs of Federal credit programs. 

Accordingly, OMB reviews and must approve the credit subsidy cost estimates generated by the Department for the Title XVII program. 

Q5. Are OMB’s activities operational or consultative? 

A5. OMB has statutory oversight for credit subsidy cost per the Federal Credit 

Reform Act of 1990, as amended. OMB reviews and must approve the credit subsidy 

cost computation generated by DOE, and works closely with DOE in the course of 

the approval process. 
100 

Q6. What is the statutory authority basis for OMB’s role in reviewing and approving these applications? 

A6. Section 503 of the Federal Credit Reform Act of 1990 states that the Director 

of OMB is responsible for determining credit subsidy estimates, in consultation with 

the agencies, to state accurately the costs of Federal credit programs. OMB has delegated the responsibility for generating costs to the agencies under this authority, 

and reviews and approves agency cost estimates for all Federal credit programs. 

Q7. Does OMB or the Department of Energy have established bench marks to complete the loan approval process? Does OMB take into consideration the timeline by 

which an applicant can start construction? 

A7. Since each transaction is unique, there are not benchmarks per se for the 

completion of the approval process. DOE must ensure each loan guarantee meets 

all statutory and regulatory requirements including, but not limited to, determining 

that each project has a reasonable prospect of repayment. Projects seeking loan 

guarantees under Title XVII are typically large, complex transactions which necessarily require time for DOE to analyze and underwrite. Similarly, the complexity 

of each transaction is a primary factor in the transactions timeline and approval 

process. In addition, once a borrower is offered a conditional commitment, there are 

often conditions which an applicant must meet before final loan documents can be 

completed and the loan ‘‘closed’’. 

That said, the process of evaluation does take project timelines into consideration, 

and the OMB review is the final step. DOE briefs OMB on project timelines, and 

OMB’s review has often included queries about applicants’ ability to meet timelines 

to ensure key milestones are met, e.g. eligibility deadlines for grants, tax credits, 

equity contributions, construction times etc., among other considerations, as these 

affect cash flows to and from the government. 

Q8. Has the Department of Energy hired additional staff with the expertise to perform these activities and what role has OMB had in conducting the same review? 

A8. DOE has hired a significant number of additional contractor support and federal staff including legal, engineering, financial, and market analysts all with relevant experience. Section 503 of the Federal Credit Reform Act of 1990 states that 

the Director of OMB is responsible for credit subsidy estimates, in consultation with 

the agencies, to state accurately the costs of Federal credit programs. OMB has 

worked with DOE to develop the credit subsidy estimation methodology used for the 

Title XVII and approved DOE’s credit subsidy cost model in 2009. OMB’s role in 

this process is consistent with the agency’s role in all Federal credit programs. In 

addition, OMB plays its usual role in reviewing whether agency actions are consistent with relevant laws and Administration policies. 

Q9. To what degree does DOE review domestic content capacity for these proposed 

Loan Guarantee approvals? 

A9. In regard to its financial and technical review process, the Program does not 

give preference to projects that have more domestic content than other projects; it 

does, however, strongly encourage domestic sourcing of components where commercially and technically feasible. 

Q10. One of the projects currently under review by DOE is a large project in Southwestern Arizona proposed by First Solar called Agua Caliente Solar Project. It is my 

understanding that this project, if approved, would allow First Solar to continue operations at their plant in Northwestern Ohio. Approving projects which have the potential for domestic sourcing should remain a priority for the administration. For the 

projects currently in the DOE loan guarantee pipeline either approved or pending, 

what can the administration tell us about the ripple effect on job creation or retention? 

A10. As part of the review process for Recovery Act projects, the Loan Guarantee 

Program considers the number of jobs that a proposed project estimates it will create. While this specific applicant, First Solar, has a solar panel manufacturing plant 

in Northwestern Ohio, the company has six additional factories worldwide. The applicant anticipates that the panels for this project will come from a combination of 

these facilities. 

Q11. Specifically for Agua Caliente Solar Project, has DOE conducted any analysis 

of the number of jobs that this project would create/retain at the First Solar manufacturing facility in NW Ohio? 

A11. The Loan Guarantee Program considers the number of direct jobs that a proposed project estimates it will create at the site, not the number of jobs that result 

from the manufacturing of components that are used at the site. 
101 

[Whereupon, at 5:25 p.m., the committee was adjourned.] 

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