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Peter Orszag Confirmation Hearing

CQ Transcripts Wire
Wednesday, January 14, 2009 5:25 PM

SEN. JOSEPH LIEBERMAN (I-CONN.): Good morning. No, good afternoon. And welcome to our hearing today. Today we're going to hold two hearings back to back for the nominees to lead the Office of Management and Budget. First, we will consider the nomination of Peter R. Orszag to be director of OMB.

That child of yours, I would say, is absolutely adorable. And I'm going to give you a moment later on to introduce him. But I would say, as a parent and now a grandparent, I'm greatly admiring of his posture, his sitting right up there. OK.

(UNKNOWN): (OFF-MIKE)

LIEBERMAN: Great. OK. And after Mr. Orszag, we will immediately after hear the nomination separately of Robert L. Nabors to be deputy director.

At this point I would welcome both of you. We're happy to have you with us today. And thank you for your service to our country and your willingness to serve once again.

These nominations come at a time of unprecedented budgetary and economic peril for our nation beyond even the normal for the Office of Management and Budget and those who lead it. The economy, after all, is facing a painful recession at the same time our government faces massive budget deficits.

In response, the incoming Obama administration is putting together a major economic recovery and reinvestment package developing plans to achieve long-term budget stability and at the same time instituting an ambitious program to improve performance and reduce the cost of government. Those are difficult, important and enormous undertakings. And OMB must be a leader in all of them. So the two of you have your work cut out for you. Dr. Orszag, with your extensive experience in budget and public policy, you are well-qualified to assume the big responsibilities of the position to which you've been nominated. Your government experience includes nearly two years as director of the Congressional Budget Office and several years as a senior economic adviser in the Clinton White House. You've also held prominent academic and private sector positions in a wide range of economic and policy areas.

The director of OMB is a key member of the president's economic team helping the president prepare and execute the budget across 14 Cabinet departments and more than 100 executive agencies, boards and commissions. The OMB director recommends how to spend every tax dollar, oversees the management of every federal government agency program and reviews rules -- every rule, really, but rules I mention by example vital to our public health, worker safety, environmental protection and regulation of our financial institutions.

If confirmed as budget director, you will be overseeing more new government money being spent more rapidly than I think we've ever experienced in our history. The stimulus package that the new administration is putting together, between $750 billion and $800 billion, dwarfs the size of the budgets of most of the countries in the world and if enacted, would be more than eight times the size of the annual budget or our largest state, California.

So I look forward to hearing from both of you today about the measures you intend to take to ensure that these enormous sums that will be spent quickly will also be spent wisely and responsibly. Beyond the immediate crisis, we face long-term fiscal imbalances that have been rising for years while we here in Congress and in the executive branch as well have acted as if they were not there. Now, the moment of truth and I hope the moment of responsibility has arrived.

Last week the Congressional Budget Office projected a $1.2 trillion national deficit in fiscal year 2009, this year and a cumulative deficit of over $3 trillion over 10 years. These numbers don't even take into account the cost of the stimulus package that I've just talked about or the long-term costs of rising health care and Social Security expenditures beyond a 10-year budget window.

Mr. Orszag, in both academia and government you have been a leader in identifying and analyzing the major long-term budgetary challenges of our time. So I'm eager to hear this afternoon your thoughts on how the new administration can move our country with Congress toward fiscal responsibility.

For decades we have depended on the willingness of our trading partners to subsidize our consumer and government deficits. The result has been large trade deficits and a gradual transfer of wealth from the United States to foreign countries, notably China and countries in the Middle East. Over the long-term and perhaps shorter than that now, this is not just undesirable, it is unsustainable. I want to know how you would begin to right these imbalances, both at the governmental and macroeconomic levels. The OMB director, I presume and hope, will also be a key player in helping to strengthen what we all agree now is our fragmented and inadequate financial regulatory structure to prevent the type of meltdown we are now experiencing from happening again. Failure of our regulatory agencies to police Wall Street adequately has certainly contributed mightily to the current national economic crisis.

I personally believe that rather than adding layers of regulation to the patchwork that already exists, real reform must begin by clearing the table of the entire existing federal framework of financial governance so that we can begin by building a new regulatory system that really will protect America's investors, institutions, consumers and economy. And this, too, I look forward to hearing your views today.

Oversight of federal acquisition of goods and services is another increasingly important responsibility of the OMB director. Federal purchasing has exceeded $400 billion for the past several years. And OMB must bring every possible efficiency out of the contracting process.

Finally, the OMB director has critical responsibilities to guide implementation of information technology and e-government across the federal government. I personally am excited that the president-elect has big plans to use technology to increase public accessibility to government and government accountability. This committee has done extensive work in authorizing e-government legislation. And we look forward to working with you to help this shared vision become a reality.

So we've got a lot of ground to cover today. It's important, critical ground and, of course, a lot of important work to do together in the years ahead. I for one look forward to it. Thank you.

Senator Collins?

SEN. SUSAN COLLINS (R-MAINE): Thank you, Mr. Chairman. Mr. Chairman, the fact that our opening statements are so similar does not indicate collusion, but just the fact that there is bipartisan concern about the issues that you raised. As you indicated, seldom have nominees for the director and deputy director of the Office of Management and Budget come before this committee at a more critical time.

The federal budget is under tremendous stress from the impact of a deep recession and because of rescue and stimulus packages. Spiraling entitlement costs are driving long-term budgetary imbalances. And the next few years will also see the cresting waves of baby boom retirements with enormous effects on Social Security and Medicare expenditures as well as on our own federal workforce.

Pointing to these trends and to the estimated $1.2 trillion deficit for the current fiscal year, the president-elect has prudently warned that unless strong measures are taken, the outlook is for red ink for as far as the eye can see. Our nation's public debt has reached $6.3 trillion, about 45 percent of our gross domestic product. According to the CBO, federal spending will climb to an astonishing 25 percent of GDP this year, more than at any time in American history outside of World War II. And I know, given or nominee's background, that he won't contest those CBO figures in this case.

With a stimulus package worth another perhaps $800 billion, our nation's debt as a percentage of GDP could rise to 60 percent, the highest level since World War II. That is, of course, an unacceptable and unsustainable scenario in the long-term for our government, for the economy and for the families and business owners who pay the government's bills.

OMB will be the leading player as the incoming administration formulates policy to deal with a grim present and an uncertain future. OMB will also be an indispensable link to Congress as the executive and legislative branches work toward consensus on finding its sustainable path forward.

Dr. Orszag comes before the committee with an impressive set of skills and experiences. As the former director of the CBO, he is very familiar with the legislative branch as well as with the intricacies of the budgets and policy analysis. I take special interest in several issues for which the OMB director is the key player. The overriding concern, of course, is the federal budget.

Dr. Orszag has already indicated that the economy and stimulus measures portend the near-term rise in the deficit. But as he knows and as we have heard from the former comptroller general, David Walker and other experts, the outlays in recent years and the growth of unfunded entitlements are unsustainable.

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

And let me add that the public expects from the next administration far better oversight and aggressive stewardship of the Troubled Asset Relief Program and of any future economic recovery packages.

Another major OMB responsibility falls under the general heading of executive branch management. This committee has repeatedly documented a voluminous, shocking waste of taxpayer dollars by the federal government in virtually every program and department.

Many of these examples have arisen in the realm of government contracting. Our committee has successfully passed important reform legislation to improve the federal acquisition process. But additional reforms, particularly the revitalization of the federal acquire workforce, must be high on OMB's list of targets for critical improvements.

Effectiveness and equity are other key management concerns. Homeland security grants, for example, are essential to ensure that every state can achieve a baseline level of readiness and response capability for both man-made and natural disasters. OMB needs to examine budget plans carefully to ensure that they're consistent with that goal.

Other special concerns which the nominee has recognized in his responses to our pre-hearing questions include transparency in government operations -- an issue of vital importance, I know, to Dr. Coburn and to many on this panel -- metrics for agency performance so we actually can measure and evaluate more effectively, closer attention to the GAO's high risk list, and the need to tackle escalating costs of health care and entitlement programs.

Today the committee will also consider the nominee for one of the deputy directors at OMB, Robert Nabors. I look forward to learning more about his background, particularly his experience as a program examiner at OMB during the Clinton administration.

That past OMB service included oversight of a previous census, and this committee is painfully aware of the failures particularly in the area of technology and planning for the upcoming census. Our exploration today with both nominees of the financial and management hurdles facing the federal government makes this a critically important hearing.

Thank you, Mr. Chairman.

LIEBERMAN: Thanks very much, Senator Collins.

We're really honored to have with us today to introduce Mr. Orszag Congressman John Spratt, Congressman Paul Ryan, the chairman and ranking member, respectively, of the House Budget Committee.

I gather that a vote has gone off in the House, so I want to let you two go forward. Speak as long or short as time allows. And then we will understand if you depart. But your presence is appreciated.

REP. JOHN SPRATT (D-S.C.): Mr. Chairman, what I will do is read the opening paragraph and the concluding paragraph, and submit my testimony for the record, with your consent.

LIEBERMAN: That's a good precedent for this committee.

SPRATT: Given the questions you've outlined for Mr. Orszag, I don't think we need to be anyway -- here anyway, because I think you'll be occupied for the rest of the afternoon.

Chairman Lieberman, Ranking Member Collins, member (sic) the Homeland Security Committee, thank you for allowing me to testify on behalf of Peter Orszag for director of OMB.

As I told the Budget Committee earlier this week, had the choice been mine, Peter Orszag is exactly the person I would have chosen for OMB and, indeed, two years ago when the nomination for the directorship of CBO was ours, Senator Conrad and I picked Peter Orszag. And let me tell you, he has fulfilled or exceeded our expectations in every way.

Mr. Chairman, our economy's in recession. But this is not your garden-variety business cycle recession, and there's no off-the-shelf traditional solution for us to turn to. In times like these, we need our best and our brightest, and Peter Orszag fills that bill.

He has the skills, temperament, the intelligence and the experience needed at OMB. I urge his confirmation and hope it will come swiftly because the work to be done is -- at OMB is already cut out, which includes next year's budget coming on the heels of this year's stimulus bill.

He's got enough to do for us to confirm him as swiftly as possible and put him to work, where I know he'll be an enormous help to the government of the United States. I, without qualification, with the highest recommendation, recommend him for this post.

LIEBERMAN: Thanks very much, Chairman Spratt.

Congressman Ryan?

REP. PAUL RYAN (R-WIS.): Chairman Lieberman, Ranking Member Collins, it's a pleasure for me to be here as well with Chairman Spratt to support Peter's nomination. We -- the three of us have spent a lot of time together over the last two years.

And I always enjoy the fact that when you typically have a witness, usually they put a glass of water in front of you. With Peter -- we put a pitcher of Diet Coke in front of him. He is a high- octane, high-energy individual.

One of the reasons why I am here to support his nomination is because of how he conducted himself and how he ran the CBO over the last two years.

We budgeteers really expect great integrity and fairness and impartiality from the Congressional Budget Office. That is exactly the kind of leadership he provided to the CBO.

While Peter and I may come from and have different economic philosophies and doctrines, we have great respect for one another.

This is a job at a time where we have the largest economic challenges in a generation, arguably the greatest fiscal challenges in the history of our nation, and we need somebody to hit the ground running. He will not miss a beat on that.

And I have every expectation and confidence that he will bring that sense of integrity on the numbers, that sense of impartiality to this new job. He's going from a job as an impartial referee to a job as an advocate for a particular administration.

And while, you know, I have concerns with the fiscal direction of this administration on some levels, I have much more comfort -- I am very pleased that he is going to be over there as the director of the OMB.

And so it is with those thoughts in mind that I am here also to offer my support for his nomination.

LIEBERMAN: Thanks very much, Congressman Ryan.

The presence of both of you means a lot to us, as I know it does to Peter Orszag, so please feel free to go back and vote, and thanks for your attendance here.

SPRATT: Thank you, Mr. Chairman.

LIEBERMAN: All the best.

We'll go forward now. Dr. Peter Orszag has filed responses to a biographical and financial questionnaire, answered pre-hearing questions submitted by the committee, and had his financial statements reviewed by the Office of Government Ethics.

Without objection, this information will be part of the hearing record, with the exception of the financial data, which is on file and available for public inspection in the committee offices.

Our committee rules require that all witnesses at nomination hearings give their testimony under oath.

Dr. Orszag, would you please stand and raise your right hand? Do you swear that the testimony you are about to give to the committee will be the truth, the whole truth and nothing but the truth, so help you God?

PETER ORSZAG: I do.

LIEBERMAN: Thank you very much. Please be seated.

Dr. Orszag, we have previously referred to at least one member of your family who is here. If there are others, family or friends, you'd like to introduce, this is a good time.

ORSZAG: Yes, I'd also -- in addition to my son, Joshua, I'd also like to introduce my significant other, Claire. Joshua's joined me at the witness table.

LIEBERMAN: Joshua.

(LAUGHTER)

LIEBERMAN: You're welcome to call on Josh if...

(CROSSTALK)

(UNKNOWN): Should we ask him to take an oath?

(LAUGHTER)

(UNKNOWN): Representative Ryan thinks you are high octane -- he should meet...

(CROSSTALK)

ORSZAG: Yeah, I have to keep up with him.

LIEBERMAN: That's true.

Before we proceed with the -- your statement, and I promise you that this is the last time I'll do this in public, but it's -- it's too irresistible for me. In the interest of full disclosure, Mr. Orszag, having taken the oath, I want to disclose a relationship the two of us have.

His mother grew up in Stamford, Connecticut next to -- in the neighborhood of my mother -- my family grew up. And both Peter and I have found out from his mother and mine, different generations, that her father, Peter's grandfather, courted my mother when they were both teenagers living in the same neighborhood.

And to give you a sense of what courtship was like in those days, my mother remembers your -- he's passed away now, but she remembers your grandfather with great warmth -- that he used to come over, Senator Collins, and help my mom, who was one of six children in a family whose father had died very early -- help my mom do the family wash. A good man.

(LAUGHTER)

Undoubtedly, with a genetic interest in budgetary control and thrift. But anyway, now that that's over and I've gotten that out...

COLLINS: Now (OFF-MIKE)

LIEBERMAN: Right.

(LAUGHTER)

Please proceed with your statement at this time.

ORSZAG: Thank you very much.

Senator Lieberman, Senator Collins, members of the committee, I'm honored to come before you as President-elect Obama's nominee for director of the Office of Management and Budget.

I'd also like to thank Mr. Spratt and Mr. Ryan for their introductions. As director of the Congressional Budget Office, I worked to establish good relationships with members of both parties, and I hope to continue that spirit of bipartisan if I am confirmed as director of OMB.

It is a momentous time to be holding this hearing. In the short run, we face the worst economic crisis since the Great Depression, with job losses of more than 2.5 million over the last year and projected job losses of 3 to 4 million more over the coming year unless we act, and act aggressively.

Over the medium to long run, we face the prospect of daunting fiscal deficits that reflect an unsustainable course that the federal budget is on.

But what I want to spend most of my time with you on this morning is government performance. I'm particularly pleased to be before this committee, because I believe that government performance and budget must be one.

Government performance must be reflected in our budgetary priorities, and then the results of improved performance will yield benefits to the budget.

So I am -- if I am confirmed, I would seek an OMB Version 2.0, where those two arms of the agency are better integrated and you see a more unified whole between performance and budgeting.

Most of the performance issues that government faces today have developed over decades and will take time to address, but there is an urgency to begin now. We need to be open to new ideas and new ways of doing things. Improving performance overall requires not only sustained focus but also a better set of metrics. After all, it is hard to change what you can't see or measure.

Significant improvements to the existing performance management system are both possible and necessary.

Let me touch briefly on several areas in which we can do better, many of which have already been discussed. First, procurement and contracting.

The dollar value of federal contracts has more than doubled over the past eight years to more than $400 billion in 2007, but the number of qualified contract officers has remained flat at about 28,000.

Given that disjuncture, it's not surprising that problems have arisen, especially at the Department of Defense.

In addition to reviewing the use of no-bid, cost-plus and inter- agency contract vehicles, we must improve the quality and quantity of the federal acquires workforce, and I am pleased that OMB is already working with the Federal Acquire Institute to do this.

We also need to use technology to create more transparency around procurement and contracting. Current vehicles such as USASpending.gov suffer from a lack of timely and accurate data and a presentation that is not seen as engaging enough to attract widespread visits.

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

We also need to clarify what is and what is not an inherently governmental function, a line that has become too blurred in recent years. The use of contractors has grown dramatically, and the result is often that we are depleting the core skills of government agencies.

That leads me to the second topic of human capital. Central to any effort to improve the performance of federal programs has to be a strategy to restore the prestige to and increase the capacity of our federal workforce.

Over the next decade, roughly 60 percent of the federal government's 1.6 million white-collar employees and 90 percent of the 6,000 federal executives will be eligible to retire.

To mitigate and offset these expected retirements, we need to take a number of actions, including, perhaps most importantly, as President-elect Obama has said, making government cool again.

We need to dramatically improve the federal hiring process, and we need to provide more opportunities for civil servants to rise to policy-level offices so that they can aspire to doing -- to seeing the results of their hard work in promotions.

The third key topic is information technology. The current -- the government currently spends $70 billion in non-classified information technology and perhaps another 20 to $30 billion in the intelligence community on information technology.

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

On the other hand, historically, IT investments have not been well integrated into the budget process, and IT investments have often not been aligned with agency missions. They also need stronger management and auditing. Major IT projects have a poor track record in government.

We also need to promote better cyber security. The number of threats continues to grow and represents risk to both key financial and other infrastructure, as well as data.

ORSZAG: If confirmed, I look forward to renewing OMB's commitment to cyber security through the Comprehensive National Cyber Security Initiative and other efforts.

A fourth key topic is financial management. Improper payments in programs such as Medicare, disability and the tax code amount to perhaps $70 billion a year. Significant savings opportunities should be -- these significant opportunities should be pursued vigorously.

I have already heard about the results that have resulted from recovery auditing and other steps, and I think those are promising measures that we should be exploring more aggressively. In addition to paying more attention to the problem and recovery auditing, we can create stronger incentives for enforcement in the first place.

We also must improve the management of the federal government's real property holdings. The federal government owns 1.2 billion structures valued at more than $1.5 trillion.

Ten percent of these facilities are either under-used or empty. That is unacceptable. We need to more aggressively pursue opportunities for disposition and terminating inefficient leases so that we can better manage the federal government's own portfolio of real properties.

Finally, we need to reexamine how we can best protect public health, the environment, and public safety through the regulatory process. I am pleased that the president elect has announced his intention to nominate Cass Sunstein, one of the nation's leading law professors and thinkers and a specialist on regulation, to run the office within OMB responsible for coordinating regulatory policy.

With that, Mr. Chairman, let me just reaffirm my commitment to working in a bipartisan manner with all of you if I am confirmed to tackle to very important challenges that we, as a nation, face. Thank you very much.

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