>> is there any way we can incorporate and -- is there anything that congress can do -- can incorporate those kinds of things. one of the things devainia has said to our committee -- he said i want to stop before it happened i'll never forget him saying that. and i want to stop the mismanagement before it happens and i think he's probably done that. so is there any way we can do those kinds of things that some of our other witnesses talked about from the very beginning seven are you following me? and what would it take us to do that?

what would we need? >> well, i think you need to have well developed plans with the agencies. part of this is changing the culture shift from a pay and chase type of an approach and there was a lot of emphasis on getting the money out the door and not all of it screening-up. changing the cultural shift and putting some additions to the pace. >> going book to dod we have a situation where we've got private contractors -- and we saw this in the coast guard. you got private contractors being hired to oversee private contractors which is again go for that culture of mediocrity. does that make any sense and how can we get around that? >> that definitely increases the risk. i mean, part of the problem is the contracting amount of funded of dod has gone like this. the acquisition work force has remained relatively flat. they haven't adapted to have the right type of oversight. part of the problem is you can

never contract out the government's decisions on what the requirements audited to be and then provide an effective oversight over that area. the lack of definitive requirements is something we see time and time in changing requirements and not applying good business practices and having a good business case in the beginning before the investments are made or the contracts are let. >> i see my time has expired. >> the gentleman from texas. >> thank you, very much, mr. chairman. i had a couple of questions. my first questions we were talking about the billions of dollars in fraud and waste. i think i know the answer to this question but i trend for government it's better to ask the question. when you're scoring the amount of waste -- let's say we're writing a check to somebody for a million dollars and 96 cents and it really should have been, you know, a billion dollars and 69 -- or a million dollars or 69 cents. we're counting that as a 27 cent error and not a million dollar

error in those numbers, right. i just want to make sure we're really chasing the really big dollars. >> well, i think the amounts we mentioned in our reports -- >> so that's the actual cost to the government and not the aggregate dollar amounts there's some error? >> yeah, there could be some error in there and some of the estimates for the medicare/medicaid, for example, some of the mistakes are incomplete documentation but a lot of is from medical and unnecessary services or people receiving money that are not eligible. >> and i think medicare and medicaid is probably a right target and we talk about using software. we have an abusiness mill record with i.t. in the federal government. i think that comes from the fact we don't try to use off the shelf products. we come up with our own -- i'm going to use the word ridiculous speculations rather than trying to squeeze something into an existing product. i realize, you know, balancing

the budget. there ought to be something already developed by the private insurance carriers who are doing pretty much the same thing. do you some advantage in doing isn't that and maybe i should direct this to the lady from ibm. is there a product. can we go plug this stuff into your congos project and start working on it. >> yes. i mean, there is a solution. i don't want to his a partly cloudy there's a solution i want to let you know cms has issued a request for proposal to do exactly what we're talking about. to do it before leverage analytics on what gets paid. >> all right. and i'll yield back the remainder of my time with just the comment that -- i really think part of what we need to be doing is looking for off the

shelf solutions. we can -- we can plug into rather than trying to develop something custom for ourselves. that always tends to be much more expensive. thank you. >> would the gentleman yield? >> sure. >> mr. dodaro, one quick question, we haven't asked you to talk about the cyberthreat of both dollar waste and failure. could you comment on that for a moment for all of us. a lot of people are just getting up to speed on that. >> this is a very important hirsch i'm glad you asked me that question. we put computer security across the federal government as a high risk area. in 1997 because of concerns that we have. it was the very first time we designated something across the whole federal government is high risk and the risk continued to escalate and the federal agencies did not have good comprehensive systems with access controls, segregation of

duties, comprehensive security programs. in 2003 we expanded it to critical infrastructure protection, energy grid and other areas. and the incidents that are occurring that are reported or going higher, the federal government needs to have a better public/private partnership with the private sector since most of the assets are in the private sector, there needs to be more early morning and that protection capabilities. this is a very important area. i was glad to see that the president commissioned a study but our review of the study shows of the 2 recommendation only two have been fully implemented to date. so there's a roadmap, clear roles and responsibilities, partnership with the private sector. this is a terribly important area and we're concerned about it. >> thank you. does the gentleman yield back? >> i do. the gentleman from new york is recognized, mr. yarman. >> you got me on the wrong -- >> i'm sorry. >> not new york, i'm sorry. >> oh, i'm sorry. >> thanks, mr. chairman.

mr. kucinich also reminds me i was from cleveland when i'm from california. >> thank you for your testimony, mr. dodaro. i wanted to talk to you about one of the categories that you've added to the high risk list and that's the revenues from oil and gas leases. according to your report, that is actually one of the largest incomes, nontaxed income sources of the government about $9 billion in 2009. and just a couple days ago you wrote an op-ed in the "new york times" you wrote in fiscal years in 2005 and 2006 that most of the data from the oil and gas companies was erroneous from millions of unexpected fees. do you know how long the oil and gas companies have been misreporting their production.

>> we did update that new york 2009 and found still continued data and inaccuracies in the system. >> we looked at interior's efforts recently to verify the protection numbers of oil and gas production and found problems with that as well. the other point i would add on this is that the assessment system generally hasn't been looked at in the last 25 years and we had made recommendations there because when the federal government was compared to the other countries and even some states it was relatively low in terms of what it was charging. interior has a study underway and they're due to produce it this year. >> do you have any estimate of how much this may have cost the taxpayers? >> not offhand, not offhand. >> in your examination of data from 2006 and '7, what company did you find to have underreported and underpaid the most? >> i'm not sure.

i'd to have provide that for the record if we have it. i'd be happy to do so. >> i'd like to make a request that you would do that and provide a list of the companies that have underreported and, therefore, underpaid. i appreciate that. mr. franks, in want to ask you a question. you made a comment about the amount of medical services provided basically as defensive medicine and i think you mentioned the number 25% possibly? >> yes, that's correct. >> where did that number come from? >> it came from a study that that came from the jackson care and the johnson noungs >> there's studies that the number is considerably lower than that. we can all agree there's a lot of service that's being unjustified. there are numbers that are considerably lower than that, are there? >> what we're going off is that study. it was -- the interesting thing about that study was the fact that it was done in private. it was something that the

anonymous and it was something the physician felt compelled under anonymity and they were given that cloak. we like to think that number and potentially admitting medicare fraud. but to pursue that question just a little bit further, would ending the fee for service compensation system medically unnecessary procedures and so forth can that help contribute to reducing that number as well? >> and the idea of as you increase the incentives for outcomes for physicians, the -- not only does the cost go down into the physicians go up they would not need to practice that

level of defensive medicine certainly. >> one question and this is purely informational ms. cammer on the issue of payments going out the door, stopping the payments before they go out the door, one of the complaints that i hear consistently -- i'm sure we all do from medical providers, doctors, hospitals and so forth is that they wait a long time for their money to begin with and because of the -- of their assessment, their characterization of being -- dealing with very low profit margins anyway, that the wait of 90 days and 120 days is already stretching them. pressuring them. how much more delay or would there be more delay based on kind of the theory of approaching payments that you've given us? >> we're at the point now through, you know, leveraging technology to do predictive analytics that you could get closer to real time reviews of those. so you could really speed it up. >> could speed it up, okay can. thank you, mr. chairman. i yield back. >> i thank the gentleman. the gentleman from pennsylvania,

mr. kelly. >> thank you, mr. chairman. mr. riji, am i saying it right? okay. i was really intrigued what you talked about and you seemed to have a really direct response to what's going on. now, the president here the other day was talking about all this capital that's sitting on the sidelines and businesses aren't investing it which leads to the premise that the only way to get out of this situation is for the government to borrow more money and spend more money. could you expand a little bit on that because the guy right now, i'm an automobile dealer, and i've been encouraged to build another building and the point that i have it's very difficult to borrow money from banks right now for small business people. while this summon sitting on the sideline, please give me an idea of the -- of this philosophy that the government just has to keep borrowing and borrowing and borrowing money to get us out of this dilemma. if you could just expand a little bit on your comments because i think you're hitting right where we need to hear this information. >> thank you. it's a great question. i think i'd like to remember --

remind people that the federal government has already done this, borrow a lot of money and pretended to invest in our economy to jumpstart it and it has not worked. this money on the sideline is a real direct product of all the uncertainty that is inserted spoke an economy when the federal government spends massive amounts because individuals and entrepreneurs are pretty rational and they understand spending today or borrowing today means taxes tomorrow. i mean, also there were kwlv, you know, new regulations going in so it induced a lot of uncertainty. and that is what this money on the sideline is. in fact, why am i going to actually invest money today a -- hire today when i don't know if i will have customers. you know, the uncertainty is the key to anything and the more the government does what created the uncertainty, the more

uncertainty we will have and the less we will recover. >> let me ask you now, the $114 billion stimulus bill and we describe it as waste, there any parts of that that you thought were worthwhile? >> i mean, i think it was the part about like unemployment benefits. i think, you know. as a society pretty wealthy we can afford to help people who are deeply in need to some extent. however, i mean, the economic literature was very clear. this was not going to work because while the government invests money, the municipal tops come from somewhere. there are no magical source for federal funds. it has to be taken from the economy and it doesn't have the return on investment that the administration claimed it was going to have. >> the whole drive was to spend this money because if we didn't spend it we were going to see unemployment rise above 8per and then so it goes to 10%.

let me ask you at some point, people knew this wasn't working. where could we have said, hey, wait a minute. this is crazy. what are we doing? we're throwing a lot of money out there. we haven't spent it all there but then there's this mad rush to spend a lot of money and it's if the scomborg we're following this judas goat, borrow more, spend more at some point it's going to break force and at some point it will break. it will break truly in the sense it's going to break. >> i agree with you. i actually would have argued that it was a bad idea to do it in the first place. and there was a lot of evidence. it hasn't worked in the '30s and it hasn't worked in the 70s most now, the other thing it's not only spending in the form of this senate bill. it's all the spending that took place in the last 10 years, in the last 20 years and the last 30 years. there's been a lot of spending. if it worked, we wouldn't be in this mess in the first place and

i think we need to change paths. and we're talking about waste and we realize waste doesn't come in the form of payments and earmarks. it comes in the form federal government where it shouldn't be. to prop companies which are failing which is a drag on the economies. which is propping up these companies to give companies to those this is worth succeeding which is totally succeeding. when the federal government gives money to the state and when it shouldn't be. this creates waste. we need to change paths and start thinking directly about what waste in government spending means. >> and i appreciate this. i wish we had more time but i have to tell you when you add the federal government and the state and local governments and we start to talk about how we're tacking our ttd and the amount of money we're wasting through government it's way over the top. thank you for being here today. i really appreciate your comments. >> thank you. i yield back my time, mr. chairman. >> thank you. we now recognize the -- are you ready?

the gentleman from cleveland, ohio, mr. kucinich. >> thank you very much, mr. chairman. over the past few days members of this house have voted on amendments to the c.r. which will severely cut or entirely eliminate government entities or programs that will cut assistance to the most vulnerable assistance. it will eliminate funding for research and some of the pressing and social and economic issues. to my knowledge, none of these existing programs appeared on the gao's list of government programs at high risk of waste, fraud and abuse. in the meantime, numerous department of defense initiatives and specifically dod contracting ranked prominently as programs that remain very susceptible to fraud and abuse. the report states that there are, quote, significant ongoing programs unquote and quote, persistently programs in the defense's inability of

performing audits of acquisition programs. it notes for fiscal year 2009, for example, the dod obligated $372 billion in contracts for goods and services and yet that the contracting is hampered by, quote, the lack of well defined legal requirements, the use of ill-suited business arrangements and the lack of an adequate number of trained acquisition and contractor oversight personnel. unquote. i have a copy of a letter sent november last year pi 8 individuals who represented 300 years of research with the defense department biblingary weapons and mr. chairman, i ask unanimous consent that the copy of the letter be entered. >> without objection. >> thank you. >> it's the national commission on fiscal responsibility and reform. these eight individuals implored the chairman to take the opportunity to make reform a centerpiece of its effort to create a motto of deficit reduction, quote, the pentagon cannot track the money it spends. routinely dod does not know if it's paid contractors once, twice if not at all.

we recently learned it does not only contractors they have and what they are employing. in sharp contrast almost every federal agency the pentagon has failed to comply with the chief's act in 199 which sought to solve the pentagon and other federal agencies to pass the links between their expenditures and appropriations authorizing these expenses. can congress be sure that budget requests from the pentagon reflect the department of defense's actual costs? >> as you mentioned, there's been an unability to have the -- aside from the army corps of engineers -- >> well, let's talk about everything else except the corps. >> right. they've not been able to pass the test of an audit so it's not clear, you know, there's accurate accounting of what the expenditures -- >> isn't it true that you have to be able to audit them to know if their costs roughly match up that with their request?

>> it would be important to which information as adequate assurance that the costs were there, yes. >> so if we don't have accurate payments of how those contractors spent those monies is it even possible to know if the dod budget request is being lost to waste, fraud or other abuse? >> well, there would be a degree of uncertainty that you wouldn't want to make in having those kinds of judgments but basically the allocations that are made through budgetary systems that are not audited now and the department is now starting to audit the budget numbers that are allocated against the costs. i think that's a good step and a step in the right direction and should eventually provide the type of assurance that you're looking for. >> when i first came to congress i was told that the department

of defense had over 1100 accounting systems, individual systems, and also that they had a trillion dollars of accounts that they could not track or reconcile. i just -- i'm hopeful that those who have the responsibility for oversight on the auditing part will pay attention to that and hope that you take that message back as well. >> i will do that. in fact, of the main reasons we can't provide an opinion on the audited consolidated financial statements to you as a government because those at the department of defense the pervasive practices and procedures and so we've been working with them. they've got some short-term priorities now focus on the budgeting numbers and asset accountability. and they have a long way to go. >> i'm hopeful that this committee as part of this

oversight responsibilities it will go deeper to some of these questions on the department of defense's spending >> would the gentleman yield? >> i certainly would. i would like to share with you when i was in the army during that period of time they decided they'd find out how many rail cars they had and they did an audit and came up with about 25% of them missing. then they did a walkdown audit and found how many had been repainted over the years to company names because they didn't have to explain to the army or, you know, the military that they were missing but there would be hell to pay if they lost one belonging to the company. but i look forward to working with you on the long-term problem at dod. >> i want to thank the gentleman and hope his remarks do not imply a favoring of privatization of the army. [laughter] >> no but i would like to know

if those rail cars have been comped. >> i note last year congressmen when they were raising the debt ceiling with the gao with the duplication of any activities or efforts of the federal government that might be cost-savings and that report is forthcoming? >> yes. >> can you give us a preliminary or a trailer or a sneak preview of what we might anticipate? >> well, we've identified about 34 different areas of clover lap and duplication for consideration by the congress and they touch several hundred programs and virtually all federal departments and agencies. now, we also is an added bonus or including in the report about another 50 cost-savings opportunities for the congress to consider and also revenue enhancements where there's abilities to tackle what's now an estimated tax gap between taxes owed and collected about 2

$290 billion. >> we don't have -- because of -- and we'll discuss in the reports some limitations as congressman kucinich alluded to. but it's difficult to come up with a quantification of billions -- it will be a lot. >> i would love to have you answer in your report on the high risk list you indicate strengthening the foundation for efficiency and effectiveness. one of your recommendations is restructuring the u.s. postal service to achieve sustainable financial viability. how? >> basically they have to change their business model. the business model they have -- and we've outlined options in the report there for the postal service to consider and for the congress as well. >> and in that business model i mean, you've got 150 million households that are being reached every day six days a

week so far by the u.s. bothal service but you've got 80% of their cost is for compensation and benefits. >> are you suggesting then that we look at both sides of the equation not only the revenue side of the equation but also the expense side of the equation? >> i think everything has to be on the table to restructure. we're looking at facilities. we just put out a report this week talking about how other companies have tackled this problem and reduced their facilities, changed their retail options, changed personnel structures. so i think all things have to be considered. in your background, with ibm, again, you've an understanding of marketing channels. you got an understanding of public/private relationships would you have any recommendations for the u.s. postal service how they can be more cost efficient, cost five

more technologically advanced? >> so we have a team of consultants that are working with the postal service today and i would be happy to get back with you with some of the recommendation that is they offered. >> that would be great. thank you. i'm a firm believer the government shouldn't be in the business of business. so i've got some concerns that i think run deep with your philosophies in your report but i want to talk specifically about project labor agreements. are you familiar with project labor agreements where any government contract that's negotiated has to be done at a prevailing wage or union wage and in most cases we've seen a situation where nonunion contractors don't get the contract because they're not capable of paying union wages and, therefore, you're seeing

union jobs being let out when competitively it may be better to go to the lowest bidder. have you worked with any project labor agreements? >> no, i have not. >> mr. price? >> no >> okay. >> but it's something that's crowding out the market. >> one last thing, mr. dodaro, you talk about the excess of real property that we have, do you have any recommendations for liquidation of those or leasing of those to at least enhance the revenue side of the budget, the u.s. budget? >> not facility by facility. we think the agencies need to do that. we pushed omb to come up with a plan on it also. there's rules in the budget process that complicate the lease versus buy decision which we recommended those be dealt with as well. >> yeah. >> we think it's basically a management responsibility >> it should be done.

>> it should be done. >> use the resources. >> yes, definitely. >> thank you, my time it up. the gentleman from massachusetts, mr. tyranny for five minutes. >> thanks to members of the panel for your testimony today. this committee has conducted a lot of oversight about both iraq and afghanistan. last year, in fact, when i was chairman of the subcommittee on national security foreign policy we uncovered evidence of the trucking contractors were paying warlords insurgents billions of dollars for so-called protection and we talk about the contractor in $3 billion in fuel contractors that are going to companies that the state department and the department of defense knew nothing about. so my question mr. dodaro, do you think we have to have some improvements in the contracting laws that will provide those authorities that will be necessary to meet the challenges of contingency conflicts? >> i definitely think there's

lessons learned that need to be applied both and potentially in law but also in practice. and that there's a lot of lessons learned about the putting this type of responsibility in a theater without appropriate training and support that need to be done adequately overseas, so, yes, i agree with you there's probably lessons learned and we can provide some of our thoughts on that. >> we appreciate that. and also we're particularly concerned about the private security contractors. you know, there's been a real persistent problems that you they're's being managed and centcom got a task force together to figure out how many private security contractors they actually employed in afghanistan and a number came in the tens of thousands in that. in iraq, the state department is about to take on a lot of the responsibilities from the department of defense and they're hiring additional private security contractors on that. so how much confidence should we

have that as dod transitions to the state department that they will oversee effectively all those thousands of private security contractors they're bringing on. >> i believe we have work underway in that area to assess that and i would be happy to provide a briefing to you on that. >> how far along are you in that? >> early on. >> well, it's a pretty immediate situation scombaip we can expedite and move that forward because we had hearings regularly throughout and we don't seem to be getting to a on -- i say we i'm not meaning you but the state department and the department of defense. your work can be very helpful on that. the other problem we have, of course, we don't seem to have enough people to really overseas those contractors that we do put it out to and that's been a real serious problem. usda, the state department, and other places on that. the wartime contracting

commission that jim leech and i had the legislation out finally got out and done their job and they found out they were hiring other private contractors to oversee other private contractors hip hop how do you assess the department of defense's process in insourcing those critical roles of insight and private contracts? decisions are made much too much on an ad hoc basis. there's really not a systemic assessment of what should be contracted out, what should be insourced and what should be insourced how you build your capabilities and our staffing and expertise to be able to do that. what expertise do you need to oversee the contractors and we've encouraged and recommended systemic assessments of that. that's the only way you can deal with that issue over time. >> we have some serious issues as we started to analyze that do you have any ideas how they might ramp that up and separate those out so that those inherently governmental functions of oversight of the contractors can actually be brought back in or insourced. is there an impediment that exists that you can recognize or

do something about or do you think this analysis is going to just wind its way out before we get some effective recourse. >> i think it all has to start with what mission do you really want to achieve there and what's the best way to be able to do that. i don't think there's going to be a magic solution to that that there's going to be a set of rules on this and that particularly when you get into environments when you're in contingency operations and planning. you need to have something that's a little bit more proboast as a foundation but then you need to be able to allow some flexibility to be put in place but you have to have proper oversight over it congressman and i think that's where things broke down. >> we had a blue light with the coast guard where they had large ships being made like that and we had a contractor out there doing doing different components and we had a contractor analyzing the job. we had them managing the job and oversee the job and when the job messed up we almost hired the same people to come in and assess how we can fix it. >> the government needs for those areas that you know you're going to contract out you need

the proper people to oversee it that are government employees to be able to make sure you got the duty of loyalty and you have the expertise and continuity to oversee it in the best interest of the government and the taxpayer >> getting a grip not outsourcing jobs that shouldn't be outsourced and the ones outsourced maybe sure we can oversee them. i think that's important. >> yes >> thank you, mr. chairman. >> thank you. the gentleman from michigan for 5 minutes. >> thank you, mr. chairman. and thank you to the panel for being here. it has been enlightening at least the portions i've been in. i wish i could have been here for the entire time. mr. dodaro, in your written testimony, you state that excess or underutilized buildings cost over 1.6 billion annually to operate. i guess the question i would flow from mr. ross' earlier was what has prevented federal government from doing something that makes so much sense such is

as sell the properties -- you stated you wouldn't pick the properties but what's kept us from doing that? >> there are certain barriers that we've recommended that omb recommended. for example, there's a lot of stakeholder interest in some of these buildings and properties that need to be dealt with to be able to do it. there's some legal requirements that are in place. but none of these are insurmountable. and our point is that you need to aggressively identify them. they're different for each property as you might imagine but they need to be dealt with on a more concerted, aggressive basis. >> what's the hesitancy towards this aggressive action from your perspective? >> yeah, to be honest with you i'm not quite sure other than it takes a lot of hard work and effort to be able to go forward on these initiatives, we've been pushing for plans to be developed to be able to do that. we're pleased they're getting

better data and they're also, you know, what the situation is like but actually implementing a lot of these things it appears to be more difficult. i'm not -- to be honest with you, i'm not quite sure what the reason is. >> any concern about any impropriety in stakeholder issues that go beyond simply dragging feet or argument that is we don't have, the resources or time or energy? i mean, is there anything that would go beyond that to something -- >> there's nothing -- i'll go back and check with our team and make sure that my answer is correct on this. and if there are any things of that nature, we'll provide them to you but in some cases like, for example, there's some historic preservation issues that need to be dealt with some of these things and other, you know, legal concerns but i'll provide a listing to you of some of the barriers and also if there are any improprieties we

will certainly let you know. >> okay. thank you. doctor, i'm tempted to just say my question is, how would you expand on your statement already? but i won't do that. maybe the question will allow that to take place. i appreciate what you had to say. in your written submission, you identify three areas of federal spending that should be addressed, one, being federal spending on functions that should be referred for the state. two, federal spending on functions that should be referred for the private sector and three, federal spending on items or services that government has no business purchasing in the first place. i'd like to focus my question mostly on this first area. it's apparent that you strongly believe in the tenth amendment referring powers to the states not enumerated to the federal government. >> i do. >> then do you believe a

re-evaluation and likely a elimination of grants that the federal government makes for federal priorities or does congress need to do something more explicit or what is it? >> i can't talk about the legal aspects because i'm a lawyer and not an economist. and so i'll go to the punish. i really think we're structuring the money that goes to the states either by cutting it off or actually turning a lot of it into blood grants instead of matching grants which -- in usually efficiency promotes overspending. it would be a good way to do it. first it would allow states to kind of have time tongue about how they will provide the service and one of the problems with the matching system that we have now about the fact -- on top of the enact it induces overspending as i've said is the fact that it's a one size fits all type of thing. and it comes with strings

attached and things you have in a certain way and that doesn't take into consideration the specificity of the state. so that would be the first step. i would either, you know, cut a lot of this money up or turn the rest into block grants. >> you're not concerned that the job can't be done then? i say that facetiously? >> there's always than understanding, this belief if the federal government doesn't do it in the it won't happen but it's just not true. and the states are already, for instance, education i mean, most of the spending already comes from the states and it is a state function or a private sector function and the states don't get this money, then they will be thinking about what they actually truly need to do and maybe a lot of these functions that they're providing right now they should turn to the private sector. so, no, i'm not concerned. >> thank you very much. i thank the gentleman. we recognize the gentlelady from the district of columbia, ms. norton smith. >> thank you very much, mr. chairman. mr. dodaro, i would like to ask

you a question that i'm sure perplexed members of this committee. and certainly the public. it has to do with very large contractors whose abuse or poor performance is so severe that they are brought to this committee or there's headlines on them and i want to know -- i want to describe the responses of federal agencies in awarding them contracts again. for example, if you did some -- if you did the functional equivalent of what some of these contractors have done is an employee, you'd be out the door and nobody would ever hire you again. but let me give you a couple of examples. kbr, doing work in iraq for department of defense, is so

faulty on the maintenance of electrical equipment that deaths resulted including dozens of deaths of american soldiers. but then they awards kbr a $2.8 billion contract to provide support services, additional support services, for our troops in iraq. or let's take the most notorious perhaps black water and private security because that's been a headliner. they still have mainly -- the state department after those headlines awarded them contracts for protective services in afghanistan. now, these people were seen as having themselves committed perhaps -- at least accused of

committing what would amount to prosecution crimes while they are doing their work. does dod and in the case of black water give contracts a game to such companies because of the difficult of the startup. it's wasteful? this is after all a competitive process? why in the world if a contractor has exposed the agency to such embarrassment and infamy would the agency want to give that contract or there must be some inherent reason for doing so? >> yeah. typically what we find when there's a lack of competition they're either regions for expediency, they need to move very quickly in an area. they need to have people who have the proper background, you

know, security clearances that type of thing or there's limited numbers of companies that could provide that service. but what we focused on is making sure there is more competition in the process. it's a better value to the government. there needs to be adequate consideration of past contractor performance in the process. there are safeguards built into the process through suspension and debarrment that need to be put into place and then follow adequately through the process. >> is it used? >> it's used but i think our work has shown that it's not always properly checked before some of the awards are made on a cross-government kind of basis. >> is there a way to structure the contract up front, for example, so that if waste and -- or worse failure to maintain the

electrical system in iraq occurs sometimes you owe the government or the government sometimes owing you. >> you need to have protections for government -- >> what kind of provisions protects them now? >> i'd have to go back and look and provide some explanations. what we did find, though, and this is being addressed is that many times there are incentive awards and fees there that contractors are being paid into the incentive fee and really weren't meeting the standards of performance as what you would think they should be but i'll go back. i'll provide to you and this committee the standard provisions that are in there. >> you're not saying to me a system of awards -- i love incentives frankly of awards and penalties, carrots and sticks, have always been thought to work. thank you very much. >> yeah, just for the record, we are doing work currently on

suspension of debarrment practices which i'll be happy to share with the committee as the work is being completed and we will provide you the federal acquisition regulations that protect the government. >> thank you. >> thank you, mr. chairman. >> i thank the gentlelady. we now recognize the gentleman from south carolina for five minutes. >> thank you, mr. chairman. it is impossible for me to explain to the folks i work for and i suspect most of my colleagues would have similar difficulty explaining to the people we work for the pervasiveness and longevity of government, waste, fraud and abuse and i commend you for gathering with us today to seek solutions and i want to start with the up with that i find most compelling, which would be criminal consequences. do you have an estimate -- and i'll throw this open to all four of you, an estimate negligence, gross negligence, criminal negligence? where is the preponderance of the waste, fraud and abuse? where does it fall in that paradigm?

not all at once. >> i can tell you from the medicare and medicaid side, a lot of what happens in terms of the prosecution of fraudulent claims within cms, unfortunately, does not occur until it meets a certain threshold of money so a lot of these claims -- >> whose threshold is that? >> i'm? -- i'm sorry seven >> who sets the threshold >> it's within cms and they determine on their allocation of resources what goes in there. >> if my numbers are correct, there are almost 50 different investigative agencies and quotes that are seeking waste, fraud and abuse just within health care. that alone is an example of waste and fraud and abuse. 50 different agencies? >> and the huge irony on that is there is waste that's going on between all those organizations

in the sense there's a lack of data-sharing that's going on between them so for instance even within medicare part a and pardon d you're missing data-sharing between those two, that they would be able to use to identify who potential crooks are and so as a result they are losing out on being able to cross-reference these individuals and some of these people may be claiming to be legitimate suppliers on part a when they're already identify as a potential fraudulent supplier for part d and so that lack of sharing is leading to the innocence that you're explaining to >> it's impossible for me to explain to anybody outside the zip code of how you can have that. with respect to the question asked by my colleague from the district of columbia about carrots and sticks, i prefer the sticks. so tell me what is being done to criminal prosecution consequences to ameliorate in

what has been if my numbers are accurate, a two decade long acknowledged problem? how many investigations have been started? how many matters? how many declarations by the u.s. attorney's office? >> we can provide that information to you for the record. there are reports that the inspector general has put out that show matters referred, how many have been investigated in the prosecutions and if that has been prosecuted as well so we can provide that information to you. and the thresholds are typically set by the justice department in terms of how much monetary money would have to be, you know, sort of broached before they would efficient and productive to go through the judicial system and that process. but those figures are available. we will provide them to you. >> okay. thank you. i would yield back the balance of my time. >> would the gentleman yield?

>> in the case of the question of prosecution, is the biggest problem the lack of prosecution from your studies or is it the lack of catching in real time these individuals before the money is taken? which do you think leads to more of the long-term abuse? the fact that people can continue stealing again and again in various ways or the fact that we don't prosecute them at a low enough level? >> while we haven't studied that issue directly it, mr. chairman, i think part of the issue is that there's -- it's not that -- you can't -- you can continue to abuse the system with low potential of getting caught so i think that that -- just from that standpoint. i'll go back and -- >> okay. one follow-up question, an earlier one. wouldn't it be impossible for

the government to contract directly with everyone, meaning, at some point the government does have to rely on general contractors to do jobs, thus, it's inevitable that you will have a contractor hiring of the contractors? >> yeah, as long as it's in a typical prime contractor or subcontractor mode i think that's fine. but when the government contracts out its responsibilities over to the prime contractor then i think you have an issue. >> which we all agree with. we all recognize the gentlelady from california for five minutes. >> thank you, mr. chairman. i'm very pleased with this hearing and frankly think that if we spent the rest of theory just dealing with the issues that were raised here and actually got some results, we would have done our job. i have much frustration with the fact that we hold hearings, we uncovered problems and then nothing happens. to you, comptroller, congratulations on your official appointment.

you have a high risk list. there are agencies that stay on this high risk list year after year with no penalties, no results, no changes. and i think that that is inexcusable. and if you need to have more authority to force these agencies to do what you recommend, then we should introduce legislation to make sure that that happens because we look foolish. and the american people look at us as if we are totally ineffective when we cannot deliver once we have uncovered a problem. let me move on to a problem that you just editorialized the "new york times" about just two days. a percentage of the proceeds from gas and oil gas at that drill on federal lands are supposed to be paid. and evidently according to

reports, there's substantial funds that could be generated, some $9 billion in fiscal year 2009. but it appears that it is on your high risk list in part because the oil and gas companies aren't paying their proper share. so i guess my question is, how long have they been underreporting? why do we allow them to underreport? why aren't the taxpayers getting the proper payments that they should be receiving because the drilling is going on, on federal lands? >> basically, i agree as a result of earlier question to go back and provide a listing of the underreporting point. what i would say there's really a couple of issues. one, there's too much reliance on self-reported data that needs to be checked. secondly, we found problems with the verification process that the interior department is supposed to use to make sure that the production figures are

correct as well. >> wait, excuse me. are you telling me that the oil and gas companies are self-reporting and we're supposed to trust them? >> well, there's supposed to be checks put in place. >> by whom. >> by the department. >> and are they? >> and the verification of the production numbers are which we believe need to be addressed and that's one of the reasons we're highlighting this as a high risk area. the other reason is that the federal government's basic system to assess what the cost would be for federal leasing hasn't been revisited for 25 years. and that when the federal government -- what it charges for leasing on federal lands is compared to what's charged in other countries or even some states, it ranks extremely low. in its charges to begin with. >> mr. chairman, i would recommend that we have a hearing specifically on this issue. the taxpayers deserve to get fair market value for the leases

that they provide to anyone, they -- the next door neighbor or an oil and gas company. and i think we should be getting justifiably ours -- we're the stewards of the taxpayers' money and i think this is a ripe area. i'd like to move very quickly to the alaska native corporation. i don't know if you've looked into it. if you have not, i would request through the committee that you do so. "the washington post" did a piece on november 26th which is astonishing to me. . >> anytime you allow for sole source contracts, there is mischief that is going to take place. in this case evidently a contract for $250 million was offered to a subsidiary of the alaska native corporation. a gentleman living in delaware -- his office was his colonial four-bedroom home and

he was providing sexual assault and harassment training except he had no experience doing that and his last contract for the government was for $73,000 and it was for janitorial services. there's been $29 billion provided to the amc over the last decade. most of the money not going to the natives. most of them going to the nonnatives. it is an absolute abuse of the program. and i think we should look into that as well. >> yeah. we issued reports in the past on that with recommendations. we're currently looking at that time again and we'll be happy to share -- >> okay, that's my problem. you issue reports. nothing happens and then there's another story written back we haven't done anything about it. i want to be part of a committee next year that actually delivers on results not just have a bunch of hearings but show we are saving the american taxpayers money and i yield back.

>> the gentlelady yields back. chairman issa had to go to the floor on several amendment that is he's dealing with so i wanted to step in as the chair. and i am up in the order so it was good timing. [laughter] >> so i'd yield myself five minutes. first of all, i want to say thank you for your testimony and your work on these important issues. as the gentlelady just said, we could spend the rest session just on what you're sharing with us and knot getting everything done on doing good oversight. chairman issa has made a priority of just this, oversight of how the federal government is handling the people's money and we're glad to have you here. while i thank all of you, mr. dodaro, i want to thank you. this is your first time testifying before this committee as the newly sworn-in comptroller general.

our congratulations on your confirmation and your 30 plus years of service at gao that brings great leadership to the agency with that experience. i'm going to start with you and i wanted to thank with your flexibility hearing and the consolidation reports that we moved back to march 9th and i look forward to hearing your testimony then and also to your upcoming report, i believe, march 1st on duplicative federal programs. we're anxious to see that and i know this is a first time report although you addressed some of those issues in other ways in the past. as chair of the subcommittee on organization and efficiency and financial management we look forward very much to working with you and you are staff because when we think of efficiency, duplication of effort certainly is not an efficient use of the taxpayers funds. so is there anything you want to give us is primer on? what we may see or shall we wait

until march 1st? >> well, i think, you know, we were charged with doing an annual report. so this will be our first annual report on this. it will basically summarize the work that we've done and new work we started as the is put in place. we focus on directionary spending programs both civilian and military. i think the facts should be on the table as well and so we will see a number of issues on that. in subsequent years we're going to focus on subsequent spending and tax expenditures as well. so we have this three-year cycle to cover the entire federal government. the first report will identify 34 different areas that touch hundreds of programs of virtually every major mission and agency in the federal government. i think you'll find plenty of opportunities to delve into some of these issues very well. you also find that there's some

limitations on the ability of us to give definitive answers of questions by how much money you'll actually save if you consolidate this because the limitations on information that's collected on a reliable basis, you know, from the agencies as well. we're adding to that another 50 items of cost-savings opportunities beyond the overlap duplication and revenue enhancements that could be -- or additional revenue could be brought in to the federal government to help cause what's an estimated $290 billion tax gap. so both revenue-generating enhancements is cost-savings opportunities and so we're looking forward to it is unveiling of the report and providing appropriate follow-up support to the congress. >> and hopefully given the timing as we are debating the new c.r. today and that's still going to be an ongoing dialog between us and the senate no matter what we pass today or tomorrow, this may give us some

additional information as we try to really look at how to be most efficient with the taxpayer funds even in the immediate term in this current year. when you look at discretionary, i do agree that you need to look at everything including dod and the duplication of efforts. i assume it's more duplication of programs with items such as the ongoing debate on the duplication of whether we have one or two engines on the joint strike. i assume it's outside of the realm of this report. >> yes, that's correct. >> i'm going to run out of time here quick. one i would add on the oil and gas royalty and i apologize 'cause i'm trying to multitask here if you already answered this. is there even a rough estimate -- you know, when we see $9 billion, i think in '09 from these royalties if they are off by even 10% that's almost a billion dollars. 900 million. is there an estimate of what you think may be lost because of the

lack of goods material in their structure? .. >> i the forward to the upcoming hearing. i'm working with uranus subcommittee chair capacity. >> i yield five gentlemen to mr. mchenry from north carolina. >> thank you for being here. it has been a long morning.

i agree with our schedule. dr. de rugy, your previous answer to mr. wallenberg and your testimony you talk about the flypaper effect. the fact that these federal transfers with matching grants at the state and local level actually increase spending and over the long term increase taxation. this is particularly interesting in light of stimulus. with $150 billion roughly in direct federal transfers to state and thereby increase spending. the question, is the federal government really complicity in the state and municipal government financial woes by these operations? >> yes, it is. >> william elaborate?

>> economic literature document this problem. and yet the system goes on. one of the things people demand is the fact that we touch federal spending going to the states. states will end up with big holes but on this assumption that the federal government has deep pockets and that is not the case. for every dollar that the federal government spends whether it is on the states or private sector, it has to tax people who live in those states and also has more money. the more the federal government does and this is howard works. will send money through the state. they can borrow this money. it actually pushes the federal government toward a more irresponsible behavior. >> in my subcommittee on this committee, we have had discussions about the state bond issue, black of real

transparency. >> there's another issue there. the fact that the federal government has been complicitous in granting special treatment to investors who think it is a really good idea to lend money to bankrupt cities in the form of tax deductions and build america bonds were the federal government subsidized lending money. the race to lend money to bankruptcy as conclusive. >> in terms of this do you think that the state and municipal financial position is worse than currently known. >> i think it is. if you take the economic approach of actually valuing the pension on unfunded liability instead of the less than $500 billion on their books, you come up with $3 trillion. so yes. the fiscal picture is worse than

we think. >> in terms of -- a separate question. i don't know if you want to answer it but in terms of our ability to know or your ability when you're doing research to see the long range unfunded liabilities of states and municipalities and even the federal government, is it knowable for the average taxpayer to see where the city or state is in terms of financial liability over the long range? >> very important. it is not what everyone wants to look at but i can tell you i find it is lazier to look for data at the federal level. is extremely complicated to look at data and the state level and municipal level and more importantly there are a lot of accounting standards that apply only to the government of very different from the accounting standards applied to the private sector that makes liability of the federal government much

smaller than it actually is and it would be a very good thing anomaly to make this data transparent but also vowed u.s. that its actual present value and actual size of this liability. >> so this is gets the versus gets the to speak the lingo. the value of things is different from government value based on accounting standards so you see some flaw with government accounting. >> there are real flaws with accounting center's. it all points in one direction of making liability and what taxpayers ultimately will have to pay and burden. that is a real problem. >> sofa as the standard would give greater transparency and

ability to understand true nature -- >> and value, liability at the future value so what you're going to pay in the future and would you need to actually put down right now with actual realistic rate of return rather than completely optimistic 8% rate of return. >> thank you. >> welcome. >> just to follow on that. you talk a little bit about accrual method of a more accurate having the federal government fully disclose and so on so when we talk about $14 trillion of debt before we had unfunded liabilities on medicare and medicaid we are really in the 50 to $60 trillion. >> currently on the financial statement of the united states unfunded liability, almost $80 trillion. >> exactly. not well focused on as we focus

on the debt which is a small fraction of that cost. >> one thing we don't talk very much about is the fact that the inter-governmental debt which is supposed to be the already funded part of the promise we make to seniors this money is gone. there are i yous in the trust funds that the only way they will be paid back is if the federal government either taxed people or borrow more money. >> we thank each of you for your testimony and the great resources you provide today and what we will continue to do is look forward to continuing to partnering with you. we are going to move to our third panel if our witnesses want to work their way towards the witness table. >> deer have anything?

>> unlike to recognize thomas schatz, mr andrew moylan, vice-president of government affairs for the taxpayers union, and mr. gary kalman is director of federal red display of office. as you saw in the previous panel pursuant to the rules all witnesses will be sworn. if you will raise your right hands. do you solemnly swear that the testimony you are about to give this committee will be the truth, the whole truth and

nothing but the truth? please be seated. all witnesses answered in the affirmative. we prefer to have only one main panel but we have saved the best for last. it is this committee's primary duty to work with watchdog groups and whistle-blowers. you are among the most important people that ever come before us. we look forward to your testimony. mr. schatz, please try to stick to five minutes and we have a lively round of questions afterwards. >> thank you, i appreciate the opportunity to appear before you today. regardless of who has been chairman, we do contribute information about where the government can become more efficient. i am thomas schatz of citizens against government waste. this was founded to build support for implementation of

president reagan's commission recommendation and other waste cutting proposals. we have helped save $1.4 trillion on those recommendations. the high risk ceres is a valuable contribution to the effort to eliminate wasteful spending, a way of recognizing the importance of this report in 1993, we produced a report called whiskey business which summarize the high risk series. that was the year we produced a prime cut and compilation of recommendations from members of congress and other sources. and i ask the entire group be entered into the record for this hearing. >> without objection. >> as the most recent report identified 763 recommendations that would save taxpayers $350 billion in one year and

$2 trillion over five years, we have top recommendations. i ask this report be entered into the record. >> without objection. >> that includes reforming or eliminating outdated and in equitable agriculture subsidies, common-sense ideas like replacing the $1 bill with a $1 coin, further exposure to hundreds of billions of dollars in tax fayette the dutch taxpayer funded bailout, and promoting innovation in the private-sector by keeping the government from regulating the internet. there are several recommendations that stand out more than others. the market access program helps agricultural producers promote products overseas. president obama and the republican study committee have identified this as a source of waste. it is corporate welfare when

companies like centrist which reported $860 million in revenue in 2009 received $2.1 million to promote its product overseas. we have been looking closely at the $2 coin. we understand the government accountability office will issue a report next month on how savings can be achieved in that area. we are not sure congress will be able to score it as we think it will save money and something that should be a very simple decision for the united states which is the only country that has such a low denomination for its paper currency. savings of $500 million a year. we will see what they are. there are programs that sounds well-intentioned such as the prevention and public health fund that will spend $14 billion

over the health care law on anti obesity and tobacco control. the government will be using tax dollars to modify individual behavior. we have seen this work so well in the office of national drug control policy with anti-drug ads. and whether it the grantees are using this to lobby for more regulation and taxes which don't usually solve that problem. looking at oversight. oversight is not used as a political weapon. we understand the most important function of this committee. taxpayers deserve to know if you send your mission statement how money is being spent. the program is not being effective. taxpayers want to know why.

to reform or terminate expenditure of their money. since it is being expanded they want to know why it is being affected. the ten most effective and least effective programs. the answer is the programs on which congress spent the most money and in which they spend the least money. that is never the right answer. we hope every member is more educated and spend more time determining which programs are more effective. thank you for allowing me to testify today. >> i am vice-president of governor affairs for the national taxpayers union. to work for lower taxes and smaller government at all levels. we are the oldest of such

organizations. we have three hundred sixty two million worldwide and in all the district as well. i will start with an old joke. the budget tells us what we can afford the doesn't keep us from spending money on it. unfortunately that has been true for too long. the current situation is bleak and i want to point out a couple nuggets to illustrate that. first of all president obama's budget estimate estimated overspending problem this year of $1.6 trillion which is equal in inflation for the entire federal budget. and we will raise the tax code and spend in real terms the federal budget of 2003 and on top of that the budget of 1982. the president's budget outlines the lowest single year deficit in the coming decade of $607 billion which is higher in absolute terms of the deficit from 789 to 2008 and roughly

equal in real terms to overspending. many have attributed the recent spending surged a crisis response due to a financial meltdown and the resulting recession the federal government has run a deficit to 51 of the last 60 years which is something we think ought to give pause to die hard kenyans who believe in economic growth cycle that surplus should be the norm. instead of lifting just a parade of horribles to drop a parade of solutions for you, there are a lot of parts that need to be done and much of that we deal with in written testimony i presented to the committee but i want to instead focus my remarks on the low hanging fruit of waste. it won't shock anyone to hear that the federal government spends too much money but whether you agree with that assessment you can agree we can spend that money in a smart fashion that we are today. that is why we joined with the public interest research group

with whom we have many disagreements but some agreements as well to offer a report called common ground bridging the political guide to reduce spending. we identified over 30 specific recommendations by federal spending reduced $600,000 by tackling waste for the middle part of the decade. the state of the union made it cool. as the previous work includes issues like spending transparency, to steal a joke from conan o'brien i heard president obama took his daughter to see the 3d version of avatar at an end one of his daughters said that is how you spend half a billion dollars. unfortunately american taxpayers spending half a trillion dollars on such things as flood insurance for repeatedly flooded homes, over payment of the national drug center which is located in the heart of the drug war in pennsylvania. among many other things. these items have been on

watchdog lists for years and opposition to these recommendations tend not to be political or ideological but parochial. a couple highlights. $62 billion in savings for identify wasteful subsidies for corporations. $353 billion in improvements to contract in an asset acquisitions. $77 billion to program execution and $107 billion in cancelling or modifying it effective military programs. hour earlier estimates were closer to a trillion dollars by the middle of the decade but tried as hard as we could to point these suggestions with critical estimate of real spending impact as well as a source like ceo or a j i 0. the report demonstrates reducing wasteful spending is not a question of right or left but right or wrong. i will conclude by noting i believe that this hearing is properly focused on the issue of what is causing our budget woes which is overspending.

revenue is set to return to postwar averages in relatively short order even if we extend the 2001-2003 tax cuts spending is projected to be above postwar averages and will skyrocket after that. that is why it is important for congress to eliminate wistful spending and tackle entitlement reform and interview constitutional limits moving forward. if we fail to seize the opportunity the result could be a painful crisis that will develop not over six months but six hours on a sunday evening as we sit with our family and folks in asian markets stampede away from american debt. to modify a line from the president i hope we can look back together on this time and say that this was the moment when the rise of red ink began to slow and the budget began to heal. >> members of the committee i thank you for inviting me to testify on behalf of the public

interest research group. and to protect public demonstrate -- democratic government. polls show 70% of the federal spending is an urgent problem. research indicates the public concerns are focused on waste whether it is by narrow interest programs that outlived their usefulness or blamed inefficiency that allowed to continue for years. we are proud to have partnered with the national taxpayers union to develop spending reductions. $600 billion in spending cuts, these are good place to start.

taxpayers deserve to know their money is being well spent and is going to true public priority and there's accountability in the system through common sense reforms. there is any number of issues that made divide, and our respective memberships, responsible on accountable spending of taxpayer dollars. congress to start where there's agreement from across the political spectrum. i would like to share the approach to the spending cuts. we answered our partnership guided by four basic principles. to oppose subsidies that provide incentives to companies with direct harm to public interest, an example here is subsidy to ethanol according to researchers at the university of minnesota and elsewhere, fares little if any truth to the benefits of ethanol and there are clearly adverse environmental impacts. we oppose subsidies to procure

profitable industries that don't need the incentive. these would engage in the activity regardless of taxpayer support. we would include in this category subsidies as have been mentioned by now. all three of as market access program and among other things effectively pay for overseas television advertising and other marketing of specific products to successful multibillion-dollar companies. these companies have the incentive and resources to do their own promotion without taxpayer handouts. support common sense reforms to make the government more efficient. examples include reducing of the inventory of underused government buildings as mentioned before. we have a lot to do in contracting. we talk about a report we did call for giving fraud and failure which was the repeated issuance of contract and renewing of contract despite the fact they didn't deliver.

finally, we would oppose funding where there's a 40 consensus to do so. strong independent agreement across the political spectrum that a program is wasteful and the agency or department receiving the funding argued against it. a specific example, just to repeat the national drug intelligence center which is the subject of numerous unfavorable reports of its impact and effectiveness, concluded duplicates existing efforts. particular value of the recommendation detailed in the report is they are specific. a focus on agreed upon wasteful spending. along those lines i would just note that it does not support across the board cuts. such policies failed to differentiate between true public priorities and where there is genuine waste or inefficiency in the system. americans prioritize national defence but if the efficiencies can be made to where we repair military vehicles military often exempt from across the board cuts that savings is no less important reforms to streamline

the cost of medicare. not in the report that would urge the committee to review special-interest carve outs through tax expenditures and loopholes. these have the same effect on the nation's deficit as direct line item spending. regardless of whether spending takes place in the tax code or appropriations process it should be part of the conversation and should be transparent, accountable and serve the public. let me end by saying many items on the list challenge longstanding subsidies and expenditures surf little or no continuing public purpose they will no doubt be intense lobbying efforts to preserve the hand out. we urge you to resist those efforts and take the first important steps toward addressing our federal spending problem and insuring any public expenditure is for the public interest. we applaud the committee for listening to these giveaways and challenge tradition and difficult decisions to reform the budget and decisions that lie ahead.

thank you. >> the first round of questioning for five minutes. mr schatz, your critical waste issue of 112th congress has an area that piqued my interest on page 17 and i ask unanimous consent this entire document replaced in the record. without objection so ordered. on page 17 it makes a statement, usa today is the source, that 83% of all public employee jobs pay greater than their comparable private-sector counterparts. when we are looking at trying to figure out waste, would you categorize paid more than what the private sector pays for comparable work as a waste and if so would this be the largest waste there is in all of government? >> there are some caveats with

that proposal. arguments that federal workers are more educated on average than the private sector workers but looking at apples to apples we would like to see a report from the congress that details where this is. the cato institute has looked at this for years and people used to believe that this was not the case. currently based the vote on compensation of benefits that public employees at every level of government are being paid at a higher level. whether that means there are too many of them, compensated or getting something out of them that is worth that compensation these are questions that need to be examined. we do think federal values should be reduced because private sector, if you have a job you are lucky to have one. most people haven't had a raise. i am encouraged that the president has said we should freeze them. that is a good first step. we have to determine which

programs are worth continuing and what is a fair rate of pay so that we are really not overpaying. the compensation of benefits particularly the benefits are much better than the private sector. >> one question following up on that is do you believe the government can come up and i will use the british word scheme, in which we can have a dynamic pace of schedule similar to the private sector so that we don't underup a. some public sector employees are underpaid compared to comparable private sector where we get a drain. to significantly improved, would that be inherently a complete change in schedules. >> when president carter came in, nobody talked to him for a

while as to that. it was on a bipartisan basis. there were high-level and well educated positions that we do need. think about security and nuclear-weapons. one of the examples, literally -- in a private sector individual. this committee in particular would be well served, something that is objective and looks at that program by program and make a determination about the fare level where we could save a lot of money. this needs to be done to get spending under control. >> a little off script.

i often don't get such a good panel to get into another area. the only way we are going to deal with overspending, includes waste, it also includes taking on entitlement. when i ask the toughest question do you believe that congress can successfully convince the american people that entitlement, social security and medicare, are not in fact an absolute health care program -- part of the social welfare safety net, and tested. >> people are living -- and they

are until 88 which is longer than they expected. there is an anomaly in medicare when it was first enacted, you can have an insurance program or payment program. it is simple math. it has to be done and we encouraged that the president said -- [talking over each other] >> whether it is social welfare of do. -- >> i will use the entire term. it means a test in some of those programs at least partially.

if we like myself and enough income outside of congress that when i am 70, won't need social security, to do. do you believe congress has the ability to convince american people separate from do they have the will? >> that conversation needs to be started, they don't need to give a. we have a health care bill where people think health care is entitlement. [talking over each other] >> it is a standing more than it is being reduced. >> do a thing congress has the ability? i do. am i convinced congress will be utilized? i'm not so convinced yet. with the we like it or not they are girding themselves from the inside. if we did not make serious changes we are rapidly approaching the point to take up

nearly as large a portion of economy as a whole as the entire federal budget today. >> if you could -- [talking over each other] >> when it comes, are you here for that? you hear this discussion with these contracts, we don't seem to be in control of. i just wondered what comments you had. >> thank you for the question.

[talking over each other] >> an important part of the puzzle with regards to tackling wasteful spending. that is what we did with u.s. pirg, identifying acquisition that is a very worthwhile suggestion as part of the report. >> we were around for a lot of defense procurement. the great commission's recommendations, and our organization publicize $436 hammers with the toilet seats. we are well aware of what needs to be done. >> i am just wondering when you look at your organization and dedicate effective and efficient use of taxpayer dollars and it was miss spier who talked about how frustrating it is to constantly be going over these problems over and over again.

we end up looking kind of -- it looks as if we can't get it done or else we don't want to get it done. and we look at all resources being put into these hearings and don't get me wrong, i am glad to hold this hearing and glad we are on the road we are on too but what i am trying to get to is the older i get the more i value my time. i am trying to make sure the time we have under our watch, we do something to actually make a difference. appreciate it the fact that these two organizations got together. that is a good start. but i am trying to figure out, what do you see? i am trying to get to how do we not talk about -- two years from

now we are talking about the same problems and they are getting worse. we make some difference in the coast guard as a small organization but it was through sheer pushing and setting deadlines as the chairman talks about, how do you work yourself out of a job is what i am getting to? >> i have been at this probably longer than the gentlemen. [talking over each other] >> you do a great job but i don't want you to die and the problem is worse. >> part of the problem is priorities in congress. members traditionally have been happier spending money and putting their name on a road or a building and taking credit for doing something whatever it might be because it might get them reelected. if we can't get enough members that say i will fix a problem because that is the right thing to do you will probably get

reelected with an even bigger majority because they will go back home and said look, i did something that made the government work better. we don't want people to have less faith in the government. we talk about what is wrong because it gets people's attention but fixing it is something that needs to be at the forefront of people's mind. agency heads come in. presidents say let's fix the problem. there is entrenched bureaucracy that doesn't want to change. it has to be an effort, a collaboration between the executive branch, congress, among these organizations so when people look at something they say we will give you credit for fixing a problem. not just spending money. >> it is a great question and i am glad you are focused on this. i will say a couple things. one is it is the fact that i

think we need to start where we can agree. a lot of these fights end up happening at the places where we disagree so the value in my testimony is value of a group partnering with u.s. pirg gives you a road map for a few places aware of parties got together and said this is where we can go you would have backup from folks that can talk to their memberships across the country. the second thing i would say is there are some places where there has been progress made. obviously not enough but last year unanimously through the house there was acquisition reforms that were made to weapons procurement systems. that took care of 20% of the problem. the can handle if we can go after weapons systems which arguably is one of the harder things to go after that we can introduce and get a bill that would take care of the remaining

80%. there are building blocks on which you can focus to make serious progress. in the senate side the last thing i would say on a number of -- for example issues life--not necessarily something everyone agrees on. mr. grassley and mr. lemon not talking about how to close those abuses and weighs to raise revenue. i think there are things out there but we need to focus on where we agree. >> i submitted this in my written testimony. the dollars and cents is easy. the political calculus has been difficult. just to explain part of that, president obama's recent budget has suggestions for termination. over a billion dollars were repeated suggestions from president bush's last proposed budget. there are a billion dollars worth of reductions that those different men agreed upon that

have still not been implemented in terms of reductions. those are things we ought to be targeting. that is the low hanging fruit. we identified $600 billion that we identify as low hanging fruit and then we climb up a little higher and fight about what to take and how big they ought to be and i can say we as an organization that i as an individual and committed to making a political calculus because it is the only way to get this done. >> thank you. ms. spier for five minutes. >> if there ever was a moment in time when we can come together and show the american people that republicans and democrats want to save the taxpayers' money, and we commit to do that from this committee we can change the world in a small way but a very significant way. the fact that you have come together from very different places and have created a list

for us of thing that they can agree on i would suggest we can sit down and see if we can agree on these particular suggested areas. this suggestion that we can save hundreds of millions of dollars by ending orders for obsolete spare parts for the military, if we can't do that we should get out of here.

if not all of these i would like to know what that specific number is. we could skip them, $500,000 apiece to buy homes in other areas and save a lot of them. those are the things i would like to see. let me ask about this mark asset program. this is pretty i rages. if we are paying centrist and mcdonald's to advertise in france and other locals around the world what could possibly justify continuing that program? >> we have been looking at this for quite some time. we have seen letters for ten years. used to bring amendments to the floor on the appropriations bill. and amendment was being offered on continuing resolutions. i don't know what happened.

the national drug intelligence center was adopted. that will finally disappear. market access, is the power of the companies that get the money that keeps it going. the political will to say that this is a huge amount of corporate welfare that should be eliminated. there has been bipartisan support but not a majority so far but it is really due to the power of these companies and their lobbying operations saying we need this million dollars to help increase sales and jobs. >> i would say while it is key to point out there are large corporations benefiting from it is not just corporations. there are large trade associations comprised a lot of those and they make very high-minded arguments about raising demand for certain types of product. there was an article recently where a gentleman was making the argument that we need to raise foreign demand for cotton so we

have greater demand for cotton farmers in this country. the way we look at it as an organization is entities like this that have significant profits on their own ought to be able to fund their own advertising and promotion techniques. taxpayers have many more important things to deal with and whether the budget situation is good or bad it does not make sense to be subsidizing. >> i would quickly add there is presumably a debate to be had weather for commerce department has a roll going out to the market for american businesses. when you start saying, in big macs and paris, whenever the purpose of the program might

have had it is completely off of that original purpose and is now not serving any purpose that promotes any value to the american taxpayer. >> cleverly changed the name from the market promotion program to market access. we want access to markets overseas, even there, it is better than we had in the past. >> tell me some of the companies besides sunkist and macdonald. >> fruit of the loom, there's a long list. >> a brief second round. they will rephrase it. a prominent bank chairman, a

seven figure salary. he is over 65. we each receive $200 a month. and benefits go to the children over and above. is there any reason today, someone making a six or seven figure salary just because they have children over 18. everything is an entitlement into law, someone needs the

money, never defined -- to give someone a hundred dollars because one of their parents is over 65 even if that person is still working on income? this is about waste. the two biggest potential rocks in the country, for medicare in the opposite order. that is not going to complete the balance the budget. high income over 65 -- >> understand and appreciate that. they don't take positions on benefits for social security or medicare. that said, we actually do have -- >> the question is is that wrong

benefit. is it the type of benefit that congress should look at relative to reach categorizing it in some way for means testing or not to make it an automatic entitlement? >> i apologize but we don't have the -- [talking over each other] >> let me say this. we do think that for example there are number of things in medicare and medicaid that should be looked at. we are not against looking at that. and medicaid for example there are number of states in which name-brand pharmaceuticals have put on -- gotten into the states to adopt actuaries that forbid medicaid from purchasing generic drug alternatives. medicaid ends up spending a lot more money than they otherwise would. >> they lobbied for a built-in -- >> people who say we should

leave entitlements off the table we think there are huge efficiencies, billions of taxpayer dollars -- obviously we can all agree on the actual fraud. >> i guarantee it shouldn't be the ritz-carlton. >> we do believe there are opportunities to make huge statements from those programs by looking at how they are being implemented. on that side we can agree. >> any other responses? >> you touched on the public opinion portion that there is something of a structural problem in how these are viewed. people are well aware of the payments they make into these systems for years and decades and to some extent they rightly feel when they get to retirement age they ought to draw upon those benefits. [talking over each other] >> they only pay into part a, b, c or d or not out of withholding the general tax revenue?

>> it is a more basic problem which is when social security was drawn up, it was not something that came to a forced savings program. we have pay-as-you-go system and that is part of the disconnect we face today and that is part of what makes dealing with these programs more difficult than they might otherwise be. >> one closing question. this one hits home. in a little while we will have an amendment. we will make it across the board cut to the branch to consider further cutting the budget that the ranking member and i share to try to go after waste and misuse of government funds. i am probably going to vote no because i don't believe you cut off the auditors's fund in order to get a better run of an enterprise. in this report that is already in, there is a proposal here that members of congress cut off

ranking in election years. not just 90 days but cut it off altogether. i would appreciate a little elaboration because i found it to be very insightful that although we should be able to respond to inquiries and mail should continue the history of franking right up to the eve of the cut off to the primary or general is certainly something, to a fair mirror. >> it does limit -- >> i yield to the gentle lady. >> i find it to be outrageous. i would be delighted -- i was doing one of your newsletter to my constituents to tell them what i had done during the year and found out it will cost $100,000 to send it out and buy

refused to do it and with the eve of the electronic newsletter and everything else i think that benefit should cease. >> in the days of the pony express this might have made sense but it doesn't now. there is so much information, twitter people still facebook, myspace, e-mail, texting, town hall meetings, if a member of congress wishes to let their constituents know what they are doing there are so many outlets that did not exist before that we believe and always believed a member of congress should only respond to a constituent if they are asked a question. that is a legitimate function of what members of congress do. we have c-span, we have everything going on. there's more information about the hearings with new rules. [talking over each other] >> this is something to you in particular, great job on this

issue over the years. >> we have done a tremendous amount of work on abuses of the francing process but the more general point you made, i often make the argument that one of the reasons i believe so deeply in limited government is because i don't think we spend enough money on the things that matter. that is why across-the-board cuts ought to be a last resort rather than a first resort because as our organizations jointly have pointed out, there are higher priority thing that lower priority things. we ought to start by eliminating lower priority things first. franking benefit is among those as tom pointed out. there are innumerable ways to communicate with constituents that don't require taxpayers to underwrite it. >> if i had gotten into the

study of liquor and marijuana in combination which is being funded we might have had another ten minutes but i recognize the ranking member. >> thank you for being here. i want to go to you to make one quick comment. i was listening to your response with regard to public employees. i think we have to be very careful when we try to make these comparisons and contrasts. you have been sensitive to it. i know you speak in a lot of places and tell a lot of stories but this is what i want you to tell. of most every one of my employees on this committee took a substantial pay cut. they are here night after night. many of them -- we have harvard and law school graduates sitting right up here and i am sure -- i don't know what happened on the other side but what i am saying is we have a lot of great people

who do a lot of sacrificeing. it makes me want to scream sometimes when i hear -- not just talking democrats but republicans too. about public employees and how they are -- have these high salaries and couldn't do better in private industry. i guarantee you most of them could but we have a lot of people who dedicate their lives to trying to do what is right and make things better for people and i get emotional about it because i hear it over and over again and it is quite unfair. and i want to talk about this whole thing of systemic fraud. i am doing a speech at the university soon talking about the fact that we need to create a new normal. it seems whether listen to the

same about contracting, i think it has become normal for certain contractors to expect to fraudulently get money from the government. it has become a part of the process. that is sad. it really is. so that is the normal. i think it was the chairman who was asking questions of somebody on the republican side and a very good question. is this criminal? is this what ever? mr. dodaro said it is something about there's a certain threshold that we look at. but the fact is the normal has become let's get something from the government. i am convinced we could do better than that.

we really can. when i think about where we are with regard and i mentioned this to be chairman, where we are with regard to technology, we can literally take gps and zero in on somebody's backyard. you mean to tell me we can't keep up with contracts? particularly when these contracts are costing the american people so much money. i agree with the chairman with regard to our mission statement. this is bigger than us. it is bigger than one party. bigger than democrats or republicans. it is taking hard earned dollars of americans and trying to make sure they are spent effectively and efficiently. the two things i just said are linked. the thing about employees. we got a lot of great employees

and need to be careful about beating up on them all the time. not just the people up here. the same public employees that collect our trash, the same one that deliver our mail. that is real. and lot of these people, probably most of them are underpaid and at the same time we also need to use our technology to -- we need to move technology and say how do we use this technology to bring that effectiveness and efficiency to government to help those employees accomplish thing they need to accomplish? we can spend and we are concentrating on spending lately but we also need -- the chairman said it in his opening that when we find ways we can save money we need to double down on that. we need to do that because we can save some pennies, that means everybody benefits.

when government benefits, when government is doing things effectively and efficiently we all benefit and that way, we bring value, more value to the lives of all americans. that is what it is all about. >> i thank the gentleman and our witnesses. if there is ever a time in which points were scored for the american people and not by one party or the other, today was that day. i would like to thank all the witnesses for their testimony. the record will stay open for seven days. if there are additional comments that you would like to have placed in the record i ask unanimous consent that you be able to do so and without objection so ordered. with that we stand adjourned.