it came down a tube of electronic decision support for those pilots so they knew exactly what was going on every moment. and if you went back to the wright brothers, you could not score in the actuarial sense the progress that would lead us in less than a century from a rickety, wooden canvas, manned kite puffing down the beach at kitty hawk to these sleek, computer-guided, miraculous aircraft that fly us in comfort around the world today. you could not do it. but that didn't mean that you shouldn't bet on it. that didn't mean you shouldn't pursue it. that didn't mean that it wouldn't make a huge difference in the quality of mankind's life to be able to have that technological leap.

so that's where we are. these five principles were a little bit beyond the kitty hawk stage, perhaps. but not by much the the day will cornlings and it will come soon when the quality of health care that each one of us receives, we'll look back and think, what we're getting now, that was canvas and wood sticks; that was primitive. we will have personalized electronic health records, companies will emerge to create applications so that whatever illness you have, the very best treatment will be downloaded so that you know what you should be doing and when, and it'll be adjusted for your blood type and family history and for your gender, if that's a factor that makes a difference, and for your body mass, whatever it is that is relevant to you getting the very best treatment as an individual, that's the kind of stuff that will be available. we'll aggregate the data about

what's effective and people who have far more brilliance than i will plow through all the data about america's health care experience and they'll start learning things about what works and what doesn't what two things we didn't notice are connected. we'll start to find those anomalies and associations. that'll hope up a whole new era of discovery and treatment. and between those new applicationapplications that win a personalized health care for americans, based on the data and the best available information so your doctor is a little bit like the pilot landing the plane out at dulles, making their own decisions, flying the plane directly but surrounded by the decision support that makes flying the plane so safe. you get out of a glide slope, the alarm goes off, there are wind gusts on the field, there are alarm goes off. all of that information and more is captured so that the pilot

can focus on flying the plane. that's the kind of support that our doctors can have, that's the kind of support that we can have, and those are american industries that will grow and emerge. so we really need to get behind this. i feel very strongly about this as you can tell and as the poor pages who have had to wait and listen to me at this late hour can tell. but i say now that it would be a shameful act on the part of the congress of the united states if, with an opportunity like that in front of us, if with a compelling cost target, as we have from delivery system reform in front of us, and with the proven thesis that by getting there we actually improve the quality of care for people -- we're not taking anything away, we're making their quality and

experience of care better, it s a win, win, win -- if we turn away from that win, win, win and i stead take the easy, lazy way of throwing seniors off the bus and putting medicare benefit cuts on them and let that bus just keep rocketing towards that cliff, that will be a moment that will merit the scorn of the american people and the shame of our own consciences because we will have do not wrong thing, and we will have done it because it was the easy way out. so i urge the white house not to take that road, to instead redouble their efforts on delivery system reform, back secretary sebelius on what she's doing, back done berwick on what he is doing and most significantly put a hard date and dollar metric out there so that the world can evaluate how

well the administration did. if this is as important as i think it is, if this is as important as the administration thinks it is by the work they've already dedicated to it, then they should be willing to set for themselves a date and dollar savings target to tell the country, by this date we will save this many hundreds of billions of dollars a year due to delivery system reform. if we don't, then it's merck. it's mush. there's no accountability to it. it's just generally going in the right drefntle a young president many years ago had a similar opportunity. we were losing a space race to the soviet union p. he could have said in a speech, i think it's time that we bent the curve of america's space program. i think it's time we bent the curve of america's space exploration. but he didn't. he said something much more

specific. he said, within a decade the united states of america is going to put a man on the moon and bring him home safely. if president john fitzgerald kennedy had given that first speech, we would never remember it, and we would never put a man on the moon. the reason we put a man on the moon is because when a president of the united states sets a hard target for the government of the united states, that vast bureaucracy moves to achieve that purpose. if the president of the united states dense that vast bureaucracy, the clarity of that purpose does not give a specific, measurable goal, and he makes that goal far less likely to achieve. so not only do i scw the twhows turn away from medicare benefit cuts and redouble their efforts

on delivery system reform, i ask them to decide how much they're going to save and by when and let us know so that we can evaluate their success in meeting that goal. i promise them every support in reaching that goal. i thank the presiding officer for his patience. i yield the floor, and i don't think i need to note the absence of a quorum. i think the order comes in operation and we go into recess. is that correct? the presiding officer: under the previous order, the senate stands adjourned until stands adjourned until

. this subcommittee hearing is an hour and a half. >> thank you, all, for being here. apologies on delays. you're busy with important responsibilities, and i appreciate your patience as we had votes on the floor earlier. i'd like to welcome ranking member and other members of being here. we are overseeing the billions spent in military and civilian operations in afghanistan. last year, the subcommittee conducted investigations of the he's nation trucking contract. the idea was to remove this burden from the armed forces while at the same time promoting the local afghan economy. since inception in 2009, allegations surfaced that war lords, power brockers, and the

taliban were seeking payments for safe passage through tribal areas. the result was a potential wind fall for our enemy. in short, the american taxpayer allegedly funded the same enemy our soldiers fought on the battlefield. while the investigation did not yield evidence this occurred, the antedotal evidence was substantial. the oversight was woefully inadequate. despite whether the allegations could be sub stanuated, the oversight structure did not allow for review. there was a hearing last june in which the leaders testified. the defense department established three task forces to examine these particular issues as well as corruption in general. today we'll hear from the defense department about findings and progress with the hearing and with the recent revelation anywhere between

$30-$60 # billion was misappropriated in iraq and afghanistan since 2001, it's critically important that the pentagon get this right. i hope it's made progress in this regard. i also want to commend my colleague, mr. tierney as he's done work on this and glad to continue on the work that he initiated. i want to recognize the gentleman from massachusetts for his opening statement. >> thank you -- [inaudible] i'll put that on. we just marked the 10th anniversary of 9/11, and it will be a decade since the forces crossed the border into afghanistan. we entered the conflict for a cause, and the men and women greatly accomplishedded the mission of al-qaeda and the threat against the united states. i want to begin by honoring and

how proud i am of all the people given service to the country, and i want to thank all of you for your sfsz to the country and for our soldiers, sailors, airline, and marines. i asked chairman to conduct the hearing to combat corruption in afghanistan, and i thank you for working with us on this issue. last year, there was a six month investigation of the lo gist ticks trucking contract in afghanistan. our investigation found that the trucking contract spawned extrouterred contractors for protection payments to obtain safe passage. our investigation shows senior officials within the military contracting chain of command were aware of the problem, but did little to address it. in plain i think lish, the envies gages found the supply chain in afghanistan relieded on paying the enemy and fueling corruption in order to sustain the military footprint. following the investigation,

general petraeus established thee task forces designed to address the problem and issued new guidelines to break down the silos of contracting and operations. they were important first steps. since then, the department provided multiple briefings to the subcommittee staff demonstrating substantial progress identifying where dollars are going. i commend the department for that effort. unfortunately, the picture is not pretty. recent news reports stated the task force 2010 identified and traced over $360 million in contracting dollars in afghanistan that had been diverted to war lords, power brokers, and criminal networks. the task force confirmed results of the subcommittee's investigation finding many of the contractors were making payments to the hands of the enemy. the contracting looks add contracting in both iraq and afghanistan and estimated $$60

billion was lost to waste, fraud, and abuse. i fear these reports are only the tip of the iceberg. much of the afghan economy centers around the united states and military presence and contracts, but a significant portion of the funds end up supporting the dew buy real estate market rather than jobs in afghanistan. there's weekly reports about politicians, brothers and cousins of politicians who have multibillion dollar contractings with the united states government. the contract is a moving industry. today, the business of afghanistan is war. how can we hope to extra kate ourselves from the war when so many benefit from the insecurity used to justify or continued presence. we crossed a tipping point in which the size of the foot print fosters further instability. every additional soldier and supply convoy we send to afghanistan further fuels the cycle of dependence, corruption, and endless war.

with that said, i want to focus today on the hearing on three basic questions. one, what is the scope of contracting corruption in afghanistan. two, what is being done to address it? three, how can we dramatically reduce it? i'm skeptical about the design of the united states endeavor there, today's hearing focuses on practical solutions that can be implemented right away. congress had an important role to play. this spring, i worked with the armed services committee to include the authorization act giving commanders in the field more authority to immediately stop contracting with companies that undermind our troops on the ground. i introduced a bill to install a permanent general, one of the key recommendations of the commissioner of wartime contracting. i encourage my colleagues here today to join me in that legislation, and i'm working 20 draft comprehensive contracting reform legislation to change how we do business in war zones. i'll close from reading from the

contracting guidance released 234 september of 2010. he wrote, and i quote, "if we spend large quantities of international contracting funds quickly with insufficient oversight, it is likely that some of the funds will unintentionally fuel corruption, financial organizations, strengthen networks, and undermind our efforts in afghanistan. we can't afford to fail of getting a handle on contracting corruption in afghanistan. it's unacceptable for dollars to make the way into the hands of those who use them to harm our brave men and women in uniform." i appreciate your testimony here, gentlemen, and i look forward to the discussion, and i thank you, mr. chairman. >> thank you. any other member have an opening statement? mr. lynch is recognized for five minutes. >> thank you, mr. chairman. i thank you for the hearing. i want to associate myself with

the remarks of the ranking member who has done work, along with the chairman, on this issue, and his staff had the benefit of traveling many times to afghanistan in the company of mr. tierney's staff, and on this issue, and i just want to amplify what was said here. i understand the mission and the president's approach, there is still, i think, a wide distance between where we should be in terms of watching our money and resources in that country, and where it is today. i honestly had eight or nine

trips over to afghanistan, and many times on this issue and on corruption in general along with kabul bank, a whole other issue. i honestly believe at this point that corruption, corruption is a greater enemy and a greater threat to afghanistan's stability than the taliban. i think the taliban can be beaten or co-oped. i think corruption in that culture, in that country, is a much tougher road, and i just, you know, i applaud mr. tierney on his great work, and, you know, i see that the dod has made changes in the contracting protocol, and that's good, but i don't think it's enough.

i don't think it's enough. i think we need a better handle on this, and i think it needs to be a tighter reign and o greater -- a greater concern for the theft, the theft of billions of dollars of american taxpayer money. the american people are doing a good thing. they are trying their best to help a country gain stability, but our kindness and generosity is being abused in this case, and it needs to stop. it needs to stop. we need to put systems in place that will prevent that abuse from continuing. we're partners in this. we're partners in this. the congress and the dod. we have to make sure that this system is tightened up, and address some of the concerns that mr. tierney has uncovered. thank you, i yield back. >> thank you. members will have seven days to submit opening statements for

the record. mr. gary is the secretary of defense for acquisition technology and lo gist ticks. mr. kim denver and mr. stephen townsend is with the pakistan coordination. pursuant to rules, all witnesses will be sworn in before they testify. please rise and raise your right hand. do you swear or affirm the testimony you're about to give will be the truth, whole truth, and nothing but the truth? >> i do. >> let the record reflect the witnesses answered in the affirmative. if you please limit your verbal testimony to five minutes and whatever materials and statements that you have for the record will be submitted in its entirety. we'll start with gary. you're now recognized for five

minutes. >> good morning, mr. chairman, ranking member. congressman lynch, i wish i would have written what you said. i tie myself to your remarks. i appreciate the effort to reduce corruption in afghanistan. this is an update to the testimony we gave last june, an i hope ce with demonstrate we've made progress. contractors continue to provide critical support to operations in afghanistan, the use of contractors in particular is a key to the counterinsurgency who coined strategy of our commanding general. they currently make up 47% of the dod contractor work force in afghanistan. there is no doubt that the strategy that promotes afghan first carries risk; however, it is clear that the coined strait ji is essential to developing a

stable afghanistan. recognizing the central contractors of september 2010 was noted previously. the commander of iasp published his contracting guidance. this guidance stressed that everyone must understand the role of contracting counterinsurgency and how it cannot only benefit, but under mind our efforts in afghanistan. due to no small part of the concerns of this committee, task force 2010 was established by that same commander to address contracting rungs and its negative impact to the coined strategy. the task force consists of individuals from uniformed services, union representatives from a variety of contracting, auditing, and investigation agencies. the team includes contract, forensic accountants who assist the task force in tracing money flu the afghan financial networks. i need not remind the committee that's the toughest part of the

job as we all recognize. one of the key efforts of task force 2010 took was the assessment of the host nation trucking contract. we're thankful for the june 2010 report which served as an important resource. the host nation trucking assessment looked at a-prime companies supporting the contract to evaluate the extent, if any, that the power brokers, and insurgents had on the execution of those services. i know one of the specific concerns of this committee was our use of a particular private security contractor, and during last year's testimony, i committed to ensuring action would be taken. immediately upon departure from this committee, we suspended operations with that contractor. on august 4th, 2011, the army entered into an administrative agreement with that private security contractor stipulating he will not provide convoy security for a period of three years, and according to this

administrative agreement, we ceased to use this security contractor for convoy security. there are a number of direct actions taken as a result of the 2010 host nation trucking assessment. the most significant action was the contracting command's decision to have a new vehicle to address the challenges we had with the previous contract. specifically the new vehicle expands the potential number of prime contractors establishes new standards of conduct, and a variety of ways of applying security. due to the complexity of this new contract and meet operational requirements, we continue to use host nation trucking vehicles with additional controls until the performance can be started under the new contract which is tomorrow. to address the concerns that you expressed with the host nation trucking -- we put together a comprehensive strategy that should drive business away from

the bad actors, enable smaller companies to prosper, and to meet the vast arrays of current complex needs. with the potential of money, we have to execute this program with care and vigilance. this is one of by several actions taken by the task force 2010. other additional examples include the debarment of 78 individuals or companies, the suspension and pending debarment of an additional 42, and the refeferl to the appropriate department official of an additional 111 persons or companies. we continue to pursue a wide range of corrective actions. however, we can't do this alone as you're aware. task force 2010 is but a part of a larger organization that is operating that. of course, challenges remain and there are concerted efforts to control corruption and contracting must persist. with the commander's commitment

that we have without any doubt and the participation of the international community, we'll continue to make progress. i thank you, and i look forward to your questions. >> thank you. mr. denver, you're recognized for five minutes. >> mr. chairman, ranks member, and to the committee, thank you for the invitation to appear today to talk about combating corruption in afghanistan. i'm here representing the contracting work force and soldiers relying on us for timely and efficient material, supply, and services in support of expedition their operationings. when the army deploys, they depend on civilian support from contractors. the last decade brought challenges to contracting. we operated in theaters where the culture includes corrupt business practices. army personnel strive to uphold the integrity of the procurement

process. we appreciate the congressional attention by several amendments in the current version of the fy12 authorization act as well as the investigative reports last year on host nation trucking and private security contractors. oversight has been a significant concern of the contracting community, the audit agencies, and congress. in response, we trained over 9600 contracting officer representatives cor,s is, vetting procedures, and increased transparency by demanding governmental approval of our sub contractors. we're on the front lines of oversight for taxpayers' dollars. we rejuvenated the training by mandating that the brigades have 80 soldiers trained to cors. the vetting is a key element in fighting corruption and ensuring security for the reconstruction

effort in afghanistan. it has been a struggle to create a process for a country that lacks universal identification criteria. identification is time consumes, but provides reliable means of security. the continued use of vetting reduces risk to contracting of bad actors creating a secure environment. let me update on how we improved the systems and processes with respect to transportation contracts. chairman, ranking member, we paid serious attention to the findings and recommendations of the report. the national after can trucking contract, nat, addresses these concerns. there's new transportation contractors welcomed by the support contracting command last month including stricter oversight and performance controls than the previous host nation contract, h and t. nat ensures greater transparency into subcontracts, code of

ethics, expands the number of prime contractors, ensures prior vetting, and establishes a teared rate structure based on security requirements separating contracts into suites to encourage others to participate. the contract ends today. execution of the nat contract begins tomorrow. the increase in the number of available contractors from 8-20 on the nat enables greater competition leading to greater work. it also provides a flexibility to spend problem contractors and facilitate the development of the trucking industry in afghanistan. nat supports congressional recommendations on the role of afghan national security forces and highway security. nat inventories trucking assets available to dod on a regular basis. as a result, nat reduces cost, pays only for services performed, and gives timely delivery resulting in improved

oversight and performance. we continue to have more effective ways to get the most value of the contracting dollars and the most effective support for the war fighters. i cannot stress enough the requirements overseeing tens of thousands of contractors, and awarding billions of dollars in an environment that is hostile on many levels. it remains a challenge to the contracting personnel t. takes time to change the environment. the u.s. army is committed to the protection of the united states, war fighters, and tax fighters through all contracting activities. thank you for your support, and i look forward to your questions. >> thank you. we'll now recognize brigadier for five minutes. >> thank you for the opportunity to appear before you today to discuss our efforts to link contracting and the flow of u.s. contracting dollars to the

counterinsurgency strategy in afghanistan. bottom line up front is we must -- we recognize we must see and address the challenges we face with corruption and popular perceptions in afghanistan. even as our supplies are fluent to the war fighters, they arrive with good reliability, surprisingly little loss in u.s. lives and battlefield resources. the focal point for the coined strategy in afghanistan is to deny terrorist safe havens and secure the afghan people. our effective management of our government's contracting dollars is essential to the success of the strategy. as you all know, after 30 years of war and social devra davis revolution, congressman lynch said corruption's a greater threat, the stability of the afghanistan than the taliban. i would agree, and so would many of the other soldiers, sailors,

airmen, and marines i was privileged to serve with recently. this involves efforts at all levels so we can see where the money is going, gain an awareness of level of control overred unintended consequences of our spending. we have, and will continue to take appropriate steps to reduce the effects of corruption and be good stewards of the american taxpayers' dollar. the u.s. military greatly increased understanding of the problem and the contracting dollars' effect on coin operations in theater. this report was helpful to that increased awareness and understanding. since last year, you've heard here we've taken a number steps to combat corruption, joint inner agencies and that's helped to map out the criminal

patronage networks that exist in afghanistan and to address corruption as a strategic problem. task force spotlight aided in tracking and enforcing procedures regarding private security companies, and task force 2010 has given us a better understanding with whom we're doing business and providing commanders and contracting activities with the information they need to take informed action. i visited with task force 2010 just three days ago to see how they are doing. under army brigadier ross ridge, task force 2010's accomplishments include a detailed study of the host trucking contract leading to identification key changes they made and contracting practices. these were integrated into the new national afghan trucking contract. this new contract provides a better understanding to service costs and increases the number of prime contractors which you already heard. they al identified individuals

and companies for referral and debartment. these are the preventative actions that they've taken. task force 2010 implemented, including working closely with sitcom's command and share information cruet the theater to share with kabul, u.s.-aid, nato, and other partners. this vetting process helps identify high-risk contractors before agreements are entered. i've highlighted just a few of the efforts that dod is making to counter of the effects of corruptions on coin operations in afghanistan. these underscore or focuses to overcome the challenges we face in afghanistan to help improve how we perform now and in the future. thanks for your continued support of our men and women in uniform, and for in opportunity to appear before you today.

i look forward to answering your questions. >> thank you, gentlemen. i'll now recognize the ranking member. as has been said before, has really done some very important work on the subject. now recognizing mr. tierney for five minutes. >> thank you, mr. chairman. thank you for the testimony, gentlemen. your testimonied height lighted the -- highlighted the creation task force 2010. it's serious about attempting to understand the problems with corruption that are going on in contracting in afghanistan. i think those are good efforts. i praised them in my opening remarks, but i do a significant problem seeing tangible evidence of them really being put into serious action at this point in time. last year, when you were in front of the cheat, you did, as you said in your testimony here today, assure us that you are concerned about commanders and risk management taken seriously and that you would start action,

and i understand that you did start action on debarment for those two individuals on that. in fact, the army announced suspension and debarment an made a big deal out of that fact, and it right any was. the task force 2010 found significant sums of money from that company went 20 insurgents while the commander served as the principle security provider. now, the findings -- you understand that our committee investigation was a committee investigation, not department of defense investigation or doj's; is that right? >> sir, it's source document, that's correct. >> i was disappointed to learn without further investigation, this went to a hearing, and then the army basically cut a deal with the trucking company. they claimed they hadn't understood what was going on in

the investigation which i would pose as nonsense, but at any rate, i was disappointed the army didn't do its investigation to nail down facts not to allow for that determination. they said, well, it wasn't much of a punishment on that basis. according to task force 2010, a war lord, a bad actor, malign actor free to contract with the united states. you have watan free to interact. do you feel you fulfilled your promise to the committee? how do you feel about it? >> sir, when we came together we said we would take under advisement, and i used the term in your investigation, anything that was in there was actionable, we'd deal with it immediately, and so the short

term solutions, as you recall, there were issues with army, the primary reason we were able to suspend the group at the national outset, and we continue to march forward. task force 2010 did, in fact, do additional work with regards to both cases that you talked to. what is important in my mind to remember is that debarment by the code of federal regulation and your own excellent congressional research service shows this over and over again should not be interpreted as punishment. debarments are there to protect the interests of the united states. >> well, you know, i'll grant you that point. >> sure. >> so the findings, $1.7 billion made in payments, passed on to malign actors. they found, in fact, he was not such an upstanding character himself working in concert with

waton contracting company. assuming what you said is true, let's protect ourselves from contracts with them, and wouldn't that require debarment avoiding to deal with these characters again? >> there's an independent suspension department official that makes the judgments based on facts presented to him. without reading into his decision, he believe, and he is the deciding official, that the government was protected because you cannot -- he agreed you will not go into additional contracts with them for a period of three years if they try to go around the corner, but -- >> he's fired for doing business there and given up with a host of others. the management company is the brothers; right? cousin to president karzai; right? get it on the table, there was a

deal to appeal this, and they got a war lord of a malign character off the hook as well. i don't find that satisfactory, sorry, i just don't find it -- general townsend, i appreciate your testimony, but when i saw on page two, the afghan population perceives our money is not positively benefiting afghan people instead of supporting malign actors. they found money was going to malign actors. >> that's fair. it's a fact. it's also a perception amongst the people. >> okay. >> we're both going down on that. it's a problem here, and it has to be stopped. now, the other part of this thing is we have a serious issue on that. what are we going to do about it? we have the task force finding telling us that we have choices. we have use of united states or isaf forces to protect the convoys, but we want to use them in other ways, and we don't have

enough of them to put them into protection; is that fair to say? >> yes. >> the forces are not ready or able to in this point in time, is that a fair statement? >> that's fair for now. we're working on it. >> you're working on it, but it's a ways from happening, so what does that leave you with to protect the convoys and to get this done? >> for now, private security companies as we build the afghan protection force. >> back to the same people involved in the problem who instigated the investigation. now, let's talk about -- one of the things found in the investigation was there was little going on to actually oversee and manage these contracts, and i know that some of the regulations addressed that, but let me -- tell me whether this is happening on the street. are people going outside the gate in observing those convoys, riding along on the convoys, auditing, and taking

investigations and inspections to be sure they are getting from one point to another? is there physically people out there doing it or just relying on reports and somebody's word that these things have been done? >> i wouldn't say that every convoy is observed or escorted, but i think significantly more of them now are than were a year ago. >> sir, if you recall last time i was here, our biggest deficiency with regard to the pse's were failing to follow our own procedures requiring the dual licensing process as you'll recall, but if you're going to use a pse, it must be dually licensed in the country, and we had a procedure we were supposed to follow, and in this particular time with regards to wanton as the subcontractor, we failed to do that. task force spotlight under general bore's, one of the

primary functions was to get her hands around that licensing and vetting process which we should have done before. the other piece that has occurred since we discussed the last time is if you'll recall, we had temporary rules in the federal code of regulation regarding the use of private security contractors overseas, and then they don't apply to us, but they apply to our sister agencies. since we've met, we've been able to finally push through the final rules which are a substantial improvement over the original, so they were published about six or eight weeks ago. that was not an easy process to get them through the cfr, and that's my fault, but they are out there, so that process and those procedures are in place. the visibility because of president car city's -- karzai's decree is driving this entire institution inside

afghanistan to a different standard right now. as you know, we are not going to be giving up pse's as a nation overall the. dip maltic side of the house will continue to use them and in retrospect, yes, in the short term, we'll use them, but our intention is to have the options to use the other two alternatively. >> i recognize myself for five minutes. can we get a grip on the dollars, and i want to understand what is also being transported. because it's by understanding there is a difference as to what the actual physical materials that are being transferred, so if -- do we have a sense of what we think we have lost? what has been pilfered through this trucking process? >> if i could take that question -- >> yes, sir.

>> as it relates to the h and t contract, i'd have to take the question for the record in terms of getting you the specific items, but understand about 700 million has been paid out, and we've -- >> paid out? >> paid to the contractors for their services, for the transportation they provided, but we have about 145 million in penalties and withholds that relate to lost equipment, pilferage -- >> do we have a total value of what had been shipped and what had been lost, pilfered, or simply didn't make it to the destination? >> i can get that for the record, sir. >> my understanding is the task force 2010 being stood up, a number of items have been recovered. do you know the value of what has been recovered? >> about $172 million in recovered losses. >> and what would be included in the list of the $172 million

that was recovered? >> i think probably just about anything we transport. you know, a piece of anything we transport on the roads from unit equipment to general purpose supplies to kind of get at the question of a second ago, we transport roughly 1.5 billion gal lores of fuel per day in afghanistan, and roughly half of the cargoes moving on the ground. >> there's certain cargo not transported via this. >> that's right. some of the recent press accounts talked about ammunition being transported in these con -- convoys, and that's not the practice in afghanistan. ammunition is typically transported only in a u.s. military escorted convoy and not in convoys 245 are secured by private security companies or moving unsecured. >> so, with these private security companies providing the

transportation and security, do we do sensitive electronics in those shipments, jump drives, and those types of things? >> i think -- we have electronics that track what the electronics do. we have intransit vehicle transponders that -- >> i'm talking about the content of what's behind those. >> so, the standard is no class vibe, no ammunition, and what we have is a class of supply called sensitive items. the simplest answer i would give you is things like night vision goggles would not be permitted to be transported by them. loaded computers would not be allowed to be transported by them. we could take it for the record to give you -- >> weapons on that list? >> no, they are sensitive items. they would not be transported by them. >> un-- uniforms? >> uniforms were transported in the convoys earlier in the

effort. we've made large efforts to reduce that now because of problems with the -- >> reduce that or eliminate that? >> probably the goal is to eliminate it, but i wouldn't say we eliminated that completely. >> that's not too reassuring. i appreciate the candor though. medical equipment? there's a "wall street journal" report i would appreciate you familiarizing yourself with. it came out in the last couple weeks talking about some of the horrendous and horrific situations that are happening in afghanistan. the article is entitled "afghan military hospital graft and deadly neglect. ". we are talking about the oversight issues. i would appreciate if you would look at the article dated september 3rd of this year as well. win of the other deep concerns here is that these -- that we're not doing our job on the ground,

and i recognize in the theater of war and all that's happening there is an added degree of pressure that i'm sure only those in theater can appreciate, but one of these reports said that often the containers were never counted or reopened once they got to their destination. what assurance can you give to the committee that you're actually solving that problem because it's pretty easy to tell -- you should be able to tell what left and what arrived, 5e7b yet the -- and yet the reports say that that check point at the end doesn't happen when our men and women receive these materials. >> i think i can -- the ground truth out there is the vast majority of everything that shows up at a base gets opened, checked, received, and looked out. there's a percentage of stuff that doesn't get received or inspected?

yes, i'd say there is. one example to describe this from my own experience. we found in a yard, we took, you know, we did a transition with the unit before us. we started inventorying everything on the base, and found a series of containers there locked up. what are they 1234 the last unit didn't take them. we opened them up and discovered parts that had been ordered overtime, you know, supplies ordered over a period of time, so the unit, so the unit ahead of us maybe didn't even order it. these things arrive, and, you know, you do your best toking the for your equipment, and now you start accounting for someone else's equipment that may be on your base. that's how it transpyres, but, yes, there's a tremendous effort for unites to account for their stuff. >> not just their stuff, but checking the manifest as to what was shipped and did it arrive. >> of course. >> mr. denver, and then i'll yield back. >> if i may, chairman, let me talk about the process of what's

happening and what we do in the contract to get our hands on the pilferage and address this issue. first, there's an understanding that the that is transportation mission request is sent to the contractors, and within that, identifies what is to be thans -- transported and trucks we need to transport further. within the convoys, we have -- if there's sensitive equipment or pilfered equipment, we seal the trucks so if they are unsealed, we're aware of it at destination. if we find a situation where that occurred, pilferaging or the seal is broken, that's a failed mission, then the contractor does not receive payment for that mission. the other thick that happens is they also, within the contract we built a d-duct relating to their total mission throughout

each month, and if there's instances of pilferages, there's deductions that takes off their invoices from the monthly shipment, and we hold it from their invoices. we're taking a number of steps to identify that. the other thing we're doing i'd say is with dcma. the intent on the previous contract is we did not have a random inspection method. in the future object nat contract, we'll have dcma at the gate, both in where origin and destination, and it will be random so that we can conduct spot checks based on what was shipped, the condition of the trucks, involving security personnel being checked that they are appropriate and banded and licensed, but the real answer is are we putting 234 the oversight? the oversight takes more than just contracting, takes a

management agency, an officer, a requirement. >> do we have a log of what is missing and the value of it? >> i would have to take that for the record and get that back to you, sir. >> thank you. >> gentleman yield for a second? >> yes. >> it's the time to have this on the record if i could. this is a sheet that the department made available to us with respect to oil deliveries. all right. it's a multipage item. in the red there's the amount of percentage of shortage of delivery. there's mostly zero. what should have been 100% is zero on that on significant occasions. now, we're also told that $25,000 is the penalty they pay for not delivering a full load, yet the value of this over $40,000 on the street, so i'm not sure we got our penalties aligned with the price on that and certainly there's 1100 trucks delivering oil that were pilfered. 5.4 million gal lores of fuel,

gone, no explanation on that. i hope we address that and i ask the chairman to put that into the record. >> without objection, we'll enter it into the record. i'll yield back. yes, general? >> i just want to put that into a little bit of context. you're right. fuel pilferage rates are higher than we want them to be. overall, pilferage rates on the ground locks in afghanistan is about 1% plus or minus, so that's overall context here. still, you know, the level of our endeavor in afghanistan, that's still a lot of stuff, 1% even. with fuel, it's up to 15%, and part of that is congressman, what you just pointed out there about penalty may not be offsetting the street value of this commodity, and this is a discussion i 4 with general ridge three days ago. he recognizes this and is working on adjusting that penalty. >> thank you. now recognize the gentleman from

massachusetts, mr. lynch for five minutes, or maybe a little bit more. >> all right. thank you, mr. chairman, i appreciate that. i want to thank you for coming before the committee and helping us. like i said before, this is one team, one fight, and we're all trying to do the right thing here. we had an opportunity, myself, i believe the chairman, and several of our staffers here. mr. alexander was there, mr. lindsey was there, but we went into kandahar and went down that route 4 that leads from karachi, goes up through qweta, and then into afghanistan. the major sea port there is in pakistan, and then these trucks leave, and the pakistani trucking outfits take over at a place that we went into. that's controlled by a fellow by

the name who is now general razik. now, they had, you know, they had threatened if we went in there to do oversight on the trucking operation that they would shut the border down, and there's thousands of trucks going through there, you know, in the course of a day, and so when we, on behalf of mr. tierney at the time who was the chairman, they shut it down just as they threatened. you know, first of all, we couldn't refuse to do our jobs doing oversight, but he followed through on the threat and shut the trucking center there, the border crossing down until we left. you know, we did as much oversight and inspection as we could, and then when we left, the oversight committee left, he opened up the border again, and, you know, myself, we had a

striker brigade with us. we didn't go down there by ourselves, but god bless them. you know, that's pretty tight control when you can shut off the oversight of the united states congress and dod and the military did what they could to get us in there to do the oversight, but that troubles me greatly that here we are spending billions of dollars in taxpayer money. we go down there. we're elected by the folks that are actually paying the freight here. we go down to inspect what's going on there, and you got this -- he's a general now, he was a colonel back then. he's a war lord is what he is. he's got -- this is all sort of taliban controlled territory that we drove through from kandahar down to the port, and i

just -- i got to tell you, you know, it's a whole lawless area, and if the guy can shut off congress from conducting reasonable oversight, then what chance do we have of implementing a system where we actually perform due diligence on protecting the taxpayers' money. it's just a, you know, i just have great misgivings about this, and unless, you know -- look, we have some leverage here. they need our help. we need to use that leverage to make sure that they operate by our standards. we shouldn't be operating under the wild west standards that they operate under, and that's sort of what's going on here, and, you know, i have to say it goes right from the top from karzai on down.

it's just rotten from top to bottom over there, and, you know, the goodness and the generosity of the american people is being abused. here they are trying to do the right thing, i know the president's going to withdrawal plan there, but in the meantime, he's trying to do the right thing. the average afghan over there is in a desperate strait, and we're trying to do the right thing from the humanitarian stand point, stand up the country to take care of themselves, but in the meanwhile, we're getting fleeced by the same people we are trying to help, a certain portion of it; right. i don't think the average afghan is really as malicious as these folks, but it's a game. it's a game. ..

and and the way that is consistent with our mission. this just can't go on. so, you know, i appreciate what you're trying to do. i appreciate your tweaking the contract by going from eight to 20. that's helpful, but next time to make going to face the same

situation, where they are blocking the oversight committee from going down there quite >> circum- a very possibly. you hit the nail in my mind on the head. what we are doing in the core of this hearing has to do with a couple of contracts. you hit the larger ratio and covers the interior is raised as has chairman that this is a society that is based on 3000 plus years of doing things this way of 30 long years of war and we are not going to change it overnight. i mean, that's the frustration we have. the metrics of the number of convictions i have are interesting and they are important, but the real issue is the efforts quite frankly that the larger task force is doing to try to engage, to change the tones so you have a judicial

system that you can trust. you had a police system you can trust in the leadership system that you can trust and it goes back to congressman tierney's comment about who is related to and what not. it's not going to happen overnight. we all know that. >> i don't think it's going to happen in a thousand years. >> and it may not. because in this committee we are not taking the narrow view. america would've been task force 2000 spotlight. to have the other partners, international partners, paul said the isaf side of the house, so we have to look at it directly. we get the right words. make no mistake. we get the right word to the senior leadership about the importance of corruption and controlling corruption. years ago we do need to get the right words. my frustration and i'm sure

everyone's frustration is the same of yours is what is tolerable. my personal opinion is we are not going to eliminate corruption. we are not in our lifetime. our efforts right now should be centered on primarily controlling corruption we can control so that our interest in dollars and values and our resources are protect it as our our allies and resources. what happens to you as you go in and as soon as you leave, unless we have a presence there 24 hours a day seven days a week, we take risk double transition back exactly as you said. so we all share your frustration, but i would say that the fact that we are looking probably cannot is going to be very tough to measure. as you know, i can't give you metrics that says that the executive branch of afghanistan is now good because these for metrics. the proof will be if we can reduce the numbers.

the only numbers they have to show you is a reduction in the number, the dollar value. that will be the bottom line. >> the gentleman's time is expired. i want to make sure we have time for the gentleman from kentucky. i recognize you for five minutes. >> thank you, mr. chairman. i'm going to use part of my time to make a unanimous consent request to sort of document into the record, last month ranking member coming request authorization from me to join the authorization to afghanistan led by senator wyden. the purpose of the delegation was to investigate allegations of contacting fred and corruption. as today's hearing demonstrates come the subcommittee is done great work on this issue and given recent media reports and to know to be here today, it is clear we must continue this oversight of this very important issue. as a member of the subcommittee, i wanted to join senator wyden's delegation to price u.s.

officials for exactly the kinds of questions we examine today. that's why was extremely disappointed that chairman isaiah rejected my request. they should not be allowed to drink bipartisan delegation to list a republican from a committee joins. this is a misguided policy that has no basis for rules and policies. the policy established by speaker pelosi and continued to speaker boehner is every foreign delegation must be bipartisan and include a republican and democrat from each committee. i'm sorry, not included republican delegation. it meets the standard because it has another republican house member from the david schweiker. but the committee and house administration opposite interparliamentary affairs have come from this misguided policy is not the speakers, the chairman isaiah's a loan. i ask unanimous consent to

chairman issa to immediately reverse this policy. thank you. >> going to hold off a ruling on that. but you might have a chance to look at the letter? >> certainly. >> you may continue. >> thank you, mr. chairman. this conversation that mr. lynch has talked about comments and misuse of taxpayer dollars and a waste of taxpayer -- american taxpayer dollars that sometimes go to where people are trying to help and according to the task force 2010 reports that task force 2010, it indicated that they have identified $360 million that has been diverted to insurgents and power brokers and warlords and so forth. some of that money, presumably funding the very insurgency that

our counterinsurgency is designed to combat. so general, as he taught about the counterinsurgency strategy, i'd like to ask you, to what extent do you think these diverted funds are undermining the counterinsurgency strategy and to what extent they are being used to attack our own troops and you think we are doing enough to make sure we are not funding attacks on our own men and women? >> thanks for the question, congressman. i had this conversation with general bridge a couple days ago and the 360 million that they have identified, that was cited thayer, is a buck at $31 billion in contracts. 31,360,000,000 is still a tremendous amount of money. >> if it's correct, it's really

bad. so, i don't know how you can quantify how much money. i think part of it is probably going to just simple prime that would exist in any society. some of that money for sure is going to i think the insurgency. i can't codify how much money it's going to taxa can thus versus some other insurgent purpose. it is clear to estimate the money goes in the insurgency and we have to do whatever we can to stop that. we have to do whatever we can to minimize it. there's nobody in uniform over there. everybody in uniform as a taxpayer, two appeared to don't like to hear that our tax dollars to funding the guys were trying to say. what i can say is we've got the processes in place partially due to the efforts of this committee, with the process in place to address it.

it'd be hard to quantify how much of the money is going to the insurgency. clearly some as too much. >> if you have a strategy or are working to develop a strategy to determine how it is getting to the insurgent and stopping that? the >> well, absolutely. you have certain task force, you have to thought and integrate the efforts of some of the other organizations like 2010. they also integrate our efforts across not just u.s. government, the afghan government and also our nato and other partners they are. so there's other organizations over there. the afghan threat finance attended a briefing with chairman mullen just a week ago by the afghan threat finance and they are an intelligence organization in a regency organization their job is to delve into this and point folks out. i can tell you they're certainly taken action there.

>> title ii the extent that you can't, you can report to the subcommittee is to progress you've made any discoveries you've made about how this process may be going on and whether you've had any success in stopping it. >> thank you, mr. chairman. the gentleman yields back. the gentleman previously requested unanimous consent to insert a letter dated september 15, 2011 without objections ordered. now recognize the gentleman from massachusetts, mr. cheney for five minutes. >> thank you. the problem is the money. nobody wants to lose the money, but the larger parties but is it doing to afghanistan in terms of this the angle that we've taken over there. one aspect of that firm jenner petraeus and songwriting that corruption is not going to be helpful is not the main things that has to have been for the

counterinsurgency to be effective. the publicly available legal documents filed by wartime in the case said there is. the alleged tribes were not birds per se, but rather facilitation papers. they argue what tom had no case or to pay government officials and other groups for police while transporting the united states military through this volatile war zone. do you agree that the security operators and contractors had no choice but to make those payments? >> i do agree that in many cases they don't have a choice in the perceived they don't have a choice. they perceive they will be attacked if they don't make some of these payments. >> and mr. motsek, do you agree with the watan's facilitation payments or bribes of large sums of cash per by provincial governors to local police or warlords in order to ensure their trucks are bothered you think that's legal in united states law?

>> clearly it is not. it is clearly counterproductive to what we are trying to do. it's part of the larger systemic problem we have. >> so here is what watan's profile designed to stay. at last be whatever necessary to ensure convoy security and prevent loss of life. the abnegation the affirmative misconduct encouraging private contractors to undertake activities that the army disallowed once they were exposed to the public. with the army aware of the common part is and does it encourage people like watan to make them? >> i am not familiar with whether the army had that information. i would tell you this. in conversations when i had a meeting but the department official, he indicated the same that you've heard today that the facilitation payments were necessary. so in that context, i would say when watan came to the table and

identified what they paid, in that context i would say that is when we were aware. i'm not familiar as to whether we are aware prior. >> watan stated the policy made a policy demonstration that's cheaper than paying for the same guns, bullets and bodies. the court goes on to call extortion payments the realities of afghan society and reality is that war. do you agree that it's simply the cost of fighting were? >> i am not sure i would agree that it cost of fighting war in afghanistan. it's certainly part the land keep in afghanistan. we took extraordinary efforts at the low tactical level to trade route out with your report that a check point was charging passage fee toll. we would go investigate that and go to great lengths to try to find out if they were charging a toll in ways we could mitigate

that. there is one example of billboards with check point says that there's no total required to pass up such a point. then you have to do with the afghan literacy rate below 30%. >> somebody with a gun will stand there and ask you flory told. >> there's no argument from us that the corruption is probably the big country because victims are the afghan people even more so than the american taxpayers. >> said there is a nexus between criminal enterprises, insurgence networks and corrupt political practices in afghanistan? we know they are relatives of people in high political offices that are involved in these contracts and subcontracts in making these payments or whatever. my question is in order to break that nexus, what prosecutions have been? how many people are prosecuted? how high up the chain? can they see an example of the well-connected people actually

been brought to the rule of law or will they continue to be an impediment to our counterinsurgency because they think the whole game is great and the government says that if the taliban? >> i can answer that question him in the context of what were talking about here, trucking, corruption. >> at the much larger picture. >> kabul bank, for example, there's a number officials under investigation with respect to the kabul bank situation corruption practiced very. and i think we are hopeful that the afghan government will prosecute some of those parties, but it's yet to have been. there's a number of investigations, over 20 investigations and work with kabul bank were waiting to see what they do. right now the united states government is conditioning some of our support to see the outcome of kabul bank. >> well, you would hope so.

reject to the airport to the capital of the cup and you can see houses that are well-heeled people living in that and the other people suffering and having a hard time making it an eye, too. i don't know he got the confidence of that to support have in this country, around the move in the right direction without doing more in that regard. so i think you got your work cut out for you. we have to take a look at our mission and prospects for accomplishing well intended goals on this thing without really addressing the issue of the way it ought to be. another's people and for the watan case and that toll brothers and a good reason why people would be disgusted when someone should've been disbarred and all of a sudden they get a slap on the wrist. this is not good and i think we have to be cautious of that. i yield back. >> the gentleman yields back. i now recognize myself for five

minutes. under the host nation tracking, with a prime contractors. six of those they were found to have committed some sort of fraudulent behavior. the fraudulent paperwork, reverse money-laundering, excessive profiteering, aiding and abetting. so now the plan is instead of having a contractors coming out with got to go to 20 contractors. one of the criticisms of the host nation tracking process was way too many contractors who can keep track of and sometimes people pay themselves only to pay themselves again and again and again. so what are you doing to alleviate this problem because you're expanding the number of contractors and at the same time, what are you doing to make sure this nefarious characters are not indeed getting on my thumb off a different name? >> fair, if i could take that question, as i indicated earlier, the real approach is ensuring that we have the right

oversight. it is true that the number of prime contractors has expanded in the new contract and many of those contractors came from the previous contract. >> how many? >> i believe it's 11. 11 total play a primer subcontractor capacity, sir. >> how many of those have previously found to be involved quite >> none of those were involved in this. 11 contractors we know that they were conducting performance previously. >> my understanding is in order to be considered from you have to have access to 600 tracks. is that right? >> it may be across. i would tell you that -- >> and afghanistan, i have to believe the universe of potential vendors and contractors is fairly small.

>> i have some information on the contracts. i would tell you it is a growing industry. but when we without the contractors. >> we are $.2 billion. if the growing industry. probably the most enriched industry areas next to the poppies. go ahead. >> but basically, we asked contract is to come into the prime contractors and subcontractors to come in and identify with the capacity was in the contract. i would tell you that with sufficient tracking assets to be provided within afghanistan from the afghan firms. so it is a developing industry. i would consider it a policy they were able to grow the industry to show some success. these new companies now participate in the new contract has been vetted. and so, are you here to assure

us that nobody who has been found to be fraudulent in the past is involved in this new contract? >> no, sir. >> how to get the assurance to get the case? >> i retired there's risks associated we're putting the oversight. do not are they or they are not allowed to participate in this new contract if they're under suspension were found to be fraudulent in the previous contract? >> thereunder suspension, but there's ongoing investigations coming after the due process run. and here to tell you something couldn't happen in the future, but those companies gewirtz who are not excluded and were not suspended commissary. >> that continue to dive further into that. time is short. laughter, propose here again. there's two programs via the afghan first in the direct

assistance something the state department is very adamant about pursuing. with those two programs, is there overlap of contracts here do we think will become increasingly -- we're asking for more oversight. we ask for more accountability and yet at the same time the state department says you got to speed up pavements and make them direct. you've got to make sure -- and i see a conflict between those objectives under afghan first and direct assistance to opera trained to do can making sure that two plus billion dollars is accountable. >> sera, that's something we talk about a leader that is the two pending pieces in the nba are somewhat keen to address your concerns. the fact that -- i can't remember whether it's a house or senate version, but both pieces passed in committee. it gives them authority to delve deeper into the secondary, those

tertiary contract or so we've never had before. as you know, we only have a legal relationship with the plan. the law changes as in the nda. that's number one. number two, you are going to grant if the law passes. they command greater authority to take people off the table which frankly last legal proof that they are undeserving to continue or to operate with us, that we can actually use in our judgment process, intel and a variety of other methods to make that assessment. both of those pieces we talked about that the early testimony we promise to review proposed legislation and it always gets a little more -- advocates on the hill. fundamentally, those two pieces are in the nda. they are key for mr. denver to

dig further into the secondary and tertiary contracts. the reality is trucking industry is a decentralized process and the bulk of your tracker is our owner operators like they are the united states and that is not going to fundamentally change. so these guys to get these contracts are able to pull together 600 or 450 south tamayo 150. that's had to pull together resources to make this happen. that's the reality of the business come in the same way in the night stayed. the key come as mr. denver said is we're trying to set that guy before he ever gets a chance to come to the table and not after the fact that your legislation gives us greater ability to do that. >> what the gentleman yield for a second? >> as early as the summer of 2009 your frequent reports of subcontractors paid money to

warlords and the taliban to guarantee safe passengers calm voice. u.s. army investigators had a briefing that was the point title post nation tracking payments to insurgents. the investigators estimated the going rate for protection was $1500.1200 per track. i contractors and the private afghan security companies, allied with warlords are insurgents or in some cases directly to militias are told the commanders. the military maintained that the federal contracting rules do not require them to some interpretations prohibited a close look below the level of prime contractors. i mean, that's a disgrace to someone in the defense contract to my people go deeper into what was behind those contracts with the subcontract level. to better quarters from someone in the military said these people should be fired and sent home. the senior defense officials said the military overseas beatitude is crazy. it's okay to pay the enemy

because they are better smacks of the congress travel unimpeded? i hope everybody gets that now. that kind of contracting is before first level law school. >> will not recognize someone from massachusetts, mr. lynch. >> thank you, mr. chairman. i appreciate that. gentlemen, the commission on wartime contracting which is an independent bipartisan commission recently published a report summarizing their work in afghanistan and iraq since 2008. in based on their estimates in the last decade, the united states has spent more than 192 billion continuing contracts and grants. at the same outcome as much as 60 billion has been lost to contract waste and fraud. mr. motsek, do you think that's a reasonable estimate? >> sera, i think i hold the record for testifying. the answer is based on the way

we discuss, the answer is no. >> what do you think the better number? >> i can't give you an exact number. >> edges had one question you answered it. we need to move on. were short on time. i'm sorry. i don't mean to be disrespectful. you've been very helpful as a witness. here's my issue. read on to present a couple plants, one in iraq or afghanistan for reducer profile for the military actually is more and more contractors. and so we've got this problem. at times, we've had more folks under contract than we've had in the military. so as this trend continues, they've estimated were already over reliance on contract is in iraq and afghanistan and it's going to get more so as we draw our troops down. and so, they put it this way.

the united states will lose much of our mission, essential organic capability and also it will create in afghanistan a rise in inflation and economic committees. you have some bad incentives are there. how do we -- how do we facilitate this transition with greater subcontract or his? 80% are non-us citizens. so we had very little control over that, you know, accountability guesses what i'm looking for. but 80% of those under contract to non-us citizens, i'm very concerned about, you know, this corruption, you know, undermining the remaining african-american in iraq and afghanistan to stabilize both those countries.

where does that leave us? or does that leave us if we transition to a contract are based -- contact your century -- a >> sera, we don't have capabilities into force today in many areas we are discussing. you would have to grow the department of defense to make that happen. so that is the reality. so you're absolutely correct. we were attacked about the broad issues of what needs to be done. the microcosm in my mind to eliminate and to give competence to local national is twofold. number one, with regard to post nation tracking this example. we're not going to pay in dollars anymore. we're not going to pay in dollars. that's a blinding/of the obvious. so now it's not dollars in the country, which has been a problem to begin with. the second piece and i don't know how to resolve this in the short-term and long-term, but until you wish or payment to the

individual without payoffs on the way down, we had this problem with the police. we have it endemic in the government. until you compare the person directly their money, there is no confidence in the system. we have gone with the international community. we are paying some of the police on their cell phone because it goes directly to the policeman and it doesn't filter down to lose those dollars along the way. so there are practical steps you have to take them which are absolutely correct. it will be a contract centric attrition. iraq obviously after december december 31st as things stand absolutely. >> mr. chairman, my tennis about expired. having been enough time over there in afghanistan, if that is the situation is, it would be worse if we had u.s. personnel, military personnel, you know, providing security of its convoys. the body count would be coming

in now, totally unacceptable. so i appreciate the effort you've need to straighten this mess out. thank you. i yield back. >> i'm going to recognize ranking member tierney for just a moment here as they conclude, we have folks coming up on the floor. >> thank you, mr. chairman. kulak continues to be providing security and norton afghanistan to this day. anybody look at the intelligence reports and our community about the background of this individual? >> sera, at the say this about roulette. can't go into a whole lot, but it's not a fair scope. >> but they get the gentlemen would provide in written form subsequent to this hearing, the amount of prosecutions that are ongoing right now before this

type of corruption and draft as well as the amount of money recovered to date. lastly, to get an idea of who's responsible so when we look at this and try to evaluate later on, we can know who to call for witness is in his attacked you. the 418 control battalion in charge of the contractors, is that correct? nobody here knows. that's one problem. they report the 143rd brigade, does that sound reasonable? >> sera, before you have your next hearing it will change as things rotate. i would caution about using the organizations for you and give you the hierarchy. >> what i have from the investigation we did is the contract signing is the

immediate response of the bagram contracting thinner, who reports that the principal assistant responsible in iraq and afghanistan who gets authority for the army acquisition than a practical matter for centcom. where do you fit in that chain? >> the commander of gtt -- commander joint contracting command admiral khalifa is the deputy and has detailed there to operate that. >> is he doing the regional contracting thinner and bagram? >> he owns that. >> he works for me. he's been detailed forward. if i could quickly explain it, the army is the executive agent for contract in the conflict. we had to get the executive

agency and it could've been a service, could've been agency. they tried many years to get away from that. because that, the army acquisition mr. denver's boss is the ultimate responsible agent from a contracting standpoint. so the authority and the words of people to operate under the joint contracting command can't be at the army to spend money and so appeals and oversight -- direct oversight, with very few exceptions within afghanistan are the army's responsibility. i'll give you the wiring diagram, sir. >> that is true. osc appointed the army is the executive agency went to my boss. i am actually detailed those authorities for executive

agencies and a good organization and provides broad oversight. were admiral khalifa is the head of the contracting officials to work for him. one in afghanistan, one senior contract official in iraq. the senior contract official oversees those, the ones he referred to. but that is the contracting chain of command. >> i suspect we'll see you gentlemen back again since you have responsibility and i want to thank the chairman account for working with us on this and appreciate his hard work and leadership on this matter. thank you all for participating. >> i want to thank you gentleman for your commitment to our country and for your service. we do thank you. the pentagon, the department of defense have to get this right. the state department has to get this right. we are talking about elegance upon billions upon billions of dollars but unfortunately, we

know, is going to feel some of the very people that we are trying to suppress. that is totally unacceptable. the waste, fraud and abuse happening in the theater of war is unacceptably high and we see that in report after report. i understand difficulties and i'm trying to appreciate all the nuances and the difficulty of war. and there will be some small degree that happens in that theater. but when we hear that tens of billions of dollars in waste, fraud and abuse, it's unacceptable. one of the next hearings we will have in the subcommittee will deal with what is happening in iraq. we have to get the contract is part of the equation right. the transition states and the department of defense to the state department, the state department is looking to bring up some thing like 17,000 contractors. so the news clips may be that we are turning down in iraq, but the reality is we are high enough to the tune of 17,000

contractors in an unbelievable amount of money. we have to get this equation right. i thank you all for being here and appreciate the great work for mr. tierney and his staff in a very collaborative effort. we find republicans, democrats working together on this. at this time, the committee will stand adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations]

>> even a partially successful strategic defense initiative would mean that the soviet plan or, looking at the united states, could not be assured of the outcome of an assault of the first time on this. >> u.s. postmaster general, pat

donahoe announced that 35,000 postal employees could lose their jobs as a result of the agency finances. he also presented a list of possible closures of postal facilities. the u.s. postal service lost over $9 billion last year. this is 45 minutes. >> all right. good morning, everyone. thank you for coming. i'm sam pulcrano, vice president of corporate communications. we are going to provide a presentation here today. after that presentation, we will allow an opportunity to ask questions and i will step down off at the podium and come back and explain how are going to handle that. but i would like to introduce to you the postmaster general, pat donahoe. used in the media left chief operating officer, megan brennan who was next to pat.

with that, they too introduce our postmaster general, pat donahoe. >> good morning. welcome. thank you for joining us today. we'll be making important announcements today about the future of our mail processing network. it is no exaggeration to say we are radically realigning the way we process mail, the way we deliver mail and the way we operate a retail network. we are doing this in response to a changing marketplace. we're also doing this to delay the foundations for a postal service that will have a sustainable business model bar into the future appeared that the postal service to be profitable, compete for customers and drive economic growth. and to do so, we must create a low-cost streamlined operational network. our immediate goal is to reduce total cost by $20 billion by 2015. we have to meet this goal to return to profitability.

what we will announce this morning will help us get part of the way they are. we will help to creative though create a low-cost delivery platforms that we need to serve our customers and to best meet the obligations to the american public. and now a day to introduce or chief operating officer, megan brennan. megan oversees all operations of the postal service for the transportation, logistics networks, retail and delivery issues plan a very big role in what we are doing now in saving the postal service in the future. so with that, megan. >> thank you, pat. good morning, everyone. thank you for joining us today. i am going to walk you through some changes to our mail processing network will fundamentally alter our operating model. now, these are significant changes that will lay the foundation for the way the postal service processes mail

for decades to come. as pat mentioned, we are responding to a changing marketplace. the reality is the volume has declined more than 43 billion pieces in the past five years and it will continue to decline. as a result of these declines, our mail processing network is much larger than we can afford. and looking ahead, mail volumes addict david make radical changes to our mail processing network. and so this morning from we make two important announcements. we are going to radically realign our mail processing network over the next two years and we are going to study 252 mail processing facilities for potential consolidation or closure. let me start with the graph to illustrate the business case for change. this graph shows are first standard for advertising mails. this is volume, trends and

projections through 2020. 2006 was the high water mark. since first-class mail has declined 25% due to electronic version of the economic slowdown. the sobering reality is first-class mail volumes will not return. people are communicating and paying bills electronic way. every project to a continued decline in first-class mail. we do expect to see growth in advertising mails in the out years. the change however has serious ramifications for the postal service infrastructure. first-class mail defines their network requirements and pays the bills. these volume declines mean we have less revenue to cover the cost of the infrastructure and we have excess capacity in our network. we simply need fewer facilities to process less mail.

i'm going to mention the work capacity quite a bit. this relates to our ability to process mail and packages. our mail processing footprint has evolved or 50 years in response to volume fluctuations and to take advantage of to want to development. if you are an operations manager back in the day comes 70s through daily to thousands thousand, you are managing growth. mail volume and revenue grew steadily during these years. during this time, we increase the use of automation to gain efficiencies. we were building new and larger facilities to house its equipment. this is a period of significant capital investment. since 2006, our thought process has been reoriented. pray to 2006, or operational goal was to stay ahead of the growth curve, to ensure that we had capacity to support the volume increase. now our operational goal is to stay ahead of the cost curve. we are contract team.

the reducing our mail processing infrastructure to get ahead of the volume declines. this activity is at the core of our ability to return to profitability. now, we've been diligent in the decline. you can see in the past five years we produce nearly 200 mail processing facilities linked on done this successfully and without any appreciable impact on our customers. we are delivering record service during this period. we also accomplish these reductions without laying off any employees. these consolidations were accomplished through a formal process that area a mail processing studies. this process works very well and we've actually been using it for decades. the study process uses object of criteria to determine the feasibility of consolidation. it also includes a public meeting to allow community members to ask questions and

provide feedback. what we are proposing to do over the next two years as a dramatic acceleration of the process we have been using. we expect to shrink are not worried to less than 200 mail processing facilities by 2013. we will continue to follow established process for studying these facilities are part we will continue to follow established process for studying these facilities are part now this is an aggressive plan, but will put us ahead of the cost or for remainder now this is an aggressive plan, but will put us ahead of the cost or for remainder of the decade in what remains will be the core of our operating network going forward. here's what a mail processing footprint looks like today. you can see where facilities throughout the country. these are varying sizes and employed anywhere from 50 to nearly two dozen employees. and here's what happens in a mail processing facility. miller's collected from a collection boxes, post office is

were dropped off directly by or large business customers. it is sorted mostly during automated process and transport it back for local delivery or to another mail processing facility, depending on the destination. most of this work takes place in the middle of the night and this is to support or overnight service commitment. in fact, our entire network was designed based on requirement that we maintain capability to deliver first-class mail the next business day. this requirement limits our ability to sort mail until all the mail can be sequenced with the local letter carrier has arrived at the facility. since this has enormous implications for the waiver process mail. it means they're operating in that constraint in this way we currently maintain so many mail processing location. this map shows off a mail processing facilities we have reviewed for possible politician or closure.

as you can see, we take a comprehensive look at our entire network. the blue star represents that is already underway. the red stars represent new studies. today. what we are releasing today is the list of 252 additional mail processing facilities that we will evaluate for potential closure. we will connect area mail processing areas to determine feasibility of consolidation in the cities will consider the overall financial impact and will include durable stakeholder input. it's expected that the studies will take approximately three days -- excuse me, three months from today to complete. we are aggressive, but not that aggressive. so here's what the future mail processing network might look like. you can see there are far fewer facilities and each supporting a larger geographic area. we are able to study closing so many facilities because are also

proposing a change to our overnight requirement for first-class nondelivery, also known as the service standard change. service standards are suitable for service achievement for each meal costs. we built our network to meet these candidates and our plan is to rebuild our network based on a two to three day standard for first-class mail. this will have tremendous benefits from an operational. and while i was to design a much more efficient at lower cost than a processing network with far fewer facilities. to give you a sense of what the change represents, let me show you how to meet the current overnight commitment. this is a 24 hour clock in the graphic shows the overnight requirement compresses our mail processing time into this window at dimity that begins roughly at midnight, runs for four to six hours. in what could sequenced mail volumes for the letter carrier, we must wait for our mail to be

delivered that day to be available. this is not especially efficient. the kind of distance associated with getting mail to and from each facility requires us to maintain so many facilities. our new operating model is based on a two to three day delivery requirements in this will allow mail to be processed approximately 20 hours a day, enabling us to process more mail per facility. another way to appreciate the power of this change is to see it expressed geographically. this is the central pennsylvania postal district service area, which is served by six mail processing facilities. the six plans are overnight to each other. because of the overnight standard, we have to maintain all this capacity and infrastructure with a relatively type. the time and distance of getting

mail to and from these facilities. if you think about the clock in the way we process mail today, our current overnight commitment means maintaining excess capacities, equipment, facility space and workforce. but today's service standard, we can meet all the mailing needs in this region with two facilities. those two facilities to process mail continually. we could maintain fewer facilities because it expanded operating window and geographic reach. i may point out that i use this example simply to demonstrate the business concept. no decisions have been made regarding these particular facilities. as they get to a network that looks more like this, we'll have less equipment, fewer facilities and will realize significant savings for the postal service. so her future network will support a two to three day first-class service standard. it will include revised entry times for first-class mail.

these consolidations will result in an estimated 50% reduction in our mail processing equipment coming significant reduction of physical footprint and will eliminate the excess capacity in her system. it will also enable us and our customers to optimize transportation. for mailers, less entry points will enable better utilization of tracks. bottom line, we expect to realize an estimated $3 billion in savings from this initiative. .does this this impact our customers? there's really two areas of change that our customers will be interested in. literally, where will they need to drop mail? and at what time? so this change will largely be transparent to the residential customer and the receivers of mail. there will be no impact at the post office or with mail delivery.

we believe our current commercial mailers will readily accommodate her new schedule and affects many large customers have been telling us you need to do this. that being said, we know the proposed changes will have some industry specific implications. so we've outlined these changes so most of the major industry groups on the conceptual basis and have been pleased with the initial response. we do have a strong record of working with our customers in the mailing industry to mitigate any potential issues and we're committed to making sure the transition works as smoothly as possible. boras is seeking, through a notice of proposed rule change regarding the service standard change, what should be published within the week. and so, we plan to work closely with customers as we've done over the past five years of aggressive consolidation. we don't make these business decisions lightly. this change is going to impact

our employees and we have a dedicated and committed workforce. our employees to a terminus job job deserve credit for the record service levels achieved in efficiencies these past few years. every mail processing employee will be touched by these changes. we know the change is unsettling, so will make every effort to accommodate employees to the extent practical. we'll also work with our union to reposition the impact of employees. we are responsible employer. over the past 12 years, we've reduced 250,000 employees, solely through attrition. we have never laid anyone off. we do have a challenge ahead of us. to reduce the size of our workforce to match her future network. and to put the employee compacting context, let me walk you through these numbers. with 559,000 total career employees. 151,000 total mail processing employees. we anticipate we will have

35,000 fewer mail processing positions in the future. now what i've discussed today will reduce annual operating expenses by $3 billion. this is one of three significant network realignment initiatives. are also redesigning the delivery functions to improve service, efficiencies and reduce costs. for us the reworking our retail network of post offices. we are expanding their network of retail partners and online offerings and we're transitioning to fewer brick-and-mortar post offices. and these changes will net a billion and a half and cost reduction. the realignment of their network will result in more than $6 billion in cost reductions by 2015. so this sets the foundation for profitable postal service that

will carry us forward. now, let me turn it back over to pass that he can explain how to get to $20 billion in cost reduction by 2015. >> thank you, macon. so, as we said, our immediate goal is to get to the $20 billion by 2015. and we have just described a very ambitious operational plan that we think we can accomplish over these next few years. and perhaps, most importantly to note here, this is something within our control. we've been saying we've got plans for any congressional how fondly of things that are within our control to get us to the 20 billion. unfortunately, this is just a part of where we need to go to get to the 20 billion. for the remainder, we are counting on two additional

things. one of the cost reductions we can achieve working with labor unions going forward. more flexibility like were able to achieve within the contract and some other changes perhaps with the help of a payments we have. we are also looking to -- seeking substantial and comprehensive long-term legislation to provide us with a much more flexible business model. we've made a number of proposals to congress of the last few and we've got to get our cost structure in mind, both with legislative issues and what we've got going forward. if were going to return profitability can look at the legislation that allows us to be flexible the way we manage this organization. specifically, delivery flexibility. what is the legislation in this from six to five days. we lost 22% in the lookahead dislike you saw from what macon showed you this morning is not going to show increases.

the second day we need to do is resolve the pre-funding issue. there's two options. one of the transfer of overpayment of the civil service fund, but we think we've got a good proposal for us to take over their own health benefits system, just like any private company. doing that allows us to pull that cost over on health benefits, which will pay $7.2 billion this year with an opportunity to choose between a percent and 10% as well as addressing the long-term costs. we think we've got an excellent plan. we shared that with congress. we should think the administration and were looking to push that going forward. additionally, workforce issues we will continue to work through with her unions as well as some proposals on retirement plans and steam line governments going forward. if we can get the legislation pushed through, along with the plans we've got in place, we know we can be successful at

achieving what we need to do from a profitability standpoint going forward in this organization. we know we can get direct 2015, resolve our finances and put the postal service on firm financial footing with our. making an ipod a lot of ideas out here for news this morning. we've been talking about a number of these over the last couple weeks. what i do now is take the opportunity to answer any questions you might have. san clemente when i start us off? thank you. >> thank you, pat and megan. it was like to do is limit the questions to three possible. we have two microphones, one on each side. have a question, please be for the microphone to be brought to you. and we ask that you please provide your name. when we start this gentleman over here.

>> marie stone from news four. what will have the internet played the reduction? >> here's the thing. the internet has had a substantial impact on the postal service. today, about 60% of americans pay their bills online and that's moved from about 5% in the year 2000. that's had a dramatic effect on first-class mail. we are facing the reality going forward that will continue to change. smoke were seen as we need to make these changes in our system now in order to get finances in order and also to help the financially going forward. >> what you say to people concerned about their post office closing of their neighborhood? >> for retail, we want to provide the best access became to the american public. some proposals we have now we're looking at small offices that don't have a lot of activity. we're looking to redesign the way we provide that service pack for the suggestions was the village post office.

rethink will provide better access to customers at a lower price. >> what can congress do to help you? >> congress to stop a comprehensive long-term legislation. we need to be bought for 65 the issue and resolve this requirement for the retiree health benefits at a few other things i mentioned appear. we need to get the administration and congress and the postal service on the same page to get this moving. it's important for the american public and for the mailing industry. >> yes, james. >> james caan is from post and can you tell us what the impact will be on priority mail and on your standing service? >> there will be no impact. that's up to three day product. there may be changes that the standard meal service standard. ..

>> we want to try to make this as transparent and as easy on our customers as possible. >> i might add that as we go forward we have extensive customer outreach efforts now through this office to ensure we hear all voices from the mailing industry. we will work with them for tailored solutions. >> okay. if we could bring the microphone over here to angela, please. >> hello. angela king with bloomberg news. you talked about wanting to get

ahead of the curve, you have gotten to the point where you can close have the facilities and still deliver the mail. how did it get to this point even though you have closed a few of the past few years? >> we have close to a large extent have been offices, airport mail facilities, consolidation, what we are going to now on a much larger facilities that will require a change in the entire network. >> so why haven't you done more sooner? >> the difference became the decision around the service and. as we have looked forward from what has happened is, you know, first-class mail, the first-class mail has dropped and cost us to step back and do two things. look at what we do and also reach out to the customers and say to customers, what, in this changing environment, should we be doing. a lot of things they have come back and said is, consistency, predictability is very

important. designing this network so that you can get the most out of your asset and at the same time provide consistent time in delivery and time of processing is exactly what they're looking for. >> you say this is going to be more consistent. relaxing the standards from one to two to two to three, you're making its lower. why on earth is this a better system for customers who these days are more reliant on faster delivery. >> here is the thing, if you take a look at what happens in blue mailboxes, customers have moved to electronic bill payment which has had a dramatic effect on our system. a lot of the consolidations we have made have been smaller plans we can keep this going on forever. that is completely irresponsible. customers are saying to us, again, this is the larger customers that gives us consistent timing and the opportunity to

bring them melt into your facilities and keep your costs down because we don't want to be priced out of the system. those of the decisions we have to make. >> the five pop a birthday card into the mail two days before the birth paneling in the past it would get their in time, you're telling me now that might not happen. >> washington d.c. >> new york city. >> it will still get their in today's. >> you are sure? >> as a matter of fact, express mail we will guarantee it. >> why don't you take a minute and talk about the increase in reliability. >> let me add, when i mentioned about revised and three-time, 61st class mail is large commercial mailers. these revised entry times, we will work with them. depending on the time of entry we can accommodate overnight service. >> okay. yes, please. >> a couple of questions when it comes to these 250 closures

being studied, he showed the maps of the announcements today, plus the ones that have already been announced, what is the number we are talking about in total, and what percentage are likely to close? >> let me describe the process. what we are announcing today are studies. sixty-one studies in progress and another to wondered 52 studies that we will work with. now, we have stated driven information. we looked at the overall financial impact ending with considerable customer input. it would be premature for me to speculate and give you a number as to how many we will ultimately close. as you can see, it covers the entire landscape. >> as to the 305,000 if your mail processing employees, you spoke about not having had to lay off anyone, the jobs that have disappeared through attrition, what are we talking about now? number one, is that 35,000 person figure to be reached by

2013 or 2015? are we talking layoffs? >> let me put it in context. we have 151,000 mail processing employees, and they will all be directly or indirectly impacted. 35,000 fewer positions. the broader picture, we currently have over 150,000 postal employees who can retire today. we will continue to work with the union, and the expectation is that we can achieve these reductions through attrition. >> you talked about creating enough breathing room putting you on financial footing to be ahead of the cost curve to the end of the decade. is this enough to really for a long term stability or will we find out and 2020 that another round of this would be necessary? >> there are two things. number one, we want to the address cost in a very short

term. when you move from six to five days, bank, $3 billion out of the system. put this process in place, $3 billion. the longer term issues are addressed with what you do with retail managing the assets. we operate over 30,000 offices. as we go forward you have to look at the best way to provide access, keeping the cost down. the other thing is the employment cost. our proposal for health benefits, our proposal for retirement plans give us short-term savings, but they also help to control the cost for a long term, so we are looking for short-term close the gap in the long term manage the cost. >> we come over on this side. >> thanks for taking the questions. what happens to the actual facilities themselves, buildings, if the decision is made to close it down? >> we are actually going to study over 30 million square feet of space.

so the disposition plan would be either resell the access outright or we look to bring existing postal operations that may be housed in leased space in tech own space. >> possible, the orlando facility, possible that other regional postal services would be brought into that structure? >> we will look at the use of that asset space. >> the other question, you mentioned all distribution center and will use will be affected somehow in some way. though some be moved? will sunday given a choice to move to this new facility or lose your job? >> yes. we have contractual agreements with our respected unions that dictate the repositioning of employees, and some may be access to the site. >> come over here please. >> so, first of all, when is the change from one to two day delivery guarantee to two to three day taking place?

and then, do you need regulator approval for any of these things, or these things that you have the authority to do right now? >> we are obligated to file proposals for a nationwide service standard change. the icrc would offer a nonbinding advisory opinion on the proposed changes. >> when does the change -- >> we will file that in november. >> abcaeight. >> and the transition, as you shrink the facility network down with the transition and all the things we do with the customers so that uc changes and service standards, changes in acceptance times and the whole 9 yards. the key thing for customers to understand is that we have an excellent plan, and we will be working with people, not just at this level, but site by site to make sure the customers are fully taking care of. >> the question over here.

>> hello. pat donahoe, you testified before congress last week or the week before. how encourage argue -- you expressed your urgency to get approval to have the legislation. from your testimony in talking with the members, how encouraged were you that there will be fast action on this considering all of the bipartisan -- the partisanship going on on the hill and that sort of thing. how encouraged are you, and do you think we will seek quick movement on this? >> well, one thing that i think was encouraging was the administration came out and said they would support the 90 day extension on the payment which gives as breathing space. when i say us, i mean postal service, administration, and congress. we are looking for bipartisan work. definitely an opportunity for everybody to get together because the postal service is still a critical part of the american economy. we are not going out of business. we are not pulling out of

business. we are trying to get our finances in order so we can stay in business to provide excellent service for a long time to come. we think that the proposals on the table, they are good proposals, support from republicans and democrats that support those in the house and the senate as well as the administration. i think they will come together and we will see a viable bill this year. by the end of the calendar year, and i think the congress knows very important and responsible thing to give us long-term comprehensive legislation. >> questions over here, and then not come back over to the side. >> hello. from the buffalo news. i am interested in this because the buffalo facility is on your list for potential closure while the rochester facility is not. i am wondering what standards you use to try to determine which facilities you would study for closure and which you really planned to have as part of your network long-term?

>> as part of the processing study, the components that we review our capacity, projected volume, customer input just to name a few. >> it is really to do with the mail and how it is processed, not in terms of numbers employees and the quality of the facility. >> no. when we are talking internally with our employees and the management team we are clear that this is not an indictment of the performance of an individual and the facility. the objective criteria to make the best decision regarding the network. >> a lot of times when you're looking at is reached and if you think about the geography around buffalo versus rochester, retail and a place like rochester. the employees of those places to a great job. >> the history of the process. >> the studies have been around

for decades. long, established process. vetted by both gao and the office of inspector general. we clearly are a very transparent about the data and also the inclusion of customer input as we work through the process. part of the process is, we will have a community meetings to beat in buffalo, new york, so the local community and mailers will have an opportunity to provide comments and feedback. >> thank you. this side please. >> amelie long. the 35,000 employees, part of the 220 by late 2015? >> yes. >> and then the 35,000 comes by 2013? >> what we are looking at is a number of things. six to five day proposals, these network proposals. when we talk about the number we set up to 220,000, and the

reason we put that in the white paper, we felt it was very responsible on our part to say to congress we need to address this issue. we talked to the unions. there are opportunities that can create opportunities to move people off the role and irresponsible way. >> will this have any impact on your ongoing union negotiations? >> always discussions that go on within the in union negotiations. it is a situation right now where we have to unions in negotiations and won in arbitration. any time, especially when you have the economic issues we are facing, it has to be taken into consideration. >> any other questions? okay. it back over here. >> to sandra. is domestic mail transitioning, will the impact on international mlb?

>> not anticipating an impact. the mail that is two to three days won't have any impact on international mail? still the same as it was before. >> no proposed changes to international standards. >> international comes into our hubs and it's distributed from there. there will not be any major change. >> thank you. >> hello. usa today. could you give me an example, please, of a specific industry that would be affected by these new standards, what kind of discussions you have had with them, and how they received it. >> let me comment. i mentioned we had conceptual briefings with the industry association and also the technical advisory committee. obviously there are concerns. it is an important topic to work

through. our intent over the next few months is to sit down with the various segments of the milling industry and work through this process to determine how we can mitigate these service standard changes and as i mentioned, with the larger commercial mailers, we think there will be able to accommodate that rather readily and maintain that overnight standard. >> could you give me a specific example. >> one of the things that we have seen over the course of time, to big changes that have been going on in the first-class mail area. one is the payment issues that people pay more bills online and not through the mail, but there are still a lot of bills that get paid through the mail, so as we work through this change we have to make sure that bill payment, we work with that industry to make sure that we are echolocation and consolidation points are such that they are able to handle the

volume and handle it in an expeditious way to get that money -- to get that money through to the recipients. the other thing, this is kind of what has given us the idea behind this. if you look at what has been happening over the course of the last few years in the first-class mail business, there has been a lot of consolidation, and the generators. a lot of the generators have moved to consolidation points where they are bringing mail to our system, and we get to end three day service standards from that point. working both ankles we think we are making the right decisions on both the service and cost standpoint. >> any more questions on this side? how about over here? >> the back. >> i'm going to get to you in one second. >> a quick question.

what do you say to folks who are saying, wait a second. i am concerned stabbed prices will increase. i will have to pay more. what can you tell them? >> the key thing is that $0.44, putting a piece of mail in the mailbox from washington d.c. to alaska is still a very good proposition. we also provide tremendous safety and security of that mail as it goes through our system. we still think we are important to the economy and society and provide excellent value. >> will you increase price? >> we will see what happens next year. we are looking at that. it would be limited to the cpi, which is 2 percent or less. >> it could possibly go up. >> it could possibly. >> let's go to the back. >> hello i was wondering what if congress does not act by the end of the calendar year, what will happen? >> we will continue with our activities as we are currently underway.

we have to. we have to reduce the network footprint and get the cost in line with the shrinking volume. we also will continue to work with the unions and work out how we can get more work force flexibility and lower the cost of labor altogether. i seriously think that congress and the administration of the gravity of the situation and will act. >> but what if? >> what if, i can't control that. the mail will get delivered. we do not have cash flow issues. i can't make this five and a half billion dollar payment. we managed cash, made changes and will make sure we make the rest of our payments the rest of the year, pay employees and suppliers. mail is important to get through to people on a daily basis. it is still very important. i have faith that congress and the administration will work with us and we would get this solved. >> yes please. >> talking about the switch from

low one day to day, how many pieces of mail, do you know how much mail will be affected? >> it depends. the mail in blue mailboxes' has been decreasing, like we said, 30, 40, 50 percent, dropping a 12% a year which represents probably less than around 15 billion pieces. so that would be affected. and like we said before, commercial mailers, the largest, lions share of the volume still have the opportunity to bring that mail and to our centralized facilities and retain that overnight service. >> and then going back to the press conference you had a couple months ago about closing post offices, what is the purpose on that? have any offices been closed and when can we expect to start shutting down? >> we are working through the process. the earliest we would finalize this review process would be late december, early january.

and i might add, as evidence that these studies are not a foregone conclusions. we are working through the post office closing process. today we have discontinued 21 studies because we did not believe that we had sufficient alternate access and product and service is available in the community for our customers. >> the key thing going bull work for us on the networks in terms of the retail side is access. we want to give people excellent access. online, in stores, number of different ways, and we want to make sure the american public gets that. we just have to keep our eye on the cost. >> let me get to the back. >> we have been talking a lot about what kind of cuts are being made. what is the post office doing to possibly create new business to compete with things like e-mail and create more revenue? >> a couple of things.

and we have not touted a lot of these things we have been working on. we have not taken our eye off revenue. we introduced a product in the last four months. it is a simplified advertising products. in just four months we have made $65 million. we continue to see real growth in priority mail and what is called parcel select. fedex and ups are our largest customers. we have seen good growth and now looking to get into the digital world more than we are today. additional announcements. we think we play an extremely important role in digital because we do a couple things. we are the most trusted network in the united states, probably the world. we can provide excellent security. working with customers, asking customers what they want and how we can help and working through it. >> over here. >> if i am a member of congress

the first thing i do when i see this list come out this the, is there a facility in my home district, and how they're protected? probably going to be getting letters and phone calls from members, you know, protecting jobs in the district. what role does congress play in this process if any? you know, frankly, how do you keep politics out of the process? >> again, the important thing is, as megan said, follow the things we are doing. they are standard criteria. no favorites. we did that with the post offices, the 3700 in the same thing here. if you remember, when you actually step back uc of very viable and a distribution of facilities across the country that makes sense. congress, again, needs to work with us going forward. we all have a responsibility to take the best interest of the

american public in general as well as what happens in the entire industry, and i think congress will work with us on that. >> any other questions? >> this 35,000 figure. i believe you said yes to both questions. >> 35,000 employees. >> 35,000 employees. the question, 2013 or 2015, which? >> here is the thing. what we have laid out through 2015 are a set of activities. six to five day delivery and other changes within what we do for my contract standpoint. what we are looking to do is to get to 420,000 employees by the beginning of 2015. there are of bunch of things in that timeframe. in three years we will move through that. of?

>> any final questions? willing to stay for a few more minutes if you want to come up and ask any additional questions. with that we will and the conference and thank everyone for coming. >> thank you. >> thank you. [inaudible conversations] >> coming up tonight on c-span2, a discussion about president obama's jobs bill and the house oversight hearing on corruption in afghanistan military contracts and the u.s. postal service announcing potential layoffs and cutbacks to stem its financial losses. >> best-selling author of a beautiful mind, sylvia nasser, talks about her latest book on economics and the intellectual pursuits she believes that help people worldwide, interviewed by financial times editor on

afterwards, one of the many nonfiction books and authors this weekend on c-span2 book tv. we will also continue our college series interviews as we talk with professors from george washington university about their latest books on voter suppression, military intervention, and modern afghanistan. michael more recounts his own life. he will also be our guest next month on in-depth, taking your phone calls october 2nd. get the complete we can schedule at booktv.org. >> that c-span networks providing coverage ofcog politics, public affairs, nonfiction books, and american history. this month, look for congress to continue federal spending into november, including funding for recent natural disasters. keep tabs on the deficit committee is to formulate a plan to lower the debt, and follow the president of candid it's.

all available on television, radio, on line, and social media sites. search, watch, and share our programs anytime the video library. we are on the road with our digital bus and local content vehicles. the c-span networks, created by cable and provided as a public service. >> now, a look at president obama's proposed a jobs bill on thursday's washington journal to policy analysts debated the cost and potential benefits. we will hear from chris edwards and michael ettlinger. this is one hour and tenm.org. minutes. >> host: this thursday we are ac back. our focus for the next hour and b minutes of this washington journal will be taking the major provisions of the president's jobs plan that have to do with w the revenue-raising side, the

tax increases being proposed.si let me introduce you to the two guests at our table who will beo part of our discussion. on my left, michael ettlinger, a vice president for economicttli policy at the cngenteerr for american progress. chris edwards, on my right, studies director for the cato institute and he also edits an internet site called downsizinge. government not work. thanks for being here. born to dive right into it and begin with the largest revenue raiser, president obama's plan to tax itemized deductions for emiz earners. the president says that doing this will raise $400 billion. according to bloomberg news. the specifics, if we could put them on screen, the president proposes to cap itemize deductions at 28 percent ofed income. at this would apply to individuals

earning 200,000 or more and couples earning 250,000 or mores let me start by asking you how this differs. >> we have this strange system of upside-down subsidies whereby people in the highest marginale tax bracket, 35 percent, when b, they take their mortgage interest deduction are, in effect, giving a 35 percent subsidy from the government, getting 35 percent of their mortgage interest paid for bymoa the federal government.gethe they get the money in the form someoneced taxes. and somebody in the loweret ckackets get lower levels of subsidy. sticking with the mortgage interest example, no one who ise designing a subsidy for home ownership outside of our weird system would ever give higher percentage subsidies tor wealthier people than middlethie income people.in and so what the president is trying to do his level that.

but he is doing is saying people in the 35% bracket, you don'tra, get the whole 35%. you are capped at 28. >> host: other countries, our. north, gives no deductions whatsoever. tell us a little bit about why the thinking as there should be, any? >> it comes from the desire tosd promote home ownership. obviously value.gues and i think one thing to remember is it has become embedded in our system. so we have proposed a plan thatt reduces a level of subsidy, butl it would be a shock to the housing system to get rid of it in one fell swoop. rid i don't think that is something on the president's agenda. on what he is intending is a range of deductions trying to level ia so that is not this perverse upside-down system that does not make sense to anybody. >> host: specifically with mortgage interest deduction, considering the state of the

housing market and people that are against this, no more shockg to the system. p how would youeo respond? w >> the best way to promote theck housing sector is not by guest:ng subsidies for higher income people.housing s that is not the troubled park. i don't think that this is some disastrous shock to the system. again, just getting rid of what, is a perverse subsidy. >> host: same with the mortgage interest deduction.ho it will go through other controversial debates over the detegage interest, the itemized deduction.n the tatimortgage interest, we have already as the country andst policy makers trimmed this back. it used to be for any mortgage. the congress limited. why not make further mak limitations, specifically in the area of mortgage? >> in the long run i would like to simplify the tax code and gen rid of all credits and deductions and use the revenue to lower overall tax rates which educe reduce distortion across

the playing field. as you point out, can -- countries like canada and y poi australia don't have deductions and their home ownership rate is as high as ours. in general what president obama is doing, he is proposing new tax credits and deductions in his jobs bill, making the taxons code more complicated. then he is putting these limitations on deductions in the tax bill as well which complex , of fires the tax code further, so i don't like those overall policy. i think he should be reducing rc complexity. lowerg ov >> host: to sectors of the economy who are already looking at this particular provision any raising concerns. one is charity. for example, wall street journal, why the jobs bill could be bad for charity. limits would likely reduce charitable giving. why this deductions are a big reason that the rich give, despite the fact

that the wealthy said they get out of kindness. if they deduct less they will give less.s yo >> this has been studied, andgus the evidence does not support that. in fact, the rich don't get out of kindness, and it is not to chase tax breaks. if someone subsidizes, but not the primary motivation.t they still lose the money i don't think that is a cause for concern. i do think that you have tohink remember that these changes in the tax code are paying for t something.meing. so it is not that we are raising taxes on a whim. if you look at the other side of the ledger, all of the job creation of will be made, the reductions in taxes in terms ofe payroll tax, which are tax provisions is really directly tcreao creating jobs. he looked at helping with the unemployed and all of the provisions on the spending side you have to look at it as a

balancingave to act. on balance there is not much ac. question in my mind that it is good for the country, good for most of the purposes, charitablc institutions. >> host: on this program we have looked at the other side of the ledger. today we are trying to understand the implications of how t intense to pay for itf through the tax cut.ill. your questions and comments in a few minutes. you will see both sides to be leet me ask you to comment on the overall. do you believe the president's plan will, in fact, stimulate jobs?mute j >> no. i am completely against everyes part of the president's jobs bill.inst he wants to put in place a temporary payroll tax cut. i don't think companies hire people based on temporary breakd that they get. they hire people based on lookinge at their long-termt thg investments. if theedld a new factory new workers. the higher. they need new workers in that factory and a higher.

even if a company would add a few marginal workers from this peril tax cut than they are proposing, wouldn't they fire them in one year once this expires? also proposing their brakes if a company hires people, they get a special $4,000 tax break. at the thought makes sense to me. the president complaints about business tax loophole but is proposing to add new ones to the code. we should focus on overall reductions in the tax rate and making it more efficient. host: limitation on itemized deductions, two other sectors. comment on charitable deductions and its effect on giving. when there be one? guest: i think there would be an effect. that does not mean i would not get rid of it in terms of overall tax reform. charity deduction is probably less distortion era than the

mortgage interest deduction. that causes hundreds of billions of dollars of extra resources to move into one industry, housing. we have seen the problem that that has created. charitable deductions, it does not create this distortion for one particular industry or activity that is really damaging to the economy. i would get rid of the charitable deductions in terms of overall tax reform. i do not see any reason to go picking on and right now. host: the other item is health care. if deductions are limited to 20% for higher earners, here is what is being written on conservative blogs. if that happens, what effect would it have? guest: it would have a marginal

effect. again, ultimately we want to get rid of the distortion that the tax code creates on the health- care industry. but i think we should do that in terms of overall tax reform. i think adding in these sorts of narrow limitations makes the tax code more complex and does not really reform t care sys host: some pe people get breaks for help savingsalth accounts. insuroes it do to the health insurance economy? >> it makes it easier for people to get health insurance. again, what the president isopo trying to do, there is no particular reason why we think higher income people should get orre i health -- help gettingvem hettingnsurance. i think that is in terms of health -- tax reform and is the objective terms of tax reform, that is the objective. i agree, the tax system is complicated and it should not be made more taut -- complicated. i see it actually as kind of a down payment for other tax reform.

you are starting to move to a more level set of subsidization, which is sort of where we end up with bigger and broader tax group. host: let me move on to another provision. this one has been getting a lot of discussion in financial newspapers. that is the president's plan to tax income of investment managers at individual rates and not capital gains rates. they propose that this will bring in about $18 billion of revenue. here is an item, for example, in the "the new york times." raises some hackles among private equity executives. what is this all about? guest: basically private equity managers are able to really -- what is really their earnings, what they make for doing their jobs, as capital gains, and get preferential 15% capital gains tax rate except for the tax rate

everybody else pays. it is simply preventing them from playing that game and prevent -- paying the same level that other people pay. guest: this is the so-called tax increase on what is called carried interest. a company structured as a partnership -- for example, venture capital -- the managers of these companies get usually 20% on the deal income, investment in company, and it is treated as capital gains income and it is sort of a gray issue. it is a debate of whether this income is really labor income or capital income. the president would not raise very much money from this provision, and i think it is a little dangerous. companies that are organized like this, venture-capital companies, have been organized like this for many decades and they helped fund silicon valley start-ups like apple and other

great companies over the decades. so i think we are playing with fire if we start hiking taxes on businesses that really our job creators in the economy. i would be quite hesitant to go ahead with that sort of tax increase. host: i wanted to put a couple more of the major provisions on the screen and you can send -- call or tweet. the next thing is about corporate jets. it has been quite -- part of the political rhetoric. the president that a plan to raise $3 billion is to limit the tax breaks corporate jet owners. reading some of the chatter about this on the internet, people who are against it suggest it will do the same thing for the private plane industry that many years ago the tax changes for the boat industry did, which is the press it in a bad economy. guest: he would reduce the

depreciation deduction for a corporate jet. this is an odd provision. the president, among his tax increases here, he reduces depreciation deductions not only for corporate jets but for various parts of the energy industry. oddly, at the same time, he is proposing to extend 100% expensing. he would allow certain companies to write off all investments first year on the one hand, but on the other hand reducing depreciation deductions for certain other industries. so, his tax policies are directly contradictory. i am ultimately for businesses writing off their investments completely first year, which is called expensing. whether it is corporate jets or energy industry equipment, let us try it -- let them write it off the first year and i think we could increase investment in the economy. host: does it make sense to take both the corporate jets and energy provisions all in one?

guest: first of all, again, it is a leveling of the playing field. without getting into the details, the corporate jets have sort of got and an access level of depreciation and so we are fixing that and raising revenue. yes, he is doing expensing as well, but -- the is the way expensing across the board which, again, that affects everybody. i think it is correcting some distortions while providing an incentive to invest during this period where we are short on investment. people are arguing, well, it will hurt the jet industry. we could have the government by every executive in the country his own corporate jet and we would help the corporate jet industry. but it would hardly be a good use of dollars. again, i know we are focusing on the taxes, but the point is how this money is being spent and it is being spent in ways that would create many, many more

jobs than frankly any would be lost in the corporate jet industry. host: before we get to telephone calls, let me ask folks to talk about the politics. speaker boehner bank is expected to give a speech in washington and we previewed that with a washington post reporter and jobs -- she suggested he would call for comprehensive tax reform, again, saying no new taxes as the deficit committee is under way. what are the politics of the president's provisions right now. guest: the tax increases will not go anywhere in the house of -- house of representatives. the white house knows this. a lot of the tax provisions they tried to pass in previous years and they could not get through congress. the carried interest provision for venture capital companies, they proposed that way back into thousand seven by democrats and it went absolutely nowhere. so, i think it is just politics. the president wants to pretend he is being responsible with the

budget. proposing revenue increases that make no sense for the economy. they have no chance of passing. i don't like the temporary tax cuts he is proposing, either. the jobs tax credits i don't think make any sense. i do not think it will cause companies to hire. i think we ought to look at overall tax reform, lowering the very high corporate tax rate, for example, would be good long- term reform and something that could also stimulate the economy in the short run. that is the type of reform. host: this morning we see in the new senators such as mary landrieu are concerned about the energy provisions of the president's proposals. what are your thoughts on the politics? guest: to some extent i agree with chris -- i did not think the white house is when did it as the specific mechanisms be a way to pass a jobs package. there are focused what the -- on

what they care about most about, and like they said, the super committee, has other ways to pay for, it is fine with them. i think the white house cares most about creating jobs. and i think they need to pay for creating jobs. and these are the mechanisms they put on the table. i do not think they are wedded to this particular mechanism. that said, senator landrieu is representing louisiana. she is representing energy interests in this case and expressing that concern. i think with respect to those particular provisions, with what oil prices are today, i do not think the oil companies need added incentives to drill for oil. host: one more and we get to telephone calls. yesterday a conservative group put out a comprehensive list of all 14 tax hikes in the president's stimulus plan. it was appearing all over the internet in various websites. they also highlighted one which

they said would raise $4.8 billion of the spectrum tax. a new $4.8 billion hidden tax on wireless consumers levied on users of license spectrum. do you know anything more about this provision? guest: it is sort of like saying the president can launch a nuclear attack on ahi of the checks and balances within government are completels ignored, the sec could raise thr tax.corais actually, it is a pretty simplet policy. opening up more of the spectrum and they are going to auction it so that is a way to allocate spectrum amongst companies.ocate even if you assume that everypa dime of this tax is passed on to cell phone users, it amounts to less than $2 per cell phone peri year. than

$2 per cell phone per year. and the money is in fact dedicated to being used for helping with the 4g build out and improving that technology as well as doing something the 9/11 commission recommended in terms of rapid responders, first responders, having a part of the spectrum of their own so they can better communicate in emergencies. host: highlighted last week with the 9/11 emergency. your thoughts? guest: the bill just -- , and fcc to raise a billion dollars a year in cellphone users and spectrum users. again, another tax we don't need. i would also get rid of the subsidies we get to the telecom industry, at that we did not need the federal government to tax or subsidize the industry.

it does well by itself. host: let's begin with telephone calls. let's begin with a call from chicago. this is carl, a democrat. caller: i would just like to say, i understand the president is trying to negate the president that a ferry that tax cuts of the solution to job creation. i would like to direct this, however, to mr. edwards. if this is malfeasance that caused this recession that put some money but out of work, and the taxpayers who had to step up with tarp and the stimulus to get it stabilized. we have done it over the last two and a half years. i would like to know from you -- with business now making profits, now $2 trillion-plus in

cash. what are they going to do on their part for the country without an incentive? why should we not expect -- they should step up. the american taxpayers stepped up. why don't they voluntarily step up? this past summer they could say we believe in america so we are not going to let someone else by our treasury notes to raise the debt ceiling, we will, to raise the money. when it is business going to step up and do something for merkel? guest: thanks requested. i think you used the word malfeasance and at the leading up to this there was malfeasance of on the federal government's side and to an extent by wall street companies, malfeasance -- wall street companies. on the government side, subsidizing the housing industry, keeping the fed reserve interest rates too low for too long, causing sort of a bubble in the economy. so, there is a lot of blame to go all around leading up to the recession and financial crash.

you are right now. i think a lot of american businesses, they are profitable. they are making money and sitting on a lot of cash. the question is, why aren't they spending and investing. if you look at the national income accounts for investments by american businesses, building new factories and structures, it is very low. it crashed a few years ago and it remains low. i would argue it is because of the environment out there is very uncertain. the tax rates on business are very high and the united states. so, if you take big american corporations like caterpillar or intel, they could invest anywhere in the world these days. we want them to invest in the united states, so we've got to give them an incentive. we've got to make the united states the best place for these companies to invest. i think they will start investing. one of the things i talked about a lot is reducing our very high corporate tax rate which i

think currently scared away investment by businesses. so, let's get those businesses investing again and they will hire people and they will create greater growth and reduce the unemployment rate. guest: a couple of things. i think that the way to get businesses investing again is to increase demand in the economy. the reason why they are not investing is not because of the corporate tax rate, the reason why they are not investing is they are not confident in -- that there is a market here in the united states. what we need to do is what the president is proposing is input more money and more middle-class families and so there is demand that the economy for the goods and services that corporations produce. we can keep going back to about cutting taxes which we have gone over and over, but it is important to remember that taxes as a share of the economy right now are at the lowest levels since 1960. we have gone into the recession

with the bush tax code and we still have the bush tax code. president obama has cut taxes since he became president. president obama at this point, taxes have been cut more in this -- his first term than they were cut under president bush, just more targeted, to middle- class. so the idea that we will go to the tax cutting well again and that is the key to get businesses hiring and investing again is wrong. what we need to do is pass the debt overhang -- housing crisis, get money in middle-class pockets, get customers back in the stores and create demand for the products of u.s. companies. host: let me single it out, corporate tax rates the united states has truth because they might get fired. the truth of the matter is the biggest transfer of wealthewersg of the comparative american corporate tax rate is? guest: the rate is high but

taxes are low. overall what u.s. corporations pay are not high, in fact, lower than other advanced economies. the tax rate is high. what we had is the situation where the rate is high but there are so many loopholes in the system that companies -- very big and profitable companies sometimes often end up paying no taxes. it is a system that i completely agree with chris is in need of reform, but the problem is not the overall level of revenue. host: anything further to add? guest: we have the highest corporate tax rate in the world at 40%, tied to japan, an average rate in europe is 23% in the global average is around 25%. we are way above average. it means a big multinational who can invest anywhere, instead of investing here, paying 40% corporate tax rate, they can

invest in china and get 25% rate, they can invest in canada. it makes no sense to me. we need to become more competitive and lower our corporate rate. host: we mentioned the deficit committee opens -- starts with a closed-door meeting today. as you wa a viewer -- correct? guest: that is what i was getting at earlier, is that the administration has offered these as a way to pay for this, but they are open to other ideas that may emerge from the committee. host: california, good morning to holly. republican. caller: good morning. this jobs plan is, like everything else he does, ideologically driven. just two cases in point. by the way, god bless cato

institute, one of the last bastions of common, decent thinking. taking away the deductions for donations. that just plays into a term that is used in 100 documents of this administration called to the federal family. he wants all help to come from the government. he wants all people to look to the government. as far as the people under water, we have employees, we have a large business. our home is --being able to deduct a house that we have a underwater and everybody else like us that is making payments on a house that is under water, one of the last advantages we have is being able to deduct. once again, he is striking the people will have something, will have created something, who

stand independent of the government. as far as the corporate jets, i wish that i had been able to use mine as often as michelle obama has flowed around the world at my expense in her separate flight even from her husband because she could not wait another two hours -- just god bless america and something has to be done about this juggernaut we have and the white house. he keeps saying the president's plan -- these are the machine that put him in the white house. he is an empty suit but they are coming after the american way of life. that is their agenda. host: thank you for your call. would you like to respond? guest: in particular the caller made the point that this is an ideologically -- this is ideologically driven. i think one of the telling things about the job creation side of the proposal is everything about that plan is something that has been embraced

by republicans at other points in time, and in fact, recently. the payroll tax cuts, it was the centerpiece of what the republicans were proposing as an alternative to the recovery act in 2009. the president has tried really hard to not make this proposal ideological, to make it something that might have a chance of, at least in part, passing muster with the republicans that controlled the house of representatives. because you have massive unemployment and we need to do something about it. host: on corporate taxes, a tweet -- guest: i am not in favor of that. right now the united states has what is called a worldwide corporate tax system. u.s. corporations are taxed on their activity around the entire globe. a system of taxation just about what every other industrial country is moving away from.

to tell you how would works -- if you are a subsidiary of a french country in brazil, the french government does not care how many profits you make in brazil. the french government assumes it is good for french industry. in this country if the u.s. can't -- company had a subsidiary in brazil would tax the money. i don't think it is a good system. i think we should follow the system and other industrial countries have gone toward, and that is to allow our multinational companies to become competitive internationally and not to over- taxed them. host: let's hear some 28%. that is the tax. if you are in a higher tax

bracket it is worth 33 or 36%. all of this is saying the value of tax deductions above that threshold should be the same as the value at the threshold. we think it is a fair provision. we think it is the kind of balance and trade off that we like. off >> host: and a voice on the other side, let's listen tosten economist martin feldstein. t >> it uses the revenue todstein ew collection of government spending programs. when we need that revenue fromed reduced tax expenditures to reduce future budget deficits fe and to lower marginal tax rates. second, as you know, the president would limit the taxhe expenditure reductions just tout higher income taxpayers, those with more than $200,000 in