[inaudible conversations] >> here on c-span2 we take you live now to the rayburn house office building for hearing on tax fraud. acting irs commissioner daniel werfel and the treasury department inspector general will be testifying before the house oversight committee on government operations.

they will also be talking about her we'll also hear from the chairman of the subcommittee. the panel is older. members are gathering. just a note that the house is gaveling in at this hour, 9:00 eastern. wwe expect the host of a series of votes coming up at 9:15 a.m. this hearing may very well break shortly. we go now live here on c-span2. >> [inaudible conversations]

>> good morning. i'd like to welcome everyone and call to order this hearing of the government operations subcommittee of the government oversight committee of the house of representatives. the subject of today's hearing is examining the skyrocketing problem of identity theft related to tax fraud at the internal revenue service. the order of business today will be, we will begin with opening statements from members, and

then we'll hear from our witnesses. we have four witnesses today, and i will introduce them later. i would remind members, it looks like we're going to have votes commencing about 9:15 which gives us, about 9:30 we will again try to get through this maybe most of our witnesses. we will then recess and return probably for questions at that point. so with that, chairman issa and myself, we usually start these hearings by saying that just generally that we have a responsibility to investigate problems with our federal government, for lack of a better term of some of those problems we call them scandals or wasteful spending, or conduct by

federal agencies or employees. and this is not an opportunity to say to take on irs, but an opportunity to follow up actually on this matter. we've had some for hearings. i was given a list of hearings, and they date back, i don't know, mr., did you participate in some of those before? so this is not a new scandal or problem. it's something that we've seen as an issue for some time. unfortunately, too, you here in just a second, cite some of the issues at hand that is a result, hasn't gotten any better. unfortunately, we've heard lately a lot about phony scandals, irs and some of the things we've had to deal with are not phony scandals.

even the leaders in the administration have conceded that in the past, particularly in regard to some of the targeting by irs, brought to our attention by the inspector general and other members of congress. we also, as you may recall just briefly, look at the conferences in a previous hearing, in wasteful spending on irs conferences. i think you're spending about 50, $45 million in one year. after we began some of the revelations with gsa and others we discovered in that hearing again, wasteful spending that exceeded what we saw and everyone was appalled at with gsa. and that review of that matter has resulted going from 45 million to about $5 million,

considerable saving for the taxpayers. and then i think all of us were stunned when we heard about, and i don't know of a better term than scandal, that the irs was improperly awarding contracts to strong council. i'm sure the members that were here that heard tammy duckworth, one of our war heroes question the witness who had scammed the system, and also irs giving half a billion dollars worth of contract potential under false pretenses, with the veterans disability. so again, we have i think an important responsibility to look at these matters. unfortunately, irs has had a number of problems, and this one that we're looking at today

continues. the incidence of identity theft related to tax fraud, now listen to this, some of this data is very interesting. it goes from 456,000 cases in 2009 to an estimated 1.9 million cases in 2013. that's a 416% increase. the treasury inspector general for tax administration estimates that irs could issue, in fact, this problem could balloon in the coming years to $21 billion in fraudulent returns over the next five years. some of the estimates are in 2011, as much as a whopping $5 billion went out the door

been paid in potentially fraudulent returns. in fact, this has become such a lucrative business for criminals, that criminals in fact are leaving the drug dealing trade, we're told, and now getting into applying and also asking for these fraudulent returns from irs. it's being said that tax fraud is actually taking work away from drug people because it's easier and safer to scammed the irs than it is to sell drugs. sad part about this, for the average person when they do file these fraudulent return claims is that it takes more than a year am and most instances, to try to get their identity problems resolved.

sometimes to try to get their credit be stored. and very often to actually just get their lives back together. they are left in limbo, and a dozen of your irs as a means of actually changing what's going on. they have made some attempts, but obviously if you just look at the increases, the dramatic increases, whatever action irs appears to be taking is not working when going again from 456,000 to almost 2 million cases. so they failed to curtail this ripoff of the public. in reviewing this matter i found that some states have been able to institute some fairly simple matters, and we may ask about what again they are doing that has worked and hasn't worked, but george has taken some

action, some of the state revenue departments have taken action and we'll hear more about that hopefully, that has successfully stopped people from illegally having taxpayer cash. irs has complained of a lack of resources and said it needs another 22 million examining cases of potential fraud. i've heard the numbers of 90,000-100,000 irs employees, maybe mr. werfel, you can tell me how many you have, but we do know from our review some 21 units of irs engaged now in tackling this problem. and again, it got worse if not better. so again, this subcommittee has held for previous hearings on this subject in the 112th congress. my colleague, the ranking member i think participate in some of those. i know he is as interested in getting to the bottom of this as

i am. and also directed because it is a very serious situation. so for those opening comments i yield now to the ranking member, the gentleman from virginia, mr. connolly. >> thank you, mr. chairman. i want to thank you for holding this hearing. there's been a lot of hearings about irs in various matters but this is one that touches almost every taxpayer, potentially. and i really want to thank you for holding this hearing. as you indicated in the previous congress, with former chairman and ranking member, and we had a series of hearings on this subject, and i attended every one of them. you know, as you indicated, i think from according to the irs taxpayer advocate, identity theft jumped 650% between 2008-2012. and as you indicated there were almost 1.9 million incidence of identity theft and fraudulent refunds. maybe, the unintended goodness

it is cutting down on drug and as you indicated. but, yeah, this is unbelievably disruptive to constituents. and if i recall him a mr. werfel will correct m my memory, as wel as during this subcommittee had under chairman platts, i think the statistic was there were only four prosecutions or convictions for this identity theft. now, when you have 1.9 million identity theft going on, that is an epidemic. the number of prosecutions and convictions, not acceptable. it's profoundly disrupted your constituents. in my own district, a gentleman and a wife filed for their 20 next returns electronically in april 2011. they fell victim to tax would identity thieves. their tax filing was rejected because someone else had used their social security number and received a refund before they felfiled their legitimate retur. my constituents tried for two

years to resolve the theft of the tax refund. he spoke with six different individuals at irs between april and august 2011 and was given six different timelines for the issue to be resolved ranging from six to eight weeks to a year. further, the irs provided conflicting information about forms to fill out, where to send the forms and whether he should follow-up with the irs or wait for the irs to contact them. in november 2011, they received the refund and thought the issue was resolved. in may 2012, 2 of my constituents tried to refinance their home a and were rejected by the mortgage company because the company was using fraudulent irs documents. when my constituent called the irs they say everything was fine here, we can't explain it, and if there's a problem we can't really do anything about it. after many ill-fated pursuits including of the situation the gentleman gave up in frustration. is problem left unresolved and refinancing is a. obviously, that's unacceptable.

to be fair, the irs recognizes -- enhance its efforts to combat identity theft by adapting a three-pronged approach. first prong is prevention which means stopping this type of tracks -- tax fraud for make successful in the first place. clearly given 1.9 million incidents, much more work needs to be done in this area. we seem to be losing the battle. the second prong is providing taxpayer services for those have been the victims of identity theft. this is a significant focus for the irs but again it appears the agency has fallen short. i can -- satisfaction is not, not a prevalent theme among constituents. for example, an audit by take a sample of 17 different identity theft cases and noted the average something for most cases to be resolved was 400 working days. unacceptable. the third prong of irs approach

is catching and convicting the criminals who committed these crimes. this is a critically important step, and one in which we are failing. if we can step up enforcement, obviouit identity theft and protects our constituents. i'm intereedmrchairman, of learning more about the irs is efforts on this three-pronged approach, including examining success stores as well as challenges still to be faced. i would also like you more about how customer service is being improved to prevent the bureaucratic nightmare that constituents as was millions of other americans face every year. this year as with every year taxpayers face a number of issues and obstacles as they try to file the return. i look forward to working with the irs government corrective actions that will strengthen taxpayer assistance in what can be a very difficult time for many citizens. i hope today we have a productive discussion about how we are going to achieve this

goal in light of this massive problem. thank you, mr. chairman. >> thank you, gentlemen. yield to the vice chairman, mr. meadows, gentleman from north carolina. >> thank you, mr. chairman. and thank you for calling this thing. thank each one of you for being here as we look forward to your testimony, and we deal with this. over the course of this year, it cannot be denied that the irs has been plagued with a wide range of scandals. and while many of these issues have been highlighted, an ongoing problem which seems to have flown under the radar continues to exist here at the irs, this issue of tax fraud and identity theft, and how it relates. i didn't realize how big the problem was and so i talked to a few stakeholders. and as i started talking to them, as they started identifying the issue, i was dumbfounded by the amount of tax fraud that exists.

and really, the potential for to even be exacerbated with the new subsidy that we've got coming in with aca and obamacare. if you got a subsidy issue, you know, we're looking at really self identifying who qualifies, it even prevents a greater challenge. identity theft, tax fraud has increased exponentially over the past five years, to the tune of 650%. when we start a look at that, tigta, will test later today, estimates that it could be as much as $21 billion, that's billion with a beat and fraudulent tax returns over the next i've years if the problem is not addressed. and they say that that estimate is conservative. as i talked yesterday to a stakeholder, he shared a couple of different stories without showing the details of just

massive tax returns that comes in, and taking advantage of the tax system that we have. and yet, thousands of returns filed on the same day with, truly with social security numbers that are legitimate, and then we see this but that is one area, and we're having to police that in the private sector. so we need to really look at a solution where the irs steps up and identifies this, corrects the problem, or if we would be sitting here 12 months from now with an even bigger problem that is greater than $21 billion. so i thank each of you for being here. i thank the chairman for calling this important hearing, and i'm looking forward to your testimony spent any other members have opening statements? >> i will be very brief because i know we will have votes in a minute. i just want to make sure that we are able to address the problem.

motion, commotion, no results. the problem gets worse. and so i'm looking forward to the testimony, but i'm also looking for solutions. you know, arguing here and arguing there and not helping taxpayers avoid being victims, and not addressing the issue of those who will take advantage of a system that may have some holes in it, and those who spend day in and day out trying to figure out how to maneuver, to extract something that don't belong to them. those are the issues that we have to address. if we can send a man to the moon we are to be able to resolve these issues. and with that, mr. chairman, i go back. >> thank the gentleman. mr. jordan? then we have time to probably get one or two of our witnesses

and. let me introduce them. again we have the honorable daniel werfel, acting commissioner of the irs. we have ms. nina olson, national taxpayer advocate of the taxpayer advocate service. mr. michael mckenney is the acting director of the inspector general for the audit of the treasury, and mr. douglas macginnitie is the state revenue commissioner of georgia. and welcome all of you. as is customary we swear in our witnesses. so if you stand, raise your right hand. [witnesses were sworn in] >> with the witnesses all answered in the affirmative, we will let the record reflect

that. >> i'm sorry, mr. chairman. catches in our, is the intention here mr. werfel first and then break? >> i think we can fit in nicely. we still have 11 minutes. so we can give them at least six. >> i am informed we have nine votes. >> so we will up recess for the appropriate time and break, and then come back. we will do the rest of the witnesses. so with that and also, members will have seven days to submit opening statements for extraneous material for the record without objection, so ordered. welcome back, mr. werfel. i asked you earlier how much longer you would be there, your success was just named today, but thank you for coming. you are recognized, again, welcome. >> chairman mica, ranking member connolly and members of the subcommittee, thank you for the opportunity to appear before you today to update you on the actions we are taking out the

irs to combat refund fraud and help victims of identity theft. refund fraud caused by identity theft is one of the biggest challenges facing the irs today. and the harm it inflicts on innocent taxpayers is a problem that we take very seriously. the irs has a comprehensive identity theft strategy focusing on preventing refund fraud, investigating these crimes, and assisting taxpayers victimized by identity theft. the agency's work on identity theft and refund fraud touches nearly every part of your organization. the irs has expanded these efforts to the 2013 filing season to better protect taxpayers and help victims. more than 3000 irs employees are currently working on identity theft, more than double the number at the start of the previous filing period. our ability to detect fraud and stop false returns before issuing a refund continues to grow. we have expanded the number and quality of identity theft

screening filters and already this year we have suspended or rejected more than fou 4.6 milln suspicious returns, which approaches the total of 5 million for all of 2012. our criminal investigations have increased as well. we have opened roughly 1100 identity theft investigations so far in fiscal year 2013, which is already more than all of 2012. we are also improving our efforts to assist taxpayers were victims of identity theft. last year we made a number of programming and procedural enhancements that enable us to move faster to identify accounts with high potential for identity theft. cases generated as a result are reassigned for review more quicker than in the past. so far this your we'v we're cloe more than 565,000 cases. that is more than three times the number of identity theft cases resolved at the same time last year. other procedural enhancements are helping us reduce releasing

funds diligent fire and case or duplicate returns are filed. as a result, taxpayers who become victims this fiscal year are receiving their refunds and having the problems resolved in less than 120 days, far more quickly than in previous years. while this is an improvement, we are continuing to find ways to shorten this time and to ease the burden on these victims. but the barriers to further progress on identity theft did exist. one is the sheer volume and complexity of these crimes. another is the need to further upgrade our technology in order to element improvement such as more sophisticated filters and better taxpayer authentication procedures. yet, another very to further progress is our difficult budget environment. the work we're already been on refund fraud and identity theft involves a difficult balance of resources and staffing at our time when our budget has been reduced by $1 billion since

fiscal year 2010. this includes a reduction of $618 million this year alone as a result of sequestration. the irs has responded to these budget reductions by becoming more efficient and cost conscious. one result of her efforts to reduce costs is that full-time staffing at the irs declined by more than 8% since fiscal year 2010, or about 8000 positions. against this backdrop our need for additional resources to fight refund fraud caused by identity theft has forged a very critical performance trade-offs. the progress that the irs is made against identity theft would not have been possible without directing resources away from other enforcement activities and our service programs. the administration's fiscal year 2014 budget request provides for an increase in funding that will let us continue to make progress against identity theft while also allowing us to continue our enforcement activities and

maintain reasonable levels of customer service. conversely, without this additional funding we would face difficult choices, and the situation would become even more serious if we were to incur additional budget cuts. we would no longer be able to sustain our current level of effort on identity theft without significant weakening of the programs. chairman mica, ranking member connolly, members of the subcommittee, this concludes my statement to our be happy to take your questions. >> what we're going to do since we have five minutes before the vote is, we will recess at this time, and then there will be at least 45 minutes of voting. we have nine votes. that brings us up to at least 10:15. so i would expect everyone to be back here by then, and we will start immediately, some i hope

10 minutes after the beginning of the last vote on the floor for members for purposes. so with that, the subcommittee stand in recess. [inaudible conversations] >> as you heard from chairman mica, this hearing on tax fraud taking a break forces of votes on the house floor. they expect to be back about 10:15 eastern the there's a series of nine plus votes on house floor. will have live coverage when they resume it on c-span2. until then we'll bring you a

discussion from the bipartisan policy center talking about the deficit and budget process. among the speakers, the former chairman of the house budget committee and also kent conrad was former chairman of the senate budget committee. we will continue with this injury as much as we can until they hearing gavels back in. >> okay, good morning. welcome to the session which were calling budget on the brink, cosponsored on the bipartisan policy center and george mason university on the public service. i'm appalled poser, the director of the programs at george mason. this session is part of a longer-term multimedia project which we are undertaking at george mason to from history and trends in federal budging over

the past 40 years. the past decades have not been uneventful for budgeting counseling from deficits to surpluses back to deficits again. and while today economic times are solely -- slowly lifting us out of the recession into deficits, the government leaders are mired in almost unprecedented gridlock it seemed to threaten the appropriation and continuity of government itself. it's no wonder why we call this session budging at the brink. mark twain once said that history doesn't repeat itself but it rhymes, and we are committed to the proposition of this useful periodically to look back in order to move forward. today's challenges truly novel? do they resemble previous battles? what can we learn from previous battles and previous issues to inform our current seemingly intractable budgets? that's really the focus of this meeting. we get our first session

together in november of 2012 big is on the 1990 budget agreement and we issued a report that is back in the rent there were brought together people like speaker tom foley, white house staff director of the time john sununu, senator domenici and others to reflect back on the lessons learned from achieving the grand bargain of yesterday and what application it might have for today. one constant over the years, past several decades increasingly has been the progressive paralysis in our collective ability to make decisions on annual budget and appropriations. will we're not talking about the elusive grand bargain. we're talking about the mundane actions to provide funding for ongoing operations and programs of the government. the consequences of gridlock for budgeting is very different than the consequences of gridlock for immigration and social security. we don't pass those programs, we live to see another day. we don't pass the budget, we shut down. and so fundamentally, these

issues about how you achieve agreement on whose terms are vital to everything government does, and along these lines over the past 37 years, university of maryland has calculated we have only a full appropriations before the budget starts in four of those past 37 years. agencies have learned to cope with a variety of temporary measures which we in washington call continuing resolutions, in many cases five or six a year. so the increasingly government grantees and contractors on a short-term lease. the uncertainty has become the new normal in washington and throughout the country. and this degree of uncertainty has been ratcheted up to new levels with the current budget sequester. a device that cuts across programs universally regardless

of whether they're effective or infectious. agents were literally caught in the middle between the president and the congress provide for public support. planning was one of victims of these high profile battles over sequester. agencies never knew for sure whether the ax would fall on them and how. this session will review how policymakers and agency managers alike are coping with this incredible conflict that's befallen the budget process. has the budget process seized up, how do leaders in the congress and in the white house and how to agencies adapt. we are really fortunate to assimilate wonderful plate of panelists today. both political leaders from recent past as was budgetary experts who can make the system really work. i'm going to now turn the program over to our first and second panels. the first one is being led by bill hoagland with the bipartisan policy center. he needs no introduction to veterans of the budget process. having served as staff director

of the senate budget committee for many years and assistant to the senate majority leader. he is going to introduce his panel as we get to go forward. the second panel which will continue after this one will be moderated by jonathan who is a longtime senior management staff at omb and director of the ibm center on the business of government. so with that let me hand the moderator over to bill hoagland, and we will get started. >> thank you, paul. good morning, everyone and welcome to the bipartisan policy center. it's a pleasure to be cohosting this discussion with the george mason university. some wise person once said that the further back you look, the further ahead you can see. as paul indicated, part of this forum was to be an oral history looking back on the budget with folks that have lived the history of it. but i've a feeling we'll be looking ahead a lot more here than looking back as we go

forward. unfortunately, we are restrained by time, and we have five very distinguished public servants have labored in these vineyards of idle state and local budgeting over decades. so rather than take the time to introduce each one of them here, you have their bios. i will introduce them briefly as i ask them the first round of questions. looking back on their history. we will then have time for a second round of questions looking forward, what they might see coming this fall. and time permitting then within an hour or so, we will have an opportunity for you to ask questions of them yourself. so ladies first. jane garvey. jane garvey was the first ever woman to administer the faa. she was appointed by president clinton in 197 and vry

bipartisan, as she continued to serve under president george w. bush until 2002. before being the administer of faa shows both the acting deputy administrator of the federal highway administration. she was the logan airport in boston manager, and she currently heads the u.s. public-private partnership at jpmorgan. most importantly, she is past chairman of the bipartisan policy center board of directors here, and continues to be a board member with us. so in 1997, ms. garvey, when you first took over at the a, the agency was being about $9 billion. and charlie before you arrived, the agency itself had estimated that you would need 10 billion annually to meet growing passenger usage and also for of course protecting the safety of the flying public. and yet as i recall, the budget resolution that year were only

going to project only going to budget of 7a half billion, or two and a half billion dollars gap. further complicating your job as you were coming in, and assessment of the agency was mandated by 1996 agency reauthorization act, and it concluded, and i quote, faa had no system to account for its costs, and the faa managers generally could not manage money properly. so simply state it, how did you successfully transform the faa while managing a $10 billion budget and just for the record, when you left in 2002, that figure had really grown to 13 billion, and today the agency is about a $22 billion agency. >> thank you. you make it sound so appealing. i'm wondering why i took the job. [laughter] let me start by saying you're exactly right.

the ig and congress and gao were very critical of the faa, an they said you really do not understand or cost system. we don't know where the money is going. the first thing i'd do is put a very sophisticated cost accounting system in place. very tough to do. we had to bring in a lot of outside experts to consult with many of our colleagues in the private sector. but we were able with a very talented cfo and staff to roll out over a series of months and years a cost accounting system that i think gives a very good handle on where money was being spent it and more importantly where we might even be able to save money. by one of the critical questions going forward for the faa in 97 was really building up some credibility. we had some issues around, i'm just going to mention three. one was labor-management relationships. we were really stuck. congress had given us the ability to negotiate contracts

with these controllers but we had hit a log jam. and we took that very seriously and felt if we really wanted to move forward, we have to first of all resolve the labor-management issues. we were able to do that. again, i will say it was not without its challenges. we were criticized by some who thought we have given to controllers too much, but from the management's perspective we sector productivity gains. and most importantly, they became very full partners in moving the modernization program forward. so that was really critical for us in five years. the second issue was really the issue with the airlines. again, modernization was something they felt intellectually committed to, but they were skeptical of the faa's ability. and so we reversed course a bit. we worked with the airlines, and that was also in keeping with the budget that we knew we were going to have. we said, what are the investments we need to make over

three to five years that our strategic and important, and will move modernization forward? so he came up with a program called preflight but i think partly because we went to congress, we went to the administration with the airlines, with our workforce. we were able to secure the budget to move forward. and the last issue that i just wanted to mention was the safety agenda. we had come off to very horrible accidents, twa and valujet. and the challenge for us was how could we create confidence in the american public, how could we create a program that again dealt with some of the safety issues. and working with nasa, working witwith a number of our colleags in the industry, we created a data program that really identified precursors, trends to deal with some of the safety issues. i think that has worked very well, and i have to give credit to the faa that have through the

years and subsequent administrators really taken that to the next level. so i think i really account for the extraordinary safety program, record that the faa has. so in the broader strokes, i would say identifying an agenda that with your stakeholders full engagement of stakeholders, identifying that agenda that is achievable in the short term as was the long-term. those are certainly some of the approaches we took to building a budget. you always leave these jobs thinking there is so much more you could do, by think we're able to move forward during those five years. >> thank you very much. governor tommy thompson, governor tommy thompson was the 42nd governor of wisconsin, the longest-serving governor in that state's history. he was chairman of amtrak when senator nickles and i try to eliminate subsidies. no. and, of course, he was secretary of department of health and human services from 2001-2005.

he was appointed by president george w. bush. most recently, just for the record also, the governor has joined the bipartisan policy center as a senior advisor, and we welcome him very much year to our organization. governor, the budget for hhs when you took over in 2001 was about $380 billion, by my record here, and along with social security, the administration then, that was the largest and is the largest still today of the domestic agencies. when you left at the end of 2004, it had grown $200 billion to over $580 billion agencies -- $580 billion agency. during her tenure, you hit with a slew of emergencies. anthrax, post-911, concerns over

bioterrorism, avian flu, and the need to stockpile smallpox vaccines. but you also cleared a backlog of waivers and state plans to help expand health insurance coverage to low-income americans. so when i look at your budget, i know we're supposed to talk about constrained budgets, but one might conclude you have no budget constraints on your agency. i kind of doubt that, but omb and gary anderson sitting down to surely give you a budget topline. how did you go about setting priorities when you submitted your budget to capitol hill? and did congress in particular mr. obi's committee place restraints on your discretionary budget that you are not anticipated? >> well, i'll tell you, being the conservative that i am, it was an interesting period of time. you've got to understand that

time, why the department of health and human services grew like a day. the department, the first year that i was there, nine months into it, 9/11 happen. up until that time the budget office was very much trying to control spending at the department health and human services. but the truth of the matter was 9/11 came, and everybody was looking for who is going to be able to pick up these pieces. the first thing, the first to mention emergency with smallpox. it was only at the time i took over 12 million doses of smallpox vaccine available in order to protect the american public. we were lucky enough. we were asked the pharmaceutical companies to look in the reserves to see if there's any chance that you might be able to find some. one company found 62 million doses of smallpox that was in a lockbox three times, and the companies have been changed three times and they found it.

we found out that the smallpox vaccine that had been manufactured in 1952 was still capable of vaccine making americans. in fact it was so good you could reduce it -- produce it for to one. we have enough vaccines right away because of that. so that was able to take care of that problem. the next problem was is that nobody really knew how to handle the protection of health in america. we have starved, the public health agencies at the state level. and of being a governor only nine months prior to that time, i saw a tremendous opportunity, and omb really didn't care that much about what i was doing over at the department. so they gave me a lot of flexibility to build the local and state public health system. so we put it commits amount of money in fat. then anthrax came, and then, of course, everybody was worried about when the threats came. since homeland security had not been created yet, department of health and human services was the place to go. so everybody gave us pretty much

a blank check to develop the public health system, the vaccine system. we have not spent any money on food safety. and give your number correctly, i was very passionate about trying to protect our food safe because i figure that was the next place. would only spending about $209 on food safety all over america and we're supposed to protect, we had 80% of the food coming in that was under our jurisdiction. so you can see a tremendous possibility for a threat. and also for any kind of terrorist action. so we would put a lot of money into that. and then we also had a vice president by the name of dick cheney who felt that it was absolutely necessary to ratchet up all the protections we possibly could. and so it was pretty much, put the money in the department of health and human services. and it was from, every time only be said you can't spend it, i would predict cheney and dick cheney says i will take care of it.

so we were able to have a very strong voice in the oval office who would always say go ahead, spend the money, protect america. that was the clarion call. so it was and preserving the money as much as making sure you developed a tremendous, a very robust state health care system, and protect american public. great vaccination system. then we decided to get into basra and set apart in so we could encourage small companies that didn't have the money to put money in to start products and get into the marketplace. that was another big thing. and then i got very active with colin powell indicates movement, and we went to africa several times. we put it commits amount of money into aids and we were the ones, my department was with the national institutes of health was able to set the program. the millennium fund. we took it to the president and the prresi to take it

over as well as the of the global fund which i chaired that i was able to convince reggie bush to put the first money into the global fund. and that increased the amount of money. and as you know, the president's number one program that he refers to now is the millennium fund, and that was stored at the department. it was our idea. we never got credit for it but it was ours. that's what happens when you do it. but basically it was a time that we were not able to constrain the budget since there was not homeland security. congress gave us a pass to do whatever was necessary to build it and that's why the department of health and human services, for public safety can is the reason the budget. in regards to congressman obey, i served with him, i knew him when his only a lowly state legislator from wausau, and so that it commits amount of respect and, roddy with them. without our fights but i guess anyone who's been with him has

had a fight with a one time or another, but it's always been good and he was extremely good to me and senator conrad was, and i've got to stop talking because when i was in the green room about three minutes ago, don nickles reach him he said listen, the senator conrad come just a 20 minute compiles the 20 mins but those other people were about the other 20 minutes. so i've got to get done because i'm getting the i from senator nickles. but it was a great time with a great opportunity to grow and agency, and actually protect america. that was the clarion call that were able to do. >> and i would point out, governor at least since 1990, 1999, 2082001 we running a surplus in the federal budget. it does make a little difference. i did not necessary plan it this way, but another badger state alumni, congressman obey, was also, he was the longest-serving member of either houses in wisconsin, in wisconsin history.

he was first elected to congress in 1969, but most importantly for this discussion he was the chairman of the powerful house appropriations committee, twice, 1994-95, and 2007-2011 when he retired from congress. now, it's with some trepidation that i ask this question. ai know when the congressional budget control act was enacted in 1974, you had some real concerns about the act and thought that the new budget committees, and remember, you are picking told by to budget committee chairman, would be captured by conservatives. now looking back on history, you have gone through many a c.r., government shutdowns but, in fact, i counted them up this morning.

there were 110 days while you your chairman, or during your time on the appropriations committee, that we had government shutdown. of course, been the worst the 1995-96 when we had 21 days of government shutdown. and even you went through a sequester. i guess the question is with some trepidation, is there anything good you could say about the budget process of helping agencies manage their operations in times of constraint? >> well, let me simply say that when the budget act was passed, i circulated a nine page memo to every member of the democratic caucus, laying out my concerns about it. and i wish i had impressions and off to fix all the problems that would develop in the future. we only had nine pages worth. in fact, we wound up having even more problems. i went back last night and took a look at the initial speech

that dick a bowling days it was the father of budget act and was mentor in the house. and this is what dick said in his first statement during the budget, during the debate in the budget act. he said the object of budget reform should be to make congress informed about and responsible for its budget actions, not to take away its power to act. second, he says budget reform must not be an instrument for rethinking congress from expressing its will on spending policy. i invite all of you to ask yourself how successful the budget committee has been, and how successful the congress has been in meeting those warnings raised by dick bolling. i'm always amused when people talk about one of the answers to

the budget problems being that we should move to a two-year budget. i think history shows we would be very lucky to be able to move to a three month budget, given all of the delays and sequestration's and crs and shutdowns that we have had. we did have government shutdowns in those days, but they were for reasons that were far out beyond the reach of any of the committees involved. in fact, the first year i was chairman, we finished every single appropriation bill before the end of the fiscal year. that didn't happen because david obey was smart but it happened because i had a cooperative ranking member named joe, republican, and i became chairman i sat down with joe and i said, we are never going to agree on the details on the

appropriation bills. but why don't we at least have a bipartisan allocation to each of the subcommittees so at least we agree on how much in each of these bills? and you agreed, and that key decision is why we were able to finish every single bill on time. i think the problem with the budget act is, first of all, it has made it harder for the congress to do its principal job of passing appropriation bills. second, without adding more months to the calendar, it has consumed a huge amount of time with a whole new additional process, which has been largely politicized and polarized as it has been considered by the congress. and i would also say that it has failed to accomplish its main goal, which was to reduce deficits. we've had deficits larger as a percentage of gdp after the budget act passed than we did

so i don't see what goals it is accomplished. the one good thing is it has great the congressional budget office, something which was sorely needed. if you want me to find one good thing about the budget process, that's it. i think there's a fundamental flaw in the way the process works. the way it works is the budget committee, flying at 30,000 feet, will lay out what they want the macroeconomic numbers to be, what they want for revenues, what they want for direct spending, what they want for foreign entitlements. but then the appropriations committee has to then implement that process. so they have to make the hundreds and hundreds of detailed decisions. and the problem is the system is working because of the way it is working today. the budget committee produces

its macroeconomic dream, but it's not balanced by what that means on a program by program basis. and so when the appropriations, it's not house rogers or patty murray's fault that we can get appropriation bills passed. the problem is there's a huge difference in judgment about what is achievable on the part of the budget committee. and then that same judgment produces a different result in the appropriations and ways and means committee. i think that's a fundamental flaw which has to be dealt with. i also think that process alone is not the problem. my friend archie the cockroach said once, he said it's not, he said what matters is not the system you have. what matters is what you do with whatever system you happen to have. and i can tell you, if tommy

thompson and i were running these committees today, i know what we would do because i know what we did in the good old days back in madison. in madison in those days we would fight like hell from nine till five. and then at 5:00 when we adjourned, we would go over to the progress bar, and the democrats would set one table and republicans would sit at one table, and the reporters would sit at the bar with their typewriters. they would hide their stories, come over to our tables and ask is, what was going on and what was our response to the of the guys just sit there and we worked it out. today, because we've seen the passing of the world war ii generation, in my view, there is much less of a sense of duty to the whole. there is much less a sense that yeah, i disagree with him but we've got to get this worked out for the good of the order. politics is supposed to define differences, and then it

supposfind a way to it. and the problem is that politicians have gotten very good at defining the problem, and the system does not help in finding ways to resolve them. >> thank you. thank you, mr. chairman. there are three chairman here's what have to be careful. let's go to another chairman, senator nickles. he served his home state of oklahoma in the u.s. senate for over 24 years, from 1987-2005 -- >> eighty-one. >> eighty-one, okay. >> you took off a term. >> he looks young, you know, because he is. he was the youngest republican ever elected to the u.s. senate at the age of 32, i believe. 31? >> thirty-one. >> just under the constitution i guess. he was assistant senate republican leader from 1996-2003, with trent lott. term limited. he became the chairman of the

senate budget committee in his last two years, 2003-2005. senator, when you took over the senate budget committee in 2003, the federal deficit in the previous year stood at $160 billion. when you left, it exceeded $400 billion. 3.4% of gdp in both cases. now, it's unfair to you to only look at those two years, but congress did pass the medicare modernization act, part d, prescription drugs. and you were instrumental in the passage of president bush's 2003 tax reform that reduced capital gains and corporate dividends to 15%. initiative revenues as a share of the economy actually increased and tell the next chairman here came along in 2007. i know you were and remain advox

rates result in increased economic growth, and i do not entirely disagree. but i guess the question is the reverse of the proverbial starve the beast approach to force spending constraints. if revenues grow, if the deficit pressure of economy comes down, as it is now, what pressure exists on congress and the executive to constraint public budgets and to eliminate maybe wasteful difficult spending? >> before i answer your question i want to revive a little history. you mentioned the deficit was 160 billion in 2002. i became chairman in 2003, but as you know since you marked up about 20 some budgets, i was chairman in 2003. we were working on the 2004 budget. 2003 is already in place. to 2003 deficit was 377, i just

happen to look it up, and you're right, two years later it was about 400. but we made significant progress because, in my opinion, because of the tax bill. because revenues were really flat. if you go back in history at that time, really from the year 2000, you might remember in the year 2000 you had a market collapse during the campaign year and so one. but nasdaq was up 5000 at one point in the year 2000, and it was 2000 in december in that year. anyway, markets collapse, revenues collapsed, deficits were exploding 2001, two and three. 2003 we passed the tax bill, and all of a sudden gdp took off. gdp in the year 2003 was 10 trillion. three years later it was 13 trillion. ..

from both of those went up dramatically, not by inflation. they went up in multiples so by reducing rates and reducing the rate on corporate distribution of profits to their owners revenue significantly increased to the government. to answer your question though what happens now when you have some i'm going to say sort of good economic news. the deficit is declining somewhat from $1.9 trillion to

$700 billion. the president made a speech last week, but i was successful. we reduce deficit spending now is down 400 billion dollars from where it was last year and we never had such a big deficit reduction. he is patting himself on the back of this year the midsession review just announced a reduction in the deficit for this year of $219 billion. this was just a week or so ago. the president is taking credit. most of that was gse's fannie and freddie and the other biggest chunk of it was revenues and a whole lot of the revenues were because people were hurrying up to do deals in the fourth quarter of last year because cap gains rates last year was 15%. this year is 23.8% as a result of the tax increases that were enacted in january. gains rates went from 15% for higher income people to 23.8.

that's a 50% increase in capital gains tax. a whole lot of deals were done and now are showing up because people wanted to hurry up and crevice and that the lower rates so you had a big explosion in revenues, about 65 billion of the 200 billion came from increased revenues. what he didn't say in that same midsession review as the deficit goes up over the ten-year period another 500 some billion dollars. he left that out so the big problem exists remain and continue and get worse. the president proposed a budget but if you look over the that 10 year cycle it has a trillion dollars in new revenues and a trillion dollars in new spending. it doesn't do anything on the debt. i don't think he cares one iota about the deficit and i think that's the biggest problem. you have a big effort in the bipartisan policy center who have been leaders in a

semi-compliment you for it. our friends alan simpson and erskine bowles have been doing fantastic work. people looking at this honey macrosense saying we can't continue with the outlook with the explosion of a lot of entitlements in the out-years because the demographics primarily. we are all going to be on these benefits and they're not going to be as many people to contribute so the outlays are not really sustainable. the deficits are unsustainable in the long run. the president has provided no leadership and we have had very little leadership from the congress and that is very regrettable. and so it curtails the ability for a significasignifica nt reduction and certainly details that we didn't have a budget for three or four years and likely i hope they get a budget conference agreement deal done towards the end of the year but they are a long way apart. harry reid wants to have a

trillion dollars of new revenue over 10 years and he is telling max baucus don't do tax reform unless you get that. the chances of that happening are zero so it's almost, it's more than chilling. it's very regrettable in my opinion and it's just not going to happen. it kind of tells you there's not going to be a grand bargain. there is not going to be the ability to make significant solutions toward solving these long-term problems. they are only going to get worse if they are ignored. >> we have some differences of opinion i see here coming up so the last panel members to leave public service with senator kent conrad. i know the senator to be as concerned as anyone about the countries fiscal outlook and one who works tirelessly to try to get something done before he left the senate last year. the chairman of the senate

budget committee from 20,722,013 before leaving and let's admit during an extremely difficult time for our financial system, our economy and of course our federal budget. again in fairness, the deficit stood at $160 billion when you took over, about 2% of gdp when you took over the gavel in 2007. when the final figures came in for last year 2012 of course the deficit was $1.1 trillion, 7%. having said that though senator a softball, looking back over your career did we do enough to constrain spending? should we have been harder on david obey's committee and agency budgets as budgeting is that the brink with cr's super committees sequesters really

work or are they merely nuisances that are putting off real painful constraints to calm as we have seen in europe and detroit last week? >> you no, you framed this all very well. i think it's so important as tommy said to put things in context. when i go back to those years, it was an extraordinary time in american fiscal history. i will never forget being called to an emergency meeting in the fall of 2008 to the majority leader's office. i was the last to arrive because i had been chairing a meeting on energy and another part of the capitol complex and i walked then and there were 16 or 17 people in the room leaders in the house and senate republicans and democrats. the chairman of the federal

reserve and the secretary of the treasury of the bush administration and it was about 6:00 in the evening. they actually posted a guard at the door and close the door. it was very unusual as you know. i knew something dramatic was afoot. and i sat down and the meeting began. this degree of the treasure in the chairman of the federal reserve told us they were taking over aig the large insurance company the next day. they made very clear they were not there to see covered by us or approval. they were there to inform us that they were taking the steps and they told us that if they did not do it they believed there would be a financial collapse within days. that gets your attention. and they then went into some considerable detail as to why a financial collapse would occur. and they name specific companies that would go under, companies that were so important to the

american economy that it was would i thank send a shudder, a collect it shuttered through the room. it became clear we were in the midst of a financial crisis unlike anything since the great depression. i believe that the steps that were taken subsequently by the bush administration and the final days of their term and the steps that were taken during the obama administration and the steps by the federal reserve, those steps collectively had not been taken i believe we would have gone into a depression. so, i think it's a small price to be paid, the additional debt that was taken on as much as i hate debt. and i do have a very big problem in seeing -- concerned about the

debt that was occurring when i was first elected back in 1986. i was deeply concerned about the trajectory the country was on them, headed for record deficits and debt. with respect to the domestic spending, that's really not the problem. 1968 and 69 we were at almost 14% of gdp in domestic discretionary spending. by 1998 that was down to 6% so domestic discretionary spending was dramatically reduced. in 2012 that was back up to just over 8% of gdp so nowhere close to where it was back in 68 or 69 and under the budget control act we are going to go down to 5% of gdp by 2022, a record low. so that is not in the appropriated in my judgment where the problem exists.

the problem exists in my judgment in the parts of the federal government and that primarily for health care accounts. we were at 1% of gdp in the health care accounts back in 1970. we are headed on the trajectory we are on for 12% of gdp in the health care accounts by 2037, 2040. so that is where the explosion in spending is occurring. it's in the health care accounts on the other side of the equation, is the revenue and this is where i do have differences with some of my republican colleagues because they say it's just a spending problem. well, if you look at the chart of spending and revenue over the last 16 years, three years ago we were at a 60 year low in

revenue and a 60 year high on spending. a 60 year low on revenue and a 60 year high on spending. no wonder we have record deficits in addition to the debt so in my judgment when some of our friends say it's just a spending problem they have got it half right. yeah it's a spending problem, a spending problem that was necessitated to avoid a depression. a revenue problem exacerbated by tax cuts that we could not afford that went too far, that took our revenue base to a 60 year low. so, my judgment we have to work both halves of this equation. on the spending side without question we have got to impose more discipline especially on the parts of the spending that are growing and it's not the domestic accounts that david was responsible for.

it is the entitlement accounts primarily the health care accounts and we have got to work on the revenue side of the equation as well. we are still not back to where we need to be on revenue. if we look at the historic record, if we look over the last six years five times we have balance. revenue has been at 20% of gdp. we are going to be at 17.5% of gdp in revenue this year so well short of where we have been in the last five times we have balance. under the revenue stream we have now by 2015 we are expecting revenue to get to 19.3% of gdp. but still somewhat short of where we had been the last five times we balanced. so i would just say this. i am honored to be part of this panel. i just want to say senator nickles, he and i have disagreements on one thing. don nickles when he gives you

his word, it is good and that is a very important thing. he also is somebody that was willing to work together to get something done. we have disagreements but we worked together productively. congressman obey i will tell you , you never questioned where david was on an issue. he made it very clear. [laughter] and, he was a joy to work with i must say. he was an absolute joy to work with because he had an orientation. did we agree on everything? know we did not that there was an attitude, let's get results. that is the thing. it's not the process. the process to me is not the problem. the problem is the problem and the problem is people who are unwilling to get a result and it's not just on one side of the aisle i might add. i wish it were.

it would make it a lot easier. we have got problems on both sides of the aisle. people who don't have the attitude let's get something done. >> kind of a rapidfire real quick around here to open it up for them to respond. tomorrow the department of commerce will release its preliminary second-quarter gdp figures. this made from what i can tell be a confusing gdp figure with estimates going forward and it may be a little bit difficult to figure it all out tomorrow but some analysts expect that growth in the second quarter could be less than 1%. as that comes out tomorrow as congress is planning on leaving, going home for the august recess at the end of this week. when they return there will be less than nine legislative days before the new fiscal year begins and at this point there have been no 2014 appropriation bills sent to the president.

the senate house has not agreed to even go to conference on the budget resolution passed by both chambers way back in march and those two budget resolutions, house and senate portend a 91 billion-dollar difference between the senate and the house $91 billion. unbelievable. and, our own estimates here at the bipartisan policy center is that we will reach the statutory statutory -- we will run out of cash and are at the end of our rope on the statutory debt limit, sometime between the end of october in mid-november and secretary lew has made it very clear this week that the administration will not negotiate on the debt limit increase. we have a 2% sequester on mandatory programs that will begin in october and a much

larger one by all mr. obey's accounts beginning in january and even the faa could face furloughs again. there is talk still of enacting fundamental tax reform this session. we have seen some green shoots of bipartisanship in the senate, not clear we have seen it in the house of representatives. i think it is fair to say we are budgeting at the brink once again. you have all been there. what should we or more importantly the american public anticipate how this fall is going to turn out? i will just open it up for anybody to take that on. >> well it doesn't look likely that congress is going to get a big deal. the statement that mr. lew made in the president said he won't negotiate on the debt limit extension is ridiculous because

i have been through a lot of debt limit extensions and negotiations and lots of times they have writers on them. the administration may not like them but they have to sign the bill or veto the bill. >> the elimination for the affordable care act. >> i doubt if it would include that but i wouldn't be a bit surprised if it has some things on it. i'm trying to remember, i think we pass the congressional review act as partners the dead and that was one of the bills i worked on harry reid was responsive. anyway congress has the right to write legislation and the president can sign it or veto it so they can try to say that they don't want any writer smack on the congress has to pass it in the house has to be mindful that they want to defund the affordable care act. they have to have something that is going to get through the senate. congress has to pass a debt

limit extension at some poin ini will say a significant dilemma. it takes leadership. it takes leadership leadership from the congress and it takes leadership from the white house to avoid the train wreck, and i think as i said before i don't think this president is really interested in deficit reduction. >> that might be a good segue to something i said that chairman obey. i guess the president is meeting tomorrow with democrats in both the house and the senate. chairman obey, chairman conrad as democrats what should the president expect when he meets with congress tomorrow, democratic members? >> let me say i was born in oklahoma. that's the last thing i have in common. [laughter]

don just said it was ridiculous for the president to say he wouldn't negotiate on the debt ceiling. what is ridiculous is the issue is being -- that is what is ridiculous because it puts that fundamental risk the economic welfare, the economic strength and leadership capability in this country worldwide. that is what is ridiculous. secondly what is ridiculous is we have had this fight about mathematics over the past three years which misses the big problem. the big problem, and again what is ridiculous is for politicians to ignore it. the big problem is the fact that we have had a huge -- coming up the income scale. meanwhile financed largely by eroding the pocketbook earnings of average middle-class families. we got to be having both parties

working together trying to figure out how you can attack that problem on a bipartisan basis rather than having another silly debate on accounting and the problem i think -- though there is one problem in process agreed on. i think one of the reasons these issues have become so politicized is because congress is never at work anymore. they come in here's -- when i was fair, when i started we started the session monday afternoon and it went until friday morning. today, they come in tuesday at 6:30 and they vote on a few meaningless issues. they are in town for a full day on wednesday. thursday by noon they are gone heading for the plane. as a result they never have the time to learn the substance of an issue and so if they don't have time to learn the substance of an issue what do they do?

they fall back on the politics of the issue and it becomes more and more polarized. to me, and the other problem is members that have to spend so much time dialing for dollars and being glorified telemarketers raising money for their campaigns, they have very little time to understand and work on the substantive differences. i really believe that you are not going to get the problem solved until we develop a higher degree of confidence in the other guy's personality and the other guys concerns. until we learn all over again congress how to work together when people differ with one another. it takes time and you need to know the human chemistry of the people you are dealing with and that is missing now. >> chairman conrad was going to happen this fall? >> i'm a little more optimisticy

optimistic i guess. i am scandinavian. [laughter] i see some kind of hopeful signs i saw it in the immigration and i saw it interestingly enough on the farm bill, in the senate. i will be quick to add that is in the senate but you know things have got to start somewhere. if we look at the deficit reductions and this is where i disagree with my colleague senator nickles. i think the president does care about deficits. i think he has had to prioritize averting a depression over deficits. that was in my judgment a wise prioritization but now the deficit is coming down quite markedly, $1.1 trillion last year and now expecting it down to $340 billion by 2015.

down to 2% of gdp. that is a very dramatic improvement. the problem is the long-term has not been dealt with. this is where i would agree. the failure collective failure, has been an inability and unwillingness to deal with their long-term prospects. i think there is at least a chance. we won't have the grand bargain, but we could have an additional increment deficit reduction which i think would help economic confidence and it would help economic growth. the president has laid out something that would make an important contribution. that is going to change cpi with health care on the revenue side in the spending side. it helps you buy $250 billion in the first 10 years but a much bigger benefit the second 10 years and be third 10 years. it possible that you do

have a negotiation around the debt limit. i personally believe whether it's right or wrong the fact is to get an agreement on a debt limit extension they are going to have to be some larger concessions and i think they are going to have to be around a long-term fiscal trajectory and there is an opportunity here to get some additional revenue and not by raising rates. i don't think that's the right way to raise revenue. we can raise revenue without raising the rates but also with some long-term entitlement reform. not the grand bargain but another step and the budget control act people said we didn't have a budget. well we didn't have a budget resolution that we had a budget law called the budget control act. it cut $900 billion out of domestic spending over 10 years and couple that with the dreaded sequester which cuts another

$1.2 trillion in addition to the previous er cut by $5 billion announced you were at $2.6 trillion. we get another 2.2, $2.3 trillion of adjustment over the next 10 years we would be on a much sounder track. >> ms. garvey and the governor to have the last word on this before we open it up for some questions from the audience but i would point, and you know this mr. chairman and that is of course that the deficit coming down is because the sequester stays in effect in those estimates. and jane that means there is potential for another sequester and another issue as it relates to faa. if you were working for the faa how would you be planning an governor how would you plan this fall? >> i think there are two issues that are critical with the faa and really with any agency facing sequester. first of all to understand what

the scenarios are. then the real difficult issue will be policy issues. if in fact this is going to go into effect do you furlough employees and attack the core modernization program? to hold back on some of the modernization programs and not furlough employees? those are very tough policy decisions that have to be made. i was certainly urged the faa and i'm sure they are doing it, is looking at those questions very seriously. i think the real concern is not so much 24 team because they make it by. it won't be easy but they make it right but as others have suggested it is the longer-term implications. you would like to think it's an opportunity for some consolidation and some changes that may have been difficult answer plus times but that is difficult. those are the policy issues that have to be laid out and laid out and i think that in a very transparent way.

>> should we open it up to the questions from the audience? >> i referred to what the circuit judge in new york said, like good sausages and good laws it's best that you don't see either one being made. the truth of the matter is that our democracy has always been not as tidy as we would like. we look at situations as business people. we have got a problem and resolve it that the government and democracy is not like that. everyone of us would like to be able to look at it and say you know make the adjustments now, ration and sit down and have a beer as dave obey and i used to do and make things happen. the congress of america today usually refers and reacts very effectively to emergencies. even in the 50s with sputnik. we were way behind the russians and all of a sudden america came together and we put the first

man on the moon. 9/11, we were way behind. america was wide open. we never thought we could have an attack on american soil. we came together. there has not been an attack on america since then. there have been attempts that we have been very successful. the financial thing but senator conrad said, i didn't like the results. i'll be the first to say that but i was not there. they came up and made a solution. the budget control act, that dave obey was talking about. you know there were a lot of problems with it but it has some good to it and senator nickles came in with a tax cut and you can argue about whether or not revenue cuts are good or not. i think they are but that's a partisan difference. the truth of the matter is the government and emergency it always comes together. i'm absolutely certain that america will come together. we are not going to allow thiskl

and at the 11th hour somehow we always come together and i'm absolutely certain the same thing will happen again. >> the bipartisan policy center i can tell you -- [laughter] allison has the microphone. we have about two minutes for some questions and please identify yourself and your association. >> my name is dave. i'm with al rp publication; and is pretty basic. we have talked a lot about the longer-term but members of the panel, do you believe that there will be some kind of at least continuing resolution or do you believe there will be a government shutdown in october and secondly the same with the debt ceiling? do you believe we are going to get to the point where an agreement will not be reached until after the ceiling technically is reached and

agencies have to take steps? >> i will touch on that briefly. no, i i don't think there will be a shutdown. i think the cr will ultimately pass. i think the house will pass a continuation and my guess is that house will pass a continuation. my guess is the initial one will be short so it will put some added interest on all sides to come to an agreement. hopefully to avert the sequester and to come up with a bigger package. i met with chairman camp. they want to do a deal. they want to come up and address entitlement. they want to do something long term that would help put us on a real stable financial future. they want to make the tax code more efficient and you can raise revenues in some areas and reduce rates in other areas and make the economy grow more. the government can make more money in the process. i know that can happen. there's a lot of income that is not taxed.

you can tax it and as a result you can reduce rates but marginal rates are too high. my marginal rate is 50%, over 50%. government gets half of any additional dollar i make. that is counterproductive and you don't have to be a high income level for that to happen. as a matter of fact you can have adjusted gross income of $90,000 if you are self-employed you are working for the government more than you are working for yourself and that's too high. >> you were also on the finance committee, wright, chairman conrad? >> i am in some of green that do not complete agreement. i would say this. i was part of bowles-simpson and we propose raising revenue not by raising marginal rates. i happen to agree with chairman nickles on this point. i think you can raise revenue and i think you could actually lower marginal rates that exist today. think you could put together a

package that would raise revenue , that would lower marginal rates somewhat that would give additional lift to the economy. you know we have got and have shown many times on the floor of the senate a five-story building in the cayman islands called hudlin house. it claims to be the home of 18,000 companies. they all are doing business out of the hudlin house in the cayman islands. they are not doing business out of the hudlin house. the only business they are doing is tax avoidance business in the united states and this is costing 100 lien dollars a year. does anyone seriously think that's a tax increase when those people pay what the rest of us are paying? >> other questions out here? there is one over here allison. see my name is dennis macdonald.

this is a question for ms. garvey. you were talking about the process of the difficult policy discussions that have to take place. you made a statement about making that more transparent. could you be more specific about what you mean by making it more more transparent sense that this had to fly in the face of the sausage making comments that your colleague just made. >> right. i think when you're laying out numbers is very good to have the stakeholders in whatever form available. there are lots of forms available with the faa and airlines certainly care a lot about that. manufactures care a lot about that in the airports care a lot about that. but consumers care a great deal about that. i think there are a lot of a lot of opportunities and there should be opportunities to layout the options. certainly laying out those options of people to understand and first and foremost i think

discussions as others have said here with congress so there really is a full understanding of what are the trade-offs? sometimes that is missing in this discussion. people aren't really clear on exactly what the trade-offs are and how, what are the considerations that the agency is giving to certain decisions? i think they could do that in a pretty transparent way. >> we have time for two more questions. >> brian alexander running a dissertation on political science at george mason university and i've been following these discussions for a long time at the bipartisan policy center. the question about about sequestration in the run-up to sequestration there are a lot of dire forecasts and predictions. now that we have seen it in effect and we are going toward another round i'm wondering in an open question to the panelists, where did some of the, in your views where did they forecasts work out worse

and maybe where did some of the forecast work out better than what you thought and sort of an update on the state of sequestration and how bad is it for how bad has it not been? >> well, i would just say this. i think sequestration is a policy really doesn't make a whole lot of sense because it is $1.2 trillion of cuts out of domestic accounts are already going down. so we are cutting the part of the federal budget that is already in decline. we are not addressing the part of the federal budget that is growing dramatically. >> you can watch all all of us on our video library at c-span.org. we will take you live back to the rayburn office building. the voting is over in the house at the time being and the hearing is for zooming on the tax fraud and the chairman is john mica of florida. >> to our panel this morning is

nina olson, the national taxpayer advocate at the national taxpayer advocate service so welcome and you are recognized. >> thank you chairman mica and thank you for inviting me to testify today about tax related identity theft. since 2004 i have identified this issue is one of taxpayer's most serious problems in nearly every annual report submitted to congress and i've testified in that numerous hearings on the subject including seven since the start of 2012. to its credit the irs has recognized identity theft is a major challenge and has devoted significant resources to addressing it however love the irs has improved its ability to detect fraudulent returns our analysis indicates it is not making comparable strides in providing assistance to identity theft victims. in my testimony and my reports to congress i have described the devastating impact to tax related identity theft on its

victims get despite some recent improvements to cycle time it often takes six months to a year or longer before the irs fully resolves identity theft cases and issues refunds to the legitimate taxpayers. thus the term assistance overall continues to be inadequate. let me offer three ways of looking at victims assistance. first, my organization the taxpayer advocate service, a cyst taxpayers whose cases have not been handled properly through normal irs channels or who are experiencing financial hardships great in fiscal year 2011 we received 34,000 cases. by far the largest number of cases on any single issue and 11% of our inventory. by fiscal year 2012 we received 55,000 identity theft cases which constituted 25% of our inventory. for the first nine months of fiscal year 2013, our identity theft cases are 32% higher than last year suggesting our case

receipts in that issue make seed 70,000 this year. tax inventory is a good barometer of virus problems that these increases suggest that at least in some respects victim assistance may actually be getting worse. second the irs processes for identifying and stopping returns filed by identity thieves and snare some returns. for example during this filing season more than 150,000 returns filed by legitimate taxpayers were flagged and deemed unpossible. this means they are processed and refunds aren't issued until someone at the irs looks at them and acts upon them. some returns were stopped because the original identity protection personal identification number was not entered on the return. the ip is the number the irs gives taxpayers when it determines they are victims so they returns can go through without stopping. when a taxpayer loses its ip the

irs will issue a replacement ip pen but confoundedly at the irs automatically stops all returns with these replacement ip pins. but is it deems them -- of the over 100,000 returns that were stopped because they did not have an ip pen more than 90% of those, over 93,000 were submitted by legitimate taxpayers if they had to wait an average of six additional weeks for the irs to process their returns and some are still waiting. in fact as of yesterday there were over 21,000 of these returns over 61 days old on average waiting to be processed. third while i am pleased that one irs unit has reduced its processing time this year that functions as part of the lifecycle of many identity theft cases. in my written statement i describe the process -- progress of the hypothetical case of

representative mini-tax cases and that it requires the sequential involvement of multiple irs units. similarly in 2012 take to analyze the files of 17 identity theft victims and found the irs had opened 58 cases to resolve the accounts of those victims and average of nearly 3.5 cases per victim. that aligns with what we have observed and explains what i hear from practitioners and taxpayers that identity theft cases often take a year or longer to resolve. lastly i note that the irs has more than 3000 employees working on identity theft cases, more than double the number from the previous year. given the irs's shrinking resources that level of staffing is not sustainable. to make sustained progress in addressing identity theft the irs must improve its core processes. in my written statement i make six recommendations. the most important is to reorganize victim assistance so

a centralized unit controls all identity theft cases and each case is assigned to an employee who manages the case from start to finish and serves as a single point of contact for the taxpayer. they irs can say this approach will require more resources what is the head of an organization that operates in exactly that manner i believe it's more efficient to assign each case to an employee than to require taxpayers to navigate multiple functions working cases with significant rework and timelines occurring along the way. i think the subcommittee for its continued interest in this matter. >> thank you for your testimony. our next witness is michael mckinney the acute if deputy inspector general for audit. at the treasury inspector general for tax administration. welcome mr. mckinney and you are recognized. >> chairman mica ranking member connolly and members of the subcommittee thank you for the

invitation to testify on the important subject of identity theft and its impact on tax administration. treasury inspector general for tax of frustration or tigda has provided coverage by conducting audits and investigations. my comments today will focus on the results of our prior audit work and to audits that are ongoing. the irs is made identity theft a party and has made some progress over the past year. however significant improvements are still needed. as of june 30 of this year the irs reported during the 2013 filing season has stop the issuance of $4.2 billion in tax refunds associated with 860,000 tax returns involved in identity theft. for the 2013 filing season the irs increase the number of identity theft to a.d. from the es irs to identify twice as many idas the prior ye. in our follow-up audit report we

issued last month we determined for tax year 2011 returns which are filed in 2012, there were approximately 1.1 million undetected tax returns with characteristics of identity theft. the associated fraudulent tax refunds totaled approximately $3.6 billion which is a 30% decrease from the $5.2 billion of undetected fraud we found for tax year 2010. even with its expanded filters it will remain a challenge for the irs to detect these fraudulent returns unless it has access to third party and come and withholding information before the tax returns or process. in this regard the irs is working with three states to determine how partial your information may be used to identify fraudulent tax returns before the refund is paid. another challenging aspect of this problem is the use of direct deposit from the fraudulent tax refunds carried most of the tax year 2011 returns we identified was an indication of identity theft

involves direct deposit to obtain tax refunds. this totaled approximately $3.5 billion. in some cases many refunds are deposit to the same bank account for example one such bank account received 446 direct deposits totaling over $591,000. tigda recommend the irs limit the number of tax refunds and the direct deposit account and we recommend the irs work with federal agencies and banking institutions to ensure tax refunds are deposited only to an account in the taxpayer's name. the irs develop new filters ford to 2013 filing season which are designed to identify and stop tax returns with similar direct deposit characteristics. as of may 30 of this year the irs indicated they identified over 154,000 such tax returns and prevented approximately $470 million in tax refunds with the use of these filters. in addition as of the end of june over 18,200 refunds were

returned from financial institutions totaling more than $60 million. the irs still faces challenges providing assistance to identity theft victims. in a current audit which reviewed cases from 2012 we found taxpayers continue to face lengthy delays in the resolution of their identity theft cases. in addition tax accounts were not always correct which result in delayed or incorrect refunds. one practice assigned to protect taxpayers from being victimized the following years the addition of identity detection personal identification numbers to the irs issued three times as many these numbers to taxpayers in 2013 as it did in 2012. the irs is continuing to take actions to improve its ability to expedite this assisted victims to prevent fraud. we'll continue our work in this very in this area to about a theft progress. chairman mica ranking member connolly and members of the subcommittee thank you for the opportunity to share my views.

>> thank you for your testimony and they will turn to our last witness on this panel, mr. douglas mcginty the state revenue commissioner at the georgia state department of revenue. welcome and you are recognized. >> thank you mr. chairman. ranking member connolly and members of the subcommittee i am the commissioner of the georgia department of revenue and i would like to thank you all for having me here today. first i think it's helpful to start with the big picture. george is the ninth largest state in the union. we have approximately 9.8 million residents and in 2012 we had 5 million taxpayers, 4.25 million individuals and 700,000 companies. in georgia the department of revenue cuts 20 billion in taxes each year which is 90 to 90% of state revenues in the state. the vast majority of our revenue are individual income tax and sales tax which is 85% of all

state revenue. last year we processed 4.25 million individual returns and of those just about 3 million were refund request totaling $2 billion so like all tax we bring in 20 billion a year and we have to manage all that information related to the 20 billion. returning to the fraud issue several years ago before my time at the department folks at the department started to recognize there was a problem with fraud and started trying to fight it. in 2000 by the group was formed within the agency called the office of special investigations to fight the fraud. we started out by putting some simple rules in place i gather much like the irs filters to process those returns. so is an example to many refunds were going to the same bank account or the same address and we started flagging those returns. there might be a good reason why

so many were going to one bank account but there might not be we wanted to take a closer look and as we evolved and criminals involved we realize the mast -- majority involved identity theft fears some of the fraud was the taxpayer may confront john claims on their own tax returns but more often some was used in legitimate taxpayer information filing a fraudulent tax in their name. we realize their ability to look at -- was very limited. just looking at a return doesn't tell you much. our ability to access all sorts of third-party data was to a great extent still is very limited. taxing authorities don't have that information most of the time. impersonal experiences show that could happen to anybody. after i started my job my wife's identity was stolen so when my wife and i filed a joint return and was kicked out we filed a return.

if that is not the definition of irony i don't know what is. but we had a process with the irs in the state level so i understand us both from an administrative perspective but also as a semi-victim. all that said the rules-based approach made a difference. last year in 2012 from the 2000 tax your program stopped 114,000 refunds totaling $75 million but as i noted we had a significant significant -- identity theft. in 2011 we were approached by a company called lexisnexis to fight that i.d. theft remember clearly the meeting with lexisnexis thinking not only do they understand the problem is but also i think of a problem that might fix fix it. often we were called in by consultants who want to sell us something that can help us identify the problem and it's much less clear how they can fix it. in 2012 we started this program and it works as follows. after all of our systems are done checking the return we think it's a pain we will send that refund request to

lexisnexis with some very limited information. lexisnexis will scrub it through their databases and based on the filters we set up along with them if they seem suspicious it will be flagged. if the return is flagged and e-mail and letter sent to the taxpayer asking them to go to web site and answer a few simple questions that only the taxpayer should know much like if you have your credit card stolen. if they can answer those questions on line the refund is put back in the queue and out it goes and nobody has to touch it. if they can't answer it or they refuse to try to answer questions we hold that refund in advance and eventually eventually we reverse it out and treated as if it was a fraudulent refund. in putting together the program we attempted to balance the various goal for processing refunds as quickly as possible protecting the states money i.e. taxpayer money and protecting taxpayer identities. we have run the program now for two seasons and in the first year there was definitely a

learning curve but this year it went pretty smoothly. from our perspectiperspecti ve the results have been excellent. it's added about 125 days to the process of the refund and a 2012 it stopped 44,000 refunds totaling over $23 million. it cost the state about $2.6 million so from a business perspective the program is a no-brainer. we spent $2.6 million in stopped $23 million in fraudulent refunds. at the same time the agency avoided costs associated with having to help deal with a mess when someone has filed a fraudulent return. one final thought for you all. our experience is the tax fraud is a growing and serious problem. last year or two programs combines top 160,000 fraudulenfraudulen t returns totaling $99 million just shy of $1 million but if you do the math that's 4% of all returns filed with us with over 5% of

the refund claims were fraudulent. i will let you do the extrapolation from that but it doesn't take long to get to pretty big numbers when you look at other states and obviously at the federal level. thank you for the opportunity and i will be happy to answer any questions. >> we thank you for your testimony from each of our witnesses and we will turn immediately to some questions here. again i m. conducting the first hearing on this. i have heard one of our witnesses say she had been involved in seven and i think this subcommittee has done four of those. the problem is though, with the ripoff and refunds that are fraudulent it has spun totally out of control. we had 456,000 cases in 2009 and in 2011 we were out one point

1 million in 2013 the estimates today are 1.9 million and some steps have been put into place but obviously we don't have a handle on this. did you testify mr. macginnitie but one account received 446 refunds? >> yes. >> i mean that is astounding that something would be triggered. i just reviewed my american express and they had a series of questions and then also i found any type of financial activity out of the ordinary is immediately triggered. i get a call from their security folks. mr. werfel can't we put in place some protections and you heard recommendations or some ideas from georgia.

where are we? >> yes we can and we should and with respect to the situation where money goes to the same bank account, we have now effective in filing season 2013 implemented a filter in our system to catch -- >> 46 wood tv ultimate? >> yes, now would be triggered. this is part of our evolving learning process as we understand the schemes we make adjustments. for us the goal is to get ahead of them so they can figure out where the schemes are going before they emerge and that is part of our challenge at the irs. >> we have heard the nightmare that was described, actually the ranking member did by his constituent experiences and being around by i think you said a half a dozen different folks. one of the recommendations from the assistance was a central unit i guess.

i imagine we have 21 units or have had and i think you probably have to have some enforcement or investigations. but mr. werfel what about some one-stop for the taxpayer who is caught in this horrible situation? >> i think that's a very important thing. we are unfolding in that direction and we have what is called the identity protection specialization unit that essentially helps us coordinate when you have multiple parts of the irs involved in a single identity theft case to make sure there is coordination but as ms. olson points out in her testimony the taxpayer advocate has specific recommendations about how we can enhance that centralization role and make it even more one-stop and for us my commitment is to evaluate ms. olson's recommendation. it's a question of making sure can we do that effectively and serve the victim and can we also do it within our resource constraints so it's a combination of things but i think the bottom line is we are

very concerned about the impact this is having on victims. obviously the impact it's having on the deficit treasury is significant that the impact it's having on victims is significant and we are committed to figure out what we can do to help. >> mr. werfel you have heard of willey sutton haven't you, the famous bank robber? >> yes. >> well mr. connolly, now didn't you, i thought you had great testimony. what was the number you said were prosecuted? >> i believe mr. chairman the last hearing we had i want to say because i asked, i want to say there were four convictions. >> four convictions. we are lucky that willie sutton isn't around today because he could skim the irs and get away with it. can you tell us where we are in execution? >> i don't have the exact number but i can tell you in the area

of criminal acts ex-investigation just like some of the areas we have described a significant ramp up in activity. we had 1100 investigations underway this year. we have convictions -- >> how many? >> i don't know the exact number >> the ranking member has said it is just a handful and that is disgraceful. people are stealing from the taxpayer and they are getting away with it. when the staff told me that some of the drug dealers are switching out to scamming and ripping off the irs again with these illegal payments that should raise eyebrows because we are talking about billions. >> i would just say that i will get you the number of prosecutions. we are seeing sentences now a 20 plus years which we think is a good deterrent. we are getting positive feedback 785 indictments on identity fraud. i just wanted to point out that i was on the phone recently with a field directors in tampa bay

and i am me for the irs in terms of our work down there. they feel they have turned a corner with local police and law enforcement getting positive feedback from local law enforcement about how the irs efforts are stepping up in this area. we have a lot of work to do. i think the point is that things are trending better in terms of our activity in this area. >> finally, can you tell me again i have heard 90,000 to 100,000 employees. what is the current number of employees with the irs? >> we have roughly 85,000 full-time employees and that when you add in part-time employees it gets to that 95,000 by the way that's an 8% reduction from where we were in 2010. >> again a lot of people who are involved in this use cost-effective means. we heard from georgia and a limited number of personnel allow electronic monitoring. somewhere we are doing it in a very inexpensive and an

effective fashion. that may yield to mr. connolly. >> mr. chairman i see the chairman of the full committee is here. i would be more than happy to yield to the chairman. >> i was going to get to him immediately after you. [laughter] .. i don't know that's the right number. the trend is improving. >> but i think all of us could agree, this isn't the only

response put up i rest nor do i mean to imply that. the i did not 1.9, almost 1.9 million cases of identity theft which involve the kinds of problems mr. macginnitie -- sounds irish. >> a little bit. >> and his wife experienced. 1.9 million, even the convictions of only 300 something people is not earth shattering. and not reassuring to the consumer, you know, to the taxpayer. so are you getting cooperation from u.s. attorneys offices on this? are they taking this more strictly? >> as an emerging risk to the irs and for the broader tax community and tax system, there's a lot going on. obviously, technology are changing. we are forging new partnerships with u.s. attorneys, local law enforcement, state. all of this is happening, it needs to happen quickly and

effectively because as the chairman pointed out this is a problem, but you pointed out, this is a problem growing exponentially. and i think what the irs is doing is showing that we are moving quickly to deal with this emerging risk, but it's growing very quickly. so we need some very sophisticated solutions here. >> yet, because here's the message. the chairman referenced if willie sutton rand again today, he would probably focus on the irs rather than banks. because the chances of you being caught, tried and convicted are miniscule. i me, if you look at a probability, it's a good place to go. for a penalty free crime. that is a great concern i think to this subcommittee. and, of course, one of things i want to give you, you mention in your testimony, mr. werfel, some of this has to do with resources. a billion dollars of cuts in the budget of the irs doesn't circumscribe the irs ability to

a full throated responsiveness expand your threat. >> there are many examples of that. what we are worried about is as our resources decline can we keep up with the level of service that we need to provide to taxpayers and appropriate enforcement activities. on the positive side as a resources go down we become more efficient. and i can point a lot of different areas, and i think the chairman mentioned in our conference spending we had a significant decline. right now we are at very low levels of travel and training and conference spending as a part of our efforts become more efficient. but there's oh so much efficiencies we can drive before the budget cuts start impact our ability to tackle huge issues like identity theft. as the appropriate setting, we can sit down and walked to the president 2014 budget and how we did at identity theft. >> i want to get it to other issues in my limited time.

mr. macginnitie, you talked about direct deposit. so here's something presumably to try to make more efficient and more immediate the tax refund to the taxpayer. but unwittingly it also made more efficient and in some ways easier for the bad guys to interrupt the flow and redirect it somewhere else. what can we do about that? and should taxpayers now insist that they want a check and not have it directly deposited? >> one of the things we recommended that they do and work with treasury on is to validate that the account that the deposit the refund into is a account and the taxpayer's name and the irs is starting to compile in that regard, or treasury has. that's starting to show benefits. the more they can authenticate things before the deposit into an account, the better off they will be. >> well, but they did the option

of asking, a check for is that correct? >> yes, that's true. >> do we find that the incidence of identity theft is much higher with direct deposit than it is with old-fashioned -- >> most of it is direct deposit. it's so quick for a person to take that inhabit put to a prepaid debit card or whatever they can accomplish, whatever they're trying to do much faster. >> thank you my time has expired and i will withhold my last question until, in less -- >> that electronic thing doesn't work, they sent my refund but my wife got it. i didn't know about it. [laughter] pleased to welcome and recognize the chair of the full committee, mr. issa. >> thank you, mr. chairman. i'll talk to pat about joint account and the benefits thereof i guess. mr. werfel, this is an important

hearing, and i want you to continue working on it. obviously, the irs is behind, clearly behind the thieves. they're getting better at it. i think mr. connolly brought the right point, which is why rob a bank when you can rob medicare, medicaid and the irs? it so much easier to rob the federal government through fraud and identity theft than it is to walk in with a gun into a bank. however, i have some frustrations i bring to you today. as you know, a number of months ago president made it clear that the behavior that occurred in an isolated basis in cincinnati was unacceptable. he charged that we would get to the bottom of it. we have gotten to the fact that it's not isolated to cincinnati as was said. it's not isolated to washington. it goes to your chief counsel's office. and as we go to do our

discovery, that's where the rub is. you promised us full cooperation, and yet the office of chief counsel of their 70 attorneys. they're delivering for documents a day per attorney to us. and they look like this. and there is in minute print it said 6103. now, if a lawyer is working on documents, four pages, a day per lawyer, are you going to tell me that this is, in fact, minimal reduction as required by law? >> well, there's a couple of statements that it would like to make if i could. >> no. of which is like your answer, please. >> the lawyers take very seriously their legal responsibility to attack information under the law, to redact information that is specific to an individual taxpayer, and all such information, bottom line, mr. chairman, is all such information whether redacted or

unredacted is delivered to this congress. it is deliberate -- >> you have delivered less than 1% -- excuse me for standing but have to get over your stack -- you delivered less than 1% of the documents, actually to the ways and means committee. you are not delivering to the ways of -- >> i disagree with the conclusion. >> i'm afraid that's what chairman camp put it out and put out in writing. >> if i'm allowed to explain i can provide -- >> here's what -- [talking over each other] >> here's my question to you. we produced i believe 63 search terms. you added some search terms. i'm not disagreeing with your adding progressive and looking for progressives. that's fine but i want more not less. you came up with this. it added up to a total of about 80 search terms. and then unilaterally, your people, the office of chief counsel, reduce that down to a dozen. they are not searching on the

terms we've asked for. our request is for all information related to this. when you eliminate search terms unilaterally, you are obstructing us i limiting the scope of discovery. do you understand it, do you understand it, mr. rove will? >> i do but disagree with the premise of your question about your offering. >> did your people limit the search terms below the search terms that are delivered actually in your response letter today? >> we are prioritizing searches in order to get you more documents more quickly and that's having an impact. in fact, this week alone do not a document production within been able to produce has increased dramatically. the disney we eliminate search terms prominently. it means we are making modifications in order to make -- >> that is not your call, mr. werfel. let's go into a little quick detail. what's interesting about this page, i understand why you removed taxpayers a specifics. deliveredisalso, this without headers. if the names with her i still

wouldn't know what those numbers are. somebody deliberately printed out information, created digital, and which they stripped out the meaningful data so you know actually what these columns are. even mr. connolly was a this doesn't look like a spreadsheet is only have because spreadsheets say what's on top of it. additionally, we asked you for information. we set the priority if you're going to slow roast the, and yoe slow rolling us. >> not true. >> mr. werfel, you frustrated this committee. you promised to do things and you were not. the office of chief counsel, as far as we not make the decisions to limit search terms. is that correct? >> i'm working together with the office of chief counsel but we're not limiting the search terms in a permanently. we are prioritizing to get the most relevant documents, if i can make a point, if i can make a point. >> i would ask unanimous consent for additional four minutes.

>> mr. chairman, i will gladly give that unanimous consent, provided the democratic side of the i'll be allowed to respond to the fact that we are now off-topic with respect to the shooting. i respect the wish and abroad of the chairman to use this opportunity to query mr. werfel on a different matter. at a respect that but i would like an equal opportunity to respond. >> i would grant the full committee chair that time, and we will grant additional time to the minority. >> i thank the chair for his graciousness. >> thank you. mr. werfel, let's go through the numbers spent i was about -- >> no, no. i've only been granted additional time. >> okay, because -- >> the democrats seem to be carrying your water. >> i think there's an important factor me to get a. i hope -- >> yes, there are important facts to get out and you're extracting them. so now -- >> that is not to. >> so now -- >> i am not supporting. >> mr. werfel, it barely you were put in by the

administration to run cover until somebody knew would come in. it is now, it is now my time and i'm going to explain to you what this committee has found. mr. werfel, in two months come out of 64 million pages can you delivered 25, or delivered 12,100. and this is over 2500 of them. they are completely useless. your interpretation of 6103 is so broad that you're delivering no meaningful information. more importantly, we have prioritized a number of discovery. lois lerner, a woman who did not properly but did attempt to take the fifth day for our committee. we've asked for all corresponded. it has not been forthcoming. we've asked for correspondence with the white house. mr. werfel, let's understand something. corresponds with white house by definition had darned well better not include 6103, because redaction is not appropriate. we are not covered by the privacy act, therefore if it includes names of individuals like sheldon and how you will target him or something and even

if it included that, quite frankly it would not b61 '03. it would be communications from the outside. additionally, your people have unilaterally chosen to redact according to them private information to mr. werfel, you don't have the right to privacy indications. on government time and government equipment. if lois lerner or others have private to mitigation, they are not subject to 6103 because it 6103 is in that we expect them to be referred to criminal prosecution if you can't have private conversations and released 61 of the. that, of course, would be wrong. so as we go through this discovery and find far access redacting common equation at all, slow rolling discovery, limiting search terms can you may call prioritizing, but you're not prioritizing as we need them. it is my expectation that we should all receive communications to and from the white house. we should'v should have alreadyd communication between anyone who is conducting non-6103 business. we should have already received

lois lerner's entire packet. these are not my expectation. these are the american people's expectations. your speed of delivery is such that you will be long gone, the president will be long gone. lois lerner will have retired before we would receive a sufficient amount of information to be meaningful. you are leaving me no choice. i've asked you for information but you're not forthcoming. your own chief counsel's office appears to be clearly compromised. the lawyers there are included in this investigation. the communications to and from those lawyers clearly mean that the office of chief counsel, apolitical appointed office, has been compromised. you are leaving me no choice but i will be preparing and sending a subpoena for these documents to the secretary of the treasury who will be remaining on, and our expectation is that the treasury department will take over the delivery of documents in a timely fashion.

uses such attorneys as they see fit that they believe are not compromised, and i would ask you to immediately instruct chief counsel that the chief counsel's office may not any longer be part of the decision-making. only attorneys who are not part of our investigation. and quite frankly, i'm deeply disappointed. it was my expectation with our past relationship and your past work that you would come in not just wanting to be a caretaker, but actually get to the bottom of this. but as simpson attorney washington, washington turned to political appointees, offices, and the president begin calling this a scandal phony. and secretary lute became calling this scandal phony. what i can't understand is how you can think the american people would accept this as phony. this is a real investigation. we need real discovery. if these doctors need to be

redacted, then by definition you have no reason to deliver them. if you can only deliver me blank pages, completely black pages, deliver them to the other committee. but i'll tell you one thing, as these pages, which are almost impossible to figure out where they came from, our gone through by the ways and means committee, you better hope, you better really hope that we don't find something there that clearly should not have been redacted, which we expect we will. moreover, i'm sad to see ago because i thought you could do something. i'm sad to have to issue a subpoena, because that's not what i thought we're going to have. we did not enter this investigation thinking that this was some grand conspiracy. we entered this thinking this is something fundamentally wrong. my democratic friends are convinced that progressives were targeted. even though your own inspector general has said he found no evidence of it, while they did find evidence of other groups, generally called tea party groups having been targeted. we don't want to find only one

site. we want to find anyone that is targeted and we want to hold people responsible. today, lois lerner is being given full play and not held accountable. our job is to find out everyone there should be held accountable and make sure the american people can trust us this will not happen again because i believe if we are thwarted in this investigation this will become a pattern of behavior, whether by the chief executive of the united states, or simply by individuals who have power within bureaucracies such as the irs, epa, osha and the like. mr. chairman, i now owe six minutes to the democratic -- >> julie noted. >> i yield back. >> and i recognize at this point the ranking member of the full committee -- >> i counted seven. >> i will make that determination. >> i'm just looking at the clock. >> we started at four. you were not here. i will make the determination.

>> mr. werfel, thank you for recognizing, mr. chairman. >> you are recognized for five minutes. i will consult with the ranking member to see how we history but the balance of the time i promised. thank you spent mr. werfel, first of all unwanted thank you for your service. i listened to what was just said to you, and i again thank you for your service. earlier this week, chairman isaac issue of obstructing the committees investigation because you are not producing documents fast enough in his opinion. you have produced to congress tens of thousands of documents. we have interviewed 18 irs witnesses, and today is the third time you testified before our committee in the last two months. in addition, mr. werfel, there's a law, section 61 of three of

the internal revenue code that prohibit you from revealing information to ourcommittee that identifies specific taxpayer information, is that right speak was that is correct. >> and you need to review all the docs which are producing to our committee to first make sure they comply with the law, is that correct? >> yes. >> i'm not concerned with your compliance, mr. werfel, because i've seen it. my concern is the actions of the ig who is blocking you from providing information about progressive groups to this committee. mr. werfel, on july 17 you testified that some non-tea party groups received treatment similar to tea party applicants, and the irs denied at least one category of applicants after a three-year review, is that rewrite? >> that's correct. >> in this instance, your career

experts review these documents and told you this information was okay to share with the committee. that it did not reveal specific taxpayer information and did not violate section 6103, b jt as you're about to produce the documents, this information, this information to the committee and the information to the committee, the ig personally claimed that it might reveal specific taxpayer information, is that right? >> that's correct. the ig reached out to me and expressed concerns about our pending delivery of information. >> subtle, so you're about to hand us documents, the same kind of documents mr. i.c.e. agents asked about, but in the ig said no, is that right? >> the ig raise serious concerns. when we asked the ig about this he confirmed that his effort to block your disclosure to the committee was unprecedented.

we don't hear those complaints coming from over the other side now. when we pressed him on this, he said he was still in ongoing come in quote ongoing discussions with your office. and that he would resolve this issue with you quote sooner rather than later. the problem is we have not heard a single word from the ig since then. can you give us an update? as he withdraw his objection? are you discussing pashtun are your discussions quote still ongoing? >> they are. i spoke with him recently about it. he reasserted his concern, and indicated that he is still not convinced that the information was -- >> the information about progressive groups? >> in this case, yes. >> to your career experts at irs us to believe it would be appropriate to provide this information to the committee? >> yes, they do spent i'm deeply

disappointed the ig would block the production of information about progressive groups to the committee. represented conley and i sent a letter to the ig yesterday asking him for an explanation. mr. chairman, kind of be included in the record. >> without objection, so ordered. >> as i said about this investigation, our job is to ensure that all applications for tactics and status are treated fairly, regardless of whether they're conservative, progressive or in between. if we do not receive the satisfaction response from the ig by next week, i would ask that you go ahead, mr. werfel, and produced these documents. the chip and just said, he just told you he wants the documents. so let's give him the documents, even over the objections of the ig. we will follow up and let you know if we hear from him, but look forward to hearing from us. >> thank you. if i can just make a point. i'm not exactly familiar with

the exact procedures of the committee adding. but i would like an opportunity to respond to each of chairman issa's allegations and questions, a lot of them weren't corrections affecting verification to i wish you were here to respond. but in some point i would like an opportunity respond. >> may i use the other five minutes? >> if you would like, you can take, you have six minutes. >> thank you. mr. werfel, i want you to take, take, thank you, mr. chairman. one of the things that i remind my committee members is that when people coming here, they come here, these are public servants giving their best, and family, everybody is watching them on c-span. employees, and they never, accusations are made and they never have an opportunity to respond. and it really, really bothers

me. antiwhite you do go ahead, respond if you may. probably need a few more minutes it because i need ask you a few more questions. do the best you can't. >> first of all the notion we are obstructing is complete false but, in fact, the opposite is true. we are involved in a thorough comprehensive effort to fully cooperate with all the congressional committees that are asking questions, asking for witnesses come asking for documents. and there's substantial facts and evidence that demonstrate our full cooperation. keep in mind i've been in seat for nine weeks and this process of moving forward and we're getting better and more effective at producing this is going on a day-to-day basis. i have more than 100 employees working on the document request that chairman issa raise a consider that. this includes 70 attorneys working full-time to review documents. we are producing documents on a weekly rolling basis. this committee has over 16, as

of today, will have over 16,000 pages of documents that have been delivered, but the congress as a whole as of today, there will be 70,000 pages of document delivered. now, what's important about the reduction process here, and what's very important to make sure that the public and the american people understand is that all of these documents are being produced to congress. we operate within legal constraints in terms of what we can deliver to him to win. we have to protect taxpayer information and there are rules enacted by this congress that require that certain document can only go to the tax committee what other documents -- >> and divisive to one '03, what happens? which they? >> is criminal. spend go ahead spent could i -- would the gentleman yield? >> of course. >> mr. cummings, that there is same chain who railed against miserable in his nine weeks tenure, did he not say on june 18 in defense of the

inspector general, mr. george, that in erring on the side of caution, that was the right policy speak was certainly did. >> and, therefore, the withholding of documents. >> that's right. >> is it also true, mr. cummings, that the list of search terms submitted to mr. werfel and irs by this committee includes 81 article? >> that's right. >> is one of the terms audit, the word audit? >> that's right. >> my that generate, i don't know, a lot of paper at irs, mr. cummings? >> yes spent i was going to get that point but let me quickly go to some of the statistics and facts to make sure that there's an understanding of the amount of discovery that is coming across from the irs to these committees speedy's and intertwined in that, your testimony earlier that you're losing, i think he said 8000 employees? 8000. >> we take this very seriously,

and out of chief counsel's office of 1600 lawyers with 100 lawyers working on this, 100 people, 70 full-time. i said when a 70,000 pages of doctors as of today by the end of the day today that will be delivered to congress. these are very relevant information on them that were specifically requested by the committees. there was a prioritization. you asked for the bolus budget. we got to do. u.s. for the e-mails. we got you into the us for training materials. e-mails of self-selected e-mails that were so selected by witnesses preparing for interviews. all of us were delivered. we respond to 41 different letters from edge of the committee including today's hearing, irs this including myself have appeared in 15 hearing since the ig report was issued. we have made 19 employees of them for a total of 29 interviews. all of this, supporting all this is thousands and thousands of work hours as work to be cooperative. is important is that the document production is

increasing. in fact, this week alone we are having increases, and the reason is because of the last few weeks we've made important changes to that process. i added more people, making technology enhancements. but perhaps most important to get to one of chairman issa's most critical concerns, which i think really warrants care clarification of what happens is when we get 82 search terms, it produces a large amount of documents. a majority of which are nonresponsive. and what happens is you have to look through every document it would have responsibly to look at every page. and if you produce analyst amount of documents to look through, it takes longer and longer to find those responsible documents and give them to you. roughly 75% of all the documents that are being pulled based on 80 plus search terms were nonresponsive. yet, staff time was being eaten up going for each document. so what we did is we try to help

the process along, not by promising we will not search these search terms, but by saying if we can take the search term and ensure that we have a higher response rate, in some of this information, then we will get information that this committee and of the committees want quicker. so no unilateral decision has been made to alter the search terms in perpetuity. not at all. that's not too. what has happened is we made an adjustment in order to increase the number of documents you get sooner rather than to be the fact that i'm able to deliver thousands of pages of documents today is because we've made these improvements. it doesn't mean we are not fully committed to getting all these documents. >> you are trying to obey the law, is that what you're telling us to quit trying to obey the law state that this congress made. and, finally, i want to it into the record the live of august 2, 2013, to chairman issa, mr. chairman, from mr. werfel. i would like to have it entered into the record.

>> without objection, so ordered. that concludes the time of the gentlemen. i will recognize mr. jordan, and mr. jordan and your 25 seconds in addition to the five minutes. >> thank you, mr. chairman. mr. werfel, you can, 81 touchdowns, 12 search terms from 2500 pages redacted, blank page. whatever. we have reasons and you gave your testimony, that's fine. but it's been almost three months since lois lerner had a plan in question asked where she told the world that this is going on. and we've been asking ever since that happened for lois lerner's e-mails. you guys won't get into his. now, that's not redacted. we just want the correspondence from the person at the center of the storm, and you guys don't give it to us. now, seems to me that's a couple hours to get 6000 lawyers, why can't you give us or e-mail

speak was i don't know that's the case but, in fact, -- >> our staff told me with not gotten -- >> we should clarify that. in fact, i received a letter recently which attached an e-mail from lois lerner that we produce. so we are producing these e-mails. in fact, when you make a specific request -- >> we want the e-mails from anyone out of irs, score spot with the white house to like it would get a? >> we have looked at those and we've searched, and in some ways, and some searches we came up with zero. there were no e-mails from the individual in the white house but this is what i try to make. you have a particular request, give it to us but we will move higher in the priority. >> why are they seek -- >> i don't know. >> wilkins come when i getting his e-mail. >> also not too. two things about william wilkins if i could. one, i think today or this weekend we are produced community specific request and is part of our cooperation, if you want to do something in front of the line, please put some in front of olympic that will help us but it's about privatization. the other thing about bill

wilkins if we offered the wilkins, to be interviewed by just me. last week we made an offer, it's a standing offer but at this time your staff has not taken us on this offer. i hope you because this is not about obstruction. this is about offering as much of the mission of the can and the fact is that i know you have a lot of questions about bill wilkins. we want to get you this initiative we have offered him to be interviewed by staff. you haven't taken us up on that. >> i want to be clear than. every single e-mail of lois lerner's that we've asked for, you sent to us? >> i -- no. but we have provided hundreds of for e-mails. >> but -- >> this is a process spent no, no, no. it's pretty simple. you go to her computer and you get or e-mail. >> it's not that simple. >> it shouldn't take three months. >> the challeng challenge that o get a little bit ago you said you did since all the fresh and as to the question did you said everything in the from lois lerner, and you said no.

so which is a? did you send them all or did you not send them all? >> we sent many lois lerner e-mails about -- >> that's different from what you first told me. you've got to be square with us. we want every single learn from e-mail -- lois lerner and would like any correspondence between the irs and the white house. you haven't given them all to us. >> here's my answer which i could, which -- >> i'm giving you plenty of time. >> this is the process and we are providing information ongoing basis. we are getting as quickly as we can to you have a specific request. we will do our best to but that of the top of the priority -- >> forget the specific request that we want every single correspondent from lois lerner and you won't give it to. here's the later broke the story with a planted question. is a lady who took the fifth. here's the lead was at the center of the storm and we want every bit of e-mail from her, and you won't give it to us. you've had three months to do it. >> i will table are committed to big we are committed to big we're committed to doing every one of lois lerner's e-mail and

providing the response. some of it has to be redacted, 6103. some has to be reviewed for relevance and -- >> why would lois lerner have 6103 information in her e-mail? she's a policy person so she's got specific taxpayer information that she's any all over the place? >> we -- you might be very normal for lois lerner to enough someone inside the irs, authorized of taxpayer information speed let me ask you to do this. you go back to the office today, can you tell the 70 lawyers amongst the 16 are get at the irs, can you tell them to focus on one thing? every single bit of correspondents lois lerner has sent to anyone on the planet, we want that information given to this committee so we can get to the bottom of the story. can you do that? >> i will go back and i'll ask the teams i prioritize that over other document request that we have received because you've asked. and that's part of the partnership spent the president wants to work hand-in-hand in congress and you guys want to get the bottom of this story.

why wasn't that done back in may when this story broke? here's the lead was taken a step who broke the story with a planted question try to blame it on to rogue agent which we know is into. why wasn't that done the very first day you came on the job where you said you know what, here's the lead at the center of this whole thing, let's get every bit of correspondents and let get that to the committee. at the present wants work hand-in-hand with congress to get to the truth, i would've expected that be the very first action you would've taken, mr. werfel, and we are three months later and usually telling us in this committee we only send you some of lois lerner's e-mails. why wasn't that done day one? >> i think the process -- >> don't you think the american people t don't like to have that information from day one? >> a couple of responses to lois lerner in those on the top of our list and we're working through it. >> we want in a we wanted them in the interest of got into his here in august. >> as i can assure we produce a lot of information that is highly relevant to your

investigation. >> mr. chairman? >> wait a second. we have 10 seconds. and go ahead. >> may i have 10 seconds? the gentleman just said that we hadn't received documents with regard to william wilkins. we have received a minor we received all of them. i've got them right here. in the gentleman like that have and i will give them to him. >> the gentleman u.s.-backed. okay, i think we even time now and i think mr. turner, the children from ohio, is to be recognized. >> first of all let me join my colleagues, mr. jordan and the chairman being advised of the fact that our the irs in the beginning didn't tell the truth on this. we are not deal with the irs coming forward and saying this is what happened. either to the american public or to this committee. the irs came forward first with a fiction that this was something that was done by rogue agents in cincinnati but now we are learning of course it was not. now they're not being forthcoming with information and

is just astounding to have members of this investigative responsibility of this committee and certainly yourself, mr. werfel, defend not giving us in american public information but the chairman has said, luckily, we are not dependent upon your good graces. the chairman is issuing subpoenas and we certainly have the full ability to diffuse the federal government authorities to compel your answers, which you have not chosen to. i think it's hysterical we do this on a rolling basis because only thing that is rolling is you're going the american people and it is going to stop. getting a stack on top, the issue of identity theft is certainly very important one. it's one that, of course, the s. and its processes can have an effect on what people have on ability. commissioner -- commissioner macginnitie, then it pronounce it correctly? i appreciate your testimony. i think it's important for us to

look to industry and the ways of which some of the data processing, and adding mining efforts can be used to be a -- data mining efforts can be used for identity theft. mr. werfel, the financial industry and commercial software manufacturer has made recognitions to the irs to improve its detection and prevention of identity theft. additionally, the irs has started to task force it to address tax and fraud. one positive is the irs issued guidance that allows dashboard to run algorithm strengthened by fraudulent returns were report the fraud to the irs. the coalition is work with the irs to ensure members of acc are can send real-time reports of fraud to the irs. mr. werfel, the financial industry is important -- taken steps in a ondition of their callous the irs working with the

tax software companies on issues of this problem? also, the state of georgia's utilize the private sector to identify potential fraud through third party information. we understand the irs has a program to receive information from industry to describe this. and how have you worked with companies to help them identify a consumer fraud and identity that? >> we have a very critical partnership with private industry. they often are developing and are at the cutting edge of sophisticated solutions to deal with fraud or error. there are companies with working with the irs right now that help inform on our filters, help inform on trends and schemes that we can help county, help provides information. we also benchmark and see what other companies are doing that can this summer challenges whether it's a credit card company or other types in the financial services industry. so i think that we have a robust

partnership with private companies and experts. and i think ever going to tackle this issue effectively we're going to have to stay very close with our corporate partners. because they are -- >> one thing is the interface between the private sector and the irs and there's communicate going back and forth which includes the study for identity theft. not just listened out industry can be applied to your internal bureaucratic operations but also through the collaboration identity theft might be more easily identified. >> i completely agree. there's a lot of dimension to this problem, and very often in technology is going to be a solution that helps us stay ahead of it. what we've been describing it is doing is a problem that's emerging quicker than the solutions are to tackle it.

technology is the key. >> turning back to the irs scanned, i want to say this. when you first came on and stood in front of these committees and gave us and the american public or statement that you going to get to the bottom of this, you don't get to decide the. you have to prove it. the fact that you're not standing in front of the committees and readily disclosing the information that would establish both what happened, is a tremendous amount of arrogance and i certainly hope that you will become a forthcoming. forthcoming. >> it's not too. it's just something not true. we are providing information spent i yield back spent we're doing and and robust and legally approach away. but any indication that were standing in the way of discovery just not true. >> thank the gentleman. recognize now the children from north carolina, mr. meadows. >> thank you, mr. chairman. thank you, each one of you for being here. mr. werfel, and mr. mckenney, if i could direct your attention, as we look at tax

preparation in the industry and addressing this issue of tax fraud. in a, what are the recommendations that have been made that have not been addressed, or that we are failing to address with regard to the ig, with various -- because we're seeing is growing, according to mr. werfel's testimony, he says it is growing. so what have we not addressed? >> from our perspective the main concern the irs needs three areas. one, the tax return comes in the door, make sure they authenticate that it's from the right taxpayer. when they validate income withholding, they need to run that against to verify that the and then on the end of where they deposit into a bank account that also needs to be authenticated. because if they deposit bank account -- those are the three there's we thing need improvement. improvement. >> mr. werfel, what you think we

have not been more successful in addressing that? is this a lack of working with attacks prepares? >> i think, yeah, we want to achieve more than we can given time and resources. as schemes emerge from the identity theft grow problem -- problem grows quicker than we addressed to one of the things that i just want to add is that we can do more to use the standard authentication procedures using credit cards, like you if you're authenticating yourself they might ask for your mother's maiden name or something that potentially the identity might not know about you. and microsemi not. so we've developed this program we call our out of wallet program where we are implementing those very types of procedures. but we find that it takes resources. the more people -- >> so this all gets down to my? >> no. i give you an example but its accommodation of knowing about the solution and having the

resources to effectively estimate it and make sure that it'it would have the most posite return on investment. there's a lot of factors at play. >> so let me go with this, because we've got an issue. you said that this is increase, this problem is increasing and yet what we have is we have, and i've talked to some of the groups that are actually working to try to solve this and the private sector. and so if it is increasing and they're making recommendations on how to fix it, the private groups that you work with, where is the problem? is it that they're making ineffective recommendations? aren't we are just not implementing it at the irs? who is at fault? >> i think it's, i don't know if i want to say it's a false. it's an inheritance reality that the problem speedy's we will break away from this life in and take you to the senate floor for a very quick pro forma session. live now to the senate floor on c-span2

the presiding officer: the senate will come to order. the clerk will read a communication to the senate. the clerk: washington, d.c., august 2, 2013. to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable mark r. warner, a senator from the commonwealth of virginia, to perform the duties of the chair. signed: patrick j. leahy, president pro tempore. the presiding officer: under the previous order, the senate stands adjourned until stands adjourned until >> and we are back now live with our hearing on c-span2. >> do you not see a problem with obamacare coming in and with the subsidies that are about to be asked for under, just, you know, in terms of just saying well, i qualify? do you not see schemes that

could come out of that that would make this pale in comparison? >> we are certainly focusing on potential risks of fraud -- >> do you see the potential for -- >> there's one point i want to make about the afford will correct which is important, is when people get tax credit under the affordable care act to help subsidize their premiums, they don't get the money. the money goes to the insurance company. so if i am an identity for someone is working to defraud the government i'm going to prioritize a place where i'm going to speedy's what you're saying is we should just get rid of where we pay people when they haven't paid any taxes, that would get rid of all of this, all the tax credits when they haven't paid taxes? >> no. when suggesting is because the affordable care act is structured if you get the economic benefit you don't get the money, go strictly to the insurance company. that is a disincentive for identity thieves and other fraudsters to come in and tried to defraud the program.

because his and another appointment process where they will get cash in hand when you're doing the type of premium tax credit application to that doesn't mean that in entire lifecycle of the affordable care act we are not concerned about certain vulnerability that we are working on. i'm just suggesting that that's a critical part of irs's role and there you have something in place that's going to disincentivize tax fraud from leveraging. >> i think the chairman for his indulgence. >> they haven't called a vote yet. they're going to call a couple of votes in a few minutes, so i guess with agreement with ranking member we will just divide the remaining time, six minutes a side. and mr. cochran you can divide your six minutes. i will recognize you at this time. spent i thank you, mr. chairman, and i thank you for being there in allocating time. let me just say, speaking for myself, mr. werfel, i apologize for the treatment you've gotten here today.

one can stand up and a pile of paper, and that act could be construed, i'm sure it was not intended, to be an intimidating act. one can use those to hide the facts, that, in fact, if anybody has blocked the issuance of documents that counter narrative, it's mr. george, who is not here today. mr. george testified under oath in response to questions to me that the 202 unidentified into d.c. was looking at, he could not, there was no way of ascertaining whether progressive groups could be included in their number. and yet, subsequently, i believe on the 18th under oath again in response to questioning from mr. cartwright of this committee, he said he had indeed been apprised that there were bolos for progressive title as

well. before the 22nd hearing. and in my view that is at the best most charitably and elusive answer. under oath. we now have the inspector general blocking documents be made available to this committee and an abundance of caution with respect to 6103, according to your own testimony. and it's been described as an unprecedented intervention by an ig on the eve of producing documents. identity outrage about that. that's just perfectly fine. it's the general counsel isn't a problem. but i say it's the inspector general who is the problem. i say the inspector general has not provided objective and independent analysis before this committee. i think he is compromise his integrity and his credibility as a witness in this trumped up so-called scandal. the fact of the matter is, based

on everything we know, the irs messed up in cincinnati. they created so-called be on the look out, bolos, to try to screen an avalanche of tax exemption applications. some of which were clearly triggered by the decision by the uniteunited states corporate thy to grateful to but they did it badly. they were cautioned not to do it and they persisted. wrong, and mike lux on the other side of the aisle are right, as are we on our side to criticize the irs. you came in in the midst of that he'll try to clean that up and get to the bottom of it and i congratulate you in trying to do so. and i have no evidence in front of me that you done anything to obstruct or block, and i will say it is unfortunate that we could not go forward on this committee on a bipartisan basis,

and understand the both progressive and conservative groups appear they were targeted. and that's wrong. it's wrong if it's conservative, it's wrong if it's progressive. but the idea that there's some underlying scandal here that is political and goes all the way to the top was indeed they narrative before any facts or even now in. and it was wrong. so i'm not surprised at the drive-by shooting nature of some of what's taken place here. and i regret it because they do not think is worthy of this committee. i think we could have and should have had a bipartisan analysis of what went wrong. but that netted just won't fly. -- that narrative it just won't fly. mr. cummings, i will post you but also my time. >> let's make this letter that i introduced in a few minutes ago, i need this to be, i need folks

to do this. states that as of today you have provided more than 16,000 pages of doctor went to the committee, more than 70,000 pages of documents to those committees that are authorized to receive taxpayer specific information, is that correct? >> yes. >> and imports of protecting the confidence you have taxpayer information, can you find what additional steps are required before the irs can produce responsive documents to our committee, and what you have done to assure this process is expedited? >> so under the law we are required to make sure that no information that is specific to a taxpayer can be disclosed to anyone that is not authorized to receive the. and under the law attacks committees, in particular chairman camp, chairman baucus, and their debt designees under the are the only entities that can receive that type of information in congress but and if i could offer an example --

>> quickly because i want to address something mr. jordan said. go ahead spent one example, it's easy to pick up the document with a bunch of black on and said he had redacted everything come visit unacceptably are some of the doctors are requested by the committees are taxpayer case files. to say i'm going to pick taxpayer x., i want to talk x., i would've thought on what application are tax exempt status, every associate with it. so we grabbed about and give it to them, and it might be a bunch of pages. because it's a taxpayer file, the entire file is protected under 6103 and it would be a crime for us to disclose that to any unauthorized sources. so we can have someone kind indicating can look at all these pages that are completely blacked out. by want to make sure if we get the facts out. the facts are those document are coming to the congress. we are working fiercely to get them up here. budgets affect their blackout is not anyway and obstruction is illegal responsibly that we have. if there are concerns about the way in which we are redacting, i

said before, we should talk to chairman camp and we should talk to chairman baucus. they have authorities to provide information as well to other members of congress. checksum thousand program in place to make sure that the right discovery receives to the right and i want to make sure that we are leveraging those checks and balances and understand the facts spent thank you again for our service. i see my time has run out. spent thank the gentleman. let's see, with six and a half minutes left now. i will yield four minutes to mr. meadows, and he can cut think you yield some of the time to mr. jordan. >> for each one of you that have come here today, i think he. with a number of questions that we'll of questions that will get you can we ask that you respond in terms of, for those particular information. mr. werfel, i want to give you a chance to change what you just responded to with ranking member cummings. you said that we had 16,000 documents at this particular time to in oversight, and --

>> let me clarify spent we have 12,000. >> today, i said as of today, we are scheduled to produced by the end of -- in a, it's on schedule. i hope, that's michael but by the end of the day today we have additional pages of doctors that will put you at about 16,500 pages for the total. >> will those be any more meaningful than what we've already gotten? >> they are responsive to the documents that -- >> will there be any more meaningful? you're an educated individual. will they be any more meaningful? >> i don't how to respond to that because the documents that you requested it we're trying to provide you responsive documents, so they will be meaningful in some way if they are responsive but i don't -- >> we are getting a very clear message but it's just one i don't think -- spent visiting more meaningful than the doctors we provided. we provided yo you follow this debris provides e-mail associate with all of us. we provide you training materials. we furnish for you 19 witnesses

and dedicate 29 different times by committee's. that's meaningful information. i think it's very meaningful information. the notion we're providing you with information that is not i don't think is correct. i want to clarify the record. >> i would yield to the gentleman, mr. issa. >> thank you. didn't plan on coming back, but i always want to go for a couple of things. >> please. >> according to you nothing on this page is anything but 100% taxpayer specific information. taxpayer identity information. identity spent it may be. as i just went right to retain if i could express be no, i could express because no, no. i've go got to this is one of yu going to get to my point very quickly because mr. cummings made a point, and it's a good income except he made a point trying to disparage a long serving government servant, the ig. the ig has been consistent, as far as i can tell, in a highly, highly limited release under

6103. in other words, ranking member is upset because he's not getting progressive groups that under oath in the ig said were not targeted, his evaluation looking at the information. the amazing thing is he didn't defend him. and i'm shocked. i'm shocked that you would not at least say that the office of inspector general, which includes key lieutenant and one of them was the democratic deputy of staff director here, that they are above politics, above the partisanship, that they have a level of consistency. instead can you let him imply that he was basically trying to thwart an investigation on progresses. >> that was not my intent spent will you make it clear today that as far as you know he has been consistent in what he has said, that his office, vote includes people certain times work for republicans or democrats, that it is considered to be nonpartisan and the best of your knowledge have been up of questions because i will

respond in this way. i have deep respect for russell george at his office. of a long-standing relationship with him and other members of the ig community. in my short tenure here, and most along the way where we have disagreed. we have disagreed on the nature whether something is 6103 or take a direct nature of some of the facts and data associate with the 501(c)(4) backlog, et cetera. but to your point, i have no basis to challenge his integrity in any way, shape, or form. i think he's an individual of great integrity. and a glad you asked the question. >> he was shot by the ranking member. >> that's not true. >> well, i'm afraid -- >> there you go again. >> the record will speak for itself. thank you i haven't done my second round. the ranking member has. and i have my five minutes? >> okay, we have divided time. we have two and half minutes left on our side spin if i could have that i will be brief. thank you. send a subpoena, i've signed it

now, to secretary lew, who by the way i'm hoping he can get about his statements on the phony scandal about this and realize this scandal israel. real americans were really victims. now, and those victims, i would love you to sit down, look at the law and make the appropriate decision, which is withholding details on people who were victimized is not the intent of 6103. ..