. you have tsa who has been supporting the secret service with magnetometers, especially during political campaigns when they are stretched very, very thin. there's a lot of support from sister agencies within dhs. and that was looked at. >> but you also, the secret service does get support from the fbi and from other agencies who are outside of homeland security, correct? >> not to the extent, i think, that you see with coast guard and tsa. >> do you think that the change, to move the secret service into dhs -- the tsa is a new creation of that, but there was obviously a coast guard before that. so the secret service's interactions with the coast guard and the support that the coast guard has provided has actually been enhanced by having a department of homeland security? >> the panel didn't look into

that question. >> you don't have a personal -- >> my sense is that the service has -- the cooperation has been enhanced by being within the same agency. >> i guess i'd like to add that i think the panel's conclusion was, we identified a substantial number of issues that needed reform at the service. for those issues, we didn't think moving them from one agency to another would address really any of the issues that we identified. and so while we understand that that was a serious debate, we thought that the focus really needed to be on solving the problems that we found. >> if i could say one more thing. i think one interesting piece on treasury was that, being an older guy, i remember well a lot of the discussion back in those days from within the service about, you know, gosh, treasury

officials, wall street guys, finance guys, they really don't understand the enforcement mission well. so over time, you've had complaints about, you know, wherever they are, people are going to think it's better somewhere else. and they -- i believe it's correct to say that at that point, the director of the secret service reported to either an assistant secretary or undersecretary of treasury. and when the change was made, there was -- it was clear that the director of the secret service would report directly to the secretary of homeland security. so i think we addressed it properly in the report. >> thank you. thank the gentleman. >> now recognize the gentleman from virginia. mr. connolly for five minutes. >> thank you, mr. chairman. i want to pick up on that very last point, mr. hagin. one of the reasons it was

originally in treasury is because of the dual mission of the secret service. and i want to get into that. your report says the paramount mission is protecting the president and other high-ranking national officials. and allows no tolerance for error. and we agree. if you look at the secret service's own documents, it says they carry out a unique dual mission of protection and investigation, meaning currency investigation. in their mission statement, their own mission statement, they say the mission is to ensure the security of the president, vice president and their families, et cetera, and protect the integrity of our currency. and investigates crimes against national financial systems committed by criminals around the world. i want to ask, we're all focused on the protection of our senior officials in government, and dignitaries who may visit the united states, but they've got a dual mission.

and the question is, is that now, frankly, a problem for the secret service? they're having trouble with the paramount mission you've identified. maybe it's time to re-examine whether the dual mission thing makes sense any longer -- especially since we moved them out of treasury. >> congressman, we looked at that issue, and we think that's a very serious question. we think that the investigative mission in some form is consistent with the protective mission. some of those skills, some of those technologies dovetail in very nicely. that said, protecting the financial system of the united states is a massive endeavor. if there aren't bounds and limits put on it. and it's likely the case, and we think this is important, because it also flows through to budgeting and personnel issues, that there has to be a very

hard, good faith look at whether or not investigative functions enhance the ability to protect, or distract. and so the issue you've identified is very real. we share that concern. and that's one of the most important things we think a new director and a new leadership team is going to have to look at. >> let me add that on the question, the -- one of the reasons why you find that the investigative mission supports the protective mission is because of the need for surge capacity, or additional capacity when the president or other protectees travel, particularly foreign travel, as well as certainly during political campaigns, the arrival of the pope in the united states, and those kinds of things where you need to be able to draw on a significant force. you also need a period of time, those four or five years in the field, to train. and then ultimately come to washington to be part of the protective detail. if you didn't have the investigative mission, you would have a very different looking organization.

really focused solely on protection. and that, i think, is -- would be a very substantial change with a variety of pros and cons. ultimately as a panel, we decided that we think, as mr. filip said, that the investigative mission does support that protective mission, but that because we believe that the protective mission is paramount, a new director has to make some serious -- >> my time's going to run out. and i really appreciate mr. filip's candor. the currency side is a massive enterprise. and i don't know that it makes sense any longer to marry the two. it may have once. i agree the spillover and positive investigative part, but frankly, the protective vision should not preclude it. the opposite, i called the secret service on occasion to ask them to investigate a potential threat against a public official, including the president of the united states. they already have that capacity.

not tied necessarily to the currency part. now, and i would say to the chairman, who's invited bipartisan cooperation here, this may be something, mr. chairman, we really need to look into. whether this continues to make any sense. i would yield if my time could be frozen. >> yes. your time can certainly be frozen. >> i think it was frozen at 55. no, go ahead. >> our staff has been working together. i do agree with you that i think we should seriously look at separating out the currency -- the protection of the currency, the investigation of that. i do think the secret service does need an investigative arm. it does go hand in glove with their mission. but separating out the currency and giving that responsibility to the treasury is something we should revisit. and we will continue to work with you and your staff. we may very well jointly introduce something on it later. >> thank you. i welcome that. i absolutely welcome working

with you and the ranking member on that. this is something that has bothered me for a long time. final question, because i'm going to run out of time, and i thank the chair. training. your report is very troubling. you actually say, training's diminished to the point of being far below acceptable levels. that just sent a chill down my spine when i read it. what could go wrong with that. and i wonder if you could just elaborate a little bit on, what can we do efficaciously to turn that around and get it to far above acceptable levels? >> thank you for the question. you know, i think it's -- i want to be -- >> sorry, you've got to straighten out that mic. there you go. all right. >> okay. i think it's important to be very clear about what we're talking about. both agents and the ppd and officers in the uniform division, when they first go to the protective detail, there's

hundreds of hours of training, you know, when they're first brought on. so really what we're talking about is in-service training, the kind of training to keep you sharp, to hone instincts, to train together in an integrated way, to train around new threat scenarios. in terms of what can we do about it, one thing that we strived to do in our report was to set a benchmark, to have a standard that leaders could be measured against, whether or not they were seeking to fulfill that standard, and to have a staffing model to support actually implementation of that. so we set two benchmarks. we set a return to the fourth shift concept for the ppd. and, you know, we said -- we took a look at large metropolitan police forces. similar federal agencies of the protective mission. their training levels are between 5% and 25%. and we thought as a panel, you know, at least 10% for the uniform division, which if you think about it is about two days a month, is something that we

should want to aspire to. so we think setting benchmarks will go a long way. >> thank the gentleman. >> recognize the gentleman from michigan for five minutes. >> thank you, mr. chairman. and thank you to the panel. your report noted that there was a common critique that you heard that the service was too insular. what are the areas of greatest concern in which the agency needs to improve? >> i think these go to the leadership question, congressman. the insularity i think goes at least in substantial part to the idea of kind of an old boys network, for want of a better term, that discipline is not always transparent, or perhaps even uniform, based on whether or not people have served together in the past, or have familiarity with each other. the insularity also goes to the point of reaching out to a

broader intelligence community and law enforcement community, to gain insights about new technologies and new techniques that are available. perhaps even going so far as to reach out to sister agencies at friendly allied nations, you know, whether it be the israelis or the british secret service equivalents, to find what techniques they found helpful in real threat environments. in the past, that had been done, and it seemed that coordination with other folks who might have insights and experts had diminished. so those were the main sort of insularities that i think we were looking at. part of it also was infusing outside expertise in areas like human resources, budgeting, technology, congressional relations, that leadership might come in those areas that's more effective than folks trained in a protective our law enforcement background. >> who are the main individuals or groups that are bringing

these concerns to you? were these coming from agents on the line? >> yes, sir. but we also would hear admissions to that effect, statements to that effect from senior people. it was a uniform -- there were a lot of voices to that effect. >> you noted here that the secret service would send low-level representatives with little authority to the interagency meetings, and that they were, in your words, hamstrung from deriving benefits from their participation. who at the service was responsible for this practice? and i guess the other question is, why? >> i think it would be sort of deputy level folks within their subject matter areas would select the people who would go to those meetings. why? i think it was just a lack of priority being placed on, or maybe a failure to appreciate the benefits that could come from being in dialogues with other parts of the law enforcement, and intelligence

community in the u.s. >> and that's a problem of insularity then. >> yes, sir. >> didn't want to branch out and find anything different than what was normal? >> i think, sir, at its most benign form, is that folks are proud of their own organization. but, you know, pride can be a virtue and pride can be a failing, too. there needs to be humility and appreciation that you can gain a lot from other folks, too. >> how far down the chain of command does this extend, does that attitude extend? >> i think it's probably not uniform with each and every person. it's certainly something that the organization has had for some time. i think there's some people at senior levels who are more open to outside perspectives. some people at junior levels with the same dynamic. it's certainly something that is prevalent enough, that a new director and a new leadership team has to, we think, respectfully pay serious attention to. >> thank you, mr. chairman. i yield back.

>> thank the gentleman. now recognize the gentle woman from new york for five minutes. >> thank you, mr. chairman. and ranking member for holding this hearing on really a critical issue. the security of the leaders of our country. incredibly important. i thank all the panelists for being here today. and all your hard work. you would not have to be a security, or a law enforcement professional to recognize that there are some very serious problems with your department, with the united states secret service. you would just have to read a newspaper, or have some common sense to see that you are an agency in deep trouble. the repeated headlines about tawdry scandals with prostitutes, and secret service professionals, the horrendous lapses of judgment, and

high-profile breaches of security, including breaking into the president of the united states' home. all these examples make it clear that something is seriously wrong in the culture and in the management of the secret service. in any organization, it is not fair to assume that the bad behavior of a few is representative of the many. but we also understand that this is not just any organization. this is the united states secret service. it used to be one of the most respected agencies in our government. and you are tasked with some of the most critical law enforcement missions in our country. among them, and first and foremost, is protecting the president of the united states, the commander in chief, and the leader of the free world.

there is no margin for error in your job. there is no slack to be granted, and there is absolutely no possibilities for do-overs. so far more important today than just fixing the blame, and talking about all of these reports, is fixing the problem. now, the question that i hear from my constituents is, how in the world did someone jump over the fence, break into the white house, roam around the home where our president sleeps, and roam around rooms where his children play, how in the world did that happen? i don't want to know specifics. i just want to know in an overall statement, can we go to bed tonight and feel that the secret service is going to protect the president of the united states? and i'm going to ask ms. gray. >> thank you for the question. i think our panel believes that the secret service is doing a job protecting the president,

and the president ultimately is safe. there are multiple layers around the president and around his personal protection. your question about how could something like that happen, that you hear from your constituents, and the like, i think the report by deputy secretary detailed a series of lapses and also failures in training and communication led to that event. and that's something that, you know, we hope our recommendations going forward can try to address. >> how can we make sure that there's no longer failures in communication, and there are no longer lapses in protecting -- i find that the people are so concerned about it, because the number one goal of government is to protect our citizens. and to protect our population. and we created the homeland security, we took many strong steps in a bipartisan way after 9/11 to better protect our citizens.

but when our citizens see the president's home broken into, it's very terrifying to them. because they put themselves in the same situation, of being afraid of someone breaking into their home. and i just find it startling that this ever happened in the first place. and i also find your recommendation, calling for a new director from outside of the secret service, i've never heard of an agency basically saying, we can't handle it ourselves, we have to have someone from the outside come in and tell us how to handle it. can you explain why you made this recommendation, and why do you think it's going to work, and why do you think that someone with the ability -- it's very difficult to get in the secret service. and the training and everything else you have, that someone from the service cannot run the service. and do you now have a separate agency that's looking at protecting the president, the vice president as they move around in their homes? ms. gray again. and then anyone else who wants to come in.

>> sure. i think our assessment of the need for an outside director is that we thought that many of the challenges that will actually lead to addressing some of these issues in the future, uniquely at this point in time, could benefit from outside leadership. one of the things we say in our report is that was not always true during the time in the secret service, but given the need to have in place a staffing model so they can make decisions that reflect actually the mission given some of the prioritization issues that we have been talking about, how do you make sure that protection of the white house compound and the president are a priority every year and that, you know, the mission creep with other areas is not infecting the organization, all of those challenges we thought could benefit from outside leadership at this time. >> thank the gentle woman. now recognize the gentleman from north carolina for five minutes. >> thank you, mr. chairman. thank you, panel, for being here today.

i want to talk a little bit about what appears to be the number one glaring concern with the fence jumper. but i also want to talk about that from a budget perspective. so let me make sure that i'm clear on this. in your opinion, the fence breach was caused because of insufficient training, is that correct? >> i think we think that -- this, i think, is detailed in the deputy's report, that training and communications issues were a substantial component of that. of allowing that individual to get as far as they did. we make a number of recommendations both in our unclassified and classified portions of the report that would address some of those issues. we also think that, increasing the -- changing and increasing the height of the fence would decrease the ability of somebody to get over the fence at all, much less get as far as that individual did. >> sure. but a couple times this morning

i've heard it try to be tied into some kind of budgetary issue. my question would be, if one of you guys saw someone jump the fence, would you know what to do? >> there's no question that -- and i think the service has -- if you talk to people rank and file across the service, they would have said, i think many individuals would say, yes, i know what i would have done. i think there is -- what we did find, though, is there was disagreement about that. in other words, there were certainly individuals in the service who thought they would have immediately deployed lethal force. others said lethal force was not appropriate. many said putting hands on and tackling the person was the right approach. the concern that led to for us was that there was a lack of training so that you would know in the instant that you needed to react what you were supposed to do. >> sure. but we cannot correlate to that budgetary issues. we passed a human trafficking bill that will train tens of thousands of agents. there's no additional funding

for it. so sometimes training to me has no boundary. i mean, from the sense it's connected with the funding. is that a fair statement in your report? >> i think where budget and training go together is the concern that because of the -- training has really disappeared because of, or at least in no small part because of, the excess overtime that individuals are working. they've canceled in-service training, particularly for the uniform division. now the training is to an unacceptable level and those folks are working very, very long hours. there is an aspect of this that i think relates to resources, as i think we tried to make clear in the report. we do think that long-term, a new director is going to have to come define the priorities and the mission in the way the service hasn't to date. i think the chairman put up a slide about funding. it's not -- it has not been a question of congress not appropriating funds. the service not coming to congress and saying what it needed.

as well as making some of the hard choices about other aspects of the mission. >> granted. but miss gray, i believe you even used the term part of the responsibility was to keep sharp and to hone instincts. i don't see where that necessarily ties into more funding. i believe that training can be done without additional resources. is that part of your report? do you think that's fair? >> i think our view is that the reason why training has reduced so significantly, is because the work force is so overstretched. so we do think that you need more personnel at the white house, both in the uniform division and special agent population, and i do think that means more resources in the near term. >> let me use the last bit of my time to talk about budget transparency. were you surprised that no one in the secret service could answer some of the budgetary questions that you proposed? >> we were concerned about that. and as we indicated, the service needs to professionalize those

aspects of the service, so that they can justify within the administration as well as here the needs that they have. because we did the best that we could to identify what we thought was a reasonable number of an increase that they needed in the immediate term. >> true. >> but i think our word was, we were hamstrung in making more definitive -- >> could we maybe say that was one of your largest surprises, that there was no go-to person when you had budgetary questions? >> we were certainly disappointed that we could not get a number of questions answered. >> is that part of the reason you're recommending a director from the outside, someone who would bring a completely different perspective, not just the secret service side, the protective side, but the budgetary side. >> we do believe they need real experts from that area and promoting from the agent population is not the way to go there. >> recognize mr. hight from georgia.

>> thank you mr. chairman, and thank you to the panel for showing up. one question that i had, that i'm still, frankly, trying to wrap my mind around in relation to what you were just referring to. the panel found that the secret service does not have in place a system budgetarily in order to even make the most prudent budget decisions. and yet at the same time, of course, we need to provide more resources, so i'm trying to wrap my mind around this whole understanding of how can we say conclusively that more resources are needed when we are likewise admitting that they don't have a system of tracking the budget that they have. they don't even know how to manage and spend the money they're already receiving. can you just clarify that? >> certainly. it's not so much about tracking the money that they receive. but it is a work force and staffing model to make decisions about how to deploy the

resources that they have. again, it's more in the planning side where we found, i think -- and the retention of the capturing of the data side we found deficiencies. i think on this question of more resources, i go back to, for us, training really drove resources. if we wanted to -- we were unable to do the analysis to say, if we want to bring everyone down to a 55-hour week, how would you do it. what we were able to look at was, if we wanted to bring everyone up to an appropriate level of training, pursuant to the benchmarks ms. gray talked to earlier, that analysis we were able to do. and that is the basis for the 200 additional uniform division and 85 additional agents. >> on the training issue, i think all of us are stunned and appalled by the fact that something as simple as an incident someone jumping over the fence, so many people didn't know what to do. that seems like it's 101 type information that every agent ought to know.

the panlt looked into training conditions that the agents are operating and it was evidently during that fence jumping incident that there was one team that actually reported that they were not even aware of the layout inside the white house. this is an amazing -- so just respond to that as well. what plan is there in the training aspect if any to not only provide more training but specific training as to where these agents are operating. >> our report attempts to address what i would call the quality of training issues that you were raising in sort of two different ways. one is more integrated training. one of the things that deputy secretary found is that some of the uniform division officers were not fully aware of the roles that other officers were

playing. those standing close to the door, those on the er team those on the canine unit the different roles and responsibilities in terms of intercepting that person and so that in part reflects a lack of sufficient integrated training, training together as teams. that's one recommendation that goes to that. on the familiarization with the white house, there was indication that deputy secretary report that members of the secret service that responding to the incident were not familiar with the inside layout of the white house. one of our recommendrecommendations, we don't think this should be hard to do, but one of our recommendations is that this service invest in a replica so you can have training in realtime environment. >> okay. thank you. i want to go to mr. filip.

you mentioned a while ago that the human resources issue and the fact that you believe that there needs to be a human resource director from the outside coming in, i'm assuming from that that the method up into this point has been agents from within who have been overseeing human resources, is that true? >> yes, sir. historically the agents have occupied senior leadership positions in a number of areas that perhaps their background and experience doesn't best prepare them to perform. the fbi benefits substantially. we think there's a consensus on that by bringing in folks from the outside who have spent their careers in those areas perhaps outside in the private industry. or other areas. and come in to lead those. we think that would be beneficial here. >> one final question. i understand there's been changing over the last several years in the hiring process. among other things online hiring. who has been pushing these

changes? are you able to, where has this been coming from? >> i don't think we got a keen sense in time we're looking at where the changes were coming from. it seems as though people were trying to find methods that would be better and they did not work. that's part of the reason we think bringing in somebody from the outside who does this for a living will be able to improve things. i don't want to have us fighting the people on this. the events of the fence jumper were a failure. we're not part of the secret service but the secret service doesn't dispute those events were a failure. at some level, you can train for 100 years, maybe things would have been different. under any scenario they were a failure. we're not trying to say there was a fence jumper. there should never be a situation where anybody gets in the front door of the white house with a knife or otherwise.

i don't want to leave the impression that we have any ambiguity about that. or frankly that people -- i think the secret acknowledged that too. it obviously can never happen again. >> thank you. >> thank you. >> recognize the gentleman from oklahoma for five minutes. >> i appreciate the hard work that the panel has done. i think it's a tough task that you've dug into in a great bipartisan fashion. my questions will focus on the training aspects, because i think that's what's crucial ultimately in getting the job done. if the personnel currently are too deployed to train how will the additional uniform that other agents be trained? >> i think this is where our staffing recommendations and our training recommendations interlink. part of what we were attempting to do is start with asking the question what would be the ideal

training benchmarks that we want to achieve and try to back out of the staffing numbers. so you can achieve that without having -- without having to navigate around the forced overtime and other staffing issues. i think that's the answer to that. >> with the increase in the additional agents, obviously, you're going to be have to absorb those to train them which will, it's almost counterproductive because they're too deployed. you're going to make the recommendation that new agents happen. that's the focus of the question. how would that be absorbed? >> probably the way this would happen, we'd like the new leadership team to make specific choices about this. you would bring in an additional special agent population. what those individuals would come on board, they would go out

to the field and begin their four to five year training period. then you would bring individuals in from the field to increase the levels at the white house for the special agents. >> thank you. >> i think all of us are just taken aback by the 25 minutes of average training. as a former combat instrument that's astounding when you're entrusted with so many things where you may have to protect somebody's life. that seems totally inadequate. did any of that 25 minutes of training include sustaining the accurate employment of firearms? >> the data that we were given from the secret service did not include the time spent on firearm qualifications and the like. the numbers that we provided in our report, 42 hours of training

fiscal year 2013 and 25 minutes on average for the uniform division was a part from firearms qualifications. >> what specifically was the training focused on if it was, if you had other aspects of training, you're quoting 25 minutes but obviously firearms training or protecting people that have been injured or whatever it might be, what aspects of training were you looking at? >> the data we received gave us the aggregate training. we can talk about -- we briefed on some of the different training protocols in the classified setting. we want to be careful about that here. >> sure. >> but i think, for example just to give an example, one of the things in the report talked about lack of training around communications equipment and how to properly use communications equipment. that's like an appropriate subject of training. i think there's indication

there's not been a lot of that in recent years. >> then were there any training recommendations that you made focused on proper reduction of threats and uniform rules of engagement? >> i think we looked at this question of the use of force policy, for example, which had been discussed quite a bit. i think what we found was very different views notwithstanding the same words on the page. i think we felt that both additional training on that was needed but also that they needed integrated training so each individual knew what their role was. who was the person the last line of defense at the door. who is the person doing the tackling? all of those, how do you work in an environment where a canine has been released.

those kinds of things, we felt and i think again the events of september 19th needed to be addressed. >> there are parts of the report that speak to threat reduction. i appreciate that. i appreciate the sensitivity on that. my question was focused did you recommend a standard uniforms rule of engagement? >> the rule that the secret service uses comes from supreme court law about dealing with appropriate use of force that's pretty uniform whether we're looking at the metropolitan police in a big city or the secret service or the fbi or whatnot. it's not so much that there's ambiguity about the policy. it's the execution. >> that answers it. thank you. i yield back my time. >> i thank the gentleman. i think this is a big area that needs to be continued to looked at.

the use of force has got to be well understood by every single person. we can never make a mistake. in this day and age if isil and other terrorists, you don't know what's underneath them. it's terrible to assume nobody somebody doesn't have anything underneath their clothing. we should deal with it appropriately. it brings up a good point. the gentleman from georgia, mr. carter, is recognized for five minutes. >> thank you for being here and thank you for what you do. this helps out tremendously, so we appreciate your efforts on this. i want to concentrate for a couple of minutes on staffing. i'm concerned here. can you tell me how we're doing? as far as new recruits go and are we getting new recruits in?

>> at the outset there was a period of time where the services hiring process was not functioning as intended whether for budgetary or other reasons. they were not getting classes through. our sense is that has improved. they are using different hiring practices again. we think that is improving. we continue to believe that having some of the mistakes made in the past related to not having professionalize human resources function or led by professionals in that area, we think that's an important change going forward. >> you're acknowledging there's been a decrease in the number of new hires, people coming in? >> there was a gap two or three years there where they were not bringing classes through at the levels they needed to sustain the work force. >> your assertion is that was not caused by a lack of interest of applicants but by the hiring

process itself? >> i think there were budgetary issues. the hiring process, it wasn't that they lacked for applicants they struggled to get them through the process in a timely way. you have people start the process, go through the process for a year and fall out of the process because they failed the polygraph or for other reasons. >> hang with me real quick. what about the forces that it is today. where are we at with our labor pool? what percentage will we see retiring in the next five to ten or be eligible to retire. i'm worried about the fact that we're going to get into a situation where we don't have enough secret service agents. >> i think our concern was looking at that gap that, really looking three or four years out from now where the individuals in an ordinary or would have been hired and weren't would be starting their rotation in

washington as part of the president or vice president's protective detail. we think a new director needs to start planning now for that. that also includes, as you look forward, 2020 will be a year with the 75th anniversary of the u.n., a presidential campaign. that's going to be a year where service will be quite busy and they need to make sure they have the personnel ready to go and train ed trained in that -- for that period. and that takes preparation now. >> would you say the white house recognizes this. it's my understanding the last budgets submitted that congress has put more money in there in order to address this scenario. >> i think as we talked about in the report the issue we saw was the service having difficulty in

defining what it needed and seeking resources for that so it wasn't so much that -- it wasn't that congress was saying we're not going to provide the president's budget. it was that as this was working up through the process the service was approaching its budget by saying here is how much we have. maybe we ask for a little bit more rather than saying here's what the mission is, here's what we need to achieve it and pursuing those resources. >> well, for myself and i suspect, and i hope for you as well, one of the most disappointing things that occurred was low morale. how did that come about? did they not watch the movies? they get you all excited about being a secret service agent. what happened? >> one these folks are working extremely long hours. in our leadership recommendations, we talked about the lack of

confidence in the work force about disciplinary and other decisions, which i think has an impact there. we met with uniform division sergeants just shortly before thanksgiving. they didn't know if they were working on -- they didn't think they would know if they were working on thanksgiving until thanksgiving morning. those kinds of things and long hours of forced overtime, they take a toll on the workforce. >> listen, that sounds -- i'm a business owner. that sounds like a management problem. that needs to be addressed immediately. thank you again for everything you've done. we appreciate your efforts. thank you, mr. chairman. i yield the remainder of my time. >> thank you. i appreciate the gentleman. now recognize the gentleman from south carolina mr. gowdy, for five minutes. >> thank you. i want to thank you for your consistently hard work on this issue while you've been the chairman and even before that when you were on the committee. i will throw this question to any of the four panelists that can answer it.

explain how working counterfeit currency cases prepares you for personal protection. >> when a new agent comes out of basic training, they're assigned to a field office for four to five years. during that assignment they have various investigative roles. they are also serving as manpower for protective stops. if the president, vice president, any of the protectees come into your region, you're assigned from your investigative role to be part of the manpower squad, which is how they start to become familiar with the protective operations. >> i get how practicing protection details help you with protection details. i'm trying to figure out how investigating someone using an

ink jet printer to print counterfeit hundred dollar bills prepares you for that. i'm trying to understand how those two missions are combined. >> they develop law enforcement skills. they develop the sense of when someone is lying and when someone is to be -- >> which leads to this question. your applicant pool, do you draw heavily from those women and men already in law enforcement and already have those skills? >> i believe in the previous hiring practices over the last few years that's not the case. they were hiring off of usa jobs. >> why not hire ex-military? i know there's an age cut off but why not hire ex-military, state, local law enforcement. a field that already has the

basic investigatory skill package you're looking for, instead of hiring somebody who is an accounting major that decided they want to join a federal law enforcement? >> i think you're likely to see with the change in hiring process to shift to drawing more from state and local law enforcement and military and has been more common to the service prior to the period when we think the hiring practices really became problematic. >> i'm sure the four of you know this. the u.s. marshals have the broadest jurisdiction of any federal law enforcement agency. they just don't use it. they search for fugitives. they provide security in the courtroom. they provide security for courthouses. they have very broad jurisdiction. they just don't use it. they have become experts in narrower field. i loved all of my years working in the secret service. i thought they were really good on the currency and counterfeiting cases.

i never understood how those two skills go together. searching for missing persons and personal protection i see how those go together. but investigating the use of ink jet printers, i don't see how the skill sets go together. it seems to me y'all are already on top of that. one question that arose with the former director that i'm not sure i got a good answer to. you mentioned training. i don't think the failure to secure and search a crime scene is a training issue. and i say that because i believe the housekeeper who did not train at either glenco or quantico knew enough to alert someone, you might want to come up and search this part of the white house. if you have to be trained to search a crime scene you're

probably not in the right line of work. so what explanation were you all, if any, able to uncover for how they missed that? >> i think you're putting your finger on something very important and it also relates to the man who got inside the front door of the white house with a knife. there are adequate explanations for failure to secure that evidence of the shooting up in the residents nor you can talk about things forever. you can talk about training forever. if there were never another hour of training for ten years, no one should get in the front door of the white house again. we're not here to defend either of those. period. those were grave mistakes and neither one should have happened. >> i appreciate your candor and the work you did. the secret service has a very rich, deep, good reputation and history. i would like to see it get back to the days where i remember it. it's a very important agency.

we have to get it right. thank you, mr. chairman. >> i thank the gentleman. recognize the gentleman from alabama for five minutes. >> thank you. miss gray, you mentioned the excessive amounts of overtime. it has been mentioned several times in this hearing. do you have any idea how many overtime hours are being worked annually? >> i think when we looked at, with respect to the agent population, we don't think there are actually accurate records for that. if we found that routinely enter pay time even when working 17, 18, 20 hours. we think the accurate records for that are difficult to find. >> let me ask you this, if the agents are not logging the hours they're working, does that mean they're uncompensated for overtime?

>> they are getting paid for their eight hours and l.e.a. pay. i think frankly we want a high performing culture. i don't think they view it as uncompensated time. certainly they are working extraordinarily long hours well beyond what anybody has measured. >> i don't think i'm communicating this correctly. what i'm trying to find out is within your budget process you have so much budgeted for salaries and benefits and certain professions when you work beyond 40 hours you're compensated for your overtime. it's time and a half. some is straight time. that's what i'm trying to find out. >> in the uniform division they are compensated for overtime. what we found in the uniform

division side is that there were wide variations. some people were working extraordinary amounts of overtime. >> that's almost 50% more of what they should work. that has implications for stamina overtime. we're paying for this. does it make sense to be paying for overtime when we can convert what we're spending on that to new personnel? >> i think that's a finding of our report. the personnel did not keep

increasing and they substituted overtime for bringing on new personnel. you're looking at the chairman's chart if you see the gap this hiring and the number of classes that go through, that's made up through overtime. we think a less tired work force would, some of that would be compensated and bringing on new people having a less tired work force. >> even on the training side you could have them trained up but if you're working that many hours you're reducing their effectiveness. the thing that gets me is it's a management issue is you're spending money on overtime. someone's making a decision to pay overtime rather than bring in the new hires which would reduce the demand on your

personnel. that just doesn't make sense. >> we agree with that. >> the clock changed on me. i thought i was out of time. the thing that keeps coming up is there seems to be an overall decline in moral in the service. i commend you for the work you're doing. i don't know how much input you had into the report we read on the recommendations for reforms. i wholeheartedly support what's in the report particularly bring in someone from the outside. i'm a big believer in bringing people from the outside into a huge organization because they

can see things that nobody else inside sees. you develop a culture over time where you start to miss the of course. i want to encourage whoever needs to be encouraged to pursue someone from outside the agency, at least in a transitional type setting to be able to come in and make the changes that will bring the agency back up to the standard of excellence that you've enjoyed for years and years and that we all expect. >> hit the talk button be you could. thank you. >> very good. i got a couple of questions. first of all, thanks for spending so much time with you today. really appreciate you doing that. obviously there's a lot of

discussion about who the new director is going to be. there's a feeling he ought to come from outside the agency. i want your opinions. why do you believe the next director should come from outside the agency? >> maybe we all should speak to that. i'll take the first crack at it. we think that all things equal it's easier for an outsider to achieve some of the things that are important. taking a fresh look at priorities. having consistent discipline, making tough personnel decisions, bringing in outside folks in the hr. again, obviously that's the president's choice ultimately. sometimes all things aren't equal in the world and someone from the inside brings in an outside leadership team with him or her and they're the right person at the right time. we'll support whoever the president chooses to extent. we be supportive of that. with think an outsider would be able to do some of those other things easier. >> i would agree with that. the only other thing i would add is our report goes into detail in some of the budget and administrative functions of the

organization that really need to have a priority in order to support it and i think we think an outside director can really bring a fresh perspective to that. >> i would echo that. one of the opportunities we had is to talk broadly across the federal government and we think there's a lot of talent that could help the service and we think that while promoting from within for certain positions is important. we think there shouldn't be more people at senior levels who come from outside the service with different backgrounds. >> having one who has the experience at changing an organization and being able to

aggressively drive the changes that are needed here to both the use of technology, the management of technology, the human resource and budget issues really need a change agent. there are a lot of really great people in the secret service. i think that we met and talked with quite a few people who we feel that with some further experience and education in terms of management training would be great directors of the service going forward. at this point in their history they need somebody who can aggressively drive change and our view was that person best come from the outside. >> that's kind of illuminating. usually people are afraid of somebody from the outside. you guys would not -- you feel somebody other than active director that the outside view would been an improvement?

>> we did not do any sort of personnel review of acting director clancy. he's done a great job and been a great public servant. we didn't do a review to that affect. there's certain parts of this job that are easier for an outsider. i think we all have great respect for him. >> right now you fly in agents. it's very expensive. could you comment on that practice? >> it does reflect an effort by the service to address short term trying to ensure they have adequate manpower at the white house. that's not a cost effective and long term strategy for dealing with these issues. that's why we recommend them bringing on more people

permanent hires, the 200 additional units, the 85 special agents. we think that's a better way to do this than more expensive ways to do that then really only for short term. >> okay. >> you feel we're spending money unnecessarily by doing this? >> that's right. >> thank you. >> i want to thank you for all you've done. i want to zero in on something we have not spent a lot of time on. when i was the chairman of the subcommittee over maritime

transportation in the coast guard, under the transportation committee we had a situation where the coast guard was purchasing boats that didn't float, literally. what we discovered was that the coast guard did not, the way they instructed their contracts and did their procurement, the major problem is they didn't have people in house who knew about it which is incredible. we literally lost hundreds of millions of dollars that takes me back to maybe we need to have people in certain areas to do that. then i was listening to what the chairman was reading. i asked myself, how does those things happen. i was wondering how significant is that.

sounds like what they do is they take agents and put them in these positions that they may not, i don't want to say might not be qualified for but probably people who have trained in those expertise that would be better in that. can you tell me the significance of that? have i got that right? >> you do, sir. i think the significance of it is real. i guess the way i would put it, i guess nicest way to put it is in life you try to put people in position where they have the

best chance of succeeding for themselves and the organization. if you have somebody who is an a plus protective person or law enforcement person they may not be an a plus person at media relations. we all have our strengths and weaknesses. what the fbi did under director muller and it seemed to be a material improvement was try to recruit, it's not always easy. it's hard the get people the leave their positions and move things but put a real focus on recruiting experts who would come into the secret service. they were attracted to the mission. it was a way to engage in public service. it was way to make a difference in america and be involved in human relations. be involved in i.t. efforts for the bureau. it's a we publicized history where it wasn't that great at i.t. for a while. they had a lot of expensive challenges and failures. they got better. we think respectfully, again,

that this is an area that would merit serious consideration because bringing in senior level people in human resources and budgeting and technology would really move the needle for the whole organization and great public service for the senior folks who came in. >> to be fair, the service does employ experts in human resources technology and other areas. that do not ever occupy the senior most spot. it's hard when the top guy is not holding that spot. >> you needs to bring in the experts and give them a seat at the leadership table. >> we talk about morale. one of the things we find in hiring people even hear on the helm, people like know they have a chance to move up in the organization.

the people that you've talked to, the agents, did they say they would prefer somebody from the outside? >> we got a mix of views on that. i think very, very telling that there were a number of individuals who talked to us who said that we really need, that would be a sign of change and that we think as an organization we would benefit from that. we did get a mix of views on that. there's within the aging population was this one being fairly applied. that's something the director has to regain the confidence on

the work force on. on the uniform size there's been errors in the secret service where it was possible to move up from the uniform division up through the special agent ranks. we see to the that the pathway is not really open. i think a new director has to think about opening that up again. >> the chairman and i have been working very hard on this issue. your report has been a guiding light. i cannot tell you how much we appreciate it. it's allowed us to delve into some things we probably would not have known about. all your recommendations will help us tremendously. it's the kind of thing we probably need to start with so that we can then delve even

deeper. i want to thank you. i want you to know that i think what you've done will make the secret service a much stronger organization. are store the on thorough that we have known for many, many years. thank you. >> i have a couple of questions for you and then we'll wrap up. they made this a priority and made it happen and smart enough to engage you all. it's a first rate panel. we appreciate the depth in which

you were able to get information and the report is so valuable to us. thank you for your time. what types of documents were you able to, the size, the quantity. >> thousands of pages of documents. everything from prior reports, sort of the kind in the 1990s, for example, there was the plane that went down on the white house property. there were a series of reports that came out of that. as well as lots of budgetary documents and manuals about everything from training to how to undertake certain operational activities. >> how were they produced to you, paper, electronically? >> i think both. >> how long did it take until you actually got the documents? >> i think we got terrific response from the service when

we asked for things. i think we were very happy with the responsiveness of the documents and frankly folks came to us with a lot of candor and gave us their unvarnished view. >> if you were to ask for documents how long would that take to get back? >> i'd probably have to ask our staff about time frames. i probably wasn't on focused. >> you started your work. day one was? >> we were brought on board at the end of the october and we worked through december 15th. >> that's an amazing amount of time. did the secret service ever complain about giving you these

documents? >> no, sir. >> any challenges with getting these documents? any personnel issues that they cited? >> i think we indicated, i think one of the challenges was to get kind of budget, the kind of resource documents with respect to evaluating some of the staffing issues that we were concerned about. trying to get that information was challenging. i don't think they have it in a form that's sort of useful to use. i would identify that as a challenge that we had. >> the budget? >> those documents. because it was difficult to get information about manpower usage and particular staffing as i think i indicated to one member we were able to assess from the bottom up what you would need to bring the training up.

>> we want to thank you for your good work. you've made quite a service. it's truly valuable. i think the service is listening to you, homeland security. we certainly are. we thank you again for your participation today. i hope we find all of these recommendations are implemented in the fullest. >> there is for our own sake. mr. phillip, you were talking about, you were answering a question and talking about the

president making a selection. then you went onto say we would support that. what does that mean? not necessarily that particular question. what do you see as you all's role now? that's what i'm trying to get to. >> i don't mean to sort of elevate our expertise unnecessarily. we put a lot of time into it. we hope we generated some insights that are useful. if it's useful for them to meet with us, so long as it's okay under the rules of appointment and all that, i can speak with great confidence for everybody involved that we would be happy to try to be supportive and useful to them. >> was it your understanding when you were appointed ta that would be part of it or is that something you're aing we're willing to do? >> i think we just want to do it.

we have developed a great respect for the secret service in this process. obviously this is an issue that anybody who cares about the country and we all truly do in the most bipartisan way that you all have embodied can feel very proud to have any small contribution towards and if we can make any further small contribution we'd be proud to do it. >> that makes me quadruple my thanks. i'm sorry. that you would do your duty and then say that we're willing to follow up to help make this organization the very best it can be. i think this is what america is

all about. this is what you all or what makes this country the great country that it is. i don't say that lightly. i really appreciate it. i know our committee does too. >> we thank you. we thank your staff. we appreciate the great work that was done. this committee stands adjourned.

michael flynn testifies today. here's a look at what he said to the house armed services committee. >> you have asked me to comment

on the state of islamic extremism. today, i have the unhappy task of informing you that according to every metric of significance, islamic extremism has grown over the last year. whether it be the scale and scope of isis and its associated movements, the number of violent islamist groups a territory which these groups control, the number of terrorist attacks these groups perpetrate, the massive numbers and suffering of refugees and displaced persons due to these islamist groups. that's approximately 15 million people. the amount of kidnapping and rape of women and children by these groups the numbers of casualties they inflict. their broad expansion and use of the internet, which is very serious. or just their sheer barberismarism we've witnessed. it is growing. we are at war with violent and extreme islamists sunni and xi

ya shia. a vision of how the world and society should be ordered and they believe violence is a legitimate means of bringing about this ideal state. the violent islamist is serious, devout, committed and dangerous. his ideology justifies the most heinous inhumane actions imaginable, and he'll not be reasoned with nor relent. this enemy must be opposed killed, destroyed and the associated extremist form of the islamic ideology must be defeated wherever it rears its ugly head. there are some who counsel patients, arguing violent islamists are not an threat and can be managed as criminals. i respectfully and strongly disagree. i've been in the theaters of war of iraq and afghanistan for many years. face this enemy up close and personal and i have seen firsthand the unrestrained cruelty of this enemy. they may be animated by medieval

ideology, but they are thoroughly modern in their capacity to kill and maim as well as precisely and very smartly message their ideas intentions and actions via the internet. in fact, they are increasingly capable of threatening our nation's interest and those of our allies. furthermore, it would be foolish for us to wait until our enemies pose a threat before taking decisive action. doing so would only increase the cost in blood and treasure later for what we know must be done now. our violent and extremely radical islamist enemies must be stopped. >> see the full house armed services committee hearing in our video library any time at c-span.org. keep track of the republican-led congress and following its new members through its first session. new congress best access on c-span c-span 2, c-span radio and c-span.org.

>> up next, the senate finance committee tackles the tax code. a pair of former senators testify. democrat and former presidential candidate bill bradley and oregon republican bob packwood, both served on the finance committee while in the senate. this runs two hours, ten minutes. today's hearing is about the need for tax reform and what lessons we can learn from the tax reform act of 1986. the last successful overhaul of the united states tax code. we have before us today two former senators who were key to that effort. i don't know why they call you former senators. i think you're always going to be senators to me. i look forward to hearing their thoughts and advice, and i think we all do, during today's hearing. before we engage meaningfully in tax reform we need a clear vision of what we want success to look like. a vision is not a specific

system of rates, of deductions or credits. instead a vision is how we want to change the opportunities for american families and the rewards that americans receive from their labor. entrepreneurship, and investment. a successfully reformed tax system will help make america the best place in the world to work, conduct business, invest, and prosper. a successfully reformed tax system will be one that provides economic growth, and is simple and fair. this, more than anything else, should be our vision for tax reform. the landmark tax reform act of 1986 was developed by then-chairman bob packwood through a careful and methodical partisan -- bipartisan process that relied heavily on member input. senator bradley was a key part of that process. i don't want to leave out congressman rostenkowski and a whole rash of others in the white house at that time. but these two are the two great leaders in the senate at that time. over the last few weeks we've begun a similar process that we

hope will yield a similar result. tax reform legislation that both parties can support. the 1986 act signed in law by president reagan reformed a costly and complicated tax system into a simpler one, with lower tax rates for american households and businesses, affording them greater personal prosperity. over time our tax system has once again become costly, complex, it's impeding growth, standing in the way of shared prosperity and placing american workers and businesses at a distinct disadvantage. put simply, it is past time for congress to stand up once again to fix our broken tax system. if you've been around washington over the last few years, chances are you've already heard me talk about tax reform. i've been making the case for tax reform on the senate floor, here in the finance committee and public appearances and written materials and in private conversations.

in december the republican staff of this committee produced a comprehensive report outlining the need for tax reform and providing some direction to our overall efforts. i'm sure everyone here has read that report cover to cover. i've already publicly laid out seven principles that i believe should guide our tax reform efforts. i will not go in to much detail on each principle today, instead i'll just talk about them briefly. first principle is economic growth. tax reform if it's done correctly should promote growth, and significantly reduce economic distortions that are present under the current income tax system. the second principle is fairness. the income tax base which has become riddled with exclusions, exemptions, deductions, and credits, should be as broad as possible. tax reform should broaden the tax base by eliminating or reducing a number of tax expenditures along with lowering tax rates and removing distortion. the third principle is simplicity.

the taxpayers and businesses spend over 6 billion hours a year complying with tax filing requirements, with annual compliance costs in excess of $171 billion. which is more than the gross domestic product of new zealand, for instance. simplifying the tax code will result in greater clarity and compliance, and will free up resources for families, job creation, and other productive uses. the fourth principle is revenue neutrality. tax reform should be revenue neutral and not an occasion to raise taxes on american households or businesses. general revenues already exceed their historic average as a share of our economy and greater revenue should not be an objective of reform. the fifth principle is performance. the joint committee on taxation lists almost 100 provisions of the tax code that will expire over the next decade. this is unacceptable. families and businesses should be able to plan for the future without wondering if the tax

code is going to change from year to year. the sixth principal is competitiveness. the combination of a high corporate tax rate, worldwide taxation and the temporary nature of some tax incentives makes american companies less competitive when compared to their foreign counterparts. tax reform should reduce burdens on businesses, large and small, to allow them to more effective compete on the world stage. the seventh principle is the promotion of savings and investment. many aspects of our current tax system discourage savings and investment, thereby hindering long-term growth. savings and investment help build the capital stock, providing fuel for economic growth, and it generates prosperity for american workers and businesses. these seven principles are the guideposts that we use when looking at tax reform proposals. i think we're going to have an interesting hearing today. we have two really great former leaders, chairman packwood and senator bradley, to see what advice they can give us if we undertake our tax reform efforts in this congress. i did read showdown in guchi gulf and some indication of how difficult this was. if anything it may be even more difficult today, because of the mess that has occurred since, none of which you deserve to be

blamed for. senator widen? >> thank you very much, chairman hatch. as chairman hatch noted, the finance committee is joined this morning by two legislators who are at the heart of the last major overhaul of the u.s. tax code in 1986. chairman packwood spent more time than anyone figuring out how to make the numbers in tax reform work. that is the tough work of legislating. senator bill bradley was the intellectual godfather of the reform plan that broadened the base, closed loopholes, and kept progressivity in the code. senator bradley lit the fire that got the reagan administration invested in reform. and i don't think anyone would question my judgment that senator bradley had by a wide margin the best jump shot in the senate tall guy caucus.

now if there's one obvious similarity between 1986 and today it's that people are quick to say that tax reform is absolutely impossible. americans say congress can't organize a two-car parade. there's no way they could come to the on major economic legislation. so what happened three decades ago needs to happen again. turning the impossible into the possible. the congress and president reagan came to the to pass the 1986 tax reform act based on what i call principled bipartisanship. one side wanted to flatten the tax code. the other side wanted to close loopholes and guarantee that the tax code treated everyone fairly. both sides said we're going to set aside the partisan attack. look for common ground, and each side came away with the feeling that it had upheld its principles. when president reagan signed the bill into law, he called it an historic overhaul of our tax

code, and a sweeping victory for fairness. he continued, and i quote here, it's also the best anti-poverty program, the best pro-family measure, and the best job creation program ever to come out of the congress of the united states. those same objectives guide the finance committee in the congress that works again to modernize our tax system. reforming the tax code is always a herculean task. but the same strategy of principled bipartisan can work once again. the congress can turn the impossible into the possible. however, policymakers need to recognize that the process is going to look different. not every part of a 30-year-old game plan for tax reform can work today. china and india are now superpowers in the global economy. which is a much bigger factor in the tax reform debate. the gulf between wage earners in the top of the income ladder has widened. and america is at its best when a rising tide lifts all the boats, and it should be obvious that making that reality -- that

a reality once again is going to take some hard work. the status of the middle class across america is at the top of the list of compelling issues for tax reform to address. it's fundamentally unfair that a middle class wage earner could pay a higher tax rate than an affluent person whose earnings come entirely from investments. the tax code should not be used to punish the wage earner in america. many tax incentives for college education and retirement savings are simply out of whack. the support those incentives provide don't always get -- get to those who need them the most. and that ought to change. another challenge is making america more competitive in the global economy. today, look and come away saying our country is trying to win a road race in a 30-year-old car. our competition, meanwhile, trades up to more efficient models. america hasn't done enough to drive innovation at home, and worse, the tax provisions for research and development expire year after year. in 1986 there wasn't a lot of talk about the tax code. for example, and a clean energy future for our country.

that's something else that has to change this time. and finally, modernizing our tax code has to be done in a fiscally responsible fashion. tax reform cannot become an exercise in slashing rates at any cost. the biggest lesson from 1986 is that tax reform is possible, when democrats and republicans set partisanship aside, come together, and focus on shared principles. over the years, i've talked frequently to senator bradley about how tax reform is always totally completely and thoroughly impossible until that moment when it happens. the finance committee today has two experienced, knowledgeable witnesses who are going to help and finally, modernizing our tax code has to be done in a fiscally responsible fashion. tax reform cannot become an exercise in slashing rates at any cost.

the biggest lesson from 1986 is that tax reform is possible, when democrats and republicans set partisanship aside, come together, and focus on shared principles. over the years, i've talked frequently to senator bradley about how tax reform is always totally completely and thoroughly impossible until that moment when it happens. the finance committee today has two experienced, knowledgeable witnesses who are going to help us get closer to that point today. chairman hatch, thank you. and i look forward to our witnesses. >> mr. chairman, mr. chairman if i may have a point of privilege just for a moment? and i thank the chair very much. i am in a intelligence briefing on iran. but i wanted to come to join the committee and its leadership in welcoming the most outstanding united states senator new jersey

has ever had to represent it. not only is he had a great ability to shoot a three-point shot effortlessly, but the intellect that bill bradley possesses, and his willingness to pass the ball to fellow teammates, made him a consummate successful united states senator here in new jersey. so, i've read his testimony. i look forward to the q&a so we can engage in some of it, and i appreciate him and senator packwood joining us. >> thank you, mr. chairman. >> thank you, senator. i think that was pretty -- of our senator. our first witness is bob packwood. senator packwood was first elected to the u.s. senate in 1968, and served the people of oregon and this body for 26 years. he was chairman of the finance committee from 1985 to 1987 and presided over this committee's efforts to draft and pass the

tax reform act of 1986. he made a typical difference in this, as did our other witness. he also served as chairman of the commerce committee for four years. and prior to his time in the senate, senator packwood practiced law in portland, oregon, for ten years. was elected to serve for three terms in the oregon state legislature. he received a bachelor's degree in political science from william f. university -- willamette. i got to pronounce that better don't i? and a law degree from university of new york law school. we feel honored to have you here today. we know you can help us in many ways to understand some of the difficulties we're going to have to get through. and hopefully give us some advice on how to get through it. our second witness is another great human being who i greatly admire and admired before he

came to the senate, and that's senator bill bradley. senator bradley represented the people of new jersey here in the senate for three terms. beginning of 1979, and as a member of the senate finance committee he played a pivotal role in the drafting and passage of the tax reform act of 1986. of course prior to his time in the senate, senator bradley was a great professional basketball player. he's a two-time nba champion and a member of the basketball hall of fame. senator bradley holds a bachelor's degree in american history from princeton, university and a master's degree from oxford university where he >> and senator bradley also holds a record for the most points ever scored in the play of basketball playoff in portland, oregon, when he scored what, 64 points? 58. mr. chairman, when i was contacted everyone asks how do you do it in '86, and are there any other parallels till today?

there are some but the circumstances were different. in our era, fairness was the issue, not income and equality. and the next to the last page of my statement, you will see a list of newspaper stories about people that paid no taxes at all. industries, defense industries at the time of the reagan buildup that not only paid no taxes, they got money back. and the public, and the members of congress, could not understand how wealthy corporations, and wealthy individuals could pay nothing. it wasn't fair. so that was the premise we were operating under at the time. you will find -- you will find in my statement on occasion the word diary. that means it was taken specifically from my diary at the time. now, what happened. first tax reform is not a new idea. stanley surrey who was president kennedy's assistant treasury secretary for tax came up with

the idea of tax expenditures. you can lower taxes and get rid of them. bill bradley and dick gephardt in their fair tax said the same thing. studies treasury one and treasury two, we all knew how it worked. we all knew that you could lower the rates, if you could get rid of deductions. it's pure mathematics. the house had public hearings for a year in 1985, and they had a lot of individual votes on things as they went along. and they picked up enemies. they picked up barnacles because some of those interests lost their votes and there's lots of single issue groups. and i don't mean the nra or right to life but you touch mortgage interest, and you've got -- you touch charitable contributions and you've got every organization in the country opposed. and the problem with the -- the

house bill is that they had enough of these barnacles attached to the bill when they finally came out of committee, that there were votes on the floor to pass it. it would have failed but for the fact that ronald reagan literally came up on the hill. met with the republicans and said, please vote for this bill, i will veto it if it passes in this form, but send it to the senate and see what they can do. with that, enough republicans changed their vote and the bill passed. although you'd never know if they changed their vote because it passed on a voice vote in the house. comes to the senate. and in those days the senate didn't get going as quickly as you've gotten going now, and going till mid-february or march. i finally started having some hearings on this bill but we didn't need many hearings because in the summer of 1985 we had about 30 hearings on the subject of tax reform. just in case the house would pass something. because if they passed it, i mean we have to act relatively

quickly and i didn't want to have a lot of hearings at the same time. so we pretty much cleared the deck of hearings. but there's one thing that caught my mind at the time of the hearings. and i would ask witnesses how low would the tax rate have to be before you didn't care whether there was any deductions? how low? 30%? 20%? 25%? it's always in that range. i didn't think much about at the time but i was intrigued that almost every witness i would ask, that's what i would get. well, all right. we come to the spring of 1966. because i'm frankly making no progress in committee. we're not making the bill any better. we're not making it any worse. we just aren't getting any place. so on friday, april 18th, i simply adjourned the committee, said we're done with the bill. somebody said you mean we're done for the day? i said no we're done with the bill. this is the end of this bill.

and at that stage i called them and this is where things moved so rapidly. i called david brockway, who was then the chief of the joint tax committee said give me three bills, 25, 26, 27 percent. he says 25% you'll have to get rid of mortgage interest. and bill i remember you saying how much trouble mortgage interest on your bill. so i asked him what about 26%? that's friday. the following tuesday he comes and he gives me three, not bills. they weren't bill form but three plans as to how you could get 25%, 26%, 27%. and i looked at them and then i was delayed for 2 1/2 days, because at this stage, up came fast track for the canadian free trade agreement. it's one of those things where the president can't move unless you give him fast track authority, and there was a

deadline. if congress had not acted by, this is tuesday, the next wednesday at midnight, he got it. the house had not acted. fell on our side to take care of it. i thought it was a slam dunk. i was sure we were there. turns out i didn't have the votes. i was missing one. and it was sparky who was mad from hawaii that the president had not answered his letter on macadamia nuts. and i had to get over that hurdle, and bring him around. we finally succeeded in doing it but it was thursday before i was done. then on thursday i presented to the committees at the same time our committee just the outlines. we have no bill. just the outlines of what might be possible, and they seemed to like that. so i thought to myself, meeting's over, and getting toward the weekend and i'm thinking at this stage how are we going to do this? and i thought the only way it can be done is bipartisan, quickly, and behind closed doors. the bipartisan because i could

see any bill that was utterly partisan on the republican side would have no success with the house conference. any bill that was not done quickly, but hung out like the house bill did, would pick up enemies all along the way. and it would have to be done behind closed doors. it was helpful to have the president on board. it wasn't critical, but it was helpful to have him basically going the same way we were going to go in the senate. on that weekend on saturday and sunday, i called six senators. bill bradley, george mitchell, pat moynihan, jack danforth, john chafee, malcolm wallace and i said would you be willing to meet in my office starting next tuesday at 8:30 to see if we can work out a bill that would be satisfactory to us, and the president? every one of them said yes.

and now passed starting that tuesday the most extraordinary experience in my life in politics. we met from tuesday to tuesday, the bill was at -- every morning at 8:30 i'd meet with staff at 7:30, this core group, a cabal as i called it at 8:30 we'd work out what we thought should be in the bill. we had one or two open committee meetings but basically the committee was just marking time waiting for us to finish. and you could tell although the meetings were behind closed doors there's no secrets in this town. and the board was getting out. we were having the meetings but no one exactly knew what it is we were doing. but on the thursday between these two tuesdays, came a phone call that became very important in this whole process, and i will read it to you, because it's from the diary. back again to tax reform in

closed session was interrupted by a phone call from daniel rostenkowski. bless his soul he said, pal, i've been thinking of coming over there and without fanfare, without press, just to say i've been through it. i know every day you go through troughs and on hills and i've been bleeding for you. but i think what you've got in terms of tax reform is the best thing congress has seen in ten years. you get this through the senate. and between the two of us we're going to put out a bill that for a generation of americans will look like a pinnacle. god i appreciated it. what he was saying, with the ways and means committee chairman is saying write this bill in the senate, ways and means doesn't say very often. we continued our meetings through friday, and then we had a public meeting friday afternoon and i said to everybody, we're done. and we're not going to meet this weekend. by this time, the hallway is packed with lobbyists, we have

speakers out there. committee we're done. we're not meeting at all this weekend. cheers in his office. and then i said, to the core group, but we will meet tomorrow. bill had already planned, went to kentucky that night for a speech, cansinged the kentucky derby and came back to be with us the next day. on that saturday the seven of us met all day, from about 8:30 to around 4:30 or 5:00 in the afternoon, and that tied up all the last of the things we needed. joint tax needed a couple days to get it together. but they would have it for us monday or tuesday. and we were ready to gone tuesday night until i finally had to make an odious deal with the oilies to get their support, not the committee, we could have beaten them in committee, but to get their support for something we needed desperately on the floor and if we lost this

particular issue on the floor the bill was dead. and that was it. we vote that night and most of the committee had not ever seen the whole outline of the bill or the whole bill until that night. so from tuesday to tuesday the seven of us worked that night the bill is adopted 20-0. now, can you do the same thing now in this committee? here are the things that would be critical. it's helpful to have the president on board, to have him with you from the start. but at a minimum, you've got to make sure that he's not against you, or gives the impression that he's not sure if he's going to vote for it, or he has some questions, because you're not going to get your members to take tough votes on things that the president might veto if you put them in a bill. so at a minimum he must say i'm open to sending you a good bill. two, i think you're going to have to do it in much the same

way we did, which is behind closed doors. but that's not uncommon in the house and the senate, even today. behind closed doors, and try to do it quickly, and present it in one grand bill. we did it combining both corporate and individual into one bill, and then used the money we raised from them to lower tax bills for everybody else. if you look on the last page of your statement you'll see who the major groups were we hit. it was almost all corporations and rich individuals. and do it in one bill so that people don't have to pick out a particular thing that they don't like and are forced to go on it. give them this. you give them the whole bill and i think they'll go for it. and so that's what we succeeded in doing and believe it or not, hitting business as hard as we did, raising their taxes, about $140 billion, we managed to lower the corporate rates from 48% to 34%. lower the individual rates from 50% to 27%. and keep the bill revenue neutral. you can do it. but orrin and ron, the two of

you are going to have to make an agreement as to what we're trying to get, and the thing i like about the fact that the two of you doing it, ron, you may recall about ten years ago we ran into each other in the dry cleaners. and you were working on tax reform then. and i know, orrin, you crossed party lines many times i remember you working with ted kennedy on things. we both showed a willingness to work across party lines and on some occasions when it didn't please your parties too much. so it can be done but it can only be done if the majority and the minority at the start are on the same page. thank you, mr. chairman. >> well, thank you. that was fascinating. we're very appreciative to have that overview. senator bradley, we'd love to hear from you. >> thank you very much, mr. chairman. it's always a pleasure to be on

a panel with senator packwood. he's an extraordinary leader, and he ran the committee with great effectiveness, not only on tax reform, but on a whole series of other issues. this is also a first for me. the first time i've been in this room since december 1996. i notice it hasn't changed. but what i'd like to do is i'd like to keep a few thoughts about structure, and make amplification on two things that senator packwood said. first, what is the ideal income tax system? i believe the ideal income tax system is a system that provides the greatest number of people the lowest rate. in terms of principles, and these were the principles that i think we used in 1986 to determine what it was in, what was out, one was efficiency. the basic threshold question for members of the finance committee, and the efficiency point is, i believe, the mark of a more efficient allocator of resources than is a member of the ways and means committee or the finance committee.

so that was one principle. the second principle is an equity question. horizontal equity. equal incomes should pay equal taxes. not somebody has the same income and next door somebody is using loopholes to reduce their tax rate. third is fairness. which is essentially vertical equity. and that is those who have more should pay more. in other words the progressive nature of the system. and fourth, do whatever you can to make the system less complex. we live in a time where few people fill out their returns, and where tax fraud is estimated to be nearly $80 billion to $100 third is fairness. which is essentially vertical equity. and that is those who have more should pay more. in other words the progressive nature of the system.

and fourth, do whatever you can to make the system less complex. we live in a time where few people fill out their returns, and where tax fraud is estimated to be nearly $80 billion to $100 billion. so those are the principles. efficiency, equity, fairness, simplicity. and you measure everything against those principles. now what do you need to pass tax reform? drawing on our experience i think you need at least six things. the first thing you need is the exact thing president packwood said. you need a president who is going to put this prestige and clout on the line to drive things through when the inevitable obstacles appear. second, you need a treasury

secretary who is the president's designee to deal with it every day, and you need a treasury secretary who has an incredible person who constantly monitors that. of course, in 1986 the president was ronald reagan. and his secretary of treasury was jim baker. and his assistant was dick darmin. all of whom played critical roles in this. i can't tell you how important it is to have a treasury secretary who can speak for the president, who doesn't have to run back to the white house all the time to check this or check that. and, in fact, as bob remembers, we got down to the critical strokes at the end of this process. there were some difference of opinion, and jim baker was in the room doing the negotiating.

because he knew enough of the substance and had paid attention to it. i remember him convening a meeting during the period when there was treasury one and treasury two, which were things that ronald reagan tasked as the treasury department to do. and he convened a meeting with jack kemp at his house, and me, and i think bob or a few other people, i think it's important to know the long-term journey of tax reform. when i came -- one of the reasons i ran for the senate was i wanted to reform the income tax system. i remember reading an article by milton friedman many years before when i was a basketball player about how you could have a tax system with 16%, and i thought that's pretty interesting. and i read all of stanley surrey from harvard, joe peckman at brookings, and i remember in

1984, i went to walter mondale who was the candidate for president, for the candidate for president, for the democrats, and tried to convince him to do tax reform. i said it could take the issue from the republicans, they were out there talking about tax cuts, here you could talk tax cuts and equity. he had been a member of the finance committee and charlie rangel was his adviser on this issue. and i think a combination of those things made him unwilling to take what he thought was the big risk for a hopeless cause, and so it passed. however, as everything in politics, nothing's secret. it leaked that maybe mondale would be doing tax reform. and so, that's when reagan

called for in the middle of the campaign a study by the treasury department. and so it happened that the people at the treasury department in the tax area were really great people, and so they took the charge seriously. and they produced a document that was an outstanding document laying out the boundaries and the parameters and the specifics of what tax reform is. naturally when you threw it out there, as i had experienced when i threw out the gephardt/bradley bradley/gephardt bill of '82, everybody chews on it. so everybody chewed on treasury one and how terrible this is and how terrible that is and you ended up having treasury two. and it accommodated some of those, stiff-armed others, but wasn't an improvement over treasury one. and so, that's how the treasury department got involved.

and you absolutely need a commitment from the treasury secretary. so you need a president, you need a treasury secretary that likes it, knows it, can cut the deal for the president. the third thing you need is a chairman of ways and means and finance who want to get this done. that see some of their own political interests are served by getting this done. and bob mentioned dan rothlinkowski. in 1981, passed a bill the first year reagan cut rates 30%, and dan ended up being labeled as the king of special interests. and so i think that what he saw in this was an opportunity to seize the good government mantle and push forward with a challenge that would make him an historic chairman of ways and means.

and i think the senate was very fortunate to have bob packwood as the chairman. because his -- i don't know specifically what your political interests were, but i sense that was that you wanted to do something that no other chairman of the finance committee had ever done before. you and wanted to do something that would affect 100 million americans in a positive way, and potentially change the way we think about taxes. without bob packwood and dan rothlinkowski and jim baker and president reagan, this never would have happened. you have to have those parts in place and then you have a chance. and then the fifth thing you need is maybe a zealot. that's the role i played in 1986. i did nothing but talk about tax reform for four years.

every speech would be tax reform. if got so bad i remember i was on a sunday morning interview show that was recorded on a thursday night and rebroadcast on sunday. and at that time my daughter was about 8 or 9 years old. and she had a girlfriend of hers saying with us. and i said, hey, dad's going to be on tv. and as the guy said, you know eyewitness news conference on the air senator bill bradley. stick around, dad's going to be on tv. she elbowed her friend and she said come on, let's go. all he's going to talk about is loopholes. indeed, that's all i talked about for four years. and i also tried -- i recognized i did not have the power. the power was with bob packwood and dan rothlinkowski, and i

tried to be supportive and play that role in whatever way i could. the sixth thing that you need if you're going to get it passed is a committed, knowledgeable staff. i remember bob's staff, absolutely key first rate. the key thing is they can cut the deal on a lot of issues. and everybody knows they speak for the chairman and they say they the same thing to everybody. they don't say one thing to one person, another thing to another. but they keep their word, just like the senator keeps his or her word. so, i think those are the six that i think you need. you need a president who's committed, a treasury secretary who's committed and knowledgeable, you need a chairman of the ways and means committee and a chairman of the finance committee. maybe or maybe not need a zealot. and then you need have a staff that is competent and honorable and has absolute integrity.

the last thing i think you need, and this is probably the most important thing, was epitomized by a visit that we made to the white house to meet president reagan. i was a democrat, kind of a junior member. i wasn't invited a lot to the white house to meet president reagan, but there i was. seated around the table in the west wing. and if you recall, each of us could go around the table and tell the president what we thought about tax reform. and he was listening, mainly not talking. so when it came to me even though he'd made his commitment and even though he's made his position clear i said, mr. president, i know you're interested in tax reform which means lower rates because when you were an actor, the rates were 90%. he kind of nodded. i said, mr. president, i'm

interested in tax reform. because when i was in basketball, i was a depreciatable asset which in fact, i was. in other words what that story says is there's got to be something for each party in a deal. it can't be all one. there's going to be something for each party. each party has to know what they want and then if they do, there's a chance to get something done. bob talked about writing the bill in a short period of time with seven people. again, the only reason that happened was because bob packwood wanted it to happen. he was the chairman. if i had called seven people they would said, okay, we'll meet you in the cafeteria the next day or two years. but when you chairman called you, you show up. so it was because of him at that committee, that small committee of committees worked.

but he also mentioned that when we were headed down the path that the house did for a long period of time, we had 30 hearings about tax reform. bob preside over every one. i was at every one. and we asked questions of every witness. and the question he mentioned was one of them, which is you know, how low would the rate have to go before you'd give up this that or the other thing. i would say how low would the rate go before you'd give up capital gains exclusion? and in the latter the answers came back -- if you were from silicon valley the witness would say, i don't care if the rate is 10%, we still need a differential for capital gains because that will affect capital depreciation depreciation, capital formation. but a lot of other people came in. i don't want to say just silicon valley but a certain kind of

person said, no matter what you have to have a differential. other people said, well, you know, if you got the rate down to about 28%, 29% we'd give up that differential for capital gains. and that is, indeed, what we did. we got rate to 28%. that 28% was the rate that applied to both capital and earned income. mr. chairman, with those thoughts i would thank the committee for the opportunity to come back to the room once every 25 years. >> we're honored to have both you have here. i think anybody listening to this has to realize you went through a very trying time. very difficult. congress was split. republican president.

i want you both to know how much i appreciate both of you. let me just ask this question. revenues in 2014 were 17.5% of gdp. trending up to 18.3%. of gdp by 2025. in other words, taxes are higher now than their historical average and headed even higher. since taxes are higher than average and raising revenue in tax reform makes enacting it less likely shouldn't we do to reform a revenue neutral basis. we'll start with you, senator packwood. >> i would much prefer you do it on a revenue neutral basis, although i would combine corporate and indi