[captions copyright national cable satellite corp. 2009]no c0 [captions copyright national >> a hearing on stimulus spending and fraud prevention. witnesses from the office of management and budget & trade commission talk about the latest reports on state and local spending spree this hearing is

held by the senate governmental affairs committee. it is chaired by joe lieberman. this is about the $787 billion stimulus package to help pull our, out of the worst recession in the living memory of most americans. we hold this hearing on the heels of what i would call mixed news about our economy. we are still not where we want and need to be. we seem to be making some progress. after a slight decrease in the unemployment rate in july, down

1/10 of a point to 9.4%, the jobless rate went back up to 9.7%y% in august which is the worst rate of unemployment in america in 26 years. we know that unemployment is a lagging indicator of an economic recovery. this was not entirely unexpected. we also know that a few months ago our financial sector was on the verge of collapse. the overall economy was teetering somewhere between a great recession and, at worst, a depression. thankfully, both of those calamities have been averted. the stock market is up. housing sales are up. manufacturing grew last month for the first time in more than one year. the unemployment level now is above what many economists predicted when we pass the stimulus in february.

the numbers for the building construction, where unemployment exceeds 17% in many states, including my own state of connecticut. perhaps that explains why, when i met with workers in the construction trade in connecticut during august, they were having a hard time expressing any gratitude for the positive effects of the stimulus. the danger of a jobless recovery remains all too real. with that in mind, many people understandably are asking if we can do more. some people have called for a second stimulus although those calls seem to have receded. others are asking, including myself, whether we can implement what we already passed faster. whether we can speed up the process so that more of our

citizens can feel the positive effects of the stimulus that we intended more quickly than will happen in the normal course. i, for one, hope that we can and i look forward to exploring that with a witnesses today. this morning, overall, we will take a status check on what has been done so far. we will ask about the capability of all levels of government, the performance of all levels of government in had been a string -- in administering the recovery act programs, as the space -- the pace of spending will pick up. we will spend more in fiscal year 2010 than this year. we will ask whether we can increase the pace of that spending even more. personally, i believe that much

has been accomplished since the recovery act was passed as a result of the recovery act. i will not fall to the temptation about telling old jokes about economists reaching the same conclusion, from what i have read, most of them agree the recovery act has helped halt america's economic slide and is pointing us and the private sector toward a recovery. certainly, mayors and governors and local officials make clear to me and others that things would have been worse without the help that the recovery act provided let me briefly sum up some of where we are now and the progress we have made. on the tax side, 95% of working americans have seen their pay checks increase because of the tax credit.

it has put about $23.2 billion into the pockets of these families, so far. in total, since the act was adopted, $62.5 billion has been potent -- pumped into the economy with tax relief with $225.5 billion more of tax cuts still to come. nearly 334,000 new homeowners have claimed the recovery act's $8,000 first-time home buyers tax credit. many analysts and people in the real estate business, brokers, agents, etc, say this provision has played a part in studying the housing market and helps increase home sales for four months in a row. in transportation infrastructure, over 6700 route 6 have been approved and 2200

are under way. hundreds of airports across the country have been awarded funds for improvements and about $1.1 billion in amtrak improvements are on the web. the recovery act is helping families through these tough times with extended unemployment insurance, increased social security payments, more food stamp assistance, and aid to states through increased medicaid grants. the recovery act payments to the states through the f-map program and stabilization fund have helped keep 135,000 teachers and 5000 law enforcement officers on the job. we will come back to all that with questions and answers. besides the spending of stimulus money, another topic this year will be our continuing interest in the transparency of recovery act spending and a final but

critical question that we want to deal with today, the challenge of the federal government's efforts which joan leibowitz is helping to spearhead to prevent from -- prevent americans from being built by credit-card scams. these are related to the stimulus. they appear to be a few but unfortunately, tough economic times are always accompanied by people who are eager to take advantage of other people's misery. they try to exploit those that are financially strapped. we look forward to that additional and unique part of

the government's response to this recession. i welcome all the witnesses today. i look forward to your testimony. i am glad to call on our distinguished ranking member, senator collins. >> seven months ago, the american recovery and reinvestment act was signed into law since that time, this committee has conducted oversight to help insure that these funds are used as intended, to help revitalize our economy by creating needed jobs, improving roads and bridges, sustaining a vital health-care programs, and investing in infrastructure and its science. these funds must be disbursed quickly to meet the goal of stimulating the economy. at the same time, we must insure that haste does not make waste. we cannot permit fraud or

mismanagement. striking the right balance between speed and caution has been a challenging task. for example, we recently learned that the social security administration erroneously sent about 10,000 stimulus checks for $250 each to people who were either dead or incarcerated. this mistake may cost taxpayers about $2.5 million. it could easily have been prevented. now, instead of these bonds stimulating the economy, the social security administration must work to recover them and put controls in place to prevent a similar errors in the future. today, as the chairman has indicated, we will explore three issues that could blunt the

economic recovery impact of the stimulus the first, unnecessary delay. the second, inadequate transparency and a third, out right fraud. first, some reports indicate that stimulus funds are entering the economy too slowly, the laying the potential economic benefit. omd has reported it is on track to meet the spending targets. i am interested in exploring with their witnesses whether the spending to date has had the desired effect on the economy whether the money is being pushed out of washington and to the intended recipients as quickly as possible. second, i want to insure that we are providing the american public with accurate and throat data about stimulus projects around the country. congress directed the creation

of the recovery.gov website to increase transparency and allow the american people to monitor stimulus spending in their own states and to help be a watchdog in abuses. progress on that website has been slow. it is compared to some private- sector alternatives. third, i am concerned about the growing incidence of fraud and predatory scams that appear to be on the rise as con artists pray on citizens facing financial hardships. these crooks are smart and they are opportunistic. they exploit these tough economic times to lure americans into scams that look and sound legitimate. they use phrases that we hear on news reports and see in the headlines such as "stimulus

grants" and "government funding" to defraud american people. these scams are not connected to the recovery act. to appreciate the potential the scams have to spread and grow, possibly an sparing thousands of trusting consumers, we must recognize that the federal stimulus program is instantly recognized as part of our economic and political vocabulary. it carries some much weight and credibility that the police in florida recently used the lure of economic stimulus checks to conduct a sting operation in which 75 people were arrested. the florida example illustrates the attention-drawing power that the words "economic stimulus " can have on the american people.

it is critical that we aggressively pursue scam artists who brazenly use the stimulus program as the springboard for fraudulent or other unfair activities. i brought to the hearing today two examples of mailings that were sent to my constituents in maine in order to illustrate my point. the first example, essentially after congress passed the recovery act, is misleading because it resembles an official government form. it could easily be mistaken as a legitimate government offer of help and assistance. for those of you who can see this, it looks very much like an irs form. it provides an identification number for the individual. it has form numbers.

it has stimulus act 2008. it is easily mistaken for an irs form and looks very officials. the second example is a letter that was sent to my constituent telling him that he is preapproved for consumer initiative because he may be experiencing a financial hardship. most of my constituents are experiencing financial hardships, regrettably. the letter implies that the initiative was established under the economic stimulus act of 2009. intel letter, the alleged manager of the so-called credit relief association, encourages the consumer to call and refer to the case number provided. it has a washington, d.c. address.

it looks very legitimate. i particularly look forward to hearing from chairman liebowitz today about the ftc's efforts to stop stimulus scams. i appreciate the work that the department of justice has been doing to train more than 10,000 federal state and local officials to monitor the contract in process for abuses such as collusion and bid rigging. these officials can help play an important watchdog role with a combination of education and enforcement, we can help prevent exploitation and stops can spread at the same time, i hope that this hearing will serve as a warning to the con artists out there that our government is on the lookout. we will alert citizens.

we will expose scams. criminals will be prosecuted. preventing fraud in the execution of stimulus funding is a key element to the ultimate success of the recovery act. i appreciate the chairman's continued to schedule important hearings to provide sufficient oversight in this area. i look forward to hearing the testimony of our witnesses. thank you. >> thank you very much, senator collins. i thank the other members of the committee who are here this morning. we will go right to rod neighbors, who is the director of the office of budgetary management for the aara. thank you for being with us. >> good morning, mr. chairman. good morning, members of the committee. thank you for inviting me. today, i would like to focus on four key areas that are of

concern to the committee. the rate of recovery expending, recipient reporting, job counting, and a single audit system. the recovery act is making a difference. the cbo has noted is one of the reasons why economic activity will rebound in the coming months. there is an effort to accelerate the pace of spending. in previous hearings, you have asked whether the pace of spending is on schedule. the answer is yes. the court recovery act was designed to ramp up in 2009, have a peak in 2010, and lay the groundwork for further growth moving corporate in april, federal agencies had obligated about $54 billion. today, nearly $234 billion has been obligated when combined with more than $66 billion in tax relief, about $300 billion has been committed agencies have outlaid nearly $94 billion in spending so far, up from $12

billion in april. combined with the tax relief, this tolls to about $159 billion. this pace of spending is consistent with their original goal about laying 70% of the $787 billion by the end of fiscal year 2010. it is consistent with the cbo official projections. the administration has worked to meet or exceed a series of ambitious targets for it. certain programs are being implemented faster than anticipated the making work pay tax credit for middle-class families was implemented three months ahead of schedule. allstate's obligated at least half of their highway bonds 10 days before necessary. the vice president presented a roadmap to recovery. it was a plan for major benchmarks that would define the recovery act during its second 100 days. the vice president announced

last week that the government had surpassed the target. in addition to implementing the recovery act quickly, it is critical we do so in a way that is transparent and accountable to the american people. that is why congress required funding recipients to provide detailed reports on the use of funds and the jobs these funds have created or saved. the first report from recipients are due on october 10. we have taken actions to anticipate the needs of recipients and develop the appropriate leadership structure to manage the expected workload. three rounds of omb guidance has clarified the expectations on grant recipients and contractors. our guidance response to the president was charged for greater transparency by going beyond the data elements required by law to capture a significant payments to vendors. the dealers and other providers of goods and services necessary to conduct federal programs. working with recovery board, we have provided detailed the

attractions for registering and submitting information that federalreporting.gov. there were about 18,000 registrants so far. we're also working with the board to conduct seven webinars, attracting more than 17,000 registrants. we will discuss how to report job estimates and data elements for reporting on recovery funds. some challenges will require specialized attention, we're forgetting with the board to provide assistance in state capitals during reporting period. we will deploy about 100 on-site liaisons' to every state capital and many of the largest counties and cities they will provide state and local recovery act

officers and serve as a backstop for pending resolution from the board and service desks and agencies. a 10-person projects supporting will oversee the operations, provide training, and coordinate information. there'll also be a team of 24 letters from different agencies position to get different answers to recipients and compile reports of what was learned on the ground. to further improve the flow of information, we respond to a recommendation from gao and implemented a state notification system. it will provide for up-to-date listings of new contracts, as well. we are committed to strengthening the reporting processes and collecting the data that we need to track spending, account jobs, and deliver on the president's promise of on president of transparency and accountability

the white house council of economic advisers later today will reverse -- will release its first report and recovery act. i cannot discuss the specifics now. i want to take this opportunity to explain the differences between the report data and the data to be submitted in october but funding recipients. the data will differ in several important ways -- the recovery act recipient reports and compass only those projects and activities funded by state fiscal relief grants and other investment spending. that comprises about 1/3 of the total spending. the cea report will assess the total program from grants spending to tax relief, to safety net spending. they will report on direct jobs and not jobs beyond that. they look at direct as well as indirect economic benefits finally, the october data is driven by the quality and

quantity of information provided by funding recipients. the completeness of their submissions will determine the quality of the october drop counts. we work with the agencies to encourage reporting on time and expect the data to improve with each successive quarter of reported. why did -- while the day that will be useful, the two different jobs estimates are not intended to reconcile with each other. i would like to focus on some changes we have made in response to concerns about the single audit process. senator macao's kohl expressed concern that the symbol of it were not set up to make -- meet the demands. a few key issues have been pointed to including the time lag in the auditing cycle and the fact of the symbol of the process might not cover all recovery act programs. in response, omb staff worked with this committee and g e o

four system that could be implemented quickly and be targeted. the collaboration is ongoing. we have modified one program so that the recovery act money will be audited. our august 6 addendum stresses that auditors should be prompted relaying any information they discover about deficiencies or weakness says. we're also planning to use pilot authority to improve internal control communication for selected major recovery act programs. as part of this program, omb will work with agencies to identify at least 10 at risk recovery act programs that should be audited on an expedited basis of six months versus the normal nine-month time frame. to participate, states must consent to being audited with respect to at least two of these programs. as an incentive, participants states will be exempt from being audited on lower risk programs. we have responded to concerns

about state oversight capacity by issuing a memorandum that allows states to use up to 0.5% funds for administrative costs and obtain those funds more quickly than traditional schedules would have allowed. we continue to listen to your concerns and look forward to continuing our constructive dialogue about the critical issues over the coming weeks and months. thank you again for this opportunity to testify. >> thank you for the opening statement. you touched on some of the items that want to ask about. john liebowitz comes to us as the chairman of the federal trade commission. we have a real concern about people trying to take advantage of the stimulus program and the hard times that many people are experiencing.

it is reassuring. even before you speak, i know you are on duty, in this regard. >> thank you for those kind words. i am john lewis, chairman of the federal trade commission and i appreciate -- i am john paul liebowitz, chairman of the federal trade commission. i will talk about frost's falsely invoking the federal government but directed at american consumers and what we do at the ftc to try and stop these scams. i will highlight a series of fraud cases that the commission has brought involving false promises of government grants. they are part of operation short change. they are 20 actions announced on august 1. they involve 14 state partners.

we challenged a variety of frauds exploding people harmed by the economic downturn. all told, with our federal and state pardons, we have brought 389 legal actions in four runs in the past five months. to the con artist today, the challenging economy presents a golden opportunity. it is an opportunity to present economic distress of american consumers and built them out of their hard-earned savings. they have sought to exploit the government's stimulus plan. they promise grant money, requiring consumers to pay in advance or provide personal information. they promised to rescue people in trouble, after they take the money, they throw these

consumers and anchor instead of a lifeline. this poster shows one of website which featured images of president barack obama and vice president joe biden. two weeks ago, a u.s. district court judge temporarily shut down the size and had a preliminary injunction hearing coming up tomorrow. as you know better than anyone, what ever website may say, the federal government does not award grants to individuals to pay personal expenses or bills nor does president barack obama handout stimulus money for random things. grant writers claim that consumers could get money from the economic stimulus. together with the state attorneys general from kansas, missouri, north carolina, this summer we filed a complaint against the defendants allegedly responsible for the scam. the defendants sent mailings

like this one. they guarantee a $25,000 grant from the u.s. government. they are urged to use the money to pay bills, expand a business, pay for education, fix up their homes, and travel the world. i am not making this up. i know those grants don't go for these kinds of things. another mailing, showman this poster from the same company, used officials looking seals. this postcard says," officials government information. $25,000 grant from the u.s. government." consumers who responded by calling a toll-free number heard this," if you have been reading the papers, you know that recent our government released over $700 billion into the private sector. what you probably don't know is that there is another $300 billion that must be given away

this year to people like you. a" ultimately, the consumers did not get krantz. they talk people into paying money to get upstream so-called brand services. several of the defendants responsible for the grant writers institute were halted in their skin. i will briefly highlight two other ftc cases. kranz for you -- grats -- cash gratns institute promised free money from federal, state, and local governments. the web site included images of president barack obama and the u.s. capitol. neither company resulted in many grants to consumers but both pocketed money from them.

in these cases, they involve 270,000 potential victims. it is conceivable that the website has been taken down because many of them have been taken down. we will follow up on that and get back to you. our actions here do not stand alone for their part of operation shortchange which challenges scams who prey on people looking for work and exploited the entrepreneur oral spirit of people looking to start their own business and promised much in the credit to consumers but did not deliver anything but debt. we regularly work together with the state attorneys general. this includes the departure of justice and hud and treasury. it can have a much bigger impact this way. we bring a lot of fraud cases. we vastly prefer that no one

calls for the scams in the first place. one way to help is to educate consumers. we hope the materials in front demonstrate that we have reached out to legitimate companies to pull down as for the scams. several major online at companies, including facebook and google, deleted these ads. let me commend these companies for their help. i also commend this committee for all of your support. there is much more to be done. we have ideas about ways you can make us more effective. we can grow the agency which is about 35% smaller than it was 30 years ago. the american population has grown by more than 30%. the president has committed to increasing our resources. i'm also happy to expand on this issue at my next appropriations committee testimony before senator callers.

i'm happy to answer any questions you have. i will yield the balance of my time. >> thanks very much. your statement justified my confidence, as expressed earlier. we will next here willearl devaney. are you still the inspector general? >> i am on leave of absence. >> this is a full-time job. >> it is. >> you have done great public service and you come before us as chairman of the recovery transparency board which was created by this stimulus act. we look forward to your testimony. >> i want to thank you for the opportunity to before -- to appear before you today. my testimony today will address the current status and future direction of the board's missions. i will be glad to answer any questions after my remarks.

i would like to begin by addressing some suggestion put forward by members of this committee. when i last testified in april, one recommendation was that the board seek the assistance of aarp and try at increasing awareness of recovery stems. -- scams. frequently, these scam started the elderly population. although we have seen a decline in recovery scam since the initial lot enactment, the relationship with these groups are in place in the event the scams begin to rise again. another suggestion made at the april hearing was that the board consider employing former journalists to assist with their reporting activity spurted since that hearing, the board has hired former journalists in various staff positions. i am pleased to report that the

redesign of recovery.gov has been redesigned it has been created, performance testing, and open for registration. as mentioned earlier, more than 19,000 recipients as of last i have registered since the site was launched on august 17. however, we are encouraging recipients to registered again. a fully enhanced version of recovery.gov is scheduled for release prior to october 10. that will provide visitors with a user-friendly and highly interactive website. it will have a mapping capacity that will allow visitors to search for spending down to their own zip codes or their own congressional districts. the redesign of the website is undergoing user testing by citizen groups and various state groups around the country.

i am very hopeful about the new features of recovery.gov 2.0. and the reporting will begin next month. i do not believe that just throwing data on a website classifies as transparency. i am also not under the illusion that in the first several quarters of reporting will be free of data-quality problems. this kind of reporting represent new territory and brings the potential for new complications. the government has never before require recipients of federal funds to report to this degree. i think it is a distinction that need to remain between data quality and integrity. although the board will play a role, by reviewing the agency's processes for assuring the quality of the data, the board's main goal will be one of data integrity. the board will strive to insure that the data on recovery.gov is

a true reflection of what the recipients receive. the board intends to carefully tracked all changes to the data and make that information on recovery.gov for all to say. the prime responsibility for data quality rests with the recipient of the funds. they are the best position to know the details associated with these funds. indeed, any direct involvement by ig's could run afoul in participating in the data quality -- up all of the inspector general's functions. recovery.gov receives most of the attention but that is only part of story. the board focuses on accountability and the attendant goal of minimizing fraud and waste. i would like to expand briefly

on my view of waste and the context of the board's mandate. whenever i say that the board is trying to minimize waste, i am referring to an objective assessment of contract and practices rather than a subjective viewpoint of the nature of particular expenditures or projects. my view is that, aside from being mindful of the recovery act's flat out prohibition, the purpose of the board is not to weigh in on spending choices that come down to an agency's judgment or opinion areas such decisions are the result of political and policy determinations made by multiple layers of watchable individuals. instead, when the board boxes on waste in the spending of recovery bonds, we will be looking principally at the incurring unnecessary costs due to ineffective practices or internal controls. the board continues to strategizing ways to receive reports of broad and refer them to the appropriate ig but also

on how to analyze trends in light of publicly available data. the board has risen to put out a solicitation for analytical tools and personnel that can best extract and harness the information. we have high hopes that this risk-based prevention protection program will serve as a future model for government oversight. the force compliance and investigative step also continues to review recovery fund procurements as they occur, coordinating with ig officers and many issues. we have referred more than 100 matters to ensure and heightened scrutiny of specific procurements that the bourse that have identified as problematic. these issues range from instances of administrative oversight to awards that may raise more serious questions requiring resolution.

the board will also implement a hot line to report potential cases of fraud or mismanagement. the board has selected a hot line will allow citizens to call, e-mail, fax, or mail letters to train operators. the board set to use this information to refer complaints to the relevant ig's for suitable response. this will be launched in conjunction with the upgrade of recovery.gov in early october. we would like to reveal the full scope of recovery spending to the american people. these will be interesting times. i do not plan to be a prognosticator but i suspect that there will be a strong reaction when the american public sees how the government spends its money for the first time. some of the instantaneous

reaction may be negative but i think though be substantial positive reaction. i truly believe that the long- term effects of such transparency will be decidedly positive. that is why i remain optimistic of the board and i will be able to achieve success in this grand experiment. i firmly believe that what we accomplished here will lay the groundwork for help future government spending takes place. mr. chairman and members of the committee, that concludes my oral remarks. i'm ready to answer any questions. >> thanks very much. at earlier hearings, we were impressed, i was, by the number of hits on the recovery.gov website. are there any current numbers on that? >> it has gone down a little since the last time i was here. people are waiting for the new web site. when that new site goes up, there'll be a phenomenal amount of hits. >> what the numbers now?

do you know? >mr. neighbors, do you have a quick answer? >> no, i don't. >> i think there were about 32,000 hits per minute not too long ago. >> which is down from what was originally? >> it is still substantial. a. it does not mean that somebody comes in and spends time there. the more appropriate measurement is how long they stay. and how often they come back. those of a kind of metrics we will use when the new web site goes up. >> the new site going up as october? >> probably the first part of october around october 5. >> as soon as you have data on that hits, it would help was comparatively after it has some time to get started. the committee would be interested in that.

the final witness is the managing director for strategic issues at the government accountability office. thank you for being here. >> thank you, mr. chairman and members of the committee. it is a great honor to be here today to discuss our july report on recovery act. there are several roles for g zeroao,ao. we have made a significant commitment to its recovery act work. i would be remiss if i did not acknowledge and express my appreciation for the extraordinary effort that my colleagues across gao due to make sure we provide the work that can support congressional oversight. they have done a remarkable job. our july report, the second to respond, addressed the use of funds, the approaches taken by

states and localities to ensure accountability, and the state plans to verify the funds are received. we discussed the status of actions in response to the recommendations we made in our april report. our third report will be out later this month, towards the end of september. in states across the country, the budget situation is bad and in many cases the future looks bleaker. that is a good news, in a sense for the four states are forced to take dramatic action to balance budgets, including staff way out -- layoffs, and furloughs. the recovery act is helping states stabilize their budgets and minimize the reductions and painful cuts they have to take in services and the size the need for tax increases. many states reported that they would have -- have had to have made a merger -- further cuts without receiving these funds. it has helped cushion the impact

of the current revenue estimates indicate that additional state actions will be needed in the coming years. significant recovery act funds are moving out to states and localities. overall, across the united states, as of august 28, treasury has outlined a about $45 billion of the estimated $49 billion in recovery act funds projected for use in state and locality -- and localities in 2009. these funds to states and localities are just a subset of the overall expenditure is going out this year that you talked about which include the tax provisions and direct payments to individuals, as well as others. the $45 billion is a sizable amount of my great more than 3/core -- 3/4 of the funds has gone out.

as of september 1, the department of transportation obligated about $18 billion for almost 7000 highway infrastructure and other eligible projects. dot has reimbursed about $1.4 billion to pay for these 7000 projects. almost half of the obligations across the nation have been part pavement in "-- improvement projects. we reported in july that the single audit reporting deadline does not provide audit results in time to address identified problems. we also noted that state auditors needed additional flexibility in funding to undertake their added single audit act responsibilities. omb has moved out of the pilot program that was to have auditors provide early notice of internal control deficiencies.

we believe the private program would address concerns about the timeliness of single audit reporting. it is very important to strike a balance that senator collins was talking about prayer in if we can have these internal control reviews come out earlier rather than waiting until the single audit? are done, we can't knn know thae are doing the right thing. i want to appreciate the leadership that this committee has shown our legislation that congress is now considering. the next big challenge for the recovery act will be recipient reported. direct recipients of recovery act funds, including states and localities, are expected to report quarterly on a number of

measures. the first of these reports is due in october. omb issued implementing guides for recipient reporting in june. in recent weeks, federal agencies have issued their own guidance that builds on the omb guidance. omb is also preparing to deploy the regional federal liaisons' that were noted to provide the on-site assistance and to establish the call center for entities that do not have an on site liaison. these efforts are welcome and serve the needy. indications are that recipient reporting, especially for this first round, will post a significant challenge for many entities. we have a mandate under the recovery action to comment on the job recovery.

we will be reporting on that in november. let me conclude my comments and i'll be happy to take any questions. >> thank you very much. thank you all. it is a good beginning. we will have seven rounds of questions by members. let me begin, mr. neighbors, by going back to the question that i raised in my opening statement. acknowledging some of the positive indicators in the economy, the general view is that the stimulus is taking some effect but there is a stubborn persistence of high unemployment. with that and other factors, there is a continuing anxiety among the american people. our economic future has a depressing effect on the economy, including spending.

the question is, can we, and i suppose should we, attempts to speed up spending and, if possible, implementation of the tax cuts to accelerate the recovery of the economy? i understand that in the normal course of what was projected, we will be spending and investing more money in the economy in fiscal year 2010 than we have this year. should we be trying to accelerate the program further to accelerate the overall recovery of the economy? >> this is an issue that the vice president has taken a partial -- personal interest in. he meets with the cabinet agencies once a month to go through recovery act issues. first and foremost is what

opportunities are available to speed up recovery act spending. a couple of areas where we have made progress is an acknowledgement that there has been a lot of focus on outlays but in certain programs, obligations have a tremendous economic benefit as well. that is one thing that the federal government has direct control over. >> give us a quick lemon's definition of l.a. and obligation. >> what it boils down to is essentially an obligation where the federal government allows a recipient to start spending money. and outlays when the recipient actually spends the money it celebrate >> so you have the authorization and natural check? >> absolutely. we have obligated a fairly large amount of money in transportation and that means we have given the states the ability to start spending that

money because they have been slow to spend it. it does not mean that has an economic impact was going on behind the scenes, the money can be used to reimburse projects that have already started. what many states do is, knowing the fact that the money is available to them to be reimbursed later on, it allows them to go off and start the project right away. you will often times see that obligations that set there for a long time and a tremendous amount of outlays that come in at the end, in those instances, like transportation, the availability of the money has a tremendous economic benefit. in other programs there are more sensitive problems. we are very focused on removing as many bureaucratic hurdles that exist within agencies so

the money can go out faster. we are trying to do that to be sensitive to the appropriate oversight over spending. we are trying to remove unnecessary bureaucratic hurdles. that includes things in the omb. this includes things like concrete rubio. we're looking at every opportunity that we have to do that. the second point is that we are trying to take lessons learned from particular agencies and try to apply them across programs. when the federal government spends money on programs that relate to tribes there is a different set of issues. we are trying to transplant the information we are learning from particular agencies and trying to educate the agencies about

the hurdles they will run into and make sure this is taken into account >> >> bottom line, based on your information, and i correct to win -- to conclude that the administration feels the more it can accelerate the spending stimulus money in the coming fiscal gear and the coming months, the better it will be in the encouraging of a faster recovery? >> yes. >> based on common sense, i assume that the more we accelerate the infusion of stimulus funding, spending and tax cuts, the better of fact we will have on the unemployment rate. is it more likely to create more

jobs? >> it is a pair conclusion but it is a tricky conclusion, as well. unemployment tends to be a lagging economic indicator. outlaying an obligation of funds does not mean that you will have employment benefits right away. the faster we can expend money in a responsible way, the sooner the jobs will come online. that is what we are trying to do. >> a final question -- we put a fair amount of money into the economy in tax cuts in this first few months. it was $66 billion. by the estimates i have seen, we still have over 225 billion more in tax cuts under the stimulus act. give us a brief description of what those are and why that number is so high.

minibus were focused on the make work pay reductions and withholding tax the people have seen. what else is coming? >> i would point to the fact that tax relief was two-year tax relief. was always thought that roughly half of the money would come out in 2009 and half would come out next year. that is part of what you are saying. the other part is a large chunk of the money is related to the alternative minimum tax. that comes due next year. next year, we will see almost all of that money out light. >> there will be a reduction in the taxes they would otherwise have paid next year? >> that is exactly right. >> do you have a number of hands? >> i don't but i can provide it

to the committee. >> is there $225 billion more in tax cuts to come? >> i think that might be a little high. it is well over one under $50 billion but i would have to get you the specifics. >> thank you very much. >> previously, mr devaney has estimated that as much as 7% of the recovery act funds may be lost to fraud and abuse. that amounts to an astonishing $55 billion. we have seen some disturbing examples already like the social security administration first sent out about 10,000 checks to individuals who had died.

then two months later, we learned that the government also sent checks to people who were incarcerated. they did not qualify. the gao mentioned today the importance of internal controls. that is to prevent these kinds of improper payments from happening in the first place. what, precisely, is omb doing to ensure that internal controls are in place across the federal government to prevent fraud and improper payments? >> we are doing two things -- with regard to the state and local governments, we have increased the amount of money that is available to state and local governments to do their internal controls. two, we are setting up this pilot program which would set up more extensive and early

review of programs and highlighting the potential issues to stop problems for they arise. the second thing we are doing and i want to give mr. devaney significant credit, when he came on board, he mentioned that for this to work, we need to make sure that they ig's and oversight is brought in as part of the program discussions. it is not on the back and because you only get people after the fact. we have ongoing discussions with our colleagues at the department of justice, the ftc, the recovery board, and with the i'' s to incorporate lessons learned in real time and best practice program management into the ongoing and cities of the particular federal agencies. we do that on an ongoing basis. >> are you satisfied with omb's efforts in this area?

>> they have certainly been doing an awful lot. . lot, senator collins. saying that, there's still more that all of us can be doing and should be doing in this regard. one of the things shortly after the act was passed and i know when you had your first hearing in early march, the acting controller general testified he got together with the ig community, separately with state and local auditors and through conference calls with the igs, a group meeting here in washington, to collectively try and understand what are our audit responsibilities? let's make sure we're getting the best bang collective thely for the buck, that there's no overlap, our efforts are coordinated. we're continuing to do that. we're focused on making sure we're getting out the best practices and fraud prevention and internal controls, down to the federal level and the state and local level as well. there's this continuing

concerted effort to get it out there. our continuing concern is we our continuing concern is we think that states the audit community and the program community in the states needs to continue to do work doing the risk assessments and making sure that they have the controls in place down at the state level to effectively oversee and make sure that the funds are being properly spent. >> i think that that is a very worthwhile effort. but clearly there's something amiss when the social security administration can send out nearly 10,000 checks that shouldn't have been sent out. so i think we need to more aggressively look at the internal controls in the federal government as well as the state and local level. mr. liebowitz, let me switch to my concern about consumer fraud. first i'm very pleased with the work that the ftc is doing in this area. it's absolutely essential.

you discussed four cases that the ftc has been pursuing. do you have any estimate at this point of the number of people who are being harmed by the scams? or could you give us an idea of the financial impact? >> sure. we know in these four cases alone, and obviously we have more investigations in the pipeline, it affected about 270,000 people. the amount of money that we think was at risk here or might have been lost to these scammers, of course, we'll try to get it back and we're in the process of doing so. isn't that great? it's about $30 million. we think of this as a small part of the -- a smart part of the approach we're taking to going after scammers who are taking advantage of consumers who are feeling legitimate financial anxiety or having problems paying their mortgages. for example, we did another

sweep involving foreclosure rescue scams and mortgage modification scams. we did it with attorneys general. and that one, for example, probably involves billions of dollars in potential losses overall. in the financial stimulus area, it's a little bit of a whack a mole problem. when we did this announcement, we know a bunch of websites, we put them on alert. they went down. that's good. but sometimes they pop up again. we keep monitoring the internet. we watch commercials, look at our consumer database and try to go after these mall factors as quickly as we can. >> i think a lot of the work that you're doing well is probably the tip of the iceberg because what i've seen in my state is a lot of times the senior citizens who are victims are too embarrassed to go forth and try to file a complaint or

they're too concerned about where do they go, they don't even know where to begin? my last question on this round for you. what advice would you give consumers who believe that they may have been taken advantage of? who should they go to? where should they turn? >> well, i would say the first thing is, if the you think you've been taken advantage of and scammed, check your bank account records and credit card records. there's a mechanism, especially in the credit card context for consumers to challenge unfair or inappropriate charges. then, you know, we have a website, www.ftc.gov. people can send complaints to us. they go to something called consumer sentinel. we look at consumer sentinel all the time to monitor complaints and go after the first mall factors. state attorneys general have been very involved, particularly

when the scams have a local dimension. if it's involving an economic stimulus scam -- first of all, there are no individual grants from the economic stimulus. second of all, there is a government website run by hhs called grants.gov. if you want to check, it's worth checking on that website because you can find -- it's an official website, not just an official-looking website. you can confirm whether something you've read about or someone who has i'm pour tuned you is legitimate or whether they're just out for your money. >> thank you. >> thanks senator collins. we'll go to the senators in order of arrival. the list i have in this order, senators tester, aureus, coburn, mccain, mccass skill and pry your. >> i want to thank the witnesses for being here today. before i get to my questions, i want to begin by saying a few

words about a story that bothered me. it's a notion when it comes to spending dollars, recovery act dollars on ports of entry on our northern border. recently there's been a few folks opinion pointed to one port in northeastern montana. in particular, white tails in daniels county, a part of the country that is vast and open. i mean that, very vast, vf open. some people have asked me why the port is getting rebuilt with recovery act dollars even though it's not as crowded as some of the other ports. a lot of reasons, none of which to say there's asbestos issues. the port is 45 years old. a lot has changed over the last 45 years when it comes to our national security. it wasn't my decision. but i will tell you it was cbp's decision. i will tell you i have pushed cbp on the northern border to make it more secure. they did decide to upgrade all

23 ports along that border. those ports are owned by the cvp. the northern border is complicated. it is wide open and uncorroded in certain areas. it is very corroded in the other areas. there's issues of waters when it comes to the great lakes region. we have to keep our eyes open as far as it comes to drug smugglers or terrorists that due harm to our country. for me it's an issue about making this country as safe as we possibly can, keeping illegal immigrants out and drugs away from our kids and neighbors. that all starts by making our ports of entry as strong as they can be, by closing the gaps and not pretend that the threats only exist on the southern border. our borders are only as strong as its weakest link. i can give you plenty of examples of what's transpired over the last few years of drugs, potential terrorists wanting to cross. the fact is that i think this committee needs to work, and we

need to work with cbp to make sure no taxpayer dollars are wasted along the border, and that we maximize our security option along all our borders and ports. i know our community will join me on that. thank you, mr. chairman for that. further questions. there's been many, many documents. the ranking member brought some up. you gentlemen brought some up about people who are getting scammed. the thought occurred to me, what's the penalty? catch these guys red-handed. what's the penalty? >> that's a great question, senator tester. we are a civil law enforcement agency. what we do first is try to shut down the scammers so they can't do further harm. sometimes we can get redress for the injured consumers and the victims. we try to do as much of that as we can. although sometimes money has dissipated. for the most part we don't have finding authority unlike 47 state attorneys general. >> does anybody have the authority to put these folks in

the clinic? >> what we do, two things, sometimes we pair with state agencies because they have finding authority. with the most egregious cases we pass them along to the department of justice for prosecution. some of the worst offenders do get prosecuted and do go to jail. >> it just occurs to me. i was out in august and there was ads continually about how you could personally benefit from recovery act dollars in this bailout era that they called it. it was baloney. i knew it was. but the fact is these guys are reaching out to people through a bunch of mediums. you talked about the internet. they're doing it on the radio. i think if there's no penalty, what the heck if you're of that ilk. >> we supported in our reauthorization and part of the consumer protection agency proposal by the president and treasury, we support still a finding authority because the majority of the commission does because we feel it's important

to have a sanction. >> i actually support jail time. >> we won't have the ability to give jail time, but we certainly support -- >> maybe, mr. chairman, we need to visit about opportunities, i mean that in a negative sense, funts to make these folks think about what they're doing. >> i think you're on to something, senator tester. there's obviously no better deterrent than to convict somebody who has really been a scam artist and put them in jail for a while. the fact we're all seeing these ads in various media means people are making money in scams. >> thank you. mr. nabors, just this week i pushed your agency to get some money out for some water projects along the northern tier. i appreciate your efforts in that. these particular water projects go -- some go to indian country, some go to -- but they're mainly indian water projects. i guess the question is for you

or mr. mihm, since they're sovereign nations, and the money goes out, talked about local liaisons. do you have the ability to do oversight in sovereign nations, to make sure the money does get to the ground once it leaves our hands? chris, do you want to -- yes, we do. our local liaisons are limited, but we do have the ability to -- working through the overall structure of the oversight community, both the igs and the agencies who work very closely with the travel governments to make sure the money is spent the way we intended it to be spent and to provide assistance to the tribal governments in terms of applying for the funding. there's a double edge to that that we want to ensure is done. >> mr. mihm? >> yes. we have oversight as well. although most of our efforts, senator tester, are focused on 16 states and the district of

columbia which collectively give about two-thirds of the money and two-thirds of the population. >> we appreciate that. i want to talk about contracting for a second. i'm just about out of time. from what i found out, there are a lot of different levels of contract. there's a national general contractor. there's potentially a regional general contractor and there may be a bunch of contract crack tort in between that before you get to the guys running the shovels and doing the work. do you ever look at that system and make recommendations saying, you know what, everybody is taking their 10% or 20% or whatever they take, and by the time we get down to the folks running the backhoes and pouring the concrete, there's not near as much left as there should. do you ever make recommendations and say why is this done this way? >> yes, we have. to add on another complicating feature of that is that you can have -- you're seeing this play out in the recovery act. you can have federal requirements in contracting and of course once the money goes to the states and if they contract out, there are different

requirements very often including different definitions of what it means to competitively bid a contract. so it can force an understanding of 50 different contracting regimes and states. so it's both a very tiered and a very complexly tiered approach to contracting as we cross government. >> i would like your opinion on what we can do from a policy statement to take complexity out of it. there's a general contractor in afghanistan and contract along the northern border. they get ahold of the local i would appreciate any ideas you have on that. >> people to the answers as soon as we can. >> senator burris.

>> thank you, mr. chairman. i am impressed with your testimony. you are doing a great job. i really appreciate that. we have a bill that suspension this committee. it has been held up. it is called 1064 which would give you.5% of financing to local state auditors and finance officers. you said that you are giving money to state and local governments for their increased responsibility. is there a dollar amount that you have on that? >> we allowed .5% to be used for administrative costs and oversight. what 1064 does is it allows an additional .5% to be used. >> that bill has been held up somewhere. we have to get it out to the floor. the house has already passed it.

there has been informed of state finance officer. we need the funds. we do not want to come up short. ntroller, former state finance officer, we need the funds. we don't want to come up short in that regard. mr. liebowitz, on the consumer fraud problem, probably a response to my colleague, senator tester, what we have on the fraud issue, and being a former attorney general in my state, is that we're dealing with a consumer being defrauded out of their funds. these are not really federal funds that they're using. they're using the vehicle of the federal government to defraud the consumer. so they're more of a local prosecutorial responsible there. am i correct in that, sir? >> yes. that's exactly what we do. we do a lot of education on the front end to try to prevent consumers from being victims. but yes, i think a lot of this, almost all of what we do involves, at least in the stimulus scam context, involves

people who are falsely representing themselves as facilitating individual stimulus grants to consumers. it's not entirely local in the sense that a lot of this is internet related. so it has a sort of national scope. >> some of that, they would try to skim some stim lutz money themselves. certainly the stimulus money is subject to be a victim of fraud as well. what you see in terms of mostly the senior citizens, they've been advertised, send us some money so you can get your stimulus money. that's more of a local issue with the states attorneys general. >> that's right. that's why we work with state agency sglgs please work with my former colleagues. the ags -- >> no, no. the ags are terrific. they're on the case in this area. >> and the state auditors as well. >> going back to your point and senator tester's point, a lot of the cases we're bringing, they're really criminal fraud cases. we're prosecuting them because

this is sort of in our bailiwick. but also they could be prosecuted criminally as you know, senator lieberman. >> one other question in terms of -- i need to get clarified on this. maybe mr. nabors can help me. the federal government is letting out contracts with contracting agencies to help track these funds or to bring in computer skill teams to help with all of this. i want to know how much of these stimulus dollars are coming directly in to costs that are going to minority contractors. for some reason we find it difficult to get this kind of -- get this kind of data. i know we're oh e oh with the stimulus money, outside contractors are being let in order to process this do we have any information on that, mr. nabors in terms of how we're handling that for minority

contractors? specifically, do you have any black contractors? >> i don't have the numbers specifically for black contractors. but some of the more recent numbers that we have with regard to some of our small business targets -- small businesses have received about 22% of the contracting dollars. >> you're talking about small nine north businesses? >> no. i'll go through a list of numbers for you. 22% for small businesses. about 3% for disabld veterans businesses and 5.9 for historically underutilized business owned contractors which in some ways capture the minority businesses. i don't have a specific number for black businesses. i can see if i can get that number for you. >> would you, please, and hispanics as well. hispanic and black businesses. there's deep concern about making sure there are skills in these areas and that our

government is being aggressive in supporting those type of businesses for their economic survivability. i did have a question, but i got so wrapped up in that one -- mr. liebowitz, in terms of the numbers, you gave senator collins the numbers, was it 270,000 and $30 million. >> for the four cases that we brought along. we know there's more fraud out there involving the stimulus. in the cases we brought thus far, that's our estimate of the number of consumers harmed and the amount of the potential harm. some of these schemes involve initial payments on a credit card of, say, $1.99 or $2.99. then there's a negative options scam that's part of this where they have your credit card

number, they keep billing you every month and until you figure out that you can cancel it, and if you cancel it in a timely manner, then you keep on paying. as someone in a different context who has been a victim of a negative options scam, they are sometimes hard for the individual consumers to detect. again, we also know there are more people out there who are probably victims. we watch the internet. we look at advertisements all the time. we look at our consumer database. we try to do as best we can to stop these types of frauds. >> mr. delaney, are we going to have a new website as federal reporting dot gov 2.0 or is recovery.gov up and running. it's up and running right now. it will be replaced by a newer version around the first part of october. >> i just told a couple people to go to recovery.gov.

>> you still o go there and you'll get the newer version when we put that up. >> thank you, mr. chairman. >> thanks very much, senator burris. senator coburn. >> let me personally thank each of you for your service. you have a tough job, a really tough job. what we want to be is not somebody that's critical, but really someone that's helpful. mr. nabors, in your testimony you said each of the stimulus projects is carefully reviewed by omb to ensure their uses of recovery act funds are thoughtful and appropriate. you work with agencies to identify and revise projects that do not meet that threshold. could you make the list of those projects that you've identified and revised available to the committee? >> i don't know that there is a consolidated list of those types of activities. let me go back to the office and see what we have and what we can

provide to the committee. >> one other concern that i have, and again i'm sure these are old numbers. the government executive article on august 31st, 2009 said that more than half the recovery act contracts to federal agencies have been awarded on a cost-plus basis. i agree with the president. that's exactly what we don't want to do. we want fixed price contracts. we don't want cost-plus contracts. cost-plus contracts always cost more. what is the administration doing, mr. nabors, to make sure that this trend is reported in this article doesn't continue? it's 53% of all the contracts let so far are cost-pluses, which is pretty worrisome? >> i think we're doing two things. first, the director of omb and the president put out instruction toss the agencies that are preferenced when at all

possible is to use competitive processes and to ensure that as much as possible that we are using fixed price contracts. i think what we're seeing with the cost-plus is somewhat an anomaly because a lot of that is being driven by the department of energy. where we've seen a lot of fixed price contracts -- a lot of variable priced contracts used is when you have things like r&d where the true costs are not known up front. if you look at most of the money for that category of contracts right now, about 90% of the money is the department of energy which was not unexpected. that having been said -- >> that went out earlier than much of the other months. so that's tended to skew it. i'm willing to stand corrected on the numbers. i know that's just a snapshot. all i'm saying is i'm concerned about it. i know the president is concerned about it. the other point i would make though, and we made it several times, if you don't get a buy-in of company's capital on

research -- in other words, them having capital at risk when they get these contracts, they're not ever going to be as efficient. so my message to you would be, even though it's department of energy and even though it's research, they ought to put capital at risk. that's one of the ways we'll control the costs. when they're cost-plus, managing those are difficult. and it's kind of like general devaney has said in the past, you're looking at it after the fact rather than preventing it in the future. the way to get that is to make sure that those contracts, those companies have to have some of their capital at risk at well. >> your point is well taken. >> that will help us a lot. mr. devaney, for you and mr. nabors, i'm very appreciative of your work. are we going to be on time with

recovery.gov, the website? >> absolutely. >> it's coming up on the 10th or the 11th of october. >> it will be up before that. >> one of the things bothering me little bit. you differentiate between integrity and quality. i don't have any doubt that you're going to make sure that the integrity of the data that you're putting up is accurate. but i'm wondering can you reach further to make sure the quality of data is accurate? >> it's a major concern, senator, and growing, quite frankly, that we have at the board. we're asking, as i mentioned in my oral remarks for recipients to report far more things to the federal government than they ever have before. and it's a tough job. i have have to meet the deadline of reporting which is october 10th. and they're doing some unique

things out there. for instance, 30-plus states are going to be reporting centrally in bulk form. and i think they're doing that to ensure that they report on time and to maybe give themselves a tad more time to look at the data at the state level to ensure it comes in in an accurate way. having said that, i'm concerned that the public's view of inaccurate data would actually harm rather than enhance transparency. so i want -- the board and i have want to do everything possible to allow folks to go in and check that data once it's gone in, to make revisions if they have to. we're going to track those changes very closely. >> is it going to be started on the website so everyone else can see it's been changed? >> we're going to be tracking

and chronicling those changes on a daily basis and make all that for anybody who wants to see that, for instance, download it, and just take it off and look at it for themselves. we're going to make that capacity available. but also we're going to put up on the website a dashboard, if you will, with pie charts and graphs that shows where the changes were made, what categories changes were made in, whether or not x percent was over at the department of commerce. we'll make all that available for everybody to see after those changes take place. >> part of your statement was the fact that you think this is going to change the way the government operates. actually the president, senator carper and myself and senator mccain put through usaspending.gov.

recovery.gov will be great and i agree with you. but the quality of the data, the integrity can be fine, but if the data is not any good and it's not a true reflection of what's happening we really haven't bought anything. i guess my final comment or question was, what is in force, what is going to be in force to make sure that the agencies which are going to be responsible for the quality of data -- at least that's what i understood you to say -- bring good quality data to you? >> well, the agencies are going to be actively in looking at that data along with their state and recipient counterparts and to get it in the best shape possible. my suspicion is it will get better -- the second quarter will be better than the first quarter, et cetera, et cetera. as you may know, when u.s.a. spending was set up, initially

51% of the data was inaccurate. we're 2 1/2 years later and it's 13%, 14% inaccurate. so it's a hard thing for recipients to report data seemingly. we're asking them in this it is going to take in leveraging of resources. they will play a role. the recovery board will do its best to aid in the process. >> you are having a problem with quality right now. is that correct? >> yes. >> so the site will have a full implementation that will take some time. is that correct? >> the site will be up and very interactive. that that mentioned earlier, it will be able to do a lot of things. you can slice and dice and do many things. i hope the data will be as accurate as it can be. it will not be fully accurate

initially. it will get better. er. and i really do believe that once people get used to doing this, this being the first time and coming at an awkward time of year -- october is usually an awkward time for most financial entities, particularly in the states, we'll have a lot of good data in there after a period of time. >> thank you very much. >> thanks senator coburn. senator mccain. >> thank you, mr. chairman. i thank the witnesses for being here today and all of their hard work. mr. mihm, in march the gao announced a hotline website for citizens to report waste, fraud or abuse. how many complaints has that hod line received? >> senator, we're reviewing -- we've got 80 credible or

initially credible responses that came in. of those we're doing eight detailed investigations. from those another 12 or so are pending, and then 22 of them that we referred over to the inspectors general. i don't have the hotline number. but 80 of them were credible enough to warrant investigation. >> thank you. i noticed in your prepared statement, mr. mihm, that one of the charts figure 2, estimated federal recovery act out lays to states and localities. in 2009 as a share of the total, and then it goes on to show 87% of estimated federal recovery act out lays to states will be in the nine programs that you have reviewed. >> yes, sir. >> 63% has been in medicaid? >> yes, sir. that's the adjustment, the increase in the f map as there was a 6.2% across the board that

went to all states, increasing the federal match, and then an additional bum up up for states that had significant increases in unemployment rates. for the first couple of rounds, this is what's out there. most of the states are receiving it in order to maintain eligibility and deal with increasing case loads they're having as a result of the recession. >> tell me how that's a job creator. >> first, since this is mandatory program, it is not one of the -- it is not -- does not have to be reported as part of the recipient reports in terms of job creations or jobs retained. they're off the table in that regard. what it usually does or what many of the states told us is in addition to helping with eligibility and case loads, it also freed up state money. and then the state money has allowed them to do less draconian cuts than they would have otherwise done. the short answer to your question, sir, is they are not subject to the reporting

requirements we're talking about. >> how much money are we talking about in the 63% that went for medicaid? >> it will be $87 billion over a two-year period. the exact money -- just to make sure i refer to this, is it's $19.6 billion from october 1 to september 4 in the 17 locations we've been looking at. >> do you have any comment on that, mr. nabors? >> i concur with the assessment. i think our view of the importance of the f map program is exactly how mr. him laid it out. what the states have told us is because they have access to this f map money in other areas such as education or law enforcement, there's reduced pressure on their budget and they're able to both create and retain other types of jobs through the availability of the f map money. >> sort of a trickle-down economics i would guess.

plvmt nabors, i've seen many administration witnesses and i understand you have to tout the success of whatever program that the administration is running. i do think it might be well to complete the record that when the stimulus package was being considered in the united states senate, the economic advisers to the president, the director of omb said maximum unemployment would be 8%. it's now 9.7%. i just came back from spending a lot of time in my state as many members did. and my state is one of the hardest hit. our small business owners that are closing their doors and storefronts and shutting down are asking me why they're too small to save, and financial

institutions are too big to fail. i have yet to come up with a very good response to that. the fact that unemployment is at 9%, lag or not lag, is not -- comes as small comfort to the citizens of my state who are unemployed and the people who are unable to remain in their homes with one of the highest foreclosure rates in the country. i would be glad to hear your response to that diatribe. >> sir, i don't disagree with anything that you've just said. our initial assessments of the state of the economy was based on inaccurate and incomplete information. and the downturn in the economy turned out to be much more significant, much more severe than originally projected in january and february.

as we look at the unemployment growth -- it's not just the numbers that we're seeing today, but the numbers that we put out in our mid session review project that unemployment could reach as high as 10%. that is unacceptable to us. and as i said to the chairman and to the ranking member, we're trying very hard as much as possible to increase the spending coming out of the recovery act. and to try to do everything possible to minimize the impact of this recession on the american people. >> i thank you for that answer, mr. nabors. mr. mihm, in your prepared statement there was a number of recommendations that gao had proposed. there's not a page number. it says gao recommendations, accountability and trance paspa.

then you have various bullets. have those recommendations been largely complied with? if not, maybe for the record you could provide us with the areas where you think there needs to be further accountability and transparency. >> the second half of your question, yes, sir. in our september report, the one that's coming out in a couple weeks, we'll give an assessment of all the recommendations we've been making and where omb and other federal agencies are in that regard. to the first half as to whether or not they've been complied with, as i mentioned earlier, i think the pilot program that director nabors was talking about for single audit is very important to addressing many of the concerns that we have in regards to the accountability and transparency aspects here. that is that we need these internal control can testing earlier. not to get into too much of the weeds on this stuff, but most state fiscal years end on june 30th. the single audits then come out nine months after that. that's the required date. often they lag a little bit more than that.

so we will not be knowing how things are going from an audit perspective in states in some cases -- well, for the fiscal year that just began, until march of 2011. there's been too much money by that point of recovery act money that will be out the door. then it will be just a historical document rather than a document that can help people manage and help us to address risks. that's why we need the risk assessments to be coming out earlier from the state auditors so that as a deficiency or weakness is identified, they can be dealt with before they become a big crisis and show up over at ftc. these are the type of things -- focusing on the pilot is very important to us. i know it's a major focus of the administration. >> i thank you. mr. chairman, my time has expired. i want to thank the witnesses. mr. liebowitz, i'm not sure we need this pact. but it's very good information. thank you. >> thanks, senator mccain for your thoughtful questions and, i might add, your high quality

diatribes. senator mccass skill. >> i'm going to try to live up to the example -- >> i have every confidence. >> -- of the diatribe. i couldn't agree more with senator tester. these people that are out there preying upon folks at this point in time, they are pond scum and they should go to jail. and whatever we need to do to help them go to jail, you need to let us know because, you know, i know you're doing sweeps. i know you're doing all this, but nothing counts more than cuffing somebody. >> i absolutely agree with you. in the context of the commerce committee reauthorization that we hope to see later this year or early next year, we'll have some ideas we can talk over with you. >> okay. great. i don't mean you to think, mr. nabors that i'm picking on you. it's going to feel like i'm

picking on you. we sent out requests for all the state auditors asking for input on how they think this is going in light of their single audit responsibilities and the stimulus funds that are out there. one of the things that came back loud and clear was the ridiculous -- i think ridiculous notion that we are mechanically making the decision that any program that gets ara funds becomes a type a high-risk program. let me give you a good example. foster care. f foster care is a low risk type a program under a-133. and the ara funding is approximately 2%. and what you do now is you push that into high risk as an a-level program which takes a tremendous amount of resources in terms of auditing.

i really think you have missed the boat in terms of using the expertise on the ground of the state auditors that are doing these single audits to make decisions about high risk and low risk as it relates to these moneys. i'm just curious. i don't mean to be a smart aleck. but is there anyone making these decisions over there that's ever done a single audit? >> the answer is yes. i take your -- i don't feel you're picking on me and i will try to answer appropriately. there are people in our shop that have done single audits. we're in constant communication with the auditing community. in essence, the pilot program that we are proposing today was born out of conversations that we had with gao, with some of your staff and with the audit community. that conversation is going to be

on going and we'll continue to have that conversation with them. >> okay. now i've got to really pour lighter fluid on the charcoal brick kets here. if we're just rolling out a pilot program, do we have specifics on when -- really this -- i think mr. mihm will back me up, mr. devaney will back me up. you've got -- the barn door is already open, and, you know, the cow is out of the barn and we're announcing the rollout of the pilot program. it will have no value whatsoever, as mr. mihm just said, if this pilot program isn't on the ground asap. i'm worried we've gone this many months and we're announcing a pilot program. how many states are in the pilot? how are you informing the states of the pilot? state auditors in missouri don't know anything about it. how long will the pilot last? how much relief from other programs is being given in

connection with the pilot program? >> the pilot program was just announced today by the deputy director of the office of management and budget. so we will be providing additional guidance about the pilot going forward. but this is something that we plan on implementing almost immediately. we do want to make sure we're in very tight coordination with the gao. it's one of the things where we believe we've made a change in the oversight regime. too often omb and gao go off on their separate ways. in this instance we actually sat down and tried to figure out what the number of states that would be available when be to any state that wants to involve themselves in the pilot. we are using pilot aborted. that is the authority that we have available to us to make these types of the terminations. it would be as expensive as the number of states that want to purchase a pitch in the program. our initial vision of the

program is that we would look at the 10 highest risks programs based on our conversations with the agency and say, of that list, a state that wants to participate in the pilot has to choose those participants for expedited audits. if they want to participate in the project, and they make those selections, then we will give them relief from do an audit on smaller, lower-risk programs. quite i am glad to hear that that is going to be available to anyone who wants to participate. i am pleased as we are working closely with the jail -- jal. i think if you all will let loose of the reins a little bit, knowing that next year's single audit is big because of the way this money is rolling out. i think you will find you will get a much better product that will provide transparency and

accountability . more transparency and accountability than saying everything that gets to ara is high risk. i think that's a huge mistake. >> i take your point -- >> exception is really hard, you guys. it's hard. it's a big bunch of paperwork. i've asked for exceptions before. i know that it is like arm wrestling a gorilla, to try to get an exception. so i think it would be better if you guys could figure out a way to loosen up a little bit. i would like to use the last few seconds i have to -- mr. devaney probably won't like this. but i had never met mr. devaney until i came to washington. i know he spent 20 years in the secret service, director of criminal enforcement of the epa for eight years, been inspector general for ten years, in the department of interior. i would say that he and the staff he directed caught jaabra of. i think to use his name on a

list of cheap political hits is unfair to him as a public servant. i think the members of this body should rise up and defend people like earl devaney who have clearly not come to government to make big money, who clearly do not have political allegiance, clearly have done everything in their career to look after the public's money. and i think including him and others on some cheap political hit list by some cable commentator does a disservice to him and many of the other people serving in positions of accountability. i wanted to put that on the record before i finished. >> thank you very much, senator. >> senator. >> thanks, senator mccaskill, i appreciate what you said. i identify myself with your remarks. from visual observation, you're right, mr. devaney was very uncomfortable as you were praising him. senator harper. >> i thought he was uncomfortable at first but the

more you got into it, the more he relaxed. so towards the end, he was enjoying it. all right. i was going to take a cheap hit at you, cheap shot, but i guess i won't. sometimes we run into people in our business on this side of the table people know we're elected officials. are you some politician? you're one of those politicians, aren't you? and over time i've taken to eith either say, well, actually, i'm not, i know some who are, but i'm sometimes i'll describe myself as i'm just a servant. or sometimes i'll say well actually i'm a statesman. i used to be a politician. but now i'm a statesman. so i -- whenever i hear folks call government bureaucrat, i don't take too kindly to that. so we thank you for your service and i, too, would like to reidentify with the remarks of senator mcskas kill. that's one of the nicest things

i've ever heard you say about anything or anybody. so treasury this day. mr. chairman, that was all i had. no, that's not all i h senator coburn are is is gone but he and i share an interest in a number of things along with others on our committee. one of the things we have an interest in is trying to recover money that's been misappropriated or misspent. one of the laws we have to comply with deals with improper payments. we know that every year agencies are supposed to report their improper payments. last year, omb told said we're up to $72 billion of improper payments, mostly overpayment, we're offering legislation this year to not just tighten that money up but to go after and recover more of the money that's inappropriately spent. and when folks asked me, how are we going to pay for health care?

where is the money going to come from without cutting people's benefits in ways that are untoward? and i talked to them about what we're doing in going after money in the medicare program that's been inappropriate ly or fraudulently spent. the last couple of years, we've been going after trying to recover money from medicare. lot of it was swindled, fraud. first year, we tried to do, didn't get anything. second year, we got a little bit of money back. last year, $700 million in just three state, post audit recovery. this year, we're going after recoveries in the other 47 st e states that goes well, we hope to be able to do the same kind of thing in medicaid. i wanted just to ask you all to share some thoughts with us about when we find, ant tight of this health care follow the money, an update on stimulus spending and fraud prevention. i want to talk about when we find where there's been fraud or monies misspent, inappropriately

spent. what are we doing or prepared to do to go after and relame the money for the treasury for the taxpayers? >> i'll take a stab at that. >> please. >> i think that early on the board and all of the igs have been interacting with department of justice. there's an already existing task force, procurement grant fraud task force that provides sort of entree into the 35 attorney generals offices around the country when a case comes up, we're going to be very aggressive to see that gets prosecut prosecuted. as aggressive as we possibly can be, if the facts support those kinds of things. so the answer is we've got about nine ace cases right now that are in the various u.s. attorneys' offices, which is a very small amount and quite frankly i'm surprised it's that small. but as soon as we see it, we make sure the appropriate ig is

doing an investigation and that gets brought into a u.s. attorney for review. and we work closely with the department of justice. and i know from talking to them, they're very interested in sending some very loud signals early, as often as they can with this money. >> anyone else at the table want to respond? >> from our perspective, when we see consumers as victims an that's where our jurisdiction is, we go after it. we work with treasury and justice. in some case, we refer for criminal prosecution because the sfraud so egregious and state igs who are better equipped to get fines and go after malefactors in their jurisdiction. we also look at where the money is going. it's really the title of this

hearing fraudsters are opportunistic, they go where the money is. you want to try and at least try and figure out where it's going a little bit in advance so you can get there maybe a little bit before sometimes. >> i think if i didn't understand, senator mccaskill used the word pond scum. not a word we hear every day. >> it's a legal term of art, actually. >> but probably a well chosen word in this case, describing folks trying to take advantage of people with this money involvement for stimulus recovery. she said there's nothing more effective than maybe cuffing somebody that's been behaving not just badly but criminally. i say the other thing that's really important is we follow the money and the money that's ended up where it shouldn't be, let's get it back. to the extent that we can get the money back, we need to do that. and it's fine to cuff people, that's good. if they ought to be cuffed, we ought to get the money back as much as we can. the other thing i want to mention is our governor,

congressman, our colleague and i were down in an area between wilmington and dover the other day where senator lieberman has driven by a time or two. his campaign trail comes right by this way. major expansion of all things a park and ride, which sits right alongside of two major north/south highways in a bedroom community, a miss called middletown, we were expanding the park and ride. we're putting in a bicycle path and pedestrian walkways from some of the neighborhoods so people can get to the park and rid and initiating new bus service for the park and ride, so it's a nice mull tie modal deal, the anticipated cost is $900,000. the project came in at $600,000. what i'm starting to notice, i don't know if you notice in projects in your state, we got a lot of people, contractors hunting for work and anxious to bid. i know senator coburn expressed

concern about cost-plus contracts, but we're finding that probably better than any time that i can remember bids coming in under, way under in some case, the anticipation. i don't know if others are seeing that. my colleagues and i had yet. but mr. mihm, any comments on that? >> yes, senator carper, your experience is consistent with what we've seen in other stats,s transportation officials are telling us bids are 5 % to 30% below what they estimated. the economy is in bad shape, but it also shows it's a good deal that they're able to do additional projects because of that your experience, again,consistent with what we've seen elsewhere. >> in this case, it was a deldot projects, but the money stays in the state and can be used for other deldot projects. that's good. that's a silver lining in what could be an otherwise rather dark cloud. thank you for your stewardship.

thank you for being, giving the term government bureaucrats a good name, a good name. thank you. >> thanks, senator carper, very much. senator collins and i each have a few more questions. we'll try to them as quickly as we can. mr. nabors in your opening statement, i would say you volunteered slightly into mr. leibowitz' territory into consumer protection wrrd to the report of the council of economic advisers today. i was interested in it and i appreciate it. i think what you were saying is that this first quarterly report of the council of economic advisers today on the stimulus act will produce results that will be greater than the recipient reports that come in in october. and i presume in job creation,

particularly. and this whole aroused some perhaps when the second reports come in, will arouse some controversy. so i appreciate you doing cea to do is calculate the impact of the recovery act overall in the economy and there is more than just direct jobs from direct federal spending involved in that. as i mentioned in the conversation with senator mccain, even something like fmap is viewed as having an economic benefit. even though it doesn't directly create a job, it does free up money for states to use in other areas and those areas are seen

as producing jobs either for law enforcement or education or other fields. so what the cea report will do is two major things that are different from the recipient reporting. one, it will calculate a broader base of job creation. it's not just capturing direct job, but it's capturing direct, indirect and what we call induced jobs. the jobs that are created as a result of manufacturers producing things for highway companies that are building the roads. all of that will have an economic essentially a trickle, throughout the entire economy. the second thing that the cea will be doing is when you look at the direct jobs that the

recipients will be calculating, it's not necessarily clear that they have all of the information with regard -- with regard to jobs that are necessarily retained as a result of that money that is something that's very important. in the overall context of the economy. and that's something that cea's report will also be capturing. >> i want to move on to one more question. it sounds to me as if you're saying they're both right. they're both answering different is a more comprehensive answer. therefore perhaps more accurate. it is not that the recipients are being inaccurate, but they are not calculating all of the effect. >> it depends on what precise question you're asking. if you want to know how many jobs the transportation project created in your neighborhood, then the recipient of reporting is probably more accurate. if you want to know about them manifestations of the recovery

act, then the other estimate is going to be more accurate. >> ok. i mentioned in my opening statement in meetings that i had last week with some building trades people in connecticut, there were concerns that they did not seem certain things. it was perplexing. i had reconvened eight meeting right before the stimulus act was adopted or right after and it was dealing with construction firms and labor unions and the state said jobs were permanent and ready to go and money came forward. my staff did some background on this. we ended up with a result that was unsettling and dismaying to me about my own state. a month to ask the state to respond. here is what i found. the state connecticut -- this is what we talked about before using the language of outlays

and money extra spent. according to the numbers revell, a 450 million of mass transit -- to lenders as a 9 million of the funds have been obligated in this case. the project has officially been chosen. . the stunning number to me. only $506,000 of that has been outlaid in the state. now i'm checking, that turns out to be one of the lowest payout rates in the country accord iin to the white house. so i wanted to ask you from your perspective, overseeing this perspective, overseeing this program, what's happening there? and is this occurring in a lot

of other states? and if association what is the administration doing about it? or what can the administration do about it? >> it is something that we are seeing in a variety of different states. i think connecticut is on the extreme side of things. i think there are two issues here. one is that, as i've mentioned previously, this is a relatively unique aspect of the highway transportation fund and other transportation monies. and i think that in part what has occurred is the state transportation offices have gotten used to do business the same way every year with regard to their normal money. if you were looking at their annual appropriations, this would be a similar type of pattern that you would see. what we are doing and what the vice president is personally doing is reaching out directly to the governors and state le e legislatures and saying this isn't a normal time. we need to make sure the money

is getting out the door and stimulating the economy in a much more direct way and people are being responsive to those requests and will continue to make those requests of the state s. >> okay. thank you. thanks, senator collins. >> thank you, mr. chairman. mr. mihm, let me follow up on the issue of how we track the number of jobs that have either been created or saved by the recovery act. for most of us looking at the job creation or the job saved number, is a very important measure as to whether the stimulus bill is achieving the goals that those of us who support it had hoped for. omb is allowing two different methods for counting the jobs created under the bill or saved. the first is direct counting. it's obvious what that means. but omb also allows a second

option, which is an extrapolation, an estimate based on project information. my concern about having two different methods of measuring job creation or the number of jobs saved is that it could serve to undermine the public's confidence in the credibility of the numbers. could you comment on the issue of do we need two different ways? or do we just need one set or one approach to measuring jobs created or saved? >> that's exactly one of the questions we're going to be looking at as we look at these recipient reports, the methodologist they use and -- well, a couple of things. first,there transparency in the reporting as to which methodologies they use. does a user of this understand how they got the number?

and then second, as we do our asse assessment, does it make sense at a high level why people would choose one methodology over another. that is is it done for all the right reasons? our approach is over the next couple of weeks, our state teams that are out there in those 16 states in the district are sitting down with officials in the states which are the direct recipients who will have to be doing the reporting to feder federalreporting.gov and understanding what the controls you'll have in place, how are you going to be reporting on the jobs to the extend that you're relying on information from some recipient, what are you going to be doing to assure yourselves you get good data? that's all before the reporting takes place. then after the reports come in, we're going to go back out there and say, did you actually do what you said you were going to do? and then beyond that, then test for some sub recipients go down and find out it flows all the way down. as i mentioned earlier, i our primary focus is going on this

time around, transportation program, highway program, that's where a lot of money is already and that's also, in my economist friends tell me that's where we can expect job impacts to the extent we're going to see them. so that's going to be the focus. but you're asking exactly the right question. the transparency on that is very important. >> it's critical. i'm very pleased that maine has the opposite situation of connecticut. we rank first in the nation in the expenditure of stimulus funds for transportation projects. and it was very heartening to me to meet simply with the owner of a construction company who told me that there were 100 people working who otherwise would not have been just from this one particular project. but it also became clear to me that this becomes very complicated on how you count. if you have a project with 100 people working on it, that

project ends and then there's another project that hires 50 of those people. how is that measured? are those 50 new jobs? so the total is 150 or is that a subset of the 100 that was originally counted? it becomes difficult. and the problems are obvious as you try to measure that, which is why i think it's important to that we have an agreed-upon measurement system and just stick with it. so the same standards are used everywhere and we have got apples to apples. >> on the particular example you're talking about. >> yes. >> i'm obviously defer to director nabors on this, but omb has tried to address that by asking recipients to report on fte basis rather than on a specific job. so we don't get into these. >> double counting. >> because the one you were describing an argument could be

made did that second job kill 50 jobs? that's not what we're trying to get at. so the fte, the full-time equivalent calculation is designed to make sure we're comparing apples to apples across the board. >> thank you. mr. leibowitz, i want to go back to the issue that senator mccaskill raised about what happens to these con artists. the ftc does a terrific job of shutting down the website, doing the sweep, but obviously you can't cuff them as she puts it or you can't prosecute it, you have to refer the case to the justice department. >> sure. >> so that raises the question is it the justice department receptive to pursuing these cases? what you always wonder and you always worry about and i've done a lot of work over the decades on consumer fraud issues is the

fear is that it's viewed as small potatoes. and that a case is never brought unless it reaches a certain threshold. and what happens particularly in the internet aid is that con artist then goes on to set up another website and scams the next set of victims. that's closed down. the prosecution is declined because it's small again. although it's probably not because the range of victims is probably far greater than it's realized. but how receptive is the justice department to following through on these cases? and i'm reading -- >> you've identified all the problems without a diatribe by the way. we work with the justice department, there's always a tension. i've been on the commission for five year, there's always a

tension at the justice department between the things that are highest priority, terrorism. >> hard core crime and things like fraud, which sometimes fall through the cracks. but attorney general holder and lenny burr who is the head of the criminal division have have been very, very reseptemberistive with the idea of bring iing more cases an we have relationships with u.s. attorneys. so we go directly to where the malfactors or. my recollection is that one of the cases that we brought, grand connect, one of the malfactors is in jail now. the husband who started the scam who was taken over over by his wife, the former mrs. neff valued da is in jail. so we are pretty good at getting cases to the justice department and the folks who can put these bad guys in jail, we have a

criminal liaison unit that's been good at referring cases. it's an ongoing effort. but we also respect the justice department's priorities, so we want to be in there as quickly as we can. so but i'll get back to you on that particular case and we'll keep the effort up and again, they've been very receptive at the justice department. >> thank you. mr. devaney, i'm not familiar with the story that senator mccaskill brought up this morning. while there are obvious issues with congressional oversight, accountability and transparency with the creation of new czar positions within the office of the president, that is the totally different issue from senate confirmed individuals who are performing important roles who do testify before us

regularly. and although i'm not familiar with the report that senator mccaskill brought up, it is extremely unfair if your position is being lumped in to the category of these other issues. let me just ask you one quick final question. you brought up a difficult issue in passing and that is you said that the board that you're overseeing is not involved in making judgments over the quality of projects for which stimulus money is spent. and that your focus, if it's a direct bar against funding, an aquarium, for example, then you would come in to play or if there's fraud, obviously. or improper payments. but that raises a question of whether there's a gap here.

because there are in projects that have been reported in the press, for example, building a guardrail around an evaporated lake, that clearly should not be fu funded. and traditionally i've looked to the gao or the ig to identify those projects. so if it's not your job to raise a red flag on those projects and i understand why you think it may not be, who's job is it? >> well, we are seeing things like that. and when we do, we bring that to the attention of either the agency directly and we've made a lot of referrals directly to the agencies, you need to look at this. and also omb. reflecting back on something director nabors said earlier, there's a very aggressive approach on the part of the vice president and his staff to get

right on this. i mean if they see something like that, they have been very -- my observation is from a distance, they've been very aggressive about that. i suspect when the data starts to roll in, we will see more of that, we will see more questionable projects. and we will make sure that all of the data gets over to the peoples of they can look at the project and we consider was approved or was not approved and do some watchful thinking about whether or not the was a smart thing to do. but there are going to be projects that two or three people look at in very different ways. was that a smart bridge will was that a bridge to nowhere? there will be a lot of opinions out there when people see this data. that is what i meant earlier when i said it was going to be an interesting time when people get to see that.

we do not want to get involved in those sort of a subjective judgments, i want to be clear about that. but nonetheless, if we see something that is clearly wrong, we will make sure that get sent -- that get sent to the right place. >> mr. chairman, i want to thank you for your leadership on this set of hearings that we have been holding. as you mentioned, this is the fifth oversight hearing. i also want to thank our staff, and i particularly want to thank my staff for their work on the consumer fraud issue. i have been very interested in those issues since my days at state government and also as chairman at psi and i appreciate your including that aspect in this hearing. >> thank you, senator. thank you for your leadership in all of your efforts leading up to this hearing and also for

iraq work that your staff did for the overall hearing. i must say, i am proud of the members of the committee, of what the questions -- i thought the questions were thoughtful. there were one or two diatribes. [laughter] but this is exactly what we want to do here. my impression is that the stimulus act as having a positive effect on the economy. it is not perfect. i appreciate the fact that, you said the effort is complete -- is particularly committed and in this way is hands-on. the vice president and his characteristic way is hands on. i thought it was very important you told me he's on the phone himself. calling governors in state where the outlaw h lay of the actual spending is not what we hoped it would be.

i thank you mr. devaney and mr. mihm for the work that you're doing to assist us really in our oversight. this was an extraordinary legislative act, with an enormous amount of money in it. we did it because of the sense of urgency we had about where our economy was heading. we worried it was heading over the cliff. we're comforted to feel now it's not anywhere near the cliff but still there's a lot of suffer, but the bottom line here is that with this much money being spent this quickly, we feel ourselves, a sense of accountability and responsibility and you're out there working for us in the various ways you are, sharing that responsibility and it's comforting to us and reward for all your good work is that we're probably going to call you back here some time at the end of october or early november, particularly after the recovery.gov gets up and we begin to receive recipient reports to see how -- what that

tells us about how we're doing. mr. leibowitz, you add a very important dimension here. i appreciate that you were here. you could tell from both the public questioning by the members and i can tell you from the sort of private conversations as people were coming by the chair here, that the numbers are very interested and concerned about the scam artists. it's been a long time since i've heard the term pond scum. and in an age where we soon may be referring to ipod scums, not pond scums. but in anyca case, there is interest among the committee in exploring any changes in law that could improve or strengthen the work that you're doing by way of deterrents, putting more power in the hands of not only the commission but the justice department. and so, i ask that you work with

our staff and your staff work with ours to see if there's something constructive that we can do with that regard. >> we would be delighted to do that. i've had discussions with senator collins because she is the ranking member of our appropriations subcommittee. part of it is -- i'll get back to you with a list. but part of it is growing the agency. we are 30% smaller than we were 30 years ago, even though the population has grown from 225 million to 305 million in the united states. part of it is just having a sort of stronger deterrents. one thing we're interested in and that there's growing support for is giving us fining authority. another is giving us easy rule making authority. in the omnibus, you gave us, congress gave us the ability to do a rule making involving mortgages, the apa rule making. which is easier rule making.

we're under something medieval called the magnusson-moss act. because of that, we will do something very, very useful that sets a clear baseline. so thank you for that support. and we're going to stay on top of that issue and get back to you. >> we'll work together on it. thank you off. the record of the hearing will be held open for 15 days for any additional questions or statements. people would like to submit. but then i thank you very much for your very, very important public service. hearing is adjourned. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> up next, the defense department general counsel for guantanamo bay talks about issues surrounding the detention facility. live at 1:00, the freedom works

tax rally at the capitol. >> this week during a special session, the supreme court heard oral argument on campaign finance. the first session for justice sonia sotomayor. >> there is no record that i am reviewing that actually goes into the very question that you are doing exists, which is, a patchwork of were the tory and jurisprudential guidelines -- of regulatory and jurisprudential guidelines that are so clear. >> here they are in their entirety today at 7:00 p.m. on c-span. and a look at the role and history of the court from its justices during supreme court week. >> tonight on c-span, and laurel service for what -- walter cronkite, who died earlier this year at the age of 92. among the speakers and mark

president obama and former president bill clinton, tom brokaw and apollo 11 astronaut buzz aldrin. that is denied beginning at 80 5:00 p.m. eastern on c-span -- that is tonight beginning at 8:35 p.m. eastern on c-span. >> the obama administration has set a deadline in 2010 to" on monday. several legal issues surrounding a decision, including civilian courts and the impact of moving trials to u.s. soil. this event is hosted by the american bar association and is 45 minutes. >> good morning. let me begin.

thank you all for coming, i very much appreciated. i am the chairman on national security law. i'm taking over from the excellent storage above our hardee. powell has become the chair of -- al has become the chair of our services division. our mission has always been to educate at the bar the public about the importance of the rule of law and of preserving the freedoms of national democracy. these programs that we're having today that we sort of meet our goals and we achieved that we want to do. as you know, we have a series of projects we did over the summer. we are continuing our due

process in terrorism series. we involve the article 3 courts and prevention series. these will all be up on our web site, which i will announce after the discussion. we are here today, though, and it is an honor and pleasure for me to introduce the general tonto on the day -- the general counsel for the department of defense on this issue. his experience has been a mixture of private practice and public service. he began his career in public service of the assistant district attorney in new york. in the late 80's and early 90's he was a federal prosecutor and tried some high-profile cases and has even argued a number of cases on appeal. he joined the law firm of paul

weiss and went on to high stake commercial cases. yet corporate clients who ranged from armstrong world industries and smith barney. in 2004 he was elected to the prestigious college of trial lawyers. he served in the air force for 27 months and return to practice again in early january of 2001. law and private practice and numerous judicial and activities. he chaired the american bar association. mr. johnson is also a member of the canton on foreign relations and was the director of the trustee of the elbow for university, the fund for modern courts, the legal aid society, the lawyers committee for civil rights under law and the new

york city bar fund. the asa or dissipates -- he also participates with the film society lincoln theater. he is also on the board of governors of the franklin delano roosevelt institute. in january 2007, mr. johnson was one of seven nominated to be chief judge of the new york state. the governor reappointed the incumbent, justice judith kaye, so it was very lucky for us that mr. johnson did not get a broken yet. [laughter] -- did not get a broken yet. -- a robe yet. [laughter] last but not least, he has also been a member of our committee for a number of years. it is my great pleasure for me to reintroduce mr. johnson. he will speak for about 20 minutes and then we'll have q&a for about 15 minutes. thank you so much. [applause]

>> thank you for reminding me of all of the committee and directorships i have had been ordered to take this drop in public service. can everybody hear me? it is a pleasure for me to be here today and to see so many good friends associated with this committee, associated with my previous life, the pentagon, general morgan, who was judge advocate general of the air force when i was general counsel of the airforce, mary islesford, who was my special assistant. some personal friends here and distinguished members of the year sherry -- of the judiciary. one person i want to single out and pay special tribute to i did not expect to see here today, but it's a pleasure and an honor

to see here today is bill kohlman. the first time that bill kohlman, he will not remember it. it was june 1974. i was in philadelphia and i was at the wedding of my first cousin and michaemy uncle, who a physician in philadelphia -- chávez 16, did not know what i wanted to do, was probably going to end up playing left field for the york mets -- [laughter] and michael in his wisdom said to me, i am going to take you by a neighbor of mine in philadelphia named william coleman. he is a hot shot corporate lawyer in philadelphia and he is a black man. for me, the thought of an african-american who was in corporate baba who had clerked on the supreme court -- was in corporate law who have scored on the supreme court then was about

as unstoppable as serving -- unfathomable as serving in this administration with barack obama now. i went by to meet mr. kohlman and my uncle told me all about him and his practice. that left a huge impression on me, even then at age 16. bill: has been a trend setter -- bill kohlman has been a trend setter in the law and a role model for me. it is somewhat of a cent -- of a coincidence, probably no coincidence that he was the first african-american lawyer at paul weiss in 1949 and i am the first african-american but partnered up offered. it is a great pleasure to see him here. thank you very much for being here. [applause] thank you for the invitation to be with you today. i was a member of this committee

for several years and attended many of its conferences. i've learned much to return my spend time with this committee and i encourage many of my colleagues in the department of defense to become more involved with you. i received this invitation many months ago and spent considerable time thinking about what i would say here today. i considered sharing with you the nuts and bolts of the legal issues surrounding one or two litigation issues pending against the defense department right now, or my insight and personal involvement. i testified four times before congress in july alone on legislative reform of military commission is currently pending as section 1031 of s-1390, the defense authorization act. then i realized there was a much larger overarching issue that we face today, something that in the day-to-day grind of my own job i must recall for myself every once in awhile.

tomorrow marks the day that along with december 7, 1941 and november 27, 1963 is one of the darkest single day is in american history. many of us have vivid, very personal connections with the traffic -- tragic events of the day. i suspect that many of you were in the pentagon that day and acted heroically to care for lives of your colleagues. for me, there are certain vivid rhetoric -- recollections of the day that i will never shake pier had a -- i was back at a law practice in new york for nine months after serving 27 months as general counsel in the air force in the clinton administration. voters in new york record to vote for republican nominees for mayor and other city offices. i drove from my home to my law office in midtown manhattan. i was driving to work about two

to three days a week, taking a bus or train the other days. depending on traffic in the lincoln tunnel, my door to dusk neared was always one hour, 10 minutes. i would leave home of around 6:30 a.m., before the tunnel got back up, part of the grudge and be in my office around -- park get the garage and be in my office around 7:45 a.m. i remember thinking that that september does not usually bring such great weather. i recall all of this about that morning because september 11 is my birthday. that day i planned to leave work early, celebrate my birthday the way i like to always spend it, a quiet dinner at home, many of my choice with my wife and two -- the menu of my toys with my wife and two kids. my office was on the 20th floor of 1285 avenue of the americas,

or as we new yorkers know it, 6 and 51st. my office was on the east side of the building, near the southeast corner. step out of my office and from the associates office a few feet away was aç clear view down sih avenue of the world trade center. i was an eyewitness to the flames and destruction caused by the first plane and the impact of the second plane, the collapse of the purse to our at 9:59 a.m. and the collapse of the second tower 10:00 a.m.. after the pentagon was hit, many of you will recall and should recall as a lesson in crisis management a number of false reports about attacks elsewhere that day. i remember seeing the fighter jet over manhattan and i remember the drive home over the george washington bridge. all the traffic on that great bridge was pointed one way, headed out of the city.

no traffic was allowed in. the city that day had been attacked and it did, indeed, feel like a war zone. politics aside, i recalled feeling terrible that i have left federal service, powerless to do anything, that the position of general counsel of the department of air force was nine months into the new administration still vacant and i was not at the pentagon that it with my career colleagues. i wanted to do something. i walked the streets looking for a hospital that would except blood donations. like december 7, 1941 and november 22, 1963, september 11, 2001 is a single day that changed the direction of our country like the water. one major military operation in afghanistan was launched as a direct result and a second military operation in iraq, some will argue, was launched as a direct result of the environment

created post 9/11. we faced an ill-defined enemy that had penetrated our borders. we knew of anthrax attacks, but we did not know when and where they would end. our leaders warned us of the next terrorist attack that would be even bigger than the attack on 9/11. the psyche of the american public changed. we were afraid. we fear for our safety and that of our children. it was within the context of this environment that's our national security legal judgments were made. which a conventional legal wisdom now says were plain wrong. we read now declassified legal opinions and are stunned that senior lawyers of our government would in very detailed and graphic terms approved waterboarding, confinement in cramped spaces, slapping a man in the face or depriving him of the slick -- of sleep all in the name of national security.

reading these briefings from 2002 and 2005 and what you see is the thinking of an era. suddenly, we faced in national security crisis that did not and does not fit neatly within the law of war or the law enforcement boxes. i raise all this not to criticize, accused, or score political points. my job is to get it right for an hour and for the future. but out of the legal judgments that were made in the years that would immediately follow 9/11, there are a few, what our president has referred to in a different context, teachable moments. this morning, i would like to share with you my own observations in this regard after only seven months on the job of general counsel of department of defense i'm still learning and i hope to continue to learn. first, as national security lawyers, we must be cautious about the legal judgments that we make during times of fear,

uncertainty, or national emergency. as justice o'connor, who in my opinion is the most influential supreme court justice of loudoun * -- of modern times wrote in a decision, it is during the most challenging times of our nation's commitment to due process is it really does this -- tested that we must preserve those principles of which we fight abroad. one of my personal pledges in his job is to adhere to the principle. as lawyers, it is our job to be steadfast in the application of the rule of law, regardless of the political climate or changing times. we must help shape policy to fit the law. we do not shape the law to fit policy. one of my closest friends -- one of my closest family friends is a retired ivy league professor in his late seventies. heç is one of the most courteo,

dignified, and mild mannered men you'll ever meet who in the 1960's was considered by many to be one of the intellectual engines of the civil rights movement. he was considered by others to be a dangerous radical submerse appeared -- subversive. our own government wiretapped his own -- his bones and sat in on his glasses -- wiretapped his phones and sat in on his classes. we must be aware that our government can go too far. second, policy makers, lawyers, judges cannot claim a zero tolerance for portrait but then try to render opinions the car out exceptions -- for torture but then try to render opinions that carve out exceptions for certain techniques. you cannot simply roll an opinion that you can hit a man, but not too hard, and expect causes of people in the field to know where that line is. as our commanders in the field

know, issue a rule of law and an opinion like that, an exception will quickly eat up their role. and the message to the interrogator in the field is that senior officials in our government are willing to tolerate a lot more. third, we were reminded in the political debates of the last few years that torture, cruel or degrading treatment of those we capture are contrary to american values. this is more than a legal judgment. it is a judgment about who we think we are as american spirit as american as -- as americans. as american as george washington and the dignity replace olli human rights of the individual. in 1776, it was george washington who wrote an order covering the treatment of haitian prisoners -- of hessian prisoners and said, treat them with humanity and we are not to copy the british army in their

brutal treatment of our unfortunate brethren. this is our history as a nation and others in the world community look to us to set and live by this example. in december, 2005, i attended a meeting of retired generals and admirals gathered to sign a letter in support of the mccain amendment. i recall 185-year-old retired two-star general who had seen the worst human abuses in the battle of iwo jima. there were not well versed in the policies of washington, but it rolla unequivocal in declaring simply, americans do not torture, with no exceptions. this is not about protecting the bad guys. it is about who we say we are as americans. that was a consensus in the room that day. this is why i am pleased that in the area of military commission's reform manning the invincibility of evidence that

are taken in cruel and degrading treatment is one of the reverse things we did in this administration. i am also pleased that it was done with unanimous support of the judge advocate general of the army, navy, air force and marines. this potential for the use of evidence of such statements was the most controversial item about the military commissions act in 2006 and in my opinion, cost the commission system more in credibility than it could ever benefit us by obtaining a few extra convictions. the ban on these statements was a change we put forward in may of 2009 among the five rules changes to military commission procedure and is a change for their codified in the pending legislation on military commission's reform. -- further codified in the pending legislation on military commission's reform. fourth, as i approached many times ripon -- before, a collaborative and open working

relation between attorneys and our jags produces better quality legal judgment and advice. the five rules changes i spoke of a moment ago were the joint work product of our giant and civilian lawyers. in july, testified before congress -- by testified before congress and promoted one standard for the admission of the detainee statements on behalf of the obama administration. the judge of its general of the services testified and proposed another. in early august i put us all together in a conference room in my office, lawyers from dot, the white house and doj, jack and civilian, and out of that came -- and agreements -- came an agreement. said about the fantastic work we lawyers are doing, we must guard against over loitering national security. we are at war with al qaeda.

the new president reiterated that in his speech at the archives on may 21. we must guard against viewing this war as a global law enforcement operation. and we must guard against advising legal guidance for the war fighter that only a lawyer can comprehend. i am pleased to be part of an administration that has made the rule of law at the corner store of the national security policy and they have a central role in the policy. president obama is a lawyer and a smart one. he -- and i agree that are promoting our own laws we promote national security, by promoting -- bon a more immediae level, we must do this to restore our credibility in the

corporate the courts are now into the business of national security to an extent no one could have imagined eight years ago. this is not because we invited them there. it is because we drew a sharp line in the san and dared them not to cross. even appointees in the prior administration are showing increasing impatience with our claims of national security into which courts cannot intrude. no person is above the law and no area of government operations is beyond the reach of the law. this morning i have tried to describe to the principles that guide me in office. but there are no easy answers to the questions that we face, i say that all the time. but i would like you to all be patient with us. we are doing our best. thank you for listening. [applause] with that, i will dare to take a

few questions. anybody have any questions? >> thank you very much for coming. i want to ask a question i have asked all of our speakers. you spoke about the general national security. i'm curious what your advice would be for individual attorneys concerning national security. what would be the personal characteristics they might bring to the table in support of policy leaders? >> well, my first immediate thought is to become involved with the work of this committee and this section of the aba. it is a terrific organization. every fall, for a couple of years when i came down from new york to produce a big in the

annual conference, i was so impressed with the depth of knowledge, you know, lawyers in government, lawyers in private practice that participated in this committee's conference. i remember, for example, chuck allen, who was our deputy for international law who had supported it in several panels, he had just come back from iraq and. the work of this committee provides terrific insights. i would say datthat what would e most important -- we have lawyers in the general counsel's office of dod who have been alongside the operators in the field with special forces, with our and combatant commands, had experience with advising the war fighter in forward deployed areas and then come back to the pentagon and worked in rank.

that is a terrific perspective about all of us have. -- that not all of us have. we have lawyers like that in the general counsel's office now. i certainly value their experience. i would say what is most important of all is a varied and diverse career. working, for example, in a large law firm in new york or washington as an associate is an excellent traininground for developing skills and tools as a lawyer. i am obviously a huge fan of public service myself and i have been eight -- an assistant u.s. attorney and have served twice in washington. i would say varied career, but i am a huge fan of involvement in bar association work. any other questions?

>> i am from national public radio. u.f. testified in july, your view then was that the administration was on track to close guantanamo. is that still your view? will guantanamo be closed by the deadline? [inaudible] >> what i think i said was that in terms of the review process, the detainee by detainee review, we are on track, and i believe that is still the case. as of july when i testified, i think we reviewed more than half of the detainee's files. we are well past that. closing guantanamo, obviously, is something that this president and this administration is committed to doing.

we believe that is something that true be done as a matter of promoting national security -- that is something that should be done as a matter of provincial and national security. a bipartisan group of distinguished americans, john mccain, a number of generals in the field, a number of senators republican and democrat have called for the closure of guantanamo bay. george debi bush at one point said he would like to close guantanamo bay -- george w. bush at one point said he would like to close guantanamo bay. secretary -- secretary gates said the same thing. our view is that bureaucracies work best with a deadline. so, we set ourselves a deadline. there are many challenges to closing guantanamo bay and transferring detainee's, releasing detainees to the appropriate places. but we all remain committed to doing this and remain committed to doing this on the deadline

that the president set. but there are many challenges. at any of the questions? yes, sir? >> [inaudible] [inaudible]

>> interesting thought. [laughter] thank you for that. yes, sir? >> you have made a convincing case that under lawyering in the face of fear can get us into trouble. you certainly understandably advised us against over lawyering. what are the factors that

policymakers, including lawyers, need to apply in making that judgment as to the correct and appropriate measure of are faced with somebody else's fear? >> well, you have struck upon the essence of my job. i guess i would start by answering that -- i would start my answer by saying, it does not make common sense. my philosophy -- does it make common sense? michael ossipee is as lawyers, we should help the policy makers build a policy from the ground up. we should not come in at the 11- hour and say yes or no to something that has been constructed over the past 12

months. we should be involved in the construction of the policy from day one, so we can help guide the construction of the policy or the rules of engagement, or the security agreement or what have you from day one. i always come back to, does it make common sense? will it make common sense to our clients that we come out the way we come out? most of the time i think it does. sometimes it does not, and you have to scratch your head and say, well, how do the lawyers get to where they get? i have found instances where we were actually able to take a step back, apply some common legal sense to our judgments and make it work for everybody. when i talk about over lawyer in the process -- lawyer iing the

process, what i mean is, as lawyers would like to fill vacuums and codify things. when i find a lot of legal jargon going into the guidance that we give -- and we are all very good at legal jargon. that is what we do. we learned in law school and would like to use it. what i find a lot of legal jargon finding its way into the guidance to the war fighters, to the commanders i asked our lawyers to take a step back and, let's try to restate is in common-sense language so people can understand. because if you put out guidance that only the jack in the field can -- jag in the field can interpret, i'm not sure that we're doing our were fighters a real service. but it is obviously a balance. and the other thing i have in mind is that because, as i said

in my prepared remarks, the current conflict is unconventional in the sense that it is not two nations fighting a declared war against one another, you cannot fit everything we do need the in one box or another. so, we work hard to find the appropriate roles and the appropriable of law for these situations that we face -- appropriate rule of law for the situations that we face. we ought to be careful not to view everything we do as a law- enforcement, evidence collection. when i testified in july, i said several times that the essential mission of our nation's military is not evidence collection. it is to capture and engage the enemy. and we do not want to change the war fighters mission in the battlefield and forward deployed areas on the possibility that there might be a criminal prosecution for the violations

of a lot -- of the laws of war. that is not their mission. that is what i mean when i say we should not overlook lawyer the process -- over lawyer the process. i hope i have answered your question. yes, sir? >> i agree that it is a careful balance and a fine line between over latyering and under law yering. one of the difficulties that we face is the underlying legal principles and, for example, slapping each prisoner. in u.s. law, the standard is not common sense, it is, does it shock the conscience. we do not care how epperson got somewhere unless it shocks the conscience. -- how a person got somewhere unless it shocks the conscience.

çin europe, the european union, there is a brighter line. how is the defense department dealing with international liaison and counterparts to try to reconcile the different international legal views on some of these very close calls? >> very carefully. [laughter] when i was in afghanistan i would visit jag offices and some of those offices would be populated by military lawyers from our coalition partners, like canada for example. i would start talking about u.s. law and how we apply u.s. law and the field and the canadian

lawyers would pipe up and say, well, that is not how we do it and that is not the international standard eater. we would have very interesting discussions -- the international standard either. we have very interesting discussions about how you do that in a forward deployed area. it is difficult. we have international notes that seem to work. it is not perfect. it is striking a balance. indeed easy -- it ain't easy is the answer to your question, but we do our best. yes, sir? >> i wanted to ask -- you asked earlier about guantanamo. when the president campaign, i believe he used the words "legal black hole" incrustation -- in trying to criticize the pri's

administration. can you tell us about barbara, that there are more prisoners there -- bagram, that there are more prisoners of theithere [unintelligible] >> as you probably know, we are in the process of building a facility there, which i think will be first rate. i believe that the guards and the force that we have employed there is first rate. the bagram population is a much more in and out population. there is more torn over in the population. many of them are transferred to to the government of afghanistan, so the nature of the population is different.

our detention operations there, we engage very much with the cooperation and bridges a patient with the government of afghanistan. i think is a fundamentally different exercise. there is litigation involving whether the habeas remedy should extend to a certain segment of the population in bagram, which is on appeal right now. so, i regard afghanistan as a fundamentally different place. it is the case that, and the supreme court said this in 2004, that a fundamental part of the mission of the military is to capture and detained the enemy -- and detain the enemy. as long as there are military, we will be in the business of capturing and detaining the

enemy. it is part of what they do. guantanamo has become an international symbol counterproductive to our national security interests. we are determined to close it. it is fundamentally different from bagram. . . i wonder what kind of

interagency approaches a new administration. i realize it can be messy and time consuming but it seems an important aspect of how we proceed. >> for example, the five rules changes we came up with in may for military commissions was done very much in collaboration with a broad array of people within the defense department in the interagency process. that work originated within the defense department in march, actually, i put together in a big room about this size lots of lawyers, jags and civilians who were involved in the prosecution, the defense of military commissions, our three t jags and we talked about, ok, what can we do, what do we think we can do to reform the

system. and i believe that the best legal judgments and the best legal advice come from collaboration with lots of people. you make the healthiest decisions when you collaborate with lots of different people and get lots of points of view. as a practical matter, somebody's cut out of the process and a legal judgment is wrong, they're going to let you know that they were cut out of the process. but more fundamentally, i believe that the best legal judgments are made when you include lots of people in the process. we have a very good relationship with olc. i speak weekly, maybe several times a week with lawyers in that office to get their advice. they consult us in the department of defense. i think we have a very good working relationship with them right now. and, more broadly in this administration, this administration likes collaboration.

they like the participation in the interagency process of lawyers and nonlawyers. i am at the white house two to three times a week for meetings. and decision making sessions. so, anyway. i hope i've answered your question. and thank you all very much. i appreciate it. [applause] >> thank you for your wonderful remarks. thank you for the questions and thank you for the jag corps which i don't think are thanks enough publicly or privately. i have a brief set of administrative announcements. the first is our next program will be september 21, sponsored with the catholic university school of law. i want to thank michael noon, since the program will address professional challenges to attorneys in the legislative and executive branches.

people who are watching can go to our website. to see the particulars of it. i also want to thank jay for mentioning our annual review which has been a success over the years. our 19th anyou'll review on the national security law will take place in washington, d.c. we will be including legislative and executive general counsel panel discussions. jay has agreed already to participate in that particular panel. and we also will have panels on cyber security, piracy, military commissions, and narcotics trafficking along the border. registration again can either go to our website or we have forms in the back. i also want to particularly thank a number people who helped work on our projects. that includes people in this room.

and, finally, the person who always we have to thank is holly mcman, who is the glue of this particular organization. and she's done an outstanding job over this period of time and we always can't thank her enough. [applause] that concludes the program this morning. thank you all for coming. >> and we are taking you live now to the u.s. capitol view of the national mall there, where a protest rally is just about to get under way to demonstrate against government spending under the obama administration. some expected speakers include former g.o.p. house majority leader dick armie, south carolina leader jim demint, steven baldwin and republican

house leaders like mike pence and tom price as well as if author and motivational speaker mason we've. this is organized by freedom works foundation and a coalition of other groups including the national taxpayer union and the tea party patriots. watching live coverage. >> we need to speak out and start taking some action and letic the people of this congress know we're serious about what we're talking about. >> troubled asset relief program. >> october 3rd, 2008, tarp-i opens up pandora's box to open up a glut of money to stabilize the banking industry.

may, 2009, the effort fails. government grows as many banks are taken over by force. february, president obama signs one of the largest spending bills in world history, a stimulus commiting generations yet unborn to a staggering debt obligation. by july, unemployment reaches new highs. consumer confidence is low and a country's economy stands on a knife's edge. june, taxpayer money bails out aut motive manufacturers like g.m. the numbers are in. bailed out manufacturers are still struggling to turn a profit. as of september 1, more unconstitutional czars are appointed in the first seven months of the new administration than in over 300 years of czarrist russia. >> i think that says it all. >> cash for clunkers. >> august, the too good to be

true used car deal goes into effect. within two weeks it stalls out on the backs of government bureaucracy. >> they will get their money but we've got to process it properly. >> it costs taxpayers an additional $3 billion. >> it has been successful beyond anybody's imagination. >> we have got to vote. we have got to go to every elected representative and remind them that there -- they are our dimes. >> legislators come home to increasing constituents ready to fire back. a health care bill gone too far. >> you don't trust me? are they going to be on the same plan they're asking? >> it will be a cold day in hell before you socialize my country. >> there are 1330 companies in the united states [inaudible]

everybody will have insurance. [inaudible] [cheers and applause] >> the calculations are adding up. 60 trillion in unfunded liabilities. soaring national debt. [inaudible] stalling. constitution under assault. liberty, it knows no political party. it is the gift of divine providence to all mankind. on this day, september 12, america gives a response that government of the people, by the people, and for the people. from sea to shining sea millions are standing as one to say we will not be bought. we will not be sold a bill of goods. and we will not disown this declaration of independence. eight years to the day america

looked up from the rubble. she saw with clarity her destiny. a destiny to defend liberty and today she stands again with a clear eye and a firm resolve. welcome, patriots, to your story, our story. the story of we, the people. welcome to the 9-12 march on washington. [cheers and applause] >> co-organizer, jenny beth martin. >> welcome, welcome, welcome. this is the official start time of the 9/12 march on washington, d.c. [cheers and applause] thank you so much for being here today. we had over 450 buses come here

today. 450. we have people who are here from alaska and hawaii and every single state in this country. [cheers and applause] in addition to what we're doing right here right now we have [inaudible] going on around the country today. those 200 events are in 45 states. 45 states. today, joining with us, and we're here making our voices heard on washington, d.c. how many of you who are here were part of the 30,000 people that attended tea parties on february 27th?

[cheers and applause] how many of you who are here attended tea parties on april 15th? [cheers and applause] how many of you who are here today made some sort of personal sacrifice to be here? [cheers and applause] how many of you had to spend money to be here? [cheers and applause] this week, when president obama addressed the joint session of congress, he said it was time for the games to stop. how many of you were playing a game in february? how many of you were playing a game in [inaudible] how many of you were playing a game when you waited over two hours to get into a town hall

to talk to your congressman or senator? were any of you playing a game? how many of you are playing a game today? is this a game to you? [chanting] president obama, this is not a game. we are here -- [chanting] we mean what we say. it is time this country -- it is time for this country to restore fiscal responsibility. we must be responsible with our money for future generations. we must have limited government, constitutionally limited government, the government our founding fathers intended. and we must let free markets

work without government interference. those are the core values of tea party patriots. those are the values for the messages you've heard this morning and you'll continue to hear today. well, i'm one of the national coordinators of the tea party patriots trats and one of the coordinators for this event. i'm just an organizer. all that i do is make it so that you have the platform to make your voice heard. [cheers and applause] apparently we were not loud enough in february. we were not loud enough in april. we were not loud enough in july. we were not loud enough in august. so we're turning up the volume. [cheers and applause]

president obama, can you hear us now? [cheers and applause] can you hear us now? [cheers and applause] [inaudible] going to continue to make our voices heard until you listen. thank you all for being here today. each and every one of you are great americans. i'm so proud to stand shoulder to shoulder with you as we work to save freedom in our country. thank you, thank you. [cheers and applause] [inaudible] through the -- we were working earlier he is now with the police, so drew's mom, please -- very good.

listen let's be a little quiet so his mom can hear. drew's mother, you need to answer the phone when alissa calls or go see a policeman yourself. your son is with a police. thank you guys very much. [applause] >> put your hands together for the [inaudible] freedom works and the organizer for the 9/12 organizer, brendan stine how'ser. >> how is everyone doing today? i heard that nancy pelosi wasn't in town, but if she's watching we do have a message for her. speaker pelosi, if you noticed, we replaced the grazz on the west lawn with astro turf. [cheers and applause] i am the director for the freedom works. we're an organization that believes in lower taxes, less

government, and more freedom. and now apparently we're on this enemy list that president obama has created. i'll talk more about that in a minute. but one thing i want to mention today, we have a ton of people here today, hundreds of thousands of people. we need to stay in touch and i'm going to bive you one simple way to do that. everyone please get out your cell phones just like they did in the presidential campaign text freedom to 74700. freedom to 74700. we have got to keep this momentum going. this whole movement started with a handful of people who decided to take to the streets. and they said that while conservatives don't really protest, but something changed. and it began last year when the republicans were bailing out

wall street and they continued when the democrats crammed the stimulus down our throats. you push people far enough, you keep pushing and they're going to push back. and that's what we've done. this movement is amazing. all these patriotics americans who have payed their own way to be here. they were not bussed in. this is not an seiu rally. this is not acorn. it sure isn't the organization by america run by the government committee. these are americans who came here on their own. so god bless each and every one of you. freedom works will continue to work with all of you to support your efforts at the local level and let's consider coming back here in about a year. [cheers and applause] oh, yes. one more thing. this message is for president obama. flag this.

>> now, put your hands together and welcome the chairman of freedom works and former house majority leader, dick armie. [cheers and applause] >> give me a smile. i want to take your picture. in case i run into nancy pelosi, i want to prove you were really here. [inaudible] you know how much i love my baby. we wanted to be here together because we have one beautiful nephew, and ten very, very beautiful grand children and we wanted them to see grandma and grand pa are here fighting for their freedom together. so we would like to start by asking you how much are here because you love your grand children? [cheers and applause] how many of you are here

because you think america made them a great promise when they promised the blessings of liberty for ourselves an our posterity and you expect your government to make good on it? [cheers and applause] you know, when the federal government just decided to go wrong over a year ago and tried to bail out wall street, we tried to tell them it won't work. and it didn't work. when the first tranche of stimulus didn't work, what did they do? what the government always does with a bad idea. if it doesn't work, do more. and we told them that wouldn't work. then we had the election. and president obama came in and said we're going to give you change you can believe in. and what did he give us? more of the same. that didn't work. then we tried to tell him it wouldn't work. so in april we said we've got to get organized. let's do some tea parties. we ran our tea parties all over the nation. how many of you were at a tea

party last april 15th? [cheers and applause] and what did they say about us? we weren't real. we didn't know what we were talking about. don't listen to those folks. so we said, well, we have to keep going. we have to keep trying. we showed up in august at the town hall meetings. what did they say about us? they weren't real. they're astro turf. they don't know what they're talking about. they'll go away. did you go away or are you back? you're back. mr. and mrs. america. and we're so proud, susan and i are so proud to be here with you on behalf of our grandchildren. now, look, i want to just make one clear idea. not too long ago, president barack obama stood right there on that stage and he said the one singular pledge of commitment that we ask of every elected official in america at every level. he pledged to commitment of

fidelity to the united states constitution. [cheers and applause] [chanting] isn't that wonderful? you're wonderful. [chanting u.s.a.] >> wince ton churchill said about the american constitutional convention that it was the greatest entrepreneurial act of courage for liberty in the history of the world, and it deserves to be respected. [cheers and applause]

and these were learned people. there was no word, no phrase, no sentence that got into the constitution by accident. they knew what the meaning of the word is, was, and they wrote exactly what they meant. and it doesn't [inaudible] to read it and understand it and know what it says. and if you can't, we'll buy you a dictionary. now, we're here today to fulfill a commitment. when benjamin franklin waubd out of the that constitutional convention he was asked by a lady on the street. she said dr. franklin, what kind of government did you give us? and he said, i gave you a republican -- a republic, if you can hold it. and we're here today to hold it.

[applause] and the one thing that they knew about all other things when they wrote that constitution was that liberty was a gift given to mankind and mankind alone by the lord god almighty, and it's the duty of a government to protect it. we protected cherished freedom because it is precious in its own right, but because it works. so let's give them a message. freedom works. freedom works. thank you for letting me be here. [chantle "freedom works"] ♪ ♪ oh beautiful for heroes

proved ♪ and liberating strife ♪ who more than share their country love ♪ and mercy more than life ♪ america america ♪ may god thy goal refined till all success be nobleness

♪ and every gain divine ♪ oh beautiful for spacious skies ♪ for amber waves of grain ♪ for purple mountains majestys ♪ above the frute plains ♪ now, wait a minute. i'm talking about america ♪ sweet america ♪ you know, god

done shed his grace on thee ♪ he crowned thigh good yes he did, in brotherhood, from sea to shining sea ♪ i wish i had somebody to help me sing this ♪ america america ♪ god shed his grace on thee ♪ he told me he would ♪ brotherhood ♪ from sea to shining sea ♪ i thank you lord.

♪ ♪ shining sea. [cheers and applause] >> with many successful years in the restaurant and auto dealership industry. this year he lost his dealership. you've seen him on fox news. now, please welcome to the stage james anderer. [applause] >> my name is james andrea. and i am an american patriot. i believe in the constitution. i believe in the bill of rights. i believe in government of the people, by the people, and for

the people. i believe in the first amendment. i believe in the right of free speech. i believe in the second amendment and the right of the individual citizen to bear arms. [cheers and applause] i'll say that again. the right of the individual to bear arms. [cheers and applause] very important. i believe in the fifth amendment that we, the people, will not be deprived of lifics liberty, or property without due process. well, my friends, what happens when due process becomes corrupted? that's exactly what happened to me. i stand before you an angry man .

i'm an angry american citizen. i am living proof of a government out of control. my business was seized, stolen from me, under the watchful eye and complete approval of president barack obama. this administration and with the help and aid of a series of government appointees, czars, and bankruptcy judges, all with no congressional oversight or approval, with the illegal misuse and total disregard for our sacred constitution. and the complete and total manipulation of our bankruptcy laws. this obama administration has

successfully achieved their goal of total control over all three branches of government. rendering the system of checks and balances meaningless. the radical liberal wing of the democratic party now controls the executive branch, the house, and the senate. i believe they also have control or undeniable influence over the judiciary. proof of this is the way that chrysler bankruptcy was handled. the judge who presided over the bankruptcy hearing interpreted the current bankruptcy laws not as they were written or intended to be used, but to conform to the obama administration's agenda. this --

[booing] this meant that the unions survive. [booing] but dealers like me and some people including children who have personal injury claims and some pensioners will be financially destroyed. bankruptcy experts, legal scholars have said this ruling will have devastating consequences in future cases. ruth bader ginsburg chose not to hear the appeal before the supreme court. [booing] big surprise. and the judge who heard the bankruptcy case was appointed another term. another big surprise. it has happened.

it has happened to me and to over 2,000 profitable, viable car dealers across this nation. this has resulted in over 150,000 workers being forced on to the unemployment lines for no reason. my business, island jeep, was stolen from me, located in lyndon hurts, new york, i was a top performing dealership in the upper 2% of nation yide sales. it was seized from me, stolen from me with no compensation whatsoever and it will be given to another individual for free. [booing] all because of corporate politics and a comply nt government. now, you see why i am an angry american.

i did not ask for this fight, but by god i'm going to win it. [cheers and applause] make no mistake about this. i speak the truth. this has happened to me and thousands of other americans. and it can happen and will happen to you if we, the people, don't stop this insane march towards socialism and tyranny. you may say this could never happen in america. well, my friends, it has. just like in many countries throughout history where a set of circumstances put in power an individual or regime that

embraced totalitarianism. unfortunately, president obama believes in this notion that government should control virtually all aspects of an individual's life. [booing] and big government can solve all problems. snsm booing] and by its very nature it exploits the worker. president obama believes he has a mandate to change america. well, i say the change he wants for america is bad. i believe the change he wants is not what our founding fathers had conceived for this great nation. [cheers and applause] i believe that is the reason president obama wants all these

changes completed as fast as possible. he wants these changes completed before congress or the american people realize exactly what hawaii has done. -- he has done. [chanting] i see he thinks his way is the best way for america. well, folks, i say he's wrong. [chanting] [cheers and applause] he got bad advice from his advisers. we, the people, are angry, even many of the people who voted for him are in revolt. we the people are in revolt against his socialist policies. we, the people, are in revolt because of his tactics. we, the people, are in revolt because of his enemy's list. and union thugs.

and goon squads sent out to town hall meetings to push around and beat up old people. we, the people, are in revolt because of his unconstitutional appointments of these czars that they don't have to go before congress and get vetted. we, the people, are in revolt because of the way president obama and the congress spends taxpayer money. thousands of earmarks and political pate ronnage. and they have the notify to call it a stimulus package. we, the people, are in revolt because our taxes are so high that they are destroying our way of life. and they keep going up and up and up. we, the people, are in revolt because our elected officials do not represent us any more.

they represent special interest groups that fund their campaigns and give them money. we, the people, are in revolt because all of us have been working hard and raising children and paying taxes and trying to make this world a better place, but we have lost our way. we have let this country be taken over by people who do not share our values. they do not share our vision. of the american dream. they do not believe in individual rights. they do not believe in the concept of personal responsibility. they do not believe in the idea that if you work hard and succeed and achieve your goals, and what you have worked for you will keep. it will not be taken from you in a form of high taxes or, in my case, property seized and given to somebody else for

free. we, the people, cannot allow this to continue and grow like a malignant disease infecting this nation. we must and we will stop it. we will stop them by organizing and attending peaceful town hall meetings and engaging our elected officials. but, my friends, when all is said and done, and in the final analysis, the only way to get our country back is to vote them out. [cheers and applause] don't give up. don't ever give up. god bless you. [cheers and applause] god bless our country. [chanting] [inaudible]

death to the terrorists. [cheers and applause] [inaudible] "new york times" the "wall street journal," u.s.a. today, and "washington post." [inaudible] [applause] >> good afternoon. i'd like to talk to you about tarp. t.a.r.p. the troubled asset relief program now in its ump teentsdz trance formation, the blout. originally, tarp authorized

former secretary henry paulson to buy toxic assets from troubled banks. within a few weeks, that more fed into a program to ejecked capital directly into those same banks and then just a couple of weeks after that, it moifed it back again to purchasing troubled assets. and, along the way, the administration exprope rated a few tens of billions of dollars to bail out the automobile industry and after that bail out insurance jinet a.i.g. and after that fiasco, our new treasury secretary timothy geithner promomented the idea -- [booing] promoting the idea of a public-private partnership using, you guessed it, public taxpayer money, for a total cost of $1 trillion. now, how did all of this come to pass? first, the federal government enacted double taxation of

didends, tax deductibility of interest. that meant corporations would use too little equity and too much debt, higher leverage, more risk. and then, alan greenspan federal reserve system fueled the credit crisis with artificially low interest rates. and that was compounded by political pressure for affordable housing. and compolicic taxpayer guarantees to fannie mae and freddie mac. all of which meant more than too much subprime lending, high risk securitized mortgages, complex derivatives. it was per verse government policy that caused this mess. privatized profits and socialized losses hedge the banks and the car companies win. the tails, the taxpayers lose. naturally, you might say if we don't like these policies we

can vote these legislators out of office. well, perhaps not. suppose the policies were not enacted by congress but by unelected bureaucrats. unaccountable to the voters. and one of the 330 alphabet agencies and cabinet departments here in d.c. that's what actually happened. the bailout was foisted on the public by the treasury secretary, not by the congress. if you look at the very first sentence in the constitution, after the preamible, article 1, section 1, all legislative powers shall be vested in congress. law making is for the legislature, not the treasury department. and note the key terms, all legislative powers shall be vested. the vesting provision is not selective and it is not discretionary. delegations are ok, said the

court, but only if the congress enacts an intel yidgible principle so the executive department knows how to flesh out the details. what is the intel yidgible principal that secretary guides anywhere must follow? no one knows least of all the taxpayers who have to pay the cost. make things better, is not an intelligenceable principle. in federalist 45, james madison warned about excessive government power, and here's what he wrote. the powers dell gate by the constitutetion to the federal government are few and defined. well, that might have been the intent, but it is not what has transpired. and as i rattle off this list, see if you can identify a single power that is authorized by the u.s. constitution. today, the federal government has immersed itself in

everything ranging from public schools to hurricane relief, drug enforcement, welfare, retirement systems, medical care, family planning, housing, even aid to the arts. not a single one of which can be found among congress' enumerated powers. too much power, too little freedom, it is time to restore constitutional government. thank you very much. [cheers and applause] ♪ ♪ [inaudible] in the government sponsored health care plan. we realize how damaging it was to our nation and how damaging it was to our ability

[inaudible] we couldn't stop it. you just couldn't. with any conscience at all you couldn't allow this to happen without speaking out. ♪ ♪ >> we came here to be sure that congress heard our concerns of everyday practicing doctors. congress after senator after aid has said to us the problem with you doctors is that you've been apolitical for too long. we say with yeah, sure, we take care of patients. >> they said if you don't get involved in the process, your voice is never heard. >> people say to me this is all about money. no, it's not about money. if it was about money i'd be in favor. it's about the ability to take care of my patients without bureaucrats interfering. 99.9% of my patients say we do not want government-run health care. >> it's amazing. we stumbled into this hearing is really what it was from congressman conyers and it was a health and information

hearing and it was all about single pair. and several of our members got up and said why we thought it was a bad idea. the next thing you know all of our doctors were speaking an none of his were and he was listening. >> we don't feel like we've been involved in the process about the people -- [inaudible] not people -- taking care of patients every day. >> this fight is a long way from being over. we have a chance of winning. and people in asking are actually listening to us. >> now, rise to your feet and welcome a man fresh from the front lines, a tireless lobbyist for the forgotten special interest, the american taxpayer. here's the director of government affairs for the 36 2,000 strong national taxpayers union. andrew moilen.

>> good afternoon, taxpayers. god afternoon, -- good afternoon america. people to my right, people to my other right. now, if you are excited to be here today and help turn our government around, let me hear an amen. president obama's in minnesota today. let me hear an amen. now, that sounded proof that hell hatsdz no furies like a taxpayer ignored. [cheers and applause] i'm director of government affairs for the national taxpayer union. we are the oldest grass roots taxpayer organization in the country and you can find out more about what we do to protect your wallet every day at ncu.org. now, he will hath no furies but you're being ignored by the media and politicians.

some of them will insist that you are not here today. that it's just a few thousand cooks with signs. well, we can help make darned sure that each and every one of you is counted in the final analysis. you can pull out your cell phone right now and text 912 to 67292. beel compile those attendance numbers and we'll send them to every one of those media outlets and publicize them for everybody to see. you can pull out your phone and text 912267292. now, congress and the president have been busy ignoring things like our federal budget deficit which at 1.6 trillion dollars is bigger than the entire federal budget from 1997. by doing that, they have ignored their way to a nearly $12 trillion deficit.

-- debt, excuse me. i have a five month old daughter who is sitting at home watching this on tv and she has a $40,000 bounty on her head before she has ever walked a step or said a word on this earth, as though she crossed the mob or something. now, if you think that's a bad idea, let me hear an amen. they've ignored, obama has promised that nobody making over $250,000 would see any kind of a tax increase. well, they're ignoring that. on health care, they want to raise your taxes to pay for a $1 trillion plan. notice the common theme here, the word trillion? with fines of up to doctors 3,800 if you don't comply. and highor taxes on thousands of individuals and small businesses. they're ignoring it on energy. a $2 trillion cap and trade national energy tax.

they've already ignored it on cigarettes. they raised the cigarette tax 62 cents a pack this year. and, you know, there's only one person who makes $250,000 and smokes and his name is barack obama. now, we have a message today that we will be ignored no more. so here's what you can do today. you can make your politician feel the heat. because when they feel the heat, they see the light. you can call your representative right now call them up and let them know how you feel. text 912 67292. we'll help you. and every single time you do that, you help to turn votes. people often forget the original wall street bailout almost failed. it dill fail excuse me because your phone calls made that happen. now, i want to say a personal thank you to the politicians that are protecting our rights

and that are working for us, people like tom price and others that you're going to hear from today. give them a round of applause. [cheers and applause] but for those who continue to ignore us, i have 12 little words and you can all sing along with me. nananana. na, na, na, na. hey hey hey good-bye. thank you. [chanting na, na, na, na, na. hey, hey, hey, good-bye. >> we've started at 10:30 this morning. people were lining up here at 8:00 a.m. and people are still coming in. [cheers and applause] buses are still dropping people off. i've been told that the expressways are blocked.

roads are closed. you guys are making a difference today. we will continue to make a difference. so what do you think? congress, president obama, can you hear us now? [cheers and applause] [cheers and applause] can you hear us now? [cheers and applause] can you hear us now? [cheers and applause] our next speaker is a 2005 graduate from the university of miami school of architecture and a former new york city architect. he is founder and c.e.o. of park bench media and is co-director of tea party 36 5, ink, i'm sorry, the new york

city tea party. welcome, calen. [applause] >> hello, america. woo. from new york city, the land of underground club, pizza and high as hell taxes. so, new york city we've been getting 10, 12,000 people for our rallies and we've been going to our community board meetings. and what do we hear from new york city council men? we've cut the application down for this social program. tell all your friends to sign up and we'll get $1 billion more next year. well, that's not very cool and it's not going to happen in new york city any more. we've been down in front of city hall, getting down in the clubs, rock bands, punk rocks, they're all talking about the pea tarties and their voice is

growing. [applause] it's not just fox news. because these punk bands in brooklyn aren't watching fox news, but they're rebelling against their gft. that's for sure. now, what we're doing is take on punk culture, because right now you helped that dirt bag from california and you have rock the vote out there telling everyone from ten years old to 25 years old to write their congressman and support health care. [inaudible] for the past 30 years modern pop culture has been us college kids and my high school sister that's what they hear and known know. it all started 30 years ago with rolling stone magazine and

the hippie counter culture. well, we have our own counter culture now. [cheers and applause] hundreds of thousands of people out here today and we all protest against the government. and that's what we need. but more importantly, we need to start taking on the culture. the proponents of liberty and freedom, we have our policy base. we have our intellectuals base. now we need our pop culture base. and it's people likestein baldwin who was up here earlier today who is going to get that going. so next time you're walking down the street, take a look at a news magazine, take a look at the news stands, and see what's going on. flip through the pages, because when you go to e on line, they're talking trash about you. so that what we're doing. we have writers who are all

under 30 years old taking it on. join a tea party. join the pop culture counter revolution and keep doing what you're doing. because it starts in new york city and underground clubs and everywhere you are, your bands and your bars, and go out and get people's opinion. so keep rallying. great job, america. [cheers and applause] >> one quick announcement. be quiet for this one because this is an important one. the parents of shawn holland need to go to the bottom of maryland avenue parkway at garfield circle. again, the parents of shawn holland go to the bottom of maryland avenue at garfield circle. shawn is there with the police. thank you. >> and now, here to take out the trash on everything you

thought you knew about conservatives, direct from the streets of dirty jersey, the nation's one and only conservative hip-hop artist. give it up for high caliber. >> make some noise. make some noise d.c. if you are an american today, make some noise. [inaudible] hey mr. conservative. this is my partner. you can hear me every week. i've got a question for you all. are there any right wing extremists in the house today? ok. ok. break it down. this is a little aca pella before we get into the music. right wing extremist what's the definition to this administration i gess a gun toting christian or someone who's against illegal immigration. there's a real threat to the safety of our nation. and you haven't seen nothing yet. how you going to call our troops a potal