senatorapo, senator -- senator crapo and then another senator. >> an increase in this stimulus is a debate separate and apart from what is necessary to deal with our long-term structural debt. .

harkening back to the health care legislation, i am much more familiar with last year's report, because i had time to read it. you are saying the key difference is the health care legislation passed by congress. is that correct? >> particularly, the alternative on the tax side, beyond the next decade, beyond that point last year, we work out specific things. -- scenarios.

>> let me make sure i captured the essence. i believe you said if all provisions are actually enacted, we would have slightly lower health-care costs, and i do not remember if you said short term or long term. >> it was being enacted. so far they are implemented. and we would have slightly lower health spending by the late 2020's. >> you are making assumptions about medicare cuts that may or may not ultimately occur, some of which may be reflected in our alternative scenario. is it a fair scenario to say --

i believe the chief actuary may have a conclusion regardless, but it is fair to say that which it is it fair to say regardless of benefits, this is not a game changer famines -- game changer? you said they would not change the long-term health care cost outlook based on this legislation. is the fair to say? >> we did not change our growth outlook because of the legislation, and i do not think we have an analytic basis for judging. the legislation takes steps toward sustainability but small steps relative to length of the journey needed to sustain --

obtain sustainability. >> so not a game changer. let me ask a couple questions about revenue, then i will yield my time back. i believe in last year's long term but it out low, -- long- term budget outlook, it says tax rates would have to reach levels never seen in the united states. high tax rates would slow the growth of the economy, making the spending burden harder to bear. this is language out of last year's report. do you still stand by that statement. >> it was very similar under the report. under that scenario, taxes

relative to gdp, and there is some discussion in the revenue chapter about the sorts of tax rates that would be experienced. >> i would like to hone in on the magnitude of tax structure. we have had testimony from two of your predecessors. he testified that tax increases required by the higher spending option of raising the overall tax burden by 50% and would continue to rise after that -- the total tax burden is considerably below the average fan would be higher than the average by midcentury, and we would be the highest taxation on the earth. in other words, raising taxes on the rich, closing tax

loopholes, eliminating wasteful programs or prohibiting year marks simply will not be enough, and in correspondence -- prohibiting earmarks simply will not be enough, and in correspondence, when asked to assume dealing with the long term structural debt on the tax side with no feedback take into account, it would have to more than double period -- more than double. the question is, and you agree with the analysis of your predecessors, and is the correspondence you sent to congressman ryan -- is that an

accurate analysis of what would be expected on the tax side? if so, at what point do you plan for the economic feedback of tax evasion? >> i have not done my own calculation, but i have respect for them, assuming they do the calculations correctly. i have not gone back to recalculate the numbers we sent, but i do not think there would be different qualitatively. if you look at the report in front of you, there is a table. i do not have a slide for this. estimates of the effective marginal tax rates under the extended baseline scenario, and the top row is the marginal tax rate on labor income. this is the rate people pay on an extra dollar of income.

in 2010, we estimate that to be about 29%. in 200035, we estimated to be about 38% -- in 200035, we estimated to be about 38% -- 2 035, we estimate it to be about 38%, sir your statement that under the current scenario which current law unfolds as written, tax rates rise considerably, and the report talks about how the tax system would feel very differently from what we have today in terms of how many taxes are being paid and who is paying. the alternative scenario, beyond 2020, we flat line ratios, and

it is a bit above the historic average, and that is designed to indicate what happened if taxes is kept in the historic relationship, and since we are not specific, you cannot do a calculation. >> so the house members now have to go to votes. we will give him a chance if that is ok with you. >> thank you, mr. chairman. thank you very much for your comments. let me go to your graph to talk about that. i want to make sure of something. this talks about mandatory federal spending on health care.

that does not talk about overall national spending. it is just medicare and medicaid. this is just those programs under the purview of the federal government, and you show a decrease of spending long term going into 2035 as a result of the historic health care reform we passed this year. you show a drop of spending overall and 2035, even though we will have added 30 million new americans into health insurance programs, so of the same time we are adding new people and to the government-sponsored health insurance programs, we are reducing the cost of health care overall. >> it is all the provisions, so you're increasing the number of americans with health insurance and reducing by the late 2020's

federal spending on health insurance under our projections. >> what sometimes get lost on a chart is that in between the 2009 projections and the lowest of the lions, the projection of the health-care plan enacted is that there are 30 some odd million americans squeezing through that would not have otherwise had health insurance without health care reform. get >> we have not had projections out to the second decade. your point is right. the legislation reduces spending in medicare and uses that money and other money to pay for substitutes for health insurance for tens of millions of additional americans. >> my understanding is private

sector health care costs have been rising higher than the health care costs for medicare for quite some time. i have something that shows over the last 10 years private health insurance spending grew by 6.9%. medicare grew by 4.5%. this chart only shows the spending at the federal level with federal programs. it does not show the overall cost for the nation and certainly does not factor in private health care spending, which has been rising at a faster rate than medicare spending has been rising. >> there is a brief discussion in the report about overall national health expenditures, but we have explained we do not really model some of the pieces as close as we model some of the federal pieces. there is also a table that

compares cost growth in medicare, medicaid, and the rest of the health-care system. the relationship in the rates across parts of the health-care system differs over time, so there are times when medicaid spending has grown faster. there are times when it has grown slower. it depends what time one looks at and the dynamics of the system and the policies your colleagues have been enacting. >> that goes to my final area of questioning. if you could put of chart 8, your three final points -- you mention in your third and final point that in your judgment the health care legislation enacted this year did not substantially diminish the challenge, and that goes to the point that we made a dent but are not taking into account the costs of health

care are not driven by what we pay in medicare and medicaid. they did not determine the cost of health care. what they determine is the level of reimbursements for providers, so we can cut medicare or medicaid all we want. that does not result in health- care costs dropping the same amount, because the private sector may not follow suit, and we may find a lot of providers may say, forget it. we are no longer going to take medicare or medicaid as reimbursement. we are going to go somewhere else. we cannot resolve the problem simply by cutting medicare or medicaid by itself.

>> one might care about other aspects of the economy as well. we are right that changes in medicare payment rates do not necessarily translate into health costs. of the same time, about half is paid for by the public sector and about half of the private sector. the way in which the public programs work is very important factor. >> we want the health care department involved if we're ever going to have real success for medicare and medicaid and generally for americans.

this goes to the whole issue i have tried to point out that if we have deficits, but to me, the biggest deficit is the jobs deficit, and while the unemployment rate is high and many offices are under-used, there's nothing that says it is wrong to try to stimulate the economy so later on when they are closer to their potential, you have to really tighten the belts and get -- i will not say fiscal year responsible. that is when you have to make the tough decisions on how to tighten the budget itself, but i would hope what we do is recognize more people are working. that means they are paying taxes instead of collecting government

services and benefits to unemployment and elsewhere as a result of not being able to work. my last point is to your second point about long run balance. some of us would like you to use the alternative fiscal scenario as the baseline. i agree that we use this to determine the numbers, but i would be very careful about going near the alternatives and eric -- alternative scenario, because if we are truly serious about having everything on the table, which will have made a breathtaking situation, because we are thereby assuming, without any discussion, that we will extend tax cuts that would principally to americans were the most wealthy in this country, and we are assuming we will continue tax cuts that

helped drive us to these massive deficits we have today, so to make those assumptions by incorporating this alternative is the scenario, i believe is a breach of our commitment to keep everything on the table until we make a decision about where we go. >> it is not my business. i want to highlight something i did not talk about carefully enough. in the extension of the tax cuts, we used the pieces identified in the statutory law that actually extends the 2003 rate cuts for the lower and middle income people, not extending them for the higher income people. if they were also extended, that would make the fiscal scenario somewhat worse. most of the money in the tax cut extension is from people with

income below $250,000 during a >> i agree to a point, because there were some provisions that went beyond helping those with lower and middle income, but for the most part, i think you are right. even if it were just for the modest and middle income that we would be taking the conversation off the table, that would still violate our obligation to keep everything off the table, because everybody should be part of the game, and that means everyone should partake in the pain as well. >> thank you. >> first of all, let me thank you for the analysis, and as someone who more often than not get report late in the game common -- late in the game, on

page 16 and 17, there are some charts that show the effect of delaying action, and we did not really talk about this, and the reason i want to raise this is that one of the things as we move along in this process, we have to keep our eye on action, and as senator durbin talked about the need to have 14 of our fellow commissioners agreed on a point of action, i think it is important for you to talk about this further, and secondly, i want to reinforce whether or not we take the action next year, it is critical to have a plan, because in business we have to operate with some level of clarity and where possible, reduce the uncertainty in world that is becoming increasingly uncertain to manage.

>> thank you for drawing attention to this. if you look at page 16, there is a figure that talks about reductions in primary spending or increeses in revenues. you close the fiscal gap under the scenario. it means having a debt ratio at the end of the years. oits factions began last year, t would require -- if it began last year, it would require different patterns of the same ultimate effect. if we wait until 2013, it requires changes of 5.7 g.d.p. if we wait to the end of the

decade, we're required to make changes of 7.9 of gdp. 4% of gdp -- that is about $600 billion. that is the extra tightening you have to do if you wait until the end to start. the other point, and i would say many people could tell you enacting cuts in spending right now would slow the recovery, but developing a credible plan for doing so now would support the recovery by reducing the uncertainty. >> i think it is worth pointing out for people not used to thinking in terms of 4% of gdp, you're talking about one trillion dollars on a 25 trillion dollar economy at that time. >> right now g.d.p. is about 15

trillion dollars very good >> if you wait, it will be 25. >> it will be bigger. >> i want to come back to a point he made that this is not a new problem. we have spent most of our time talking about the impact of the health care legislation on moving the revenue curve, but the answer is common and they did not move it very much. they could argue about how much and the timing, but for those of us who have looked at publications for a long time, this graph looks a lot like the same graph last year and the year before. it has a current law line that does not look so terrible,

because it assumes the tax cuts expire when the losses they will -- when the law says they will and the alternative minimum tax is bringing in a lot of revenue, so that does not look so scary, but cdo has been pointing 5 that congress probably will, and i would say should fix that, and that some of these tax cuts would be extended. that is what makes it look so scary, and it is not. the health care changes, which

may make it a little better. if not everything is carried through, they might make it a the basic problem is still there. it is a structural problem having to do with health care costs and aging that we have to deal with. >> thank you very much. i want to go back into some of your analysis and your alternative scenario. i appreciate the alternative scenario. i know this commission is not bound by any of the information we are presented, but it certainly helps tried to figure out what is the reality we are dealing with and what the numbers do mean, and i want to go through a couple of the numbers that i understand you have included in your

alternative scenario. i understand the adjustments have been included. assuming congress will continue to delay or in some way fix the steep cuts to reimbursement, what was the assumption? was it a slow growth rate? what was it? >> we assume the payments rise with the index, which basically covers the costs of the input physicians purchase verio -- physicians purchase. >> have you or could you create a graph that would show the impact so someone like me could add it in or take it out and

analyze in that context? could you generate such a charge? -- such a chart? >> we have analyzed many things, and you can pick the one you want, and we will help you find it. >> i know you could refer to them. also the other medicare costs. i understand there are similar types of medicare cuts most people do not have any believe congress will allow to happen, and i assume you put those in your alternative assumptions. >> what it does is follows the baseline current law clause the health care legislation over the next decade. over the next decade, the provisions in the legislation to reduce payments to providers,

those are included as having an effect until 2020. beyond 2020, some of those provisions do not have affected anymore. >> are there charts that would show how in 2020 and foreign the actual numbers of what adjustment you are making because of those cuts? >> i think we can provide some details. we can talk to you. >> similarly, what kind of adjustment are you assuming in your numbers? >> i believe we go back to 2009. it has expired. then we increase over time the various pressures to inflation, and the effect of that is essentially to hold the share of

the population that would e paying the alternative tax. >> is there a charge that would specifically show the impact of doing or not doing that? >> certainly over the next 10 years common and many alternatives appear in the regular rated the next 10 years, many alternatives appear -- certainly over the next 10 years, many of your alternatives appear. >> with regards to the tax cuts, your assumptions are those tax cuts will be extended for the lower and middle class but not for those making more than $250,000 a year? >> that is correct. >> i am changing subjects. >> there is an income tax under the extended baseline but

extending the provisions you describe. the data is on the website already. >> that is the kind of thing i am talking about, and i would like to see the chart which the numbers. >> they were posted at 9:00 this morning. >> back to your chart, you talk about the lack of an intrinsic contradiction between providing additional stimulus today and in your words, imposing fiscal restraints several years from now. i assume when you talk about the need to impose fiscal restraints several years ago that you're not just talking about stopping the stimulus, but you're actually talking about somehow recapturing the spending so it does not push the economic consequences into the years. is that correct? >> that is correct.

the point i was trying to illustrate is one can widen the deficit now and at the same time implement policy changes that would recoup that later, but all of that would hold to the projections i have given. if wants to add -- if one wants to address the problems, one is to go further of course. >> let me ask one day in and. my memory -- yours is probably better than mine. going back to the 1990's, it is not so great, but trying to figure out whether the savings will actually take affect, if i remember correctly, the savings into 1993 action that congress did to medicare all materializes, and i think the

ones we did in 1997, the vast majority did. some kind of historical reference would be helpful to by a couple of thoughts. one is that medicare spending by the federal government came in below projected in the wake of the 1997 balanced budget agreement, and that point has been raised a number of times by people who think we underestimated the savings from that fact. it is hard to know just where the source of that error was. whether that was because we underestimated that effect for over an estimated whether spending would be in that is hard to tell, except were a couple of positions where we think we understand some particular dynamics unfolding we had not anticipated. as a general manner, 1997 was

right as managed care was moving across the country. overall national spending slowed, and in the baseline projections, i think not a lot of weight was put on that as a persistent factor, so there is a least a plausible story we underestimated the facts of that act. given all the legislation that has been inactive for medicare over the last decade and the demographics and economic forces at work, medicare spending per beneficiary, adjusting for overall spending, has increased about 4% a year. under our projections, given our baseline and the legislation, we project medicare spending will rise about 2% fed a year for the next two decades, so it is a

sharp slowdown from what has been experienced, and it is because of the magnitude of the slowdown we wrote a number of cost estimates. it was unclear whether such a reduction in spending could be achieved. whether it was too limited health care or the quality of care. >> i am not challenging your assumptions. i was simply trying to remember what the reality was of what occurred. i have never seen a perfect protection ever. >> you have not as yet. >> even if they are imperfect, they are scary, and what is concerning is that under either scenario you're looking at a debt ratio which determines the

state applied to it. is that not correct? >> that is correct. >> i use the term unsustainable, and a lot of other people do. what does that mean? what is the event -- when you are sitting around, and you say public debt is 80% of gdp and the total debt is over 100% of gdp, and that is unsustainable, and we have had a 35% of gdp public debt, what is the defense you folks seem that is going to be fine and sustainability or a series of events -- what is the event you folks see that is going to refine sustainability for a series of events. >> a number of people talk about possible scenarios, but there

was no consensus about this, and i think there was not a consensus because there is not much experience to draw on. the defects of the crowning of proceeded incrementally they are wearing away what would otherwise be achievable. the more unpredictable part is perceptions of investors behind treasury securities and the point at which they would become worried we did not have a commitment to honor those commitments is a matter of psychology as much as economics, and if you'll get the experience of other countries, and we plan to -- if you look at the experience of other countries, the losses of confidence tend to come quickly.

interest rates go up a little bit every month for many years. the point at which that happens is almost impossible to really predict, because it depends not just on the actual level of debt but the review on where that is headed and the willingness of the electorate and elected officials to address it. the situation in greece was one many people are worried about, but few had a basis to know when it would blow up. >> practical applications on main street is their standard of living goes down. >> certainly down from what we had an underlying very strong economy, and as you look of

lines from the chart we have shown, they go up, but ultimately, if the debt goes unchecked, yes, it means declines in standards of living. >> you have laid out a two-step scenario here. the first of you are implying is to get the economy going, and that may mean stimulus, which means we maintain the bush tax cuts as they are. the second step is to put in play adjustments that reduce the deficit. how do you perceive those being set forth?

if we're not going to do this from the beginning, and you're not going to have an immediate adjustment. how do you see future congresses with the game plan that leads to fiscal responsibility? >> that is an important question. i am saying as a matter of analytics one can have a policy, but i think you were right that establishing the credibility of those future cuts would be difficult and difficult in part because there already are current laws that would narrow the deficit over time that many people expect congress to change.

the tax cut continues to the alternative income tax. there is a set of features already in current law that many people do not expect the congress to stick with, and if your concern is adding other items to that list might not be credible, that i think is an important and legitimate concern, and it is hard for me to judge what the perception would be. it would require some public commitment from a large collection of the elected officials, and that is what the group i am meeting with -- >> wouldn't we have to do specific

initiatives and various tax policy counts? >> i think specificity is very important in establishing credibility >> thank you. >> i think you said you are presuming we return to normal economic activity by 2012. is that what you said? >> our projection is the unemployment rate gets back to 5% by 2014. we do discuss in the report the fact tax revenue week project to jump a lot, but it would not be a complete recovery, and that is part of the crucial point that we expect a slow recovery.

>> are you concerned at all that our failure to do additional fiscal stimulus will help or hurt those projections in 2014? >> our judgment is further fiscal stimulus this year or next year would help the economy. what constitutes stimulus depends on the statistics in changes of policy, but we talked about what type of policy we think would fit the bill. we think that would move us back faster. it would not solve the problem overnight, but it would lead to faster employment growth. >> what were the recommendations you thought would get us there faster?

>> we issued a report in january that looked at a variety of ideas that have been talked about. the crucial question is whether the changes in extra spending -- we have ultimately additional private spending, so it increases unemployment benefits or other benefits directed at lower income people. we have fairly high paying for the buck because people tend to spend a large share of the money they have received. changes in taxes for higher income people in the short run, and hiring people will tend to save people a larger share than they have received. on the spending side, the crucial question is whether it gets done quickly. we think money that goes to

state governments will tend to be spent fairly quickly because the state governments are in tight fiscal condition. money that goes to infrastructure spending tends to thin out more slowly, and they are looking at these numbers and seeing how that spending takes a while. >> my second issue is that i think we need a fiscal plan, because you cannot run anything without a fiscal plan, but i am wondering where the conventional wisdom comes that if you make the plan the market reacts favorably, so you have japan, which has high debt to gdp ratio, which has a plan, but we now have made plans in europe,

which does not seem to be making people feel comfortable, and people are invested in the u.s. for all kinds of reasons about our security and economic and political system, so why do we think we will get that kind of balance and the long run simply because we have a plan? >> that is a very good question, and we discussed that at our meeting a few weeks ago. a number of analysts think the austerity plan greece has agreed to will not work. for many analysts, it is not credible, and that seems to be wired it is not coming fears about three debt -- seems to be why it is not calming fears about greek debt. another issue of our advisers

thought was important was the underlying economic nature of the country involve greater -- country involved. our treasury debt is viewed as an asset. when there are problems in the rest of the world, money tends to come here. our treasury rates are already pretty low, and that brings us to something we could easily model. in the discussion i had earlier, i tried to be vaguer, and she talked about the importance of a greater clarity. a very important aspect of recession in early recoveries is a lack of confidence. consumer confidence was

reported to have fallen. >> when you talk about investors, you're talking about investors who have invested in our treasury or in businesses? since our treasury is so low, it seemed like having a plan is not going to change that in the short run. >> i think they mean it in different contexts. when we talk about the risks of a fiscal crisis in the united states, then i was referring to investments in treasury securities. i think in terms of the benefit a credible plan might have for the short term economic situation in the united states, i mean general confidence in hiring and families in buying houses and spending money. >> as we see the amount of money

we're spending in paying off the debt continues to increase unless we do something, what is the advantage or disadvantage to having some sort of surcharge to pay the debt off faster? what economic impact does that have? >> the lower the debt is at any point, the better over a long run, the lower the debt is, the better that is for economic growth and income, so if one redos did 20 years from now, that would be good -- reduced its 20 years ago, that would be good, but if one were to bring the debt down sooner, one would have more favorable conditions

for saving investments and people's incomes. good >> thank you. >> senator baucus has not had a turn. i think everyone else has triggered -- everyone else has. >> i am going to ask a couple questions. when i think has already been addressed, but i would like to state it again, because i think this point needs to be addressed. but in march this year they provided a cost estimate for the final legislation. you and i had many conversations about it, and the legislation would reduce the deficit by $143 billion over the first 10 years. that is what they estimated, and

many of us pointed out we are actually reducing our deficits and debts by the amount you stated in your letter. the latest reports provide two scenarios. isn't it true they still estimate the health care legislation will reduce federal budget deficit by $143 billion over the first 10 years and approximately half a percent in 17 years? >> that is absolutely true. i began by making that point. >> i know you have an alternative fiscal scenario common and and that has raised some eyebrows, -- alternative fiscal scenario, and that has raised some eyebrows. i questioned the wisdom of the

congressional budget office embarking on such a course -- in part, because when we wrote the health care legislation, what made discussions that we had, to get a limit on health care costs, we set up this operation with other ways to limit health- care costs, and those in some sense were suggestions by you as to what we could do with the health care costs, and there were similar conversations with respect to the degree to which they helped providers, not congress says they will not do that or at least not as much as they said they will. it will apply to the

reimbursement rate, whether they will maintain the same rate or increase it. i would like to comment that it does cause concern for me to try to project what congress will or will not do, but on the same point, i would like to hear from euan -- hear from you, to what degree does the alternative fiscal scenario change dependent on health care changes on the one hand and changes to tax law on the other? if you could break that out a little bit in your alternative scenario, how much do you

attribute to each of those components? >> let me say they embarked on the idea of giving alternative scenarios many years ago, and we have done that over time, particularly in the last decade, because there are a number of provisions of current law that many analysts are skeptical will unfold that many do not view as part of our underlying policies common and and the 2001 and 2003 tax cut for the most important aspect of that. many members of congress extended those tax cuts. the medicare payments, another feature of current law at the substantial drop to occur later this year that congress has repeatedly deferred would affect

many more people. >> i am sorry to interrupt. are you assuming current payment rates, or are you assuming payment rates with an inflation factor added in? >> we assume current law with the drop in payment rates. under the alternative scenario, we assume they move up with cost of input over the next decade. >> you assume continuation with cost increases? >> that is right. the succession of aspects of current law that many analysts expect the congress will not allow to happen, and in the health care legislation, there are aspects of that law, particularly as they unfold over the second decade that many

analysts are skeptical whether they will occur, and we have said it is unclear to us whether such a reduction in the spending over that time could be achieved. >> use some analysts are skeptical. what about you personally? -- you say the analysts are skeptical. what about you personally? >> we have not made projections, but in order to help you and your colleagues understand the quantitative affects of certain provisions of current law, we think it is helpful to show what would happen under some alternative position? -- alternative position. i know it is a matter of judgment. >> my biggest concern is the health care estimates. i understand your thoughts, but

when it gets to the health care, there is no track record yet. even before we essentially implement health care reform, you say you will not do it. that is concerning. i urge you to not get into the realm of what congress is going to do in the future, certainly there has been no track record. the president signed them. >> the other question was about the quantitative magnitude. there is a table on page 7. the top of the table looks at the extended baseline scenario. the largest difference is in revenue.

revenues are about 23% of gdp. >> i am looking at page 7. >> if you look at the right-hand column, the top part of the table is about the extended baseline, so you can compare the numbers and see what makes the biggest quantitative difference, so for revenues, we project revenues to be 23.3% of gdp in 2035, and under the alternative fiscal scenario, we project revenues to be 19.3% of gdp. but as a little above the long- term average. 23.3% would be well above what we expect. four percentage points of the difference between the scenarios

is on the revenue side. the second most important difference is in other non- interest spending -- everything but social security and major health programs and interest payments, so you should think of national defence and smaller entitlement programs. under the extended baseline scenario, other non-interest spending is 7.8% of gdp, and as you looked at the bottom of numbers, under the alternative scenario, it is 9.3% of gdp. even that is low by historic standards. give 7.8% would be the lowest since before the world war, so that difference is about 1.5% of gdp, so that is the second most important difference in scenarios.

the third is a difference of about 1% between the scenarios, so the different assumptions on the health side that you are concerned about are essentially the third most important difference between the scenarios. >> our challenge is to make sure there is no backsliding common -- no backsliding, to make sure we maintain those cuts. our job is to prove you wrong. >> i am not rooting for any of these scenarios. i am trying to illustrate. >> you are being analytical. you still reached a conclusion, and our goal is to make sure we proves that will not work. thank you. >> thank you, senator.

>> first, i honestly believe no member of this commission wants us to fail. that is a twisted view, and i have been accused of being naive before. if it is true, i would be said about that. if there is any member that hopes we will fail, i have lots of things to do in life, and i guess i have the greatest care year, but i remember the late 1930's and the stimulus and people who came to my house to mow the grouse who had been brokers on wall street -- mow the grass who had been brokers on wall street. goo.

get the rest of the schedule at booktv.org. "washington journal" continues. host: joining us is blake hounshell managing editor of foreign policy magazine. if the current edition is titled the bad guys' issue. you call this group the committee to destroy the world. tell us who they are around what they have in common. guest: it is a parody for a news magazine fans of the "time" magazine cover from the 1990's with alan greenspan, larry summers and bob ruben. this is the flip side. the guys who are trying to do bad things.

you have robert mugabe the dictator in single -- zimbabwe. he turned them from a breadbasket to a failed state. we have the leader in burma. then you have omar bashir to his left leading the genocide in darfur. kim jong ill on the other side. the guy you may not recognize is from the central african republican. host: what do they have in common all of them? how can you explain who they are and people like them? guest: the short answer is they are dictators. they are people who have established a country that revolves around them. often times it is their families or close associates who basically loot and pillage the resources of their countries. what we say in this issue is 5

that failed states make dictators and dictators make failed states worse. host: you take it to countries around the world. what are we looking at? guest: that picture, i believe, is from west africa. it is from a huge garbage dump i think it is in ghana, which is one of the better countries. but they still have this habit of again into actually makes money by importing garbage and sorting it. host: let's go to the other side of the african continent because you lead your list of failed states and here is a look at the list and maybe the camera with get in there closely or we can put them on the screen. somalia number one. talk to us about somalia? why is it a failed state? guest: in many ways it is the original failed state. when the term was coined which

was in our manage in 1992 -- in our magazine in 1992. that is when somalia was in the headlines with the blackhawk down incident. people were struggling to deal with the countries that were falling apart at the end of the cold war. somalia has ever since gotten worse and worse. the international community, washington, doesn't really have an answer for how to deal with these. host: take us deeper into somalia. per capita g.d.p. $298 a year? guest: yes. that is even a guesstimate. nobody is keeping good statistics. they barely have a functioning governme government. nine million performance. job mortality under five. two hundred per 1,000. that is one in five. what do the statistics tell you? guest: they tell you a story of a place that you wouldn't want to live. this is a country that is barely

a country. it not able to provide for its citizens. we have militias ruling. the government that is the u.s. supported for the just controls a few city blocks in mogadishu and the officials barely get out of the compound we are told. it is a country that is lawless. ruled by militias and at the top of the index the past three years. host: before we get to calls and we will put the numbers up on the screen for blake hounshell, we will have separate liens for democrats, republicans and independents. how do you put this together, this index? >> we work with the fund for peace which spends all year going through media reports, reports of places like the world bank, international monetary fund, anderson international

human rights watch, places that have people on the ground and are reporting back. they combine a bunch of different indicators, 12 indicators, and come up with a ranking each year. we are not saying by the way that every state on the index has failed. it is just different degrees of stability basically. host: how do you define failed? you have separate criteria. what are they? guest: we are looking mainly at economic factors, refugee flows, how they treat their own citizens in terms of human rights. how much control the government has over its own territory. there are 12 different factors. i won't belabor the readers with all of them. but when you add them up these are the countries that should be at the top of the list, they should be blinking red and we should worry about the outbreak of conflict, genocide, that sort

of thing. host: in the article you have somalia. two decades later the u.s. has no plans and they have been very much involved there on and off over the decades. why should we be thinking of somalia? guest: somalia is important as much as a symbol as in its own right. it is a symbol of our own lack of understanding about how to rebuild shattered societies, shattered governments. somalia has been a ward of the international community the last two decades. it is a great case study of a place that hasn't gotten any better. we tried all different numbers of things and now there is a conversation in washington about disengage the. people are thinking maybe we should try getting out of there and letting somalia stew in its own juices which i think would be no answer. host: let's stay in africa for one more minute.

several other countries, at least the top five countries that you have here are all in africa. what is it itself and the world's approach to the continent that makes these failed states? guest: i think historically africa has never really had strong states. when there have been strong states in africa they have opinion hugely oppressive. egypt is a good example of a state that doesn't treat its citizens well. but gyp is a rare -- egypt is a rare example of a coherent entity around several thousand years. most of them are artificial. the borders were created by clone ideal powers and -- clone ideal powers and don't map up well with ethnic groups. you have history that encourages groups to fight and the resources are scattered across

borders and that makes for an ugly situation in places like the congo which is where a lot of technology for things like cell phones come from, the minerals that are being fought over in eastern congo by a number of groups. this is kind of a semianarchy particulic place. host: congo is number five on the list. you touched on egypt. you have it it at 49. let's get to calls for blake hounshell. jacksonville, florida, first. stuart, republican. caller: good morning. i just want to make a comment. it is my opinion that we were and can still be an exceptional state or country. i feel now that we are kind of going downhill because we have

50% or more of the people that are dependent on entitlement programs and welfare and i think you should have put obama's picture in there of the group of fell also youed earlier. i wish we could come back to a country that people are independent and take care of themselves and depending on the country for everything. . caller: good morning. i noticed that you opened this

episode by showing various men from around the world and associating them with the countries which they caused to be failed states. and shortly thereafter, you gave list of the failed states around the world. i noticed on there that number 7 on crour list is iraq. would you explain to us why that's a failed state and who was specifically caused toyota fail? i'm real interested in that and i will take my comment off the air. host: iraq. guest: sure. iraq has had a few rough years in our index. at one point it went up to number two at the height of the chaos and violence in 2006-2007. there's no question that the u.s. invasion of iraq fragment that had country. aud lot of ethno sectarian violence, basically a civil war going on. and it is actually doing slightly better now. but i think the ranking on our index is just a sign that

things aren't quite gum drops and lolly pops there just because u.s. troops are leaving. there's still a lot of problems. there's still bombs going off nearly every day. there's still 100-something thousand u.s. troops there at the moment. and they haven't even formed a government yet since they had the elections this spring. host: part of the reason the vice president is there. here's one of the headlines in the "washington post." he is meeting with officials, as we know. and the subhead to the piece is that the troop issues and the country's leadership unresolved. so they're still working on how to deal with the political situation there. if the troops pull out. st. petersberg, florida on the line, wendy, good morning. caller: good morning. yes. i'd like to ask about failed states. and i think that i'm worried, because i have never seen america move so fast, so quick

with laws going through our congress that people don't even have time to read. and i count on obama having transparency and having us allowed to read what we were going to pass. and i have never seen people throw down bills in the congress and in the senate and say, i want these signed by tomorrow and returned to my office. host: let's hear from dillon, tennessee. caller: yes. my viewpoint on this wholee situation is that we are at a point where we spend billions of dollars every year of taxpayers money on aid to these countries, these failed states brks it somalia or zimbabwe or

anywhere we are. and we largely do that through the u.n., but we have this middle ground that we sit on and we never do anything. we give these people aid and then we have drug wars -- drug lords that take their aid and we have troops on the ground that aren't allowed to shoot back. and in the gulf around somalia, the ships aren't allowed to fire on the pirates. there's all these problems with actually excuting our beliefs on helping these countries, and we just keep digging ourselves a deeper hole in debt and we never seem to do any good. host: let's get the perspective of our guest. guest: sure. you may be surprised how little relatively the united states spends on foreign aid relative the size of its economy. we spend something like $45 billion a year if you take out afghanistan and iraq. some would argue that we don't

spend nearly enough. there's a good argument about whether the united states really belongs in a place like afghanistan at all. and that's certainly one of the failed states at the top of our list, i think it's number six. and when we talk to the administration about what's the strategy for a failed state, they brought up afghanistan as a test case and they said afghanistan was a pete rhode island dish for their failed state dish strategy. so we can see it's a lot harder than we want toyota be in a place like afghanistan when we've got our next door neighbor in mexico bodies showing up on the side of roads every week, we can't seem to get mexico parts of mexico stabilized how are we going to be able to do in afghanistan. that's what a lot of people say. host: the numbers in afghanistan about $1100 per year. also, the life expectancy, just

44 years old. what does a number like that mean to the future, the development of a country? guest: well, probably the more relevant number in afghanistan is their birth rate. their birth rate is through the roof. and there are people that worry that afghanistan is going to be in conflict for the next four decades if not longer solely because they've got this crop of young men there and young men like to fight. so i think 44 is a number that is terrifying, but i think more terrifying is a birth rate that's into the fours and into the fives, a country that is just exploding even as there are literally explosions going on all over the place. host: child mortality is 257. and then moving on, fertility rate births per woman, you have seven. also, some interesting facts here, mobile phone subscriptions per 100 people, 27. internet users per 100 people,

two. and length of time of the leader in office there, under, about nine years now for president karzi. back to pirates. the caller mentioned pirates. you devote a couple pages to what you call the pirate den. what should we be taking away prom these pages? guest: somalia has become sort of the perfect haven for piracy. it's got a huge coastline, ships passing there every day, valuable ships. it's got no government. and basically, you know, pirates there have free rein. i think there is something like 13 ships from around the world there that are tasked with combatting the pirates, but that's not nearly enough when you have a huge expanse in the guff across from the coast of somalia. the good news is that we have been able to defeat piracy in the past in the strait of molacka in malaysia. and that sort of bodes well for being able to combat pirates in

somalia. but so far, we haven't seen the kind of international will that it would take to get it done. host: tim on the republican line from virginia, good morning, tim. caller: to you and all your staff for coming in on this great day. and i would just like to say that if america fails it won't be because of the ideas or because of our founding documents. it will be because the people and the people we vote into office and all these people who think that freedom means the freedom from personal responsibility and all they can do is criticize. we need contributors, we need love, kindness, forgiveness, and personal responsibility. thank you and god bless america. host: atlanta on the line. what do you make of this list of failed states? caller: well, the way i see it is that we as americans and europeans have contributed to

the failed states. host: how so? caller: because colonialization and -- colonialization and just the state of pillage of the continent of africa. guest: that's certainly a huge factor historically. but truth is that there are countries that have overcome that history. so i think there are a lot of factors. it's kind of like that movie murder on the orient express, based on the detective novel. and in that movie the detective is trying to figure out who killed the passenger and it turned out that everyone killed them. so when you think about failed states, there are a lot of different factors that are to blame. clolalism being -- colonialism being one of them. these places that have kind of weak systems make it easy for

tirnltse tyrants basically crazy people to come to power and do bad things. host: las vegas as we take a look at the cover. they call these men the committee to destroy the world. the issue, they're calling it the bad guys issue. who is to blame for failed states. republican caller from vegas. go ahead, please. caller: yes, sir. i am from somalia originally. and i do see there is like in reality, attachment to reality is totally different than what you guys show on tv that i was watching. it's really lots of people from ethiopia or from neighboring countries which are not included right now. and they do come, like we have a lot of eetsdzyopians who

imgrated to somalia for finding a job. somalia's problem is not economically, it's security. host: caller, let me ask, when did you come to the u.s. and why did you come? caller: i came in 1995. and at that time, civil wars were raging. when i came to the united states, and of course it's far better. there's no comparnes. but what i'm saying is that economically it's not that bad. and we do have responsibilities as we are the last empire left on the earth. so we do have responsibility of smaller countries. host: so what should the responsibility of the u.s. be? because part of the debate here in washington as we've been talking about is what should the policy be towards somalia

at this point? caller: the policy i think should be letting somalis be somalis and give the people freedom where they have the options, we always have these -- we always are supporting these tyrants and dictators. and if people want to live a certain way that we might not be happy with it. host: let somalis be somalis. good enough. guest: someone said that's the current policy. i think what the caller is alloading to is the ethiopiaen military went in there a few years ago to try to defeat the islamists that were ruling in mogedeeshi. they were able to push them out but they didn't -- did leave a lot of instability in their wake. and a lot of somalis don't have

a warm feeling toward ethiopia. the reality is that we were backing a government that is not democratically a elected going into a country that is chaotic. there are no slillser bullets here but some would question whether it is smart to get another country involved in somal ya's mess. host: number 10 there is pakistan. speak to us about pakistan. because when you plug nuke leer weapons into the equation here, many like pakistan, what does that mean? guest: it's terrifying. we don't have great visibility on what kind of controls pakistan has on its nuke leer weapons. pakistan routinely says they're fine, don't worry about it. people in the u.s. government that know about these things tend to think that's ok. they have talked to the pakistanis behind the scenes and feel comfortable that the weapons are secure. i think the worry that people

who look at this have is that when the nukes are on the move, if -- let's say there's some incident with india. let's say india mobilizes troops along the border, pakistan mobilizes and they have these mobile nuclear launchers. people worry that militants could get their hands on them at that point in time. so i don't know how realistic that scenario is. i guess it's sort of the thing we'll find out if it happens. but they tell thause smart people are worrying about this and looking into it. i think the bigger worry is that the government in pakistan just collapses. i don't see that happening in the near term. i think you just have a military that controls the country there and will continue to control it. but they're kind of a fren my right now. they're with us and they're against us at the same time. host: our guest joined the foreign policy in 2006. blake is now managing editor of that publication, foreign

policy.com is the website. educated in political science at yale. the next call from san juan, puerto rico. good morning to you. caller: yes. actually my question here is perhaps the u.k. and the stumplet is a huge part of it. and the old saying is a u.s. is a good starter but a poor finisher. a good example is panama. the same thing in somalia. the same thing in iraq. and now in afghanistan. we left those countries, all u.s. and cumplete perhaps left those countries in the worst shape. and of course once the super powers so called install a puppet leader and they don't like what he deeveyates from what he or they like, then they label him and they abandon him. i understand. but what is the solution? you say all the problems. what are the solutions to these

issues? host: thanks. guest: i wish i could tell you that there was an easy answer. but i think what we are learning is that there isn't an easy answer in places like this. if we can't stabilize a place like afghanistan after a decade, admittedly it's a hard case. but you have to wonder whether we are trying for goals that are not achieveable. and i think one of the things that we might see general petraeus do in afghanistan now that he is there is to try to lower the goal posts and say, look, we're not after democracy run out of kabul kind of a situation that has never existd in that country. we are just going to try to get a minimum level of stability that's good enough to get the united states out with its head held high. and i think as we become more aware of these places in the world, we have started to think that there are problems that we can solve in a way that the

world never actually has been able to solve. host: orlando hanging on now. thanks for waiting. independent caller. what would you like to say? caller: i would just like to say that i think the world is really misleading because -- world failed state -- because to the average person who does not follow world affairs, they won't know. but the u.s. creates dictators dwhrout the world. for example, they supported mark ost in the fill pins. they supported the shah in iran. and i forget the gentleman's name in zy year that is now the democratic republic of congo, they supported him for years until he was overthrown. and even in haiti, they supported john carl dufe yea who was escorted out by american planes when he went to

france. so, i think that the united states creates a lot of these failed states. in the case of muge abie, it is u.s. sanctioning i think that is really hurting zimbab we more than mugabe all because he took land from the white rode quetions. that's all i have to say. host: before you respond, one twitter comment as the camera continues to go down the list of the 60 failed states says this. they want to more more about the history of zimbabwe. not long ago it was the bread basket of africa. what happened? guest: i think robert mog by happened to zimbabwe. they had this disastrous land reform program and that led to enormous hyper inflation and very few countries that go through the currency of

zimbabwe was running into the millions and billions per dollar. and when that happens, you know, people can't save. people can't invest. you know, people just have to sort of take these wheel bareos full of bills and try to live their lives. and that led to enormous ref gee flows into south africa. for instance, i think there's something like 250,000 zimbab we's liing in south africa today as a result of his policies. and this is something that i think he did to himself. this wasn't the u.s. and the british forcing him to do anything. he wasn't interested in doing. the sanctions are reactions to his policies, not the cause of them. host: to another part of the world, central america. you have a separate watch list that touches on guatemala and

honduras. and you make the connection in that piece that policy towards mexico, especially in the drug area, has affected these two countries. guest: there's definitely a game of wackem all going on in south america. we had some success to the drug lords in colombia so they moved a lot of their cocaine distribution operations to mexico. and then the president of mexico launched a huge crackdown, and that led a lot of activity to move south to gaut malla and honduras. and mexico is a pretty powerful country relatively speaking. it's a developed country. gaut ma and honduras are not little government resources.h and basically the governments there just don't have the capacity to fight the drug lors lords the way that mexico might or colombia might. and so they've basically become

central american narco states and they really don't have the capability o fight back. host: some of the detail here in the piece. a mere 1% of cocaine went through central america as recently as 2007. today, summer between 60 and 90% does. he also talks a little bit about honduras and the crime there. 7.3 million people, 15 murders a day. guest: it's like washington, d.c. in the battle days. host: let's go to jerry, good morning. caller: yes. thanks for taking this call. i like your perspective on guinea. i think maybe today we may hear the two finalists with respect to their first ever elections since 1958 since independence. do yeah have any insight? would you care to forecast if guinea can ever remove -- be removed from the failed state

status? guest: well, i'm actually pleasantly surprised that they've even had this election. i think a lot of people like me included, when he came to power there, there was that massacre in the stadium last september. people were very skeptical that the hunto would meet its promise of holding elections. but i think as we have seen in a lot of other places, elections aren't the end game usually, you know, a place that doesn't have a good democratic tradition has a real hard time establishing the type of institutions that can make democracy really work. it's not just a question of do you have an election or do you not. a lot of the places told the top of our failed states index, the leaders were elected. a great example is the president of egypt. he was elected several times and no one would call him a democratic leader.

host: nags head, north carolina. drags, good morning. caller: yes. thank you for taking myy call. i have a couple questions for your guest whose insights have been have very informative. urpt talking about pakistan earlier. how did they get their nuclear capability? and the second question is, with the monetary support that we give them, do you think that they are really kind of evening it up? or do you think they're kind of watching this? -- patching this? guest: well, that's the million dollar question. there are a lot of smart people in ashington that are trying to figure this out. as to the nuclear question, i believe pakistan has some help from the chinese although they deny it. they developed nuclear weapons from the 80s and 90s in response to india's development of nuclear weapons. there was a time when pakistan was sanctioned by the united

states, and people say, you know, that didn't really work well either. right now we're sort of friends with tack -- pakistan. we're giving them a billion in foreign aid in addition to he reimbursements that we give them for war on terror activities. caller: i understand politically. i mean, they get support from us and they kind of like have to support us with the counter, with what's going on around this area. they kind of have to play the political thing with the people, too. guest: right. caller: it's just scary. pakistan is a scary to me. guest: well, you know, the obama administration can claim some victories here. i mean, the pakistani military went into south waziristan at

the urging of the administration and cleared out some of the taliban that were fighting against the pakistani government that they had sort of turned a blind eye to for many years and finally i think we were able to convince them that it was in their interest to do that. the real question is, is pakistan going to go into places like north wa stir zan where you have afghan taliban and associated militant groups that aren't threatingning pakistan right now that are directing their activities towards nato troops in afghanistan. i think it's very dangerous right now with the time line that the president laid out for the beginning of u.s. troops to withdraw. a lot of military folks in pakistan are taking that as a sign that the u.s. is going to leave and so they are hedging their bets and saying maybe we need these militants to be around for a while. we want them on our side. host: do you have have a

separate section here the worst of the worst and general coke nut. that's how you describe these things. the top is kim jong ill of north carolina who we most recently read might be grooming his son who nobody seems to know much about for taking over. what else can you tell us? guest: this was done by someone who is an economist at the american university here in town. he is from ghana. and so coconut heads is his term for kind of these dictators that come into power and loot their countries. i guess it's a west african term. but kim jong il is definitely the worst of the worst. here's a guy that runs the world's last stalinnist state. people there, they basically don't have a functioning market economy, they have some black markets. but it's a place where you can only get two or three channels on your tv. the government actually sets

the tv so that you can't get other channels. it's a hugely repressive place. neighbors watch on other neighbors. each sort of apartment block will have several people who are designated by the security services to rat on their neighbors, and that's the kind of situation that makes people very frightened every day. host: obthis list of dictators, we touched on the top four that are on the cover here. but number five and number seven on this list and number 22 are the folks who run turk men stan, uzbekistan and belarus, all former sove yet republics. what is it about those former republics? guest: well, i think there is still a lot of sove yet mentality in places like that. and in a place like belarus, it is still being run as if it is almost like a sove yet satellite. belarus has had its spats with russia over the year, but it's

been basically a friendly country. the president call him the last dictator of europe. he is not nearly as bad as some of the other folks on this list. the dictator in charge of turk men stan whose name i won't even try to pronounce right now, he took over from a guy named turkman bashi who wrote his own version of the bible, basically and tried to change the names of the month to members of his family. i mean, this is really a kind of crazy place. host: big trading partner, holder of lots of u.s. debt, china. the leader, you are calling him the worst of the worst among the bad dude dictators. what do we know about him? guest: i think technically people might gripe that technically he is not not a dictator, he is the head of a large bureaucratic communist party but they are largely a

repressive state. they have enormous numbers of internet minders who monitor the chinese internet for certain key words that they don't want people to say. you're not allowed to talk about tibet, you're not allowed to talk about taiwan, you're not allowed to talk about the uighers, a minority group in western china. china is certainly a lot freer than it was, say, in 1979 but it still has one of the most repressive state apparatuses in the world. host: queens, new york. you're on with the managing editor of foreign policy. good morning. caller: thank you for having me. i have a comment and a question. my quhent is, first we need to define the words that we are using. and a dictator is a strong leader with a firm hand who can get their country through a crisis or turbulence. examples is back in ancient rome was a dictator. and also after helping out

ancient rome. it's interesting today that we have leaders who are forced to either please the west and reconstitute their economy by liberalizing it to the negative impact of their people, or to not please their people and be voted out. an finally, my question is, i know you said that these failed states, most of them only have parts of colonialism. but that's not true. the top five are in africa and they're directly the result of racism and colonialism. and the people know it. and the rest of the states on the list, most of these are former colonies who have not been given the chance to strive and develop on their own with their own great men, with their own patrick henries and their own george washingtons. and i think if we look at it through a pure honest view with brotherhood, not from any bias viewpoint, we can see that fees

failed states don't have to be failed states if they're gin the chance to grow in the way that they want to. guest: i think that people here would like nothing better than to have these places grow and thrive on their own. and the truth is that the problems in many of these failed states are due to neglect more than they are to medling from the international community at this point. what i meant to say earlier is that there are countries that were colonies that are doing pretty well right now. ghana is actually a good example. look, they had this great run in the world cup. they have a pretty functioning economy and government. senegal is another place that has had democratic elections used to be a french colony. so there are success stories even in africa that have overcome the colonial legacy. so i don't think that we can say that it is only colonialism that is to blame. it's certainly a factor but it

is one that can be overcome. host: last call, joe, independent. good morning, joe. caller: good morning. how are you? guest: fine, sir. caller: if you would just for the viewers put up the top ten failed states for a moment. the common thread i see is i think there is an al qaeda influence and if there's not an al qaeda influence, then you have -- i'm probably going to ruffle some feathers here, the so-called religion of peace, you have radical islam influence. and i will take your comment off the air. thank you very much. host: that will be the final comment from you. guest: i tend to view relidgebs as a product of their societies and a product of the politics or economics in which they grow. i don't think we can blame any one religion for the problems in these places. when you have a country like malaysia or indonesia, a muslim country that is thriving. i think we need to look for

other factors besides the religion. i think a place like, for instance, saudi arabia, which is a very strong state but certainly no one could call it a free society, a lot of the things that people attribute to islam there can really be thought of as bedoin practices, desert traditions. so i think religion is sort of, it leads you in the wrong direction. it's a red herrinn and i think we should look for other influences. host: blake houn shell is managing editor of f foreign .

more to come on this piece and more of your calls. is america exceptiona but if you haven't heard, we want to introduce you to an interesting story about the declaration of independence on this july 4th. here is one of the headlines. tod today's philadelph"philadelphi." they title it "appearing acts." jefferson erased a word preservation scientists at the library of congress discovered that jefferson, evenn the act of declaring independence from england had trouble breaking free from rule. in an early draft he wrote the word "subjects" when referring to the american people. he then replaced it with

citizens, a term he used frequently in the final draft. the library released the news of the word for the first time this past friday. on the phone we have the librarian of congress james billington to join us to tell us more about it. dr. billington, good morning. happy fourth. how did this come about? >> it came through a new technology where we know there was a little blur behind the word citizen. we never knew what was underneath. and it was what jefferson originally wrote. but you have to realize we are talking about exceptionalism, bringing the 13 colonies widely dispersed together, they were never met as a gup until 17 in albany and theyater declared their independence. that is astonishing, really. up unt that time they

generally referred to themselves as subjects of the king. they were unhappy with much that the king was doing and it was a remote power and top-down philosophy. they got together, and after they had actually, the congress, called us an independent nation on july 2, between the 2nd and #ed they -- 4th they had the debate of how to explain it to the world and wte a document like a declaration that would explain it. then the processy which it came into being, which was a deba debate, there are collections in jefferson's rough draft that y can see on your website and in creating the united states it was an amaze iing production. they discussed the history of europe, the history of classic alan particularity tkantiquity d he wrote it after we were independent on the 2nd.

and you can look at this imaging and read what was underneath, what was smudged out before. and instead of subjects they were all independent colonies subject of the king. they were not citizens of something new. the term had been used before but it was the accepted thing and the reason in a sense for declaring independents. there were not any more top down. everybody was a citizen and they had freedoms and responsibilities. and later they had rights. all of those -- most of those founding documents are in the library of congress and preserved in the original. here you see jefferson's rough draft and you see the collections that were -- you see the corrections. adams and franklin wrote corrections and jefferson penciled them in and so we are discovering by breaking down light and taking photographs you can see what is underneath the

pencilling and ink covers or in this case a word that was smudged out and carefully wrote "citizens" over it. you c see it there. it is relatively dark. you can see the sort of smudging around it. there is speculation of what was underneath but we thought it was "patriots" or some other word but it was a servile word of being a subject and being replaced by being a citizen. you take successive digital photographs and you break up the light into the component parts and you can see what is underneath. you see he tried to follow to some extent right over the original words so that even though they had been smudged out, they wouldn't be discovered, it would be more difficult to see the word underneath. you can do this for all kinds of things. the capitol was called the same

kind of image, the reflective image. that diagonal thing is breaking up the light into the component parts using you want extra vial late -- ultravial late you can detect the changes from congress's house to capitol, o-l, on the infrared band. so you take digital photographs of the broken up light, what is called optical dispersing of the pects of light. that means you don't have to sample it or tamper with it or use radioactive materials. you have the clean untouched original version. that is why preserving these original versions andsing this new technology, which combines digital photography with breaking up of light into component parts, is tell us more and more about what the

contracting in combat zones, who are our subcontractors? only the chairman and ranking member of the subcommittee be allowed tomake opening statements. i ask consent that the hearing record be kept open for five business days for that all members of the subcommittee may be allowed to submit a written statement for the record. so ordered. good morning. my appall aeologies for being a late. we know that certainly it was unintended. i appreciate jeff for being here. all of you for showing up today nd giving us your considerable expertise. i sadly rept that i understand we'll have votes at about 10:30, so there will be an interruption on this. we'll try to mke it as brief as possible and get back here for that. so today we continue our oversight on the united states government contracting in our conflicts overseas. we'll ask the important questions, who's getting the taxpayer money, and how are they using those funds once they get

it? last week, this subcommittee held a hearing that examined the results of investigation into afghanistan. that uncovered distressing details about how taxpayer money is funding corruption in afghanistan and how the contract is undermining united states counterinsurgency strategy. equally tubling is the finding that the united states officials charged with oversees this contract had no visibility. in most cases, officials did not know who the subcontractors were, let alone who they employed, how they unctioned, or where they spent their money. to give one example, 7 of the 8 prime contractors in the host nation either directly or indirectly, he provides security for the convoys. he claims to spend $1.5 million per month on ammunition. and he has attacked convoys that do not use his security services.

still, no united states military officials have ever met with the commander. and despite the fact that he receives miions of dollars of taxpayer money, there have been no attempts to enforce the laws that fund his contractual relationship. it's unconscionable that the military does not have tighter control. but the host nation trucking contract is not the only problem. this week's economists report that 570 nato contracts worth millions of dollars were issued in southern afghanistan, but nobody is sure to whom. in january, the special inspector general for iraq reconstruction, one of our witnesses here today, issued a report about a state department contract which noted that over $2.5 billion in u.s. funds were vulnerable to waste and fraud. in may, the inspector general for the united states issued an audit of his private security contractors in afghanistan which highlighted significant problems with contracts.

it found that they do not have, and i quote again, reasonable assurance that private security contractors are reporting all serious security incides as suitability qualifies and are authorized to operate in afghanistan. audits from the department of the state, usaid and others have found problems in embassy construction, fuel delivery and educational outreach programs. the government accountability office, another of our witnesses here today, has reported that the agencies are not even able to accurately report the number of contract personnel working on united states contracts. just yesterday, the "wall street urnal" reported that over $3 billion in cash has been flown out of afghantan the last three years. that's $3 billion of cash on a plne flying out of afghanistan. officials believe that at least some of that money has been skimmed from united states contracts. the conflicts in iraq and afghanistan have changed the way

the united states wages war. with more contractors than troops currently in both countries, the role that he's civilians play has become important. the changing role of contractors has challenged the agencies that employee them. thus far, the agencies have not risen to meet those challenges. congress s tried to impose greater control over contingencies contractors and subcontractors including private security companies. the last three defense authorization acts include provisions aimed at strengthening oversight mechanisms and mandate more stringent controls on contractors. these new regulations have not been sufficient. we're here today, however, not to criticize what has or has not been done so far. we want to work in the spirit of constructive oversight. today we're asking what can be done to keep these problems from reoccurring. we have invited a panel of witnesses with expertise and experiencen the area of contingency contracting. it's my hope that today we can

discuss what we can do to increase visibility, oversighh and accountability over the contractors and subcontractors who are now crucial to the success of our missions in iraq and afghanistan. as we learn from the host nation trucking investigation, the actions of the subcontractors on that contract may be undermining our strategy in the region. with so much at stake, it's time to dig in and find solutions. i look forward to continuing that conversation today and with that, i'd like to recognize mr. flake for his opening statement. >> thank you. as the chairman said, given the report that was iued just a couple of weeks ago in the hearing held last week, this is very important. there is enough water under the bridge. we have enough time. with iraq and afghanistan and with these contracts in place to have some kind of history that we can look to and to see what we're doing wrong and what we can do better. i look forward to the testimony.

>> with that, we'll introduce the witnesses for today's hearing. i'll introduce each of you here now and then we'll start again at the end of the interviews. mr. william solis is from the united states government accountality office where he's responsible for a wide range of program audits and veilsevaluat. throughout his career at oa, mr. solis' work has included military readiness and training, weon system effectiveness, housing and military doctrine. he's received numerous goa awards. mary ugonn is from the inector general's office. she is a certified public accountant with 29 years of accounting experience. the last 26 of which have been with the inspector general. miss ugone publicly was

recognized by the president of the united states as the 2007 recipient of the meritorious rank award. this award is one of the highest in the federal government service. she's also recipient of the inspector general distinguished service award and the secretary of defense exceptional service award and a member of the association of government accountants and graduate of the federal executive institute. have i said your name properly? >> you have. >> thank you. i appreciate that. mr. stewart bowen jr. previously served as the inspector general for the provisional authority. his mission includes assuring visibility. under the previous administration, he served as the department assistant to the president, the staff secretary and the special assistant to the president and counsel. mr. bowen was a partner at a law firm and was also an intelligence officer in the

united states air force, achieving the rank of captain. he holds a b.a. from the university of south. we welcome you back, sir. you've been with us before. mr. richard fontaine previously served as foreign policy advisor to senator john mccain for five years. during his tenure with senator mccain, mr. fontaine worked on foreign policy legislaon such as the 9/11 implement station report. he is a policy analyst in the asian affairs directory. prior to that, mr. fontaine worked with richard armitage. mr. fontaine holds a b.a. from tulane university. i want to thank all of you for being witnesses here today and for taking time out of your schedules. looks like i'll swear you in and

we'll go down and vote. maybe we'll get one or two statements in before we head off. we're going to swear our witnesses in. please rise and raise your right has. do you solemnly swear or affirm to tell the truth, the whole truth and nothing but the truth. thank you. the record will reflect that all of the witnesses answered in the affirmative. as mr. bowen knows and the others know, your full statement is going to be entered into the record by consent of the committee members. we ask that you try to syns iis >> chairman tierney, ranking member flake, members of the subcommittee, appreciate the opportunity to be here to discuss aumber of issues related to the d.o.d.'s use of contractors to support contingency operations. the report the subcmittee issued in the hearing held last week focused a number of oversight challenges related to the host nation trucking

contract providing support to the u.s. forces. the oversight issues associated with this contract highlight many of the oversight a long-stding challenges at our reorts have addressed in the past. my statement today will focus on the challenges the department continues to face when it uses contractors and contingencies like afghanistan. i'll discuss two steps the department needs to take to address these challenges in future operations to include the need for d.o.d. to evaluate its reliance on contractors and institutionally an for their use. as you know, d.o.d. relies greatly on contractors to support its current operations. currently there are about 95,000 contractors in iraq supporting about -- or 95,000 contractors in iraq supporting about 90,000 troops. over 112,000 contract personnel in afghanistan supporting 94,000 troops. inaddition, goa reported that

d.o.d. had more than 40,000 contracts in place in fiscal year 2008 and for the first six months of 2009 to support operations in afghanistan. d.o.d. officials have stated that the department is likely to continue to rely on contractors to support future contingenciec. based on our ongoing audit work in iraq and afghanistan, d.o.d. continues to face a number of challenges to fully integrate operational contract support within the department to include finalizing joint guidance for operational contract support as required by congress, identifying and planning for the use of contractors in support of ongoing operations and in d. d.o.d.'s planning for future conngencies, providing personnel to conduct oversight and management of contractors, training of non-acquisition personnel such as unit commanders and contracting officer representatives on how to work effectively with contractors and contingency operations. and lastly, ensuring that local

and host country nationals have been properly screened and badged. since the mid-'90s, we have made numerous recommendations aimed at addressing these challenges. while d.o.d. has taken some actions in response to our recommendations, it's been slow to implement others. for example, d.o.d. continues to face challenges in contract support for ongoing operations. recently officials from several battalions who had just returned from afghanistan told us when they arrived at their locations that were intended to be their combat outpost that they lacked housing, heating, laundry facilities, showers and food services. additionally, because these units were unaware that they'd have the responsibility, they did not plan fo and aocation personnel to handle the extensive contract management and oversight duties associad with building and maintaining their combat outpost.

as a result, these units had to assign military personnel away from their primary missions in order to handle these contract management duties. failure to plan for contractor support goes well beyond iraq and afghanistan. as we reported earlier this year, the department has made limited progress in improving the rol of contractors. for example, d.o.d. guidance calls for the inclusion of the operational contract support annex in some operation plans. however, of the 89 plans that require such annexes, we found only four plans with these annexes had been approved and the annexes had been drafted for an additional 30 plans. d.o.d. continues to risk not understanding the extent to which the department will be relying on contractors to support combat operations, and, two, being unprepared to provide over sight of the contractor personnel because they have not been included in the planning process.

let me just say quickly, d.o.d. has taken some steps to institution institutionalize contract support. in addition, they've issued a variety of contractor guidance. let me just close and say that in looking towards a future, what is needed is a cultural change across d.o.d. that emphasizes the importance of contract support throughout all aspe aspects, including planning, training and personnel requirements. only when d.o.d. has established its future vision for the use and role of contractors supporting deployed forces and fully institutionalizes the concepts of operational contract support can it effectively address its long-term capability to oversee and manage those contractors. it is important that this change occur quickly while current operations keep a significant amount of attention focused on the use and role of contractors in the political will exists to

effect such a change within d.o.d. failure to do so will likely result in the department continuing to confront the challenges it faces today in future contingencies. this concludes my statement. i'll be happy to answer any questions. >> thank you, mr. solis. miss ugone? >> chairman tierney,anking member flake and members of the subcommittee, thank you for the opportunity to appear on behalf of the inspector general to discuss contracting in combat zones. specifically, i will highlight a few key deficiencies in contingency contracting and discuss related ongoing actions to help prevent waste, fraud and abuse. since the early 1990s, we have identified contract management as a major challenge for the department to overcome. and the government accountability office has continued to identify this area as high-risk. the need for expediency in contingency operatis such as in iraq and afghanistan can

further increase risks. in may 2010, we issued our report, a framework for reform. the intent of the report was to provide a useful tool for contract managers in their efforts time prove contingency contracting practices. one of the most important areas in contingency contracting is requirements definition. because the pace of contingency operations should compel us to get it right in the beginning. in particular, requirements need to be appropriately translated into contractor performance expectations and measures. in february 2010, we and our colleagues at the department of state inspector general office jointly reported that two task orders valued at $1 billion did not meet defense needs in developing the afghan national police because the coract did not allow for rapid changes to the requirements as theecurity situation in afghanistan changed.

another important area is adequate administration of the contract. fundamental steps include having a quality assurance plan and assigning qualified contracting officer representatives. for example, a special operations forces support activity contracting officer did not assign a contracting officer representative to 44 service task orders valued at $514 million. only after a test caused damage to a c-130 aircraft did officials discover that a ntractor improperly installed a part that later cost $219,000 to fix. sufficient controls of the payment process to ensure that payments were proper is another important area in contingency contracting. for example, marine corps official s did not authorize ovr 9,500 patients totaling about $310 million. we found the marine corps officials made 32 duplicate

payments totaling 2.5 milli$2.5. one vendor was paid over $3 million. although the examples i provided today involve the relationship between the department and prime contractors, the need for effective contract management oversight also exists when the department, through its prime contractors, relies on subcontractors. subcontracting guidance applies to the phases of the contracting process. for example, during source selection, when required by the contracting officer, offers must demonstrate the responsibility of their proposed subcontractors. the contracting officer may also require consent to ubcontract, to adequately protect the government because the type of subcontract, its complexity or value or because special surveillance is needed. additionally, the federal acquisition regulation emphasizes that government

quality assurance on subcontracted supplies over services should only be performed when it is in the government's interest. ultimately, however, the prime contractor is responsible for delivering suppli or services that conform to the contract requirements. therefore, it is the prime contractor's responsibility to ensure that a proposed subcontra is appropriate for the risks involved and is consistent with sound business judgment. there remains continuing concern about whether a prime contractor provides value to the contract when the subcontractor is performs most or all the tasks under the contract. in spanse to section 852 of the national defense authorization act for fiscal year 2007, the department of defense has implemented contract claes providing the officer with the authority to recover excessive charges for contracts where the prime contractor or a subcontractor adds no value in

accomplishing the work performed under the contract. the effectiveness of contractor support to expand u.s. operations in afghanistan and other contingency operations can be improved by applying lessons learned from contingency contracts already executed. among the steps that can be taken to improve contingency contracting are define what is needed and how it can be measured. have bth program and contracting personnel involved in implementing a well-documented oversight plan, and have required documentary evidence such as a receiptf goods and services to support proper payments. in closing, i'd like to add that the top priority of the office of the inspector general, department of defense, is to provide effective and meaninul oversight in southwest asia. we will continue to coordinate and integrate our efforts within the oversight community and i look forward to answering any

questions you may have. thank you. >> thank you very much. mr. bowen? >> good mornig, chairman tierney, ranking member flank. thank you for inviting me here to address the challenges of contracting in combat zones, specifically to address the issue of who are our subcoractors. permit me to provide three premises that frame my remarks. first, the iraq experience underscores the truism that contracting in a war zone is uniquely challenging and vulnerable to fraud, waste and abuse. second, that fraud, waste and abuse will get worse unless a regime is implemented that balances the principle of effective financial stewardship with the goal of mission accomplishment. third, a weakly resourced contract corps, such as we've seen in iraq and afghanistan, will harm oversight and, as you

pointed out, potentially undermine mission accomplishment. we' we've been studying the problems arising from iraq contracting for the last six years. 've issued 230 reports. that's what -- we've gotten into some of the subcontracting issues. in those cases, we've seen that the primes don't frequently know who their subcontractors are either. to find out what knowledge the defense department had about their primes, about the subcontractors, and thus this hearing. two paramount lessons learned arise from our reporting that i think still need to be addressed to grapple with this issue. one, as we pointed out four years ago in our contracting lesson learned report, the -- the u.s. government should devellp and implement a

contingency federal acquisition requirement, set of regulations, that is specifically shaped and defined for contingency operations. two, as part o an overall reform, the recognize nishz that there's lack of unity of command and thus a lack of unity and effort and a new institution should be established that grants contracting, personnel, i.t., all of the elements essential to success and that institution should be given responsibility. right now we have gsa, not really functioning. the stabilization at state has the personnel responsibilities, not really engaged in iraq at all. very limited in afghanistan. and d.o.d., meanwhile, is pushing forward with its significant stabilization entities. that reform, that challenge, that problem stands before the congress and the country to fix. finding out and understanding

contract -- who our subcontractors are, who our contractors are in iraq and afghanistan should be studied through three lenses. in iraq, two policies shaped the overall contracting effort. the heavy use of contractors to begin with, unprecedented in the history of contingency operations. in 2008, reaching upwards of 190,0 contractors in country. with a contracting court simply not sufficient, not capable of keeping track of it. thus, waste. the real issue in iraq. the real issue in afghanistan. severe waste, billions of dollars wasted needlessly because of poor quality assurance programs, which are intended to ensure there are quality control programs which primes are supposed to implement to cover subcontractors. didn't get done enough. as aresult, this serious waste occurred. second, the movement towards using local contractors understandably to build capital, to -- to improve ployment, but

you -- but in iraq, we don't know who those contractors are. we don't have a database. it's difficult to track. there was waste and corruption that ensued. on the transparency front, i think that if the congress wants to know who our subcontractors are, amending the far is a good way to do it. right now, the only way that -- that the contracts that chairman towns requested from d.o.d. will reveal who the subcontractors are, if the terms of the contract required it. however, if you so chose, you could amend the law to -- to require a minimal disclosure of subcontracting. i think that's a step in the right direction towards transparency. on the accountability front, rebuilding the ctracting corps is an essential element to ensuring not just the oversight of primes but the oversight of subcontractors. so in summary, i think there are four recommendations that we put forward for the committee and for the congss to consider. implement the contingency and federal acquisition regulation

and develop the u.s. office for contingency operations to manage these -- these methods. this is new for protectingur national security interest abroad. second, reexamine the heavy use of contractors in contingencies and explore whether some functions are, in fact, being incorrectly outsourced. third, rebuild the contracting corps. it's ongoing at d.o.d., but i think it's a governmentwide issue. when you have 190,000 contractors, you've got to have a contrrcting corps that's capable. we don hve it tay. and finally, amend the far as you see fit to give you the transparency, the information you need and want about who our subcontractors are. with that, mr. chairman, and members, i look forward to your questions. >> thank you very much. mr. fontaine. >> thank you very much for granting me the opportunity to

testify today. i'm honored to take part in this hearing. my testimony today is based on a report called "contracting and conflicts: the path to reform." in this report, i discuss possible solutions to many of the poblems that have plagued the contracting process. the entire report is available for download on our website. our report proceeds from the realization that when our nation goes to war, contractors go it. the invasion of afghanistan together with the march 2003 invasion of iraq saw an increase in the size and scope of contracted support on the battleffeld that is unprecedented. but the system in which this contrting takes place has not caught up with the new reality. as america's dependence on contractors is likely to continue, the need for reform is prsing. my written testimony details many recommendations we've made to move down the path to reform.

i'd like to highlight a few that are particularly important. first, expand the workforce. as the volume and scale of contracts is exploding in recent years, the number of government workers qualified to oversee them has remained stable or even fallen. it's critical to grow the workforce both in washington and overseas. only by expanding the quantity and quality of the government's human infrastructure will the majority of other necessary reforms be possible. second, increase transparency and scrutiny. the post invasion reconstruction environments in iraq and afghanistan represent the largest mrkets for private contracting firms, which has led to inconsistent data. we should establish uniform standards across agencies and contract type for consistency and consolidation of data. they should improve the transparency of subcontractors and establish a permanent inspector general and include clauses in contracts that require firms to enforce rules at impact the overall u.s.

mission. third, establish a coordination mechanism within the executive branch. the approach to contingency contracting remains fragments. we propose establishing a formal but relatively simple mecnch in which state, d.o.d. and usaid woulfocus on contingency contracting and then ensure that these individuals meet on a regular business in order to harmonize policies and standards. fourth, deal better with the military implications. the unprecedented number of private contracto on the battlefield and the vast scope of their activities put dilemmas for the u.s. military. the department of defense needs to give much more strategic thought to the role that private contractors play. they should consult with contractors during the military mission planning process. include the roles of contractors in predeployment training and

have military education courses. fifth, clarify laws and regulations. the legal framework governing expeditionary contractors in wartime is complicated. it features overlapping jurisdictions and it's ambiguous. the department of defense together with the department of justice should clarify how the rious laws that apply to contractors -- we believe that congress should amend the military jurisdiction act to cover all expeditionary contractors and streamline acquisition regulations that govern u.s. service contracting in hostile environments. sixth and finally, resolve the inherently governmental conundrum. u.s. laws law aimed to protect the core functions of government by prohibiting anyone but government employees from providing those tasks. the government should define those areas in which there is some consensus and move toward a core competency approach.

such an approach would focus on the functions the u.s. government should possess and maintainrather than debate internally over which are inherently governmental. i would note that the u.s. government and its contract employees have been thrust together as partners in a shared endeavor. the scale, cost and duration of which have taken nearly all observers by surprise. the reality is that america's reliance on practice contractors is not likely to fade and it's time for the united states to adapt. as a result, the government, the military, the contracting community and the american people will benefit from sweeping reform of the contracting system, reform that ensures the private sector's re. thank you very much, and i look forward to your questions. >> thank you, mr. fontaine. now for the continuation of that bad news i spoke about, i think it's more prudent if wereak no and go and vote. there are only two votes. hopefully we'll be back relatively soon. i'd say cerinly by about five minutes of 11:00. so if you want to get yourself a

cup of coffee, relax a little bit, my apologies and wll be back. we'll be adjoined until 11:00. thank you for your patience on that. we had one more vote that had been anticipated. it took a little longer, but we're happy that you're all back with us. we're going to start asking some questions, which i'll kick off. i want to ask about the basic premise of this whole operation here. everybody seems to be testifying on the notion that we've accepted the premise that private contracting and subcontracting is here to stay on contingency operations.

yet every one of you cites numerous problems with oversight, with management, personnel, integration of dethe planling, the command structure, liability, responsibility, control over individuals for whom we're going to get the blame, whatever they do, even though they may not be technically in our state department or department of defense. given all of those difficulties and separating out the state and usaid part of it right now, starting with the department of defense, why haven't we giving more consideration to the notion of not having contractors and subcontractors in our military operations where we already have established clear lines of responsibility for those in the military, clear lines of management, clear lines of accountability. it seems to me that if we just define military operations as inherently governmental because the military operations in the name of the united states under our flag overseas, that that

would remiededy a lot of these problems. mr. solis? >> i'll take a first stab at it. i think what we've tried to say is that we're not saying that contractors should be used one way or the other. i think we try to say that from what we understand from the department in military operations that it's likely that they are going to be part of it. so we're not saying that they are. that being said, going back to what i mentioned in our statement, there needs to be a fundamental look at the requirements for contracting if, in fact, you want to do contracting. i don't think we're trying to say that you will use contracting, but if that's what you are going to do in terms of your military operations, you to plan that up front. you have to look and say, are we going to contract for certain things? not just on the logistical side, that we are using contractors on the intel side and network operations and a number of other things. we are using them as linguists.

everywhere i go, military members are saying i think we've gone too far. but there needs to be this fundaaental look-see at the beginning to see if we are going to use them and if we are, we need to put the proper controls in place. >> i agree with you there. when i look at you talking about being on top of this issue since the 1990s and advising everybody to look at these contracts and moving forward and basically it's been blown off. i mean, here we are 20 years later and you've got a little bit of complans with some of the recommendations and a whole lot of non-compliance. miss ugone? >> i think my colleagues here have raised the issue of the inherently governmental function issue, which is -- i believe that policy definitions have been proposed of that. the issue is how closely relateicide it to the inherently governmental function? and should these critical capabilities be insourced? i believe there was legislation passed in the last couple of

years that requires the military departments to take a look at their contracted-out capabilities to see whether or not any of them should actually be insourced, which is brought back in house. and that's one way in which the department can analyze that particular situation. i think there's already legislation out there that -- >> there is. legislation is there. the compliance isn't. that's the problem. again, the question is back to when did war ever become something that wasn't inherently governmental? in all of the things that go with it. when i see recommendations here, you know, trying to incorporate in and integrate into the command chain contractors so that they're more involved in the planning and the operations, if you're going to do that, you might as well have them on your payroll. mr. bowen? >> mr. chairman, you say when did that happen. i think the time is the late 1980s. and essentially the support. fuel, food of troops in the

field was outsourced. and we've spent now in iraq in excess of $35 billion in -- in that -- in those three areas. it's been an incrementalism since the late 1980s. what can be covered? it's a continuing question in every conflict. and the answer is always, a little bit more. >> has anybody looked at what did we do in world war ii, what did we do in the korean conflict? mr. fontaine? what a segue, huh? >> in our report, we have a historical section that looks back, actually, all the way to george washington. and contractors in some way, shape, or form have played a role in all of our conflicts going back that far. there are thousands of contractors working in vietnam and korea. the condition changbig change h dependence that the u.s. has had on what they've done. in vietnam, you had a large number of contractors working on

construction projects in vietnam. and that obviously is less controversial in terms of what contractors do. you know, now we -- in the current wars we've had contractors doing interrogation, private security operations, weapons maintenance, according to report even, you know, maintaining drone operations, those sort of things, which are much more controversial. that's the big change that's happened over the years, the scope of activities the contractors have begun to carry out and because we have, you know, upwards of 200,000 contractors now in iraq and afghanistan, if you pulled those out of the operation or tried to federalize them all, it would be very difficult to do. >> and i wonder how easy it would be to be over there in these conflicts if there were 200,000 people in the united states in combat has opposed to 90,000 in one place with 110,000 contractors, sort of off the books. >> well, this is another -- i mean, i think this is another aspect of it, the political cost

goes down to the -- to the degree that contracting support goes up. because, you know, we always mourn the losses of american service people who are killed. but contractors die and are hurt and they barely register. so there's a reduction in the political cost of these operations. but i think at the same time, unless the united states has a very significant reduction in its international commitments, which personally i think is relatively unlikely, at least in the near to midterm, we will probably continue to rely with our current structure on contractors to do the work that our military is not big enough to carry out on its own. >> thank you. mr. flake? >> let me just follow on that team if i could. we -- the report that was issued with record to the war lord inc., this is one that -- it was mentioned before by mr. solis that you take into account efficiency and whether or not it aids our policy, our overall policy goals.

this is one where when you have local contractors with the trucking contract, i think it's undoubtedly the most efficient way to move goods between military bases in afghanistan. but when we find out that a significant portion of the money that's -- that is used to pay those contracts is going for protection money to some very unsavory characters, some of whom, very tight with the taliban or are contracting with the taliban for this protection, that certainly runs counter to our policy, our counterinsurgency policy, which calls for one source of authority, that being the afghan government, and no parallel authority structures there that were in this case not only tolerating, we're building up these militias and war lords and whatnot. how do we reconcile that? it kind of goes back to what the chairman was talking about and

where, you know, the political costs -- certainly, if we -- if we did what the soviets did, use their force structure to guard the supply lines, according to this report, it was 75% of their force structure. that would require, you know, doubling of our number of troops and wouldn't be very efficient and we'd have certainly more casualties. but it may be the the only way n effective counterinsurgency policy as we've defined it. how do we reconcile that or can we reconcile that? >> the policy issue is using financial resources to pacify a region and it was certainly an expedient process ad hoc keeping the trucking route safe. the anbar awakening spent in

excess of $450 million of commander's emergency response program money to pacify anbar province and regional areas. similar policy issues, different approaches to how well thought out, how well structured the execution of the two programs was. in afghanistan, the policy execution was essentially expedient and almost outsourced. in iraq was carefully transitioned as the maintenance. now borne financially by the iraqi government. >> how does this look in terms of the use of contractors? >> obviously, in any war funneling money to your enemy is not a good idea. at some point there may need to be a fundamental choice made

whether to proceed, whether the effects are mitigated through oversight, to proceed in fashion where we are willing to trade money in order to have a pacified area which our supply lines can travel, knowing some of that money can go to our enemy, or whether we are willing to tolerate our casualties or disruption to our supply lines. that is probably a fundamental choice. when it comes to counterinsurgency, not only do they have all the problems you just described when it comes to aiding our enemies, reducing government legitimacy, giving them more opportunity to attack or not attack, there is a strategic communications issue to this we are supposed to be on the side of the good guys. as word gets out that we are sort of willingly or knowingly providing money that ends up in the hands of the taliban, i wonder if that promotes a sense that the united states is not in this for the long term in order

to actually see the government succeed rather than trying to build a short-term expediency. >> if there is no value added from having the prime contractor or the subcontractors that we have the authority to pull back some of the funds used for that, how often is that utilized? >> we haven't done work in the area on the pass through. that was legislation enacted in fy-2007. one of the things it focuses on is the subcontractor level. we do han to do work based on the contingency contracting framework for reform. we identified where primes had problems. when we look at the primes that are idiq contracts. if there is issues, are issues related to pass-through as well as other issues related to

subcontractor responsibility, as well. >> you are not aware of any instances where we actually pulled that funds? >> no. i'm not aware of any instances where we pulled excess costs. >> thank you. >> thank you, mr. chair. last week we found out that in the course of investigating the host nation trucking contract that military were relying on reports from subcontractors that were actually driving the trucks and providing security for the convoys and there was strong evidence these subcontractors were paying off the taliban. this is a very distressing situation. what areas of oversight are appropriate for dod to leave up to the prime contractor and what areas should they take a more

direct role and how can we prevent this corruption from occurring? >> i think one of the things prayering for this hearing, it became quite apparent that the federal acquisition regulation has not kept up with subcontract management. we just took one contract out of here, idiq contract with five prime contractors. there are 200 subcontractors under that prichlt if you take a look at federal acquisition regulation, there are provisions, but as far as subcontract management, i don't think it's kept up with the level of subcontractor performance that's required under these primes. i think there needs to be a look at the federal acquisition regulation with respect to subcontract management.

>> are there not guideline for this? >> there are and there is and i talked about a little bit in my opening statement. there is the consent to subcontract which is if the contracting officer requires a prime to provide information on their subs in order for the contracting officer to consent to subcontract, there is some insight into subcontractor responsibility. if the contracting officer does not require that, then you're not going to have the insight. the provisions currently allows a lot of leeway to the contracting officer. >> what would change to it have this more stringent oversight of the subcontractor? >> i didn't hear the question. >> what could -- what would it take to change it so could you have this change? >> one of the provisions -- let me take the situation with the

war lord situation. the contracting officer can, under the current provisions designate subcontracts in that situation as something that requires special surveillance or special oversight. it does allow to do that. could you say i need to subcontract with these primes and get insight into your subcontractors and i could establish perhaps a special surveillance program for those particular subcontractors. there are some provisions, but it's up to the contracting officer. to determine whether those provisions are invoked. if there are other additional requirements that have to do with the contract purchasing system. it gets more details as to when you have to get a consent to subcontract from the contracting

officer. >> i want to ask about the culture. it was talked about the ability to institutionalize contract support by accepting contractors as an integral part of the total force. i also note you had had several recommendations but the dod has been slow to implement many of the recommendations. would could change this culture? >> i think one of the things again, and i think the joint staff and this was alluded to last week, there was a joint staff study to look at the relines of contractors in iraq. that begins the process of looking how reliant the dod you is not only in iraq but in operations in terms of reliance.

also the testimony here. >> when you look at future operations, there are requirements to look for contract requirements for future operations. that has to be done rigorously and on time. unless the department does that kind of thing, we are going to be in the same situation talking about another contract the next time. the only other thing i would offer is in the current version of the defense authorization bill that the senate just passed, they made some changes to the requirement for looking at contractor requirements in the defense bill. it's going to bring that strategic look up to it at that point. i think there are basic problems in terms again.

lessons learned, background screenings. i think those things, we are on record with some of the recommendations to make changes to that for whatever reason the department and has not acted upon those in a timely manner. we are trying to pursue some of those. the fundamental pace is i've got to look at your reliance on contractors before you start making other adjustments. >> thank you, yield back. >> mr. duncan, you're recognized five minutes. >> thank you very much, mr. chairman. thank you for holding another hearing and trying to call attention to all the problems, all the waste, fraud and abuse. one scandal after another that's gone on for many years. throughout all this time we had more contractors than

subcontractors than we had soldiers in these areas. i heard mr. fontaine say a moment ago the use of contractors by the military has gone on since the founding of the country. there's never been the ridiculous mark-ups, the almost excessive, obscene profiteering, the rip-offs of the taxpayers that have gone on to the extent they have gone on in iraq and afghanistan. these wars have been far more about money than they have been about any real threat to this nation. it's really very sad about what's gone on.

there is no real way to correct when you have prime companies dealing with each other. things are done at a fourth or third or half the cost that you have when you have the federal government involved. has been the worst and the most expensive of any of the federal contracting that's gone on by our government. that's all we have to say. thank you very much for giving me this time. >> thank you, mr. duncan. >> thank you, mr. chairman. thank you for holding this hearing. mr. bowen, good to see you again. we've had a long history over the iraq reconstruction model.

i've been to iraq 12 times working with you to try to tighten up the situation there. we started at a very low basis. what trouble mees when i more often visit afghanistan, i don't see that the lessons learned in iraq are being used. it distresses me greatly when i went down to try to meet with a couple of war lords down there on the afghanistan/pakistani border. they ended up shutting down the pass there and shut off the trucking because they didn't want me down that area asking questions.

even the modest and painful gains achieved in iraq and afghanistan, i'm wondering, mr. bowen because you are the inspector general for iraq reconstruction, you're the one who was the point person for us. can you point -- i know you helped the inspector general for afghan reconstruction? i know you helped him file some reports. >> that's right. >> the reports are, at least the ones i've seen and asked for, they are, well, very poor, i would say, in my estimation going into afghanistan and asking for a progress report and where we are, even if not just a status report, even if there is no progress to report, tell us where we are. that information has been very poor, not very informative. when i compare it to the

information i get from you and your office in iraq, i have low confidence for the inspector general for afghan reconstruction. it may be because of the environment there. it may be my expectations are too high. i wonder if you could share lessons learned in iraq. >> almost exactly two years ago we had a coloquy in this room about the police training camp

that never got completed. i point that out to say this is a continuing and enduring problem. that is enshurg the taxpayer interests are protected while mission goals are achieved. one doesn't trump the other. the shortfalls you saw in afghanistan, the shortfalls experienced today in both countries is the lack of transparency, no required report as we heard today regarding subcontractors. lack of effective accountability, insufficient oversight presence in country. you went outside the wire, we've been outside the wire a lot in iraq. we've been together, you and i and sometimes when our inspectors have visited sites frequently, we are the first americans they've seen in a long time. so the quality assurance programs being done outside the wire are not sufficient to

protect those taxpayers' interests, not with standing importance of the mission goals. what lessons should be applied? twoo that are in my statement. one, the contingency federal acquisition regulation we talked about report, recommended four years ago. i think these settings as you point out are uniquely difficult and uniquely susceptible to fraud, waste and abuse, and therefore, special, focused contracting regulation should be developed for all ages to use in theater. what most don't realize, there are multiple visits of the f.a.r. at work that. creates problem for contractors and creates problems for contract managements and causes waste which is ultimately the --

where taxpayer interest is in fraud and waste. it shouldn't be dependent on personality. it ought to be driven by structure and that should be an office that would bring contracting, i.t., personnel, bring planning, oversight, execution under one roof. >> let me continue on that line. your testimony recalled december 2009 trip to afghanistan you took. you were told by members of the defense contract management agency that they require d experts and oversight. they plan to staff those positions with contractors.

what are we doing? is this wise strategy? you're going to hire contractors to oversee contractors? >> i'm not saying it's the way it should be done. i think it's the lack of planning for the use of contractors. you have to look at what your requirements are going to be. if we are going to be doing more contracting or require people who have to have technical backgrounds, particularly in the constructions trades, engineering trades, is this where we want to be? i think ultimately this is what they may have had to do. we have no choice. >> you had this issue since the late '80s. it seems total non-responsiveness on that.

they are going to assign contract representatives related to health and safety, food surf yes, sir and power generation, leaving other services with no contract oversight. how smart is that? >> my understanding they were categorizing high, medium risk. it's not they weren't going to have oversight, they were going to have less oversight. they were not going to review those contracts as often. it was maybe once a quarter or shorter, longer periods of time. it does create risk. looking at these contracts and things, i've got to continue to look at, is this going to increase my risk? is it going to -- there's got to be a continual review. cane not just say i'm not going to do this ever again. you're just going to set yourself up for problems.

>> they talked about the experts. do you have any information how the department of defense is progressing employing a cadre of experts? >> i don't have a macroview, much more selective view depending on the contract. the international narcotics law enforcement contract we looked at, that was $1 billion on equipment and training afghan national police. we were told by the command that they stood up a contracting officer representative oversight structure just for that one contract. but we do have concerns about contingency contracting. particularly using our framework for reform. the area that is the area that

is problematic is getting the contract right, monitoring and paying. we have concerns about those same issues again in afghanistan. that's one of the things that we want to watch as the money flows in to equip and train the afghan national police and the security forces. >> i think you made that point well. too little oversight, too little people professionized in managing the contracts. we have people in one case so we contracted out to people to oversee the contract. that's how absurd it gets. >> i think the key is, aerogoing to get it wrong at the end if you don't get it right at the beginning. if you don't translate those requirements correctly and you don't plan the acquisitions and you don't have a strategy for

how you're going to spend the money, then you're going to have a problem. definitely. >> i'm beginning to think we can't rely on the department of defense to do this any longer. maybe they should put a s.w.a.t. team together to get these things in place and shove it on them. >> what best practices can we look at of some of the other agencies that could be done here? what are some of the other agencies doing or is it applicable at all given the scale that we are dealing with here at dod? >> congressman, i have not -- my work has been focused on the dod side it. can't really answer your question in terms of best practices. obviously, i think the department knows things that it has to do.

again, it hasn't always translated into doing those best practices. again, things like doing lessons learned as stuart mentioned, i think translating that over from iraq to afghanistan, whether it's reconstruction or military operations will use the contractors. i think the department is aware of the kinds of things that it needs to do. i think dod is aware of the things that it needs to do. i think it's a matter of implementation at this point. >> that is incumbent on us then to -- we can rewrite the regs, but nothing has seemed to work to prompt them other than simply withholding funds. then you get into policy issues

bigger than all of this. >> there is obviously a lot of guidance out there already. we can raise this to a more strategic level in plans of operations and military missions. that's one of the first things that's got to be done. i think holding folks accountable and feet to the fire in terms of implementing these regulations is the next step. there is an awful lot of guidance. the other thing i would mention is we talk about this in a contracting sense. i think the other entity within dod that's got to step up to the plate is personnel and readiness aside. i think it is a four structure issue. again, how we look at iraq or afghanistan, we have nearly a couple hundred thousand personnel, both contractors and military members doing the mission. is that where we want to be? is that how we want to do these

things? the kinds of things contractors doing today are things we want to do for future operations? that's where it's also not just the contracting side. i agree with everything my colleagues have said about things like requirements and planning, but i also think it's got to be a four-structure issue and look and see and where we want to be with personnel, both contractors and military members. >> what are your current thoughts on having an inspector general for contingency and how would that improve our ability to oversee progress or lack of progress from various agencies? >> having a special standing inspector general would simply ensure the oversight was well prepared in advance of any operation beginning. in both iraq and afghanistan.

adequate oversight was not created until adequate operations were under way. in afghanistan's case, seven years after it was under way. the dam has broken. the disaster was unfolding. it's difficult to make as significant difference as we were able to make in iraq. the fits within the gist of this hearing the need for greater accountability together with more transparency. >> mr. fontaine, can you compare for us the competencies involved when the military oversees its own personnel versus how well they do in overseeing the conduct of contractors? >> well, this is an ongoing problem related to the laws, regulations, internal command structures that the military has versus what the contractors

have. the contractors at the end of the day are responsible for the terms of their cootract. nonfulfillment of the contract has certain penalties, but not the same penalties that, for example, military personnel have if they don't obey an order where they can be court-martialed. the discipline and the command and control procedures on the mill side are much clearer and crisper on the military side rather than the contracting side. the contracting side there has been increasingly an attempt to write into the contracts themselves some of these. contractors before were not subject to the uniform code of military justice. they are now subject to some provisions of the ucmj. contractors before were not subject to fragmentary orders and other orders from commanders in the field. there's been a move in the right direction. you fundamentally will have a

disjunction between the way military personnel operation and contractors doing the same function because of who they are responsible to at the end of the day. >> thank you. i didn't see mr. welsh was back. i didn't want to usurp his time. mr. welsh, i recognize you for five minutes. >> thank you very much. i thank the witnesses for the good work they are doing. one of the contradictions, of course, is the more we spend on contracting, the more we undercut the chain of command in the military. i want to just ask your opinions on things because you're not the ones who make the decisions. mr. solis, i understand it's recently reported there is $100 million contract for blackwater to provide security to cia bases. as you know, blackwater has an

incredible history. they shot all the iraqis which looks like a hair-trigger response. they authorized payments to allow a company to continue in business. the company's under continuing investigation with the foreign corrupt practices act. in '09, blackwater lost its state department contract to provide diplomatic security for officials in iraq because of the nisor square incident in. april 2010, federal prosecutors charged five former senior blackwater officials with weapons violations and making false statements. why in the world would we enter into any new contract with a company like that?

>> i don't think i can answer that in detail. when folks making decisions on those contracts have to look at past performance. obviously the way they worked in the past. things you raised would raise concern, i would imagine. not income the decision chain, i don't know exactly how that decision would have been made by the folks who are making it. >> ms. ugone, how about you? >> there are a couple of things. as bill had said, pest performance. we did an audit a few years ago. frankly, the population of past performance information, we are not doing a very good job of populating that. that actually would be quite helpful in having primes register that information. they have a section in the past performance information blocks for also providing information on subcontractors. at the same time there also should be a look at whether or

not any of these subs are on the excluded parties list or have been suspended or barred. there are numerous checks that the contracting officer can use. >> let me develop on this. obviously, you can have a list where the history of the subcontracts is made available to the people that are going to be signing a contract. in the case of blackwater it's well known what their record is. that isn't a mystery to the cia. one of the dilemmas i think we have and maybe mr. bowen, i'll ask you to comment on this. the urgent requirements providing security in this case to our cia officers and forward operating basis, which obviously has to be a compelling concern for mr. panetta outweigh considerations about criminal allegations, reckless use of violence by a company because they can get the job done. that internal contradiction means that we waive decency in

some respect absent and go back to blackwater despite their crummy record. >> we can't waive core principles of stewardship of the taxpayer dollars. mission accomplishment has to be balanced with the core principles of oversight and execution and country. mission accomplished does not trump those principles. i think though regarding the subcontracting issue, we talked about it today, so much of it is discretionary. what information you can as an oversight body get access to to find out what's going on below that surface so that you can, you and frank lit departments can make better judgments. that calls for some amendment of the federal acts regulation that will give you data, information, about subcontractors so that from here, from this data you can make judgments about how the

primes are doing. >> all right. i commend you for the good work you've been doing over the years. >> thank you, sir. >> i yield back. >> mr. lynch, would you care for further questions? >> sure. thank you. since the beginning of the war in iraq and up to the present there's been a trend to to contract out core government services. the argument initially made by the bush administration is this is going to allow us to save money here. there were efficiencies gained here. after all of our experience, i just don't see that. is there cause to revisit that assumption that contracting out, while it does allow us to tap into some expertise that is not available or wasn't available at the time, is there cause here

for us to review that decision to contract out government services rather than have, rather than to build internally our government capacity to do this with government employees? >> yeah. i think i would divide that into two separate points. first is on the cost. and providing comprehensive costs comparisons between contractors and government personnel carrying out the same function and our gao colleague may be able to say more on this it's proved to be exceedingly difficult for a variety of reasons. one of the last year reports required data from the department of defense in order to make this comparison, department of defense was unable to provide the data. there seems to be a difference in cost as you sort of move up the skills chain. if you're going to hire local or third party nationals to do construction, laundry or mail service, you're much more likely to save money than to do things

sort of at the top of the skills, private security, more engineering function. if you hire americans you may pay on a per day basis more than an american official to do the same things. the benefits seem to be lesson the cost side often and more on quick deployability of contractors into a war zone. on the inherently governmental side, there is certainly reason to revisit this whole issue. our recommendation has been to try to move away from trying to divide every single activity into interntly governmental and against a law to never contract out.

we might be able to have the flexibility to do that, but that shouldn't be the run of the mill way we do our operations. >> in our recent experience we have found that our federal pension rules, you know, we have some very highly skilled experienced personnel who we could use in afghanistan and ir iraq. if we brought them back in as government employees and this goes to treasury, dod, the whole nine yards, they would have to, well, they would basically violate their pension rules and be penalized for coming back. recently in the subcommittee i chair on federal employees, we actually entertained creating flexibility there to allow folks

to come back into government employment without violating their pension rules and without being penalized to come back on to the payroll and to provide that service for a year or 18 months. then go back into retirement. is that the type of flexibility that might help us in some of those upper trench responsibilities that you referred to? >> the double dipping problem is a real issue. i would say that makes sense on the contract management level. a number of people pointed out correctly we do not have enough contract governors in the u.s. golfs. you cannot mint a qualified government contract officer in five days, maybe not even a year. you often can't just pluck one who's never done government

contracting from the private sector. you may get folks who are contracts office who left the government, have pensions, don't have an incentive to come back in because they would have to give that up. be able to come back two years to serve their country and put their expertise to use. >> my time expired. i yield back, mr. chairman. >> thank you. >> you talk in your report about the department of defense being hampered by the department's inability to institutional contract support by ccepting contractors as an integral part of the total force which is part of my reaction to that is you might as well make them part of the total force. assuming that, what i think is common sense, doesn't prevail, what are the major obstacles you think are preventing the department of defense from doing that? from accepting contractors as an integral part of their force?

>> that is reiterating what the department had as qdr. that is what the reliance on contractors would be. they said their total force includes military members, da civilians and contractors. i think in terms of trying to get to that point about institutionalization and, again, i keep hammering about planning, planning, planning. i think it's something while they do a lot of on the military side, military force structure pace, it's left out in gaps. i think the army does what they call a total army analysis. there was talk before i came to this hearing there is a piece about doing something for contractors to. my knowledge, that has not ever been done. what has to happen, i've got to look at what you're going to need for your military force

structure. if i have gaps then you've got to make a policy decision. do i want to fill that with military members? do i want to fill that with civilians or fill that with contractors? if i want to fill it with any of those, particularly contractors, then what are the risks involved with those? what are the requirements? then what am i going to need to absorb that contractor force into that force structure? i think again it's got to be something that the military makes as a top priority. i know the secretary has talked about this. admiral mullin talked about this. >> this is not the first hearing we had. do you know of any efforts that has gone from talk to action? >> again, it's been ad hoc. i think there have been efforts. the joint staff study which was to look at reliance on contractors in iraq. i think there's efforts to put

planners out to the different combatant commands to help them prepare and do the annex ws, but it's been slow. there needs to be more forceful effort at the highest levels to implement and do the things that are already on the books. there's a lot of guidance. there's work force planning guidance out there. that includes not only contractors, but military, the whole force structure of what you need to conduct your military operations. >> the slowness of activity borders on insubordination. it's frustrating from the policy and the legislation is in place. it's just the actual execution. we've got to think of strategy from our end and the white house to get this thing in gear. i want to wrap things up. we didn't really talk a lot

about background screening, tracking of local personnel, which did come up during our last hearing on the trucking situation. was an important factor. witnesses came up to us after to reiterate how important it was to identify the subcontractors out there. in iraq, mr. bowen we've seen them do it one way. in afghanistan they are doing it ad hoc to make sure there is some aspect on that. if there is a department of defensewide screening policy absent on that, do we know whether or not your agency mr. solis or ms. ugone, have down any work in this area or made recommendations? >> actually we have ongoing work right now on the issue of contractors occupying sensitive positions that don't have proof of kreernses.

there is excessing regulation in the department that needs to be xied. with the issue is a compliance issue. that report that we are working on right now, we are expecting it to go final in the next month or two. >> and the department of defense, are they moving forward, as well? >> it depends on their response to our report. we haven't received it yet as to, we are predicting they'll agree with us that there is an issue and they need to solve it. >> we'll track that. >> one obstacle is in the doj about the screening with the under secretary defense of intelligence and screening local personnel. it seems like sort of fantastic

that would bring things to a grinding halt that they wouldn't find a way to resolve that. would you give us an update whether they have resolved that particular dispute or found somebody to referee it? >> my understanding, i'm going to turn to my staff back here, that's been turned over now to at&l to resolve this issue in terms of trying to figure out what the background screening requirements are going to be. >> do you believe that will happen? >> i don't know it clearly falls in either spot. there needed to be some way of coming up with a plan that would incorporate what usdi would be looking for as well as at&l. my understanding it's been turned over to at&l and that's as far as we know at this point. they have not responded in terms of what the specific things they are going to do. that is something we'll continue

to follow up on. obviously, it's a very important issue in terms of the background screening. that is something we'll look into. >> finally, ms. ugone, you mentioned your report didn't get into an examination of subcontractors on that. do you think your examination of subcontractors would apply? >> yes. the process itself is critical, particularly when it comes to the requirements from translating it into a statement of work and the actual contract administration. those two areas we think are absolutely critical. you don't get it right in the beginning, aerogoing to have problems at the end. also contract administration has the payment function in it. that is a recurring problem in the contract administration, not having the invoices and receives of goods and services reconciled is a key issue. >> i suspect we could go on for quite a bit offtime because your

written testimony with your oral testimony was very provocative and indepth and informing. i think we are going to stop at this point of time. i want to give each of you an opportunity to tell us if there is one thing you think we didn't cover deeply enough or didn't mention at all that we should have? that would be probably a good day to wind down. mr. solis? >> i think we've covered a lot. i appreciate the fact that the subcommittee had this hearing. i think there are a lot of things that have gone on with operational contract support that need to be looked into. obviously, we talked about a lot of things they haven't done. i think there is opportunities for the department to move out and grasp these things. i think, again, as mr. flake mentioned, asked about best practices, i think they are aware of what they need to do. it's a matter of execution at this point. i think there needs to be more planning for the use of

contractors and con continuation sis. by doing that, that would mitigate a number of issues that would include things like station tracking problems. >> as money flows into equipment and training, the afghan national security forces, the department needs to apply the lessons learned from prior contingency contracting practices, particularly paying attention to planning for the acquisition up front as billions of dollars are flowed in to do the mission. >> thank you. mr. bowen? >> mr. chairman, you were exploring the causes of these problems. when did they begin? i think the decision to drastically reduce the contracting course. as outsourcing was expanding,

the capacity to oversee and contract manage that outsourcing was contracting. the consequences there from are with us today. >> mr. fontaine? >> just one final point and it gets to training. if contractors are going to be part of the total force, which the 2010 qdr says they are, then those military individuals are civilians who go over to theaters who don't do contract management will need to know something about contractors, what they do, how to find out what they do, what the regulations are and whether they can order them to do something or not. currently, if you go out to one of the training places before the predeployment training, they are actually run by contractors, but there is almost no plain contractors. when they get over to afghanistan and iraq they'll find more of them than they'll find of the military. same thing is true in war game,

the role of contractors incorporated. in the 2008 national theirization act there was a requirement the dod issue a joint directive to bring together war gaming and predeployment training, the role of contractors integrate that. they have not issued that document yet even though it was required in 2008. moving down that path would be a real step forward. >> great. my final final question. would each of you tell me what you think is the place or person at the department of defense, the state department and usaid where this committee should go to inquire on progress and make sure results occur? >> i'll say for dod because i'm not as familiar with state or aid, but it's combined between dr. carter and the undersecretary for personnel writing.

it would fall between those two. it's not only a contracting and contract issue, it's a four structure and personnel issue. >> thank you. miss ugone. >> nato training mission, combined security transmission command afghanistan. and the undersecretary defense comptroller. >> mr. bowen? >> only one is pat kennedy, undersecretary for management at the state department. >> thank you. >> mr. fontaine? >> since we are adding people as we go along the table here, at a.i.d. it's split. i think there's two areas at a.i.d., the bureau that handles conflict and humanitarian reconstruction would be the place to go. if you don't go above that to say is there one, the handle of

issues. >> thank you all once again for [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] i'm out >> today, of "washington journal," stephen rose. also, a look at trade between america and china with sam gilston. more with tom fahey of "the new hampshire union