[Senate Hearing 111-737]
[From the U.S. Government Printing Office]



                                                         S. Hrg. 111-737
 
 NOMINATION OF THE HONORABLE JACOB J. LEW, OF NEW YORK, TO BE DIRECTOR 
                 OF THE OFFICE OF MANAGEMENT AND BUDGET

=======================================================================

                  HEARING & EXECUTIVE BUSINESS MEETING

                               before the

                        COMMITTEE ON THE BUDGET
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               ----------                              


September 16, 2010--HEARING ON THE NOMINATION OF THE HONORABLE JACOB J. 
LEW, OF NEW YORK, TO BE DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET

September 23, 2010--EXECUTIVE BUSINESS MEETING ON THE NOMINATION OF THE 
 HONORABLE JACOB J. LEW TO BE DIRECTOR OF THE OFFICE OF MANAGEMENT AND 
                                 BUDGET

                                     
                                     



             Printed for use of the Senate Budget Committee


 NOMINATION OF THE HONORABLE JACOB J. LEW, OF NEW YORK, TO BE DIRECTOR 
                 OF THE OFFICE OF MANAGEMENT AND BUDGET




                                                        S. Hrg. 111-737

 NOMINATION OF THE HONORABLE JACOB J. LEW, OF NEW YORK, TO BE DIRECTOR 
                 OF THE OFFICE OF MANAGEMENT AND BUDGET

=======================================================================

                  HEARING & EXECUTIVE BUSINESS MEETING

                               before the

                        COMMITTEE ON THE BUDGET
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

September 16, 2010--HEARING ON THE NOMINATION OF THE HONORABLE JACOB J. 
LEW, OF NEW YORK, TO BE DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET
September 23, 2010--EXECUTIVE BUSINESS MEETING ON THE NOMINATION OF THE 
 HONORABLE JACOB J. LEW TO BE DIRECTOR OF THE OFFICE OF MANAGEMENT AND 
                                 BUDGET

                                     
                                     



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                                   2
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                        COMMITTEE ON THE BUDGET

                  KENT CONRAD, North Dakota, Chairman

PATTY MURRAY, Washington             JUDD GREGG, New Hampshire
RON WYDEN, Oregon                    CHARLES E. GRASSLEY, Iowa
RUSSELL D. FEINGOLD, Wisconsin       MICHAEL ENZI, Wyoming
BILL NELSON, Florida                 JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan            JIM BUNNING, Kentucky
BENJAMIN L. CARDIN, Maryland         MIKE CRAPO, Idaho
BERNARD SANDERS, Vermont             JOHN ENSIGN, Nevada
SHELDON WHITEHOUSE, Rhode Island     JOHN CORNYN, Texas
MARK R. WARNER, Virginia             LINDSEY O. GRAHAM, South Carolina
JEFF MERKLEY, Oregon                 LAMAR ALEXANDER, Tennessee
MARK BEGICH, Alaska
CARTE P. GOODWIN, West Virginia

                  Mary Naylor, Majority Staff Director

                 Cheryl Reidy, Minority Staff Director

                                  (ii)

  


                            C O N T E N T S

                               __________

                                HEARING

                                                                   Page
September 16, 2010--Hearing on the Nomination of The Honorable 
  Jacob J. Lew, of New York, to be Director of the Office of 
  Management and Budget..........................................     1

                    STATEMENTS BY COMMITTEE MEMBERS

Chairman Kent Conrad.............................................     1
Ranking Member Judd Gregg........................................     2

                           WITNESS STATEMENT

Lew, Jacob J., of New York, Nominee to be Director of the Office 
  of Management and Budget.......................................  3, 6


                   MATERIALS SUBMITTED FOR THE RECORD

Statement of Biographical and Financial Information Requested of 
  Presidential Nominee Jacob J. Lew to be Director of the Office 
  of Management and Budget.......................................    36
Pre-hearing questions from Chairman Kent Conrad with answers by 
  Jacob J. Lew...................................................    43
Pre-hearing questions from Ranking Member Judd Gregg with answers 
  by Jacob J. Lew................................................    49
Post-hearing questions from Ranking Member Judd Gregg with 
  answers by Jacob J. Lew........................................    54
Post-hearing questions from Budget Committee members with answers 
  by Jacob J. Lew................................................
      Senator Murray.............................................    59
      Senator Wyden..............................................    66
      Senator Stabenow...........................................    71
      Senator Sanders............................................    72
      Senator Merkley............................................    75
      Senator Begich.............................................    76
      Senator Grassley...........................................    77
      Senator Enzi...............................................    78
      Senator Sessions...........................................    81
      Senator Bunning............................................    89
      Senator Crapo..............................................    90
      Senator Cornyn.............................................    95

                       EXECUTIVE BUSINESS MEETING

Executive Business Meeting on the Nomination of The Honorable 
  Jacob J. Lew to be Director of the Office of Manangement and 
  Budget.........................................................    97
Committee Votes..................................................    97



 NOMINATION OF THE HONORABLE JACOB J. LEW, OF NEW YORK, TO BE DIRECTOR 
                 OF THE OFFICE OF MANAGEMENT AND BUDGET

                              ----------                              


                      THURSDAY, SEPTEMBER 16, 2010

                                       U.S. Senate,
                                   Committee on the Budget,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9 a.m., in room 
SD-608, Dirksen Senate Office Building, Hon. Kent Conrad, 
Chairman of the Committee, presiding.
    Present: Senators Conrad, Murray, Nelson, Cardin, Sanders, 
Whitehouse, Warner, Merkley, Begich, Gregg, Sessions, Crapo, 
Ensign, and Alexander.
    Staff present: Mary Ann Naylor, Majority Staff Director; 
and Cheri Reidy, Minority Staff Director.

              OPENING STATEMENT OF CHAIRMAN CONRAD

    Chairman Conrad. The hearing will come to order. I want to 
welcome everybody to the Senate Budget Committee today. We are 
considering President Obama's nomination of Jack Lew to be the 
next Director of the Office of Management and Budget.
    I want to first welcome Jack back to the Committee. He is 
well known and well respected by the members of this Committee. 
I also want to welcome Jack's family who are with him today, 
including his wife, Ruth, and his daughter, Shoshana. We are 
pleased that they could be here as well. Welcome. We hope Jack 
will introduce them when he makes his opening statement. I am 
sure he will.
    As everyone knows in public service, we could not do our 
jobs without the incredible support of our families, and we 
recognize and very much appreciate the sacrifice that the Lew 
family has made in the previous assignments Jack has had, 
including as head of the OMB.
    I believe Jack is a superb choice for this position. When I 
was asked by the White House my reaction, I told them, ``I do 
not think you could make a better choice than Jack Lew.'' Not 
only has he already served in this critical post and done so 
with real distinction, but he brings with him a wide range of 
public and private sector experience, including his current 
position as Deputy Secretary of State for Management and 
Resources, which in itself is a challenging posting.
    Importantly, Jack knows how to make the touch choices that 
will be needed to put our country back on a sound fiscal 
course. When he completed his service at OMB, the country had a 
surplus of more than $200 billion. And Jack knows how to reach 
across the aisle to find bipartisan agreement. He was 
instrumental in putting together the 1997 bipartisan deficit 
reduction package that helped create those surpluses. And Jack 
has the highest integrity. Anyone who has worked closely with 
him over the years knows that. He has repeatedly proven himself 
to be an outstanding public servant.
    So Jack Lew brings with him exactly the kind of knowledge, 
experience, bipartisan spirit, and integrity that we need at 
OMB right now. He is the ideal person to lead this critical 
agency.
    The economic and budget challenges facing the Nation are 
great. In the near term, we need to strengthen the economic 
recovery and promote job creation; and at the same time, to 
address the Nation's long-term fiscal crisis, we must begin now 
to put in place a deficit reduction policy that will kick in 
after the economy is on stronger footing. That is why the work 
of the President's bipartisan Fiscal Commission is so 
important.
    Combining these policies of short-term job creation and 
long-term deficit reduction is no easy task, but the 
fundamental economic security of the country depends on it. In 
these challenging times, it is imperative that we have strong 
leadership at OMB. I hope we can move quickly on this 
nomination. We cannot afford to leave this position vacant at 
such a critical time.
    It is my hope to schedule a Committee vote on this 
nomination soon so that the full Senate has time to confirm the 
nominee before it adjourns for the election.
    Before we swear in the witness and hear his testimony, we 
will turn first to Senator Gregg, the Ranking Member of this 
Committee, for his opening statement. I want to thank Senator 
Gregg for accommodating this change in the schedule because of 
votes that are to come in the Senate this morning. And I also 
want to express my very strong appreciation to Senator Gregg 
for the support that he has already shown for this nomination.
    Senator Gregg.

               OPENING STATEMENT OF SENATOR GREGG

    Senator Gregg. Thank you, Mr. Chairman, and let me 
associate myself with your comments relative to the nominee. I 
apologize that I will have to leave early.
    There are people throughout our Government who make the 
Government work. I mean, a lot of people do not think it works, 
but large segments of our Government work well, and it is 
because of people who have dedicated themselves to public 
service and have gone the extra mile in that area. And 
certainly Jack Lew falls in that category.
    I have had the great pleasure of knowing Jack for years. He 
probably did not know me when I was a junior Member of the 
House and he was working for Speaker O'Neill. But I know of 
Jack. And since then, I have watched him do many jobs, all of 
them very well and with great integrity and great 
forthrightness. He always give you the straight answer. It may 
not be one you agree with, but it is always a straight answer. 
And he is willing to make the tough calls that have to be made 
at OMB. He has already done it once. The fact that he is 
willing to go back again may question his thought process.
    [Laughter.]
    Senator Gregg. But it is great that you are, and the Nation 
is fortunate to have you assume this position during this time 
when clearly, in my opinion, the biggest threat to this Nation 
after the potential of a terrorist using a weapon of mass 
destruction is our financial health. And we need leadership in 
the area of disciplining ourselves financially, and I look 
forward to working with you to accomplish that, and I thank you 
again for being willing to take on this job. I especially 
appreciate your wife's understanding in allowing you to take on 
this job.
    Thank you, Jack.
    Chairman Conrad. Under the Committee rules, we are required 
to put the witness under oath, so we will do that. Will you 
please rise? Do you swear that the testimony that you are about 
to give will be the truth, the whole truth, and nothing but the 
truth?
    Mr. Lew. Yes, sir.
    Chairman Conrad. If asked to do so and if given reasonable 
notice, will you agree to appear before this Committee and 
answer any questions that members of this Committee might have?
    Mr. Lew. Yes, sir.
    Chairman Conrad. Please be seated. You may proceed with 
your testimony. I again want to thank Senator Gregg for 
changing his schedule to accommodate this early beginning 
because of votes that are to follow. We know that he has 
prescheduled--there are other things that he has to go to, but 
he will no doubt return.
    Again, welcome to the Committee and please proceed.

  TESTIMONY OF THE HONORABLE JACOB J. LEW, OF NEW YORK, TO BE 
        DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET

    Mr. Lew. Thank you very much, Mr. Chairman, and I thank 
Senator Gregg as well for the kind welcome and the very kind 
words of introduction. It has really been my honor to work with 
both of you for many years, and I think that it really is a 
testimony to the possibility of bipartisan cooperation. But I 
have known Senator Gregg for decades, and while we have not 
always agreed, we have always been able to work together in a 
constructive way, and we have reached good results.
    I take great pride in my current and prior Government 
service, and it is really an honor to be considered today as 
the nominee to be Director of the Office of Management and 
Budget.
    I am delighted that joining me today are my wife, Ruth, and 
my daughter, Shoshi. Together with my son, Danny, and my 
daughter-in-law, Zahava, who could not be here today--they are 
in New York--my family has supported me unfailingly and 
unconditionally during my career in public service--often 
through long hours, late nights, and, unfortunately, more than 
a few missed family events. Their daily sacrifices have made 
possible my public service, and for that I am very grateful.
    I am also blessed to have had role models whose influence 
is always with me. My parents--Ruth and Irving Lew--taught me 
the importance of being involved in the community and world 
around us. The late Speaker Thomas P. O'Neill, Jr., was not 
just my boss for 8 years early in my career, but he was a 
mentor who shared his wisdom about the legislative and the 
policymaking process and more generally about how to forge 
consensus.
    It has been my honor and privilege to serve under President 
Clinton and, most recently, as a deputy to Secretary of State 
Clinton, and I am deeply grateful to both of them for the 
opportunity to serve and for their continuing friendship.
    Finally, I am grateful to President Obama for nominating me 
to serve as the next Director of the Office of Management and 
Budget. I am humbled by the confidence he has shown in me as we 
face the enormous challenges that lie ahead.
    This is neither my first time testifying before the 
Committee nor my first time testifying before the Committee 
about budget issues.
    My familiarity with OMB gives me a knowledge of the 
institution's workings and gives me a respect for it that is 
deep and heartfelt. I appreciate the centrality of OMB to the 
efficient and effective operation of the Federal Government, 
and I have the greatest respect and admiration for the women 
and men who work there to fulfill this critical mission.
    Since my previous service at OMB, I have worked in similar 
management and budget roles in large nonprofit and private 
sector organizations, and I have experienced firsthand that all 
large organizations wrestle with the same challenge of how to 
fulfill strategic core missions with scarce resources and 
competing demands.
    Indeed, the process of forging consensus behind priorities, 
directing new resources where they are most critical, and 
finding internal savings to support these initiatives is an 
universal challenge.
    In addition, in my current role at the State Department, I 
have now been on the front lines, not just setting policy but 
working to implement it--often to the very finest details and 
with the greatest of stakes: the safety of our brave men and 
women who volunteer to serve in dangerous assignments.
    Together, these experiences from the past decade have 
broadened the perspective I would bring to the position for 
which you are considering me.
    As we all know too well, President Obama has asked me to 
serve in this position at a time that is very different from 
when I last sat in the Director's office.
    In the late 1990's, our challenge was how to maintain a 
prudent fiscal policy while transitioning into a world of 
budget surpluses and robust economic growth.
    Today, a series of policy choices and the worst economic 
downturn since the Great Depression present us with very 
different challenges. With millions of Americans who are 
desperately looking for work and are still unable to find jobs, 
our first task is to sustain and deepen the economic recovery 
to spur new job creation in the face of unsustainable budget 
deficits. At the same time, we must put our Nation back on a 
sustainable fiscal course in the medium term while making 
investments critical to long-term economic growth; and we need 
to do this in a way that strengthens our fiscal position for 
decades to come.
    Indeed, the coming months may be the most critical time in 
fiscal policy in recent memory.
    As the President has said, it will take tough choices--and 
putting partisan differences aside--to do what is right for the 
country today, what is right for our children, and what is 
right for our grandchildren.
    Throughout my career, I have tried to work collaboratively 
across partisan and ideological divides to cut through gridlock 
and to help solve what seem like intractable problems. If 
confirmed as OMB Director, I will work in that bipartisan 
fashion again--with the members of this Committee, the 
leadership of both chambers, and with all those committed to 
taking constructive steps to rejuvenating our Nation's economy 
and its fiscal standing.
    And while we should aspire to never waste taxpayer dollars 
regardless of whether the budget is in surplus or deficit, the 
management of the Federal Government is particularly important 
during lean times. I look forward to working with this 
Committee, if confirmed, to make sure that every dollar we 
spend has the desired impact and makes a difference.
    Getting our economy back on track and our fiscal house in 
order will take hard work. I am honored that the President has 
asked me to join him in this endeavor, and I am grateful to 
this Committee for its consideration of my nomination.
    Thank you very much, and I look forward to answering any 
questions that you have.
    [The prepared statement of Mr. Lew follows:]

    [GRAPHIC] [TIFF OMITTED] T8157.001
    

    [GRAPHIC] [TIFF OMITTED] T8157.002
    

    Chairman Conrad. Thanks again, Jack. Thanks for your 
previous service, and thank you very much for being willing to 
step up to the plate once again at really a remarkably 
challenging time.
    First of all, we faced the greatest economic downturn since 
the Great Depression. I will never forget in 2008 being called 
to an emergency meeting in the Majority Leader's office, 
arriving there at about 6 o'clock one evening, and there was 
the head of the Federal Reserve, the Secretary of the Treasury 
in the previous administration, all the leaders of Congress, 
Republicans and Democrats; and they were to tell us they were 
taking over AIG the next morning. And they told us very clearly 
they were not there to ask our approval, they were not there to 
seek our approval. They were there to tell us they had made the 
decision to do it, and they believed if they did not do it, 
there would be a financial collapse in days.
    That is as sobering a news as anyone can receive, and they 
gave their rationale--the Chairman of the Federal Reserve, the 
Secretary of the Treasury--why they believed that would occur.
    And so we confronted a circumstance that if the Government 
had not stepped forward and taken a series of very dramatic 
actions, we well could have faced another depression. In fact, 
we now have economic analysis from two very distinguished 
economists of differing philosophical backgrounds who tell us 
had these actions not been taken, we would currently have an 
unemployment rate of 16 percent, and we would still be in a 
very severe economic downturn.
    While things remain difficult and challenging, unemployment 
stubbornly high and underemployment too high, nonetheless, we 
have been brought back from the brink. We were losing 800,000 
jobs a month when President Obama took office. We are now 
seeing the creation of tens of thousands of jobs a month, 
although not nearly as much as what all of us would hope for.
    Economic growth was a negative 6 percent in the first 
quarter the President was in office. It has now turned 
positive, although not as strongly positive as I think all of 
us would hope for.
    So that is the circumstance that you inherit. You walk into 
a situation in which we have been brought back from the brink 
of what could have been a financial collapse--and, by the way, 
not just here but globally. And that meant the explosion of 
debt because the Government had to come in to prevent this 
collapse. That meant dramatically increased expenditures, 
dramatically reduced revenues, as we both cut taxes and spent 
money in order to prevent a collapse.
    But all of that is unsustainable. Even before this downturn 
occurred, we were on a long-term path that was unsustainable. I 
have warned my colleagues many times that the debt is the 
threat. I believe that deeply.
    So while we have had to see an increase in debt in the 
short term to avert a collapse, we now need to pivot and focus 
like a laser at bringing down this debt. What recommendations 
will you bring to the President for coping with this longer-
term crisis?
    Mr. Lew. Senator, I could not agree more that the situation 
that this administration inherited demanded immediate action. 
We were headed off the cliff in terms of where the economy 
might go. There was no obvious bottom, and the actions taken 
helped restore the ability for there to be a recovery. And we 
are seeing a recovery. None of us are satisfied with the rate 
of the recovery. None of us are satisfied with the sustained 
high levels of unemployment.
    History tells the story of the path taken, not the path not 
taken. If we had not responded to the very, very severe 
economic crisis, we would indeed be seeing much worse economic 
circumstances with much higher rates of unemployment.
    I think as we look ahead, it is a very, very significant 
challenge to simultaneously focus on the fact that we have to 
continue to encourage economic growth, we have to continue to 
encourage job creation; but we cannot put off for years 
worrying about the deficit. We have to be able to think about 
both in the same timeframe.
    I think that the key challenge is for us to begin to take 
actions which will not have an effect today or tomorrow because 
I do not believe that putting the brakes on today or tomorrow 
is the right answer, but that we take actions that will send a 
signal of real confidence that right over the horizon we are 
putting in place the policies that will put us back on a path 
toward fiscal discipline.
    I think it is possible to do that. I think it can only be 
done in a bipartisan way. I think that the President has 
appointed a Commission, which you serve on, which we are 
looking very, very hopefully for the results of as being a 
place where the beginning of a bipartisan consensus can begin 
to develop.
    I do not think we have faced a more significant fiscal 
challenge in my lifetime, and we will be judged based on our 
ability to respond.
    Chairman Conrad. I think that is true.
    Let me ask you this question: The President has put in 
place a Fiscal Commission. Senator Gregg and I tried to get 
that Commission authorized by law. Unfortunately, we fell 
somewhat short of the super majority required. We did have a 
majority vote in the U.S. Senate for that proposition. The 
President then went to his authority to name by Executive order 
a Commission, 18 members, a bipartisan Commission, with the 
requirement that if 14 of the 18 of us can agree on a plan--and 
both Senator Gregg and I serve on that Commission. If 14 of the 
18 of us can agree--there will be a report on December 1st, and 
we have had a commitment from leadership in both the House and 
the Senate that if 14 of the 18 can agree, there will be a vote 
in Congress before the end of this year.
    The circumstance we confront is very clear. Revenue is the 
lowest it has been as a share of our gross domestic product in 
60 years. Spending is the highest it has been as a share of our 
gross domestic product in 60 years. Clearly we need to reduce 
spending as a share of the economy, and we need to raise 
revenue.
    Let me just say my own belief is, before we raise taxes on 
anyone, we ought to collect the taxes that are already due from 
people who are not now paying what they owe. If we collected 
what was owed, we would not need any additional revenue 
increase by my calculation--if we just collected what is owed. 
Unfortunately, by my calculation we are only collecting about 
80 percent of what is owed, partly because of the explosion of 
offshore tax havens, partly as a result of abusive tax shelters 
that have grown geometrically.
    Let me just ask you: What is your view of the interaction 
between the Office of Management and Budget and the work of 
this Fiscal Commission leading up to a decision in December of 
what we will recommend?
    Mr. Lew. Senator, let me begin by saying I think that the 
challenge we have is to leave things on the table because the 
answer will not be one or another thing. This will require many 
elements for us to make the kind of progress that needs to be 
made.
    I think that the administration has taken, wisely, the view 
of not restricting the space in which the Commission can work. 
In an environment like this, I have watched commissions work 
really since 1983 with the Social Security Commission. It is a 
place where ideas can be safely pursued outside of the 
political spotlight, and when you look to a commission, I think 
what you can do from the point of view of either the Congress 
or the executive branch is to give it a little bit of room so 
that the exploration of ideas, whether they are ideas that you 
end up agreeing to or not, does not become in and of itself 
something that is too dangerous.
    The political environment has made it very challenging to 
pursue ideas that might ultimately not be chosen because just 
the thought process of going through, looking at the options, 
becomes a liability.
    So I think the administration has widely stepped back a 
little bit, giving the Commission room, and said that we are 
open to the Commission's recommendations, we look forward to 
being able to work with the Commission's recommendations; and I 
think most importantly, if there can be the beginning of a 
bipartisan process in the Commission, take that forward and use 
it as a basis to work together in the year to come.
    As far as the process goes that you described, you know, I 
am aware of the commitments that have been made. That is really 
a set of congressional decisions, but the President remains 
committed to the idea, as I understand it, that if there is a 
positive recommendation, it should be brought forward for a 
vote.
    Chairman Conrad. I thank you. I think that is an excellent 
answer.
    Let me just reserve at this point Senator Gregg's time and 
turn to Senator Sessions. We will do 5-minute rounds for the 
beginning, given the notice by leadership last night that we 
are going to have votes starting in the 10:30-10:45 time range. 
I just wanted to thank Senator Sessions and thank all of our 
colleagues for accommodating this last- minute change, moving 
up the schedule, because they gave us the indication that there 
are going to be votes on the floor at 10:30 to 10:45.
    Senator Sessions.
    Senator Sessions. Thank you, Mr. Chairman, and thank you 
for many of the comments that you have made in opening, because 
we are indeed facing a financial challenge of great import. I 
have a Judiciary hearing at 10, so I will have to be leaving, 
and I appreciate the opportunity to make a few comments and ask 
a few questions.
    President Obama's budget outlines an appropriate transition 
from economic recovery to fiscal discipline. In your answers to 
questions in response to the Committee, you stated, ``It lays 
out a path that brings deficits''--annual deficits, not debt--
``as a share of the economy from 10 percent of GDP this year to 
4 percent of GDP in 2013.'' That is a goal that can be 
achieved, I am confident probably more could be achieved, but, 
Mr. Lew, having been in this world before, you know it will not 
be easy. There will be a lot of people that feel they should 
not take any haircut, any trimming, any lack of growth in their 
budget because what they are doing is so important it just must 
be funded. And that is the psychology we are dealing with, and 
it is not an easy one.
    But I have trouble accepting that as an example of real 
fiscal discipline. It plans to double the publicly held debt 
under the President's budget from $5.8 trillion to $11.6 
trillion by 2012, and triple it in 10 years to $17.6 trillion 
by 2018. Those are the CBO numbers that we have seen. Interest 
payments skyrocket from $187 billion in 2009 to an annual 
interest payment of $916 billion in 2020, which I think will be 
significantly higher than any other Government expense at that 
time, or at least higher than the Defense Department budgets 
today, which are the highest. And that is a burden. There is no 
free lunch. To spend money today we do not have puts burdens 
that we carry forever unless we start paying down the debt.
    The President's budget basically calls for a Fiscal 
Commission which we can hope is successful. It has got some 
good people on it. And I know you will work hard to support it. 
But the goal of this Commission, I have got to tell you, as 
stated by the President, is unacceptable. The goal of it is to 
stabilize the deficit at 3 percent of GDP, close quote. Three 
percent of GDP. Well, that would be an annual deficit in the 
year 2015 of $552 billion, which is higher than what President 
Bush's highest deficit was, and he had a growing number of 
deficits. It caused quite a bit of concern and criticism.
    So you were OMB Director and rightly deserve credit for 
seeing the budget balanced--actually, it balanced not long 
after I came to the Senate. Do I get credit?
    [Laughter.]
    Chairman Conrad. A little bit. A little bit.
    Senator Sessions. But I would just suggest, in all honesty, 
that some of those 1994 Republicans who shut the Government 
down over spending deserve some credit for balancing that 
budget. And they stood up and made tough choices, resisted 
increased spending, resisted President Clinton's desire to 
spend more money year after year on various different things, 
and essentially all of you together worked and balanced the 
budget.
    But the goal was to balance the budget, not to reach an 
area where we have got a 3-percent annual deficit as a 
percentage of GDP. Hopefully our economy will be growing in the 
future, and 3 percent would be above the $552 billion. Don't 
you think that is a fundamental flaw? Don't you think, Mr. Lew, 
that if we are going to ask the American people to stand up and 
put us on a sound financial footing, our goal within a 
foreseeable, reasonable period of time should be to reach 
balance?
    Mr. Lew. Senator, I was very proud on my last day as OMB 
Director to sit in this chair and have a chart to my right 
which showed interest on the debt being eliminated if we stayed 
on the path that we were on at the time when I left the Office 
of Management and Budget. There is no doubt that we are in an 
unsustainable fiscal situation right now.
    I think that if you look at the goal of the Fiscal 
Commission, it is not the final goal. It is the next goal. The 
President's budget had a plan to get the deficit down to 4 
percent of GDP. The Commission was asked to bring it to 3 
percent of GDP. We cannot get to balance until we stabilize the 
debt, until we stabilize the deficit and the debt that follows.
    I think that the ultimate goal has to be to do more than 
that, but I do not think that given the forecasts that everyone 
is working from right now, given the options that it will take 
to get to 3 percent, that we should minimize how important it 
is to accomplish that goal of stabilizing the deficit.
    I think if the Commission is able to help build a set of 
bipartisan options where we look at a range of mechanisms that 
will help us to bring the deficit to a level that is 
sustainable, we will then be sitting down and having the 
conversation about how to take the next step.
    In terms of bipartisan cooperation, I think it is very 
important to remember that 1997 was a bipartisan balanced 
budget agreement. 1990 was a bipartisan balanced budget 
agreement. That is the right way to do it.
    In 1993, it is also important to remember that there was 
extremely significant deficit reduction, and that was part of 
solving the problem, and that was not a bipartisan effort. I do 
not think that we should be looking at the 1993 model. We 
should be looking at 1990 and 1997. That is what is good for 
the country. That is where I think ultimately the answers lie.
    I do not think that anyone in the administration is saying 
that 3 percent of GDP forever is where the deficit should be. 
But it would be a huge accomplishment to go from 10 percent to 
3 percent.
    Senator Sessions. Well, it would be progress. There is no 
doubt about that, Mr. Lew, and I believe you have much to 
offer, and I look forward to working with you in that effort. 
But I just do not think leadership is setting a goal to reach 
an annual deficit of $550 billion. I believe we have got to 
have more clarity and more commitment to go further than that. 
And we might surprise ourselves where we end up.
    I would note you did not have a Deficit Commission in the 
1990's. Basically it was battled out on the floor of the House 
and the Senate year after year, spending bill after spending 
bill, vetoes and so forth--oh, I am sorry, Mr. Chairman. Thank 
you.
    Chairman Conrad. Thank you. I would just say that the goal 
of the Commission--the 3 percent is an interim goal, but the 
charge to the Commission is much broader, and I think it would 
be a failure if that is all we accomplished.
    I think what is absolutely essential is we put the country 
on a long-term, sustainable fiscal basis, and that is going to 
take--I would agree with the Senator. That is going to take a 
lot more than achieving the interim goal of 3 percent. In fact, 
my own belief is we have got to try to get the debt as a share 
of GDP--not just stabilize it. The first thing is to stabilize 
it. But then we have actually got to reduce it so we have room 
for things that might occur in the future, whether it is a 
natural disaster or whether it is a foreign attack or what 
other exigencies might occur.
    Senator Sessions. Mr. Chairman, I would note that we have 
had some bipartisan effort. I appreciate Senator Begich and 
Senator Warner working with Senator McCaskill and myself to try 
to enforce the President's spending levels that he has 
proposed. If we could do that, that would be a small step but a 
significant one.
    Thank you.
    Chairman Conrad. Senator Murray.
    Senator Murray. Thank you very much, Mr. Chairman.
    Mr. Lew, welcome, and thank you to you and your family for 
your willingness to do this. I, too, appreciate your integrity 
and your dedication to public service and willingness to take 
on this position.
    You are not new to this scene, and I, too, remember the 
meeting that Senator Conrad described in the office late at 
night, but the troubles of our economy started much longer 
before that, when we saw the Bush economic policies of paying 
for pretty much everything off budget, from wars to tax cuts. 
And I think we have learned some important lessons from that.
    But I want to go back to the lessons that you might be able 
to share with us because when you came in under President 
Clinton, we were facing an annual budget deficit of about $300 
million with no end in sight.
    Mr. Lew. Billion.
    Senator Murray. Three hundred billion. Sorry, $300 billion, 
with no end in sight. And we had to craft our way out of that 
to a point by the time that you left, we were looking at a 
surplus.
    I wondered if you could share with us some of the policies 
that you implemented back in the 1990's to help us reduce that 
deficit, and can those lessons be applied today?
    Mr. Lew. I think that it is very important to remember that 
in the 1990's we operated in an environment with rules that 
said that fiscal discipline is important. We had PAYGO rules, 
so you could not have tax cuts or spending increases without 
having offsets. I think it was incredibly important, and the 
fact that the PAYGO rules lapsed and we went through a long 
period of time where there was freedom to both reduce taxes and 
increase spending without regard to whether there was an offset 
was a very significant contributing factor.
    No doubt the wars and the economic downturn contributed to 
building up the deficit and the debt that we are now dealing 
with, but an awful lot of it was a result of a lack of 
discipline and not paying for policy as it was being made.
    Those rules actually preceded the administration that I 
served in. They were established in the previous budget 
agreement, but they were honored by the administration I served 
in. And that meant saying no to an awful lot of things that we 
would have liked to have done.
    In 1993, there were very difficult measures taken both to 
reduce spending and to increase revenue. It was done in a 
balanced way that was meant to be fair, not impose a burden on 
working Americans where it could be avoided. And it showed a 
dedication to the principle that fiscal discipline matters.
    I think it is incredibly important that from 1993 to 1997 
there was a sustained focus on fiscal discipline, and it was 
very important that it was bipartisan after 1993. There were 
indeed members of the other party that were very vocal speaking 
about fiscal discipline. In 1997, we had a bipartisan 
agreement.
    I think that the relationship between what we do in the 
Federal Government as a matter of fiscal policy and the larger 
economy is one that it is hard to map in economic equations. I 
think it is as much psychology as it is math.
    I think that the business community looks to what we are 
doing, and they ask, Are we confident that they are dedicated 
and heading in the right direction or not?
    I think the fact that we are now in a place where the size 
of the deficit and the lack of a serious conversation about how 
to reduce it causes a great deal of unease and uncertainty, 
which I think is one of the reasons why businesses across the 
country are sitting on an awful lot of resources, cash, that 
could be invested in plant and equipment and hiring.
    I think we need to come together not just about specific 
policies, but to show this kind of dedication that we are going 
to stay at it. There is not a silver bullet. It is not going to 
be solved with one or another individual policy. I think one of 
the most important things for us to remember is that it is 
going to take concerted effort with multiple elements and 
everybody finding room to compromise. And it will not probably 
be done all at once. We will make progress, and then we will 
have to make more progress.
    I think in the 1990's the key was we stayed at it and we 
got the job done.
    Senator Murray. Thoughtful, and I think something all of us 
need to really focus on as we move forward, so I appreciate 
that.
    Now, I did want to also ask you about the Environmental 
Management (EM) program that we talked about when you came to 
my office. This is the program that is responsible for cleaning 
up our Federal Government's legal and moral obligation for 
nuclear waste across the country, like Hanford in my State, and 
it is extremely important. As you know, the EM mission is about 
25 percent of DOE's budget, and I have been very clear with 
this administration. We have to be consistent with this funding 
and meet our legal and moral obligations. This administration 
has fallen short in meeting that, and that waste that remains 
in my State and across the country from the Manhattan Projects 
and cold war efforts were from a war effort, and now that we 
are hearing that we may be seeing a 5-percent cut in the EM 
budget. I want you to really think about the fact that this is 
defense spending, and it cannot be just defense when it suits 
the Government. And I want to talk with you about making sure 
that we have a robust annual budget for EM that will meet those 
legal obligations that we have to clean up Hanford and other 
sites around the country, and I also would like your commitment 
to that. And if you could give that to me today, I would 
appreciate it.
    Mr. Lew. Senator, I understand the issue of dealing with 
these waste sights is a very important. It is critical not just 
at Hanford but in a number of parts of the country, and it is 
an important environmental and health and safety challenge that 
we have to address.
    I, if confirmed, will work with the staff at OMB and the 
team at the Department of Energy to fully understand the 
issues, and I will work with you to try and see if we can come 
up with the best possible solution.
    Senator Murray. OK. I assure you we will have many 
conversations, but this is extremely important, so thank you 
very much.
    Chairman Conrad. I would just like to on that point second 
what Senator Murray has said. I do not think I will ever forget 
being at a secure briefing--and I cannot discuss all of what 
was revealed there, but this issue is critically important. It 
is a national priority. Senator Murray able represents the 
State that is most involved or one of the most involved, but 
this really is a national priority, and it is clearly important 
that we address it in that way.
    Next we will go to Senator Crapo. Senator Crapo, we had 
indicated earlier we are going to 5-minute rounds this morning 
because of the votes that have been announced on the floor.
    I also want to say Senator Crapo is a valued member of the 
Fiscal Commission.
    Senator Crapo. Thank you very much, Senator Conrad, and, 
Mr. Lew, I appreciate you appearing here before us today. I 
would also like to join in support of the comments that were 
made by Senator Murray and Senator Conrad about the importance 
of our EM budget. It is critical that it receive the attention 
that it needs.
    Following along that, I want to talk to you first about the 
DOE loan guarantees for nuclear power production in the United 
States. I am a very strong proponent of these loan guarantees, 
and this is a program that was authorized in 2005. It is 
critical, frankly, in my opinion, to the success of our 
movement into nuclear power as one of the more important parts 
of our National Energy Policy.
    Unfortunately, we have faced, in my opinion, difficulty 
between DOE and OMB, and I am not quite sure why. But it 
appears to me that there is a problem with these two agencies 
working together effectively on this issue. We have had 
unnecessary bureaucratic hold-ups from what appears to be 
infighting between OMB and DOE. And I do not know if I have 
correctly described that, but something is wrong because we 
cannot seem to get proper and timely movement forward on the 
process.
    As an example, I inquired about some specifics in late 
November of 2009 with several other Senators and did not even 
get a response after repeated attempts until just very 
recently.
    And I want to be clear about this because it is so 
important that this program function effectively and is not 
undermined by bureaucratic delays.
    OMB, in my opinion, must be a close and transparent partner 
with DOE in this process. And, in my opinion, from what I have 
observed, DOE is doing a good job and in my view trying to get 
these loans out the door and get the program implemented. But 
somewhere along the road there is a blockage of some sort. And 
I do not know exactly how to tell you what the problem is, but 
there is a problem, and I would just like to get your 
commitment that you will take a personal interest in this and 
try to see that whatever the issue is between OMB and DOE, that 
we resolve it and we get to a smooth operation in terms of 
implementing this program.
    Mr. Lew. Senator, I must confess that I am not terribly 
familiar with the details of this. It was enacted while I was 
out of Government, and I have not been involved in it from my 
current vantage point at the State Department.
    I do have a good relationship with Secretary Chu. I have a 
great deal of respect for him. I think that one of the 
important functions that OMB should play is to focus on what 
issues need to be resolved and to run a process that permits 
the issues to be addressed so that Government can move forward 
effectively and smoothly. And, if confirmed, I would bring the 
appropriate people together so that I can get up to speed 
quickly on this issue.
    Senator Crapo. Well, I appreciate that, and I look forward 
to working with you on it, and hopefully we can resolve these 
problems.
    One other thing I would like to get to before my time runs 
out, just changing subjects entirely, is the Secure Rural 
Schools and Communities Self-Determination Act. Are you 
familiar with it?
    Mr. Lew. I am generally familiar with it. I would not 
pretend to be as familiar in the detail that you are.
    Senator Crapo. Sure. Well, I understand, and just as a 
quick summary, this is legislation, this is a program that is 
designed to help those communities and counties in the country 
where there is heavy Federal ownership of property and, 
therefore, lack of a property tax base in the county, to have 
the Federal Government pay its fair share of operations in the 
county. That is a very quick summary of it.
    The problem we have is that we continue to have to fight 
cycle after cycle for reauthorization of the program, and we 
are coming up again in the near future with the need to 
reauthorize the program after the end of 2011 funding. And I 
would just like to be sure that the administration is aware of 
this need, that the administration puts the reauthorization in 
the budget and proposes to move it forward so that we do not 
have to have that fight yet once again here in Congress as we 
move forward to try to get this program reauthorized.
    Mr. Lew. Senator, while I am not familiar with the details 
of that provision, I generally am familiar with the impact of 
the kinds of approaches, and I have always thought it is 
important to be careful as we look at programs like that to 
make sure that we are appropriately compensating for the impact 
and not creating much larger programs than we otherwise would 
and that they be targeted appropriately.
    If confirmed, I would work with the OMB staff to make sure 
I understand that issue, and I would be happy to speak with you 
about it. I do not have the detailed knowledge to respond at a 
detailed level.
    Senator Crapo. All right. Well, I will followup with you 
then after you get fully engaged on this, but it is a critical 
program which has broad national support, and we just do not 
need to be going through this continuous cycle of trying to 
work it into the budget, and we would appreciate your help and 
support on that.
    Mr. Lew. Thank you.
    Senator Crapo. Thank you.
    Chairman Conrad. Thank you, Senator Crapo.
    Senator Cardin.
    Senator Cardin. Thank you very much, Mr. Chairman.
    Let me followup on Senator Crapo's point as it relates to 
these guarantees for nuclear power. We have the same concerns, 
and it seems that there is a disagreement between OMB and DOE 
as to how the cost is calculated under Title 17 of the Energy 
Policy Act, that there is a disagreement as to whether to use a 
generic cost recovery, 55 percent, or whether it should be 
sensitive to the individual transaction.
    We have a project moving forward at Calvert Cliffs in 
Maryland. This is thousands of jobs. It is ready. It is 
important for our energy policy in our country, and it has the 
strong support of our State and local communities. The 
bureaucracy is not working as effectively as it should. So I 
want you to know there is bipartisan interest to resolve this 
issue so we can move forward. We are concerned that investors 
are getting nervous because of the delays, and I would second 
Senator Crapo's point and ask you to give this your personal 
attention to resolve this so we can move forward with a policy 
that the Obama administration is supporting.
    Mr. Lew. Right.
    Senator Cardin. And one which has support here in Congress.
    Mr. Lew. Senator, at the risk of speculating about 
something that I have already said I do not start out with a 
detailed knowledge of, I suspect it is a credit budget scoring 
issue where we have one law that tells us how to score credit 
issues and we have another law that has designed a nuclear loan 
guarantee program, and the challenge is reconciling the two.
    I understand that is an important function that OMB plays 
to be in the middle of that space and that coming to a 
resolution is important. I will have to go back and study the 
issue, if confirmed, to make sure I understand precisely what 
the resolution might look like.
    Senator Cardin. You are a quick study. We are very 
confident you will pick this up quickly and use your talent to 
resolve it so that we can move forward with a policy that we 
all agree is right for this country.
    I want to take my time to first thank you for being willing 
to do this again and thank your family. You have had an 
incredible record of public service, and we thank you for your 
contributions to the Congress, to several administrations, and 
your work currently in the State Department, and now going back 
to OMB. We thank you for being willing to do this. This is 
tough work, and I think we all recognize that we have to get 
back to the fiscal discipline that we had in the 1990's.
    I think the challenge is as we started the 21st century, 
that discipline was not there on tax cuts, it was not there on 
military spending; and most recently, with our major concern of 
getting out of a major economic recession and we had to figure 
out how to get our economy moving, fiscal discipline was not 
there either. We must restore fiscal discipline, and the good 
news is that we all understand it and the American public 
understands it, that we need to get this budget into balance. 
There is genuine concern that our economy cannot sustain the 
types of deficits that we are currently have and that we are 
projecting for the future.
    I would underscore the lesson that you mentioned from the 
1990's on fiscal discipline and PAYGO, and I say that because 
we are currently considering certain extensions of tax 
policies. I do not hear in Congress the type of discipline I 
would like to hear related to not only non-defense spending, 
but also revenues and military spending. Everything needs to be 
subject to the same type of discipline if we are going to have 
a plan that will meet the Chairman's expectations and the 
President's expectations of where we need to be for this 
Nation. Secretary Lew, I think you can be extremely helpful to 
us in this debate. Your credibility on this subject is well 
earned. You have accomplished a great deal. And I thank you for 
moving forward, and I ask that you be very open and frank with 
us in getting us to focus on this issue that is so critically 
important to America's future.
    Mr. Lew. Thank you, Senator. I believe that as we go 
forward, it is critical that we ask ourselves every time how 
are we going to pay for the things that we want to do. But I 
also think it is important to distinguish the actions that were 
taken to respond to the fiscal crisis from normal spending. In 
order to create millions of jobs, in order to create economic 
growth where it did not existing, it was, I think, critically 
important at the beginning of this administration to actually 
increase the deficit. That was the exception to the rule. That 
was the way to stimulate the economy. It cannot become the 
normal rule. If it becomes the normal rule, we are on a path 
that goes nowhere good.
    But I do not think that I would compare the actions taken 
on, say, Recovery Act to the actions taken on the other 
measures that you are describing.
    Senator Cardin. I totally agree with you. I was just trying 
to point out that we have got to work together on fiscal 
discipline.
    Mr. Lew. Absolutely.
    Senator Cardin. There is no question that managing the debt 
and managing spending are critically important of economic 
activities you need to get out of a recession. To me, that is 
basic economics, and I fully supported those policies.
    What I am suggesting, though, is that you cannot use this 
indefinitely, and you need to recognize that now the deficit is 
a drag on our economy, and that deficit reduction must be part 
of the equation as we develop the next round of fiscal 
policies.
    Mr. Lew. And it is always hard to change gears.
    Senator Cardin. Thank you.
    Thank you, Mr. Chairman.
    Chairman Conrad. Thank you. And I thank the Senator for his 
strong statement as well.
    Senator Begich.
    Senator Begich. Thank you very much, and I want to echo 
thank you for your willingness to serve and go through these 
types of hearings. And I am sure once you are appointed that 
there will be plenty more that you will be subjected to and 
wonder why you decided to do this again. But thank you very 
much for your----
    Mr. Lew. It is my honor.
    Senator Begich. Thank you.
    I want to followup on a couple commission people had, but 
before I do that, I want to talk about one specific Alaska 
program. It is called the Denali Commission. You may or may not 
be familiar with it. I am assuming if you have been around a 
while, you probably are familiar to some degree with it. You 
know, it is in the process of once again going through a 
reauthorization process. We have seen incredible success in 
Alaska with it where the overhead is less than 5 percent to 
administer incredible projects and develop infrastructure, 
whether it be clinics or water and sewer projects in very rural 
areas. And OMB has always taken a view that--they have not been 
very kind to it, to be very frank with you. But I can name 
program after program in the Federal Government that is very 
inefficient compared to this one, which actually matches local 
dollars, Federal dollars, and talks about sustainability, kind 
of what I think you are talking about today, is how do you 
create these budgetary situations that create sustainability.
    I am not asking you to make a comment on it right now. I 
would like to have further discussion. But in order to do that, 
to be very frank with you, you need to come to Alaska. I would 
be remiss if I did not invite you, but also, we have had seven 
Cabinet Secretaries up there over the last year and a half; we 
have had multiple Department heads. Once they see the living 
conditions in some of these areas and why the Commission is 
critical--and it is kind of a one-shot in, and then the local 
communities take it from there. There are no operating 
requirements afterwards by the Federal Government. I hope you 
would look kindly to that offer and opportunity.
    Mr. Lew. Well, I thank you for the invitation. I actually 
had hoped at one point to go to Alaska and because of a family 
illness had to cancel the trip, and it has been something I 
have always meant to get back to. So I am familiar with the 
Denali Commission. The years when I was working on the budget, 
when Senator Stevens chaired the Appropriations Committee, I 
became very familiar with the geography of Alaska, and I would 
look forward to working with you on these issues.
    Senator Begich. Great. And we recognize there are some 
issues within it that need to be resolved, and that is why in 
the reauthorization we hope to do that.
    A couple things in a broader context, if I can. You know, 
over the last week here we have been struggling with resolving 
this 1099 issue and trying to find a proper pay-for. As you 
know, two amendments were up, both failed. We have introduced 
an amendment. I have put it on the table with Senator Ben 
Nelson from Nebraska as well as some other sponsors trying to 
resolve this issue. And I guess the question I have for you is: 
Now, that the President has also now said that that provision 
should be--he did not say repealed. I say repealed, because I 
think it is onerous, and I am probably one of the only people 
in the U.S. Senate who actually fills 1099s out as a small 
business owner.
    Is OMB willing to step up to the plate and help us resolve 
this and get a good pay-for on this in very short order?
    Mr. Lew. Senator, I am familiar with the provision, and I 
concur that it is important to find a way to make the provision 
not be as onerous, and that would require a pay-for.
    Senator Begich. Correct.
    Mr. Lew. I am not familiar with the conversations that have 
been going on so, if confirmed, I would become familiar with 
them at a detailed level. But I do concur that it is in our 
mutual interest to find a solution because it is a provision 
that is kind of--while it was a pay-for in the health reform 
bill, it is not central to it.
    Senator Begich. Correct.
    Mr. Lew. It was just a means of financing.
    Senator Begich. Right.
    Mr. Lew. And I am not sure, as I understand it, that it was 
well understood what the scope of the impact might have been at 
the time it was designed, and having filled out 1099s, I 
understand----
    Senator Begich. You know exactly what I am talking about, 
and if you are small businessperson, it is a lot of additional 
paperwork, and on goods, it is even more cumbersome. And my 
issue was that the IRS never could tell you what the compliance 
rate was on the existing 1099 format they have for services, so 
how could they determine what their success rate would be on 
this? You know, I will not go into my rant about how CBO 
scores, because I do not get it, to be very frank with you, the 
way they do it. Things that should be scored they do not score. 
Things that do not make any sense, they score. But I will leave 
that for another discussion, because I do think after you are 
confirmed--and I am hoping you will be--one of the things I 
would like to find out over the longer term is how accurate 
these scores have been, because we spend so much time here 
debating the score, and then we move on to the next time. We 
never look back and see was it accurate or not. So that is, 
again, another discussion for another day, and I would be 
looking forward to that.
    The last comment I guess I would like to--I have several 
other questions, but just one really quick, and that is on the 
tax policy for the country. As you know, we are tinkering with 
the Bush tax cuts and what is going to be, what is not going to 
be. We will spend our time, you know, a lot of work on it, and 
then we will come back a year from now or 2 years from now or 6 
months from now. And I guess I would like OMB to take a serious 
look at a bill that I have now cosponsored, which is the Gregg-
Wyden bill, which really gets rid of a lot of loopholes, 
flattens the tax rates out for individuals to three rates--15, 
25, 35 rates; takes the corporate rate from 35 to 24, giving us 
a more competitive edge in the world market; keeps the hard-
core issues that benefit middle class, help small business.
    It seems like, you know, 2 years from now we will be back 
at this whole debate again about, you know, what special 
interest group is lobbying us for what special tax provision 
they want so they can go tell their client they have done a 
good job versus let us do something once and for all that is 
good for the American people, and also gives certainty to the 
business community. Because I think these tax policies we are 
going to be tinkering with will not give certainty to the 
business community to unleash those dollars you mentioned in 
your opening that are sitting idle. They are looking for long-
term policy--I do not know if you have a quick comment on that. 
I am well over my time.
    Mr. Lew. Yes, Senator, I think that it has been a long time 
since there has been a serious discussion about the kind of 
basic structure of the Tax Code. I think the general principle 
that loophole closing is an important thing, because if for no 
other reason it promotes trust in the tax system because it 
promotes a sense of fairness that people in comparable 
positions face comparable tax liabilities.
    I am not familiar with all the pending proposals that are 
out there now. As you know, it is principally the Department of 
Treasury that handles tax policy, but OMB is very much involved 
in matters of fiscal policy. And I would imagine, if confirmed, 
I will be engaged in those conversations.
    Senator Begich. Great. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Conrad. Thank you, Senator.
    Senator Alexander, would you defer to Senator Whitehouse 
for 5 minutes? He has a Judiciary----
    Senator Alexander. I will be happy to.
    Chairman Conrad. I thank the gentleman for his courtesy. 
Senator Whitehouse.
    Senator Whitehouse. I thank the distinguished Senator from 
Tennessee, and I thank Mr. Lew for his willingness to serve and 
for his distinguished record of service to date.
    My questions will relate to health care, and let me ask you 
first, as you look at the looming fiscal liabilities that our 
country faces, where in that array do you see our fiscal 
liability regarding health care?
    Mr. Lew. I think that there is no way of denying that 
health care is an enormous part of our economy. It is roughly 
18 percent of our total economy, and one can hardly talk about 
the----
    Senator Whitehouse. And the forward-looking liabilities 
eclipse all others, do they not?
    Mr. Lew. It has been growing in the past, and I think one 
of the challenges is to put the kinds of reforms in place that 
begin to create some downward pressures on what the growth in 
health care costs are.
    Senator Whitehouse. Good. Let me ask you about that, with 
around 18 percent of GDP being spent on health care, when we 
compare that to our competitor nations around the globe, no one 
is even close to having to carry that kind of a fiscal burden 
for their health care program, are they?
    Mr. Lew. It has for many years been the case that we have 
had the anomalous situation of devoting more of our GDP to 
health care while we have had less people with coverage than 
some of our competitors, which is one of the reasons health 
care reform was so important----
    Senator Whitehouse. And in addition, we have had----
    Mr. Lew [continuing]. And we had to begin by closing the 
gaps.
    Senator Whitehouse. In addition, when we do international 
comparisons on health outcomes for the American people compared 
to others, it is patently clear that we are getting nowhere 
near our money's worth for this colossal expenditure of 
national wealth. Is that not also correct?
    Mr. Lew. Well, I think that what is clear is that we need 
to have more knowledge about outcomes and policy needs to be 
informed by that. One of the things that the health reform bill 
does, it sets up mechanisms that will for the first time put in 
place those kinds of mechanisms.
    Senator Whitehouse. Let me duck into that, because that is 
exactly the place where I am going. The President's Council on 
Economic Advisers said not too long ago that it should be 
possible to cut total health expenditures about 30 percent 
without worsening outcomes, which would suggest that savings on 
the order of 5 percent of GDP could be feasible.
    Now, just to do the math quickly, something on the order of 
5 percent of GDP is something on the order of $700 billion, is 
it not?
    Mr. Lew. The simple arithmetic--I am not familiar with the 
report, but that is the arithmetic, yes.
    Senator Whitehouse. Yes. So I guess my point is there are 
very big stakes here, and everybody from your predecessor, 
Director Orszag, to Dr. Gawande, who is one of the more lucid 
writers on this issue, have pointed out that the way to get to 
that $700 billion is an iterative, dynamic path of what Dr. 
Gawande called experimentation and learning as we use the tools 
in the health reform bill and others to learn our way through 
how to improve outcomes while improving the quality of care.
    The concern that I have is that for reasons of it being 
that kind of an iterative and dynamic process that needs to go 
forward, it exceeds the ability of CBO to score it. It exceeds 
the ability of OMB to score it. And my worry is that as we go 
into an environment in which we need to show progress on the 
deficit, this issue--reducing the cost of health care by 
improving the quality of care, by improving outcomes and 
lowering costs and getting as much of that $700 billion in 
savings as we can--will fade, not because it is not important, 
not because it is not the biggest number, not because it is not 
a win-win for the American people, but because there is not a 
hard score attached to it.
    My primary question to you is: Are you willing to take off 
the goggles of scoring and look at the larger policy issues and 
the potentials, recognize the limitations of the scoring, and 
assure that, to the extent you can in this administration and 
as the Director of OMB, you give this issue of health care 
reform the full energy and attention and interest that it 
deserves?
    Mr. Lew. Senator, one of the issues that I have worked most 
intently on in my 20 years in public service is health care, 
and it is an issue for which I have a great deal of passion and 
more than a little bit of experience.
    I think that the Affordable Care Act was a historic piece 
of legislation that both created a path to coverage for 
millions of Americans and set in motion forces to lead to the 
kinds of reforms that you are describing.
    I think the implementation of the Affordable Care Act is 
one of this administration's highest priorities. As OMB 
Director, the President made it clear to me that he expected 
me, if confirmed, to pay a great deal of attention to it. And 
it is something I look forward to participating in.
    Senator Whitehouse. Good. We will work well together, then. 
I appreciate your appreciation of this as a very significant 
priority. And I again the distinguished Senator from Tennessee 
for his courtesy to me. I appreciate it.
    Chairman Conrad. Senator Alexander.
    Senator Alexander. Thanks, Mr. Chairman.
    Mr. Lew, welcome, and thank you for being willing to serve. 
If I am not mistaken, entitlement spending is about 56 percent 
of the budget. Is that about right?
    Mr. Lew. More or less, yes.
    Senator Alexander. Would you think in this time of what I 
think is overspending, with an alarming deficit, it would be a 
good idea to not have new entitlement spending?
    Mr. Lew. I think that the growth of entitlements is 
principally driven by health care and Social Security. And I 
think that----
    Senator Alexander. But I mean to authorize new entitlement 
spending. Don't you think it would be a good idea not to have 
any more new entitlement spending?
    Mr. Lew. I think as we go forward, the challenge is, in an 
environment defined by PAYGO rules, to make sure that anything 
that we do in this area we pay for. I think that the challenge 
of finding savings is very real, and we have to begin by not 
creating new long-term expenditures without worrying about how 
we are paying for them.
    Senator Alexander. But don't you see a difference between 
entitlement and discretionary in the sense that if it is 
entitlement it is just on automatic pilot and we never get 
control of it; if it is discretionary, we have to approve it 
every year?
    Mr. Lew. I think that, you know, the programs like Social 
Security, Medicare, and Medicaid that have been set up the way 
they are, are not outside of our purview. I know that in the 
case of Medicare and Medicaid, I have on many occasions 
participated in processes that have changed those programs.
    Senator Alexander. Hard to do, though, isn't it?
    Mr. Lew. It is hard, but I would not--I do not think we 
should think of them as beyond our reach. We have to be careful 
about what we do because people have a right to the benefits 
that they paid for and expect to earn. But I do not agree with 
the notion that they are kind of on automatic pilot and outside 
of our control. In 1983, we proved to the contrary by having 
very significant Social Security reforms that created a 
generation of stability in the program.
    Senator Alexander. The Obama administration has proposed 
converting the entire Pell grant program to the mandatory side 
of the budget, then provide an annual increase of CPI plus 1 
percent a year. This would shift about $300 billion over 10 
years to the mandatory side of the budget, plus $118 billion to 
fund the maximum grant award, plus another $69 billion to 
increase and index the maximum award.
    Now, that is a lot of money. I mean, Republicans on the 
Appropriations Committee have suggested that we spend about 
$300 billion over 10 years less than the President has asked 
for this year, and the Majority Leader has said he agrees with 
that. And we all think--that just affects 30 percent of the 
budget, not counting the emergency spending. And we are all 
proud of the fact that we may be able to save $300 billion 
right now, but here the administration is coming along and 
proposing erasing that effort and spending nearly a half 
trillion, moving from discretionary to mandatory. Isn't that an 
unwise thing to do in the middle of such spending problems?
    Mr. Lew. Senator, I would begin by saying that, you know, 
the Pell grant program is an enormously important program. If 
we look to the future of this country, the education of the 
young men and women who go through the Pell grant program----
    Senator Alexander. Let us say you and I agree on that.
    Mr. Lew. That is key to our future, both in terms of our 
economic growth and the fairness of this country.
    I think that the proposal in the President's budget, as I 
understand it--and I was not at OMB designing it, so I have an 
outsider's knowledge of it. But my understanding of it, it was 
in the context of an overall budget that observed the PAYGO 
rules that would have paid for it.
    So I think that it is important to ask the question not 
should we make that kind of a change in Pell, but are we truly 
in a position to pay for it.
    Senator Alexander. So if we can pay for it, you see no 
problem with adding a half trillion dollars, taking a half 
trillion from the discretionary side and putting it on 
automatic pilot?
    Mr. Lew. I think that the bipartisan support for Pell 
grants over the 20-plus years I have worked on Pell grant 
funding suggests that there is going to be substantial funding 
for Pell grants, whichever side it is on.
    I think that the proposal was not so much to increase the 
spending except on the margin, but it was----
    Senator Alexander. You are ducking my question. You are 
basically saying you think it is OK to add a half trillion 
dollars in mandatory spending at a time when the President's 
proposals would double the debt in 5 years and triple it in 10.
    Mr. Lew. I am saying the question is: Are we paying for it?
    Senator Alexander. When you were OMB Director during the 
Clinton administration, you supported biennial budgeting. Do 
you still think that is a good idea?
    Mr. Lew. You know, I testified several times before the 
Congress on it, and I observed at the time, as I believe now, 
that the annual budget process gives us precious little time to 
focus on program implementation, both in the executive branch 
and in the legislative branch.
    I think there are many challenges to biennial budgeting. 
The systems of Congress are well established. Dealing with 
annual appropriations is more than a tradition. It is a deeply 
ingrained mode of thinking and functioning. It would require 
changing the way everyone thinks and acts in a dramatic way.
    I think that the goal of creating a space to focus on 
program management and implementation is a worthy one. In the 
many years that it has been discussed, I have never seen the 
consensus form around it, but I think it is the kind of 
conversation that is very much worth pursuing because the 
effective implementation of programs is, I think, one of the 
challenges both at OMB and in the Congress that we all need to 
pay a great deal of attention to.
    Senator Alexander. Mr. Chairman, my time is up. Could I 
make an observation in response to that?
    Chairman Conrad. Yes, sir.
    Senator Alexander. Well, thank you, Mr. Lew, for that 
comment. I hope we can continue that conversation because that 
idea, the idea of a 2-year budget, has bipartisan roots, and it 
has more support today on the Republican side and among 
appropriators than it did 20 years ago or 10 years ago. And we 
feel, many of us on the Republican side--and I am sure my 
colleagues on the Democrat side may feel the same way--we have 
done a poor job at oversight. And as you say, spending 1 year 
on appropriations and the next year on program implementation, 
repeal and review of excessive regulations would be a very 
healthy thing from a Government that has grown too complicated 
and too big. So maybe that is an area where we can have further 
discussion.
    Mr. Lew. And I would just add that every proposal for a 
biennial budget has recognized the need for mid-course 
corrections because decisions that are made on a long-term 
basis undoubtedly would run into changed circumstances that 
would need to be addressed. So it is both the oversight but 
also the effective mechanism for mid-course corrections that 
would need to be worked through.
    Senator Alexander. Thank you, Mr. Chairman.
    Chairman Conrad. Thank you.
    On this point, if I can just for a moment, I have been a 
long-time opponent of biennial budgeting. I do not know of any 
large institution that does not budget every year. But with 
that said, given what I have now seen over these last many 
years, in the election years it has now become the rule rather 
than the exception that we do not have a budget. That is not a 
healthy thing. And it may well require that we move to a form 
of biennial budgeting so that we can assure there is a budget 
blueprint in place.
    The only time we have been able to break that in the last 
number of years was 2008. I was able to get a budget through in 
an election year. But if you go back, Republicans, Democrats in 
charge of the Senate, we are now falling into a pattern in 
which we do not do a budget in an election year.
    And so I must say, my attitude is changing very 
dramatically on this issue, and I would be happy to work with 
the Senator and others to see if we cannot form a proposal that 
could get adopted and we would put in place an effective plan 
that would assure a budget blueprint.
    Senator Alexander. The State of Texas has a 2-year budget.
    Chairman Conrad. Well, I am not sure I want to be copying 
Texas.
    [Laughter.]
    Chairman Conrad. Senator Nelson.
    Senator Nelson. I understand the subject came up about the 
deficit reduction Commission. Would you offer some further 
comments, please?
    Mr. Lew. Senator, I think that the deficit reduction 
Commission was given one of the most important challenges and 
assignments that we face as a country today: How do we get our 
fiscal house in order and get back on a path to having a 
sustainable level of debt and deficit?
    It is a very hard challenge. Getting from 10 percent of GDP 
deficits to 3 percent of GDP deficits requires a broad array of 
difficult decisions and choices. One of the keys to the way the 
Commission was set up is it was set up on a bipartisan basis 
with people of integrity on both sides, and the call to come 
together and try and find areas where there could possibly be 
bipartisan consensus.
    The administration has taken the view, I think correctly, 
that it should give some space to the Commission and let that 
work be done outside of the 24-hour news cycle, without the 
things being taken off the table prematurely. And that does not 
mean embracing everything that might be discussed in the 
Commission.
    Certainly there will be things that are discussed in the 
Commission that not everyone on the Commission will agree to 
and those outside of the Commission might have issue with. But 
I think it is very important that there be a space where the 
Commission can do its work and hopefully come back in early 
December with a report that has a bipartisan consensus.
    Senator Nelson. You worked for Tip O'Neill, and if you will 
recall, one of the most successful acts in Government was a 
bipartisan Commission to save Social Security in 1983. I would 
like your opinion on the experience of that success compared to 
the present attempt, given the fact that you basically had two 
old Irishmen back then--one who was President and one who was 
Speaker--that basically threw their weight behind the 
bipartisan Commission and kept Social Security off the table as 
an election issue at the next election. That does not seem to 
be the case in this toxic, highly partisan atmosphere that we 
have now.
    Your observations?
    Mr. Lew. Senator, I was proud to be Speaker O'Neill's 
liaison to the 1983 Social Security Commission, and the 
successful work of that Commission is something that I am proud 
to have been associated with.
    I think that the challenge at the time was to be in a 
political environment that was highly charged while not taking 
specific things off the table so that there was nothing to talk 
about in the Commission. And I know that my role working for 
the Speaker at the time was to help him think through how could 
he take a position that was very principled in terms of 
defending Social Security and standing up for a program that he 
and I both believe is one of the greatest things that we have 
done in this country while leaving open some space for people 
of good will to come to a set of recommendations that would 
solve a problem without which the American people would not 
have confidence in this great program.
    There were a number of components of the Social Security 
Commission report that easily could have been taken off the 
table in a political season. The fact that they were not is one 
of the reasons that that Commission was able to succeed. And I 
think it was important that there was a discussion of those 
ideas taking place outside of the kind of heat of the political 
environment because at the time Social Security was, as it 
still is called, the third rail of American politics. I do not 
think that there is a soul alive who would question Speaker 
O'Neill's commitment to the Social Security program. I for one 
think that he showed the greatest respect and loyalty to that 
program by permitting that discussion to take place and then 
embracing it would President Reagan which, by the two of them 
coming forward, made it possible to take what was a historic 
and important action.
    Senator Nelson. Can you imagine President Obama and Senator 
McConnell and Leader Boehner coming forward after this election 
and embracing a report of the deficit Commission that would be 
passed, has to be passed by 14 of the 18 members?
    Mr. Lew. Look, I think it is highly premature to think 
about the outcomes, the specific outcomes of the Commission. 
One of the elements of giving it space is that we have not 
commented a lot on the specific work of the Commission, and I 
think that is appropriate.
    One thing I will observe as a general principle is that we 
have almost always been surprised by unlikely allies coming 
together when there has been real bipartisan progress. People 
were surprised when President Reagan and Speaker O'Neill came 
together in 1983. People were surprised when Speaker Gingrich 
and President Clinton came together in 1997. So I do believe in 
the possibility of things that do not look the most likely from 
where we sit today.
    Senator Nelson. I would just say in conclusion that one of 
the things I learned when I sat at the knee of Tip O'Neill was 
that he and President Reagan would fight like the dickens, but 
they would walk out the door at the end of the day as personal 
friends. And that personal relationship led to an atmosphere by 
which, when it was time to build a consensus, they could do it. 
I am fearful that those personal relationships do not exist 
today.
    Chairman Conrad. I thank the Senator. I would just say on 
this Committee they do. Senator Gregg and I fight mightily on 
issues of policy, but at the end of the day, we are personal 
friends, and I do think that helped us get a Commission formed. 
And I also want to acknowledge that in the negotiating of that 
Commission, Senator Nelson played a key role. And when I needed 
a strong ally to go to the Vice President's residence on a 
weekend, Senator Nelson volunteered for the effort and played a 
very constructive role.
    Senator Ensign.
    Senator Ensign. Thank you, Mr. Chairman. I think it is just 
because you and Senator Gregg have such sweet personalities.
    [Laughter.]
    Senator Ensign. Mr. Lew, thank you for volunteering at this 
really critical time in our country's history. We had a nice 
visit in my office yesterday, and I appreciated that time with 
you. And I know we have some philosophical differences, but I 
certainly respect the work and your intellect. You have a huge 
challenge ahead of us at this critical time.
    I think what Senator Nelson said about us needing 
bipartisanship at this time, because this debt crisis that we 
have--I mean, just look at the chart displayed up there, that 
represents the interest that we are going to pay on our debt 
each year. And these are the President's numbers going in 2011 
to over $200 billion, to over $900 billion by 2020. And we know 
those numbers are scary because we do not get anything for it. 
It is like a family that has a credit card. If you think about 
this as our national credit card, we do not get anything for 
the money that we pay on interest on our national credit card. 
It is just wasted money. We do not build any roads; we do not 
get any veterans' benefits for it; we do not get any Social 
Security benefits for it. been That is just money that goes out 
the door, and it is because we have overspending for too many 
years. And this debt Commission certainly is important if we 
have the potential courage to embrace its recommendations.
    You know, I realize we have different philosophies about 
how to get the economy going. But certainly, getting the 
economy going is something we all can agree on. How to do it is 
difference. I believe that we should be cutting taxes and 
cutting spending. Obviously the administration has a different 
philosophy on that. But, you know, once the economy is growing, 
we still have this massive spending that is going on here in 
Washington, D.C., to deal with. And it is not just from the 
stimulus bill. We have dramatically increased discretionary 
spending in all the appropriations, especially non-security 
appropriations, over the last couple of years. And everybody is 
talking about fiscal responsibility now, but when it comes to 
votes, we are not getting those kinds of votes. I am not sure 
exactly when that is going to happen, but we absolutely need it 
to happen.
    If you could pull up the next slide, please? This is the 
debt held by the public as a percentage of GDP, and we can see 
what it has done historically. It has had its ups and downs, 
but it is not anything compared to what according to the 
President's budget is going to do over the next 10 years. I 
mean, these numbers are completely unsustainable.
    If you go to the next slide, this shows what people have 
been talking about, about debt held by the public, that it 
doubles in 5 years and triples in 10 years.
    You know, I just look at this from a simple perspective. A 
family, a business, State governments, local governments, 
Federal Governments, debt at a certain point causes collapse. 
Whether it is personal bankruptcy or whether it is a country's 
bankruptcy, debt becomes too big at some point. And we as a 
Nation we have a AAA rating on our debt right now. Well, that 
AAA rating is in trouble. I mean, you hear talks about it right 
now. And we do not know when the rating agencies are going to 
decide that America is maybe not the safest place and so it 
does not deserve that AAA rating. But if it does happen, we are 
in trouble. We are in absolute trouble. We know that that is a 
possibility.
    What we saw happen in Greece on our television sets earlier 
this year, Greece needed the European Union to bail them out. 
We do not have anybody to bail us out. If the United States 
goes down, the rest of the world's economy comes down with us. 
And that is why I believe it is so critical for us at this 
juncture in history to join together as Republicans and 
Democrats, forget our party labels. This debt is such a serious 
problem.
    I actually am one of those people who as far as the tax 
cuts are concerned, would rather see those tax cuts offset with 
spending cuts. If you are going to keep the tax rates the same, 
which I believe that they should be, I do believe in spending 
reductions to pay for that policy. I think that the more that 
we can hold down this deficit and this debt, the better that we 
are going to be long term as far as economic health for this 
country is concerned.
    If given the choice whether to keep taxes where they are 
and not pay for them or to raise taxes, I would choose keeping 
taxes where they are and not pay for them. But my ideal 
situation would be keep taxes where they are and to cut 
spending so we are not increasing the deficit. I think it over 
history it has shown that that is the best way to go.
    But my basic plea to you is--you are going to be our new 
OMB chairman upon your confirmation--that you do everything you 
can to encourage the administration to reach across the aisle. 
To join those of us who are willing to join you and to attack 
this serious debt problem that we have in the United States, 
because it is absolutely, I believe, unsustainable and is going 
to threaten the very future of the United States economy. And 
when you threaten the future of the United States economy, you 
threaten the future of our very existence as a constitutional 
republic.
    So, Mr. Chairman, I know I did not have any questions in 
there, but I think that this is important to talk about and so 
critical for us as Senators up here and the Members of the 
House, Senators, and the White House to be working together on 
this as we go forward.
    Chairman Conrad. I thank the Senator.
    Senator Sanders. Thank you very much, Mr. Chairman. And, 
Mr. Lew, thanks very much for joining us.
    Let me just say to my good friend Mr. Ensign, I am very 
glad that our Republican friends are concerned about the debt 
and the deficit, but let me just remind them. Some of us voted 
for the war in Iraq, which will end up costing $3 trillion. It 
was not paid for. Not me. Not many others.
    Some of us voted for huge tax breaks for the rich, many, 
many hundreds of billions of dollars, which added to part of 
the problem of how under Bush we almost doubled the national 
debt. Some of us voted for it. Some of us did not.
    Some of us voted for the Medicare Part D prescription drug 
program written by the insurance companies that was not paid 
for. Some of us voted for it. Some of us did not----
    Senator Ensign. No, some of us did not.
    Senator Sanders. OK. I was not talking about you in 
particular, but it did pass under Republican leadership.
    Some of us voted for the Wall Street bailout. A lot of that 
money was repaid. Some of it was. Some of it was not. Some of 
us did not vote.
    So before we talk about the seriousness of the debt--and I 
certainly agree with you, it is a serious issue--let us 
remember how we got there, who voted for these unpaid programs 
and who did not.
    But, Mr. Lew, welcome and thank you very much for your 
service.
    Senator Ensign and Senator Alexander and others are 
absolutely right. Debt is a very serious problem. We have to 
deal with it. But it is one of many problems. Among other 
things, the middle class in America is collapsing. Poverty 
reduction is increasing. When President Bush was President, the 
middle class saw a $2,000-a-year decline in median family 
income.
    The issue I want to talk about, which I hear very little 
discussion about and I want your views on, is the fact that the 
United States today has the most unequal distribution of income 
and wealth of any major country on Earth. Sometimes we talk 
about the economy like we are all in this together. We clearly 
are not.
    Now, I want your judgment and tell me what you think. In 
2007, the wealthiest 1 percent earned 23.5 percent of all 
income in America. In the 1970's, that number was 8 percent. 
The top 1 percent in the 1970's earned 8 percent. The top 1 
percent now is earning almost 24 percent of all income.
    Do you think that that is OK? Do you think that that is an 
issue that the President should focus on? Do you think it is 
morally OK? Do you think it is economically OK?
    Mr. Lew. You know, I think that the distribution of income 
is a challenge and a problem, and it is something that we need 
to focus on. I think as a matter of Federal policy, it is 
really one of the things that drives the debate on whether or 
not to extend the tax cuts for people earning over $250,000 a 
year. It would be the wrong thing to do at a time when we have 
the disparity of income distribution that you are describing.
    I think that the real challenge we face is how to grow the 
economy, grow jobs, create the kinds of better income earning 
opportunities for more working Americans.
    Senator Sanders. We certainly agree, and that is what 
everybody says. But the reality is over the last 30 years 
almost all of the new income created has gone to the top 1 
percent, and, in fact, today the top one-tenth of 1 percent 
earns 11 percent of the income. Do you think that that is 
morally acceptable?
    Mr. Lew. I think that it is very important that we focus on 
what are the income levels of working Americans, middle-income 
Americans, and the decline of incomes is not a good thing.
    Senator Sanders. In your judgment--and certainly it was 
exacerbated during the Bush years, but it would be wrong to say 
it was only the Bush years--why has over the last 30 years the 
middle class collapsed or significantly declined, the rich 
become much richer, and poverty increased in America? In your 
judgment, why has that happened?
    Mr. Lew. I think that there have been trends in our economy 
that have done tremendous damage to the manufacturing base of 
the economy. The loss of manufacturing jobs has had a lot to do 
with it. I think that we need to look at the kinds of trends 
that you are talking about and ask how do our policies affect 
that, if our policies affect that.
    I know over the years I have worked hard on things like 
earned income tax credits to address issues like that. There 
are Federal responses that have been very effective, though not 
effective enough, because----
    Senator Sanders. If I can, I am sorry. Time is short. You 
touch on manufacturing. I think that is an extremely important 
point. I think you are right. I know in my State, which is not 
a major manufacturing State, we lost about 25 percent of our 
manufacturing jobs in the last 6 years. I think under Bush we 
lost over 4 million manufacturing jobs.
    Many of us believe that one of the reasons--not the only 
reason--is a disastrous trade policy which has basically said 
to corporate America, Of course, you can throw American workers 
out on the street, hire people in China for 50 cents an hour, 
and bring your product back into this country. I myself voted 
against NAFTA, Permanent Normal Trade relations with China and 
so forth and so on.
    What do you think about trade policies? Are they working or 
have they helped destroy manufacturing in America?
    Mr. Lew. I think that it is important that we look at these 
issues for both the benefits that come from enhanced trade, 
free trade, and the potential costs.
    Senator Sanders. You think the benefits have outweighed the 
losses?
    Mr. Lew. I think that the risk to the United States of 
closing off from the world----
    Senator Sanders. That was not the question.
    Mr. Lew [continuing]. Are very great.
    Senator Sanders. Going back in history, do you think the 
unfettered free trade policies that have gone on from Reagan, 
under Republicans and Democrats, have benefited the American 
worker or hurt the American worker?
    Mr. Lew. I think for a worker who has lost their job----
    Senator Sanders. That was not my question. Of course, for a 
worker----
    Mr. Lew. I cannot speak to the statistical averages. I 
would have to go back and look at them. My understanding of the 
trade policies has been there have been many benefits as well 
as costs. I think the costs are things we have to focus on. We 
have to look at the reason. We have to ask the question: Is 
that because of unfair policies? Is that because of countries--
--
    Senator Sanders. I think the reason is not that 
complicated. When you can hire people for 30 cents an hour, 
that is a pretty good reason to go abroad, and that is what 
people----
    Mr. Lew. Senator, I think it is very important as we look 
at trade agreements to ask whether the kinds of laws that 
protect worker rights, the kinds of laws that protect 
environmental standards are in effect.
    Senator Sanders. We heard that under President Clinton as 
well. He was wrong then, and I am afraid those who are touting 
that line are wrong today.
    We are in the midst of a horrendous recession right now; 16 
percent of our people are unemployed or underemployed. Clearly 
the immediate precipitating factor was the collapse on Wall 
Street. Do you believe that the deregulation of Wall Street 
pushed by people like Alan Greenspan and Robert Rubin 
contributed significantly to the disaster we saw on Wall Street 
several years ago?
    Mr. Lew. Senator, when we discussed it, as I mentioned to 
you, I do not consider myself an expert in some of these 
aspects of the financial industry. My experience in the 
financial industry has been as a manager, not as an investment 
adviser.
    My sense, as someone who has generally been familiar with 
these trends, is that the problems in the financial industry 
preceded deregulation. There was an increasing emphasis on 
highly abstract leveraged derivative products that got us to 
the point that in the period of time leading up to the 
financial crisis risks were taken. They were not fully 
embraced. They were not well understood.
    I do not personally know the extent to which deregulation 
drove it, but I do not believe that deregulation was the 
proximate cause. I would defer to others who are more expert 
about the industry to try and parse it better than that.
    Senator Sanders. Thank you, Mr. Lew. And thank you for the 
extra time, Mr. Chairman.
    Chairman Conrad. Let me just say I think these are very 
important points. My own assessment of what led to the collapse 
was a combination, really a toxic brew of overly loose fiscal 
policy, an explosion of debt in the previous administration 
when times were good, an overly loose fiscal policy following 
9/11, the Federal Reserve keeping interest rates abnormally low 
for an extended period of time, and the result being an overly 
loose fiscal policy and an overly loose monetary policy at the 
same time--something you rarely see in economic history--
coupled with deregulation.
    I think the Senator is entirely right. I think 
deregulation--part of that toxic brew--has a central 
responsibility in the near collapse. And I do not know how it 
can be otherwise.
    We had trillions of dollars of derivatives, exotic 
insurance products that were deployed to try to defend against 
people taking outsize risks. Major financial houses that were 
not satisfied with 11:1 leverage wanted 30:1 leverage and got 
30:1 leverage under the previous administration. Got 30:1 
leverage. It works great when things are going up. It does not 
work so good when things are going down. And the previous 
administration looked the other way. They absolutely did. I 
think the economic history of it is clear.
    I just read the book, by the way, ``The Big Short.'' If you 
want an interesting education on what occurred, read that book, 
``The Big Short.''
    Senator Merkley.
    Senator Merkley. Thank you very much, Mr. Chair. And Bear 
Stearns actually hit 40:1. In fact, went from 20:1 to 40:1 in a 
single year during that period. Just phenomenal.
    Chairman Conrad. The Senator is talking about leverage.
    Senator Merkley. Yes. Yes, 40:1 leverage.
    Chairman Conrad. There were firms that were well over 40:1 
leverage, which worked, which means if something you are 
betting on goes up a dollar, you make $40. It also means if it 
goes down a dollar, you lose $40.
    Senator Merkley. It means you crash overnight when the 
market turns, and you melt down the entire economy, and that is 
where we are now.
    I want to turn to a piece of the Oregon economy, which is 
an arrangement regarding our forests. In 1908, the Federal 
Government worked out a deal that said, hey, we are not--our 
forests take up big chunks of counties throughout Oregon, and 
in other States, and we are not paying any property taxes, and 
clearly you have to maintain the infrastructure, so we will 
have a 25-percent revenue-sharing arrangement for the timber 
cut.
    Well, along comes this century and a variety of 
environmental overlays have proceeded to take land that was 
specifically set aside, the ONC lands, for the counties, and 
essentially timber cannot be cut on it.
    And so a deal was worked in 2000 that extended until now in 
a few different iterations that said, We understand we are not 
allowing you to cut, we understand there is no revenue sharing, 
so we are going to now compensate by filling in that hole of 
those revenues that are needed for the infrastructure of the 
counties.
    This is a century-plus deal between the Federal Government 
and the communities. Oregon is dramatically affected; so are 
many other States. And President Obama said during his campaign 
that he understood this and that he would bring people 
together, that he would forge a long-term solution, that he was 
supportive.
    Well, this latest piece of this is expiring in 2011, and 
this contract needs to be honored between the Federal 
Government and the people of my State that have large tracts of 
forest.
    Are you prepared to make that happen?
    Mr. Lew. Senator, I am generally familiar with the issue 
and, if confirmed, I obviously would become much more familiar 
with the issue. In general, I know the question of what the 
impact of Federal policies are on districts is something that 
has been challenging to calculate what the right kind of 
compensation is. I would certainly commit to working through 
those issues, understanding them and working with you.
    Senator Merkley. I must say that is not satisfactory. Our 
President made a commitment. This commitment is central to the 
economies of my State. The Secretary of Agriculture is working 
on it; the Secretary of the Interior is working on it. But 
getting this into the budget is essential--that is being put 
together right now. And I would like you to come up to speed on 
this topic and have your commitment that you are going to get 
this done before you are confirmed because this is the 
lifeblood--33 of my 36 counties are profoundly affected by this 
long-term contract with the Federal Government over the use of 
the forest lands. Now, they would much prefer to be able to 
log. That creates jobs. But as long as the Federal rules have 
turned back that possibility, at a minimum the revenues 
necessary to operate the infrastructure of the county or 
contribute to that effort needs to be sustained in this deal.
    And so if you are not adequately familiar to make that 
commitment today, I am asking that you come up to speed on it. 
I certainly feel like it is essential that anyone heading up 
this position not only understand this historic structure, 
understand why it is essential, and plans to honor the contract 
that was developed between timber counties and the Federal 
Government.
    Mr. Lew. Senator, I certainly agree in principle that 
commitments made should be honored, and I have to confess that 
there are a number of details of the Federal budget that I have 
not focused on in the last 10 years with the same detail that I 
did when I was at OMB the last time. I can make the commitment 
to come up to speed quickly, and I would be happy to have 
appropriate interaction with you on it.
    Senator Merkley. I will look forward to that. Thank you.
    Thank you, Mr. Chair.
    Chairman Conrad. Thank you, Senator Merkley.
    Let me just say that I think Senator Merkley has expressed 
this very clearly and very forcefully to those of us on the 
Committee, and we understand the central importance this plays 
in the economy of his State, and I intend to be supportive of 
Senator Merkley on this issue. He has made very, very clear to 
the members of this Committee the importance of it to him and 
to his State. So I want to rivet the point.
    Senator Merkley. Thank you very much, Mr. Chair, and I 
appreciated your support when we put a space holder for this 
program in our budget plan. That was very helpful, and it 
recognizes the fact that this needs to be a contract honored.
    Chairman Conrad. And I have committed to the Senator on 
this matter and intend to absolutely keep that commitment.
    You know, there are these issues that are in each of our 
States that are critically important. I have an issue in my 
State that I want to raise as well, because we have a Federal 
working group that is considering options to dealing with the 
crisis in my State. The crisis is in the Devils Lake Basin. We 
have a lake that has gone up 30 feet in the last 17 years, and 
it is a lake that is three times the size of the District of 
Columbia. And there is nothing else like it anywhere in the 
country, to have a runaway lake that has gone from 49,000 acres 
to 180,000 acres. And it is now 6 feet from an uncontrolled 
release. This is after going up 30 feet in the last 17 years. 
It had gone up 3-1/5 feet last year, went up over 2 feet this 
year. We are now within 6 feet of having an uncontrolled 
release from this lake, which would create massive flooding 
problems not only in the Devils Lake Basin but for every city 
and town downstream, towns that have just had massive flooding 
2 years ago. If this were an uncontrolled release of water, 
their flood stages would be 5 feet above what they experienced 
in 2008, and the water would stay high for 30 days. Now, this 
is almost Biblical in terms of the threat to the eastern part 
of my State.
    I have had a series of hearings all across the State in 
every affected area. I have had a Flood Summit with every 
Federal agency that has a responsibility represented. We have 
asked the administration and they agreed to put together a 
Federal working group. OMB is a very important part of that 
working group. They are about to issue their report. I am 
extremely concerned about what I hear might be in that report. 
I have not seen anything in writing, but I can tell you that 
there are certain things that simply must be done. We must move 
additional water off that lake. We must change water quality 
provisions in order to do that. We must relax the water quality 
standards in order to be able to do that.
    There is no serious option, because if we do not do that, 
if we do not move more water off the west side of the lake 
where the water quality is dramatically better than out of the 
east end of the lake where an uncontrolled release would occur. 
It is very hard for people to get their minds around it. The 
water quality out of the east end of the lake is 5 times worse 
than the water quality out of the west side of the lake. So if 
there is an uncontrolled release of water out of the east end, 
we will face extremely serious consequences downstream. So it 
just makes common sense to release more water. We are already 
releasing water out of the west end through a State-operated 
outlet. But we are constrained by water quality issues. That 
simply must be addressed. We also must construct a structure on 
the east end to prevent an uncontrolled release that would be 
an absolute catastrophe.
    Now, some counsel, well, let us just have some more 
meetings and we will enter into more discussions. There is no 
time for that. We are now in a timeline--this next spring, the 
town of Minnewaukan, which is on the edge of the lake now--when 
all this started, it was 8 miles from the lake. Now Minnewaukan 
is virtually in the lake.
    So I now that you are not yet confirmed. You are not in a 
position to influence the outcome of this officially, this 
report. I would just say to you this to me is a matter of 
extraordinary importance to the people that I represent and to 
me.
    Mr. Lew. Senator, I remember the issue well from when I was 
at OMB the last time, and I worked with you and the delegation 
on issues related to Devils Lake at the time. I know there is a 
commission working on it, but I have not been involved with the 
commission. So you may know more than I do about where the 
Commission is heading. But I would look forward to continuing 
the conversation with you.
    Chairman Conrad. They have committed to issuing a report by 
the 20th of this month, and it would be an extremely serious 
matter if that is not an aggressive approach to dealing with 
this problem, because we are past the point of more 
conversations. We need action and it is absolutely imperative 
that it be done in the interest of everyone, those in the 
basin, those downstream.
    We had a meeting here with the mayors of all the affected 
communities, with the Governor of the State, and we were 
unanimous in our position. Unanimous. Very rare in today's 
political climate. Republicans, Democrats, local officials, 
county officials, State officials, the Federal delegation, 
absolutely unanimous with respect to what has to be done.
    With that, I want to indicate to members that we would like 
all written questions to be submitted by the end of business 
today. It is my intention that we move this nomination as 
expeditiously as possible. We have a 48-hour notice 
requirement. I will be visiting with Senator Gregg about when 
we give that notice. But it is my intention that we will vote 
on this early next week.
    I thank all the members for their attendance today, for 
their interest, for their courtesy. I thank Jack Lew for his 
willingness to serve. We certainly appreciate that, and for his 
family as well.
    The hearing will be adjourned.
    Mr. Lew. Thank you, Mr. Chairman.
    [Whereupon, at 10:48 a.m., the Committee was adjourned.]



   STATEMENT OF BIOGRAPHICAL AND FINANCIAL INFORMATION REQUESTED OF 
                         PRESIDENTIAL NOMINEES

                      A. BIOGRAPHICAL INFORMATION

1. Name: Jacob Joseph Lew/Jack Lew

2. Position to which nominated: Director Office of Management 
and Budget

3. Date of nomination: August 5, 2010

4. Address: (REDACTED)

5. Date and place of birth: New York, NY; August 29, 1955

6. Martial status: Married to Ruth N. Schwartz

7. Names and ages of children: (REDACTED)

8. Education:

Carleton College 9/72 - 6/73
Harvard College 9/75 - 6/78 (AB, 1978)
Georgetown University Law Center 8/79 - 9/83 (JD, 1983)

9. Employment Record: 

- City of Boston, Office of Management and Budget, Deputy 
Director of Program Analysis, 1978-1979 (Boston, MA)

-US House Democratic Steering and Policy Committee (Washington, 
DC)
Deputy Director, 1979-1985
Executive Director, 1985-1987

-Van Ness, Feldmen and Curtiss (Washington, DC)
Attorney, 1987
Partner, 1988-1991

-Democratic National Committee, Campaign '88 Issues Director, 
1988 (Washington, DC)

-Center for Middle East Research, Executive Director, 1992-1993 
(Washington, DC)

-White House, Special Assistant to the President, 1993-1994 
(Washington, DC)

-Office of Management and Budget (Washington, DC)

Assistant Direct, 1994
Executive Associate Director, 1995
Deputy Director, 1995-1998
Director, 1998-2001

-Georgetown University Public Policy Institute, Research 
Professor, 2001 (Washington, DC)

-New York University, Executive Vice President and Clinical 
Professor of Public Policy, 2001-2006 (New York, NY)

-Citigroup (New York, NY)

Managing Director and Chief Operating Officer of Global Wealth 
Management division, 2006-2007
Managing Director and Chief Operating Office of Citi 
Alternative Investments division, 2008-2009

-Department of State, Deputy Secretary of State for Management 
and Resources, 2009-present (Washington, DC)

10. Government Experience: 

White House Commission on Aviation Security, Member, 1997
Corporation for National and Community Service, Board Member, 
2004-2008 (Washington, DC)

11. Business relationships: 

Kaiser Family Foundation, Trustee (2007-2009)
College Board Task Force on Higher Education Reform (2006)
Center on Budget and Policy Priorities, Board Member (2008-
2009)
Tobin Project Board Member (2006-2009)
Hamilton Project, Brookings Institution, Advisory Board Member 
(2006-2009)
City Year New York, Advisory Board Chair (2003-2009)
Institute for Policy Integrity, NYU Law, Advisory Board Member 
(2008-2009)
IDT Corporation, Board Member (2001-2003)
CVCI Private Equity Fund, Limited Partner (207-present)
Citigroup, Managing Director (2006-2009)

12. Memberships:

-Brookings Institution, Hamilton Project, Advisory Board Member 
(2006-2008
-Hebrew Institute of Riverdale, Member (2001-present)
-Council on Foreign Relations, Member (2006-2008)
-National Academy of Social Insurance, Member (2002-208)
-Council on Excellence in Government, Member (2001-2008)
-Beth Sholom Congregation and Talmud Torah (1992-present)

13. Political affiliations and activities:

(a) List all offices with a political party which you have held 
or any public office for which you been a candidate.

Democratic National Committee, Campaign '88 Issues Director, 
1988 (Washington, DC)

(b) List all memberships and offices hild in and services 
rendered to all political parties or election committees during 
the last 10 years.

None.

(c) Itemize all political contributions to any individual, 
campaign organization, political party, political action 
committee, or similar entity of $50 or more for the past 5 
years.

Jacob Lew:

-2/8/06-Friends of Hillary Clinton-$1000
-2/8/06-Judy Feder for Congress-$1000
-3/22/06-Joseph Courtney for Congress-$250
-7/26/06-Friends of Joseph Lieberman-$1000
-10/20/06-Judy Feder for Congress-$1000
-2/24/07-Rangel for Congress-$1000
-3/2/07-Hillary Clinton for President-$2300
-9/25/07-Judy Feder for Congress-$250
-2007-Citigroup PAC-$2080
-8/28/08-Friends of Hillary Clinton-$2300
-8/31/08-Obama for America-$2300
-10/24/08-Judy Feder for Congress-$250
-2008-Citigroup PAC-$4784

Ruth Schwartz:

-3/2/07-Hillary Clinton for President-$2300
-2/7/08-Hillary CLinton for President-$2300

14. Honors and awards:

Council on Foreign Relations (member)
National Academy of Social Insurance (member)
Council on Excellence in Government (member)

15. Published writings:

-US Department of State, The Ambassador's Review: Positioning 
the State Department to Achieve the Obama Administration's 
Policy Goals (Spring 2009)

-Center for American Progress, Change for America, Chapter: 
Ensuring Fiscal Responsibility and Government Accountability 
(with Sally Katzen) (2008)
-Center on Budget and Policy Priorities, A Balanced Approach to 
Restoring Fiscal Responsibility (with Henry Aaron, et al) (July 
9, 2008)
-``A Budget That Doesn't Add Up,'' The New York Times (March 1, 
2001)
-``Medicare: A Clinton Success,'' The Washington Post (March 
19, 1999)
-``Using the Surplus to Invest in Our future,'' The Hill (March 
3, 1999)
-``A Budget for America's Cities,'' Nation's City Weekly 
(Febrary 22, 1999)
-``Our Debt to the Future,'' The Washington Post (with Robert 
E. Rubin) (February 4, 1999)

16. Speeches:

August 5, 2010-Remarks at Center for Strategic and 
International Studies (CSIS) on ``The Next Phase in America's 
Relationship with Iraq''
July 27, 2010-Press Conference with Admiral Michael Mullen, 
Iraq
July 23, 2010-Remarks-Iraq Transition Conference, National 
Defense University
June 2, 2010-Remarks at the Association for Safe International 
Road Travel (ASIRT) Dinner
April 21, 2010-Remarks at the First Annual U.S.-African Union 
High Level Bilateral Meetings
April 16, 2010-Special State Department Briefing, Subject: Jack 
Lew and Rajiv Shah's Trip to Afghanistan and Pakistan
March 25, 2010-Remarks at the Signing a Letter of Intent 
Regarding Cooperation in Construction of Priority Roads in 
Pakistan Ceremony
March 24, 2010-Plenary Remarks at the Opening Session of the 
U.S.-Pakistan Strategic Dialogue
March 18, 2010-Speech at the Center for Strategic and 
International Studies: Rollout of the Smart Global Health 
Policy's Final Report
March 4, 2010-Council on Foreign Relations, Closed Session
February 1, 2010-Remarks at DipCorps
February 1, 2010-Special State Department Briefing, Subject: 
2011 State Department Budget
January 6, 2010-Remarks to National Institute of Health, 
``Plans for Research and Innovation in the Global Health 
Initiative''
December 9, 2009-Remarks to InterAction
December 1, 2009-Remarks at the World Bank, Subject: World Aids 
Day
November 19, 2009-Town Hall Meeting with Students, Staff and 
Trainers the Camp Atterbury-Muscatatuck Center for Complex 
Operations
November 9, 2009-Media Roundtable at Camp Atterbury-Muscatatuck 
Center for Complex Operations
October 26, 2009-Special State Department Briefing, Subject: 
State Department Assistance to Military Efforts in Afghanistan 
and Pakistan
October 14, 2009-Remarks to U.S. Global Leadership Coalition
October 8, 2009-Remarks at National Defense University 
Interagency Symposium
September 11, 2009-Special State Department Briefing, Subject: 
Recent Trip to South Asia (Iraq, India, Pakistan and 
Afghanistan)
September 4, 2009-Press Roundtable at The American Center, New 
Delhi, India
July 27, 2009-U/S China S&ED Pleanary Remarks
July 10, 2009-Regular State Department Briefing, Subject: 
Quadrennial Diplomacy and Development Review
June 24, 2009-Opening Remarks for Deputy Secretary Lew's Press 
Availability, OECD, Paris
June 4, 2009-Remarks at the Conference on the Future of Foreign 
Ministries, Panel 2: Aligning the Ministry with Government 
Priorities, Toronto, Canada
June 2, 2009-GACI Board of Directors Reception, World Bank
May 5, 2009-The White House Regular Briefing, Subject: Global 
Health Strategy
April 30, 2009-Press Conference, Subject: Swine Flu, or H1N1
March 4, 2009-Remarks at the Center for U.S. Global Engagement 
Meeting, Subject: Putting Smart Power to Work
December 9, 2009-Hearing of the Senate Foreign Relations 
Committee, Subject: The New Afghanistan Strategy
December 3, 2009-Hearing of the House Armed Services Committee, 
Subject: Afghanistan: The Results of the Strategic Review, Part 
I
May 13, 2009-Hearing of the House Foreign Affairs Committee, 
Subject: Building Capacity to Protect U.S. National Security: 
The Fiscal Year 2010 International Affairs Budget
April 22, 2010-Hearing of the Senate Foreign Relations 
Committee, Subject: Promoting Global Food Security: Next Steps 
for Congress and the Administration
January 22, 2009-Hearing of the Senate Foreign Relations 
Committee, Subject: Nominations of James Steinberg and Jacob 
Lew for Deputy Secretary of State

17. Selection:

(a) What do you believe in your background or employment 
experience affirmatively qualifies for this particular 
appointment?

I believe the sum of my experience, including prior service as 
OMB Director, make me well qualified for this nomination. If 
confirmed, I look forward to undertaking the responsibilities 
of this office.

(b) Were any conditions, expressed or implied, attached to your 
nomination? If so, please explain.

No.

(c) Have you made any commitment(s) with respect to the 
policies and principles you will attemt to implement in the 
position for which you have been nominated? If so, please 
identify such commitment(s) and all persons to whom such 
commitments have been made.

No.

                   B. FUTURE EMPLOYMENT RELATIONSHIPS

1. Will you sever all connections with your present employers, 
business firms, business associations or business organizations 
if you are confirmed by the Senate?

If confirmed, I will remain an employee of the US Government.

2. Do you have any plans, commitments or agreements to pursue 
outside employment, with or without compensation, during your 
service with the government? If so, please explain.

No.

3. Do you have any plans, commitments or agreements after 
completing government service to resume employment, affiliation 
or practice with your previous employer, business firm, 
association or organization?

No.

4. Has anybody made a commitment to employ your services in any 
capacity after you leave government service? If so, please 
identify such person(s) and commitment(s) and explain.

No.

5. If confirmed, do you expect to serve out your full term or 
until the next Presidential election, whichever is applicable? 
If not, please explain.

Yes.

                   C. POTENTIAL CONFLICTS OF INTEREST

1. If confirmed, are there any issues from which you may have 
to recuse or disqualify yourself because of a conflict of 
interest or the appearance of a conflict of interest? If so, 
please explain.

In connection with the nomination process, I have consulted 
with the Office of Government Ethics and the Office of 
Management and Budget's designated agency ethics official to 
identify potential conflicts of interest. Any potential 
conflicts of interest will be resolved in accordance with the 
terms of an ethics agreement that I have entered into with 
OMB's designated agency ethics official and that has been 
provided to this Committee. I am not aqare of any other 
potential conflicts of interest.

2. Identify and describe all investments, obligations, 
liabilities, business relationships, dealings, financial 
transactions, and other financial relationships which you 
currently have or have had during the last 10 years, whether 
for yourself, on behalf of a client, or acting as an agent, 
that could in any way constitute or result in a possible 
conflict of interest in the position to which you have been 
nominated.

In connection with the nomination process, I have consulted 
with the Office of Government Ethics and the Office of 
Management and Budget's designated agency ethics official to 
identify potential conflicts of interest. Any potential 
conflicts of interest will be resolved in accordance with the 
terms of an ethics agreement that I have entered into with 
OMB's designated agency ethics official and that has been 
provided to this Committee. I am not aqare of any other 
potential conflicts of interest.

3. Describe any activity during the past 10 years in which you 
have engaged for the purpose of directly or indirectly 
influencing the passage, defeat or modification of any 
legislation or affecting the administration and execution of 
law or public policy other than while in a federal government 
capacity.

Apart from my duties as a government official during the past 
10 years, I have had minimal engagement in legislation and 
policy-making. While employed by New York University, I had 
occasional meetings with members of congress and local 
government officials on education policy.

4. Do you agree to have written opinions provided to the 
Committee by the designated agency ethics officer of the Office 
of Management and Budget and by the Office of Government Ethics 
concerning potential conflicts of interest or any legal 
impediments to your serving in this position?

Yes.

5. Explain how you will resolve potential conflicts of 
interest, including any disclosed by your response to the above 
questions.

In connection with the nomination process, I have consulted 
with the Office of Government Ethics and the Office of 
Management and Budget's designated agency ethics official to 
identify potential conflicts of interest. Any potential 
conflicts of interest will be resolved in accordance with the 
terms of an ethics agreement that I have entered into with 
OMB's designated agency ethics official and that has been 
provided to this Committee. I am not aqare of any other 
potential conflicts of interest.

                            D. LEGAL MATTERS

1. Have you ever been disciplined or cited for a breach of 
ethics for unprofessional conduct by, or been the subject of a 
complaint to any court, administrative agency, professional 
association, disciplinary committee, or other professional 
group? If so, provide details.

No.

2. To your knowledge, have you ever been investigated, 
arrested, charged or convicted (including pleas of guilty or 
nolo contendre) by any Federal, State, or other law enforcement 
authority for violation of any Federal, State, county or 
municipal law, regulation, or ordinance, other than a minor 
traffic offense? If so, provide details.

No.

3. Have you or any business of which you are or were an 
officer, director or owner ever been involved as a party of 
interest in any administrative agency proceeding or civil 
litigation? If so, provide details.

As large institutions, Citigroup and New York University are 
routinely involved in litigation, and were during the periods I 
was working for them. However, to my knowledge, no suit 
involved allegations related to my own conduct, and I was not 
involved in any legal proceedings.

4. Please advise the Committee of any additional information, 
favorable or unfavorable, which you feel should be considered 
in connection with our nomination.

None.

                     E. TESTIFYING BEFORE CONGRESS

1. If confirmed, are you willing to appear and testify before 
any duly constituted committee of the Congress on such 
occasions as you may be reasonably requested to do so?

Yes.

2. If confirmed, are you willing to provide such information as 
may be requested by any committee of the Congress?

Yes.

                           F. FINANCIAL DATA

    All information requested under this heading must be 
provided for yourself, your spouse, and your dependents.

1. Please provide personal financial information not already 
listed on the SF278 Financial Disclosure form that identifies 
and states the value of all:

    (a) assets of $10,000 or more held directly or indirectly, 
including but not limited to bank accounts, securities, 
commodities futures, real estate, trusts (including the terms 
of any beneficial or blind trust of which you, your spouse, or 
any of your dependents may be a beneficiary), investments, and 
other personal property held in a trade or business or for 
investment other than household furnishings, personal effects, 
clothing, and automobiles; and
(REDACTED)

    (b) liabilities of $10,000 or more including but not 
limited to debts, mortgages,loans, and other financial 
obligations for which you, your spouse, or your dependents have 
a direct or indirect liability or which may be guaranteed by 
you, your spouse, or your dependents; and for each such 
liability indicate the nature of the liability, the amount, the 
name of the creditor, the terms of payment, the security or 
collateral, and the current status of the debt repayment. If 
the aggregate of your consumer debts exceeds $10,000, please 
include the total as a liability. Please include additional 
information, as necessary, to assist the Committee in 
determining your financial solvency. The Committee reserves the 
right to request additional information if a solvency 
determination cannot be made definitively from the information 
provided.

(REDACTED)

2. List sources, amounts and dates of all anticipated receipts 
from deferred income arrangements, stock options, executory 
contracts and other future benefits which you expect to derive 
from current or previous business relationships, professional 
services and firm memberships, employers, clients and 
customers. If dates or amounts are estimated, please so state. 
Please only include those items not listed on the SF 278 
Financial Disclosure form.

(REDACTED)

3. Provide the identity of and a description of the nature of 
any interest in an option, registered copyright, or patent held 
during the past 12 months and indicate which, if any, from 
which you have divested and the date of divestment unless 
already indicated on the personal financial statement.

(REDACTED)

4. Provide a description of any power of attorney which you 
hold for or on behalf of any other person.

(REDACTED)

5. List sources and amounts of all gifts exceeding $500 in 
value received by you, your spouse, and your dependents during 
each of the last three years. Gifts received from members of 
your immediate family need not be listed.

(REDACTED)

6. Have you filed a Federal income tax return for each of the 
past 10 years? If not, please explain.

(REDACTED)

7. Have your taxes always been paid on time including taxes on 
behalf of any employees? If not, please explain.

(REDACTED)

8. Were all your taxes, Federal, State, and local, current 
(filed and paid) as of the date of your nomination? If not, 
please explain.

(REDACTED)

9. Has the Internal Revenue Service or any other state or local 
tax authority ever audited your Federal, State, local, or other 
tax return? If so, what resulted from the audit?

(REDACTED)

10. Have any tax liens, either Federal, State, or local, been 
filed against you or against any real property or personal 
property which you own either individually, jointly, or in 
partnership? If so, please give the particulars, including the 
date(s) and the nature and amount of the lien. State the 
resolution of the matter.

(REDACTED)

11. Provide for the Committee copies of your Federal income tax 
returns for the past 3 years. These documents will be made 
available only to Senators and staff persons designated by the 
Chairman and Ranking Minority Member. They will not be 
available for public inspection.

These documents are provided to the committee.

12. Have you ever been late in paying court-ordered child 
support? If so, provide details.

(REDACTED)

13. Have you ever filed for bankruptcy or been a party to any 
bankruptcy proceeding? If so, provide details.

(REDACTED)
    PRE-HEARING QUESTIONS FROM CHAIRMAN KENT CONRAD WITH 
ANSWERS BY JACOB J. LEW

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    PRE-HEARING QUESTIONS FROM RANKING MEMBER JUDD GREGG WITH 
ANSWERS BY JACOB J. LEW

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EXECUTIVE BUSINESS MEETING ON THE NOMINATION OF THE HONORABLE JACOB J. 
       LEW TO BE DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET

                      THURSDAY, SEPTEMBER 23, 2010


                                       U.S. Senate,
                                   Committee on the Budget,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 12:44 p.m. in 
Room S-219, The Capitol, Hon. Kent Conrad Chairman of the 
Committee presiding.
    Present: Senators Conrad, Murray, Wyden, Feingold, 
Stabenow, Cardin, Sanders, Whitehouse, Warner, Merkley, Begich, 
Goodwin, Gregg, Enzi, Sessions, Bunning, Ensign, and Alexander.
    Also present: Ronald Storhaug, Clerk.
    Chairman Conrad. The meeting of the committee will come to 
order. We're meeting to vote on the nomination of Jack Lew to 
be next Director of the Office of Management and Budget. We 
will withhold statements at this time. I do intend to support 
the nomination. I hope others will as well. Unless Senator 
Gregg has something to add, we'll move directly to a vote on 
the nomination.
    Senator Gregg. I suggest we vote. I intend to vote for him.
    Chairman Conrad. The Clerk will call the roll.
    The Clerk: Mrs. Murray.
    Senator Murray. Aye.
    The Clerk: Mr. Wyden.
    Senator Wyden. Aye.
    The Clerk: Mr. Feingold.
    Chairman Conrad. Aye by proxy.
    The Clerk: Mr. Nelson.
    [No response.]
    The Clerk: Ms. Stabenow.
    Senator Stabenow. Aye.
    The Clerk: Mr. Cardin.
    Senator Cardin. Aye.
    The Clerk: Mr. Sanders.
    Senator Sanders. No.
    The Clerk: Mr. Whitehouse.
    Senator Whitehouse. Aye.
    The Clerk: Mr. Warner.
    Senator Warner. Aye.
    The Clerk: Mr. Merkley.
    Senator Merkley. Aye.
    The Clerk: Mr. Begich.
    Senator Begich. Aye.
    The Clerk: Mr. Goodwin.
    [No response.]
    The Clerk: Mr. Gregg.
    Senator Gregg. Aye.
    The Clerk: Mr. Grassley.
    [No response.]
    The Clerk: Mr. Enzi.
    Senator Gregg. Aye by proxy.
    The Clerk: Mr. Sessions.
    Senator Sessions. Aye.
    The Clerk: Mr. Bunning.
    Senator Bunning. Aye.
    The Clerk: Mr. Crapo.
    Senator Gregg. Aye by proxy.
    The Clerk: Mr. Ensign.
    Senator Ensign. Aye.
    The Clerk: Mr. Cornyn.
    Senator Gregg. Aye by proxy.
    The Clerk: Mr. Graham.
    Senator Gregg. Aye by proxy.
    The Clerk: Mr. Alexander.
    Senator Alexander. Aye.
    The Clerk: Mr. Chairman.
    Chairman Conrad. Aye.
    Senator Gregg. Would the Clerk note that Mr. Grassley votes 
aye by proxy.
    Chairman Conrad. And we will leave the vote open for the 
next 15 minutes to allow other members to cast their vote.
    Thank you all.
    [Pause.]
    Senator Feingold. Aye.
    [Pause.]
    Senator Goodwin. Aye.
    Chairman Conrad. Senator Nelson votes aye by proxy.
    The vote is?
    The Clerk: 22 to 1.
    [Whereupon, at 12:58 p.m., the meeting was adjourned.]