Floor Statements

I thank the gentleman.

There are two issues before Congress: one is the reassertion of its responsibility under article I and the War Powers Act; number two is the decision on the limited use of force for humanitarian missions in Libya. The Hastings resolution accomplishes both.

It reasserts our authority under article I and the War Powers Act. It says, yes, we do support limited intervention with a role for the U.S. in saving lives in Libya. That mission is necessary to avert a humanitarian disaster. Two, the mission has broad international support, including from the Arab League. Three, the U.S. role is limited in scope: no boots on the ground. And, finally, we are, by acting, asserting our responsibility under the War Powers Act and our responsibility under article I.

Mr. Chairman, I have an amendment at the desk.

Mr. Chairman, oil companies, of course, benefit from significant subsidies. This amendment would require that applicant oil companies for permits to drill would disclose as part of their application the taxpayer-provided subsidies that they enjoy. They would make that specific as to the leases for which they're seeking permission to drill.

Now, we've had a long debate, Mr. Chairman, in this body about the wisdom of subsidies to oil companies and we have a strong contingent in this body that favors those subsidies, making arguments that it's good for the economy, good for producing energy, and beneficial to the taxpayer. We have many in this body, myself among them, who believe that these subsidies are too rich and they're unnecessary.

When oil company profits are a trillion dollars in the past year, when the price of oil has been hovering between $95 and $113 a barrel, when the companies have enjoyed record profits this year, the question arises by me and by many as to whether or not it makes sense to ask the taxpayers to reach into their pockets and to provide subsidies to a mature industry--an important industry, but a mature industry and a very profitable industry with a very high-priced product where they can generate and are succeeding in generating significant profits for that industry.

This is not about whether they're doing good or they're doing bad--we have oil companies that are doing their job--but it is about whether taxpayers should be, at the very minimum, made explicitly aware as to how much it is they're being asked to subsidize oil companies when they seek these leases.

One of the challenges we have that has been a major point by the new majority is that we have a budget deficit and we've got to control spending. Spending is both on the direct appropriations side and what's called here the tax expenditure side. I think our constituents would know that as tax breaks. Why not take every action we can when it comes to spending and it comes to tax breaks to mobilize the awareness of the American people so they know what it is we're spending their money on, whether it's for a spending program or a tax break subsidy.

So this is about disclosure. It's about unleashing the power of knowledge, making it available to the American people so they can tell their representatives, You know what? We think that subsidy is a pretty good idea, or, You know what? We don't have to continue to be shelling out money for that subsidy. We want to go in a new direction.

So, Mr. Chairman, my amendment is about empowering the democratic objectives of this country.

I reserve the balance of my time.

I would just say this to my colleague: You and I disagree, obviously, on the subsidies. We don't disagree that the oil industry does provide good jobs to a lot of American families and a product that we need to keep our economy going. But there's a reasonable basis for disagreement about whether a particular subsidy has outlived its useful life. It is real money out of the pocket of the taxpayer.

While the suggestion is made that it would be tough to figure out what the subsidies are, these companies that enjoy these subsidies have accountants who scour the Tax Code to make certain that every legally available subsidy is one that they, in fact, do take. They actually owe that due diligence and that effort to their shareholders to make certain that they get maximum value for the shareholders, and that includes paying not a nickel more in taxes than they're legally required to pay by the rules that this House of Representatives sets.

So this is not about whether you're for or against the tax subsidies as they exist--we disagree on that--but it is about saying to the American taxpayer, when the company is filling out

this application, after they've done their tax filings, which they do every year, they can specify what the benefit is they are getting courtesy of the United States taxpayer. That's really what this is about.

What is the problem with letting people know how their money is being spent?

I yield back the balance of my time.

Mr. Chairman, I demand a recorded vote.

I move to strike the last word.

Madam Chairman, I rise in support of the amendment, and I do it with great deference and respect to my leader, the ranking member of the Agriculture Committee.

But here's the issue. One, at what point do we have taxpayers given relief from these $6 billion subsidies to an industry? The ethanol industry gets 45 cents a gallon. They get the benefit of 54 cents as a protective tariff against the import of, among others, Brazilian ethanol, and then they get a mandate requiring that they put ethanol in their vehicles. Now, as Mr. Flake mentioned, that's a trifecta: subsidy, protective tariff, and a mandate. No other industry has that level of Federal taxpayer and legislative benefit. We just don't have it.

Second, this is helping parts of rural America. I listened carefully to what Mr. Peterson said, but it is causing significant difficulties in my State for our dairy farmers who purchase grain. One of the rising costs for them is the cost of grain, and one of the factors in that are these tariff barriers and mandates that are pushing up their costs. So it's making life on the dairy farm pretty tough.

Now, the final thing is that folks who use small engines like chainsaws or weed whackers or lawn mowers or boats where they don't run that engine continuously as we do our cars are complaining--and mechanics are backing them up--that the ethanol is doing real damage to those engines.

So it's time, I think, for this Congress to step back and give the taxpayer some relief. Ethanol, if it's going to sink or swim, it should be doing it on its own merits at this point.

I yield to my friend from Arizona (Mr. Flake).

I thank you, Mr. Speaker.

Members of the House, the default clock is ticking. We face a default on August 2 if we do not raise the debt ceiling. Raising the debt ceiling is always a difficult vote. It is difficult because we have to do something that's necessary but not popular.

Now, the question of the debt ceiling is about paying obligations already incurred. It's not about giving this House of Representatives permission to spend more money. But what has happened with this debt ceiling debate is that it is being used as leverage by both sides to try to get its way on a long-term budget resolution, and the reality is that this country needs both. It needs, number one, to have a long-term resolution on its fiscal situation, but, number two--this is the immediate need--it has to pay its bills.

America is a great country. It has always paid its bills, and the debt ceiling is about that and nothing more. Incidentally, those bills are ones that have been incurred by Congresses that many of us were never part of. And it's not a question of whether it's a bill that you would have supported incurring the expense for: the Iraq war, the Afghanistan war, the Medicare prescription part D, the two cuts in taxes during the Bush administration, all of which were on the credit card. I was against those, but those are obligations that we have and we must pay them.

The risk of default is enormous. Every increase in the interest rate of 1 percent will cost the American taxpayers $160 billion. The default clock is ticking.

Now, 2 weeks ago the majority brought to the floor a clean debt ceiling bill for the purpose of defeating it, and immediately upon bringing this bill to the floor and defeating it, with unanimous Republican opposition and many Democrats voting no, Members went back to their offices and called Wall Street and said, Just kidding. We will raise the debt ceiling but we wanted to send a signal.

We are playing with fiscal fire here. You know, it's fine to negotiate, but negotiations cannot lead to default.

Mr. Speaker, if we in this Congress, with the Republican majority now leading the way, fail to honor the Nation's obligations by making good on our responsibility to pay our bills, the bond market will work its will and we will lose our AAA credit rating, and we will do enormous damage to this economy.

This is not about a Democrat or Republican speaking. Let me quote Chairman Bernanke and a few others who commented on the urgency of paying our bills. Chairman Bernanke just yesterday said that failure to raise the debt ceiling would create fundamental doubts about the creditworthiness of the United States and damage the special role that the dollar and the Treasury securities have in the global market. Now, I understand the desire to use the debt limit deadline to force some necessary and difficult fiscal policy adjustments, Mr. Bernanke said, but the debt limit is the wrong tool for that important job.

A few other people commenting on this:

JPMorgan CEO Jamie Dimon: A default would be a moral disaster. It will dwarf Lehman. Every single company with treasuries, every insurance fund, every requirement that--it will start snowballing, automatic, if you don't pay your debt. There will be default by rating agencies. All short-term financing will disappear. That's Jamie Dimon of JPMorgan.

The Chamber of Commerce: Failure to raise the debt ceiling would create uncertainty and fear and threaten the credit rating of the United States.

Moody's Rating Service on downgrading America's rating: Since the risk of continuing stalemate has grown, if progress in negotiations is not evident by the middle of July, such a rating action is likely.

Fitch Rating Service: Failure to raise the debt ceiling in a timely manner would imply a crisis of governance that could imperil the U.S.'s AAA status.

So we have two problems. We have a long-term problem that requires resolution, a long-term fiscal plan, but we have an immediate problem, and that is to protect the integrity of America's reputation for paying its bills.

If we have a downgrade in our rating, it's going to affect the interest rates that we pay, and that's going to hurt folks in Republican districts. It's going to hurt folks in Democratic districts who have no power to do anything.

We must raise our debt. We must pay our bills.

Mr. Speaker, this Congress and this country face two great fiscal challenges. One is long term, and one is urgent and immediate. Long term, we know we have to restore balance to our budget, and negotiations are under way in an effort to accomplish that.

There are significant differences in approach. Do you follow the outlines of the Ryan budget, which basically cut taxes for very wealthy Americans in the hope that will create jobs and pay for that by slashing or ending Medicare? Or do you proceed along the outline in the Obama budget which essentially would put everything on the table, including the Pentagon and including revenues?

But either way, the urgent and immediate responsibility is that we pay our bills. And either side that engages in a game of chicken with the obligation of this country to maintain its full faith and credit is playing with fiscal fire and using a loaded gun for a game of Russian roulette. That gun is pointed at the heart of the American economy.

America pays its bills. We must do that and do whatever is required in order to maintain our reputation for doing so.

I thank the gentleman.

Mr. Speaker, I signed that letter, I led that letter, and I will tell you why I did. America faces two challenges. One is we must pay our bills. Whether those bills were incurred for a war that you supported or you opposed; whether those bills were incurred by a Congress you served in or you didn't; whether it was for a prescription drug program that you were for or against, a bill incurred, an obligation incurred, is an obligation that must be paid. That is the fundamental responsibility that I acknowledge as a citizen, that I acknowledge as an American, that I acknowledge as a Congressman.

Second, this question of a long-term deficit reduction plan, we need it. You are right. We understand that.

Where is it?

You have the opportunity in this legislation to present your plan that will get us on a glide path to fiscal balance. It's not here, suggesting either you don't have a plan or the plan you want to present doesn't have the support of the American people.

We are playing Russian roulette with a loaded gun in the American economy, and the deficit clock is ticking. This requires a substantial response. The approach taken, a suspension vote, trivializes both our short-term obligation to pay our bills and our long-term obligation to have a long-term deficit reduction plan.

And the fact that this is done, being sponsored by folks who immediately say they are against what they proposed and then quietly making phone calls to Wall Street saying they are for what they just voted against, is what is Washington business as usual that people are tired of and is not solving our problem.

The default clock is ticking.

I thank the gentleman from Utah.

Members of the Committee, a test of a great democracy is its capacity to make the grave decision to send its citizens to war. Such a decision was made after the attack on September 11 of 2001. It was a bipartisan decision. It was made for the right reasons at the right time and for the right result.

Al Qaeda was in Afghanistan. Osama bin Laden planned and executed the

9/11 mission from Afghanistan. And we sent our soldiers to war. Vermont soldiers and soldiers from all around the country sacrificed bravely and served well.

But an equally grave challenge and test for a democracy is whether once that machinery of war has been put in gear, when circumstances change as the national security requires, can that democracy amend its decision, amend its policy as conditions have changed?

We are at that moment today. It is a bipartisan question that faces us all. And the amendment that Mr. Chaffetz and I offer suggests that the policy that we are now pursuing, nation building in Afghanistan, is no longer the policy that is either financially sustainable nor in our best national security interests.

There are three reasons: number one, the threat of al Qaeda has diminished in Afghanistan; the threat of terrorism in the world has not. This is not a nation state-centered threat. It is dispersed and decentralized. Mr. Chaffetz and I say let us have a decentralized and dispersed response.

The tactics that were so successful in eliminating Osama bin Laden, excellent and coordinated intelligence and excellent and fierce special forces, was successful. Mr. Chaffetz and I, in our amendment, believe it is time for America to move from nation-state building to counterterrorism.

Second, the situation in Afghanistan with an unreliable partner, incredible corruption that has been going from bad to worse, does not allow our military or our taxpayers to have any confidence that that nation-building strategy can be successful.

So we call upon Congress to face this grave national security question from the perspective of is it time to change.

Mr. Chair, today I want to highlight a critical issue facing the Intelligence Community: increasing reliance on contractors.

A 2010 Washington Post story reported that 30 percent of the workforce in our intelligence agencies is contractors. Furthermore, the Post estimated that out of 854,000 people with top-secret clearances, 265,000 are contractors. I encourage my colleagues to read this eye opening article.

These startling facts cause me great concern--we've learned the hard way time and time again what happens when we fail to monitor the work of federal contractors. The federal government has the responsibility to maintain its commitment to monitoring their use--with special attention made to the evolving nature of their work and the associated national security risks inherent to outsourcing these tasks. I look forward to working with the Select Committee on Intelligence to achieve this goal.

[From the Washington Post, July 20, 2010]

National Security, Inc.

(By Dana Priest and William M. Arkin)

In June, a stone carver from Manassas chiseled another

perfect star into a marble wall at CIA headquarters, one of

22 for agency workers killed in the global war initiated by

the 2001 terrorist attacks.

The intent of the memorial is to publicly honor the courage

of those who died in the line of duty, but it also conceals a

deeper story about government in the post-9/11 era: Eight of

the 22 were not CIA officers at all. They were private

contractors.

To ensure that the country's most sensitive duties are

carried out only by people loyal above all to the nation's

interest, federal rules say contractors may not perform what

are called ``inherently government functions.'' But they do,

all the time and in every intelligence and counterterrorism

agency, according to a two-year investigation by The

Washington Post.

What started as a temporary fix in response to the

terrorist attacks has turned into a dependency that calls

into question whether the federal workforce includes too many

people obligated to shareholders rather than the public

interest--and whether the government is still in control of

its most sensitive activities. In interviews last week, both

Defense Secretary Robert M. Gates and CIA Director Leon

Panetta said they agreed with such concerns.

The Post investigation uncovered what amounts to an

alternative geography of the United States, a Top Secret

America created since 9/11 that is hidden from public view,

lacking in thorough oversight and so unwieldy that its

effectiveness is impossible to determine.

It is also a system in which contractors are playing an

ever more important role. The Post estimates that out of

854,000 people with top-secret clearances, 265,000 are

contractors. There is no better example of the government's

dependency on them than at the CIA, the one place in

government that exists to do things overseas that no other

U.S. agency is allowed to do.

Private contractors working for the CIA have recruited

spies in Iraq, paid bribes for information in Afghanistan and

protected CIA directors visiting world capitals. Contractors

have helped snatch a suspected extremist off the streets of

Italy, interrogated detainees once held at secret prisons

abroad and watched over defectors holed up in the Washington

suburbs. At Langley headquarters, they analyze terrorist

networks. At the agency's training facility in Virginia, they

are helping mold a new generation of American spies.

Through the federal budget process, the George W. Bush

administration and Congress made it much easier for the CIA

and other agencies involved in counterterrorism to hire more

contractors than civil servants. They did this to limit the

size of the permanent workforce, to hire employees more

quickly than the sluggish federal process allows and because

they thought--wrongly, it turned out--that contractors would

be less expensive.

Nine years later, well into the Obama administration, the

idea that contractors cost less has been repudiated, and the

administration has made some progress toward its goal of

reducing the number of hired hands by 7 percent over two

years. Still, close to 30 percent of the workforce in the

intelligence agencies is contractors.

``For too long, we've depended on contractors to do the

operational work that ought to be done'' by CIA employees,

Panetta said. But replacing them ``doesn't happen overnight.

When you've been dependent on contractors for so long, you

have to build that expertise over time.'' A second concern of

Panetta's: contracting with corporations, whose

responsibility ``is to their shareholders, and that does

present an inherent conflict.''

Or as Gates, who has been in and out of government his

entire life, puts it: ``You want somebody who's really in it

for a career because they're passionate about it and because

they care about the country and not just because of the

money.''

Contractors can offer more money--often twice as much--to

experienced federal employees than the government is allowed

to pay them. And because competition among firms for people

with security clearances is so great, corporations offer such

perks as BMWs and $15,000 signing bonuses, as Raytheon did in

June for software developers with top-level clearances.

The idea that the government would save money on a contract

workforce ``is a false economy,'' said Mark M. Lowenthal, a

former senior CIA official and now president of his own

intelligence training academy.

As companies raid federal agencies of talent, the

government has been left with the youngest intelligence

staffs ever while more experienced employees move into the

private sector. This is true at the CIA, where employees from

114 firms account for roughly a third of the workforce, or

about 10,000 positions. Many of them are temporary hires,

often former military or intelligence agency employees who

left government service to work less and earn more while

drawing a federal pension.

Across the government, such workers are used in every

conceivable way. Contractors kill enemy fighters. They spy on

foreign governments and eavesdrop on terrorist networks. They

help craft war plans. They gather information on local

factions in war zones. They are the historians, the

architects, the recruiters in the nation's most secretive

agencies. They staff watch centers across the Washington

area. They are among the most trusted advisers to the four-

star generals leading the nation's wars.

So great is the government's appetite for private

contractors with top-secret clearances that there are now

more than 300 companies, often nicknamed ``body shops,'' that

specialize in finding candidates, often for a fee that

approaches $50,000 a person, according to those in the

business.

Making it more difficult to replace contractors with

federal employees: The government doesn't know how many are

on the federal payroll. Gates said he wants to reduce the

number of defense contractors by about 13 percent, to pre-9/

11 levels, but he's having a hard time even getting a basic

head count.

``This is a terrible confession,'' he said. ``I can't get a

number on how many contractors work for the Office of the

Secretary of Defense,'' referring to the department's

civilian leadership.

The Post's estimate of 265,000 contractors doing top-secret

work was vetted by several high-ranking intelligence

officials who approved of The Post's methodology. The

newspaper's Top Secret America database includes 1.931

companies that perform work at the top-secret level. More

than a quarter of them--533--came into being after 2001, and

others that already existed have expanded greatly. Most are

thriving even as the rest of the United States struggles with

bankruptcies, unemployment and foreclosures.

The privatization of national security work has been made

possible by a nine-year ``gusher'' of money, as Gates

recently described national security spending since the 9/11

attacks.

With so much money to spend, managers do not always worry

about whether they are spending it effectively.

``Someone says, `Let's do another study,' and because no

one shares information, everyone does their own study,'' said

Elena Mastors, who headed a team studying the al-Qaeda

leadership for the Defense Department. ``It's about how many

studies you can orchestrate, how many people you can fly all

over the place. Everybody's just on a spending spree. We

don't need all these people doing all this stuff.''

Most of these contractors do work that is fundamental to an

agency's core mission. As a result, the government has become

dependent on them in a way few could have foreseen: wartime

temps who have become a permanent cadre.

Just last week, typing ``top secret'' into the search

engine of a major jobs Web site showed 1,951 unfilled

positions in the Washington area, and 19,759 nationwide:

``Target analyst,'' Reston. ``Critical infrastructure

specialist,'' Washington, D.C. ``Joint expeditionary team

member,'' Arlington.

``We could not perform our mission without them. They serve

as our `reserves,' providing flexibility and expertise we

can't acquire,'' said Ronald Sanders, who was chief of human

capital for the Office of the Director of National

Intelligence before retiring in February. ``Once they are on

board, we treat them as if they're a part of the total

force.''

The Post's investigation is based on government documents

and contracts, job descriptions, property records, corporate

and social networking Web sites, additional records, and

hundreds of interviews with intelligence, military and

corporate officials and former officials. Most requested

anonymity either because they are prohibited from speaking

publicly or because, they said,

they feared retaliation at work for describing their

concerns.

The investigation focused on top-secret work because the

amount classified at the secret level is too large to

accurately track. A searchable database of government

organizations and private companies was built entirely on

public records. [For an explanation of the newspaper's

decision making behind this project, please see the Editor's

Note.]

The national security industry sells the military and

intelligence agencies more than just airplanes, ships and

tanks. It sells contractors' brain power. They advise, brief

and work everywhere, including 25 feet under the Pentagon in

a bunker where they can be found alongside military personnel

in battle fatigues monitoring potential crises worldwide.

Late at night, when the wide corridors of the Pentagon are

all but empty, the National Military Command Center hums with

purpose. There's real-time access to the location of U.S.

forces anywhere in the world, to granular satellite images or

to the White House Situation Room.

The purpose of all this is to be able to answer any

question the chairman of the Joint Chiefs of Staff might

have. To be ready 24 hours a day, every day, takes five

brigadier generals, a staff of colonels and senior

noncommissioned officers--and a man wearing a pink contractor

badge and a bright purple shirt and tie.

Erik Saar's job title is ``knowledge engineer.'' In one of

the most sensitive places in America, he is the only person

in the room who knows how to bring data from far afield,

fast. Saar and four teammates from a private company, SRA

International, teach these top-ranked staff officers to think

in Web 2.0. They are trying to push a tradition-bound culture

to act differently, digitally.

That sometimes means asking for help in a public online

chat room or exchanging ideas on shared Web pages outside the

military computer networks dubbed .mil--things much resisted

within the Pentagon's self-sufficient culture. ``Our job is

to change the perception of leaders who might drive change,''

Saar said.

Since 9/11, contractors have made extraordinary

contributions--and extraordinary blunders--that have changed

history and clouded the public's view of the distinction

between the actions of officers sworn on behalf of the United

States and corporate employees with little more than a

security badge and a gun.

Contractor misdeeds in Iraq and Afghanistan have hurt U.S.

credibility in those countries as well as in the Middle East.

Abuse of prisoners at Abu Ghraib, some of it done by

contractors, helped ignite a call for vengeance against the

United States that continues today. Security guards working

for Blackwater added fuel to the five-year violent chaos in

Iraq and became the symbol of an America run amok.

Contractors in war zones, especially those who can fire

weapons, blur ``the line between the legitimate and

illegitimate use of force, which is just what our enemies

want,'' Allison Stanger, a professor of international

politics and economics at Middlebury College and the author

of ``One Nation Under Contract,'' told the independent

Commission on Wartime Contracting at a hearing in June.

Misconduct happens, too. A defense contractor formerly

called MZM paid bribes for CIA contracts, sending Randy

``Duke'' Cunningham, who was a California congressman on the

intelligence committee, to prison. Guards employed in

Afghanistan by ArmorGroup North America, a private security

company, were caught on camera in a lewd-partying scandal.

But contractors have also advanced the way the military

fights. During the bloodiest months in Iraq, the founder of

Berico Technologies, a former Army officer named Guy

Filippelli, working with the National Security Agency.

invented a technology that made finding the makers of

roadside bombs easier and helped stanch the number of

casualties from improvised explosives, according to NSA

officials.

Contractors have produced blueprints and equipment for the

unmanned aerial war fought by drones, which have killed the

largest number of senior al-Qaeda leaders and produced a

flood of surveillance videos. A dozen firms created the

transnational digital highway that carries the drones' real-

time data on terrorist hide-outs from overseas to command

posts throughout the United States.

Private firms have become so thoroughly entwined with the

government's most sensitive activities that without them

important military and intelligence missions would have to

cease or would be jeopardized. Some examples:

*At the Department of Homeland Security (DHS), the number

of contractors equals the number of federal employees. The

department depends on 318 companies for essential services

and personnel, including 19 staffing firms that help DHS find

and hire even more contractors. At the office that handles

intelligence, six out of 10 employees are from private

industry.

*The National Security Agency, which conducts worldwide

electronic surveillance, hires private firms to come up with

most of its technological innovations. The NSA used to work

with a small stable of firms; now it works with at least 484

and is actively recruiting more.

*The National Reconnaissance Office cannot produce, launch

or maintain its large satellite surveillance systems, which

photograph countries such as China, North Korea and Iran,

without the four major contractors it works with.

*Every intelligence and military organization depends on

contract linguists to communicate overseas, translate

documents and make sense of electronic voice intercepts. The

demand for native speakers is so great, and the amount of

money the government is willing to pay for them is so huge,

that 56 firms compete for this business.

*Each of the 16 intelligence agencies depends on

corporations to set up its computer networks, communicate

with other agencies' networks, and fuse and mine disparate

bits of information that might indicate a terrorist plot.

More than 400 companies work exclusively in this area,

building classified hardware and software systems.

Hiring contractors was supposed to save the government

money. But that has not turned out to be the case. A 2008

study published by the Office of the Director of National

Intelligence found that contractors made up 29 percent of the

workforce in the intelligence agencies but cost the

equivalent of 49 percent of their personnel budgets. Gates

said that federal workers cost the government 25 percent less

than contractors.

The process of reducing the number of contractors has been

slow, if the giant Office of Naval Intelligence in Suitland

is any example. There, 2,770 people work on the round-the-

clock maritime watch floor tracking commercial vessels, or in

science and engineering laboratories, or in one of four

separate intelligence centers. But it is the employees of 70

information technology companies who keep the place

operating.

They store, process and analyze communications and

intelligence transmitted to and from the entire U.S. naval

fleet and commercial vessels worldwide. ``Could we keep this

building running without contractors?'' said the captain in

charge of information technology. ``No, I don't think we

could keep up with it.''

Vice Adm. David J. ``Jack'' Dorsett, director of naval

intelligence, said he could save millions each year by

converting 20 percent of the contractor jobs at the Suitland

complex to civil servant positions. He has gotten the go-

ahead, but it's been a slow start. This year, his staff has

converted one contractor job and eliminated another--out of

589. ``It's costing me an arm and a leg,'' Dorsett said.

Washington's corridors of power stretch in a nearly

straight geographical line from the Supreme Court to the

Capitol to the White House. Keep going west, across the

Potomac River, and the unofficial seats of power--the

private, corporate ones--become visible, especially at night.

There in the Virginia suburbs are the brightly illuminated

company logos of Top Secret America: Northrop Grumman, SAIC,

General Dynamics.

Of the 1,931 companies identified by The Post that work on

top-secret contracts, about 110 of them do roughly 90 percent

of the work on the corporate side of the defense-

intelligence-corporate world.

To understand how these firms have come to dominate the

post-9/11 era, there's no better place to start than the

Herndon office of General Dynamics. One recent afternoon

there, Ken Pohill was watching a series of unclassified

images, the first of which showed a white truck moving across

his computer monitor.

The truck was in Afghanistan, and a video camera bolted to

the belly of a U.S. surveillance plane was following it.

Pohill could access a dozen images that might help an

intelligence analyst figure out whether the truck driver was

just a truck driver or part of a network making roadside

bombs to kill American soldiers.

To do this, he clicked his computer mouse. Up popped a

picture of the truck driver's house, with notes about

visitors. Another click. Up popped infrared video of the

vehicle. Click: Analysis of an object thrown from the

driver's side. Click: U-2 imagery. Click: A history of the

truck's movement. Click: A Google Earth map of friendly

forces. Click: A chat box with everyone else following the

truck, too.

Ten years ago, if Pohill had worked for General Dynamics,

he probably would have had a job bending steel. Then, the

company's center of gravity was the industrial port city of

Groton, Conn., where men and women in wet galoshes churned

out submarines, the thoroughbreds of naval warfare. Today,

the firm's commercial core is made up of data tools such as

the digital imagery library in Herndon and the secure

BlackBerry-like device used by President Obama, both

developed at a carpeted suburban office by employees in

loafers and heels.

The evolution of General Dynamics was based on one simple

strategy: Follow the money.

The company embraced the emerging intelligence-driven style

of warfare. It developed small-target identification systems

and equipment that could intercept an insurgent's cellphone

and laptop communications. It found ways to sort the billions

of data points collected by intelligence agencies into piles

of information that a single person could analyze.

It also began gobbling up smaller companies that could help

it dominate the new intelligence landscape, just as its

competitors were doing. Between 2001 and 2010, the company

acquired 11 firms specializing in satellites, signals and

geospatial intelligence, surveillance, reconnaissance,

technology integration and imagery.

On Sept. 11, 2001, General Dynamics was working with nine

intelligence organizations. Now it has contracts with all 16.

Its

employees fill the halls of the NSA and DHS. The corporation

was paid hundreds of millions of dollars to set up and manage

DHS's new offices in 2003, including its National Operations

Center, Office of Intelligence and Analysis and Office of

Security. Its employees do everything from deciding which

threats to investigate to answering phones.

General Dynamics' bottom line reflects its successful

transformation. It also reflects how much the U.S.

government--the firm's largest customer by far--has paid the

company beyond what it costs to do the work, which is, after

all, the goal of every profit-making corporation.

The company reported $31.9 billion in revenue in 2009, up

from $10.4 billion in 2000. Its workforce has more than

doubled in that time, from 43,300 to 91,700 employees,

according to the company.

Revenue from General Dynamics' intelligence- and

information-related divisions, where the majority of its top-

secret work is done, climbed to $10 billion in the second

quarter of 2009, up from $2.4 billion in 2000, accounting for

34 percent of its overall revenue last year.

The company's profitability is on display in its Falls

Church headquarters. There's a soaring, art-filled lobby,

bistro meals served on china enameled with the General

Dynamics logo and an auditorium with seven rows of white

leather-upholstered seats, each with its own microphone and

laptop docking station.

General Dynamics now has operations in every corner of the

intelligence world. It helps counterintelligence operators

and trains new analysts. It has a $600 million Air Force

contract to intercept communications. It makes $1 billion a

year keeping hackers out of U.S. computer networks and

encrypting military communications. It even conducts

information operations, the murky military art of trying to

persuade foreigners to align their views with U.S. interests.

``The American intelligence community is an important

market for our company,'' said General Dynamics spokesman

Kendell Pease. ``Over time, we have tailored our organization

to deliver affordable, best-of-breed products and services to

meet those agencies' unique requirements.''

In September 2009, General Dynamics won a $10 million

contract from the U.S. Special Operations Command's

psychological operations unit to create Web sites to

influence foreigners' views of U.S. policy. To do that, the

company hired writers, editors and designers to produce a set

of daily news sites tailored to five regions of the world.

They appear as regular news Web sites, with names such as

``SETimes.com: The News and Views of Southeast Europe.'' The

first indication that they are run on behalf of the military

comes at the bottom of the home page with the word

``Disclaimer.'' Only by clicking on that do you learn that

``the Southeast European Times (SET) is a Web site sponsored

by the United States European Command.''

What all of these contracts add up to: This year, General

Dynamics' overall revenue was $7.8 billion in the first

quarter, Jay L. Johnson, the company's chief executive and

president, said at an earnings conference call in April.

``We've hit the deck running in the first quarter,'' he said,

``and we're on our way to another successful year.''

In the shadow of giants such as General Dynamics are 1,814

small to midsize companies that do top-secret work. About a

third of them were established after Sept. 11, 2001, to take

advantage of the huge flow of taxpayer money into the private

sector. Many are led by former intelligence agency officials

who know exactly whom to approach for work.

Abraxas of Herndon, headed by a former CIA spy, quickly

became a major CIA contractor after 9/11. Its staff even

recruited midlevel managers during work hours from the CIA's

cafeteria, former agency officers recall.

Other small and medium-size firms sell niche technical

expertise such as engineering for low-orbit satellites or

long-dwell sensors. But the vast majority have not invented

anything at all. Instead, they replicate what the

government's workforce already does.

A company called SGIS, founded soon after the 2001 attacks,

was one of these.

In June 2002, from the spare bedroom of his San Diego home,

30-year-old Hany Girgis put together an information

technology team that won its first Defense Department

contract four months later. By the end of the year, SGIS had

opened a Tampa office close to the U.S. Central Command and

Special Operations Command, had turned a profit and had 30

employees.

SGIS sold the government the services of people with

specialized skills; expanding the types of teams it could put

together was one key to its growth. Eventually it offered

engineers, analysts and cyber-security specialists for

military, space and intelligence agencies. By 2003, the

company's revenue was $3.7 million. By then, SGIS had become

a subcontractor for General Dynamics, working at the secret

level. Satisfied with the partnership, General Dynamics

helped SGIS receive a top-secret facility clearance, which

opened the doors to more work.

By 2006, its revenue had multiplied tenfold, to $30.6

million, and the company had hired employees who specialized

in government contracting just to help it win more contracts.

``We knew that's where we wanted to play,'' Girgis said in

a phone interview. ``There's always going to be a need to

protect the homeland.''

Eight years after it began, SGIS was up to revenue of $101

million, 14 offices and 675 employees. Those with top-secret

clearances worked for 11 government agencies, according to

The Post's database.

The company's marketing efforts had grown, too, both in

size and sophistication. Its Web site, for example, showed an

image of Navy sailors lined up on a battleship over the words

``Proud to serve'' and another image of a Navy helicopter

flying near the Statue of Liberty over the words ``Preserving

freedom.'' And if it seemed hard to distinguish SGIS's work

from the government's, it's because they were doing so many

of the same things. SGIS employees replaced military

personnel at the Pentagon's 24/7 telecommunications center.

SGIS employees conducted terrorist threat analysis. SGIS

employees provided help-desk support for federal computer

systems.

Still, as alike as they seemed, there were crucial

differences.

For one, unlike in government, if an SGIS employee did a

good job, he might walk into the parking lot one day and be

surprised by co-workers clapping at his latest bonus: a

leased, dark-blue Mercedes convertible. And he might say, as

a video camera recorded him sliding into the soft leather

driver's seat, ``Ahhhh . . . this is spectacular.''

And then there was what happened to SGIS last month, when

it did the one thing the federal government can never do.

It sold itself.

The new owner is a Fairfax-based company called Salient

Federal Solutions, created just last year. It is a management

company and a private-equity firm with lots of Washington

connections that, with the purchase of SGIS, it intends to

parlay into contracts.

``We have an objective,'' says chief executive and

President Brad Antle, ``to make $500 million in five years.''

Of all the different companies in Top Secret America, the

most numerous by far are the information technology, or IT,

firms. About 800 firms do nothing but IT.

Some IT companies integrate the mishmash of computer

systems within one agency; others build digital links between

agencies; still others have created software and hardware

that can mine and analyze vast quantities of data.

The government is nearly totally dependent on these firms.

Their close relationship was on display recently at the

Defense Intelligence Agency's annual information technology

conference in Phoenix. The agency expected the same IT firms

angling for its business to pay for the entire five-day get-

together, a DIA spokesman confirmed.

And they did.

General Dynamics spent $30,000 on the event. On a perfect

spring night, it hosted a party at Chase Field, a 48,569-seat

baseball stadium, reserved exclusively for the conference

attendees. Government buyers and corporate sellers drank beer

and ate hot dogs while the DIA director's morning keynote

speech replayed on the gigantic scoreboard, digital baseballs

bouncing along the bottom of the screen.

Carahsoft Technology, a DIA contractor, invited guests to a

casino night where intelligence officials and vendors ate,

drank and bet phony money at craps tables run by professional

dealers.

The McAfee network security company, a Defense Department

contractor, welcomed guests to a Margaritaville-themed social

on the garden terrace of the hotel across the street from the

convention site, where 250 firms paid thousands of dollars

each to advertise their services and make their pitches to

intelligence officials walking the exhibition hall.

Government officials and company executives say these

networking events are critical to building a strong

relationship between the public and private sectors.

``If I make one contact each day, it's worth it,'' said Tom

Conway, director of federal business development for McAfee.

As for what a government agency gets out of it: ``Our goal

is to be open and learn stuff,'' said Grant M. Schneider, the

DIA's chief information officer and one of the conference's

main draws. By going outside Washington, where many of the

firms are headquartered, ``we get more synergy. . . . It's an

interchange with industry.''

These types of gatherings happen every week. Many of them

are closed to anyone without a top-secret clearance.

At a U.S. Special Operations Command conference in

Fayetteville, N.C., in April, vendors paid for access to some

of the people who decide what services and gadgets to buy for

troops. In mid-May, the national security industry held a

black-tie evening funded by the same corporations seeking

business from the defense, intelligence and congressional

leaders seated at their tables.

Such coziness worries other officials who believe the post-

9/11 defense-intelligence-corporate relationship has become,

as one senior military intelligence officer described it, a

``self-licking ice cream cone.''

Another official, a longtime conservative staffer on the

Senate Armed Services Committee, described it as ``a living,

breathing organism'' impossible to control or curtail. ``How

much money has been involved is just mind-boggling,'' he

said. ``We've built such a vast instrument. What are you

going to do with this thing? . . . It's turned into a jobs

program.''

Even some of those gathered in Phoenix criticized the size

and disjointedness of the intelligence community and its

contracting base. ``Redundancy is the unacceptable

norm,'' Lt. Gen. Richard P. Zahner, Army deputy chief of

staff for intelligence, told the 2,000 attendees. ``Are we

spending our resources effectively? . . . If we have not

gotten our houses in order, someone will do it for us.''

On a day that also featured free back rubs, shoeshines, ice

cream and fruit smoothies, another speaker, Kevin P. Meiners,

a deputy undersecretary for intelligence, gave the audience

what he called ``the secret sauce,'' the key to thriving even

when the Defense Department budget eventually stabilizes and

stops rising so rapidly.

``Overhead,'' Meiners told them--that's what's going to get

cut first. Overhead used to mean paper clips and toner. Now

it's information technology, IT, the very products and

services sold by the businesspeople in the audience.

``You should describe what you do as a weapons system, not

overhead,'' Meiners instructed. ``Overhead to them--I'm

giving you the secret sauce here--is IT and people. . . . You

have to foot-stomp hard that this is a war-fighting system

that's helping save people's lives every day.''

After he finished, many of the government officials

listening headed to the exhibit hall, where company

salespeople waited in display booths. Peter Coddington, chief

executive of InTTENSITY, a small firm whose software teaches

computers to ``read'' documents, was ready for them.

``You have to differentiate yourself,'' he said as they

fanned out into the aisles. Coddington had glass beer mugs

and pens twirling atop paperweight pyramids to help persuade

officials of the nation's largest military intelligence

agency that he had something they needed.

But first he needed them to stop walking so fast, to slow

down long enough for him to start his pitch. His twirling

pens seemed to do the job. ``It's like moths to fire,''

Coddington whispered.

A DIA official with a tote bag approached. She spotted the

pens, and her pace slowed. ``Want a pen?'' Coddington called.

She hesitated. ``Ah . . . I have three children,'' she

said.

``Want three pens?''

She stopped. In Top Secret America, every moment is an

opportunity.

``We're a text extraction company . . . ,'' Coddington

began, handing her the pens.

Mr. Speaker, I rise today to recognize an outstanding Vermonter, Dr. William Tonti of Essex Junction.

On February 1, 2011 Dr. Tonti celebrated an astonishing milestone: He earned his 250th patent making him one of the most accomplished inventors in Vermont and the country. This impressive accomplishment is worthy of recognition by this Congress.

Dr. Tonti is a graduate of Northwestern University where he earned his Bachelor's of Science in Electrical Engineering. He continued his education in Vermont, first earning an MBA from St. Michaels College and then a Master's of Science and a PhD in Electrical Engineering from the University of Vermont.

In 1978, he began what would prove to be a distinguished career at IBM in Essex Junction, Vermont. Dr. Tonti's work focused on areas fundamental to the functioning of our society, including advanced DRAM semiconductors, nanotechnology, microprocessors and chip reliability.

In addition to his professional accomplishments, Dr. Tonti has been an been an active community member and citizen. His commitment to IBM is only surpassed by his dedication and commitment to his wife, Debbie, and daughters, Janelle and Samantha.

Dr. Tonti was recently named an IBM Master Inventor for Life, a great honor that IBM bestows to only a handful of its most innovative employees worldwide. This is a fitting recognition for a lifetime of impressive accomplishments and for a Vermonter of high character.

As Vermont's Representative in this Congress, I ask that Dr. Tonti be recognized for his accomplishments and applauded for his contributions to the state of Vermont and this country.

I thank the gentleman.

Imagine what we could do for the American consumer at the pump if we stopped lobbing rhetorical grenades back and forth and decided to focus on the concrete things that it is within our power to do today that would lower the price at the pump. There's three things.

One, why are we giving tax breaks to oil companies? You do have to wonder. A trillion dollars in profits. Nothing wrong with that. But do they really need to reach into the pocket of the American consumer and get $40 billion on top of that? That's number one.

Number two, have the futures market be about protecting the consumer, not enriching the hedge fund Wall Street speculator. It is astonishing what's going on. And it's so bad that even Goldman Sachs acknowledges that at least $27 on the price of a $110 barrel of oil is about speculation. Why in the world do we allow that? Because every time you and I go to the pump, our constituents go to the pump, they're paying for Wall Street and they're paying for tax breaks to oil companies.

The third thing we can do, and we can do it short-term, is go into the Strategic Petroleum Reserve. Two Republican Presidents and one Democratic President have done that with great effect--lowering the price 33 percent, 19 percent, and 9 percent. It gives immediate relief to the consumer at the pump.

We can do this together if the agenda is about doing something for your constituent and mine and not just having this political food fight. End speculation, end the tax breaks, and go into that asset belonging to all of us, the Strategic Petroleum Reserve, and bring prices down immediately.

I thank the gentlelady.

Henry Hyde was one of the outstanding Members of the House of Representatives in the history of the House of Representatives. He believed intently in a pro-life position, and the remarks of colleagues who support this legislation are ones that I think Mr. Hyde would approve of. But he was also a master legislator, and he understood that other people have a different point of view than he has, and on the matter of abortion, something that is a matter of faith for many people, a matter of conscience for everyone, there are different points of view.

The excellent job that Mr. Hyde did was to take direct taxpayer funding out of the equation. If there were going to be abortions, they were not going to be paid for by taxpayer dollars. This amendment takes it a radical step further. What it does is it says, if there is any tax credit that is part of a health care plan, then this legislation would prohibit a small business from offering that health care plan to its workers.

Now, just think about the enormous burden that is being placed on hundreds, if not thousands, of small businesses in Vermont, on millions of small businesses in this country. Every one of those businesses, where it offers a comprehensive health care plan to their employees that may include abortion services, suddenly has to unravel those plans and deny that coverage to its workers. So what we have is an action by the sponsors of this legislation that would impose its will far beyond what Mr. Hyde ever did or sought to do on every small business in this country.

By the way, there's another issue here, a precedent. If now we're starting to interfere with the use of tax credits, does this mean the next target is what kind of home you buy if you're going to get the use of a taxpayer deduction?

I thank the gentlelady.

Does it mean that if you're doing research on biotechnology, that the tax credit is going to be restricted and dictated by a majority, whoever it happens to be, of this House of Representatives? The basic question for this Congress is whether we're going to allow the status quo to exist through the Hyde amendment where people can exercise their conscience on this important question, or are we going to have a dictation from this Congress that absolutely and completely prohibits people from making that choice themselves.

The mutual respect that Mr. Hyde understood we needed in this country is really going to be frayed with this legislation. So I would urge Members to vote against this legislation. That's out of respect for the fact that there are sharply different views on this extraordinarily important question.

Mr. Chairman, I have an amendment at the desk.

Mr. Chairman, this Congress and the last Congress are at odds

about health care. It is a fundamental question of fundamental importance to the people of this country.

The last Congress passed the Patient Protection and Affordability Act. The first act of this Congress, of the House of Representatives, was to repeal that act. We have got disagreement about what should be done. The House legislation is pending in the Senate, likely to go nowhere. This legislation before us today is a further effort to unravel the law that was passed by the House, the Senate, and signed by the President last year.

Acknowledging that there is a serious debate within this body about the future direction of health care, this amendment would allow for the State health exchanges, where there have been applications by 13 States for early innovator grants, to go forward. It would exempt from the defunding $1.9 billion that would be then subject to appropriations up to that amount. It wouldn't guarantee it. It would be subject to appropriations. My preference, quite frankly, was to make that mandatory, as it was in the original bill, but that was not permitted under the rules in order to make this amendment in order.

The advantage to doing this is it does, and I speak to my friend the gentleman from Texas, it allows the local States to be making decisions about how best to design their health care. Just to go through some of the recitation by the gentleman from Texas, the early innovator grants have been awarded to 11 States. Again, it allows them to decide what is the best design of these health exchanges. And these States include what we might call red States and blue States. It is Kansas and Wisconsin. It is Maryland and Massachusetts. It does include Vermont, my State, that has taken on responsibility to try to move forward to design a health care system that is good for business, good for consumers, and good for taxpayers.

So the fundamental question here is: Do you think that States can be a laboratory of experimentation and policy? The States take action. They implement a plan according to the design in Boston if it is Massachusetts, or Hartford if it is Connecticut, or Tulsa if it is Oklahoma, or Montpelier if it is Vermont; and the folks in that State, where they have fundamental responsibility for the citizens of that State, will be making the decision.

This allows us to be partners with the States where they take on this responsibility. They get some help from the Federal Government to implement these health benefit exchanges, and we are allowed, then, to basically get the benefit of the Federal system where States make decisions and the Federal Government is a partner.

I reserve the balance of my time.

How much time do I have remaining?

Thank you.

I want to talk a minute about Social Security. You have access to Social Security whether you live in Texas or you live in Vermont. It's a program that benefits every single citizen of this country. The underlying premise of Social Security is that we're all in it together. We all pay into the benefit program and we all benefit, whether you're rich or whether you're poor. We're all in it together.

Our amendment acknowledges that this is a stronger and better country if all of us have access to affordable health care, whether you live in Texas or you live in Vermont. So, yes, it is true that in the Welch amendment we maintain that national commitment to all Americans being covered and all Americans benefiting by access to health care, which we know they need. But what it also does is say that in the implementation and in the delivery of health care, driving decisions and authority down to the local level will help us be successful. It will allow States to show that maybe they have the better way of achieving this goal of access to health care for every citizen in the country.

So, yes, I say to the gentleman from Texas, we do embrace in my amendment the concept that every American should have access to affordable health care. But what we also do, I say to the gentleman from Texas, is acknowledge that States can experiment; that folks at the local level may have a better way to make decisions and actually to deliver care. And if they design a plan in Texas to do it one way and we design a plan to do it in Vermont another way, why not? Why not let the States figure out how to make good on this promise to America that every one of us can have access to the health care that we need.

I yield back the balance of my time.

I thank the gentleman for yielding.

Madam Chair, one of the great companies in this Nation, and a big company in Vermont, is International Business Machines. This year they are about to celebrate their 100th anniversary. I was speaking to some folks from IBM in my office a few days ago, and they told me the story of what happened to them in 1992.

The world was turning upside down in the tech industry. Companies that wanted to survive had to make big decisions. They had 400,000 employees, and there was some question as to whether they were going to make payroll. They had to make changes. They did two things. They looked at every single element of their operation. They looked at every single line item in their spending. In every single place they could make a cut, tough as it was, they did. They made cuts. But they also said where do we have to be in 10 years, and what do we have to do to get there?

As nerve-wracking as it was for those folks at IBM, they made decisions to invest money in acquisitions, in research and development, to meet a plan that required investment, that required spending at a time when they were doing every single thing they could to save every single nickel.

Now IBM is stronger than ever, and it's going to celebrate its 100th anniversary. This country has to make similar decisions. We have to cut. There is not an argument here. I listened to Paul Ryan when he gave his opening statement, and he said we have to leave this country and its fiscal state better off for our kids and grandkids. He is right. There is no question about it. That means like companies that look at a balance sheet, we have to look every single place we can to save money.

The criticism about many governmental programs you know is right, we know is right. Wherever we can find that waste, fraud, or abuse, let's get rid of it. That serves nobody, Republican or Democrat. But on the other hand, we have to make investments. There are places we in fact do have to spend money. And we have seen that in the history of our country. So judgments have to be made.

My question about the Republican budget is basically the premise in the budget. It's not the goal. Mr. Ryan stated that well. He speaks for me when he says about that obligation to leave our kids better off. But there are two premises in the budget as I see it. One is that lower taxes are always better and will lead to growth. Sometimes that's true, but not always. We have to have revenues to pay for infrastructure, to pay for things like broadband deployment, to pay for the National Institute of Science, things that we might argue about where is the best priority, but we need revenues to do things like a company needs revenues to make investments.

The second premise is that less spending is always better than more investment. Those, as I see it, are the two premises that are in the Ryan budget. And those are debatable.

Now, the other aspect of the budget that in my view, Madam Chair, is lacking is what's off the table. It's not what's on the table. I don't agree with the Medicare proposal in the Ryan budget. But it's fair to put Medicare on the table for debate. We've got to make that more affordable.

What is the problem is that the Pentagon is off the table, the war in Iraq and Afghanistan are still on the credit card and off the table. Whatever our positions are on some of these matters, including military, we will all stand up, we have to pay our way.

I thank the gentleman for yielding.

America is in a very dangerous place on this budget, and it's not an

unsolvable problem. We can get from where we are to where we need to be--and that is fiscal balance--if we put everything on the table and have a balanced approach. If, instead, we limit our consideration to essentially 12 percent of the budget, the so-called ``domestic discretionary''--things like low-income heating assistance, the Small Business Administration, scholarships for our kids wanting to go to college, scientific research--if we limit our attention to that 12 percent of the budget, even if we cut that entire 12 percent we would have trillion dollar deficits for as far as the eye can see. It won't work. There is a design defect here.

We have aggravated it with the deal that was made to extend the tax cuts at the high end when we were here in our special session after the last election, that $750 billion that we have to borrow in order to pay for those tax cuts for the top 2 percent.

We have to put everything on the table. It has to include the Pentagon, it has to include revenues, it has to include eliminating wasteful and unproductive, non-job-generating tax expenditures to mature and profitable industries like the oil industry. It has to include eliminating the ethanol subsidy, something that was promoted by the Member from Oklahoma (Mr. Sullivan). We put everything on the table. We can get from where we are to where we need to be.

One thing we also cannot do is start playing budgetary hostage taking. There is looming ahead of us the question of whether we will raise the debt ceiling or use that as a leverage point, as some are suggesting. This is not a leverage point; it's a moral obligation.

America was in fiscal balance in the 8 years of the Clinton administration. When he handed the keys over to the new President, Mr. Bush, there was a projected $5.7 trillion deficit.

Yes, thank you. I appreciate your historical perspective on it.

There are really two things that I want to address. Number one: What are the policies that were part of getting us to that $11.5 trillion deficit? Number two: What do we need to do now in order to get to fiscal balance?

The two policies were, one, a war of choice where the Pentagon in its activities was not subject to the same scrutiny of actually having to pay as you go, so the cost of the war in Iraq was $1 trillion. The war in Afghanistan, as you mentioned, started out as a mission to dislodge Osama bin Laden. It was transformed into nation-building.

And no matter how necessary or debatable either of those events were, those wars were, you do have to pay for it. It's not as though because it's in the name of national security it can be exempt from fiscal responsibility. In fact, what's unusual is that this is the first time in the history of our country where we have been at war where we actually haven't asked for shared sacrifice by the taxpayers, but we've made the entire burden be borne by our military. So we've got to pay; and we didn't do it, as you pointed out.

The second is the theory that's being advanced by many that if you cut taxes, it will create wealth and create jobs. In some places and some times and in some circumstances that will work. In fact, many standard economists say that in a recession, it's the time to cut taxes, not raise them. But the more that is focused on the middle class who are struggling--especially in a down economic time--to pay their bills, if they get a tax cut, they have discretionary income or they have income liberated, that money is going to go right back into the economy. But every tax cut does not generate jobs, and many tax cuts end up adding significantly to the deficit.

The President Bush tax cut in 2001 and the President Bush tax cut in 2003 added $2.3 billion to the deficit. So you have a Pentagon that is not subject to pay-as-you-go and you have tax cuts that don't pay for themselves. Those are two major contributing factors to that $11.5 trillion deficit on the heels of a $5.6 trillion surplus. The debate we are having now in this House is enormously consequential to the future. Republicans won this last election, and a major argument they made is that we've got to get spending under control. They're right. I agree with that. We have to get to fiscal balance.

The challenge is if we're going to get there, do we need a plan that repeats those two policies of the Bush administration, namely, keeping the Pentagon off the table and increasing tax cuts, particularly to the high end, but keeping off the table Pentagon savings, keeping off the table eliminating tax loopholes and keeping off the table the question of revenues?

Democrats, in my view, have to be willing to come forward and say, look, the programs that we have been strong supporters of have to be re-examined, we have to reform them, we have to make them more efficient; and if they are not working, we have to acknowledge that and move on. We have to do our share. The President's proposal that would freeze domestic spending for 5 years is pretty dramatic, but many Democrats would be willing to support tough medicine as long as the plan had on the table other things that are major contributors to the fiscal situation we're in. That's, of course, revenues; that's, of course, the Pentagon; and that's, of course, tax loopholes in the tax system.

We can get from where we are to where we need to be. We saw that in recent years when it happened under President Clinton. Again, as you pointed out, in those years, Tax Codes matter; but in the Clinton years when we had higher tax rates, we created 20 million jobs. In the Bush years when we had lower tax rates, we created 600,000 jobs. And also incomes were increasing.

So this has to be reviewed by this body, in my view, as a practical problem for us to solve, not an ideological argument that every tax cut is going to be beneficial anymore than every spending program is going to be beneficial. You have to apply judgment to the situation at hand. The big challenge for us is restoring the fiscal balance.