Speaker: U.S. Representative Jim Nussle (R-Ia), Chairman
Location: Washington, D.C.
Witnesses: David Walker, Comptroller General, General Accounting Office; former U.S. Representative Lee Hamilton, U.S. Commission on National Security in the 21st Century; and former House Speaker Newt Gingrich

NUSSLE: We call the Budget Committee hearing to order. Today we begin the process of hearings for fiscal year 2003 budget. For that matter possible, fiscal year 2002 supplemental budget requests and priorities. Today's hearing is entitled, "Ensuring Domestic Security Issues and Potential Costs." We have two very distinguished panels today who come forward and will enlighten us on a number of different topics.

This hearing is intended to examine the broad issues and challenges in ensuring the nation's domestic security in the midst of a current war against terrorism. It is not specifically focused on President Bush's Office of Homeland Security, although I have no doubt, there will be many references to that office and to priorities that that office may in the future be brining forth. The hearing today will in part examine the extensive work on the part of the General Accounting Office in reviewing the U.S. government's anti- terrorism programs outlining the agency's findings, presenting some specific recommendations for organizational efficiencies and management improvement.

In addition, representatives of the United States Commission on National Security for the 21st Century will be present and will present commissioned findings and recommendations on defending the United States against terrorism. Prior to the attacks of September 11th, the administration's fiscal year 2002 requests for anti- terrorism programs totaled $12.8 billion spread across 43 different federal agencies. Additional resources, no doubt, will be forthcoming and have been forthcoming. But funds may not be spent it the most efficient manner absent a strong, effective organizational plan that prioritizes these programs and avoids duplication.

So one of the questions today will be what of the most effective way to consolidate and manage the government's anti-terrorist efforts. GAO has found that the government does not yet have a sound terrorist vulnerability assessment in place. And without such an assessment, it is probably not possible to target funds to correct the most critical vulnerabilities in national infrastructure. So the second question will be how soon can a comprehensive threat and risk assessment be completed for this nation. And then finally, fully recognizing that the president needs maximum flexibility to get the Office of Homeland Security established quickly.

Many details remain to be resolved, including but not limited to, how much budgetary control the director requests and will the director truly have a single focal point for homeland security, as was promised by the president. How can the director leverage state and local enforcement, public health resources for maximum effectiveness. In short, how can the new Office of Homeland Security operate with the most effective, efficient plan for the future?

The budget for 2003 that we will be discussing and formulating in short order needs to take into account an emerging new and revitalized priority for homeland security. In short, today's hearing only begins the process of examining homeland security in combating terrorism. This is not meant to try and take a drink out of the fire hydrant all in one fell swoop. There are a number of other hearings. And there is, in fact, a security briefing with Secretary Rumsfeld at 3 o'clock that I know members are interested in attending.

But it is to begin the process, and so what I would suggest today our main focus be, where has our priority been with regard to homeland security in combating terrorism, and where is it today now as far as a priority for the federal government? It will be and serve as a preface for determining the priority in next year's budget and I would recommend to members that we do this in that light and that we focus the hearing in that manner so that we can hold a number of hearings in order to get to the bottom of this as we move forward.

Before we begin with the panels, I'd like to recognize John Spratt for any comments he would like to make.

SPRATT: Thank you, Mr. Chairman.

Mr. Chairman, Mr. Walker, Lee Hamilton and I guess the speaker is to arrive later, first of all, we look forward to your testimonies. My understanding is the GAO has done almost 70 studies over the years on what you might today call homeland security and we look forward to your sharing the fruits of that inquiry with us.

My understanding, too, that a former colleague, Mr. Hamilton, and our former colleague, the speaker Newt Gingrich, will be talking about organizing the government in order to better protect ourselves against terrorist attacks, protecting the attacks, deterring the attacks, responding to them once they occur. This dialogue is long overdue, and I'm glad we're having it here in this committee because it's important.

I don't want to detract from that important topic, but the chairman said this is my priorities. What priorities have we addressed, and what priorities haven't we adequately addressed? And I want to take just a minute to talk about the (inaudible). The list for nuclear terrorism and the need for nuclear (inaudible) proliferation program effort to see that they do not (inaudible).

Just days before September the 11th, smugglers were apprehended in Turkey. Not the first time they were apprehended there. It was believed at the time possibly to be bomb grade uranium, trying to smuggle it out of Russia. Yesterday, President Bush acknowledged and warned that bin Laden and Al Qaeda have been actively seeking nuclear materials for some time.

SPRATT: We are not doing nearly enough, nearly as much as we should to keep nuclear materials and nuclear know-how out of the hands of terrorists. This isn't a part of this mission (ph), but the (inaudible) and I have worked on it in the Armed Services Committee. The main program that deals with this whole problem is called (inaudible). But it needs more attention even though it has some bipartisan support. The fact of the matter is, the sad truth of the matter is, non-proliferation has been a harder sale, a much harder sale than it really ought to be.

The DOE shares the mission with DOD, the Department of Energy. The amount of money that we put up to the Department of Energy all tolled, everything that would fall under this rubric, is not inconsiderable. It's $874 million last year. One of those accounts that is line itemed is for non-proliferation and verification R&D. This sort of thing in the budget, it doesn't get a lot attention. It doesn't have any program connectivity back home with particular constituents, unless you come from one of states with one of the national labs.

But in any event, by last year, last budget year, a number of programs had been clustered under this particular umbrella. And the total funding for it was about $227 million. This year's budget request came over. That program, that line had been cut by $57.5 million for reasons that I still do not understand. But let me give you one out of many things that will suffer the consequence of that reduction. That's the development of censors that can detect bioterrorism activities that are taking place either in the production or in the aftermath of an attack, so that we can get a real time readout, a quick analysis, chemical analysis, biological analysis of what the agent is, and then public health authorities, knowing this, can act quickly to stop it.

There's a system called BAEIS. It's an acronym for Biological Aerosol Entry Information System. The labs have been developed (inaudible) this and (inaudible). They field-tested this system. It falls under the rubric of those accounts that were cut back 25 percent by $57 million in this year's budget. Now we raised the issue again in the Armed Services Committee. It's been raised in the Appropriations Committee and the Energy (inaudible) Subcommittee succeeded in restoring about $30 million.

There's still a substantial cut there. And it's the sort of thing we really need to call attention to. It doesn't have a lot of sex appeal, a lot of drama. It doesn't buy you a lot of constituent support, but it is, I think, critically important. And if nobody else will champion the cause and the need, I think this committee, among others, ought to take it up. And that's why I indulged you--took advantage of your indulgence to strike that particular thing. It may be totally off the script that you're going to talk about, General Walker, but nevertheless, I wanted to lay it on the record here and raise it to the attention of my colleagues.

Thank you for coming, and we look forward to hearing your testimony.

NUSSLE: Thank you, Mr. Spratt.

David Walker, who is the comptroller general and works for us at the General Accounting Office. I welcome you to the committee. I also want to parenthetically, as I told you in private and in front of a number of members who were involved over the last three or four weeks as a result of the Anthrax here on Capitol Hill, want to show our appreciation to you and to the General Accounting Office for the use of your facilities.

It's something that, as I told you, one of the things that I have learned in Washington is that real estate on Capitol Hill is probably one of the most prized possessions. And for you to unselfishly allow us to come over and use your hall is something that we are deeply grateful and indebted to you for, and we appreciate all your staff's indulgence and assistance as we made that transition, and we welcome you today.

Long before aviation security was a topic on the public's agenda, GAO was conducting a number of investigations and issuing reports that long before bioterrorism and weapons of mass destruction, back when it was just a possible theoretical possibility, you were warning us. we appreciate that you would now come before us and give us an update on the questions that we have asked, and we welcome your testimony. And I invite you to present it at this time. Welcome.

WALKER: Thank you, Mr. Chairman.

Mr. Pratt, other members of the committee, it's a pleasure to be back before you. Let me first just say for the record that it's our pleasure to accommodate the members of the House of Representatives. It was obviously something that we felt was appropriate to do. It was a hardship on us, but it enabled us to get close to our client (ph) in new and unexpected ways. But I'm sure that you're happy to be back in your offices, and we look forward to continuing to work with you.

With regard to today's hearing, I've got an extensive statement for the record, and I'm just going to summarize the most important parts very quickly to allow time for Q and A. Obviously, you have two very distinguished individuals who are going to be on the next panel. The terrorist attacks of September 11th have profoundly changed the agendas of Congress, the White House, federal agencies, state and local governments and a number of private sector entities, while simultaneously altering the way of life for many Americans.

As a lesson from history inscribed in the front of the National Archives states, "Eternal vigilance is the price of liberty." Our fight against terrorism is not a short-term effort. And homeland security will forever be a priority for our nation. As a result, we must find the best ways to sustain our efforts over the significant time period and leverage our finite resources, both human and financial, in ways that will have the greatest impact. An effective framework to address these challenges will require not only leadership, with a clear vision, develop and implement a homeland security strategy in coordination with all relevant partners, but also the ability to marshal and direct the necessary resources, both financial and human, to get the job done.

The recent establishment of the Office of Homeland Security is a good first step, but a series of questions must be addressed regarding how this office will be structured, what authority its director will have, and how this effort can be institutionalized and sustained over time. The director will need to define the scope and objectives of the homeland security strategy. This strategy should be comprehensive and count the steps necessary to reduce our vulnerability, deter attacks, manage the effects of any attacks, and provide for appropriate response. The strategy must involve all levels of government, the private sector, individual citizens both here and abroad and other nations.

This strategy should also use a risk management approach to focus finite national resources on areas of greatest need. We can never have zero risk. We don't have enough money for zero risk. Even if we put every amount of money we could at it, we'll never get zero risk. And we have finite resources. As the first board notes, one of the challenges that former Governor Ridge, now Director Ridge, will face is that even before September 11th, which this chart was done right before September 11th, there were a lot of players on the field in the federal government.

Mr. Chairman, you noted 43 players in last year's budget alone receiving money for homeland security. And actually, this is just to combat terrorism. I would argue that combating terrorism is a subset of homeland security, and that arguably, there are other issues that would come under homeland security, but this is obviously arguably the biggest part of it, if you will. This doesn't count. State and local government, it doesn't count. With many other entities, it must be coordinated with. While homeland security is an urgent and vital national priority, we should recognize that the challenges that it presents illustrate a range of challenges facing our government in other areas that are not as visible or urgent, but nevertheless, important.

These include a lack of mission clarity, too much fragmentation and overlap, the need to improve the federal government's human capital strategy, difficulties in coordination and operation among levels of government and cross sectors of the economy, and the need to better measure performance and make sure that for the money that Congress appropriates, you get demonstrable results. Because just because you get the money, doesn't mean you're going to get results.

As we respond to these urgent priorities of today and the long term requirements of homeland security, our nation still must address a number of other short term and long term fiscal challenges that were presents before September 11th and they remain here today. Our history suggests that we've encouraged sizable deficits when the security of our nation or the state of our economy was at risk. We are fortunate to face these risks today at a time where we have some near term budget flexibility. It's important to remember, however, that the long-term pressures on the budget have not lessened. In fact, they are much worse as a result of not only the events of September 11th, but the declining economy and continued increases in health care costs.

As a result, the ultimate task of addressing today's urgent needs without unduly exacerbating our long-range challenges have become much more difficult. As the next two boards will note, this is very important. Mr. Chairman, I may go a little over five minutes. I apologize, but I think this is very important. This is based upon CBO's August projection, which is the latest projection. And if you assume that Congress spends the unified surplus--I'm not saying you're going to spend the unified surplus, but if you spend the unified surplus, which is on budget plus Social Security, I think it's very likely that you're going to spend it in the next year or two. Hopefully you won't after that.

But if you do that, this is our future. By the year 2030, there is no money for discretionary spending. By the year 2050, the only thing the federal government will be doing is paying bondholders. The only thing the federal government will be doing is paying bondholders. The next chart demonstrates how it looked before September 11th. And this is not just because of September 11th. It's also because the decline in the economy and a number of other things, OK? But even before September 11th, and before the additional decline in the economy, it was already bad.

We thought we were going to save every penny of the Social Security surplus. Even if we had saved every penny of the Social Security surplus, discretionary spending was going to have to be cut by 50 percent. And the long-term outcome was bleak and unacceptable. My point is simple. There are a lot of legitimate demands that must be addressed today because of the events of September 11th. And there are a number of actions that Congress will undoubtedly want to take in order to try to stimulate our economy to get our economy back on track. But it's important that those be focused on legitimate need rather than want.

It's important to try to avoid hitchhikers, those who want to stack wants on top of needs. To be able to realize that what we have here is a very profound long-range challenge. Nothing less than a need to fundamentally reassess what the federal government does. To review, reassess and reprioritize everything the federal government does and how it does it. Because the numbers do not add up. All too frequently, the way the debates have been is we assume that the base is acceptable. And therefore, the debate is about the increment, the plus or minus, over the base.

The base doesn't work. We cannot sustain the base long term. We have to start figuring out what is the government doing, what are you getting for it, what kind of return on investment, and how does that compare with the new competing demands, whether they be security related, whether they be prescription drugs, whether they be whatever it might be, how do they--what's the most important priority, because you can't meet them all realistically. You can't meet them all. So as a result, in summary, of the terrorist attack on September 11th was a defining moment for our nation, our government and in some respects, the world.

The appointment of former Governor Ridge to head the Office of Homeland Security within the executive office of the president is a promising first step in marshaling the resources necessary to address our homeland security requirements. It can be argued, however, that statutory underpinnings and effective Congressional oversight, are critical to sustaining broad scale initiatives over the long term. Therefore, as you move beyond immediate response, I think it's important that you consider the implications of different structures for this Office of Homeland Security, not only on its ability to effectively get the job done, but on your ability, the Congress' ability, to conduct effective oversight and our ability at GAO to help you to be able to do that.

I have serious concern that the way that this is proposing to be structured right now may not make it effective and could seriously compromise our ability to help the Congress engage in effective oversight. I also believe that we need to work together to figure out how we and others can help the Congress make sure that whatever money you appropriate as a result--that Congress appropriates--as a result of the acts of September 11th are used for the intended purpose with demonstrable results. And I think that the model that was used for Hurricane Mitch and other kinds of disaster assistance efforts may be something we want to talk about how best to do that.

WALKER: We've already started talking with OMB. They're just starting to really get their systems together. Obviously, they're in a crisis management mode. But I think it's important because we are talking about significant sums of money and our long-range challenges are now tougher. Obviously we stand ready to help you in any way that we can. And we look forward to doing so. Thank you very much.

NUSSLE: Thank you, General Walker.

Prior to September, the government's proposed fiscal year 2002 budget for all programs under the definition of combating terrorism was approximately $12.8 billion. As I understand it, $8.6 billion was categorized as quote, "combating terrorism," $1.8 billion was, quote, "to combat weapons of mass destruction," and $2.6 billion was categorized, quote, "critical infrastructure protection," for a total of $12.8 billion. This, as I understand it, is a 78 percent increase since fiscal year 1998, which was the first year that some of these definitions appeared in the budget and appeared in appropriations.

It was slightly more than half spent by the Department of Defense. How do we measure the effectiveness of this money that has spent and the priority that has been put toward combating terrorism, combating weapons of mass destruction and critical infrastructure protection? Are we only able to do that through the prism of what occurred on September 11th or is there a way to examine the effectiveness of these resources that have been spent and coordinated thus far? And what model would you suggest?

I think you gave us some very good advice with regard to oversight, particularly in caveat to Congress' often cheerful method of providing hitchhikers under the rubric of combating terrorism. Now just about everything has that definition attached to it, it seems, or stimulating the economy. How would we model the oversight for these programs? Well first let me say that those are the numbers that have been reported to you, that this is how much money was appropriated and how much money was spent for those activities.

But I think that one of the things that has to be done on a targeted basis, and we're happy to try to work with this committee and others as appropriate, is what are they actually doing with that money. I mean, that's how much money they got. That's how much money they spent. But what did they do with the money? And in some cases, it may be investment oriented. It may be R&D.

And you may need to do R&D and R&D may not end up paying--you know, getting a payoff in year one, but it's something that you need to do because it's something that you need to do in order to try to stay ahead of the curve and that ultimately will be able to demonstrate that you are getting some return over that over a period of time. One of the concerns that I have is is there's not enough focus on what is being done with the money and what are we getting for the money.

There's also been a challenge in government in that most of the activities that have occurred have been everybody looking at their silo. Each of these individual 43 departments and agencies being responsible and accountable for what they do rather than looking across government. In the area of counterterrorism, homeland security, by definition, you have to take a horizontal approach across the federal government as well as across boundaries domestically and internationally.

I think we need to work together building off of GEPRA (ph), you know, but targeting in in areas of opportunity, you know, security being one of the most fundamental, to try to work with the Congress and others to do a more thorough analysis of what actually is being done and what is being achieved with what's being done. When could that analysis be completed? Because I think what I'm concerned about is that we will very cheerfully enter into a bidding war when it comes to from a partisan standpoint or even in a non-partisan standpoint in an effort to demonstrate our desire to protect America.

We've said, the president said, every American has said they'd be willing to pay just about any price to ensure that September 11th never happened again. That's easy to say in a speech when the Budget Committee meets coming in January, February and March to actually put that on paper and realize the juxtaposition that has with health care, welfare, the environment, transportation and everything else in the federal budget. That will be a little bit harder pill to swallow and more difficult to sustain long term fiscal sanity and get us back on an even keel in short order.

So how quickly can we come up with that kind of analysis so that we are better prepared to enter into this next budget cycle? What I would suggest is this. We have created within the GAO a unit, you know, a task being the focus horizontally, on the issue of homeland security. And Brandle Yem (ph) is the director of that group. What I would suggest is we get him and his people together with your staff and let's figure out what we can scope out to get down within a reasonable period of time. Obviously it depends upon how much you want us to do.

We can make it a priority. I think it needs to be a priority. And I think it's a (inaudible) to quite frankly what needs to be done in a whole range of areas in government. This just happens to be the most acute need right now, and so we'll work with you.

(UNKNOWN): Great.

NUSSLE: And as part of the horizontal approach, we need to include state and local as well.

(UNKNOWN): OK, let me mention something on state and local. I met today, this morning, with a number of state treasurers who are trying to work with us then we'll end up working with the administration because they want to play a part here and they want to leverage the economic power of the states and the state pension fund to combat terrorism. And there are things that can be done in that regard, and we're working with them and trying to facilitate for them to be able to network with others to get that done through Governor Ridge, et cetera, if you will.

NUSSLE: Mr. Spratt.

SPRATT: Let me follow up on that idea. Would it be possible then, for the General Accounting Office, first of all, to take something like the wiring diagram you have there and expand upon it and give us an inventory of all the programs in the federal government, associated agencies that are counterterrorism and homeland security today? Or is that a doable task?

(UNKNOWN): I think it's a doable task, and part of the problem that you have, obviously Mr. Spratt, is that you can come up with a good faith effort to get that done ...

SPRATT: We want something usable.

CROSS TALK

I mean, you can give us a big continuum (ph) and nobody will ever look at it.

(UNKNOWN): No, I understand what you're saying. Yes, yes.

SPRATT: Secondly, obviously we would want the organizations and we would want the programs associated with those organizations. In many cases, they would be dual and triple applications. They would not just be homeland security. There would be other purposes. And we'd like to know, I think, the cost associated with the program. And then once we get that, I guess we need to talk to you about how do you measure effectiveness. It's easy to say that. We use the word cost effective all the time. We don't really have a good device for measuring cost effectiveness. Is that doable?

(UNKNOWN): We can come up with the agencies. We can have a good faith effort of coming up with what they report the cost is being. We're not going to be able to audit the cost. Obviously one of the problems with cost is how do you define it. Are they allocating overhead to it? Is it just direct costs? I mean, there are a lot of issues there. So I think what we can do is do the best we can to get some meaningful information that gives you a baseline, but ultimately this is something we're going to have to do over time in more depth over time.

SPRATT: Well, we'd welcome the opportunity to sit down with your staff and work out that project. Thank you.

NUSSLE: Mr. Gutknecht?

GUTKNECHT: Thank you Mr. Chairman, Mr. Walker.

It's been said that one of the first casualties of war is the truth. And there have been some rumors floating around, and I just want to find out what you know about this. I was told last week, for example, that the last three years we have--the federal government has spent several hundred million dollars on consultants to deal with bioterrorism. And in view of the rather ham-fisted way that we seem to have dealt with Anthrax, I'm just curious--two things--first of all, can you confirm that or do you know that? And is there a way we can find out whether or not that's true?

And secondly, I think, you know, we owe it to our constituents to find out what in the world we've gotten for all the money we have spent. What the number is we don't know right now. But we know it's a pretty sizable number over the last three years. And I guess I'd just like to work with you and I hope you would work with Budget Committee because I do think there will be a tendency over the next year or so, and perhaps beyond, to be willing to spend a lot more money. But I agree that at some point we have to demonstrate to our constituents and to the taxpayers that in fact they're getting fair value for the money we spent.

Do you know anything about the amount ...

WALKER?: I do not know the amount of money that's been spent on bioterrorism consultants, but hopefully at least we'll get a feel for what's being proposed to be spent on bioterrorism as part of this other region (ph). I don't know if we have a way to figure that out or not. The information that we get does not break it out by whether or not it's for consultants versus other. I'll see what, if anything, we can do on that. But I cannot confirm the fact that we spent several hundred million dollars on bioterrorism.

GUTKNECHT: Mr. Chairman, let me just brag for a minute if I can on some of my constituents. You know, for all the money we have spent over the last number of years on bioterrorism, the one thing that we learned to our despair that we really did not have an effective test for Anthrax. And a team of researchers working in my district with no federal funds, in the last 30 days, has developed a test for Anthrax at Mayo Clinic, which will give you results within 30 minutes.

And I think that there's an example and I think maybe a lesson for us, and that is that all the money that we're throwing in to some of the federal agencies we don't seem to get the kind of results. And here we have some scientists working in the lab in Rochester, Minnesota with no federal funds and they come up with a test within 30 days that will give us answers within 30 minutes. And I hope we won't lose that lesson as we go forward.

I yield back.

NUSSLE: I think we also have to keep in mind that we've had one producer of, you know, vaccine for Anthrax or at least one type of Anthrax that has not received FDA approval. And so we've spent a tremendous amount of money on that, and yet FDA hasn't approved the vaccine. That's an example of something that's gone wrong, too.

I'm going to call on Mr. Bentsen next, but let me propound a unanimous consent request. I would ask unanimous consent that we invite to the table after Mr. Bentsen has an opportunity to ask questions, our second panel, and allow them to make their presentation. We have a briefing at 3:00 and I think it would be good to get their thoughts on this as well before we go (inaudible). So Mr. Bentsen will call that second panel out.

BENTSEN: Thank you, Mr. Chairman. And excuse my voice.

Mr. Walker, you raised some interesting questions. And I apologize for our second panel, but I'm going to have to leave to go back to a markup on the reinsurance bill that we're working on in response to September 11th, which may well have future budget implications. But you raised some interesting questions to whether or not the cost--and there will be a cost associated with this--but whether or not it's a supplemental cost or it becomes a substitution cost for other programs that we might do. And I don't know that any of us have that answer.

We know that most of the first responders are state and local but we also don't know the answer of whether this is a federal cost that the federal government ultimately will have to underwrite. So it's a very complicated issue. I'd like to turn your attention to a story that ran Monday in the New York Times about the public health care system in responding to bioterrorism. And I'd ask unanimous consent to insert it in the record, if I might.

And it was in response to a letter, or in part at least in response, to a letter put out by the American Hospital Association where they estimated that the cost of bringing the nation's hospitals up to speed to deal with bioterrorism response would be about $11 billion plus. I didn't read this article first thing Monday morning because I was sitting at Baylor College of Medicine in Houston and the head of the institution that I was sitting with had read it, and mentioned it to me. And all over this country, major hospitals and medical centers, including the Mayo Clinic, I assume, are in the process of figuring out what they would do, how they would respond to a bioterrorism attack.

Where are we and where has the federal government been in trying to deal with those issues? It's my understanding in the past we've had a research budget of about $200 million at the NIH and other funding at CDC. But have we taken any of the appropriate steps to ensure that the public health system is ready to address any sort of widespread bioterrorism attack? And what do you all estimate the cost will be?

WALKER: Well, Jan Heinrich, who is the director in our health care practice, will come up--I'd like to briefly respond to what we've done in the area of what the government has done in bioterrorism. And then I'd like to briefly come back and talk to you about infrastructure.

(UNKNOWN): Yes, on the public health side, it's only been recently that we've begun to reinvest in the infrastructure that we need, if in fact we're going to be able to respond adequately. That's our surveillance systems, our training so that we can recognize the biological agents. The hospitals' systems side in the emergency rooms, I know that there's a great deal of concern within the American's hospital systems because all of our federal programs have really been focused on efficiency, and really cutting out the excess capacity.

And I think that what we're hearing now is that we don't have that excess capacity. And so we have heard varying reports about what, in fact, it will cost us to expand emergency room capability and to expand hospital care.

BENTSEN: Do you think the $11 billion figure that AHA puts out is a ballpark figure or...

(UNKNOWN): I'd really want to look very carefully at that.

WALKER (?): I think this is a serious issue that goes beyond this that I'd like to touch on very quickly. Based on all the work the GAO has done, even with the events of September 11th, there is significant excess fiscal plan infrastructure in a range of areas that we need to take a look at. And I would argue because of the event of September 11th, we now need to look at it quicker because what we're going to have to do is ensure the safety and security and the proper equipping of a number of facilities.

Whether they be DOD, BA, postal service facilities, federal facilities, we're going to need to do that. We have significant excess physical plant right now, and ultimately we're going to have to rationalize that physical plant. And I would hope that we could think about accelerating the rationalization of that because we're going to have to invest the safeguard of that fiscal plan and to properly equip it, and to properly staff whatever physical plant we have in light of the events of September 11th.

And so I think--you know, I know there are a lot of people coming out now saying, "Oh, gee well, if something cataclysmic happened, we would end up having to use all the rooms that we have." We've got to go back to risk assessment. What's the likelihood that that's going to happen? Can we afford to pay for and staff for something that might have a 1 percent or less than 1 percent probability? This is some of the things we have to go through.

BENTSEN: Thank you, Mr. Chairman.

NUSSLE: Thank you. I'd invite Chairman Hamilton and Speaker Gingrich to the witness table.

Like the GAO, the U.S. Commission on National Security for the 21st Century did not regard domestic use of weapons of mass destruction by terrorists as science fiction or as a threat that might be 20 years in the future. So for your farsightedness and your willingness to do some heavy lifting on the commission to begin the thought process, at that time, hopefully far into the future. But as we know now, not quite so. We are very grateful for your work product. We are grateful for your attendance here today.

Begin with Speaker Gingrich. Welcome back to the Budget Committee and to the Congress. And I look forward to your testimony.

GINGRICH: Mr. Chairman and Mr. Spratt and the members, I'm grateful to be here. Chairman Hamilton and I are very grateful you take the (inaudible) let us chat with you. Let me start for just 30 seconds and pick up on what General Walker started with, which is that this committee should, I think, take seriously the notion that we have to rethink health care, rethink Social Security, have a profound increase in the value per dollar of the government spending. DOD procurement would be an example.

The example that Mr. Gutknecht cited where within 30 days, we had generated a product in the private sector from a world class institution that probably would have taken 10 years under normal processes. And then fourth, I think we have to look at economic growth. Because the difference over the 30 years you were citing between a 3 percent average and a 2 percent average is a stunning multiple.

And I would say this committee ought to take those four zones as very profound areas of reform without which you cannot solve the problems that General Walker outlined. We on the Hart-Rudman Commission, which I commend President Clinton for having agreed to establish and Secretary Cohen for having agreed to sponsor, we reached three key conclusions I just want to cite to you. The first is, as we reported in March, that we have to plan on the assumption that a weapon of mass destruction will be used in an American city, and that we have to assume that in the next 25 years, that is the number one threat to the United States.

At the time we said it, I think a lot of news media thought it was either science fiction or irrelevant. But around September 12th, they became more interested. I just want to emphasize what we cited was neither September the 11th nor the Anthrax event. The Anthrax event has involved four deaths and 17 infections. September the 11th actually understressed the system in terms of casualties because so many people tragically died in the buildings, they didn't need medical care.

And I would just suggest to you, you look at all the reports for the last 15 years, if you had a major biological problem, either a large Anthrax, a reengineered smallpox, or a reengineered flu, the largest epidemic of the 20th century was flu in 1918. It killed more people than died in four years of the First World War. So flu can be properly engineered and an extraordinarily dangerous illness. And you have to remember, we may not have the correct vaccine, which is why buying 300 million units is probably the right thing to do, but we had better be building a brute force capacity to identify, analyze and respond.

And we may have to maintain shadow factories that are capable of being converted rapidly, or factories that are paid at a double capacity, because you may literally have to produce a brand new vaccine to a brand new engineered disease. These are very serious things. I agree they may only be 1 percent occasions, but if you have a nuclear weapon go off in an American city or you have a major biological event, people in the next hearing are not going to say, "Gee, you were really prudent in not worrying about that."

And I think it requires mobile systems. It requires using a large part of the National Guard and it requires a significant investment. Let me also point out the second thing we said was a danger after a weapon of mass destruction in an American city was the failure of American math and science education and the failure to invest enough in science. And I would argue that tripling the budget of the National Science Foundation. I don't care where you take the money from. Tripling the budget of the National Science Foundation is as big a national security investment as anything else you'll do.

And insisting on measured productive math and science education is central to our survival. And we said as a group unanimously, this is a larger threat than any conceivable conventional war. And I think that should sober anybody who cares about national security in terms of our education. And third, we concluded that there has to be a homeland security agency, and our reason was simple. Based on the drug czar's experience, having a coordinating exultation role is in the end futile.

There has to be real power. Now there are a lot of different ways to design that real power. But if you have 44 or 52 or 60 agencies after Governor Ridge leaves, after the president ceases to focus on this crisis, the next homeland security director is going to be essentially impotent. Furthermore, because homeland security is central to the Congress, the Congress had better have a position, which is accountable to the Congress. This should be a position, which is approved by the Senate. It should be a position in which you can compel testimony. I think it's a very important issue.

Let me just say two last quick things. My personal bias is is you do all your planning looking at the charts that General Walker already laid out. You can't get intelligence and national defense on a world basis for less than 4 percentage GDP. That every effort to try to do it going to end up coming short, and then later you'll wonder why that particular shortfall--and I agree with what Mr. Spratt said exactly on his point. There are too many things like that we need to be doing we're not doing right now.

And lastly, I think the Congress right now should set a benchmark of September the 15th next year. You could do this in two weeks. Set a benchmark of September the 15th next year, assume two major crises, one nuclear, the other biological. And lay out what the United States should be capable of doing on that date. Because if we don't set right now a tough goal for September a year from now, then when it happens a year from now, we'll wonder why we're not capable. I hope it won't happen. But I think it is realistic to assume you can have a major problem in at least one city, and we could be 10 percent prepared if we don't cut through the red tape and cut through the inertia and insist in a wartime kind of urgency.

NUSSLE: Mr. Hamilton?

HAMILTON: Mr. Chairman and Mr. Spratt, thank you for the opportunity to testify. The speaker was a little modest when he referred to the commission and the idea the commission--the Hart- Rudman Commission really originated with the speaker. And President Clinton and Secretary Cohen made the appointments. We had a remarkable conviction, very broadly based, Republicans, Democrats, liberals, conservatives, across the board of the political spectrum. And the unique thing about it, the important thing about it, was the unanimity of the recommendations.

The principle point was in terms of conclusions that Americans will likely die on American soil, possibly in large numbers. That was written about a year ago. And it unfortunately turned out to be very prophetic. We also concluded that the federal government was very poorly organized to deal with the question of homeland security. And mentioned, as the chairman did a moment ago, the number of agencies that are involved--as a matter of fact, I think 43 probably understates it. I think it's a good many more than that if you really look at it carefully.

And we said that the federal government had a very fragmented ad hoc approach to the question of homeland security. Let me summarize very quickly some of the other recommendations and I'll not go into any detail, just kind of cover them as quickly as I can. The president had to develop a comprehensive strategy. I think that's under way now. Three elements to it, prevention, preventing the possible terrorist attacks from taking place. That's the best defense, of course.

Protection, protection all kinds of critical infrastructure across this country. And of course, the response mechanism for responding to a disaster after it strikes. We proposed, as the speaker suggested, the National Homeland Security Agency. I would want to say a little more about that. The director would be a member of the cabinet. He would be confirmed in the Senate. He would have his own budget. He would have his own staff. And the core of it would be what is today FEMA, but you would add the Customs Service, the Border Patrol and the Coast Guard.

We also made a recommendation with regard to the Congress. And we think the Congress is not very well organized either to deal with homeland security. The problem here is not just with the executive branch, but trying to explain to the Congress or testify before the Congress on homeland security is an enormously complicated task, because you've split all over the place jurisdiction with regard to homeland security. And you have to get your act together in the United States Congress just as clearly as the executive branch has to get its act together.

Now on the point of organization. The threshold question is, how serious is the threat of terrorism to the national security? If you believe that that is the number one threat to the United States, as the commission unanimously believe, then it has enormous implications as to the way you organize the government and the way you allocate your resources. There are plenty of other threats to the national security, some of them very serious indeed. We'd like to be able to deal with all of them, put all the possible resources against each of them. But you can't do that.

You've got to establish priorities. If this is the number one threat, then you had better begin to allocate your budget and your resources and organize your government in such a way that you deal with the number one threat. At the moment, there are two schools of thought. One envisions the White House office, similar to the National Security Counsel or the National Economic Counsel. That's been put into place now by the president. Mr. Walker, I think, was exactly right when he said that's an excellent first step.

I also agree with him that it is not sufficient. The second approach, a cabinet official, direct control over department, direct control over budget, direct control over staff. And the commission was pretty solid on this. We were very solid. We thought you needed a department of government with cabinet status. Does the person in charge have the clout, does he have the money, does he have the staff to get things done? That's the key.

Now I think Governor Ridge is an excellent choice. He'll have total support of the president. He'll have good access to the president. But over the long term, you've got to look at this problem beyond the Bush administration. You've got to look at it in terms of years, not in terms of a few months or even four years time. And I think it just is terribly important, if you want to move this federal bureaucracy, you've got to have someone in that position that has clout. You can't do it the ballots of this year.

You've got a heavy, heavy schedule for the remaining few weeks, but you certainly ought to be thinking about setting up a cabinet agency when you come back. When Don Rumsfeld was the secretary of Defense the first time, not this time, he made this statement on one occasion when he got into a conflict with the intelligence community, he said, "If it's in my budget, I control it." That is a statement that everyone of us can fully appreciate. If we were running the defense department, if we were running any other department, agency, if it's in our budget, we would want to control it.

That is precisely the problem that Governor Ridge is going to confront. He's going to be sitting around that table with a lot of very powerful actors in this town, as powerful as you can get around a single table. And the only way he is going to be able to move that bureaucracy over a period of time, Governor Ridge and his successors, will be to have his budget and to be able to control that budget. Now I know there's a lot of argument here for coordination and we have to deal with a lot of problems through interagency coordination and cooperation. It's an important thing to do in ordinary times.

But these are not ordinary times. This is a national emergency.

HAMILTON: And we are at war. And the business of national homeland security is an urgent national priority. So I think--I guess my time has concluded--we've got to look at this in terms of clout, in terms of budget, in terms of strategy, in terms of staff and the point that has been made by both the speaker and Mr. Walker is this. If you want to read the Congress out of the action, do it by executive order.

The national security adviser is tough to get up before this Congress. You cannot compel the national security adviser to come up here. They often cooperate. They're often very generous in that. If you're a department head, the Congress can compel them to be here. And you can ask them the tough questions, which is your duty to do, in your oversight responsibilities. If you want to read the Congress out of all this, just let it drift along for a period of years and months under an executive order. If you want to put the Congress into the action, give it a statutory base.

NUSSLE: I thank our witnesses.

Mr. Sununu?

SUNUNU: Thank you, Mr. Chairman. And thank you for joining us. I'd like the panel members to address, or at least begin by addressing in a little bit more detail, one of the Commission recommendations dealing with establishing an independent agency for homeland security. There was also a recommendation to establish an assistant secretary of defense for homeland security. How do those--would those two interact? And the proposal is to move Customs, Border Patrol and the Coast Guard into homeland security. Would they report within the Department of Defense to the undersecretary? Would they report to the Homeland Security director, or are they one in the same?

WALKER?: I think with respect to the Coast Guard, the Border Patrol and Customs, they would report to the director of the Homeland Security Agency. When you're dealing with the federal government, with all of these cross-cutting responsibilities, it's literally impossible to bring everything under one person. We did not recommend that the intelligence functions be put under the director of Homeland Security. We did not recommend that the defense function. We kept that completely different.

We did say that the DOD, as you've suggested Mr. Sununu, should have an assistant secretary reporting directly to the secretary of defense on homeland security, which the Department of Defense I think does not have today. So we try to elevate it within the department ...

SUNUNU: What elements within DOD would that individual be responsible for?

WALKER: I don't think I can respond to that other than to say those elements that have responsibility for homeland defense. We did believe that the primary DOD agency or bureau that would have responsibility here would be the National Guard. The National Guard is in place. The infrastructure is in every state, and already performs functions that are very similar to what we are asking here. So that becomes the primary DOD body that you would deal with.

SUNUNU: Speaker Gingrich, you talked a little bit about bioterrorism and I guess the scope of the threat, the technology that's out there that we would even have a difficult time imagining at this point, you know, modified bugs, whether it's flu or smallpox or others. There are a number of key elements to dealing with the bioterrorism threat, where I think there are probably--we could argue there are some weaknesses. The R&D side, developing vaccines, treatments, distribution and the logistics associated with providing vaccines, treatment where it might be needed.

The first responders, that their need for equipment, training and technology. My question is, is there a particular area here or one that I haven't mentioned where you see the greatest technical weakness or the greatest need for resources that we, as a Congress, ought to focus our attention first?

GINGRICH: That's a very good question, and I'm going to give you a very discouraging answer. If you go back and watch the movie, "Titanic", there's a fateful moment where the designer of the ship tells the heroine that they'd actually designed the ship to have the full number of lifeboats, but they didn't want to crowd the promenade so they only put half of them on, a decision which ultimately cost well over a thousand lives.

Before the First World War, outside the professional military, nobody understood the change in scale. And you can read all sorts of books just before the first World War that said no war could last more than 60 days because the economies would collapse, et cetera. Before the Second World War, to have suggested either the Holocaust and the deliberate massacre of 6 million people, or to have suggested nuclear weapons or for that matter, firebombing, which actually killed more people than nuclear weapons, would have been unthinkable.

People would have said that's not at all likely. You're in the same boat now. And the challenge is to say--to just go back and have your staff put together the seven to 10 best reports of the last 10 years on biological events and put it on a chart and stare at it. It probably won't occur. It's probably not really (inaudible). But the study that said a lay down by airplane of an aerosol anthrax over Washington would kill 1,100,000 people. Look what four deaths and 17 total people involved did to this economy, to the Congress, to staffing, to buildings.

And then imagine a serious event. We have not seen, by the standard of our Commission, a serious event here. And so I would just say to you, you have to look at all of it. And you have to be ruthless about the notion, you can't necessarily know what will hit you because we don't today understand biological knowledge. So you've got to have a very fast response time, which is why the breakthrough that Mr. Gutknecht mentioned is so important. I would say you've got to look at the whole system because it's the piece you don't fix that's going to kill a lot of people.

WALKER?: Mr. Sununu, may I respond?

SUNUNU: Please.

WALKER?: The one that worries me the most in the biological area is smallpox. Smallpox is of course exceedingly contagious. The American population today, if you're under--I don't know what the age is, 30, 40 years of age, you've not been vaccinated. If you have a breakout of smallpox, you'll have devastating numbers of dead from smallpox in the younger population. Those of us who are my age had a smallpox vaccination, and the percentages are that we would experience very small number of deaths, even though the vaccination was many, many years ago.

Smallpox is the killer biological weapon. I agree with Mr. Spratt's comments earlier about nuclear weapons. That I would rank even higher, probably, in the total list.

SUNUNU?: Thank you. I think it's important to bring these together. First, you have to look at a risk assessment. You have to do a comprehensive risk assessment as to what is the spectrum of risk. I'd like to piggyback on something that Speaker Gingrich said. You may have said that the risk of a certain thing happening is not very high, but nonetheless, we've got to be prepared to deal with it. But how you deal with it is important.

For example, Speaker Gingrich talked about the fact that in order to address the adverse implications of a particular weapon of mass destruction in city X, maybe we ought to be thinking about having a national capability that has mobility that can be moved to city X, because we don't know where city X is. OK, very, very quickly, and have a national response team or whatever else. But in the absence of looking at it that way, let me tell you how people are going to treat it. Every city and every department and agency are going to want to end up building their own infrastructure, which is totally irrational and unaffordable.

So we have to do the risk assessment, set the priorities and then figure out how best to respond to that risk. Certain things may be local, certain may be regional, certain may be national, certain may be federal, state, local, whatever.

(UNKNOWN): But we should begin now to vaccinate everybody in the country for smallpox.

NUSSLE: Mr. Clement?

CLEMENT: Thank you, Mr. Chairman.

This is a wonderful panel, and all of you are great leaders. And you sure give us a lot of food for thought.

General Walker, I'll start with you first. I know you mentioned the role of government. It was almost as if you were saying that you feel like your hands are tied right now when it comes to moving forward with an effective oversight. Were you saying that?

WALKER: Well what I'm saying is that what's clear to me when you look at these numbers and you project them out, is that in addition to entitlement reform, which Speaker Gingrich talked about, that there are current priorities and future priorities that Congress is going to want to fund, and that the American people are going to demand it to fund. And it would be prudent for it to fund. But because of what's in the baseline right now, the numbers just don't work. So if you want to close the gap that I showed between, you know, what current tax burdens will allow and what the projected funding is going to be, in addition to growing the economy, which obviously will help, but it's not going to solve the gap that we're talking about here, you're going to have to look at the base departments agency's programs and activities, and you're going to review, reassess, reprioritize. Some things may be doing things that are worthwhile, but they're not generating decent results, and you've got a higher priority that you want to be able to fund or need to be able to fund.

In addition, with regard to homeland security, I am very seriously concerned about how you're going to conduct effective oversight and how we're going to help you do that unless this agency is a statutory agency. Because we could get in to the position of being almost a drunken sailor, spend money as if there's no tomorrow with no accountability, because we're spending it for national security or counterterrorism. It's amazing how many things can be cloaked under the rubric of national security or counterterrorism, and I'll just leave it at that.

CLEMENT: Speaker Gingrich, I wanted to ask you about--I know you made mention that--I know you could say more things in fewer words than any fellow I've ever worked with. And fewer words and say so much, even being a Georgian. That's pretty good being a Tennesseean myself. But let me ask you about--I know you mentioned about rethinking Social Security and health care. You know, I could very well argue that that's a national security too because, you know, people don't have enough money to live on or they don't have the proper health care. They can't survive either. That's national security. Am I wrong?

GINGRICH: Well, no. I think first of all, you know, President Eisenhower, who had a fair background in military, always emphasized that financial security and financial strength were a key part of how we'd ultimately defeat the Soviet Union, and he was very frugal with defense spending and very tough minded about trying to have a strong economy and a strong society. And I think, certainly, you have to look at a range of issues, where I would argue this committee, if you take General Walker's charts, which said even without the problems since September 11th, there were certain inevitable long term challenges you're faced with.

And I've spent most of the last three years looking at health care. And I'll just say flatly, if we don't transform the health care system, you can't possibly make the current structure work when the baby boomers retire. It's just going to fall apart. And you go down the list of these things. I think that's another hearing for another day. But your point is exactly right. For the long term future of the country, there are Social Security issues. There are financial issues. There are health issues that are as profound for the country as national security. And unless they're all working, the country doesn't work.

I think that's a more than fair point, which is why I would argue, you want to think carefully and cleverly about as much as your civil defense being either volunteer or part time. Let me give you three quick examples. We ought to have a public health corps of volunteers so if you got to a biological event--in a city like New York, you could absorb 100,000 people dealing with smallpox. So you want those to be part time volunteers who get trained twice a year and are doing it because if there's a crisis, much like the World War II bomb shelter wardens were in Britain.

Second, you probably want a civil defense system, much like we had in the 50's, where FEMA would organize people. So if you had a big nuclear event or a big bomb event, you would have people who could go to it. Third, I believe notionally, and I wouldn't defend the number precisely, but you probably want 40 percent of the National Guard redirected to medical and construction challenges, which frankly, the Guard hierarchy will probably fight. But for the country's future, that's where you embed it at lowest cost to have the local response capabilities.

CLEMENT: And Mr. Hamilton, no one have I learned more from when it comes to international relations than you. You've been my mentor, as you know, over the years. And I just wanted to ask you, to diffuse the situation we've got now, if something could break where we could have peace in the Middle East or between the Israelis and the Palestinians, is that--I know we've got Afghanistan to deal with and all that right now and the Taliban. But besides that, is that the key that unlocks the door to bring about a reduction, knowing we're not going to get to zero risk ever, just like General Walker said. But is that the key that unlocks that door if we truly are going to grasp terrorism?

HAMILTON: No, I don't think it's the key that unlocks the door. Like it or not, the Arab countries today do in fact link the war on terrorism with progress in the Israeli-Palestinian dispute. So it's a factor. But I think you could remove the very troublesome factor, the Palestinian-Israeli dispute, and you would still have the phenomenon of terrorism because it's much more deep seated than just the Arab- Israeli dispute.

CLEMENT: Thank you.

NUSSLE: Mr. Thornberry?

THORNBERRY: Thank you, Mr. Chairman. And I appreciate this hearing and those which are to follow. I agree with Mr. Spratt on the issue of non-proliferation, but I also believe that is but one example in our government where one can question whether our priorities are right, whether they've changed since September 11th and whether they're right going into the rest of the century. And I think this committee has a role in helping focus on those priorities.

I guess I'd like to ask each of you to comment on two questions. One question is, it seems to me that the Hart-Rudman recommendations are not necessarily inconsistent with Governor Ridge's office. In other words, I see Governor Ridge, as has been described by the White House, as a national security adviser. The national security adviser has departments to implement this coordinated policy, which he or she formulates.

And it does seem to me that a department of homeland security to implement at least those policies dealing with border and cyberterrorism and emergency response make some sense. And so it is not inconsistent with Governor Ridge's position. Indeed, it could help him do his job better. And if Governor Ridge is going around making sure the Border Patrol is talking to Customs Service radios, then he is functioning at the wrong level, but somebody's got to do it.

And General Walker, it seems to me that that arrangement is not inconsistent with the principles you laid out. And I'd like to know if anybody disagrees with that. My second question is more difficult. How do we impart this sense of urgency that is necessary to make the changes here and in the executive branch? I'm circulating an editorial from USA Today from last week that basically says that there's no way Congress is ever going to do this Hart-Rudman recommendations because Congress will not step on toes here or in the executive branch to rearrange. It's just too difficult. It's just too politically difficult.

I agree with the speaker. We have not yet gotten to the big event. How do we impart that sense of urgency in order to prepare, better prepare, for that big event? And I'd like for each of you to give us some advice on how we can do that.

WALKER: Well first, with regard to the Office of Homeland Security, I would say, as you know, we issued this report, which ironically came out very shortly after September 11th, because we'd obviously done a lot of work before September 11th on combating terrorism. In fact, we issued it on the day that the president came up here and spoke to the Joint Session of Congress and the first recommendation was that they create an office similar to what he did on the night that we issued the report.

And we'd obviously talked to him about it some months in advance. It was a partial adoption. We were clear that we thought that it needed to have a statutory basis, and that it would be preferable if it was a PAS (ph) appointment. Why? Two reasons. Number one, history has told me that if you don't have control, whether you're in the public sector or the private sector, if you don't have significant control over financial and human resources, if all you have is an outbox, not an inbox, you are not going to be effective over time.

Number two, there is no question that Governor Ridge and President Bush know each other well, like each other, work effectively. And in this environment, maybe there's a good chance that this model could work. But that's looking at it on an individual basis, not an institutional basis. And I think that Congress needs to look at it on an institutional basis. And number three, which is what I care about for you because you're my client and because we are an instrument to help you do your job, if you want to have effective oversight, I'm very seriously concerned that this office does not have a statutory basis. Less about whether or not it's PAS (ph) or its Cabinet level.

If this office does not have a statutory basis, because of some of the problems we've experienced already in conjunction with the energy task force and the vice president, you're going to have problems and we're going to have problems getting access to information to get you to do your job. And in an area like homeland security, I would argue that is unacceptable to the American people.

GINGRICH: Let me say first I agree with everything General Walker just said. I would simply add on the issue of being like the national security adviser, that's a profound misunderstanding of why the national security adviser matters. The national security adviser matters because the president of the United States talks with his or her counterparts all over the world virtually every day. And in order to do that, the national security adviser is the first person to brief them every day, and is with them at different times every day.

That will never be true of a homeland security office. They'll never be comparable in centrality to the president. Second, we've got to decide whether we're going to be a comfortable country until the crisis or a serious country. And this is the core of your urgency question. I think hearings matter. I think the Congress ought to hold a series of threat based hearings and then say, "OK, do we want to be the people who take the right steps before there's a catastrophe, or would we rather just wait and hold the hearings after the catastrophe?"

There is a very real--not gigantic, but real possibility of something really bad happening. And I think we have not--I agree with you. The reason people don't feel urgency is because they're told over and over again by the government, things are under control. This is not like Desert Storm. We're not sending professionals half a world away where we get to watch it on TV. This is a very complicated, very long term struggle that has direct life and death implications at home. We are not today functioning that way.

It's a major problem. I think the president gets it. I think the vice president gets it. I think the secretary of defense gets it. I'm not sure, frankly, much beyond there that people yet have a sense of driving urgency that there could be a crisis tomorrow morning, and we are not prepared for that crisis.

HAMILTON: I should say first of all that Mr. Thornberry recognized this problem far before his other colleagues did. And we on the National Security Commission are grateful to you for your recognition of that and your leadership. He was talking about this months and months ago. And I think he's been an effective voice of leadership. I agree with your observation. There's nothing inconsistent here, Hart-Rudman-Bush. The president deserves a lot of credit for moving this forward. He did what he had to do.

He's created an executive order. He started the process. Now the Congress has to do what it's supposed to do, I think. And it's an evolving matter. I don't think there's a right way or a wrong way to deal with this organizational question necessarily. There may be a more effective way to do it than the other way. Whatever we do is going to be an improvement over what we had before, I'm sure of that.

Now secondly, on imparting a sense of urgency, let me make this observation. I think the people of this country today are in the grip of fear. And they want information and they want leadership today. And the domestic situation proved more serious than our public officials initially indicated, I believe. This is a function of leadership. You have to disclose fully what you know and what you don't know. We don't know everything. We don't know everything about anthrax. We've all learned. Even the scientists have learned a lot about anthrax in the last few days.

You have to avoid speculation. You have to make sure your facts are straight. And you have to recommend specific steps that people can take. They're out there today. I hear all of you talking about--I hear the president talking about how urgent the situation is, how great the risk is. They agree with that. By gosh, they've had it demonstrated graphically on September 11th. What they're really saying to themselves is what do I need to do for myself and my family. And you've got to give them some direction. You're the leaders, and the president, and I think the president's making a genuinely good effort to try to do this.

And I know Governor Ridge is. And it's a very, very tough job. The president and Governor Ridge are not going to get it right every time. There's just too many things we're not sure of here. So how do you impart this sense of urgency? That's your job. You're the leaders. And the rest of us have to do the best we can to try to give you support.

NUSSLE: Ms. McCarthy?

MCCARTHY: Thank you, and I find the testimony of everyone really extremely interesting. I agree with the sense of urgency. I don't know whether it's my nursing training. And I'll be very honest with you, even when we were here without our office--and I thank you for sharing space--and looking at my colleagues, everyone was saying like, oh this is nothing. It is something. On the health care needs, smallpox--I mean, that is what we should be worrying about.

You know, obviously we didn't get the message across on anthrax. An awful lot of people did know some things about it, but not to the extent of what was happening. Buildings didn't have to be closed in my opinion, because to spray at the beginning, it is usually completed at that time. The other stuff where it would be a negative or positive on the swab, we spent so much money and time and fear among people. And we have to get that right. And we have to have one spokesperson, as far as I'm concerned, giving that education out there.

I agree with you (inaudible) that we have to start educating the people. They are scared. And yet, when I give a speech and say, "We have a long haul ahead of us, and we're going to have to be careful," and yet we're sending a message out there, oh go to the movies and everything. And that's fine. We have to keep the economy going. But I also happen to agree that it's almost like we're taking care of children. We don't want them to know too much and yet they know a lot more than their fears are built on their imagination. That's what we're seeing with our adults, our families.

But as far as home security, we have to get this right. And that's going to be the toughest job, in my opinion, here in Congress. Because it's going to become political. And you know it and everyone else knows it. Once the politics get involved in what we're trying to do as far as the right thing, unfortunately I think that we might lose in the end. I happen to think there is a sense of urgency. I happen to think that something is going to happen, whether it's next week, whether it's next month. And we are not prepared for it. And we are not. And that's a sad thing, but we'll learn from it.

And I hope they listen to you when we look to see how to set up the correct formula for home security. And I hope everyone works together on it. This is the biggest challenge this nation has faced in a long, long time. And other nations are going to be looking towards us to see if we do it right. So we have a lot at stake at this. But the biggest problem as far as I'm concerned is the budget that we're talking about (inaudible) whether (ph) (inaudible) that we need tax stimulus or not, our moneys right now should be going to security, national security and everything else has to be put on hold. I guess that's the basic line as far as I'm concerned.

(UNKNOWN): (inaudible) real quickly on that. First, I thought back after these events happened in light of September 11th back in college in my undergraduate days, where I was taught about Maslow's theory. Some of us might (inaudible). Faced with self-preservation, at the pinnacle was self-actualization. I would argue that prior to September 11th, a lot of people in this country were focused on me and they were focused on self-actualization. How can I maximize what I get out of life?

Today there's a lot of people focused on self-preservation, which is a concern, but they're also focused on we, and my family, which is a positive. On the other side, is I agree with Mr. Hamilton because of the fact that if you look at risk, with regard to smallpox, from the standpoint of mortality and the infectious nature of that, that's a very serious issue. And even those of us who've had the vaccine, evidence notes that it was years ago, it is not likely to be as effective.

MCCARTHY: Actually, after 10 years it really doesn't have an effect. I was lucky. When I went to nursing school, we had to get another shot. So I have had it twice in my life. 1964 was the last time. 1974, I believe, is when they gave the last shot, if I'm not mistaken.

HAMILTON (?): Can I just (inaudible) I think you put your finger on something very important. We are very likely to have overreacted to the relatively small anthrax event and the under-reacting to the scale of the threat simultaneously. So we're spending an enormous amount of energy running in circles, and not nearly enough energy on tough deep decisions that would enable this country to survive the serious problem.

MCCARTHY: Thank you.

NUSSLE: Mr. Hastings?

HASTINGS: Thank you, Mr. Chairman.

I found the testimony of all three of you to be fascinating, and probably wouldn't have been as fascinating if it were held on September the 10th. But nevertheless, that's where we are.

I guess one observation I'd like to ask all three of you, General Walker, when you were talking, you were talking about the idea that you'll never get to zero risk. You never attain that 100 percent. And yet at the same time, you're all talking about an inventory of some sort of risk assessment on a variety of areas and I haven't fully looked into your report, so I can't respond to everything that you had suggested. But the question then comes, if you can't get zero risk, at what percentage is acceptable to be on guard? And then in that process, what do we do or how do we respond to maybe the threats that different political philosophies will have as it relates to us in a free and open society?

So I invite you, if you understand--hopefully you understand what I'm saying--to respond to that, to give us some sort of guidance on that.

HAMILTON (?): Let me draw a distinction. I don't think you'd want to live in a society, which was so tightened down, that you had no risk of ever having anything bad happen. Just as people don't want to buy a car which is so heavy and so structured that nothing could ever hurt you. It would be a tank, and it would be effective, but it wouldn't sell very much. I think the biggest challenge from a homeland security standpoint is to think through the responses. And as General Walker said, to design and to be mobile and fluid. And as we've argued, to make them as much as possible, Reserve, Guard and civil defense oriented so that you recognize most of the time you don't need them.

But to actually build them to be pretty robust, because if you have a big problem, and a large Anthrax exposure would be a big problem. Smallpox or another engineered contagent would be a big problem. One or more nuclear weapons would be a big problem. What you want to have is enough response capability that you can smother a problem of that size, but you want to build it in such a way that most of the time you're not paying for it to be on standby.

Most of the time it's a reserve capability built into the society rather than a full time agency standing to one side waiting for what could be a once in 30 years event. But you don't want to have that--it's the same thing as boats carrying lifeboats. What you don't want to do is find out you're at the once in 30 year event and you have no capacity to respond.

(UNKNOWN): (inaudible)

WALKER (?): I think your question, Mr. Hastings is really on the mark, because it raises the most difficult task, I think, the president and Governor Ridge confront. And that's the question of priorities. You've got the nuclear attack. You've got the biological. You've got the chemical. You've got conventional. And I think what they have to do is determine what kind of attacks are most likely. And what can be done to prevent those attacks. Now that's a very, very tough call.

Because what you'd like to do is say, "OK, we're going to defend against all of them, and we've got enough money to do it." But we don't have. Where do you put your resources? And that's tough. Most people now put chemical down the list, for example. But it was a chemical attack that blew up the building in Oklahoma City. The materials used in that attack are the materials that are used every day on the farm. So you can't just ignore that.

I would put the nuclear first. I'd put biological, and as I've indicated smallpox at the head of the list. There are about eight or nine, what do you call, pathogens or whatever. And I'd rank them, and then I'd begin to identify what kind of things should be done to prevent each one. And you may get the list wrong. Because you can't predict them. I've sat in on a 100 meetings on terrorism. Nobody at any time ever suggested to me that somebody would fly a jet airliner into the Trade Center or the Pentagon. So you can't hit it every time. But the tough job is priorities and allocating resources.

HAMILTON (?): A couple things that I think are important. First, there is no right answer, or no single answer. There is no minimum acceptable percentage or whatever. You have to do a risk assessment. You have to assess your threats, your vulnerabilities, criticality, and you have to compare that against the resources that you have. Governor Ridge is the one who has to be responsible for doing that for the executive branch.

But I would argue that since the Congress appropriates the money, and since the Congress is also going to be accountable for what happens or what doesn't happen, all the more reason why it's important that you have to ability to conduct not micromanagement, but effective oversight with regard to these activities. And so that comes back to the bulk of my testimony. Thank you.

HASTINGS: One follow up. That leads to a follow up here. I found that your testimony on figure 2 on page 10 of the spikes that you had of the deficits throughout our history, they all showed up in times of war. Maybe there's a study on this elsewhere, but you don't mention it at least what I read here. It's what I call the unintended consequences of other legislation. For example, we're still trying to repeal the telephone tax of 1898. That's still on the book. But also because of the wage of price controls. The Second World War, we led to health care being delivered by the employees, unintended consequence.

Is there a study that you have within GAO where you've looked at statutes that were passed during this period of time, that may be still on the books that have had consequences that are contrary--or causing us problems right now? You put up the Medicare chart. You probably could have put Medicaid up there, and I would suggest that part of that is because it was at least linked to those policies of the Second World War. But just, do you have a response to that.

WALKER (?): We haven't done that, but let me tell you, look on page 10, figure 2, which talks about deficits and surpluses as a percentage of GDP. It practically points out that in times of war or serious economic recession or depression, we've had deficits but we've come out of it. There are two things that we face now that we've never faced before, and we are in times of war. Number one, demographics are working against us, not for us.

And number two, health care costs are out of control. The system is fundamentally broken. And so therefore, we didn't face (inaudible). We've better do something (inaudible).

HASTINGS: Thank you, Mr. Chairman.

NUSSLE: (inaudible). Thank you.

Ms. Clayton?

CLAYTON: Thank you, Mr. Chairman, for having the hearing. And thank the panelists for their (inaudible) presentation. Also is appreciative in both instances your (inaudible) in your deliberations prior to the events of September 11th, you've been doing a considerable amount of (inaudible). I was struck by the commission's--the national security preface. It says that, "The U.S. Commission on national security (inaudible) was borne more than two years ago out of the conviction that the entire range of the U.S. national security policies and processes required reexamination (inaudible) circumstances."

Question. When you looked at the threats, (inaudible) gave all kinds of reasons for the threats. Yet when we look at responding to the threats, we correctly looked at how do we (inaudible) make an assessment, but how do we detect and (inaudible)? We do not look at the causes, which we can prevent. You described the new circumstances as the advancement of information, the globalization, the quick access to information, the lack of stability in certain countries.

You described that it also (inaudible) by our failure to invest in science and education because we are not possibly keeping up. When I looked at the recommendations initially, Mr. Walker, as well as the (inaudible) part of the commission (ph), it put those--Mr. Walker doesn't mention it at all--but you put those kind of at the back of your report (inaudible)--not the back, but it's not the first. And I gather my question is, is it important to talk about the root causes of these? Or is it important to talk about the organization and the leadership? And do we--and back to the question of how urgent is urgent? Who describes the urgency of the situation?

Is it the talking heads on the media who describe it? That's part of why we have the Anthrax anxiety rather than Anthrax facts. And when we also begin to try to examine the structure at the lower level at our health department and try to get them engaged in it, they are fearful because the science is changing so fast. We do need to--homeland security is very, very important. It is the same threat in part that has threatened us abroad that is really threatening us here. The difference is, we as Americans have never suffered that. So we are now trying to find out how the current infrastructure can respond to these new circumstances.

So it seems to me we also have to create not only coordinating (inaudible) who brings all these little boxes together to respond to it, but we need to--I think one of you talked about a new paradigm of thinking on how we respond to that. I have not heard enough today to make me feel that the premise, particularly of the U.S. Commissions report, because I did some part of it earlier when it first came out where the commission is talking about it. Because I was interested in this science and education component of it. And there was a lot of emphasis in that. Can you speak to that?

GINGRICH (?): Well, let me start with saying, when we first sat down with the president to create the commission, our point was that the world was changing so dramatically that we wanted an unconstrained look at the future. So it doesn't start with defense. It doesn't start with intelligence. It doesn't start with any narrow position. It says, what's going to affect American security in the next 25 years. In that sense, it was the broadest commission since 1947. And as Mr. Hamilton pointed out, it was one that was very bipartisan and very serious. It took us the three years to think these things through.

As I pointed out earlier, I thought it was remarkable that a commission on national security would list science and math and science education as the number two problem. And we'd say flatly in a sentence that we brought up so that every commission member signed off on it, this is a bigger threat than any conceivable conventional war. So in that sense, there is a root challenge that we tried to highlight.

I would just say two things about the way you put it. And I thought you were very helpful. One is, I believe the long term overseas threats we're dealing with are vastly beyond Al Qaeda and bin Laden and require a very profound look at how we encourage modernity and how we encourage the rise of states that are compatible with the world we live in. I think it's a much harder problem that we have yet dealt with and it's a topic I'd be glad to talk about sometime.

Second, when you start talking about the civil defense of the future, I believe the Internet, the capacity to reach every single doctor, including every retired doctor, every single nurse, including retired nurses, if you have planning in advance, you could have a web page that was highly authoritative that the National Institutes of Health and the Center for Disease Control jointly produce that was exactly accurate, that gave you the most accurate information as of three minutes ago.

People could build a high sense of certainty. That requires a willingness to cut through the bologna of the current bureaucracies and the current pork barrel and the current unwillingness to reach outside normal institution, which partly goes back to the earlier question that was raised about sense of urgency. We are still behaving as though politics as usual and bureaucratic infighting as usual is tolerable, and there's a very real risk that we're going to kill a lot of Americans because we can't get people to understand we're in a modern world with modern technologies and those technologies cut across all of the bureaucracies including a totally new capabilities if you organize around them, instead of cutting them off by your bureaucratic channels.

HAMILTON: I might say a word, Ms. Clayton, about why the commission reached the conclusion it did with respect to Americans dying on American soil. There is the question of root causes. We went to 28 different countries. One of the things we found there was resentment and hostility against the United States, not just in countries that are adversaries of ours, but almost every country. Now sometimes that was expressed more strongly than others. Sometimes there was indeed hostility. But always a resentment. And we came to recognize that, though it's hard for us to believe in this country, an awful lot of people in this world have grudges against us.

Some of them to the extent that they want to kill us and kill innocent people. Secondly, we determined that the terrorists have, and this is obviously, I guess, greatly expanded their capabilities and their sophistication in using those capabilities. And third, we found that the American communities are very vulnerable. You put all of this together and we said terrorism is the number one threat.

Now your question about root causes or organization or leadership, here I move into an area that is admittedly controversial. But I do believe myself that to deal with terrorism, you have to look at the question of root causes. I don't want to suggest for a moment that that's easy to do. I know how difficult it is to deal with those problems.

HAMILTON: But I think we have to look at the reasons why people turn to terrorism, and we have to understand that there's a lot of misery and there's a lot of despair, there's a lot of hopelessness, there are a lot of governments out there that just are not responsive to the needs of their people who serve only a very few people in the country.

And that's part of why people turn to terrorism. Now, I don't suggest for a moment we can deal with that easily. I know how complicated that is. On the other hand, you have to be sensitive, I think, to it and have to try to understand this phenomenon of terrorism better than we do.

Why do these people do these things? Part answer is--only a partial answer is that foreign policy has consequences. It has been the unanimous view of every member of Congress I've known, every president I've known that the United States should put forces in Saudi Arabia. I have never, ever heard a speech against it.

That's what triggered Osama bin Laden. What really made him mad was American forces' presence in Saudi Arabia. From our standpoint, that's a given. We have to have forces there to protect the supply of oil. From his standpoint, he sees it as defiling everything that he holds sacred. Foreign policy has consequences.

(UNKNOWN): One final question. I'll submit it in writing. Thank you.

PUTNAM: Thank you, Mr. Chairman. I've read the report, and I think General Boyd did an outstanding job as your executive director for that mission. And, quite honestly, I'm a little bit envious of the opportunity that you all had to participate in this and to deal with the best epidemiologists and the best thermographers (ph) and the best sociologists and the best educators and the best foreign policy folks in every possible region of the world to come up with a broad- based, comprehensive plan in dealing with nano-technology and everything all over the map.

One of the things that you highlighted in the report that you've just mentioned, Mr. Hamilton, was that one of the greatest threats the United States faces in the next decade is resentment. And you said that the nation was not prepared for a terrorist attack on its own soil, and then you took it a step further and said not only is the nation not prepared but it is less prepared than it thinks it is. How has the reaction of the United States to the attacks on New York and Washington--how has the reaction fit within your expectations for the American public's response?

HAMILTON: I must say I've been favorably impressed. As I look at the response in New York City, which was the principal focus of the attack, it was better than I would have anticipated the manner in which they dealt with that horrible tragedy. As I see what I think is happening across the country now, as every community says, "Well, is my hospital prepared to deal with an attack in my home town and so forth, I'm encouraged by that. And I think the president deserves some credit for this in alerting the country to it.

Now, I don't want to be Pollyannaish about this. We all know that we've got a long, long way to go to be prepared. But September 11 has had a profound impact on the American people, and I think we are seeing the American people respond as we would expect them to--very constructively and favorable. Overall I've been well-impressed with the way they've responded.

PUTNAM: Mr. Speaker?

GINGRICH: I guess I want to agree but with a very deep condition. There's a real distinction between how people responded to the World Trade Center and how they responded to anthrax, because they've been very different responses so far.

If we had had a really big attack, I think the odds are even money we would have been in a total mess. And, again, I just want to emphasize: The weapon of mass destruction is a totally different event than even the World Trade Center, which was a confinable and definable event in one small part of New York City. It was not an event that had two- or three- or four-mile radius with all sorts of secondary and tertiary damage.

Second, if we had been hit by a wave of attacks every other day for a week, we would have been in a totally different situation. And, third, if we get hit by a biological on a big scale, whether it's infectious or it is simply widely dispersed aerosols, we will be in a different situation.

So I would say the American people have responded in a very positive way to a threat that's very real, but we should not in any way underestimate how rapidly this system would break down in its current structures if we were hit by a really serious attack.

WALKER: First, I think that the U.S. has always done a great job in responding to crises, and whether it be at the Pentagon or whether it be in New York City, people come together to do what has to be done. Whether you work for the federal, state or local government or whether you're public sector, private sector, non-for-profit sector, it's amazing. And from that standpoint, I think it's positive.

Personally, I've been disappointed with regard to the public's reaction as it relates to the anthrax situation. I think that there's been more fear and more concern and more potentially adverse reaction than potentially should be justified, and we haven't done enough to really focus on some of the other areas, whether it be smallpox or whatever else that could, frankly, be a lot more profound with regard to the implications.

And so I think positive on crisis management response, disappointing with regard to the reaction to the real nature and extent of the threat for anthrax, and let's hope we can end up moving forward from here.

PUTNAM: Recognizing the psychology motivation of these terrorists, your focused, quite understandably, on low-risk, high- consequence events. How much attention or focus does the commission have on low-risk, low-casualty types of low-tech terrorist events that would have a fundamental impact on public confidence and food safety, food supply, quality of public health, things of that nature which would have much less of an impact than a nuclear weapon but tremendous economic and psychological ramifications? 

HAMILTON: Mr. Putnam, I think we just didn't go into that kind of detail. We did not try to speculate on which types of the terrorist attacks would be employed by the terrorists, and I don't recall extensive discussions as to, for example, poisoning the American food supply.

PUTNAM: Thank you.

Thank you, Mr. Chairman.

(UNKNOWN): Thank you. Just to ask a rhetorical question, can we have Social Security without national security? If a bomb hit the Social Security Administration, would we be able to secure the retirement future of Americans or maybe what happened to the retirement security system in Poland when the German army swept over the plains? We're not used to domestic damage in the United States. When you look at the bloody destruction of France or Britain in the last wars, this is something that passed us by, something the United States has not seen since 1865 on a large scale.

And I'm worried about your chart, General Walker, about how debt can threaten democracy, that we have seen various French republics vote themselves into debt, depression and dictatorship by transferring such a huge burden onto a future generation.

So I wonder if the panel can comment on that, that we haven't suffered domestic damage before. It lifts the costs by quantum levels above the damage that we delivered against Germany or Japan, because we were not being hit back. How can we conduct a vast social program if a foreign army is able to destroy large amounts of real estate in our country?

And what about a vast amount of debt? I'm wondering if you could give us, for the record, a comparison with huge levels of debt that other countries have run up in the past and what happened to their political dynamic?

WALKER: Well, let me try to reinforce a c