House Appropriations with OMB Director Shaun Donovan
House Appropriations Committee
Subcommittee on Financial Services and General Government
“Budget Hearing – Office of Management and Budget”
Monday, March 16, 2015
Key Topics & Takeaways
- DOL Fiduciary Rule: Chairman Crenshaw (R-Fla.) expressed concern that the DOL’s fiduciary rule could carry unintended consequences that would hurt low and middle income investors who seek financial advice to help prepare for retirement. Donovan said the DOL has had “extensive consultations” with the SEC that have included technical assistance.
- Crenshaw commented that this Subcommittee also oversees that SEC, and that he would ask the same kinds of questions when considering the SEC budget.
- Dynamic Scoring: Rep. Bishop (D-Ga.) asked about the downsides of dynamic scoring. Donovan identified two issues with the use of dynamic scoring by the Congressional Budget Office: 1) it takes very uncertain effects and uses them to score bills in a way that makes the budgeting process less accurate; and 2) it only looks at effects on the tax side, but not the spending side.
- Retrospective Review of Regulations: Ranking Member Serrano (D-N.Y.) asked about the OMB’s retrospective review of regulations. Donovan replied that the review has seen about 500 completed initiatives that will save about $20 billion in the short run, and much more in the long-run. He said the review has engaged all federal agencies and has included discussions with stakeholders to identify areas where progress can be made.
Speakers
- Shaun Donovan, Director, Office of Management and Budget
Opening Statements
In his opening statement, Chairman Ander Crenshaw (R-Fla.) stated that the House Appropriations Committee has carefully worked since 2010 to reduce discretionary spending, but that mandatory outlays have increased significantly, and that the nation’s long-term interests require deficit and debt reduction. He stressed that social benefits enjoyed today must be paid for tomorrow, and lamented that the president’s budget proposal does not address how to distribute these costs.
Crenshaw noted that the Office of Management and Budget (OMB) has the responsibility of reviewing all federal regulations to ensure that proposed rules keep pace with changing technology and changing needs in society while avoiding duplicative and inconsistent policies. In this spirit, he expressed his belief that the Securities and Exchange Commission (SEC) should move first, before the Department of Labor (DOL), on a proposed fiduciary rule in order to avoid any confusion that would surround different standards of care for broker-dealers and investment advisors.
In his opening statement, Ranking Member Jose Serrano (D-N.Y.) said the OMB plays a unique role in preparing the president’s budget and monitoring the implementation of government programs, all while improving the efficiency and effectiveness of the federal government as a whole.
In his testimony, Director Shaun Donovan of the Office of Management and Budget said President Obama will not accept a budget that “locks in sequestration” and supported a budget that would build on economic progress by ending sequestration for domestic priorities. He also highlighted OMB’s regulatory responsibility of undertaking a retrospective review of regulations, noting that it has detailed over 500 initiatives to date to save $20 billion in the short term.
Question and Answer
Crenshaw expressed concern that the DOL’s fiduciary rule could carry unintended consequences that would hurt low and middle income investors who seek financial advice to help prepare for retirement. He asked how the OMB could be sure that this would not be duplicative or inconsistent with what the SEC already does, and whether there would be an opportunity for the public to comment on the rulemaking.
Donovan explained that he is limited in what he can say about a pending review, but stated that the DOL has specific statutory responsibilities that are unique in this area, and so it is important that it move forward with a rulemaking but in a coordinated manner. He said the DOL has had “extensive consultations” with the SEC that have included technical assistance. Donovan added that the OMB will ensure that the public has an opportunity to comment on the rule when it is published.
Crenshaw commented that this Subcommittee also oversees that SEC, and that he would ask the same kinds of questions when considering the SEC budget.
Rep. Tom Graves (R-Ga.) opined that the Administration is “talking out of both sides of its mouth” by encouraging middle-income Americans to save for their futures while at the same time “making it nearly impossible for them” by supporting the DOL’s fiduciary rulemaking. He suggested that the rule punishes low and middle-income earners and benefits the wealthy, and asked Donovan what commitment he could provide that the rule would not disproportionately harm low-income IRA holders and small businesses. Donovan said the rule is “obviously very focused on achieving the right balance” of preserving consumer access to advice while protecting them from advice that could hurt them in the long-run. He added that OMB will look carefully at a cost-benefit analysis.
Graves commented that all consumers must have the opportunity to access advice, and that citizens have the ability to discern good advice from the bad. He said limiting choice will only hurt all consumers. He then asked where OMB is in the process of a full economic analysis of the rule, but Donovan said only that a significant analysis of costs and benefits will be released when the rule is published.
Rep. Kevin Yoder (R-Kans.) stressed the need to employ a cost-benefit analysis to ensure that the rule does not unnecessarily impact small advisors and cause investors to lose options for advice. He stated that many in Congress are concerned about the rule’s impacts on “regular folks at home.”
Effects of Sequestration
Serrano asked what the consequences of continuing sequestration would be for the OMB. Donovan answered that the OMB saw the effects of sequestration as well as any federal agency. He said the resulting losses in social benefits in areas such as education, veterans’ affairs and housing were significant, and that addressing this would be critical to economic growth moving forward.
Cutting Spending
Rep. Scott Rigell (R-Va.) asked Donovan to explain the Administration’s position on spending “generally.” Donovan explained that the budget proposes more than 100 different spending cuts and consolidations, but that mandatory spending remains the biggest challenge. He said there is also a need to look at wasteful spending in the tax code, where changes could lead to substantial savings and promote economic growth.
Rep. Steve Womack (R-Ark.) commented that Congress will not be able to “appreciably change the situation” without address the mandatory side of spending.
Rep. Sanford Bishop (D-Ga.) asked about the downsides of dynamic scoring. Donovan identified two issues with the use of dynamic scoring by the Congressional Budget Office: 1) it takes very uncertain effects and uses them to score bills in a way that makes the budgeting process less accurate; and 2) it only looks at effects on the tax side, but not the spending side.
Retrospective Review of Regulations
Serrano asked about the OMB’s retrospective review of regulations. Donovan replied that the review has seen about 500 completed initiatives that will save about $20 billion in the short run, and much more in the long-run. He said the review has engaged all federal agencies and has included discussions with stakeholders to identify areas where progress can be made.
For more information on this hearing, please click here.
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House Appropriations Committee
Subcommittee on Financial Services and General Government
“Budget Hearing – Office of Management and Budget”
Monday, March 16, 2015
Key Topics & Takeaways
- DOL Fiduciary Rule: Chairman Crenshaw (R-Fla.) expressed concern that the DOL’s fiduciary rule could carry unintended consequences that would hurt low and middle income investors who seek financial advice to help prepare for retirement. Donovan said the DOL has had “extensive consultations” with the SEC that have included technical assistance.
- Crenshaw commented that this Subcommittee also oversees that SEC, and that he would ask the same kinds of questions when considering the SEC budget.
- Dynamic Scoring: Rep. Bishop (D-Ga.) asked about the downsides of dynamic scoring. Donovan identified two issues with the use of dynamic scoring by the Congressional Budget Office: 1) it takes very uncertain effects and uses them to score bills in a way that makes the budgeting process less accurate; and 2) it only looks at effects on the tax side, but not the spending side.
- Retrospective Review of Regulations: Ranking Member Serrano (D-N.Y.) asked about the OMB’s retrospective review of regulations. Donovan replied that the review has seen about 500 completed initiatives that will save about $20 billion in the short run, and much more in the long-run. He said the review has engaged all federal agencies and has included discussions with stakeholders to identify areas where progress can be made.
Speakers
- Shaun Donovan, Director, Office of Management and Budget
Opening Statements
In his opening statement, Chairman Ander Crenshaw (R-Fla.) stated that the House Appropriations Committee has carefully worked since 2010 to reduce discretionary spending, but that mandatory outlays have increased significantly, and that the nation’s long-term interests require deficit and debt reduction. He stressed that social benefits enjoyed today must be paid for tomorrow, and lamented that the president’s budget proposal does not address how to distribute these costs.
Crenshaw noted that the Office of Management and Budget (OMB) has the responsibility of reviewing all federal regulations to ensure that proposed rules keep pace with changing technology and changing needs in society while avoiding duplicative and inconsistent policies. In this spirit, he expressed his belief that the Securities and Exchange Commission (SEC) should move first, before the Department of Labor (DOL), on a proposed fiduciary rule in order to avoid any confusion that would surround different standards of care for broker-dealers and investment advisors.
In his opening statement, Ranking Member Jose Serrano (D-N.Y.) said the OMB plays a unique role in preparing the president’s budget and monitoring the implementation of government programs, all while improving the efficiency and effectiveness of the federal government as a whole.
In his testimony, Director Shaun Donovan of the Office of Management and Budget said President Obama will not accept a budget that “locks in sequestration” and supported a budget that would build on economic progress by ending sequestration for domestic priorities. He also highlighted OMB’s regulatory responsibility of undertaking a retrospective review of regulations, noting that it has detailed over 500 initiatives to date to save $20 billion in the short term.
Question and Answer
Crenshaw expressed concern that the DOL’s fiduciary rule could carry unintended consequences that would hurt low and middle income investors who seek financial advice to help prepare for retirement. He asked how the OMB could be sure that this would not be duplicative or inconsistent with what the SEC already does, and whether there would be an opportunity for the public to comment on the rulemaking.
Donovan explained that he is limited in what he can say about a pending review, but stated that the DOL has specific statutory responsibilities that are unique in this area, and so it is important that it move forward with a rulemaking but in a coordinated manner. He said the DOL has had “extensive consultations” with the SEC that have included technical assistance. Donovan added that the OMB will ensure that the public has an opportunity to comment on the rule when it is published.
Crenshaw commented that this Subcommittee also oversees that SEC, and that he would ask the same kinds of questions when considering the SEC budget.
Rep. Tom Graves (R-Ga.) opined that the Administration is “talking out of both sides of its mouth” by encouraging middle-income Americans to save for their futures while at the same time “making it nearly impossible for them” by supporting the DOL’s fiduciary rulemaking. He suggested that the rule punishes low and middle-income earners and benefits the wealthy, and asked Donovan what commitment he could provide that the rule would not disproportionately harm low-income IRA holders and small businesses. Donovan said the rule is “obviously very focused on achieving the right balance” of preserving consumer access to advice while protecting them from advice that could hurt them in the long-run. He added that OMB will look carefully at a cost-benefit analysis.
Graves commented that all consumers must have the opportunity to access advice, and that citizens have the ability to discern good advice from the bad. He said limiting choice will only hurt all consumers. He then asked where OMB is in the process of a full economic analysis of the rule, but Donovan said only that a significant analysis of costs and benefits will be released when the rule is published.
Rep. Kevin Yoder (R-Kans.) stressed the need to employ a cost-benefit analysis to ensure that the rule does not unnecessarily impact small advisors and cause investors to lose options for advice. He stated that many in Congress are concerned about the rule’s impacts on “regular folks at home.”
Effects of Sequestration
Serrano asked what the consequences of continuing sequestration would be for the OMB. Donovan answered that the OMB saw the effects of sequestration as well as any federal agency. He said the resulting losses in social benefits in areas such as education, veterans’ affairs and housing were significant, and that addressing this would be critical to economic growth moving forward.
Cutting Spending
Rep. Scott Rigell (R-Va.) asked Donovan to explain the Administration’s position on spending “generally.” Donovan explained that the budget proposes more than 100 different spending cuts and consolidations, but that mandatory spending remains the biggest challenge. He said there is also a need to look at wasteful spending in the tax code, where changes could lead to substantial savings and promote economic growth.
Rep. Steve Womack (R-Ark.) commented that Congress will not be able to “appreciably change the situation” without address the mandatory side of spending.
Rep. Sanford Bishop (D-Ga.) asked about the downsides of dynamic scoring. Donovan identified two issues with the use of dynamic scoring by the Congressional Budget Office: 1) it takes very uncertain effects and uses them to score bills in a way that makes the budgeting process less accurate; and 2) it only looks at effects on the tax side, but not the spending side.
Retrospective Review of Regulations
Serrano asked about the OMB’s retrospective review of regulations. Donovan replied that the review has seen about 500 completed initiatives that will save about $20 billion in the short run, and much more in the long-run. He said the review has engaged all federal agencies and has included discussions with stakeholders to identify areas where progress can be made.
For more information on this hearing, please click here.